Asset Purchase Agreement MD Energy

4/29/2016
EDGARONLINESUNWORKS,INC.(SUNW)8K/A3/3/2015
AMENDEDANDRESTATED
ASSETPURCHASEAGREEMENT
ThisAmendedandRestatedAssetPurchaseAgreement(theAgreement)ismadeandenteredintoasofFebruary28,
2015byandbetweenMDEnergy,LLC,aNevadalimitedliabilitycompany,whichhasamailingaddressat92919 th Street,
RanchoCucamonga,California91730(MDEorSeller),DanielJ.MitchellandAndreaC.Mitchell(collectively,theMDE
Members),Solar3D,Inc.,aDelawarecorporation(Parent),andMDEnergy,Inc.,aCaliforniacorporationandwhollyowned
subsidiaryofParent(BuyerorCompany),withrespecttothefollowingfacts:
RECITALS
A.
TheMDEMembersown100%ofthemembershipinterestsofMDE.
B.
MDEisengagedinenergy,infrastructure,electricalandbuildingconstruction(theBusiness).
C.
TheCompanydesirestoacquirefromSellerandSellerdesirestosellcertainofthepropertiesandassetsandthe
businessandgoodwill(includingallintellectualproperty)ofSeller,andSellerdesirestosellsuchassetsonthe
termsandsubjecttotheconditionssetforthherein.
D.
Certain of the parties have previously entered into that certainAsset PurchaseAgreement dated November 3,
2014, and now, immediately prior to the Closing as provided for therein, desire to amended and restate such
agreementassethereinaftersetforth.
NOW, THEREFORE , for good and valuable consideration the receipt and sufficiency of which are hereby
acknowledgedbythepartiestothisAgreement,andinlightoftheaboverecitalstothisAgreement,thepartiestothisAgreement
herebyagreeasfollows:
1.SaleandPurchase.
1.1 TransferofAssets.Uponandsubjecttothetermsandconditionshereinstated,Buyershallacquirefrom
Seller,andSellershalltransfer,assignandconveytoBuyer,thetangibleandintangibleassetsofSellerdescribedontheattached
ExhibitA,whicharereferredtocollectivelyhereafterasthe"Assets".TheAssetsshallincludeSeller'scashandcashequivalentsor
accounts receivable, subject to the provisions of Section 5.7. Each of theAssets shall be transferred, assigned and conveyed by
appropriateinstrumentsreasonablysatisfactorytoBuyer.BuyershalltakepossessionoftheAssetsattheircurrentlocation,whichis
atSeller'sprincipalplaceofbusiness.
1.2 Allocation . The purchase price for the Assets shall be allocated as set forth on Exhibit B (the
"Allocation"), to be agreed upon and completed prior to the Closing, as hereinafter defined. Each of the parties shall report this
transaction for state and federal tax return purposes in accordance with theAllocation and shall not file any tax return or report
(including IRS Form 8594) or otherwise take a position with federal or state tax authorities which is inconsistent with such
Allocation.TheAllocationisintendedtocomplywithSection1060oftheInternalRevenueCodeof1986,asamended(the"Code")
andtheregulationspromulgatedthereunder.
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1.3 Assumed Liabilities . In addition to the Purchase Price, Buyer shall assume by an undertaking (the
Undertaking)asoftheClosing,(i)liabilitiesandobligationsundertheAssumedAgreements(definedinExhibitA)butonlyto
theextentsuchliabilitiesorobligationsarisefromgoodsorservicesreceivedbyBuyeronoraftertheClosingorarisefromgoodsor
servicestobeprovidedbyBuyeronoraftertheClosingand,ineachcase,totheextentsuchAssumedAgreementsareproperly
assignedtoBuyerandarenottheresultofanyfailureoftimelypaymentorperformancebySellerpriortotheClosingoranybreach
bySelleroftheAssumedAgreements,and(ii)tradeaccountspayabletovendorsandsuppliersforproductsorservicessetforthon
Schedule1.3(ii),butonlytotheextentsuchpayablesareincludedascurrentliabilitiesindeterminingNetWorkingCapital(defined
below),butnootherliabilitiesorobligationswhatsoever.ThespecificliabilitiestobeassumedbyBuyerpursuanttothisSection
1.3arehereinaftersometimescollectivelyreferredtoastheAssumedLiabilities.
1.4 Excluded Liabilities . Anything in this Agreement to the contrary notwithstanding, Seller shall be
responsibleforallliabilitiesandobligationsnotexpresslyassumedbyBuyerunderthisAgreement,andBuyershallnotassume,or
inanywaybeliableorresponsiblefor,anyliabilitiesorobligationsofSellerexceptasspecificallyprovidedinSection1.3.
1.5 SaleandPurchaseofAssets.InconsiderationforthePurchasePrice(asdefinedinSection1.5ofthis
Agreement)andtheothercovenantsoftheParentandtheCompanyinthisAgreement,SelleragreestoselltoBuyer,andBuyer
agreestopurchasefromSeller,ontheClosingDate(asdefinedinSection4.1ofthisAgreement)theAssets.
1.6 PurchasePrice.AsconsiderationforthesalebySelleroftheAssetstotheCompanyontheClosing
Date, the Company will pay to Seller $3,500,000 plus or minus the applicable Working Capital Surplus or Working Capital
Deficit(eachasdefinedbelow)(thePurchasePrice),$850,000ofwhichispayableincashassetforthininSection1.6(c)(the
CashPayment),and$2,650,000ofwhichispayableininstallmentsoveraperiodoffiveyearsaftertheClosingDate,asdefined
inSection4.1ofthisAgreement,pursuanttotheParentsconvertiblepromissorynotebearingsimpleinteresttherateof4%per
annum (the Note) in the form of the promissory note attached to this Agreement as Exhibit C. The Note will be
unsecured.TheCashPaymentwillbemadetoSellerbywiretransferorcashiersorcertifiedcheckmadepayabletoSelleratthe
timessetforthinSection1.6(c).IntheeventofaWorkingCapitalSurplus(definedbelow),BuyershallpaytoSellertheWorking
CapitalSurplusbywiretransferorcashierorcertifiedcheckmadepayabletoSeller,withinthirty(30)daysaftertheClosing.In
theeventofaWorkingCapitalDeficit(definedbelow),thefinalpaymentdescribedinSection1.6(c)shallbereducedbythe
amountoftheWorkingCapitalDeficit.AtorpriortotheClosing,Buyerwilldeliverthe$400,000oftheCashPaymentandthe
executedNotetoSeller.
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(a)ForpurposesofthisAgreement:
i. Current Assets means the current assets of Seller as determined in accordance with U.S. generally
acceptedaccountingprinciples,butonlytotheextentincludedintheAssetsbeingsoldtoBuyerpursuantto
thisAgreement.
ii.CurrentLiabilitiesmeansthecurrentLiabilitiesofSellerasdeterminedinaccordancewithU.S.generally
acceptedaccountingprinciples,butonlytotheextentincludedintheAssumedLiabilitiesbeingassumedby
BuyerpursuanttothisAgreement.
iii.WorkingCapitalmeansanamountequalto(a)theamountoftheCurrentAssets,minus(b)theamountof
theCurrentLiabilities.
iv.WorkingCapitalDeficitmeanstheamountbywhichtheWorkingCapitalasoftheClosingislessthan
$200,000.
v.WorkingCapitalSurplusmeanstheamountbywhichtheWorkingCapitalasoftheClosingisgreater
than$200,000.
(b)WorkingCapitalDetermination.Withinthirty(30)daysaftertheClosing,BuyerandSellershalljointlypreparea
calculation of the Working Capital Surplus, if any, and Working Capital Deficit, if any, in each case as of the
Closing(theClosingStatement).TheClosingStatement,andthecomponentsthereof,willbedeterminedusing
generallyacceptedaccountingmethodsashistoricallyappliedbySeller.
(c)CashPayment.TheCashPaymentshallconsistoftwoparts:$400,000tobepaidatorpriortotheClosingandthe
remaining$450,000(subjecttoadjustmentintheeventofaWorkingCapitalDeficit)shallbepaidnotlaterthan
thirty(30)daysaftertheClosing.
2.CovenanttoRemainEmployeesofMDE.
