Document:

EX-10.87

Exhibit 10.87

MERGER AGREEMENT

This MERGER AGREEMENT (this “Agreement”) is made and entered into as of September 12,
2005, by and between Warp Technology Holdings, Inc., a Nevada corporation operating under the name
Halo Technology Holdings (“Purchaser”), TAC/Halo, Inc., a California corporation and a
wholly owned subsidiary of Purchaser (“Merger Sub”), Tesseract Corporation, a California
corporation (the “Company”) and Platinum Equity, LLC, a Delaware limited liability company
(“Seller”).

R E C I T A L S

A. Seller owns 100% of the common stock, par value $0.01 per share (the “Stock”), of
the Company.

B. Merger Sub is a wholly owned subsidiary of Purchaser.

C. The respective Boards of Directors of Purchaser, Merger Sub and the Company have approved
the merger of the Company with and into Merger Sub (the “Merger”), pursuant to which Merger
Sub will be the surviving corporation and Seller will be entitled to receive the consideration
provided for in this Agreement, all upon the terms and subject to the conditions set forth herein;

D. For Federal income tax purposes, Purchaser and Seller intend for the Merger contemplated
hereby to qualify as a “reorganization” within the meaning of Section 368(a) of the Code.

A G R E E M E N T

In consideration of the foregoing recitals and the respective covenants, agreements,
representations and warranties contained herein, the parties, intending to be legally bound, agree
as follows:

ARTICLE 1

DEFINITIONS

Unless otherwise defined, capitalized terms used herein shall have the following meanings:

“Act” shall have the meaning given to such term in Section 4.7.

“Action” shall mean any action, claim, suit, litigation, proceeding, arbitration or
mediation.

“Agreement” shall have the meaning given to it in the Preamble.

“Business” shall mean the business and operations of the Company.

“Cash Consideration” shall have the meaning given to such term in Section 2.5.

“Certificates of Merger” shall have the meaning given to such term in Section 2.1.

“CCC” shall mean the California Corporations Code (the “CCC”)

“Closing” shall have the meaning given to such term in Section 2.1.

“Closing Date” shall have the meaning given to such term in Section 2.1.

“Code” shall mean the Internal Revenue Code of 1986, as amended, and the regulations
promulgated thereunder.

“Common Stock” means the common stock of the Purchaser.

“Company” shall have the meaning given to such term in the Preamble.

“Contracts” shall mean all contracts, arrangements, licenses, Leases, understandings,
purchase orders, invoices and other agreements to which the Company is a party, whether written,
oral, established through course of dealing or otherwise.

“Damages” shall mean all claims, demands, losses, liabilities, obligations, damages,
expenses, including, without limitation, interest, penalties and reasonable attorneys’,
accountants’ and experts’ fees and costs of investigation incurred as a result thereof.

“Effective Time” shall have the meaning given to such term in Section 2.1.

“Employee Benefit Plan(s)” shall mean other than any obligations pursuant to any Laws,
(i) any Employee Welfare Plan or any Pension Plan, (ii) any “multi-employer plan,” as defined in
Section 4001(a)(3) of ERISA to which the Company has contributed or been obligated to contribute,
and (iii) any deferred compensation plan, severance pay, bonus plan, profit sharing plan, stock
option plan, employee stock purchase plan, and any other employee benefit plan, agreement (other
than employment agreements with individual Employees), arrangement or commitment maintained by the
Company for the benefit of Employees.

“Employee Welfare Plan” shall mean other than any obligations pursuant to any Laws,
any “employee welfare benefit plan,” as defined in Section 3(l) of ERISA, which the Company
sponsors, or under which the Company may incur any liability, and which covers any Employees,
including each multi-employer welfare benefit plan.

“Employees” shall have the meaning given to such term in Section 3.10(e) hereof.

“Encumbrances” shall mean any claim, lien, pledge, option, charge, mortgage,

security interest, restriction, encumbrance or other right of third parties, whether voluntarily
incurred or arising by operation of law and includes any agreement to give any of the foregoing in
the future.

“Environmental Laws” shall mean all applicable Laws (including consent decrees and
administrative orders) relating to the public health and safety and protection of the environment,
including those governing the use, handling, storage, transportation and disposal or remediation of
hazardous substances.

“Equity Consideration” shall have the meaning given to such term in Section 2.5.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as

amended.

“Financial Statements” shall have the meaning given to such term in Section 3.9(a)
hereof.

“GAAP” shall mean generally accepted accounting principles as in effect from time to
time in the United States of America, consistently applied.

“Governmental Authority” shall mean (i) any nation, state, county, city or other
jurisdiction of any nature, (ii) any federal, state, local, municipal, foreign or other government
(or any department, agency, or political subdivision thereof), (iii) any governmental or
quasi-governmental authority of any nature, or (iv) any body exercising executive, legislative,
judicial, regulatory or administrative actions of or pertaining to government.

“Halo Financial Statements” have the meaning given to such term in Section 4.10.

“Indebtedness” shall mean (i) any liability for borrowed money, (ii) any liability
arising from a guarantee of another Person’s borrowed money, (iii) a promissory note or similar
instrument of indebtedness, and (iv) any liability for the payment of purchase price from the
acquisition of the Company, or past acquisitions of other businesses by the Company.

“Indemnitee” shall have the meaning given to such term in Section 6.2(c) hereof.

“Indemnitor” shall have the meaning given to such term in Section 6.2(c) hereof.

“Intellectual Property” shall mean (i) any and all trademarks, service marks, trade
names, mask works, copyrights and patents (including registrations, licenses, and applications
pertaining thereto) owned by or licensed to the Company, and (ii) any and all trade secrets,
discoveries, inventions, know-how and any and all other intellectual property rights owned by or
licensed to the Company that are used by the Company, other than standard licenses to use ordinary,
commercially available software and systems.

“knowledge of Seller”, “to Seller’s knowledge” and any similar phrase shall
mean the actual knowledge of Rick Bigelow, Christian Ruth, Adam Cooper, Jason Farber and Dan
Krasner.

“Laws” shall mean any and all case law, common law, and any and all federal, state,
local or foreign laws, statutes, rules, regulations, executive orders, codes or ordinances enacted,
adopted, issued or promulgated by any Governmental Authority.

“Leased Real Property” shall have the meaning given to such term in Section 3.11.

“Leases” shall mean all leases, subleases, licenses and other lease agreements,
together with all amendments, supplements and nondisturbance agreements pertaining thereto, to
which the Company is a party and pursuant to which the Company leases, subleases or licenses any
real property.

“Material Adverse Effect” shall mean any event, change, circumstance or effect that
has, or is reasonably likely to have, a material adverse effect on the business, operations,
financial condition, taken as a whole, of the Company, other than any event, change, circumstance
or effect relating (i) to the United States economy in general, or the economy of any foreign
country in general in which the Company participates, (ii) in general to the industries in which
the Company operates and not specifically relating to the Company, (iii) financial, banking, or
securities markets (including any disruption thereof and any decline in the price of any security
or any market index), (iv) to the announcement of the Agreement or any transactions contemplated
hereunder, the fulfillment of the parties’ obligations hereunder or the consummation of the
transactions contemplated by this Agreement, or (v) to any outbreak or escalation of hostilities or
act of terrorism involving the United States or any declaration of war by the U.S. Congress.

“Material Contracts” shall have the meaning given to such term in Section 3.12(a).

“Merger” shall have the meaning given to such term in Recital C.

“Merger Consideration” shall have the meaning given to such term in Section 2.5.

“Merger Sub” shall have the meaning given to such term in the Preamble.

“Most Recent Balance Sheet” shall have the meaning given to such term in Section
3.9(a).

“Note” shall have the meaning given to such term in Section 2.6.

“Obligations” means any Indebtedness or other obligation of any nature, whether
secured, unsecured, recourse, nonrecourse, liquidated, unliquidated, accrued, absolute, fixed,
contingent, ascertained, unascertained, known, unknown or otherwise.

“Ordinary Course” means the ordinary course of Business of the Company consistent with
past custom and practice (including with respect to quantity and frequency).

“Pension Plan” shall mean other than any obligations pursuant to any Laws, any
“employee pension benefit plan,” as defined in Section 3(2) of ERISA (including any “multiemployer
plan,” as defined in Section 3(37) of ERISA), which the Company sponsors or to which the Company
contributes or is required to contribute, or under which the Company may incur any liability.

“Permits” shall mean all franchises, permits, licenses, qualifications, rights-of-way,
easements, municipal and other approvals, authorizations, orders, consents and other rights from,
and filings with, any Governmental Authority.

“Permitted Encumbrances” shall mean (i) tax liens with respect to taxes not yet due
and payable or which are being contested in good faith by appropriate proceedings and for which
appropriate reserves have been established in accordance with GAAP, consistently applied; (ii)
deposits or pledges made in connection with, or to secure payment of, utilities or similar
services, workers’ compensation, unemployment insurance, old age pensions or other social security
obligations; (iii) purchase money security interests in any property acquired by the Company; (iv)
interests or title of a lessor under any Lease; (v) mechanics’, materialmen’s or contractors’ liens
or encumbrances or any similar lien or restriction for amounts not yet due and payable or which are
being contested in good faith; (vi) easements, rights-of-way, restrictions and other similar
charges and encumbrances not interfering with the Ordinary Course or materially detracting from the
value of the assets of the Company; and (vii) source code escrows granted in favor of certain
customers.

“Person” means an individual, a partnership (general or limited), a corporation, an
association, a limited liability company, a joint stock company, a trust, an estate, a joint
venture or an unincorporated organization.

“Pre-Closing Tax Period” shall have the meaning given to such term in Section 7.1.
hereof

“Proceeding” shall mean any demand, claim, suit, action, litigation, investigation,
audit, arbitration, administrative hearing or other proceeding of any nature.

“Purchaser” shall have the meaning given to such term in the Preamble to this
Agreement.

“Purchaser Schedules” shall have the meaning given to such term in Article 4.

“Purchaser’s 401(k) Plan” shall have the meaning given to such term in Section 5.4(b)
hereof.

“Purchaser’s FSA” shall have the meaning given to such term in Section 5.4(c) hereof.

“Purchaser Sponsored Plan” shall have the meaning given to such term in Section 5.4(a)
hereof.

“Registration Rights Agreement” shall mean the agreement of the Purchaser to register
the Common Stock issuable upon conversion of the Series D Preferred Stock in a form to be agreed
upon by the Purchaser and the Seller, each acting reasonably.

“Representative” shall mean any officer, director, principal, shareholder, partner,
member, attorney, accountant, advisor, agent, trustee, employee or other representative of a party.

“SEC” shall have the meaning given to such term in Section 4.10.

“SEC Documents” shall have the meaning given to such term in Section 4.10.

“Seller” shall have the meaning given to such term in the Preamble.

“Seller’s 401(k) Plan” shall have the meaning given to such term in Section 5.4(b)
hereof.

“Seller’s FSA” shall have the meaning given to such term in Section 5.4(c) hereof.

“Senior Credit Warrants” shall have the meaning given to such term in Section 4.9.

“Series D Certificate of Designation” means the Purchaser’s Certificate of
Designation, Preferences and Rights in the form to be agreed upon between Purchaser and Seller,
each acting reasonably, prior to the Closing.

“Series D Preferred Stock” means shares of Purchaser’s preferred stock designated as
Series D Preferred Stock and having such other preferences and rights as is set forth in the Series
D Certificate of Designation

“Stock” shall have the meaning given to such term in Recital A.

“Subordinated Note Payment” shall have the meaning given to such term in Section 2.6.

“Tax(es)” shall mean all taxes, charges, fees, levies, duties, imposts or other
assessments or charges imposed by and required to be paid to any Governmental Authority, including,
without limitation, income, excise, property, sales, use, transfer, gains, ad valorem or value
added, stamp, payroll, windfall, profits, gross receipts, employment, withholding, social security,
workers’ compensation, unemployment compensation, documentation, license, registration, customs
duties, tariffs, net worth and franchise taxes (including any interest, penalties or additions
attributable to or imposed on or with respect to any such assessment) and any estimated payments or
estimated taxes.

“Tax Audit” shall have the meaning given to such term in Section 7.4 hereof.

“Tax Return” shall mean any return, report, information return or other similar
document or statement (including any related or supporting information) filed or required to be
filed with any Governmental Authority in connection with the determination, assessment or
collection of any Tax or the administration of any Laws, regulations or administrative requirements
relating to any Tax, including, without limitation, any information, return, claim for refund,
amended return or declaration of estimated Tax and all federal, state, local and foreign returns,
reports and similar statements.

“4Horsemen Purchase Agreement” shall mean that certain Stock Purchase Agreement, dated
of even date herewith, between Purchaser, Seller, EnergyTRACS Acquisition Corp. and Milgo Holdings,
LLC.

“Third Party Reimbursement” shall have the meaning given to such term in Section 6.5
hereof.

ARTICLE 2

MERGER

2.1 Closing. The consummation of the Merger (the “Closing”) shall take place
on September 30, 2005 (such date, the “Closing Date”) provided that (i)
commensurate with the Closing, the transactions contemplated by the 4Horsemen Purchase Agreement
shall be consummated and (ii) as of such date, the conditions set forth in Section 8.1 (with
respect to Purchaser’s obligation to Close) and Section 8.2 (with respect to Sellers’ obligations
to Close) shall have been satisfied and (iii) Purchaser shall have filed and caused to become
effective the Series D Certificate of Designation with the Nevada Secretary of State. On or
immediately following the Closing, the parties hereto shall cause the Merger to be consummated by
filing articles or certificates of merger as contemplated by the CCC in the form of Exhibit
A attached hereto (the “Certificates of Merger”), together with any required related
certificates, with the Secretary of State of the State of California, in such form as required by,
and executed in accordance with the relevant provisions of, the CCC (the time of such filing being
the “Effective Time”).

2.2 Merger. At the Effective Time, and subject to and upon the terms and conditions
of this Agreement and the CCC, the Company shall be merged with and into the Merger Sub, the
separate existence of the Company shall cease, and the Merger Sub shall continue as the surviving
corporation. The Merger Sub as the surviving corporation after the Merger is hereinafter referred
to as the “Surviving Corporation.”

2.3 Effect of the Merger. At the Effective Time, the effect of the Merger shall be as
provided in this Agreement, the Certificates of Merger and the applicable provisions of the CCC.
Without limiting the generality of the foregoing, and subject thereto, at the Effective Time all
the property, rights, privileges, powers and franchises of the Company and Merger Sub shall vest in
the Surviving Corporation, and all debts, liabilities and duties of the Company and Merger Sub
shall become the debts, liabilities and duties of the Surviving Corporation.

2.4 Certificate of Incorporation.

(a) Certificate of Incorporation. At the Effective Time, the Certificate of
Incorporation of the Merger Sub as in effect immediately prior to the Effective Time, as amended
and restated to be in the form attached to the Certificate of Merger, shall be the Certificate of
Incorporation of the Surviving Corporation, until thereafter amended in accordance with the CCC and
such Certificate of Incorporation.

(b) Bylaws. At Effective Time, the Bylaws of Merger Sub, as in effect immediately
prior to the Effective Time, shall be the Bylaws of Merger Sub until thereafter amended in
accordance with the CCC, the Certificate of Incorporation of the Surviving Corporation and such
Bylaws.

(c) Directors. The board of directors and officers of Merger Sub immediately prior to
the Effective Time shall be the initial board of directors and officers of Merger Sub, each such
director and officer to hold office in accordance with the Certificate of Incorporation and Bylaws
of the Surviving Corporation.

2.5 Merger Consideration. The aggregate consideration payable pursuant to the Merger
to the holder of the Stock shall consist of (a) $5,500,000 in cash payable at Closing (the
“Cash Consideration”), (b) that number of shares of Series D Preferred Stock as shall be
obtained by dividing $6,750,000 by a divisor to be agreed upon by Purchaser and Seller, each acting
reasonably and in a manner consistent with the discussions held between them prior to the date
hereof (the “Equity Consideration”), and (c) $1,750,000 payable no later than March 31,
2006 (the “Note Payment”). Such Cash Consideration, Equity Consideration and the Note
Payment shall in the aggregate be referred to as the “Merger Consideration”.

2.6 Conversion of the Stock; Merger Sub Shares.

(a) Conversion of Shares. All shares of Stock outstanding as of the Effective Time
shall, by virtue of the Merger and without any action on the part of the holder thereof,
automatically be converted into the Cash Consideration, the Equity Consideration and the right to
receive the Note Payment. Purchaser’s obligation to make the Note Payment shall be represented by
delivery to Seller of a promissory note to be agreed upon by Purchaser and Seller, each acting
reasonably, prior to the Closing (the “Note”).

(b) Treasury Shares. Each share of capital stock held in the Company’s treasury as of
the Effective Time, if any, shall, by virtue of the Merger, be canceled without payment of any
consideration therefor.

(c) Merger Sub Share. Each share of Merger Sub issued and outstanding as of the
Effective Time shall, by virtue of the Merger and without any action on the part of the holder
thereof, automatically be converted into one fully paid and nonassessable share of the Surviving
Corporation.

2.7 Exchange of Certificates.

(a) At the Closing, certificates representing the Stock shall be canceled in exchange for the
Merger Consideration.

(b) No Fractional Securities. No fractional shares of Series D Preferred Stock shall be
issuable in the Merger. In lieu of any such fractional shares, Seller shall be entitled to receive
the next whole share of Series D Preferred Stock rounding up to if such fraction is 0.5 or greater
or down if such fraction is less than 0.5.

