Document:

exv4w11

EXHIBIT 4.11

Final Form of Warrant

THIS COMMON STOCK PURCHASE WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED IN VIOLATION OF
SUCH ACT, THE RULES AND REGULATIONS THEREUNDER OR THE PROVISIONS OF THIS COMMON STOCK PURCHASE
WARRANT.

Number of Shares of Common Stock: [_____]

Warrant No.                     

COMMON STOCK PURCHASE WARRANT

To Purchase Common Stock of

Energy Focus, Inc.

          This Is To Certify That [                    ], or registered assign (the “Holder”), is
entitled, at any time from the Issuance Date (as hereinafter defined) to the Expiration Date (as
hereinafter defined) to purchase from Energy Focus, Inc., a Delaware corporation (the “Company”),
[___(___)] shares of Common Stock (as hereinafter defined and subject to adjustment as
provided herein), in whole or in part, including fractional parts, at a purchase price of equal to
$0.01 (subject to adjustment as provided herein, the “Exercise Price”), all on the terms and
conditions and pursuant to the provisions hereinafter set forth.

          This Warrant is issued pursuant to, and the Holder is entitled to the benefits of, that
certain Warrant Acquisition Agreement dated as of March 30, 2010 by and between the Company and the
investor party thereto (the “Warrant Acquisition Agreement”). Capitalized terms used herein
without definition are used with the definitions assigned thereto in such Warrant Acquisition
Agreement.

          1. DEFINITIONS

          As used in this Common Stock Purchase Warrant (this “Warrant”), the following terms shall have
the respective meanings set forth below:

          “Business Day” shall mean any day that is not a Saturday or Sunday or a day on which banks in
New York City, New York are required or permitted to be closed in the City of New York.

          “Issuance Date” shall mean March 30, 2010.

          “Commission” shall mean the Securities and Exchange Commission or any other federal agency
then administering the Securities Act and other federal securities laws.

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          “Common Stock” shall mean (except where the context otherwise indicates) the Common Stock, par
value $0.0001 per share, of the Company as constituted on the Issuance Date, and any capital stock
into which such Common Stock may thereafter be changed, and shall also include (i) capital stock of
the Company of any other class (regardless of how denominated) issued to the holders of shares of
Common Stock upon any reclassification thereof which is also not preferred as to dividends or
assets over any other class of stock of the Company and which is not subject to redemption and (ii)
shares of common stock of any successor or acquiring Company received by or distributed to the
holders of Common Stock of the Company in the circumstances contemplated by Section 4.5.

          “Convertible Securities” shall mean options, evidences of indebtedness, shares of stock or
other securities which are convertible into or exchangeable, with or without payment of additional
consideration in cash or property, for shares of Common Stock, either immediately or upon the
occurrence of a specified date or a specified event.

          “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, or any successor
federal statute, and the rules and regulations of the Commission thereunder, all as the same shall
be in effect from time to time.

          “Exercise Period” shall mean the period during which this Warrant is exercisable pursuant to
Section 2.1.

          “Expiration Date” shall mean the fifth anniversary hereof.

          “Fundamental Corporate Change” shall have the meaning set forth in Section 4.5.

          “Holder” shall mean the Person in whose name the Warrant or Warrant Shares set forth herein is
registered on the books of the Company maintained for such purpose.

          “Market Price” shall mean, on any date of determination, (i) the closing price of a share of
Common Stock on such day as reported on the principal Trading Market on which the Common Stock is
listed or traded, or (ii) if the Common Stock is not listed on a Trading Market, the closing bid
price for a share of Common Stock on such day in the over-the-counter market, as reported by the
OTC Bulletin Board, or (iii) if the Common Stock is not then listed or quoted on the OTC Bulletin
Board, the closing bid price for a share of Common Stock on such day in the over-the-counter market
as reported by the National Quotation Bureau Incorporated (or any similar organization or agency
succeeding to its functions of reporting prices).

          “Other Property” shall have the meaning set forth in Section 4.5.

          “Person” shall mean any individual, sole proprietorship, partnership, joint venture, trust,
incorporated organization, association, Company, institution, public benefit Company, entity or
government (whether federal, state, county, city, municipal or otherwise, including, without
limitation, any instrumentality, division, agency, body or department thereof).

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

          “Trading Day” means (i) a day on which the Common Stock is traded on a Trading Market, or (ii)
if the Common Stock is not listed on a Trading Market, a day on which the Common Stock is traded in
the over-the-counter market, as reported by the OTC Bulletin Board, or (iii) if the Common Stock is
not then quoted on the OTC Bulletin Board, a day on which the Common Stock is quoted in the
over-the-counter market as reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding to its functions of reporting prices); provided, that in the
event that the Common Stock is not listed or quoted as set forth in (i), (ii) and (iii) hereof,
then the term “Trading Day” shall mean a Business Day.

          “Trading Market” means whichever of the New York Stock Exchange, the American Stock Exchange,
the Nasdaq National Market, or the Nasdaq Bulletin Board on which the Common Stock is listed or
quoted for trading on the date in question.

          “Transfer” shall mean any disposition of any Warrant or Warrant Shares or of any interest in
either thereof, which would constitute a sale thereof within the meaning of the Securities Act.

          “Warrant Shares” shall mean the shares of Common Stock issued or issuable to the Holder of
this Warrant upon the exercise thereof.

          “Warrants” shall mean this Warrant and all warrants issued upon transfer, division or
combination of, or in substitution for, any thereof. All Warrants shall at all times be identical
as to terms and conditions and date, except as to the number of shares of Common Stock for which
they may be exercised.

          2. EXERCISE OF WARRANT

          2.1 Manner of Exercise

          From the Issuance Date and until 5:00 p.m., Eastern Standard Time, on the Expiration Date, the
Holder may exercise this Warrant, on any Business Day, for all or any part of the number of shares
of Common Stock purchasable hereunder, subject to the further restriction in the next paragraph.

          In order to exercise this Warrant, in whole or in part, the Holder shall surrender this
Warrant to the Company at its principal office at 32000 Aurora Road, Solon, Ohio 44139, or at the
office or agency designated by the Company pursuant to Section 12, together with a written notice
of the Holder’s election to exercise this Warrant, which notice shall specify the number of shares
of Common Stock to be purchased, and shall be accompanied by payment of the Exercise Price in cash
or wire transfer or cashier’s check drawn on a United States bank. Such notice shall be
substantially in the form of the subscription form appearing at the end of this Warrant as Exhibit
A, duly executed by the Holder or his agent or attorney. Upon receipt of the items referred to
above, the Company shall, as promptly as practicable, execute or cause to

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be executed and deliver or cause to be delivered to the Holder a certificate or certificates
representing the aggregate number of full shares of Common Stock issuable upon such exercise,
together with cash in lieu of any fraction of a share, as hereinafter provided. The stock
certificate or certificates so delivered shall be, to the extent possible, in such denomination or
denominations as the Holder shall request in the notice and shall be registered in the name of the
Holder or, subject to Section 9, such other name as shall be designated in the notice. This
Warrant shall be deemed to have been exercised and such certificate or certificates shall be deemed
to have been issued, and the Holder or any other Person so designated to be named therein shall be
deemed to have become the holder of record of such shares for all purposes, as of the date the
notice, together with the cash or check or wire transfer of funds and this Warrant is received by
the Company as described above and all taxes required to be paid by the Holder, if any, pursuant to
Section 2.2 prior to the issuance of such shares have been paid, provided that if the Warrant is
exercised in connection with a merger, reorganization or other Fundamental Corporate Change, such
exercise may be made conditional upon the consummation of such event. If this Warrant shall have
been exercised in part, the Company shall, at the time of delivery of the certificate or
certificates representing Warrant Shares, deliver to the Holder a new Warrant evidencing the rights
of the Holder to purchase the unpurchased shares of Common Stock called for by this Warrant, which
new Warrant shall in all other respects be identical with this Warrant, or, at the request of the
Holder, appropriate notation may be made on this Warrant and the same returned to the Holder.
Notwithstanding any provision herein to the contrary, the Company shall not be required to register
shares in the name of any Person who acquired this Warrant (or part hereof) or any Warrant Shares
otherwise than in accordance with this Warrant.

          2.2 Payment of Taxes and Charges

          All shares of Common Stock issuable upon the exercise of this Warrant pursuant to the terms
hereof shall be validly issued, fully paid and nonassessable, freely tradable and without any
preemptive rights. The Company shall pay all expenses in connection with, and all taxes and other
governmental charges that may be imposed with respect to, the issuance or delivery thereof, unless
such tax or charge is a tax on income imposed by law upon the Holder in connection with the
issuance of the Common Stock to a person other than the Holder, in which case such taxes or charges
shall be paid by the Holder.

          2.3 Fractional Shares

          The Company shall not be required to issue a fractional share of Common Stock upon exercise of
any Warrant. As to any fraction of a share which the Holder would otherwise be entitled to
purchase upon such exercise, the Company shall pay a cash adjustment in respect of such fraction in
an amount equal to the same fraction of the Market Price per share of Common Stock as of the date
of exercise of the Warrant giving rise to such fraction of a share.

          2.4 Cashless Exercise During Event

          Notwithstanding any other provision contained herein to the contrary, from and after the
six-month anniversary of the Closing Date, whenever an Event has occurred and is continuing and at
any time after the expiration of the Effectiveness Period, the Holder may elect to receive, without
the payment by the Holder of the aggregate Exercise Price in respect of the

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shares of Common Stock to be acquired, shares of Common Stock of equal value to the value of
this Warrant, or any specified portion hereof, by the surrender of this Warrant (or such portion of
this Warrant being so exercised) together with a subscription form in the form attached hereto as
Exhibit A, with appropriate modification to reflect such cashless exercise, duly executed, to the
Company. Thereupon, the Company shall issue to the Holder such number of fully paid, validly
issued and nonassessable shares of Common Stock as is computed using the following formula:

          

          where

          X = the number of shares of Common Stock to which the Holder is entitled upon such cashless
exercise;

          Y = the total number of shares of Common Stock covered by this Warrant for which the Holder
has surrendered purchase rights at such time for cashless exercise (including both shares to be
issued to the Holder and shares as to which the purchase rights are to be canceled as payment
therefor);

          A = the Market Price of one share of Common Stock as at the date the net issue election is
made; and

          B = the Warrant Price in effect under this Warrant at the time the net issue election is made.

          2.5 Buy-In

          If at any time when a Registration Statement is in effect or required to be in effect with
respect to the Warrant Shares, as provided for by the Securities Purchase Agreement, (a) a
certificate representing the Warrant Shares is not delivered to the Holder within three (3)
Business Days of the due exercise of this Warrant by the Holder and (b) prior to the time such
certificate is received by the Holder, the Holder, or any third party on behalf of the Holder or
for the Holder’s account, purchases (in an open market transaction or otherwise) shares of Common
Stock to deliver in satisfaction of a sale by the Holder of shares represented by such certificate
(a “Buy-In”), then the Company shall pay in cash to the Holder (for costs incurred either directly
by such Holder or on behalf of a third party) the amount by which the total purchase price paid for
Common Stock as a result of the Buy-In (including brokerage commissions, if any) exceeds the
proceeds received by such Holder as a result of the sale to which such Buy-In relates. The Holder
shall provide the Company written notice indicating the amounts payable to the Holder in respect of
the Buy-In.

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          3. TRANSFER, DIVISION AND COMBINATION

          3.1 Transfer

          Subject to compliance with Section 9, transfer of this Warrant and all rights hereunder, in
whole or in part, shall be registered on the books of the Company to be maintained for such
purpose, upon surrender of this Warrant at the principal office of the Company referred to in
Section 2.1 or the office or agency designated by the Company pursuant to Section 12, together with
a written assignment of this Warrant substantially in the form of Exhibit B hereto duly executed by
the Holder or his agent or attorney and funds sufficient to pay any transfer taxes payable upon the
making of such transfer. Upon such surrender and, if required, such payment, the Company shall,
subject to Section 9, execute and deliver a new Warrant or Warrants in the name of the assignee or
assignees and in the denomination specified in such instrument of assignment, and shall issue to
the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant
shall promptly be canceled. A Warrant, if properly assigned in compliance with Section 9, may be
exercised by a new Holder for the purchase of shares of Common Stock without having a new warrant
issued.

          3.2 Division and Combination

          Subject to Section 9, this Warrant may be divided or combined with other Warrants upon
presentation hereof at the aforesaid office or agency of the Company, together with a written
notice specifying the names and denominations in which new Warrants are to be issued, signed by the
Holder or his agent or attorney. Subject to compliance with Sections 3.1 and 9, as to any transfer
which may be involved in such division or combination, the Company shall execute and deliver a new
Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice.

          3.3 Expenses

          The Company shall prepare, issue and deliver at its own expense (other than transfer taxes)
the new Warrant or Warrants under this Section 3.

          3.4 Maintenance of Books

          The Company agrees to maintain, at its aforesaid office or agency, books for the registration
and the registration of transfers of the Warrants.

          4. ADJUSTMENTS

          The number of shares of Common Stock for which this Warrant is exercisable, or the price at
which such shares may be purchased upon exercise of this Warrant, shall be subject to adjustment
from time to time as set forth in this Section 4. The Company shall give the Holder notice of any
event described below which requires an adjustment pursuant to this Section 4 at the time of such
event.

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          4.1 Stock Dividends, Subdivisions and Combinations

          If at any time the Company shall:

          (a) declare or pay to the holders of its Common Stock a dividend payable in, or other
distribution of, shares of Common Stock or in Convertible Securities;

          (b) subdivide its outstanding shares of Common Stock into a larger number of shares of Common
Stock; or

          (c) combine its outstanding shares of Common Stock into a smaller number of shares of Common
Stock;

then (i) the number of shares of Common Stock for which this Warrant is exercisable immediately
after the occurrence of any such event shall be adjusted to equal the number of shares of Common
Stock which a record holder of the same number of shares of Common Stock for which this Warrant is
exercisable immediately prior to the occurrence of such event would own or be entitled to receive
after the occurrence of such event, and (ii) the then-current Exercise Price shall be adjusted to
equal (A) the then-current Exercise Price multiplied by the number of shares of Common Stock for
which this Warrant is exercisable immediately prior to the adjustment divided by (B) the number of
shares for which this Warrant is exercisable immediately after such adjustment.

          4.2 Certain Other Distributions

          If at any time the Company shall declare or pay to the holders of its Common Stock any
dividend or other distribution of:

          (a) cash;

          (b) any evidences of its indebtedness, any shares of its stock or any other securities or
property of any nature whatsoever (other than cash, Convertible Securities or additional shares of
Common Stock); any warrants or other rights to subscribe for or purchase any evidences of its
indebtedness, any shares of its stock or any other securities or property of any nature whatsoever
(other than cash, Convertible Securities or additional shares of Common Stock);

          then, upon exercise of this Warrant, the Holder shall be entitled to receive such dividend or
distribution as if the Holder had exercised this Warrant prior to the date of such dividend or
distribution. A reclassification of the Common Stock (other than a change in par value, or from
par value to no par value or from no par value to par value) into shares of Common Stock and shares
of any other class of stock shall be deemed a distribution by the Company to the holders of its
Common Stock of such shares of such other class of stock within the meaning of this Section 4.2
and, if the outstanding shares of Common Stock shall be changed into a larger or smaller number of
shares of Common Stock as a part of such reclassification, such change shall be deemed a
subdivision or combination, as the case may be, of the outstanding shares of Common Stock within
the meaning of Section 4.1.

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          4.3 Dilutive Issuances

          If at any time after the Issuance Date the Company shall issue or sell shares of Common Stock
or Convertible Securities (other than (i) securities issued or issuable in Excluded Issuances or
(ii) shares of Common Stock issued as a result of a dividend or other distribution on the Common
Stock payable in Common Stock or (iii) a subdivision of outstanding shares of Common Stock),
without consideration or for a consideration per share less than $0.86, the Exercise Price shall be
reduced to a price (calculated to the nearest cent) (i) determined in accordance with the following
formula:

          

          where:

	 	P1 = 	 	 Applicable Exercise Price in effect
immediately prior to such new issue or sale.
	 
	 	Q1 = 	 	 Number of shares of Common Stock outstanding
plus the number of shares of Common Stock issuable upon conversion or
exercise of Convertible Securities outstanding immediately prior to
such new issue or sale.
	 
	 	P2 = 	 	 100% of the weighted average price per share
of Common Stock received or deemed by the Company upon such new issue
or sale.
	 
	 	Q2 = 	 	 Number of shares of Common Stock issued or
sold, or deemed to have been issued, in the subject transaction.

          For purposes of this Section 4.3, upon the sale or issuance of Convertible Securities, the
maximum number of shares of Common Stock issuable upon the exercise, conversion or exchange of such
Convertible Securities (as set forth in the instrument relating thereto without regard to any
provisions contained therein for a subsequent adjustment of such number) shall be deemed to be
issued as of the time of such issue or sale and the consideration deemed received for such shares
of Common Stock shall be the consideration actually received by the Company for the issue of such
Convertible Securities plus the minimum additional consideration to be received by the Company upon
the full exercise, conversion or exchange of such Convertible Securities. Insofar as any
consideration received, or to be received, by the Company consists of property other than cash,
such consideration shall be computed at the fair value thereof at the time of such issue or sale,
as determined in good faith by the Board.

          4.4 Other Provisions Applicable to Adjustments under this Section

          The following provisions shall be applicable to the making of adjustments of the number of
shares of Common Stock for which this Warrant is exercisable and the current Exercise Price
provided for in this Section 4:

          (a) When Adjustments to be Made. The adjustments required by this Section 4 shall be made
whenever and as often as any specified event requiring an adjustment shall occur. For the purpose
of any adjustment, any specified event shall be deemed to have occurred at the close of business on
the date of its occurrence.

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          (b) Fractional Interests. In computing adjustments under this Section 4, fractional
interests in Common Stock shall be taken into account to the nearest 1/10th of a share.

          (c) When Adjustment not Required. If the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend or distribution or
subscription or purchase rights and shall, thereafter and before the distribution to the holders
thereof, legally abandon its plan to pay or deliver such dividend, distribution, subscription or
purchase rights, then thereafter no adjustment shall be required by reason of the taking of such
record and any such adjustment previously made in respect thereof shall be rescinded and annulled.

