Document:

exhibit10-1.htm

    LIMITED
      LIABILITY INTEREST PURCHASE AGREEMENT

     

    THIS
      LIMITED LIABILITY INTEREST PURCHASE AGREEMENT (this “Agreement”) is entered into
      as
      of this 5th day of May, 2008 by and among Artesian Water Maryland, Inc., a
      Delaware corporation (the “Buyer”), Mountain Hill Water
      Company, LLC, a Maryland limited liability company (the “Company”), and Sunrise
      Holdings L.P., a Pennsylvania limited partnership and the Company’s sole member
      (the “Member” and
      together with the Company, collectively the “Sellers”).  Artesian
      Resources Corporation, a Delaware corporation and the sole stockholder of the
      Buyer (“Artesian”),
      joins in this Agreement for the limited purposes herein set forth.

     

    WHEREAS,
      the Company is a private water utility company that provides potable water
      and
      fire suppression service (the “Business”) in the areas known
      as Principio Business Park (current service) and Charlestown Crossing (future
      service) each in Cecil County, Maryland as more fully described in the map
      (the
      area in orange) attached to Schedule
      1.1 (the “Existing
      Service Territory”), and has the ability, upon approval of the applicable
      governmental authorities and the purchase and installation of the necessary
      infrastructure, to provide water service to areas located outside of the
      Existing Service Territory and in Cecil County, Maryland as more fully described
      in the map (the area in red) attached to Schedule
      1.1 (the “Potential
      Expansion Service Territory”), which together with the Existing Service
      Territory comprises a service territory located in Cecil County, Maryland of
      approximately 8,000 acres (the Existing Service Territory and the Potential
      Expansion Service Territory collectively comprise the “Service Territory”);
      and

     

    WHEREAS,
      the Company contracted with the Buyer to install the Water Plant (as defined
      on
Exhibit
      A hereto); and

     

    WHEREAS,
      from the time that the Company first commenced operation of the Business on
      October 1, 2007, the
      Company has contracted with Buyer to perform both the day-to-day field
      operations of the Business (namely operation of the Water Plant, transmission
      lines and systems), as well as to handle certain administrative functions of
      the
      Business (namely billing of customers collections of accounts receivable,
      reporting to the PSC, and reporting to the applicable governmental sewer
      authorities); and

     

    WHEREAS,
      the Buyer desires to purchase from the Member, and the Member desires to sell,
      assign, transfer and convey to the Buyer, all of the Company’s issued and
      outstanding LLC Interests (as hereinafter defined) (the “Acquired Interests”),
      free and clear of all Liens (as hereinafter defined), but excluding the Member
      Lien (as hereinafter defined), on the terms and conditions herein set
      forth.

     

    NOW,
      THEREFORE, in consideration of the representations, warranties, covenants and
      agreements of the parties hereinafter set forth, as well as for other good
      and
      valuable consideration, the receipt and adequacy is hereby acknowledged, the
      Buyer, the Sellers and Artesian, intending to be legally bound hereby, do hereby
      agree as follows:

     

    ARTICLE
      I                                                                                    

     

    DEFINITIONS

     

    
      	
              Section
                1.1  

            	
              Definitions.

            

    

     

    Except
      as
      otherwise expressly provided in this Agreement, the capitalized terms used
      in
      this Agreement shall have the meanings specified in Exhibit
      A hereto and
      shall be equally applicable to both the singular and plural forms.

     

    ARTICLE
      II                                                                                    

     

    SALE
      AND DELIVERY OF ACQUIRED INTERESTS

     

    
      	
              Section
                2.1  

            	
              Sale
                and Delivery of
                Acquired Interests.

            

    

     

    Subject
      to the terms and conditions of this Agreement, at the Closing, the Member shall
      sell, assign, transfer, convey and deliver to the Buyer, free and clear of
      all
      Liens (excluding the Member Lien, as hereinafter defined), all of its right,
      title and interest in and to the Acquired Interests as of the Effective Date
      (as
      hereinafter defined).

     

    
      	
              Section
                2.2  

            	
              Purchase
                Price; Payment Thereof; Adjustment
                Thereto.

            

    

     

    In
      consideration of the sale,
      assignment, transfer, conveyance and delivery of the Acquired Interests by
      the
      Member to the Buyer and in reliance on the representations, warranties,
      covenants and agreements made by the Member and the Company in this Agreement,
      at the Closing, the Buyer shall pay to the Member a sum equal to the following
      (the
“Purchase
      Price”): (i) Five Million
      Nine Hundred Fifty-Three Thousand Five Hundred Thirty-Six and 67/100 Dollars
      ($5,953,536.67), representing the Total Asset Value as of 12/31/07, less
      (ii) an amount sufficient to pay the amounts set forth on Schedule
      2.2, which shall include, without limitation all debt of the Company
      and/or Transaction Expenses that have not been paid by or on behalf of the
      Company at or prior to the Closing (collectively “Closing Debt”), plus
      (or
      minus, as applicable) (iii) an amount equal to the sum of the net change
      in the Total Asset Value from the Effective Date through the Closing Date
      (including but not limited to accrued interest on the aggregate Total Asset
      Value for the time period commencing on the Effective Date and ending on the
      Closing Date, and an administrative fee on any increase in the value of the
      Property, Plant and Equipment for the time period commencing on the Effective
      Date and ending on the Closing Date).  At the Closing, the
      Purchase Price shall be paid by the Buyer to the Company as
      follows:

     

    (a) an
      amount
      equal to twenty percent (20%) of the Purchase Price (the “Down Payment”);
      and

     

    
      	
              (b)  

            	
              the
                balance of the Purchase Price, if any, by a promissory note to be
                paid in
                four (4) equal annual installments of principal, plus interest accruing
                at
                a rate equal to the London Interbank Offering Rate (“LIBOR”) (determined
                as
                set forth in the Note, as such term is defined below) plus 150 basis
                points, compounded annually using the average outstanding and unpaid
                balance for the previous twelve (12) month period, on the terms and
                conditions of the promissory note in substantially the form attached
                hereto as Exhibit
                B (the “Note”).  Subject
                to the terms of this Agreement, the parties hereto agree that the
                obligations of the Buyer under the Note shall be secured by a first
                priority lien and security interest perfected by executing the Security
                Agreement (as hereinafter defined) and filing a Financing Statement
                on
                Form UCC-1 against the all of the assets of the Company (as defined
                on
                Exhibit
                A) in favor of the Member (“Member Lien”).  In addition,
                Artesian shall guarantee the obligations of the Buyer under the Note
                on
                the terms and conditions set forth in the guaranty substantially
                in the
                form attached hereto as Exhibit
                C (the “Guaranty”).

            

    

     

    
      	
              (c)  

            	
              The
                Closing Debt amount shall be paid by the Buyer, at Buyer’s sole expense,
                at the Closing directly to the creditors set forth on Schedule
                2.2 in accordance with the instructions set forth in the applicable
                payoff or release letters in respect of such amounts, by certified
                or
                cashier’s check or wire transfer of immediately available funds to an
                account or accounts designated in writing by the applicable creditor
                at
                Closing.  Buyer agrees and acknowledges that the full and
                complete satisfaction of the Closing Debt by the Buyer is a prerequisite
                to the Member being in a position to convey the Acquired Interests
                to the
                Buyer free and clear of all Liens (excluding the Member
                Lien).

            

    

     

    ARTICLE
      III                                                                                    

     

    CLOSING

     

    
      	
              Section
                3.1  

            	
              Closing.

            

    

     

    The
      closing of the transactions
      contemplated by this Agreement (the “Closing”)
      shall take place at the offices of
      DLA Piper US LLP, 6225 Smith Avenue, Baltimore, Maryland 21209, commencing
      at
      10:00 a.m. local time on a date that is three (3) Business Days following the
      satisfaction or waiver of the conditions to Closing set forth in Articles
      VIII and IX
      of this Agreement, or
      such
      other date as the Buyer and the Company shall mutually agree upon in writing,
      but in no event later than August 1, 2008.  The date of the Closing is
      herein referred to as the “Closing
      Date.”Notwithstanding
      the
      Closing Date, the parties hereto agree that the transfer of the Acquired
      Interests from the Member to the Buyer shall have an effective transfer date
      as
      of 11:59 p.m. on December 31, 2007 (“Effective Date”)

     

    
      	
              Section
                3.2  

            	
              Closing
                Deliveries.

            

    

     

    
      	
              (a)  

            	
              At
                the Closing, the Sellers shall deliver, or cause to be delivered,
                to the
                Buyer each of the following:

            

    

     

    
      	
              (i)  

            	
              an
                instrument of assignment, duly endorsed by the Member, transferring
                the
                Acquired Interests to the Buyer as of the Effective
                Date;

            

    

     

    
      	
              (ii)  

            	
              an
                easement agreement in substantially the form of Exhibit
                D attached hereto (the “Easement
                Agreement”),
                duly executed by the Sellers and their Affiliates party
                thereto;

            

    

     

    
      	
              (iii)  

            	
              all
                Required Consents (as defined below in Section
                8.4)
                listed on Schedule
                4.4;

            

    

     

    
      	
              (iv)  

            	
              the
                certificates required by Sections
                9.1
                and 9.2;

            

    

     

    
      	
              (v)  

            	
              a
                certificate of an authorized officer or the managing member
                of the
                Company certifying the truth and correctness of attached copies of
                the articles of organization, operating agreement and resolutions
                of the
                managing member (both as managing member and in its capacity as the
                sole
                member of the Company) approving the execution and delivery of this
                Agreement and the Transaction Documents and the consummation of the
                transactions contemplated hereby, in substantially the form of Exhibit
                E attached hereto;

            

    

     

    
      	
              (vi)  

            	
              a
                certificate of an authorized officer of the general partner of the
                Member certifying
                the truth
                and correctness of attached copies of the articles or certificate
                of
                formation or organization, operating agreement and resolutions of
                the
                general partner of the Member approving the execution and delivery
                of this
                Agreement and the Transaction Documents and the consummation of the
                transactions contemplated hereby, in substantially the form of Exhibit
                F attached hereto;

            

    

     

    
      	
              (vii)  

            	
              a
                certificate, dated as of a date no earlier than three days prior
                to the
                Closing Date, duly issued by the applicable Governmental Authority
                in the
                State of Maryland, showing that the Company is in good standing and
                authorized to do business in such
                jurisdiction;

            

    

     

    
      	
              (viii)  

            	
              a
                certificate, dated as of a date no earlier than three days prior
                to the
                Closing Date, duly issued by the applicable Governmental Authority
                in the
                Commonwealth of Pennsylvania, showing that the Member is in good
                standing
                and authorized to do business in such
                jurisdiction;

            

    

     

    
      	
              (ix)  

            	
              duly
                executed payoff
                letters or release letters from the creditors set
                forth
                Schedule
                2.2 and from
                any other lenders of the Company, all in form and substance
                reasonably acceptable to the Buyer (the “Payoff
                Letters”);

            

    

     

    
      	
              (x)  

            	
              duly
                executed UCC-3 termination
                statements, lien releases or such other release and termination
                instruments (or copies thereof), as the Buyer shall reasonably request,
                including but not limited to, with respect to the Liens set forth
                on
                Schedule
                2.2, in order
                to vest
                all right, title and interest in and to the Acquired Interests free
                and
                clear of all Liens; and

            

    

     

    
      	
              (xi)  

            	
              such
                other documents and
                instruments as may be reasonably necessary to effect the intent of
                this
                Agreement and consummate the transactions contemplated
                hereby.

            

    

     

    
      	
              (b)  

            	
              At
                the Closing, the Buyer shall deliver, or cause to be delivered, each
                of
                the following:

            

    

     

    
      	
              (i)  

            	
              the
                Down Payment;

            

    

     

    
      	
              (ii)  

            	
              the
                Note duly executed by the Buyer;

            

    

     

    
      	
              (iii)  

            	
              the
                full payment of the Closing Debt;

            

    

     

    
      	
              (iv)  

            	
              the
                Easement Agreement duly executed by the
                Buyer;

            

    

     

    
      	
              (v)  

            	
              the
                certificates required by Sections
                8.1
                and 8.2;

            

    

     

    
      	
              (vi)  

            	
              a
                certificate signed by the Secretary or Assistant Secretary of the
                Buyer
                certifying the truth and correctness of attached copies of the certificate
                of incorporation and bylaws, and that the board of directors of the
                Buyer
                has approved the execution, delivery of this Agreement, the Transaction
                Documents to which it is a party and the consummation of the transactions
                contemplated hereby;

            

    

     

    
      	
              (vii)  

            	
              a
                certificate, dated as of a date no earlier than three days prior
                to the
                Closing Date, duly issued by the applicable Governmental Authority
                in the
                State of Delaware, showing that the Buyer is in good standing and
                authorized to do business in such
                jurisdiction;

            

    

     

    
      	
              (viii)  

            	
              the
                “Security
                Agreement” duly executed by Buyer in substantially in a form
                attached hereto as Exhibit
                G  and UCC-1 financing statement duly executed by the
                Buyer representing a first lien security interest in all of the Company’s
                assets in favor of the Member.

            

    

     

    
      	
              (c)  

            	
              At
                the Closing, Artesian shall deliver, or cause to be delivered, to
                the
                Company each of the following:

            

    

     

    
      	
              (i)  

            	
              the
                Guaranty, duly executed by Artesian;
                and

            

    

     

    
      	
              (ii)  

            	
              a
                certificate signed by the Secretary or Assistant Secretary of Artesian
                certifying the truth and correctness of attached copies of the certificate
                of incorporation and bylaws, and that the board of directors of Artesian
                has approved the execution, delivery of this Agreement, the Transaction
                Documents to which it is a party and the consummation of the transactions
                contemplated hereby.

            

    

     

    ARTICLE
      IV

     

    REPRESENTATIONS
      AND WARRANTIES OF THE SELLERS 

     

    The
      Sellers hereby jointly and severally
      represent and warrant to the Buyer that the following representations and
      warranties are, as of the date hereof, and will be, as of the Closing Date,
      true
      and correct:

     

    
      	
              Section
                4.1  

            	
              Organization
                and Good Standing.

            

    

     

    
      	
              (a)  

            	
              The
                Company is a limited liability company duly organized, validly existing
                and in good standing under the Laws of the State of Maryland, and
                is duly
                authorized and qualified to do business under all applicable Laws,
                regulations, ordinances and orders of public authorities with full
                corporate power and authority to carry on its business in the places
                and
                in the manner as now conducted, to own or hold under lease the properties
                and assets it now owns or holds under lease, and to perform all of
                its
                obligations under the Material Contracts.  The Company is not
                qualified to do business in any jurisdiction other than its state
                of
                organization.  The Company has not conducted business under any
                name other than “Mountain Hill Water Company, LLC” and “Principio Water
                Company, LLC” since its date of
                formation.

            

    

     

    
      	
              (b)  

            	
              The
                Member is a limited partnership duly organized, validly existing
                and in
                good standing under the Laws of the Commonwealth of
                Pennsylvania.

            

    

     

    
      	
              Section
                4.2  

            	
              Capitalization;
                Title to Limited Liability Company
                Interests.

            

    

     

    
      	
              (a)  

            	
              Schedule
                4.2 sets forth
                the authorized Limited Liability Company Interests of the Company
                (the
                “LLC Interests”),
                the name of each Person holding any such LLC Interests (including
                any
                options, warrants or other rights to purchase any equity securities
                of the
                Company or LLC Interests) and any securities convertible into or
                exchangeable for LLC Interests and the amount and type of such securities
                held by such Person as of the date of this
                Agreement.  Immediately after the Closing, all of the issued and
                outstanding LLC Interests shall be held beneficially and of record
                by the
                Buyer, free and clear of all Liens (excluding the Member Lien and
                subject
                to the Buyer’s full and complete payment and satisfaction of the Closing
                Debt).  Except as set forth on Schedule 4.2, the
                Company has no issued and outstanding LLC Interests or securities
                convertible into or exchangeable for LLC Interests or any other ownership
                interest or containing any profit participation features, nor does
                the
                Company have outstanding any rights or options to subscribe or to
                purchase
                its LLC Interests or other ownership interest or any equity appreciation
                rights or phantom equity plans.  The Company is not subject to
                any obligation (contingent or otherwise) to repurchase or otherwise
                acquire or retire any of its LLC Interests or other ownership interest
                or
                any warrants, options or other rights to acquire its LLC
                Interests.  All of the outstanding LLC Interests have been duly
                authorized and are validly issued, fully paid and nonassessable and
                were
                not issued in violation of any statutory or contractual or preemptive
                rights or similar restrictions.

            

    

     

    
      	
              (b)  

            	
              The
                Company does not own as of the date hereof and will not own as of
                the
                Closing Date, of record or beneficially, or control, directly or
                indirectly, any capital stock, securities convertible into capital
                stock
                or any other equity interest in any corporation, limited association
                or
                other business entity.  The Company is not directly or
                indirectly, a participant in any joint venture, partnership or other
                non-corporate entity (including any limited liability
                company).

            

    

     

    
      	
              (c)  

            	
              There
                are no statutory or contractual or preemptive rights, rights of first
                refusal or similar rights or restrictions with respect to the sale
                of any
                LLC Interests hereunder.  The Company has not violated any
                applicable federal or state securities laws in connection with the
                offer,
                sale or issuance of any of its LLC Interests, and the offer and sale
                of
                the Acquired Interests hereunder does not require any registration
                under
                any applicable federal or state securities laws.  There are no
                agreements with respect to the voting or transfer of the LLC
                Interests.

            

    

     

    
      	
              (d)  

            	
              The
                Company has no Indebtedness having the right to vote (or convertible
                into
                or exchangeable for, securities having the right to vote) on matters
                on
                which the holder(s) of the LLC Interests may
                vote.

            

    

     

    
      	
              (e)  

            	
              The
                Member has good and marketable title to the Acquired Interests and,
                at the
                Closing, will transfer good and marketable title to the Acquired
                Interests, free and clear of all Liens (excluding the Member Lien
                and
                subject to the Buyer’s full and complete payment and satisfaction of the
                Closing Debt), to the Buyer.

            

    

     

    
      	
              Section
                4.3  

            	
              Authority
                and
                Validity.

            

    

     

    The
      execution and delivery by each Seller, the performance by each Seller under,
      and
      the consummation by each Seller of the transactions contemplated by, this
      Agreement and each of the agreements, instruments and documents contemplated
      hereby (the “Transaction
      Documents”) to which such Seller is a party, has been duly and validly
      authorized by all required action by or on behalf of each
      Seller.  This Agreement and each of the Transaction Documents has been
      duly and validly executed and delivered by each Seller party thereto, and
      constitutes the valid and binding obligation of each Seller party thereto,
      enforceable against such Seller in accordance with its terms, except as the
      same
      may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
      or similar Laws now or hereafter in effect relating to the enforcement of
      creditors’ rights generally or by principles governing the availability of
      equitable remedies.

     

    
      	
              Section
                4.4  

            	
              No
                Conflict; Required Consents.

            

    

     

    Except
      for, and subject to receipt of, the Required Consents (as defined in Section 8.4), all of
      which are listed on Schedule 4.4,
      neither the execution and delivery of this Agreement or any of the Transaction
      Documents, nor the carrying out of any of the transactions contemplated hereby,
      will (a) result in any violation, termination or modification of, or be in
      conflict with, the Company's articles of organization or operating agreement,
      each as amended to date, (b) result in any breach of or constitute a default
      (or
      with notice or lapse of time or both would become a default) under, or give
      to
      others any rights of termination, amendment, acceleration or cancellation,
      or
      result in the creation of any lien upon any of its properties or assets pursuant
      to any Permit or any Contract  to which the Company is a party or by
      which it or any of the Acquired Interests are bound or affected, or (c) result
      in any violation of, or be in conflict with, any Law or Permit applicable to
      the
      Company or by which the Acquired Interests are bound or affected.

     

    
      	
              Section
                4.5  

            	
              Total
                Asset Value.

            

    

     

    Attached
      to Schedule
      4.5 is a true, complete and correct list of the aggregate value of all
      of
      the Company’s assets as of December 31, 2007, (collectively, “Total Asset Value”).

     

    
      	
              Section
                4.6  

            	
              Title
                to and Condition of Assets.

            

    

     

    Schedule
      4.5, Schedule
      4.7,
      and
Schedule
      4.8, sets forth all of the assets, properties and rights (in each case
      whether real or personal or tangible or intangible) of the Company as of the
      date of this Agreement and as of the Closing Date.  The assets,
      properties and rights set forth on Schedule
      4.5, Schedule
      4.7,
      and
Schedule
      4.8 constitute
      all
      assets, properties and rights (in each case whether real or personal or tangible
      or intangible) necessary for the Company to conduct the Business after the
      Closing as it is presently being conducted.  Except as set forth on
Schedule
      4.5, no Affiliate of the Company owns or leases from or to the Company
      any of the assets, properties and rights set forth on Schedule
      4.5, Schedule
      4.7, and Schedule
      4.8.  The Company has good and marketable title to, or a valid
      leasehold interest in, or a valid license to use, all of the assets, properties
      and rights (in each case whether real or personal or tangible or intangible)
      set
      forth on Schedule
      4.5, Schedule
      4.7,
      and
Schedule
      4.8 used by the Company in the Business or located on any property owned,
      leased or used by the Company, free and clear of all Liens and defects of
      title.  To the best of the Sellers’ Knowledge, all of the tangible
      assets of the Company (collectively,“Property,
      Plant and
      Equipment”) are in good condition and repair, ordinary wear and tear
      excepted, and has been maintained and repaired in a good and workmanlike manner
      in accordance with industry standards.

     

    
      	
              Section
                4.7  

            	
              Real
                Property.

            

    

     

    The
      Company does not hold, and has never held, any real property in fee
      simple.  The Company does not lease any real property (“Leased Property”) or have a
      right to access or use any other real property (including by easement) (each,
      an
“Easement”) except as
      described on Schedule
      4.7.  The Company has valid and enforceable leasehold interest
      or easement in each Leased Property and Easement, respectively, listed on Schedule
      4.7, free and clear of all Liens.  None of the Easements will
      terminate as a result of the execution and delivery of this Agreement or any
      of
      the Transaction Documents nor the carrying out of the transactions contemplated
      hereby.

     

    
      	
              Section
                4.8  

            	
              Contracts.

            

    

     

    
      	
              (a)  

            	
              The
                Company is not a party to any instruments, documents, contracts,
                agreements, arrangements, commitments, bids, leases, licenses or
                any other
                contract rights (whether written or oral) (collectively, “Contracts”) other
                than
                the Contracts set forth on Schedule
                4.8 (the “Material
                Contracts”).  True and complete copies, or, in the case
                of oral Contracts, written summaries of all Material Contracts have
                been
                delivered to the Buyer.  All Material Contracts are in full
                force and effect and constitute the valid, legal, binding and enforceable
                obligation of the Company, and, to the Sellers’ Knowledge, the
                counterparties thereto in accordance with their terms, except as
                the same
                may be limited by applicable bankruptcy, insolvency, reorganization,
                moratorium or similar Laws now or hereafter in effect relating to
                the
                enforcement of creditors’ rights generally or by principles governing the
                availability of equitable remedies.  No act or omission has
                occurred which, through the passage of time or the giving of notice,
                or both, would with respect to any Material Contract set forth on
Schedule
                4.8: (a) constitute a material breach or default under any such
                Material Contract or cause the acceleration of any obligations of
                the
                Company thereunder, (b) result in the creation of any Lien on any
                of the
                Acquired Interests, or (c) give rise to or automatic termination
                thereof.  Except as set forth on Schedule
                4.8), the Company has not been notified that any party to any
                Material Contract that it intends to cancel, terminate, not renew
                or
                exercise an option under any Material Contract, whether in connection
                with
                the transactions contemplated hereby or otherwise and no such action
                has
                been threatened or contemplated.

            

    

     

    
      	
              Section
                4.9  

            	
              Litigation.

            

    

     

    There
      are
      no outstanding Orders of any Governmental Authority involving the Business
      or
      the Acquired Interests.  There is no Litigation and there are no other
      actions, suits, or legal, administrative or arbitral proceedings or
      investigations (collectively, “Claims”) (whether or not
      the
      defense thereof or Liabilities in respect thereof are covered by insurance),
      pending or, to the Sellers’s Knowledge, threatened against or involving the
      Business or the Acquired Interests, and no material Claims have been instituted
      or, to the Sellers’ Knowledge, threatened against or involving the Business or
      the Acquired Interests.

     

    
      	
              Section
                4.10  

            	
              Environmental.

            

    

     

    
      	
              (a)  

            	
              To
                the best of Sellers’ Knowledge, no real property currently or formerly
                owned or leased or used by the Company or any of its Affiliates
                (collectively, “Real
                Property”) is or has been listed on the National Priorities List,
                the Comprehensive Environmental Response, Compensation, Liability
                Information System (“CERCLIS”) or any
                similar
                state list, or is or has been the subject of any “Superfund” evaluation or
                investigation, or any other investigation or proceeding of any
                Governmental Authority or unaffiliated third party (each, a “Third Party”) or of
                the
                Sellers evaluating whether any remedial action is necessary to respond
                to
                any release of any Hazardous Substance, pollutant or contaminant
                on or in
                connection with such Real Property.

            

    

     

    
      	
              (b)  

            	
              To
                the best of Sellers’ Knowledge, the Business of the Company and its
                Affiliates are and at all times have been operated in compliance
                with all
                applicable Laws concerning the protection of the public health, public
                safety or the environment (“Environmental
                Laws”).  To the best of Sellers’ Knowledge, none of the
                Company’s assets or properties are required to be upgraded or modified in
                order to comply with applicable Environmental Laws.  Neither the
                Company nor any of its Affiliates has ever received any claims or
                notices,
                oral or written, (i) (A) alleging that the Company or any of its
                Affiliates is liable under any Environmental Law, or (B) ordering
                the
                Company or any of its Affiliates to remedy or recommending that the
                Company or any of its Affiliates remediate, any environmental damage
                to
                any Real Property or modify or upgrade its assets to comply with
                Environmental Laws, and (ii) to the Sellers’ Knowledge, no such claims or
                notices are threatened or pending and there are no facts or circumstances
                that would reasonably be expected to give rise to any such claim
                or
                notice.

            

    

     

    
      	
              (c)  

            	
              Except
                in compliance with applicable Environmental Laws, to the Sellers’
                Knowledge there has been no release or threatened release of any
                Hazardous
                Substance, pollutant or contaminant to any soil, groundwater, surface
                water, building component, wastewater, air or other media: (i) on
                or from
                any Real Property during the ownership, occupation or use of such
                Real
                Property by the Company or any of its Affiliates, or at or from any
                other
                location where the Company or any of its Affiliates arranged for
                the
                storage, treatment, disposal or handling of any Hazardous Substance,
                pollutant or contaminant, or (ii) by the Company or any of its Affiliates
                on any other real property.

            

    

     

    
      	
              (d)  

            	
              Except
                as set forth on Schedule
                4.10(d), there are no and have not been any underground storage
                tanks, above-ground storage tanks, underground piping (except for
                water or
                sewer), asbestos-containing materials, polychlorinated biphenyls
                or
                Hazardous Substances used, stored, treated or disposed of at any
                Real
                Property.

            

    

     

    
      	
              (e)  

            	
              Schedule
                4.10(f) lists all environmental audits, assessments or reports and
                any other written information concerning the Company’s actual or potential
                liability under any Environmental Law (collectively, “Environmental Reports”)
                in the possession or control of the Sellers or any of their Affiliates,
                including, without limitation, all Phase I, II and III environmental
                assessment reports with respect to the Real Property in the possession
                or
                control of the Sellers or any of their Affiliates.  A true and
                complete copy of each Environmental Report listed on Schedule
                4.10(f) has previously been delivered by the Company to the
                Buyer.

