**Exhibit 10.3**

 

 

**STOCK PURCHASE AGREEMENT**

 

 

**BY AND BETWEEN**

 

 

**MINOL, L.P.**

 

 

**AND**

 

 

**SOUTHWEST WATER COMPANY**

 

 

**Dated as of June 27, 2005**

 

 

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Table of Contents

 
| ARTICLE I -  SALE OF SHARES; CLOSING                   |              |
|-------------------------------------------------------------|-------------------|
|                                                        |              |   |   |   |
|                                                        | Section 1.1  |   | Purchase of Shares |   |
|                                                        | Section 1.2  |   | Share Purchase Price |   |
|                                                        | Section 1.3  |   | Closing; Effective Time |   |
|                                                        | Section 1.4  |   | Deliveries at Closing |   |
|                                                        | Section 1.5  |   | Purchase Price Adjustments at Closing |   |
|                                                        | Section 1.6  |   | Purchase Price Adjustments After  Closing |   |
|                                                        | Section 1.7  |   | Establishment of Holdback Fund |   |
|                                                        |              |   |   |   |
| ARTICLE II  - REPRESENTATIONS AND WARRANTIES OF SELLER |              |
|                                                        |              |   |   |   |
|                                                        | Section 2.1  |   | Company’s Organization and  Qualification |   |
|                                                        | Section 2.2  |   | Company’s Capitalization |   |
|                                                        | Section 2.3  |   | Seller’s Organization and Good  Standing |   |
|                                                        | Section 2.4  |   | Authority Relative to the Agreement |   |
|                                                        | Section 2.5  |   | No Violation |   |
|                                                        | Section 2.6  |   | Consents and Approvals |   |
|                                                        | Section 2.7  |   | Company Financial Statements |   |
|                                                        | Section 2.8  |   | Absence of Changes |   |
|                                                        | Section 2.9  |   | Litigation |   |
|                                                        | Section 2.10 |   | Compliance with Applicable Laws |   |
|                                                        | Section 2.11 |   | Tax Matters |   |
|                                                        | Section 2.12 |   | Bankruptcy |   |
|                                                        | Section 2.13 |   | Employment Matters |   |
|                                                        | Section 2.14 |   | Intellectual Property |   |
|                                                        | Section 2.15 |   | Environmental Compliance |   |
|                                                        | Section 2.16 |   | Title to Properties; Encumbrances |   |
|                                                        | Section 2.17 |   | Insurance |   |
|                                                        | Section 2.18 |   | Permits and Licenses |   |
|                                                        | Section 2.19 |   | Agreements, Contracts and Commitments |   |
|                                                        | Section 2.20 |   | Warranties |   |
|                                                        | Section 2.21 |   | Books and Records |   |
|                                                        | Section 2.22 |   | Material Assets |   |
|                                                        | Section 2.23 |   | Condition of Personal Property |   |
|                                                        | Section 2.24 |   | Accounts Receivable |   |
|                                                        | Section 2.25 |   | Inventories |   |
|                                                        | Section 2.26 |   | No Undisclosed Liabilities |   |
|                                                        | Section 2.27 |   | Employee Benefit Plans; ERISA |   |
|                                                        | Section 2.28 |   | Certain Business Practices |   |
|                                                        | Section 2.29 |   | Customers and Suppliers |   |
|                                                        | Section 2.30 |   | Brokers |   |
|                                                        | Section 2.31 |   | Bank Accounts |   |

 

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|                                                            | Section 2.32 |   | Disclaimer of Additional and Implied  Warranties                      |   |
|-----------------------------------------------------------------|-------------------|--------|-----------------------------------------------------------------------|--------|
|                                                            |              |   |                                                                  |   |
| ARTICLE III  - REPRESENTATIONS AND WARRANTIES OF PURCHASER |              |
|                                                            |              |   |                                                                  |   |
|                                                            | Section 3.1  |   | Organization and Authority                                            |   |
|                                                            | Section 3.2  |   | Authority Relative to Agreement                                       |   |
|                                                            | Section 3.3  |   | No Violation                                                          |   |
|                                                            | Section 3.4  |   | Consents and Approvals                                                |   |
|                                                            | Section 3.5  |   | Investment Intent                                                     |   |
|                                                            | Section 3.6  |   | Financing                                                             |   |
|                                                            | Section 3.7  |   | Disclaimer of Additional and Implied  Warranties                      |   |
|                                                            |              |   |                                                                  |   |
| ARTICLE IV  - CERTAIN TAX MATTERS                          |              |
|                                                            |              |   |                                                                  |   |
|                                                            | Section 4.1  |   | Preparation and Filing of Returns                                     |   |
|                                                            | Section 4.2  |   | Tax Indemnification by Seller                                         |   |
|                                                            | Section 4.3  |   | Tax Indemnification by Purchaser                                      |   |
|                                                            | Section 4.4  |   | Allocation of Certain Taxes                                           |   |
|                                                            | Section 4.5  |   | Refunds and Carrybacks                                                |   |
|                                                            | Section 4.6  |   | Cooperation on Tax Matters; Tax Audits                                |   |
|                                                            | Section 4.7  |   | Termination of Tax-Sharing Agreements                                 |   |
|                                                            | Section 4.8  |   | Tax Claims                                                            |   |
|                                                            |              |   |                                                                  |   |
| ARTICLE V -  ADDITIONAL COVENANTS                          |              |
|                                                            |              |   |                                                                  |   |
|                                                            | Section 5.1  |   | Access To, and Information Concerning,  Properties and Records        |   |
|                                                            | Section 5.2  |   | Public Announcements                                                  |   |
|                                                            | Section 5.3  |   | Good Faith Efforts to Consummate  Transactions                        |   |
|                                                            | Section 5.4  |   | Company’s Employees                                              |   |
|                                                            | Section 5.5  |   | Resignations                                                          |   |
|                                                            | Section 5.6  |   | Further  Assurances                                                   |   |
|                                                            | Section 5.7  |   | Restrictive  Covenants                                                |   |
|                                                            | Section 5.8  |   | Certain  Employee Matters                                             |   |
|                                                            | Section 5.9  |   | Intercompany  Debt                                                    |   |
|                                                            | Section 5.10 |   | Collection  of Accounts Receivable; Repurchase of Accounts Receivable |   |
|                                                            | Section 5.11 |   | MTI  Transmitter System Replacement                                   |   |
|                                                            | Section 5.12 |   | Employee  and Independent Contractor Matters                          |   |
|                                                            |              |   |                                                                  |   |
| ARTICLE VI  - CONDITIONS TO CLOSING                        |              |
|                                                            |              |   |                                                                  |   |
|                                                            | Section 6.1  |   | Conditions  to Each Party’s Obligation Under this Agreement      |   |
|                                                            | Section 6.2  |   | Conditions  to the Obligations of Purchaser Under this Agreement      |   |
|                                                            | Section 6.3  |   | Conditions  to the Obligations of Seller Under this Agreement         |   |

 

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| ARTICLE VII - TERMINATION; AMENDMENT;  WAIVER                         |               |
|----------------------------------------------------------------------------|--------------------|
|                                                                       |               |   |   |   |
|                                                                       | Section 7.1   |   | Termination |   |
|                                                                       | Section 7.2   |   | Effect  of Termination |   |
|                                                                       | Section 7.3   |   | Amendment  and Modification |   |
|                                                                       | Section 7.4   |   | Extension;  Waiver |   |
|                                                                       |               |   |   |   |
| ARTICLE VIII  - REMEDIES                                              |               |
|                                                                       |               |   |   |   |
|                                                                       | Section 8.1   |   | Remedies  for Breach of Representations, Warranties and Covenants of Seller Before the  Closing Date |   |
|                                                                       | Section 8.2   |   | Indemnification  by Seller |   |
|                                                                       | Section 8.3   |   | Indemnification  by Purchaser |   |
|                                                                       | Section 8.4   |   | Notice  and Defense of Third-Party Claims |   |
|                                                                       | Section 8.5   |   | Limitations  of Liability |   |
|                                                                       | Section 8.6   |   | Exclusive  Remedies |   |
|                                                                       | Section 8.7   |   | Mediation |   |
|                                                                       | Section 8.8   |   | Holdback  Fund |   |
|                                                                       |               |   |   |   |
| ARTICLE IX  - SURVIVAL OF REPRESENTATIONS, WARRANTIES AND INDEMNITIES |               |
|                                                                       |               |   |   |   |
|                                                                       | Section 9.1   |   | Survival  of Representations, Warranties and Indemnities |   |
|                                                                       |               |   |   |   |
| ARTICLE X  - FORCE MAJEURE                                            |               |
|                                                                       |               |   |   |   |
|                                                                       | Section 10.1  |   | Force  Majeure |   |
|                                                                       | Section 10.2  |   | Termination  Upon Extended Force Majeure |   |
|                                                                       |               |   |   |   |
| ARTICLE XI  - MISCELLANEOUS                                           |               |
|                                                                       |               |   |   |   |
|                                                                       | Section 11.1  |   | Expenses |   |
|                                                                       | Section 11.2  |   | Brokers  and Finders |   |
|                                                                       | Section 11.3  |   | Entire  Agreement; Assignment |   |
|                                                                       | Section 11.4  |   | Waiver;  Consents |   |
|                                                                       | Section 11.5  |   | Severability |   |
|                                                                       | Section 11.6  |   | Notices |   |
|                                                                       | Section 11.7  |   | Governing  Law |   |
|                                                                       | Section 11.8  |   | Jurisdiction  and Venue |   |
|                                                                       | Section 11.9  |   | Waiver  of Jury Trial |   |
|                                                                       | Section 11.10 |   | Descriptive Headings |   |
|                                                                       | Section 11.11 |   | Parties in Interest; No Third-Party  Beneficiary |   |
|                                                                       | Section 11.12 |   | Counterparts |   |
|                                                                       | Section 11.13 |   | Incorporation by Reference |   |
|                                                                       | Section 11.14 |   | Certain Definitions |   |

 

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**STOCK PURCHASE AGREEMENT**

 

THIS STOCK PURCHASE AGREEMENT (this “**Agreement**”)is entered into as of June 27, 2005 (the “**EffectiveDate**”), by and between Southwest Water Company, a Delawarecorporation (“**Seller**”), and Minol, L.P., aDelaware limited partnership (“**Purchaser**”).  Seller and Purchaser are sometimes referredto herein individually as a “**Party**” andcollectively as the “**Parties**”.

 

**RECITALS**

 

WHEREAS, Seller is the owner of 25,000 shares of the issued andoutstanding common stock, without par value (the “**Common Stock**”),of Master Tek International, Inc., a Colorado corporation (the “**Company**”), and the Common Stock constitutes all of theissued and outstanding capital stock of the Company;

 

WHEREAS, Purchaser desires to purchase from Seller, and Seller desiresto sell to Purchaser, all such shares of the Common Stock (the “**Shares**”), upon the terms and conditions set forth herein;

 

WHEREAS, Seller is making certain representations, warranties, agreements,covenants and indemnities herein as an inducement to Purchaser to enter intothis Agreement, and Purchaser is making certain representations, warranties,agreements, covenants and indemnities herein as an inducement to Seller toenter into this Agreement; and

 

WHEREAS, capitalized terms used but nototherwise defined in this Agreement shall have the meanings ascribed to them inSection 11.14.

 

NOW, THEREFORE, in consideration of the recitals and the respectiverepresentations, warranties, covenants and indemnities contained herein, andother good and valuable consideration, the receipt and sufficiency of which arehereby acknowledged and intending to be legally bound hereby, the Partieshereby agree as follows:

 

# **ARTICLE I**SALE OF SHARES; CLOSING

 

## **Section 1.1****                                   Purchase of Shares.**  Subject to the terms and conditions of thisAgreement, on the Closing Date (as defined in Section 1.3(a) below),Seller will sell and deliver to Purchaser, and Purchaser will purchase fromSeller, the Shares.

##  

## **Section 1.2****                                   SharePurchase Price.**  The purchaseprice for the Shares is $12,150,000.00 USD, plus or minus any adjustments tosuch sum required by Section 1.5 or Section 1.6 (the ”**Purchase Price**”).  Except for the amount withheld in escrowpursuant to Section 1.7, Purchaser shall pay to Seller on the nextBusiness Day following the Closing (as defined inSection 1.3(a) below) the Purchase Price, as adjusted to theClosing Date, by wire transfer of immediately available funds to the accountdesignated by Seller.

 

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## **Section 1.3****                                   Closing;Effective Time.**

##  

### **(a)****                             Closing.**  The purchase and sale of the Shares (the “**Closing**”) provided for in this Agreement shall take place inthe offices of Jenkens & Gilchrist, LLP, 12100 Wilshire Boulevard,15th Floor, Los Angeles, California 90025, at 10:00 A.M. (Los Angeles,California time) on June 27, 2005, or at such other time and place as maybe agreed in writing by the Parties.  Forpurposes of this Agreement, the date on which the Closing actually occurs isthe “**Closing Date**”.

###  

### **(b)****                             EffectiveTime.**  The purchase and sale ofthe Shares provided for in this Agreement shall be effective for Tax,accounting and all other purposes as of 12:01 A.M. (Westminster, Coloradotime) on the Closing Date (the “**Effective Time**”), except as provided otherwise in thisAgreement or otherwise agreed in writing by the Parties.

###  

### **(c)****                             Closingby Fax/FedEx.**  Notwithstandingthe foregoing, the Parties may agree for the Closing to occur by facsimile orother electronic transmission of the Transaction Documents (as defined in Section 1.4below) on the Closing Date, with executed original Transaction Documents to besent to the appropriate Party (or its legal counsel) by Federal Express (orother nationally recognized guaranteed and receipted overnight deliveryservice) or local courier service.

###  

## **Section 1.4****                                   Deliveriesat Closing.**  Each of Purchaserand Seller will deliver, or cause to be delivered, at the Closing the followingdocuments and instruments (collectively, the “**TransactionDocuments**”) to which it or any of its Affiliates is a party:

##  

### **(a)****                             SellerDeliveries.**  Seller shalldeliver, or cause its appropriate Affiliates to deliver, to Purchaser:

###  

#### **(i)****                                    ClosingStatement.**  The Closing Statement(as defined in Section 1.5(a) below), duly executed by Seller;

####  

#### **(ii)****                                StockCertificates.**  The originalcertificate or certificates evidencing 25,000 of the Shares, together withendorsements or stock powers duly executed in blank by Seller;

####  

#### **(iii)****                            Officer’sCertificate of Seller.**  A certificate,upon which Purchaser may rely, duly executed by a duly authorized officer ofSeller certifying as true, accurate and complete, as of the Closing Date:  (A) a copy of the resolutions of Seller’sboard of directors (or equivalent governing body) authorizing the execution,delivery and performance of this Agreement and the Transaction Documents towhich Seller is a party and the consummation of the transactions contemplatedby this Agreement by Seller; and (B) the incumbency of the officer orofficers authorized to execute on behalf of Seller this Agreement and theTransaction Documents to which it is a party;

####  

#### **(iv)****                               Officer****’s Certificate of the Company.**  A certificate, upon which Purchaser may rely,duly executed by a duly authorized officer of the Company certifying as

 

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#### true, accurate and complete, as of theClosing Date:  (A) a certified copyof the Articles of Incorporation (or equivalent Organizational Document) of theCompany issued by the Colorado Secretary of State; (B) a copy of theBylaws (or equivalent Organizational Document) of the Company; (C) acertified copy of the Certificate of Foreign Qualification (or equivalentOrganizational Document) of the Company issued by the Secretary of State ofTexas and California; and (D) the incumbency of the officer or officersauthorized to execute on behalf of the Company the Transaction Documents towhich it is a party;

####  

#### **(v)****                                   ClosingCertificate of Seller. **Acertificate from a duly authorized officer of Seller, dated as of the ClosingDate, certifying that the conditions set forth in Sections 6.2(a) and (c) havebeen satisfied;

####  

#### **(vi)****                               Consents**.Copies or other satisfactory evidence of the Consent of the Person listed orreferred to in Schedule 2.6 as the Person whose Consent will beobtained at or prior to the Closing Date**;**

####  

#### **(vii)****                           GovernmentalCertificates.**  Certificates ofexistence and good standing, if applicable, issued by the Secretary of State(or other appropriate officer) of the state of the Company’s organization andthe states of Texas and California, as of a date reasonably close to theClosing Date;

####  

#### **(viii)****                       UCC,Judgment and Tax Lien Search Reports.** Uniform Commercial Code, judgment and tax lien search reports of theCompany for the names “Master Tek International, Inc.” and “SouthwestWater Billing Solutions, Inc.” and “RCI Utilities, Inc.” and “Intelli-Billing”issued by the Colorado Secretary of State, the County Clerk of JeffersonCounty, Colorado, the Texas Secretary of State and the County Clerk of DallasCounty, Texas, dated as of a date reasonably close to the Closing Date;

####  

#### **(ix)****                              MinuteBooks**.  The minute book or booksof the Company and all of the contents thereof;

####  

#### **(x)****                                  Resignations. **Duly executed written resignations fromeach director and officer of the Company as required by Section 5.5,in a form and content acceptable to Purchaser;

####  

#### **(xi)****                              EscrowAgreement.**  The Escrow Agreement(as defined in Section 8.8(a) below), duly executed by allparties thereto other than Purchaser;

####  

#### **(xii)****                          ArmstrongRelease.**  A duly executedSeparation Agreement and General Release of Claims between the Company andScott Armstrong, dated effective prior to the Closing Date, in a form andcontent acceptable to Purchaser (the “**Armstrong Release**”);

####  

#### **(xiii)****                      Leased Vehicles.**  A pay-off letter from EMKAY, Inc.stating the full amount required to be paid for Seller to own the LeasedVehicles (as defined in Section 1.5(c) below), free and clearof all Liens;

 

3

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#### **(xiv)****                         LeasedComputer Equipment.**  A pay-offletter from CSI Leasing, Inc. stating the full amount required to be paidfor Seller to own the Leased Computer Equipment (as defined in Section 1.5(d) below),free and clear of all Liens;

####  

#### **(xv)****                             Work-inProgress Certificate**.  TheWork-in Progress Certificate (as defined in Section 1.6(a)(ii) below), duly executed by Seller; and

####  

#### **(xvi)****                         OtherTransaction Documents.**  All suchother certificates of title, deeds and instruments of sale, assignment,conveyance and transfer as may be reasonably necessary or as Purchaser mayreasonably request to effect the sale, transfer, assignment, conveyance anddelivery of the Shares to Purchaser in accordance with this Agreement and anyother Transaction Documents, and where necessary or desirable, in recordableform, in each case, as is necessary to effect the purchase and sale of theShares and other transactions contemplated by this Agreement.

####  

### **(b)****                             PurchaserDeliveries.**  Purchaser shalldeliver, or cause its appropriate Affiliates to deliver, to Seller:

###  

#### **(i)****                                    ClosingStatement.**  The ClosingStatement, duly executed by Purchaser;

####  

#### **(ii)****                                PurchasePrice.**  On the next Business Dayfollowing the Closing, the Purchase Price, as adjusted to the Closing Date;

####  

#### **(iii)****                            Manager’sCertificate of Purchaser.**  Acertificate, upon which Seller may rely, duly executed by a manager ofMinol,  LLC, a Delaware limited liabilitycompany and the general partner of Purchaser (“**Minol GP**”),certifying as true, accurate and complete, as of the Closing Date:  (A) a copy of the resolutions of MinolGP’s managers (or equivalent governing body) authorizing the execution,delivery and performance of this Agreement and the Transaction Documents towhich Purchaser is a party and the consummation of the transactionscontemplated by this Agreement by Purchaser; (B) a certified copy of theCertificate of Limited Partnership (or equivalent Organizational Document) ofPurchaser issued by the Delaware Secretary of State; (C) a copy of select pages ofthe Agreement of Limited Partnership (or equivalent Organizational Document) ofPurchaser; (D) a certified copy of the Certificate of Formation (orequivalent Organizational Document) of Minol GP; (E) a copy of select pages ofthe Limited Liability Company Agreement of Minol GP; and (F) the incumbencyof the officer or officers authorized to execute on behalf of Purchaser thisAgreement and the Transaction Documents to which it is a party;

####  

#### **(iv)****                               Closing****Certificate of Purchaser. **A certificate from a duly authorizedofficer of Purchaser, dated as of the Closing Date, certifying that theconditions set forth in Section 6.3(a) and (b) have beensatisfied;

 

4

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#### **(v)****                                   GovernmentalCertificates.**  Certificates ofexistence and good standing, if applicable, issued by the Secretary of State(or other appropriate officer) of the state of its organization, as of a datereasonably close to the Closing Date, for Purchaser;

####  

#### **(vi)****                               Escrow****Agreement.**  The Escrow Agreement, duly executed by allparties thereto other than Seller and Escrow Agent (as defined in Section 8.8(a) below);and

####  

#### **(vii)****                           OtherTransaction Documents.**  All suchother deeds and instruments of sale, assignment, conveyance and transfer as maybe reasonably necessary to effect the sale, transfer, assignment, conveyanceand delivery of the Shares to Purchaser in accordance with this Agreement andany other Transaction Documents, and where necessary or desirable, inrecordable form, in each case, as is necessary to effect the purchase and saleof the Shares and other transactions contemplated by this Agreement.

