Document:

EXHIBIT 10.1
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                            ASSET PURCHASE AGREEMENT
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BETWEEN:    Western Power & Equipment Corp.,
            an Oregon corporation                                    ("Western")

AND:        Yukon Equipment, Inc.
            an Alaska corporation                                      ("Buyer")

DATE:       May 17, 2007

                                    RECITALS
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A. Western is the owner and operator of construction equipment sales, service,
and leasing operations in Anchorage and Fairbanks, Alaska (the "Retail
Operations"); and

B. Buyer desires to purchase from Western certain of the assets relating to the
Retail Operations, and Western is willing to sell such assets to Buyer all under
the terms and conditions below.

                                    AGREEMENT
                                    ---------

ARTICLE 1.  DEFINITIONS

         SECTION 1.01 "Affiliate" shall mean any Person that directly, or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with the Person specified.

         SECTION 1.02 "Knowledge" with respect to Western shall mean the best
knowledge of Dean McLain, President and Bob Harbin, Vice President of Sales.

         SECTION 1.03 "Lien" shall mean any mortgage, pledge, security interest,
lease, lien or other encumbrance of any kind, including without limitation any
conditional sale contract, title retention contract or similar arrangement.

ARTICLE 2.  PURCHASE AND SALE

         SECTION 2.01 PURCHASE AND SALE OF ASSETS. Buyer purchases from Western,
and Western sells to Buyer, all of the right, title and interest of Western in
the following assets and rights associated with the Retail Operations (the
"Purchased Assets"), which Purchased Assets are more particularly described
below:
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         (a)  Equipment. All items of equipment and attachments set forth on
              EXHIBIT A ("Equipment").

         (b)  Parts. All parts set forth on EXHIBIT B ("Parts").

         (c)  Furniture & Fixtures. All furniture and fixtures set forth on
              EXHIBIT C ("F&F").

         (d)  Shop Tools. Shop equipment, service tools, parts and service
              manuals and literature set forth on EXHIBIT D ("Shop Tools").

         (e)  Vehicles. All vehicles set forth on EXHIBIT E ("Vehicles").

         (f)  Office and Shop Supplies. All office and shop supplies EXCEPT
              items imprinted with Western's logo (such as letterhead, order
              forms, and similar items).

         (g)  Signage. All existing signage at the Retail Operations
              ("Signage").

         (h)  Computer Equipment. All computer equipment set forth on EXHIBIT F
              ("Computers").

         (i)  Service and Parts Manuals. All service and parts manuals and
              literature currently at the Retail Operations.

         (j)  Leasehold Improvements. All leasehold improvements currently at
              the Retail Operations.

         (k)  Service Work-in-Process. All service work-in-process as of the
              date of closing.

         (l)  Assumed Business Name. All rights to the dba/tradename of Yukon
              Equipment.

         SECTION 2.02 EXCLUDED ASSETS. The assets of Western being sold,
transferred, assigned, and delivered to Buyer shall include only those Purchased
Assets described in Section 2.01. Such Purchased Assets shall not, however,
include any of the following assets or properties of Western:

         (a)  Cash and cash equivalents on hand or in banks as of the closing
              date;

         (b)  All accounts receivable as of the closing date;

         (c)  All certificates of deposit and other forms of security or bid
              deposits held by third-parties;
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         (d)  Prepaid taxes, insurance, and other expenses and credits, refunds
              and receivables of such items.

         (e)  Any other assets not specifically described in Section 2.01.

For purposes of this Agreement, all of the property, assets, and rights retained
by Western under this Section 2.02 are collectively referred to as the "Excluded
Assets."

         SECTION 2.03 PURCHASE PRICE.

         (a)  The purchase price for the Purchased Assets ("Purchase Price") is
              as follows:

              (1)  Equipment. The purchase price for the Equipment, as set forth
                   on EXHIBIT A attached hereto, is a total of $10,759,274.31;
                   consisting of $7,387,320.38 for new equipment, $249,953.31
                   for used equipment, and $3,122,000.62 for rental equipment.
                   Terms are cash, debt assumption as set forth on EXHIBIT A-1,
                   and/or dealer transfer as of the date of closing set forth
                   above.

              (2)  Parts. The purchase price for the Parts, as set forth on
                   EXHIBIT B attached hereto, is $647,295.10. Terms are cash
                   and/or dealer transfer as of the date of closing set forth
                   above.

              (3)  Furniture & Fixtures. The purchase price for the Furniture &
                   Fixtures, as set forth on EXHIBIT C attached hereto, shall be
                   $52,409.25. Terms are cash at closing.

              (4)  Shop Tools. The purchase price for the Shop Tools, as set
                   forth on EXHIBIT D attached hereto, shall be $81,881.08.
                   Terms are cash at closing.

              (5)  Vehicles. The purchase price for the Vehicles, as set forth
                   on EXHIBIT E attached hereto, shall be $80,000.00. Terms are
                   cash at closing.

              (6)  Office and Shop Supplies. The purchase price for the Office
                   and Shop Supplies, as set forth above, shall be $3,000.00
                   payable in cash at closing.

              (7)  Signage. The purchase price for the Signage, as set forth
                   above, shall be $5,000.00 payable in cash at closing.

              (8)  Computers. The purchase price for the Computers, as set forth
                   on EXHIBIT F attached hereto, shall be $11,315,25 payable in
                   cash at closing.
<PAGE>
              (9)  Service and Parts Manuals. The purchase price for the Service
                   and Parts Manuals, as set forth above, shall be $5,000.00
                   payable in cash at closing.

              (10) Leasehold Improvements. The purchase price for the Leasehold
                   Improvements, as set forth above, shall be $-0- payable in
                   cash at closing.

              (11) Service Work-In-Process. The purchase price for the Service
                   Work-In-Process, as set forth above, shall be $32,764.70
                   payable in cash at closing. Except as otherwise provided in
                   section 7.02, Buyer will assume all of Western's future
                   liabilities and obligations to perform machine warranty work
                   for a prepaid fee of $30,000 which fee to be credited against
                   the purchase price at closing.

              (12) Prepaid Items. All prepaids expenses, taxes, purchases, and
                   deposits shall be prorated between Buyer and Western as of
                   the date of close. At closing, Buyer shall reimburse Western
                   for that portion of such prepaid items that are properly
                   allocated to the Retail Operations after the date of closing.

         (b)  The Purchase Price for all assets specified above is payable in
              full in cash at closing and/or dealer transfer at closing as set
              forth above. In the event that Case Corp. does not authorize any
              dealer transfer set forth above, in whole or in part, Buyer shall
              remit such amount to Western in cash within 5 days of Western's
              request to Buyer.

         SECTION 2.04 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be
allocated in the manner set forth in Sections 2.03 and 2.05.

         SECTION 2.05 GOODWILL. In addition to the above Purchase Price, Buyer
shall pay for all of Western's goodwill and going concern value for the Retail
Operations. The Goodwill value for the Retail Operations is agreed to be
$500,000 payable in accordance with the terms of a Promissory Note in the form
attached as EXHIBIT G. However, Buyer is not purchasing and will not obtain any
right to use Western's tradenames or trademarks.

