Document:

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                            ASSET PURCHASE AGREEMENT

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                                 By and Between

                          POWER EFFICIENCY CORPORATION
                            (A Delaware corporation)

                                    PURCHASER

                                       and

                            PERFORMANCE CONTROL, LLC
                     (a Michigan limited liability company)

                                     SELLER

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

                              Dated August 7, 2000

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

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THIS  AGREEMENT  (the  "Agreement"),  made and entered into as of the 7th day of
August 2000, by and between Power Efficiency Corporation, a Delaware corporation
(the "Purchaser"),  with an office at 4220 Varsity Drive, Suite E, Ann Arbor, MI
48108, and Performance  Control,  LLC, a Michigan limited liability company (the
"Seller"), having an address 4220 Varsity Drive, Suite E, Ann Arbor, MI 48108.

                              W I T N E S S E T H:

         WHEREAS,  the Seller is engaged in the  assembly  and  distribution  of
motor controller  products and energy management related  electrical  components
(the "Business"); and

         WHEREAS, Seller desires to sell, and Purchaser desires to purchase, all
of Seller's assets employed in the Business as more fully described in Section 1
hereof;

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

                                    SECTION 1

                             Assets to be Purchased

         Subject  to the terms and  conditions  of this  Agreement,  the  Seller
hereby  agrees to sell,  assign,  transfer  and  deliver to  Purchaser,  and the
Purchaser agrees to purchase, acquire and accept from the Seller, at the Closing
(as hereinafter  defined) provided for herein,  the following  described assets,
properties  and rights  (collectively  the  "Assets")  on the  Closing  Date (as
hereinafter  defined),  including any additions thereto or replacements  thereof
between  the date  hereof and the  Closing  Date,  free and clear of any and all
liens, claims, charges,  restrictions and encumbrances,  except as expressly set
forth herein:

         1.1 Certain Contracts. Those contracts described on Schedule 1.1.

         1.2 Current  Product and Inventory.  All of Sellers current product and
inventory,  including  those  described on Schedule  1.2.  (Items  designated by
Seller as obsolete may be transferred, but shall be assigned no dollar value.)

          1.3 Permits.  All of Seller's right,  title and interest in and to all
state  and  municipal  permits,   certificates,   registrations,   licenses  and
authorizations  to operate  the  Business  as  described  on  Schedule  1.3 (the
"Permits).

          1.4 Books and Records. All of Seller's files,  documents,  records and
books of accounts,  including,  but not limited to, engineering drawings,  plans
and artwork, relating to the Assets and the Business for at least the last seven
(7) years (the "Books

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and  Records").  Books and Records shall include  without  limitation all notes,
papers, drawings, plans, calculations,  formulations,  bills of material for all
research and  development  and  products  relating to the  Business,  whether in
conceptual phase, pre- development, development, presently marketed, or formerly
marketed.

          1.5 Other Contracts. Any other contracts or agreements relating to the
operation of the Assets or the  Business,  including,  without  limitation,  all
options,  contracts to purchase and other rights in and to property held or used
by Seller, service agreements,  maintenance agreements, as described on Schedule
1.5 (the "Other Contracts").

          1.6 Intellectual Property. All right, title and interest of Seller, if
any,  in  and  to  any  patents,  trademarks,  copyrights,   registrations  (and
applications for the foregoing),  trade names,  licenses and service marks owned
by Seller or in which Seller has rights and  licenses,  as described on Schedule
1.6 (the  "Intellectual  Property").  The trade  names  shall  include,  but not
limited to, the names  "Performance  Controller@ and "Precis Energy" (the "Trade
Names").

         1.7 Goodwill. All of Seller's goodwill with respect to the Business.

         1.8 Accounts Receivable. All accounts receivable of Seller with respect
to the Business existing as of the Closing Date (the "Accounts Receivable"). The
Accounts Receivable are evidenced by Schedule 1.8 .

         1.9 Prepaid  Expenses.  All prepaid  expenses  ("Prepaid  Expenses") of
Seller with respect to the Business  existing as of the Closing Date,  except as
set forth to the contrary on Schedule 1.9 annexed hereto.

         1.10  Furniture,  Fixtures and Equipment.  All furniture,  fixtures and
equipment  (collectively  the "Fixtures") owned by Seller as of the Closing Date
with  respect  to the  Business  except as set forth on  Schedule  1.10  annexed
hereto.

         1.11 Customer  Lists.  Contact  information  regarding all customers of
Seller within the last seven (7) years with respect to the  Business,  including
addresses,  telephone numbers and contact names for each customer (the "Customer
Lists") as described on Schedule 1.11 annexed hereto.

         1.12 Website. All rights, title and interest, including all copyrights,
in  and  to  all  content   contained  in  the  Internet  web  site  located  at
www.performancecontrol.com  and  attached as Schedule  1.12,  including  but not
limited to all graphics,  graphical interfaces,  designs,  layouts, text, source
code and object code related thereto.

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                                    SECTION 2

                                 Purchase Price

          2.1  Purchase  Price.  The  Purchase  Price for the Assets to be sold,
transferred  and  conveyed to  Purchaser  by Seller,  shall be an  aggregate  of
1,112,245  authorized but unissued shares of the Purchaser's common stock, $.001
par value per share (the "Common  Stock"),  which the Seller  hereby  accepts as
fair,  just and  reasonable  compensation  for the Assets  (the  "Shares").  The
Shares,  which may hereinafter be referred to as the "Purchase Price",  shall be
issued and  delivered  at the Closing on the  Closing  Date and  represented  by
certificates registered in the names of the Seller and those Members referred to
in Section 2.3 subject to the requirement to deliver 50,000 Shares to the Escrow
Agent pursuant to Section 17.1 hereof.

          2.2 Seller's  Right to  Terminate.  In the event the Purchaser has not
consummated  the sale of a minimum of $300,000  worth of its securities for cash
in the Private  Offering  (as that term is defined in the next  sentence)  on or
before  July 28,  2000,  the Seller has  retained  the right,  on ten days prior
written notice to the Purchaser, to terminate this Agreement with the Purchaser.
In this  regard,  and in order to finance the business  combination  between the
parties,  the  Purchaser  has  undertaken  to implement a private  offering of a
minimum of $300,000 and a maximum of  $1,000,000 of the  Purchaser's  securities
(the "Private Offering").  The Private Offering shall consist of a minimum of 12
and a maximum of 40 units offered at $25,000 per unit. Each unit to be comprised
of 25,000 shares of the  Purchaser's  Common Stock,  offered at $1.00 per share,
and a five year  warrant to purchase  25,000  shares of the  Purchaser's  Common
Stock at $3.00 per share  during  the first  year,  $4.00 per share  during  the
second year and $5.00 per share during the third year.  Until July 28, 2000, the
Seller shall not (i) solicit or encourage  any offer or enter into any agreement
for the sale,  transfer or other disposition of any of the Assets to or with any
other  entity or person,  other  than sales of assets by Seller in the  ordinary
course of its business,  (ii) entertain or pursue any unsolicited  offer for any
such sale,  transfer  or other  disposition,  or (iii)  furnish to any person or
entity (other than the Purchaser, and its authorized agents and representatives)
any nonpublic information  concerning Seller or its business,  financial affairs
or  prospects  for the purpose or with the intent of  permitting  such person or
entity to evaluate a possible acquisition of any of the Assets.

          2.3 Use of the Shares. The Seller shall utilize an aggregate of 28,500
Shares to satisfy  $114,000  in notes  payable to Members  and an  aggregate  of
73,745  Shares to satisfy  $294,978 in accrued  salaries  payable to Members and
employees  of  the  Seller.   Seller's  obligations  under  this  Agreement  are
conditioned upon its receipt from the holders of the various notes payable,  and
the persons entitled to receive their accrued salaries, of settlement agreements
from those persons, in which they agreed to accept such number of shares in full
satisfaction  of their claims (which  condition  Seller may waive in whole or in
part). At Seller's request, Seller may return the share certificates issued

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pursuant  to this  Section  2.3 in the name of Ashley  Heimbaugh  (or his heirs)
and/or Tim Fielding,  to the  Purchaser,  whereupon the Purchaser  shall reissue
such  share  certificates  in the name of Seller  (and in such  event,  Seller's
liability  to  Ashley   Heimbaugh   and/or  Tim   Fielding   shall  be  Excluded
Liabilities).

                                    SECTION 3

                                     Closing

          3.1  The  closing  of  the  transactions   contemplated   hereby  (the
"Closing")  shall  be held  within  two  business  days of  satisfaction  of the
conditions  to closing  set forth in  Sections  8 and 9 hereof,  but in no event
later than August 7, 2000 (the "Closing Date"), and shall be held at the offices
of Lester Yudenfriend,  Esq., 1133 Broadway,  Suite 321, New York 10010, or such
other place as the parties shall mutually agree upon in writing.

                                    SECTION 4

                            Assumption of Liabilities

          4.1  Assumption  of Certain  Liabilities.  Purchaser  shall assume and
agrees to pay,  perform and discharge when due, and to indemnify and hold Seller
harmless  from,  only  the  following  liabilities  and  obligations  of  Seller
(individually,  an "Assumed Liability" or collectively, the "Liabilities"),  and
no other  liabilities  of Seller,  which  relate to and arise  during the period
subsequent to the Closing:

               (i) All  liabilities  and  obligations  of Seller arising from or
               under  Seller's   accounts  payable  listed  on  Schedule  4.1(i)
               attached hereto;

               (ii) All  liabilities  and  obligations of Seller arising from or
               under  the  equipment  leases   identified  on  Schedule  4.1(ii)
               attached hereto, including postage meter;

               (iii) All  liabilities  and obligations of Seller arising from or
               under the  Contracts,  the Other  Contracts and the  Intellectual
               Property;

               (iv) All  liabilities  and  obligations of Seller arising from or
               under all written agreements,  leases and licenses,  existing and
               holdover,  held by Seller for the use of real estate on which the
               Business  is  operated,  including  those  described  on Schedule
               4.1(iv) (the "Leases"); and

               (v) All  liabilities  and  obligations  of Seller arising from or
               under the  software  leases  listed on Schedule  4.1(v)  attached
               hereto.

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               (vi) Unknown product warranty claims.

Purchaser  and  Seller  agree  that the  Assumed  Liabilities  shall not  exceed
$438,888.20  (which is $452,666.20 less $13,786.00).  The parties agree that for
purposes  of  determining  whether the  Assumed  Liabilities  exceed this dollar
limit,  amounts  which may be due for periods on or after the Closing Date under
various contracts of Seller that are assumed by the Purchaser shall not be taken
into account  (for  example,  without  limiting  the  foregoing,  rent under the
Seller's  Lease for periods on or after the Closing Date shall not be counted as
part of the  dollar  cap in this  section).  To the extent  that  Purchaser  may
satisfy  the Assumed  Liabilities  by payment of less than  $438,880.20  (either
because the Assumed  Liabilities  on Seller's books and records do not aggregate
that  amount,  or because the holder of such  liabilities  are willing to accept
lesser  amounts,  or for any other reason),  then Purchaser  agrees to assume so
much of the Seller's Excluded  Liabilities as is equal to the difference between
$438,880.20  and the amount  actually  paid by  Purchaser to satisfy the Assumed
Liabilities.  Seller shall designate which of its Excluded  Liabilities shall be
paid pursuant to this paragraph.  (To illustrate the foregoing,  if Purchaser is
able to satisfy  the  Assumed  Liabilities  in full by  payment of an  aggregate
$338,880.20,  then  Purchaser  will agree to assume an  additional  $100,000  of
Seller's  Excluded  Liabilities.)  Purchaser  shall  make its books and  records
relating to the Assumed Liabilities  available for inspection by the Seller from
time to time after the Closing on reasonable advance notice to verify the amount
of payment made by Purchaser with respect to such Assumed Liabilities.

          4.2 Control by Purchaser. From and after the Closing Date, a committee
of the Purchaser's Board of Directors  comprised of Nicholas Anderson and Steven
Shulman,  shall by unanimous  consent,  have complete  control over the payment,
settlement  or other  disposition  of the Assumed  Liabilities  and the right to
commence,  conduct and control all  negotiations  and  proceedings  with respect
thereto. Seller shall notify Purchaser promptly of any claim made against Seller
with respect to any Assumed  Liability  and shall not,  except with  Purchaser's
prior  written  consent,  voluntarily  make any payment  of,  settle or offer to
settle,  or consent to any  compromise  or admit  liability  with respect to any
Assumed  Liability.  Seller shall  cooperate  with  Purchaser in any  reasonable
manner  requested by Seller in connection  with any  negotiations or proceedings
involving any Assumed Liability. Purchaser hereby indemnifies and holds harmless
Seller and Seller's Members,  officers,  and agents,  from and against any claim
arising out of Purchaser's failure to pay the Assumed Liabilities.

          4.3  Excluded  Liabilities.  Purchaser  shall be  obligated to pay any
Assumed  Liability  only to the extent that it  constitutes  a valid and legally
enforceable  claim against  Seller,  and nothing herein shall prevent  Purchaser
from contesting any Assumed Liability in good faith. Any other provision of this
Agreement to the contrary notwithstanding (except for the last four sentences of
Section  4.1),  Purchaser  shall not and does not  assume  any of the  following
liabilities or obligations of Seller:

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               (i) those not  included  in Section  4.1 or relating to assets of
               Seller which are not included in the Assets;

               (ii) those  liabilities or obligations not set forth in Schedules
               4.1(i) or  4.1(ii)  relating  directly  to the  operation  of the
               Assets accrued, due and payable as of the Closing Date;

               (iii)  any   matter   for  which   Purchaser   is   entitled   to
               indemnification by Seller under Section 12 hereof;

               (iv) any liability or  obligation  incurred by Seller on or after
               the Closing Date  including any  liability of Seller  pursuant to
               Section 20.13;

               (v) any  liability  or  obligation  involving  the payment of any
               federal,  state or local  taxes on or  measured  by income or any
               comparable  tax imposed  under any other tax statutes or interest
               or  penalties  relating  thereto  unless  they  are  specifically
               enumerated on Schedule 4.1;

               (vi) any liability or obligation  incurred in connection with the
               operation of the Assets  arising prior to the Closing Date unless
               they are specifically enumerated on Schedule 4.1;

               (vii)  obligations  to  Seller's  employees   (including  pension
               liabilities,   stay  bonuses,   severance  and  all  of  Seller's
               contracts,  if any with  employees  pertaining to the Business of
               Seller) unless they are specifically enumerated on Schedule 4.1.

               (viii)  taxes  payable  by  Seller  and/or  its  shareholders  or
               affiliates  arising out of the transactions  contemplated by this
               Agreement;

               (ix) pending litigation,  threatened litigation or claims made or
               threatened;

               (x) inter-company obligations;

               (xi) known tort liabilities;

               (xii)  environmental  liabilities of any kind whether incurred by
               Seller or Seller's predecessors; and

               (xiii) known product warranty claims.

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                                    SECTION 5

                    Representations and Warranties of Seller

         Seller represents and warrants to Purchaser,  which representations and
warranties shall be true as of the date hereof and shall survive the Closing for
a period of one year, as follows:

          5.1 Organization and Standing.  Seller is a limited  liability company
duly  organized  under the laws of the State of Michigan and is in good standing
under  such  laws.  Seller  is  duly  qualified  to  do  business  as a  foreign
corporation in, and is in good standing in each state in which the nature of its
business or the  ownership or leasing of its property  makes such  qualification
necessary,  except  where the  failure to so  qualify  would not have a material
adverse effect on Seller or any of its businesses,  properties or assets. Seller
has all requisite  power and authority  necessary to own,  lease and operate its
properties  and to carry on its business as same is presently  being  conducted;
and Seller lawfully holds all franchises, licenses, and permits necessary and/or
required therefor.

          5.2 No Defaults. Except as set forth in this Agreement, neither Seller
nor,  to the best of  Seller's  knowledge,  any third party is in default in any
respect under any of the contracts, leases or other items set forth or described
in the  Schedules  referred  to  herein  to which  Seller is a party or by which
Seller or the Assets or the Business may be bound or affected, and there has not
occurred  any  event  which  with the  lapse of time or giving of notice or both
would  constitute  such a  default;  to the  best of  Seller's  knowledge,  such
contracts,  leases,  insurance  policies  and other  items are legal,  valid and
binding  obligations of the respective parties thereto enforceable in accordance
with their terms; and, to the best of Seller's knowledge, there are no defenses,
offsets or  counterclaims  thereto which may be made by parties  thereto nor has
Seller waived any rights thereunder.

