Document:

Exhibit 10.1 Stillwater Trust 1

    Exhibit
      10.1

     

    ASSET
      PURCHASE AGREEMENT

     

    This
      ASSET PURCHASE AGREEMENT (this “Agreement”) is made, as of June 1, 2006, by and
      between STILLWATER HYDRO PARTNERS L.P., a Delaware limited partnership
      (“Seller”), and BORALEX STILLWATER LLC, a Delaware limited liability company
      (“Purchaser”).

     

    BACKGROUND

     

    A. Seller
      is
      engaged in the business of operating a federally licensed hydroelectric
      generating plant located at 104 Hudson Street, Stillwater, New York 12170 (the
      “Business”).

     

    B. Seller
      desires to sell to Purchaser the Purchased Assets (as defined herein) and
      Purchaser desires to purchase the Purchased Assets from Seller, all on the
      terms
      and conditions hereinafter set forth.

     

    C. Seller
      and Purchaser are entering into this Agreement to evidence their respective
      duties, obligations and responsibilities.

     

    NOW,
      THEREFORE,
      in
      consideration of the respective representations, warranties, covenants and
      agreements contained in this Agreement, each of Seller and Purchaser agrees
      as
      follows:

     

     

    ARTICLE
      I

     

    DEFINITIONS

     

    1.1Defined
      Terms.
      The
      following terms when used in this Agreement (or in the Schedules and Exhibits
      to
      this Agreement) with initial letters capitalized have the meanings set forth
      below:

     

    “Affiliate”
      of a
      Person means any other Person that (a) directly or indirectly controls the
      specified Person; (b) is controlled by or is under direct or indirect
      common control with the specified Person; or (c) is an officer, director,
      employee, representative or agent or subsidiary of the Person. For the purposes
      of this definition, “control,”
when
      used with respect to any specified Person, means the power to direct the
      management or policies of the specified Person, directly or indirectly, whether
      through the ownership of voting securities, partnership or limited liability
      company interests, by contract or otherwise.

     

    “Agreement”
      means
      this Asset Purchase Agreement, together with the Schedules and Exhibits
      hereto.

     

    “Articles”
      means
      the
      Articles of this Agreement.

     

    “Assigned
      Contracts”
      has the
      meaning set forth in Section 2.1(b).

     

    “Assumed
      Liabilities”
      has the
      meaning set forth in Section 2.3.

     

    “Bill
      of Sale”
      means
      the Bill of Sale, substantially in the form of Exhibit
      B
      hereto,
      to be delivered at the Closing, with respect to Seller's interests in the
      Tangible Personal Property included in the Purchased Assets to be transferred
      to
      Purchaser at the Closing.

     

    ‘Business”
      has
      the
      meaning set forth in the Background of this Agreement.

     

    “Business
      Day”
      means a
      day other than Saturday, Sunday or a day on which banks are legally closed
      for
      business in the State of New York.

     

    “Capital
      Expenditure”
      means
      any expenditure for additions or changes to property, plant and equipment and
      any other expenditures (excluding repairs but including capitalized maintenance
      costs) that would be capitalized on Seller’s balance sheet in accordance with U.
      S. generally accepted accounting principles (GAAP).

     

    “Closing”
      has the
      meaning set forth in Section 2.5.

     

    “Closing
      Date”
      has the
      meaning set forth in Section 2.5.

     

    “Code”
      means
      the United States Internal Revenue Code of 1986, as amended.

     

    “Commercially
      Reasonable Efforts”
      means
      those efforts (i) which are reasonably foreseeable by the Parties at the time
      of
      executing this Agreement, (ii) which a Party would reasonably expect the other
      Party to take under the circumstances in order to satisfy its obligations
      hereunder, and (iii) which a Party would undertake for its own benefit under
      similar circumstances in order to achieve the results contemplated by this
      Agreement, provided that such efforts will not require or include either expense
      or conduct not ordinarily incurred or engaged in by Persons seeking to implement
      transactions of the type contemplated by this Agreement.

     

    “Confidential
      Information”
      has the
      meaning assigned to such term in the Confidentiality Agreement.

     

    “Confidentiality
      Agreement”
      means
      that certain confidentiality agreement between Seller and Purchaser accepted
      by
      Seller as of December 8, 2005. 

     

    “Dam
      Operation Agreement”
      means
      the Agreement executed July 15, 1991 between Seller and the New York State
      Department of Transportation Regarding Operation and Maintenance of the Hudson
      River and the New York State Barge Canal, Champlain Division, Within the
      Boundaries of the Stillwater/Lock C-4 Project as the same may be amended from
      time to time. 

     

    “Deed”
      means
      the bargain and sale deed containing the clause required by Section 13 of the
      New York lien law and conforming to the requirements of the PCB Disposal Letter,
      in the form of Exhibit
      C.

     

    “Defect
      in Title”
      has the
      meaning set forth in Section
      5.17.

     

    “Down
      Payment”
      has the
      meaning set forth in Section 2.6.

     

    “Due
      Diligence Inspections and Reviews”
      means
      any due diligence, inspection or review related to the Purchased Assets and
      described in or conducted pursuant to the terms and conditions of the
      Confidentiality Agreement, inclusive of all third party consultant studies
      and
      reports. 

     

    “Effective
      Date”
      means
      the date on which this Agreement is executed and delivered by the
      Parties.

     

    “Encumbrances”
      means
      any mortgages, pledges, liens, security interests, conditional and installment
      sale agreements, activity and use limitations, conservation easements, deed
      restrictions, easements, encumbrances and charges of any kind.

     

    “Environmental
      Laws”
      means
      any Governmental Rule relating to air emissions, storage and use of hazardous
      or
      toxic substances, generation, treatment, storage, and disposal of hazardous
      wastes, wastewater discharges and similar environmental matters, including
      the
      Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C.
      § 9601 et seq.),
      the
      Hazardous Materials Transportation Act (49 U.S.C. § 1801 et seq.),
      the
      Resource Conservation and Recovery
      Act (42 U.S.C. § 6901 et seq.),
      the
      Federal Water Pollution Control Act (33 U.S. C. § 1251 et seq.),
      the
      Clean Air Act (42 U.S.C. § 7401 et seq.),
      the
      Toxic Substances Control Act (15 U.S.C. § 2601 et seq.),
      the
      Oil Pollution Act (33 U.S.C. § 2701 et seq.)
      and
      the Emergency Planning and Community Right-to-Know Act (42 U.S.C. § 11001
et seq.).

     

    “ERISA”
      means
      the Employee Retirement Income Security Act of 1974, as amended.

     

    “ERISA
      Affiliate”
      means
      any trade or business (whether or not incorporated) which is or ever has been
      under common control, or which is or ever has been treated as a single employer,
      with Seller under Section 414(b), (c), (m) or (o) of the Code.

     

    “Escrow
      Agent”
      has the
      meaning set forth in Section 2.6.

     

    “Escrow
      Agreement”
      means
      the agreement in the form annexed hereto as Exhibit D to be entered into between
      the Parties and the Escrow Agent simultaneously with the execution of this
      Agreement.

     

    “Event
      of Loss”
      has the
      meaning set forth in Section 5.11(b).

     

    “Excluded
      Assets”
      has the
      meaning set forth in Section 2.2.

     

    “Exhibits”
      means
      the exhibits to this Agreement.

     

    “FERC”
      means
      the Federal Energy Regulatory Commission, or its regulatory successor, as
      applicable.

     

    “FERC
      License”
means
      the hydropower license issued by FERC pursuant to Part I of the Federal Power
      Act for FERC Project No. 4684, including amendments and all current issuances
      and submissions related thereto.

     

    “FIRPTA”
      means
      the Foreign Investment in Real Property Tax Act of 1980.

     

    “Governmental
      Approval”
      means
      any authorization, consent, approval, waiver, exception, variance, order,
      franchise, permit, license or exemption issued by any Governmental
      Authority.

     

    “Governmental
      Authority”
      means
      any federal, state, local or other governmental, regulatory or administrative
      agency, governmental commission, department, board, subdivision, court,
      tribunal, or other governmental arbitrator, arbitral body or other authority
      having jurisdiction over the matter or Person in question, including
      FERC.

     

    “Governmental
      Rule”
      means,
      with respect to any Person, any applicable law, statute, treaty, rule,
      regulation, ordinance, order, code, judgment, decree, directive, injunction,
      writ or similar action or decision duly implementing any of the foregoing by
      any
      Governmental Authority, but does not include Governmental
      Approvals.

     

    “Hazardous
      Substances”
      means
      any chemical, material or substance that is listed or regulated under applicable
      Environmental Laws as a “hazardous” or “toxic” substance or waste, or as a
“contaminant,” or is otherwise listed or regulated under applicable
      Environmental Laws because it poses a hazard to human health or the
      environment.

     

    “Hydro
      Easement”
      means
      the Hydro Easement dated as of July 29, 1992 between the People of the State
      of
      New York acting through the Office of General Services and the
      Seller.

     

    “Hydroelectric
      Plant”
      has the
      meaning set forth in Section 2.1(a).

     

    “Indemnifiable
      Claim”
      has the
      meaning set forth in Section 6.8.

     

    “Indemnitee”
      has the
      meaning set forth in Section 6.5.

     

    “Indemnitor”
      has the
      meaning set forth in Section 6.5

     

    “Intellectual
      Property”
      means
      all copyrights, trademarks, trade names, trade styles, service marks, patents,
      patent rights, shop rights, proprietary information and other intellectual
      property and the right and/or license to use any of the foregoing.

     

    “Interconnection
      Agreement”
      means
      the Interconnection Agreement between Seller and Niagara Mohawk Power
      Corporation dated as of May 3, 1993. 

     

     “Inventories”
      means
      materials, spare parts, tools, appliances and movable equipment, consumable
      supplies and inventories relating to the operation of the Hydroelectric
      Plant.

     

    “Knowledge”
      or
      similar phrases in this Agreement means: (i) in the case of Seller, the
      actual, current knowledge of the Seller’s or Seller’s Affiliates’
representatives listed in Schedule 1.1
      at the
      Effective Date (or, with respect to any certificate delivered pursuant to
Section 7.3,
      as of
      the Closing Date); and (ii) in the case of Purchaser, the actual, current
      knowledge of the Purchaser’s or Purchaser’s Affiliates’ representatives listed
      in Schedule 1.1
      at the
      Effective Date (or, with respect to the certificate delivered pursuant to
Section 8.4,
      as of
      the Closing Date).

     

    “Liquidated
      Damages Amount”
      has the
      meaning set forth in Section 2.9(b).

     

    “Major
      Loss”
      has the
      meaning given such term in Section 5.11(b).

     

    “Material
      Adverse Effect”
      means
      any physical or operational change (or such changes taken together) in, or
      effect on, the Purchased Assets that is materially adverse to the value of
      the
      Purchased Assets as compared with the conditions on the Effective
      Date.

     

    “Minor
      Loss”
      means an
      Event of Loss that is not a Major Loss.

     

    “Notice
      of Claim”
      has the
      meaning set forth in Section 6.5.

     

    “NYPSC”
      means
      the New York State Public Service Commission.

     

    “NYSDEC”
      means
      the New York State Department of Environmental Conservation.

     

    “Party”
      means
      either Seller or Purchaser, as the context requires; “Parties”
means,
      collectively, “Seller
      and Purchaser”.

     

    “PCB
      Disposal Letter”
      means
      the letter dated May 26, 1993 from the NYSDEC to Donald Hamer relative to the
      PCB Disposal Facility. 

     

    “Permits”
      means
      those permits listed on Schedule
      2.1(c).

     

    “Permitted
      Encumbrances”
      means
      (a) liens for taxes and other governmental charges and assessments which are
      not
      yet due and payable, (b) mechanics’ and materialmen’s liens and similar liens
      with respect to work for which Purchaser is obligated to pay pursuant to
Section 5.13,
      (c)
      other liens, Encumbrances or title imperfections with respect to the Purchased
      Assets which are not material and which do not materially detract from the
      value
      of or materially impair the existing or proposed use of the Purchased Assets
      affected by such liens, Encumbrances or title imperfections, (d) all exceptions
      set forth in any deeds related to the Real Property listed on Schedule
      2.1(a)(i),
      (e)
      liens, Encumbrances or title imperfections with respect to the Purchased Assets
      created by or resulting from the acts or omissions of Purchaser, and (f) the
      liens, encumbrances, or title imperfections listed on Schedule
      3.7.

     

    “Person”
      means an
      individual, partnership, joint venture, corporation, limited liability company,
      trust, association or unincorporated organization, or any Governmental
      Authority.

     

    “Power
      Sales Agreement”
      means
      the Power Sales Agreement, dated as of September 19, 1989, between Niagara
      Mohawk Power Corporation, as amended by Amendment dated August 28, 1990 and
      by
      the Power Sales Agreement Acknowledgment and Consent dated as of August 27,
      1992.

     

    “Pre-Approved
      Capital Expenditures”
      has the
      meaning set forth in Section
      5.13.

     

    “Procedures”
      has the
      meaning set forth in Section 9.9(c).

     

    “Project”
      means
      the Purchased Assets and the Business.

     

    “Prudent
      Utility Practices”
      means
      any of the practices, methods and acts engaged in or approved by a significant
      portion of the competitive electric generation industry for facilities similar
      in size and type to the Hydroelectric Plant during the relevant time period,
      or
      any of the practices, methods or acts which, in the exercise of reasonable
      judgment in light of the facts known at the time the decision was made, could
      have been expected to accomplish the desired result at a reasonable cost
      consistent with good business practices, reliability, safety, law, regulation,
      environmental protection and expedition. Prudent Utility Practices are not
      intended to be limited to the optimum practices, methods or acts to the
      exclusion of all others, but rather to be acceptable practices, methods or
      acts
      generally accepted in the industry.

     

    “Purchased
      Assets”
      has the
      meaning set forth in Section 2.1.

     

    “Purchase
      Price”
      has the
      meaning set forth in Section
      2.6 as
      adjusted pursuant to Section
      2.7.

     

    “Purchaser”
      has the
      meaning set forth in the introductory paragraph of this Agreement.

     

    “Purchaser
      Claims”
      has the
      meaning set forth in Section 6.2(a).

     

    “Purchaser
      Group”
      has the
      meaning set forth in Section 6.2(a).

     

    “Purchaser
      Required Consent(s)”
      has the
      meaning set forth in Section 5.2(b).

     

    “Real
      Property”
      means
      the real property interests listed on Schedule
      2.1(a)(i).

     

    “Related
      Agreements”
      means
      the Confidentiality Agreement, the Deed, the Bill of Sale and the assignments
      of
      the Assigned Contracts and the Permits.

     

    “Release”
      means
      release, spill, leak, discharge, dispose of, pump, pour, emit, empty, inject,
      leach, dump, or allow to escape into or through the environment.

     

    “Schedules”
      means
      the schedules to this Agreement.

     

    “Section”
      means a
      numbered section of this Agreement included within an Article that begins
      with the same number as that section.

     

    “Seller”
      has the
      meaning set forth in the introductory paragraph of this Agreement.

     

    “Seller
      Claims”
      has the
      meaning set forth in Section 6.3
      (a).

     

    “Seller
      Group”
      has the
      meaning set forth in Section 6.3(a).

     

    “Tangible
      Personal Property”
      means
      the personal property to be conveyed to Seller pursuant to Sections
      2.1(a)(ii),
      (iii),
      (iv)
      and
2.1(d)
      of this
      Agreement.

     

    “Tax”
      means
      any federal, state, local or foreign income, gross receipts, license, payroll,
      employment, excise, severance, stamp, occupation, premium, windfall profits,
      environmental (including taxes under Section 59A of the Internal Revenue
      Code of 1986, as amended), customs duties, capital stock, franchise, profits,
      withholding, social security (or similar), unemployment, disability, real
      property (including assessments, fees or other charges based on the ownership
      of
      real property), personal property, sales, use, transfer, registration, value
      added, alternative or add-on minimum, estimated tax, or other tax of any kind
      whatsoever, including any interest, penalty or addition thereto, whether
      disputed or not, including, without limitation, any item for which a Person’s
      liability arises as a transferee or successor-in-interest.

     

    “Third
      Party Claim”
      means a
      claim by a Person that is not a member of the Seller Group or the Purchaser
      Group.

     

    “Transferred
      Employees”
      has the
      meaning set forth in Section
      5.15.

     

    “Unlimited
      Representations”
      means
      Seller’s representations and warranties set forth in Sections
      3.1(a)
      and
(b),
      3.6
      and
3.8.