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF SELLER

Except as set forth in the disclosure schedules (“Schedules”) delivered by Seller to
Purchaser upon execution of this Agreement or pursuant to Section 5.11 (referencing the applicable
section of this Article 3), Seller represents and warrants to Purchaser as follows:

3.1 Organization and Existence. The Company is a corporation, duly incorporated,
validly existing and in good standing under the laws of the state of California. The Company has
all requisite power and authority to own and operate the Business and to carry on the Business as
presently conducted. The Company is qualified or licensed to do business in each jurisdiction in
which the conduct of the Business or ownership of its properties make such qualification necessary,
except for such jurisdictions in which the failure to be so duly qualified or licensed would not
have a Material Adverse Effect. Schedule 3.1 lists: (i) the employer identification number for the
Company; (ii) all legal names used by the Company and its predecessors, if any, in the last three
(3) years; (iii) all entities merged with or into the Company or its respective predecessors, if
any, in the last three (3) years; and (iv) the address for each location at which the Company has
an office or otherwise has any material assets (other than Employees working out of their homes).
Accurate and complete copies of the articles of incorporation and bylaws, each as amended to date,
have been made available to Purchaser.

3.2 Authorization. Each of Seller and the Company has the requisite power and
authority to enter into this Agreement, to perform its obligations hereunder, and to consummate the
transactions contemplated hereby. The execution, delivery and performance of this Agreement by
Seller and the Company have been duly authorized by all necessary action on the part of Seller and
the Company.

3.3 Due Execution and Delivery; Binding Obligations. This Agreement has been duly
executed and delivered by Seller and the Company. This Agreement constitutes a legal, valid and
binding agreement of Seller and the Company, enforceable against Seller and the Company in
accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, arrangement, moratorium or similar Laws relating to or limiting creditors’ rights
generally or by equitable principles relating to enforceability.

3.4 Capitalization; Title to the Stock.

(a) (i) The Stock is owned, of record and beneficially, as of the date hereof and the Closing,
by Seller, and represents the only outstanding stock, stock appreciation rights, phantom stock
rights, profit participation rights or any other economic, voting, ownership or any other type of
direct or indirect equity interest in the Company. As of the date hereof and Closing, there are no
securities in the Company other than the Stock.

(b) The bylaws and articles of incorporation of the Company do not impose upon any holder of
the Stock any obligation to make capital contribution commitments to the Company. As of the
Closing Date, the Stock will be held by Seller free and clear of all Encumbrances, other than those
arising under applicable state or Federal securities laws.

(c) As of the Closing, Seller is not subject to any restrictions on transfer, rights of first
refusal or other restrictions or obligations relating to the Stock. As of the Closing Date, there
will be no outstanding subscription, option, warrant, call right, preemptive right or other
agreement or commitment obligating the Company to issue, sell, deliver or transfer (including any
right of conversion or exchange under any outstanding security or other instrument) any economic,
voting, ownership or any other type of membership or other interest or security in the Company,
other than pursuant to any actions taken by on behalf of Purchaser or its affiliates. Schedule
3.4 sets forth a list of the officers and directors of the Company.

3.5 Subsidiaries and Joint Ventures.

(a) The Company does not have any subsidiaries.

(b) As of the date hereof and Closing, the Company is not a partner in any general or limited
partnership, a member of any limited liability company, an equity owner of any entity or a party to
any joint venture with any other Person.

3.6 No Conflict or Violation; Consents. Neither the execution and delivery of this
Agreement by Seller or the Company nor the consummation of the transactions contemplated hereby,
will result in (i) a violation of, or a conflict with, the organizational documents of Seller or
the Company; (ii) a violation by Seller or the Company of any applicable Law; (iii) a violation by
Seller or the Company of any order, judgment, writ, injunction, decree or award to which Seller or
the Company is a party or by which Seller or the Company is bound or affected; (iv) a breach of or
cause a default under, or result in the termination of, or accelerate the performance of, or create
in favor of any Person other than the Company a right of termination or consent under, any Material
Contract; or (v) an imposition of an Encumbrance on the Stock or the assets of the Company.

3.7 Governmental Consents and Approvals. Except to the extent that the absence thereof
would not have a Material Adverse Effect, no Permit, approval, consent or authorization of, or
declaration, filing, application, transfer or registration with, any Governmental Authority is
required to be made or obtained by Seller or the Company by virtue of the execution, delivery or
performance of this Agreement or the consummation of the transactions contemplated hereby in order
to enable Purchaser to own the Stock and to permit the Surviving Corporation to continue the lawful
operation of the Business following the Closing Date in substantially the same manner as it is
presently conducted by the Company.

3.8 Pending Litigation. Schedule 3.8 sets forth a complete and correct list of all
pending Actions and, to the knowledge of Seller, any Actions threatened against the Company, or
which have been initiated by the Company, or which would affect the ability of Seller to consummate
the sale of the Stock.

3.9 Financial Information.

(a) Financial Statements. Seller has furnished to Purchaser copies of (i) the
Company’s unaudited balance sheet as of December 31, 2004, and the related statements of income for
the fiscal year then ended, (ii) the Company’s unaudited balance sheet as of December 31, 2003 and
the related consolidated statements of income for the fiscal year then ended and (iii) the
Company’s balance sheet as of June 30, 2005 (the “Most Recent Balance Sheet”) and the
related statement of income for the six months then ended (the “Financial
Statements”). Except as set forth on Schedule 3.9(a), the Financial Statements have been
prepared in accordance with GAAP on a consistent basis during the respective periods, fairly
present in all material respects the financial condition of the Company at the respective dates
thereof and the results of operations of the Company for the respective periods covered by the
statements of income contained therein, and are correct and complete in all material respects.

(b) Indebtedness. As of the Closing Date, the Company will not have any outstanding
Indebtedness.

(c) Undisclosed Liabilities. The Company does not have any Obligations except (i)
liabilities which are reflected and properly reserved against in the Most Recent Balance Sheet,
(ii) liabilities incurred in the Ordinary Course since the Most Recent Balance Sheet date, (iii)
liabilities arising under any of the Contracts, (iv) liabilities which are not required to be
reflected on a balance sheet prepared in accordance with GAAP.

(d) Inter-company Assets and Liabilities. As of the Closing Date, all non-trade
payable inter-company accounts receivable, accounts payable and accrued inter-company expenses
between the Company, on the one hand, and the Seller and its affiliates, on the other hand, shall
have been paid or otherwise extinguished and there will be no non-trade inter-company assets or
liabilities.

(e) Controls. The Company maintains a reasonable process or procedure under which
management of the Company is aware of or authorizes material transactions of the Company such that
such transactions may be recorded on the quarterly and annual financial reports of the Company in
accordance with GAAP.

3.10 Absence of Certain Changes. Since the Most Recent Balance Sheet, there has been
no Material Adverse Effect. In addition, since the Most Recent Balance Sheet, the Company has
operated in the Ordinary Course and has not, with a view to the anticipated sale of the Company,
(i) sought to extend the time of payment of any payables in a manner inconsistent with the Ordinary
Course, (ii) sought to advance the collection of receivables in a manner inconsistent with the
Ordinary Course, or (iii) offered any material discounts on any receivables or extended maintenance
agreement outside the Ordinary Course. Without limiting the generality of the foregoing, since the
Most Recent Balance Sheet the Company has not:

(a) sold, assigned, licensed, leased, transferred, disposed of, or agreed to sell, assign,
license, lease, transfer or dispose of, any asset other than in the Ordinary Course;

(b) acquired any equity interests in any other Persons, acquired any material assets, except
in the Ordinary Course, nor acquired or merged with any other business or Person;

(c) incurred or created any Encumbrances on any of its assets, other than Permitted
Encumbrances;

(d) suffered the destruction, damage or other loss (whether or not covered by insurance) of
any assets or property material to the conduct of the Business;

(e) increased the salary or other compensation payable or to become payable to any employee of
the Company (“Employees”) or obligated itself to pay any bonus or other additional salary
or compensation to any Employee in each case other than in the Ordinary Course;

(f) other than with respect to at-will Employees, entered into any employment Contract or
collective bargaining Contract, or modified the terms of any existing such Contract, or made any
other change in employment terms for any Employees outside of the Ordinary Course;

(g) adopted, amended, modified, or terminated any Employee Benefit Plan;

(h) made any loan to, or entered into any other transaction with, any Employees, other than
the hiring of at-will Employees in the Ordinary Course;

(i) waived, amended, modified, terminated or canceled any Material Contract or material right,
nor has any third party taken any such action with respect to any Material Contracts;

(j) suffered any disposition or lapse of any owned Intellectual Property, including, without
limitation, the expiration of any applications for registration of any owned Intellectual Property
rights;

(k) licensed any Intellectual Property, other than to end users, customers or distributors in
the Ordinary Course;

(l) made any material capital expenditures;

(m) made any investment in, or any loan to, any other Person;

(n) created, incurred, assumed, or guaranteed any Indebtedness;

(o) terminated the services of any key Employee without cause;

(p) made any non-cash dividend or non-cash distribution to any holder of the Stock;

(r) issued any new equity securities;

(s) made any change in the accounting policies of the Company, other than as required in
accordance with law or GAAP.

(t) entered into any Contract to take any action, or permit any occurrence, described above.

3.11 Real Property. Schedule 3.11 sets forth a complete and correct list of all real
property leased by the Company (“Leased Real Property”). The Company has not subleased or
otherwise granted any other Person a right to use any real property. The Company does not own any
fee interest in any real property. To Seller’s knowledge, no Proceedings are pending which would
affect or pertain to the zoning or use of any of the material Leased Real Property.

3.12 Material Contracts.

(a) Schedule 3.12(a) sets forth a complete list of the following Contracts (the
“Material Contracts”): all (i) agreements for Indebtedness to which the Company is
a party and which will not be terminated at or prior to Closing; (ii) agreements or commitments to
make material capital expenditures; (iii) agreements to sell, lease or otherwise dispose of any
material assets or properties of the Company, other than in the Ordinary Course; (iv) agreements
limiting the freedom of the Company to compete in any line of business or in any geographic area or
with any Person; (v) Leases; (vi) joint venture agreements and partnership agreements to which the
Company is a party; (vii) any license from a third party for Intellectual Property, other than
shrink wrapped software that is generally available in the commercial markets, such as word
processing programs; (viii) Contracts involving the Company’s investment in, or any loan to, any
other Person; (ix) other than with respect to at-will Employees, employment agreements or loan
agreements with any Employees; (x) Contracts that involve payments or receipts of either (A) more
than $50,000 annually or (B) $200,000 in the aggregate in future payments or receipts over the life
of such Contract; (xi) any Contract between the Company, on the one hand, and Seller or an
affiliate of Seller (other than a Company), on the other hand, (xii) contracts relating to
commission arrangements with others, (xiii) consulting contracts or severance agreements, (xiv)
capital leases (as determined in accordance with GAAP), and (xv) any Contract with Federal, state
or local government or any agency or department thereof that involve receipts of more than $150,000
annually. All Material Contracts that have been provided to Buyer are accurate and complete
copies.

(b) Each Material Contract is valid, binding and enforceable against the Company in accordance
with its terms, except that such enforcement may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other laws, now or hereafter in effect, relating
to or limiting creditors’ rights generally, and (ii) general principles of equity (regardless of
whether enforceability is considered in a proceeding at law or in equity). To the knowledge of
Seller, each Material Contract is valid, binding and enforceable against the other parties thereto,
in accordance with its terms. The Company is not in default, violation or breach in any material
respect under any Material Contract, and no event has occurred which with notice or lapse of time
would constitute a material breach or default, or permit termination, modification, or
acceleration, under such Material Contract. Except as disclosed on Schedule 3.12(b), each Material
Contract shall be in full force and effect without penalty in accordance with its terms immediately
following the consummation of the transaction contemplated hereby.

3.13 Intellectual Property.

(a) Schedule 3.13(a) sets forth a complete and correct list of all products or services
offered by the Companies (other than those that form an immaterial portion of the Business) as well
as patents, patent applications, registered trademarks, registered service marks, and registered
copyrights, and all applications for registration included in the registered Intellectual Property
filed by or held in the name of the Company.

(b) (i) Without expansion of the representations and warranties made in this subjection
(b)(ii) and (b)(iii), all right, title and interest in and to the Intellectual Property is either
owned by the Company free and clear of all Encumbrances, other than Permitted Encumbrances, or is
licensed by the Company from a third party unaffiliated with Seller pursuant to a written license,
(ii) no claims have been made or, to the knowledge of Seller, threatened (including by way of a
demand letter), to Seller or the Company by any Person, and to the knowledge of Seller, there are
no grounds for any Person to claim that (A) the Company does not own or have the right to use, as
applicable, any material Intellectual Property used in the Business, (B) the operation of the
Business of the Company as presently conducted is infringing, misappropriating or otherwise
violating the intellectual property rights of any Person, or (C) the Intellectual Property
purported to be owned by the Company infringes, misappropriates or otherwise violates the
intellectual property rights of any third party or is invalid or unenforceable, and (iii) to the
knowledge of Seller, the Company is not infringing, misappropriating or otherwise violating, or has
infringed, misappropriated or otherwise violated any intellectual property rights of any other
Person. To Seller’s knowledge, the Company has taken reasonable and customary steps to safeguard
and maintain the secrecy and confidentiality of the Intellectual Property.

(c) To the knowledge of Seller, no Person is currently infringing or otherwise violating the
Company’s rights in any owned Intellectual Property.

(d) The registrations with respect to the registered Intellectual Property owned by the
Company set forth on Schedule 3.13(a) (other than those trademarks designated “Inactive Marks” or
“Trademark Applications”) are complete and accurate and are in full force and effect.

3.14 Employees. There is no labor strike, dispute, slowdown, or stoppage pending or,
to the knowledge of Seller, threatened against the Company. Neither Seller nor the Company is
party to or bound by any collective bargaining agreement with respect to any Employees. To the
knowledge of Seller, no certification question or organizational drive exists or has existed within
the past two (2) years with respect to Employees. There is no unfair labor practice, charge or
complaint of discrimination (including discrimination based upon sex, age, marital status, race,
national origin, sexual preference, handicap or veteran status) or any other matter against or
involving the Company pending or, to the knowledge of Seller, threatened before the National Labor
Relations Board, the Equal Employment Opportunity Commission or any other Governmental Authority
pertaining to or involving Employees. Except as required by any Law, the Company has not entered
into any severance Contract or similar arrangement in respect of any Employee that will result in
any obligation (absolute or contingent) of the Company to make any payment to any Employee
following termination of employment or upon consummation of the transactions contemplated by this
Agreement. Schedule 3.14(b) lists the names of all current Employees as of the date of this
Agreement. Seller has provided a list to Purchaser that contains the current base salary or hourly
wage rate and the 2004 bonuses and commissions of all Employees.

The Company is in compliance in all material respects with all applicable Laws relating to
employment practices. The Company has made available to Purchaser accurate and complete copies of
all current and existing employee manuals and handbooks.

3.15 Employee Benefits. Schedule 3.15 sets forth a complete and correct list of all
Employee Benefit Plans of the Company. Each such Employee Benefit Plan complies in all material
respects with the provisions of and has been administered in compliance with the provisions of
ERISA and all other applicable Laws. Without limiting the generality of the foregoing, no
“prohibited transaction” (as such term is defined in Section 4975 of the Code, or in Part 4 of
Subtitle B of Title I of ERISA) has occurred with respect to any such Employee Benefit Plan that
could result in the imposition of material Taxes or penalties on the Company, and neither Seller
nor the Company has failed to make any contribution to, or to make any payment under, any such
Employee Benefit Plan that it was required to make prior to Closing pursuant to the terms of such
Employee Benefit Plan or pursuant to applicable Law that could result in any material liability to
the Company. To the extent that the Company or its affiliates have accrued or reserved for any
contribution or payment under any such Employment Benefit Plan in the Financial Statement or the
Most Recent Balance Sheet it shall be not be deemed a breach of the representations set forth in
this Section.

3.16 Taxes. (i) All Tax Returns relating to the Company that are required by Law to
be filed have been duly filed on a timely basis, (ii) all amounts set forth thereon have been paid
in full and all such Tax Returns are correct and complete in all material respects, (iii) the
Company has not waived or has been requested to waive any statute of limitations in respect of
Taxes, (iv) there are no pending or threatened Actions for the assessment or collection of Taxes
that relate to the activities or income of the Company, (v) there are no liens for Taxes upon the
assets of the Company other than liens for Taxes not yet due and payable or being contested in good
faith, (vi) all material Taxes which the Company is required by Law to withhold or to collect for
payment have been duly withheld and collected, and have been paid or accrued, reserved against and
entered on their respective books and records in accordance with GAAP and (vii) all material Tax
deficiencies of the Company determined as a result of any past completed audit have been satisfied.
There are no Tax-sharing agreements or similar arrangements (including indemnity arrangements)
with respect to or involving the Company. The Company has properly requested, received and
retained all necessary sales tax exemption certificates.

3.17 Compliance with Law. The Company currently conducts the Business in compliance
in all material respects with all Laws applicable to the conduct of the Business. Neither Seller
nor the Company has received any written notice from, nor does Seller have any knowledge that, any
Governmental Authority or other Person is claiming or threatening to claim any violation or
potential violation of any Law with respect to the Company.

3.18 Permits. The Company holds all material Permits necessary for the lawful
operation of the Business as presently conducted, and all such Permits are in full force and
effect.

3.19 Insurance. Schedule 3.19 contains an accurate list of all policies of insurance
in effect on the date hereof relating to the Company. All such policies are valid, outstanding and
enforceable. The Company has not received notice of any actual or threatened modification or
cancellation of any such insurance.

3.20 Brokers and Finders. All negotiations relating to this Agreement and the
transactions contemplated hereby have been carried on without the intervention of any Person acting
on behalf of Seller or the Company in such manner as to give rise to any claim against Purchaser or
the Company, for any brokerage or finders’ commission, fee or similar compensation.

