AGREEMENT AND PLAN OF MERGER

Exhibit 10.1

AGREEMENT AND PLAN OF MERGER

     THIS AGREEMENT AND PLAN OF MERGER is dated as of September 26, 2006, and is by and among LIME ENERGY CO., a Delaware corporation (“ ELC ”), KAPADIA ACQUISITION, INC., a Delaware corporation (“ Acquisition ”), KAPADIA CONSULTING, INC., a New York corporation (“ Kapadia ”), and PRADEEP KAPADIA, an individual (the “Stockholder”).

W I T N E S S E T H:

     WHEREAS, ELC desires to acquire Kapadia by means of a transaction which is described in Section 368 of the Internal Revenue Code of 1986, as amended and accorded tax-free treatment thereunder except to the extent otherwise required in respect of cash consideration; and

     WHEREAS, in order to consummate the transactions contemplated herein, Acquisition has been formed and Kapadia will be merged with and into Acquisition (with Acquisition as the surviving entity), upon and subject to the terms as further specified in this Agreement; and

     WHEREAS, the Stockholder is the sole stockholder of Kapadia and is agreeable to such acquisition on and subject to the terms of this Agreement;

     NOW, THEREFORE, the parties hereto agree as follows:

ARTICLE 1 — MERGER

     1.1 Merger . Upon due satisfaction or waiver of all the conditions precedent set forth herein, at the Effective Date (as defined below), Kapadia shall be merged with and into Acquisition on the terms and conditions set forth in this Agreement and as permitted by and in accordance with the New York Corporation Law (the “ New York Act ”) and the General Corporation Law of Delaware (the “ Delaware Act ”). Thereupon, the separate existence of Kapadia shall terminate and Acquisition, as the surviving entity (the “ Surviving Entity ”), shall continue to exist under and be governed by the Delaware Act, with its Certificate of Incorporation and its By-laws as in effect at the Effective Date to remain unchanged, unless and until amended subsequent thereto, except that

     (a) the Certificate of Incorporation and the By-laws of the Surviving Entity shall contain provisions with respect to exculpation from liability, indemnification and advancement of expenses that are at least as favorable to the present and former directors and officers of Kapadia as the corresponding provisions set forth in the Certificate of Incorporation and By-Laws of Kapadia as of the date of this Agreement; and

     (b) pursuant to the Certificate of Merger (as defined below), the name of Acquisition shall be changed to “Kapadia Energy Services, Inc.”

The merger of Kapadia with and into Acquisition as herein provided is referred to as the “ Merger ”.

     1.2 Filing of Certificate of Merger . Upon the Closing (as defined below), ELC, Acquisition and Kapadia will cause the Certificate of Merger in substantially the form of Exhibit A attached hereto (the “ Certificate of Merger ”) to be executed, acknowledged and filed with the Secretary of State of the State of Delaware as provided in Sections 103 and 252 of the Delaware Act and filed with the Secretary of State of New York as provided in Section ___ of the New York Act, and the Surviving Entity shall thereafter cause a copy of the Certificate of Merger, certified by the Secretary of State of Delaware, to be recorded in all required or appropriate offices and jurisdictions, and in the offices of such public officials within and without the States of Delaware and New York as may be required by law.

     1.3 Effective Date of Merger . The Merger shall become effective as provided in the Certificate of Merger, after filing thereof with the Secretary of State of Delaware and with the Secretary of State of New York. The date and time of such effectiveness is herein referred to as the “ Effective Date ”.

     1.4 Directors . From and after the Effective Date, the directors of the Surviving Entity shall consist of the individuals identified on Schedule 1.4 attached hereto until replaced in accordance with the Surviving Entity’s Certificate of Incorporation and By-laws.

     1.5 Officers . From and after the Effective Date, the officers of the Surviving Entity shall consist of the individuals identified on Schedule 1.5 attached hereto until replaced in accordance with the Surviving Entity’s By-laws.

     1.6 Effect of Merger on Equity Ownership of Constituents .

     (a)  Acquisition Stock . In connection with the Merger, each share of capital stock of Acquisition outstanding as of the Effective Date shall remain unchanged as a share of capital stock of the same class of the Surviving Entity.

     (b)  Kapadia Stock . Upon the Effective Date, each share of capital stock of Kapadia of any class issued and outstanding as of the Effective Date, by virtue of the Merger and without any action on the part of the holder thereof, shall automatically be converted into the right to receive a pro rata portion, based on the total number of shares of capital stock of Kapadia outstanding as of the Effective Date, of (x) the Cash Consideration (as defined below), and (y) the ELC Stock Consideration (as defined below).

     (c)  Definitions . For purposes of this Agreement, the following terms shall have the following meanings:

“ Base Amount ” means $50,000.

“ Cash Consideration ” means an amount equal to $1,250,000, plus or minus the Closing Working Capital Adjustment Amount, if any.

“ Closing Working Capital ” means Kapadia’s cash, cash equivalents, accounts receivable and Work in Progress (as herein defined) as of the Closing Date, minus Kapadia’s accounts payable, deferred revenue, any Pre-Closing Bonus Payments which Kapadia has agreed to pay but not paid as of the Closing Date, accrued project costs, and indebtedness as of the Closing Date, determined in accordance with generally accepted accounting principles.

