Unassociated Document


    Exhibit
      10.14

    
 

    PREFERRED
      STOCK PURCHASE AGREEMENT

     

    BY
      AND
      AMONG

     

    TRULITE,
      INC.,

     

    TRULITE
      ENERGY PARTNERS, L.P.

     

    AND

     

    THE
      PRINCIPAL STOCKHOLDERS OF TRULITE, INC.

     

    NAMED
      HEREIN

     

    Dated
      as
      of July 26, 2004

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    TABLE
      OF CONTENTS


    
      
        
          	
                   

                	
                  Page

                
	
                  Article
                    I DEFINITIONS

                	
                  4

                
	 	
                   

                
	
                  Article
                    II SALE AND PURCHASE OF SHARES

                	
                  8

                
	 	 
	
                  SECTION
                    2.1 AUTHORIZATION AND DESCRIPTION OF THE SERIES A PREFERRED
                    STOCK

                	
                  9

                
	
                  SECTION
                    2.2 FIRST TRANCHE CLOSING

                	
                  10

                
	
                  SECTION
                    2.3 SECOND TRANCHE CLOSING

                	
                  10

                
	
                  SECTION
                    2.4 THIRD TRANCHE CLOSING

                	
                  10

                
	
                  SECTION
                    2.5 USE OF PROCEEDS

                	
                  11

                
	 	
                   

                
	
                  Article
                    III REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE PRINCIPAL
                    STOCKHOLDERS

                	
                  11

                
	 	 
	
                  SECTION
                    3.1 CORPORATE EXISTENCE AND POWER; CAPACITY

                	
                  11

                
	
                  SECTION
                    3.2 AUTHORIZATION; BINDING OBLIGATIONS

                	
                  11

                
	
                  SECTION
                    3.3 SUBSIDIARIES

                	
                  12

                
	
                  SECTION
                    3.4 CAPITALIZATION

                	
                  12

                
	
                  SECTION
                    3.5 NO CONFLICT; NO CONSENT

                	
                  12

                
	
                  SECTION
                    3.6 FINANCIAL STATEMENTS

                	
                  13

                
	
                  SECTION
                    3.7 LIENS; INDEBTEDNESS; UNDISCLOSED LIABILITIES

                	
                  13

                
	
                  SECTION
                    3.8 RELATED PARTY TRANSACTIONS

                	
                  14

                
	
                  SECTION
                    3.9 INTELLECTUAL PROPERTY

                	
                  14

                
	
                  SECTION
                    3.10 INSURANCE

                	
                  15

                
	
                  SECTION
                    3.11 TAX RETURNS

                	
                  15

                
	
                  SECTION
                    3.12 MATERIAL CONTRACTS AND OBLIGATIONS

                	
                  16

                
	
                  SECTION
                    3.13 REAL PROPERTY

                	
                  16

                
	
                  SECTION
                    3.14 NECESSARY LICENSES AND PERMITS

                	
                  17

                
	
                  SECTION
                    3.15 COMPLIANCE WITH LAW

                	
                  17

                
	
                  SECTION
                    3.16 ENVIRONMENTAL COMPLIANCE

                	
                  17

                
	
                  SECTION
                    3.17 LITIGATION

                	
                  17

                
	
                  SECTION
                    3.18 NO MATERIAL DEVELOPMENTS

                	
                  17

                
	
                  SECTION
                    3.19 EMPLOYEE BENEFIT PLANS

                	
                  17

                
	
                  SECTION
                    3.20 CERTAIN CONTRACTS

                	
                  18

                
	
                  SECTION
                    3.21 CORPORATE DOCUMENTS, BOOKS AND RECORDS

                	
                  18

                
	
                  SECTION
                    3.22 DISCLOSURE

                	
                  18

                
	
                  SECTION
                    3.23 CERTAIN AGREEMENTS OF OFFICERS AND EMPLOYEES

                	
                  18

                
	
                  SECTION
                    3.24 REGISTRATION RIGHTS

                	
                  18

                
	
                  SECTION
                    3.25 INVESTMENT COMPANY

                	
                  18

                
	
                  SECTION
                    3.26 PRIVATE OFFERING; NO REGISTRATION

                	
                  18

                
	
                  SECTION
                    3.27 EMPLOYEES

                	
                  19

                
	
                  SECTION
                    3.28 TRADE RELATIONS

                	
                  19

                
	
                  SECTION
                    3.29 BROKERS AND FINDERS

                	
                  19

                
	 	
                   

                
	
                  Article
                    IV INVESTOR REPRESENTATIONS

                	
                  19

                
	 	 
	
                  SECTION
                    4.1 NO DISTRIBUTION

                	
                  19

                
	
                  SECTION
                    4.2 AUTHORIZATION

                	
                  19

                


        

         

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

         

      

    

    
      
        	
                Article
                  V COVENANTS TO BE PERFORMED PRIOR TO THE FIRST TRANCHE
                  CLOSING

              	
                20

              
	 	 
	
                SECTION
                  5.1 CONDUCT OF BUSINESS

              	
                20

              
	
                SECTION
                  5.2 NOTIFICATION

              	
                21

              
	
                SECTION
                  5.3 AGREEMENTS WITH DIRECTORS, OFFICERS, EMPLOYEES AND
                  SHAREHOLDERS

              	
                21

              
	
                SECTION
                  5.4 APPROVALS

              	
                22

              
	
                SECTION
                  5.5 DUE DILIGENCE

              	
                22

              
	
                SECTION
                  5.6 FINANCIAL STATEMENTS

              	
                22

              
	
                SECTION
                  5.7 SATISFACTION OF CONDITIONS

              	
                22

              
	 	
                 

              
	
                Article
                  VI CONDITIONS TO THE INVESTOR’S OBLIGATIONS

              	
                23

              
	 	 
	
                SECTION
                  6.1 CONDITIONS TO INVESTOR’S OBLIGATIONS AT THE FIRST TRANCHE
                  CLOSING

              	
                23

              
	
                SECTION
                  6.2 CONDITIONS OF THE COMPANY’S OBLIGATIONS AT THE FIRST TRANCHE
                  CLOSING.

              	
                25

              
	 	 


      

    

    
      
        	
                Article
                  VII COVENANTS TO BE PERFORMED PRIOR TO THE SECOND AND THIRD TRANCHE
                  CLOSINGS

              	
                25

              
	 	
                 

              
	
                SECTION
                  7.1 CONDUCT OF BUSINESS

              	
                26

              
	
                SECTION
                  7.2 NOTIFICATION

              	
                26

              
	
                SECTION
                  7.3 APPROVALS

              	
                26

              
	
                SECTION
                  7.4 SATISFACTION OF CONDITIONS

              	
                26

              
	 	 
	
                Article
                  VIII CONDITIONS TO SECOND AND THIRD TRANCHE CLOSINGS

              	
                26

              
	 	 
	
                SECTION
                  8.1 CONDITIONS OF THE INVESTOR’S OBLIGATIONS AT THE SECOND AND THIRD
                  TRANCHE CLOSING

              	
                26

              
	
                SECTION
                  8.2 CONDITIONS OF THE COMPANY’S OBLIGATIONS AT THE SECOND OR THIRD TRANCHE
                  CLOSING

              	
                27

              
	 	 
	
                Article
                  IX INDEMNITY

              	
                28

              
	 	
                 

              
	
                SECTION
                  9.1 INDEMNIFICATION

              	
                28

              
	
                SECTION
                  9.2 SURVIVAL OF OBLIGATIONS

              	
                30

              
	 	 
	
                Article
                  X TERMINATION

              	
                30

              
	 	
                 

              
	
                SECTION
                  10.1 TERMINATION RIGHTS

              	
                30

              
	
                SECTION
                  10.2 EFFECT OF TERMINATION

              	
                30

              
	 	 
	
                Article
                  XI MISCELLANEOUS

              	
                31

              
	 	
                 

              
	
                SECTION
                  11.1 EXPENSES

              	
                31

              
	
                SECTION
                  11.2 LEGEND

              	
                31

              
	
                SECTION
                  11.3 NOTICES

              	
                31

              
	
                SECTION
                  11.4  SURVIVAL
                  AND TERMINATION OF COVENANTS, AGREEMENTS, REPRESENTATIONS AND
                  WARRANTIES

              	
                
                  32

                

              
	
                SECTION
                  11.5 AMENDMENTS AND WAIVERS

              	
                33

              
	
                SECTION
                  11.6 CHOICE OF LAW; REMEDIES; SUBMISSION TO JURISDICTION

              	
                33

              
	
                SECTION
                  11.7 FURTHER ASSURANCES

              	
                34

              
	
                SECTION
                  11.8 ENTIRE AGREEMENT; COUNTERPARTS; SECTION HEADINGS

              	
                34

              


      

    

     

    
      EXHIBITS

      
        	 	
                Exhibit
                  A

              	
                Form
                  of Series A Certificate of Designation

              
	 	
                Exhibit
                  B

              	
                Form
                  of Investor’s Rights Agreement

              
	 	
                Exhibit
                  C

              	
                Form
                  of Right of First Refusal and Co-Sale Agreement

              
	 	
                Exhibit
                  D

              	
                Form
                  of Invention Assignment

              
	 	
                Exhibit
                  E

              	
                Form
                  of Employment Agreement

              
	 	
                
                  Exhibit
                    F

                

              	
                Management
                  Agreement

              
	 	
                Exhibit
                  G

              	
                Milestones

              


      

      


    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
PREFERRED
      STOCK PURCHASE AGREEMENT

     

    THIS
      PREFERRED STOCK PURCHASE AGREEMENT (this “Agreement”)
      is
      dated as of July 26, 2004, by and among Trulite, Inc., a Delaware corporation
      (the “Company”),
      and
      Trulite Energy Partners, L.P., a Texas limited partnership (“Investor”), and the
      principal stockholders of the Company named on the signature pages hereto (the
      “Principal
      Stockholders”).

     

    WHEREAS,
      the Company requires funds in order to satisfy its working capital requirements,
      and Investor desires to invest funds into the Company upon the terms and
      conditions set forth in this Agreement; and

     

    WHEREAS,
      the Company has authorized the issuance of and desires to sell to Investor
      and
      Investor proposes to buy shares of Series A Preferred Stock on the terms and
      conditions set forth herein.

     

    NOW,
      THEREFORE, in consideration of the premises and the mutual covenants contained
      in this Agreement, the parties agree as follows:

     

     

    DEFINITIONS

     

    For
      all
      purposes of this Agreement the following terms shall have the meanings set
      forth
      in this Article I:

     

    “Affiliate”
      means,
      as applied to any specified Person, any Person directly or indirectly
      controlling, controlled by or under direct or indirect common control with
      the
      Person and shall also include (a) any Person who is a director or beneficial
      owner of at least 10% of the Person’s then outstanding equity securities (if an
      entity) and Family Members of any such Person (if an individual), (b) any Person
      of which the Person or an Affiliate (as defined in clause (a) above) of the
      Person shall, directly or indirectly, either beneficially own at least 10%
      of
      the Person’s then outstanding equity securities or constitute at least a l0%
      equity participant, and (c) in the case of a specified Person who is an
      individual, any Family Member of such Person. 

     

    “Agreement”
      has the
      meaning specified in the introduction to this Agreement.

     

    “Business
      Day”
      means
      any day other than a Saturday, Sunday or a legal holiday in the State of Texas
      or any other day on which commercial banks in any such State are authorized
      by
      law or government decree to close.

