Document:

exv10w1

 

EXECUTION VERSION

STOCK PURCHASE AGREEMENT

BY AND BETWEEN

CATALYTICA ENERGY SYSTEMS, INC.,

ACORN FACTOR, INC.

COALOGIX INC.

AND WITH RESPECT TO ARTICLE 11 ONLY

RENEGY HOLDINGS, INC.

DATED NOVEMBER 7, 2007

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page	 
	ARTICLE 1 DEFINITIONS
	 	 	2	 
	1.1 Certain Definitions
	 	 	2	 
	1.2 Other Definitions
	 	 	4	 
	 
	 	 	 	 
	ARTICLE 2 SALE AND TRANSFER OF SHARES; CLOSING
	 	 	6	 
	2.1 Purchase and Sale of Shares
	 	 	6	 
	2.2 Assumption of Liabilities
	 	 	6	 
	2.3 Consideration for the Shares
	 	 	7	 
	2.4 Further Assurances
	 	 	9	 
	2.5 Closing
	 	 	9	 
	2.6 Closing Obligations
	 	 	9	 
	 
	 	 	 	 
	ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER CONCERNING THE BUSINESS
	 	 	10	 
	3.1
Qualification; Organization; Subsidiaries, etc.
	 	 	10	 
	3.2 Capital Structure
	 	 	11	 
	3.3 Business Financial Statements
	 	 	12	 
	3.4 No Undisclosed Liabilities
	 	 	12	 
	3.5 Compliance with Law; Permits
	 	 	12	 
	3.6 Environmental Laws and Regulations
	 	 	13	 
	3.7 Employee Benefit Plans
	 	 	14	 
	3.8 Absence of Certain Changes or Events
	 	 	17	 
	3.9 Investigations; Litigation
	 	 	18	 
	3.10 Tax Matters
	 	 	18	 
	3.11 Labor Matters
	 	 	19	 
	3.12 Intellectual Property
	 	 	19	 
	3.13 Real Property
	 	 	21	 
	3.14 Title to Assets
	 	 	22	 
	3.15 Material Contracts
	 	 	22	 
	3.16 Insurance
	 	 	23	 
	3.17 Equipment and Other Tangible Property
	 	 	23	 
	3.18 Suppliers and Customers
	 	 	23	 
	3.19 Absence of Certain Business Practices
	 	 	24	 
	3.20 Transactions with Affiliates
	 	 	24	 
	3.21 No Other Assets
	 	 	24	 
	3.22 No Business Material Adverse Effect
	 	 	24	 
	 
	 	 	 	 
	ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF SELLER CONCERNING ITSELF
	 	 	25	 
	4.1 Organization
	 	 	25	 
	4.2 Corporate Authority Relative to this Agreement; No Violation
	 	 	25	 

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TABLE OF CONTENTS
(Continued)

	 	 	 	 	 
	 	 	Page	 
	4.3 Finders or Brokers
	 	 	27	 
	4.4 No Additional Representations
	 	 	26	 
	4.5 Financial Statements Included in SEC Filings
	 	 	26	 
	 
	 	 	 	 
	ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER
	 	 	26	 
	5.1 Organization
	 	 	27	 
	5.2 Corporate Authority Relative to this Agreement; No Violation
	 	 	27	 
	5.3 Investigations; Litigation
	 	 	28	 
	5.4 Finders or Brokers
	 	 	28	 
	5.5 Investment Intent
	 	 	28	 
	5.6 Solvency
	 	 	28	 
	5.7 Financing
	 	 	29	 
	5.8 Operations of Buyer
	 	 	29	 
	 
	 	 	 	 
	ARTICLE 6 COVENANTS
	 	 	29	 
	6.1 Confidentiality
	 	 	29	 
	6.2 Tax Matters
	 	 	29	 
	6.3 Public Announcements
	 	 	31	 
	6.4 Transaction Costs
	 	 	31	 
	6.5 Retention of and Access to Records
	 	 	31	 
	6.6 Payments
	 	 	32	 
	6.7 Cooperation in Post-Closing Litigation
	 	 	32	 
	6.8 Cooperation as to Financial Statements
	 	 	32	 
	6.9 Return of Excluded Assets
	 	 	32	 
	 
	 	 	 	 
	ARTICLE 7 EMPLOYMENT MATTERS
	 	 	33	 
	7.1 Employees
	 	 	33	 
	7.2 Welfare Plans
	 	 	33	 
	7.3 Severance
	 	 	34	 
	7.4 Savings Plans
	 	 	34	 
	7.5 Post-Retirement Benefit Liabilities
	 	 	34	 
	7.6 Long Term Disability
	 	 	34	 
	7.7 Life Insurance
	 	 	34	 
	7.8 Vacation
	 	 	35	 
	7.9 Cooperation
	 	 	35	 
	7.10 Post-Closing Date Participation
	 	 	35	 
	7.11 General
	 	 	35	 
	 
	 	 	 	 
	ARTICLE 8 INDEMNIFICATION; REMEDIES
	 	 	35	 
	8.1 Survival
	 	 	35	 
	8.2 Indemnification by Parent and Buyer
	 	 	36	 
	8.3 Indemnification by Seller
	 	 	36	 

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TABLE OF CONTENTS
(Continued)

	 	 	 	 	 
	 	 	Page	 
	8.4 Notice of Claims
	 	 	36	 
	8.5 Procedure for Indemnification; Third Party Claims; Arbitration
	 	 	36	 
	8.6 Limitations on Indemnification
	 	 	38	 
	8.7 Exclusive Remedy
	 	 	39	 
	 
	 	 	 	 
	ARTICLE 9 GENERAL PROVISIONS
	 	 	40	 
	9.1 Notices
	 	 	40	 
	9.2 Certain Definitions
	 	 	41	 
	9.3 Interpretation
	 	 	42	 
	9.4 Counterparts
	 	 	42	 
	9.5 Entire Agreement; Third-Party Beneficiaries
	 	 	42	 
	9.6 Governing Law
	 	 	42	 
	9.7 Assignment
	 	 	42	 
	9.8 Nondisclosure
	 	 	42	 
	9.9 Amendments; Waiver
	 	 	42	 
	9.10 Enforcement
	 	 	43	 
	9.11 Severability
	 	 	43	 
	 
	 	 	 	 
	ARTICLE 10 GUARANTEE OF BUYER’S OBLIGATIONS
	 	 	43	 
	10.1 Guaranty
	 	 	43	 
	10.2 Guaranty Absolute
	 	 	43	 
	10.3 Obligations Several
	 	 	44	 
	10.4 Obligations Continuing
	 	 	44	 
	10.5 Enforcement of Guaranty
	 	 	45	 
	10.6 Waiver
	 	 	45	 
	10.7 Expenses
	 	 	45	 
	10.8 Benefit of Guaranty
	 	 	46	 
	10.9 Reinstatement
	 	 	46	 
	10.10 Continuing Guaranty
	 	 	46	 
	10.11 Effective Date and Term of Guaranty
	 	 	46	 
	 
	 	 	 	 
	ARTICLE 11 GUARANTEE OF SELLER’S OBLIGATIONS
	 	 	46	 
	11.1 Guaranty
	 	 	46	 
	11.2 Guaranty Absolute
	 	 	46	 
	11.3 Obligations Several
	 	 	47	 
	11.4 Obligations Continuing
	 	 	47	 
	11.5 Enforcement of Guaranty
	 	 	48	 
	11.6 Waiver
	 	 	48	 
	11.7 Expenses
	 	 	48	 
	11.8 Benefit of Guaranty
	 	 	48	 
	11.9 Reinstatement
	 	 	49	 
	11.10 Continuing Guaranty
	 	 	49	 
	11.11 Effective Date and Term of Guaranty
	 	 	49	 

-iii-

 

EXHIBITS

	 	 	 
	EXHIBIT A

	 	Assignment and Assumption Agreement
	EXHIBIT B

	 	Opinion of Counsel to Seller
	EXHIBIT C

	 	Opinion of Counsel to Buyer

SCHEDULES

	 	 	 
	SCHEDULE A

	 	Excluded Assets
	SCHEDULE B

	 	Purchase Price Allocation
	SCHEDULE C

	 	Current Assets
	SCHEDULE D

	 	Current Liabilities
	SCHEDULE E

	 	Working Capital Example Computation

-iv-

 

STOCK PURCHASE AGREEMENT

     THIS STOCK PURCHASE AGREEMENT (this “Agreement”) is made as of November 7, 2007, by
and between Catalytica Energy Systems, Inc., a Delaware corporation (“Seller”), Acorn
Factor, Inc., a Delaware corporation (“Parent”), CoaLogix Inc., a Delaware corporation and
a subsidiary of Parent (“Buyer”) and with respect to Article 11 only, Renegy Holdings,
Inc., parent of Seller (“Renegy”).

RECITALS

     WHEREAS, Seller owns all of the issued and outstanding shares of capital stock of CESI-SCR,
Inc., a Delaware corporation and a direct wholly-owned subsidiary of Seller (“CESI-SCR”),
and CESI-Tech Technologies, Inc., a Delaware corporation and a direct wholly-owned subsidiary of
Seller (“CESI-Tech”).

     WHEREAS, CESI-SCR owns all of the issued and outstanding membership interests of SCR-Tech,
LLC, a North Carolina limited liability company and a direct wholly-owned subsidiary of CESI-SCR
(“SCR-Tech” and, collectively with CESI-SCR and CESI-Tech, the “Acquired Companies”
and each an “Acquired Company”).

     WHEREAS, the Acquired Companies are engaged in the business of cleaning and regenerating
selective catalyst reduction (“SCR”) catalyst used by coal-fired power generation
facilities to reduce nitrogen oxide emissions and providing SCR catalyst management services for
such power generation facilities (collectively, the “Business”).

     WHEREAS, Seller and/or its Subsidiaries (as defined below) are subject to certain liabilities
relating to the Business.

     WHEREAS, Seller desires to sell to Buyer, and Buyer desires to purchase from Seller, all of
the issued and outstanding shares of capital stock of CESI-SCR and CESI-Tech (the
“Shares”), and in connection therewith, Buyer has agreed to assume certain liabilities of
Seller relating to the Business, all upon the terms and subject to the conditions set forth in this
Agreement.

AGREEMENT

     NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and
for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged,
the parties hereby agree as follows.

 

 

ARTICLE 1

DEFINITIONS

     1.1 Certain Definitions.  For purposes of this Agreement, the following terms have the
meanings specified or referred to in this Section 1.1:

     “Ancillary Agreement” — the Assignment and Assumption Agreement.

     “assets” — all properties, assets, rights (contractual or otherwise) and claims,
whether personal, tangible or intangible.

     “Business Intellectual Property” — all Intellectual Property owned by the Acquired
Companies for use in the Business as conducted as of the date hereof.

     “Closing Date” — the date and time as of which the Closing actually takes place.

     “COBRA” — the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.

     “Contract” — any written agreement, contract, subcontract, lease, understanding,
instrument, note, option, warranty, purchase order, license, sublicense, insurance policy, benefit
plan or legally binding commitment or undertaking of any nature.

     “Excluded Assets” — the assets of the Acquired Companies set forth on
Schedule A hereto.

     “Governmental Entity” — any Federal, state or local government or any court,
administrative agency, bureau, commission, department or other authority of any domestic or foreign
government or any arbitrator in any case that has jurisdiction over an applicable party or any of
its properties or assets.

     “Intellectual Property” — (a) inventions and discoveries, whether patentable or not,
invention disclosures, and all Patents; (b) Trademarks; (c) published and unpublished works of
authorship, whether copyrightable or not (including databases and other compilations of
information), copyrights therein and thereto, and registrations and applications therefor, and all
renewals, extensions, restorations and reversions thereof; (d) Trade Secrets and (e) all other
intellectual property or similar proprietary rights, including all formulas, know-how, processes,
techniques, designs, and all foreign counterparts to any of the items described in the foregoing
clauses (a) through (e).

     “IP Applications”— all applications filed with a Governmental Entity to obtain any Registered
Intellectual Property, including applications for Patents, copyright registrations or Trademark
registrations.

     “IRC” — the Internal Revenue Code of 1986, as amended from time to time, or any
successor law.

-2-

 

     “IRS” — the United States Internal Revenue Service or any successor agency, and, to
the extent relevant, the United States Department of the Treasury.

     “IT Assets” —the Acquired Companies’ computers, computer software, firmware,
middleware, servers, workstations, routers, hubs, switches, data communications lines, and all
other information technology equipment, and all associated documentation.

     “Liability” — any direct or indirect debt, obligation or liability of any kind or
nature, whether accrued or fixed, absolute or contingent, determined or determinable, matured or
unmatured, and whether due or to become due, asserted or unasserted, or known or unknown.

     “Licensed Intellectual Property” —Intellectual Property and IP Applications that the
Acquired Companies are licensed or otherwise permitted by other persons to use.

     “Patent Application” — any IP Application filed with a Governmental Entity to obtain a
Patent.

     “Patents” — patents and applications therefor, including divisions, continuations,
continuations-in-part and renewal applications, and including renewals, extensions and reissues.

     “Proceeding” — any action, inquiry, proceeding, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before any Governmental Entity.

     “Registered Intellectual Property” — any issued Patent, copyright registration,
Trademark registration or other similar Intellectual Property registration, in each case that is
issued, registered or granted by the United States Patent and Trademark Office, the United States
Copyright Office or any corresponding foreign Governmental Entity, and any application filed with
any such Governmental Entity for the purpose of obtaining such a registration.

     “Representative” — with respect to a particular person, any director, officer,
employee, agent, consultant, or other representative of such person, including legal counsel,
accountants, financial advisors and lenders.

     “SEC” — the Securities and Exchange Commission.

     “Trade Secrets” — confidential and proprietary information, trade secrets and
know-how, including processes, schematics, business methods, formulae, drawings, prototypes,
models, designs, customer lists, supplier lists, databases and other compilations of information.

     “Trademarks” — trademarks, service marks, brand names, certification marks,
collective marks, d/b/a’s, Internet domain names, logos, symbols, trade dress, assumed names,
fictitious names,
trade names, and other indicia of origin, all applications and registrations for the
foregoing, and all goodwill associated therewith and symbolized thereby, including all renewals of
the same.

-3-

 

     1.2 Other Definitions.  The following terms are defined in the Sections
indicated:

	 	 	 
	Term
	 	Section
	Acquired Companies

	 	Recitals
	Acquired Company

	 	Recitals
	Acquired Company Real Property

	 	 3.13
	Acquired Companies Registered Intellectual Property

	 	 3.12(a)
	Acquired Material Lease

	 	 3.13
	affiliates

	 	 9.2(b)
	Agreement

	 	Preamble
	Assignment and Assumption Agreement

	 	 2.6(a)(ii)
	Assumed Liabilities

	 	 2.2(b)
	Basket

	 	 8.6(a)
	Benefit Plans

	 	 3.7(a)
	Business Balance Sheet

	 	 3.3
	business day

	 	 9.2(e)
	Business Employee

	 	 3.7(a)
	Business Employees

	 	 3.7(a)
	Business Financial Statements

	 	 3.3
	Business Material Adverse Effect

	 	 3.1
	Business Material Contracts

	 	 3.15(a)
	Buyer

	 	Preamble
	Buyer Savings Plan

	 	 7.4
	Buyer Indemnified Parties

	 	 8.3
	CESI-SCR

	 	Recitals
	CESI-Tech

	 	Recitals
	Closing

	 	 2.5
	Closing Working Capital

	 	 2.3(b)(ii)
	Confidentiality Agreement

	 	 0
	control

	 	 9.2(b)
	controlled by

	 	 9.2(b)
	Controlled Group Liability

	 	 3.7(h)
	Environmental Law

	 	 3.6(b)
	ERISA

	 	 3.7(a)
	Exchange Act

	 	 3.20
	Excluded Liabilities

	 	 2.2(c)
	GAAP

	 	 3.3
	Hazardous Substance

	 	 3.6(c)
	Indemnified Party

	 	 8.4
	Indemnifying Party

	 	 8.4
	Independent Accountant

	 	 2.3(b)(iv)
	IP Applications

	 	 1.1
	IT Assets

	 	 1.1
	knowledge

	 	 9.2(d)

-4-

 

	 	 	 
	Term
	 	Section
	Law

	 	 3.5(a)
	Laws

	 	 3.5(a)
	Licensed Intellectual Property

	 	 1.1
	Lien

	 	 4.2(c)
	Losses

	 	 8.2
	Notice of Disagreement

	 	 2.3(b)(iv)
	Parent

	 	Preamble
	Patent Application

	 	 1.1
	Parent Guaranteed Obligations

	 	 10.1
	Permitted Lien

	 	 4.2(c)
	person

	 	 9.2(c)
	Pre-Closing Income Tax Return

	 	 6.2(b)
	Pre-Closing Tax Period

	 	 6.2(a)
	Property Taxes

	 	 6.2(a)
	Purchase Price

	 	 2.3(a)
	Registered Intellectual Property

	 	 1.1
	Renegy

	 	Preamble
	Renegy Guaranteed Obligations

	 	 11.1
	SCR-Tech

	 	Recitals
	SCR

	 	Recitals
	Securities Act

	 	 3.20
	Seller

	 	Preamble
	Seller Disclosure Schedules

	 	Article 3
	Seller Indemnified Parties

	 	 8.2
	Seller Permits

	 	 3.5(b)
	Seller Savings Plans

	 	 7.4
	Seller SEC Documents

	 	 3.20
	Shares

	 	Recitals
	Statement of Working Capital

	 	 2.3(b)(ii)
	Straddle Period

	 	 6.2(a)
	Subsidiaries

	 	 9.2(a)
	Survival Period

	 	 8.1
	Tax Contest

	 	 6.2(b)
	Tax Return

	 	 3.10(b)
	Taxes

	 	 3.10(b)
	Trade Secrets

	 	 1.1
	Trademarks

	 	 1.1
	Transfer Taxes

	 	 6.4
	under common control with

	 	 9.2(b)
	Working Capital

	 	 2.3(b)(i)

-5-

 

ARTICLE 2

SALE AND TRANSFER OF SHARES; CLOSING

     2.1 Purchase and Sale of Shares. Subject to the terms and conditions of this
Agreement, at the Closing, (i) Seller will sell and transfer the Shares to Buyer free and clear of
all Liens (other than restrictions imposed by applicable securities laws), and Buyer will purchase
the Shares from Seller. Notwithstanding anything herein to the contrary, Seller or any of its
Subsidiaries (including the Acquired Companies) shall be permitted to cause any or all of the
Acquired Companies to transfer to Seller (and thereby to not directly or indirectly sell or
transfer to Buyer) any Excluded Assets.

     2.2 Assumption of Liabilities. 

          (a) Assumption. Upon the terms and subject to the conditions set forth herein, at
the Closing and effective as of the Closing Date, Buyer shall assume from Seller (and therefore
agree to pay, perform and discharge), and Seller shall irrevocably convey, transfer and assign
to Buyer, all of the Assumed Liabilities. For the avoidance of doubt, and notwithstanding
anything else to the contrary herein, it is understood and agreed that Buyer shall assume all
Liabilities of the Acquired Companies by virtue of Buyer’s purchase of the Shares (including the
indirect purchase of the membership interests of SCR-Tech).

          (b) Definition of Assumed Liabilities. For all purposes of and under this
Agreement, the term “Assumed Liabilities” shall mean, refer to and include only the
following Liabilities of Seller, and only to the extent such Liabilities arise out of or relate
to the operation of the Business:

                    (i) Liabilities of Seller reflected in the Business Financial Statements and Liabilities
incurred in the ordinary course of business after the date of the Business Financial Statements in
connection with the operation of the Business (including any Liabilities related to workers
compensation for any Business Employees);

                    (ii) Liabilities for Taxes that are the responsibility of Buyer pursuant to
Section 6.2 or Section 6.4;

                    (iii) Liabilities of Seller arising out of or in connection with any Proceedings to the extent
related to the Business, whether in existence on or after the date hereof (including any
Proceedings set forth in Section 3.11 of the Seller Disclosure Schedules and any
Liabilities related to workers compensation for any Business Employees for all periods on or
after the Closing Date);

                    (iv) Liabilities of Seller for any obligation to make severance or retention payments to any
Business Employee as set forth in any employment agreement or other Contract between Seller or any
of its Subsidiaries and any such Business Employee;

-6-

 

                    (v) Liabilities of Seller for all accrued vacation and sick time of, and bonus plan payments
payable to, all Business Employees;

                    (vi) all Liabilities assumed or to be performed by Buyer pursuant to Article 7 and the
second sentence of Section 2.2(a);

                    (vii) Liabilities of Seller arising from discharges or releases of Hazardous Substances,
violations of Environmental Laws or similar matters to the extent such Liabilities are related to
the operations of the Business, any Acquired Company Real Property or any other real property
owned, leased or otherwise occupied at any time for the operation of the Business or by an Acquired
Company;

                    (viii) Liabilities under all employment agreements and other Contracts between Seller or any
of its Subsidiaries and any Business Employee, but specifically excluding any Liabilities of Seller
relating to stock options or other equity-based compensation involving any securities of Seller or
any of its Subsidiaries; and

                    (ix) Liabilities of Seller for the capitalized leases set forth in Section 2.2(b)(ix)
of the Seller Disclosure Schedules.

          (c) Definition of Excluded Liabilities. Notwithstanding anything to the contrary
set forth in this Section 2.2 or elsewhere in this Agreement, Buyer shall not assume,
and Seller agrees that Buyer shall not be liable or otherwise responsible for, the following
Liabilities of Seller (the Liabilities referred to in clauses (i) through (ii) of this
Section 2.2(c), collectively, the “Excluded Liabilities”):

                    (i) Liabilities of Seller in respect of transaction costs payable by Seller pursuant to
Section 6.4;

                    (ii) Liabilities for Taxes that are the responsibility of Seller pursuant to
Section 6.2;

                    (iii) Liabilities for inter-company notes or accounts payable owed by an Acquired Company to
Seller or any Subsidiary of Seller (other than any Acquired Company); and

                    (iv) any other Liabilities of Seller (but not the Acquired Companies), other than Assumed
Liabilities .

     2.3 Consideration for the Shares. 

          (a) Subject to the adjustments in Section 2.3(b), the aggregate consideration (the
“Purchase Price”) for the Shares will be (i) $9,600,000 in cash and (ii) the assumption
by Buyer of the Assumed Liabilities pursuant to Section 2.2. The Purchase Price shall
be allocated to the Shares as set forth on Schedule B hereto.

-7-

 

     (b) Working Capital Adjustment.

          (i) For all purposes of and under this Agreement, the term “Working Capital” shall
mean (x) the value of the current assets of the categories described on Schedule C hereto
of the Acquired Companies, minus (y) the value of the current liabilities of the categories
described on Schedule D hereto of the Acquired Companies or included in the Assumed
Liabilities; provided, however, that for purposes of determining Working Capital, the Assumed
Liabilities shall not include any costs or expenses required to be paid by Buyer pursuant to the
terms of this Agreement, including any Transfer Taxes payable by Buyer pursuant to Section
6.4.

          (ii) As promptly as practicable, but in any event within thirty (30) days following the
Closing, Buyer shall cause to be prepared and delivered to Seller a statement (the “Statement
of Working Capital”) setting forth the Working Capital as of the Closing (the “Closing
Working Capital”). The Statement of Working Capital shall include the corresponding balance
sheet and statement of income—each of which shall be prepared in accordance with GAAP (except for
the omission of notes thereto)—and consistent with the manner of preparation of the example
computation of Working Capital for September 30, 2007, attached as Schedule E hereto, and
with the past practices of Seller. Buyer will cooperate and work in good faith with Seller, and
Seller will cooperate with and assist Buyer, including through providing any reasonably requested
documentation, in the preparation of the Statement of Working Capital. Buyer will, upon Seller’s
written request, make available to Seller and its auditors a copy of all workpapers and other books
and records utilized by Buyer in the preparation of the Statement of Working Capital.

          (iii) Subject to Section 2.3(b)(iv), within thirty (30) days following delivery of the
Statement of Working Capital pursuant to Section 2.3(b)(ii), (A) Buyer shall pay to Seller
the amount, if any, that the Closing Working Capital reflected in the Statement of Working Capital
exceeds $500,000, or (B) Seller shall pay to Buyer the amount, if any, that $500,000 exceeds the
Closing Working Capital reflected in the Statement of Working Capital. Any and all payments made
pursuant to this Section 2.3(b)(iii) shall be made by wire transfer of immediately
available funds to an account designated in writing by the party to receive such payment. Any
payment made pursuant to this Section 2.3(b)(iii) shall be deemed to be an adjustment to
the Purchase Price.

          (iv) If Seller disagrees in good faith with the Statement of Working Capital, then Seller
shall notify Buyer in writing (the “Notice of Disagreement”) of such disagreement within
twenty-five (25) days following delivery of the Statement of Working Capital. If Buyer has not
received a Notice of Disagreement within such twenty-five (25)-day period, Seller shall be deemed
to have accepted the Statement of Working Capital. Any Notice of Disagreement shall set forth in
reasonable detail the adjustments Seller proposes to make to the Statement of
Working Capital and the basis therefor and shall be consistent with the provisions of
Section 2.3(b)(ii). Thereafter, Seller and Buyer shall attempt in good faith to resolve
and finally determine the amount of the Closing Working Capital. If Seller and Buyer are unable to
resolve the disagreement within thirty (30) days following delivery of the Notice of Disagreement,
then Seller and Buyer shall select a mutually acceptable, nationally recognized independent
accounting firm that does not then have a relationship with Seller or Buyer (the “Independent
Accountant”), to resolve the

-8-

 

disagreement and make a determination with respect thereto. If
Seller and Buyer are unable, within ten (10) days, to select a mutually acceptable Independent
Accountant, then each of Seller and Buyer shall select a nationally recognized independent
accounting firm that does not have a relationship with Seller or Buyer, and these two firms will
choose a nationally recognized independent accounting firm who will serve as the Independent
Accountant. The determination of the Independent Accountant to resolve the disagreement between
Seller and Buyer as to the Statement of Working Capital will be made, and written notice thereof
given to Seller and Buyer, within thirty (30) days after the selection of the Independent
Accountant. The determination by the Independent Accountant shall be final, binding and conclusive
upon Seller and Buyer, absent manifest error. The scope of the Independent Accountant’s engagement
(which will not be an audit) shall be limited to the resolution of the disputed items described in
the Notice of Disagreement, and the recalculation, if any, of the Statement of Working Capital in
light of such resolution. If an Independent Accountant is engaged pursuant to this
Section 2.3(b)(iv), the fees and expenses of the Independent Accountant shall be borne
equally by Seller and Buyer. Within ten (10) days after delivery of a notice of determination by
the Independent Accountant as described above, any payment required by Section 2.3(b)(iii)
shall be made, based on such determination.

     2.4 Further Assurances. For a period of one hundred eighty (180) days after the
Closing, and without further consideration therefor, (a) Seller shall execute and deliver such
documents and take such other actions as Buyer may reasonably request in order to more effectively
convey the Shares to Buyer and evidence the transactions contemplated by this Agreement, and
(b) Buyer shall execute and deliver such documents and take such other actions as Seller may
reasonably request (including executing such further instruments and certificates of assumption,
novation and release as Seller may reasonably request) in order to effectively make Buyer
responsible for all Assumed Liabilities and release Seller therefrom to the fullest extent
permitted under applicable Law and evidence the transactions contemplated by this Agreement.

     2.5 Closing. Except to the extent that Buyer and Seller agree on another time and
place, the purchase and sale (the “Closing”) provided for in this Agreement will take place
at the offices of Wilson Sonsini Goodrich & Rosati, Professional Corporation at 650 Page Mill Road,
Palo Alto, CA 94304, at 10:00 a.m. (local time) on the date hereof.

     2.6 Closing Obligations. At the Closing:

          (a) Seller will deliver to Buyer:

                    (i) certificates representing the Shares, duly endorsed (or accompanied by duly executed stock
or transfer powers), for transfer to Buyer;

                    (ii) a duly executed Instrument of Assignment and Assumption from Seller substantially in the
form attached hereto as Exhibit A (the “Assignment and Assumption Agreement”);

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                    (iii) an opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation, dated as of
the date of the Closing, in substantially the form attached hereto as Exhibit B;

                    (iv) a duly executed certificate of Seller that Seller is not a foreign person subject to
withholding under Section 1445 of the IRC; and

                    (v) all other instruments or documents as Buyer may reasonably request to effect the
assignment of the Shares as contemplated hereby.

          (b) Buyer will deliver to Seller:

                    (i) the Purchase Price by wire transfer in immediately available funds to the account(s)
specified by Seller;

                    (ii) an opinion of Eilenberg Krause & Paul LLP, dated as of the date of the Closing, in
substantially the form attached hereto as Exhibit C;

                    (iii) a duly executed copy of the Assignment and Assumption Agreement; and

                    (iv) duly executed copies of all other instruments and certificates of assumption, novation
and release as Seller may reasonably request in order to effectively make Buyer responsible for all
Assumed Liabilities and release Seller therefrom to the fullest extent permitted under applicable
Law.

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF SELLER CONCERNING THE BUSINESS

     Except as disclosed in the disclosure schedules delivered by Seller to Buyer concurrently with
the execution of this Agreement (it being agreed that any information set forth in one Section of
such disclosure schedules shall be deemed to apply to each other Section thereof to which its
relevance is reasonably apparent) (the “Seller Disclosure Schedules”), Seller represents
and warrants to Buyer as follows:

     3.1 Qualification; Organization; Subsidiaries, etc.  Each of the Acquired Companies is
a legal entity duly organized, validly existing and in good standing under the Laws of its
respective jurisdiction of organization and has all requisite corporate or similar power and
authority to own, lease and operate its properties and assets and to carry on its business as
presently conducted and is qualified to do business and is in good standing as a foreign
corporation in each jurisdiction where the ownership, leasing or operation of its assets or
properties or conduct of its business requires such qualification, except where the failure to be
so organized, validly existing, qualified or in good standing, or to have such power or authority,
would not have, individually or in the aggregate, a

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Business Material Adverse Effect. As used in
this Agreement, any reference to any facts, circumstances, events or changes having a “Business
Material Adverse Effect” means such facts, circumstances, events or changes that are, or would
reasonably be expected to be, materially adverse to the business, financial condition or continuing
operations of the Business taken as a whole but shall not include facts, circumstances, events or
changes (a) generally affecting the industries in which the Acquired Companies operate or the
economy or the financial or securities markets in the United States or elsewhere in the world,
including regulatory and political conditions or developments (including any outbreak or escalation
of hostilities or acts of war or terrorism) or (b) resulting from (i) the announcement or the
existence of, or compliance with, this Agreement or the transactions contemplated hereby or
(ii) changes in applicable Law, GAAP or accounting standards. No Acquired Company is in violation,
in any material respect, of any of the provisions of its respective certificate of incorporation
and by-laws or similar organizational documents. All of the outstanding shares of capital stock
of, or other equity interests in the Acquired Companies have been validly issued and are fully paid
and non-assessable, owned directly or indirectly by Seller, free and clear of all Liens, other than
restrictions imposed under securities laws, and are not subject to any restriction on the right to
vote, sell or otherwise dispose of such capital stock or other ownership interests, except for
restrictions imposed by applicable securities laws.

     3.2 Capital Structure.

          (a) All outstanding shares of capital stock or other equity interests of each Acquired
Company are duly authorized, validly issued, fully paid and non-assessable and free of
pre-emptive rights.

          (b) There are no outstanding subscriptions, options, warrants, calls, convertible
securities or other similar rights, agreements or commitments relating to the issuance of
capital stock or other equity interests to which any Acquired Company is a party obligating any
Acquired Company to (i) issue, transfer or sell any shares of capital stock or other equity
interests of such Acquired Company or securities convertible into or exchangeable for such
shares or equity interests, (ii) grant, extend or enter into any such subscription, option,
warrant, call, convertible securities or other similar right, agreement, arrangement or
commitment to repurchase, (iii) redeem or otherwise acquire any such shares of capital stock or
other equity interests, or (iv) provide funds to, or make any investment (in the form of a loan,
capital contribution or otherwise) in, any of its Subsidiaries. There are no outstanding or
authorized
stock appreciation, phantom stock, profit participation or other similar stock or other
equity-based rights of any Acquired Company.

          (c) No Acquired Company has any outstanding bonds, debentures, notes or other obligations,
the holders of which have the right to vote (or which are convertible into or exercisable for
securities having the right to vote) with the stockholders or other equity holders of such
Acquired Company on any matter.

          (d) There are no voting trusts or other agreements or understandings to which any Acquired
Company is a party with respect to the voting of the capital stock or other equity interests of
such Acquired Company.

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          (e) The copies of the certificate of incorporation and by-laws or similar organizational
documents of each of the Acquired Companies, as the case may be, made available to Buyer are
true, accurate, and complete copies thereof and reflect all amendments made through the date of
this Agreement. The stock and minute books of the Acquired Companies made available to Buyer
for review were correct and complete in all material respects as of the date they were so made
available, no further entries have been made through the date of this Agreement, and such minute
books contain an accurate record of all stockholder, member and entity actions of the
stockholders, members and directors (and any committees thereof) of the Acquired Companies taken
by written consent or at a meeting since January 1, 2005 and through the date hereof. All
corporate or entity actions taken by the Acquired Companies have been duly authorized or
ratified to the extent required by applicable Law.

          (f) CESI-SCR does not have any Subsidiaries other than SCR-Tech and neither CESI-Tech nor
SCR-Tech has any Subsidiaries.

     3.3 Business Financial Statements. Attached to Section 3.3 of the Seller
Disclosure Schedules is a true, correct and complete copy of the unaudited statement of assets and
liabilities of the Business as of September 30, 2007 (the “Business Balance Sheet”), and
the related unaudited statements of revenues and expenses for the nine (9)-month period then ended
(collectively with the Business Balance Sheet, the “Business Financial Statements”). The
Business Financial Statements are derived from the books and records of the Acquired Companies,
were prepared in accordance with United States generally accepted accounting principles
(“GAAP”) (except that they do not include the notes to the Business Financial Statements
required under GAAP) and fairly present, in all material respects, the assets and the liabilities
of the Acquired Companies as of the dates thereof, and the results of operations of the Acquired
Companies for the periods then ended.

     3.4 No Undisclosed Liabilities. Except (a) as reflected or reserved against in the
Business Balance Sheet (or the notes thereto), (b) for liabilities permitted by or incurred
pursuant to this Agreement, (c) for liabilities and obligations incurred in the ordinary course of
business consistent with past practice since the date of
the Business Balance Sheet, (d) for liabilities and obligations for pension liabilities and
insurance reserves, including in connection with workers compensation, and (e) for liabilities or
obligations which have been discharged or paid in full in the ordinary course of business, none of
the Acquired Companies has any liabilities or obligations, of any nature, in each case, whether or
not accrued, contingent or otherwise, that would be required by GAAP to be reflected on a
consolidated balance sheet of the Business (or in the notes thereto). The Business Financial
Statements and Section 3.3 of the Seller Disclosure Schedules specifically identify and set
forth those liabilities of Seller currently known to Seller that are to become Assumed Liabilities
at the Closing. Any inter-company promissory notes or accounts payable previously owed by the
Acquired Companies to Seller or to any of its Subsidiaries (other than the Acquired Companies) have
been converted to contributed capital.

     3.5 Compliance with Law; Permits.

          (a) Each Acquired Company is in compliance in all material respects with and is not in
default in any material respect under or in violation in any material respect of any

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applicable
federal, state, local or foreign constitution, law, statute, ordinance, rule, regulation,
judgment, order, injunction, decree or agency requirement issued, enacted, adopted, promulgated,
implemented or otherwise put into effect by or under the authority of any Governmental Entity
(collectively, “Laws” and each, a “Law”). None of the Acquired Companies has
received or entered into any citations, complaints, consent orders, compliance schedules, or
other similar enforcement orders relating to any noncompliance of any of the Acquired Companies
with any Laws. None of the Acquired Companies has received any written notice from any
Governmental Entity that any of them is not currently compliance with any Laws. Without limiting
the generality of the foregoing, neither Seller nor any of the Acquired Companies has received
written notice of any claim, action, suit, investigation or proceeding, or to the knowledge of
Seller, is aware of any threatened claim, action, suit, investigation or proceeding, that would
be reasonably likely to result in a finding that Seller or any of the Acquired Companies is not
or has not been in compliance in all material respects with Laws, with respect to the Business,
relating to (a) the development, testing, manufacture, packaging, distribution and marketing of
products by the Business, (b) employment, safety and health, (c) building, zoning and land use
and/or (d) the Foreign Corrupt Practices Act and the rules and regulations promulgated
thereunder.

          (b) Each Acquired Company is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exceptions, consents, certificates, approvals and
orders of any Governmental Entity necessary for the Acquired Companies to own, lease and operate
their properties and assets or to carry on the Business as it is now being conducted (the
“Seller Permits”), except where the failure to have any of the Seller Permits would not
have, individually or in the aggregate, a material adverse effect on the Business. Each
Acquired Company has complied in all material respects with all terms and conditions of the
Seller Permits, and all Seller Permits are in full force and effect in all material respects.