As an inducement to Buyer to enter into and to perform its obligations under this Agreement, Daniel J. Mitchell
covenants to enter into employment agreements with Buyer in substantially the form attached here as Exhibit D (the
EmploymentAgreement). In the event that Daniel J. Mitchell (Terminating Seller) voluntarily resigns as an employee of
MDE, unless the Terminating Seller resigns or terminates his employment with MDE due to death, disability rendering the
Terminating Seller unable to work, or a constructive termination of the Terminating Sellers employment by Buyer, or is
involuntarilyterminatedasanemployeeofMDEforcause,ineithercasepriortothethree(3)yearanniversaryoftheClosing,
thenBuyerwillhavethesoleright,exercisableatanytimewithinoneyearaftersuchtermination,toeither(i)causeanimmediate
conversionofalloranyportionoftheoutstandingbalanceoftheNoteintosharesofBuyerscommonstockinaccordancewith
thetermsandconditionsoftheNoteor(ii)prepayalloranyportionoftheoutstandingbalanceoftheNoteincashprovided,that
intheeventofanysuchconversionoftheNote,allcommonstockissuedpursuanttosuchaconversionwillbesubjecttoatwo
yearlockupwherebySellerwillnotbeabletotransfer,hypothecate,assignorsellanyofthosesharesfortwoyearsafterreceiptof
them.Inanyevent,Sellerwill,withrespecttotheresalebyanyofthemofanyofthesharesofBuyerscommonstockissuedto
thematanytimepursuanttoanyconversionofanyportionoftheoutstandingbalanceoftheirNotes,besubjecttotherestrictions,
conditionsandrequirementsapplicabletoanaffiliateofBuyerunderRule144oftheSecuritiesActof1933,asamended,evenif
SellerortheMDEMembersarenolongertechnicalaffiliatesofBuyer.
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3.OtherCovenants.
3.1 CovenantNottoCompete.AsamaterialinducementforBuyertoenterintothisAgreement,theMDE
MembersagreethatduringthetermoftheiremploymentordirectorshiporconsultancywithMDEortheCompany(collectively,
theirEngagement),andforaperiodofthree(3)yearsaftertheterminationoftheirEngagement(theNonCompetitionPeriod),
theycovenantandagreethateachofthemshallnot,directlyorindirectlyown,manage,operate,participatein,produce,represent,
distributeand/orotherwiseactonbehalfofanyperson,firm,corporation,partnershiporotherentitywhichinvolvesphotovoltaic
solarenergy(theCompetitiveBusiness)anywherewithintheUnitedStates,itspossessionsandterritories,CanadaorMexico
(collectively,theTerritory)orhireanyemployeeorformeremployeeofBuyerorMDEtoperformservicesinorinvolvingthe
CompetitiveBusiness,unlesstheindividualhiredshallhavedepartedBuyer'sorMDEsemploymentatleasttwelve(12)months
priortothehiring.TheNonCompetitionPeriodwill,however,beoneyearinsteadofthreeyearswithrespecttoaTerminating
Sellerif(i)thatSellersemploymentisinvoluntarilyterminated(i.e.,bytheCompany)withoutcauseor(ii)intheeventofa
materialbreachofBuyerspaymentobligationsundertheNote.ForthepurposeofthisAgreement,causemeansSellercommits
amaterialbreachofthisAgreementorhisEngagementagreementwiththeCompany,whichbreachisnotcuredwithinten(10)
daysofwrittennoticethereof,orfraud,willfulmisconduct,grossnegligence,afelonycriminalact,orabreachofhisfiduciary
dutytotheCompanyduringthetermofhisEngagementwiththeCompany.TheMDEMembersfurthercovenantandagreethat
duringtheNonCompetitionPeriod,theywillnotdirectlyorindirectlysolicitoragreetoservicefortheirbenefitorthebenefitof
anythirdparty,anyofBuyersorMDEscustomers.Notwithstandingtheforegoing,nothinginthisSection3.1shallprohibit
them from owning, managing, operating, participating in the operation of, or advising, consulting or being employed by any
entity that is not involved in the Competitive Business. The MDE Members acknowledge and agree that Buyer will expend
substantial time, talent, effort and money in marketing, promoting, managing, selling and otherwise exploiting the businesses
BuyerandMDEoperate,inpartbyvirtueofBuyersacquisitionoftheAssetspursuanttothisAgreement,thatMDEMembersare
allofthemembersofMDE,thattheyarereceivingasubstantialbenefitfromthetransactionscontemplatedhereunderandthatthe
benefitreceivedbyBuyerandtheminagreeingtobeboundbythisSection3.1areamaterialpartoftheconsiderationforthe
transactionscontemplatedbythisAgreement.ThepartiesrecognizethatthisSection3.1containsconditions,covenants,andtime
limitations that are reasonably required for the protection of the business of MDE and Buyer. If any limitation, covenant or
condition shall be deemed to be unreasonable and unenforceable by a court or arbitrator of competent jurisdiction, then this
Section3.1shallthereuponbedeemedtobeamendedtoprovideformodificationofsuchlimitation,covenantand/orconditionto
such extent as the court or arbitrator shall find to be reasonable and such modification shall not affect the remainder of this
Agreement.TheMDEMembersacknowledgethat,intheeventanMDEMemberbreachesthisAgreement,moneydamageswill
notbeadequatetocompensateBuyerforthelossoccasionedbysuchbreach.TheMDEMembersthereforeconsent,intheevent
of such a breach, to the granting of injunctive or other equitable relief against the MDE Members by any court of competent
jurisdiction.
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3.2 SellertoChangeName.OntheClosingDate,SellerwillfileanappropriateamendmenttoitsArticlesof
OrganizationtochangeitsnametoanamethatisnotsimilartoSellerortheCompany,andshallnotfurtherchangeoramendits
nameoruseanytradeorfictitiousname.
3.3FilingofSalesTaxReturns.Sellershallfilewithallappropriateauthoritiesitsfinalsalestaxreturnswithin
thirty(30)daysaftertheClosingDate,orsuchearlierdateassuchreturnsaredue.Anyliabilitiesorobligationsresultingtherefrom,
including,withoutlimitation,duetoauditsofsaidreturns,shallbetheliabilityandobligationofSellerandtheMDEMembers,and
Buyershallhavenoobligationwhatsoeverwithrespectthereto.
3.4NoticetoCustomers.AtClosing,SellerandBuyershallsignaletteronSellersletterheadadvisingSellers
customersofthesaleofSellersbusinessandinstructingsuchcustomerstopayoutstandingpayablesowingtoSellertoBuyer,in
formsatisfactorytoBuyer.
3.5BulkSalesLaws.SellerandtheMDEMembersshallberesponsibleforcompliancewithanyapplicablebulk
saleslaw.SellerandtheMembersrepresentandwarrantthatSeller'sprincipalbusinessisnotthesaleofinventoryfromstock.The
MDEMembersshallindemnifyandholdBuyerharmlessagainstanyandallclaims,losses,liabilitiesanddamagesandanyandall
costsandexpenses,whichBuyermayincurasaresultoforarisingoutofanyfailurebythepartiestocomplywithanybulksales
law.
4.ClosingandFurtherActs.
4.1 Time and Place of Closing . Upon satisfaction or waiver of the conditions set forth in this
Agreement, the closing of the transactions contemplated by thisAgreement (the Closing) will take place in Santa Barbara,
Californiaat11:00a.m.(localtime)onFebruary28,2015,oronsuchotherdatethatthepartiesmaymutuallyagreeinwriting(the
ClosingDate.
4.2ActionsatClosing.AttheClosing,thefollowingactionswilltakeplace:
(a)BuyerwillpaytoSellerthePurchasePriceasprovidedinSection1.5ofthisAgreementbydeliveryof(i)
cashintheamountoftheinitialportionoftheCashPaymentassetforthinSection1.6(c),whichwillbedepositedina
singleaccountdesignatedbySellerinwritingdeliveredtoBuyerpriortotheClosing,and(ii)anexecutedNote.
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(b)SellerwilldelivertotheCompanyanexecutedBillofSale,AssignmentandAssumptionAgreementintheform
attachedasExhibitE.
(c)MDEwilldelivertoBuyercopiesofnecessaryresolutionsoftheBoardofManagersofMDEauthorizing
theexecution,delivery,andperformanceofthisAgreementandtheotheragreementscontemplatedbythisAgreement,
whichresolutionshavebeencertifiedbyanofficerofMDEasbeingvalidandinfullforceandeffect.