     

    “Capital
      Securities”
      means,
      as to any Person that is a corporation, the authorized shares of such Person’s
      capital securities, including all classes of common, preferred, voting and
      nonvoting capital securities, and, as to any Person that is not a corporation
      or
      an individual, the ownership shares in such Person, including, without
      limitation, the right to share in profits and losses, the right to receive
      distributions of cash and property, and the right to receive allocations of
      items of income, gain, loss, deduction and credit and similar items from such
      Person, whether or not such shares include voting or similar rights entitling
      the holder thereof to exercise control over such Person.

     

    “Closing” has
      the
      meaning given such term in Section 2.1(b)(iii) of this Agreement.

     

    “Closing
      Date”
      has the
      meaning specified in Section 2.4(a) of this Agreement.

     

    “COBRA”
      means
      the Consolidated Omnibus Budget Reconciliation Act of 1985, as
      amended.

     

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

     

    “Common
      Stock”
      means
      the shares of common stock, par value $0.0001 per share, of the Company.


     

    “Company”
      has the
      meaning specified in the introduction to this Agreement.

     

    "Company's
      Knowledge"
      means
      the knowledge of the Principal Stockholders

     

    “Co-Sale
      Agreement”
      means
      the Right of First Refusal and Co-Sale Agreement, by and between the Company
      and
      Investor, substantially in the form attached hereto as Exhibit C.

     

    “Employee
      Plan”
      means
      any plan or arrangement as defined in Section 3(3) of ERISA that (a) is subject
      to any provision of ERISA, (b) is maintained, administered or contributed to
      by
      the employer and (c) covers any employee or former employee of the
      employer.

     

    “Environmental
      Laws”means
      any
      applicable Laws of any Governmental Authority having jurisdiction over any
      Asset
      or party which relate to pollution, the protection or cleanup of the
      environment, or the release or disposal of deleterious substances into the
      environment, including, but not limited to, ambient air, surface water,
      groundwater, land surface or subsurface strata; including all such laws, orders,
      rules, regulations, judgments or decrees as same may be amended, varied or
      modified in the future.

     

    “Environmental
      Liabilities”means
      all
      obligations, duties, losses, liabilities, claims, fines, expenses, damages,
      costs (including attorney's fees and expenses) or penalties created by, related
      to, or arising out of any Environmental Law and pertaining to the Company,
      whether attributable, in whole or in part, to actions, events or conditions
      existing or occurring before the date hereof.

     

    “ERISA”
      means
      the Employee Retirement Income Security Act of 1974, any successor statute
      of
      similar import, and the rules and regulations thereunder, collectively, and
      from
      time to time amended and in effect.

     

    “Family
      Member”
      means,
      as applied to any individual, such individual’s spouse, child (including a
      stepchild or an adopted child), grandchild, parent, brother or sister thereof
      or
      any spouse of any of the foregoing, and each trust created for the exclusive
      benefit of one or more of them.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    “Financial
      Statements”
      means
      the unaudited balance sheet and unaudited income statement of the Company as
      of
      and for the period ended December 31, 2003.

     

    “First
      Termination Date”
      has the
      meaning specified in Section 10.1(b) of this Agreement.

     

    “First
      Tranche Closing”
      has the
      meaning specified in Section 2.1(b)(i) of this Agreement.

     

    “First
      Tranche Closing Date”
      has the
      meaning specified in Section 2.2 of this Agreement.

     

    “First
      Tranche Shares”
      has the
      meaning specified in Section 2.2(a) of this Agreement. 

     

    “Generally
      accepted accounting principles”
      or
“GAAP”
      means
      accounting principles which are (a) consistent with the principles promulgated
      or adopted by the Financial Accounting Standards Board and its predecessors
      and
      other recognized principle setting bodies, in effect from time to time, (b)
      applied on a basis consistent with prior periods, and (c) such that a certified
      public accountant would, insofar as the use of accounting principles is
      pertinent, be in a position to base an opinion as to financial statements in
      which such principles have been properly applied.

     

    “Governmental
      Approvals”
      has the
      meaning specified in Section 6.1(f).

     

    “Governmental
      Authority”
      shall
      mean any nation or government, any state or other political subdivision thereof
      and any entity exercising executive, legislative, judicial, regulatory or
      administrative functions of or pertaining to government. 

     

    “Indemnified
      Liabilities”
      has the
      meaning specified in Section 9.1(a) of this Agreement.

     

    “Indemnified
      Parties”
      has the
      meaning specified in Section 9.1(a) of this Agreement.

     

    “Indemnitors”
      has the
      meaning specified in Section 9.1(b) of this Agreement.

     

    “Intellectual
      Property”
      has the
      meaning specified in Section 3.9(a) of this Agreement.

     

    “Investor”
      has the
      meaning specified in the introduction to this Agreement.

     

    “Investor’s
      Rights Agreement”
      means
      the Investor’s Rights Agreement, by and between the Company and Investor,
      substantially in the form attached hereto as Exhibit B.

     

    “Jadoo
      Agreement”
      means
      the Exclusivity and Development Agreement, by and between the Company and Jadoo
      Power Systems, Inc.

     

    “Laws”
      means,
      as to any Person, any law, statute, ordinance, decree, writ, requirement, order,
      judgment, injunction, rule, regulation (or official interpretation of any of
      the
      foregoing) of, and the terms of any license of permit issued by, any
      Governmental Authority which is applicable to such Person.

     

    “Licensed
      Intellectual Property”
      has the
      meaning specified in Section 3.9(a) of this Agreement.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    “Lien”
      means
      (a) any encumbrance, mortgage, pledge, lien, charge or other security interest
      of any kind upon any property or assets of any character, or upon the income
      or
      profits therefrom; (b) any acquisition of or agreement to have an option to
      acquire any property or assets upon conditional sale or other title retention
      agreement, device or arrangement (including a capitalized lease); or (c) any
      sale, assignment, deposit arrangement, pledge, lease or other transfer intended
      as security, or having the effect of providing security, for an obligation.
      

     

    “Management
      Agreement”
      means
      the Management Agreement by and between the Company and Contango Capital
      Partnership Management, LLC, substantially in the form attached hereto as
      Exhibit F.

     

    “Material
      Adverse Effect”
      means
      any effect, change, event, condition, result or occurrence that has a materially
      adverse impact to the business, operations, properties, condition (financial
      or
      otherwise), results of operations, assets, liabilities or prospects of the
      Company.

     

    “Material
      Contract”
      means
      any outstanding contract, plan, lease, commitment or other agreement (whether
      in
      writing or not) (whether or not entered into in the ordinary course of business)
      entered into by or otherwise binding upon the Company and obligating or
      committing the Company to (a) expend or otherwise pay an amount in excess
      of $10,000, (b) to receive an amount in excess of $10,000, (c) incur
      any indebtedness (direct or indirect, thus, including, without limitation,
      any
      guaranty, endorsement or other contingent obligation) in an amount in excess
      of
      $10,000, (d) restrict its line of business or limit or prevent its
      competition with any Person in any way, (e) restrict the disclosure
      of
      information in its possession, (f) share profits, revenues or cash flows,
      (g) subject any of its properties to a Lien (except for current property
      taxes not yet due and payable), issue any securities, employ any person, acquire
      or lease real property or (h) incur any other obligation or commitment not
      cancelable on 30 days or less notice without any penalty or other financial
      obligation. Any reference to a dollar amount in this definition shall be
      calculated in the aggregate over the life of the particular commitment or
      obligation in question and shall include any interest, fees or expenses
      associated therewith.

     

    “Owned
      Intellectual Property”
      has the
      meaning specified in Section 3.9(a).

     

    “Permits”
      has the
      meaning specified in Section 3.14 of this Agreement.

     

    “Person”
      means
      an individual, partnership, corporation, association, trust, joint venture,
      unincorporated organization, and any government, governmental department or
      agency or political subdivision thereof.

     

    “Principal
      Stockholders”
      has the
      meaning specified in the introduction to this Agreement.

     

    “Purchased
      Shares”
      has the
      meaning specified in Section 2.1(b)(iii) of this Agreement.

     

    “Restrictive
      Order”
      has the
      mean specified in Section 6.1(e) of this Agreement.

     

    “Second
      Termination Date”
      has the
      meaning specified in Section 10.1(b) of this Agreement.

     

    “Second
      Tranche Closing”
      has the
      meaning specified in Section 2.3(a) of this Agreement.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    “Second
      Tranche Shares”
      has the
      meaning specified in Section 2.1(b)(ii).

     

    “Second
      Tranche Trigger Event”
      shall
      have the meaning specified in Section 2.1(b)(ii).

     

    “Securities
      Act”
      means
      the Securities Act of 1933, as amended, or any successor federal statute, and
      the rules and regulations of the Securities and Exchange Commission thereunder,
      all as the same shall be in effect at the time.

     

    “Series
      A Certificate of Designation”
      means
      the Certificate of Designation of the Relative Rights and Preferences of the
      Series A Cumulative Convertible Preferred Stock of Trulite, Inc. to be filed
      with the Delaware Secretary of State substantially in the form attached hereto
      as Exhibit A. 

     

    “Series
      A
      Preferred Stock”
      means
      the shares of Series A Cumulative Convertible Preferred Stock, par value $0.0001
      per share, of the Company. 

     

    “Suit”
      has the
      meaning specified in Section 10.6(c) of this Agreement.

     

    “Tax”
      or
“Taxes”
      means
      (a) all net income, gross income, gross receipts, sales, use, ad valorem,
      transfer, franchise, profits, license, withholding, payroll, employment, excise,
      severance, stamp, occupation, premium, property or windfall profits taxes,
      or
      other taxes of any kind whatsoever, together with any interest and any
      penalties, additions to tax or additional amounts imposed by any taxing
      authority (domestic or foreign) upon the Company with respect to all periods
      or
      portions thereof ending on or before the date hereof and/or (b) any liability
      of
      the Company for the payment of any amounts of the type described in the
      immediately preceding clause (a) as a result of being a member of an affiliated
      or combined group.

     

    “Termination
      Date”
      has the
      meaning specified in Section 10.1(b) of this Agreement.

     

    “Third
      Termination Date”
      has the
      meaning specified in Section 10.1(b) of this Agreement.

     

    “Third
      Tranche Closing”
      shall
      have the meaning specified in Section 2.1(b)(iii).

     

    “Third
      Tranche Closing Date”
      shall
      have the meaning specified in Section 2.7.

     

    “Third
      Tranche Shares”
      shall
      have the meaning specified in Section 2.1(b)(iii).

     

    “Tranche”
      has the
      meaning specified in Section 2.1(b) of this Agreement.

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    SALE
      AND PURCHASE OF SHARES

     

    Authorization
      and Description of the Series A Preferred Stock.
      

     

    Subject
      to only filing the Series A Certificate of Designation with the State of
      Delaware, the Company has authorized the issuance and sale to Investor of
      500,000 shares of Series A Preferred Stock, in exchange for aggregate cash
      consideration of $500,000. The terms of the Series A Preferred Stock are as
      set
      forth in the Series A Certificate of Designation attached hereto as Exhibit
      A.