     3.6 Environmental Laws and Regulations.

          (a) Except as would not, individually or in the aggregate, result in a material adverse
effect on the Business, (i) Seller (with respect to the Business) and the Acquired Companies are
in compliance with all applicable Environmental Laws, (ii)  no Hazardous Substance (as defined
below) is present at, in, on, under or about any of the properties currently owned or leased by
any of the Acquired Companies in amounts exceeding the levels permitted by applicable
Environmental Laws and for which any Acquired Company would reasonably be expected to be liable,
(iii)  since the date of the Business Balance Sheet none of Seller or any of its Subsidiaries
(including the Acquired Companies) have received any written notices, demand letters or requests
for information from any person, including any Governmental Entity alleging that Seller (with
respect to the Business) or the Acquired Companies may be in violation of, or liable under, any
Environmental Law as it pertains to the operation of the Business and neither the Acquired
Companies nor, with respect to the Business, Seller are the subject of any outstanding written
notices, demand letters or requests for information from any person, including any Governmental
Entity alleging that Seller or any of its Subsidiaries may be in violation of, or liable under,
any Environmental Law as it pertains to the operation of the

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Business, and (iv) neither Seller
(with respect to the Business) nor any Acquired Company is the subject of any suit, settlement,
court order, administrative order, judgment or written claim asserted or arising under any
Environmental Law.

          (b) As used herein, “Environmental Law” means any applicable Law relating to
(x) the protection, preservation or restoration of the environment (including air, water vapor,
surface water, groundwater, drinking water supply, surface land, subsurface land, plant and
animal life or any other natural resource), or (y) the exposure to (including employee exposure
to), or the use, storage, recycling, treatment, generation, transportation, processing,
handling, labeling, production, release or disposal of Hazardous Substances, in each case as in
effect at the date hereof. It is agreed and understood that no representation or warranty is
made in respect of environmental matters in any Section of this Agreement other than this
Section 3.6.

          (c) As used herein, “Hazardous Substance” means any material, substance or waste
listed, defined, designated or classified as hazardous, toxic, radioactive, or dangerous, a
pollutant or contaminant or otherwise regulated, by any Governmental Entity, including any
petroleum or any derivative or byproduct thereof, radon, radioactive material, friable asbestos,
urea formaldehyde or polychlorinated biphenyls.

     3.7 Employee Benefit Plans.

          (a) Section 3.7(a) of the Seller Disclosure Schedules lists all Benefit Plans.
“Benefit Plans” means all plans, programs, policies, agreements or other arrangements,
whether or not “employee benefit plans” (within the meaning of Section 3(3) of the Employee
Retirement
Income Security Act of 1974, as amended (“ERISA”), whether or not subject to
ERISA), providing for all payroll practices, including employment, consulting or other
compensation agreement, or bonus or other incentive compensation, stock purchase, equity or
equity-based compensation, deferred compensation, change in control, sick leave, loan, salary
continuation, educational assistance, health, medical, dental, disability, accident or life
insurance benefits, vacation, severance, retirement, pension or savings benefits, plans,
policies, agreements or arrangements that are sponsored, maintained or contributed to by Seller
or any of its affiliates for the benefit of current or former employees, directors or
consultants of any Acquired Company (with respect to their relationship to the Business) (each a
“Business Employee” and collectively, the “Business Employees”).

          (b) Other than as disclosed on Section 3.7(a) of the Seller Disclosure Schedules,
neither Seller nor any Acquired Company has any commitment to establish any new Benefit Plan
(except to the extent required by Law or to conform any such Benefit Plan to the requirements of
any applicable Law, as required by this Agreement) or to modify any Benefit Plan for the benefit
of the Business Employees.

          (c) Seller has made available to Buyer correct and complete copies of:

                    (i) each Benefit Plan;

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                    (ii) the most recent annual report (Form Series 5500 and all schedules and financial
statements attached thereto), if any, required under ERISA or the IRC in connection with each
Benefit Plan;

                    (iii) the most recent summary plan description together with the summary(ies) of material
modifications thereto, if any, required under ERISA with respect to each Benefit Plan; and

                    (iv) any IRS determination letters relating to each Benefit Plan.

          (d) Each Benefit Plan has been maintained and administered in material compliance with its
terms and with applicable Law, statutes, orders, and rules and regulations, including but not
limited to ERISA and the IRC to the extent applicable thereto.

          (e) Any Benefit Plan intended to be qualified under Section 401(a) of the IRC and each
trust intended to qualify under Section 501(a) of the IRC:

                    (i) has either applied for, prior to the expiration of the requisite period under applicable
Treasury Regulations or IRS pronouncements, or obtained a favorable determination, notification,
advisory and/or opinion letter, as applicable, as to its qualified status from the IRS or still has
a remaining period of time under applicable Treasury Regulations or IRS pronouncements in which to
apply for such letter and to make any amendments necessary to obtain a favorable determination;

                    (ii) incorporates or has been amended to incorporate all provisions required to comply with
the Tax Reform Act of 1986 and subsequent legislation; and

                    (iii) has, to the knowledge of the Seller, had no event, condition or circumstance that has
adversely affected or is likely to adversely affect such qualified status.

          (f) Except as set forth in Section 3.7(f) of the Seller Disclosure Schedules, no
Benefit Plan provides, reflects or represents any liability to provide post-termination or
retiree welfare benefits to any person for any reason, except as may be required by COBRA or
other applicable statute, and neither Seller nor any Acquired Company has made a binding
commitment to provide to any Business Employee (either individually or to Business Employees as
a group) with post-termination or retiree welfare benefits, except to the extent required by
COBRA or other applicable statute.

          (g) No Benefit Plan is subject to Title IV or Section 302 of ERISA or Section 412 or
Section 4971 of the IRC.

          (h) There does not exist any Controlled Group Liability (as defined below) that would be a
liability of Seller or any of its Subsidiaries, including any Acquired Company (or constitute an
Assumed Liability), at the time of or following the Closing. “Controlled Group
Liability” means liabilities (i) under Title IV of ERISA, (ii) under Section 302 of ERISA,

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(iii) under Sections 412 and Section 4971 of the IRC or (iv) as a result of a failure to comply
with the continuation coverage requirements of Section 601 et seq. of ERISA and Section 4980B of
the IRC, other than such liabilities that arise solely out of, or relate solely to, the Benefit
Plans which are disclosed in Section 3.7(a) of the Seller Disclosure Schedules.

          (i) The consummation of the transactions contemplated by this Agreement will not:

                    (i) entitle any Business Employee to severance pay, unemployment compensation or any other
payment, except as expressly provided in this Agreement or as required by applicable Law, or

                    (ii) accelerate the time of payment or vesting, or increase the amount of compensation due any
such Business Employee, except as expressly provided in this Agreement.

          (j) Seller is in good faith compliance with the requirements of Section 409A of the IRC
with respect to all “nonqualified deferred compensation plans” (as defined in Section 409A of
the IRC) maintained by Seller or any Acquired Company to which any Acquired Company or any
Business Employee is a party.

          (k) Neither Seller nor any Subsidiary (including, but not limited to any Acquired Company)
has ever contributed or been obligated to contribute to any “multiemployer plan” (within the
meaning of Section 3(37) of the IRC).

          (l) Seller and each Acquired Company have timely made all payments and contributions due
from them through the Closing with respect to each Benefit Plan and no payments or contributions
are owed by either the Seller or any Acquired Company with respect to any Benefit Plan for all
periods ending on or before the Closing.

          (m) Neither Seller nor any Acquired Company has incurred or reasonably expects to incur any
complete or partial withdrawal liability with respect to any “multiemployer plan” (within the
meaning of Section 3(37) of the IRC).

          (n) Neither Seller nor any Acquired Company maintains any welfare benefit fund within the
meaning of the Section 419 of the IRC with respect to any Business Employees.

          (o) Except as set forth in Section 3.7(o) of the Seller Disclosure Schedules, the
Business Balance Sheet properly and adequately reflects any and all liabilities and obligations
of Seller and each Acquired Company relating to any period ending on or prior to the Closing in
respect of all Business Employees, for (a) unpaid compensation, salaries, wages, disability
payments and other payroll items (including, without limitation, bonus, incentive or deferred
compensation, vacation or other paid leave), (b) unpaid contributions, costs and expenses to or
in respect of any Benefit Plan, (c) severance or other termination benefits relating to,
resulting from or arising in respect of any termination of employment occurring on or prior to

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the Closing, and (d) any Assumed Liabilities relating to Business Employees not otherwise
specified herein.

          (p) There is no contract, Benefit Plan or arrangement covering any Business Employee that,
individually or collectively, could give rise to the payment of any amount that would not be
deductible pursuant to the terms of Section 280G of the IRC.

     3.8 Absence of Certain Changes or Events. Since the date of the Business Balance
Sheet, through the date of this Agreement, except as otherwise contemplated, required or permitted
by this Agreement, the Business has been conducted, in all material respects, in the ordinary
course of business consistent with past practice and there has not been (i) any event, development
or state of circumstances that has had, individually or in the aggregate, a Business Material
Adverse Effect, (ii) any non-cash distribution or dividend made by any Acquired Company, (iii) any
repurchase of equity securities by any Acquired Company, (iv) any split, combination or
reclassification of any of the Acquired Companies’ capital stock or other equity interests, (v) any
material change in accounting methods, principles or practices of any Acquired Company or, with
respect to the Business, Seller, (vi) any acquisition by any Acquired Company of, or agreement by
any Acquired Company to, acquire, any business or corporation, partnership, association or other
business organization or division thereof, (vii) any sale, lease, license, encumbrance (other than
a Permitted Lien) or other disposition of any properties or assets of any Acquired Company, except
the sale, lease, license, encumbrance or disposition of property or assets in the ordinary course
of business consistent with past practice, (viii) any damage, destruction or loss, whether or not
covered by insurance, with respect to the properties or assets of any Acquired Company having a
replacement cost of more than $50,000, (ix) entry by an Acquired Company into
any employment, deferred compensation, severance or similar agreement (or amendment to any
such agreement) with any Business Employee, or any agreement with any Business Employee to increase
the compensation payable by it to any such Business Employee or to increase the coverage or
benefits available under any severance pay, termination pay, vacation pay, salary continuation for
disability, sick leave, deferred compensation, bonus or other incentive compensation, insurance,
pension or other employee benefit plan made to, for or with such Business Employees other than, in
each case, in the ordinary course of business consistent with past practice, (x) any election by
Seller relating to Taxes in respect of the Acquired Companies or settlement or compromise of any
claim relating to Taxes in respect of the Acquired Companies, (xi) entry into, amendment or
termination of any material agreement to which an Acquired Company is a party or by which it is
bound; (xii) any material change, whether written or oral, to any agreement or understanding with
any of the Acquired Companies’ material suppliers or customers; (xiii) any acceleration or delay in
collection of any notes or accounts receivable of the Acquired Companies in advance of or beyond
their regular due dates or the dates when they would have been collected in the ordinary course of
business consistent with past practices; (xiv) any delay or accelerated payment of any accrued
expense, trade payable or other liability of the Acquired Companies beyond or in advance of its due
date or the date when such liability would have been paid in the ordinary course of business
consistent with past practices; or (xv) any settlement of any claim or litigation, or filing of any
motions, orders, briefs or settlement agreements in any proceeding involving the Acquired Companies
before any Governmental Entity or any arbitrator.

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     3.9 Investigations; Litigation. As of the date hereof, there are no actions, suits,
claims, investigations or proceedings pending or, to the knowledge of Seller, threatened against
any of the Acquired Companies or Seller (with respect to the Business) at law or in equity before
any Governmental Entity or arbitrator, and there are no orders, judgments or decrees affecting the
Acquired Companies or the Business issued by any Governmental Entity or arbitrator. To the
knowledge of Seller, there is no investigation or review pending by any Governmental Entity with
respect to the Acquired Companies or the Business.

     3.10 Tax Matters.

          (a) (i) Seller and each Acquired Company have prepared and timely filed (taking into
account any extension of time within which to file) all Tax Returns with the appropriate
Governmental Entity in all jurisdictions in which such Tax Returns are required to be filed and
all such filed Tax Returns are true, correct and complete in all material respects, (ii) Seller
and each Acquired Company have fully and timely paid all Taxes that are required to be paid,
except with respect to matters contested in good faith or for which adequate reserves have been
established in accordance with GAAP, (iii) the U.S. consolidated federal income Tax Returns of
Seller and it Subsidiaries have been examined by the Internal Revenue Service (or the period for
assessment of the Taxes in respect of which such Tax Returns were required to be filed has
expired) for all periods ending on or before December 31, 2002, (iv) there are not
pending or threatened, any audits, examinations, investigations or other proceedings in
respect of U.S. federal or state Taxes, (v) there are no Liens for Taxes on any of the assets of
the Acquired Companies other than Permitted Liens, (vi) neither Seller nor Acquired Company has
been a “controlled corporation” or a “distributing corporation” in any distribution occurring
during the two-year period ending on the date hereof that was purported or intended to be
governed by Section 355 of the IRC (or any similar provision of state, local or foreign Law),
(vii) each Seller and each Acquired Company have complied with all applicable Laws relating to
the payment and withholding of Taxes and have duly and timely withheld and paid over to the
appropriate Governmental Entity all amounts required to be so withheld and paid over under such
Laws, and (viii)  neither Seller nor any Acquired Company has engaged in a “reportable
transaction,” within the meaning of Treas. Reg. Section 1.6011-4(b), including any transaction
that is the same or substantially similar to one of the types of transactions that the Internal
Revenue Service has determined to be a tax avoidance transaction and identified by notice,
regulation or other form of published guidance as a “listed transaction,” as set forth in Treas.
Reg. Section 1.6011-4(b)(2).

          (b) As used in this Agreement, (i) “Taxes” means any and all domestic or foreign,
federal, state, local or other taxes of any kind (together with any and all interest, penalties,
additions to tax and additional amounts imposed with respect thereto) imposed by any
Governmental Entity, including taxes on or with respect to income, franchises, windfall or other
profits, gross receipts, property, sales, use, capital stock, unclaimed property, payroll,
employment, unemployment, social security, workers’ compensation or net worth, taxes in the
nature of excise, withholding, ad valorem or value added, and any obligations with respect to
such amounts arising as a result of being a member of an affiliated, consolidated, combined or
unitary group for any period or under any agreements or arrangements with any other person and

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including any liability for taxes of a predecessor entity, and (ii) “Tax Return” means
any return, report or similar filing (including the attached schedules) required to be filed
with respect to Taxes, including any information return, claim for refund, amended return or
declaration of estimated Taxes.

          (c) SCR-Tech has been since February 20, 2004, and is currently treated as a corporation
for all Taxes and Tax Return purposes.

     3.11 Labor Matters. (a) As of the date hereof, (i) there are no strikes or lockouts
with respect to any Business Employees and, (ii) to the knowledge of Seller, there is no union
organizing effort pending against the Business or with respect to any Business Employees,
(iii) there is no unfair labor practice, labor dispute (other than routine individual grievances)
or labor arbitration proceeding pending against the Business, and (iv) there is no slowdown, or
work stoppage in effect with respect to Business Employees and (b) the Acquired Companies and, with
respect to the Business, Seller, are in compliance in all material respects with all applicable
Laws respecting (i) employment and employment practices, (ii) terms and conditions of employment
and wages and hours and (iii) unfair labor practices. There has been no “mass layoff” or “plant
closing” as defined under the Worker Adjustment and Retraining Act of 1988 with respect to the
Business as a result of any action taken
by Seller (other than at the written direction of Buyer or as a result of any of the
transactions contemplated hereby) within the past six (6) months. No Acquired Company has entered
into any collective bargaining agreement or union contract recognizing any labor organization as
the bargaining agent of any Business Employees.

     3.12 Intellectual Property.

          (a) Section 3.12(a) of the Seller Disclosure Schedules sets forth a true and
complete list of all (i) Registered Intellectual Property owned by the Acquired Companies as of
the date of this Agreement (“Acquired Companies Registered Intellectual Property”),
indicating for each item the registration or application number and the applicable filing
jurisdiction and (ii) all Contracts to which Seller or an Acquired Company is a party granting
rights to Seller or the Acquired Companies to use third party Intellectual Property with respect
to the Business (except “shrink wrap” or “click wrap” contracts, and other inbound licenses for
generally commercially available software for which Seller or an Acquired Company has paid less
than $50,000, but including nonassertion and similar agreements with respect to third party
Intellectual Property) or granting rights to third parties to use Business Intellectual Property
owned by the Acquired Companies (except licenses granted by the Acquired Companies in the
ordinary course of business in connection with the Acquired Companies’ products or services, but
including non-assertion or similar agreements with respect to Business Intellectual Property).
The Acquired Companies exclusively own (beneficially, and of record where applicable) all
Business Intellectual Property, free and clear of all Liens other than Permitted Liens,
exclusive licenses and non-exclusive licenses granted outside of the ordinary course of
business. The Acquired Companies Registered Intellectual Property is subsisting and unexpired
and has not been abandoned, and is valid and enforceable, and all filing, renewal or other fees
therefor due on or before the Closing Date have been or will be timely and fully paid, and is
not subject to any

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outstanding order of any Governmental Entity adversely affecting the Acquired
Companies’ use thereof or their rights thereto. The Acquired Companies have timely responded to
all office actions or other comments, actions or filings of any kind made by any Governmental
Entities with respect to any IP Application. To Seller’s knowledge, neither the Acquired
Companies nor any officer, employee or agent of the Acquired Companies have, in connection with
the filing or prosecution of any Patent Application owned by the Acquired Companies, made an
untrue statement of a material fact or fraudulent statement to any Governmental Entity, failed
to disclose a material fact required to be disclosed to any Governmental Entity, or committed an
act, made a statement, or failed to make a statement that would provide a basis to invalidate or
hold unenforceable any Patent Application, if and when granted. All files for all Acquired
Companies Registered Intellectual Property or IP Applications owned by the Acquired Companies
are true, accurate and complete in all material respects. The Business Intellectual Property
and the Licensed Intellectual Property include all the Intellectual Property owned by or
licensed to the Acquired Companies and material to the operation of the Business as presently
conducted. All of the Business Intellectual Property shall survive materially unchanged the
consummation of the transactions contemplated by this Agreement. The conduct of the Business
as currently conducted does not infringe or otherwise violate in any material respect, and
the Acquired Companies have not infringed or otherwise violated in any material respect, the
Intellectual Property rights of any third party during the five-year period immediately
preceding the date of this Agreement. There is no material litigation, opposition,
cancellation, proceeding, objection or claim pending, or asserted or threatened in writing,
against the Acquired Companies concerning the ownership, validity, registerability,
enforceability, infringement or use of, or licensed right to use, any Intellectual Property. To
Seller’s knowledge, no person is violating any Business Intellectual Property right or other
material Intellectual Property right that the Acquired Companies hold exclusively. The Acquired
Companies have performed all material obligations imposed on them with respect to Licensed
Intellectual Property, have made all payments required to date, and are not, nor is another
party thereto, in breach or default thereunder in any respect, nor is there any event which with
notice or lapse of time or both would constitute a default or breach thereunder.

          (b) To Seller’s knowledge, the Acquired Companies have taken reasonable and necessary
measures to protect the confidentiality of all Trade Secrets that are owned or used by the
Acquired Companies and are material to the Business and the status of such Trade Secrets as
“trade secrets” under all applicable Law. To Seller’s knowledge, except as would not be
material to the Business, such Trade Secrets have not been used, disclosed to or discovered by
any person except pursuant to valid non-disclosure and/or license agreements which have not been
breached. To Seller’s knowledge, none of the Acquired Companies’ current employees, consultants
and contractors has any patents issued or applications pending for any device, process, design
or invention of any kind now used or needed by the Acquired Companies in the furtherance of the
Business, which patents or applications have not been assigned to or licensed by the Acquired
Companies. Substantially all of the Acquired Companies’ current and prior employees,
consultants and contractors have executed valid Intellectual Property and confidentiality
agreements for the benefit of the Acquired Companies, substantially in accordance with forms
which the Acquired Companies have prior to the date of this Agreement

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made available to Buyer
for its review, except such employees, consultants and contractors who do not perform tasks
likely to result in the creation of material Intellectual Property.

          (c) Consummation of the transaction contemplated by this Agreement will not trigger any
modification, termination or acceleration under, or create any license or similar Lien on
Intellectual Property owned or held by Buyer or its affiliates, except to the extent that such
license or Lien may be created as a result of a Contract entered into by Buyer or its
affiliates. The Acquired Companies have not granted any exclusive or non-exclusive rights to
the use of any Business Intellectual Property to third parties except with respect to the
material Contracts listed in Section 3.15 of the Seller Disclosure Schedules and
confidentiality and non-disclosure agreements. To Seller’s knowledge, the Acquired Companies’
rights to the Licensed Intellectual Property are valid, subsisting and enforceable and are not
subject to any outstanding order, judgment, decree or agreement adversely affecting the Acquired
Companies’ use thereof or its rights thereto.

          (d) The IT Assets generally operate and perform as required by the Acquired Companies in
connection with its business, and have not malfunctioned or failed within the past three years
in a manner which has materially reduced the overall functionality of the IT Assets as a whole,
other than isolated failures or outages that have been corrected. To Seller’s knowledge, the IT
Assets do not contain any “time bombs,” “Trojan horses,” “backdoors,” “trap doors,” “worms,”
viruses or other similar devices or effects that (i) enable or assist any person to access
without authorization the IT Assets, or (ii) otherwise significantly adversely affect the
functionality of the IT Assets, except as disclosed in its documentation. To Seller’s
knowledge, no person has gained material unauthorized access to the IT Assets. To Seller’s
knowledge, none of the IT Assets contains any shareware, open source code, or other software
whose use, as used by the Acquired Companies, requires disclosure or licensing of any Business
Intellectual Property. The Acquired Companies have implemented reasonable backup and disaster
recovery technology.

     3.13 Real Property. Section 3.13 of the Seller Disclosure Schedules sets
forth a complete list of all real property leased for occupancy by the Acquired Companies (the
“Acquired Company Real Property”), true and correct copies of which have been previously
made available to Parent or Buyer. Each occupancy agreement for leased Acquired Company Real
Property (each, an “Acquired Material Lease”) is valid and enforceable. No Acquired
Company is in default in any material respect under the terms of any Acquired Material Lease and,
to the knowledge of Seller, no other party to any Acquired Material Lease is in default under the
terms of any Acquired Material Lease. Each Acquired Material Lease is a valid and binding
obligation of an Acquired Company and, to the knowledge of Seller, of each other party thereto, and
is in full force and effect, except that (i) such enforcement may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other similar Laws, now or hereafter in
effect, relating to creditors’ rights generally and (ii) equitable remedies of specific performance
and injunctive and other forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought. The Acquired
Companies do not own any real property.

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     3.14 Title to Assets. All assets owned by the Acquired Companies are owned free and
clear of all Liens other than Permitted Liens.

     3.15 Material Contracts.

          (a) Section 3.15 of the Seller Disclosure Schedules sets forth all of the following
Contracts to which (x) any Acquired Company is a party or by which any of them are bound, and
(y) Seller is a party or by which it is bound and pursuant to which Seller has or may have any
obligations or liabilities that are or will become Assumed Liabilities, excluding in all
cases of clauses (x) and (y) the Acquired Material Leases (collectively, the “Business
Material Contracts”):

                    (i) Contracts with any labor union or association representing any Business Employee;

                    (ii) Contracts for joint ventures, strategic alliances or partnerships;

                    (iii) Contracts containing covenants of any of the Acquired Companies or, with respect to the
Business, Seller, not to compete in any line of business or with any person in any geographical
area or not to solicit or hire any person with respect to employment;

                    (iv) Contracts relating to the acquisition (by merger, purchase of stock or assets or
otherwise) by any of the Acquired Companies of any operating business or material assets or the
capital stock of any other person;

                    (v) Contracts relating to the incurrence, assumption or guarantee of any indebtedness or
imposing a Lien on any of the assets of the Acquired Companies, including indentures, guarantees,
loan or credit agreements, sale and leaseback agreements, purchase money obligations incurred in
connection with the acquisition of property, mortgages, pledge agreements, security agreements, or
conditional sale or title retention agreements;

                    (vi) purchase Contracts giving rise to liabilities of any of the Acquired Companies in excess
of $25,000 individually;

                    (vii) all Contracts providing for payments by or to any of the Acquired Companies in excess of
$25,000 in any fiscal year;

                    (viii) Contracts under which any of the Acquired Companies has made loans to any other person
(other than advances to Business Employees for business expenses in the ordinary course of
business); or

                    (ix) Contracts providing for severance, retention, change in control or other similar
payments.

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          (b) No Acquired Company, and to the knowledge of Seller, no other party to any Business
Material Contract, is in breach of or default under the terms of any Business Material Contract,
except for breaches or defaults that would not, individually or in the aggregate, have a
material adverse effect on the Business. Each Business Material Contract is a valid and binding
obligation of an Acquired Company and, to the knowledge of Seller, of each other party thereto,
and is in full force and effect, except that (i) such enforcement may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other similar Laws, now or hereafter in
effect, relating to creditors’ rights generally and (ii) equitable remedies of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any proceeding therefor
may be brought.

     3.16 Insurance. All insurance policies (including fire, liability, product liability,
workers’ compensation and vehicular) presently in effect that relate to the Acquired Companies or
the Business are sufficient for compliance by the Acquired Companies with all applicable Laws and
all Business Material Contracts. None of the insurance carriers for such policies has given
written notice to the Acquired Companies of an intention to cancel any such policy or to materially
increase any insurance premiums (including workers’ compensation premiums), or that any such
insurance will not be available in the future on substantially the same terms as currently in
effect. Neither Seller nor the Acquired Companies has any claim pending against any of its
insurance carriers under any of such policies and, to the knowledge of Seller, there has been no
actual or alleged occurrence of any kind which could reasonably be expected to give rise to any
such claim. During the prior three years, all notices required to have been given by the Acquired
Companies to any insurance company have been timely and duly given, and no insurance company has
asserted that any claim is not covered by the applicable policy relating to such claim.

     3.17 Equipment and Other Tangible Property. The Acquired Companies’ equipment,
furniture, machinery, vehicles, structures, fixtures and other tangible property, other than
inventory, is suitable for the purposes for which intended and is in operating condition consistent
with normal industry standards, except for ordinary wear and tear, and except for such properties
as shall have been taken out of service on a temporary basis for repairs or replacement consistent
with the Acquired Companies’ prior practices and normal industry standards. Such properties are
free of any material structural or engineering defects, and during the past five years there has
not been any significant interruption of the Business due to inadequate maintenance or obsolescence
of such properties.

     3.18 Suppliers and Customers. The Acquired Companies maintain good relations with all
of their material suppliers and customers as well as with governments, partners, financing sources
and other parties with whom the Acquired Companies have significant relations, and no such party
has canceled, terminated or, or to Seller’s knowledge, made any threat to the Acquired Companies to
cancel or otherwise terminate its relationship with the Acquired Companies or to materially
decrease its services or supplies to the Acquired Companies or its direct or indirect purchase or
usage of the products or services of the Acquired Companies. Notwithstanding the foregoing, Seller
has disclosed to Parent and Buyer that the customers of the Acquired Companies are not parties to
any

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long-term supply, purchase or other written agreements with any of the Acquired Companies, that
such customers only acquire goods and services from the Acquired Companies by means of purchase
orders and that there is no obligation of any such customers to continue purchasing goods and
services from the Acquired Companies.

     3.19 Absence of Certain Business Practices. None of the Acquired Companies or any
affiliate or, to the knowledge of Seller, any agent of the Acquired Companies, or any other person
acting on behalf of or associated with the Acquired Companies, acting alone or together, has (a)
received, directly or indirectly, any rebates, payments, commissions, promotional allowances or any
other economic benefits, regardless of their nature or type, from any customer, supplier, employee
or agent of any customer or supplier; or (b) directly or indirectly given or agreed to give any
money, gift or similar benefit to any customer, supplier, employee or agent of any customer or
supplier, any official or employee of any government (domestic or foreign), or any political party
or candidate for office (domestic or foreign), or other person who was, is or may be in a position
to help or hinder the business of the Acquired Companies (or assist the Acquired Companies in
connection with any actual or proposed transaction), in each case of (a) and (b) which (i) may
subject the Acquired Companies to any damage or penalty in any civil, criminal or governmental
litigation or proceeding, (ii) if not given in the past, may have had an adverse effect on the
assets, business or operations of the Acquired Companies, or (iii) if not continued in the future,
may adversely affect the Business.

     3.20 Transactions with Affiliates. Except as set forth in the forms, reports and
documents required to be filed by Seller with the SEC pursuant to the Securities Act of 1933, as
amended (the “Securities Act”) and the Securities Exchange Act of 1934, as amended (the
“Exchange Act”) (the “Seller SEC Documents”), and except for normal advances to
employees consistent with past practices, payment of compensation for employment and board services
to employees and directors, respectively, in each case, consistent with past practices, and
participation in scheduled Benefit Plans by employees and directors, the Acquired Companies have
not purchased, acquired or leased any property or services from, or sold, transferred or leased any
property or services to, or loaned or advanced any money to, or borrowed any money from, or entered
into or been subject to any management, consulting or similar agreement with, or engaged in any
other significant transaction with any officer, director or stockholder of the Acquired Companies
or any of their respective affiliates. Except as set forth in the Seller SEC Documents, no
affiliate of the Acquired Companies is indebted to the Acquired Companies for money borrowed or
other loans or advances, and the Acquired Companies are not indebted to any such affiliate.

     3.21 No Other Assets. Other than (i) insurance policies held by or for the benefit of
Seller and any rights, claims or causes of action under such insurance policies and (ii) Benefit
Plan assets held by Seller, as of the Closing Date there shall be no assets held by Seller
necessary for Buyer to conduct the Business as it is now being conducted.

     3.22 No Business Material Adverse Effect. Since the date of the Business Financial
Statements, no Business Material Adverse Effect has occurred.

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ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF SELLER CONCERNING ITSELF

     Except as disclosed in the Seller Disclosure Schedules, Seller represents and warrants to
Buyer as follows:

     4.1 Organization. Seller is a legal entity duly organized, validly existing and in
good standing under the Laws of the State of Delaware.

     4.2 Corporate Authority Relative to this Agreement; No Violation.

          (a) Seller has all requisite corporate power and authority to enter into this Agreement and
the Ancillary Agreement to be executed and delivered by Seller and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this Agreement and
the Ancillary Agreement to be executed and delivered by Seller and the consummation of the
transactions contemplated hereby and thereby have been duly and validly authorized by the board
of directors of Seller, and no other corporate proceedings on the part of Seller are necessary
to authorize the consummation of the transactions contemplated hereby and thereby, including the
approval by Renegy of the transactions contemplated hereby as sole stockholder of Seller. This
Agreement has been duly and validly executed and delivered by Seller, and the Ancillary
Agreement to be executed and delivered by Seller will, as of the Closing, have been, duly and
validly executed and delivered by Seller and, assuming this Agreement constitutes the valid and
binding agreement of Buyer and the Ancillary Agreement constitutes the valid and binding
agreement of the other parties thereto, this Agreement constitutes, and as of the Closing, the
Ancillary Agreement to be executed by Seller will constitute, the valid and binding agreement of
Seller, enforceable against Seller in accordance with its terms.

          (b) No authorization, consent or approval of, or filing with, any Governmental Entity is
necessary, under applicable Law, for the consummation by Seller of the transactions contemplated
by this Agreement and the Ancillary Agreement.

          (c) The execution and delivery by Seller of this Agreement and the Ancillary Agreement do
not, and, except as described in Section 4.2(b), the consummation of the transactions
contemplated hereby and thereby and compliance with the provisions hereof and thereof will not
(i) result in any violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of any material
obligation or to the loss of a benefit under any loan, guarantee of indebtedness or credit
agreement, note, bond, mortgage, indenture, lease, agreement, contract, instrument, permit,
concession, franchise, right or license binding upon Seller or the Acquired Companies or result
in the creation of any liens, claims, mortgages, encumbrances, pledges, security interests,
equities or charges of any kind (each, a “Lien”), other than any such Lien (A) for Taxes
or governmental assessments, charges or claims of payment not yet due, being contested in good
faith or for which adequate accruals or reserves have been established, (B) which is a statutory

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carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or other similar lien arising
in the ordinary course of business, and not delinquent, (C) which is disclosed on the Business
Balance Sheet or securing liabilities reflected on such Business Balance Sheet or (D) which was
incurred in the ordinary course of business consistent with past practice and not in violation
of this Agreement since the date of the Business Balance Sheet and is immaterial in amount (each
of the foregoing, a “Permitted Lien”), upon any of the properties or assets of any
Acquired Company, (ii) conflict with or result in any violation of any provision of the
certificate of incorporation or by-laws or other equivalent organizational document, in each
case as amended, of Seller or any Acquired Company, (iii) conflict with or violate any
applicable Laws, other than, in the case of clauses (i) and (iii), any such violation, conflict,
default, termination, cancellation, acceleration, right, loss or Lien that would not have,
individually or in the aggregate, a material adverse effect on the Business and would not
materially impair or delay the consummation of the transactions contemplated hereby.

     4.3 Finders or Brokers. Except for Hadley Partners, Incorporated, whose fees and
commissions will be the sole responsibility of Seller, Seller has not employed any investment
banker, broker or finder in connection with the transactions contemplated by this Agreement who
might be entitled to any fee or any commission in connection with or upon consummation of the
transactions contemplated hereby.

     4.4 No Additional Representations. Other than the representations and warranties
expressly set forth in Article 3 and this Article 4, Seller shall not be deemed to
have made any other representation or warranty in connection with this Agreement or the
transactions contemplated hereby.

     4.5 Financial Statements Included in SEC Filings. Each of the audited consolidated
financial statements and unaudited interim financial statements of Seller included (or incorporated
by reference) in the Seller SEC Documents filed with the SEC on or after December 31, 2005,
including the audited financial statements of Seller as of and for the year ended December 31,
2006, has been prepared in accordance with GAAP applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto), is accurate and complete in all
material respects and fairly presents in all material respects the consolidated financial position
of Seller and its Subsidiaries (including the Acquired Companies) as of the dates thereof and the
consolidated results of Seller’s operations and the changes in Seller’s consolidated financial
position for the periods then ended, in the case of the unaudited interim financial statements
subject to the absence of footnotes and year end audit adjustments which will not, individually or
in the aggregate, be material in magnitude. Such unaudited interim financial
statements reflect all adjustments necessary to fairly present, in all material respects, the
results of operations for the interim periods presented.

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ARTICLE 5

REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER

     Parent and Buyer each jointly and severally represents and warrants to Seller that:

     5.1 Organization. Parent and Buyer each is a legal entity duly organized, validly
existing and in good standing under the Laws of the State of Delaware. Parent currently owns all
of the outstanding capital stock of Buyer, and at the Closing Parent will own no less than a
majority of the then outstanding capital stock of Buyer.

     5.2 Corporate Authority Relative to this Agreement; No Violation.

          (a) Parent and Buyer each has all requisite corporate power and authority to enter into
this Agreement and the Ancillary Agreement, and to consummate the transactions contemplated
hereby and thereby. The execution and delivery of this Agreement and the Ancillary Agreement to
be executed and delivered by Parent and Buyer, and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized by the board of directors
of each of Parent and Buyer, and no other corporate proceedings on the part of Parent or Buyer
are necessary to authorize the consummation of the transactions contemplated hereby and thereby.
This Agreement has been, and the Ancillary Agreement to be executed and delivered by Parent and
Buyer will be, duly and validly executed and delivered by Parent or Buyer, as the case may be,
and, assuming this Agreement and Ancillary Agreement constitute the valid and binding agreement
of Seller, this Agreement constitutes, and as of the Closing, the Ancillary Agreement will
constitute, the valid and binding agreement of Parent or Buyer, as the case may be, enforceable
against Parent or Buyer in accordance with its terms.

          (b) Other than in connection with or in compliance with (i) the Delaware General
Corporation Law, (ii) the Securities Act, and (iii) the Exchange Act, no authorization, consent
or approval of, or filing with, any Governmental Entity is necessary, under applicable Law, for
the consummation by Parent and Buyer of the transactions contemplated by this Agreement and the
Ancillary Agreement, except for such authorizations, consents, approvals or filings, that, if
not obtained or made, would not materially impair or delay the consummation of the transactions
contemplated hereby.

          (c) The execution and delivery by Parent and Buyer of this Agreement and the Ancillary
Agreement does not, and, except as described in Section 5.2(b), the consummation of
the transactions contemplated hereby and thereby and compliance with the provisions hereof
and thereof will not (i) result in any violation of, or default (with or without notice or lapse
of time, or both) under, or give rise to a right of termination, cancellation or acceleration of
any material obligation or to the loss of a material benefit under any loan, guarantee of
indebtedness or credit agreement, note, bond, mortgage, indenture, lease, agreement, contract,
instrument, permit, concession, franchise, right or license binding upon Parent, Buyer or any of
their respective Subsidiaries, (ii) conflict with or result in any violation of any provision of
the certificate of incorporation or by-laws or other equivalent organizational document, in each
case as amended, of Parent, Buyer or any of their respective Subsidiaries or (iii) conflict with
or violate any applicable Laws, other than, in the case of clauses (i) and (iii), any such
violation, conflict, default, termination, cancellation, acceleration, loss or Lien that would
not materially impair or delay the consummation of the transactions contemplated hereby.

