STOCK PURCHASE AGREEMENT

Exhibit 99.1

STOCK PURCHASE AGREEMENT

by and between

TELKONET, INC.

and

FRANK T. MATARAZZO

December 5, 2005

TABLE OF CONTENTS

STOCK PURCHASE AGREEMENT

      THIS STOCK PURCHASE AGREEMENT is made and entered into as of this 5th day of December, 2005, by and between Telkonet, Inc., a Utah corporation (“Purchaser”) and Frank T. Matarazzo, an individual and resident of the state of New Jersey (“Seller”). Capitalized terms used herein and not otherwise defined herein shall have the meanings given to such terms in Section 1.1 hereof.

RECITALS

      WHEREAS , Seller owns 125 shares of common stock without par value of Microwave Satellite Technologies Inc. (the “Company”), which represents all of the issued and outstanding capital stock of the Company; and

      WHEREAS , Seller desires to sell, and Purchaser desires to purchase, 112 shares of $___ par value common stock of the Company (the “Shares”), which represents 90% of the issued and outstanding capital stock of the Company, on the terms and subject to the conditions set forth herein.

      NOW , THEREFORE , in consideration of the mutual covenants and provisions set forth in this Agreement, Seller and Purchaser agree as follows:

ARTICLE I

Definitions

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

          “Acquisition Proposal” has the meaning set forth in Section 5.3 hereof.

          “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 Disclosure Schedules hereto, as this Agreement may be amended from time to time.

          “Articles of Incorporation” means the Articles of Incorporation of the Company, as filed with the Secretary of State of the State of New Jersey, as amended from time to time.

          “Balance Sheet” has the meaning set forth in Section 3.8 hereof.

          “Balance Sheet Date” has the meaning set forth in Section 3.8 hereof.

          “Business Day” means a day other than Saturday, Sunday or any day on which the principal commercial banks located in the State of New Jersey are authorized or obligated to close under the laws of such state.

          “Bylaws” means the Bylaws of the Company, as amended.

          ‘Business Plan” has the meaning set forth in Section 6.2(m) hereof.

          “Cash Consideration” has the meaning set forth in Section 2.2.

          “Closing” means the consummation of the transactions contemplated herein.

          “Closing Date” has the meaning set forth in Section 7.1 hereof.

          “Code” means the Internal Revenue Code of 1986, as amended, and any reference to a particular Code section shall be interpreted to include any revision of or successor to that section.

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

          “Company 409A Plans” has the meaning set forth in Section 3.17(h) hereof.

          “Company Employee” has the meaning set forth in Section 5.7(a) hereof.

          “Confidentiality Agreement” has the meaning set forth in Section 5.5 hereof.

          “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.

          “Copyrights” means U.S. and foreign registered and unregistered copyrights (including those in computer software and databases), rights of publicity and all registrations and applications to register the same.

          “Encumbrances” has the meaning set forth in Section 3.4 hereof.

          “Environmental Law” means all applicable federal, state, local or foreign laws, rules and regulations, orders, decrees, judgments, permits, filings and licenses and common law rulings relating to (i) protection and cleanup of the environment and activities or conditions related thereto, including those relating to the generation, handling, disposal, transportation or release of “hazardous substances” or controlled substances; and (ii) the health or safety of employees in the workplace environment with respect to hazardous substances or controlled substances.

          “ERISA” has the meaning set forth in Section 3.17(a) hereof.

          “ERISA Affiliate” means, with respect to any entity, trade or business, any other entity, trade or business that is a member of a group described in Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of ERISA that includes the first entity, trade or business, or that is a member of the same “controlled group” as the first entity, trade or business pursuant to Section 4001(a)(14) of ERISA.

          “Financial Statements” has the meaning set forth in Section 3.8 hereof.

          “Governmental Entity” means any domestic, foreign or multinational federal, state, provincial, regional, municipal or local governmental or administrative authority, including any court, tribunal, agency, bureau, committee, board, regulatory body, administration, commission or instrumentality constituted or appointed by any such authority.