     

    Subject
      to the terms and conditions of this Agreement, the shares of Series A Preferred
      Stock shall be issued and the consideration paid in three installments (each
      installment hereinafter referred to as a “Tranche”)
      as
      follows:

     

    The
      parties shall schedule a closing in accordance with the terms of Section 2.2
      (the “First
      Tranche Closing”),
      at
      which, subject to the terms and conditions hereof, Investor shall purchase
      from
      the Company, and the Company shall issue and sell to Investor, 100,000 shares
      of
      Series A Preferred Stock in exchange for the consideration described in Section
      2.2.

     

    Upon
      the
      occurrence of the Second Tranche Trigger Event, the parties shall schedule
      a
      closing under Section 2.3 (the “Second
      Tranche Closing”),
      at
      which, subject to the terms and conditions hereof, Investor shall purchase
      from
      the Company, and the Company shall issue and sell to Investor, 200,000 shares
      of
      Series A Preferred Stock (the “Second
      Tranche Shares”)
      in
      exchange for the consideration described in Section 2.3. The “Second
      Tranche Trigger Event”
      shall
      occur at such time when Investor is satisfied, in its sole discretion, that
      the
      Company has (A) demonstrated the flat membrane hydrogen fuel capsule, (B) sold
      at least two fuel cell capsules to third persons that are not customers of
      the
      Company as of the date hereof, and (C) executed and entered into the Jadoo
      Agreement. It is estimated that the Second Tranche Closing shall occur on or
      before October 31, 2004.

     

    Upon
      the
      occurrence of the Third Tranche Trigger Event, the parties shall schedule a
      closing under Section 2.4 (the “Third
      Tranche Closing”
      and the
      First Tranche Closing, the Second Tranche Closing and Third Tranche Closing
      are
      sometimes individually or collectively referred to herein as the “Closing
      Date”),
      at
      which, subject to the terms and conditions hereof, Investor shall purchase
      from
      the Company, and the Company shall issue and sell to Investor, 200,000 shares
      of
      Series A Preferred Stock (the “Third
      Tranche Shares”
      and,
      together with the First Tranche Shares and the Second Tranche Shares, the
“Purchased
      Shares”)
      in
      exchange for the consideration described in Section 2.4. The “Third
      Tranche Trigger Event”
      shall
      occur at such time when Investor is satisfied, in its sole discretion, that
      the
      Company has demonstrated (A) the tube membrane hydrogen fuel capsule and control
      interface with fuel cell and (B) the flat membrane hydrogen fuel capsule and
      control interface with fuel cell. It is estimated that the Third Tranche Closing
      shall occur on or before February 28, 2005.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    First
      Tranche Closing.
      The sale
      and purchase of the First Tranche Shares shall take place at the offices of
      Jones, Walker, Waechter, Poitevent, Carrère & Denègre, L.L.P. as soon as
      practicable after the satisfaction of the conditions precedent set forth in
      Article VI hereof, or if no date has been agreed to by the parties, any date
      specified by any party to the other party upon five days’ written notice (the
“First
      Tranche Closing Date”).
      At
      the First Tranche Closing, subject to the terms and conditions set forth herein,
      the Company shall sell the First Tranche Shares to Investor by delivering to
      Investor the First Tranche Shares registered in the name of Investor or its
      designee, free and clear of any Lien, and Investor shall purchase the First
      Tranche Shares from the Company at a purchase price of $1.00 per share by wiring
      in same day funds $100,000 to such account as the Company may specify. The
      Company shall deliver to Investor, or to such other Person as Investor shall
      direct, concurrently with the Closing, payment for any fees and expenses for
      which Investor is entitled to reimbursement pursuant to
      Section 11.1.

     

    Second
      Tranche Closing.
      

     

    Subject
      to the terms and conditions of this Agreement, the Second Tranche Closing shall
      take place at the offices of Jones, Walker, Waechter, Poitevent, Carrére &
      Denégre, L.L.P. as soon as practicable after the satisfaction of the conditions
      precedent set forth in Article VIII hereof following the Company’s delivery to
      Investor of written notice of the Second Tranche Trigger Event, or, if no date
      has been agreed to, on any date specified by any party to the other upon five
      days’ written notice following the Company’s delivery of such notice (the
“Second
      Tranche Closing Date”).

     

    At
      the
      Second Tranche Closings, subject to the terms and conditions set forth herein,
      the Company shall sell the Second Tranche Shares to Investor by delivering
      to
      Investor the Second Tranche Shares registered in the name of Investor or its
      designee, free and clear of any Lien, and Investor shall purchase the Second
      Tranche Shares from the Company at a purchase price of $1.00 per share by wiring
      in same day funds $200,000 to such account as the Company may
      specify.

     

    Third
      Tranche Closing.
      

     

    Subject
      to the terms and conditions of this Agreement, the Third Tranche Closing shall
      take place at the offices of Jones, Walker, Waechter, Poitevent, Carrére &
      Denégre, L.L.P. as soon as practicable after the satisfaction of the conditions
      precedent set forth in Article VIII hereof following the Company’s delivery to
      Investor of written notice of the Third Tranche Trigger Event, or, if no date
      has been agreed to, or any date specified by any party to the other upon five
      days’ written notice following the Company’s delivery of such notice (the
“Third
      Tranche Closing Date”
      and the
      First Tranche Closing Date, Second Tranche Closing Date and Third Tranche
      Closing Date are sometimes individually and collectively referred to herein
      as
      the “Closing
      Date”).

     

    At
      the
      Third Tranche Closing, subject to the terms and conditions set forth herein,
      the
      Company shall sell the Third Tranche Shares to Investor by delivering to
      Investor the Third Tranche Shares registered in the name of Investor or its
      designee, free and clear of any lien, and Investor shall purchase the Third
      Tranche Shares from the Company at a purchase price of $1.00 per share by wiring
      in same day funds $200,000 to such account as the Company may
      specify.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Use
      of Proceeds.
      Proceeds
      from the sale of the Purchased Shares hereunder shall be used by the Company
      for
      such working capital and other corporate purposes as are approved by the
      Company’s Board of Directors.

     

    REPRESENTATIONS
      AND WARRANTIES OF THE COMPANY

    AND
      THE PRINCIPAL STOCKHOLDERS

     

    In
      order
      to induce Investor to enter into this Agreement and to purchase the Purchased
      Shares, the Company and the Principal Stockholders hereby jointly and severally
      represent and warrant that:

     

    Corporate
      Existence and Power;
      Capacity. 

     

    The
      Company is a corporation duly incorporated, validly existing and in good
      standing under the laws of the State of Delaware and is duly qualified as a
      foreign corporation and authorized to do business in all other jurisdictions
      in
      which the nature of the activities conducted by it or the nature of its business
      or properties makes such qualification necessary. The Company has the corporate
      power to own its properties and to carry on its business as now conducted and
      as
      proposed to be conducted and to enter into and perform its obligations under
      this Agreement and all other agreements required to be executed by the Company
      hereunder. 

     

    Each
      Principal Stockholder has all requisite legal right, power, capacity and
      authority to execute, deliver and perform his obligations under this Agreement
      and all other agreements on instruments contemplated hereunder to which he
      is
      proposed to be a party.

     

    Authorization;
      Binding Obligations. 

     

    The
      execution, delivery and performance by the Company of this Agreement (a) are
      within the Company’s power and authority and (b) have been duly authorized by
      all necessary corporate action of the Company. The issuance, sale and delivery
      of the Purchased Shares in accordance with this Agreement, and the issuance
      and
      delivery of the shares of Common Stock issuable upon conversion of the Purchased
      Shares, have been duly authorized by all necessary corporate action on the
      part
      of the Company, and all such shares have been duly reserved for issuance. The
      Purchased Shares when so issued, sold and delivered against payment therefore
      in
      accordance with the provisions of this Agreement, and the shares of Common
      Stock
      issuable upon conversion of the Purchased Shares, when issued upon such
      conversion, will be duly and validly issued, fully paid and nonassessable.
      The
      execution and delivery by the Company of this Agreement, and the issuance and
      sale by the Company of the Purchased Shares hereunder, will result in legally
      binding obligations of the Company, enforceable against it in accordance with
      the respective terms and provisions hereof. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Each
      of
      this Agreement and all other agreements contemplated hereunder to which the
      Principal Stockholders are proposed to be parties, when fully executed and
      delivered, will constitute valid and legally binding obligations of the
      Principal Stockholders, enforceable in accordance with their respective terms,
      except (i) as limited by applicable bankruptcy, insolvency, reorganization,
      moratorium, or other laws affecting enforcement of creditors’ rights generally;
      (ii) as limited by laws or equitable principles relating to the availability
      of
      specific performance, injunctive relief, or other equitable remedies, and (iii)
      to the extent the indemnification and contribution provisions contained in
      the
      Investor’s Rights Agreement may be limited by applicable federal or state
      securities laws.

     

    Subsidiaries.
      The
      Company does not have any subsidiaries. 

     

    Capitalization. 

     

    Capital
      Securities.
      The
      Company’s authorized Capital Securities consist solely of 2,500,000 shares of
      Common Stock and 1,500,000 shares of Series A Preferred Stock. All of the
      presently issued shares of the Company’s Capital Securities are issued and owned
      by the persons listed on Schedule
      3.4(a)
      and are
      duly authorized, validly issued and outstanding, fully paid and nonassessable.
      Schedule
      3.4(a)
      sets
      forth the capitalization of the Company immediately prior to the First Tranche
      Closing Date and after giving effect to the transactions contemplated herein.
      All of the issued and outstanding shares of capital stock of the Company have
      been offered, issued and sold by the Company in compliance with all applicable
      federal and state securities laws. Except as set forth on Schedule
      3.4(a)
      and as
      otherwise contemplated by this Agreement, there is no agreement, written or
      oral, between the Company and any holders of its securities, or, to the best
      of
      the Company’s Knowledge, among any holder of its securities, relating to the
      sale or transfer (including without limitation agreements relating to rights
      of
      first refusal, co-sale rights or “drag-along” rights), registration under the
      Securities Act, or voting, of the capital stock of the Company.

     

    Options,
      Etc.
      Except
      as set forth on Schedule
      3.4(b)
      and as
      otherwise contemplated by this Agreement, there are no outstanding rights
      (preemptive or otherwise) or options to subscribe for or purchase from the
      Company, or any warrants or other agreements providing for or requiring the
      issuance or purchase by the Company of, any Capital Securities or any securities
      convertible into, exchangeable for, or exercisable into Capital Securities,
      or
      any voting trusts, proxies or agreements relating to the voting of the Company’s
      Capital Securities.

     

    No
      Conflict; No Consent.
      

