UNIT PURCHASE AGREEMENT

THIS UNIT PURCHASE AGREEMENT is made and entered into as of this 15 ^th day of March, 2007, by and among TELKONET, INC. a Utah corporation (“ Purchaser ”), ETHOSTREAM, LLC, a Wisconsin limited liability company (the “ Company ”), Jason Tienor (“ Tienor ”), Jeff Sobieski (“ Sobieski ”), Kevin Burns (“ Burns ”), David Lau (“ Lau ”), Clocktower Properties, LLC (“ Clocktower ”), Andrew Garni (“ Andrew ”), Christina Garni (“ Christina ”), John Maul (“ Maul ”) and Helen Gaudiosi (“ Gaudiosi ,” together with Tienor, Sobieski, Burns, Lau, Clocktower, Andrew, Christina and Maul, the “ Members ”). Capitalized terms used herein and not otherwise defined herein shall have the meanings given to such terms in Section 1.1 hereof.

WHEREAS , the Company is engaged in the business of providing wireless and wired network technologies for hospitality and other commercial and residential properties (the “ Business ”);

WHEREAS , the Members own, in the aggregate, 100% of the issued and outstanding membership units of the Company;

WHEREAS , the Members desire to sell, and Purchaser desires to purchase, all of the issued and outstanding membership units (the “ Units ”) of the Company on the terms and subject to the conditions set forth herein.

NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties and agreements hereinafter set forth, and intending to be legally bound hereby, the parties hereto agree as follows:

1.1   Definitions . As used in this Agreement, the following terms shall have the following meanings:

“ 409A Plans ” is defined in Section 3.20(m).

“ Adjustment Period ” is defined in Section 2.5.

“ Affiliate ” means, with respect to any specified Person, any other Person which, directly or indirectly, controls, is under common control with, or is controlled by, such specified Person.

“ Agreement ” means this Agreement and the Company Disclosure Schedules hereto, as this Agreement may be amended from time to time.

“ Anniversary Date ” is defined in Section 2.3.

“ Arbitrator ” has the meaning set forth in Section 2.4(c) hereof.

“ Baseline Net Working Capital ” means an amount equal to the amount outstanding on the Line of Credit on the Closing Date plus $200,000.

 “ Benefit Plan ” means any collective bargaining agreement, any Pension Plan or any bonus, profit sharing, deferred compensation, incentive compensation, performance, retirement, vacation, severance or termination, disability, death benefit, employment, consulting, independent contractor, member, retention, hospitalization, fringe benefit, medical, dental, vision or other material plan, program, policy, arrangement or Contract (whether or not subject to the Laws of the United States) established, maintained, contributed to or required to be established, maintained or contributed to by the Company or any ERISA Affiliate, in each case, providing benefits to any employee of the Company, and in each case whether written or oral, informal or formal, subject to ERISA or not.

“ Business Day ” means any day other than (i) a Saturday or Sunday, or (ii) a day on which banking institutions located in Wisconsin are permitted or required by Law, executive order or decree of a Governmental Entity to remain closed.

“ Cash Consideration ” is defined in Section 2.2.

“ Certificate of Formation ” means the certified Articles of Organization of the Company, as filed with the Department of Financial Institutions of Wisconsin, as amended.

“ Closing ” is defined in Section 7.1.

“ Closing Date ” is defined in Section 7.1.

“ Closing Date Net Working Capital ” is defined in Section 2.4.

“ Closing Date Price ” is defined in Section 2.2.

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

“ Commission ” means the Securities and Exchange Commission, or any other federal agency at the time administering the Securities Act.

“ Common Stock ” is defined in Section 2.2.

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

“ Company Certificate ” is defined in Section 6.2(a).

“ Company Indemnified Party ” is defined in Section 9.3.

“ Company Intellectual Property ” means all Intellectual Property owned, used, under development or filed by or licensed to the Company.

“ Constitutive Documents ” means the Company’s Certificate of Formation and Operating Agreement.

“ Contract ” means any loan or credit agreement, bond, debenture, note, mortgage, indenture, guarantee, lease or other contract, commitment, agreement, instrument, obligation, undertaking, concession, franchise, license or legally binding arrangement or understanding, whether written or oral.

“ Controlled Group Liability ” means any and all liabilities under (i) Title IV of ERISA, (ii) Section 302 of ERISA, (iii) Sections 412 and 4971 of the Code, (iv) the continuation coverage requirements of Section 601 et seq. of ERISA and Section 4980B of the Code, (v) the portability and nondiscrimination requirements of Section 701 et seq. of ERISA and Section 9801 et seq. of the Code, and (vi) Section 4975 of the Code.

“ Copyright ” means any registered copyright (i) licensed from any third party (other than “shrink-wrap” software), or (ii) assigned, registered or applied for.

“ Current Assets ” means the aggregate value of the accounts receivable of the Company, as determined in accordance with the Company’s historic accounting methods consistently applied in accordance with past practice.  

“ Current Liabilities ” means the aggregate value of the accounts payable of the Company, which shall include the following line items appearing on the Most Recent Balance Sheet (i) accounts payable, (ii) accounts payable, credit card, (iii) hotel use fees payable, (iii) accrued insurance payable, and (iv) sales tax payable, each determined in accordance with the Company’s historic accounting methods consistently applied in accordance with past practice.

“ Delivery Date ” is defined in Section 2.4(a).