####  

## **Section 1.5****                                   PurchasePrice Adjustments at Closing.**

##  

### **(a)****                             ClosingStatement.**  At the Closing,Seller and Purchaser will execute and deliver a closing statement in the formattached hereto as Exhibit A (the “**Closing Statement**”) setting forthany increase, decrease or other adjustment to the Purchase Price required bythis Agreement at the time of Closing, along with the resulting amount of thePurchase Price to be paid at Closing, and any other matters the Parties agreeto set forth therein.  In connection withpreparing the Closing Statement, Seller shall cause the Company to provide theinformation necessary for Seller and Purchaser to jointly verify the accuracyof the number of Billing Units at the Cut-Off Time.

###  

### **(b)****                             BillingUnits; Closing Date True-up.**

###  

#### **(i)****                                   **Tothe extent the aggregate number of Billing Units at the Cut-Off Time is greaterthan or less than 208,000, the Purchase Price will be adjusted on adollar-for-dollar basis on the Closing Date as follows:

####  

##### **(A)****                               Increased.**  The Purchase Price will be increased, in theevent the number of Billing Units is greater than 208,000, by the product of (A) $58.41,multiplied by (B) the difference between 208,000 and the actual number ofBilling Units; or

#####  

##### **(B)****                               Reduced.**  Subject to Section 1.5(b)(ii), the Purchase Price will be reduced, in the eventthe number of Billing Units is less than 208,000, by the product of (A) $58.41per unit, multiplied by (B) the difference between 208,000 and the actualnumber of Billing Units.

#####  

#### **(ii)****                               **ThePurchase Price shall not be reduced at the time of the Closing to an amountless than $12,000,000.00 pursuant to Section 1.5(b)(i)(B).

####  

### **(c)****                             Pay-offof Leased Vehicles. **Schedule 1.5(c) setsforth a true, accurate and complete list (including year, make, model andvehicle identification number) of all the vehicles leased by Seller (for use bythe Company) from EMKAY, Inc. under the Material

 

5

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### Leases (asdefined in Section 2.19(a)(iv) below)that are vehicle leases (the “**Leased Vehicles**”).  On or before the Closing Date, Seller willfully pay-off the Material Leases covering the Leased Vehicles and have goodand valid title to them.  On the ClosingDate, the Leased Vehicles will be in the possession of the Company at eitherits offices in Westminster, Colorado or Dallas, Texas, or in the possession ofa Company employee in Virginia Beach, Virginia. In consideration for the payment of the Purchase Price, Seller herebysells the Leased Vehicles to the Company and the Company acquires the LeasedVehicles from Seller.  Within fifteen(15) days following the Closing, Seller will deliver to the Company theoriginal certificates of title (or other equivalent documentation of ownershipof the Leased Vehicles), duly endorsed for transfer to the Company and filingwith the applicable Governmental Body. The Leased Vehicles must be free and clear of all Liens within fifteen(15) days following the Closing Date.

###  

### **(d)****                             Pay-offof Leased Computer Equipment. **Schedule 1.5(d) setsforth a true, accurate and complete list of all the computer equipment leasedby Seller (for use by the Company) from CSI Leasing, Inc. under theMaterial Leases that are computer server, computer equipment or computermonitor leases (the “**Leased Computer Equipment**”).  On or before the Closing Date, Seller willfully pay-off the Leased Computer Equipment and have good and valid title toit.  On the Closing Date, the LeasedComputer Equipment will be in the possession of the Company at either itsoffices in Westminster, Colorado or Dallas, Texas.  In consideration for the payment of thePurchase Price, Seller hereby sells the Leased Computer Equipment to theCompany and the Company acquires the Leased Computer Equipment from Seller.  The Leased Computer Equipment must be freeand clear of all Liens within fifteen (15) days following the Closing Date.

###  

## **Section 1.6****                                   PurchasePrice Adjustments After Closing.**

##  

### **(a)****                             Inventoryand Work in Progress Estimate.**

###  

#### **(i)****                                   **Onthe last Business Day prior to the Closing Date, Seller and Purchaser shalljointly update, using the books and records of the Company, the inventory andphysical count jointly conducted by Seller and Purchaser on June 16, 2005,of all items of inventory of the Company (the “**Pre-closingInventory**”), wherever located, including all finished goods, rawmaterials, spare parts and all other materials and supplies to be used orconsumed by the Company and to be reflected on, and used to determine, theClosing Date Balance Sheet and Closing Date Net Working Capital (as such termsare defined in Section 1.6(b)(ii) below); provided,that Company’s inventory of MTI Transmitter Systems, and Inovonics TransmitterSystems, although counted, will not be used in determining the Closing DateBalance Sheet and Closing Date Net Working Capital.  A list setting forth the results of thePre-closing Inventory, as updated through the last Business Day prior to theClosing Date, shall be included in the Closing Statement.  This joint determination of the Pre-closingInventory is prepared for purposes of the Net Working Capital Adjustment (asdefined in Section 1.6(b) below) and shall be final andbinding on the Parties, absent fraud.

####  

#### **(ii)****                               **Onthe last Business Day prior to the Closing Date, Seller shall estimate, in goodfaith, the percentage completion, as of the Effective Time, of all work-in-

 

6

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#### progress underConstruction Contracts (as defined in Section 2.19(a)(iii) below)of the Company (the ”**Work-in Progress**”).  A certificate setting forth the results ofthe Work-in Progress estimation shall be delivered to Purchaser at the Closing(the “**Work-in Progress Certificate**”).  This certification of the Work-in Progress isprepared for purposes of the Net Working Capital Adjustment.  The results of the Work-in Progressestimation and the results set forth in the Work-in Progress Certificate shallbe final and binding on the Parties, absent material error.

####  

### **(b)****                             NetWorking Capital Adjustment.**

###  

#### **(i)****                                    TheAdjustment.**  Following theClosing, the Purchase Price shall be adjusted in the amount equal to the NetWorking Capital Adjustment.  If the NetWorking Capital Adjustment is positive (i.e., Closing Date Net Working Capitalis greater than the Base Net Working Capital), the Purchase Price shall beincreased by the amount of the Net Working Capital Adjustment.  If the Net Working Capital Adjustment isnegative (i.e., Closing Date Net Working Capital is less than the Base NetWorking Capital), the Purchase Price shall be reduced by the amount of the NetWorking Capital Adjustment.

####  

#### **(ii)****                                CertainDefined Terms.**  As used in thisAgreement, the following terms mean:

####  

#### “**Net Working Capital Adjustment**” (whichmay be a positive or negative amount) means the algebraic sum of (A) theClosing Date Net Working Capital, minus (B) the Base Net Working Capital.

####  

##### “**Closing Date Net Working Capital**”(which may be a positive or negative number) means the difference between (A) thecurrent assets of the Company at the Effective Time, and (B) the currentliabilities of the Company at the Effective Time, all determined in accordancewith GAAP on a basis consistent with the Company Financial Statements, but withthe adjustments thereto set forth on Schedule 1.6(b)-A applied inmaking the calculation.  An example ofthe calculation of the Closing Date Net Working Capital at March 31, 2005,based on the unaudited balance sheet of the Company at March 31, 2005, isset forth on Schedule 1.6(b)-B.

#####  

##### “**Base Net Working Capital**” means$1,305,343.00 USD.

#####  

#### **(iii)****                            True-upCalculation.**  Within thirty (30)days after the Closing Date, Seller and Purchaser will use their respectivereasonable best efforts jointly to prepare (A) the unaudited balance sheetof the Company at the Effective Time (the “**Closing Date Balance Sheet**”)and (B) a schedule (the “**Adjustment Schedule**”)setting forth a reasonably detailed calculation of the Closing Date Net WorkingCapital and the Net Working Capital Adjustment, if any, along with theresulting Purchase Price (the “**True-Up Calculation**”).  The Closing Date Balance Sheet and AdjustmentSchedule shall be prepared on the same basis as the Company FinancialStatements, but with the adjustments thereto set forth on Schedule 1.6(b)-C.  Seller and Purchaser, respectively, shalleach bear their own costs to prepare the Closing Date Balance Sheet andAdjustment Schedule.  Seller andPurchaser shall cooperate in all reasonable respects

 

7

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#### with each otherin connection with the preparation of the Closing Date Balance Sheet andAdjustment Schedule.  The True-UpCalculation shall be deemed to be final and conclusive and agreed to byPurchaser and Seller, and shall be the basis for the true-up payment of the NetWorking Capital Adjustment required by Section 1.6(b)(i).  If the Parties cannot within such thirty (30)day period (or such longer period as the Parties may mutually agree upon inwriting) agree upon and prepare the Closing Date Balance Sheet, the Adjustment Schedule andthe True-Up Calculation, then either Party may deliver written notice (the “**Dispute Notice**”) to the other Party of such dispute.

####  

#### **(iv)****                               Dispute****Resolution.**

####  

##### **(A)****                              **Uponreceipt of a Dispute Notice, Purchaser and Seller shall resolve the dispute inaccordance with the procedure set forth in Section 1.6(b)(iv)(B).

#####  

##### **(B)****                              **Uponreceipt of the Dispute Notice, the Parties shall engage a mutually agreeablenationally- or regionally-recognized independent public accounting firm, withwhich none of the Parties or any of their respective Affiliates has any prioror ongoing relationship (“**Accountant**”),for the limited purpose of resolving only the disagreements of the Parties withrespect to the True-Up Calculation, provided that all determinations made bythe Accountant shall be made in accordance with this Section 1.6(b) (includingthe Schedules referenced therein).  Thedeterminations of the Accountant shall be conclusive and binding on theParties, except in the event of manifest error in such determinations, and thefees and expenses of the Accountant shall be divided equally between Seller andPurchaser.  Each Party shall beresponsible for any other fees and expenses it incurs in connection with theresolution of such dispute.  For purposeshereof, the “**Net Working Capital Adjustment DeterminationDate**” means the date on which the final determination of the NetWorking Capital Adjustment is made in accordance with either Section 1.6(b)(iii) or Section 1.6(b)(iv).

#####  

#### **(v)****                                   Payment.**

####  

##### **(A)****                              **Purchasershall pay to Seller any positive Net Working Capital Adjustment, in cash, plusinterest thereon at a rate of six percent (6.0%) per annum (“**Borrowing Rate**”) from the Closing Date, within five (5) BusinessDays after the Net Working Capital Adjustment Determination Date.

#####  

##### **(B)****                              **Inthe event of a negative Net Working Capital Adjustment, Seller shall pay toPurchaser, one-half (1/2) of the amount owed through a claim against anddeduction from the Holdback Fund, and the other one-half (1/2) in cash, in bothcases plus interest thereon at the Borrowing Rate from the Closing Date.  The Holdback Fund claim must be paid toPurchaser within sixteen (16) Business Days after the Net Working CapitalAdjustment Determination Date.  The cashpayment must be paid to Purchaser within five (5) Business Days after theNet Working Capital Adjustment Determination Date.  To the extent the amount in the Holdback Fundis insufficient, the entire Net Working CapitalAdjustment shall be paid by Seller in cash.

 

8

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### **(c)****                             BillingUnits; Post-Closing True-up.**

###  

#### **(i)****                                   **Onthe 65th day following the Closing Date, the Purchase Price shall bedecreased in the amount equal to the negative Net Set-Off Amount, if any.  If the Net Set-Off Amount is a positivenumber, the Purchase Price shall not be increased or otherwise adjusted.  The “**Net Set-Off Amount**”is equal to the sum of:

####  

##### **(A)****                              **Theproduct of (A) $58.41, multiplied by (B) the number of Non-BillingUnits, if any, that start billing****within thesixty (60) days following the Closing Date. Schedule 1.6(c)(i) lists the 8,064 individualapartment, suite or similar units that at the Cut-Off Time are covered by aSubmetering Contract, but under which billing has not started as of that date(the “**Non-Billing Units**”); minus

#####  

##### **(B)****                              **Theproduct of (A) $58.41, multiplied by (B) the number of UnnoticedCancelled Units, if any.  “**Unnoticed Cancelled Units**” are Billing Units that wereincluded in determining the Billing Units at the Cut-Off Time under Section 1.5(b),but for which a notice of termination (the “**Notice ofTermination**”) of the applicable Submetering Contract was sent by theclient or customer by electronic mail prior to the Effective Time or by U.S.mail (or other reputable courier) with a postmark prior to the Effective Time,but it was not received by the Company or an Affiliate until sometime duringthe sixty (60) days following the Closing Date. The Company or such Affiliate will use commercially reasonable effortsto deliver a copy of the Notice of Termination to Seller together with astatement reflecting the number of Billing Units to which the Notice ofTermination relates within twenty-four (24) hours following receipt.

#####  

#### **(ii)****                               **Inthe event of a negative Net Set-Off Amount, Seller shall pay to Purchaser,one-half (1/2) of the amount owed through a claim against and deduction fromthe Holdback Fund, and the other one-half (1/2) in cash, in both cases plusinterest thereon at the Borrowing Rate from the Closing Date.  The Holdback Fund claim must be paid to Purchaserwithin sixteen (16) Business Days after the 65th day following theClosing Date.  The cash payment must bepaid to Purchaser within five (5) Business Days after the 65thday following the Closing Date.  To theextent the amount in the Holdback Fund is insufficient,the entire Net-Set Off Amount shall be paid by Seller in cash.

####  

#### **(iii)****                           **Purchasershall use all commercially reasonable efforts, and shall cause the Company touse all commercially reasonable efforts, to start billing each and all of theNon-Billing Units within the sixty (60) day period referred to in Section 1.6(c)(i)(A).

####  

## **Section 1.7****                                   Establishmentof Holdback Fund.** Notwithstanding any other provision of this Agreement to the contrary,at the Closing, an amount equal to the Purchase Price, as adjusted to theClosing Date, multiplied by ten percent (10%) (the “**Holdback Fund**”), shall not be paid to Seller, but insteadshall be withheld by Purchaser from the Purchase Price, and be subject to andpaid pursuant to the provisions of Section 8.8.  At the Effective Time, Seller shall have thecontingent and deferred right to receive the portion of the Holdback Fundpayable to

 

9

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## Seller pursuant to Section 8.8,if any.  TheHoldback Fund shall include any interest or other income earned thereon duringthe period such funds are held in escrow.

##  

# **ARTICLE II**REPRESENTATIONS AND WARRANTIES OF SELLER

# ** **

Seller makes the representations andwarranties set forth in this ARTICLE II to Purchaser.  Seller has delivered to Purchaser theschedules to this Agreement (the “**Seller Schedules**”), including those referred to in this ARTICLE II,on the Effective Date and such Seller Schedules have been reviewed and acceptedby Purchaser.  All matters set forth inthe Seller Schedules shall be deemed to be disclosed not only in connectionwith the representation and warranty specifically referenced on a given SellerSchedule, but for all purposes relating to the representations and warrantiesof Seller set forth in this ARTICLE II.

 

## **Section 2.1****                                   Company’sOrganization and Qualification.**

##  

### **(a)****                            **Schedule 2.1(a) setsforth the Company’s jurisdiction of incorporation and each other jurisdictionin which it is authorized to do business. The Company is duly incorporated, validly existing and in good standingunder the Laws of the jurisdiction of its incorporation.  The Company has all requisite corporate powerand corporate authority to carry on its business as it is now being conducted,and to own, lease and operate its properties and assets, and to perform all itsobligations under the Contracts to which it is a party or by which it isbound.  Except as set forth on Schedule 2.1(a),the Company is duly qualified to do business as a foreign corporation and is ingood standing under the Laws of each state or other jurisdiction in which theproperties and assets owned, leased or operated by it or the nature of thebusiness conducted by it make such qualification necessary, except in suchjurisdictions where the failure to be duly qualified or in good standing wouldnot have or be a Material Adverse Effect on the Company.

###  

### **(b)****                            **TheCompany has no Subsidiaries.

###  

### **(c)****                            **True,accurate and complete copies of the Organizational Documents of the Company,with all amendments thereto through the Closing Date, have been made availableto Purchaser.

###  

### **(d)****                            **Theonly names under the Company has conducted anybusiness since April 3, 2000, are:  “MasterTek International, Inc.” and “Southwest Water Billing Solutions, Inc.”and “RCI Utilities, Inc.” and “Intelli-Billing”.

###  

### **(e)****                            **Thenames and titles of the officers and directors of the Company are listed on Schedule 2.1(e).

 

10

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## **Section 2.2****                                   Company’sCapitalization.**

##  

### **(a)****                            **Theauthorized, issued and outstanding capital stock of the Company is set forth onSchedule 2.2.  The Shares arethe only securities of the Company that are issued or outstanding.

###  

### **(b)****                            **Selleris, and will be on the Closing Date, the legal record and beneficial owner andholder of, and has, and on the Closing Date will have, sole legal record andbeneficial title to, the Shares.  Sellerowns the Shares free and clear of all Liens.

###  

### **(c)****                            **Eachof the issued shares of capital stock of, or other equity interest in, theCompany is duly authorized, validly issued and, in the case of shares ofcapital stock, fully paid and nonassessable, and has not been issued inviolation of (nor are any of the authorized shares of capital stock of, orother equity interests in, the Company subject to) any preemptive or similarrights created by applicable Laws, the Articles of Incorporation or Bylaws (orthe equivalent Organizational Documents) of the Company, or any Contract towhich Seller or the Company is a party or is bound, and all such issued sharesor other equity interests of the Company are owned free and clear of all Liens.

###  

### **(d)****                            **Exceptas set forth on Schedule 2.2, there are no issued or outstandingsubscriptions, options, convertible securities, rights (including registrationrights), warrants, calls, irrevocable proxies or other agreements orcommitments of any kind obligating the Company to grant, sell or issue anysecurity of or equity interest in the Company, or irrevocable proxies or anyagreements restricting the transfer of or otherwise relating to any security orequity interest in the Company.

###  

### **(e)****                            **Thereare no bonds, debentures, notes or other indebtedness of the Company having theright to vote (or convertible into or exchangeable or exercisable forsecurities or equity interests having the right to vote) on any matters onwhich shareholders may vote (the “**Company Voting Debt**”)issued or outstanding.

###  

### **(f)****                              **TheCompany has no obligations, contingent or otherwise, (i) to repurchase,redeem or otherwise acquire any shares of capital stock or other equityinterests of the Company, or (ii) to provide material funds to, or to makeany material investment in (in the form of a loan, capital contribution orotherwise), or to provide any guarantee with respect to the materialobligations of, any other Person.

###  

### **(g)****                           **TheCompany (i) does not, directly or indirectly, own, (ii) has notagreed to purchase or otherwise acquire, and (iii) does not hold anyinterest convertible into or exchangeable or exercisable for, any capital stockor other equity interest of any corporation, partnership, joint venture,limited liability company, or other business association or entity.

###  

### **(h)****                           **Exceptas set forth on Schedule 2.2 with regard to the payment of Taxes,the Company is not a party to or bound by any Contract of any character,contingent or otherwise, pursuant to which any Person is or may be entitled toreceive any payment based on, or calculated in accordance with, the revenues orearnings of the Company.

 

11

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### **(i)****                              **Thereare no voting trusts, proxies or other agreements or understandings to whichthe Company is a party or by which it is bound with respect to the voting ofany shares of capital stock or other equity interests of the Company.

###  

### **(j)****                              **Alldividends and distributions that have ever been declared by the Company havebeen paid in full prior to the Effective Date.

###  

## **Section 2.3****                                   Seller’sOrganization and Good Standing.** Seller is a Delaware corporation, validly existing and in good standingunder the Laws of the State of Delaware.

##  

## **Section 2.4****                                   AuthorityRelative to the Agreement.** Seller has full corporate power and corporate authority to execute anddeliver this Agreement, and the Transaction Documents to which it is a party,and no further proceedings on the part of the Seller are necessary toconsummate the transactions contemplated hereby.  This Agreement has been, and the TransactionDocuments to which Seller is a party will be, duly and validly executed anddelivered by Seller, and this Agreement constitutes, and the Transaction Documentsto which Seller is a party will constitute, the valid and binding obligation ofSeller enforceable against Seller in accordance with its terms, subject to theeffect of bankruptcy, insolvency, reorganization, moratorium, or other similarLaws relating to creditors’ rights generally and general equitableprinciples.  The Company has fullcorporate power and corporate authority to execute and deliver the TransactionDocuments to which it is a party, and no further proceedings on the part of theCompany are necessary to consummate the transactions contemplated hereby.

