PURCHASEAGREEMENT byand among NECDG II, LLC, asthe Seller, NEC-EPSHOLDING, LLC, asthe Company and ENERGYAND POWER SOLUTIONS, INC., asthe Buyer, Datedas of July 3, 2008 TABLE OFCONTENTS

 

 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Section 2.1.           Purchase and Sale of the Membership Interests.

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

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

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

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

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

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

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

Section 6.7.           Tax Matters.

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

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

(c)           Filing of Tax Returns, Etc.

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

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

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

 

 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Section 8.2.           Indemnification by the Seller.

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

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

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

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

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

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

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

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

 

 

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

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

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

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

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

Section 8.4.           Procedures for Indemnification.

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

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

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

Section 8.5.           Procedures for Third-Party Claims.

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

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

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

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

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

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

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

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

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

(a)

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

NEC DG II, LLC

53 South Main Street, Suite 310

Hanover, New Hampshire 03755

Attention:

Jim McNamara

Facsimile:

603 ###-###-####

Email:   ***@***

NEC-EPS Holding, LLC

c/o NEC DG II, LLC

53 South Main Street, Suite 310

Hanover, New Hampshire 03755

Attention:

Jim McNamara

Facsimile:

603 ###-###-####

Email:   ***@***

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

Rath, Young and Pignatelli, P.C.

54 Canal Street

Boston, Massachusetts 02114

Attention:

Oliver W. Stalter

Facsimile:

617 ###-###-####

Email:

***@***

(b)

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

Energy and Power Solutions, Inc.

150 Paularino Avenue, Suite A120

Costa Mesa, CA 92626

Attention:

Jay Zoellner, Chief Executive Officer

Facsimile:

(714) 957-1093

Email:

***@***

NEC-EPS Holding, LLC

c/o Energy and Power Solutions, Inc.

150 Paularino Avenue, Suite A120

Costa Mesa, CA 92626

Attention:

Jay Zoellner, Chief Executive Officer

Email:

***@***

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

Bingham McCutchen LLP

600 Anton Blvd., 18th Floor

Costa Mesa, CA 92626

Attention:

Stephanie Siegel Brecher

Facsimile:

714 ###-###-####

Email:

***@***

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

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

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

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

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

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

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

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

Section 9.14.         Enforcement. Notwithstanding anything to the contrary in this Agreement, the parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. Accordingly, each of the parties shall be entitled to specific performance of the terms hereof, including an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any California State or federal court sitting in Los Angeles (or, if such court lacks subject matter jurisdiction, in any appropriate California State or federal court), this being in addition to any other remedy to which such party is otherwise entitled at law or in equity. Each of the parties hereby further waives (a) any defense in any action for specific performance that a remedy at law would be adequate and (b) any requirement under any law to post security as a prerequisite to obtaining equitable relief.

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

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

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

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

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

 

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

 

FOR VALUE RECEIVED, the undersigned, Energy and Power Solutions, Inc., a California corporation ("Maker"), promises to pay to the order of NEC DG II, LLC, a Delaware limited liability company (“Holder”), the principal sum of Two Million Dollars ($2,000,000) in five installments. Interest on the unpaid principal balance shall be paid at a rate of three percent (3%) per annum (on the basis of a 365 day year and the actual number of days elapsed), compounded monthly. On each of the first five anniversaries of the date of this unsecured promissory note (this “Note”), Maker shall pay Holder the principal amount of Four Hundred Thousand Dollars ($400,000) plus all accrued interest. The entire unpaid principal balance and any interest accrued thereon shall become due and payable on the fifth anniversary of the date of this Note.

All payments under this Note shall be made to Holder or its order, in lawful money of the United States of America and delivered to Holder by wire transfer to the following account of Holder:

Mellon Bank

One Mellon Bank Plaza

Pittsburgh, PA

ABA Number: 043-000-261

SWIFT CODE: MELNUS3P

For Credit To: Merrill Lynch Account

For Further Credit to: New Energy Capital LLC

Account Number:

or at such other place as Holder or any holder hereof shall designate in writing for such purpose from time to time.

