PURCHASE AND SALE AGREEMENT

EXHIBIT 2.8

PURCHASE AND SALE AGREEMENT

GLOBAL WATER RESOURCES, LLC

AND

SONORAN UTILITY SERVICES, LLC

DATED

JUNE 15, 2005

PURCHASE AND SALE AGREEMENT

     THIS PURCHASE AND SALE AGREEMENT (“ Agreement ”!, dated as of June 15, 2005, by and among GLOBAL WATER RESOURCES, LLC, a Delaware limited liability company “ Purchaser/GWR ”), and SONORAN UTILITY SERVICES, LLC, an Arizona limited liability company “ Sonoran/Seller ”).

WITNESSETH:

      WHEREAS, Sonoran and GWR operate water and wastewater utilities that are adjacent to each other in and near the City of Maricopa; and

      WHEREAS, the growth and service needs of the area continue to accelerate; and

      WHEREAS, the Parties acknowledge and agree that as of the date of this Agreement each is serving customers; and

      WHEREAS, the Parties have identified certain efficiencies and benefits that will accrue to the landowners, homeowners and businesses if the Parties combined their operations; and

      WHEREAS, Sonoran is the contract manager of the 387 Domestic Water Improvement District (“387 DWID”) and the 387 Wastewater Improvement District (“387 WWID”) (collectively “the Districts”) and the Parties acknowledge and agree that this Sale, all its terms, conditions, representations and warranties are conditioned upon District actions to review, consent or approve the Sale pursuant to the Management Agreements; and

      WHEREAS, GWR holds certificates of convenience and necessity to its service areas; and

      WHEREAS, agreement has been reached on the terms by which GWR will acquire the Assets; and

      WHEREAS the Parties agree that the consideration set forth is fair and reasonable and shall be paid, pursuant to the terms of this Agreement; and

      WHEREAS, the Parties agree that GWR has entered into a contractual relationship with Sonoran for the provision of all utility services required of Sonoran, the “Interim Operating and Bulk Water & Wastewater Services Agreement” dated April 14 2005 (hereinafter the “IOA”); and

      WHEREAS, the Parties acknowledge that GWR will make efforts that result in all existing Master Utility Agreements (“MUA”) between developers and Sonoran being replaced with new agreements between developers and GWR; and

      WHEREAS, the Parties agree that Palo Verde Utilities Company (“PVU”) and Santa Cruz Water Company (“SCW”) will apply for the extensions of their service areas through a contiguous CC&N expansion through the ACC, and apply to the CAAG for the amendment of the 387 District’s 208 waste water planning area into PVU’s 208 waste water planning area; and

      WHEREAS, the Parties have entered into the binding April 14, 2005 Letter of Intent (“LOI”)(attached hereto as Exhibit 1) and agree that the Conditions Precedent of the LOI have been or will be materially satisfied in a manner which allows PVU and SCW to acquire the Assets of the Districts and/or Sonoran. These assets will include, but not be limited to, the water plant, the sewer plant, all lines installed in the ground, pump stations and real property owned or controlled by the Districts and/or Sonoran, the operating contracts for the 387 DWID and the 387 WWID and the infrastructure contracts; and

      WHEREAS, the Parties acknowledge that there was a requirement to acquire a certain parcel of land for the proposed 5.6 MGD wastewater treatment plant for approximately Eight Hundred Thousand and No/100 Dollars ($800,000.00) and that this land will not be required for GWR to provide the required service. Therefore, this transaction is specifically excluded from this agreement, and will be terminated or retained by the Seller on or before the Closing. Notwithstanding the foregoing, approximately one half acre of this parcel will be needed for a lift station which Purchaser shall receive; and

      WHEREAS, the Parties acknowledge that closing and post-closing the Parties shall continue to expend their best efforts to obtain all necessary approvals and documentation by working cooperatively with one another; and

      WHEREAS, prior to closing the Sale, GWR shall support all efforts of Sonoran with government, regulatory authorities, landowners and others to continue providing service within the Districts; and

      WHEREAS, the Parties incorporate herein by this reference all of the terms and conditions contained in the LOI; and

      WHEREAS, Seller desires to sell, and Purchaser desires to purchase, all of the Assets of the Seller, for the consideration, on the terms and subject to the conditions set forth in this Agreement.