##  

## **Section 2.5****                                   NoViolation.**  Except as set forthon Schedule 2.5, neither the execution, deliverynor performance of this Agreement, in its entirety, nor the consummation of thetransactions contemplated hereby, as of the Closing Date:

##  

### **(a)****                            **Tothe Knowledge of Seller and the Company, materially violates (“**Violation**”) any laws, orders, writs, judgments, injunctions,awards, decrees, rules, statutes, permits, ordinances or regulations (the “**Laws**”) applicable to Seller or the Company;

###  

### **(b)****                            **Isin material conflict with, results in a material breach or any termination ofany provision of, causes the acceleration of the maturity of any debt orobligation pursuant to, constitutes a material default (or gives rise to anyright of termination, cancellation or acceleration) under, or results in thecreation of any Lien upon any currently owned property of Seller or the Companypursuant to, any terms, conditions or provisions of any note, license,instrument, indenture, mortgage, deed of trust or other agreement orunderstanding or any other restriction of any kind or character, to whichSeller or the Company is a party or by which any currently owned property ofSeller or the Company is subject or bound (collectively, “**Default**”);or

###  

### **(c)****                            **Conflicts(“**Conflict**”) with or results in anybreach of any provision of the Certificate or Articles of Incorporation, Bylawsof Seller or the Company or any other Organizational Documents of Seller or theCompany.

 

12

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## **Section 2.6****                                   Consentsand Approvals.**  Except asdescribed on Schedule 2.6, and except for obtaining the required regulatory approvals describedon Schedule 2.6 (the “**Required Regulatory Approvals**”), no prior Consent of, or declaration, filing orregistration with, any Person, domestic or foreign, is required of or by Selleror the Company in connection with the execution, delivery and performance bySeller of this Agreement and the transactions contemplated hereby.

##  

## **Section 2.7****                                   CompanyFinancial Statements.**

##  

### **(a)****                            **Schedule 2.7(a) containstrue, accurate and complete copies of the unaudited financial statements of theCompany, consisting of the balance sheets and related statements of operationsand shareholder’s equity as of and for the years ended December 31, 2002,December 31, 2003 and December 31, 2004, (collectively, the “**Historical Company Financial Statements**”).  The Historical Company FinancialStatements:  (i) were prepared fromthe books and records of the Company; (ii) were prepared in accordancewith GAAP (except for the absence of footnotes) consistently applied throughoutthe periods involved; and (iii) fairly present in all material respectsthe assets and liabilities of the Company as of the dates of the balance sheetsand the financial results of the Company for the periods presented.

###  

### **(b)****                            **Schedule 2.7(b) containstrue, accurate and complete copies of the interim unaudited financialstatements of the Company, consisting of the balance sheet and relatedstatement of operations and shareholder’s equity as of and for the three (3) monthsended March 31, 2005, (collectively, the “**InterimCompany Financial Statements**”). The Interim Company Financial Statements:  (i) were prepared from the books andrecords of the Company; (ii) were prepared in accordance with GAAP (exceptfor the absence of footnotes) consistently applied throughout the periodsinvolved; and (iii) fairly present in all material respects the assets andliabilities of the Company as of the date of the balance sheet and thefinancial results of the Company for the period presented.  The Historical Company Financial Statementsand Interim Company Financial Statements are collectively referred to in thisAgreement as the “**Company FinancialStatements**”.

###  

## **Section 2.8****                                   Absenceof Changes.**  Except as setforth on Schedule 2.8, since the date of the Interim CompanyFinancial Statements, the Company has conducted business only in the OrdinaryCourse of Business and there has not been:

##  

### **(a)****                            **Anyamendment to its Articles of Incorporation or Bylaws or other OrganizationalDocuments, or any change in the character or conduct of its business in anymaterial respect;

###  

### **(b)****                            **Anydeclaration, setting aside or payment of any dividends or distributions inrespect of the Shares or any redemption, purchase or other acquisition of anyof the securities or other equity interests of the Company;

 

13

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### **(c)****                            **Anymaterial increase in the benefits under, or the establishment or amendment of,any bonus, insurance, severance, deferred compensation, pension, retirement,profit sharing, performance awards (including, without limitation, the grantingof stock  appreciation rights orrestricted stock awards), stock purchase or other employee benefit plan, or anyincrease in the compensation payable or to become payable to any of thedirectors or officers of the Company or the employees of the Company as agroup; or

###  

### **(d)****                            **AnyMaterial Adverse Effect on the Company; or

###  

### **(e)****                            **Anymaterial agreement, commitment or transaction entered into, except in theOrdinary Course of Business, or except for this Agreement and the transactionscontemplated hereby.

###  

## **Section 2.9****                                   Litigation.**  Except as set forth on Schedule 2.9,there are no Proceedings pending or, to the Knowledge of Seller and the Company,threatened in writing against the Company or involving any of the materialproperties or material assets of the Company, at law or in equity or before orby any foreign, federal, state, municipal, or other governmental court,department, commission, board, bureau, agency, or other instrumentality orPerson or any board of arbitration or similar entity.  Neither the Company nor any of its propertiesor assets is subject to any executory judgment, order, writ, injunction, decreeor award of any Governmental Body, including without limitation, any cease anddesist order and any consent decree, settlement agreement or other similarcontract or agreement with any Governmental Body.  To the Knowledge of Seller and the Company,as of the Closing Date, there are no facts or events that have occurred orfailed to occur that reasonably could be expected to result in the commencementof any Proceeding involving the Company or any of its material properties ormaterial assets which if determined adversely to the Company would have aMaterial Adverse Effect on the Company.

##  

## **Section 2.10****                            Compliancewith Applicable Laws.**  Nouncured material violation of any applicable Laws by the Company exists.  The Company has not received written noticefrom any Governmental Body or other Person of any failure to materially complyor the material violation of any applicable Laws with respect to the Company orits facilities.

##  

## **Section 2.11****                            TaxMatters.**  Except as and to theextent set forth on Schedule 2.11:

##  

### **(a)****                            **SinceApril 3, 2000, all Returns in respect of Taxes required to have been filedwith respect to the Company (including any consolidated federal income taxreturn and any state Return that includes the Company on a consolidated,combined or unitary basis) have been timely filed;

###  

### **(b)****                            **AllTaxes required to be shown on such Returns or otherwise due or payable havebeen timely paid and all payments of estimated Taxes required to be made withrespect to the Company have been made;

###  

### **(c)****                            **Allsuch Returns are true, correct and complete in all material respects;

 

14

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### **(d)****                            **Noadjustment relating to any of such Returns has been proposed  formally or informally in writing byany taxing authority and, to the Knowledge of Seller, no basis exists for anysuch adjustment;

###  

### **(e)****                            **Thereare no outstanding subpoenas or written requests for information with respectto any such Returns of the Company or the Taxes reflected on such Returns;

###  

### **(f)****                              **Thereare no pending or, to the Knowledge of Seller and the Company, threatenedProceedings for the assessment or collection of Taxes against (i) theCompany or (ii) any corporation that was included in the filing of aReturn with the Company on a consolidated, combined or unitary basis whichwould have a Material Adverse Effect on the Company;

###  

### **(g)****                           **Thereare no Tax liens on the Company and there are no recorded Tax liens on anyasset of the Company;

###  

### **(h)****                           **TheCompany is not a party to any agreement or arrangement that would result,separately or in the aggregate in, the payment of any “excess parachutepayment” within the meaning of section 280G(b) of the Code;

###  

### **(i)****                              **Noacceleration of the vesting schedule for any property that issubstantially nonvested within the meaning of the regulations under section 83of the Code will occur in connection with the transactions contemplated by thisAgreement;

###  

### **(j)****                              **TheCompany does not owe any amount pursuant to any written or unwritten Taxsharing agreement or arrangement or will have any liability after the ClosingDate in respect of any written or unwritten Tax sharing agreement orarrangement executed or agreed to prior to the Closing Date;

###  

### **(k)****                          **AllTaxes required to be withheld, collected or deposited by the Company have beentimely withheld, collected or deposited and, to the extent required, have beenpaid to the relevant taxing authority;

###  

### **(l)****                              **Anyadjustment of Taxes of the Company made by the Internal Revenue Service that isrequired to be reported to any state, local or foreign taxing authority hasbeen so reported and any additional Tax due as a result thereof has been paidin full;

###  

### **(m)****                        **Thereare no outstanding waivers or agreements extending the statute of limitationsfor any period with respect to any Tax to which the Company may be subject;

###  

### **(n)****                           **Thereare no requests for rulings or information currently outstanding that couldaffect the Taxes of the Company, or any similar matters pending with respect toany taxing authority;

###  

### **(o)****                            **Thereare no proposed reassessments of any property owned or leased by the Company orother proposals that could increase the amount of any Tax to which the Companywould be subject; and

 

15

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### **(p)****                            **Nopower of attorney that is currently in force has been granted with respect toany matter relating to Taxes that could affect the Company.

###  

## **Section 2.12****                            Bankruptcy.**  There are no bankruptcy,reorganization or arrangement Proceedings pending against, being contemplatedby or, to the Knowledge of Seller and the Company, threatened in writingagainst Seller or the Company.

##  

## **Section 2.13****                            EmploymentMatters.**

##  

### **(a)****                            **Schedule 2.13sets forth a true, accurate and complete list of the following informationabout each current employee of the Company, including any employees on leave ofabsence or layoff status:  name; jobtitle; compensation; any change in compensation since January 1, 2005;vacation accrued; hours of unrecorded sick leave, and service credited forpurposes of vesting and eligibility to participate under any of the Company’sEmployee Benefit Plans (as defined in Section 2.27 below).

###  

### **(b)****                            **TheCompany is in compliance in all material respects with all applicable Lawsrespecting employment practices and terms of employment (“**EmploymentLaws**”) and no uncured material violation of any applicableEmployment Laws by the Company exists.

###  

### **(c)****                            **TheCompany has not received written notice from any Governmental Body or otherPerson of any failure to materially comply or the material violation of anyapplicable Employment Laws with respect to the Company or its facilities.

###  

### **(d)****                            **TheCompany is not (i) to the Knowledge of Seller and the Company, now subjectto a union organizing effort; or (ii) subject to any collective bargainingagreement with respect to any of its employees. The Company does not have any current general labor disputes.  To the Knowledge of Seller and the Company,there are no strikes, material slowdowns, work stoppages or lockouts, orthreats thereof, by or with respect to any employees of the Company.

###  

## **Section 2.14****                            IntellectualProperty.**

##  

### **(a)****                            **Schedule 2.14(a) listsall foreign and domestic patents, patent applications, trademarks and servicemarks, trademark and service mark applications, trade names, copyrights, andcopyright applications (whether registered or unregistered) (collectively, the “**Intellectual Property**”) held, owned or used by the Companyas of the Closing Date (“**Included****Intellectual Property**”). Except as set forth on Schedule 2.14(a), the Company owns orlicenses or otherwise has the right to use all the Included IntellectualProperty, without the payment of any royalties or other payments to anythird-party.  The Included IntellectualProperty constitutes all the Intellectual Property necessary for the conduct ofthe Business of the Company as it is currently conducted, except where thefailure to own, license or have the right to use such Included IntellectualProperty would not have or be a Material Adverse Effect on the Company.

###  

### **(b)****                            **TheIncluded Intellectual Property does not include any of the trade names of theCompany listed on Schedule 2.14(b), which are assets of Seller thathave been used by the Company.

 

16

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### **(c)****                            **TheCompany is not currently in receipt of any written notice of any materialviolation of, and to the Knowledge of Seller and the Company, is not violatingor infringing upon the intellectual property rights of any other Person in anyof the Included Intellectual Property.

###  

### **(d)****                            **Exceptas set forth on Schedule 2.14(d), to the Knowledge of Seller andthe Company, no other Person is infringing or threatening to infringe anyintellectual property rights of the Company with respect to any of theIntellectual Property.

###  

## **Section 2.15****                            EnvironmentalCompliance.**  Except as setforth on Schedule 2.15, to the Knowledge of Seller and the Company:

##  

### **(a)****                            **NoHazardous Substances exist on the Real Property in quantities which violate,and would require reporting to any Governmental Body and cleanup under,applicable Environmental Laws;

###  

### **(b)****                            **TheCompany has not received written notice from any Governmental Body or otherPerson alleging a violation of applicable Environmental Laws; and

###  

### **(c)****                            **Neitherthe Company nor any of the Company’s facilities are in material violation ofany Environmental Laws.

###  

## **Section 2.16****                            Titleto Properties; Encumbrances.** Except as set forth on Schedule 2.16, the Company has goodand valid title to all of the assets reflected in the balance sheets includedamong the Company’s Financial Statements other than any assets thereinreflected that (x) have been sold or otherwise disposed of in the OrdinaryCourse of Business since the date thereof or (y) are not, individually or inthe aggregate, material to the Company, free and clear of all Liens other than (i) liens,mortgages, pledges, security interests or other encumbrances securingindebtedness shown on the Company Financial Statements, (ii) liens fortaxes, payments of which are not yet delinquent or that are being contested ingood faith by appropriate Proceedings, (iii) liens in respect of pledgesor deposits under workers’ compensation laws, unemployment insurance, socialsecurity or public liability laws, or similar legislation, carriers’,warehousemen’s, mechanics’, laborers’ and materialmen’s and similar liens, ifthe obligations secured by such liens are not then delinquent or are beingcontested in good faith by appropriate Proceedings, (iv) liens relating toaccounts payable incurred in the Ordinary Course of Business and consistentwith past practice, and (v) such imperfections of title which do notmaterially detract from the value of the assets of the Company (subparagraphs(i), (ii), (iii), (iv) and (v) are referred to herein as “**Permitted Liens**”). Except as set forth on Schedule 2.16, the Company holdsunder valid lease agreements all real and personal properties that are subjectto leases and enjoys peaceful and undisturbed possession of such propertiesunder such leases, other than (a) any properties as to which such leaseshave terminated in the Ordinary Course of Business, and (b) any propertiesthat, individually or in the aggregate, are not material to the Company.

 

17

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## **Section 2.17****                            Insurance.**  Schedule 2.17(a) sets fortha list of all policies of insurance currently in effect relating to thebusiness or operations of the Company (true, accurate and complete copies ofwhich have been made available to Purchaser). All premiums due and payable for such insurance policies have been paidin the Ordinary Course of Business and the insurance policies are in full forceand effect.  Except as set forth on Schedule 2.17(a),there are no claims pending under any such policies.  Except as indicated on Schedule 2.17(a),no such policies of insurance will remain in effect upon the consummation ofthe transactions contemplated by this Agreement.

##  

## **Section 2.18****                            Permitsand Licenses.**  Schedule 2.18sets forth a true, accurate and complete list of all the GovernmentalAuthorizations the Company has which, except as set forth on Schedule 2.18,comprise all the Governmental Authorizations the Company is required to haveunder applicable Laws to conduct its business as it is now being conducted,except where the failure to have such permits, licenses, certificates andauthorities would not result in a Material Adverse Effect on the Company.  Except as set forth in Schedule 2.18,the consummation of the transactions contemplated by this Agreement will notconstitute a violation of any permit, license, certificate or authority fromany Governmental Body, which would result in a Material Adverse Effect.

##  

## **Section 2.19****                            Agreements,Contracts and Commitments.**

##  

### **(a)****                            **Schedule 2.19sets forth a true, accurate and complete list of:

###  

#### **(i)****                                   **AllContracts to which the Company is a party or by which any its assets orproperties is bound (i) that involves consideration or other expenditurein excess of $10,000.00 during a fiscal year, (ii) that involvesperformance by the Company over a period of more than six (6) months, (iii) thatcannot, by its terms, be terminated by the Company without penalty or paymenton thirty (30) days or less notice, or (iv) that is otherwise material tothe ongoing business or ongoing operations of the Company (the “**Material Contracts**”);

####  

#### **(ii)****                               **AllContracts (which schedule shall reflect which such Submetering Contractsare written or oral) to which the Company is a party or by which any of itsassets or properties is bound that obligate the Company to furnish meterreading, billing (including allocation billing and ratio billing) or collectionservices in the Business (the “**SubmeteringContracts**”);

####  

#### **(iii)****                           **AllContracts to which the Company is a party or by which any its assets orproperties is bound that obligate the Company to furnish installation,construction or maintenance services in the Business (the “**Construction Contracts**”); and

####  

#### **(iv)****                              **AllContracts to which the Company (or the Seller, in the case of Leased Vehiclesand Leased Computer Equipment that are used by the Company) is a party or bywhich any its assets or properties is bound that are real or personal propertyleases (the “**Material Leases**”);

 

18

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#### **(v)****                                  **AllContracts to which the Company is a party or by which any its assets orproperties is bound that are guarantees or under which the Company indemnifiesor is contingently liable for the payment or performance of any liability orobligation of any other Person (the “**Guarantees**”);

####  

#### **(vi)****                              **AllContracts between the Company, on the one hand, and any of its Affiliates orany of the shareholders, officers, directors, employees, consultants, salesrepresentatives, agents (or any of their respective Affiliates), on the otherhand (the “**Affiliate Agreements**”);

####  

#### **(vii)****                          **AllContracts to which the Company is a party or by which any its assets orproperties is bound that are licenses of any of the Included IntellectualProperty (the “**Material IP Licenses**”); and

####  

#### **(viii)****                      **All theInternet domain name registrations used by the Company in conducting itsbusiness, together with the name of the applicable registrar of Internet domainnames (the “**Domain Name Contracts**”).

####  

## The Material Contracts, Submetering Contracts, Construction Contracts,Material Leases, Guarantees, Affiliate Agreements, Material IP Licenses andDomain Name Contracts are collectively referred to in this Agreement as the “**Company Contracts**”.

##  

### **(b)****                            **True,accurate and complete copies of the written****CompanyContracts have been made available to Purchaser.  There are no amendments or modifications toany of the Company Contracts that have not been made available to Purchaser.

###  

### **(c)****                            **Tothe Knowledge of Seller and the Company, each of the Company Contractsconstitutes the valid and legally binding obligation of the partiesthereto.  Except as set forth on Schedule 2.19,the Company is in full compliance with all material terms and requirements ofthe Company Contracts.  To the Knowledgeof the Seller and the Company, none of the Company Contracts materiallyviolates any applicable Laws.  To theKnowledge of Seller and the Company, each other Person that has or had anyobligation or liability under any of the Company Contracts is in fullcompliance with all material terms and requirements thereof.

###  

### **(d)****                            **NeitherSeller nor the Company has given or received from any other Person any writtennotice regarding any actual, alleged, possible or potential violation or breachof, or default under, any of the Company Contracts.  There are no renegotiations of, attempts torenegotiate, or outstanding rights to renegotiate any reduction of materialamounts paid or payable to the Company under any of the Company Contracts.  Neither Seller nor the Company has receivedfrom any Person any written notice regarding the termination or amendment ofthe term of any of the Company Contracts.

###  

### **(e)****                            **TheCompany is not a party to or bound by any Contract or Organizational Documentwhich purports to restrict by virtue of a noncompetition, territorialexclusivity or other

 

19

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### provisioncovering such subject matter, the scope of the business or operations of theCompany or any of its Affiliates geographically or otherwise.

###  

### **(f)****                              **Thereis no power of attorney that is currently effective and outstanding withrespect to the business, operations or any of the assets or properties of theCompany.

###  

## **Section 2.20****                            Warranties.**

##  

### **(a)****                            **Exceptas set forth on Schedule 2.20, there are no pending nor, to theKnowledge of Seller and the Company, threatened in writing, material claimsunder or pursuant to any warranty, whether expressed or implied, on products orservices sold or performed prior to the Closing Date by the Company that arenot disclosed or referred to in the Company Financial Statements and that arenot fully reserved****against inaccordance with GAAP.

###  

### **(b)****                            **Allof the services performed by the Company (whether directly or indirectlythrough independent contractors) during the 12 months preceding the ClosingDate, to the Knowledge of Seller and the Company, have been performed inmaterial conformity with all express written warranties, and, except withrespect to Transmitter Warranty Claims (as defined in Section 8.2(c)(ii) below)for which Seller has agreed to indemnify Purchaser and the Company, to theKnowledge of the Seller and the Company, the Company will not have any materialliability for replacement or repair or for other damages relating to or arisingfrom any such services, except for amounts incurred in the Ordinary Course ofBusiness which are immaterial and not required by GAAP to be disclosed in theCompany Financial Statements.

###  

### **(c)****                            **Schedule 2.20(c) isa true, accurate and complete list of all MTI Transmitter Systems installed asof the Closing Date (and not otherwise replaced or removed) in any dwellings orbuildings for which the Company furnishes billing (including allocation billingand ratio billing) services under a Submetering Contract.

###  

### **(d)****                            **Schedule 2.20(d) isa true, accurate and complete list of all billing meters reading “zero” at June 8,2005.