          4.5 Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets

          In case the Company shall reorganize its capital, reclassify its capital stock, consolidate or
merge with or into another Person (where the Company is not the survivor or where there is a change
in or distribution with respect to the Common Stock of the Company), or sell, convey, transfer or
otherwise dispose of all or substantially all its property, assets or business to another Person,
or effectuate a transaction or series of related transactions in which more than 50% of the voting
power of the Company is disposed of (each, a “Fundamental Corporate Change”) and, pursuant to the
terms of such Fundamental Corporate Change, shares of common stock of the successor or acquiring
Company, or any cash, shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or in lieu of common
stock of the successor or acquiring Company (“Other Property”), are to be received by or
distributed to the holders of Common Stock, then the Holder shall have the right thereafter to
receive, upon exercise of the Warrant, such number of shares of common stock of the successor or
acquiring Company or of the Company, if it is the surviving Company, and Other Property as is
receivable upon or as a result of such Fundamental Corporate Change by a holder of the number of
shares of Common Stock for which this Warrant is exercisable immediately prior to such Fundamental
Corporate Change. In case of any such Fundamental Corporate Change, this Warrant shall expire and
be of no further force and effect on the closing date of such Fundamental Corporate Change and, in
lieu of any other rights of the Holder hereunder, the Holder shall have the right to receive, with
within five Business Days of the closing of such Fundamental Corporate Change, cash in an amount
equal to the Black Scholes Value of the remaining unexercised portion of this Warrant on the date
of such Fundamental Corporate Change. In the event the Company and the Holder are unable to agree
on the Black Scholes Value, the parties shall submit the matter to a mutually agreeable accounting
firm of regional or national stature for the purpose of making a binding determination of the Black
Scholes Value.

          4.6 Other Action Affecting Common Stock

          In case at any time or from time to time the Company shall take any action in respect of its
Common Stock, other than any action described in this Section 4, or any other event occurs, which
would have a materially adverse effect upon the rights of the Holder, the number of shares of
Common Stock and/or the purchase price thereof shall be adjusted in such

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manner as may be equitable in the circumstances, as determined in good faith by the Board of
Directors of the Company.

          4.7 Nasdaq Limitation; Par Value Limitation

          (a) Notwithstanding any other provision in Sections 4.3 or 4.6 to the contrary, if a
reduction in the Exercise Price pursuant to Sections 4.3 or 4.6 would require the Company to obtain
stockholder approval of the transactions contemplated by the Purchase Agreement pursuant to Nasdaq
Rule 5635 and such stockholder approval has not been obtained, (i) the Exercise Price shall be
reduced under Section 4.3, or may be reduced under Section 4.6, to the maximum extent that would
not require stockholder approval under such Rule, and (ii) the Company shall under Section 4.3, or
may under Section 4.6, use its commercially reasonable efforts to obtain such stockholder approval
as soon as reasonably practicable, including by calling a special meeting of stockholders to vote
on such Exercise Price adjustment. This provision shall not restrict the number of shares of
Common Stock which a Warrantholder may receive or beneficially own in order to determine the amount
of securities or other consideration that such Holder may receive in the event of a Fundamental
Corporate Change.

          (b) Notwithstanding anything herein to the contrary, the Company agrees not to enter into
any transaction which, by reason of any adjustment hereunder, would cause the Exercise Price to be
less than the par value per share of Common Stock.

          5. NOTICES TO THE HOLDER

          5.1 Notice of Adjustments

          Whenever the number of shares of Common Stock for which this Warrant is exercisable, or
whenever the price at which a share of such Common Stock may be purchased upon exercise of the
Warrants, shall be adjusted pursuant to Section 4, the Company shall forthwith prepare a
certificate to be executed by the chief financial officer of the Company setting forth, in
reasonable detail, the event requiring the adjustment and the method by which such adjustment was
calculated (including a description of the basis on which the Board of Directors of the Company
determined the fair value of any evidences of indebtedness, shares of stock, other securities or
property or warrants or other subscription or purchase rights referred to in Section 4.2),
specifying the number of shares of Common Stock for which this Warrant is exercisable and (if such
adjustment was made pursuant to Section 4.2 or 4.5) describing the number and kind of any other
shares of stock or Other Property for which this Warrant is exercisable, and any change in the
purchase price or prices thereof, after giving effect to such adjustment or change. The Company
shall promptly cause a signed copy of such certificate to be delivered to the Holder in accordance
with Section 14.2. The Company shall keep, along with the transfer register maintained in
accordance with Section 3.4, copies of all such certificates and cause the same to be available for
inspection at said office during normal business hours by the Holder or any prospective purchaser
of a Warrant designated by the Holder.

          5.2 Notice of Corporate Action

          If at any time:

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          (a) the Company shall take a record of the holders of its Common Stock for the purpose of
entitling them to receive a dividend or other distribution, or any right to subscribe for or
purchase any evidences of its indebtedness, any shares of stock of any class or any other
securities or property, or to receive any other right; or

          (b) there shall be any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any consolidation or merger of the Company
with, or any sale, transfer or other disposition of all or substantially all the property, assets
or business of the Company to, another Company; or

          (c) there shall be a voluntary or involuntary dissolution, liquidation or winding up of the
Company;

then, in any one or more of such cases, the Company shall give to Holder (i) at least 10 days’
prior written notice of the date on which a record date shall be selected for such dividend,
distribution or right or for determining rights to vote in respect of any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or
winding up, and (ii) in the case of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding up, at least 10
days’ prior written notice of the date when the same shall take place. Such notice in accordance
with the foregoing clause also shall specify (i) the date on which any such record is to be taken
for the purpose of such dividend, distribution or right, the date on which the holders of Common
Stock shall be entitled to any such dividend, distribution or right, and the amount and character
thereof, and (ii) the date on which any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding up is to take place
and the time, if any such time is to be fixed, as of which the holders of Common Stock shall be
entitled to exchange their shares of Common Stock for securities or other property deliverable upon
such reorganization, reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up. Each such written notice shall be sufficiently given if
addressed to the Holder at the last address of the Holder appearing on the books of the Company and
delivered in accordance with Section 14.2.

          6. NO IMPAIRMENT

          The Company shall not by any action, including, without limitation, amending its certificate
of incorporation or through any reorganization, transfer of assets, consolidation, merger,
dissolution, issuance or sale of securities or other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all times in good faith
assist in the carrying out of all such terms and in the taking of all such actions as may be
necessary or appropriate to protect the rights of the Holder against impairment. Without limiting
the generality of the foregoing, the Company will (a) not increase the par value of any shares of
Common Stock receivable upon the exercise of this Warrant above the amount payable therefor upon
such exercise immediately prior to such increase in par value, (b) take all such action as may be
necessary or appropriate in order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this Warrant, and (c) use its best
efforts to obtain all such authorizations, exemptions or consents from any

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public regulatory body having jurisdiction thereof as may be necessary to enable the Company
to perform its obligations under this Warrant.

          Upon the request of the Holder, the Company will at any time during the period this Warrant is
outstanding acknowledge in writing, in form satisfactory to the Holder, the continuing validity of
this Warrant and the obligations of the Company hereunder.

          7. RESERVATION AND AUTHORIZATION OF COMMON STOCK

          From and after the Issuance Date, the Company shall at all times reserve and keep available
for issuance upon the exercise of Warrants such number of its authorized but unissued shares of
Common Stock as will be sufficient to permit the exercise in full of all outstanding Warrants. All
shares of Common Stock which shall be so issuable, when issued upon exercise of any Warrant and
payment therefor in accordance with the terms of such Warrant, shall be duly and validly issued and
fully paid and nonassessable and not subject to preemptive rights.

          Before taking any action which would cause an adjustment reducing the then-current Exercise
Price below the then par value, if any, of the shares of Common Stock issuable upon exercise of the
Warrants, the Company shall take any corporate action which may be necessary in order that the
Company may validly and legally issue fully paid and nonassessable shares of such Common Stock at
such adjusted Exercise Price.

          Before taking any action which would result in an adjustment in the number of shares of Common
Stock for which this Warrant is exercisable or in the then-current Exercise Price, the Company
shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be
necessary from any public regulatory body or bodies having jurisdiction thereof.

          8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS

          In the case of all dividends or other distributions by the Company to the holders of its
Common Stock with respect to which any provision of Section 4 refers to the taking of record of
such holders, the Company will in each case take such a record and will take such record as of the
close of business on a Business Day. The Company will not at any time, except upon dissolution,
liquidation or winding up of the Company, close its stock transfer books or Warrant transfer books
so as to result in preventing or delaying the exercise or transfer of any Warrant.

          9. RESTRICTIONS ON TRANSFERABILITY

          The Warrants and the Warrant Shares shall not be transferred, hypothecated or assigned before
satisfaction of the conditions specified in the legend affixed to the first page of this Warrant,
which conditions are intended, in part, to ensure compliance with the provisions of the Securities
Act with respect to the Transfer of any Warrant or any Warrant Shares. The Holder, by acceptance
of this Warrant, agrees to be bound by the provisions of this Section 9.

12

 

          10. LIMITATIONS ON EXERCISE.

          Notwithstanding anything to the contrary contained herein, the number of Warrant Shares that
may be acquired by the Warrantholder upon any exercise of this Warrant (or otherwise in respect
hereof) shall be limited to the extent necessary to insure that, following such exercise (or other
issuance), the total number of shares of Common Stock then beneficially owned by such Warrantholder
and its Affiliates and any other Persons whose beneficial ownership of Common Stock would be
aggregated with the Warrantholder’s for purposes of Section 13(d) of the Securities Exchange Act of
1934, as amended (the “Exchange Act”), does not exceed 19.9% of the total number of issued and
outstanding shares of Common Stock (including for such purpose the shares of Common Stock issuable
upon such exercise). For such purposes, beneficial ownership shall be determined in accordance with
Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. This
provision shall not restrict the number of shares of Common Stock which a Warrantholder may receive
or beneficially own in order to determine the amount of securities or other consideration that such
Holder may receive in the event of a Fundamental Corporate Change.

          11. LOSS OR MUTILATION

          Upon receipt by the Company from the Holder of evidence reasonably satisfactory to it of the
ownership of and the loss, theft, destruction or mutilation of this Warrant and indemnity
reasonably satisfactory to it (it being understood that the written agreement of the Holder shall
be sufficient indemnity), and in case of mutilation upon surrender and cancellation hereof, the
Company will execute and deliver in lieu hereof a new Warrant of like tenor to the Holder;
provided, in the case of mutilation no indemnity shall be required if this Warrant in identifiable
form is surrendered to the Company for cancellation.

          12. OFFICE OF THE COMPANY

          As long as any of the Warrants remain outstanding, the Company shall maintain an office or
agency (which may be the principal executive offices of the Company) where the Warrants may be
presented for exercise, registration of transfer, division or combination as provided in this
Warrant.

          13. LIMITATION OF LIABILITY

          No provision hereof, in the absence of affirmative action by the Holder to purchase shares of
Common Stock, and no enumeration herein of the rights or privileges of the Holder hereof, shall
give rise to any liability of the Holder for the purchase price of any Common Stock or as a
stockholder of the Company, whether such liability is asserted by the Company or by creditors of
the Company. Nothing in the foregoing shall be construed in any manner to limit or deny the
liability of a Holder in any other capacity, including, without limitation, as a director of the
Company.

13

 

          14. MISCELLANEOUS

          14.1 Nonwaiver

          No course of dealing or any delay or failure to exercise any right hereunder on the part of
the Holder shall operate as a waiver of such right or otherwise prejudice the Holder’s rights,
powers or remedies. No waiver by the Holder of any right hereunder on any one occasion shall
operate as a waiver of such right on any other occasion.

          14.2 Notice Generally

          Except as may be otherwise provided herein, any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed
given and effective on the earliest of (a) the date of transmission, if such notice or
communication is delivered via facsimile (provided the sender receives a machine-generated
confirmation of successful transmission) at the facsimile number specified in this Section prior to
6:30 p.m. eastern time on a Business Day, (b) the next Business Day after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile number specified in
this Section on a day that is not a Business Day or later than 6:30 p.m. eastern time on any
Business Day, (c) the Business Day following the date of transmission, if sent by a nationally
recognized overnight courier service, or (d) upon actual receipt by the party to whom such notice
is required to be given. The address for such notices and communications shall be the same as
provided in the Warrant Acquisition Agreement; or such other address as may be designated in
writing hereafter, in the same manner, by such addressee.

          14.3 Remedies

          The Holder in addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights under Section 2 of this
Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by it of the provisions of Section 2 of this Warrant and hereby
agrees to waive the defense in any action for specific performance that a remedy at law would be
adequate.

          14.4 Successors and Assigns

          Subject to the provisions of Sections 3.1 and 9, this Warrant and the rights evidenced hereby
shall inure to the benefit of and be binding upon the successors of the Company and the successors
and assigns of the Holder. The provisions of this Warrant are intended to be for the benefit of
all Holders from time to time of this Warrant and, with respect to Section 9 hereof, the holders of
Warrant Shares, and shall be enforceable by any such holder or the holder of Warrant Shares.

          14.5 Amendment

          This Warrant may be modified or amended or the provisions hereof waived with the written
consent of the Company and the Holder.

14

 

          14.6 Severability

          Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this Warrant shall be prohibited
by or invalid under applicable law, such provision shall only be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision or the remaining
provisions of this Warrant.

          14.7 Headings

          The headings used in this Warrant are for the convenience of reference only and shall not, for
any purpose, be deemed a part of this Warrant.

          14.8 Governing Law

          This Warrant shall be governed by the laws of the State of Delaware, without regard to the
provisions thereof relating to conflicts of law.

          14.9 Disputes

          In the case of a dispute as to the determination of the Exercise Price or the arithmetic
calculation of the securities or other property deliverable upon exercise of this Warrant, the
Company shall promptly issue and deliver to the Holder the securities or other properties that are
not in dispute.

          In Witness Whereof, the Company has caused this Warrant to be duly executed by the
undersigned, thereunto duly authorized, as of the date written below.

Dated: March 30, 2010

	 	 	 	 	 
	 	Energy Focus, Inc.

 	 
	 	By:  	 	 
	 	 	Name:  	Nicholas G. Berchtold 	 
	 	 	Its: Vice President of Finance and

       Chief Financial Officer 	 
	 

15

 

EXHIBIT A

SUBSCRIPTION FORM

[To be executed only upon exercise of Warrant]

          The undersigned registered owner of this Warrant irrevocably exercises this Warrant for the
purchase of                      shares of Common Stock of Energy Focus, Inc. and herewith makes payment
therefor, all at the price and on the terms and conditions specified in this Warrant and requests
that certificates for the shares of Common Stock hereby purchased (and any securities or other
property issuable upon such exercise) be issued in the name of and delivered to

 

whose address is

 

and, if such shares of Common Stock shall not include all of the shares of Common Stock issuable as
provided in this Warrant, that a new Warrant of like tenor and date for the balance of the shares
of Common Stock issuable hereunder be delivered to the undersigned.

	 	 	 	 	 
	 
	 
	 	 

(Name of Registered Owner)
	 	 
	 
	 	 	 	 
	 
	 
	 	 

(Signature of Registered Owner)	 	 
	 
	 	 	 	 
	 
	 
	 	 

(Street Address)	 	 
	 
	 	 	 	 
	 
	 
	 	 

(City)     (State)      (Zip Code)
	 	 
	 
	 	 	 	 
	 
	 	Notice: The signature on this subscription must
correspond with the name as written upon the face
of the within Warrant in every particular,
without alteration or enlargement or any change
whatsoever.	 	 

A-1

 

EXHIBIT B

ASSIGNMENT FORM

          For Value Received the undersigned registered owner of this Warrant hereby sells,
assigns and transfers unto the Assignee named below all of the rights of the undersigned under this
Warrant, with respect to the number of shares of Common Stock set forth below:

	 	 	 
	 	 	No. of Shares of
	Name and Address of Assignee	 	Common Stock
	 
	 
	 	 

and does hereby irrevocably constitute and appoint

 

attorney-in-fact to register such transfer on the books of Energy Focus, Inc. maintained for the
purpose, with full power of substitution in the premises.

Dated:                     

	 	 	 	 	 
	 
	 	 
	 	 
	 
	 	(Name of Registered Owner)	 	 
	 
	 	 	 	 
	 
	 
	 	 

(Signature of Registered Owner)	 	 
	 
	 	 	 	 
	 
	 	Notice: The signature on this assignment must
correspond with the name as written upon the face
of the within Warrant in every particular,
without alteration or enlargement or any change
whatsoever.	 	 

