AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER

BY AND BETWEEN

SKYWIDE CAPITAL MANAGEMENT LIMITED

AND

SINOENERGY CORPORATION

DATED AS OF OCTOBER 12, 2009

AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER (this “ Agreement ”), dated as of October 12, 2009, is by and between Skywide Capital Management Limited, a company incorporated with limited liability under the laws of the British Virgin Islands (the “ Buyer ”) and Sinoenergy Corporation, a corporation organized under the laws of the state of Nevada (the “ Company ”).

WHEREAS, the Board of Directors and members of Buyer and the Board of Directors of the Company deem it advisable and in the best interests of each Party and their respective members and shareholders that the Buyer acquire the Company in order to advance the long-term business interests of the Buyer and the Company;

WHEREAS, the acquisition of the Company shall be effected through a merger (the “ Merger ”) of the Company with and into the Buyer in accordance with the terms of this Agreement and the NGCL and the BVIBCA.

NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth below, the Buyer and the Company agree as follows:

ARTICLE I

DEFINITIONS

Action means any claim, action, suit, arbitration, mediation, inquiry, proceeding or investigation by or before any Governmental Entity, arbitrator or mediator.

Affiliate when used with respect to any party shall mean any person who is an “affiliate” of that party within the meaning of Rule 405 promulgated under the Securities Act; provided , that for purposes of this Agreement, Buyer shall not be deemed an Affiliate of the Company and the Company shall not be deemed an Affiliate of Buyer.

Agreement has the meaning attributed thereto in the Preamble.

Business Day means any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by Law to be closed in The City of New York.

Buyer has the meaning attributed thereto in the Preamble.

Buyer Material Adverse Effect   means any material adverse change, event, circumstance or development with respect to, or any material adverse effect on, (i) the business, assets, liabilities, capitalization, prospects, condition (financial or otherwise), or results of operations of the Buyer and its Subsidiaries, taken as a whole or (ii) the ability of the Buyer to consummate the transactions contemplated by this Agreement.  For the avoidance of doubt, the parties agree that the terms “material”, “materially” or “materiality” as used in this Agreement with an initial lower case “m” shall have their respective customary and ordinary meanings, without regard to the meanings ascribed to Buyer Material Adverse Effect  or Company Material Adverse Effect.

BVIBCA means the British Virgin Islands Business Companies Act, 2004, as amended.

Company has the meaning attributed thereto in the Preamble.

Company Balance Sheet means  the consolidated, audited balance sheet of the Company as of September 30, 2008.

Company Board means the Board of Directors of the Company.

Company Disclosure Schedule has the meaning attributable thereto in the first paragraph of Article IV.

Company Material Adverse Effect means any change in, or effect on, the business, operations, assets, liabilities or condition (financial or otherwise) of the Company and its Subsidiaries which, when considered either individually or in the aggregate together with all other adverse changes or effects with respect to which such phrase is used in this Agreement, is, or is reasonably likely to be, materially adverse to the business, operations, assets, liabilities or condition (financial or otherwise) of the Company and its Subsidiaries, taken as a whole, excluding effects resulting from (i) changes in general economic conditions or in the securities markets in general that do not affect the Company and its Subsidiaries in a materially disproportionate manner relative to other companies in the same industry, (ii) changes in the industries in which the Company and its Subsidiaries operate (including legal and regulatory changes) that do not specifically relate to the Company and its Subsidiaries and that do not affect the Company and its Subsidiaries in a materially disproportionate manner relative to other companies in such industry, (iii) acts taken pursuant to or in accordance with this Agreement at the request of the Buyer, or (iv) acts of terrorism or war (whether or not declared); provided , however , that the Buyer recognizes that the Company has incurred net losses for the three and nine months ended June 30, 2009, and that the financial statements at June 30, 2009 and for the nine months then ended include an explanatory paragraph stating that the financial statements have been prepared on a going concern basis and do not include any adjustments that might result from the uncertainties described in the third paragraph of Note 2 of the notes to such consolidated financial statements (the “ Uncertainties Paragraph ”) and the continuation of losses substantially consistent with such losses and the continuation of the matters described in the Uncertainties Paragraph shall not be deemed a Company Material Adverse Effect.

Company Unaudited Balance Sheet means the consolidated, unaudited balance sheet of the Company as of June 30, 2009.

Encumbrance means any security interest, pledge, mortgage, lien, charge, hypothecation, option to purchase or lease or otherwise acquire any interest, conditional sales agreement, claim, restriction, covenant, easement, right of way, title defect, adverse claim of ownership or use, transfer restriction, voting agreement, proxy or other limitation on voting rights, or other encumbrance of any kind, other than any obligation to accept returns of inventory in the ordinary course of business and other than those arising by reason of restrictions on transfers under federal, state and foreign securities Laws.

Exchange Act means the Securities Exchange Act of 1934, as amended.

Governmental Entity means any court, arbitrational tribunal, administrative agency or commission or other governmental or regulatory authority, agency or instrumentality of any nation, state or other political subdivision thereof, or any stock market or stock exchange on which the Shares are listed for trading.

Governmental Order means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Entity.

