FORM F-1

Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. o

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

Telvent GIT, S.A. is a Spanish corporation and this is our initial public offering. We are selling 8,700,000 ordinary shares.

Prior to this offering, no public market exists for our ordinary shares. We currently anticipate that the initial public offering price will be between $ 12.50 and $ 14.50 per share. We have applied to have our ordinary shares quoted on the Nasdaq National Market under the symbol “TLVT.” Our ordinary shares will not be listed on any exchange or otherwise quoted for trading in Spain.

Investing in our ordinary shares involves risks that are described in the “Risk Factors” section beginning on page 8 of this prospectus.

The underwriters may also purchase up to an additional 107,900 ordinary shares from the selling shareholders named in this prospectus and 1,197,100 shares from us at the public offering price, less the underwriting discount, within 30 days from the date of this prospectus to cover any overallotments. We will not receive any proceeds from the sale of ordinary shares by the selling shareholders in the overallotment.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

You should rely only on the information contained in this prospectus. None of us, the selling shareholders, or the underwriters have authorized any person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. None of us, the selling shareholders, or the underwriters are making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus. Our business, financial condition, results of operations and prospects may have changed since that date.

Unless otherwise indicated, (1) the terms “we,” “us,” “our company,” “our” and “Telvent” refer to Telvent GIT, S.A. and includes Telvent GIT, S.A. and its subsidiaries unless the context otherwise requires, (2) “Abengoa” refers to Abengoa, S.A. and its subsidiaries (including Telvent Corporation, S.L., Telvent Investments, S.L. and Siema AG) and excludes Telvent GIT, S.A. and its subsidiaries, unless the context otherwise requires, (3) “the Abengoa Group” refers to Abengoa, S.A. and its subsidiaries, including Telvent GIT, S.A. and its subsidiaries, (4) “shares” and “ordinary shares” refer to our ordinary shares, (5) all references to “U.S. Dollars,” “dollars,” “$” and “U.S. $” are to the legal currency of the United States and all references to “Euros” and “€” are to the legal currency of the European Union; and (6) all references to the NMS Division of Metso refer to Metso Automation SCADA Solutions Ltd. and Metso Automation SCADA Solutions Inc., which we acquired on January 31, 2003. Discussions of the history of our business in this prospectus include the histories of the businesses we have acquired prior to their acquisition by us. All references to “Latin America” include Mexico and all references to “North America” refer to the United States and Canada.

All references to our results of operations are reported in accordance with generally accepted accounting principles in the United States, or U.S. GAAP, except references to our backlog, recurring revenues, core revenues, five-year selected consolidated financial data and results of operations by sectors and geographies, which, unless the context otherwise requires, refer to our financial information as reported in accordance with generally accepted accounting principles in Spain, or Spanish GAAP.

Information in this prospectus assumes that the underwriters do not exercise their overallotment option to purchase up to 1,197,100 and 107,900 additional ordinary shares from us and the selling shareholders, respectively, and reflects the 200 for 1 split of our ordinary shares effected on April 15, 2004. Some numbers discussed in this prospectus are approximated.

This prospectus contains some of our trademarks and service marks, including the following: Telvent, Sainco, Itaca, ValTick, SmartTOLL, VidiToll, ClearingToll, ClearingTrans, MobiFast and Sicotie.

Market and industry data used throughout this prospectus, including information relating to market share and trends, are based on our good faith estimates. These estimates were based on our review of internal surveys, independent industry publications and other publicly available information. This prospectus contains references to market leadership positions in certain sectors. Unless otherwise stated, these references should be understood as leadership in terms of revenues.

Certain persons participating in this offering may engage in transactions that stabilize, maintain or otherwise affect the price of our ordinary shares. Such transactions may include stabilization and the purchase of our ordinary shares to cover short positions. For a description of these activities, see “Underwriting.”

The distribution of this prospectus and the offering of ordinary shares may be restricted by law in certain jurisdictions, and no action has been or will be taken in any jurisdiction by us or by any of the underwriters that would permit a public offering of the ordinary shares or distribution of a prospectus in any jurisdiction where action for this purpose is required, other than the United States. All persons into whose possession this prospectus comes must inform themselves of and observe all such restrictions. Neither we nor the underwriters accept any responsibility for any violation by any person, whether or not a prospective purchaser of ordinary shares, of any such restrictions.

The ordinary shares have not, whether directly or indirectly, been offered or sold and, for up to six months following the consummation of this offering, will not be offered or sold to persons in the United Kingdom except to persons whose ordinary activities involve them acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which do not constitute an offer to the public in the United Kingdom for the purposes of the Public Offers of Securities Regulations 1995. We have (i) complied and will comply with all applicable provisions of the FSMA in respect of anything done by us in relation to the ordinary shares in, from or otherwise involving the United Kingdom and (ii) only communicated or caused to be communicated, and will only communicate or cause to be communicated, any invitation or inducement to engage in investment activity (within the meaning of section 21 of the FSMA) in connection with the sale of the ordinary shares in circumstances where section 21(1) of the FSMA does not apply to us, to persons who fall within the exemptions to section 21 of the FSMA set out in The Financial Services and Markets Act 2000 (Financial Promotion) Order 2001 (the “Order”) (including to persons exempted under Article 19 (Investment Professionals) or Article 49(2)(a) to (d) (high net worth companies, unincorporated associations etc.) of the Order) or to persons to whom the invitation or inducement may otherwise lawfully be communicated or cause to be communicated.

The ordinary shares may not be offered, advertised or sold in Spain except in accordance with the requirements of the Spanish Securities Market Law (Law 24/1998 of July 28 as amended by Law 37/1998 of November 16) and Royal Decree 291/1992, on Issues and Public Offering of Securities as amended or restated by Royal Decree 2590/1998 of 7 December (“R.D. 291/92”). The prospectus is not verified or registered in the administrative registries of the National Stock Exchange Commission (“CNMV”) in Spain, and therefore a public offer for subscription of the ordinary shares shall not be promoted in Spain. Notwithstanding the above, the ordinary shares may be offered in Spain subject to the requirement set forth in R.D. 291/92, and, in particular, in Article 7.1.a if a private placement of the ordinary shares is addressed exclusively to institutional investors. The institutional investors will be subject to the restriction on the transmission of the ordinary shares to the other investors in Spain that are not institutional investors set forth in Article 7.1.a of R.D. 291/92.

PROSPECTUS SUMMARY

This summary highlights key aspects of the information contained elsewhere in this prospectus. Because it is a summary, it does not contain all of the information that you should consider before making an investment decision regarding our ordinary shares. You should read the entire prospectus carefully, including the “Risk Factors” section and the financial statements and the accompanying notes to those statements. All references in this prospectus to our results of operations are reported in accordance with generally accepted accounting principles in the United States, or U.S. GAAP, except references to our backlog, recurring revenues, core revenues, five-year selected consolidated financial data and results of operations by sectors and geographies, which, unless the context otherwise requires, refer to our financial information as reported in accordance with generally accepted accounting principles in Spain, or Spanish GAAP. Core revenues consists of all types of revenue recognized under Spanish GAAP that are also recognized as revenue under U.S. GAAP.

Telvent

Introduction

We are an information technology company that provides value-added real-time products and services solutions to customers in targeted industrial sectors (Energy, Traffic, Transport and Environment) primarily in Spain, North America, Latin America (including Mexico) and China. Our products and services solutions include systems integration, consulting services, design and engineering services, and software that enable our customers to more efficiently manage their operations and business processes. We have a well-established presence in the industries in which we operate and our solutions help to manage and control:

• approximately 60% of the oil and gas transmission pipeline mileage in North America, through, for example, the use of our SCADA (supervisory, control and data acquisition) systems and applications that monitor flow and detect leaks;

• the transmission and distribution of electricity to more than 80 million people around the world, through, for example, our applications that track network conditions and facilitate remote control of networks;

• the daily traffic flow at over 6,000 intersections in some of the largest cities in our core geographies through, for example, the use of our intelligent traffic systems that monitor and control urban traffic; and

• the transportation of passengers on trains and subways in major metropolitan areas, including Madrid and New York City, through, for example, the use of our applications for ticketing systems and for the monitoring and control of the network that supplies electrical power to train cars.

Our business is organized in three primary ways — across sectors, IT solutions and geographies.

Sectors: We have developed distinctive skills in our targeted industrial sectors that involve mission-critical functions for large flow-based networks.

Real-time IT Solutions: Our mission-critical real-time products and services solutions collect raw data at the field level, transform that data into operational information, and convert the operational information into business intelligence.

Specific Geographies: We currently focus on four geographic regions: Spain, North America, Latin America and China. We started operations in Spain over 40 years ago.

Our Strengths

of operations of the former NMS Division of Metso, which we acquired as of January 31, 2003. This acquisition was the primary source of our 2003 revenue growth. For the six months ended June 30, 2004, we generated revenues of € 126.5 million and income from operations of € 5.6 million. Our revenues and income from operations increased 17.4% and 257.7%, respectively, from the six months ended June 30, 2003 to the six months ended June 30, 2004. This increase in revenues was primarily due to the consolidation of revenue from our temporary consortiums, increased business activity and revenues attributable to our ownership of the NMS Division of Metso for the entire six-month period ended June 30, 2004. Net income for the six months ended June 30, 2004 increased to € 3.6 million from € 0.5 million for the six months ended June 30, 2003.

Revenues visibility. We maintain a backlog, which represents the portion of our signed contracts for which performance is pending. The backlog results from our turnkey project execution contracts, which range from 12 to 18 months, and our multi-year maintenance and managed service contracts. We had a core revenues backlog of € 265.8 million as of December 31, 2003, compared with € 214.8 million as of December 31, 2002, which represents a 23.7% increase. 87.6% of our 2003 core revenues came from customers that were our customers in previous years. 20.0% of our 2003 core revenues came from multi-year maintenance and managed service contracts, which typically have terms ranging from three to five years. As of June 30, 2004, our core revenues backlog was € 330.4 million and 88.7% of our core revenues for the six months ended June 30, 2004 came from customers that were our existing customers in previous years.

Diversified blue chip customer base. Our representative customer base consists of companies responsible for generation, transmission and distribution in the energy sector, and government and quasi-government agencies in the traffic, transport and environment sector. Our core group of customers includes some of the largest energy companies in the United States, Canada, Spain, Mexico, Brazil and China, some of the largest Spanish and Latin American utilities, the traffic or transport authorities of some of the largest cities in Spain, North America, Latin America and China, and a number of government environmental entities in Spain and North America. Our long-standing relationships with many of our customers, some of which span more than 15 years, have allowed for the progressive introduction of new products and services to our installed customer base.

Distinctive proprietary technology. Through our research and development effort, we have developed proprietary products. Our research and development planning process is designed to ensure that new developments are aligned with our business strategy and with customer needs and demands, which we believe increases the effectiveness of our research and development process.

Flexible technology approach. We have developed a series of strategic alliances with other vendors that have allowed us to build an integrated portfolio of proprietary, as well as third-party, solutions.

Global solutions delivered locally. Our operational model has allowed us to leverage our sector expertise in the geographies in which we operate and to build a competitive advantage over both less sophisticated local integrators and large but less technologically flexible global suppliers.

Experienced international management team. On average, our executive officers have more than 15 years of industry experience. In addition, most of these individuals have been employed by us for many years in our targeted geographies.

Proven internal management processes and systems. We operate with rigorous management and risk control systems. We and our subsidiaries have implemented these systems as a result of our parent company, Abengoa, being a public company in Spain.

Relationship with Abengoa. The Abengoa Group is comprised of diversified industrial and technology companies. Together with Telvent Investments, Telvent represents the Abengoa Group’s information technology business unit. We generally operate independently from Abengoa’s other businesses although we benefit from

our relationship with Abengoa in a number of ways. In particular, our relationship enables us to identify cross-selling opportunities and gain market intelligence by maintaining close contact with the other companies in the Abengoa Group. The other benefits we realize from the Abengoa Group structure include our access to the professional support services that we purchase from other companies of the Abengoa Group, and our ability to sell certain communications, IT and related services to other companies of the Abengoa Group.

Our Market Opportunity

We expect that, in general, our target geographic markets will grow in the near term, primarily driven by the following trends:

• Increased infrastructure spending in our key sectors;

• Infrastructure development in China; and

• Demand for new information technology products and services.

We expect these trends also to be supported by continuing GDP growth in each of our core geographies of Spain, North America, Latin America and China.

Our Growth Strategy

• Develop or consolidate a leadership position in terms of revenues in our current geographies for our core sectors and develop ways to expand our capabilities to new sectors;

• Complete a fully integrated offering of solutions in our core sectors; and

• Capture sector-specific real-time process outsourcing opportunities.

Risk Factors

Our business is subject to significant risks. The following risks to our business, as well as the other risks that we face, are more fully described under “Risk Factors” beginning on page 8:

• Adverse economic conditions, particularly in Spain where we generated 56.6% of our 2003 core revenues, may reduce the demand for information technology services and solutions;

• We are particularly sensitive to uncertainties inherent in government and state-owned company contracts and information technology budgets;

• Our operations are expanding and we may not be able to manage this process in an effective manner;

• We may incur financial risk in connection with “Build-Operate-Transfer” programs; we have not yet made an equity investment in a “B-O-T” project;

• We may not be able to grow through extending our sales into our other geographies, selling more higher value-added solutions or developing our real-time process outsourcing program;

• We may not be able to acquire businesses, or integrate businesses we do acquire, in the manner in which we anticipate;

• Our relationships with our alliance partners may not be successful, which could adversely affect our business and the implementation of our growth strategy;

• Future movements in currency rates may adversely affect our results of operations;

• We may not be able to keep pace with rapidly changing technology and as a result we may not be able to compete effectively;

• Our majority shareholder has the ability to control matters requiring a shareholder vote, and, because we are a “controlled company” under Nasdaq rules, our board of directors is not required to have a majority of independent directors; and

• Abengoa’s credit facility places indirect restrictions on our ability to purchase or sell assets, merge with another company, make acquisitions and incur indebtedness.

Corporate Information and History

Since the incorporation in 1963 of Sociedad Anónima de Instalaciones de Control (Sainco), or Sainco, now known as Telvent Energía y Medio Ambiente, S.A., we and our predecessors have been able to establish long-standing relationships with our Energy and Traffic customers and progressively introduce new ranges of products and services solutions to the market. We and our predecessors also have developed new related sectors, such as Environment and Transport, and we and our predecessors have successfully entered new geographies, such as our entry into Mexico, Brazil and China in the 1990s. We have also been able to successfully integrate acquisitions, including our recent acquisition of the NMS Division of Metso through which we gained entry into the North American market. Telvent GIT, S.A. was incorporated in Spain in 2000 as the holding company for the information technology businesses of Abengoa, our controlling shareholder. The formation of this holding company structure was completed on January 1, 2001, upon Abengoa’s contribution of the shares of Telvent Energía y Medio Ambiente and its subsidiaries to us. We operate our business principally through five subsidiaries, including Telvent Energía y Medio Ambiente and Telvent Canada Ltd., which is the entity that owns the assets formerly owned by the NMS Division of Metso. Discussions of the history of our business in this prospectus include the histories of the businesses we have acquired prior to their acquisition by us. Our principal executive offices are located at Valgrande, 6, 28108 Alcobendas, Madrid, Spain and we can be contacted at (34) 902-33-55-99 or (34) 917-14-70-02. We or our subsidiaries also have offices in the United States, Canada, Mexico, Brazil and China. Our Internet address is www.telvent.com. The information contained in our Web site is not a part of this prospectus.

The Offering

The following information assumes that the underwriters do not exercise the option granted by the selling shareholders named in this prospectus and us to purchase up to an additional 1,305,000 ordinary shares in the offering. All ordinary share information reflects the 200 for 1 split of our ordinary shares effected on April 15, 2004. Unless we indicate otherwise, all information in this prospectus assumes an initial public offering price of $ 13.50, the midpoint of the range set forth on the front cover of this prospectus.


Ordinary Shares Offered By Us		8,700,000 ordinary shares.

Shares Outstanding After the Offering		After the offering, we will have 28,700,000 ordinary shares issued and outstanding.

Shares Owned by Abengoa After the Offering		After the offering, Abengoa will own, directly or indirectly, 18,201,000, or 63.4%, of our ordinary shares.

Offering Price		$ per ordinary share.

Use of Proceeds		We estimate that the net proceeds from the offering will be approximately $ 109.2 million. We expect to use $ 87.4 million to $ 98.3 million of our net proceeds from this offering for acquisitions, joint ventures, and equity investments in “Build-Operate-Transfer” projects, $ 5.5 million to $ 16.4 million to finance the expansion of our products and services solutions, and the remainder for general working capital purposes.

Dividends		We do not anticipate paying any cash dividends on our ordinary shares in the foreseeable future.

Lock-up		We, together with all of our existing shareholders, will agree with the underwriters not to sell or transfer any ordinary shares for 180 days after the date of this prospectus without first obtaining the written consent of the representatives.

Proposed Nasdaq National Market Symbol		“TLVT”. Our ordinary shares will not be listed on any exchange or otherwise quoted for trading in Spain.

Reporting		We have agreed with the underwriters to provide certain periodic and other reports to the SEC and to post them on our website.

Settlement and Delivery		You must pay for the ordinary shares in U.S. Dollars by the closing date of the offering, which is expected to be , 2004. Delivery of the ordinary shares will be subject to registration with the Mercantile Registry of Madrid of the capital increase associated with the issuance of the shares offered by us in this offering. In the event that these shares are not registered within four business days after the pricing of the offering, the offering will be cancelled, you will not receive any ordinary shares and any payment you have made will be returned to you promptly without interest. The underwriters will advance us funds prior to closing to facilitate our registration of the capital increase.

Risk Factors		See “Risk Factors” and other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in our shares.

Summary Consolidated Financial Data

You should read the following information with our consolidated financial statements and related notes, “Selected Consolidated Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus.

The summary consolidated statement of operations data for 2003 and 2002 and the summary consolidated balance sheet data as of December 31, 2003 and 2002 are derived from our audited consolidated financial statements included elsewhere in this prospectus and should be read in conjunction with, and are qualified in their entirety by reference to, these consolidated financial statements and related notes. These consolidated financial statements were prepared in accordance with U.S. GAAP. The summary condensed consolidated statement of operations data for the six months ended June 30, 2004 and June 30, 2003 and the summary condensed consolidated balance sheet data as of June 30, 2004 are derived from our unaudited condensed consolidated interim financial statements included elsewhere in this prospectus and should be read in conjunction with, and are qualified in their entirety by reference to, these condensed consolidated financial statements and related notes.



			Six Months Ended June 30,						Year Ended December 31,

			2004⁽¹⁾		2004		2003⁽²⁾		2003⁽¹⁾⁽²⁾		2003⁽²⁾		2002


			(unaudited)

			(In thousands, except per share data)
Consolidated Statement of Operations Data:
	Revenues⁽³⁾		$	154,109	€	126,537	€	107,797	$	313,892	€	257,732	€	219,435
	Cost of revenues⁽³⁾			119,528		98,143		84,438		246,197		202,149		180,752

		Gross profit		34,581		28,394		23,359		67,695		55,583		38,683

	General and administrative			13,829		11,355		11,806		22,905		18,807		18,536
	Sales and marketing			5,293		4,346		3,617		11,072		9,091		3,705
	Research and development			4,280		3,514		3,171		13,735		11,278		5,772
	Depreciation and amortization			4,322		3,549		3,191		7,238		5,943		3,116
	Impairment charges⁽⁴⁾			—		—		—		1,935		1,589		2,290

		Total operating expenses		27,724		22,764		21,785		56,885		46,708		33,419

	Income from operations			6,857		5,630		1,574		10,810		8,875		5,264
	Financial (expense), net⁽⁵⁾			(2,307)		(1,894)		(1,155)		(5,336)		(4,381)		(1,463)
	Net income		$	4,440	€	3,646	€	454	$	5,498	€	4,514	€	4,671

Pro Forma Data:
	Pro forma basic and diluted net income per ordinary share⁽⁶⁾		$	0.15	€	0.13			$	0.19	€	0.16



	As of June 30,				As of December 31,

	2004⁽¹⁾		2004		2003⁽¹⁾		2003		2002


	(unaudited)

	(In thousands)
Consolidated Balance Sheet Data:
Cash	$	21,424	€	17,591	$	33,778	€	27,735	€	32,731
Restricted cash⁽⁷⁾		—		—		—		—		49,681
Working capital⁽⁸⁾		2,695		2,213		(17,695)		(14,529)		(13,864)
Total assets		334,402		274,573		385,470		316,504		335,708
Net related party credit line balance⁽⁹⁾		(2,257)		(1,853)		(8,209)		(6,740)		(52,743)
Short-term debt		1,184		972		18,108		14,868		16,775
Long-term debt⁽¹⁰⁾		35,323		29,003		42,160		34,617		19,378
Shareholders’ equity		76,968		63,197		73,480		60,333		61,193



	Six Months Ended
	June 30,				Year Ended December 31,

	2004⁽¹⁾		2004		2003⁽¹⁾⁽²⁾		2003⁽²⁾		2002


	(unaudited)

	(In thousands, except percentages)
Other Data:
Gross Margin				22.4%				21.6%		17.6%
Backlog (as of period-end)⁽¹¹⁾	$	402,388	€	330,395	$	323,658	€	265,751	€	214,785
Recurring revenues⁽¹²⁾				88.7%				87.6%		89.1%

⁽¹⁾    Data presented in U.S. Dollars was translated from Euros to U.S. Dollars at the June 30, 2004 exchange rate of U.S. $ 1.2179 to € 1.00.

⁽²⁾    Financial results for the six months ended June 30, 2003 and for the year ended December 31, 2003 include five and eleven months, respectively, of results of operations of the NMS Division of Metso, which we acquired on January 31, 2003.

⁽³⁾    During 2003, we implemented the requirements of FIN 46-R, “Consolidation of Variable Interest Entities,” for those variable interest entities that had been created after January 31, 2003. As a result of this implementation, we recorded additional revenues and cost of revenues relating to other venturers of € 3.7 million for the year ended December 31, 2003. As of January 1, 2004, we extended the implementation of FIN 46-R to those variable interest entities that had been created prior to February 1, 2003. The effect of this implementation was to consolidate certain joint venture agreements for the six months ended June 30, 2004. The effect of this consolidation was our recording additional revenues of € 10.0 million relating to other venturers and additional cost of revenues of € 9.5 million relating to other venturers for the six months ended June 30, 2004. The financial statements of prior periods were not restated and the effect of consolidating these entities did not result in a cumulative effect of a change in accounting principle as of January 1, 2004.

⁽⁴⁾    Impairment charges reflects expenses in connection with some of our minority investments. These investments were sold in August 2004.

⁽⁵⁾    Financial (expense) income, net in 2003 reflects, among other things, € 1.9 million of expense related to the cost of guarantees in connection with one of our minority investments. We sold this investment in June 2004.

⁽⁶⁾    Assumes that our 200 to 1 stock split occurred as of the beginning of the period presented, that there were 20,000,000 ordinary shares outstanding during all the periods presented and that we sold 8,700,000 ordinary shares in this offering.

⁽⁷⁾    Restricted cash reflects the cash collateral account we maintained to provide credit support in connection with a guarantee relating to a minority investment. The collateral account was no longer required as of July 2003.

⁽⁸⁾    Working capital is the sum of accounts receivable and inventory, less accounts payable.

⁽⁹⁾    Net related party credit line balance of the net amount of our loans to Abengoa (€ 44.3 million as of December 31, 2002 and € 50.2 million as of December 31, 2003), and our borrowings from Abengoa (€ 97.0 million as of December 31, 2002 and € 57.0 million as of December 31, 2003). See “Relationship Between Telvent and the Abengoa Group” and Note 21 to our Consolidated Financial Statements.

⁽¹⁰⁾   Long-term debt consists of long-term debt plus the current portion of long-term debt.

⁽¹¹⁾   Our backlog represents the portion of our signed contracts for which performance is pending. Backlog amounts are presented in accordance with Spanish GAAP. Backlog excludes our pipeline of projects that we are pursuing but as to which we have not yet signed binding agreements.

⁽¹²⁾   Recurring revenues is defined as core revenues from customers who were customers in previous years as a percentage of core revenues. Recurring revenues percentages are calculated using core revenues derived in accordance with Spanish GAAP.

Investing in our ordinary shares involves risks. You should carefully consider the risks described below, together with the other information contained in this prospectus, before purchasing our ordinary shares. Our business, financial condition or results of operations could be materially adversely affected by any of these risks. The trading price of our shares could decline due to any of these risks and you may lose all or part of your investment.

Our business is exposed to the risk that adverse economic conditions, particularly in Spain, will reduce the demand for information technology services and solutions.

Demand for information technology services is dependent on customers’ operations, budgets and overall financial condition. Therefore, demand for our services is highly sensitive to changes in general economic conditions and consolidation among our target customers in our core sectors. In particular, we are sensitive to economic conditions in our Energy and Traffic sectors, which constituted 75.9% of our 2003 core revenues. Generalized or localized downturns or inflationary pressures in Spain, North America, Latin America or China could also have an adverse effect on our business and financial condition. This is particularly true in Spain, where 56.6% of our core revenues were generated during 2003. As much of our business activity is highly concentrated in Spain, our business and financial condition is largely dependent upon economic conditions in Spain. In addition, if worldwide adverse economic conditions continue or worsen, our expected growth will be adversely affected.

We are particularly sensitive to risks relating to the uncertainties inherent in government and state-owned company contracts, especially in Spain.

A substantial percentage of our revenue derives from services we provide as a contractor and subcontractor on various projects with governmental entities, including state-owned companies. In 2003, 47.1% of our core revenues were derived from services we provided to governmental entities. Our Traffic and Environment sectors are particularly dependent upon contracts with governmental entities and state-owned companies. Although a number of government projects for which we serve as a contractor or subcontractor are planned as multi-year projects, governments normally reconsider the funding of these projects on an annual (or more frequent) basis, particularly in the United States. Generally, these governmental entities may change the scope of, or terminate or delay, these projects at their convenience. In particular, 30.4% of our 2003 core revenues came from contracts or subcontracts with Spanish governmental entities. As a result of the recent election of a new government in Spain in March 2004, there may be significant budgetary changes for various Spanish infrastructure and investment projects. The termination or a major reduction in the scope of a major government project could have a material adverse effect on our results of operations and financial condition. In addition, economic or political instability in any of the countries in which we operate, particularly in Latin America and China, can impact government expenditures on infrastructure projects and, accordingly, could have a material adverse effect on our ability to achieve growth in those geographies.

We may not be able to manage effectively our expanding operations, which may impede our growth or negatively impact our performance.