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     5.3 Investigations; Litigation. As of the date hereof, (a) there is no investigation
or review pending by any Governmental Entity with respect to Parent, Buyer or any of their
respective Subsidiaries, and (b) there are no actions, suits, inquiries, claims, investigations or
proceedings pending against or affecting Parent, Buyer or any of their respective Subsidiaries, or
any of their respective properties at law or in equity before, and there are no orders, judgments
or decrees of, or before, any Governmental Entity or arbitrator, in each case of clauses (a) or
(b), which would materially impair or delay the consummation of the transactions contemplated
hereby.

     5.4 Finders or Brokers. Except for Stephens Inc., neither Parent, Buyer nor any of
their respective Subsidiaries has employed any investment banker, broker or finder in connection
with the transactions contemplated by this Agreement who might be entitled to any fee or any
commission in connection with or upon consummation of the transactions contemplated hereby.

     5.5 Investment Intent. Buyer is acquiring the Shares not with a view to their
distribution within the meaning of Section 2(a)(11) of the Securities Act. Buyer is an “accredited
investor” as defined in Rule 501(a) of the Securities Act. Buyer has substantial experience in
evaluating and investing in private placement transactions of securities in companies similar to
the Acquired Companies and acknowledges that Buyer can protect its own interests. Buyer has such
knowledge and experience in financial and business matters so that Buyer is capable of evaluating
the merits and risks of its investment in the Acquired Companies. Buyer has had an opportunity to
ask questions of, and receive answers from, the officers of Seller and the Acquired Companies
concerning this Agreement, the exhibits and schedules attached hereto and thereto and the
transactions contemplated hereby and thereby, as well as Seller’s and the Acquired Companies’
respective businesses, management and financial affairs, which questions were answered to Buyer’s
satisfaction. Buyer believes that it has received all the information Buyer considers necessary or
appropriate for deciding whether to purchase the Shares. Buyer also hereby acknowledges that it is
relying solely on its own counsel and not on any
statements or representations of Seller or its agents for legal advice with respect to the
purchase of the Shares or the transactions contemplated hereby.

     5.6 Solvency. Assuming the accuracy of the representations and warranties contained
in Article 3 and Article 4, immediately after giving effect to the transactions
contemplated by this Agreement (including any financing in connection with the transactions
contemplated hereby), (a) neither Parent nor Buyer will have incurred debts beyond its ability to
pay such debts as they mature or become due and the then present fair salable value of the assets
of Parent or Buyer, as the case may be, will exceed the amount that will be required to pay its
respective probable liabilities (including the probable amount of all contingent liabilities) and
its respective debts as they become absolute and matured, (b) the assets of Parent and Buyer, at a
fair valuation, will exceed its respective debts (including the probable amount of all contingent
liabilities) and (c) neither Parent nor Buyer will have unreasonably small capital to carry on its
business as presently conducted or as proposed to be conducted. No transfer of property is being
made and no obligation is being incurred in connection with the transactions contemplated hereby
with the intent to hinder, delay or defraud creditors of Seller or any of its Subsidiaries,
including any Acquired Company.

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     5.7 Financing. Buyer has available on the Closing Date sufficient funds to enable it
to consummate the transactions contemplated hereby and the Ancillary Agreement.

     5.8 Operations of Buyer. Parent caused Buyer to be formed solely for the purpose of
engaging in the transactions contemplated hereby, and prior to Closing, Buyer will be inactive and
will not have engaged in any business activities and will conduct activities only as contemplated
hereby.

ARTICLE 6

COVENANTS

     6.1 Confidentiality. The parties acknowledge that SCR-Tech, on behalf of Seller, and
Parent have previously executed a Confidentiality Agreement dated as of May 23, 2007 (the
“Confidentiality Agreement”), which Confidentiality Agreement will continue in full force
and effect in accordance with its terms, and each of the parties hereto agrees to be bound by the
terms of the Confidentiality Agreement (as if a party thereto if not already a party thereto) and
to hold, and will cause its respective directors, officers, employees, agents and advisors
(including attorneys, accountants, consultants, bankers and financial advisors) to hold, any
Evaluation Material (as defined in the Confidentiality Agreement) confidential in accordance with
the terms of the Confidentiality Agreement (provided that Parent’s
obligations thereunder shall terminate at Closing with regard to confidential information of
the Acquired Companies and the Business).

     6.2 Tax Matters.

          (a) Responsibility for Certain Taxes. Seller shall indemnify and hold the Buyer
Indemnified Parties harmless against any Taxes imposed on or with respect to any Acquired
Company with respect to any taxable period (or portion thereof) ending on or before the Closing
Date (each, a “Pre-Closing Tax Period”) and any Losses arising therefrom, except to the
extent such Taxes or Losses have been reflected as a liability on the Statement of Working
Capital. In the case of any taxable period that includes (but does not end on) the Closing Date
(each, a “Straddle Period”), (i) the portion of any real, personal and intangible
property or ad valorem Taxes (“Property Taxes”) imposed upon any Acquired Company that
is allocable to the Pre-Closing Tax Period shall be equal to the amount of such Property Taxes
for the entire Straddle Period that are in the Pre-Closing Tax Period and the denominator of
which is the number of days in the Straddle Period, and (ii) the portion of any Taxes other than
Property Taxes imposed upon any Acquired Company that is allocable to the Pre-Closing Tax Period
shall be computed as if such taxable period ended on the Closing Date; provided, however, that
exemptions, allowances or deductions that are calculated on an annual basis (including
depreciation and amortization deductions), other than with respect to property placed in service
after the Closing, shall be allocated between the period ending on the Closing Date and the
period after the Closing Date in proportion to the number of days in each period. Buyer shall
indemnify and hold Seller harmless against any and all liabilities, obligations or commitments,
whether or not accrued, assessed or currently due and payable for any Taxes imposed on any
Acquired Company or the Business that are not the responsibility of Seller pursuant to this
Section 6.2(a).

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     (b) Tax Returns. Buyer shall be responsible for the preparation and filing of any
Tax Return of or with respect to any Acquired Company that is required to be filed after the
Closing Date, other than any Tax Return for any Tax asset or Tax liability relating to income,
franchise or similar Taxes of (i) Seller with respect to any taxable period (or portion thereof)
or (ii) any Acquired Company with respect to a Pre-Closing Tax Period (each, a “Pre-Closing
Income Tax Return”). To the extent that Buyer is required to remit any Taxes that are the
responsibility of Seller pursuant to Section 6.2(a), Seller shall pay to Buyer any such
Taxes at least ten (10) days prior to the due date for payment of such Taxes. Seller shall be
responsible for the preparation and filing of any Tax Return with respect to any Acquired
Company or the Business that is required to be filed on or before the Closing Date and any
Pre-Closing Income Tax Return, including in each case any amended Tax Return, and each such Tax
Return shall be true and correct in all material respects, completed in accordance with
applicable Law, and
consistent with past practice. To the extent that Seller is required to remit any Taxes
that are the responsibility of Buyer pursuant to Section 6.2(a), Buyer shall pay to
Seller any such Taxes at least ten (10) days prior to the due date for payment of such Taxes.

     (c) Tax Contests. Seller shall control and bear the cost of the conduct of any
audit, claim, dispute or controversy (“Tax Contest”) relating to any Tax for which
Seller is responsible pursuant to Section 6.2(a), provided that Buyer shall be entitled
to participate, at its own expense, in any Tax Contest involving a Straddle Period. Buyer shall
control all other Tax Contests relating to any Acquired Company.

     (d) Refunds and Credits; Waiver of Carrybacks. Any refund or credit with respect
to Taxes described in Section 6.2(a) that are the responsibility of Seller shall be for
the account of Seller, except to the extent such refund or credit is reflected as an asset on
the Statement of Working Capital, and if Buyer or any Acquired Company receives or becomes
entitled to any refund or credit that relates to such Taxes, Buyer shall pay Seller the amount
of any such refund or the value of such credit (in each case, net of any taxes incurred by Buyer
with respect thereto). All other refunds and credits shall be for the account of Buyer, and if
Seller receives any such refund or credit, Seller shall pay to Buyer the amount of any such
refund or the value of such credit (in each case, net of any taxes incurred by Seller with
respect thereto). To the extent permitted by applicable Law, Buyer shall (or shall cause or
permit each Acquired Company to) elect to relinquish any carryback of a Tax attribute to any
taxable period or portion thereof ending on or before the Closing Date. In cases where Buyer
cannot elect to relinquish such carrybacks, neither Seller nor any of its Subsidiaries shall
have any obligation to pay to Buyer any Tax refund or other amount resulting from a carryback of
a post-acquisition Tax attribute of any Acquired Company into a Tax Return for a Pre-Closing Tax
Period.

     (e) Cooperation. The parties to this Agreement shall provide assistance to each
other as reasonably requested in preparing and filing Tax Returns and responding to Tax
Contests, provide reasonably detailed notice of any Tax Contest sufficient to apprise the other

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party of the nature of the claim, make available to each other as reasonably requested all
relevant information, records, and documents, including workpapers, relating to Taxes of any
Acquired Company or the Business and retain any books and records that could reasonably be
expected to be necessary or useful in connection with any preparation by any other party of any
Tax Return or for any Tax Contest.

          (f) Tax Sharing Agreements. Any Tax sharing or Tax allocation agreement between
one or more of the Acquired Companies and Seller or any of its Subsidiaries (other than the
Acquired Companies) shall be terminated prior to the Closing, and no payments shall be made
thereunder on or after the Closing Date.

          (g) Survival; Conflicts. Notwithstanding anything to the contrary contained
herein, the obligations pursuant to this Section 6.2 and Section 6.4 shall
survive until the applicable statute of limitations with respect to the Tax Liabilities in
question. In the event of a conflict between the provisions of this Section 6.2 or
Section 6.4, as applicable, and any other Section of this Agreement, Section 6.2
or Section 6.4, as applicable, shall govern and control.

     6.3 Public Announcements. Parent and Seller will consult with and provide each other
the opportunity to review and comment upon any press release relating to this Agreement or the
transactions contemplated herein or, to the extent practicable, any other public statement relating
to this Agreement or the transactions contemplated herein made by Parent or Seller or their
respective Subsidiaries prior to the issuance of such press release or, to the extent practicable,
other public statement and shall not issue any such press release or, to the extent practicable,
other public statement prior to such consultation, except as may be required by applicable Law or
by obligations pursuant to any listing agreement with any national securities exchange or market.

     6.4 Transaction Costs. Except as otherwise indicated in this Section 6.4,
each of Parent and Buyer shall pay all transaction costs and expenses (including legal, accounting
and other professional fees and expenses and other fees described in Section 5.4 with
respect to Parent, Buyer and their respective Subsidiaries) that it incurs in connection with the
negotiation, execution and performance of this Agreement and the consummation of the transactions
contemplated hereby. Parent shall pay all amounts required to be paid by Parent pursuant to
Section 10.7. Seller shall pay all transaction costs and expenses (including legal,
accounting and other professional fees and expenses and other fees described in
Section 4.3) that it incurs in connection with the negotiation, execution and performance
of this Agreement and the consummation of the transactions contemplated hereby. Notwithstanding
the foregoing and anything to the contrary contained in this Agreement, Parent and/or Buyer shall
be responsible for and pay any transfer Taxes (including stock transfer, sales, use value-added, ad
valorem and deed Taxes) and the fees and costs of recording or filing any applicable conveyancing
instruments associated with the transactions contemplated by this Agreement (“Transfer
Taxes”). Seller and Buyer shall cooperate in the preparation, execution and filing of all Tax
Returns regarding any Transfer Taxes that become payable as a result of the transactions
contemplated by this Agreement.

     6.5 Retention of and Access to Records. From and after the Closing, Parent and Buyer
shall preserve, in accordance with the normal document retention policy of the Business, all books

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and records transferred by Seller to Buyer pursuant to this Agreement. In addition to the
foregoing, for a period of six years following the Closing, each party shall afford to the other
party hereto, and its counsel, accountants and other authorized agents and Representatives, and
their respective counsel, accountants and other authorized agents and Representatives, during
normal business hours and upon the execution and delivery of a confidentiality and non-disclosure
agreement in customary form and substance (which shall include appropriate exceptions for
disclosure relating to Tax matters), reasonable access to the employees, books, records and other
data relating to the Acquired Companies, the Business, the Assumed Liabilities and the Business
Employees in its possession, and the right to make copies and extracts therefrom, to the extent
that such access may be reasonably required by the requesting party (a) to facilitate the
investigation, litigation and final disposition of any claims which may have been
or may be made against any such party or person, or its affiliates, (b) for the preparation of
Tax Returns and audits, and (c) for any other reasonable business purpose.

     6.6 Payments. From and after the Closing, if Seller or any of its Subsidiaries
receive a payment of accounts receivable belonging to the Business, they will promptly turn such
payment over to Buyer and if Buyer or any of its Subsidiaries receive a payment of accounts
receivable belonging to the business of Seller or its Subsidiaries (other than the Acquired
Companies), they will promptly turn such payment over to Seller.

     6.7 Cooperation in Post-Closing Litigation. For a period of six (6) years following
the Closing, each of Seller, Parent and Buyer will cooperate with the other in the investigation,
defense or prosecution of any action, suit, inquiry, claim, investigation or proceeding which is
pending, instituted or threatened either (a) against Parent or Buyer and which relates to or arises
out of the Assumed Liabilities or (b) against Seller and which relates to or arises out of the
Excluded Liabilities. The party seeking such cooperation will reimburse the party providing such
cooperation for all reasonable expenses (including salaries of employees who are required to be
absent from their employment or devote substantial amounts of time in satisfaction of the
obligations set forth in this Section 6.7) incurred by the party providing such cooperation
in connection with such cooperation.

     6.8 Cooperation as to Financial Statements. For a period of ninety (90) day from the
date hereof, Seller agrees that it will cooperate in good faith, to the extent reasonably requested
by Parent, in the preparation of the financial statements of the Business that are required to be
filed by Parent pursuant to the Exchange Act. For a period of ninety (90) day from the date
hereof, Buyer agrees that it will cooperate in good faith, to the extent reasonably requested by
Seller or Renegy, in the preparation of any financial statements (including pro forma financial
statements) that are required to be filed by Renegy pursuant to the Exchange Act, including by
providing Seller with reasonable access to any relevant personnel, books and records related to the
Business that are necessary in furtherance of the foregoing.

     6.9 Return of Excluded Assets. Promptly following the Closing, and in any event
within fifteen (15) days after the Closing Date, Parent shall (or shall cause Buyer to) remit to
Seller all cash and cash equivalents on the general ledger of each Acquired Company or otherwise
held by each Acquired Company, in each case, as of the Closing. The remittance will be treated as
a return of Excluded Assets and not as an adjustment to the Purchase Price. If at any time within
twelve (12)

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months following the Closing Date, Parent or Buyer becomes aware of any other Excluded
Assets that were delivered to Buyer in connection with this Agreement or the Ancillary Agreement,
Parent or Buyer, as the case may be, shall promptly notify Seller of the Excluded Assets in its
possession, and shall return (or at Seller’s discretion, destroy) such Excluded Assets at Parent’s
expense, including all copies thereof. In any
case, Buyer agrees to keep and treat all Excluded Assets as “Evaluation Material” in
accordance with the terms of the Confidentiality Agreement.

ARTICLE 7

EMPLOYMENT MATTERS

     7.1 Employees. Business Employees of Seller and its Subsidiaries who remain employed
after the Closing Date shall be eligible to receive compensation and employee benefits under
Buyer’s employee benefit plans (each a “Buyer Benefit Plan”) on the same basis as similarly
situated active employees of Buyer and its subsidiaries; provided that nothing herein is intended
to result in a duplication of benefits. In addition, each Business Employee will receive service
credit for all periods of employment with Seller or Acquired Company or any of its subsidiaries or
any predecessor thereof prior to the Closing Date for purposes of vesting, eligibility and benefit
levels under any Buyer Benefit Plan in which such employee participates after the Closing Date, to
the same extent and for the same purposes thereunder as such service was recognized under any
analogous Seller Benefit Plan in effect immediately prior to the Closing Date.

     7.2 Welfare Plans. 

     (a) Until December 31, 2007, Buyer covenants that it shall (a) assume, adopt and maintain the
medical, dental, health, pharmaceutical, and vision Benefit Plans of the Acquired Companies and
its Subsidiaries, relating to the Business and listed in Section 7.2 of the Seller
Disclosure Schedules (the “Scheduled Welfare Plans”) and, accordingly, shall thereby
continue in full force and effect each Scheduled Welfare Plan subject to the terms and conditions
thereof, to the extent such Scheduled Welfare Plan is offered as of the Closing Date to the
Business Employees and their dependents; or (b) provide all Business Employees and their
dependents, with coverage under one or more medical, dental, health, pharmaceutical, and vision
benefit plans of Buyer (the “Successor Welfare Plans”), including without limitation health
coverage (collectively, “Coverage”), which meets the following requirements as of the
Closing Date: (A) the Coverage is substantially identical to the coverage provided under the
Scheduled Welfare Plans, (B) service with Seller prior to the Closing Date shall be credited
against all service and waiting period requirements under the Successor Welfare Plans, (C) the
Successor Welfare Plans shall not provide any pre-existing condition exclusions and
actively-at-work requirements (except to the extent such exclusions or requirements were applicable
under the corresponding Scheduled Welfare Plan), and (D) the deductibles and/or co-payments in
effect under the Successor Welfare Plans shall be reduced by any deductibles and/or co-payments
paid by such employee and/or his or her covered dependents under the Scheduled Welfare Plans for
the plan year in which the Closing Date occurs. Notwithstanding anything to the contrary herein,
Buyer covenants that it shall assume, adopt and maintain the Scheduled Welfare Plans until at least
November 30, 2007 for the benefit of Seller and/or Renegy

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employees to the extent such Scheduled Welfare Plans are offered as of immediately prior to
the Closing Date to such employees and their dependents, and, accordingly, such Scheduled Welfare
Plans shall thereby continue in full force and effect until at least November 30, 2007, subject to
the terms and conditions thereof; provided, that nothing herein shall obligate Buyer to pay any
premiums in respect of such Scheduled Welfare Plans for any employees that are not Business
Employees.

     (b) Buyer agrees that any workers’ compensation benefits for Business Employees shall be the
sole obligation of Buyer and not Seller (whether related to claims incurred before, on or after the
Closing Date).

     7.3 Severance. Buyer shall provide any Business Employee whose employment is
terminated by Buyer within twelve (12) months following the Closing Date, with severance payments
and benefits, which are no less favorable than the severance pay and benefits such employee would
have received had he or she terminated employment with Seller on the Closing Date, as set forth in
Section 7.3 of the Seller Disclosure Schedules.

     7.4 Savings Plans. Buyer hereby agrees that Buyer shall, or shall cause the Acquired
Company to, adopt a plan that is intended to qualify as a “cash or deferred arrangement” under
Section 401(k) of the IRC (the “Buyer Savings Plan”) for the benefit of the Business
Employees. Seller shall, within the requirements of Law, cause distributions to be made to the
Business Employees from any Seller Benefit Plan that is intended to qualify as a “cash or deferred
arrangement” under Section 401(k) of the IRC (the “Seller Savings Plans”).

     7.5 Post-Retirement Benefit Liabilities.  Effective as of the Closing Date, Buyer
shall assume (and does hereby assume), shall be responsible for, covenants to pay or otherwise
discharge, and shall indemnify and hold harmless, Seller against any liability, claim or obligation
(including reasonable attorney’s fees) relating to or arising out of the Seller Benefit Plans that
provide for post-retirement medical and life insurance benefits for Business Employees that relate
to the Business. Such post-retirement medical and life insurance benefits will continue to be
maintained on the same terms and conditions in effect on the Closing Date with respect to all
Business Employees who have retired on or prior to the Closing Date and are receiving or entitled
to receive post-retirement medical and life insurance benefits.

     7.6 Long Term Disability.  Effective as of the Closing Date, Buyer shall assume (and
does hereby assume), shall be responsible for, covenants to pay or otherwise discharge, and shall
indemnify and hold harmless, Seller against any liability, claim or obligation (including
reasonable attorney’s fees) relating to or arising out of any Business Employee’s long-term
disability claim.

     7.7 Life Insurance.  Effective as of the Closing Date, Buyer shall assume (and does
hereby assume), shall be responsible for, covenants to pay or otherwise discharge, and shall
indemnify and hold harmless, Seller against any liability, claim or obligation (including
reasonable attorney’s fees) relating to or arising out of the Seller Benefit Plans that provide for
life insurance benefits for Business Employees that relate to the Business.

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     7.8 Vacation. Except as may otherwise be required by Law, effective as of the Closing
Date, Buyer shall assume Seller’s liability for all accrued, but unpaid vacation time of Business
Employees to the extent such liability is not already a liability of an Acquired Company.

     7.9 Cooperation. Upon request, Seller shall provide Buyer, and Buyer shall provide
Seller, such documents, data and information as may reasonably be necessary to implement the
provisions of this Article 7 and to administer their respective benefit plans, subject to
applicable Law.

     7.10 Post-Closing Date Participation. Seller acknowledges that as of the Closing
Date, Business Employees shall no longer be eligible to actively participate in the Benefit Plans
listed on Section 7.10 of the Seller Disclosure Schedules except to the extent required by
Law or until such time (following the Closing) as a Business Employee becomes an employee of
Seller. Nothing in this Section 7.10 shall otherwise affect or reduce the accrued benefits
as of the Closing Date of Business Employees under such Benefit Plans.

     7.11 General. Nothing in this Article 7 or elsewhere in this Agreement shall
be construed as (a) conferring any legal rights upon any Business Employee for continuation of
employment by Buyer or its affiliates, (b) requiring Buyer to implement, or limiting the rights of
Buyer to amend or discontinue, any fringe benefit plan, program or practice or any other employee
benefit plan of any nature whatsoever, except as expressly provided otherwise in this
Article 7 or (c) conferring upon any Business Employee any rights or remedies under this
Agreement (including under this Article 7).

ARTICLE 8

INDEMNIFICATION; REMEDIES

     8.1 Survival. The representations and warranties contained herein and in the Ancillary Agreement or
certificates delivered pursuant to this Agreement or the Ancillary Agreement shall survive the
Closing until 5:00 p.m., California time, on the fifteen (15)-month anniversary of the Closing
Date; provided, however, that (i) the representations and warranties contained in
Section 3.6 (Environmental Laws and Regulations) (the “Environmental Items”) shall
survive until the three (3)-year anniversary of the Closing Date, (ii) the representations and
warranties contained in Section 3.1 (Qualification; Organization; Subsidiaries, etc.),
Section 3.7 (Employee Benefit Plans), Section 3.10 (Tax Matters) and
Section 3.14 (Title to Assets) (such representations, for definitional purposes
collectively with the Environmental Items referred to herein as the “Specified Indemnity
Items”) shall survive until the expiration of the applicable statute of limitations, and (iii)
in the event of fraud, any such representation or warranty shall survive until the expiration of
the applicable statute of limitations with respect to Seller (but only to the extent fraud by any
person may be imputed to Seller under applicable law) and the person committing such fraud or with
actual knowledge of the same (each such survival period described in this Section 8.1, a
“Survival Period”). Notwithstanding the foregoing, the representations or warranties in
respect of which indemnity may be sought under Section 8.2 or Section 8.3, and the
indemnity with respect thereto, shall survive the

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applicable Survival Period and thereafter until
resolved if a claim in respect thereof has been made prior to the end of such Survival Period.

     8.2 Indemnification by Parent and Buyer. Subject to Section 8.1 and
Section 8.6, from and after the Closing, each of Parent and Buyer shall jointly and
severally indemnify, defend and hold harmless Seller and its affiliates and their respective
stockholders, officers, directors, employees, affiliates, agents and Representatives (collectively,
the “Seller Indemnified Parties”), from and against all judgments, settlements, demands,
claims, actions or causes of action, deficiencies, assessments, Liabilities, losses, damages
(whether direct or indirect, incidental or consequential), interest, fines, penalties, costs and
expenses (including reasonable legal, accounting and other costs and expenses incurred in
connection with investigating, defending, settling or satisfying any and all such demands, claims,
actions or causes of action (collectively, “Losses”) arising out of, resulting from,
related to or associated with (i) any and all of the Assumed Liabilities, (ii) the breach of any of
the representations and warranties of Parent or Buyer contained in this Agreement and (iii) the
breach of any covenant or other agreement on the part of Parent or Buyer under this Agreement.

     8.3 Indemnification by Seller. Subject to Section 8.1 and
Section 8.6, from and after the Closing, Seller shall indemnify, defend and hold harmless
Buyer and its affiliates and their respective stockholders, officers, directors, employees,
affiliates, agents and representatives (collectively, the “Buyer Indemnified Parties”),
from and against all Losses arising out of, resulting from, related to or associated with (i) any
and all of the Excluded Liabilities, (ii) the breach of any of the representations and warranties
of Seller contained in this Agreement and (iii) the breach of any covenant or other agreement on
the part of Seller under this Agreement.

     8.4 Notice of Claims. Each party entitled to indemnification under this Article 8 (the “Indemnified
Party”) shall give notice to the party required to provide such indemnification (the
“Indemnifying Party”) promptly after such Indemnified Party has actual knowledge of any
claims as to which indemnity is sought (stating in reasonable detail the basis of the claim for
indemnification and the Section or Sections of this Agreement providing for such indemnification),
provided, however, that the failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this Article 8 except to
the extent that the Indemnifying Party has been adversely affected by such failure.

     8.5 Procedure for Indemnification; Third Party Claims; Arbitration.

          (a) Promptly after receipt by an Indemnified Party of notice of the commencement of any
Proceeding against it, such Indemnified Party will, if a claim in connection therewith is to be
made against an Indemnifying Party under Section 8.2 or Section 8.3, as the case
may be, give notice (in addition to the notice required by Section 8.4) to the
Indemnifying Party of the commencement of such claim, but the failure to notify the Indemnifying
Party will not relieve the Indemnifying Party of any liability that it may have to any
Indemnified Party, except to the extent that the Indemnifying Party demonstrates that the
defense of such action is prejudiced by the Indemnified Party’s failure to give such notice.

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     (b) If any Proceeding referred to in Section 8.5(a) is brought against an
Indemnified Party and it gives notice to the Indemnifying Party of the commencement of such
Proceeding, the Indemnifying Party will be entitled to participate in such Proceeding and, to
the extent that it wishes (unless (x) the Indemnifying Party is also a party to such Proceeding
and the Indemnified Party determines in good faith that joint representation would be
inappropriate, or (y) the Indemnifying Party fails to provide reasonable assurance to the
Indemnified Party of its financial capacity to defend such Proceeding and provide
indemnification with respect to such Proceeding), to assume the defense of such Proceeding with
counsel satisfactory to the Indemnified Party and, after notice from the Indemnifying Party to
the Indemnified Party of its election to assume the defense of such Proceeding, the Indemnifying
Party will not, as long as it actively and diligently conducts such defense, be liable to the
Indemnified Party under this Article 8 for any fees of other counsel or any other
expenses with respect to the defense of such proceeding, in each case subsequently incurred by
the Indemnified Party in connection with the defense of such Proceeding, other than reasonable
costs of investigation. If the Indemnifying Party assumes the defense of a Proceeding, (i) it
will be conclusively established for purposes of this Agreement that the claims made in that
Proceeding are within the scope of and subject to indemnification, subject to the limitations
set forth in Section 8.6, (ii) no compromise or settlement of such claims may be
effected by the Indemnifying Party without the Indemnified Party’s consent unless the sole
relief provided is monetary damages that are paid in full by the Indemnifying Party, and
(iii) the Indemnified Party will have no liability with respect to any compromise or settlement
of such claims effected without its consent. The indemnified Party will not unreasonably
withhold, delay or condition its consent to the settlement or compromise of
a proceeding being defended by the Indemnifying Party pursuant to the foregoing if the sole
relief provided thereby is monetary damages. If notice is given to an Indemnifying Party of the
commencement of any Proceeding and the Indemnifying Party does not, within thirty (30) days
after the Indemnified Party’s notice is given, give notice to the Indemnified Party of its
election to assume the defense of such Proceeding, the Indemnifying Party will be bound by any
determination made in such Proceeding or any compromise or settlement effected by the
Indemnified Party of such Proceeding, in each case, with the consent of the Indemnifying Party
(not to be unreasonably withheld, delayed or conditioned if the sole relief provided thereby is
monetary damages). Each party hereto shall furnish such information regarding itself or the
claim in question as the other party may reasonably request in writing and shall otherwise
cooperate with the other party to such extent as shall be reasonably required in connection with
the defense of such claim and litigation resulting therefrom.

     (c) Should the Indemnified Party and the Indemnifying Party be unable to agree as to any
particular item or items or amount or amounts with respect to any claim for which
indemnification is sought pursuant to this Article 8, then either party may demand
arbitration of the matter, to be conducted by one arbitrator mutually agreeable to Seller and
Parent. In the event that, within twenty (20) days after determination to submit any dispute to
arbitration, Seller and Parent cannot mutually agree on one arbitrator, then, within ten days
after the end of such twenty (20)-day period, Seller and Parent shall each select one
arbitrator. The two arbitrators so selected shall select a third arbitrator. Any such
arbitration shall be held in New York, New York, under the rules then in effect of the American
Arbitration Association.

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The losing party shall pay or reimburse the prevailing party, as
applicable, all expenses relating to the arbitration, including the respective expenses of each
party, the fees of each arbitrator and the administrative fee of the American Arbitration
Association. The decision of the arbitrator or a majority of the three arbitrators, as the case
may be, as to the validity and amount of any such claim shall be final, binding, and conclusive
upon the parties to this Agreement and the Indemnifying Parties, absent manifest error.
Promptly after a decision of the arbitrator(s) requiring payment by an Indemnifying Party to an
Indemnified Party, the Indemnifying Party shall make such payment to such Indemnified Party.

     8.6 Limitations on Indemnification.

          (a) An Indemnifying Party shall not have any liability under Section 8.2(ii),
Section 8.2(iii), Section 8.3(ii) or Section 8.3(iii) (except with
regard to Buyer’s obligations to pay the Purchase Price and the parties’ respective obligations
to pay for any amounts under Section 6.4) unless the aggregate amount of Losses incurred
by the Indemnified Party and indemnifiable thereunder arising out of, resulting from, related to
or associated with the breach of the representations, warranties, covenants or agreements
exceeds $192,000 (the “Basket”) and, in any event (except with regard to Buyer’s
obligations to pay the Purchase Price and the parties’ respective obligations to pay for any
amounts under Section 6.4), only the aggregate amount of such Losses in excess of the
Basket shall be indemnifiable hereunder; provided,
however, that the Basket shall not apply to any breach of the Specified Indemnity Item or
to any liability under Section 8.2(i) or Section 8.3(i).

          (b) Subject to this Section 8.6, no Indemnified Party shall make a claim for
indemnification pursuant to this Agreement for Losses incurred by such Indemnified Party arising
out of, resulting from, related to or associated with the breach of the representations,
warranties, covenants or agreements contained in this Agreement (other than a claim with respect
to breach of any Specified Indemnity Item or any liability under Section 8.2(i) or
Section 8.3(i), for which this Section 8.6(b) shall not apply) unless the amount
of such Losses (excluding Specified Indemnity Items or any liability under Section
8.2(i) or Section 8.3(i)) relating to such claim exceeds $500.00; provided, however,
that at such time as an Indemnified Party makes a claim or claims for indemnification pursuant
to this Agreement for Losses, excluding any Specified Indemnity Item or any liability under
Section 8.2(i) or Section 8.3(i), in an aggregate amount exceeding the Basket,
such threshold amount for any additional claims shall increase to $5,000, until the point that
the aggregate amount of all such additional claims that are less than $5,000 equals or exceeds
$50,000, at which point all of such additional claims, together with all future claims in excess
of $500, shall be indemnified pursuant to the terms of Article 8.

          (c) Neither Seller nor Buyer shall be required to indemnify any person under
Section 8.2(ii), Section 8.2(iii), Section 8.3(ii) or
Section 8.3(iii) (except with regard to Buyer’s obligations to pay the Purchase Price
and the parties’ respective obligations to pay for any amounts under Section 6.4) for an
aggregate amount of Losses exceeding:

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                    (i) in the case of the Specified Indemnity Items or Excluded Liabilities, in the case of
Seller, $9,600,000 in connection with Losses related to the breach of any such Specified Indemnity
Items or such Excluded Liabilities; and

                    (ii) in the case of all other representations, warranties, covenants or agreements, $1,920,000
in connection with Losses related to the breach of any such representations, warranties, covenants
or agreements of Seller or Parent and Buyer, respectively.

          (d) An Indemnifying Party shall not have any liability under Section 8.2(ii),
Section 8.2(iii), Section 8.3(ii) or Section 8.3(iii) (except with
regard to Buyer’s obligations to pay the Purchase Price) for any Losses unless an Indemnified
Party shall have delivered to the Indemnifying Party a claim in accordance with
Section 8.4 identifying such Losses (and stating in reasonable detail the basis of the
claim for indemnification and the Section or Sections of this Agreement providing for such
indemnification with regard to such Losses) prior to the termination of the applicable Survival
Period.

          (e) No Loss arising from a liability reflected on the Statement of Working Capital (as
adjusted pursuant to any disputes) shall be subject to indemnification pursuant to
Section 8.3.

          (f) Notwithstanding anything to the contrary contained herein, if any Buyer Indemnified
Party is entitled to indemnification under Section 8.3(ii) or Section 8.3(iii),
such
Buyer Indemnified Party shall be entitled to such indemnification in accordance with this
Article 8 notwithstanding its assumption of the Assumed Liabilities and obligations
under Section 8.2(i) and notwithstanding anything to the contrary in the Ancillary
Agreement; provided, however, in no event shall any Buyer Indemnified Party be entitled to any
duplicative recovery for such items, pursuant to Section 8.3(i) or otherwise.

          (g) Notwithstanding anything to the contrary herein, in no event shall Seller have any
liability under this Agreement (including this Article 8) for any Losses relating to a
claim the underlying facts of which were known by Parent or Buyer on or prior to the Closing.

     8.7 Exclusive Remedy. Subject to the applicability of Section 6.2 and
Section 6.4, except for claims for fraud and except for covenants contained herein which by
their terms are to be performed at or after the Closing, the indemnification obligations under this
Article 8 shall be the sole and the exclusive remedy of the parties hereto with respect to
any breach of any representation, warranty, covenant or agreement under this Agreement or Ancillary
Agreement by any party hereto or any certificate delivered in connection herewith or therewith,
except that nothing herein or in any such certificate shall be construed or interpreted as limiting
or impairing the rights or remedies that the parties hereto may have at equity for injunctive
relief or specific performance.

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ARTICLE 9

GENERAL PROVISIONS

     9.1 Notices. All notices, requests, claims and other communications under this
Agreement shall be in writing and shall be deemed given if delivered personally or by overnight
courier to the parties at the following addresses (or at such other address for a party as shall be
specified by notice from such party):

(a) If to Seller, to

Catalytica Energy Systems, Inc.

301 West Warner Road, Suite 132

Tempe, Arizona 85284

Attention: Richard M. Weinroth, Esq.

Phone: (480) 556-5555

Telecopy: (480) 998-5089

With a copy to:

Wilson Sonsini Goodrich & Rosati

Professional Corporation

650 Page Mill Road

Palo Alto, California 94304

Attention: Donna M. Petkanics, Esq.
                   Bradley L. Finkelstein, Esq.

Phone: (650) 493-9300

Telecopy: (650) 493-6811

(b) If to Parent or Buyer, to:

CoaLogix Inc.

c/o Acorn Factor, Inc.

4 West Rockland Road, 1st Floor

Montchanin, Delaware 19710

Attention: Chief Executive Officer

Phone: 302-656-1708

Telecopy: 302-994-3086

and

Acorn Factor, Inc.

4 West Rockland Road, 1st Floor

Montchanin, Delaware 19710

Attention: Chief Executive Officer

Phone: 302-656-1708

Telecopy: 302-994-3086

-40-

 

With a copy to:

Eilenberg Krause & Paul LLP

11 East 44th Street, 19th Floor

New York, New York 10017

Attention:Sheldon Krause, Esq.

Phone:(212) 986-9700

Telecopy:(212) 986-2399

     9.2 Certain Definitions. For purposes of this Agreement:

          (a) References in this Agreement to “Subsidiaries” of any party shall mean any
corporation, partnership, association, trust or other form of legal entity of which (i) more
than 50% of the outstanding voting securities are on the date hereof directly or indirectly
owned by such party or a Subsidiary of such party, or (ii) such party or any Subsidiary of such
party is a
general partner (excluding partnerships in which such party or any Subsidiary of such party
does not have a majority of the voting interests in such partnership).