Indebtedness means, with respect to any Person, without duplication, (A) all obligations of such Person for borrowed money, or with respect to deposits or advances of any kind to such Person, (B) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (C) all obligations of such Person upon which interest charges are customarily paid, (D) all obligations of such Person under conditional sale or other title retention agreements relating to property purchased by such Person, (E) all obligations of such Person issued or assumed as the deferred purchase price of property or services (excluding obligations of such Person or creditors for raw materials, inventory, services and supplies incurred in the Ordinary Course of Business), (F) all capitalized lease obligations of such Person, (G) all obligations of others secured by any lien on property or assets owned or acquired by such Person, whether or not the obligations secured thereby have been assumed, (H) all obligations of such Person under interest rate or currency hedging transactions (valued at the termination value thereof), (I) all letters of credit issued for the account of such Person and (J) all guarantees and arrangements having the economic effect of a guarantee by such Person of any Indebtedness of any other Person.

Intellectual Property means the rights associated with or arising out of any of the following:  (i) domestic and foreign patents and patent applications, together with all reissuances, divisionals, continuations, continuations-in-part, revisions, renewals, extensions, and reexaminations thereof, and any identified invention disclosures (“ Patents ”); (ii) trade secret rights and corresponding rights in confidential information and other non-public information (whether or not patentable), including ideas, formulas, compositions, inventor’s notes, discoveries and improvements, know-how, manufacturing and production processes and techniques, testing information, research and development information, inventions, invention disclosures, unpatented blueprints, drawings, specifications, designs, plans, proposals and technical data, business and marketing plans, market surveys, market know-how and customer lists and information (“ Trade Secrets ”); (iii) all copyrights, copyrightable works, rights in databases, data collections, “moral” rights, mask works, copyright registrations and applications therefore and corresponding rights in works of authorship (“ Copyrights ”); (iv) all trademarks, service marks, logos, trade dress and trade names and domain names indicating the source of goods or services, and other indicia of commercial source or origin (whether registered, common law, statutory or otherwise), all registrations and applications to register the foregoing anywhere in the world and all goodwill associated therewith (“ Trademarks ”); (v) all computer software and code, including assemblers, applets, compilers, source code, object code, development tools, design tools, user interfaces and data, in any form or format, however fixed (“ Software ”); and (vi) all Internet electronic addresses, uniform resource locators and alphanumeric designations associated therewith and all registrations for any of the foregoing (“ Domain Names ”).

Knowledge means, with respect to any particular matter pertaining to the Company or any Subsidiary, the actual knowledge of the chief executive officer, the executive vice president or the chief financial officer of the Company regarding such matter; provided that such officers shall be deemed to have made due and diligent inquiry of those employees, agents, consultants or other Persons whom such officers reasonably believe would have knowledge of the matters represented.

Law means any statute, law, ordinance, regulation, rule, code, principle of common law and equity or other requirement of law of a Governmental Entity or any Governmental Order.

Merger has the meaning attributed thereto in the Preamble.

NGCL means the Nevada General Corporation Law (NRS §§ 78.010, et seq. and NRS §§ 92A.005, et seq. ) , as amended.

Ordinary Course of Business , with respect to any action, means such action is:

(i)           consistent with the recent past practices of such Person and is taken in the ordinary course of the normal day-to-day operations of such Person; and

(ii)           not required to be authorized by the board of directors of such Person.

Person means any individual, partnership, firm, corporation, association, trust, unincorporated organization, Governmental Authority, joint venture, limited liability company or other entity.

SEC means the United States Securities and Exchange Commission.

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

Shares means the $.001 par value common stock of the Company.

Subsidiary means, with respect to a party, any corporation, partnership, joint venture, limited liability company or other business association or entity, whether incorporated or unincorporated, of which (i) such party or any other Subsidiary of such party is a general partner or a managing member (excluding partnerships, the general partnership interests of which held by such party and/or one or more of its Subsidiaries do not have a majority of the voting interest in such partnership), (ii) such party and/or one or more of its Subsidiaries holds voting power to elect a majority of the board of directors or other governing body performing similar functions, or (iii) such party and/or one or more of its Subsidiaries, directly or indirectly, owns or controls more than 50% of the equity, membership, partnership or similar interests.

Taxes means all taxes, charges, fees, levies or other similar assessments or liabilities, including income, gross receipts, ad valorem, premium, value-added, excise, real property, personal property, sales, use, services, transfer, withholding, employment, payroll and franchise taxes imposed by the United States of America or any state, local or foreign government, or any agency thereof, or other political subdivision of the United States of America or any such government, and any interest, fines, penalties, assessments or additions to tax resulting from, attributable to or incurred in connection with any tax or any contest or dispute thereof.

Tax Returns means all reports, returns, declarations, statements or other information required to be supplied to a taxing authority in connection with Taxes.