We are currently experiencing a period of rapid growth. This places a significant strain on our managerial and operational resources. Our number of employees grew from 1,644 as of December 31, 2002, to 2,116 as of December 31, 2003, mostly arising from employees added in connection with our acquisition of the NMS Division of Metso. To accommodate our growth, we must implement new or upgraded operating and financial systems, procedures and controls throughout many different locations, including processes to address trade barriers and receivables collection. These efforts may not be successful. Our failure to expand and integrate these systems and procedures efficiently could cause our expenses to grow and our revenues to decline or grow more slowly than expected.

We may not be able to develop real-time process outsourcing programs in the manner we anticipate, which may restrict our growth opportunities.

One of our growth strategies is to develop real-time process outsourcing programs in response to a trend among our customers to outsource sector-specific process operations. We have only recently started to develop these programs and we may not be successful in developing them in the manner we anticipate, or our customers may elect not to outsource these functions. If either or both of these occur, our growth opportunities and future operating results may be adversely affected.

We may incur financial risk in connection with “Build-Operate-Transfer” programs.

“Build-Operate-Transfer” projects represent one method of financing a real-time process outsourcing program. A typical component of these “B-O-T” programs is a requirement to fund a portion of the equity investment required to construct the project in exchange for the right to operate a portion of the project (such as a toll system) for a fee over the life of the project. This has the result of exposing us to the risks inherent in an equity investment in a technological project, including the risks of integration delays and cost overruns, and could require us to incur indebtedness or obtain financing in order for us to be able to fund our required equity investment, which could increase our leverage and adversely affect our financial condition and results of operations. We have not yet made an equity investment in a “B-O-T” project. We anticipate that we will invest some of the proceeds we receive from this offering in “B-O-T” projects.

We may not be able to successfully extend our sales of our solutions into our other geographies, which may impede our growth.

Part of our growth strategy is predicated on extending our sales in the Energy, Traffic, Transport and Environment sectors to all of the geographies in which we currently operate. There are unique challenges in each geography in which we operate and extending the geographical reach of our sectors may be more difficult than we anticipate. In addition, in certain of our sectors (particularly Traffic and Transport), customers are local in nature and so to extend our sectors into new geographies we will need to develop relationships with new customers. To the extent that we are unable to do so, we may not be able to implement our growth strategy.

We may not be able to integrate our acquired businesses successfully, which may impede our growth and hurt our operations.

Much of our recent revenue growth is due to our January 2003 acquisition of the NMS Division of Metso in North America. As part of our growth strategy, we anticipate making additional acquisitions in the future and expect to use proceeds from this offering to finance the costs of such acquisitions. The success of any acquisitions we may make will depend on our ability to integrate the personnel and acquired assets. Some of these acquisitions may be made in regions where the labor market is generally more competitive than some of our current labor markets. We may encounter difficulties in integrating acquisitions with our existing operations. This risk is heightened because we envision making acquisitions outside of Spain as part of our growth strategy, even though much of our management and central operations are based in Spain. Our inability to successfully integrate any businesses we acquire would cause us not to realize the degree or timing of benefits we expected and would impair our ability to achieve our growth strategy.

We may face adverse effects from investigations of our parent, four of its directors and its general counsel, its majority shareholder, and our chairman and chief executive officer.

In October 2003, the Audiencia Nacional in Spain announced that it had begun a criminal investigation into the role of Abengoa’s majority shareholder, Inversión Corporativa I.C., S.A., and four directors of Abengoa, including its chairmen, in a series of transactions resulting in our purchase of our initial 3.71% interest in Xfera Móviles S.A., a start-up stage third generation mobile telephony company. We believe this investigation focuses on whether the Xfera transaction improperly benefited Inversión Corporativa at the expense of Abengoa’s minority shareholders. In September 2004, we learned that the Audiencia Nacional had

extended the criminal investigation into the roles of our chairman and chief executive officer, Manuel Sanchez, and of the general counsel of Abengoa who also served as the secretary to the board of directors of Telvent from October 2000 to April 2004. We believe the investigation involving our chairman and chief executive officer focuses on his role in connection with our acquisition of the Xfera interest in December 2002 and in particular concerns whether, as our chief executive officer at the time we acquired the interest in Xfera, he cooperated with the directors of Abengoa to complete the transaction by not providing information to our board of directors that would be adequate for our board to make an informed and independent decision regarding the acquisition of the Xfera interest. The CNMV, the Spanish stock market regulator, opened an investigation in January 2003 that focuses on whether an agreement between Abengoa and its majority shareholder in October 2000 constituted a “relevant fact” that should have been identified to the CNMV.

These investigations and inquiries are pending (although the CNMV investigation has been suspended pending resolution of the Audiencia Nacional proceeding) and we cannot predict their outcomes, nor can we predict the time in which these investigations and inquiries will be resolved, including with respect to our chairman and chief executive officer. These investigations and inquiries could have a material adverse effect on our business because they could divert the attention of our chairman and chief executive officer and other members of our management team. If the outcomes of any of these investigations and inquiries are adverse, or if any of these investigations and inquiries are protracted, they could have a material adverse effect on the ability of our chairman and chief executive officer to exercise his duties, indirectly have a material adverse effect on our financial condition, results of operations and prospects or, at a minimum, create a negative impression of us in the stock market or with our customers or cause our share price to decline. Further, to the extent there is an adverse finding against our chairman and chief executive officer in the Audiencia Nacional proceeding, he might be formally accused of criminal wrongdoing and could face criminal charges in a criminal trial. To the extent of an adverse finding in such a criminal trial, our chairman and chief executive officer could face various penalties including incarceration, fines or an inability to hold office in a public corporation. In addition, our vice president for business and corporate development is, along with our chairman and chief executive officer, also one of the two joint directors of Telvent Investments, the Abengoa entity that currently holds the interest in Xfera, and therefore he might also need to devote attention to these matters. See “Relationship Between Telvent and the Abengoa Group — Minority Investments.”

We may need additional capital, which, if we can obtain it, could cause us to take steps that may dilute your investment, increase our indebtedness, or both.

Our credit arrangements with Abengoa are our primary source of borrowed capital for our working capital or other needs and permit us to request to borrow up to € 45.0 million for a period not to exceed one year. Abengoa may, at its option, elect not to lend us funds under this arrangement. In addition, Abengoa currently provides us with credit support in connection with some of our performance bonds and some of our lending arrangements and also periodically guarantees our lines of credit and our trade letters of credit with respect to some of our projects. Any refusal or inability of Abengoa to provide us with funding under the credit arrangement or to provide us with guarantees or credit support, because of financial constraints on Abengoa or otherwise, could significantly curtail our ability to access short-term capital and could have a material adverse effect on us. We may require additional cash resources due to changed business conditions or other future developments, including any joint ventures, investments or acquisitions we may decide to pursue. If the resources available to us are insufficient to satisfy our cash requirements, we may seek to sell additional equity or debt securities or obtain additional credit arrangements. The sale of additional equity securities could result in additional dilution to our shareholders. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations. We cannot assure you that any additional financing will be available in amounts or on terms acceptable to us, if at all.

We may not be able to implement appropriate hedging strategies to protect against future movements in currency rates between the Euro and the U.S. Dollar, which may adversely affect our results of operations.

We are exposed to foreign exchange risk arising from various currency exposures. Some of our expenses are recorded in foreign currencies while a significant amount of our revenues is recorded in Euros, the legal

Our relationships with our alliance partners may not be successful, which could adversely affect our business and the implementation of our growth strategy.

In certain markets and sectors, we depend on alliances to generate sales and manage existing projects. In China we have an alliance with Open Systems Control, Inc., which is exclusive in some sectors, to provide information technology services to the oil and gas, electricity and water sectors of the economy. We also have alliances with Environmental Systems Research Institute, or ESRI, for geographic information and Echelon Corporation for device networking technologies. Our alliances with Open Systems Control and ESRI are one-year, renewable agreements, while the Echelon alliance is terminable upon notice. If these relationships are not successful or the alliances are not renewed on favorable terms, our business and growth may be adversely affected and the value of your shares may decline.

The failure of our mission-critical information technology solutions or our customers’ systems could expose us to liability.

We provide real-time products and services solutions for our customers’ information technology systems, which in turn monitor mission-critical business functions and protect against problems such as leaks, waste or power outages. In the event that our customers’ systems experience a failure they claim is related to us or to our products and services solutions, we may be subject to claims for injuries and other damages. Our insurance may not be sufficient or may not apply to any exposure to which we may be subject resulting from this type of product failure.

Our operations depend on facilities throughout the world and are subject to risks that could disrupt the services that we provide.

In providing our services, we operate out of more than 20 facilities worldwide. Our facilities and operations could be damaged or disrupted by a natural disaster, war, political unrest, terrorist activity, computer viruses or public health concerns. The uncertainty surrounding the outcome of the Spanish elections following the March 11, 2004 terrorist attack in Madrid particularly affected our core revenues from our Spanish customers as recognized under Spanish GAAP, as invoicing was delayed on projects for many of these customers. We do not yet know what further impact the March 11 terrorist attack in Madrid, Spain and the transition to the new government will have on our results of operations. A major catastrophe, such as an earthquake or other natural disaster at any of our sites, or significant political unrest, war or terrorist activities in any of the areas where we conduct operations, could result in a prolonged interruption of or disruption to the services we provide to our customers. We may not be able to provide our services in the manner required by our customers if any of the foregoing occur, which would damage our reputation, business and financial condition.

A slow-down of the Chinese economy, adverse changes in political and economic policies of the Chinese government, or changes in the willingness of third parties to fund projects in China may reduce our growth and profitability.

Our core revenues in China during 2003 were € 11.9 million. As part of our growth strategy, we expect our Chinese operations to grow over the next several years. However, growth estimates in China are particularly unpredictable and our sales in China are subject to significant volatility. Since the late 1970s, the Chinese government has been reforming the economic system in China. However, any Chinese government economic reform policies or measures may from time to time be modified or revised. Although the Chinese economy has grown significantly in the past decade, we cannot assure you that the Chinese economy will

continue to grow at historical rates, if at all. In addition, China’s regulatory policies create additional administrative and operational burdens for us and increase our costs of doing business, and also make it more difficult for foreign companies to repatriate income from China. Any adverse changes in economic conditions in China, or changes in policies of the Chinese government or Chinese laws and regulations, could have a material adverse effect on the overall economic growth of China and investment in infrastructure and information technology. In addition, the funding for most of our projects in China has come from third parties, such as the World Bank and the Spanish government. Changes in the willingness of such parties to provide funds for infrastructure projects, including for information technology services and solutions, would materially impact our ability to maintain or increase our current level of activity in China. These developments could adversely affect our businesses, lead to reduction in demand for our services, adversely affect our competitive position and limit our future growth.

We depend substantially on a limited number of key personnel who would be difficult to replace. If we lose the services of these individuals, our business will be adversely affected.

Our continued growth and success depend in large part on the managerial and technical skills of the members of our senior management, particularly Manuel Sánchez, José Ignacio del Barrio, Ana María Plaza, Larry Stack, David Jardine, Dai Yue, Luis Rancé, Marcio Leonardo, José Montoya, Philip Goulet and Ignacio González-Domínguez, and the success of our expansion efforts depends on significant management attention to integration and coordination. Any loss of services of any of those individuals would negatively affect our business. In addition, during periods in which demand for technically-skilled employees is great, we may experience significant employee turnover. These individuals are in high demand and we may not be able to attract or retain the staff we need.

Most of our executive officers, including our chairman and chief executive officer, are not subject to written employment contracts. In addition, the employment contracts we do have do not specify a fixed employment period and do not contain non-compete provisions.

There are many companies that provide competing solutions in the sectors and geographies in which we operate. In particular, we compete on our ability to provide innovative solutions to our customers. If we are unable to continue to develop innovative solutions for our customers at competitive prices, we will not be able to compete successfully with our competitors. The competition we face is intense and we expect it to increase in the future.


	•	price reductions and lower revenues;

	•	loss of customers;

	•	lower than anticipated growth; or

	•	loss of market share.

In addition, our competitors may develop products and services solutions that are better than ours, that are more appealing to customers or that achieve greater market acceptance. We compete with large engineering and industrial firms and small sector-driven specialized firms on a geographic and customer basis, including General Electric, Affiliated Computer Services, Indra Sistemas, S.A., Sice (Sociedad Iberica de Construcciones Electricas, S.A.), and Transdyn Controls, Inc. Many of our competitors are larger than we are and have greater financial and marketing resources than we do. Many of our competitors have longer operating histories and greater name recognition than we do. These advantages may allow our competitors to respond more quickly to new or emerging technologies or changes in customer requirements than we can. It is also possible that new competitors may emerge and acquire significant market share. In addition, particularly in Spain, we often face significant competition from construction companies that also provide solutions similar to ours. To the extent these construction companies build an infrastructure project, they have an advantage

Our acquisitions and joint venture strategy involve risks and uncertainties that may harm our business or cause it not to perform as expected.

As part of our business strategy, we continually review potential acquisitions, joint ventures and strategic alliances that we expect will complement our existing business. In particular, we are relying on potential acquisitions, joint ventures and strategic alliances to help us fuel our growth by enhancing the value-added products and services solutions that we can offer to our installed customer base. We do not know if we will be able to identify any joint ventures, acquisitions or alliances or that we will be able to successfully close these transactions.

Any acquisitions and joint ventures we pursue may result in numerous risks and uncertainties, including:


	•	the risks associated with entering geographic or business markets in which we have no or only limited prior experience;

	•	the diversion of management attention from other business concerns; and

	•	the risk that an acquired business, joint venture or investment will not perform as expected or that it will expose us to unforeseen liabilities.

To the extent we recognize goodwill in any acquisition and we later deem that goodwill to be impaired, we will recognize losses which will adversely affect our results of operations and financial condition.

If we make minority investments in other companies, we will be exposed to the risk that we will not control those businesses or may need to invest additional capital in them.

We may directly or indirectly make minority investments in other companies. If we obtain any such minority investments, we will not control any such companies and the business decisions of such companies may not be in our best interests. Some of these investments may require ongoing expenditures if we are required to meet capital calls in order to maintain our level of equity investment. If we do not make these additional investments when we are obligated to do so, our ownership interest may be diluted. In addition, if the value of these strategic investments declines, we may be subject to losses that will adversely affect our results of operations and financial condition.

Changes in technology could adversely affect our business and hurt our competitive position.

The markets for our services change rapidly because of changes in customer requirements, technological innovations, new product introductions, prices, industry standards and domestic and international economic factors. New products and technology may render existing information services or technology infrastructure obsolete, excessively costly or otherwise unmarketable. If we are unable to introduce and integrate new technologies into our services in a timely and cost-effective manner, our competitive position will suffer and our prospects for growth will be impaired.

Our proprietary technology is difficult to protect and unauthorized use of our proprietary technology by third parties may reduce the value of our products, services and brand and impair our ability to compete effectively.

Our success and ability to compete depend in large part upon our ability to protect our proprietary technology. We currently hold no patents or registered copyrights, and rely on a combination of trade secret and intellectual property laws, nondisclosure and other contractual agreements and technical measures to protect our proprietary rights. These measures may not be sufficient to protect our technology from third-party infringement and could subject us to increased competition or cause us to lose market share. In addition, these measures may not protect us from the claims of employees and other third parties. We also face risks to the protection of our proprietary technology because our products are sold in markets such as China and Latin America that provide less protection for intellectual property than is provided under U.S. or Spanish laws.

Labor and employment laws in Spain and other geographies in which we operate may make it difficult for us to reduce our workforce if we deem it advisable.

Spanish law places significant limitations on, and imposes a number of procedural requirements for, a company’s ability to reduce its workforce through layoffs or otherwise. These provisions of Spanish law could make it more difficult, expensive and time-consuming for us to reduce our workforce at a time when we consider it in our best interest to do so. Approximately 70% of our workforce is located in Spain. In addition, Latin America and Canada, where approximately 24% of our employees are located, also have more restrictive labor and employment laws regarding workforce reductions than are typical in the United States.

Our business may suffer if we are sued for infringing the intellectual property rights of third parties.

We are subject to the risk of adverse claims and litigation alleging infringement by us of the intellectual property rights of others. Third parties may assert infringement claims in the future alleging infringement by our current or future products or applications. These claims may result in protracted and costly litigation, and subject us to liability if we are found to have infringed third parties’ intellectual property rights, and, regardless of the merits or ultimate outcome, may divert management’s attention from the operation of our business.

Abengoa, our majority shareholder, will be in a position to control matters requiring a shareholder vote and this ownership concentration may adversely affect the market price of our shares as well as the ability of our other shareholders to influence matters subject to shareholder vote.

Under Spanish law, a holder of 5% or more of a Spanish company’s ordinary shares has the right to call an extraordinary meeting of shareholders. Upon completion of the offering, Abengoa will directly and indirectly own 63.4% of our outstanding ordinary shares. This will give Abengoa sufficient voting power to call an extraordinary meeting of shareholders, and, at that meeting, as a result of its majority ownership of our ordinary shares, to:


	•	elect at least a majority of our directors;

	•	effect certain amendments to our by-laws and other organizational documents;

	•	control our decisions regarding debt incurrence, stock issuance and the declaration and payments of dividends;

	•	control our management; and

	•	approve or reject any merger, consolidation or sale of substantially all of our assets.

This concentration of ownership of our ordinary shares could delay or prevent mergers, tender offers or other purchases of our ordinary shares. Therefore, this concentration of ownership may adversely affect our share price. As a result of its ownership, Abengoa will have the ability to control all matters submitted for shareholder vote. Abengoa may choose to vote in a manner that is not consistent with the desires of the other owners of our ordinary shares or in a manner that the other owners of our ordinary shares do not consider to be in their best interest. In addition, as of June 30, 2004, approximately 56% of the shares of Abengoa, S.A. were owned by its majority shareholder, Inversión Corporativa. Any significant change in Abengoa’s ownership structure could have a material effect on the manner in which Abengoa exercises its voting power. Because we will be a “controlled company” as defined by the rules of the Nasdaq National Market, Abengoa may choose to elect more directors to our board and, when we form a Compensation Committee and Nominating Committee, our board of directors may choose to appoint directors who are not independent of Abengoa or us to those committees.

Our ability to implement our business strategy may be negatively affected by Abengoa’s financial condition, its other business opportunities and its agreements with its lenders.

At the closing of the offering, although we will not be directly responsible for the repayment of any loans made by third parties to Abengoa, Abengoa’s current credit facility contains, and its credit facilities in the future may contain, covenants between the Abengoa Group and its lenders which take into account our financial performance and financial condition as a consolidated entity. Some kinds of transactions which we may wish to undertake might require the consent or approval of Abengoa’s lenders in order for Abengoa to avoid a default under its agreement with those lenders because of the indirect restrictions imposed on us by the terms of Abengoa’s credit facility. These indirect restrictions arise out of covenants made by Abengoa in its credit facility that require Abengoa to ensure that none of its subsidiaries, including us, grant security interests in or dispose of their assets, make loans or otherwise extend credit, or enter into merger or combination transactions, other than in the ordinary course of their respective businesses. The covenants have the indirect effect of restricting our ability to take any of these actions or engage in any of these transactions, even if we consider them to be in our interest, because Abengoa has agreed with its lenders to ensure that we do not do so. In addition, Abengoa’s credit facility limits Abengoa’s ability to incur debt as calculated on a consolidated basis to include Abengoa and its subsidiaries, including us. These restrictions on Abengoa could have the indirect effect of limiting our ability to incur additional indebtedness when it might otherwise be in our interest to do so. Our ability to implement our business strategy could be adversely affected by Abengoa’s compliance with its obligations under its credit facilities.

As our contracts with Abengoa were negotiated between parties under common control, it is possible we may have been able to obtain better terms from third parties or may not be able to replace them with equally-favorable arrangements.

Our contracts with Abengoa were negotiated between parties under common control. It is possible that we may have been able to obtain better terms from third parties and that the terms we received under the contracts with Abengoa may increase our expenses and reduce our net income compared to the terms of contracts we might have obtained from third parties. The most important of these contracts are our credit arrangement and service agreements with Abengoa. Our credit arrangement with Abengoa is our primary source of borrowings and our service agreements with Abengoa provided us with € 15.9 million of our 2003 core revenues and € 6.3 million of our core revenues for the six months ended June 30, 2004. We have not attempted to negotiate similar arrangements with unaffiliated parties and do not know whether third parties would enter into such arrangements with us on more or less favorable terms, if at all. Consequently, if these agreements were terminated for any reason, we cannot assure you that we could enter into equally-favorable arrangements with third parties, if at all. Our inability to replace these arrangements on equally-favorable terms could reduce our core revenues, limit our available borrowings and adversely affect our ability to achieve our growth objectives.

Abengoa is not required to provide any security for funds we lend to it under our credit arrangement and any such loans will be treated as subordinated debt under Spanish law, which may limit our ability to be repaid and impair our financial condition in the event of Abengoa’s insolvency or bankruptcy.

Under our credit arrangement with Abengoa, we may lend up to € 45.0 million at any one time to Abengoa for a period not to exceed one year. This arrangement is unsecured and may provide Abengoa with funds on a more favorable basis than otherwise available to it from third parties. We may not be repaid or receive the interest we have earned on those funds. Abengoa has significant other indebtedness currently outstanding, some or all of which may be secured or otherwise senior to us upon its insolvency or bankruptcy, which would also make it more difficult for us to be repaid upon any insolvency or bankruptcy. According to Spanish insolvency law, any loan between an insolvent or bankrupt company that forms part of a group and any of its affiliated companies will be considered to be a subordinated loan for the purposes of the bankruptcy or insolvency proceedings. As a result of that subordination, payment of that affiliate loan shall be subject to the prior payment by the insolvent or bankrupt company of its other indebtedness and trade payables that are not expressly subordinated by law. Accordingly, under Spanish law, any money we loan to Abengoa may be considered to be subordinated debt of Abengoa in the event of Abengoa’s insolvency or bankruptcy.

There has been no public market for our ordinary shares prior to this offering, and the market price may fall below the public offering price.

Prior to this initial public offering, there has been no public market for our ordinary shares. It is likely that the initial public offering price for our ordinary shares will differ from the market price for our ordinary shares after the initial public offering. We cannot assure you that an active trading market for our shares will develop or that the market price of our shares will not fall below the initial public offering price.

The market price for our ordinary shares may be affected by prevailing exchange rates between the dollar and the Euro.

The value of your investment in our ordinary shares will be affected by prevailing rates of exchange between the U.S. Dollar and the Euro, because much of our business is conducted in Euros, while our ordinary shares will be traded in U.S. Dollars. Changes in prevailing exchange rates could result in declines in the market price of our ordinary shares for reasons unrelated to the performance of our business.

We will have broad discretion in how to use the net proceeds we receive from this offering and we may not apply the proceeds to uses with which all our shareholders agree.

We have no specific allocation for the net proceeds, and our management retains the right to utilize the net proceeds as it determines. We cannot assure you that management will be able to use the proceeds to effectively continue the growth of our business or that management will use the proceeds in a manner with which all our shareholders will agree.

You will experience immediate and substantial dilution in the book value of the ordinary shares you purchase and the initial public offering price may not reflect such dilution.

The initial public offering price for our ordinary shares will be substantially higher than the net tangible book value per ordinary share issued of $ 2.69 as of June 30, 2004. Purchasers of our shares in the offering will therefore incur an immediate and substantial dilution of $ 7.82 in the net tangible book value per share from the initial public offering price (assuming an initial offering price of $ 13.50, the midpoint of the range set forth on the front cover of this prospectus).

The price of our ordinary shares is likely to be highly volatile and you may not be able to resell our ordinary shares at or above the price you paid.

Following this offering, the prices at which our ordinary shares will trade are likely to be highly volatile and may fluctuate substantially. Given that Abengoa and our executive officers will own 67.4% of our ordinary shares after the offering, a significant portion of our shares may not trade in large amounts following the offering. In addition, the stock market has from time to time experienced significant price and volume fluctuations that have affected the market prices of the securities of information technology companies, and which may be unrelated to our operating performance or prospects. Furthermore, our operating results and prospects from time to time may be below the expectations of market analysts and investors. Any of these events could result in a material decline in the prevailing market prices of our ordinary shares and could prevent you from selling your ordinary shares at a higher price than the price you paid.

We will bear increased costs as a result of becoming a publicly-traded company in the United States.

As a result of becoming a publicly-traded company in the United States, we expect that our general and administrative costs will increase by a meaningful amount. This increase is the result of higher expenses associated with director and officer liability insurance, auditing, management oversight, regulatory requirements (including the need to make regulatory filings as well as establish and maintain internal controls and procedures) and the establishment and maintenance of heightened corporate governance measures. In addition, we will incur additional legal and accounting costs as a result of being a U.S. public company and reporting in accordance with U.S. GAAP. The increased costs and the time demands on management may have an adverse effect on our results of operations.

We may adopt an equity-based compensation plan that may adversely affect our ordinary shares.

In the future, we may adopt an equity-based compensation plan which may adversely affect our ordinary shares. Although we have no current concrete plans to implement an equity-based compensation plan for employees and senior management, we expect in the future to consider adopting some form of an equity-based incentive plan.

We have no current plans to pay a dividend and Abengoa can effectively control the timing and amount of any dividends that we pay in the future.

Our by-laws and Spanish law require shareholder approval in order for us to declare dividends. If we declare dividends in the future, we may not be able to pay them more frequently than annually due to certain provisions of Spanish law. Although we will declare any dividends in Euros as required under Spanish law, we intend to pay dividends in U.S. Dollars. Any holders of our ordinary shares outside of the United States may incur costs associated with receiving dividends in U.S. Dollars. Our ability to pay any dividends and the effect of any such dividends on our financial position will be affected by changes in exchange rates. The amount of the dividends we may pay will be based on a calculation of our net income in Euros in accordance with Spanish GAAP. Upon completion of the offering, Abengoa will own 63.4% of our ordinary shares and therefore, subject to the requirements of Spanish corporate law, effectively will be in a position to control whether and when we declare any dividends. The timing of the declaration and payments of dividends may not be in your best interests and you may be subject to a tax on the payment of any dividends that we pay.

You will not be able to trade our shares on any exchange outside the United States.

Our ordinary shares will only be listed in the United States on the Nasdaq National Market and we have no plans to list our shares in Spain or any other jurisdiction. As a result, a holder of our ordinary shares outside the United States may not be able to effect transactions in our shares as readily as it could if our shares were listed on an exchange in that holder’s home jurisdiction.

We are a Spanish corporation and it may be difficult to enforce judgments against us in U.S. domestic courts.

We are a corporation organized under the laws of the Kingdom of Spain. At this time, none of our directors or executive officers is a resident of the United States. As a result, even though we have appointed CT Corporation System as our agent for service of process, investors may not be able to effect service of process within the United States upon us or our directors or officers regarding matters arising under the U.S. securities laws, or to enforce judgments of U.S. courts based upon these laws.

