Document:

Exhibit 10.3 to CapSource Financial, Inc. Form 8-K dated December 28, 2005

Exhibit 10.3  

WHOLESALE FLOOR PLAN FINANCING AGREEMENT

FOR TRAILER DEALERS

This Wholesale Floor Plan Financing Agreement (this “Agreement”) is entered into this  14th day of April 2006
, between ___________________________  (hereinafter referred to as “Dealer”) a  Capsource Equipment Company, Inc. whose principal place of business is located at
Nevada Corporation, 15609 Valley Blvd. Fontana, CA 92335
 and Navistar Financial Corporation, located at 425 N. Martingale Rd. Schaumburg, IL 60173 (“Lender”).

          1.
PURPOSE. The purpose of this Agreement is to set forth the conditions under
which the Lender shall provide wholesale (floor plan) financing for inventory
consisting of: (i) NEW equipment to a Dealer for the Dealer’s purchase of new
trailers manufactured, distributed or offered for sale by one or more
manufacturers and (ii) USED equipment taken in trade or purchased by Dealer
(new equipment and used equipment are hereinafter collectively referred to as
the “Equipment”).

          2.
GOODS COVERED. This Agreement shall apply to all Equipment that Dealer desires
to purchase from manufacturer from time to time or that Dealer may take in
trade or purchases from time to time.

          3. FINANCE TERMS. The Dealer agrees that
all Equipment financed by Lender in accordance with the provisions of this
Agreement shall draw interest or accrue a financing charge and a flat charge at
rates established by the Lender in accordance with Lender’s New and Used Floor
Plan Terms for Dealers, as amended, supplemented or modified from time to time,
the form of which is attached hereto as Exhibit A. Credit for the purchase
price of the Equipment covered hereby will be extended by Lender subject to its
prior and continuous approval. Lender may at
any time without notice place a limit upon the amount of credit that may be
extended to the Dealer and may at any time, without notice, change any credit
limit so established.

          4.
GRANT OF SECURITY INTEREST. To protect the Lender when credit is extended, and
to secure payment of all amounts due or to become due for any indebtedness or
obligations now or hereafter owing by Dealer to the Lender, whether or not
arising under this Agreement, until all such indebtedness shall have been paid
in cash, and all such obligations have been completely satisfied, the Lender
hereby retains, and Dealer hereby grants a first priority security interest
under the Uniform Commercial Code or other applicable laws in and to Dealer’s
inventory of Equipment, now or hereinafter acquired, and all attachments,
accessories, equipment and service parts attached thereto purchased hereunder
which is manufactured or distributed by Manufacturer or which credit is
extended by Manufacturer or Lender, all chattel paper, contracts, instruments
and accounts of whatever nature arising out of the sale, lease, rental or other
disposition of the above described Equipment, all repossessions of the above
described Equipment, all credits or other amounts due hereunder in the form of
allowances, warranty reimbursements or otherwise, and the cash and non-cash
proceeds, and products thereof, including without limitation, insurance
proceeds of all of the above.

          5.
GUARANTY. Dealer shall cause to be delivered to Lender simultaneously with the
execution of this
Agreement the personal guaranties (substantially in a form as attached hereto
as Exhibit B) of and
___________________________________
and ___________________________and guaranteeing any and all
indebtedness
of Dealer to Lender and any affiliate of Lender, its successors and assigns, as
a guaranty of all of Dealer’s obligations, including all payment obligations,
hereunder.

          6.
ADDITIONAL DOCUMENTATION. When requested by the Lender, the Dealer will execute
and deliver, or cause to be executed and delivered, to Lender, in form and
substance satisfactory to Lender such notes (in the form of which is attached
hereto as Exhibit C), such other financing statements (the form of which is
attached hereto as Exhibit D) a signatory authorization and minutes approving
such authorization (the form of which is attached hereto as Exhibit E) and
liens, notes or contracts or such other title retention or security instruments
or any other documents as may be required by the Lender covering the Equipment
and all other security described above, and securing any and all indebtedness
owing by the Dealer to the Lender or any of its affiliates.

	
 

	
 

	
 

	
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          7.
 OBLIGATION
TO PAY. Regardless of any terms established by Manufacturer or Lender on
Equipment sold to the Dealer on credit, the Dealer’s obligation to pay Lender
on the note(s) will become immediately due and payable whenever the Equipment
is resold, leased, rented or placed in use. The Dealer agrees to pay all
initial taxes imposed by law upon the privilege of executing said liens, notes
or contracts or other title retention or security instruments or documents, and
if it fails to do so, to reimburse the Lender for all costs of such taxes paid
by the Lender on behalf of the Dealer.

When the Dealer is indebted
to the Lender, or to any affiliate of the Lender, on past due notes, or for
goods resold by the Dealer, the Dealer shall, when the Lender requires, assign
or endorse and promptly deliver to the Lender, for its account or for the
account of any affiliate or subsidiary of the Lender or for the account of
both, sufficient good accounts or well-secured notes, or other assets, to cover
said indebtedness, to be held as additional security. The Dealer agrees to pay
a collection fee on the cash collected by the Lender upon such Equipment
security which fee will be determined at the time the Equipment security is
assigned.

          8.
SCHEDULES AND REPORTS. Dealer shall deliver to Lender as soon as available, and
in any event within 90 days after the end of Dealer’s fiscal year, a complete
audited financial statement for Dealer’s business.

          9.
REPRESENTATIONS, WARRANTIES AND COVENANTS. Dealer hereby covenants, represents,
warrants and agrees as follows:

	
 

	
 

	
 

	
 

	
 

	
(a)

	
The financial statements
  delivered or to be delivered by Dealer to Lender at or prior to the date of
  this Agreement and at all times subsequent thereto accurately reflect the
  financial condition of Dealer, and there has been no material adverse change
  in the financial condition, the operations, the properties or prospects of
  Dealer since the date of the financial statements most recently delivered to
  Lender prior to the date of this Agreement;

	
 

	
 

	
 

	
 

	
(b)

	
The office where Dealer
  keeps its books, records and accounts (or copies thereof) concerning the
  Equipment, Dealer’s principal place of business and all of Dealer’s other
  places of business are as set forth in Exhibit F attached hereto; Dealer
  shall promptly (but in no event less than ten (10) days prior thereto) advise
  Lender in writing of the proposed opening of any new place of business, the
  closing of any existing place of business, and any change in the location of
  Dealer’s books, records and accounts (or copies thereof) concerning the
  Equipment;

	
 

	
 

	
 

	
 

	
(c)

	
Dealer is a corporation,
  limited liability company, partnership (circle one) duly organized, validly existing,
  and in good standing under the laws of the state of
  ____________________________ and Dealer is  Nevada
  duly qualified and in good standing in all states where the nature and extent
  of the business transacted by it or the ownership of its assets makes such
  qualification necessary. Dealer shall deliver to Lender a certified copy of a
  resolution of Dealer’s Board of Directors and/or Members authorizing the
  execution by Dealer of this Agreement and the transactions contemplated
  hereby substantially in the form of Exhibit G attached hereto.

	
 

	
 

	
 

	
 

	
(d)

	
Unless the prior written
  approval of Lender shall first have been obtained:

	
 

	
 

	
 

	
 

	
 

	
 

	
(i)

	
Dealer will not change
  Dealer’s name in any manner unless Dealer shall have given Lender at least
  thirty (30) days prior written notice thereof and shall have taken all action
  necessary or reasonably requested by Lender to amend any financing statements
  or continuation statements. Dealer will not sign or authorize the signing on
  Dealer’s behalf of any financing statement naming Dealer as Debtor covering
  all or any portion of the Equipment, except financing statements naming
  Lender as Secured Party.

	
 

	
 

	
 

	
 

	
 

	
 

	
(ii)

	
There are no actions or
  proceedings which are pending or threatened against Dealer which might result
  in any material adverse change in its financial condition or materially
  adversely affect the Equipment and Dealer shall, promptly upon becoming aware
  of any such pending or threatened action or proceeding, give written notice
  thereof to Lender;

	
 

	
 

	
 

	
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(iii)

	
 Dealer is not in default
  under any material contract, lease or commitment to which it is a
  party or by which it is bound, nor does Dealer know of any dispute regarding
  any

          10.
ADDITIONAL COVENANTS OF THE DEALER. Until payment or satisfaction in full of
all liabilities, unless Dealer obtains Lender’s prior written consent waiving
or modifying any of Dealer’s covenants hereunder in any specific instance,
Dealer agrees as follows:

	
 

	
 

	
 

	
 

	
(a)

	
Dealer shall promptly advise
  Lender in writing of (i) any material adverse change in the business, assets
  or condition, financial or otherwise, of Dealer, the occurrence of any Event
  of Default hereunder or the occurrence of any event which, if uncured, will
  become an Event of Default hereunder after notice or lapse of time (or both)
  or (ii) any default or notice of termination or termination of its agreement
  with the Manufacturer;

	
 

	
 

	
 

	
 

	
(b)

	
Lender, or any persons
  designated by it, shall have the right, at any time, to call at Dealer’s
  places of business at any reasonable times, and without hindrance or delay,
  to inspect the Equipment and to inspect, audit, check and make extracts from
  Dealer’s books, records, journals, orders, receipts and any correspondence
  and other data relating to the Equipment. Dealer shall furnish to Lender such
  information relevant to Lender’s rights under this Agreement as Lender shall
  at any time and from time to time request. Dealer authorizes Lender to
  discuss the affairs, finances and business of Dealer with any managers or
  employees responsible for the financial records of the Dealer and to discuss
  the financial condition of Dealer with Dealer’s independent public
  accountants. Any such discussions shall be without liability to Lender or to
  Dealer’s independent public accountants;

	
 

	
 

	
 

	
 

	
(c)

	
Dealer shall keep the
  Equipment in good condition, repair and order; shall permit Lender to examine
  any of the Equipment at any time and wherever the Equipment may be located;
  shall not permit the Equipment, or any part thereof, to be levied upon under
  execution, attachment, distraint or other legal process; shall not sell,
  lease, grant a security interest in or otherwise dispose of any of the
  Equipment except as expressly permitted by this agreement; and shall not
  secrete or abandon any of the Equipment, or retitle any of the Equipment for
  which there is a certificate of title;

	
 

	
 

	
 

	
 

	
(d)

	
Dealer shall file all
  required tax returns and pay all of its taxes when due, including, without
  limitation, taxes imposed by federal, state or municipal agencies, and shall
  cause any liens for taxes to be promptly released; provided, that Dealer
  shall have the right to contest the payment of such taxes in good faith by
  appropriate proceedings so long as (i) the amount so contested

          11.
DEFAULT. An Event of Default shall be deemed to have occurred upon the
happening of any one of the following events:

	
 

	
 

	
 

	
 

	
(a)

	
a breach by the Dealer of
  any of the provisions of or representations contained in this Agreement, or

	
 

	
 

	
 

	
 

	
(b)

	
a default by Dealer in the
  payment of any installment of principal or interest on any of the Notes
  referred to in this Agreement or a default under any other contract or
  agreement between Dealer and Lender or any affiliate of Lender.

	
 

	
 

	
 

	
 

	
(c)

	
the failure of any Dealer
  or guarantor to perform, keep or observe any of the covenants, conditions,
  promises, agreements or obligations of such Dealer or guarantor under this
  Agreement or any of the other agreements;

	
 

	
 

	
 

	
 

	
(d)

	
the making or furnishing
  by Dealer or guarantor to Lender of any representation, warranty,
  certificate, schedule, report or other communication within or in connection
  with this Agreement or the other agreements or in connection with any other
  agreement between such Dealer or guarantor and Lender, which is untrue or
  misleading in any respect;

	
 

	
 

	
 

	
 

	
(e)

	
the institution by Dealer
  of proceedings to be adjudicated a bankrupt or insolvent, or proposing the
  entry of an order for relief against it, or the consent by it to the
  institution of bankruptcy or insolvency proceedings against it, or the filing
  by it of a petition or answer or consent seeking reorganization or relief
  under the Federal Bankruptcy Code or any other similar law, or the making by
  it of any assignment for the benefit of creditors, or the admission by it in
  writing of its inability to pay its debts generally as they become due.

	
 

	
 

	
 

	
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          12.
REMEDIES UPON DEFAULT.

	
 

	
 

	
 

	
 

	
(a)

	
Upon the occurrence of an
  Event of Default, Lender may declare that all of the notes and all amounts
  due or to become due thereunder are immediately due and payable. This
  declaration shall be in addition to and not in lieu of any other remedies
  available to Lender. Lender’s waiver of rights arising pursuant to any Event
  of Default, or of any successive Event of Default, shall not constitute a
  waiver of any subsequent Event of Default, including the specific Event of Default
  formerly waived.

	
 

	
 

	
 

	
 

	
(b)

	
Upon the occurrence of an
  Event of Default, Lender may exercise from time to time any rights and
  remedies available to it under the Uniform Commercial Code and any other
  applicable law in addition to, and not in lieu of, any rights and remedies
  expressly granted in this Agreement or in any of the other agreements and all
  of Lender’s rights and remedies shall be cumulative and non-exclusive to the
  extent permitted by law.

	
 

	
 

	
 

	
 

	
 

	
In particular, but not by
  way of limitation of the foregoing, Lender may, without notice, demand or
  legal process of any kind, take possession of any or all of the Equipment (in
  addition to Equipment of which it already has possession), wherever it may be
  found, and for that purpose may pursue the same wherever it may be found, and
  may enter into any of Dealer’s premises where any of the Equipment may be,
  and search for, take possession of, remove, keep and store any of the
  Equipment until the same shall be sold or otherwise disposed of, and Lender
  shall have the right to store the same at any of Dealer’s premises without
  cost to Lender.

	
 

	
 

	
 

	
 

	
 

	
At Lender’s request,
  Dealer shall, at Dealer’s expense, assemble the Equipment and make it
  available to Lender at one or more places to be designated by Lender and reasonably
  convenient to Lender and Dealer.

	
 

	
 

	
 

	
 

	
 

	
Dealer recognizes that if
  Dealer fails to perform, observe or discharge any of its liabilities under
  this Agreement or the other agreements, no remedy at law will provide
  adequate relief to Lender, and agrees that Lender shall be entitled to
  temporary and permanent injunctive relief in any such case without the
  necessity of proving actual damages. Any
  notification of intended disposition of any of the Equipment required by law
  will be deemed reasonably and properly given if given at least ten (10)
  calendar days before such disposition.

	
 

	
 

	
 

	
 

	
 

	
Any proceeds of any
  disposition by Lender of any of the Equipment may be applied by Lender to the
  payment of expenses in connection with the Equipment, including, without
  limitation, legal expenses and reasonable attorneys’ fees, and any balance of
  such proceeds may be applied by Lender toward the payment of such of the
  liabilities, and in such order of application, as Lender may from time to
  time elect or may be applied against any other obligation by Dealer to Lender
  or any affiliate of Lender. Any surplus remaining after the satisfaction of
  all obligations will be returned to Dealer. If the proceeds of such sale are
  insufficient to satisfy the obligations Dealer agrees to pay any deficiency.

	
 

	
 

	
 

	
 

	
(c)

	
All rights and remedies
  herein granted to Lender are cumulative and not alternative and any remedy
  herein specifically set forth is in addition to any applicable remedy that
  may be provided for and available by law. No waiver by Lender of any default
  or breach shall operate as a waiver of any other default or breach, as of the
  same default or breach on a future occasion.