B-1exv10w40

EXHIBIT 10.40

Execution copy

MEMBER INTEREST PURCHASE AGREEMENT

December 29, 2009

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	Article I — Purchase and Sale of Units 
	 	 	1	 
	Section 1.1 Units; Excluded Assets; Excluded Liabilities 
	 	 	1	 
	Section 1.1.1 Purchase of Units 
	 	 	1	 
	Section 1.1.2 Excluded Assets 
	 	 	1	 
	Section 1.1.3 Excluded Liabilities 
	 	 	1	 
	Section 1.2 Transfer of Units 
	 	 	2	 
	Section 1.3 Assignment of Contracts and Rights 
	 	 	2	 
	Section 1.4 Survival of Quotations 
	 	 	2	 
	 
	 	 	 	 
	Article II — Closing; Purchase Price; Other Considerations 
	 	 	3	 
	Section 2.1 Closing 
	 	 	3	 
	Section 2.2 Cash Purchase Price 
	 	 	3	 
	Section 2.3 Earn-Out 
	 	 	3	 
	Section 2.4 Convertible Promissory Note 
	 	 	3	 
	Section 2.5 Security Agreement 
	 	 	4	 
	Section 2.6 Unit Pledge Agreement 
	 	 	4	 
	Section 2.7 Buyer Financial Termination Provision 
	 	 	4	 
	Section 2.8 Listing of Common Stock 
	 	 	4	 
	Section 2.9 Bonding Capacity 
	 	 	4	 
	Section 2.10 Step-In Rights 
	 	 	4	 
	Section 2.11 Rent 
	 	 	4	 
	Section 2.12 Post-Closing Agreement 
	 	 	5	 
	Section 2.13 Management Fee 
	 	 	5	 
	Section 2.14 Shares of Common Stock 
	 	 	5	 
	 
	 	 	 	 
	Article III — Representations and Warranties of Sellers and Company 
	 	 	5	 
	Section 3.1 Organization 
	 	 	5	 
	Section 3.2 Qualification of Company 
	 	 	6	 
	Section 3.3 Authorization 
	 	 	6	 
	Section 3.3.1 Authority 
	 	 	6	 
	Section 3.3.2 No Breach of Violation 
	 	 	6	 
	Section 3.4 Financial Statements 
	 	 	6	 
	Section 3.4.1 Statements 
	 	 	6	 
	Section 3.4.2 Accuracy 
	 	 	7	 
	Section 3.4.3 No Undisclosed Liabilities 
	 	 	7	 
	Section 3.4.4 Absences of Changes 
	 	 	7	 
	Section 3.4.5 Discharge of Liabilities 
	 	 	8	 
	Section 3.5 Assets 
	 	 	8	 
	Section 3.5.1 Title 
	 	 	8	 
	Section 3.5.2 Condition 
	 	 	8	 
	Section 3.6 Equipment 
	 	 	8	 
	Section 3.7 Intellectual Property 
	 	 	8	 
	Section 3.7.1 
	 	 	8	 

i

 

	 	 	 	 	 
	Section 3.7.2 
	 	 	8	 
	Section 3.7.3 
	 	 	9	 
	Section 3.7.4 
	 	 	9	 
	Section 3.8 Contracts and Obligations 
	 	 	9	 
	Section 3.8.1 Identification 
	 	 	9	 
	Section 3.8.2 Full Force and Effect 
	 	 	9	 
	Section 3.8.3 No Default 
	 	 	9	 
	Section 3.8.4 Copies 
	 	 	10	 
	Section 3.8.5 Renegotiation 
	 	 	10	 
	Section 3.8.6 Sufficiency of Contract 
	 	 	10	 
	Section 3.9 Employees and Labor Matters 
	 	 	10	 
	Section 3.9.1 
	 	 	10	 
	Section 3.9.2 
	 	 	10	 
	Section 3.9.3 
	 	 	10	 
	Section 3.9.4 
	 	 	10	 
	Section 3.9.5 
	 	 	11	 
	Section 3.10 Litigation 
	 	 	11	 
	Section 3.10.1 Litigation Pending or Threatened 
	 	 	11	 
	Section 3.10.2 This Transaction 
	 	 	11	 
	Section 3.11 Third Party Consent 
	 	 	11	 
	Section 3.12 Permits 
	 	 	11	 
	Section 3.13 Government Contracts Compliance 
	 	 	11	 
	Section 3.14 Government Authorizations 
	 	 	11	 
	Section 3.15 Taxes 
	 	 	12	 
	Section 3.16 Benefit Plans 
	 	 	12	 
	Section 3.16.1 Benefit Plans; Company Plans 
	 	 	12	 
	Section 3.16.2 Company Group Matters; Funding 
	 	 	12	 
	Section 3.16.3 Compliance 
	 	 	13	 
	Section 3.16.4 Qualified Plans 
	 	 	13	 
	Section 3.16.5 No Defined Benefit or Multi-employer Plans 
	 	 	13	 
	Section 3.16.6 Prohibited Transactions; Fiduciary Duties; Post-Retirement Benefits 
	 	 	13	 
	Section 3.17 Compliance with Environmental Laws 
	 	 	13	 
	Section 3.17.1 
	 	 	14	 
	 Section 3.17.2
	 	 	14	 
	Section 3.17.3 
	 	 	14	 
	Section 3.17.4 
	 	 	14	 
	Section 3.17.5 
	 	 	14	 
	Section 3.17.6 
	 	 	15	 
	Section 3.17.7 
	 	 	15	 
	Section 3.17.8 
	 	 	15	 
	Section 3.17.9 
	 	 	15	 
	Section 3.17.10 
	 	 	15	 
	Section 3.18 Brokers 
	 	 	15	 
	Section 3.19 Ownership of Company 
	 	 	15	 
	Section 3.19.1 Units; Capitalization 
	 	 	15	 

ii

 

	 	 	 	 	 
	Section 3.19.2 Title to Units 
	 	 	16	 
	Section 3.20 Disclosures 
	 	 	16	 
	 
	 	 	 	 
	Article IV — Representations and Warranties of Buyer 
	 	 	16	 
	Section 4.1 Organization 
	 	 	16	 
	Section 4.2 Qualification of Buyer 
	 	 	16	 
	Section 4.3 Authorization 
	 	 	16	 
	Section 4.3.1 Authority 
	 	 	16	 
	Section 4.3.2 No Breach of Violation 
	 	 	17	 
	Section 4.4 Litigation 
	 	 	17	 
	Section 4.4.1 Litigation Pending or Threatened 
	 	 	17	 
	Section 4.4.2 This Transaction 
	 	 	17	 
	Section 4.5 Brokers 
	 	 	17	 
	Section 4.6 Third Party Consent 
	 	 	17	 
	Section 4.7 Permits 
	 	 	18	 
	Section 4.8 Government Contracts Compliance 
	 	 	18	 
	Section 4.9 Government Authorizations 
	 	 	18	 
	Section 4.10 Disclosures 
	 	 	18	 
	 
	 	 	 	 
	Article V — Covenants 
	 	 	18	 
	Section 5.1 Affirmative Covenants of Seller 
	 	 	18	 
	Section 5.2 Negative Covenants of Seller 
	 	 	19	 
	Section 5.3 Affirmative Covenants of Buyer 
	 	 	20	 
	Section 5.4 Negative Covenants of Buyer 
	 	 	21	 
	Section 5.5 Access to Information 
	 	 	22	 
	Section 5.5.1 Access of Buyer Before Closing 
	 	 	22	 
	Section 5.5.2 Access of Buyer After Closing 
	 	 	22	 
	Section 5.5.3 Access of Sellers 
	 	 	22	 
	Section 5.6 Filing and Authorizations 
	 	 	23	 
	Section 5.7 Administration of Accounts 
	 	 	23	 
	Section 5.7.1 In Trust for Buyer 
	 	 	23	 
	Section 5.7.2 In Trust for Seller 
	 	 	23	 
	Section 5.8 Tax and Other Excluded Liabilities 
	 	 	23	 
	Section 5.8.1 Seller Obligations 
	 	 	23	 
	Section 5.8.2 Buyer Obligations 
	 	 	24	 
	Section 5.8.3 Conveyance Fees 
	 	 	24	 
	Section 5.9 Further Assurances 
	 	 	24	 
	Section 5.10 Public Announcements 
	 	 	24	 
	Section 5.11 Risk of Loss 
	 	 	24	 
	 
	 	 	 	 
	Article VI — Conditions Precedent to Obligations of Buyer and Buyer Parent 
	 	 	25	 
	Section 6.1 Conditions 
	 	 	25	 
	Section 6.1.1 Representations and Warranties 
	 	 	25	 
	Section 6.1.2 No Material Adverse Change 
	 	 	25	 
	Section 6.1.3 Due Diligence Review 
	 	 	25	 
	Section 6.1.4 Schedules Delivered 
	 	 	25	 

iii

 

	 	 	 	 	 
	Section 6.1.5 No Adverse Facts Disclosed 
	 	 	25	 
	Section 6.1.6 Obtaining of Consents and Approvals 
	 	 	25	 
	Section 6.1.7 Performance by Seller and Seller Shareholder 
	 	 	26	 
	Section 6.1.8 Absence of Litigation 
	 	 	26	 
	Section 6.1.9 Officers Certificate 
	 	 	26	 
	Section 6.1.10 Delivery of Documents 
	 	 	26	 
	Section 6.2 Waiver 
	 	 	27	 
	 
	 	 	 	 
	Article VII — Conditions Precedent to Obligations of Seller and Seller Shareholder 
	 	 	27	 
	Section 7.1 Conditions 
	 	 	27	 
	Section 7.1.1 Representations and Warranties 
	 	 	27	 
	Section 7.1.2 No Material Adverse Change 
	 	 	27	 
	Section 7.1.3 Due Diligence Review 
	 	 	27	 
	Section 7.1.4 Schedules Delivered 
	 	 	27	 
	Section 7.1.5 No Adverse Facts Disclosed 
	 	 	27	 
	Section 7.1.6 Obtaining of Consents and Approvals 
	 	 	28	 
	Section 7.1.7 Performance by Buyer and Parent Buyer 
	 	 	28	 
	Section 7.1.8 Absence of Litigation 
	 	 	28	 
	Section 7.1.9 Officer’s Certificate 
	 	 	28	 
	Section 7.1.10 Delivery of Documents 
	 	 	28	 
	Section 7.2 Waivers 
	 	 	28	 
	 
	 	 	 	 
	Article VIII — Indemnification 
	 	 	29	 
	Section 8.1 Survival of Representations 
	 	 	29	 
	Section 8.2 Indemnification by the Seller and Seller Shareholder 
	 	 	29	 
	Section 8.3 Indemnification by Buyer and Buyer Parent 
	 	 	29	 
	Section 8.4 Notice of Claims 
	 	 	30	 
	Section 8.5 Good Faith Effort to Settle Disputes; Set-Off 
	 	 	30	 
	 
	 	 	 	 
	Article IX — Termination 
	 	 	30	 
	Section 9.1 Termination Events 
	 	 	30	 
	Section 9.1.1 Breach 
	 	 	30	 
	Section 9.1.2 Mutual Consent 
	 	 	30	 
	Section 9.1.3 Closing Date 
	 	 	30	 
	Section 9.2 Effect on Termination 
	 	 	31	 
	 
	 	 	 	 
	Article X — Seller Covenant Not to Compete 
	 	 	31	 
	Section 10.1 Noncompetition Agreement 
	 	 	31	 
	Section 10.1.1 
	 	 	31	 
	Section 10.1.2 
	 	 	31	 
	Section 10.1.3 
	 	 	32	 
	Section 10.1.4 
	 	 	32	 
	Section 10.1.5 
	 	 	32	 
	Section 10.2 Allowed Competition 
	 	 	32	 
	Section 10.2.1 
	 	 	32	 
	Section 10.2.2 
	 	 	32	 

iv

 

	 	 	 	 	 
	Section 10.2.3 
	 	 	32	 
	Section 10.2.4 
	 	 	32	 
	 
	 	 	 	 
	Article XI — Miscellaneous 
	 	 	32	 
	Section 11.1 Expenses 
	 	 	33	 
	Section 11.2 Amendments and Waivers 
	 	 	33	 
	Section 11.3 Entire Agreement 
	 	 	33	 
	Section 11.4 Notices 
	 	 	33	 
	Section 11.5 Severability 
	 	 	34	 
	Section 11.6 Cumulative Remedies 
	 	 	34	 
	Section 11.7 Waiver 
	 	 	34	 
	Section 11.8 Assignment 
	 	 	34	 
	Section 11.9 Successors and Assigns 
	 	 	34	 
	Section 11.10 No Third Party Beneficiaries 
	 	 	34	 
	Section 11.11 Counterparts 
	 	 	34	 
	Section 11.12 Governing Law; Jurisdiction 
	 	 	34	 
	Section 11.13 Dispute Resolution 
	 	 	35	 
	Section 11.13.1 
	 	 	35	 
	Section 11.13.2 
	 	 	35	 
	Section 11.13.3 
	 	 	35	 
	Section 11.14 Construction 
	 	 	35	 
	Section 11.14.1 Words 
	 	 	35	 
	Section 11.14.2 No Presumption 
	 	 	35	 
	Section 11.14.3 Headings 
	 	 	35	 
	 
	Signatures 
	 	 	36	 
	 
	Index to Appendix and Schedules 
	 	 	37	 
	 
	Appendix A — Definitions 
	 	 	37	 
	 
	Schedules 
	 	 	42	 
	Schedule 1.1 — Excluded Assets and Liabilities
	 	 	 	 
	Schedule 3.0 — Disclosure Schedule
	 	 	 	 
	Schedule 4.0 — Disclosure Schedule
	 	 	 	 
	Schedule A-8 — Contracts
	 	 	 	 

v

 

MEMBER INTEREST PURCHASE AGREEMENT

     This Member Interest Purchase Agreement (“Agreement”) is entered into as of December 29, 2009,
by and among Energy Focus, Inc., a Delaware corporation (“Buyer”), Stones River Companies, LLC, a
Tennessee limited liability company (“Company”), TLC Investments, LLC, a Tennessee limited
liability company (“TLC”), and Jami Hall and Robert E. Wilson, Tennessee residents (TLC, Ms. Hall,
and Mr. Wilson collectively, the “Sellers”).

RECITALS

     WHEREAS, TLC is the sole owner of all of the member interests of the Company (the “Units”) and
Ms. Hall and Mr. Wilson are the sole owners of all of the member interests of TLC; and

     WHEREAS, upon the terms and subject to the conditions hereinafter set forth, Sellers desire to
sell, and Buyer desires to purchase, the Units, subject to the terms and conditions set forth
herein, so that on and after the Closing Date, as defined in Section 2.1, the Buyer can acquire the
Assets of the Company and operate its Business, as defined in Appendix A.

     NOW, THEREFORE, in consideration of the premises, and the mutual representations, warranties,
covenants and agreements hereinafter set forth, and each intending to be legally bound hereby, the
parties agree as follows:

ARTICLE I

PURCHASE AND SALE OF UNITS

     Section 1.1 Units; Excluded Assets; Excluded Liabilities.

          1.1.1 Purchase of Units. Subject to the terms and conditions of this Agreement,
Sellers shall sell, assign, transfer and deliver to Buyer at the Closing, and Buyer shall purchase
from Sellers at the Closing, the Units, free and clear of all liens, encumbrances, and restrictions
of any kind, in exchange for the purchase price, as described in Article II below.

          1.1.2 Excluded Assets. Sellers shall not sell, and Company shall not retain after the
Closing, the assets of the Company set forth on Schedule 1.1 (the “Excluded Assets”). Prior to or
after the Closing, the Company shall transfer or distribute the Excluded Assets to the Sellers as
the parties shall agree.

          1.1.3 Excluded Liabilities. As of and after the Closing, the Company shall not be
responsible for the liabilities of the Company set forth on Schedule 1.1 (the “Excluded
Liabilities”), and Sellers shall assume, perform, and in due course discharge the Excluded
Liabilities, and indemnify and hold harmless the Company and the Buyer from and against those
Liabilities, according to the terms of Section 8.2. As of the Closing, the Assets of the Company

1

 

being retained by it shall be free and clear of all liens, mortgages, encumbrances, and
restrictions.

     Section 1.2 Transfer of Units. At the Closing, title to all of the Units shall pass
to Buyer. Sellers shall present to Buyer: (i) certificate(s) representing the Units, duly
endorsed, with powers of attorney duly executed in blank, with all transfer taxes, if any, paid in
full, and/or a separate assignment of the Units, duly endorsed; (ii) the minute book(s), unit
ledgers and seal of Company; and (iii) such other instruments of title which are reasonably
appropriate to convey and assign all of the Units to Buyer. From and after the Closing, Sellers
and Buyer shall cooperate to execute, deliver and record such instruments of title and other
documents reasonably requested by the other part(ies) in order to more fully perfect Buyer’s right,
title and interest in and to the Units, and to more fully perfect the security interests and pledge
granted and conveyed from Buyer and Company to Sellers.

     Section 1.3 Assignment of Contracts and Rights. Anything to the contrary
notwithstanding, this Agreement shall not operate to assign any Contract or any other Asset or any
claim, right or benefit arising thereunder or resulting therefrom, if an attempted assignment
thereof as part of the sale and purchase of the Units, without the consent of a third party thereto
(including a government or governmental unit), would constitute a breach, default or other
contravention thereof or in any way adversely affect the rights of Company, Sellers, or Buyer
thereunder. Company, Sellers, and Buyer shall each use their reasonable best efforts to obtain the
consent of such third parties for the assignment hereof prior to Closing, and if such consent is
not obtained by Closing or if such attempted assignment thereof would not assign all of the rights
thereunder at Closing, then Company, Sellers, and Buyer, shall continue to cooperate and use their
reasonable best efforts to obtain an assignment of all of such rights thereunder. To the extent
that the consents and waivers referred to herein are not obtained, or until the impediments to the
sale, assignment, transfer, delivery or sublease referred to therein are resolved, Sellers and
Company shall use their reasonable best efforts to: (i) provide, at the request of Buyer, to Buyer
the benefits of any such Asset referred to herein, (ii) cooperate in any lawful arrangement
designed to provide such benefits to Buyer, and (iii) enforce, at the request of and for the
account of Buyer, any rights of Sellers or Company arising from any Asset referred to herein
against any third person (including a government or governmental unit) including the right to elect
to terminate in accordance with the terms thereof upon the advice of Buyer. Buyer shall not be
required by this Section 1.3 to enter into any arrangement that would impose any additional cost,
expense or liability or that would deprive Buyer of any material benefits or profits. Nothing
herein shall affect the conditions to Buyer’s obligations set forth in Article VI herein.

     Section 1.4 Survival of Quotations. For all Contracts, proposals, bids, and the like
listed on Schedule A-8, Sellers shall provide to Buyer copies of all quotations for the provision
of goods and services submitted by their Affiliates. Sellers shall cause those Affiliates to honor
those quotations and, if requested by Buyer, shall provide written confirmations from the
Affiliates.

2

 

ARTICLE II

CLOSING; PURCHASE PRICE; OTHER CONSIDERATION

     Section 2.1 Closing. Subject to Section 9.1.3, the Closing (“Closing”) of the sale
and purchase of the Units and the consummation of the other transactions contemplated herein, shall
take place as of December 31, 2009 (the “Closing Date”).

     Section 2.2. Cash Purchase Price. On the Closing Date, Buyer shall deliver to Sellers
by wire transfer in immediately available funds or by certified check the amount of One Million
Five Hundred Thousand Dollars ($1,500,000.00) (the “Cash Purchase Price”).