Our counsel has advised us that there is doubt that a lawsuit based upon U.S. securities laws could be brought in an original action in Spain, and that there is doubt that a foreign judgment based on the U.S. securities laws could be enforced in Spain. Our counsel has also advised us that the courts of Alcobendas, Madrid, Spain have exclusive jurisdiction for challenging corporate resolutions, while the general rules of jurisdiction and international treaties will apply to any other claims by shareholders against us.

Your rights and responsibilities as a shareholder will be governed by Spanish law and will differ in some respects from the rights and responsibilities of shareholders under U.S. law. In particular, you will not have appraisal rights in the case of a merger or consolidation.

We are incorporated under Spanish law. The rights and responsibilities of holders of our ordinary shares are governed by our by-laws and by Spanish law. These rights and responsibilities differ in some respects from the typical rights and responsibilities of shareholders in U.S. corporations. For example, under Spanish law, we are required to set aside 10% of our net income as a legal reserve until the balance of the reserve is equivalent to at least 20% of our issued share capital. In addition, Spanish law makes it more difficult for us to pay dividends more frequently than annually and Spanish law does not grant appraisal rights to a corporation’s shareholders who wish to challenge the consideration to be paid upon a merger or consolidation of the corporation.

At our ordinary general meeting, shareholders are asked to approve the actions of our management, the financial statements of our previous fiscal year and the allocation of our net income and loss. If our

Additionally, pursuant to the Spanish Corporation Law and our by-laws, shareholders have preemptive rights to subscribe for any new shares issued by us, including the ordinary shares. These preemptive rights may be voluntarily waived by our shareholders or may be abolished in certain circumstances if our shareholders pass a resolution at a shareholders’ meeting in accordance with Article 159 of the Spanish Corporation Law. Our ability to raise funds through the sale of ordinary shares in the future, our ability to use our ordinary shares to make acquisitions, and our ability to provide management with equity-based compensation, could be adversely affected by these preemptive rights.

Provisions of Spanish law and of our by-laws may delay, prevent or make difficult an acquisition of us, which could prevent a change of control and therefore prevent payment of any expected acquisition premium on the price of our shares.

Provisions of Spanish corporation and tax law may have the effect of delaying, preventing or making it more difficult for another entity to merge with or acquire us. Further, as is the case in civil law jurisdictions generally, a merger or takeover in Spain is subject to substantially more administrative process than would be the case in a typical U.S. jurisdiction. This additional administrative process could protract or make more expensive the process of effecting such a transaction. Under Spanish law, directors of a corporation may be elected to serve for terms of up to five years and we have adopted five-year terms for our directors, although actions taken at the general shareholders’ meeting may result in the directors being removed at any time. As a result of these five-year terms, not all of our directors will be elected each year. This may have the result of delaying or making more expensive an attempt to effect a change of control of our company. Third parties who are otherwise willing to pay a premium over prevailing market prices to gain control of us may be unable or unwilling to do so because of these provisions of Spanish law. This could cause our ordinary shares to trade at prices below the price for which third parties might be willing to pay to gain control of us.

The closing of this offering will be subject to the registration of the shares issued with the Mercantile Registry of Madrid.

The closing of the sale of the ordinary shares will be subject to the registration with the Mercantile Registry of Madrid of the capital increase associated with the issuance of the ordinary shares. In the event that the shares are not registered with the Mercantile Registry of Madrid within four business days after pricing of the offering, the offering will not close, you will not receive any of our ordinary shares and any payment you may have made will be returned to you promptly without interest.

Future sales by our existing shareholders of a substantial number of our shares in the public market could adversely affect the price of our shares.

If our existing shareholders sell substantial amounts of our ordinary shares following this offering, the market price of our ordinary shares could fall. These sales also might make it more difficult for us to sell equity or equity-related securities in the future at a time and price that we deem appropriate. The ordinary shares we are selling pursuant to this prospectus will be eligible for immediate resale in the public market without restrictions, and the ordinary shares our existing shareholders hold may also be sold in the public market in the future, subject to the restrictions contained in Rule 144 under the Securities Act and applicable lock-up agreements and provided that the circumstances in which they are offered or sold in Spain do not constitute an offer of securities under Spanish law. As of the date of this prospectus, all of our ordinary shares will be subject to Rule 144 restrictions, lock-up agreements, or both, except for any ordinary shares sold in this offering. In particular, upon completion of this offering Abengoa will hold, directly or indirectly, 63.4% of our ordinary shares. Although we believe Abengoa has no present intention to sell those ordinary shares, we cannot assure you that this will continue to be its intention in the future. In the event that Abengoa sells some or all of its shares to another party, our other shareholders will not generally be eligible to participate in the sale. See “Shares Eligible for Future Sale” and “Underwriting” for additional information regarding resale restrictions.

Many statements we make in this prospectus contain forward-looking statements that reflect our current expectations and views of future events. These forward-looking statements can be identified by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “is/are likely to” or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include, among other things:


	•	our anticipated growth strategies in each of the sectors in which we operate;

	•	the levels of growth we anticipate in our targeted geographies;

	•	our future business development, results of operations and financial condition;

	•	the effect on our results of operations of the March 11 terrorist attack and the transition to the new government in Spain;

	•	the success of our research and development activities;

	•	our ability to continue to control costs and maintain the quality of our services and solutions;

	•	our ability to develop technologically advanced solutions and to execute successfully our real-time process outsourcing programs;

	•	risks associated with the financing of “Build-Operate-Transfer” programs;

	•	our ability to provide integrated IT solutions;

	•	our ability to sell additional products to our existing customer base;

	•	our expectations regarding information technology expenditures by our customers;

	•	our ability to identify, acquire and integrate complementary businesses;

	•	the trend of our customers to outsource more of their mission-critical activities;

	•	our expectations regarding the payment of dividends and our future effective tax rate;

	•	our ability to grow based upon our relationship with Abengoa;

	•	Abengoa’s future activities with respect to us;

	•	our ability to retain senior management and other highly-skilled personnel;

	•	our anticipated use of proceeds;

	•	our ability to increase revenues and operating margins by shifting our product mix; and

	•	the importance of our alliances, joint venture partners and investments.

The forward-looking statements included in the prospectus are subject to risks, uncertainties and assumptions about our company. Our actual results of operations may differ materially from the forward-looking statements as a result of risk factors described under “Risk Factors” and elsewhere in this prospectus.

The risk factors described under “Risk Factors” are not exhaustive. Other sections of this prospectus include additional factors that could adversely impact our business and financial performance. Moreover, we operate in an emerging and evolving environment. New risk factors emerge from time to time, and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

We estimate that the net proceeds from the sale of ordinary shares by us in this offering, after deducting underwriting discounts, will be approximately $ 109.2 million, or approximately $ 124.3 million if the underwriters exercise their overallotment option in full, based on an assumed initial public offering price of $ 13.50 per ordinary share (the midpoint of the range set forth on the front cover of this prospectus). Abengoa has agreed to fully reimburse our offering expenses. We will not receive any of the proceeds of any sale of ordinary shares by the selling shareholders if the underwriters exercise their overallotment option to purchase ordinary shares from them.

The principal purpose of this offering is to enable us to implement our business strategy. After deducting underwriting discounts and other offering expenses, we anticipate that 80-90% of the proceeds we receive, or $ 87.4 million to $ 98.3 million, will be used for acquisitions (including the payment of up to € 1.5 million of deferred contingent purchase price in connection with our recent acquisitions of ICX Sistemas, S.A., which is located in Spain, and the western region business unit of Xwave Solutions Inc., which is located in Canada), joint ventures and equity investments in “B-O-T” projects, and 5-15%, or $ 5.5 million to $ 16.4 million, will be used to finance the expansion of our products and services solutions through our research and development efforts. Any remaining proceeds we receive will be used for general working capital purposes. We do not intend to use these proceeds to cancel our outstanding debt or invest in capital expenditures.

We have not yet determined the exact amount of net proceeds to be used specifically for each of the preceding purposes. The exact amount of proceeds used for any specific purpose could change based on a number of factors affecting our business, such as changes in the economy or as a result of opportunities that arise. Accordingly, our board of directors and our management will have significant flexibility in applying the net proceeds of this offering. Pending the application of the net proceeds of this offering as described above, we plan to invest the net proceeds in interest-bearing accounts at international financial institutions. We will not lend the proceeds of this offering to Abengoa pursuant to our credit arrangements with it.

Prior to the offering, as a 91.0% subsidiary of Abengoa, we have distributed our net income to our shareholders to the extent permitted by Spanish law. We currently intend to retain any future earnings to finance the growth and expansion of our business. As a result, we do not anticipate paying any cash dividends in the foreseeable future. We anticipate that any dividends that we do pay will be declared in Euros, as required by Spanish law, but paid in U.S. Dollars at the exchange rate as of the time of declaration of such dividends. Our by-laws require majority shareholder approval for the declaration of dividends. As Abengoa will own a majority of our ordinary shares after the offering, it effectively will be able to control our dividend policy.

The timing and amount of future dividend payments, if any, we make will depend on a variety of factors, including our earnings, prospects and financial condition, capital investment required to implement our strategy for growth and expansion, other capital expenditure requirements, payment of financial obligations, our generation of cash from operations and general business conditions, legal restrictions and such other factors as our board of directors considers relevant. Under their financing agreements, our North American subsidiaries, through which we conduct our business in North America, are prohibited from paying dividends until their outstanding obligations under their financing agreements are paid in full.

Dividends may be subject to withholding tax in Spain. Dividends payable by us to non-residents of Spain are subject to withholding tax at the rate of 15%, subject to reductions pursuant to applicable tax treaties. See “Taxation – Spanish Taxation.”

Under Spanish law, a corporation may declare and pay dividends only out of profits remaining after transfer to legal reserves, or out of distributable reserves, and only if the net worth of the corporation is not, before or as a result of the dividend distribution, lower than its issued share capital. The calculations of these profits will be based on Telvent GIT’s unconsolidated net income in accordance with Spanish GAAP rather than U.S. GAAP.

Spanish law requires us to allocate at least 10% of our net income each year to a legal reserve, until the balance of such reserve is equivalent to at least 20% of our issued share capital. A corporation’s legal reserve is not available for distribution to shareholders except upon liquidation. Our legal reserve as of December 31, 2003 was below the required level of 20% of our issued share capital as of such date. We were required to add 10% of Telvent GIT’s net income, measured on an unconsolidated basis in accordance with Spanish GAAP, to our legal reserve at our 2004 General Shareholders’ Meeting, and we will be required to add 10% of our net income to our legal reserve each year until we have reached the required legal reserve of 20% of our issued share capital. In 2003, 10% of Telvent GIT’s net income, measured on an unconsolidated basis in accordance with Spanish GAAP, was € 772 thousand. Our obligation to make additional allocations to the legal reserve will increase upon the issuance of shares in this offering, by an additional amount equal to 20% of the newly-issued share capital, and could be subject to future changes. We may also make payment of dividends from our distributable reserves. As of December 31, 2003, we had distributable reserves of € 123 thousand. In addition, Spanish law makes it more difficult for us to pay dividends more frequently than annually, although our board of directors or shareholders under certain circumstances may declare a distribution of interim dividends based on the fiscal year’s results out of our distributable reserves and/or the profits since the beginning of the fiscal year if we have the minimum balance in our legal reserves and other reserves established by our by-laws.

Although laws vary from state to state within the United States, uncollected dividends and shares may be considered abandoned property under the laws of a shareholder of record’s state of residence after a period of time, ranging from three years to seven years, has passed since that shareholder’s last contact with our transfer agent. If a shareholder of record does not claim dividends from our transfer agent within the applicable time period, our transfer agent, in accordance with applicable state law, will transfer the amount of the unclaimed dividend and the related shares to the treasury of that shareholder’s state of residence as reflected in the transfer agent’s records, which may not be that shareholder’s actual state of residence. Amounts paid to a state treasury in this manner will not be repaid to us, and whether or not that shareholder is subsequently permitted to recover the property from the state treasury will depend on that state’s law.


	•	on an actual basis; and

	•	on an as adjusted basis to reflect the following transactions relating to the offering:


	•	our issuance and sale of 8,700,000 ordinary shares in the offering; and

	•	the transfer of amounts outstanding under the stock compensation plan to additional paid-in capital.

The assumed initial public offering price is $ 13.50 per ordinary share, the midpoint of the range set forth on the cover page of this prospectus. This translates into $ 109.2 million or € 89.7 million of net proceeds (based upon the noon buying rate in effect as of June 30, 2004) after deducting underwriting discounts. Our other offering expenses will be fully reimbursed by Abengoa. See Note 9 to our Unaudited Condensed Consolidated Financial Statements.

You should read this information together with our consolidated financial statements and the related notes included elsewhere in this prospectus and the information under “Use of Proceeds,” “Selected Consolidated Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The information below is presented in accordance with U.S. GAAP.

The following discussion assumes an initial public offering price of $ 13.50 per ordinary share, the midpoint of the range set forth on the front cover of this prospectus, and is presented in accordance with U.S. GAAP.

Our net tangible book value at June 30, 2004 was $ 53.9 million, or $ 2.69 per ordinary share, using a currency translation of $ 1.2179 to € 1.00. Net tangible book value per ordinary share is determined by dividing our net tangible worth (total assets minus goodwill, intangible assets, total liabilities, stock compensation plan and minority interests) by 20,000,000 shares, which is the number of ordinary shares outstanding before giving effect to the offering.


	•	giving effect to our sale of 8,700,000 ordinary shares in the offering without giving effect to the overallotment option and after our April 15, 2004 stock split, and

	•	deducting underwriting discounts,

net tangible book value at June 30, 2004 would have been $ 163.1 million or $ 5.68 per ordinary share. This represents an immediate increase in pro forma net tangible book value to existing shareholders of $ 2.99 per ordinary share and an immediate dilution to new investors of $ 7.82 per ordinary share. Dilution is determined by subtracting pro forma net tangible book value after the offering from the initial public offering price per ordinary share.

The ordinary shares acquired by our directors and executive officers during the past 5 years were acquired from Abengoa and did not cause dilution to any other existing shareholder.

We manage our business and report our results of operations using Euros. The following table describes, for the periods and dates indicated, information concerning the noon buying rate for the Euro in New York City for cable transfers as certified for customs purposes by the Federal Reserve Bank of New York. Average figures reflect the average of the noon buying rates on the last day of each month during the relevant period.

For the six full months preceding the date of this offering, the high and low exchange rates were as follows:

Unless otherwise noted or the context otherwise requires, all convenience translations from Euros to U.S. Dollars and from U.S. Dollars to Euros in this prospectus were made at a rate of U.S. $ 1.2179 to € 1.00 and U.S. $ 1.00 to € 0.8211, respectively, both calculated using the noon buying rate in effect as of June 30, 2004. The prevailing rates as of October 1, 2004 were U.S. $ 1.2400 to € 1.00 and € .8065 to $1.00. We make no representation that any Euro or U.S. Dollar amounts could have been, or could be, converted into U.S. Dollars or Euros, as the case may be, at any particular rate, the rates stated above, or at all.

The following information contains selected consolidated financial data for the six months ended June 30, 2004 and June 30, 2003 and for the years 2003 and 2002, all of which is prepared in accordance with U.S. GAAP, and for the six months ended June 30, 2004 and June 30, 2003 and for the years 2003, 2002, 2001, 2000 and 1999, all of which is prepared in accordance with Spanish GAAP. The U.S. GAAP information and Spanish GAAP information are not readily comparable. The differences between U.S. GAAP and Spanish GAAP could be significant and the effect of these differences may be material, individually or in the aggregate.

You should read the following information with our consolidated financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus.

The selected consolidated statement of operations data for 2003 and 2002 and the consolidated balance sheet data as of December 31, 2003 and 2002 are derived from our audited consolidated financial statements included elsewhere in this prospectus and should be read in conjunction with, and are qualified in their entirety by reference to, these consolidated financial statements and related notes. These consolidated financial statements were prepared in accordance with U.S. GAAP. The summary condensed consolidated statement of operations data for the six months ended June 30, 2004 and June 30, 2003 and the condensed consolidated balance sheet data as of June 30, 2004 are derived from our unaudited consolidated interim financial statements included elsewhere in this prospectus and should be read in conjunction with, and are qualified in their entirety by reference to, these condensed consolidated financial statements and related notes. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates.” The results of operations for the six months ended June 30, 2004 may not necessarily be indicative of the operating results that may be expected for the entire year.


⁽¹⁾	Data presented in U.S. Dollars was translated from Euros to U.S. Dollars at the June 30, 2004 exchange rate of U.S. $1.2179 to € 1.00.

⁽²⁾	Financial results for the six months ended June 30, 2003 and for the year ended December 31, 2003 include five and eleven months, respectively, of results of operations of the NMS Division of Metso, which we acquired on January 31, 2003.

⁽³⁾	During 2003, we implemented the requirements of FIN 46-R, “Consolidation of Variable Interest Entities” for those variable interest entities that had been created after January 31, 2003. As a result of this implementation, we recorded additional revenues and cost of revenues relating to other venturers of € 3.7 million for the year ended December 31, 2003. As of January 1, 2004, we extended the implementation of FIN 46-R to those variable interest entities that had been created prior to February 1, 2003. The effect of this implementation was to consolidate certain joint venture agreements for the six months ended June 30, 2004. The effect of this consolidation was our recording additional revenues of € 10.0 million relating to other venturers and additional cost of revenues of € 9.5 million relating to other venturers for the six months ended June 30, 2004. The financial statements of prior periods were not restated and the effect of consolidating these entities did not result in a cumulative effect of a change in accounting principle as of January 1, 2004.

⁽⁴⁾	Impairment charges reflects expenses in connection with some of our minority investments. These investments were sold in August 2004.

⁽⁵⁾	Financial (expense) income, net in 2003 reflects, among other things, a € 1.9 million of expense related to the cost of guarantees in connection with one of our minority investments. We sold this investment in June 2004.

⁽⁶⁾	Prior to the offering, as a subsidiary of Abengoa we have distributed our net income, calculated in accordance with Spanish GAAP, to our shareholders to the extent permitted by Spanish law. See “Dividend Policy.”

⁽⁷⁾	Assumes that our 200 to 1 stock split occurred as of the beginning of the period presented and that there were 20,000,000 ordinary shares outstanding during all the periods presented.

⁽⁸⁾	Restricted cash consists of the cash collateral account we maintained to provide credit support in connection with a guarantee relating to a minority investment. The collateral account was no longer required as of July 2003.

⁽⁹⁾	Net related party credit line balance consists of the net amount of our loans to Abengoa (€ 44.3 million as of December 31, 2002 and € 50.2 million as of December 31, 2003) and our borrowings from Abengoa (€ 97.0 million as of December 31, 2002 and € 57.0 million as of December 31, 2003). See “Relationship Between Telvent and the Abengoa Group” and Note 21 to our Consolidated Financial Statements.


⁽¹⁰⁾	Long-term debt consists of long-term debt plus the current portion of long-term debt.

You should read the selected consolidated financial data set forth below in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Comparison of Segment Information of Six Months Ended June 30, 2004 to Six Months Ended June 30, 2003” and “— Comparison of Segment Information of Year Ended December 31, 2003 to Year Ended December 31, 2002” appearing elsewhere in this prospectus.

Our selected consolidated statement of operations data for 2003, 2002, 2001, 2000 and 1999 and the consolidated balance sheet data as of December 31, 2003, 2002, 2001, 2000 and 1999 below are derived from our audited consolidated financial statements. The selected condensed consolidated statement of operations data for the six months ended June 30, 2004 and June 30, 2003 and the condensed consolidated balance sheet data as of June 30, 2004 are derived from our unaudited condensed consolidated financial statements. These consolidated financial statements were prepared in accordance with Spanish GAAP for the years 1999 through 2003 and the six months ended June 30, 2003 and June 30, 2004. See “Management’s Discussion and Analysis of Results of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates.”

The unaudited pro forma combined statement of operations data is derived from our audited consolidated statement of operations for the year ended December 31, 2003, appearing elsewhere in this prospectus, and the unaudited management accounts of Metso Automation SCADA Solutions Ltd. (“Metso Ltd.”) and Metso Automation SCADA Solutions Inc. (“Metso Inc.”) for the month ended January 31, 2003. Collectively, we refer to Metso Ltd. and Metso Inc. as the NMS Division of Metso. The unaudited pro forma combined statement of operations data has been prepared to reflect the combined results of operations as if the acquisition had occurred on January 1, 2003.

The following unaudited pro forma combined financial information gives effect to our acquisition using the purchase method of accounting for business combinations. The operating results of the NMS Division of Metso are reflected in our consolidated financial statements prospectively from the January 31, 2003 acquisition date. The acquisition transaction is more fully described below.

You should read the unaudited pro forma combined financial information in conjunction with the historical audited financial statements and the related notes of Telvent, Metso Ltd. and Metso Inc. included elsewhere in this prospectus.

The unaudited pro forma combined financial data appearing below is based on our consolidated financial statements prepared in accordance with U.S. GAAP. These principles require the use of estimates that affect the reported amounts of assets, liabilities, revenues and expenses. Actual results could differ from those estimates. The unaudited pro forma combined financial information has been prepared based on the assumptions described in the notes thereto. The objective of the unaudited pro forma combined information is to provide information about the continuing impact of the acquisition by indicating how the transaction might have affected historical financial statements had it occurred as of January 1, 2003, with respect to the unaudited pro forma combined statement of operations. The unaudited pro forma combined statement of operations comprises historical financial data that has been retroactively combined to reflect the effect of the acquisition as described in the notes thereto and does not reflect any adjustments to reflect significant trends or other factors that may be relevant in considering future performance.

The unaudited pro forma combined financial information do not purport to be indicative of what the operating results would have been, had our acquisition of the NMS Division of Metso actually taken place as of January 1, 2003.

On January 31, 2003, we purchased 100% of the shares of Metso Automation SCADA Solutions Ltd. and Metso Automation SCADA Solutions Inc. from Metso Corporation, a Finnish corporation, for € 35.7 million in cash, including acquisition expenses of € 3.3 million and also including the additional deferred purchase price payment of € 5.2 million. The acquisition is accounted for under the purchase method of accounting for business combinations. The assets and liabilities acquired are recorded at fair value, with the excess of purchase price over the fair value of net assets representing goodwill. The numbered paragraphs below refer to corresponding item numbers set forth in the pro forma combined statement of operations.


⁽¹⁾	Comprising the historical consolidated statement of operations of Telvent for the year ended December 31, 2003 and incorporating the results of the NMS Division of Metso from January 31, 2003, the effective date of acquisition.

⁽²⁾	Comprising the results of the NMS Division of Metso for the month of January 2003 as derived from the unaudited management information of Metso Ltd. and Metso Inc., which have been prepared in accordance with U.S. GAAP and are in conformity with our accounting policies.

⁽³⁾	Adjustment to depreciation and amortization represents amortization expense related to the acquired intangible assets as per the purchase price allocation. These are amortized on a straight-line basis over their estimated useful lives of the intangible assets. The identifiable intangibles and their useful lives are as follows: backlog (2 years), software technology (5 years) and customer relationships (10 years).

⁽⁴⁾	Goodwill resulting from the acquisition is not subject to amortization.

⁽⁵⁾	Reflects interest expense associated with the amounts borrowed to finance the acquisition of the NMS Division of Metso. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

⁽⁶⁾	The pro forma adjustments were tax affected using a tax rate of 35%.

⁽⁷⁾	Assumes that our 200 to 1 stock split occurred as of the beginning of the period presented.

All references to our results of operations are reported in accordance with U.S. GAAP except references to our results of operations by sectors and geographies, which, unless the context requires otherwise, are presented in accordance with Spanish GAAP.

The following discussion contains information about our results of operations, financial condition, liquidity and capital resources that we have prepared in accordance with U.S. GAAP. It also includes information about our core revenues and gross profit by sectors and geographies prepared in accordance with Spanish GAAP. Core revenues consists of all types of revenue recognized under Spanish GAAP that are recognized as revenue under U.S. GAAP. The U.S. GAAP information and the Spanish GAAP information are not readily comparable. The differences between U.S. GAAP and Spanish GAAP could be significant and the effects of these differences may be material, individually or in the aggregate.

We are an information technology company that provides value-added real-time products and services solutions to customers in targeted industrial sectors (Energy, Traffic, Transport and Environment) primarily in Spain, North America, Latin America (including Mexico) and China. Our mission-critical real-time solutions and applications collect raw data at the field level, transform that data into operational information, and convert the operational information into business intelligence. We are capable of providing solutions to link this business intelligence to our customers’ enterprise information technology systems.

Our customers include some of the largest energy companies in the United States, Canada, Spain, Mexico, Brazil and China, some of the largest Spanish and Latin American utilities, the traffic or transport authorities of some of the largest cities in Spain, North America, Latin America and China and a number of government environmental entities in Spain and North America.

Our Energy and Traffic sectors accounted for 43.3% and 32.6% of our core revenues in accordance with Spanish GAAP during the fiscal year ended December 31, 2003 and 43.4% and 26.9% during the six month period ended June 30, 2004. Our three largest geographic regions are Spain, Latin America and North America, which accounted for 56.6%, 18.3% and 11.7%, respectively, of our 2003 core revenues, and 51.8%, 19.1% and 14.2%, respectively, of our core revenues for the six months ended June 30, 2004, in accordance with Spanish GAAP.

Since the incorporation in 1963 of our predecessor Sociedad Anónima de Instalaciones de Control (Sainco), or Sainco, now known as Telvent Energía y Medio Ambiente, we and our predecessors have been able to establish long-standing relationships with our customers in our Energy and Traffic sectors and progressively introduce new ranges of products and services solutions to the market. We and our predecessors also have developed new related sectors, such as Environment and Transport, and we and our predecessors have successfully entered new geographies, such as our entry into Mexico, Brazil and China in the 1990s.

Since Telvent was incorporated in 2000 as the holding company for the information technology businesses of the Abengoa Group, there have been occasional strategic realignments of the ownership of some businesses within the Abengoa Group. In 2001, we sold Abentel Telecomunicaciones, S.A. to Abengoa, and in 2002, we acquired Telvent Housing, S.A., Telvent Factory Holding AG and Telvent Portugal S.A. from Abengoa.

In June 2004, Abengoa restructured its ownership interest in Telvent by forming Telvent Corporation. Abengoa owns its entire interest in Telvent through Telvent Corporation and Siema AG, another of Abengoa’s wholly-owned subsidiaries. Telvent Corporation also owns 99.99% of the capital stock of Telvent Investments, the entity to which we sold all of our remaining minority investments, including our investment in Xfera, for a

On January 31, 2003, we acquired the NMS Division of Metso, an information technology company that provides us with a strategic position in the U.S. and Canada, for € 35.7 million in cash, including the additional deferred purchase price payment of € 5.2 million. In January 2004, we paid the final € 5.2 million deferred installment of this purchase price.