     

    Except
      as
      set forth on Schedule
      3.5,
      neither
      the execution and delivery by the Company this Agreement or the other agreements
      to be executed in connection therewith, nor the performance of any of the
      obligations contemplated hereby and thereby, will (i) violate the certificate
      of
      incorporation or bylaws of the Company, (ii) violate, conflict with or result
      in
      a breach of any provision of, or constitute a default under, or result in the
      termination or cancellation of, or accelerate the performance required by,
      or
      result in the creation of any Lien upon any of the properties of the Company,
      under any note, bond, mortgage, indenture, license, franchise, permit, lease,
      contract, agreement or other instrument or commitment or obligation to which
      the
      Company or any of their respective properties may be bound, (iii) violate any
      law applicable to the Company or any of its properties, or (iv) require any
      consent, approval or authorization of, or notice to, or declaration,
      qualification, filing or registration with, any federal, state or local
      governmental authority in connection with the execution, delivery and
      performance of this Agreement or the other agreements to be executed in
      connection therewith by the Company, other than, with respect to items (ii),
      (iii) and (iv), those violations, conflicts, breaches, defaults, terminations,
      cancellations, accelerations or failures to perform that will not have, or
      be
      reasonably likely to have, a Material Adverse Effect.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Neither
      the execution and delivery by any of the Principal Stockholders of this
      Agreement or any other agreement to be executed in connection herewith to which
      they are proposed to be parties, nor the performance of any of the obligations
      contemplated hereby and thereby, will (i) violate, conflict with or result
      in a
      breach of any provision of, or constitute a default under, or result in the
      termination or cancellation of, or accelerate the performance required by,
      or
      result in the creation of any Liens upon any of the properties of any Principal
      Stockholder, under any note, bond, mortgage, indenture, license, franchise,
      permit, lease, contract, agreement or other instrument or commitment or
      obligation to which such stockholder or any of its respective properties may
      be
      bound, (ii) violate any statute, rule, regulation, mandate, decree, judgment,
      decision, order or ordinance applicable to any Principal Stockholder or any
      of
      its respective properties, or (iii) require any consent, approval or
      authorization of, or notice to, or declaration, qualification, filing or
      registration with, any Governmental Authority in connection with the execution,
      delivery and performance of this Agreement or any other agreement to be executed
      in connection herewith by any Principal Stockholder, other than, with respect
      to
      items (i), (ii) and (iii), those violations, conflicts, breaches, defaults,
      terminations, cancellations, accelerations or failures to perform that would
      not
      be reasonably likely to materially impair the ability of any Principal
      Stockholder to perform its obligations hereunder or thereunder or prevent the
      consummation of the transactions contemplated hereunder or
      thereunder.

     

    Financial
      Statements.
      A copy
      of the Financial Statements is attached hereto as Schedule
      3.6.
      The
      Financial Statements are in accordance with the books and records of the
      Company, present fairly the financial condition and results of operations of
      the
      Company, at the dates and for the periods indicated, and have been prepared
      in
      accordance with GAAP.

     

    Liens;
      Indebtedness; Undisclosed Liabilities.
      There
      are no Liens upon any of the Company’s properties other than the Liens which are
      listed on Schedule
      3.7
      and
      Liens on personal property created in connection with equipment leases. Except
      as set forth on Schedule
      3.7,
      as of
      the date hereof, the Company does not have any outstanding indebtedness,
      obligation or liability of any nature other than (i) the liabilities set forth
      on the face of the Financial Statements or the footnotes thereto, and (ii)
      liabilities and obligations that have arisen in the ordinary course of the
      Company’s business since the date of the balance sheet included in the Financial
      Statements. None of the Company's outstanding indebtedness or instruments
      relating thereto provide voting rights with respect to the Company or to the
      holders thereof. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Related
      Party Transactions.
      There
      are no obligations of the Company or any of its Affiliates to their respective
      officers, directors, stockholders, employees or their Family Members other
      than
      (a) for payment of salary for services rendered, (b) reimbursement for
      reasonable expenses incurred on behalf of the Company or any of its Affiliates
      and (c) for other standard employee benefits made generally available to all
      employees and disclosed under Schedule 3.19. Except as set forth on Schedule
      3.8, no officer, director, stockholder or employee of the Company or any of
      its
      Affiliates or any of his or her Family Members is indebted to the Company or
      any
      of its Affiliates, nor is the Company or any of its Affiliates indebted (or
      committed to make loans or extend or guarantee credit) to any of them. Neither
      the Company nor any of its Affiliates or, to the best of the Company’s
      Knowledge, any officers, directors, stockholders or employees of the Company
      or
      its Affiliates, have any direct or indirect ownership interest in any firm
      or
      corporation with which the Company or any of its Affiliates has a business
      relationship, or any firm or corporation that competes with the Company or
      its
      Affiliates, other than ownership interests in 2% or less of the outstanding
      stock of publicly traded companies that may compete with the Company or any
      of
      its Affiliates. To the best of the Company’s Knowledge, no officer, director,
      stockholder, employee or any of their Family Members has any pecuniary interests
      in any contract, commitment, agreement or property (real or personal), tangible
      or intangible, used in or pertaining to the business of the Company or any
      of
      its Affiliates (other than such contracts that relate to such person’s ownership
      of Common Stock or other securities of the Company or any of its
      Affiliates). 

     

    Intellectual
      Property.
      

     

    Schedule
      3.9(a)
      sets
      forth a full and complete list of all patents, patent applications, trademarks,
      service marks, software, trade names and copyrights owned by the Company
      (collectively, the “Owned
      Intellectual Property”)
      and
      all patents, patent applications, trademarks, service marks, licensed software,
      trade names and copyrights used but not owned by the Company (collectively,
      the
“Licensed
      Intellectual Property”
      and,
      together with the Owned Intellectual Property, the “Intellectual
      Property”).
      The
      Company owns all right, title and interest in and to the Owned Intellectual
      Property, free and clear of any Liens, and has a valid and enforceable
      contractual right to use the Licensed Intellectual Property. Without limiting
      the generality of the foregoing, the Company has a valid and enforceable right
      to use all licensed software that is material to the conduct of its business,
      and the Company is using all such licensed software in compliance, in all
      material respects, with the applicable license agreements. The Intellectual
      Property listed on Schedule
      3.9(a)
      is the
      only intellectual property that is necessary for the Company to conduct its
      business (as such business is presently conducted or as it is proposed to be
      conducted). The loss or expiration of any Intellectual Property is not
      threatened, pending or reasonably foreseeable. The Company and its Affiliates
      have used their reasonable best efforts to protect the Intellectual Property.
      No
      present or former stockholder, officer, director, employee, consultant, agent
      or
      independent contractor of the Company or any of its Affiliates has claimed
      any
      ownership or other right in or to any Intellectual Property nor, to the best
      of
      the Company’s Knowledge, owns or has any other right in or to any Intellectual
      Property.

     

    The
      conduct of the business of the Company (as such business is presently conducted
      and as it is proposed to be conducted) has not infringed or misappropriated
      and
      will not infringe or misappropriate any proprietary rights of third parties,
      and, to the best of the Company’s Knowledge, the Owned Intellectual Property has
      not been infringed or misappropriated by third parties. No third party has
      asserted any claim or, to the best of the Company’s Knowledge, has threatened to
      assert any claim against the Company or any of its Affiliates with respect
      to
      (i) the continued employment by, or association with, the Company or any of
      its
      Affiliates of any of their present officers, employees or consultants, (ii)
      the
      invalidity, use, misuse or unenforceability of any of the Intellectual Property
      owned or used by the Company or any of its Affiliates, or (iii) the use of
      any
      information that the Company or any of its Affiliates is purportedly prohibited
      from using under any agreements or arrangements or any Laws applicable to unfair
      trade practices, unfair competition, trade secrets or proprietary information.
      The Company has taken all reasonable measures to protect the proprietary nature
      of each item of its Intellectual Property, and to maintain in confidence all
      trade secrets and confidential information, that it owns or uses.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Neither
      the Company nor any of its Affiliates has any need to utilize any inventions,
      trade secrets or proprietary information of any of its employees made prior
      to
      or during their employment by the Company or of any other third parties, except
      for inventions, trade secrets or proprietary information that have been assigned
      or licensed to the Company or one of its Affiliates. All intellectual property
      rights relating to products or services prepared or developed for the Company
      or
      one of its Affiliates by their respective employees or consultants have been
      properly assigned to the Company or one of its Affiliates.

     

    Insurance.

     

    A
      description of, or copies of, all policies of title, liability, fire, worker’s
      compensation and other forms of insurance (including bonds) insuring the
      Company’s properties, assets and operations has been made available for
      inspection and review by Investor and/or its counsel. Except as set forth on
      Schedule
      3.10
      hereto,
      all such policies are in full force and effect, have been underwritten by
      unaffiliated insurers and the Company believes are sufficient for all applicable
      requirements of Law. All such policies shall continue in full force and effect
      after the Closing Date with respect to occurrences which would have been covered
      by such policies prior to the Closing Date, except to the extent the Company’s
      Board of Directors determines that such policies or coverages should be
      changed.

     

    Tax
      Returns.

     

    The
      Company has filed or caused to be filed all Tax returns that are required to
      have been filed in any jurisdiction, and have paid all Taxes shown to be due
      and
      payable on such returns and all other Taxes and assessments levied upon them
      or
      their properties, assets, income or franchises, to the extent such Taxes and
      assessments have become due and payable and before they have become delinquent,
      except for any Taxes and assessments the amount, applicability or validity
      of
      which is currently being contested in good faith by appropriate proceedings
      and
      with respect to which the Company has established adequate reserves in
      accordance with GAAP. As of the date hereof, there are no material Taxes due
      with respect to, or material assessments levied upon, the properties, assets,
      income or franchises of the Company. The amount shown on the Financial
      Statements as provision for taxes is sufficient in all material respects for
      payment of all accrued and unpaid federal, state, county, local and foreign
      taxes for the period then ended and all prior periods.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Material
      Contracts and Obligations. 

     

    A
      true,
      complete and accurate list, categorized by subject matter, of all Material
      Contracts has been made available for inspection and review by counsel for
      Investor.

     

    Except
      as
      set forth on Schedule
      3.12(b)
      hereto,
      all Material Contracts are valid, binding and in full force and effect as to
      the
      Company and neither the Company nor, to the Company’s Knowledge, any other party
      thereto, is in material breach or violation of, or material default under,
      nor
      is there any reasonable basis for a claim of such breach or violation by the
      Company or such default by the Company under, the terms of any such Contract,
      and no event has occurred which constitutes or, with the lapse of time or the
      giving of notice or both, would constitute, such a material breach, violation
      or
      default by the Company thereunder.

     

    None
      of
      the Principal Stockholders are a party to or are bound by (i) any stockholder
      agreement, voting trust, proxy or similar arrangement restricting or governing
      a
      Principal Stockholder’s rights to vote or dispose of its shares of Common Stock,
      (ii) any loan or advance to the Company or any of its Affiliates or any contract
      or agreement relating to the making of any such loan or advance, (iii) any
      loan,
      commitment, contract or agreement obligating any Principal Stockholder to repay
      any amounts to the Company or any of its Affiliates, (iv) any guarantee or
      other
      contingent liability in respect of any Liens or any other debt, liability or
      obligation of the Company or any of its Affiliates or (v) any agreement or
      commitment, whether absolute or contingent, obligating any such Principal
      Stockholder to sell or otherwise dispose of any shares of Common Stock, or
      to
      refrain from any such sale, other than pursuant to the Investor’s Rights
      Agreement or Co-Sale Agreement.

     

    Real
      Property. 

     

    The
      Company does not own any real property.