A Triggering Event shall be deemed to have occurred if:  (a) the Company Board shall have failed to recommend that the Company’s shareholders vote to approve the Agreement, or shall have withdrawn or modified (without the consent of the Buyer) in a manner adverse to the Buyer the Company Board Recommendation (it being understood and agreed that any “stop-look-and-listen” communication by the Company Board to the shareholders of the Company pursuant to Rule 14d-9(f) of the Exchange Act shall not be deemed to constitute a withdrawal, modification or change of its recommendation of this Agreement); (b) the Company shall have failed to include in the Proxy Statement the Company Board Recommendation; (c) the Company Board fails to reaffirm the Company Board Recommendation, or fails to reaffirm its determination that the Merger is fair to and in the best interests of the Company’s shareholders, in a press release if so requested by the Buyer, within 10 days after the Buyer requests in writing that such recommendation or determination be reaffirmed; (d) the Company Board shall have approved, endorsed or recommended any Acquisition Proposal; (e) the Company shall have entered into any letter of intent or similar document or any Contract relating to any Acquisition Proposal, other than confidentiality agreements that the Company is required or permitted to enter into pursuant Section 7.1 of the Agreement; (f) a tender or exchange offer relating to securities of the Company shall have been commenced and the Company shall not have sent to its security holders, or filed with the SEC, within 10 Business Days after the commencement of such tender or exchange offer, a statement disclosing that the Company recommends rejection of such tender or exchange offer; or (g) the Company or any Representative of the Company shall have breached in any material respect any material obligations set forth in Section 7.1 of this Agreement.

Term                                                                                                             Section

ARTICLE II

THE MERGER

2.1   Effective Time of the Merger .  Subject to the provisions of this Agreement, prior to the Closing, the Buyer shall prepare, and on the Closing Date or as soon as practicable thereafter the Buyer shall cause to be filed with the Secretary of State of the State of Nevada, and with the Registrar of Corporate Affairs of the British Virgin Islands (the “ Registrar ”), articles of merger (in each case, the “ Articles of Merger ”) in such form as is required by, and executed by the Surviving Company in accordance with, the relevant provisions of the NGCL and the BVIBCA and shall make all other filings or recordings required under the NGCL and BVIBCA.  The Merger shall become effective upon the filing of the Articles of Merger with the Secretary of State of the State of Nevada and with the Registrar, or at such later time as is established by the Buyer and the Company and set forth in the Articles of Merger (the “ Effective Time ”).

2.2   Closing .  The closing of the Merger (the “ Closing ”) shall take place at 10:00 a.m., Eastern time, on a date to be specified by the Buyer and the Company (the “ Closing Date ”), which shall be no later than the second Business Day after satisfaction or waiver of the conditions set forth in Article VII (other than delivery of items to be delivered at the Closing and other than satisfaction of those conditions that by their nature are to be satisfied at the Closing, it being understood that the occurrence of the Closing shall remain subject to the delivery of such items and the satisfaction or waiver of such conditions at the Closing), at the offices of Arent Fox LLP, 1675 Broadway, New York, New York  10019, unless another date, place or time is agreed to in writing by the Buyer and the Company.

2.3   Effects of the Merger .  At the Effective Time (i) the separate existence of the Company shall cease and the Company shall be merged with and into the Buyer (the Buyer following the Merger is sometimes referred to herein as the “ Surviving Company ”) and (ii) the memorandum and articles of association of the Buyer as in effect immediately prior to the Effective Time shall be the memorandum and articles of association of the Surviving Company, until further amended in accordance with the BVIBCA.  The Merger shall have the effects set forth in Section 92A.250 of the NGCL and Sections 173 and 174 of the BVIBCA.

2.4   Directors and Officers .  The directors of the Buyer immediately prior to the Effective Time shall be the initial directors of the Surviving Company and officers of the Company immediately prior to the Effective Time shall be the officers of the Surviving Company, each to hold office in accordance with the articles of association of the Surviving Company.

ARTICLE III

CONVERSION OF SECURITIES

3.1   Conversion of Capital Stock .  As of the Effective Time, by virtue of the Merger and without any action on the part of the holder of any shares of the capital stock of the Company or authorized shares of the Buyer:

(a)   Each of the Shares issued and outstanding immediately prior to the Effective Time (other than Shares held in the Company’s treasury or by any wholly-owned Subsidiary of the Company and Shares owned beneficially by the Buyer or any wholly-owned Subsidiary of the Buyer) shall be converted into and represent the right to receive $1.90 in cash per share of the Shares, without any interest thereon (the “ Merger Consideration ”).

(b)   Cancellation of Stock Owned by the Parties and Their Subsidiaries .  All of the Shares that are owned by the Company as treasury stock or by any wholly-owned Subsidiary of the Company and any Shares owned by the Buyer, any shareholder of the Buyer or any wholly-owned Subsidiary of the Buyer immediately prior to the Effective Time shall be cancelled and shall cease to exist and no shares of the Buyer or other consideration shall be delivered in exchange therefor.