3.21 Accounts Receivable. The accounts and notes receivable reflected in the Most
Recent Balance Sheet of the Company are recorded in accordance with GAAP, and the accounts and
notes receivable after the date of the Most Recent Balance Sheet arose from bona fide transactions,
including sales of goods or services rendered. All reserves for bad debt shown on the Most Recent
Balance Sheet of the Company are reflected properly in accordance with GAAP.

3.22 Customers. Schedule 3.22 sets forth a complete and accurate list of the names of
the ten customers who purchased from the Company the greatest dollar volume of products or services
during the Company’s last fiscal year, showing the approximate total billings in United States
dollars to each such customer during such fiscal year. The Company has not received any written
communication from any customer named on Schedule 3.22 of any intention to return, terminate or
materially reduce purchases from the Company.

3.23 Bank Accounts. Set forth on Schedule 3.23 is a complete list of each bank,
brokerage or similar account of the Company and the names of all officers or employees of the
Company who are authorized to make withdrawals therefrom or dispositions.

3.24 Books and Records. The business accounting and operating records of the Company
have been maintained in accordance with generally accepted industry practice.

3.25 Environmental Matters. The Company is operating in compliance in all material
respects with applicable Environmental Laws in respect to the Leased Real Property. The Company
has not received any notice in the last three years from any Governmental Authority in connection
with environmental issues arising out of or relating to the Leased Real Properties. There are no
pending civil, criminal or administrative proceedings against the Company under any Environmental
Laws arising out of or relating to the condition of any of the Leased Real Properties or the
Company’s activities thereon.

3.26 No Other Agreements to Sell the Company or the Stock. Seller does not have any
Contract with any other Person to sell all or a majority of the Stock or all or substantially all
of the assets of the Company or to effect any merger, consolidation or other reorganization of the
Company or to enter into any agreement with respect thereto, except pursuant to this Agreement.

3.27 Investment Intent. Seller is acquiring the Series D Preferred Stock and the
Common Stock issuable upon conversion thereof for its own account for investment and not with a
view to, or for sale in connection with, any distribution thereof. Seller is an “accredited
investor” as defined in Rule 501(a) of Regulation D of the Securities Act of 1933, as amended.
Seller understands and agrees that it may not sell, dispose, transfer, pledge, hypothecate or
otherwise dispose of any of the Series D Preferred Stock or any of the Common Stock issuable upon
conversion thereof (i) without registration under the Securities Act of 1933, as amended, except
pursuant to an exemption from such registration available under such Act and (ii) except in
accordance with any applicable provisions of state and local securities Laws.

3.28 Questionable Payments. To the knowledge of Seller, none of the executives,
officers, or employees of the Company (when acting in such capacity or otherwise on behalf of the
Company): (i) has used or is using any corporate funds for illegal contributions, gifts,
entertainment or other unlawful expenses relating to political activity; (ii) has used or is using
any corporate funds for any direct or indirect unlawful payments to any foreign or domestic
government officials or employees; (iii) has violated or is violating any provision of the Foreign
Corrupt Practices Act of 1977; (iv) has established or maintained, or is maintaining, any unlawful
fund of corporate monies or other corporate properties; or (v) has made any bribe, payoff, kickback
or other unlawful payment.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF PURCHASER

Except as set forth in the disclosure schedules (the “Purchaser Schedules”) delivered
by Purchaser to Seller upon execution of this Agreement or pursuant to Section 5.11 (referencing
the applicable section of this Article 4), Purchaser represents and warrants to Seller as follows:

4.1 Organization. Purchaser is a corporation duly organized, validly existing and in
good standing under the Laws of Nevada. Merger Sub is a corporation, duly organized, validly
existing and in good standing under the Laws of California.

4.2 Authorization. Purchaser has the requisite power and authority to enter into this
Agreement, the Note, to file the Series D Certificate of Designation and to enter into the
Registration Rights Agreement, to perform its obligations hereunder and thereunder, and to
consummate the transactions contemplated hereby and thereby, including the issuance of the Series D
Preferred Stock and the Common Stock issuable upon conversion of the Series D Preferred Stock. The
execution, delivery and performance by Purchaser of this Agreement, the Note, the Series D
Certificate of Designation and the Registration Rights Agreement have been duly authorized by all
necessary action on the part of Purchaser. Merger Sub has the requisite power and authority to
enter into this Agreement, to perform its obligations hereunder, and to consummate the transactions
contemplated hereby. The execution, delivery and performance by Merger Sub of this Agreement have
been duly authorized by all necessary action on the part of Merger Sub.

4.3 Due Execution and Delivery; Binding Obligations. This Agreement, the Registration
Rights Agreement, the Note and the Series D Certificate of Designation have been duly executed and
delivered by Purchaser and constitute legal, valid and binding agreements of Purchaser, enforceable
in accordance with their respective terms, except as such enforcement may be limited by bankruptcy,
insolvency, reorganization, arrangement, moratorium or similar Laws relating to or limiting
creditors’ rights generally or by equitable principles relating to enforceability. This Agreement
has been duly executed and delivered by Merger Sub and constitutes a legal, valid and binding
agreement of Merger Sub, enforceable in accordance with its terms, except as such enforcement may
be limited by bankruptcy, insolvency, reorganization, arrangement, moratorium or similar Laws
relating to or limiting creditors’ rights generally or by equitable principles relating to
enforceability.

4.4 No Conflict or Violation. Neither the execution and delivery of this Agreement,
the Registration Rights Agreement, the Note or the Series D Certificate of Designation by Purchaser
nor the consummation of the transactions contemplated hereby and thereby, including the issuance of
the Series D Preferred Stock and the Common Stock issuable upon conversion of the Series D
Preferred Stock will result in (i) a violation of, or a conflict with, the organizational documents
of Purchaser; (ii) a violation by Purchaser of any applicable Law; (iii) a violation by Purchaser
of any order, judgment, writ, injunction, decree or award to which Purchaser is a party or by which
Purchaser is bound or affected; (iv) a breach of or cause a default under, or result in the
termination of, or accelerate the performance of, or create in favor of any Person other than
Purchaser a right of termination or consent under, any material Contract to which Purchaser is a
party; or (v) an imposition of an Encumbrance on the Series D Preferred Stock or the Common Stock.

4.5 Consents and Approvals. No consent, permit, approval or authorization of, or
declaration, filing, application, transfer or registration with, any Governmental Authority, or any
other Person is required to be made or obtained by Purchaser by virtue of the execution, delivery
or performance of this Agreement, the Note, the Registration Rights Agreement or the Series D
Certificate of Designation.

4.6 Brokers and Finders. All negotiations relating to this Agreement and the
transactions contemplated hereby have been carried on without the intervention of any Person acting
on behalf of Purchaser in such manner as to give rise to any claim against

Seller or the Company for any brokerage or finders’ commission, fee or similar compensation.

4.7 Investment Intent. Purchaser is acquiring the Stock for its own account for
investment and not with a view to, or for sale in connection with, any distribution thereof.
Purchaser is an “accredited investor” as defined in Rule 501(a) of Regulation D of the Securities
Act of 1933, as amended (the “Act”). Purchaser understands and agrees that it may not
sell, dispose, transfer, pledge, hypothecate or otherwise dispose of any of the Stock (i) without
registration under the Act, except pursuant to an exemption from such registration available under
such Act and (ii) except in accordance with any applicable provisions of state and local securities
Laws.

4.8 Investigation by Purchaser. Purchaser acknowledges that it has been provided with
access to such information concerning the Company as it has requested and has deemed necessary and
appropriate to permit it to conduct such review to its satisfaction.

4.9. Capital Structure. As of June 30, 2005, the authorized capital stock of
Purchaser consists only of: 150,000,000 shares of Common Stock, of which 3,110,800 shares were
issued and outstanding; 16,000,000 shares of Series C Preferred Stock, 14,193,095 shares of which
are issued and outstanding; and outstanding options and warrants to purchase 22,285,971 shares of
Common Stock and there are no other authorized shares of any class authorized, issued or
outstanding. In addition, outstanding convertible subordinated notes are convertible into
2,500,000 shares of Common Stock and warrants to purchase Common Stock were issued in connection
with the Purchaser’s senior credit facility entered into on August 2, 2005 (the “Senior Credit
Warrants”). Assuming an additional drawdown of $15.0 million under such credit facility in
connection with the transactions contemplated by this Agreement and the 4Horsemen Purchase
Agreement, there will be in the aggregate 2,065,505 shares of Common Stock issuable upon exercise
of the Senior Credit Warrants at a strike price of $.01 per warrant share. Other than the
convertible instruments described above, no person has any phantom rights, options, warrants or
other equity interest or instrument convertible into any equity interest in Purchaser or otherwise
has any right to acquire any equity interest or any instrument convertible into any equity interest
in Purchaser. All of the issued and outstanding shares of Purchaser’s capital stock have been duly
authorized and validly issued and are fully paid, nonassessable and free of preemptive rights and
were issued in full compliance with applicable state and Federal securities law and any rights of
third parties. The Equity Consideration and the Common Stock issuable upon conversion of the
Series D Preferred Stock, will be, when issued, duly authorized, validly issued, fully paid,
nonassessable, free of preemptive rights and issued in accordance with applicable state and Federal
securities laws and any rights of third parties, free and clear of all Encumbrances. Other than as
listed on Schedule 4.10, there are no voting agreements, buy-sell agreements, options or rights of
first purchase agreements or other agreement of any kind among Purchaser and any of the security
holders of Purchaser relating to the securities of Purchaser held by them. Other than as listed on
Schedule 4.10, no Person has the right to require Purchaser to register any securities of Purchaser
under the Act. The issuance and sale of the Equity Consideration hereunder will not obligate
Purchaser to issue shares or other securities to any other Person (other than Seller) and will not
result in the adjustment of the exercise, conversion, exchange or reset price of any outstanding
security. Purchaser has reserved a sufficient number of shares of capital stock for issuance upon
conversion of the Series D Preferred Stock. The offer and sale of the Equity Consideration to
Seller as contemplated hereby is exempt from the registration requirements of the Act, subject to
the accuracy of Seller’s warranties hereunder.

4.10 SEC Documents/Purchaser Financial Statements. Purchaser has furnished or made
available to Seller true and complete copies of all reports or registration statements filed by it
with the U.S. Securities and Exchange Commission (the “SEC”) since January 1, 2004, all in
the form so filed (all of the foregoing being collectively referred to herein as the “SEC
Documents”). As of their respective filing dates, the SEC Documents complied in all material
respects with the requirements of the Act or the Securities Exchange Act of 1934, as amended, as
the case may be, and none of the SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading, except to the
extent corrected by a document subsequently filed with the SEC. The consolidated financial
statements of Purchaser, including the notes thereto, included in the SEC Documents (the “Halo
Financial Statements”) have been prepared in accordance with GAAP consistently applied (except
as may be indicated in the notes thereto or, in the case of unaudited statements, as permitted by
SEC rule) and present fairly, in all material respects, the consolidated financial position of
Purchaser at the dates thereof and the consolidated results of its operations and cash flows for
the periods then ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments).

4.11 Taxes. (i) All Tax Returns relating to Purchaser and its subsidiaries that are
required by Law to be filed have been duly filed on a timely basis, (ii) all amounts set forth
thereon have been paid in full and all such Tax Returns are correct and complete in all material
respects, and (iii) there are no material pending or threatened Actions for the assessment or
collection of Taxes that relate to the activities or income of Purchaser or its subsidiaries.

4.12 Indebtedness. All Indebtedness of Purchaser and its subsidiaries is disclosed in
the SEC Documents. Neither Purchaser nor its subsidiaries is in material violation of any terms of
any Indebtedness.

4.13. Litigation. Except as disclosed in the SEC Documents, there are no pending, or
to Purchaser’s knowledge, threatened, Actions against Purchaser or its subsidiaries.

4.14 Undisclosed Liabilities. Purchaser and its subsidiaries do not have any
liabilities or obligations (known, unknown, asserted, unasserted, absolute, contingent, accrued,
unaccrued, liquidated, unliquidated, due, to become due, or otherwise, including any liability for
Taxes) except (i) liabilities which are reflected and properly reserved against in the most recent
balance sheet included in the SEC Documents, (ii) liabilities incurred in the ordinary course of
Purchaser’s and its subsidiaries’ business since the date of such balance sheet, (iii) liabilities
arising under any of the Contracts, (iv) liabilities which are not required to be reflected on a
balance sheet prepared in accordance with GAAP.

4.15 Internal Controls. Purchaser and its subsidiaries currently conduct their
business in compliance in all material respects with all Laws applicable to the conduct of their
respective business, including the Sarbanes-Oxley Act of 2002.

ARTICLE 5

COVENANTS

5.1 Third Party Consents. Seller shall provide such commercially reasonable
assistance as Purchaser may reasonably request in obtaining third party consents set forth on
Schedule 3.6. In no event shall Seller be liable for obtaining the consents set forth on Schedule
3.6.

5.2 Confidentiality. No party shall use any information or data obtained in
connection with the negotiation of the transactions contemplated by this Agreement for any purpose
other than to pursue and further the consummation of such transactions. The obligations set forth
in this Section 5.2 are in addition to and are not intended to supersede or replace the obligations
of Purchaser pursuant to any confidentiality agreement entered into by Purchaser and Seller and
their respective affiliates prior to the date hereof.

5.3 Publicity. Any press release or similar announcement concerning the consummation
of the transactions contemplated hereby by any party shall be provided to the other parties for
review and approval prior to its release, which approval shall not be unreasonably withheld;
provided, however, Seller or Purchaser or their respective affiliates may, without the consent of
the other, publish and use standard tombstone announcements regarding the consummation of the
transactions contemplated by this Agreement; provided further, that in no event shall any party
publicly disclose the Merger Consideration or the approximate amount thereof, without the consent
of the other parties. Following the issuance of the initial announcement, either party may,
without the consent of the other, publish additional announcements that contain substantially
similar material as the initial announcement. This Section 5.3 shall not prevent announcements
provided by law or securities regulations, provided that the other parties hereto shall have the
opportunity to read and comment on such announcements prior to the release thereof.

5.4 Employees and Employee Benefits.

(a) Purchaser understands and acknowledges that, effective as of the Closing Date, the
employee benefits currently provided to Employees under the Employee Benefit Plans listed on
Schedule 3.15 shall terminate (except to the extent benefits under any Employee Benefit Plan may be
available after the Closing under the terms of any such plan, to the extent required by Law).
Following the Closing, Purchaser covenants to Seller to comply with all applicable Law regarding
the continuance of current compensation and benefits for the Employees. Except to the extent that
any employee benefits will continue to be available to the Employees under any Employee Benefit
Plans, Purchaser shall either provide employee benefits to the Employees under one or more employee
benefit plans offered by Purchaser to its employees or to employees of other companies affiliated
with Purchaser or shall establish new employee benefit plans for the Employees (any such employee
benefit plans are referred to as “Purchaser Sponsored Plans”). Purchaser shall use
commercially reasonable efforts to provide, where applicable, that: (i) any waiting periods or
limitations regarding pre-existing conditions with respect to the Employees and their beneficiaries
under any Purchaser Sponsored Plans will be waived to the extent waived or satisfied under the
applicable Employee Benefit Plan; (ii) any covered expenses incurred by an Employee under any
Employee Benefit Plan for any plan period prior to the Closing will be credited towards any
deductibles, limits or out-of-pocket maximums under any Employee Benefit Plan; and (iii) each
Purchaser Sponsored Plan will give each Employee credit for such Employee’s service with the
Company and its respective predecessor companies prior to the Closing for eligibility and vesting
purposes only, to the extent such service was credited under the applicable Employee Benefit Plan.

(b) 401(k) Plans. Effective as of the Closing Date, the Employees shall cease to
participate in the Platinum Equity 401(k) Plan (“Seller’s 401(k) Plan”), and on or as soon
as administratively practicable following the Closing Date, Purchaser shall provide to the
Employees either the right to participate in a 401(k) plan offered by Purchaser to its employees or
to employees of other companies affiliated with Purchaser or shall establish a new 401(k) plan for
the Employees (any such 401(k) plan is referred to as “Purchaser’s 401(k) Plan”). As soon
as is reasonably practicable following the Closing Date, Seller shall cause the trustee of Seller’s
401(k) Plan to transfer account balances related to the Employees (including any outstanding loans)
from Seller’s 401(k) Plan to Purchaser’s 401(k) Plan in accordance with the requirements of
Sections 411(d)(6) and 414(l) of the Code. Such transfer shall be made in cash, except that any
promissory notes evidencing participant loans shall be transferred in kind. Seller and Purchaser
shall use commercially reasonable efforts to effect such transfer of assets in a timely manner.
Until such transfer is accomplished, Seller shall cause the trustee(s) of Seller’s 401(k) Plan to
suspend any default on any loan from Seller’s 401(k) Plan to any Employee.

(c) Flexible Spending Accounts. Purchaser shall establish a flexible spending account
for medical and dependent care expenses under a new or existing plan established or maintained
under Section 125 and Section 129 of the Code (“Purchaser’s FSA”), effective as of the
Closing Date, for each Employee who is a participant, and maintains a positive account balance, in
a flexible spending account for medical or dependent care expenses under a plan maintained by
Seller pursuant to Section 125 and Section 129 of the Code ( “Seller’s FSA”). Purchaser
shall credit the applicable account of each such Employee under the Purchaser’s FSA with an amount
equal to the balance of each such Employee’s account under the Seller’s FSA on the date immediately
prior to the commencement of participation in Purchaser’s FSA, and Seller will transfer to
Purchaser in cash the funding for all positive account balances.