          5.3  Noncontravention.  The execution,  delivery,  and  performance by
Seller of this Agreement and compliance therewith including (i) the execution of
the Bill of Sale annexed hereto as Exhibit 10.1(iii) and (ii) the Assignment and
Assumption Agreement, annexed hereto as Exhibit 10.1(iv) and (iii) the execution
and  delivery of any other  document,  certificate  or agreement to be delivered
hereunder in  connection  herewith,  will not (a) result in any violation of and
will not  conflict  with,  or (b)  result in a breach of any of the terms of, or
constitute a default under,  or (c) constitute an event which with notice or the
passage of time or both would  constitute a default under,  or (d) result in the
imposition of any lien or any other encumbrance on or with respect to any of the
Assets as a result of any provision of, or (e) result in the acceleration of any
provision  of,  any law of any type  whatsoever  to  which  Seller  is  subject,
Seller's  Operating  Agreement or similar  governing  document,  as amended,  or
By-Laws,  as amended, or any mortgage,  indenture,  agreement (written or oral),
instrument,  judgment, decree, order, rule or regulation or other restriction to
which  Seller is a party or by which it or any of its  business,  properties  or
assets, is or

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may be bound or affected.

          5.4 No Consents.  Except with  respect to any consents to  assignments
required  pursuant to Section 8.6 hereof, no consent,  approval,  qualification,
order or authorization of, or filing with, any governmental  authority or any of
Sellers'  members,  lenders or other  creditors is required in  connection  with
Seller's  valid  execution,  delivery and  performance of this Agreement and all
other  agreements,  instruments  and  documents  to be  delivered  hereunder  in
connection  herewith.  Notwithstanding  the  foregoing  (or anything else to the
contrary in this Agreement or the Schedules or ancillary agreements),  Purchaser
acknowledges  that consents to the  transactions  contemplated by this Agreement
are required from  Heritage Bank (with respect to the Seller's bank  financing),
Highland  Industrial  Properties,  L.L.C. (with respect to the Seller's lease of
its Varsity Drive, Ann Arbor,  Michigan  premises),  and the U.S.  Department of
Defense (with respect to Seller's  contract  with the Defense  Department),  and
that none of such consents will be obtained from those parties, Purchaser hereby
expressly  waiving any requirement  that Seller obtain such consents and waiving
any claim against the Seller arising out of the failure to obtain such consents.

          5.5  Due  Authorization.  Seller  has  full  legal  right,  power  and
authority to enter into and perform  this  Agreement  and all other  agreements,
instruments and documents to be delivered hereunder in connection herewith,  and
the  execution  and  delivery  hereof  by  Seller  and the  consummation  of the
transaction  contemplated  hereby have been duly  authorized and approved by the
Managers and Members and constitute the legal, valid and binding  obligations of
Seller  enforceable  against  Seller in accordance  with their terms.  Certified
copies of the  resolutions  of Seller's  Managers  regarding  the  foregoing are
attached  hereto as Exhibit  10.1(v).  Such  resolutions  have not been altered,
amended, modified, rescinded or revoked.

          5.6 Brokers or Finders.  Seller represents that neither Seller nor any
of Seller's  officers,  directors,  agents or employees  has taken any action to
cause Purchaser to incur any liability whatsoever to any party for any brokerage
commission,  finder's fee, agent's  commission or similar fee in connection with
this Agreement or any transaction contemplated hereby.

          5.7 Financial Statements. Annexed hereto as Schedule 5.7 are copies of
a balance  sheet of Seller dated as of June 30, 2000 and  statements of accounts
payable dated as of July 31, 2000 and accounts  receivable  dated as of June 30,
2000.  The foregoing  financial  statements are  hereinafter  referred to as the
"Financial  Statements".  The fiscal year pertaining to the Financial Statements
is the calendar year. Pursuant to Section 8.10 of this Agreement, Seller's Chief
Financial  Officer or Member of equivalent rank and function shall certify,  and
the  Seller  hereby  represents  and  warrants,  that to the  best  of  Seller's
knowledge:

                  (i) Each of the Financial Statements,  together with the notes
thereto

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(A) is in agreement with the books,  records and  accounting  methods of Seller,
(B) is complete and correct and presents fairly the financial position,  results
of operations and changes in financial  position of the Business as of the dates
and for the periods  indicated,  and (C) have been prepared in  accordance  with
accounting principles  consistently applied throughout the periods involved. The
books of account of Seller fully and fairly reflect all of the  transactions  of
Seller and are complete and correct;

                  (ii)  Since  June 30,  2000,  there has not been any  material
adverse  change in the  financial  condition,  results of  operations  or in the
business, properties or assets of Seller; and

                  (iii) At June 30,  2000,  the Seller did not have any material
obligation or liability, absolute or contingent, which had accrued at that date,
or  had  arisen  out  of  transactions  effected  prior  to  that  date  or  was
attributable  to periods  prior to that date or to action taken or omitted to be
taken during such periods,  other than such  obligations  and liabilities as are
shown or provided for on Seller's balance sheet as of said date, included in the
Financial  Statements,  together with the notes thereto,  or as are set forth in
the Schedules referred to herein.

          5.8  Exclusive  Contracts.  Except as set forth on Schedule  5.8,  the
Seller  has  entered  into no oral  written  or other  agreements  with  former,
existing or future  customers,  sales  representatives  or other  parties  which
provide any exclusive rights to such party for the sale, purchase,  marketing or
distribution of any of the products of the Business.

          5.9 Effective Permits; Transferability. Annexed hereto as Schedule 5.9
are  photocopies  of all Permits.  The Permits are  transferable  to  Purchaser.
Except as set forth on Schedule 1.3, and to the best of the Seller's  knowledge,
there is a Permit for all aspects of the Business and Assets requiring a Permit.
Each Permit is in full force and effect, is not in default,  all fees payable in
connection  therewith  have been paid and Seller has  received no notice that it
has not complied with the material terms of the Permits.

          5.10 Other Contracts.  Schedule 5.10 contains photocopies of all Other
Contracts,  which Other  Contracts are  assignable  to Purchaser.  Except as set
forth on Schedule 1.5, to the best of Seller's knowledge,  Seller is not a party
to any agreement not entered into in the ordinary course of business,  or to any
indenture, mortgage, deed of trust, lease or other agreement.

          5.11  Title to  Assets.  To the best of the  Seller's  knowledge,  the
Seller (and no other  person) has good and  marketable  title to all the Assets,
free and clear of any and all (i)  restrictions  on or conditions to transfer or
assignment, and (ii) mortgages, liens, pledges, charges,  encumbrances,  claims,
and other covenants,  conditions or restrictions except as set forth on Schedule
5.11. Except as otherwise represented herein, to the best of Seller's knowledge,
Seller is not party to, nor are the Assets bound by any agreement,

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restriction  or condition  which is adverse to the Assets or Seller's  business,
properties or financial condition. To the best of Seller's knowledge,  there are
no undisclosed  liabilities or  obligations  with respect to the Assets,  either
accrued,  absolute,  direct,  contingent  or otherwise,  which would  materially
impair the value of the Assets, except as set forth on Schedule 5.11.

          5.12  Certain  Defaults  and  Violations.  Except  as set forth to the
contrary  in  this  Agreement,   the  Certain   Contracts  and  Other  Contracts
(collectively  "the Agreements") all are in full force and effect on all parties
thereto,  and Seller has  received  no written  notice that Seller has not fully
complied  with  all  terms  and  conditions  therein.  To the  best of  Seller's
knowledge,  except as set forth on Schedule  5.12,  there  exists no fact which,
with the  passage of time or the giving of notice,  would  constitute  a default
thereunder  or  entitle  any  other  party to  terminate  or  amend  any of such
Agreements.  Except as set forth on Schedule 5.12, Seller has received no notice
that any party to any of the  Agreements  intends to cancel or terminate  any of
them or to exercise or not to exercise any options thereunder.

          5.13  Trademarks  and Similar  Rights.  Schedule  1.6  annexed  hereto
contains a brief description of (i) all trademarks,  trade names and copyrights,
or applications  therefor,  and all of the trade secrets,  processes,  formulas,
technical information and know-how, of every kind and description which are used
or relate to the Business and Assets, including, without limitation, those owned
by or registered  in the name of Seller or in which Seller has any right,  title
or interest (ii) all license  agreements  to which Seller is a party,  either as
licensor or licensee, with respect to any trademarks, trade names or copyrights,
and (iii) all claims  alleging  that in the conduct of Seller's  business as now
conducted  Seller  is  infringing  any  patents,   trademarks,  trade  names  or
copyrights of others.

          5.14 Compliance with Laws;  Licenses.  Except as set forth on Schedule
5.14,  and to the best of the Seller's  knowledge,  (i) Seller has complied with
all laws, regulations, ordinances, licensing requirements and orders to which it
is subject  (collectively,  "Laws"),  including without  limitation,  all zoning
Laws,  applicable  to its Assets and the  Business,  the breach or  violation of
which  could have a material  adverse  effect on the  Assets or  Business;  (ii)
Seller has filed with the proper authorities all statements and reports required
by the Laws;  (iii) Seller  possesses all  necessary  licenses,  franchises  and
permits to conduct the Business in the manner in which and in the  jurisdictions
and places where such  Business are now  conducted;  and (iv)  operations of the
Business  is a  permitted  use  under  applicable  Laws.  Except as set forth on
Schedule  5.14,  Seller has not,  within the past three (3) years,  received any
notice  (oral  or  written)  from  any  federal,   state,  county  or  municipal
governmental  authority  alleging a violation of any Law in connection  with the
Business or the Assets.

         5.15  Litigation.  Schedule  5.15  annexed  hereto  contains a true and
correct  list of all  civil,  criminal,  administrative,  arbitration  or  other
actions, suits, proceedings

                                       11

<PAGE>

(including,   without   limitation,   condemnation   or  proposed   condemnation
proceedings) or investigations  pending,  or to the best of Seller's  knowledge,
threatened against or affecting Seller, the Assets or the Business, at law or in
equity or  admiralty or before or by any court or federal,  state,  municipal or
other governmental  department,  commission,  board,  agency or instrumentality,
domestic or foreign.  Except to the extent  indicated in Schedule 5.15,  none of
such actions, suits, proceedings or investigations,  either (i) involves a claim
for an amount exceeding the amount recoverable by Seller from insurance, subject
to the  deductible  amounts  under said  policies,  or (ii) would,  if adversely
determined, result in any material adverse change in the condition, financial or
other,  of the Assets or the Business.  Seller is not subject to any  continuing
court or administrative order, writ,  injunction or decree,  applicable to it or
the Assets or the  Business,  and is not in default  with  respect to any order,
writ, injunction or decree, of any court or federal,  state,  municipal or other
governmental or  quasi-governmental  department,  commission,  board,  agency or
instrumentality, domestic or foreign.

         5.16 Taxes Paid; Etc.

                           (i) Seller has filed all federal, state and local tax
                  returns required to be filed, and has paid all federal,  state
                  and local  taxes  which are due and  payable  as shown on such
                  returns,  and any  assessments  received  by Seller  have been
                  paid.

                           (ii) There are no pending or, to Seller's  knowledge,
                  threatened  tax  examinations,   claims,  liens,  assessments,
                  deficiencies  or liabilities to which the assets,  business or
                  properties of Seller may be subject.

                           (iii)   Seller  has  not   consented  to  extend  the
                  limitations  period  for the  assertion  of any  claim for any
                  federal, state or local tax liability.

          5.17 No Material  Changes.  Since April 30, 2000,  except as set forth
herein or in any  Schedule  referred to herein,  and to the best of the Seller's
knowledge,  Seller has not (i) incurred or become subject to, or agreed to incur
or become  subject to, any  obligation  or  liability,  absolute or  contingent,
except for  obligations  entered into in the ordinary  course of business;  (ii)
granted any  increases  in the wages or salaries of  employees  of the  Business
except in the ordinary  course of business and  consistent  with past  practice;
(iii) paid any bonus or made any  similar  payment;  (iv)  canceled or agreed to
cancel  any debts or claims of the  Business  except in the  ordinary  course of
business;  (v)  suffered  any  extraordinary  losses  or  waived  any  rights of
substantial  value; (vi) directly or indirectly paid or made a commitment to pay
any  severance or  termination  pay to any officer or executive  employee of the
Business;  (vii) made any material change in its mode of management or operation
or method of accounting;  (viii) made any capital  expenditures  or entered into
commitments  therefor with respect to the Business,  other than  expenditures or
commitments not exceeding  $5,000 in the aggregate;  (ix) entered into any other
transaction  except in the ordinary course of business;  or (x) entered into any
Contract

                                       12

<PAGE>

which  requires a payment  more than one (1) month in advance,  nor accepted any
payments under any contract more than one (1) month in advance.

          5.18 Books and Records;  Customer Lists.  Schedule 5.18 annexed hereto
contains a list of all of the material books and records of Seller pertaining to
the Assets and the Business,  including,  without limitation,  lists,  telephone
directory listings,  credit records and information,  purchase and sales records
and information, advertising records, information and materials, sales promotion
records and  information,  market  research data,  records and information as to
meeting competition and all other contracts, files, instruments,  literature and
other documents pertaining to the Business.

          5.19 Labor Matters;  Benefit Plans.  There is no strike or other labor
dispute  involving Seller pending or threatened which would adversely affect the
Assets or the Business,  properties, rights or goodwill of Seller. All employees
of Seller are employees at will. Seller acknowledges that Purchaser shall not be
obligated to hire any employees of Seller.

          5.20 Receivables.  To the best of Seller's knowledge: The accounts and
other  receivables  shown  on the  balance  sheets  included  in  the  Financial
Statements,  and the  receivables  that will exist on the Closing Date,  are and
will be bona fide receivables,  without claim or set-off, except for the set-off
rights  regarding  the  receivables  from the  Purchaser  which,  to the best of
Seller's knowledge, will be paid in accordance with their terms.

         5.21 Easements, Etc. Schedule 5.21 annexed hereto sets forth all of the
easements,  licenses or rights of way held or used by Seller not  otherwise  set
forth herein.

          5.22  Disclosure.  Neither this Agreement  (including the Exhibits and
Schedules  referred  to herein and each of the  Financial  Statements  and notes
thereto) nor any documents furnished pursuant hereto by Seller (collectively the
"Documents"), contains any false or misleading statements respecting Seller, the
Assets or the Business.

         5.23 Environmental Matters. To the best of the Seller's knowledge:

                    (i) Seller is in  compliance  with all  applicable  Federal,
               state and local laws and ordinances,  including,  but not limited
               to, the Resource  Conservation  Recovery Act (42 U.S.C.  6901, et
               Seq.),  the  Comprehensive   Environmental   Responsibility   and
               Liability   Act  (42  U.S.C.   9601  et  seq.)  and  the  Federal
               Insecticide,  Fungicide  and  Rodenticide  Act (7  U.S.C.  136 et
               seq.).

                    (ii) There have been no claims,  litigation,  administrative
               proceedings,  whether  actual  or  threatened,  or  judgments  or
               orders,  relating to any hazardous substances,  hazardous wastes,
               discharges, emissions or

                                       13

<PAGE>

               other forms of pollution  relating in any way to the operation of
               the  Business  or to  any  real  estate  owned  or,  to  Seller's
               knowledge, leased by Seller (collectively, "Real Estate").

                    (iii) There have been no hazardous  substances  or hazardous
               wastes, as defined by the Resource  Conservation and Recovery Act
               (42  U.S.C.  Subsection  6901,  et  seq.)  and the  Comprehensive
               Environmental  Responsibility  Compensation  and Liability Act 42
               (U.S.C.  Subsection  9601,  et  seq.),  generated,  manufactured,
               refined, transported,  treated, stored, handled or disposed of on
               the Real Estate by Seller or, to Seller's knowledge,  any lessor,
               previous  owner or  occupant  of the  Real  Estate  or any  other
               person.