“ Disclosure Schedule ” means a schedule of exceptions to the representations and warranties of the Company and the Members set forth in Article III, delivered contemporaneously with this Agreement.

“ Disputed Matters ” is defined in Section 2.4(c).

“ Employee Members ” is defined in Section 2.3.

“ Employment Agreements ” means the employment agreements to be executed at or prior to the Closing between Purchaser and each of Tienor and Sobieski.

“ Encumbrances ” is defined in Section 3.5.

“ Environment ” means any and all environmental media, including, but not limited to, ambient air, surface water, ground water, drinking water supply, land surface, subsurface strata, wetlands or sediments.

“ Environmental Law ” means any and all federal, state, local or foreign statutes, laws, codes, regulations, rules, orders, judgments, binding judicial decisions, permits, writs, decrees, licenses, approvals, injunctions, written policies, ordinances and binding directives pertaining to or relating to protection or restoration of the Environment, pollution, health and safety, noise, radiation, or the manufacture, generation, handling, storage, use, emission, discharge, release, transportation, treatment, disposal or remediation of any Hazardous Material and the health or safety of employees in the workplace environment with respect to Hazardous Material, including the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation, and Liability Act, the Occupational Safety and Health Act, the Toxic Substances Control Act, the Emergency Planning and Community Right-to-Know Act, the Federal Insecticide, Fungicide, and Rodenticide Act, the Safe Drinking Water Act, the Hazardous Materials Transportation Act and any similar federal, state or local law, as each is in effect as of the date hereof.

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

“ ERISA Affiliate ” means any Person which is (or at any relevant time was) a member of a “controlled group of corporations” with, under “common control” with, or a member of an “affiliate service group” with the Company as such terms are defined in Section 414(b), (c), (m) or (o) of the Code.

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended, or any similar successor United States statute, and the rules and regulations of the Commission issued under such act, as they each may, from time to time, be in effect.

“ Financial Statements ” are defined in Section 3.9(a).

“ First Tail Period ” is defined in Section 5.12.

“ Fourth Tail Period ” is defined in Section 5.12.

“ Governmental Entity ” means any nation, state, province, county, city or political subdivision and any official, agency, arbitrator, authority, court, department, commission, board, bureau, instrumentality or other governmental or regulatory authority of any thereof, whether domestic or foreign.

“ Hazardous Material ” means, whether alone or in combination, whether solid, liquid or gaseous: (i) any pollutant, contaminant, substance, chemical or material that is listed, classified or regulated pursuant to any Environmental Law; (ii) any petroleum, petroleum product, waste oil, crude oil and its fractions, asbestos and asbestos-containing material, urea formaldehyde, nuclear material, natural or synthetic gas, pesticide, or polychlorinated biphenyl; (iii) any pollutant, contaminant, substance, material, chemical or waste that is explosive or radioactive; or (iv) any hazardous chemical, pollutant, contaminant, hazardous waste, toxic chemical, all as defined as hazardous under the Environmental Law.

“ Holdback ” shall be an amount held back from the Purchase Price determined in accordance with Section 2.3.

“ Holdback Shares ” is defined in Section 2.3.

“ Indebtedness ”   of any Person means, without duplication: (i) all indebtedness of such Person for borrowed money, with respect to deposits or advances of any kind or for the deferred purchase price of property or services (other than current trade liabilities incurred in the Ordinary Course of Business and payable in accordance with customary practices or being disputed in good faith); (ii) all principal, interest, prepayment penalties and premiums and other obligations of such Person evidenced by bonds, debentures, notes or similar instruments; (iii) all Indebtedness of third parties secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien or other claim on property owned or acquired by such Person, whether or not the obligations secured thereby have been assumed; and (iv) all guarantees by such Person of Indebtedness of third parties.

“ Indemnified Party ” means either a Purchaser Indemnified Party or a Company Indemnified Party.

“ Indemnifying Party ” means the party from which indemnification is sought pursuant to Article IX.

“ Intellectual Property ” means any (i) Patents, (ii) Marks, (iii) Copyrights, (iv) trade secrets, as defined in the Uniform Trade Secrets Act, including confidential research and development, know-how, formulas, compositions, manufacturing and production processes and techniques, methods, schematics, technology, technical data, designs, drawings, flowcharts, block diagrams, specifications, customer and supply lists, pricing and cost information, and business and marketing plans and proposals, (v) software or computer programs, (vi) licenses and agreements pursuant to which a Person has acquired rights in or to any of the foregoing or licenses or agreements pursuant to which a Person has licensed or transferred the right to use any of the foregoing, or (vii) domain names, and (viii) unregistered rights in copyright to print or electronic publications and content.

“ Issued Patent ” means a Patent which has been granted by the PTO, or any patent office of any other country, which is unexpired and which has not been held invalid by a decision of a court or other appropriate body of competent jurisdiction.

“ IRS ” means the United States Internal Revenue Service.

“ Judgment ” means any judgment, order or decree of, or issued by, any Governmental Entity.

“ Knowledge ” means, with respect to any matter in question, the actual knowledge of Jason Tienor and Jeff Sobieski after reasonable inquiry. Known has a correlative meaning.

“ Law ” means any constitution, act, statute, law, ordinance, treaty, rule or regulation of any Governmental Entity.

“ Legal Proceeding ” means any action, suit, proceeding, claim, arbitration or investigation before any Governmental Entity or before any arbitrator or mediator or similar party, or any investigation or review by any Governmental Entity.