          13.
INSURANCE REQUIREMENTS. Equipment delivered to Dealer in accordance with the
provisions of this Agreement will be covered in part by insurance provided by
Lender. Such insurance will be effected by a standard form Automobile Physical
Damage Policy with Wholesale Floor Plan Endorsement, Double Interest Form,
issued to Lender or its assignee as the named insured. A summary of such
provisions of insurance is attached hereto as Exhibit
H. In addition, Borrower shall maintain insurance with responsible
companies with an A. M. Best rating of not less than B+, in such amounts and
against such risks as is usually carried by owners of similar businesses and
properties in the same general geographic area in which Borrower operates.
(Said insurance shall name Lender as an additional insured party. All costs and
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Borrower. In the
event that Borrower shall default in the making of any payment for said
insurance premiums, Lender may, but need not, make any such payments. Any such
payments made by Lender shall become additional indebtedness which shall be
subject to all of the terms and conditions of this Agreement and which shall be
secured by the same security agreements which secure the remainder of the loan
which is the subject of this Agreement.)

          14.
RETAIL FINANCING If Dealer desires to apply for a Retail Financing Program,
Dealer shall enter into a Retail Financing Program agreement and all related
documents, exhibits and finance bulletins forming a part of the Retail
Financing Program agreement. A copy of the Retail Financing Program agreement
is attached hereto as Exhibit I.

          15.
NOTICE. All written notices and other written communications with respect to
this Agreement shall be sent by ordinary, certified or overnight mail, by
telecopy or delivered in person, and in the case of Lender shall be sent to it
at Navistar Financial Corporation, 2850 West Golf Road, Rolling Meadows,
Illinois 60008,

Attention: Vice President of
Credit, and in the case of Dealer shall be sent to it at its principal place of
business set forth on the first page of this Agreement to the attention of
Dealer’s President.

          16.
CHOICE OF GOVERNING LAW; CONSTRUCTION FORUM. This Agreement, the notes and all
other agreements between Dealer and Lender are submitted by Dealer to Lender
for Lender’s acceptance or rejection at Lender’s principal place of business as
an offer by Dealer to borrow monies from Lender now and from time to time
hereafter, and shall not be binding upon Lender or become effective until
accepted by Lender, in
writing, at said place of business. If so accepted by Lender, this Agreement,
the notes and all other agreements between Dealer and Lender shall be deemed to
have been made at said place of business. This Agreement, the notes and all
other agreements between Dealer and Lender shall be governed and controlled by
the internal laws of the State of Illinois as to interpretation, enforcement,
validity, construction, effect, and in all other respects, including, without
limitation, the legality of the interest rate and other charges, but excluding
perfection of the security interests in the Equipment, which shall be governed
and controlled by the laws of the relevant jurisdiction. If any provision of
this Agreement shall be held to be prohibited by or invalid under applicable
law, such provision shall be ineffective only to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or
remaining provisions of this Agreement.

          17.
WAIVER OF JURY TRIAL; OTHER WAIVERS.

	
 

	
 

	
 

	
 

	
(a)

	
Dealer
  hereby waives all rights to trial by jury in any action or proceeding which
  pertains directly or indirectly to this Agreement, the notes, the other
  agreements or the Equipment.

	
 

	
 

	
 

	
 

	
(b)

	
Dealer hereby waives all
  rights to notice and hearing of any kind prior to the exercise by Lender of
  its rights to repossess the Equipment of Dealer without judicial process or
  to replevy, attach or levy upon such Equipment without prior notice or
  hearing.

          18.
AUTHORITY. All persons who execute this Agreement individually agree that, both
in their capacities as shareholders/owners/officers/members of Dealer and in
their individual capacities, they shall take no action which is or may be
inconsistent with this Agreement; they will perform each and every act
necessary to effectuate the representations, covenants and obligations of
Dealer hereunder; they will perform each and every act and execute each and
every document required of them as individuals; and they will not sell, assign,
pledge, or in any way encumber their shares of stock in Dealer.

          19.
TERMINATION. This Agreement may be terminated at any time at the will of any
party hereto by giving written notice thereof to the other parties by
registered mail addressed to the last known address of the other parties, or by
personal delivery. In the event of termination by any party, all obligations
owing by the Dealer to Company or Lender, or any of its affiliates or
subsidiaries shall become immediately due and payable.

	
 

	
 

	
 

	
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          IN WITNESS
WHEREOF, this Agreement has been
executed by the parties hereto as of the date and year above written.

Accepted
by Lender at

Schaumburg, Illinois

NAVISTAR FINANCIAL
CORPORATION

	
 

	
 

	
 

	
Capsource Equipment
  Company, Inc.

	
 

	

	
 

	
 

	
 

	
 

	
 

	
By: 

	
 

	
 

	
By: 

	
 

	
 

	

	
 

	
 

	

	
 

	
(Lender)

	
 

	
 

	
(Dealer)

	
 

	
 

	
 

	
 

	
 

	
Its: 

	
 

	
 

	
Its: 

	
 

	
 

	

	
 

	
 

	

	
 

	
 

	
 

	
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EXHIBIT A

FLOOR PLAN RATE AND TERMS FOR DEALERS

1. Agreement: This Exhibit
A is attached to and forms a part of that certain Wholesale Floor Plan
Financing Agreement (the “Agreement”) between  Capsource Equipment Company,
Inc. (“Borrower”) and Navistar Financial Corporation (“Lender”).
Capitalized terms used herein without definition will have the meaning as
described in the Agreement.

Borrower acknowledges that the rates and terms contained herein may be
amended, modified or supplemented from time to time. Unless otherwise agreed to by Lender, the rates and
terms in effect on the date Lender extends any Floor Plan Financing to Borrower
under the Agreement, shall be the rates and terms in effect for said Floor Plan
Financing until it is repaid in full. Borrower’s request to Lender to extend
such Floor Plan Financing shall be deemed an acceptance of the terms,
conditions, provisions and rates in force for the particular rates and terms in
effect at that time by Lender.

2. Maximum Credit

	
 

	
 

	
 

	
 

	
(a)

	
New: Sales price of Equipment,

	
 

	
 

	
 

	
 

	
(b)

	
Used: The maximum Floor Plan Financing for Used Equipment shall be
  one hundred (100%) of its “as is” wholesale value as determined by Lender’s
  appraisal thereof. The minimum floorplan note shall be $5,000.00.

3. Maturity: New: Principal
payment shall be due twelve (12) months from the first of the month following
date of invoice and creation of the Floor Plan Note. A Floor Plan Note covering
Equipment in new condition may be extended by Lender or its assignee for a
three (3) month renewal period, provided all accrued interest has been paid and a curtailment of ten percent (10%)
of the original Floor Plan Note principal balance (“Curtailment”) is paid to Lender or its assignee at the original
maturity date.

Provided that prior Curtailment payments have been paid as scheduled
and the Borrower continues to have approved Floor Plan Financing, the Borrower
shall pay additional curtailments on Equipment every three (3) months. At the
option of the Lender, the cash Curtailment may be waived. Provided the
Equipment remains on­hand and unsold, the number of additional 90-day extension
periods for New Equipment shall be unlimited provided the ten percent (10%)
Curtailments of the original amount are paid with each extension. The amount
due for subsequent Curtailments may be increased in the event that depreciation
or weathering of the Equipment is deemed, in the sole judgment of the Lender or
its assignee, to warrant such additional amount.

If payment for the Curtailment that is due upon original maturity is
not received and credited to the Borrower Floor Plan Note by the last business
day of the maturity month, the Curtailment amount, plus a non-refundable service charge equal to fifteen
(15) days interest will be charged to the Borrower’s accounts receivable statement.

Used: A ten percent (10%) curtailment shall be due on the first month
follwing six (6) months from the date of creation of a Floor Plan Note (“Curtailment”). A ten percent (10%)
curtailment of the original Floor Plan Note principal balance shall be due on the first of the month following nine
(9) months from the date of creation of a Floor Plan Note. Payment in full of
the outstanding balance shall be due on the first of the month following twelve
(12) months from the date of creation of Floor Plan Note.

Provided that prior Curtailment payments have been paid as scheduled
and the Borrower continues to have approved Floor Plan Financing, if at the end
of such maturity periods, the Equipment is still on hand, unsold and not in
service of any kind, in as good condition as it was when the related Floor Plan
Note was accepted by Lender, and any reconditioning necessary to place any
Equipment in salable condition has been completed, the period for which the Equipment will be financed
will be extended for an additional ninety (90) days upon payment in cash of ten percent (10%) of the original
amount of the Floor Plan Note. At the option of Lender, the cash

	
 

	
 

	
 

	
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Exhibit A
  (NonUtility-New)

Curtailment
may be waived. Provided that prior Curtailment payments have been paid as
scheduled and the Borrower continues to have approved Floor Plan Financing and
provided the Equipment remains on-hand and unsold, the number of additional ninety (90) day extension periods for
the Equipment shall be unlimited provided the ten percent (10%)
Curtailments of the original amount are paid with each extension. Such
Curtailments may be increased in
amount in the event that the depreciation or weathering of the Equipment(s) is
deemed, in the sole judgement of Lender, to warrant such additional amounts.

If the Curtailment due is not received and credited by Lender by the
last business day of the maturity month, the Curtailment amount, including a non-refundable
service charge equal to fifteen (15) days interest, will be charged to the
Borrower’s accounts receivable statement.

4. Interest: Each Floor
Plan Note will bear interest at Prime Rate plus one and one-quarter percent
(1.25%) for New Equipment and one and three-quarters percent (1.75%) for Used
Equipment. Prime rate shall be determined for the ensuing month by the Prime
Rate on the third Monday of the current month. If interest rate determined as
set forth herein exceeds the rate permitted by law, then the highest rates
permitted by law shall apply. Navistar Financial Corporation reserves the right
to change the rate of interest on newly booked Floor Plan Notes at any time.

5. Flat Rate: A flat
charge, currently .00065%, will be charged on the outstanding Floor Plan Note
balance on the last day of
each month to the Borrower’s monthly accounts receivable statement. In no event
will the flat charge be less than
$450.00 per month as long as a Floor Plan balance is owed to Lender at month
end. Payment is due immediately upon receipt each month by Borrower of the
Borrower’s accounts receivable statement. The flat charge may be changed at any
time by Lender giving Borrower ten (10) days prior written notification.

6. Payment: All Floor Plan
Notes shall accrue interest until Lender or its assignee receives full
settlement upon established terms. Settlement may be transmitted to Lender by
check or wire transfer, and credit will be applied effective the next banking
day following an initiating message, provided that the initiating message is
received by lender by 12:00 noon, Borrower’s local time. If payment is received
by a Borrower’s check, Floor Plan
Notes shall accrue interest to and including the second (business or banking)
day after such remittance is received
by the designated bank lock box.

7. Application of Proceeds:
The credit for each Floor Plan Note accepted hereunder will be applied as
follows:

	
 

	
 

	
 

	
 

	
(a)

	
First to the balance owing to the Lender or manufacturer for the sold
  Equipment covered by such Floor Plan Note;

	
 

	
 

	
 

	
 

	
(b)

	
If Borrower is not further indebted to Lender for the sold Equipment
  covered by such Floor Plan Note, the balance may be applied, at the option of
  Lender, against other obligations owing to Lender or its affiliates, paid in
  cash to the Borrower, or paid as directed by Borrower.

8. Additional Documentation: At Lender’s
request, Borrower agrees to deliver to Lender the manufacturer’s certificate of
origin, the Certificate of Title, if a Certificate of Title has been issued for
Used Equipment, and agrees to execute such other documents as may be required
by Lender.

9. Modification: Any term or condition of this Agreement may be
modified by Lender from time to time by the issuance of written finance
bulletins. No representative of Lender, except for the President or any Vice
President, in writing, may waive any provision of the Agreement or modify its
terms.

	
 

	
 

	
 

	
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Exhibit A
  (NonUtility-New)

EXHIBIT
B

GUARANTY
(For Wholesale)

FH-217

THIS CONTINUING UNCONDITIONAL GUARANTY (this “Guaranty”), is made by
the undersigned (“Guarantor,”
or if made by more than one person or entity, collectively, “Guarantor”) to NAVISTAR FINANCIAL CORPORATION
(“NFC”), and any and all of its affiliates (collectively “Affiliates”) whose principal address is 425 N.
Martingale Rd.
Schaumburg, IL 60173 (NFC and Affiliates are referred to collectively as “Companies”).

R E C I T A L S:

          WHEREAS, __________,
a(n) Capsource Equipment Company, Inc. Nevada Corporation , whose
principal office is located at 15609 Valley Blvd. Fontana, CA 92335 (“Obligor”) desires and may desire from time to
time to obtain financial accommodations
from Companies including, without limitation, wholesale (floor-plan) financing,
parts financing, open account financing, capital loans, or other loans (whether
pursuant to wholesale (floor-plan) financing arrangements, parts security
agreements, open account financing arrangements, capital loan and security
agreements or other instruments or agreements); and

          WHEREAS,
Companies are requiring this Guaranty as a condition to extending or continuing
to extend any financial
accommodations to Obligor; and

          WHEREAS,
because of the ownership, business relations or other circumstances existing
with respect to Obligor and
Guarantor, Guarantor has determined that Guarantor will economically benefit by entering into this Guaranty, thereby inducing
Companies to provide the aforementioned financial accommodations to Obligor.

          1. Guaranty.
Guarantor hereby absolutely and unconditionally guarantees: (a) the prompt
payment of all monetary obligations of any sort which Obligor is now or may
hereafter become liable to Companies
(“Monetary Obligations”), whether pursuant to the agreements referenced in the
first WHEREAS clause above or other
agreements or instruments (collectively, “Agreements”), all as and when such
Monetary Obligations become due under such Agreements; and (b) the full and
timely performance of each and every other obligation of Obligor under the
Agreements (“Non-Monetary Obligations”); for which such Monetary Obligations
and Non-Monetary Obligations (collectively, “Obligations”) Guarantor shall be
jointly and severally liable with Obligor. Guarantor expressly acknowledges
that this Guaranty will apply not only to Agreements entered into as of the
date hereof, but also to any additional Agreements and all amendments, and
schedules and other supplements of any Agreements which are entered into prior
to the termination of this Guaranty.