We prepared our financial statements as of and for the years ended December 31, 2003 and 2002 and as of and for the six months ended June 30, 2004 and June 30, 2003 in accordance with U.S. GAAP. Our results of operations for the 2004 and 2003 periods reflect our acquisition of the NMS Division of Metso on January 31, 2003. Accordingly, the results of operations of the former NMS Division of Metso are reflected for eleven months in our results of operations for the year ended December 31, 2003, and for five months in our results of operations for the six months ended June 30, 2003.

The following table sets forth certain statement of operations data as a percent of revenues for the six-month periods ended June 30, 2004 and June 30, 2003 and shows the percentage change for selected items on a period-to-period basis.

⁽¹⁾

During 2003, we implemented the requirements of FIN 46-R, “Consolidation of Variable Interest Entities” for those variable interest entities that had been created after January 31, 2003. As a result of this implementation, we recorded additional revenues and cost of revenues relating to other venturers of € 3.7 million for the year ended December 31, 2003. As of January 1, 2004, we extended the implementation of FIN 46-R to those variable interest entities that had been created prior to February 1, 2003. The effect of this implementation was to consolidate certain joint venture agreements for the six months ended June 30, 2004. The effect of this consolidation was our recording additional revenues of € 10.0 million relating to other venturers and additional cost of revenues of € 9.5 million relating to other venturers for the six months ended June 30, 2004. The financial statement of prior periods were not restated and the effect of consolidating these entities did not result in a cumulative effect of a change in accounting principle as of January 1, 2004. We participate in these joint ventures in certain of our long-term service contracts. These joint ventures are variable interest entities as they have no equity and are operated through a management committee, comprised of equal representation from each of the venture partners, which makes decisions about the joint venture’s activities.

The increase in revenues was primarily due to the effect of the consolidation of € 10.0 million of revenue attributable to other venturers in our temporary consortiums, the majority of which were consolidated for the first time in 2004 due to a change in accounting for those consortiums. See Note 3 to our Unaudited Condensed Consolidated Financial Statements. Revenues also increased due to increased business activity and including revenues attributable to our ownership of the NMS Division of Metso for the entire six months ended June 30, 2004 as compared to only five months during the six months ended June 30, 2003. However, this growth was partially offset by the negative impact of the translation of our non-Euro-denominated revenues due to the average exchange rate appreciation of the Euro against other currencies in which we generated revenues. Accordingly, amounts were translated into Euros at lower exchange rates in the six months ended June 30, 2004 as compared to the six months ended June 30, 2003. Our achievement of future organic revenue growth will depend upon the further development of our business and the resumption of Spanish business activity following the overall economic slow-down in Spain as a result of the uncertainty surrounding the outcome of the Spanish elections following the March 11 terrorist attack in Madrid and the transition to a new government. For a more detailed discussion of specific factors contributing to our revenue performance during the six months ended June 30, 2004 and to factors affecting our business due to the elections in Spain, see “— Comparison of Segment Information of Six Months Ended June 30, 2004 to Six Months Ended June 30, 2003.”

Our cost of revenues as a percentage of revenues decreased slightly from the six months ended June 30, 2003 to the six months ended June 30, 2004. As a result of our restructuring efforts, we have been able to reduce our cost of revenues. We do not believe that the decline in cost of revenues as a percentage of revenues represents a trend. Cost of revenues for the six months ended June 30, 2004 includes € 9.5 million due to the effect of the consolidation of cost of revenues from our temporary consortiums, which amount represents the cost of revenues attributable to other venturers and reduces our gross margin. Our cost of revenues from non-Euro-denominated expenses was lower than it otherwise would have been as a result of the translation of our non-Euro-denominated costs due to the average exchange rate appreciation of the Euro against other currencies. Additionally, gross margin improved due primarily to higher than expected margins in some completed contracts, margins associated with our maintenance contracts in the six months ended June 30, 2004 and revenues from our higher value-added applications. See “— Comparison of Segment Information of Six Months Ended June 30, 2004 to Six Months Ended June 30, 2003.”

General and administrative expenses decreased as a percentage of our revenues from the six months ended June 30, 2003 to the six months ended June 30, 2004, due to the effect of the consolidation of our temporary consortiums. In absolute terms, these expenses decreased due to cost savings that we achieved from our continuing restructuring efforts, including the reduction of our office lease expense at our Houston Delivery Unit facility. The stock compensation plan increased our general and administrative expenses; the impact of these charges was € 0.8 million and € 0.3 million for the six months ended June 30, 2004 and June 30, 2003, respectively.

Our sales and marketing expense increased as a percentage of revenues, primarily as a result of higher sales personnel costs associated with an increase in our efforts to pursue new opportunities during the six months ended June 30, 2004.

Research and development expenses increased primarily as a result of higher research and development expenses incurred as a result of the inclusion of the results of operations of the NMS Division of Metso for the entire six-month period ended June 30, 2004.

Depreciation and amortization increased from the six months ended June 30, 2003 to the six months ended June 30, 2004 in absolute terms due to the inclusion of the results of operation of the NMS Division of Metso for the entire 2004 period. The impact of the non-cash expense with respect to the amortization of the purchase price allocation relating to the acquisition of the NMS Division of Metso was € 1.0 million during the six months ended June 30, 2004 and € 0.9 million during the six months ended June 30, 2003.

Financial expense increased primarily as a result of the depreciation of the Euro against the U.S. Dollar between December 31, 2003 to June 30, 2004, as compared to the appreciation of the Euro against the U.S. Dollar between December 31, 2002 to June 30, 2003. To the extent that our non-Euro-denominated monetary assets exceed our non-Euro denominated monetary liabilities, our results of operations will be negatively affected by an appreciation of the Euro against other currencies and positively affected by depreciation of the Euro against other currencies. Our financial expense also increased from the six months ended June 30, 2003 to the six months ended June 30, 2004 due to debt we incurred in May 2003 to re-finance our acquisition of the NMS Division of Metso, which bears interest at a higher rate than the debt we repaid. See “— Liquidity and Capital Resources.”

Income tax expense increased from a benefit of € 0.1 million in the six months ended June 30, 2003 to an expense of € 0.1 million in the six months ended June 30, 2004. The increase in tax expense for the six months ended June 30, 2004 compared to the six months ended June 30, 2003 is based on the level of income before income taxes and our expectation of research and development deductions.

As a result of the foregoing reasons, our net income increased from the six months ended June 30, 2003 to the six months ended June 30, 2004 by € 3.2 million.

Comparison of Segment Information of Six Months Ended June 30, 2004 to Six Months Ended June 30, 2003

We prepared the following segment information in accordance with Spanish GAAP. We prepare our internal financial forecasting and reporting information in accordance with Spanish GAAP. The following information contains selected consolidated financial data for the six months ended June 30, 2004 and the six months ended June 30, 2003 prepared in accordance with Spanish GAAP. The U.S. GAAP information and Spanish GAAP information are not readily comparable. The differences between U.S. GAAP and Spanish GAAP could be significant and the effect of these differences may be material, individually or in the aggregate.

In particular, revenue under Spanish GAAP in a given period may differ significantly from revenue under U.S. GAAP for the same period due to the different revenue recognition policies imposed under the respective accounting principles. Due to the application of these different accounting principles, our Spanish GAAP core revenues decreased for the six months ended June 30, 2004, as compared to the six months ended June 30, 2003, in contrast to an increase in core revenues under U.S. GAAP for the same periods. The two most significant adjustments which give rise to this difference relate to the application of the percentage-of-completion method and the effects of the consolidation of the temporary consortiums.

Under both Spanish GAAP and U.S. GAAP, revenue is recorded under the cost-to-cost method. Under U.S. GAAP, the revenue recorded is based on the ratio of total cost and estimated cost to date multiplied by

Additionally, there is a difference in the amount of revenue recognized for the temporary consortiums due to the effects of the adoption of FIN 46-R under U.S. GAAP. Consolidation of these consortiums is a permanent difference between the accounting principles, as these consortiums are not subject to consolidation under Spanish GAAP. In the future, the level of activity conducted through these consortiums that meet the conditions for consolidation under FIN 46-R will determine the extent of those differences.


	(a)	the difference in the application of the method of revenue recognition, which increased revenues by € 17.1 million and € 5.8 million for the six months ended June 30, 2004 and June 30, 2003, respectively; and

	(b)	the adjustment of the temporary consortiums, which increased revenues from Spanish GAAP to U.S. GAAP in an amount of € 10.0 million for the six months ended June 30, 2004, and which decreased revenues from Spanish GAAP to U.S. GAAP in an amount of € 2.1 million for the six months ended June 30, 2003.


⁽²⁾	Gross profit does not appear in our presentation of financial information in accordance with Spanish GAAP because it is not a recognized line item pursuant to the formatting of financial statements for Spanish GAAP purposes.

Our Energy sector core revenues increased due to the inclusion of the results of the former NMS Division of Metso for the entire six-month period ended June 30, 2004. Without the inclusion of the NMS Division of Metso for the entire 2004 period, our Energy sector core revenues would have declined. Our results in this sector were adversely affected by an overall economic slow-down in Spain pending the outcome of the Spanish national elections, which were held in March 2004, and the transition to a new government in the

months following the election. The uncertainty surrounding the outcome of the Spanish elections following the March 11 terrorist attack in Madrid also particularly affected our revenues from our Spanish customers, as invoicing was delayed on projects for many of these customers. Under Spanish GAAP, we recognize revenues upon the acceptance of an invoice by the customer, rather than on the percentage-of-completion basis applied under U.S. GAAP, and therefore a delay in acceptance of our invoices affects our Spanish GAAP results but not our U.S. GAAP results. We also experienced a decline in our North American Electricity unit, which further impacted core revenues. In particular, approximately 56.4% of our U.S. GAAP revenue recognition adjustment in the six months ended June 30, 2004 relates to our Energy sector. Our reported core revenues were further constrained by the increase in the average exchange rate of the Euro, our reporting currency, relative to other currencies in which our revenues are denominated in this sector, primarily the U.S. Dollar; in the six months ended June 30, 2004, 66.0% of our Energy core revenues were recorded in currencies other than the Euro. Gross margin declined overall in this sector due to lower margins in our Canadian operation and the negative impact of the translation of U.S. dollar-denominated revenues due to the average exchange rate appreciation of the Canadian dollar against the U.S. dollar, as our Canadian operation incurs costs in Canadian dollars and generates most of its revenues in U.S. dollars.

Our Traffic sector is particularly sensitive to the overall economic climate in Spain, as the majority of our core revenues in this sector historically have been derived from projects in Spain. The decrease in core revenues within our Traffic sector was primarily due to an overall economic slowdown in Spain pending the outcome of the Spanish national elections, the transition to the new government, and the resulting invoicing delays discussed above, including contracts where our payment is expected to be received from the proceeds of loans from the Spanish government to Chinese traffic authorities. In particular, approximately 35.4% of our U.S. GAAP revenue recognition adjustment in the six months ended June 30, 2004 relates to our Traffic sector. Core revenues also decreased from poor performance of our naval traffic business, as revenues fell from € 4.7 million in the six months ended June 30, 2003 to € 1.1 million in the six months ended June 30, 2004. Most of our Traffic sector core revenues derive from Euro-denominated contracts, so our performance in this sector was less affected in the six months ended June 30, 2004 by the appreciation of the average exchange rate of the Euro than our performance in the Energy sector. Our gross margin improved due to a greater percentage of core revenues being associated with higher margin maintenance contracts with our existing customers.

Our Transport sector is particularly sensitive to the overall economic climate in Spain, as the majority of our core revenues in this sector historically have been derived from projects in Spain. Core revenues within our Transport sector for the six months ended June 30, 2004 decreased significantly from core revenues for the six

The increase in core revenues and gross profit margin in our Environment sector reflected the revenue impact of several new projects that we commenced in the second half of 2003, primarily in other geographies, particularly Mozambique, Jordan and Bolivia. 38.9% of our Environment sector core revenues were recorded in Euros, so our performance in this sector was less affected in the six months ended June 30, 2004 by the appreciation of the average exchange rate of the Euro than our performance in the Energy sector. Gross margin declined due to the higher than expected costs incurred in the early stages of our new projects.

The amounts above represented further market development and our continuing evaluation of new sectors such as public administration and health care. It also reflects the managed services projects we provide through our real-time process outsourcing activities. Projects in this sector are conducted through Euro-denominated contracts, so our performance in this sector was not affected in the six months ended June 30, 2004 by the appreciation of the average exchange rate of the Euro. Gross margin improved due to the growth in revenues associated with our public administration and health care businesses in this sector without a corresponding increase in costs.

The following table identifies our core revenues by region, the approximate percentage of core revenues by region as a percentage of total core revenues during the six-month period ended June 30, 2004 and the six-month period ended June 30, 2003 and the percentage change per region for the periods presented. Period-to-period changes in the geographical distribution of our core revenues may be influenced by a delay in the

The following table sets forth certain statement of operations data as a percent of revenues for the years ended December 31, 2003 and 2002 and shows the percentage change for selected items on a year-to-year basis.

The increase in revenues was primarily due to the acquisition of the NMS Division of Metso on January 31, 2003. In addition, during 2003 we experienced organic growth in all sectors where we operate. However, this growth was partially offset by the negative impact of the translation of our non-Euro-denominated revenues due to the appreciation of the Euro against other currencies in which we generated revenues. Our revenue growth was also negatively affected by the performance of our naval traffic venture. In addition, part of our revenue growth derived from an increase in our managed services due to higher adoption rates by customers of our disaster recovery solutions and an increased customer base. For a more detailed discussion of specific factors contributing to our revenue growth, see “— Comparison of Segment Information of Year Ended December 31, 2003 to Year Ended December 31, 2002” and “— Quantitative and Qualitative Disclosure of Market Risk.”

Our cost of revenues as a percentage of revenues decreased from 2002 to 2003 by 4.0 percentage points. The NMS Division of Metso, which now operates through our Telvent North America subsidiaries, generates more revenues from higher value-added applications with higher gross margins relative to most of the rest of our business. This decrease is also due to lower costs, particularly those costs associated with the delivery of our managed services solutions. As a result of our restructuring efforts, we have also been able to reduce our cost of revenues. We do not believe that the decline in cost of revenues as a percentage of revenues represents a trend. Our cost of revenues from non-Euro-denominated expenses was lower than it otherwise would have been as a result of the translation of our non-Euro-denominated costs due to the appreciation of the Euro against other currencies. See “— Comparison of Segment Information of Year Ended December 31, 2003 to Year Ended December 31, 2002” and “— Quantitative and Qualitative Disclosure of Market Risk.”

General and administrative expenses decreased as a percentage of revenues from 2002 to 2003 due to the effect of the consolidation of revenues from our temporary consortiums. In absolute Euro terms, general and administrative expenses increased due to the acquisition of the NMS Division of Metso, as well as from increased use of professional services. These increases were partially offset by cost savings that we achieved from our restructuring efforts. We expect to achieve further cost savings in the near future from our continuing restructuring efforts, but we also expect to incur additional costs including internal accounting and legal costs as a result our becoming a publicly-traded company in the United States. These increased costs from being publicly traded include costs associated with director and officer liability insurance, auditing, management oversight, regulatory requirements (including the need to make regulatory filings) and the establishment and maintenance of heightened corporate governance measures.

Our sales and marketing expense increased by € 5.4 million, or 1.8 percentage points as a percentage of revenues, primarily as a result of higher advertising expenses and sales personnel costs incurred as a result of the acquisition of the NMS Division of Metso. Excluding our acquisition of the NMS Division of Metso, our sales and marketing costs were relatively constant. In the future, we expect to leverage the sales and marketing staff we acquired through our acquisition of this division for the benefit of our entire business and to consolidate and focus our marketing efforts through our North American operations.

Our research and development expenses have increased, both in absolute terms and as a percentage of revenues, since we acquired the NMS Division of Metso. The increase in research and development expenses from 2002 to 2003 as a percentage of revenues is the result of the higher research and development expenses of the NMS Division of Metso relative to the rest of our business. We expect our North American operations to maintain their research and development efforts and levels consistent with those prior to our acquisition and we hope to extend any benefits achieved from these efforts across our global operations. However, as a result of our acquisition of the NMS Division of Metso, we expect to realize synergies from a consolidation of our research and development activities and we expect our total 2004 research and development expenses to be below our 2003 research and development expenses. Excluding the impact of the acquisition, our research and development expense was relatively constant over the period.

The increase in depreciation and amortization from 2002 to 2003 was primarily due to the acquisition of the NMS Division of Metso, which has a higher level of depreciable assets than the rest of our business. Depreciation and amortization expense increased due to the impact of the purchase price allocation of € 2.0 million from the acquisition, which consisted primarily of an adjustment in the value of intangible assets such as backlog, software technology and customer relationships. We expect the impact of the purchase price allocation amortization to be the same amount for 2004 and to decrease to € 1.4 million in 2005. See Note 10 to our Consolidated Financial Statements. Excluding the impact of the acquisition, our depreciation and amortization would have been constant from 2002 to 2003.

In 2002 and 2003, we incurred impairment charges of € 2.3 million and € 1.6 million, respectively, related to some of our minority equity investments. In June and August 2004, we sold all of these investments to Telvent Investments at book value. Accordingly, we do not expect to incur any charges in the future with respect to any of these minority investments.

Financial expense increased € 1.9 million due to expenses related to the cost of guarantees amounting to € 35.8 million in connection with our Xfera investment and certain investment commitments. The guarantees expire when the commitments are met; however, we transferred this obligation to our affiliate in June 2004 in conjunction with our sale of the Xfera investment to it at a sale price of € 26.4 million. Our affiliate is an indirect subsidiary of Abengoa and is not one of our subsidiaries. We have no further obligations relating to the Xfera investment. Financial expense also increased by € 0.8 million due to debt incurred to finance our acquisition of the NMS Division of Metso. In addition, financial expenses increased as a result of the appreciation of the Euro against the U.S. Dollar from 2002 to 2003. Our non-Euro-denominated monetary assets exceeded our non-Euro-denominated liabilities during these periods. We cannot predict whether and for how long the Euro will continue to strengthen against the dollar. To the extent that our non-Euro-denominated monetary assets continue to exceed our non-Euro denominated monetary liabilities, our results of operations will be negatively affected by an appreciation of the Euro against other currencies and positively affected by depreciation of the Euro against other currencies. These increased costs were partially offset by lower interest rates on our variable rate obligations. See “— Liquidity and Capital Resources.”

The € 0.7 million increase in other expense primarily resulted from a non-recurring provision for surcharges and penalties. Other expense also includes gains and losses from disposals of fixed assets.

In 2002 and 2003, our income tax benefit was € 1.2 million and € 0.8 million, respectively. Our effective income tax rate was reduced by the research and development tax credits that we received under applicable tax laws in Spain and North America in both 2002 and 2003. In addition, we received tax benefits because of the tax loss carry-forwards from certain of our subsidiaries. Following utilization of our existing net loss carry-forwards, we expect our effective tax rate in the future to be 20% due to our ongoing research and development tax credit. See Note 18 to our Consolidated Financial Statements.

As a result of the foregoing reasons, our net income decreased from 2002 to 2003 by € 0.2 million.

Comparison of Segment Information of Year Ended December 31, 2003 to Year Ended December 31, 2002

We prepared the following segment information in accordance with Spanish GAAP. We prepare our internal financial forecasting and reporting information in accordance with Spanish GAAP. The following information contains selected consolidated financial data for 2003 and 2002 prepared in accordance with Spanish GAAP. The U.S. GAAP information and Spanish GAAP information are not readily comparable. The differences between U.S. GAAP and Spanish GAAP could be significant and the effect of these differences may be material, individually or in the aggregate. In addition, we have made certain adjustments to our core


	(a)	the consolidation of Telvent Housing, Telvent Factory and Telvent Portugal which were purchased from a company under common control during the year ended December 31, 2002, which accounted for an increase in revenue of € 9.9 million in 2002 and which was accounted for in a manner similar to a pooling of interests;

	(b)	the difference in the application of the method of revenue recognition, which increased revenues by € 1.5 million and € 0.9 million for the year ended December 31, 2003 and 2002, respectively; and

	(c)	the adjustment of the temporary consortiums, which decreased revenues from Spanish GAAP to U.S. GAAP in an amount of € 11.4 million and € 3.6 million for the years ended December 31, 2003 and 2002 respectively.


⁽²⁾	Gross profit does not appear in our presentation of financial information in accordance with Spanish GAAP because it is not a recognized line item pursuant to the formatting of financial statements for Spanish GAAP purposes.

⁽³⁾	We have adjusted our Spanish GAAP results of operations for the year ended December 31, 2002 in this table in order to conform with our presentation of net revenues under U.S. GAAP for the year ended December 31, 2002.

The most important driver of the growth in our Energy sector in 2003 was our acquisition of the NMS Division of Metso on January 31, 2003, which recorded consolidated core revenues of € 42.9 million for the eleven-month period ending December 31, 2003. Now called Telvent North America, the principal products and services solutions of this division are provided to our Oil & Gas and Electricity customers. Our gross profit margin was positively affected in 2003 by the sale of more internally developed, higher value-added applications, such as GMAS, OASyS DNA and POLARIS, to our installed customer base in North America. Our reported core revenues growth was constrained by the increase in the value of the Euro, our reporting currency, relative to other currencies in which our revenues are denominated in this sector, primarily the U.S. Dollar; in 2003, 66.4% of our Energy core revenues were recorded in currencies other than the Euro. This activity is consistent with our strategy. Our 2003 energy core revenues and gross profit margin suffered in 2003 due to poor performance of our Mexican operations in 2002. At the end of 2002, we experienced turnover in

Core revenues generated by the road traffic department within our Traffic sector increased from € 71.7 million in 2002 to € 79.9 million in 2003, or 11.4%, in part due to its initial sales of projects incorporating our OASyS product. However, our naval traffic core revenues, which come from a joint venture in which we participate, declined from € 14.9 million in 2002 to € 7.4 million in 2003, or 50%, due to poor performance of the joint venture resulting from a lack of shared vision between the owners of this business. We currently own 50% of this joint venture and have begun to discuss the possibilities for the naval traffic business with the other owner, but no decision or agreement has been reached. Most of our Traffic sector core revenues derive from Euro-denominated contracts, so our performance in this sector was less affected in 2003 by the increase in the value of the Euro than our performance in the Energy sector.

Our growth in core revenues and gross profit margin in our Transport sector is due primarily to our successful, multi-year research and development effort relating to the launch of our MobiFast advanced payment systems technology. Although we began selling these systems in 2002, we completed an upgrade to our MobiFast system in late 2002, which led to a more successful roll-out in 2003 and our improved results. Most of our Transport sector core revenues derive from Euro-denominated contracts, so our performance in this sector was less affected in 2003 by the increase in the value of the Euro than our performance in the Energy sector.

The increase in core revenues and gross profit margin in our Environment sector resulted from our successful delivery of systems based on our OASyS product in combination with some specialized applications such as AWS. 56.6% of our Environment sector core revenues were recorded in Euros, so our performance in this sector was less affected in 2003 by the increase in the value of the Euro than our performance in the Energy sector.

The amounts above represented our market development and our continuing evaluation of new sectors such as public administration and health care. It also reflects the managed services projects we provide through our real-time process outsourcing activities. The incremental contribution to our gross profit margin from the addition of new managed services customers is higher than the gross profit margin contribution generated from our other activities in the periods presented. This activity is conducted in Euro-denominated contracts, so our performance in this sector was less affected in 2003 by the increase in the value of the Euro than our performance in the Energy sector.

The following table identifies our core revenues by region, the approximate percentage of core revenues by region as a percentage of total core revenues during 2002 and 2003 and the percentage change per selected region for the periods presented.

We have not historically been materially affected by inflation in our core geographies.

We do not believe there is inherent seasonality in our revenues as reported under U.S. GAAP. We historically have experienced fluctuations in the cash we receive throughout the year as we tend to receive greater payments in the first and fourth quarters than in the second and third quarters due to the budgetary cycles of some of our customers. Some of this seasonality may be reflected in our Spanish GAAP core revenues but not in our revenues reported under U.S. GAAP due to the differences in the revenue recognition policies we apply under the respective accounting principles. See “— Comparison of Segment Information of Six Months Ended June 30, 2004 to Six Months Ended June 30, 2003”.

We have significant relationships with our majority shareholder, Abengoa. For a description of the credit arrangements and other related party transactions, see “Relationship Between Telvent and the Abengoa Group” and Note 21 to our Consolidated Financial Statements.

Management believes that our available cash and investments, cash flow from our ongoing operations and net proceeds received by us from this offering will be sufficient to finance our working capital for the foreseeable future. If we have a need in the future for additional liquidity, we will seek to obtain additional or increased lines of credit from Abengoa or third-party lenders.

For the six months ended June 30, 2004, net cash used in operating activities was € 7.8 million, compared with net cash provided by operating activities of € 2.1 million for the six months ended June 30, 2003. We had € 6.8 million of non-cash adjustments to net income for the six months ended June 30, 2004, including depreciation and amortization charges of € 3.5 million, compared with € 9.0 million of non-cash adjustments to net income, including € 3.2 million of depreciation and amortization charges, for the six months ended June 30, 2003. Working capital and temporary joint ventures used € 18.2 million of our operating cash in the six months ended June 30, 2004 compared with € 7.3 million in the six months ended June 30, 2003. The decrease in operating cash for the six months ended June 30, 2004 was mainly due to the increase in our inventory of € 11.2 million, in our unbilled revenues of € 15.2 million and in our accounts receivable of € 2.0 million and the decrease in our accounts payable, related parties and other assets of € 6.9 million. These changes were partially offset by an increase in billing in excess of cost and estimated earnings of € 8.5 million, accrued and other liabilities of € 7.6 million and the incorporation of the temporary consortiums’ working capital of € 1.1 million. The main reason for these negative operating cash flow changes was the overall economic slowdown in Spain pending the outcome of the Spanish national elections, the transition to the new government, and the resulting invoicing delays. The decrease in operating cash for the six months ended June 30, 2003 was mainly due to the increase in our inventory of € 9.4 million, unbilled revenues of € 18.8 million and the decrease in our accounts payable, related parties and other assets of € 14.3 million. These changes were partially offset by our decrease in accounts receivable of € 11.2 million and the increase in our billing in excess of cost and estimated earnings of € 16.2 million and accrued and other liabilities of € 7.7 million.