     

    A
      true
      and accurate description of all real and material personal property leased
      by
      the Company setting forth (i) the name of the lessor and (ii) a description
      of
      the property leased has been made available for inspection and review by
      Investor and/or its counsel. With respect to such leases, the property described
      in each lease is presently used by the Company as lessee under the terms of
      such
      lease, and such leases are in full force and effect, and the Company is not
      in
      default of the terms of any such lease in any material respect nor, to the
      best
      of the Company’s Knowledge, is any lessor in default in any material respect
      under any such lease nor have any events occurred which, with the giving of
      notice or the lapse of time, or both, would be a default under any such lease,
      and (b) the occupation, possession and use of the properties leased by the
      Company has not been disturbed and, to the Company's Knowledge, no claim has
      been asserted or threatened which is adverse to the rights of the Company to
      the
      continued occupation, possession and use of such leased property. The Company
      has good title to, or a valid leasehold interest in, all of its material
      properties and assets, including all properties and assets reflected in the
      Financial Statements, except those disposed of since the date thereof in the
      ordinary course of business.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Necessary
      Licenses and Permits.
      Except
      as set forth on Schedule
      3.14,
      the
      Company has all licenses, permits, consents, concessions and other
      authorizations of governmental, regulatory or administrative agencies or
      authorities, whether foreign, federal, state, or local (collectively,
“Permits”),
      required to own and lease its properties and assets, to conduct its business
      as
      now conducted and to comply in all material respects with all applicable
      Laws.

     

    Compliance
      with Law.
      The
      Company is, in all material respects, in compliance with all applicable and
      material Laws, regulations, orders, judgments, decrees, permits, licenses,
      franchises and authorizations.

     

    Environmental
      Compliance.
      Seller
      has complied, and is complying with, all Environmental Laws affecting the
      Company, and there are no pending or, to the Company's Knowledge, threatened
      Environmental Liabilities against the Company.

     

    Litigation.
      Except
      as set forth on Schedule
      3.17,
      there
      is no suit, claim, action, proceeding or investigation pending or, to the best
      of the Company's Knowledge, threatened against the Company at law or in equity
      or before any Governmental Authority or before any arbitrator of any kind and,
      to the best of the Company’s Knowledge, there is no reasonable basis for any
      such suit, claim, action, proceeding or investigation.

     

    No
      Material Developments.
      Except
      as set forth on Schedule
      3.18,
      since
      the date of the Financial Statements, there has been no occurrence or
      development, nor is there any change pending, which has had, or might reasonably
      be expected to have, a Material Adverse Effect.

     

    Employee
      Benefit Plans. 

     

    The
      Company has provided a true and complete copy of each Employee Plan, current
      summary plan description (and, if applicable, related trust documents) and
      all
      amendments thereto and written interpretations thereof.

     

    The
      Company has never maintained an “employee benefit plan” (as defined in Section
      3(3) of ERISA) that is or was (i) a plan subject to Title IV of ERISA or (ii)
      a
“multi-employer plan” (as defined in Section 3(37) of ERISA).

     

    Each
      Employee Plan that is intended to be qualified under Section 401(a) of the
      Code
      is so qualified and the Company has received, within the last two years, a
      favorable determination letter from the Internal Revenue Service with respect
      to
      each such Employee Plan.

     

    Full
      payment has been made of all amounts that the Company is or has been required
      to
      have paid as contributions to or benefits due under any Employee Plan under
      applicable Law or under the terms of any such plan.

     

    Neither
      the Company nor any of its directors, officers, employees or Affiliates has
      engaged in any transaction with respect to the Employee Plans that could subject
      the Company to a tax, penalty or liability for a prohibited transaction, as
      defined in Section 406 of ERISA or Section 4975 of the Code. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    To
      the
      Company's Knowledge, there are no facts or circumstances that might give rise
      to
      any liability under Title I of ERISA. 

     

    Certain
      Contracts.
      Any and
      all written employment agreements, arrangements or understandings (and
      description thereof if not otherwise reduced to writing) with any of its
      officers, directors, employees, partners, agents or shareholders have been
      made
      available for inspection and review by Investor and/or its counsel.


     

    Corporate
      Documents, Books and Records.
      The
      minute books of the Company contain accurate records of all meetings and
      consents in lieu of meetings of the Board (and its committees) and stockholders
      of the Company since incorporation. Except as reflected in such minute books
      or
      as set forth on Schedule
      3.21,
      there
      are no minutes of meetings or consents in lieu of meetings of the Board (or
      its
      committees) or of the stockholders of the Company. The books and records of
      the
      Company accurately reflect the material transactions to which the Company is
      a
      party or by which its properties are subject or bound, and such books and
      records have been properly kept and maintained in all material
      respects.

     

    Disclosure.
      No
      representation, warranty or statement made in this Agreement or in any
      agreement, certificate, statement or document furnished by or on behalf of
      the
      Company at the Closing or in connection with Investor’s evaluation of the
      transactions contemplated by this Agreement contains or will contain any untrue
      statement of material fact or omit to state a material fact necessary in order
      to make the statements contained herein or therein, in light of the
      circumstances in which they were made, not misleading.

     

    Certain
      Agreements of Officers and Employees.
      To the
      Company’s Knowledge, no officer or employee of the Company is, or is now
      expected to be, in violation of any term of any employment contract, patent
      disclosure agreement, proprietary information agreement, noncompetition
      agreement, nonsolicitation agreement, or any other contract or agreement or
      restrictive covenant relating to the right of any such officer or employee
      to be
      an employee, to be employed by the Company, or because of the nature of the
      business conducted or proposed to be conducted by the Company or relating to
      the
      use of trade secrets or proprietary information of others, and to the Company’s
      Knowledge, the continued employment of the Company’s officers and employees does
      not subject the Company or Investor to any liability with respect to any of
      the
      foregoing matters.

     

    Registration
      Rights.
      Except
      as otherwise contemplated by this Agreement, no Person has demand or other
      registration rights to cause the Company to file any registration statement
      under the Securities Act relating to the securities of the Company or any right
      to participate in any such registration statement

     

    Investment
      Company.
      Neither
      the Company, nor any Person controlling the Company is an “investment company”
      within the meaning of the Investment Company Act of 1940, as
      amended.

     

    Private
      Offering; No Registration.
      No form
      of general solicitation or general advertising was used by the Company or,
      to
      the Company’s Knowledge, by its representatives in connection with the offer and
      sale of the Purchased Shares. No registration of the Purchased Shares pursuant
      to the provisions of the Securities Act or any state securities or “blue sky”
      laws will be required by the offer, sale or issuance of the Purchased Shares
      pursuant to this Agreement.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Employees.
      J.
      Kevin Shurtleff and Eric J. Ladd are the only employees of the Company. The
      Company is in compliance with all applicable laws respecting employment and
      employment practices, terms and conditions of employment, wages and
      law.

     

    Trade
      Relations.
      To the
      Company's Knowledge, there exists no actual or threatened termination,
      cancellation or limitation of, or any adverse modification or change in, the
      business relationship or business of the Company or its business with any
      customer or any group of customers which is, individually or in the aggregate,
      material to the business of the Company, or with any material
      supplier.

     

    Brokers
      and Finders.
      No
      Person has or will have any right or valid claim for any commission, fee or
      other compensation in connection with the sale and purchase of the Purchased
      Shares as an investment banker, finder or broker, or in any similar capacity.
      

     

     

    INVESTOR
      REPRESENTATIONS

     

    In
      order
      to induce the Company to enter into this Agreement and to sell the Purchased
      Shares, Investor hereby represents and warrants that: 

     

    No
      Distribution. 

     

    Investor
      is acquiring the Purchased Shares for investment purposes only, for its own
      account, and not as nominee or agent for any other Person, and not with a view
      to, or for resale in connection with, any distribution thereof within the
      meaning of the Securities Act; provided that Investor may transfer the Purchased
      Shares, in whole or in part, to another entity under common control with the
      Investor.

     

    Investor
      is an “accredited investor” within the meaning of Rule 501 of Regulation D as
      promulgated under the Securities Act. Investor was not organized for the
      specific purpose of acquiring the Purchased Shares.

     

    Investor
      has sufficient knowledge and experience in business and financial matters so
      as
      to be able to evaluate the risks and merits of its investment in the Purchased
      Shares, and Investor is able financially to bear the risks thereof.

     

    Authorization. Investor
      has taken all actions necessary to authorize it (a) to execute, deliver and
      perform all of its obligations under this Agreement and (b) to consummate the
      transactions contemplated hereby. This Agreement is a legally valid and binding
      obligation of Investor, enforceable against it in accordance with its terms,
      except for (i) the effect thereon of bankruptcy, insolvency, reorganization,
      moratorium and other similar Laws relating to or affecting the rights of
      creditors generally and (ii) limitations imposed by federal or state Laws or
      equitable principles upon the specific enforceability of any of the remedies,
      covenants or other provisions thereof and upon the availability of injunctive
      relief or other equitable remedies.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    COVENANTS
      TO BE PERFORMED PRIOR

    TO
      THE FIRST TRANCHE CLOSING

     

    Between
      the date hereof and the First Tranche Closing Date, the Company agrees, and
      the
      Principal Stockholders agree to cause the Company, to comply with the following
      covenants and agreements:

     

    Conduct
      of Business.
      

     

    Except
      as
      otherwise provided in paragraph (b), the Company shall:

     

    conduct
      its business as it is presently conducted (or proposed to be conducted) and
      use
      commercially reasonable efforts to maintain relationships with all current
      or
      prospective customers, suppliers, sales agents, lessors, lessees, licensors,
      licensees and others having business relations with the Company on substantially
      the same terms generally available on the date of this Agreement;

     

    Maintain
      in effect all Permits material to the operation of its business;

     

    Maintain
      its assets and properties in good repair, order and condition, reasonable wear
      and use excepted;

     

    Maintain
      its insurance coverage consistent with past practice;

     

    Maintain
      its books and records substantially in accordance with prior practice, except
      for changes mandated by the Financial Accounting Standards Board, any
      governmental authority or any other third party, or as required by
      GAAP;

     

    refrain
      from issuing or selling any capital stock or equity interests, or any options,
      warrants or other rights or securities that permit any third party to acquire
      any such securities in any manner, except in accordance with this
      Agreement;

     

    refrain
      from declaring, setting aside, increasing or paying any dividend, or declaring
      or making any distribution on, or directly or indirectly combining, redeeming,
      reclassifying, purchasing, or otherwise acquiring, any shares of its capital
      stock;

     

    Refrain
      from becoming primarily or secondarily liable for any indebtedness for borrowed
      money;

     

    Refrain
      from incurring any Liens;

     

    refrain
      from selling, leasing or transferring or otherwise disposing of any asset having
      a value in excess of $10,000, other than those disposed of in the ordinary
      course of business consistent with past practice;

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Refrain
      from merging or consolidating with another entity;

     

    Refrain
      from amending or modifying its organizational documents, or amending, modifying
      or terminating any contract or agreement listed on Schedule 2.9;

     

    Refrain
      from waiving any material claims or rights of substantial value, other than
      in
      the ordinary course of business;

     

    refrain
      from making any operating or capital expenditures or commitments or purchasing
      any assets having a value in excess of $10,000, other than in accordance with
      written expenditure plans or programs that have been provided to
      Investor;

     

    refrain
      from increasing the benefits provided under any employee benefit plan or
      increasing the general rates of compensation of any employee or employees,
      except as required by Law;

     

    Refrain
      from entering into any contract or commitment involving aggregate payments
      in
      excess of $10,000, other than agreements freely terminable by the Company or
      any
      of its Affiliates without penalty upon 60 days’ notice or less;

     

    Refrain
      from taking any action, or omitting to take any action, that would cause any
      representation or warranty contained in this Agreement to become untrue;
      and

     

    Refrain
      from agreeing to take any action that would violate any other item of this
      Section.