          2. Actions
by Companies Not to Affect Liability. The liability of Guarantor hereunder
shall not be affected by: (a) the renewal, extension, modification, termination
or acceleration of an Agreement by lapse of time or otherwise (all of which are
hereby authorized by Guarantor) or a release or limitation of the liability of
Obligor or Obligor’s estate under any Agreement in any bankruptcy or insolvency
proceeding; (b) any extension
in the time for making any payment due under an Agreement or acceptance of partial payment from Obligor; (c) the
acceptance or release by Companies of any additional security or any other
guaranty for the performance of Obligor’s obligations under an Agreement; (d)
the failure during any period of time whatsoever of Companies to attempt to
collect any amount due under an Agreement from Obligor or any other guarantor
of an Agreement or to exercise any remedy available under an Agreement, any
other guaranty of an Agreement or any other security instrument given as
security for performance of an Agreement, in the event of a default in the
performance by Obligor of the

	
 

	
 

	
 

	
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Exhibit B

terms of an Agreement; (e) Companies’s consent to
any assignment(s) or successive assignments of an Agreement, or any subletting or successive subletting of any of the
equipment covered by a lease constituting
an Agreement; (f) any assignment or successive assignments of Companies’s
interest under an Agreement (whether absolute or as Equipment);
(g) Companies’s consent to any changed, expanded or different use of the equipment which is the subject of, or was
financed pursuant to, an Agreement; (h) the assertion by Companies against Obligor of any rights or remedies
reserved or granted to Companies
under an Agreement, including the commencement by Companies of any proceedings
against Obligor; (i) any assignment or other transfer, by operation of law or
otherwise, of any or all of Obligor’s interest in an Agreement or any equipment
which may have been the subject thereof or financed pursuant thereto; or (j)
any dealings, transactions or other matter occurring between Companies and
Obligor or between Companies and any Guarantor; whether or not a Guarantor has
knowledge or has been notified of or agreed to any of the foregoing.

          3. Waivers.
Guarantor hereby expressly waives: (a) notice of acceptance of this Guaranty; (b) presentment, demand, notice of dishonor,
protest and notice of protest, and all other notices whatsoever, including, without limitation, notice of any
event or matter described in Section 2 hereof; (c) any and all claims or
defenses based upon lack of diligence in: (i) collection of any amount the
payment of which is guaranteed hereby; (ii) protection of any Equipment or
other security for an Agreement or the failure to perfect or maintain
perfection of any security interest granted as security for any Obligations
under an Agreement; (iii) realization upon any other security given for an
Agreement; (iv) the discharge, liquidation or reorganization of Obligor in
bankruptcy or the rejection of an Agreement by Obligor or a trustee in bankruptcy;
or (v) the discharge or bankruptcy of any Guarantor or any other guarantor of
an Agreement; (d) any and all defenses of suretyship; (e) the release of, or
failure to prosecute the obligations of, any other guarantor of an Agreement,
whether or not such other guarantor is a Guarantor hereunder; and (f) any other
circumstances which might constitute a legal or equitable discharge or defense
of a guarantor. IN ADDITION, GUARANTOR HEREBY WAIVES ALL RIGHTS TO TRIAL BY
JURY IN ANY ACTION OR PROCEEDING WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THIS
GUARANTY.

          4. Nature
of Remedies. No delay or omission on the part of Companies in the exercise
of any right or remedy hereunder shall operate as a waiver thereof. All
remedies of Companies hereunder shall be in addition to, and exercisable
consecutively or concurrently in any combination with any and all remedies
available to Companies by operation of law or at equity or under an Agreement
or any other guaranty or
security agreement, and Companies may exercise its remedies hereunder against a
Guarantor without the necessity for
any suit or proceedings of any kind or nature against Obligor or any other
Guarantor or any other guarantor or against any security, and without the
necessity of any notice to Obligor or Guarantor of nonpayment, nonobservance,
nonperformance or other default by Obligor under an Agreement. Written
acknowledgment by Obligor or the judgment of any court establishing the amount
due from Obligor shall be conclusive and binding on Guarantor.

          5. Costs
of Collection. In the event of the enforcement of this Guaranty by
Companies, Companies shall be
entitled to collect from Guarantor, Companies’s costs of collection and
enforcement, including, without
limitation, reasonable attorneys’ fees.

          6. Subordination. Any current or future liability
of Obligor to Guarantor (whether or not arising out of a payment by Guarantor under this
Guaranty) is hereby subject and subordinated to Companies’s rights against
Obligor under the Agreements.

          7. Assignment. This Guaranty shall not be
assignable by Guarantor, but shall be
binding upon the successors to and legal representatives
of Guarantor. This Guaranty shall be assignable by Companies, both absolutely and as Equipment, and
shall inure to the benefit of their respective successors and assigns.

          8. Governing Law. This Guaranty shall be governed
by, and construed in accordance with, the law of the State of Illinois.

	
 

	
 

	
 

	
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Exhibit B

          9. Severability. If any term, restriction
or covenant of this Guaranty is deemed illegal or unenforceable, all other terms, restrictions and covenants and the
application thereof to all persons
and circumstances subject hereto shall remain unaffected to the extent
permitted by law; and if any application of any term, restriction or covenant
to any person or circumstances is deemed illegal, the application of such term,
restriction or covenant to other persons and circumstances shall remain
unaffected to the extent permitted by law.

          10. Reinstatement.
Notwithstanding anything to the contrary contained in this Guaranty, Guarantor
agrees that, to the extent that Obligor makes a payment or payments to
Companies, which payment or payments or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside and/or
required to be repaid to Obligor, its estate, trustee, receiver or any other party, including, without limitation, a Guarantor,
under any bankruptcy law, state or federal law, common law or equitable theory, then to the extent of
such payment or repayment, Obligor’s Obligations under the Agreements or the
part thereof which has been paid, reduced or satisfied by such amount, and
Guarantor’s obligations hereunder with respect to same, shall be reinstated and
continued in full force and effect as of the date such initial payment,
reduction or satisfaction occurred.

          11. Financial
Statements. Guarantor hereby represents and warrants to Companies that the
signed financial statements delivered by Guarantor to Companies are true,
accurate and correct.

          12. Information
About Obligor. Guarantor hereby assumes responsibility for keeping itself
informed of the financial condition of Obligor, and any and all other
guarantors of the Agreements and of all other circumstances bearing upon the
risk of nonpayment or nonperformance of Obligor that diligent inquiry would
reveal and Guarantor hereby agrees that Companies shall have no duty to advise
Guarantor of information known to Companies regarding such condition or any
such circumstances or to undertake any investigation with respect thereto. If
Companies, in its sole discretion, undertakes at any time or from time to time
to provide any such information to Guarantor, Companies shall be under no obligation
to update any such information or to provide any such information to Guarantor
on any subsequent occasion.

          13. Joint
and Several Obligations. If there is more than one Guarantor hereunder, the
obligations of each Guarantor hereunder are joint and several with all other
Guarantors.

          14. Termination
by Guarantor. This Guaranty may be terminated by Guarantor giving Companies ten (10) days written notice thereof,
but such termination shall only be effective as to Agreements and amendments and schedules and other
supplements to Agreements entered into after the effective date of such
termination. If there is more than one (10) Guarantor hereunder, but less than
all such Guarantors sign the termination notice, then such termination shall be
effective (as described above) only as to those Guarantors signing the notice;
and the obligations of the remaining Guarantors shall remain unaffected by such
notice.

          15. Notices.
All notices hereunder shall be personally delivered, sent by registered or
certified U.S. mail or sent by a nationally recognized overnight courier
service, in each instance to the address set forth herein or such other address
as Guarantor or Companies may provide by notice to the other. Notices will be deemed given when received if delivered
personally (or if delivery is refused, when refused), three (3) business days after being mailed, postage
prepaid, or one (1) business day after being sent by such overnight courier.

	
 

	
 

	
 

	
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Exhibit B

          IN WITNESS WHEREOF, the undersigned has (have) executed this Guaranty
as of the
day of _______________.

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Individual
  Guarantor:

  	
   

  	
  Corporate
  Guarantor:

  
	
   

  	
  

  	
   

  	
  (Corporate
  Name:) Capsource Financial, Inc.

  	
   

  
	
  (Signature:)

  	
  

  	
   

  	
   

  	
   

  	
   

  
	
  (Print
  Name:)

  	
  

  	
   

  	
  (State of
  Formation, Incorporation or Organization:) Nevada

  
	
  (Address:)

  	
  

  	
   

  	
   

  
	
   

  	
  

  	
   

  	
  By:

  	
  

  
	
   

  	
  

  	
   

  	
  Title: President

  
	
   

  	
   

  	
   

  	
  Corporate
  Address:

  	
   

  
	
   

  	
   

  	
   

  	
  2305 Canyon
  Boulevard Suite 103

  	
   

  
	
   

  	
   

  	
   

  	
  Boulder, CO
  80302

  
	
   

  	
   

  	
   

  	
  Attest:

  	
  

  
	
   

  	
   

  	
   

  	
   

  	
  

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Individual
  Guarantor:

  	
   

  	
  Corporate
  Guarantor:

  	
   

  
	
  (Signature:)

  	
  

  	
   

  	
  (Corporate
  Name:)

  	
  

  
	
  (Print
  Name:)

  	
  

  	
   

  	
   

  	
   

  	
   

  
	
  (Address:)

  	
  

  	
   

  	
  (State of
  Formation, Incorporation or Organization:)

  
	
   

  	
  

  	
   

  	
   

  	
   

  	
  

  
	
   

  	
  

  	
   

  	
  By: 

  	
  

  
	
   

  	
   

  	
   

  	
  Title:

  	
  

  
	
   

  	
   

  	
   

  	
  Corporate
  Address:

  	
  

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Attest:

  	
  

  
	
   

  	
   

  	
   

  	
   

  	
  

  
	
   

  	
   

  	
   

  	
   

  	
  

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Individual
  Guarantor:

  	
   

  	
  Corporate
  Guarantor:

  	
   

  
	
  (Signature:)

  	
  

  	
   

  	
  (Corporate
  Name:)

  	
   

  	
   

  
	
  (Print
  Name:)

  	
  

  	
   

  	
   

  	
   

  	
   

  
	
  (Address:)

  	
  

  	
   

  	
  (State of
  Formation, Incorporation or Organization:)

  
	
   

  	
  

  	
   

  	
   

  	
   

  	
  

  
	
   

  	
  

  	
   

  	
  By: 

  	
  

  
	
   

  	
   

  	
   

  	
  Title:

  	
  

  
	
   

  	
   

  	
   

  	
  Corporate
  Address:

  	
  

  
	
   

  	
   

  	
   

  	
  Attest:

  	
  

  
	
   

  	
   

  	
   

  	
   

  	
  

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Individual Guarantor:

  	
   

  	
  Corporate
  Guarantor:

  	
   

  
	
  (Signature:)

  	
  

  	
   

  	
  (Corporate
  Name:)

  	
   

  	
   

  
	
  (Print
  Name:)

  	
  

  	
   

  	
   

  	
   

  	
   

  
	
  (Address:)

  	
  

  	
   

  	
  (State of
  Formation, Incorporation or Organization:)

  
	
   

  	
  

  	
   

  	
   

  	
   

  	
  

  
	
   

  	
  

  	
   

  	
  By:

  	
  

  
	
   

  	
   

  	
   

  	
  Title:

  	
  

  
	
   

  	
   

  	
   

  	
  Corporate
  Address:

  	
  

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Attest:

  	
  

  
	
   

  	
   

  	
   

  	
   

  	
  

  
	
   

  	
   

  	
   

  	
   

  	
  

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
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  B
  SignatoryExhibit 10.4 to CapSource Financial, Inc. Form 8-K dated December 28, 2005

Exhibit 10.4  

ASSET PURCHASE AGREEMENT

by and among

CAPSOURCE FINANCIAL, INC.,

and its designee

CAPSOURCE EQUIPMENT COMPANY, INC.

and

PRIME TIME EQUIPMENT, INC.

and

ITS PRESIDENT

May __, 2006

ASSET PURCHASE AGREEMENT

          This
Asset Purchase Agreement (“Agreement”) is made by and between Capsource
Financial, Inc., a Colorado corporation or its designee CapSource Equipment
Company, Inc., a Nevada corporation (“Buyer”) and Prime Time Equipment, Inc., a
California corporation (“Company” sometimes referred to as the “Seller”), and
Seller’s President (the “President”) effective as of May  __, 2006.

RECITALS

          WHEREAS,
Seller is engaged in the business of selling truck trailers including, but not
limited to, the leasing, financing and servicing of dry van and refrigerated
truck trailers (the “Business”), which Business is based in Fontana,
California, U.S.A. (together, the “Premises”), and has its principal office at
15609 Valley Boulevard, Fontana, California 92335.

          WHEREAS,
subject to the terms and conditions hereinafter set forth, Seller desires to
sell to Buyer, and Buyer desires to purchase from Seller, substantially all of
the property and assets of the Business.

          WHEREAS,
the President will receive substantial direct and indirect benefits from the
transactions contemplated by this Agreement, and Buyer has required that the
President enter into this Agreement as a condition to Buyer’s execution hereof.

          NOW,
THEREFORE in consideration of the mutual representations, warranties, covenants,
agreements and conditions hereinafter set forth and the mutual benefits to be
derived from this Agreement, the parties hereto agree as follows:

ARTICLE I

PURCHASE AND SALE OF ASSETS

          Section
1.1 Assets to be Transferred.
Upon and subject to the terms and conditions set forth in this Agreement
(including without limitation Section 1.2), on the Closing Date (as defined in
Section 10.1 of this Agreement), Seller shall sell, transfer, convey, assign
and deliver to Buyer, and Buyer shall purchase and accept from Seller, all of
the business, property and assets owned by Seller or to which the Seller has
rights which are used by Seller in connection with the Business, whether any
such assets are located on, or in transit to or from, the Premises, held on
consignment or for sale by others, or otherwise including the business,
property and assets identified below in this Section 1.1, all as the same shall
exist on the Closing Date (collectively, the “Purchased Assets”).  The Retained Assets (as defined in Section
1.2 of this Agreement) are specifically excluded from the business, property
and assets to be purchased and sold pursuant to this Agreement.  The Purchased Assets shall include without
limitation the following:

                    (a)
Books and Records.  All books,
records and other documents and information relating to the Assets and the
Business, including, without limitation, all customer files and records, and
all other data related to all present and former customers of the Business, all
payment records and account history of all such customers, prospect
information, marketing data, sales literature, inventory records, purchase
orders and invoices, customer information, correspondence, price lists, quotes
and bids, catalogues and brochures of every kind and nature, all  supplier lists, sales data, records,
telephone records, files (“Books and Records”);

                    (b)
Machinery and Equipment.  All
machinery, equipment, tools, furniture, fixtures, computer equipment, leasehold
improvements, and other personal property and related spare parts, maintenance
supplies and other property listed on Schedule 1.1(b) which are located at the
Premises (the “Machinery and Equipment”);

                    (c)
Receivables.  Except as provided
in Section 1.2 hereof, all accounts receivable relating to the Business but
excluding those intra-company or aged receivables previously deemed by Seller
to be not collectible that are designated as such on Schedule 1.1(c)(the
“Receivables”);

                    (d)
Vehicles.  Except as provided in
Section 1.2 hereof, all vehicles owned by Seller which are used in the
Business, including without limitation the vehicles listed on Schedule 1.1(d)
of this Agreement (the “Vehicles”);

                    (e)
Intellectual Property.  All
patents, patent applications, copyrights, copyright applications, trade names,
trademarks or service marks, registered or unregistered and applications
therefor, logos, processes, proprietary data, computer software or firmware
programs, software manuals, inventions, trade secrets, Internet domain names,
e-mail addresses and proprietary or trade secret designs, test data and any
other material documentation for products or circuits owned by the Company or
used or held for use in connection with the Business, together with all
licenses related to the foregoing, whether Seller is the licensee or licensor
thereunder and all other intellectual property rights used in the conduct of
the Business and licenses thereof, and the legal and trade names of Company or
any derivative thereof including any of the foregoing listed on Schedule 1.1(e)
of this Agreement (the “Intellectual Property”);

                    (f)
Technical Information.  Except as
described in Section 1.2 of this Agreement, all technical and marketing
information owned by Seller relating to the Business, including product
specifications, drawings, plans, designs, test results, manufacturing
documentation, research reports, technical manuals new developments, know-how,
ideas and trade secrets and all documentation thereof and all claims and rights
relating thereto (“Technical Information”);

Page 2 of 35

                    (g)
Contracts.  Subject to the
provisions of Section 2.2(d) of this Agreement, all rights existing under leases,
contracts, agreements and commitments relating to the Business under (1)
commitments of Seller relating to the Business with respect to open unfilled
purchase orders issued to suppliers and open unfilled sales orders received
from customers, which have been entered into in the ordinary course of
business; (2) the real estate lease described on Schedule 4.8 of this
Agreement; and (3) the personal property leases, license agreements, software
license agreements, consulting agreements, maintenance and service agreements,
and all other similar contracts and commitments whether written or oral
relating to the Business and either listed on Schedule 1.1(g) to this Agreement
or entered into by Seller in the ordinary course of business prior to the
Closing Date (collectively, the “Contracts”);

                    (h)
Licenses; Permits.  All
governmental licenses, permits, franchises, approvals and identification
numbers of Seller to the extent transferable or temporarily usable and relating
to the Business including, but not limited to the licenses, permits
registrations and franchises listed on Schedule 1.1 (h) (“Licenses and
Permits”);

                    (i)
Computer Software.  All
information systems, programs, and software and documentation thereof relating
to the Business owned by Seller or to which the Seller has rights and located
at the Premises including, but not limited to the programs, and software listed
on Schedule 1.01 (i) (“Computer Software”); 

                    (j)
Inventory.  All raw materials, work
in process and finished goods inventory that are current and suitable for use
in the normal course of business, and excluding obsolete or defective
inventory  including, but not limited to
the inventory listed on Schedule 1.01 (j) (“Inventory”).