###  

## **Section 2.21****                            Booksand Records.**  The books,accounts, ledgers and files of the Company are true, accurate and complete inall material respects and have been maintained in accordance with soundbusiness and accounting practices.

##  

## **Section 2.22****                            MaterialAssets.**

##  

### **(a)****                            **Atrue, complete and accurate list of all the properties, rights and assets ownedby the Company (whether tangible or intangible, and whether real, personal ormixed) and reflected on the balance sheet included in the Interim CompanyFinancial Statements is set forth on Schedule 2.22 (the “**Material Assets**”).  Atrue and complete and accurate list of all the properties, rights and assetsleased by the Company under the Material Leases is listed on Schedule 2.22as leased properties, rights and assets.

 

20

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### **(b)****                            **Exceptas set forth on Schedule 2.22, the Material Assets together withthe Material Leases (i) constitute all the material properties, rights andassets, including contract rights and equipment, used or held for use by theCompany in the operation of the facilities and other business operations of theCompany as they were operated in the 12-month period ending on the date of theInterim Company Financial Statements, and are operated on the Effective Dateand will be operated through the Closing Date, and (ii) constitute all ofthe material properties, rights and assets that are necessary for operation ofthe facilities and other business operations of the Company as they areoperated on the Effective Date and will be operated through the Closing Date.

###  

### **(c)****                            **TheCompany has good and valid title, free and clear of all Liens, to all theMaterial Assets reflected in the Interim Company Financial Statements as beingowned by the Company, as of the date thereof, other than (i) any assets orproperties that have been sold or otherwise disposed of in the Ordinary Courseof Business since the date of such Interim Company Financial Statements, (ii) Liensdisclosed in the notes to such financial statements, (iii) statutory Liensfor current Taxes not yet due, (iv)  Liens arising in the Ordinary Courseof Business, and (v) Liens and imperfections of title described in Section 2.16.

###  

## **Section 2.23****                            Conditionof Personal Property.** Each material item of personal property of the Company****is in good working order and repair (taking its age andordinary wear and tear into account), has been operated and maintained in theOrdinary Course of Business and remains in suitable and adequate condition foruse consistent with its primary use.

##  

## **Section 2.24****                            AccountsReceivable.**  The accountsreceivable of the Company reflected in the balance sheet dated as of March 31,2005 included in the Interim Company Financial Statements, and the additionalaccounts receivable reflected on the books and records of the Company since thedate of the Interim Company Financial Statements (collectively, the “**Accounts Receivable**”), unless paid prior to the ClosingDate, and except to the extent and net of the aggregate amount reserved againstthereon as set forth in the Interim Company Financial Statements (the “**A/R Reserve**”), represent valid obligations arising fromsales actually made or services actually performed by the Company in theOrdinary Course of Business.  Schedule 2.24sets forth a true, accurate and complete list (identifying the name and addressof the obligor, amount owed and aging) of the Accounts Receivable as of thedate of the Interim Company Financial Statements and at the Cut-Off Time.  Except as set forth on Schedule 2.24,the Accounts Receivable are owned by the Company free and clear of all Liens,other than Permitted Liens and except to the extent otherwise reserved againstor reflected in the Interim Company Financial Statements.  To the Knowledge of Seller and the Company,there is no contest, claim or right of set-off under any Contract with the obligorof any Accounts Receivable.

##  

## **Section 2.25****                            Inventories.**

##  

### **(a)****                            **Exceptas set forth in Schedule 2.25(a):

###  

#### **(i)****                                   **Theinventories held by the Company are reflected in the balance sheet dated as of March 31,2005 included in the Interim Company Financial Statements, and in

 

21

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#### the Pre-closingInventory for additional inventory reflected on the books and records of theCompany since the date of the Interim Financial Statements, at the lower ofcost or market value in accordance with GAAP;

####  

#### **(ii)****                               **Noneof such inventories have been written up in value or repurchased by, orreturned to, the Company at an increased value;

####  

#### **(iii)****                           **Allsuch inventories are owned by the Company free and clear of all Liens, otherthan Permitted Liens and except to the extent otherwise reserved against orreflected in the Interim Company Financial Statements; and

####  

#### **(iv)****                              **Tothe Knowledge of the Company, there are no material adverse conditions thataffect the supply of materials available to the Company, and to the Knowledgeof Seller and the Company, the consummation of the transactions contemplatedhereby will not adversely affect any such supply.

####  

### **(b)****                            **Schedule 2.25(b) listsa true, complete and accurate inventory of all Inovonics Transmitter Systemsowned by the Company and designed for use to replace MTI Transmitter Systemslisted on Schedule 2.20(c) (the “**ReplacementTransmitters**”).

###  

## **Section 2.26****                            NoUndisclosed Liabilities.**  Except (a) asand to the extent of the amounts specifically reflected or accrued for in thebalance sheet dated as of March 31, 2005 included in the Interim CompanyFinancial Statements, (b) for current liabilities and obligations incurredin the Ordinary Course of Business since such balance sheet date, (c) asto the specific matters disclosed in or arising out of matters set forth on Schedule 2.26and the other Seller Schedules or which are the subject of otherrepresentations and warranties in this ARTICLE II and (d) liabilitiesor obligations which do not have a Material Adverse Effect on the Company, tothe Knowledge of Seller, the Company does not have any liabilities orobligations of any nature (whether matured, absolute, accrued, contingent,conditional or otherwise, and whether due or to become due), and to the Seller’sKnowledge, there is no basis for the assertion or recovery against the Companyof any liability or obligation not excepted by the preceding clauses (a) through(d) of this Section 2.26.

##  

## **Section 2.27****                            EmployeeBenefit Plans; ERISA.**

##  

### **(a)****                            **Setforth on Schedule 2.27(a), is a complete and accurate list of allEmployee Benefit Plans under which any of the Company’s employees, or anydependents thereof, participates or benefits or are eligible to participate orbenefit.

###  

### **(b)****                            **Asused in this Agreement, the term “**Employee Benefit Plans**”means:  (i) any “employee benefitplan” or “plan” within the meaning of Section 3(3) of the EmployeeRetirement Income Security Act of 1974, as amended (“**ERISA**”);and (ii) all plans or policies providing for “fringe benefits” (includingvacation, paid holidays, personal leave, employee discounts, educationalbenefits or similar programs), and each other bonus, incentive compensation,deferred compensation, profit sharing, stock, severance, retirement, health,life,

 

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### disability, group insurance, employment,stock option, stock purchase, stock appreciation right, performance share,supplemental unemployment, layoff, consulting, or any other similar plan,agreement, policy or understanding (whether written or oral, qualified ornonqualified, currently effective or terminated), and any trust, escrow orother agreement related thereto, which:  (A) isor has been established, maintained or contributed to by Seller or the Companyor any other corporation or trade or business under common control with Seller(an “**ERISA Affiliate**”) as determined under Section 414(b),(c) or (m) of the Code with respect to Seller, or with respect to whichSeller has or may have any liability that could affect Seller or Seller’sassets, properties, operations, or activities; or (B) provides benefits,or describes policies or procedures applicable, to any present or formerdirector, officer or employee of Seller or any dependent thereof, regardless ofwhether funded.  Employee Benefit Plansalso includes any written or oral representations made to any present or formerdirector, officer or employee of the Company promising or guaranteeing anyemployer payment or funding for the continuation of medical, dental, life ordisability coverage for any period of time beyond the end of the current planyear (except to the extent of coverage required under Section 4980B of theCode).

###  

### **(c)****                            **Sellerhas made available to Purchaser a true, accurate and complete copy of eachEmployee Benefit Plan under which any of the Company’s employees, or anydependents thereof, participates or benefits or are eligible to participate orbenefit and, if applicable, related trust agreements, all amendments theretoand written interpretations thereof, the most recently disseminated summaryplan description and an explanation of any material plan modifications madeafter the date thereof, and the most recent determination letter received fromthe Internal Revenue Service, if applicable. Seller has no formal plan or commitment, whether legally binding or not,to create any additional Employee Benefit Plans or modify or change anyexisting Employee Benefit Plans that would affect any employee of the Company,or any dependent or beneficiary thereof.

###  

### **(d)****                            **Selleror an ERISA Affiliate other than the Company is the primary sponsoring employerof each Employee Benefit Plan that covers any employees of the Company, or anydependents thereof.

###  

### **(e)****                            **EachEmployee Benefit Plan under which any of the Company’s employees, or dependentsthereof, participates or benefits or are eligible to participate or benefit,and each agreement, contract or other commitment, obligation or arrangementrelating to any Employee Benefit Plan or the assets of any Employee BenefitPlan (or its related trust) including, but not limited to, each administrativeservices agreement, insurance policy or annuity contract, may be amended orterminated to reflect the withdrawal of the Company as a covered orparticipating employer at any time without any liability to the Company, otherthan liabilities which would not have a Material Adverse Effect on the Company.

###  

### **(f)****                              **Tothe Knowledge of Seller and the Company, each Employee Benefit Plan has beenoperated in all material respects in compliance with applicable ERISA and Taxqualification requirements and all other applicable Laws.

 

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### **(g)****                           **Thereis no Employee Benefit Plan that is maintained or contributed to by Seller orany ERISA Affiliate that is or was subject to Part 3 of Title I of ERISAor Title IV of ERISA and none of the Employee Benefit Plans is or was a “multipleemployer plan” or a “multi-employer plan” (as described or defined in ERISA orthe Code).

###  

### **(h)****                           **Exceptfor coverage required under Code Section 4980B, no written or oralrepresentations have been made by, or on behalf of, the Company, the Seller orany ERISA Affiliate to any employee or officer or former employee or officer ofthe Company promising or guaranteeing any coverage under any employee welfarebenefit plan (as defined in ERISA Section 3(1)) for any period of timebeyond the end of the current plan year.

###  

### **(i)****                              **Otherthan routine claims for benefits, there are no material actions, suits, claims,audits or investigations pending for which the Company has received writtennotice or, to the Knowledge of Seller and the Company, threatened in writingagainst, or with respect to, any of the Employee Benefit Plans or their assets,trustees or administrators; and all contributions required to be made to theEmployee Benefit Plans have been made timely and, in all material respects, inaccordance with applicable Laws.

###  

### **(j)****                              **Purchaserdoes not, directly or indirectly, assume or otherwisetake any responsibility for contributions or benefits under, or theadministration, maintenance or sponsorship of, any of the Employee BenefitPlans of Seller, and Purchaser shall have no liability therefore.

###  

## **Section 2.28****                            CertainBusiness Practices. **Since April 3,2000, to the Knowledge of Seller, neither the Company nor any directors,officers, representatives, agents or employees of the Company (in theircapacities as such) has, directly or indirectly:  (a)  (i) used any funds forunlawful contributions, gifts, entertainment or other unlawful purposesrelating to political activity, (ii)  made any unlawful payment to foreignor domestic government officials or employees or to foreign or domesticpolitical parties or campaigns or violated any provision of the Foreign CorruptPractices Act of 1977, as amended and including any corresponding provisions ofsucceeding law, and the regulations promulgated thereunder (the “**FCPA**”), or (iii) made any other unlawful payment; (b) madeor received any contribution, gift, bribe, rebate, payoff, influence payment,kickback or other payment to or from any Person, private or public, regardlessof the form, whether in money, property or services (i) to obtainfavorable treatment in securing business, (ii) to pay for favorabletreatment for business secured, (iii) to obtain special concessions or forspecial concessions already obtained, for or in respect of the Company, or (iv) inviolation of any applicable Laws; or (c) established or maintained anyfund or asset that has not been recorded in the books and records of theCompany.

##  

## **Section 2.29****                            Customersand Suppliers.**  Except as setforth on Schedule 2.29, no customer of the Company that accountedfor more than five percent (5%) of the consolidated revenues or income of theCompany during both the last full fiscal year ending December 31, 2004 andthe interim period ending May 31, 2005 has advised the Company in writingthat, with respect to customers of the Company, such customer will stop ormaterially terminate buying materials, products or services from theCompany.  No supplier of the Company thatis a sole

 

24

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## supplier of anysignificant product or component to the Company, has advised the Company inwriting that it will stop, or materially decrease the rate of, supplyingmaterials, products, or services to the Company.

##  

## **Section 2.30****                            Brokers.**  Except as set forth on Schedule 2.30,no broker, finder or investment banker is entitled to any brokerage, finder’sor other fee or commission in connection with the transactions contemplatedhereby based upon arrangements made by or on behalf of Seller or theCompany.  Seller is responsible for andwill pay in full the fee owed each Person listed on Schedule 2.30in connection with the transactions contemplated hereby.

##  

## **Section 2.31****                            BankAccounts.**  Schedule 2.31lists all of the deposit, savings, money market and other accounts at banks orother financial institutions (with each identified by name of the bank, name ofthe account, account number and the name of any Person authorized to withdrawfrom or access the account) where any funds or monies of the Company are keptor deposited.

##  

## **Section 2.32****                            Disclaimerof Additional and Implied Warranties.**  Seller is making no representations orwarranties, expressed or implied, of any nature whatsoever except asspecifically set forth in ARTICLE II.

 

# **ARTICLE III**REPRESENTATIONS AND WARRANTIES OF PURCHASER

 

Purchaser hereby makes the representationsand warranties set forth in this ARTICLE III to Seller.

 

## **Section 3.1****                                   Organizationand Authority.**

##  

### **(a)****                            **Purchaseris a limited partnership duly organized, validly existing and in good standingunder the Laws of the State of Delaware. Purchaser has all requisite limited partnership power and limitedpartnership authority to carry on its business as it is now being conducted,and to own, lease and operate its properties and assets, and to perform all itsobligations under the agreements and instruments to which it is a party or bywhich it is bound.  Purchaser is dulyqualified to do business as a foreign limited partnership and is in good standingunder the Laws of each state or other jurisdiction in which the properties andassets owned, leased or operated by it or the nature of the business conductedby it make such qualification necessary, except in such jurisdictions where thefailure to be duly qualified or in good standing would not have or be aMaterial Adverse Effect on Purchaser.

###  

### **(b)****                            **True,correct and complete copies of the Organizational Documents of Purchaser, withall amendments thereto through the date of this Agreement, have been deliveredby Purchaser.

###  

## **Section 3.2****                                   AuthorityRelative to Agreement.** Purchaser has full limited partnership power and authority to executeand deliver this Agreement, and the Transaction Documents to which it is aparty, and no further proceedings on the part of Purchaser are necessary to

 

25

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## consummate thetransactions contemplated hereby.  ThisAgreement and the Transaction Documents to which Purchaser is a party has beenduly and validly executed and delivered by Purchaser, and this Agreement, andthe Transaction Documents to which Purchaser is a party will constitute thevalid and binding obligation of Purchaser enforceable against Purchaser inaccordance with its terms, subject to the effect of bankruptcy, insolvency,reorganization, moratorium, or other similar Laws relating to creditors’ rightsgenerally and general equitable principles.

##  

## **Section 3.3****                                   NoViolation.**  Neither theexecution, delivery nor performance of this Agreement, in its entirety, nor theconsummation of the transactions contemplated hereby, as of the Closing Date, (i) toPurchaser’s knowledge, violates (“**Purchaser’s Violation**”)in any material respect any Law , order, writ, judgment, injunction, award,decree, rule, statute, ordinance or regulation applicable to Purchaser, (ii) isin conflict with, results in a breach or termination of any provision of,causes the acceleration of the maturity of any debt or obligation pursuant to,constitutes a default (or gives rise to any right of termination, cancellationor acceleration) under, or results in the creation of any Lien upon anycurrently owned property of Purchaser pursuant to, any terms, conditions orprovisions of any note, license, instrument, indenture, mortgage, deed of trustor other agreement or understanding or any other restriction of any kind orcharacter, to which Purchaser is a party or by which any currently ownedproperty of Purchaser is subject or bound (collectively, “**Purchaser’sDefault**”), or (iii) conflicts (“**Purchaser’sConflict**”) with or results in any breach of any provision of theCertificate or Articles of Incorporation or Bylaws of Purchaser, whichPurchaser’s Violation, Purchaser’s Default or Purchaser’s Conflict couldreasonably be expected to have or be a Material Adverse Effect on Purchaser.

##  

## **Section 3.4****                                   Consentsand Approvals.**  No prior consent, approval orauthorization of, or declaration, filing or registration with any person,domestic or foreign, is required of or by Purchaser in connection with theexecution, delivery and performance by Purchaser of this Agreement and thetransactions contemplated hereby.

##  

## **Section 3.5****                                   InvestmentIntent.**

##  

### **(a)****                            **Purchaseris acquiring the Shares for its own account for investment and not with a viewtoward resale or redistribution in a manner which would require registrationunder the Securities Act of 1933, as amended (the “**SecuritiesAct**”), or the securities laws of any state, and Purchaser does notpresently have any reason to anticipate any change in its circumstances or otherparticular occasion or event which would cause it to sell the Shares or anypart thereof or interest therein. Purchaser has not offered or sold the Shares or any part thereof orinterest therein, and has no present intention of dividing the Shares with othersor of reselling or otherwise disposing of the Shares or any part thereof orinterest therein either currently or after the passage of a fixed ordeterminable period of time or upon the occurrence or nonoccurrence of anypredetermined event or circumstance.

 

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### **(b)****                            **Purchaseracknowledges that (i) its acquisition of the Company involves a highdegree of risk and (ii) it understands that the purchase of the Shares isan illiquid investment.

###  

### **(c)****                            **Purchaseracknowledges that Seller has made available, or caused the Company to makeavailable, to Purchaser the opportunity to evaluate the merits and risksassociated with ownership of the Shares, including information related to thefinancial position and results of operations of the Company.  Specifically, Purchaser acknowledges receiptof the Company Financial Statements and Purchaser has had access to officers ofthe Company to make such further inquiry as Purchaser has deemedappropriate.  Purchaser represents thatit has made other investments of a similar nature or, by reason of Purchaser’sbusiness and financial experience and of the business and financial experienceof those persons it has retained to advise it with respect to its purchase andownership of the Shares, it is a sophisticated, well-informed investor and hasacquired the capacity to protect its own interest in investments of thisnature.  In reaching the conclusion thatit desires to acquire the Shares, Purchaser has carefully evaluated its financialresources and investment position, and the risks associated with thisinvestment and acknowledges that it is able to bear the economic risks of thisinvestment.

###  

## **Section 3.6****                                   Financing.**  Purchaser has sufficient capital resources toenable Purchaser to pay the Purchase Price in accordance with Section 1.2and to effect the other transactions contemplated by this Agreement at theClosing Date.

##  

## **Section 3.7****                                   Disclaimerof Additional and Implied Warranties.**  Purchaser is making no representations orwarranties, express or implied, of any nature whatsoever except as specificallyset forth in ARTICLE III of this Agreement.

##  

# **ARTICLE IV**CERTAIN TAX MATTERS

 

## **Section 4.1****                                   Preparationand Filing of Returns**.

##  

### **(a)****                            **Sellershall prepare and timely file, or shall cause to be prepared and timely filed,at its cost and expense, the following Returns with respect to the Company orin respect of its businesses, assets or operations:

###  

#### **(i)****                                   **AllReturns for any Taxes for any taxable period ending on or before the ClosingDate imposed upon, or measured by, income; and

####  

#### **(ii)****                               **Allother Returns required to be filed (taking into account extensions) prior tothe Closing Date.

####  

### **(b)****                            **AnyReturn to be prepared and filed by Seller in accordance with Section 4.1(a) shall,to the extent permitted by applicable Laws, be prepared on a basis consistentwith the last previous Return of the Company.

 

27

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### **(c)****                            **Purchasershall prepare and timely file, or shall cause to be prepared and timely filed,at its cost and expense, all other Returns with respect to Company or inrespect of its businesses, assets or operations.

###  

### **(d)****                            **AnyReturn to be prepared and filed by Purchaser for taxable periods beginningbefore the Closing Date and ending after the Closing Date shall, to the extentpermitted by applicable Law, be prepared on a basis consistent with the lastprevious Return of the Company.

###  

## **Section 4.2****                                   TaxIndemnification by Seller.** Seller shall indemnify the Purchaser Indemnified Parties (as defined in Section 8.2below) in respect of, and hold the Purchaser Indemnified Parties harmlessagainst (i) the failure to perform any covenant or agreement set forth inthis Article IV, and (ii) without duplication, the followingTaxes:

##  

### **(a)****                            **Anyand all Taxes due and payable by the Company for any taxable period ending(or deemed pursuant to Section 4.4(b) to end) on orbefore the Closing Date; and

###  

### **(b)****                            **Anyliability of the Company for Taxes for periods ending (or deemed pursuant to Section 4.4(b) toend) on or before the Closing Date under Treasury Regulation Section 1.1502-6or under any comparable or similar provision under state, local or foreign lawsor regulations except to the extent of the accruals or reserves for Taxes setforth on the Closing Date Balance Sheet.