5.5 Replacement of Certain Insurance Policies. Purchaser understands and acknowledges
that, effective as of the Closing Date, the insurance coverage currently provided to the Company
under the insurance policies listed on Schedule 3.19, shall terminate. From and after the Closing,
Purchaser shall be solely responsible for providing insurance coverage for the Surviving
Corporation.

5.6 Replacement of L/C’s and Cash Deposits. At Closing, Purchaser shall (i) replace
the letters of credit issued on behalf of the Company that are listed on Schedule 5.6 with
alternate letters of credit from a nationally recognized bank and (ii) shall replace the cash
security deposits set forth on Schedule 5.6 or, alternatively, the Cash Consideration portion of
the Merger Consideration shall be increased by the amount of such cash deposits.

5.7 Access to Information. Between the date hereof and the earlier of Closing or
termination of the transactions contemplated hereby, the Company and Seller shall give Purchaser
and its designated representatives, upon reasonable notice and at mutually agreeable times, access
to all of the properties, assets and employees of the Company and to all of the Company’s
documents, books and records relating to its current and past operations and business and to make
copies thereof. Purchaser will not reveal any confidential data and/or information supplied by the
Company except to its management, counsel, accountants, insurance representatives, investment and
commercial bankers and like agents, for purposes relating to the evaluation and consummation of the
transactions contemplated by this Agreement, and in the event the transactions contemplated by this
Agreement are not consummated, such data and information will be returned to the Company and will
be held confidential by those to whom it is disclosed.

5.8 Conduct of the Business Pending Closing. Except as set forth on Schedule 5.8,
between the date hereof and the Closing hereunder, Purchaser will cause the Company to (unless
otherwise consented to by Seller which consent will not be unreasonably withheld or unless
disclosed in the Disclosure Schedules):

	 	(a)	 	conduct the Business in its Ordinary Course;

	 	(b)	 	not enter into any Contract with any party, other than
Contracts entered into in the Ordinary Course, and not amend, modify or
terminate any Contract other than in the Ordinary Course without the prior
written consent of Purchaser;

	 	(c)	 	use commercially reasonable efforts to preserve its business
intact, to keep available the services of its Employees, and to preserve its
relationships with its customers and others with whom it deals consistent with
past practice;

	 	(d)	 	maintain in full force and effect all of the insurance
policies listed on Schedule 3.19;

	 	(e)	 	continue to maintain all of its usual books and records in
accordance with its past practices and not to make any material Tax elections;

	 	(f)	 	not amend its articles or incorporation, bylaws or other
organizational documents;

	 	(g)	 	not declare or make any non-cash dividend or other non-cash
payment on or with respect to the Stock, redeem or otherwise acquire any
securities or issue any securities or any, option, warrant or right relating
thereto;

	 	(h)	 	not pay any bonuses to any of its Employees, other than in
the Ordinary Course or as required by pre-existing Contracts;

	 	(i)	 	not waive any right or cancel any material claim;

	 	(j)	 	not increase the compensation or the rate of compensation
payable to any of its Employees;

	 	(k)	 	maintain its entity existence and not merge or consolidate
with any other entity;

	 	(l)	 	comply with all material respects with (i) provisions of any
Contract and (ii) all applicable Laws consistent with past practices;

	 	(m)	 	Not make any capital expenditures in excess of $5,000 per
expenditure and/or $10,000 in the aggregate;

	 	(n)	 	neither discuss nor negotiate with any other Person or entity
the sale or other transfer, or Encumbrance (other than Permitted
Encumbrances), of the assets or the Stock;

	 	(o)	 	not incur any Indebtedness for borrowed money;

	 	(p)	 	keep the assets necessary to the conduct of its Business in
good order and repair, consistent with past practice and subject to ordinary
wear and tear;

	 	(q)	 	deposit all funds received by it into such Company’s
principal bank account; and

	 	(r)	 	use commercially reasonable efforts to effectuate the
transactions contemplated by this Agreement.

5.9 Payment on Account of Contract. Between the date hereof and up until and after
the Closing hereunder, Seller shall immediately remit any payment it receives (if any) on account
of a Contract of the Company to the Company or Purchaser, as the case may be.

5.10 Transaction Bonuses. With respect to any payments due under the change of
control bonus letters referenced on Schedule 5.10 (the “Transaction Bonus Agreements”), the
parties acknowledge that the initial payment due under such Bonus Agreements (the “Initial
Payment”) shall be paid by the Company immediately prior to Closing (the “Initial Payment
Date”), and on or prior to such Initial Payment Date Seller shall pay to the Company the
respective amount of such Initial Payment less any cash remaining in the Company at Closing. The
obligation to pay the remaining installment under the Bonus Agreements shall be paid by Seller and
such obligation is hereby assigned to Seller effective immediately following payment of the Initial
Payment.

5.11 Update of Schedules. Between the date hereof and Closing, Seller shall have the
right to update and amend its Schedules, and Purchaser shall have the right to update and amend the
Purchaser Schedules, which amendments (a “Schedule Change”), if any, shall be effective
with respect to the other Sections of this Agreement, provided, however, that if a Schedule Change
relates, to the disclosing party’s knowledge, to facts or circumstances in existence prior to the
date hereof that should have been disclosed on such party’s Schedules as of the date hereof, and
such Schedule Change constitutes a Material Adverse Effect, the party negatively affected by the
Schedule Change may terminate the Agreement if written notice of such termination is provided to
the party submitting the Schedule Change within three business days of the terminating party’s
receipt of the Schedule Change. Neither party may make a claim for Damages based on the facts or
circumstances disclosed in a Schedule Change, and the Schedules as modified by any Schedule Change
shall be the “Schedules” in effect at and as of the Closing Date.

ARTICLE 6

INDEMNIFICATION

6.1 Survival of Representations and Warranties. All representations and warranties
made hereunder or pursuant hereto or in connection with the transactions contemplated hereby shall
survive the Closing through the date which is one year after the Closing Date, except all
representations and warranties made by Seller under Sections 3.4, 3.5, and 3.16, which shall
survive the Closing through the date of the applicable statute of limitations.

6.2 Indemnification Obligations.

(a) Indemnification by Seller. Seller shall indemnify, defend and hold harmless
Purchaser, the Surviving Corporation, and their respective affiliates, and Representatives, and
shall reimburse each such Person on demand for any Damages resulting from any of the following: (i)
any breach or default in the performance by Seller of any covenant or agreement contained herein,
in any agreement contemplated hereby or executed in connection herewith, or in any certificate or
other instrument delivered or to be delivered by or on behalf of Seller pursuant hereto or thereto;
(ii) any breach of warranty or inaccurate representation made by Seller herein; provided, however,
that with respect to the breach of any representation or warranty, Seller shall not be required to
pay any Damages to Purchaser unless the aggregate amount of all Damages exceeds $280,000.00, in
which case all Damages shall be paid in excess of $280,000.00, and (ii) in no event shall the
aggregate amount of Damages payable by Seller for breach of representation and warranty exceed
$2,100,000.00, provided, however, that this limit on Damages shall not apply to Damages for
breaches of warranty or inaccurate representation made by Seller under Sections 3.2 3.4, 3.5 and
3.16, and Damages for breaches of these Sections shall instead be limited to the Merger
Consideration.

(b) Indemnification by Purchaser. Purchaser shall indemnify, defend and hold harmless
Seller and any of its affiliates and Representatives, and shall reimburse each such Person on
demand for any Damages resulting from any of the following: (i) any breach or default in the
performance by Purchaser of any covenant or agreement of Purchaser contained herein, in any
agreement contemplated hereby or executed in connection herewith, or in any certificate or other
instrument delivered or to be delivered by or on behalf of Purchaser pursuant hereto or thereto;
(ii) any breach of warranty or inaccurate representation made by Purchaser herein; and (iii) the
operation of the Business of the Surviving Corporation after the Closing Date provided, however,
that, with respect to a breach of a representation or warranty by Purchaser (A) Purchaser shall not
be required to pay any Damages to Seller or any such Persons unless the aggregate amount of all
Damages exceeds $280,000.00, in which case all Damages shall be paid in excess of $280,000.00, and
(B) in no event shall the aggregate amount of Damages payable by Purchaser exceed $2,100,000.00.

(c) Claims for Indemnity. Whenever a claim for Damages shall arise for which one
party (“Indemnitee”) shall be entitled to indemnification hereunder, Indemnitee shall
notify the other party(s) (“Indemnitor”) in writing within thirty (30) days of the first
receipt of notice of such claim, and in any event within such shorter period as may be necessary
for Indemnitor to take appropriate action to resist such claim; provided that the failure to give
notice as herein provided shall not relieve Indemnitor of its obligation to indemnify Indemnitee
except to the extent that Indemnitor shall have been prejudiced in its ability to defend such
claim. Notwithstanding anything in this Agreement to the contrary, written notice of any
Indemnitee’s claim for indemnification for breach of representations and warranties must be given
within the survival period for such representations and warranties set forth in Section 6.1, and
any indemnity claim for breaches of representations and warranties which has not been noticed in
writing by such date shall be time-barred, irrespective of whether such claim was known or unknown
by such date to the party seeking indemnification. Each notice shall specify all facts known to
Indemnitee giving rise to such indemnity rights and shall estimate the amount of the liability
arising therefrom. If Indemnitee is duly notified of a dispute, the parties shall attempt to settle
and compromise the same, or if unable to do so within thirty (30) days (or such longer period as
they may agree) of Indemnitor’s delivery of notice of a dispute, such dispute shall be settled by
mediation or binding arbitration in the manner set forth in Section 10.13. Any rights of
indemnification established by reason of such settlement, compromise or arbitration shall promptly
thereafter be paid and satisfied by Indemnitor.

(d) Defense of Third Party Claims. Upon receipt by Indemnitor of a notice from an
Indemnitee with respect to any claim of a third party against Indemnitee, Indemnitor may assume the
defense of such claim with counsel reasonably satisfactory to Indemnitee, and Indemnitee shall
cooperate to the extent reasonably requested by Indemnitor in defense or prosecution thereof and
shall furnish such records, information and testimony and attend all such conferences, discovery
proceedings, hearings, trials and appeals as may be reasonably requested by Indemnitor in
connection therewith. If Indemnitor assumes the defense of such claim, Indemnitee shall have the
right to employ its own counsel in any such case, but the fees and expenses of such counsel shall
be at the expense of Indemnitee. If Indemnitor has assumed the defense of any claim against
Indemnitee, Indemnitor shall have the right to settle any claim for which indemnification has been
sought and is available hereunder involving only cash payment and/or a release it from liability;
provided that, to the extent that such settlement requires Indemnitee to take, or prohibits
Indemnitee from taking, any action or purports to obligate Indemnitee, then Indemnitor shall not
settle such claim without the prior written consent of Indemnitee. If Indemnitor does not assume
the defense of a third party claim and disputes Indemnitee’s right to indemnification, Indemnitee
shall have the right to participate in the defense of such claim through counsel of its choice, at
Indemnitor’s expense (subject to the validity of the Indemnitee’s claim), and Indemnitee shall have
control over the litigation and authority to resolve such claim with the prior consent of
Indemnitor, which consent shall not be unreasonably withheld.

6.3 No Double Recovery. Notwithstanding the fact that any Indemnitee may have the
right to assert claims for indemnification under or in respect of more than one provision of this
Agreement or another agreement entered into in connection herewith in respect of any fact, event,
condition or circumstance, no Indemnitee shall be entitled to recover the amount of any Damages
suffered by such Indemnitee more than once under all such agreements in respect of such fact,
event, condition or circumstance, and an Indemnitor shall not be liable for indemnification to the
extent the Indemnitee has otherwise been fully compensated on a dollar-for-dollar basis for such
Damages pursuant to the procedures set forth in Section 6.2.

6.4 Cooperation. Notwithstanding anything to the contrary contained in this Article
6, the parties shall cooperate with each other in connection with any claim for indemnification
hereunder, including to obtain the benefits of any insurance coverage for third party claims that
may be in effect at the time a third party claim is asserted.

6.5 Mitigation. The amount of any Damages of any Indemnitee under this Article 6
shall be net of (a) the amount, if any, receivable by the Indemnitee from any third party
(including, without limitation, any insurance company or other insurance provider) and (b) the
amount, if any, equal to any Tax benefit that may be utilized within three years of the date hereof
(such amounts being collectively referred to herein as a “Third Party Reimbursement”), in
respect of or attributable to the Damages suffered thereby. If, after receipt by the Indemnitee of
any indemnification payment hereunder, such Person receives or becomes entitled to receive a Third
Party Reimbursement in respect of the same Damages for which indemnification was made and such
Third Party Reimbursement was not taken into account in assessing the amount of indemnification,
then the Indemnitee shall turn over all of such Third Party Reimbursement to the Indemnitor up to
the amount of the indemnification paid pursuant hereto.

6.6 Exclusive Remedy. Except in the case of fraud, the indemnification provided in
this Article 6 will constitute the exclusive remedy of the Purchaser, the Company, the Surviving
Corporation, and their respective affiliates and Representatives, or Seller and its affiliates and
Representatives, as the case may be, and their respective assigns from and against any and all
Damages asserted against, resulting to, imposed upon or incurred or suffered by, any of them,
directly or indirectly, as a result of, or based upon or arising from the breach of any
representation or warranty or the non-fulfillment of any agreement or covenant in or pursuant to
this Agreement or any other agreement, document, or instrument required hereunder. Purchaser and
Seller each hereby waive, to the fullest extent permitted under applicable Law, any and all rights,
claims, and causes of action it may have against any other party, or any of such other party’s
affiliates, to the contrary.

6.8 Adjustments to Merger Consideration . Any payments made pursuant to this Article
6 shall be consistently treated as adjustments to the Merger Consideration for all Tax purposes by
Seller and Purchaser.

6.9 Intentional Misrepresentation. Notwithstanding any other provision hereof to the
contrary, any claims of fraud shall not be limited by any survival period contained in this
Agreement or any limit on indemnification or remedy contained in this Agreement.

6.10 Damages. Notwithstanding anything to the contrary elsewhere in this Agreement,
no party or its affiliates will be liable to the other party(s) or its affiliates for any Damages
other than compensatory Damages. Each party agrees that it is not entitled to recover and agrees
to waive any claim with respect to, and will not seek, consequential, punitive or any other special
Damages as to any matter under, relating to or arising out of the transactions contemplated by this
Agreement; provided, however that the foregoing shall not limit any indemnification obligations of
either party with respect to third party claims.

ARTICLE 7

TAX MATTERS

7.1 Payment of Taxes. Seller shall pay, and indemnify, defend and hold the Purchaser
and the Surviving Corporation harmless against, any and all Taxes of the Company (including without
limitation, any Taxes due from Seller) allocable to any taxable periods ending on or before the
Closing Date and the portion through the end of the Closing Date for any taxable period that
includes (but does not end on) the Closing Date (the “Pre-Closing Tax Period”). In the
case of any taxable period that includes (but does not end on) the Closing Date, the amount of any
Taxes based on or measured by income or receipts of the Company allocable to the Pre-Closing Tax
Period shall be determined based on an interim closing of the books as of the close of business on
the Closing Date, and the amount of other Taxes of the Surviving Corporation allocable to the
Pre-Closing Tax Period shall be deemed to be the amount of such Tax for the entire taxable period
multiplied by a fraction the numerator of which is the number of days in the taxable period ending
on the Closing Date and the denominator of which is the number of days in such taxable period. The
parties acknowledge that Taxes associated with revenue recognized by the Surviving Corporation
after the Closing Date will be the responsibility of the Purchaser or the Surviving Corporation.

7.2 Preparation of Tax Returns. Seller shall prepare and file all income Tax Returns
for the Company for any tax periods ending on or prior to the Closing Date. Except as otherwise
provided in the preceding sentence, Purchaser shall prepare all Tax Returns for the Company or the
Surviving Corporation, as applicable. Any officer of Company as of the day immediately preceding
the Closing Date shall have the authority, and by execution of this Agreement Purchaser hereby
grants any such officer the authority, to sign any of such Tax Returns prepared by Purchaser.
Seller shall reimburse Purchaser for Taxes of the Company which are allocable to the Pre-Closing
Period (in accordance with Section 7.1) within 15 days after payment by Purchaser or the Surviving
Corporation of such Taxes. Purchaser shall not file, or cause the Surviving Corporation to file,
any amended Tax Returns for the Company or the Surviving Corporation, as applicable, for tax
periods that include a period prior to the Closing Date without prior written consent of Seller,
such consent not to be unreasonably withheld or delayed.

7.3 Payment Over of Refunds. The Surviving Corporation shall promptly pay, and
Purchaser shall cause the Surviving Corporation to pay, to Seller any refund, overpayment, or
credit (including any interest paid or credited with respect thereto) of Taxes attributable to Tax
periods (or portions thereof) ending on or before the Closing Date.

7.4 Control of Tax Audits. Seller shall have the right, at its own expense, to
control any audit or examination by any Governmental Authority (a “Tax Audit”), initiate
any claim for refund, contest, resolve and defend against any assessment, notice of deficiency, or
other adjustment or proposed adjustment relating to any and all Taxes for any taxable period ending
on or before the Closing Date with respect to the Company or Surviving Corporation, as applicable;
provided that Seller shall not resolve any such contest without the consent of Purchaser, such
consent not to be unreasonably withheld or delayed. Purchaser shall have the right, at its own
expense, to control, or have the Surviving Corporation control, any other Tax Audit, initiate any
other claim for refund, and contest, resolve and defend against any other assessment, notice of
deficiency, or other adjustment for tax years beginning after the Closing Date.