     

    Notwithstanding
      anything herein to the contrary, the Company may take any action expressly
      contemplated or required under this Agreement or the agreements executed in
      connection therewith and effect any other transactions expressly approved in
      writing by any executive officer of Investor.

     

    Notification.
      The
      Company shall promptly notify Investor of (a) any failure of the Company to
      comply in any material respect with any covenant or agreement contained herein
      that is required to be complied with prior to the First Tranche Closing Date,
      or
      any event, occurrence or condition that could adversely affect the ability
      of
      the Company to perform any such covenants or agreements prior to the First
      Tranche Closing Date, (b) any event, occurrence or condition that causes or
      will
      cause any representation or warranty contained in Article III to become untrue
      or (c) any event, occurrence or condition that could result in a Material
      Adverse Effect. The Company shall thereafter consult with Investor regarding
      the
      actions the Company and its Affiliates have taken and propose to take with
      respect thereto.

     

    Agreements
      with Directors, Officers, Employees
      and Shareholders.
      The
      Company shall cause (a) each of the Principal Stockholders and Eric J. Ladd
      to
      enter into a confidential information and inventions assignment agreement in
      substantially the form attached hereto as Exhibit D, or in such other form
      acceptable to Investor, and (b) each of J. Kevin Shurtleff and Eric J. Ladd
      to
      enter into an employment agreement in substantially the form attached hereto
      as
      Exhibit E, or in such other form acceptable to Investor. The Company shall
      use
      commercially reasonable efforts to obtain director and officer liability
      insurance coverage on the terms and conditions contemplated by the Investor’s
      Rights Agreement, effective as of the First Tranche Closing Date.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Approvals.
      

     

    The
      Company (i) shall make on a prompt and timely basis any governmental or
      regulatory notifications, applications and filings required to be made by it,
      and shall use commercially reasonable efforts to receive all Permits and other
      Governmental Approvals, that are necessary to issue the First Tranche Shares
      or
      to consummate any other transaction that this Agreement contemplates will be
      completed on or before the First Tranche Closing Date and (ii) shall maintain
      the effectiveness of any such Permits and approvals in accordance with their
      respective terms.

     

    The
      Company shall (i) use commercially reasonable efforts to obtain prior to the
      First Tranche Closing Date all consents or approvals of third parties that
      are
      necessary or appropriate to issue the First Tranche Shares or to consummate
      any
      other transaction that this Agreement contemplates will be completed on or
      before the First Tranche Closing Date and (ii) shall maintain the effectiveness
      of any such consents or approvals in accordance with their respective
      terms.

     

    Due
      Diligence.
      Between
      the date of this Agreement and the First Tranche Closing Date, the Company
      will
      (a) allow Investor and its representatives full and free access during normal
      business hours to the Company’s officers and directors, properties, contracts,
      books and records, and other non-privileged documents and data of the Company,
      (b) furnish Investor and its representatives with copies of all such contracts,
      books and records, and other existing documents and data as Investor may
      reasonably request, (c) furnish Investor and its representatives with such
      additional financial, operating, and other data and information as Investor
      and
      its representatives may reasonably request and (d) furnish Investor, upon
      request, with drafts of any of the agreements or instruments described herein
      that must be completed, executed or delivered on or prior to the First Tranche
      Closing Date, including those referenced in Section 5.3.

     

    Financial
      Statements.
      The
      Company shall promptly deliver to Investor, within five days after they are
      prepared, true and complete copies of all monthly financial statements of the
      Company, as applicable, prepared in the ordinary course in accordance with
      GAAP
      applied on a consistent basis throughout the periods indicated and with each
      other. 

     

    Satisfaction
      of Conditions.
      Without
      limiting the generality or effect of any other provision of this Article V,
      the
      Company will use commercially reasonable efforts to complete the milestones
      set
      forth on Exhibit G hereto and satisfy promptly all of the conditions required
      to
      be satisfied on or prior to the First Tranche Closing Date under Article
      VI.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    CONDITIONS
      TO THE INVESTOR’S OBLIGATIONS 

     

    Conditions
      to Investor’s Obligations at the First Tranche
      Closing.
      Investor’s obligation to purchase the First Tranche Shares is subject to
      compliance by the Company with its agreements and representations herein
      contained, and to the satisfaction, on or prior to the First Tranche Closing
      Date, of the following conditions:

     

    Debt
      Restructuring. The
      Company shall have repaid all of its indebtedness on terms and conditions
      satisfactory to Investor in its sole discretion.

     

    Management
      Agreement.
      The
      Company shall have entered into and executed the Management
      Agreement.

     

    Representations
      and Warranties; Compliance with Covenants. The
      representations and warranties of the Company and the Principal Stockholders
      contained herein shall be true and correct in all material respects on and
      as of
      the First Tranche Closing Date, and the Company and the Principal Shareholders
      shall have performed and complied with all agreements, covenants and obligations
      required to be performed or complied with by them prior to the First Tranche
      Closing.

     

    Filing
      of Certificates of Designation. The
      Series A Certificate of Designation shall have been duly filed by the Company
      with the Secretary of State of the State of Delaware and shall be
      effective.

     

    Government
      Proceedings; Litigation.
      As
      of the
      First Tranche Closing Date, there shall not be in effect a preliminary or
      permanent injunction, temporary restraining order or other judicial or
      administrative order or decree in any jurisdiction, the effect of which declares
      unlawful or enjoins or prohibits this Agreement or any of the transactions
      contemplated hereby or thereby (a “Restrictive
      Order”).
      In
      addition, no action or proceeding before any court or government body will
      be
      pending or threatened that, in the reasonable judgment of Investor, makes it
      inadvisable or undesirable to consummate the transactions contemplated by this
      Agreement or any other agreement to be executed in connection therewith by
      reason of the probability that the action or proceeding will result in a
      Restrictive Order.

     

    Legality;
      Governmental and Other Authorizations. The
      sale
      of the First Tranche Shares by the Company to Investor shall not be prohibited
      by any Law, and shall not subject Investor to any penalty, special tax, or
      other
      onerous condition imposed by a Governmental Authority. All necessary consents,
      approvals, licenses, permits, orders and authorizations of, or registrations,
      declarations and filings with, any Governmental Authority or of or with any
      other Person, with respect to any of the transactions contemplated by this
      Agreement (“Governmental
      Approvals”),
      shall
      have been duly obtained or made and shall be in full force and
      effect.

     

    No
      Material Adverse Effect.
      Since
      the
      date of the Financial Statements, (a) there shall have been no event, occurrence
      or conditions that has resulted in, or with the lapse of time will result in,
      a
      Material Adverse Effect; (b) except for the First Tranche Shares and as
      otherwise contemplated by this Agreement, there shall not have been any change
      in the Capital Securities, or increase in the indebtedness, of the Company;
      and
      (c) the Company shall not have incurred any liability or obligation or any
      group
      of related liabilities or obligations, direct or contingent, that is material
      to
      the Company that is required to be disclosed on a balance sheet or the footnotes
      thereto in accordance with GAAP and is not disclosed on the last balance sheet
      or footnotes thereto of the Company previously provided to the
      Investor.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Delivery
      of First Tranche Closing Documents.
      The
      Company shall have delivered to Investor, in form and substance reasonably
      satisfactory to Investor, the following:

     

    certificates
      evidencing the First Tranche Shares to be issued and sold to Investor at the
      First Tranche Closing and registered in the name of Investor;

     

    the
      Investor’s Rights Agreement duly executed by the Company and the Principal
      Stockholders;

     

    the
      Co-Sale Agreement duly executed by the Company and the Principal
      Stockholders;

     

    each
      of
      the invention assignments duly executed by the Principal Stockholders and Eric
      J. Ladd;

     

    each
      of
      the employment agreements duly executed by the Company and J. Kevin Shurtleff
      and Eric J. Ladd;

     

    resolutions
      of the Board of Directors of the Company, certified by the Secretary or
      Assistant Secretary of the Company, to be duly adopted and in full force and
      effect on such date, authorizing (A) the execution, delivery and performance
      of
      this Agreement, the Investor’s Rights Agreement, the Co-Sale Agreement and any
      other agreements or instruments contemplated hereby and thereby and the
      consummation of the transactions contemplated hereby and thereby, (B) the
      issuance of the Purchased Shares and the reservation of the number of shares
      of
      Common Stock issuable upon conversion of the Purchased Shares, and (C) the
      appropriate officers of the Company to execute and deliver this Agreement,
      the
      Investor’s Rights Agreement, the Co-Sale Agreement, and any other agreements or
      instruments contemplated hereby and thereby and stock certificates evidencing
      the Purchased Shares;

     

    a
      certificate of an appropriate officer of the Company or other appropriate
      person, dated the First Tranche Closing Date, certifying that (A) all of the
      conditions set forth in this Article VI are satisfied on and as of the First
      Tranche Closing Date and (B) the representations and warranties of the Company
      and the Principal Stockholders contained herein are true and correct in all
      material respects on and as of the First Tranche Closing Date;

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    a
      certificate, dated the most recent practicable date prior to the First Tranche
      Closing Date, issued by the Secretary of State of the State of Delaware as
      to
      the good standing of the Company and such certificates, dated the most recent
      practicable date prior to the First Tranche Closing Date, issued by the
      appropriate secretary of state showing that the Company is qualified as a
      foreign corporation and in good standing in all other jurisdictions in which
      it
      has executive offices or transacts business;

     

    a
      copy of
      the certificate of incorporation of the Company, certified as of the most recent
      practicable date by the Secretary of State of the State of Delaware, and
      certified by the Secretary or Assistant Secretary of the Company, as true and
      correct as of the First Tranche Closing Date; and

     

    such
      additional information and materials Investor may reasonably request and
      specifically identify prior to the Closing Date.

     

    General.
      All
      instruments and legal, governmental, administrative and corporate proceedings
      in
      connection with the transactions contemplated by this Agreement shall be
      satisfactory in form and substance to Investor and its counsel, and Investor
      and
      its counsel shall have received copies of all documents, including, without
      limitation, records of corporate or other proceedings and any consents,
      licenses, approvals, permits and orders required to be secured by the Company
      in
      connection with the transactions contemplated herein or which Investor or its
      counsel may have requested in connection therewith.

     

    Due
      Diligence.
      Investor shall have completed to its sole
      satisfaction a due diligence investigation of the Company.

     

    Conditions
      of the Company’s Obligations at the First Tranche
      Closing.

     

    The
      Company’s obligation to sell and issue the First Tranche Closing Shares pursuant
      to this Agreement is subject to the compliance by Investor with the Agreements
      and representations herein contained, and to the satisfaction, on or prior
      to
      the First Tranche Closing Date, of the following conditions:

     

    Representations
      and Warranties.
      Each
      of
      the representations and warranties of Investor contained herein shall be true
      and correct in all material respects on and as of the First Tranche Closing
      Date.

     

    No
      Restrictive Order.
      As
      of the
      First Tranche Closing Date, there shall not be in effect any Restrictive
      Order.

     

    Governmental
      Approvals.
      All
      Governmental Approvals required to be obtained on or before the First Tranche
      Closing Date shall have been duly obtained or made and shall be in full force
      and effect.

     

    COVENANTS
      TO BE PERFORMED PRIOR

    TO
      THE SECOND AND THIRD TRANCHE CLOSINGS

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Prior
      to
      the Second and Third Tranche Closing Dates, the Company agrees, and the
      Principal Shareholders agree to cause the Company, to comply with the following
      covenants and agreements:

     

    Conduct
      of Business.
      i.
      Except
      as otherwise provided in paragraph (b), the Company shall comply in all respects
      with the covenants and agreements set forth in Section 5.1(a).

