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Unassociated Document

    SERIES
B PREFERRED STOCK PURCHASE AGREEMENT

     

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

     

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

     

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

     

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

     

    1.        
    PURCHASE
AND SALE OF SERIES B STOCK.

     

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

     

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

    

     

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

     

    
      
         

      

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

     

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

     

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

     

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

     

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

     

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

      
        
           

        

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

     

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

     

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

     

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

     

    “NGEN”
means NGEN II, L.P.

     

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

     

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

     

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

     

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

     

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

     

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

    
      
         

      

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

     

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

     

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

     

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

    
      
        
           

        

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

       

    

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

     

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

     

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

     

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

     

    2.5           Valid Issuance of
Stock.

     

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

     

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

    
      
         

      

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

     

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

     

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

     

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

     

    2.10           Status of Proprietary
Assets.

    
      
         

      

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

       

    

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

     

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

    
      
         

      

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

       

    

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

     

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

     

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

     

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

     

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

    
      
         

      

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

     

    2.15           Contracts and Other
Commitments.

     

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

     

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

     

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

    
      
         

      

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
         

      

      
        -10-

        
          

        

      

      
         

      

    

     

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

       

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

       

    

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

     

    2.17           Employee
Matters.

     

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

     

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

     

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

     

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

    
      
        
        

      

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

     

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

     

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

     

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

     

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

    
      
        
        

      

      
        -12-

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

    
      
        
        

      

      
        -13-

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

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

    
      
        
        

      

      
        -14-

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

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

    
      
        
        

      

      
        -15-

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

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

     

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

    
      
        
        

      

      
        -16-

        
          

        

      

      
        
        

      

    

     

    (b)           Any
legend required by the Related Agreements.

     

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

     

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

     

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

     

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

     

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

     

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

    
      
        
        

      

      
        -17-

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

    
      
        
        

      

      
        -18-

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

    
      
        
        

      

      
        -19-

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

    6.           POST-CLOSING
COVENANTS.

     

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

     

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

     

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

     

    7.           GENERAL
PROVISIONS.

     

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

    
      
        
        

      

      
        -20-

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

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

     

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

    
      
        
        

      

      
        -21-

        
          

        

      

      
        
        

      

    

     

    (a)           the
date of personal delivery;

     

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

     

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

     

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

     

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

     

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

     

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

    
      
        
        

      

      
        -22-

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

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

     

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

    
      
        
        

      

      
        -23-

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

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

    
      
        
        

      

      
        -24-

        
          

        

      

      
        
        

      

    

     

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

     

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

     

    
      
         

      

      
        -25-

        
          

        

      

      
         

      

    

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

    

    COMPANY:

    

    ENERGY
AND POWER SOLUTIONS, INC.

    

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

     

     

     

     

     

     

     

     

     

    
      
        
          
            	 
      	
                    [Signature
      Page to Series B Preferred Stock Purchase Agreement]

                  	 
      
	 
      	 
      	 
      

          

          

        

         

      

      
         

        
          

        

      

      
         

      

    

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

    

    INVESTORS:

    

    ALTIRA
TECHNOLOGY FUND V L.P.

    

    By:
Altira Management V LLC

    Its
General Partner

    

    By:  Altira
Group LLC

    Its Sole
Managing Member

    

    

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

     

     

     

     

     

     

     

     

    
      
        
          
            	 
      	
                    [Signature
      Page to Series B Preferred Stock Purchase Agreement]

                  	 
      
	 
      	 
      	 
      

          

          

        

         

      

      
         

        
          

        

      

      
         

      

    

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

    

    INVESTORS:

    

    NGEN
II, L.P.

    

    By: NGEN
Partners II, LLC

    Its
General Partner

    

    

    By: /s/ Steven Parry            
Steven
Parry
Managing
Member

     

     

     

     

     

     

     

    

    

    
      
        
          
            	 
      	
                    [Signature
      Page to Series B Preferred Stock Purchase Agreement]

                  	 
      
	 
      	 
      	 
      

          

          

        

         

      

      
         

        
          

        

      

      
         

      

    

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

    

    INVESTORS:

    

    THE
ENVIRONMENT AGENCY ACTIVE

    PENSION
FUND

    

    By: 
The Environment Agency,
its
Administrative Authority

     

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

     

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

     

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

       

    

    STICHTING
CUSTODY ROBECO MASTER

    CLEAN
TECH II (EUR)

    

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

       

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

    

    STICHTING
CUSTODY ROBECO MASTER

    CLEAN
TECH II (USD)

    

    

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

       

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

      

    

    
 

    
      
        
          
            	 
      	
                    [Signature
      Page to Series B Preferred Stock Purchase Agreement]Unassociated Document

     

    

    PURCHASE
AGREEMENT

    

    by
and among

    

    NEC
DG II, LLC,

    as
the Seller,

    

    NEC-EPS
HOLDING, LLC,

    as
the Company

    

    and

    

    ENERGY
AND POWER SOLUTIONS, INC.,

     

    as
the Buyer,

    

    Dated
as of July 3, 2008

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    TABLE OF
CONTENTS

    

    
      
        
          
            
              
                
                  	 
      	 
      	 
      	
                          Page

                        
	 
      	 
      	 
      	 
      
	ARTICLE I.           DEFINITIONS	
                          1

                        
	 
      	 
      	 
      
	
                           

                        	
                          Section 1.1.

                        	
                          Certain
      Defined Terms

                        	
                          1

                        
	 
      	
                          Section 1.2.

                        	
                          Table
      of Definitions

                        	
                          5

                        
	 
      	 
      	 
      	 
      
	ARTICLE II.         
      PURCHASE
      AND SALE	
                          6

                        
	 
      	 
      	 
      
	 
      	
                          Section 2.1.

                        	
                          Purchase
      and Sale of the Membership Interests

                        	
                          6

                        
	 
      	
                          Section 2.2.

                        	
                          Closing

                        	
                          7

                        
	 
      	 
      	 
      	 
      
	ARTICLE III.        REPRESENTATIONS
      AND WARRANTIES OF THE SELLER	
                          8

                        
	 
      	 
      	 
      
	 
      	
                          Section 3.1.

                        	
                          Organization

                        	
                          8

                        
	 
      	
                          Section 3.2.

                        	
                          Authority

                        	
                          8

                        
	 
      	
                          Section 3.3.

                        	
                          No
      Conflict; Required Filings and Consents

                        	
                          8

                        
	 
      	
                          Section 3.4.

                        	
                          Membership
      Interests

                        	
                          9

                        
	 
      	
                          Section 3.5.

                        	
                          Brokers

                        	
                          9

                        
	 
      	 
      	 
      	 
      
	ARTICLE IV.        REPRESENTATIONS
      AND WARRANTIES OF THE COMPANY	
                          9

                        
	 
      	 
      	 
      	 
      
	 
      	
                          Section 4.1.

                        	
                          Organization
      and Qualification

                        	
                          9

                        
	 
      	
                          Section 4.2.

                        	
                          Authority

                        	
                          10

                        
	 
      	
                          Section 4.3.

                        	
                          No
      Conflict; Required Filings and Consents

                        	
                          10

                        
	 
      	
                          Section 4.4.

                        	
                          Equity
      Interests; Subsidiaries; Joint Ventures

                        	
                          11

                        
	 
      	
                          Section 4.5.

                        	
                          Financial
      Statements; No Undisclosed Liabilities; Indebtedness;
      Guaranties

                        	
                          11

                        
	 
      	
                          Section 4.6.

                        	
                          Absence
      of Certain Changes or Events

                        	
                          12

                        
	 
      	
                          Section 4.7.

                        	
                          Compliance
      with Law; Permits

                        	
                          13

                        
	 
      	
                          Section 4.8.

                        	
                          Litigation

                        	
                          13

                        
	 
      	
                          Section 4.9.

                        	
                          Employees
      and Directors

                        	
                          13

                        
	 
      	
                          Section 4.10.

                        	
                          Insurance

                        	
                          14

                        
	 
      	
                          Section 4.11.

                        	
                          Personal
      Property

                        	
                          14

                        
	 
      	
                          Section 4.12.

                        	
                          Real
      Property

                        	
                          14

                        
	 
      	
                          Section 4.13.

                        	
                          Intellectual
      Property

                        	
                          15

                        
	 
      	
                          Section 4.14.

                        	
                          Taxes

                        	
                          15

                        
	 
      	
                          Section 4.15.

                        	
                          Environmental
      Matters

                        	
                          16

                        
	 
      	
                          Section 4.16.

                        	
                          Material
      Contracts

                        	
                          17

                        
	 
      	
                          Section 4.17.

                        	
                          Affiliate
      Transactions

                        	
                          18

                        
	 
      	
                          Section 4.18.

                        	
                          Suppliers
      and Customers

                        	
                          19

                        
	 
      	
                          Section 4.19.

                        	
                          Accounts
      Receivable

                        	
                          19

                        
	 
      	
                          Section 4.20.

                        	
                          Brokers

                        	
                          19

                        
	 
      	
                          Section 4.21.

                        	
                          Bank
      Accounts

                        	
                          19

                        
	 
      	
                          Section 4.22.

                        	
                          Regulatory
      Matters

                        	
                          19

                        

                

              

            

          

        

      

    

    
      
         

      

      
        i

        
          

        

      

      
         

      

    

    TABLE OF
CONTENTS

    (continued)

    

    
      
        
          
            
              
                
                  
                    	 
      	 
      	 
      	
                            Page

                          
	 
      	 
      	 
      	 
      
	ARTICLE V.         
      REPRESENTATIONS
      AND WARRANTIES OF THE BUYER	
                            20

                          
	 
      	 
      	 
      	 
      
	
                             

                          	
                            Section 5.1.

                          	
                            Organization

                          	
                            20

                          
	 
      	
                            Section 5.2.

                          	
                            Authority

                          	
                            20

                          
	 
      	
                            Section 5.3.

                          	
                            No
      Conflict; Required Filings and Consents

                          	
                            21

                          
	 
      	
                            Section 5.4.

                          	
                            Brokers

                          	
                            21

                          
	 
      	
                            Section 5.5.

                          	
                            Solvency

                          	
                            21

                          
	 
      	
                            Section 5.6.

                          	
                            Litigation

                          	
                            21

                          
	 
      	
                            Section 5.7.

                          	
                            Investment
      Intent

                          	
                            22

                          
	 
      	 
      	 
      	 
      
	ARTICLE VI.       
      ADDITIONAL
      AGREEMENTS	
                            22

                          
	 
      	 
      	 
      	 
      
	 
      	
                            Section 6.1.

                          	
                            Further
      Assurances

                          	
                            22

                          
	 
      	
                            Section 6.2.

                          	
                            Letters
      of Credit

                          	
                            22

                          
	 
      	
                            Section 6.3.

                          	
                            Intercompany
      Arrangements

                          	
                            22

                          
	 
      	
                            Section 6.4.

                          	
                            Consents
      and Filings; Actions by Parties

                          	
                            22

                          
	 
      	
                            Section 6.5.

                          	
                            Public
      Announcements

                          	
                            23

                          
	 
      	
                            Section 6.6.

                          	
                            Release
      of Guaranties

                          	
                            23

                          
	 
      	
                            Section 6.7.

                          	
                            Tax
      Matters

                          	
                            23

                          
	 
      	
                            Section 6.8.

                          	
                            Directors’,
      Officers’ and Members’ Indemnification

                          	
                            26

                          
	 
      	 
      	 
      	 
      
	ARTICLE VII.      
      CONDITIONS
      TO CLOSING	
                            27

                          
	 
      	 
      	 
      	 
      
	 
      	
                            Section 7.1.

                          	
                            General
      Conditions

                          	
                            27

                          
	 
      	
                            Section 7.2.

                          	
                            Conditions
      to Obligations of the Seller

                          	
                            27

                          
	 
      	
                            Section 7.3.

                          	
                            Conditions
      to Obligations of the Buyer

                          	
                            28

                          
	 
      	 
      	 
      	 
      
	ARTICLE VIII.     
      INDEMNIFICATION	
                            28

                          
	 
      	 
      	 
      	 
      
	 
      	
                            Section 8.1.

                          	
                            Survival
      of Representations and Warranties

                          	
                            28

                          
	 
      	
                            Section 8.2.

                          	
                            Indemnification
      by the Seller

                          	
                            29

                          
	 
      	
                            Section 8.3.

                          	
                            Indemnification
      by the Buyer

                          	
                            30

                          
	 
      	
                            Section 8.4.

                          	
                            Procedures
      for Indemnification

                          	
                            30

                          
	 
      	
                            Section 8.5.

                          	
                            Procedures
      for Third-Party Claims

                          	
                            31

                          
	 
      	
                            Section 8.6.

                          	
                            Tax
      Treatment of Indemnification

                          	
                            31

                          
	 
      	
                            Section 8.7.

                          	
                            No
      Duplication of Recovery

                          	
                            32

                          
	 
      	
                            Section 8.8.

                          	
                            Exclusive
      Remedy After the Closing

                          	
                            32

                          
	 
      	 
      	 
      	 
      
	ARTICLE IX.       
      GENERAL
      PROVISIONS	
                            32

                          
	 
      	 
      	 
      	 
      
	 
      	
                            Section 9.1.

                          	
                            No
      Presumption Against Drafting Party

                          	
                            32

                          
	 
      	
                            Section 9.2.

                          	
                            Fees
      and Expenses

                          	
                            32

                          
	 
      	
                            Section 9.3.

                          	
                            Amendment
      and Modification

                          	
                            32

                          
	 
      	
                            Section 9.4.

                          	
                            Waiver

                          	
                            32

                          
	 
      	
                            Section 9.5.

                          	
                            Notices

                          	
                            33

                          
	 
      	
                            Section 9.6.

                          	
                            Interpretation

                          	
                            34

                          

                  

                

              

            

          

        

      

    

    
      
         

      

      
        ii

        
          

        

      

      
         

      

    

    

    TABLE OF
CONTENTS

    (continued)

    

    
      
        
          	 
      	 
      	 
      	
                  Page

                
	
                   

                	 
      	 
      	 
      
	 
      	
                  Section 9.7.

                	
                  Entire
      Agreement

                	
                  34

                
	 
      	
                  Section 9.8.

                	
                  No
      Third-Party Beneficiaries

                	
                  34

                
	 
      	
                  Section 9.9.

                	
                  Governing
      Law

                	
                  35

                
	 
      	
                  Section 9.10.

                	
                  Arbitration

                	
                  35

                
	 
      	
                  Section 9.11.