          “Indebtedness” means (a) all indebtedness for borrowed money 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), (b) any other indebtedness that is evidenced by a note, bond, debenture or similar instrument and (c) all guarantee obligations with respect to any of the foregoing.

          “Indemnified Person” means the Person or Persons entitled to, or claiming a right to, indemnification under Article VIII.

          “Indemnifying Person” shall mean the Person or Persons claimed by the Indemnified Person to be obligated to provide indemnification under Article VIII.

          “Intellectual Property” means Trademarks, Patents, Copyrights, Trade Secrets and Licenses.

          “Knowledge” of the Seller means the actual knowledge of Frank T. Matarazzo.

          “Leases” has the meaning set forth in Section 3.11(b) hereof.

          “Licenses” means all licenses and agreements pursuant to which the Company has acquired rights in or to any Intellectual Property, or licenses and agreements pursuant to which the Company has licensed or transferred the right to use any of the foregoing.

          “Lien” means any lien, mortgage, pledge, security interest, lease, restriction, conditional sale or other title retention agreement, charge or encumbrance of any kind, whether voluntary or involuntary.

          “Losses” has the meaning set forth in Section 8.2 hereof.

          “Material Adverse Effect” means any material adverse change in, or material adverse effect on, the business, financial condition or operations of a party and its Subsidiaries, taken as a whole; provided, however, that to the extent any adverse change or effect is caused by or results from any of the following, it shall not be deemed to constitute, or be taken into account in determining whether or not there has been or would be, a “Material Adverse Effect”: (a) factors or conditions affecting the industries in which a party hereto participates, the U.S.

economy as a whole, or foreign economies as a whole in any countries where a party has material operations or the capital markets generally (which changes in each case do not materially and disproportionately affect such party), (b) an outbreak or escalation of hostilities involving the U.S., the declaration by the U.S. of a national emergency or war, or the occurrence of any acts of terrorism, (c) the announcement or pendency of this Agreement or the performance of this Agreement or the transactions contemplated hereby by the parties, or (d) changes in any applicable law, ordinance, administrative or governmental rule or regulation.

          “Notices” has the meaning set forth in Section 11.1 hereof.

          “Patents” means issued U.S. and foreign patents and pending patent applications, patent disclosures, and any and all divisions, continuations, continuationsinpart, reissues, reexaminations, and extensions thereof, any counterparts claiming priority therefrom, utility models, patents of importation/confirmation, certificates of invention and similar statutory rights.

          “Permits” has the meaning set forth in Section 3.19 hereof.

          “Permitted Liens” has the meaning set forth in Section 3.24 hereof.

          “Person” means any individual, corporation, proprietorship, firm, partnership, limited partnership, limited liability company, trust, association, governmental authority or other entity.

          “Plan” means and includes all employee benefit plans, programs, policies, practices, and other arrangements providing benefits to any employee or former employee of the Company or beneficiary or dependent thereof, whether or not written, sponsored or maintained by the Company or any ERISA Affiliate to which the Company or any ERISA Affiliate contributes or is obligated to contribute or under which any current or former employee of the Company is entitled to any compensation or benefits (whether or not contingent) as a result of service to the Company or an ERISA Affiliate. Without limiting the generality of the foregoing, the term “Plans” includes all employee welfare benefit plans within the meaning of Section 3(1) of ERISA and all employee pension benefit plans within the meaning of Section 3(2) of ERISA, and all employee stock option or stock purchase plans, bonus or incentive plans or programs, severance pay plans, policies, practices or agreements, fringe benefits, and employment agreements.

          “Purchase Price” has the meaning set forth in Section 2.2 hereof.

          “Purchase Price Adjustment” has the meaning set forth in Section 2.3 hereof.

          “Purchaser” means Telkonet, Inc.