      WHEREAS the Assets will be worth substantially more than the Purchase Price set forth herein when combined with the assets of GWR given the infrastructure that GWR presently has in place as well as the expanded CC&N which will allow PVU and SCW to provide water and wastewater services to the area of the 387 District

      NOW, THEREFORE, in consideration of the mutual covenants, promises, representations, and warranties contained herein, the Purchaser agrees to purchase and the Seller agrees to sell the Assets of Sonoran on the terms and conditions set forth herein:

ARTICLE 1
DEFINITIONS

     The terms defined in this Article I, whenever used in this Agreement (including in the Schedules) shall have the respective meanings indicated below for all purposes of this Agreement. All references herein to a Section, Article or Schedule are to a Section, Article or Schedule of or to this Agreement, unless otherwise indicated.

      ACC: means the Arizona Corporation Commission.

      Additional Purchase Consideration: as defined in Section 2.3.2.

      ADOR: means Arizona Department of Revenue.

      ADWR: means the Arizona Department of Water Resources.

      Affiliate: of a Person means a Person that directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, the first Person. “Control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or credit arrangement, as trustee or executor, or otherwise.

      Agreement: means this Purchase and Sales Agreement, including the Schedules and Exhibits hereto.

      Applicable Law: means all applicable provisions of all (i) constitutions, treaties, statutes, laws (including the common law), rules, regulations, ordinances, codes or orders of any Governmental Authority, (ii) Governmental Approvals, and (iii) orders, decisions, injunctions, judgments, awards and decrees of or agreements with any Governmental Authority.

      Assets: means all assets, except Excluded Assets, associated with the operation of Sonoran (including all capital and profits) including but not limited to the Management Agreements, all real property described on Schedule 3.1.14(b), tanks, surface/ground water treatment equipment, pump stations, wells, water rights, water distribution systems, vehicles and all real and personal property assets, inventory and equipment currently used to conduct the operation of the 387 DWID, the Management Agreements for the 387 Domestic Water Improvement District and the assets thereof, inclusive of all real property described on Schedule 3.1.14(b), waste water collection infrastructure, waste water treatment facilities, water reclamation facilities and all ancillary and auxiliary equipment vehicles and all real and personal property assets, inventory and equipment currently used for the 387 WWID to conduct its business. Assets shall further include all

rights to distributions, together with the right to exercise all privileges, powers and remedies as the operator of the 387 DWID and the 387 WWID.

      AzPDES: means Arizona Pollutant Discharge Elimination System.

      Business: means all of the business operations of Sonoran as currently conducted.

      CAAG: means the Central Arizona Association of Governments.

      CAAG208 or 208 Plan: means a waste water facility plan reviewed and approved by the Central Arizona Association of Governments under Section 208 of the Clean Water Act.

      CC&N: means the Certificate of Convenience and Necessity granted by the ACC to the respective utility companies which will allow PVU and SCW to provide water and waste water services to the area of the 387 Districts.

      Closing: as defined in Section 2.2.

      Closing Costs: as defined in Section 9.1.

      Closing Date: as defined in Section 2.2.

      Closing Date Balance Sheets: means the separate balance sheets prepared in respect of Sonoran in accordance with past practices consistently applied reflecting the respective assets and liabilities of Sonoran as of the Closing Date and reflecting the best estimate, in the opinion of Seller, acting reasonably, for those current assets and liabilities of Sonoran that are not capable of actual determination as of the Closing Date.

      Code: means the Internal Revenue Code of 1986, as amended.

      Conditions Precedent: as defined in Section 5.2.3.

      Connection Fees: as defined in Section 2.3.4.

      Consent: means any consent, approval, authorization, waiver, permit, grant, franchise, concession, agreement, license, exemption or order of, registration, certificate, declaration or filing with, or report or notice to, any Person, including but not limited to any Governmental Authority.

      Contracts: as defined in Section 3.1.11(a).

      Dispute: as defined in Section 8.1.

      Districts: means the 387 Domestic Water Improvement District and the 387 Waste water Improvement District.

      Effective Date: The Effective Date of this agreement shall be March 30, 2005.

      Environmental Laws: mean all Applicable Laws, regulations, standards, requirements, ordinances, policies, guidelines, orders, approvals, notices, permits or directives, or parts thereof, pertaining to environmental or occupational health and safety matters, in effect as at the date hereof.

      Excluded Assets: as set forth in Schedule 3.1.28.

      Existing Service Area: means the area covered by the CC&N and certain other areas as to which, as of the Effective Date, PVU and SCW have either applied, or have entered into agreements obligating PVU and SCW to apply, to the ACC to extend the CC&N, which Existing Service Area is depicted on Schedule C to the LOI.