     

    1.2Interpretation.
      In this
      Agreement, unless a clear contrary intention appear:

     

    (a)the
      singular number includes the plural number and vice versa;

     

    (b)reference
      to any Person includes such Person’s successors and assigns but, if applicable,
      only if such successors and assigns are permitted by this Agreement, and
      reference to a Person in a particular capacity excludes such Person in any
      other
      capacity;

     

    (c)reference
      to any gender includes each other gender;

     

    (d)reference
      to any agreement (including this Agreement), document or instrument means such
      agreement, document or instrument as amended or modified and in effect from
      time
      to time in accordance with the terms thereof and, if applicable, the terms
      hereof;

     

    (e)reference
      any Article, Section, Schedule, Exhibit or definition to any clause means such
      clause of such Article, Section, Schedule, Exhibit or definition;

     

    (f)“hereunder,”
      “hereof,” “hereto” and words of similar import are references to this Agreement
      as a whole and not to any particular Section or other provision hereof or
      thereof;

     

    (g)“including”
      (and with correlative meaning “include”) means including without limiting the
      generality of any description preceding such term;

     

    (h)relative
      to the determination of any period of time, “from” means “from and including,”
“to” means “to but excluding” and “through” means “through and including;”
and

     

    (i)reference
      to any law (including statutes and ordinances) means such law as amended,
      modified codified or reenacted, in whole or in part, and in effect from time
      to
      time, including rules and regulations promulgated thereunder.

     

     

    ARTICLE
      II

     

    

     

    PURCHASE
      AND SALE OF ASSETS

     

    2.1Transfer
      of Assets.
      Subject
      to the terms and conditions of this Agreement, at the Closing, Seller will
      sell,
      convey, assign, transfer and deliver to Purchaser, and Purchaser will purchase
      and acquire from Seller all of Seller’s right, title and interest in and to the
      following assets (collectively, the “Purchased
      Assets”)
      free
      and clear of all Encumbrances other than Permitted Encumbrances:

     

    (a)The
      Stillwater, New York Hydroelectric Plant, FERC License # NY-4684 (the
“Hydroelectric
      Plant”) consisting
      of the following:

     

    (i)all
      of
      Seller’s right, title or interest in, to and under the Real Property, the dam,
      all fixtures, structures, buildings, facilities, and other improvements thereon
      and all appurtenances thereto and all easements and other rights relating to
      the
      Real Property described on Schedule 2.1(a)(i),
      including, but not limited to, the Hydro Easement, together with any other
      real
      property rights held by Seller and necessary to comply with the FERC License
      or
      located within the Project Boundary as identified in the FERC License,
as
      modified with regard to transfers of property approved by FERC;

     

    (ii)all
      machinery, equipment, and furniture owned by the Seller and located in or on
      and
      used in the operation and/or maintenance of the Hydroelectric Plant as of March
      20, 2006, including but not limited to the Tangible Personal Property listed
      or
      referred to in Schedule
      2.1(a)(ii)
      (which
      Schedule includes all current Inventories as of the Effective Date, and the
      PCB
      containment facilities referenced in the FERC License and PCB Letter) and
      Seller's leasehold or possessory interest, if any, in any such property located
      at the Hydroelectric Plant which is not owned by Seller;

     

    (iii)all
      Inventories on the Closing Date;

     

    (iv)the
      34.5
      kV transmission line and connections owned by Seller, as more particularly
      described in the Interconnection Agreement and all rights transferred to Seller
      by the Interconnection Agreement; 

     

    (b)all
      contracts, agreements and personal property leases listed on Schedule
      2.1(b)
      (the
“Assigned
      Contracts”);

     

    (c)all
      governmental authorizations held by the Seller related to the Project and
      identified in Schedule 2.1(c),
      to the
      extent transferable (collectively, the “Permits”);

     

    (d)all
      books, operating records, employment records of Transferred Employee(s),
      reports, correspondence with regulators, inspection reports, engineering or
      design plans, specifications, drawings, procedures, software or tools used
      to
      process and report production, environmental or other data, safety and
      maintenance manuals and similar items of the Seller relating in any material
      way
      to the Purchased Assets or the Business;

     

    (d)all
      unexpired, transferable warranties and guarantees from third parties with
      respect to the Purchased Assets;

     

    (e)the
      Intellectual Property relating to the Purchased Assets (including Seller’s
      goodwill therein and the rights of Seller in and to the name of the
      Hydroelectric Plant) and all rights, privileges, claims, causes of action,
      indemnification rights and options to the extent pertaining to the Purchased
      Assets or the Assumed Liabilities relating to the Purchased Assets as listed
      on
Schedule 2.1(e);
      

     

    (f)subject
      to satisfaction of Purchaser’s indemnification obligations under Section 6.3,
      the rights of Seller in and to any causes of action, claims or defenses against
      third parties (including indemnification and contribution) relating to the
      Project or any Assumed Liabilities;

     

    (g) the
      accounts receivable, notes receivable and other receivables of Seller allocable
      to the period subsequent to Closing, pursuant to Section 5.7(b) hereof.

     

    2.2Excluded
      Assets.
      Nothing
      in this Agreement will constitute or be construed as conferring on Purchaser,
      and Purchaser is not acquiring, any right, title or interest in or to
      (a) the assets listed or described on Schedule 2.2,
      which
      are associated with the Purchased Assets but are specifically excluded from
      the
      sale, if any (b) any deposit accounts or other accounts not expressly set
      forth in Section 2.1
      or any
      schedule referred to therein, (c) any personnel records of Seller and its
      Affiliates except the Transferred Employee Records and those records the
      disclosure of which is required by law or legal or regulatory process; (d)
      any
      accounts receivable, notes receivable and other receivables of the Seller
      allocable to the period prior to the Closing;(e) any
      contracts, agreements or other obligations or liabilities of Seller other than
      obligations and liabilities arising under the Assigned Contracts on and after
      the Closing Date, (f) all cash and cash equivalents held in the name of Seller
      as of the Closing Date, and
      (g)
      any of
      Seller’s rights or obligations in any contract representing an intercompany
      transaction between Seller and an Affiliate of Seller, whether or not such
      transaction relates to the provision of goods and services, payment
      arrangements, intercompany charges or balances, or the like (collectively,
      with
      clauses (a), (b), (c), (d), (e), (f) and (g) above, the “Excluded
      Assets”).

     

    2.3Assumption
      of Liabilities.
      Upon
      Closing, Purchaser will assume and retain all obligations and liabilities of
      any
      kind or nature whatsoever arising after the Closing, and associated with any
      of
      the following (collectively, the “Assumed
      Liabilities”):

     

    (a)Environmental
      Liabilities.
      Any
      liability, obligation, or responsibility under or related to current or future
      Environmental Laws or the common law, whether such liability, obligation, or
      responsibility is known or unknown, contingent or accrued, arising after the
      Closing as a result of or in connection with: (a) any violation or alleged
      violation of Environmental Law with respect to the ownership and operation
      of
      the Purchased Assets, including any obligations with respect to the PCB concrete
      storage vault located within Project Boundaries for periods following Closing,
      including any new requirements imposed after Closing with respect to the storage
      vault; (b) compliance with applicable Environmental Laws with respect to the
      ownership or operation of the Purchased Assets; (c) loss of life, injury to
      persons or property, or damage to natural resources caused (or allegedly caused)
      by any violation or alleged violation of an Environmental Law with respect
      to
      the ownership and operation of the Purchased Assets, including the Release
      of
      Hazardous Substances or the off-site disposal, storage, transportation,
      discharge, Release, recycling, or the arrangement for such activities, of
      Hazardous Substances. 

     

    (b)Use
      and Operation Liabilities.
      The use
      or operation of the Purchased Assets or the Business after the Closing,
      including: (i) any obligation to decommission, deactivate, demolish, or close
      the Purchased Assets or Real Property or any portion thereof, including any
      obligation to restore the Real Property to its natural state, and (ii) any
      obligation arising from the use or operation of surface impoundments; or (iii)
      any other facility used for the treatment, storage or disposal of Hazardous
      Substances and that is authorized, licensed or permitted for that use by any
      Governmental Authority and made part of the Purchased Assets. 

     

    (c)Compliance
      Liabilities.
      Obligations to comply with the Permits listed on Schedule
      2.1(c).

     

    (d)Assigned
      Liabilities.
      Subject
      to Section
      2.4(c),
      all
      liabilities and obligations arising or accruing with respect to periods
      occurring after the Closing under (i) the Assigned Contracts, (ii) the
      Permits, (iii) all other agreements and contracts disclosed and assigned to
      Purchaser pursuant to this Agreement, (iv) all contracts and agreements
      entered into by Seller with respect to the Purchased Assets after the Effective
      Date consistent with the terms of this Agreement, (v) any applicable
      governmental regulations and (vi)  Inventories, and , except, in each case,
      to the extent such liabilities and obligations, but for a breach or default
      by
      Seller, would have been paid, performed, or otherwise discharged on or prior
      to
      the Closing Date, or to the extent the same arise out of any such breach or
      default, or in any event which after the giving of notice would constitute
      a
      default by Seller.

     

    (e)Employee
      Liabilities.
      All
      liabilities and obligations to Transferred Employees set forth on Schedule
      2.3(e) for
      which
      Purchaser is liable pursuant to Section 5.15.

     

    (f)Tax
      Liabilities.
      All
      liabilities and obligations associated with the Purchased Assets in respect
      of
      Taxes for which Purchaser is liable pursuant to Section 5.6.

     

    (g)Capital
      Expenditure Liabilities.
      All
      liabilities and obligations incurred by Seller between the Effective Date and
      the Closing Date with respect to Pre-Approved Capital Expenditures.

     

    (h)Other
      Specified Liabilities.
      All
      other liabilities and obligations expressly relating to the Purchased Assets
      and
      allocated to Purchaser in this Agreement or any of the Related
      Agreements.

     

    2.4Excluded
      Liabilities.
      Notwithstanding anything to the contrary in this Agreement, nothing in this
      Agreement shall be construed to impose on Purchaser, and Purchaser shall not
      assume or be obligated to pay, perform or otherwise discharge, the following
      liabilities or obligations (the “Excluded
      Liabilities”):

     

    (a)Any
      liabilities or obligations of Seller in respect of any Excluded Assets or other
      assets of Seller which are not Purchased Assets or related to the Purchased
      Assets;

     

    (b)any
      liabilities or obligations in respect of Taxes attributable to the ownership,
      operation or use of the Purchased Assets for taxable periods, or portions
      thereof, ending before the Closing;

     

    (c)any
      payment obligations of Seller for goods delivered or services rendered prior
      to
      the Closing Date except expenditures made pursuant to Section 5.13 or as
      otherwise provided herein;

     

    (d)any
      fines
      or penalties imposed by a Governmental Authority resulting from acts or
      omissions of Seller prior to the Closing;

     

    (e)any
      liabilities, obligations or responsibilities of Seller relating to the
      employment or termination of employment of any employee of Seller.

     

    (f) any
      liability, obligations or responsibilities under or related to any current
      or
      future Environmental Laws or the common law, arising as a result of or in
      connection with the ownership or operation of the Purchased Assets on or before
      the Closing Date.

     

    2.5Closing.
      The
      Parties will use their Commercially Reasonable Efforts to assure that the
      closing of the sale of the Purchased Assets to, and the assumption of the
      Assumed Liabilities by, Purchaser (the “Closing”)
      takes
      place at the offices of Hinman, Howard & Kattell, LLP, Binghamton, New York
      within five (5) Business Days following the date on which the conditions
      precedent set forth in Article
      7
      and
Article
      8
      have
      been either satisfied or waived by the Party for whose benefit such conditions
      precedent exist, or on such other date and at such other place as the Parties
      may mutually agree. The date of Closing is the “Closing
      Date.”

     

    2.6Purchase
      Price and Payment.
      The
      consideration for the purchase of the Purchased Assets is nine million three
      hundred fifty thousand and no/100 dollars ($9,350,000.00) subject to the
      adjustments set forth in Section
      2.7
      (as so
      adjusted, the “Purchase
      Price”), such
      payment in U.S. funds to be made by wire transfer to an account(s) designated
      by
      Seller, one hundred fifty thousand and no/100 Dollars ($150,000.00) (the
“Down
      Payment”) of
      which
      is to be deposited with Hinman, Howard & Kattell, LLP (the “Escrow
      Agent”) pursuant
      to an Escrow Agreement in the form annexed hereto as Exhibit
      D
      (the
Escrow
      Agreement”)
      and the
      balance of which is to be paid in cash at the Closing. 

     

    2.7Adjustments
      to Purchase Price .
      At the
      Closing, the Purchase Price shall be adjusted, without duplication, to account
      for the items set forth in this Section
      2.7.

     

    (a)The
      Purchase Price shall be adjusted to account for the items prorated as of the
      Closing Date pursuant to Section
      5.7.

     

    (b)The
      Purchase Price shall be increased by the amount expended by Seller between
      the
      Effective Date and the Closing Date for Pre-Approved Capital Expenditures
      required by Section
      5.13
      to be
      paid by Purchaser.

     

    .
      

     

    2.8Allocation
      of Purchase Price.
      The
      Purchase Price will be allocated among the Purchased Assets as set forth on
      Schedule
      2.8.
      The
      Parties will file all tax returns consistent with the allocation of the Purchase
      Price set forth on Schedule 2.8.
      If the
      Purchase Price is adjusted pursuant to Section
      2.7 (b),
      the
      items in Schedule
      2.8 will
      be
      adjusted to reflect that adjustment. The Parties agree that, for U.S. income
      tax
      purposes, the Purchase Price plus the amount of the Assumed Liabilities and
      any
      adjustments to the Purchase Price (but only to the extent such items are
      permitted to be taken into account under the tax law) shall be allocated on
      a
      basis consistent with Section 1060 of the Code and the Treasury Regulations
      thereunder. Purchaser and Seller agree to file Internal Revenue Service Form
      8594 (Asset Acquisition Statement Under Section 1060), and all federal, state,
      local and foreign tax returns, in accordance with such allocations. Purchaser
      and Seller agree to provide the other promptly with any information required
      to
      complete Form 8594. Purchaser and Seller shall notify and provide the other
      with
      reasonable assistance in the event of an examination, audit or other proceeding
      regarding the allocation of the Purchase Price pursuant to this section.
      Purchaser and Seller shall not take any position in any tax return, tax
      proceeding or audit that is inconsistent with such allocation without the
      consent of the other Party. 

     

    2.9Default. 

     

    (a)Purchaser’s
      Remedies.
      If the
      sale of the Purchased Assets is terminated pursuant to Section 9.12
      because
      of Seller’s default hereunder, then, subject to the next sentence, Purchaser
      may: (i) seek specific performance of Seller’s obligations under Section 9.9
      which
      (if awarded), and with all costs of enforcement of such specific performance
      (inclusive of lost profits caused by the delay in Closing, if any) will be
      Purchaser’s sole remedy for such default by Seller; and (ii) either in lieu of,
      or absent a judgment for specific performance, recover damages equal to
      Purchaser’s actual, reasonable out-of-pocket costs and expenses incurred in
      connection with the transaction contemplated by this Agreement, including those
      associated with Purchaser’s Due Diligence Inspection and Reviews.
      

     

    (b)Seller’s
      Remedies.
      If the
      purchase of the Purchased Assets is not consummated in accordance with this
      Agreement because of Purchaser’s material default hereunder, then Seller will,
      as its sole remedy, have the right to retain the Down Payment as liquidated
      damages (the “Liquidated
      Damages Amount”),
      and
      Seller will have no other remedy, whether at law or in equity, for the failure
      to close by Purchaser hereunder (provided Seller will still be entitled to
      receive any costs and expenses due to Seller pursuant to this Agreement and
      the
      benefit of any obligations, covenants and indemnities hereunder and under the
      Confidentiality Agreement by Purchaser which expressly survive the termination
      of this Agreement). THE
      PARTIES EXPRESSLY AGREE AND ACKNOWLEDGE THAT SELLER’S ACTUAL DAMAGES IN THE
      EVENT OF A DEFAULT BY PURCHASER WOULD BE EXTREMELY DIFFICULT OR IMPRACTICABLE
      TO
      ASCERTAIN AND THAT THE LIQUIDATED DAMAGES AMOUNT REPRESENTS THE PARTIES’
REASONABLE ESTIMATE OF SUCH DAMAGES. THE PAYMENT OF THE LIQUIDATED DAMAGES
      AMOUNT IS NOT INTENDED AS A FORFEITURE OR PENALTY.

     

    

     

    ARTICLE
      III

     

    REPRESENTATIONS,
      WARRANTIES AND DISCLAIMERS OF SELLER

     

    Seller
      represents, warrants and, where specified, disclaims to Purchaser as follows,
      which representations and warranties will survive the Closing as provided in
      Section 6.1:
      

     

    3.1Transaction
      Representations.

     

    (a)Organization
      and Existence.
      Seller
      is a duly organized and validly existing limited partnership in good standing
      under the laws of the State of Delaware and authorized to do business in the
      State of New York, and has full requisite partnership power and authority to
      carry on the Business.