“ Lien ”   means any lien, pledge, claim, charge, mortgage, encumbrance or other security interest of any kind, whether arising by Contract or by operation of Law.

“ Line of Credit ” means that certain line of credit between the Company and F & M Bank-Wisconsin, dated as of February 10, 2004.

“ Losses ” means any debts, obligations and other liabilities (whether known or unknown, absolute or contingent, liquidated or unliquidated, due or to become due, accrued or not accrued, asserted or unasserted or otherwise), losses, claims, damages, Taxes, interest obligations, deficiencies, Judgments, assessments, fines, fees, penalties, expenses (including amounts paid in settlement, interest, court costs, costs of investigators, fees and reasonable expenses of attorneys, accountants, financial advisors, consultants and other experts, and other expenses of litigation). Losses shall not include any incidental or consequential damages, including, but not limited to, lost profits or business opportunities or amounts with respect to which specific reserves have been created on the Most Recent Balance Sheet.

“ Mark ” means any trademark, trade name, trade dress, service mark or domain name.

“ Master Escrow Agreement ” means that certain Master Escrow Agreement to be entered into on the Closing Date by and among Purchaser, the Escrow Agent (as therein defined) and the Members substantially in the form of Exhibit A hereto.

“ Material Adverse Change ” means any change, circumstance, development, state of facts, event or effect (i) that has had or would reasonably be expected to have a material adverse change or effect (taken alone or in the aggregate with any other adverse change or effect) in or with respect to the business, properties, assets, condition (financial or otherwise), liabilities (contingent or otherwise) or results of operations of the Business in an amount in excess of $100,000, or (ii) that would reasonably be expected to prevent or materially impede, interfere with, hinder or delay the consummation by the Company of the transactions contemplated by this Agreement; provided that none of the following shall be deemed to constitute, and none of the following shall be taken into account in determining whether there has been or will be a Material Adverse Change: (a) any change relating to the United States economy or securities markets in general, so long as any impact on the Business is not disproportionate, (b) any adverse change, effect, event, occurrence, state of facts or development described in clause (i) or (ii) above resulting from conditions generally affecting the industry in which the Company participates, (c) the announcement or consummation of the closing of the transactions contemplated hereby, and (d) changes in any applicable Law.

“ Material Contract ” is defined in Section 3.14(a).

“ Members’ Representative ” is defined in Section 11.7.

“ Most Recent Balance Sheet ” is defined in Section 3.9(a).

“ Most Recent Balance Sheet Date ” means December 31, 2006.

“ Nonemployee Members ” is defined in Section 2.3.

“ Notice of Disagreement ” is defined in Section 2.4(c).

“ Operating Agreement ” means the Operating Agreement of the Company, dated November 11, 2004, as amended.

“ Ordinary Course of Business ” means any action taken if: (i) such action is consistent with past practice including as to amount and frequency and is taken in the course of normal day-to-day operations and (ii) such action complies with Law.

“ Party ” means a party to this Agreement.

“ Patent ” means any United States or foreign patent, any application for a United States or foreign patent, or any continuation, continuation-in-part, division, renewal, extension (including any supplemental protection certificate), reexamination or reissue thereof.

“ Pension Plan ” means any “employee pension benefit plan,” as defined in Section 3(2) of ERISA.

“ Permit ” means any federal, state or local, domestic or foreign, governmental consent, approval, order, authorization, certificate, filing, notice, permit, concession, registration, franchise, license or right.

“ Permitted Liens ” means the following, to the extent not securing Indebtedness: (i) statutory Liens for Taxes not yet due or payable or being contested in good faith by appropriate proceedings; (ii) Liens for assessments and other governmental charges or Liens of landlords, carriers, warehousemen, mechanics and repairmen incurred in the Ordinary Course of Business, in each case for sums not yet due and payable or due but not delinquent or being contested in good faith by appropriate proceedings; (iii) Liens incurred in the Ordinary Course of Business in connection with workers’ compensation, unemployment insurance and other types of social security; and (iv) any interest or title of a lessor under an operating lease or capitalized lease or of any licensor under a license.

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

“ PTO ” means the United States Patent and Trademark Office.

“ Purchase Price ” is defined in Section 2.2.

“ Purchase Price Adjustment ” is defined in Section 2.4(b).

“ Purchase Shares ” means the shares of Common Stock issued as the Stock Consideration.

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

“ Purchaser Certificate ” is defined in Section 6.3(a).

“ Purchaser Indemnifiable Loss ” is defined in Section 9.2.

“ Purchaser Indemnified Party ” is defined in Section 9.2.

“ Put Option ” is defined in Section 5.12.

“ Quarterly Release ” is defined in Section 2.3(b).

“ Real Property ” is defined in Section 3.13.

“ Representatives ” means, with respect to a Person, such Person’s legal, financial, internal and independent accounting and other advisors and representatives.

“ Rule 144 ” shall mean Rule 144 promulgated under the Securities Act.

“ Second Tail Period ” is defined in Section 5.12.

“ Securities Act ” means the Securities Act of 1933, as amended, or any similar successor United States statute, and the rules and regulations of the Commission issued under such act, as they each may, from time to time, be in effect.

“ Stock Consideration ” is defined in Section 2.2

“ Subsidiary ” means, with respect to any Person, another Person (i) of which 50.0% or more of any class of capital stock is owned or controlled, directly or indirectly, by such first Person, or (ii) of which such first Person is a general partner.