      Feasibility Period: as defined in Section 5.2.

      Financial Statements: as defined in Section 3.1.4.

      GAAP: means generally accepted accounting principles as in effect in the United States of America as determined by the Financial Accounting Standards Board from time to time applied on a consistent basis as of the date of any application thereof.

      Governmental Approval: means any Consent of, with, or from any Governmental Authority.

      Governmental Authority: means any nation or government, any state or other political subdivision thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including, without limitation, any government authority, agency, department, board, commission or instrumentality of the United States, any State of the United States or any political subdivision thereof, and any tribunal or arbitrator(s) of competent jurisdiction, and any self-regulatory organization.

      Hazardous Substance: means any substance, material or waste which is regulated by Environmental Law, including petroleum, petroleum products, asbestos, presumed asbestos-containing material or asbestos-containing material, urea formaldehyde and polychlorinated biphenyls.

      ICFA: means an Infrastructure Coordination and Finance Agreement.

      Indemnified Party: as defined in Section 7.3.

      Indemnifying Party: as defined in Section 7.3.

      Initial Payment Date: as defined in Section 2.3.1(b).

      IOA: means the Interim Operating and Bulk Water & Wastewater Services Agreement” dated April 14, 2005.

      Knowledge of the Seller: as defined in Section 3.1.30.

      Leased Real Property: means all real property interests granted, acquired, and/or established pursuant to the Leases.

      Leases: means the real property leases, subleases, licenses and occupancy agreements pursuant to which the Companies are the lessee, sublessee, licensee or occupant and which are described in Section 3.1.11 and Section 3.1.13. Without limiting the foregoing, the term “Lease” does not include easements.

      Lien: means any mortgage, deed of trust, pledge, hypothecation, right of others, claim, security interest, encumbrance, lease, sublease, license, occupancy agreement, adverse claim or interest, easement, covenant, encroachment, burden, title defect, title retention agreement, voting trust agreement, interest, equity, option, lien, right of first refusal, charge or other restrictions or limitations of any nature whatsoever, including but not limited to such as may arise under any Contracts,

      Liquidated Damages: Seller and Purchaser acknowledge that it is impractical and extremely difficult to fix, prior to the execution of this Agreement, the actual damages that Purchaser would sustain in the event of a breach of any warranty or representation contained in this Agreement and/or the refusal by Seller to close escrow and therefore have agreed that liquidated damages, as defined in Section 6.3(c) and Section 6.4 are reasonable estimates of Purchaser’s probable damages for the breaches or defaults described therein and are not penalties.

      LOI: means the means the letter of intent dated April 14,2005, from Purchaser to Seller regarding Purchaser’s non-binding expression of interest to purchase the Assets of Seller.

      Losses: as defined in Section 7.1.

      Management Agreements: means that certain Wastewater Treatment, Collection, and Management Services Agreement between Sonoran and the 387 WWID and that certain Water Supply and Management Services Agreement between Sonoran and the 387 DWID, both dated as of June 25, 2003.

      Material Adverse Effect: with regard to Sonoran, means any event, occurrence, fact, condition, change or effect that individually or in the aggregate with similar events, occurrences, facts, conditions, changes or effects will or can reasonably be expected to result in a cost, expense, charge, liability, loss of revenue or diminution in value equal to or greater than $20,000.

      Material Contract: as defined in Section 3.1.11.

      New Customer: means any equivalent dwelling units within the existing or expanded service area of Sonoran, the Districts, PVU or SCW, as evidenced by residential meters placed and connected in homes occupied by home owners who are first physically connected and receive service on or after April 14, 2005.

      Owned Real Property: means the real property interests owned by Sonoran which are described in Section 3.1.13(a).

      Permit: means any consent, license, permission, authorization, approval, registration, permit or right-of-way issued, granted, given or otherwise made available by or under the authority of any Governmental Authority or pursuant to any Applicable Law.

      Person: means any natural person, firm, partnership, association, corporation, company, limited liability company, limited partnership, trust, business trust, Governmental Authority, or other entity.

      Post Closing Balance Sheets: means the balance sheet prepared by Purchaser in respect of the Companies in accordance with past practices reflecting the assets and liabilities of the Companies as at the Closing Date and incorporating the actual determination of any current assets and liabilities of the Companies which were estimated for the purpose of the Closing Date Balance Sheets.