“ Closing Working Capital Adjustment Amount ” means the amount (if any) by which the Closing Working Capital is greater than or less than an amount equal to Base Amount.

“ Common Stock ” means the common stock of ELC, par value $0.0001 per share.

“ ELC Stock Consideration ” means 500,000 shares of Common Stock (which shares shall be issued to Pradeep and Susan Kapadia as joint tenants).

“ Intentional Fraud ” means any factual statement known by Kapadia and/or Stockholder to be false when made, upon which ELC was induced to rely, or any omission of any material fact known by Kapadia and/or Stockholder to be material and necessary to make the statements contained in the Agreement, in light of the circumstances in which they were made, not materially false or misleading.

“ Pre-Closing Bonus Payments ” means up to $75,000 which Kapadia pays or agrees to pay to Kapadia employees (other than the Stockholder) as bonuses with respect to calendar year 2006.

“ Work in Progress ” means, as of the date of determination, the estimated costs and profits of Kapadia in excess of billings on uncompleted contracts, determined in accordance with generally accepted accounting principles.

     1.7 Closing Working Capital Adjustment .

     (a) Upon the Effective Date, the amount of Cash Consideration to be distributed shall be estimated and subject to adjustment based on a final determination of Closing Working Capital made in accordance with this Section 1.7.

     (b) Not later than two (2) days prior to the Closing Date, Kapadia and the Stockholder shall deliver to ELC the certificate of Kapadia’s chief financial officer (the “ Estimated Closing Working Capital Certificate ”) certifying the estimated Closing Working Capital based on the financial books and records of Kapadia through the most recent date for which such books and records are then current and any other relevant information or considerations, including any borrowings intended to be made by Kapadia prior to Closing. The

Estimated Closing Working Capital Certificate shall be accompanied by all relevant supplemental financial and other information. ELC shall review the Estimated Closing Working Capital Certificate and related information and shall promptly notify Kapadia and the Stockholder if ELC disagrees with the estimated Closing Working Capital as stated therein. If there is disagreement, ELC and the Stockholder shall attempt to resolve such matter and agree upon the estimated Closing Working Capital amount for purposes of clause (a) of this Section 1.7. In the event that they are unable to agree, then, for purposes of clause (a) of this Section 1.7, the amount to be distributed at Closing shall be equal to the amount certified in the Estimated Closing Working Capital Certificate (as the same may be revised based upon efforts of the Stockholder and ELC to reach an agreement hereunder) minus one-half of the reduction thereto which ELC has proposed.

     (c) As promptly as practicable following the Effective Date, ELC and the Stockholder shall determine actual Closing Working Capital. If ELC and Stockholder are unable to reach agreement within forty (40) days following the Closing Date, then that portion of the determination which is the subject of disagreement shall be submitted to ELC’s accountants (which are BDO Seidman) and an accounting firm named by Stockholder (the “ Stockholder’s Accountants ”) for consideration. If BDO Seidman and the Stockholder’s Accountants are able to reach agreement within fifteen (15) days thereafter, then their decision shall be final. If they are not able to reach agreement as to the disputed issues within fifteen (15) days, then they shall jointly select a third accounting firm, independent of each of ELC and Kapadia and the Stockholder, which shall decide the disputed issue as soon thereafter as practicable and whose decision shall be final for purposes of determining the Closing Working Capital and the Cash Consideration.

     (d) In the event that actual Closing Working Capital, determined in accordance with the foregoing, is greater than the estimated amount which was used for purposes of Closing, ELC shall promptly distribute the additional amount in cash to the Stockholder. In the event that actual Closing Working Capital is less than the estimated amount which was used for purposes of Closing, then the Stockholder shall promptly remit to ELC the amount of the overpayment.

     1.8 Legend . Each certificate evidencing any shares of ELC Common Stock issued to the Stockholder pursuant to this Agreement shall bear the following legend:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THESE SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED, TRANSFERRED OR HYPOTHECATED OR OTHERWISE ASSIGNED IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL, SATISFACTORY TO LIME ENERGY CO., THAT THERE IS AN AVAILABLE EXEMPTION FROM REGISTRATION.

The legend set forth above shall be removed and ELC shall promptly issue a certificate without such legend, if: (i) such shares are registered for resale under the Securities Act of 1933, as amended (the “ Securities Act ”); (ii) in connection with a sale transaction, the Stockholder

provides ELC with an opinion of counsel reasonably acceptable to ELC to the effect that a public sale, assignment or transfer of such shares of Common Stock may be made without registration under the Securities Act; or (iii) the Stockholder provides ELC with reasonable assurances that such shares of Common Stock have been or are being sold pursuant to Rule 144.