ARTICLE 3.  DELIVERIES

         SECTION 3.01  DELIVERIES BY WESTERN.  Western has delivered to Buyer
the following:

<PAGE>
         (a)  An executed and acknowledged bill of sale form and substance as
              necessary to transfer to Buyer all of Western's right, title, and
              interest in and to the Purchased Assets; and

         (b)  The other documents, instruments, and writings required to be
              delivered by Western pursuant to this Agreement or otherwise
              required in connection herewith.

         SECTION 3.02  DELIVERIES BY BUYER.  Buyer has delivered to Western the
following:

         (a)  The amount of the Purchase Price and any other amounts due under
              this Agreement;

         (b)  Fully executed Promissory Note for Goodwill;

         (c)  Duly executed and effective assumptions of lease for both the
              Anchorage, AK facility and the Fairbanks, AK facility; and

         (d)  Any other documents, instruments and writings required to be
              delivered by Buyer pursuant to this Agreement or otherwise
              required in connection herewith.

ARTICLE 4.  REPRESENTATIONS AND WARRANTIES OF WESTERN.  Western represents and
warrants to Buyer as set forth below:

         SECTION 4.01 ORGANIZATION AND QUALIFICATION. Western is a corporation
validly existing and in good standing under the laws of the State of Oregon and
is duly qualified to conduct business in the State of Alaska.

         SECTION 4.02 AUTHORITY RELATIVE TO THIS AGREEMENT. Western has the
requisite corporate power to execute and deliver this Agreement and the related
agreements contemplated hereby to which it is a party and to consummate the
transactions contemplated thereby. This Agreement and the related agreements
contemplated hereby to which Western is a party have been duly executed and
delivered by Western and constitute legal, valid, and binding obligations of
Western and are enforceable against Western in accordance with their terms
subject to the effect of any applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or similar laws affecting creditors' rights
and remedies generally and to the effect of general principles of equity
(regardless of whether enforcement is considered in a proceeding at law or in
equity).

         SECTION 4.03 OWNERSHIP OF PURCHASED ASSETS. Western has title to the
tangible and intangible personal property included in the Purchased Assets
sufficient for the conduct of the Retail Operations as currently conducted by
Western.

         SECTION 4.04 ACCURACY OF INFORMATION. To the Knowledge of Western, all
information contained in this Agreement and all exhibit to this Agreement,
including descriptions of the
<PAGE>
Purchased Assets, price information, and information on the schedules to such
exhibits and to the Agreement, is true and correct.

         SECTION 4.05 USE OF COMPUTER SYSTEM AND SOFTWARE. In connection with
Buyer's purchase of the Retail Operations, Buyer has requested that after the
close of such purchase the Buyer be allowed to continue to use Western's
computer system and software until such time as Buyer has its own system and
software operational. Western agrees to allow such access and provide ongoing
support of Buyer's use of Western's system under the following terms and
conditions:

         (a)  Buyer shall pay Western $2,500 per month (or such other sum as may
              be agreed between Buyer and Western in writing) for access to and
              use of Western's computer system and software. Such amount shall
              be paid by the first of each month for each month that Buyer uses
              Western's system. The first and last months' fees shall be
              prorated for the actual portion of the month Buyer had access to
              Western's system.

         (b)  All third-party charges for use of the system and software
              including, without limitation, database creation and maintenance
              fees, programming and software changes, set-up, data input, file
              conversion, and similar fees and expenses incurred by Western
              shall be reimbursed by Buyer to Western upon Western's request.

         (c)  Western shall not be held responsible or liable for system or
              software problems or errors.

         (d)  Buyer will be solely responsible for acquiring and setting up a
              new system for Buyer's use and to pay all fees and expenses
              related thereto including, but not limited to, set-up, date input,
              file conversion, database creation and transfer, user access, and
              maintenance.

         (e)  Western shall provide routine ongoing support of Western's system
              and Buyer's use of such system. Western will not provide training
              or other non-routine support.

         (f)  Buyer acknowledges receipt of the outline of issues to be
              considered in using Western's systems and in establishing Buyer's
              own system attached as EXHIBIT 4.05.

         (g)  Buyer agrees to reimburse Western for all regular dataline access
              fees for the Retail Operations while Buyer is using Western's
              system. These fees vary somewhat but are approximately $780 per
              month for Anchorage and $830 per month for Fairbanks.

ARTICLE 5.  REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and
warrants to Western as set forth below.
<PAGE>
         SECTION 5.01 ORGANIZATION AND QUALIFICATION. Buyer is a corporation
validly existing and in good standing under the laws of the State of Alaska.

         SECTION 5.02 AUTHORITY RELATIVE TO THIS AGREEMENT. Buyer has the
requisite corporate power to execute and deliver this Agreement and the related
agreements contemplated hereby to which it is a party and to consummate the
transactions contemplated thereby. This Agreement and the related agreements
contemplated hereby to which Buyer is a party have been duly executed and
delivered by Buyer and constitute legal, valid, and binding obligations of Buyer
and are enforceable against Buyer in accordance with their terms subject to the
effect of any applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium, or similar laws affecting creditors' rights and remedies
generally and to the effect of general principles of equity (regardless of
whether enforcement is considered in a proceeding at law or in equity).

         SECTION 5.03 FINANCING. Buyer has sufficient funds or committed lines
of credit to consummate the transactions contemplated by this Agreement.

         SECTION 5.04 INSPECTION OF PURCHASED ASSETS. Buyer has inspected to its
complete satisfaction the physical condition of the Purchased Assets.

         SECTION 5.05 BANKRUPTCY. Buyer is not, and has not within the past six
years been, the subject of a bankruptcy or insolvency proceeding, nor is Buyer
subject to any Lien that might adversely affect Buyer's ability to perform its
obligations as contemplated by this Agreement.

         SECTION 5.06 TAXES AND FEES. Buyer shall be responsible for and pay all
taxes and fees applicable to this transaction including, but not limited to,
sales taxes, use taxes, transfer taxes/fees, and registration fees.

         SECTION 5.07 EMPLOYER IDENTIFICATION NUMBER. Buyer's federal employer
identification number is 20-8865620.

         SECTION 5.08 ASSUMPTION OF LEASES. Buyer will take all actions required
to assume all real property and personal property leases for the Retail
Operations.

         SECTION 5.09 REPLACEMENT OF SECURITY DEPOSITS. Buyer will take all
actions required to replace all existing prepayments, security deposits, and bid
deposits held by customers and vendors ("Deposits") and refund all Deposits to
Western at closing. Deposits are listed on attached as EXHIBIT H.

ARTICLE 6.  ADDITIONAL COVENANTS OF THE PARTIES

         SECTION 6.01 FURTHER ASSURANCES. Each party will use reasonable efforts
to take, or cause to be taken, all action, and to do, or cause to be done, all
things necessary, proper, or advisable to carry out all of its respective
obligations under this Agreement and to consummate and make effective the
purchase and sale of the Purchased Assets and the assumption of the real
property leases pursuant to this Agreement. Each party shall, and shall cause
its Affiliates to,
<PAGE>
execute, acknowledge, and deliver all such further conveyances, notices,
assumptions, releases, and acquittances and such other instruments, and shall
take such further actions, as may be necessary or appropriate more fully to
assure to Buyer and their successors or permitted assigns, all of the
properties, rights, titles, interests, estates, remedies, powers, and privileges
intended to be conveyed to Buyer pursuant to this Agreement and more fully to
assure to Western and its Affiliates and their successors and assigns the
assumption of the liabilities and obligations intended to be assumed by Buyer
pursuant to this Agreement, respectively.