      Purchase Price: as defined in Section 2.3.

      Purchaser: as defined in the first paragraph to this Agreement.

      Purchaser Indemnitees: as defined in Section 7.1.

      PVU: means Palo Verde Utilities Company.

      Sale: as defined in Section 2.1, subject to the terms of the Agreement.

      Schedules: means each of the schedules and exhibits attached to and made a part of this Agreement.

      SCW: means Santa Cruz Water Company.

      Seller: as defined in the first paragraph to this Agreement.

      Seller Indemnitees’, as defined in Section 7.2.

      Seller’s Materials: as defined in Section 6.2.

      Subject Territories as defined in Schedule 2.3.2.

      Tax or Taxes: means any federal, state, provincial, local, foreign or other income, alternative, minimum, accumulated earnings, personal holding company, franchise, capital stock, net worth, capital, profits, windfall profits, gross receipts, value added, privilege, sales, use, goods and services, excise, customs duties, transfer, conveyance, mortgage, registration, stamp, documentary, recording, premium, severance, environmental (including taxes under Section 59A of the Code), real property, personal property, transfer ad valorem, intangibles, rent, occupancy, license, occupational, employment, unemployment insurance, social security, disability, workers’

compensation, payroll, health care, registration, withholding, estimated or other similar tax, duty or other governmental charge or assessment or deficiencies thereof (including all interest and penalties thereon and additions thereto whether disputed or not).

      Tax Return: means any return, report, declaration, form, report, claim for refund or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

      Water Meter Consideration: as defined in Section 2.3.3.

ARTICLE 2
PURCHASE AND SALE OF THE ASSETS: CLOSING

      2.1 Sale and Purchase of Assets. Seller hereby agrees to sell all of the Assets of Sonoran to PVU and SCW, which are wholly owned subsidiaries of GWR, including all rights of the Seller in the capital and profits of Sonoran, all rights to distributions and the right to exercise all of the rights, privileges, powers and remedies of Sonoran as the operator of the 387 DWID and the 387 WWID, and Purchaser agrees to cause PVU and SCW to purchase the Assets of Sonoran from Seller.

      2.2 Closing. The Closing of the sale and purchase of the Assets, which shall include the transfer of assets and the obligation to make payment in accordance with the terms and conditions stated herein, shall occur at the time this Agreement is executed.

      2.3 Purchase Price. Subject to adjustment as provided in Sections 2.4 through 2.7, the total purchase price (the “ Purchase Price ”) to be paid for the Assets shall be and consist of the following:

      2.3.1 Initial Purchase Price. The Initial Purchase Price payable for the Assets shall be Seven Million One Hundred Ninety Six Thousand Eight Hundred and Two and No/100 Dollars ($7,196,802.00) paid as follows:

          (a) $100,000.00, as an earnest money deposit, which is already on deposit at First American Title Insurance Company (“Escrow Agent”), 4801 East Washington Street, Suite 110, Phoenix, Arizona 85034 (Attention: Carol Peterson), and being held by the Escrow Agent in an interest bearing account.

          (b) The balance of the Initial Purchase Price, Seven Million Ninety Six Thousand Eight Hundred and Two and No/100 Dollars ($7,096,802.00), shall be paid upon the later to occur of the issuance of the CC&N and the termination of the Management Agreements (with the exception of normal post termination provisions) (Initial Payment Date), provided however that if the Initial Payment Date has not occurred by December 1, 2005, GWR shall pay Seller interest monthly at an annualized rate of 7.5% on the balance of the Initial Purchase Price by cash, cashier’s check or other immediately available funds and the Initial Purchase Price shall be deferred at GWR’s election and paid in full on the later to occur of the issuance of the CC&N or the termination of the Management Agreements (with the exception of normal post termination provisions), by cash, cashier’s check or other immediately available funds. No

such interest shall be due and payable prior to February 1, 2006. In the event that the Initial Purchase Price is paid in full prior to February 1,2006, no interest payment shall be due and owing.

      2.3.2 Additional Purchase Consideration. Purchaser shall pay Seller an additional Ten Million, Five Hundred Thousand and No/100 Dollars ($10,500,000.00) paid upon sale of homes or equivalent dwelling units evidenced by the sale of a home by the builder of that home to a homeowner as evidenced by the water meter no longer being in the homebuilder’s name within the Subject Territories (Schedule 2,3.2) after April 14,2005, to be paid as follows unless the Initial Payment Date has not occurred:

	(a)		$2,500,000 paid upon the Sale of 2,500 Homes; and,
	(b)		$3,750,000 at the Sale of an additional 2,500 Homes; and,
	(c)		$4,250,000 at the Sale of an additional 5,000 Homes.