                    (iv) There have been no  discharges,  spillages or disposals
               of  hazardous  substances  or  hazardous  wastes  (as  defined in
               Section  5.23 (ii)  above) on the Real  Estate by Seller,  or, to
               Seller's  knowledge,  any lessor or previous owner or occupant of
               the Real Estate or any other person.

          5.24 No Severance. All of the Seller's employees are currently serving
without the benefit of written employment agreements and are therefore deemed to
be at will employees under Michigan law. The Seller is under no legal obligation
to pay severance pay to any of the Seller's employees.

          5.25 Certain  Indebtedness.  Set forth on Schedule 5.25 annexed hereto
is a list of all secured indebtedness and other secured liabilities to which the
Assets are subject (the  "Indebtedness"),  including  the  respective  names and
addresses  of the  obligors  and  obligees,  the amount of and  security for the
Indebtedness.  All such  Indebtedness,  except for the  Indebtedness of Michigan
Heritage  Bank,  which the Purchaser has agreed to assume on its existing  terms
and conditions, shall be satisfied and discharged by the Seller at or before the
Closing.

         5.26  Investment  Representations.  The Seller shall cause itself,  and
each Member and Manager to execute the form of investment  letter annexed hereto
as Schedule 5.26 wherein each shall  acknowledge,  accept and/or represent that:
(i) the Shares will be "restricted securities" as that term is defined under the
Act; (ii) the Shares will be acquired solely for investment purposes and without
a view towards the resale or distribution thereof; (iii) the Shares will be held
for the applicable one year holding period proscribed by Rule 144 under the Act;
(iv) the  holding  period of the Shares  may be  voluntarily  extended  upon the
request of the  Purchaser's  investment  banker,  so long as all other  existing
Shareholders of the Purchaser agree to a similar holding period; (v) any sale of
the Shares will be accomplished only in accordance with the Act or the rules and
regulations of the SEC adopted  thereunder;  (vi) a standard form of restrictive
legend shall be imprinted on all certificates representing the Shares; and (vii)
a standard  form of stop transfer  order shall be imposed  against the Shares on
the books and records of the

                                       14

<PAGE>

Company's transfer agent.

         5.27 No Retail Sales. Seller does not make sales at retail to end users
and  therefore  is not  required  by law to  collect  or remit  sales tax to any
governmental authority.

                                    SECTION 6

             Representations, Warranties and Covenants of Purchaser

         Purchaser represents and warrants to Seller the following,  which shall
be true as of the date hereof,  and which  representations  and warranties shall
survive the Closing:

          6.1  Organization  and  Standing.  Purchaser  is  a  corporation  duly
organized,  validly existing and in good standing under the laws of the State of
Delaware and has full power and  authority to enter into this  Agreement  and to
carry out the transactions contemplated hereby.

          6.2 Due Authorization. The execution, delivery and performance of this
Agreement and the transactions  contemplated hereby have been duly authorized by
all  necessary  corporate  action on the part of  Purchaser  and this  Agreement
(together with all documents and instruments executed by Purchaser in connection
herewith)  constitutes  the valid,  legal and binding  obligation  of Purchaser,
enforceable in accordance with its terms.

         6.3 Certain  Documents.  Purchaser  acknowledges  that it has  received
copies of and reviewed the Financial Statements set forth on Schedule 5.7.

          6.4 Brokers or Finders.  Purchaser  represents that neither  Purchaser
nor any of Purchaser's  officers,  directors,  agents or employees has taken any
action to cause Seller to incur any  liability  whatsoever  to any party for any
brokerage  commission,  finder's  fee,  agent's  commission  or  similar  fee in
connection with this Agreement or any transaction contemplated hereby.

         6.5 Confidentiality.  The Purchaser hereby covenants and agrees to keep
confidential  any and all  information  concerning the Seller that the Purchaser
learned or acquired  pursuant to the Purchaser's due diligence  investigation of
the Seller under and pursuant to Section 7.1 of this Agreement.

        6.6  Capitalization.  As of the date of this  Agreement  the  authorized
capitalization  of the  Purchaser is  comprised  of  9,000,000  shares of Common
Stock, $.001 par value per share ("Common Shares"), and 500,000 shares of "blank
check" preferred stock, $.001 par value (the "Preferred Shares"). Similarly, the
Purchaser's  issued and  outstanding  capitalization  consists of: (i) 4,383,600
Common  Shares and no  Preferred  Shares;  (ii) five year options to purchase an
aggregate of 463,640 Common Shares at $5.00 per Common Share expiring on October
31, 2001; (iii) five year options to purchase

                                       15

<PAGE>

an  aggregate  of 36,360  Common  Shares at $5.50 per Common  Share  expiring on
October 31, 2001;  (iv) five year Warrant  issued to Telpac  Corporate  Services
pursuant to the Term Sheet  between the  Purchaser  and the Seller  dated May 6,
2000 to purchase 50,000 shares at $2.00 per common share; and (v)  underwriter's
warrants to purchase an  aggregate of 36,720  Common  Shares at $5.50 per Common
Share.  As  of  the  date  of  this  Agreement  the  Purchaser's  fully  diluted
capitalization is comprised of 4,970,320 Common Shares.

      6.7 Proposed Financing. As of the date of this Agreement, the Purchaser is
engaged in a private  offering of a minimum of 12 ($300,000) and a maximum of 40
($1,000,000) units offered at $25,000 per unit (the "Units"). Each Unit consists
of 25,000 shares of the Purchaser's Common Stock, offered at $1.00 per share and
a five year warrant to purchase 25,000 shares of the Purchaser's Common Stock at
$3.00 per share  during the first year,  $4.00 per share  during the second year
and $5.00 per share during the third year (the  "Financing").  The  Purchaser is
conducting the Financing solely to "accredited  investors" under and pursuant to
the  provisions of Rule 506 of Regulation D under the Securities Act of 1933, as
amended so as to be exempt from registration thereunder.

             6.8  Acknowledgment of Debt. The Purchaser  acknowledges and agrees
that it is indebted to the Seller in the aggregate  amount of $54,751.91  and is
holding 485 controller boards (inventory) belonging to the Seller valued at $346
per board. In the event the Financing is not consummated as hereinabove provided
in Section  6.7,  and the Seller has elected to terminate  this  Agreement,  the
$54,751.91 in  indebtedness  shall be paid by the Purchaser to the Seller within
60 days from the Seller's notice of cancellation,  and the 485 controller boards
shall be returned to the Seller.

            6.9 Payment of Seller's  Delinquent Rent and Other Obligations.  The
Purchaser acknowledges and agrees that upon the Closing, it shall deliver to the
Seller  $29,168.36  of the net  proceeds  derived from the  Financing,  to repay
monies advanced on the Seller's behalf for delinquent rent ($15,382.18), and for
the payment of certain other accrued payables ($13,786.18) of Seller.

         6.10 Offering  Memorandum.  Purchaser  represents and warrants that the
information  contained in the Offering  Memorandum  attached  hereto as Schedule
6.10 is true and correct in all material respects.

                                    SECTION 7

                               Covenants of Seller

          7.1 Access.  Seller  covenants and agrees that  throughout  the period
prior,  up to and  including  the Closing  Date,  it shall allow  Purchaser  and
Purchaser's  accountants and other  representatives  reasonable  access,  during
normal business hours throughout

                                       16

<PAGE>

the period prior to the Closing Date, to all of Seller's properties, facilities,
contracts, commitments,  undertakings, books, records and files and will furnish
to Purchaser and/or Purchaser's  representatives all such information concerning
the  affairs  of Seller  as  Purchaser  or its  representatives  reasonably  may
request.

         7.2  Operations in Ordinary  Course.  Seller  covenants and agrees that
throughout the period prior, up to and including the Closing Date, it shall:

                    (i)  Continue to operate the  Business  in  accordance  with
               current  industry  practices,  and to preserve for  Purchaser the
               goodwill  of the  suppliers  and  customers  of Seller and others
               having business relations with Seller;

                    (ii) Not enter into any contract,  commitment or arrangement
               or take any of the  actions  of the types  prohibited  in Section
               5.17 hereof  other than in the  ordinary  course of the  Seller's
               business;

                    (iii)  Continue to maintain  the  existing  insurance on the
               Assets.

          7.3 No  Settlements.  Seller  covenants and agrees that throughout the
period prior,  up to and including the Closing Date, it shall not enter into any
material compromise or settlement of any litigation,  proceeding or governmental
investigation  relating to the Business or the Assets,  unless Seller shall have
first consulted with Purchaser regarding such compromise or settlement.

          7.4 Certain Renewals.  Seller covenants and agrees that throughout the
period prior to, up to and  including  the Closing  Date, it shall not terminate
its current lease for office space without first consulting with the Purchaser.

         7.5 Accounts Receivable.  From and after the Closing Date, any Accounts
Receivable (as defined in Section 1.8) shall be promptly  remitted to Purchaser.
This Section 7.5 shall survive the Closing.

          7.6 No Public  Statements.  From and after the date of this Agreement,
Seller  and  Seller's  Members,  employees  and  agents  agree to make no public
statements  regarding  the  execution  or  terms  of  this  Agreement.  Seller's
obligations  pursuant  to this  Section  7.6 shall  continue  until the date the
Purchaser publishes a press release or makes any other public announcement.

         7.7  Disputed  Writing.  Seller  warrants,  covenants  and agrees that,
provided that this transaction  closes according to its terms,  Seller shall not
view a certain  disputed prior writing  characterized  by the Seller as an asset
purchase  agreement by and between the Purchaser  and Seller dated  December 31,
1998 (the  "Disputed  Writing")  as a legally  enforceable  contract  and Seller
irrevocably waives pursuing any claims or actions

                                       17

<PAGE>

against  Purchaser  based on or  arising  out of the  Disputed  Writing.  Seller
further  warrants,  covenants  and agrees  that the  Agreement  is the final and
controlling asset purchase  agreement by and between Purchaser and Seller.  This
Section 7.7 shall survive the Closing.

         7.8 No Seller Interference.  From and after the date of this Agreement,
the Seller (and each of its  Members)  shall  refrain  from  engaging in any act
which in any manner whatsoever interferes with the rights of the Purchaser under
the Certain Contracts,  the Permits, the Books and Records, the Other Contracts,
the  Intellectual  Property  or any other asset  included  in the  Assets.  This
section shall not apply to any act or omission taken by Steve Shulman.

                                    SECTION 8

         Conditions Precedent to the Obligations of Purchaser

         The obligations of Purchaser to consummate the transactions  under this
Agreement  at the  Closing  are,  at the  option of  Purchaser,  subject  to the
fulfillment to its  satisfaction  on or before the Closing Date of the following
conditions:

          8.1 Representations  and Warranties  Correct.  All representations and
warranties of Seller  contained in this  Agreement  shall be true and correct in
all  material  respects  on and as of the  Closing  Date with the same force and
effect as if such  representations and warranties had been made on and as of the
Closing Date.

          8.2  Performance.  All of the terms,  covenants and conditions of this
Agreement  to be  complied  with and  performed  by the  Seller on or before the
Closing  Date,  shall have been  complied  with and  performed  in all  material
respects.

          8.3 Proceedings and Documents.  All corporate and other proceedings in
connection  with the  transactions  contemplated  hereby and all  documents  and
instruments  incident to such transactions  shall be reasonably  satisfactory in
form and substance to Purchaser and its counsel.

         8.4 Delivery of All Exhibits and Schedules. Seller shall have delivered
all certificates, Exhibits, and Schedules required pursuant to this Agreement in
form and substance reasonably satisfactory to Purchaser and its counsel.

          8.5 No Actions Pending.  There shall be no action or proceeding before
any court or  governmental  body pending or  threatened  wherein an  unfavorable
judgment,  decree or order would: (i) prevent the carrying out of this Agreement
or any of the transactions or events contemplated  hereby; (ii) declare unlawful
or invalid  transactions or events  contemplated by this Agreement;  (iii) cause
such  transactions to be rescinded;  (iv) require  Purchaser to divest itself of
any of the Assets; (v) adversely and materially

                                       18

<PAGE>

affect the right of Purchaser after the Closing Date to own,  operate or control
any of the Assets;  or (vi) require  Purchaser to pay damages as a result of any
of the transactions contemplated by this Agreement.

          8.6 Consents, Waivers, Etc. All consents, waivers, approvals, licenses
or authorizations of third parties or governmental authorities or any amendments
or  modifications  to  existing  agreements  with third  parties  required  as a
pre-condition to the consummation of the transactions contemplated hereby, shall
have been duly obtained.

          8.7 Sales Tax Lien  Clearance.  Seller shall have filed with the State
of Michigan any and all notices as shall be required  under  applicable  law and
received  any such  written  evidence so as to insure that the State of Michigan
has no possible  claim for or lien against any of the Assets for or with respect
to any tax on or  relating to the Assets or the  Business of the Seller.  In the
event that the State of Michigan shall be unable to provide  clearance  pursuant
to the foregoing sentence, and instead notifies the Seller of the existence of a
possible  claim for tax, the Purchaser  shall  thereupon  place into escrow such
number of Shares  comprising  the  Purchase  Price and for such time as shall be
required by the State of Michigan in  satisfaction of any tax liability shown to
be due to the State of Michigan.

         8.8 Notification of Creditors. [intentionally deleted]

         8.9 Opinion of Counsel.  Purchaser  shall have received an opinion (the
"Opinion of Seller's  Counsel") of Seyburn,  Kahn,  Ginn, Bess and Serlin,  P.C.
("Seller's  Counsel"),  dated the Closing Date, in form and substance reasonably
satisfactory to Purchaser, to the effect that:

                    (i) the Seller is a limited liability company duly organized
               and validly existing under the laws of the State of Michigan;

                    (ii)  each  of  the  Agreement  and  all  other  agreements,
               instruments   and   documents  to  be  delivered  in   connection
               therewith,  have been duly authorized by Seller and is the legal,
               valid and binding obligation of Seller, enforceable in accordance
               with its terms,  except as the same may be limited by bankruptcy,
               insolvency and other laws of general application now or hereafter
               in effect  relating  to the rights  and  remedies  of  creditors,
               subject to the available laws of equitable remedies;

                    (iii) the delivery to Purchaser of the documents of transfer
               contemplated  by  this  Agreement   transfers  to  the  Purchaser
               whatever title the Seller owns in the Assets;

                    (iv)  Seller's  Counsel  does not know of any action,  suit,
               proceeding, investigation or claim pending or threatened, against
               or affecting Seller or

                                       19

<PAGE>

               any assets, business,  property or rights of Seller except as set
               forth in Schedule 5.15 hereto;

                    (v) The sale by Seller to  Purchaser  on the Closing Date of
               the  Assets  pursuant  to the  terms  of this  Agreement  and the
               consummation of the transactions contemplated hereby will not (i)
               violate any  provision  of law; or (ii) to the best of  counsel's
               knowledge result in any breach of, or constitute a default under,
               or  constitute  an event which with  notice or lapse of time,  or
               both, would constitute a default under, or result in the creation
               of any lien,  security  interest,  charge or encumbrance upon any
               property of Seller under any lease,  indenture or other agreement
               (written or oral) or other  instrument to which Seller is a party
               or by which  Seller or the Assets or the Business may be bound or
               affected; and

                    (vi)  Seller  has taken all action  required  on its part to
               consummate the  transactions  contemplated by this Agreement.  No
               filing with any federal,  state or local  governmental  authority
               (including,   without  limitation,  any  taxing  authorities)  is
               required in connection with the  consummation of the transactions
               contemplated by this Agreement.

                    (vii) The "bulk sales law" has been repealed in the State of
               Michigan,  and  no  other  Michigan  law  requires  a  Seller  of
               substantially  all of its assets to give notice to its  creditors
               of such sale.

         8.10 Payment of Indebtedness. [Intentionally deleted]

         8.11  Certification  of Seller's  CFO.  The  Seller's  Chief  Financial
Officer or Member of equivalent rank and function shall certify:

                    (i)  As  required  by  paragraph  5.7  with  respect  to the
               Financial Statements;

                    (ii)  Seller  has  filed  all  federal,  state and local tax
               returns  required to be filed,  and all federal,  state and local
               taxes which are due and payable,  and any assessments received by
               Seller have been paid.