                    (k)
Balance Sheet Assets.  All assets
reflected on the Latest Balance Sheet (as defined in Section 4.4) or acquired
by Seller after the date thereof, except those sold in the ordinary course of
business after the date thereof; 

                    (l)
Goodwill.  All goodwill of the
Business; and

                    (m)
Prepaid Expenses/Deposits.  All
prepaid expenses and deposits relating to the Business, excluding certain
deposits, prepaid expenses and accrued expenses identified on Schedule 1.1(m)
of this Agreement (“Prepaid Deposits”).

          Section
1.2 Retained Assets.
Notwithstanding the provisions of Section 1.1 of this Agreement, Seller
shall not sell, transfer, assign, convey or deliver to Buyer, and Buyer shall
not purchase or accept from Seller, the following assets of Seller, whether
relating exclusively or nonexclusively to the Business (collectively the
“Retained Assets”):

                    (a)
Tax Refunds.  All tax refunds for
periods ending on or before the Closing Date, specifically including those tax
refunds identified on Schedule 1.2(b) of this Agreement;

Page 3 of 35

                    (b)
Insurance.  All insurance
policies owned by Seller and rights to collect insurance proceeds under
policies owned by Seller, except as otherwise provided in Section 9.5 of this
Agreement;

                    (c)
Contracts.  Any Contracts
not assumed by Buyer as provided in Section 2.2(d) of this Agreement; and

                    (d)
Scheduled Assets.  The assets
listed on Schedule 1.2(f) of this Agreement, which Schedule will be updated as
of the Closing Date for changes in amounts in the ordinary course of business
between the date of this Agreement and the Closing Date.

ARTICLE II

ASSUMPTION OF LIABILITIES

          Section
2.1 Liabilities to be Assumed.
Subject to the terms and conditions of this Agreement and the
consummation of the transactions contemplated by this Agreement, on the Closing
Date (as defined in Section 10.1 of this Agreement), Buyer shall assume and
shall pay, discharge and perform when due the following liabilities and
obligations of Seller arising and accruing in connection with, and relating
exclusively to, the operation of the Business (collectively, the “Assumed
Liabilities”):

                    (a)
Stated Liabilities.  As of the
Closing Date, the trade accounts payable, and certain other accrued expenses
and liabilities arising out of or relating to the Business, all of which shall
be set forth on the Closing Date Statement of Purchased Assets and Assumed Liabilities
prepared in accordance with, and finally accepted as provided in, Article III
of this Agreement;

                    (b)
Contracts.  The executory
liabilities and obligations arising after the Closing Date under the Contracts
which are designated as being, and in fact are, assigned to Buyer with any
required consent;

                    (c)
Transferring Employees.  The
liabilities and obligations of the Buyer as, and to the extent, provided in
Section 11.1 of this Agreement;

          Section
2.2 Retained Liabilities.  Seller
shall retain all obligations and responsibilities for any claims, debts,
defaults, duties or liabilities of the Business or of Seller, whether absolute,
accrued, liquidated or otherwise, and whether due or to become due, asserted or
unasserted, known or unknown, contingent or fixed, not specifically assumed by
Buyer, or which Buyer is not specifically responsible for, under this Agreement
(collectively, the “Retained Liabilities”), including without limitation:

                    (a)
Taxes.  All Taxes (as defined in
Section 4.15(a) of this Agreement), prorated as of the Closing Date, concerning
the Business or Seller;

Page 4 of 35

                    (b)
Sales Commissions.  All sales
commissions payable to the Seller’s employees or any sales representative
(regardless of whether Buyer employs such employees or sales representatives
from and after the Closing Date) accrued prior to the Closing Date;

                    (c)
Retained Assets.  Any liability
or obligations of Seller relating to or arising out of the Retained Assets;

                    (d)
Employee Benefit Plans.  Any
obligations of Seller pertaining to any employee pension or benefit plan of
Seller relating to the former or current employees of the Business and arising
prior to the Closing Date; 

                    (e)
Employees.  All obligations and
liabilities pertaining to the employees of the Business as provided in Section
11.1 of this Agreement or arising out of or relating to any employee grievance
whether or not the affected employees are hired by Buyer by current or former
employees, whether filed in the past or at any time in the future, for
commissions due for products already shipped or invoiced, unpaid wages,
overtime, sick pay, severance, vacation, 401k plans, or other payments due,
disability or workers compensation; any form of misconduct, discrimination or
sexual harassment;

                    (f)
Violations and Defaults.  All
obligations and liabilities: (i) resulting from any violation by Seller of any
statute, law, rule, regulation, ordinance or order, judgment, decree, writ or
injunction; (ii) under an agreement that result from any breach or default (or
event that with notice or lapse of time would constitute a breach or default)
by Seller under such agreement; or (iii) that arise out of or constitute
damages to Buyer as the result of a breach of any representation or warranty
provided by Seller in connection with this Agreement;

                    (g)
Product Warranty.  All
obligations and liabilities resulting from product liability, warranty, credit
memoranda issued by the Seller or strict liability claims relating to products
sold or leased by the Seller in the ordinary course of the Business prior to
the Closing Date; and

                    (h)
Financial Obligations.  All
obligations and liabilities under any guaranties by the Seller of or in respect
of any indebtedness, liabilities or obligations of any other person or entity
and any amounts owed by the Seller to attorneys, accountants or other
professionals engaged from time to time by the Seller (including, without
limitation, any engaged with respect to the transactions contemplated hereby). 

          Buyer
shall have no obligation under this Agreement, by operation of law or otherwise
to assume, pay or discharge any of the Retained Liabilities.  Seller agrees to satisfy in due course the
Retained Liabilities, except those being contested or denied by Seller in good
faith, and hereby indemnifies and holds Buyer harmless with respect to such
Retained Liabilities.

Page 5 of 35

ARTICLE III

PURCHASE PRICE - PAYMENT

          Section
3.1 Purchase Price.  In
consideration of the sale and transfer to Buyer of the Purchased Assets as
provided in Section 1.1 of this Agreement and the Agreement Not to Compete in
Section 11.6, Buyer (i) shall assume the Assumed Liabilities as set forth in
Section 2.1 of this Agreement and (ii) shall pay to Seller an aggregate
purchase price of One Hundred  Thousand
Dollars ($100,000) plus an additional amount equal to the value of the net
assets of the Seller, excluding cash in banks, on the Closing (the “Purchase
Price”).

          Section
3.2 Payment.  Buyer shall pay the
Purchase by cashier’s check on the Closing Date, provided the conditions set
forth in Article I hereof have been fulfilled.
Seller agrees and understands that the payment and receipt of the
Purchase Price shall be subject to repayment to the Buyer for the purpose of
satisfying and adjustments to the Purchase Price as set forth in Section 3.6. 

          Section
3.3 Closing Date Statement of Purchased Assets and Assumed Liabilities.  Within twenty (20) days after the
Closing Date, or as soon thereafter as is reasonably practicable, Buyer shall
prepare and submit to Seller a statement of the Purchased Assets and the
Assumed Liabilities as of the Closing Date (the “Closing Date Statement of
Purchased Assets and Assumed Liabilities”).
The Closing Date Statement of Purchased Assets and Assumed Liabilities
shall identify, as of the Closing Date, the “Net Book Value”, which is defined
for purposes of this Agreement as the book value of the Purchased Assets, minus
the book value of the Assumed Liabilities, as generally described in Section
2.1(a) of this Agreement.  The Closing
Date Statement of Purchased Assets and Assumed Liabilities shall be prepared in
accordance with generally accepted accounting principles (“GAAP”).

          Section
3.4 Acceptance of Closing Date Statement of Purchased Assets and Assumed
Liabilities.  Upon completion of the
Closing Date Statement of Purchased Assets and Assumed Liabilities, Buyer shall
deliver such Closing Date Statement of Purchased Assets and Assumed Liabilities
to Seller.  In addition, Buyer shall
furnish to Seller its calculation of the amount of Net Book Value (including
all relevant details and data supporting such calculation) and accord Seller
the opportunity for full verification of such amount.  Seller shall have twenty (20) days after receipt of the Closing
Date Statement of Purchased Assets and Assumed Liabilities and the Buyer’s
calculation of Net Book Value, to accept or reject in writing Buyer’s
calculation of Net Book Value.  In the
event Seller concurs in Buyer’s calculation of Net Book Value or fails to
notify Buyer in writing of a dispute in Buyer’s calculation of Net Book Value
as provided in this Section 3.4, then Buyer’s calculation of Net Book Value
shall govern for all purposes of this Agreement.  If, however, Seller rejects Buyer’s calculation of Net Book Value,
Seller shall notify Buyer within the such twenty (20) day period, and the
written notice must set forth the items and amounts of the Net Book Value
rejected and the reasons for such rejection.
In the event Seller rejects Buyer’s calculation of Net Book Value, the
parties shall attempt in good faith to reach agreement on the amount of the Net
Book Value and the

Page 6 of 35

resulting
adjustment to Purchase Price, if any, pursuant to Section 3.6 of this
Agreement, but if no such agreement is reached within twenty (20) days after
Seller notifies Buyer of a dispute in Buyer’s calculation of Net Book Value,
then either party may, by written notice, require submission of such dispute to
arbitration in accordance with the rules of the American Arbitration
Association, by one arbitrator (the “Arbitrator”) who shall be a certified
public accountant selected by mutual agreement of the parties; provided,
however, in no event shall the Arbitrator be affiliated with an accounting firm
selected as the regular outside accounting firm of either party.  Each party shall bear its own expenses in
preparing and reviewing the Closing Date Statement of Purchased Assets and
Assumed Liabilities and the Net Book Value calculation in connection with any
such arbitration proceedings.  The
Arbitrator’s fees and expenses shall be paid by the non-prevailing party to
such arbitration as determined by the Arbitrator.  The Arbitrator shall have access to all necessary accounting and
other records that may be requested by the Arbitrator from time to time.  The determination of the Arbitrator shall be
final and binding on both Buyer and Seller.
The Arbitrator shall apply the standards specified in this Agreement in
determining the matters submitted thereto.

          Section
3.5 Intentionally Omitted.  

          Section
3.6 Purchase Price Adjustment.
Following the final determination of the Net Book Value in accordance
with Sections 3.3 and 3.4 of this Agreement (whether by acceptance by Seller,
agreement between Seller and Buyer or arbitration), the Seller and Buyer agree
to an adjustment of the Purchase Price dollar for dollar for any increase or
decrease in  the Net Book Value as
reflected on the Company’s balance sheet as at April 19, 2006 and the Net Book
Value as of the Closing Date.  Any
adjustment shall be paid to the Seller or received by the Buyer in immediately
available funds within two (2) business days of such final adjustment.

          Section
3.7 Allocation of Purchase Price.
The Purchase Price shall be allocated among the Purchased Assets as set
forth in Schedule 3.7.  Such allocation
shall be reflected, as well, on IRS form 8594 (Asset Acquisition Statement
Under Section 1060), which completed Form, each of Buyer and Seller shall file
separately with the Internal Revenue Service pursuant to the requirements of
Section 1060 of the Internal Revenue Code of 1986, as amended.  Each party shall update such allocation to
reflect any post-Closing adjustments in the Purchase Price pursuant to Section
3.6.  Seller and Buyer agree that such
allocation is fair and equitable.
Seller and Buyer further agree to act in a manner consistent with such
allocation for all purposes, including the filing and preparation of all
federal, state and local tax returns filed by them subsequent to the Closing
Date, and the determination by Seller of taxable gain or loss of the Purchased
Assets and the determination by Buyer of its tax basis with respect to the
Purchased Assets.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF SELLERS

Page 7 of 35

          Seller
and President jointly and severally make the following representations and
warranties to Buyer:

          Section
4.1 Existence.  The Seller is a
corporation duly organized, validly existing and in good standing under the
laws of the State of California and has full power, right and authority to own,
lease and operate its properties and to conduct its business as presently
conducted.  Seller and is duly qualified
or licensed to do business as a foreign entity in good standing in every
jurisdiction in which the conduct of its business requires such qualification
or the failure to so qualify will not have a material adverse effect on the
Business or Assets.  Set forth on
Schedule 4.1 is a list of any and all fictitious business names under which either
Seller or the President has operated at anytime during the past 5 years.

          Section
4.2 Authority.  Seller and the
President has full power and authority to enter into this Agreement and to
effect the transactions contemplated by this Agreement.  No approvals or consents of any persons or
entities are necessary for the execution, delivery and performance of this
Agreement by the Seller or the President, except as have been obtained (or will
be obtained prior to Closing). This Agreement has been duly authorized,
executed and delivered by the Seller and the President and is a valid and
binding obligation of the Seller and the President enforceable against each of
them in accordance with its terms subject to:
(a) applicable bankruptcy, insolvency, reorganization and moratorium
laws and other laws of general application affecting enforcement of creditors’
rights generally; and (b) limitations on the availability of equitable
remedies.

          Section
4.3 No Conflict or Violation.
Except as set forth on Schedule 4.3 of this Agreement, neither the
execution and delivery of this Agreement nor consummation of the transactions
contemplated hereby will result in: (a) a violation or breach of or default
under any term or provision of any contract, agreement, lease, commitment,
license, permit, authorization or concession to which either Seller or the
President is a party or to which any of them or any of their property or the
Assets may be bound or constitute an event which with notice, lapse of time, or
both, would result in any such violation, breach or default (or give rise to
any right of termination, amendment, cancellation or acceleration); (b) except
as contemplated by this Agreement, require the Company to make any payment to
any entity or person; (c) result in the imposition or creation of any lien upon
any of the Assets; or (d) a material violation by either Seller or the
President of any statute, rule, regulation, ordinance, code, order, judgment,
writ, injunction, decree or award, or constitute an event which with notice,
lapse of time, or both, would result in any such violation.