If the Initial Payment Date has not occurred at the time that any payment in this section 2.3.2 becomes due and owing, such payment shall be deferred at GWR’s election and made at the time of payment of the Initial Purchase Price with interest at 7.5% annualized from the date such payment would have been due until the payment is made.

           2.3.2.1 Payment of Additional Purchase Consideration. Irrespective of absorption rates or the milestones established by Section 2.3.2 (b) and (c), any unpaid balance of the Ten Million and No/100 Dollars ($10,000,000.00) as it relates to Section 2.3.2 only will be paid in full upon the anniversary often (10) years of the Initial Payment Date. Seller shall only be entitled to the additional $500,000 over $10,000,000 if the Sale of 10,000 Homes occurs within 10 years of the Initial Payment Date.

      2.3.3 Water Meter Consideration. The Seller shall be entitled to Additional Consideration based on the water meters placed and connected in the Subject Territories (Exhibit C to the LOI — Item 12, specifically excluding items 1,2,3,4,5,6,7 (except as noted in 1f2.3.4), 9 and 10) as the meters are installed as evidenced by the water meter no longer being in the homebuilder’s name. For each residential meter placed and connected in the Subject Territories for a period not to exceed eighteen years (18) from the Initial Payment Date, the Seller shall be entitled to Three Hundred and No/100 Dollars ($300) per meter, paid annually in arrears by February 28 ^th of the year following the subject year. For each residential meter placed and connected in the Subject Territories (Exhibit C to the LOI — Item 3 & 4) for a period not to exceed eighteen years (18) from the Initial Payment Date , the Seller shall be entitled to One Hundred and Fifty No/100 Dollars ($150) per meter, paid annually in arrears by 28 February of the year following the subject year.

      2.3.4 Connection Fees. The Seller, or its Affiliates, shall be entitled to additional compensation that shall be computed, for convenience only, as a reduced rate or discount in all lands the Seller or its Affiliates own in the Limited

Subject Territories (Exhibit C to the LOI — Item 9). This computation shall be equivalent to Five Hundred and No/100 Dollars ($500) per meter less than the then prevailing rate (per the then terms (which, among other terms, includes a CPI adjustment) of the GWRICFA referred to herein as the “Fees”) established by Purchaser for the area within the Subject Territories. The mechanism for payment may be set up as a payment or a discount by mutual agreement, provided mat if it is a payment it shall be payable within thirty (30) days following Purchaser’s receipt of the Fees. Notwithstanding the above, the rate established for the property known as La’Osa (approximately 17,000 acres) shall be $2,800.00 per equivalent dwelling unit (there shall be no $500 discount for the L’Osa acreage) plus the applicable CPI adjuster utilized in the standard GWR ICFA”) payable at final plat in accordance with the GWR ICFA then in effect. The fee rate for the property known as Vistoso in 387 North shall be $2800.00 subject to no CPI adjustment payable at final plat. Purchaser shall pay Seller $550 per unit within thirty (30) days following receipt of the fees on the Vistoso property in 387 North only as reflected on Schedule 2.3.4. Any fees owed by Seller to Purchaser for any lands subject to this paragraph shall be due at Final Plat, notwithstanding the terms in existing ICFA.

      2.3.5 Additional Payments. GWR shall cause to be paid within three days of Closing all debts and obligations of Sonoran that it is required to pay pursuant to the LOI and all trade payables as of March 30,2005, as referenced in 2.4(b), all as set forth on schedule 2.3.5.

      2.4 Liabilities.

      2.4.1 Assumed Liabilities. On the Closing Date, but effective as of the Effective Date, GWR shall assume and agree to discharge the following liabilities of Seller (the Assumed Liabilities):

2.4.1.1 All liabilities, obligations and debts shown on Seller’s March 30, 2005 balance sheet to the extent set forth on schedule 2.3.5.

2.4.1.2 All liabilities, obligations and debts of any kind or nature related to the day to day operation of the Assets after March 30, 2005.