If a payment under this Note otherwise would become due and payable on a Saturday, Sunday or legal holiday, the due date thereof shall be extended to the next day which is not a Saturday, Sunday or legal holiday, and interest shall be payable thereon during such extension.

The indebtedness evidence by this Note shall be unsecured and, as such, there shall be no collateral for this Note and Holder shall not impose any liens or security interests on the property of Maker.

The following events shall be “Events of Default” hereunder:

(a)	Maker shall fail to pay, as and when payment is due, any sum payable hereunder and shall fail to remedy such failure for a period of thirty (30) days after receiving notice of such failure from Holder;

(b)	Maker shall admit in writing its inability to pay its debts hereunder as they mature or shall make an assignment of this Note for benefit of its creditors;

(c)	A proceeding in bankruptcy or for reorganization of the Maker under any state or federal law for the relief of debtors shall be commenced against or by Maker; and

(d)	An event of default shall have been declared in writing and be continuing under any of Maker’s material indebtedness for borrowed money due to a failure by Maker to make a required payment under such indebtedness in an amount greater than $750,000.

This Receipt of Closing Amount is made on July ___, 2008 by NEC DG II, LLC, a Delaware limited liability company (“Seller”). Capitalized terms not defined herein shall have the meaning given to them under the terms of the Purchase Agreement, dated July 3, 2008, by and among NEC-EPS Holding, LLC, a Delaware limited liability company, Energy Power Solutions, Inc., a California corporation, and Seller (the “Purchase Agreement”)

Seller hereby acknowledges that the payment of $4,252,245.00 received from Buyer on the date hereof constitutes the entire Closing Amount under the terms of the Purchase Agreement. Seller confirms that it has received the Closing Amount and that such receipt constitutes acceptance of the Closing Amount and ratification of the acknowledgements set forth herein.

IN WITNESS WHEREOF, Seller has executed this Receipt of Closing Amount as of the date first hereinabove written.

____________, 2008

Board of NEC-EPS Holdings, LLC

Franklin Energy Center, LLC

Lynn Energy Center, LLC

COI Energy Center, LLC

Ladies and Gentlemen:

I, _________________________________, hereby resign as ____________________________of __________________, effective as of and contingent upon the closing of the purchase by Energy and Power Solutions, Inc. of all of NEC DG II, LLC’s membership interests in NEC-EPS Holding, LLC.

In witness whereof, the undersigned has executed this resignation as of the date set forth above.

Section 1445 of the Internal Revenue Code of 1986, as amended (the “Code”), provides that a transferee of a U.S. real property interest must withhold tax if the transferor is a foreign person. For U.S. tax purposes (including Code Section 1445), the owner of a disregarded entity (which has legal title to a U.S. real property interest under local law) will be the transferor of the property and not the disregarded entity. To inform Energy and Power Solutions, Inc., a California corporation (the “Transferee”), that withholding of tax is not required upon the Transferee’s purchase from NEC DG II, LLC, a Delaware limited liability company (the “Transferor”), of the membership interests in NEC-EPS Holding, LLC, a Delaware limited liability company that is disregarded as separate from the Transferor for federal income tax purposes, the undersigned hereby certifies the following on behalf of the Transferor:

1.

The Transferor is not a foreign corporation, foreign partnership, foreign trust, or foreign estate (as those terms are defined in the Code and the Treasury Regulations promulgated thereunder).

2.

Transferor is not a disregarded entity as defined in Treasury Regulations Section 1.1445-2(b)(2)(iii).

3.

The Transferor’s U.S. employer identification number is 20 ###-###-####.

 

The Transferor understands that this certification may be disclosed to the United States Internal Revenue Service by the Transferee and that any false statement contained herein could be punished by fine, imprisonment, or both.

Under penalties of perjury, I declare that I have examined this certification and to the best of my knowledge and belief it is true, correct, and complete, and I further declare that I have the authority to sign this document on behalf of the Transferor.

Date:  _________, 2008