(d)BuyerandParentwilldelivertoMDEcopiesofcorporateresolutionsoftheBoardsofDirectorsofBuyerand
Parentauthorizingtheexecution,deliveryandperformanceofthisAgreementandtheotheragreementscontemplated
bythisAgreement,whichresolutionshavebeencertifiedbyofficersofBuyerandParentasbeingvalidandinfullforce
andeffect.
(e)MDEwilldelivertotheBuyertrueandcompletecopiesofMDEsArticlesofOrganizationanda
CertificateofGoodStandingfromtheSecretaryofStateofNevada,whichcertificateandcertificateofgoodstandingare
datednotmorethan30dayspriortotheClosingDate.
(f)Deliveryofanyadditionaldocumentsorinstrumentsasapartymayreasonablyrequestorasmaybe
necessarytoevidenceandeffectthesale,assignment,transferanddeliveryoftheAssetstoBuyer.
4.3 ActionsPreClosing. Seller and the MDE Members will at all times prior to and after the Closing
cooperatefullywithBuyerandBuyersofficers,directors,representatives,accountantsandlawyerstoenableBuyertoconduct
thoroughduediligenceofMDEandtoenableMDEtoprepareandhaveauditedallfinancialstatementsdeemednecessaryby
BuyertocomplywithallofitsreportingobligationswiththeSecuritiesandExchangeCommission,includingwithoutlimitation
thepreparationandfilingofitsReportsonForm8Kwithinfour(4)businessdaysaftertheClosing,withoutauditedfinancial
statements, and with audited financial statements within seventyone (71) days after the Closing, subject to the provisions of
Section4.5ofthisAgreement.
4.4 ActionsPostClosing.TheMDEMemberswillatalltimesaftertheClosingcooperatefullywithBuyer
and Buyers officers, directors, representatives, accountants and lawyers to complete the preparation and audit of all financial
statementsofBuyerandMDEdeemednecessaryorappropriatebyBuyer,andtoenableBuyertocomplywithallofitsreporting
obligationswiththeSecuritiesandExchangeCommission.
4.5CostsofFinancialAuditofMDE.Buyerwillbearthecostsofthe2013and2014auditsofMDE
financialstatements,exceptthatMDEwillreimburseBuyerforthetotalcostoftheaudit(nottoexceed$25,000),asinvoicedby
theauditor,ifanyofthefollowingeventsoccur:(i)theauditcannotbecompletedduetothelackofreasonablecooperationfrom
Seller,theMDEMembersorMDEspersonnel,or(ii)theauditedfinancialsandrecordsofMDEare,intheopinionofthecertified
auditors,materiallyandadverselydifferentthanthosepresentedtotheBuyerpriortothedateofthisAgreement,or(iii)Selleror
theMDEMembersrefusetoproceedwiththeClosingandBuyerisready,willingandabletoproceedwiththeClosing,orSelleror
theMDEMembersotherwisemateriallybreachthisAgreement.Withtheexceptionofpossibleauditfeereimbursement,underno
circumstances will either Buyer or Seller or the MDE Members be due any termination expenses in connection with this
Agreement.
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5.RepresentationsandWarrantiesoftheMDEMembersandSeller.
ExceptassetforthontheDisclosureSchedules,attachedheretoasExhibitF,theMDEMembersandSellerrepresentand
warrant,jointlyandseverally,asofthedatehereof,toBuyerandParentasfollows:
5.1 PowerandAuthorityBindingNatureofAgreement.TheMDEMembersandSellerhavefull
power and authority to enter into this Agreement and to perform their obligations hereunder. The execution, delivery, and
performance of thisAgreement by MDE have been duly authorized by all necessary action on its part. Assuming that this
Agreementisavalidandbindingobligationofeachoftheotherpartieshereto,thisAgreementisavalidandbindingobligation
oftheMDEMembersandSeller,exceptasmaybelimitedbybankruptcy,moratorium,insolvencyorothersimilarlawsgenerally
affecting the enforcement of creditors rights, and the effect or availability of rules of law governing specific performance,
injunctiverelieforotherequitableremedies(regardlessofwhetheranysuchremedyisconsideredinaproceedingatlaworin
equity).
5.2 Subsidiaries.Thereisnocorporation,generalpartnershiplimitedpartnership,jointventure,association,
trustorotherentityororganizationthatMDEdirectlyorindirectlycontrolsorinwhichMDEdirectlyorindirectlyownsany
equityorotherinterest.
5.3 GoodStanding.MDE(i)isdulyorganized,validlyexistingandingoodstandingunderthelawsofthe
jurisdictioninwhichitisorganized,(ii)hasallnecessarypowerandauthoritytoownitsassetsandtoconductitsbusinessasitis
currentlybeingconducted,and(iii)isdulyqualifiedorlicensedtodobusinessandisingoodstandingineveryjurisdiction(both
domesticandforeign)wheresuchqualificationorlicensingisrequired.
5.4 Financial Statements . MDE has delivered to Buyer the following compiled unaudited financial
statementsandwillcooperatewithBuyertoprepareauditedversionsofthefollowingfinancialstatementspriortotheClosing
(theMDEFinancialStatements):(i)theunauditedcompiledbalancesheetsofMDEasofDecember31,2013andSeptember
30,2014,(ii)theunauditedstatementsofincomefortheyearendedDecember31,2013,theunauditedstatementsofincomefor
the nine months ended September 30, 2014 and the (iii) unaudited statements of retained earnings and members equity as of
September 30, 2014. Except as stated therein or in the notes thereto, the MDE Financial Statements: (a) present fairly the
financialpositionofMDEasoftherespectivedatesthereofandtheresultsofoperationsandchangesinfinancialpositionof
MDEfortherespectiveperiodscoveredtherebyand(b)havebeenpreparedinaccordancewithMDEsnormalbusinesspractices
appliedonaconsistentbasisthroughouttheperiodscovered.
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5.5 Capitalization.TheMDEMembersown100%ofMDEsmembershipinterests,andtherearenooptions,
warrantsorotherrightstoacquireanyownershipinterestinMDE,exceptassetforthinthisAgreement.Theexistingmembership
interestswereissuedtotheMDEMembersinfullcompliancewithallapplicablefederal,state,localandforeignsecuritieslaws
andotherlaws.
5.6 AbsenceofChanges.ExceptasotherwisesetforthonSchedule5.6heretoorotherwisedisclosedto
andacknowledgedbyBuyerinwritingpriortotheClosing,sinceSeptember30,2014:
(a)Therehasnotbeenanymaterialadversechangeinthebusiness,condition,assets,operationsorprospectsof
MDEandnoeventhasoccurredthatisreasonablylikelytohaveamaterialadverseeffectonthebusiness,condition,
assets,operationsorprospectsofMDE.
(b) MDE has not repurchased, redeemed or otherwise reacquired any of its membership interests or other
securities.
(c)MDEhasnotsoldorotherwiseissuedanyofitsmembershipinterests.
(d)MDEhasnotamendeditsarticlesoforganization,operatingagreementorothercharterororganizational
documents,norhasiteffectedorbeenapartytoanymerger,recapitalization,reorganizationorsimilartransaction.
(e)MDEhasnotformedanysubsidiaryorcontributedanyfundsorotherassetstoanysubsidiary.
(f)MDEhasnotpurchasedorotherwiseacquiredanymaterialassets,norhasitleasedanyassetsfromanyother
person,exceptintheordinarycourseofbusinessconsistentwithpastpractice.
(g)MDEhasnotmadeanycapitalexpenditureoutsidetheordinarycourseofbusinessorinconsistentwithpast
practice.
(h)MDEhasnotsoldorotherwisetransferredanymaterialassetstoanyotherperson,exceptintheordinary
courseofbusinessconsistentwithpastpracticeandatapriceequaltothefairmarketvalueoftheassetstransferred.
(i)Therehasnotbeenanymaterialloss,damageordestructiontoanyofthematerialpropertiesorassetsofMDE
(whetherornotcoveredbyinsurance).
(j)MDEhasnotwrittenoffasuncollectibleanyindebtednessoraccountsreceivable,exceptforwriteoffsthat
weremadeintheordinarycourseofbusinessconsistentwithpastpractice.
(k)MDEhasnotleasedanyassetstoanyotherpersonexceptintheordinarycourseofbusinessconsistentwith
pastpracticeandatarentalrateequaltothefairrentalvalueoftheleasedassets.