(c)   Treatment of Company Stock Options and Common Stock Purchase Warrants .  Prior to the Effective Time, the Company Board (and/or, if appropriate, the Compensation Committee thereof) shall adopt appropriate resolutions and take all other actions necessary to provide that each Company Stock Option and each Company Stock Purchase Warrant, whether or not then vested or exercisable, shall, at the Effective Time, be cancelled, and each holder thereof, other than the Buyer, any shareholder of the Buyer or any wholly-owned Subsidiary of the Buyer, shall be entitled to receive a payment in cash as provided in Section 7.8(b) hereof (subject to any applicable withholding taxes).  As provided herein, unless otherwise determined by the Buyer, the Company Stock Plans (and any feature of any other Benefit Plans or other plan, program or arrangement providing for the issuance or grant of any other interest in respect of the capital stock of the Company) shall terminate as of the Effective Time.  After the date hereof, the Company will not issue any Company Stock Options, Company Stock Purchase Warrants or other options, warrants, rights or agreements which would entitle any person to acquire any capital stock of the Company or, except as otherwise provided in this Section 3.1(c) or in Section 7.8 , to receive any payment in respect thereof.

3.2   Exchange of Certificates, Company Stock Options and Company Stock Purchase Warrants .  The procedures for exchanging outstanding Shares for Merger Consideration, and outstanding Company Stock Options and Company Stock Purchase Warrants for Option Consideration, pursuant to the Merger are as follows:

(a)   Exchange Agent .  As of the Effective Time, the Buyer shall deposit with the Company’s transfer agent or another bank or trust company designated by the Buyer and reasonably acceptable to the Company (the “ Exchange Agent ”), for the benefit of the holders of Shares, Company Stock Options and Company Stock Purchase Warrants, for exchange in accordance with this Section  3.2 , through the Exchange Agent, cash in an amount sufficient to pay the aggregate Merger Consideration and the aggregate Option Consideration (such aggregate consideration being hereinafter referred to as the “ Exchange Fund ”), payable pursuant to Section  3.1 to holders of certificates which immediately prior to the Effective Time represented outstanding Shares (the “ Certificates ”), and pursuant to Sections 3.1(c) and 7.8(b) to the holders of Company Stock Options and Company Stock Purchase Warrants.

(b)   Exchange Procedures .  As soon as reasonably practicable after the Effective Time, the Exchange Agent shall mail to each holder of record of a Certificate, Company Stock Option and Company Stock Purchase Warrant (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates, Company Stock Options and Company Stock Purchase Warrants shall pass, only upon delivery of the Certificates, Company Stock Options and Company Stock Purchase Warrants to the Exchange Agent and shall be in such form and have such other provisions as the Buyer may reasonably specify) and (ii) instructions for effecting the surrender of the Certificates, Company Stock Options and Company Stock Purchase Warrants in exchange for each holder’s respective Merger Consideration or Option Consideration.  Upon surrender of a Certificate, Company Stock Option or Company Stock Purchase Warrant for cancellation to the Exchange Agent or to such other agent or agents as may be appointed by the Buyer, together with such letter of transmittal, duly executed, and such other documents as may reasonably be required by the Exchange Agent, the holder of each Certificate, Company Stock Option and Company Stock Purchase Warrant shall be entitled to receive in exchange therefor cash representing (i) that number of whole Shares evidenced by such Certificate multiplied by the Merger Consideration, and the Certificate so surrendered shall immediately be cancelled; and/or (ii) the Option Consideration payable with respect to the surrendered Company Stock Option or Company Stock Purchase Warrant.  In the event of a transfer of ownership of Shares which is not registered in the transfer records of the Company, the payment representing the Merger Consideration payable to the registered holder may be paid to a person other than the person in whose name the Certificate so surrendered is registered, if such Certificate is presented to the Exchange Agent, accompanied by all documents required to evidence and effect such transfer and by evidence that any applicable stock transfer taxes have been paid.  Until surrendered as contemplated by this Section  3.2 , each Certificate, Company Stock Option and Company Stock Purchase Warrant shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the payment contemplated by this Section  3.2 or Section 7.8(b) , as the case may be.

(c)   No Further Ownership Rights in Shares .  All payments upon the surrender for exchange of Certificates in accordance with the terms hereof shall be deemed to have been paid in full satisfaction of all rights pertaining to such Shares, and from and after the Effective Time there shall be no further registration of transfers on the share transfer books or register of members of the Surviving Company of the Shares which were outstanding immediately prior to the Effective Time.  If, after the Effective Time, Certificates are presented to the Surviving Company or the Exchange Agent for any reason, they shall be cancelled and exchanged as provided in this Article II.

(d)   Termination of Exchange Fund .  Subject to any applicable escheat or similar Law, any portion of the Exchange Fund which remains undistributed to the holders of Shares 180 days after the Effective Time shall be delivered to the Buyer, upon demand, and any holder of Shares who has not previously complied with this Section  3.2 shall thereafter look only to the Buyer, as a general unsecured creditor, for payment of his, her or its claim for Merger Consideration.

(e)   Investment of Exchange Fund   The Exchange Agent shall invest cash included in the Exchange Fund, as directed by the Buyer, on a daily basis, provided that no such investment or loss thereon shall affect the amounts payable pursuant to the provisions of this Article III.  Any interest and other income resulting from such investments shall be paid to the Buyer.

(f)   No Liability .  To the extent permitted by applicable Law, none of the Buyer, the Company, the Surviving Company or the Exchange Agent shall be liable to any holder of Shares delivered to a public official pursuant to any applicable abandoned property, escheat or similar Law.  If any Certificate shall not have been surrendered prior to one year after the Effective Time (or immediately prior to such earlier date on which any cash payable to the holder of such Certificate pursuant to this Article III would otherwise escheat to or become the property of any Governmental Entity), any such cash in respect of such Certificate shall, to the extent permitted by applicable Law, become the property of the Surviving Company, free and clear of all claims or interest of any person previously entitled thereto.