            

    

     

    
      	
              Section
                4.11  

            	
              Taxes.

            

    

     

    
      	
              (a)  

            	
              The
                Sellers have no unpaid liability for any Taxes in respect of any
                taxable
                period ending on or before the Effective Date.  As used in this
                Agreement, the term “Pre-Closing Tax
                Period”
                shall mean any taxable period ending on or before the Effective
                Date.

            

    

     

    
      	
              (b)  

            	
              Each
                of the Sellers has filed or will cause to be timely filed all Tax
                Returns
                required to have been filed by it prior to or with respect to the
                Effective Date (subject to any timely extensions permitted by Law)
                with
                the appropriate taxing authority with respect to Taxes for any period
                ending on or before the Effective Date.  The Sellers have paid,
                or made provision for the payment of, all Taxes that have or may
                have
                become due for all periods covered by the Tax Returns or otherwise,
                or
                pursuant to any assessment received by the Sellers.  Schedule
                4.11 sets forth all of the jurisdictions in which Tax Returns
                are
                filed by or on behalf of the Company and a description of such Tax
                Returns
                filed in each such jurisdiction is listed opposite the name of each
                jurisdiction listed on Schedule
                4.11.

            

    

     

    
      	
              (c)  

            	
              (i)
                No deficiency for any amount of Tax has been asserted or assessed
                by a
                taxing authority against the Sellers that remains unpaid, (ii) no
                notice
                of audit or possible assessment has been received from any taxing
                authority by the Sellers, and (iii) the Sellers have not agreed to
                any
                waiver or extension of the statute of limitations applicable to the
                assessment or collection of any Tax imposed in respect of a Pre-Closing
                Tax Period.

            

    

     

    
      	
              (d)  

            	
              The
                Sellers have withheld or
                otherwise collected all Taxes or other amounts it was required to
                withhold
                or collect under any applicable federal, state or local Law, including,
                without limitation, any amounts required to be withheld or collected
                with
                respect to employee, state and federal income tax withholding, social
                security, unemployment compensation, sales or use taxes (excluding
                any
                sales or use taxes applicable to the transfer of the Acquired Interests
                as
                contemplated by this Agreement), workmen’s compensation or other similar
                Taxes, and all such amounts have been timely remitted to the proper
                authorities.

            

    

     

    
      	
              (e)  

            	
              The
                Company has not been a member
                of an affiliated group that files or filed consolidated federal income
                Tax
                Returns. The Company is not a party to any tax allocation, tax sharing
                or
                other Contract pursuant to which it is obligated to pay the Taxes
                of
                another Person.

            

    

     

    
      	
              Section
                4.12  

            	
              Compliance
                with Laws;
                Permits.

            

    

     

    
      	
              (a)  

            	
              The
                ownership and operation of the Company and its assets, properties
                and
                rights and the operation of the Business as it is currently conducted
                and
                operated do not violate or infringe any Law in any material
                respect.  The Sellers have not received written notice (or, to
                the Sellers’ Knowledge, oral notice) of any violation by the Company of
                any Law applicable to the operation of the Business as currently
                conducted
                or ownership and operation of the company and its assets, properties
                and
                rights as currently operated.  The Company has timely paid all
                applicable fees or other Taxes, including registration fees and
                maintenance fees, required by any Governmental Authority to maintain
                the
                Permits in good standing.

            

    

     

    
      	
              (b)  

            	
              Schedule
                4.12 lists all approvals, consents, licenses, permits, waiver
                or
                other authorizations issued, granted, given or otherwise made available
                by
                or under the authority of any Governmental Authority (collectively,
“Permits”) that are
                used
                by the Company and its Affiliates in the ownership, maintenance or
                operation of the assets, properties or rights of the Company or the
                conduct of the Business, as presently conducted.  A true and
                complete copy of each Permit listed on Schedule
                4.12 has previously been delivered by the Company or the Member
                to
                the Buyer.  All such Permits are in full force and effect, and
                the Company is not in default under any such Permit.  The
                Company and its Affiliates have taken all necessary actions to maintain
                the effectiveness of the Permits.  No written notice (or, to the
                Sellers’ Knowledge, any oral notice) of default, suspension, revocation,
                or cancellation of any Permit from any Governmental Authority has
                been
                received by the Company or any of its Affiliates and, to the Sellers’
                Knowledge, there is no proposed or threatened issuance of any such
                notice
                or basis for any such action.  The Permits listed in Schedule
                4.12 are all of the material Permits necessary for the Company
                to
                conduct the Business as currently
                conducted.

            

    

     

    
      	
              Section
                4.13  

            	
              Employees
                and Employee Benefits.

            

    

     

    There
      are
      no, and have never been, any employees of the Company. There are no, and have
      never been any, employee benefit plans (as defined in Section 3(3) of the
      Employee Retirement Income Security Act of 1974, as amended) or other plans,
      Contracts or policies established or maintained for the benefit of or affecting
      any employees, consultants, independent contractors, agents or other service
      providers for the Company (collectively, “Benefit Plans”) sponsored,
      maintained or contributed to by the Company or any ERISA Affiliate or to which
      the Company or any ERISA Affiliate is or was at any time obligated to make
      payments or contributions, or with respect to which the Company or any ERISA
      Affiliate has or may have any liability.

     

    
      	
              Section
                4.14  

            	
              Undisclosed
                Liabilities.

            

    

     

    The
      Company has no liabilities or obligations of any type (whether accrued,
      contingent, unliquidated or otherwise and regardless of when asserted) arising
      out of or which could reasonably be expected to arise out of any acts or
      omissions relating to the Company, its predecessors or the conduct of the
      Business at or prior to the date hereof, or at or prior to the Closing Date,
      other than liabilities set forth in the Financial Statements or, as of the
      Closing Date, as will be set forth on Schedule
      4.14.  The Company has no Indebtedness as of the date of this
      Agreement other than the Indebtedness described on Schedule
      4.14 and will have no Indebtedness as of the Closing Date other than as
      set forth on Schedule
      2.2.

     

    
      	
              Section
                4.15  

            	
              Service
                Territory

            

    

     

    All
      of
      the Company’s approvals from Cecil County, Maryland and the PSC to operate a
      private water company are attached as Schedule 4.15. To the best of
      the Sellers’ Knowledge, the Company has: (a) valid and enforceable rights to use
      and access the Existing Service Territory and to use, access, operate and
      otherwise conduct its Business and own and operate its assets, properties and
      other rights in the Existing Service Territory, including the right to access
      and maintain and the assets, properties and rights of the Company located within
      the Existing Service Territory, and (b) to the best of Sellers’ Knowledge, the
      Company’s Business and the assets, properties and rights of the Company within
      the Existing Service Territory conform: (i) to all applicable Laws, including
      material zoning requirements, without reliance upon a variance issued by a
      Governmental Authority or a classification of the parcel in question as a
      nonconforming use, and (ii) to all restrictive covenants, if any, or other
      liens
      affecting all or part of the Existing Service Territory.  To the best
      of Sellers’ Knowledge, upon receipt of the applicable approvals and
      authorizations from Governmental Authorities, the Buyer will have valid and
      enforceable rights to use and access the Potential Expansion Service Territory
      and to use, access, operate and otherwise conduct the Business and own and
      operate the Company and the assets, properties and rights of the Company within
      the Potential Expansion Service Territory.  There is no pending or, to
      the Sellers’ Knowledge, threatened, Litigation by any Governmental Authority
      involving the Company’s ability to provide services or otherwise conduct its
      operations within the Service Territory, including any Claims by any
      Governmental Authority to annex all or any portion of the Company’s Business,
      assets or properties within the Existing Service Territory.

     

    
      	
              Section
                4.16  

            	
              Absence
                of Material Adverse Change.

            

    

     

    Since
      January 1, 2008 there has been no Material Adverse Change or, to the Sellers’
Knowledge, any event or circumstance, or liability or obligation of any nature
      (whether accrued, contingent, absolute, determined, determinable or otherwise),
      that, individually or in the aggregate, would reasonably be expected to result
      in a Material Adverse Change.

     

    
      	
              Section
                4.17  

            	
              Transactions
                with Related Parties.

            

    

     

    Except
      as
      set forth on Schedule
      4.17, there is no Contract between the Company and (a) any current or
      former officer, member, general or limited partner, employee, independent
      contractor, agent of the Sellers (b) any parent, spouse, child, brother, sister
      or other family relation (by blood or marriage) of any such officer, member,
      general or limited partner, employee, independent contractor, agent of the
      Sellers; (c) any corporation, partnership or other entity of which any such
      officer, member, general or limited partner, employee, independent contractor,
      agent of the Sellers or any such family relation is an officer, director,
      manager, partner, trustee or greater than 10% equity owner or beneficiary;
      or
      (d) any Affiliate of the Sellers.  Each of the transactions set
      forth on Schedule
      4.17 is on terms no less favorable to the Company than could reasonably
      be obtained by the Company from an unrelated third party in an arm’s length
      negotiation.

     

    
      	
              Section
                4.18  

            	
              Certain
                Payments.

            

    

     

    The
      Company has not, nor has and officer, manager, member, general or limited
      partner, employee or agent of the Sellers, directly or indirectly on behalf
      of
      the Company, (a) made any payment in violation of any federal, state,
      local, municipal, foreign or other Law to any person or entity, private or
      public, regardless of form, whether in money, property, or services, or
      (b) established or maintained any fund or asset that has not been recorded
      in the Records.

     

    
      	
              Section
                4.19  

            	
              Customer
                and Supplier Relationships.

            

    

     

    Schedule
      4.19 lists all the customers of the Company as of the date hereof (the
“Customers”) and all of
      the suppliers of the Company as of the date hereof (the “Suppliers”).  Except
      as set forth on Schedule
      4.19, the Company has not received any written notice from any Customer
      regarding its intent to, or its attempt or threat to, cancel its Contract or
      its
      other relationship with the Company or to substantially reduce its purchases
      from the Company, whether as a result of the transactions contemplated by this
      Agreement or otherwise.  To the Sellers’ Knowledge, the Company is not
      engaged in any disputes with any Customer the outcome of which could result
      in a
      Material Adverse Change.

     

    
      	
              Section
                4.20  

            	
              Officers
                and
                Directors; Bank Accounts.

            

    

     

    Schedule
      4.20 lists all of the
      officers and managers of the Company and all bank accounts of the Company
      (designating each authorized signatory and the level of each signatory’s
      authorization).

     

    
      	
              Section
                4.21  

            	
              No
                Brokers.

            

    

     

    No
      Seller
      nor any Person acting on behalf of any Seller or any Representative of the
      Sellers has agreed to pay a commission, finder’s or investment banking fee, or
      similar payment in connection with this Agreement or any matter related hereto
      to any Person, nor has any such Person taken any action on which a claim for
      any
      such payment could be based, other than payments for which the Buyer will have
      no liability or obligation.

     

    
      	
              Section
                4.22  

            	
              Disclosure.

            

    

     

    All
      agreements, schedules, exhibits,
      certificates or reports furnished or to be furnished to the Buyer by or on
      behalf of the Sellers in connection with this Agreement or the transactions
      contemplated hereby are true, complete and accurate in all material
      respects.  None of the representations and warranties set forth in
      this Agreement (as modified by the disclosure schedules thereto), the schedules
      and certificates furnished by the Sellers to the Buyer pursuant hereto, taken
      as
      a whole, contain any untrue statement of a material fact or omit to state a
      material fact necessary to make the statements contained herein or therein
      not
      misleading.

     

    
      	
              Section
                4.23  

            	
              No
                Other
                Representations and
                Warranties.

            

    

     

    Except
      for the representations and warranties contained in this Article IV, the
      Sellers make no other representations or warranty with respect to the Company,
      the Business or the Acquired Interests.

     

    ARTICLE
      V                                                                                    

     

    REPRESENTATIONS
      AND WARRANTIES OF THE BUYER AND ARTESIAN

     

    The
      Buyer and Artesian, jointly and
      severally, hereby represent and warrant to the Sellers that the following
      representations and warranties are, as of the date hereof, and will be, as
      of
      the Closing Date, true and correct:

     

    
      	
              Section
                5.1  

            	
              Organization
                and Good Standing.

            

    

     

    The
      Buyer and Artesian are each a
      corporation duly organized, validly existing and in good standing under the
      Laws
      of the State of Delaware.  The Buyer and Artesian each has full
      corporate power and authority to own its properties and carry on its business
      as
      it is now being conducted.

     

    
      	
              Section
                5.2  

            	
              Authority
                and Validity.

            

    

     

    The
      execution and delivery by the Buyer and Artesian, the performance by the Buyer
      and Artesian under, and the consummation by the Buyer and Artesian of the
      transactions contemplated by, this Agreement and the Transaction Documents
      to
      which the Buyer and/or Artesian is a party, have been duly and validly
      authorized by all required corporate action by or on behalf of the Buyer and/or
      Artesian.  This Agreement and the Transaction Documents to which the
      Buyer and/or Artesian are a party have been, duly and validly executed and
      delivered by the Buyer and/or Artesian and constitute valid and binding
      obligations of the Buyer and/or Artesian, enforceable against the Buyer and/or
      Artesian in accordance with their respective terms, except as the same may
      be
      limited by applicable bankruptcy, insolvency, reorganization, moratorium or
      similar Laws now or hereafter in effect relating to the enforcement of
      creditors’ rights generally or by principles governing the availability of
      equitable remedies.

     

    
      	
              Section
                5.3  

            	
              No
                Violation.

            

    

     

    There
      is
      no legal action, proceeding or investigation pending or, to the knowledge of
      the
      Buyer and/or Artesian, threatened against the Buyer and/or Artesian, nor is
      there any Judgment outstanding against the Buyer and/or Artesian or to or by
      which the Buyer and/or Artesian is subject or bound that materially adversely
      affects the ability of the Buyer to consummate any of the transactions
      contemplated hereby.

     

    
      	
              Section
                5.4  

            	
              Consents.

            

    

     

    Except
      as set forth on Schedule
      5.4, no consent, approval,
      permit, authorization of, declaration to or filing with any Governmental
      Authority or any other Person on the part of the Buyer and/or
      Artesian is required in connection
      with the execution and delivery of this Agreement or the consummation of the
      transactions contemplated hereby.

     

    
      	
              Section
                5.5  

            	
              No
                Brokers.

            

    

     

    Neither
      the Buyer and/or
      Artesian nor any Person acting on
      behalf of the Buyer and/or Artesian has agreed to pay a
      commission,
      finder’s fee, investment banking fee or similar payment in connection with this
      Agreement or any matter related hereto nor has the Buyer and/or
      Artesian taken any action on which
      a claim for any such payment could be based.

     

    
      	
              Section
                5.6  

            	
              Environmental.

            

    

     

    
      	
              (a)  

            	
              To
                the best of Buyer’s Knowledge, the Plant, Property and Equipment are
                being, and at all times during the Buyer’s operation have been, operated
                in compliance with all applicable Environmental Laws.  To the
                best of Buyer’s Knowledge, none of the Plant, Property and Equipment is
                required to be upgraded or modified in order to comply with existing
                applicable Environmental Laws.  Neither the Buyer nor Artesian
                has ever received any claims or notices, oral or written, (i) (A)
                alleging
                that the Buyer or any of its Affiliates is liable under any Environmental
                Law with respect to the operation of the Business, or (B) ordering
                the
                Buyer or any of its Affiliates to remedy or recommending that the
                Buyer or
                any of its Affiliates remediate, any environmental damage to any
                of the
                Plant, Property and Equipment or modify or upgrade the Plant, Property
                and
                Equipment to comply with Environmental Laws, and (ii) to the Buyer’s
                Knowledge, no such claims or notices are threatened or pending and
                there
                are no facts or circumstances that would reasonably be expected to
                give
                rise to any such claim or notice.

            

    

     

    
      	
              (b)  

            	
              Except
                in compliance with applicable Environmental Laws, there has been
                no
                release or threatened release of any Hazardous Substance, pollutant
                or
                contaminant to any soil, groundwater, surface water, building component,
                wastewater, air or other media on or from any Real Property during
                the
                Buyer’s operation of the Business.

            

    

     

    
      	
              Section
                5.7  

            	
              Disclosure.

            

    

     

    None
      of
      the representations and warranties set forth in this Agreement (as modified
      by
      the disclosure schedules thereto), the schedules and certificates furnished
      by
      the Buyer and/or Artesian to the Company pursuant hereto, taken as a whole,
      contain any untrue statement of a material fact or omit to state a material
      fact
      necessary to make the statements contained herein or therein not
      misleading.

     

    
      	
              Section
                5.8  

            	
              No
                Other
                Representations and
                Warranties.

            

    

     

    Except
      for the representations and warranties contained in this Article V, neither
      the Buyer nor Artesian makes any other representations or warranty with respect
      to the Buyer, Artesian or the Company, the Business or the Acquired
      Interests.

     

    ARTICLE
      VI                                                                                    

     

    PRE-CLOSING
      COVENANTS

     

    During
      the period from the date of this
      Agreement through and including the Closing Date:

     

    
      	
              Section
                6.1  

            	
              Conduct
                of the Business of the Company Pending Closing.  Except
                as set forth in Schedule
                6.1, as otherwise performed by Buyer pursuant to the operating
                agreement between Buyer and the Company, or as may be first consented
                to
                by Buyer in writing, during the period from the date of this Agreement
                through and including the Closing Date, the Company shall, and the
                Member
                shall cause the Company to, conduct the Business according to its
                ordinary
                and usual course of business and to preserve intact the Business,
                assets,
                properties and rights of the Company and will not sell, lease, transfer,
                assign, convey or make any dividend or distribution in respect of
                any LLC
                Interests (whether in cash, securities or in kind property) amend
                modify,
                cancel or terminate any Assumed Contract, will not amend any Tax
                Return
                and will otherwise maintain satisfactory relationships with respect
                to the
                Business and the assets, properties and rights of the Company with
                Governmental Authorities, Suppliers, agents, Customers, and others
                having
                business relationships with the Company.  In addition, the
                Company shall promptly notify the Buyer in writing of any notice
                or other
                communication that it receives (written or oral) respecting any Litigation
                or Audit involving or affecting the Company.  Without limiting
                the foregoing and except as set forth on Schedule
                6.1 or as may be first consented to by Buyer in writing, the
                Company shall not, and the Member shall cause the Company not
                to:  

            

    

     

    
      	
              (a)  

            	
              enter
                into any Contract other than with Customers or Suppliers in the ordinary
                course of business substantially as conducted
                heretofore;

            

    

     

    
      	
              (b)  

            	
              cause
                any Material Adverse Change or perform or not perform any action
                the
                performance or non-performance of which would reasonably be expected
                to
                result in a Material Adverse
                Change;

            

    

     

    
      	
              (c)  

            	
              make
                any loan or advance to any Person other than for services provided
                to
                Customers on credit in the ordinary course of business consistent
                with
                past practice;

            

    

     

    
      	
              (d)  

            	
              (i)
                incur any Indebtedness, except expenses and current liabilities incurred
                in connection with or for services rendered or goods supplied in
                the
                ordinary course of business or obligations or liabilities incurred
                by
                virtue of the execution of this Agreement, or (ii) create any Lien
                on any
                asset of the Company or the Acquired
                Interests;

            

    

     

    
      	
              (e)  

            	
              issue
                or transfer the Acquired Interests or any other equity interests
                of the
                Company or securities or indebtedness convertible into or exchangeable
                for
                equity interests of the Company;

            

    

     

    
      	
              (f)  

            	
              cancel,
                waive or release any debt, right or claim, except, in each case,
                in the
                ordinary course of business consistent with past
                practice;

            

    

     

    
      	
              (g)  

            	
              change
                the accounting principles, methods or practices (including, without
                limitation, any change in depreciation or amortization policies or
                rates)
                utilized by the Company;

            

    

     

    
      	
              (h)  

            	
              make
                any capital expenditure or commitment
                therefor;

            

    

     

    
      	
              (i)  

            	
              hire
                any employees or adopt any Benefit Plan;
                or

            

    

     

    
      	
              (j)  

            	
              make,
                revoke or change any Tax election, or settle any matter relating
                to
                Taxes;

            

    

     

    
      	
              (k)  

            	
              take
                any action that if taken after the date of this Agreement would constitute
                a variance from or breach of the representations and warranties set
                forth
                in Article
                4 of this Agreement

            

    

     

    
      	
              Section
                6.2  

            	
              Supplements
                to Schedules.  The
                Sellers, on the one hand, and the Buyer, on the other, shall promptly
                give
                to the other notice with respect to any matter or change hereafter
                arising
                which, if existing or occurring on or before the date hereof, would
                have
                been required to be set forth or described in any of the Schedules
                hereto
                or which is necessary to correct or make the representations and
                warranties contained herein correct and complete as of the Closing
                Date
                and shall supplement or amend the Schedules hereto as appropriate
                with
                respect to such matters.  If pursuant to this Section
                6.2 the
                Sellers disclose any such change that constitutes a Material Adverse
                Change, or relates to any material and adverse events, facts or
                circumstances, then the Buyer shall have the right and option, exercisable
                at any time prior to Closing, to terminate this Agreement upon giving
                written notice to the Seller.

            

    

     

    
      	
              Section
                6.3  

            	
              Access;
                Cooperation.  The Sellers shall provide the Buyer and its
                Representatives with all information that the Buyer may reasonably
                request
                in auditable form.  Upon reasonable prior written notice, the
                Sellers shall provide the Buyer and its Representatives with access
                during
                regular business hours to the assets and properties, Records and
                Customers
                and Suppliers of the Company.  The Sellers and their
                Representatives will also cooperate with the Buyer and its
                Representatives, including the Buyer’s auditors and counsel, in the
                preparation of any documents or other materials required in connection
                with the transactions contemplated by this Agreement.  In
                addition, the Sellers and the Buyer shall use their respective reasonable
                good faith efforts to satisfy all conditions to Closing and all other
                matters relating to the consummation of the transactions contemplated
                by
                this Agreement and the Transaction Documents.  The Sellers and
                the Buyer shall cooperate with each other in connection with any
                filings
                with any Governmental Authority and shall use their reasonable good
                faith
                efforts to furnish to each other all information required for any
                such
                filing to be made with any Governmental Authority in connection with
                the
                transactions contemplated by this
                Agreement.

            

    

     

    
      	
              Section
                6.4  

            	
              Due
                Diligence/Exclusive Dealing; Confidentiality Prior to
                Closing.  

            

    

     

    The
      confidentiality provisions under the caption “Due Diligence” and the provisions
      of the first paragraph under the caption “Non-Solicitation” of the Basic Terms
      of letter of intent, dated January 28, 2008, between the Buyer and the Company
      (as may be subsequently amended or modified from time to time in accordance
      with
      its terms, the “Letter of
      Intent”) shall continue in full force and effect until Closing, at which
      time such agreement shall terminate and be of no further force or
      effect.  In addition, the parties will not disclose, and will take
      reasonable steps to prevent the disclosure to others, of the terms and existence
      of this Agreement and the Transaction Documents (including drafts thereof)
      and
      all negotiations leading thereto, unless (i) compelled to do so by Law or valid
      legal process, or (ii) the other parties to this Agreement shall have consented
      to such disclosure.  No party, however, shall be prohibited from
      disclosing any such information to its legal and financial
      advisors.

     

    
      	
              Section
                6.5  

            	
              Cooperation
                Obtaining
                Approvals from Governmental
                Authorities.

            

    

     

    On
      or
      before May 10, 2008, the Buyer shall, at Buyer’s sole cost, prepare any and all
      necessary applications to be filed with the PSC to approve the transfer of
      the
      Acquired Interests from the Member to the Buyer, and Buyer shall cause said
      application(s) (together with any filing fees) to be delivered to the Member
      on
      or before May 15, 2008.  The Member’s counsel shall be responsible for
      filing these PSC application(s) and generally interfacing with the PSC on the
      approval of said applications.  From the date of this Agreement
      through the Closing Date, upon request by the Buyer, the Sellers shall support
      in writing and otherwise reasonably cooperate with the Buyer to assist the
      Buyer
      in the obtaining of, any other authorizations or other Permits, excluding any
      franchise, from any Governmental Authority, sought by the Buyer in the Existing
      Service Territory or the Potential Expansion Service
      Territory.  Reasonable costs incurred by Sellers, except for costs or
      expenses of any legal counsel engaged by Sellers, shall be borne by the
      Buyer.

     

    ARTICLE
      VII                                                                                    

     

    POST-CLOSING
      COVENANTS

     

    
      	
              Section
                7.1  

            	
              Payment
                of Taxes; Tax
                Returns.

            

    

     

    
      	
              (a)  

            	
              The
                Buyer shall pay in a timely manner any transfer, stamp, sales and
                use, and
                recordation Taxes resulting from or payable in connection with the
                sale of
                the Acquired Interests pursuant to this
                Agreement.

            

    

     

    
      	
              (b)  

            	
              From
                and after the Closing through and including the date that is the
                seventh
                (7th) anniversary of the Closing Date, the Member, on the one hand,
                and
                the Company and the Buyer, on the other, shall cooperate fully with
                each
                other and make available or cause to be made available to each other
                in a
                timely fashion such data relating to Taxes, prior Tax Returns and
                filings
                and other information as may be reasonably requested for the preparation
                by the Buyer or the Company, on the one hand, or the Member, on the
                other,
                of any Tax Returns, elections, consents or certificates required
                to be
                prepared and filed by the Buyer, the Company or the Member and any
                audit
                or other examination by any Governmental Authority, or judicial or
                administrative proceeding relating to liability for Taxes.  The
                Buyer, the Company and the Member will each retain, and cause their
                respective Affiliates to retain, and provide to the other party all
                records and other information which may be relevant to any such Tax
                Return, audit or examination, proceeding or determination, and will
                each
                provide the other party with any final determination of any such
                audit or
                examination, proceeding or determination that affects any amount
                required
                to be shown on any Tax Return of the other party for any
                period.  Without limiting the generality of the foregoing, each
                of the Buyer and the Company, on the one hand, and the Member, on
                the
                other, shall retain copies of all Tax Returns, supporting work schedules
                and other records relating to tax periods or portions thereof ending
                prior
                to or on the Closing Date.

            

    

     

    
      	
              (c)  

            	
              With
                respect to any Pre-Closing Tax Period for which Tax Returns are required
                to be filed by or on behalf of the Company after the Closing Date,
                the
                Member shall timely prepare and file (or cause to be prepared and
                filed)
                all Tax Returns for such Pre-Closing Tax Period, and will pay when
                due all
                Taxes for all Pre-Closing Tax Periods (whether or not shown on such
                Tax
                Returns).  The Member shall be liable for all Taxes arising from
                any Tax imposed with respect to any Pre-Closing Tax Period, whether
                or not
                shown on a Tax Return with respect to such period.  The Member
                shall provide the Buyer with photocopies of the Tax Returns relating
                to a
                Pre-Closing Tax Period.

            

    

     

    
      	
              (d)  

            	
              The
                Buyer shall timely prepare and file (or cause to be so prepared and
                filed)
                all Tax Returns that are required to be filed by the Company after
                the
                Effective Date other than any Tax Return the Member is required to
                file
                pursuant to Section
                7.1(c)
                of this Agreement (the “Buyer’s Tax Returns”)
                and will pay the Taxes for the periods covered by the Buyer’s Tax Returns,
                when due.