          (b) References in this Agreement (except as specifically otherwise defined) to
“affiliates” shall mean, as to any person, any other person which, directly or
indirectly, controls, or is controlled by, or is under common control with, such person. As
used in this definition, “control” (including, with its correlative meanings,
“controlled by” and “under common control with”) shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of management or policies
of a person, whether through the ownership of securities or partnership or other ownership
interests, by contract or otherwise.

          (c) References in this Agreement (except as specifically otherwise defined) to
“person” shall mean an individual, a corporation, a partnership, a limited liability
company, an association, a trust or any other entity, group (as such term is used in
Section 13(d)(3) of the Exchange Act) or organization, including a Governmental Entity, and any
permitted successors and assigns of such person.

          (d) References in this Agreement to “knowledge” of a party shall mean the actual
knowledge of any of the officers or managerial personnel of such party (which for the avoidance
of doubt shall include the actual knowledge of Robert W. Zack, Richard M. Weinroth and Kevin
Lane in the case of Seller), with respect to the matter in question, and such knowledge as any
of such officers or managerial personnel reasonably should have obtained upon reasonable
investigation and inquiry into the matter in question.

          (e) References in this Agreement to “business day” shall mean any day other than a
Saturday, Sunday or a day on which the banks in New York or Arizona are authorized by law or
executive order to be closed.

          (f) References in this Agreement to specific laws or to specific provisions of laws shall
include all rules and regulations promulgated thereunder. Any statute defined or

-41-

 

referred to
herein or in any agreement or instrument referred to herein shall mean such statute as from time
to time amended, modified or supplemented, including by succession of comparable successor
statutes.

     9.3 Interpretation. When a reference is made in this Agreement to a Section, Exhibit
or Disclosure Schedule, such reference shall be to a Section of, or an Exhibit or Schedule to, this
Agreement unless otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the word “include,” “includes” or
“including” is used in this Agreement, it shall be deemed to be followed by the words
“without limitation.”

     9.4 Counterparts. This Agreement may be executed in counterparts, all of which shall be considered one and
the same agreement and shall become effective when one or more counterparts have been signed by
each party and delivered to each other party.

     9.5 Entire Agreement; Third-Party Beneficiaries. This Agreement and the other
agreements referred to herein constitute the entire agreement (and supersede each prior agreement
and understanding, whether written or oral) among the parties regarding the subject matter of this
Agreement. This Agreement is not intended to confer any rights or remedies on any person other
than the parties hereto. The rights of Buyer Indemnified Parties and Seller Indemnified Parties
under Article 8 may be asserted by Parent and Buyer, on the one hand, and Seller, on the
other hand, respectively.

     9.6 Governing Law. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Delaware regardless of any Laws that might otherwise govern under
applicable principles of conflicts of laws thereof.

     9.7 Assignment. Neither this Agreement nor any right, interest or obligation
hereunder shall be assigned, in whole or in part, by operation of law or otherwise, by any party
without the prior written consent of the other party. Subject to the preceding sentence of this
Section 9.7, this Agreement will be binding upon, inure to the benefit of, and be
enforceable by, the parties and their respective legal successors and permitted assigns.

     9.8 Nondisclosure. Except as may be required by applicable Law or the requirements of
the NASDAQ Stock Market, Inc., for a period of three (3) years following the Closing, Seller will
(and will cause its Subsidiaries to) take commercially reasonable steps comparable to those steps
Seller takes with regard to its own similar confidential information to protect the confidentiality
of all confidential information related to the Business in the possession of Seller or its then
Subsidiaries (other than information which is or becomes known to the public other than through a
breach of this Section 9.8 by Seller).

     9.9 Amendments; Waiver. This Agreement may not be amended or modified except by
written agreement of the parties hereto. No breach of any covenant, agreement, representation or
warranty made herein shall be deemed waived unless expressly waived in writing by the party who
might assert such breach.

-42-

 

     9.10 Enforcement. The parties agree that irreparable damage would occur if any provision of this Agreement
were not performed in accordance with its terms or were otherwise breached. Each party shall be
entitled to injunctive relief to prevent any breach of this Agreement and to enforce this Agreement
specifically in any court of the State of Delaware or any court of the United States located in the
State of Delaware (in addition to any other remedy to which such party is entitled at law or in
equity). In addition, each party hereby:

          (a) submits itself to the personal jurisdiction of (i) the courts of the State of Delaware;
and (ii) the United States District Court for the District of Delaware with respect to any
dispute, suit, action or proceeding arising out of, or based on any matter arising out of or in
connection with, this Agreement or any transaction contemplated hereby to the extent such courts
would have subject matter jurisdiction with respect to such dispute;

          (b) agrees that it will not attempt to deny or defeat such personal jurisdiction or venue
by motion or other request for leave from any such court; and

          (c) agrees that it will not bring any action relating to this Agreement (or any
transactions contemplated by this Agreement) in any court other than such courts referred to
above.

     9.11 Severability. Each provision of this Agreement will be interpreted so as to be
effective and valid under applicable Law, but if any provision is held invalid, illegal or
unenforceable under applicable Law in any jurisdiction, then such invalidity, illegality or
unenforceability will not affect any other provision, and this Agreement will be reformed,
construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision
had never been included herein.

ARTICLE 10

GUARANTEE OF BUYER’S OBLIGATIONS

     10.1 Guaranty. Parent hereby absolutely, irrevocably, continuously and
unconditionally guarantees to Seller (i) the full and prompt payment when due of all of Buyer’s
financial obligations (including payment of the Purchase Price) under this Agreement and the
Ancillary Agreement and (ii) the timely performance by Buyer of all of its duties, agreements,
covenants and obligations under Section 2.4 (clauses (i) and (ii) collectively, the
“Parent Guaranteed Obligations”).

     10.2 Guaranty Absolute. The liability of Parent under this Article 10 shall be absolute, unconditional,
present and continuing until all of the Parent Guaranteed Obligations have been indefeasibly paid
in full or performed, as applicable, irrespective of:

-43-

 

          (a) any assignment or other transfer, in whole or in part, of Seller’s interests in and
rights under this Agreement and/or the Ancillary Agreement, including, without limitation,
Seller’s right to receive payment and require performance of the Parent Guaranteed Obligations;

          (b) any amendment, waiver, renewal, extension or release of or any consent to or departure
from or other action or inaction related to this Agreement or the Ancillary Agreement, or any
other agreement or instrument relating to the Parent Guaranteed Obligations;

          (c) any lack of validity or enforceability of or defect or deficiency in this Agreement
(including this Article 10) or any other documents to which Seller, Parent or their
respective Subsidiaries is or may become a party;

          (d) any modification, extension or waiver of any of the terms of this Agreement (including
this Article 10);

          (e) except as to applicable statutes of limitation, failure, omission, delay, waiver or
refusal by Seller to exercise, in whole or in part, any right or remedy held by Seller with
respect to this Agreement (including this Article 10);

          (f) insolvency, bankruptcy, reorganization, arrangement, adjustment, composition,
assignment for the benefit of creditors, liquidation, winding up, dissolution or other similar
proceeding of Seller, Parent, any of their respective Subsidiaries or any other guarantor of the
Parent Guaranteed Obligations or other similar proceeding; and

          (g) any other circumstance that might otherwise constitute a defense available to, or a
discharge of, Parent in respect of the Parent Guaranteed Obligations, other than payment in full
of the Parent Guaranteed Obligations.

     10.3 Obligations Several. This is a guaranty of payment and performance and not of
collection. The obligations of Parent hereunder are several from those of Buyer or any other
person, and are primary obligations concerning which Parent is the principal obligor. There are no
conditions precedent to the enforcement of this Article 10, except as expressly contained
herein. It shall not be necessary for Seller, in order to enforce payment and performance by
Parent under this Article 10, to exhaust its remedies against Buyer, any other guarantor,
or any other person liable for the payment or performance of the Parent Guaranteed Obligations.
Seller shall not be required to mitigate damages or take any other action to reduce, collect, or
enforce the Parent Guaranteed Obligations.

     10.4 Obligations Continuing. This Article 10 shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Parent Guaranteed Obligations are annulled, set aside,
invalidated, declared to be fraudulent or preferential, rescinded or must otherwise be returned,
refunded or repaid by Seller, upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of Parent, Buyer or any other guarantor, or upon or as a result of the appointment
of a receiver, intervener or conservator of, or trustee or similar officer for,

-44-

 

Parent, Buyer or
any other guarantor or any substantial part of their property or otherwise, all as though such
payment or payments had not been made.

     10.5 Enforcement of Guaranty. In no event shall Seller have any obligation (although
it is entitled, at its option) to proceed against Buyer before seeking satisfaction from Parent,
and Seller may proceed, prior or subsequent to, or simultaneously with, the enforcement of Seller’s
rights hereunder, to exercise any right or remedy which it may have under this Agreement, including
this Article 10.

     10.6 Waiver. Parent hereby waives:

          (a) notice of acceptance of the guaranty in this Article 10, of the creation or
existence of any of the Parent Guaranteed Obligations and of any action by Seller in reliance
hereon or in connection herewith;

          (b) except as expressly set forth herein, promptness, diligence, all setoffs, presentment,
demand for payment or performance, notice of dishonor, nonpayment or nonperformance, protest and
notice of protest with respect to the Parent Guaranteed Obligations;

          (c) any requirement for Seller or any other person to protect, secure, perfect or insure
any security interest or lien or any property subject thereto or exhaust any right or take any
action against Parent, any other entity or any collateral;

          (d) any provision of any statute or judicial decision otherwise applicable hereto which
restricts or in any way limits the rights of any obligee against a guarantor or surety following
a default or failure of performance by an obligor with respect to whose obligations the
guarantee or surety is provided;

          (e) any requirement that suit be brought against, or any other action by Seller be taken
against, or any notice of default or other notice be given to, or any demand be made on, Parent
or any other person, or that any other action be taken or not taken as a condition to Parent’s
liability for the Parent Guaranteed Obligations under this Article 10 or as a condition
to the enforcement of this Article 10 against Parent; and

          (f) any defense of Buyer or the cessation, from any cause whatsoever, of the liability of
Buyer.

     10.7 Expenses. Parent hereby agrees to pay on demand any and all costs, including
reasonable legal fees, and other expenses incurred by Seller in enforcing Parent’s obligations
under this Article 10. Parent hereby unconditionally, absolutely and irrevocably agrees to
hold Seller and its successors and assigns harmless and to indemnify Seller and its successors and
assigns from, for and against any and all costs and expenses, including reasonable attorneys’ fees,
arising out of or relating to any failure by Parent to carry out, observe and perform in accordance
with this Article 10 any of the Parent Guaranteed Obligations contained in or arising from
this Article 10.

-45-

 

     10.8 Benefit of Guaranty. The provisions of this Article 10 are for the
benefit of Seller and its successors, transferees, endorsees and assigns.

     10.9 Reinstatement. This Article 10 shall remain in full force and effect and
continue to be effective should any petition be filed by or against Buyer or Parent for liquidation
or reorganization, should Buyer or Parent become insolvent or make an assignment for the benefit of
creditors or should a receiver or trustee be appointed for all or any significant part of Buyer’s
or Parent’s assets, and shall continue to be effective or be reinstated, as the case may be, if at
any time payment and performance of the Parent Guaranteed Obligations, or any part thereof, is,
pursuant to applicable law, rescinded or reduced in amount, or otherwise must be restored or
returned by Seller, whether as a “voidable preference,” “fraudulent conveyance,” or otherwise, all
as though such payment or performance had not been made. In the event that any payment, or any
part thereof, is rescinded, reduced, restored or returned, the Parent Guaranteed Obligations shall
be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored
or returned.

     10.10 Continuing Guaranty. This Article 10 is a continuing guaranty and shall
remain in effect until the Parent Guaranteed Obligations have been paid in full. Any other
guarantors of all or any part of the Parent Guaranteed Obligations may be released without
affecting the liability of Parent hereunder.

     10.11 Effective Date and Term of Guaranty. The guaranty under this Article 10
shall be effective at the Closing. Seller shall not have any rights under this Article 10,
express or implied, nor shall Parent have any obligations under this Article 10, express or
implied, until the Closing. Subject to the foregoing sentence, this Article 10 shall
continue in full force and effect until payment in full of the Parent Guaranteed Obligations;
provided, however, that the obligations and liabilities of Parent under this Article 10
shall continue in full force and effect with respect to any breach of Parent’s obligations
hereunder or of the Parent Guaranteed Obligations, in each case occurring prior to such
termination.

ARTICLE 11

GUARANTEE OF SELLER’S OBLIGATIONS

     11.1 Guaranty. Renegy hereby absolutely, irrevocably, continuously and
unconditionally guarantees to Buyer the full and prompt payment when due of all of Seller’s
financial obligations (if any) under Section 2.3(b)(iii) and Section 8.3 of this
Agreement (collectively, the “Renegy Guaranteed Obligations”).

     11.2 Guaranty Absolute. The liability of Renegy under this Article 11 shall
be absolute, unconditional, present and continuing until all of the Renegy Guaranteed Obligations
have been indefeasibly paid in full or performed, as applicable, irrespective of:

          (a) any assignment or other transfer, in whole or in part, of Buyer’s interests in and
rights under this Agreement and/or the Ancillary Agreement, including, without

-46-

 

limitation,
Buyer’s right to receive payment and require performance of the Renegy Guaranteed Obligations;

          (b) any amendment, waiver, renewal, extension or release of or any consent to or departure
from or other action or inaction related to this Agreement or the Ancillary Agreement, or any
other agreement or instrument relating to the Renegy Guaranteed Obligations;

          (c) any lack of validity or enforceability of or defect or deficiency in this Agreement
(including this Article 11) or any other documents to which Buyer, Renegy or their
respective Subsidiaries is or may become a party;

          (d) any modification, extension or waiver of any of the terms of this Agreement (including
this Article 11);

          (e) except as to applicable statutes of limitation, failure, omission, delay, waiver or
refusal by Buyer to exercise, in whole or in part, any right or remedy held by Buyer with
respect to this Agreement (including this Article 11);

          (f) insolvency, bankruptcy, reorganization, arrangement, adjustment, composition,
assignment for the benefit of creditors, liquidation, winding up, dissolution or other similar
proceeding of Buyer, Renegy, any of their respective Subsidiaries or any other guarantor of the
Renegy Guaranteed Obligations or other similar proceeding; and

          (g) any other circumstance that might otherwise constitute a defense available to, or a
discharge of, Renegy in respect of the Renegy Guaranteed Obligations, other than payment in full
of the Renegy Guaranteed Obligations.

     11.3 Obligations Several. This is a guaranty of payment and performance and not of
collection. The obligations of Renegy hereunder are several from those of Seller or any other
person, and are primary obligations concerning which Renegy is the principal obligor. There are no
conditions precedent to the enforcement of this Article 11, except as expressly contained
herein. It shall not be necessary for Buyer, in order to enforce payment and performance by Renegy
under this Article 11, to exhaust its remedies against Seller, any other guarantor, or any
other person liable for the payment or performance of the Renegy Guaranteed Obligations. Buyer
shall not be required to mitigate damages or take any other action to reduce, collect, or enforce
the Renegy Guaranteed Obligations.

     11.4 Obligations Continuing. This Article 11 shall continue to be effective
or be reinstated, as the case may be, if at any time any payment of any of the Renegy Guaranteed
Obligations are annulled, set aside, invalidated, declared to be fraudulent or preferential,
rescinded or must otherwise be returned, refunded or repaid by Buyer, upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of Renegy, Seller or any other guarantor, or
upon or as a result of the appointment of a receiver, intervener or conservator of, or trustee or
similar officer for, Renegy, Seller or any other guarantor or any substantial part of their
property or otherwise, all as though such payment or payments had not been made.

-47-

 

     11.5 Enforcement of Guaranty. In no event shall Buyer have any obligation (although
it is entitled, at its option) to proceed against Seller before seeking satisfaction from Renegy,
and Buyer may proceed, prior or subsequent to, or simultaneously with, the enforcement of Buyer’s
rights hereunder, to exercise any right or remedy which it may have under this Agreement, including
this Article 11.

     11.6 Waiver. Renegy hereby waives:

          (a) notice of acceptance of the guaranty in this Article 11, of the creation or
existence of any of the Renegy Guaranteed Obligations and of any action by Buyer in reliance
hereon or in connection herewith;

          (b) except as expressly set forth herein, promptness, diligence, all setoffs, presentment,
demand for payment or performance, notice of dishonor, nonpayment or nonperformance, protest and
notice of protest with respect to the Renegy Guaranteed Obligations;

          (c) any requirement for Buyer or any other person to protect, secure, perfect or insure any
security interest or lien or any property subject thereto or exhaust any right or take any
action against Renegy, any other entity or any collateral;

          (d) any provision of any statute or judicial decision otherwise applicable hereto which
restricts or in any way limits the rights of any obligee against a guarantor or surety following
a default or failure of performance by an obligor with respect to whose obligations the
guarantee or surety is provided;

          (e) any requirement that suit be brought against, or any other action by Buyer be taken
against, or any notice of default or other notice be given to, or any demand be made on, Renegy
or any other person, or that any other action be taken or not taken as a condition to Renegy’s
liability for the Renegy Guaranteed Obligations under this Article 11 or as a condition
to the enforcement of this Article 11 against Renegy; and

          (f) any defense of Seller or the cessation, from any cause whatsoever, of the liability of
Seller.

     11.7 Expenses. Renegy hereby agrees to pay on demand any and all costs, including
reasonable legal fees, and other expenses incurred by Buyer in enforcing Renegy’s obligations under
this Article 11. Renegy hereby unconditionally, absolutely and irrevocably agrees to hold
Buyer and its successors and assigns harmless and to indemnify Buyer and its successors and assigns
from, for and against any and all costs and expenses, including reasonable attorneys’ fees, arising
out of or relating to any failure by Renegy to carry out, observe and perform in accordance with
this Article 11 any of the Renegy Guaranteed Obligations contained in or arising from this
Article 11.

     11.8 Benefit of Guaranty. The provisions of this Article 11 are for the
benefit of Buyer and its successors, transferees, endorsees and assigns.

-48-

 

     11.9 Reinstatement. This Article 11 shall remain in full force and effect and
continue to be effective should any petition be filed by or against Seller or Renegy for
liquidation or reorganization, should Seller or Renegy become insolvent or make an assignment for
the benefit of creditors or should a receiver or trustee be appointed for all or any significant
part of Seller’s or Renegy’s assets, and shall continue to be effective or be reinstated, as the
case may be, if at any time payment and performance of the Renegy Guaranteed Obligations, or any
part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or otherwise must be
restored or returned by Buyer, whether as a “voidable preference,” “fraudulent conveyance,” or
otherwise, all as though such payment or performance had not been made. In the event that any
payment, or any part thereof, is rescinded, reduced, restored or returned, the Renegy Guaranteed
Obligations shall be reinstated and deemed reduced only by such amount paid and not so rescinded,
reduced, restored or returned.

     11.10 Continuing Guaranty. This Article 11 is a continuing guaranty and shall remain in effect until the
Renegy Guaranteed Obligations have been paid in full. Any other guarantors of all or any part of
the Renegy Guaranteed Obligations may be released without affecting the liability of Renegy
hereunder.

     11.11 Effective Date and Term of Guaranty. The guaranty under this Article 11
shall be effective at the Closing. Buyer shall not have any rights under this Article 11,
express or implied, nor shall Renegy have any obligations under this Article 11, express or
implied, until the Closing. Subject to the foregoing sentence, this Article 11 shall
continue in full force and effect until payment in full of the Renegy Guaranteed Obligations;
provided, however, that the obligations and liabilities of Renegy under this Article 11
shall continue in full force and effect with respect to any breach of Renegy’s obligations
hereunder or of the Renegy Guaranteed Obligations, in each case occurring prior to such
termination.

Signature page follows]

-49-

 

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

	 	 	 	 	 
	SELLER	 	 
	 
	 	 	 	 
	CATALYTICA ENERGY SYSTEMS, INC.	 	 
	a Delaware corporation	 	 
	 
	 	 	 	 
	By:

	 	/s/ Robert W. Zack
 

	 	 
	Name: Robert W. Zack	 	 
	Title: CFO	 	 
	 
	 	 	 	 
	PARENT	 	 
	 
	 	 	 	 
	ACORN FACTOR, INC.	 	 
	a Delaware corporation	 	 
	 
	 	 	 	 
	By:

	 	/s/ John A. Moore	 	 
	 

	 	 	 	 
	Name: John A. Moore	 	 
	Title: CEO	 	 
	 
	 	 	 	 
	BUYER	 	 
	 
	 	 	 	 
	COALOGIX INC.	 	 
	a Delaware corporation	 	 
	 
	 	 	 	 
	By:

	 	/s/ John A. Moore	 	 
	 

	 	 	 	 
	Name: John A. Moore	 	 
	Title: President	 	 

[Signature Page to Stock Purchase Agreement]

 

	 	 	 	 	 
	WITH RESPECT TO ARTICLE 11 ONLY,	 	 
	 
	 	 	 	 
	RENEGY	 	 
	 
	 	 	 	 
	RENEGY HOLDINGS, INC.	 	 
	a Delaware corporation	 	 
	 
	 	 	 	 
	By:

	 	/s/ Robert W. Zack	 	 
	 

	 	 	 	 
	Name: Robert W. Zack	 	 
	Title: Chief Financial Officer and Executive Vice President	 	 

[Signature Page to Stock Purchase Agreement]exv10w1

 

Exhibit 10.1

Execution Copy

 

STOCK PURCHASE AGREEMENT

by and between

Sempra Energy

and

Energy West Incorporated

Dated as of January 30, 2007

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	1. DEFINITIONS
	 	 	1	 
	 
	 	 	 	 
	1.1. Defined Terms.
	 	 	1	 
	1.2. Construction of Certain Terms and Phrases
	 	 	9	 
	 
	 	 	 	 
	2. THE PURCHASE AND SALE OF STOCK
	 	 	10	 
	 
	 	 	 	 
	2.1. Sale and Transfer
	 	 	10	 
	2.2. Payment of the Purchase Price
	 	 	10	 
	2.3. Preparation of the Closing Date Balance Sheet
	 	 	10	 
	 
	 	 	 	 
	3. PRE-CLOSING COVENANTS AND UNDERTAKINGS
	 	 	11	 
	 
	 	 	 	 
	3.1. Satisfaction of Closing Conditions
	 	 	12	 
	3.2. Conduct of the Business of the Company and the Subsidiary Prior to Closing
	 	 	12	 
	3.3. Consents and Approvals
	 	 	14	 
	3.4. Access, Information and Confidentiality
	 	 	16	 
	3.5. Delivery of Financial Statements and Regulatory Filings
	 	 	18	 
	3.6. Pre-Closing Transfers and Debt Forgiveness
	 	 	18	 
	3.7. Public Announcements
	 	 	18	 
	 
	 	 	 	 
	4. ADDITIONAL AGREEMENTS
	 	 	19	 
	 
	 	 	 	 
	4.1. Tax Matters
	 	 	19	 
	4.2. Employee and Benefit Matters
	 	 	23	 
	4.3. Transition Services Agreement; Post-Closing Cooperation
	 	 	25	 
	4.4. Guaranties or Bonds
	 	 	25	 
	4.5. Agreement Not to Solicit Employees
	 	 	27	 
	4.6. The Company’s or the Subsidiary’s Use of Seller Marks
	 	 	28	 
	4.7. Insurance Claims
	 	 	29	 
	4.8. Payment of Fine
	 	 	29	 
	 
	 	 	 	 
	5. REPRESENTATIONS AND WARRANTIES OF SELLER REGARDING THE COMPANY AND THE SUBSIDIARY
	 	 	29	 
	 
	 	 	 	 
	5.1. Organization and Good Standing of the Company and the Subsidiary; Foreign
Qualifications
	 	 	29	 
	5.2. Capitalization of the Company and the Subsidiary
	 	 	30	 
	5.3. Financial Statements; Undisclosed Liabilities
	 	 	31	 
	5.4. Taxes
	 	 	31	 
	5.5. Tangible Personal Property
	 	 	31	 
	5.6. Agreement Related to Other Instruments; Consents
	 	 	32	 
	5.7. Absence of Changes
	 	 	32	 
	5.8. Material Claims
	 	 	33	 
	5.9. Permits; Compliance With Laws
	 	 	33	 
	5.10. Real Property
	 	 	34	 
	5.11. Intellectual Property; Software
	 	 	34	 

i

 

 

	 	 	 	 	 
	5.12. Material Contracts
	 	 	35	 
	5.13. Labor Matters
	 	 	37	 
	5.14. ERISA and Related Matters
	 	 	37	 
	5.15. Guaranties or Bonds
	 	 	38	 
	5.16. Employees
	 	 	38	 
	5.17. Environmental Matters
	 	 	38	 
	5.18. Insurance Coverage
	 	 	39	 
	5.19. Governmental Filings
	 	 	39	 
	5.20. Accounts Receivable
	 	 	39	 
	 
	 	 	 	 
	6. REPRESENTATIONS AND WARRANTIES OF SELLER REGARDING SELLER AND THE PURCHASED SHARES
	 	 	40	 
	 
	 	 	 	 
	6.1. Organization and Standing
	 	 	40	 
	6.2. Corporate Power and Authority; Enforceability
	 	 	40	 
	6.3. No Violation or Conflict by Seller
	 	 	40	 
	6.4. Seller Governmental Approvals
	 	 	40	 
	6.5. Title to the Purchased Shares
	 	 	41	 
	6.6. Litigation Against Seller
	 	 	41	 
	 
	 	 	 	 
	7. REPRESENTATIONS AND WARRANTIES OF PURCHASER
	 	 	41	 
	 
	 	 	 	 
	7.1. Organization and Standing
	 	 	41	 
	7.2. Corporate Power and Authority; Enforceability
	 	 	41	 
	7.3. No Violation or Conflict by Purchaser
	 	 	42	 
	7.4. Purchaser Governmental Approvals
	 	 	42	 
	7.5. Litigation Against Purchaser
	 	 	42	 
	7.6. Purchase for Investment
	 	 	42	 
	7.7. Financial Capacity; Solvency
	 	 	43	 
	7.8. “As Is” Sale
	 	 	43	 
	 
	 	 	 	 
	8. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
	 	 	44	 
	 
	 	 	 	 
	8.1. Representations True at the Closing
	 	 	44	 
	8.2. Covenants of Seller
	 	 	44	 
	8.3. No Injunction, Etc.
	 	 	44	 
	8.4. Consents, Approvals and Waivers
	 	 	44	 
	8.5. Absence of Material Adverse Effect
	 	 	44	 
	8.6. Other Agreements
	 	 	45	 
	8.7. Maritimes Guarantee
	 	 	45	 
	 
	 	 	 	 
	9. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER
	 	 	45	 
	 
	 	 	 	 
	9.1. Representations True at Closing
	 	 	45	 
	9.2. Covenants of Purchaser
	 	 	45	 
	9.3. No Injunction, Etc.
	 	 	45	 
	9.4. Consents, Approvals and Waivers
	 	 	45	 
	9.5. Other Agreements
	 	 	46	 

ii

 

 

	 	 	 	 	 
	10. CLOSING
	 	 	46	 
	 
	 	 	 	 
	10.1. Time and Place of Closing
	 	 	46	 
	10.2. Transactions at Closing
	 	 	46	 
	 
	 	 	 	 
	11. SURVIVAL OF REPRESENTATION AND WARRANTIES; INDEMNIFICATION
	 	 	48	 
	 
	 	 	 	 
	11.1. Survival of Representations, Warranties and Agreements
	 	 	48	 
	11.2. Agreements to Indemnify Purchaser Indemnitees
	 	 	48	 
	11.3. Agreements to Indemnify the Seller Indemnitees
	 	 	49	 
	11.4. Recoveries
	 	 	49	 
	11.5. Limitations on Indemnity
	 	 	49	 
	11.6. Survival
	 	 	50	 
	11.7. Notice and Defense of Actions
	 	 	51	 
	11.8. Exclusive Remedy
	 	 	52	 
	11.9. Treatment
	 	 	53	 
	 
	 	 	 	 
	12. TERMINATION
	 	 	53	 
	 
	 	 	 	 
	12.1. Method of Termination
	 	 	53	 
	12.2. Procedure and Effect of Termination
	 	 	54	 
	 
	 	 	 	 
	13. GENERAL PROVISIONS
	 	 	54	 
	 
	 	 	 	 
	13.1. Notices
	 	 	54	 
	13.2. Brokers
	 	 	56	 
	13.3. Expenses
	 	 	56	 
	13.4. Further Assurances
	 	 	56	 
	13.5. Attribution of Knowledge
	 	 	56	 
	13.6. Waiver
	 	 	57	 
	13.7. Assignment; Binding Effect; No Third-Party Beneficiaries
	 	 	57	 
	13.8. Headings
	 	 	57	 
	13.9. Entire Agreement
	 	 	57	 
	13.10. Modifications
	 	 	57	 
	13.11. Governing Law
	 	 	58	 
	13.12. Severability
	 	 	58	 
	13.13. Counterparts
	 	 	58	 
	13.14. Exhibits and Schedules Incorporated
	 	 	58	 
	13.15. Waiver of Certain Damages
	 	 	58	 
	13.16. Joint Preparation
	 	 	59	 
	13.17. Performance by Affiliates
	 	 	59	 
	13.18. Consent to Jurisdiction; Waivers of Trial by Jury
	 	 	59	 

iii

 

 

LIST OF EXHIBITS

	 	 	 
	Exhibit A

	 	Assumed Working Capital Calculation
	 
	 	 
	Exhibit B

	 	Form of Transition Services Agreement
	 
	 	 
	Exhibit C

	 	Form of Seller’s Closing Certificate
	 
	 	 
	Exhibit D

	 	Form of Purchaser’s Closing Certificate

iv

 

 

LIST OF SCHEDULES

	 	 	 
	Schedule 3.2

	 	Conduct of the Business Prior to Closing
	Schedule 3.6(a)

	 	Excluded Assets and Liabilities
	Schedule 3.6(b)

	 	Pro Forma Balance Sheets
	Schedule 4.2.1

	 	Company’s Employees
	Schedule 5.2

	 	Capitalization of the Company and the Subsidiary
	Schedule 5.3.1

	 	Financial Statements
	Schedule 5.3.2

	 	Undisclosed Liabilities
	Schedule 5.4

	 	Taxes
	Schedule 5.5.1

	 	Tangible Personal Property
	Schedule 5.6

	 	Company’s Consents and Approvals
	Schedule 5.7

	 	Absence of Changes
	Schedule 5.8

	 	Material Claims
	Schedule 5.9

	 	Permits; Compliance with Laws
	Schedule 5.10.1

	 	Owned Real Property
	Schedule 5.10.2

	 	Leased Real Property
	Schedule 5.11.1

	 	Intellectual Property
	Schedule 5.11.2(a)

	 	Company’s and Subsidiary’s Software
	Schedule 5.11.2(b)

	 	Non-Company Affiliates’ Software
	Schedule 5.11.3

	 	Intellectual Property Infringement
	Schedule 5.12

	 	Material Contracts
	Schedule 5.13

	 	Labor Matters
	Schedule 5.14

	 	ERISA and Related Matters
	Schedule 5.15

	 	Guaranties or Bonds
	Schedule 5.16

	 	Employees
	Schedule 5.17

	 	Environmental Compliance
	Schedule 5.18

	 	Insurance Coverage
	Schedule 5.19

	 	Government Filings
	Schedule 5.20

	 	Accounts Receivable
	Schedule 6.3

	 	No Violation or Conflict by Seller
	Schedule 6.4

	 	Seller Governmental Approvals
	Schedule 6.6

	 	Litigation Against Seller
	Schedule 7.3

	 	No Violation or Conflict by Purchaser
	Schedule 7.4

	 	Purchaser Governmental Approvals
	Schedule 13.5(a)

	 	Attribution of Knowledge for Seller
	Schedule 13.5(b)

	 	Attribution of Knowledge for Purchaser

v

 

 

STOCK PURCHASE AGREEMENT

     THIS STOCK PURCHASE AGREEMENT (this “Agreement”) is entered into as of this 30th day
of January, 2007 (the “Effective Date”), by and between SEMPRA ENERGY, a corporation incorporated
under the laws of the State of California, USA (“Seller”), and Energy West Incorporated, a
corporation incorporated under the laws of the State of Montana, USA (“Purchaser”).

W I T N E S S E T H:

     WHEREAS, Seller owns all of the issued and outstanding capital stock of Penobscot Natural Gas
Company, Inc. (the “Company”);

     WHEREAS, the Company owns a one hundred percent (100%) membership interest in Bangor Gas
Company LLC (the “Subsidiary”); and

     WHEREAS, Purchaser desires to purchase from Seller, and Seller desires to sell to Purchaser,
all of the issued and outstanding capital stock of the Company after the transfer of the Excluded
Assets and Liabilities (as defined herein), all in accordance with the terms and subject to the
conditions set forth herein.

     NOW, THEREFORE, in consideration of the premises and the mutual promises, representations,
warranties and covenants hereinafter set forth, the parties hereto agree as follows:

1. DEFINITIONS

1.1. Defined Terms.

     As used herein, the following terms shall have the following meanings unless the context
otherwise requires:

     “Accounting Expert” has the meaning set forth in Section 2.3.2
.

     “Accounts Receivable” means any and all accounts receivable of the Company or the
Subsidiary, as the term “accounts receivable” is understood under GAAP.

     “Accrued Tax Liability” means the aggregate amount of Income Tax liabilities
(including deferred Taxes) of the Company and the Subsidiary as reflected on the Closing Date
Balance Sheet.

     “Action” has the meaning set forth in Section 11.7.1.

     “Adjustment Amount” means an amount equal to the sum of: (i) the Assumed Working
Capital Amount; minus (ii) the Closing Date Working Capital Amount.

     “Affiliate” means (a) with respect to each of Seller, the Company and the Subsidiary,
and any other member of the Sempra Group; and (b) with respect to any other Person,
any Person

 

 

that, directly or indirectly, through one or more intermediaries, Controls, is Controlled by, or is
under common Control with, such first Person. For purposes of this definition and this Agreement,
the Company and the Subsidiary shall be deemed to be Affiliates of Seller prior to the Closing and
Affiliates of Purchaser from and after the Closing.

     “Agreement” has the meaning set forth in the Preamble.

     “Assets” means all of the assets, rights, interests, contract rights, accounts,
claims, credits, franchises and properties of the Company and the Subsidiary, whether real,
personal, tangible or intangible.

     “Assumed Working Capital Amount” means an amount equal to the sum of: (i) the
Consolidated Working Capital Assets reflected in the Interim Financial Statements; minus (ii) the
Consolidated Working Capital Liabilities reflected in the Interim Financial Statements, calculated
as set forth on Exhibit A hereto.

     “Benefit Plan” means: (a) each “employee benefit plan,” as such term is defined in
Section 3(3) of ERISA, (b) each plan that would be an “employee benefit plan”, as such term is
defined in Section 3(3) of ERISA, if it was subject to ERISA, such as foreign plans and plans for
directors, (c) each stock bonus, stock ownership, stock option, stock purchase, stock appreciation
rights, phantom stock, or other stock plan (whether qualified or nonqualified), and (d) each bonus
or incentive compensation plan; provided, however, the term “Benefit Plan” shall
not include (i) routine employment policies and procedures or payroll plans developed and applied
in the ordinary course of business and consistent with past practice, including wage, vacation,
holiday, and sick or other leave policies, (ii) workers’ compensation insurance, and
(iii) directors’ and officers’ liability insurance.

     “Big Four Accounting Firm” means and includes any of the following independent
certified public accounting firms: PricewaterhouseCoopers, LLP, KPMG LLP, Deloitte & Touche LLP,
Ernst & Young LLP and any combined entity including two or more of such firms; provided,
however, that in no event shall the term “Big Four Accounting Firm” include any such
accounting firm that at the relevant time is the principal outside financial auditing firm for
Seller or Purchaser.

     “Business Day” means any day excluding Saturday, Sunday and any day that is a legal
holiday in the State of California, the State of New York or the State of Maine.

     “Cap” has the meaning set forth in Section 11.5.2 .

     “CERCLA” has the meaning given to it in the definition of “Environmental Law.”

     “Closing” or “Closing Date” means the consummation of the transactions
contemplated by Section 10.2.

     “Closing Date” has the meaning set forth in Section 10.1.

     “Closing Date Balance Sheet” has the meaning set forth in Section 2.3.1.

 

 

     “Closing Date Working Capital Amount” means an amount equal to the sum of: (i) the
Consolidated Working Capital Assets reflected in the Closing Date Balance Sheet; minus (ii) the
Consolidated Working Capital Liabilities reflected in the Closing Date Balance Sheet.

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

     “Company” has the meaning set forth in the Preamble.

     “Company Plan” means each Benefit Plan (other than the Seller Plans) that is sponsored
or maintained as of the date of this Agreement by the Company or the Subsidiary for the benefit of
any of their current or former directors, officers or employees.

     “Company’s Employees” has the meaning set forth in Section 4.2.