7.5 Cooperation. Purchaser and the Surviving Corporation, on the one hand, and
Seller, on the other hand, shall cooperate fully, as and to the extent reasonably requested by the
other party, in connection with the filing of Tax Returns pursuant to this Article 7, and any
audit, litigation or other proceeding with respect to Taxes. Such cooperation shall include the
retention and (upon the other party’s request) the provision of records and information which are
reasonably relevant to any such audit, litigation or other proceeding and making employees
available on a mutually convenient basis to provide additional information and explanation of any
material provided hereunder. Purchaser, the Surviving Corporation, and Seller shall (i) retain all
books and records with respect to Tax matters pertinent to the Company relating to any taxable
period beginning before the Closing Date until the expiration of the statute of limitations (and,
to the extent notified by Purchaser or Seller, any extensions thereof) of the respective taxable
periods, and to abide by all record retention agreements entered into with any Governmental
Authority and (ii) to give the other party reasonable written notice prior to transferring,
destroying or discarding any such books and records and, if the other party so requests, the
Surviving Corporation or Seller as the case may be, shall allow the other party to take possession
of such books and records. Upon request, Purchaser and Seller further agree to use their
reasonable commercial efforts to obtain any certificate or other document from any Governmental
Authority or any other Person as may be necessary to mitigate, reduce or eliminate any Tax that
could be imposed (including but not limited to with respect to the transactions contemplated
hereby).

7.6 Transfer Taxes. Purchaser and Seller shall each bear one-half of any sales,
transfer, stamp, real property transfer or gains or similar Taxes incurred, whether direct or
indirect, as a result of the purchase of the Stock by the Purchaser.

7.7 368(a) Transaction. Seller and Purchaser intend that the transactions
contemplated hereby qualify as “tax-free” reorganization within the meaning of Section 368 of the
Code and, for Tax reporting purposes, will report the transactions contemplated hereby as a
tax-free reorganization.

ARTICLE 8

DELIVERIES AT CLOSING

8.1 Conditions Precedent to Closing of Purchaser. Purchaser’s obligation to
consummate the transactions contemplated hereby is subject, at Purchaser’s option, to the
fulfillment and satisfaction of each of the following conditions:

(a) The representations and warranties of Seller contained in this Agreement will be true and
correct in all material respects on and as of the Closing Date with the same force and effect as
though made on and as of the Closing Date, except representations and warranties specifically made
only as of an earlier date; Seller will have performed and complied in all material respects with
all covenants and agreements required by this Agreement to be performed or complied with by Seller
on or prior to the Closing Date and Seller will have delivered to Purchaser a certificate, dated
the Closing Date and signed by an officer of Seller to the foregoing effect; and

(b) No action, suit or proceeding will have been instituted before any court or Governmental
Authority or instituted or threatened by any Person which seeks to restrain or prevent the carrying
out of the transactions contemplated hereby.

8.2 Conditions Precedent to Closing of Seller. Seller’s obligation to consummate the
transactions contemplated hereby is subject, at Seller’s option, to the fulfillment and
satisfaction of each of the following conditions:

(a) The representations and warranties of Purchaser contained in this Agreement will be true
and correct in all material respects on and as of the Closing Date with the same force and effect
as though made on and as of the Closing Date, except representations and warranties specifically
made only as of an earlier date; Purchaser will have performed and complied in all material
respects with all covenants and agreements required by this Agreement to be performed or complied
with by Purchaser on or prior to the Closing Date and Purchaser will have delivered to Seller a
certificate, dated the Closing Date and signed by an officer of Purchaser to the foregoing effect;
and

(b) No action, suit or proceeding will have been instituted before any court or Governmental
Authority or instituted or threatened by any Person which seeks to restrain or prevent the carrying
out of the transactions contemplated hereby.

8.3. The Company’s and Seller’s Deliveries at Closing. The Company and the Seller, as
applicable, shall deliver to Purchaser at Closing:

(a) A stock power assigning all of the Stock to Purchaser;

(b) Good standing certificate or the equivalent for the Company, dated no earlier than ten
(10) days before the Closing Date, from the jurisdiction of incorporation;

(c) Duly executed resignations of each member of the board of directors of the Company;

(d) The minute books, equity transfer books or similar books and records and seal, if
available, of the Company (or as soon as possible after Closing);

(e) To the extent necessary and to the extent such authorizations are in the name of an
employee of a Seller, authorized forms to change permitted users and authorized persons for banking
relationships;

(f) A countersigned copy of the Registration Rights Agreement;

(g) Evidence satisfactory to Seller that Purchaser shall have filed and caused to become
effective the Series D Certificate of Designation with the Nevada Secretary of State

(h) The Certificate of Merger; and

(i) All keys to safe deposit boxes of the Company, if any, which are held by Seller and
authorized forms to change the permitted users of the safe deposit boxes.

8.4 Purchaser’s Deliveries at Closing. Purchaser shall deliver to Seller at Closing:

(a) wire transfers of immediately available United States federal funds in the amounts equal
to the Cash Consideration;

(b) the Registration Rights Agreement;

(c) a stock certificate representing the Series D Preferred Stock;

(d) the Note;

(e) the Series D Certificate of Designation; and

(f) the Certificates of Merger.

ARTICLE 9

TERMINATION

9.1 Right to Terminate. Notwithstanding anything to the contrary set forth in this
Agreement, this Agreement may be terminated and the transactions contemplated herein abandoned at
any time prior to the Closing:

	 	(a)	 	by mutual written consent of Purchaser, on the one hand, and
Seller on the other;

	 	(b)	 	by Purchaser, on the one hand, or Seller on the other hand,
if a court of competent jurisdiction shall have issued an order, decree or
ruling permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement, and such order, decree, ruling or
other action shall have become final and nonappealable;

	 	(c)	 	by Seller if Purchaser (x) breaches its representations and
warranties in any material respect or (y) fails to comply in any material
respect with any of its covenants or agreements contained herein; provided
that Seller shall have first provided Purchaser with a 15 day period to cure
such breach after receipt of notice thereof by Seller; or

	 	(d)	 	by Purchaser if Seller and/or the Company (x) breach their
representations and warranties in any material respect or (y) fail to comply
in any material respect with any of its covenants or agreements contained
herein, provided that Purchaser shall have first provided Seller with a 15 day
period to cure such breach after receipt of notice thereof by Purchaser.

	 	(e)	 	in the manner set forth in Section 5.11.

9.2 Effect of Termination. In the event of termination of this Agreement by either
Purchaser or Seller as provided above, the provisions of this Agreement shall immediately become
void and of no further force and effect, other than this Section 9.2 and Sections 5.2
(Confidentiality) and 5.3 (Publicity), the limitations on indemnity set forth in Article 7, 10.2
(Expenses), 10.4 (Controlling Law) and 10.13 (Arbitration/Mediation), which shall each survive the
termination of this Agreement, and there shall be no liability on the part of any of Purchaser or
Seller to one another, except for material breaches of this Agreement prior to the time of such
termination.

ARTICLE 10

MISCELLANEOUS PROVISIONS

10.1 Further Assurances. Each party to this Agreement shall execute, acknowledge and
deliver any further documents and instruments and take any other action consistent with the terms
of this Agreement that may reasonably be requested by the other party for the purpose of giving
effect to the transactions contemplated by this Agreement, whether before, concurrent with or after
the consummation of the transactions contemplated hereby.

10.2 Expenses. Each of the parties shall pay all costs and expenses incurred by it or
on its behalf in connection with this Agreement and the transactions contemplated hereby,
including, without limitation, fees and expenses of its own financial consultants, accountants and
counsel.

10.3 Entire Agreement. This Agreement, together with the agreements referred to
herein and the Schedules hereto and thereto, set forth the entire agreement between the parties
with regard to the subject matter hereof and thereof.

10.4 Governing Law; Jurisdiction. The validity, construction and performance of this
Agreement, and any Action arising out of or relating to this Agreement shall be governed by the
Laws of the State of Delaware, without regard to the Laws of the State of Delaware as to choice or
conflict of Laws.

10.5 Waiver and Amendment. This Agreement may be amended, supplemented, modified
and/or rescinded only through an express written instrument signed by the parties or their
respective successors and permitted assigns. Any party may specifically and expressly waive in
writing any portion of this Agreement or any breach hereof, but only to the extent such provision
is for the benefit of the waiving party, and no such waiver shall constitute a other or continuing
waiver of any preceding or succeeding breach of the same or any other provision. The consent by one
party to any act for which such consent was required shall not be deemed to imply consent or waiver
of the necessity of obtaining such consent for the same or similar acts in the future, and no
forbearance by a party to seek a remedy for noncompliance or breach by another party shall be
construed as a waiver of any right or remedy with respect to such noncompliance or breach.

10.6 Assignment. Except as specifically provided otherwise in this Agreement, neither
this Agreement nor any interest herein shall be assignable (voluntarily, involuntarily, by judicial
process, operation of Law, or otherwise), in whole or in part, by any party without the prior
written consent of the other party. Notwithstanding the foregoing, Seller may, without the consent
of Purchaser, whether before or after the Closing, assign all of its rights and obligations under
this Agreement to any affiliate of Seller, provided that such assignment does not relieve Seller of
any of its obligations under this Agreement, and Purchaser may, without the consent of Seller,
whether before or after the Closing, assign all of its rights and obligations under this Agreement
to any affiliate, provided that such assignment shall not relieve Purchaser of any of its
obligations under this Agreement.

10.7 Successors and Assigns; No Third Party Beneficiary. Each of the terms,
provisions, and obligations of this Agreement shall be binding upon, shall inure to the benefit of,
and shall be enforceable by the parties and their respective legal representatives, successors and
permitted assigns. Nothing in this Agreement will be construed as giving any Person, other than the
parties to this Agreement and their successors and permitted assigns, any right, remedy or claim
under, or in respect of, this Agreement or any provision hereof.

10.8 Notices. All notices, requests, demands and other communications made under this
Agreement shall be in writing, correctly addressed to the recipient as follows:

If to Seller:

Platinum Equity, LLC

360 N. Crescent Dr.

South Building

Beverly Hills, CA 90210

Attention: Eva M. Kalawski, Esq.

Facsimile No.: (310) 712-1863

If to Purchaser:

Halo Technology Holdings

200 Railroad Avenue

Greenwich, CT 06830

Attention: Ernest Mysogland

Facsimile No.: (203) 422-5329

Notices, requests, demands and other communications made under this Agreement shall be deemed
to have been duly given (i) upon delivery, if served personally on the party to whom notice is to
be given, (ii) on the date of receipt, refusal or non-delivery indicated on the receipt if mailed
to the party to whom notice is to be given by first class mail, registered or certified, postage
prepaid, or by air courier, or (iii) upon confirmation of satisfactory transmission of a facsimile
if sent by facsimile. Any party may give written notice of a change of address in accordance with
the provisions of this Section and after such notice of change has been received, any subsequent
notice shall be given to such party in the manner described at such new address.

10.9 Severability. Each provision of this Agreement is intended to be severable.
Should any provision of this Agreement or the application thereof be judicially declared to be or
become illegal, invalid, unenforceable or void, the remainder of this Agreement will continue in
full force and effect and the application of such provision to other Persons or circumstances will
be interpreted so as reasonably to effect the intent of the parties.

10.10 Cumulative Remedies. No remedy made available hereunder by any of the
provisions of this Agreement is intended to be exclusive of any other remedy, and each and every
remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or
hereafter existing at Law or in equity or by statute or otherwise.

10.11 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 a single
agreement.

10.12 Facsimile Signatures. This Agreement and any other document or agreement
executed in connection herewith (other than any document for which an originally executed signature
page is required by law) may be executed by delivery of a facsimile copy of an executed signature
page with the same force and effect as the delivery of an originally executed signature page. In
the event any party delivers a facsimile copy of a signature page to this Agreement or any other
document or agreement executed in connection herewith, such party shall deliver an originally
executed signature page upon request; provided, however, that the failure to deliver any such
originally executed signature page shall not affect the validity of the signature page delivered by
facsimile, which has and shall continue to have the same force and effect as the originally
executed signature page.

10.13 Arbitration/Mediation. Except to the extent a party is entitled to injunctive
or other equitable relief, any controversy or claim arising out of or relating to this Agreement or
any agreement referred to herein or attached hereto, shall first be attempted to be settled by
mediation (by a mutually agreeable mediator located in a mutually agreeable location) and then by
binding arbitration before a single arbitrator in accordance with the then existing rules for
commercial arbitration of the American Arbitration Association, and judgment upon any award
rendered by the arbitrator may be entered in any court having jurisdiction thereof. Such
arbitration shall be held in a mutually agreeable location. The costs of such arbitration (other
than attorneys’ fees and other experts’ fees and related costs) shall be borne equally by the
parties. Each party shall bear its own attorneys’ fees and other experts’ fees and related costs.
The arbitrator shall not have the authority to award punitive damages or to award attorneys’ fees
or costs to any party in any such arbitration proceedings.

10.14 Interpretation. The language in all parts of this Agreement shall be in all
cases construed simply according to its fair meaning and not strictly for or against any party.
The captions of the Sections and Subsections of this Agreement are for convenience only and shall
not affect the construction or interpretation of any of the provisions of this Agreement. Except
as otherwise provided or if the context otherwise requires, whenever used in this Agreement, (a)
any noun or pronoun shall be deemed to include the plural and the singular, (b) the terms “include”
and “including” shall be deemed to be followed by the phrase “without limitation,” (c) the word
“or” shall be inclusive and not exclusive, (d) unless the context otherwise requires, all
references to Articles and Sections refer to Articles and Sections of this Agreement and all
references to Schedules are to Schedules attached to this Agreement, each of which is made a part
of this Agreement for all purposes, (e) the words “herein,” “hereof” and “hereunder” and other
words of similar import refer to this Agreement as a whole and not to any particular Section or
other subdivision, (f) any definition of or reference to any Law, agreement, instrument or other
document herein will be construed as referring to such Law, agreement, instrument or other document
as from time to time amended, supplemented or otherwise modified, and (g) any definition of or
reference to any statute will be construed as referring also to any rules and regulations
promulgated thereunder.

10.15 Warranty of Authority. Each of the entities signing this Agreement warrants and
represents that the individual signing on behalf of such entity is duly authorized and empowered to
enter into this Agreement and bind such entity hereto.

[SIGNATURE PAGE TO MERGER AGREEMENT]

IN WITNESS WHEREOF, each of the parties has executed this Agreement as of the date first set forth
above.

PURCHASER:

WARP TECHNOLOGY HOLDINGS, INC.

By: /s/ Ernest C. Mysogland

Name: Ernest C. Mysogland

An authorized officer

MERGER SUB:

TAC/HALO, INC.

By: /s/ Ernest C. Mysogland

Name: Ernest C. Mysogland

An authorized officer

SELLER:

PLATINUM EQUITY, LLC

By: /s/ Sally A. Ward

Name: Sally A. Ward

An authorized officer

THE COMPANY:

TESSERACT CORPORATION

By: /s/ Sally A. Ward

Name: Sally A. Ward

An authorized officerEX-10.1

COMPLIANCE AND SETTLEMENT AGREEMENT BETWEEN TFM, GRUPO TFM, GRUPO TMM, KCS AND THE FEDERAL

GOVERNMENT

Complex Type of Compliance and Settlement Agreement entered into on one part by TFM, S.A. de C.V.
(hereinafter TFM), represented in this act by Marcoflavio Rigada Soto; Grupo Transportación
Ferroviaria Mexicana, S.A. de C.V. (hereinafter GRUPO TFM), represented in this act by Marcoflavio
Rigada Soto; Grupo TMM, S.A. (hereinafter GRUPO TMM), represented in this act by José Francisco
Serrano Segovia and Javier Segovia Serrano; and Kansas City Southern (hereinafter KCS), represented
in this act by Jay M. Nadlman; and on the other part by the FEDERAL GOVERNMENT of the United
Mexican States, through the conduct of the Secretariat of Communications and Transports (Secretaría
de Comunicaciones y Transportes) (hereinafter SCT), represented in this act by Aarón Dychter
Poltolarek; the Secretariat of Finance and Public Credit (Secretaría de Hacienda y Crédito Público)
(hereinafter SHCP), through the Federal Treasury (Tesorería de la Federación) (hereinafter TESOFE),
represented in this act by Claudia María Bazúa Witte; and the Revenue Administration Service
(Servicio de Administración Tributaria) (hereinafter SAT), represented in this act by José María
Zubiría Maqueo;, and with the appearance of the General Attorney of the Republic (Procuraduría
General de la República) (hereinafter PGR), represented by Germán Castillo Banuet; pursuant to the
following Antecedents, Representations and Clauses:

For the effects of this AGREEMENT, the terms used have the meanings ascribed to them in the First
Clause.

ANTECEDENTS

	 	1.	 	Transactions that caused the VAT refund and obligation of the company. On December 2 and 3,
1996, the FEDERAL GOVERNMENT and the Northeast Railway Company (Ferrrocarril del Noreste, S.A.
de C.V.; (at that time owned by the FEDERAL GOVERNMENT and currently TFM), entered into two
agreements: a purchase and sale agreement of fixed assets and an agreement for the sublease of
locomotives; as well as the granting of a concession. The total amount for the three
transactions was $16,185,190,392.30 pesos (Sixteen billion one hundred and eighty five
million one hundred ninety thousand three hundred and ninety two 30/100 pesos), comprised of
$14,074,078,602.00 pesos (Fourteen billion seventy four million seventy eight thousand six
hundred and two 00/100 pesos), plus $2,111,111,790.30 pesos (Two billion one hundred eleven
million one hundred eleven thousand seven hundred and ninety 30/100 pesos), the final amount
was equivalent to the VAT.