                	
                  Disclosure
      Generally

                	
                  35

                
	 
      	
                  Section 9.12.

                	
                  Personal
      Liability

                	
                  35

                
	 
      	
                  Section 9.13.

                	
                  Assignment;
      Successors

                	
                  35

                
	 
      	
                  Section 9.14.

                	
                  Enforcement

                	
                  35

                
	 
      	
                  Section 9.15.

                	
                  Currency

                	
                  36

                
	 
      	
                  Section 9.16.

                	
                  Severability

                	
                  36

                
	 
      	
                  Section 9.17.

                	
                  Counterparts

                	
                  36

                
	 
      	
                  Section 9.18.

                	
                  Facsimile
      Signature

                	
                  36

                
	 
      	
                  Section 9.19.

                	
                  Time
      of Essence

                	
                  36

                

        

      

    

    

    TABLE OF
EXHIBITS

    

    
      
        	
                Exhibit
      A

              	
                Form
      of Promissory Note

              
	
                Exhibit
      B

              	
                Form
      of Receipt of Closing Amount

              
	
                Exhibit
      C

              	
                Form
      of Letter of Resignation

              
	
                Exhibit
      D

              	
                Form
      of FIRPTA Certificate

              

      

    

    

      
        
           

        

        
          iii

          
            

          

        

        
           

        

      

    

     

    PURCHASE
AGREEMENT

    

    This
PURCHASE AGREEMENT (this “Agreement”) is made
and entered into as of July 3, 2008, by and among NEC DG II, LLC, a Delaware
limited liability company (the “Seller”), NEC-EPS
Holding, LLC, a Delaware limited liability company (the “Company”), and Energy
and Power Solutions, Inc., a California corporation (the “Buyer”).

    

    RECITALS

    

    A.           WHEREAS,
the Seller owns 80% and Buyer owns 20% of the issued and outstanding Membership
Interests (as defined below) of the Company.

    

    B.           
WHEREAS, the Seller wishes to sell to the Buyer, and the Buyer wishes to
purchase from the Seller, the Seller’s Membership Interests.

    

    AGREEMENT

    

    In
consideration of the foregoing and the mutual covenants and agreements herein
contained, and intending to be legally bound hereby, the parties agree as
follows:

    

    ARTICLE
I.

    DEFINITIONS

    

    Section
1.1.     Certain Defined
Terms.  For purposes of this Agreement:

    

    “Act” means the
Delaware Limited Liability Company Act (6 Del.C. § 18-101, et seq.) as amended,
and any successor to such statute.

    

    “Action” means any
claim, action, suit, arbitration or proceeding by or before any Governmental
Authority.

    

    “Affiliate” means,
with respect to any Person, any other Person that directly, or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with, such first Person. For the purposes of this Agreement, the
Company and its Subsidiaries are deemed to be Affiliates of the Seller, but not
the Buyer, prior to the Closing and Affiliates of the Buyer, but not the Seller,
after the Closing.

    

    “Ancillary Agreement”
means any agreement entered into in connection with the transactions
contemplated by this Agreement and shall include the exhibits
hereto.

    

    “Business Day” means
any day that is not a Saturday, a Sunday or other day on which banks are
required or authorized by Law to be closed in the city of Los
Angeles.

    

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

    

    “control,” including
the terms “ controlled
by” and “under
common control with,” means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, as
trustee or executor, as general partner or managing member, by contract or
otherwise.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    “Employee Plan” means
each (a) employee benefit plan (as defined in Section 3(3) of ERISA), whether or
not subject to ERISA and (b) bonus, stock option, stock purchase, restricted
stock, incentive, deferred compensation, retiree medical or life insurance,
supplemental retirement, fringe, or other benefit plan, program or
arrangement.

    

    “Encumbrance” means
any charge, claim, mortgage, lien, option, pledge, security interest or other
restriction of any kind (other than those created under applicable securities
laws).

    

    “ERISA” means the
Employee Retirement Income Security Act of 1974, and the rules and regulations
promulgated thereunder, as amended from time to time, or any successor statute.
Any reference herein to a particular provision of ERISA shall mean, where
appropriate, the corresponding provision in any successor statute or
regulation.

    

    “FPA” means the
Federal Power Act, as amended, and, as the context requires, the FERC
regulations thereunder.

    

    “GAAP” means United
States generally accepted accounting principles as in effect on the date
hereof.

    

    “Governmental
Authority” means any United States federal, state or local, or non-United
States, governmental, regulatory or administrative authority, agency or
commission or any judicial or arbitral body.

    

    “Indebtedness” means,
with respect to the Company or its Subsidiaries, (a) all indebtedness for
borrowed funds, whether or not evidenced by a writing, (b) all obligations
evidenced by bonds, debentures, notes or other similar instruments, (c) all
obligations in respect of letters of credit, but only to the extent drawn and
not otherwise included in clause (a) above, (d) all guaranties of indebtedness
for borrowed funds of any other Person and (e) all obligations with respect to
capital leases.

    

    “Intellectual
Property” means (i) trade names, trademarks and service marks, domain
names, corporate names trade dress and similar rights, whether registered or
unregistered, and applications to register any of the foregoing; (ii) patents
and patent applications; (iii) copyrights (whether registered or unregistered)
and applications for registration; and (iv) confidential and proprietary
information, including trade secrets and know-how.

    

    “IRS” means the
Internal Revenue Service of the United States.

    

    “Knowledge” with
respect to the Company means the actual knowledge of the persons listed in Schedule 1.1(a) of the Disclosure
Schedules as of the date of this Agreement (or, with respect to a certificate
delivered pursuant to this Agreement, as of the date of delivery of such
certificate) after reasonable inquiry.

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    “Law” means any
statute, law, ordinance, regulation, rule, code, injunction, judgment, decree or
order of any Governmental Authority.

    

    “Leased Real Property”
means the real property leased or licensed by the Company or its Subsidiaries,
in each case, as tenant, together with all easements, licenses, rights and
appurtenances of the Company or its Subsidiaries relating to the foregoing. For
the avoidance of doubt, the term Leased Real Property includes each “Parcel”
under the Cogeneration Energy Purchase Agreements described in Schedule 4.16(a) of the Disclosure
Schedules.

    

    “Losses” means all
losses, liabilities, costs, damages and expenses (including reasonable
attorneys’ fees) actually incurred or paid by an Indemnified Party.

    

    “Material Adverse
Effect” means, with respect to the Company, any event, change,
circumstance, effect or state of facts that is materially adverse to (a) the
business, financial condition or results of operations of any of the Company or
its Subsidiaries, taken individually or (b) the ability of the Company to
perform its obligations under this Agreement or to consummate the transactions
contemplated hereby; provided,
however, that “Material Adverse
Effect” shall not include the effect of any circumstance, change, development,
event or state of facts arising out of or attributable to any of the following,
either alone or in combination: (1) the markets in which the Company and its
Subsidiaries operate generally, except to the extent any such condition has a
substantially disproportionate effect on the Company and its Subsidiaries, taken
as a whole, relative to other Persons principally engaged in the same industry
as the Company and its Subsidiaries, (2) general economic or political
conditions (including those affecting the securities or commodities markets),
except to the extent any such condition has a substantially disproportionate
effect on the Company and its Subsidiaries, taken as a whole, relative to other
Persons principally engaged in the same industry as the Company and its
Subsidiaries, (3) the public announcement of this Agreement or of the
consummation of the transactions contemplated hereby, (4) acts of war (whether
or not declared), sabotage or terrorism, military actions or the escalation
thereof or other force majeure events occurring after the date hereof, and (5)
any changes in applicable Laws or accounting rules.

    

    “Membership Interests”
means all of the interest and ownership of Seller and Buyer as members in the
Company, including the capital account of Seller and Buyer, their participation
in the profits and losses of the Company in accordance with their percentage
interest, and all of their other rights and obligations under the Operating
Agreement and the Act, relating to the Company.

    

    “Operating Agreement”
means that certain Amended and Restated Operating Agreement for NEC-EPS Holding,
LLC, dated April 13, 2005.

    

    “Permitted
Encumbrance” means (a) statutory liens for current Taxes not yet due or
delinquent (or which may be paid without interest or penalties) or the validity
or amount of which is being contested in good faith by appropriate proceedings,
(b) inchoate mechanics’, carriers’, workers’, repairers’ and other similar lien
rights related to work in progress and arising or incurred in the ordinary
course of business, and (c) all exceptions, restrictions, easements, covenants,
conditions imperfections of title, charges, rights-of-way and other Encumbrances
that do not materially interfere with the present use of the
assets of the Company or any of its Subsidiaries.

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    

    “Person” means an
individual, corporation, partnership, limited liability company, limited
liability partnership, syndicate, person, trust, association, organization or
other entity, including any Governmental Authority, and including any successor,
by merger or otherwise, of any of the foregoing.

    

    “Post-Closing Tax
Period” means any Taxable period commencing after the Closing Date,
including the portion of any Straddle Period commencing on the Closing
Date.

    

    “Pre-Closing Tax
Period” means any Taxable period ending on or prior to the Closing Date,
including the portion of any Straddle Period up to but not including the Closing
Date.

    

    “Representatives”
means, with respect to any Person, the managers, member’s representatives,
officers, directors, employees, agents, accountants, advisors, bankers and other
representatives of such Person.

    

    “Straddle Period”
means any Taxable period beginning on or before the Closing Date and ending
after the Closing Date.

    

    “Subsidiary” means,
with respect to any Person, any other Person of which at least 50% of the
outstanding voting securities or other voting equity interests are owned,
directly or indirectly, by such first Person.

    

    “Tax” or “Taxes” (and with
correlative meaning, “Taxable” and “Taxing”) means any United States federal,
state or local, or non-United States, income, gross receipts, franchise,
estimated, alternative minimum, add -on minimum, sales, use, transfer,
registration, value added, excise, natural resources, severance, stamp,
withholding, occupation, premium, windfall profit, environmental, customs,
duties, real property, personal property, capital stock, net worth, intangibles,
social security, unemployment, disability, payroll, license, employee or other
tax or similar levy of any kind whatsoever, including any interest, penalties or
additions to tax in respect of the foregoing.

    

    “Tax Return” means any
return, declaration, report, claim for refund, information return or other
document (including any related or supporting estimates, elections, schedules,
statements or information) filed or required to be filed in connection with the
determination, assessment or collection of any Tax or the administration of any
Laws or administrative requirements relating to any Tax.

    

    “Taxation Authority”
means any Governmental Authority having any responsibility for (a) the
determination, assessment or collection or payment of any Tax, or (b) the
administration, implementation or enforcement of or compliance with any Law
relating to any Tax.

    

    “Third-Party Claim”
means an assertion of or the commencement of any Action by a third party with
respect to any matter that an Indemnified Party believes may give rise to an indemnity claim pursuant to Article VII,
including any notice, review, assessment or deficiency issued by or from a
Governmental Authority.

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    

    Section
1.2.     Table of Definitions.
The following terms have the meanings set forth in the Sections referenced
below:

    

    
      
        
          
            	
                    Definition

                  	 	
                    Section

                  
	 
      	 	 
      
	
                    Agreed-Upon
      Allocation

                  	 	
                    2.1(c)

                  
	
                    Agreement

                  	 	
                    Preamble

                  
	
                    Allocation
      Accounting Firm

                  	 	
                    2.1(c)

                  
	
                    Balance
      Sheet

                  	 	
                    4.5(a)

                  
	
                    Buyer

                  	 	
                    Preamble

                  
	
                    Claim
      Certificate

                  	 	
                    8.4(a)

                  
	
                    COI

                  	 	
                    4.1(b)

                  
	
                    Closing

                  	 	
                    2.2(a)

                  
	
                    Closing
      Amount

                  	 	
                    2.2(b)(i)

                  
	
                    Closing
      Date

                  	 	
                    2.2(a)

                  
	
                    Company

                  	 	
                    Preamble

                  
	
                    Conveyance
      Taxes

                  	 	
                    6.7(g)

                  
	
                    Disclosure
      Schedules

                  	 	
                    Article
      IV

                  
	
                    Dispute
      Accounting Firm

                  	 	
                    6.7(c)(ii)

                  
	
                    Disputed
      Claim

                  	 	
                    8.4(b)

                  
	
                    Environmental
      Laws

                  	 	
                    2.2(a)

                  
	
                    Environmental
      Laws

                  	 	
                    4.15

                  
	
                    Environmental
      Permits

                  	 	
                    4.15

                  
	
                    Final
      Allocation

                  	 	
                    2.1(c)

                  
	
                    Financial
      Statements

                  	 	
                    4.5(a)

                  
	
                    FERC

                  	 	
                    4.22(b)

                  
	
                    Franklin

                  	 	
                    4.1(b)

                  
	
                    Hazardous
      Materials

                  	 	
                    4.15

                  
	
                    Indemnified
      Party(ies)

                  	 	
                    8.4(a)

                  
	
                    Indemnifying
      Party

                  	 	
                    8.4(a)

                  
	
                    Intellectual
      Property

                  	 	
                    4.13(a)

                  
	
                    Interim
      Financial Statements

                  	 	
                    4.5(a)

                  
	
                    Lynn

                  	 	
                    4.1(b)

                  
	
                    Material
      Contracts

                  	 	
                    4.16(a)

                  
	
                    Material
      Customer

                  	 	
                    4.18

                  
	
                    Material
      Supplier

                  	 	
                    4.18

                  
	
                    Note

                  	 	
                    2.2(b)(ii)

                  
	
                    Permits

                  	 	
                    4.7(b)

                  
	
                    Policies

                  	 	
                    4.10

                  
	
                    Proposed
      Allocation

                  	 	
                    2.1(c)

                  
	
                    PUHCA

                  	 	
                    4.22(b)

                  
	
                    Purchase
      Price

                  	 	
                    2.1(a)

                  
	
                    Release

                  	 	
                    4.15

                  
	
                    Securities
      Act

                  	 	
                    5.6

                  
	
                    Seller

                  	 	
                    Preamble

                  
	
                    Third
      Party

                  	 	
                    6.11(b)

                  
	
                    Third
      Party Acquisition

                  	 	
                    6.11(b)

                  

          

        

      

    

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    

    ARTICLE
II.

    PURCHASE
AND SALE

    

    Section
2.1.           Purchase and Sale of the
Membership Interests.