          “Purchaser Common Stock” has the meaning set forth in Section 2.2 hereof.

          “Purchaser Indemnified Party” has the meaning set forth in Section 8.2 hereof.

          “Representatives” has the meaning set forth in Section 5.5 hereof.

          “Reserve Stock Consideration” has the meaning set forth in Section 2.4 hereof.

          “Securities Act” means the Securities Act of 1933, as amended.

          “Seller” means Frank T. Matarazzo.

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

          “Stock Consideration” has the meaning set forth in Section 2.2.

          “Subsidiary” means, with respect to any Person, any corporation or other organization, whether incorporated or unincorporated, of which (a) at least a majority of the securities or other interests having by their terms ordinary voting power to elect a majority of the board of directors or others performing similar functions with respect to such corporation or other organization is directly or indirectly owned or controlled by such Person or by any one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries or (b) such Person or any other Subsidiary of such Person is a general partner (excluding any such partnership where such Person or any Subsidiary of such party does not have a majority of the voting interest in such partnership).

          “Subscriber” has the meaning set forth in Section 2.3(b).

          “Tax” means (i) any income, gross receipts, gains (including capital gains), license, occupancy, payroll, employment, excise, financial institutions, severance, stamp, occupation, fringe benefits, group, goods and services, franking deficits, debits, premium, windfall or excess profits, environmental (including Taxes under Section 59A of the Code), customs duties, capital stock, franchise, unincorporated business, profits, withholding, information, social security (or similar), unemployment, disability, workers’ compensation, land, real property, personal property, unclaimed property, ad valorem, production, sales, use, license, transfer, registration, value added, alternative or addon minimum, accumulated earnings, personal holding company, estimated, or other tax, report or assessment of any kind whatsoever imposed by any Governmental Entity, including any interest, penalty, assessment, or addition thereto, whether disputed or not; and (ii) any obligations under any agreements or arrangements with respect to any Taxes described in clause (i) above.

          “Tax Returns” means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including all schedules or attachments thereto.

          “Trade Secrets” means all categories of trade secrets as defined in the Uniform Trade Secrets Act, including confidential research and development, knowhow, formulas, compositions, manufacturing and production processes and techniques, methods, schematics, technology, technical data, designs, drawings, flowcharts, block diagrams, specifications, customer and supplier lists, pricing and cost information, and business and marketing plans and proposals.

          “Trademarks” means U.S. and foreign registered and unregistered trademarks, trade dress, service marks, logos and designs, trade names, Internet domain names, corporate names and all registrations and applications in connection therewith.

ARTICLE II

Purchase and Sale of Shares

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

     2.2 Purchase Price . The purchase price for the Shares shall be the aggregate of: (a) One Million Six Hundred Thousand (1,600,000) unregistered (the “Stock Consideration”) shares of $0.001 par value common stock of the Purchaser (the “Purchaser Common Stock”); and (b) One Million Eight Hundred Thousand Dollars ($1,800,000.00) (the “Cash Consideration,” together with the Stock Consideration, the “Purchase Price”). The shares to be delivered and the portion of the Cash Consideration to be paid by Purchaser to Seller at the Closing shall be as set forth in Section 7.2.