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(l)MDEhasnotmortgaged,pledged,hypothecatedorotherwiseencumberedanyassets,exceptintheordinary
courseofbusinessconsistentwithpastpractice.
(m)MDEhasnotenteredintoanycontract,orincurredanydebt,liabilityorotherobligation(whetherabsolute,
accrued, contingent or otherwise), except for (i) contracts that were entered into in the ordinary course of business
consistent with past practice and that have terms of less than six months and do not contemplate payments by
ortoMDEwhichwillexceed,overthetermofthecontract,tenthousanddollars($10,000)intheaggregate,and
(ii)currentliabilitiesincurredintheordinarycourseofbusinessconsistentwiththepastpractice.
(n)MDEhasnotmadeanyloanoradvancetoanyotherperson,exceptforadvancesthathavebeenmadeto
customers in the ordinary course of business consistent with past practice and that have been properly reflected as
accountsreceivables.
(o)Otherthanannualraisesorbonusespaidorprovidedconsistentwithpastbusinesspractices,MDEhasnot
paidanybonusto,orincreasedtheamountofthesalary,fringebenefitsorothercompensationorremunerationpayable
to,anyofthemanagers,officersoremployeesofMDE.
(p)NocontractorotherinstrumenttowhichMDEisorwasapartyorbywhichMDEoranyofitsassetsareor
wereboundhasbeenamendedorterminated,exceptintheordinarycourseofbusinessconsistentwithpastpractice.
(q)MDEhasnotdischargedanylienordischargedorpaidanyindebtedness,liabilityorotherobligation,except
for current liabilities that (i) are reflected in the MDE Financial Statements as of September 30, 2014 or have been
incurredsinceSeptember30,2014intheordinarycourseofbusinessconsistentwithpastpractice,and(ii)havebeen
dischargedorpaidintheordinarycourseofbusinessconsistentwithpastpractice.
(r)MDEhasnotforgivenanydebtorotherwisereleasedorwaivedanyrightorclaim,exceptintheordinary
courseofbusinessconsistentwithpastpractice.
(s)MDEhasnotchangeditsmethodsofaccountingoritsaccountingpracticesinanyrespect.
(t)MDEhasnotenteredintoanytransactionoutsidetheordinarycourseofbusinessorinconsistentwithpast
practice.
(u) MDE has not agreed or committed (orally or in writing) to do any of the things described in clauses (b)
through(t)ofthisSection5.6.
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5.7 Absence of Undisclosed Liabilities . MDE has no debt, liability or other obligation of any nature
(whetherdueortobecomedueandwhetherabsolute,accrued,contingentorotherwise)thatisnotreflectedorreservedagainstin
theMDEFinancialStatementsasofSeptember30,2014,exceptforobligationsincurredsinceSeptember30,2014intheordinary
andusualcourseofbusinessconsistentwithpastpractice.
5.8 MDEAssets.
(a)TheexecutionanddeliveryofthisAgreementandtheconsummationofthetransactionscontemplated
herebywillnotresultinabreachofthetermsandconditionsof,orresultinalossofrightsunder,orresultinthecreation
ofanylien,chargeorencumbranceupon,anyoftheAssets.
(b)MDEhasgoodandmarketabletitletotheAssets,freeandclearofallmortgages,liens,leases,pledges,
charges,encumbrances,equitiesorclaims,exceptasexpresslydisclosedinwritingbyMDEtoBuyerpriortotheClosing
Date.
(c) Except as reflected in the MDE Financial Statements, the
Assetsarenotsubjecttoanymaterialliability,absoluteorcontingent,whichhasnotbeendisclosedbyMDEtoand
acknowledgedbyBuyerinwritingpriortotheClosingDate.
(d)MDEhasprovidedtoBuyerinwritinganaccuratedescriptionofalloftheassetsofMDEorusedinthe
businessofMDE.
(e)MDEhasprovidedtoBuyerinwritingalistofallcontracts,agreements,licenses,leases,arrangements,
commitments and other undertakings to which MDE is a party or by which it or its property is bound. Except as
specifiedbyMDEtoandacknowledgedbyBuyerinwritingpriortotheClosingDate,allofsuchcontracts,agreements,
leases,licensesandcommitmentsarevalid,bindingandinfullforceandeffect.Assoonaspracticableaftertheexecution
ofthisAgreementbyallparties,MDEwillprovideBuyerwithcopiesofallsuchdocumentsforBuyersreview.
5.9 CompliancewithLawsLicensesandPermits.MDEisnotinviolationof,norhasitfailedto
conductitsbusinessinmaterialcompliancewith,anyapplicablefederal,state,localorforeignlaws,regulations,rules,treaties,
rulings,orders,directivesordecrees.MDEhasdeliveredtoBuyeracompleteandaccuratelistandprovidedBuyerwiththeright
toinspecttrueandcompletecopiesofallofthelicenses,permits,authorizationsandfranchisestowhichMDEissubjectandall
saidlicenses,permits,authorizationsandfranchisesarevalidandinfullforceandeffect.Saidlicenses,permits,authorizations
and
franchises
constitute
all
of
the
licenses,
permits,authorizationsandfranchisesreasonablynecessarytopermitMDEtoconductitsbusinessinthemannerinwhichit
isnowbeingconducted,andMDEisnotinviolationorbreachofanyoftheterms,requirementsorconditionsofanyofsaid
licenses,permits,authorizationsorfranchises.
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5.10 Taxes . Except as disclosed herein, MDE has accurately and completely filed with the appropriate
UnitedStatesstate,localandforeigngovernmentalagenciesalltaxreturnsandreportsrequiredtobefiled(subjecttopermitted
extensionsapplicabletosuchfilings),andhaspaidoraccruedinfullalltaxes,duties,charges,withholdingobligationsandother
governmentalliabilitiesaswellasanyinterest,penalties,assessmentsordeficiencies,ifany,dueto,orclaimedtobedueby,any
governmental authority (including taxes on properties, income, franchises, licenses, sales and payroll). (All such items are
collectively referred to herein as Taxes). The MDE Financial Statements fully accrue or reserve all current and deferred
taxes. MDE is not a party to any pending action or proceeding, nor is any such action or proceeding threatened by any
governmental authority for the assessment or collection of Taxes. No liability for taxes has been incurred other than in the
ordinarycourseofbusiness.TherearenoliensforTaxesexceptforliensforpropertytaxesnotyetdelinquent.MDEisnotaparty
toanyTaxsharing,Taxallocation,Taxindemnityorstatuteoflimitationsextensionorwaiveragreementandinthepastyearhas
notbeenincludedonanyconsolidatedcombinedorunitaryreturnwithanyentityotherthanMDE.MDEhasdulywithheldfrom
each payment made to each person from whom such withholding is required by law the amount of all Taxes or other sums
(including but not limited to United States federal income taxes, any applicable state or municipal income tax, disability tax,
unemploymentinsurancecontributionandFederalInsuranceContributionActtaxes)requiredtobewithheldthereforeand
haspaidthesametothepropertaxauthoritiespriortotheduedatethereof.TotheextentanyTaxeswithheldbyMDEhavenot
beenpaidasoftheClosingDatebecausesuchTaxeswerenotyetdue,suchTaxeswillbepaidtothepropertaxauthoritiesina
timelymanner.AllTaxreturnsfiledbytheMDEareaccurateandcomplywithandwerepreparedinaccordancewithapplicable
statutesandregulations.TheMDEMembersandSellerwillcauseMDEtoprepareandfileallTaxreturnsandpayallTaxes
requiredpriortotheClosing.SuchTaxreturnswillbesubjecttoreviewandapprovalbyBuyer,whichapprovalwillnotbe
unreasonablywithheld.
5.11 EnvironmentalComplianceMatters.MDEhasatallrelevanttimeswithrespecttotheBusinessor
otherwisebeeninmaterialcompliancewithallenvironmentallaws,andhasreceivednopotentiallyresponsiblepartynoticesor
similarnoticesfromanygovernmentalagenciesorprivatepartiesconcerningreleasesorthreatenedreleasesofanyhazardous
substanceasthattermisdefinedunder42U.S.C.960(1)(14).
5.12 Compensation . MDE has provided Buyer with a full and complete list of all officers, directors,
employeesandconsultantsofMDEasofthedatehereof,specifyingtheirnamesandjobdesignations,theirrespectivecurrent
wages, salaries or other forms of direct compensation, and the basis of such compensation, whether fixed or commission or a
combinationthereof.