     Section 2.3 Earn-Out.

          (a) Buyer shall deliver to Sellers a quarterly payment equal to the product obtained by
multiplying (i) the Gross Revenue from the Business of the Company during the previous quarter by
(ii) 0.025 (the “Earn-Out”). Gross Revenue is defined as total invoice price less tax and freight
on materials-only sales, if listed as separate line items, and inclusive of properly executed
change orders. Gross Revenue from a project shall include all material, labor and professional
services revenue associated with a contract recorded by the Company.

          (b) The Earn-Out shall be paid to Sellers over a period of forty-two (42) months following the
Closing Date. The Earn-Out shall be paid to Sellers within forty-five (45) days after the end of
each calendar quarter, from the quarter ending December 31, 2009 through the quarter ending June
30, 2013 (the “Earn-Out Period”). Buyer shall not be deemed to be in default under this Section
2.3 unless and until it has failed to make full payment following written notice from Sellers to
Buyer and 45-days opportunity to cure the failure to make timely payment.

          (c) With respect to any project listed on Schedule A-8 and on which Sellers or any of their
Affiliates have accrued but unreimbursed engineering expenses, Sellers shall be deemed to have
earned engineering fees at 2.5% of the job’s unearned gross revenue. The fees shall be treated as
a job-related cost entitled to mechanics’ and/or other lien rights as security for payment. The
payment in full of the Earn-Out related to the project shall be deemed full payment of the
engineering fees and expenses.

     Section 2.4 Convertible Promissory Note. On the Closing Date, Buyer shall deliver to
Sellers a convertible promissory note in the principal face amount of $500,000.00 (the “Promissory
Note”). The Promissory Note shall bear interest at the compound rate equal to the “Wall Street
Journal Prime Rate” in effect from time to time as and when announced and reported in the Journal
and at www.bankrate.com plus two percent (2%). The Promissory Note, including all interest
and other payments that may be due thereunder, shall be due and payable without demand immediately
upon the earlier of (i) June 30, 2013 and/or (ii) the filing of any proceeding for bankruptcy,
receivership and/or insolvency of Buyer and/or Company (the “Maturity Date”). Sellers shall have
the right to convert the entire principal face amount of the Promissory Note, in whole but not in
part, into 500,000 shares of Common Stock of Buyer

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during the period beginning on June 30, 2010 and ending on the Maturity Date. In the event of a
conversion by Sellers, any and all accrued interest and other costs shall be immediately due and
payable in cash. Buyer shall pay to Sellers a fee of $500,000.00 if Buyer’s Common Stock has not
performed as set forth in the Note.

     Section 2.5 Security Agreement. The obligations of Buyer under the Promissory Note
and under this Agreement shall be secured by a first-lien-position security interest in all Assets
and all other assets of Company pursuant to a security agreement among Sellers, Buyer, and Company
(“Security Agreement”).

     Section 2.6 Unit Pledge Agreement. The obligations of Buyer under the Promissory Note
and under this Agreement shall be secured by a first-lien-position security interest in and pledge
of all of the Units (including but not limited to any options, warrants or other contracts for
issuance of units) pursuant to a unit pledge agreement among Sellers, Buyer, and Company (“Unit
Pledge Agreement”).

     Section 2.7 Buyer Financial Termination Provision. The Security Agreement and the
Unit Pledge Agreement shall provide that the Sellers, in addition to the ability to exercise any
and all remedies available at law or in equity, shall have the right to terminate this Agreement
before June 30, 2013 if Buyer and/or Company files, or is placed into, bankruptcy, receivership, or
any other form of reorganization or restructuring for the benefit of creditors, and that filing is
not discharged within sixty (60) days.

     Section 2.8 Listing of Common Stock. Buyer shall use its best efforts to maintain
the listing of its common stock for trading on the NASDAQ Global Market. In the event that its
common stock should cease to be listed on that Market, Buyer shall use its best efforts to promptly
list its common stock on a nationally recognized stock exchange, automated quotation system, or
over-the-counter market. Buyer shall not be deemed to be in default under this Section 2.8 unless
and until its common stock has failed to be listed on a nationally recognized stock exchange,
automated quotation system, or over-the-counter market for a period of at least ninety (90) days.

     Section 2.9 Bonding Capacity. On and after the Closing Date, Buyer or Company shall
demonstrate its ability to procure and maintain performance and payment bonding sufficient for the
amount and timing of the projects in its proposal “pipeline” by providing a reasonably satisfactory
Line of Authorization or other evidence of bonding capacity reasonably satisfactory to Sellers.

     Section 2.10 Step-In Rights. In the event that Buyer or Company does not pursue
specific projects due to bonding considerations, in addition to the ability to exercise any and all
remedies available at law or in equity, Sellers shall have “step-in” rights to assume and perform
projects independent from Buyer and Company. Sellers can pursue any other projects that Buyer or
Company decline in writing.

     Section 2.11 Rent. For a period of one year following the Closing Date, Sellers shall
provide Company with lighted, heated, and air conditioned office space at Sellers’ premises

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located at 1244 Gallatin Pike, Madison, Tennessee, or at such other location(s) as Sellers shall
operate their business activities, to conduct the Business being acquired by Buyer at no additional
cost to Buyer or Company pursuant to a rent agreement (the “Rent Agreement”).

     Section 2.12 Post-Closing Operations Agreement. At the Closing the parties shall
enter into a transition and post-closing operations agreement (the “Post-Closing Operations
Agreement”).

     Section 2.13 Management Fee. Buyer shall cause Company to deliver to TLC a management
fee of $1,232,000.00, without set-off, paid in equal monthly installments at the end of each month
beginning January 31, 2010 and ending December 31, 2010, for overhead expenses to TLC in support of
up to $20,000,000.00 in Company project revenues in 2010 for those projects on which TLC provides
installation support services. Buyer shall cause Company to deliver an additional eight percent
(8%) management fee on Company project revenues above $20,000,000.00 in fiscal year 2010 for those
projects on which TLC provides installation support services. “Project revenues” shall have the
same meaning as “Gross Revenue” in Section 2.3(a).

     Section 2.14 Shares of Common Stock. At the Closing Buyer shall issue to Sellers
1,000,000 shares of its Common Stock (the “Shares”). The Shares shall be entitled to the same
registration rights as the conversion shares covered by the Convertible Promissory Note. If
required by Sellers in writing on or before June 30, 2010, Buyer shall facilitate the sale of the
Shares at a guaranteed price of at least $1.00 per Share as soon as possible after written notice
from the Sellers. If Buyer has not received a written notice from Sellers by July 1, 2010, the
guarantee shall expire.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SELLERS AND COMPANY

     Each of Sellers hereby represents and warrants to Buyer as of the date hereof and, if
different, as of the Closing Date, except as set forth on Disclosure Schedule 3.0, as follows:

     Section 3.1 Organization. Each of Company and TLC is a limited liability company duly
established, validly existing and in good standing under the laws of the State of Tennessee and
has the requisite company power and authority to own, use, operate or lease all of its property
and assets, and to carry on its business as it is now being conducted, in all material respects.
Company has no subsidiaries and does not have any ownership interests in any other Person.
“Person” means an individual, a partnership, a corporation, a limited liability company and
association, a joint stock company, a trust, a joint venture, any other legal entity, an
unincorporated organization, or a governmental entity (or any department, agency, or political
subdivision thereof) and the term “Other Agreement” with respect to any party shall mean the other
agreements and documents contemplated hereby to be executed and delivered by such party or any
Affiliate thereof on or before the Closing.

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     Section 3.2 Qualification of Company. Company is duly qualified or licensed as a
foreign corporation to do business, and is in good standing, in each jurisdiction where the
Business or the nature of its activities makes such qualification or license necessary.

     Section 3.3 Authorization.

          3.3.1 Authority. Sellers and Company have all requisite power and legal authority to
enter into and perform this Agreement and to consummate the transactions contemplated hereby. This
Agreement has been duly executed and delivered by Sellers and Company and constitutes, and each
Other Agreement which is to be executed and delivered by Sellers and Company, when executed and
delivered by each of them, shall constitute, the legal, valid and binding obligation of them,
enforceable in accordance with its terms, except to the extent that enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, receivership, moratorium and other similar
laws relating to or affecting the rights and remedies of creditors generally and by general
principles of equity including, without limitation, concepts of materiality, reasonableness, good
faith and fair dealing and the possible unavailability of specific performance, injunctive relief
or other equitable remedies, regardless of whether enforceability is considered in a proceeding in
equity or at law.

          3.3.2 No Breach or Violation. Execution, delivery and performance of this Agreement
by Sellers and Company and consummation of the transaction contemplated hereby will not lead to or
cause a violation, breach, or default or result in the termination of, or accelerate the
performance required by, or result in the creation or imposition of any Encumbrance (as defined in
Section 3.5.), whether by notice or lapse of time or both, or otherwise conflict with any term or
provision of the following:

          (a) Sellers’ or Company’s articles of organization or operating agreement, as amended;

          (b) As of the Closing, any note, bond, mortgage, contract, indenture or agreement to lease,
license or other instrument or obligation to which Sellers and/or Company is a party or is bound
(as pertains to Company’s Business): (i) where such violation, breach or default would have a
material adverse effect on the Units, the operation of the Business or the financial condition of
Sellers or Company; or (ii) except as to which required consents, amendments or waivers shall have
been obtained by Sellers or Company prior to the Closing for any such violation, breach or default;
or

          (c) Any court or administrative order, writ or injunction or process, or any permit, license,
or consent decree to which Sellers or Company is a party or is bound.

     Section 3.4 Financial Statements.

          3.4.1 Statements. The Sellers have previously delivered to Buyer (a) the reviewed
balance sheets, income statements and retained earnings and statements of cash flows for Company,
together with the accompanying footnotes, for the six (6) month period (“Reviewed Annual
Statement”) ended December, 2008 and (b) unaudited balance sheets,

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income statements and retained earnings and statements of cash flows for Company,
together with the accompanying footnotes, for the nine month period ending September 30, 2009
(the balance sheet as of September 30, 2009 is sometimes referred to herein as the (“Interim
Balance Sheet”) which have been provided in electronic format as Account’s copy of Quickbooks
accounting records (all of the foregoing referred to herein collectively as the “Company Financial
Statements”). The Company Financial Statements have been prepared in accordance with GAAP on a
consistent basis throughout the indicated periods (except for changes required as a result of
changes in GAAP and, with respect to the Interim Financial Statements, the absence of notes and for
normal year-end adjustments) and fairly present in all material respects the financial condition,
assets and liabilities and results of operations and cash flows of Sellers in accordance with GAAP
at the dates and for the periods indicated.

          3.4.2 Accuracy. The Company Financial Statements, and each of them, fairly present the
results of operations, financial position and cash flows of for and as of the date or period
covered thereby. Subject to normal year-end adjustments, the Company Financial Statements were
prepared in accordance with the tax accounting rules and regulations as adopted from time to time
by the Internal Revenue Service under the Internal Revenue Code of 1986, as amended (the “Tax
Convention”) applied on a basis consistent with principles applied by Company in prior years, and
in accordance with the books of account of Company, which have been maintained in all respects in
accordance with sound business practices, and reflect all transactions involving Sellers and set
forth therein are, in all materials respects, true and correct.

          3.4.3 No Undisclosed Liabilities. Company has no liabilities or obligations of any
nature, secured or unsecured, known or unknown, due or to become due, asserted or unasserted,
absolute, accrued, or unaccrued, liquidated or unliquidated, contingent, executory or otherwise, of
a nature required to be reflected in a balance sheet prepared in accordance with Tax Convention,
which were not adequately and completely disclosed and reserved for in the Company Financial
Statements, except for those liabilities and obligations which were incurred since the Financial
Date in the ordinary course of business and which have been disclosed in writing in Schedule 3.0 to
Buyer.

          3.4.4 Absences of Changes. Other than as set forth in Schedule 3.0 delivered
hereunder, since the Financial Date there has not been and, as of the Closing Date, there shall not
be:

          (a) Any material adverse change in the Assets, the Business, or the financial condition of
Company;

          (b) Any material change in the contingent obligations or liabilities of Company which relate
to Company by way of guaranty, documentary credit, standby credit, endorsement, indemnity, warranty
or otherwise;

          (c) Any material waiver or cancellation by Company of rights or of debts owed to Company;

          (d) Any amendment to any agreement, commitment, or transaction (including without limitation
any borrowing, lease, capital expenditure or capital financing, but excluding

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change orders and other contract amendments in the ordinary course of Company’s business) by
Company, material to the Business, the Assets, or Company or which, if such action were taken on
the date hereof, would require disclosure pursuant to this Agreement, or

          (e) Any material change by Company is its accounting methods or practices, assumptions or
methods of calculating, or any change by Company in its accounting principles, relating to the
Business.

          3.4.5 Discharge of Liabilities. Other than as set forth in Schedule 3.0 delivered
hereunder, since the Financial Date and as of the Closing Date: (i) Company has not paid,
discharged or satisfied any claims, liabilities or obligations (absolute, accrued, contingent or
otherwise) other than the payment, discharge, or satisfaction in the ordinary course of business
and consistent with past practice; and (ii) Company has not terminated, amended or suffered the
termination or amendment of, or failed to perform all of its obligations under, any of the
Contracts or any agreement, contract, lease or license affecting the Business.

     Section 3.5 Assets.

          3.5.1 Title. Company has good, valid and marketable title to all of the Assets. The
title to each Asset is free and clear of all title defects, objections, liens, mortgages, security
interests, pledges, charges and encumbrances, adverse claims, equities, or any other rights of
others or other adverse interests of any kind including without limitation, licenses, escrow
arrangements, leases, chattel mortgages, conditional sales contracts, collateral security
arrangements and other title or interest retention arrangements (each an “Encumbrance” and
collectively the “Encumbrances”).

          3.5.2 Condition. All tangible Assets have no material defects, and are in good
operating condition and repair and are adequate for the uses to which they are put in the Company.

     Section 3.6 Equipment. There exists no condition which interferes with the economic
value of any item of Equipment, except as disclosed on Disclosure Schedule 3.0.

     Section 3.7 Intellectual Property.

          3.7.1 Except as set forth in Disclosure Schedule 3.0, Seller has good, sole and marketable
title to all such Intellectual Property, free and clear of any Encumbrances and Sellers are not
aware of any claims that any rights or interest of Company in the Intellectual Property is being
challenged in any way.

          3.7.2 Except as set forth in Disclosure Schedule 3.0:

               (a) Company has no patents or inventions, domestic or foreign, or pending applications for
patents on inventions, and no copyrights, registrations or pending application for registration of
copyrights;

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               (b) No Person has any right of renewal, reversion, or termination with respect to any
copyrights owned by Seller or any rights under such copyrights;

               (c) Company has no registered trademarks, trade names, service marks or pending applications
to register trademarks, trade names, or service marks, related to any products or services sold or
licensed by it or which it otherwise uses in the conduct of its business;

               (d) Company does not own any patents or applications for patents that relate to or affect the
products or services sold or licensed to customers by Company or any Intellectual Property owned by
Company; and

               (e) There are, and have been, no options, licenses or agreements of any kind relating to any
of the Intellectual Property owned by Company or to the use; manufacture, sale or other
exploitation of products or services based on or embodied in such Intellectual Property.

          3.7.3 Company and Sellers acknowledge that Company has not maintained a trade secrets policy,
that there is no Intellectual Property owned by Seller that requires such a policy, and that the
failure to have such a policy has not had a material adverse effect on the Business.

          3.7.4. Company has not infringed or misappropriated, and is not infringing or misappropriating
any Intellectual Property of another Person and there is no claim pending, or to the knowledge of
Company, threatened, against Company with respect to any alleged infringement or misappropriation
of any Intellectual Property owned by another Person. Sellers have no knowledge that any Person is
infringing or misappropriating any Intellectual Property of Company.

     3.8 Contracts and Obligations:

          3.8.1 Identification. Schedule A-8 delivered hereunder includes an accurate and
complete list as of the date hereof and as of the Closing Date, of the Contracts and identifies
each Contract by the parties thereto, the date, and subject matter.

          3.8.2 Full Force and Effect. All Contracts are valid and binding upon Company and, to
the best knowledge and belief of Sellers, are valid and binding on the each other party thereto.

          3.8.3 No Default. With respect to each of the Contracts, neither Company nor, to the
best knowledge and belief of Sellers, any other party thereto is in material breach thereof or
material default thereunder, and there does not exist any event, condition or omission which would
constitute such material breach or material default (whether by lapse of time or notice or both),
except for such breaches, defaults and events as to which requisite waivers or consents have been
obtained.

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          3.8.4 Copies. Sellers have delivered to Buyer a correct and complete copy of each
written Contract and a written summary setting forth the terms and conditions of each oral
contract.

          3.8.5 Renegotiation. There are no renegotiations of, attempts to renegotiate or
outstanding rights to renegotiate any material amounts paid or payable to Company under current or
completed contracts with any person or entity having the contractual or statutory right to amend or
require such renegotiation and no such person or entity has made written demand for such
negotiation, excepting any change orders that are or would be issued in the ordinary course of
business with respect to the Contracts.

          3.8.6 Sufficiency of Contract. To the best knowledge and belief of Sellers, the
Contracts are of sufficient nature, condition and quantity to permit Buyer to operate the Business
immediately upon the Closing in the ordinary course of business and consistent with the past
practices of Company; provided however that Sellers make no representation or warranty regarding
cash flow, profitability, Buyer’s capacity to bond or any other financial aspect of the Business
after the Closing.

     Section 3.9 Employees and Labor Matters.

          3.9.1 Company has delivered to Buyer, and Buyer has acknowledged the receipt of, a list of (a)
all agreements between Company and its employees or other Persons providing services for
compensation, and (b) all employees of Company entitled to receive annual compensation in excess of
$5,000 and their positions, job categories, and salaries. The transactions contemplated by this
Agreement will not result in any liability for severance pay to any employee or other Person,
excluding any potential liability for or arising out of a claim for unemployment benefits in the
event a Company employee is not immediately employed by Buyer. Company has not informed any
employee or other Person that the Person will receive an increase in compensation as a result of
the transactions covered by this Agreement, with the exception of employees who have job-related
benefits with Company which Buyer does not offer and in those circumstances Company has informed
those employees that Buyer has agreed to convert those benefits to an adjustment in paid
compensation. All of the employees of Company are “at will” employees and may be terminated by
Company at any time, without liability or obligation except the payment of normal compensation
accrued up to the time of termination of employment.