     2.3 Purchase Price Adjustment .

          (a) If, at any time during the three (3) year period following the Closing Date, the Company achieves three thousand three hundred (3,300) Subscribers (such date being the “Adjustment Date”), calculated in accordance with this Section 2.3, Purchaser shall issue to Seller that number of unregistered, fully paid and nonassessable shares of Purchaser’s common stock, if any, necessary for the value of the Stock Consideration which is still owned by Seller as of the Adjustment Date to be equal to $4.50 per share (such shares of Purchaser Common Stock, if any, the “Adjustment Stock Consideration”). Purchaser shall deliver to Seller the Adjustment Stock Consideration, if any, within fifteen (15) business days of the Adjustment Date. The Adjustment Amount shall be the product of: (i) the average price of Purchaser Common Stock as listed on the American Stock Exchange (or such other exchange as the stock of Purchaser may then be listed) for the thirty (30) days prior to the Adjustment Date (the “Adjustment Average”); and (ii) the Stock Consideration. The Adjustment Stock Consideration shall be the number of shares of the Purchaser’s common stock resulting from the quotient of: (i) Seven Million Two Hundred Thousand Dollars ($7,200,000.00) minus the Adjustment Amount; divided by (ii) the Adjustment Average. If the Purchaser achieves the 3,300 Subscribers and if as of the Adjustment Date, the Adjustment Average exceeds $4.50 per share, there shall be no reduction in the Reserve Stock Consideration and all shares of the Reserve Stock Consideration shall be released to Seller as set forth in the Escrow Agreement.

          (b) For purposes of this Section 2.3, a Subscriber shall be any of the following:

     (i) any customer of Company for video and data services who is existing as of the date of Closing;

     (ii) any customer for video and data services who is not a Purchased Subscriber (as defined below) and who is added by the Company following the Closing;

     (iii) any customer of Company for video services, but not data services, who is not a Purchased Subscriber, whether such customer was existing as of the date of the Closing or added thereafter, shall be counted as 0.75 of a Subscriber (provided, that if such customer becomes a customer of the Company for data services during the three (3) year period following the Closing Date, then such customer shall be counted as one Subscriber);

     (iv) any Purchased Subscriber for video and data services shall be counted as 0.50 of a Subscriber; and

     (v) any Purchased Subscriber for video services, but not data services, shall be counted as 0.375 of a Subscriber (provided, that if such customer becomes a customer of the Company for data services during the three (3) year period following the Closing Date, then such customer shall be counted as 0.50 of a Subscriber).

            (c) A Purchased Subscriber is any Subscriber for which the Company directly or indirectly pays or issues to any third party any form of consideration other than the Company’s customary agreement to provide the video and/or data services subscribed for.

     2.4 Reserve . Purchaser shall withhold from the Purchase Price (a) One Million Two Hundred Thousand (1,200,000) shares (the “Reserve Stock Consideration”) of the Stock Consideration, which shall be held in escrow pursuant to an Escrow Agreement in a form substantially similar to the agreement set forth in Exhibit A, attached hereto and made a part hereof (the “Escrow Agreement”), and (b) Nine Hundred Thousand Dollars ($900,000.00) of the Cash Consideration, which shall be paid to Seller on or before January 1, 2007.

ARTICLE III

Representations and Warranties of the Seller

     Except as set forth in the Disclosure Schedule, Seller represents and warrants to Purchaser 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 Qualification . The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of New Jersey, and is duly authorized to transact business and is in good standing in each jurisdiction in which the ownership of its assets or conduct of its business requires such qualification, except where the failure to be so authorized and in good standing would not have a Material Adverse Effect on the Company. The Company has made available to Purchaser prior to the execution of this Agreement complete and correct copies of its Articles of Incorporation and Bylaws.

     3.2 Authority . The Company has all requisite corporate power and authority necessary to own and operate its properties and to carry on its business as currently conducted, except where the failure to have such power or authority would not have a Material Adverse Effect on the Company. Seller has all requisite power and authority to execute, deliver and perform his obligations under this Agreement and the other documents, instruments and certificates to be executed and delivered by Seller, pursuant to this Agreement. The execution, delivery and performance by Seller of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by all necessary action on the part of the Company and Seller, as the sole shareholder of the Company, and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the transactions contemplated hereby.

     3.3 Enforceability . This Agreement has been duly executed and delivered by the Seller, and, assuming due and valid authorization, execution and delivery hereof by Purchaser, is a valid and binding obligation of Seller, enforceable against him in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws of general application affecting enforcement of creditors’ rights generally and to general equity principles.