     1.9 Registration; Listing . Within one (1) year after the date of this Agreement, ELC will file with the Securities and Exchange Commission (“ SEC ”) a registration statement under the Securities Act on Form S-1 (together with all amendments and supplements thereto, the “ S-1 Registration Statement ”) covering all of the shares of Common Stock issued by ELC pursuant to Section 1.6 (the shares of common stock which are required to be included under the S-1 Registration Statement are herein referred to as the “ Registrable Stock ”), and will apply or take other action to have all such shares of Registrable Stock listed on any principal exchange upon which shares of the Common Stock are then publicly traded. ELC shall use reasonable efforts to have such S-1 Registration Statement declared effective as promptly thereafter as possible, and shall maintain the effectiveness of the S-1 Registration Statement until the earlier of (a) the date on which all shares of the Registrable Stock covered by the S-1 Registration Statement have been sold by the Stockholder, or (b) the 24-month anniversary of the Closing Date. ELC shall bear all of the fees and expenses (other than underwriting or sales discounts and commissions incurred by the Stockholder) related to such registration, including (a) the cost of providing a reasonable number of copies of the applicable prospectus, as the same may be amended, to the Stockholder to permit sales under the S-1 Registration Statement and (b) the reasonable fees and expenses of one special counsel to the Stockholder (not to exceed $5,000) in connection with the review and filing of the S-1 Registration Statement.

ARTICLE 2 — CLOSING

     2.1 The Closing . The closing of the transactions contemplated by this Agreement (the “ Closing ”) shall take place in the separate locations with the use of fax or email and the exchange of signatures in counterparts. Closing shall commence at 11:00 a.m. Chicago time on the fifth business day after each condition described in Articles 8 and 9 is satisfied (or irrevocably waived by the parties entitled to the benefit thereof), or at such other time and place as soon thereafter as such conditions are satisfied (or waived) as shall be mutually agreed upon by the parties (the date upon which Closing occurs is herein referred to as the “ Closing Date ”).

     2.2 Closing Deliveries .

     (a)  Cash and Stock Deliverable to Stockholder At Closing . Upon the Effective Date, ELC shall cause to be delivered to the Stockholder (a) by certified check or other acceptable payment means, an amount equal to the estimated amount of the Cash Consideration determined as provided in Section 1.7 hereof, and (b) one or more stock certificates representing the Stock Consideration, registered in the name of the Stockholder.

     (b)  Other Deliveries . The parties hereto shall execute and deliver to each other the agreements, instruments and documents described in Articles 8 and 9 hereof.

ARTICLE 3 — CERTAIN EFFECTS OF MERGER

     3.1 Effect of Merger . Upon and after the Effective Date, the separate existence of Kapadia shall cease and shall be merged into Acquisition, with Acquisition as the “ Surviving Entity ” possessing all rights, privileges, immunities and franchises of a public or a private nature of each of the constituent entities; and all property, real, personal and mixed and all debts due on whatever account, including subscriptions to shares and all other choses in action, and all and every other interest of or belonging to or due to each of the constituent entities shall be taken and deemed to be transferred to and vested in the Surviving Entity without further act or deed; and the title to any real estate or any interest therein, vested in any of the constituent entities shall not revert to or be in any way impaired by reason of the Merger contemplated herein. The Surviving Entity shall, after the Effective Date, be responsible for all the liabilities and obligations of each of the constituent entities (but without prejudice to the rights of Acquisition and ELC arising due to a breach by Kapadia or the Stockholder of a representation, warranty or covenant contained in this Agreement), and any claim existing, or action or proceeding pending by or against any of such constituent entities may be prosecuted or defended by the Surviving Entity as if such Merger had not taken place. Neither the rights of creditors nor any liens upon the property of any of the constituent entities shall be impaired by the Merger contemplated herein.

     3.2 Further Assurances . If at any time after the Effective Date, the Surviving Entity shall consider or be advised that any further deeds, assignments or assurances in law or any other things are necessary, desirable or proper:

     other than any amendment of this Agreement or any other agreement or document executed by Kapadia in connection with the Contemplated Transactions (as such term is defined in Section 4.2(b)), then Acquisition, and its officers and managers, for and on behalf of Kapadia or Acquisition, shall and will execute and deliver all such deeds, assignments, instruments and assurances in law and do all other things necessary, desirable or proper to vest, perfect or confirm title to such property or rights in the Surviving Entity and otherwise to carry out the purposes of this Agreement, and the officers and directors of the Surviving Entity are severally fully authorized in their respective names thereof or otherwise to take any and all such actions; provided , however, in no event shall such actions result in liability, cost or expense to the Stockholder unless he shall have consented in writing in advance to the same.

ARTICLE 4 — REPRESENTATIONS AND WARRANTIES
OF KAPADIA AND THE STOCKHOLDER

Kapadia and the Stockholder hereby jointly and severally represent and warrant to ELC and Acquisition as follows, except as set forth in the disclosure schedules delivered by Kapadia and

the Stockholder to ELC on the date hereof. The representations and warranties provided below shall survive Closing hereunder to the extent set forth in Section 11.1 hereof:

     4.1 Organization; Good Standing; Ownership . Kapadia is a corporation duly organized and validly existing and in good standing under the laws of the State of New York, with full corporate power and authority to conduct its business as it is now being conducted and to own or use the properties and assets that it purports to own or use and to enter into and perform its obligations under this Agreement and any other instrument, document or agreement to be executed and delivered by Kapadia hereunder. The Stockholder is the sole stockholder and director of Kapadia and no other person or entity holds any options, warrants, convertible securities or other rights to acquire any securities of or assets or properties of Kapadia or any of the ownership of Kapadia.

     The Stockholder is domiciled in the State of California and his legal address is 3000 East Ojai Avenue, Ojai, California 93023.