5.13NoDefault.
(a) Each of the contracts, agreements or other instruments of MDE and each of the standard Customer
AgreementsorcontractsofMDEisalegal,bindingandenforceableobligationbyoragainstMDE,subjecttotheeffect
ofapplicablebankruptcy,insolvency,reorganization,moratoriumorothersimilarfederalorstatelawsaffectingtherights
of creditors and the effect or availability of rules of law governing specific performance, injunctive relief or other
equitable remedies (regardless of whether any such remedy is considered in a proceeding at law or in equity).To the
knowledgeofSeller,nopartywithwhomMDEhasanagreementorcontractisindefaultthereunderorhasbreachedany
termsorprovisionsthereofwhichismaterialtotheconductofMDEsbusiness.
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(b)MDEhasperformedorisnowperformingtheobligationsof,andMDEisnotinmaterialdefault(or
wouldbytheelapseoftimeand/orthegivingofnoticebeinmaterialdefault)inrespectof,anycontract,agreementor
commitmentbindinguponitoritsassetsorpropertiesandmaterialtotheconductofitsbusiness.Nothirdpartyhas
raisedanyclaim,disputeorcontroversywithrespecttoanyoftheexecutedcontractsofMDE,norhasMDEreceived
notice of warning of alleged nonperformance, delay in delivery or other noncompliance by MDE with respect to its
obligationsunderanyofthosecontracts,norarethereanyfactswhichexistindicatingthatanyofthosecontractsmaybe
totallyorpartiallyterminatedorsuspendedbytheotherpartiesthereto.
5.14 ProductWarranties.ExceptasotherwisedisclosedtoandacknowledgedbyBuyerintheformofa
writtendisclosureschedulepriortotheClosingandforwarrantiesunderapplicablelaw,(a)therearenowarranties,expressor
implied,writtenororal,withrespecttotheproductsorprojectsofMDE,(b)therearenopendingorthreatenedclaimswith
respecttoanysuchwarrantyand(c)MDEhasno,andaftertheClosingDate,willhaveno,liabilitywithrespecttoanysuch
warranty,whetherknownorunknown,absolute,accrued,contingent,orotherwiseandwhetherdueortobecomedue,otherthan
customaryreturnsintheordinarycourseofbusinessthatarefullyreservedagainstintheMDEFinancialStatements.Intheevent
thatwarrantyclaimsariseaftertheClosing,theMDEMembersshallhavetherighttosettlethoseclaimsthroughMDE,subject
onlytoacostoflaborandmaterialschargewithoutanymarkup.
.
5.15 ProprietaryRights.
(a)MDEhasprovidedBuyerinwritingacompleteandaccuratelistandprovidedBuyerwiththerightto
inspecttrueandcompletecopiesofallsoftware,patentsandapplicationsforpatents,trademarks,tradenames,service
marks,andcopyrights,andapplicationstherefore,ownedorusedbyMDEorinwhichithasanyrightsorlicenses,except
forsoftwareusedbyMDEandgenerallyavailableonthecommercialmarket.MDEhasprovidedBuyerwithacomplete
andaccuratedescriptionofallagreementsorprovidedBuyerwiththerighttoinspecttrueandcompletecopiesofall
agreements of MDE with each officer, employee or consultant of MDE providing MDE with title and ownership to
patents, patent applications, trade secrets and inventions developed or used by MDE in its business. All of such
agreements are valid, enforceable and legally binding, subject to the effect or availability of rules of law governing
specificperformance,injunctiverelieforotherequitableremedies(regardlessofwhetheranysuchremedyisconsidered
inaproceedingatlaworinequity).
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(b)MDEownsorpossesseslicensesorotherrightstouseallcomputersoftware,softwareprograms,
patents, patent applications, trademarks, trademark applications, trade secrets, service marks, trade names, copyrights,
inventions, drawings, designs, customer lists, propriety knowhow or information, or other rights with respect thereto
(collectivelyreferredtoasProprietaryRights),usedinthebusinessofMDE,andthesamearesufficienttoconduct
MDEsbusinessasithasbeenandisnowbeingconducted.
(c) The operations of MDE do not conflict with or infringe, and no one has asserted to MDE that such
operationsconflictwithorinfringeonanyProprietaryRightsowned,possessedorusedbyanythirdparty.Thereareno
claims,disputes,actions,proceedings,suitsorappealpendingagainstMDEwithrespecttoanyProprietaryRights,and
nonehasbeenthreatenedagainstMDE.Therearenofactsorallegedfactwhichwouldreasonablyserveasabasisfor
anyclaimthatMDEdoesnothavetherighttouse,freeofanyrightsorclaimsofothers,allProprietaryRightsinthe
development,manufacture,use,saleorotherdispositionofanyorallproductsorservicespresentlybeingused,furnished
orsoldintheconductofthebusinessofMDEasithasbeenandisnowbeingconducted.
(d)TotheknowledgeofSeller,noemployeeofMDEisinviolationofanytermofanyemploymentcontract,
proprietary information and inventions agreement, noncompetition agreement, or any other contract or agreement
relatingtotherelationshipofanysuchemployeewithMDEoranypreviousemployer.
5.16 Insurance.MDEhasprovidedBuyerwithcompleteandaccuratecopiesofallpoliciesofinsuranceand
providedBuyerwiththerighttoinspecttrueandcompletecopiesofallpoliciesofinsurancetowhichMDEisapartyorisa
beneficiaryornamedinsuredasoftheClosingDate.MDEhasinfullforceandeffect,withallpremiumsduethereonpaidthe
policiesofinsurancesetforththerein.Therewerenoclaimsinexcessof$10,000assertedorcurrentlyoutstandingunderanyof
theinsurancepoliciesofMDEinrespectofallmotorvehicle,generalliability,errorsandomissions,workerscompensation,and
medicalclaimsduringthecalendaryearendingonDecember31,2013ortheninemonthsendingSeptember30,2014.
5.17 LaborRelations.NoneoftheemployeesofMDEarerepresentedbyanyunionorarepartiestoany
collectivebargainingarrangement,and,totheknowledgeofSeller,noattemptsarebeingmadetoorganizeorunionizeanyof
MDEsemployees.ExceptasdisclosedinwritingtoBuyerpriortotheClosing,totheknowledgeofSeller,thereisnotpresently
pending or existing, and there is not presently threatened, any material (a) strike, slowdown, picketing, work stoppage or
employee grievance process, or (b) action, arbitration, audit, hearing, investigation, litigation, or suit (whether civil, criminal,
administrative, investigative, or informal) against or affecting MDE relating to the alleged violation of any legal requirement
pertainingtolaborrelationsoremploymentmatters.MDEisincompliancewithallapplicablelawsrespectingemploymentand
employmentpractices,termsandconditionsofemployment,wagesandhours,occupationalsafetyandhealthandisnotengaged
in any unfair labor practices. MDE is in compliance with the Immigration Reform and ControlAct of 1986. MDE has no
employmentagreementsexceptwithsomeofitsemployees,whichshallbedisclosedintheformofawrittendisclosureschedule
deliveredbytheMDEMembersandSellertoBuyerandacknowledgedbyBuyerinwritingpriortotheClosing.
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5.18 ConditionofPremises.AllrealpropertyleasedbyMDEisingoodconditionandrepair,ordinary
wearandtearexcepted.
5.19 NoDistributorAgreements.ExceptasdisclosedtoandacknowledgedbyBuyerinwritingpriorto
theClosing,MDEisnotapartyto,noristhepropertyofMDEboundby,anydistributorsormanufacturersrepresentativeor
agencyagreement.
5.20 ConflictofInterestTransactions.Nopastorpresentshareholder,director,officeroremployeeof
MDEoranyoftheiraffiliates(i)isindebtedto,orhasanyfinancial,businessorcontractualrelationshiporarrangementwith
MDE,or(ii)hasanydirectorindirectinterestinanyproperty,assetorrightwhichisownedorusedbyMDEorpertainstothe
businessofMDEwiththeexceptionofoutstandingshareholderloanswhichwillbesatisfiedanddischargedinfullpriortothe
ClosingDate.