          3.9.2 Company is in substantial compliance with all applicable federal, state and local laws
respecting employment and employment practices, terms and conditions of employment, wages and
hours.

          3.9.3 There is no strike, labor dispute, slowdown or stoppage actually pending, or to the best
knowledge of Seller, threatened, against or directly affecting Company.

          3.9.4 There is no pending complaint filed with the National Labor Relations Board or any other
governmental agency alleging unfair labor practices, civil rights violations, employment
discrimination charges, or the like against Company with respect to the operation of

10

 

the Business, and there are no existing facts which would lead to any such unfair labor practice
charge.

          3.9.5 Company has not entered into any collective bargaining agreements with any party.

     Section 3.10 Litigation.

          3.10.1 Litigation Pending or Threatened. Except as listed in Schedule 3.0, there are
no claims, actions, suits, hearings, arbitrations, disputes, proceedings (public or private) or
governmental investigations, pending or threatened, against or affecting Company, the Units, the
Assets, or the Business, at law or in equity, before or by any federal, state, municipal or other
governmental or nongovernmental department, commission, board, bureau, agency, court or other
instrumentality, or by any private person or entity, there is no basis for any such action, suit or
proceeding, and there are no existing or threatened, orders, judgments or decrees of any court or
governmental agency affecting Company, the Units, the Assets or the Business.

          3.10.2 This Transaction. There are no legal, administrative, arbitration or other
proceedings or governmental investigations pending or threatened, against or affecting Company, the
Units, the Assets or the Business, which seek to enjoin or rescind the transactions contemplated by
this Agreement or otherwise prevent Sellers or Company from complying with the terms and provisions
of this Agreement.

     Section 3.11 Third Party Consent. With the exception of Company’s or Sellers’
lenders, there are no approvals, authorizations, certificates and consent of any third parties
necessary or required to effect the transfer to Buyer of all rights, powers and franchises of
Sellers related to Company, the Assets, or the Business, except as listed on Schedule 3.0.

     Section 3.12 Permits. There are no approvals, authorizations, certificates, consents,
licenses, orders and/or permits of any governmental agencies, whether federal, state or local,
necessary to the ownership, use, or operation of Company, the Units, the Assets or the Business,
except as set forth on Schedule 3.0 hereto. Sellers will cooperate with Buyer in Buyer’s efforts
to obtain any such government approvals for a period of three months following Closing.

     Section 3.13 Government Contracts Compliance. Company is not in, and consummation of
this Agreement and the transactions contemplated hereby will not result in, any violation, breach
or default of any term or provision of: (a) any contract, subcontract or agreement between any
United States, foreign, state or local governmental or regulatory authority and Seller, or (b) any
bid, proposal or quote submitted to any United States, foreign, state or local governmental or
regulatory authority by Company.

     Section 3.14 Government Authorizations. Execution, delivery and performance of this
Agreement by Sellers and/or Company and consummation of the transactions contemplated hereby, will
not require any consent, approval, authorization, or permit from, or any filing with or
notification to, any United States, foreign, state or local governmental or regulatory authority,
except with respect to government entities that are parties to Contracts.

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     Section 3.15 Taxes. As used in this Agreement, “Taxes” and all derivations thereof
means any federal, state, local or foreign income, gross receipts, license, payroll, employment,
severance, stamp, occupation, premium, windfall profits, environmental, customs, duties, capital
stock, franchise, profits, withholding, social security (or similar), unemployment, disability,
real property, personal property, sales, uses, ad valorem, transfer, registration, value added,
alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty, or addition thereto. The term “Tax Returns” shall include all federal, state,
local and foreign returns, declarations, statements, reports, schedules, and information returns
required to be filed with any taxing authority in connection with any Taxes.

               (a) Company has timely filed all Tax Returns and reports required to have been filed by it,
and has paid all Taxes due to any taxing authority required to have been paid by it on or prior to
the date hereof;

               (b) None of such Tax Returns contain, or will contain, a disclosure statement under Section
6662 of the of the Code, or any equivalent or predecessor statute;

               (c) Company has not received notice that the Internal Revenue Service or any other taxing
authority has asserted or proposed to assert against Seller any deficiency or claim for Taxes and
no issue has been raised by any taxing authority in any audit which, by application of similar
principles, reasonably could be expected to result in a proposed deficiency of Company for any
period not so examined;

               (d) There are no pending or, to the knowledge of Sellers or Company, threatened actions,
audits, proceedings or investigations with respect to Sellers involving the assessment or
collection of Taxes;

               (e) There are no liens for Taxes due and payable upon the Assets; and

               (f) Sellers and/or Company have not applied for a ruling relating to Taxes from any taxing
authority or entered into any closing agreement with any taxing authority.

Sellers will hold harmless and indemnify Buyer and Company from all pre-acquisition tax obligations
pursuant to Section 8.2.

     Section 3.16 Benefit Plans.

          3.16.1 Benefit Plans; Company Plans. Schedule 3.0 identifies the amounts of any
discretionary annual contributions that Company has made to any Benefit Plan (or Seller Plan) in
respect of each of the last three (3) years or any portion thereof.

          3.16.2 Company Group Matters; Funding. Company has no obligation to contribute to, or
any direct or indirect liability under or with respect to, any Benefit Plan of the type described
in Sections 4063 and 4064 of ERISA or Section 413(c) of the Code. No accumulated funding
deficiency (as defined in Section 302 of ERISA and Section 412 of the Code) exists nor has any
funding waiver from the IRS been received or requested with respect to

12

 

any Seller Plan, and no excise or other Tax is due or owing because of any failure to comply
with the minimum funding standards of the Code or ERISA with respect to any Company Plan. Company
has not at any time since its inception through and including the date hereof been subject to being
aggregated with any other corporation under Sections 414(b), (c), (m) or (o) of the Code.

          3.16.3 Compliance. Each Company Plan and all related trusts, insurance contracts
and funds have been created, maintained, funded and administered in all material respects in
compliance with all applicable laws and in compliance with the plan document, trust agreement,
insurance policy or other writing creating the same or applicable thereto. To the best knowledge
and belief of Sellers, no Company Plan is or is proposed to be under audit or investigation.

          3.16.4 Qualified Plans. Schedule 3.0 discloses each Company Plan that purports to
be a qualified plan under Section 401(a) of the Code and exempt from United States federal income
Tax under Section 501(a) of the Code (a “Qualified Plan”). With respect to each Qualified Plan, a
determination letter (or opinion or notification letter, if applicable) covering the Tax Reform Act
of 1986 and later Code changes for which the remedial amendment period has not closed has been
received from the IRS that such plan is qualified under Section 401(a) of the Code and exempt from
federal income Tax under Section 501(a) of the Code. No Qualified Plan has been amended since the
date of the most recent such letter. To the best knowledge and belief of Sellers and Company no
fiduciary of any Qualified Plan nor any agent thereof has done anything that would adversely affect
the qualified status of a Qualified Plan or the qualified status of any related trust.

          3.16.5 No Defined Benefit or Multi-employer Plans. Company has not at any time since
its inception sponsored or maintained a defined benefit plan within the meaning of Section 3(35) of
ERISA.

          3.16.6 Prohibited Transactions; Fiduciary Duties; Post-Retirement Benefits. No
prohibited transaction (within the meaning of Section 406 of ERISA and Section 4975 of the Code)
with respect to any Company Plan exists or has occurred that could subject Company to any liability
or Tax under Part 5 of Title I of ERISA or Section 4975 of the Code. Neither Company nor any
administrator or fiduciary of any Company Plan, nor any agent of any of the foregoing, has engaged
in any transaction or acted or failed to act in a manner that will subject Seller to any liability
for a breach of fiduciary or other duty under ERISA or any other applicable law. With the
exception of the requirements of Section 4980B of the Code, no post-retirement benefits are
provided under any Company Plan that is a welfare benefit plan as described in ERISA Section 3(1).

     Section 3.17 Compliance with Environmental Laws.

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          3.17.1 To the best knowledge and belief of Sellers and Company after investigation, the
operation of the Business by Company has been in compliance with the applicable laws and
regulations of all federal, state and local government authorities having jurisdiction with respect
thereto, including, without limitation, all requirements pursuant to environmental protection,
health or safety laws and regulations (including the disposal of hazardous substances and solid
wastes).

          3.17.2 Company has not undertaken any activity causing (i) the premises to become a hazardous
waste treatment, storage or disposal facility within the meaning of the Resource Conservation and
Recovery Act of 1976, 42 U.S.C. §6901 et. seq., as amended (“RCRA”) or any similar federal, state
or local laws or regulations, (ii) a release or threatened release of hazardous waste from the
Premises within the ambit of the Comprehensive Environmental Response, Compensation, and Liability
Act of 1980 and the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. §9601 et.
seq., as amended (collectively referred to as “CERCLA”) or the Toxic Substances Control Act, 15
U.S.C. §2601 et. seq., as amended (“TSCA”), or any similar federal, state or local laws and
regulations, or (iii) the discharge of pollutants or effluents into any water source or system, or
the discharge into the air of any emissions, which would require a permit under the Federal Water
Pollution Control Act, 33 U.S.C. §1251 et. seq., as amended (“FWPCA”), or the Clean Air
Act, 42 U.S.C. §7401, et. seq., as amended (“CAA”), respectively, or any similar federal,
state or local laws or regulations.

          3.17.3 To the best knowledge and belief of Sellers and Company, no oil, petroleum, chemical
liquids, solid, liquid, gaseous products, toxic substances, or any wastes, solid waste, hazardous
waste or hazardous substance of any kind, are currently stored or used on the premises and have not
been stored or used on the leased premises in the past, and no part of the premises is or has been
used as a dump or landfill of any kind except in the ordinary course of Seller’s Business. As used
herein, the terms “wastes”, “solid waste”, “hazardous waste”, and “hazardous substance” shall have
the meanings as such terms are defined in CERCLA, RCRA and in the Ohio Revised Code, as amended,
and any regulations now or hereafter promulgated pursuant thereto, and shall also include any
sewage or mixture of sewage or other waste material that passes through a sewer system to a
treatment facility, any industrial waste-water discharges subject to regulation under FWPCA, and
any source material, special nuclear material or byproduct material as defined by the Atomic Energy
Act of 1954, 42 U.S.C. §3011 et. seq., as amended.

          3.17.4 Neither Company, nor, to the best of its or Sellers’ knowledge, any other party, has
caused or suffered to occur, a discharge, spillage, uncontrolled loss, seepage or filtration of oil
or petroleum or chemical liquids or solid, liquid or gaseous products or hazardous waste (a
“spill”), as those terms are used in Chapter 3745 of the Ohio Revised Code, as amended, at, upon,
under, within or emanating from the Premises or any contiguous real estate which has been included
in the property description of the Premises within the preceding three years.

          3.17.5 Company has not transported any Regulated Material or arranged for the transportation
of any Regulated Material to any location that is listed or proposed for listing on the National
Priorities List pursuant to CERCLA, on CERCLIS or any other location that is the subject of
federal, state or local enforcement action or other investigation that may lead to claims

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against Seller for cleanup costs, remedial action, damages to natural resources, to other
property or for personal injury including claims under CERCLA. The Premises is not listed or
proposed for listing on the National Priorities List pursuant to CERCLA, CERCLIS or any state or
local list of sites requiring investigation or cleanup. “Regulated Material” means any hazardous
substance as defined by any Environmental Law and any other material regulated by any applicable
Environmental Law, including, polychlorinated biphenyls, petroleum, petroleum-related material,
crude oil or any fraction thereof. “CERCLIS” means the Comprehensive Environmental Response
Compensation Liability Information System List pursuant to CERCLA. “Environmental Law” means any
applicable federal, state or local law, in effect as of the Closing Date, relating to the
protection of human health and safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants, including common law nuisance, property damage and similar common law
theories.

          3.17.6 Company has not received any request for information, notice of claim, demand or other
notification that it is or may be potentially responsible with respect to any investigation,
abatement or cleanup of any threatened or actual release of any Regulated Material.

          3.17.7 To the best knowledge and belief of Sellers and Company after investigation, Sellers or
Company have received all required federal, state, and local licenses, certificates or permits
relating to the Business or the premises, and the Business and Company’s facilities, property and
equipment are in compliance with the foregoing in all respects.

          3.17.8 To the best knowledge and belief of Sellers and Company after investigation, Company
has filed all applications, notices and other documents necessary to effect the timely renewal or
issuance of all permits necessary under any Environmental Laws for the continued conduct and
operation of the Business in the manner now conducted.

          3.17.9 To the best knowledge and belief of Sellers and Company after investigation, there are
no permits, registrations, licenses and authorizations held by Company in connection with the
Business under the Environmental Laws and Sellers and Company knows of no reason why the Business
would require them.

          3.17.10 Sellers and Company will hold harmless and indemnify Buyer from all pre-acquisition
Environmental obligations pursuant to Section 8.2.

    Section 3.18 Brokers. No broker or finder has acted for Sellers or Company in
connection with this Agreement or the transactions contemplated hereby. Sellers and Company are not
obligated to pay any fee or commission to any broker, finder, investment banker or other
intermediary in connection with the transactions contemplated by this Agreement.

     Section 3.19 Ownership of Company.

          3.19.1 Units; Capitalization. There are no Securities Rights with respect to any
Units, nor are there any securities convertible into or exchangeable for any Units, or any other
Security Rights with respect to any unissued Units. “Securities Right” means any option,

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warrant, other right, proxy, put, call, demand, plan, commitment, agreement, understanding, or
arrangement of any kind relating to any Units, or any right relating to issuance, sale, assignment,
transfer, purchase, redemption, conversion, exchange, registration or voting rights with respect to
any Units of the Company, whether issued or unissued, or any other security convertible into or
exchangeable for Units of the Company conferred by statute, by the Company’s governing documents,
or by agreement, including any subscription right, pre-emptive purchase right, or registration
right. All of the Units are (a) validly issued, fully paid and nonassessable, (b) were not issued
in violation of the terms of any agreement or other understanding of Company, and (c) were issued
in compliance with all applicable federal and state securities laws and regulations.

          3.19.2. Title to Units. TLC owns all of the Company’s Units. Ms. Hall and Mr.
Wilson own all of the member interests of TLC.

     Section 3.20 Disclosures. To the best knowledge and belief of Sellers and Company
after investigation, no statement, representation or warranty made by Sellers or Company in this
Agreement, in any Exhibit hereto or Schedule delivered hereunder, or in any certificate, statement,
list, schedule or other document furnished or to be furnished to Buyer hereunder, contains any
untrue statement of a material fact, or fails to state a material fact necessary to make the
statements contained herein or therein, in light of the circumstances in which they are made, not
misleading.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF BUYER

     Buyer hereby represents and warrants to Sellers, as of the date hereof and, if different, as
of the Closing Date, except as set forth on Disclosure Schedule 4.0, as follows:

     Section 4.1 Organization. Buyer is a corporation duly organized, validly existing and
in good standing under the laws of Delaware, and has the requisite power and authority to own,
operate or lease the properties that it requires to carry on its businesses in all material
respects as such is now being conducted.

     Section 4.2 Qualification of Buyer. As of the Closing, Buyer shall be duly qualified
or licensed as a foreign corporation to do business, and is in good standing, in Tennessee, if such
qualification is necessary in the reasonable judgment of Buyer, and in each other jurisdiction
where the character of the Assets, the Business or the nature of its activities makes such
qualification or license necessary.

     Section 4.3 Authorization.

          4.3.1 Authority. Buyer has all requisite power and authority to enter into and
perform this Agreement and to consummate the transactions contemplated hereby. This Agreement is a
valid and binding obligation of it, enforceable in accordance with its terms. This Agreement has
been duly executed and delivered by Buyer and constitutes, and each Other Agreement which is to be
executed and delivered by Buyer, when executed and delivered by it,

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shall constitute, the legal, valid and binding obligation of it, enforceable in accordance with its
terms, except to the extent that enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, receivership, moratorium and other similar laws relating to or
affecting the rights and remedies of creditors generally and by general principles of equity
including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing
and the possible unavailability of specific performance, injunctive relief or other equitable
remedies, regardless of whether enforceability is considered in a proceeding in equity or at law.

          4.3.2 No Breach or Violation. Execution, delivery and performance of this Agreement
by Buyer and consummation of the transactions contemplated hereby will not cause a breach or
default or otherwise conflict with any term or provision of the following:

               (a) Its articles of incorporation or bylaws, as may be amended;

               (b) Any court of administrative order, writ or injunction or process, or any consent decree to
which it is party or is bound: (i) where such violation, breach or default would have a material
adverse effect on the business, results of operations or financial condition of it, considered as a
whole, or (ii) except as to which required consents, amendments or waivers shall have been obtained
by it prior to the Closing for any such violation, breach or default.

     Section 4.4 Litigation.

          4.4.1 Litigation Pending or Threatened. There are no claims, actions, suits,
hearings, arbitrations, disputes, proceedings (public or private) or governmental investigations
pending or, to the best of Buyer’s knowledge, threatened, against or affecting Buyer, at law or in
equity, before or by any federal, state, municipal or other governmental or non-governmental
department, commission, board, bureau, agency, court or other instrumentality, or by any private
person or entity, there is no basis for any such action, suit or proceeding, and there are no
existing or threatened, orders, judgments or decrees of any court or governmental agency affecting
Buyer.

          4.4.2 This Transaction. There are no legal, administrative, arbitration or other
proceedings or governmental investigations pending or, to the best of Buyer’s knowledge, threatened
against Buyer which seek to enjoin or rescind the transactions contemplated by this Agreement or
otherwise prevent Buyer from complying with the terms and provisions of this Agreement.

     Section 4.5 Brokers. Buyer has not paid or become obligated to pay any fee or
commission to any broker, finder, investment banker or other intermediary in connection with the
transactions contemplated by this Agreement.