	 	2.	 	Purchase and Sale. On January 31, 1997, the PURCHASE AND SALE AGREEMENT of the shares
representing 80% of the capital stock of the railway company named Ferrocarril del Noreste,
S.A. de C.V., (currently TFM), was executed between the FEDERAL GOVERNMENT, represented by the
TESOFE and Ferrocarriles Nacionales de México, as sellers, with the appearance of the SCT, and
Transportación Ferroviaria Mexicana, S. de R.L. de C.V. (currently GRUPO TFM) as buyer. In
said agreement, GRUPO TFM obligated itself to acquire the 20% of the shares (SECOND PACKET) on
the terms and conditions therein stipulated.

	 	3.	 	Amendment of the PURCHASE AND SALE AGREEMENT. The PURCHASE AND SALE AGREEMENT was amended on
June 9, 1997 through the AMENDMENT AGREEMENT that extended the term for the purchase of the
SECOND PACKET.

	 	4.	 	Refund of the VAT to TFM. TFM requested from TESOFE the payment of the positive balance of
the VAT arising from the operations described in Antecedent 1 of this AGREEMENT. With respect
to the described request it established the implied denial in accordance with the provisions
of article 37 of the Fiscal Code of the Federation. As a result, on October 29, 1997, TFM
initiated before the former Federal Fiscal Court a nullity trial so that it would be granted
the refund of the VAT generated as a result of the transactions described in Antecedent 1.
After several judicial proceedings, on August 13, 2003 the Federal Court of Fiscal and
Administrative Justice issued a judgment through which it ordered the requested VAT refund, as
a result TESOFE on January 19, 2004 issued the tax refund certificate in the amount of
$2,111,111,790.30 pesos (Two billion one hundred eleven million one hundred eleven thousand
seven hundred and ninety 30/100 pesos).

On January 26, 2005, the Federal Court of Fiscal and Administrative Justice issued a judgment
through which –in compliance with the JUDGMENT issued by the Fourth Collegiate Court for
Administrative Matters of the First Circuit of November 23, 2004, which resolved the appeal of
complaint for defect in complying with the judgment mentioned in the preceding paragraph– it
ordered the issuance in favor of TFM of a single certificate, through which it would pay the
requested refund in the amount of $2,111,111,790.30 pesos (Two billion one hundred eleven
million one hundred eleven thousand seven hundred ninety 30/100 pesos), plus the indexation
for inflation and corresponding interest, in the terms that are established in Article 22 of
the Federal Fiscal Code in effect since January 1, 1997, which totals $12,965,742,236.00 pesos
(Twelve billion nine hundred sixty five thousand seven hundred forty two thousand two hundred
and thirty six 00/100 pesos), the same which was challenged through an appeal of complaint
initiated by the SHCP, which was decided in the session of August 24, 2005, and in said
session the complaint was declared to be unfounded.

Due to the foregoing, that judgment remains firm and its contents are definitive and
unassailable.

TESOFE’s compliance with the JUDGMENT is currently pending.

	 	5.	 	Purchase and Sale of 20% of the shares (SECOND PACKET). Pursuant to the terms set forth in
the PURCHASE AND SALE AGREEMENT, the SCT notified GRUPO TFM, on April 25 and on October 31,
2003, of the obligation to purchase from the FEDERAL GOVERNMENT the 20% of the remaining
 shares of TFM.

	 	6.	 	PENDING CONTROVERSIES.

	 	A)	 	Ordinary Commercial Trial 166/2003-V, initiated on October 16, 2003 by GRUPO TFM against
TESOFE, SCT and PGR, is pending before the Twelfth District Court for Civil Matters in the
Federal District, in which the judicial interpretation of certain clauses of the PURCHASE AND
SALE AGREEMENT and the AMENDMENT AGREEMENT relevant to the sale of the SECOND PACKET was
requested. Currently there are no pending procedures; nonetheless, this trial was consolidated
with case number 230/2004.

	 	B)	 	Constitutional Protection Trial number 1628/2003, initiated on November 25, 2003 by GRUPO TFM
against the SCT and PGR with respect to the exercise by the SCT of the put of the SECOND
PACKET. This case was assigned to the Fourth District Judge for Administrative Matters in the
Federal District, who granted the definitive suspension in order to maintain the matters in
their current status.

	 	C)	 	Ordinary Commercial Trial 230/2004, initiated on December 3, 2004 by the FEDERAL GOVERNMENT
against TFM, GRUPO TFM, GRUPO TMM and KCS, in which it demanded compliance with all of the
obligations that derive from the biding process and the PURCHASE AND SALE AGREEMENT, among
which are included the obligation to purchase the SECOND PACKET and to cover the potential
liability in favor of the FEDERAL GOVERNMENT in connection with the transferred VAT;

This matter was consolidated with the Ordinary Commercial Trial described in paragraph A)
above. The procedure is currently suspended by means of the appeal initiated by the PGR
representing the FEDERAL GOVERNMENT against the judgment that ordered the new service of
process on the defendants as a result of the modification of the admission decree.

	 	7.	 	Because of the existence of the PENDING CONTROVERSIES, on June 28, 2005, TFM presented an
offer through which it intends to put an end to the same, which was ratified through a letter
dated September 2, 2005 (Annex 1).

	 	8.	 	On September 8, 2005, the Secretariat of Public Function, through official communication
1102.-5633, issued at the request of the SCT and SHCP a favorable opinion with respect to the
execution of this AGREEMENT. (Annex 2).

	 	9.	 	Appearance of the PARTIES.

	 	I.	 	The FEDERAL GOVERNMENT appears through:

	 	A)	 	The SCT which has an interest that the Federal Government not suffer any patrimonial damage;
that the SAT through official communication 330-SAT-17137 of September 12, 2005, left without
effect its requirement of collection effected through official communication 102-SAT-416, of
November 10, 2004 (Annex 3) and that the Secretariat of the Public Function issued the opinion
referred to in official communication 1102.-5633, of September 8, 2005, which form a part of
this instrument; as well as because: i) it is the Entity authorized by the SHCP (pursuant to
the publication of January 29, 1997 in the Official Gazette of the Federation) to carry out
the sale of the certificates representing the capital stock of Ferrocarril del Noreste, S.A.
de C.V. (currently TFM), obliged by it to provide and to promote the conduct of it to the end
that the authorized sale procedure is carried out in an opportune, effective, and transparent
manner, and in accordance with the applicable legal provisions (Art. 2 of the aforementioned
Resolution); ii) it is the authority that as sector coordinator and exercising the indicated
authorization participated in the fixed asset purchase and sale agreement mentioned in section
I of the section of antecedents of this instrument and it granted the corresponding concession
title, presented the corresponding tax statement in connection with the VAT to be delivered;
iii) that it is the sector coordinator responsible for the process of selling the shares of
Ferrocarril del Noreste, S.A. de C.V. (currently TFM), including the sale of the SECOND
PACKET, that pursuant to the PURCHASE AND SALE AGREEMENT notified to TFM, GRUPO TFM, KCS and
GRUPO TMM the number of shares of the SECOND PACKET and, consequently, pursuant to this
AGREEMENT receives a price identical to the price agreed in the PURCHASE AND SALE AGREEMENT,
which will be covered with the execution of this AGREEMENT, in order to deliver it to TESOFE;
iv) for the matters related to the CLAIMS OF THE FEDERAL GOVERNMENT; v) it is a defendant in
the Ordinary Commercial Trial 166/2003-V; and vi) it is the responsible authority in the
Constitutional Protection Trial number 1628/2003;

	 	B)	 	The SHCP, through the conduct of TESOFE and SAT:

1. TESOFE, in attention to its interest that the FEDERAL GOVERNMENT not suffer any patrimonial
damage; as well as because: i) it is obliged to comply the JUDGMENT, that is to say, to issue
the SPECIAL CERTIFICATE FOR REFUND OF TAXES, and ii) it has physical custody of the shares
corresponding to the SECOND PACKET, which accordingly will be covered by and delivered with
the execution of the present instrument, and consequently, it receives the delivery that is
made to the SCT of the price agreed to in the PURCHASE AND SALE AGREEMENT in which it was a
party along with the Mexican National Railway (Ferrocarriles Nacionales de México), with the
appearance of the SCT;

2. The SAT, in attention to its interest that the FEDERAL GOVERNMENT not suffer any
patrimonial damage and because it is the authority that: i) must instruct TESOFE to comply
with the JUDGMENT; ii) recognize and accept the waiver performed by TFM and GRUPO TFM with
respect to the VAT refund, and iii) recognize the assignment of collection rights regarding
the VAT refund derived from the JUDGMENT on the terms set forth in the Third clause;

	 	II.	 	And for the other part TFM, GRUPO TFM, GRUPO TMM and KCS:

	 	A)	 	TFM since it is: i) the entity in which name the SPECIAL CERTIFICATE FOR REFUND OF TAXES must
be issued; ii) a party in the Ordinary Commercial Trial 230/2004 described in Antecedent 6,
and iii) the purchaser of the SECOND PACKET;

	 	B)	 	GRUPO TFM since it is: i) a party in Ordinary Commercial Trial 166/2003-V; ii) the plaintiff
in Constitutional Protection Trial number 1628/2003; and iii) a party in the Ordinary
Commercial Trial 230/2004, described in Antecedent 6;

	 	C)	 	GRUPO TMM since it is a party in Ordinary Commercial Trial 230/2004 described in Antecedent
6; and

	 	D)	 	KCS since it is a party in Ordinary Commercial Trial 230/2004 described in Antecedent 6.

	 	10.	 	The PGR appears in its capacity as representative of the Federation: i) in Ordinary
Mercantile Trial 166/2003-V; ii) in Constitutional Protection Trial 1628/2003; and iii) in the
Ordinary Mercantile Trial 230/2004, described in Antecedent 6 of this AGREEMENT and,
consequently, it will present this AGREEMENT for ratification before the judicial authority in
the above mentioned Ordinary Mercantile Trial 230/2004 (Annex 5).

In view of the foregoing, the FEDERAL GOVERNMENT, on one side, and TFM, GRUPO TFM, GRUPO TMM and
KCS agree to enter into this Agreement under the following Representations and Clauses:

REPRESENTATIONS

	 	1.	 	TFM states through its representatives that:

	 	A)	 	It is a corporation duly incorporated under Mexican law, registered at the Public Registry of
Commerce of its corporate domicile, by means of public deed number 50,413, dated November 22,
1996, granted before Miguel Alessio Robles, Esq., notary public number 19 of the Federal
District, which is hereby reproduced as if it were inserted herein verbatim for all legal and
consensual effects, with the name Ferrocarril del Noreste, S.A. de C.V., which changed to its
present corporate name TFM, S.A. de C.V., meeting all requirements of the General Law of
Commercial Entities (Ley General de Sociedades Mercantiles) and of applicable Law in general,
being the same corporation for all legal effects.

	 	B)	 	In a session of the Board of Directors: i) the levels of risk of the PENDING CONTROVERSIES
and the potential FUTURE CONTROVERSIES were recognized, and ii) its representatives were
authorized to carry out the acknowledgement, assumption, transmission and waivers that this
AGREEMENT implies and that this instrument formalizes, which is evidenced in the notarization
of the minutes made as per public deed number 23,422, dated as of July 22, 2005, granted
before Héctor Manuel Cárdenas Villarreal, Esq., notary public number 201 of the Federal
District, which is hereby reproduced as if it was inserted verbatim herein for all legal and
consensual effects.

	 	C)	 	Its representatives have the broadest possible faculties for the execution of this act, and
that such faculties have not been revoked, modified or reformed in any manner, which is
evidenced in the public deed identified in the prior section B), which is hereby reproduced as
if it was inserted herein verbatim for all legal and consensual effects.

	 	D)	 	TFM participates in this AGREEMENT, among others, because the PENDING CONTROVERSIES have
involved deterioration of its commercial image and of its relationships with the FEDERAL
GOVERNMENT, as well as of the expenses that those actions generate; situations that have
caused its operations and therefore its competitiveness with the other concessionaires of the
Mexican railroad system to be strongly affected as a public service provider, for which it has
become necessary to end those PENDING CONTROVERSIES.

	 	2.	 	GRUPO TFM states through its representatives that:

	 	A)	 	It is a corporation duly incorporated under Mexican law, recorded at the Public Registry of
Commerce of its corporate domicile, by means of public deed number 32,372, dated July 12,
1996, granted before Miguel Limón Díaz, Esq. notary public number 97 of the Federal District,
which is hereby reproduced as if it were inserted herein verbatim for all legal and consensual
effects, with the corporate name Transportación Ferroviaria Mexicana, S. de R.L. de C.V.,
which changed to its present corporate name Grupo Transportación Ferroviaria Mexicana, S.A. de
C.V., meeting all requirements of the General Law of Commercial Entities and of applicable
Laws in general, being the same corporation for all legal effects.

	 	B)	 	In a session of the Board of Directors: i) the levels of risk of the PENDING CONTROVERSIES
and the potential FUTURE CONTROVERSIES were recognized, for GRUPO TFM itself and for its
subsidiary TFM, and ii) it authorized its representatives to carry out the acknowledgement,
assumption, transmission and waivers that this AGREEMENT implies and that this instrument
formalizes, which is evidenced in the notarization of the minutes made through public deed
number 23,418, dated as of July 21, 2005, granted before Héctor Manuel Cárdenas Villarreal,
Esq., notary public number 201 of the Federal District, which is hereby reproduced as if it
was inserted herein verbatim for all legal and consensual effects.

	 	C)	 	Its representatives have the broadest possible faculties for the execution of this act, and
such faculties have not been revoked, modified or reformed in any manner, which is evidenced
in terms of the public deed referred to in section B) hereof.

	 	D)	 	Its representatives were authorized to present a dismissal from the Constitutional Protection
Trial, the Ordinary Mercantile Trial 166/2003-V and the Ordinary Civil Trial referred in
Antecedent 6, sections B and C, since as a consequence of the execution of this AGREEMENT they
are moot.

	 	3.	 	GRUPO TMM states through its representatives that:

	 	A)	 	It is a corporation duly incorporated under the laws of the United Mexican States, recorded
at the Public Registry of Commerce of its corporate domicile, by means of public deed number
22729, dated September 19, 1958, granted before Miguel Limón Uriarte, Esq., notary public
number 44 of the Federal District, which is hereby reproduced as if it were herein inserted
verbatim for all legal and consensual effects, with the denomination of Transportación
Marítima Mexicana, S.A. de C.V., which changed to its current name, Grupo TMM, S.A., complying
with all requirements of the General Law of Commercial Entities and of applicable Laws in
general, being the same corporation for all legal effects.

	 	B)	 	In a session of the Board of Directors: i) the levels of risk of the PENDING CONTROVERSIES
and the potential FUTURE CONTROVERSIES were recognized, and ii) its representatives were
authorized to carry out the acknowledgement, assumption, transmission and waivers that this
AGREEMENT implies and that this instrument formalizes, which is evidenced in the notarization
of the minutes made as per public deed number 39,847, of September 12, 2005, granted before
Miguel Limón Díaz, Esq., notary public number 97 of the Federal District, which is hereby
reproduced as if it was inserted herein verbatim for all legal and consensual effects.

	 	C)	 	Its representatives have the broadest faculties for the execution of this act, and such
faculties have not been revoked, modified or reformed in any manner, which is evidenced in
terms of the public deed referred to in section B) hereof, and which is hereby reproduced as
if it were inserted herein verbatim for all applicable legal and consensual effects.

4. KCS states through its representatives that:

	 	A)	 	It is a corporation duly incorporated under the laws of the State of Delaware, United States
of America.

	 	B)	 	That in the session of its Executive Committee: i) the levels of risk of the PENDING
CONTROVERSIES and the potential FUTURE CONTROVERSIES were recognized, and ii) its
representatives were authorized to carry out the acknowledgements, assumptions, transmissions
and waivers that this AGREEMENT implies and that this instrument formalizes, which is
evidenced in the minutes of September 12, 2005 (translated to Spanish), which is hereby
reproduced as if it was inserted herein verbatim for all legal and consensual effects.

	 	C)	 	That its representatives have the most ample faculties for the execution of this act, which
faculties have not been revoked, modified or reformed in any way, which is evidenced in terms
of the notarization before the public notary of the United States of America, Deborah A. Snoke
of Clay County, State of Missouri, which commission expires May 21, 2007, notarized September
12, 2005, certified September 12, 2005 by Robin Carnahan, Secretary of State of the State of
Missouri, through apostille number 136214, notarized by Guillermo Oliver Bucio, Esq., notary
public number 246 of the Federal District, which is hereby reproduced as if it was inserted
herein verbatim for all legal and consensual effects.

	 	5.	 	TFM, GRUPO TFM, GRUPO TMM and KCS declare that they execute this AGREEMENT because of the
benefits that it implies for them, which are, along with those set forth in Representation 9,
sections H) and I), the following:

	 	A)	 	That the requested VAT refund will be resolved.

	 	B)	 	That through the assignment by TFM of the right to collect the VAT refund, equivalent to the
amount of $5,623,927,338.00 pesos (Five billion six hundred twenty three million nine hundred
twenty seven thousand three hundred and thirty eight 00/100 pesos), they will transfer to TFM
ownership of the shares of the SECOND PACKET.

	 	6.	 	The FEDERAL GOVERNMENT, through the SCT and SHCP, the latter through the conduct of SAT and
TESOFE, state that:

	 	A)	 	They have the faculties necessary for the execution and performance of this AGREEMENT.

	 	B)	 	Within their authorities and in accordance to that set forth in Antecedent 9, subpart I, they
will carry out, respectively, the acknowledgement, transmission and waivers derived from this
AGREEMENT.