         SECTION 6.02 ASSIGNMENT OF CONTRACTS. Buyer agrees to assume all
liabilities for the leases specified on attached EXHIBIT 6.02. To the extent any
lease, contract, right, or commitment included in the Purchased Assets is not
capable of being assigned, transferred, subleased, or sublicensed without the
consent or waiver of the issuer thereof, the other party thereto, or any third
party (including a government or governmental unit), or if such assignment,
transfer, sublease, or sublicense or attempted assignment, transfer, sublease or
sublicense would constitute a breach thereof or a violation of any law, decree,
order, regulation, or other governmental edict, this Agreement shall not
constitute an assignment, transfer, sublease, or sublicense thereof, or an
attempted assignment, transfer, sublease or sublicense of any such lease,
contract, right, or commitment. Anything in this Agreement to the contrary
notwithstanding, Western is not obligated to transfer to Buyer any of its rights
and obligations in and to any such contract, lease, right, or commitment without
first having obtained all necessary consents and waivers.

         SECTION 6.03 PRESERVATION OF RECORDS. Except for tax records, Buyer
shall preserve and keep (or cause to be preserved and kept) the books and
records conveyed pursuant to this Agreement, and Western shall preserve and keep
(or cause to be preserved and kept) such books and records as it or any of its
Affiliates shall retain with respect to the Purchased Assets, for a period of
three years after the date of this Agreement, and Buyer and Western shall each
grant to the other reasonable access to such books and records retained by them
during such period. In the event either Buyer or Western wishes to destroy such
records after such period, it shall first give written notice to the other party
and the other party shall have the right at its option, upon prior written
notice given to the party providing the initial notice, to take possession of
said records as promptly as practicable, but in any event within 180 days after
the date of its notice requesting the same.

         SECTION 6.04 RISK OF LOSS. Buyer assumes all risk of loss from all
causes with respect to the Purchased Assets from and after the date of this
Agreement.

         SECTION 6.05 CERTAIN PERSONNEL MATTERS.

         (a)  Compensation of and any bonuses for all employees hired by Buyer
              for all periods of employment subsequent to the date of this
              Agreement shall be borne and paid for by Buyer. All vacation, sick
              day, commissions, and holiday pay of all employees of the Retail
              Operations that have accrued or were earned prior to the date of
              this Agreement shall be the sole responsibility of Western and
              shall be paid in full prior to the date of this Agreement or
              accrued on the books of Western and remitted to the employee at
              the time of such payments are due to the employees. Buyer shall be
              responsible for all vacation, sick day, commissions, and holiday
<PAGE>
              pay of all employees of the Retail Operations that accrue or are
              earned after the date of closing.

         (b)  Western shall be solely liable and responsible for obligations
              under any and all deferred compensation, pension, profit sharing,
              retirement, group insurance, or other employee benefit or welfare
              plans, written or oral, relating to employees of the Retail
              Operations, whether or not constituting an "employee benefit plan"
              under the Employee Retirement Income Security Act of 1974, as
              amended, that have accrued through and including the date of this
              Agreement. Buyer shall be solely liable and responsible for such
              obligations from the date of this Agreement.

         SECTION 6.06 BUSINESS CUTOFF. Commencing as of the day following the
date of this Agreement (i) all sales of new, used, and allied machinery and
attachments, parts and service shall be deemed to have been conducted for the
account of Buyer and (ii) all obligations for the following shall be deemed to
have been for the account of Buyer: sales commissions, travel, and entertainment
expenses, purchases of parts, machinery, and attachments and shop and office
supplies, shipping costs and costs of outside labor and materials incurred in
connection with the Retail Operations.

         SECTION 6.07. CONSENT OF CASE CREDIT CORPORATION AND CASE CORPORATION.
Buyer acknowledges that Western's agreements with Case Credit Corporation and
Case Corporation ("Case") require that Western obtain the consent of Case to the
sale transaction described in this agreement, and that such consent is the
responsibility of Buyer.

         SECTION 6.08. ALLOCATION OF ENVIRONMENTAL RESPONSIBILITY. The Buyer
acknowledges that Western is conducting Phase One environmental surveys for the
Retail Operations. Seller shall provide copies of the surveys upon their
completion. Buyer agrees to assume the risk and liability for all environmental
claims related to the Retail Operations occurring on and after the date of
closing. Western shall be liable for all environmental claims related to the
Retail Operations arising before the date of closing.

ARTICLE 7.  INDEMNIFICATION AND LIMITATIONS ON LIABILITY

         SECTION 7.01 DEFINITIONS. As used in this Article, the following terms
shall have the meanings set forth below:

         (a)  Losses. The term "Loss" or "Losses" shall mean any and all direct
              or indirect payments, assessments, liabilities, costs and expenses
              paid or incurred (whether or not known or asserted prior to the
              date hereof, fixed or unfixed, conditional or unconditional,
              choate or inchoate, liquidated or unliquidated, secured or
              unsecured, accrued, absolute, contingent or otherwise), including
              without limitation penalties, interest on any amount payable to an
              unaffiliated party as a result of the foregoing and, subject to
              Section 7.05 hereof, any legal or other expenses reasonably
              incurred in connection with investigating or defending any
              Third-Party Claims, whether or not resulting in any liability, and
              all amounts paid in respect of claims or actions in accordance
              with Section 7.05 hereof; provided,
<PAGE>
              however, that Losses shall not include any loss of profit or
              anticipated profit and shall be net of any insurance proceeds
              received by an Indemnitee from a nonaffiliated insurance company
              on account of such Losses (after deducting any direct costs
              incurred in obtaining such proceeds); provided, further, however,
              that nothing in this Article shall require an Indemnitee to
              proceed against its insurance carrier.

         (b)  Third-Party Claims. The term "Third-Party Claims" shall mean any
              claims, actions or rights asserted against an Indemnitee by a
              party that is not the Indemnitor and is not an Affiliate of the
              Indemnitee, including without limitation, claims by governmental
              authorities.

         (c)  Indemnitee. The term "Indemnitee" shall mean any Person that may
              be entitled to seek indemnification pursuant to the provisions of
              Section 7.02 or Section 7.03 hereof.

         (d)  Indemnitor. The term "Indemnitor" shall mean any Person that may
              be obligated to provide indemnification pursuant to Section 7.02
              or Section 7.03 hereof.

         (e)  Specified Officer. With respect to any particular matter, the term
              "Specified Officer," as applied to any corporation, shall mean the
              chairman, president, general counsel, any vice president, or
              secretary of such corporation, or the manager of any plant or
              other facility of such corporation, or any other employee or agent
              of such corporation (who may report, directly or indirectly, to
              such person) having responsibility for an operational or staff
              function who in the normal course of such officer's, manager's or
              other person's responsibility would reasonably be expected to have
              knowledge of such matter.