     4.2 Enforceability; Authority; No Conflict .

     (a) This Agreement constitutes the legal, valid and binding obligation of Kapadia and the Stockholder, enforceable against each of them in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors’ rights generally and by general principles of equity. Kapadia and the Stockholder each have the right, power and authority to execute and deliver this Agreement and to perform its or his obligations under this Agreement, and such action by Kapadia has been duly authorized by all necessary action by Kapadia’s stockholders and board of directors.

     (b) Neither the execution and delivery of this Agreement nor the consummation or performance of any of the transactions on the part of Kapadia and the Stockholder contemplated hereby (the “ Contemplated Transactions ”) by Kapadia and the Stockholder, as applicable, will, directly or indirectly:

     (i) breach any provision of the certificate of incorporation, by-laws or other governing document (the “ Governing Documents ”) of Kapadia or any resolution adopted by the stockholders or directors of Kapadia;

     (ii) breach or conflict with any federal, state or local law (including case law), statute, ordinance, code or regulation (collectively, “ Legal Requirements ”) applicable to Kapadia or the Stockholder or give any governmental body or agency the right to challenge or seek to prevent any of the Contemplated Transactions or to exercise any remedy or obtain any relief under any Legal Requirement or under any order, injunction, judgment, decree, ruling, assessment or arbitration award (collectively, “ Orders ”) to which Kapadia or the Stockholder, or any of Kapadia’s assets, is subject; or

     (iii) contravene, conflict with or result in a violation or breach of any of the terms or requirements of any governmental authorization, permit or license that is held by

Kapadia or the Stockholder.

     (c) Neither Kapadia nor the Stockholder is required to give any notice to or obtain any consent from any person or entity in connection with its or his execution and delivery of this Agreement or the consummation or performance by it or him of any of the Contemplated Transactions, except where the failure to give any notice to or obtain any consent could not reasonably be expected to have a Material Adverse Effect (as defined in Section 4.4 below) and except as set forth in Schedule 4.2 (Required Consents) attached hereto.

     4.3 Financial Statements; Absence of Undisclosed Liabilities . Attached hereto as Schedule 4.3 are Kapadia’s unaudited annual statements of income and cash flows for the fiscal years ended December 31, 2005 and 2004 and the related unaudited balance sheets as at December 31, 2004 and 2005 (the “ Annual Financial Statements ”). The Annual Financial Statements have been prepared by Kapadia in accordance with its books of account and financial records and, except as set forth in Schedule 4.3 (Financial Condition Disclosures) , fairly present the financial condition and the results of operations of Kapadia as at the respective dates thereof and for the periods referred to in such financial statements in accordance with generally accepted accounting principles consistently applied.

     (b) Kapadia has no material liabilities which are not reflected on Schedule 4.3 (Financial Condition Disclosures) , other than (i) ordinary course liabilities for wages and benefits, trade payables, utilities and similar items incurred in the ordinary course of the Business (none of which are for torts or breach of contract or product liability claims), (ii) liabilities under any agreements, contracts, commitments, licenses or leases which have arisen in the ordinary course of business (none of which relates to a material breach of contract or any tort claim); (iii) liabilities for taxes for the period after December 31, 2005, and (iv) other items which are described on Schedule 4.3 (Financial Condition Disclosures ). Notwithstanding the foregoing, this Section 4.3(b) shall not be deemed a representation and warranty with respect to the absence of liabilities that would be required to be disclosed to ELC pursuant to any other section of this Agreement, it being understood and agreed that the specific representations and warranties applicable to any liabilities under another section of this Agreement, including, without limitation, any “knowledge” or “materiality” qualifiers, are intended to be the only representations and warranties made with respect to any such liabilities.

     4.4 Subsidiaries; Governing Documents; Qualifications . Kapadia does not have any subsidiaries and does own or hold any interest in any partnership, proprietorship, corporation or other business entity. Kapadia and the Stockholder have delivered to ELC complete copies of (a) the Certificate of Incorporation of Kapadia and all amendments thereto, and (b) the By-laws of Kapadia as currently in effect. Kapadia is duly qualified to do business as a foreign corporation and is in good standing in California and each other state and jurisdiction in which such licensing or qualification is required, except where the failure to so qualify or be licensed to do business could not reasonably be expected to have a material adverse effect on the business, assets, or financial condition of Kapadia (a “ Material Adverse Effect ”).

     4.5 Affiliate Transactions . Except as described in Schedule 4.5 (Affiliate Transactions) attached hereto, as of the date hereof and since December 31, 2005, neither the Stockholder nor any Affiliate (as defined below) is or has been indebted to, or is or has been a creditor of, or a guarantor of any obligation of or a party to any material contract, agreement, license, option, commitment or other arrangement, written or oral, express or implied, with Kapadia. For purposes of this Agreement, an “ Affiliate ” means any director of Kapadia, any spouse or family member (including parents, in-laws, children, step-children, siblings, grandchildren and nieces and nephews) of the Stockholder, or any corporation, partnership or other entity in which the Stockholder (or the spouse of the Stockholder or any such member of the Stockholder’s family) has any equity or ownership interest of five percent (5%) or more in the aggregate.