    

    (a)           Upon
the terms and subject to the conditions of this Agreement, at the Closing, the
Seller shall sell, assign, transfer, convey and deliver all of its Membership
Interests to the Buyer, and the Buyer shall purchase Seller’s Membership
Interests from the Seller, for an aggregate purchase price of U.S.$6,252,245.00
(the “Purchase
Price”), as determined pursuant to Schedule 2.1(a) of
the Disclosure Schedules.

    

    (b)           As
of the Closing, the Seller shall no longer own any Membership Interests or other
interests in the Company and shall be deemed to have resigned as a member of the
Company. The Buyer consents to the resignation of the Seller as a member of the
Company as of the Closing.

    

    (c)           As
soon as practicable, and in any event not later than one hundred eighty
(180)days after the Closing, the Seller shall provide the Buyer with a proposed
allocation of the Purchase Price, as adjusted for federal income Tax purposes to
take into account the liabilities of the Company, among the assets of the
Company by asset category in accordance with the principles of Section 1060 of
the Code (the “Proposed
Allocation”). The Buyer shall have the right to consent or object to the
Proposed Allocation during the thirty (30) day period immediately following
delivery of the Proposed Allocation. If the Buyer delivers a notice of objection
to the Seller during that thirty (30) day period, the Seller and the Buyer shall
negotiate in good faith to resolve their differences with respect to the
Proposed Allocation. If the Buyer makes no objection during that thirty (30) day
period or the Seller and the Buyer agree on an allocation within the thirty (30)
day period following the Buyer’s delivery of such a notice of objection, the
Proposed Allocation or the agreed allocation, as applicable, shall be final and
binding on the Seller and the Buyer (the “Agreed-Upon
Allocation”). If the Seller and the Buyer are unable to reach agreement
on the Proposed Allocation within thirty (30) days following the delivery to the
Seller of the Buyer’s notice of objection to the Proposed Allocation, the
allocation shall be determined by a nationally recognized independent accounting
firm mutually selected by the Buyer and the Seller (the “Allocation Accounting
Firm”) using customary valuation methodologies; provided, however, that
the Allocation Accounting Firm shall make its determination within thirty (30)
days following the date on which the Allocation Accounting Firm is selected
pursuant to this Section 2.1(c). The
fees and expenses of the Allocation Accounting Firm shall be shared equally
between the Seller and the Buyer. The determination made by the Allocation
Accounting Firm of the allocation shall be, absent manifest error, final and
binding on the Seller and the Buyer (the “Final Allocation”).
The Agreed-Upon Allocation and the Final Allocation, as applicable, may be
revised by mutual agreement of the Buyer and the Seller, from time to time prior
to and following the Closing, so as to reflect any matters that need updating
(including Purchase Price adjustments, if any). The Seller and the Buyer shall
acknowledge that the allocation shall be done at arm’s length
based upon a good faith determination of fair market values, subject to final
determination by the Allocation Accounting Firm, if
applicable.

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    
      

      (d)          Each
of the Seller, the Buyer and their respective Affiliates shall (i) be bound by
the Agreed-Upon Allocation or Final Allocation, as applicable, for purposes of
determining any Taxes, and (ii) prepare and file, and cause its Affiliates to
prepare and file, its Tax Returns on a basis consistent with the Agreed-Upon
Allocation or Final Allocation, as applicable. None of the Seller, the Buyer or
their respective Affiliates shall take any position inconsistent with the
Agreed-Upon Allocation or Final Allocation, as applicable, in any Tax Return, in
any Tax refund claim, in any Tax litigation or administrative proceeding, or
otherwise unless required by final determination by an applicable Taxation
Authority. In the event that the Agreed-Upon Allocation or Final Allocation, as
applicable, is disputed by any Taxation Authority, the party receiving notice of
the dispute shall promptly notify the other party hereto, and the Buyer and the
Seller agree to use their best efforts to defend such Allocation in any audit or
similar proceeding.

      

      Section
2.2.           Closing.

      

      (a)           The
sale and purchase of the Membership Interests shall take place at a closing (the
“Closing”) to
be held at the offices of Bingham McCutchen LLP, 600 Anton Boulevard, 18th
Floor, Costa Mesa, California, 92626-1924, at 10:00 A.M. (California time) on
the date of this Agreement. The day on which the Closing takes place is referred
to as the “Closing
Date.” Notwithstanding any provision in this Agreement, the Closing shall
be effective as of 12:01 A.M. on the Closing Date (the “Effective Time”), and
all actions scheduled in this Agreement for the Closing Date shall be deemed to
occur simultaneously at the Effective Time, except as otherwise contemplated
hereby or as expressly agreed in writing by the parties.

      

      (b)          At
the Closing, the Buyer shall deliver or cause to be delivered to the
Seller:

      

      (i)           an
amount equal to the Purchase Price minus $2,000,000 (the “Closing Amount ”) in
immediately available funds in United States dollars by wire transfer to the
bank account designated in writing by the Seller to the Buyer at least two
Business Days prior to the Closing Date;

      

      (ii)          a
Promissory Note, properly executed by the Buyer and in the amount of $2,000,000,
substantially in the form set forth in Exhibit A (the “Note”);
and

      

      (iii)         the
certificates, consents and other documents referred to herein, including without
limitation the certificate referred to in Section 7.2(a)
hereof, and such other certificates, consents and other documents as the Seller
may reasonably request in order to consummate or implement the transactions
contemplated by this Agreement.

      

      (c)          At
the Closing, the Seller shall deliver or cause to be delivered to the
Buyer:

      
        
           

        

        
          7

          
            

          

        

        
           

        

      

      (i)           a
receipt for the Closing Amount, properly executed by Seller, substantially in
the form of Exhibit
B;

      

      (ii)          letters
of resignation from all of the directors and officers of the Company and its
Subsidiaries, other than Jay Zoellner as a director of the Company,
substantially in the form of Exhibit
C;

      

      (iii)         a
properly executed statement in the form of Exhibit D, dated as
of the Closing Date, which conforms to the requirements of Treasury Regulations
Section 1.1445-2(b)(2); and

      

      (iv)       
the certificates, consents and other documents referred to herein, including
without limitation the certificates referred to in Section 7.3(a)
hereof, and such other certificates, consents and other documents as the Buyer
may reasonably request in order to consummate or implement the transactions
contemplated by this Agreement.

      

      ARTICLE
III.

      REPRESENTATIONS
AND WARRANTIES OF THE SELLER

      

      Except as
set forth in the Disclosure Schedules attached hereto (collectively, the “Disclosure
Schedules”), the Seller hereby represents and warrants to the Buyer as
follows:

      

      Section
3.1.           Organization. The
Seller is a limited liability company duly organized, validly existing and in
good standing under the laws of its jurisdiction of formation and has all
necessary power and authority to own, lease and operate its properties and to
carry on its business as it is now being conducted.

      

      Section
3.2.           Authority. The Seller
has the power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated
hereby. The execution, delivery and performance by the Seller of this Agreement
and the consummation by the Seller of the transactions contemplated hereby have
been duly and validly authorized by all necessary action on the part of the
Seller. This Agreement and the Ancillary Agreements to which the Seller is a
party have been duly and validly executed and delivered by the Seller. This
Agreement constitutes, and the Ancillary Agreements to which the Seller is a
party will constitute as of the Closing, a legal, valid and binding obligation
of the Seller, enforceable against the Seller in accordance with its terms,
except as enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors’ rights generally
and by general principles of equity (regardless of whether considered in a
proceeding in equity or at law).

      

      Section
3.3.           No Conflict; Required
Filings and Consents.

      

      (a)           The
execution, delivery and performance by the Seller of this Agreement and the
Ancillary Agreements to which the Seller is a party and the consummation of the
transactions contemplated hereby, do not:

      

      (i)           conflict
with or violate the certificate of formation or limited liability company
operating agreement of the Seller;

      
        
           

        

        
          8

          
            

          

        

        
           

        

      

      (ii)          conflict
with or violate any Law applicable to the Seller or by which any property or
asset of the Seller is bound or affected; or

      

      (iii)         conflict
with, result in any breach of, constitute a default (or an event that, with
notice or lapse of time or both, would become a default) under, or require any
consent of any Person pursuant to, any material contract or agreement to which
the Seller is a party.

      

      (b)         
The Seller is not required to file, seek or obtain any notice, authorization,
approval, order, permit or consent of or with any Governmental Authority in
connection with the execution, delivery and performance by the Seller of this
Agreement and the Ancillary Agreements to which the Seller is a party or the
consummation of the transactions contemplated hereby or thereby.

      

      Section
3.4.           Membership Interests.
The Seller is the sole record and beneficial owner of its Membership Interests,
free and clear of any Encumbrance. The Seller has the right, authority and power
to sell, assign and transfer its Membership Interests to the Buyer. At the
Closing, upon delivery of Seller’s Membership Interests to Buyer, Buyer will
acquire good, valid and marketable title to Seller’s Membership Interests, free
and clear of any Encumbrance. Other than Seller’s and Buyer’s Membership
Interests, there are no other interests in, options for, rights to acquire,
agreements to issue, or securities exercisable for or convertible into any
equity interest of the Company. Other than this Agreement, neither the Seller
nor any of its Affiliates is a party to, or bound by, any contract, arrangement,
agreement, instrument or order relating to the issuance, sale, repurchase,
assignment, or other transfer of the Membership Interests.

      

      Section
3.5.           Brokers. No broker,
finder or investment banker is entitled to any brokerage, finder’s or other fee
or commission in connection with the transactions contemplated hereby based upon
arrangements made by or on behalf of the Seller.

      

      ARTICLE
IV.

      REPRESENTATIONS
AND WARRANTIES OF THE COMPANY

      

      Except as
set forth in the Disclosure Schedules, the Company hereby represents and
warrants to the Buyer as follows:

      

      Section
4.1.           Organization and
Qualification.

      

      (a)           The
Company is (i) a limited liability company duly formed, validly existing and in
good standing under the laws of the jurisdiction in which it is organized as set
forth in Schedule
4.1(a) of the Disclosure Schedules, and has all necessary limited
liability company power and authority to own, lease and operate its properties
and to carry on its business as it is now being conducted and (ii) duly
qualified or licensed as a foreign limited liability company to do business, and
is in good standing, in each jurisdiction where the character of the properties
owned, leased or operated by it or the nature of its business makes such
qualification or licensing necessary.

      
        
           

        

        
          9

          
            

          

        

        
           

        

      

      (b)           Franklin
Energy Center, LLC (“Franklin”), Lynn
Energy Center, LLC (“Lynn”) and COI Energy
Center, LLC (“COI”) are the
Company’s only Subsidiaries. Each of Franklin, Lynn and COI is
(i) a limited liability company organized, validly existing and in good standing
under the laws of the jurisdiction in which it is organized as set forth in
Schedule 4.1(b)
of the Disclosure Schedules, and has all necessary power and authority to own,
lease and operate its properties and to carry on its business as it is now being
conducted and (ii) duly qualified or licensed as a foreign organization to do
business, and is in good standing, in each jurisdiction where the character of
the properties owned, leased or operated by it or the nature of its business
makes such qualification or licensing necessary.

      

      (c)           The
Company has heretofore furnished to the Buyer a complete and correct copy of (i)
the certificate of formation and operating agreement, each as amended as of the
date hereof, of the Company. Such certificate of formation and operating
agreement are in full force and effect.

      

      Section
4.2.           Authority. The
Company has the power and authority to execute and deliver this Agreement and
the Ancillary Agreements to which it is a party and to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. The execution, delivery and performance by the Company of this
Agreement and the Ancillary Agreements to which it is a party and the
consummation by the Company of the transactions contemplated hereby and thereby
have been duly and validly authorized by all necessary action. This Agreement
has been, and the Ancillary Agreements to which the Company is a party will be
as of the Closing, duly and validly executed and delivered by the Company and
constitute a legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as enforcement may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors’ rights generally and by general principles of
equity (regardless of whether considered in a proceeding in equity or at
law).

      

      Section
4.3.           No Conflict; Required
Filings and Consents.

      

      (a)           The
execution, delivery and performance by the Company of this Agreement or any of
the Ancillary Agreements to which it is a party and the consummation of the
transactions contemplated hereby and thereby, do not:

      

      (i)           conflict
with or violate the certificate of formation of the Company or the Operating
Agreement;

      

      (ii)          conflict
with or violate any Law applicable to the Company or by which any property or
asset of the Company is bound or affected; or

      

      (iii)         except
as set forth on Schedule 4. 3(a)(iii)
of the Disclosure Schedules, conflict with, result in any breach of, constitute
a default (or an event that, with notice or lapse of time or both, would become
a default) under, or require any consent of any Person pursuant to, any Material
Contract.

      

      (b)          The
Company is not required to file, seek or obtain any notice, authorization,
approval, order, permit or consent of or with any Governmental Authority in
connection with the execution, delivery and performance by the Company of this
Agreement and the Ancillary Agreements to which it is a party and
the consummation of the transactions contemplated hereby and
thereby.

      
        
           

        

        
          10

          
            

          

        

        
           

        

      

      Section
4.4.           Equity Interests;
Subsidiaries; Joint Ventures.

      

      (a)           Except
for the issued and outstanding shares of equity interests of the Company set
forth in Schedule
4.4(a) of the Disclosure Schedules, no Person owns any equity,
partnership, membership or similar interest in, or any interest convertible
into, exercisable for the purchase of or exchangeable for any such equity,
partnership, membership or similar interest in the Company.

      

      (b)           The
Company is the sole record and beneficial owner of all the issued and
outstanding equity interests of its Subsidiaries, which interests have been duly
authorized and validly issued, are fully paid and non-assessable and are set
forth in Schedule
4.4(b) of the Disclosure Schedules. Except for the equity interests of
Franklin, Lynn or COI, the Company and its Subsidiaries (i) do not presently own
or control, directly or indirectly, any equity, partnership, membership or
similar interest in, or any interest convertible into, exercisable for the
purchase of or exchangeable for any such equity, partnership, membership or
similar interest in any Person or (ii) are not participants in any joint
venture, partnership or similar arrangement.

      

      Section
4.5.           Financial Statements; No
Undisclosed Liabilities; Indebtedness; Guaranties.