            

    

     

    
      	
              (e)  

            	
              Any
                Tax refunds that are actually received by the Buyer or the Company
                and
                relate to a Pre-Closing Tax Period or portions thereof in respect
                of Taxes
                actually paid by the Company or the Member at or prior to the Closing
                shall be for the account of the Member and the Buyer shall promptly
                pay
                any such refunds (or portions thereof) to the
                Member.

            

    

     

    
      	
              Section
                7.2  

            	
              Audits.

            

    

     

    
      	
              (a)  

            	
              The
                Buyer shall notify the Member in writing within ten (10) Business
                Days
                after receipt by the Buyer or the Company of any written notice of
                examination, audit or proceeding (an “Audit”) regarding
                any
                Tax Return relating to any Pre-Closing Tax Period or other period
                with
                respect to which the Member may have an indemnification obligation
                under
                Section
                10.  Upon written notice to the Buyer within five (5)
                Business Days after the Buyer gives the Member notice of any Audit
                and at
                the Member’s expense, the Member shall have the right to exercise control
                over the handling, disposition and/or settlement of any issue raised
                in
                any Audit regarding any Tax Return relating to any Pre-Closing Tax
                Period,
                and shall consult and notify the Buyer on any positions taken during
                such
                Audit and any proposed or resulting settlement (subject to the terms
                of
                this Section
                7.2(a)).  If the Member shall not timely assume the
                defense of any Audit or diligently defend against any Audit (as determined
                by the Buyer in its sole discretion) or the Buyer or the Member shall
                otherwise mutually agree, then the Buyer shall have the right to
                exercise
                control at any time over the handling, disposition and/or settlement
                of
                any issue raised in any Audit regarding any Tax Return of the Company
                relating to any Pre-Closing Tax Period (including the right to settle
                or
                otherwise terminate any contest with respect thereto).  The
                right of the Buyer, the Company or any Subsidiary to be indemnified
                hereunder will not, however, be adversely affected by their failure
                to
                give notice hereunder, except to the extent that the Member is materially
                adversely affected from such failure.  The Member shall not
                settle any issue or claim or otherwise terminate any contest with
                respect
                to any such Audit without the prior written consent of the
                Buyer.

            

    

     

    
      	
              (b)  

            	
              The
                Buyer shall have the right to exercise control at any time over the
                handling, disposition and/or settlement of any issue raised in any
                official inquiry or Audit regarding any Tax Return of the Company
                (including the right to settle or otherwise terminate any contest
                with
                respect thereto) without any adverse effect on the Buyer’s right to
                indemnification under this Agreement, except as otherwise set forth
                in
                Section
                7.2(a).

            

    

     

    
      	
              Section
                7.3  

            	
              Access
                to Water Services by the Member and its
                Affiliates.

            

    

     

    
      	
              (a)  

            	
              From
                and after the Closing Date and through and including the twentieth
                (20th)
                anniversary of the Closing Date, the Member and its Affiliates, all
                of
                which are identified on the attached Schedule
                7.3 (collectively, the “Member’s Affiliates”)
                will provide the Company and its Affiliates  with a right of
                first refusal to provide water capacity (potable water and fire
                suppression) at rates based upon standard cost of services principles
                and
                approved by the Maryland Public Service Commission (the “PSC”) and any
                other
                applicable Governmental Authority to any user to which any of Member’s
                Affiliates reasonably requests in any territory within Cecil County,
                Maryland that is now being or is hereafter serviced with water by
                the
                Company or its Affiliates, which territory shall include the Service
                Territory and the land currently owned by one or more of the Member’s
                Affiliates within Cecil County as identified on the map attached
                to Schedule
                7.3.  In addition, the Company, together with its
                Affiliates, hereby agrees that for the period of time that Company
                or its
                Affiliates (and/or their successors and assigns) own water infrastructure
                within Cecil County, Maryland, the Company (or its Affiliates) will,
                at
                the election of the Member’s Affiliates (subject to the right of first
                refusal terms of this Section
                7.3(a)), provide water capacity (potable water and fire
                suppression) at rates based upon standard cost of services principles
                and
                approved by the PSC and any other applicable Governmental Authority
                to any
                user to which any of the Member’s Affiliates reasonably requests in any
                territory within Cecil County, Maryland that is now being or is hereafter
                serviced with water by the Company or its Affiliates, which territory
                shall include but not be limited to the Existing Service Territory
                and the
                land currently owned by one or more of Member’s Affiliates within Cecil
                County as identified on the map attached to Schedule
                7.3.  Following the Closing Date, the Member’s Affiliates
                will reasonably cooperate with the Company and its Affiliates, pursuant
                to
                the provisions of Section
                7.7 of
                this Agreement in obtaining all franchises or other Permits from
                any
                Governmental Authority required for the Company to comply with the
                provisions of this Section
                7.3.  The Company's agreement to serve any user
                reasonably requesting service under this subsection may not apply:
                (i) if the Company cannot obtain authority for necessary real
                property, rights-of-way or other physical access to users, (ii) in
                developments or buildings that are subject to exclusive arrangements
                with
                other providers, or (iii) when the water service cannot be
                reasonably provided in a manner to assure acceptable water quality,
                or in a manner that the PSC finds not to be economically feasible so
                that the cost of such service cannot be recovered in rates as approved
                by
                the PSC.

            

    

     

    
      	
              (b)  

            	
              From
                and after the Closing Date, the Company will construct any future
                transmission mains (or spine lines), pumping stations or storage
                tanks for
                fire suppression to be constructed within the Service Territory at
                its own
                cost.

            

    

     

    
      	
              (c)  

            	
              On
                or before the commencement of site work on the 252+
                acre
                residential/commercial development known as Charlestown Crossing,
                LLC, the
                Company shall install, at the Company’s own cost, the connector line to
                Charlestown Crossing (the “Charlestown
                Connector”).

            

    

     

    
      	
              (d)  

            	
              From
                and after the Closing Date, with the exception of the Charlestown
                Connector (which shall be installed by the Company, at its own cost),
                the
                construction of distribution or service lines within the Service
                Territory
                for specific users shall be the sole and exclusive responsibility
                of the
                developer or applicable end user for such distribution or service
                line(s)
                and shall not in any manner be the responsibility or at the cost
                of the
                Company or its Affiliates.

            

    

     

    
      	
              (e)  

            	
              Notwithstanding
                anything to the contrary in this Section
                7.3,
                the Company or its Affiliates shall be entitled at all times (including,
                without limitation, with respect to the Company’s obligations under Section
                7.3(c))
                to assess customer or developers connecting to any transmission main
                a
                proportionate share (per EDU upon connection) of the cost to install
                such
                transmission mains (or spine lines), pumping stations or storage
                tanks for
                fire suppression based upon principles and approved by the PSC and
                any
                other applicable Governmental Authority.  For purposes of this
                Section
                7.3, costs to install a transmission main shall consist solely
                of
                materials, labor and reasonable overhead to construct and shall
                specifically exclude profit accruing to the benefit of the Company
                or its
                Affiliate in respect of such
                construction.

            

    

     

    
      	
              (f)  

            	
              Artesian
                shall guarantee the obligations of the Company under this Section
                7.3 on
                the terms and conditions set forth in the
                Guaranty.

            

    

     

    
      	
              (g)  

            	
              The
                rights and benefits of the Company and its Affiliates under this
Section
                7.3 and
                the Company’s obligations under this Section
                7.3
                shall, in each case, inure to and be binding upon their respective
                successors or assigns (including third party purchasers of the Company’s
                of its Affiliates’ equity or assets).  In this regard, the
                Company (or its Affiliates) hereby agrees, represents and covenants
                that
                in the event that the Company (or its Affiliates) contracts to sell
                its
                assets to a third party purchaser that would necessitate the sale,
                license
                and/or lease of all or substantially all of the assets of the Company
                (or
                any other presently owned or future acquired water infrastructure
                by the
                Company or its Affiliates within Cecil County, Maryland) to a third
                party,
                the Company (or its Affiliates) shall include an affirmative covenant
                in
                the asset purchase agreement, lease agreement or license agreement
                with
                the third party purchaser, lessee and/or licensee, whereby this third
                party shall be required to assume the Company’s (or its Affiliates’)
                contractual liabilities, duties and obligations under Section
                7.3 of
                this Agreement.

            

    

     

    
      	
              Section
                7.4  

            	
              Buyer
                Permits.

            

    

     

    
      	
              (a)  

            	
              Between
                the Closing Date and December 31, 2008, the Company will, and the
                Buyer
                will cause the Company to, prepare and submit application(s) to the
                Maryland Department of the Environment (“MDE”) and the
                PSC (as
                well as any other necessary Governmental Authority) to authorize
                the
                expansion of the Water Plant to a production capacity of Six Hundred
                Thousand (600,000) gallons per day.  Following the submittal of
                the application(s), the Company will, and the Buyer will cause the
                Company
                to, use commercially reasonable efforts to pursue the approval of
                the
                application(s), said efforts to include, without limitation: (i)
                the
                Company responding to any requests for information by any Governmental
                Authority within the time period required by the requesting Governmental
                Authority, and (ii) in the event that any Governmental Authority
                has not
                formally approved the Company’s application (as may be amended based on
                comments and feedback from any other Governmental Authority) before
                the
                first anniversary of the Company submitting its application(s) to
                each
                respective Governmental Authority, the Company exercising its due
                process
                rights to have its application reviewed, appealed or otherwise
                decided.

            

    

     

    
      	
              (b)  

            	
              Between
                January 1, 2009 and December 31, 2010, the Company will, and the
                Buyer
                will cause the Company to, prepare and submit an application to the
                MDE
                and the PSC (as well as any other necessary Governmental Authority)
                to
                authorize the expansion of the Water Plant to a production capacity
                of One
                Million (1,000,000) gallons per day.  Following the submittal of
                the application(s), the Company will, and the Buyer will cause the
                Company
                to, use commercially reasonable efforts to pursue the approval of
                the
                application(s), said efforts to include, without limitation: (i)
                the
                Company responding to any requests for information by any Governmental
                Authority within the time period required by the requesting Governmental
                Authority, and (ii) in the event that any Governmental Authority
                has not
                formally approved the Company’s application (as may be amended based on
                comments and feedback from any other Governmental Authority) before
                the
                first anniversary of the Company submitting its application(s) to
                each
                respective Governmental Authority, the Buyer exercising its due process
                rights to have its application reviewed, appealed or otherwise
                decided.

            

    

     

    
      	
              (c)  

            	
              The
                Member shall, and shall cause its Affiliates to, reasonably cooperate
                with
                the Company and the Buyer, at the Company’s expense, in connection with
                the application(s) pursuant to this Section
                7.3
                (such costs of preparing and filing the application(s) to be borne
                by the
                Company) and will furnish to the Company and the Buyer any information
                in
                the possession of the Member or its Affiliates required for such
                applications to be made with the Governmental
                Authority.  Nothing set forth in this Agreement shall require
                Company or its Affiliates to defend against any governmental challenges
                or
                denials of any application made by the Company pursuant to this Section
                7.4;
                provided, however, that in the event that any such application is
                met with
                any governmental challenges and/or denials, the Company will, and
                the
                Buyer will cause the Company to, work in good faith with the Member
                to
                amend any such application(s) in an effort to address any issues
                raised in
                the governmental challenges and/or
                denials.

            

    

     

    
      	
              (d)  

            	
              The
                rights and benefits of the Company and its Affiliates under this
Section
                7.4 and
                the obligations of the Company and the Buyer under this Section
                7.4
                shall, in each case, inure to and be binding upon their respective
                successors or assigns (including third party purchasers of the Company’s
                of its Affiliates’ equity or assets).  In this regard, the
                Company (or its Affiliates) hereby agrees, represents and covenants
                that
                in the event that the Company (or its Affiliates) contracts to sell
                its
                assets to a third party purchaser that would necessitate the sale,
                license
                and/or lease of all or substantially all of the assets of the Company
                (or
                any other presently owned or future acquired water infrastructure
                by the
                Company or its Affiliates within Cecil County, Maryland) to a third
                party
                at or prior to the termination or expiration of the Company’s and the
                Buyer’s covenants under this Section
                7.4,
                the Company (or its Affiliates) shall include an affirmative covenant
                in
                the asset purchase agreement, lease agreement or license agreement
                with
                the third party purchaser, lessee and/or licensee, whereby this third
                party shall be required to assume the Company’s (or its Affiliates’)
                contractual liabilities, duties and obligations under Section
                7.4 of
                this Agreement.

            

    

     

    
      	
              Section
                7.5  

            	
              Mandatory
                Partial
                Prepayment of the Note.

            

    

     

    If
      at any
      time after the Closing Date and prior to the satisfaction and discharge in
      full
      of all of the Buyer’s obligations to the Member under the Note, the Buyer shall
      directly or indirectly through the Company actually collect connection fees
      or
      contributions in aid of construction for new customers within the Service
      Territory (collectively “Connection Fees”) that in the
      aggregate equal the Purchase Price, then thereafter the Buyer shall remit to
      the
      Member in partial prepayment of the Note (without incurring any penalties or
      premiums or requiring advance notice) all Connection Fees actually paid to
      the
      Buyer directly or indirectly through the Company until the satisfaction and
      discharge in full of all of the Buyer’s obligations to the Member under the
      Note, which Connection Fees shall be remitted by the Buyer to the Member within
      thirty (30) days of the Buyer’s or the Company’s receipt of
      payment.  Any such prepayments shall be applied to the last payments
      due under the Note.

     

    
      	
              Section
                7.6  

            	
              Further
                Assurances.

            

    

     

    At
      any time and from time to time after
      the Closing, at the reasonable request of the Buyer or the Company and without
      further consideration (but at the Company’s or the Buyer’s cost of preparation
      and filing), the Member promptly shall execute and deliver such confirmatory
      instruments of sale, transfer, conveyance, assignment and confirmation, and
      take
      such other reasonable action, as the Buyer may reasonably request to transfer,
      convey and assign to the Buyer, and to confirm the Buyer’s right, title and
      interest in and to, all of the Acquired Interests or any assets, properties
      or
      rights of the Company and otherwise to carry out the purposes and intent of
      this
      Agreement.

     

    
      	
              Section
                7.7  

            	
              Cooperation
                Obtaining
                Approvals from Governmental
                Authorities.

            

    

     

    Subsequent
      to the Closing Date, upon request by the Buyer or the Company, the Member shall
      support in writing and otherwise reasonably cooperate with the Buyer, at the
      Company’s expense, to assist the Buyer or the Company, as the case may be, in
      the obtaining of, any authorizations or other Permits, including a franchise,
      from any Governmental Authority sought by the Buyer in the Existing Service
      Territory or the Potential Expansion Service Territory.  Reasonable
      costs incurred by Member, except for costs or expenses of any legal counsel
      engaged by the Member, shall be borne by the Buyer or the Company.

     

    ARTICLE
      VIII                                                                                    

     

    CONDITIONS
      PRECEDENT TO THE OBLIGATIONS OF THE SELLERS

     

    The
      obligations of the Sellers with
      respect to actions to be taken on the Closing Date are subject to the
      satisfaction or waiver on or prior to the Closing Date of each of the conditions
      set forth in this Article
      VIII.

     

    
      	
              Section
                8.1  

            	
              Representations
                and
                Warranties.

            

    

     

    All
      representations and warranties of the Buyer contained in this Agreement shall
      be
      true and correct as of the Closing Date with the same effect as though such
      representations and warranties had been made on and as of such date; and a
      certificate to the foregoing effect dated the Closing Date and signed by an
      authorized officer of the Buyer shall have been delivered to the
      Sellers.

     

    
      	
              Section
                8.2  

            	
              Performance
                of
                Obligations.

            

    

     

    Each
      and all of the agreements of the
      Buyer to be performed on or before the Closing Date pursuant to the terms of
      this Agreement shall have been duly performed in all material respects, each
      of
      the documents, agreements, consents and other items to be delivered to the
      Sellers pursuant to Section
      3.2(b)shall have been
      delivered, and the Buyer shall have delivered to the Sellers a certificate,
      dated as of the Closing Date, to such effect.

     

    
      	
              Section
                8.3  

            	
              No
                Litigation

            

    

     

    No
Litigation
      before a court or any
      other Governmental Authority shall have been instituted or threatened seeking
      to
      restrain or prohibit the transactions contemplated by this Agreement, and no
      Governmental Authority shall have taken any other action prohibiting the Sellers
      from proceeding with the transactions hereunder.

     

    
      	
              Section
                8.4  

            	
              Consents
                and Approvals.

            

    

     

    All
      necessary consents of and filings required to be obtained or made with any
      Person or any Governmental Authority relating to the consummation of the
      transactions contemplated herein (collectively, “Required Consents”) by the
      Buyer shall have been obtained and made, including those described on Schedule
      5.4.

     

    
      	
              Section
                8.5  

            	
              Satisfaction
                of
                Indebtedness; Release of
                Liens.

            

    

     

    The
      Buyer
      shall have paid and satisfied in full all obligations of the Company for the
      Closing Debt, and fully and finally released and terminated all Liens in respect
      thereof and provided the Seller with evidence of such satisfaction and discharge
      and release and termination, as requested by the Seller, including, without
      limitation, the Payoff Letters and UCC-3s or other releases to be delivered
      pursuant to Section
      3.2(a)(xi).

     

    

     

    

     

    ARTICLE
      IX                                                                                    

     

    CONDITIONS
      PRECEDENT TO THE OBLIGATIONS OF THE BUYER

     

    The
      obligations of the Buyer with
      respect to actions to be taken on the Closing Date are subject to the
      satisfaction or waiver on or prior to the Closing Date of all of the conditions
      set forth in this Article
      IX.

     

    
      	
              Section
                9.1  

            	
              Representations
                and Warranties.

            

    

     

    All
      the representations and warranties
      of the Sellers contained in this Agreement shall be true and correct as of
      the
      Closing Date with the same effect as though such representations and warranties
      had been made on and as of such date; and Sellers shall have each delivered
      to
      the Buyer a certificate to such effect, dated as of the Closing Date, that,
      with
      respect to the Company, shall have been signed by the Managing Member of the
      Company and, with respect to the Member, shall have been signed by the General
      Partner of the Member.

     

    
      	
              Section
                9.2  

            	
              Performance
                of Obligations.

            

    

     

    Each
      and all of the agreements of the
      Sellers to be performed on or before the Closing Date pursuant to the terms
      of
      this Agreement shall have been duly performed in all material respects, each
      of
      the documents, agreements, consents and other items to be delivered to the
      Sellers pursuant to Section
      3.2(a)shall have been
      delivered, and the Sellers shall have each delivered to the Buyer a certificate
      to such effect, dated as of the Closing Date, that, with respect to the Company,
      shall have been signed by the Managing Member of the Company and, with respect
      to the Member, shall have been signed by the General Partner of the
      Member.

     

    
      	
              Section
                9.3  

            	
              No
                Litigation.

            

    

     

    No
Litigation
      before a court or any
      other Governmental Authority shall have been instituted or threatened seeking
      to
      restrain or prohibit the transactions contemplated by this Agreement, and no
      Governmental Authority shall have taken any other action prohibiting the Buyer
      or Artesian from proceeding with the transactions hereunder.

     

    
      	
              Section
                9.4  

            	
              Consents
                and Approvals.

            

    

     

    All
      Required Consents to have been obtained or made by the Sellers shall have been
      obtained and made, including those described on Schedule
      4.4.  All necessary approvals of the PSC shall have been
      obtained and shall be in full force and effect.

     

    
      	
              Section
                9.5  

            	
              Absence
                of Certain Changes.

            

    

     

    No
      change
      that constitutes or results in a Material Adverse Change shall have occurred
      or
      arisen.

     

    ARTICLE
      X                                                                                    

     

    INDEMNIFICATION

     

    
      	
              Section
                10.1  

            	
              Obligations
                of the Seller and the
                Member.

            

    

     

    
      	
              (a)  

            	
              As
                consideration for the commitment of the Buyer hereunder, the Member
                shall
                indemnify and hold harmless the Buyer, its successors and assigns,
                and
                each of its Affiliates, equity owners, directors, officers, agents,
                Representatives and employees and each other Person, if any, controlling
                such person (each a “Buyer Indemnified
                Person”), from and against all Liabilities to which such Buyer
                Indemnified Person may become subject as a result of, or based upon
                or
                arising out of, directly or indirectly, (i) any material inaccuracy
                in, or
                breach or nonperformance of, any of the representations, warranties,
                covenants or agreements made by the Sellers in or pursuant to this
                Agreement (regardless of any notification pursuant to Section
                6.2
                that corrects any representation or warranty of the Sellers that
                was
                incorrect or inaccurate as of the date hereof and reading out any
                materiality qualifications), (ii) acts or omissions of the Company
                or its
                predecessors prior to the Closing, (iii) Liability under any Environmental
                Laws arising from any activity of the Sellers or any of their predecessors
                prior to the Closing, (iv) the Company’s ownership or operation of the
                Company, the Business or the assets, properties or rights of the
                Company
                prior to the Closing Date (excluding any negligent acts or omissions
                of
                the Buyer or its Affiliates as the contracted operator of the Business),
                (v) Liability with respect to any Lien on or in respect of any of
                the
                assets, properties or rights of the Company that is not released
                by the
                Closing Date (excluding the Member’s Lien or any lien associated with the
                Closing Debt), (vii) Liability arising out of or relating to any
                Litigation by the Town of North East, Maryland, against the Company,
                or
                (viii) the matters disclosed on Schedule 4.14; and (in
                each case) will reimburse any Buyer Indemnified Person for all reasonable
                expenses (including the reasonable fees of counsel) as they are incurred
                by any such Buyer Indemnified Person in connection with investigating,
                preparing or defending any such action or claim pending or threatened,
                whether or not such Buyer Indemnified Person is a party
                hereto.

            

    

     

    
      	
              (b)  

            	
              The
                Member and its Affiliates hereby release and discharge the Company
                of all
                Liabilities and obligations of the Member and its Affiliates arising
                from
                or relating to the period prior to the Closing, excluding any Liabilities
                arising from the negligent acts or omissions of the Buyer or its
                Affiliates, whether pursuant to this Agreement or
                otherwise.  Neither the Member nor any of its Affiliates shall
                seek or otherwise be entitled to seek contribution or any other payments
                from the Company for any or all Liabilities that the Member or its
                Affiliates is or shall be obligated to pay arising from or relating
                to the
                period prior to the Closing, excluding any Liabilities arising from
                the
                negligent acts or omissions of the Buyer or its Affiliates, whether
                pursuant to this Agreement or
                otherwise.

            

    

     

    
      	
              Section
                10.2  

            	
              Obligations
                of the Buyer and Artesian.

            

    

     

    As
      consideration for the commitment of
      the Sellers hereunder, the Buyer and Artesian shall, jointly and severally,
      release, waive claims against, indemnify and hold harmless the Member and its
      Affiliates, equity owners, directors, officers, agents and employees and each
      other Person, if any, controlling the Member or any of its Affiliates (each
      a
“Seller
      Indemnified Person”) from
      and against any Liability to which such Seller Indemnified Person may become
      subject as a result of, or based upon or arising out of, directly or indirectly:
      (a) any material inaccuracy in, or breach or nonperformance of, any of the
      representations, warranties, covenants or agreements made by the Buyer and/or
      Artesian in or pursuant to this Agreement, (b) all Liabilities directly
      resulting from the Buyer’s installation of the Water Plant or the Buyer’s
      operation of the assets of the Company prior to the Closing, (c) any
      sales and use and/or transfer Tax related to the transfer of the Acquired
      Interests from the Company to Buyer, or (d) the Buyer’s ownership or operation of
      the Company, Business or assets, properties or rights of the Company following
      the Closing Date, and (in each case) will reimburse any Seller Indemnified
      Person for all reasonable expenses (including the reasonable fees of counsel)
      as
      they are incurred by any such Seller Indemnified Person in connection with
      investigating, preparing or defending any such action or claim pending or
      threatened, whether or not such Seller Indemnified Person is a party
      hereto.

     

    
      	
              Section
                10.3  

            	
              Tax
                Indemnification.

            

    

     

    The
      Member and its Affiliates
      shall be responsible for, and the Member and its Affiliates, jointly and severally, shall
      indemnify and hold harmless each Buyer Indemnified Person in respect of, any
      Liability, (or actions or claims in respect thereof) attributable to any
      breach by the Member or its Affiliates of the covenants set forth in Sections 7.1 or 7.2
      or any and all
      Taxes relating to any Pre-Closing Tax Period, including any Tax that is or
      results in a Lien upon the Acquired Interests, but excluding any sales and
      use
      tax, any bulk sales or transfer Tax arising from the transfer of the Acquired
      Interests.  The Member and its Affiliates shall not enter into any
      settlement or agreement in compromise of any claim relating to Taxes with any
      Governmental Authority which purports to bind the Company or its Affiliates
      with
      respect to any tax period without the Buyer’s prior written
      consent.

     

    
      	
              Section
                10.4  

            	
              Procedure.

            

    

     

    (a)           
      Each Buyer Indemnified Person
      and
      Seller Indemnified Person shall be referred to collectively herein as an
“Indemnified
      Person.”  Any
      Indemnified Person seeking indemnification with respect to any actual or alleged
      Liability shall give notice to the Person from whom indemnification is sought
      (each, an “Indemnifying
      Person”) on or before the
      date specified in Section
      10.5.  Failure to
      provide the specified notice, however, will not affect the Indemnified Person’s
      rights to indemnity hereunder from the Indemnifying Person, unless the
      Indemnifying Person can show actual material prejudice resulting from such
      failure and then only to the extent of such actual material
      prejudice.

     

    (b)           
      If any Liability is asserted
      by
      any third party against any Indemnified Person, the Indemnifying Person shall
      have the right, unless otherwise precluded by applicable Law, to conduct and
      control the defense, compromise or settlement of any action or threatened action
      brought against the Indemnified Person in respect of matters addressed by the
      indemnity set forth in this Article
      X  (an “Action”).

     

    (c)           
      The Indemnified Person shall
      have
      the right to employ counsel separate from counsel employed by the Indemnifying
      Person in connection with any such Action or threatened Action and to
      participate in the defense thereof, but the fees and expenses of such counsel
      employed by the Indemnified Person shall be at the sole expense of the
      Indemnified Person, unless(i)
      the Indemnifying Person shall have
      elected not, or, after reasonable written notice of any such Action or
      threatened Action, shall have failed (within ten (10) days after the
      Indemnifying Persons’ receipt of such written notice), to assume or participate
      in the defense thereof, (ii) the employment thereof has been specifically
      authorized by the Indemnifying Person in writing, or (iii) the parties to
      any such Action or threatened Action (including any impleaded parties) include
      both the Indemnifying Person and the Indemnified Person and the Indemnifying
      Person shall have been advised in writing by counsel for the Indemnified Person
      that there may be one or more defenses available to the Indemnified Person
      that
      are not available to the Indemnifying Person or legal conflicts of interest
      pursuant to applicable rules of professional conduct between the Indemnifying
      Person and the Indemnified Person (in which case, the Indemnifying Person shall
      not have the right to assume the defense of such Action on behalf of the
      Indemnified Person), in any of which events referred to in clauses (i), (ii)
      and
      (iii) the fees and expenses of one such separate counsel employed by the
      Indemnified Person shall be at the expense of the Indemnifying
      Person.