         (f)  Notice Period--Third-Party Claims. The term "Notice Period," as
              applied to any Third-Party Claim for which an Indemnitee seeks to
              be indemnified pursuant to this Article, shall mean the period
              ending the earlier of the following:

              (1)  Three months after the time at which any Specified Officer of
                   the Indemnitee (or the Indemnitee, if the Indemnitee is an
                   individual) has received actual notice of such Third-Party
                   Claim.

              (2)  With respect to any Third-Party Claim that has become the
                   subject of proceedings before any court or tribunal, such
                   time as would allow the Indemnitor sufficient time to
                   contest, on the assumption that there is an arguable defense
                   to such Third-Party Claim, such proceeding prior to any
                   judgment or decision thereon.

              (3)  With respect to any Third-Party Claim that the Indemnitee
                   proposes to pay or settle, such time as would provide the
                   Indemnitor sufficient time
<PAGE>
                   prior to such payment or settlement to determine whether to
                   contest such claim and assume the defense pursuant to
                   Section 7.05.

              (4)  The time period under which a Claim Notice must be given as
                   set forth in Section 7.06.

         (g)  Claim Notice. The term "Claim Notice" shall have the meaning set
              forth in Section 7.04.

         SECTION 7.02 INDEMNITY BY WESTERN. Subject to Section 7.09, Western
shall, to the fullest extent permitted by law, defend and hold harmless Buyer
and their Affiliates, including the directors, officers, employees, agents and
representatives of each of them (each of whom may be an Indemnitee pursuant to
this section), from and against the following:

         (a)  Breach. All Losses arising from the breach by Western in any
              material respect of any of its covenants or representations set
              forth in this Agreement.

         (b)  Liabilities. All Losses relating to the ownership or operation of
              the Retail Operations prior to the date of this Agreement.

         SECTION 7.03 INDEMNITY BY BUYER. Buyer shall, to the fullest extent
permitted by law, defend and hold harmless Western and its Affiliates, including
the current and former directors, officers, employees, agents, and
representatives of each of them (each of whom may be an Indemnitee pursuant to
this section), from and against the following:

         (a)  Liabilities. All Losses (other than Losses for which Western is
              obligated to indemnify Buyer pursuant to Section 7.02) relating to
              or arising from the ownership, operation, occupancy, construction,
              condition (including without limitation environmental conditions)
              or use of the Purchased Assets or the Real Property or operation
              of a dealership, to the extent such Losses relate to, arise from
              or are associated with any period after the date of this Agreement
              and whether arising from the negligence or gross negligence of
              Western or any of its Affiliates or otherwise.

         (b)  Breach. All Losses arising from the breach by Buyer in any
              material respect of any of their covenants or representations set
              forth in this Agreement.

         SECTION 7.04 NOTIFICATION OF THIRD-PARTY CLAIMS. In no case shall any
Indemnitor under this Agreement be liable with respect to any Third-Party Claim
against any Indemnitee unless the Indemnitee shall have delivered to the
Indemnitor within the Notice Period a notice ("Claim Notice") describing in
reasonable detail the facts giving rise to such Third-Party Claim and stating
that the Indemnitee intends to seek indemnification for such Third-Party Claim
from the Indemnitor pursuant to this Article.

         SECTION 7.05 DEFENSE OF CLAIMS. Upon receipt of a Claim Notice from an
Indemnitee with respect to any Third-Party Claim, the Indemnitor may assume the
defense thereof with counsel reasonably satisfactory to such Indemnitee and the
Indemnitee shall cooperate in all
<PAGE>
reasonable respects in such defense. The Indemnitee shall have the right to
employ separate counsel in any action or claim and to participate in the defense
thereof, provided that the fees and expenses of counsel employed by the
Indemnitee shall be at the expense of the Indemnitor only if such counsel is
retained pursuant to the second succeeding sentence or if the employment of such
counsel has been specifically authorized by the Indemnitor. The Indemnitor may
conduct such defense in the name of or on behalf of the Indemnitee or Indemnitor
and shall have full authority and control with respect thereto, including the
settlement thereof. If the Indemnitor does not notify the Indemnitee within 60
days after receipt of the Claim Notice that it elects to undertake the defense
thereof, the Indemnitee shall have the right to defend at the expense of the
Indemnitor the claim with counsel of its choosing, subject to the right of the
Indemnitor to assume the defense of any claim at any time prior to settlement or
final determination thereof. In such event, the Indemnitee shall send a written
notice to the Indemnitor of any proposed settlement of any claim, which
settlement the Indemnitor may reject, in its reasonable judgment, within 30 days
after receipt of such notice. Failure to reject such settlement within such
30-day period shall be deemed an acceptance of such settlement. In the event the
Indemnitor rejects such settlement, the Indemnitee shall have the right to
settle the claim over the objection of the Indemnitor, unless the Indemnitor
assumes the defense from the Indemnitee upon rejecting the settlement.

         SECTION 7.06 NOTICE OF OTHER CLAIMS. In the event any Indemnitee should
have a claim against any Indemnitor under or in connection with this Agreement
that does not involve a Third-Party Claim, the Indemnitee shall notify the
Indemnitor of such claim, specifying the nature of and specific basis for such
claim and the amount of such claim, with reasonable promptness, but in no event
later than when notice thereof is required to be made pursuant to this Article.
The Indemnitor shall remit payment for the amount of such claim upon receipt of
an invoice therefor, or in the event of a dispute, the Indemnitee and the
Indemnitor shall proceed in good faith to negotiate a resolution of such
dispute, and if not resolved through negotiations, such dispute will be resolved
by litigation in an appropriate court of competent jurisdiction.

         SECTION 7.07 ACCESS AND COOPERATION. Western and Buyer shall each
cooperate fully with the other as to all claims made under this Agreement, shall
make available to the other as reasonably requested all information, records and
documents relating to all such claims and shall preserve all such information,
records and documents until the termination of any such claim. Western and Buyer
also shall each make available to the other, as reasonably requested and subject
to availability, its personnel (including technical and scientific), agents and
other representatives who are responsible for preparing or maintaining
information, records or other documents, or who may have particular knowledge
with respect to any such claim.

         SECTION 7.08 NO INSURANCE. The indemnifications provided for in this
Article shall not be construed as a form of insurance and shall be binding upon
and inure to the benefit of Western and Buyer and their respective Affiliates,
successors and permitted assigns. Western and Buyer hereby waive for themselves,
their Affiliates, successors and permitted assigns, including without limitation
any insurers, any rights to subrogation for Losses arising from claims for which
each of them is respectively liable or against which each respectively
indemnifies the other, and, if necessary, Western and Buyer shall obtain waiver
of such subrogation from their respective insurers.
<PAGE>
         SECTION 7.09 LIMITATIONS ON LIABILITIES.

         (a)  Limitation on Liability.

              (1)  Western's obligations for any claim relating to any
                   Environmental Law, Hazardous Materials, or other
                   environmental matter shall arise only under Section 7.02(b).