     

    (b)Execution,
      Delivery and Enforceability.
      The
      execution and delivery of this Agreement and the Related Agreements by Seller,
      and the consummation of the transactions contemplated hereby and thereby, have
      been duly authorized by all necessary limited partnership action required on
      the
      part of Seller. Assuming Purchaser’s due authorization, execution and delivery
      of this Agreement and the Related Agreements which are executed by Purchaser,
      this Agreement and the Related Agreements which are executed by Seller
      constitute the valid and legally binding obligations of Seller, enforceable
      against Seller in accordance with its and their terms, except as such
      enforceability may be limited by the bankruptcy, insolvency, reorganization,
      moratorium or other similar laws of general application relating to or affecting
      the enforcement of creditors’ rights and by general equitable
      principles.

     

    (c)No
      Violation.
      Subject
      to the Parties satisfying their respective obligations to obtain or process
      (as
      applicable) the consents, approvals, Permits, licenses, filings and notices
      described in Section 5.2,
      neither
      the execution and delivery of this Agreement or any of the Related Agreements
      executed by Seller, nor the compliance with any provision hereof or thereof,
      nor
      the consummation of the transactions contemplated hereby or thereby will
      materially:

            

                   (i)    violate,
      or conflict with, or result in a breach of any provisions of the limited
      partnership agreement of Seller or its certificate of formation; or

                

                  (ii)    violate
      any material governmental rule applicable to Seller or the Purchased Assets;
      or

                    

                  (iii)    subject
      to obtaining any consents required by Section
      5.2(d),
      result
      in the acceleration of, create in any party the right to accelerate, terminate,
      modify, cancel, exercise any adverse remedy with respect to, or require a notice
      under, any agreement, contract, lease, license, note, bond, mortgage, indenture,
      instrument, obligation or other arrangement to which the Project, Purchased
      Assets or Seller is a party or by which it is bound or to which any of such
      items are subject (or result in the imposition of any encumbrance upon any
      of
      the Purchased Assets)

     

    (d)Consents
      and Approvals.
      Subject
      to the (i) matters set forth in Schedule 3.1
      and
      (ii) the Parties satisfying their respective obligations to obtain or
      process (as applicable) the consents, approvals, Permits, licenses, filings
      or
      notices described in Section 5.2,
      no
      consent or approval of, filing with or notice to any Person is required to
      be
      obtained or made by Seller in connection with Seller’s execution, delivery and
      performance of this Agreement and the Related Agreements which are executed
      by
      Seller, or the consummation of the transactions contemplated hereby or thereby,
      which, if not obtained or made, will prevent Seller from performing its
      obligations hereunder or thereunder.

     

    3.2Suitability
      of Assets; Disclaimer.
      Subject
      to matters set forth in Schedule 3.2, the Purchased Assets, including all
      mechanical equipment and component parts thereof, are suitable for the purposes
      for which they have been operated, comply in all material respects with the
      FERC
      License, have been and will be maintained through the Closing in a manner
      consistent with past practices and the FERC License, and to Seller’s Knowledge
      are not currently in need of replacement or material repair. EXCEPT AS OTHERWISE
      EXPRESSLY PROVIDED HEREIN, SELLER EXPRESSLY DISCLAIMS ANY REPRESENTATIONS OR
      WARRANTIES OF ANY KIND OR NATURE, EXPRESS OR IMPLIED, AS TO THE CONDITION,
      VALUE
      OR QUALITY OF THE PURCHASED ASSETS OR THE PROSPECTS (FINANCIAL AND OTHERWISE),
      RISKS AND OTHER INCIDENTS OF THE PURCHASED ASSETS AND SELLER SPECIFICALLY
      DISCLAIMS ANY REPRESENTATION OR WARRANTY OF MERCHANTABILITY, USAGE, SUITABILITY
      OR FITNESS FOR ANY PARTICULAR PURPOSE WITH RESPECT TO THE PURCHASED ASSETS,
      OR
      ANY PART THEREOF, OR AS TO THE WORKMANSHIP THEREOF, OR THE ABSENCE OF ANY
      DEFECTS THEREIN, WHETHER LATENT OR PATENT. 

     

    3.3Compliance
      with Laws and Regulations.
      Except
      as set forth on Schedule
      3.3,
      each of
      Seller and the Project is, and on the Closing Date shall be, in material
      compliance with all Government Rules applicable to Seller or the Project. Seller
      has received no notice from, and to Seller’s Knowledge no notice is threatened
      or pending from, any Governmental Authority to the effect (i) that Seller’s
      current use and operation of any of the Hydroelectric Plant violates in any
      material respect any Governmental Rule in existence as of execution of this
      Agreement, (ii) that any improvements located on the Real Property are not
      constructed in compliance with any Governmental Rule or (iii) that any
      repair, alteration, restoration or improvement is needed with respect to any
      of
      the Purchased Assets in order to be in compliance with any Governmental
      Rule.

     

    3.4Governmental
      Approvals. 
      Except
      as provided on Schedule 3.4,
      (a) Seller has all Governmental Approvals necessary to own and operate the
      Purchased Assets, (b) Schedule 2.1(c),
      Schedule 5.2(a)
      and
Schedule
      5.2(b)
      list all
      material Governmental Approvals which directly and specifically relate to the
      current use and operation of the Purchased Assets by Seller, (c) Seller
      (i) is not in violation of any Governmental Approvals other than violations
      which could not be reasonably expected to have a Material Adverse Effect and
      (ii) has not received any notice from any Governmental Authority of any
      potential violation or indicating that any Governmental Authority considers
      Seller to be in violation of any Governmental Approvals.

     

    3.5Litigation.
      Except
      as set forth on Schedule
      3.5,
      there
      are no pending or, to Seller's Knowledge, threatened action, investigation
      or
      request for information by any Governmental Authority or third Person or other
      facts which could result, or has resulted, in (a) the institution of legal
      proceedings to prohibit or restrain the performance of this Agreement or any
      of
      the Related Agreements, or the consummation of the transactions contemplated
      hereby or thereby, or (b) a claim for damages as a result of this Agreement
      or
      any of the Related Agreements, or the consummation of the transactions
      contemplated hereby or thereby. Except as may be specified in Schedule
      3.5,
      there
      is no pending or, to Seller's Knowledge, threatened litigation, claim,
      investigation, proceeding, order or directive, private or governmental, which
      directly and specifically relates to the Purchased Assets or the operation
      thereof.

     

    3.6Title.
      Schedule 2.1(a)(i)
      sets
      forth a true and complete list of all Real Property and other real property
      interests that are part of, or material to, the business or operations of the
      Purchased Assets. Seller has leasehold or other contractual interests in all
      Purchased Assets identified in Schedules 2.1(b)
      and,
      subject only to the Permitted Encumbrances, (i) good, valid and marketable
      record title to the Real Property and (ii) good and marketable and valid
      title to all Purchased Assets to be transferred pursuant to Section 2.1.
      To the
      Knowledge of Seller, all improvements on the Real Property owned or leased
      by
      Seller conform in all material respects to applicable Government Rules regarding
      zoning and building ordinances. Except for the matters set forth in Schedule
      3.1(d),
      no
      condition or circumstances exists that would require or permit any party to
      an
      Assigned Contract to cancel or suspend any real property right of
      Seller.

     

    3.7Permitted
      Encumbrances.
      To
      Seller's Knowledge, Schedule 3.7
      sets
      forth all Encumbrances affecting Seller’s Real Property, including matters of
      record. True and correct copies of all surveys, abstracts, title opinions and
      policies of title insurance in Seller’s possession with respect to such Real
      Property have been delivered by Seller to Purchaser. None of the Permitted
      Encumbrances materially adversely affect the existing use of the Real Property
      or the Purchased Assets.

     

    3.8Brokers.
      All
      negotiations relating to this Agreement and the transactions contemplated hereby
      have been carried on by Seller with the assistance of Marcus & Millichap,
      brokers. Seller warrants that it will be responsible for the payment of any
      brokerage commission, finder’s fee or other like payment to Marcus &
Millichap. No other Person is entitled to a broker’s fee as a result of any
      action by the Seller.

     

    3.9Certain
      Contracts and Arrangements.
      Except
      (i) as listed in Schedule
      3.9,
      (ii) for contracts, agreements, personal property leases, commitments,
      understandings or instruments which will expire prior to the Closing Date,
      (iii) for agreements with suppliers entered into in the ordinary course of
      business and (iv) for contracts agreements, personal property leases,
      commitments, understandings or instruments with a value less than twenty five
      thousand dollars ($25,000.00) or with annual or aggregate payments of less
      than
      twenty five thousand dollars ($25,000.00), Seller is not a party to any written
      contract, agreement, personal property lease, commitment, understanding or
      instrument which is material to the business or operations of the Purchased
      Assets and not part of the Purchased Assets.

     

    3.10 Environmental
      Issues. Except
      as
      set forth in Schedule
      3.10,
      (a)
      there are no environmental claims against, or to Seller’s Knowledge threatened
      against, Seller with respect to the Purchased Assets; (b) no Releases of
      Hazardous Substances have occurred at, from, on, or under the Real Property
      and
      no Hazardous Substances are present on or migrating from the Real Property
      that
      are reasonably likely to give rise to a material environmental claim against
      Seller or Seller’s successors, except where such Releases would not be
      anticipated to have a Material Adverse Effect; (c) there are no liens arising
      under or pursuant to any Environmental Law with respect to the Purchased Assets
      and, to Seller's Knowledge, there are no facts, circumstances, or conditions
      that are reasonably likely to be expected to restrict, encumber, or result
      in
      the imposition of special conditions under any Environmental Law with respect
      to
      the ownership, occupancy, development, use, or transferability of the Purchased
      Assets; (d) the Purchased Assets include no (i) underground storage tanks,
      active or abandoned or (ii) equipment containing polychlorinated-biphenyl;
      (e)
      Seller holds, and is in compliance with, all permits licenses, certificates
      and
      governmental authorizations required for Seller to operate the Purchased Assets
      under applicable Environmental Law; and (f) Seller has not received any request
      for information or been notified of any potential environmental claim regarding
      the Purchased Assets and to Seller’s Knowledge, no investigation or remediation
      is being conducted or is pending as to the Purchased Assets. The representations
      and warranties made by Seller in this Section
      3.10
      are the
      exclusive representations and warranties made to Purchaser relating to
      environmental matters.

     

    3.11  ERISA. Schedule
      3.11(a)
      lists
      all deferred compensation, pension, profit-sharing and retirement plans,
      including multi-employer plans, and all welfare, severance, stock-based, bonus
      and other employee benefit or fringe benefit plans, programs and arrangements,
      whether written or oral, maintained or with respect to which contributions
      have
      been made in the last five (5) years or are made by Seller in respect of
      Transferred Employees (such plans, programs and arrangements, collectively
      the
“Benefit Plans”). To Seller’s Knowledge, each Benefit Plan is in compliance in
      all material respects with the applicable provisions of ERISA, the Code and
      all
      applicable laws. 

     

    3.12  Labor
      Matters.
      There
      are no labor union, collective bargaining agreements or other labor agreements
      pertaining to the Transferred Employees to which Seller is a party or subject.
      Except as set forth in Schedule
      3.12
      and
      except for such matters as will not have a Material Adverse Effect, to Seller’s
      Knowledge: (a) Seller is in compliance with all applicable laws respecting
      employment and employment practices, occupational health and safety and wages
      and hours; (b) Seller has not received written notice of any unfair labor
      practice complaint against it; (c) there is no labor strike, slowdown or
      stoppage actually pending or threatened against or affecting Seller; (d) no
      grievance or arbitration proceeding arising out of or under collective
      bargaining agreement is pending against Seller; and (e) Seller has not
      experienced any primary work stoppage.

     

    3.13   ERISA
      and Labor Matters Disclaimer.
      Except
      as set forth in Sections
      3.11
      and
3.12,
      Seller
      expressly disclaims any representation or warranty with respect to any ERISA
      or
      labor matters and any employee benefits provided for thereunder. Purchaser
      acknowledges that it is has conducted its own independent review of the ERISA
      and labor matters and is not relying on any other material or information
      provided by or communication made by Seller with respect thereto when making
      its
      decision to acquire the Purchased Assets. 

     

    3.14 Financial
      Statements.
      Copies
      of
      the financial statements of Seller that have been made available to Purchaser
      are attached hereto as Schedule
      3.14
      (the
"Financial
      Statements").
      The
      Financial Statements were prepared by Seller’s accountants from Seller’s books
      and records and, to Seller’s Knowledge, are in conformity with U.S. generally
      accepted accounting principles for financial reporting applied on a consistent
      basis ("GAAP"),
      except
      as
      specifically noted in such Financial Statements or on Schedule
      3.14,
      are
      true, correct and complete in all material respects, and present fairly the
      financial condition of the Seller at the dates indicated and the results of
      Seller's operations for the periods indicated. Any internally prepared interim
      cash flows for the Business may not be prepared in accordance with GAAP, but
      fairly represent the operations of the Business.

     

    3.15 No
      Adverse Change.
      Since
      the date of the latest Financial Statements, there has been no: (a) material
      adverse change in the Business or the Purchased Assets, other than changes
      in
      the ordinary course of business; (b) transactions by Seller, other than in
      the
      ordinary course of business, which have had any Material Adverse Effect on
      the
      Business or the Purchased Assets; (c) sale, transfer or other disposition of
      any
      significant asset used in the Business, other than sales in the ordinary course
      of Business; (d) increase in compensation payable by Seller to any officer
      or
      employee of the Business, except annual increases consistent with prior
      practice; (e) change in accounting methods or practices of Seller (including,
      without limitation, depreciation and amortization practices); (f) acceleration
      of the recognition of any revenue or delay of the recognition of any liabilities
      or expenses except in the ordinary course of business; (g) destruction, damage
      to, or loss of any asset (whether or not covered by insurance) that had or
      has a
      Material Adverse Effect on the Business or the Purchased Assets, individually
      or
      in the aggregate; or (h) material change in the manner of conducting the
      Business, including the maintenance and repair of machinery, equipment, vehicles
      and facilities.

     

    3.16 Insurance
      Coverage.
      Seller
      maintains policies of fire, liability and other forms of insurance covering
      the
      Business and the Purchased Assets, in amounts and against such losses and risks
      as are reasonable for assets of the type or class of the Purchased Assets,
      including casualty insurance covering the Purchased Assets. Seller has not
      received any notice from any insurer disclaiming coverage, or canceling a policy
      within the last five years. Except as set forth in Schedule 3.16, Seller has
      no
      claims pending under any insurance policy, and all claims made during the last
      five years are identified in Schedule
      3.16
      attached
      hereto. Seller has no Knowledge of any occurrence for which the Project or
      the
      Seller may be liable that could give rise to an insurance claim against
      Purchaser or the Purchased Assets on or after the Effective Date. 

     

    3.17 Tax
      Matters.  Seller
      has, and through the Closing will, duly and timely file all federal, state,
      local and other tax returns, estimates and reports required to be filed by
      it
      and all such returns are, or will be when filed, true, complete and correct
      in
      all material respects and Seller or its partners have paid or will pay all
      federal, state and local income, profits, environmental, franchise, sales,
      use,
      occupation, real or personal property, value-added, ad valorem, withholding,
      social security, payroll, excise and other taxes, charges, levies, tariffs,
      duties, liabilities, assessments, fees and governmental charges (including
      all
      interest and penalties) (collectively "Taxes") imposed upon or claimed to be
      owed by, the Seller or its partners, which are due and payable or claimed by
      any
      taxing authority or governmental entity to be due and payable through periods
      ending on or before the Closing Date, in each case to the extent Purchaser
      would
      incur liability for Seller's failure to file such Returns or pay such Taxes.
      Seller knows of no audits, assessments, notices of deficiency, deficiencies,
      investigations, claims or demands for taxes or proposed deficiencies against
      Seller for any Federal, state or local income taxes. No issue or issues have
      been raised in connection with any prior or pending inquiry into, or audit
      of,
      any tax filings of Seller which may be expected to be raised in the future
      by
      such taxing authorities and no facts exist or have existed which would
      constitute grounds for the assessment of any further tax liabilities, which
      individually or in the aggregate are material with respect to the periods which
      have not been examined by the IRS. No claims are being asserted with respect
      to
      any Taxes of Seller for which Purchaser reasonably could be held liable and
      Seller knows of no basis for the assertion of any such claim. Seller's U.S.
      Federal Income Tax Returns for the 2000, 2001, 2002, 2003, 2004 and 2005 fiscal
      years have been delivered to Purchaser. Seller has paid to the appropriate
      taxing authorities, or will pay when due, all amounts which were required to
      be
      withheld or paid with respect to all taxes on income, unemployment, workers'
      compensation, social insurance or other similar programs or benefits with
      respect to salary and other compensation of their respective directors, officers
      and employees and taxes required to be withheld. 

     

    3.18
       Utility
      Regulation.
      The
      Project has been, and remains, a duly certified qualifying small power
      production facility pursuant to the Public Utility Regulatory Policies Act
      of
      1978. 

     

    ARTICLE
      4  

     

    
      
         

        

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    REPRESENTATIONS
      AND WARRANTIES OF PURCHASER

     

    Purchaser
      represents and warrants to Seller as follows, which representations and
      warranties will survive the Closing as provided in Section 6.1:

     

    4.1  Transaction
      Representations.

     

    (a)  Organization
      and Existence.
      Purchaser is a duly organized and validly existing limited liability company
      in
      good standing under the laws of the State of Delaware, and as of the Closing
      Date will be authorized to do business under the laws of the State of New
      York.