###  

## **Section 4.3****                                   TaxIndemnification by Purchaser.** Purchaser shall indemnify the Seller Indemnified Parties in respect of,and hold the Seller Indemnified Parties harmless against, any and all Taxes forany taxable period beginning (or deemed pursuant to Section 4.4(b) tobegin) after the Closing Date.

##  

## **Section 4.4****                                   Allocationof Certain Taxes.**

##  

### **(a)****                            **TheParties agree that if the Company is permitted but not required underapplicable state or local Tax Laws to treat the Closing Date as the last day ofa taxable period, the Parties shall treat such day as the last day of a taxableperiod.  The Parties agree that they willtreat the Company as if it ceased to be part of the affiliated group ofcorporations of which Seller is a member within the meaning of Section 1504of the Code, and any comparable or similar provision of state, local or foreignLaws, at the Effective Time.

###  

### **(b)****                            **AnyTaxes for a taxable period ending after the Closing Date with respect to theCompany shall be paid by Purchaser or the Company, and the Taxes for suchperiod shall be apportioned for purposes of Section 4.2 and Section 4.3between the Parties based on the actual operations of the Company during theportion of such period ending on the Closing Date, if any, and the portion ofsuch period beginning on the day following the Closing Date, and for purposesof the provisions of Section 4.2, Section 4.3 and Section 4.5,each portion of such period shall be deemed to be a taxable period (whether ornot it is in fact a taxable period).  AnyTaxes allocated or apportioned by means of this Section 4.4(b) shall,to the extent allocated to

 

28

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### the period beforethe Closing Date, be for the account of Seller and any Taxes allocated orapportioned by means of this Section 4.4(b) shall, to theextent allocated to the period after the Closing Date, be for the account ofPurchaser.

###  

### **(c)****                            **Sellershall make any payment of Taxes apportioned under Section 4.4(b) forwhich it is liable under Section 4.2(a) to Purchaser not laterthan five Business Days prior to the due date for the payment of such Taxes(including estimated Taxes).

###  

### **(d)****                            **TheParties agree that neither Seller nor Purchaser shall, in connection with thepurchase of the Shares under this Agreement, make any election under Section 338of the Code.

###  

## **Section 4.5****                                   Refundsand Carrybacks.**

##  

### **(a)****                            **Sellershall be entitled to an amount equal to any refunds (including any interestpaid thereon) or credits of Taxes attributable to taxable periods ending (ordeemed pursuant to Section 4.4(b) to end) on or before theClosing Date to the extent such refunds (including any interest paid thereon)or credits were not included in the Closing Date Balance Sheet.  Purchaser shall promptly notify Seller inwriting of any Tax refund(s) received by or payable to the Company after theClosing in respect of periods before or including the Closing Date.

###  

### **(b)****                            **Purchaser,the Company, and/or their Affiliates, as the case may be, shall be entitled toany refunds (including any interest paid thereon) or credits of Taxesattributable to (i) taxable periods beginning (or deemed pursuant to Section (b) tobegin) after the Closing Date and (ii) taxable periods ending (or deemedpursuant to Section 4.4(b) to end) on or before the ClosingDate to the extent such refunds (including any interest paid thereon) orcredits were included in the Closing Date Balance Sheet.

###  

### **(c)****                            **Purchasershall, or shall cause the Company promptly to, forward to or reimburse Sellerfor any refunds (including any interest paid thereon) or credits due Seller(pursuant to the terms of this Agreement) after receipt thereof, and Sellershall promptly forward to Purchaser or reimburse Purchaser for any refunds(including any interest paid thereon) or credits due Purchaser after receiptthereof.

###  

### **(d)****                            **Purchaserand Seller agree that the Company shall not carry back in respect to anyconsolidated, combined or unitary Return any item of loss, deduction or creditwhich arises in any taxable period ending after the Closing Date to any taxableperiod ending on or before the Closing Date.

###  

## **Section 4.6****                                   Cooperationon Tax Matters; Tax Audits.**

##  

### **(a)****                            **TheParties and their respective Affiliates shall cooperate in the preparation ofall Returns for any Tax periods for which one Party could reasonably requirethe assistance of the other Party in obtaining any necessary information.  Such cooperation shall include, but not belimited to, furnishing prior years’ Returns or return preparation packages to

 

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### the extent related to a Company or Subsidiaryillustrating previous reporting practices or containing historical informationrelevant to the preparation of such Returns, and furnishing such otherinformation within such Party’s possession requested by the Party filing suchReturns as is relevant to their preparation. Such cooperation and information also shall include without limitationprovision of powers of attorney for the purpose of signing Returns and defendingaudits and promptly forwarding copies of appropriate notices and forms or othercommunications received from or sent to any applicable governmental authorityresponsible for the imposition of Taxes (the “**TaxingAuthority**”) which relate to the Company, and providing copies of allrelevant Returns to the extent related to either Company, together withaccompanying schedules and related workpapers, documents relating to rulings orother determinations by any Taxing Authority and records concerning theownership and tax basis of property, which the requested Party maypossess.  The Parties and theirrespective Affiliates shall make their respective employees and facilitiesavailable on a mutually convenient basis to explain any documents orinformation provided hereunder.

###  

### **(b)****                            **Purchasershall promptly notify Seller in writing of any written notice of a proposedassessment or claim in an audit or administrative or judicial proceedinginvolving the Company which, if determined adversely to the taxpayer, would begrounds for indemnification under this ARTICLE IV; provided,however, that a failure to give such notice will not affect Purchaser’sright to indemnification hereunder, except to the extent, if any, that, but forsuch failure, Seller could have avoided the Tax liability in question.  In the case of an audit or administrative orjudicial Proceeding that relates to any pre-Closing taxable year or period,provided that within thirty (30) days after Seller receives the written noticefrom Purchaser required under this  Section 4.6(b) andprior to taking any action with respect to such audit or administrative orjudicial proceeding, Seller acknowledges in writing its liability under this Section 4.6to hold the Purchaser Indemnified Parties harmless against the full amount ofany adjustment which may be made as a conduct of such audit or proceeding; provided,however, that Seller shall not settle or otherwise compromise any issue ormatter without Purchaser’s prior written consent if such issue or matter willhave a material affect on the Tax liability of Purchaser or the Company for apost-Closing taxable year or period. Purchaser also may participate in any such audit or proceeding.  Purchaser may, without any effect to itsright to indemnification under this ARTICLE IV, to defend the samein such manner as it may deem appropriate, including, but not limited to,settling such audit or proceeding.  Except as provided otherwise in this ARTICLE IV,Purchaser shall control at its own expense any and all audit, administrativeand judicial proceedings related to the Company or the Company’s Taxes.

###  

## **Section 4.7****                                   Terminationof Tax-Sharing Agreements.** All Tax sharing agreements or similar arrangements with respect to orinvolving the Company shall be terminated prior to the Closing Date and, afterthe Closing Date, the Company shall not be bound thereby or have any liabilitythereunder for amounts due in respect of periods ending on or before theClosing Date.

##  

## **Section 4.8****                                   TaxClaims.**  Notwithstanding anyprovision of this Agreement to the contrary, this ARTICLE IV shallgovern all indemnity or other claims related to, or in respect of, Taxes(collectively, “**Tax Claims**”) and the provisionsset forth in ARTICLE VIII of this Agreement shall not apply or haveany effect on Tax Claims.  Purchaser andSeller agree that any

 

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## amounts paid byeither of them to the other Party pursuant to this ARTICLE IV orpursuant to ARTICLE VIII of this Agreement shall be treated as anadjustment to the Purchase Price for all Tax purposes.

##  

# **ARTICLE V**ADDITIONAL COVENANTS

# ** **

## **Section 5.1****                                   AccessTo, and Information Concerning, Properties and Records.**   Intentionally Omitted.

##  

## **Section 5.2****                                   PublicAnnouncements.**  Without the priorwritten approval of Seller (in the case of a release or statement by Purchaser)or Purchaser (in the case of a release or statement by Seller), no Party heretowill issue, or permit any agent or Affiliate of such Party to issue, any pressreleases or otherwise make, or cause any agent or Affiliate of such Party tomake, any public statements with respect to this Agreement and the transactionscontemplated hereby, except when such release or statement is deemed in goodfaith by the releasing Party to be required by applicable Laws or under theapplicable rules and regulations of a stock exchange or market on whichthe securities of the releasing Party or any of its Affiliates are listed.  In each case to which such exception applies,the releasing Party will use its reasonable efforts to provide a copy of suchrelease or statement to Purchaser (in the case of a release or statement bySeller) or Seller (in the case of a release or statement by Purchaser) andincorporate any reasonable changes which are suggested by such non-disclosingParty prior to releasing or making the statement.  Without limiting the foregoing, Seller willfile a Form 8-K in connection with this Agreement and the transactionscontemplated by this Agreement containing such information as Seller deemsappropriate.

##  

## **Section 5.3****                                   GoodFaith Efforts to Consummate Transactions.**  Subject to the terms and conditions of thisAgreement, Purchaser and Seller agree to use reasonable good faith efforts totake, or cause to be taken, all actions, and to do, or cause to be done, allthings necessary, proper, or advisable under this Agreement and applicable Lawsand regulations, to consummate and make effective, as soon as practicable afterthe Effective Date, the transactions contemplated by this Agreement, including,without limitation, securing all third-party approvals and the RequiredRegulatory Approvals necessary to consummate the transactions provided hereinand to satisfy the other conditions to Closing contained herein as soon asreasonably practicable.  Each Party agreesto make copies of its respective regulatory filings and related correspondenceto regulatory agencies available to the other Party.  Notwithstanding any provision contained inthis Agreement to the contrary, Seller shall direct the initiation and prosecution of, and throughcounsel of its own choosing will have control over, all filings and Proceedingsbefore any Governmental Bodies in order to obtain the Required RegulatoryApprovals.

##  

## **Section 5.4****                                   Company’sEmployees.**  During the pendencyof the transactions contemplated hereby, Seller shall cause the Company, to theextent not prohibited by Law or Contract, to give to Purchaser and its representatives access, upon reasonable request and atreasonable times, throughout the period prior to the Closing, to all employeesof Company.

 

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## **Section 5.5****                                   Resignations.**  On or prior to the Closing Date, each ofPeter J. Moerbeek, James Wisener, David Rodrigue, and Cheryl L. Clary****shall resign, in writing, from all positions held by him asan officer, director, employee, consultant and/or independent contractor of theCompany, effective as of the Closing Date.

##  

## **Section 5.6****                                   FurtherAssurances.**  Seller and Purchasereach agree that from time to time after the Closing Date, they will execute anddeliver, and will cause their respective Affiliates to execute and deliver suchfurther documents and instruments, and take, and cause their respectiveAffiliates to take such other action, as may be reasonably necessary to carryout the purposes and intents of this Agreement.

##  

## **Section 5.7****                                   RestrictiveCovenants.** Seller and Purchaser covenant and agree as follows:

##  

### **(a)****                             Statementof Enforceability**.  Selleracknowledges that this Section 5.7 is entered into in conjunctionwith the sale of a going concern business and is fully enforceable as writtenunder Tex. Bus. Comm. Code §15.50 and other applicable Laws.  Seller further acknowledges that theprovisions in this Section 5.7 are conditions precedent andmaterial inducements to Purchaser entering into this Agreement and consummatingthe transactions contemplated by this Agreement.

###  

### **(b)****                             NoncompetitionCovenant. **Seller agrees that,during the Restricted Period, it will not, and will not permit any other SellerRestricted Person, to, for itself or any other Person, engage in any RestrictedActivity anywhere in the Restricted Territory, except on behalf of the Companyin providing any transition services agreed upon in writing by the Parties inconnection with this Agreement.

###  

### **(c)****                             NonsolicitationCovenant. **Seller agrees that,during the Restricted Period (except for employment advertisements which areplaced in newspapers or other periodicals of general circulation), it will not,and will not permit any other Seller Restricted Person, for itself or any otherPerson, to directly or indirectly, induce or attempt to induce any Person Knownto Seller to be employed by the Purchaser Group in a managerial or supervisorycapacity to leave the employ of the Purchaser Group, except, in each case, ifsuch Person first solicits any Seller Restricted Person.

###  

### **(d)****                             MutualNondisparagement Covenant.** Neither any of the Seller RestrictedPersons, on the one hand, nor the Purchaser Group, on the other hand, will, orencourage any of their respective shareholders, directors, officers, employees,or agents to, at any time during or after the Restricted Period, disparage theother Party or any of its shareholders, directors, officers, employees, agent,Subsidiaries, or Affiliates.

###  

### **(e)****                             Remedies.**

###  

#### **(i)****                                    InjunctiveRemedy.**  Seller acknowledges thatthe foregoing restrictions in this Section 5.7 (the “**Restrictions**”),including those relating to geographic area,

 

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#### duration and scope of activity, in view ofthe nature of the business in which the Purchaser Group has been, is and willbe engaged, are reasonable and necessary in order to protect the goodwill andother legitimate business interests of the Purchaser Group, and that anyviolation thereof would result in immediate and irreparable injury to thePurchaser Group, and Seller, therefore, further acknowledges that, in the eventit violates, or threatens to violate, any of the Restrictions, the PurchaserGroup will be entitled to obtain from any court of competent jurisdiction,without the posting of any bond or other security, preliminary and permanentinjunctive relief as well as damages and an equitable accounting of allearnings, profits and other benefits arising from such violation, which rightswill be cumulative and in addition to any other rights or remedies in law orequity to which it may be entitled.  IfSeller violates any of the Restrictions, the applicable restricted period willbe tolled from the time of commencement of the violation until such time as theviolation has been cured to the Purchaser Group’s satisfaction.  If any Restrictions, or any part thereof, aredetermined in any Proceeding to be invalid or unenforceable, the remainder ofthe Restrictions will not thereby be affected and will be given full effectwithout regard to the invalid provisions. If the Restrictions should be adjudged unreasonable in any Proceeding,then the reviewing Governmental Body or other Person will have the power toreform the Restrictions to the extent reasonably necessary to make theRestrictions valid and enforceable and, in the modified form, such provisionswill then be enforceable and must be enforced.

####  

#### **(ii)****                                Survival.**  Notwithstanding any other provision of thisAgreement, the provisions of this Section 5.7 will survive for theRestricted Period, and longer with respect to Section 5.7(d).

####  

## **Section 5.8****                                   CertainEmployee Matters**.

##  

### **(a)****                             FoltzEmployment Agreement**.

###  

#### **(i)****                                   **Schedule 5.8(a)-1is a true, correct and complete copy of the Master Tek International, Inc.Key Employee Agreement between Greg Foltz (“**Foltz**”)and the Company dated June 18, 2004 (the “**EmploymentAgreement**”).  Schedule 5.8(a)-2is a true, correct and complete list of the commission schedule whichPurchaser would cause Company to offer to Foltz, assuming the closing of thetransactions contemplated hereby (the “**Purchaser Commission Schedule**”),but for the existence of the Employment Agreement.

####  

#### **(ii)****                               **Followingthe Closing, Seller will reimburse the Company, monthly in arrears through theremaining term of the Employment Agreement (i.e., through December 31,2007), an amount equal to (i) the amount the Company actually paid toFoltz under Sections 3.1, 3.2, and 3.4 of the Employment Agreement (and for noother payments thereunder) during such period, plus an amount equal to theemployer’s portion of amounts payable under the Federal Insurance ContributionsAct for each payment made to Foltz, plus applicable state and Federalunemployment insurance for each payment made to Foltz, plus a reasonable feefor Purchaser’s cost to process payroll payments to Foltz, less (ii) theamount which Company would have had to pay Foltz pursuant to the PurchaserCommission Schedule during the same period for the actual work or servicesperformed by Foltz during such period.

 

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#### As a condition to each of Seller’s monthlypayments, the Company will provide Seller with reasonable written documentsillustrating and evidencing the determination of the amount to be reimbursedpursuant to this Section 5.8(b) and evidence of actualpayments made to Foltz.

####  

#### **(iii)****                           **Purchaserwill cause the Company to refrain from amending the Employment Agreement in anymanner (i) that results in Seller being required to make additional orgreater reimbursement payments under Section 5.8(a)(ii); and (ii) withoutFoltz’s prior written consent.  Purchaserwill cause the Company to comply with each and all of its obligations under theEmployment Agreement, as such may be amended, which accrue or arise followingthe Effective Time.  Purchaser will causethe Company to materially comply with all applicable Laws with respect to theCompany’s employment of Foltz under the Employment Agreement, as such may beamended.

####  

### **(b)****                             ArmstrongRelease**.  For and on behalf ofthe Company, following the Closing, Seller will timely make each and all of thepayments and reimbursements due to Scott Armstrong under the ArmstrongRelease.  Seller will promptly notifyPurchaser in the event that Seller is notified of any dispute or claim relatingto the Armstrong Release.

###  

## **Section 5.9****                                   IntercompanyDebt.**  Seller will convert thenet amount of Intercompany Debt owed to Seller into equity prior to the ClosingDate without any resulting Tax or other consequences, whether or not adverse,on the financial condition of the Company. The Company shall not be subject to, bound by or obligated to pay any ofthe Intercompany Debt following the Effective Time, and all of it is herebyterminated if not converted.  As used inthis Agreement, the term “**Intercompany Debt**”means the aggregate indebtedness as of the Effective Time payable by theCompany to Seller or any of its Affiliates.

##  

## **Section 5.10****                            Collectionof Accounts Receivable; Repurchase of Accounts Receivable.**

##  

### **(a)****                            **Followingthe Closing Date, Purchaser will cause the Company to collect the AccountsReceivable in substantially the same manner and with the same effort anddiligence as the Company used in collecting its other accounts receivableduring the 12-month period preceding the date of the Interim Company FinancialStatements.  But, the Company will not berequired to commence litigation or other Proceedings in attempting to collectany Accounts Receivable.  The Company maynot compromise, settle or adjust the amount of any Accounts Receivable withoutSeller’s prior written consent, which shall not be unreasonably withheld ordelayed.  For purposes of this Agreement,the Accounts Receivable will be deemed to be uncollectible if, after takinginto account and exhausting A/R Reserve, full payment is not collected by theCompany through the collection efforts contemplated by this Section 5.10within one hundred eighty (180) days following the Closing Date (the “**Repurchase Date**”).

###  

### **(b)****                            **Purchasershall have the right, by written notice (the “**ReceivablesNotice**”) to Seller given on, or not later than ten (10) daysafter the Repurchase Date, to require Seller to repurchase for cash and withoutrecourse, within sixteen (16) Business Days of the date of the ReceivablesNotice, the uncollected account(s) receivable identified in the Receivables

 

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### Notice, provided that such account(s)receivable remains uncollected at such time. Seller shall repurchase the applicable uncollected account(s) receivablefor a purchase price equal to its/their aggregate face value, and Seller shallpurchase and pay for such account(s) receivable as provided herein.

###  

### **(c)****                            **Therepurchase price of the accounts receivables to be purchased shall be paid,one-half (1/2) of the amount owed through a claim against and deduction fromthe Holdback Fund, and the other one-half (1/2) in cash.  The Holdback Fund claim and the cash paymentmust be paid to Purchaser within sixteen (16) Business Days after the date ofthe Receivables Notice.  To the extentthe amount in the Holdback Fund is insufficient to pay the claim against theHoldback Fund, such amount will be paid by Seller in cash.

###  

### **(d)****                            **Purchasershall execute and deliver to Seller all instruments as shall be reasonablynecessary to effectively vest in Seller all of the right, title and interest ofPurchaser with respect to any uncollected Accounts Receivable repurchased bySeller pursuant to this subsection without representation or recourse, butfree and clear of all Liens created by Purchaser following the Closing Date,other than Permitted Liens.

###  

## **Section 5.11****                            MTITransmitter System Replacement**.

###  

### **(a)****                            **Followingthe Effective Time, Purchaser will cause the Company to continue, withcommercially reasonable diligence, Company’s program of replacing all MTITransmitter Systems installed as of the Closing Date in those dwellings orbuildings for which the Company furnishes billing services (includingallocation billing and ratio billing) under a Submetering Contract withInovonics Transmitter Systems in a manner consistent with the Company’s pastbusiness practices (the “**Replacement Program**”).

###  

### **(b)****                            **Purchasershall cause Company to use the Replacement Transmitters only for theReplacement Program and for no other purpose. For each MTI Transmitter System replaced in connection with theReplacement Program, Purchaser shall have the right to receive for each MTITransmitter System replaced an amount equal to Company’s actual and reasonablethird party costs incurred to replace said transmitter or, if a third party isnot engaged to replace the transmitters, a reasonable allocation of theinternal costs actually incurred by the Company (but such allocation ofinternal costs actually incurred shall not exceed the reasonable costs of anindependent third party to replace said transmitter).  Purchaser shall not receive any amount on accountof the cost of a Replacement Transmitter. To the extent that Replacement Transmitters are insufficient for theReplacement Program, then Purchaser shall have the right to receive for eachMTI Transmitter System replaced an amount equal to Company’s actual andreasonable third party cost incurred to acquire additional InovonicsTransmitter Systems.