Net cash provided by operating activities in 2003 was € 12.3 million. For the year ended December 31, 2003, we had € 17.5 million of non-cash adjustments to net income as a result of depreciation and amortization charges of € 5.9 million, as well as asset impairment charges of € 1.6 million related to certain of our minority investments carried at cost. We also recorded a non-cash adjustment of € 3.5 million related to a foreign currency exchange loss reflected in our consolidated statement of operations due to the impact of the appreciation of the Euro against other currencies on our monetary assets and liabilities. In 2003, operating activities reflect our recognition of the carry-forward of net operating tax losses, which resulted in a € 4.4 million non-cash tax benefit in our consolidated statement of operations. Working capital used € 9.8 million of our operating cash, mainly driven by the significant decrease in our accounts payable, related parties and other assets, billing in excess of cost and estimated earnings on uncompleted contracts and accrued and other liabilities and the increase on unbilled revenues, which was partially offset by the use of our receivables factoring program and a decrease in our work in process, as reflected in a decline in our inventory balance.

Net cash provided by operating activities in 2002 was € 7.1 million. For the year ended December 31, 2002, we had € 9.1 million of non-cash adjustments to net income as a result of depreciation and amortization charges of € 4.1 million, as well as asset impairment charges of € 2.3 million related to certain of our minority investments

Net cash provided by investing activities for the six months ended June 30, 2004 was € 40.9 million, compared with net cash used in investing activities for the six months ended June 30, 2003 of € 30.1 million. The investing activities in the six months ended June 30, 2003 primarily related to the acquisition of the NMS Division of Metso for € 35.7 million. In the six months ended June 30, 2004, we received € 26.1 million from the sale of investments (substantially all of which related to the sale of our Xfera investment), we used € 5.2 million borrowed from related parties to pay the deferred payment of the acquisition of the NMS Division of Metso, and we used cash of € 2.3 million to purchase equipment. Additionally, during the six months ended June 30, 2004, we collected € 23.0 million due from related parties that we primarily used to repay short-term debt. Additionally, in the six months ended June 30, 2003, we received € 8.0 million from Abengoa which was held in an escrow account as cash collateral associated with our Xfera investment.

Net cash provided by investing activities in 2003 was € 19.9 million. This amount is related primarily to our acquisition of the NMS Division of Metso for € 35.7 million, including acquisition expenses of € 3.3 million and the deferred purchase price payment of € 5.2 million. The deferred purchase price was paid in January 2004. We financed this acquisition from various sources described in greater detail below. In addition, we received the € 49.7 million previously held in a cash collateral account related to our investment in Xfera. During 2003, we used € 1.1 million to purchase available-for-sale securities including our € 1.0 million investment in Viryanet. In 2003, we also incurred € 3.5 million of capital expenditures related to the build-out of our facilities and data centers. Additionally, we lent € 5.9 million in 2003 to related parties under our reciprocal credit agreement.

Net cash used in investing activities in 2002 was € 93.1 million. This amount was mainly driven by our acquisition of our interests in Xfera, Telvent Housing, Telvent Portugal and Telvent Factory. In connection with our € 25.0 million investment in Xfera, we were initially required to deposit € 49.7 million in a cash collateral account in conjunction with guarantees for the then-existing future funding commitments for Xfera. As a result of the reorganization of Abengoa Group companies we acquired Telvent Housing, Telvent Portugal and Telvent Factory from Abengoa for a total amount of € 10.8 million. In 2002, we incurred a total of € 19.8 million of capital expenditures related to the building of our facilities and data centers. Additionally, we sold a total of € 1.2 million of equipment at book value to a party under common control. Accordingly, there was no gain or loss as a result of the transaction. During the year, we received € 11.1 million from related parties under our reciprocal credit agreement which was subsequently used to finance our capital expenditures.

Cash used in financing activities for the six months ended June 30, 2004 totalled € 46.4 million, compared with cash provided by financing activities of € 7.8 million for the six months ended June 30, 2003. During the six months ended June 30, 2004, we repaid € 27.9 million of debt owed to Abengoa incurred in connection with the acquisition of Xfera and repaid € 20.1 million of short-term debt incurred in connection with the acquisition of the NMS Division of Metso. In addition, during the six months ended June 30, 2004, we received € 1.7 million in proceeds of short-term debt. During the six months ended June 30, 2003, we incurred € 12.9 million in net short-term debt and long-term debt to partially finance the Metso acquisition. In the six months ended June 30, 2003, we paid for 80% of this acquisition, net of cash, and our investment in Xfera using proceeds from borrowings and available cash.

Cash used in financing activities in 2003 totaled € 32.9 million. During this period, we repaid to Abengoa the entire € 49.7 million of cash collateral that had been held in escrow as security for guarantees made in relation to our investment in Xfera and also repaid € 25.0 million of amounts owing from our initial investment in Xfera. We received € 14.0 million from Abengoa as reflected in the amount due from related parties to repay a portion of short-term indebtedness that we incurred in connection with our acquisition of the NMS Division of Metso. We also received € 20.0 million from Abengoa to fund a potential equity investment in a business that we ultimately determined not to make. In 2003, we borrowed € 16.9 million mainly to complete the financing of the purchase price of the NMS Division of Metso and to finance other working capital requirements. These amounts were subsequently repaid to Abengoa in the first quarter of 2004. During 2003, we paid dividends of € 6.2 million.

Cash provided by financing activities in 2002 totaled € 104.1 million. We received the majority of this amount through our reciprocal credit agreement with related parties. In particular € 25.0 million was provided by Abengoa in connection with our investment in Xfera, which we subsequently repaid to Abengoa in 2003. Additionally, we received € 49.7 million from Abengoa which was held in escrow for the financing of future funding commitments for Xfera. We received € 32.2 million from short-term debt used to finance our working capital requirements and long-term debt which we used to reduce amounts due to related parties. The long-term debt we received supported several lease-back agreements. Additionally, during 2002 we repaid € 15.4 million of our short-term debt reflecting a substantial portion of our working capital financing. During 2002, we paid dividends of € 8.4 million.

Cash. Our cash at December 31, 2003 and December 31, 2002 was € 27.7 million and € 32.7 million, respectively. In addition, in 2002 we had € 49.7 million of restricted cash due to a cash collateral account we needed to maintain in connection with our Xfera investment. Our requirement to provide this cash collateral account was eliminated in July 2003, and so we had no such restricted cash at December 31, 2003. Our cash at June 30, 2004 was € 17.6 million, compared with € 11.8 million at June 30, 2003.

As a corporate policy, we try to optimize working capital so that our projects are cash-flow positive over their life cycles. We achieve this result by factoring our receivables under agreements that we have with various financial institutions. We do not factor any of our North American receivables at this time, in part due to the pledge of receivables under Telvent Canada’s financing arrangements. With respect to those receivables we do factor, which includes substantially all of our Spanish receivables, we have entered into several accounts receivable factoring arrangements under which we recorded the accelerated receipt of € 51.9 million of cash for the year ended December 31, 2003 and € 44.4 million for the year ended December 31, 2002, and, for the six months ended June 30, 2004 and June 30, 2003, € 44.1 million and € 34.8 million, respectively, in each case in the aggregate on available trade account receivables. We sell, on a revolving and non-recourse basis, some of these trade account receivables. We account for these transactions as sales because we relinquish control of the pooled receivables. Accordingly, pooled receivables sold under these facilities are excluded from receivables on

The following discussion is a summary of our current credit arrangements and the material loan facilities of our subsidiaries.

Abengoa Credit Arrangement. On April 20, 2004, we established a new bilateral credit arrangement with Abengoa which replaced the prior credit arrangements that we and our subsidiaries had with Abengoa. Under this new arrangement, we and Abengoa have agreed that we may borrow funds from or lend funds to each other, from time to time upon not less than one day’s notice, up to a maximum of € 45.0 million (or the equivalent amount in any other currency quoted in the Spanish currency market). Borrowings under this credit arrangement bear interest at EURIBOR, or LIBOR for borrowings other than in Euro, in either case plus 0.75% per year for a period not to exceed one year, with interest added to the outstanding balance. Each borrowing matures on the last date of the fiscal year in which such borrowing was made, without requiring any earlier payment of principal. This credit arrangement is optional and either we or Abengoa may elect not to make loans to the other. This arrangement has an initial term ending December 31, 2004, and renews for annual one-year terms until terminated by either party. Our indebtedness under this arrangement as of June 30, 2004 was € 1.9 million, after giving effect to the use of € 25.6 million of proceeds from our disposition of our Xfera investment, and € 43.1 million remained available to us as of this date. See “Capitalization.” We incur no costs and receive no payments under this arrangement unless and until we borrow or loan funds thereunder. The terms of our prior arrangements with members of the Abengoa Group were substantially the same as this arrangement except the prior arrangements involved many of our subsidiaries, were € 90.0 million in aggregate and created firm, and not optional, lending commitments from all involved parties.

ABN Amro Loan Facility. We also participate in a loan facility with ABN Amro Bank under which Abengoa, certain subsidiaries of Abengoa and certain of our subsidiaries are borrowers and we and certain of our subsidiaries and certain other Abengoa subsidiaries are guarantors. The total amount of this credit facility is € 50.0 million. Of that overall maximum borrowing amount, our subsidiaries have a sub-limit of € 30.0 million, Abengoa has a sub-limit of € 20.0 million, and the other Abengoa subsidiaries collectively have a sub-limit of € 15.0 million. We may use that sub-limit for letters of credit, sureties, import financing, rebate financing, bank overdrafts (up to € 3.0 million), and guarantees; however, the availability of our € 30.0 million sub-limit is subject to the usage of this facility by other members of the Abengoa Group. The joint and several guarantee of our subsidiaries and us under this facility is limited to amounts borrowed by any of our subsidiaries under this facility, and does not extend to any amounts borrowed by any members of the Abengoa Group other than us. This facility provides for interest rates and fees as agreed to by the parties from time to time based on the type of credit extended by ABN Amro under the loan facility. This facility terminates upon notice by any of the parties. At December 31, 2003, € 13.0 million of our sub-limit was used in connection with our acquisition of the NMS Division of Metso and € 16.6 million was committed to other arrangements including performance bonds and bid bonds. The interest rate charged in 2003 for the € 13.0 million loan was the applicable LIBOR or EURIBOR rate plus 0.95%. We pay ABN Amro fees of 0.6% of the outstanding amount of bid bonds per year and 0.7% of the outstanding amount of performance bonds per year. As of June 30, 2004, the maximum amount of this facility to which we were assured access was € 1.7 million.

Telvent Canada Ltd.: Telvent Canada Ltd. has two separate credit facilities with LaSalle Bank. Both facilities were obtained on May 2, 2003, in part to finance our acquisition, through Telvent Canada, of the NMS Division of Metso. Each of these facilities is secured by a first lien on all of the assets and capital stock of Telvent Canada and its wholly-owned subsidiary, Telvent USA. We refer to these facilities as Facility A and Facility B. Until Facility A and Facility B are repaid, Telvent Canada may not pay a dividend and we will be unable to factor any receivables of Telvent Canada or Telvent USA. See Note 14 to our Consolidated Financial Statements.

At Telvent Canada’s option, interest on the facilities accrues using either LIBOR or Base Rate indices plus an applicable margin. This margin is determined based on a debt coverage ratio calculation, which is

tested quarterly. The facilities are secured by a first lien on all of the assets and capital stock of Telvent Canada and its subsidiaries. The facilities are cross-collateralized and provide for cross-defaults. As of March 31, 2004, Telvent Canada was in breach of one of the quarterly covenant requirements in its credit facilities with LaSalle Bank. As of June 11, 2004 it received a waiver for the covenant breach as of March 31, 2004. The waiver also included a reduced covenant requirement as of June 30, 2004, which Telvent Canada satisfied. However, as of June 30, 2004, Telvent Canada would have been in breach of the original covenant, if applicable. As of September 30, 2004 the original covenant requirement will be applicable and will remain in place for the duration of the credit facility. We believe that it is not probable that Telvent Canada will fail to meet the covenant requirement at September 30, 2004 and at other measurement dates within the next 12 months. We have reached this conclusion based upon current budgets and forecasts. We continue to monitor and revise our internal forecasts periodically. Additional information regarding the facilities is set forth below:

Facility A is a secured revolving line of credit up to $8 million (or its equivalent in Canadian dollars), and may be used for working capital and general corporate purposes and for the issuance of letters of credit based on a monthly borrowing base formula that is determined as a percentage of eligible accounts receivable and inventory at Telvent Canada Ltd. Facility A provides for quarterly payments of interest and the payment of all outstanding principal on or before March 31, 2008. Telvent Canada’s ability to borrow under Facility A will be based on a monthly borrowing base formula determined as a percentage of eligible accounts receivable and inventory.

As of June 30, 2004, $ 4.2 million was available and $ 3.8 million was outstanding under Facility A based on this formula.

Facility B is a secured delayed-draw term credit facility in the amount of $5.5 million (or its equivalent in Canadian dollars). The principal amount of outstanding loans in respect of Facility B shall be repaid in equal quarterly installments plus interest based on a five-year amortization schedule commencing on August 1, 2003 and expiring on or before March 31, 2008. Telvent Canada is required at the end of each fiscal year to allocate excess cash flow to the amounts outstanding under Facility B.

Telvent Canada borrowed $ 3.4 million under Facility B in connection with the closing of the acquisition of the NMS Division of Metso on January 31, 2003 and borrowed the remaining $2.1 million under Facility B on January 31, 2004. As of June 30, 2004, $ 1.2 million was available under Facility B.

Telvent Energía y Medio Ambiente, S.A.: Telvent Energía y Medio Ambiente borrowed € 3.6 million from Caja Madrid on October 25, 2001 for working capital requirements and other general corporate purposes. This loan matures on October 2008 and provides for repayment of principal in equal installments of € 152,000 plus payment of interest at the three-month EURIBOR rate plus 0.60%. As of June 30, 2004, the amount of outstanding principal plus accrued and unpaid interest was € 2.4 million.

Telvent Housing: Telvent Housing has leaseback financings on the equipment and fixtures installed in our two Madrid facilities and our Barcelona facility. We lease each of these facilities under long-term leases. As of June 30, 2004, € 13.4 million was outstanding under these facilities. These facilities mature on various dates, ranging from May 30, 2006 to April 7, 2007. In addition to the installation leaseback facilities, Telvent Housing also obtained a loan from Fortis Bank on March 6, 2003 in the amount of € 10 million, which loan is secured by equipment and fixture assets. This loan matures on September 1, 2006, bears interest at the twelve-month EURIBOR rate plus 1.25% and provides for repayment in equal monthly installments of € 207,000 and a final payment at maturity of € 1.5 million. As of June 30, 2004, the amount of outstanding principal plus accrued interest under this loan was € 6.9 million. Abengoa is a guarantor of these facilities.

In the ordinary course of business, we arrange for surety bonds, letters of credit and performance guarantees. Our performance guarantees are generally in the form of performance bonds to our customers. The bonds are for a fixed monetary amount and match the duration of the contract. We mitigate our risk by

Abengoa has outstanding a € 500.0 million credit facility that contains covenants and agreements that restrict it, and provides that it will prevent its subsidiaries (including us), from taking actions that have certain effects on financial covenants. In particular, the Abengoa credit facility provides for limitations on Abengoa’s ability on a consolidated basis to have net indebtedness. The facility, which expires in 2008, is guaranteed by various members of the Abengoa Group, including two of our subsidiaries. At the closing of this offering, these entities will no longer be guarantors of this loan facility.

We expect that our principal uses of funds for the next several years will include acquisitions, joint ventures, new product development, interest and principal payments on our indebtedness, net working capital increases and capital expenditures, including research and development activities. We intend to finance our growth objectives through cash generated by our business activities and proceeds we receive from this offering. Management believes available resources are sufficient to fund our business for the foreseeable future.

We have made investments of € 5.8 million and € 11.3 million in research and development in 2002 and 2003, respectively. Our research and development spending was € 3.5 million during the six months ended June 30, 2004, compared with € 3.2 million during the six months ended June 30, 2003, and we expect that our research and development spending will be € 10.0 million in 2004. Our research and development expenses have increased in absolute terms since we acquired the NMS Division of Metso. However, as a result of this acquisition, we expect to realize synergies from a consolidation of our research and development activities and we expect our total 2004 research and development expenditures to be below our 2003 research and development expenses.

Over the last two years we have spent, on average, between € 1.0 million to € 1.5 million on replacement-type capital expenditures. In 1999, we embarked on a project to build data centers in the Iberian Peninsula that required capital expenditures. The amount we spent in 2002 and 2003 was € 9.0 million and € 4.3 million, respectively.

In the future, we may become involved in “Build-Operate-Transfer” projects if the trend toward outsourcing certain activities by our potential customers continues to evolve. In these transactions, we would be required to fund an equity investment in projects. These equity investments would increase our need for capital.

The following tables set forth our current ongoing contractual obligations and commercial commitments as of June 30, 2004 and December 31, 2003:

We have contractual obligations to make future payments on debt and lease agreements. Additionally, in the normal course of business, we enter into contractual arrangements where we commit to future purchases of services from unaffiliated and related parties, and request deposits from our customers. This table does not include our short-term debt.

Long-term debt includes the total amount outstanding under long term financing arrangements and is more fully discussed in Note 14 to our Consolidated Financial Statements.

Capital lease obligations include the amounts owed to third parties in connection with facilities, equipment and machinery acquired under capital. Operating lease obligations are more fully discussed in Note 17 to our Consolidated Financial Statements.

Other long-term liabilities include the total amount outstanding under government loans, customer deposits and other payments due to suppliers and are more fully discussed in Note 15 to our Consolidated Financial Statements.

We do not currently have any off-balance sheet transactions or investments in special-purpose entities whose purpose is to facilitate off-balance sheet transactions. Certain of our subsidiaries have guaranteed obligations of Abengoa, but these guarantees will be released on or before the completion of this offering. See “Relationship between Telvent and the Abengoa Group – Abengoa Loan Facility” and Note 17 to our Consolidated Financial Statements.

We participate in certain joint venture arrangements in connection with our share of long-term service contracts. These arrangements are considered arising out of a variable interest in an unconsolidated entity in aordance with Financial Aounting Standards Board Interpretation No. 46, Consolidation of Variable Interest Entities, or FIN 46-R. See Note 7 to our Consolidated Financial Statements for a more detailed description of these joint ventures which we consolidate in aordance with FIN 46-R as of December 31, 2003. See also Note 3 to our Unaudited Condensed Consolidated Financial Statements for a description of the joint ventures which we have consolidated in aordance with FIN 46-R since January 1, 2004.

We provide guarantees in the normal course of our business, including guarantees made to sub-contractors who provide services on our behalf for completed contracts, performance guarantees in association with long-term project bids, guarantees relating to one of our minority investments (which were assumed by another party when the investment was sold) and warranty guarantees. See Note 17 to our Consolidated Financial Statements for a more detailed description of these guarantees, including the duration and maximum potential payments arising under these arrangements.

Market risk is the risk of unexpected losses in earnings relating to our assets and liabilities from unfavorable changes in interest rates, foreign exchange rates and equity prices. The primary market risk we are exposed to is exchange rate risk associated with contracts denominated in currencies other than the Euro. We are also exposed to a lesser extent to interest rate risk from our interest-bearing assets and liabilities and equity price risk on our marketable equity investments.

The majority of our assets, liabilities, sales and costs are denominated in Euros. Our Spanish business enters into contracts where revenues and costs are denominated in other currencies, principally the U.S. Dollar. Our foreign subsidiaries also enter into contracts principally denominated in local currencies, the U.S. Dollar or the Euro that are managed against their functional currency or the Euro. At the present time, we generally hedge our currency risk on a project-specific basis only where our revenues and/or costs are denominated in currencies which differ from the functional currency of our contracting entity. We currently do not engage in currency translation hedging with respect to the Euro.

We manage our foreign exchange exposures in accordance with our internal policies and guidelines. We manage the foreign currency exposure on an individual contract basis using foreign exchange contracts that generally have maturities of 3 months to 12 months and that mature when the forecasted revenues or expenses are anticipated to occur. The counterparties to these contracts are highly-rated financial institutions.

Although these are economic hedges, in accordance with our financial statements prepared in accordance with U.S. GAAP, we record these contracts at fair value on our balance sheet, with related gains and losses recorded as earnings on our consolidated statement of operations, because these are our initial U.S. GAAP financial statements and we are not able to receive hedge accounting treatment for these economic hedges retroactively.

The following tables provide quantitative information about our foreign exchange contracts by principal currency as of June 30, 2004, December 31, 2003 and December 31, 2002.

The above table includes embedded derivatives that we bifurcate from certain long-term binding contracts denominated in a different currency to the functional or reporting currency of either party. Similar to freestanding derivatives, these are recorded at fair value within the balance sheet with related gains and losses recorded in earnings.

As a result of our increase in sales in North America in 2003 due to the acquisition of the NMS Division of Metso, we were subject to greater exposure to fluctuations between the U.S. Dollar and the Euro. As the percentage of our U.S. Dollar-denominated revenues continues to increase as a percentage of our revenues, we expect this trend to continue.

We are also exposed to interest rate risk from our interest-bearing debt obligations. The interest rate on these instruments is based on a rate of three-month or one-year EURIBOR, plus the applicable margins. We do not currently engage in any hedging of interest rate risk through the use of forward contracts, swaps or any other derivative instruments. We use interest rate caps to limit the impact of interest rate increases for some of our long-term debt obligations. We manage certain specific exposures using interest rate caps to limit the impact of interest rate increases. These contracts mature between 2006 and 2008. Our exposure is limited to the premiums paid to purchase the caps. Total premiums paid were € 71,500 and € 43,000 during the years ended December 31, 2003 and 2002, respectively, and no premiums were paid during the six-month periods ended June 30, 2004 and 2003.

Details of the terms of our short-term and long-term debt are reflected in Note 13 and Notes 14 and 15 to our Consolidated Financial Statements, respectively.

We have a portfolio of marketable equity securities that is exposed to equity price risk. As of June 30, 2004, the fair value of these securities was € 2.0 million, reflecting gross unrealized gains of € 1.0 million before taxes. As of December 31, 2003, the fair value of our marketable equity securities was € 2.7 million, reflecting gross unrealized gains of € 1.6 million before taxes. As of December 31, 2002, we held no marketable equity securities.

Our discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements for fiscal years 2002 and 2003 and for the six months ended June 30, 2003 and 2004, which, except as otherwise noted, have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. We base our estimates on historical experience and on various other assumptions we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

An understanding of our accounting policies for these items is critically important to understanding our consolidated financial statements. The following discussion provides more information regarding the estimates and assumptions used for these items in accordance with U.S. GAAP and should be read in conjunction with the notes to our consolidated financial statements.

We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements:


	•	revenue recognition;

	•	consolidation of variable interest entities;

	•	valuation of financial investments and other-than-temporary impairment;

	•	stock-based compensation; and

	•	goodwill and intangible assets.

We provide services to our customers under contracts that contain various pricing mechanisms and other terms. These contracts generally fall into one of the following categories:


	•	products and services solutions – which are typically long-term contracts (in excess of a year) and maintenance contracts in the Energy, Traffic, Transport and Environment sectors; and

	•	managed services – which includes leasing arrangements, monthly fixed-rate contracts, fixed-rate hourly contracts, and research and development activities funded by government agencies and other third parties.


	•	there is persuasive evidence that an arrangement exists;

	•	delivery has occurred or services have been rendered;

	•	the fee is fixed or determinable; and

	•	collectibility is probable.

For products and services solutions contracts, revenue is recognized in accordance with the provisions of Statement of Position No. 81-1, “Accounting for Performance of Construction-Type and Certain Production-Type Contracts.” In general, SOP 81-1 requires the use of the percentage-of-completion method to recognize revenue and profit as our work progresses. We use the cost-to-cost method to measure our progress towards completion. This method relies on estimates of total expected costs or total expected hours to complete the construction service, which are compared to costs or hours incurred to date, to arrive at an estimate of how much revenue and profit has been earned to date.

Because these estimates may require significant judgment, depending on the complexity and length of the services, the amount of revenues and profits that have been recognized to date are subject to revisions. If we do not accurately estimate the amount of costs or hours required or the scope of work to be performed, do not complete our projects within the planned periods of time, or do not satisfy our obligations under the contracts, then revenues and profits may be significantly and negatively affected and losses may need to be recognized. Revisions to revenue and profit estimates are reflected in income in the period in which the facts that give rise to the revision become known.

For our managed services contracts, we recognize revenue earned on the leasing, maintenance, and monthly fixed-rate contracts on a straight-line basis over the term of the contract. For contract arrangements under which there is a fixed-rate per hour charge, we record income based on time incurred to date.

Amounts received for research and development activities have been included in unearned income and are amortized into income in the period during which the services are performed and the revenue is earned.

In contracts for both products and services solutions and managed services, we may bill the customer prior to performing the service, which would require us to record unearned income. In other contracts, we may perform the service prior to billing the customer, which would require us to record unbilled revenue.

Following the issuance of FIN 46 Consolidation of Variable Interest Entities, as revised in December 2003 by FIN 46-R, we consolidate certain joint venture arrangements or Union Temporal de Empresas

Determination of whether a de facto agency relationship exists between us and the other venturers because of transfer restrictions is based upon the facts and circumstances of each agreement and requires judgment to assess the substance of the restriction, and in particular whether or not the “restricted party” has the ability to realize or manage its economic interest in the UTE and the reasons and economic rationale behind the restrictions placed on that party. A different interpretation or assessment of the restriction may lead to a conclusion that a de facto agency relationship does not exist and may mean that certain UTEs would not need to be consolidated under FIN 46-R.

Once we have determined that a de facto agency relationship does exists, further judgment is required to identify which party is the primary beneficiary. Under FIN 46-R, as the venturers in a UTE are exposed to a majority of the UTE’s expected losses and expected residual returns, one of the venturers must be deemed to be the primary beneficiary, and the party in the group that is most closely associated with the UTE will be deemed to be the beneficiary. This is based on an analysis of all relevant facts and circumstances, including the nature of the relationships between, and activities of, the parties involved. A different interpretation of these facts and circumstances or different assessment of who is most closely associated with the UTE could result in a conclusion that a different venturer is the primary beneficiary and in that case we would not consolidate that UTE.

We regularly monitor all of our minority investments in other businesses (which are recognized in our financial statements as long-term investments) for changes in fair value and record impairment when we judge a decline in fair value to be other-than-temporary. An investment is considered impaired if its estimated fair value is less than its carrying value. When an investment appears to be impaired, we evaluate whether the impairment is other-than-temporary. An other-than-temporary decline in fair value is generally considered to have occurred if it is probable that the decline in value will not be recovered.

When market quotations are not readily available because of the nature of the security or illiquid market conditions, we estimate the fair value based primarily on a review of the business conditions affecting the company in which we have invested and other external indications of value. Determining the fair value where there is little or no market liquidity is a subjective process involving significant management judgment because of inherent uncertainties related to the actual future performance of the entity in which we have made the investments. Changes in various assumptions used in our analyses can result in significant changes in valuation. We update our assumptions on an ongoing basis based on changes in market conditions.