2.4.1.3 The obligations assumed by GWR in the IOA.

2.4.1.4 All obligations shown on Schedules 3.1.6 and 3.1.11.

      2.4.2 Retained Liabilities. The Retained Liabilities shall remain the sole responsibility of and shall be retained, paid, performed and discharged solely by Seller. Retained Liabilities shall mean every liability, debt or obligation of Seller other than the Assumed Liabilities, including but not limited to:

2.4.2.1 Any liability to indemnify, defend or reimburse under the Management Agreements for matters occurring or arising prior to March 30, 2005.

2.4.2.2 Any liability to indemnify, defend or reimburse prior members of Seller.

      2.5 Allocation The Purchase Price shall be allocated in accordance with Exhibit 2.9. After the Closing, the parties shall make consistent use of the allocation specified in Exhibit 2.9 for all Tax purposes and in all filing, declarations and reports with the IRS in respect thereof, including the reports required to be filed under Section 1060 of the Code. In any Proceeding related to the determination of any Tax, neither Purchaser nor Seller shall contend or represent that such allocation is not a correct allocation. The parties further agree the consideration received by Seller pursuant to Sections 2.3.2, 2.3.3 and 2.3.4 shall be deemed received in exchange for intangible assets and accounted for as an open transaction recognizable by Seller when actually paid by Purchaser to Seller.

ARTICLE 3
REPRESENTATIONS AND WARRANTIES

      3.1 Representations and Warranties of Seller to Purchaser. The Parties agree that all representations and warranties contained herein shall survive and be enforceable for two years from Closing. As of the date hereof and as of the Closing Date, Seller hereby represents and warrants to Purchaser as follows:

      3.1.1 Authorization, etc. Seller has duly executed and delivered this Agreement. This Agreement and any agreements executed by Seller in connection herewith constitute the legal, valid, and binding obligations of Seller, enforceable against Seller in accordance with their terms, subject to bankruptcy, insolvency, reorganization, fraudulent transfer and conveyance, receivership, moratorium, and similar laws affecting creditors’ rights generally, and to the availability of equitable remedies (whether asserted at law or in equity).

      3.1.2 Seller Status. Sonoran is a limited liability company duly organized, validly existing, and in good standing under the laws of Arizona with full power and authority to carry on its business and to own, lease and operate its properties as and in the places where such business is conducted and such properties are owned, leased, or operated. Sonoran is duly qualified or licensed to do business and is in good standing in Arizona, which is the only jurisdiction in which the Company’s operations or the character of the properties owned, leased, or operated by it makes such qualification or licensing necessary. Seller has delivered to Purchaser complete and correct copies of Sonoran’s articles of organization, as amended and in effect on the date hereof. Sonoran is not in violation of any of the provisions of its articles of organization or other organizational documents.

      3.1.3 No Conflicts, etc. The execution, delivery, and performance by Seller of this Agreement and the consummation of the transactions contemplated hereby do not and will not conflict with or result in a violation of or a default under (with or without the giving of notice or the lapse of time or both) (i) any Applicable Law applicable to the Seller or any Affiliate of the Seller, or any of the properties or assets of the Seller, (ii) the articles of organization or operating

agreement or other organizational documents of the Seller, (iii) the Districts (subject to the Districts’ consent), or (iv) any Material Contract to which the Seller is a party or by which Seller or any of its respective properties or assets, may be bound or affected (including any contract or agreement between Seller, Sonoran or any Affiliate thereof). Other than as set forth in the LOI or in this Purchase and Sale Agreement, no Governmental Approval or other consent is required to be obtained by Seller or Sonoran in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby and no notice to any Governmental Authority is required to be given by Seller, Purchaser or Sonoran before the Closing Date in connection with the transactions contemplated hereby.

      3.1.4 Financial Statements. Seller has delivered to Purchaser unaudited financial statements of Sonoran for the periods ended December 31, 2004, and March 31, 2005 (collectively, the “Financial Statements”), including in each case a balance sheet, and a statement of income and retained earnings. The Financial Statements are complete and correct in all material respects, accurately reflect the assets, liabilities, and results of operations and financial condition of Sonoran as of their respective dates. Sonoran does not owe any obligations and is not subject to any liability other than those obligations and liabilities (i) that are expressly stated in this Agreement (including, but not limited to Schedules 2.3.5, 3.1.6 and 3.1.11), or (ii) that are set forth in the financial statements dated March 31,2005 provided to the Purchaser.

      3.1.5 Solvency. Seller is not insolvent, nor has Seller committed an act of bankruptcy, proposed a compromise or arrangement to its creditors generally, had any petition in bankruptcy filed against it, filed a petition or undertaken any action proceeding to be declared bankrupt, to liquidate its assets or to be dissolved. The transactions contemplated by this Agreement will not cause Seller to become insolvent or to be unable to satisfy and pay its debts and obligations generally as they come due.