          Section
4.4 Financial Information.
Attached as Schedule 4.4 are true and correct copies of Seller’s
Financial Statements relating to Seller’s Business.  _Financial Statements_ mean (i) balance sheets of Seller as of
December 31, 2005, together with statements of income for each of the calendar
years 2003, 2004 and 2005; (ii) a balance sheet for Seller as of March 31,
2006; and (iii) and a balance sheet for Seller as of close of business on April
19, 2006 (_Latest Balance Sheet_), and related statements of income for the
year-to-date period then ended.  The
Financial Statements have been prepared in accordance with generally accepted

Page 8 of 35

accounting
principles consistently applied through the periods indicated and fairly
present the financial position of Seller’s Business as of the respective dates
of the balance sheets and the results of Seller’s Business operations for the
respective periods indicated.  The
Financial Statements have been prepared from the books and records of Seller,
which accurately and fairly reflect the transactions of, acquisitions and
dispositions of Assets by, and incurrence of Liabilities by Seller. To Seller’s
knowledge, Seller has no Liabilities of or relating to the Assets or Seller’s
Business except for (i) Liabilities reflected on the Latest Balance Sheet; (ii)
current liabilities incurred in the Ordinary Course of Business after the date
of the Latest Balance Sheet; and (iii) such other liabilities specifically described
on the Schedules attached to this Agreement. All inventories and supplies
reflected in the Latest Balance Sheet or included in the Assets are of good and
merchantable quality and are salable in the Ordinary Course of Business (in the
case of inventory held for sale) or currently usable (in the case of other
inventory, supplies and raw materials).
The values of the inventories reflected in the Latest Balance Sheet are
stated in accordance with generally accepted accounting principles. Neither
Seller nor President is insolvent.

          Section
4.5 Undisclosed Liabilities.
With respect to the Assumed Liabilities, Seller has no liability, known
or unknown, absolute or contingent, which is not shown or provided for on
Schedule 2.1(a) of this Agreement, except obligations or liabilities totaling
less than $5,000 in the aggregate incurred in the ordinary course of business
or otherwise disclosed in this Agreement.

          Section
4.6 No Material Adverse Changes.
Except as set forth on Schedule 4.6 of this Agreement, or as otherwise
disclosed in this Agreement, since December 31, 2005 (except as otherwise noted
below), there have not been any:  (a)
changes which, individually or in the aggregate, are materially adverse to the
Business or the Purchased Assets, or any changes in the Business or the
Purchased Assets which, individually or in the aggregate, have materially and
adversely affected the Business or the Purchased Assets; (b) damage,
destruction or loss of a material nature affecting the Business or the
Purchased Assets whether or not adequately covered by insurance; (c) incurrence
of any obligation or liability relating to the Business (absolute or
contingent) except current liabilities incurred, and obligations under
contracts entered into, in the ordinary course of business; (d) incurrence of
any mortgage, pledge or subjecting to liens, charges, security interests or any
other encumbrances, of any of the Purchased Assets except in the ordinary
course of business; (e) sale, assignment, transfer or license (or agreement to
do any of the foregoing) of any Intellectual Property or any other Purchased
Asset (except performance of Contracts, and sales of Inventory, in the ordinary
course of business); (f) to Seller’s knowledge, sufferance of any extraordinary
loss or waiver of any right of substantial value with respect to the Business;
(g) change in employee compensation with respect to employees of the Business
other than normal salary increases in the ordinary course of business or other
increases required by any union contracts; (h) material transactions with
respect to the Business other than in the ordinary course of business; (i)
amendment or termination of any material Contract; (j) actual or, to Seller’s
knowledge, threatened labor trouble, strike or other occurrence or condition of
a similar character (or any receipt of notice of any of the foregoing) which
had or might have a material

Page 9 of 35

adverse effect
on the Business; or (k) changes in the accounting methodology and procedures
pertaining to the Business.

          Section
4.7 Purchased Assets.  Except for
the Retained Assets referred to in Section 1.2 of this Agreement, the Purchased
Assets constitute all the properties and assets used or useful in connection
with the Business and the operation of the Business as being conducted as of
the date of this Agreement and constitute all the assets necessary for the
conduct of the Business as being conducted as of the date of this
Agreement.  All tangible Purchased
Assets are in good condition and repair, ordinary wear and tear excepted, and
(where applicable) are in good working order and have been properly and
regularly maintained. Except as set forth on Schedules 4.7 or 4.8 of this
Agreement, Seller now has and on the Closing Date will have, and will convey to
Buyer at Closing, good and marketable title to all of the Purchased Assets free
from all liens, charges, pledges, security interests, claims and encumbrances
of every kind. No tangible Assets are located outside of Seller’s possession,
except as described in Schedule 4.7.
Except for the Premises, Seller has no interest (leasehold or otherwise)
or any rights in, any real property that is used in Seller’s Business.  

          Section
4.8 Leased Real Estate.  Schedule
4.8 of this Agreement sets forth and describes:  (a) the real estate which is leased by Seller and used in
connection with the conduct of the Business (the “Leased Real Estate”); (b) the
lease agreements pursuant to which Seller leases or otherwise makes use of the
Leased Real Estate (the “Real Estate Leases”); ( c ) the real estate owned by
the President and to be leased by the President to the Buyer and a Form of
Commercial Lease Agreement to be used to accomplish such lease..  Except as disclosed in Schedule 4.8 of this
Agreement, there are no defaults under the Real Estate Lease, nor has the
landlord under the Real Estate Leases given Seller any oral or written notice
of any claim, action or suit at law or in equity arising out of the Real Estate
Lease.

          Section
4.9 Contracts.  Except for (a)
purchase and sale commitments of Seller relating to the Business with respect
to open unfilled purchase orders issued to suppliers and open unfilled sales
orders received from customers, which have been entered into in the ordinary
course of business; and (b) contracts, agreements, arrangements and commitments
specifically set forth on other Schedules of this Agreement (including, but not
limited to, the Real Estate Lease set forth on Schedule 4.8 of this Agreement),
Schedule 1.1(g) is a list of all leases, licenses, contracts, commitments and
agreements to which Seller is a party or by which it is bound, and which relate
to the Business.  Except as set forth on
Schedule 4.9 of this Agreement, each of the Contracts is in full force and
effect and is valid and enforceable in all respects by Seller in accordance
with their respective terms, and Seller is not in default in the observance or
the performance of any term or obligation to be performed by it under each of
the Contracts and the Real Estate Lease, and there exists no event or condition
which with the giving of notice or lapse of time, or both, would constitute a
default thereunder.  No other person is
in default in the observance of the performance of any term or obligation to be
performed by such person under each of the Contracts, and there are no
unresolved disputes under any of the Contracts or the Real Estate Lease.  True and correct copies of all Contracts and
the Real Estate Lease are included in a binder delivered to Buyer on or prior
to the date

Page 10 of 35

hereof as part
of Schedule 1.1(h) hereof, to the extent that the Contract is in writing.  If any Contract is not in writing, Schedule
1.1(h) sets forth the parties to such contract and describes all terms thereof,
or in the case of any oral agreement affecting a written Contract, the terms of
such oral agreement.

          Section
4.10 Intellectual Property.
Subject to the provisions of Section 1.2(f) of this Agreement, the list
of Intellectual Property set forth on Schedule 1.1(e) of this Agreement
contains all of the trademarks, trade names, trade styles, service marks and
copyrights used exclusively in connection with the Business, including all
registrations therefor and licenses thereof.
To the extent indicated on Schedule 1.1(e) of this Agreement, the
Intellectual Property has been duly registered in, filed in or issued by the
United States Patent and Trademark Office.
Except as set forth on Schedule 4.10 of this Agreement:  (a) Seller has received no notice from any
other person challenging the right of Seller to use the Intellectual Property;
and (b) Seller has not, in its operation of the Business, infringed and is not
now infringing, on any trademark, trade name, trade secret or copyright held by
any other person, firm or company, in any manner which materially affects the
Business or the Purchased Assets.

          Section
4.11 Litigation; Claims.

                    (a)
Except as described on Schedule 4.11 of this Agreement, there is no litigation,
proceeding, government investigation or labor dispute or grievance by or
against Seller pending or threatened with respect to the transactions
contemplated by this Agreement, the Business, its employees or the Purchased
Assets at law, in equity or admiralty, or by or before any federal, state or
municipal court, government department, commission, board, bureau, agency or
instrumentality, domestic or foreign, or any arbitrations, nor are there any
orders, writs, injunctions or decrees of any court or arbitrator or federal,
state, local or other government department, commission, board, bureau, agency
or instrumentality, domestic or foreign, in existence relating to the
transactions contemplated by this Agreement, the Business, its employees or the
Purchased Assets.

                    (b)
Except as listed on Schedule 4.11 of this Agreement, Seller is not aware of any
material facts, events or occurrences by reason of which any material claim,
action or proceeding may be brought by or against Seller with respect to the
transactions contemplated by this Agreement, the Business, its employees or the
Purchased Assets taken as a whole.

                    (c)
Except as set forth on Schedule 4.11 of this Agreement, during the two years
preceding the date of this Agreement Seller has not received any notice of any
claims with respect to the Business, its employees or the Purchased Assets.

          Section
4.12 Compliance With Law.  The
Business and the Purchased Assets as conducted or held by Seller on the date of
this Agreement do not violate, in any material respect, any statute, code,
ordinance, regulation, requirement or order of any governmental body, the
enforcement of which would have a material adverse effect on the operation of
the Business or the Purchased Assets.

Page 11 of 35

          Section
4.13 Employees; Labor Relations.

                    (a)
Schedule 4.13(a) of this Agreement contains, as of the dates shown on such
Schedule, accurate and complete information as to names and rates of
compensation (whether in the form of salaries, bonuses, commissions or other
supplemental compensation now or hereafter payable) of all employees of Seller
relating to the Business (grouped by categories as indicated thereon), together
with information as to any employment contracts or severance arrangements with
any such employees, any arrangements involving the indebtedness of such
employees to Seller and any arrangements involving the indebtedness of Seller
to such employees in any amount.

                    (b)
Except as described on Schedule 4.13(b) of this Agreement, to Seller’s
knowledge, since December 31, 2005, there has been no material adverse change
in the relationship of employees of the Business with Seller nor any strike or
material labor disturbance by any such employees affecting Seller. Seller has
no collective bargaining, union or labor agreements, contracts or other
arrangements with any group of employees, labor union or employee
representative and Seller does not know of any organization effort currently
being made or threatened by or on behalf of any labor union with respect to
employees of Seller.

                    (c)
Except as set forth on Schedule 4.13(c), the Company is not a party to any
employment or consulting agreement and there are no bonus, commission or other
incentive compensation programs in effect for its employees or agents.  In addition, except as set forth on Schedule
4.13(c), there is no employment handbook, personnel policy manual, or similar
document that creates rights to continued employment or similar
employee-related obligations.

                    (d)
Except as set forth on Schedule 4.13(d), the Company is not a party to any
collective bargaining agreement or other agreement or arrangement regarding
union activity, and the Company is not the subject of any union organizing
activity. Seller has not experienced, and Seller does not know or have
reasonable grounds to know of any basis for, any strike, material labor
trouble, work stoppage, slow down or other interference with or impairment of
Seller’s Business.  Seller is, and has
at all times been, in compliance, in all material respects, with all applicable
statutes, rules, laws, regulations, rulings and the like respecting employment
and employment practices, terms and conditions of employment, wages, hours of
work and occupational safety and health, and is not engaged in any unfair labor
practices. 

                    (e)
Except as described on Schedule 4.13(e), (i) Seller does not provide, nor is it
obligated to provide, directly or indirectly, any benefits for employees,
including, without limitation, any pension, profit sharing, deferred
compensation, severance pay or other severance obligations, stock option,
retirement, bonus, hospitalization, insurance, vacation or other employee
benefits under any practice, agreement or understanding; and (ii) Seller has

Page 12 of 35

not had and
does not now maintain any _employee benefit plan_ (as that term is defined in
Section 3(3) of the Employment Retirement Income Security Act of 1974 as
amended), on behalf of Seller or any other party, which covers or covered any
employees or former employees of Seller.

          Section
4.14 Taxes and Tax Liens.

                    (a)
The Purchased Assets shall not be subject to any liens, claims or encumbrances
with respect to federal, state, local or foreign income, franchise, sales, use,
occupation, net worth, property, wage withholding, accumulated earnings,
personal holding company, excise, transfer or other taxes, assessments,
interest, penalties, deficiencies, fees, rents and other governmental charges
and impositions (collectively, the “Taxes”), pertaining to the Business
attributable to periods up to the Closing Date.

                    (b)
There are no pending or to Seller’s knowledge threatened examinations, reviews,
audits or investigations of the federal, state or local income tax returns or
reports of Seller relating to the Business, and no issue or question has been
raised (and is currently pending) by any taxing authority in connection with
any of Seller’s tax returns or reports. 

                    (c)
Seller has withheld proper and accurate amounts from employees of the Business
in full and complete compliance with all withholding and similar provisions of
the Internal Revenue Code and any and all other applicable laws, statutes,
codes, ordinances, rules and regulations, and Seller has timely filed proper
and accurate federal, state and local returns, reports and estimates with
respect to employee income tax withholding, social security taxes and
unemployment taxes relating to the Business for all years and periods up
through the Closing Date (and portions thereof) for which such returns and
reports were due; and any and all amounts shown on such returns and reports to
be due and payable have been paid in full.
All payments (including interest and penalties) due or to become due
from Seller with respect to the Business for employee income tax withholding,
social security taxes and unemployment taxes for any year or accounting period
(or portion thereof) ended on or prior to the Closing Date will be either paid
in full prior to or shortly after the Closing Date.  With respect to the Business, Seller has filed, or will file, all
federal, state, local and foreign tax returns, reports and notices required to
be filed prior to the Closing Date and has paid or will pay all such taxes due
as shown on such returns and all such taxes otherwise due. No tax deficiency
has been proposed or assessed against Seller and Seller has not executed any
waiver of any statute of limitations on the assessment or collection of any
tax.

          Section
4.15 Environmental Matters.
Except as set forth on Schedules 4.15(a) and 4.15(b) of this Agreement,
to Seller’s knowledge:

                    (a)
The licenses and permits listed on Schedule 4.15(a) of this Agreement are the
only governmental licenses, approvals, permits and authorizations currently
required for the ownership, use or occupancy of the Leased Real Estate or for
the operation of the Business as now being conducted and of the Purchased
Assets, the failure to obtain which would have a

Page 13 of 35

material
adverse effect on the Business or the Purchased Assets or on Seller’s operation
of the Leased Real Estate.  Except as
otherwise disclosed on Schedule 4.15(a): (i) all such licenses and permits are
valid and in full force and effect; and (ii) Seller has not received any notice
that any appropriate authority has revoked, suspended or terminated, or intends
to revoke, suspend or terminate, any of such licenses and permits.