Determining whether a decline in fair value is other-than-temporary often involves estimating the outcome of future events and accordingly requires significant management judgment. We consider various factors, both subjective and objective, in determining whether we should recognize an other-than-temporary impairment charge. As a primary indicator of other-than-temporary impairment, we consider the duration and extent to which the fair value is less than our book value coupled with our intent and ability to hold the investment for a period of time sufficient to allow us to recover our investment. Our assessment of other-than-temporary impairment focuses primarily on specific factors, such as operational and financing cash flows, and business and financial outlook. We incorporate the impact of any credit enhancements in our assessment. Broader industry and sector performance indicators are also evaluated. Based on information available as of each balance sheet date, we determine if other-than-temporary impairment exists. New information or economic developments in the future could lead to additional impairment.

If we believe that the impairment of a security or other investment is other-than-temporary, the amount is recognized as a realized loss and the carrying value of the investment is written down to fair value. Once we

Specifically in our determination as to whether an other-than-temporary impairment existed in our investment in Xfera we looked at criteria such as:


	•	The ability of Xfera to adjust its business plans to the changes in the market for UMTS services and the extent to which we deem those plans to be realistic.

	•	Internal valuations that have been performed by Xfera.

	•	The ability of Xfera to obtain vendor financing.

	•	The valuation trends of quoted companies operating in the Spanish mobile telephony markets.

	•	The transactions in the shares of Xfera among the consortium members and the extent to which these transactions would be representative of transactions at the same date between willing buyers and sellers in the market.

A further discussion of the carrying value of our investment in Xfera as well as analysis of the development of the cost per share of our investment is included in Note 6 to our Consolidated Financial Statements.

Under a plan established by Abengoa, certain employees, including members of our management team, entered into agreements with Abengoa to buy our ordinary shares from Abengoa. These ordinary shares contained a put feature whose strike price was based on a formula. For ordinary shares sold prior to the year ended December 31, 2003, compensation expense was calculated based on the formula price at each balance sheet date. For ordinary shares sold to employees during 2003, compensation expense was calculated based on the fair value of our stock at the date of sale, which has been estimated based on the midpoint of the expected price range for a public share offering less a 15% discount. The allocation of a discount was due to the non-marketability of the shares as a result of the absence of a public market. See Note 20 to our Consolidated Financial Statements.

Goodwill is tested for impairment at least annually and written down when impaired. Goodwill is tested for impairment by comparing the fair value of the reporting unit with its carrying value. Fair value is generally determined using discounted cash flows, market multiples and market capitalization. Significant estimates used in the fair value methodologies include estimates of future cash flows, future short-term and long-term growth rates, weighted average cost of capital and estimates of market multiples of the reportable unit. If these estimates or their related assumptions change in the future, we may be required to record impairment charges for our goodwill and intangible assets with an indefinite life. See Note 10 to our Consolidated Financial Statements.

We recorded goodwill in relation to our acquisition of the NMS Division of Metso on January 31, 2003. We have selected December 31 as the date as of which we will perform our annual goodwill impairment tests. As of December 31, 2003, no impairment was recognized.

We have also recorded intangible assets with finite lives in relation to our acquisition of the NMS Division of Metso. These comprise contract backlogs, software licenses, software technology and customer relationships. The value of these intangible assets was based on an independent valuation report. We are amortizing the intangible assets over their estimated useful lives which are two years for contract backlogs, four years for software licenses, five years for software technology and ten years for customer relationships. If our estimates of useful lives were to change, we would be required to aelerate the amortization charge recognized in earnings. We review the carrying value of our finite life intangibles for impairment loss when ever events or changes in circumstances indicate that the carrying value may not be recoverable. The recoverability assessment involves considerable estimates of future cash flows in association with recorded finite life intangibles. If these estimates or related assumptions change in the future, we may be required to record impairment charges for our finite life intangible assets. See Note 10 to our Consolidated Financial Statements.

We are an information technology company that provides value-added real-time products and services solutions to customers in targeted industrial sectors (Energy, Traffic, Transport and Environment) primarily in Spain, North America, Latin America (including Mexico) and China. These products and services solutions include systems integration, consulting services, design and engineering services, and software that enable our customers to more efficiently manage their operations and business processes.

In 2003 we achieved revenues of € 257.7 million and income from operations of € 8.9 million. Net income declined in 2003 by 3.4% from € 4.7 million to € 4.5 million. Our 2003 results include eleven months of results of operations of this division, which we acquired as of January 31, 2003. This acquisition was the primary source of our 2003 revenue growth. During the first six months of 2004, we generated revenues of € 126.5 million, income from operations of € 5.6 million, and net income of € 3.6 million.

Our business is organized in three primary ways — across sectors, IT solutions and geographies.

Sectors: We have developed distinctive skills in our targeted industrial sectors that share the following characteristics:


	•	Mission-critical: Our solutions are specifically designed to address mission-critical functions in sectors that require real-time data gathering, interpretation and immediate response and decision making.

	•	Extensive networks: From 5,000-mile pipelines to river basins to electricity transmission and distribution grids to interstate highways, our solutions monitor extensive networks where comprehensive data gathering and control is required to better control those networks and ensure their reliability.

	•	Flow-based: Whether related to fluids, energy or traffic, we have broad experience in information applications that facilitate the organization and management of continuous flow along a defined path.

We currently provide our solutions to customers in the Energy, Traffic, Transport and Environment sectors, all of which share these characteristics. The following chart provides a summary of the allocation of our core revenues among our sectors for the last two fiscal years.

As an example, for a typical project in the Energy sector, we would provide a complete solution for the operation of an oil and gas pipeline network through:


	•	remote terminal units (RTUs) that measure flow data and that transmit the data in a digital format through a telecommunication system;


	•	OASyS, our supervisory, control and data acquisition (SCADA) and control system that monitors pipeline flow based on the data transmitted by the RTUs and assembles the data into operational information, such as volumetric data;

	•	operational applications that use operating, safety, and cost data to notify a customer’s enterprise system of inventory, trend and cost-cutting information; and

	•	business applications such as POLARIS that prepare data in a form that can interface with enterprise resource planning or accounting systems for invoicing, banking and real-time business decision-making.

Our services and solutions can then be classified into four different complementary categories representing the four stages of converting field data into decision-making mission-critical information. We refer to these four categories collectively as the “hourglass.” This is illustrated in the diagram below.

We believe that the “hourglass” shape depicts the market for the provision of our solutions in our targeted industry sectors because we believe fewer companies provide solutions for control systems and advanced operational applications in these sectors than provide solutions to capture field data or for business applications.

Specific Geographies: We currently focus on four geographic regions: Spain, North America, Latin America and China. We started operations in Spain over 40 years ago. While we continue to solidify and grow our presence in Spain, we have also developed a strong presence and expect to continue to grow in North America and Latin America. We also expect to increase our presence in China, which we have entered more recently.


	•	Spain: Traffic and Transport represent our largest sectors in the Spanish market, where we have provided solutions to three of the four subway systems in Spain and intelligent traffic systems to numerous cities, including Madrid. We also have significant sales in Environment and in the Electricity unit of our Energy sector.

	•	North America: We are a leader in the Oil & Gas unit of our Energy sector, based upon transmission pipeline mileage.

	•	Latin America: We have a strong presence in Mexico and Brazil.

	•	China: We have been able to build a position in the Energy, Traffic and Transport sectors that we believe will constitute a platform for future growth.

The following chart illustrates an approximate breakdown of our core revenues by region for each of the last two fiscal years.

Growth and profitability. In 2003, we achieved revenues of € 257.7 million and income from operations of € 8.9 million, representing increases of 17.5% and 68.6%, respectively, from 2002 to 2003. Net income declined in 2003 by 3.4% from € 4.7 million to € 4.5 million. Our 2003 results include eleven months of results of operations of the former NMS Division of Metso, which we acquired as of January 31, 2003. This acquisition was the primary source of our 2003 revenue growth. For the six months ended June 30, 2004, we generated revenues of € 126.5 million and income from operations of € 5.6 million. Our revenues and income from operations increased 17.4% and 257.7%, respectively, from the six months ended June 30, 2003 to the six months ended June 30, 2004. This increase in revenues was primarily due to the consolidation of revenues from our temporary consortiums, increased business activity and revenues attributable to our ownership of the NMS Division of Metso for the entire six-month period ended June 30, 2004. Net income for the six months ended June 30, 2004 increased to € 3.6 million from € 0.5 million for the six months ended June 30, 2003.

Our growth over the last decade has been characterized by a combination of organic and non-organic initiatives:


	•	Consolidation of core sectors and geographies: We enhanced our position in Energy and Traffic in Spain and increased penetration of new products into our installed customer base.

	•	Expansion of core sectors into new geographic markets: We focused on geographic markets where we believed in time we could secure a leadership position, such as Energy in Latin America and Traffic in China.

	•	Entry in related new sectors: We developed distinctive solutions for Environment and Transport, building on our technology and research and development capabilities. In Environment, these solutions include our water management applications and weather information and decision support systems. In Transport, these solutions include our toll management and ticketing systems.

	•	Successful integration of acquisitions: We successfully integrated the NMS Division of Metso into our organization after acquiring it in January 2003.

In order to manage our rapid growth, we have and will continue to reinforce our operating and financial systems as well as introduce other advanced management processes to optimize performance and maximize cost savings. Other steps we have taken to manage that growth include dividing our organization into Product Centers, industry-specific Competency Centers, and local geographic Delivery Units.

Diversified blue chip customer base. Our customers include some of the largest energy companies in the United States, Canada, Spain, Mexico, Brazil and China, some of the largest Spanish and Latin American utilities, the traffic or transport authorities of some of the largest cities in Spain, North America, Latin America and China, and a number of government environmental entities in Spain and North America. Our long-standing relationships with many of our customers, some of which span more than 15 years, have allowed for the progressive introduction of new products and services to our installed customer base. A representative sample of blue chip customers for whom we have provided services during one or more of the past several years, together with the percentage of our core revenues represented by each of these customers during our 2003 fiscal year, includes the following within each sector:


	•	Energy – Oil & Gas: ChevronTexaco (1.0%), Pemex (0.7%), Conoco Phillips (0.5%), PetroChina (0.5%) and Petrobras (0.2%).

	•	Energy – Electricity: Electronorte (3.8%), Rio Light (0.7%), Red Electrica (0.6%), Iberdrola (0.6%), Federal Electricity Commission of Mexico (0.6%) and Endesa (0.6%).

	•	Traffic: traffic authorities of Madrid (1.4%), Zhengzhou (1.1%), Belo Horizonte (0.7%), Barcelona (0.6%) and Guangzhou (0.2%).

	•	Transport: Spanish national railways (2.4%), Tianjin metro (1.8%), Madrid metro (1.5%) various Spanish regional highway authorities (1.1%), NYC subway (0.6%) and Bilbao metro (0.2%).

	•	Environment: Spanish Ministry of the Environment (1.9%), National Water Commission of Mexico (0.8%), East Bay (California) Municipal Utility District (0.3%) and South Florida Water Management District (0.2%).

Diversified geographic exposure. Spain represented 56.6% of our 2003 core revenues. Latin America and North America represented 18.3% and 11.7% of our 2003 core revenues, respectively. We have increased our presence in China in recent years. China accounted for approximately 4.4% of our 2003 core revenues. For the six months ended June 30, 2004, Spain, Latin America, North America and China represented 51.8%, 19.1%, 14.2%, and 2.5% of our core revenues, respectively. We believe this geographic diversification reduces our exposure to regional economic and political issues and provides us with a mix of stable and high-growth markets. We expect to further diversify our revenues among our core geographies in the future.

Distinctive proprietary technology. Through our research and development effort, we have developed proprietary products, including a supervisory control and information management system (OASyS), a dynamic network of industry-specific advanced applications (OASyS DNA), SimSuite Pipeline and POLARIS Revenue Accounting and Inventory Management (energy applications), advanced urban traffic management systems (ITACA), and data collection applications and devices (RTUs) for electricity transmission and distribution. Our research and development planning process is designed to ensure that new developments are aligned with our business strategy and with our customer needs and demands, which we believe increases the effectiveness of our research and development process. We have a dedicated research and development team of approximately 140 engineers and have made cumulative research and development investments over the last two fiscal years of € 17.1 million.

Flexible technology approach. We have developed a series of strategic alliances with other vendors that have allowed us to build on our integrated portfolio of proprietary and third-party solutions.

Examples of this type of alliance include our agreement with ESRI as a preferred partner for geographical information systems in each of our sectors, our long-standing relationship with DMS Power Engineering Group for applications in the electrical distribution operational applications space and our alliance with Echelon Corporation for device networking technologies. These alliances are comprised of preferred partnership, exclusive distribution, software license and value-added reseller agreements.

Global solutions delivered locally. Our operational model has allowed us to leverage our sector expertise in the geographies in which we operate and to build a competitive advantage over less sophisticated local integrators and large but less technologically flexible global suppliers.

We are organized and operated in a manner that allows us to combine local customer knowledge with deep functional and technical expertise. Our operations are based on the following three levels:


	•	Our Geographical Delivery Units house customer-centric local teams to serve customers in a specific geography. These units are based in the United States (Houston and Baltimore), Canada (Calgary), Mexico (Mexico City), Spain (Madrid and Seville), Brazil (Sao Paulo and Rio de Janeiro) and China (Beijing).

	•	Our industry-specific Competency Centers are responsible for the development of complete solutions by integrating our products, third-party products and services for each sector in which we operate. Our Competency Centers are located in Calgary (Oil & Gas), Seville (Electricity and Environment), Madrid (Traffic) and Bilbao (Transport) and include sector specialists that integrate proprietary technology and third-party products.

	•	Our Product Centers, located in our facilities in Calgary, Madrid, Seville and Bilbao, execute our research and development strategy.

Experienced international management team. Our leadership team has extensive industry experience with a long track record of working for us. On average, our executive officers have more than 15 years of industry experience in our targeted geographies. The composition of our management reflects the geographies in which we operate.

Proven internal management process and systems. We operate with rigorous management and risk control systems. We have implemented these systems as a result of our parent company, Abengoa, being a public company in Spain. These systems are based upon a company-wide set of management policies and risk control practices, centered on the following:


	•	A firm-wide set of ten standard policies covering the following key management topics, which is an integral component of our business culture:


	•	minimum contract requirements;

	•	financial and currency exchange management;

	•	management of legal matters;

	•	risk analysis and insurance management;

	•	quality control and environmental management;

	•	computer resource specifications;

	•	general and administrative expense procedures;

	•	consolidation, auditing and management of tax issues;

	•	management information systems; and

	•	corporate identity and communication.


	•	Monthly profit and loss reporting at the project level, and contract guidelines that establish minimum margin and positive cash flow targets for each project; and

	•	Strong risk control practices, including an internal audit department that reports quarterly to the Audit Committee of our board of directors.

Relationship with Abengoa. We benefit from our relationship with Abengoa in a number of ways. In particular, it enables us to identify cross-selling opportunities and gain market intelligence by maintaining close contact with the other companies in the Abengoa Group.

We expect that, in general, our target geographic markets will grow in the near term, primarily driven by the following trends:


	•	Increased infrastructure spending in our key sectors: We anticipate that increased security concerns, recent service failures, such as electricity blackouts, and economic recovery will drive infrastructure investments, especially in the U.S. and Latin America.

	•	Infrastructure development in China: Expected GDP growth rates of approximately 8% in China over the next several years will require substantial infrastructure investment. We expect projected investments in China in electrical capacity, oil & gas (approximately 6,000 new miles of pipelines by 2010) and transportation (approximately 16,000 new miles of toll highways by 2015) to boost performance and consequently spending in several of our core sectors. Due to our recent successes in China, we believe we are well-positioned to participate in a portion of this growth.

	•	Demand for new information technology products and services: We believe that our Energy and Transport customers are increasingly looking to outsource real-time solutions, and we believe this trend will open up new markets.

We expect these trends also to be supported by continuing GDP growth in each of our core geographies of Spain, North America, Latin America and China.

Our goal is to sustain revenue growth and increase profit margins by shifting product mix toward our higher value-added applications. From 2001 to 2003, we developed or acquired new higher value-added products (such as OASyS DNA and POLARIS), which we have already deployed to customer projects. In the future, we expect the sales of these products to represent a higher portion of our overall revenues. We price our solutions based upon the level of the technology and service support required, with a recognition of the importance of these solutions to our customers’ enterprise systems. For higher value-added applications, our solutions are priced on a business-value basis, taking into account the benefits we provide to our customers through our knowledge of their businesses as well as the competitive market. For lower value-added applications, pricing is typically based on volume and ability to supply the solutions. The remainder of our fixed-price contracts are priced on cost-plus basis. We also will continue the implementation of several cost-saving initiatives at the corporate and operational levels and we anticipate that we will realize these cost savings in the next several years. These initiatives include the integration of support functions for our subsidiaries such as accounting and administration. Additionally, we have identified opportunities for further growth by making substantial investments both in acquisitions and proprietary product developments. Our near-term growth objectives are to:


	•	Develop or consolidate a leadership position in our current geographies for our core sectors and develop ways to expand our capabilities to serve new sectors;

	•	Complete a fully integrated offering of solutions in our core sectors; and

	•	Capture sector-specific real-time process outsourcing opportunities.

Develop or consolidate a leadership position in current geographies for our core sectors and develop ways to expand our capabilities to serve new sectors: We expect to solidify our position and continue to grow organically in Spain and Latin America, strengthen our presence in North America and attempt to capture growth opportunities in China due to expected increases in infrastructure investment. We will also consider acquisition opportunities in selected sectors, primarily in North America.


	•	Organic growth in Spain and Latin America: Leverage our current position to capture further growth coming from continued infrastructure development;


	•	Strengthen presence in North America: Continue increasing our penetration of our current customer base in electricity by leveraging an improved product portfolio and entering the Traffic and Transport markets by leveraging our international expertise and track record;

	•	Capture growth in China: Expand our presence with large Chinese oil companies, extend our electricity business to new regions and develop further the opportunity in Traffic and Transport through our own resources and our strategic alliances; and

	•	Consider acquisition opportunities: In order to accelerate our expansion, we are evaluating acquisitions, primarily in the Traffic and Transport sectors, and, in North America, in the Electricity sector.

Recently, we purchased 100% of the shares of ICX Sistemas, S.A. for € 1.8 million and we purchased the western region business unit of Xwave Solutions Inc. for € 1.6 million. ICX Sistemas is engaged in the development of applications and services for health care information systems. We expect to leverage this strength in offering solutions for public health management systems. Xwave specializes in customized information technology solutions, particularly in the oil and gas market.

During the last two years, we have taken several steps to consolidate our position in current geographies of our core sectors. The most relevant actions include:


	•	Creating new internal teams for our sectors in certain geographies with growth potential;

	•	Capturing and creating cross-selling opportunities by leveraging our market position and local resources;

	•	Extending our commercial network of agents and hiring dedicated local sales forces; and

	•	Analyzing selected acquisition opportunities and alliances.

Complete a fully integrated offering of solutions in our core sectors: We currently offer Energy – Oil & Gas and Traffic customers integrated solutions that link field data collection with their enterprise information technology systems. We will concentrate on increasing the range of our product portfolio for our other sectors with applications such as workforce management, geographic information systems, customer information systems and asset management solutions. We will seek to achieve this objective through three different initiatives:


	•	Research and Development: Use our Product Centers to complete our array of solutions for Electricity and Transport customers;

	•	Alliances: Reinforce our network of alliances, such as ESRI (geographic information systems) or Echelon Corporation (device networking technologies), which will increase our distinctiveness as a preferred value-adding partner of these leading technologies in relevant applications; and

	•	Acquisitions: Make selective acquisitions to gain control of distinctive technologies in the Electricity and, potentially, the Environment sectors.

Capture sector-specific real-time process outsourcing opportunities: Our third growth objective is to capitalize on the trend of many of our customers to outsource more of their sector-specific process operations to third-party service providers. This trend has already appeared in our Transport and Energy sectors.

For our Energy – Oil & Gas customers, we provide complete solutions that address the capture of field data, control systems, advanced operational applications and business applications. The unit is based in our Calgary competency center, and currently conducts business in Spain, North America, Latin America and China.

Oil & Gas has traditionally been a core market for us. After establishing a strong presence in Spain, we expanded our Oil & Gas activities through our alliance with, and January 2003 acquisition of, the NMS Division of Metso.

Strengths. Our product offerings in the Oil & Gas unit reflect the following competitive strengths:


	•	Market leadership: We are a market leader in pipeline transport and distribution solutions in North America based upon transmission pipeline mileage, where we compete directly with global players like Siemens AG, Honeywell International Inc. and Emerson Electric Co.

	•	Distinctive customer base: Our solutions are used by our customers to control approximately 60% of the oil and gas transmission pipeline capacity in North America. We maintain long-standing relationships with many of these customers and have developed or implemented new solutions to address customer needs.

	•	Integrated complete solution: We offer integrated products and services solutions in Oil & Gas, including the OASyS Oil & Gas management suites, SimSuite for pipeline control and leak detection and POLARIS for revenue accounting. Additionally, we believe the recent introduction of new RTUs will enhance our product offering in this sector. Also, we believe growing security concerns should enhance demand for our applications in this sector as we believe our applications have comparatively strong security features.


	•	LMS. LMS is a real-time operations software system for liquid pipelines that includes a number of flexible, high-performance modules that meet a variety of real-time operational needs. These modules include metering and ticketing, tank management, leak detection, pump statistics and data validation.

	•	SimSuite Pipeline. SimSuite is a technologically-advanced transient pipeline simulation system, with a variety of on-line real-time and off-line simulation applications. On-line real-time applications include batch tracking, leak detection and virtual telemetry. Off-line applications include engineering and design analysis, operational planning and control center operator training and evaluation.

	•	POLARIS. POLARIS Liquids and POLARIS Gas provide a comprehensive commercial accounting solution, which integrates ticketing, production volume accounting, revenue accounting, billing and customer reporting. This solution allows our customers to increase their business efficiency, in part by allowing them to conduct business in a web-based secure environment accessible by employees, customers and partners, irrespective of the source of the input data, thus minimizing entry and manual processes. POLARIS runs on both UNIX and Windows platforms and uses Oracle®, Microsoft SQL Server® or Sybase® as its data repository.

	•	Gas Suite. Gas Suite is a comprehensive software solution that integrates operations, measurement and commercial processes such as flow measurement, inventory management, historical data collection, historical data processing and operations applications.

	•	Real Time Gas. Our Real Time Gas monitoring suite complements our OASyS SCADA system with tools to operate a pipeline safely and efficiently through real-time calculation and monitoring of line pack, storage and compressor performance.

	•	Gas Day Operations. Our Gas Day Operations (GDO) application enables operations and planning personnel to generate, monitor, and revise current and predicted load for gas pipeline distribution.


	•	Gas Measurement Applications. The Gas Measurement Applications (GMAS) modules of our Gas Suite provide a comprehensive gas measurement, data collection, aggregation, validation and processing solution.

	•	OASyS. OASyS is a supervisory control and real-time information system platform that permits the addition of multiple applications that are linked through standard interfaces.


	•	Maintain our current leadership position in North America and Latin America. We plan to maintain this position by leveraging our large installed customer base to introduce newly-developed enterprise applications such as DNA, GMAS, POLARIS and SimSuite. We have already been successful in progressively introducing our full range of products to several of our long-standing customers, including Duke Energy, ChevronTexaco and Edison Gas.

	•	Significantly increase our share of the Chinese market. The most attractive opportunity for us in China lies in the transport and distribution segments of the market, where approximately 5,600 miles of transport pipeline network are planned to be built through 2010, and approximately 100 million more residential customers are projected to be served by 2010. To expand our presence in China, we will leverage our existing local resources and our relationship with our current value-added reseller, Open Systems Control, which has approximately 25 engineers. We have an exclusive agreement for the Energy sector with Open Systems Control, through which it provides services both as an agent for commercial activity and market intelligence and as a value-added reseller.

For our Energy – Electricity customers, we provide complete solutions, including field data, control systems, advanced operational applications and business applications. The unit is based in our Seville competency center and currently conducts business in Spain, North America and Latin America.

Our Electricity business was built around a technologically-advanced product portfolio and the development of long-standing relationships with key utilities in Spain, Mexico and Brazil. The acquisition of the NMS Division of Metso provided us with a significant installed customer base in the U.S. and sales and distribution capabilities in the North American market. In addition, we are establishing a presence in the Chinese market, in cooperation with our local value-added reseller. In this sector, our competitors include Indra, General Electric and Affiliated Computer Services, Inc.

Strengths. Our product offerings in the Electricity unit reflect the following competitive strengths:


	•	Customer platforms in Spain, Latin America and North America. We have strong relationships with many of the largest electric utilities of Spain, Brazil and Mexico, and we have a significant installed customer base in North America.

	•	Strong portfolio solutions provide a platform for developing business applications. Our Electricity unit’s offering of products and services solutions is especially strong in the areas of field data capture, control systems and operational applications for transmission and distribution. We believe further potential for expanding our offering of solutions exists in the area of business applications.


	•	Distribution Management Systems. Our Distribution Management Systems, or DMS, applications track network conditions and permit testing of different operational scenarios within a simulated environment. The simulation mode facilitates short-circuit analysis and energy loss minimization


		and tests different network configurations. DMS also includes an application for short-term load forecasting and a training simulator.

	•	Integrated Control Systems. We provide electric utility customers with master control station communication technologies to enable remote control of network facilities for every aspect of the Electricity business:


	•	Distribution: Substation and feeder networks.

	•	Transmission: Substations.

	•	Generation: Substantially all types of power plants.

These solutions are built around RTU products that are typically connected with our integrated control systems.


	•	Continue growth in Spain and Latin America. We expect continued growth in Spain and Latin America as a result of our customers’ continued investments in renovation and replacement of existing equipment and expected investments in new infrastructure development.

	•	Increase our presence in North America. We expect continued investment in renovation and replacement of equipment, increases in existing security levels and upgrades of current systems to address new product and service demand. We anticipate increasing our presence by introducing our North American customers to new products tested in Spain and Latin America.

	•	Strengthen our position in China. We have completed several distribution projects in China. We plan to extend our coverage of distribution systems through our commercial network of agents already in place for the Energy – Oil & Gas unit and Traffic.

	•	Capture the market opportunity for higher value-added complete solutions and real-time process outsourcing. We intend to complete our product offerings in Electricity by adding applications that establish a link with corporate IT systems. We will focus on developing or implementing the following applications: enterprise integration platform, workflow and workforce management, geographical information systems, asset management and customer information systems. To achieve this, we will rely on internal research and development capability and the development of strategic partnerships, including our recent alliance with ESRI. Additionally, we expect to target acquisitions of specialized players with complementary product portfolios. We will also evaluate options to enter the sector-specific managed services business, focusing on low capital-intensive data management processes, such as meter reading or SCADA, and DMS operation management.