5.21 Litigation . There is no action, suit, proceeding, dispute, litigation, claim, complaint or, to the
knowledge of Seller, investigation by or before any court, tribunal, governmental body, governmental agency or arbitrator
pendingorthreatenedagainstorwithrespecttoMDEwhich(i)ifadverselydeterminedwouldhaveamaterialadverseeffecton
thebusiness,condition,assets,operationsorprospectsofMDE,or(ii)challengesorwouldchallengeanyoftheactionsrequired
tobetakenbyMDEunderthisAgreement.Thereexistsnobasisforanysuchaction,suit,proceeding,dispute,litigation,claim,
complaintorinvestigation.
5.22 NonContravention.Neither(a)theexecutionanddeliveryofthisAgreement,nor(b)theperformance
ofthisAgreementwill:(i)contraveneorresultinaviolationofanyoftheprovisionsoftheorganizationaldocumentsofMDE
(ii)contraveneorresultinaviolationofanyresolutionadoptedbythemembersordirectorsofMDE(iii)resultinaviolationor
breachof,orgiveanypersontherighttodeclare(whetherwithorwithoutnoticeorlapseoftime)adefaultunderortoterminate,
anymaterialagreementorotherinstrumenttowhichMDEisapartyorbywhichMDEoranyofitsassetsarebound(iv)give
anypersontherighttoacceleratethematurityofanyindebtednessorotherobligationofMDE(v)resultinthelossofanylicense
orothercontractualrightofMDE(vi)resultinthelossof,orinaviolationofanyoftheterms,provisionsorconditionsof,any
governmental license, permit, authorization or franchise of MDE (vii) result in the creation or imposition of any lien, charge,
encumbranceorrestrictiononanyoftheassetsofMDE(viii)resultinthereassessmentorrevaluationofanypropertyofMDEby
anytaxingauthorityorothergovernmentalauthority(ix)resultintheimpositionof,orsubjectMDEtoanyliabilityfor,any
conveyanceortransfertaxoranysimilartaxor(x)resultinaviolationofanylaw,rule,regulation,treaty,ruling,directive,order,
arbitrationaward,judgmentordecreetowhichMDEoranyofitsassetsoranylimitedliabilityinterestsaresubject.
5.23 Approvals.MDEhasprovidedBuyerwithacompleteandaccuratelistofalljurisdictionsinwhich
MDEisauthorizedtodobusinessalongwiththedocumentationevidencingsuchauthorization.Noauthorization,consentor
approvalof,orregistrationorfilingwith,anygovernmentalauthorityisrequiredtobeobtainedormadebyMDEinconnection
withtheexecution,deliveryorperformanceofthisAgreement,includingtheconveyancetoBuyeroftheBusiness.
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5.24 Brokers.MDEhasnotagreedtopayanybrokeragefees,findersfeesorotherfeesorcommissionswith
respecttothetransactionscontemplatedbythisAgreement,andnopersonisentitled,orintendstoclaimthatitisentitled,to
receiveanysuchfeesorcommissionsinconnectionwithsuchtransaction.
5.25 SpecialGovernmentLiabilities.MDEhasnoexistingorpendingliabilities,obligationsordeferred
payments due to any federal, state or local government agency or entity in connection with its business or with any program
sponsoredorfundedinwholeorinpartbyanyfederal,stateorlocalgovernmentagencyorentity,noraretheMDEMembersor
SellerawareofanythreatenedactionorclaimoranyconditionthatcouldsupportanactionorclaimagainstMDEortheMDE
Businessforanyofsaidliabilities,obligationsordeferredpayments.
5.26 FullDisclosure.NeitherthisAgreement(includingtheexhibitshereto)noranystatement,certificate
orotherdocumentdeliveredtoBuyerbyoronbehalfofMDEcontainsanyuntruestatementofamaterialfactoromitstostatea
materialfactnecessarytomaketherepresentationsandotherstatementscontainedhereinandthereinnotmisleading.
5.27 TaxAdvice.TheMDEMembersandSellerherebyrepresentandwarrantthattheyhavesoughttheir
ownindependenttaxadviceregardingthetransactionscontemplatedbythisAgreementandneithertheMDEMembersnorSeller
havereliedonanyrepresentationorstatementmadebyBuyer,theCompany,ortheirrepresentativesregardingthetaximplicationsof
suchtransactions.
5.28 Acknowledgement of Risks . The MDE Members hereby represent and warrant that they have
conducted a thorough review of Buyers public reports and financial statements filed by it with the Securities and Exchange
Commission, and have had an opportunity to ask questions of and to receive additional information from representatives of
Buyer.TheMDEMembersacknowledgethattherearesubstantialrisksassociatedwithowningtheNoteandBuyerscommon
stockintowhichitisconvertible,includingbutnotlimitedto(i)thoseriskfactorsspecificallydisclosedtotheMDEMembersin
writingbyBuyer,acopyofwhichhasbeendeliveredtotheMDEMembers,(ii)BuyermaydefaultontheNoteandthepriceofits
common
stock
may
decline,
(iii)
the
transferability
of
Buyers
common
stock
is
restrictedbyapplicablefederalandstatesecuritieslawsaswellasbythetermsofthisAgreementandtheNote,andmay
be impaired by a lack of trading volume, and (iv) those additional risks described in public reports filed by Buyer with the
SecuritiesandExchangeCommission.TheMDEMembersrepresentandwarrantthattheyaresophisticated,knowledgeableand
experiencedinmakinginvestmentsofthiskindandarecapableofevaluatingtherisksandmeritsofacquiringtheNote.
6.RepresentationsandWarrantiesofBuyerandParent.
BuyerandParenteachrepresentsandwarrants,jointlyandseverally,totheMDEMembersandSellerasfollows:
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6.1 PowerandAuthorityBindingNatureofAgreement.BuyerandParenteachhasfullpowerand
authoritytoenterintothisAgreementandtoperformitsobligationshereunder.Theexecution,deliveryandperformanceofthis
AgreementbyBuyerandParenthavebeendulyauthorizedbyallnecessaryactiononitspart.AssumingthatthisAgreementisa
validandbindingobligationoftheotherpartyhereto,thisAgreementisavalidandbindingobligationofBuyerandParent.
6.2 Approvals.Noauthorization,consentorapprovalof,orregistrationorfilingwith,anygovernmental
authorityoranyotherpersonisrequiredtobeobtainedormadebyBuyerorParentinconnectionwiththeexecution,deliveryor
performanceofthisAgreement.
6.3 RepresentationsTrueonClosingDate.TherepresentationsandwarrantiesofBuyerandParentset
forthinthisAgreementaretrueandcorrectonthedatehereof,andwillbetrueandcorrectontheClosingDateasthoughsuch
representationsandwarrantiesweremadeasoftheClosingDate
6.4 NonContravention.NeithertheexecutionnordeliveryofthisAgreement,northeperformanceofthis
Agreementwillcontraveneorresultinamaterialviolationofanyoftheprovisionsofanyotheragreementorobligationofthe
CompanyorParent.
6.5 FullDisclosure.NeitherthisAgreement(includingtheexhibitshereto)noranystatement,certificateor
otherdocumentdeliveredtoSellerbyoronbehalfofBuyerorParentcontainsanyuntruestatementofamaterialfactoromitsto
stateamaterialfactnecessarytomaketherepresentationsandotherstatementscontainedhereinandthereinnotmisleading.
7.ConditionstoClosing.
7.1ConditionsPrecedenttoBuyersandParentsObligationtoClose.BuyersandParentsobligationto
closethetransactionascontemplatedinthisAgreementisconditionedupontheoccurrenceorwaiverbyBuyerandParentofthe
following:
(a)TheMDEMembershavedeliveredanupdatedlistofAssetsthatisaccurateandcompleteasofnotmore
thanfive(5)businessdayspriortotheClosing.
(b)AllrepresentationsandwarrantiesoftheMDEMembersandSellermadeinthisAgreementorinany
exhibitorscheduleheretodeliveredbytheMDEMembersandSellershallbetrueandcorrectasoftheClosingDate
withthesameforceandeffectasifmadeonandasofthatdate.
(c)TheMDEMembersandSellershallhaveperformedandcompliedwithallagreements,covenantsand
conditionsrequiredbythisAgreementtobeperformedorcompliedwithbythempriortoorattheClosingDate.
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(d)BuyerandParentmustbesatisfiedinitssoleandabsolutediscretionwithitsduediligenceoftheMDE
MembersandSeller.