              (2)  Western shall have no liability for any Indemnifiable Loss,
                   and Buyer shall have no liability for any claim for
                   indemnification under Section 7.03, unless a Claim Notice or
                   other notice has been delivered to the other as required by
                   Section 7.04 or Section 7.06. In addition, and anything
                   herein to the contrary notwithstanding, Western shall have no
                   liability for any Indemnifiable Loss, and Buyer shall have no
                   liability for any claim for indemnification under Section
                   7.03, for any breaches of covenants hereunder, unless a Claim
                   Notice or other notice has been delivered to the other within
                   one year after performance of the covenant giving rise to
                   such Indemnifiable Loss or claim for indemnification, as the
                   case may be, is required under this Agreement. In addition,
                   and anything herein to the contrary notwithstanding, Western
                   shall have no liability for any Indemnifiable Loss for any
                   breaches of representations hereunder unless a Claim Notice
                   or other notice has been delivered to it within the period
                   that the representation giving rise to such Indemnifiable
                   Loss survives as set forth in Article 8.

         (b)  No Incidental or Consequential Damages. Neither Buyer nor Western
              shall be entitled to recover from the other for any Losses any
              amount in excess of the actual damages suffered by such party.
              Buyer and Western each waive any right to recover punitive,
              special, exemplary, incidental and consequential damages.

         (c)  Maximum Liability. Neither Western nor any of its Affiliates shall
              be liable for aggregate Losses (i) in excess of the Purchase
              Price, or (ii) for any Losses pertaining to the Real Property in
              excess of the purchase price thereof.

         (d)  Exclusive Remedy. Western and Buyer each hereby acknowledges and
              agrees that its sole and exclusive remedy with respect to any and
              all claims relating to the representations, warranties, covenants
              and agreements contained in this Agreement or other claims
              pursuant to or in connection with this Agreement shall be pursuant
              to the indemnification provisions set forth in this Article.

         (e)  No Rescission. No breach of any representation, warranty, covenant
              or agreement contained herein shall give rise to any right on the
              part of Buyer or Western, as the case may be, after the
              consummation of the purchase and sale contemplated hereby, to
              rescind this Agreement or any of the transactions contemplated
              hereby.
<PAGE>
         (f)  Mitigation. Buyer and Western shall take all reasonable steps to
              mitigate all Losses upon and after becoming aware of any event
              that could reasonably be expected to give rise to any Losses that
              are indemnifiable hereunder.

ARTICLE 8.  SURVIVAL. The representations and warranties of Western set forth in
this Agreement and in any certificate or instrument delivered in connection
herewith shall survive for a period of one year following the date of this
Agreement.

ARTICLE 9.  BROKERS. Each of the Buyer and Western represent to the other that,
neither of the Buyer nor Western has, directly or indirectly, employed any
broker, finder or intermediary in connection with this Agreement or the
transactions contemplated hereby who might be entitled to a fee or commission
upon the execution of this Agreement or consummation of the transactions
contemplated hereby.

ARTICLE 10. EXPENSES. Except as otherwise specifically provided herein, each
party will bear all legal and other costs and expenses incurred by it.

ARTICLE 11. NOTICES; MISCELLANEOUS

         SECTION 11.01 NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally or by
facsimile transmission or mailed by registered or certified mail (return receipt
requested), postage prepaid, to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice; provided,
that notices of a change of address shall be effective only upon receipt
thereof):

         To Western, as follows:                     To Buyer, as follows:

         Western Power & Equipment Corp.             Yukon Equipment, Inc.
         6407-B N.E. 117th Avenue                    2020 E. Third Avenue
         Vancouver, WA  98662                        Anchorage, AK 99501
         Attn: President                             Attn:  President
         Facsimile: (360) 253-4830                   Facsimile: (907) 276-6795

         SECTION 11.02  MISCELLANEOUS.

         (a)  Entire Agreement. This Agreement supersedes all prior agreements
              between the parties (written or oral) and, except as aforesaid, is
              intended as a complete and exclusive statement of the terms of the
              Agreement between the parties. This Agreement may be amended only
              by a written instrument duly executed by the parties.

         (b)  Governing Law; Venue. This Agreement shall be governed by and
              construed in accordance with the laws of the State of Alaska,
              without regard to the principles of conflicts of laws of such
              state. If any action is brought to enforce or interpret this
              agreement, such action shall be brought in a federal district
              court of Alaska or any Alaska state court.
<PAGE>
         (c)  Headings. The headings contained in this Agreement are for
              reference purposes only and shall not affect in any way the
              meaning or interpretation of this Agreement.

         (d)  Assignability. Neither Buyer nor Western may transfer, assign, or
              encumber any of its rights, duties, or obligations under this
              Agreement or any part hereof without the prior written consent of
              the other party. Except as otherwise provided herein, this
              Agreement shall be binding upon and inure to the benefit of the
              parties hereto and their respective successors and permitted
              assigns.

         (e)  No Third-Party Beneficiaries. Except as otherwise expressly
              provided herein, nothing in this Agreement shall entitle Western,
              Buyer, or their respective successors and assigns permitted hereby
              to any claim, cause of action, remedy, or right of any kind.

         (f)  Severability. Any term or provision of this Agreement that is
              invalid or unenforceable in any jurisdiction shall, as to such
              jurisdiction, be ineffective to the extent of such invalidity or
              unenforceability, but this shall not affect the validity or
              enforceability of any of the terms and provisions of this
              Agreement in any other jurisdiction. If any provision of this
              Agreement is so broad as to be unenforceable, such provision shall
              be interpreted to be only so broad as is enforceable.

         (g)  Equitable Relief. The parties hereto agree that irreparable damage
              would occur in the event that any of the provisions of this
              Agreement were not performed in accordance with their specific
              terms or were otherwise breached. Accordingly, it is agreed that
              the parties shall be entitled to an injunction or injunctions to
              prevent breaches of this Agreement and to enforce specifically the
              terms and provisions hereof in any court of the United States or
              any state having jurisdiction, this being in addition to any other
              remedy at law or in equity.

         (h)  Counterparts. This Agreement may be executed in any number of
              counterparts, no one of which needs to be executed by all the
              parties, and this Agreement shall be binding upon all the parties
              with the same force and effect as if all the parties had signed
              the same document, and each such signed counterpart shall
              constitute an original of this Agreement.

         (i)  Closing. Closing shall occur at the Retail Operations' Anchorage
              facility on or before May 4, 2007 or at such other time and place
              as the parties may mutually agree to; but in no event shall
              closing occur later than May 31, 2007.

         Western Power & Equipment Corp.,        Yukon Equipment, Inc.,
         an Oregon corporation                   an Alaska corporation

         By: ___________________________         By: ___________________________
             R.J. Harbin                             Morry Hollowell
             Vice President of Sales                 PresidentEXHIBIT 10.2
                                                                    ------------

                      SECOND AMENDMENT AND WAIVER AGREEMENT

                  This Second Amendment and Waiver Agreement (this "Agreement"),
is made and entered into as of April 17, 2007, by and between Western Power &
Equipment Corp., a Delaware corporation (along with its subsidiaries signatory
hereto, the "Company") and Rockmore Investment Master Fund Ltd (the "Holder").