                    (b)
Seller has not stored, treated, disposed, dumped, buried, spilled or otherwise
released any material, including any chemical substance, “Hazardous Substance”,
“Pollutants”, “Contaminants”, petroleum, including crude oil or any fraction
thereof, natural gas, liquefied natural gas, synthetic gas or any “Solid Waste”
on, beneath or about the Leased Real Estate, except for inventories of such
materials or solid waste used or generated in the ordinary course of the
Business.  Further, any such inventories
of materials or solid waste were and are stored in compliance with any and all
applicable Environmental Requirements such that there has been and is no
release of any such material or solid waste to the environment which could
cause the incurrence of response or removal costs or other liabilities or
obligations under CERCLA, any other Environmental Requirement or at common law.

                    (c)
Seller has not received in connection with the Business or the Purchased Assets
any notice from any governmental authority or private or public entity advising
that Seller is potentially responsible for response, removal or other costs
with respect to a release or threatened release of Hazardous Substance, Pollutants,
Contaminants or Solid Waste under CERCLA, any other Environmental Requirement
or at common law.

                    (d)
Seller has not received notice of any violation of any Environmental
Requirement relating to the Leased Real Estate or the operation of the
Business, or any of the processes followed, results obtained or products made
by or on behalf of the Business.

          “Environmental
Requirements” shall mean all applicable statutes, regulations, rules,
ordinances, codes, licenses, permits, orders, approvals, plans, authorizations,
concessions, franchises and similar items in effect as of the date hereof
relating to the protection of human health or the environment of all
governmental agencies, departments, commissions, boards, bureaus or instrumentalities
of the United States, the states and political subdivisions thereof, and all
applicable judicial and administrative and regulatory decrees, judgments and
orders relating to the protection of human health or the environment, including
all requirements, including but not limited to those pertaining to reporting,
licensing, permitting, investigation and remediation of emissions, discharges,
releases or threatened releases of any Hazardous Substance, Pollutant,
Contaminant or Solid Waste.

          “Hazardous
Substances,” “Pollutants” and “Contaminants” shall be as defined under the
Comprehensive Environmental Response Compensation and Liability Act,
(“CERCLA”), as amended up to the date of this Agreement.

          “Solid
Waste” shall be as defined under the Solid Waste Disposal Act, 42 U.S.C. §
6901, et seq., as amended up to the date of this Agreement.

Page 14 of 35

          Section
4.16 Brokers and Finders.  Seller
represents that it has engaged no broker or finder in connection with the
subject matter of this Agreement, and Seller shall be responsible solely for
any fee due any broker or finder in connection with the subject matter of this
Agreement.  Seller has not employed any
broker or finder or incurred any liability for any other brokers’, finders’ or
agents’ fees for which Buyer is or could become liable in connection with, or
as a result of, the transactions contemplated by this Agreement.

          Section
4.17 No Agreements to Acquire Assets.
No person or entity other than Buyer has any agreement, option,
understanding or commitments or any right or privilege (whether by law,
preemptive or contractual) capable of becoming an agreement, option or
commitment, for the purchase or other acquisition of any of the Assets.

          Section
4.18 Competing Interests.  Except
as described in Schedule 4.18, neither Seller nor the President, officer,
director or management level employee of Seller or any Affiliate or immediate
family member of any of the foregoing (a) owns, directly or indirectly, an
interest in any person or entity that is a competitor, customer or supplier of
Seller or that otherwise has material business dealings with Seller or (b) is a
party to, or otherwise has any direct or indirect interest opposed to Seller
under, any Company Agreement, Other Company Agreement or other business
relationship or arrangement material to Seller.  Provided, however, that it shall not be a breach of this
representation and warranty should said person or entity invest in
publicly-traded equity securities constituting less than three percent (3%) of
the outstanding securities of such class.

          Section
4.19 Insurance.  Schedule 4.19
lists all insurance policies and fidelity bonds covering Seller, Seller’s
Business, the Assets or Seller’s employees.
There is no claim by Seller pending under any of such policies or bonds
as to which coverage has been questioned, denied or disputed by the
underwriters of such policies or bonds, except as disclosed on Schedule
4.19.  All premiums due and payable under
all such policies and bonds have been paid, and Seller is in compliance with
the terms of such policies and bonds. All such policies may be terminated with
respect to Seller as of the Closing Date; provided, however product liability
coverage may be cancelled after the Closing Date only if Seller’s product
liability policies are occurrence type and the applicable policies, if
terminated, provide coverage for all pre-Closing Date claims until the
applicable statute of limitation has barred action on any such claims.  If occurrence policies are not in existence,
then Seller shall maintain product liability coverage until the applicable
statute of limitation has barred action on any such claims.

          Section
4.20 Subsidiaries.  The Company
has no subsidiaries or directly or indirectly owns any equity or debt interest
in any corporation, partnership, company, joint venture or other person or
entity, or any obligation, right or option to acquire any such interest.

          Section
4.21 Accounts Receivables.  All
Receivables reflected in the Latest Balance Sheet or included in the Assets
have been incurred in the ordinary course of business and are valid, binding
and enforceable obligations due to the Seller and are fully collectible in the

Page 15 of 35

ordinary
course of business, without resort to litigation, at the face amount thereof
without any counterclaim, offset or other reduction by the customer thereunder,
except as may otherwise be provided in Schedule 4.21.  Except as indicated on Schedule 4.21, the Receivables are not
past due. 

          Section
4.22 Restrictions on Business Activities.  Seller is not bound by any agreement commitment, settlement,
judgment, injunction, order or decree to which Seller is a party or otherwise
binding upon Seller or the Purchased Assets that has or may have the effect of
prohibiting or impairing any business practice of Seller or the conduct of
Seller’s Business anywhere in the world.

          Section
4.23 No Misrepresentations.  The
representations, warranties and statements made by Seller or President in or
pursuant to this Agreement are true, complete and correct in all material
respects and do not contain any untrue statement of a material fact or omit to
state any material fact necessary to make any such representation, warranty or
statement, under the circumstances in which it is made, not misleading.  Seller and the President have disclosed to
Buyer all facts and information material to the proposed purchase of the Assets
hereunder that are known to Seller or the President.

          Section
4.24 Permits and Compliance.
Seller has obtained and now holds all governmental permits and licenses
required to own and operate Seller’s Business.
Seller has complied with and has no notice of any suspected or actual non-compliance
with, all applicable governmental statutes, laws, ordinances, decrees, orders,
rules and regulations, except for possible minor instances of non-compliance
that, when taken as whole, will not have a material affect on the Assets,
Seller’s Business or the financial condition or prospects of Seller’s Business.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF BUYER

          Buyer
makes the following representations and warranties to Seller:

          Section
5.1 Corporate Existence.  Buyer
is a corporation duly organized, validly existing and in good standing under
the laws of the State of Colorado and have full power to own its properties and
to conduct its business as presently conducted.

          Section
5.2 Corporate Authority.  Buyer
has full power and authority to enter into this Agreement and to effect the
transactions contemplated by this Agreement.
This Agreement has been duly authorized, executed and delivered by Buyer
and is a valid and binding obligation of Buyer enforceable against it in
accordance with its terms subject to:
(a) applicable bankruptcy, insolvency, reorganization and moratorium
laws and other laws of general application affecting enforcement of creditors’
rights generally; and (b) limitations on the availability of equitable
remedies.

Page 16 of 35

          Section
5.3 No Conflict or Violation.
Except as set forth on Schedule 5.3 of this Agreement, neither the
execution and delivery of this Agreement nor consummation of the transactions
contemplated hereby will result in:  (a)
a violation or breach of or default under any term or provision of any
indenture, mortgage, contract, agreement, lease, commitment, license,
franchise, permit, authorization or concession to which Buyer is a party or to
which they or any of their property may be bound or constitute an event which
with notice, lapse of time, or both, would result in any such violation, breach
or default; or (b) a violation by Buyer of any statute, rule, regulation,
ordinance, code, order, judgment, writ, injunction, decree or award, or
constitute an event which with notice, lapse of time, or both, would result in
any such violation.

ARTICLE VI

INTERIM COVENANTS OF SELLER

          Seller
covenants and agrees with Buyer that between the date of this Agreement and the
Closing Date:

          Section
6.1 Operation of the Business.
Seller will operate the Business in the ordinary course of business and
in the same manner as presently operated, and shall maintain and repair the
Purchased Assets in substantially the same manner as they are maintained and
repaired.  Seller will refrain from
taking or omitting to take any action that would violate Seller’s
representations and warranties under Article IV of this Agreement or render
them inaccurate as of the date of this Agreement or the Closing Date or that in
any way would prevent the consummation of the transactions contemplated hereby.

          Section
6.2 Insurance.  Seller will
maintain existing fire and casualty insurance and “all risk” insurance with
respect to the Purchased Assets and the Business.

          Section
6.3 Access to Records and Properties.
Prior to the Closing Date, Buyer may conduct such investigation of the
Purchased Assets and of the Business as Buyer deems appropriate.  Between the date of this Agreement and the
Closing Date, Seller shall give to Buyer and its agents and representatives,
including its independent accountants and attorneys, full access to all the
facilities, offices, books and records of the Business or included in the
Purchased Assets, and such further financial and operating data and other
information with respect to the Purchased Assets, the Business and the Initial
Statement of Purchased Assets and Assumed Liabilities as Buyer shall reasonably
request.  Such investigation shall be
conducted in a manner so as to minimize interference with the operation of the
Business.

          Section
6.4 Updating of Information.
Seller will deliver revised or supplementary Schedules to this
Agreement, containing accurate information as of the Closing Date, in order to
enable Buyer to confirm the accuracy of Seller’s representations and warranties
and otherwise effectuate the provisions of this Agreement.  The receipt by Buyer of any revised or

Page 17 of 35

supplementary
schedules to this Agreement shall in no way prejudice the Buyer’s right to
terminate this Agreement based upon the failure of any condition to be
satisfied under Section 9.1 hereof.
Seller shall promptly inform Buyer, in writing, of the occurrence or
failure of any action or event that would violate Seller’s representations and
warranties under this Agreement or render them inaccurate as of the date hereof
or the Closing Date or that would constitute a breach of any covenant of Seller
under this Agreement or a failure of any condition to the obligations of either
Seller or Buyer under this Agreement.

ARTICLE VII

INTERIM COVENANTS OF BUYER

          Buyer
covenants and agrees with Seller that between the date of this Agreement and
the Closing Date:

          Section
7.1 Performance.  Buyer will
perform all acts to be performed by it pursuant to this Agreement and will
refrain from taking or omitting to take any action that would violate Buyer’s
representations and warranties under this Agreement or render them inaccurate
as of the date of this Agreement or the Closing Date or that in any way would
prevent the consummation of the transactions contemplated under this Agreement.

          Section
7.2 Updating of Information.
Buyer will deliver revised documentation as may be applicable, containing
accurate information as of the Closing Date, in order to enable Seller to
confirm the accuracy of Buyer’s representations and warranties and otherwise
effectuate the provisions of this Agreement.
The receipt by Seller of any revised or supplementary schedules to this
Agreement shall in no way prejudice the Seller’s right to terminate this
Agreement based upon the failure of any condition to be satisfied under Section
9.2 hereof.  Buyer will promptly inform
Seller, in writing, of the occurrence or failure of any action or event that
would violate Buyer’s representations and warranties under this Agreement or
render them inaccurate as of the date of this Agreement or the Closing Date or
that would constitute a breach of any covenant of Buyer under this Agreement or
a failure of any condition to the obligations of either Buyer or Seller under
this Agreement.

ARTICLE VIII

INDEMNIFICATION

          Section
8.1 Indemnification by Buyer.
Subject to the limitations set forth in Section 8.2, Buyer shall indemnify,
defend and hold Seller and its President, employees and agents (collectively,
the _Seller Parties_) from, against and in respect of any and all judgments,
settlements, liabilities, obligations, claims, demands, contingencies, damages,
costs and expenses, including all court costs and reasonable attorneys’ fees
(collectively, _Losses_), that Seller shall incur or suffer, which arise,
result from or relate to:

Page 18 of 35

                    (a)
the breach of any representation, warranty or other agreement made by
Buyer  in this Agreement or pursuant
hereto or any allegation by a third party that, if true, would constitute such
a breach;

                    (b)
the Assumed Liabilities; or

                    (c)
debts, obligations or liabilities arising from the conduct of the Business by
Buyer on or after the Closing Date including, but not limited to, noncompliance
with any Environmental Requirement which is the result of action or conduct
occurring on or after the Closing Date.

          Section
8.2 Limitations on Buyer’s Indemnification Obligations.  The Seller Parties will not be entitled to
indemnification under Section 8.1 unless the aggregate amount of all Losses for
which indemnification is sought by the Seller Parties pursuant to such Section
exceeds $25,000 (the _Indemnification Threshold_), in which case the Seller
Parties will be entitled to indemnification for the amount of such Losses in
excess of such amount.  The maximum
aggregate Losses for which the Seller Parties will be entitled to
indemnification under Section 8.1 is $500,000.
Notwithstanding the foregoing, there shall be no application of the
Indemnification Threshold with respect to any breach or alleged breach of any
representation or warranty resulting from Buyer’s intentional misrepresentation
or fraud.

          Section
8.3 Indemnification by Seller.
Subject to the limitations set forth in Section 8.4, Seller and the
President, jointly and severally, shall indemnify, defend and hold Buyer, its
affiliates and their respective directors, officers, owners, employees and
agents (collectively, the _Buyer Parties_) from, against and in respect of any
and all judgments, settlements, liabilities, obligations, claims, demands,
contingencies, damages, costs and expenses, including all court costs and
reasonable attorneys’ fees (collectively, _Losses_), that Buyer shall incur or
suffer, which arise, result from or relate to:

                    (a)
the breach of any representation, warranty or other agreement made by Seller or
the President in this Agreement or pursuant thereto or any allegation by a
third party that, if true, would constitute such a breach;

                    (b)
The Retained Liabilities;

                    (c)
debts, obligations or liabilities arising from the conduct of the Business by
Seller prior to the Closing Date, to the extent such liabilities are not
Assumed Liabilities, including without limitation the liabilities and
obligations with respect to noncompliance with any Environmental Requirement
which is the result of action or conduct occurring prior to the Closing Date;

                    (d)
debts, obligations or liabilities arising from the conduct of any other
business by Seller on or after the Closing Date.

Page 19 of 35

          Section
8.4 Limitations on Seller’s Indemnification Obligations.  Subject to the exceptions set forth below,
the Buyer will not be entitled to indemnification under Section 8.3 unless the
aggregate amount of all Losses for which indemnification is sought by the Buyer
Parties pursuant to such Section exceeds $25,000 (the _Indemnification
Threshold_), in which case the Buyer Parties will be entitled to
indemnification for the amount of such Losses in excess of such amount.  The maximum aggregate Losses for which the
Buyer Parties will be entitled to indemnification under Section 8.3 is
$500,000.  Notwithstanding the
foregoing, there shall be no application of the Indemnification Threshold with
respect to: (a) any breach or alleged breach of any representation or warranty
resulting from Seller’s or any President’s intentional misrepresentation or
fraud; (b) any breach or alleged breach of any representation or warranty set
forth in Sections 4.1, 4.4, 4.10, 4.11, 4.14, 4.15 or 4.22; or (c) any of the
Other Excluded Liabilities described on Schedule 2.2. 