###  

### **(c)****                             MonthlyClaim Report; Payment.**

###  

#### **(i)****                                   **Withinthirty (30) days following the end of each calendar month following ClosingDate through and including December 31, 2005, Purchaser and Company willdeliver to Seller a report certified by officers of Purchaser and Companyreflecting the total

 

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#### number of MTI Transmitter Systems replacedduring the preceding calendar month pursuant to the Replacement Program, theaddress of replacement for each such MTI Transmitter System replaced, the nameof the applicable customer, the number of Replacement Transmitters remaining inCompany’s possession, the total amount due to Purchaser in accordance with Section 5.11(b) onaccount of transmitter replacements concluded during the preceding month, andother facts reasonably requested by Seller (the “**MonthlyClaim Report**”).  The failureto deliver the Monthly Claim Report within the 30-day period does not affectPurchaser’s right to be paid by Seller.

####  

#### **(ii)****                               **Sellershall have a period of fifteen (15) days after such delivery of the MonthlyClaim Report to (A) acknowledge that the claim stated in the Monthly ClaimReport is accurate and that the amount claimed is correct, in which casePurchaser shall have the right to receive, by making a written request thereforto the Escrow Agent, the sum equal to the claim set forth in the applicableMonthly Claim Report from the Holdback Fund, or (B) deny that either theMonthly Claim Report is accurate or that the amount claimed is incorrect, inwhich case, the Escrow Agent shall retain in the Holdback Fund an amountreasonably sufficient to pay such unresolved claim if required pursuant to Section 8.8(e).  The failure of Seller to give such noticewithin such fifteen (15) day period shall be deemed to be an acknowledgmentthat such claim set forth in the Monthly Claim Report and the amount claimedare correct.

####  

### **(d)****                             ConcludingClaim Report; Payment.**

###  

#### **(i)****                                   **Withinthirty (30) days following December 31, 2005, Purchaser and Company willdeliver to Seller a report certified by officers of Purchaser and Companyreflecting:  (i) the total number ofMTI Transmitter Systems replaced in the Replacement Program since the ClosingDate, (ii) the address of replacement for each such MTI Transmitter Systemreplaced, (iii) the name of the applicable customer, (iv) the numberof Replacement Transmitters remaining in Company’s possession, if any, (v) thenumber of MTI Transmitter Systems which have not been replaced as of December 31,2005 in accordance with the Replacement Program, and (vi) Purchaser’sreasonable estimate of the amounts which will be payable by Seller inaccordance with Section 5.11(b) on account of all transmitterreplacements to be made pursuant to the Replacement Program, and other factsreasonably requested by Seller (the “**Concluding Claim Report**”).  The failure to deliver the Concluding ClaimReport within the 30-day period does not affect Purchaser’s right to be paid bySeller.

####  

#### **(ii)****                               **Sellershall have a period of fifteen (15) days after such delivery of the ConcludingClaim Report to (A) acknowledge that the claim stated in the ConcludingClaim Report is accurate and that the estimated to be payable is correct, inwhich case Purchaser shall have the right to receive, by making a writtenrequest therefor to the Escrow Agent, the sum equal to the claim set forth inthe applicable Concluding Claim Report from the Holdback Fund, or (B) denythat either the Concluding Claim Report is accurate or that the amountestimated is incorrect, in which case, the Escrow Agent shall retain in theHoldback Fund an amount reasonably sufficient to pay such estimate if requiredpursuant to Section 8.8(e). The failure of Seller to give such notice within such fifteen (15) dayperiod shall be deemed to be an

 

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#### acknowledgment that such claim set forth inthe Concluding Claim Report and the amount claimed are correct.

####  

## **Section 5.12****                            Employeeand Independent Contractor Matters.**

##  

### **(a)****                            **Immediatelyfollowing the Closing and without cost or expense to Seller, Purchaser willcause the Company to credit each of Company’s employees with such hours of “sickleave” as each such employee shall have accrued as listed in Schedule 2.13.  Any and all liabilities or costs associatedwith crediting and honoring such sick leave will be borne entirely by the Purchaserand the Company and, as described on Schedule 1.6(b)–C, such costsshall not be an adjustment to the Closing Date Balance Sheet.

###  

### **(b)****                            **Foreach of Company’s employees and dependents of such employees participating inmedical, dental, life insurance, and long-term disability insurance plans onthe Closing Date, Seller shall maintain and continue coverage through andincluding June 30, 2005, at no cost or expense to Purchaser, the Companyor such employees or dependents, of each such employee and dependents in thesame manner as provided immediately prior to the Closing Date.

###  

### **(c)****                            **IfSeller maintains a group health plan, then Seller will to the extent, and forthe entire period necessary, satisfy the requirements of Code Section 4980and the group health plan requirements of Chapter 100 of the Code(collectively, “**COBRA**”).

###  

### **(d)****                            **Withinthirty (30) days following the Closing, Seller will assume from the Company allthe liabilities and obligations of the Company under that certain ExclusiveRetainer Agreement, dated January 1, 2004, between Mr. DiGregorio andthe Company (the “**DiGregorio RetainerAgreement**”).  Purchaser willcause the Company to reasonably cooperate with Seller in effecting thisassumption.  Neither Purchaser nor theCompany will have any liability or obligation following the Closing under theDiGregorio Retainer Agreement.

###  

# **ARTICLE VI**CONDITIONS TO CLOSING

# ** **

## **Section 6.1****                                   Conditionsto Each Party’s Obligation Under this Agreement.**  The respective obligations of (i) Purchaserto purchase and pay for the Shares and (ii) Seller to sell the Shares, atthe Closing are subject to the satisfaction or waiver of the followingconditions on or prior to the Closing Date:

##  

### **(a)****                            **Thereceipt of any required approvals required by a Governmental Body underapplicable Law for the consummation of the transactions contemplated by thisAgreement and the expiration or termination of any applicable waiting periodwith respect thereto;

###  

### **(b)****                            **Allconsents, approvals and waivers from third parties required to be obtained toconsummate the transactions contemplated by this Agreement shall have been obtained;and

 

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### **(c)****                            **TheClosing will not violate any injunction, order or decree of any court orgovernmental body having competent jurisdiction.

###  

## **Section 6.2****                                   Conditionsto the Obligations of Purchaser Under this Agreement.**  The obligations of Purchaser to purchase andpay for the Shares at the Closing are subject to the satisfaction or waiver ofthe following conditions on or prior to the Closing Date:

##  

### **(a)****                            **Allrepresentations and warranties of Seller shall be true and correct as of theEffective Date (subject to Seller’s right to cure any inaccuracy or breach ofany representation or warranty set forth herein) and at and as of the Closing,with the same force and effect as though made on and as of the Closing;

###  

### **(b)****                            **Onthe Closing Date, no Proceeding (excluding any such matter initiated by Selleror any of its Affiliates) shall be pending or threatened before anyGovernmental Body or private tribunal of competent jurisdiction seeking toenjoin or restrain the consummation of the Closing or recover substantialdamages from Seller or Purchaser or any of their respective Affiliatesresulting therefrom; and

###  

### **(c)****                            **Sellershall have performed all obligations and agreements and complied with allcovenants contained in this Agreement to be performed or complied with by itprior to the Closing Date.

###  

## **Section 6.3****                                   Conditionsto the Obligations of Seller Under this Agreement.**  The obligation of Seller to sell its Sharesat the Closing is subject to the satisfaction or waiver of the followingconditions on or prior to the Closing Date:

##  

### **(a)****                            **Allrepresentations and warranties of Purchaser contained herein shall be true andcorrect as of the Effective Date (subject to Purchaser’s right to cure anyinaccuracy or breach of any representation or warranty set forth herein) and atand as of the Closing, with the same force and effect as though made on and asof the Closing; and

###  

### **(b)****                            **Purchasershall have performed all obligations and agreements and complied with allcovenants contained in this Agreement to be performed or complied with by itprior to the Closing Date.

 

# **ARTICLE VII**TERMINATION; AMENDMENT; WAIVER

 

## **Section 7.1****                                   Termination.**

##  

### **(a)****                            **ThisAgreement may be terminated and the transactions contemplated hereby may beabandoned at any time prior to the Closing Date:

###  

#### **(i)****                                   **Bymutual written consent executed by the Parties;

 

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#### **(ii)****                               **ByPurchaser if there is an inaccuracy or breach of any representation, warrantyor covenant of Seller set forth in this Agreement which breach has not beencured within thirty (30) days following receipt by Seller of written notice ofsuch breach and which breach results in or can reasonably be anticipated toresult in a Material Adverse Effect on the Company;

####  

#### **(iii)****                           **BySeller if there is an inaccuracy or breach of any representation, warranty orcovenant of Purchaser set forth in this Agreement which breach has not beencured within thirty (30) days following receipt by Purchaser of written noticeof such breach and which breach results in or can reasonably be anticipated toresult in a Material Adverse Effect on the Company; or

####  

#### **(iv)****                              **ByPurchaser or Seller if any court of competent jurisdiction in the United Statesof America or other (federal or state) governmental body shall have issued anorder, decree or ruling or taken any other action restraining, enjoining orotherwise prohibiting the transactions contemplated by this Agreement and suchorder, decree, ruling or other action shall have not been terminated, dismissed,or otherwise vacated within six (6) months after being issued.

####  

### **(b)****                            **ThisAgreement may be terminated and the transactions contemplated hereby may beabandoned at any time prior to the Closing by Purchaser if the amount of thePurchase Price to paid at the time of Closing, after giving effect to anyadjustments to the Purchase Price required by Section 1.5(b)(i), isor would be less than $12,000,000.00. But, if Purchaser does not terminate this Agreement pursuant to thisSection, then notwithstanding Section 1.5(b)(i) but subject toSection 1.5(b)(ii), the amount of the Purchase Price paid at thetime of the Closing, as adjusted to the Closing Date, shall not be less than$12,000,000.00.  However, nothing in thisAgreement restricts the Purchase Price from being reduced below $12,000,000.00based on adjustments required under Section 1.6 following theClosing Date.

###  

## **Section 7.2****                                   Effectof Termination.**  In the event ofthe termination and abandonment of this Agreement pursuant to Section 7.1,this Agreement shall thereafter become null and void and have no effect,without any liability on the part of any Party or its directors, officers orshareholders, other than the provisions of Section 5.2, ARTICLE VIIIand ARTICLE X.

##  

## **Section 7.3****                                   Amendmentand Modification.**  This Agreementmay be amended, modified, terminated, rescinded, or supplemented only bywritten agreement of the Parties.

##  

## **Section 7.4****                                   Extension;Waiver.**  At any time prior to theClosing Date, the Parties may (i) extend the time for the performance ofany of the obligations or other acts of the other Party hereto, (ii) waiveany inaccuracies in the representations and warranties contained herein or inany document, certificate or writing delivered pursuant hereto, or (iii) waivecompliance with any of the agreements or conditions contained herein.  Any agreement on the part of any Party to anysuch extension or waiver shall be valid only if set forth in an instrument inwriting signed by or on behalf of such Party.

 

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# **ARTICLE VIII**REMEDIES

# ** **

## **Section 8.1****                                   Remediesfor Breach of Representations, Warranties and Covenants of Seller Before theClosing Date.**  Upon execution ofthis Agreement through and including the Closing, the exclusive remedy, for anymaterial inaccuracy or breach of any representation, warranty or covenant inthis Agreement by Seller shall be termination of this Agreement by Purchaser inaccordance with and subject to Section 7.1(b).

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## **Section 8.2****                                   Indemnificationby Seller.**  Except as otherwiseexpressly provided in Section 5.1 with respect to Taxes or this ARTICLE VIII,and subject to Section 8.5 and the other limitations stated in thisARTICLE VIII and ARTICLE IX, beginning immediatelyafter the Closing and continuing for the applicable periods after the ClosingDate provided in ARTICLE IX, Seller agrees to and shall defend,indemnify and hold harmless Purchaser and the Company and their respectivesuccessors, assigns, officers, directors, employees, agents, attorneys,accountants, financial advisers and representatives (the “**PurchaserIndemnified Parties**”) from and against, and shall reimburse thePurchaser Indemnified Parties for, each and every claim, action, loss, suit,demand, cost, expense, liability, penalty, assessment, judgment, settlement,fine, diminution in value and other damage (including incidental andconsequential damages), including, without limitation, reasonable attorney’sfees (collectively, a ”**Loss**”) incurredby any of the Purchaser Indemnified Parties, relating to, resulting from orarising out of, or any allegation by any third-party of, the following:

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### **(a)****                            **Anybreach of or inaccuracy in any representation or warranty of Seller set forthin this Agreement or in any of the Transaction Documents;

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### **(b)****                            **Anybreach or nonfulfillment of any covenant, agreement or other obligation ofSeller set forth in this Agreement or in any of the Transaction Documents; or

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### **(c)****                            **Withoutlimiting the generality of the preceding provisions of this Section 8.2,any Losses relating to, resulting from or arising out of:

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#### **(i)****                                   **Claimsor Proceedings by any of the Company’s directors, officers or employeesrelating to this Agreement or the transactions contemplated hereby, or claimsby any of the Company’s current or former shareholders, directors or officersrelating to any matter occurring prior to the Effective Time, including withoutlimitation, claims for reimbursement of expenses or indemnification under theCompany’s Organizational Documents or otherwise;

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#### **(ii)****                               **Subjectto Section 5.11, expenses relating to the Replacement Program, andto the extent not duplicative, warranty and related claims or Proceedings withrespect to the MTI Transmitter Systems sold and installed by the Company priorto the Effective Time (the ”**Transmitter Warranty Claims**”);

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#### **(iii)****                           **Claimsor Proceedings by, or on behalf of, Scott Armstrong, or any of his agents,successors, assigns, heirs or legal representatives, relating to (i) hisemployment or

 

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#### termination of employment with the Company(including, without limitation, the entering into the Armstrong Release or thepayments and reimbursements due to Scott Armstrong under the Armstrong Release,or (ii) the Retention and Change of Control Agreement, dated April 11,2005, between the Company and Scott Armstrong (collectively, the ”**Armstrong Claims**”);

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#### **(iv)****                              **Claimsor Proceedings by, or on behalf of, Foltz, or any of his successors, assigns,heirs or legal representatives, relating to (1) his employment with theCompany (including, without limitation, under the Employment Agreement),subject to, following the Closing the Company’s compliance with its obligationsunder the Employment Agreement and not violating applicable Laws with respectto Foltz’s employment, or (2) without limiting the generality of thepreceding clause (1), Claims or Proceedings under Section 3.3, Section 3.4(a),Section 3.4(b) (but limited only to Claims, if any, as a result ofdifferences between the “401(k) plan” in effect prior to the Effective Time andthe “401(k) plan” in effect after the Effective Time, or Section 3.5 ofthe Employment Agreement, or (3) Claims or Proceedings related to orarising out of the allegations in that certain letter dated June 8, 2005from Brett B. Flagg to James C. Wisener, a true, accurate and complete copy ofwhich has been made available to Purchaser prior to the Closing Date, but onlyto the extent the allegations in the letter apply to acts or omissions prior toor at the Closing (collectively, the “**Foltz Claims**”);

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#### **(v)****                                  **Anyof the following matters disclosed in the Seller Schedules (collectively, the “**Disclosed Matters**”): The conduct of the utility aggregation business in Texas without aGovernmental Authorization issued by the Texas Public Utility Commission orother applicable Government Body.

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The foregoing matters giving rise to therights of the Purchaser Indemnified Parties to indemnification hereunder arereferred to as the “**Purchaser Claims**”.

 

With respect to matters not involving anyProceeding brought or asserted by third-parties, within ten (10) daysafter notification from Purchaser supported by reasonable documentation settingforth the nature of the circumstances entitling Purchaser to indemnityhereunder, Seller, at no cost or expense to Purchaser, shall diligentlycommence resolution of such matters in a reasonably acceptable manner and shalldiligently and timely prosecute such resolution to completion.  With respect to those claims that may besatisfied by payment of a liquidated sum of money, including, withoutlimitation, claims for reimbursement of expenses incurred in connection withany circumstances entitling Purchaser to indemnity hereunder, Seller shall paythe full amount so claimed to the extent supported by reasonable documentationwithin fifteen (15) days of such resolution. If litigation or any other Proceeding is commenced or threatened by anythird-party for which Purchaser is entitled to indemnification under this Section 8.2,the provisions of Section 8.4 shall control.

 

## **Section 8.3****                                   Indemnificationby Purchaser.**  Except asotherwise expressly provided in this ARTICLE VIII, Purchaser agreesto and shall defend, indemnify and hold harmless Seller from and against, andshall reimburse Seller and each of Seller’s successors, assigns, officers,directors, employees, agents, attorneys, accountants, financial advisors, andrepresentatives

 

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## (the ”**SellerIndemnified Parties**”) for, each and every Loss, relating to,resulting from or arising out of, or any allegation by any third-party of, thefollowing:

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### **(a)****                            **Anybreach of inaccuracy in any representation or warranty of Purchaser set forthin this Agreement or in any of the Transaction Documents;

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### **(b)****                            **Anybreach or nonfulfillment of any covenant, agreement or other obligation ofPurchaser set forth in this Agreement or in any of the Transaction Documents;or

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### **(c)****                            **Tothe extent applicable, any compliance or non-compliance by the Company on orafter the Closing Date with the Worker Adjustment and Retraining NotificationAct or any similar state or local Law;

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### **(d)****                            **Thefailure to obtain (or the refusal to grant) the Consent of or required by orpursuant to, as the case may be, those Persons listed or referred to in Schedule 2.6which have not been obtained prior to the Closing Date, except for thoseConsents indicated on Schedule 2.6 as being obtained on or prior tothe Closing Date;

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### **(e)****                            **AnyProceeding relating to events, conditions, operations, facts, circumstances oracts of Purchaser, the Company or any of their respective Affiliates whichshall occur subsequent to the Closing Date, other than any Proceeding relatingto this Agreement or the transactions contemplated by this Agreement, or ascontemplated by this Agreement as being the responsibility or obligation ofSeller following the Closing.

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With respect to matters not involvingProceedings brought or asserted by third parties, within ten (10) daysafter notification from Seller or the Company supported by reasonabledocumentation setting forth the nature of the circumstances entitling suchparty to indemnity hereunder, Purchaser, at no cost or expense to such partyshall diligently commence resolution of such matters in a reasonably acceptablemanner and shall diligently and timely prosecute such resolution tocompletion.  With respect to those claimsthat may be satisfied by payment of a liquidated sum of money, Purchaser shallpay the amount so claimed to the extent supported by reasonable documentationwithin fifteen (15) days of such resolution. If litigation or any other Proceeding is commenced or threatened by anythird-party for which Seller is entitled to indemnification under this Section 8.3,the provisions of Section 8.4 shall control.

 

## **Section 8.4****                                   Noticeand Defense of Third-Party Claims.**  If any Proceeding shall be brought or assertedby a third-party against an indemnified party or any successor thereto (the “**Indemnified Person**”) in respect of which indemnity may besought under this ARTICLE VIII from an indemnifying person or anysuccessor thereto (the “**Indemnifying Person**”)pursuant to any Proceeding, the Indemnified Person shall give prompt writtennotice of such Proceeding to the Indemnifying Person who shall either assumethe defense thereof, including the employment of counsel reasonablysatisfactory to the Indemnified Person and the payment of all reasonableexpenses, or notify the Indemnified Person of its election to tender itsmaximum liability, if limited, under this Agreement for such claim to theIndemnified Person in full and complete satisfaction and release of itsobligation under ARTICLE VIII; provided, that any delay or failure

 

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## so to notify the Indemnifying Person shallrelieve the Indemnifying Person of its obligations hereunder only to theextent, if at all, that it is prejudiced by reason of such delay orfailure.  In no event shall anyIndemnified Person be required to make any expenditure or bring any cause ofaction to enforce the Indemnifying Person’s obligations and liability under andpursuant to the indemnifications set forth in this ARTICLE VIII.  The Indemnified Person shall have the rightto employ separate counsel in any of the foregoing Proceedings and toparticipate in the defense thereof, but the reasonable fees and expenses ofsuch counsel shall be at the expense of the Indemnified Person if there existactual conflicts of interest which make representation by the same counselinappropriate.  The Indemnified Person’sright to participate in the defense or response to any Proceeding should not bedeemed to limit or otherwise modify its obligations under this ARTICLE VIII.  In the event that the IndemnifyingPerson, within twenty (20) days after notice of any such Proceeding, fails toassume the defense thereof, the Indemnified Person shall have the right toundertake the defense, compromise or settlement of such Proceeding for theaccount of and at the expense of the Indemnifying Person, subject to the rightof the Indemnifying Person to assume the defense of such Proceeding withcounsel reasonably satisfactory to the Indemnified Person at any time prior tothe settlement, compromise or final determination thereof.  Notwithstanding anything in this ARTICLE VIIIto the contrary, the Indemnifying Person shall not, without the IndemnifiedPerson’s prior written consent (which consent shall not be unreasonablywithheld or delayed), settle or compromise any Proceeding or consent to theentry of any judgment with respect to any Proceeding; *provided,however*, if the Indemnified Person withholds its consent to asettlement involving monetary consideration only, the Indemnifying Person maynotify the Indemnified Person of its election to tender the monetary amount ofthe proposed settlement to the Indemnified Person in full and completesatisfaction and release of its obligation under ARTICLE VIII; and *provided, further*, the Indemnifying Party may settle orcompromise any Proceeding or claim asserted with respect to TransmitterWarranty Claims asserted by third-party(ies), except to the extent covered bythe Replacement Program and Section 5.11.