“ Tail Period ” is defined in Section 5.12.

“ Tax ” means any United States federal, state, local and foreign income, profits, franchise, license, capital, transfer, ad valorem , wage, severance, occupation, import, custom, gross receipts, payroll, sales, employment, use, stamp, alternative or add-on minimum, environmental, withholding and any other tax, duty, assessment or governmental tax charge of any kind whatsoever, imposed or required to be withheld by any taxing authority, including any interest, additions to tax, or penalties applicable or related thereto.

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

“ Third Party Claim ” means any suit, proceeding, claim or demand by a Person other than a Person from which indemnification may be sought under Article IX.

“ Third Tail Period ” is defined in Section 5.12.

“ Trading Market ” means whichever of the New York Stock Exchange, the American Stock Exchange, the NASDAQ Global Market, the NASDAQ Capital Market or OTC Bulletin Board on which Common Stock is listed or quoted for trading on the date in question.

“ Triggering Event ” is defined in Section 5.12.

“ Twenty-Day VWAP ” is defined in Section 2.5(a)

“ Units ” has the meaning set forth in the Recitals.

“ WARN Act ” means the Worker Adjustment and Retraining Notification Act of 1991.

2.1   Purchase and Sale of Units . Upon the terms and conditions set forth in this Agreement, at the Closing, the Members shall sell to Purchaser, and Purchaser shall purchase from the Members, the Units.

2.2   Purchase Price . The purchase price for the Units shall be $11,756,097 (the “ Purchase Price ”). The Purchase Price shall be payable by Purchaser through the delivery to the Members of Cash (the “ Cash Consideration ”) and shares (the “ Stock Consideration ”) of Purchaser’s common stock, par value $0.001 per share (the “ Common Stock ”), subject to the Holdback set forth in Section 2.3 and to adjustment pursuant to Sections 2.4 and 2.5. The Members may elect to receive the Purchase Price entirely in shares of Common Stock or a combination of cash and Common Stock, provided   that, no Member shall have the right to receive more than 20% of such Member’s pro rata portion of the Purchase Price in cash and in no event shall the aggregate amount of cash paid by Purchaser to all Members exceed $2,000,000. The number of shares of Common Stock issuable as the Stock Consideration shall be determined assuming a per share price equal to the closing price of the Common Stock on the American Stock Exchange on the trading day immediately preceding the Closing Date (the “ Closing Date Price ”). The Cash Consideration shall be paid at the Closing, by wire transfer to such bank account(s) designated in writing by the Members, in immediately available United States Dollars.

2.3   Holdback . Purchaser shall withhold from the Purchase Price the entire amount of the Stock Consideration (the “ Holdback Shares ”). The Holdback Shares shall be maintained in an escrow account (the “ Escrow Account ”) pursuant to the Master Escrow Agreement. The Holdback Shares then remaining in the Escrow Account, minus that number of Holdback Shares having a value equal to the total of all demanded (and unpaid and unresolved) obligations of the Company or the Members required to be funded from the Holdback (collectively, the “ Holdback Obligations ”), shall be released:

(a)   to those Members who are not employees of the Company on the Closing Date (the “ Nonemployee Members ”) on the first anniversary of the Closing Date (the “ Anniversary Date ”); and

(b)   to those Members who are employees of the Company on the Closing Date (the “ Employee Members ”), which Employee Members are listed on Schedule 2.3(b) , pro rata in twelve equal installments, the first four installments of which shall be payable on the Anniversary Date and the remaining installments of which shall be payable quarterly (each subsequent installment, a “ Quarterly Release ”), beginning on the last day of the third month following the Anniversary Date and on the last day of each third month thereafter. The Holdback shall be the sole remedy to fund any of the obligations of the Company or the Members pursuant to Section 9.2 hereof.

2.4   Purchase Price Adjustment .

(a)   Within sixty (60) days of the Closing (the “ Delivery Date ”), Purchaser shall deliver to the Members a calculation as of the Closing Date, prepared in accordance with the Company’s historic accounting methods consistently applied in accordance with past practice, of the amount, if any, by which the combined Current Assets of the Company exceed the combined Current Liabilities of the Company (“ Closing Date Net Working Capital ”).

(b)   In the event Closing Date Net Working Capital is less than Baseline Net Working Capital, the Members shall be required to refund to Purchaser the amount by which Baseline Net Working Capital exceeds Closing Date Net Working Capital. In the event Closing Date Net Working Capital is more than Baseline Net Working Capital, Purchaser shall be required to pay to the Members the amount by which Closing Date Net Working Capital exceeds Baseline Net Working Capital. Any amounts owed pursuant to this Section 2.4(b) shall be due and payable within thirty (30) days of the Delivery Date, unless disputed in accordance with Section 2.4(c). The adjustment to the Purchase Price provided for in this Section is hereinafter referred to as the “ Purchase Price Adjustment .”