     

    (b)  Execution,
      Delivery and Enforceability.
      Purchaser has full power to enter into, and to carry out its obligations under,
      this Agreement and the Related Agreements that are executed by Purchaser. The
      execution and delivery of this Agreement and the Related Agreements which are
      executed by Purchaser, and the consummation of the transactions contemplated
      hereby and thereby, have been duly authorized by all necessary action required
      on the part of Purchaser. Assuming Seller’s due authorization, execution and
      delivery of this Agreement and the Related Agreements which are executed by
      Seller, this Agreement and the Related Agreements which are executed by
      Purchaser constitute the valid and legally binding obligations of Purchaser,
      enforceable against Purchaser in accordance with its and their terms, except
      as
      such enforceability may be limited by bankruptcy, insolvency, reorganization,
      moratorium or other similar laws of general application relating to or affecting
      the enforcement of creditors’ rights and by general equitable
      principles.

     

    (c)  No
      Violation.
      Subject
      to the Parties satisfying their respective obligations to obtain or process
      (as
      applicable) the consents, approvals, Permits, licenses, filings and notices
      described in Section 5.2,
      neither
      the execution and delivery of this Agreement or any of the Related Agreements
      executed by Purchaser, nor the compliance with any provision hereof or thereof,
      nor the consummation of the transactions contemplated hereby or thereby
      will:

     

    (1)  violate
      or conflict with, or result in a breach of any provisions of the organizational
      documents of Purchaser; or

     

    (2)  violate
      any material Governmental Rule applicable to Purchaser.

     

    (d)  No
      Consents.
      Subject
      to the Parties satisfying their respective obligations to obtain or process
      (as
      applicable) the consents, approvals, permits, licenses, filings and notices
      described in Section 5.2,
      no
      consent or approval of, filing with or notice to any Person is required to
      be
      obtained or made by Purchaser in connection with Purchaser’s execution, delivery
      and performance of this Agreement and the Related Agreements which are executed
      by Purchaser, or the consummation of the transactions contemplated hereby or
      thereby, which, if not obtained or made, will prevent Purchaser from performing
      its obligations hereunder or thereunder.

     

    4.2  Litigation.
      Except
      as set forth on Schedule
      3.5,
      there
      is no pending, or to Purchaser's Knowledge, threatened action, investigation
      or
      request for information by any Governmental Authority or third Person or any
      facts which could result, or has resulted, in (a) the institution of legal
      proceedings to prohibit or restrain the performance of this Agreement or any
      of
      the Related Agreements or the consummation of the transactions contemplated
      hereby or thereby, or (b) a claim for damages as a result of this Agreement
      or
      any of the Related Agreements, or the consummation of the transactions
      contemplated hereby or thereby. 

     

    4.3  Brokers.
      All
      negotiations relating to this Agreement and the transactions contemplated hereby
      have been carried on by Purchaser without the intervention of any other Person
      and in such a manner as not to give rise to any valid claim against Seller
      (by
      reason of Purchaser’s actions) for a brokerage commission, finder’s fee or other
      like payment to any Person, other than the fees of Marcus & Millichap, which
      are payable by Seller.

     

    4.4  “As
      Is” Sale.
      EXCEPT
      AS OTHERWISE EXPRESSLY PROVIDED HEREIN, PURCHASER UNDERSTANDS AND AGREES THAT
      THE PURCHASED ASSETS ARE BEING ACQUIRED “AS IS, WHERE IS” ON THE CLOSING DATE,
      AND IN THEIR CONDITION ON THE CLOSING DATE, AND THAT OTHER THAN THE
      REPRESENTATIONS AND WARRANTIES OF SELLER SET FORTH HEREIN OR IN ANY RELATED
      AGREEMENTS, PURCHASER IS RELYING ON ITS OWN EXAMINATION OF THE PURCHASED
      ASSETS.

     

    

     

    ARTICLE
      5  

     

    

     

    COVENANTS
      AND OTHER MATTERS

     

    5.1  Due
      Diligence Inspections and Reviews.
      Purchaser will bear all of its own costs, expenses and charges incurred in
      connection with its Due Diligence Inspections and Reviews.

     

    5.2  Consents
      and Authorizations.

     

    (a) Seller’s
      Responsibility.
      Seller
      will use Commercially Reasonable Efforts to obtain each authorization, consent,
      license, permit and approval that may be necessary for its execution and
      delivery of, and the performance of its obligations under, this Agreement,
      including:

     

    (i)  all
      authorizations, consents, licenses, permits and approvals of Governmental
      Authorities and third Persons required by applicable law or required by any
      such
      third Persons in connection with the consummation of the transactions
      contemplated by this Agreement and the Related Agreements and with Seller’s
      operation of the Hydroelectric Plant, including those listed in Schedule
      5.2(a);

     

    (ii)  without
      limiting the generality of clause (i) above, the specific consents to the
      assignment from Seller to Purchaser of (or, as applicable, the reissuance of)
      the Governmental Approvals listed in Schedule
      2.1(c);
      and

     

    (iii)  without
      limiting the generality of clause (i) above, the assignment to Purchaser of
      Seller rights and obligations under the Assigned Contracts.

     

    (b)   Purchaser
      Responsibility.
      Purchaser will use Commercially Reasonable Efforts to obtain each authorization,
      consent, license, permit and approval that may be necessary for its execution
      and delivery of, and the performance of its obligations under, this Agreement,
      including those items listed in Schedule
      5.2(b).
      

     

    (c) FERC
      Transfer.
      The
      parties will each bear 50% of the cost of drafting and filing a license transfer
      application with the Federal Energy Regulatory Commission. 

     

    5.3  Cooperative
      Effort; Work Arounds.
      Anything in this Agreement to the contrary notwithstanding, this Agreement
      shall
      not constitute an agreement to assign any Purchased Asset or any claim or right
      or any benefit arising thereunder or resulting therefrom if an attempted
      assignment thereof, without consent of a third party thereto, would constitute
      a
      breach or other contravention thereof or in any way adversely affect the rights
      of Purchaser or Seller thereunder. If any transfer or assignment by Seller
      to,
      or any assumption by Purchaser of, any interest in, or liability, obligation
      or
      commitment under, any Purchased Asset requires the consent of a third party,
      then such transfer, assignment or assumption shall be made subject to such
      consent being obtained. Seller
      and Purchaser will use their Commercially Reasonable Efforts (but without any
      payment of money by Seller or Purchaser) to obtain the consent of such third
      parties. If such consent is not obtained, Purchaser and Seller will cooperate
      in
      any mutually agreeable arrangement under which Purchaser shall obtain the
      economic claims, rights and benefits of the Purchased Asset with respect to
      which the consent has not been obtained in accordance with this Agreement.
      Such
      reasonable arrangement may include subcontracting, sub-licensing, or subleasing
      to Purchaser, or an arrangement under which Seller would, to the extent
      commercially practicable, enforce for the benefit of Purchaser, any and all
      rights of Seller against any third party thereto. Seller will promptly pay
      to
      Purchaser all monies received by Seller after the Closing constituting a
      Purchased Asset (or the proceeds thereof) or under any Purchased Asset or any
      claim or right or any benefit arising thereunder that accrues after the Closing,
      except to the extent the same represents an Excluded Asset. To the extent any
      Assigned Contract may not be assigned to Purchaser by reason of the absence
      of
      any such consent and provided only to the extent no material portion of the
      economic claims, rights or benefits under such Assigned Contract are received
      by
      Purchaser, Purchaser shall not assume any Assumed Liabilities arising under
      such
      Assigned Contract, other than such as arise from Purchaser’s failure to comply
      with the terms of such Assigned Contract (except with respect to a failure
      by
      Purchaser to obtain the consent to the assignment to Purchaser of such Assigned
      Contract by Seller) Following Closing, Purchaser will notify promptly all
      relevant Governmental Authorities and all third persons of the change in
      ownership of the Purchased Assets resulting from the transactions contemplated
      herein, to the extent required by applicable law or the specific underlying
      agreement(s).

     

    5.4  Confidentiality.

     

    (a)  General.
      Each
      Party (and its officers, employees, counsel, representatives and agents) will,
      using the same degree of care as that Party takes to preserve and safeguard
      its
      own confidential information, maintain in confidence and not disclose to third
      Persons, any Confidential Information received from the other Party (or its
      officers, employees, counsel, representatives and agents), whether before or
      after the date hereof, in connection with the transactions contemplated by
      this
      Agreement. The Parties further acknowledge that any Confidential Information
      provided under the Confidentiality Agreement will be considered Confidential
      Information for purposes of this Agreement and agree that they are bound by
      the
      terms of the Confidentiality Agreement as though they were parties thereto.
      Each
      Party may disclose Confidential Information received from the other Party (i)
      if
      and to the extent required by law, court order, subpoena or other lawful order
      of a Governmental Authority with jurisdiction, (ii) to any other Persons in
      connection with Purchaser's insuring and financing, with respect to the
      Purchased Assets and with respect to obtaining health and welfare benefits
      for
      Transferred Employees, (iii) to employees who are to be Transferred
      Employees; (iv) subject to Section
      5.5
      to
      existing and potential suppliers, and to such Persons as Purchaser expects
      it
      may have business dealings regarding the Purchased Assets from and after the
      Closing Date; or (v) in accordance with Section 5.4(b).
      If this
      Agreement is terminated pursuant to Section 9.12,
      each
      Party will return promptly, if so requested by the other Party, any Confidential
      Information provided to it and will use Commercially Reasonable Efforts to
      return any copies thereof that may have been provided to others in accordance
      with this Section 5.4.

     

    (b)  Regulatory
      Agencies.
      Upon
      the other Party's prior written approval (which, except as provided below shall
      not be unreasonably withheld), either Party may provide Confidential Information
      to any Governmental Authority with jurisdiction as is necessary for such Party
      to comply with its obligations under Section 5.2.
      To the
      extent permitted by Government Rule, the disclosing Party will seek confidential
      treatment for the Confidential Information provided to any Governmental
      Authority and the disclosing Party will notify the other Party as far in advance
      as is practicable of its intention to release to any Governmental Authority
      any
      Confidential Information.

     

    (c)  Survival.
      The
      obligations of the Parties in this Section 5.4
      will
      survive the termination of this Agreement, the discharge of all other
      obligations owed by the Parties to each other, any transfer of title to the
      Purchased Assets and the Closing of the transactions contemplated in this
      Agreement.

     

    5.5  Purchaser
      Contact with Employees.
      Purchaser agrees that, except as otherwise provided herein, prior to the Closing
      Date, it will not contact any employees with respect to any aspect of the
      Purchased Assets or the transactions contemplated hereby without the prior
      written consent of Seller, which consent will not unreasonably be withheld,
      conditioned or delayed.

     

    5.6  Further
      Assurances.
      At any
      time or from time to time after the Closing, each Party will, upon the
      reasonable request of the other Party, execute and deliver any further
      instruments or documents and take all such further actions as may reasonably
      be
      required to fulfill and implement the terms of this Agreement or realize the
      benefits intended to be afforded hereby.

     

    5.7  Taxes,
      Prorations, Credits and Closing Costs.

     

    (a)  Taxes.

     

    (i)  Purchaser
      will pay all Taxes (other than Seller’s income Taxes), including sales, use,
      mortgage recording tax and documentary transfer Taxes, arising in connection
      with the sale and transfer of the Purchased Assets and Seller will pay the
      transfer tax associated with the sale of the Real Estate. Seller and Purchaser
      will each pay its own income Taxes. State and local real property Taxes relating
      to the Purchased Assets for each tax year in which the Closing occurs will
      be
      prorated between Purchaser and Seller on the following basis: Seller is to
      be
      responsible for all such Taxes for the period up to the Closing and Purchaser
      is
      responsible for all such Taxes for the period on and after the Closing. All
      Taxes assessed on an annual basis will be prorated on the assumption that an
      equal amount of Taxes applies to each day of the year, regardless of how any
      installment payments are billed or made.

     

    (ii)  After
      the
      Closing, Purchaser will notify Seller in writing, within fifteen (15) days
      after
      its receipt of any correspondence, notice or other communication from a taxing
      authority or any representative thereof, of any pending or threatened tax audit,
      or any pending or threatened judicial or administrative proceeding that involves
      Taxes relating to the Purchased Assets, for the period prior to the Closing,
      and
      furnish Seller with copies of all correspondence received from any taxing
      authority in connection with any audit or information request with respect
      to
      any such Taxes relating to the Purchased Assets for the period prior to the
      Closing.

     

    (b)  Income
      and Expenses.
      Except
      as set forth in this Section 5.7,
      all
      items of income and expense, including power sales revenues, rents and charges
      under the Assigned Contracts, allocable to the period prior to the Closing
      will
      be for the account of Seller and all items of income and expense, including
      power sales revenues, rents and other charges under the Assigned Contracts,
      allocable to the period on and after the Closing will be for the account of
      Purchaser, all as determined by the accrual method of accounting. Any payments
      due from one Party to the other pursuant to this Section 5.7(b)
      will be
      paid at Closing.

     

    (c)  Proration
      Method.
      For
      purposes of calculating prorations, Purchaser will be deemed to own the
      Purchased Assets, and, therefore, entitled to the income therefrom and
      responsible for the expenses thereof for the entire day upon which the Closing
      occurs and thereafter. All prorations will be made on the basis of the actual
      number of days of the month which will have elapsed as of the day of the Closing
      and based upon a three hundred sixty-five (365) day year. The amount of the
      prorations will be subject to adjustment in cash after the Closing, as and
      when
      complete and accurate information becomes available, and the Parties agree
      to
      cooperate and use their good faith efforts to make such post-closing
      adjustments. Revenues for the sale of electricity for the month in which the
      Closing occurs or for any previous period for which Niagara Mohawk or its
      successors have not yet reported shall be based upon 98.5% of the production
      shown on the records of the Hydroelectric Plant and shall be subject to a
      post-closing adjustment up receipt by Purchaser of notification from Niagara
      Mohawk of actual readings at its connection point.

     

    (d)  Purchaser’s
      Closing Costs.
      In
      connection with Closing, Purchaser will pay: (i) all costs of (1) any title
      policy and all endorsements thereto that Purchaser elects to obtain, (2)
      Purchaser’s Due Diligence Inspections and Reviews, (3) obtaining the
      authorizations, consents, licenses, permits and approvals disclosed in
Section 5.2(b),
      other
      than Seller’s costs of pursuing the same 
      and (4)
      any Person other than Marcus & Millichap that is entitled to a brokerage
      commission, finder’s fee or other like payment by reason of Purchaser’s actions,
      and (ii) fifty percent (50%) of any document recordation costs, including
      transfer taxes.

     

    (e)  Seller’s
      Closing Costs.
      In
      connection with Closing, Seller will pay all costs of (1) obtaining the
      authorizations, consents, licenses, permits and approvals described in
Section 5.2(a),
      except
      for Purchaser’s legal costs, and (2) fees due to Marcus & Millichap and any
      other Person that is entitled to a brokerage commission, finder’s fee or other
      like payment by reason of Seller's actions; and (3) 50% of any document
      recordation costs, including transfer taxes.

     

    5.8  Acknowledgement
      by Purchaser.
      THE
      REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS AGREEMENT CONSTITUTE THE SOLE
      AND EXCLUSIVE REPRESENTATIONS AND WARRANTIES OF SELLER IN CONNECTION WITH THE
      TRANSACTIONS CONTEMPLATED HEREBY.
      Except
      for the representations and warranties expressly set forth herein and in any
      Related Agreements, Purchaser disclaims reliance on any representations,
      warranties or guarantees, either express or implied, by Seller, its officers,
      directors, counsel, representatives or agents.

     

    5.9  No
      Recourse.
      To the
      extent the transfer, conveyance, assignment and delivery of Purchased Assets
      to
      Purchaser as provided in this Agreement is accomplished by deeds, assignments,
      sublicenses, subleases, subcontracts or other instruments of transfer and
      conveyance, whether executed at the Closing or thereafter, these instruments
      are
      made without representation or warranty by, or recourse against, Seller, except
      as expressly provided in this Agreement or in such instruments of transfer
      or
      conveyance.

     

    5.10  Advice
      of Changes.
      Prior
      to the Closing, each Party will advise the other in writing with respect to
      any
      matter arising after execution of this Agreement of which that Party obtains
      Knowledge and which, if existing or occurring at the date of this Agreement,
      would have been required to be set forth in any of the Schedules.