     

    (d)           
      The Indemnifying Person shall
      not,
      without the written consent of the Indemnified Person, settle or compromise
      any
      such Action or threatened Action or consent to the entry of any judgment which
      does not include as an unconditional term thereof the giving by all other
      participants to the Indemnified Person a release from all liability in respect
      of such Action or threatened Action.  In addition, the Indemnifying
      Person shall not, without the prior written consent of the Indemnified Person,
      settle or compromise any such Action or threatened Action or consent to the
      entry of any judgment which provides for injunctive or equitable relief with
      respect to any Indemnified Person.  Unless the Indemnifying Person
      shall have elected not, or shall have after reasonable written notice of any
      such Action or threatened Action failed, to assume or participate in the defense
      thereof, the Indemnified Person may not settle or compromise any Action or
      threatened Action without the written consent of the Indemnifying Person, such
      consent not to be unreasonably withheld, conditioned, or
      delayed.

     

    (e)           
      If, after reasonable written
      notice of any such Action or threatened Action, the Indemnifying Person does
      not
      affirmatively undertake to defend the Indemnified Person, a recovery against
      the
      Indemnified Person for damages suffered by it in good faith, is conclusive
      in
      its favor against the Indemnifying Person; provided,
however,
      that no such conclusive presumption
      shall be made if the Indemnifying Person has not received reasonable written
      notice of the Action against the Indemnified Person.

     

    
      	
              Section
                10.5  

            	
              Survival
                of Certain Provisions.

            

    

     

    
      	
              (a)  

            	
              The
                representations and warranties and indemnification and other obligations
                of the Sellers and the Buyer and Artesian set forth set forth in
Article
                IV,
                Article
                V
                and Sections
                10.1, 10.2
                and 10.3,
                as the
                case the may be, shall survive the Closing and shall continue in
                full
                force and effect without limitation after the Closing for a period
                of
                twenty-four (24) months following the Closing Date, except that:
                (a)
                claims related to fraud or willful misconduct shall survive until
                the
                expiration of ten (10) Business Days following the date on which
                the
                statute of limitations otherwise applicable to such claim has expired,
                (b)
                claims for indemnification arising from the breach of the representations
                and warranties contained in Sections
                4.11
                (Taxes) or the breach of the covenants contained in Sections
                7.1,
                7.2,
                10.2(b) or
10.3,
                shall
                survive until the expiration of ten (10) Business Days following
                the date
                on which the statute of limitations otherwise applicable to such
                claim has
                expired, and (c) claims for indemnification arising from the breach
                of the
                representations and warranties contained in Section
                4.10
                (Environmental Matters) and Section
                5.6
                (Environmental Matters) or under Sections
                10.1(a)(iii) or 10.2(c)
                shall
                survive until the fifth (5th)
                anniversary of the Closing Date; and (e) claims for indemnification
                arising from the breach of the representations and warranties contained
                in
                Sections
                4.1 (Organization and Good Standing), 4.2
                (Capitalization; Title to Limited Liability Company Interests), 4.20
                (No
                Brokers), 4.3
                (Authority
                and Validity), 4.6
                (Title to
                Assets), 5.1
                (Organization and Good Standing), 5.2
                (Authority
                and Validity) and 5.5
                (No
                Brokers) or arising under Sections
                10.1(a)(iv), (v),
(vi),
(vii)
                or (viii)
                or Section
                10.2(b)
                shall survive indefinitely.

            

    

     

    
      	
              (b)  

            	
              Except
                as otherwise set forth in Section
                10.5(a), each of the covenants, agreements and obligations of the
                parties contained in this Agreement will survive the Closing and
                will
                continue in full force and effect in accordance with its terms, or,
                if not
                specific as to duration, for a period of ten (10) Business Days after
                the
                expiration of the applicable statutes of limitations relating
                thereto.

            

    

     

    
      	
              (c)  

            	
              Each
                period of survival of the representations and warranties, covenants
                and
                agreements prescribed by Section
                10.5(a)
                and (b)
                above is referred to as a “Survival
                Period.”  The liabilities of each party under its
                respective representations and warranties, covenants and agreements
                will
                expire as of the expiration of the applicable Survival Period; provided,
                however, that such expiration will not include, extend or apply to
                any
                representation or warranty or covenant the breach of which has been
                asserted by a party in a written notice to the other party before
                such
                expiration.

            

    

     

    
      	
              Section
                10.6  

            	
              Limitations
                on
                Indemnification

            

    

     

    
      	
              (a)  

            	
              No
                Indemnified Person shall be permitted to seek indemnification from
                the
                Indemnifying Person for any Liabilities of or to the Indemnifying
                Person
                or any other Person entitled to indemnification from the Indemnified
                Person (the “Indemnifiable
                Liabilities”) arising out of or resulting from any breach of any
                Basket-Eligible Representations and Warranties (as hereinafter defined)
                unless the amount for which the Indemnifying Person would be liable
                to the
                Indemnified Person, but for the provisions of this Section
                10.6,
                would exceed Ten Thousand Dollars ($10,000) in the aggregate (the
“Basket”).  If
                the amount of Indemnifiable Liabilities for which an Indemnifying
                Person
                would be entitled to seek indemnification against the Indemnified
                Person
                arising out of or resulting from breaches of the Basket-Eligible
                Representations and Warranties exceeds the Basket, the Indemnifying
                Person
                will be liable to the Indemnified Person, as the case may be, for
                the full
                amount of such Indemnifiable Liabilities arising out of or resulting
                from
                breaches of Basket-Eligible Representations and Warranties, dollar
                for
                dollar from the first dollar of such Indemnifiable
                Liabilities.  The Basket shall apply to all claims for
                indemnification for Indemnifiable Liabilities arising out of or resulting
                from any breach of any representation or warranty (“Basket-Eligible
                Representations
                and Warranties”) other than (i) any breach by the Sellers of any
                representation or warranty contained in Sections
                4.1,
                4.2,
                4.4,
                4.5,
                4.10
                or
                4.19;
                (ii) any breach by the Buyer or Artesian of any representation or
                warranty
                contained in Sections
                5.1,
                5.2
                or
                5.5;
                (iii) any claims for Indemnifiable Liabilities by any Buyer Indemnified
                Person arising out of or resulting under Sections
                10.1(d), (e),
(f),
(g)
                or (h)
                or Section
                10.3;
                (iv) any claims for Indemnifiable Liabilities by any Seller Indemnified
                Person arising out of or resulting under Sections
                10.2(b) or (d);
                or (v)
                claims related to fraud or willful
                misconduct.

            

    

     

    
      	
              (b)  

            	
              The
                maximum liability of any Indemnifying Person pursuant to this Article
                X shall
                be Six Hundred Thousand Dollars ($600,000) (the “Cap”), except
                that
                claims for Indemnifiable Liabilities arising out of or resulting
                from the
                following shall not be subject to the Cap: (i) the breach by the
                Sellers
                of any representation or warranty contained in Sections
                4.1,
                4.2,
                4.3,
                4.5,
                4.6,
                4.11
                or
                4.20,
                (ii) the breach by the Buyer or Artesian of any representation or
                warranty
                contained in Sections
                5.1,
                5.2
                or
                5.5,
                (iii) any claims for Indemnifiable Liabilities by any Buyer Indemnified
                Person arising out of or resulting under Sections
                7.1,
                7.2,
                10.1(a)(iv),
                (v),
                (vi),
                (vii)
                or
                (viii)
                or
                Section
                10.3; (iv) any claims for Indemnifiable Liabilities by any Seller
                Indemnified Person arising out of or resulting under Sections
                10.2(b) or (d);
                (v) any
                Liabilities of any Buyer Indemnified Person arising out of or relating
                to
                any breach of any covenant, agreement or obligation (other than a
                representation or warranty) contained in this Agreement to be performed
                by
                the Company on or prior to Closing; (iv) any Liabilities of any Buyer
                Indemnified Person arising out of or relating to any breach of any
                covenant, agreement or obligation (other than a representation or
                warranty) contained in this Agreement to be performed by the Member
                prior
                to, at or after Closing; (v) any Liabilities of any Seller Indemnified
                Person relating to the Buyer’s of its Affiliates’ negligent operation of
                the Business prior to Closing or the Company’s negligent operation of the
                Business subsequent to the Closing or (vi) any claim related to fraud
                or
                willful misconduct.  All indemnities provided for in the
                Agreement shall apply even in the event of joint and/or concurrent
                negligence, strict liability, or other fault of the party whose liability
                is indemnified.

            

    

     

    
      	
              Section
                10.7  

            	
              Remedies.

            

    

     

    (a)           
      Each party hereto acknowledges
      that irreparable damage would result if this Agreement is not specifically
      enforced.  Therefore, the rights and obligations of the parties under
      the Agreement, including, without limitation, their respective rights and
      obligations to sell and purchase the Acquired Interests and comply with the
      covenants set forth in this Agreement, shall be enforceable by a decree of
      specific performance issued by any court of competent jurisdiction, and/or
      appropriate injunctive relief may be applied for and granted in connection
      therewith.  Each party hereto agrees that monetary damages would not
      be adequate compensation for any loss incurred by reason of a breach by it
      of
      the provisions of this Agreement relating to the Closing and hereby agrees
      to
      waive the defense that a remedy at law would be adequate in any action for
      specific performance or injunctive relief hereunder.  Each party
      hereto agrees to waive any rights to require the other party hereto to prove
      actual damages or post a bond or other security as a condition to the granting
      of any equitable relief under this Section
      10.7.

     

    
      	
              (a)  

            	
              Except
                as otherwise provided herein, no delay of or omission in the exercise
                of
                any right, power or remedy accruing to any party as a result of any
                breach
                or default by any other party under this Agreement shall impair any
                such
                right, power or remedy, nor shall it be construed as a waiver of
                or
                acquiescence in any such breach or default, or of any similar breach
                or
                default occurring later; nor shall any waiver of any single breach
                or
                default be deemed a waiver of any other breach or default occurring
                before
                or after that waiver.  All rights and remedies of any party
                described in this Agreement are cumulative of each other and of every
                right or remedy such party may otherwise
                have.

            

    

     

    
      	
              Section
                10.8  

            	
              Right
                of Set
                Off.

            

    

     

    The
      Buyer
      shall have the rights of recoupment, set-off, defense and counterclaim with
      respect to all or any part of any obligation of a Seller Indemnified Person
      to
      make a payment under this Article
      X.  The
      Buyer may exercise the foregoing rights by notifying the Member that the Buyer
      is reducing the amount of any present or future payments under the
      Note.  Prior to
      any such recoupment, set-off, defense or counterclaim, the Buyer shall submit
      a
      notice to the Member of any claim for which it is entitled to payment,
      specifying in reasonable detail (i) the nature of the claim and (ii) the amount
      of the claimed liability in respect of each such claim.  If within ten
      (10) days after receipt of such claim no notice of objection has been filed
      by
      the Member, the Buyer may offset the amount of such claimed liability against
      any
      present or future payments under the Note.  In the event of any
      objection notice with respect to such claim, the amount of such claim shall
      be
      withheld by the Buyer from any payments otherwise required under the Note and
      the amount of such payment shall be deposited into escrow with an escrow agent
      mutually acceptable to the parties until such claim is resolved by the
      parties.

     

    ARTICLE
      XI                                                                                    

     

    TERMINATION

     

    
      	
              Section
                11.1  

            	
              Termination.

            

    

     

    This
      Agreement may be terminated at any
      time prior to the Closing upon the occurrence of any of the
      following:

     

    
      	
              (a)  

            	
              at
                any time, by mutual written consent of the Buyer and the
                Sellers;

            

    

     

    
      	
              (b)  

            	
              by
                either the Buyer or the Sellers at any time (if such party itself
                is not
                then in material breach of any of its representations and warranties,
                covenants, agreements or other obligations contained in this Agreement),
                if the other party is in material breach or default of any of its
                representations and warranties, covenants, agreements or other obligations
                herein, which breach or default remains uncured for a period of ten
                (10)
                days after such other party’s receipt of written notice of such breach or
                default;

            

    

     

    
      	
              (c)  

            	
              by
                the Buyer at any time pursuant to Section
                6.2 of
                this Agreement;

            

    

     

    
      	
              (d)  

            	
              by
                either the Buyer, on the one
                hand, or the Sellers, on the other, (if such party itself is not
                then in
                material breach of any of its representations and warranties, covenants,
                agreements or other obligations contained in this Agreement) upon
                written
                notice to the other, if the transactions contemplated by this Agreement
                shall not have closed by August 1,
                2008.

            

    

     

    
      	
              Section
                11.2  

            	
              Consequences
                of Termination; Regulatory
                Terminations.

            

    

     

    
      	
              (a)  

            	
              In
                the event that this Agreement shall be terminated pursuant to this
Article
                XI,
                (a) each party will redeliver all documents, work papers and other
                material of any other party relating to the transactions contemplated
                hereby, whether so obtained before or after the execution hereof,
                to the
                party furnishing the same, and (b) all further obligations of the
                parties under this Agreement shall terminate without further liability
                of
                any party to any other party, except that (i) the provisions of this
Section
                11.2
                and the expenses provision contained in Section
                12.1
                shall survive such termination and continue in full force and effect,
                (ii)
                nothing herein shall relieve any party from Liability for any material
                breach of any covenant or any willful breach of any other provision
                of
                this Agreement prior to such
                termination.

            

    

     

    
      	
              (b)  

            	
              Notwithstanding
                anything to the contrary in Section
                11.2(a), in the event that this Agreement shall be terminated
                pursuant to this Article
                XI,
                the Buyer shall not
                be
                liable for any failure to perform its respective obligations hereunder
                due
                to any request or demand by, or requirement of, or any failure to
                obtain
                any necessary approval of, the PSC, including without limitation
                the Buyer’s obligation to secure its obligations under the Note and
                Security Agreement by a first priority lien and security interest
                against
                all of the Company’s assets.

            

    

     

    ARTICLE
      XII                                                                                    

     

    GENERAL
      PROVISIONS

     

    
      	
              Section
                12.1  

            	
              Expenses.

            

    

     

    Except
      as
      provided in Sections
      10.1 and 10.2 or
      as otherwise
      specifically provided in this Agreement, the parties shall bear their respective
      expenses incurred in connection with the preparation, execution and performance
      of this Agreement and the consummation of the transactions contemplated hereby,
      including, without limitation, all fees and expenses of their respective
      Representatives and all fees, expenses and costs for obtaining any Required
      Consent of such
      party.

     

    
      	
              Section
                12.2  

            	
              Confidentiality.

            

    

     

    
      	
              (a)  

            	
              The
                Member recognizes and acknowledges that it and its Affiliates have
                in the
                past, currently have, and in the future may have, access to certain
                non-public confidential information of the Buyer, regarding the Buyer,
                the
                Company or the Business (collectively, “Confidential
                Information”), such as operational policies and pricing and cost
                policies, which are valuable, special and unique assets.  The
                Member agrees that it will not, and will cause its Affiliates not
                to,
                disclose any Confidential Information to any Person for any purpose
                or
                reason whatsoever, except
                (i) to the authorized Representatives of the Buyer who need to know
                information in connection with the transactions contemplated hereby
                and
                (ii) to its own Representatives, counsel and other advisors who first
                agree to the confidentiality provisions of this Section
                12.2,
                unless
                (A) such information becomes known to the public generally through
                no
                fault of the Member, or (B) disclosure is required by Law or valid
                legal
                process, provided, that prior to disclosing any information pursuant
                to
                this clause (B), the Member shall, to the extent permitted by Law
                or valid
                legal process, give prior written notice thereof to the Buyer and
                provide
                the Buyer with the opportunity to contest such disclosure.  In
                the event of a breach or threatened breach of the provisions of this
Section
                12.2 by
                the Member, the Buyer and the Company shall be entitled to an injunction
                restraining the other party from disclosing, in whole or in part,
                such
                confidential information.  Nothing herein shall be construed as
                prohibiting the Buyer or the Company from pursuing any other available
                remedy for such breach or threatened breach, including the recovery
                of
                damages.

            

    

     

    
      	
              (b)  

            	
              Because
                of the difficulty of measuring economic losses as a result of the
                breach
                of the foregoing covenants in this Section
                12.2,
                and because of the immediate and irreparable damage that would be
                caused
                for which they would have no other adequate remedy, the Member agrees
                that, in the event of a breach by it or any of its Affiliates of
                the
                foregoing covenants, the covenant may be enforced by the Buyer or
                the
                Company against the Member and its Affiliates by any equitable remedy,
                including, without limitation, injunction, specific performance,
                and
                restraining order, without the necessity of proving actual damages
                or
                posting a bond or other security.

            

    

     

    
      	
              (c)  

            	
              This
                Section
                12.2 shall survive the termination of, or Closing under, this
                Agreement for a period of five (5)
                years.

            

    

     

    
      	
              Section
                12.3  

            	
              Amendments
                and Waivers.

            

    

     

    Any
      term of this Agreement may be
      amended, supplemented or modified only with the written consent of the Buyer
      and
      the Sellers and the observance of any term of this Agreement may be waived
      (either generally or in a particular instance and either retroactively or
      prospectively), only with the written consent of the party against whom the
      waiver is sought to be enforced.  No waiver of any of the provisions
      of this Agreement shall be deemed or shall constitute a waiver of any other
      provision hereof (whether or not similar), nor shall such waiver constitute
      a
      continuing waiver unless otherwise expressly provided.

     

    
      	
              Section
                12.4  

            	
              Successors
                and Assigns.

            

    

     

    This
      Agreement shall be binding upon and
      shall inure to the benefit of the parties hereto and their respective legal
      representatives, successors, heirs, executors and assigns; provided,
however,
      that this Agreement and all rights and
      obligations hereunder may not be assigned or transferred without the prior
      written consent of the other parties hereto, except
      that the Buyer may assign
      its rights hereunder to a direct or indirect wholly-owned subsidiary of the
      Buyer, so long as the Buyer remains liable for its obligations
      hereunder.

     

    
      	
              Section
                12.5  

            	
              Third
                Party Beneficiaries.

            

    

     

    The
      rights created by this Agreement are
      solely for the benefit of the parties hereto and the respective successors
      or
      permitted assigns, and no other Person shall have or be construed to have any
      legal or equity right, remedy or claim under or in respect of or by virtue
      of
      this Agreement or any provision herein contained; provided,
however,
      that the provisions of Sections
      7.3, 7.4,
7.5,
7.6
      and 7.7
      and Article
      X
above are intended for
      the
      benefit and burden of the parties specified therein, and their respective legal
      representatives, successors, heirs, executors and
      assigns.  Notwithstanding the foregoing, Sellers’Affiliates specified
      on the attached Schedule
      7.3 shall be third party
      beneficiaries of this Agreement.

     

    
      	
              Section
                12.6  

            	
              Choice
                of Law;
                Venue.

            

    

     

    This
      Agreement shall be governed by and
      construed under, and the rights of the parties determined, in accordance with
      the Laws of the State of Maryland (without reference to the choice of Law
      provisions of the State of Maryland).  Each of the parties hereto
      irrevocably consents to the service of any process, pleading, notices or other
      papers by the mailing of copies thereof by registered, certified or first class
      mail, postage prepaid, to such party at such party’s address set forth herein,
      or by any other method provided or permitted under the Laws of the State of
      Maryland. Each party hereby irrevocably submits to the jurisdiction of
      any federal or state court located in State of Maryland (and any appellate court
      therefrom) over any action or proceeding arising out of or relating to this
      Agreement.  Each party hereby irrevocably and unconditionally waives
      and agrees not to plead, to the fullest extent provided by Law, any objection
      it
      may have to venue and the defense of an inconvenient forum to the maintenance
      of
      such action or proceeding in such courts.

     

    
      	
              Section
                12.7  

            	
              Waiver
                of Jury Trial.

            

    

     

    EACH
      PARTY HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY
      PROCEEDING (WHETHER BASED IN CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
      RELATING TO THIS AGREEMENT OR ANY TRANSACTION OR AGREEMENT CONTEMPLATED HEREBY
      OR THE ACTIONS OF ANY PARTY HERETO IN THE NEGOTIATION, ADMINISTRATION,
      PERFORMANCE OR ENFORCEMENT HEREOF.

     

    
      	
              Section
                12.8  

            	
              Notices.

            

    

     

    Unless
      otherwise provided in this Agreement, any notice required or permitted under
      this Agreement shall be given in writing and shall be deemed effectively given
      upon the earlier of (a) personal delivery to the party to be notified or
      (b) the next Business Day after dispatch via nationally recognized
      overnight courier, all addressed to the party to be notified at the address
      indicated for such party below, or at such other address as such party may
      designate by 10 Business Days’ advance written notice to the other
      parties.  Notices should be provided in accordance with this Section 12.8 at the
      following addresses:

     

    If
      to the Buyer, or post-Closing, the
      Company
      to:                                                With a copy to:

     

    Artesian
      Resources
      Corporation                                                                            
DLA Piper US
      LLP

    664
      Churchmans
      Road                                                                                             
 6225 Smith
      Ave

    Newark,
      Delaware
      19702                                                                                          
 Baltimore, Maryland
      21209

    Attn:                                                                                                                            
       David
      Spacht                               
Attn:  Carville B.
      Collins, Esq.

    Telephone:
      302-454-6912                                                                                          
Telephone: 410-580-4125

    Telecopier
      302-453-6980                                                                                           
Telecopier: 410-580-3001

    Email:                                           
      DSpacht@artesianwater.com                            Email:  carville.collins@dlapiper.com

    

    If
      to the Member, or pre-Closing, the
      Company
      to:                                                                                                         

     

       
      With a copy
      to:

    

    Mountain
      Hill Water Company
      LLC                                          The Stewart
      Companies

    Attn:  Dale
      C.
      Voorheis                                                               Attn:  Joseph P. Clark
      II

    950
      Smile
      Way                                                                            
950 Smile Way

    York
      PA
      17404                                                                            
York PA 17404

    Tel:  (717)
      771-3530                                                                       Tel: (717) 771-3505

    FAX:  (717)
      854-6288                                                                    
FAX:  (717)
      854-6288

    EMail:  dcv@stewartcompanies.com                                        
      EMail:  jpc@stewartcompanies.com

     

    
      	
              Section
                12.9  

            	
              Severability.

            

    

     

    If
      one or more provisions of this
      Agreement shall be held invalid, illegal or unenforceable, such provision shall,
      to the extent possible, be modified in such manner as to be valid, legal and
      enforceable but so as to most nearly retain the intent of the parties, and
      if
      such modification is not possible, such provision shall be severed from this
      Agreement.  In either case, the balance of this Agreement shall be
      interpreted as if such provision were so modified or excluded, as the case
      may
      be, and shall be enforceable in accordance with its terms.

     

    
      	
              Section
                12.10  

            	
              Entire
                Agreement.

            

    

     

    This
      Agreement, together with the
      exhibits and schedules hereto (which are hereby made a part hereof and
      specifically incorporated by reference herein), constitutes the entire agreement
      among the parties with respect to the subject matter hereof and, except as
      provided in the following sentence, supersedes all prior understandings and
      agreements, whether written or oral.

     

    
      	
              Section
                12.11  

            	
              Construction.

            

    

     

    The
      parties have participated jointly in the negotiation and drafting of this
      Agreement.  In the event an ambiguity or question of intent or
      interpretation arises, this Agreement shall be construed as if drafted jointly
      by the parties, and no presumption or burden of proof shall arise favoring
      or
      disfavoring any party by virtue of authorship of any provision of this
      Agreement.  The titles and subtitles used in this Agreement are used
      for convenience only and are not to be considered in construing or interpreting
      this Agreement.

     

    
      	
              Section
                12.12  

            	
              Counterparts.

            

    

     

    This
      Agreement may be executed in two or
      more counterparts, including by means of telefaxed signature pages, each of which shall be
      deemed an
      original, but all of which together shall constitute one and the same
      instrument.

     

    Section
      12.13  Time
      is of the Essence.

     

    The
      parties hereto hereby agree that
      time is of the essence with respect to the performance of each party’s
      respective obligations and commitments under this Agreement.

     

    [
      SIGNATURES APPEAR ON THE FOLLOWING
      PAGE. ]

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the
      parties have executed this Asset Purchase Agreement as of the date first above
      written.

     

    BUYER:

     

    ARTESIAN
      WATER MARYLAND,
      INC.

     

    By:                                                                      
      

    Name:

    Title:

    

    ARTESIAN:

    

    For
      the limited purposes set forth in
Sections
      2.2, 3.2(c)and
7.3
      of the
      Agreement

     

    ARTESIAN
      RESOURCES
      CORPORATION

     

    By:                                                                      
      

    Name:

    Title:

    

    COMPANY:

     

    MOUNTAIN
      HILL WATER COMPANY,
      LLC

    

     

    By:                                                                      
      

    Name:

    Title:

    

    MEMBER:

     

    SUNRISE
      HOLDINGS,
      L.P.

    

     

    By:                                                                      
      

    Name:

    Title:exhibit4-3.htm

     

     

    EXHIBIT
4.3

     

    

     

    SECOND
AMENDED AND RESTATED

    SUNPOWER
CORPORATION 2005 STOCK INCENTIVE PLAN

     

    (Adopted
by the Board on August 12, 2005, amended by the Board on September 23,
2005, amended by the Board and the stockholders on October 5, 2005, amended by
the Board and the stockholders on May 4, 2006, amended by the Board and the
stockholders effective February 12, 2007, amended by the Board and the
stockholders effective May 4, 2007, and amended by the Board and the
stockholders on May 8, 2008).

     

    (Reflects
2:1 Reverse Stock Split on November 10, 2005)

    
      
        
           

          

           

        

         

      

      
         

        
          

        

      

      
         

      

    

    

    
      

       

      

    

     

    Table of
Contents

     

     TABLE OF CONTENTS

    
      	 
      	 
      	 
      	 
      	
              Page

            
	
              SECTION
      1.

            	 
      	
              ESTABLISHMENT AND
    PURPOSE.

            	 
      	
              A-1

            
	 
      	 
      	 
      	 
      	 
      
	
              SECTION
      2.

            	 
      	
              DEFINITIONS.

            	 
      	
              A-1

            
	
              (a)

            	 
      	
              “Affiliate”

            	 
      	
              A-1

            
	
              (b)

            	 
      	
              “Award”

            	 
      	
              A-1

            
	
              (c)

            	 
      	
              “Board of
      Directors”

            	 
      	
              A-1

            
	
              (d)

            	 
      	
              “Change
      in Control”

            	 
      	
              A-1

            
	
              (e)

            	 
      	
              “Code”

            	 
      	
              A-2

            
	
              (f)

            	 
      	
              “Committee”

            	 
      	
              A-2

            
	
              (g)

            	 
      	
              “Company”

            	 
      	
              A-2

            
	
              (h)

            	 
      	
              “Consultant”

            	 
      	
              A-2

            
	
              (i)

            	 
      	
              “Employee”

            	 
      	
              A-2

            
	
              (j)

            	 
      	
              “Exchange Act”

            	 
      	
              A-2

            
	
              (k)

            	 
      	
              “Exercise Price”

            	 
      	
              A-2

            
	
              (l)

            	 
      	
              “Fair
      Market Value”

            	 
      	
              A-2

            
	
              (m)

            	 
      	
              “ISO”

            	 
      	
              A-2

            
	
              (n)

            	 
      	
              “Nonstatutory Option” or
      “NSO”

            	 
      	
              A-2

            
	
              (o)

            	 
      	
              “Offeree”

            	 
      	
              A-2

            
	
              (p)

            	 
      	
              “Option”

            	 
      	
              A-2

            
	
              (q)

            	 
      	
              “Optionee”

            	 
      	
              A-3

            
	
              (r)

            	 
      	
              “Outside
      Director”

            	 
      	
              A-3

            
	
              (s)

            	 
      	
              “Parent”

            	 
      	
              A-3

            
	
              (t)

            	 
      	
              “Participant”

            	 
      	
              A-3

            
	
              (u)

            	 
      	
              “Plan”

            	 
      	
              A-3

            
	
              (v)

            	 
      	
              “Purchase Price”

            	 
      	
              A-3

            
	
              (w)

            	 
      	
              “Restricted Share”

            	 
      	
              A-3

            
	
              (x)

            	 
      	
              “Restricted Share
      Agreement”

            	 
      	
              A-3

            
	
              (y)

            	 
      	
              “SAR”

            	 
      	
              A-3

            
	
              (z)

            	 
      	
              “SAR
      Agreement”

            	 
      	
              A-3

            
	
              (aa)

            	 
      	
              “Service”

            	 
      	
              A-3

            
	
              (bb)

            	 
      	
              “Share”

            	 
      	
              A-3

            
	
              (cc)

            	 
      	
              “Stock”

            	 
      	
              A-3

            
	
              (dd)

            	 
      	
              “Stock
      Option Agreement”

            	 
      	
              A-3

            
	
              (ee)

            	 
      	
              “Stock
      Unit”

            	 
      	
              A-3

            
	
              (ff)

            	 
      	
              “Stock
      Unit Agreement”

            	 
      	
              A-3

            
	
              (gg)

            	 
      	
              “Subsidiary”

            	 
      	
              A-3

            
	
              (hh)

            	 
      	
              “Total
      and Permanent Disability”

            	 
      	
              A-4

            
	 
      	 
      	 
      	 
      	 
	
              SECTION
      3.