     Section 4.6 Third Party Consent. With the exception of notification to NASDAQ Stock
Market, LLC and Buyer’s senior lender, there are no approvals, authorizations, certificates and
consent of any third parties necessary or required for Buyer to fulfill its obligations under this
Agreement.

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     Section 4.7 Permits. Buyer shall obtain, by Closing, any approvals, authorizations,
certificates, consents, licenses, orders and/or permits of any governmental agencies, whether
federal, state or local, necessary to the ownership, use or operation of the Units, Assets, or
Business.

     Section 4.8 Government Contracts Compliance. Buyer is not in, and consummation of
this Agreement and the transactions contemplated hereby will not result in any, violation, breach
or default of any term or provision of: (a) any contract, subcontract or agreement between any
United States, foreign, state or local governmental or regulatory authority and Buyer or (b) any
bid, proposal or quote submitted to any United States, foreign, state or local governmental or
regulatory authority by Buyer.

     Section 4.9 Government Authorizations. Execution, delivery and performance of this
Agreement by Buyer, and consummation of the transactions contemplated hereby, will not require any
consent, approval, authorization, or permit from, or any filing with or notification to, any United
States, foreign, state or local governmental or regulatory authority except with respect to
Government entities who are parties to Contracts, and except for a notification to NASDAQ Stock
Market, LLC.

     Section 4.10 Disclosures. To the best knowledge and belief of Buyer after
investigation, no statement, representation or warranty made by Buyer in this Agreement, in any
exhibit hereto or Schedule delivered hereunder, or in any certificate, statement, list, schedule or
other document furnished or to be furnished to Sellers hereunder, contains any untrue statement of
a material fact, or fails to state a material fact necessary to make the statements contained
herein or therein, in light of the circumstances in which they are made, not misleading.

ARTICLE V

COVENANTS

     Section 5.1 Affirmative Covenants of Sellers. With respect to the Company, the Units,
the Business, and the Assets, except as may be agreed in writing by Buyer, each Seller shall, and
shall cause Company to, at all times from the date hereof through the Closing Date:

               (a) Use its best efforts to preserve and protect the goodwill, rights, properties, assets and
business organization of Company and to prevent the occurrence of any event or condition which
would have a material adverse effect on the Assets, the Business or the financial condition or
results of operations of Company;

               (b) Use its best efforts to preserve and protect the present goodwill and relationships of
Company and the Business with creditors, suppliers, customers, licensors, licensees, contractors,
distributors, the U.S. Government, lessors and lessees and others having business relationships
with it;

               (c) Maintain clear, unencumbered title to the Units and the Assets and maintain all tangible
Assets in customary repair, order and condition, reasonable wear and tear,

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damage by fire and other
casualty excepted, and promptly repair, restore or replace any Assets which are damaged or
destroyed by fire or other casualty, whether insured or uninsured;

               (d) Comply in all material respects with all applicable federal, state, foreign and local
laws, rules and regulations;

               (e) Maintain the books and records of Company in the usual and ordinary course consistent with
past practices in such manner as is necessary to ensure satisfaction of the representations and
warranties set forth in Article III of this Agreement and in a manner that fairly and accurately
reflects its income, expenses, assets, and liabilities in accordance with Tax Convention;

               (f) File all Tax Returns required to be filed and make timely payment of all Taxes shown to be
due on such returns;

               (g) Use its best efforts to obtain, prior to the Closing Date, all consents, approvals and
waivers, including all such consents, approvals or waivers required to be obtained from the
government (whether federal, state or local) its customers, vendors, suppliers, lessors, and
consents of the other parties to the contracts and any teaming agreements, partnerships or other
arrangements between Company and any other person or entity, necessary or required to vest in Buyer
all of Sellers’ and Company’s rights and title to, and interest in, the Assets in conformity with
the representations and warranties of Sellers herein;

               (h) Promptly notify Buyer in writing of any adverse change in the Business or the Assets, or
any adverse change with respect to the relationships of Company and its employees or its creditors,
suppliers, customers, subcontractors, licensors, licensees, lessors and lessees, and others having
business relationships with it;

               (i) Promptly notify Buyer in writing of the threat, institution or receipt of any claim,
action, suit, inquiry, proceeding, notice of violation, demand letter, subpoena, government audit
or disallowance by or before any court or governmental or other regulatory or administrative
agency; and

               (j) Promptly supplement or amend and deliver to Buyer supplements or amendments to the
Schedules that Sellers are required to prepare hereunder with respect to any matter arising
hereafter which, if existing or occurring as at the date of this Agreement, would have been
required to have been set forth and described in such Schedule. No supplement or amendment of a
Schedule made pursuant to this Paragraph (j) of Section 5.1 shall be deemed to cure any breach of
any representation or warranty made in this Agreement, nor shall any such supplement or amendment
be deemed to relate back to any date prior to its delivery without the written consent of Buyer.

     Section 5.2 Negative Covenants of Sellers. With respect to the Company, the Units,
the Business, and the Assets, each Seller shall not, and shall cause Company not to, do any of the
following, without the prior written consent of Buyer, from the date hereof through the
Closing Date:

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               (a) Incur or agree to incur any obligation or liability (absolute or contingent) in connection
with any of the Company, the Units, the Business, or the Assets, except liabilities arising out of,
incurred in connection with, or related to the operation of the Business in the ordinary course and
the consummation of this Agreement;

               (b) Sell, transfer, assign, license or otherwise dispose of, or encumber in any way, any of
the Units, the Company, the Business, or the Assets;

               (c) Amend, modify or terminate any of the Contracts;

               (d) Waive or cancel any rights or claims relating to the Company, the Units, the Business, or
the Assets;

               (e) Seek, solicit or agree to any offer for the sale of the Company, the Units, the Business,
or the Assets or any material part thereof, or seek, solicit or agree to any merger of the Company
with any other entity whereby the Company or its successor shall not be fully capable of and
obligated to perform all of the Company’s obligations under this Agreement;

               (f) Undertake any transaction, including, but not limited to, the incurring of any
indebtedness for borrowed money, except in the ordinary course of business; or

               (g) Offer or enter into any contract, understanding, plan, or agreement to take any action
described in this Section 5.2.

     Section 5.3 Affirmative Covenants of Buyer. With respect to the Company, the
Business, and the Assets, except as may be agreed in writing by Sellers and the Company, Buyer each
shall at all times from the date hereof through the end of the Earn-Out Period:

               (a) Use its best efforts to preserve and protect the goodwill, rights, properties, assets and
business organization of the Company and to prevent the occurrence of any event or condition which
would have a material adverse effect on the Business, the Assets, or the financial condition or
results of operations of the Company;

               (b) Use its best efforts to preserve and protect the present goodwill and relationships of the
Company with creditors, suppliers, customers, licensors, licensees, contractors, distributors, the
U.S. Government, lessors and lessees and others having business relationships with it;

               (c) Maintain clear unencumbered title to the Units, the Company, the Business, and the Assets,
with the exception of a first-lien-position security interest granted to Sellers, and a second- or
third-lien-position security interest granted to a senior or mezzanine lender, and maintain all
tangible Assets in customary repair, order and condition, reasonable wear and tear, damage by fire
and other casualty excepted, and promptly repair, restore or
replace any Assets which are damaged or destroyed by fire or other casualty, whether insured
or uninsured;

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               (d) Comply in all material respects with all applicable federal, state, foreign and local
laws, rules and regulations;

               (e) Maintain the books and records of Buyer and Company in the usual and ordinary course
consistent with past practices in such manner as is necessary to ensure satisfaction of the
representations and warranties of Buyer as set forth in this Agreement and in a manner that fairly
and accurately reflects its income, expenses, assets, and liabilities in accordance with Tax
Convention;

               (f) File all Tax Returns required to be filed and make timely payment of all Taxes shown to be
due on such returns;

               (g) Promptly notify Sellers in writing of any adverse change in the Business, or any adverse
change with respect to the relationships of Buyer and Company and their employees or their
creditors, suppliers, customers, subcontractors, licensors, licensees, lessors and lessees, and
others having business relationships with them; and

               (h) Promptly notify Sellers in writing of the threat, institution or receipt by Buyer or
Company of any claim, action, suit, inquiry, proceeding, notice of violation, demand letter,
subpoena, government audit or disallowance by or before any court or governmental or other
regulatory or administrative agency.

     Section 5.4 Negative Covenants of Buyer. With respect to the Units, the Company, the
Business, and the Assets, Buyer shall not do any of the following from the date hereof through the
end of the Earn-Out Period:

               (a) Incur or agree to incur any obligation or liability (absolute or contingent) in connection
with any of the Units, the Company, the Business, or the Assets, except liabilities arising out of,
incurred in connection with, or related to the operation of the Business in the ordinary course and
the consummation of this Agreement;

               (b) Sell, transfer, assign, license or otherwise dispose of, or encumber in any way, any of
the Units, the Company, the Business, or the Assets, with the exception of a first-lien-position
security interest granted to Sellers, and a second- or third-lien-position security interest
granted to a senior or mezzanine lender;

               (c) Amend, modify or terminate any of the Contracts in any matter that would materially
diminish the gross revenue projected as of Closing;

               (d) Seek, solicit or agree to any offer for the sale of the Units, the Company, the Business,
or the Assets, or any material part thereof, or seek, solicit or agree to any merger of Buyer with
any other entity whereby Buyer or its successor shall not be fully capable of and obligated to
perform all of Buyer’s obligations under this Agreement;

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               (e) Incur any indebtedness for borrowed money that is senior in lien position to the lien
position of Sellers; or

               (f) Offer or enter into any contract, understanding, plan, or agreement to take any action
proscribed in this Section 5.4.

     Section 5.5 Access to Information.

          5.5.1 Access of Buyer Before Closing. Subject to the April 20, 2009 Confidentiality
Agreement previously signed and delivered by the parties hereto, from and after the date of this
Agreement and until the Closing Date, Buyer and its agents and representatives shall have full and
complete access: (a) to all properties (whether real or personal), books and records of the Company
(the confidentiality of which Buyer agrees to maintain) for purposes of conducting such
investigations, appraisal or audits at its own expense as Buyer deems necessary or advisable under
the circumstances; (b) to review, analyze and investigate the Intellectual Property, and all
aspects concerning such property; and (c) to discuss any related business affairs of, and condition
(financial or otherwise) of, Seller, the Business and/or the Business with such persons, including
but not limited to the directors, officers, employees, accountants, landlords, counsel and
creditors of Seller as Buyer considers necessary for the purposes of conducting its investigations,
appraisals or audits in connection with the transactions contemplated by this Agreement.

          5.5.2 Access of Buyer After Closing. Sellers shall furnish to Buyer all financial and
Tax Return information as reasonably may be requested after the Closing for the purpose of filing
or defending tax returns of Buyer or a subsequent purchaser of the Company or the Business.

          5.5.3 Access of Sellers. From and after the date of this Agreement and until the
end of the Earn-Out Period, Sellers and their agents and representatives shall have full and
complete access, for the purpose of verifying compliance with the representations, warranties, and
covenants of this Agreement: (a) to all properties (whether real or personal), books and records of
Buyer relating to the Units, the Company, the Business, and the Assets (the confidentiality of
which Sellers agree to maintain) for purposes of conducting such investigations, appraisals or
audits at their own expense as Sellers deems necessary or advisable under the circumstances; (b) to
review, analyze and investigate the Intellectual Property, and all aspects concerning such
property; and (c) to discuss any related business affairs of, and condition (financial or
otherwise) of, the Company, the Business, and/or the Assets with such persons, including but not
limited to the directors, officers, employees, accountants, and counsel of Buyer as Sellers
consider necessary for the purposes of conducting its investigations, appraisals or audits. Upon
request of Sellers, Buyer shall provide the following reports:

          1) Monthly income statement for the Company.

          2) Monthly pipeline report.

          3) Monthly schedule of completed and uncompleted projects.

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     Section 5.6 Filing and Authorizations. (a) To the extent not obtained prior to
the Closing, Sellers each shall, after the Closing Date, continue to use its best efforts promptly
to comply with all federal, state, and local laws and regulations and to obtain all necessary
governmental authorizations, and approvals to: (i) obtain all consents, approvals and waivers,
including all such consents, approvals or waivers required to be obtained from the government
(whether federal, state or local) and Company’s customers, vendors, suppliers, lessors, and
consents of the other parties to the contracts and any teaming agreements, partnerships or other
arrangements between Company and any other person or entity, necessary or required to vest in Buyer
all of Company’s rights and title to, and interest in, the Company, the Business, and the Assets
in conformity with the representations and warranties of Sellers herein, and (ii) obtain all
permits, licenses and waivers, with regard to the transactions contemplated by this Agreement.

          (b) Buyer shall, after the Closing Date, use its best efforts to comply with all federal,
state, and local laws and regulations and to obtain all necessary governmental authorizations, and
approvals to: (i) obtain all consents, approvals and waivers, including all such consents,
approvals or waivers required to be obtained from the government (whether federal, state or local)
and Company’s customers, vendors, suppliers, lessors, and consents of the other parties to the
Contracts and any teaming agreements, partnerships or other arrangements between Buyer and any
other person or entity, necessary or required operate the Company and the Business in conformity
with the representations and warranties of Sellers herein, and (ii) obtain all permits, licenses
and waivers, with regard to the transactions contemplated by this Agreement.

     Section 5.7 Administration of Accounts.

          5.7.1 In Trust For Buyer. All payments and reimbursements made in the ordinary course
by any third party in the name of or to the Company in connection with or arising out of the
Business and the Assets after the Closing Date, shall be held by Sellers in trust to the benefit of
the Company and, immediately (not more than twenty-one (21) calendar days) upon receipt by Sellers
of any such payment or reimbursement, Sellers shall pay over to the Company the amount of such
payment or reimbursement without right of set-off.

          5.7.2 In Trust for Seller. All payments and reimbursements made in the ordinary
course by any third party in the name of or to Buyer or the Company in connection with or arising
out of the Excluded Assets after the Closing Date shall be held by Buyer and the Company in trust
to the benefit of Sellers and, immediately (not more than twenty-one (21) calendar days) upon
receipt by Buyer or the Company of any such payment or reimbursement, Buyer or the Company shall
pay over to Sellers the amount of such payment or reimbursement without right of set-off.

     Section 5.8 Taxes and Other Excluded Liabilities.

          5.8.1 Sellers’ Obligations. Sellers acknowledge their legal obligations to pay the
Excluded Liabilities, including Taxes relating to all items of income, loss, gain, deduction and
credit attributable to or relating to ownership of the Company and the Business up to and including
the Closing Date.

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          5.8.2 Buyer and Company Obligations. Buyer and the Company acknowledge their legal
obligations to pay Taxes relating to all items of income, loss, gain, deduction and credit
attributable to or relating to ownership of the Company and the Business assets after the Closing
Date.

          5.8.3 Conveyance Fees. Seller shall promptly file and pay when due any and all
returns with respect to any conveyance or transfer taxes or fees, excluding sales and use taxes,
with respect to the sale, transfer and purchase of the Business and the Assets of the Company under
this Agreement.

     Section 5.9 Further Assurances. From time to time after the Closing, Sellers shall at
their own expense, execute and deliver, or cause to be executed and delivered, such documents to
Buyer and the Company as they may reasonably request, and from time to time after the Closing,
Buyer and Company shall, at their own expense, execute and deliver such documents to Sellers as
they may reasonably request, in order to more effectively consummate the transaction contemplated
by this Agreement.

     Section 5.10 Public Announcements. Except as required by law, Sellers, Buyer, and
Company shall consult with each other before issuing any press release or otherwise making any
public statement with respect to this Agreement and the transactions contemplated hereby, and shall
not issue any such press release or make any such public statement prior to such consultation.

     Section 5.11 Risk of Loss. If between the date hereof and the Closing Date, there is
any loss, destruction or other physical damage to the Business or any Assets resulting from theft,
accident or any other casualty, whether or not insured, or any lien or encumbrance exists or is
placed on any Units or Assets and is not removed or released on or prior to the Closing Date
(collectively, a “Casualty Loss”), then Sellers shall promptly give notice to Buyer of such
Casualty Loss and the amount of insurance, if any, payable to Sellers with respect thereto. If such
Casualty Loss does not prevent the fulfillment of a condition to Buyer’s obligations to consummate
the transactions contemplated by this Agreement, or if it does and Buyer waives such condition,
then Buyer shall have the option, which shall be exercised by Buyer by giving Sellers written
notice within ten (10) days after receipt of the above notice from Sellers, or if there is not ten
(10) days prior to the Closing Date, as soon as possible but not less than (24) hours prior to the
Closing, of either: (i) causing the affected Asset to become an Excluded Asset and Buyer shall be
entitled to reduce the Purchase Price payable to Sellers at Closing pursuant to Subsection 2.3.1 in
an amount equal to a binding estimate to be obtained by Sellers from a qualified third party
reasonably acceptable to Buyer of the cost required to restore the affected Asset substantially to
its condition prior to such Casualty Loss or the reasonably estimated value of the affected Asset;
or (ii) terminating this Agreement whereupon Sellers and Buyer shall have no liabilities or
obligations with respect to the transactions contemplated by this Agreement.

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ARTICLES VI

CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER

     Section 6.1 Conditions. The obligations of Buyer under this Agreement to perform
Articles I and II herein shall be subject to the fulfillment, to its reasonable satisfaction, on or
prior to the Closing Date, of all of the following conditions precedent:

          6.1.1 Representations and Warranties. All representations and warranties of Sellers
and of Company contained in this Agreement and in all certificates, schedules and other documents
delivered by Sellers to Buyer or its representatives pursuant to this Agreement and/or in
connection with the transactions contemplated hereby shall be true, complete and accurate in all
material respects as of the date when made and as of the Closing Date with the same force and
effect as though such representations and warranties had been made on and as of the Closing Date.

          6.1.2 No Material Adverse Change. During the period from the date hereof to the
Closing Date, Sellers shall not have sustained any material loss or damage to the Units, the
Company, the Business, or the Assets, whether or not insured, nor shall there have been any
material adverse change in the Business.