          Section
8.5 Notice of Claims.  Any party
entitled to receive indemnification under this Article 8 (the _Indemnified
Party_) agrees to give prompt written notice to the party or parties required
to provide such indemnification (the _Indemnifying Parties_) upon the
occurrence of any indemnifiable Loss or the assertion of any claim or the
commencement of any action or proceeding in respect of which such a Loss may
reasonably be expected to occur (a _Claim_), but the Indemnified Party’s
failure to give such notice shall not affect the obligations of the
Indemnifying Party under this Article 8 except to the extent that the
Indemnifying Party is materially prejudiced thereby.

          Section
8.6 Defense of Claims.  The
Indemnifying Party may elect to assume and control the defense of any Claim,
including the hiring and direction of counsel reasonably satisfactory to the
Indemnified Party and the payment of related expenses, if (a) the Indemnifying
Party acknowledges its obligation to indemnify the Indemnified Party for any
Losses resulting from such Claim and provides reasonable evidence to the
Indemnified Party of its financial ability to satisfy such obligation; (b) the
Claim does not seek to impose any liability or obligation on the Indemnified
Party other than for money damages; and (c) the Claim does not relate to the
Indemnified Party’s relationship with its customers or employees.  If such conditions are satisfied and the
Indemnifying Party elects to assume and control the defense of a Claim, then
(i) the Indemnifying Party may settle such Claim; and (ii) the Indemnified
Party may employ separate counsel and participate in the defense thereof at its
own expense unless (A) the Indemnifying Party has failed to adequately assume the
defense of such Claim or to employ counsel with respect thereto or (B) a
conflict of interest exists between the interests of the Indemnified Party and
the Indemnifying Party that requires representation by separate counsel, in
which case the fees and expenses of such separate counsel shall be paid by the
Indemnifying Party.  If such conditions
are not satisfied, the Indemnified Party may assume and control the defense of
the Claim.

          Section
8.7 Time Limits to Indemnification Obligations.  An Indemnifying Party shall not have any
indemnification obligations hereunder with respect to any claim for
indemnification made by an Indemnified Party more than 1 year after the Closing
Date, except

Page 20 of 35

indemnification
obligations relating to claims based on fraud, actual dishonesty or intentional
misrepresentation, or representations or warranties set forth in Sections 4.7
(Title to Assets), 4.14 (Taxes) or 4.15 (Hazardous Substances), which shall
survive until 60 days after the expiration of the applicable statues of
limitations.

          Section
8.8 Survival of Representations, Warranties and Indemnification Obligations.  The indemnification obligations,
representations and warranties of Seller and the President on the one hand and
Buyer on the other, made in or pursuant to this Agreement and the Closing
certificates attached hereto shall survive the execution and delivery of this
Agreement, the consummation of the transactions contemplated by this Agreement
and any investigation, inquiry or knowledge of the other party.   

          Section
8.9 Treatment of Indemnity Payments.
The parties hereto agree to treat all indemnity payments made pursuant
to this Agreement as adjustments to the Purchase Price for all purposes,
including tax purposes.

ARTICLE IX

CONDITIONS PRECEDENT TO CLOSING

          Section
9.1 Conditions Precedent to Closing by Buyer.  All obligations of Buyer under this Agreement are subject to the
fulfillment prior to or at the Closing of each and every one of the following
conditions:

                    (a)
Representations and Warranties Correct.
All representations and warranties of Seller made in or pursuant to this
Agreement and all Schedules to this Agreement shall be true and correct as of
the date made and at and as of the Closing Date, with the same force and effect
as though made at and as of the Closing Date, and Buyer shall have received
from the chief executive officer of Seller a certificate to such effect, in
form and substance reasonably satisfactory to Buyer.

                    (b)
Performance; No Default.  Seller
shall have performed, observed and complied with all the obligations and
conditions required by this Agreement to be performed, observed or complied
with by it at or prior to the Closing Date.

                    (c)
Documents Delivered.  Seller
shall have delivered at the Closing all of the documents described in Section
10.2 of this Agreement.

                    (d)
Consents to Assignment, Lease.
Seller shall have secured the written consents to assign or transfer the
Contracts designated as requiring consent as a condition to Closing on Schedule
1.1(h) of this Agreement and executed a new Real Estate Lease substantially in
the form attached as Exhibit 9.1 to this Agreement.

Page 21 of 35

                    (e)
No Material Adverse Change.  As
of the Closing Date, there shall not have occurred in the opinion of Buyer, in
its sole discretion, any material adverse change in the financial condition,
results of operations, assets or liabilities of Seller’s Business since the
date of the Latest Balance Sheet; and there shall have been no suit, action,
arbitration, legal or administrative proceeding or governmental investigation
pending or threatened against or affecting Seller, the Assets, Seller’s
Business or the prospects of same.

                    (f)
Responses to Due Diligence.  The
form and content of Seller’s responses to Buyer’s requests for information
shall have satisfied Buyer’s due diligence review and inquiry conducted by
Buyer in connection with the transactions contemplated by this Agreement.

                    (g)
Lien Clearance.  Seller shall
have delivered to Buyer executed UCC-3 Termination Statements or other releases
or assurances of releases satisfactory to Buyer to evidence the release of any
liens on the Assets. 

                    (h)
Financing.  Buyer shall have
successfully concluded a debt or equity round of financing for a minimum amount
of Two Million Dollars ($2,000,000) gross proceeds.

          Section
9.2 Conditions Precedent to Closing by Seller.  All obligations of Seller under this Agreement are subject to the
fulfillment prior to or at the Closing of each and every one of the following
conditions:

                    (a)
Representations and Warranties Correct.
All representations and warranties of Buyer made in or pursuant to this
Agreement shall be true and correct as of the date made and at and as of the
Closing Date, with the same force and effect as though made at and as of the
Closing Date, and Seller shall have received from the chief executive officer
of Buyer a certificate to such effect, in form and substance reasonably
satisfactory to Seller.

                    (b)
Performance; No Default.  Buyer
shall have performed, observed and complied with all the obligations and
conditions required by this Agreement to be performed, observed or complied
with by it at or prior to the Closing Date.

                    (c)
Documents Delivered.  Buyer shall
have delivered at the Closing all of the documents described in Section 10.3 of
this Agreement.

          Section
9.3 Waiver of Conditions Precedent.
If any condition precedent to Closing by Buyer as set forth in Section
9.1 of this Agreement is not satisfied and such condition is not waived by
Buyer at or prior to the Closing Date, or if any condition precedent to Closing
by Seller as set forth in Section 9.2 of this Agreement is not satisfied and
such condition is not waived by Seller at or prior to the Closing Date, Buyer
or Seller, as the case may be, may terminate this Agreement at their respective
option by notice to the other party.
Such right of termination shall be in addition to any other rights any
party may have against another for a breach of its commitments hereunder.  In the event that a condition precedent to Closing
is not

Page 22 of 35

met, the party
for whose benefit the condition exists may waive such condition precedent and
proceed with the Closing, and in such event the party so waiving such condition
precedent shall have no recourse against the other party because of the failure
of such condition.

          Section
9.4 Termination in the Event of Damage to Purchased Assets.  In the event any of the Purchased Assets are
damaged or destroyed by fire or other casualty, Seller will immediately notify
Buyer in writing of such event and the extent of damage thereof, and Buyer
shall have the right to either (i) terminate this Agreement if the damage or
destruction exceeds Five Thousand Dollars ($5,000.00) and such damage or
destruction materially affects the Buyer’s ability to carry on the Business as
conducted on the day immediately preceding such damage or (ii) consummate the
purchase of the Purchased Assets as in existence following such damage or
destruction.  Buyer will notify Seller
in writing which of the two alternative elections Buyer desires to pursue
within thirty (30) days of receipt of Seller’s notice with respect to damage or
destruction by fire or other casualty.
If Buyer elects to consummate the purchase contemplated by this
Agreement, an appropriate reduction will be made in the Purchase Price as
agreed by the parties, or in the alternative, Buyer will be entitled to all
insurance proceeds and an amount equal to the deductible amount required to be
paid under the applicable insurance policies (the total amount of proceeds and
deductible payments not to exceed the amount of the Purchase Price to be paid
hereunder), and at the Closing, Seller will assign to Buyer all rights under
all of such insurance policies.

ARTICLE X

CLOSING

          Section
10.1 Closing Date.  Subject to
the conditions precedent to closing by Buyer and Seller under Article IX of
this Agreement, the closing of the transactions contemplated under this
Agreement (the “Closing”) shall take place at 10:00 a.m. local time at the
offices of the Seller on or before May 5, 2006; provided, however, that either
party may, by written notice to the other given not later than May 1, 2006,
elect to postpone the Closing Date for a period of not more than ten (10) days.

          Section
10.2 Documents Delivered by Seller.
At the Closing, Seller will sell, convey, transfer, assign and deliver
to Buyer, and Buyer shall acquire from Seller, all of the Purchased
Assets.  To effect such sale and delivery,
Sellers will deliver the following to Buyer or Buyer’s agents at Closing in
form and substance reasonably satisfactory to Buyer, as shall be effective to
vest in Buyer all of Seller’s rights in and under the Purchased Assets as
provided for in this Agreement:

                    (a)
a general bill of sale transferring the Purchased Assets to Buyer, and such
other similar instruments of conveyance, transfer and assignment as may be
necessary under the laws of the state in which such assets are located to
convey to Buyer good and marketable title to all personal property included in
the Purchased Assets;

Page 23 of 35

                    (b)
assignments of the Intellectual Property in a form sufficient for filing;

                    (c)
all consents to the assignment to Buyer of the Contracts designated on
Schedules 1.1(h) and 4.8 of this Agreement as requiring such consent as a
condition to Closing;

                    (d)
a certificate signed by the chief executive officer of Seller, dated as of the
Closing Date, certifying that the conditions specified in Section 9.2 of this
Agreement have been satisfied in full;

                    (e)
certified copies of resolutions duly adopted by the Board of Directors of
Seller authorizing the execution and delivery of this Agreement and the sale
and transfer of the Purchased Assets to Buyer; 

                    (f)
Consulting Agreement covering the one individual specified in Section 10.4;

                    (g)
A New Real Estate Lease as noted in Section 9.1(d);  

                    (h)
Non Compete Agreement;

                    (i)
such additional documents as Buyer may deem necessary to evidence the truth and
accuracy, as of the Closing Date, of the representations and warranties
contained herein and the due satisfaction and performance at or prior to the Closing
of all agreements and covenants to be complied with, satisfied and performed by
Seller, including without limitation a schedule of the unpaid amounts owing by
the Seller under the Real Estate Lease up to the Closing Date; and

                    (j)
a receipt for the payment by Buyer of the Initial Payment as required by
Section 3.2 of this Agreement.

          Simultaneously
with such delivery, Seller shall take all action necessary to put Buyer in
actual possession and operating control of the Purchased Assets and the
Business.

          Section
10.3 Documents Delivered by Buyer.
Buyer will deliver the following to Seller at Closing in form and
substance reasonably satisfactory to Seller:

                    (a)
a certificate signed by the chief executive officer of Buyer, dated as of the
Closing Date, certifying that the conditions specified in Section 9.1 of this
Agreement have been satisfied in full and that Buyer has received all
information requested prior to Closing and is not aware of any adverse
conditions or defaults by Seller hereunder;

                    (b)
certified copies of resolutions duly adopted by the Board of Directors of Buyer
authorizing the execution, delivery and performance of this Agreement; 

Page 24 of 35

                    (c)
Consulting Agreement covering the one individual specified in Section 10.4(a); 

                    (d)
A New Real Estate Lease as noted in Section 9.1(d);  

                    (e)
such additional documents as Seller may deem necessary to evidence the truth
and accuracy, as of the Closing Date, of the representations and warranties
contained herein and the due satisfaction and performance at or prior to the
Closing Date of all agreements and covenants to be complied with, satisfied and
performed by Buyer;

                    (f)
the Closing Date payment in the amount and form of delivery as required by
Section 3.2 of this Agreement.

          Section
10.4 Other Closing Documents.  At
Closing, the parties shall also execute and deliver the following documents:

                    (a)
Consulting Agreement among Buyer and the following individual: Seller’s
President,  substantially in the form
attached hereto as Exhibit 10.4(a); 

                    (b)
Real Estate Lease Agreement; and

                    (c)
Non Compete Agreement. 

          Section
10.5 Risk of Loss.  Title to, and
risk of loss or destruction or damage to, the Purchased Assets shall remain
with Seller until the completion of the Closing, at which time title and risk
of loss to the Purchased Assets will pass to Buyer.

ARTICLE XI

ADDITIONAL AGREEMENTS OF BUYER AND SELLER

          Section
11.1 Employees; Retirement and Benefit Plans.

                    (a)
Termination of Transferring Employees.
Seller shall, as of the Closing Date, terminate all active employees of
the Business on the Closing Date and (except as provided in Section 11.1(e)
below) their participation in Seller’s employee plans.

                    (b)
Hiring of Transferring Employees.
Buyer shall offer employment as of the Closing Date to all active
employees of the Business on the Closing Date at the California locations and
such employees who accept employment with Buyer as of the Closing Date shall be
considered “Transferring Employees”.
Such employment shall be for substantially the same positions and at
substantially the same wage and salary rates as those in effect on the Date of
Closing, and Buyer shall provide to the Transferring Employees reasonably
similar same health and medical insurance, sick leave, vacation and other
welfare-type benefits as

Page 25 of 35

shall be in
effect on the Closing Date.  Buyer will
give all Transferring Employees credit for service with Seller under all
vacation and holiday plans maintained by Buyer for the benefit of Transferring Employees.

                    (c)
Employee and Third Party Rights.
Nothing contained in this Agreement shall be deemed to give any employee
of Seller the right to be retained in the employ of Buyer after the Closing
Date or to interfere with Buyer’s right to discharge any employee at any
time.  Nothing contained in this Section
11.1 or elsewhere in this Agreement shall be deemed to create in any employee
any right as a third party beneficiary.

                    (d)
Retirement Savings and Profit-Sharing Plan.  Effective as of the Closing Date, the Transferring Employees
shall not be eligible to participate in the Seller’s Retirement Savings and
Profit Sharing Plan (the “Seller’s Plan”), other than for the purposes of vesting
in their employer contribution accounts thereunder, taking withdrawals from
their accounts in accordance with the provisions of the Seller’s Plan and
making loan payments as described below. For purposes of this Section 11.1(d),
a Transferring Employee’s hiring by Buyer shall not be deemed a separation from
service, a separation of employment or a termination of employment for purposes
of taking a withdrawal from Seller’s Plan.

                    (e)
Employee Medical Insurance Claims.
Buyer and Seller agree that claims submitted (whether before or after
Closing) by employees of the Business and their covered dependents for medical
and dental services provided prior to the Closing Date shall be the obligation
of Seller and shall be covered by Seller’s medical and dental plans, and that claims
submitted by Transferring Employees for medical and dental (to the extent
covered by Buyer’s plan) services provided on and after the Closing Date shall
be the responsibility of Buyer and covered by Buyer’s medical and dental (to
the extent provided by Buyer) plan.
Seller shall be responsible for any and all obligations and liabilities
(including, but not limited to, penalties and taxes) for group health
continuation coverage under the Consolidation Omnibus Reconciliation Act of
1985, as amended, with respect to former employees (and their spouses and
dependents) of the Business who have elected such coverage as of the Closing
Date.