     3.4 Title to Shares . Seller has good and marketable title to the Shares, free and clear of all restrictions, Liens, voting trusts, stockholder agreements, proxies, agreements, arrangements and encumbrances of any kind whatsoever (collectively, “Encumbrances”). Upon the Closing, Seller shall transfer good and marketable title to the Shares to Purchaser free and clear of all Encumbrances.

     3.5 Capitalization . As of the date hereof, the authorized capital stock of the Company consists of 1000 shares of common stock without par value of which 125 shares are issued and outstanding. All of the issued and outstanding Shares have been duly authorized, are validly issued, fully paid, and nonassessable, and are held of record and beneficially by stockholders in the amounts and percentages set forth on Section 3.5 of the Disclosure Schedule. The rights, preferences and privileges of the Shares are as set forth in the Articles of Incorporation. 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 capital stock. 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, stockholder agreements or other agreements or understandings with respect to the voting of the capital stock of the Company.

     3.6 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.

     3.7 Consents and Approvals; No Violations . None of the execution, delivery or performance of this Agreement by Seller, the consummation by Seller of the transactions contemplated hereby or compliance by Seller with any of the provisions hereof will (a) conflict with or result in any breach of any provision of the Articles of Incorporation or Bylaws of the Company, (b) require any filing with, or permit, authorization, consent or approval of, any Governmental Entity, (c) result in a violation or breach of, or constitute (with or without due

notice or lapse of time or both) a default (or give rise to any right of termination, cancellation or acceleration) under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, lease, license, contract, agreement or other instrument or obligation to which the Company is a party or by which the Company or any of its properties or assets may be bound, or (d) violate any order, writ, injunction, decree, statute, rule or regulation applicable to the Company or Seller or any of their respective properties or assets.

     3.8 Financial Statements . The Company has made available to the Purchaser reviewed financial statements as of April 30, 2004 (“2004 Financial Statements”), a draft financial statement as of April 30, 2005 (“2005 Financial Statements”), and a reviewed balance sheet (“Balance Sheet”) as of October 31, 2005 (“Balance Sheet Date”) (collectively, the “Financial Statements”). The Financial Statements referred to in this Section 3.8 present fairly, in all material respects, the financial condition of the Company as of the respective dates and the results of operations and cash flows for the respective periods indicated and have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) applied on a consistent basis, except for the absence of required footnotes, and subject to typical yearend auditing adjustments. Except as set forth on Schedule 3.8 of the Disclosure Schedule, or as reflected in the Balance Sheet, as of the Balance Sheet Date, the Company has incurred no material liabilities, either accrued, contingent or otherwise, of a type required to be recorded on a balance sheet or disclosed in the notes thereto under GAAP, except for liabilities incurred after the Balance Sheet Date in the ordinary course of business that, in the aggregate, will not have a Material Adverse Effect.

     3.9 Undisclosed Liabilities . To the Knowledge of the Company, the Company does not have any liabilities, obligations or commitments of any nature (absolute, accrued, contingent or otherwise), except (i) liabilities, obligations or commitments which are appropriately reflected or reserved against in the Balance Sheet; (ii) liabilities, obligations or commitments which have been incurred in the ordinary course of business and consistent with past practice since the Balance Sheet Date; (iii) liabilities, obligations or commitments disclosed in the Disclosure Schedule or that will not have a Material Adverse Effect on the Company; and (iv) express performance obligations under the contracts and agreements of the Company.