            	 
      	
              ADMINISTRATION.

            	 
      	
              A-4

            
	
              (a)

            	 
      	
              Committee Composition

            	 
      	
              A-4

            
	
              (b)

            	 
      	
              Committee for Non-Officer
      Grants

            	 
      	
              A-4

            

    

    
      
        
           

           

           

        

         

      

      
         

        
          

        

      

      
         

      

    

    

     

    
      	
              (c)

            	 
      	
              Committee Procedures

            	 
      	
              A-4

            
	
              (d)

            	 
      	
              Committee
    Responsibilities

            	 
      	
              A-4

            
	 
      	 
      	 
      	 
      	 
      
	
              SECTION
      4.

            	 
      	
              ELIGIBILITY.

            	 
      	
              A-5

            
	
              (a)

            	 
      	
              General
      Rule

            	 
      	
              A-5

            
	
              (b)

            	 
      	
              Automatic Grants to Outside
      Directors

            	 
      	
              A-5

            
	
              (c)

            	 
      	
              Ten-Percent
Stockholders

            	 
      	
              A-6

            
	
              (d)

            	 
      	
              Attribution Rules

            	 
      	
              A-6

            
	
              (e)

            	 
      	
              Outstanding Stock

            	 
      	
              A-6

            
	 
      	 
      	 
      	 
      	 
      
	
              SECTION
      5.

            	 
      	
              STOCK
      SUBJECT TO PLAN.

            	 
      	
              A-6

            
	
              (a)

            	 
      	
              Basic
      Limitation

            	 
      	
              A-6

            
	
              (b)

            	 
      	
              Award
      Limitation

            	 
      	
              A-6

            
	
              (c)

            	 
      	
              Additional Shares

            	 
      	
              A-6

            
	 
      	 
      	 
      	 
      	 
      
	
              SECTION
      6.

            	 
      	
              RESTRICTED SHARES.

            	 
      	
              A-7

            
	
              (a)

            	 
      	
              Restricted Stock
    Agreement

            	 
      	
              A-7

            
	
              (b)

            	 
      	
              Payment
      for Awards

            	 
      	
              A-7

            
	
              (c)

            	 
      	
              Vesting

            	 
      	
              A-7

            
	
              (d)

            	 
      	
              Voting
      and Dividend Rights

            	 
      	
              A-7

            
	
              (e)

            	 
      	
              Restrictions on Transfer of
      Shares

            	 
      	
              A-7

            
	 
      	 
      	 
      	 
      	 
      
	
              SECTION
      7.

            	 
      	
              TERMS
      AND CONDITIONS OF OPTIONS.

            	 
      	
              A-7

            
	
              (a)

            	 
      	
              Stock
      Option Agreement

            	 
      	
              A-7

            
	
              (b)

            	 
      	
              Number
      of Shares

            	 
      	
              A-7

            
	
              (c)

            	 
      	
              Exercise
      Price

            	 
      	
              A-7

            
	
              (d)

            	 
      	
              Withholding Taxes

            	 
      	
              A-7

            
	
              (e)

            	 
      	
              Exercisability and Term

            	 
      	
              A-7

            
	
              (f)

            	 
      	
              Exercise
      of Options

            	 
      	
              A-8

            
	
              (g)

            	 
      	
              Effect
      of Change in Control

            	 
      	
              A-8

            
	
              (h)

            	 
      	
              No
      Rights as a Stockholder

            	 
      	
              A-8

            
	
              (i)

            	 
      	
              Modification, Extension and Renewal of
      Options

            	 
      	
              A-8

            
	
              (j)

            	 
      	
              Restrictions on Transfer of
      Shares

            	 
      	
              A-8

            
	
              (k)

            	 
      	
              Buyout
      Provisions

            	 
      	
              A-8

            
	 
      	 
      	 
      	 
      	 
      
	
              SECTION
      8.

            	 
      	
              PAYMENT
      FOR SHARES.

            	 
      	
              A-8

            
	
              (a)

            	 
      	
              General
      Rule

            	 
      	
              A-8

            
	
              (b)

            	 
      	
              Surrender of Stock

            	 
      	
              A-8

            
	
              (c)

            	 
      	
              Services
      Rendered

            	 
      	
              A-8

            
	
              (d)

            	 
      	
              Cashless
      Exercise

            	 
      	
              A-8

            
	
              (e)

            	 
      	
              Exercise/Pledge

            	 
      	
              A-9

            
	
              (f)

            	 
      	
              Other
      Forms of Payment

            	 
      	
              A-9

            
	
              (g)

            	 
      	
              Limitations under Applicable
      Law

            	 
      	
              A-9

            
	 
      	 
      	 
      	 
      	 
      
	
              SECTION
      9.

            	 
      	
              STOCK
      APPRECIATION RIGHTS.

            	 
      	
              A-9

            
	
              (a)

            	 
      	
              SAR
      Agreement

            	 
      	
              A-9

            

    

    
      
        
           

          

           

        

         

      

      
         

        
          

        

      

      
         

      

    

    

     

    
      	
              (b)

            	 
      	
              Number
      of Shares

            	 
      	
              A-9

            
	
              (c)

            	 
      	
              Exercise
      Price

            	 
      	
              A-9

            
	
              (d)

            	 
      	
              Exercisability and Term

            	 
      	
              A-9

            
	
              (e)

            	 
      	
              Effect
      of Change in Control

            	 
      	
              A-9

            
	
              (f)

            	 
      	
              Exercise
      of SARs

            	 
      	
              A-9

            
	
              (g)

            	 
      	
              Modification or Assumption of
      SARs

            	 
      	
              A-9

            
	
              (h)

            	 
      	
              Buyout
      Provisions

            	 
      	
              A-9

            
	 
      	 
      	 
      	 
      	 
      
	
              SECTION
      10.

            	 
      	
              STOCK
      UNITS.

            	 
      	
              A-10

            
	
              (a)

            	 
      	
              Stock
      Unit Agreement

            	 
      	
              A-10

            
	
              (b)

            	 
      	
              Payment
      for Awards

            	 
      	
              A-10

            
	
              (c)

            	 
      	
              Vesting
      Conditions

            	 
      	
              A-10

            
	
              (d)

            	 
      	
              Voting
      and Dividend Rights

            	 
      	
              A-10

            
	
              (e)

            	 
      	
              Form and
      Time of Settlement of Stock Units

            	 
      	
              A-10

            
	
              (f)

            	 
      	
              Death of
      Recipient

            	 
      	
              A-10

            
	
              (g)

            	 
      	
              Creditors’ Rights

            	 
      	
              A-10

            
	 
      	 
      	 
      	 
      	 
      
	
              SECTION
      11.

            	 
      	
              ADJUSTMENT OF SHARES.

            	 
      	
              A-10

            
	
              (a)

            	 
      	
              Adjustments

            	 
      	
              A-10

            
	
              (b)

            	 
      	
              Dissolution or
    Liquidation

            	 
      	
              A-11

            
	
              (c)

            	 
      	
              Reorganizations

            	 
      	
              A-11

            
	
              (d)

            	 
      	
              Reservation of Rights

            	 
      	
              A-11

            
	 
      	 
      	 
      	 
      	 
      
	
              SECTION
      12.

            	 
      	
              DEFERRAL
      OF AWARDS.

            	 
      	
              A-11

            
	
              (a)

            	 
      	
              Committee Powers

            	 
      	
              A-11

            
	
              (b)

            	 
      	
              General
      Rules

            	 
      	
              A-12

            
	 
      	 
      	 
      	 
      	 
      
	
              SECTION
      13.

            	 
      	
              AWARDS
      UNDER OTHER PLANS.

            	 
      	
              A-12

            
	 
      	 
      	 
      	 
      	 
      
	
              SECTION
      14.

            	 
      	
              PAYMENT
      OF DIRECTOR’S FEES IN SECURITIES.

            	 
      	
              A-12

            
	
              (a)

            	 
      	
              Effective Date

            	 
      	
              A-12

            
	
              (b)

            	 
      	
              Elections to Receive NSOs, Restricted Shares or
      Stock Units

            	 
      	
              A-12

            
	
              (c)

            	 
      	
              Number
      and Terms of NSOs, Restricted Shares or Stock
    Units

            	 
      	
              A-12

            
	 
      	 
      	 
      	 
      	 
      
	
              SECTION
      15.

            	 
      	
              LEGAL
      AND REGULATORY REQUIREMENTS.

            	 
      	
              A-12

            
	 
      	 
      	 
      	 
      	 
      
	
              SECTION
      16.

            	 
      	
              WITHHOLDING TAXES; COMPLIANCE WITH SECTION 409A OF
      THE CODE.

            	 
      	
              A-12

            
	
              (a)

            	 
      	
              General

            	 
      	
              A-12

            
	
              (b)

            	 
      	
              Share
      Withholding

            	 
      	
              A-12

            
	 
      	 
      	 
      	 
      	 
      
	
              SECTION
      17.

            	 
      	
              OTHER
      PROVISIONS APPLICABLE TO AWARDS.

            	 
      	
              A-13

            
	
              (a)

            	 
      	
              Transferability

            	 
      	
              A-13

            
	
              (b)

            	 
      	
              Qualifying Performance
      Criteria

            	 
      	
              A-13

            
	 
      	 
      	 
      	 
      	 
      
	
              SECTION
      18.

            	 
      	
              NO
      EMPLOYMENT RIGHTS.

            	 
      	
              A-14

            
	 
      	 
      	 
      	 
      	 
      

    

    
      
        
           

          

           

        

         

      

      
         

        
          

        

      

      
         

      

    

    

     

    
      	
              SECTION
      19.

            	 
      	
              DURATION AND
AMENDMENTS.

            	 
      	
              A-14

            
	
              (a)

            	 
      	
              Term of
      the Plan

            	 
      	
              A-14

            
	
              (b)

            	 
      	
              Right
      to Amend or Terminate the Plan

            	 
      	
              A-14

            
	
              (c)

            	 
      	
              Effect
      of Termination

            	 
      	
              A-14

            
	 
      	 
      	 
      	 
      	 
      
	
              SECTION
      20.

            	 
      	
              EXECUTION.

            	 
      	
              A-14

            
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      

    

     

    

    
      
        
           

          

           

        

         

      

      
         

        
          

        

      

      
         

      

    

    SUNPOWER
CORPORATION

     

    SECOND
AMENDED AND RESTATED SUNPOWER CORPORATION 2005 STOCK INCENTIVE PLAN

     

     SECTION 1. ESTABLISHMENT AND
PURPOSE.

     

    The Plan
was adopted by the Board of Directors on August 12, 2005, and amended by
the Board of Directors on September 23, 2005, and the Plan as so amended
was approved by the shareholders of the Company on October 10, 2005, to be
effective as of the date of the initial offering of Stock to the public pursuant
to a registration statement filed by the Company with the Securities and
Exchange Commission (the “Effective Date”), which was November 17, 2005.
The Plan reflects the two for one reverse stock split effected on
November 10, 2005. The Plan was subsequently amended by the Board of
Directors and the shareholders of the Company on May 4, 2006, amended by
the Board of Directors and the shareholders of the Company again effective
February 12, 2007, amended by the Board of Directors and the shareholders
of the Company effective May 4, 2007, and again amended by the Board of
Directors and the shareholders of the Company effective May 8, 2008. The purpose
of the Plan is to promote the long-term success of the Company and the creation
of stockholder value by (a) encouraging Employees, Outside Directors and
Consultants to focus on critical long-range objectives, (b) encouraging the
attraction and retention of Employees, Outside Directors and Consultants with
exceptional qualifications and (c) linking Employees, Outside Directors and
Consultants directly to stockholder interests through increased stock ownership.
The Plan seeks to achieve this purpose by providing for Awards in the form of
restricted shares, stock units, options (which may constitute incentive stock
options or nonstatutory stock options) or stock appreciation
rights.

     

     SECTION 2. DEFINITIONS.

     

     (a) “ Affiliate ” shall mean any
entity other than a Subsidiary, if the Company and/or one of more Subsidiaries
own not less than 50% of such entity.

     

     (b) “ Award ” shall mean any award
of an Option, a SAR, a Restricted Share or a Stock Unit under the
Plan.

     

     (c) “ Board of Directors ” shall
mean the Board of Directors of the Company, as constituted from time to
time.

     

     (d) “ Change in Control ” shall
mean the occurrence of any of the following events:

     

    (i) Any
“person” (as defined below) other than Cypress Semiconductor Corporation who by
the acquisition or aggregation of securities, is or becomes the “beneficial
owner” (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 50% or more of the
combined voting power of the Company’s then outstanding securities ordinarily
(and apart from rights accruing under special circumstances) having the right to
vote at elections of directors (the “Base Capital Stock”); except that any
change in the relative beneficial ownership of the Company’s securities by any
person resulting solely from a reduction in the aggregate number of outstanding
shares of Base Capital Stock, and any decrease thereafter in such person’s
ownership of securities, shall be disregarded until such person increases in any
manner, directly or indirectly, such person’s beneficial ownership of any
securities of the Company; or

     

    (ii) The
consummation of a merger or consolidation of the Company with or into another
entity or any other corporate reorganization, if persons who were not
stockholders of the Company immediately prior to such merger, consolidation or
other reorganization own immediately after such merger, consolidation or other
reorganization 50% or more of the voting power of the outstanding securities of
each of (A) the continuing or surviving entity and (B) any direct or
indirect parent corporation of such continuing or surviving entity;
or

     

    (iii) The
sale, transfer or other disposition of all or substantially all of the Company’s
assets.

     

    For
purposes of subsection (d)(ii) above, the term “person” shall have the same
meaning as when used in Sections 13(d) and 14(d) of the Exchange Act but shall
exclude (1) a trustee or other fiduciary holding securities under an
employee benefit plan maintained by the Company or a Parent or Subsidiary and
(2) a corporation owned directly or indirectly by the stockholders of the
Company in substantially the same proportions as their ownership of the
Stock.

     

    Any other
provision of this Section 2(d) notwithstanding, a transaction shall not
constitute a Change in Control if its sole purpose is to change the state of the
Company’s incorporation or to create a holding company that will be owned in
substantially the same proportions by the persons who held the Company’s
securities immediately before

    
      
        A-1

      

      
        
        

        
          

        

      

      
        
        
 such
transaction, and a Change in Control shall not be deemed to occur if the Company
files a registration statement with the United States Securities and Exchange
Commission for the initial offering of Stock to the public or if there is a
spinoff of the Company by a Parent resulting in a dividend or distribution
payable in Stock to the Parent’s stockholders.

    

     

     (e) “ Code ” shall mean the
Internal Revenue Code of 1986, as amended.

     

     (f) “ Committee ” shall mean the
Compensation Committee as designated by the Board of Directors, which is
authorized to administer the Plan, as described in Section 3
hereof.

     

     (g) “ Company ” shall mean SunPower
Corporation, a California corporation, until it reincorporates in Delaware prior
to Effective Date, by merging into SunPower Corporation, a Delaware corporation,
and after such reincorporation and merger the “Company” shall mean SunPower
Corporation, a Delaware corporation.

     

     (h) “ Consultant ” shall mean
(i) a consultant or advisor who provides bona fide services to the Company,
a Parent, a Subsidiary or an Affiliate as an independent contractor (not
including service as a member of the Board of Directors) or a member of the
board of directors of a Parent or a Subsidiary, in each case who is not an
Employee, or (ii) a common-law employee of an Affiliate.

     

     (i) “ Employee ” shall mean any
individual who is a common-law employee of the Company, a Parent or a
Subsidiary.

     

     (j) “ Exchange Act ” shall mean the
Securities Exchange Act of 1934, as amended.

     

     (k) “ Exercise Price ” shall mean,
in the case of an Option, the amount for which one Share may be purchased upon
exercise of such Option, as specified in the applicable Stock Option Agreement.
“Exercise Price,” in the case of a SAR, shall mean an amount, as specified in
the applicable SAR Agreement, which is subtracted from the Fair Market Value of
one Share in determining the amount payable upon exercise of such
SAR.

     

     (l) “ Fair Market Value ” with
respect to a Share, shall mean the market price of one Share, determined by the
Committee as follows:

     

    (i) If
the Stock was traded over-the-counter on the date in question but was not traded
on The Nasdaq Stock Market LLC, then the Fair Market Value shall be equal to the
last transaction price quoted for such date by the OTC Bulletin Board or, if not
so quoted, shall be equal to the mean between the last reported representative
bid and asked prices quoted for such date by the principal automated
inter-dealer quotation system on which the Stock is quoted or, if the Stock is
not quoted on any such system, by the Pink Sheets LLC;

     

    (ii) If
the Stock was traded on The Nasdaq Stock Market LLC, then the Fair Market Value
shall be equal to the last reported sale price quoted for such date by The
Nasdaq Stock Market LLC;

     

    (iii) If
the Stock was traded on a United States stock exchange on the date in question,
then the Fair Market Value shall be equal to the closing price reported for such
date by the applicable composite-transactions report; and

     

    (iv) If
none of the foregoing provisions is applicable, then the Fair Market Value shall
be determined by the Committee in good faith on such basis as it deems
appropriate.

     

    In all
cases, the determination of Fair Market Value by the Committee shall be
conclusive and binding on all persons.

     

     (m) “ ISO ” shall mean an employee
incentive stock option described in Section 422 of the
Code.

     

     (n) “Nonstatutory Option” or “
NSO ” shall mean an
employee stock option that is not an ISO.

     

     (o) “Offeree” shall mean an
individual to whom the Committee has offered the right to acquire Shares under
the Plan (other than upon exercise of an Option).

     

     (p)
“ Option ” shall mean
an ISO or Nonstatutory Option granted under the Plan and entitling the holder to
purchase Shares.

     

    
      
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     (q) “Optionee” shall mean an
individual or estate who holds an Option or SAR.

     

     (r) “Outside Director ” shall mean
a member of the Board of Directors who is also an “independent director” as
defined in (i) if the Stock is listed on The Nasdaq Stock Market LLC, Rule
4200(a)(15) of the Marketplace Rules of The Nasdaq Stock Market LLC, as such
rule may be amended from time to time, which governs the independence
determination with respect to directors serving on the board of directors for
companies listed on The Nasdaq Stock Market LLC or (ii) if the Stock is
listed on the New York Stock Exchange, Section 303A.02 of the New York
Stock Exchange Listed Company Manual, as such rule may be amended from time to
time, which governs the independence determination with respect to directors
serving on the board of directors for companies listed on the New York Stock
Exchange.

     

     (s) “Parent ” shall mean any
corporation (other than the Company) in an unbroken chain of corporations ending
with the Company, if each of the corporations other than the Company owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain. A corporation that attains
the status of a Parent on a date after the adoption of the Plan shall be a
Parent commencing as of such date.

     

     (t) “Participant” shall mean an
individual or estate who holds an Award.

     

     (u) “Plan” shall mean this Second
Amended and Restated SunPower Corporation 2005 Stock Incentive Plan, as amended
or amended and restated from time to time.

     

     (v) “Purchase Price” shall mean
the consideration for which one Share may be acquired under the Plan (other than
upon exercise of an Option), as specified by the Committee.

     

     (w) “Restricted Share” shall mean
a Share awarded under the Plan.

     

     (x) “Restricted Share Agreement”
shall mean the agreement between the Company and the recipient of a Restricted
Share which contains the terms, conditions and restrictions pertaining to such
Restricted Shares.

     

     (y) “SAR” shall mean a stock
appreciation right granted under the Plan.

     

     (z) “SAR Agreement” shall mean the
agreement between the Company and an Optionee which contains the terms,
conditions and restrictions pertaining to his or her SAR.

     

     (aa) “Service” shall mean service
as an Employee, Consultant or Outside Director. Service does not terminate when
an Employee goes on a bona fide leave of absence, that was approved by the
Company in writing, if the terms of the leave provide for continued service
crediting, or when continued service crediting is required by applicable law.
However, for purposes of determining whether an Option is entitled to ISO
status, an Employee’s employment will be treated as terminating 90 days after
such Employee went on leave, unless such Employee’s right to return to active
work is guaranteed by law or by a contract. Service terminates in any event when
the approved leave ends, unless such Employee immediately returns to active
work. The Company determines which leaves count toward Service, and when Service
terminates for all purposes under the Plan.

     

     (bb) “Share” shall mean one share
of Stock, as adjusted in accordance with Section 8 (if
applicable).

     

     (cc) “Stock” shall mean the
Class A Common Stock of the Company.

     

     (dd) “ Stock Option Agreement ”
shall mean the agreement between the Company and an Optionee that contains the
terms, conditions and restrictions pertaining to his Option.

     

     (ee) “Stock Unit” shall mean a
bookkeeping entry representing the equivalent of one Share, as awarded under the
Plan.

     

     (ff) “Stock Unit Agreement” shall
mean the agreement between the Company and the recipient of a Stock Unit which
contains the terms, conditions and restrictions pertaining to such Stock
Unit.

     

     (gg) “Subsidiary” shall mean any
corporation, if the Company and/or one or more other Subsidiaries own not less
than 50% of the total combined voting power of all classes of outstanding stock
of such corporation.  

    
      
        A-3

      

      
        
        

        
          

        

      

          A corporation
that attains the status of a Subsidiary on a date after the adoption of the Plan
shall be considered a Subsidiary commencing as of such date.

    

     

     (hh) “Total and Permanent
Disability” shall mean permanent and total disability as defined by
section 22(e)(3) of the Code.

     

     SECTION 3.
ADMINISTRATION.

     

     (a) Committee Composition. The
Plan shall be administered by the Committee. The Committee shall consist of two
or more directors of the Company, who shall be appointed by the Board. In
addition, the composition of the Committee shall satisfy (i) such
requirements as the Securities and Exchange Commission may establish for
administrators acting under plans intended to qualify for exemption under Rule
16b-3 (or its successor) under the Exchange Act; and (ii) such requirements
as the Internal Revenue Service may establish for outside directors acting under
plans intended to qualify for exemption under Section 162(m)(4)(C) of the
Code.

     

     (b) Committee for Non-Officer
Grants. The Board may also appoint one or more separate committees of the
Board, each composed of one or more directors of the Company who need not
satisfy the requirements of Section 3(a), who may administer the Plan with
respect to Employees who are not considered officers or directors of the Company
under Section 16 of the Exchange Act, may grant Awards under the Plan to
such Employees and may determine all terms of such grants. Within the
limitations of the preceding sentence, any reference in the Plan to the
Committee shall include such committee or committees appointed pursuant to the
preceding sentence. The Board of Directors may also authorize one or more
officers of the Company to designate Employees, other than officers under
Section 16 of the Exchange Act, to receive Awards and/or to determine the
number of such Awards to be received by such persons; provided, however, that
the Board of Directors shall specify the total number of Awards that such
officers may so award.

     

     (c) Committee Procedures. The
Board of Directors shall designate one of the members of the Committee as
chairman. The Committee may hold meetings at such times and places as it shall
determine. The acts of a majority of the Committee members present at meetings
at which a quorum exists, or acts reduced to or approved in writing by all
Committee members, shall be valid acts of the Committee.

     

     (d) Committee Responsibilities.
Subject to the provisions of the Plan, the Committee shall have full authority
and discretion to take the following actions:

     

    (i) To
interpret the Plan and to apply its provisions;

     

    (ii) To
adopt, amend or rescind rules, procedures and forms relating to the Plan,
including rules and regulations relating to sub-plans established for the
purpose of satisfying applicable foreign laws including qualifying for preferred
tax treatment under applicable foreign tax laws;

     

    (iii) To
authorize any person to execute, on behalf of the Company, any instrument
required to carry out the purposes of the Plan;

     

    (iv)To
determine when Awards are to be granted under the Plan;

     

    (v) To
select the Offerees and Optionees;

     

    (vi)To
determine the number of Shares to be made subject to each Award;

     

    (vii) To
prescribe the terms and conditions of each Award, including (without limitation)
the Exercise Price and Purchase Price, and the vesting or duration of the Award
(including accelerating the vesting of Awards, either at the time of the Award
or thereafter, without the consent of the Participant), to determine whether an
Option is to be classified as an ISO or as a Nonstatutory Option, and to specify
the provisions of the agreement relating to such Award;

     

    (viii) To
amend any outstanding Award agreement, subject to applicable legal restrictions
and to the consent of the Participant if the Participant’s rights or obligations
would be materially impaired;

     

    (ix) To
prescribe the consideration for the grant of each Award or other right under the
Plan and to determine the sufficiency of such consideration;

     

    (x) To
determine the disposition of each Award or other right under the Plan in the
event of a Participant’s divorce or dissolution of marriage;

    
      
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    (xi) To
determine whether Awards under the Plan will be granted in replacement of other
grants under an incentive or other compensation plan of an acquired
business;

     

    (xii) To
correct any defect, supply any omission, or reconcile any inconsistency in the
Plan or any Award agreement;

     

    (xiii) To
establish or verify the extent of satisfaction of any performance goals or other
conditions applicable to the grant, issuance, exercisability, vesting and/or
ability to retain any Award; and

     

    (xiv) To
take any other actions deemed necessary or advisable for the administration of
the Plan.

     

    Subject
to the requirements of applicable law, the Committee may designate persons other
than members of the Committee to carry out its responsibilities and may
prescribe such conditions and limitations as it may deem appropriate, except
that the Committee may not delegate its authority with regard to the selection
for participation of or the granting of Options or other rights under the Plan
to persons subject to Section 16 of the Exchange Act. All decisions,
interpretations and other actions of the Committee shall be final and binding on
all Offerees, all Optionees, and all persons deriving their rights from an
Offeree or Optionee. No member of the Committee shall be liable for any action
that he has taken or has failed to take in good faith with respect to the Plan,
any Option, or any right to acquire Shares under the Plan.

     

     SECTION 4. ELIGIBILITY.

     

     (a) General Rule. Only Employees
shall be eligible for the grant of ISOs. Only Employees, Consultants and Outside
Directors shall be eligible for the grant of Restricted Shares, Stock Units,
Nonstatutory Options or SARs.