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## **Section 8.5****                                   Limitationsof Liability.**

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### **(a)****                            **AnIndemnifying Person shall have no liability under this ARTICLE VIIIunless written notice of a claim for indemnity, or written notice of specificfacts as to which an indemnifiable Loss is expected to be incurred, shall havebeen given within the applicable period provided in ARTICLE IX.

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### **(b)****                            **Notwithstandingany other provision of this Agreement to the contrary, the aggregate liabilityof Seller under this Agreement shall not exceed (i) with respect tobreaches or the inaccuracy of any representations or warranties contained in Section 2.1,Section 2.2, Section 2.3, Section 2.4, Section 2.6,Section 2.11, Section 2.16 or Section 2.30an amount equal, in the aggregate, to the Purchase Price, or (ii) withrespect to any of the other representations or warranties in ARTICLE IIof this Agreement, the aggregate amount of $2,000,000.00.  This Section 8.5(b) shallnot apply to limit the liability of Seller for any of the Retained SellerLiabilities or Tax Claims.

 

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### As used in this Agreement, the term “**RetainedSeller Liabilities**” means:  (i) paymentof the Purchase Price or any adjustments thereto under Section 1.5or Section 1.6, (ii) the Transmitter Warranty Claims, (iii) theArmstrong Claims, (iv) the Foltz Claims, (v) Tax Claims, and (vi) theDisclosed Matters.

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### **(c)****                            **Notwithstandingany other provision of this Agreement to the contrary, but subject to the lastsentence of this Section 8.5(c), Seller shall be liable forindemnification under this Agreement only to the extent that the amount of anyindemnifiable Loss, individually or in the aggregate with all other such Lossescovered by this Agreement, exceeds $75,000.00 (the “**BasketAmount**”), and in such event, Seller shall be liable only for theamount of all such Losses that exceed the Basket Amount up to the applicableindemnification cap under Section 8.5(b).  But, this Section 8.5(c) shallnot apply to limit the liability of Seller for any of the Retained SellerLiabilities or Tax Claims.

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### **(d)****                            **Notwithstandingany other provision of this Agreement to the contrary, if Seller has committedfraud, there shall be no limitations under this Agreement on Seller’s liabilityfor indemnity or otherwise.

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### **(e)****                            **Purchasershall use commercially reasonable efforts to mitigate any Loss suffered,incurred or sustained by Purchaser arising out of any matter for whichPurchaser is entitled to indemnification herein, upon Purchaser having obtainedactual knowledge of such breach by Seller. In the event that Purchaser shall fail to make such commerciallyreasonable efforts to mitigate such Loss, then notwithstanding anything else tothe contrary contained herein, Seller shall not be required to indemnifyPurchaser for any Loss that could reasonably be expected to have been avoidedhad Purchaser made such efforts.

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### **(f)****                              **Incalculating the amount of any Loss for which any Indemnifying Person is liableunder this ARTICLE VIII, there shall be deducted (i) theamount of any insurance recoveries, excluding any amounts which are in effectself-insured whether through retention amounts or otherwise, the IndemnifiedPerson in fact receives as a direct consequence of the circumstances to whichthe Loss related or from which the Loss resulted or arose; and (ii) anyindemnification, contribution or other similar payment actually recovered bythe Indemnified Person from any third-party with respect thereto.  The Indemnified Person agrees to first makeclaim against any applicable insurance coverage, including, if applicable, theinsurance coverage for the Company to seek recovery for any Loss, and theIndemnifying Person shall have the right to pursue such recovery against anysuch insurance coverage in the name of the insured.  Seller, Purchaser and the Company herebymutually waive all express and/or implied subrogation rights, and assignment ofsuch rights, against each other in regard to any such insurance claim. Theabove-required waivers shall also extend to all Affiliates of Seller,Purchaser, and the Company, and their respective officers, directors, agents,and employees.  Any such amounts orbenefits received by an Indemnified Person with respect to any indemnity claimafter it has received an indemnity payment hereunder shall be promptly paidover to the Indemnifying Person, but not in excess of the amount paid by theIndemnifying Person to the Indemnified Person with respect to such claim.  For purposes of determining the insurancerecoveries, if Purchaser elects not to maintain insurance coverage identical tothe insurance coverage of the

 

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### Company maintained by Seller as of theClosing Date, Purchaser and the Company shall be deemed to have receivedinsurance benefits equal to the greater of the insurance benefits Purchaserand/or Company, as the case may be, would have received had it maintained suchinsurance policies in effect after the Closing or the insurance benefits itactually receives.

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### **(g)****                           **Inthe event that (i) any condition set forth in ARTICLE VI isnot satisfied, (ii) the failure of such condition to be satisfied iswaived in writing by the Party or Parties entitled to the benefit of suchcondition, and (iii) the Parties nevertheless consummate the transactionscontemplated by this Agreement at the Closing, then the Parties shall be deemedto have waived any claim for Loss or other relief only to the extent that suchLoss or other relief relates solely and directly to such condition that was sowaived.

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### **(h)****                            NOTWITHSTANDINGANY OTHER PROVISION OF THIS AGREEMENT, ABSENT FRAUD NO PARTY HERETO SHALL HAVEANY LIABILITY UNDER THIS AGREEMENT FOR CONSEQUENTIAL DAMAGES (SUCH AS LOSS OFPROFIT), OR, MULTIPLE, TREBLE, EXEMPLARY OR PUNITIVE DAMAGES OF ANY TYPE UNDERANY CIRCUMSTANCES REGARDLESS OF WHETHER SUCH DAMAGES MAY BE AVAILABLEUNDER TEXAS LAW, THE LAW OF ANY OTHER STATE, OR FEDERAL LAW.**

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## **Section 8.6****                                   ExclusiveRemedies.**

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### **(a)****                            **Exceptwith respect to Tax Claims (which are governed solely by ARTICLE IV),and absent fraud, the remedies of the Parties specifically provided for by thisARTICLE VIII shall be the sole and exclusive remedies of theParties for (i) any breach or inaccuracy of the representations andwarranties contained in this Agreement or any of the Transaction Documents, or (ii) thefailure to perform any covenants, agreements or obligations contained in thisAgreement, any Transaction Document or in any other agreement or documentfurnished or delivered pursuant hereto.

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### **(b)****                            **Withoutlimiting the generality of the foregoing provisions of Section 8.6(a),the Parties acknowledge and agree that, before the Closing Date, Section 8.1provides the exclusive remedies for any material breach or inaccuracy of therepresentations, warranties and covenants of Seller contained in thisAgreement.

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## **Section 8.7****                                   Mediation.**  Before either Party may initiate any suit,arbitration or other Proceeding, the Parties pledge to attempt first to resolvethe controversy or claim arising out of or relating to this Agreement (“**Dispute**”) by mediation before a mutually acceptable mediatorwithin thirty (30) days after either Party first gives notice ofmediation.  Mediation shall be conductedin Dallas, Texas and shall be conducted and completed within sixty (60) daysfollowing the date either Party first gives notice of mediation.  The fees and expenses of the mediator shallbe shared equally by the Parties.  Themediator shall be disqualified as a witness, expert or counsel for any partywith respect to the Dispute and any related matter.  Mediation is a compromise negotiation andshall constitute privileged communications. The entire mediation process shall be confidential and the conduct,statements, promises, offers, views and opinions of

 

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## the mediator and the Parties shall not bediscoverable or admissible in any legal Proceeding for any purpose; provided,however, that evidence which is otherwise discoverable or admissible shallnot be excluded from discovery or admission as a result of its use in themediation.

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## **Section 8.8****                                   HoldbackFund.**

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### **(a)****                             Escrowof Holdback Fund.**  At theClosing, Purchaser shall cause the Holdback Fund to be delivered, by wiretransfer of immediately available funds to and directly deposited with,JPMorgan Chase Bank, a National Association (the “**Escrow Agent**”),on behalf of Seller, in escrow for the account and future potential benefit ofSeller.  The Holdback Fund shall be heldby the Escrow Agent pursuant to the terms and conditions of an Escrow Agreementin the form attached hereto as Exhibit B (the “**EscrowAgreement**”).  The costs andexpenses of the Escrow Agent shall be paid by Purchaser.

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### **(b)****                             Procedurefor Claims Against Holdback Fund.**

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#### **(i)****                                   **TheHoldback Fund shall be held in escrow from the Closing Date through March 31,2006 (the “**Holdback Period**”).

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#### **(ii)****                               **Inaddition to Purchaser’s rights under Section 5.11, if, during theHoldback Period, any Purchaser Indemnified Party believes that it is entitledto indemnification with respect to any Tax Claim or Purchaser Claim, subject toSection 5.11, the Purchaser Indemnified Party shall give Sellernotice thereof by delivering to Seller, no later than the last day of theHoldback Period, a certificate signed by the Purchaser Indemnified Party (a “**Claim Certificate**”) stating that Losses exist pursuant to Section 4.2or Section 8.2, as the case may be, and specifying such Tax Claimor Purchaser Claim in reasonable detail, to the extent it has actual knowledgethereof.

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#### **(iii)****                           **Sellershall have a period of fifteen (15) days after such delivery of the ClaimCertificate, to (A) acknowledge that such Tax Claim or Purchaser Claim, asthe case may be, is covered by the indemnification provisions of Section 4.2or Section 8.2, as applicable, and that the amount claimed iscorrect, in which case the Purchaser Indemnified Party shall have the right toreceive, by making a written request therefor to the Escrow Agent, the amountof such Tax Claim or Purchaser Claim, as the case may be, from the HoldbackFund, or (B) deny that the amount claimed is correct, in which case Sellershall indemnify, defend and hold the Purchaser Indemnified Party harmless withrespect to such Tax Claim or Purchaser Claim, as the case may be, as providedin Section 4.2 or Section 8.2, as applicable, or (C) denythat the Tax Claim or Purchaser Claim, as the case may be, is covered by theindemnification provisions of Section 4.2 or Section 8.2,as applicable, in which case, without waiving or limiting its rights toindemnification pursuant to Section 4.2 or Section 8.2,as applicable, the Purchaser Indemnified Party shall have the sole andexclusive right to determine whether to pay or contest any amount claimed by athird-party and relating to the Tax Claim or Purchaser Claim, as the case maybe, and, subject to resolution of whether and to what extent such Tax Claim orPurchaser Claim, as the case may be, is covered by such indemnificationprovisions, the Escrow Agent shall retain in the Holdback Fund an amount reasonablysufficient to pay such unresolved Tax Claim or

 

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#### Purchaser Claim, as the case may be, ifrequired pursuant to Section 8.8(e) hereof.  The failure of Seller to give such noticewithin such fifteen (15) day period shall be deemed to be an acknowledgmentthat such Tax Claim or Purchaser Claim is covered by the indemnificationprovisions of Section 4.2 or Section 8.2, as the casemay be, and that the amount of the Tax Claim or Purchaser Claim is correct.

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### **(c)****                             Releaseof Holdback Fund.**  Subject to theprovisions of this Agreement and the Escrow Agreement, the Holdback Fund shallbe held in escrow until the earlier of (i)  the date Purchaser and Selleragree such funds may be released and paid to Seller pursuant to Section 8.8(e),and (ii) the fifth (5th) Business Day after the last day forthe escrow of the Holdback Fund as specified in Section 8.8(b)(i).

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### **(d)****                             Deliveryto Seller.**  No later than five (5) BusinessDays after the date of release of the Holdback Fund pursuant to Section 8.8(c),the Escrow Agent shall deliver to Seller (i)  any remaining portion of the Holdback Fund after payment ofany amounts therefrom to Purchaser pursuant to Section 8.8(b) orSection 8.8(c), plus (ii)  the aggregate amount of anyremaining portion of interest or other income earned thereon during the periodsuch funds were held in escrow.

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### **(e)****                             Exceptionfrom Release.**  If there is anyTax Claim or Purchaser Claim with respect to which Purchaser has given noticeto Seller prior to the earliest date of release of the Holdback Fund pursuantto Section 8.8(c), which is not then resolved, the amount of theHoldback Fund reasonably sufficient to pay such unresolved Tax Claim orPurchaser Claim, as the case may be, may be retained in escrow, subject to theEscrow Agreement, if desired by Purchaser in its sole discretion.  If Purchaser desires that any portion of theHoldback Fund be retained pursuant to this Section 8.8(e), it shallgive notice thereof to Seller and the Escrow Agent no later than the subjectrelease date.  Upon resolution of the TaxClaim or Purchaser Claim, as the case may be, the portion of the Holdback Fundretained pursuant to this Section 8.8(e) shall be delivered toSeller in the same manner as provided herein for funds not retained.

 

# **ARTICLE IX**SURVIVAL OF REPRESENTATIONS, WARRANTIES AND INDEMNITIES

 

## **Section 9.1****                                   Survivalof Representations, Warranties and Indemnities.**  The Parties agree that their respectiverepresentations, warranties and indemnities contained in this Agreement or anyof the Transaction Documents shall survive as follows:  (a) any claim related torepresentations, warranties and indemnities contained in Section 2.1,Section 2.2, Section 2.3, Section 2.4, Section 3.1or Section 3.2 shall survive the Closing and must be commencedwithin two (2) years after the Closing Date; (b) any claim related torepresentations, warranties and indemnities contained in Section 2.20or Section 8.2(c)(ii) shall survive the Closing and must becommenced within the shorter of (i) one year after the Closing Date, or (ii) oneyear after the date of installation of applicable product or the performance ofthe services to which Sections 2.20 and 8.2(d)(ii) relate; (c) anyclaim related to representations, warranties and indemnities contained in Section 2.11or ARTICLE IV shall survive the Closing and must be commencedwithin the longer of three (3) years after the Closing Date and the periodof the applicable statute

 

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## of limitations; (d) any claims relatedto the indemnities in Section 8.2(c)(iv) shall survive theClosing and must be commenced within the period of the applicable statue oflimitations; (e) any claims related to the indemnities in Section 8.3(e) shallsurvive the Closing and must be commenced within the longer of four (4) yearsafter the Closing Date and the period of the applicable statue of limitationsand (f) any claim related to any other representations, warranties andindemnities not specified in the preceding clauses (a) through (e) shallsurvive the Closing and must be commenced within one (1) year after theClosing Date.

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# **ARTICLE X**FORCE MAJEURE

# ** **

## **Section 10.1****                            ForceMajeure.**  No Party shall beliable to the other Party, its Subsidiaries, Affiliates, or any other Person inprivity with such other Party, its Subsidiaries or Affiliates, for any delaysor damage or any failure to act hereunder (other than the failure to pay money)that may be due, occasioned, or caused by reason of any Laws promulgated by anyfederal, state, or local Governmental Body or any court of law or by the rules,regulations, or orders of any public body or official purporting to exerciseauthority or control respecting the activities and operations contemplatedhereunder, or due, occasioned, or caused, directly or indirectly, by strikes,attacks of terrorists, wars (declared or undeclared), insurrections, civilunrests, hostilities, action of the elements, weather or water conditions,inability to obtain critical materials or supplies, or any other cause beyondthe control of the non-performing Party. In the event of the occurrence of any of the foregoing, the obligationsof the non-performing Party shall be suspended during the continuance of anysuch event or condition, and the time permitted for performance under thisAgreement shall be extended for a period of time equal to the period of suchsuspension.

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## **Section 10.2****                            TerminationUpon Extended Force Majeure.**  Inthe event that either Party cannot perform its obligations hereunder for aperiod of ninety (90) consecutive days due to an event of Force Majeure, theParties will meet promptly to endeavor to reach a mutual agreement on thecourse of action to be taken.  If theParties cannot mutually agree on such course of action, the non-affected Partymay, at its sole option, serve notice terminating this Agreement, effectiveupon the receipt of such notice by the affected Party.

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# **ARTICLE XI**MISCELLANEOUS

# ** **

## **Section 11.1****                            Expenses.**  All costs and expenses incurred in connectionwith the transactions contemplated by this Agreement shall be paid by the Partyincurring such costs and expenses. Seller shall pay from its funds, and not the funds of the Company, allcosts and expenses incurred by either Seller or the Company in connection withthe transactions contemplated by this Agreement.

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## **Section 11.2****                            Brokersand Finders.**  Except for thePersons identified in Schedule 2.30, all negotiations on behalf ofPurchaser and Seller relating to this Agreement and the transactionscontemplated by this Agreement have been carried on by the Parties hereto andtheir respective

 

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## agents directly without the intervention ofany other person in such manner as to give rise to any claim against Purchaseror Seller for financial advisory fees, brokerage or commission fees, finder’sfees or other like payment in connection with the consummation of thetransactions contemplated hereby.

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## **Section 11.3****                            EntireAgreement; Assignment.**  ThisAgreement (a) constitutes the entire agreement among the Parties withrespect to the subject matter hereof and supersedes all other prior agreementsand understandings, both written and oral, among the Parties or any of themwith respect to the subject matter hereof, and (b) shall not be assignedby operation of law or otherwise, without consent of the other Party.

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## **Section 11.4****                            Waiver;Consents.**  Any failure of a Partyto comply with any obligation, covenant, agreement or condition herein may bewaived by the Party affected thereby only by a written instrument signed by theParty granting such waiver.  No waiver,or failure to insist upon strict compliance, by any Party of any condition orany breach of any obligation, term, covenant, representation, warranty oragreement contained in this Agreement, in any one or more instances, shall beconstrued to be a waiver of, or estoppel with respect to, any other conditionor any other breach of the same or any other obligation, term, covenant,representation, warranty or agreement. Whenever this Agreement requires or permits consent by or on behalf ofany Party hereto, such consent shall be given in writing in a manner consistentwith the requirements for a waiver.

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## **Section 11.5****                            Severability.**  The invalidity or unenforceability of anyprovision of this Agreement shall not affect the validity or enforceability ofany other provisions of this Agreement, which shall remain in full force and effect.

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## **Section 11.6****                            Notices.**  All notices, requests, claims, demands andother communications hereunder shall be in writing and shall be deemeddelivered at the time delivered by hand, one Business Day after transmission byfacsimile (with confirmation copy sent by regular U.S. mail), or three (3) BusinessDays after placement in the United States Mail by Registered or Certified Mail,Return Receipt Requested, postage prepaid and addressed as follows:

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if to Seller:

 

Mr. Peter Moerbeek

President and Chief Operating Officer

Southwest Water Company

One Wilshire Building

624 S. Grand Avenue

Los Angeles, CA  90017

Telecopy No. (213)929-1888

 

with copy (which will not constitute notice) to:

 

John F. Cermak, Esq.

 

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Jenkens & Gilchrist, LLP

12100 Wilshire Boulevard, 15thFloor

Los Angeles, CA  90025

Telecopy No. (310) 820-8859

 

if to Purchaser:

 

Michael S. Quigley, President

Minol, L.P.

15280 Addison Road, Suite 100

Dallas, TX 75001

Telecopy No. (972) 386-7711

 

with copy (which will not constitute notice) to:

 

Jonathan K.Henderson, Esq.

Hughes &Luce LLP

1717 Main Street, Suite 2800

Dallas, TX 75201

Telecopy No. (214) 939-5849

 

or to such other address as the person to whom notice is given may havepreviously furnished to the others in writing in the manner set forth above(provided that notice of any change of address shall be effective only uponreceipt thereof).

 

## **Section 11.7****                            GoverningLaw.**  Any dispute between theParties relating to this Agreement or any of the other Transaction Documentswill be construed under and in accordance with the laws of the State of Texasapplicable to contracts between residents of Texas that are to be whollyperformed within such state, without regard to conflicts of law principles.

##  

## **Section 11.8****                            Jurisdictionand Venue.**  Any process againstPurchaser or Seller in or in connection with, any Proceeding arising out of orrelating to this Agreement or any of the transactions contemplated by thisAgreement may be served personally or by certified mail at the address setforth in Section 11.6 with the same effect as though served on itor him personally.  Purchaser and Sellerhereby irrevocably submit in any Proceeding arising out of or relating to thisAgreement or any of the transactions contemplated by this Agreement to theexclusive jurisdiction and venue of a United States District Court located inDallas, Texas.