     3.10 Absence of Certain Developments . Except as disclosed in the Balance Sheet, the Disclosure Schedule or expressly required by this Agreement, since the Balance Sheet Date:

          (a) To the Knowledge of Seller, no Material Adverse Effect on the Company has occurred;

          (b) The business of the Company has been conducted only in the ordinary course consistent with past practice;

          (c) The Company has not: (i) amended its Articles of Incorporation or Bylaws, (ii) issued, sold, transferred, pledged, disposed of or encumbered any shares of any class or series of its capital stock, or securities convertible into or exchangeable for, or options, warrants, calls, commitments or rights of any kind to acquire, any shares of any class or series of its capital stock, (iii) declared, set aside or paid any dividend or other distribution payable in cash, stock or property with respect to any shares of any class or series of its capital stock,

(iv) split, combined or reclassified any shares of any class or series of its stock, or (v) redeemed, purchased or otherwise acquired directly or indirectly any shares of any class or series of its capital stock, or any instrument or security which consists of or includes a right to acquire such shares;

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

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

          (f) The Company has not incurred material loss of, or significant injury to, any of its material 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 any of its material assets to any Encumbrance (other than Permitted Liens);

          (h) The Company has not sold, exchanged, transferred or otherwise disposed of any of its assets, except in the ordinary course of business consistent with past practice;

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

          (j) The Company has not written down the value of any assets or written off as uncollectible any accounts receivable, except in the ordinary course of business consistent with past practice and none of which, individually or in the aggregate, would have a Material Adverse Effect on the Company; and

          (k) 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 Properties; Leases . (a) The Balance Sheet reflects all of the personal property used by the Company in its business or otherwise held by the Company except for (i) property acquired or disposed of in the ordinary course of the business of the Company since the Balance Sheet Date, and (ii) personal property not otherwise material to the business of the Company.

          (b) The Company owns no real property. Section 3.11(b) of the Company Disclosure Schedule sets forth all leases of real property held by the Company (the “Leases”). The Company has made available to Purchaser a true and correct copy of each such lease, together with all amendments thereto. Each Lease is a valid, binding and enforceable obligation of the Company, and to the Knowledge of Seller, the other parties thereto, in accordance with its terms and is in full force and effect, subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws of general application affecting enforcement of creditors’ rights generally and to general equity principles. All necessary third party consents, approvals, filings and registrations required to be obtained by the Company with respect to such leases in

connection with the transactions contemplated by this Agreement have been, or prior to the Closing will be, made or obtained and, to the Knowledge of Seller, there have been no threatened cancellations thereof, and there are no outstanding disputes thereunder. The Company is not in default in any material respect under any of the Leases and, as of the date hereof, to the Knowledge of Seller, no other party is in default in any material respect under any of the Leases. There has not occurred any event which (whether with or without notice, lapse of time or both or the happening or occurrence of any other event) would constitute a default in any material respect on the part of the Company, or, as of the date hereof, to the Knowledge of Seller, a party other than the Company.

     3.12 Contracts .

           (a) Section 3.12 of the Company Disclosure Schedule sets forth, as of the date hereof, each of the following types of contracts and other agreements, to which the Company is a party:

     (i) any contract, license, lease (including capital and operating leases) or other agreement, or any other commitment of the Company that provides for payment by or to the Company in excess of $10,000.00;

     (ii) any partnership or joint venture agreement;

     (iii) any lease or other occupancy or use agreement, oral or written, or any options, rights of first refusal or security or other interests (other than Permitted Encumbrances) in or relating to the Company’s business or assets;

     (iv) any agreements 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;

     (v) any material agreements that contain provisions requiring the Company to indemnify any other party thereto;

     (vi) any collective bargaining or similar agreement;

     (vii) any contract or agreement with any bank, finance company or similar organization for Indebtedness of the Company;

     (viii) any contract or agreement that materially restricts the Company from engaging in any line of business anywhere in the world;

     (ix) any agreement with a Person with respect to employment for a period of time;

     (x) any agreement granting any Person a Lien on any of the Company’s assets; and

     (xi) any other contract or agreement material to the Company or its business as presently being conducted, which is not otherwise identified pursuant to this Section 3.12(a) or otherwise in the Disclosure Schedule.