     4.6 Governmental Authorizations . All permits, licenses and other governmental authorizations (“ Governmental Authorizations ”) necessary for the operation of Kapadia’s business have been obtained and are in full force and effect, except where the failure to have done so could not reasonably be expected to have a Material Adverse Effect. Schedule 4.6 (Governmental Authorizations) attached hereto contains an accurate list of each Governmental Authorization held by Kapadia or that otherwise relates to its business. Each such authorization, is valid and in full force and effect, and no event has occurred or circumstance exists that may (with or without notice or lapse of time) constitute or result directly or indirectly in a violation of or a failure to comply with any term or requirement of any such Governmental Authorization, or result directly or indirectly in the revocation, withdrawal, suspension, cancellation or termination of, or any modification to, any such Governmental Authorization. Neither Kapadia nor the Stockholder has received, at any time after December 31, 2004, any notice or other communication (whether oral or written) from any governmental body regarding any actual, alleged, possible or potential violation of or failure to comply with any term or requirement of any Governmental Authorization, or any actual, proposed, possible or potential revocation, withdrawal, suspension, cancellation, termination of or modification to any Governmental Authorization. All applications required to have been filed for the renewal of the Governmental Authorizations and all other filings required to have been made with respect thereto have been duly filed on a timely basis with the appropriate governmental bodies.

     4.7 Warranty and Product Liability . No claims or demands have been made against Kapadia alleging injury to individuals or property as a result of the ownership, possession or use of any product manufactured or sold by Kapadia. All products sold by Kapadia prior to the Closing Date have been, are and will be of good quality, merchantable and in compliance in all material respects with the requirements of the respective purchase orders and agreements under which such goods have been, are or are to be sold. Notwithstanding the foregoing, it is acknowledged and agreed that this representation and warranty is limited expressly, with respect to products sold by Kapadia, to the warranties received by Kapadia by the manufacturers of such products (each, a “ Manufacturer’s Warranty ” and collectively, the “ Manufacturers’ Warranties ”), and Kapadia’s representations and warranties with respect to such products being good quality, merchantable and in compliance in all material respects with the requirements of the respective purchase orders and agreements is limited expressly to the terms and conditions of such

Manufacturers’ Warranties. All services sold by Kapadia prior to the Closing Date and all services performed by Kapadia as part of work in process prior to the Closing Date have been, are and will be of good quality and in compliance in all material respects with the requirements of the respective purchase orders and agreements under which such services have been, are or are to be sold.

     4.8 Assets .

     (a) As of the Closing Date, Kapadia will not own any real property. Schedule 4.8(a) (Property) contains a true and correct legal description and street address for each parcel of real property leased by Kapadia as lessee (the “ Leased Real Property ”) and a description of each item of personal property which is leased by Kapadia as lessee (the “ Leased Personal Property ”). All of the applicable leases relating to the Leased Real Property and the Leased Personal Property are also listed on Schedule 4.8(a) (the “ Leases ”) and true and complete copies of each of the Leases have been provided to ELC.

     (b) Except as otherwise disclosed on Schedule 4.8(b) attached hereto:

     (i) all the assets of Kapadia are either (i) owned free and clear of all security interests, mortgages, pledges, liens, conditional sales agreements, leases, encumbrances or charges of any nature whatsoever, or (ii) leased by Kapadia as lessee under the Leases;

     (ii) neither Kapadia nor any other party to any Lease is in default thereunder in any material respect and there are no defenses or offsets by either party thereto against the other, and the consummation of the Contemplated Transaction will not affect or impair the terms, validity or enforceability thereof or require the consent of any party thereto;

     (iii) none of the Leased Real Property is subject to any leasehold interest or tenancy or other right to use or occupancy held by or in favor of any person or entity other than Kapadia;

     (iv) Kapadia’s use of the Leased Real Property as it has been used in connection with the operation of its business is in compliance with all applicable zoning and other Legal Requirements;

     (v) the assets of Kapadia, including those that are leased under the Leases, include all assets and properties, real and personal, tangible and intangible, of every kind and description used or held for use in connection with its business and operations and are in good operating condition and repair (with the exception of normal wear and tear) and are free from defects other than minor defects that do not materially interfere with the continued use thereof in conduct of normal operations; and

     (vi) none of the operations of Kapadia carried on at the Leased Real Property encroach upon any adjacent real property and no notice or other communication to the

effect that any such encroachment has occurred or is existing has been received by Kapadia or the Stockholder.

     4.9 Contracts . Schedule 4.9 (Material Contracts) attached hereto contains a complete listing of each of the following to which Kapadia is a party or which relates to its business or assets (other than the Leases):

     (a) any open, outstanding or unfulfilled contract for the purchase of inventory, materials or supplies or equipment or any capital item involving an obligation of more than $10,000 individually or $25,000 in the aggregate;

     (b) any open, outstanding or unfulfilled contract not made in the ordinary and usual course of business;

     (c) any contract with any labor union or other labor organization;

     (d) any pension plans, bonus, deferred or incentive compensation, profit sharing plans, retirement plans, health care plans, life or disability insurance, vacation and paid holiday, termination or severance pay, executive compensation or other agreements or arrangements providing for employee remuneration or benefits (collectively, “ Employee Plans ”) to which Kapadia is a party or by which Kapadia is bound;