(g)   Withholding Rights .  Each of the Buyer and the Surviving Company shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of Shares such amounts as it reasonably determines that it is required to deduct and withhold with respect to the making of such payment under the Internal Revenue Code of 1986, as amended (the “ Code ”), or any other applicable provision of Law.  To the extent that amounts are so withheld by the Surviving Company or the Buyer, as the case may be, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the Shares in respect of which such deduction and withholding was made by the Surviving Company or the Buyer, as the case may be.

(h)   Lost Certificates .  If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such Certificate to be lost, stolen or destroyed and, if required by the Surviving Company, the posting by such person of a bond in such reasonable amount as the Surviving Company may direct as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent shall issue in exchange for such lost, stolen or destroyed Certificate, the Merger Consideration deliverable in respect thereof pursuant to this Agreement.

ARTICLE IV

 

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants to the Buyer that the statements contained in this Article IV are true and correct, subject to the exceptions set forth in the disclosure schedule delivered by the Company to the Buyer on or before the execution and delivery of this Agreement (the “ Company Disclosure Schedule ”).  The Company Disclosure Schedule shall be arranged in paragraphs corresponding to the numbered and lettered paragraphs contained in this Article IV that contain references to such Company Disclosure Schedule; provided , however , that any information contained in response to any numbered or lettered section of this Article IV shall constitute disclosure pursuant to this Article IV.  For purposes of this Agreement, each statement or other item of information set forth in the Company Disclosure Schedule shall be deemed to be a representation and warranty made by the Company in Article IV.

(a)   Each of the Company and its Subsidiaries is a corporation duly organized, validly existing and in good standing under the Laws of the jurisdiction of its incorporation, has all requisite corporate power and authority to own, lease and operate its properties and assets and to carry on its business as now being conducted, except for such failures to be so organized, qualified or in good standing, individually or in the aggregate, that have not had, and could not reasonably be expected to have a Company Material Adverse Effect.  There is no jurisdiction in the United States in which the nature of the business conducted by the Company or property owned by it requires qualification as a foreign corporation.

(b)   Section 4.1(b) of the Company Disclosure Schedule sets forth a complete and accurate list of (i) all of the Company’s Subsidiaries and the Company’s direct or indirect equity interest therein and (ii) the Company’s interest in any Person which is not a Subsidiary, including any Person in which the Company has a non-controlling equity interest.

(c)   The Company has delivered to the Buyer complete and accurate copies of the certificate of incorporation and by-laws of the Company and of the charter, by-laws or other organizational documents of each Subsidiary of the Company, in each case as amended to date.  The Company is not in default under, or in violation of, its certificate of incorporation or by-laws, and each of its Subsidiaries is not in violation of its comparable organizational documents.

(a)   The authorized capital stock of the Company consists of 10,000,000 shares of preferred stock, par value $0.001 per share, none of which are outstanding or authorized for issuance, and 50,000,000 Shares.  The rights and privileges of each class of the Company’s capital stock are as set forth in the Company’s certificate of incorporation.  As of the date of this Agreement, 15,942,336 Shares were issued and outstanding, and no Shares were held in the treasury of the Company or by Subsidiaries of the Company.

(b)   Section 4.2(b) of the Company Disclosure Schedule lists the number of Shares reserved for issuance pursuant to outstanding convertible notes, stock options and stock purchase warrants, as of the date of this Agreement and any plans or other arrangements under which additional notes, options and warrants may be issued or granted (collectively, the “ Company Stock Plans ”) and sets forth a complete and accurate list of all holders of outstanding notes convertible into, and options and warrants to purchase, Shares (such outstanding notes, options and warrants, respectively, the “ Company Convertible Notes ,” “ Company Stock Options ” and the “ Company Stock Purchase Warrants ”), whether or not granted under the Company Stock Plans, and the number of Shares issuable pursuant to each Company Convertible Note, each Company Stock Option and each Company Stock Purchase Warrant, and the conversion, exercise or purchase price, the date of grant or issuance, the repurchase price payable per unvested Share, and the expiration date thereof. The Company has provided to the Buyer accurate and complete copies of all Company Stock Plans, and the forms of all convertible note, stock option and common stock warrant agreements evidencing Company Convertible Notes, Company Stock Options and Company Stock Purchase Warrants, and there are no agreements, understandings or commitments to amend, modify or supplement such documents, which documents include any applicable provisions relating to adjustments in the number of Shares which may be issued pursuant thereto.