     “Confidential Information” means (a) all information concerning a party hereto and/or
its Affiliates furnished to another party hereto or any director, officer, employee, agent,
advisor, or other representative (a “Representative”) of such receiving party or any of its
Affiliates in writing, orally or electronically by such disclosing party or any Representative of
such disclosing party or any of its Affiliates in connection with this Agreement or the
transactions contemplated herein, whether before or after the date hereof, including, but not
limited to, any such information (i) concerning the business, financial condition, operations,
products, services, assets, customers, forecasts and/or liabilities of such disclosing party and/or
its Affiliates, (ii) which relates to technologies, intellectual property or capital, models,
concepts, or ideas of such disclosing party and/or its Affiliates, (iii) of third parties that such
disclosing party and/or its Affiliates is required under applicable Law or contracts to keep
confidential, or (iv) that has been clearly identified as confidential; and (b) terms and
conditions of this Agreement and any other agreement entered into pursuant hereto, the fact that
the parties hereto have entered into this Agreement, and that this Agreement exists;
provided, however, the term “Confidential Information” shall not include
information that: (i) is already known or in the possession of such receiving party at the time of
disclosure, as evidenced by such receiving party’s written documentation, unless received or
obtained as confidential information; (ii) becomes subsequently available to such receiving party
on a non-confidential basis from a source not known or reasonably suspected by such receiving party
to be bound by a confidentiality agreement or secrecy obligation owed to such disclosing party;
(iii) is or becomes generally available to the public other than as a result of a breach of
Section 3.4.2 by such receiving party or any Representative of
such receiving party or any of its Affiliates; or (iv) is independently developed by such receiving
party without use, directly or indirectly, of Confidential Information of such disclosing party, as
evidenced by such receiving party’s written documentation; provided further,
however, if only a portion of the Confidential Information falls under one of the foregoing
exceptions, then only that portion shall not be deemed Confidential Information.

     “Consolidated” means: (i) with respect to the financial statement(s) of the Company
and the Subsidiary, the presentation of the results of operations and the financial position of the
Company and the Subsidiary essentially as if the Company and the Subsidiary were a single company
with one or more branches or divisions; and (ii) with respect to any financial item(s) of the
Company and the Subsidiary, the presentation of such item(s) essentially as if the Company and the
Subsidiary were a single company with one or more branches or divisions, in each case

 

 

as determined
in accordance with GAAP (whether or not the Company and the Subsidiary would in fact be
Consolidated under GAAP).

     “Consolidated Income Tax Returns” means any Income Tax Returns filed for any
consolidated, combined or unitary group of corporations under federal, state or local laws, the
common parent of which is Seller or a direct or indirect subsidiary of Seller other than the
Company or the Subsidiary.

     “Consolidated Working Capital Assets” means the sum of: (i) all current assets of the
Company and the Subsidiary, including, without limitation, cash and cash equivalents, marketable
securities, accounts receivable, notes receivable, prepayment expenses (including, without
limitation, prepaid rent, personal property taxes, real property taxes, business license taxes,
pipeline franchise taxes and insurance), inventory (including, without limitation, fuel and spare
parts), and allowance for doubtful accounts and other current asset accounts; minus (ii)
deferred taxes, mark-to-market accruals, and intercompany receivables, of the Company and the
Subsidiary on a Consolidated basis as of the Closing Date.

     “Consolidated Working Capital Liabilities” means the sum of: (i) all current
liabilities of the Company and the Subsidiary, including, without limitation, accounts payable,
accrued expenses, short-term debt and other current liability accounts; minus (ii) accrued
taxes, current portion of long-term debt, mark-to-market accruals, and intercompany payables, of
the Company and the Subsidiary on a Consolidated basis as of the Closing Date.

     “Continuation Period” has the meaning set forth in Section 4.2.2.

     “Contract” means any legally binding obligation or agreement (other than a Benefit
Plan) to which the Company or the Subsidiary is a party, whether or not reduced to writing, and
specifically including but not limited to any note, bond, mortgage, lease of real or personal
property, license agreement, construction contract, subcontract, engineering contract, guarantee,
suretyship agreement, pledge agreement, indemnity, joint venture or partnership agreement,
confidentiality agreement, non-competition agreement, insurance contract, employment agreement or
other contract or agreement.

     “Control” means (a) the possession, directly or indirectly, of the power to direct or
cause the direction of management and policies of a Person, whether through the ownership of voting
securities, as a trustee or executor, by contract or credit arrangement, or otherwise, or (b) the
ownership of more than fifty percent (50%) of the equity interest in a Person.

     “Deductible” has the meaning set forth in Section 11.5.1..

     “Default” shall mean (a) a material breach or default, or (b) the occurrence of an
event that with the passage of time or the giving of notice or both would constitute a material
breach or default.

     “DOJ” means the United States Department of Justice.

     “Dollar” or “$” means the lawful currency of the United States.

 

 

     “Environmental Law” means any federal, state, provincial or local law, statute,
ordinance, rule, regulation, or order relating to the protection of the environment, including the
Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. § 9601 et seq.)
(“CERCLA”), the Hazardous Material 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.), and the Safe Drinking Water Act (42 U.S.C. § 300
et seq.), as amended or supplemented, that is in effect on the Closing Date.

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

     “Evaluation Period” has the meaning set forth in Section 3.2.

     “Excluded Assets and Liabilities” has the meaning set forth in Section 3.6.

     “FERC” means the United States Federal Energy Regulatory Commission.

     “Financial Statements” means, collectively, the Interim Financial Statements and the
Year-End Financial Statements.

     “FIRPTA Certificate” means a certificate, as described in Treasury Regulation Section
1.1445-2(b)(2), which is signed under penalties of perjury by an authorized representative of
Seller, and which (i) certifies that the Seller is not a “foreign person,” as defined in Treasury
Regulation Section 1.1445-2(b)(2), and (ii) provides Seller’s name, identifying number (as defined
in Section 6109 of the Code), and office address.

     “FTC” means the United States Federal Trade Commission.

     “GAAP” means generally accepted accounting principles as recognized by the American
Institute of Certified Public Accountants, as in effect from time to time.

     “Governmental Authority” means any nation, province, state, county, municipality and
any other political subdivision of any of the foregoing, and any Person exercising executive,
legislative, regulatory or administrative functions of or pertaining to government, including MPUC,
FERC, FTC, DOJ, SEC and IRS.

     “Guaranty or Bond” means any guaranty, letter of credit, surety bond and any other
similar material agreement or arrangement pursuant to which Seller or one or more
Non-Company Affiliates has obligations with respect to any obligations of the Company or the
Subsidiary, and any security or collateral furnished in connection with any such guaranty, letter
of credit, surety bond or other similar agreement or arrangement.

     “Hazardous Substance” means and includes each substance designated as a hazardous
waste, hazardous substance, hazardous material, pollutant, contaminant or toxic substance under any
Environmental Law and any petroleum hydrocarbons.

     “Income Tax” means any Taxes imposed on, or measured by, net income.

 

 

     “Income Tax Returns” means any Tax Returns relating to Income Taxes.

     “Indemnified Party” means any Person seeking indemnification from another Person
pursuant to Section 11.

     “Indemnifying Party” means any Person against whom a claim for indemnification is
asserted pursuant to Section 11.

     “Intellectual Property” means the following intellectual property rights, including
both statutory and common law rights, if applicable: (a) copyrights and registrations for
copyrights, (b) trademarks, service marks, trade names, slogans, domain names, logos, symbols, and
trade dress, and registrations and applications for registrations thereof, and (c) trade secrets
and confidential information, including ideas, designs, concepts, compilations of information,
methods, techniques, procedures, processes and other know-how, whether or not patentable.

     “Interim Financial Statements” means the unaudited, pro forma consolidated balance
sheet of the Company and the Subsidiary dated September 30, 2006.

     “IRS” means the United States Internal Revenue Service.

     “Law” means any law, statute, code, ordinance, regulation, order, reporting or
licensing requirement, or rule, including those promulgated, interpreted or enforced by any
Governmental Authorities.

     “Lien” means any mortgage, pledge, lien, security interest, hypothecation, conditional
sale agreement, restriction, option, defect in title, easement, encumbrance, charge, or other
similar title exception; provided, however, that the term “Lien” shall not include
(a) liens for current Taxes not yet due and payable, including liens for nondelinquent ad valorem
taxes and nondelinquent statutory liens arising other than by reason of any default on the part of
the Company, the Subsidiary, Seller or any of their Affiliates, (b) liens in favor of carriers,
warehousemen, mechanics, landlords and materialmen imposed by mandatory provisions of Law and
incurred in the Ordinary Course of Business for sums not yet due and payable, and (c) as to any
leased Asset, the rights of the lessor or landlord with respect to such leased Asset.

     “Losses”
has the meaning set forth in Section 11.2.1.

     “Major Customer” shall mean any customer of the Company or the Subsidiary from which
the Company or the Subsidiary recognized in accordance with GAAP at least Twenty-Five Thousand
Dollars ($25,000) in revenue between January 1, 2006, and June 30, 2006.

     “Marked Materials” has the meaning set forth in Section 4.6.2.

     “Material Adverse Effect” means any change (or changes taken together) in, or effect
on, the business, financial condition or operations of the Company or the Subsidiary that is (are)
materially adverse to the business, financial condition or operations of the Company or the
Subsidiary, taken as a whole, but excluding (1) any change (or changes taken together) or effect
generally affecting natural gas distribution companies as a whole, (2) any change (or changes taken
together) or effect which is cured (including by the payment of money) before the earlier

 

 

of the
Closing or the termination of this Agreement under Section 12.1, or (3) any order of or
action by any Governmental Authority applicable to natural gas distribution companies generally
that imposes restrictions, regulations or other requirements thereon. Without limiting the
foregoing and except for purposes of Sections 5.7(1) and 8.5, any uninsured loss or damage suffered by the Company or the Subsidiary
in excess of Twenty-Five Thousand Dollars ($25,000) shall be deemed to have a Material Adverse
Effect.

     “Material Contracts” has the meaning set forth in Section 5.12.1.

     “Minimum Severance Benefit” has the meaning set forth in Section 4.2.4.

     “MPUC” means the Maine Public Utilities Commission.

     “New Guaranty or Bond” has the meaning set forth in Section 4.4.1.

     “Non-Company Affiliate” means any Affiliate of Seller other than the Company or the
Subsidiary.

     “Ordinary Course of Business” means, with respect to the Company and the Subsidiary,
the ordinary course of business which is commercially reasonable and consistent with past practices
of the Company and the Subsidiary.

     “Organizational Documents” means articles of incorporation, certificate of
incorporation, charter, bylaws, certificate of formation, limited liability company operating
agreement, joint venture agreement or partnership agreement, as applicable.

     “Outstanding Guaranty or Bond” has the meaning set forth in Section 4.4.4.

     “Patent” means (a) any patent granted by the U.S. Patent and Trademark Office or
comparable agency of any other country, as well as any reissued and reexamined patent and
extensions corresponding to such patent, and (b) any patent application filed with the U.S.
Patent and Trademark Office or comparable agency in any other country, as well as any related
continuation or continuation in part, any divisional application and patent issuing therefrom, and
any respective foreign counterpart patent application or foreign patent issuing therefrom.

     “Permits” means all licenses and permits issued by any Governmental Authority.

     “Person” means an individual, partnership, limited partnership, joint venture, limited
liability company or partnership, corporation, bank, trust, company, business entity, governmental
entity or organization, or unincorporated organization.

     “Pre-Closing Separate Income Tax Returns” has the meaning set forth in
Section 4.1.1.

     “Preliminary Purchase Price” has the meaning set forth in Section 2.2.2.

     “Property and Casualty Claims” has the meaning set forth in Section 4.7.

     “Purchase Price” has the meaning set forth in Section 2.2.1.

 

 

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

     “Purchaser” has the meaning set forth in the Preamble.

     “Purchaser Indemnitees” has the meaning set forth in Section 11.2.1.

     “Purchaser’s Plans” has the meaning set forth in Section 4.2.2.

     “Real Property Leases” has the meaning set forth in Section 5.10.2.

     “Regulatory Approval” means the approval by the MPUC of the transaction contemplated
by this Agreement.

     “Regulatory Filing” has the meaning set forth in Section 3.3.3(a).

     “Replacement Guaranty or Bond” has the meaning set forth in Section 4.4.3.

     “Representative” has the meaning given to it in the definition of “Confidential
Information.”

     “Restricted Period” means the period commencing on the Closing Date and expiring on
the second anniversary of the Closing Date.

     “Retained Employee Liabilities” has the meaning set forth in Section 4.2.

     “Scheduled Claim” means any of the matters set forth in Schedule 5.8.

     “SEC” means the United States Securities and Exchange Commission.

     “Seller” has the meaning set forth in the Preamble.

     “Seller Indemnitees” has the meaning set forth in Section 11.3.

     “Seller Insurance Policies” means policies of insurance with insurance carriers and
contractual arrangements with insurance adjusters maintained by Seller or its Affiliates prior to
the Closing.

     “Seller Marks” has the meaning set forth in Section 4.6.1.

     “Seller Plan” means each Benefit Plan (other than the Company Plans) that is
sponsored, maintained or contributed to as of the Closing Date by Seller or a Non-Company Affiliate
and that covers the current or former directors, officers or employees of the Company or the
Subsidiary.

     “Sempra Group” means the affiliated group of entities of which Seller is the common
parent corporation.

     “Separate Income Tax Returns” means Income Tax Returns of the Company or the
Subsidiary, other than Consolidated Income Tax Returns.

 

 

     “Software” means computer software programs including operating systems, application
programs and software tools.

     “Straddle Returns” has the meaning set forth in Section 4.1.2.

     “Subsidiary” has the meaning set forth in the Preamble.

     “Tangible Personal Property” means all machines, equipment, tools, computers,
terminals, telephones, telephone systems, furniture, automobiles, fixtures, leasehold improvements,
parts and other tangible personal property and fixtures owned or leased by the Company and the
Subsidiary, including the property listed on Schedule 5.5.1.

     “Tax” or “Taxes” means all United States, federal, state and local, and all
foreign, income, profits, franchise, gross receipts, payroll, transfer, sales, employment, use,
property, excise, value added, ad valorem, estimated, stamp, alternative or ad-on minimum,
recapture, environmental, withholding and any other taxes, charges, duties, impositions or
assessments, together with all penalties and additions imposed on or with respect to such amounts,
or levied, assessed or imposed against the Company or the Subsidiary, including any liability for
taxes of any predecessor entity.

     “Tax Audit” has the meaning set forth in Section 4.1.10(a).

     “Tax Indemnified Person” has the meaning set forth in Section 4.1.10(a).

     “Tax Indemnifying Person” has the meaning set forth in Section 4.1.10(a).

     “Tax Return” means any return, declaration, report, claim for refund, or information
return or statement filed or required to be filed by the Company or the Subsidiary, including any
predecessor entities, with any taxing authority in connection with the determination, assessment,
collection or imposition of any Taxes.

     “Third Party” means any Person other than Seller, Purchaser, any Indemnified Party or
any Affiliate of Seller, Purchaser or any Indemnified Party.

     “Transfer Tax” has the meaning set forth in Section 4.1.7.

     “Transferred Employee” has the meaning set forth in Section 4.2.

     “Transition Services Agreement” has the meaning set forth in Section 4.3.

     “Year-End Financial Statements” means the unaudited, pro forma consolidated balance
sheet of the Company and the Subsidiary dated December 31, 2005.

  1.2. Construction of Certain Terms and Phrases

     Unless the context of this Agreement otherwise requires, (a) words of any gender include the
other gender; (b) words using the singular or plural number also include the plural or singular
number, respectively; (c) the terms “hereof,” “herein,” “hereunder,” “hereby” and derivative or

 

 

similar words refer to this entire Agreement; (d) the terms “include,” “includes,” and
“including” shall be deemed to be followed by the words “but not limited to;” (e) the term
“Section” refers to the specified Section of this Agreement; (f) the term “Schedule” or “Exhibit”
refers to a Schedule or Exhibit attached to this Agreement; (g) references to time are to San
Diego, California time; and (h) the term “material” and derivative or similar words refer to
materiality with respect to the Company and the Subsidiary on an aggregate basis. Whenever this
Agreement refers to a number of days, such number shall refer to calendar days unless Business Days
are specified. Except as otherwise stated herein, all accounting terms used herein and not
expressly defined herein shall have the meanings given to them under GAAP.

2. THE PURCHASE AND SALE OF STOCK

  2.1. Sale and Transfer

Upon the terms and subject to the conditions hereinafter set forth, Seller shall, at the Closing,
sell, assign, transfer, convey and deliver to Purchaser, and Purchaser shall purchase and acquire
from Seller, all of Seller’s right, title and interest in and to all of the issued and outstanding
shares of common stock of the Company (the “Purchased Shares”), in exchange for the
Purchase Price.

  2.2. Payment of the Purchase Price

          2.2.1. Upon the terms and subject to the conditions hereinafter set forth, the aggregate
purchase price (the “Purchase Price”) to be paid by Purchaser to, or caused to be paid
to, Seller for the Purchased Shares shall be equal to the Preliminary Purchase Price, subject to
adjustment up or down, as the case may be, by the Adjustment Amount, payable in cash.

          2.2.2. Upon the terms and subject to the conditions hereinafter set forth, in consideration
of the delivery by Seller of the Purchased Shares, Purchaser shall pay to Seller at the Closing
an amount equal to Five Hundred Thousand Dollars ($500,000) (the “Preliminary Purchase
Price”), in cash by wire transfer of immediately available U.S. federal funds.

          2.2.3. Subject to the consummation of the Closing, within three (3) Business Days after the
Closing Date Balance Sheet and determination of the Adjustment Amount are deemed final and
binding upon the parties as provided in Section 2.3, (a) if the Adjustment Amount is a
negative amount, Purchaser shall pay to Seller the Adjustment Amount in cash by wire transfer of
immediately available U.S. federal funds, or (b) if the Adjustment Amount is a positive amount,
Seller shall pay to Purchaser the Adjustment Amount in cash by wire transfer of immediately
available U.S. federal funds, as the case may be.

  2.3. Preparation of the Closing Date Balance Sheet

          2.3.1. After the Closing Date, Purchaser, with the cooperation and assistance of Seller,
shall prepare an unaudited consolidated balance sheet of the Company and the Subsidiary as of
the Closing Date (but after taking into account the transactions to occur at or prior to the
Closing pursuant to this Agreement) (the “Closing Date Balance Sheet”), together

 

 

with supporting schedules with respect thereto. The Closing Date Balance Sheet shall be
prepared in accordance with GAAP (except for required footnotes) applied in a manner consistent
with the preparation of the Financial Statements and at a level of detail sufficient to identify
the components necessary to calculate the Adjustment Amount. Purchaser shall deliver the
Closing Date Balance Sheet and all supporting schedules with respect thereto to Seller as soon
as practicable, but in any event no later than ninety (90) days after the Closing Date, together
with Purchaser’s determination of the Adjustment Amount based upon the Closing Date Balance
Sheet, certified by an officer of Purchaser, and the work papers relating thereto. Unless
disputed as contemplated by Section 2.3.2, such determination by Purchaser shall be
deemed final and binding on the parties hereto for all purposes of this Agreement. All costs
and expenses of preparing the Closing Date Balance Sheet and determining the Adjustment Amount
pursuant to this Section 2.3.1 shall be borne solely by Purchaser.

          2.3.2. If Seller desires to dispute any matter set forth on the Closing Date Balance Sheet
relating to the Adjustment Amount or Purchaser’s calculation of the Adjustment Amount, Seller
must, within thirty (30) days of Seller’s receipt of all documents and computations required to
be delivered to it pursuant to Section 2.3.1, deliver to Purchaser a written notice of
its objection, setting forth in reasonable detail the basis of the objection. Thereafter, the
parties hereto shall use their commercially reasonable efforts to resolve such dispute. If the
parties hereto are unable to resolve such dispute within thirty (30) days after Purchaser
receives Seller’s notice of objection, Purchaser and Seller shall, within five (5) days after
the foregoing 30-day period, submit such dispute or controversy for resolution by a senior
partner at a Big Four Accounting Firm mutually agreed to by Purchaser and Seller (the
“Accounting Expert”). Purchaser and Seller, respectively, shall submit their
determinations of the items in dispute to the Accounting Expert within five (5) days from the
engagement of the Accounting Expert. The Accounting Expert shall review the books and records
of the Company and the Subsidiary to resolve the dispute in question, applying the terms of this
Agreement, including, where applicable, GAAP in a manner consistent with the preparation of the
Financial Statements. The Accounting Expert shall deliver to Purchaser and Seller his or her
resolution of such dispute, together with his or her work papers relating thereto, as soon as
practicable, but in any event, no later than thirty (30) days from the engagement of the
Accounting Expert as described above. The scope of the Accounting Expert’s work shall be
limited to that necessary to resolve the particular issues in dispute that affect the
determination of the Adjustment Amount. In no event shall the decision by the Accounting Expert
exceed the scope of the relief sought by the parties. The Accounting Expert shall follow the
provisions of this Section 2.3 and shall have no power to alter, amend or deviate from
the provisions of this Section 2.3. All hearings and reports, correspondence and other
documents related to the resolution of such dispute shall be conducted or written in the English
language. The determination of the Accounting Expert shall be deemed final and binding on the
parties for all purposes of this Agreement. Each party in any dispute resolution proceeding
commenced under this Section 2.3.1 shall bear such party’s own costs and expenses
(including expert witness and attorneys’ fees) of investigating, preparing and pursuing such
dispute. The fees and expenses of the Accounting Expert in connection with the foregoing shall
be shared equally by Purchaser and Seller.

 

 

3. PRE-CLOSING COVENANTS AND UNDERTAKINGS

  3.1. Satisfaction of Closing Conditions

The parties shall use their commercially reasonable efforts to bring about, as soon as practical
after the date hereof, the satisfaction of all the conditions set forth in Sections 8 and
9.

  3.2. Conduct of the Business of the Company and the Subsidiary Prior to Closing

     Except with the prior written consent of Purchaser (which consent shall not be unreasonably
withheld, delayed or conditioned) or as otherwise provided in Schedule 3.2, and except as
may be required to effect the transactions contemplated by this Agreement, or as is otherwise
authorized by this Agreement (including Section 3.6 with respect to the Excluded Assets and
Liabilities), Seller covenants that it will, and will cause the Company and the Subsidiary to,
during the period commencing on the date of this Agreement and terminating at the Closing:

               (a) preserve intact the legal existence of the Company and the Subsidiary to the extent within
Seller’s control, carry on the Company’s and the Subsidiary’s business in the Ordinary Course of
Business, and use its commercially reasonable efforts to preserve the goodwill of all Persons
having business relations with the Company or the Subsidiary;

               (b) maintain the Tangible Personal Property in the Ordinary Course of Business;

               (c) keep in force at no less than their present limits all existing surety bonds and policies
of insurance insuring the Assets and the Company’s and the Subsidiary’s business, except to the
extent that any such surety bond or insurance policy is no longer applicable or otherwise required
pursuant to the business of the Company or the Subsidiary;

               (d) use commercially reasonable efforts to maintain in full force and effect all Permits held
by the Company and the Subsidiary, except those Permits the failure of which to hold, individually
or in the aggregate, could not reasonably be expected to have a Material Adverse Effect;

               (e) neither enter into, modify, amend or terminate any Material Contract or Real Property
Lease except in the Ordinary Course of Business, nor waive, release, compromise or assign any
material rights or claims thereunder except in the Ordinary Course of Business, nor suffer, permit
or incur any of the transactions or events described in Section 5.7 to the extent such
events or transactions are within the reasonable control of Seller, the Company or the Subsidiary;

               (f) not make any distributions of the Assets to Seller in the form of return of capital or
dividends, except for the transactions contemplated in Sections 3.6 and 4.1;

               (g) not make or permit any change in the Company’s or the Subsidiary’s Organizational
Documents, or in the Company’s or the Subsidiary’s authorized, issued or outstanding securities;

 

 

               (h) not issue any additional shares of capital stock, membership interests or other securities
or ownership interests of the Company or the Subsidiary, grant any stock option or right to
purchase any security or ownership interest of the Company or the Subsidiary, issue any security or
ownership interest convertible into such securities or ownership interests, purchase, redeem,
retire or otherwise acquire any of such securities or ownership interests, or declare, set aside or
pay any dividend or cash distribution in respect of the securities or ownership interests of the
Company or the Subsidiary, except for the transactions contemplated in Sections 3.6 and
4.1;

               (i) not make any changes in the Company’s or the Subsidiary’s accounting methods or practices,
except any such change which could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect;

               (j) not (i) pay, or incur any obligation for any payment of, any contribution or other amount
to, or with respect to, any Company Plan, (ii) pay any bonus to, make any loan, pay or transfer any
Assets to, or grant any increase in the compensation of, any director, officer, or employee of the
Company or the Subsidiary, or (iii) make any increase in the pension, retirement or other benefits
of the Company’s or the Subsidiary’s directors, officers, or employees, except, with respect to any
of the foregoing subsections (i) through (iii), (A) in the Ordinary Course of Business, (B) to the
extent required by Law or (C) with respect to any officer or director of the Company or the
Subsidiary who receives no compensation from the Company or the Subsidiary;

               (k) not have the Company or the Subsidiary pay, lend or advance any amount to or in respect
of, or sell, transfer or lease any Assets to, or enter into any agreement, arrangement or
transaction with, Seller or any Non-Company Affiliate, except for (i) payments, agreements,
transactions and arrangements in the Ordinary Course of Business, (ii) payments pursuant to
agreements existing on the date hereof, and (iii) the transactions contemplated in Sections
3.6 and 4.1;

               (l) except in the Ordinary Course of Business, not permit the Company or the Subsidiary to (i)
incur or assume any indebtedness for borrowed money or issue any debt securities, or (ii) assume,
guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any Person other than itself or its respective subsidiaries;

               (m) not permit the Company or the Subsidiary to (i) make any loans, advances or capital
contributions to, or investments in, any Person other than itself or its respective subsidiaries,
(ii) pledge or otherwise encumber shares of capital stock of itself or its respective subsidiaries,
or (iii) mortgage or pledge any of the Assets, or create or suffer to exist any Lien thereupon;

               (n) not permit the Company or the Subsidiary to acquire, sell, lease or dispose of any Assets
except (i) in the Ordinary Course of Business or (ii) as contemplated in Sections 3.6
and 4.1;

 

 

               (o) not permit the Company or the Subsidiary to (i) acquire any Person (or division thereof),
any equity interest therein or all or substantially all of the assets thereof whether through a
merger, consolidation or purchase, or (ii) enter into a joint venture, partnership or any other
equity alliance with any Person except in the Ordinary Course of Business;

               (p) not (i) permit the Company or the Subsidiary to terminate the employment of any of its
employees, (ii) permit the Company or the Subsidiary to hire any employee of Seller or any
Non-Company Affiliate, (iii) permit Seller or any Non-Company Affiliate to hire away any employee
of the Company or the Subsidiary or (iv) permit the Company or the Subsidiary to hire any
additional employees who were not employees of the Company or the Subsidiary as of the date of this
Agreement, except, with respect to the foregoing subsections (i) through (iv), (A) in the Ordinary
Course of Business, (B) with Purchaser’s prior written consent or (C) in connection with any
transfer of the Excluded Assets and Liabilities; and

               (q) not agree to do anything that would violate any of the foregoing affirmative and negative
covenants of this Section 3.2.

  3.3. Consents and Approvals

          3.3.1. Subject to the allocation of responsibility set forth in Section 3.3.3,
Seller agrees to, and agrees to cause the Company and the Subsidiary to, apply for and use
commercially reasonable efforts to obtain no later than at the Closing (a) the Regulatory
Approval, (b) the waiver, consent and approval of all Persons whose waiver, consent or approval
is required by Law for Seller’s execution and delivery of this Agreement and Seller’s, the
Company’s and the Subsidiary’s consummation of the transactions contemplated herein, including
any consents or approvals in connection with the transfer of the Excluded Assets and
Liabilities, and (c) the waiver, consent and approval of all Persons whose waiver, consent or
approval is required by any Material Contract, Real Property Lease, consent, judgment, decree,
order or Permit to which Seller, the Company or the Subsidiary is a party or subject immediately
prior to the Closing, and which would prohibit or require the waiver, consent or approval of any
Person to, such transactions or under which, without such waiver, consent or approval, such
transactions would constitute an occurrence of Default under the provisions thereof, except for
any such waiver, consent or approval, with respect to subsections (b) and (c) only, which could
not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect
or a material adverse effect on the ability of Seller to consummate the transactions described
herein; provided, however, that none of Seller, the Company or the Subsidiary
shall make any agreements or understandings adversely affecting the Assets, the Company and the
Subsidiary, or their business, as a condition to obtaining any waivers, consents or approvals
required by this Section 3.3.1, except with the prior written consent of Purchaser
(which consent shall not be unreasonably withheld, delayed or conditioned). Purchaser agrees to
apply for and use commercially reasonable efforts to obtain no later than the Closing the
waiver, consent and approval of all Persons whose waiver, consent or approval is (i) required by
Law for Purchaser’s execution and delivery of this Agreement and Purchaser’s consummation of the
transactions contemplated herein, including the consents and approvals described in the first
sentence of

 

 

Section 9.4, or (ii) is required by any material contract, consent, judgment,
decree, order or Permit to which Purchaser is a party or subject immediately prior to the
Closing, and which would prohibit, or require the waiver, consent or approval of any Person to,
such transaction or under which, without such waiver, consent or approval, such transaction
would constitute an occurrence of Default under the provisions thereof, except for any such
waiver, consent or approval (with respect to either such subsection (i) or (ii)) which could
not, individually or in the aggregate, reasonably be expected to have a material adverse effect
on the ability of Purchaser to consummate the transactions described herein.

          3.3.2. Each of the parties hereto (a) will take all commercially reasonable actions
necessary to comply promptly with all Laws that may be imposed on such party with respect to the
transactions contemplated herein (including requesting all necessary approvals for and executing
all necessary agreements for the novation of any Material Contracts with any Governmental
Authority, requesting all necessary approvals of subcontractors to such contracts, providing
notices and disclosures as required for foreign Persons, and furnishing all information required
under any Law in connection with approvals of or filings with any Governmental Authority
(including MPUC, FTC, DOJ, SEC or IRS)); provided, however, the foregoing shall
not require any of the parties hereto or any of their Affiliates to sell or otherwise divest of
a material portion of their respective assets or properties or discontinue any of their
respective significant operations; and (b) will promptly cooperate with and furnish information
to each other in connection with any such legal requirements imposed upon any of them in
connection with the transactions contemplated herein. Any filings or approvals required to be
accomplished by Seller, the Company, the Subsidiary or any Non-Company Affiliate in accordance
with this Section 3.3.2 shall be at Seller’s or such Non-Company Affiliate’s expense,
and any filings or approvals required to be accomplished by Purchaser or any of its Affiliates
in accordance with this Section 3.3.2 shall be at Purchaser’s or any such Purchaser
Affiliate’s expense.

            3.3.3. MPUC Regulatory Filing.

               (a) Purchaser and Seller shall have joint responsibility for the preparation and filing of
the regulatory filing(s) to be made to the MPUC requesting the Regulatory Approval (the
“Regulatory Filing”). Upon the request of the other party, Seller and Purchaser shall use
commercially reasonable efforts to cooperate with such other party to prepare and file the
Regulatory Filing.

               (b) Purchaser and Seller shall use commercially reasonable efforts to file as soon as
practicable after the date hereof the Regulatory Filing, and execute all agreements and
documents, in each case, to obtain as promptly as practicable the Regulatory Approval.
Purchaser and Seller shall act diligently, and shall coordinate in completing and submitting the
Regulatory Filing. Purchaser and Seller shall each have the right to review and approve (which
such approval shall not be unreasonably withheld, delayed or conditioned) in advance all of the
information relating to the transactions contemplated by this Agreement which appears in the
Regulatory Filing. Purchaser and Seller agree that all telephonic calls and meetings with the
MPUC relating to the transactions contemplated by this Agreement shall be conducted by Purchaser
and Seller jointly. Each party will bear its own legal costs incurred in connection with the
preparation and filing of the Regulatory Filing.

 

 

               3.3.4. Nothing in this Agreement will require either party to accept any condition to,
limitation on or other term concerning the grant of the Regulatory Approval if such condition,
limitation or other term, alone or in the aggregate with such other conditions, limitation or
other terms would (i) require the disposition by Purchaser of any material asset(s); (ii) have a
material adverse effect on either party or any of its Affiliates in its acquisition, ownership,
use, operation or disposition of any property other than the Assets; or (iii) materially change
or impair the commercial expectation of the Purchaser with respect to the sale or distribution
of gas by the Company or Subsidiary.

  3.4. Access, Information and Confidentiality

          3.4.1. Prior to the Closing, Seller shall cause the Company and the Subsidiary to (a) give
Purchaser and its authorized Representatives reasonable access, during normal business hours and
upon reasonable notice, to the books, records, files, documents and contracts of the Company and
the Subsidiary, and (b) allow Purchaser (together with its authorized Representatives) to make a
reasonable number of visits, during normal business hours and upon reasonable notice, to each
office, facility and other property owned or leased by the Company or the Subsidiary;
provided, however, that (i) Purchaser shall not have access to the personnel
files of the Company or the Subsidiary prior to Closing; (ii) any such investigation or visit by
Purchaser and its authorized Representatives shall be conducted in such a manner as not to
interfere unreasonably with the normal operations of the Company and the Subsidiary; and (iii)
Seller shall have the right to have a representative of its choice present at any such
investigation or visit by Purchaser.

          3.4.2. (a) Subject to the first sentence of subsection (b) of this Section 3.4.2, a
party hereto receiving Confidential Information from another party hereto shall not disclose and
shall keep strictly confidential all such Confidential Information of such disclosing party;
provided, however, that such receiving party may disclose Confidential Information of such
disclosing party (i) to any Representative of such receiving party or any of its Affiliates who
needs to know such information for purposes of consummating the transactions contemplated
herein, provided that (A) each such Representative shall have been provided with a copy of this
Section 3.4.2 and (B) such receiving party agrees to be responsible for such
Representative’s compliance with the terms of this Section 3.4.2 binding on such
receiving party; (ii) to any partner, Affiliate, lender or investor of such receiving party or
any of its Affiliates, or any Representative of such partner, Affiliate, lender or investor who
needs to know such information for purposes of consummating the transactions contemplated
herein, provided that, prior to any disclosure, each such partner, Affiliate, lender, investor
or Representative shall have entered into an agreement with such disclosing party that contains
terms and conditions regarding confidential treatment of such information that are substantially
the same as the provisions of this Section 3.4.2 and (iii) to the extent that such
receiving party or Representative is required to disclose such information in order to avoid
committing a violation of any applicable law, rule or regulation, including any rules or
regulations of any securities association, stock exchange or national securities quotation
system, provided that such receiving party provides prompt written notice to such disclosing
party of the proposed disclosure and, if applicable, takes the other actions required in

 

 

connection with a required disclosure pursuant to the first sentence of subsection (b) of
this Section 3.4.2. A receiving party shall not use any Confidential Information of a
disclosing party for any purpose other than for purposes of consummating the transactions
contemplated herein.

                    (b) In the event that a receiving party or any Representative of such receiving party or any
of its Affiliates is requested or required, pursuant to any applicable court order, administrative
order, statute, regulation or other official order by any Governmental Authority, to disclose any
Confidential Information of a disclosing party, such receiving party shall (i) provide such
disclosing party with prompt written notice of any such request or requirement so that such
disclosing party may seek a protective order or other appropriate remedy and/or waive compliance
with the provisions of this Section 3.4.2, and (ii) reasonably cooperate with such
disclosing party to obtain such protective order or other remedy. In the event such protective
order or other remedy is not obtained and a disclosing party fails to waive compliance with the
relevant provisions of this Section 3.4.2, such receiving party agrees to (A) furnish only
that portion of the Confidential Information for which such receiving party is advised by written
opinion of its legal counsel, which counsel and opinion are reasonably satisfactory to such
disclosing party, is legally required to be disclosed, (B) upon such disclosing party’s request and
expense, use its commercially reasonable efforts to obtain assurances that confidential treatment
will be accorded to such information, and (C) give such disclosing party prior written notice of
the Confidential Information to be disclosed as far in advance of its disclosure as is reasonably
practicable.

                    (c) If this Agreement is terminated prior to the Closing or at any other time for any reason,
upon the written request of a disclosing party, each receiving party will, and will cause all
Representatives of such receiving party or any of its Affiliates to promptly, (i) deliver to such
disclosing party all original Confidential Information (whether written or electronic) furnished to
such receiving party or any Representative of such receiving party or any of its Affiliates by or
on behalf of such disclosing party, and (ii) if specifically requested by such disclosing party,
destroy (A) any copies of such Confidential Information (including any extracts therefrom), and (B)
any portion of such Confidential Information that may be found in reports, analyses, notes,
compilations, studies and other documents prepared by or for such receiving party. After the
written request referenced in the foregoing sentence is given, upon written request of such
disclosing party for any reason, such receiving party shall cause one of its duly authorized
officers to certify in writing to such disclosing party that the requirements of the preceding
sentence have been satisfied in full. From and after the Closing, Purchaser shall be released from
all obligations owed by it to Seller under this Section 3.4.2 with respect to the
Confidential Information owned by the Company or the Subsidiary.