     (e) any unperformed written agreement for the employment of any individual on a full-time, part-time, consulting or other basis or relating to the present or future compensation or other benefits available to any person or any transaction between any person and Kapadia;

     (f) any licenses, permits or franchises relating to Kapadia’s business;

     (g) any dealer or distributor agreement;

     (h) any sales agency or advertising contract;

     (i) any contract, agreement or document regarding any lien, pledge, security interest or other encumbrance upon any assets of Kapadia;

     (j) contracts with customers (except for purchase orders placed by customers in the ordinary course of business);

     (k) any contract pursuant to which Kapadia made or will make loans, or has or will have incurred debts or borrowed or will borrow money, or become a guarantor or surety or pledged its credit on or otherwise become responsible with respect to any undertaking of another;

     (l) any contract involving any restrictions relating to Kapadia or its business

with respect to (i) the geographical area of operations, scope or type of business of Kapadia or (ii) confidentiality; and

     (m) any other contract or agreement, either written or oral, which is material to Kapadia or its business.

     As used in this Agreement, “ contract ” means any contract, lease, agreement, arrangement, commitment or understanding, written or oral, expressed or implied. The items which are required to be listed on Schedule 4.9 (Material Contracts), taken together with the Leases, are sometimes collectively referred to herein as the “ Material Contracts ”.

     Kapadia has performed all material obligations required to be performed by it prior to the date hereof, and Kapadia is not in material default, under any of the Material Contracts. None of the other parties to any of the Material Contracts is in material default thereunder. No notice of default or noncompliance with the terms thereof or of termination thereof has been received by Kapadia or the Stockholder. Neither Kapadia nor the Stockholder has any basis to believe that any other party to any of the Material Contracts is likely to materially default thereunder or is likely to issue any notice of default or termination thereunder.

     4.10 Litigation; Compliance with Law .

     (a) Except for the matters listed on Schedule 4.10 (Legal Matters) attached hereto, there have not been and are no actions, suits or proceedings pending or threatened relating to Kapadia or its business before or by any court or federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign.

     (b) Kapadia is and has been at all times in compliance in all material respects with all applicable Legal Requirements applicable to Kapadia or its business and there exists no basis for any claim for compensation or damage or other relief against Kapadia or its business for any violation of any Legal Requirement. All notices received by Kapadia or the Stockholder regarding alleged non-compliance and orders, writs, injunctions, decrees and arbitration decisions are listed on Schedule 4.10 (Legal Matters) and copies of such notices, orders, writs, injunctions, decrees and arbitration decisions have been delivered to ELC and Acquisition; provided , however, that this representation and warranty shall not be deemed to encompass matters involving compliance with applicable Legal Requirements where one or more other specific representations are made in Article 4 of this Agreement that cover applicable Legal Requirements with respect to a specific topic (whether or not the term “Legal Requirements” is used in such representation and warranty) including, without limitation, Taxes, employee benefits, labor and employment matters and Environmental Laws.

     (c) Other than matters disclosed on Schedule 4.10 (Legal Matters) attached hereto, since December 31, 2005 there have not been and are not now any actions, suits, investigations or proceedings pending or threatened against Kapadia or any of its subsidiaries before any court, arbitrator or administrative or governmental body that (a) seek to enjoin or otherwise prevent the consummation of the Contemplated Transactions or (b) materially and adversely affect, or as to

which there is a reasonable possibility of an adverse decision that would materially and adversely affect, either individually or collectively, the business or financial condition of Kapadia.

     (d) Kapadia is not in violation of any judgment, order, writ, injunction, decree, rule or regulation of any court or governmental department, commission, board, bureau, agency or instrumentality, the violation of which reasonably could be expected to, either individually or collectively, materially and adversely affect the business or financial condition of Kapadia.

     4.11 Taxes . All federal, state, county, local and foreign tax returns, reports and declarations of estimated tax or estimated tax deposit forms required to be filed by Kapadia have been duly filed, or are being contested in good faith pursuant to appropriate proceedings. Kapadia has paid all Taxes (as defined below) which have become due and has paid all installments of estimated Taxes due, except to the extent any such Taxes are being contested in good faith pursuant to appropriate proceedings. All Taxes and other assessments and levies which Kapadia is required by law to withhold or to collect have been duly withheld and collected, and have been paid over to the proper governmental authorities or are held by Kapadia in separate bank accounts for such payment, or are being contested in good faith pursuant to appropriate proceedings. All Tax disputes or contests are described on Schedule 4.11 (Tax Matters) hereto. Kapadia has adequate reserves on the Interim Balance Sheet for the payment of all Taxes of any kind, whether disputed or not, and whether accrued, due, absolute, contingent or otherwise, which were or which may be payable by Kapadia for any periods or fiscal years ending on or prior to the date of the Interim Balance Sheet, including all Taxes imposed before or after the Effective Date which are attributable to any such period or fiscal year. Except as disclosed on Schedule 4.11 (Tax Matters) attached hereto, where such returns and reports have not been audited and either approved or settled, there has not been any waiver or extension of any applicable statute of limitations, and Kapadia has not received any notice of deficiency or adjustment, and complete copies of such returns or reports have been furnished to ELC and Acquisition. Any disputes or contests by Kapadia regarding Taxes will not have a Material Adverse Effect. “ Tax ” or “ Taxes ” means all taxes, levies, imposts, fees, duties and other like charges of any nature whatsoever imposed by a governmental authority responsible for the imposition of any such tax, including, without limiting the generality of the foregoing, all income, sales, use, ad valorem, stamp, transfer, payroll, franchise and intangible taxes and fees of any nature upon properties or assets, whether tangible or intangible, or upon income, receipts, payrolls, transactions, net worth, capital, investment or franchise, together with any and all additions thereto and penalties and interest payable with respect thereto or to any assessment or collection thereof.