(c)   Except (x) as set forth in this Section 4.2 , and (y) as reserved for future grants under Company Stock Plans, (i) there are no equity securities of any class of the Company or any of its Subsidiaries (other than equity securities of any such Subsidiary that are directly or indirectly owned by the Company), or any security exchangeable into or exercisable for such equity securities, issued, reserved for issuance or outstanding and (ii) there are no options, warrants, equity securities, calls, rights, commitments or agreements of any character to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound obligating the Company or any of its Subsidiaries to issue, exchange, transfer, deliver or sell, or cause to be issued, exchanged, transferred, delivered or sold, additional shares of capital stock or other equity interests of the Company or any of its Subsidiaries or any security or rights convertible into or exchangeable or exercisable for any such shares or other equity interests, or obligating the Company or any of its Subsidiaries to grant, extend, accelerate the vesting of, otherwise modify or amend or enter into any such option, warrant, equity security, call, right, commitment or agreement.  Neither the Company nor any of its Subsidiaries has outstanding any stock appreciation rights, phantom stock, performance-based rights or similar rights or obligations.

 

 

There are no obligations, contingent or otherwise, of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of the capital stock of the Company or any of its Subsidiaries or to provide funds to or make any investment (in the form of a loan, capital contribution or otherwise) in the Company or any Subsidiary of the Company or any other entity, other than guarantees of bank obligations of Subsidiaries of the Company entered into in the Ordinary Course of Business or as disclosed in the Company SEC Reports.  Neither the Company nor any of its Affiliates is a party to or is bound by any, and to the Knowledge of the Company, there are no, agreements or understandings with respect to the voting (including voting trusts and proxies) or sale or transfer (including agreements imposing transfer restrictions) of any shares of capital stock or other equity interests of the Company or any of its Subsidiaries not disclosed in the Company SEC Reports. There are no registration rights, and there is no rights agreement, “poison pill” anti-takeover plan or other agreement or understanding to which the Company or any of its Subsidiaries is a party or by which it or they are bound with respect to any equity security of any class of the Company or any of its Subsidiaries or with respect to any equity security, partnership interest or similar ownership interest of any class of any of its Subsidiaries not disclosed in the Company SEC Reports.

(e)   All outstanding Shares are, and all Shares subject to issuance as specified in Section 4.2(b) above, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, will be, duly authorized, validly issued, fully paid and non-assessable and not subject to or issued in violation of any Encumbrance, purchase option, call option, right of first refusal, preemptive right, subscription right or any similar right under any provision of the NGCL, the Company’s certificate of incorporation or by-laws or any agreement to which the Company is a party.

(f)   All of the outstanding shares of the Capital Stock of each of the Company’s Subsidiaries are owned as set forth in Note 1(d) of the Notes to Consolidated Financial Statements in the Company’s Form 10-Q for the quarter ended June 30, 2009 and have been issued in accordance with applicable law and the governing instruments of the Subsidiary, and are owned free and clear of any Encumbrances, except as disclosed in the Company SEC Reports. There are no outstanding options, warrants, calls, stock appreciation rights, or other rights or commitments or any other agreements of any character relating to the sale, issuance or voting of, or the granting of rights to acquire any shares of the capital stock of any of the Company’s Subsidiaries, or any securities or other instruments convertible into, exchangeable for or evidencing the right to purchase any shares of the capital stock of any of the Company’s Subsidiaries except as disclosed in the Company SEC Reports.

(g)   All Company Stock Options, all Company Stock Purchase Warrants and all issued and outstanding Shares have been issued in compliance with the Securities Act and any applicable state blue sky Laws.  Any consents of the holders of Company Stock Options and Company Stock Purchase Warrants which are required in connection with the actions contemplated by Section  7.8 have been obtained, and such actions so contemplated comport with the requirements of the documents underlying any such derivative securities.

(a)   The Company has all requisite corporate power and authority to enter into this Agreement and, subject only to the adoption of this Agreement and the approval of the Merger (the “ Company Voting Proposal ”) by the Company’s shareholders under the NGCL (the “ Company Shareholder Approval ”), to consummate the transactions contemplated by this Agreement.  Without limiting the generality of the foregoing, the Company Board, at a meeting duly called and held, by the unanimous vote of all directors and upon the approval and recommendation of a special committee of the Company Board comprised solely of four independent directors (i) determined that the Merger is fair and in the best interests of the Company and its shareholders, (ii) adopted this Agreement in accordance with the provisions of the NGCL, (iii) directed that this Agreement and the Merger be submitted to the shareholders of the Company for their adoption and approval and resolved to recommend that the shareholders of the Company vote in favor of the adoption of this Agreement and the approval of the Merger and (iv) to the extent necessary, adopted a resolution having the effect of causing the Company not to be subject to any provision of the NGCL relating to a merger with interested stockholders (including, without limitation, a “fair price,” “moratorium,” or “control share acquisition” statute) that might otherwise apply to the Merger and any other transactions contemplated by this Agreement.  The execution and delivery of this Agreement and the consummation of the transactions contemplated by this Agreement by the Company have been duly authorized by all necessary corporate action on the part of the Company, subject only to the required receipt of the Company Shareholder Approval.  This Agreement has been duly executed and delivered by the Company and constitutes the valid and binding obligation of the Company, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors’ rights and remedies generally and to general principles of equity.