          (b) As of the date hereof, (i) there is not and, to the Knowledge of Seller, there has not been claimed or alleged by any Person with respect to any contract to which the Company is a party or by which it is bound any existing default or event that, with notice or lapse of time or both, would constitute a default or event of default on the part of the Company or, to the Knowledge of Seller, on the part of any other party thereto, except such defaults, events of default and other events that would not have a Material Adverse Effect on the Company, and (ii) no consent, approval, authorization or waiver from, or notice to, any Governmental Entity or other Person is required in order to maintain in full force and effect any of the contracts listed in Section 3.12 of the Disclosure Schedule, other than (A) such consents and waivers that have been obtained and are in full force and effect and such notices that have been duly given and (B) such consents, approvals, authorizations, waivers or notices the failure of which to have or give would not have a Material Adverse Effect on the Company.

     3.13 Customers and Suppliers . Since the Balance Sheet Date through the date hereof, the Company has not received written notice of an intent to terminate any contract set forth on Section 3.12 of the Disclosure Schedule.

     3.14 Intellectual Property .

          (a) Ownership . The Intellectual Property (other than offtheshelf or shrinkwrap software) is set forth in Section 3.14 of the Company Disclosure Schedule. The Company is the sole owner or exclusive licensee of all Intellectual Property purported to be owned or exclusively licensed by the Company, except where the failure to be sole owner or exclusive licensee would not have a Material Adverse Effect on the Company. There are no claims or demands against the Company by any other Person pertaining to any of such Intellectual Property, and no proceedings have been instituted, or are pending or, to the Knowledge of Seller, threatened, which challenge the rights of the Company in respect thereof. The Company has the right to use, and to the Knowledge of Seller without infringing or misappropriating the intellectual property rights of others, all Intellectual Property and Trade Secrets owned by the Company required for or incident to its products, services, or its business as presently conducted. The Company has taken reasonable steps it believes to be required in accordance with sound business practice to establish and preserve its ownership of all material registered Copyright, Patent, Trademark, Trade Secret and other proprietary rights with respect to its products and technology, including, but not limited to, work for hire agreements and intellectual property assignments from all employees and contractors of the Company.

          (b) Validity . To the Knowledge of Seller, all Intellectual Property is valid and enforceable, and no written notice has been received by the Company alleging anything to the contrary.

          (c) Confidentiality . To the Knowledge of Seller, or except as would not have a Material Adverse Effect on the Company, no Trade Secret of the Company has been disclosed to any third party other than pursuant to written nondisclosure agreements.

          (d) No Third Party Infringers . To the Knowledge Seller, no third party has infringed or misappropriated any Intellectual Property, except as would not have a Material Adverse Effect on the Company.

          (e) No Restrictions . Except as would not have a Material Adverse Effect on the Company, there are no settlements, forbearances to sue, consents, judgments, orders or other obligations, other than Licenses made in the ordinary course of business, that do or may: (i) restrict the Company’s rights to use any Intellectual Property; (ii) restrict the conduct of the business of the Company in order to accommodate a third party’s intellectual property; or (iii) permit third parties to use any Intellectual Property.

          (f) Infringement by the Company . Except for customer contracts in the ordinary course of business and confidentiality agreements by employees with former employers, to the Knowledge of Seller, none of the Company’s employees have any agreements or arrangements with any Persons other than the Company related to confidential information, Trade Secrets or inventions of such Persons or restricting any such employees’ engagement in business activities of the Company as presently conducted and solely to the extent such confidential information, Trade Secrets or inventions are material to the business of Company as presently conducted. To the Knowledge of Seller, the activities of the Company’s employees on behalf of the Company do not violate any such agreements or arrangements known to the Company and Seller.

     3.15 Insurance . Section 3.15 of the Disclosure Schedule sets forth a description of all insurance policies in effect as of the date hereof, providing coverage with respect to the business or assets of the Company. Each of such policies is valid and binding and in full force and effect in all material respects, and all premiums due thereunder have been paid when due, except for any failures to pay any such premiums that, individually or in the aggregate, would not have a Material Adverse Effect on the Company. All of the policies listed in Section 3.15 of the Disclosure Schedule shall continue in full force and effect following the transactions contemplated by this Agreement.