     4.12 Employee Relations . Except as shown on Schedule 4.12 (Personnel) attached hereto, there are no labor disputes, grievances, notices or other proceedings pending or threatened with respect to Kapadia or its business, nor does a basis exist for any such dispute or grievance. Schedule 4.12 (Personnel) attached hereto lists all employees of Kapadia and their respective titles or positions and salaries or hourly rates and describes generally all benefits which they are provided. Schedule 4.12 (Personnel) also lists all directors and officers of Kapadia.

     4.13 Banks, Powers of Attorney . Schedule 4.13 (Banks) attached hereto is a correct and complete list setting forth the name of each bank in which Kapadia has an account or safe deposit box, the name of each person authorized to draw thereon or to have access thereto, and the name of each person (if any) holding a power of attorney from Kapadia.

     4.14 Indebtedness . Schedule 4.14 (Indebtedness) attached hereto is a correct and complete list of all instruments, agreements or arrangements pursuant to which Kapadia has borrowed any money, incurred any indebtedness or established any line of credit or letter of credit which is currently outstanding and which represents a liability or potential liability of Kapadia. True and complete copies of all such written instruments, agreements or arrangements have previously been delivered to ELC and Acquisition.

     4.15 Insurance . Schedule 4.15 (Insurance) attached hereto is a list and brief description of all policies of insurance (showing the name of carrier and type of insurance) held by or on behalf of Kapadia. Kapadia has its buildings, plants, properties and operations, including but not limited to machinery, equipment and inventories, adequately insured against loss or damage by fire and all other hazards and risks of the character usually insured against by persons operating similar businesses and properties in the area where Kapadia’s business activities are conducted under valid and enforceable policies issued by insurers of recognized responsibility. Such insurance coverage will be continued in full force and effect to the Closing Date. Kapadia has not been refused any insurance by an insurance carrier to which it has applied for insurance during the past three years. Kapadia is in compliance in all material respects with all applicable requirements of its insurance carriers.

     4.16 Patents, Trademarks, Etc. Schedule 4.16 attached hereto sets forth a correct and complete list of all copyrights, patents, trademarks, trade names, service marks, processes, inventions, and formulae applied for, issued to or owned by Kapadia, or under which Kapadia is licensed or franchised or which Kapadia licenses to others, all of which are valid, in good standing and uncontested. Kapadia possesses all copyrights, patents, inventions, formulae, processes (secret or otherwise), trademarks, trade names and service marks necessary to conduct its business as presently conducted. Kapadia has not received any notice with respect to any alleged infringement or unlawful use of any copyright, patent, trademark, trade name, service mark, process, invention or formula or other intangible property right owned by others. Except as disclosed on Schedule 4.16 (Intellectual Property) attached hereto, no shareholder, director, officer or employee or Affiliate of Kapadia has any interest in any such copyright, patent, trade name, trademark, service mark, process, invention or formula. Kapadia has not granted any outstanding licenses or other rights to any copyright, patent, invention, formula, process, trademark, trade name or service mark listed on Schedule 4.16 (Intellectual Property) .

     4.17 Accounts Payable . The accounts payable of Kapadia reflected on Schedule 4.3 (Financial Condition Disclosures) are complete and were actual and bona fide accounts payable which rose in the ordinary and usual course of the business.

     4.18 Accounts Receivable . The accounts receivable and unbilled work in process of Kapadia, as reflected in Schedule 4.3 (Financial Condition Disclosures) , are actual and bona fide

accounts receivable and unbilled work in process which arose in the ordinary and usual course of the business, represent valid obligations due to Kapadia, and are not subject to defenses or set-off claims, except to the extent reflected in Schedule 4.3 (Financial Condition Disclosures) .

     4.19 Inventory . No inventory is held by Kapadia on consignment from any other person or entity or is held by any other person or entity on consignment for Kapadia. The inventory held by Kapadia (if any) is usable or saleable in the ordinary course of business, except for obsolete inventory not reflected on the Interim Balance Sheet, and complies in all material respects with Kapadia’s specifications therefore and any related purchase orders or purchase agreements. All raw materials and work-in-process included in inventory reflected in the Interim Balance Sheet (if any) are items which are used in Kapadia’s business.