          6.1.3 Due Diligence Review. During the period from the date hereof to the Closing
Date, Buyer shall have had the opportunity to complete its due diligence investigation in
connection with the transactions contemplated by this Agreement and such investigation has not
revealed any fact, event or circumstance which, in its sole discretion, could be expected to have a
material adverse effect on the transactions contemplated by this Agreement.

          6.1.4 Schedules Delivered. All Schedules to be delivered to Buyer prior to Closing
hereunder shall have been so delivered to it either at the time of execution of this Agreement or
with time sufficient for Buyer’s review, and each such Schedule shall be satisfactory in form and
content to them, such satisfaction to be determined at their sole discretion.

          6.1.5 No Adverse Facts Disclosed. Neither any investigation of Sellers, nor any
disclosure Schedule, nor any other document delivered in connection with this Agreement, shall have
revealed any facts and circumstances which reflect in a material adverse way on the Units, the
Company, the Business, or the Assets, as determined by Buyer in its sole discretion and judgment.

          6.1.6 Obtaining of Consents and Approvals. Except as otherwise contemplated by this
Agreement, Sellers shall have executed and delivered to Buyer, or shall have caused to be executed
and delivered, any consents, waivers, approvals, permits, licenses or authorizations which, if not
obtained on or prior to the Closing Date, would have a material adverse effect on the Units, the
Company, the Business, or the Assets.

25

 

          6.1.7 Performance by Sellers. Sellers shall have performed and complied in all
material respects with all agreements, covenants, obligations and conditions required by this
Agreement to be performed or complied with by them on or before the Closing Date.

          6.1.8 Absence of Litigation. There shall not be in effect any judicial or regulatory
order enjoining or restraining the transactions contemplated by this Agreement, and there shall not
be instituted or pending any action or proceeding before any federal, state or foreign court or
governmental agency or other regulatory or administrative agency or instrumentality: (a)
challenging the acquisition by Buyer of the Units, the Company, the Business, or the Assets, or
otherwise seeking to restrain, materially condition or prohibit consummation of the transactions
contemplated by this Agreement, or seeking to impose any material limitations on any provision of
this Agreement, or (b) seeking to compel Buyer or Sellers to dispose of or hold separate, the
Units, the Company, the Business, or the Assets, or any portion of them, as a result of the
transactions contemplated by this Agreement.

          6.1.9 Officers Certificate. Buyer shall have received a certificate, dated the
Closing Date, executed by Sellers stating that the conditions set forth in Sections 6.1.1 through
6.1.3 and 6.1.5 through 6.1.7 hereof have been satisfied.

          6.1.10 Delivery of Documents; Other Actions. (a) The execution and delivery to
Buyer by Sellers and/or Company of the following, all dated as of the Closing Date and acceptable
in form and substance to Buyer, Sellers, and Company:

               (i) a separate assignment of the Units;

               (ii) the agreements and documents required by the terms of this Agreement to be executed and
delivered by Sellers and/or the Company;

               (iii) the noncompetition, nondisclosure and nonsolicitation agreements of Sellers and
employees of the Company required by Buyer and an employment agreement between the Company and
Robert E. Wilson;

               (iv) such other conveyances, instruments of title, assignments, consents, recordings, and
other documents as may be, in the reasonable opinion of Buyer, necessary or proper to transfer to
it ownership of the Units, the Company, the Business, and the Assets and rights being acquired by
them hereunder; and

               (v) such other documents, instruments and certificates as may be reasonably requested by Buyer
or its counsel to effectuate the transactions contemplated by this Agreement, including without
limitation the quotation commitments from Affiliates of Sellers referred to in Section 1.1.6.

          (b) The receipt by Buyer and delivery to Sellers of evidence of bonding capacity reasonably
satisfactory to Sellers, as required by Section 2.9, and the execution by and exchange among Buyer,
Sellers, and Company of an agreement relating to post-closing invoices, payments, and purchase
orders, and other subjects.

26

 

          (c) The version of this Agreement dated as of December 29, 2009 and signed by the parties,
has been approved and ratified by the Board of Directors of Buyer.

     Section 6.2 Waiver. Buyer may, in its sole discretion, waive in writing fulfillment
of any or all of the conditions set forth in Section 6.1 of this Agreement, provided that such
waiver granted pursuant to this Section 6.2 shall have no effect upon any of the other conditions
not so waived.

ARTICLE VII

CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS

     Section 7.1 Conditions. The obligations of each Seller under this Agreement to perform
Articles I and II herein shall be subject to the fulfillment, to its reasonable satisfaction, on or
prior to the Closing Date, of all of the following conditions precedent:

          7.1.1 Representations and Warranties. All representations and warranties of Buyer
contained in this Agreement and in all certificates, schedules and other documents delivered by
Buyer to Sellers or their representatives pursuant to this Agreement and or in connection with the
transactions contemplated hereby shall be true, complete and accurate in all material respects as
of the date when made and as of the Closing Date with the same force and effect as though such
representations and warranties had been made on and as of the Closing Date.

          7.1.2 No Material Adverse Change. During the period from the date hereof to the
Closing Date, Buyer shall not have sustained any material adverse change in its business or
operations.

          7.1.3 Due Diligence Review. During the period from the date hereof to the Closing
Date, each Seller shall have had the opportunity to complete its due diligence investigation in
connection with the transactions contemplated by this Agreement and such investigation has not
revealed any fact, event or circumstance which, in its sole discretion, could be expected to have a
material adverse effect on the transactions contemplated by this Agreement.

          7.1.4 Schedules Delivered. All Schedules to be delivered to Sellers prior to Closing
hereunder shall have been so delivered to them either at the time of execution of this Agreement or
with time sufficient for Sellers’ review, and each such Schedule shall be satisfactory in form and
content to them, such satisfaction to be determined at their sole discretion.

          7.1.5 No Adverse Facts Disclosed. Neither any investigation of Buyer or any Schedule,
nor any other document delivered in connection with this Agreement, shall have revealed any facts
and circumstances which reflect in a material adverse way on Buyer or its

27

 

ability to carry out the events and obligations established by this Agreement through the
expiration of the Earn-Out Period, as determined by Sellers in their sole discretion and judgment.

          7.1.6 Obtaining of Consents and Approvals. Except as otherwise contemplated by this
Agreement, Buyer shall have executed and delivered to Sellers, or shall have caused to be executed
and delivered, any consents, waivers, approvals, permits, licenses or authorizations which, if not
obtained on or prior to the Closing Date, would have a material adverse effect on the capacity of
Buyer to honor its obligations under this Agreement.

          7.1.7 Performance by Buyer. Buyer shall have performed and complied in all material
respects with all agreements, covenants, obligations and conditions required by this Agreement to
be performed or complied with by it on or before the Closing Date.

          7.1.8 Absence of Litigation. There shall not be in effect any judicial or
regulatory order enjoining or restraining the transactions contemplated by this Agreement.

          7.1.9 Officer’s Certificate. Sellers shall have received a certificate, dated the
Closing Date, executed on behalf of Buyer by an appropriate Person stating that the conditions set
forth in Sections 7.1.1 through 7.1.8 hereof have been satisfied.

          7.1.10 Delivery of Documents; Other Actions. (a) The execution and delivery to
Sellers by Buyer of the following, all dated as of the Closing Date and acceptable in form and
substance to Sellers, Buyer, and Company:

               (i) the consideration set forth in Article II hereof;

               (ii) the agreements and documents required by the terms of this Agreement to be executed and
delivered by Buyer, and an offer of an employment agreement between the Company and Robert E.
Wilson;

               (iii) such other documents, instruments and certificates as may be reasonably requested by
Sellers or their counsel to effectuate the transactions contemplated by this Agreement; and

               (iv) the Buyer’s Line of Authorization or other evidence of bonding capacity reasonably
satisfactory to Sellers, as required by Section 2.9.

          (b) The execution by and exchange among Sellers, Buyer, and Company of an agreement relating
to post-closing invoices, payments, and purchase orders, and other subjects.

          (c) The version of this Agreement dated as of December 29, 2009 and signed by the parties,
has been approved and ratified by the Board of Directors of Buyer.

     Section 7.2 Waivers. Sellers may, in their sole discretion, waive in writing
fulfillment of any or all of the conditions set forth in Section 7.1 of this Agreement, provided
that such

28

 

waiver granted pursuant to this Section 7.2 shall have no effect upon any other conditions not
so waived.

ARTICLE VIII

INDEMNIFICATION

     Section 8.1 Survival of Representations. All representations, warranties, covenants
and agreements made by any party in this Agreement or pursuant hereto shall survive the Closing,
but no claim may be made with respect to any breach of any representation or warranty hereunder
after June 23, 2015. The parties acknowledge that they have performed comprehensive due diligence
investigations and that they have no knowledge of any facts and circumstances which would result in
the inaccuracy of any representation or warranty of Buyer, Company, and/or Sellers, as applicable.

     Section 8.2 Indemnification by the Sellers. Subject to the limitations set forth in
this Article 8 and the Closing of the transactions contemplated by this Agreement, each Seller
shall indemnify, defend, save and hold each of Buyer and its officers, directors, employees,
Affiliates and agents (collectively, “Buyer Indemnitees”) harmless from and against all demands,
claims, actions or causes of action, assessments, losses, damages, deficiencies, liabilities, costs
and expenses, including reasonable attorneys’ fees, interest, penalties, and all reasonable amounts
paid in investigation, defense or settlement of any of the foregoing (collectively, “Buyer
Damages”) asserted against, imposed upon, resulting to or incurred by any of the Buyer Indemnitees,
directly or indirectly, in connection with, or arising out of, or resulting from (i) a breach of
any of the representations and warranties made by the Sellers in Article III of this Agreement,
except as set forth above in Section 8.1 (“Buyer Warranty Damages”), and (ii) a breach of any of
the covenants or agreements made by the Sellers, or a breach of any of the covenants or agreements
of Sellers, in or pursuant to this Agreement and in any Other Agreement to which the Sellers are a
party. The amount of this indemnity shall not exceed, in the aggregate, the sum of $3,450,000.00.

     Section 8.3 Indemnification by Buyer. Subject to the limitations set forth in this
Article 8 and the Closing of the transactions contemplated by this Agreement, Buyer shall
indemnify, defend, save and hold Sellers and their officers, directors, employees, Affiliates, and
agents (collectively “Seller Indemnitees”) harmless from and against any and all demands, claims,
actions or causes of action, assessments, losses, damages, deficiencies, liabilities, costs and
expenses, including reasonable attorneys’ fees, interest, penalties, and all reasonable amounts
paid in investigation, defense or settlement of any of the foregoing (collectively, “Seller
Damages”) asserted against, imposed upon, resulting to or incurred by any of the Seller
Indemnitees, directly or indirectly, in connection with, or arising out of, or resulting from (i) a
breach of any of the representations and warranties made by Buyer in Article IV of this Agreement,
except as set forth above in Section 8.1 (“Shareholder Warranty Damages”), or (ii) a breach of any
of the covenants or agreements made by Buyer in or pursuant to this Agreement and in any Other
Agreement to which Buyer is a party.

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     Section 8.4 Notice of Claims. If any Buyer Indemnitee or Seller Indemnitee (an
“Indemnified Party”) believes that it has suffered or incurred or will suffer or incur any Buyer
Damages or Seller Damages (“Damages”) for which it is entitled to indemnification under this
Article 8, or if any legal, governmental or administrative proceeding which may result in such
damages is threatened or asserted (including any written notice from any taxing authority), such
Indemnified Party shall so notify the party or parties from whom indemnification is being claimed
(the “Indemnifying Party”) with reasonable promptness and reasonable particularity in light of the
circumstances then existing. If any action at law or suit in equity is instituted by or against a
third party with respect to which any Indemnified Party intends to claim any Damages, such
Indemnified Party shall promptly notify the Indemnifying Party of such action or suit. The failure
of an Indemnified Party to give any notice required by this Section 8.5 shall not affect any of
such party’s rights under this Article 8 except to the extent such failure is actually prejudicial
to the rights or obligations of the Indemnifying Party.

     Section 8.5 Good Faith Effort to Settle Disputes; Set-Off. The parties agree that,
prior to commencing any litigation against the others concerning any matter with respect to which
such party intends to claim a right of indemnification in such proceeding, Sellers and Buyer shall
meet in a timely manner and attempt in good faith to negotiate a settlement of such dispute during
which time such parties shall disclose to the others all relevant information relating to such
dispute. In addition to any other remedy available at law or in equity, following an unsuccessful,
good-faith effort to settle a dispute, any party may withhold from any monies that it owes the
other parties the amount in dispute, provided that (i) such funds are deposited in an
interest-bearing escrow account pending final resolution of the dispute, and (ii) written notice is
given to all parties of the amount withheld and the custodian of the funds.

ARTICLE IX

TERMINATION

     Section 9.1 Termination Events. Subject to the provisions of Section 9.2, this
Agreement may, by written notice given at or prior to the Closing in the manner hereinafter
provided, be terminated and abandoned only as follows:

          9.1.1 Breach. By Sellers or by Buyer , upon written notice, if a material default or
breach shall be made by the other parties, with respect to the due and timely performance of any of
the other parties’ respective covenants and agreements contained herein, or with respect to the
due compliance with any of their respective representations and warranties contained in Article
III or IV, as applicable, and such default cannot be cured prior to Closing and has not been
waived;

          9.1.2 Mutual Consent. By written mutual consent of all parties; or

          9.1.3 Closing Date. By written notice of Sellers or Buyer, if the Closing shall not
have occurred on or before December 31, 2009, which date may be extended to such later date as may
be agreed upon in writing by the parties; provided, however, that the right to terminate this
Agreement under this Subsection 9.1.3 shall not be available to any of the

30

 

respective parties whose failure to fulfill any obligation under this Agreement has been the
cause of, or resulted in, the failure of the Closing to occur on or before such date.

     Section 9.2 Effect on Termination. In the event this Agreement is terminated pursuant
to Section 9.1 herein, all further rights and obligations of the parties hereunder shall terminate,
and neither any of the parties nor their Affiliates, nor any of the respective directors, officers
or employees of any of the parties nor their Affiliates shall have any liability to any of the
others, except that the obligations set forth in Section X herein shall survive; provided, however,
that if this Agreement is so terminated by a party because one or more of the conditions to its
obligations hereunder as set forth in Articles VI and VII herein is not satisfied as a result of
the other party’s failure to comply with its obligations under this Agreement, the rights of the
terminating party to pursue all legal remedies for breach of contract and damages shall survive
such termination and the breaching party shall be fully liable for any and all damages, costs and
expenses sustained or incurred by the terminating party as a result of such breach. In addition
thereto, any nondisclosure agreement executed by the parties hereto shall survive the termination
of this Agreement.

ARTICLE X

SELLER COVENANT NOT TO COMPETE

     Section 10.1 Noncompetition Agreement.

          10.1.1 So long as Buyer is not in material default of any of its obligations to Sellers,
Sellers agree that, for a period of time equal to the Earn-Out Period plus an additional two (2)
years, that is, until June 30, 2015 (the “Non-Competition Period”), Sellers shall not, directly or
indirectly:

          (a) engage in, carry on, be employed by or have any interest in a business substantially
similar to the Business within the United States of America (collectively, the “Market Area”);

          (b) enter into, engage in, or be employed by any business in competition with the Company in
the Market Area;

          (c) induce any person, excepting Robert Wilson, who is a present or future employee, officer,
agent, affiliate or customer of the Company or Buyer to terminate such person’s relationship with
the Company or Buyer;

          (d) induce any customer, supplier or any other party with whom the Company does business to
refuse to do business with the Company; or

          (e) solicit, or assist any person in the solicitation of, the Company’s customers.

          10.1.2 Sellers acknowledge that the length of time and geographic restriction pertaining to
all prohibitions in Section 10.1 are reasonable and necessary for the legitimate

31

 

protection of Buyer’s and the Company’s business and interests.

          10.1.3 Sellers expressly agree and understand that the remedy at law for any breach by Sellers
of Section 10.1 will be inadequate and that the damages flowing from such breach are not readily
susceptible to being measured in monetary terms. Accordingly, Sellers’ acknowledge that upon
adequate proof of Sellers’ violation of this Section 10.1, each of Buyer and the Company will be
entitled, among other remedies and without any requirement that it post a bond in order to obtain
any such relief, to immediate injunctive relief and may obtain a temporary restraining order
restraining any threatened or further breach. Nothing in this Article X will be deemed to limit
Buyer’s or the Company’s remedies at law or in equity for any breach by Sellers of any of the
provisions of this Agreement.

          10.1.4 In the event any court of competent jurisdiction determines that the specified time
period or geographical area set forth in Section 10.1 is unreasonable, arbitrary or against public
policy, then a lesser time period or geographical area that is determined by the court to be
reasonable, non-arbitrary and not against public policy shall be enforced.

          10.1.5 In the event Sellers violate any legally enforceable provision of this Article X as to
which there is a specific time period during which Sellers are prohibited from taking certain
actions or engaging in certain activities, then, in such event the violation will toll the running
of the time period from the date of the violation until the violation ceases.

     Section 10.2. Allowed Competition. The provisions of Section 10.1 shall not apply
with respect to:

          10.2.1 Any work by Sellers and/or other corporations, limited liability companies,
partnerships, trusts, or other business entities, including sole proprietorships, owned or
controlled by Sellers, which work is consistent with the business activities of electrical
contracting and lighting maintenance of that entity that existed prior to the Closing Date. In the
event a business entity controlled by Sellers is requested by an unrelated party to perform
services which are in direct conflict with the Business of the Company, Sellers shall use their
best efforts to promote the interests of the Company;

          10.2.2 Any work which the Company is unable to bond or otherwise unable to place under
contract;

          10.2.3 Any work or a contract on which the Company materially defaults and/or fails to remedy
a material breach; and

          10.2.4 Any work or a contract when Buyer or the Company goes bankrupt, goes into receivership,
and/or otherwise goes into reorganization and for which Buyer or the Company fails to reaffirm the
contract and/or work.