                    (f)
Post-Retirement Medical and Life Insurance Benefits.  Notwithstanding anything to the contrary contained
herein, Seller shall be responsible for, and shall indemnify, hold harmless and
defend Buyer from, any and all liabilities for post-retirement medical and life
insurance benefits for all current and, insofar as it relates to employment
with Seller prior to the Closing Date, future retirees of the Business who are
entitled to retiree medical and life insurance benefits under Seller’s benefit
plans as of the Closing Date; provided, however, that with respect to future
retirees the Seller’s responsibility and coverage for such benefits will be
secondary to Buyer’s responsibility and coverage for such benefits to the
extent such benefits are provided under any benefit plans offered by Buyer and
earned by the future retirees based on service with the Buyer; however, Buyer
shall have no obligation to provide post-retirement medical and life insurance
benefits.  A true and complete list of
such current and future retirees is attached hereto as Schedule 11.1(g).  Nothing contained in this Section 11.1(g) of
this

Page 26 of 35

Agreement
shall be deemed to confer any benefits upon any employees who are not otherwise
eligible for such benefits as of the Closing Date.

                    (g)
Disability Claims.  Seller shall
continue to be responsible after the Closing Date for disability benefits for
employees of the Business who are absent from work as of the Closing Date due
to disability, illness or injury, including those arising under any worker’s
compensation laws or plans (“Disabled Employees”), consistent with the terms of
Seller’s disability benefit plans or the provisions of any worker’s
compensation laws.  A true and complete
list of all Disabled Employees existing as of the date hereof is attached
hereto as Schedule 11.1(g), along with a description for each person listed
thereon (whether covered by Seller’s disability benefit plans or worker’s
compensation laws) of the following information:  their current disability period and the nature of their
disability, and Seller will deliver at Closing an updated list of the Disabled
Employees as of the Closing Date for Buyer’s approval at Closing of any such
updated information.  Seller’s
obligation to any such Disabled Employee(s) shall continue until such employee
attains maximum medical recovery and receives a doctor’s release to return to
work or until Seller’s obligations under its disability benefit plans or any
worker’s compensation laws expire.  Upon
such employee’s attaining such recovery and receiving such release, Seller
shall terminate such employee consistent with its obligations under Section
11.1(a) of this Agreement and Buyer shall make such employee an offer of
employment consistent with Buyer’s obligations under Section 11.1(b) of this
Agreement if Buyer or Seller has a contractual or other legal obligation to
provide such employment.  If any such
employee accepts the Buyer’s offer of employment, Seller shall have no further
obligations with respect to disability benefits for such employee.

                    (h)
Worker’s Compensation Claims.  Seller shall be liable for worker’s compensation claims filed by
employees of the Business which arise solely out of work-related injuries which
occur prior to the Closing Date.
Notwithstanding the above, with respect to worker’s compensation claims
filed after the Closing Date by Transferring Employees, where the claim arises
out of exposures occurring both prior to and on and after the Closing Date,
Buyer’s and Seller’s liability with respect to said claims shall be allocated
in accordance with applicable state laws.
Buyer shall be liable for worker’s compensation claims filed by
Transferring Employees which arise solely out of work-related injuries which
occur on or after the Closing Date.

                    (i)
Vacation and Sick Leave.  Buyer
agrees to assume and timely discharge as part of the Assumed Liabilities,
Seller’s obligation for accrued vacation and sick leave, as of the Closing
Date, for the Transferring Employees.
Said Assumed Liabilities shall be recorded and accrued on the Closing
Date Statement of Purchased Assets and Assumed Liabilities as required by
Section 2.1(a) of this Agreement.

          Section
11.2 Confidentiality.  Buyer
acknowledges that prior to the Closing Date it will be furnished with or become
exposed to certain information which is considered to be confidential and
proprietary, regardless of whether such information is marked or otherwise
identified as confidential or proprietary, including, without limitation,
customer lists, earnings

Page 27 of 35

history and
market information (the “Confidential Information”).  Buyer agrees that it will keep the Confidential Information
confidential and neither it nor its agents or employees will, without the prior
written consent of Seller or the proper owner of such information, disclose or
use the Confidential Information, other than consistent with the terms of this
Agreement.  Notwithstanding anything to
the contrary in this Agreement, the provisions of this Section shall not apply
to information which:  (a) is permitted
in writing by Seller or the proper owner of such information to be disclosed or
used; or (b) is within the public domain or becomes part of the public domain
without any breach of this Agreement; or (c) is known to Buyer prior to the
disclosure of such information; or (d) is received from a third party; or (e)
is independently developed by Buyer’s employees who did not have access to such
information; or (f) is required to be disclosed by judicial or administrative
process or, in the opinion of counsel, by other mandatory requirements of
law.  All obligations of Buyer with
respect to the Confidential Information shall terminate immediately upon the
Closing of the transaction contemplated by this Agreement.  If the transaction contemplated by this
Agreement is not consummated, Buyer shall promptly return to Seller all
documents, work papers, and other materials (including all copies made thereof)
obtained or made pursuant to this Agreement.

          Section
11.3 Expenses.  Except as
otherwise provided in this Agreement, and whether or not the transaction
contemplated hereby is consummated, each party to this Agreement shall pay its
own expenses incident to this Agreement and the transaction contemplated hereby
including, without limitation, all legal and accounting fees and disbursements.

          Section
11.4 Sales, Use, Transfer and Other Taxes.  Seller shall determine, collect from Buyer and pay when due all
sales, use, transfer and other taxes arising from the sale of the Purchased
Assets by Seller to Buyer.   Seller
shall pay when due all foreign, federal, state or local taxes measured by or
with respect to the income or gross receipts of the Business for all periods
ending prior to the Closing Date.
Personal property taxes relating to the Purchased Assets shall be
prorated between Seller and Buyer as of the Closing Date (with Seller being
responsible for such items for all periods ending prior to the Closing Date and
Buyer being responsible for such items beginning on and after the Closing
Date), and Seller and Buyer each agree to pay its respective share of such
items when due.

          Section
11.5 Regulatory and Other Authorizations.  Each party hereto will use reasonable efforts to obtain all
authorizations, consents, orders and approvals of all federal, state and
foreign regulatory bodies and officials that may be or become necessary for its
execution and delivery of, and the performance of its obligations pursuant to,
this Agreement (including, but not limited to, consents with respect to the
assignment of all government contracts), and will cooperate fully with the
other party in promptly seeking to obtain all such authorizations, consents,
orders and approvals.

          Section
11.6 Non-Competition.  In
consideration of Buyer’s purchase of the Assets including Seller’s Business
(and the goodwill associated therewith), the President of the Seller  covenants to Buyer that, for a period of
five (5) years from the Closing Date, he nor any Related Person shall, without
the prior written consent of Buyer (which consent may be given

Page 28 of 35

or withheld in
the sole discretion of Buyer), directly or indirectly (in any capacity,
including as a General Partner, partner, member, investor, manager, lender,
principal, director, officer, employee, consultant, contractor or agent of any
other person or entity): (a) own, manage, control, participate or engage in, or
have any financial interest in any other person or entity that engages in, the
business or operations of designing, developing, manufacturing, processing,
fabricating, testing, servicing, maintaining, supporting, replacing,
refurbishing, retrofitting, distributing, licensing, providing, installing,
marketing, selling, consulting on or otherwise dealing with a Competing Product
(each individually and collectively referred to as a _Competing Business_)
within the geographic area consisting of each country, state, region, or
locality in which Seller has carried on its business, which area the parties
agree is, and stipulate to be, a worldwide business area including, but not
limited to, the United States, Canada, and Mexico (the _Covered Area_), (b)
solicit, influence, or attempt to solicit or influence, any customer, or any
person or entity that is, or within the eighteen-month period preceding the
date of such activity was, a purchaser of goods of services from either Buyer
or any Affiliate of Buyer to purchase a Competing Product (defined below) from
any person or entity other than the Buyer or an Affiliate of Buyer or (c)
employ, or recruit or solicit for employment, any person who is an employee of
Buyer or any Affiliate of Buyer (or was an employee of Buyer at any time within
the 6-month period preceding the subject act of solicitation recruitment or
employment).  As used in this Agreement,
a _Competing Product_ means products and services that are either the same as
or similar to the products and services offered by Seller, which products and
services the parties agree are, and stipulate to be, any form of leasing,
selling or servicing of truck trailers. _Affiliate_ means any person or entity
directly or indirectly through one or more intermediaries controlling,
controlled by or under common control with Seller, President or Buyer, as the
case may be.  As used in the definition
of Affiliate, _control_ and derivatives of that term mean the power to dictate
the management policies of a person or organization, whether by direct or
indirect ownership of voting securities or otherwise.  _Related Person_ means an Affiliate of either Seller or
President.

          Section
11.7 Publicity.  Neither Seller
nor Buyer shall make any announcement of the transactions contemplated by this
Agreement except as required by law or as mutually agreed to, and then, only
when, and in the form, mutually agreed upon by them.

ARTICLE XII

SURVIVAL; SEVERABILITY OF CERTAIN AGREEMENTS

          Section
12.1 Survival of Representations and Warranties.  All representations and warranties of either
party in this Agreement shall survive Closing for a period of one (1) year
beyond the Closing Date (the “Survival Period”).  In the event of a breach by either party of any representation or
warranty hereunder, the non-defaulting party shall deliver written notice of
such breach to the defaulting party before the expiration of the Survival
Period.  Any action based on an alleged
breach of a representation or warranty hereunder shall be commenced within
twelve (12) months after the expiration of the Survival Period.  In the event that the non-defaulting party
shall fail to provide notice or commence an action within the

Page 29 of 35

time
limitations provided above, such party shall be deemed to have waived any
rights or causes of action based on such breach.

          Section
12.2 Survival of Certain Covenants and Obligations.  The parties hereby agree that the covenants
and obligations set forth in Articles II, III and VIII of this Agreement shall
survive Closing.

ARTICLE XIII

MISCELLANEOUS PROVISIONS AND AGREEMENTS

          Section
13.1 Notices.  All notices,
requests, demands and other communications made under this Agreement shall be
in writing and shall be deemed duly given upon receipt if sent by registered or
certified mail, return receipt requested, postage prepaid, as follows, or to
such other address or person as either party may designate by notice to the
other party under this Agreement:

	
 

	
 

	
 

	
 

	
If to SELLER
  or PRESIDENT:

	
 

	
 

	
 

	
Ken Moore

  49630 Lincoln Drive

  Indio, CA 92201

	
 

	
 

	
 

	
 

	
with a copy
  to:

	
 

	
 

	
 

	
 

	
 

	

	
 

	
 

	

	
 

	
 

	

	
 

	
 

	
Attn:  

	
  

	
 

	
 

	
  

	

	
 

	
 

	
 

	
 

	
If to BUYER:

	
 

	
 

	
 

	
CapSource
  Financial, Inc.

  1729 Donegal Dr.

  St. Paul, Minnesota 55125

  Attn: Mr. Steven Reichert, VP and General Counsel

  Fax: 651-578-6614

	
 

	
 

	
 

	
 

	
with a copy
  to:

	
 

	
 

	
 

	
 

	
CapSource
  Financial, Inc.

  2305 Canyon Blvd., Suite 103

  Boulder, CO 80302

  Attn: Mr. Fred Boethling, President and CEO

  Fax: 303-245-0521

Page 30 of 35

          Section
13.2 Amendments; Termination.
This Agreement cannot be changed or terminated orally and no waiver of
compliance with any provision or condition of this Agreement and no consent
provided for in this Agreement shall be effective unless evidenced by an
instrument in writing duly executed by both parties.  This Agreement (except for the provisions of Section 11.3 of this
Agreement, which shall continue in effect) and the transactions contemplated by
this Agreement may be terminated and abandoned at any time prior to the Closing
Date:  (a) by mutual written agreement
of Buyer and Seller; or (b) by Buyer or Seller upon written notice given to the
other party after entry of an order or injunction restraining or prohibiting
the sale or purchase of the Business and the Purchased Assets.  Without prejudice to any other rights or
remedies which it may have, either party may, prior to the Closing Date,
forthwith abandon the transactions, contemplated by this Agreement by written
notice to the other party if there shall have been a failure of any condition
or a breach of any representation or warranty contained in this Agreement by
the other party which failure or breach is not cured or cannot reasonably be
cured prior to the Closing Date, or if a default shall be made by the other
party in the timely performance of any of that party’s agreements or
obligations contained in this Agreement.
No breach of this Agreement shall be forgiven by the mere passage of
time.

          Section
13.3 Assignment.  This Agreement
shall be binding upon and inure to the benefit of the parties and their
respective successors, legal representatives and assigns.  This Agreement may not be assigned by either
party hereto.

          Section
13.4 Entire Agreement.  This
Agreement and the Schedules attached to this Agreement and the other writings
specifically identified in this Agreement or contemplated by this Agreement
contain the entire agreement among the parties to this Agreement with respect
to the transactions contemplated in this Agreement and supersede all previous
written or oral negotiations, commitments and writings.

          Section
13.5 Counterpart Signature.  This
Agreement may be executed in two or more counterparts and all such counterparts
shall constitute one and the same instrument.

          Section
13.6 Severability.  If any one or
more of the provisions of this Agreement shall be held to be invalid, illegal
or unenforceable, the validity, legality or enforceability of the remaining
provisions of this Agreement shall not be affected thereby.  To the extent permitted by applicable law,
each party waives any provision of law which renders any provision of this
Agreement invalid, illegal or unenforceable in any respect.

          Section
13.7 Applicable Law; Venue.  This
Agreement shall be governed by and construed and enforced in accordance with
the laws of the State of Colorado excluding its conflict of law principles, and
all actions interpreting, enforcing or

Page 31 of 35

effecting this
Agreement shall be brought in the federal or state courts in Colorado and all
parties submit to the jurisdiction of such courts.

          Section
13.8 Headings.  Headings and
captions contained in this Agreement are inserted only as a matter of
convenience and in no way define, limit or extend the scope of this Agreement
or any provision hereof.

          Section
13.9 Facsimile Execution and Delivery.
A facsimile or other reproduction of this Agreement  may be executed by one or more Parties, and
an executed copy of this Agreement may be delivered by one or more Parties by
facsimile or similar electronic transmission device pursuant to which the
signature of or on behalf of such Party can be seen, and such execution and
delivery will be considered valid, binding, and effective for all
purposes.  At any Party’s request, all
Parties agree to execute an original of this Agreement as well as any facsimile
or other reproduction hereof and/or thereof.

[Signature page follows]

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

	
 

	
 

	
Buyer:
  Capsource Equipment Company, Inc.

	
 

	

	
By

	
 

	
 

	

	
Its

	
 

	
 

	

Page 32 of 35

	
 

	
 

	
Seller:
  Prime Time Equipment Inc.

	
 

	

	
By 

	
 

	
 

	

	
Its

	
 

	
 

	

	
 

	
Seller’s President

	
 

	

	
Kenneth
  Moore

[Signature page for Asset Purchase Agreement between Capsource
Equipment Company, Inc. and Prime Time Equipment Inc.]

Page 33 of 35

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