                  WHEREAS, the Company, the Holder and the other investors
signatory thereto (the "Other Holders" and collectively with the Holder, the
"Holders") are parties to that certain Securities Purchase Agreement (the
"Purchase Agreement"), dated June 8, 2005, pursuant to which the Company issued
to the Holder its Series A Variable Rate Secured Convertible Debentures (the
"Debentures") with an aggregate principal amount among all Holders of
$30,000,000, of which $19,330,544.30 in principal currently remains outstanding;

                  WHEREAS, an "Event of Default" under the Debentures has
occurred pursuant to Section 8(a)(i) as a result of the Company's untimely
payment of the Monthly Redemption Amount due on January 1, 2007, which was
subsequently paid, and March 1, 2007, which shall be deferred pursuant to the
terms hereunder (collectively, the "Existing Defaults");

                  WHERAS, as a result of the occurrence of the Existing Defaults
and pursuant to the Purchase Agreement, Debentures and other agreements entered
into in connection therewith, each Holder is entitled, among other things, to
enforce its rights and remedies against the Company and against the collateral
(the "Collateral") securing the obligations thereunder (the "Obligations"),
including, without limitation, to accelerate and immediately demand payment in
full of all Obligations and foreclose on the Collateral;

                  WHEREAS, the parties have reached an agreement with respect to
the modification and amendment of certain terms of the Debentures relating to
the early payment of principal under the Debentures and the waiver of the
Existing Defaults, which agreement is reflected in this Agreement and in similar
agreements the Company is entering into with each Other Investor
contemporaneously with this Agreement (the "Other Agreements");

                  WHEREAS, the Company and each Holder desire to remove Omicron
Master Trust as Agent and to appoint Rockmore Investment Master Trust Ltd. as
Agent under the Transaction Documents; and

                  WHEREAS, capitalized terms used herein, but not otherwise
defined, shall have the meanings ascribed to such terms as set forth in the
Purchase Agreement.

                  NOW, THEREFORE, in consideration of the terms and conditions
contained in this Agreement, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties, intending
to be legally bound hereby, agree as follows:

     1.   Incorporation of Preliminary Statements and Acknowledgement. The
preliminary statements set forth above by this reference hereto are hereby
incorporated into this Agreement. Without limiting the foregoing, the Company
hereby acknowledges that the Existing Defaults have occurred and are continuing
under the terms of the Debentures and, notwithstanding anything to the contrary
in this Agreement, the Purchase Agreement, the Debentures or any of the other
Transaction Documents, the Company acknowledges and agrees that upon a breach of
this Agreement by the Company, such breach
<PAGE>
shall be an Event of Default under the Debentures and each Holder has the right
to immediately enforce payment of all of the Obligations and, in connection
therewith, without further notice, to enforce its liens on, and security
interests in, the Collateral (as defined under the Security Agreement) and real
property subject to the deed of trust granted to the Holders.

     2.   Waiver of Existing Defaults. The Holder hereby agrees, solely in
connection with the existence of the Existing Defaults, to waive until the
Maturity Date (as defined in the Debentures and amended hereunder) its right to
enforce payment of all of the Obligations and, in connection therewith, enforce
its liens on, and security interest in, the Collateral. Notwithstanding anything
herein to the contrary, this waiver is limited only to the Existing Defaults and
any other past or future Events of Default, including a breach of this
Agreement, shall not be deemed waived hereunder. The Holder has no knowledge of
the existence of any Events of Default other than the Existing Defaults.

     3.   Consideration for Waiver of Existing Defaults. In consideration for
granting the waiver set forth in Section 2 above, the Company shall provide to
the Holder each of the following:

          a. CASH PAYMENT. The Company shall pay, concurrently herewith, to the
     Holder, in cash, the amounts set forth next to the Holder's name on ANNEX A
     attached hereto on or prior to the dates set forth therein. In the event
     that the Debentures held as of the date hereof by the Holder (the "Holder's
     Debentures") are paid in full pursuant to Section 4 on or prior to June 30,
     2007, such amount shall be credited against the principal and interest
     outstanding of the Holder's Debentures at the time of such payment. In the
     event that such payment is not made prior to June 30, 2007, such payment
     shall be deemed a waiver fee and shall not be applied against or offset
     principal, interest or any other amounts owed to the Holder under the
     Holder's Debentures or the Purchase Agreement. In the event that the
     Holder's Debentures are paid in full pursuant to Section 4 on or prior to
     June 30, 2007 and a determination must be made as to whether such payments
     are applied against principal or interest on the Holder's Debentures, such
     payments shall be made first to accrued but unpaid interest and then to
     principal; and

          b. INTEREST IN MINING LLC. The Company shall grant and assign the
     Holder, or its designated assigns, at the election of the Holder, a
     membership interest in Arizona Pacific Material, LLC, an Arizona limited
     liability company (the "LLC"), equal to the percentage of membership
     interest set forth next to the Holder's name on ANNEX B attached hereto.
     Within 10 business days of the date hereof, the Company shall have
     delivered to the Holder satisfactory evidence of such ownership in the LLC
     including a duly executed Transfer Agreement, membership certificates and
     any other documents reasonably requested by the Holder in connection with
     the transfer of ownership thereof. The Holder hereby assigns its right to
     such membership interest in the LLC to APM Acquisition Corporation, a
     Delaware corporation.

     IN THE EVENT THAT THE COMPANY FAILS TO DELIVER THE ITEMS IN CLAUSES A. AND
B. ABOVE WITHIN THE TIME PERIODS SET FORTH THEREIN, AN EVENT OF DEFAULT UNDER
THE HOLDER'S DEBENTURES SHALL BE DEEMED TO HAVE OCCURRED AND THE WAIVER GRANTED
IN SECTION 2 ABOVE SHALL BE NULL AND VOID AND OF NO FURTHER FORCE OR EFFECT.

     4.   Redemption at Option of Company. The Holder hereby consents to the
redemption in full (but not in part) of the Holder's Debentures in cash as
provided below in this Section 4. The Company shall provide the Holder with at
least 5 Trading Days' prior written notice (the "Notice of Redemption") of the
date that payment of the applicable Redemption Price (as defined herein) in full
is to be made, which date of payment must occur on or before June 30, 2007 (the
"Redemption Date"). The redemption price (the "Redemption Price") shall equal
the sum of (a) 100% of the principal amount of the Holder's Debentures
outstanding on the Redemption Date (including the Additional Debentures issued
to the Holder
<PAGE>
pursuant to Section 5(a) and the Deferred Payments subject to Section 6 below),
(b) accrued but unpaid interest thereon through and including the Redemption
Date and (c) all other fees and other amount due in respect of the Holder's
Debentures and any Additional Debentures held by the Holder. Payment in full of
the Redemption Price in cash must be made on the Redemption Date. Up until the
date that such payment is made in full, the Holder shall have the right to
convert the Holder's Debentures pursuant to the terms thereof. Failure to make
payment of the applicable Redemption Price on the Redemption Date shall be
deemed an Event of Default under the Holder's Debentures. If the Company elects
to cause a redemption pursuant to this Section 4, then it must simultaneously
take the same action with respect to the Debentures held by the Other Investors
pursuant to Section 4 of the Other Agreements.