                    (iii)  There  are no  pending  or,  to  Seller's  knowledge,
               threatened  tax   examinations,   claims,   liens,   assessments,
               deficiencies  or  liabilities  to which the  assets,  business or
               properties of Seller may be subject.

                    (iv)  Seller has not  consented  to extend  the  limitations
               period for the  assertion of any claim for any federal,  state or
               local tax liability.

         8.12  Shareholders  Agreement.  Execution of  Shareholder  Agreement by
Seller,

                                       20

<PAGE>

certain members of Seller, Purchaser and certain stockholders of Purchaser.

                                    SECTION 9

              Conditions Precedent to the Obligations of the Seller

The obligations of Seller to consummate the transactions under this Agreement at
the Closing are, at the option of the Seller,  subject to the fulfillment to its
satisfaction on or before the Closing Date of the following conditions:

          9.1  Performance.  All of the terms,  covenants and conditions of this
Agreement  to be  complied  with and  performed  by  Purchaser  on or before the
Closing  Date  shall  have been  complied  with and  performed  in all  material
respects.

          9.2 Representations  and Warranties  Correct.  All representations and
warranties of Purchaser contained in this Agreement shall be true and correct in
all  material  respects  on and as of the  Closing  Date with the same force and
effect as though such  representations and warranties had been made on and as of
the Closing Date.

          9.3 Proceedings and Documents.  All corporate and other proceedings in
connection  with the  transactions  contemplated  hereby and all  documents  and
instruments  incident to such transactions  shall be reasonably  satisfactory in
form and substance to Seller and its counsel.

          9.4 Opinion of  Purchaser's  Counsel.  Seller  shall have  received an
opinion  (the  "Opinion of  Purchaser's  Counsel") of Lester  Yudenfriend,  Esq.
("Purchaser's  Counsel"),   dated  the  Closing  Date,  in  form  and  substance
reasonably satisfactory to Seller, to the effect that:

                    (i) the  corporate  existence and good standing of Purchaser
               are as represented and warranted in Section 6.1;

                    (ii)  this  Agreement  is  the  legal,   valid  and  binding
               obligation  of  Purchaser,  enforceable  in  accordance  with its
               terms,   except  as  the  same  may  be  limited  by  bankruptcy,
               insolvency and other laws of general application now or hereafter
               in effect  relating  to the rights  and  remedies  of  creditors,
               subject to the available laws of equitable remedies;

                    (iii) Purchaser's Counsel does not know of any action, suit,
               proceeding, investigation or claim pending or threatened, against
               or  affecting  Purchaser  or any  assets,  business,  property or
               rights of Purchaser; and

                    (iv) When issued and  delivered  to the Members and Managers
               of the Seller, the Shares will be duly and validly issued,  fully
               paid and non- assessable with no personal liability  attaching to
               the ownership thereof.

         9.5 Financing  Contingency.  In the event that Purchaser has not sold a
minimum of $300,000 worth of units in the Private Offering on or before July 28,
2000, and all other  conditions for Closing are satisfied,  the Purchaser  shall
have the right to terminate this Agreement.

        9.6 Consents, Waivers, Etc. All consents,  waivers, approvals,  licenses
or authorizations of third parties or governmental authorities or any amendments
or  modifications  to  existing  agreements  with third  parties  required  as a
pre-condition to the consummation of the transactions contemplated hereby, shall
have been duly obtained.

                                   SECTION 10

                    Closing Documents; Documents of Transfer

         10.1 Seller's Deliveries. At the Closing, Seller shall deliver or cause
to be delivered or made available to Purchaser:

                    (i) All original Certain Contracts, Other Contracts and Site
               Leases in Seller's possession or obtainable by Seller.

                    (ii) The original Permits.

                    (iii) A duly  executed  bill of sale, in the form of Exhibit
               10.1(iii) annexed hereto, for the Assets.

                    (iv) A duly executed  assignment  and  assumption  agreement
               (the  "Assignment"),  in the  form of  Exhibit  10.1(iv)  annexed
               hereto,  to Purchaser of all of Seller's  title and rights in the
               Permits,  the  Certain  Contracts,   the  Other  Contracts,   the
               Intellectual  Property,  the Accounts  Receivable and the Prepaid
               Expenses.

                    (v)  An  executed  and  certified   resolution  of  Seller's
               Managers, in the form of Exhibit 10.1(v) hereto,  authorizing the
               execution, delivery and performance of this Agreement.

                    (vi) Such  consents  of third  parties  as are  required  to
               transfer any of the Assets to Purchaser.

                    (vii) The Books and Records.

                    (viii) The Opinion of Seller's Counsel.

                                       21

<PAGE>

                    (ix) A list of the Accounts  Receivable and Prepaid Expenses
               existing as of the Closing Date.

                    (x) Any and all  necessary  UCC-3  Statements of Release and
               all other  discharges  and  releases  necessary  to delivery  the
               Assets  free and  clear of all  liens,  claims  and  encumbrances
               (except  as  specifically  excepted  in  this  Agreement  and the
               Schedules and Exhibits annexed hereto), together with evidence of
               the satisfaction of all Indebtedness.

                    (xi) Such other  documents  as counsel for  Purchaser or its
               title company shall reasonably request.

                    (xii) Updated Schedules, if any.

                    (xiii) The Certification of Seller's Chief Financial Officer
               required under Section 8.11 of this Agreement.

         10.2 Purchaser's  Deliveries.  On or before the Closing Date, Purchaser
shall deliver or cause to be delivered to Seller:

                    (i) The Purchase Price set forth in Section 2.1 hereof.

                    (ii) An executed and  certified  resolution  of  Purchaser's
               Board of  Directors,  in the  form of  Exhibit  10.2(ii)  annexed
               hereto,  authorizing  the execution,  delivery and performance of
               this Agreement.

                    (iii) The Opinion of Purchaser's Counsel.

                    (iv)  Evidence  of  the  funding  of  the  Escrow  Fund  (as
               hereinafter defined) by Purchaser.

                    (v)  Such  other  documents  as  counsel  for  Seller  shall
               reasonably request.

                                   SECTION 11

                           Adjustments and Prorations

          11.1 All  Accounts  Receivable  existing as of the Closing Date shall,
upon the Closing,  become the property of Purchaser.  If any Accounts Receivable
are remitted to Seller after the Closing,  such remittances shall immediately be
forwarded to Purchaser pursuant to Section 7.5 hereof.

          11.2 If, as of the Closing  Date there shall be more than Four Hundred
Thirty-  Eight   Thousand   Eight  Hundred   Eighty  Dollars  and  Twenty  Cents
($438,880.20)  of Assumed  Liabilities,  then if  Purchaser  assumes such excess
Assumed  Liabilities  and actually  pays them the Purchaser  shall  decrease the
Purchase Price  (through an adjustment to the escrowed  shares) by one Share for
each Two Dollars and Fifty Cents ($2.50) of excess Assumed Liabilities.

                                   SECTION 12

                                 Indemnification

          12.1  Indemnification  by Seller.  Seller shall, and hereby agrees to,
indemnify,  defend and hold Purchaser  harmless from,  against and in respect of
the following up to an aggregate maximum of $125,000 for all such claims:

                           (i) Any and all  liabilities,  obligations,  damages,
                  losses,  costs or expenses  of  Purchaser  resulting  from any
                  misrepresentation,  breach of warranty,  or  nonfulfillment of
                  any  covenant or  agreement  on the part of Seller  under this
                  Agreement, or from any misrepresentation in, or omission from,
                  any  certificate  or  other  instrument  furnished  or  to  be
                  furnished by Seller to Purchaser under this Agreement;

                           (ii) Any and all liabilities,  obligations,  damages,
                  losses,  costs or  expenses  of  Purchaser  arising  out of or
                  resulting from (A) the failure of Seller to satisfy or perform
                  any Excluded Liability, (B) all tax liabilities or obligations
                  of Seller  existing  at the  Closing  Date,  and (C) claims of
                  third parties asserted against  Purchaser by reason of acts or
                  omissions   of  Seller   or   employees,   agents,   servants,
                  representatives or independent contractors of Seller occurring
                  prior to the Closing Date; and

                           (iii)  All  claims,  actions,   suits,   proceedings,
                  demands,    assessments,    judgments,   expenses   (including
                  reasonable attorneys' fees) and costs (collectively,  "Costs")
                  incident to any of the foregoing.

                  12.2 Procedure. Should any Cost be asserted against Purchaser,
Purchaser  shall notify  Seller of such Cost and give Seller an  opportunity  to
defend same and settle same without any cost to Purchaser,  and Purchaser  shall
fully cooperate with Seller in connection  with such defense,  which shall be at
Seller's  expense.  In the event that  Seller  fails to defend the same within a
reasonable  length of time,  Purchaser  shall be  entitled to assume the defense
thereof,  and Seller  shall be liable to repay  Purchaser  for all its  expenses
incurred  in  connection  with  said  defense  (including  attorneys'  fees  and
settlement payments).

         12.3  Basket.  Purchaser  shall not be  entitled to recover any damages
under this indemnification Section 12 unless and until the Purchaser's aggregate
claims for

                                                       22

<PAGE>

indemnification exceed $25,000, at which time the Purchaser shall be entitled to
recover all such damages (up to the aggregate amount in Section 12.1).

         12.4  Indemnification by Purchaser.  Purchaser shall, and hereby agrees
to, indemnify,  defend and hold harmless Seller from and against, and in respect
of:

                           (i) Any and all  liabilities,  obligations,  damages,
                  losses,  costs  or  expenses  of  Seller  resulting  from  any
                  misrepresentation,  breach of warranty,  or  nonfulfillment of
                  any covenant or agreement on the part of Purchaser  under this
                  Agreement, or from any misrepresentation in, or omission from,
                  any  certificate  or  other  instrument  furnished  or  to  be
                  furnished by Purchaser to Seller under this Agreement; and

                           (ii) Any and all liabilities,  obligations,  damages,
                  losses,  costs  or  expenses  of  Seller  arising  out  of  or
                  resulting  from (A) the  failure  of  Purchaser  to satisfy or
                  perform  any Assumed  Liability;  (B) all tax  liabilities  or
                  obligations  of Purchaser  from and after the Closing Date and
                  which  are  not  Seller's  responsibility  hereunder;  and (C)
                  claims of third parties  asserted  against Seller by reason of
                  acts or omissions of Purchaser or employees, agents, servants,
                  representatives   or  independent   contractors  of  Purchaser
                  occurring after the Closing Date; and

                           (iii)  All  claims,  actions,   suits,   proceedings,
                  demands,    assessments,    judgments,   expenses   (including
                  reasonable attorneys' fees) and costs (collectively,  "Costs")
                  incident to any of the foregoing.

                           (iv) Notwithstanding anything to the contrary in this
                  Section 12.4,  Purchaser's  liability  under this Section 12.4
                  shall not exceed an aggregate maximum of $125,000 for all such
                  claims (excepting claims arising out of Purchaser's failure to
                  pay any of the Assumed Liabilities,  and claims arising out of
                  the  representations  and warranties  made in Section 6.6, 6.7
                  and 6.9 hereof);  furthermore  Seller shall not be entitled to
                  recover any damages  under this  Section 12.4 unless and until
                  the  Seller's  aggregate  claims  for  indemnification  exceed
                  $25,000 (excepting claims relating to: payment of the purchase
                  price, assumption of liabilities,  or, payments of the sums in
                  Section  6.9  hereof),  at  which  time  the  Seller  shall be
                  entitled  to recover  all such  damages  (up to the  aggregate
                  amount in this Section 12.4(iv)).

          12.5 Procedure. Should any Cost be asserted against Seller then Seller
shall notify  Purchaser of such Cost and give Purchaser an opportunity to defend
the same and settle same without any cost to Seller,  and the Seller shall fully
cooperate  with  Purchaser in connection  with such  defense,  which shall be at
Purchaser's expense. In the event that Purchaser fails to defend the same within
a reasonable time,  Seller shall be entitled to assume the defense thereof,  and
Purchaser shall be liable to repay Seller for

                                       23

<PAGE>

all its expenses incurred in connection with said defense (including  attorneys'
fees and settlement payments).

         12.6 This Section 12 shall survive the Closing of this  Agreement for a
period of one year.

                                   SECTION 13

                              Intentionally Omitted

                                   SECTION 14

                            Notification of Creditors

                              Intentionally Omitted

                                   SECTION 15

                                  Risk of Loss

          15.1 The risk of loss or damage to the Assets,  by fire or  otherwise,
until the Closing Date, shall be borne by Seller and after Closing by Purchaser.
During such  period of time that Seller  bears the risk of loss or damage to the
Assets, Seller shall be entitled to all proceeds of applicable insurance.

                                   SECTION 16

                                  Condemnation

          16.1 In the event of receipt,  prior to Closing,  of written notice (a
"Condemnation  Notice") by Seller that a governmental agency, body,  commission,
bureau or other  authority  desires  to  acquire  any  portion  of the Assets by
condemnation   or  eminent  domain   proceedings  (a  "Taking"),   Seller  shall
immediately  notify  Purchaser  in writing.  In no event shall  Seller  agree to
terminate, sell or transfer its interest in the Assets without the prior written
consent  of  Purchaser.  In the event  that all or any  portion of the Assets be
taken or transferred in the aforesaid  proposed  eminent domain or  condemnation
proceedings  before the Closing Date,  Purchaser  shall have the right either to
terminate  this  Agreement,  in which event all monies  deposited  by  Purchaser
hereunder  shall be returned to it,  together with any interest  earned thereon,
whereupon this Agreement shall be null and void and neither party shall have any
rights  against the other,  or to elect to proceed  hereunder and receive credit
against the Purchase Price for the amount  received by Seller,  when  determined
finally from the condemning authority;  provided, however, that if the amount of
compensation  by  reason  of said  Taking  shall  not  have  then  been  finally
determined and Purchaser  elects to proceed  hereunder,  Purchaser shall pay the
Purchase

                                       24

<PAGE>

Price as herein  provided,  and any sums so  received  by Seller  for the Assets
subject to the Taking shall be paid to Purchaser. Seller warrants and represents
to Purchaser  that no Taking has occurred  within the past three (3) years,  nor
has Seller received any Condemnation Notice within the past three (3) years with
respect to the Business or the Assets.

                                   SECTION 17

                            Post-Closing Escrow Fund

          17.1 At the  Closing  hereof,  an  aggregate  of 50,000  Shares or the
equivalent of One Hundred Twenty-Five Thousand ($125,000.00) Dollars in value of
Shares  computed at $2.50 per Share (the "Escrow  Fund") shall be deposited with
an escrow agent (the "Escrow  Agent") in accordance  with  paragraph 2.1 hereof.
The Escrow  Agent shall be  Continental  Stock  Transfer & Trust  Company.  Said
Escrow Fund shall be held by the Escrow Agent for a period not to exceed one (1)
year from the Closing Date (the "Escrow Period"), subject to the terms hereof.