     

     (b) Automatic Grants to Outside
Directors. Unless otherwise determined by the Board of Directors, the
following Awards shall be automatically granted as follows:

     

    (i) Each
Outside Director who first joins the Board of Directors on or after the date of
the Company’s 2008 annual meeting of stockholders shall receive, subject to
approval of the Plan by the Company’s stockholders, a grant of 6,600 Stock Units
(subject to adjustment under Section 11) on the date of his or her election
to the Board of Directors. Twenty percent (20%) of such Stock Units granted
under this Section 4(b)(i) shall vest and become exercisable on the first
anniversary of the date of grant. The balance of such Stock Units (i.e. the
remaining eighty percent (80%)) shall vest and become exercisable annually
over a four-year period beginning on the day which is one year after the first
anniversary of the date of grant, at an annual rate of 20% of the total number
of Stock Units. Notwithstanding the foregoing, each such Stock Unit shall become
vested if a Change in Control occurs with respect to the Company during the
Outside Director’s Service.

     

    (ii) On
the first business day following the conclusion of each regular annual meeting
of the Company’s stockholders, commencing with the Company’s 2008 annual meeting
of stockholders, each Outside Director who was not elected to the Board for the
first time at such meeting and who will continue serving as a member of the
Board of Directors thereafter shall receive, subject to approval of the Plan by
the Company’s stockholders, a grant of 4,000 Stock Units (subject to adjustment
under Section 11), provided that such Outside Director has served on the
Board of Directors for at least six months. Twenty-five percent (25%) of
such Stock Units granted under this Section 4(b)(ii) shall vest and become
exercisable quarterly over a one-year period, with the first twenty-five percent
(25%) of such Stock Units vesting on the day that is the three-month anniversary
of the date of grant.  Notwithstanding the foregoing, each such Stock
Unit granted under this Section 4(b)(ii) shall become vested if a Change in
Control occurs with respect to the Company during the Outside Director’s
Service.

     

    (iii)
Each Outside Director or non-employee director who is first appointed Chairman
of the Board of Directors on or after the date of the Company’s 2008 annual
meeting of stockholders, shall receive, subject to approval of the Plan by the
Company’s stockholders, a grant of 10,000 Stock Units (subject to adjustment
under Section 11) on the date of his or her appointment as Chairman of the
Board of Directors. Twenty-five percent (25%) of such Stock Units granted
under this Section 4(b)(iii) shall vest and become exercisable quarterly
over a one-year period, with the first twenty-five percent (25%) of such
Stock Units vesting on the day that is the three-month anniversary of the date
of grant. Notwithstanding the foregoing, each such Stock Unit shall become
vested if a Change in Control occurs with respect to the Company during the
Service of the Chairman of the Board of Directors.

     

    
      
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    (iv) On
the first business day following the conclusion of each regular annual meeting
of the Company’s stockholders, commencing with the Company’s 2008 annual
meeting, the Chairman of the Board of Directors shall receive, subject to
approval of the Plan by the Company’s stockholders, a grant of 10,000 Stock
Units (subject to adjustment under Section 11), provided that the Chairman
of the Board of Directors has served on the Board of Directors for at least six
months and will continue serving as Chairman of the Board of Directors
thereafter. Twenty-five percent (25%) of such Stock Units granted under
this Section 4(b)(iv) shall vest and become exercisable quarterly over a
one-year period, with the first twenty-five percent (25%) of such Stock
Units vesting on the day that is the three-month anniversary of the date of
grant. Notwithstanding the foregoing, each such Stock Unit shall become vested
if a Change in Control occurs with respect to the Company during the Service of
the Chairman of Board of Directors.

     

     (c) Ten-Percent Stockholders . An
Employee who owns more than 10% of the total combined voting power of all
classes of outstanding stock of the Company, a Parent or Subsidiary shall not be
eligible for the grant of an ISO unless such grant satisfies the requirements of
Section 422(c)(5) of the Code.

     

     (d) Attribution Rules. For
purposes of Section 4(c) above, in determining stock ownership, an Employee
shall be deemed to own the stock owned, directly or indirectly, by or for such
Employee’s brothers, sisters, spouse, ancestors and lineal descendants. Stock
owned, directly or indirectly, by or for a corporation, partnership, estate or
trust shall be deemed to be owned proportionately by or for its stockholders,
partners or beneficiaries.

     

     (e) Outstanding Stock. For
purposes of Section 4(c) above, “outstanding stock” shall include all stock
actually issued and outstanding immediately after the grant. “Outstanding stock”
shall not include shares authorized for issuance under outstanding options held
by the Employee or by any other person.

     

     SECTION 5. STOCK SUBJECT TO
PLAN.

     

    (a) Basic Limitation. Shares
offered under the Plan shall be authorized but unissued Shares or treasury
Shares. The aggregate number of Shares authorized for issuance as Awards under
the Plan shall not exceed 3,192,133 Shares, plus (i) any Shares subject to
options granted under the Company’s 1988 Incentive Stock Plan and 1996 Stock
Plan which lapse or otherwise terminate prior to being exercised subsequent to
August 12, 2005, and plus (ii) any of the 105,000 Shares subject to
non-plan options granted during 2004 that lapse or otherwise terminate prior to
being exercised subsequent to August 12, 2005.  Notwithstanding
the foregoing, the number of Shares available for issuance under the Plan will
be increased on the first day of each fiscal year beginning with the 2009 fiscal
year, in an amount equal to the least of (x) 3% of the outstanding shares of all
classes of common stock of the Company on the last day of the immediately
preceding fiscal year, (y) 6,000,000 Shares, or (z) such number of Shares
determined by the Board of Directors.  The limitations of this
Section 5(a) shall be subject to adjustment pursuant to Section 11.
The number of Shares that are subject to Options or other Awards outstanding at
any time under the Plan shall not exceed the number of Shares which then remain
available for issuance under the Plan. The Company, during the term of the Plan,
shall at all times reserve and keep available sufficient Shares to satisfy the
requirements of the Plan.  Notwithstanding the above, the aggregate
number of shares actually issued or transferred by the Company upon the exercise
of ISOs will not exceed fifteen million (15,000,000) shares.

     

     (b) Award Limitation. Subject to
the provisions of Section 11, no Participant may receive Options, SARs,
Restricted Shares or Stock Units under the Plan in any calendar year that relate
to more than five hundred thousand (500,000) Shares.

     

     (c) Additional Shares. If
Restricted Shares or Shares issued upon the exercise of Options are forfeited,
then such Shares shall again become available for Awards under the Plan. If
Stock Units, Options or SARs are forfeited or terminate for any other reason
before being exercised, then the corresponding Shares shall become available for
Awards under the Plan. If Stock Units are settled, then only the number of
Shares (if any) actually issued in settlement of such Stock Units shall reduce
the number available under Section 5(a) and the balance shall again become
available for Awards under the Plan. If SARs are exercised, then only the number
of Shares (if any) actually issued in settlement of such SARs shall reduce the
number available in Section 5(a) and the balance shall again become
available for Awards under the Plan.

     

    
      
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     SECTION
6. RESTRICTED SHARES.

     

     (a) Restricted Stock Agreement.
Each grant of Restricted Shares under the Plan shall be evidenced by a
Restricted Stock Agreement between the recipient and the Company. Such
Restricted Shares shall be subject to all applicable terms of the Plan and may
be subject to any other terms that are not inconsistent with the Plan. The
provisions of the various Restricted Stock Agreements entered into under the
Plan need not be identical.

     

     (b) Payment for Awards. Subject
to the following sentence, Restricted Shares may be sold or awarded under the
Plan for such consideration as the Committee may determine, including (without
limitation) cash, cash equivalents, full-recourse promissory notes, past
services and future services.

     

     (c) Vesting. Each Award of
Restricted Shares may or may not be subject to vesting. Vesting shall occur, in
full or in installments, upon satisfaction of the conditions specified in the
Restricted Stock Agreement. A Restricted Stock Agreement may provide for
accelerated vesting in the event of the Participant’s death, disability or
retirement or other events. The Committee may determine, at the time of granting
Restricted Shares of thereafter, that all or part of such Restricted Shares
shall become vested in the event that a Change in Control occurs with respect to
the Company.

     

     (d) Voting and Dividend Rights .
The holders of Restricted Shares awarded under the Plan shall have the same
voting, dividend and other rights as the Company’s other stockholders. A
Restricted Stock Agreement, however, may require that the holders of Restricted
Shares invest any cash dividends received in additional Restricted Shares. Such
additional Restricted Shares shall be subject to the same conditions and
restrictions as the Award with respect to which the dividends were
paid.

     

     (e) Restrictions on Transfer of
Shares. Restricted Shares shall be subject to such rights of repurchase,
rights of first refusal or other restrictions as the Committee may determine.
Such restrictions shall be set forth in the applicable Restricted Stock
Agreement and shall apply in addition to any general restrictions that may apply
to all holders of Shares.

     

     SECTION 7. TERMS AND CONDITIONS OF
OPTIONS.

     

     (a) Stock Option Agreement. Each
grant of an Option under the Plan shall be evidenced by a Stock Option Agreement
between the Optionee and the Company. Such Option shall be subject to all
applicable terms and conditions of the Plan and may be subject to any other
terms and conditions which are not inconsistent with the Plan and which the
Committee deems appropriate for inclusion in a Stock Option Agreement. The Stock
Option Agreement shall specify whether the Option is an ISO or an NSO. The
provisions of the various Stock Option Agreements entered into under the Plan
need not be identical. Options may be granted in consideration of a reduction in
the Optionee’s other compensation.

     

     (b) Number of Shares. Each Stock
Option Agreement shall specify the number of Shares that are subject to the
Option and shall provide for the adjustment of such number in accordance with
Section 11.

     

     (c) Exercise Price. Each Stock
Option Agreement shall specify the Exercise Price. The Exercise Price of an
Option shall not be less than 100% of the Fair Market Value of a Share on the
date of grant. Subject to the foregoing in this Section 7(c), the Exercise
Price under any Option shall be determined by the Committee at its sole
discretion. The Exercise Price shall be payable in one of the forms described in
Section 8.

     

     (d) Withholding Taxes. As a
condition to the exercise of an Option, the Optionee shall make such
arrangements as the Committee may require for the satisfaction of any federal,
state, local or foreign withholding tax obligations that may arise in connection
with such exercise. The Optionee shall also make such arrangements as the
Committee may require for the satisfaction of any federal, state, local or
foreign withholding tax obligations that may arise in connection with the
disposition of Shares acquired by exercising an Option.

     

     (e) Exercisability and Term. Each
Stock Option Agreement shall specify the date when all or any installment of the
Option is to become exercisable. The Stock Option Agreement shall also specify
the term of the Option; provided that the term of an ISO shall in no event
exceed 10 years from the date of grant (five years for Employees described in
Section 4(c)). A Stock Option Agreement may provide for accelerated
exercisability in the event of the Optionee’s death, disability, or retirement
or other events and may provide for expiration prior to the end of its term in
the event of the termination of the Optionee’s Service. Options may be awarded
in combination with SARs, and 

    
      
        A-7

      

      
        
        

        
          

        

      

      
        
        

      

    

    such an
Award may provide that the Options will not be exercisable unless the related
SARs are forfeited. Subject to the foregoing in this Section 7(e), the
Committee at its sole discretion shall determine when all or any installment of
an Option is to become exercisable and when an Option is to expire.

     

     (f) Exercise of Options. Each
Stock Option Agreement shall set forth the extent to which the Optionee shall
have the right to exercise the Option following termination of the Optionee’s
Service with the Company and its Subsidiaries, and the right to exercise the
Option of any executors or administrators of the Optionee’s estate or any person
who has acquired such Option(s) directly from the Optionee by bequest or
inheritance. Such provisions shall be determined in the sole discretion of the
Committee, need not be uniform among all Options issued pursuant to the Plan,
and may reflect distinctions based on the reasons for termination of
Service.

     

     (g) Effect of Change in Control.
The Committee may determine, at the time of granting an Option or thereafter,
that such Option shall become exercisable as to all or part of the Shares
subject to such Option in the event that a Change in Control occurs with respect
to the Company.

     

     (h) No Rights as a Stockholder.
An Optionee, or a transferee of an Optionee, shall have no rights as a
stockholder with respect to any Shares covered by his Option until the date of
the issuance of a stock certificate for such Shares. No adjustments shall be
made, except as provided in Section 11.

     

     (i) Modification, Extension and Renewal
of Options. Within the limitations of the Plan, the Committee may modify,
extend or renew outstanding options or may accept the cancellation of
outstanding options (to the extent not previously exercised), whether or not
granted hereunder, in return for the grant of new Options for the same or a
different number of Shares and at the same or a different exercise price, or in
return for the grant of the same or a different number of Shares. The foregoing
notwithstanding, no modification of an Option shall, without the consent of the
Optionee, materially impair his or her rights or obligations under such
Option.

     

     (j)
Restrictions on Transfer of
Shares. Any Shares issued upon exercise of an Option shall be subject to
such special forfeiture conditions, rights of repurchase, rights of first
refusal and other transfer restrictions as the Committee may determine. Such
restrictions shall be set forth in the applicable Stock Option Agreement and
shall apply in addition to any general restrictions that may apply to all
holders of Shares.

     

     (k) Buyout Provisions. The
Committee may at any time (a) offer to buy out for a payment in cash or
cash equivalents an Option previously granted or (b) authorize an Optionee
to elect to cash out an Option previously granted, in either case at such time
and based upon such terms and conditions as the Committee shall
establish.

     

     SECTION 8. PAYMENT FOR
SHARES.

     

     (a) General Rule. The entire
Exercise Price or Purchase Price of Shares issued under the Plan shall be
payable in lawful money of the United States of America at the time when such
Shares are purchased, except as provided in Section 8(b) through
Section 8(g) below.

     

     (b) Surrender of Stock. To the
extent that a Stock Option Agreement so provides, payment may be made all or in
part by surrendering, or attesting to the ownership of, Shares which have
already been owned by the Optionee or his representative. Such Shares shall be
valued at their Fair Market Value on the date when the new Shares are purchased
under the Plan. The Optionee shall not surrender, or attest to the ownership of,
Shares in payment of the Exercise Price if such action would cause the Company
to recognize compensation expense (or additional compensation expense) with
respect to the Option for financial reporting purposes.

     

     (c) Services Rendered. At the
discretion of the Committee, Shares may be awarded under the Plan in
consideration of services rendered to the Company or a Subsidiary prior to the
award. If Shares are awarded without the payment of a Purchase Price in cash,
the Committee shall make a determination (at the time of the award) of the value
of the services rendered by the Offeree and the sufficiency of the consideration
to meet the requirements of Section 6(b).

     

     (d) Cashless Exercise. To the
extent that a Stock Option Agreement so provides, payment may be made all or in
part by delivery (on a form prescribed by the Committee) of an irrevocable
direction to a securities broker to sell Shares and to deliver all or part of
the sale proceeds to the Company in payment of the aggregate Exercise
Price.

     

    
      
        A-8

      

      
        
        

        
          

        

      

      
        
        

      

    

     (e) Exercise/Pledge. To the
extent that a Stock Option Agreement so provides, payment may be made all or in
part by delivery (on a form prescribed by the Committee) of an irrevocable
direction to a securities broker or lender to pledge Shares, as security for a
loan, and to deliver all or part of the loan proceeds to the Company in payment
of the aggregate Exercise Price.

     

     (f) Other Forms of Payment. To
the extent that a Stock Option Agreement or Restricted Stock Agreement so
provides, payment may be made in any other form that is consistent with
applicable laws, regulations and rules.

     

     (g) Limitations under Applicable
Law. Notwithstanding anything herein or in a Stock Option Agreement or
Restricted Stock Agreement to the contrary, payment may not be made in any form
that is unlawful, as determined by the Committee in its sole
discretion.

     

     SECTION 9. STOCK APPRECIATION
RIGHTS.

     

     (a) SAR Agreement. Each grant of
a SAR under the Plan shall be evidenced by a SAR Agreement between the Optionee
and the Company. Such SAR shall be subject to all applicable terms of the Plan
and may be subject to any other terms that are not inconsistent with the Plan.
The provisions of the various SAR Agreements entered into under the Plan need
not be identical. SARs may be granted in consideration of a reduction in the
Optionee’s other compensation.

     

     (b)
Number of Shares. Each
SAR Agreement shall specify the number of Shares to which the SAR pertains and
shall provide for the adjustment of such number in accordance with
Section 11.

     

     (c) Exercise Price. Each SAR
Agreement shall specify the Exercise Price, which shall be no less than 100% of
the fair market value of a share on the date of grant.

     

     (d) Exercisability and Term. Each
SAR Agreement shall specify the date when all or any installment of the SAR is
to become exercisable. The SAR Agreement shall also specify the term of the SAR.
A SAR Agreement may provide for accelerated exercisability in the event of the
Optionee’s death, disability or retirement or other events and may provide for
expiration prior to the end of its term in the event of the termination of the
Optionee’s service. SARs may be awarded in combination with Options, and such an
Award may provide that the SARs will not be exercisable unless the related
Options are forfeited. A SAR may be included in an ISO only at the time of grant
but may be included in an NSO at the time of grant or thereafter. A SAR granted
under the Plan may provide that it will be exercisable only in the event of a
Change in Control.

     

     (e) Effect of Change in Control.
The Committee may determine, at the time of granting a SAR or thereafter, that
such SAR shall become fully exercisable as to all Common Shares subject to such
SAR in the event that a Change in Control occurs with respect to the
Company.

     

     (f) Exercise of SARs. Upon
exercise of a SAR, the Optionee (or any person having the right to exercise the
SAR after his or her death) shall receive from the Company (a) Shares,
(b) cash or (c) a combination of Shares and cash, as the Committee
shall determine. The amount of cash and/or the Fair Market Value of Shares
received upon exercise of SARs shall, in the aggregate, be equal to the amount
by which the Fair Market Value (on the date of surrender) of the Shares subject
to the SARs exceeds the Exercise Price.

     

     (g) Modification or Assumption of
SARs. Within the limitations of the Plan, the Committee may modify,
extend or assume outstanding SARs or may accept the cancellation of outstanding
SARs (whether granted by the Company or by another issuer) in return for the
grant of new SARs for the same or a different number of shares and at the same
or a different exercise price. The foregoing notwithstanding, no modification of
a SAR shall, without the consent of the holder, materially impair his or her
rights or obligations under such SAR.

     

     (h) Buyout Provisions. The
Committee may at any time (a) offer to buy out for a payment in cash or
cash equivalents a SAR previously granted or (b) authorize an Optionee to
elect to cash out a SAR previously granted, in either case at such time and
based upon such terms and conditions as the Committee shall
establish.

     

    
      
        A-9

      

      
        
        

        
          

        

      

    

     SECTION 10. STOCK UNITS.

     

     (a) Stock Unit Agreement. Each
grant of Stock Units under the Plan shall be evidenced by a Stock Unit Agreement
between the recipient and the Company. Such Stock Units shall be subject to all
applicable terms of the Plan and may be subject to any other terms that are not
inconsistent with the Plan. The provisions of the various Stock Unit Agreements
entered into under the Plan need not be identical. Stock Units may be granted in
consideration of a reduction in the recipient’s other
compensation.

     

     (b) Payment for Awards. To the
extent that an Award is granted in the form of Stock Units, no cash
consideration shall be required of the Award recipients.

     

     (c) Vesting Conditions. Each
Award of Stock Units may or may not be subject to vesting. Vesting shall occur,
in full or in installments, upon satisfaction of the conditions specified in the
Stock Unit Agreement. A Stock Unit Agreement may provide for accelerated vesting
in the event of the Participant’s death, disability or retirement or other
events. The Committee may determine, at the time of granting Stock Units or
thereafter, that all or part of such Stock Units shall become vested in the
event that a Change in Control occurs with respect to the
Company.

     

     (d)
Voting and Dividend
Rights . The holders of Stock Units shall have no voting rights. Prior to
settlement or forfeiture, any Stock Unit awarded under the Plan may, at the
Committee’s discretion, carry with it a right to dividend equivalents. Such
right entitles the holder to be credited with an amount equal to all cash
dividends paid on one Share while the Stock Unit is outstanding. Dividend
equivalents may be converted into additional Stock Units. Settlement of dividend
equivalents may be made in the form of cash, in the form of Shares, or in a
combination of both. Prior to distribution, any dividend equivalents which are
not paid shall be subject to the same conditions and restrictions (including
without limitation, any forfeiture conditions) as the Stock Units to which they
attach.

     

     (e) Form and Time of Settlement of Stock
Units. Settlement of vested Stock Units may be made in the form of
(a) cash, (b) Shares or (c) any combination of both, as
determined by the Committee. The actual number of Stock Units eligible for
settlement may be larger or smaller than the number included in the original
Award, based on predetermined performance factors. Methods of converting Stock
Units into cash may include (without limitation) a method based on the average
Fair Market Value of Shares over a series of trading days. Vested Stock Units
may be settled in a lump sum or in installments. The distribution may occur or
commence when all vesting conditions applicable to the Stock Units have been
satisfied or have lapsed, or it may be deferred to any later date. The amount of
a deferred distribution may be increased by an interest factor or by dividend
equivalents. Until an Award of Stock Units is settled, the number of such Stock
Units shall be subject to adjustment pursuant to
Section 11.

     

     (f) Death of Recipient. Any Stock
Units Award that becomes payable after the recipient’s death shall be
distributed to the recipient’s beneficiary or beneficiaries. Each recipient of a
Stock Units Award under the Plan shall designate one or more beneficiaries for
this purpose by filing the prescribed form with the Company. A beneficiary
designation may be changed by filing the prescribed form with the Company at any
time before the Award recipient’s death. If no beneficiary was designated or if
no designated beneficiary survives the Award recipient, then any Stock Units
Award that becomes payable after the recipient’s death shall be distributed to
the recipient’s estate.

     

     (g) Creditors’ Rights. A holder
of Stock Units shall have no rights other than those of a general creditor of
the Company. Stock Units represent an unfunded and unsecured obligation of the
Company, subject to the terms and conditions of the applicable Stock Unit
Agreement.

     

     SECTION 11. ADJUSTMENT OF
SHARES.

     

     (a) Adjustments. In the event of
a subdivision of the outstanding Stock, a declaration of a dividend payable in
Shares, a declaration of a dividend payable in a form other than Shares in an
amount that has a material effect on the price of Shares, a combination or
consolidation of the outstanding Stock (by reclassification or otherwise) into a
lesser number of Shares, a recapitalization, a spin-off or a similar occurrence,
the Committee shall make adjustments in one or more of:

     

    (i) The
number of Options, SARs, Restricted Shares and Stock Units available for future
Awards under Section 5;

     

    (ii) The
limitations set forth in Sections 5(a) and (b);

     

    (iii) The
number of Stock Units to be granted to Outside Directors under
Section 4(b);

    
      
        A-10

      

      
        
        

        
          

        

      

      
        
        

      

    

    (iv) The
number of Shares covered by each outstanding Option and SAR;

     

    (v) The
Exercise Price under each outstanding Option and SAR; or

     

    (vi) The
number of Stock Units included in any prior Award which has not yet been
settled.

     

    Except as
provided in this Section 11, a Participant shall have no rights by reason
of any issue by the Company of stock of any class or securities convertible into
stock of any class, any subdivision or consolidation of shares of stock of any
class, the payment of any stock dividend or any other increase or decrease in
the number of shares of stock of any class.

     

     (b) Dissolution or Liquidation.
To the extent not previously exercised or settled, Options, SARs and Stock Units
shall terminate immediately prior to the dissolution or liquidation of the
Company.

     

     (c) Reorganizations. In the event
that the Company is a party to a merger or other reorganization, outstanding
Awards shall be subject to the agreement of merger or reorganization. Such
agreement shall provide for:

     

    (i) The
continuation of the outstanding Awards by the Company, if the Company is a
surviving corporation;

     

    (ii) The
assumption of the outstanding Awards by the surviving corporation or its parent
or subsidiary;

     

    (iii) The
substitution by the surviving corporation or its parent or subsidiary of its own
awards for the outstanding Awards;

     

    (iv)
Acceleration of the expiration date of the outstanding unexercised Awards to a
date not earlier than thirty (30) days after notice to the Participant;
or

     

    (v)
Settlement of the value of the outstanding Awards which have vested as of the
consummation of such merger or other reorganization in cash or cash equivalents;
in the sole discretion of the Company, settlement of the value of some or all of
the outstanding Awards which have not vested as of the consummation of such
merger or other reorganization in cash or cash equivalents on a deferred basis
pending vesting; and the cancellation of all vested and unvested Awards as of
the consummation of such merger or other reorganization.

     

     (d) Reservation of Rights. Except
as provided in this Section 11, an Optionee or Offeree shall have no rights
by reason of any subdivision or consolidation of shares of stock of any class,
the payment of any dividend or any other increase or decrease in the number of
shares of stock of any class. Any issue by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall not
affect, and no adjustment by reason thereof shall be made with respect to, the
number or Exercise Price of Shares subject to an Option. The grant of an Option
pursuant to the Plan shall not affect in any way the right or power of the
Company to make adjustments, reclassifications, reorganizations or changes of
its capital or business structure, to merge or consolidate or to dissolve,
liquidate, sell or transfer all or any part of its business or
assets.

     

     SECTION 12. DEFERRAL OF
AWARDS.

     

     (a) Committee Powers. In a manner
that complies with Section 409A of the Code, the Committee (in its sole
discretion) may permit or require a Participant to:

     

    (i) Have
cash that otherwise would be paid to such Participant as a result of the
exercise of a SAR or the settlement of Stock Units credited to a deferred
compensation account established for such Participant by the Committee as an
entry on the Company’s books;

     

    (ii) Have
Shares that otherwise would be delivered to such Participant as a result of the
exercise of an Option or SAR converted into an equal number of Stock Units;
or

     

    (iii)
Have Shares that otherwise would be delivered to such Participant as a result of
the exercise of an Option or SAR or the settlement of Stock Units converted into
amounts credited to a deferred compensation account established for such
Participant by the Committee as an entry on the Company’s books. Such amounts
shall be determined by reference to the Fair Market Value of such Shares as of
the date when they otherwise would have been delivered to such
Participant.

    
      
        A-11

      

      
        
        

        
          

        

      

      
        
        

      

    

     (b) General Rules. A deferred
compensation account established under this Section 12 may be credited with
interest or other forms of investment return, as determined by the Committee. A
Participant for whom such an account is established shall have no rights other
than those of a general creditor of the Company. Such an account shall represent
an unfunded and unsecured obligation of the Company and shall be subject to the
terms and conditions of the applicable agreement between such Participant and
the Company. If the deferral or conversion of Awards is permitted or required,
the Committee (in its sole discretion) may establish rules, procedures and forms
pertaining to such Awards, including (without limitation) the settlement of
deferred compensation accounts established under this
Section 12.

     

     SECTION 13. AWARDS UNDER OTHER
PLANS.

     

    The
Company may grant awards under other plans or programs. Such awards may be
settled in the form of Shares issued under this Plan. Such Shares shall be
treated for all purposes under the Plan like Shares issued in settlement of
Stock Units and shall, when issued, reduce the number of Shares available under
Section 5.

     

     SECTION 14. PAYMENT OF DIRECTOR’S FEES
IN SECURITIES.

     

     (a) Effective Date. No provision
of this Section 14 shall be effective unless and until the Board has
determined to implement such provision.

     

     (b) Elections to Receive NSOs,
Restricted Shares or Stock Units. An Outside Director may elect to
receive his or her annual retainer payments and/or meeting fees from the Company
in the form of cash, NSOs, Restricted Shares or Stock Units, or a combination
thereof, as determined by the Board and in a manner that complies with Section
409A of the Code. Such NSOs, Restricted Shares and Stock Units shall be issued
under the Plan. An election under this Section 14 shall be filed with the
Company on the prescribed form.