      

      (a)           Copies
of the audited consolidated balance sheets of the Company and its Subsidiaries
as at December 31, 2007 and December 31, 2006, and the related audited
consolidated statements of income, stockholders’ equity and cashflows of the
Company and its Subsidiaries, together with all related notes and schedules
thereto, accompanied by the reports thereon of the Company’s independent
auditors (collectively referred to as the “Financial Statements”) and the
unaudited consolidated balance sheets of the Company and its Subsidiaries as at April 30,
2008 (the “Balance
Sheet”), and the related consolidated statements of income, stockholders’
equity and cashflows of the Company and its Subsidiaries (collectively referred
to as the “Interim
Financial Statements”) are attached hereto as Schedule 4.5(a) of
the Disclosure Schedules. Each of the Financial Statements and the Interim
Financial Statements (i) has been prepared based on the books and records of the
Company and its Subsidiaries (except as may be indicated in the notes thereto),
(ii) has been prepared in accordance with GAAP applied on a consistent basis
throughout the periods indicated (except as may be indicated in the notes
thereto) and (iii) fairly presents, in all material respects, the consolidated
financial position, results of operations and cash flows of the Company and its
Subsidiaries as at the respective dates thereof and for the respective periods
indicated therein, except as otherwise noted therein and subject, in the case of
the Interim Financial Statements, to normal and recurring year-end adjustments
and the absence of notes.

      

      (b)           There are no debts, liabilities or
obligations, whether accrued or fixed, absolute or contingent, matured or
unmatured or determined or determinable, of the Company and its Subsidiaries of
a nature required to be reflected on a balance sheet prepared in accordance with
GAAP, other than any such debts, liabilities or obligations (i) reflected or
reserved against on the Interim Financial Statements, the Financial Statements
or the notes thereto, (ii) incurred since the date of the
Balance Sheet in the ordinary course of business of the Company and its
Subsidiaries, or (iii) for Taxes.

      
        
           

        

        
          11

          
            

          

        

        
           

        

      

      (c)           The
Company and its Subsidiaries have no liability or obligation for Indebtedness
other than as set forth on Schedule 4.5(c) of
the Disclosure Schedules and true, correct and complete copies of all
instruments and documents, if any, evidencing, creating, securing or otherwise
relating to such Indebtedness have been delivered to Buyer.

      

      (d)           Schedule 4.5(d) of
the Disclosure Schedules contains a list and brief description of all
guaranties, performance bonds, bid bonds, letters of credit and other similar
agreements by which the Seller, the Company or their respective Affiliates have
entered into in connection with the business of the Company and its Subsidiaries
(the “Guaranties”). True,
correct and complete copies of all Guaranties have been delivered to
Buyer.

      

      Section
4.6.           Absence of Certain Changes
or Events.

      

      (a)           Since
the date of the Balance Sheet, there has not occurred any Material Adverse
Effect with respect to the Company or its Subsidiaries.

      

      (b)           Since
the date of the Balance Sheet, the business of the Company and its Subsidiaries
has been conducted in the ordinary course and in substantially the same manner
as previously conducted.

      

      (c)           Since
the date of the Balance Sheet, neither the Company nor any of its Subsidiaries
has:

      

      
        (i)           amended
its organizational documents;

      

      

      (ii)          declared,
set aside or paid any dividend or made any other distribution to the holders of
the equity interests in the Company;

      

      (iii)         loaned,
advanced, invested or made a capital contribution of any amount to or in any
Person, other than advances in the ordinary course of business;

      

      (iv)         sold,
assigned, pledged, disposed of or otherwise transferred, or suffered or
permitted an Encumbrance (other than a Permitted Encumbrance) to exist on any
assets, in each case, other than assets that are obsolete or no longer useful to
the business of the Company or its Subsidiaries in the ordinary course of
business;

      

      (v)          incurred
or assumed any Indebtedness or guarantee of any such Indebtedness, repaid any
Indebtedness or guarantee of any Indebtedness, or cancelled any material
Indebtedness, in each case, other than in the ordinary course of
business;

      

      (vi)         acquired
by merging or consolidating with, or by purchasing a substantial portion of the
assets of, or by purchasing all of or substantial equity interests in, any other
person or its business or acquired any material assets, other than assets
acquired in the ordinary course of business or capital assets permitted to be
acquired pursuant to clause (vii) below;

      
        
           

        

        
          12

          
            

          

        

        
           

        

      

      (vii)        incurred any
capital expenditure excluding for purposes hereof, capital expenditures set
forth on Schedule
4.6(c)(vii) of the Disclosure Schedules;

      

      (viii)       commenced
any litigation, other than (A) litigation in connection with the collection of
accounts receivable or (B) litigation as a result of suits, actions or other
proceedings commenced against the Company or its Subsidiaries;

      

      (ix)         entered
into any lease of real property, other than renewals in respect of existing
Leased Real Property in the ordinary course of business, or amended,
supplemented, otherwise modified or terminated any lease governing Leased Real
Property, other than amendments, supplements or other modifications in the
ordinary course of business;

      

      (x)          accelerated
the time of collection of or granted any offset, counterclaim or discount
against any accounts receivable, extended the time of payment of any accounts
payable, written-down or written-off any inventory or revalued any of its assets
(including writing down (or up) of the value of inventory or equipment), in each
case except in the ordinary course of business; or

      

      (xi)         agreed
or committed to agree to do any act described in clauses (i) through (x)
above.

      

      Section
4.7.           Compliance with Law;
Permits.

      

      (a)           Each
of the Company and its Subsidiaries is in compliance with all Laws applicable to
it in all material respects.

      

      (b)           Each
of the Company and its Subsidiaries is in possession of all permits, licenses,
franchises, approvals, certificates, consents, waivers, concessions, exemptions,
orders, registrations, notices or other authorizations of any Governmental
Authority necessary for the Company and its Subsidiaries to own, lease and
operate its properties and to carry on its business as currently conducted (the
“Permits”).

      

      Section
4.8.           Litigation.  As
of the date hereof, there is no pending, or to the Knowledge of the Company,
threatened Action by or against the Company or its Subsidiaries, except as set
forth in Schedule
4.8 of the Disclosure Schedules.

      

      Section
4.9.           Employees and
Directors.

      

      (a)           The
Company and its Subsidiaries do not have, nor have they ever had, any employees.
The Company and its Subsidiaries do not engage the services of, nor have they
ever engaged the services of, any consultants, contractors or other such service
providers. The Company and its Subsidiaries do not have, nor have they ever had,
any Employee Plan.

      

      (b)           Schedule 4.9(b) of
the Disclosure Schedules sets forth a true, correct and complete list of (i) the
names of the current directors and officers of the Company and its Subsidiaries
as well as the compensation and other benefits such directors receive or have
received from the Company and its Subsidiaries and (ii) the names of all past
directors and officers of the Company and its Subsidiaries as
well as the compensation and other benefits such directors received from the
Company and its Subsidiaries. All of the officers of the Company and its
Subsidiaries are and have been, since the formation of the Company and its
Subsidiaries, non-employee statutory officers.

      
        
           

        

        
          13

          
            

          

        

        
           

        

      

      

      Section
4.10.         Insurance. Schedule 4.10 of the
Disclosure Schedules sets forth, as of the date hereof, a true, correct and
complete list of all policies of insurance currently maintained by or for the
benefit of the Company or its Subsidiaries (collectively, the “Policies”). All such
Policies are in full force and effect and provide insurance in such amounts as
are sufficient to comply with applicable Laws relating to the maintenance of
insurance. No notice of cancellation or termination has been received with
respect to any such Policy.

      

      Section
4.11.         Personal Property.
The equipment and the tangible assets owned and leased by the Company and its
Subsidiaries, all of which is set forth in Schedule 4.11 of the
Disclosure Schedules, include all tangible personal property, including all
vehicles, machinery, equipment, tools, computer hardware and software,
furniture, fixtures (both real and personal), furnishings and other similar
property required to operate the business of the Company and its Subsidiaries as
presently conducted. Each such asset or property has been maintained in
accordance with ordinary industry practice, is in good operating condition and
repair, subject to normal wear and tear, and is usable and adequate in the
ordinary course of business and for the use or uses to which it is being put.
Except as set forth on Schedule 4.11 of the
Disclosure Schedules, all equipment and tangible assets owned or leased by the
Company and its Subsidiaries has been maintained and operated in accordance with
all applicable Laws, and all necessary licenses have been obtained and
maintained with respect to such equipment. The Company and its Subsidiaries have
good, valid and marketable title to all such owned equipment and tangible
assets. All of the equipment and assets owned or leased by the Company and its
Subsidiaries are located at a “Parcel” (as such term is defined in each of the
Cogeneration Energy Purchase Agreements described in Schedule 4. 16(a) of
the Disclosure Schedules) included within the Leased Real Properties, and,
except as expressly set forth in those certain Cogeneration Energy Purchase
Agreements described in Schedule 4.16(a) of
the Disclosure Schedules, all of the equipment and assets on such “Parcels” are
owned or leased by the Company and its Subsidiaries.

      

      Section
4.12.         Real Property. (a)
The Company and its Subsidiaries currently do not own, nor have they ever owned,
any real property.

      

      (b)           Schedule 4.12(b) of
the Disclosure Schedules lists the street address of each parcel of Leased Real
Property and the identity of the lessor, lessee or licensee and current occupant
(if different from lessee or licensee) of each such parcel of Leased Real
Property. The Company and its Subsidiaries have a valid leasehold estate in or
license to use and occupy all Leased Real Property, free and clear of all
Encumbrances, other than Permitted Encumbrances or as expressly set forth in
those certain Cogeneration Energy Purchase Agreements described in Schedule 4.16(a) of
the Disclosure Schedules. The Company and its Subsidiaries are not in default, and,
to the Knowledge of the Company, no other party to any Company or Subsidiary
lease of real property is in default, under any such leases or licenses, and
each lease or license of real property is in full force and effect and is
enforceable in accordance with its terms and shall not cease to be in full force
and effect as a result of the transactions contemplated by this
Agreement. The Company and its Subsidiaries do not lease, sublease or license
any real property to any other Person. The Company has made available to Buyer
complete and accurate copies of all leases or licenses of real property of the
Company and its Subsidiaries.

      
        
           

        

        
          14

          
            

          

        

        
           

        

      

      

      Section
4.13.         Intellectual
Property. Schedule 4.13 of the
Disclosure Schedules sets forth a true, correct and complete list of all
Intellectual Property owned by the Company or its Subsidiaries and used in the
Company’s or its Subsidiaries’ businesses. No claim has been asserted or
threatened that the use or exploitation by the Company or its Subsidiaries of
any Intellectual Property owned by the Company or its Subsidiaries infringes the
Intellectual Property of any third party. Schedule 4.13 of the
Disclosure Schedules also contains a complete and accurate list of all licenses
or similar agreements or arrangements to which the Company or any Subsidiary is
a party, either as licensor or licensee, for any Intellectual Property rights,
in each case identifying the subject Intellectual Property rights. Except as set
forth on Schedule 4.13 of the
Disclosure Schedules, the Company and its Subsidiaries own all right, title
and interest to, or
have the right to use pursuant to a valid and enforceable written license, all
Intellectual Property rights necessary for the operation of their respective
businesses as presently conducted and as presently proposed to be conducted,
free and clear of all Encumbrances, except for Permitted Encumbrances. Except as
set forth on Schedule
4.13 of the Disclosure Schedules, the loss or expiration of any
Intellectual Property right or related group of Intellectual Property rights
owned by, used by or licensed to the Company or its Subsidiaries is not
threatened, pending or reasonably foreseeable. The Company and its Subsidiaries
have taken all necessary reasonable actions to maintain and protect the
Intellectual Property rights which it owns. To the Knowledge of the Company, the
owners of any Intellectual Property rights licensed to the Company and its
Subsidiaries have taken all necessary and desirable actions to maintain and
protect the Intellectual Property rights that are subject to such
licenses.

      

      Section
4.14.         Taxes. Except as set
forth on Schedule
4.14 of the Disclosure Schedules:

      

      (a)           All
Tax Returns required by applicable Law have been filed with any Taxation
Authority by the Company or its Subsidiaries have been filed in a timely manner
(taking into account any valid extension) in accordance with all applicable
Laws, and all such Tax Returns are true, correct and complete in all material
respects, and all Taxes shown to be due thereon have been paid. All Tax Returns
of the Company and its Subsidiaries for all Tax periods since their respective
formations have been made available to Buyer.

      

      (b)           Since
the date of its formation, the Company has been properly treated as a
partnership for United States federal income tax purposes.

      

      (c)           Other
than Permitted Encumbrances, there are no Encumbrances for Taxes on any of
Seller’s Membership Interests or the assets of the Company or any of the assets
of or membership interests in any of the Company’s Subsidiaries.

      

      (d)        
  The Company and its Subsidiaries have complied with all applicable
Laws relating to the withholding of Taxes and the remittance of withheld Taxes
to the applicable Taxation Authority.

      
        
           

        

        
          15

          
            

          

        

        
           

        

      

      (e)           No
written notification has been received by the Company, its Subsidiaries, or
Seller that any audit, examination or similar proceeding is pending, proposed or
asserted with regard to any Taxes or Tax Returns of the Company or its
Subsidiaries.

      

      (f)           Neither
the Company nor any of its Subsidiaries is a party to or bound by any Tax
sharing agreement or Tax indemnity agreement (including any closing agreement or
other agreement relating to Taxes with any Taxation Authority, but excluding
contracts with vendors, landlords, and other non-Affiliates whose principal
purpose is addressing non-Tax matters).

      

      (g)           Neither
the Company nor any of its Subsidiaries is subject to any private letter ruling
of the IRS or comparable rulings of other Taxation Authorities that, in any such
case, will be in effect following the Closing Date.

      

      (h)           Neither
the Company nor any of its Subsidiaries has entered into a “reportable
transaction” within the meaning of Treasury Regulations Section
1.6011-4(b)(1).

      

      (i)        
   The Company has not been an “includible corporation” that is a
member of an affiliated group filing and consolidated United States federal
income tax return.

      

      Section
4.15.         Environmental
Matters. Except as set forth on Schedule 4.15 of the
Disclosure Schedules:

      

      (a)           The
Company and its Subsidiaries are in compliance with all applicable Environmental
Laws.

      

      (b)           The
Company and its Subsidiaries have obtained and are in compliance with all
Environmental Permits.

      

      (c)           Neither
the Company nor any of its Subsidiaries has received any written notice
regarding any actual or alleged material violation or claim of potential
liability, and no claim, cause of action, action, lawsuit, investigation,
proceeding or litigation is pending, or, to the Knowledge of the Company,
threatened, with respect to any Environmental Law, including any investigatory,
remedial or corrective action obligations relating to the Company or its
Subsidiaries, arising under any Environmental Law.