          3.4.3. During the period commencing on the date of this Agreement and terminating at the
Closing, Purchaser shall not contact or have discussions with any of the employees, customers or
vendors of Seller, the Company or the Subsidiary, whether in person or by telephone, mail or
other means of communication, without the specific prior written authorization of Richard
Vaccari, Amy Chiu or Randall L. Clark (which consent shall not be unreasonably withheld, delayed
or conditioned). In the event such consent is granted, Seller shall have the right to have one
of its representatives present during any such contact or discussion, Purchaser shall only
contact and hold discussions with such employees,

 

 

customers and vendors through Representatives of Purchaser previously approved by Seller,
Purchaser shall cause such Representatives to comply with all procedures and protocols regarding
such contacts and discussions that may be established by Seller, and any such contract or
discussion with employees shall occur only during normal business hours of the Company or the
Subsidiary.

  3.5. Delivery of Financial Statements and Regulatory Filings

     During the period commencing on the date of this Agreement and terminating at the Closing,
Seller shall deliver to Purchaser, within thirty (30) days of being available or filed, copies of
(a) all regularly prepared unaudited monthly, quarterly and annual consolidated financial
statements of the Company and the Subsidiary prepared after the date of this Agreement, and (b) all
material filings or submissions by the Company or the Subsidiary with any Governmental Authority
made after the date of this Agreement.

  3.6. Pre-Closing Transfers and Debt Forgiveness

     The parties hereto acknowledge and agree that prior to Closing, Seller shall cause the Company
and the Subsidiary to transfer to Seller (or any Non-Company Affiliate or a Third Party selected by
Seller) (a) any brokerage account balances or credits, and rights in and to brokerage accounts held
or owned by the Company or the Subsidiary, (b) the Company’s and the Subsidiary’s rights or
licenses to any Intellectual Property containing, referencing or otherwise pertaining to the words,
marks or names “Sempra Energy,” “Sempra” or any derivations or variations thereof, and (c) all of
the Company’s and the Subsidiary’s right, title and interest in and to the assets, properties and
rights and associated liabilities, obligations and employees described in Schedule 3.6(a)
(collectively, the “Excluded Assets and Liabilities”). Notwithstanding anything herein to
the contrary, (i) all references herein to any assets, liabilities or employees of the Company or
the Subsidiary (including the Assets and the Tangible Personal Property) shall expressly exclude
the Excluded Assets and Liabilities, and (ii) all references herein to the business or operation of
the business of the Company or the Subsidiary, whether with respect to financial, accounting,
legal, tax or other operations, shall expressly exclude the businesses or the operation of the
businesses related to the Excluded Assets and Liabilities. Prior to the Closing Date, Seller shall
eliminate all inter-company indebtedness between itself and the Company through the cancellation or
equitization of such inter-company indebtedness. An unaudited, pro forma consolidated balance
sheet of the Company and the Subsidiary, dated as of December 2006, and reflecting the elimination
of such inter-company indebtedness, is attached hereto as Schedule 3.6(b).

  3.7. Public Announcements

     No party hereto or any of its Affiliates shall make any public announcement of the execution
and delivery of this Agreement or the transactions contemplated by this Agreement without first
obtaining the prior written consent of the other party hereto, such consent not to be unreasonably
withheld, delayed or conditioned; provided, however, that nothing contained in this
Section 3.7 shall prohibit any party hereto or any of its Affiliates from (i) making any
disclosures or having any discussions with the MPUC regarding this Agreement or the transaction
contemplated by this Agreement in accordance with Section 3.3.3, or (ii) making any public

 

 

announcement if such party or its Affiliate determines in good faith, on the advice of legal
counsel, that such public disclosure is required by applicable Law; provided
further, that in such event, such party or its Affiliate shall consult with the other party
hereto prior to making such disclosure to the extent reasonably practicable.

4. ADDITIONAL AGREEMENTS

  4.1. Tax Matters

          4.1.1. Seller shall (i) cause the Company and the Subsidiary to prepare and file on a
timely basis all Tax Returns of the Company or the Subsidiary for all Tax periods which end on
or prior to the Closing Date and which are filed after the Closing Date; and (ii) pay all Taxes
of the Company and the Subsidiary with respect to such Tax periods, or shall reimburse Purchaser
within fifteen (15) days after payment by Purchaser of such Taxes. Seller shall prepare, or
cause to be prepared, (i) all Consolidated Income Tax Returns and (ii) all Separate Income Tax
Returns of the Company or the Subsidiary due after the Closing Date that relate solely to
periods ending on or before the Closing Date (such Separate Income Tax Returns being referred to
as “Pre-Closing Separate Income Tax Returns”). Seller shall submit to Purchaser any
Pre-Closing Separate Income Tax Returns at least thirty (30) days prior to the due date (after
all appropriate extensions) of such Tax Return for Purchaser’s review. Purchaser shall cause
the Company and the Subsidiary to timely and appropriately file all Pre-Closing Separate Income
Tax Returns submitted by the Seller in accordance with this Section 4.1.1.

          4.1.2. Purchaser shall cause the Company and the Subsidiary to prepare and file on a timely
basis all Tax Returns of the Company or the Subsidiary (other than Consolidated Income Tax
Returns and Pre-Closing Separate Income Tax Returns) due after the Closing Date, including all
Tax Returns that relate to periods beginning before and ending after the Closing Date
(“Straddle Returns”). All Straddle Returns shall be prepared on a basis consistent with
procedures and practices of the Company or the Subsidiary in effect as of the date hereof for
filing such Tax Returns. Purchaser shall submit all Straddle Returns related to Income Taxes to
Seller at least thirty (30) days prior to the due date (after all appropriate extensions) of
such Straddle Return for Seller’s review and approval (which will not be unreasonably withheld).
Purchaser shall not, or allow the Company or the Subsidiary to, amend a Tax Return (or extend
the statute of limitations for assessment or collection of any Taxes with respect to a Tax
Return) that relates to any period (or portion thereof) ending on or before the Closing Date
without the prior written permission of Seller (which will not be unreasonably withheld).

          4.1.3. Purchaser and Seller shall to the extent permitted under applicable law (i) elect to
have the tax year of the Company and the Subsidiary that ends on the Closing Date to end on (and
include) the Closing Date and (ii) treat all transactions occurring on the Closing Date but
after the Closing as occurring on the day after the Closing Date. To the extent that the tax
year of the Company or the Subsidiary does not end on the Closing Date such that the Tax Return
is a Straddle Return, the Income Taxes payable on the Straddle Return shall be allocated between
the portion of the period ending on the Closing Date and the portion of the period beginning
after the Closing Date assuming that the taxable period

 

 

for the Straddle
Return actually included two separate periods, one ending on the Closing Date and one
beginning on the date after the Closing Date, provided that all exemptions, allowances, or
deductions for the entire taxable for the Straddle Return which are calculated on an annual
basis (including, but not limited to, depreciation and amortization deductions) shall be
allocated between the two short periods in proportion to the number of days in each period.

          4.1.4. The parties hereto acknowledge and agree that Seller shall be entitled exclusively
to control, defend and settle any action or proceeding associated with any Tax, audit, appeals
process or litigation involving the Company or the Subsidiary that relates solely to periods
ending on or before the Closing Date.

          4.1.5. Access to Information

                    (a) From and after the Effective Date, Seller shall grant to Purchaser (or its designees)
access at all reasonable times to the information, books and records relating to the Company and
the Subsidiary within the possession of Seller (including without limitation work papers and
correspondence with taxing authorities, but excluding personnel files), and shall afford Purchaser
(or its designees) the right (at Purchaser’s expense) to take extracts therefrom and to make copies
thereof, to the extent reasonably necessary to permit Purchaser (or its designees) to prepare Tax
Returns, to conduct negotiations with taxing authorities, and to implement the provisions of, or to
investigate or defend any claims between the parties arising under, this Section 4.1.

                    (b) From and after the Effective Date, Purchaser shall grant to Seller (or its designees)
access at all reasonable times to all of the information, books and records relating to the Company
and the Subsidiary within the possession of Purchaser or the Company or the Subsidiary (including
without limitation work papers and correspondence with taxing authorities), and shall afford Seller
(or its designees) the right (at Seller’s expense) to take extracts therefrom and to make copies
thereof, to the extent reasonably necessary to permit Seller (or its designees) to prepare Tax
Returns, to conduct negotiations with taxing authorities, and to implement the provisions of, or to
investigate or defend any claims between the parties arising under, this Agreement.

                    (c) Each of the parties hereto will preserve and retain all schedules, work papers and other
documents relating to any Tax Returns of or with respect to the Company or the Subsidiary or to any
claims, audits or other proceedings affecting the Company or the Subsidiary until the expiration of
the statute of limitations (including extensions) applicable to the taxable period to which such
documents relate or until the final determination of any controversy with respect to such taxable
period, and until the final determination of any payments that may be required with respect to such
taxable period under this Agreement.

          4.1.6. Purchaser and Seller shall provide (and Purchaser shall cause the Company and the
Subsidiary to provide) each other with such assistance as may reasonably be requested by the
other in connection with the preparation of any Tax Return (including, without limitation, any
Consolidated Income Tax Return), any audit or other examination by any taxing authority, or any
judicial or administrative proceedings relating to liabilities for

 

 

Taxes. Such assistance shall
include making employees available on a mutually convenient
basis to provide additional information or explanation of material provided hereunder and
shall include providing copies of relevant tax returns and supporting material. Purchaser and
Seller will retain (and Purchaser shall cause the Company and the Subsidiary to retain) for the
full period of any statute of limitations any documents which may be relevant to such
preparation, audit, examination, proceeding or determination.

          4.1.7. All real or personal property Taxes assessed on an annual basis shall be prorated
between Seller and Purchaser as of the Closing Date based 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, except that Purchaser will bear all supplemental or other state and local real and
personal property Taxes which arise out of a change in ownership of the Company or of the
Subsidiary. Amounts attributable to the period beginning before and ending on the Closing Date
shall be borne by Seller and amounts attributable to the remainder of the year shall be borne by
Purchaser. Seller shall pay its portion of such real and personal property Taxes to Purchaser
on the Closing Date, and except as provided in the next sentence, shall have no further
liability or obligation with respect to such Taxes. If the amount of all real and personal
property Taxes due for the 2007 year (commencing January 1, 2007) has not been assessed by the
taxing authorities as of the Closing Date, then the amount of real and personal property Taxes
as prorated between Seller and Purchaser for the 2007 tax year will be estimated on the basis of
the 2006 tax year’s real and personal property Taxes and such amount will be subject to a
true-up adjustment after the Closing Date based upon the actual amount of Taxes assessed. If
any 2007 property Tax bills are received by Seller, Seller shall immediately forward such Tax
bills to Purchaser, who will remit payment of such Tax bills on or before the date on which the
Tax is due.

          4.1.8. Purchaser and Seller shall each pay one-half of all federal, state, local, foreign
and other transfers, sales, use or similar Tax (a “Transfer Tax”) applicable to, imposed
upon or arising out of the transfer of the Purchased Shares or any other transaction
contemplated by this Agreement.

          4.1.9. All refunds (whether direct or in the form of credit), plus interest thereon, for
Taxes received by the Company or the Subsidiary for periods (or portions thereof) ending on or
before the Closing Date to the extent not included as an asset on the Closing Date Balance Sheet
shall be property of Seller. Purchaser shall cooperate with Seller and its Affiliates in order
to take all necessary steps to claim any such refund for Seller. To the extent that the Company
or the Subsidiary receives a refund for Taxes that is property of Seller, Purchaser shall notify
Seller within three (3) Business Days of receipt by the Company or the Subsidiary of such
refund. Within ten (10) Business Days of its receipt of such refund, the Company or the
Subsidiary, as the case may be, shall pay to Seller an amount equal to the refund received plus
any interest received from the applicable governmental authority with respect to such refund.

          4.1.10. Contest Provisions.

                    (a) Each of Purchaser, on the one hand, and Seller, on the other hand (the “Tax
Indemnified Person”), shall notify the chief tax officer (or other appropriate person) of

 

 

Seller or Purchaser, as the case may be (the “Tax Indemnifying Person”), in writing within
ten
(10) Business Days of receipt by the Tax Indemnified Person of written notice of any pending
or threatened audits, adjustments, claims, examinations, assessments or other proceedings (a
“Tax Audit”) which are likely to affect the liability for Taxes of such other party. If
the Tax Indemnified Person fails to give such timely notice to the other party, it shall not be
entitled to indemnification for any Taxes arising in connection with such Tax Audit if such failure
to give notice adversely affects the other party’s rights to participate in the Tax Audit.

                    (b) If such Tax Audit relates to any taxable period, or portion thereof, ending on or before
the Closing Date or for any Taxes for which Seller is liable in full under this Agreement, Seller
shall, at its expense, control the defense and settlement of such Tax Audit. If such Tax Audit
relates to any taxable period, or portion thereof, beginning on or after the Closing Date or for
any Taxes for which Purchaser is liable in full under this Agreement, Purchaser shall, at its
expense, control the defense and settlement of such Tax Audit.

                    (c) If such Tax Audit relates to Taxes for which both Seller and Purchaser are liable under
this Agreement, to the extent practicable, such Tax items will be distinguished and each party will
control the defense and settlement of Taxes for which it is so liable. If such Tax Audit relates
to a taxable period, or portion thereof, beginning before and ending after the Closing Date and any
Tax item cannot be identified as being a liability of only one party or cannot be separated from a
Tax item for which the other party is liable, Seller, at its expense, shall control the defense and
settlement of the Tax Audit, provided that such party defends the items as reported on the relevant
Tax Return and provided further that no such matter shall be settled without the written consent of
both parties, not to be unreasonably withheld.

                    (d) Any party whose liability for Taxes may be affected by a Tax Audit shall be entitled to
participate at its expense in such defense and to employ counsel of its choice at its expense and
shall have the right to consent to any settlement of such Tax Audit (not to be unreasonably
withheld) to the extent such settlement would have an adverse effect for a period for which that
party is not liable for Taxes, under this Agreement or otherwise.

          4.1.11. All Tax sharing or similar agreements that include Seller and the Company or the
Subsidiary shall be cancelled prior to the Closing Date such that the Company and the Subsidiary
shall have no further rights or obligations under such agreements. On or prior to the Closing
Date, Seller shall have the right, notwithstanding any other provision of this Agreement, to
have the Company and the Subsidiary distribute an amount equal to the Company’s or the
Subsidiary’s share of the Income Tax liability of any consolidated group including Seller and
the Company or the Subsidiary.

          4.1.12. Post-Closing Actions Which Affect Seller’s Tax Liability.

                    (a) Except to the extent required by applicable Laws, Purchaser shall not permit the Company,
the Subsidiary or any other Affiliate of Purchaser to take any action on or after the Closing Date
which could materially increase Seller’s liability for Taxes (including any liability of Seller to
indemnify Purchaser for Taxes under this Agreement).

                    (b) Except to the extent required by applicable Laws, Purchaser shall not

 

 

permit the Company,
the Subsidiary or any other Affiliate of Purchaser to amend any Tax
Return filed by, or with respect to, the Company or the Subsidiary for any taxable period, or
portion thereof, beginning before the Closing. This provision shall not be construed to limit or
prohibit Purchaser’s right to challenge real or personal property tax assessments for periods prior
to the Closing Date; provided, however, Purchaser shall indemnify and hold Seller
and its Affiliates harmless from any adverse Tax consequences resulting from any such challenge.

          4.1.13. Neither the Company nor the Subsidiary shall carry back any net operating losses,
other tax attributes or tax item to any period ending on or before the Closing Date. If the
Company or the Subsidiary is required to carry back a net operating loss, other tax attribute,
or tax item to a period ending on or before the Closing Date, Purchaser shall indemnify and hold
Seller and its Affiliates harmless from any adverse Tax consequences resulting from such
carryback.

          4.1.14. FIRPTA Certificate. Prior to Closing, Seller shall deliver a FIRPTA
Certificate to Purchaser.

  4.2. Employee and Benefit Matters

          4.2.1. Schedule 4.2.1 contains a list of employees who are actively employed by the Company
or the Subsidiary (including individuals on vacation, short-term disability or similar leave but
excluding those persons on long-term disability leave) on the date hereof who the parties agree
and acknowledge will be treated as employees of the Company or the Subsidiary for purposes of
this Agreement, which such Schedule 4.2.1 shall be amended as of the Closing Date to add or
delete any employees that were hired or terminated after the Effective Date in accordance with
Section 3.2(p) hereof. All employees listed on Schedule 4.2.1 as of the Closing Date shall be
referred to herein as “Company’s Employees.” For the sixty (60) day period following the
Closing Date (the “Evaluation Period”), Purchaser shall evaluate Company’s Employees and
determine which of Company’s Employees, if any, will be terminated at the end of the Evaluation
Period; provided, however, that Purchaser shall not terminate more than forty
percent (40%) of Company’s Employees during or at the end of the Evaluation Period. Each of
Company’s Employees who is not terminated as of the end of the Evaluation Period shall
hereinafter be referred to as a “Transferred Employee.” Each of Company’s Employees who is
terminated as of the end of the Evaluation Period shall be referred to as a “Terminated
Employee.” Seller shall retain and satisfy, or reimburse the Subsidiary as applicable for, any
and all responsibility, and Purchaser shall have no liability or responsibility whatsoever, for
any and all claims, liabilities and obligations, whether contingent or otherwise, relating to
(i) any former or retired employee of the Company or the Subsidiary whose employment terminated
prior to the Effective Date and who is not a Transferred Employee, including, without
limitation, any unpaid salary, wages, bonuses or other compensation or severance pay or
benefits, (ii) severance payments in an amount equal to three (3) months’ base pay due to any of
Company’s Employees whose employment was terminated by Purchaser during the Evaluation Period,
in addition to any payments to such Company’s Employee pursuant to any of the employment,
retention or similar agreements set forth on Schedule 5.12.1.5, (iii) any Transferred
Employee arising out of or relating to any period, or otherwise incurred, prior to the Closing
Date, including, without limitation, any unpaid salary, wages, bonuses or other compensation or
severance pay, benefits or group

 

 

health care coverage required by Section 4980B of the Code or
Section 601 of ERISA,
except for those benefits referenced in Section 4.2.5, and (iv) the Seller Plans (such
claims, liabilities and obligations, collectively the “Retained Employee Liabilities”). Any
severance payment or retention payment made by Seller pursuant to subsection (ii) above shall be
conditioned upon the Terminated Employee executing a general release of claims against Seller,
the Company, the Subsidiary and Purchaser.

          4.2.2. Continuation Period. For the nine (9) month period following the Closing Date
(the “Continuation Period”), Purchaser shall (i) provide each Transferred Employee, during
any portion of the Continuation Period that such employee is employed by Purchaser, a rate of pay
that is no less than the rate of pay that such Transferred Employee receives immediately prior to
the Closing Date and (ii) provide such Transferred Employees (as a group) with the employee
benefit plans, programs and policies (other than equity-based plans, programs or policies) that
are substantially similar in the aggregate to those employee benefit plans, programs and policies
that are maintained by Purchaser or its Affiliates from time to time for the benefit of similarly
situated employees of Purchaser or its Affiliates (any such employee benefit plans of Purchaser in
which Transferred Employees become eligible to participate after the Closing shall be referred
hereinafter as, the “Purchaser’s Plans”). If Purchaser has no similarly situated
employees, Purchaser shall provide such Transferred Employees with benefit plans, programs and
policies substantially similar in the aggregate to the benefit plans, programs and policies
provided to such Transferred Employees immediately prior to the Closing Date. Notwithstanding any
other provision herein, Purchaser shall not have any obligation to continue the employment of any
Transferred Employee for any period following the Closing Date. Neither Purchaser nor Purchaser’s
Plans shall receive assets from, nor be required to assume any of the liabilities of, the Seller
Plans.

          4.2.3. With respect to the Purchaser’s Plans, except to the extent otherwise required by
applicable law, Purchaser shall use commercially reasonable efforts (i) with respect to each such
plan that is a medical or health plan, to waive, or cause the waiver of, any exclusions for
pre-existing conditions and waiting periods for each Transferred Employee and his/her dependents
to the extent that such pre-existing condition exclusions and waiting periods were previously
satisfied by such Transferred Employee or his/her dependents under the comparable Benefit Plan
covering such Transferred Employee immediately prior to becoming eligible to participate in
Purchaser’s Plan, (ii) with respect to each such plan that is a medical or health plan, provide
each Transferred Employee with credit for any deductibles and out- of-pocket expenses paid or
incurred by such Transferred Employee under the comparable Benefit Plan covering such Transferred
Employee immediately prior to becoming eligible to participate in Purchaser’s Plan (to the same
extent such credit was given under such comparable Benefit Plan) in satisfying any applicable
deductible or out- of-pocket requirements under such Purchaser’s Plan for the plan year in which
such Transferred Employee became eligible to participate in Purchaser’s Plan, and (iii) recognize
service of the Transferred Employees credited by Seller solely for purposes of eligibility to
participate and vesting in any Purchaser’s Plan in which the Transferred Employees are eligible to
participate after the Closing Date to the extent that such service was recognized for that purpose
under the analogous Benefit Plan prior to such transfer; provided however, that in
no event shall the Transferred Employees be entitled to any credit to the extent that it would
result in a duplication of benefits with respect to the same period of service.

 

 

          4.2.4. Purchaser shall provide severance benefits in an amount no less than three (3) months’
base pay (hereinafter referred to as the “Minimum Severance Benefit”), to any Transferred
Employee who is terminated without cause during the Continuation Period.

          4.2.5. On the Closing Date, Purchaser shall receive a credit against the Purchase Price in
an amount equal to the sum of all Company’s Employees’ unused flexible holiday and vacation
time.

4.3. Transition Services Agreement; Post-Closing Cooperation

                    (a) Within sixty (60) days of the Effective Date but in no event later than the Closing Date,
Purchaser and Seller shall reasonably cooperate with the other to identify such transition services
that Purchaser may require to transition the operations of the Company and the Subsidiary to
Purchaser on the Closing Date. To the extent such transition services are identified, at the
Closing, Seller and Purchaser shall enter into a Transition Services Agreement in the form attached
hereto as Exhibit B (the “Transition Services Agreement”).

                    (b) Following the Closing, Seller and Purchaser shall, upon request by the other party,
cooperate with such other party by furnishing any additional information, executing and delivering
any additional documents and/or instruments and doing any and all such other things as may be
reasonably required by the parties or their counsel to consummate or otherwise implement the
transactions contemplated by this Agreement.

4.4. Guaranties or Bonds

          4.4.1. After the date hereof and prior to the Closing, Seller shall not, and shall cause
the Non-Company Affiliates not to, without the prior written consent of Purchaser, (a) enter
into, issue or obtain any Guaranty or Bond (each individually, a “New Guaranty or
Bond”), or (b) amend or otherwise modify any Guaranty or Bond; provided,
however, that notwithstanding anything to the contrary contained in this
Section 4.4:

                    (a) Purchaser shall not unreasonably withhold, delay or condition its consent to any New
Guaranty or Bond which is entered into in the Ordinary Course of Business, and Purchaser shall not
unreasonably withhold, delay or condition its consent to any amendment or other modification of any
Guaranty or Bond in the Ordinary Course of Business if such amendment or other modification would
not result in a breach of any provision of this Agreement; and

                    (b) Seller and the Non-Company Affiliates may, without the prior written consent of Purchaser,
enter into, issue or obtain any New Guaranty or Bond to replace, substitute for or backstop any
Guaranty or Bond, or amend or otherwise modify any Guaranty or Bond, if such New Guaranty or Bond
or such amendment or other modification contains terms and conditions that, in all material
respects, are no more adverse to Seller and/or the applicable Non-Company Affiliate than such
existing Guaranty or Bond.

          4.4.2. Seller shall promptly provide Purchaser with a true and correct copy of any New
Guaranty or Bond or amendment or other modification to a Guaranty or Bond. In no event shall
the Company or the Subsidiary pay or commit to pay Seller, any Non-

 

 

Company Affiliate or any other Person any fee or other compensation in consideration of
Seller and/or any Non-Company Affiliate agreeing to enter into any New Guaranty or Bond or any
amendment or other modification to a Guaranty or Bond, but nothing in this sentence is a
limitation on rights of subrogation in favor of Seller or any Non-Company Affiliate.

          4.4.3. Purchaser shall use its commercially reasonable efforts to (a) obtain complete and
unconditional release of Seller and any Non-Company Affiliates at or prior to the Closing with
respect to each of the Guaranties or Bonds, and (b) subject to the final sentence of this
Section 4.4.3, cause the beneficiary or beneficiaries of each such Guaranty or Bond to
terminate and redeliver to Seller and such Non-Company Affiliates such Guaranty or Bond. The
commercially reasonable efforts obligation of Purchaser described in this Section 4.4.3
shall include the obligation to offer and deliver to the beneficiary of such Guaranty or Bond,
promptly upon request by Seller, (i) in the case such Guaranty or Bond is a guaranty, a
replacement guaranty issued to such beneficiary by Purchaser or another Person having a net
worth and a credit rating at least equal to those of Purchaser, and which replacement guaranty
contains terms and conditions not less favorable to such beneficiary in any material respect
than the terms and conditions of such existing guaranty, (ii) in the case such Guaranty or Bond
is a letter of credit, a replacement letter of credit issued to such beneficiary by a Person
having a net worth and a credit rating at least equal to those of the issuer of such existing
letter of credit, and which replacement letter of credit contains terms and conditions not less
favorable to such beneficiary in any material respect than the terms and conditions of such
existing letter of credit, (iii) in the case such Guaranty or Bond is a surety bond, a
replacement surety bond issued to such beneficiary by a Person having a net worth and a credit
rating at least equal to those of the issuer of such existing surety bond, and which replacement
surety bond contains terms and conditions not less favorable to such beneficiary in any material
respect than the terms and conditions of such existing surety bond, and (iv) in the case such
Guaranty or Bond is any other security agreement or arrangement, a replacement security
agreement or arrangement provided to such beneficiary by a Person having a net worth and a
credit rating at least equal to those of the provider of such existing security agreement or
arrangement, and which replacement security agreement or arrangement contains terms and
conditions not less favorable to such beneficiary in any material respect than the terms and
conditions of such existing security agreement or arrangement (each individually, a
“Replacement Guaranty or Bond”). Notwithstanding anything in this Agreement to the
contrary, during the period commencing on the date of this Agreement and terminating at the
Closing, Purchaser, with Seller’s prior written approval, may contact and have discussions with
each beneficiary of a Guaranty or Bond in order to satisfy its obligations under this
Section 4.4; provided, however, Seller shall have the right to have one
of its representatives present during any such contact or discussion, and Purchaser shall only
contact and hold discussions with such beneficiaries through Representatives of Purchaser
previously approved by Seller, and Purchaser shall cause such Representatives to comply with all
procedures and protocols regarding such contacts and discussions that may be established by
Seller.

          4.4.4. If any Guaranty or Bond is not released, terminated and returned as of the Closing
as contemplated in Section 4.4.2 (each individually an “Outstanding Guaranty or
Bond”), then Purchaser shall from and after the Closing:

 

 

                    (a) continue to use its commercially reasonable efforts to (i) obtain complete and
unconditional release of Seller and any Non-Company Affiliates with respect to each of the
Outstanding Guaranties or Bonds, and (ii) cause the beneficiary or beneficiaries of each such
Outstanding Guaranty or Bond to terminate and redeliver to Seller and such Non-Company Affiliates
such Outstanding Guaranty or Bond; and

                    (b) promptly pay to Seller, after receipt by Purchaser of any invoice therefor, all reasonable
out-of-pocket costs and expenses incurred by Seller or any Non-Company Affiliate after the Closing
Date in connection with, or pursuant to the terms of, any Outstanding Guaranty or Bond until the
complete and unconditional release of Seller and any Non-Company Affiliate’s obligations with
respect to such Outstanding Guaranty or Bond.

     The commercially reasonable efforts obligation of Purchaser described in this
Section 4.4.3 shall be the same as those set forth in Section 4.4.2;
provided, however, if any Outstanding Guaranty or Bond is not released and
terminated as contemplated in this Section 4.4.3 within ninety (90) days of the Closing
Date, Purchaser shall promptly upon Seller’s request offer and deliver to the beneficiary of such
Outstanding Guaranty or Bond (i) in the case such Outstanding Guaranty or Bond is a guaranty, a
replacement guaranty issued to such beneficiary by Purchaser or another Person having a net worth
and a credit rating at least equal to those of Purchaser, and which replacement guaranty contains
terms and conditions that are substantially identical to the terms and conditions of such existing
guaranty, (ii) in the case such Outstanding Guaranty or Bond is a letter of credit, a replacement
letter of credit issued to such beneficiary by a Person having a net worth and a credit rating at
least equal to those of the issuer of such existing letter of credit, and which replacement letter
of credit contains terms and conditions that are substantially identical to the terms and
conditions of such existing letter of credit, (iii) in the case such Outstanding Guaranty or Bond
is a surety bond, a replacement surety bond issued to such beneficiary by a Person having a net
worth and a credit rating at least equal to those of the issuer of such existing surety bond, and
which replacement surety bond contains terms and conditions that are substantially identical to the
terms and conditions of such existing surety bond, and (iv) in the case such Outstanding Guaranty
or Bond is any other security agreement or arrangement, a replacement security agreement or
arrangement provided to such beneficiary by a Person having a net worth and a credit rating at
least equal to those of the provider of such existing security agreement or arrangement, and which
replacement security agreement or arrangement contains terms and conditions that are substantially
identical to the terms and conditions of such existing security agreement or arrangement.

          4.4.5. From and after the Closing Date, Purchaser hereby agrees to indemnify and hold
harmless Seller and each Non-Company Affiliate that is a party to or has furnished any Guaranty
or Bond from and against any and all Losses (including any increase in the liability of Seller
or any Non-Company Affiliate in respect of Taxes) suffered or incurred by Seller or any
Non-Company Affiliate arising from or related to any Outstanding Guaranty or Bond.

4.5. Agreement Not to Solicit Employees

     Unless otherwise consented to in writing by Purchaser, Seller agrees that during the
Restricted Period, neither Seller nor any Non-Company Affiliate will solicit or hire away any

 

 

Transferred Employee, except (a) in so far that such employee responds to a bona fide public
job advertisement made by Seller or any Non-Company Affiliate (whether posted on a public site on
the Internet or in a newspaper, magazine or other publication of general circulation), (b) if such
employee initiates contacts regarding employment or engagement with Seller or a Non-Company
Affiliate without any direct or indirect solicitations by Seller or any Non-Company Affiliate,
(c) if the employment of such employee has been terminated by the Company, the Subsidiary,
Purchaser or any Affiliate of Purchaser prior to commencement of employment discussions between
such employee and Seller or any Non-Company Affiliate, or (d) if such employee is submitted to
Seller or any Non-Company Affiliate by a third-party unaffiliated employment agency provided
neither Seller nor any Non-Company Affiliate has provided such employment agency any information
regarding its interest in such employee.

4.6. The Company’s or the Subsidiary’s Use of Seller Marks

          4.6.1. Except to the extent otherwise provided in Section 4.6.1, Purchaser shall
not acquire, nor shall the Company or the Subsidiary retain, reserve, or hold, any rights or
licenses to, any Intellectual Property containing, referencing or otherwise pertaining to the
words, marks or names “Sempra Energy,” “Sempra” or any derivatives or variations thereof
(collectively, the “Seller Marks”) or any names, servicemarks, trademarks, designs,
trade dress, or logos confusingly similar thereto. Within twenty (20) days after the Closing
Date, Purchaser will cause the Company and the Subsidiary to amend their Organizational
Documents to the extent necessary to remove the Seller Marks from the name of the Company and
the Subsidiary. Except to the extent otherwise provided in Section 4.6.1, as soon as
reasonably practicable after the Closing (but in any event, not later than ninety (90) days
thereafter), Purchaser will cause the Company and the Subsidiary (a) to remove all trademarks,
service marks, trade names, slogans, domain names, logos, symbols and trade dress including the
Seller Marks from the properties and assets (including all signage, equipment, training material
and Software) of the Company and the Subsidiary, and (b) otherwise to cease all use of the
Seller Marks or any other terms that are confusingly similar thereto.

          4.6.2. To the extent that any Seller Marks are used by the Company or the Subsidiary in
operating its business on stationery, signage, equipment, invoices, receipts, forms, packaging,
advertising and promotional materials, product, training and service literature and materials,
Software or like materials (collectively, the “Marked Materials”), then, effective as of
the Closing, Seller grants to the Company or the Subsidiary a non-exclusive, non-transferable,
limited license to use any such Marked Materials for a period not to exceed ninety (90) days
after the Closing solely and exclusively for its own internal use, consistent with the past
practices of the Company or the Subsidiary in operating its business; provided
that (a) the Company or the Subsidiary shall not without the prior written consent of
Seller use such Seller Marks in any other manner during such time, and (b) Purchaser shall
within ninety (90) days after the Closing Date cause the Company and the Subsidiary not to use
any Marked Materials (other than signage on equipment and on training materials or Software for
internal use only) without first crossing out or marking over such Seller Marks or otherwise
clearly indicating on such Marked Materials that the Company or the Subsidiary is no longer an
Affiliate of Seller. After the Closing, Purchaser shall cause the Company and the Subsidiary
not to reorder any Marked Materials.

 

 

          4.6.3. Notwithstanding anything to the contrary herein, any use by Purchaser of any Seller
Mark or Marked Materials shall include any and all notices or disclaimers required by Law to be
included with or on such Seller Marks or Marked Materials including but not limited to any
disclaimers required by the California Public Utilities Commission to be used by Affiliates of
San Diego Gas & Electric Company and Southern California Gas Company.

4.7. Insurance Claims

                    Seller shall be solely responsible for the administration and, to the extent applicable,
payment of any Property and Casualty Claims with a date of occurrence prior to the Closing, and
hereby releases Purchaser, the Company, the Subsidiary and their Affiliates of any responsibility
or liability therefor. Purchaser shall be solely responsible for the administration and, to the
extent applicable, payment of any Property and Casualty Claims with a date of occurrence on or
after the Closing, and hereby releases Seller and each Non-Company Affiliate of any responsibility
or liability therefor. For purposes hereof, “Property and Casualty Claims” shall mean
workers’ compensation, auto liability, general liability, products liability, professional
liability, fiduciary liability, pollution liability and director and officer liability claims
relating to the business of the Company or the Subsidiary and claims for damages caused to
facilities of the Company or the Subsidiary generally insured under all risk property and boiler
and machinery insurance coverage, in each case including reported claims and incurred but not
reported claims. Seller shall be solely responsible for the administration and payment of all
costs associated with claims for workers’ compensation and other occupational health or injury
claims of employees of Seller or the Subsidiary prior to the Closing Date and for any claim filed
subsequent to the Closing Date made in connection with any injury, event or occurrence taking place
prior to the Closing Date.

4.8. Payment of Fine.

     Seller shall pay, or shall reimburse Purchaser for, any fine assessed by a Governmental
Authority in connection with the matter disclosed on Schedule 5.9.

	5.	 	REPRESENTATIONS AND WARRANTIES OF SELLER REGARDING THE COMPANY AND THE SUBSIDIARY

     Seller represents and warrants to Purchaser that:

	 	5.1.	 	Organization and Good Standing of the Company and the Subsidiary; Foreign
Qualifications

          5.1.1. The Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Maine, USA, and has all requisite corporate power and
authority to own and lease the properties it currently owns and leases and to carry on its
business as such business is currently conducted. The Subsidiary is a limited liability company
duly formed, validly existing and in good standing under the laws of the State of Maine, USA,
and has all requisite limited liability company power and authority to own and lease the
properties it currently owns and leases and to carry on its business as such business is
currently conducted.

 

 

          5.1.2. The Company and the Subsidiary are duly licensed, registered and qualified to do
business as a foreign corporation or limited liability company, as the case may be, and is in
good standing in all jurisdictions in which the ownership, leasing or operation of its assets or
the conduct of its business as currently conducted requires such qualification under applicable
Law, except where the failure to be so licensed, registered or qualified, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.

          5.1.3. Seller has heretofore made available to Purchaser true, correct and complete copies
of the Organizational Documents, each as amended to the date hereof, of the Company and the
Subsidiary.