     4.20 No Material Adverse Change . Since December 31, 2005, Kapadia has conducted itself and its business only in the ordinary course consistent with past practices and, except as set forth in Schedule 4.20 (Changes Since December 31, 2005) attached hereto, there has not been any:

     (a) damage to or destruction or loss of any material asset, whether or not covered by insurance;

     (b) entry into, termination of or receipt of notice of termination of any Material Contract;

     (c) sale (other than sales of inventory in the ordinary course of business), lease or other disposition of any assets or properties of Kapadia having a book value of more than $5,000 individually or $25,000 in the aggregate;

     (d) indication by any customer or supplier of dissatisfaction regarding its relationship with Kapadia or any intention to discontinue or change the terms of its relationship with Kapadia or its business;

     (e) material change in the accounting methods used by Kapadia;

     (f) material defects in any products or services which Kapadia has manufactured or sold, or any claim made or threatened to be made asserting any product liability or warranty liability of Kapadia or any facts or basis which could reasonably be construed to raise product liability or recall or warranty liability concerns with respect to products or services which Kapadia has manufactured or sold; or

     (g) other event constituting, or which may reasonably be expected to cause, a Material Adverse Effect.

     4.21 Employee Benefits . Except for the matters disclosed on Schedule 4.21 attached hereto, as to which true and complete copies of all relevant plans, agreements, insurance policies, and other documentation have been furnished by Kapadia and the Stockholder to ELC and

Acquisition, Kapadia has no pension plans or employee welfare benefit plans (as such terms are defined in the Employment Retirement Income Security Act of 1974, as amended, (“ ERISA ”)). There is no material pending or threatened proceeding or governmental action relating to any Employee Plan (as defined in Section 4.9(d)), nor is there any basis for any such proceeding or action.

     4.22 Environmental Warranties .

     (a) Kapadia and the Stockholder have provided to Acquisition and ELC prior to the date hereof copies of all environmental audits, assessments or occupational health studies and all analyses of any groundwater, soil, air or asbestos samples taken with respect to any real estate used in Kapadia’s business by, or at the direction of, Kapadia or the Stockholder or any of their employees or counsel, or any governmental agency (collectively, the “ Environmental Audits ”), and copies of all written communications between Kapadia or the Stockholder and any environmental agencies regarding any such real estate.

     (b) Kapadia and the Stockholder have provided to Acquisition and ELC prior to the date hereof copies of all Occupational Safety and Health Administration claims made against Kapadia or its business.

     (c) There is no radioactive material located on any of the real property used or owned by Kapadia.

     (d) Other than as disclosed in the Environmental Audits or as set forth on Schedule 4.22 (Environmental Matters) attached hereto, Kapadia has operated in compliance in all material respects with all applicable Environmental Laws (as hereinafter defined), no investigation, administrative order or notice, consent, order and agreement, litigation, settlement or environmental claim or lien with respect to Hazardous Materials or ACMs (as such terms are hereinafter defined) is proposed, threatened or in existence with respect to Kapadia or any real property used or owned by Kapadia or with respect to any off-site waste disposal to which waste relating to the operations of Kapadia has been taken. None of Kapadia’s operations have contaminated any real property owned or used by Kapadia, or any adjacent real property, with Hazardous Materials. None of the real property owned or used by Kapadia is or has been used for the storage, disposal or processing of, or was the site of any release of, Hazardous Materials in violation of any Environmental Laws.

     (e) The term “ Environmental Laws ” shall mean the Federal Clean Air Act, Federal Water Pollution Control Act, Resource Conservation and Recovery Act, Solid Waste Disposal Act, Toxic Substance Control Act and Comprehensive Environmental Response, Compensation and Liability Act, and any other federal, state or local laws, regulations or other requirements regulating or otherwise concerning Hazardous Materials or the environment. The term “ Hazardous Material(s) ” shall mean any hazardous, toxic or dangerous substance, pollutant, contaminant, waste or other material regulated under Environmental Laws; ACMs; oil and petroleum products and natural gas, natural gas liquids, liquefied natural gas, and synthetic gas usable for fuel; chemicals subject to the OSHA Hazard Communication Standard; and industrial

process and pollution control wastes whether or not hazardous within the meaning of the Federal Resource Conversation and Recovery Act.

     4.23 Brokers or Finders . Neither Kapadia nor the Stockholder has incurred any obligation or liability, contingent or otherwise, for brokerage or finders’ fees or agents’ commissions or other similar payments in connection with the consummation of the Contemplated Transactions.

     4.24 No Misleading Statements or Omissions . No representation or warranty made by Kapadia or the Stockholder in this Agreement, and no statement made by or on behalf of either Kapadia or the Stockholder in any certificate, document, exhibit or schedule expressly required to be furnished hereunder, contains or will contain any untrue statement of a material fact or omits or will omit to state any material fact necessary to make such representation or warranty or statement, in light of the circumstances under which such representation, warranty or statement was made, not misleading to a prospective purchaser of Kapadia.

     4.25 No Registration . Kapadia and the Stockholder understand that when issued at Closing the Shares will not have been registered under the Securities Act of 1933 (the “ Securities Act ”), as amended, by reason of a specific exemption from the registration provisions of the Securities Act, the availability of which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of Stockholder’s representations and warranties as expressed herein or otherwise made pursuant hereto.

     4.26 Investment . The Stockholder will be acquiring the Shares for his own account for investment, not as a nominee or agent, and not with a view to, or for resale in connection with, any distribution thereof, nor with any present intention of selling, granting any participation in, or otherwise distributing the same, and the Stockholder does not have any contract, undertaking, agreement or arrangement with any person or entity to sell, transfer or grant participation to such person or ent