     

     (c) Number and Terms of NSOs, Restricted
Shares or Stock Units. The number of NSOs, Restricted Shares or Stock
Units to be granted to Outside Directors in lieu of annual retainers and meeting
fees that would otherwise be paid in cash shall be calculated in a manner
determined by the Board. The terms of such NSOs, Restricted Shares or Stock
Units shall also be determined by the Board.

     

     SECTION 15. LEGAL AND REGULATORY
REQUIREMENTS.

     

    Shares
shall not be issued under the Plan unless the issuance and delivery of such
Shares complies with (or is exempt from) all applicable requirements of law,
including (without limitation) the Securities Act of 1933, as amended, the rules
and regulations promulgated thereunder, state securities laws and regulations
and the regulations of any stock exchange on which the Company’s securities may
then be listed, and the Company has obtained the approval or favorable ruling
from any governmental agency which the Company determines is necessary or
advisable. The Company shall not be liable to a Participant or other persons as
to: (a) the non-issuance or sale of Shares as to which the Company has been
unable to obtain from any regulatory body having jurisdiction the authority
deemed by the Company’s counsel to be necessary to the lawful issuance and sale
of any Shares under the Plan; and (b) any tax consequences expected, but
not realized, by any Participant or other person due to the receipt, exercise or
settlement of any Award granted under the Plan.

     

     SECTION 16. WITHHOLDING TAXES;
COMPLIANCE WITH SECTION 409A OF THE CODE.

     

     (a) General . To the extent
required by applicable federal, state, local or foreign law, a Participant or
his or her successor shall make arrangements satisfactory to the Company for the
satisfaction of any withholding tax obligations that arise in connection with
the Plan. The Company shall not be required to issue any Shares or make any cash
payment under the Plan until such obligations are satisfied.

     

     (b) Share Withholding. The
Committee may permit a Participant to satisfy all or part of his or her
withholding or income tax obligations by having the Company withhold all or a
portion of any Shares that otherwise would be issued to him or her or by
surrendering all or a portion of any Shares that he or she previously acquired.
Such Shares shall be valued at their Fair Market Value on the date when taxes
otherwise would be withheld in cash. In no event may a Participant have Shares
withheld that would otherwise be issued to him or her in excess of the number
necessary to satisfy the legally required minimum tax
withholding.

     

    
      
        A-12

      

      
        
        

        
          

        

      

      
        
        

      

    

    (c)               To
the extent applicable, it is intended that this Plan and any grants made
hereunder comply with the provisions of Section 409A of the Code, so that the
income inclusion provisions of Section 409A(a)(1) of the Code do not apply to
the Participants.  This Plan and any grants made hereunder shall be
administered in a manner consistent with this intent.  Any reference
in this Plan to Section 409A of the Code will also include any regulations or
any other formal guidance promulgated with respect to such Section by the U.S.
Department of the Treasury or the Internal Revenue Service.

     

    (d)               Neither
a Participant nor any of a Participant’s creditors or beneficiaries shall have
the right to subject any deferred compensation (within the meaning of Section
409A of the Code) payable under this Plan and grants hereunder to any
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
attachment or garnishment.  Except as permitted under Section 409A of
the Code, any deferred compensation (within the meaning of Section 409A of the
Code) payable to a Participant or for a Participant’s benefit under this Plan
and grants hereunder may not be reduced by, or offset against, any amount owing
by a Participant to the Company or any of its affiliates.

     

    (e)               If,
at the time of a Participant’s separation from service (within the meaning of
Section 409A of the Code), (i) the Participant shall be a specified employee
(within the meaning of Section 409A of the Code and using the identification
methodology selected by the Company from time to time) and (ii) the Company
shall make a good faith determination that an amount payable hereunder
constitutes deferred compensation (within the meaning of Section 409A of the
Code) the payment of which is required to be delayed pursuant to the six-month
delay rule set forth in Section 409A of the Code in order to avoid taxes or
penalties under Section 409A of the Code, then the Company shall not pay such
amount on the otherwise scheduled payment date but shall instead pay it, without
interest, on the first business day of the seventh month after such six-month
period.

     

    (f)               Notwithstanding
any provision of this Plan and grants hereunder to the contrary, in light of the
uncertainty with respect to the proper application of Section 409A of the Code,
the Company reserves the right to make amendments to this Plan and grants
hereunder as the Company deems necessary or desirable to avoid the imposition of
taxes or penalties under Section 409A of the Code.  In any case, a
Participant shall be solely responsible and liable for the satisfaction of all
taxes and penalties that may be imposed on a Participant or for a Participant’s
account in connection with this Plan and grants hereunder (including any taxes
and penalties under Section 409A of the Code), and neither the Company nor any
of its affiliates shall have any obligation to indemnify or otherwise hold a
Participant harmless from any or all of such taxes or penalties.

     

     SECTION 17. OTHER PROVISIONS APPLICABLE
TO AWARDS.

     

     (a) Transferability. Unless the
agreement evidencing an Award (or an amendment thereto authorized by the
Committee) expressly provides otherwise, no Award granted under this Plan, nor
any interest in such Award, may be sold, assigned, conveyed, gifted, pledged,
hypothecated or otherwise transferred in any manner (prior to the vesting and
lapse of any and all restrictions applicable to Shares issued under such Award),
other than by will or the laws of descent and distribution; provided, however,
that an ISO may be transferred or assigned only to the extent consistent with
Section 422 of the Code. Any purported assignment, transfer or encumbrance
in violation of this Section 17(a) shall be void and unenforceable against
the Company.

     

    (b) Qualifying Performance
Criteria. The number of Shares or other benefits granted, issued,
retainable and/or vested under an Award may be made subject to the attainment of
performance goals for a specified period of time relating to one or more of the
following performance criteria, either individually, alternatively or in any
combination, applied to either the Company as a whole or to a business unit or
Subsidiary, either individually, alternatively or in any combination, and
measured either annually or cumulatively over a period of years, on an absolute
basis or relative to a pre-established target, to previous years’ results or to
a designated comparison group or index, in each case as specified by the
Committee in the Award: (a) cash flow, (b) earnings per share,
(c) earnings before interest, taxes and amortization, (d) return on
equity, (e) total stockholder return, (f) share price performance,
(g) return on capital, (h) return on assets or net assets,
(i) revenue, (j) income or net income, (k) operating income or
net operating income, (l) operating profit or net operating profit,
(m) operating margin or profit margin, (n) return on operating
revenue, (o) return on invested capital, or (p) market segment shares
(“Qualifying Performance Criteria”). The Committee in an Award may provide for
the adjustment of any evaluation of performance under a Qualifying Performance
Criteria to exclude any objective and measurable events specified in the Award,
including but not limited to any of the following events that occurs during a
performance period: (i) asset write-downs,
(ii) litigation

     

    
      
        A-13

      

      
        
        

        
          

        

      

      
        
        
 or
claim judgments or settlements, (iii) the effect of changes in tax law,
accounting principles or other such laws or provisions affecting reported
results, (iv) accruals for reorganization and restructuring programs, (v)
acceleration of amortization of debt issuance costs, (vi) stock-based
compensation charges, (vii) purchase-accounting related charges, including
amortization of intangible purchased assets, acquired in-process research and
development charges, and similar charges associated with purchase accounting,
(viii) any extraordinary nonrecurring items as described in Accounting
Principles Board Opinion No. 30, and (ix) the related tax effects
associated with each of the adjustments listed in clauses (i) through (viii)
above. If applicable, the Committee shall determine the Qualifying Performance
Criteria not later than the 90th day of the performance period, and shall
determine and certify, for each Participant, the extent to which the Qualifying
Performance Criteria have been met. The Committee may not in any event increase
the amount of compensation payable under the Plan upon the attainment of a
Qualifying Performance Goal to a Participant who is a “covered employee” within
the meaning of Section 162(m) of the Code.

    

     

     SECTION 18. NO EMPLOYMENT
RIGHTS.

     

    No
provision of the Plan, nor any right or Option granted under the Plan, shall be
construed to give any person any right to become, to be treated as, or to remain
an Employee. The Company and its Subsidiaries reserve the right to terminate any
person’s Service at any time and for any reason, with or without
notice.

     

     SECTION 19. DURATION AND
AMENDMENTS.

     

     (a) Term of the Plan. The Plan,
as set forth herein, shall terminate automatically on August 12, 2015 and
may be terminated on any earlier date pursuant to Subsection
(b) below.

     

     (b) Right to Amend or Terminate the
Plan. The Board of Directors may amend the Plan at any time and from time
to time. Rights and obligations under any Award granted before amendment of the
Plan shall not be materially impaired by such amendment, except with consent of
the Participant. An amendment of the Plan shall be subject to the approval of
the Company’s stockholders only to the extent required by applicable laws,
regulations or rules.

     

     (c) Effect of Termination. No
Awards shall be granted under the Plan after the termination thereof. The
termination of the Plan shall not affect Awards previously granted under the
Plan.

     

    SECTION
20. EXECUTION.

     

    To record
the adoption of the Plan by the Board of Directors, the Company has caused its
authorized officer to execute the same.

    
      	 
      	
              SUNPOWER
      CORPORATION

            
	 
      	 
      	 
      
	 
      	
              By:

            	 
      
	 
      	
              Name:

            	 
      
	 
      	
              Title:

            	 
      

    

     

    

     

    
      
        
          A-14

          

           

        

         

      

      
         

        
          

        

      

      
         

      

    

    

     

     

    SECOND
AMENDED AND RESTATED

     

     

    SUNPOWER
CORPORATION 2005 STOCK INCENTIVE PLAN

     

     

    NOTICE
OF STOCK OPTION GRANT

     

    You have
been granted the following Option to purchase Class A Common Stock of SunPower
Corporation (the “Company”) under the Second Amended and Restated SunPower
Corporation 2005 Stock Incentive Plan (the “Plan”):

     

    
      	
              Name
      of Optionee:

            	
              ________________

            
	
              Total
      Number of Option Shares Granted:

            	
              ________________

            
	
              Type
      of Option:

            	
              ⁭  Incentive
      Stock Option

            
	 
      	
              ⁭  Nonstatutory
      Stock Option

            
	
              Exercise
      Price Per Share:

            	
              $                    

            
	
              Grant
      Date:

            	
              ________________

            
	
              Vesting
      Commencement Date:

            	
              ________________

            
	
              Vesting
      Schedule:

            	
              ________________

            
	
              Expiration
      Date:

            	
              ________________;
      this Option expires earlier if your Service terminates earlier, as
      described in the Stock Option
Agreement.

            

    

     

    By your
signature and the signature of the Company’s representative below, you and the
Company agree that this Option is granted under and governed by the term and
conditions of the Plan and the Stock Option Agreement, both of which are
attached to and made a part of this document.

     

    By signing this document you further
agree that the Company may deliver by e-mail all documents relating to the Plan
or this award (including without limitation, prospectuses required by the
Securities and Exchange Commission) and all other documents that the Company is
required to deliver to its security holders (including without limitation,
annual reports and proxy statements).  You also agree that the Company
may deliver these documents by posting them on a website maintained by the
Company or by a third party under contract with the Company.  If the
Company posts these documents on a website, it will notify you by
e-mail.

    

    
      	
              OPTIONEE:

            	
              SUNPOWER
      CORPORATION

            
	 
      	 
      
	 
      	 
      	
              By:

            	 
      
	
              Optionee’s
      Signature

            	 
      
	 
      	 
      	
              Title:

            	 
      
	
              Optionee’s
      Printed Name

            	 
      

    

     

    
      
        B-1

      

      
        
        

        
          

        

      

      
        
        

      

    

    SECOND
AMENDED AND RESTATED

     

     

    SUNPOWER
CORPORATION 2005 STOCK INCENTIVE PLAN

     

     

    STOCK
OPTION AGREEMENT

     

    
      	
              Tax
      Treatment

            	
              This
      Option is intended to be an incentive stock option under Section 422 of
      the Internal Revenue Code or a nonstatutory option, as provided in the
      Notice of Stock Option Grant. Even if this Option is designated as an
      incentive stock option, it shall be deemed to be a nonstatutory option to
      the extent required by the $100,000 annual limitation under Section 422(d)
      of the Internal Revenue Code.

            
	
              Vesting

            	
              This
      Option becomes exercisable in installments, as shown in the Notice of
      Stock Option Grant. This Option will in no event become exercisable for
      additional shares after your service as an Employee or a Consultant has
      terminated for any reason.

            
	
              Term

            	
              This
      Option expires in any event at the close of business at Company
      headquarters on the day before the 10th anniversary of the Grant Date, as
      shown on the Notice of Stock Option Grant (fifth anniversary for a more
      than 10% stockholder as provided under the Plan if this is an incentive
      stock option). This Option may expire earlier if your Service terminates,
      as described below.

            
	
              Regular
      Termination

            	
              If
      your Service terminates for any reason except death or “Total and
      Permanent Disability” (as defined in the Plan), then this Option will
      expire at the close of business at Company headquarters on the date three
      (3) months after the date your Service terminates (or, if earlier, the
      Expiration Date). The Company has discretion to determine when your
      Service terminates for all purposes of the Plan and its determinations are
      conclusive and binding on all persons.

            
	
              Death

            	
              If
      your Service terminates because of death, then this Option will expire at
      the close of business at Company headquarters on the date 12 months after
      the date your Service terminates (or, if earlier, the Expiration Date).
      During that period of up to 12 months, your estate or heirs may exercise
      the Option.

            
	
              Disability

            	
              If
      your Service terminates because of your Total and Permanent Disability,
      then this Option will expire at the close of business at Company
      headquarters on the date 12 months after the date your Service terminates
      (or, if earlier, the Expiration Date).

            
	
              Leaves
      of Absence

            	
              For
      purposes of this Option, your Service does not terminate when you go on a
      military leave, a sick leave or another bona fide leave of
      absence, if the leave was approved by the Company in writing and if
      continued crediting of Service is required by the terms of the leave or by
      applicable law. But your Service terminates when the approved leave ends,
      unless you immediately return to active
work.

            

    

     

    
      
        B-2

      

      
        
        

        
          

        

      

      
        
        

      

    

    
      	 
      	
              If
      you go on a leave of absence, then the vesting schedule specified in the
      Notice of Stock Option Grant may be adjusted in accordance with the
      Company’s leave of absence policy or the terms of your leave. If you
      commence working on a part-time basis, then the vesting schedule specified
      in the Notice of Stock Option Grant may be adjusted in accordance with the
      Company’s part-time work policy or the terms of an agreement between you
      and the Company pertaining to your part-time schedule.

            
	
              Restrictions
      on Exercise

            	
              The
      Company will not permit you to exercise this Option if the issuance of
      shares at that time would violate any law or regulation. The inability of
      the Company to obtain approval from any regulatory body having authority
      deemed by the Company to be necessary to the lawful issuance and sale of
      the Company stock pursuant to this Option shall relieve the Company of any
      liability with respect to the non-issuance or sale of the Company stock as
      to which such approval shall not have been obtained. However, the Company
      shall use its best efforts to obtain such approval.

            
	
              Notice
      of Exercise

            	
              When
      you wish to exercise this Option you must notify the Company by completing
      the attached “Notice of Exercise of Stock Option” form and filing it with
      the Human Resources Department of the Company. Your notice must specify
      how many shares you wish to purchase. Your notice must also specify how
      your shares should be registered. The notice will be effective when it is
      received by the Company. If someone else wants to exercise this Option
      after your death, that person must prove to the Company’s satisfaction
      that he or she is entitled to do so.

            
	
              Form
      of Payment

            	
              When
      you submit your notice of exercise, you must include payment of the Option
      exercise price for the shares you are purchasing. Payment may be made in
      the following form(s):

            
	 
      	
              •

            	
              Your
      personal check, a cashier’s check or a money order.

            
	 
      	
              •

            	
              Certificates
      for shares of Company stock that you own, along with any forms needed to
      effect a transfer of those shares to the Company. The value of the shares,
      determined as of the effective date of the Option exercise, will be
      applied to the Option exercise price. Instead of surrendering shares of
      Company stock, you may attest to the ownership of those shares on a form
      provided by the Company and have the same number of shares subtracted from
      the Option shares issued to you. However, you may not surrender, or attest
      to the ownership of shares of Company stock in payment of the exercise
      price if your action would cause the Company to recognize a compensation
      expense (or additional compensation expense) with respect to this Option
      for financial reporting purposes.

            
	 
      	
              •

            	
              By
      delivery on a form approved by the Committee of an irrevocable direction
      to a securities broker approved by the Company to sell all or part of your
      Option shares and to deliver to the Company from the sale proceeds an
      amount sufficient to pay the Option exercise price and any
  

            

    

     

    
      
        B-3

      

      
        
        

        
          

        

      

      
        
        

      

    

    
      	 	 	 withholding
      taxes. The balance of the sale proceeds, if any, will be delivered to you.
      The directions must be given by signing a special “Notice of Exercise”
      form provided by the Company.
	 
      	
              •

            	
              By
      delivery on a form approved by the Committee of an irrevocable direction
      to a securities broker or lender approved by the Company to pledge Option
      shares as security for a loan and to deliver to the Company from the loan
      proceeds an amount sufficient to pay the Option exercise price and any
      withholding taxes. The directions must be given by signing a special
      “Notice of Exercise” form provided by the Company.

            
	 
      	
              •

            	
              Any
      other form permitted by the Committee in its sole
    discretion.

            
	 
      	
              Notwithstanding
      the foregoing, payment may not be made in any form that is unlawful, as
      determined by the Committee in its sole discretion.

            
	
              Withholding
      Taxes and Stock Withholding

            	
              You
      will not be allowed to exercise this Option unless you make arrangements
      acceptable to the Company to pay any withholding taxes that may be due as
      a result of the Option exercise. These arrangements may include
      withholding shares of Company stock that otherwise would be issued to you
      when you exercise this Option. The value of these shares, determined as of
      the effective date of the Option exercise, will be applied to the
      withholding taxes.

            
	
              Restrictions
      on Resale

            	
              By
      signing this Agreement, you agree not to sell any Option shares at a time
      when applicable laws, Company policies or an agreement between the Company
      and its underwriters prohibit a sale. This restriction will apply as long
      as you are an employee, consultant or director of the Company or a
      subsidiary of the Company.

            
	
              Transfer of Option

            	
              In
      general, only you can exercise this Option prior to your death. You cannot
      transfer or assign this Option, other than as designated by you by will or
      by the laws of descent and distribution, except as provided below. For
      instance, you may not sell this Option or use it as security for a loan.
      If you attempt to do any of these things, this Option will immediately
      become invalid. You may in any event dispose of this Option in your will.
      Regardless of any marital property settlement agreement, the Company is
      not obligated to honor a notice of exercise from your former spouse, nor
      is the Company obligated to recognize your former spouse’s interest in
      your Option in any other way.

            
	 
      	
              However,
      if this Option is designated as a nonstatutory stock option in the Notice
      of Stock Option Grant, then the Committee may, in its sole discretion,
      allow you to transfer this Option as a gift to one or more family members.
      For purposes of this Agreement, “family member” means a child, stepchild,
      grandchild, parent, stepparent, grandparent, spouse, former spouse,
      sibling, niece, nephew, mother-in-law, father-in-law, or sister-in-law
      (including adoptive relationships), any individual sharing your household
      (other than a tenant or employee), a trust in which one or
  

            

    

     

    
      
        B-4

      

      
        
        

        
          

        

      

      
        
        

      

    

    
      	 	 more
      of these individuals have more than 50% of the beneficial interest, a
      foundation in which you or one or more of these persons control the
      management of assets, and any entity in which you or one or more of these
      persons own more than 50% of the voting interest.
	 
      	
              In
      addition, if this Option is designated as a nonstatutory stock option in
      the Notice of Stock Option Grant, then the Committee may, in its sole
      discretion, allow you to transfer this option to your spouse or former
      spouse pursuant to a domestic relations order in settlement of marital
      property rights.

            
	 
      	
              The
      Committee will allow you to transfer this Option only if both you and the
      transferee(s) execute the forms prescribed by the Committee, which include
      the consent of the transferee(s) to be bound by this
      Agreement.

            
	
              Retention
      Rights

            	
              Neither
      your Option nor this Agreement gives you the right to be retained by the
      Company or a subsidiary of the Company in any capacity. The Company and
      its subsidiaries reserve the right to terminate your Service at any time,
      with or without cause.

            
	
              Stockholder
      Rights

            	
              You,
      or your estate or heirs, have no rights as a stockholder of the Company
      until you have exercised this Option by giving the required notice to the
      Company and paying the exercise price. No adjustments are made for
      dividends or other rights if the applicable record date occurs before you
      exercise this Option, except as described in the Plan.

            
	
              Adjustments

            	
              In
      the event of a stock split, a stock dividend or a similar change in
      Company stock, the number of shares covered by this Option and the
      exercise price per share may be adjusted pursuant to the
    Plan.

            
	
              Applicable
      Law

            	
              This
      Agreement will be interpreted and enforced under the laws of the State of
      Delaware (without regard to their choice-of-law
    provisions).

            
	
              The
      Plan and Other Agreements

            	
              The
      text of the Plan is incorporated in this Agreement by reference. All
      capitalized terms in the Stock Option Agreement shall have the meanings
      assigned to them in the Plan. This Agreement and the Plan constitute the
      entire understanding between you and the Company regarding this Option.
      Any prior agreements, commitments or negotiations concerning this Option
      are superseded. This Agreement may be amended only by another written
      agreement, signed by both parties.

            

    

     

    BY
SIGNING THE COVER SHEET OF THIS AGREEMENT,

     

     

    YOU
AGREE TO ALL OF THE TERMS AND CONDITIONS

     

     

    DESCRIBED
ABOVE AND IN THE PLAN.

     

     

    

     

     

    

     

    
      
        
          B-5

          

           

        

         

      

      
         

        
          

        

      

      
         

      

    

    

     

     

    SECOND
AMENDED AND RESTATED

     

     

    SUNPOWER
CORPORATION 2005 STOCK INCENTIVE PLAN

     

     

    NOTICE
OF EXERCISE OF STOCK OPTION

     

     

    You
must sign this Notice on the last page before submitting

     

     

    it
to the Company

     

    
      	
              OPTIONEE
      INFORMATION:

            	 
      
	 
      	 
      
	
              Name:

            	 
      	 
      	
              Social
      Security Number:

            	 
      
	 
      	 
      	 
      	 
      	 
      
	
              Address:

            	 
      	 
      	
              Employee
      Number:

            	 
      

    

    

     

    
      	
              OPTION
      INFORMATION:

            	 
      
	 
      	 
      
	
              Date
      of Grant:

            	
              _______________,
      200__

            	
              Type
      of Stock Option:

            
	
              Exercise
      Price per Share:  $______________

            	
              ⁭

            	
              Nonstatutory
      (NSO)

            
	
              Total
      number of shares of Class A Common Stock of SunPower Corporation (the
      “Company”) covered by option:  __________

               

            	
              ⁭

            	
              Incentive
      (ISO)

            

    

    

     

     

    EXERCISE
INFORMATION:

     

    Number of
shares of Class A Common Stock of the Company for which option is being
exercised now:                      .
(These shares are referred to below as the “Purchased Shares.”)

     

    Total
exercise price for the Purchased Shares: $                            

     

    Form of
payment enclosed [check all that
apply]:

     

    
      	
              ⁭

            	
              Check
      for $                    ,
      payable to “SunPower Corporation”

            
	 
      	 
      
	
              ⁭

            	
              Certificate(s)
      for ______________ shares of Class A Common Stock of the Company that I
      have owned for at least six months or have purchased in the open market.
      (These shares will be valued as of the date when the Company receives this
      notice.)

            
	 
      	 
      
	
              ⁭

            	
              Attestation
      Form covering                     
      shares of Class A Common Stock of the Company. (These shares will be
      valued as of the date when the Company receives this
    notice.)

            

    

     

    
      
        B-6

      

      
        
        

        
          

        

      

      
        
        

      

    

    Name(s)
in which the Purchased Shares should be registered

     

     

    [please check one
box]:

     

    
      	
              ⁭

            	
              In
      my name only

            	 
      
	
              ⁭

            	
              In
      the names of my spouse and myself as community property

            	
              My
      spouse’s name (if applicable):

              ____________________________________________

            
	
              ⁭

            	
              In
      the names of my spouse and myself as joint tenants with the right of
      survivorship

            	 
      
	
              ⁭

            	
              In
      the name of an eligible revocable trust

            	
              Full
      legal name of revocable trust:

              ____________________________________________

              ____________________________________________

              ____________________________________________

            
	
              The
      certificate for the Purchased Shares should be sent to the following
      address:

            	
              ____________________________________________

              ____________________________________________

              ____________________________________________

            

    

    

     

    ACKNOWLEDGMENTS:

     

    
      	
              1.

            	
              I
      understand that all sales of Purchased Shares are subject to compliance
      with the Company’s policy on securities trades.

            
	
              2.

            	
              I
      hereby acknowledge that I received and read a copy of the prospectus
      describing the Second Amended and Restated SunPower Corporation 2005 Stock
      Incentive Plan and the tax consequences of an exercise.

            
	
              3.

            	
              In
      the case of a nonstatutory option, I understand that I must recognize
      ordinary income equal to the spread between the fair market value of the
      Purchased Shares on the date of exercise and the exercise price. I further
      understand that I am required to pay withholding taxes at the time of
      exercising a nonstatutory option.

            
	
              4.

            	
              In
      the case of an incentive stock option, I agree to notify the Company if I
      dispose of the Purchased Shares before I have met both of the tax holding
      periods applicable to incentive stock options (that is, if I make a
      disqualifying disposition).

            
	
              5.

            	
              I
      acknowledge that the Company has encouraged me to consult my own adviser
      to determine the form of ownership that is appropriate for me. In the
      event that I choose to transfer my Purchased Shares to a trust that does
      not satisfy the requirements of the Internal Revenue Service (i.e., a
      trust that is not an eligible revocable trust), I also acknowledge that
      the transfer will be treated as a “disposition” for incentive stock option
      tax purposes. As a result, the favorable incentive stock option tax
      treatment will be unavailable and other unfavorable tax consequences may
      occur.

            

    

    

     

    
      	
              SIGNATURE
      AND DATE:

            	 
      
	 
      	 
      	 
      	
              __,
      200_

            

    

    
      
        
          B-7

          

           

        

         

      

      
         

        
          

        

      

      
         

      

    

    

     

    SECOND
AMENDED AND RESTATED

    SUNPOWER
CORPORATION 2005 STOCK INCENTIVE PLAN

    NOTICE
OF GRANT OF RESTRICTED STOCK

    

    Unless
otherwise defined herein, the terms defined in the Plan shall have the same
defined meanings in this Notice of Grant.

    

    Name:

    

    You have
been granted ______
Restricted Shares.  Additional terms of this grant are as
follows:

    

    Date of
Grant                                                                           __________

    

    Grant
Number                                                                           __________

    

    Vesting
Date:                                                                           __________

    

    

    
      	
              Vesting
      Schedule

            	
              __________

            

    

    

    

    Expiration
Date:                                                                           N/A

    

    

    You must
sign and return this Notice of Grant to the Company prior to the Expiration
Date.  If you fail to do so, then the Award granted hereunder will be
deemed null and void.

    

    You will
not receive a certificate representing the Restricted Shares upon vesting,
unless and until you have made satisfactory arrangements with the Company with
respect to the payment of any income, employment and other taxes which the
Company determines must be withheld with respect to such Shares upon their
vesting.  You
hereby agree to accept as binding, conclusive and final all decisions or
interpretations of the Committee upon any questions relating to the Plan and
this Award.