      3.1.6. Absence of Undisclosed Liabilities. Except as disclosed on Schedules 3.1.6 and 3.1.11, Sonoran has no liabilities or obligations of any nature, whether known or unknown, absolute, accrued, contingent, or otherwise and whether due or to become due, arising out of or relating to Sonoran, except as and to the extent specifically disclosed or reserved against in the Financial Statements or specifically taken into account in the calculation of the Working Capital. No overcharges have been collected by Sonoran; there are no unapproved line extension agreements for which approval is necessary; there are no due and unpaid refunds on any line extension agreement or any advances in aid of construction; there are no due and unrefunded security deposits; there are no due and unrefunded meter deposits.

      3.1.7 Taxes.

          (a) Seller has delivered to Purchaser complete and correct copies of

all Tax Returns filed by or with respect to Sonoran, its assets or operations since January 1, 2004. Sonoran has filed all Tax Returns that Sonoran was required to file prior to the date hereof. To the Knowledge of Seller, and in its reasonable belief, all such Tax Returns were correct and complete in all material respects. All Taxes owed by or attributable to Sonoran (whether or not shown on any Tax Return) with respect to Tax Returns the due date of which (as extended, if applicable) preceded the date hereof have been paid.

          (b) With respect to each taxable period for Sonoran ending prior to the date hereof:

          (i) there is no action, lawsuit, taxing authority proceeding or audit or claim for refund now in progress, pending or threatened against or with respect to Sonoran regarding Taxes;

          (ii) there are no Liens on the assets of Sonoran or on any of the Assets relating or attributable to Taxes (other than Liens on assets of Sonoran for sales, use and payroll Taxes not yet due and payable) and Seller has no knowledge of any reasonable basis for the assertion of any claim relating or attributable to Taxes which, if adversely determined, would result in any Lien on any asset of Sonoran or on any of the Assets;

          (iii) Sonoran has withheld and paid all Taxes required to have been withheld and paid in connection with any amounts paid or owing to any employee, independent contractor, creditor, stockholder or other Person.

      3.1.8 Operation of Business. Since January 1, 2005, Sonoran has conducted its business only in the ordinary course consistent with prior practice, until the Effective Date.

      3.1.9 Litigation. Except as set forth on Schedule 3.1.9:

          (a) There is no action, claim, demand, lawsuit, proceeding, arbitration, grievance, citation, summons, subpoena, inquiry, or investigation of any nature, civil, criminal, regulatory, or otherwise, in law or in equity, pending or, to the Knowledge of Seller, overtly threatened against Sonoran or in any way affecting Sonoran, its assets or its business or relating to the transactions contemplated by this Agreement, and there is no valid basis for the same.

          (b) Sonoran is not a party to, or bound by, any decree, order, injunction, settlement agreement or arbitration decision or award (or agreement entered into in any administrative, judicial or arbitration proceeding with any Governmental Authority) with respect to or affecting the properties, assets, personnel or business activities of Sonoran; and

          (c) No citation, free, or penalty has been levied or asserted against the Company under any Environmental Law or any other Governmental Authority.

      3.1.10 Ownership. Seller owns all legal and beneficial right, title and interest in and to the Assets, free and clear of any and all Liens. Except for this Agreement, there are no outstanding agreements or commitments (contingent or otherwise) obligating Seller to sell or transfer any of the Assets. There are no ownership transfer restrictions or member agreements in effect other than those set out in Sonoran’s operating agreement.

      3.1.11 Material Contracts. Except as set forth herein:

     (a) Schedule 3.1.11 lists all agreements, contracts, commitments, and other instruments and arrangements (whether written or oral) of the types described below by which the Company or any of its assets, businesses, or operations receive benefits, or to which the Company is a party, or by which the Company is bound, other than insignificant contracts entered into in the ordinary course of business consistent with past practice (the “Material Contracts”):

     (i) leases, licenses, permits, franchises, insurance policies, warranties, guarantees, Governmental Approvals, and other contracts concerning or relating to the Company’s real property,

     (ii) contracts for capital expenditures in excess of $50,000 each;

     (iii) performance bonds, completion bonds, bid bonds, suretyship agreements and similar instruments;

     (iv) joint venture., partnership, and similar contracts involving a sharing of profits and/or expenses;

     (v) agreements providing for the leasing to or by the Company of personal property;

     (vi) Line Extension Agreements; and

     (vii) agreements or instruments under which the Company has acquired or holds its Water Rights; and

     (b) Pursuant to the terms of the LOI, Seller has delivered to Purchaser complete and correct copies of all written Material Contracts, together with all amendments thereto.