      

      (d)           Neither
the Company nor any of its Subsidiaries has, or to the Knowledge of the Company,
has any other Person caused or allowed any Hazardous Material to be Released,
discharged or disposed at, on or beneath the Leased Real Property or any
property formerly leased and/or operated by the Company in violation of
applicable Environmental Law; nor to the Knowledge of Company, is there any
Hazardous Material that has migrated, is migrating or threatening to migrate
from other properties at, on or beneath any of the Leased Real
Property.

      

      (e)           Neither
the Company nor any of its Subsidiaries has any liability for the implementation
of or costs associated with any cleanup, removal, remediation, corrective action
or natural resource damages arising from arrangement by the Company or its
Subsidiaries for the storage, treatment, transport, disposal or recycling of any
Hazardous Materials at any location under any Environmental
Law.

      
        
           

        

        
          16

          
            

          

        

        
           

        

      

      (f)            The
representations and warranties contained in this Section 4.15 are the
only representations and warranties of the Company with respect to compliance
with or liability under any Environmental Permit or any Environmental Law
applicable to the Company and its Subsidiaries.

      

      For
purposes of this Agreement:

      

      “Environmental Laws”
means all federal, state and local, Laws, statutes, regulations and ordinances
concerning pollution, or protection of the environment, including all those
relating to the presence, use, production, generation, handling, transportation,
treatment, storage, disposal, labeling, testing, processing, discharge, release,
threatened release, exposure, potential exposure, control or cleanup of any
Hazardous Materials, as such requirements are enacted and in
effect.

      

      “Environmental
Permits” means all permits, licenses, authorizations, certificates and
approvals of any Governmental Authority relating to or required under or
pursuant to any Environmental Law.

      

      “Hazardous Materials”
means any chemical, substance, compound or material defined as a hazardous
substance, hazardous waste, hazardous material, toxic chemical, pollutant or
contaminant, or regulated by or pursuant to any Environmental Law, including any
petroleum hydrocarbon or degradation product thereof, asbestos, polychlorinated
biphenyls or other substances, the presence, use, production, generation,
handling, transportation, treatment, storage, disposal, labeling, testing,
processing, discharge, Release, threatened Release, control, cleanup, exposure
of or exposure to which is subject to regulation under any Environmental
Law.

      

      “Release” shall mean
the release, spill, emission, leaking, pumping, injection, deposit, disposal,
discharge, dispersal, leaching or migrating into the indoor or outdoor
environment of any Hazardous Materials into or through the air, soil or surface
or subsurface water.

      

      Section
4.16.         Material
Contracts.

      

      (a)           Schedule 4.16(a) of
the Disclosure Schedules lists, as of the date hereof, each of the following
contracts and agreements of the Company and its Subsidiaries (such contracts and
agreements as described in this Section 4.16(a) being
“Material
Contracts”):

      

      (i)           all
contracts or agreements that provide for payment or receipt by the Company or
its Subsidiaries of more than $25,000 per year or which the Company or its
subsidiaries cannot terminate without penalty on less than thirty (30) days’
notice;

      

      
        (ii)          all
contracts and agreements relating to Indebtedness;

      

      

      (iii)         all
contracts and agreements that limit or purport to limit the ability of the
Company or its Subsidiaries to compete in any line of business or with any
Person or in any geographic area or during any period of
time;

      
        
           

        

        
          17

          
            

          

        

        
           

        

      

      (iv)         all joint
venture, partnership or similar agreements or arrangements;

      

      (v)       
  all contracts or agreements pursuant to which the Company or its
Subsidiaries has granted any exclusive or “most-favored’ rights to any third
party;

      

      (vi)         all
contracts or agreements relating to any Encumbrance upon any of the assets or
properties o of the Company or its Subsidiaries;

      

      (vii)        any
surety, guarantee, indemnification or similar contract or agreement involving
potential obligations payable by the Company or its Subsidiaries;

      

      (viii)       all
contracts or agreements relating to the making of any loan, advance or capital
contribution to, or investment in, any other Person;

      

      (ix)         all
contracts or agreements relating to the acquisition or disposition (including by
way of merger, consolidation, acquisition or sale of stock or assets or
otherwise) of any material assets, properties or securities;

      

      
        (x)          all
energy purchase agreements;

      

      

      (xi)         all
service and maintenance agreements, including any long term service
agreements;

      

      
        (xii)       
all
gas commodity contracts;

      

      

      
        (xiii)      
all
energy procurement contracts; and

      

      

      (xiv)       any
other contract or agreement that is material to the Company and its Subsidiaries, taken as a
whole.

      

      (b)          Each
Material Contract is valid and binding on the Company or the applicable
Subsidiary, as the case may be, and, to the Knowledge of the Company, the
counterparties thereto, and is in full force and effect. Except as set forth on
Schedule
4.16(b) of the Disclosure Schedules, none of the Company, any of its
Subsidiaries nor, to the Knowledge of the Company, any counterparty to any
Material Contract is in breach of, or default under, any Material Contract to
which it is a party. The Company has previously delivered to Buyer a complete
and accurate copy of each Material Contract.

      

      Section
4.17.        Affiliate
Transactions. Neither the Company, its Subsidiaries nor any Affiliate
currently owns an equity interest in any Person that has had material business
dealings with the Company or its Subsidiaries, other than business dealings or
transactions between the Company and its Subsidiaries or as otherwise disclosed
on Schedule
4.17 of the Disclosure Schedules.

      
        
           

        

        
          18

          
            

          

        

        
           

        

      

      Section
4.18.         Suppliers and
Customers. The documents and information supplied by the Company to Buyer
with respect to relationships and volumes of business done with the significant
suppliers and customers of the Company and its Subsidiaries are accurate in
all material respects. Schedule 4.18 of the
Disclosure Schedules accurately identifies each customer of the Company and its
Subsidiaries in the fiscal year ended December 31, 2007 or the four month period
ended April 30, 2008 (each, a “Material Customer”), and provides an accurate
and complete list of each of the Company’s material suppliers (each, a “Material Supplier”), as well
as an accurate total of the aggregate purchases from the Material Suppliers
for the
four month period ended April 30, 2008. No Material Customer has given oral or
written notice to the Company or its Subsidiaries that it intends to stop, or
(other than pursuant to task orders in the ordinary course) decrease the rate
of, buying products or services from the Company or any of its Subsidiaries. No
Material Supplier of the Company or its subsidiaries has indicated to the
Company or its Subsidiaries that it will stop, or (other than pursuant to task
orders in the ordinary course) decrease the rate of, supplying materials,
products or services to the Company and its Subsidiaries.

      

      Section
4.19.         Accounts Receivable.
The accounts receivable of the Company (i) are fairly recorded in the books and
records of the Company, (ii) have arisen in the ordinary course of business and
(iii) are not subject to any defense, counterclaim or set-off of which the
Seller or the Company has received written notice, except for customary
reserves.

      

      Section
4.20.         Brokers. The Buyer
shall not be obligated to pay any brokerage, finder’s or other fee or commission
to any broker, finder or investment banker in connection with the transactions
contemplated by this Agreement based on arrangements made by or on behalf of the
Company.

      

      Section
4.21.         Bank Accounts. Schedule 4.21 of the
Disclosure Schedules lists (i) the name and city of each bank or other financial
institution at which the Company or its Subsidiary maintains an account (whether
check, savings or otherwise), lockbox or safe-deposit box, and (ii) the account
number of each such account.

      

      Section
4.22.         Regulatory
Matters.

      

      (a)           Neither
the Company nor its Subsidiaries is a “public utility,” as that term is defined
in Section 201(e) of the FPA.

      

      (b)           Neither
the Company nor its Subsidiaries is a “holding company” (as that term is defined
in Section 1262(6) of the Public Utility Holding Company Act of 2005 (“PUHCA 2005”) and the
regulations and orders of the Federal Energy Regulatory Commission (“FERC”) thereunder) of
any “public utility” (as that term is defined in Section 201(e) of the
FPA).

      

      (c)           Each
Subsidiary of the Company constitutes an “electric utility company” and
therefore a “public-utility company” by reason of their ownership of the
cogeneration projects listed on Schedule 4.22(e) of
the Disclosure Schedules, as those terms are defined in Section 1262 of PUHCA
2005 and the regulations and orders of the FERC thereunder. However, so long
each of the electric generation projects owned by such Subsidiaries constitutes
a “Qualifying Facility” under the Public Utility Regulatory Policies Act of 1978
and regulations and orders of the FERC thereunder, the Company and its
subsidiaries will qualify for the regulatory exemptions from FERC’s regulations
implementing PUHCA 2005, to the extent provided in 18 C.F.R. §366.3(a).
Further, regardless of any “Qualifying Facility” status, no Subsidiary is
required to maintain any “jurisdictional rates” as defined at 18 C.F.R. §366.1,
and therefore pursuant to 18 C.F.R. §366.3(b), FERC is required to provide the
Company and its Subsidiaries with the same ongoing regulatory exemptions as
provided in 18 C.F.R. §366.3(a).

      
        
           

        

        
          19

          
            

          

        

        
           

        

      

      (d)           Solely
by reason of the execution, delivery, and consummation of the transactions
provided for in this Agreement and the Ancillary Agreements, neither the Company
nor its Subsidiaries shall be or become subject to regulation by the FERC under
either of the FPA or PUHCA 2005.

      

      (e)           Neither
the Company nor its Subsidiaries are involved in any cogeneration project other
than those listed on Schedule 4.22(e) of
the Disclosure Schedules. Each of the cogeneration projects listed on Schedule 4.22(e) of
the Disclosure Schedules is a “Qualifying Facility,” as that term is defined
under 18 C.F.R. 292.101(b)(1), of no greater than 20 MW of maximum nominal
electric power production capacity. The transactions contemplated by this
Agreement and the Ancillary Agreements require no approval or authorization
under Section 203 of the FPA and the regulations of the FERC thereunder. The
status of each of the cogeneration projects listed on Schedule 4.22(e) of
the Disclosure Schedules as a “Qualifying Facility” has not been challenged by
or before the FERC in any proceeding, and, to the Knowledge of the Company, no
such challenge is pending or threatened. The certifications and
self-certifications of “Qualifying Facility” status of each of the cogeneration
projects listed on Schedule 4.22(e) of
the Disclosure Schedules most recently caused to be on file with the FERC are
based on design criteria, and are accurate and complete as of the date hereof.
Continuing status as a “Qualifying Facility” is conditioned on continuing
compliance with FERC’s requirements applicable to “qualifying cogeneration
facilities” set forth at 18 C.F.R. §292.203(b).

      

      (f)           Neither
the Company nor its Subsidiaries has ever been subject to any proceeding by or
before the FERC in which the compliance of the Company or its Subsidiaries with
the FPA, PUHCA 2005, or any regulation or order of the FERC was in
issue.

      

      ARTICLE
V.

      REPRESENTATIONS
AND WARRANTIES OF THE BUYER

      

      The Buyer
hereby represents and warrants to the Seller as follows:

      

      Section
5.1.           Organization. The
Buyer is a corporation duly formed, validly existing and in good standing under
the laws of the State of California and has all necessary corporate power and
authority to own, lease and operate its properties and to carry on its business
as it is now being conducted.

      

      Section
5.2.           Authority. The Buyer
has the corporate power and authority to execute and deliver this Agreement to
perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution, delivery and performance by the Buyer of
this Agreement and the Ancillary Agreements to which Buyer is a party and the
consummation by the Buyer of the transactions contemplated hereby and thereby
have been duly and validly authorized by all necessary corporate action. This
Agreement and the Ancillary Agreements to which Buyer is a party have been duly
and validly executed and delivered by the Buyer. This Agreement
and the Ancillary Agreements to which Buyer is a party constitute legal, valid
and binding obligations of the Buyer, enforceable against the Buyer in
accordance with their respective terms, except as enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors’ rights generally and by general principles of equity
(regardless of whether considered in a proceeding in equity or at
law).

      
        
           

        

        
          20

          
            

          

        

        
           

        

      

      

      Section
5.3.           No Conflict; Required
Filings and Consents.

      

      (a)           The
execution, delivery and performance by the Buyer of this Agreement and the
Ancillary Agreements to which Buyer is a party and the consummation of the
transactions contemplated hereby and thereby, do not:

      

      (i)           conflict
with or violate the articles of incorporation or bylaws of the
Buyer;

      

      (ii)          conflict
with or violate any Law applicable to the Buyer or by which any property or
asset of the Buyer is bound or affected; or

      

      (iii)         conflict
with, result in any breach of, constitute a default (or an event that, with
notice or lapse of time or both, would become a default) under, or require any
consent of any Person pursuant to, any material contract or agreement to which
the Buyer is a party;

      

      other
than, in the case of clauses (ii) and (iii) above, any such instances that,
individually or in the aggregate, would not prohibit or materially impair the
Buyer’s ability to perform its obligations under this Agreement or the Ancillary
Agreements.

      

      (b)          The
Buyer is not required to file, seek or obtain any notice, authorization,
approval, order, permit or consent of or with any Governmental Authority in
connection with the execution, delivery and performance by the Buyer of this
Agreement or the Ancillary Agreements to which the Buyer is a party or the
consummation of the transactions contemplated hereby or thereby, except for (i)
filings as may be required by any applicable federal or state securities or
“blue sky” laws, or (ii) as may be necessary as a result of any facts or
circumstances relating to the Seller or any of its Affiliates.

      

      Section
5.4.           Brokers. No broker,
finder or investment banker is entitled to any brokerage, finder’s or other fee
or commission in connection with the transactions contemplated hereby based upon
arrangements made by or on behalf of the Buyer.

      

      Section
5.5.           Solvency. The Buyer
is solvent and has sufficient funds to permit the Buyer to consummate the
transactions contemplated by this Agreement.

      

      Section
5.6.           Litigation. As of the
date hereof, there is no pending Action by or against the Buyer that will
prevent consummation of the transactions contemplated
hereby.

      
        
           

        

        
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      Section
5.7.           Investment Intent.
The Buyer is acquiring the Membership Interests for its own account for
investment purposes only and not with a view to any public distribution thereof
or with any intention of selling, distributing or otherwise disposing of the
Membership Interests in a manner that would violate the
registration requirements of the Securities Act of 1933, as amended (the “Securities Act”). The
Buyer agrees that the Membership Interests may not be sold, transferred, offered
for sale, pledged, hypothecated or otherwise disposed of without registration
under the Securities Act and any applicable state securities laws, except
pursuant to an exemption from such registration under the Securities Act and
such laws. The Buyer is able to bear the economic risk of holding the Membership
Interests for an indefinite period (including total loss of its investment), and
(either alone or together with its Representatives) has sufficient knowledge and
experience in financial and business matters so as to be capable of evaluating
the merits and risk of its investment.