     5.   Consideration for Company Redemption Right. In consideration for
granting the redemption right set forth in Section 4 above, the Company shall
undertake the following:

          a. ADDITIONAL DEBENTURES. Concurrently herewith, the Company shall
     issue to each Holder a convertible debenture (collectively the "Additional
     Debentures"), substantially in the form of the Debentures, with a principal
     amount equal to 10% of the principal amount of Debentures outstanding and
     held by such Holder on the date hereof. The principal amount of Additional
     Debentures issuable to each Holder are set forth on ANNEX C attached
     hereto. The rights and obligations of the Company with respect to the
     Additional Debentures and the shares of Common Stock issuable pursuant to
     the Additional Debentures (the "Additional Underlying Shares") shall be
     identical in all respects to the rights and obligations of the Company with
     respect to the Debentures and the Underlying Shares issued and issuable
     pursuant to the Transaction Documents. Each Transaction Document is hereby
     amended so that the term "Debentures" includes the Additional Debentures
     and the term "Underlying Shares" includes the Additional Underlying Shares.
     The Company acknowledges and agrees that the obligations of the Company and
     its Subsidiaries under the Additional Debentures and this Agreement shall
     be "Obligations" as defined under the Security Agreement and under the deed
     of trust for the benefit of the Holders granting a first-position lien and
     encumbrance upon certain real property owned by the LLC as required under
     the Purchase Agreement. In the event of any redemption pursuant to Section
     4 above and Section 4 of the Other Agreements, the Additional Debentures
     must be redeemed in full along with the Debentures.

          b. USE OF PROCEEDS FROM CAPITAL RAISE. After the date hereof, in the
     event that the Company raises capital (in one or more financings) through
     the issuance of debt or equity of any kind, the Company shall use the
     proceeds raised thereunder first for the redemption in full of the
     Debentures, the Additional Debentures and all amounts owing thereunder and
     under the Transaction Documents and this Agreement until all such
     obligations are paid in full. Any redemption pursuant to this Section 5(b)
     must occur pro rata among the Holders with respect to the Debentures and
     the Additional Debentures held by all the Holders.

     IN THE EVENT THAT THE COMPANY FAILS TO DELIVER THE ADDITIONAL DEBENTURES
WITHIN 5 BUSINESS DAYS OF THE DATE HEREOF, AN EVENT OF DEFAULT UNDER THE
DEBENTURES SHALL BE DEEMED TO HAVE OCCURRED AND THE COMPANY REDEMPTION RIGHT SET
FORTH IN SECTION 4 SHALL BE NULL AND VOID AND OF NO FURTHER FORCE OR EFFECT.

     6.   Deferral of March and April Monthly Redemption Payments and April 1
Interest Payment. The Holder hereby agrees to defer until the final Maturity
Date (as defined in the Debenture and amended hereunder) its right to enforce
payment of the March 1, 2007 and April 1, 2007 Monthly Redemptions and the April
1, 2007 quarterly interest payment by the Company ("Deferred Payments").
Notwithstanding anything herein to the contrary, this waiver is limited only to
the Deferred Payments and payment of any other Monthly Redemption Amounts or
interest payment shall not be deemed waived hereunder. Payment
<PAGE>
of the Deferred Payments shall be made on the earlier of December 31, 2007 or
the date that the Debentures are accelerated pursuant to an Event of Default or
paid sooner pursuant to a redemption hereunder or under the Debentures.

     7.   Amendment to Debentures. In consideration for deferring the right set
forth in Section 6 above, the definition of "Maturity Date" under the Debentures
is hereby amended such that (a) $4 million of principal, in the aggregate and
pro-rata among the Holders in relation to their the outstanding principal amount
of Debentures on June 30, 2007, (b) $3 million of principal, in the aggregate
and pro-rata among the Holders in relation to their then outstanding principal
amount of Debentures, is due and payable on October 31, 2007 and (c) the entire
principal amount of the Debentures is due and payable on December 31, 2007.
Additionally, all regularly scheduled interest payments or Monthly Redemptions
(except with respect to the Deferred Payments) required under the Debentures
shall be paid as scheduled therein. The schedule of payments to each Holder
hereunder and under the respective Debentures is set forth on ANNEX D attached
hereto.

     8.   Appointment of Rockmore as Agent. The appointment of Omicron Master
Trust as Agent pursuant to Section 18 of the Security Agreement or any other
provision of the Transaction Documents is hereby revoked. The appointment of
Rockmore Investment Master Trust Ltd. as Agent pursuant to Section 18 of the
Security Agreement and any other Transaction Document is immediately effective.
Rockmore Investment Master Fund Ltd. is hereby authorized to amend the currently
filed UCC-1s to add Rockmore Investment Master Fund Ltd. and Portside Growth and
Opportunity Fund as secured parties hereunder and to remove Omicron Master Trust
as a secured party.

     9.   RELEASE. THE COMPANY HEREBY RELEASES THE HOLDER AND ITS AFFILIATES,
OFFICERS, EMPLOYEES, DIRECTORS, MEMBERS, AGENTS AND ATTORNEYS (COLLECTIVELY, THE
"RELEASEES") FROM ANY AND ALL CLAIMS, DEMANDS, LIABILITIES, RESPONSIBILITIES,
DISPUTES, CAUSES OF ACTION (WHETHER AT LAW OR EQUITY) AND OBLIGATIONS OF EVERY
NATURE WHATSOEVER, WHETHER LIQUIDATED OR UNLIQUIDATED, KNOWN OR UNKNOWN, MATURED
OR UNMATURED, FIXED OR CONTINGENT (COLLECTIVELY, "CLAIMS") THAT THE COMPANY MAY
HAVE AGAINST THE RELEASEES WHICH ARISE FROM OR RELATE TO ANY ACTIONS, OR
INACTIONS WHICH THE RELEASEES MAY HAVE TAKEN PRIOR TO THE DATE HEREOF.

     10.  Opinion of Company Counsel. In connection with this Agreement, the
Company shall deliver to the Holder an opinion of counsel in form and substance
reasonably satisfactory to the Holder.

     11.  Representations and Warranties of the Company. The Company hereby
makes to the Holder the following representations and warranties:

          i. Authorization; Enforcement. The Company has the requisite corporate
     power and authority to enter into and to consummate the transactions
     contemplated by this Agreement and otherwise to carry out its obligations
     hereunder and thereunder. The execution and delivery of this Agreement by
     the Company and the consummation by it of the transactions contemplated
     hereby have been duly authorized by all necessary action on the part of the
     Company and no further action is required by the Company, its board of
     directors or its stockholders in connection therewith other than in
     connection with the Required Approvals. This Agreement has been duly
     executed by the Company and, when delivered in accordance with the terms
     hereof will constitute the valid and binding obligation of the Company
     enforceable against the Company in accordance with its terms except (i) as
     limited by general equitable principles and applicable bankruptcy,
     insolvency, reorganization, moratorium and other laws of general
     application affecting enforcement of creditors' rights generally, (ii) as
     limited by laws relating to the availability of specific
<PAGE>
     performance, injunctive relief or other equitable remedies and (iii)
     insofar as indemnification and contribution provisions may be limited by
     applicable law.