          17.2  In the  event  that,  at any  time  during  the  Escrow  Period,
Purchaser  shall  claim that  Seller has  breached  any of its  representations,
warranties or covenants  hereunder,  or any claim is made against Purchaser by a
creditor  of Seller  with  respect  to a  liability  of  Seller or the  Business
accruing  prior to the Closing  Date other than the Assumed  Liabilities,  or if
Purchaser   shall   incur  any  Cost  (as   defined  in   Paragraph   12.2(iii))
(collectively,  a "Claim"),  it shall provide notice  thereof to Seller,  with a
copy to the  Escrow  Agent,  such  notice to set forth  with  particularity  the
specifics  of any such  Claim,  and Seller  shall have the right to cure same in
accordance with the provisions of Paragraph 17.5 hereof or to dispute or contest
any such  Claim.  In the event that  Seller does not dispute or contest any such
Claim and/or fails to cure same pursuant to Paragraph 17.5 hereof, Purchaser may
thereafter  furnish to the Escrow Agent a duly executed and notarized  affidavit
setting forth the specifics of any such Claim,  including,  without  limitation,
the amount thereof and basis therefor,  the date of the notice thereof to Seller
and a certification that Seller has not disputed or contested same or has failed
to cure same  within the time  provided  for herein.  Unless  Seller has paid to
Purchaser  the amount of such Claim within ten (10) days after receipt by Escrow
Agent of the notice and  certification of Seller,  the Escrow Agent shall on the
10th day after receipt  promptly deliver to Purchaser from the Escrow Fund, such
number of Shares as shall  equal the amount of such Claim  divided by $2.50.  In
the event,  however,  that  Seller  shall  elect to dispute or contest  any such
Claim,  he  shall  be  required,  within  ten (10)  days of  Purchaser's  notice
hereunder,  to provide  notice  thereof to Purchaser,  with a copy to the Escrow
Agent, which notice shall set forth with particularity the specifics of any such
dispute  or  contest  as  between  the  parties  hereto or their  successors  or
representatives.  In the event of any such  dispute  or  contes,  Purchaser  and
Seller  hereby  agree that any such  dispute or contest  shall be settled in the
City of Pittsburgh,  State of Pennsylvania,  by a single arbitrator appointed in
accordance with the commercial  rules then in force of the American  Arbitration
Association, the decision of which shall be deemed to be final, and judgment

                                       25

<PAGE>

upon any award or decision  rendered  thereby may be entered in any court having
jurisdiction  thereof.  Purchaser  and Seller  hereby  submit to the in personam
jurisdiction of the American Arbitration  Association in the City of Pittsburgh,
State of Pennsylvania  and agree that any process in any arbitration  proceeding
hereunder may be personally  served upon either of them within or outside of the
City of  Pittsburgh,  State of  Pennsylvania.  The Escrow Agent shall retain the
portion of the Escrow Fund  covered by any such  dispute  until its receipt of a
certified copy of any such  arbitration  decision or award in favor of Purchaser
(the "Award").  The parties  acknowledge that the Escrow Agreement  provides for
arbitration in New York,  New York at the request of the Escrow Agent.  However,
the  parties to this  Agreement  agree that if an escrow  claim can be  resolved
without the active  participation  of the Escrow Agent,  then they shall resolve
such claim in Pittsburgh, Pennsylvania pursuant to this Section.

          17.3 The Escrow  Agent  shall then  convert  the Award into  Shares by
dividing the Award by $2.50.  The  resultant  number of Shares shall be deducted
from the Escrow Fund and,  upon  written  notice to the Seller,  returned to the
Purchaser for  restoration  to authorized  but unissued  status or to be held as
treasury  stock.  Any Shares  constituting  the remaining  balance in the Escrow
Fund,  shall be returned to the Seller  without  further  notice to Purchaser or
Seller hereunder, upon the expiration of the Escrow Period.

          17.4 The  parties to this  Agreement,  other  than the  Escrow  Agent,
acknowledge and agree that the Escrow Agent shall not be liable for any error or
judgment  or for any  mistake of fact,  law or for  anything  which it may do or
refrain from doing in connection  herewith,  except its own gross  negligence or
willful misconduct.  Seller and Purchaser agree to indemnify,  hold harmless and
defend  the Escrow  Agent from any loss,  damage,  claim,  liability,  judgment,
expense  (including  reasonable  attorneys'  fees) or other  charge  incurred or
sustained by it by reason of any act or omission performed or omitted hereunder,
but this  indemnity  shall not be  applicable  to any loss,  liability,  damage,
claim, judgment,  expense or other charge resulting from the gross negligence or
willful misconduct of the Escrow Agent.

          17.5 In the event of a Claim after the Closing  ("Event of  Default"),
Purchaser  shall give Seller written notice thereof and Seller shall have thirty
(30) days from  receipt of any such  notice to cure the same.  In the event that
any Event of Default  cannot  reasonably  be cured within such time period,  the
same  shall not be  deemed an Event of  Default  if Seller  commences  such cure
within such period and  diligently  pursues and completes such cure within sixty
(60) days of the  receipt of any notice of Claim  (provided,  however,  that all
such cures must be completed by the conclusion of the Escrow  Period,  or if not
cured by such time, the Escrow Period shall be extended for an additional  sixty
(60) days with  respect  to that Claim  only (and the  balance  of the  Escrowed
Shares shall be released to the Seller),  and if not cured by such additional 60
day period of time shall be considered a Claim not subject to cure).

         17.6 The Escrow  Agent shall have the right to rely  conclusively  upon
the

                                       26

<PAGE>

notices delivered  hereunder,  and shall be under no obligation to ascertain the
authenticity of such notices, nor to determine the factual accuracy thereof.

          17.7 The Escrow Agent is acting as a stakeholder  only with respect to
the Escrow  Fund.  If there is any  dispute as to  whether  the Escrow  Agent is
obligated to deliver to Escrow Fund (or any portion  thereof)  and/or to whom it
should be delivered,  the Escrow Agent shall not make any delivery,  but in such
event the Escrow  Agent shall hold the Escrow  Fund until  receipt by the Escrow
Agent of an authorization in writing signed by all parties having an interest in
such  dispute,  directing  the  disposition  of same,  or in the absence of such
authorization  the  Escrow  Agent  shall  hold the  Escrow  Fund until the final
determination of the rights of the parties in an appropriate proceeding. If such
written  authorization is not given, or proceedings for such  determination  are
not begun  within a  reasonable  period of time and  diligently  continued,  the
Escrow Agent shall have the right, at any time thereafter, to commence an action
or  proceeding,  at the sole cost and  expense of Seller and  Purchaser,  in the
nature of interpleader in any court having jurisdiction  thereof, and to deposit
the Escrow Fund with such court,  and thereupon,  be discharged from any and all
further liability hereunder.

                                   SECTION 18

                                    Severance

         18.1  Purchaser  is not  obligated  to hire  any  employees  of  Seller
("Seller Employees").

                                   SECTION 19

                              Specific Performance

          19.1 If Seller shall default in its  obligations  under this Agreement
to consummate the transactions  provided herein,  or to perform any of its other
obligations  hereunder or to deliver any of the Closing documents required to be
delivered by Seller,  then,  in addition to any other rights and remedies  which
Purchaser may have, whether under this Agreement or at law or equity,  Purchaser
shall also have the right to specifically enforce this Agreement against Seller.

                                   SECTION 20

                            Miscellaneous Provisions

          20.1 Remedies.  The remedies  provided  herein shall be cumulative and
shall not preclude  the  assertion by Seller or Purchaser of any other rights or
the seeking of any other remedies against the other.

                                       27

<PAGE>

          20.2 Severability. The invalidity or unenforceability of any provision
of  this  Agreement  pursuant  to any  applicable  law  or  court  of  competent
jurisdiction  shall not affect the validity or  enforceability  of the remaining
provisions  hereof,  but this Agreement  shall be construed as if not containing
the provision  held invalid or  unenforceable  in the  jurisdiction  in which so
held.

          20.3 Expenses. Except as otherwise stated herein, Seller shall pay its
own attorneys fees and other expenses and Purchaser  shall pay its own attorneys
fees and other expenses in connection  with this Agreement and the  consummation
of the transactions contemplated hereby.

          20.4 Notices.  All notices,  requests demands,  instructions and other
communications  required or permitted to be given under this Agreement  shall be
in  writing  and shall be deemed  to have  been duly  given if given by  prepaid
telegram,  or mailed  by  overnight  mail or by  first-class,  postage  prepaid,
registered  or certified  mail,  return  receipt  requested,  to the  respective
parties as follows:

(a)      If to Purchaser, to:            Power Efficiency Corporation
--------------------------------------------------------------------------------
                                         4220 Varsity Drive, Suite E
                                         Ann Arbor, Michigan 48108
                                         Attn: Nicholas Anderson, President
--------------------------------------------------------------------------------
With a copy to:                          Lester Yudenfriend, Esq.
                                         1133 Broadway, Suite 321
                                          New York, New York 10010
--------------------------------------------------------------------------------
(b)      If to Seller:                   Performance Control, Inc.
--------------------------------------------------------------------------------
                                         4220 Varsity Drive, Suite E
                                         Ann Arbor, Michigan 48108
                                         Attn: Steven Schulman, Member
--------------------------------------------------------------------------------
With a copy to:                          Seyburn, Kahn, Ginn, Bess and Serlin
                                         2000 Town Center, Suite 1500
                                         Southfield, Michigan 48075-1195
                                         Attn: Bruce H. Seyburn, Esq.
--------------------------------------------------------------------------------
                  Any party  hereto may change the address or addresses to which
such  communications  are to be directed to it by giving  written  notice to the
other parties hereto of such change in the manner above provided.

                                       28

<PAGE>

          20.5 Successors and Assigns;  Third Party Rights. This Agreement shall
be binding upon and shall inure solely to the benefit of the parties  hereto and
their respective  successors and permitted  assigns.  Nothing in this Agreement,
express or implied, is intended to and shall not under any circumstances  create
any enforceable right or benefit in any other person  whatsoever,  nor shall any
other person whatsoever be entitled to have any claim,  cause of action or right
based upon or arising out of the existence of this Agreement or the consummation
of the transactions contemplated hereby.

         20.6  Assignment.  This Agreement shall not be assigned by either party
without the prior written consent of the other party.

         20.7 Captions.  The paragraph  headings contained in this Agreement are
for reference  purposes only and shall not affect the meaning or  interpretation
of this Agreement.

         20.8 Entire Agreement;  Amendments;  Waiver. This Agreement constitutes
the  entire  agreement  between  the  parties  hereto and  supersedes  all prior
agreements and understandings, oral and written, between the parties hereto with
respect to the subject matter hereof.  This Agreement may be amended,  modified,
superseded  or  canceled,  and  any of the  terms,  covenants,  representations,
warranties  or  conditions  hereof may be waived,  only by a written  instrument
executed by Purchaser on the one hand, and Seller, on the other hand, or, in the
case of a waiver, by the party waiving  compliance.  The failure of any party at
any time or times to require  performance  of any  provision  hereof shall in no
manner  affect the right of such party at a later time to enforce  the same.  No
waiver by any party of any  condition,  or of the breach of any provision  term,
covenant,  representation  or warranty  contained in this Agreement,  whether by
conduct or  otherwise,  in any one or more  instances,  shall be deemed to be or
construed  as a further or  continuing  waiver of any such  condition  or of the
breach of any other provision,  term,  covenant,  representation  or warranty of
this Agreement.

         20.9 Governing  Law. This Agreement  shall be governed by and construed
under  the laws of the  State of  Pennsylvania,  without  giving  effect  to the
conflict laws of the State of Pennsylvania.

         20.10 Further  Assurances.  After the Closing Date, each party shall do
all such  further  acts and shall  execute,  acknowledge  and  deliver  all such
instruments,  documents  and  assurances,  as may be  necessary  to  perfect  or
evidence consummation of the transactions contemplated hereby.

         20.11  Counterparts.  This  Agreement  may be  executed  in one or more
counterparts,  each of  which  shall  be  deemed  to be an  original  and  which
counterparts together shall constitute one and the same Agreement of the parties
hereto. Telecopied signatures shall be binding as originals.

                                       29

<PAGE>

          20.12 Gender. Whenever the masculine gender is used in this Agreement,
and whenever  required by the context,  the same shall  include the feminine and
neuter genders.

          20.13 Taxes.  Seller shall pay all sales,  use, income and/or transfer
taxes  applicable to the  conveyance or transfer of the Assets which are payable
under applicable law, together with all interest and penalties thereon,  if any,
to the extent such  interest and penalties  are  attributable  to the actions or
inactions of Seller.  To the extent  applicable  law or regulation  imposes upon
Purchaser the obligation to report or to pay such taxes,  interest or penalties,
Seller shall promptly  reimburse  Purchaser therefor upon receipt of Purchaser's
invoice for the amount of such taxes, and Seller shall also reimburse  Purchaser
for any interest and penalties imposed thereon to the extent attributable to the
actions or inactions of Seller with respect thereto.

                                       30

<PAGE>

         IN  WITNESS  WHEREOF,  the  parties  hereto  have  duly  executed  this
Agreement as of the day and year first above written.

Power Efficiency Corporation

By:
   --------------------------------------
     Nicholas Anderson, President

By:

   --------------------------------------
      Anthony Caputo, Chairman

Performance Control, LLC

By:

   --------------------------------------
       Steven Shulman, Manager

As to Paragraph 17 Only:

Escrow Agent:
------------
Continental Stock Transfer & Trust Company

By:

   --------------------------------------
      Roger T. Birnhammer, Vice President

                                       31

<PAGE>

                                    INDEX OF
                             SCHEDULES AND EXHIBITS

1.1                            Certain Contracts
--------------------------------------------------------------------------------
1.2                            Inventory
--------------------------------------------------------------------------------
1.3                            Permits
--------------------------------------------------------------------------------
1.5                            Other Contracts
--------------------------------------------------------------------------------
1.6                            Intellectual Property
--------------------------------------------------------------------------------
1.8                            Accounts Receivable
--------------------------------------------------------------------------------
1.9                            Prepaid Expenses
--------------------------------------------------------------------------------
1.10                           Furniture, Fixtures and Equipment
--------------------------------------------------------------------------------
1.11                           Customer Lists
--------------------------------------------------------------------------------
1.12                           Web Site Copyrights
--------------------------------------------------------------------------------
4.1                            Assumed Liabilities
--------------------------------------------------------------------------------
5.7                            Financial Statements
--------------------------------------------------------------------------------
5.8                            Exclusive Contracts
--------------------------------------------------------------------------------
5.9                            Permits (copies)
--------------------------------------------------------------------------------
5.10                           Other Contracts (copies)
--------------------------------------------------------------------------------
5.11                           Title to Assets
--------------------------------------------------------------------------------
5.12                           Defaults
--------------------------------------------------------------------------------
5.14                           Compliance With Laws
--------------------------------------------------------------------------------
5.15                            Litigation
--------------------------------------------------------------------------------
5.18                            Books and Records; Customer Lists
--------------------------------------------------------------------------------
5.21                            Easements
--------------------------------------------------------------------------------
5.25                            Secured Indebtedness
--------------------------------------------------------------------------------
5.26                            Investment Letter
--------------------------------------------------------------------------------
6.10                            Offering Memorandum
--------------------------------------------------------------------------------

EXHIBIT                  TITLE
-------                  -----

10.1 (ii)         Bill of Sale
--------------------------------------------------------------------------------
10.1 (iv)         Assignment
--------------------------------------------------------------------------------
10.1 (v)          Certified Seller's Resolutions
--------------------------------------------------------------------------------
10.1 (viii)       Opinion of Seller's Counsel
--------------------------------------------------------------------------------
10.1 (xiii)       Certification of Seller's Chief Financial Officer
--------------------------------------------------------------------------------

                                       32

<PAGE>

10.2 (ii)         Certified Purchaser's Resolutions
--------------------------------------------------------------------------------
10.2(iii)         Opinion of Purchaser's Counsel
--------------------------------------------------------------------------------

                                       33

<PAGE>

                                EXHIBIT 10.1(ii)

                                  BILL OF SALE

                  WHEREAS,   Performance   Control,   LLC,  a  Michigan  limited
liability company (the "Seller"), is the owner of certain assets (the "Assets"),
all as more fully described in the Agreement (as hereinafter defined); and

                  WHEREAS, Seller and Power Efficiency  Corporation,  a Delaware
corporation (the "Purchaser"),  entered into an asset purchase agreement,  dated
August, 2000 (the "Agreement"),  pursuant to which Seller has agreed to sell and
Purchaser  has agreed to  purchase  the Assets on the terms and  conditions  set
forth therein; and

                  WHEREAS,  terms defined  herein shall have the same meaning as
terms defined in the Agreement, unless the context requires otherwise;

                  KNOW  ALL MEN BY  THESE  PRESENTS  that  Seller,  for good and
valuable  consideration,  the  receipt  and  sufficiency  of  which  are  hereby
acknowledged,  and intending to be legally bound, has granted,  bargained, sold,
conveyed, transferred, assigned and delivered, and by these presents does hereby
grant, bargain, sell, convey, transfer, assign and deliver to the Purchaser, its
successors  and assigns,  all of the right,  title and interest of the Seller in
and to all of the Assets .