##  

## **Section 11.9****                            Waiverof Jury Trial.**  EACH OF PURCHASERAND SELLER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY AND ALLRIGHTS IT MAY HAVE TO TRIAL BY JURY IN RESPECT OF ANY ACTION, SUIT, OR ANYCOURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) ORACTIONS OR OMISSIONS OF PURCHASER OR SELLER RELATING TO THIS AGREEMENT,PROCEEDING OR OTHER LITIGATION BROUGHT TO RESOLVE ANY DISPUTE ARISING UNDER,ARISING OUT OF, OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER AGREEMENT,DOCUMENT

 

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## OR INSTRUMENT EXECUTED OR DELIVERED INCONNECTION HEREWITH OR THEREWITH.

##  

## **Section 11.10****                     DescriptiveHeadings.**  The descriptiveheadings are inserted for convenience of reference only and are not intended tobe part of or to affect the meaning or interpretation of this Agreement.

##  

## **Section 11.11****                     Partiesin Interest; No Third-Party Beneficiary.**  Except as contemplated in ARTICLE VIIIfor Indemnified Persons other than Seller and Purchaser, this Agreement shallbe binding upon and inure solely to the benefit of each Party hereto, andnothing in this Agreement, express or implied, is intended to confer upon anyother person any rights or remedies of any nature whatsoever under or by reasonof this Agreement.

##  

## **Section 11.12****                     Counterparts.**  This Agreement may be executed in two or morecounterparts, each of which shall be deemed to be an original, but all of whichshall constitute one and the same agreement.

##  

## **Section 11.13****                     Incorporationby Reference.**  Any and all SellerSchedules, schedules, exhibits, annexes, statements, reports, certificates orother documents or instruments referred to herein or attached hereto areincorporated herein by reference hereto as though fully set forth at the pointreferred to in the Agreement.

##  

## **Section 11.14****                     CertainDefinitions.**  For the purposes ofthis Agreement, the following terms shall have the meanings specified orreferred to below whether or not capitalized when used in this Agreement.

##  

### **(a)****                            **“**Affiliate**” means, with respect to any Person, any Personthat, directly or indirectly, controls, is controlled by, or is under commoncontrol with, the Person in question. For the purposes of this definition, “control” (including “controlling,”“controlled by” and “under common control with”) as used with respect to anyperson or other entity, means the possession, directly or indirectly, of thepower to direct or cause the direction of the management and policies of suchperson or other entity, whether through the ownership of voting securities, bycontract or otherwise.

###  

### **(b)****                            **“**Billing Unit**”means an individual apartment, suite or similar unit covered by a SubmeteringContract for which meter reading, billing (including allocation billing andratio billing) or collection services have been furnished prior to the Cut-OffTime and for which a valid invoice for billing services has been presentedprior to the Cut-Off Time to the occupant for payment or, if the unit isvacant, to the client or customer under the Submetering Contract that is payingthe billing fee while the unit is vacant. In order to qualify as a “Billing Unit”, as of the Cut-Off Time, theSubmetering Contract covering the Billing Unit must not have been terminatedand no written notice of termination can have been received by the Company orany of its Affiliates.

 

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### **(c)****                            **“**Business**” means the business of selling meter readingequipment and furnishing meter reading, billing (including allocation billingand ratio billing), collection, installation, construction and maintenanceservices for owners of multi-unit residential dwellings and commercial officebuildings with respect to the water, sewer, electrical and other utilitiesprovided to the occupants of the dwellings and buildings.

###  

### **(d)****                            **“**Business Day**” means any day other than a Saturday, a Sundayor a holiday on which national banking associations in the State of Texas areclosed.

###  

### **(e)****                            **“**Code**” means the Internal Revenue Code of 1986, asamended.  All citations to the Code or tothe regulations promulgated thereunder shall include any amendments or anysubstitute or successor provisions thereto.

###  

### **(f)****                              **“**Consent**” means any approval, consent, ratification, waiver,notification, license, permit, or other authorization (including anyGovernmental Authorization).

###  

### **(g)****                           **“**Contract**” means any contract, agreement, obligation,promise, purchase order, sales order, license, lease, commitment, arrangement,or undertaking (whether written or oral, and whether express or implied) thatis legally binding.

###  

### **(h)****                           **“**Cut-Off Time**”means 5:00 P.M. (Westminster, Colorado time), on the last Business Dayprior to the Closing Date.

###  

### **(i)****                              **“**Environment**” means all air, surface water, groundwater, orland, including land surface or subsurface, including all fish, wildlife, biotaand all other natural resources.

###  

### **(j)****                              **“**Environmental Law**” means any and all Laws (including, butnot limited to, the Comprehensive Environmental Response, Compensation andLiability Act, 42 U.S.C. § 9601, et. seq.) relating to the protection ofhealth and the Environment, worker health and safety, and/or governing thehandling, use, generation, treatment, storage, transportation, disposal,manufacture, distribution, formulation, packaging, labeling, or Release of HazardousSubstances, whether now existing or subsequently amended or enacted, and thestate analogies thereto, all as amended or superseded from time to time; andany common law doctrine, including, but not limited to, negligence, nuisance,trespass, personal injury, or property damage related to or arising out of thepresence, Release, or exposure  to aHazardous Substance.

###  

### **(k)****                          **“**GAAP**” means generally accepted accounting principles in theUnited States, applied on a basis consistent with the Company FinancialStatements.

###  

### **(l)****                              **“**Governmental Authorization**”means any approval, consent, ratification, notification, franchise, license,permit, waiver, product registration, or other authorization issued, granted,given, or otherwise made available by or under the authority of anyGovernmental Body or pursuant to any Legal Requirement.

 

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### **(m)****                        **“**Governmental Body**”means any (i) nation, state, county, city, town, village, district orother jurisdiction of any nature, (ii) federal, state, local, municipal,foreign or other government, (iii) governmental or quasi-governmentalauthority of any nature (including any governmental agency, commission, branch,department, official, or entity and any court or other tribunal), (iv) multi-nationalorganization or body, or (v) body exercising, or entitled to exercise, anyadministrative, executive, judicial, legislative, police, regulatory or taxingauthority or power of any nature.

###  

### **(n)****                           **“**Hazardous Substance**” means petroleum, petroleum hydrocarbonsor petroleum products, petroleum by-products, radioactive materials, asbestosor asbestos-containing materials, gasoline, diesel fuel, pesticides, radon,urea formaldehyde, lead or lead-containing materials, polychlorinatedbiphenyls; and any other chemicals, materials, substances or wastes in anyamount or concentration which are now included in the definition of “hazardoussubstances,” “hazardous materials,” “hazardous wastes,” “extremely hazardouswastes,” “restricted hazardous wastes,” “toxic substances,” “toxic pollutants,”“pollutants,” “regulated substances,” “solid wastes,” or “contaminants” orwords of similar import, under any Environmental Law.

###  

### **(o)****                            **“**Inovonics Transmitter System**” means the following group ofInovonics transmitter components / part numbers:  225-008 (Inovonics DCC), 260-004(repeaters-Inovonics), 450-022 (Inovonics serial receiver), 950-016(Transmitter Inovonics) and 950-017 (Transmitter Inovonics).

###  

### **(p)****                            **“**Knowledge**” or “**Known**” means, when used with reference to Seller or theCompany, that Seller or the Company shall be deemed to have “knowledge” of orto have “known” a particular fact or other matter only if any of PeterMoerbeek, James Wisener, Linda Moore or Scott Armstrong has current, actualknowledge or knows of such fact or other matter.

###  

### **(q)****                            **“**Liens**” means allmortgages, deeds of trust, claims, liens, judgments, security interests,pledges, leases, conditional sale contracts, rights of first refusal, options,charges, liabilities, obligations, agreements, powers of attorney, limitations,reservations, restrictions and other encumbrances or adverse claims of everykind and nature, including any restriction on use, voting, transfer, receipt ofincome or exercise of any attribute of ownership.

###  

### **(r)****                            **“**Material Adverse Effect**” means any adverse change,singularly or in the aggregate when taken together with all other adversechanges, in the properties or assets, earnings, financial condition, results ofoperations, business or prospects of the Company or Purchaser, as applicable,from the Effective Date, Closing Date or such other date specified in theapplicable provision of this Agreement, of more than $200,000.00.  But, none of the following changes may beconsidered in determining whether any particular change has a Material AdverseEffect:  (i) changes in generaleconomic conditions that do not adversely affect the Company or Purchaser, asapplicable, relative to other similarly situated Persons; (ii) changesresulting from the announcement and performance of this Agreement and thetransactions contemplated hereby and compliance with the covenants set forthherein; (iii) changes or developments in the industries in which theCompany or Purchaser, as applicable, operates that

 

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### generally affect all Persons in suchindustries and do not adversely affect the Company or Purchaser, asapplicable,, relative to other similarly situated Persons; (iv) changes ordevelopments in markets or commodity prices that generally affect all entitiesand do not adversely affect the Company or Purchaser, as applicable,, relativeto other similarly situated Persons; (v) changes arising out of theadoption, amendment or issuance, after the Effective Date, of any applicableLaws or any new interpretation of any Laws by any Governmental Body thatgenerally affects all Persons and do not adversely affect the Company orPurchaser, as applicable,, relative to other similarly situated Persons; (vi) changesin any applicable tax Laws or accounting principles that generally affect allPersons and do not adversely affect the Company or Purchaser, as applicable,relative to other similarly situated Persons; or (vii) any changesresulting from a failure to consummate the transactions contemplated by this Agreement,or otherwise resulting from or relating to the taking of any actioncontemplated by this Agreement.

###  

### **(s)****                            **“**MTI Transmitter System**” means the following group of MTItransmitter components / part numbers: 225-006 (central station receiver), 260-003 (repeater-pilot LED), 275-013(computer for central station), 450-012 (isolation module), 450-014 (interfacemodule-white) and 950-015 (transmitter TX2002).

###  

### **(t)****                              **“**Ordinary Course of Business**” means an action taken by aPerson that is:

###  

#### **(i)****                                   **Consistentwith the past practices of such Person and is taken in the ordinary course ofthe normal day-to-day operations of such Person; or

####  

#### **(ii)****                               **Similarin nature and magnitude to actions customarily taken, without any authorizationby the board of directors (or by any Person or group of Persons exercisingsimilar authority), in the ordinary course of the normal day-to-day operationsof other Persons that are in the same line of business as such Person.

####  

### **(u)****                           **“**Organizational Documents**” means, with respect to any entity,the certificate of incorporation, articles of incorporation, certificate offormation, by-laws, articles of organization, limited liability companyagreement, limited partnership agreement, formation agreement, joint ventureagreement, general partnership agreement or other similar organizationaldocuments of such entity, together with any shareholder agreement, votingagreement or similar agreement among two or more of the equity owners of anysuch entity.

###  

### **(v)****                             **“**Person**” means an individual, partnership, joint venture,corporation, limited liability company, trust, association or unincorporatedorganization, any governmental authority, or any other entity.

###  

### **(w)****                          **“**Proceeding**” means any action, arbitration, audit, hearing,investigation, litigation, or suit (whether civil, criminal, administrative,investigative, or informal) commenced, brought, conducted, or heard by orbefore, or otherwise involving, any Governmental Body or arbitrator.

 

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### **(x)****                            **“**Purchaser Group**” means and includes Purchaser and, followingthe Closing, the Company.

###  

### **(y)****                            **“**Real Property**” means real property owned or leased by theCompany as of the Effective Date or the Closing Date, as applicable.

###  

### **(z)****                            **“**Release**” means any spilling, leaking, pumping, pouring,emitting, emptying, discharging, injecting, escaping, leaching, dumping, ordisposing of a Hazardous Substance into the Environment.

###  

### **(aa)****                      **“**Returns**” means all returns, declarations, reports,statements, and other documents required to be filed in respect of Taxes(including any information returns), and the term “Return” means any one of theforegoing Returns.

###  

### **(bb)****                      **“**Restricted Activity**”means engaging in or conducting, as an owner, principal, partner, shareholder,member, manager, consultant or in any other capacity, the business of (A) providingor furnishing water, natural gas, or electricity submeter reading, submeterbilling (including allocation billing and ratio billing) or submeter collectionservices for apartment, suite or similar units, and/or (B) selling orinstalling submeters for apartment, suite or similar unit and related equipmentfor providing or furnishing submeter reading services for individual apartment,suite or similar units.

###  

### But, the term “Restricted Activity” does not including the following(the “**Permitted Activity**”):

###  

#### **(i)****                                   **AnyRestricted Activity that a Seller Restricted Person is permitted to perform orrequired under applicable Laws to perform by any Governmental Body within thegeographic areas covered by the certificates of convenience and necessityissued by the Governmental Body to a regulated utility at any time owned by aSeller Restricted Person; or

####  

#### **(ii)****                               **AnyRestricted Activity that occurs as a result of a Seller Restricted Person:

####  

##### **(A)****                              **Acquiring,directly or indirectly, by purchase, merger or otherwise, another Person, orcontrol of another Person, that engages in a Restricted Activity, or

#####  

##### **(B)****                              **Acquiring,directly or indirectly, all or substantially all of the assets of a business ofanother Person that engages in a Restricted Activity,

#####  

##### Except the foregoing activity described in clause (A) and (B) arenot permitted if such Restricted Activity occurs as a result of a SellerRestricted Person:  (1) acquiring aTarget Person by merger with such Target Person; (2) directly acquiringall of the capital stock, limited liability company membership interests,partnership interests (or other equity ownership interests) of a Target Person(but this does not restrict indirectly acquiring such equity interests byvirtue of purchasing, merging with or otherwise acquiring the Person that ownsor holds the subject equity ownership interests), or (3) directlyacquiring all or substantially

 

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##### all of the assets of a business of a TargetPerson (but this does not restrict indirectly acquiring such assets by virtueof acquiring such assets in connection with the acquisition of all orsubstantially all of the business of a Person that is not a Target Person).

#####  

The term “Restricted Activity” also does not include: (x) any businessor activity of any Seller Restricted Person, excluding Company, as conducted onthe Effective Date and the Closing Date; or (y) the business of any Person (orsuch Person’s Subsidiaries) that, directly or indirectly, acquires Seller (bymerger or otherwise) or control of Seller.

 

### **(cc)****                      **“**Restricted Period**”means the period beginning on the Closing Date and ending on the thirdanniversary of the Closing Date.

###  

### **(dd)****                      **“**Restricted Territory**”means the geographic area including the continental United States.

###  

### **(ee)****                      **“**Seller Restricted Person**” means Seller and any Personrequired under GAAP to be consolidated with Seller for financial statementpurposes.

###  

### **(ff)****                          **“**Subsidiary**” means, when used with reference to an entity,any corporation, partnership or limited liability company, a majority of theoutstanding voting securities, partnership interests or membership interests ofwhich are owned directly or indirectly by such entity or any partnership, jointventure or other enterprise in which such entity currently has, directly orindirectly, any controlling equity interest.

###  

### **(gg)****                    **“**Target Person**” means and includes the following Persons:American Utility Management, Inc. of Hillside, IL; CBSI – An Alliance DataSystems Company of Hillside, IL; Commercial Water and Energy Company of Miami,FL; Conservice, LLC of North Logan, UT; Energy Billing Systems, Inc. ofColorado Springs, CO; Holcutt, Inc. of Dallas, TX; Ista (formally ViterraEnergy Services) of San Diego, CA; National Water & Power of SantaAna, CA; Ocius, LLC of Chicago, IL; Studebaker Submetering, Inc. ofAlexandria, VA; and ViaStar Energy, Inc. of Indianapolis, IN.

###  

### **(hh)****                    **“**Taxes**” means all federal, state, local, foreign, and othernet income, gross income, gross receipts, sales, use, ad valorem, transfer,franchise, profits, license, lease, service, service use, withholding, payroll,employment, excise, severance, stamp, occupation, premium, property, windfallprofits, customs, duties, or other taxes, fees, assessments, or charges of anykind whatever, together with any interest and any penalties, additions to tax,or additional amounts with respect thereof, and the term “Tax” means any one ofthe foregoing Taxes.

###  

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, each of the Parties has caused this Agreement to beduly executed on its behalf by its officers thereunto duly authorized, all asof the Effective Date.

 
|   | **SELLER:**                                       |   |
|--------|---------------------------------------------------|--------|
|   |                                              |   |
|   | SOUTHWEST  WATER COMPANY,  a Delaware corporation |
|   |                                              |   |
|   |                                              |   |
|   | By:                                               |   |   |
|   | Name:                                             |   |   |
|   | Title:                                            |   |   |
|   |                                              |   |
|   | **PURCHASER:**                                    |   |
|   |                                              |   |
|   | MINOL, L.P.,  a Delaware limited partnership      |
|   |                                              |
|   |                                              |   |   |
|   |                                              | By:    | MINOL, LLC,  a Delaware limited liability company |
|   |                                              |   |   |
|   |                                              |   |   |
|   |                                              |   | By: |   |   |
|   |                                              |   |   | Alexander  Lehmann, |
|        |                                                   |        |  |  |  |  |  |

 

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**LIST OFSCHEDULES AND EXHIBITS**

 
| **Schedules**           | ** ** | ** ** | ** ** | ** **                                       |
|-------------------------|------------|------------|------------|--------------------------------------------------|
| Schedule 1.5(c)    |       | –     |       | Leased Vehicles                                  |
| Schedule 1.5(d)    |       | –     |       | Leased Computer Equipment                        |
| Schedule 1.6(b)-A  |       | –     |       | Adjustments to Closing Date Net Working  Capital |
| Schedule 1.6(b)-B  |       | –     |       | Example of Closing Date Net Working Capital      |
| Schedule 1.6(b)-C  |       | –     |       | Accepted Adjustments to Base Working  Capital    |
| Schedule 1.6(c)(i) |       | –     |       | Non-Billing Units                                |
| Schedule 2.1(a)    |       | –     |       | Company’s Organization and Qualification    |
| Schedule 2.1(e)    |       | –     |       | Officers and Directors of the Company            |
| Schedule 2.2       |       | –     |       | Company’s Capitalization                    |
| Schedule 2.5       |       | –     |       | Violations/Conflicts                             |
| Schedule 2.6       |       | –     |       | Consents and Approvals                           |
| Schedule 2.7(a)    |       | –     |       | Historical Company Financial Statements          |
| Schedule 2.7(b)    |       | –     |       | Interim Company Financial Statements             |
| Schedule 2.8       |       | –     |       | Absence of Changes                               |
| Schedule 2.9       |       | –     |       | Litigation                                       |
| Schedule 2.11      |       | –     |       | Tax Matters                                      |
| Schedule 2.13      |       | –     |       | Employment Matters                               |
| Schedule 2.14(a)   |       | –     |       | Included Intellectual Property                   |
| Schedule 2.14(b)   |       | –     |       | Retained Intellectual Property                   |
| Schedule 2.14(d)   |       | —     |       | Infringement of Intellectual Property            |
| Schedule 2.15      |       | –     |       | Environmental Compliance                         |
| Schedule 2.16      |       | –     |       | Title to Properties                              |
| Schedule 2.17(a)   |       | –     |       | Insurance – List of Policies                |
| Schedule 2.18      |       | –     |       | Licenses and Permits                             |
| Schedule 2.19      |       | –     |       | Agreements, Contracts and Commitments            |
| Schedule 2.20      |       | –     |       | Warranties                                       |
| Schedule 2.20(c)   |       | –     |       | MTI Transmitter Systems                          |
| Schedule 2.20(d)   |       | –     |       | Billing Meters Reading “Zero”          |
| Schedule 2.22      |       | –     |       | Material Assets                                  |
| Schedule 2.24      |       | –     |       | Accounts Receivable                              |
| Schedule 2.25(a)   |       | –     |       | Inventories                                      |
| Schedule 2.25(b)   |       | –     |       | Replacement Transmitters                         |
| Schedule 2.26      |       | –     |       | No Undisclosed Liabilities                       |
| Schedule 2.27(a)   |       | –     |       | Employee Benefit Plans                           |
| Schedule 2.29      |       | –     |       | Customers and Suppliers                          |
| Schedule 2.30      |       | –     |       | Brokers                                          |
| Schedule 2.31      |       | –     |       | Bank Accounts                                    |
| Schedule 5.8(a)-1  |       | –     |       | Employment Agreement (Greg Foltz)                |
| Schedule 5.8(a)-2  |       | –     |       | Purchaser Commission Schedule                    |

 
| **Exhibits**   | ** ** | ** ** | ** ** | ** **                     |
|----------------|------------|------------|------------|--------------------------------|
| Exhibit A |       | –     |       | Form of Closing Statement |
| Exhibit B |       | –     |       | Form of Escrow Agreement  |

 

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**EXHIBIT A**

**FORM OFCLOSING STATEMENT**

 

 

**[SEE ATTACHED]**

 

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**EXHIBIT B**

**FORM OFESCROW AGREEMENT**

 

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