(b)   The execution and delivery of this Agreement by the Company do not, and the consummation by the Company of the transactions contemplated by this Agreement shall not, (i) conflict with, or result in any violation or breach of, any provision of the articles of incorporation or by-laws of the Company or of the charter, by-laws, or other organizational document of any Subsidiary of the Company, (ii)  conflict with, or result in any violation or breach of, or constitute (with or without notice or lapse of time, or both) a default (or give rise to a right of termination, cancellation or acceleration of any obligation or loss of any benefit) under, or require a consent or waiver under, constitute a change in control under, require the payment of a penalty under or result in the imposition of any Encumbrance on the Company’s or any of its Subsidiaries’ assets under, any of the terms, conditions or provisions of any material note, bond, mortgage, indenture, lease, license, contract or other agreement, instrument or obligation to which the Company or any of its Subsidiaries is a party or by which any of them or any of their properties or assets may be bound, (iii) subject to obtaining the Company Shareholder Approval and compliance with the requirements specified in clauses (i) through (iv) of Section 4.3(c) below, conflict with or violate any permit, concession, franchise, license, judgment, injunction, order, decree or Law applicable to the Company or any of its Subsidiaries or any of its or their properties or assets, or (iv) result in the creation of a material lien on any of the material properties or assets of the Company or any of its Subsidiaries, except in the case of clauses (ii) and (iii) of this Section  4.3(b) for any such conflicts, violations, breaches, defaults, terminations, cancellations, accelerations or losses that, individually or in the aggregate, could not constitute or could not reasonably be expected to constitute a Company Material Adverse Effect.  There are no consents, waivers or approvals under any of the Company’s or any of its Subsidiaries’ agreements, licenses or leases required to be obtained in connection with the consummation of the transactions contemplated hereby.

(c)   No consent, approval, license, permit, order or authorization of, or registration, declaration, notice or filing with any Governmental Entity is required by or with respect to the Company or any of its Subsidiaries in connection with the execution and delivery of this Agreement by the Company or the consummation by the Company of the transactions contemplated by this Agreement, except for (i) the filing of Articles of Merger with the Secretary of State of the State of Nevada and with the Registrar, (ii) the filing of the Proxy Statement with the SEC in accordance with the Exchange Act, (iii) the filing of such reports, schedules or materials under Section 13, Rule 14a-12 or other relevant sections under the Exchange Act as may be required in connection with this Agreement and the transactions contemplated hereby and (iv) such consents, approvals, orders, authorizations, registrations, declarations and filings as may be required under applicable state securities Laws and the securities Laws of any foreign country.

(d)   The affirmative vote of the holders of a majority of the outstanding Shares on the record date for the Company Shareholders Meeting is the only vote of the holders of any class or series of the Company’s capital stock or other securities necessary for the adoption of this Agreement and for the consummation by the Company of the Merger and the other transactions contemplated by this Agreement and the Support Agreements.  There are no bonds, debentures, notes or other indebtedness of the Company having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which shareholders of the Company may vote.

(a)   The Company has filed all registration statements, forms, reports and other documents required to be filed by the Company with the SEC and/or the Nasdaq Stock Market since June 1, 2006 pursuant to the Exchange Act (the “ Company SEC Reports ”), all of which are publicly available on the SEC’s EDGAR system; provided , however , that the Company has not filed a proxy statement on Schedule 14A or an information statement on Schedule 14C since September 8, 2006.  Prior to the Closing, the Company will have furnished to the Buyer a true, correct and complete copy of any additional Company SEC Reports filed with the SEC or the Nasdaq Stock Market on or after the date hereof but prior to the Closing.  The Company SEC Reports (i) were or will be filed on a timely basis, provided , however , that no representation is made that each current report on Form 8-K was filed on a timely basis, (ii) at the time filed, were, to the Company’s Knowledge at the time of such filing, or will be prepared in compliance in all material respects with the applicable requirements of the Exchange Act, and the rules and regulations of the SEC thereunder applicable to such Company SEC Reports including the provision of all statements and certifications required by (x) Rule 13a-14 or 15d-14 under the Exchange Act or (y) 18 U.S.C. §1350 (Section 906 of the Sarbanes-Oxley Act of 2002), and (iii) did not or will not at the time they were or are filed contain any untrue statement of a material fact or omit to state a material fact required to be stated in such Company SEC Report or necessary in order to make the statements in such Company SEC Report, in the light of the circumstances under which they were made, not misleading.  No Subsidiary of the Company is subject to the reporting requirements of Section 13(a) or Section 15(d) of the Exchange Act.  There are no off-balance sheet or securitization structures or transactions with respect to the Company or any of its Subsidiaries that would be required to be reported or set forth in the Company SEC Reports and were not reflected therein.  As used in this Section 4.4 , the term “file” and variations thereof shall be broadly construed to include any manner in which a document or information is furnished, supplied or otherwise made available to the SEC.