5.2. Capitalization of the Company and the Subsidiary

          5.2.1. The authorized capital stock of the Company consists of 3,000 shares of common
stock, no par value per share, of which 100 shares are issued and outstanding. The Purchased
Shares (a) constitute all of the issued and outstanding shares of capital stock of the Company,
(b) are validly authorized and issued, fully paid, and nonassessable, and (c) are, and at the
Closing will be, owned beneficially and of record entirely by Seller. No Purchased Shares were
issued in violation of any preemptive, first refusal or other subscription rights of any
shareholder of the Company or any other Person, and, to the knowledge of Seller, all Purchased
Shares were offered and sold in compliance with all applicable federal, state and provincial
securities Laws. There are no outstanding options, warrants, calls, commitments or plans by the
Company to issue any additional shares of its capital stock, or to
pay any dividends on such shares, or to purchase, redeem or retire any outstanding shares of its capital stock, nor are
there outstanding any securities or obligations which are convertible into or exchangeable for
any shares of capital stock of the Company. There are no stock appreciation rights, phantom
stock or similar rights in existence with respect to the Company. No Person other than Seller
owns or otherwise has any rights to any equity securities of the Company.

          5.2.2. The Company owns one hundred percent (100%) of the issued and outstanding equity
interests in the Subsidiary. All of such issued and outstanding equity interests were duly
authorized for issuance and were not issued in violation of any preemptive, first refusal or
other subscription rights, and, to the knowledge of Seller, all equity interests in the
Subsidiary were offered and sold in compliance with all applicable federal, state and provincial
securities Laws. There are no outstanding options, warrants, calls, commitments or plans by the
Subsidiary to issue any additional equity interests, or to pay any dividends on such equity, or
to purchase, redeem or retire any outstanding equity interests, nor are there outstanding any
securities or obligations which are convertible into or exchangeable for any equity interest in
the Subsidiary. No Person other than the Company owns or otherwise has any rights to any equity
interests in the Subsidiary.

          5.2.3. Neither the Company nor the Subsidiary owns, directly or indirectly, any capital
stock or other equity interest in any corporation, partnership, joint venture, limited liability
company or partnership, association or other legal entity except as set forth on Schedule
5.2.

 

 

5.3. Financial Statements; Undisclosed Liabilities

          5.3.1. Attached hereto as Schedule 5.3.1 are true, correct and complete copies of
the Financial Statements which have been generated in accordance with the books and records of
the Company. Except as set forth in Schedule 5.3.1, the Financial Statements (a) have
been prepared in accordance with GAAP (except that they do not include required footnotes), and
(b) fairly and accurately present the financial position and the results of operations of the
Company and the Subsidiary on a consolidated, pro forma basis (as explained in
Schedule 5.3.1) as of the dates and for the periods indicated in accordance with GAAP
(except that they do not include required footnotes).

          5.3.2. Neither the Company nor the Subsidiary has any liability or obligation that would be
required to be disclosed on a balance sheet prepared in accordance with GAAP, except for the
liabilities and obligations of the Company or the Subsidiary (a) disclosed or reserved against
in the Interim Financial Statements, (b) set forth in Schedule 5.3.2, or (c) incurred or
accrued in the Ordinary Course of Business since December 31, 2005.

5.4. Taxes

     Except as provided in Schedule 5.4: (i) the Company and the Subsidiary have timely
filed all material Separate Income Tax Returns and other material Tax Returns required to be filed
for the Company or the Subsidiary on a separate basis, and all such returns are true and accurate
in all material respects; (ii) the Company and the Subsidiary have paid (or have established
adequate reserves on their books and records amounts for) all material Taxes due and payable in
respect of such Tax Returns except those being contested in good faith; (iii) the Company and the
Subsidiary have withheld all amounts known to the Company or the Subsidiary to be required to be
withheld from payments to employees and other third parties and have remitted such amounts to the
appropriate taxing authority in accordance with applicable laws; (iv) neither the Company nor the
Subsidiary has executed or filed with any taxing authority (whether federal, state, local or
foreign) any agreement or other document (other than normal requests to extend the time for filing
a Tax Return) extending or having the effect of extending the period for assessment of any Tax that
is due with respect to a Separate Income Tax Return or other material Tax Returns that the Company
or the Subsidiary is required to file on a separate basis; and (v) to Seller’s knowledge, no
federal, state, local or foreign Tax audits or other administrative proceeding, discussions or
court proceedings are presently in progress with regard to any Separate Income Tax Returns or other
material Tax Returns that the Company or the Subsidiary is required to file on a separate basis.

5.5. Tangible Personal Property

          5.5.1. Schedule 5.5.1 sets forth a list of all Tangible Personal Property with a
cost greater than Five Thousand Dollars ($5,000.00) owned by the Company or the Subsidiary, and
designates which entity owns said property. Except as set forth in Schedule 5.5.1, the
Company and the Subsidiary have good and valid title (or, in the case of leased Tangible
Personal Property, a good and valid leasehold interest) to all of the Tangible Personal Property
used in the operation of the business of the Company and the Subsidiary as currently conducted,
in each case free and clear of any material Lien.

 

 

          5.5.2. All of the Accounts Receivable shown on the Financial Statements and the Accounts
Receivable constituting a part of the Assets arose in the Ordinary Course of Business in
connection with bona fide transactions.

5.6. Agreement Related to Other Instruments; Consents

     Except as set forth in Schedule 5.6, the execution, delivery and performance by Seller
of this Agreement and the other documents, instruments and agreements to be entered into by Seller
pursuant hereto do not and will not, and the consummation of the transactions contemplated hereby
and thereby will not, conflict with or violate any provision of the Organizational Documents of the
Company or the Subsidiary, or constitute an occurrence of a Default or require the consent or
approval of any Person under any provision of (a) any mortgage, deed of trust, conveyance to secure
debt, note or loan to which the Company or the Subsidiary is a party, or (b) any Material Contract
or any Real Property Lease.

5.7. Absence of Changes

     Since September 30, 2006, neither the Company nor the Subsidiary has, except as set forth in
Schedule 5.7:

                    (a) transferred, assigned or conveyed any material Assets except in the Ordinary Course of
Business or as contemplated in Sections 3.6 and 4.1;

                    (b) suffered any material destruction, damage or loss to any material Assets (casualty or
other), whether or not covered by insurance;

                    (c) except as described in Schedule 5.12, entered into any Material Contract except in
the Ordinary Course of Business;

                    (d) except as described in Schedule 5.12, terminated or amended or suffered the
termination or amendment of, failed to perform in all material respects its obligations under, or
suffered or permitted any Default to exist under, any Material Contract or Real Property Lease;

                    (e) caused or consented to the imposition of a material Lien on any Asset;

                    (f) made any distributions to Seller in the form of the return of capital, dividends or cash
distributions, except for the transaction contemplated in Sections 3.6 and 4.1;

                    (g) incurred or assumed any indebtedness for borrowed money or issued any debt security,
except for payables incurred in the Ordinary Course of Business;

                    (h) waived any material right of the Company or the Subsidiary of cancelled any debt or claim
held by the Company of the Subsidiary;

                    (i) made any loan to any officer, director, employee or shareholder of the Company or the
Subsidiary;

 

 

                    (j) increased, directly or indirectly, the compensation paid or payable to any officer,
director, employee or agent of the Company or the Subsidiary except in accordance with Section
3.2(j) hereof;

                    (k) hired or fired any employees of the Company or the Subsidiary or changed any such
employee’s terms or conditions of employment except in accordance with Section 3.2(p)
hereof ;

                    (l) taken or suffered any other act that may reasonably be expected to cause or result in a
Material Adverse Effect;

                    (m) received any adverse ruling or denial of any request by any Governmental Authority,
including but not limited to the MPUC; or

                    (n) agreed to do any of the foregoing items of this Section 5.7.

5.8. Material Claims

     Except as set forth in Schedule 5.8, there is no litigation, suit, action, proceeding
or claim pending or, to the knowledge of Seller, proposed or threatened against the Company or the
Subsidiary that (a) affects the Company, the Subsidiary or the Assets and could, individually or in
the aggregate, if pursued or resulting in a judgment against the Company or the Subsidiary,
reasonably be expected to have a Material Adverse Effect, or (b) seeks restraint, prohibition, or
other injunctive relief in connection with this Agreement or the consummation of the transactions
contemplated hereby. Except as set forth in Schedule 5.8, there is no judgment, decree,
injunction, order, determination, award, finding or letter of deficiency of any Governmental
Authority or arbitrator outstanding with respect to the Agreement or against the Company, the
Subsidiary or, to the knowledge of Seller, any of the Assets, except in each case that could not,
individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

5.9. Permits; Compliance With Laws

     Except as set forth in Schedule 5.9 and for Environmental Matters, which are addressed
exclusively in Section 5.17, the Company and the Subsidiary possess all Permits that are
required under applicable Law for the ownership or operation of the business of the Company and the
Subsidiary as currently conducted, all such Permits are in full force and effect, and the Company
and the Subsidiary are in compliance with all of the terms and conditions of such Permits, except
in each case for any Permit or violation which could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. No proceeding is pending or, to the
knowledge of Seller, threatened seeking the revocation or limitation of any such Permit. Except as
set forth in Schedule 5.9, the Company and the Subsidiary are in compliance with all
applicable Laws, except for any violation under any such Law which could not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect. Neither the Company nor
the Subsidiary has received any written notice from any Governmental Authority alleging its
violation of any applicable Law, which violation could, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.

 

 

5.10. Real Property

          5.10.1. The Company and the Subsidiary do not own any fee simple interest in real property
other than the real property, buildings and improvements described in Schedule 5.10.1.
The Company owns good, valid and marketable fee simple title to such real property, free and
clear of any Lien other than any Liens that, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect or materially adversely affect the
function of such property in connection with its use in the Ordinary Course of Business. Except
as set forth on Schedule 5.10.1, no part of such real property is subject to any
assignment, lease, license, sublease or other agreement granting to any Person any right to the
possession, use, occupancy or enjoyment of such property. To the knowledge of Seller, such real
property complies in all material respects with all federal, state, provincial and local Laws
and all applicable private restrictions.

          5.10.2. Seller has heretofore delivered to Purchaser true, correct and complete copies of
all leases (including all amendments thereto) of real property currently leased by the Company
or the Subsidiary, a list of which is set forth in Schedule 5.10.2 (collectively, the
“Real Property Leases”). Each Real Property Lease is valid and binding on the Company
or the Subsidiary that is a party thereto and, to the knowledge of Seller, on the other parties
thereto, and is enforceable against the Company or the Subsidiary and, to the knowledge of
Seller, the other parties thereto in accordance with the terms thereof, except as enforceability
may be limited by bankruptcy, insolvency, fraudulent conveyance, fraudulent transfer,
reorganization, moratorium, applicable equitable principles or other similar Laws from time to
time in effect affecting the enforcement of creditors’ rights generally. Except as described in
Schedule 5.10.2, the Company or the Subsidiary that is a party to a Real Property Lease
has performed all material obligations required to be performed by it to date under such Real
Property Lease, and neither the Company nor the Subsidiary nor, to the knowledge of Seller, any
other party thereto is in Default under any of the Real Property Leases. Except as set forth in
Schedule 5.10.2 and to the knowledge of Seller, no part of the property leased pursuant
to a Real Property Lease is subject to any assignment, lease, license, sublease, or other
agreement granting to any Person other than as specified in such Real Property Lease any right
to the possession, use, occupancy or enjoyment of such leased property.

5.11. Intellectual Property; Software

          5.11.1. Except for the Seller Marks, Schedule 5.11.1 sets forth a list of all
issued Patents and registered copyrights, trademarks, service marks and trade names owned or
licensed by the Company or the Subsidiary and currently used in conducting its business in the
United States or any foreign country, and the annual licensing fee to be paid by the Company or
the Subsidiary for the use of such Intellectual Property, if any. The Company and the
Subsidiary own, or have the license or right to use in the United States and in any foreign
country in which they conduct business, all Intellectual Property currently used and necessary
to conduct the business of the Company or the Subsidiary as presently conducted, in each case in
the United States and in each foreign country where the Company or the Subsidiary uses such
Intellectual Property, except for such Intellectual Property the failure of which to own or
license would not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

 

 

          5.11.2. Except for “off-the-shelf” commercially available word processing, accounting,
inventory control and similar Software used by the Company or the Subsidiary, Schedule
5.11.2(a) sets forth a list of all Software owned or licensed by the Company or the
Subsidiary, and Schedule 5.11.2(b) sets forth a list of all Software owned or licensed
by any Non-Company Affiliate, which is currently used in conducting any Company business in the
United States or any foreign country, except for Software the failure of which to own or license
would not, individually or in the aggregate, reasonably be expected to have a Material Adverse
Effect. Schedules 5.11.2(a) and 5.11.2(b) also set forth the annual licensing
fee owed by the Company or the Subsidiary to utilize said Software. The Company and the
Subsidiary own, or have the license or right to use all such Software currently used and
necessary to conduct the business of the Company or the Subsidiary as presently conducted, in
each case in the United States and in each foreign country where the Company or the Subsidiary
uses such Software, except for such Software the failure of which to own or license would not,
individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

          5.11.3. To the knowledge of Seller, no Third Party has asserted against the Company or the
Subsidiary a claim in writing that the Company or the Subsidiary is infringing the Intellectual
Property of such Third Party. Except as set forth in Schedule 5.11.3, to the knowledge
of Seller, no Third Party is infringing the Intellectual Property owned or exclusively licensed
by the Company or the Subsidiary, except for any such infringement which could not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.

5.12. Material Contracts

               5.12.1. Schedule 5.12 sets forth a true, correct and complete list, as of the date
hereof, of all Contracts (other than Real Property Leases) of the following categories
(collectively, the “Material Contracts”):

                    5.12.1.1.   any Contract (including any confidentiality agreements) between the Company or the
Subsidiary and one or more Major Customers;

                    5.12.1.2.   any Contract (other than agreements for the license or purchase of Software)
involving payments by the Company or the Subsidiary in excess of $10,000;

                    5.12.1.3.   any partnership agreement, joint venture agreement or non-wholly-owned limited
liability company operating agreement;

                    5.12.1.4.   any Contract (including any confidentiality agreements) between the Company or the
Subsidiary, on the one hand, and Seller or any Non-Company Affiliate, on the other hand;

                    5.12.1.5.   any employment, personal services, consulting, severance, noncompetition, golden
parachute or similar contract with or for the benefit of officers, directors or other individuals
and requiring payments by the Company or the Subsidiary;

 

 

                    5.12.1.6.   any guaranty, surety bond or letter of credit issued or posted, as applicable, by
the Company or the Subsidiary in which the Company or the Subsidiary is the guarantor, indemnitor
or reimbursing party, as applicable;

                    5.12.1.7. any agreement requiring payment to any Person of a commission or fee other than in
the Ordinary Course of Business;

                    5.12.1.8.   any distributor, sales representative, independent contractor or similar
agreement;

                    5.12.1.9.  any agreement under which the Company or the Subsidiary or any of their officers or
directors are restricted from carrying on any business, or competing in any line of business, in
the State where the Company does business;

                    5.12.1.10. any indenture, trust agreement, loan agreement or note to which the Company or
Subsidiary is a party that involves or evidences outstanding indebtedness, obligation or
liabilities for borrowed monies;

                    5.12.1.11. any agreement for the disposition of a material portion of the Company’s or the
Subsidiary’s Assets (other than the sale of inventory in the Ordinary Course of Business);

                    5.12.1.12. any stand-alone indemnification agreement providing for indemnification obligations
on the part of the Company or Subsidiary;

                    5.12.1.13.  any agreement for the acquisition of any of the properties, securities or other
ownership interest of the Company or the Subsidiary or the grant to any Person of any options,
rights of first refusal, exclusive negotiation or preferential similar rights to purchase any of
such Assets, properties, securities or other ownership interest; and

                    5.12.1.14. any commitment or agreement to enter into or post any of the foregoing items of
this Section 5.12.1.

As of the date of this Agreement, Seller has made available to Purchaser true, correct and complete
copies of all written Material Contracts. Each Material Contract is in full force and effect, and
is valid and binding on the Company or the Subsidiary, as applicable, that is a party thereto and,
to the knowledge of Seller, the other parties thereto, and is enforceable against the Company or
the Subsidiary and, to the knowledge of Seller, the other parties thereto in accordance with the
terms thereof, except as enforceability may be limited by bankruptcy, insolvency, fraudulent
conveyance, fraudulent transfer, reorganization, moratorium, applicable equitable principles or
similar laws from time to time in effect affecting the enforcement of creditors’ rights generally.
Any and all Equity Financing Agreements, at the request of the Purchaser, shall be terminated by
the Company, the Subsidiary, and/or by the Seller as of the Closing Date. The Company or the
Subsidiary that is a party to a Material Contract has performed all material obligations required
to be performed by it to date under such Material Contract, and neither the Company nor the
Subsidiary, nor, to the knowledge of Seller, any other party thereto is in Default under such
Material Contract, nor does any condition exist that with notice or lapse of time would

 

 

constitute a Default thereunder. To the knowledge of Seller, no surety bond or letter of credit
that constitutes a Material Contract has been called or drawn upon.

5.13. Labor Matters

     Except as set forth on Schedule 5.13, within the last three (3) years, to the
knowledge of Seller, (a) neither the Company nor the Subsidiary has been the subject of any union
activity, nor has there been any strike of any kind called against the Company or the Subsidiary,
nor has there been any lockout or work stoppage involving the Company or the Subsidiary, and (b)
neither the Company nor the Subsidiary has violated any applicable federal, state or provincial Law
relating to labor or labor practices with regard to the Company’s and the Subsidiary’s business,
except for any such violation which could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. Except as set forth on Schedule 5.13, neither
the Company nor the Subsidiary is a party to any collective bargaining agreement.

5.14. ERISA and Related Matters

          5.14.1. Schedule 5.14 sets forth a true, correct and complete list, as of the date
hereof, of all Company Plans. Seller has made available to Purchaser true, correct and complete
copies of the most recent summary plan descriptions, if any, with respect to the Company Plans.
Schedule 5.14 also sets forth a true, correct and complete list, as of the date hereof, of
all Seller Plans. Seller has made available to Purchaser true, correct and complete copies of the
most recent summary plan descriptions, if any, with respect to the Seller Plans.

          5.14.2. Neither the Company nor the Subsidiary contributes or has an obligation to contribute,
and has not within six (6) years prior to the date of this Agreement contributed or had an
obligation to contribute, to a multiemployer plan (within the meaning of Section 3(37) of ERISA) or
a Benefit Plan (other than a Seller Plan) subject to Title IV of ERISA, Section 302 of ERISA or
Section 412 of the Code.

          5.14.3. With respect to any “employee benefit plan,” within the meaning of Section 3(3) of
ERISA, that is not a Company Plan, and which is sponsored, maintained, or contributed to, or has
been sponsored, maintained, or contributed to within six (6) years prior to the date of this
Agreement, by the Company, the Subsidiary or any corporation, trade, business, or entity under
common control with the Company or the Subsidiary, within the meaning of Section 414(b), (c), or
(m) of the Code or Section 4001 of ERISA, (a) no withdrawal liability, within the meaning of
Section 4201 of ERISA, has been incurred, which withdrawal liability has not been satisfied, (b) no
liability to the Pension Benefit Guaranty Corporation has been incurred by any such entity, which
liability has not been satisfied, (c) no accumulated funding deficiency, whether or not waived,
within the meaning of Section 302 of ERISA or Section 412 of the Code has been incurred, and
(d) all contributions (including installments) to such plan required by Section 302 of ERISA and
Section 412 of the Code have been timely made.

          5.14.4. In connection with the consummation of the transactions contemplated by this
Agreement, no payments of money or other property, acceleration of benefits, or provision of other
rights have been or will be made hereunder, under any agreement contemplated herein, or under any
Company Plan that would be reasonably likely to be nondeductible under Section

 

 

280G of the Code, whether or not some other subsequent action or event would be required to
cause such payment, acceleration, or provision to be triggered.

5.15. Guaranties or Bonds

     Schedule 5.15 sets forth a true, correct and complete list, as of the date hereof, of
all Guaranties or Bonds.

5.16. Employees

     Except as set forth on Schedule 5.12, neither the Company nor the Subsidiary has any
written or oral contract with any individual currently engaged, or previously engaged, in the
business of the Company or the Subsidiary as an employee. Schedule 5.16 sets forth a true,
correct and complete list, as of the date(s) set forth therein, of the names, position and initial
employment date of all current employees of the Company and the Subsidiary. Prior to the date
hereof, Seller has made available to Purchaser on a confidential basis for each such employee his
or her current base pay. No changes in such base pay for such employees have been made, promised
or authorized by the Company or the Subsidiary since September 30, 2006, except as described in
Schedule 5.16 and except in accordance with the requirements of Section 3.2(p)
hereof. Except as set forth in Schedule 5.16 or as provided under any Material Contract,
there are no loans or other obligations payable or owing by the Company or the Subsidiary to any
officer, director or employee of the Company or the Subsidiary, except salaries, wages, bonuses and
salary advances and reimbursement of expenses incurred and accrued in the Ordinary Course of
Business, nor are any loans or debts payable or owing by any such individuals to the Company or the
Subsidiary, nor have the Company or the Subsidiary guaranteed any of such individuals’ respective
loans or obligations.

5.17. Environmental Matters

     Except as set forth in Schedule 5.17, and except for any matter which could not,
individually or in the aggregate, reasonably be expected to have a Material Adverse Effect:

          5.17.1. the Company and the Subsidiary and their respective operations are in compliance
with all applicable Environmental Laws;

          5.17.2. neither the Company nor the Subsidiary is subject to any pending or, to the
knowledge of Seller, threatened claim, action, suit, investigation, inquiry or proceeding under
any Environmental Law and to Seller’s knowledge there is no such action proposed or threatened;

          5.17.3. all Permits, if any, required to be obtained by the Company and the Subsidiary
under any Environmental Law in connection with its respective operations as they are currently
being conducted, including those relating to the management of Hazardous Substances, have been
obtained by the Company or the Subsidiary, and are in full force and effect on the date hereof;

          5.17.4. to the knowledge of Seller, there have been no releases of Hazardous Substances on
any real property owned or leased by the Company or the Subsidiary in

 

 

connection with the operations of the Company and the Subsidiary that requires remediation
under applicable Environmental Laws;

          5.17.5. Seller has made available to Purchaser on a confidential basis all environmental
site assessment reports, studies and related documents in the possession of the Company, the
Subsidiary, Seller or any Non-Company Affiliate and relating to environmental matters in
connection with operation of the Assets.

     Notwithstanding any other provision of this Agreement, including without limitation
Section 5.9, Seller makes no representation or warranty regarding any environmental matters
except as expressly set forth in this Section 5.17.

5.18. Insurance Coverage

     Schedule 5.18 sets forth a true, correct and complete summary of all Seller Insurance
Policies and any surety bonds (if applicable) covering the Company, the Subsidiary, the Assets, the
business of the Company and the Subsidiary, and the employees of the Company and the Subsidiary,
other than any such insurance policies related to Benefit Plans. There is no claim by the Company
or the Subsidiary pending under any such policies or bonds as to which coverage has been
questioned, denied or disputed by the underwriters of such policies and bonds. All premiums due
and payable under such policies and bonds have been paid, and the Company and the Subsidiary are
otherwise in material compliance with the terms and conditions of all such policies and bonds. To
the knowledge of Seller, there is no threatened termination of such policies and bonds.

5.19. Governmental Filings

     Except as disclosed on the attached Schedule 5.19, no Person needs to provide any
notice to, or obtain any Permits from any Governmental Authority for the consummation of the
transactions contemplated by this Agreement.

5.20. Accounts Receivable

     All Accounts Receivable represent valid obligations and are not subject to any set offs or
counterclaims. All Accounts Receivable and all Accounts Receivable arising between the Effective
Date and the Closing Date are owned by the Company or the Subsidiary free and clear of any security
interests, and are collectible in the aggregate face amount thereof, without result to litigation
or extraordinary collection activity within ninety (90) days after the Closing Date. Seller has
not received any written notice from an account debtor stating that any Account Receivable in an
amount in excess of Five Thousand Dollars ($5,000.00) is subject to any contest, claim or set off
by such account debtor. No discount or allowance from any Account Receivable has been made or
agreed to, and none represents billing prior to the actual sale of gas or provision of services.

 

 

	6.	 	REPRESENTATIONS AND WARRANTIES OF SELLER REGARDING SELLER AND THE PURCHASED SHARES
	 
	 	 	Seller represents and warrants to Purchaser that:

6.1. Organization and Standing

     Seller is a corporation duly incorporated, validly existing and in good standing under the
laws of the State of California, USA.

6.2. Corporate Power and Authority; Enforceability

     Seller has all requisite corporate power and authority to execute and deliver this Agreement
and the other documents, instruments and agreements to be entered into by it pursuant hereto, to
perform its obligations hereunder and thereunder, and to consummate the transactions contemplated
hereby and thereby. The execution, delivery and performance by Seller of this Agreement and each
and every agreement, document and instrument to be executed, delivered and performed by Seller in
connection herewith have been duly authorized and approved by all requisite corporate action on the
part of Seller. This Agreement has been duly and validly executed and delivered by Seller, and, on
the Closing Date, all other agreements to be entered into by Seller pursuant hereto will have been
duly and validly executed and delivered by Seller. This Agreement is, and each and every
agreement, document and instrument provided for herein to be executed and delivered and to which
Seller is a party will be, when executed and delivered by the parties thereto, valid and binding on
Seller, and enforceable against Seller in accordance with its respective terms, except as
enforceability may be limited by applicable equitable principles or by bankruptcy, insolvency,
fraudulent conveyance, fraudulent transfer, reorganization, moratorium or similar Laws from time to
time in effect affecting the enforcement of creditors’ rights generally.

6.3. No Violation or Conflict by Seller

     Except as set forth in Schedule 6.3, the execution, delivery and performance by Seller
of this Agreement and each and every other agreement, document and instrument to be entered into by
Seller pursuant hereto do not and will not, and the consummation of the transactions contemplated
hereby and thereby will not, conflict with or violate any provision of the certificate of
incorporation or bylaws of Seller, or constitute an occurrence of a Default or require the consent
or approval of any Person under any provision of any contract or agreement to which Seller is a
party or by which it is bound.

6.4. Seller Governmental Approvals

     Except as set forth in Schedule 6.4, the execution, delivery and performance by Seller
of this Agreement, and the other documents, instruments and agreements to be entered into by Seller
pursuant hereto, do not and will not, and the consummation of the transactions contemplated hereby
and thereby will not (a) violate any consent, judgment, order or decree or any applicable rule or
regulation of any Governmental Authority to which Seller, the Company, the Subsidiary or any
Non-Company Affiliate is a party or is subject to, (b) require of Seller, the Company, the
Subsidiary or any Non-Company Affiliate a filing or registration with any

 

 

Governmental Authority, or (c) require Seller, the Company, the Subsidiary or any Non-Company
Affiliate to obtain any consent, approval, Permit, certificate or order of any Governmental
Authority under applicable Law or by any applicable consent, judgment, order or decree or any
applicable rule or regulation of any Governmental Authority.

6.5. Title to the Purchased Shares

     Seller owns, beneficially and of record, all of the Purchased Shares free and clear of any and
all Liens. There are no outstanding subscriptions, options, warrants, rights of first refusal or
other agreements or commitments, other than this Agreement, obligating Seller to transfer, or
granting an option or right by Seller to any Person to purchase or acquire from Seller the
Purchased Shares or any other securities of the Company.

6.6. Litigation Against Seller

     Except as set forth in Schedule 6.6, there is no litigation, suit, action, proceeding,
claim or investigation pending or, to the knowledge of Seller, proposed or threatened against
Seller that (a) affects Seller, any Non-Company Affiliate, the Company, the Subsidiary or the
Assets, and could, individually or in the aggregate, if pursued or resulting in a judgment against
Seller, reasonably be expected to have a material adverse effect on the ability of Seller to
consummate the transactions described herein, or (b) seeks restraint, prohibition, or other
injunctive relief in connection with this Agreement or the consummation of the transactions
contemplated hereby. There is no judgment, decree, injunction, order, determination, award,
finding or letter of deficiency of any Governmental Authority or arbitrator outstanding against
Seller with respect to this Agreement.

	7.	 	REPRESENTATIONS AND WARRANTIES OF PURCHASER
	 
	 	 	Purchaser represents and warrants to Seller that:

7.1. Organization and Standing

     Purchaser is a corporation duly incorporated, validly existing and in good standing under the
laws of the State of Montana.

7.2. Corporate Power and Authority; Enforceability

     Purchaser has all requisite corporate power and authority to execute and deliver this
Agreement and the other documents, instruments and agreements to be entered into by it pursuant
hereto, to perform its obligations hereunder and thereunder, and to consummate the transactions
contemplated hereby and thereby. The execution, delivery and performance by Purchaser of this
Agreement and each and every other agreement, document and instrument to be executed, delivered and
performed by Purchaser in connection herewith have been duly authorized and approved by all
requisite corporate action on the part of Purchaser. This Agreement has been duly and validly
executed and delivered by Purchaser, and, on the Closing Date, all other agreements to be entered
into by Purchaser pursuant hereto will have been duly and validly executed and delivered by
Purchaser. This Agreement is, and each and every agreement, document and instrument provided for
herein to be executed and delivered and to

 

 

which Purchaser is a party will be, when executed and delivered by the parties thereto, valid
and binding on Purchaser, and enforceable against Purchaser in accordance with their respective
terms, except as enforceability may be limited by applicable equitable principles or by bankruptcy,
insolvency, fraudulent conveyance, fraudulent transfer, reorganization, moratorium or similar Laws
from time to time in effect affecting the enforcement of creditors’ rights generally.

7.3. No Violation or Conflict by Purchaser

     Except as set forth in Schedule 7.3, the execution, delivery and performance by
Purchaser of this Agreement and each and every other agreement, document and instrument to be
entered into by Purchaser pursuant hereto do not and will not, and the consummation of the
transactions contemplated hereby and thereby will not, conflict with or violate any provisions of
the articles of incorporation or the bylaws of Purchaser, or constitute an occurrence of Default or
require the consent or approval of any Person under any provision of any contract or agreement to
which Purchaser is a party or by which it is bound.

7.4. Purchaser Governmental Approvals

     Except as set forth in Schedule 7.4, the execution, delivery and performance by
Purchaser of this Agreement, and the other documents, instruments and agreements to be entered into
by Purchaser pursuant hereto, do not and will not, and the consummation of the transactions
contemplated hereby and thereby will not (a) violate any consent, judgment, order or decree or any
rule or regulation of any Governmental Authority to which Purchaser or any Affiliate of Purchaser
is a party or is subject to, (b) require of Purchaser or any Affiliate of Purchaser a filing or
registration with any Governmental Authority, or (c) require Purchaser or any Affiliate of
Purchaser to obtain any consent, approval, Permit, certificate or order of any Governmental
Authority under applicable Law or by any applicable consent, judgment, order or decree or any
applicable rule or regulation of any Governmental Authority.

7.5. Litigation Against Purchaser

     There is no litigation, suit, action, proceeding, claim or investigation pending or, to the
knowledge of Purchaser, proposed or threatened against Purchaser that (a) affects Purchaser or any
Affiliate of Purchaser and could, individually or in the aggregate, if pursued or resulting in a
judgment against Purchaser or such Affiliate, reasonably be expected to have a material adverse
effect on the ability of Purchaser to consummate the transactions described herein, or (b) seeks
restraint, prohibition, or other injunctive relief in connection with this Agreement or the
consummation of the transactions contemplated hereby. There is no judgment, decree, injunction,
order, determination, award, finding or letter of deficiency of any Governmental Authority or
arbitrator outstanding against Purchaser with respect to this Agreement.

7.6. Purchase for Investment

     Purchaser is acquiring the Purchased Shares pursuant to the exemption provided by Section 4(2)
of the Securities Act of 1933, as amended, and has made, independently and without reliance on
Seller (except to the extent that Purchaser has relied upon the representations and warranties of
Seller contained herein), its own analysis of the Purchased Shares, the Company,

 

 

the Subsidiary and the Assets for the purpose of acquiring the Purchased Shares, and Purchaser
has had reasonable and sufficient access to such documents and other information and materials as
it considers appropriate to make its necessary evaluation. Purchaser is acquiring the Purchased
Shares solely for its own account for investment and not with a view to or for the distribution
thereof. Purchaser acknowledges that the Purchased Shares are not registered under the Securities
Act of 1933, as amended, and that none of the Purchased Shares may be transferred or sold except
pursuant to the registration provisions of the Securities Act of 1933, as amended, or pursuant to
an applicable exemption therefrom.

7.7. Financial Capacity; Solvency

     Purchaser will (a) at the Closing have the financial capacity to satisfy all of its payment
obligations due at the Closing under this Agreement and the other documents, instruments and
agreements to be entered into by it pursuant hereto, and (b) after the payment of the Purchase
Price and the Closing, be solvent and have the ability to pay its current obligations as they come
due, including all post-closing obligations of Purchaser under this Agreement and the other
documents, instruments and agreements to be entered into by it pursuant hereto.

7.8. “As Is” Sale

     EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES OF SELLER SET FORTH IN THIS AGREEMENT, PURCHASER
UNDERSTANDS AND AGREES THAT THE ASSETS, INCLUDING THE TANGIBLE PERSONAL PROPERTY, ARE BEING
ACQUIRED “AS IS, WHERE IS” ON THE CLOSING DATE, AND IN THEIR CONDITION ON THE CLOSING DATE “WITH
ALL FAULTS,” AND THAT PURCHASER IS RELYING ON ITS OWN EXAMINATION OF THE ASSETS. WITHOUT LIMITING
THE GENERALITY OF THE FOREGOING AND EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES OF SELLER
EXPRESSLY SET FORTH IN THIS AGREEMENT, PURCHASER UNDERSTANDS AND AGREES THAT SELLER EXPRESSLY
DISCLAIMS ANY REPRESENTATIONS OR WARRANTIES AS TO THE OPERATION OF THE ASSETS, INCLUDING THE TITLE,
CONDITION, VALUE OR QUALITY OF THE ASSETS OR THE PROSPECTS, LIABILITIES, RISKS AND OTHER INCIDENTS
OF THE ASSETS AND ANY REPRESENTATION OR WARRANTY OF MERCHANTABILITY, USAGE, SUITABILITY OR FITNESS
FOR ANY PARTICULAR PURPOSE WITH RESPECT TO THE ASSETS OR ANY PART THEREOF, OR AS TO THE WORKMANSHIP
THEREOF OR THE ABSENCE OF ANY DEFECTS THEREIN, WHETHER LATENT OR PATENT. PURCHASER FURTHER AGREES
THAT, EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES OF SELLER EXPRESSLY SET FORTH IN THIS
AGREEMENT, NO DUE DILIGENCE MATERIALS OR OTHER INFORMATION OR MATERIALS PROVIDED BY, OR
COMMUNICATION MADE BY, SELLER OR ANY REPRESENTATIVE OF SELLER WILL CONSTITUTE, CREATE OR OTHERWISE
CAUSE TO EXIST ANY REPRESENTATION OR WARRANTY WHATSOEVER, WHETHER OR NOT EXPRESSLY DISCLAIMED BY
THE FOREGOING.

 

 

	8.	 	CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER

     The obligations of Purchaser to consummate the transactions contemplated by this Agreement
shall be subject to the satisfaction, on or before the Closing, of each and every one of the
following conditions, all or any of which may be waived, in whole or in part, by Purchaser for
purposes of consummating such transactions:

8.1. Representations True at the Closing

     The representations and warranties made by Seller in this Agreement shall be true and correct
when made, and immediately prior to the Closing with the same force and effect as though such
representations and warranties had been made as of such time.

8.2. Covenants of Seller

     Seller shall have duly performed in all material respects all of the covenants, acts and
undertakings to be performed by it on or prior to the Closing pursuant to the Agreement, and a duly
authorized officer of Seller shall have delivered to Purchaser a certificate in the form attached
hereto as Exhibit C dated as of the Closing Date certifying to the fulfillment of this
condition and the condition set forth in Section 8.1.

8.3. No Injunction, Etc.

     No action, proceeding, investigation, regulation or legislation shall have been instituted or
threatened by any Person other than Purchaser or any Affiliate of Purchaser before any court or
Governmental Authority to enjoin, restrain, or prohibit the consummation of the transactions
contemplated hereby.

8.4. Consents, Approvals and Waivers

     Seller’s execution and delivery of this Agreement and consummation of the transactions
contemplated hereby shall have been approved by all Governmental Authorities, including the
Regulatory Approval, and no such approvals, independently or in the aggregate, shall have resulted
in a Material Adverse Effect on the regulatory treatment of the Company or the Subsidiary. Either
(i) Purchaser shall have received a true, correct and complete copy of each consent, approval,
waiver and agreement required to be obtained by Seller no later than the Closing pursuant to
Section 3.3, or (ii) if Seller was unable to obtain such consent, approval, waiver or
agreement after having complied with its obligations under Section 3.3, Seller shall have
obtained for, or provided Purchaser with, in a form reasonably acceptable to Purchaser, the
economic practical benefit to Purchaser as if such consent, approval, waiver or agreement had been
received. .

8.5. Absence of Material Adverse Effect

     Since September 30, 2006, no Material Adverse Effect shall have occurred.

 

 

8.6. Other Agreements

     Seller shall have entered into the Transition Services Agreement with Purchaser as
contemplated in Section 4.3.