(c)   The Members’ Representative shall have ten (10) business days from the Delivery Date to deliver a written notice of disagreement to Purchaser (a “ Notice of Disagreement ”). During such period, Purchaser shall make the books and accounting records relating to the Business (including work papers) and appropriate accounting personnel reasonably available to the Members’ Representative. Any such Notice of Disagreement shall specify in reasonable detail the nature of any disagreement so asserted. If no Notice of Disagreement is delivered within such ten (10) business day period, the Closing Date Net Working Capital amount shall become final and binding upon the parties. Following delivery of a Notice of Disagreement, the parties shall attempt to resolve any differences that they may have with respect to any matter specified in the Notice of Disagreement. If the parties fail to reach a written agreement with respect to all such matters within 60 days of the Notice of Disagreement, then all such matters as specified in the Notice of Disagreement as to which such written agreement has not been reached (the “ Disputed Matters ”) shall be submitted to and reviewed by an arbitrator (the “ Arbitrator ”), who shall be selected by the Members’ Representative and Purchaser. The Arbitrator shall act promptly (in no event to exceed 20 days) to resolve all Disputed Matters and his or her decision with respect to all Disputed Matters shall be final and binding upon the parties. The fees and expenses of the Arbitrator incurred in resolving the Disputed Matters shall be borne equally by the Members and Purchaser. Any adjustment required pursuant to this Section 2.4(c) shall be paid by the Members or Purchaser, as appropriate, by wire transfer to such bank account(s) designated by the Members or Purchaser, as appropriate, within five (5) days of final determination thereof in immediately available United States Dollars.

2.5   Adjustment to Number of Shares Issued as Stock Consideration .

(a)   If during the twelve months following the Closing (the “ Adjustment Period ”), the Common Stock has a volume-weighted average trading price, rounded to the nearest one-hundredth of one cent (the “ Twenty Day VWAP ”), of at least $4.50, as reported on the American Stock Exchange, for twenty (20) consecutive trading days, the aggregate number of shares of Common Stock issuable to the Members as the Stock Consideration shall be adjusted such that the number of shares of Common Stock issuable as the Stock Consideration shall be determined assuming a per share price equal to $4.50. For purposes of this Agreement, the Twenty Day VWAP shall be calculated using the default criteria for the function known as “Bloomberg VWAP” of the AQR function for the Common Stock on the automated quote and analytical system distributed by Bloomberg Financial LP.

(b)   If Purchaser, at any time during the Adjustment Period, (i) pays a stock dividend on its Common Stock or otherwise makes a distribution of any class of capital stock that is payable in shares of Common Stock, (ii) subdivides outstanding shares of Common Stock into a larger number of shares, or (iii) combines outstanding shares of Common Stock into a smaller number of shares, then an equitable adjustment shall be made to the number of shares of Common Stock issuable as Stock Consideration and the calculation of the volume-weighted average trading price of the Common Stock.

Except as set forth in the Company Disclosure Schedule delivered to Purchaser simultaneously with the execution hereof, the Company and the Members jointly and severally represent and warrant to Purchaser for its reliance in the execution, delivery and performance of this Agreement that all of the statements contained in this Article III are true and correct as of the date of this Agreement (or, if made as of a specified date, as of such date).

3.1   Organization and Standing . The Company: (a) is a limited liability company duly organized, validly existing and in current status under the Laws of the State of Wisconsin; (b) has all requisite limited liability company power and authority to own its properties, carry on its business as now being conducted; and (c) is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the nature of its business or the ownership, leasing or operation of its properties makes such qualification or licensing necessary, which jurisdictions are listed in Section 3.1 of the Disclosure Schedule, except to the extent that the failure to be so qualified or licensed would not reasonably be expected to result in a Material Adverse Change. The Company has made available to Purchaser complete and correct copies of its Constitutive Documents, as amended, to date. The Company is not in violation of any of the provisions of its Constitutive Documents.

3.2   Power and Authority; Binding Agreement . The Company and each Member have all requisite power and authority to execute and deliver this Agreement, to consummate the transactions contemplated hereby and to perform their respective obligations hereunder. This Agreement has been duly executed and delivered by the Company and each Member and, assuming due execution and delivery by the other parties hereto, constitutes a valid and binding obligation of the Company and each Member, enforceable against each of them in accordance with its terms, subject in each case to bankruptcy, reorganization, insolvency or similar laws affecting the enforcement of creditors’ rights in general and to general principles of equity (regardless of whether considered in a proceeding in equity or an action at law).

3.3   Noncontravention .

(a)   Other than as set forth in Section 3.3(a) of the Disclosure Schedule, the execution and delivery by the Company of this Agreement, the consummation of the transactions contemplated by this Agreement and the compliance by the Company and the Members with the provisions of this Agreement do not and will not conflict with, or result in any violation or breach of, or default (with or without notice or lapse of time or both) under, or give rise to a right of, or result in, termination, cancellation or acceleration of any obligation or to a loss of a material benefit under, or result in the creation of any Lien in or upon any of the properties or assets of the Company under, or give rise to any increased, additional, accelerated or guaranteed rights or entitlements under, any provision of: (i) the Constitutive Documents; (ii) assuming all consents set forth in Section 3.14(b) of the Disclosure Schedule are obtained, any indebtedness, loan or credit agreement, bond, debenture, note, mortgage, indenture, guarantee, lease or other Material Contract to which the Company or any Member is a party or bound by or its properties or assets are bound by or subject to or otherwise under which the Company or any Member has rights or benefits; or (iii) any (A) Law, or (B) Judgment, in each case, applicable to the Company or any Member, its properties or assets other than in the cases of (ii) and (iii) above, any such conflicts, violations, breaches, defaults, rights, entitlements, losses or Liens that have not given rise to, or would not reasonably be anticipated to give rise to, an event constituting a Material Adverse Change.