	 	C)	 	They recognize and accept that the JUDGMENT regarding the VAT refund to TFM is final and
unassailable and that as of this date it obligates the FEDERAL GOVERNMENT to issue a SPECIAL
CERTIFICATE FOR REFUND OF TAXES in an amount of $12,965,742,236.00 pesos (Twelve billion nine
hundred sixty five million seven hundred forty two thousand two hundred and thirty six 00/100
pesos).

	 	D)	 	They recognize the levels of risk concerning the PENDING CONTROVERSIES as well as the
potential FUTURE CONTROVERSIES and their probable economic effects.

	 	E)	 	They recognize and accept each and every one of its terms, conditions and scope as described
in the Antecedents of this AGREEMENT regarding the sale of the SECOND PACKET, the CLAIMS of
the FEDERAL GOVERNMENT, the possible defenses of GRUPO TFM against the FEDERAL GOVERNMENT and,
in general, the representations of this AGREEMENT.

	 	F)	 	That they enter into this AGREEMENT because of the benefits for the FEDERAL GOVERNMENT that
it implies, such as, along with those set forth in Representation 9, sections H) and I), to
comply with the JUDGMENT in the terms set forth in the Third clause, section (i).

	 	7.	 	The SCT states that:

	 	A)	 	It is a Secretariat of the Centralized Federal Public Administration, in accordance with
articles 26 and 36 of the Organic Law of Federal Public Administration, pursuant to articles
1, second paragraph, and 2 of the same statute.

	 	B)	 	It appears and participates with the capacity set forth in Antecedent 9, subpart I, part A),
through the conduct of the Undersecretary of Transportation and that it has faculties to
execute this AGREEMENT according to articles 36, subsections I, VIII and XXVII, and 48 and 49
of the Organic Law of Federal Public Administration; 32 of the Federal Law of State Entities,
twelfth of the Accord by which the Inter-Secretarial Commission of Dis-incorporation was
created, and 6, subpart IX, of the Internal Regulation of the Secretariat of Communications
and Transports.

	 	C)	 	The requirement of November 10, 2004 formulated by SAT has been rendered ineffective,
pursuant to official communication 330-SSAT-17137 of September 12, 2005, notified by such
authority on the same date.

	 	8.	 	The SHCP, through TESOFE and the SAT, respectively, state that:

	 	A)	 	The SHCP is a Secretariat of the Centralized Federal Public Administration, in accordance
with articles 26 and 31 of the Organic Law of the Federal Public Administration, pursuant to
articles 1, second paragraph, and 2 of the same statute.

	 	B)	 	The TESOFE states that it is an administrative unit of the SHCP and it has the authority to
enter into this AGREEMENT, in conformity with what is set forth in articles 76 and 77 of the
Federal Treasury Service Law and 11, subsections XXVI and XLIII, of the Internal Regulation of
the SHCP, acting with the capacity set forth in Antecedent 9, subpart I, part B), clause 1).

	 	C)	 	The SAT states that it is a decentralized branch of the SHCP in accordance with what is
provided for in Article 1 of the Revenue Service Administration Law, and it has faculties to
execute this AGREEMENT in accordance with articles 7, subpart XVIII, of said law and 3,
subparts VIII and XV, of the Internal Regulation of the Revenue Administration Service, acting
with the capacity stated in Antecedent 9, subpart I, part B), clause 2).

	 	9.	 	The PARTIES jointly state:

	 	A)	 	That they recognize and accept in each and every one of its terms, conditions and scope as
described in the Antecedents regarding: i) the purchase and sale of the SECOND PACKET; (ii)
the CLAIMS OF THE FEDERAL GOVERNMENT; iii) the PENDING CONTROVERSIES and the potential FUTURE
CONTROVERSIES, and iv) in general, the Representations of this AGREEMENT.

	 	B)	 	That they expressly recognize the capacity with which the other PARTIES appear, as well as
that of their legal representatives for all applicable legal effects.

	 	C)	 	That the execution of this AGREEMENT implies its express consent with the performance of the
acts that are stipulated herein, as a result of which they will be obligated, which it is
their intention to do, in accordance with what is provided for in article 78 of the Commercial
Code and, if applicable, article 1832 of the Federal Civil Code.

	 	D)	 	That all the PENDING CONTROVERSIES, which are being litigated, originate from:

	 	a)	 	The transactions related with the privatization of the company Ferrocarril del
Noreste, S.A. de C.V., currently TFM (Antecedents 1 and 5).

	 	b)	 	The PURCHASE AND SALE AGREEMENT and its AMENDMENT AGREEMENT (Antecedents 2 and
3).

	 	c)	 	Compliance with the JUDGMENT.

That the controversies arose due to the difference of criteria, opinions and claims of each of
the PARTIES, and that due to their inability to resolve them in amicable accord due to the
different points of view and interpretations of each of the PARTIES, they responded in defense
of their interests to exercise different actions which have resulted in repercussions in
different areas, and there exists the possibility of exercising others.

That the actions and objectives of the PARTIES came into conflict by reason of the belief,
each one of the others, of the default of the other, the lack of right, the enforceability of
a right, the enforceability of an obligation, the non-performance or the origin of an
obligation.

	 	E)	 	That they have complete knowledge of the effects of this AGREEMENT, in the sense that by
virtue of the same compliance is given to the JUDGMENT and all PENDING CONTROVERSIES are
resolved in a definitive, total and absolute manner, as well as the potential FUTURE
CONTROVERSIES, as this AGREEMENT has the same effects in terms of articles 2953 of the Federal
Civil Code and articles 354, 355, 357, final paragraph, 373, section I and 405, second
paragraph of the Federal Code of Civil Proceedings, as a final and definitive judgment, being
those effects that are set forth in clauses Third and Fourth of this instrument.

	 	F)	 	That they agree and expressly obligate themselves to carry out the procedural requirements
(Annex 4) that permit them to jointly present and ratify the contents and signatures of this
AGREEMENT before any jurisdictional and administrative authorities as is necessary, including,
but not limited to, before tribunals, courts, appellate courts, judges, and magistrates in
order for this instrument to be elevated to a definitive judgment and with the enforceability
of a final judgment and having effects in any proceeding related to its purpose, obligating
the PARTIES to treat it on the same the terms and conditions agreed to herein (Annex 5).

	 	G)	 	That they accept that in case that any of the PARTIES executes any action, notwithstanding
the nature of such action, that is, to claim or require by judicial or extrajudicial action or
by any other means the reimbursement, payment or delivery of any loan or amount related to the
concepts that are the subject matter of this AGREEMENT, criminal liability will be incurred
since it is a final judgment.

	 	H)	 	That they expressly recognize that they constitute fundamental aspects of the spirit for the
execution of this AGREEMENT that:

	 	i)	 	In compliance of the JUDGMENT, the FEDERAL GOVERNMENT is obliged to issue a
SPECIAL CERTIFICATE FOR REFUND OF TAXES in an amount of $12,965,742,236.00 (Twelve
billion nine hundred sixty five thousand seven hundred forty two thousand two hundred
and thirty six 00/100 pesos);

	 	ii)	 	The PENDING CONTROVERSIES that are aired in courts, tribunals and before
administrative authorities are in litigation and their procedural phase is far from
obtaining a judgment that resolves them definitively and without the possibility of any
additional appeal; and

	 	iii)	 	They would also resolve those FUTURE CONTROVERSIES that could arise pursuant to
the defense of the interests of each one of the PARTIES related directly or indirectly
to the PENDING CONTROVERSIES.

	 	I)	 	That by virtue of the performance of several waivers, dismissals, acknowledgements,
transmissions and acceptances that this settlement implies, they will derive the following
benefits:

	 	(i)	 	The certainty that compliance is given to the JUDGMENT, since TFM will assign
to the FEDERAL GOVERNMENT the collection rights in an amount corresponding to the VAT
refund to: a) pay the SECOND PACKET, b) pay in an anticipated manner on behalf of TFM
the income tax corresponding to the default interest effectively collected, and c)
waive the rights to the remainder described in section (iii) below.

	 	(ii)	 	The certainty that the FEDERAL GOVERNMENT sells and transmits the property of
the shares of the SECOND PACKET on the best conditions for the State, since they will
be covered through this AGREEMENT at the value set forth in clause twenty-sixth of the
PURCHASE AND SALE AGREEMENT and not at the inferior value determined in the valuation
that is part of the proposal referred in Antecedent 7 and TFM receives them in the
terms of clause Third, sections iii) to v) of this AGREEMENT, stating that it assumes
the risks it may suffer with future fluctuations in the value of such shares and it
knows the current market value, and that it agrees with this representation and with
the clauses of this AGREEMENT due to the benefits that this settlement with its
counterparty implies.

	 	(iii)	 	The certainty that TFM waives for the benefit of the FEDERAL GOVERNMENT a part
of the VAT refund, which implies for the FEDERAL GOVERNMENT a direct benefit in not
disbursing the amount of $6,789,941,894.00 (Six billion seven hundred eighty nine
million nine hundred forty one thousand eight hundred ninety four 00/100 pesos), in
terms of the Third clause, paragraphs i) and ii).

	 	(iv)	 	The certainty that, with the effect of a final judgment, all of the PENDING
CONTROVERSIES are resolved and all of the FUTURE CONTROVERSIES are prevented, in terms
of the Third clause, sections (vi), (vii) and (x).

	 	10.	 	The PGR states that:

	 	A)	 	It is an institution of the Federal Executive Power, empowered to intervene in all the
matters in which the Federation is a party, pursuant to Article 102, Section “A”, of the
Political Constitution of the United Mexican States.

	 	B)	 	It has the faculties to appear in this AGREEMENT pursuant to Articles 4, subpart II,
paragraph b) and 7 of the Organic Law of the Office of the Attorney General of the Republic
and 12, subpart IX , and 32, subpart I of the Regulation of its Organic Law.

	 	C)	 	At the request of the FEDERAL GOVERNMENT it intervenes in the trials set forth in Antecedent
6 of this AGREEMENT, and that it is aware that the agreement between the PARTIES has an impact
in the aforementioned litigation.

	 	D)	 	It will file before the Twelfth District Judge for Civil Matters in the Federal District this
AGREEMENT, in order to be approved by the judge, in order for it to have the effects of a
final judgment, and therefore it adheres to the statements of representation 9 section F), in
the scope of its competence.

On the basis and foundation previously expressed the PARTIES submit and subject themselves to
the following:

CLAUSES

FIRST.- DEFINITIONS.

The PARTIES expressly agree for all applicable legal and consensual effects and for the
interpretation, performance and due fulfillment of this AGREEMENT, to set forth the following
conventional definitions:

SPECIAL CERTIFICATE FOR REFUND OF TAXES.- The document that the TESOFE is obliged to issue
for purposes of granting the VAT refund, in compliance with the JUDGMENT.

AGREEMENT.- This instrument executed on one part by TFM, GRUPO TFM, GRUPO TMM and KCS and
on the other by the FEDERAL GOVERNMENT, through the SCT, and the SHCP through the TESOFE and the
SAT, and with the appearance of the PGR.

PURCHASE AND SALE AGREEMENT.- The agreement executed on January 31, 1997, by the FEDERAL
GOVERNMENT, through the TESOFE and the Mexican National Railway (Ferrocarriles Nacionales de
México), with the appearance of the SCT, and by Transportación Ferroviaria Mexicana, S. de R.L. de
C.V., which is referred to in Antecedent 2.

PENDING CONTROVERSIES.- All those judicial and administrative proceedings pending
definitive resolution that are described in the Antecedents of this AGREEMENT; as well as all the
trials, proceedings, actions, claims, defenses and exceptions, judicial and administrative, that
have been initiated and are currently being litigated and that have made up the dispute between the
PARTIES with respect to the matters described in Antecedent 6 of this AGREEMENT.

FUTURE CONTROVERSIES.- All of those potential or future judicial and administrative
proceedings in respect to any matter related to the purchase and sale of the shares of the SECOND
PACKET, the CLAIMS OF THE FEDERAL GOVERNMENT, and the VAT refund.

AMENDMENT AGREEMENT.- The amendment agreement executed on June 9, 1997 between TESOFE and
GRUPO TFM, GRUPO TMM and KCS, with the appearance of the SCT, in respect to the PURCHASE AND SALE
AGREEMENT, to set forth the extension of the agreed term for the sale of the SECOND PACKET. This
amendment agreement is referred in Antecedent 3 of this AGREEMENT.

JUDGMENT.- The final and definitive resolution issued by the Full Panel of the Superior
Chamber of the Federal Court of Fiscal and Administrative Justice in the fiscal trial
18003/97-11-10-1/99-PL-03-04, in compliance with the resolution issued in Complaint Appeal Q.A.
99/2004 by the Fourth Collegiate Court in Administrative Matters for the First Circuit that is
referred to in Antecedent 4, as well as with respect to the resolution issued in the session of
August 24, 2005, by the Fourth Collegiate Court in Administrative Matters for the First Circuit,
notified on September 1, 2005, whereby it resolves Complaint appeal Q.A. 78/2005 presented by the
SHCP. By virtue of the stated judgments the issuance of a certificate in favor of TFM was ordered,
by means of which the requested refund in an amount of $2,111,111,790.30 (Two thousand one hundred
eleven million one hundred eleven thousand seven hundred and ninety pesos and thirty centavos) is
paid, plus the indexation for inflation and the corresponding interest, which totals
$12,965,742,236.00 (Twelve billion nine hundred sixty five thousand seven hundred forty two
thousand two hundred and thirty six 00/100 pesos).

FEDERAL GOVERNMENT.- The government exercised through the Executive branch set forth in
articles 39, 40, 41 and 49 of the Political Constitution of the United Mexican States.

GRUPO TFM.- The commercial company currently named Grupo Transportación Ferroviaria
Mexicana, S.A. de C.V., and previously named Transportación Ferroviaria Mexicana, S. de R.L. de
C.V.

GRUPO TMM.- The commercial company named GRUPO TMM, S.A., formerly named Transportación
Marítima Mexicana, S.A. de C.V.

VAT.- Value Added Tax.

KCS.- The commercial company incorporated under the laws of the State of Delaware, United
States of America, named Kansas City Southern, formerly named Kansas City Southern Industries, Inc.

THE PARTY.- Singularly and individually TFM, GRUPO TFM, GRUPO TMM, KCS or the FEDERAL
GOVERNMENT, by the conduct of the SCT and the SHCP, through the TESOFE and the SAT, as applicable.

PARTIES.- Collectively, TFM, GRUPO TFM, GRUPO TMM, KCS and the FEDERAL GOVERNMENT, by the
conduct of the SCT and the SHCP, through the TESOFE and the SAT, as applicable.

PGR.- The Office of the Attorney General of the Republic.

CLAIMS OF THE FEDERAL GOVERNMENT.- The obligations on behalf of TFM that were claimed in
the ordinary mercantile trial 230/2004, referred in Antecedent 6, section C.

SAT.- The Revenue Administration Service.

SCT.- The Secretariat of Communications and Transports.

SECOND PACKET.- The 20% (twenty percent) remaining of the shares that the FEDERAL
GOVERNMENT maintains for their sale on the terms provide for in the PURCHASE AND SALE AGREEMENT and
its AMENDMENT AGREEMENT, in respect to its participation as shareholder of TFM’s capital stock and
that is sold pursuant to this AGREEMENT.

SHCP.- The Secretariat of Finance and Public Credit.

TESOFE.- The Federal Treasury.

TFM.- The commercial company currently named TFM, S.A. de C.V., and previously named
Ferrocarril del Noreste, S.A. de C.V.

COMPLEX TYPE SETTLEMENT.- The reciprocal concessions and transmissions of property which
are granted by the PARTIES of this AGREEMENT, entered into on one part by TFM, GRUPO TFM, GRUPO TMM
and KCS on the other by the FEDERAL GOVERNMENT, by the conduct of the SCT and the SHCP, through
TESOFE and the SAT, with the appearance of the PGR.

SECOND.- PURPOSE OF THE AGREEMENT.

The PARTIES accept and agree expressly that the purpose of this AGREEMENT is:

	 	(i)	 	To give compliance to the JUDGMENT, and

	 	(ii)	 	To grant reciprocal concessions to end the PENDING CONTROVERSIES and prevent
the FUTURE CONTROVERSIES (in accordance with article 2944 of the Federal Civil Code).

THIRD.- OBLIGATIONS OF THE AGREEMENT.

The PARTIES recognize and expressly agree that the purpose and overriding ends of the AGREEMENT are
to comply with the JUDGMENT and substitute the current undefined legal relations derived from the
trials, proceedings, interpretations, claims and actions between both PARTIES, for a legal
relationship irrevocably defined.

Through the execution of this AGREEMENT, the concrete legal consequences of complying with the
JUDGMENT will occur, as well as having the indisputable and incontrovertible right that has been
recognized and the waiver that has been made, pursuant to article 2953 of the Federal Civil Code
and to comply, if applicable, with the transfers derived from the relevant recognitions or waivers,
which are:

	 	(i)	 	To give compliance to the JUDGMENT, and as a substitution of issuing the
SPECIAL CERTIFICATE FOR REFUND OF TAXES, the PARTIES agree to the following:

	 	a.	 	That TFM in this act partially waives the collection of such
refund with respect to default interest in an amount of $6,789,941,894.00 (Six
billion seven hundred eighty nine million nine hundred forty one thousand eight
hundred ninety four 00/100 pesos).

	 	b.	 	That the FEDERAL GOVERNMENT recognizes and accepts TFM’s waiver
concerning the VAT refund, in an amount of $6,789,941,894.00 (Six billion seven
hundred eighty nine million nine hundred forty one thousand eight hundred
ninety four 00/100 pesos).

	 	c.	 	That TFM acknowledges the receipt and assigns to the benefit of
the FEDERAL GOVERNMENT the collection rights concerning the VAT refund in an
amount of $5,623,927,338.00 (Five billion six hundred twenty three million nine
hundred twenty seven thousand three hundred and thirty eight 00/100 pesos),
which will be destined to the payment of the SECOND PACKET.

	 	d.	 	That TFM deems as received and assigns to the benefit of the
FEDERAL GOVERNMENT the collection rights over the VAT refund, in respect to the
amount of $551,873,004.00 (Five hundred fifty one million eight hundred seventy
three thousand and four 00/100 pesos), which will be destined to the payment of
the definitive income tax caused by the default interest that will be applied
by TFM to the concept referred to in the preceding paragraph; TFM may not
subsequently request compensation or refund of this tax paid in a definitive
manner.