     

    5.11  Casualty
      Loss.

     

    (a) Minor
      Loss. Except
      as
      set forth in this Section, Seller shall bear the risk of Minor Loss of the
      Purchased Assets occurring between the Effective Date and the Closing. If any
      Purchased Asset is damaged, Seller shall replace such item and/or repair such
      damage and bring the Purchased Asset to its condition as on the Effective Date,
      provided that Seller shall first notify Purchaser of the anticipated cost of
      repair and Purchaser may elect to take a credit for the cost of replacement
      or
      repair at the time of Closing in the amount payable under any insurance policy
      of Seller, in which case Seller shall not be obligated to make the repair.
      If
      Purchaser does not make this election and if a replacement or repair cannot
      be
      completed by the time scheduled for the Closing, the time for the Closing will
      be extended to a date ten (10) days following the completion of the repair
      or
      replacement. 

     

    (b) Major
      Loss. If,
      at
      any time prior to Closing, the Hydroelectric Plant suffers a
      total
      or partial casualty loss (“Event
      of Loss”) that
      is
      reasonably estimated by an engineer to cost in excess of One Hundred Thousand
      and no/100 Dollars ($100,000) (a “Major
      Loss”),
      Seller will promptly inform Purchaser of the Major Loss. As soon as practicable
      following the Major Loss, Seller will provide to Purchaser its detailed written
      engineer’s estimate (“Seller’s
      Estimate”) setting
      forth the amount required to repair or replace the damaged Purchased Assets
      and
      the estimated time period for completion of such repair or replacement and
      the
      amount available from insurance proceeds. Thereafter, Purchaser shall have
      the
      right to elect to either (i) terminate this Agreement; (ii) delay the Closing
      and allow Seller to repair or replace the damaged Purchased Assets at Seller’s
      sole cost and expense, provided that Seller shall have no obligation to make
      such repair or replacement if the insurance proceeds are not sufficient for
      such
      purpose, or (iii) take the amount estimated by Seller as a credit against the
      Purchase Price and proceed to Closing on all Purchased Assets, in which case
      the
      Seller shall have no obligation to repair the asset; provided, that if Purchaser
      does not agree with Seller’s Estimate, Purchaser may require that a separate
      repair estimate be provided by a mutually acceptable engineer (“Third Party
      Estimate”), to be used in lieu of any Seller estimate as a credit against the
      Purchase Price; and provided further that the amount of both Seller’s Estimate
      and any Third Party Estimate is limited to the amount of the insurance proceeds
      available to Seller relating to the damage (or that would have been available
      absent breach by Seller of insurance policy terms or payment requirements).
      If
      the Third Party Estimate is higher than Seller’s Estimate, Seller shall pay the
      cost of obtaining the Third Party Estimate. Otherwise Purchaser shall be liable
      for the cost of obtaining the Third Party Estimate. If the Purchaser elects
      to
      have Seller make the repair and the insurance funds are available to Seller
      for
      such purpose, the completion of the repair or replacement of the Purchased
      Assets relating to a Major Loss and the completion of the work relating to
      a
      Major Loss, will be a condition to the Closing (and the outside date for the
      Closing set forth in Section 9.12(a)(6)
      will be
      extended by the estimated time for completion of such repair or replacement
      plus
      ten (10) days). 

     

    (c) Purchaser’s
      Election.
      Purchaser will make its election as provided in (b) above within the thirty
      (30)
      day period immediately following receipt of a Seller’s Estimate relating to a
      Major Loss. 

     

    (d) If
      Purchaser fails to make the election set forth in Section 5.11(
      b)
      within
      the thirty (30) day period immediately following receipt of Seller’s notice of a
      Major Loss, Purchaser will be deemed to have terminated the Agreement.

     

    (e) The
      provisions of Section 5-1311 of the New York General Obligations Law shall
      not
      apply to this Agreement. 

     

    5.12  Conduct
      of Business and Maintenance of Purchased Assets Pending
      Closing.
      Except
      as described herein or to the extent Purchaser otherwise consents in writing,
      during the period from the date hereof to the Closing Date, Seller (i) shall
      operate the Purchased Assets in the ordinary course consistent with its past
      practices; (ii) shall use Commercially Reasonable Efforts to preserve the
      goodwill and relationships with customers, suppliers and others having business
      dealings with them with respect thereto; and (iii) shall comply in all material
      respects with all applicable laws, rules and regulations relating to the
      Purchased Assets, including without limitation, all Environmental Laws.
      Notwithstanding the foregoing, except as contemplated in this Agreement or
      as
      described in Schedule
      5.12,
      or as
      required under applicable law or by any Governmental Authority, prior to the
      Closing Date, without the written consent of Purchaser, which consent shall
      not
      be unreasonably withheld, Seller will not, with respect to the Purchased
      Assets:

     

    (a)  Capital
      Expenditures.
      Except
      as allowed or required pursuant to Section 5.13
      make any
      Capital Expenditure with respect to the Project, other than replacements and
      repairs made in the ordinary course of Seller's business acting in accordance
      with its past practices, or enter into any contract or commitment
      therefore;

     

    (b)  Transfers.
      Sell,
      lease (as lessor), transfer, and except for Permitted Encumbrances, encumber
      or
      pledge any of the Purchased Assets, other than Purchased Assets used, consumed
      or replaced in the ordinary course of business;

     

    (c)  Modification,
      Amendment and Termination.
      Modify,
      amend or voluntarily terminate any of the Assigned Leases or Assigned Contracts
      or any of the Permits, licenses or variances listed on Schedule
      2.1(c)
      other
      than (i) when required by applicable law or (ii) with cause to the extent
      consistent with Seller’s past practices, or as may be required in connection
      with transferring Seller’s rights or obligations thereunder to Purchaser in
      connection with the transaction contemplated by this Agreement or with Purchaser
      obtaining the authorizations, consents, licenses, permits and approvals
      disclosed in Section 5.2
      (b);

     

    (d)  Operation
      and Maintenance.
      Except
      in the case of a casualty loss which will be governed by Section 5.11,
      operate
      or maintain the Hydroelectric Plant in a manner inconsistent with Seller’s past
      practices;

     

    (e)  Sales
      Agreements.
      Enter
      into any modification of the Power Sales Agreement;

     

    (f)  Employees.
      With
      respect to Transferred Employees only and except in the normal course of
      business, grant any raises, institute any new employee benefit plans or welfare
      plans, discipline, promote or demote, hire or fire any Transferred Employee,
      other than in the ordinary course of business according to past practices,
      without the consent of Purchaser; or

     

    (g)  Agreements.  Agree
      to enter into any of the transactions set forth in subsections (a) through
      (f).

     

    5.13  Pre-Approved
      Capital Expenditures .
      Notwithstanding anything to the contrary contained herein, from the Effective
      Date through the Closing, Seller may (without Purchaser’s consent) make capital
      expenditures described on Schedule 5.13
      (“Pre-Approved
      Capital Expenditures”). Purchaser
      will pay to Seller at Closing as an addition to the Purchase Price, the amount
      expended by Seller on account of all Pre-Approved Capital Expenditures made
      between the Effective Date and the Closing and not theretofore paid by
      Purchaser. 

     

    5.14  Post
      Closing -- Information and Records.

     

    (a)  Information
      and Administrative Support.
      Purchaser agrees that, from and after the Closing Date, it will, promptly
      following the request of Seller, provide such information and administrative
      support as will be reasonably requested by Seller to enable Seller to comply
      with its obligations with respect to the issuance of Forms W-2, 1099 and other
      tax reports, reports and notices relating to health and other plans, income
      tax
      returns, preparation of financial statements and completion of Seller's audit
      for the fiscal year ended December 31, 2006 or such earlier date as Seller
      determines to liquidate, or to assist Seller in the defense or prosecution
      of
      law suits and other similar matters.

     

    (b)  Books
      and Records.
      For a
      period of seven (7) years after the Closing (or, if requested in writing by
      Seller within seven (7) years after the Closing, until the closing of the
      examination of Seller federal income tax returns for all periods prior to and
      including the Closing), Purchaser will not dispose of any books, records,
      documents, or information relating to any of the Purchased Assets delivered
      to
      it by Seller without first giving notice to Seller thereof and permitting Seller
      to retain or copy such books and records as it may select. During such period,
      Purchaser will permit Seller to examine and make copies, at Seller’s expense, of
      such books, records, documents and information for any reasonable purpose,
      including any litigation now pending or hereafter commenced against Seller,
      or
      the preparation of income or other tax returns.

     

    5.15  Transferred
      Employees.

     

    (a)  Employment.
      Purchaser may at any time offer employment to any of Seller’s employees listed
      on Schedule
      2.3(e).
      Any
      employee accepting employment from Purchaser is a “Transferred
      Employee.”
      During
      the period between the Effective Date and the Closing Date, Seller shall use
      reasonable efforts to keep available the Transferred Employees on Schedule
      2.3(e)
      for
      employment by Purchaser. Seller shall have no obligations to require any such
      employees to accept employment with Purchaser.

     

    (b) Bonus,
      Vacation Time, etc.
      Seller
      shall pay immediately following the Closing, all compensation, bonus, severance,
      vacation and holiday compensation, workers’ compensation or other employment
      benefits which have accrued to or on behalf of any Transferred Employees
      immediately prior to the Closing Date. 

     

    5.16  Supplements
      to Schedules.
      Prior
      to the Closing Date, the Parties shall supplement or amend the Schedules with
      respect to any matter hereafter arising which, if existing or occurring at
      the
      Effective Date would have been required to be set forth in such Schedules.
      Such
      supplement or amendment as to matters arising after the Effective Date may
      constitute a Material Adverse Effect hereunder, but otherwise will not affect
      the liability of any party hereto for its representations or warranties
      hereunder. 

     

    5.17  Title
      Evidence.
      Seller
      has provided Purchaser with a copy of a mortgagee title insurance policy issued
      to Seller’s lender in 1993. Purchaser, at its own expense will obtain a
      commitment for title insurance. Seller shall provide the title company and
      Purchaser such information in its possession as they may reasonably request
      in
      connection with the issuance of the title commitment. Without limiting the
      foregoing, Seller shall provide the title company and Purchaser with copies
      of
      the each survey in its possession as soon as practicable, and no later than
      at
      least ten (10) days prior to the date set for Closing regarding the Real
      Property, with any abstracts of title, title reports or title policies covering
      the Real Property that may be in existence and are in Seller’s possession.
      Purchaser shall be responsible for the payment of any premium due with respect
      to any title insurance. Promptly after receiving a title commitment from the
      Title Company, Purchaser shall notify Seller in writing of any defects in title
      that are not Permitted Encumbrances and which would cause title to the Real
      Property to be uninsurable (any of which is called a “Defect
      of Title”).
      Seller
      shall cause any Defect of Title to be removed at its own cost and expense,
      and
      the Closing Date shall be extended as reasonably necessary to allow Seller
      time
      to remove all Defects of Title; provided that if Seller cannot remove a Defect
      in Title, or has not done so within sixty (60) days after delivery of the title
      commitment, Purchaser may elect to either terminate the Agreement; or (ii)
      proceed to Closing, in spite of such Defect in Title.

     

    5.18  Access
      to Project and Information.

     

    (a)  
      Prior to
      Closing, Seller will, during ordinary business hours and upon reasonable notice
      (i) give Purchaser and Purchaser’s representatives reasonable access to all
      books, records, plants, offices and other facilities and properties constituting
      the Purchased Assets; (ii) permit Purchaser to make such reasonable inspections
      thereof as Purchaser may reasonably request; (iii) permit Purchaser to
      investigate the potential for increasing the capacity of the Project, including
      testing the composition of sediments and riverbed, provided that Purchaser
      has
      secured any permit or authorization required for such activity and provided
      evidence thereof to Seller; (iv) furnish Purchaser with such financial and
      operating data and other information with respect to the Purchased Assets as
      Purchaser may from time to time reasonably request; (v) furnish Purchaser a
      copy
      of each material report, schedule or other document filed or received by Seller
      since the date hereof with respect to the Purchased Assets from or to FERC,
      NYPSC, NYSDEC or any other Governmental Authority having jurisdiction over
      the
      Purchased Assets; provided,
      however,
      that
      (A)
      any such investigation shall be conducted in such a manner as not to interfere
      unreasonably with the operation of the Purchased Assets, (B) Seller shall not
      be
      required to take any action which would constitute a waiver of the
      attorney-client privilege and (C) Seller need not supply Purchaser with any
      information that Seller is legally prohibited to supply. Seller will provide
      Purchaser or Purchaser's representatives with access to the Transferred Employee
      Records.

     

    (b)  Purchaser
      and Seller acknowledge that all information furnished to or obtained by
      Purchaser or Purchaser’s Representatives pursuant to this Section
      5.18
      shall be
      subject to the provisions of the Confidentiality Agreement.

     

    (c)  Following
      the Closing Date, each Party and its respective representatives shall have
      reasonable access to all of the books and records relating to the Purchased
      Assets, including all Transferred Employee records or other personnel and
      medical records required by law, legal process or subpoena, in the possession
      of
      the other Party or Parties to the extent that such access may reasonably be
      required by such Party in connection with the Assumed Liabilities or the
      Excluded Liabilities, or other matters relating to or affected by the operation
      of the Purchased Assets. Such access shall be afforded during normal business
      hours by the Party or Parties in possession of such books and records upon
      receipt of reasonable advance notice. The Party or Parties exercising this
      right
      of access shall be solely responsible for any costs or expenses incurred by
      it
      or them pursuant to this Section
      5.18(c).
      If the
      Party or Parties in possession of such books and records shall desire to dispose
      of any such books and records, such Party or Parties shall, prior to such
      disposition, give the other Party or Parties a reasonable opportunity at such
      other Party's or Parties' expense, to segregate and remove such books and
      records as such other Party or Parties may select. Notwithstanding the
      foregoing, the right of access to medical records and other confidential
      employee records shall be subject to all applicable legal
      requirements.

     

    (d)  Seller
      agrees (i) not to release any Person (other than Purchaser) from any
      confidentiality agreement now existing with respect to the Purchased Assets,
      or
      waive or amend any provision thereof, and (ii) to assign any rights arising
      under any such confidentiality agreement (to the extent assignable) to
      Purchaser.

     

    ARTICLE
      6  

     

    

     

    INDEMNIFICATION

     

    6.1  Survival
      of the Parties’ Representations and Warranties.

     

    (a)  Survival
      Period of Certain Representations and Warranties.
      Except
      for Unlimited Representations and the representations pursuant to Section 3.17,
      the representations and warranties of Seller contained in Article 3
      and any
      certificate delivered on the Closing Date will survive the Closing until the
      date which is eighteen (18) months after the Closing Date, at which time these
      representations and warranties will terminate. Representations and warranties
      pursuant to Section 3.17 shall survive until the end of any applicable statute
      of limitation or available review period affecting the tax returns referenced
      in
      Section 3.17. Unlimited Representations do not terminate. The representations
      and warranties of Purchaser contained in Article 4
      and any
      certificate delivered on the Closing Date will survive the Closing until the
      date which is eighteen (18) months after the Closing Date, at which time these
      representations and warranties will terminate. 

     

    (b)  Termination
      of All Other Representations and Warranties.
      Except
      as otherwise provided for herein, all other representations and warranties
      of
      Seller and Purchaser contained in this Agreement will terminate on the Closing
      Date and will be of no further force or effect.

     

    6.2  Indemnification
      by Seller.

     

    (a)  Purchaser
      Claims.
      Except
      as otherwise provided in Section 6.2(b)
      and
Section 6.2(c),
      Seller
      will indemnify, defend and hold harmless Purchaser and its parents and
      Affiliates, and each of their officers, directors, employees, attorneys, agents
      and successors and assigns (collectively, the “Purchaser
      Group”),
      from
      and against all damages, claims, losses, liabilities and expenses, up to the
      limits set forth below plus reasonable legal, accounting and other expenses,
      which arise out of or result from the following (collectively, “Purchaser
      Claims”):

     

    (1)  any
      breach or violation of this Agreement by Seller other than as set forth in
      (2)
      below relating to Article 3 hereof, as to which a Notice of Claim is received
      by
      Seller prior to the day that is 18 months following the Closing
      Date;

     

    (2)  any
      material breach or inaccuracy of the representations or warranties made in
      Article
      3
      as to
      which a Notice of Claim is received by Seller prior to any termination of such
      representation or warranty pursuant to Section 6.1 above. 

     

    (3)  any
      Third
      Party Claims against any member of the Purchaser Group for damages (but only
      where the alleged personal injury or property damage occurred before the Closing
      Date) resulting from or arising out of the ownership or operation of the
      Purchased Assets by Seller prior to the Closing;

     

    (4)  any
      loss
      or damages resulting from or arising out of Seller’s ownership or operation of
      the Excluded Assets before or after the Closing, or failure to discharge when
      due the Excluded Liabilities; and

     

    (5)  any
      loss
      or damages caused by Seller's grossly negligent or fraudulent concealment of
      information of which Seller had Knowledge regarding environmental conditions,
      regulatory orders or other conditions affecting the Project and existing prior
      to the Closing. 

     

    (b)  Seller’s
      Exceptions.
      Purchaser Claims will not include any damages, claims, losses, liabilities
      and
      expenses with respect to which Purchaser has agreed to provide indemnification
      pursuant to Section 6.3.
      