     (c) All Material Contracts are in full force and effect and

enforceable against Contract.

      3.1.12 Insurance. Schedule 3.1.12 contains a complete and correct list and summary description of all insurance policies maintained by or for the benefit of the Seller. Seller has delivered to Purchaser complete and correct copies of all such policies together with all riders and amendments thereto. Such policies are in full force and effect, and all premiums due thereon have been paid. Seller has complied in all material respects with the terms and provisions of such policies. The Seller is not aware of any circumstances which might give rise to any claim under the policies listed on Schedule 3.1.12 (except the Lennar lawsuit related claim).

      3.1.13 Real and Personal Property. To the knowledge of the Seller:

     (a) Sonoran has good, clear, record, marketable or insurable title to its assets and properties, including real property, free and clear of any and all Liens, other than (i) statutory Liens for Taxes not yet due, (ii) Liens incurred or deposits made in the ordinary course of the Business in connection with workers’ compensation, unemployment insurance and other types of social security or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return of money bonds and similar obligations, and those Liens described in Schedule 3.1.13(a) (collectively, the “Permitted Liens”), The real and personal property of the Company constitute all of the assets necessary for the continued conduct of the Business after the Closing in substantially the same manner as presently being conducted.

     (b) Schedule 3.1.13(b) contains a complete and accurate list of all owned real property (except easements which are reflected on final plats). To the Knowledge of Seller, there are no unrecorded or oral leases, arrangements, agreements, understandings, options, contracts or rights of first refusal affecting or relating to any of the real property. Permanent, legal access is available to the real property (except easements) from a dedicated public right-of-way (except as noted).

     (c) Neither Seller nor Sonoran has received, and Seller is not aware of, any notification, restriction, or stipulation from a Governmental Authority requiring any work to be undertaken on any real property or threatening the use of any real property. There are no pending or, to the Knowledge of Seller, threatened condemnation proceedings affecting any portion of any real property. Sonoran’s use of its real property for the various purposes for which such real property is used is permitted under all applicable zoning requirements and is not subject to any permitted nonconforming use or structure classification (Purchaser is aware of the City of Maricopa CUP, the Tortosa red tag, or requirements and pending

permitting applications listed on Schedule 3.1,13(c) which are hereby excluded from this representation and the actions of the City of Maricopa concerning City owned utilities).

     (d) There is no tax assessment (in addition to the normal, annual general real estate tax assessment) pending or, to the Knowledge of Seller, threatened with respect to any owned real property. There is no challenge or appeal brought by Sonoran that is pending regarding the amount of real estate taxes on, or the assessed valuation of, any real property for which Sonoran is responsible for the payment of taxes in respect thereof, and there has been no special arrangement or agreement entered into by Sonoran with any Governmental Authority with respect thereto.

     (e) The facilities, plants, machinery and equipment of Sonoran are, in the aggregate, in good working order and condition, ordinary wear and tear excepted, and have been maintained generally in accordance with prescribed operating instructions (if any) necessary to ensure the effectiveness of equipment warranties and/or service plans.

     (f) To the Knowledge of Seller, there are no historical or archeological materials or artifacts of any kind or any Indian ruins of any kind located on any part of the real property.

     (g) To the Knowledge of Seller, no part of the real property is “critical habitat” as defined in the Federal Endangered Species Act, 16 U.S.C. §§ 1531 et seq., as amended, or in regulations promulgated thereunder, nor are any “endangered species” or “threatened species” located on the real property, as defined therein.

     (h) The Parties acknowledge that the May 4, 2005 First American Commitment for Title Insurance contains a number of issues concerning title, access, easements and other issues that the Parties will work through in good faith to allow the conveyances anticipated above to be made as soon after closing as practicable.

      3.1.14 Water Rights. The only Water Rights claimed by Sonoran as a basis to withdraw and deliver water to existing and future customers of Sonoran are Sonoran’s rights to withdraw ground water.

      3.1.15 Permits. Sonoran possesses all Permits which are required in order for Sonoran to lawfully own its properties and assets and conduct its business as presently conducted (Seller is aware of the pending 208 Amendment and the City