(e)BuyerandParentshallhavereceivedareportfromeachoftheSecretariesofStateforNevadaand
Californiashowingtheexistenceorabsenceofliens,financingstatementsandotherencumbrancesrecordedagainstany
oftheAssets,datednotmorethanfive(5)dayspriortotheClosing,andsuchreportshallbesatisfactorytoBuyerand
Parentinitssoleandabsolutediscretion.
7.2 ConditionsPrecedentto the MDE MembersandSellers Obligation to Close . The MDE

MembersandSellersobligationtoclosethetransactionascontemplatedinthisAgreementisconditionedupontheoccurrence
orwaiverbytheMDEMembersofthefollowing:
(a)AllrepresentationsandwarrantiesofBuyerandParentmadeinthisAgreementorinanyexhibithereto
deliveredbyBuyershallbetrueandcorrectonandasoftheClosingDatewiththesameforceandeffectasifmadeon
andasofthatdate.
(b)BuyerandParentshallhaveperformedandcompliedwithallagreementsandconditionsrequiredby
thisAgreementtobeperformedorcompliedwithbyBuyerandParentpriortoorattheClosingDate.
(c)BuyerandParentshallhaveexecutedanddeliveredanEmploymentAgreementtoDanielJ.Mitchell.
8.SurvivalofRepresentationsandWarranties.
AllrepresentationsandwarrantiesmadebyeachofthepartiesheretowillsurvivetheClosingforeighteen(18)months
aftertheClosingDate,orlongerifexpresslyandspecificallyprovidedintheAgreement.MDEandtheMDEMemberswillhave
jointandseveralliabilityunderthisAgreement,exceptforthecovenantnottocompeteinSection3.1ofthisAgreementorwhere
otherwiseexpresslyandspecificallyprovidedinthisAgreement.
9.Indemnification.
9.1 IndemnificationbytheMDEMembers.TheMDEMembersagreejointlyandseverally,toindemnify,
defend and hold harmless Buyer and its affiliates against any and all claims, demands, losses, costs, expenses, obligations,
liabilitiesanddamages,includinginterest,penaltiesandreasonableattorneysfeesandcosts(Losses),incurredbyBuyerorany
ofitsaffiliatesarising,resultingfrom,orrelatingtoanyandallliabilitiesofMDEincurredpriortotheClosingDateorrelatingto
theAssetspriortheClosingDate,anymisrepresentationofamaterialfactoromissiontodiscloseamaterialfactmadebytheMDE
MembersorSellerinthisAgreement,inanyexhibitstothisAgreementorinanyotherdocumentfurnishedortobefurnishedby
MDE or Sellers under this Agreement, or any breach of, or failure by the MDE Members or Seller to perform, any of their
representations,warranties,covenantsoragreementsinthisAgreementorinanyexhibitorotherdocumentfurnishedortobe
furnishedbytheMDEMembersorSellerunderthisAgreement.
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9.2
Indemnification by Buyer . Buyer and Parent agree, jointly and

severally,toindemnify,defendandholdharmlesstheMDEMembersandSelleragainstanyandallLossesincurredbythe
MDEMembersorSellerarisingaftertheClosingDate,resultingfromorrelatingtoanybreachof,orfailurebyBuyerorParentto
perform,anyofitsrepresentations,warranties,covenantsoragreementsinthisAgreementorinanyexhibitorotherdocument
furnishedortobefurnishedbyBuyerorParentunderthisAgreement.
9.3 ProcedureforIndemnificationClaims.
(a)Wheneveranypartiesbecomeawarethataclaim(anUnderlyingClaim)hasarisenentitlingthemtoseek
indemnification
under
Section
9
of
this
Agreement,suchparties(theIndemnifiedParties)shallpromptlysendanotice(Notice)tothepartiesliableforsuch
indemnification(theIndemnifyingParties)oftherighttoindemnification(theIndemnityClaim)provided,however,that
thefailuretosonotifytheIndemnifyingPartieswillrelievetheIndemnifyingPartiesfromliabilityunderthisAgreementwith
respecttosuchIndemnityClaimonlyif,andonlytotheextentthat,suchfailuretonotifytheIndemnifyingPartiesresultsin
theforfeiturebytheIndemnifyingPartiesofrightsanddefensesotherwiseavailabletotheIndemnifyingPartieswithrespect
totheUnderlyingClaim.AnyNoticepursuanttothisSection9.3(a)shallsetforthinreasonabledetail,totheextentthen
available,thebasisforsuchIndemnityClaimandanestimateoftheamountofdamagesarisingtherefore.
(b) If an Indemnity Claim does not result from or arise in connection with any Underlying Claim or legal
proceedingsbyathirdparty,theIndemnifyingPartieswillhavethirty(30)calendardaysfollowingreceiptoftheNoticeto
issue a written response to the Indemnified Parties, indicating the Indemnifying Parties intention to either (i) contest the
IndemnityClaimor(ii)accepttheIndemnityClaimasvalid.TheIndemnifyingPartiesfailuretoprovidesuchawritten
responsewithinsuchthirty(30)dayperiodshallbedeemedtobeanacceptanceoftheIndemnityClaimasvalid.Intheevent
thatanIndemnityClaimisacceptedasvalid,theIndemnifyingPartiesshall,withinfifteen(15)BusinessDaysthereafter,pay
Losses incurred by the Indemnified Parties in respect of the Underlying Claim in cash by wire transfer of immediately
available funds to the account or accounts specified by the Indemnified Parties. To the extent appropriate, payments for
indemnifiableLossesmadepursuanttothisAgreementwillbetreatedasadjustmentstothePurchasePrice.
(c)IntheeventanIndemnityClaimresultsfromorarisesinconnectionwithanyUnderlyingClaimorlegal
proceedingsbyathirdparty,theIndemnifyingPartiesshallhavefifteen(15)calendardaysfollowingreceiptoftheNoticeto
sendaNoticetotheIndemnifiedPartiesoftheirelectionto,attheirsolecostandexpense,assumethedefenseofanysuch
Underlying Claim or legal proceeding provided that such Notice of election shall contain a confirmation by the
IndemnifyingPartiesoftheirobligationtoholdharmlesstheIndemnifiedPartieswithrespecttoLossesarisingfromsuch
Underlying Claim.The failure by the Indemnifying Parties to elect to assume the defense of any such Underlying Claim
withinsuchfifteen(15)dayperiodshallentitletheIndemnifiedPartiestoundertakecontrolofthedefenseoftheUnderlying
ClaimonbehalfofandfortheaccountandriskoftheIndemnifyingPartiesinsuchmannerastheIndemnifiedPartiesmay
deem appropriate, including, but not limited to, settling the Underlying Claim.The parties controlling the defense of the
UnderlyingClaimshallnot,however,settleorcompromisesuchUnderlyingClaimwithoutthepriorwrittenconsentofthe
otherparties,whichconsentshallnotbeunreasonablywithheldordelayed.Thenoncontrollingpartiesshallbeentitledto
participatein(butnotcontrol)thedefenseofanysuchaction,withtheirowncounselandattheirownexpense.
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(d)TheIndemnifyingPartiesandtheIndemnifiedPartieswillcooperatereasonably,fullyandingoodfaithwith
eachother,atthesoleexpenseoftheIndemnifyingPartiessubjecttothelastsentenceofSection9.3(c)ofthisAgreement,in
connectionwiththedefense,compromiseorsettlementofanyUnderlyingClaimincluding,withoutlimitation,bymaking
availabletotheotherpartiesallpertinentinformationandwitnesseswithintheirreasonablecontrol.
(e)BasketLimitationsonIndemnificationCalculationofLosses.
(i)Basket.ABuyerIndemnifiedPartyshallnotbeentitledtomakeaclaimforindemnificationforanyLosses
arising out of Section 9.1 until the aggregate amount of all claims for Losses which arise out of Section 9.1 exceedsTen
ThousandDollars($10,000)(theBasket).IntheeventtheaggregateamountofsuchLossesexceedstheBasket,thenthe
SellershallindemnifysuchBuyerIndemnifiedPartywithrespecttotheamountofallLossesexceedingtheamountofthe
Basket.
(ii) Sellers and MDE Member Cap. The maximum aggregate liability of the Seller and MDE Members,
collectively, under Section 8.2(a) for all Losses shall be an amount equal to the Purchase Price actually received by such
SellerorMDEMember(theSellersCap).