     

    (c)  Seller’s
      Limitations.
      Any
      indemnity obligations of Seller to the Purchaser Group are subject to the
      following limits, plus reasonable legal, accounting and other expenses of
      Purchaser Group: (i) indemnities arising under 6.2(a)(1): $1 million; (ii)
      indemnities arising under 6.2(a)(2): the Purchase Price; (iii) indemnities
      arising under 6.2(a)(3): no limit; (iv) indemnities arising under 6.2(a)(4):
      $1
      million; (v) indemnities arising under 6.2(a)(5): no limit. Except as is
      necessary to provide the indemnity in Section 6.2(a)(5), the Purchaser Group
      will not in any event be entitled to any punitive, incidental, indirect, special
      or consequential damages resulting from or arising out of any Purchaser Claims.
      

     

    6.3  Indemnification
      by Purchaser.

     

    (a)  Seller
      Claims.
      Except
      as otherwise specifically provided in Section 6.3(b)
      and
Section 6.3(c),
      Purchaser will indemnify, defend and hold harmless Seller and its Affiliates
      and
      each of their officers, directors, employees, attorneys, agents and successors
      and assigns (collectively, the “Seller
      Group”),
      from
      and against all damages, claims, losses, liabilities and expenses up to a
      maximum amount of five hundred thousand dollars ($500,000), including reasonable
      legal, accounting and other expenses, which arise out of or relate to the
      following (collectively, “Seller
      Claims”).

     

    (1)  any
      breach or violation of this Agreement by Purchaser other than as set forth
      in
      (2) below relating to Article 4 hereof, as to which a Notice of Claim is
      received by Purchaser prior to the day that is 18 months following the Closing
      Date;

     

    (2)  any
      material breach or inaccuracy of any of the representations or warranties made
      in Article
      4
      as to
      which a Notice of Claim is received by Purchaser prior to the day that is 18
      months following the Closing Date. 

     

    (3)  any
      Third
      Party Claims against any member of the Seller Group for loss or damages
      resulting from or arising out of the ownership or operation of the Purchased
      Assets from and after the Closing;

     

    (4)  the
      failure, after the Closing, of Purchaser to pay or otherwise discharge when
      due
      the Assumed Liabilities;

     

    (5)  any
      loss
      or damages resulting from or arising out of the ownership or operation of the
      Purchased Assets after the Closing.

     

    (b)  Purchaser
      Exceptions.
      Seller
      Claims will not include any damages, claims, losses, liabilities and expenses
      for which Seller has agreed to provide indemnification or insurance pursuant
      to
Section 6.2.

     

    (c)  Purchaser
      Limitations.
      The
      Seller Group will not in any event be entitled to any punitive, incidental,
      indirect, special or consequential damages resulting from or arising out of
      any
      Seller Claim. 

     

    6.4 Basket;
      Maximum Liability; Other Indemnification Matters.

     

     No
      indemnitor shall have any obligation to indemnify or hold harmless a
      indemnitee except to the extent that the aggregate amount of loss incurred
      by the Purchaser Indemnified Parties or the Seller Indemnified Parties exceeds
      $100,000 and only to the extent of such excess; the foregoing limitations shall
      not apply to any loss arising our of any breach of any of the Unlimited
      Representations or any loss arising as a result of the gross negligence or
      intentional misrepresentation of the other Party. 

     

    6.5   Notice
      of Claim.
      Subject
      to the terms of this Agreement and upon obtaining Knowledge of a claim for
      which
      it is entitled to indemnity under this Article
      6“Indemnification”,
      the Party seeking indemnification hereunder (the “Indemnitee”)
      will
      promptly notify the Party against whom indemnification is sought (the
“Indemnitor”)
      in
      writing of any damage, claim, loss, liability or expense which the Indemnitee
      has determined has given or could give rise to a claim under Section 6.2
      or
Section 6.3.
      (The
      written notice is referred to as a “Notice
      of Claim”.)
      A
      Notice of Claim will specify, in reasonable detail, the facts known to the
      Indemnitee regarding the claim. The failure to provide (or timely provide)
      a
      Notice of Claim will not affect the Indemnitee’s rights to indemnification,
      except as otherwise provided by the specific time frames set forth in
Section 6.2
      and
Section 6.3;
      provided, however, the Indemnitor is not obligated to indemnify the Indemnitee
      for the increased amount of any claim which would otherwise have been payable
      to
      the extent that the increase resulted from the failure to deliver timely a
      Notice of Claim.

     

    6.6  Defense
      of Third Party Claims.
      The
      Indemnitor will defend, in good faith and at its expense, any claim or demand
      set forth in a Notice of Claim relating to a Third Party Claim for which
      indemnification is due pursuant to Section
      6.2
      or
Section
      6.3
      and the
      Indemnitee, at its expense, may participate in the defense. The Indemnitee
      cannot settle or compromise any Third Party Claim so long as the Indemnitor
      is
      defending it in good faith. If the Indemnitor elects not to contest a Third
      Party Claim, the Indemnitee may undertake its defense at Indemnitor’s expense,
      and the Indemnitor will be bound by the result obtained by the Indemnitee.
      The
      Indemnitor may at any time request the Indemnitee to agree to the abandonment
      of
      the contest of the Third Party Claim or to the payment or compromise by the
      Indemnitor of the asserted claim or demand. If the Indemnitee does not object
      in
      writing within fifteen (15) days of the Indemnitor’s request, the Indemnitor may
      proceed with the action stated in the request. If within that fifteen (15)
      day
      period the Indemnitee notifies the Indemnitor in writing that it has determined
      that the contest should be continued, the Indemnitor will be liable under this
      Article
      6 only
      for
      an amount up to the amount which the third Party to the contested Third Party
      Claim had agreed to accept in payment or compromise as of the time the
      Indemnitor made its request and the Indemnitor may pay such amount into the
      Court and shall thereafter have no responsibility for the defense of the claim.
      This Section 6.6
      is
      subject to the rights of any Indemnitee’s insurance carrier that is defending
      the Third Party Claim.

     

    6.7  Consultation
      and Cooperation.
      The
      Party defending the Third Party Claim will (a) consult with the other Party
      throughout the pendency of the Third Party Claim regarding the investigation,
      defense, settlement, trial, appeal or other resolution of the Third Party Claim;
      and (b) afford the other Party the opportunity to be associated in the defense
      of the Third Party Claim. The Parties will cooperate in the defense of the
      Third
      Party Claim. The Indemnitee will make available to the Indemnitor or its
      representatives all records and other materials reasonably required by them
      for
      use in contesting any Third Party Claim (subject to obtaining an agreement
      to
      maintain the confidentiality of confidential or proprietary materials in a
      form
      reasonably acceptable to Indemnitor and Indemnitee). If requested by the
      Indemnitor, the Indemnitee will cooperate with the Indemnitor and its counsel
      in
      contesting any Third Party Claim that the Indemnitor elects to contest or,
      if
      appropriate, in making any counterclaim against the Person asserting the claim
      or demand, or any cross-complaint against any Person. The Indemnitor will
      reimburse the Indemnitee for any expenses incurred by Indemnitee in cooperating
      with or acting at the request of the Indemnitor.

     

    6.8  Mitigation
      and Limitation on Claims.
      As used
      in this Agreement, the term “Indemnifiable
      Claim”
means
      any Purchaser Claims or Seller Claims. Notwithstanding anything to the contrary
      contained herein:

     

    (a)  Reasonable
      Steps to Mitigate.
      The
      Indemnitee will take all reasonable steps to mitigate all losses, damages and
      the like relating to an Indemnifiable Claim, including availing itself of any
      defenses, limitations, rights of contribution, claims against third Persons
      and
      other rights at law or equity, and will provide such evidence and documentation
      of the nature and extent of the Indemnifiable Claim as may be reasonably
      requested by the Indemnitor. The Indemnitee’s reasonable steps include the
      reasonable expenditure of money to mitigate or otherwise reduce or eliminate
      any
      loss or expense for which indemnification would otherwise be due under this
      Article
      6,
      and the
      Indemnitor will reimburse the Indemnitee for the Indemnitee’s reasonable
      expenditures in undertaking the mitigation.

     

    (b)  Net
      of Benefits.
      Any
      Indemnifiable Claim is limited to the amount of actual damages sustained by
      the
      Indemnitee by reason of such breach or nonperformance shall be determined after
      deducting therefrom the amount of any insurance proceeds and other third party
      recoveries, if any, actually received by the Purchaser Indemnified Parties
      or
      Seller Indemnified Parties, as applicable, in respect of such loss and the
      amount of any tax benefit actually realized with respect thereto. 

     

    6.9  Remedies
      Exclusive.
      The
      remedies set forth in this Article
      6
      constitute the sole and exclusive remedy for any post-Closing claims made for
      breach of this Agreement. Each Party waives any provision of law to the extent
      that it would limit or restrict the agreements contained in this Article
      6.

     

    ARTICLE
      7  

     

    

     

    CONDITIONS
      PRECEDENT TO OBLIGATIONS OF

     

    PURCHASER
      AT THE CLOSING

     

    The
      obligations of Purchaser under this Agreement to complete the purchase of the
      Purchased Assets and assume the Assumed Liabilities are subject to the
      satisfaction (or waiver by Purchaser), on or prior to the Closing, of each
      of
      the following conditions precedent:

     

    7.1  Purchaser’s
      Receipt of Governmental Approvals and Consents.
      Purchaser shall have received all Governmental Approvals and all authorizations
      and consents of third Persons required by applicable law or required by any
      such
      third Persons in connection with the consummation of the transactions
      contemplated by this Agreement and with Purchaser’s operation of the
      Hydroelectric Plant and has obtained all Purchaser Required Consents.
Purchaser
      may elect to waive its receipt of any approvals other than any required
      Governmental Approvals.

     

    7.2  No
      Material Adverse Effects or Proceedings.
      No
      Material Adverse Effect affecting the Purchased Assets shall have occurred
      and
      be continuing. No suit, action or other proceeding against any Party or its
      Affiliates shall be pending before any court or Governmental Authority which
      seeks to restrain or prohibit any of the transactions contemplated by this
      Agreement. 

     

    7.3  Phase
      I Audit.
      Purchaser shall have obtained a Phase I environmental assessment in conformance
      with ASTM standard E 1527-00 disclosing
      no conditions that would constitute a Material Adverse Effect or necessitate
      further appropriate inquiry by a bona fide purchaser. Purchaser shall complete
      this Phase I on or before twenty days following receipt of a final survey of
      the
      Real Property (delivery of which is a separate condition precedent) and shall
      provide Seller with a copy within ten days of its receipt. Purchaser will also
      provide Seller with a copy of any interim draft Phase I that anticipates only
      the final survey as a condition to completion, and Purchaser will notify Seller
      as to any item constituting a Material Adverse Effect or necessitating further
      appropriate inquiry identified in any draft Phase I. 

     

    7.4  Deliveries. Seller
      shall have delivered, or caused to be delivered, to Purchaser at the Closing
      the
      following documents and payment:

     

    (a)  Payments.
      All
      amounts due Purchaser from Seller under this Agreement.

     

    (b)  Deed.
      A
      Deed,
      duly executed by Seller.

     

    (c)  Bill
      of Sale.
      A Bill
      of Sale with respect to the Purchased Assets substantially in the form of
Exhibit
      B,
      duly
      executed by Seller.

     

    (d)  Assignments.
      Assignments of the Assigned Contracts and the Permits, in form and substance
      reasonably acceptable to Purchaser. 

     

    (e)  Organizational
      Documents and Good Standing Certificate.
      The
      Limited Partnership Agreement and Certificate of Limited Partnership of Seller
      certified as of the Closing Date by the Managing Partner of Seller, a good
      standing certificate for Seller from the Secretary of State of the State of
      Delaware and a copy of a certificate of authority to do business from the
      Secretary of State of the State of New York.

     

    (f)  Partner’s
      Certificate.
      A
      certificate of a General Partner of Seller certifying that the Persons signing
      this Agreement, the Related Agreements and any other documents delivered by
      Seller in connection with the Closing have been duly authorized to sign and
      execute such document(s) on behalf of the Seller.

     

    (g)  Resolutions.
      A
      certificate of an officer of a General Partner of Seller to the effect that
      the
      execution of this Agreement and the performance of by Seller of the obligations
      as been authorized by all necessary partnership action, accompanied by copies
      of
      such resolutions of the partners of Seller as may be required by Seller’s
      Limited Partnership Agreement to authorize the transactions contemplated by
      this
      Agreement and the Related Agreements and authorize the Person executing this
      Agreement or the Related Agreements and other documents to execute and deliver
      this Agreement, the Related Agreements and any other documents or instruments
      which they deem necessary and appropriate in connection with this
      Agreement.

     

    (h) Title
      Evidence. Uniform
      Commercial Code Searches showing the Seller to have good and marketable title
      to
      the tangible and intangible personal property which are part of the Purchased
      Assets, subject only to Permitted Encumbrances, together with such title
      documentation as shall be required by the title company issuing the title
      commitment.

     

    (i)  FIRPTA.
      A
“FIRPTA” affidavit, substantially in the form of Exhibit
      E,
      duly
      executed by Seller.

     

    (j)  Representation
      and Warranty Certificate.
      A
      certificate, dated as of the Closing Date, duly executed by Seller and
      confirming its warranties and representations made under Article
      3
      and any
      of the Schedules, as of the Closing Date, and that such representations and
      warranties shall be true in all material respects.

     

    (k) Cure
      of any Seller Breaches.
      Evidence that Seller has cured any breach or default of Seller hereunder, if
      any, except to the extent that Purchaser has elected to waive such cure as
      provided herein.

     

    (l) License
      Compliance.
      Either:
      (i) a legal opinion from counsel acceptable to Purchaser (with Donald Clarke,
      Esq. deemed acceptable) regarding current compliance of the licensee with
      Article 5 of the FERC License; (ii) amendments of the Hydro Easement and Dam
      Operation Agreement to incorporate a “Linweave Clause” as described in that
      certain letter dated July 30, 1992 from FERC’s General Counsel to Mr. Donald E.
      Hamer; or (iii) consent to a reduction in the Purchase Price of $25,000 as
      compensation to Purchaser for the absence of either (i) or (ii) above.

     

    (m)
       Other
      Documents.
      Such
      other documents, opinions, instruments or certificates as Purchaser or its
      counsel may reasonably request and in form reasonably acceptable to Purchaser,
      including copies of as-built drawings of the Project, inclusive of the PCB
      disposal vault in Seller’s possession; provided, however, that all such
      documents, instruments or certificates are made without representation or
      warranty by, or recourse against, Seller, all such representations and
      warranties being made exclusively in this Agreement. 

     

    7.5   No
      Termination.
      This
      Agreement shall not have been terminated pursuant to Section 9.12.

     

    

     

    ARTICLE
      8  

     

    

     

    CONDITIONS
      PRECEDENT TO OBLIGATIONS OF

     

    SELLER
      AT THE CLOSING

     

    The
      obligations of Seller under this Agreement to complete the sale of the Purchased
      Assets and transfer the Purchased Assets, Assigned Contracts and Assumed
      Liabilities to Purchaser are subject to the satisfaction or waiver, on or prior
      to the Closing, of each of the following conditions precedent:

     

    8.1  Seller’s
      Receipt of Approvals and Consents.
      Subject
      to the provisions of Section
      7.1,
      Purchaser or Seller shall have received 

     

    (a)  all
      Governmental Approvals, and all authorizations and consents of third Persons
      required by applicable law or required by any such third Persons in connection
      with the consummation of the transactions contemplated by this Agreement and
      with Purchaser’s operation of the Hydroelectric Plant; and 

     

    (b)
      consent
      of a majority in interest of the general partners of the Seller as required
      by
      Seller’s limited partnership agreement. Seller shall notice any required meeting
      of partners within three (3) days following the execution of this agreement,
      which notice shall provide no more than 15 days notice of meeting. Immediately
      following such meeting, Seller shall notify Buyer of any action taken at such
      meeting or in lieu of a meeting. 

     

    

     

    8.2  Seller’s
      Receipt of Governmental Approvals and Consents.
      Seller
      shall have received all Governmental Approvals required to be obtained by Seller
      and all authorizations and consents of third Persons required by applicable
      law
      or required by any such third Persons in connection with the consummation of
      the
      transactions contemplated by this Agreement, including those listed on
Schedule
      5.2(a),
      provided that Purchaser may waive any approval other than any required
      Governmental Approval.

     

    8.3  No
      Adverse Proceedings or Events.
      No suit,
      action or other proceeding against any Party or its Affiliates shall be pending
      before any court or Governmental Authority which seeks to restrain or prohibit
      one or more of the transactions contemplated by this Agreement or to obtain
      material damages or other material relief in connection with this Agreement
      or
      the transactions contemplated hereby.

     

    8.4  Deliveries.
      Seller
      shall have received the following documents and payments:

     

    (a)  Escrow
      Release.
      A
      release executed by the Purchaser directing the Escrow Agent to release the
      balance in the Escrow Account to the Seller.