     

    Notwithstanding
      anything herein to the contrary, the Company may take any action expressly
      contemplated or required under this Agreement or the other agreements executed
      in connection herewith and effect any other transactions expressly approved
      in
      writing by any executive officer of Investor or duly approved by the Board
      of
      Directors of the Company.

     

    Notification.
      The
      Company shall promptly notify Investor of (a) any failure of the Company to
      comply in any material respect with any covenant or agreement contained herein
      that is required to be complied with prior to the Second and Third Tranche
      Closing Date, or any event, occurrence or condition that could adversely affect
      the ability of the Company to perform any such covenants or agreements prior
      to
      the Second and Third Tranche Closing Date, (b) any event, occurrence or
      condition that causes or will cause any representation or warranty contained
      in
      Article III to become untrue or (c) any event, occurrence or condition that
      could result in a Material Adverse Effect. The Company shall thereafter consult
      with Investor regarding the actions the Company and its affiliates have taken
      and propose to take with respect thereto.

     

    Approvals.
      The
      Company shall use commercially reasonable efforts to maintain the effectiveness
      of all Governmental Approvals or other consents or approvals obtained prior
      to
      the First Tranche Closing Date under Section 5.4.

     

    Satisfaction
      of Conditions.
      Without
      limiting the generality or effect of any other provision of this Article VII,
      the Company will use commercially reasonable efforts to satisfy promptly all
      of
      the conditions required to be satisfied on or prior to the Second or Third
      Tranche Closing Date, as the case may be, under Article VIII.

     

    CONDITIONS
      TO SECOND AND THIRD TRANCHE CLOSINGS

     

    Conditions
      of the Investor’s Obligations at the Second and Third Tranche
      Closing.

     

    The
      obligations of Investor under Section 2.3 or 2.4, as the case may be, of this
      Agreement are subject to the fulfillment on or before the applicable Closing
      Date of each of the following conditions, the waiver of which shall not be
      effective against Investor without its consent thereto in writing:

     

    Trigger
      Event.
      The
      Second Tranche Trigger Event or the Third Tranche Trigger Event, as the case
      may
      be, shall have occurred.

     

    Representations
      and Warranties.
      The
      representations and warranties of the Company and the Principal Stockholders
      contained in Article III shall be true and correct on and as of the applicable
      Closing Date with the same effect as though such representations and warranties
      had been made on and as of such date.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Performance.
      The
      Company and the Principal Stockholders shall have performed and complied with
      in
      all material respects all agreements, covenants and obligations contained in
      this Agreement that are required to be performed or complied with by them on
      or
      before the applicable Closing Date. 

     

    No
      Material Adverse Effect.
      Between
      the First Tranche Closing Date and the applicable Closing Date, there shall
      have
      been no event, occurrence or condition that has resulted in, or with the lapse
      of time will result in, a Material Adverse Effect.

     

    Government
      Proceedings; Litigation.
      As
      of the
      applicable Closing Date, there shall not be in effect any Restrictive Order.
      In
      addition, no action or proceeding before any Governmental Authority will be
      pending or threatened that, in the reasonable judgment of the Investor, makes
      it
      inadvisable or undesirable to consummate the transaction contemplated by Section
      2.3 or 2.4, as the case may be, of this Agreement by reason of the probability
      that the action or proceeding will result in a Restrictive Order.

     

    Governmental
      Approvals.
      All
      Governmental Approvals obtained prior to the First Tranche Closing Date shall
      remain effective, final and non-appealable as of the applicable Closing Date
      on
      the same terms and conditions in effect as of the First Tranche Closing
      Date.

     

    Closing
      Documents.
      Investor
      shall have received all of the following, in form and substance satisfactory
      to
      Investor:

     

    certificates
      evidencing the applicable Purchased Shares to be issued and sold to Investor
      at
      the Closing and registered in the name of Investor;

     

    a
      certificate of an appropriate officer of the Company, dated as of the applicable
      Closing Date, certifying that (A) all of the conditions set forth in this
      Article 8.1 are satisfied as of the applicable Closing Date and (B) the
      representations and warranties of the Company contained herein are true and
      correct in all material respects on and as of the applicable Closing
      Date;

     

    a
      certificate, dated the most recent practicable date prior to the applicable
      Closing Date, issued by the Secretary of State of the State of Delaware as
      to
      the good standing of the Company; and

     

    such
      other documents, agreements, consents and other instruments relating to the
      transactions contemplated by this Agreement and as Investor may reasonably
      request.

     

    Conditions
      of the Company’s Obligations at the Second or Third Tranche
      Closing.
      The
      obligations of the Company to Investor under Section 2.3 or 2.4, as the case
      may
      be, of this Agreement are subject to the fulfillment on or before the applicable
      Closing Date of each of the following conditions, the waiver of which shall
      not
      be effective against the Company without its consent thereto in writing:


     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Representations
      and Warranties.
      Each
      of
      the representations and warranties of Investor contained herein shall be true
      and correct in all material respects on and as of the applicable Closing
      Date.

     

    No
      Restrictive Orders.
      As
      of the
      applicable Closing Date, there shall not be in effect any Restrictive
      Order.

     

    Governmental
      Approvals.
      All
      Governmental Approvals obtained prior to the First Tranche Closing Date shall
      remain effective, final and non-appealable as of the applicable Closing Date
      on
      the same terms and conditions in effect as of the First Tranche Closing
      Date.

     

    INDEMNITY

     

    Indemnification. 

     

    The
      Company and each of the Principal Stockholders, jointly and severally, hereby
      agree, to indemnify Investor, its Affiliates and their directors, officers,
      employees, counsel, agents or representatives (collectively, the “Indemnified
      Parties”)
      against, and hold them harmless from, to the fullest extent lawful, all losses,
      claims, damages, liabilities, costs (including, without limitation, costs of
      preparation and reasonable attorneys’ fees and disbursements) and expenses,
      including expenses of investigation (collectively, “Indemnified
      Liabilities”),
      incurred by it or them and arising out of or in connection with this Agreement
      or the transactions contemplated hereby (or any other document or instrument
      executed herewith or pursuant hereto), whether or not the transactions
      contemplated by this Agreement are consummated and whether or not any
      Indemnified Party is a formal party to any proceeding, including, but not
      limited to: (a) the execution, delivery, performance or enforcement by the
      Company and the Principal Stockholders of this Agreement or any other agreement
      contemplated hereby; (b) any actual or proposed use of proceeds of the issuance
      and sale of the Purchased Shares hereunder, and (c) the breach or inaccuracy
      of
      any representation, warranty, covenant or agreement made by the Company or
      the
      Principal Stockholders herein, provided, however, that the Company and the
      Principal Stockholders shall not be liable to any Indemnified Party for any
      Indemnified Liabilities to the extent that it shall be finally determined by
      a
      court of competent jurisdiction (which determination is not subject to appeal
      or
      review) that such Indemnified Liabilities arose from the gross negligence or
      willful misconduct of such Indemnified Party. The Company and the Principal
      Stockholders, jointly and severally, hereby agree to reimburse any Indemnified
      Party promptly for all such Indemnified Liabilities as they are incurred by
      such
      Indemnified Party. The obligations of the Company and the Principal Stockholders
      to each Indemnified Party hereunder shall be separate obligations, and the
      Company’s and the Principal Stockholders’ liability to any such Indemnified
      Party hereunder shall not be extinguished solely because any other Indemnified
      Party is not entitled to indemnity hereunder. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    In
      case
      any action, claim or proceeding shall be brought against any Indemnified Party
      with respect to which indemnity may be sought against the Company and the
      Principal Stockholders (the “Indemnitors”)
      hereunder, such Indemnified Party shall promptly notify the Indemnitors in
      writing and the Indemnitors shall assume the defense thereof, including the
      employment of counsel reasonably satisfactory to such Indemnified Party and
      payment of all fees and expenses incurred in connection with the defense
      thereof. The failure to so notify the Indemnitors shall not affect any
      obligation they may have to any Indemnified Party under this Agreement or
      otherwise except to the extent that (as finally determined by a court of
      competent jurisdiction (which determination is not subject to any further review
      or appeal)) such failure materially and adversely prejudiced the Indemnitors.
      Each Indemnified Party shall have the right to employ separate counsel in such
      action, claim or proceeding and participate in the defense thereof, but the
      fees
      and expenses of such counsel shall be at the expense of each Indemnified Party
      unless (i) the Indemnitors have agreed to pay such expenses; (ii) the
      Indemnitors have failed promptly to assume the defense and employ counsel
      reasonably satisfactory to such Indemnified Party; or (iii) the named parties
      to
      any such action, claim or proceeding (including any impleaded parties) include
      any Indemnified Party and such Indemnifying Party or an Affiliate of such
      Indemnifying Party, and such Indemnified Party shall have been advised by
      counsel, and counsel for the Indemnitors acting in good faith concurs, that
      (x)
      there may be one or more legal defenses available to it which are different
      from
      or in addition to those available to the Indemnitors or (y) a conflict of
      interest may exist if such counsel represents such Indemnified Party and the
      Indemnitors. The Indemnitors shall not be liable for any settlement of any
      such
      action effected without their written consent (which shall not be unreasonably
      withheld). The Indemnitors agree that they will not, without the Indemnified
      Party’s prior written consent, consent to entry of any judgment or settle or
      compromise any pending or threatened claim, action or proceeding in respect
      of
      which indemnification or contribution may be sought hereunder unless the
      foregoing contains an unconditional release, in form and substance reasonably
      satisfactory to such Indemnified Party, of such Indemnified Party from all
      liability and obligation arising therefrom.

     

    If
      the
      indemnification provided for in this Section 9.1 is unavailable to, or
      insufficient to hold harmless, any Indemnified Party in respect of any
      Indemnified Liabilities referred to therein (for reasons other than such
      Indemnified Party’s gross negligence or willful misconduct as herein provided),
      then the Indemnitors shall have an obligation to contribute to the amount paid
      or payable by such Persons as a result of such Indemnified Liabilities in such
      proportion as is appropriate to reflect the relative fault of the Indemnitors,
      on the one hand, and such Indemnified Party, on the other hand, in connection
      with the actions which resulted in such Indemnified Liabilities as well as
      any
      other relevant equitable considerations. The amount paid or payable by any
      such
      Person as a result of the Indemnified Liabilities referred to above shall be
      deemed to include, subject to the limitations set forth in this Section 9.1,
      any
      reasonable legal or other fees or expenses reasonably incurred by such Person
      in
      connection with any investigation, lawsuit or legal or administrative action
      or
      proceeding. The parties hereto agree that it would not be just and equitable
      if
      contribution pursuant to this Section 9.1 were determined by pro rata allocation
      or by any other method of allocation which does not take account of the
      equitable considerations referred to in this Section 9.1(c).

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    All
      notices that are required under this Section 9.1 to be furnished to the
      Indemnitors may be furnished solely to the Company.

     

    Survival
      of Obligations.
      The
      obligations of the Indemnitors and Investor under this Article IX shall survive
      the issuance of the Purchased Shares and the termination of this
      Agreement.