(iii)ExclusionsfromtheBasketandSellersCap.Notwithstandingtheforegoing,thefollowingLosses
shallnotbesubjecttotheprovisionsoftheBasketandtheSellersCapandaBuyerIndemnifiedPartyshallbeentitledto
indemnificationwithrespecttosuchLossesinaccordancewiththisArticle9asthoughtheBasketandtheSellersCapwere
notapartofthisAgreement:
(1) Lossesrelatingto,causedbyorresultingfromthebreachofanyoftheSellersand/or
MDEMembersrepresentationsandwarrantiesasaresultoffraudorintentionalmisrepresentationand
(2)
Lossesrelatingto,causedbyorresultingfromthebreachofanyongoingcovenantof
theSellerorMDEMember.
9.4Recovery.LossesforwhichaBuyerIndemnifiedPartymaybeentitledtorecoverpursuanttothisArticle9
shallfirstbeoffsetagainsttheoutstandingprincipalamountoftheNote,ifany,andsecond,afteranyavailableprincipalamountof
theNotehasbeenexhausted,againstanySellerorMDEMemberinaccordancewiththisArticle9.Exceptforspecificperformance
andinjunctiverelief,theindemnificationobligationsandproceduressetforthinthisArticle9shallbethesoleandexclusiveremedy
forliabilitiesarisingoutofthisAgreementandthetransactionscontemplatedhereby.
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10.InjunctiveRelief.
10.1 DamagesInadequate.Eachpartyacknowledgesthatitwouldbeimpossibletomeasureinmoneythe
damagestotheotherpartyifthereisafailuretocomplywithanycovenantsandprovisionsofthisAgreement,andagreesthatin
theeventofanybreachofanycovenantorprovision,theotherpartytothisAgreementwillnothaveanadequateremedyatlaw.
10.2 InjunctiveRelief.ItisthereforeagreedthattheotherpartytothisAgreementwhoisentitledtothe
benefitofthecovenantsandprovisionsofthisAgreementwhichhavebeenbreached,inadditiontoanyotherrightsorremedies
whichtheymayhave,willbeentitledtoimmediateinjunctiverelieftoenforcesuchcovenantsandprovisions,andthatinthe
eventthatanysuchactionorproceedingisbroughtinequitytoenforcethem,thedefaultingorbreachingpartywillnoturgea
defensethatthereisanadequateremedyatlaw.
11.FurtherAssurances.
FollowingtheClosing,theMDEMembersandSellershallfurnishtoBuyersuchinstrumentsandotherdocumentsas
Buyermayreasonablyrequestforthepurposeofcarryingoutorevidencingthetransactionscontemplatedhereby.
12.FeesandExpenses.
Eachpartyheretoshallpayallfees,costsandexpensesthatitincursinconnectionwiththenegotiationandpreparation
ofthisAgreementandincarryingoutthetransactionscontemplatedhereby(including,withoutlimitation,allfeesandexpenses
ofitscounselandaccountant).
13.Waivers.
Ifanypartyatanytimewaivesanyrightshereunderresultingfromanybreachbytheotherpartyofanyoftheprovisions
ofthisAgreement,suchwaiverisnottobeconstruedasacontinuingwaiverofotherbreachesofthesameorotherprovisionsof
thisAgreement.Resorttoanyremediesreferredtohereinwillnotbeconstruedasawaiverofanyotherrightsandremediesto
whichsuchpartyisentitledunderthisAgreementorotherwise.
14.SuccessorsandAssigns.
EachcovenantandrepresentationofthisAgreementwillinuretothebenefitofandbebindinguponeachoftheparties,
theirpersonalrepresentatives,assignsandothersuccessorsininterest.
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15.EntireandSoleAgreement.
This Agreement constitutes the entire agreement between the parties and supersedes all other agreements, representations,
warranties, statements, promises and undertakings, whether oral or written, with respect to the subject matter of this
Agreement.ThisAgreementmaybemodifiedoramendedonlybyawrittenagreementsignedbythepartiesagainstwhomthe
amendmentissoughttobeenforced.ThepartiesacknowledgethatasofthedateoftheexecutionofthisAgreement,anyandall
otheragreements,otherthantheNoteattachedasanexhibittothisAgreement,eitherwrittenorverbal,regardingthesubstanceof
thisAgreementwillbeterminatedandbeofnofurtherforceoreffect.
16.GoverningLaw.
This Agreement will be governed by the laws of California without giving effect to applicable conflict of law
provisions.WithrespecttoanylitigationarisingoutoforrelatingtothisAgreement,eachpartyagreesthatitwillbefiledinand
heardbythestateorfederalcourtswithjurisdictiontohearsuchsuitslocatedinSantaBarbaraCounty,California.
17.Counterparts.
ThisAgreement may be executed simultaneously in any number of counterparts, each of which counterparts will be
deemedtobeanoriginal,andsuchcounterpartswillconstitutebutoneandthesameinstrument.
18.Assignment.
Except in the case of an affiliate of Buyer, thisAgreement may not be assignable by any party without prior written
consentoftheotherparties.
19.Remedies.
Except as otherwise expressly provided herein, none of the remedies set forth in thisAgreement are intended to be
exclusive,andeachpartywillhaveallotherremediesnoworhereafterexistingatlaw,inequity,bystatuteorotherwise.The
electionofanyoneormoreremedieswillnotconstituteawaiveroftherighttopursueotheravailableremedies.
20.SectionHeadings.
ThesectionheadingsinthisAgreementareincludedforconvenienceonly,arenotapartofthisAgreementandwillnot
beusedinconstruingit.
21.Severability.
In the event that any provision or any part of this Agreement is held to be illegal, invalid or unenforceable, such
illegality, invalidity or unenforceability will not affect the validity or enforceability of any other provision or part of this
Agreement.
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22.Notices.
Eachnoticeorothercommunicationhereundermustbeinwritingandwillbedeemedtohavebeendulygivenonthe
earlierof(i)thedateonwhichsuchnoticeorothercommunicationisactuallyreceivedbytheintendedrecipientthereof,or(ii)the
datefive(5)daysafterthedatesuchnoticeorothercommunicationismailedbyregisteredorcertifiedmail(postageprepaid)to
theintendedrecipientatthefollowingaddress(oratsuchotheraddressastheintendedrecipientwillhavespecifiedinawritten
noticegiventotheotherpartieshereto):
IftotheMDEMembersandSeller:
MDEnergy,LLC
92919thStreet
RanchoCucamonga,California91730
Attn:DanielJ.Mitchell,ManagingMember
Telephone:(909)7217091
Facsimile:
IftoBuyerorParent:
Solar3D,Inc.
26WestMissionStreet,#8
SantaBarbara,California93101
Attention:JamesNelson,ChiefExecutiveOfficer
Telephone:(805)6909000
Facsimile:(805)4560600
23.Publicity.
Exceptasmayberequiredinorderforapartytocomplywithapplicablelaws,rules,orregulationsortoenableapartyto
complywiththisAgreement,ornecessaryforBuyertoprepareanddisseminateanyprivateorpublicplacementsofitssecurities
ortocommunicatewithitsstakeholders,nopressrelease,noticetoanythirdpartyorotherpublicityconcerningthetransactions
contemplatedbythisAgreementwillbeissued,givenorotherwisedisseminatedwithoutthepriorapprovalofeachoftheparties
hereto.
[Signaturesonfollowingpage.]
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INWITNESSWHEREOF,thisAgreementhasbeenenteredintoasofthedatefirst
abovewritten.
MDE:
THEMDEMembers:
Company/Buyer:
MDEnergy,LLC
By:/s/DanielJ.
Mitchell
DanielJ.Mitchell,Managing
Member
/s/DanielJ.
Mitchell
DanielJ.Mitchell,Individually
/s/AndreaC.
Mitchell
AndreaC.Mitchell,Individually
MDENERGY,INC.
By:/s/JamesB.
Nelson
JamesB.Nelson,Chairman
SOLAR3D,INC.,aDelaware
corporation
By:/s/JamesB.
Nelson
JamesB.Nelson,ChiefExecutive
Officer
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EXHIBITA
AssetsandAssumedAgreements
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ExhibitB
AllocationofPurchasePrice
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EXHIBITC
PromissoryNote
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ExhibitD
EmploymentAgreement
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EXHIBITE
BillofSale,AssignmentandAssumptionAgreement
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EXHIBITF
DisclosureSchedules
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7.2 ConditionsPrecedentto the MDE MembersandSellers Obligation to Close . The MDE

Indemnification by Buyer . Buyer and Parent agree, jointly and

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