	 	(ii)	 	That the FEDERAL GOVERNMENT recognizes and accepts the amount of
$5,623,927,338.00 pesos (Five billion six hundred twenty three million nine hundred
twenty seven thousand three hundred and thirty eight 00/100 pesos), as payment for the
SECOND PACKET, through the assignment of TFM’s collection right concerning the VAT
refund.

	 	(iii)	 	That the FEDERAL GOVERNMENT transfers as property to TFM the shares of the
SECOND PACKET, and hereby delivers to TFM the corresponding provisional share
certificates 1 and 2 that represent 510 class III shares of Series “A”, Sub-series
“A-1”, provisional share certificates 1 and 2 that represent 141,166,215 class III
 shares of Series “A”, Sub-series “A-2”, provisional share certificates 1 and 2, that
represent 490 class III shares of Series “B”, Sub-series “B-1”, and provisional share
certificates 1 and 2 that represent 135,630,286 class III shares of Series “B”,
Sub-series “B-2”, all shares of the SECOND PACKET duly endorsed in property.

	 	(iv)	 	That TFM receives in property provisional share certificates 1 and 2 that
represent 510 class III shares of Series “A”, Sub-series “A-1”, provisional share
certificates 1 and 2 that represent 141,166,215 class III shares of Series “A”,
Sub-series “A-2”, provisional share certificates 1 and 2, that represent 490 class III
 shares of Series “B”, Sub-series “B-1”, and provisional share certificates 1 and 2 that
represent 135,630,286 class III shares of Series “B”, Sub-series “B-2”, all shares of
the SECOND PACKET duly endorsed in property.

	 	(v)	 	The PARTIES themselves grant and reciprocally recognize the settlement
exception (“exceptio litis per transacionem finitae”), in the terms set forth in
Article 2953 of the Federal Civil Code, in the sense that pursuant to this AGREEMENT
the PENDING CONTROVERSIES and the potential FUTURE CONTROVERSIES shall be deemed to be
resolved as final judgment in the event that any of the PARTIES again raises the same
controversy, therefore the decision of the PARTIES remains final.

	 	(vi)	 	The PARTIES set forth and admit, for all legal and consensual effects, that
this settlement is of complex type and therefore the effects and consequences of the
AGREEMENT are not merely declarative, but they also imply transfers.

The PARTIES recognize and accept that pursuant to the provisions of this AGREEMENT
the JUDGMENT is fully complied with and special certificate No. A.-089622, issued by
the TESOFE on January 19, 2004, shall cease to have effects, without reserving any
right to exercise it.

	 	(vii)	 	The PARTIES recognize and accept that the existing controversies are those
described in the chapter of Antecedents.

	 	(viii)	 	The PARTIES and the PGR undertake to file this AGREEMENT before the Twelfth District
Court for Civil Matters in the Federal District in the Ordinary Commercial Trial
referred in Antecedent 6, section C.

	 	(ix)	 	The PARTIES agree that, in connection with:

	 	1.	 	The Ordinary Commercial Trial referred in Antecedent 6, part
A), TFM must file its dismissal (Annex 6).

	 	2.	 	The Constitutional Protection Trial referred in Antecedent 6,
part B), TFM must file its dismissal (Annex 7).

	 	3.	 	The Ordinary Commercial Trial referred in Antecedent 6, part
C), the PARTIES and the PGR shall present this AGREEMENT and perform the
necessary actions in order for the judge to elevate it to the level of a final
judgment.

TFM is obligated to present before the competent jurisdictional bodies, the dismissals
of each one of the controversies, within three business days following the execution
of this AGREEMENT. PGR is obligated to present this AGREEMENT before the judicial
authority within the three business days following the execution of this AGREEMENT, as
well as to conclude the appeal against the judicial resolution of May 23, 2005, and
the Constitutional Protection Trial for the denial of a preliminary injunction. TFM
and the PGR shall perform the foregoing, pursuant to the forms attached hereto as
Annexes 5, 6, 7 and 8.

TFM and the PGR shall reciprocally deliver within the three business days after they
are obtained, on behalf of the corresponding judicial authorities, a certified copy of
each one of the requests made as well as the applicable resolutions issued with
respect thereto.

	 	(x)	 	The PARTIES accept and recognize that there are no other actions, claims,
controversies, trials or administrative acts, other than those mentioned in respect to
the purpose of this AGREEMENT, and that in case that due to an error or omission, a
controversy has not been included and exists with respect to the compliance of the
JUDGMENT; the sale of the SECOND PACKET and the CLAIMS OF THE FEDERAL GOVERNMENT, and,
in general, of the matters related with the PARTIES derived from the process of
privatization of Ferrocarril del Noreste, S.A. de C.V.; it shall be resolved in terms
of this instrument pursuant to the provisions of this AGREEMENT.

	 	(xii)	 	The PARTIES accept and assume that the content that originated the purpose of
this AGREEMENT consists in the fundamental obligation to recognize the right to comply
with the waiver that has been made pursuant to the Settlement, which causes three
concrete legal consequences:

	 	a.	 	Each of the PARTIES has as undisputable and incontrovertible the right
that has been recognized or the waiver that has been made pursuant to article 2953
of the Federal Civil Code and to comply, if applicable, with the transfers derived
from the acknowledgement or the waiver established in this AGREEMENT.

	 	b.	 	Each of the PARTIES has as undisputable and incontrovertible the right
or thing that has been transferred, pursuant to article 2953 of the Federal Civil
Code and to comply, if applicable, with the transfers derived from the transmission
set forth in this AGREEMENT.

	 	c.	 	Each of the PARTIES to reciprocally grant, in the event that any of the
PARTIES initiates the same controversy again, the settlement exception (“exceptio
litis per transacionem finitae”) equivalent to a final judgment.

The PARTIES agree that this AGREEMENT gives compliance to the JUDGMENT and that due to its
category it is directed to the definition of the legal controversies between the PARTIES,
which immediately ends the disputes described in this AGREEMENT.

The PARTIES approve and admit that the rights involved in the controversies or legal
relations that are resolved through this AGREEMENT are rights that are within commerce, and
that they are susceptible of being transferred, discounted or waived as is provided for in
articles 2955 in its final part and 6 of the Federal Civil Code.

FOURTH.- UNITY OF THE AGREEMENT.

The PARTIES recognize and accept that this AGREEMENT is the only one that exists among them with
respect to the purpose set forth in clause Second above and therefore this AGREEMENT substitutes
any agreement, contract, relation or legal negotiation existing among them, and therefore they
agree that this AGREEMENT shall govern the legal relations and shall end any difference or
controversy, whether by interpretation, default, lack of action or of right or due to any other
reason, preventing and ending any future contingencies and trials.

FIFTH.- RATIFICATION AND FINAL JUDGMENT.

The PARTIES agree and expressly undertake to ratify the content and signatures of this AGREEMENT
before the jurisdictional and administrative authorities that may be necessary, including, without
limitation, courts, appellate courts, judges, and magistrates, with the purpose of elevating this
instrument to a definitive judgment and with the status of a final judgment, and the PARTIES agree
to perform such process on the agreed terms and conditions.

The PARTIES set forth that the effects of the Settlement, ratified before a judicial authority and
once the jurisdictional entity gives it the status of a final judgment, implies that:

	 	a.	 	It has executive force and the executive procedure may be followed to enforce
the settlement in accordance with articles 354, 355, 356 section III and 357 of the
Federal Code of Civil Procedures.

	 	b.	 	This AGREEMENT will be interpreted with its legal effects, in the same manner
as if it were a definite judgment elevated to the category of a final judgment in
accordance with the provisions of article 2953 of the Federal Civil Code.

SIXTH.- ADDITIONAL RESPONSIBILITY 

The PARTIES agree and accept from this moment, that the PARTY initiating any action of any kind
(whether demanding or requiring judicially or extra-judicially or through any other way) with the
purpose of requesting the refund, payment or delivery of any transfer or amount regarding the
reciprocal transfers and concessions that are referred in clause Second of this AGREEMENT, will
incur in a responsibility, since it is equivalent to a final judgment (“exceptio litis per
transacionem finitae”), pursuant to the provisions of article 2953 of the Federal Civil Code, and
therefore the waivers, acceptances and settlements set forth in clause Second of this instrument
have full force, scope and validity, and therefore the defendant or affected party shall enforce
the exception of settlement before the jurisdictional authority that is resolving the matter
through the presentation of this AGREEMENT.

SEVENTH.- DOMICILES.

All the communications, notices and notifications that the PARTIES and the PGR the must be made
pursuant to this AGREEMENT or derived from the same, shall be made in writing, at the domiciles
indicated below, and the party making them shall obtain evidence that the communication was
delivered to its recipient at the respective domicile.

The PARTIES and the PGR expressly agree that for any communications, notices, judicial or
extrajudicial notifications related to this AGREEMENT, which derives from or is related hereto, for
all applicable legal and consensual effects they set forth as their domiciles the following:

• TFM

Periférico Sur Ave., 4829, 4th Floor

Col. Parques del Pedregal

14010 Mexico, Federal District

Mexico

• GRUPO TFM

Periférico Sur Ave. 4829, 4th Floor

Col. Parques del Pedregal

14010 Mexico, Federal District

Mexico

• GRUPO TMM

De la Cúspide Ave. 4755,

Col. Parques del Pedregal

C.P. 14010 Mexico, Federal District

• KCS

Av. Periférico Sur 4829, 4th Floor

Col. Parques del Pedregal

14010 Mexico, Federal District

Attention: Senior Vice President & General Counsel

• SCT

SCT National Center, Xola and Universidad Avenues

Section “C”, 1st Floor, Col. Narvarte

C.P. 03020, México, D.F.

-TESOFE

Constituyentes Ave. 1001, Tower A, 4th Floor

Col. Belén de las Flores, Deleg. Álvaro Obregón

C.P. 01110, Mexico Federal District

-SAT

Hidalgo Ave. #77, Mod. I, P.B.

Col. Guerrero

C.P. 06300, Mexico, Federal District

-PGR

Calle Soto No. 62

Col. Guerrero, Deleg. Cuahutémoc

C.P. 06300, Mexico, Federal District

EIGHT.- INTERPRETATION. 

The PARTIES accept, recognize and manifest their will that for the purposes of interpretation,
judgment or execution of this AGREEMENT the Antecedents, Annexes, Representations and Clauses shall
have the same force, scope and validity.

NINTH.- COSTS AND EXPENSES. 

Each of the PARTIES shall be responsible for the costs and expenses that have been caused or are
caused from the controversies, trials and existing procedures, and therefore each one shall bear,
including but not limited to, the fees of lawyers or experts, the payment of contributions or
expenses of any kind that have been generated or will be generated for such controversies, as well
as for the execution of this Settlement.

TENTH.- JURISDICTION AND COMPETENCE.

The PARTIES agree expressly that for the interpretation, judgment or execution, if applicable, of
the content and scope of the Antecedents, Representations and Clauses of this AGREEMENT, they
submit from this moment to the jurisdiction of the competent federal courts for mercantile matters
of Mexico City, waiving hereafter any other jurisdiction that may correspond to them due to their
present or future domiciles.

Once this document was read by the PARTIES and knowing the scope and legal force of this AGREEMENT
they sign it in ten counterparts as an express manifestation of their will and perfecting the act
with their consent, after being advised by their respective legal experts.

Mexico, Federal District as of September 12, 2005.

THE PARTIES

For TFM, S.A. de C.V.

C. Marcoflavio Rigada Soto

For Grupo Transportación Ferroviaria Mexicana, S.A. de C.V.

C. Marcoflavio Rigada Soto

For GRUPO TMM, S.A.

C. José Francisco Serrano Segovia

C. Javier Segovia Serrano

For Kansas City Southern

C. Jay M. Nadlman

FEDERAL GOVERNMENT

Federal Treasury

C. Claudia María Bazúa Witte

Secretariat of Communications and Transports

C. Aarón Dychter Poltolarek

Revenue Administration Service

José María Zubiría Maqueo

Office of the Attorney General of the Republic

C. Germán Castillo Banuet

1

EXHIBITS TO THE COMPLIANCE AND SETTLEMENT AGREEMENT ENTERED INTO BY AND BETWEEN TFM, GRUPO TFM,
GRUPO TMM, KCS AND THE FEDERAL GOVERNMENT

	 	 	 
	Annex 1.-

Annex 2.-

Annex 3.-

Annex 4.-

Annex 5.-

Annex 6.-

Annex 7.-

Annex 8.-

Annex 9.-

	 	Communication dated June 28, 2005, ratified through a

communication dated September 2nd, 2005,

through which TFM, GRUPO TFM, GRUPO TMM and KCS presented

a proposal to the FEDERAL GOVERNMENT in terms of which

they intend to end the present controversies and potential

future ones.

Official communication number 1102.-5633 dated September

8, 2005, issued by the Secretariat of the Public Function.

Official communication number 330-SAT-17137 dated

September 12, 2005 and official communication number

102-SAT-416, dated November 10, 2004.

Writ through which TFM, GRUPO TFM, GRUPO TMM and KCS, will

appear before the TWELFTH DISTRICT JUDGE FOR CIVIL MATTERS

IN THE FEDERAL DISTRICT, to acknowledge the service of

process in respect to the judicial resolution of May 23,

2005, and they are legally summoned to trial.

Writ through which the PGR, along with TFM, GRUPO TFM,

GRUPO TMM and KCS will present the Compliance and

Settlement Agreement before the TWELFTH DISTRICT JUDGE FOR

CIVIL MATTERS IN THE FEDERAL DISTRICT.

Writ through which TFM will present before the TWELFTH

DISTRICT JUDGE FOR CIVIL MATTERS IN THE FEDERAL DISTRICT

its dismissal of the legal action pursued in Ordinary

Commercial Trial number 166/2003.

Writ through which the PGR will present before the SECOND

UNITARY CIRCUIT COURT FOR CIVIL AND ADMINISTRATIVE MATTERS

OF THE FIRST CIRCUIT, the dismissal of the appeal related

to the Ordinary Commercial Trial number 230/2004, assigned

to the Twelfth District Judge for Civil Matters in the

Federal District.

Writ through which the PGR, along with TFM, GRUPO TFM,

GRUPO TMM and KCS, will request the MAGISTRATE OF THE

FIRST UNITARY COURT FOR CIVIL AND ADMINISTRATIVE MATTERS

OF THE FIRST CIRCUIT, to dismiss, in their capacity as

plaintiffs, each and all of constitutional protection

trials consolidated to trial number 71/2005.

Public deeds that evidence the capacity of the

representatives of TFM, GRUPO TFM, GRUPO TMM and KCS

	 	 	 	(a) Second official transcript of public deed number 23,418 dated July 21,
2005, granted before Héctor Manuel Cárdenas Villarreal, Esq., Notary Public
number 201 of the Federal District, that contains the written confirmation of the
resolutions taken unanimously in lieu of a shareholders meeting by the
shareholders of Grupo Transportación Ferroviaria Mexicana, S.A. de C.V.
(“GTFM”), regarding the authorization for the company to appear and
express its conformity with the offer sent by TFM, S.A. de C.V. (“TFM”),
to the Federal Government of United Mexican States, in connection with the
definitive judgments that oblige the Federal Government to issue a special
certificate for the return of taxes;

	 	 	 	(b) Second official transcript of public deed number 23,422 dated July 22,
2005, granted before Héctor Manuel Cárdenas Villarreal, Esq., Notary Public
number 201 of the Federal District, that contains the written confirmation of the
resolutions taken unanimously in lieu of a shareholders meeting by the
shareholders with voting rights of TFM regarding the authorization for the
company to present an offer to the Federal Government of the United Mexican
States, in connection with the definitive judgments that oblige the latter to
issue a special certificate for the return of taxes; and

	 	 	 	(c) A special power of attorney dated September 12, 2005, granted abroad by
Kansas City Southern, dully apostilled, in favor of Messrs. Paul J. Weyandt,
Robert B. Terry, Jay M. Nadlman and José Vicente Corta Fernández, in order to be
exercised jointly or severally, to perform certain acts on behalf of the
principal in connection with (i) TFM’s right to receive a VAT refund in
1997 and (ii) the potential obligation of GTFM, Grupo TMM, S.A. or the
principal to acquire the Mexican Federal Government’s remaining shares of TFM
(the “Settlement”), including, without limitation, to carry out a
settlement offer, the execution of a settlement agreement with the necessary
transmissions, concessions and waivers, present dismissals, and carry out the
other actions and to execute the documents that may be necessary or convenient to
perform the Settlement.

	 	(d)	 	General Powers of Attorney of GRUPO TMM, S.A.- Public deed number
38,632 dated January 24, 2002, granted before Notary Public number 97 of the
Federal District, Miguel Limón Díaz, Esq.

Data of certification of the resolution of the Board of Directors.- Public deed
number 39,847 dated September 12, 2005, granted before Notary Public number 97 in
the Federal District, Miguel Limón Díaz, Esq., through which the certification of
the resolution taken in a Board’s meeting on June 13, 2005, issued by the
Secretary of the Board of Directors of GRUPO TMM, S.A., was notarized.

2

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