     

    TERMINATION

     

    Termination
      Rights.
      This
      Agreement may be terminated at any time prior to the Third Tranche Closing
      Date:

     

    at
      any
      time by the written consent of the Company and Investor;

     

    by
      the
      Company or Investor (i) if the First Tranche Closing shall not have occurred
      on
      or before September 30, 2004 (the “First
      Termination Date”)
      , (ii)
      if the Second Tranche Closing shall not have occurred on or before December
      31,
      2004 (the “Second
      Termination Date”),
      or
      (iii) if the Third Tranche Closing shall not have occurred on or before March
      31, 2005 (the “Third
      Termination Date”
      and the
      First Termination Date, the Second Termination Date and Third Termination Date
      are sometimes individually or collectively referred to herein as the
“Temrination
      Date”);
      provided, however, that the right
      to
      terminate this Agreement under this Section 10.1(b) shall not be available
      to a
      party if its own failure to fulfill or perform any obligation under this
      Agreement has been a substantial cause of, or has substantially resulted in,
      the
      failure of the applicable Closing to occur on or before such date;

     

    by
      the
      Company if any of the conditions provided in Section 6.2 or 8.2, as the case
      may
      be, have not been satisfied on or before the applicable Termination Date and
      have not been waived by the Company;

     

    by
      Investor if any of the conditions provided in Section 6.1 or 8.1, as the case
      may be, have not been satisfied on or before the applicable Termination Date
      and
      have not been waived by Investor;

     

    by
      Investor if there has been a breach by the Company of any material
      representation, warranty or covenant contained in this Agreement and such breach
      has not been cured within 15 days after receipt of written notice thereof from
      Investor; or

     

    by
      the
      Company or Investor if any Governmental Authority shall have issued an order,
      decree or ruling or taken any other action enjoining or prohibiting the sale
      and
      purchase of the Purchased Shares and the other transactions contemplated by
      this
      Agreement and such order, decree, ruling or other action has become final and
      nonappealable.

     

    Effect
      of Termination.
      If this
      Agreement is terminated pursuant to Section 10.1, this Agreement shall be of
      no
      further force and effect and there shall be no further liability hereunder
      on
      the part of any party hereto or their respective Affiliates, directors,
      officers, shareholders, agents or other representatives; provided, however,
      that
      notwithstanding anything to the contrary contained herein, the provisions of
      Article IX, this Section 10.2 and Section 11.1 shall survive any termination
      of
      this Agreement.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    MISCELLANEOUS

     

    Expenses.
      Whether
      or not the Closing occurs, the Company shall directly pay 50% of the fees and
      expenses of counsel to Investor incurred in connection with the transactions
      contemplated by this Agreement.

     

    Legend.
      None
      of
      the
      Purchased Shares have been registered under the Securities Act or any state
      securities laws. The certificates representing the Purchased Shares shall bear
      substantially the following legend:

     

    THE
      SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND
      CONDITIONS OF THAT CERTAIN PREFERRED STOCK PURCHASE AGREEMENT BY AND BETWEEN
      TRULITE, INC. AND CONTANGO CAPITAL MANAGEMENT LLC, DATED JULY 26, 2004, AND
      HAVE
      NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
      OR
      ANY APPLICABLE STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED UNTIL (I) A
      REGISTRATION STATEMENT UNDER THE ACT OR SUCH APPLICABLE STATE SECURITIES LAWS
      SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (II) IN THE OPINION OF
      COUNSEL ACCEPTABLE TO THE COMPANY, REGISTRATION UNDER THE ACT OR SUCH APPLICABLE
      STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED
      TRANSFER.

     

    Notices. 

     

    All
      demands, notices, requests, consents and other communications required or
      permitted under this Agreement shall be in writing and shall be personally
      delivered or sent by facsimile machine (with a confirmation copy sent by one
      of
      the other methods authorized in this Section 11.3), commercial (including FedEx)
      or U.S. Postal Service overnight delivery service, or, deposited with the U.S.
      Postal Service mailed first class, registered or certified mail, postage
      prepaid, as set forth below:

     

     

    If
      to the
      Company, addressed to:

     

    573
      East
      950 North

    Orem,
      Utah 84079

    Attention:
      President

    Facsimile:
      (801) 426-6583

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    with
      a
      copy to:

    David
      L.
      Glazier

    Robinson,
      Seiler & Glazier, LC

    80
      North
      100 East

    P.
      O. Box
      1266

    Provo,
      Utah 84603-1266

     

    If
      to
      Investor, addressed to:

     

    William
      J. Berger

    Chief
      Executive Officer

    520
      Post
      Oak Blvd.

    Suite
      820

    Houston,
      Texas 77027

    Facsimile:
      (713) 417-3548

     

    with
      a
      copy to:

     

    Lisa
      M.
      Buchanan

    Jones,
      Walker, Waechter, Poitevent, Carrére & Denégre, L.L.P.

    Waterway
      Plaza Two

    10001
      Woodloch Forest Drive

    Suite
      350

    The
      Woodlands, TX 77380

    Facsimile:
      (281) 296-4404

    


    Notices
      shall be deemed given upon the earlier to occur of (i) receipt by the party
      to
      whom such notice is directed; (ii) if sent by facsimile machine, on the day
      (other than a Saturday, Sunday or legal holiday in the jurisdiction to which
      such notice is directed) such notice is sent if sent (as evidenced by the
      facsimile confirmed receipt) prior to 5:00 p.m. Houston, Texas Time and, if
      sent
      after 5:00 p.m. Eastern Time, on the day (other than a Saturday, Sunday or
      legal
      holiday in the jurisdiction to which such notice is directed) after which such
      notice is sent; (iii) on the first business day (other than a Saturday, Sunday
      or legal holiday in the jurisdiction to which such notice is directed) following
      the day the same is deposited with the commercial carrier if sent by commercial
      overnight delivery service; or (iv) the fifth day (other than a Saturday, Sunday
      or legal holiday in the jurisdiction to which such notice is directed) following
      deposit thereof with the U.S. Postal Service as aforesaid. Each party, by notice
      duly given in accordance therewith may specify a different address for the
      giving of any notice hereunder.

     

    Survival
      and Termination of Covenants, Agreements, Representations and
      Warranties.
      All
      covenants, agreements, representations and warranties made herein shall be
      deemed to have been relied on by each such party, notwithstanding any
      investigation made by such party or on its behalf. All representations and
      warranties made herein shall survive the execution and delivery of this
      Agreement and any Closing.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Amendments
      and Waivers.
      Except
      as otherwise expressly provided herein, 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)
      upon the written consent of the Company, the Principal Stockholders and
      Investor. Any amendment or waiver effected in accordance with this Section
      11.5
      shall be binding upon the Company, the Principal Stockholders and
      Investor.

     

    Choice
      of Law; Remedies; Submission to Jurisdiction. 

     

    THIS
      AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF
      THE
      STATE OF TEXAS (WITHOUT GIVING EFFECT TO ANY CONFLICTS OR CHOICE OF LAWS
      PROVISIONS WHICH WOULD CAUSE THE APPLICATIONS OF THE DOMESTIC SUBSTANTIVE LAWS
      OF ANY OTHER JURISDICTION).

     

    The
      parties hereto agree that irreparable harm would occur in the event that any
      of
      the agreements and provisions of this Agreement were not performed fully by
      the
      parties hereto in accordance with their specific terms or conditions or were
      otherwise breached, and that money damages are an inadequate remedy for breach
      of this Agreement because of the difficulty of ascertaining and quantifying
      the
      amount of damage that will be suffered by the parties hereto in the event that
      this Agreement is not performed in accordance with its terms or conditions
      or is
      otherwise breached. It is accordingly hereby agreed that the parties hereto
      shall be entitled to an injunction or injunctions to restrain, enjoin and
      prevent breaches of this Agreement by the other parties and to enforce
      specifically such terms and provisions of this Agreement in any court of the
      United States or any state having jurisdiction, such remedy being in addition
      to, and not in lieu of, any other rights and remedies to which the other parties
      are entitled to at law or in equity.

     

    Except
      as
      otherwise expressly provided in this Agreement any disputes arising out of,
      in
      connection with or with respect to this Agreement, the subject matter hereof,
      the performance or nonperformance of any obligation hereunder, or any of the
      transactions contemplated hereby may be adjudicated in the state or federal
      courts having jurisdiction in the County of Harris in the State of Texas. Each
      party hereto hereby irrevocably submits to the personal jurisdiction of such
      courts for the purpose of any such suit, action, counterclaim, or proceeding
      arising out of, in connection with or with respect to this Agreement, the
      subject matter hereof, the performance or non-performance of any obligation
      hereunder or any of the transactions contemplated hereby or thereby
      (collectively, a “Suit”).
      Each
      of the parties hereto hereby waives and agrees not to assert by way of motion,
      as a defense or otherwise in any such Suit, any claim that it is not subject
      to
      the jurisdiction of the above courts, that such Suit is brought in an
      inconvenient forum, or that the venue of such Suit is improper; provided,
      however, that nothing herein shall be construed as a waiver of any right that
      any party hereto may have to remove a Suit from a court of sitting in the State
      of Texas to the United States District Court having jurisdiction in the County
      of Harris in the State of Texas. The Company and Investor hereby agree that
      service of all writs, process and summonses in any Suit may be made upon such
      party by certified mail, return receipt requested, at its address as provided
      in
      Section 12.3. Nothing herein shall in any way be deemed to limit the ability
      of
      any party to serve any such writs, process or summonses in any other manner
      permitted by applicable Law.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

     

     

     

    Further
      Assurances.
      Each of
      the parties shall execute such documents and take, or cause to be taken, all
      appropriate action, and shall do or cause to be done, all things necessary,
      proper or advisable under applicable Laws to consummate the transactions
      contemplated hereby and obtain any consents, exemptions, authorizations, or
      other actions by, or give any notices to, or make any filings with, any
      Governmental Authority or any other Person.

     

    Entire
      Agreement; Counterparts; Section Headings.
      This
      Agreement, including all exhibits and other ancillary agreements hereto,
      contains the entire understanding of the parties hereto with respect to its
      subject matter. This Agreement supersedes all prior representations, agreements
      and understandings between the parties with respect to its subject matter.
      This
      Agreement may be executed in any number of counterparts, each of which shall
      be
      deemed an original, but all of which together shall constitute one and the
      same
      instrument. The descriptive headings of sections and paragraphs of this
      Agreement are inserted for convenience only and do not constitute a part of
      this
      Agreement, and shall not affect in any way the meaning or interpretation of
      this
      Agreement.

     

     

     

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the Company and Investor have executed this Agreement as of
      the
      day and year first above written.

    
      
        	 	 	 
	 	COMPANY:
	 	 
	 	TRULITE, INC.
	 
 	 
 	 
 
	 	By:  	
                /s/ William J. Berger

                
                  
William
                  J. Berger

              	 	 
	 	
                President
                  and Chief Executive Officer

              


      

      
        	 	 	 
	 	 	 
	 	INVESTOR:
	 	 
	 	TRULITE ENERGY PARTNERS, L.P.
	 
 	 
 	 
 
	 	By:  	CONTANGO
                CAPITAL PARTNERSHIP MANAGEMENT LLC
	 	 	
              
	 	 	
	 	
                
William
                J. Berger
	 	President
                and Chief Executive Officer


      

      
        	 	 	 
	 	 
	 	PRINCIPAL
                STOCKHOLDERS:
	 	 
	 	  	
                /s/
                  Kevin Shurtleff