(b)   No consent, approval, order or authorization of, registration, declaration or filing with, or notice to, any Governmental Entity is required by or with respect to the Company in connection with the execution and delivery by the Company of this Agreement, the consummation by the Company of the transactions contemplated hereby or the compliance by the Company with the provisions of this Agreement, except for such consents, approvals, orders, authorizations, registrations, declarations, filings and notices, the failure of which to be obtained or made individually or in the aggregate would not impair in any material respect the ability of the Company to perform its obligations under this Agreement and will not result in a Material Adverse Change.

3.4   Compliance with Laws . The Company is and has been in compliance in all material respects with all applicable Laws and Judgments of any Governmental Entity applicable to its businesses or operations. The Company has not received a written notice or other written communication (or, to the Knowledge of the Company, any oral notice or other communication) that is currently pending alleging a possible violation by the Company of any applicable Law or Judgment of any Governmental Entity applicable to the Company’s businesses or operations.

3.5   Title to Units . Except as set forth in Section 3.5 of the Disclosure Schedule, the Members have good and marketable title to the Units, free and clear of all restrictions, Liens, voting trusts, agreements, proxies, arrangements and encumbrances of any kind whatsoever (collectively, “ Encumbrances ”). Upon the Closing, the Members shall transfer good and marketable title to the Units to Purchaser free and clear of all Encumbrances.

3.6   Capitalization . All of the issued and outstanding Units have been duly authorized, are validly issued, fully paid and nonassessable, and are held of record and beneficially by the Members. As of the date hereof, the Units are, and as of the Closing Date will be, all of the issued and outstanding membership interests of the Company. Except as set forth in Section 3.6 of the Disclosure Schedule, there are no outstanding or authorized options, warrants, purchase rights, subscription rights, conversion rights, exchange rights, or other contracts or commitments that could require the Company to issue, sell, or otherwise cause to become outstanding any of its membership interests. There are no outstanding or authorized stock appreciation, phantom stock, profit participation, or similar rights with respect to the Company. There are no voting trusts, proxies, member agreements or other agreements or understandings with respect to the voting of the membership interests of the Company.

3.7   Subsidiaries . The Company has no subsidiaries. The Company does not own or hold the right to acquire any shares of stock or any other security or interest, directly or indirectly, of or in any Person.

3.8   Permits . The Company validly holds and has in full force and effect, or has taken appropriate steps to obtain or renew, all material Permits necessary for it to own, lease or operate its properties and assets and to carry on its businesses as now conducted. The Company is in compliance in all material respects with the terms and conditions of all such Permits and there has occurred no material default (with or without notice or lapse of time or both) or material violation of, or under, or event giving to any other Person any right of termination, amendment or cancellation of, any such Permit. None of such Permits will be subject to suspension, modification, revocation or nonrenewal as a result of the consummation of the transactions contemplated hereby or the execution and delivery of this Agreement. No proceeding is pending or, to the Knowledge of the Company, threatened, seeking the revocation or limitation of any Permit. Section 3.8 of the Disclosure Schedule lists each Permit of a material nature issued or granted to or held by the Company. All of the Permits listed on Section 3.8 of the Disclosure Schedule are held in the name of the Company, and none are held in the name of any Company employee or agent or otherwise on behalf of the Company.

3.9   Financial Statements .

(a)   Section 3.9(a) of the Disclosure Schedule sets forth the unaudited balance sheet of the Company as of December 31, 2006 (the “ Most Recent Balance Sheet ”), December 31, 2005 and December 31, 2004, together with the related statements of income for the twelve months ended December 31, 2006, December 31, 2005 and December 31, 2004 (collectively, the “ Financial Statements ”). The Financial Statements: (i) are consistent with the books and records of the Company; (ii) have been prepared in accordance with the Company’s historic accounting methods consistently applied in accordance with past practice; and (iii) present fairly the financial condition and results of operations of the Company as of the respective dates thereof and for the periods referred to therein in all material respects.

(b)   All accounts receivable of the Company, whether reflected on the Most Recent Balance Sheet or otherwise, are current and arose from valid transactions in the Ordinary Course of Business. The Company has received no written (or, to the Company’s Knowledge, other) notice or other indication and the Company has no Knowledge that any of the Company’s accounts receivable will not be collectible in full, net of any reserves shown on the Most Recent Balance Sheet.

(c)   All accounts payable of the Company, whether reflected on the Most Recent Balance Sheet or otherwise, are current and arose from valid transactions in the Ordinary Course of Business.

3.10   Absence of Changes or Events . Except as set forth in Section 3.10 of the Disclosure Schedule, since December 31, 2006:

(a)   The Company has conducted its business only in the Ordinary Course of Business;

(b)   there has occurred no Material Adverse Change, nor any change, circumstance, development, state of facts, event or effect that would reasonably be expected to result in a Material Adverse Change;

(c)   The Company has not: (i) amended its Constitutive Documents; (ii) issued, sold, transferred, pledged, disposed of or encumbered any of its membership interests or any commitments or rights of any kind to acquire any of its membership interests; or (iii) purchased or otherwise acquired directly or indirectly any of its membership interests, or any instrument or security which consists of or includes a right to acquire such membership interests;

(d)   The Company has not adopted a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring or other reorganization of the Company;

(e)   The Company has not changed in any material respect any of the accounting policies or methods used by it;

(f)   The Company has not incurred loss of, or significant injury to, any of its assets whether as a result of any natural disaster, labor trouble, accident, other casualty or otherwise;

(g)   The Company has not mortgaged, pledged or subjected to any Lien (other than Permitted Liens), any of its assets;

(h)   The Company has not sold, exchanged, transferred or otherwise disposed of any of its assets, except in the Ordinary Course of Business;

(i)   The Company has not canceled any debts or claims;

(j)   The Company has not reserved for or written down the value of any assets or written off as uncollectible any accounts receivable, except in the Ordinary Course of Business and none of which, individually or in the aggregate, would result in a Material Adverse Change;

(k)   The Company has not made, or committed to make, any capital expenditures in excess of $100,000 individually or in the aggregate; and

(l)   The Company has not made any agreement to do any of the foregoing, other than negotiations with Purchaser and its Representatives regarding the transactions contemplated by this Agreement.