      

      ARTICLE
VI.

      ADDITIONAL
AGREEMENTS

      

      Section
6.1.           Further Assurances.
At Seller’s sole expense, Seller, at any time after the Closing Date, shall take
any action, including the execution of any document, reasonably requested by
Buyer, and shall take any other action consistent with the terms of this
Agreement, which may reasonably be requested by Buyer in furtherance of the
transactions contemplated by this Agreement. As promptly as practicable after
the Effective Time, and in no event later than five days after the Closing Date,
Seller shall, at Seller’s sole expense, turn over all books and records of the
Company and its Subsidiaries to Buyer.

      

      Section
6.2.           Letters of Credit.
Any cash collateral, deposit, advanced payment of rent or other money paid by
the Seller or its Affiliates (including the Company and its Subsidiaries) in
furtherance of the business of the Company and its Subsidiaries, including any
cash collateral paid by Seller under the contracts set forth on Schedule 6.2 of the
Disclosure Schedules, is reflected in the Purchase Price and, as a result, is
the property of the Buyer, the Company and its Subsidiaries after the Closing.
Any such collateral or payment incorrectly returned or refunded to Seller shall
be promptly paid by Seller to Buyer.

      

      Section
6.3.           Intercompany
Arrangements. Except as set forth on Schedule 6.3 of the
Disclosure Schedules, all intercompany and intracompany accounts or contracts
between the Company and its Subsidiaries, on the one hand, and the Seller and
its Affiliates (other than the Company and its Subsidiary), on the other hand,
including any asset management contracts between the Company and Seller, shall
be cancelled without any consideration or further liability to any party and
without the need for any further documentation, immediately prior to the
Closing.

      

      Section
6.4.           Consents and Filings;
Actions by Parties.

      

      (a)           Each
of the parties shall use all commercially reasonable efforts to take, or cause
to be taken, all appropriate action to do, or cause to be done, all things
necessary, proper or advisable under applicable Law or otherwise to consummate
and make effective the transactions contemplated by this Agreement, and no party
hereto shall take or cause to be taken any action that would reasonably be
expected to prevent, impede or delay the consummation or effectiveness of the
transactions contemplated hereby. In furtherance and not in limitation of the
foregoing, each party hereto agrees to obtain from Governmental Authorities and
other Persons all consents, approvals, authorizations,
qualifications and orders as are necessary for the consummation of the
transactions contemplated by this Agreement.

       

      
        
          
          

        

        
          22

          
            

          

        

        
          
          

        

      

    

    (b)           Each
of the parties shall promptly notify the other parties of any communication it
or any of its Affiliates receives from any Governmental Authority relating to
the matters that are the subject of this Agreement and permit the other parties
to review in advance any proposed communication by such party to any
Governmental Authority. No party to this Agreement shall agree to participate in
any meeting with any Governmental Authority in respect of any filings,
investigation or other inquiry unless it consults with the other parties in
advance and, to the extent permitted by such Governmental Authority, gives the
other parties the opportunity to attend and participate at such meeting. The
parties will provide each other with copies of all correspondence, filings or
communications between them or any of their Representatives, on the one hand,
and any Governmental Authority or members of its staff, on the other hand, with
respect to this Agreement and the transactions contemplated hereby.

    

    (c)           In
the event that any administrative or judicial Action is instituted (or
threatened to be instituted) by a Governmental Authority or private party
challenging the transaction contemplated by this Agreement, or any other
agreement contemplated hereby, (i) each of the Seller, the Buyer and the Company
shall cooperate in all respects with each other; (ii) the Seller and the Buyer
shall be obligated to contest and resist any such Action and to have vacated,
lifted, reversed or overturned any decree, judgment, injunction or other order,
whether temporary, preliminary or permanent, that is in effect and that
prohibits, prevents or restricts consummation of the transactions contemplated
by this Agreement; and (iii) the Seller and the Buyer must defend, at their cost
and expense, any Action or Actions, whether judicial or administrative, in
connection with the transactions contemplated by this Agreement.

    

    Section
6.5.           Public Announcements.
The parties hereto shall consult with each other before issuing, and provide
each other the opportunity to review and comment upon, any press release or
other public statement with respect to the transactions contemplated hereby, and
shall not issue any such press release or make any such public statement prior
to such consultation, except as may be required by applicable Law.

    

    Section
6.6.           Release of
Guaranties. The parties hereto agree to cooperate and the Buyer will use
its best efforts to obtain the release of the Seller or its Affiliates (other
than the Company or its Subsidiaries) that are a party to each of the Guaranties
as of the Closing Date, including, by assuming the Seller’s or such Affiliates’
obligations, as applicable, under the Guaranties, or by providing substitute
guarantees, performance bonds, bid bonds, letters of credit or other similar
agreements in lieu thereof; provided, however, that such
releases shall not be a condition to Closing.

    

    Section
6.7.           Tax
Matters.

    

    (a)           Characterization of
Transaction. The Seller, the Buyer, and their respective Affiliates shall
each treat the transfer of Seller’s Membership Interests to Buyer in the manner
provided in IRS Revenue Ruling 99 -6, 1999-1 CB 432 (January 15, 1999) for all
United States federal and applicable state and local income Tax purposes. The
Seller, the Buyer and their respective Affiliates shall not file any Tax Return
or take any position for any United States federal, state or local income Tax
purpose inconsistent with such treatment.

    
      
         

      

      
        23

        
          

        

      

      
         

      

    

    

    (b)           Apportionment. With
respect to any Tax Return for any Straddle Period of the Company or its
Subsidiaries, each party will apportion any Taxes arising out of or relating to
a Straddle Period to the Pre-Closing Tax Period and the Post-Closing Tax Period
based upon a “closing-of-the-books” immediately prior to the opening of business
on the Closing Date; provided, however, that real and personal property Taxes
and similar Taxes and Taxes based on net worth, capital, intangibles, or similar
items, shall be allocated on a per diem basis.

    

    (c)           Filing of Tax Returns,
Etc.

    

    (i)           The
Seller will prepare and timely file, or cause to be prepared and timely filed,
all Tax Returns of the Company and its Subsidiaries with respect to Tax periods
ending on or before the Closing Date to the extent such Tax Returns have not
been filed prior to the Closing Date, and Seller will timely pay, or cause to be
timely paid, all Taxes shown as due thereon; provided that nothing in this Section 6.7 shall
affect the rights of the Seller to indemnification under Section 8.3(c). The
Buyer will prepare and timely file, or cause to be prepared and timely filed,
all Tax Returns of the Company and its Subsidiaries with respect to any Straddle
Period to the extent such Tax Returns have not been filed prior to the Closing
Date, and the Buyer will timely pay, or cause to be timely paid, all Taxes shown
as due thereon; provided that nothing in this Section 6.7 shall
affect the rights of the Buyer to indemnification under Section 8.2(a)(iv).
The Buyer shall deliver, at least thirty (30) days prior to the due date (taking
into account extensions) for the filing of each such Tax Return for any Straddle
Period in the case of income Taxes, and at least ten (10) days prior to the due
date (taking into account extensions) for the filing of each such Tax Return for
any Straddle Period in the case of non-income Taxes, to the Seller a statement
setting forth the amount of Tax for which the Seller is responsible pursuant to
Section
8.2(a)(iv) and a copy of such proposed Tax Return. The Seller shall have
the right to review such proposed Tax Return and the statement prior to the
filing of such Tax Return. The Seller and the Buyer agree to consult and resolve
in good faith any issue arising as a result of the review of such Tax Return and
statement and mutually consent to the filing of such Tax Return. Subject to
Section
6.7(c)(ii) and Section 6.7(h), the
Seller shall pay to the Buyer the amount, if any, of the Tax shown on the Tax
Return for which the Seller is responsible pursuant to Section 8.2(a)(iv)
unless and to the extent that the Buyer’s failure to comply with its obligations
under this Section
6.7 with respect to the preparation and review of a Tax Return adversely
affects the Seller (for the avoidance of doubt, the amount so payable by the
Seller shall be determined by taking into account any prior estimated or other
payments of the applicable Taxes) no later than three (3) Business Days before
the due date (taking into account extensions) of the applicable Tax Return, and
any such payment shall be treated as a payment by the Seller under Section 8.2(a)(iv)
with respect to the applicable Tax Return. Neither the Buyer nor any of its
Affiliates shall file any amended Tax Returns for any periods for or in respect
of the Company or its Subsidiaries with respect to which the Seller is obligated
to prepare, or cause to be prepared, the original such Tax Returns pursuant to
this Section
6.7 or for which the Seller has a right of review and consent pursuant to
this Section
6.7 without the prior written consent of the Seller (which consent, in
the case of such a Tax Return for a Straddle Period, shall not be unreasonably
withheld, delayed or conditioned).

    
      
         

      

      
        24

        
          

        

      

      
         

      

    

    

    (ii)          If
a dispute arises following the review of any Tax Return by either party pursuant
to Section
6.7(c)(i), and such dispute is not resolved by the parties within ten
(10) days prior to the due date of such Tax Return (taking into account any
applicable extensions of time), such dispute will be settled by a nationally
recognized independent accounting firm mutually appointed by the Buyer and the
Seller (the “Dispute
Accounting Firm”), which shall submit its final determination within
seven (7) days. The Dispute Accounting Firm’s determination shall be final,
binding and conclusive on the parties hereto absent manifest error. Any and all
costs arising from, and expenses incurred in connection with, the Dispute
Accounting Firm determination shall be borne equally by the Buyer and the
Seller. Following the Dispute Accounting Firm determination, the party
responsible for filing the applicable Tax Return shall file or cause the Company
or its Subsidiaries to file that Tax Return on or prior to the applicable due
date. In the event the Dispute Accounting Firm has not made a final
determination by the date that is three (3) days before the date on which such
Tax Return is required to be filed (including any available extensions), then
the party responsible for filing the Tax Return pursuant to Section 6.7(c)(i)
shall timely file that Tax Return as such party shall determine in good faith,
taking into account the deliberations to date, and the Seller shall pay the
Buyer or the Taxation Authority, as applicable, the amount (if any) that the
Buyer has calculated in good faith to be due and owing by it in accordance with
Section
6.7(c)(i). Within five (5) days following resolution of the dispute by
the Dispute Accounting Firm, any amounts determined to be due upon final
resolution of the dispute (including interest and penalties with respect to any
underpayment of Tax shown on the Tax Return as filed compared to the Tax shown
on the Tax Return prepared in accordance with the Dispute Accounting Firm’s
determination), taking into account amounts already paid under this Section 6 .7(c)(ii),
shall be promptly paid by the relevant party to the other party and, where
applicable, the party responsible for filing such Tax Returns shall file amended
Tax Returns.

    

    (d)           Refunds. The Seller
shall be entitled to retain or, to the extent actually received by or otherwise
available to the Buyer or its Affiliates, receive prompt payment from the Buyer
or any of its Affiliates of eighty percent (80%) of the amount of any refund or
any credit with respect to Taxes (including without limitation refunds arising
by reason of amended Tax Returns filed after the Closing Date or otherwise) with
respect to any Pre-Closing Tax Period relating to the Company or its
Subsidiaries. The Buyer shall be entitled to retain or, to the extent actually
received by the Seller or its Affiliates, receive prompt payment from the Seller
or any of its Affiliates of twenty percent (20%) of the amount of any refund or
credit with respect to Taxes (including without limitation refunds arising by
reason of amended Tax Returns filed after the Closing Date or otherwise) with
respect to any Pre-Closing Tax Period relating to the Company or its
Subsidiaries. The Buyer shall be entitled to retain or, to the extent actually
received by the Seller or its Affiliates, receive prompt payment from the Seller
or any of its Affiliates of one hundred percent (100%) of the amount of any
refund or credit with respect to Taxes (including without limitation refunds
arising by reason of amended Tax Returns filed after the Closing Date or
otherwise) with respect to any Post-Closing Tax Period relating to the Company
or its Subsidiaries. Any refunds or credits of Taxes with respect to Straddle
Periods shall be apportioned between Pre-Closing Tax Periods and Post-Closing
Tax Periods pursuant to the principles set forth in Section
6.7(b).

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

     

    (e)           Resolution of Tax
Controversies. If a claim shall be made by any Taxation Authority that
might result in an indemnity payment to the Buyer or any of its Affiliates
pursuant to Section
8.2, the Buyer shall promptly notify the Seller of such claim. In the
event that a Taxation Authority determines a deficiency in any Tax, the party
ultimately responsible for payment of a majority of such Tax under this
Agreement, whether by indemnity or otherwise, shall have authority to determine
whether to dispute such deficiency determination and to control the prosecution
or settlement of such dispute; provided that with respect to Straddle Periods,
the Seller and the Buyer shall jointly control the dispute and both the Seller
and the Buyer shall have the right to consent to any proposed settlement
thereof, such consent not to be unreasonably withheld, delayed or conditioned.
The provisions of this Section 6.7(e) shall
be applied in lieu of the provisions of Section 8.5 where
applicable.

    

    (f)          
 Tax
Cooperation. Each of the parties and their Affiliates shall provide the
other party with such information, records, powers of attorney and other
assistance and make such of its officers, directors, employees and agents
available as may reasonably be requested by such other party in connection with
the preparation and filing of any Tax Return as contemplated by this Agreement
or in connection with any audit or other proceeding that relates to the Company
or its Subsidiaries.

    

    (g)           Conveyance Taxes.
Notwithstanding any other provisions of this Agreement to the contrary, all
transfer, documentary, recording, sales, use, registration, stamp and other
similar Taxes (including all applicable real estate transfer Taxes, but
excluding any Taxes based on or attributable to income or capital gains)
together with any notarial and registry fees and recording costs imposed by any
Taxation Authority in connection with the transfer of Seller’s Membership
Interests hereunder (“Conveyance Taxes”)
will be shared equally by the Buyer, on the one hand, and the Seller, on the
other hand, regardless of which party is obligated to pay such Conveyance Taxes
under applicable Law; provided, however, that the Buyer shall pay and be solely
responsible for all value added, goods and services and any other similar Taxes
that are recoupable by the Buyer or any of its Affiliates. To the extent that
one party claims any exemptions from any Conveyance Taxes (it being understood
that each party shall claim any such exemptions available to it), such party
shall provide to the other party the appropriate exemption certificates. The
parties and their respective Affiliates will cooperate in timely preparing and
filing all Tax Returns that may be required to comply with Law relating to
Conveyance Taxes.