                  TO HAVE AND TO HOLD unto the  Purchaser,  its  successors  and
assigns, forever.

                  Seller hereby  represents and warrants to the Purchaser  that:
(i) the  Seller has good and  marketable  title to all of the  Assets,  free and
clear of any and all liens,  charges,  security interests or encumbrances of any
nature  whatsoever;  (ii) the Seller will warrant and defend said title  against
the claims of any and all other persons, firms,  corporations or other entities,
whatsoever;  (iii) the Seller has the right to  transfer  the Assets  hereunder;
(iv) the Seller will execute and deliver all such other and further  instruments
of  assignment or transfer and otherwise as may be requested by the Purchaser to
effect,  evidence and complete the aforesaid  sale and transfer of the Assets to
the Purchaser  pursuant hereto;  (v) the Assets are being sold "as is, where is"
except for the express representations and warranties of the Seller contained in
the  Agreement;  and  (vi)  the  Seller  hereby  disclaims  any and all  implied
warranties of  merchantability  or fitness for a particular purpose with respect
to the Assets.

                                       34

<PAGE>

                  IN WITNESS  WHEREOF,  Seller has executed and  delivered  this
Bill of Sale as of the day of August, 2000.

                                             Performance Control, LLC

                                             By:
                                                -------------------------------
                                                   Steven Shulman, Manager

                                EXHIBIT 10.1(iv)

                      ASSIGNMENT AND ASSUMPTION AGREEMENT

                  WHEREAS,   Performance   Control,   LLC,  a  Michigan  limited
liability company (the "Seller"), is the owner of certain assets (the "Assets"),
all as more fully described in the Agreement (as hereinafter defined); and

                  WHEREAS, Seller and Power Efficiency Corporation.,  a Delaware
corporation (the "Purchaser"),  entered into an asset purchase agreement,  dated
August ,2000 (the "Agreement"),  pursuant to which Seller has agreed to sell and
Purchaser  has agreed to  purchase  the Assets on the terms and  conditions  set
forth therein; and

                  WHEREAS,  terms defined  herein shall have the same meaning as
terms defined in the Agreement, unless the context requires otherwise.

                  KNOW ALL MEN BY THESE  PRESENTS that the Seller,  for good and
valuable  consideration,  the  receipt  and  sufficiency  of  which  are  hereby
acknowledged,  and intending to be legally bound, has granted,  bargained, sold,
conveyed, transferred, assigned and delivered, and by these presents does hereby
grant, bargain, sell, convey, transfer, assign and deliver to the Purchaser, its
successors  and assigns,  all of the right,  title and interest of the Seller in
and to the Assets, including,  without limitation,  the Contracts,  Intellectual
Property, Accounts Receivables, Prepaid Expenses, Permits and Other Contracts.

                  TO  HAVE  AND TO  HOLD  unto  Purchaser,  its  successors  and
assigns, forever.

                  Seller hereby  represents  and warrants to the Purchaser  that
the Seller has good and marketable title to all of the Assets, free and clear of
any and all liens,  charges,  security  interests or  encumbrances of any nature
whatsoever; that it will warrant and defend said title against the claims of any
and all other persons, firms, corporations or other entities,  whatsoever;  that
it has the right to grant,  transfer  and  assign the  Assets;  and that it will
execute and deliver all such other and further

                                       35

<PAGE>

instruments  of  assignment or transfer and otherwise as may be requested by the
Purchaser to effect,  evidence and complete the  aforesaid  sale and transfer of
the Assets to the Purchaser pursuant hereto.

                  From and after the date  hereof,  Purchaser  hereby  agrees to
assume and perform all of Seller's obligations with respect to the Assets to the
extent required under the Agreement.

                  IN WITNESS WHEREOF, the Seller and Purchaser have executed and
delivered this Assignment as of the day of August, 2000.

Power Efficiency Corporation                         Performance Control, LLC

By:                                                  By:
   ------------------------------                       --------------------
     Nicholas Anderson, President                       Steven Shulman, Manager

By:
   -----------------------------
      Anthony Caputo, Chairman

                                       36

<PAGE>

                                 EXHIBIT 10.1(v)

                         CERTIFIED SELLER'S RESOLUTIONS

                                       37

<PAGE>

                                EXHIBIT 10.1(vii)

                           OPINION OF SELLER'S COUNSEL

                                EXHIBIT 10.2(ii)

                        CERTIFIED PURCHASER'S RESOLUTIONS

             UNANIMOUS WRITTEN CONSENT IN LIEU OF A SPECIAL MEETING
                             OF ALL THE DIRECTORS OF

                          POWER EFFICIENCY CORPORATION

                  The  undersigned,  being all the directors of Power Efficiency
Corporation,  a Delaware corporation (the "Corporation") do hereby authorize and
consent to the adoption of the following resolutions:

                  WHEREAS,   Performance   Control,   LLC,  a  Michigan  Limited
Liability Company (the "Seller"),  is the owner of certain assets (the "Assets),
all as more fully described in the Agreement (as hereinafter defined); and

                  WHEREAS,  it is in the best  interest  of the  Corporation  to
execute,  deliver and perform the terms,  covenants and  conditions of a certain
Asset Purchase Agreement (the "Agreement"),  dated as of May , 2000, between the
Corporation and the Seller, pursuant to which the Corporation shall purchase and
acquire from the Seller,  and the Seller shall sell,  assign and transfer to the
Corporation,  the  Assets  (as  defined  in the  Agreement),  upon the terms and
subject to the conditions set forth in the Agreement,  a copy of which Agreement
is annexed hereto as an exhibit;

                  NOW, THEREFORE,  IT IS RESOLVED, that the Corporation execute,
deliver and perform the terms, covenants and conditions of the Agreement; and it
is further

                  RESOLVED,  that all the directors and the appropriate officers
of the Corporation be, and they hereby are,  authorized,  empowered and directed
to do any and all  things  necessary  and  proper to  effectuate  the  foregoing
resolutions.

                                       38

<PAGE>

                  IN WITNESS WHEREOF, the undersigned have executed this Consent
as of the day of August, 2000.

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

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

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

                  I hereby  certify  that the  following  resolutions  were duly
adopted by the Board of Directors of Power  Efficiency  Corporation,  a Delaware
corporation, effective as of August __, 2000, and that the same is still in full
force and effect as of the date hereof.

POWER EFFICIENCY CORPORATION

By:
   --------------------------------
      Nicholas Anderson, President

[SEAL]

                                       39

<PAGE>

                                EXHIBIT 10.2(ii)

                                       40STOCKHOLDERS' AGREEMENT

                                  by and among

                                Nicholas Anderson
                                 Anthony Caputo

                                  Philip Elkus
                                 Steven Shulman

                            Performance Control, LLC
                                       and

                          Power Efficiency Corporation

                              Dated: August 7, 2000

<PAGE>

                                              STOCKHOLDERS' AGREEMENT
                                                 TABLE OF CONTENTS

                                                                         age

1.               Corporate Governance                                     2

   1.1.    Board of Directors.                                            2

   1.2.    Initial Officers of the Company.                               4

   1.3.    Certain Actions Requiring Majority Stockholder Approval.       4

2.         Transfers of Shares                                            6

   2.1.    Certain Restrictions.                                          6

   2.2.    Right of First Refusal on Percon Group Shares.                 7

   2.3.    Right of First Offer on the Founders                           8
           Shares and "Take Along" Rights.

   2.4.    "Tag Along" Rights.                                            7

   2.5     Legends; Shares Subject to this Agreement.                     9

3.         Management Stock Option Plan                                   9

   3.1     Adoption of Management Stock Option Plan.                     10

   3.2     Administration by the Compensation Committee.                 10

   3.3     Issuance of Options to Purchase Common Stock.                 10

                                                                         10

4.         Miscellaneous                                                 10

   4.1.    Legends on Stock Certificates.                                10

   4.2.    Term.                                                         11

   4.3.    Injunctive Relief.                                            11

   4.4.    Notices.                                                      11

   4.5.     Successors and Assigns.                                      12

   4.6.    Company Information.                                          12

   4.7.    Governing Law.                                                13

   4.8.    Headings.                                                     13

   4.9.    Entire Agreement; Amendment.                                  13

   4.10.   No Waiver.                                                    14

   4.11.   Undertaking.                                                  14

   4.12.   Counterparts.                                                 14

<PAGE>

                             STOCKHOLDERS' AGREEMENT

                  AGREEMENT  dated as of August  7,  2000 by and among  Nicholas
Anderson, residing at 1536 208th Street, Bayside, NY 11360 ("Nicholas"), Anthony
Caputo, residing at 1155 Colonial Way, Bridgewater, NJ 08807("Anthony"),  Philip
Elkus,   residing  at  2488  Orchard  Lake  Road,  Farmington  Hills,  MI  48334
("Philip"),  Steven  Shulman,  residing at 5807 Fox Hollow Court,  Ann Arbor, MI
48105 ("Steven"), Performance Control, LLC, a Michigan limited liability company
having  an  address  at 4220  Varsity  Drive,  Suite  E,  Ann  Arbor,  MI  48108
("Percon"),  and Power  Efficiency  Corporation,  a  Delaware  corporation  with
temporary  offices at 4220  Varsity  Drive,  Suite E, Ann  Arbor,  MI 48108 (the
"Company").  Nicholas and Anthony are sometimes  collectively referred to herein
as (the "Founders"),  and Philip,  Steven and Percon are sometimes  collectively
referred to herein as (the "Percon  Group").  Each of the parties  hereto (other
than the Company) and any other person who shall hereafter  become a party to or
agree to be bound by the terms of this agreement (the  "Agreement") is sometimes
referred to as a "Stockholder" and all of such parties are sometimes referred to
as the "Stockholders."

                              W I T N E S S E T H:

         WHEREAS,  the  Company  and  Percon are  parties  to an asset  purchase
agreement of even date herewith (the "Asset Agreement"); and

         WHEREAS,  immediately prior to the closing of the Asset Agreement,  and
not giving  effect to the proposed  financing  referenced  in Section 6.7 to the
Asset  Agreement,  there were  4,383,600  shares of the Company's  common stock,
$.001 par value per share ("Common Stock") outstanding;

         WHEREAS, the execution and delivery of this Agreement is a condition to
the closing of the Asset Agreement;

         WHEREAS,  pursuant  to the Asset  Agreement,  the members of the Percon
Group  and the  individuals  listed  on  Schedule  1 hereto  will be  issued  an
aggregate of 1,112,245 shares of Common Stock  ("Acquisition  Stock");  of which
50,000  shares of  Acquisition  Stock are being held in escrow  pursuant  to the
terms of the Asset Agreement;

         WHEREAS,  as of the  closing of the Asset  Agreement,  the  holdings of
Common  Stock  by the  Stockholders  (collectively,  the  "Shares")  will  be as
follows:

               Stockholder Name                                 Number of Shares

               Nicholas Anderson                                   1,646,500
                Anthony Caputo                                     1,340,000
                 Philip Elkus                                        22,500
                  Percon LLC                                       1,004,853
                Steven Shulman                                       64,843

         WHEREAS,  the parties hereto deem it in their best interests and in the
best interests of the Company to provide  consistent and uniform  management for
the Company and to regulate  certain of their  rights in  connection  with their
interests  in the Company,  and desire to enter into this  Agreement in order to
effectuate those purposes; and

         WHEREAS,  the parties  hereto also  desire to  restrict  under  certain
circumstances the sale, assignment,  transfer,  encumbrance or other disposition
of the Shares,  including issued and outstanding  Shares as well as Common Stock
which may be issued  hereafter,  or which may become  issuable  pursuant  to the
exercise  of options or  warrants  hereafter  granted and to provide for certain
rights and obligations with respect thereto as hereinafter provided.

         NOW, THEREFORE,  in consideration of the premises and of the covenants,
terms and conditions  herein  contained,  the parties  hereto  mutually agree as
follows:

1.       CORPORATE GOVERNANCE

         1.1.     Board of Directors.

                  (a) Number of  Directors.  The Company  shall be governed by a
Board of Directors  consisting  of three (3) members.  The number of members may
not be increased or decreased except as provided in Section 1.3.

                  (b)  Nomination  and  Election  of  Directors.  The  following
procedures shall govern the nomination and election of directors of the Company:

          (i) For so long as the Founders shall beneficially own at least 65% of
     the  Shares  held by them on the date  hereof,  they shall be  entitled  to
     nominate and have  elected two (2)  directors  acceptable  to them in their
     sole discretion (the "Founders Directors").

          (ii) The Percon  Group shall be entitled to nominate  and have elected
     one (1) director (the "Percon Director");

         (c) Initial Board of  Directors.  The initial Board of Directors of the
Company shall consist of the following three members:

Name of Director                 Type of Director
Nicholas Anderson                Founders Director
Scott Straka                     Founders Director
Steven Shulman                   Percon Director

                                       2

<PAGE>

                  (d) Removal of Directors. Except as otherwise provided in this
Section 1.1(d),  each holder of Shares agrees not to take any action or to cause
the Company to take any action to remove, with or without cause, any director of
the Company.  Notwithstanding the foregoing,  The Percon Group and/or the Percon
Director  shall at all times have the right to recommend  the  removal,  with or
without  cause,  of the  Percon  Director;  and the  Founders  and the  Founders
Directors shall have the right to recommend the removal,  with or without cause,
of any  Founders  Director.  If the removal of any  director is  recommended  as
provided in the immediately  preceding  sentence,  then the  Stockholders  shall
immediately  cause a special meeting of stockholders to be held, or shall act by
written  consent  without a meeting,  for the purpose of removing such director,
and each  Stockholder  agrees to vote all its  Shares,  or to  execute a written
consent in respect of all such Shares, for the removal of such director.

                  (e)  Vacancies.  At any time a vacancy  exists on the Board of
Directors,  the remaining  directors (if any) representing the Stockholder whose
Board seat is vacant shall have the right to  designate  and elect the person to
fill such vacancy.  If no directors  representing  the  Stockholder  remain as a
result of such vacancy,  the  Stockholder  shall have the right to designate and
elect the person to fill such  vacancy.  To the extent  required by law, (i) all
directors  on the Board and (ii) all  holders of Shares,  shall vote in favor of
electing such designated director to fill the vacancy and all such persons shall
take the  necessary  actions to amend the by-laws to reflect the  provisions  of
this Agreement.

                  (f) Covenant to Vote. Each of the Stockholders agrees to vote,
in person or by proxy, all of the Shares beneficially owned by such Stockholder,
at any annual or special  meeting of  stockholders of the Company called for the
purpose  of voting on the  election  of  directors  or by  consensual  action of
stockholders  without a meeting with respect to the  election of  directors,  in
favor of the election of the  director(s)  nominated by the Percon Group and the
Founders,  respectively,  as the case may be, in accordance  with Section 1.1(b)
hereof.  Each  Stockholder  shall vote the Shares owned by such  Stockholder and
shall take all other actions necessary to ensure that the Company's  Articles of
Incorporation  and By-Laws do not at any time  conflict  with the  provisions of
this Agreement.

                  (g)  Quorum.  No action  shall be taken at any  meeting of the
Board of Directors of the Company,  except for the  adjournment of such meeting,
unless at least two Founders Directors and one Percon Director shall be present.
For purposes of a quorum,  any director may be present at any meeting in person,
by means of telephone or similar communications equipment by means of which each
person  participating in the meeting can hear and speak to each other or, to the
extent  permitted  under  applicable  law, by proxy or by nominee  director.  No
action  shall be taken at any meeting of  stockholders  of the Company  unless a
majority of the Shares  beneficially  owned by the Founders and the Percon Group
are represented at the meeting, in person or by proxy.

                  (h)  Committees  of the Board.  The Board shall  appoint  such
committees,  including an audit committee and a compensation committee, as shall
be permissible under Section 141 of the General  Corporation Law of the State of
Delaware and as the Board shall deem reasonable and necessary.  At least half of
the members of any such  committee  shall be  comprised  of Founders  Directors,
provided,  that if the Board creates an executive committee,  one member of such
committee must be a Percon Director.

                  (i) Special  Meetings of  Directors.  Special  meetings of the
Board may be called by the  President  of the Company and shall be called by the
President  of the  Company or the  Secretary  of the  Company  upon the  written
request of a Percon Director or a Founders Director.