          ii. No Conflicts. The execution, delivery and performance of this
     Agreement by the Company and the consummation by the Company of the
     transactions contemplated hereby do not and will not: (i) conflict with or
     violate any provision of the Company's or any Subsidiary's certificate or
     articles of incorporation, bylaws or other organizational or charter
     documents, or (ii) conflict with, or constitute a default (or an event that
     with notice or lapse of time or both would become a default) under, result
     in the creation of any Lien (except as contemplated by the Security
     Documents) upon any of the properties or assets of the Company or any
     Subsidiary, or give to others any rights of termination, amendment,
     acceleration or cancellation (with or without notice, lapse of time or
     both) of, any material agreement, credit facility, debt or other material
     instrument (evidencing a Company or Subsidiary debt or otherwise) or other
     material understanding to which the Company or any Subsidiary is a party or
     by which any property or asset of the Company or any Subsidiary is bound or
     affected, or (iii) subject to the Required Approvals, conflict with or
     result in a violation of any law, rule, regulation, order, judgment,
     injunction, decree or other restriction of any court or governmental
     authority to which the Company or a Subsidiary is subject (including
     federal and state securities laws and regulations), or by which any
     property or asset of the Company or a Subsidiary is bound or affected;
     except in the case of each of clauses (ii) and (iii), such as could not
     have or reasonably be expected to result in a Material Adverse Effect.

          iii. Issuance of the Additional Debentures. The Additional Debentures
     are duly authorized and, upon the execution of this Agreement by the Holder
     and the Other Agreements by the Other Holders, will be duly and validly
     issued, fully paid and nonassessable, free and clear of all Liens imposed
     by the Company other than restrictions on transfer provided for in the
     Transaction Documents. The Additional Underlying Shares, when issued in
     accordance with the terms of the Additional Debentures, will be validly
     issued, fully paid and nonassessable, free and clear of all Liens imposed
     by the Company. The Company has reserved from its duly authorized capital
     stock a number of shares of Common Stock for issuance of the Additional
     Underlying Shares sufficient for the conversion in full of the Additional
     Debentures.

          iv. Equal Consideration. Except as set forth in this Agreement, no
     consideration has been offered or paid to any person to amend or consent to
     a waiver, modification, forbearance or otherwise of any provision of any of
     the Transaction Documents.

          v. Survival and Bring Down. All of the Company's warranties and
     representations contained in this Agreement shall survive the execution,
     delivery and acceptance of this Agreement by the parties hereto. The
     Company expressly reaffirms that each of the representations and warranties
     set forth in the Purchase Agreement, except with respect to the Existing
     Defaults, continues to be true, accurate and complete, and the Company
     hereby remake and incorporate herein by reference each such representation
     and warranty as though made on the date of this Agreement.

     12.  Representations and Warranties of the Holder. The Holder represents
and warrants as of the date hereof to the Company as follows:

          i. Authority. The execution, delivery and performance by the Holder of
     the transactions contemplated by this Agreement have been duly authorized
     by all necessary corporate or similar action on the part of the Holder.
     This Agreement has been duly executed by the Holder, and when delivered by
     the Holder in accordance with the terms hereof, will constitute the valid
     and legally binding obligation of the Holder, enforceable against it in
     accordance with its terms, except
<PAGE>
     (i) as limited by general equitable principles and applicable bankruptcy,
     insolvency, reorganization, moratorium and other laws of general
     application affecting enforcement of creditors' rights generally, (ii) as
     limited by laws relating to the availability of specific performance,
     injunctive relief or other equitable remedies and (iii) insofar as
     indemnification and contribution provisions may be limited by applicable
     law.

          ii. Own Account. The Holder understands that the Additional Debentures
     are "restricted securities" and have not been registered under the
     Securities Act or any applicable state securities law and is acquiring
     Additional Debentures as principal for its own account and not with a view
     to or for distributing or reselling such Additional Debenture or any part
     thereof in violation of the Securities Act or any applicable state
     securities law, has no present intention of distributing any of such
     Securities in violation of the Securities Act or any applicable state
     securities law and has no arrangement or understanding with any other
     persons regarding the distribution of such Additional Debentures (this
     representation and warranty not limiting such Holder's right to sell the
     Additional Underlying Shares pursuant to the Registration Statement or
     otherwise in compliance with applicable federal and state securities laws)
     in violation of the Securities Act or any applicable state securities law.
     The Holder is acquiring Additional Debentures hereunder in the ordinary
     course of its business. The Holder does not have any agreement or
     understanding, directly or indirectly, with any Person to distribute any of
     the Additional Debentures or Additional Underlying Shares.

          iii. Holder Status. The Holder is an "accredited investor" as defined
     in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities
     Act. The Holder is not required to be registered as a broker-dealer under
     Section 15 of the Exchange Act.

     13.  Effect on Transaction Documents. Except as expressly set forth above,
all of the terms and conditions of the Transaction Documents shall continue in
full force and effect after the execution of this Agreement and shall not be in
any way changed, modified or superseded by the terms set forth herein, including
but not limited to, any other obligations the Company may have to the Holder
under the Transaction Documents.

     14.  Amendments and Waivers. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given, unless the same shall be in writing and signed by the Company and the
Holder.

     15.  Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be delivered as set forth
in the applicable Transaction Document.

     16.  Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and permitted assigns of each of the parties
and shall inure to the benefit of the Holder. The Company may not assign (except
by merger) its rights or obligations hereunder without the prior written consent
of the Holder. The Holder may assign their respective rights hereunder in the
manner and to the Persons as permitted under the applicable Transaction
Document.

     17.  Execution and Counterparts. This Agreement may be executed in two or
more counterparts, all of which when taken together shall be considered one and
the same agreement and shall become effective when counterparts have been signed
by each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission or by e-mail delivery of a ".pdf" format
data file, such signature shall
<PAGE>
create a valid and binding obligation of the party executing (or on whose behalf
such signature is executed) with the same force and effect as if such facsimile
or ".pdf" signature page were an original thereof.

     18.  Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be determined in
accordance with the provisions of the Transaction Documents.

     19.  Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their commercially reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.

     20.  Headings. The headings in this Agreement are for convenience only, do
not constitute a part of the Agreement and shall not be deemed to limit or
affect any of the provisions hereof.

     21.  Effectiveness. The effectiveness of this Agreement shall be expressly
conditioned upon the Holder's receipt, on or before April 20, 2007, of copies of
the Other Agreements in form and substance satisfactory to the Holder duly
executed by all of the Other Holders; (ii) the execution and delivery by the
Company and the LLC of the Membership Interest Transfer Agreements relating to
the transfer and assignment of, in the aggregate among all such agreements, a
10% Class A Membership Interest in the LLC to the Holders, and (iii) Holder's
receipt of a certificate, dated as of the date hereof, executed by the Chief
Executive Officer of the Company certifying that no Event of Default and no
event which with the giving of notice or the passage of time (or both), would
constitute an Event of Default under the Debentures has occurred or is
continuing. No consideration was or will be offered or paid to the Other Holders
in connection with the their execution of the Other Agreements; provided,
however, that the Company shall pay concurrently herewith Rockmore Investment
Master Fund $40,000 for its administrative and legal fees and expenses.

                            [SIGNATURE PAGE FOLLOWS]

<PAGE>

     IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties
have executed this Agreement as of the date first set forth above.

                                    WESTERN POWER & EQUIPMENT CORP.

                                    By: ________________________________
                                        Name:
                                        Title:

                                    WESTERN POWER & EQUIPMENT CORP.
                                    an Oregon corporation and subsidiary
                                    of the Company

                                    By: ________________________________
                                        Name:
                                        Title:

Name of Holder: ________________________________________________________

SIGNATURE OF AUTHORIZED SIGNATORY OF HOLDER: ___________________________

Name of Authorized Signatory: __________________________________________

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