    

    (h)           Payments of Property
Taxes. The parties will make payments to each other to the extent
necessary so that the Seller shall bear eighty percent (80%) and Buyer shall
bear twenty percent (20%) of the cost of real property, personal property, and
other similar Taxes imposed on the assets of the Company for the Pre-Closing Tax
Period and the Buyer shall bear one-hundred percent (100%) of the cost of real
property, personal property, and other similar Taxes imposed on the assets of
the Company for the Post-Closing Tax Period, such payments to be made as soon as
practicable after the Closing in each case after the amount of such Taxes has
been determined. For this purpose, real property, personal property, and other
similar Tax obligations for the assets of the Company for any Straddle Period
shall be allocated between the Pre-Closing Tax Period and the Post-Closing Tax
Period on a per diem basis.

    

    Section
6.8.           Directors’, Officers’ and
Members’ Indemnification. The certificate of formation, limited liability
company operating agreement or other comparable organizational documents of each
of the Company or any of its Subsidiaries shall contain provisions no less
favorable with respect to indemnification for acts or omissions by members,
officers and directors in their capacities as such at any time prior to the
Closing than are set forth in such documents immediately prior to the Closing,
which provisions shall not be amended, repealed or otherwise modified for a
period of six (6) years after the Closing in any manner that would adversely
affect the rights thereunder of individuals who at or prior to the Closing were
present or former members, officers or directors of the Company or its
Subsidiaries at the Closing relating to service prior to the
Closing.

    
      
         

      

      
        26

        
          

        

      

      
         

      

    

    

    ARTICLE
VII.

    CONDITIONS
TO CLOSING

    

    Section
7.1.           General Conditions.
The respective obligations of the Buyer, the Seller and the Company to
consummate the transactions contemplated by this Agreement shall be subject to
the fulfillment, at or prior to the Closing, of each of the following
conditions, any of which may, to the extent permitted by applicable Law, be
waived in writing by any party in its sole discretion (provided, that such
waiver shall only be effective as to the obligations of such
party):

    

    (a)           No
Governmental Authority shall have enacted, issued, promulgated, enforced or
entered any Law (whether temporary, preliminary or permanent) that is then in
effect and that enjoins, restrains, makes illegal or otherwise prohibits the
consummation of the transactions contemplated by this Agreement;

    

    (b)           Any
notices, approvals or other requirements of any Governmental Authority necessary
to consummate the transactions contemplated hereby and to conduct the business
of the Company and its Subsidiaries after the Closing in all material respects
as it was conducted prior thereto shall have been given, obtained or complied
with, as applicable; and

    

    (c)           The
amounts held in escrow pursuant to that certain escrow agreement of even date
herewith among Buyer, Seller and the escrow agent party thereto shall have been
disbursed to the parties in accordance with paragraph (a) of Section 3 of such
escrow agreement.

    

    Section
7.2.           Conditions to Obligations of
the Seller. The obligations of the Seller to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment, at or prior
to the Closing, of each of the following conditions, any of which may be waived
in writing by the Seller in its sole discretion:

    

    (a)           The
representations and warranties of the Buyer contained in this Agreement shall be
true and correct both when made and as of the Closing Date, or in the case of
representations and warranties that are made as of a specified date, such
representations and warranties shall be true and correct as of such specified
date, except where the failure to be so true and correct (without giving effect
to any limitation or qualification as to “materiality” (including the word
“material”) or “material adverse effect” set forth therein) would not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect with respect to the Buyer. The Buyer shall have performed all
obligations and agreements and complied in all material respects with all
covenants and conditions required by this Agreement to be performed or complied
with by it prior to or at the Closing. The Sellers shall have received from the
Buyer a certificate certifying the statements set forth in the preceding
sentences, signed by a duly authorized officer thereof; and

    
      
         

      

      
        27

        
          

        

      

      
         

      

    

    

    (b)          Buyer shall have delivered to Seller
all of the deliverables set forth in Section
2.2(b).

    

    Section
7.3.           Conditions to Obligations of
the Buyer. The obligations of the Buyer to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment, at or prior
to the Closing, of each of the following conditions, any of which may be waived
in writing by the Buyer in its sole discretion:

    

    (a)          
The representations and warranties of the Seller and the Company contained in
this Agreement shall be true and correct both when made and as of the Closing
Date, or in the case of representations and warranties that are made as of a
specified date, such representations and warranties shall be true and correct as
of such specified date, except where the failure to be so true and correct
(without giving effect to any limitation or qualification as to “materiality”
(including the word “material”) or “Material Adverse Effect” set forth therein)
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect with respect to the Company or its Subsidiaries, taken
individually. The Seller and the Company shall have performed all obligations
and agreements and complied in all material respects with all covenants and
conditions required by this Agreement to be performed or complied with by them
prior to or at the Closing. The Buyer shall have received from the Seller a
certificate certifying the statements set forth in the preceding sentences,
signed by a duly authorized officer thereof;

    

    (b)           Seller shall have delivered to Buyer
all of the deliverables set forth in Section
2.2(c);

    

    (c)           Seller
shall have delivered all the third party and governmental consents and approvals
set forth in Schedule
7.3(c) of the Disclosure Schedules; and

    

    (d)          There
shall be no Material Adverse Effect with respect to the Company or any of its
Subsidiaries.

    

    ARTICLE
VIII.

    INDEMNIFICATION

    

    Section
8.1.           Survival of Representations
and Warranties . All representations and warranties made by the parties
in this Agreement shall survive the Closing until eighteen (18) months after
Closing Date, at which time they automatically shall expire; provided, that (x)
the Tax representations and warranties contained in Section 4.14 (Taxes),
Section 4.15
(Environmental Matters) and Section 4.22
(Regulatory Matters) shall survive the Closing until 90 days after the
expiration of the applicable statute of limitations, at which time they
automatically shall expire, and (y) the representations and warranties contained
in Section 3.1
(Organization), Section 3.2
(Authority), Section
3.4 (Membership Interests) Section 3.5
(Brokers), Section
4.1 (Organization and Qualification), Section 4.2
(Authority), Section
4.4 (Equity Interests; Subsidiaries; Joint Ventures), Section 4.20
(Brokers), Section
5.1 (Organization), Section 5.2
(Authority) and Section 5.4 (Brokers)
shall survive the Closing in perpetuity. Any claims under this Agreement with
respect to a breach of a representation or warranty must be asserted by a
written notice on or before the expiration of the applicable survival period for
such representation, warranty, covenant or agreement, and if such a notice is
given, the survival period for such representation or warranty shall continue
solely as to the specific matters subject to the claim asserted until it is
fully resolved as provided herein.

    
      
         

      

      
        28

        
          

        

      

      
         

      

    

    

    Section
8.2.           Indemnification by the
Seller.

    

    (a)           General . Subject to
the provisions of this Article VIII, the
Seller agrees to indemnify the Buyer or any of its officers, directors,
shareholders, affiliates, agents or representatives and, after the Closing, the
Company, and hold such Persons harmless from and against, any and all Losses
incurred or sustained by, or imposed upon, such Persons, with respect to or by
reason of:

    

    (i)        
  any breach or inaccuracy of any representation or warranty made by
the Seller in Article
III hereof or the Company in Article IV hereof or
in any agreement, document or certificate delivered to the Buyer by the Seller
or the Company in connection with the transactions contemplated by this
Agreement;

    

    (ii)          any
nonfulfillment or breach of any covenant, agreement or obligation to be
performed by the Seller or the Company under this Agreement or in connection
with the transactions contemplated hereby;

    

    (iii)         any
liability or obligation arising out of or related to any intercompany or
affiliate agreement, arrangement or understanding;

    

    (iv)        without
duplication of the Seller’s obligations under Section 8.2(a) and
Section 6. 7,
eighty percent (80%) of any Taxes of the Company or its Subsidiaries
attributable to any Pre-Closing Tax Period, provided that, for this purpose and
for purposes of Section 6.7(c)(i),
Taxes resulting from transactions that occur on the Closing Date shall be attributable to
the Post-Closing Tax Period and shall not be attributable to any Pre-Closing Tax
Period; and

    

    (v)         any
inaccuracy in Schedule
2.1(a) of the Disclosure Schedules that erroneously inflates the Purchase
Price.

    

    (b)           Dollar Thresholds for
Indemnification. For purposes of determining those Losses that will be
subject to indemnification under Section 8.2(a) , the
Buyer and the Seller have agreed to use the dollar thresholds provided in this
Section
8.2(b):

    

    (i)           the
Seller shall not be liable to the Buyer for any claims unless and until the
total Losses suffered by the Buyer with respect to all claims under this Section 8.2 exceeds
an amount equal to $100,000, in which case Seller shall be liable for all
Losses, including such $100,000; and

     

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

     

    (ii)          the
maximum total amount payable by the Seller under this Section 8.2 with
respect to all Losses shall not exceed an amount equal to the Purchase Price;
provided, however, that the
limitation set forth in Section 8.2(b)(i)
shall not apply to any Losses arising out of or relating to any breach or
inaccuracy of any representation or warranty made in Section 3.1 (Organization),
Section
3.2 (Authority), Section 3.4 (Membership Interests), Section 3.5 (Brokers),
Section
4.1 (Organization and
Qualification), Section 4.2 (Authority),
Section
4.4 (Equity Interests; Subsidiaries;
Joint Ventures), Section 4.14 (Taxes)
or Section 4.20
(Brokers) or to any claims for indemnification under Section
8.2(a)(ii)-(v).

    

    (c)           Limitation on
Indemnification. Seller shall not be responsible for indemnifying Buyer
for any Losses resulting directly from Buyer’s action, or an obligation of Buyer
that Buyer did not satisfy, under the contracts set forth in Schedule 8.2(c) of
the Disclosure Schedules.

    

    Section
8.3.           Indemnification by the
Buyer. Subject to the provisions of this Article VIII, the Buyer
agrees to indemnify the Seller or any of its officers, directors,
shareholders, affiliates,
agents or representatives and, prior to the Closing, the Company, and hold such
Persons harmless from and against, any and all Losses incurred or sustained by,
or imposed upon, such Persons, with respect to or by reason of:

    

    (a)           any
breach or inaccuracy of any representation or warranty made by the Buyer in this
Agreement or in any agreement, document or certificate delivered to the Seller
by the Buyer in connection with the transactions contemplated by this
Agreement;

    

    (b)           any
nonfulfillment or breach of any covenant, agreement or obligation to be
performed by the Buyer under this Agreement; and

    

    
      (c)           without
duplication of the Buyer’s obligations under Section 6.7,
(i) twenty
percent (20%) of any Taxes of the Company or its Subsidiaries attributable to
any Pre-Closing Tax Period and (ii) one-hundred percent (100%) of any Taxes of
the Company or its Subsidiaries attributable to any Post-Closing Tax Period,
provided that, for this purpose and for purposes of Section 6.7(c)(i),
Taxes resulting from transactions that occur on the Closing Date shall be
attributable to the Post-Closing Tax Period.

    

    

    Section
8.4.           Procedures for
Indemnification.

    

    (a)           If
a party seeking indemnification (the “Indemnified Party”)
shall claim to have suffered a Loss for which indemnification is available under
Section 8.2 or
8.3, as the
case may be, the Indemnified Party shall promptly notify the party responsible
for indemnification under this Article VIII (the
“Indemnifying
Party”) in writing of such claim which written notice shall describe the
nature of such claim, the facts and circumstances that give rise to such claim
and the amount of such claim if reasonably ascertainable at the time such claim
is made (or if not then reasonably ascertainable, the maximum amount of such
claim reasonably estimated by the Indemnified Party) (such notification being
the “Claim
Certificate”). In the event that within thirty (30) days after the
receipt by the Indemnifying Party of such a written notice from the Indemnified
Party, the Indemnified Party shall not have received from the Indemnifying Party
a written objection to such claim, such claim shall be conclusively presumed and
considered to have been assented to and approved by the Indemnifying Party
following receipt by the Indemnifying Party of a written notice from the
Indemnified Party to such effect.

    
      
         

      

      
        30

        
          

        

      

      
         

      

    

    

    (b)           If
an Indemnifying Party objects to the indemnification of an Indemnified Party in
respect of any claim or claims specified in any Claim Certificate, the
Indemnifying Party shall deliver a written notice to such effect to the
Indemnified Party within thirty (30) days after receipt by the Indemnifying
Party of such Claim Certificate. Thereafter, the Indemnifying Party and the
Indemnified Party shall attempt in good faith to agree upon the rights of the
respective parties for a period of not less than thirty (30) days after receipt
by the Indemnified Party of such written objection with respect to each of such
claims to which the Indemnifying Party has objected. If the Indemnified Party
and the Indemnifying Party agree with respect to any of such claims, the
Indemnified Party and the Indemnifying Party shall promptly prepare and sign a
memorandum setting forth such agreement. Should the Indemnified Party and the
Indemnifying Party fail to agree as to any particular item or items or amount or
amounts (each, a “Disputed Claim”) within such
30-day period, then either party shall be entitled to pursue its available
remedies for resolving its claim for indemnification.

    

    (c)           An
Indemnifying Party shall promptly reimburse an Indemnified Party for all Losses
under a claim, or Buyer may offset amounts due to Buyer or its Affiliates as an
Indemnified Party against amounts due to Seller under the Note, after thirty
(30) days passes from the receipt of a Claim Certificate by the Indemnified
Party without objection by the Indemnifying Party or, in the event a claim is
disputed, resolution of the Indemnified Party’s claim is reached under the terms
of Section
8.4(b).

    

    Section
8.5.           Procedures for Third-Party
Claims.

    

    (a)           Any
Indemnified Party seeking indemnification pursuant to this Article VIII in respect of any Third-Party Claim shall give
the Indemnifying Party from whom indemnification with respect to such claim is
sought (i) prompt written notice of such Third-Party Claim and (ii) copies of
all documents and information relating to any such Third- Party Claim; provided, that the
failure by the Indemnified Party to so notify or provide copies to the
Indemnifying Party shall not relieve the Indemnifying Party from any liability
to the Indemnified Party for any liability hereunder except to the extent that
such failure shall have materially and actually prejudiced the defense of such
Third-Party Claim.