                  (j) Special  Meetings  of  Stockholders.  Special  meetings of
stockholders  may be called by the Board and shall be called by the President of
the Company or the Secretary of the Company upon the written request of a Percon
Director or a Founders Director.

                  (k) Board of  Directors  and  Officers  of  Subsidiaries.  The
composition  of the board of directors  and officers of each  subsidiary  of the
Company  shall  require the  approval of the Percon  Director  and the  Founders
Directors.

                                       2

<PAGE>

         1.2. Initial Officers of the Company.  Each of the Stockholders  agrees
to cause  the  Board of  Directors  of the  Company  initially  to  appoint  the
following persons as officers of the Company in the following positions:

                  Office                                         Name
President                                     Steven Shulman
Chief Executive Officer                       to be agreed to by the Directors
Chief Operating Officer                       Nicholas Anderson
Chief Financial Officer                       to be agreed to by the Directors
Treasurer/Controller                          to be agreed to by the Directors
Secretary                                     Gerard S. DiFiore

If any of such  officers  are unable to serve,  or cease for any reason to be an
officer of the  Company,  their  successors  shall be  appointed by the Board of
Directors of the Company. The parties hereto agree that the Company should enter
into  employment  agreements  with each  officer  mentioned  above to assure the
Company of such officer's services for a fixed period of time.

         1.3. Certain Actions Requiring Majority  Stockholder  Approval.  For so
long as the  Percon  Group  and  the  Founders  shall  collectively  own  shares
constituting  at least 40% of the Common Stock then  outstanding  without either
(A) the prior unanimous vote of the Percon Director and the Founders  Directors,
or  (B)  the  prior  affirmative  vote  of at  least  75%  of  the  Shares  then
beneficially  owned by the  Founders  and the Percon  Group  taken  collectively
(either of (A) or (B) being referred to as a "Majority Vote"), the Company shall
not,  and the  Percon  Director  and the  Founders  Directors  shall  use  their
respective  best  efforts  to  preclude  the  Company,  directly  or  indirectly
(including  through any  Subsidiaries  (as hereinafter  defined) of the Company)
from taking the following actions:

                  (a) issue or sell any shares of, or cause or permit any of its
Subsidiaries  to issue or sell any  shares  of,  any class or series of  capital
stock of the Company or such Subsidiary,  or any securities convertible into, or
exercisable  or  exchangeable  for, any shares of any class or series of capital
stock of the Company or such  Subsidiary,  other than (i) employee stock options
issued  pursuant to the Company's  Management  Stock Option Plan (as hereinafter
defined  in  Section  3.1  hereof) or a plan  approved  by a  Majority  Vote (an
"Approved  Plan"),  (ii) shares issued upon  exercise of stock  options  granted
pursuant to the Company's 1994 Incentive  Stock Option Plan or an Approved Plan,
and (iii) other issuances expressly contemplated by the Asset Agreement (such as
the proposed  financing  referenced in Section 6.7 of the Asset  Agreement).  As
used herein, "Subsidiary" means any corporation,  partnership or other entity of
which  securities or other ownership  interests  having ordinary voting power to
elect a majority of the Board of Directors (or other persons  performing similar
functions) are at the relevant time directly or indirectly owned by the Company;

                                       4

<PAGE>

                  (b)  except  as  provided  in or  contemplated  by  the  Asset
Agreement,  purchase,  redeem,  retire or  otherwise  acquire,  or set aside any
assets or deposit any funds for the  purchase,  redemption,  retirement or other
acquisition  of,  any  shares of any class or  series  of  capital  stock of the
Company or any securities  convertible into, or exercisable or exchangeable for,
any shares of any class or series of capital stock of the Company;

                  (c)  purchase  or  otherwise  acquire,  or cause or permit any
Subsidiary to purchase or otherwise  acquire in one  transaction  or a series of
related  transactions  (other than  purchases  of  inventory  or services in the
ordinary course of business),  any  significant  business or assets from a third
party, whether through stock or asset purchase or otherwise;

                  (d) sell, lease,  assign or otherwise  transfer or dispose of,
or cause or permit any Subsidiary to sell, lease,  assign or otherwise  transfer
or dispose of, in one  transaction  or a series of related  transactions  (other
than sales of inventory or services in the ordinary course of business),  all or
substantially  all of the  Company's  assets to a third party,  whether  through
stock or asset sale or otherwise;

                  (e) enter  into any  agreement,  or adopt any  resolution,  or
cause or  permit  any  Subsidiary  to  enter  into any  agreement  or adopt  any
resolution,  in respect of (i) any merger of the Company or such Subsidiary with
or  into  any  other  corporation,   partnership  or  other  entity,   (ii)  any
consolidation  of the  Company or such  Subsidiary  with any other  corporation,
partnership  or other  entity,  (iii)  any  transaction  or  series  of  related
transactions  in which the  Company  shall  sell or  otherwise  transfer  all or
substantially  all of the  Company's  business,  property  or assets or (iv) any
dissolution, liquidation or reorganization of the Company;

                  (f)  amend,   modify,   alter  or  repeal  its   Articles   of
Incorporation or By-Laws in any respect in  contravention  of this Agreement,  a
true and  complete  copy of which have been  delivered on the date hereof to the
Percon Group;

                  (g) effect any initial  public  offering of the  securities of
the Company or any Subsidiary pursuant to the Securities Act of 1933, as amended
(the "Securities Act");

                  (h)  amend or  modify on  behalf  of the  Company  the  terms,
provisions or conditions of this Agreement or extend the term of this Agreement;
or

alter the size of the Board of Directors.

                                       5

<PAGE>

2.       TRANSFERS OF SHARES

         2.1. Certain Restrictions.

                  (a) Notwithstanding anything to the contrary set forth herein,
no  Stockholder  or  Transferee  (as  hereinafter  defined in Section 2.5) shall
directly or indirectly sell, assign, pledge, encumber,  hypothecate or otherwise
dispose  of  including  any  disposition  by  way  of  a  statutory   merger  or
consolidation involving a Stockholder that is not a natural person (collectively
a "Transfer")  any Shares at any time,  unless any such Transfer shall have been
effected in accordance with the terms of this Agreement.

                  (b) No  Stockholder  shall  Transfer any Shares at any time if
such action would  constitute a violation of any federal or state  securities or
blue sky laws or a breach of the conditions to any exemption  from  registration
of Shares  under any such laws or a breach of any  undertaking  or  agreement of
such  Stockholder  entered  into  pursuant  to such laws or in  connection  with
obtaining an exemption thereunder. Each Stockholder agrees that any Shares to be
received  by  such  Stockholder  pursuant  to the  Asset  Agreement  shall  bear
appropriate  legends  restricting  the sale or other  transfer  of such stock in
accordance with applicable  federal or state securities or blue sky laws, as set
forth in Section 4.1 hereof.

                  (c)  Except  as  otherwise  provided  in  this  Agreement,  no
Stockholder  shall  grant  any  proxy or enter  into or agree to be bound by any
voting trust with respect to any Shares nor shall any Stockholder enter into any
stockholder  agreements or arrangements of any kind with any person with respect
to any Shares inconsistent with the provisions of this Agreement (whether or not
such  agreements  and  arrangements  are with other  Stockholders  or holders of
Shares  who  are  not  parties  to  this  Agreement),  including  agreements  or
arrangements  with  respect  to  the  acquisition,  disposition  or  voting  (if
applicable) of any Shares,  nor shall any Stockholder act, for any reason,  as a
member of a group or in concert with any other  persons in  connection  with the
acquisition,  disposition or voting (if  applicable) of any Shares in any manner
which is inconsistent with this Agreement.

                  (d) None of the restrictions  contained in this Agreement with
respect to  Transfers  of Shares  shall apply to  Transfers of Shares to (i) any
affiliate  of a  Stockholder  (as such term is defined  in Rule 12b-2  under the
Securities  Exchange Act of 1934, as amended (the  "Exchange  Act")) thereof (an
"Affiliate Transferee");  or (ii) to members of a Stockholder's immediate family
or his lineal descendants (a "Family Transferee"). Any such Affiliate Transferee
or Family  Transferee shall be considered a "Permitted  Transferee" for purposes
of this  Agreement.  Only in the  event  such  Affiliate  Transferee  or  Family
Transferee shall become an Affiliate of the Company as a result of any permitted
transfer hereunder,  such Affiliate  Transferee or Family Transferee shall agree
in writing to be bound by the terms of this Agreement.

                                        6

<PAGE>

         2.2. Right of First Refusal on Percon Group Shares.

                  (a) Except as may otherwise be set forth herein, if any member
of the Percon Group desires to Transfer any Shares now or hereafter beneficially
owned by it to any other person (other than (i) pursuant to a registered  public
offering  under the  Securities  Act; (ii) a public resale under  Securities Act
Rule 144 effected in accordance with Section 2.2(d) hereof;  or (iii) a Transfer
of all of its Shares to an Affiliate  Transferee  or a Family  Transferee)  such
Percon  Group member shall before  effecting  such  Transfer  first give written
notice (a "Seller's  Notice") to the Founders  stating their desire to make such
Transfer,  the  identity  of the party to whom such  Shares are  proposed  to be
transferred  (the  "ROFR  Transferee"),  the  number  of Shares  proposed  to be
transferred  (the  "Offered  Shares"),  the cash price (the "First Offer Price")
agreed upon between the Percon Group member and the ROFR Transferee at which the
Stockholder  proposes to sell the Offered Shares (it being understood and agreed
that the Founders may not Transfer,  sell or otherwise  dispose of Shares except
for cash) and any other  material  terms  proposed  for the sale of such Offered
Shares.

                  (b) Upon receipt of the Seller's  Notice (the "First  Offer"),
the Founders or any Affiliate of the Founders chosen by the Founders, shall have
the  irrevocable  and exclusive  option (the "Option") to buy all of the Offered
Shares at the First Offer Price.  The Founders' Option shall be exercisable by a
written notice to the holder of the Offered Shares (the "Buyer's Notice"), given
within 10 days from the date of the Seller's Notice.

                  (c) If the applicable Seller's Notice shall be duly given, and
if the Founders shall not have exercised  their Option to purchase (or for their
designee to purchase) the Offered Shares at the First Offer Price within 45 days
of the date the applicable  member of the Percon Group gave the Seller's Notice,
then,  subject to the other provisions of this Agreement,  the applicable member
of the Percon  Group  shall be free for a period of 90 days from the  earlier of
(i) the 10th day following the date of the last Seller's Notice or (ii) the date
the  applicable  member of the Percon Group shall have received  written  notice
from the Founders  stating their  intention not to exercise the Option,  to sell
the Offered Shares not to be purchased by the Founders to the ROFR Transferee at
a price  not more than 10%  below  the  First  Offer  Price and on the terms and
conditions not materially less favorable, taken as a whole, than those set forth
in the  Seller's  Notice.  In any such sale the ROFR  Transferee  must  agree to
become a party to and be bound by the terms of this Agreement.

                  (d) All other provisions of this Section 2.2  notwithstanding,
any  member of the  Percon  Group  intending  to make a public  resale of Shares
pursuant  to  Securities  Act Rule 144,  following  satisfaction  of the holding
period and other requirements thereof, may do so provided

               (i)  a Seller's  Notice is provided to the Founders as in Section
                    2.2(a);

               (ii) the Founder's  Option is not exercised  within 5 days, or if
                    exercised,  the sale of the Shares to the Founders is closed
                    within 10 days; and

               (iii)the  number  of Shares  sold may not  exceed  the  quarterly
                    volume limitation provided by Rule 144(e).

                  (e) If the  Offered  Shares  are not sold by the member of the
Percon Group pursuant to Section 2.2(c) or 2.2(d) above,  upon the expiration of
the 90  day  period  contemplated  by  Section  2.2(c)  or  the  10  day  period
contemplated  by Section 2.2(d),  as applicable,  the Offered Shares shall again
become subject to the right of first refusal provisions of this Section 2.2.

                                       7

<PAGE>

         2.3.  Right of First  Offer on the  Founders  Shares  and "Take  Along"
Rights.

                  (a)  If a  Founder  desires  to  Transfer  any  Shares  now or
hereafter  beneficially owned by it to any other person (other than (i) pursuant
to a registered  public  offering under the Securities Act; (ii) a public resale
under Securities Act Rule 144 effected in accordance with Section 2.3(d) hereof;
or (iii) a Transfer to an Affiliate Transferee or a Family Transferee, including
a Founder) such Founder shall before  effecting such Transfer first give written
notice (a "Founders  Seller's  Notice") to the Percon Group stating their desire
to make  such  Transfer,  the  identity  of the party to whom  such  Shares  are
proposed to be transferred (the "ROFR Transferee") the number of Shares proposed
to be transferred  (the "the Founders  Offered  Shares"),  the cash price (the "
Founders  First Offer  Price")  agreed upon  between  such  Founder and the ROFR
Transferee at which the Founder proposes to sell the Founders Offered Shares (it
being understood and agreed that Percon Group members may not Transfer,  sell or
otherwise  dispose  of Shares  except  for cash)  and any other  material  terms
proposed for the sale of such Founders Offered Shares.

                  (b) Upon  receipt of the  Founders  Seller's  Notice (the "the
Founders  First  Offer"),  the Percon  Group shall have the option (the  "Percon
Option") to buy all of the Founders  Offered  Shares at the Founders First Offer
Price.  The  Percon  Option  shall be  exercisable  by a written  notice to such
Founder (the "Percon Buyer's Notice"), given within 10 days from the date of the
Founders Seller's Notice.

                  (c) If the applicable  Founders  Seller's Notice shall be duly
given,  and if the Percon Group shall not have exercised  their Percon Option to
purchase the Founders Offered Shares at the Founders First Offer Price within 45
days of the date  the  Founders  gave the  Founders  Seller's  Notice,  then the
Founders  shall be free for a period of 90 days from the earlier of (i) the 10th
day following the date of the last the Founders Seller's Notice or (ii) the date
the Founders  shall have received  written  notice from the Percon Group stating
their intention not to exercise the Percon Option,  to sell the Founders Offered
Shares to the ROFR  Transferee  at a price not more than 10% below the  Founders
First Offer Price and on terms and  conditions not  materially  less  favorable,
taken as a whole,  than those set forth in the Founders  Seller's Notice. In any
such sale the ROFR  Transferee  must  agree to become a party to and be bound by
the terms of this Agreement and the Founders shall have the right to require the
Percon  Group to sell or  otherwise  transfer  to such  ROFR  Transferee  Shares
beneficially  owned by the Percon Group,  at the same price per Share and in the
same  proportion  as such ROFR  Transferee  has offered to purchase the Founders
Offered Shares.

                  (d) All other provisions of this Section 2.3  notwithstanding,
any Founder  intending to make a public resale of Shares  pursuant to Securities
Act  Rule  144,   following   satisfaction  of  the  holding  period  and  other
requirements thereof, may do so provided:

                    (i)  a Founders  Seller's  Notice is  provided to the Percon
                         Group as in Section 2.3(a);

                    (ii) the Percon Option is not exercised within 5 days, or if
                         exercised,  the sale of the Shares to the Percon  Group
                         is closed within 10 days; and

                    (iii)the number of Shares sold may not exceed the  quarterly
                         volume limitation provided by Rule 144(e).

                  (e) If  the  Founders  Offered  Shares  are  not  sold  by the
Founders  pursuant to Section 2.3(c) or 2.3(d) above, upon the expiration of the
90 day period  contemplated by Section 2.3(c) or the 10 day period  contemplated
by Section 2.3(d), as applicable, the Founders Offered Shares shall again become
subject to the right of first refusal provisions of this Section 2.3.

                                       8

<PAGE>

         2.4. "Tag Along" Rights.