     3.16 Employees; Labor . The Company has made available to Purchaser an accurate and complete list of titles or job descriptions and annual compensation for the preceding fiscal year, of all employees of the Company. There is no labor strike, slowdown, stoppage or lockout actually pending, or to the Knowledge of Seller, threatened against the Company. The Company is not a party to or bound by any collective bargaining agreement with any labor organization applicable to employees of the Company. To the Knowledge of Seller, there is not pending any demand for recognition or any other request or demand from a labor organization for representative status with respect to Persons employed by the Company. No labor union has been certified by the National Labor Relations Board as bargaining agent for any of the employees of the Company. The Company has not experienced any material work stoppage or other material labor difficulty during the twoyear period ending on the date hereof. There is no unfair labor practice charge or complaint against the Company or, to the Knowledge of Seller, threatened before the National Labor Relations Board.

     3.17 Employee Benefit Plans . (a) Following the Closing, the Company will not maintain, participate in, have any obligation under or to contribute to, on behalf of any current or former

employee of the Company (or their beneficiaries or dependents) (1) any existing incentive, bonus, commission, deferred compensation, retention, change in control, severance or termination pay plan, agreement or arrangement, whether formal or informal and whether legally binding or not; (2) any existing pension, profitsharing, stock purchase, stock option, group life insurance, hospitalization insurance, disability, retirement or any other employee benefit plan, agreement or arrangement, whether formal or informal and whether legally binding or not; (3) any existing fringe or welfare benefit plan, agreement or arrangement, whether formal or informal and whether legally binding or not; or (4) any other existing “employee benefit plan” as such term is defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).

          (b) To the Knowledge of Seller, the Company has not engaged in a transaction in connection with which it could be subject either to a civil penalty assessed pursuant to Section 502(i) of ERISA or a tax imposed by Section 4975 of the Code.

          (c) The Company has not ever maintained or been obligated to contribute to a Plan covered by Title IV of ERISA or Section 412 of the Code, and the Company has not incurred and could not be reasonably expected to incur any direct or indirect liability under Title IV of ERISA, contingent or otherwise.

          (d) Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (either alone or in conjunction with any other event, such as termination of employment or other service) (i) result in or cause any payment (whether of severance pay or otherwise), acceleration, forgiveness of indebtedness, vesting, distribution or increase in benefits with respect to any Plan for any current or former director, officer, employee or other service provider of the Company, (ii) give rise to any obligation to fund any payment or benefit by the Company, (iii) give rise to any limitation on the ability of the Company to amend or terminate any Plan, or (iv) result in any payment or benefit that will be characterized as an “excess parachute payment,” within the meaning of Section 280G of the Code under any Plan.

          (e) Each Plan maintained by the Company may be unilaterally amended or terminated by the Company, without material liability or penalty, subject to the rights of existing participants under the Plans.

          (f) The Company has not participated in, maintained or contributed to or been required to contribute to a “multiemployer plan,” as such term is defined in Section 3(37) of ERISA.

          (g) There are no pending or, to the Knowledge of Seller, threatened claims (other than routine claims for benefits in the ordinary course), lawsuits or arbitrations which have been asserted or instituted against the Plans, any fiduciaries of the Plans with respect to their duties to the Plans or the assets of any of the trusts under any of the Plans which could reasonably be expected to result in any material liability of the Company. !

          (h) The Company does not have any Plan or any other agreement or arrangement under which the Company has any liability under a “nonqualified deferred

compensation plan” within the meaning of Section 409A of the Code and the applicable Treasury guidance thereunder (the “Company 409A Plans”) which does not comply with the requirements of Section 409A of the Code.

          (i) The Internal Revenue Service