3.11   Undisclosed Liabilities . To the Knowledge of the Company, the Company does not have any liabilities, obligations or commitments of any nature (whether known or unknown, absolute, accrued, contingent, liquidated or otherwise), except: (i) liabilities, obligations or commitments which are appropriately reflected or reserved against on the Most Recent Balance Sheet; (ii) liabilities, obligations or commitments which have been incurred in the Ordinary Course of Business and consistent with past practice since the Most Recent Balance Sheet Date; (iii) liabilities, obligations or commitments disclosed in the Disclosure Schedule; and (iv) express performance obligations under the contracts and agreements of the Company.

3.12   Assets other than Real Property .

(a)   Section 3.12(a) of the Disclosure Schedule sets forth a list of each tangible personal property asset owned or leased by the Company that is material to the Company’s business, specifying for each asset whether such asset is owned or leased. The Company is the true and lawful owner or lessee of and has good and valid title to, or a valid leasehold interest in, all personal property (tangible or intangible) reflected on the Most Recent Balance Sheet or thereafter acquired, except inventory that has been sold or otherwise disposed of in the Ordinary Course of Business since the Most Recent Balance Sheet Date and not in violation of this Agreement, in each case, free and clear of all Liens (other than Permitted Liens).

(b)   Except as set forth in Section 3.12(b) of the Disclosure Schedule, all material tangible personal property of the Company is located at the offices of the Company at 10200 Innovation Drive, Milwaukee, WI 53226. Except as set forth in Section 3.12(b) of the Disclosure Schedule, all material personal property of the Company is free from material defects and is in good working order, ordinary wear and tear excepted. All material tangible leased personal property of the Company is in good working order, ordinary wear and tear excepted.

3.13   Real Property . Section 3.13 of the Disclosure Schedule lists all real property and interests in real property owned or leased by or to the Company (each, a “ Real Property ”). The Company has delivered to Purchaser complete and accurate copies of all leases, including any subleases, and any operating agreements relating to any leased Real Property. With respect to each Real Property, except as set forth in Section 3.13 of the Disclosure Schedule: (i) the Company has good and valid title to such Real Property or the leasehold estate relating to any leased Real Property, free and clear of all Liens (other than Permitted Liens and Liens which would not reasonably be expected to materially impair the current uses or the occupancy by the Company of such Real Property), leases, assignments, subleases, easements, covenants, rights of way and other similar restrictions of any nature whatsoever, other than those identified in the leases and operating agreements provided to Purchaser; (ii) any lease relating to any leased Real Property is in writing and is legal, valid, binding, in full force and effect and enforceable against the Company in accordance with its terms; (iii) any lease relating to any leased Real Property will, immediately following the Closing Date, continue to be legal, valid, binding, in full force and effect and enforceable in accordance with its terms as in effect on the date hereof; (iv) the Company is not and, to the Knowledge of the Company, no other party to any lease relating to a leased Real Property is, in breach or violation of, or in default under, such lease; (v) all facilities included in any leased Real Property are supplied with utilities and other services adequate for the operation of such facilities in the manner currently used by the Company; (vi) all rents and additional rents due on any lease relating to a leased Real Property have been paid; (vii) to the Knowledge of the Company, the current use by the Company of the facilities located on all Real Property does not violate any local zoning or similar land use requirement or other Law in any material respect; and (viii) all necessary third party consents, approvals, filings and registrations required to be obtained by the Company with respect to any leases in connection with the transactions contemplated by this Agreement or otherwise, have been made or obtained or will be made or obtained as of the Closing Date.

3.14   Contracts .

(a)   Section 3.14(a) of the Disclosure Schedule lists the following Contracts to which the Company is a party or by which it is bound (each such Contract, whether or not set forth in such section of the Disclosure Schedule, a “ Material Contract ”):

(i)   employment or consulting Contract, or any employee collective bargaining agreement or other Contract with any labor union or any Company employee;

(ii)   Contract not to compete or otherwise restricting the development, manufacture, marketing, distribution or sale of any products or services by the Company;

(iii)   Contract containing any “non-solicitation” or “no-hire” provision that restricts the Company in any manner;

(iv)   Contract containing any provision that purports to apply to or restrict the Company from engaging in any line of business anywhere in the world;

(v)   Contract with or involving the Members or any Affiliate of the Members (other than the Company);

(vi)   lease, sublease or similar Contract with any Person under which the Company is a lessor or sublessor of, or makes available for use to any Person (other than the Company), (A) any Real Property, or (B) any portion of any premises otherwise occupied by the Company;