    

    (b)           The
Indemnifying Party shall have the right, at its option, and expense, to defend
against, negotiate, settle or otherwise deal with any Third-Party Claim with
respect to which it is the Indemnifying Party and to be represented by counsel
of its own choice, and the Indemnified Party will not admit any liability with
respect thereto or settle, compromise, pay or discharge the same without the
consent of the Indemnifying Party, which consent shall not be unreasonably
withheld, so long as the Indemnifying Party is contesting or defending the same
with reasonable diligence and in good faith; provided, that the
Indemnified Party may participate in any proceeding with counsel of its choice
and at its expense; provided further, that the
Indemnifying Party may not enter into a settlement of any such Third-Party Claim
without the consent of the Indemnified Party, which consent shall not be
unreasonably withheld.

    

    Section
8.6.           Tax Treatment of
Indemnification. The Buyer and the Seller agree to treat any indemnity
payment made pursuant to this Article VIII as an
adjustment to the Purchase Price for all Tax purposes.

    
      
         

      

      
        31

        
          

        

      

      
         

      

    

    

    Section
8.7.           No Duplication of
Recovery. Any liability for indemnification under this Agreement shall be
determined without duplication of recovery by reason of the state of facts
giving rise to such liability constituting a breach of more than one
representation, warranty, covenant or agreement.

    

    Section
8.8.           Exclusive Remedy After the
Closing. EXCEPT WITH RESPECT TO CLAIMS OF FRAUD OR INTENTIONAL
MISREPRESENTATION, THE RIGHTS OF INDEMNITY PROVIDED IN THIS ARTICLE VIII ARE THE
PARTIES’ SOLE AND EXCLUSIVE REMEDY AFTER THE CLOSING RELATING IN ANY WAY TO THE
SUBJECT MATTER OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY AND ALL
OTHER RIGHTS OF INDEMNITY OR CONTRIBUTION, WHETHER CREATED BY LAW OR OTHERWISE,
ARE HEREBY WAIVED; PROVIDED, THAT THE
FOREGOING SHALL NOT PROHIBIT A PARTY FROM SEEKING INJUNCTIVE RELIEF, SPECIFIC
PERFORMANCE OR OTHER EQUITABLE REMEDIES.

    

    ARTICLE
IX.

    GENERAL
PROVISIONS

    

    Section
9.1.           No Presumption Against
Drafting Party. Each of the Buyer, the Seller and the Company
acknowledges that each party to this Agreement has been represented by counsel
in connection with this Agreement and the transactions contemplated by this
Agreement. Accordingly,
any rule of law or any legal decision that would require interpretation of any
claimed ambiguities in this Agreement against the drafting party has no
application and is expressly waived.

    

    Section
9.2.           Fees and Expenses.
Except as otherwise provided herein, all fees and expenses incurred in
connection with or related to this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such fees or expenses, whether or
not such transactions are consummated; provided, however, that Seller shall pay
for all such fees and expenses of the Company. In the event of termination of
this Agreement, the obligation of each party to pay its own expenses will be
subject to any rights of such party arising from a breach of this Agreement by
the other.

    

    Section
9.3.           Amendment and
Modification. This Agreement may not be amended, modified or supplemented
in any manner, whether by course of conduct or otherwise, except by an
instrument in writing signed on behalf of each party and otherwise as expressly
set forth herein.

    

    Section
9.4.           Waiver. No failure or
delay of any party in exercising any right or remedy hereunder shall operate as
a waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such right or
power, or any course of conduct, preclude any other or further exercise thereof
or the exercise of any other right or power. The rights and remedies of the
parties hereunder are cumulative and are not exclusive of any rights or remedies
which they would otherwise have hereunder. Any agreement on the part of any
party to any such waiver shall be valid only if set forth in a written
instrument executed and delivered by a duly authorized officer on behalf of such
party.

    
      
         

      

      
        32

        
          

        

      

      
         

      

    

    

    Section
9.5.           Notices. All notices
and other communications hereunder shall be in writing and shall be deemed duly
given (a) on the date of delivery if delivered personally, or if electronically,
upon written confirmation of receipt by facsimile, email or otherwise, (b) on
the first Business Day following the date of dispatch if delivered utilizing a
next-day service by a recognized next-day courier or (c) on the earlier of
confirmed receipt or the fifth Business Day following the date of mailing if
delivered by registered or certified mail, return receipt requested, postage
prepaid. All notices hereunder shall be delivered to the addresses set forth
below, or pursuant to such other instructions as may be designated in writing by
the party to receive such notice:

    

    
      	
               
      

            	
              (a)

            	
              if
      to the Seller or, prior to the Closing, the Company,
  to:

            

    

    

    NEC DG
II, LLC

    53 South
Main Street, Suite 310

    Hanover,
New Hampshire 03755

    
      	
            	
              Attention: 

            	
              Jim
      McNamara

            

    

    
      	
            	
              Facsimile: 

            	
              603-653-7524

            

    

    Email:  jmcnamara@newenergycapital.com

    

    NEC-EPS
Holding, LLC

    c/o NEC
DG II, LLC

    53 South
Main Street, Suite 310

    Hanover,
New Hampshire 03755

    
      	
            	
              Attention: 

            	
              Jim
      McNamara

            

    

    
      	
            	
              Facsimile: 

            	
              603-653-7524

            

    

    Email:  jmcnamara@newenergycapital.com

    

    with a
copy (which shall not constitute notice) to:

    

    Rath,
Young and Pignatelli, P.C.

    54 Canal
Street

    Boston,
Massachusetts 02114

    
      	
            	
              Attention: 

            	
              Oliver
      W. Stalter

            

    

    
      	
            	
              Facsimile: 

            	
              617-523-8855

            

    

    
      	
            	
              Email: 

            	
              ows@rathlaw.com

            

    

    

    
      	
            	
              (b) 

            	
              if
      to the Buyer or, after the Closing, the Company,
  to:

            

    

    

    Energy
and Power Solutions, Inc.

    150
Paularino Avenue, Suite A120

    Costa
Mesa, CA 92626

    
      	
            	
              Attention: 

            	
              Jay
      Zoellner, Chief Executive Officer

            

    

    
      	
            	
              Facsimile: 

            	
              (714)
      957-1093

            

    

    
      	
            	
              Email: 

            	
              jayz@epsway.com

            

    

    
      
         

      

      
        33

        
          

        

      

      
         

      

    

    

    NEC-EPS
Holding, LLC

    c/o
Energy and Power Solutions, Inc.

    150
Paularino Avenue, Suite A120

    Costa
Mesa, CA 92626

    
      	
            	
              Attention: 

            	
              Jay
      Zoellner, Chief Executive Officer

            

    

    
      
        	
              	
                Facsimile: 

              	
                (714)
      957-1093

              

      

    

    
      	
            	
              Email: 

            	
              jayz@epsway.com

            

    

    

    with a
copy (which shall not constitute notice) to:

    

    Bingham
McCutchen LLP

    600 Anton
Blvd., 18th Floor

    Costa
Mesa, CA 92626

    
      	
            	
              Attention: 

            	
              Stephanie
      Siegel Brecher

            

    

    
      	
            	
              Facsimile: 

            	
              714-830-0700

            

    

    
      	
            	
              Email: 

            	
              stephanie.brecher@bingham.com

            

    

    

    Section
9.6.           Interpretation. When
a reference is made in this Agreement to a Section, Article or Exhibit such
reference shall be to a Section, Article or Exhibit of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement or in any Exhibit are for convenience of reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement. All
words used in this Agreement will be construed to be of such gender or number as
the circumstances require. Any capitalized terms used in any Exhibit but not
otherwise defined therein shall have the meaning as defined in this Agreement.
All Exhibits annexed hereto or referred to herein are hereby incorporated in and
made a part of this Agreement as if set forth herein. The word “including” and
words of similar import when used in this Agreement will mean “including,
without limitation,” unless otherwise specified.

    

    Section
9.7.           Entire Agreement.
This Agreement (including the Exhibits and Schedules hereto) and the Ancillary
Agreements constitute the entire agreement, and supersede all prior written
agreements, arrangements, communications and understandings and all prior and
contemporaneous oral agreements, arrangements, communications and understandings
among the parties with respect to the subject matter hereof and thereof. This
Agreement and the Ancillary Agreements shall not be deemed to contain or imply
any restriction, covenant, representation, warranty, agreement or undertaking of
any party with respect to the transactions contemplated hereby or thereby other
than those expressly set forth herein or therein or in any document required to
be delivered hereunder or thereunder, and none shall be deemed to exist or be
inferred with respect to the subject matter hereof. Notwithstanding any oral
agreement or course of action of the parties or their Representatives to the
contrary, no party to this Agreement shall be under any legal obligation to
enter into or complete the transactions contemplated hereby unless and until
this Agreement shall have been executed and delivered by each of the
parties.

    

    Section
9.8.           No Third-Party
Beneficiaries. Nothing in this Agreement, express or implied, is intended
to or shall confer upon any Person other than the parties and their respective
successors and permitted assigns any legal or equitable right, benefit or remedy
of any nature under or by reason of this Agreement.

    
      
         

      

      
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    Section
9.9.           Governing Law. This
Agreement and all disputes or controversies arising out of or relating to this
Agreement or the transactions contemplated hereby shall be governed by, and
construed in accordance with, the internal laws of the State of California,
without regard to the laws of any other jurisdiction that might be applied
because of the conflicts of laws principles of the State of
California.

    

    Section
9.10.         Arbitration. Any
dispute, controversy or claim arising out of, in connection with, or relating to
this Agreement, the Ancillary Agreements or any breach or alleged breach thereof
shall be determined and settled by arbitration in Orange County in the State of
California, subject to Section 9.9, pursuant
to the rules then in effect of the American Arbitration Association. Any award
shall be final, binding and conclusive upon the parties, and a judgment rendered
thereon may be entered in a United States District Court located in the State of
California or any California state court having jurisdiction over the subject
matter of the dispute or matter.

    

    Section
9.11.         Disclosure Generally.
Notwithstanding anything to the contrary contained in the Disclosure Schedules
or in this Agreement, the information and disclosures contained in any
Disclosure Schedule shall be deemed to be disclosed and incorporated by
reference in any other Disclosure Schedule as though fully set forth in such
Disclosure Schedule for which applicability of such information and disclosure
is reasonably apparent on its face. The fact that any item of information is
disclosed in any Disclosure Schedule shall not be construed to mean that such
information is required to be disclosed by this Agreement. Such information and
the dollar thresholds set forth herein shall not be used as a basis for
interpreting the terms “material” or “Material Adverse Effect” or other similar
terms in this Agreement.

    

    Section
9.12.         Personal Liability.
This Agreement shall not create or be deemed to create or permit any personal
liability or obligation on the part of any direct or indirect stockholder of the
Seller or the Buyer or any member, member’s representative, manager, officer,
director, employee, Representative or investor of any party hereto.

    

    Section
9.13.         Assignment;
Successors. Neither this Agreement nor any of the rights, interests or
obligations under this Agreement may be assigned or delegated, in whole or in
part, by operation of law or otherwise, by any party without the prior written
consent of the other parties, and any such assignment without such prior written
consent shall be null and void; provided, however, that the
Buyer may assign this Agreement to any Subsidiary of the Buyer with prior
written notice to the Seller, but without the prior consent of the Seller or the
Company; provided further, that the Seller may assign
any of its rights under this Agreement, including the right to
receive the Purchase Price, to one or more Affiliates of the Seller with prior
written notice to the Buyer, but without the consent of the Buyer or the
Company; provided still
further,
that no assignment shall limit the assignor’s obligations hereunder. Subject to
the preceding sentence, this Agreement will be binding upon, inure to the
benefit of, and be enforceable by, the parties and their respective successors
and assigns.

    

    Section
9.14.         Enforcement.
Notwithstanding anything to the contrary in this Agreement, the parties 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, each of the parties shall be entitled to
specific performance of the terms hereof, including an injunction or injunctions
to prevent breaches of this Agreement and to enforce specifically the terms and
provisions of this Agreement in any California State or federal court sitting in
Los Angeles (or, if such court lacks subject matter jurisdiction, in any
appropriate California State or federal court), this being in addition to any
other remedy to which such party is otherwise entitled at law or in equity. Each
of the parties hereby further waives (a) any defense in any action for specific
performance that a remedy at law would be adequate and (b) any
requirement under any law to post security as a prerequisite to obtaining
equitable relief.

    
      
         

      

      
        35

        
          

        

      

      
         

      

    

    

    Section
9.15.         Currency. All
references to “dollars” or “$” or “US$” in this Agreement refer to United States
dollars, which is the currency used for all purposes in this
Agreement.

    

    Section
9.16.         Severability.
Whenever possible, each provision or portion of any provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable Law, but if any provision or portion of any provision of this
Agreement is held to be invalid, illegal or unenforceable in any respect under
any applicable Law or rule in any jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provision or portion of any
provision in such jurisdiction, and this Agreement shall be reformed, construed
and enforced in such jurisdiction as if such invalid, illegal or unenforceable
provision or portion of any provision had never been contained
herein.

    

    Section
9.17.         Counterparts. This
Agreement may be executed in two or more counterparts, all of which shall be
considered one and the same instrument and shall become effective when one or
more counterparts have been signed by each of the parties and delivered to the
other parties.

    

    Section
9.18.         Facsimile Signature.
This Agreement may be executed by facsimile signature and a facsimile signature
shall constitute an original for all purposes.

    

    Section
9.19.         Time of Essence. Time
is of the essence with regard to all dates and time periods set forth or
referred to in this Agreement.

    

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        37

        
          

        

      

      
         

      

    

    

    IN
WITNESS WHEREOF, each of the Seller, the Company and the Buyer have caused this
Agreement to be executed as of
title date first written above by their respective officers thereunto
duly authorized.

    

    
      
        
          
            
              
                
                  	 
      	
                          NEC
      DG II, LLC

                        
	 
      	 
      
	 
      	
                          By:

                        	 
      
	 
      	 
      	
                           
      Name:

                        
	 
      	 
      	
                           
      Title:

                        
	 
      	 
      
	 
      	
                          NEC-EPS
      HOLDING, LLC

                        
	 
      	 
      
	 
      	
                          By:

                        	 
      
	 
      	 
      	
                           
      Name:

                        
	 
      	 
      	
                           
      Title:

                        
	 
      	 
      
	 
      	
                          ENERGY
      AND POWER SOLUTIONS, INC.

                        
	 
      	 
      
	 
      	
                          By:

                        	
                           
      /s/ JAY B ZOELLNER

                        
	 
      	 
      	
                           
      Name:  JAY B
      ZOELLNER

                        
	 
      	 
      	
                           
      Title: 
PRESIDENT

                        

                

              

            

          

        

      

    

    
      
         

      

      
        38

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