Our Traffic solutions are focused on minimizing urban congestion and maximizing interurban road capacity. Our products and services solutions cover traffic management systems, incident detection, intersection controllers and city access management systems. The Traffic sector is based in our Madrid competency center, and its business has historically been focused in Spain, with recent expansion to Latin America and China. In this sector, our competitors include Peek Traffic Corporation, Sice and Etra.

Our Traffic sector reported core revenues of € 87.3 million in 2003, representing 32.6% of our core revenues. Spain represented 71.8% of this core revenue, with Latin America and China representing the remainder. During the first six months of 2004, our Traffic sector reported core revenues of € 26.7 million, representing 26.9% of our core revenues for the period.


	•	Ability to transfer expertise to new geographies. We believe we are a leader in the Traffic sector in Spain. In Latin America, we have undertaken traffic management projects in Sao Paolo, Brazil;


		Rosario, Argentina and Santo Domingo, Dominican Republic. In China, we have undertaken urban and interurban traffic projects, including large projects in Beijing and Shandong.

	•	Strong portfolio of integrated product solutions. We provide an integrated complete solution to our Traffic customers, with applications ranging from RMY controllers to capture field data, ITACA to provide an advanced operational application control system and geographical information systems, and an enforcement processing system at the advanced applications level.


	•	ITACA: intelligent system for urban traffic control;

	•	RedEye: red-light detection system;

	•	RMY: controller to capture and process traffic data;

	•	Odyssey: intelligent traffic control, highway and city access management system; and

	•	Sicotie: tunnel management and control system.


	•	Continue growth in Spain and Latin America. Continued growth will require us to leverage our current position to develop the urban and interurban traffic management business in Mexico and Brazil and to capture incremental growth in the Spanish traffic market.

	•	Execute growth strategy in North America. The North American market represents a key opportunity for the future development of our traffic business. In order to enter this market, we intend to exploit our international experience and track record to pursue initial projects. We also expect to evaluate developing alliances and making selective acquisitions.

	•	Extend presence in China. In order to execute our growth strategy in China, we will rely on the expansion of our existing commercial agent network, which currently consists of a permanent office in Beijing and four third-party agents that cover 10 of the largest Chinese cities (Beijing, Liaoning, Shandong, Henan, Hubei, Hunan, Guangdong, Guangzhou, Yunnan and Gansu), by extending the agent model to other cities in China having at least three million residents. We selected these agents based on their experience, reputation and contacts in this target market and we compensate them on a commission basis based upon the total contract amount. Furthermore, we will continue to pursue projects funded by international agencies such as the World Bank.

Our Transport solutions include ticketing systems for railways and public transportation systems, automated toll solutions for highways, and access control and payment systems for parking. The unit is based in our Bilbao competency center. In this sector, our competitors include Indra, Logica CMG, Q-Free ASA, Cubic Corporation, and Transdyn.

Our Transport sector reported core revenues of € 22.9 million in 2003, representing 8.5% of our core revenues. Activity in Spain represented 94.3% of these core revenues. During the first six months of 2004, our Transport sector reported core revenues of € 7.3 million, representing 7.3% of our core revenues for the period.

Our growth in recent years has been fueled by our development of new ticketing systems for public transport services, with significant new projects in Madrid for the Madrid metro and the Spanish national railway authority, in Bilbao for the Bilbao metro and in Tianjin, China for the Tianjin Binhai Mass Transit Development Authority.

We also provide solutions for naval transport through a joint venture with Indra and Izar, in which we hold a 50% interest.

Strengths. Our product solutions in Transport reflect the following strengths:


	•	Strong presence in the Spanish market. We have assisted several customers in Spain in implementing their recent advanced infrastructure projects.

	•	Comprehensive product range. We offer an innovative portfolio of solutions, including dynamic lane toll systems and unified ticketing solutions, and we are developing other solutions that we will be able to introduce in the future.

Products. Within the Transport sector, we offer advanced solutions for railway traffic controls, toll management, ticketing, automatic vehicle identification, video surveillance, navigation systems and maritime training simulators. Our proprietary toll system products include dynamic lanes, antennae and tags for highway tolls. Our proprietary ticketing products include unified ticketing and vending machine ticketing.


	•	SmartTOLL: an intelligent system for toll management and control for concession motorways, tunnels and bridges.

	•	VidiToll: digital video system.

	•	ClearingToll: clearing system for collection and management systems in tolls.

	•	AVC: automatic vehicle classification system.


	•	MobiFast: management and control system for ticket sales and cancellations for travelers in railway stations.

	•	ValTick: Transport ticket sales and cancellation management and control system for bus terminals.

	•	ClearingTrans: clearing systems for ticket sales and cancellation systems in buses.


	•	Maintain growth in Spain. We expect overall market growth will be driven by new concessions from the Spanish railway infrastructure regulatory authority, construction of new light railway lines in Alicante, Malaga and Seville and extension of subway networks in Barcelona, Bilbao, Madrid and Valencia. We expect to capture this growth in part through the continued deployment of our MobiFast and ValTick proprietary products. We hope to capture additional railway and subway projects by leveraging our proven track record in Spain.

	•	Capture opportunities in China. In China, the National Highway System is projected to comprise a total of 22,000 miles of toll highways by 2015, compared to 6,000 miles in 2000. We expect Chinese authorities to adopt latest-generation technologies, which we address with a complete range of electronic toll systems. In ticketing, we expect the build-up of subway and light railway networks in Beijing and other large cities to provide an opportunity to leverage our geographic presence and our existing traffic and toll projects. We are currently taking part in subway contests and have obtained our first ticketing contract in China.

	•	Enter the North American transport market. We intend to leverage our technology, the expertise we have developed in Spain and our existing commercial platform in the U.S. to develop our North American transport business. In addition, we will explore acquisitions or alliances to enhance our distribution capabilities.

	•	Capture real-time process outsourcing opportunities. We intend to pursue real-time process outsourcing opportunities. Some of these may involve our facilitating a portion of the financing of specific projects and charging a fee for our services in exchange for operating certain elements of a


		project such as toll and ticketing systems over a period of time in connection with “Build-Operate-Transfer” projects.

Our Environment solutions include all our activities related to meteorology, water and wastewater management. This unit is based in the Seville competency center and currently conducts its business in Spain, North America and Latin America.

The Environment sector reported € 19.0 million of core revenues in 2003, representing 7.1% of our core revenues. Activity in Spain represented 55.7% of this core revenue. Activity in North America and Latin America represented 29.0% of this core revenue and the remainder relates to internationally-funded projects in other geographies. During the first six months of 2004, our Environment sector reported € 11.5 million of core revenues, representing 11.6% of our core revenues for the period.

Our Environment business was developed around our proprietary technical expertise in meteorology and the extension of our existing products to the water and wastewater market. We achieved critical mass through a long-standing relationship with Spain’s Ministry of the Environment, National Meteorology Institute, and Airport Authority, and we have more recently expanded this sector through initial projects in Latin America and the development of our water business in North America. In this sector, our competitors include Almos Systems BV, Vaisala oyj, Indra and Transdyn.

Strengths. Our product solutions in Environment reflect the following strengths:


	•	Leadership in the Spanish market: We believe we are a market leader in Spain as we provide solutions to most of the major Spanish airports and have a strong customer base of government entities, including Spain’s Ministry of the Environment and the National Meteorology Institute;

	•	Strong and growing position in North America and Latin America: We continue to expand our customer base of local utilities and airports in North America and Latin America.

	•	Comprehensive product solutions. We offer comprehensive products and services solutions for water systems and strong offerings in meteorology control systems.

Products. Within this sector, our solutions focus on water management and meteorology applications.


	•	Water Management. We offer customized water management applications to manage IT relating to the water cycle.


	•	Meteorology Network: measures, in real time, parameters affecting water management relating to de-icing and precipitation;

	•	Flood Warning System: helps to actively manage environmental information concerning a flood event; and

	•	Watershed Management Optimization: balances aspects of river basin ecology and economic water management such as water quality and water resource allocation.


	•	Meteorology Solutions. We offer solutions for aeronautical meteorology and weather information systems. We also offer solutions for surface meteorological observation, integrating components required by these systems in one product.


	•	Telvent AWS: weather observation systems for agriculture, aeronautical, roads and highway applications;

	•	Weather Decision Support System: provides a solution for making short-term predictions and warnings and allows non-meteorologist customers to make decisions to reduce dangers due to adverse weather events; and

	•	Telvent Weather Information System: manages environmental information collected and used by meteorological forecasting organizations and institutions.


	•	Maintain growth in Spain. We will pursue opportunities to upgrade the existing systems of our customers and increase our offering of higher value-added applications such as workforce management systems and geographical information systems.

	•	Increase presence in North America. We will seek to expand our presence with our current customer base and focus our expansion in the sunbelt states and in the East Coast.

In addition to our targeted market sectors described above, a small percentage of our business historically has been derived from testing new business opportunities that we believe satisfy two requirements:


	•	the potential to become a core sector in the future; and

	•	the ability to provide access to technologies or services that can be applied in current sectors (or complement our research and development efforts).

Our current portfolio includes opportunities in the public administration and health care sectors, including our recent acquisition of ICX Sistemas. In addition, we generate other revenues from opportunities we pursue in the management of mission-critical infrastructures and applications and through our data center capabilities in Madrid, Barcelona, Seville and Lisbon. We do not consider these operations to be central to our business and growth strategy going forward, but we have no present plans to discontinue them. We derived core revenues of € 22.7 million from these operations in 2003, which represented 8.8% of our 2003 core revenues. During the first six months of 2004, these operations reported core revenues of € 10.7 million, representing 10.7% of our core revenues for the period.

Constant Investment. Our research and development planning process ensures that our research and development investments are aligned with our long-term strategic and business objectives and responds to our customers’ needs.

Product and Competency Centers. Our research and development activity is based in Calgary (SCADA and Oil & Gas applications), Madrid (Traffic applications), Seville (RTU and Electricity applications) and Bilbao (payment systems), where we have a total of approximately 140 engineers.

Successful Track Record. Our research and development function has developed products including the OASyS SCADA system for our Oil & Gas customers, RTUs for electric distribution and, most recently, the MobiFast advanced payment system for the Transport sector.

From time to time our affiliate, Telvent Investments, may make strategic minority investments that we believe may provide us with access to emerging technologies critical to our business. Under certain circumstances, we may consider making strategic minority investments in the future, although we presently do not intend to do so. We have made minority investments in the past and recently have divested all of such investments to Telvent Investments.

Since the incorporation in 1963 of Sainco, now known as Telvent Energía y Medio Ambiente S.A., we have been able to establish long-standing relationships with our Energy and Traffic customers and increase our


	•	1963: Incorporation of Sainco.

	•	1977: Entry into Traffic sector.

	•	1978: Entry into Environment sector.

	•	1986: Entry into Transport sector.

	•	1988: Start of our international expansion to Latin America with completion of Energy projects in Mexico.

	•	1993: Award of first Traffic sector projects in China.

	•	1996: Start of our operations in Brazil.

	•	2000: Our incorporation as a holding company for the information technology businesses of Abengoa.

	•	2001: Initial sale by Abengoa of our ordinary shares to management.

	•	2001: Disposition to Abengoa of Abentel Telecomunicaciones, S.A., which provided telecommunication network construction services.

	•	2002: Acquisition from Abengoa of Telvent Housing and Telvent Portugal, which provide data warehousing and monitoring services and solutions.

	•	2003: Acquisition of the NMS Division of Metso in North America.

	•	2003: Adopted the Telvent brand name throughout our business operations.

For several years, we have operated largely as an independent subsidiary of Abengoa, with our own premises and offices in our core countries and an independent management and sales force.


	•	It enables us to identify cross-selling opportunities and gain market intelligence by maintaining close contact with the other companies in the Abengoa Group;

	•	We receive support from Abengoa in some administrative areas (such as legal, tax, human resources administration, and project guarantees) pursuant to service agreements; and

	•	We have a € 45 million bilateral credit arrangement with Abengoa through which we may borrow from or lend money to Abengoa on terms and pricing that we believe are favorable to us. This credit arrangement is at the option of each of Abengoa and us.

We expect to continue to benefit from our relationship with Abengoa. We believe that currently Abengoa expects to maintain a significant ownership interest in us.

Our sales and marketing department is responsible for product management, account management, sales administration and corporate marketing communication. By working closely with our account management team, our product management team analyzes and identifies product and technology trends in our target markets and works closely with our research and development group to develop new products, product enhancements and product capabilities as demanded by our customers.

Our services are predominantly sold by our direct sales force. Our sales support group works closely with our sales force to provide them with sales tools, technical training and on-going logistical support to

Our sales and marketing workforce is located in Spain, North America, Latin America and China. We also rely upon our alliance partner, Open Systems Control, to market our products and services solutions in China.

We rely on trademark and copyright law, trade secret protection and confidentiality and/or license agreements with our employees, customers, partners and others to protect our intellectual property rights. We generally pursue the registration of our trademarks in all of our geographies, where practicable, and we seek to protect our marks against similar and confusing marks of third parties. We do not possess any patents or registered copyrights, but we do have registered marks and applications pending for registered marks, including “Telvent,” in North America and the European Union. “Telvent” is a registered community mark in the European Union.

We had the following number of employees as of the dates and in the functional areas specified in the following table.

Our employees were located in the following countries as of the dates specified in the following table:

A significant portion of this growth in the number of employees from 2002 to 2003 arose from employees added in connection with our acquisition of the NMS Division of Metso. From time to time, we employ independent contractors to support our research and development and marketing departments. Other than approximately 25 employees who are subject to Spanish worker representation regulations, none of our personnel is represented under collective bargaining agreements. We consider our relations with our employees to be good.

Our principal executive offices are located in Madrid, under a lease that expires in 2011. We categorize our other facilities as Delivery Units, Competency Centers or Product Centers.

Delivery Units. Our Delivery Units are geographic and customer focused and are located in Houston, Texas; Calgary, Canada; Madrid, Spain; Barcelona, Spain; and Seville, Spain; Mexico City, Mexico; Beijing, China; and Rio de Janeiro, Brazil.

Competency Centers. Our Competency Centers focus on providing solutions to our target sectors and are located in Seville, Spain (Energy – Electricity and Environment); Calgary, Canada (Energy – Oil & Gas); Madrid, Spain (Traffic); and Bilbao, Spain (Transport).

Product Centers. Our Product Centers focus on product-specific applications and are located in Calgary, Canada (OASyS); Baltimore, Maryland (SimSuite); Houston, Texas; and Seville, Spain (RTU); Bilbao, Spain (Mobismart).

As of June 30, 2004, we had facilities in more than 20 locations in Spain, North America, Latin America and China, all of which we lease. As detailed in the table below, our leases cover approximately 59,946 square meters (645,254 square feet) of office space (including the Madrid facility) and have expiration dates ranging from one to 10 years. In addition, we also lease approximately 33,468 square meters (approximately 360,246 square feet) of data room space. Upon expiration of our leases, we do not anticipate any significant difficulty in obtaining renewals or alternative space. We believe that our current facilities are suitable and adequate for our business.

We have commitments related to facilities, office space and equipment under non-cancelable operating leases and fixed maintenance agreements ranging from one to six years.

We are subject to lawsuits from time to time, including lawsuits that we have relating to our acquisitions. There are no material legal proceedings pending or, to our knowledge, threatened, against us. For a description of proceedings regarding Xfera that affect Abengoa and our chairman and chief executive officer, see “Relationship Between Telvent and the Abengoa Group.”

The following chart shows the name and country of organization of, and our percentage ownership in, each of our significant subsidiaries.

The following table sets forth information for our current directors and executive officers. The address for our directors and executive officers is c/o Telvent GIT, S.A., Valgrande, 6, 28108 Alcobendas, Madrid, Spain.

Manuel Sánchez – Director since January 2002, Chairman and Chief Executive Officer. Mr. Sánchez joined Telvent in 1989 as a software engineer. In 1995, he became Telvent México’s General Manager. In 2000, he was promoted to the position of General Manager of Telvent Energía y Medio Ambiente, a subsidiary of Telvent. In 2001, Mr. Sánchez was named our Chief Executive Officer. Mr. Sánchez is also Chairman of GIRH, Abengoa’s human resources outsourcing subsidiary, since 2002. Mr. Sánchez was appointed as our Chairman in April 2004. He is also one of two joint directors of each of Telvent Investments, which is the Abengoa entity to which we have transferred our ownership interest in our minority investments, and Telvent Corporation, which is our majority shareholder. He holds a degree in Industrial Engineering from ICAI Madrid and a degree in business administration (IPADE, Mexico). He also serves as a director of Viryanet.

His Royal Highness Carlos de Borbón – Dos Sicilias y Borbón Parma – Director since January 2003. His Royal Highness has served as a board member of several companies, including CEPSA (a Spanish fuel company), and Iberpistas (the Spanish tollway operator). He also sponsors and presides over various foundations including Banesto, San Benito de Alcántara (the Spanish Nature Conservation Foundation) and the Foundation for the Protection of the Environment. At present, he is the President of the Patronage of the Navy Museum and President of the Spanish Nobleman Association. HRH Carlos de Borbón earned a law degree from Complutense University (Madrid, Spain).

Miguel Cuenca – Director since November 2000. Mr. Cuenca was Secretary of the National Industry Institute (INI) from 1985 until 1993. INI is the Spanish state-owned holding company that holds all of the shares in governmental entities and state-owned companies in Spain. He also has been a Member of the Economic and Social Council of the European Union (1990-1992) and Vice-President of Iberia Airlines of Spain (1993-1995). Currently, he is President of the Innovation and Technology Wood Managing Commission

Eduard Punset – Director since November 2000; Member of the Audit Committee. Mr. Punset has written several books and co-authored others about the impact of technology on business growth. At present, he is a professor for several institutions and manages REDES, a television program about scientific publications. He is chairman of Agencia Planetaria (a multimedia science production company). He is also the Deputy Director of Economic and Financial Studies for the Banco Hispano Americano and from 1980 to 1981 he was Spain’s Minister for Relations with the European Union. Mr. Punset has a law degree from the University of Madrid, and received degrees in Monetary Economy at l’Ecole de Hautes Etudes of the Sorbonne and a Master of Sciences from London University.

Javier Salas – Director since November 2000; Chairman of the Audit Committee. Mr. Salas was General Manager of Corporate Management at INI from 1988 until 1990 and was later promoted to President. He was Chairman of Iberia Airlines of Spain from 1993-1995. At present, he is a board member and member of the administration council of several companies including GED Iberian Private Equity SGERC (private equity), Gate Skate SGERC, GED Capital Development, S.A. (venture capital), and Optimiza Gestión Integral de Flotas, S.A. He is also a member of the Advisory Committee of the Banco Privado Portugues (banking and financial services) and Axioma, Inc. He serves as the President of the Environment and Companies Foundation and is a director of Saga Servicios Financieros (banking and financial services). Mr. Salas has been president of the Professional Cleanliness Company since 2001. Mr. Salas has an economics degree from University of Málaga, Spain.

José B. Terceiro – Director since November 2000; Member of the Audit Committee. Mr. Terceiro is a professor of Applied Economics at Complutense University (Madrid, Spain). Mr. Terceiro is Chairman of the Board of Advisers of Abengoa, S.A. and Bioetonal Galicia, S.A. and is a board member of the Prisa Group, Abengoa, Union Fenosa, Iberia Airlines of Spain and Aberdeen International Fund. He held several Spanish government offices, including Undersecretary of the Cabinet Office, General Director for Libraries and Books, the National Education Advisor and Vice-President of the Center for Constitutional Studies. He is a member of the Economic and Social Council of Spain. In addition, Mr. Terceiro has also been a professor at other universities in Spain and abroad, including Complutense University (Madrid, Spain) and the Universidad de La Havana, and developed the program of the North-American Universities for the University of Madrid. From 1983 until 1999, Mr. Terceiro was the advisor of the Academic Board of the Royal College Complutense at Harvard.

Cándido Velázquez-Gaztelu – Director since November 2000. Mr. Velázquez-Gaztelu was Chairman of Tabacalera S.A. from 1973 to 1988 and was Chairman of Telefónica, S.A. (the main Spanish telephone company) from 1989 to 1996. Currently, he is an advisory board member of Abengoa and Accenture (management and technology consulting) and is a board member of Adolfo Domínguez (clothing design and manufacturing), Wisdom Lux (an entertainment company), Zenith Media (media planning and buying agency) and Worldbest Cigars. He is also president of the Spanish Autism Confederation. Mr. Velázquez-Gaztelu graduated from Granada University in Law and Social Studies and holds an MBA from IESE (Barcelona, Spain).

José Ignacio del Barrio – General Manager of Telvent, Vice President Business and Corporate Development. Mr. del Barrio is responsible for business development at Telvent and has worked for Abengoa and Telvent for the last 16 years. Mr. del Barrio started his career in Telvent as a Project Manager for large-scale strategic projects in Africa and Latin America in the Communications Division and was later promoted to Director of the International Department. In 1993, he was named Telvent Mexico’s General Manager. After three years in Mexico, he took the position of Sales and Marketing Director of Telvent Energy and Environment and in 1998 he was named Managing Director of the Communications Division. In 2001, he was named Telvent’s General Manager, where he founded and held executive positions in Telvent Housing, Telvent Datahouse and Telvent Interactiva. Mr. del Barrio is also one of two joint directors of each of Telvent Investments, which is the Abengoa entity to which we have transferred our ownership interest in our minority investments, and Telvent Corporation, which is our majority shareholder. Mr. del Barrio graduated with a

Ana María Plaza – Chief Financial Officer. Ms. Plaza joined Telvent in 1999 as its Financial Controller and Internal Audit Manager and became CFO in 2001. From September 2003 to April 2004, she held the position of Audit and Consolidation Director in Abengoa. Prior to joining Telvent, Ms. Plaza spent four years at the Audit and Consolidation Corporate Department of Abengoa. She also worked for PricewaterhouseCoopers from 1991 to 1995. Ms. Plaza holds an MA in Economics from Cordoba University and an Executive MBA from IESE (Madrid, Spain).

Larry Stack – Chief Technology Officer and Telvent North America Vice President, Marketing and Technology. As Chief Technology Officer, Mr. Stack is responsible for global coordination of product research, technology development and product management on a global level and strategic marketing activities of Telvent North America. Beginning in 1986 at Valmet (later known as Metso Automation), a leading international automation company, Mr. Stack held various project, research and development management and executive positions for 15 years. Mr. Stack graduated Electronics Engineering Technology (Honors) from the Southern Alberta Institute of Technology.

David Jardine – President and Chairman of Telvent North America. Mr. Jardine has led the Calgary based-unit, which we acquired in 2003, since 1987. Previously, he was Vice President of Westronic Inc., which manufactured automation products for the electric utility market and was subsequently sold to GE Power Systems. Mr. Jardine received a degree in Electrical Engineering from the University of Manitoba and holds an MBA from the Haskayne School of the University of Calgary.

Dai Yue – Vice President — China. Mr. Dai joined us in July 2002. Previously, he spent thirteen years as Chief Representative in China and Director of Project for MQM, S.A. and two years in IBG Group as General Manager where he specialized in industrial projects in China, including petrochemical, machine tools, defense, energy, water and waste treatment. Mr. Dai holds an MS in communications and a Master’s degree in Spanish culture from Beijing Foreign Study University of China.

Luis Rancé – Vice President — Mexico. Mr. Rancé joined Telvent in 1990 at the time of incorporation of our Mexican subsidiary. Prior to joining us, he spent five years running his own energy management systems business. Before that, he spent 24 years with the main power utilities in México: Luz y Fuerza del Centro (LYF) and Comisión Federal de Electricidad (CFE), both government utilities, where he held various executive operations positions. Mr. Rancé has a B.S. degree in electrical and mechanical engineering from Universidad Autónoma de México (UNAM), and a Master’s degree in Power Systems from Pennsylvania State University.

Marcio Leonardo – Vice President — Brazil. Mr. Leonardo has held his current position since 2001. Prior to joining us, he spent 17 years managing his own engineering company, which was a supplier to the industrial automation market in Brazil. Mr. Leonardo was also Professor of the Electrical Department of the Catholic University of Minas Gerais and he held different board positions at the Brazilian Electrical and Electronic Industry Association. He holds a B.S. degree in electrical and electronic engineering from the Federal University of Minas Gerais and a specialization degree in industrial electronics from the Catholic University of Minas Gerais.

José Montoya – Vice President — Traffic and Transport. Mr. Montoya has held his current position since 1989. Currently, he is a member of the board of directors for several of our subsidiaries. He is also the Vice-Chairman of the Spanish Traffic Organization (PEMTRA); Vice-President of the Spanish Road Association and a member of the Road Safety National Council, to which he was appointed by the Department of the Interior of Spain. Mr. Montoya graduated in engineering from the Universidad Politécnica de Linares and also holds an MBA from IESE (Madrid, Spain).

Philip Goulet – Vice President — Oil & Gas. In addition to being Vice President — Oil & Gas, Mr. Goulet leads the Telvent North America energy business. He joined the company in 1981, and his most recent prior position before being put in charge of the North American energy business was as Vice President

Ignacio González-Domínguez – Vice President — Energy and Electricity. Mr. González-Domínguez joined us in 1990 as a Project Engineer participating in key control systems projects. From 1995 to 1998, he worked as an engineer and Project Manager for the Electrical Sector. In 1998, he was promoted to the position of International Proposals Department Manager, until 1999 when he was named Telvent Mexico’s General Manager. In 2002, he was named General Manager of Telvent Energy and Environment. Mr. González-Domínguez holds an honors degree in Industrial Engineering, with a specialization in electricity, from Seville University and an MBA from San Telmo’s Institute (Seville).

Under Spanish law, the board of directors of a Spanish corporation is responsible for management, administration and representation in all matters concerning our business, subject to the provisions of the by-laws and resolutions adopted at general shareholders’ meetings by a majority vote of the shareholders. Although we are not required to have a majority of our board consist of independent members under applicable Nasdaq listing standards because we are a “controlled company” pursuant to those standards, we will endeavor to appoint a majority of the members of the board of directors from outside of our company. Three of our seven current directors (Messrs. Cuenca, Punset and Salas) are independent under applicable Nasdaq listing standards.

Directors are elected by our shareholders to serve five-year terms. A director may be re-elected to serve for an unlimited number of terms. If a director does not serve out his or her entire term, the board of directors may fill the vacancy by appointing a shareholder as a replacement director to serve until the next general shareholders’ meeting, when the appointment may be ratified or a new director to fill the vacancy is elected or replaced. A director may resign or be removed (with or without cause) from office by a majority vote of the shareholders at the general shareholders’ meeting. As a result of these five-year terms, not all of our directors will be elected each year, and in some years none of our directors will stand for election.