(vii)   lease or similar Contract with any Person under which (A) the Company is lessee of, or holds or uses, any machinery, equipment, vehicle or other tangible personal property owned by any Person (other than any Contracts that individually do not involve the payment by or to the Company of more than   $10,000 in any twelve-month period), or (B) the Company is a lessor or sublessor of, or makes available for use by any Person, any tangible personal property owned or leased by the Company;

(viii)   Contract for the purchase or sale of products or the furnishing or receipt of services: (A) calling for performance over a period of more than one (1) year; (B) requiring or otherwise involving payment by or to the Company of more than $10,000 in any twelve-month period or more than $40,000 in the aggregate in any three year period; (C) in which the Company has granted manufacturing rights, “most favored nation” pricing provisions or marketing or distribution rights relating to any products or territory; or (D) in which the Company has agreed to purchase or sell a minimum quantity of goods or services or has agreed to purchase or sell goods or services exclusively from a certain party;

(ix)   Contract for the disposition of any assets or business of the Company other than sales of inventory in the Ordinary Course of Business or any agreement for the acquisition, directly or indirectly, of the assets or business of any other Person;

(x)   Contract for any joint venture or partnership;

(xi)   Contract granting a third party any license to any Company Intellectual Property, or pursuant to which the Company has been granted by a third party any license to any Intellectual Property other than “off the shelf” or other standard widely commercially available software products, or any other license, option or other Contract relating in whole or in part to Company Intellectual Property or the Intellectual Property of any other Person;

(xii)   Contract (other than trade debt incurred in the Ordinary Course of Business) under which the Company has borrowed any money from, or issued any note, bond, debenture or other evidence of Indebtedness to, any Person;

(xiii)   Contract (including so called “take or pay” or “keep well” agreements) under which (A) any Person has directly or indirectly guaranteed Indebtedness, liabilities or obligations of the Company, or (B) the Company has directly or indirectly guaranteed Indebtedness, liabilities or obligations of any Person (in each case other than endorsements for the purpose of collection in the Ordinary Course of Business);

(xiv)   Contract (other than trade debt incurred in the Ordinary Course of Business) under which the Company has, directly or indirectly, made any advance, loan, extension of credit or capital contribution to, or other investment in, any Person;

(xv)   mortgage or other Lien upon any Leased Property, other than Permitted Liens and Liens which would not materially impair the current uses or the occupancy by the Company of such Leased Property;

(xvi)   Contract providing for indemnification of any Person by the Company other than any agreement of indemnification entered into in connection with the sale or license of software products in the Ordinary Course of Business;

(xvii)   Contract providing that the Company or any Company employee maintain the confidentiality of any information, or providing for any Person to maintain the confidentiality of any information material to the Company or the Business;

(xviii)   Contract involving a research or development collaboration or similar arrangement;

(xix)   Contract granting any third party a security interest in any of the Company’s assets;

(xx)   Contract giving any party the right to renegotiate or require a reduction in price or refund of payments previously made in connection with the business of the Company; and

(xxi)   Contract not entered into in the Ordinary Course of Business and requiring a payment of greater than $10,000 in any twelve-month period.

(xxii)   Each Contract is in full force and effect, and is legal, valid, binding and enforceable against the Company in accordance with its terms. True and complete copies of each Material Contract (and a written summary of the terms of any oral Material Contracts) have been delivered to Purchaser. Except as set forth in Section 3.14(b) of the Disclosure Schedule, there is no material default, material violation or material breach under any Contract by the Company or, to the Company’s Knowledge, by any other party thereto, and no event has occurred or condition exists that with the lapse of time or the giving of notice or both would constitute a material default, material violation or material breach thereunder by the Company or, to the Company’s Knowledge, any other party thereto, except to the extent such default, violation or breach would not individually or in the aggregate cause a Material Adverse Change. Except as set forth in Section 3.14(b) of the Disclosure Schedule, no notice, waiver, consent or approval is required (or the lack of which would give rise to a right of termination, cancellation or acceleration of, or entitle any party to accelerate, whether after the giving of notice or lapse of time or both, any obligation under the Contracts) under or relating to any Contract in connection with the execution, delivery and performance of this Agreement or the consummation of the transactions contemplated hereby.

3.15   Intellectual Property .

(a)   Section 3.15(a) of the Disclosure Schedule sets forth a true and complete list of all Company Intellectual Property as defined in parts (i) through (vi) of the definition of Intellectual Property and a true and accurate description or summary of the Intellectual Property as defined in parts (vii) through (viii) of such definition.

(b)   Except as set forth in Section 3.15(b) of the Disclosure Schedule, the Company owns or has valid licenses to use, free and clear of all Liens or any other claims, including, without limitation, any claim of ownership or other right by any inventor on any Patent, all Company Intellectual Property that is material to the Company or the operation of its business as currently conducted. There are no claims or demands by any other Person pertaining to any Company Intellectual Property, and no proceedings have been instituted, or are pending or, to the Knowledge of the Company, threatened, which challenge the rights of the Company in respect thereof.

(c)   Except as set forth in Section 3.15(c) of the Disclosure Schedule, all Company Intellectual Property, other than that which is licensed to the Company and other than Company Intellectual Property under development, has been properly assigned to the Company. 

(d)   Except as set forth in Section 3.15(d) of the Disclosure Schedule, the Company does not pay or receive any royalty to or from anyone with respect to any Company Intellectual Property, nor has the Company licensed anyone to use any Company Intellectual Property.

(e)   Except as