                  (a) If the  Founders  intend  to seek  to  sell  or  otherwise
transfer a Control Portion (as hereinafter defined) of their Shares to any other
person (other than a Permitted  Transferee)  the Founders shall first deliver to
the Percon Group a written notice (the "the Founders Tag Along Notice") advising
the Percon Group of the  Founders'  intention  to sell a Control  Portion of its
Shares and  specifying  the price at which the  Founders  proposes  to sell such
Shares and any other material terms proposed for the sale. Within ten days after
the date of the Founders Tag Along Notice,  the Percon Group must deliver to the
Founders a written notice (the "the Percon Group Tag Along  Notice")  indicating
whether the Percon  Group shall  require the  Founders to have any of the Percon
Group's  Shares  included in the  proposed  sale in the same  proportion  as the
Founders  propose to sell or  transfer.  The  Percon  Group's  determination  to
participate  in such sale,  as evidenced  by the Percon Group Tag Along  Notice,
shall  be  final  and  irrevocable,  provided  such  sale is made on  terms  not
materially  less  favorable,  taken as a whole,  to the  Founders and the Percon
Group from the terms  specified  in the Founders  Tag Along  Notice.  The Percon
Group's  determination  not to  participate  in such sale,  as  evidenced by the
Percon Group Tag Along Notice,  or the Percon Group's  failure to timely deliver
the Percon Group Tag Along Notice, shall be final and irrevocable and the Percon
Group shall be deemed to have waived its right to participate in any such sale.

                  (b) For purposes of this  Section 2.4, a "Control  Portion" of
the Founders'  Shares shall mean that number of Shares which,  when  effectively
transferred  to another  person (other than an Affiliate of the Founders)  shall
result in such person  beneficially  owning on a fully  diluted  basis a greater
number of Shares than any other Stockholder and its Affiliates.

         2.5.  Legends;  Shares  Subject  to this  Agreement.  Unless  otherwise
expressly provided herein or in the Management Stock Option Plan, no Stockholder
shall Transfer any Shares to any person  (regardless of the manner in which such
Stockholder initially acquired such Shares) nor shall the Company issue, sell or
otherwise transfer any Shares to any person (all persons acquiring Shares from a
Stockholder or from the Company,  regardless of the method of transfer, shall be
referred to collectively as  "Transferees"  and  individually as a "Transferee")
unless (i) such  Shares  bear  legends as  provided in Section 4.1 and (ii) such
Transferee  shall have  executed and  delivered  to the Company,  as a condition
precedent to any acquisition of such Shares, an instrument in form and substance
reasonably satisfactory to the Company confirming that such Transferee agrees to
become a party to this  Agreement and takes such Shares subject to all the terms
and conditions of this  Agreement;  provided that the provisions of this Section
2.4 shall not apply in  respect  of a sale of Shares  included  in a  registered
public  offering  under  the  Securities  Act  and  the  rules  and  regulations
promulgated  thereunder.  The Company  shall not  transfer  upon their books any
Shares to any person except in accordance with this Agreement.

                                       9

<PAGE>

3.       MANAGEMENT STOCK PLAN

         3.1.  Adoption of Management Stock Option Plan. The Board shall adopt a
management  stock  incentive plan (the  "Management  Stock Option Plan") at such
future date and containing  such terms and conditions as a majority of the Board
of  Directors,  including an  affirmative  vote by the Percon  Directors,  shall
determine.

         3.2. Administration by the Compensation Committee. The Management Stock
Option Plan shall be administered by the Compensation  Committee of the Board of
Directors.

         3.3. Issuance of Options to Purchase Common Stock. The Management Stock
Option Plan shall be authorized and entitled to issue to management personnel of
the Company (as identified by the Compensation Committee) options to purchase up
to 1,500,000 shares of Common Stock.

4.       MISCELLANEOUS

         4.1.  Legends on Stock  Certificates A copy of this Agreement  shall be
filed  with the  Secretary  of the  Company  and kept  with the  records  of the
Company.   Each  of  the  Stockholders   hereby  agrees  that  each  outstanding
certificate  representing  Shares subject to this  Agreement  shall bear legends
reading substantially as follows:

                                       10
<PAGE>

          (a)  THE  SHARES   REPRESENTED  BY  THIS  CERTIFICATE  HAVE  NOT  BEEN
          REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,  OR ANY STATE
          SECURITIES  OR BLUE  SKY  LAWS,  AND MAY NOT BE  TRANSFERRED,  SOLD OR
          OTHERWISE  DISPOSED OF EXCEPT  PURSUANT TO AN  EFFECTIVE  REGISTRATION
          STATEMENT OR PURSUANT TO AN  EXEMPTION  FROM  REGISTRATION,  UNDER THE
          SECURITIES ACT AND SUCH STATE SECURITIES OR BLUE SKY LAWS.

          (b)  THE  SHARES  REPRESENTED  BY  THIS  CERTIFICATE  ARE  SUBJECT  TO
          RESTRICTIONS  ON TRANSFER,  AND CERTAIN  VOTING  RESTRICTIONS,  ON THE
          TERMS AND CONDITIONS SET FORTH IN A  STOCKHOLDERS'  AGREEMENT DATED AS
          OF AUGUST 7, 2000, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY OR
          FROM THE HOLDER OF THIS  CERTIFICATE.  NO TRANSFER OF SUCH SHARES WILL
          BE MADE ON THE BOOKS OF THE COMPANY UNLESS  ACCOMPANIED BY EVIDENCE OF
          COMPLIANCE WITH THE TERMS OF SUCH AGREEMENT.

          (c) THE  HOLDER  OF THIS  CERTIFICATE  AGREES  FOR SUCH  PERIOD AS THE
          COMPANY'S INVESTMENT BANKER SHALL REASONABLY REQUEST AND TO THE EXTENT
          ALSO  AGREED  TO BY THE  FOUNDERS  (AS  SUCH  TERM IS  DEFINED  IN THE
          SHAREHOLDERS  AGREEMENT),  NOT TO DIRECTLY OR INDIRECTLY  OFFER,  SELL
          (INCLUDING   BY  EFFECTING   ANY  SHORT   SALE),   CONTRACT  TO  SELL,
          HYPOTHECATE,  PLEDGE,  GRANT ANY OPTION FOR THE SALE OF,  ACQUIRE  ANY
          OPTION TO DISPOSE  OF,  TRANSFER  OR  OTHERWISE  DISPOSE OF ANY COMMON
          STOCK,  WITHOUT OBTAINING THE PRIOR WRITTEN CONSENT OF SUCH INVESTMENT
          BANKER,  WHICH  CONSENT MAY BE WITHHELD OR GRANTED IN SUCH  INVESTMENT
          BANKER'S SOLE DISCRETION.

Such  certificate  shall  bear  any  additional  legend  required  by the  Asset
Agreement or required for compliance with state securities or blue sky laws.

         4.2. Term.  This Agreement  shall terminate on the date of the first to
occur of the following events: (i) the closing of the sale by one or more of the
Founders  pursuant to one or more offerings  registered under the Securities Act
to any person or group of persons  who are not,  and who do not  become,  at the
time of sale,  parties to this Agreement of a number of Shares equal to at least
50% of the  maximum  total  number  of Shares  beneficially  owned by all of the
Founders at any time;  (ii)  Bankruptcy,  receivership,  or  dissolution  of the
Company;  (iii) the voluntary agreement of all the parties who are then bound by
the  terms  hereof;  (iv)  the  acquisition  of  all  the  Shares  by one of the
Stockholders; or (v) five years from the date of this Agreement.

         4.3.  Injunctive  Relief.  It is hereby agreed and acknowledged that it
will be impossible to measure in money the damages that would be suffered if the
parties fail to comply with any of the  obligations  herein  imposed on them and
that in the event of any such failure,  an aggrieved  person will be irreparably
damaged and will not have an  adequate  remedy at law.  Any such  person  shall,
therefore, be entitled to injunctive relief, including specific performance,  to
enforce  such  obligations,  and if any  action  should be  brought in equity to
enforce any of the  provisions  of this  Agreement,  none of the parties  hereto
shall raise the defense that there is an adequate remedy at law.

         4.4. Notices. All notices, statements,  instructions or other documents
required to be given hereunder, shall be in writing and shall be given either by
hand delivery,  by overnight delivery service,  by facsimile  transmission or by
mailing the same in a sealed  envelope,  first-class  mail,  postage prepaid and
either certified or registered, return receipt requested, addressed as follows:

                                       11

<PAGE>

--------------------------------------------------------------------------------
if to the Percon Group, to:               Performance Control, LLC
                                          4220 Varsity Drive, Suite E
                                          Ann Arbor, MI 48108
--------------------------------------------------------------------------------
with a copy to their counsel:             Seyburn, Kahn, Ginn, Bess and Serlin
                                          2000 Town Center
                                          Suite 1500
                                          Southfield, MI 48075
--------------------------------------------------------------------------------
if to the Founders, send                  Power Efficiency Corporation
notices to them at the notice
address given of the signature
page hereof, or the Company, to:

--------------------------------------------------------------------------------
with a copy to their counsel:             Gerard S. DiFiore, Esq.
                                          Reed Smith Shaw & McClay LLP
                                          One Riverfront Plaza, First Floor
                                          Newark, NJ  07102

and to the other  parties at their  addresses  reflected in the stock records of
the  Company.  Each  Stockholder,  by  written  notice  given to the  Company in
accordance  with this  Section  4.4 may  change the  address  to which  notices,
statements,  instruction or other documents are to be sent to such  Stockholder.
All notices, statements, instructions and other documents hereunder that are (i)
mailed  shall be deemed to have been given on the date of mailing,  (ii) sent by
hand  delivery or by facsimile  transmission  shall be deemed to have been given
when received,  or (iii) sent by overnight  delivery  service shall be deemed to
have been given one business day after sent. Whenever pursuant to this Agreement
any notice is required to be given by any  Stockholder to any other  Stockholder
or  Stockholders,  such  Stockholder  may  request  from the  Company  a list of
addresses  of all  Stockholders  of the  Company,  which list shall be  promptly
furnished to such Stockholder.

         4.5.  Successors and Assigns.  This Agreement shall be binding upon and
shall inure to the benefit of the parties,  and their respective  successors and
permitted  assigns.  If any  Transferee  of any  Stockholder  shall  acquire any
Shares, or any right to acquire Shares,  in any manner,  whether by operation of
law or otherwise,  such Shares shall be held subject to all of the terms of this
Agreement,  and  by  taking  and  holding  such  Shares  such  person  shall  be
conclusively  deemed  to have  agreed to be bound by and to  perform  all of the
terms and provisions of this Agreement.

         4.6.  Company  Information.  The  Company  agrees  to  deliver  to each
Stockholder, without charge, so long as such Stockholder owns any Shares:

                  (a)  Within  45 days  after the end of each  quarterly  fiscal
period  (except  the last) in each fiscal year of the  Company,  a  consolidated
balance sheet of the Company and their  consolidated  Subsidiaries as of the end
of such  quarter,  and  consolidated  statements  of income and cash flow of the
Company and their consolidated  Subsidiaries for such quarter and the portion of
the  fiscal  year  ending  with  such  quarter,  setting  forth in each  case in
comparative  form the figures for the  corresponding  periods a year earlier and
the figures set forth in the Company's  budget for such periods and  accompanied
by a narrative  description  of such financial  statements in reasonable  detail
prepared by the chief accounting or financial officer of the Company.

                  (b)  Within 90 days after the end of each  fiscal  year of the
Company,  a  consolidated  balance  sheet of the Company and their  consolidated
Subsidiaries as of the end of such fiscal year, and  consolidated  statements of
income, and cash flows for such fiscal year, in each case prepared in accordance
with generally  accepted  accounting  principles,  setting forth in each case in
comparative  form the figures for the  previous  fiscal year and the figures set
forth in the Company's budget for such fiscal year.

                  (c)  Promptly  after  receipt  of  a  request  therefor,   any
information  required by or necessary  for a  Stockholder  to comply with local,
state or federal regulatory or tax filing requirements.

                                       12

<PAGE>

                  (d)  Permit  representatives  of the  Founders  and the Percon
Group at reasonable times upon prior reasonable notice to visit and inspect such
financial  records  and the  premises  of the  Company  at  reasonable  times on
reasonable  notice and to make  copies of such  records as such  representatives
deem necessary, other than documents subject to the attorney-client privilege or
the attorney work product  privilege,  and to discuss the business,  operations,
assets,  properties  and  financial  and other  conditions  of the Company  with
officers and employees of the Company and with their independent accountants.

                  (e)  With   reasonable   promptness,   such   other  data  and
information as from time to time may be reasonably requested.

         4.7.  Governing  Law.  Regardless  of  the  place  of  execution,  this
Agreement  shall be governed by and construed in accordance with the laws of the
State of Delaware,  applicable  to contracts  made and to be performed  entirely
within such state.

         4.8.  Headings.  All headings are inserted herein for convenience  only
and do not form a part of this Agreement.

         4.9.  Entire  Agreement;   Amendment.  This  Agreement  and  the  other
agreements  referenced  herein  contain the entire  agreement  among the parties
hereto with respect to the  transactions  contemplated  herein and supersede all
prior written agreements and negotiations and oral  understandings,  if any, and
this  Agreement  may not be amended,  supplemented  or  discharged  except by an
instrument in writing  signed by all the  Stockholders.  Concurrently  with such
amendment  or  modification  of  this  Agreement  or as  soon  thereafter  as is
practicable the Certificate of Organization  and By-Laws of the Company shall be
amended by necessary corporate action. In the event that any Stockholder, or the
Company  shall  be  required,  as  a  result  of  the  enactment,  amendment  or
modification,   subsequent  to  the  date  hereof,  of  any  applicable  law  or
regulations,  or by the order of any governmental  authority, to take any action
which is  inconsistent  with or which would  constitute a violation or breach of
any terms of this Agreement,  then the  Stockholders,  and the Company shall use
their best efforts to negotiate an appropriate  amendment or modification of, or
waiver of compliance with, such terms.

                                       13

<PAGE>

         4.10. No Waiver.  No failure to exercise and no delay in exercising any
right,  power or privilege of a party  hereunder shall operate as a waiver nor a
consent to the  modification  of the terms hereof  unless given by that party in
writing.

         4.11.  Undertaking.  the  Founders  and the Company  hereby  agree that
before completing any extraordinary corporate transaction involving the Company,
the Founders and the Company will  consider,  and will consult with Percon Group
with  respect  to,  methods to  minimize or  eliminate  any  adverse  income tax
consequences to Percon Group that could arise as a result of such  extraordinary
corporate  transaction,  and the Founders and the Company will take such actions
as they deem  necessary or appropriate to minimize or eliminate any such adverse
income tax consequences to Percon Group, so long as in the opinion of counsel to
the Founders and the Company such actions will not have any adverse  consequence
or effect on the Founders or the Company.

         4.12.  Counterparts.  This  Agreement  may be  executed  in two or more
counterparts,  each of  which  shall be  deemed  an  original,  but all of which
together shall constitute one and the same instrument. Fax copy signatures shall
be given the same effect as original signatures.

      [rest of page left blank intentionally - next page is signature page]

                                       14

<PAGE>

                  IN  WITNESS  WHEREOF,   the  parties  here  have  caused  this
Agreement to be duly executed on the date first written above.

PERFORMANCE CONTROL, LLC                      POWER EFFICIENCY CORPORATION

By:                                           By:
   ---------------------------------             ------------------------------
      Steven Shulman, Managing Member               Nicholas Anderson, President

----------------------------                  -------------------------------
Anthony Caputo, Individually                  Nicholas Anderson, Individually
1155 Colonial Way                             1536 208th Street
Bridgewater, NJ 08807                         Bayside, NY 08807

----------------------------                  -------------------------------
Philip Elkus, Individually                    Steven Shulman, Individually
2488 Orchard Lake Road                        5807 Fox Hollow Court
Farmington Hill, MI 48334                     Ann Arbor, MI 48105

<PAGE>

                                   SCHEDULE 1

                           DETAIL OF ACQUISITION STOCK

                        Name of Holder Number of Shares
<TABLE>
<CAPTION>

<S>                                                                         <C>
Philip Elkus                                                                22,500
Steven Shulman                                                              64,843
Ashley Heimbaugh                                                            12,273
Tim Fielding                                                                 4,026
Louis Stober                                                                 3,750
Percon                                                                     954,853
Percon (shares held by Escrow Agent pursuant to terms of Asset Agreement)   50,000
TOTAL                                                                    1,112,245
</TABLE>

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