     

    (b)  Purchase
      Price and Other Payments.
      All
      amounts due Seller from Purchaser under this Agreement, including the balance
      of
      the Purchase Price to be paid pursuant to Section 2.6
      as
      adjusted pursuant to
      Section 2.7.

     

    (c)  Assignments.
      Assignments of the Assigned Contracts and the Permits in form and substance
      reasonably acceptable to Seller. 

     

    (d)  Organizational
      Documents and Good Standing Certificate.
      The
      Articles of Organization and Operating Agreement of Purchaser certified as
      of
      the Closing Date by a member or manager of Purchaser and a good standing
      certificate from the Secretary of State of the State of Organization and a
      Certificate of Authority to do business in the State of New York.

     

    (e)   Officer’s
      Certificate.
      A
      Certificate of Purchaser’s manager or member certifying that the person signing
      this Agreement and the Related Agreements and any other documents delivered
      by
      Purchaser in connection with the Closing has been duly authorized to sign and
      execute such document(s)) on behalf of Purchaser.

     

    (f)   Representation
      and Warranty Certificate.
      Certificate, dated as of the Closing Date, duly executed by Purchaser updating
      its warranties and representations made under Article
      4
      and any
      of the Schedules, to the Closing Date.

     

    (g)  Other
      Documents.
      Such
      other documents, instruments or certificates as Seller or its counsel may
      reasonably request and in a form reasonably acceptable to Seller; provided,
      however, that all such documents, instruments or certificates are made without
      representation or warranty by, or recourse against, Purchaser, all such
      representations and warranties being made exclusively in this
      Agreement.

     

    8.5 No
      Termination.
      This
      Agreement shall not have been terminated pursuant to Section 9.12.

     

    ARTICLE
      9  

     

    

     

    MISCELLANEOUS
      AGREEMENTS AND ACKNOWLEDGEMENTS

     

    9.1  Expenses.
      Except
      as otherwise provided herein, each Party is responsible for its own costs and
      expenses (including attorneys’ and consultants’ fees, costs and expenses)
      incurred in connection with this Agreement and the consummation of the
      transactions contemplated by this Agreement.

     

    9.2  Entire
      Document.
      This
      Agreement (including the Exhibits and Schedules to this Agreement) and the
      Related Agreements contain the entire agreement between the Parties with respect
      to the transactions contemplated hereby, and supersede all negotiations,
      representations, warranties, commitments, offers, contracts and writings (except
      for the Confidentiality Agreement) prior to the execution date of this
      Agreement, written or oral. No waiver and no modification or amendment of any
      provision of this Agreement is effective unless made in writing and duly signed
      by the Parties referring specifically to this Agreement, and then only to the
      specific purpose, extent and interest so provided.

     

    9.3  Schedules.
      The
      Schedules delivered pursuant to the terms of this Agreement and as updated
      at
      Closing are an integral part of this Agreement to the same extent as if they
      were set forth verbatim herein.

     

    9.4  Counterparts.
      This
      Agreement may be executed in one or more counterparts, each of which is an
      original, but all of which together constitute one and the same
      instrument.

     

    9.5  Severability.
      If any
      provision hereof is held invalid or unenforceable by any arbitrator or as a
      result of future legislative action, this holding or action will be strictly
      construed and will not affect the validity or effect of any other provision
      hereof. To the extent permitted by law, the Parties waive, to the maximum extent
      permissible, any provision of law that renders any provision hereof prohibited
      or unenforceable in any respect.

     

    9.6  Assignability.
      This
      Agreement is binding upon and inures to the benefit of the successors and
      assigns of the Parties, but is not assignable by any Party without the prior
      written consent of the other Party, which consent will not unreasonably be
      withheld. Any such assignment is conditioned on the assignee’s agreement in
      writing to assume the assigning Party’s duties and obligations under this
      Agreement and the Related Agreements. Any assignment effected in accordance
      with
      this Section 9.6
      will not
      relieve the assigning Party of its obligations and liabilities under this
      Agreement and the Related Agreements.

     

    9.7  Captions.
      The
      captions of the various Articles, Sections, Exhibits and Schedules of this
      Agreement have been inserted only for convenience of reference and do not
      modify, explain, enlarge or restrict any of the provisions of this
      Agreement.

     

    9.8  Governing
      Law.
      The
      validity, interpretation and effect of this Agreement are governed by and will
      be construed in accordance with the laws of the State of New York applicable
      to
      contracts made and performed in such State and without regard to conflicts
      of
      law doctrines except to the extent that certain matters are preempted by Federal
      law or are governed by the law of the jurisdiction of organization of the
      respective parties.

     

    9.9  Dispute
      Resolution.

     

    (a)  Intent
      of the Parties.
      Except
      as provided in Section
      2.9
      and in
      the next sentence, the sole remedy available to either Party for any claim
      arising out of or relating to this Agreement or any Related Agreement is the
      dispute resolution procedure set forth in this Section 9.9.
      Either
      Party may seek a preliminary injunction or other provisional judicial remedy
      if
      such action is necessary to prevent irreparable harm or preserve the status
      quo,
      in which case both Parties nonetheless will continue to pursue resolution of
      the
      dispute by means of this procedure. If the parties cannot resolve a dispute
      under Section 9.9(b)
      or
Section 9.9(c),
      then
      the dispute shall be settled through recourse to the courts.

     

    (b)  Management
      Negotiations.
      The
      Parties will attempt in good faith to resolve any dispute or claim arising
      out
      of or relating to this Agreement or a Related Agreement promptly by negotiations
      between a managerial representative of Seller or his or her designated
      representative and an executive of similar authority of Purchaser. Either Party
      may give the other Party written notice of any dispute or claim. Within twenty
      (20) days after delivery of said notice, the executives will meet at a mutually
      acceptable time and place, and thereafter as often as they reasonably deem
      necessary to exchange information and to attempt to resolve the dispute or
      claim. If the matter has not been resolved within sixty (60) days of the first
      meeting, either Party (by notice to the other Party) may initiate a mediation
      of
      the controversy pursuant to Section 9.9(c).

     

    (c)  Mediation.
      If a
      Party initiates mediation to resolve any dispute or claim as provided in
      Section 9.9(
      b),
      the
      Parties will try in good faith to settle the dispute or claim within sixty
      (60)
      days thereafter by mediation in accordance with the then-existing CPR Model
      Procedure for Mediation of Business Disputes (the “Procedures”).
      If the
      matter has not been resolved within the sixty (60) day period, either Party
      (by
      notice to the other Party) may initiate legal action to resolve the dispute
      or
      claim.

     

    9.10  Notices.
      All
      notices, requests, demands and other communications under this Agreement must
      be
      in writing and must be delivered in person or sent by certified mail, postage
      prepaid, by facsimile or by overnight delivery, and properly addressed as
      follows:

     

    If
      to
      Seller:

     

    Stillwater
      Hydro Partners L.P.

    265
      Genesee Street

    Auburn,
      NY 13021

    Attention:
      Charles A. Bouley, Jr.

    Facsimile
      No.: (315) 253-4419

     

    With
      a
      copy to:

     

    Hinman,
      Howard & Kattell, LLP

    700
      Security Mutual Building

    80
      Exchange Street

    Binghamton,
      NY 13901

    Attention:
      Thomas F. Farrell

    Facsimile
      No.: (607) 723-6605

    

    If
      to
      Purchaser:

     

    Boralex
      Stillwater, LLC

    c/o
      Boralex Inc. 770 Sherbrooke Ouest

    Montreal,
      Quebec H3A 1G1 

    Attn:
      General Counsel

    Facsimile
      No.: 514-284-9895

    

    With
      a
      copy to:

     

    Curtis
      Whittaker, Esq.

    Rath,
      Young & Pignatelli

    One
      Capital Plaza, Box 1500

    Concord,
      New Hampshire 03301

    Facsimile
      No.: 603-226-2700

     

    Any
      Party
      may from time to time change its address for the purpose of notices to that
      Party by a similar notice specifying a new address, but no such change is
      effective until it is actually received by the Party sought to be charged with
      its contents.

     

    All
      notices and other communications required or permitted under this Agreement
      which are addressed as provided in this Section 9.10
      are
      effective upon delivery, if delivered personally or by overnight mail, and,
      are
      effective five (5) days following deposit in the United States mail, postage
      prepaid if delivered by mail.

     

    9.11  [Reserved]
      . 

     

    9.12  Termination.

     

    (a)  Rights
      To Terminate.
      In
      addition to the other rights of the parties hereto, this Agreement may, by
      written notice given on or prior to the Closing Date, in the manner provided
      in
Section 9.10,
      be
      terminated at any time prior to the Closing Date:

     

    (1)  by
      Seller
      if there has been a material misrepresentation or a material default or material
      breach by Purchaser with respect to any Purchaser’s representations and
      warranties in this Agreement or in any Related Agreement or the due and timely
      performance of any of Purchaser’s covenants and agreements contained in this
      Agreement or in any Related Agreement, and such misrepresentation, default
      or
      breach is not cured by the earlier of
      the
      Closing Date or the date thirty (30) days after receipt by Purchaser of written
      notice specifying particularly such misrepresentation, default or
      breach;

     

    (2)  by
      Purchaser if there has been a material misrepresentation or a material default
      or breach by Seller with respect to Seller’s representations and warranties in
      this Agreement or in any Related Agreement or the due and timely performance
      of
      any of Seller’s covenants and agreements contained in this Agreement or in any
      Related Agreement, and such misrepresentation, default or breach is not cured
      by
      the earlier of the Closing Date or the date thirty (30) days after receipt
      by
      Seller of written notice specifying particularly such misrepresentation, default
      or breach;

     

    (3)  by
      Seller
      on thirty (30) days’ written notice if Purchaser shall not have received all
      Purchaser Required Consents by the date which is six (6) months after the
      Effective Date or Purchaser has not waived such consents;

     

    (4)  by
      Purchaser in accordance with Section 5.11;

     

    (5)  by
      mutual
      agreement of Seller and Purchaser; or

     

    (6)  by
      Seller
      or Purchaser if the Closing has not occurred on or before September 30,
      2006.

     

    (b)  Effect
      of Termination.
      If this
      Agreement is terminated pursuant to Section 9.12
      (a), all
      further obligations and liabilities of the Parties hereunder will terminate,
      except (i) as otherwise contemplated by the Agreement, (ii) for the obligations
      set forth in Sections
      2.9,
      3.8,
      4.3,
      5.3,
      Article
      6
      and
Article
      9,
      and
      (iii) for the obligations of the Parties set forth in the Confidentiality
      Agreement. Upon termination, the originals of any items, documents or written
      materials provided by one Party to the other Party will be returned by the
      receiving Party to the providing Party, and any Confidential Information
      retained by the receiving Party will be kept confidential.

     

    9.13  No
      Third Party Beneficiaries.
      Except
      as may be specifically set forth in this Agreement, nothing in this Agreement,
      whether express or implied, is intended to confer any rights or remedies under
      or by reason of this Agreement on any Persons other than the Parties and their
      respective permitted successors and assigns, nor is anything in this Agreement
      intended to relieve or discharge the obligation or liability of any third
      Persons to any Party, nor give any third Persons any right of subrogation or
      action against any Party.

     

    9.14  No
      Joint Venture.
      Nothing
      contained in this Agreement creates or is intended to create an association,
      trust, partnership, or joint venture or impose a trust or partnership duty,
      obligation, or liability on or with regard to any Party.

     

    9.15  Construction
      Of Agreement.
      Ambiguities or uncertainties in the wording of this Agreement will not be
      construed for or against any Party, but will be construed in the manner that
      most accurately reflects the Parties’ intent as of the date they executed this
      Agreement.

     

    9.16  Effect
      of Closing Over Known Unsatisfied Conditions or Breached Representations,
      Warranties or Covenants.
      If
      Seller or Purchaser elects to proceed with the Closing while knowing (as
      evidence in a written notice from the other party) of any failure to be
      satisfied of any condition in its favor or the breach of any representation,
      warranty or covenant by the other Party, the condition that is unsatisfied
      or
      the representation, warranty or covenant which is breached at the Closing Date
      will be deemed waived by such Party, and such Party will be deemed to fully
      release and forever discharge the other Party on account of any and all claims,
      demands or charges, known or unknown, with respect to the same.

     

    9.17  Conflicts.
      In the
      event of any conflicts or inconsistencies between the terms of this Agreement
      and the terms of any of the Related Agreements, the terms of this Agreement
      will
      govern and prevail.

     

    9.18  Consent
      To Jurisdiction.
      THE
      PARTIES ACKNOWLEDGE AND AGREE THAT THE COURTS OF THE STATE OF NEW YORK SITTING
      IN CAYUGA COUNTY OR THE DISTRICT COURT FOR THE NORTHERN DISTRICT OF NEW YORK
      SHALL HAVE EXCLUSIVE JURISDICTION OVER THIS AGREEMENT. EACH OF SELLER AND
      PURCHASER ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY
      AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS
      AND
      WAIVES ANY DEFENSE OF FORUM NON CONVENIENS. IF NOT A RESIDENT OF THE STATE
      OF
      NEW YORK, PURCHASER MUST APPOINT AND MAINTAIN AN AGENT FOR SERVICE OF PROCESS
      IN
      THE STATE OF NEW YORK WHICH CAN BE THE SECRETARY OF STATE OF THE STATE OF NEW
      YORK. NOTHING IN THIS SECTION 9.18
      IS
      INTENDED TO MODIFY OR EXPAND THE TERMS AND PROVISIONS OF SECTION 9.9
      (a).

     

    
      
         

        

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

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

     

    STILLWATER
      HYDRO PARTNERS L.P.

    By:
      Stillwater Corporation, General Partner

    

    

    By:
      /s/
      C.
      ALAN BOULEY____ 

    Name:
      C.
      Alan Bouley

    Title:
      President

    

     

    BORALEX
      STILLWATER LLC 

     

    

     

    By:
      /s/
      SYLVAIN AIRD ____ 

    Name: Sylvain
      Aird

    Title: SecretaryCERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF
                      SERIES A CONVERTIBLE PREFERRED STOCK
                                OF MODAVOX, INC.

MODAVOX, INC., a corporation organized and existing under the laws of the State
of Delaware (the "Corporation"), DOES HEREBY CERTIFY THAT:

Pursuant to authority conferred upon the Board of Directors (the "Board") by the
Amended and Restated Certificate of Incorporation of the Corporation, as amended
(the "Certificate of Incorporation") and pursuant to the provisions of the
Delaware General Corporation Law, the Board, pursuant to a unanimous written
consent effective as of February 27, 2006, adopted the following resolution
providing for the designations, preferences and relative, participating,
optional and other rights, and the qualifications, limitations and restrictions,
of the Series A Convertible Preferred Stock:

      WHEREAS, the Certificate of Incorporation provides for two classes of
      shares known as common stock, $0.0001 par value per share (the "Common
      Stock"), and preferred stock, $0.0001 par value per share (the "Preferred
      Stock"); and

      WHEREAS, the Board is authorized by the Certificate of Incorporation to
      provide for the issuance of the shares of Preferred Stock in series, and
      by filing a certificate pursuant to the applicable law of the State of
      Delaware, to establish from time to time the number of shares to be
      included in such series and to fix the designations, preferences and
      rights of the shares of each such series and the qualifications,
      limitations and restrictions thereof.

      NOW, THEREFORE, BE IT RESOLVED, that the Board deems it advisable to, and
      hereby does, designate a Series A Convertible Preferred Stock and fixes
      and determines the preferences, rights, qualifications, limitations and
      restrictions relating to the Series A Convertible Preferred Stock as
      follows:

            1. DEFINITIONS. For purposes of this Certificate of Designation, the
      following terms shall have the following meanings:

                  (a) "CLOSING PRICE(S)" means, for any security as of any date,
            the greater of (i) the closing ask price and closing bid price of
            such security on the principal securities exchange or trading market
            where such security is listed or traded as reported by Bloomberg
            Financial Markets or a comparable reporting service of national
            reputation selected by the Corporation and reasonably acceptable to
            holders of a majority of the then outstanding shares of Series A
            Stock if Bloomberg Financial Markets is not then reporting Closing
            Prices of such security (collectively, "Bloomberg"), or (ii) the
            last reported closing sale price of such security in the
            over-the-counter market on the electronic bulletin board for such
            security as reported by Bloomberg or a comparable reporting service
            of national reputation selected by the Corporation and reasonably
            acceptable to holders of a majority of the then outstanding shares
            of Series A Stock if Bloomberg Financial Markets is not then
            reporting closing sale prices of such security.
<PAGE>

                  (b) "CONVERSION DATE" means, for any conversion of the Series
            A Stock into Common Stock, the date specified in the notice of
            conversion in the form attached hereto (the "Notice of Conversion"),
            so long as the copy of the Notice of Conversion is faxed (or
            delivered by other means resulting in notice) to the Corporation
            before 11:59 p.m., Arizona time, on the Conversion Date indicated in
            the Notice of Conversion. If the Notice of Conversion is not so
            faxed or otherwise delivered before such time, then the Conversion
            Date shall be the date the holder faxes or otherwise delivers the
            Notice of Conversion to the Corporation.