(b)   Each of the consolidated financial statements (including, in each case, any related notes and schedules) contained or to be contained in or incorporated by reference in the Company SEC Reports at the time filed (i) complied or will comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto and (ii) were or will be prepared in accordance with United States generally accepted accounting principles (“ !GAAP ”) applied on a consistent basis throughout the periods involved (except as may be indicated in the notes to such financial statements or as otherwise reflected in the Company SEC Reports or, in the case of unaudited interim financial statements, as permitted by the SEC on Form 10-QSB or Form 10-Q under the Exchange Act).  Each of the consolidated balance sheets (including, in each case, any related notes and schedules) contained or to be contained or incorporated by reference in the Company SEC Reports at the time filed fairly presented or will fairly present the consolidated financial position of the Company and its Subsidiaries as of the dates indicated and each of the consolidated statements of operations, shareholders’ equity and cash flows contained or to be contained or incorporated by reference in the Company SEC Reports (including, in each case, any related notes and schedules) fairly presents, or will fairly present, the results of operations, changes in shareholders’ equity and cash flows, as the case may be, of the Company and its Subsidiaries for the periods set forth therein, except that the unaudited interim financial statements were or are subject to normal and recurring year-end adjustments which were not or are not expected to be material in amount.

(c)   The business, property, management and financial condition of the Company is disclosed in the Company SEC Reports.  The Company SEC Reports, taken together, do not contain any statement which, at such time and in light of the circumstances under which it was made, is false or misleading with respect to any material fact, or omit to state any material fact necessary in order to make the statements made in the Company SEC Reports, taken together, not false or misleading.

(d)   The information to be supplied by or on behalf of the Company for inclusion in any filing pursuant to Rule 14a-12 under the Exchange Act (each a “ Regulation M-A Filing ”), shall not at the time any Regulation M-A Filing is filed with the SEC, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading.  The Proxy Statement will comply as to form in all material respects with the requirements of the Exchange Act and the rules and regulations thereunder, except that no representation or warranty is made by the Company with respect to statements made based on information supplied by the Buyer specifically for inclusion therein.  The information to be supplied by or on behalf of the Company for inclusion in the proxy statement (the “ Proxy Statement ”) to be sent to the shareholders of the Company in connection with the meeting of the Company’s shareholders to consider the Company Voting Proposal (the “ Company Shareholders Meeting ”), which shall be deemed to include all information about or relating to the Company, the Company Voting Proposal and the Company Shareholder Meeting, shall not, on the date the Proxy Statement is first mailed to shareholders of the Company, or at the time of the Company Shareholders Meeting or at the Effective Time, contain any statement which, at such time and in light of the circumstances under which it shall be made, is false or misleading with respect to any material fact, or omit to state any material fact necessary in order to make the statements made in the Proxy Statement not false or misleading; or omit to state any material fact necessary to correct any statement in any earlier communication with respect to the solicitation of proxies for the Company Shareholders Meeting which has become false or misleading.  If at any time prior to the Effective Time any fact or event relating to the Company or any of its Affiliates which should be set forth in an amendment or supplement to the Proxy Statement should be discovered by the Company or should occur, the Company shall promptly inform the Buyer of such fact or event.

(e)   During the periods subsequent to June 1, 2006 that the Company was subject to such requirements, the Company has been and is in compliance in all material respects with (i) the applicable provisions of the Sarbanes-Oxley Act of 2002 and (ii) the applicable listing and corporate governance rules and regulations of The Nasdaq Stock Market LLC.

(f)   The Company has designed disclosure controls and procedures to ensure that material information relating to the Company, including its consolidated Company Subsidiaries, is made known to the chief executive officer and the chief financial officer of the Company by others within those entities.

(g)   The Company has disclosed in the Company SEC Reports any significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect in any material respect the Company’s ability to record, process, summarize and report financial information.  The Company knows of no fraud or allegation of fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls over financial reporting.

(h)   As of the date hereof, to the Knowledge of the Company, the Company has not identified any material weaknesses in the design or operation of internal controls over financial reporting not disclosed in the Company SEC Reports.  To the Knowledge of the Company, there is no reason to believe that chief executive officer and chief financial officer will not be able to give the certifications and attestations required pursuant to the rules and regulations adopted pursuant to Section 404 of the Sarbanes−Oxley Act of 2002 when next due.  Buyer understands that the attestation by the Company’s registered independent public accounting firm is not required.

4.5   No Undisclosed Liabilities; Indebtedness .  Neither the Company nor any of its Subsidiaries has any liabilities or obligations of any nature, whether or not accrued, contingent or otherwise, except for (i) liabilities and obligations that are specifically disclosed in type and amount on the Company Unaudited Balance Sheet or in the notes thereto and (ii) liabilities and obligations incurred in the Ordinary Course of Business since June 30, 2009, that are not and could not, individually or in the aggregate with all other liabilities and obligations of the Company and its Subsidiaries, reasonably be expected to have a Company Material Adverse Effect.

4.6   Absence of Certain Changes or Events .  Since the date of the Company Unaudited Balance Sheet, the Company and its Subsidiaries have conducted their respective businesses only in the Ordinary Course of Business and, since such date, there has not been (i) any change, event, circumstance, development or effect (whether or not covered by insurance) that, individually or in the aggregate, has had, or could reasonably be expected to have, a Company Material Adverse Effect or (ii) any other action or event that would have required the consent of the Buyer pursuant to Section  6.1 of this Agreement had such action or event occurred after the date of this Agreement.

4.7   Taxes .  Due to the Buyer’s familiarity with the Company’s operations, the Company makes no warranties or representations with regard to Taxes.

4.8   Owned and Occupied Real Properties .  Due to the Buyer’s familiarity with the Company&rsq