    

    By your
signature below prior to the Expiration Date, you agree that this Notice of
Grant, the form of Restricted Stock Agreement attached as Exhibit A hereto and
the Second Amended and Restated SunPower Corporation 2005 Stock Incentive Plan
constitute your entire agreement with respect to this Award and may not be
modified adversely to your interest except by means of a writing signed by the
Company and you.

    

    GRANTEE:

    

    _______________________________

    Signature

    

    ________________________________

    Print Name

    
      
        
          C-1

          

           

        

         

      

      
         

        
          

        

      

      
         

      

    

     

    

    SECOND
AMENDED AND RESTATED

     SUNPOWER
CORPORATION 2005 STOCK INCENTIVE PLAN

    RESTRICTED
STOCK AGREEMENT

    EXHIBIT
A

    

    1.           Grant.  The
Company hereby grants to ________ (the “Grantee”) an
award of Restricted Shares (“Restricted Shares”), as set forth in the Notice of
Grant of Restricted Stock (the “Notice of Grant”) and subject to the terms and
conditions in this Restricted Stock Agreement and the Second Amended and
Restated SunPower Corporation 2005 Stock Incentive Plan (the
“Plan”).  Unless otherwise defined herein, the terms defined in the
Plan and the Notice of Grant shall have the same defined meanings in this
Restricted Stock Agreement.

    

    2.           Vesting
Schedule.  Subject to paragraph 3, the Restricted Shares
awarded by this Restricted Stock Agreement will vest in the Grantee according to
the vesting schedule specified in the Notice of Grant.

    

    3.           Forfeiture upon Termination
of Service.  Notwithstanding any contrary provision of this
Restricted Stock Agreement or the Notice of Grant, if the Grantee terminates
Service with the Company for any or no reason prior to vesting, the unvested
Restricted Shares awarded by this Restricted Stock Agreement will thereupon be
forfeited at no cost to the Company.

    

    4.           Issuance of Restricted
Shares.  The Shares subject to this grant of Restricted Shares
shall be registered in the Grantee’s name and shall be fully paid and
nonassessable.  If any certificate or other evidence of ownership is
issued, it shall bear an appropriate legend referring to the restrictions
hereinafter set forth.

    

    5.           Grant is Not
Transferable.  The Shares subject to this grant of Restricted
Shares and the rights and privileges conferred hereby will not be transferred,
assigned, pledged or hypothecated in any way (whether by operation of law or
otherwise) and will not be subject to sale under execution, attachment or
similar process, unless the Restricted Shares are nonforfeitable as provided in
Section 2 hereof; provided, however, that the
Grantee’s rights with respect to such Shares may be transferred by will or
pursuant to the laws of descent and distribution.  Upon any attempt to
transfer, assign, pledge, hypothecate or otherwise dispose of this grant, or any
right or privilege conferred hereby, or upon any attempted sale under any
execution, attachment or similar process, this grant and the rights and
privileges conferred hereby immediately will become null and void.

    

    6.           Rights as Stockholder;
Dividends.  Except as otherwise provided herein, from and after
the Date of Grant, the Grantee shall have all of the rights of a shareholder
with respect to the Restricted Shares covered by this Restricted Stock
Agreement, including the right to vote such Restricted Shares and receive any
dividends that may be paid thereon; provided, however,

     

    
      
        C-2

      

      
        
        

        
          

        

      

      
        
        
that any
additional Shares or other securities that the Grantee may become entitled to
receive pursuant to a stock dividend, issuance of rights or warrants, stock
split, combination of shares, recapitalization, merger, consolidation,
separation, or reorganization or any other change in the capital structure of
the Company shall be subject to the same restrictions as the Restricted Shares
covered by this Restricted Stock Agreement.

    

    

    7.           No Effect on
Employment.  The Grantee’s employment with the Company and its
Subsidiaries is on an at-will basis only.  Accordingly, the terms of
the Grantee’s employment with the Company and its Subsidiaries will be
determined from time to time by the Company or the Subsidiary employing the
Grantee (as the case may be), and the Company or the Subsidiary will have the
right, which is hereby expressly reserved, to terminate or change the terms of
the employment of the Grantee at any time for any reason whatsoever, with or
without good cause or notice.

    

    8.           No Employment
Contract. This award is a
voluntary, discretionary bonus being made on a one-time basis and it does not
constitute a commitment to make any future awards.  This award of
Restricted Shares and any payments made hereunder will not be considered salary
or other compensation for purposes of any severance pay or similar allowance,
except as otherwise required by law.  Nothing in this Restricted Stock
Agreement will give the Grantee any right to continue employment with the
Company or any Subsidiary, as the case may be, or interfere in any way with the
right of the Company or a Subsidiary to terminate the employment of the
Grantee.

    

     

    9.           Address for
Notices.  Any notice to be given to the Company under the terms
of this Restricted Stock Agreement will be addressed to the Company at 3939
North First Street, San Jose, California 95134, Attn: Treasury, or at
such other address as the Company may hereafter designate in writing or
electronically.

    

    10.           Taxes and
Withholding.  To the extent
that the Company is required to withhold any federal, state, local or foreign
tax in connection with any delivery of Shares pursuant to this Restricted Stock
Agreement, and the amounts available to the Company are insufficient, it shall
be a condition to the receipt of such delivery that the Grantee make
arrangements satisfactory to the Company for payment of the balance of such
taxes required to be withheld.  Unless otherwise determined by the
Committee, this tax withholding obligation shall be satisfied by the retention
by the Company of Shares otherwise deliverable pursuant to this award; provided, however, that the
Shares retained for payment of the tax must satisfy the minimum tax withholding
amount permissible under the method that results in the least amount
withheld.

    

    11.           Plan
Governs.  This Restricted Stock Agreement and the Notice of
Grant are subject to all terms and provisions of the Plan.  In the
event of a conflict between one or more provisions of this Restricted Stock
Agreement or the Notice of Grant and one or more provisions of the Plan, the
provisions of the Plan will govern.

    

    12.           Committee
Authority.  The Committee will have the power to
interpret the Plan and this Restricted Stock Agreement and to adopt such rules
for the administration, interpretation and application of the Plan as are
consistent therewith and to interpret or revoke any such rules 

     

    
      
        C-3

      

      
        
        

        
          

        

      

      
        
        

      

    

    (including,
but not limited to, the determination of whether or not any Restricted Shares
have vested).  All actions taken and all interpretations and
determinations made by the Administrator in good faith will be final and binding
upon the Grantee, the Company and all other interested persons.  No
member of the Administrator will be personally liable for any action,
determination or interpretation made in good faith with respect to the Plan or
this Restricted Stock Agreement. 

    

    13.           Amendments.  Any
amendment to the Plan shall be deemed to be an amendment to this Restricted
Stock Agreement to the extent that the amendment is applicable hereto; provided, however, that no
amendment shall adversely affect the rights of the Grantee under this Restricted
Stock Agreement without the Grantee’s consent.

    

    14.           Severability.  If
any provision of this Restricted Stock Agreement or the application of any
provision hereof to any person or circumstances is held invalid or
unenforceable, the remainder of this Restricted Stock Agreement and the
application of such provision in any other person or circumstances shall not be
affected, and the provisions so held to be invalid or unenforceable shall be
reformed to the extent (and only to the extent) necessary to make it enforceable
and valid.

    

     

    15.           Governing
Law.  This Restricted Stock Agreement shall be governed by and
construed in accordance with the internal substantive laws of the State of
Delaware, without giving effect to any principle of law that would result in the
application of the law of any other jurisdiction.

    

    

    

    

    

    

    

    
      
        
          C-4

          

           

        

         

      

      
         

        
          

        

      

      
         

      

    

     

    SECOND
AMENDED AND RESTATED

     

     

     SUNPOWER
CORPORATION 2005 STOCK INCENTIVE PLAN

     

     

    NOTICE
OF GRANT OF RESTRICTED STOCK UNITS

     

    Unless
otherwise defined herein, the terms defined in the Plan shall have the same
defined meanings in this Notice of Grant.

     

    Name:

     

    You have
been granted ______ Restricted Stock Units
(“RSUs”).  Additional terms of this grant are as follows:

     

    
      	
              Date
      of Grant:

            	 	 

    

     

    
      	
              Grant
      Number:

            	 	 

    

     

    
      	
              Vesting
      Schedule:

            	 	 

    

     

    
      	
              Expiration
      Date:

            	
              N/A

            

    

     

    You must
sign and return this Notice of Grant to the Company prior to the Expiration
Date.  If you fail to do so, then the Award granted hereunder will be
deemed null and void.

     

    You will
not receive a certificate representing the Shares upon the RSUs becoming
nonforfeitable, unless and until you have made satisfactory arrangements with
the Company with respect to the payment of any income, employment and other
taxes which the Company determines must be withheld with respect to such Shares
upon the RSUs becoming nonforfeitable.  You hereby agree to
accept as binding, conclusive and final all decisions or interpretations of the
Committee upon any questions relating to the Plan and this Award.

     

    By your
signature below prior to the Expiration Date, you agree that this Notice of
Grant, the form of Restricted Stock Unit Agreement attached as Exhibit A hereto and
the Second Amended and Restated SunPower Corporation 2005 Stock Incentive Plan
constitute your entire agreement with respect to this Award and may not be
modified adversely to your interest except by means of a writing signed by the
Company and you.

     

    GRANTEE:                                                                                     SUNPOWER
CORPORATION

     

    _________________________                By:                                                                

    Signature                                                                                      
 Name:

                             
Title:

    _________________________
Print
Name

    
      
        
          D-1

          

        

         

      

      
         

        
          

        

      

      
         

      

    

     

    SECOND
AMENDED AND RESTATED

     

     

     SUNPOWER
CORPORATION 2005 STOCK INCENTIVE PLAN

     

     

    RESTRICTED
STOCK UNIT AGREEMENT

     

     

    EXHIBIT
A

     

    1. Grant.  The
Company hereby grants to ________ (the “Grantee”) an award
of Restricted Stock Units (“RSUs”), as set forth in the Notice of Grant of
Restricted Stock Units (the “Notice of Grant”) and subject to the terms and
conditions in this Restricted Stock Unit Agreement and the Second Amended and
Restated SunPower Corporation 2005 Stock Incentive Plan, as may be amended from
time to time (the “Plan”).  The term “Restricted Stock Units” shall
have the same meaning as that ascribed to the term “Stock Units” in the
Plan.  All terms used herein with initial capital letters and not
otherwise defined herein or in the Notice of Grant that are defined in the Plan
shall have the meanings assigned to them in the Plan.

     

    2. Payment of
RSUs.  The RSUs covered by this Restricted Stock Unit Agreement
shall become payable to Grantee if they become nonforfeitable in accordance with
Section 3 (Vesting Schedule) hereof.

     

    3. Vesting
Schedule.  Subject to Section 4 (Forfeiture upon Termination of
Service), the Grantee’s right to receive the Shares subject to the RSUs awarded
by this Restricted Stock Unit Agreement will vest in the Grantee according to
the vesting schedule specified in the Notice of Grant.

     

    4. Forfeiture upon Termination
of Service.  Notwithstanding any contrary provision of this
Restricted Stock Unit Agreement or the Notice of Grant, if the Grantee
terminates Service with the Company for any or no reason prior to vesting, the
unvested RSUs awarded by this Restricted Stock Unit Agreement will thereupon be
forfeited at no cost to the Company.

     

    5. Form and Time of Payment of
RSUs.  Except as otherwise provided for in Section 8
(Adjustments), payment for the RSUs shall be made in form of the Shares at the
time they become nonforfeitable in accordance with Section 3 (Vesting Schedule)
hereof.

     

    6. No Dividend
Equivalents.  The Grantee of RSUs shall not be entitled to
dividend equivalents.

     

    7. Grant is Not
Transferable. Subject to the provisions of Section 10(f) of the Plan
regarding the designation of beneficiaries, neither the RSUs granted hereby nor
any interest therein or in the Shares related thereto shall be transferable
other than by will or the laws of descent and distribution prior to
payment.

     

    8. Adjustments. In the event of any
change in the aggregate number of outstanding Shares by reason of (a) any stock
dividend, extraordinary dividend, stock split, combination of shares,
recapitalization or other change in the capital structure of the Company, or (b)
any 

     

    
      
        D-2

      

      
        
        

        
          

        

      

      
        
        
Change in
Control, merger, consolidation, spin-off, split-off, spin-out, split-up,
reorganization or partial or complete liquidation, or other distribution of
assets, issuance of rights or warrants to purchase securities, or (c) any other
corporate transaction or event having an effect similar to any of the foregoing,
then the Board of Directors (or the Committee) shall adjust the number of RSUs
then held by the Grantee in such manner as to prevent dilution or enlargement of
the rights of the Grantee that otherwise would result from such
event.  Moreover, in the event of any such transaction or event, the
Board of Directors (or the Committee), in its discretion, may provide in
substitution for any or all of the Grantee’s rights under this Restricted Stock
Unit Agreement such alternative consideration as it may determine to be
equitable in the circumstances.

    

     

    9. Compliance with Section 409A
of the Code.  To the extent applicable, it is intended that
this Restricted Stock Unit Agreement and the Plan comply with the provisions of
Section 409A of the Code, so that the income inclusion provisions of Section
409A(a)(1) do not apply to the Grantee.  This Restricted Stock Unit
Agreement and the Plan shall be administered in a manner consistent with this
intent.

     

    10. No Service
Contract. The grant of the RSUs to
the Grantee is a voluntary, discretionary bonus being made on a one-time basis
and it does not constitute a commitment to make any future
awards.  The grant of the RSUs and any payments made hereunder will
not be considered salary or other compensation for purposes of any severance pay
or similar allowance, except as otherwise required by law.  Nothing in
this Restricted Stock Unit Agreement will give the Grantee any right to continue
Service with the Company or any Subsidiary, as the case may be, or interfere in
any way with the right of the Company or a Subsidiary to terminate the Service
of the Grantee.

     

    11. No Effect on
Service.  The Grantee’s Service with the Company and its
Subsidiaries is on an at-will basis only.  Accordingly, the terms of
the Grantee’s Service with the Company and its Subsidiaries will be determined
from time to time by the Company or the Subsidiary to which the Grantee provides
Service (as the case may be), and the Company or the Subsidiary will have the
right, which is hereby expressly reserved, to terminate or change the terms of
the Service of the Grantee at any time for any reason whatsoever, with or
without good cause or notice.

     

    12. Address for
Notices.  Any notice to be given to the Company under the terms
of this Restricted Stock Unit Agreement will be addressed to the Company at 3939
North First Street, San Jose, California 95134, Attn: Treasury, or at
such other address as the Company may hereafter designate in writing or
electronically.

     

    13. Taxes and
Withholding.  To the extent
that the Company is required to withhold any federal, state, local or foreign
tax in connection with any delivery of Shares pursuant to this Restricted Stock
Unit Agreement, and the amounts available to the Company are insufficient, it
shall be a condition to the receipt of such delivery that the Grantee make
arrangements satisfactory to the Company for payment of the balance of such
taxes required to be withheld.  Unless otherwise determined by the
Committee, this tax withholding obligation shall be satisfied by the retention
by the Company of Shares otherwise deliverable pursuant to this award; provided, however, that the
Shares retained for payment of the tax must satisfy the minimum tax withholding
amount permissible under the method that results in the least amount
withheld.

     

    
      
        D-3

      

      
        
        

        
          

        

      

      
        
        

      

    

    14. Plan
Governs.  This Restricted Stock Unit Agreement and the Notice
of Grant are subject to all terms and provisions of the Plan.  In the
event of a conflict between one or more provisions of this Restricted Stock Unit
Agreement or the Notice of Grant and one or more provisions of the Plan, the
provisions of the Plan will govern.

     

    15. Committee
Authority.  The Committee will have the power to
interpret the Plan and this Restricted Stock Unit Agreement and to adopt such
rules for the administration, interpretation and application of the Plan as are
consistent therewith and to interpret or revoke any such rules (including, but
not limited to, the determination of whether or not any RSUs have
vested).  All actions taken and all interpretations and determinations
made by the Committee in good faith will be final and binding upon the Grantee,
the Company and all other interested persons.  No member of the
Committee will be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan or this Restricted
Stock Unit Agreement.

     

    16. Data
Privacy.  Information about the Grantee and the Grantee’s
participation in the Plan may be collected, recorded, and held, used and
disclosed for any purpose related to the administration of the
Plan.  The Grantee understands that such processing of this
information may need to be carried out by the Company and its Subsidiaries and
by third party administrators whether such persons are located within the
Grantee’s country or elsewhere, including the United States of
America.  The Grantee consents to the processing of information
relating to the Grantee and the Grantee’s participation in the Plan in any one
or more of the ways referred to above.

     

    17. Amendments.  Any
amendment to the Plan shall be deemed to be an amendment to this Restricted
Stock Unit Agreement to the extent that the amendment is applicable hereto;
provided, however, that no
amendment shall adversely affect the rights of the Grantee under this Restricted
Stock Unit Agreement without the Grantee’s consent.

     

    18. Severability.  If
any provision of this Restricted Stock Unit Agreement or the application of any
provision hereof to any person or circumstances is held invalid or
unenforceable, the remainder of this Restricted Stock Unit Agreement and the
application of such provision in any other person or circumstances shall not be
affected, and the provisions so held to be invalid or unenforceable shall be
reformed to the extent (and only to the extent) necessary to make it enforceable
and valid.

     

    19. Successors and
Assigns.  Without limiting Section 7 (Grant is Not
Transferable) hereof, the provisions of this Restricted Stock Unit Agreement
shall inure to the benefit of, and be binding upon, the successors,
administrators, heirs, legal representatives and assigns of the Grantee, and the
successors and assigns of the Company.

     

    20. Governing
Law.  This Restricted Stock Unit Agreement shall be governed by
and construed in accordance with the internal substantive laws of the State of
Delaware, without giving effect to any principle of law that would result in the
application of the law of any other jurisdiction.

     

    

     

    
      
        
          D-4

          

        

         

      

      
         

        
          

        

      

      
         

      

    

     

    SECOND
AMENDED AND RESTATED

     

     

     SUNPOWER
CORPORATION 2005 STOCK INCENTIVE PLAN

     

     

    NOTICE
OF GRANT OF RESTRICTED STOCK UNITS

     

    Unless
otherwise defined herein, the terms defined in the Plan shall have the same
defined meanings in this Notice of Grant.

     

    You have
been granted the number of Restricted Stock Units (“RSUs”) in the amount and on
the date, and subject to the other terms indicated in the “Summary of Award” on
the online acceptance web page.

     

    You will
not receive a certificate representing the Shares upon the RSUs becoming
nonforfeitable, unless and until you have made satisfactory arrangements with
the Company with respect to the payment of any income, employment and other
taxes which the Company determines must be withheld with respect to such Shares
upon the RSUs becoming nonforfeitable.  You hereby agree to
accept as binding, conclusive and final all decisions or interpretations of the
Committee upon any questions relating to the Plan and this Award.

     

    By
checking the boxes on Step 2 of the online acceptance, you agree that this
Notice of Grant, the form of Restricted Stock Unit Agreement attached as Exhibit A hereto and
the Second Amended and Restated SunPower Corporation 2005 Stock Incentive Plan
constitute your entire agreement with respect to this Award and may not be
modified adversely to your interest except by means of a writing signed by the
Company and you.

     

    
      
        
          E-1

          

        

         

      

      
         

        
          

        

      

      
         

      

    

     

    SECOND
AMENDED AND RESTATED

     

     

     SUNPOWER
CORPORATION 2005 STOCK INCENTIVE PLAN

     

     

    RESTRICTED
STOCK UNIT AGREEMENT

     

     

    EXHIBIT
A

     

    1. Grant.  The
Company hereby grants you (the “Grantee”) an award
of Restricted Stock Units (“RSUs”), as set forth in the Notice of Grant of
Restricted Stock Units (the “Notice of Grant”) and subject to the terms and
conditions in this Restricted Stock Unit Agreement and the Second Amended and
Restated SunPower Corporation 2005 Stock Incentive Plan, as may be amended from
time to time (the “Plan”).  The term “Restricted Stock Units” shall
have the same meaning as that ascribed to the term “Stock Units” in the
Plan.  All terms used herein with initial capital letters and not
otherwise defined herein or in the Notice of Grant that are defined in the Plan
shall have the meanings assigned to them in the Plan.

     

    2. Payment of
RSUs.  The RSUs covered by this Restricted Stock Unit Agreement
shall become payable to Grantee if they become nonforfeitable in accordance with
Section 3 (Vesting Schedule) hereof.

     

    3. Vesting
Schedule.  Subject to Section 4 (Forfeiture upon Termination of
Service), the Grantee’s right to receive the Shares subject to the RSUs awarded
by this Restricted Stock Unit Agreement will vest in the Grantee according to
the vesting schedule specified separately by the Company to the
Grantee.

     

    4. Forfeiture upon Termination
of Service.  Notwithstanding any contrary provision of this
Restricted Stock Unit Agreement or the Notice of Grant, if the Grantee
terminates Service with the Company for any or no reason prior to vesting, the
unvested RSUs awarded by this Restricted Stock Unit Agreement will thereupon be
forfeited at no cost to the Company.

     

    5. Form and Time of Payment of
RSUs.  Except as otherwise provided for in Section 8
(Adjustments), payment for the RSUs shall be made in form of the Shares at the
time they become nonforfeitable in accordance with Section 3 (Vesting Schedule)
hereof.

     

    6. No Dividend
Equivalents.  The Grantee of RSUs shall not be entitled to
dividend equivalents.

     

    7. Grant is Not
Transferable. Subject to the provisions of Section 10(f) of the Plan
regarding the designation of beneficiaries, neither the RSUs granted hereby nor
any interest therein or in the Shares related thereto shall be transferable
other than by will or the laws of descent and distribution prior to
payment.

     

    8. Adjustments. In the event of any
change in the aggregate number of outstanding Shares by reason of (a) any stock
dividend, extraordinary dividend, stock split, combination of shares,
recapitalization or other change in the capital structure of the Company, or (b)
any 

     

    
      
        E-2

      

      
        
        

        
          

        

      

      
        
        
Change in
Control, merger, consolidation, spin-off, split-off, spin-out, split-up,
reorganization or partial or complete liquidation, or other distribution of
assets, issuance of rights or warrants to purchase securities, or (c) any other
corporate transaction or event having an effect similar to any of the foregoing,
then the Board of Directors (or the Committee) shall adjust the number of RSUs
then held by the Grantee in such manner as to prevent dilution or enlargement of
the rights of the Grantee that otherwise would result from such
event.  Moreover, in the event of any such transaction or event, the
Board of Directors (or the Committee), in its discretion, may provide in
substitution for any or all of the Grantee’s rights under this Restricted Stock
Unit Agreement such alternative consideration as it may determine to be
equitable in the circumstances.

    

     

    9. Compliance with Section 409A
of the Code.  To the extent applicable, it is intended that
this Restricted Stock Unit Agreement and the Plan comply with the provisions of
Section 409A of the Code, so that the income inclusion provisions of Section
409A(a)(1) do not apply to the Grantee.  This Restricted Stock Unit
Agreement and the Plan shall be administered in a manner consistent with this
intent.

     

    10. No Service
Contract. The grant of the RSUs to
the Grantee is a voluntary, discretionary bonus being made on a one-time basis
and it does not constitute a commitment to make any future
awards.  The grant of the RSUs and any payments made hereunder will
not be considered salary or other compensation for purposes of any severance pay
or similar allowance, except as otherwise required by law.  Nothing in
this Restricted Stock Unit Agreement will give the Grantee any right to continue
Service with the Company or any Subsidiary, as the case may be, or interfere in
any way with the right of the Company or a Subsidiary to terminate the Service
of the Grantee.

     

    11. No Effect on
Service.  The Grantee’s Service with the Company and its
Subsidiaries is on an at-will basis only.  Accordingly, the terms of
the Grantee’s Service with the Company and its Subsidiaries will be determined
from time to time by the Company or the Subsidiary to which the Grantee provides
Service (as the case may be), and the Company or the Subsidiary will have the
right, which is hereby expressly reserved, to terminate or change the terms of
the Service of the Grantee at any time for any reason whatsoever, with or
without good cause or notice.

     

    12. Address for
Notices.  Any notice to be given to the Company under the terms
of this Restricted Stock Unit Agreement will be addressed to the Company at 3939
North First Street, San Jose, California 95134, Attn: Treasury, or at
such other address as the Company may hereafter designate in writing or
electronically.

     

    13. Taxes and
Withholding.  To the extent
that the Company is required to withhold any federal, state, local or foreign
tax in connection with any delivery of Shares pursuant to this Restricted Stock
Unit Agreement, and the amounts available to the Company are insufficient, it
shall be a condition to the receipt of such delivery that the Grantee make
arrangements satisfactory to the Company for payment of the balance of such
taxes required to be withheld.  Unless otherwise determined by the
Committee, this tax withholding obligation shall be satisfied by the retention
by the Company of Shares otherwise deliverable pursuant to this award; provided, however, that the
Shares retained for payment of the tax must satisfy the minimum tax withholding
amount permissible under the method that results in the least amount
withheld.

     

    
      
        E-3

      

      
        
        

        
          

        

      

      
        
        

      

    

    14. Plan
Governs.  This Restricted Stock Unit Agreement and the Notice
of Grant are subject to all terms and provisions of the Plan.  In the
event of a conflict between one or more provisions of this Restricted Stock Unit
Agreement or the Notice of Grant and one or more provisions of the Plan, the
provisions of the Plan will govern.

     

    15. Committee
Authority.  The Committee will have the power to
interpret the Plan and this Restricted Stock Unit Agreement and to adopt such
rules for the administration, interpretation and application of the Plan as are
consistent therewith and to interpret or revoke any such rules (including, but
not limited to, the determination of whether or not any RSUs have
vested).  All actions taken and all interpretations and determinations
made by the Committee in good faith will be final and binding upon the Grantee,
the Company and all other interested persons.  No member of the
Committee will be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan or this Restricted
Stock Unit Agreement.

     

    16. Data
Privacy.  Information about the Grantee and the Grantee’s
participation in the Plan may be collected, recorded, and held, used and
disclosed for any purpose related to the administration of the
Plan.  The Grantee understands that such processing of this
information may need to be carried out by the Company and its Subsidiaries and
by third party administrators whether such persons are located within the
Grantee’s country or elsewhere, including the United States of
America.  The Grantee consents to the processing of information
relating to the Grantee and the Grantee’s participation in the Plan in any one
or more of the ways referred to above.

     

    17. Amendments.  Any
amendment to the Plan shall be deemed to be an amendment to this Restricted
Stock Unit Agreement to the extent that the amendment is applicable hereto;
provided, however, that no
amendment shall adversely affect the rights of the Grantee under this Restricted
Stock Unit Agreement without the Grantee’s consent.

     

    18. Severability.  If
any provision of this Restricted Stock Unit Agreement or the application of any
provision hereof to any person or circumstances is held invalid or
unenforceable, the remainder of this Restricted Stock Unit Agreement and the
application of such provision in any other person or circumstances shall not be
affected, and the provisions so held to be invalid or unenforceable shall be
reformed to the extent (and only to the extent) necessary to make it enforceable
and valid.

     

    19. Successors and
Assigns.  Without limiting Section 7 (Grant is Not
Transferable) hereof, the provisions of this Restricted Stock Unit Agreement
shall inure to the benefit of, and be binding upon, the successors,
administrators, heirs, legal representatives and assigns of the Grantee, and the
successors and assigns of the Company.

     

    20. Governing
Law.  This Restricted Stock Unit Agreement shall be governed by
and construed in accordance with the internal substantive laws of the State of
Delaware, without giving effect to any principle of law that would result in the
application of the law of any other jurisdiction.

     

    

     

    
      
        
          E-4

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