8.7. Maritimes Guarantee

     The amount guaranteed by Seller pursuant to that certain Guarantee dated as of December 28,
1999, in favor of Maritimes and Northeast Pipeline LLC, shall have been reduced to an amount equal
to or less than One Million Five Hundred Thousand Dollars ($1,500,000).

	9.	 	CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER

     The obligations of Seller to consummate the transactions contemplated by this Agreement shall
be subject to the satisfaction, on or before the Closing, of each and every one of the following
conditions, all or any of which may be waived, in whole or in part, by Seller for purposes of
consummating such transactions:

9.1. Representations True at Closing

     The representations and warranties made by Purchaser in this Agreement shall be true and
correct when made, and immediately prior to the Closing with the same force and effect as though
such representations and warranties had been made on and as of such time.

9.2. Covenants of Purchaser

     Purchaser shall have duly performed in all material respects all of the covenants, acts and
undertakings to be performed by it on or prior to the Closing pursuant to the Agreement, and the
President of Purchaser shall have delivered to Seller a certificate in the form attached hereto as
Exhibit D dated as of the Closing Date certifying to the fulfillment of this condition and
the condition set forth in Section 9.1.

9.3. No Injunction, Etc.

     No action, proceeding, investigation, regulation or legislation shall have been instituted or
threatened by any Person other than Seller, the Company, the Subsidiary or any Non-Company
Affiliate before any court or Governmental Authority to enjoin, restrain or prohibit the
consummation of the transactions contemplated hereby.

9.4. Consents, Approvals and Waivers

     Purchaser’s execution and delivery of this Agreement and the consummation of the transactions
contemplated hereby shall have been approved by (a) the board of directors of Purchaser, and
(b) all Governmental Authorities whose approvals are required by Law. Seller shall have received a
true, correct and complete copy of each consent, approval, waiver and

 

 

agreement required to be obtained by Purchaser no later than the Closing pursuant to
Section 3.3. Seller’s execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby shall have been approved by all Governmental Authorities whose
approvals are required by Law, except for any such approval which could not, individually or in the
aggregate, reasonably be expected to have a material adverse effect on the ability of Seller to
consummate the transactions described herein.

9.5. Other Agreements

     Seller shall have entered into the Transition Services Agreement with Purchaser as
contemplated in Section 4.3.

	10.	 	CLOSING

10.1. Time and Place of Closing

     Upon the terms and subject to the conditions set forth herein, the Closing shall take place at
the offices of Winston & Strawn LLP, 1700 K Street NW, Washington DC 20006, commencing at 10:00
a.m., on the tenth (10th) Business Day after the Business Day on which all of the conditions to the
Closing set forth in Sections 8 and 9 are satisfied or waived, or at such other
place, time or date the parties may agree in writing (the date of the Closing being referenced
herein as the “Closing Date”).

10.2. Transactions at Closing

     At the Closing, each of the following shall occur:

          10.2.1. Seller’s Performance. At the Closing, Seller shall deliver to Purchaser
each of the following:

                    10.2.1.1.   all certificates representing the Purchased Shares or, if applicable, replacement
certificates together with lost certificate affidavits and indemnifications (in form and substance
reasonably acceptable to Purchaser), duly endorsed for transfer or accompanied with executed blank
stock powers (in form and substance reasonably acceptable to Purchaser), together with a new
certificate representing such shares issued in the name of Purchaser;

                    10.2.1.2.   original stock ledgers, articles of incorporation, certificates of incorporation,
charters, certificates of formation, bylaws, joint venture agreements, partnership agreements,
limited liability company operating agreements, and board of directors’, shareholders’ and members’
minutes of the Company and the Subsidiary;

                    10.2.1.3.   a receipt of Seller evidencing Seller’s receipt of the Preliminary Purchase Price;

                    10.2.1.4.   the certificate of a duly authorized officer of Seller as described in
Section 8.4;

 

 

                    10.2.1.5.   satisfactory evidence of the consents, approvals, waivers and agreements described
in Section 8.4;

                    10.2.1.6.   certificates of existence or good standing of the Company and the Subsidiary, as
of the most recent practicable date, from the appropriate Governmental Authority of the
jurisdiction of their respective incorporations or formations and the jurisdictions in which each
is qualified to do business;

                    10.2.1.7.   certificates of existence or good standing of Seller, as of the most recent
practicable date, from the appropriate Governmental Authority of the jurisdiction of its
incorporation;

                    10.2.1.8.   Secretary or Assistant Secretary certificates of incumbency for the officers of
Seller who sign on behalf of Seller this Agreement and any other documents, instruments or
agreements to be entered into by Seller pursuant hereto;

                    10.2.1.9.   the Transition Services Agreement signed by Seller;

                    10.2.1.10.   resignations, or evidence of termination of his or her office, by each director
and officer of the Company, unless otherwise agreed by the parties;

                    10.2.1.11.   such other evidence of the performance of all covenants and satisfaction of all
conditions required of Seller by this Agreement, at or prior to the Closing, as Purchaser may
reasonably require; and

                    10.2.1.12. all books and records relating to the operation of the Company and the Subsidiary
to the extent separate from those of Seller, including but not limited to all such electronic
records, files, ledgers and other documentation reasonably required by Purchaser in connection with
the ongoing operation of the Company and the Subsidiary.

                    10.2.2. Purchaser’s Performance. At the Closing, Purchaser shall deliver to Seller
each of the following:

                    10.2.2.1.   the Preliminary Purchase Price in cash by wire transfer of immediately available
U.S. federal funds to an account designated by Seller, which account shall be identified to
Purchaser by Seller not less than three (3) Business Days prior to the Closing Date;

                    10.2.2.2.   the certificate of the President of Purchaser described in Section 9.2;

                    10.2.2.3.   certificates of existence or good standing of Purchaser, as of the most recent
practicable date, from the appropriate Governmental Authority of the jurisdiction of its
incorporation;

                    10.2.2.4.   Secretary or Assistant Secretary certified copies of resolutions of the board of
directors of Purchaser approving the transactions contemplated by this Agreement;

 

                         10.2.2.5.   Secretary or Assistant Secretary certificates of incumbency for the officers of
Purchaser who sign on behalf of Purchaser this Agreement and any other documents, instruments or
agreements to be entered into by Purchaser pursuant hereto;

                         10.2.2.6.   the Transition Services Agreement signed by Purchaser; and

                         10.2.2.7.   such other evidence of the performance of all covenants and satisfaction of all
conditions required of Purchaser by this Agreement, at or prior to the Closing, as Seller may
reasonably require.

11. SURVIVAL OF REPRESENTATION AND WARRANTIES; INDEMNIFICATION

11.1. Survival of Representations, Warranties and Agreements

               11.1.1. All representations, warranties, covenants, indemnities and obligations made or
undertaken by Seller in this Agreement are material, have been relied upon by Purchaser and
shall survive the Closing hereunder as set forth in Section 11.6, and shall not merge in
the performance of any obligation by any party hereto. EXCEPT FOR THE SPECIFIC REPRESENTATIONS
AND WARRANTIES OF SELLER SET FORTH IN THIS AGREEMENT, SELLER MAKES NO OTHER REPRESENTATION OR
WARRANTY, EXPRESS OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS
FOR A PARTICULAR PURPOSE.

               11.1.2. All representations, warranties, covenants, indemnities and obligations made or
undertaken by Purchaser in this Agreement are material, have been relied upon by Seller and
shall survive the Closing hereunder as set forth in Section 11.6, and shall not merge in
the performance of any obligation by any party hereto. EXCEPT FOR THE SPECIFIC REPRESENTATIONS
AND WARRANTIES OF PURCHASER SET FORTH IN THIS AGREEMENT, PURCHASER MAKES NO OTHER REPRESENTATION
OR WARRANTY, EXPRESS OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS
FOR A PARTICULAR PURPOSE.

11.2. Agreements to Indemnify Purchaser Indemnitees

               11.2.1. Subject to the other provisions of this Section 11, Seller hereby agrees to
indemnify and hold harmless Purchaser, each Affiliate of Purchaser, their respective directors
and officers, and their respective successors and assigns (collectively, “Purchaser
Indemnitees”), from and against any and all liability, obligation, loss, Lien, damage,
injury, cost and expense (including reasonable attorneys’ fees and costs and expenses related
thereto) (collectively, “Losses”) suffered or incurred by any Purchaser Indemnitee
arising from: (a) any breach of any indemnity, covenant, representation or warranty of Seller
contained in this Agreement, (b) any misrepresentation in the certificate delivered at the
Closing pursuant to Section 8.2, (c) the Excluded Assets and Liabilities, whether
arising before or after Closing, (d) the Seller Plans, (e) all Income Taxes (other than for
Income Taxes resulting from any transaction engaged in by the Company or the Subsidiary on the
Closing Date, but after the Closing) of the Company or the Subsidiary (including Income Taxes of
any other Person for which the Company or the Subsidiary is liable under Treasury Regulation
section 1.1502-6 or similar provision of foreign, state or local law) for periods (or

 

 

portions thereof) ending on or prior to the Closing Date to the extent such Income Taxes
exceed the Accrued Tax Liability; or (f) any Scheduled Claim, which claims the parties
acknowledge and agree that Seller has acknowledged its duty to defend in accordance with
Section 11.7.2 and, thereby, Seller has a right to control the defense of in accordance
with the provisions of Section 11.7.2

               11.2.2. For all purposes of this Section 11, after the Closing, any Loss suffered
or incurred by the Company or the Subsidiary arising from any breach of any indemnity, covenant,
representation or warranty by Seller referenced in Section 11.2.1 shall be deemed
suffered and incurred by Purchaser for purposes of such Section 11.2.1, and Purchaser
shall be entitled to seek indemnification under such Section 11.2.1 against Seller alone
for any such Loss without any liability of the Company or the Subsidiary. In addition,
effective as of the Closing, Seller waives any and all rights of contribution, cost recovery or
other payment from the Company or the Subsidiary, whether arising by agreement or operation of
Law (including Environmental Law), to the extent of any liability of Seller under this
Agreement.

11.3. Agreements to Indemnify the Seller Indemnitees

          Subject to the other provisions of this Section 11, Purchaser hereby agrees to
indemnify and hold harmless Seller, the Company, the Subsidiary, each Non-Company Affiliate, their
respective directors and officers, and their respective successors and assigns (collectively, the
“Seller Indemnitees”), from and against all Losses suffered or incurred by any Seller
Indemnitee arising from: (a) any breach of any indemnity, covenant, representation, or warranty of
Purchaser contained in this Agreement, (b) any misrepresentation in the certificate delivered at
the Closing pursuant to Section 9.2, (c) any Income Taxes incurred as a result of any
transaction engaged in by the Company or the Subsidiary on the Closing Date but after the Closing,
or (d) the termination on or after the Closing Date of employment or change in compensation,
incentive opportunities or benefits of any Transferred Employee on or after the Closing Date.

11.4. Recoveries

          The determination of the amount of any Loss for purposes of this Section 11 shall take
into account the amount of insurance proceeds payable with respect thereto pursuant to any Third
Party insurance policy, but only to the extent such amounts are actually paid to the Indemnified
Party.

11.5. Limitations on Indemnity

                         11.5.1. The Indemnified Parties agree not to seek recourse against, and shall not recover
from, any Indemnifying Party under this Section 11 on account of any Loss resulting from a
breach of any representation or warranty herein or in any certificate delivered pursuant hereto
until the aggregate amount of all Losses suffered by the Indemnified Parties as a result of
breaches of all representations or warranties herein (as adjusted pursuant to Section 11.4)
exceeds One Hundred Thousand Dollars ($100,000) (the “Deductible”), in which case the
Indemnifying Party shall be liable only for the aggregate amount of Losses suffered by the
Indemnified Party in excess of the Deductible; provided, however, that (a) the
limitation of the Deductible shall not apply to Losses resulting from a breach of any
representation or warranty

 

 

contained in Section 5.2.1, Section 5.2.2, Section 5.4, the first
three sentences of Section 6.2, Section 6.5, or the first three sentences of
Section 7.2; and (b) for purposes of determining Losses under this Section 11
resulting from any breach of any representation or warranty, such representations and warranties
shall be interpreted to disregard all qualifications and conditions in such representations and
warranties relating to materiality or Material Adverse Effect.

                  11.5.2. The aggregate liability of the Indemnifying Parties under this Section 11
resulting from breaches of representations or warranties herein and in any certificates delivered
pursuant hereto shall be limited to an amount equal to the Purchase Price (the “Cap”);
provided, however, that the limitation of the Cap shall not apply to Losses
resulting from a breach of any representation or warranty contained in Section 5.2.1,
Section 5.2.2, Section 5.4, the first three sentences of Section 6.2,
Section 6.5, or the first three sentences of Section 7.2.

11.6. Survival

             11.6.1. All claims by a Purchaser Indemnitee for indemnification pursuant to this
Section 11 resulting from breaches of representations or warranties herein shall be
forever barred unless Seller is notified:

                                   11.6.1.1.   in the case of a claim based upon a breach of Section 5.4 with respect to
any taxable period ending on or prior to the Closing Date, within the statutory period of
limitations (including any extensions thereof), unless such claim is raised by the taxing authority
by way of an offset against any claim or suit for refund by or on behalf of the Company or the
Subsidiary, or pursuant to the mitigation provisions contained in the Code or any applicable
statutes, in which case a claim may be made within one (1) year after such offset or assessment; or

                                   11.6.1.2.   in all other cases within eighteen (18) months after the Closing Date;
provided that if written notice for a claim of indemnification has been given by
Purchaser pursuant to Section 11.7.1 on or prior to the last day of the foregoing 18-month
period, then the obligation of Seller to indemnify any Purchaser Indemnitee pursuant to this
Section 11 shall survive with respect to such claim until such claim is finally resolved;
provided, further, however, that claims based upon a breach of Section
5.2.1, Section 5.2.2, the first three sentences of Section 6.2, or Section
6.5 may be brought at any time within the statute of limitations that applies to such claim or
claims.

                  11.6.2. All claims by a Seller Indemnitee for indemnification pursuant to this Section
11 resulting from breaches of representations or warranties herein shall be forever barred
unless Purchaser is notified within eighteen (18) months after the Closing Date; provided
that if written notice for a claim of indemnification has been given by Seller on behalf of
any Seller Indemnitee pursuant to Section 11.7.1 on or prior to the last day of the
foregoing 18-month period, then the obligation of Purchaser to indemnify any Seller Indemnitee
pursuant to this Section 11 shall survive with respect to such claim until such claim is
finally resolved; provided, further, however, that claims based upon a
breach of the first three sentences of Section 7.2 may be brought at any time within the
statute of limitations that applies to such claim or claims.

 

 

11.7. Notice and Defense of Actions

          The obligations and liabilities of each Indemnifying Party hereunder shall be subject to the
following terms and conditions:

                         11.7.1. Notice. Except with respect to any Scheduled Claim, the Indemnified Party
shall give written notice to the Indemnifying Parties promptly after it becomes aware of any claim,
action or proceeding (each, an “Action”) as to which indemnity may be sought under this
Section 11; provided that in any event, the Indemnified Parties shall give
written notice of an Action within thirty (30) days after being served with the related process or
legal proceeding. Such notice shall state the nature and basis of such claims or events and the
amounts thereof, to the extent known, and shall attach copies of any complaint, demand or
arbitration notice received by the Indemnified Party. Such notice shall be given in accordance
with Section 13.1. The failure of the Indemnified Party to give notice as provided herein
shall relieve the Indemnifying Party of any obligation under this Section 11 only if and to
the extent that such failure materially prejudices the ability of the Indemnifying Party to defend
such Action, and such failure shall in no event relieve the Indemnifying Party of any liability
that the Indemnifying Party may have to the Indemnified Party otherwise under this Section
11.

                         11.7.2. Defense of Actions.

                                   11.7.2.1.   (a)  Except with respect to any Scheduled Claim, in the event that the
Indemnifying Parties acknowledge in writing a duty to defend with respect to such Action, the
Indemnifying Parties shall have the right, at their expense, to control the defense of any such
Action. If the Indemnifying Parties wish to control the defense of such Action, they shall deliver
written notice thereof to the Indemnified Parties within sixty (60) days after receipt of the
notice described in Section 11.7.1. After such notice, the Indemnifying Parties shall
engage independent internal or external legal counsel (and reasonably acceptable to the Indemnified
Parties) to assume the defense of such Action; provided, however, that the
Indemnified Party may also participate in such defense, at its own expense; and provided,
further, that any Indemnifying Party shall not be entitled to assume the defense or
control of any Action if (i) the Indemnifying Party fails to acknowledge its duty to defend as set
forth in the preceding sentence, (ii) the Indemnified Party agrees, in writing, to assume the
defense of such Action and forego any indemnity claimed under this Section 11, (iii) in the
reasonable opinion of legal counsel for the Indemnified Party, such Action involves the potential
imposition of a criminal liability on the Indemnified Party, its directors, officers, employees or
agents, (iv) in the reasonable opinion of legal counsel for the Indemnified Party, an actual or
potential conflict of interest exists where it is advisable for such Indemnified Party to be
represented by separate legal counsel, or (v) with respect to Purchaser only, failure to stay the
enforcement of such Action will result in the imminent risk of sale, forfeiture or loss of all or
any material portion of the Assets or a material disruption in the operation of the acquired
business. In the circumstances identified in the foregoing subsections 11.7.2(a)(i)
through (v), the Indemnified Party shall be entitled to control and assume responsibility
for the defense of such Action, at the cost and expense of the Indemnifying Party. The
Indemnifying Party may, in any event, participate in such proceedings at its own cost and expense.

 

 

                                             (b) With respect to any Scheduled Claim, Seller shall have the right and obligation, at its
expense, to control the defense of such Scheduled Claim. Purchaser also may participate in such
defense, at its own expense. Seller shall have the right to select and engage internal or external
legal counsel (which shall be reasonably acceptable to Purchaser if selected and engaged after the
date of this Agreement) to assume the defense of such Scheduled Claim.

                                   11.7.2.2.   The Indemnifying Party, in the defense of any such Action, shall have the right in
its sole discretion to settle such Action only if (a) settlement involves only the payment of money
and execution of appropriate releases of the Indemnified Party and its Affiliates, (b) there is no
finding or admission of any violation of Law or violation of the rights of any Person by the
Indemnified Party or its Affiliates, and (c) the Indemnified Party or its Affiliates will have no
liability with respect to such compromise or settlement. Otherwise, no such Action shall be
settled or agreed to without the prior written consent of the Indemnified Party (which consent
shall not be unreasonably withheld, delayed or conditioned). If the Indemnified Party withholds,
delays or conditions its consent in an unreasonable manner, the Indemnified Party shall not be
entitled to indemnification under this Section 11 for any Loss in excess of the amount for
which the Action could reasonably have been compromised but for such withholding, delay or
conditioning of consent.

                                   11.7.2.3.   Except with respect to any Scheduled Claim, in the event that the Indemnifying
Parties shall not agree in writing to assume the defense of such Action or in the event the
Indemnified Party assumes control of such Action pursuant to Section 11.7.2, the
Indemnified Parties may engage internal or external legal counsel acceptable to them to assume the
defense and may contest, pay, settle or compromise any such Action on such terms and conditions
reasonably acceptable to the Indemnified Parties. If the Indemnifying Parties are obligated to
indemnify the Indemnified Parties in respect to such Action under this Agreement, the fees and
expenses of such counsel retained by the Indemnified Parties shall constitute litigation expenses
subject to indemnification under this Section 11.

                                   11.7.2.4.   In the defense of any Action, regardless of who is in control, the Indemnified
Parties and the Indemnifying Parties shall fully cooperate in good faith in connection with such
defense and shall cause their legal counsel, accountants and Affiliates to do so, and shall make
available to the other party all relevant books, records, and information (in such Person’s
control) during normal business hours, and shall furnish to each other, at the Indemnifying Party’s
expense, such other assistance as the other party may reasonably require in connection with such
defense.

11.8. Exclusive Remedy

          Except for remedies that cannot be waived as a matter of law and remedies available for
breaches under Section 13.2, the indemnification obligations under this Section 11
shall be the sole and exclusive remedies of the parties hereto with respect to any breach of any
representation, warranty, covenant, indemnity, or agreement under this Agreement or any certificate
delivered pursuant hereto by any party hereto, except that nothing contained herein shall be
construed as limiting or impairing the rights and remedies that the parties hereto may have at
equity for injunctive relief and specific performance, including such equitable remedies

 

 

with respect to enforcement of rights and obligations under Sections 2.1, 2.2, 3.4.2,
3.6, 3.7, 4.3, 4.4, 4.5 and 4.6.

11.9. Treatment

          All indemnification payments under this Agreement shall be treated as adjustments to the
Purchase Price.

12. TERMINATION

12.1. Method of Termination

          This Agreement constitutes the binding and irrevocable agreement of the parties hereto to
consummate the transactions contemplated hereby subject to the terms and conditions contained
herein, the consideration for which is the covenants set forth in Sections 2, 3 and
4, and expenditures and obligations incurred and to be incurred by Purchaser, on the one
hand, and by Seller, the Company and the Subsidiary, on the other hand, in respect of this
Agreement, and this Agreement may be terminated or abandoned only as follows:

                    12.1.1. By the unanimous written consent of Seller and Purchaser, notwithstanding prior
approval (if any) by the board of directors of either Purchaser or Seller;

                    12.1.2. If any condition to the Closing under Sections 8 and 9 has not been
satisfied (or waived) by 5:00 p.m. on the one (1) year anniversary of the Effective Date or at
such other time and date as may be mutually agreed upon by the parties in writing, Seller may
terminate this Agreement by written notice given to Purchaser if Seller has neither (a)
proximately contributed to the occurrence of the failure to satisfy the conditions set forth in
Sections 8 and 9 by such date, nor (b) failed to use its commercially reasonable
efforts to satisfy the conditions set forth in Sections 8 and 9;

                    12.1.3. If any condition to the Closing under Sections 8 and 9 has not
been satisfied (or waived) by 5:00 p.m. on the one (1) year anniversary of the Effective Date or
at such other time and date as may be mutually agreed upon by the parties in writing, Purchaser
may terminate this Agreement by written notice given to Seller if Purchaser has neither (a)
proximately contributed to the occurrence of the failure to satisfy the conditions set forth in
Sections 8 and 9 by such date, nor (b) failed to use its commercially reasonable
efforts to satisfy the conditions set forth in Sections 8 and 9; or

                    12.1.4. By either Seller or Purchaser if (a) there shall be any Law that makes consummation
of the transactions contemplated herein illegal or otherwise prohibited; or (b) any judgment,
injunction, order or decree permanently enjoining any of the parties hereto from consummating
the transactions contemplated herein is entered and such judgment, injunction, order or decree
shall become final and non-appealable.

          Notwithstanding anything in this Section 12.1 to the contrary, no party hereto that is
in breach of a material obligation under this Agreement shall be entitled to terminate this
Agreement except with the prior written consent of the other party hereto.

 

 

12.2. Procedure and Effect of Termination

                    12.2.1. In the event of a termination by any party pursuant to and in accordance with
Section 12.1, such terminating party shall give prompt written notice thereof as
provided therein to the other party, and the transactions contemplated hereby shall be abandoned
and terminated, without further action by any of the parties hereto, except as provided in
Section 12.2.1.

                    12.2.2. In the event of a termination pursuant to Section 12.1:

                                   12.2.2.1.   All filings, applications and other submissions relating to the consummation of
the transactions contemplated herein shall, to the extent practicable, be withdrawn from the
Governmental Authority or other Person to which made; and

                                   12.2.2.2.   No party hereto, or any of its Affiliates, nor any shareholder, member, partner,
director, officer, employee, or agent of any such party or any of its Affiliates, shall have any
liability or further obligation to any other party hereto or any of its Affiliates, nor to any
shareholder, member, partner, director, officer, employee, or agent of such other party or any of
its Affiliates pursuant to this Agreement, except (a) that the provisions of Sections
3.4.2, 3.7, 12.2 and 13 (and associated defined terms) shall survive
any such termination and not be extinguished thereby, provided that the provisions
of Section 3.4.2 shall terminate on the later of the second anniversary of such termination
or the date the Confidential Information loses its status as a trade secret or no longer qualify as
confidential under applicable Law; and (b) any party hereto nevertheless shall be entitled to seek
any remedy to which it may be entitled at law or in equity for the violation or breach by the other
party hereto of any agreement, covenant, indemnity, representation or warranty contained in this
Agreement that occurs prior to the termination.

13. GENERAL PROVISIONS

13.1. Notices

          All notices, demands and requests hereunder by any party hereto to the other party hereto
shall be in writing, and shall be delivered by hand, nationally recognized overnight courier,
facsimile, or registered or certified mail, return receipt requested, first class postage prepaid,
addressed as follows:

                    13.1.1. If to Seller:

Sempra Energy

101 Ash Street

HQ 17

San Diego, CA 92101-3017

Attn: Richard Vaccari

Facsimile No. 619-696-2911

and copies to legal counsel to Seller, the Company and the Subsidiary:

 

 

Sempra Energy

101 Ash Street

San Diego, CA 92101-3017

Attn: Assistant General Counsel, Corporate

Facsimile No. 619-696-4310

and

Winston & Strawn LLP

1700 K Street, N.W.

Washington, D.C. 20006

Attn: Gerald P. Farano

Facsimile No. 202-282-5100

                    13.1.2. If to Purchaser:

Energy West, Incorporated and Energy West Propane Inc.

P.O. Box 2229

Great Falls, MT 59403

Attn: David A. Cerotzke, President and Chief Executive Officer

Facsimile No.: (406) 791-7560

and copies to legal counsel to Purchaser:

Dworken & Bernstein Co., LPA

60 South Park Place

Painesville, OH 44077

Attn: Melvyn E. Resnick and Jodi Littman Tomaszewski

Facsimile No.: (440) 352-3469

                    13.1.3. If delivered by hand or nationally recognized overnight courier, the day on which a
notice, demand or request is delivered shall be the date on which such delivery is made, if
delivered by facsimile, the day upon which sender receives from its facsimile machine the
correct answerback of the addressee and confirmation of uninterrupted transmission by a
transmission report or the recipient confirming by telephone to the sender that the recipient
has received the facsimile message shall be the date on which such delivery is made (provided a
hard copy of such transmission is dispatched by first class mail within 48 hours), and, if
delivered by mail, the day on which such notice, demand or request is received shall be the date
of delivery; provided that a notice given in accordance with this Section
13.1 but received on any day other than a Business Day or after business hours in the place
of receipt, will be deemed to be received on the next Business Day in that place.

                    13.1.4. Any party hereto may change its address or facsimile number specified for notices
herein by designating a new address or facsimile number for notices by notice to the other party
in accordance with this Section 13.1.

 

 

13.2. Brokers

                    13.2.1. Purchaser represents and warrants to Seller that no investment banker, broker or
finder has acted for Purchaser or any of its Affiliates in connection with this Agreement or the
transactions contemplated herein. Purchaser hereby agrees to indemnify and hold harmless
Seller, the Company, the Subsidiary and their respective Affiliates against any fee, loss or
expense arising out of any claim by any investment banker, broker or finder employed or alleged
to have been employed by Purchaser or any of its Affiliates in connection with this Agreement or
the transactions contemplated herein.

                    13.2.2. Seller represents and warrants to Purchaser that no investment banker, broker or
finder has acted for Seller, the Company, the Subsidiary or any of their Affiliates in
connection with this Agreement or the transactions contemplated herein, except for WestLB AG and
ABN AMRO Incorporated. Seller hereby agrees to indemnify and hold harmless Purchaser, any
Affiliate of Purchaser, and, after the Closing, the Company and the Subsidiary against any fee,
loss or expense arising out of any claim by any investment banker, broker or finder employed or
alleged to have been employed by Seller, the Company, the Subsidiary or any of their Affiliates
in connection with this Agreement or the transactions contemplated herein, including WestLB AG
and ABN AMRO Incorporated.

13.3. Expenses

          All expenses incurred by a party hereto in connection with or related to the authorization,
preparation, negotiation and execution of this Agreement and the Closing of the transactions
contemplated hereby, including all fees and expenses of agents, representatives, legal counsel,
accountants and other technical consultants employed by such party, shall be borne solely and
entirely by the party that has incurred the same (except as otherwise expressly provided herein),
and provided that all expenses incurred by Seller shall be paid by Sempra, as opposed to the
Company and the Subsidiary.

13.4. Further Assurances

          Each party covenants that at any time, and from time to time, after the Closing, it will
execute such additional instruments and take such actions as may be reasonably requested by the
other party to confirm or perfect or otherwise to carry out the intent and purposes of this
Agreement.

13.5. Attribution of Knowledge

          With respect to any representation or warranty set forth in this Agreement or any other
agreements, certificates or instruments delivered pursuant hereto that is expressly qualified by:
(a) the phrase “to the knowledge of Seller” or “to the best knowledge of Seller” and variations
thereof when used with respect to Seller shall refer only to matters actually known, and not
constructively known, to any of the individuals listed on Schedule 13.5(a); and (b) the
phrase “to the knowledge of Purchaser” or “to the best knowledge of Purchaser” and variations
thereof when used with respect to Purchaser shall refer only to matters actually known, and not
constructively known, to any of the individuals listed on Schedule 13.5(b). Without
limiting the

 

 

foregoing, a matter shall be deemed to be “actually known” by an individual listed on
Schedule 13.5 if such individual has received written notice of such matter.

13.6. Waiver

          Any failure on the part of any party hereto to comply with any of its obligations, agreements
or conditions hereunder may be waived in writing by the other party to whom such compliance is
owed. No waiver of any provision of this Agreement shall be deemed, or shall constitute, a waiver
of any other provision, whether or not similar, nor shall any waiver constitute a continuing
waiver.

13.7. Assignment; Binding Effect; No Third-Party Beneficiaries

          Neither this Agreement nor any of the rights, interests or obligations under this Agreement
may be assigned or delegated, in whole or in part, by operation of law or otherwise by any party
hereto without the prior written consent of the other party hereto, and any such assignment without
such prior written consent shall be null and void. Subject to the preceding sentence, this
Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the parties hereto
and their respective successors and permitted assigns. No provision of this Agreement or any
agreement referenced herein shall create a third-party beneficiary relationship or otherwise confer
any benefit, entitlement or right upon any Person other than the parties to this Agreement or such
referenced agreement, as the case may be, except for Sections 11.2 and 11.3, which
are intended to benefit and be enforceable by any of the Purchaser Indemnitees or the Seller
Indemnitees, respectively.

13.8. Headings

          The section and other headings in this Agreement are inserted solely as a matter of
convenience and for reference, and are not a part of this Agreement. References to any “Section”
herein (such as “Section 5”) shall be construed to include a reference to all subsections
thereunder (i.e., 5.1, 5.1.1, 5.1.2, ... 5.6, 5.7 ... etc).

13.9. Entire Agreement

          This Agreement constitutes the entire agreement between the parties hereto with respect to the
subject matter herein and supersedes and cancels any prior agreements, representations, warranties,
or communications, whether oral or written, between the parties hereto relating to the transactions
contemplated hereby or the subject matter herein.

13.10. Modifications

          Neither this Agreement nor any provision hereof may be modified, amended, changed, waived,
discharged or terminated orally, but only by an agreement in writing signed by the party against
whom or which the enforcement of such modification, amendment, change, waiver, discharge or
termination is sought.

 

 

13.11. Governing Law

          Except with respect to regulatory matters that by their nature are expressly governed by Maine
law, this Agreement shall be governed by and construed in accordance with the laws of the State of
New York, without regards to the principles of conflicts of laws thereof other than Sections 5-1401
and 5-1402 of the New York General Obligations Law.

13.12. Severability

          The provisions of this Agreement shall be deemed severable and the invalidity or
unenforceability of any provision shall not affect the validity or enforceability of the other
provisions hereof. If any provision of this Agreement, or the application thereof to any Person or
any circumstance, is invalid or unenforceable, (a) a suitable and equitable provision shall be
substituted therefor in order to carry out, so far as may be valid and enforceable, the intent and
purpose of such invalid or unenforceable provision, and (b) the remainder of this Agreement and the
application of such provision to other Persons or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such invalidity or unenforceability affect the validity
or enforceability of such provision, or the application thereof, in any other jurisdiction.

13.13. Counterparts

          This Agreement may be executed in one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same instrument. Execution by
facsimile signature shall be deemed to be, and shall have the same effect as, execution by original
signature.

13.14. Exhibits and Schedules Incorporated

          All Exhibits and Schedules attached hereto are incorporated herein by reference. The section
numbers in the Schedules correspond to the section numbers in this Agreement; provided, however,
that any information disclosed in the Schedules under any section number shall be deemed to be
disclosed and incorporated in any other section of this Agreement where such disclosure is made
with such specificity, or in such a context, that it is reasonably apparent that such disclosure is
applicable to such other section numbers. Prior to the Closing Date, Seller shall supplement or
amend the Schedules with respect to any matter relating to the subject matter thereof hereafter
arising which, if existing or occurring at the date of this Agreement, would have been required to
be set forth or described in the Schedules. No supplement or amendment of any Schedule made
pursuant to this Section 13.14 shall be deemed to cure any breach of, or expand or limit
the scope of, or otherwise modify or affect any representation or warranty made in this Agreement
unless the parties agree thereto in writing.

13.15. Waiver of Certain Damages

          Each of the parties hereto (a) agrees that only actual damages shall be recoverable under this
Agreement, (b) hereby waives any right to recover special, punitive, consequential, incidental or
exemplary damages and loss of revenues or profits; provided, however, that the
foregoing limitations shall not limit the amount recoverable by an Indemnified Party pursuant to
Section 11 for claims by any Third Party against such Indemnified Party.

 

 

13.16. Joint Preparation

          The parties have participated jointly in the negotiation and drafting of this Agreement. In
the event an ambiguity or question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any of the provisions of this
Agreement.

13.17. Performance by Affiliates

          Any obligation of any party hereto owed to any other party hereto under this Agreement, which
obligation is performed, satisfied or fulfilled by an Affiliate of such party, shall be deemed to
have been performed, satisfied or fulfilled by such party.

13.18. Consent to Jurisdiction; Waivers of Trial by Jury 

          Each party irrevocably agrees that any legal action or proceeding arising out of or relating
to this Agreement or for recognition and enforcement of any judgment in respect hereof or thereof
brought by another party hereto or its successors or assigns may be brought and determined in the
Supreme Court of the State of New York located in New York, New York, or the United States District
Court for the Southern District of New York located in New York, New York, and each party hereby
irrevocably submits with regard to any action or proceeding for itself and in respect to its
property, generally and unconditionally, to the nonexclusive jurisdiction of the aforesaid courts.
Each party hereto hereby irrevocably waives, and agrees not to assert, by way of motion, as a
defense, counterclaim or otherwise, in any action or proceeding with respect to this Agreement,
(a) any claim that it is not personally subject to the jurisdiction of the above-named courts for
any reason other than the failure to lawfully serve process, (b) that it or its property is exempt
or immune from jurisdiction of any such court or from any legal process commenced in such courts
(whether through service of notice, attachment prior to judgment, attachment in aid of execution of
judgment, execution of judgment or otherwise), and (c) to the fullest extent permitted by
applicable law, that (i) the suit, action or proceeding in any such court is brought in an
inconvenient forum, (ii) the venue of such suit, action or proceeding is improper and (iii) this
Agreement, or the subject matter hereof or thereof, may not be enforced in or by such courts. Each
party hereto further agrees that service of any process, summons, notice or document by U.S.
registered mail to such party’s respective address set forth in Section 13 shall be effective
service of process for any action, suit or proceeding with respect to any matters to which it has
submitted to jurisdiction in this Section 13.18. EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY
WAIVES TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING RELATING TO A DISPUTE AND FOR ANY
COUNTERCLAIM WITH RESPECT THERETO.

[Signatures On The Following Page]

 

 

     IN WITNESS WHEREOF, each party hereto has caused this Stock Purchase Agreement to be executed
on its behalf, all as of the day and year first above written.

	 	 	 	 	 	 	 
	 	 	Seller:	 	 
	 
	 	 	 	 	 	 
	 	 	SEMPRA ENERGY	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Mark A. Snell	 	 
	 

	 	 	 	 

        Mark A. Snell, Executive Vice President and

        Chief Financial Officer
	 	 
	 	 	Dated: January 30 , 2007	 	 
	 
	 	 	 	 	 	 
	 	 	Purchaser:	 	 
	 
	 	 	 	 	 	 
	 	 	ENERGY WEST, INCORPORATED	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/David A. Cerotzke	 	 
	 

	 	 	 	 

         David A. Cerotzke, President
	 	 
	 	 	Dated: January 30 , 2007	 	 

[Penobscot Stock Purchase Agreement Signature Page]

 

 

EXHIBIT A

to

Stock Purchase Agreement

Assumed Working Capital Calculation

See attached.

A-1

 

 

EXHIBIT B

to

Stock Purchase Agreement

Form of Transition Services Agreement

See attached.

B-1

 

 

EXHIBIT C

to

Stock Purchase Agreement

Form of Seller’s Closing Certificate

C-1

 

 

EXHIBIT D

to

Stock Purchase Agreement

Form of Purchaser’s Closing Certificate

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