                  (c) "CONVERSION PRICE" means Fixed Conversion Price or the
            Variable Conversion Price, as the case may be, in effect as of such
            date and subject to adjustment as provided herein.

                  (d) "FIXED CONVERSION PRICE" means US twenty-five cents
            ($0.25) per share, and shall be the sole conversion price in effect
            until one (1) year after the issuance date.

                  (e) "FIRST CONVERSION DATE" means the earliest of (i) the
            360th day following the Issuance Date or (ii) the date that the
            Corporation receives net cash proceeds of any equity of quasi-equity
            (e.g. preferred or convertible preferred stock) financing exceeding
            five hundred thousand dollars ($500,000) that allows the Corporation
            to redeem all or a portion of the Series A Stock.

                  (e) "ISSUANCE DATE" means the date of the closing under the
            Agreement and Plan of Reorganization by and among the Corporation
            and Kino Interactive Group, LLC with respect to the initial issuance
            of the Series A Stock (the "Agreement and Plan of Reorganization").

                  (f) "VARIABLE CONVERSION PRICE" means the average of the
            Closing Prices for the Common Stock during the twenty (20)
            consecutive trading days immediately preceding such date of
            determination but at no time less than US US twenty-five cents
            ($0.25) per share being the minimum conversion price and at no time
            more than US one dollar ($1.00) per share being the maximum
            conversion price. There will be no Variable Conversion Price until
            the First Conversion Date has passed.

            2. DESIGNATION. The shares of such series of Preferred Stock shall
      be designated "Series A Convertible Preferred Stock" (the "Series A
      Stock").

                                       2
<PAGE>

            3. AUTHORIZED NUMBER. The authorized number of shares constituting
      the Series A Stock shall be two million (2,000,000).

            4. LIQUIDATION.

                  (a) LIQUIDATION PROCEDURE. Upon any liquidation, dissolution
            or winding up of the Corporation, whether voluntary or involuntary,
            the holders of shares of Series A Stock shall be entitled, before
            any distribution or payment is made upon any junior securities, to
            be paid an amount equal to US twenty-five cents ($0.25) per share of
            Series A Stock, representing the liquidation preference per share of
            the Series A Stock (as adjusted for any combinations, divisions or
            similar recapitalizations affecting the shares of Series A Stock)
            (the "Liquidation Payments"). If upon any liquidation, dissolution
            or winding up of the Corporation, whether voluntary or involuntary,
            the assets to be distributed among the holders of shares of Series A
            Stock and securities pari passu with the Series A Stock ("Parity
            Securities") shall be insufficient to permit payment in full to the
            holders of shares of Series A Stock and any Parity Securities of the
            distributions to which they are entitled, then the holders of all
            such securities shall share ratably in such distribution of assets
            in accordance with the amount which would be payable on such
            distribution if the amounts to which the holders of outstanding
            shares of Series A Stock and Parity Securities are entitled were
            paid in full. A consolidation or merger of the Corporation with or
            into any other corporation or corporations or other entity (other
            than a merger in which the Corporation is the survivor and the
            stockholders of the Corporation prior to such merger own more than a
            majority of the voting securities of the Corporation following such
            merger), a transaction or a series of related transactions in which
            the stockholders of the Corporation transfer a majority of the
            voting securities of the Corporation to any person or a sale, lease
            or transfer of all or substantially all of the assets of the
            Corporation shall be deemed to be a liquidation, dissolution, or
            winding up of the Corporation as those terms are used in this
            Section 4; provided, however, that no such consolidation, merger,
            transaction or series of related transactions that is approved by a
            vote pursuant to Section 6 hereof shall be deemed to be a
            liquidation, dissolution or winding up of the Corporation. The
            Corporation shall provide to holders of shares of Series A Stock
            thirty (30) days' prior written notice of any such sale, conveyance,
            exchange, transfer, consolidation or merger.

                  (b) REMAINING ASSETS. Upon any liquidation, dissolution or
            winding up of the Corporation, whether voluntary or involuntary,
            after the holders of shares of Series A Stock shall have been paid
            in full the Liquidation Payments, the remaining assets of the
            Corporation may be distributed ratably per share in order of
            preference to the holders of junior securities in accordance with
            their respective terms.

                                       3
<PAGE>

                  (c) NOTICE OF LIQUIDATION. Written notice of a liquidation,
            dissolution or winding up of the Corporation, whether voluntary or
            involuntary, stating a payment date, the amount of the Liquidation
            Payments and the place where said Liquidation Payments shall be
            payable, shall be given by mail, postage prepaid, not less than
            thirty (30) days prior to the payment date stated therein, to each
            holder of record of shares of Series A Stock at his post office
            addresses as shown by the records of the Corporation.

                  (d) FRACTIONAL SHARES. The Liquidation Payments with respect
            to each outstanding fractional share of Series A Stock shall be
            equal to a ratably proportionate amount of the Liquidation Payments
            with respect to each outstanding share of Series A Stock.

            5. CONVERSION. The holders of shares of Series A Stock shall have
      the following conversion rights:

                  (a) CONVERSION. Subject to the limitations set forth below,
            each share of the Series A Stock shall be convertible at any time
            after the First Conversion Date in whole but not in part, unless
            previously redeemed, at the option of the holder of record thereof,
            into the number of fully paid and nonassessable shares of Common
            Stock equal to the quotient obtained by dividing (i) the quotient
            obtained by dividing (A) the aggregate Liquidation Payments of the
            shares of Series A Stock being converted by (B) the Conversion Price
            by (ii) four (4), upon surrender to the Corporation or its transfer
            agent of the certificate or certificates representing the Series A
            Stock to be converted, as provided below, or if the holder notifies
            the Corporation or its transfer agent that such certificate or
            certificates have been lost, stolen or destroyed, upon the execution
            and delivery of an agreement satisfactory to the Corporation to
            indemnify the Corporation from any losses incurred by it in
            connection therewith. The conversion rights herein provided shall be
            apportioned ratably among the holders of the Series A Stock in
            proportion to the number of shares of Series A Stock owned by such
            holders.

                  (b) CONVERTED SHARES. Any shares of Series A Stock which have
            been converted shall be cancelled and all dividends on converted
            shares of Series A Stock shall cease to accrue and the certificates
            representing shares of Series A Stock so converted shall represent
            the right to receive such number of shares of Common Stock into
            which such shares of Series A Stock are convertible. The Board shall
            at all times, so long as any shares of Series A Stock remain
            outstanding, reserve a sufficient number of authorized but unissued
            shares of Common Stock to be issued in satisfaction of the
            conversion rights and privileges aforesaid.

                                       4
<PAGE>

                  (c) MECHANICS OF CONVERSION. In the case of a conversion,
            before any holder of Series A Stock shall be entitled to convert the
            same into shares of Common Stock, it shall surrender the certificate
            or certificates therefor, duly endorsed, at the office of the
            Corporation or its transfer agent for the Series A Stock, and shall
            give written notice to the Corporation of the election to convert
            the same and shall state therein the name or names in which the
            certificate of certificates for shares of Common Stock are to be
            issued. The Corporation shall, as soon as practicable thereafter and
            in any case within ten (10) business days of the Corporation's
            receipt of the notice of conversion, issue and deliver at such
            office to such holder of Series A Stock, or to the nominee or
            nominees of such holder, a certificate or certificates for the
            number of shares of Common Stock to which such holder shall be
            entitled as aforesaid; provided that such holder or nominee(s), as
            the case may be, shall be deemed to be the owner of record of such
            Common Stock as of the date that written notice is given to the
            Corporation of such holder's properly completed and executed
            election to convert and the surrender of the certificates
            representing the Series A Stock being converted, duly endorsed, at
            the office of the Corporation or its transfer agent (or an
            indemnification agreement as set forth in Section 5(a) hereof in
            case such certificates have been lost, stolen or destroyed). A
            certificate or certificates will be issued for the remaining shares
            of Series A Stock in any case in which fewer than all of the shares
            of Series A Stock represented by a certificate are converted.

                  (d) ISSUE TAXES. The Corporation shall pay all issue taxes, if
            any, incurred in respect of the issue of shares of Common Stock on
            conversion. If a holder of shares surrendered for conversion
            specifies that the shares of Common Stock to be issued on conversion
            are to be issued in a name or names other than the name or names in
            which such surrendered shares stand, then the Corporation shall not
            be required to pay any transfer or other taxes incurred by reason of
            the issuance of such shares of Common Stock to the name of another,
            and if the appropriate transfer taxes shall not have been paid to
            the Corporation or the transfer agent for the Series A Stock at the
            time of surrender of the shares involved, the shares of Common Stock
            issued upon conversion thereof may be registered in the name or
            names in which the surrendered shares were registered, despite the
            instructions to the contrary.

                  (e) VALID ISSUANCE. All shares of Common Stock which may be
            issued in connection with the conversion provisions set forth herein
            will, upon issuance by the Corporation, be validly issued, fully
            paid and nonassessable, free from preemptive rights and free from
            all taxes, liens or charges with respect thereto created or imposed
            by the Corporation.

                                       5
<PAGE>

            6. ADJUSTMENT OF CONVERSION PRICE. The number and kind of securities
      issuable upon the conversion of the Series A Stock and the Conversion
      Price shall be subject to adjustment from time to time in accordance with
      the following provisions:

                  (a) REORGANIZATION, RECLASSIFICATION. In the event of a
            reorganization, share exchange, sale, conveyance, or
            reclassification, in a transaction or series of related
            transactions, including where there is a shift in more than fifty
            percent (50%) of the voting power of the Corporation ("Change of
            Control") other than a change in par value, or from par value to no
            par value, or from no par value to par value or a transaction
            described in Section 6(b) below, each share of Series A Stock shall,
            after such reorganization, share exchange or reclassification, be
            convertible at the option of the holder into the kind and number of
            shares of stock and/or other securities, cash or other property
            which the holder of such share of Series A Stock would have been
            entitled to receive if the holder had held the Common Stock issuable
            upon conversion of such share of Series A Stock immediately prior to
            such reorganization, share exchange or reclassification.

                  (b) CONSOLIDATION, MERGER. In the event of a merger or
            consolidation to which the Corporation is a party which results in a
            Change of Control, each share of Series A Stock shall, after such
            merger or consolidation, be convertible at the option of the holder
            into the kind and number of shares of stock and/or other securities,
            cash or other property which the holder of such share of Series A
            Stock would have been entitled to receive if the holder had held the
            Common Stock issuable upon conversion of such share of Series A
            Stock immediately prior to such consolidation or merger.

            7. VOTING RIGHTS. The holders of the Series A Stock shall have the
      same voting rights as the holders of the Common Stock. In addition, the
      holders of shares of Series A Stock shall vote as a separate class on all
      matters adversely affecting the Series A Stock. The authorization or
      issuance of additional Common Stock, or other securities having
      liquidation, dividend, voting or other rights junior to the Series A shall
      not be deemed to adversely affect the Series A Stock. In addition to the
      other voting rights of the holders of the Series A Stock specified herein,
      for so long as any shares of Series A Stock are outstanding, the
      Corporation will not, and it will cause its subsidiaries not to, without
      the affirmative vote, or the written consent pursuant to the Delaware
      Business Corporation Act, of the holders of a majority of the outstanding
      shares of Series A Stock to amend, waive or repeal any provisions of, or
      add any provision to, (i) this Certificate or (ii) any provision of the
      Certificate of Incorporation or Bylaws of the Corporation or any other
      certificate of designation filed with the Secretary of State of Delaware
      by the Corporation in a manner that would adversely effect or impair the
      rights of the holders of the Series A Stock.

                                       6
<PAGE>

            8. DIVIDENDS.

                  The holders of the Series A Stock shall not be entitled to
            receive payment of cash dividends on shares thereof.

            9. REDEMPTION OR RETIREMENT OF PREFERRED STOCK.

                  (a) The Corporation shall have the right at any time to
            purchase all or any part of its Series A Stock issued and
            outstanding by paying to the respective holders thereof the sum of
            twenty-five cents ($0.25) for each share of such stock redeemed.

                  (b) Notwithstanding Section 9(c) below, the Corporation shall
            apply toward the purchase or redemption of the Series A Stock as
            herein provided any funds it has paid as license fees to Kino
            Communications, L.L.C., an Arizona limited liability company, under
            that certain License Agreement dated as of December 5, 2005.

                  (c) The Corporation may apply toward the purchase or
            redemption of the Series A Stock as herein provided any part of its
            surplus funds or an amount of its stated capital which shall not be
            greater than the stated capital represented by the shares purchased
            or redeemed, but under no circumstances shall the Corporation apply
            any other funds or any further part of its stated capital toward the
            purchase or redemption of such stock. The purchase or redemption of
            any such stock shall not be made where the effect of any such
            purchase or redemption and application of stated capital thereto
            shall be to reduce the net assets of the Corporation below the
            stated capital remaining after giving effect to the cancellation of
            such shares, or if the Corporation is insolvent or would thereby be
            made insolvent, or where the effect of any such purchase or
            redemption and application of stated capital thereto shall be to
            conflict with, or constitute a breach or default under any provision
            of any agreement, contract, commitment or instrument to which the
            Corporation is a party.

                  (d) The Board of Directors of the Corporation shall have full
            power and discretion to select from the outstanding Preferred Stock
            of the Corporation particular shares for redemption or purchase, and
            its proceedings in this connection shall not be subject to attack
            except for actual and intentional fraud. In all instances, the Board
            shall have complete authority to determine upon and take the
            necessary proceedings fully to effect the purchase or redemption of
            the shares selected for redemption, and the cancellation of the
            certificates representing such shares. Upon the completion of such
            proceedings, the rights of holders of the shares of such Preferred
            Stock which have been redeemed and called in shall in all respects
            cease, except that such holders, in the case of Section 9(c) above,
            shall be entitled to receive the redemption price for their
            respective shares.

                                       7
<PAGE>

                  (e) Whenever any shares such preferred stock of the
            Corporation are purchased or redeemed as herein authorized, the
            Corporation may, by resolution of its Board of Directors, retire
            such shares, and thereupon this Corporation shall, in connection
            with the retirement of such shares, cause to be filed a certificate
            of reduction of stated capital.

            10. FUTURE PREFERRED STOCK ISSUES. The Corporation may issue one or
      more additional Series of Preferred Stock without the consent of the
      holders of the Series A Stock, provided, however, that the rights and
      preferences of such subsequent series of preferred stock as to
      liquidation, dividends, voting, redemption, and registration rights shall
      not be superior (but may be pari passu) to those of the Series A Stock.

IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Designations as of this 27th day of February, 2006, and affirms that this
Certificate of Designations is his act and deed and that the statements
contained herein are true under penalties of perjury.

MODAVOX, INC.

BY: /s/ Robert D. Arkin
    ---------------------------
        Robert D. Arkin
        Chairman

NOTICE OF CONVERSION

      (To be Executed by the Registered Holder
      in order to Convert the Series A Preferred Stock)

The undersigned hereby irrevocably elects to convert ____________ shares of
Series A Preferred Stock (the "CONVERSION"), represented by stock certificate
Nos(s). ___________ (the "PREFERRED STOCK CERTIFICATES"), into shares of common
stock ("COMMON STOCK") of MODAVOX, INCORPORATED (the "CORPORATION") according to
the conditions of the Certificate of Designations, Preferences and Rights of
Series A Convertible Preferred Stock (the "CERTIFICATE OF DESIGNATION"), as of
the date written below. If securities are to be issued in the name of a person
other than the undersigned, the undersigned will pay all transfer taxes payable
with respect thereto. No fee will be charged to the holder for any conversion,
except for transfer taxes, if any. A copy of each Preferred Stock Certificate is
attached hereto (or evidence of loss, theft or destruction thereof).

                                       8
<PAGE>

The Corporation shall electronically transmit the Common Stock issuable pursuant
to this Notice of Conversion to the account of the undersigned or its nominee
(which is _________________) with DTC through its Deposit Withdrawal Agent
Commission System ("DTC TRANSFER").

The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable to the undersigned upon conversion of the
Series A Preferred Stock shall be made pursuant to registration of the Common
Stock under the Securities Act of 1933, as amended (the "ACT"), or pursuant to
an exemption from registration under the Act.

In lieu of receiving the shares of Common Stock issuable pursuant to this Notice
of Conversion by way of DTC Transfer, the undersigned hereby requests that the
Corporation issue and deliver to the undersigned physical certificates
representing such shares of Common Stock.

Date of Conversion:
                    -------------------------------

Applicable Conversion Price:
                             ----------------------

Number of Shares of Common

Stock to be Issued:
                    -------------------------------

Signature:
           ----------------------------------------

Name:
      ---------------------------------------------

Address:
         ------------------------------------------

                                       9

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