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ARTICLE XI

MISCELLANEOUS

     Section 11.1 Expenses. Each of the respective parties to this Agreement shall pay its
own costs and expenses (including all legal, accounting, broker, finder and investment banker fees)
relating to this Agreement, the negotiations leading up to this Agreement, and the transactions
contemplated by this Agreement.

     Section 11.2 Amendments and Waivers. No amendment of any provision of this Agreement
shall be valid unless the same shall be in writing and signed by all parties. No waiver by any
party of any default, misrepresentation, or breach of representation, warranty or covenant
hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of representation, warranty or covenant hereunder or affect
in any way any tights arising by virtue of any prior or subsequent such occurrence.

     Section 11.3 Entire Agreement. This Agreement, including the Exhibits hereto and the
Schedules delivered hereunder, contain all of the terms, conditions and representations and
warranties agreed upon by the parties relating to the subject matter of this Agreement and
supersede all prior and contemporaneous agreements, negotiations, correspondence, undertakings,
and communications of the parties, oral or written, respecting such subject matter; provided,
however, that the parties from time to time may agree in writing on interpretations of the
provisions of this Agreement, and that the confidentiality agreement dated April 20, 2009 executed
by the parties shall remain in full force and effect accordingly to its terms.

     Section 11.4 Notices. All notices, requests, demands and other communications made in
connection with this Agreement shall be in writing and shall be deemed to have been duly given on
the date of delivery, if delivered by hand to the persons identified below, or on the date of
receipt if mailed by certified mail, postage prepaid, return receipt requested, addressed as
follows:

	 	If to Buyer:	 	 Energy Focus, Inc.

32000 Aurora Road

Solon, Ohio 44321

Attn: Mr. Joseph G. Kaveski, Chief Executive Officer

Facsimile No.: 440.848.8561
	 
	 	With a copy to: 	 	 Mr. Gerald W. Cowden

Cowden & Humphrey Co. LPA

4600 Euclid Avenue, Suite 400

Cleveland, Ohio 44103

Facsimile No.: 216.241.2881
	 
	 	If to Sellers: 	 	 Mrs. Jami Hall

1244 Gallatin Pike South

Madison, Tennessee 37115

Facsimile No.: 615.883.0988

33

 

	 	With a copy to: 	 	 Mr. John I. Harris, III

Of counsel

Schulman, Leroy & Bennett, PC

P. O. Box 190676

501 Union Street, Seventh Floor

Nashville, Tennessee 37219

Facsimile No.: 615.254.5407

     Section 11.5 Severability. If any provision of this Agreement is held to be
unenforceable for any reason, the parties shall negotiate to adjust such provision rather than have
such clause become void, if possible, in order to achieve the intent of the parties to this
Agreement to the extent possible. In any event all other provisions of this Agreement shall be
deemed valid and enforceable to the full extent possible.

     Section 11.6 Cumulative Remedies. The remedies provided herein are cumulative and not
exclusive and shall not preclude assertion by either party hereto of any other rights or the
seeking of any other remedies against the other party.

     Section 11.7 Waiver. Waiver of any term or condition of this Agreement by any of the
parties shall only be effective if in writing and shall not be construed as a waiver of any
subsequent breach or failure of the same term or condition, or a waiver of any other term or
condition, of the Agreement.

     Section 11.8 Assignment. No party to this Agreement may assign or delegate, by
operation of law or otherwise, all or any portion of its rights, obligations or liabilities under
this Agreement without the prior written consent of the other parties to this Agreement, which it
may withhold in its absolute discretion; provided, however, that Buyer may assign this Agreement in
connection with a merger or consolidation involving Buyer, or a sale of substantially all of
Buyer’s assets, so long as the purchaser or assignee assumes Buyer’s obligations under this
Agreement.

     Section 11.9 Successors and Assigns. The rights, liabilities and obligations of the
parties hereto arising under this Agreement shall attach to and be binding upon the parties, and
their heirs, representatives, successors, and permitted assigns.

     Section 11.10 No Third Party Beneficiaries. Nothing in this Agreement shall confer
any rights upon any person or entity who is not a party to this Agreement.

     Section 11.11 Counterparts. This Agreement may be signed in any number of
counterparts with the same effect as if the signatures to each counterpart were upon a single
instrument, and all such counterparts together shall be deemed an original of this Agreement.

     Section 11.12 Governing Law; Jurisdiction. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware and of the United States, without
giving effect to the doctrine of conflicts of laws. The parties each agree that the federal and
state courts located within the State of Ohio and the State of Tennessee shall have nonexclusive

34

 

jurisdiction as to all matters, actions, claims or disputes arising out of this Agreement or
the transactions contemplated hereby.

     Section 11.13 Dispute Resolution. The parties agree to use their diligent efforts
in order to reach an amicable agreement with respect to all disagreements which might arise under
this Agreement. All disputes arising under this Agreement which are not settled amicably as
specified above shall be finally settled in accordance with the following:

          11.13.1 The parties will attempt in good faith to resolve any controversy or claim arising out
of or relating to this Agreement promptly by negotiations between senior executives of the parties
who have authority to settle the controversy.

          11.13.2 The disputing party shall give the other party written notice of the dispute. Within
twenty (20) days after receipt of said notice, the receiving party shall submit to the other a
written response. The notice and response shall include (a) a statement of each party’s position,
and (b) the name and title of the executive who will represent the party. The executives shall
meet at a mutually acceptable time and place within one (1) month of the date of the disputing
party’s notice and thereafter as often as they reasonably deem necessary to exchange relevant
information and to attempt to resolve the dispute.

          11.13.3 If the matter has not been resolved within two (2) months of the disputing party’s
notice, or if the party receiving said notice will not meet within one (1) month, both parties
agree that each party shall be free to pursue all remedies at law, in equity or otherwise without
any other obligations pursuant to this Section 11.13.

     Section 11.14 Construction.

          11.14.1 Words. All references in this Agreement to the singular shall include the
plural, the plural shall include the singular where applicable, and all references to gender shall
include both genders and the neuter. All references in this Agreement to days shall be calendar
days unless specified as business days. All accounting terms not otherwise identified herein shall
have the meanings assigned to them in accordance with general accepted accounting principles
consistently applied.

          11.14.2 No Presumption. In interpreting any provision of this Agreement no
presumption shall be drawn against the party drafting the provision.

          11.14.3 Headings. The table of contents and the headings of each Article, Section and
Subsection herein are for the purposes of convenience only and shall not be read or interpreted as
having any meaning or effect.

(Signatures on the following page.)

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

	 	 	 	 	 
	 	SELLERS:

TLC INVESTMENTS, LLC

 	 
	 	By:  	/s/ Jami Hall
 	 
	 	 	Name:  	Jami Hall 	 
	 	 	Its: President 	 
	 
	 	 	 
	 	     /s/ Jami Hall
 	 
	 	Jami Hall 	 
	 	 	 
	 
	 	 	 
	 	     /s/ Robert E. Wilson
 	 
	 	Robert E. Wilson 	 
	 	 	 
	 
	 	COMPANY:

STONES RIVER COMPANIES, LLC

 	 
	 	By:  	/s/ Jami Hall
 	 
	 	 	Name:  	Jami Hall 	 
	 	 	Its: President 	 
	 
	 	BUYER:

ENERGY FOCUS, INC.

 	 
	 	By:  	/s/ Joseph G. Kaveski
 	 
	 	 	Name:  	Joseph G. Kaveski 	 
	 	 	Its: Chief Executive Officer 	 

36

 

	 	 	 	 	 

APPENDIX AND SCHEDULES

Index

	 	 	 	 	 
	APPENDIX
	 	 	 	 
	 
	 	 	 	 
	Appendix A  — Definitions
	 	 	 	 
	 
	 	 	 	 
	SCHEDULES
	 	 	 	 
	 
	 	 	 	 
	Schedule 1.1  —  Excluded Assets and Liabilities
	 	 	 	 
	Schedule 3.0  —  Disclosure Schedule
	 	 	 	 
	Schedule 4.0  —  Disclosure Schedule
	 	 	 	 
	Schedule A-8  —  Contracts
	 	 	 	 

37

 

APPENDIX A

Definitions

References to Certain Definitions:

“Accounts Receivable “shall have the meaning set/forth in Section A-8 of Appendix A

“Assets” shall have the meaning set forth in Section A-1 of Appendix A

“Benefit Plan” shall have the meaning set forth in Section 3.16

“Business” shall have the meaning set forth in Section A-1 of Appendix A

“Buyer Damages” shall have the meaning set forth in Section 8.2

“Buyer Indemnitees” shall have the meaning set forth in Section 8.2

“Buyer Warranty Damages” shall have the meaning set forth in Section 8.2

“CAA” shall have the meaning set forth in Section 3.17.2

“Cash Purchase Price” shall have the meaning set forth in Section 2.2.

“Casualty Loss” shall have the meaning set forth in Section 5.11

“CERCLA” shall have the meaning set forth in Section 3.17.2

“CERCLIS” shall have the meaning set forth in Section 3.17.5

“Closing Date” shall have the meaning set forth in Section 2.1

“Closing” shall have the meaning set forth in Section 2.1

“Contracts” shall have the meaning set forth in Section A-8 of Appendix A

“Company Financial Statements” shall have the meaning set forth in Section 3.4.1

“Convertible Promissory Note” shall have the meaning set forth in Section 2.4

“Copyrights” shall have the meaning set forth in Section A-6 of Appendix A

“Customer Lists” shall have the meaning set forth in Section A-7 of Appendix A

“Damages” shall have the meaning set forth in Section 8.4

“Earn-Out” and “Earn-Out Period” shall have the meanings set forth in Section 2.3.

“Encumbrances” shall have the meaning set forth in Section 3.5.1

“Environmental Law” shall have the meaning set forth in Section 3.17.5

“Equipment” shall have the meaning set forth in Section A-2 of Appendix A

“ESCO” shall have the meaning set forth in Section A-1 of Appendix A

“Excluded Assets” shall have the meaning set forth in Section 1.1.2

“Excluded Liabilities” shall have the meaning set forth in Section 1.1.3

“FWPCA” shall have the meaning set forth in Section 3.17.2

“Hazardous Substance” shall have the meaning set forth in Section 3.17.3

“Hazardous Waste” shall have the meaning set forth in Section 3.17.3

“Indemnified Party” shall have the meaning set forth in Section 8.4

“Indemnifying Party” shall have the meaning set forth in Section 8.4

“Intellectual Property” shall have the meaning set forth in Section A-3 of Appendix A

“Interim Balance Sheet” shall have the meaning set forth in Section 3.4.1

“Inventory” shall have the meaning set forth in Section A-8 of Appendix A

“Know-How” shall have the meaning set forth in Section A-4 of Appendix A

“Line of Authorization” shall mean the bonding document referred to in Section 7.1.10

“Market Area” shall have the meaning set forth in Section 10.1.1

“Non-Competition Period” shall have the meaning set forth in Section 10.1.1

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“Other Agreement” shall have the meaning set forth in Section 3.1

“Person” shall have the meaning set forth in Section 3.1

“Promissory Note” shall have the meaning set forth in Section 2.4

“Qualified Plan” shall have the meaning set forth in Section 3.16.4

“RCRA” shall have the meaning set forth in Section 3.17.2

“Regulated Material” shall have the meaning set forth in Section 3.17.5

“Rent Agreement” shall have the meaning set forth in Section 2.12

“Reviewed Annual Statement” shall have the meaning set forth in Section 3.4.1

“Security Agreement” shall have the meaning set forth in Section 2.5

“Securities Right” shall have the meaning set forth in Section 3.19.1

“Seller Damages” shall have the meaning set forth in Section 8.3

“Seller Indemnitees” shall have the meaning set forth in Section 8.3

“Seller Indemnitees” shall have the meaning set forth in Section 8.3

“Seller Plan” shall have the meaning set forth in Section 3.16.1

“Shareholder Warranty Damages” shall have the meaning set forth in Section 8.3

“Solid Waste” shall have the meaning set forth in Section 3.17.3

“Spill” shall have the meaning set forth in Section 3.17.4

“Tax Convention” shall have the meaning set forth in Section 3.4.2

“Tax Returns” shall have the meaning set forth in Section 3.15

“Taxes” shall have the meaning set forth in Section 3.15

“Trademarks” shall have the meaning set forth in Section A-5 of Appendix A

“Transition and Post-Closing Operations Agreement” shall have the meaning set forth in Section 2.13

“TSCA” shall have the meaning set forth in Section 3.17.2

“Unit” shall have the meaning set forth in the Recitals

“Unit Pledge Agreement” shall have the meaning set forth in Section 2.6

“Wastes” shall have the meaning set forth in Section 3.17.3

“Working Capital” shall have the meaning set forth in A-8 of Appendix A

Certain Other Definitions:

     A-1. Assets and Business. All assets, properties, rights, and contracts, wherever
located, whether tangible or intangible, which are owned by, licensed by, and/or leased by Company,
whether or not reflected on the books and records of Company including without limitation the
Contracts, Accounts Receivable, Working Capital, Inventory, Customer Lists, Equipment, and
Intellectual Property (the “Assets”), and which are used in the business of providing lighting,
retrofit, and energy services to energy service companies (“ESCOs”) as operated by Company (the
“Business”).

     A-2. Equipment. All equipment, brochures, catalogues, manuals, guides and
references, furniture, computers (including transferable operating system software and licenses
thereof used thereon) and other office equipment, office supplies, and other tangible assets
(“Equipment”).

     A-3. Intellectual Property. (i) All inventions (whether patentable or unpatentable
whether or not reduced to practice), all improvements thereto, and all patents, utility models,
design

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patents, patent applications, and patent disclosures, together with all re-issuances,
continuations, continuations-in-part, revisions, extensions, and re-examinations thereof, (ii) all
trademarks, service marks, trade dress, logos, trade names, and corporate names, together with all
translations, adaptations, derivations, and combinations thereof and including all goodwill
associated therewith, and all applications, registrations, and renewals in connections therewith,
including the Trademarks, (iii) all copyrightable works, all copyrights, and all mask works and all
applications, registrations, and renewals in connection therewith, including the Copyrights, (iv)
all mask works and all applications, registrations, and renewals in connection therewith, (v) all
trade secrets and confidential business information (including ideas, research and development,
know-how, formulas, compositions, manufacturing and production processes and techniques, technical
data, designs, drawings, schematics, engineering information, specifications, customer and supplier
lists, pricing and cost information, and business and marketing plans and proposals), including the
Know-How, (vi) all transferable computer software (including data and related documentation), (vii)
all other proprietary rights, and (viii) all copies and tangible embodiments thereof (in whatever
form or medium) (“Intellectual Property”).

     A-4. Know-How. All (i) research and development results, processes, trade secrets,
methods, operating techniques, know-how, algorithms, formulae, specifications, drawings, designs,
chip designs, mask works, inventions, discoveries and engineering information, and (ii) quality
control, testing, operational, logistical, maintenance and other technical data and information and
technology; and all documents, notebooks, engineering and software development logbooks, tapes,
discs, records, reports and other media relating thereto (“Know-How”).

     A-5. Trademarks. All trademarks, trade names and service marks, and registrations and
applications for such trademarks, trade names and service marks domestic and foreign, used in the
Business (“Trademarks”).

     A-6. Copyrights. All copyrights, and registration and applications for such
copyrights, domestic and foreign, used in the Business (“Copyrights”).

     A-7. Customer Lists. All customer lists of the Business and all records relating to
purchase orders, contracts, and any other items or list possessed or used in the Business, made by
or for Company with respect to sales or future sales of products, goods or services. The customer
lists shall include all records and any other available document or media bearing information
relating to current, former or prospective customers (all available years) of the Business,
together with all of Company’s right, title and interest in and to such customer lists, rights to
contract renewals and other rights to provide services to the customers of Company, and any and all
rights under agreements Company may have with third parties relating thereto (collectively, the
“Customer Lists”).

     A-8. Contracts, Projects, Proposals, and Related Accounts Receivable, Working Capital and
Inventory. All contracts, subcontracts, licenses and sublicenses, agreements, projects and
other arrangements, proposals, bids, quotations, purchase orders and commitments, and sales orders
and commitments, including joint venture, teaming and partnership agreements, and

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leases of personal property, in each case limited to those specifically identified on Schedule
A-8 delivered hereunder (collectively, the “Contracts”). All right, title and interest in and to
Company’s accounts receivable which have arisen under the Contracts and remain outstanding and
unpaid as of the Closing Date, including all documentation maintained by Company evidencing the
same (collectively, the “Accounts Receivable”). All right, title, and interest in and to the
Company’s “working capital” under the Contracts, with “working capital” being defined as the excess
of receivables associated with a project over costs associated with the project. All right, title
and interest in and to the Company’s “inventory” under the Contracts, with “inventory” being
defined as all goods, merchandise, work-in-progress, raw materials, finished goods, and all other
materials, supplies and tangible personal property associated with a project.

     A-9. “Code” shall mean Section 1060 of the Internal Revenue Code of 1986, as amended.

     A-10. “ERISA” shall mean Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended, and the applicable rulings and regulations thereunder.

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SCHEDULE 1.1

Excluded Assets and Liabilities

Excluded Assets:

     Balance Sheet. All balance sheet assets, with the exception of Contracts set forth on
Schedule A-8 and certain items of equipment as the parties shall agree.

     Insurance. All rights under any Company-owned insurance policies, including, but not
limited to, any cash surrender value or cancellation value as of the Closing Date.

     Personal Items. Personal items of Sellers.

Excluded Liabilities:

     Taxes. Any and all Taxes of the Company relating to time periods and/or events
occurring before the Closing Date.

     Environmental Liability. Any and all environmental obligations, charges,
liabilities, or conditions of the Company relating to time periods and/or events occurring before,
or conditions existing as of, the Closing Date.

     Litigation. Any and all obligations, liabilities, or judgments relating to
litigation, threatened litigation, or claims relating to time periods and/or events occurring
before the Closing Date, with the exception of workers compensation claims made after the Closing
Date.

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SCHEDULE 3.0

Disclosure Schedule

Section 3.7.2:

     The name of the Company as a Tennessee limited liability company: “Stones River Companies,
LLC”.

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SCHEDULE 4.0

Disclosure Schedule

None

44

 

SCHEDULE A-8

Contracts

45

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