Under Spanish law, the board of directors may delegate its powers to an executive committee or other delegated committee or to one or more executive officers, unless the shareholders’ meeting has specifically delegated certain powers to the board and have not approved the board’s delegation to others. We have not established an executive committee, but may do so in the future. Spanish corporate law provides that resolutions appointing an executive committee or any executive officer or authorizing the permanent delegation of all, or part of, the board’s power require a two-thirds majority of the members of the board of directors. Certain powers provided in Spanish corporate law may not be delegated, including the drafting of the financial statements and its proposal for approval by the shareholders’ meeting, disapproval of which would prohibit the filing of the company’s annual accounts in the Mercantile Registry of Madrid.

Following is a brief description of our audit committee and a brief description of our planned nominating committee and compensation committee.

Our Audit Committee, which we established in January 2003, reports to the board regarding the appointment of our independent public accountants, the scope and results of our annual audits, compliance with our accounting and financial policies and management’s procedures and policies relative to the adequacy of our internal accounting controls. At this time, our Audit Committee is responsible for the oversight of our relationship with Abengoa, including the approval of the terms and conditions of transactions between Abengoa and us. The members of the Audit Committee are Messrs. Salas, Punset and Terceiro. Messrs. Salas and Punset are independent in accordance with Nasdaq’s listing standards and the independence requirements of the SEC. Under applicable Nasdaq listing standards, we are not required to have a fully-independent Audit Committee for one year. Within one year, we expect that all of our audit committee members will be

We expect to establish a Nominating Committee and a Compensation Committee within one year from the closing of the offering. The Nominating Committee will be responsible for nominating directors and establishing criteria for selecting and evaluating board members and management. The Compensation Committee will be responsible for reviewing the performance and establishing the compensation of the chief executive officer and our other senior executive officers. We expect that the members of each of these committees will be independent in accordance with Nasdaq’s independence requirements for such committees.

The Sarbanes-Oxley Act of 2002, as well as related new rules subsequently implemented by the SEC, require foreign private issuers, including us, to comply with various corporate governance practices. In addition, Nasdaq has recently adopted amendments to its requirements for its listed companies. We intend to take all actions necessary for us to maintain compliance with the applicable corporate governance requirements of the Sarbanes-Oxley Act, the rules adopted by the Securities and Exchange Commission and the listing standards of Nasdaq.

We have received exemptions from the Nasdaq listing standards that require the solicitation of proxies and that a quorum at a shareholders’ meeting constitute at least 33 1/3% of the outstanding shares of the company’s voting stock. See “Description of Ordinary Shares — Attendance and Voting at Shareholders’ Meetings” and “Where You Can Find More Information.”

We anticipate that we will pay each of our directors who is not our employee an annual director’s fee of € 18,000, which our board may change from time to time.

For the year ended December 31, 2003, the total amount of compensation (including salary and bonus) we paid to our eleven executive officers was € 1.7 million. Our directors, excluding our chief executive officer, received compensation from us of € 100,000 in 2003.

We have not set aside or accrued any amounts to provide pension, retirement or similar benefits for our directors because our directors are not entitled to any of these benefits.

During 2003, Mr. Terceiro received director fees in the amount of € 44,000 for his work as a director of Abengoa, S.A. and Mr. Velázquez-Gaztelu received fees in the amount of € 72,121 for services rendered to Abengoa as a consultant.

Under a plan established by Abengoa, certain of our employees, including members of our management team, entered into agreements with Abengoa to buy our ordinary shares from Abengoa. Such purchases were financed using bank loans guaranteed by Abengoa and the ordinary shares that are not subject to the overallotment option are pledged as collateral to the respective lender. In addition, the selected employees and Abengoa entered into call option agreements for our ordinary shares. According to this agreement, Abengoa, in certain circumstances (including certain events of non-continuation of employment), is entitled to buy back the

The ordinary shares sold under the stock purchase plan contained certain performance and vesting features. There are two different vesting schedules depending on when the ordinary shares were acquired. Under one schedule, 15% of the shares vest on the earlier of the third anniversary of their acquisition or an initial public offering of our shares and 85% on the fifth anniversary. Under the other schedule, 15% vest on the earlier of the third anniversary of their acquisition or an initial public offering of our shares, 35% of the shares vest on the fifth anniversary of the purchase and 50% of the shares vest on seventh anniversary of the purchase. Under these vesting features, 15.0% of the ordinary shares sold vested in 2004, 17.0% of the ordinary shares sold will vest in 2006, and 68.0% of the ordinary shares sold will vest in 2008.

Participating employees were required to enter into a non-competition agreement with us for a period of five years from the date of the purchase agreement. Mr. Sánchez has purchased 370,000 shares under this plan and the rest of our senior management team has purchased an additional 766,800 shares. As noted above, Abengoa guaranteed the bank loans used by our senior management team to purchase our shares from Abengoa, but we did not arrange either the loan or the guarantee; therefore, we do not believe the loans or Abengoa’s guarantees are prohibited loans under the Sarbanes-Oxley Act of 2002.

We do not believe Abengoa will enter into any further such agreements regarding our ordinary shares.

The Abengoa Group is comprised of a set of diversified industrial and technology companies that provide solutions for sustainable development, the information and knowledge society, and the creation of infrastructures. The Abengoa Group provides these solutions through four business units:


	•	Bioenergy;

	•	Environmental services;

	•	Engineering and industrial construction; and

	•	Information technology.

Telvent, along with Telvent Investments, comprises Abengoa’s information technology business unit. Abengoa, through Telvent Corporation and Siema, owns 91.0% of our ordinary shares prior to completion of this offering and will own 63.4% of our ordinary shares upon completion of this offering. We do not have an ownership interest in Telvent Investments. Since our inception, our results of operations have been fully consolidated by Abengoa. Abengoa is a public company headquartered in Seville, Spain and its shares are listed on the Madrid Stock Exchange.

We generally operate our business independently from Abengoa’s other businesses. For instance, we do not have the same executive officers as Abengoa, S.A., and we maintain our own sales force and lease our own premises and offices in all of our core geographies.

Our position within the Abengoa Group provides us with significant benefits. Historically, Abengoa has enabled us to pursue larger contracts by providing us with corporate guarantees of our performance obligations backed by its larger balance sheet and access to lines of credit with third parties. Abengoa also guarantees our leaseback facilities. As many of Abengoa’s customers purchase the kind of services that we offer, we have also benefited from cross-selling opportunities with Abengoa’s customers. Abengoa further assists us by sharing market intelligence with us. In addition, Abengoa provides us with legal and other administrative services which we do not believe we could obtain on our own on more favorable terms and conditions. Our Audit Committee is responsible for the oversight of our relationship with Abengoa, including the approval of the terms and conditions of transactions between Abengoa and us. See “Risk Factors — As our contracts with Abengoa were negotiated between parties under common control, it is possible we may have been able to obtain better terms from third parties or may not be able to replace them with equally favorable arrangements.”

We have entered into a number of service agreements with Abengoa for the provision of professional services to assist, improve and support us with the expansion of our activities. These services include:


	•	cash pooling arrangement;

	•	financial management;

	•	institutional support with international multilateral financing organizations;

	•	institutional commercial assistance;

	•	tax and legal advisory services;

	•	centralized asset management;

	•	support in providing official global credit rating;

	•	assistance with auditing and consolidation services under Spanish GAAP;

	•	provision of guarantees and endorsements;


	•	negotiation and optimization of global corporate insurance policies;

	•	internal publicity and corporate image;

	•	human resources services; and

	•	other support services.

The agreements have been entered into separately between Abengoa and certain of our subsidiaries. Each agreement has a one-year term and is extended annually unless terminated within 30 days prior to its expiration by either party. We may reduce the level of services we request under these agreements. Each agreement provides that either party may terminate the agreement if the other party does not fulfill its obligations. None of the agreements may be assigned without the prior written consent of the other party. The total amounts of the services provided by Abengoa under the services agreements were € 2.1 million in 2002, € 2.4 million in 2003 and € 1.4 million in the first six months of 2004.

We also have entered into a service agreement with Gestión Integral de Recursos Humanos, S.A., or GIRH, a subsidiary of Abengoa. This agreement provides us with services for personnel management, recruiting and hiring personnel, human resources development, employment relationships and occupational safety. This agreement was entered into in 2003, with a one-year renewable term. We recorded expenses under this agreement of € 1.3 million in 2003 and € 0.6 million in the first six months of 2004. Our chairman and chief executive officer, Manuel Sánchez, is also the chairman of GIRH.

In addition to the services agreements, we purchase a variety of supplies from Abengoa and its subsidiaries, which primarily consist of production, assembly and engineering of electronic and control boards and mechanical installation services. Our purchases of supplies from Abengoa and its subsidiaries totaled € 11.5 million in 2002, € 4.4 million in 2003, and € 3.3 million in the first six months of 2004. We believe these purchases were on at least as favorable terms and conditions as we could have obtained from third-party suppliers. We also lease our Seville facility from a member of the Abengoa Group. Our lease expenses in 2002 and 2003 from this lease arrangement totaled € 0.4 million per year. In the first six months of 2004, our lease expense from this arrangement was € 0.2 million.

Our total expense amounts recorded in favor of Abengoa were € 14.0 million in 2002, € 9.0 million in 2003 (including € 0.5 million in interest expense) and € 5.9 million in the first six months of 2004 (including € 0.4 million in interest expense).

During 2002 and 2003, we recognized core revenues and payments for services of € 9.0 million and € 15.9 million, respectively, from services that we and our subsidiaries provided to Abengoa primarily for the provision of communications, IT and related services. During the first six months of 2004, we recognized core revenues of € 6.3 million from services we and our subsidiaries provided to Abengoa. The largest of these agreements involve our subsidiary, Telvent Outsourcing, which has agreements with Abengoa that generally provide for one-year terms and are renewable annually. In 2002 and 2003, the revenues from these agreements amounted to € 3.1 million and € 7.9 million, respectively.

As of June 30, 2004, we had borrowed € 1.9 million under our credit arrangement with Abengoa and € 43.1 million remained available to us as of that date. We and certain of our subsidiaries were parties to reciprocal credit arrangements with Abengoa and other entities in the Abengoa Group, which were replaced by the arrangement described below.

On April 20, 2004, we established a new bilateral credit arrangement with Abengoa which replaced the prior credit arrangements that we and our subsidiaries had with Abengoa. Under this new arrangement, we and Abengoa have agreed that we may borrow funds from or lend funds to each other, from time to time upon not less than one day’s notice, up to a maximum of € 45.0 million (or the equivalent amount in any other currency quoted in the Spanish currency market). Borrowings under this credit arrangement bear interest at EURIBOR,

or LIBOR for borrowings other than in Euro, in either case plus 0.75% per year for a period not to exceed one year, with interest added to the outstanding balance. Each borrowing matures on the last date of the fiscal year in which such borrowing was made, without requiring any earlier payment of principal. This credit arrangement is optional and either we or Abengoa may elect not to make loans to the other. This arrangement has an initial term ending December 31, 2004, and renews for annual one-year terms until terminated by either party. Our indebtedness under this arrangement as of June 30, 2004 was € 1.9 million, after giving effect to the use of € 25.6 million of proceeds from our disposition of our Xfera investment. See “Capitalization.” We incur no costs and receive no payments under this arrangement unless and until we borrow or loan funds thereunder. The terms of our prior arrangements with members of the Abengoa Group were substantially the same as this arrangement except the prior arrangements involved many of our subsidiaries, were € 90.0 million in aggregate and created firm, and not optional, lending commitments from all involved parties.

We also participate in a loan facility with ABN Amro Bank under which Abengoa, certain subsidiaries of Abengoa and certain of our subsidiaries are the borrowers and we and certain of our subsidiaries and certain other Abengoa subsidiaries are guarantors. The total amount of this credit facility is € 50.0 million. Of that overall maximum borrowing amount, our subsidiaries have a sub-limit of € 30.0 million, Abengoa has a sub-limit of € 20.0 million, and the other Abengoa subsidiaries collectively have a sub-limit of € 15.0 million. We may use that sub-limit for letters of credit, sureties, import financing, rebate financing, bank overdrafts (up to € 3.0 million), and guarantees; however, the availability of our € 30.0 million sub-limit is subject to the usage of this facility by other members of the Abengoa Group. The joint and several guarantee of our subsidiaries and us under this facility is limited to amounts borrowed by any of them under this facility, and does not extend to any amounts borrowed by any members of the Abengoa Group other than us. This facility provides for interest rates and fees as agreed to by the parties from time to time based on the type of credit extended by ABN Amro under the loan facility. At December 31, 2003, € 13.0 million of our sub-limit was used in connection with our acquisition of the NMS Division of Metso and € 16.6 million was committed to other arrangements including performance bonds and guarantees. As of June 30, 2004, the maximum amount of this facility to which we were assured access was € 1.7 million.

Sale of Minority Investments to Telvent Investments. In June and August 2004, we sold all of our remaining minority investments, including our investment in Xfera, to our affiliate Telvent Investments, an indirect subsidiary of Abengoa, for a net amount of € 35.4 million. Telvent Investments also assumed all of our obligations under our Xfera-related guarantees. See Note 11 to our Unaudited Condensed Consolidated Financial Statements. We sold these investments because of the inherent volatility associated with companies in early-stage technologies, although we continue to have the opportunity to benefit from the synergies presented by these investments. We are not a shareholder of Telvent Investments.

Our Purchase of Xfera Shares. On December 30, 2002 we acquired 3.71% of the capital stock of Xfera, the holder of a third generation mobile telephony license covering Spain, for € 25.0 million. In addition to buying the interest in Xfera, we also assumed € 111.0 million in guarantees from Inversión Corporativa to the bank guaranteeing Xfera’s obligations to the Spanish government. These guarantees were reduced to € 17.3 million in June 2003 as announced by the Spanish government on December 26, 2002. All of our guarantees were assumed by Telvent Investments in connection with our sale to it of our investment in Xfera at a sale price of € 26.4 million, which is an amount equal to the carrying value of the investment. As a result of an increase in our ownership interest in Xfera, the amount of these guarantees totaled € 35.8 million prior to the sale.

Background. Xfera is a consortium that was the winning bidder in a competitive tender for a third generation mobile telephony license awarded in March 2000 by the Spanish government. We held an interest in a different consortium that submitted an unsuccessful bid for the same license. We were originally offered the opportunity to purchase this Xfera interest in October 2000 and would have purchased it at that time because it complemented our strategic business objectives. However, we were not allowed to buy this interest in Xfera in October 2000 because the second-highest bidder in the auction (in which we participated)

As a result of this legal issue, in October 2000 Inversión Corporativa entered into an option agreement with Mercapital Telecom (“Mercapital”), an investor in Xfera, to purchase Mercapital’s Xfera interest. The option was exercisable at any time during the last quarter of 2002, at a purchase price equal to the price paid, or which would have been paid, by Mercapital, representing a payment of € 25.0 million. Under the agreement with Mercapital, Mercapital had the option to cause Inversión Corporativa to buy the Xfera interest at this exercise price, and Inversión Corporativa had the option to buy the Xfera interest at this price.

At the time of the agreement with Mercapital, Inversión Corporativa simultaneously entered into an option agreement with Abengoa giving Abengoa the right to buy Mercapital’s Xfera interest from Inversión Corporativa during either September 2002 or September 2003. The purchase price of the Xfera interest under this option was originally € 55 million if Abengoa exercised the option during September 2002, and € 67.0 million if the option was exercised during September 2003. Under the original arrangement, Abengoa was also required to pay € 3.0 million for the option at the time of its exercise.

Under the rules governing the auction, the consortium participants were required to provide substantial guarantees to the Spanish government and Inversión Corporativa was required by its bank to support the guarantee in an amount proportional to its 3.71% interest. The bank also required Inversión Corporativa to obtain Abengoa’s assistance to provide the necessary guarantee. As part of these arrangements, Inversión Corporativa agreed to indemnify Abengoa against any losses relating to the transaction until the commercial launch of Xfera’s third generation mobile telephony business. Under the agreement among the bank and Inversión Corporativa, which was in force until December 31, 2002, the bank had the option at the maturity of the agreement to ask Inversión Corporativa to arrange for a substitute guarantor or alternatively to provide a cash security deposit up to the total amount of Inversión Corporativa’s shares of the guarantee to the Spanish government if the bank considered it necessary. If Inversión Corporativa did not provide the bank with the cash security deposit or other alternative security acceptable to the bank, the bank would enforce the guarantee against Inversión Corporativa first and then against Abengoa. Inversión Corporativa pledged shares representing 15.0% of the share capital of Abengoa as security for its obligations to the bank.

Between October 2000 and December 2002, the option agreement between Inversión Corporativa and Abengoa was modified twice to reflect the changing commercial outlook for the third generation mobile telephony license. First, the additional € 3.0 million payment was cancelled in December 2001. Then, in April 2002, the exercise price under the option was reduced to the same amount contained in the Mercapital agreement.

In November 2002, we became eligible to acquire the Xfera interest when the second-highest bidder lost its challenge to the license award. Simultaneously, the bank guaranteeing Xfera’s obligations to the Spanish government announced that the agreement with Inversión Corporativa ending December 31, 2002 would not be extended by the bank and asked Inversión Corporativa to arrange for a substitute guarantor or to fully cash collateralize the amount of the guaranty. Inversión Corporativa was unable to fully cash collateralize the guaranty. Abengoa did not want the bank to enforce its claim under the guaranty for a number of reasons, including the fact that the enforcement of the obligation (i.e., to issue a guarantee in an amount of € 111.0 million without acquiring the Xfera shares) would have caused a default under Abengoa’s syndicated loan agreement, which two of our subsidiaries guaranteed.

Instead of assuming the bank guarantees, as we were still interested in acquiring the Xfera interest, we purchased the Xfera interest for an amount equal to the exercise price provided for € 25.0 million, which was the amount reflected in Inversión Corporativa’s October 2000 option agreement with Mercapital. This amount represents Mercapital’s accumulated amount of capital contribution, associated administrative and financing costs and Inversión Corporativa’s guarantee costs, and most of this amount was paid by us in March 2003. This purchase effectively led to the unwinding of the credit arrangements supporting Inversión Corporativa’s share of Xfera’s guarantees to the Spanish government.

Investigations into the Xfera Matter. As described below, investigations into the Xfera transaction have begun in Spain by CNMV and the Audiencia Nacional, the Spanish Superior Court for special crimes.

CNMV. CNMV, the Spanish stock market regulator, opened an investigation in January 2003 which focuses on whether an agreement between Abengoa and Inversión Corporativa in October 2000 constituted a “relevant fact” that should have been identified to the CNMV. At the time of the October 2000 transactions, we understand from Abengoa that it received advice from outside legal counsel that the transaction with Inversión Corporativa would not be viewed as a conflict of interest under Spanish law and that Spanish law did not require the disclosure of a relevant fact in connection with the option arrangements. Abengoa has notified CNMV that it believes it made all required disclosures, and that it entered into the Xfera transactions for the benefit of Abengoa generally and Telvent in particular. As part of CNMV’s procedures, it notified the Audiencia Nacional. The CNMV investigation has been suspended pending resolution of the Audiencia Nacional proceeding.

Audiencia Nacional. In October 2003, the Audiencia Nacional announced that it had begun a criminal investigation into the role of Inversión Corporativa and four directors of Abengoa, including its chairmen, in the Xfera transaction. We believe the investigation focuses on whether the Xfera transaction improperly benefited Inversión Corporativa at the expense of Abengoa’s minority shareholders. As part of these investigations, our chairman and chief executive officer was interviewed as a witness. In June 2004, we sold our investment in Xfera to an indirect subsidiary of Abengoa for an amount equal to the carrying value of our investment at that date of € 26.4 million. This resulted in our realizing no gain or loss on the investment.

In September 2004, we learned that the Audiencia Nacional had extended the criminal investigation into the roles of our chairman and chief executive officer, Manuel Sanchez, and of the general counsel of Abengoa who also served as the secretary to the board of directors of Telvent from October 2000 to April 2004. The Spanish Criminal Code provides that, under specific circumstances, it would be a crime for an officer of a Spanish company to commit acts of mismanagement. The investigation involving our chairman and chief executive officer is being brought pursuant to this statute and focuses on his role as a potential accomplice to the four Abengoa directors in connection with our acquisition of the Xfera interest in December 2002. In particular, the investigation concerns whether, as our chief executive officer at the time that we acquired the interest in Xfera, he cooperated with the directors of Abengoa to complete the transaction by not providing information to our board of directors that would be adequate for our board to make an informed and independent decision regarding the acquisition of the Xfera interest. In connection with our acquisition of the Xfera interest in December 2002, our chairman and chief executive officer, at a board meeting held in November 2002, made a presentation to our board of directors recommending approval of the Xfera purchase, which we believe enabled the board of directors to evaluate the Xfera investment. Following the presentation, our board approved the acquisition and our chief executive officer executed and delivered the definitive transaction documentation on our behalf.

In Spain, criminal procedures are conducted in three distinct phases: (i) the investigation stage; (ii) the accusation stage; and (iii) the oral trial or hearing and the sentence. To date, the criminal investigations against the four Abengoa directors, Abengoa’s general counsel and our chairman and chief executive officer are in the first phase listed above. The Audiencia Nacional has not formally accused any of the parties and the investigations are still in the preliminary stages. If the judge conducting the Audiencia Nacional investigation concludes that there is substance to the criminal charges raised by the prosecutor in the criminal investigation against our chairman and chief executive officer or any of the other parties that are subject to the investigation, the prosecutor will have the opportunity to formally accuse any applicable party and the judge will then decide whether any of the parties are to be brought to trial as accused parties pursuant to the second and third phases described above.

Our chairman and chief executive officer has advised us that he intends to vigorously defend any charges which may be brought against him in connection with this investigation. With respect to any charge relating to his not having provided adequate information to our board, our chairman and chief executive officer has advised us that he believes that he provided the directors with adequate information pursuant to which they were able to make an informed decision regarding the Xfera investment. Telvent Investments, which is the

So far, these investigations do not target Telvent, Abengoa, or any of our directors, executive officers or employees other than our chairman and chief executive officer. We cannot predict the outcome of these investigations and inquiries, nor can we predict the time in which these investigations and inquiries will be resolved, including with respect to our chairman and chief executive officer. If the outcomes of any of these investigations and inquiries are adverse, or if any of these investigations and inquiries are protracted, they could have a material adverse effect on the ability of our chairman and chief executive officer to exercise his duties, indirectly have a material adverse effect on our financial condition, results of operations and prospects or, at a minimum, create a negative impression of us in the stock market or with our customers or cause our share price to decline. In particular, we could sustain these effects from an adverse outcome of any proceedings against our chairman and chief executive officer, or his involvement in protracted investigations or inquiries. Further, to the extent there is an adverse finding against our chairman and chief executive officer in the Audiencia Nacional proceeding, he might be formally accused of criminal wrongdoing and could face criminal charges in a criminal trial. To the extent of an adverse finding in such a criminal trial, our chairman and chief executive officer could face various penalties including incarceration, fines or an inability to hold office in a public corporation. See “Risk Factors — We may face adverse effects from investigations of our parent, four of its directors and its general counsel, its majority shareholder, and our chairman and chief executive officer.”

On May 28, 2002, Abengoa entered into a syndicated loan facility in the amount of € 500.0 million, which facility is guaranteed by members of the Abengoa Group, including two of our subsidiaries, Telvent Energía y Medio Ambiente and Telvent Tráfico y Transporte. The facility, which expires in 2008, is used to finance projects and other investments in the businesses and activities of the Abengoa Group. The lenders have agreed to release the guarantee of this facility by our subsidiaries effective upon the closing of this offering; however, our financial condition and results of operations will affect Abengoa’s compliance with its covenants under this loan facility.

The following table sets forth certain information regarding beneficial ownership of our ordinary shares before the offering and as adjusted to reflect the sale of the ordinary shares in the offering and shares to be sold subject to the underwriters’ exercise of their overallotment option by:


	•	each person or entity known to own beneficially more than 5% of our outstanding ordinary shares;

	•	each of our executive officers;

	•	each director;

	•	all directors and executive officers as a group; and

	•	the other selling shareholder.


⁽¹⁾	Beneficial ownership is determined in accordance with the rules of the SEC, and includes voting or investment power with respect to the securities.

⁽²⁾	The information presented is based upon the sale of 8,700,000 ordinary shares and does not reflect the sale of ordinary shares subject to the overallotment option.

⁽³⁾	* represents beneficial ownership of less than one percent of our ordinary shares.

⁽⁴⁾	The overallotment option will initially be covered by shares of the selling shareholders’ ordinary shares on a pro rata basis and then, with respect to the balance of the overallotment, from us.


⁽⁵⁾	Reflects ownership of shares through Telvent Corporation, S.L. and Siema AG, each of which is a wholly-owned subsidiary of Abengoa, S.A. As of June 30, 2004, Inversión Corporativa owned approximately 56% of the shares of Abengoa, S.A. Inversión Corporativa is a private corporation, which we believe has 330 shareholders, none of whom we believe has a controlling interest.

⁽⁶⁾	Each of our directors, executive officers and Mr. Fernández has an address c/o Telvent GIT, S.A., Valgrande, 6, 28108 Alcobendas, Madrid, Spain.

⁽⁷⁾	Assuming exercise in full of the overallotment option, Manuel Sánchez will own 333,000 ordinary shares, or 1.1% of our ordinary shares.

Each of the selling shareholders is one of our executive officers, except Mr. Fernández. Each selling shareholder acquired his or her shares through the stock compensation plan established by Abengoa.

The following summary provides information concerning our capital stock and briefly describes all material provisions of our by-laws (estatutos) and Spanish law. The information set forth below describes all material considerations concerning our capital stock. For the complete terms of our by-laws, please see the copy filed as an exhibit to the registration statement of which this prospectus forms a part.

As of the date of this prospectus, our issued share capital is 60,101,000, divided into 20,000,000 issued and outstanding ordinary shares, € 3.00505 par value per share. All of our issued and outstanding shares are duly authorized, validly issued, fully paid and non-assessable. More than 10% of our authorized share capital has been paid for with assets other than cash in transactions taking place over the last five years. Prior to the offering none of our ordinary shares is held of record in the United States.

On April 26, 2001, our share capital was redenominated into euros, causing our issued share capital to decrease by € 210.43. On April 15, 2004, we effected a 200 for 1 split of our ordinary shares, which caused our shares to increase from 100,000 shares to the 20,000,000 reflected above. The following table reflects a reconciliation of the number of ordinary shares outstanding at the beginning and end of 2003.

The issuance of the ordinary shares subject to this offering and their sale to the underwriters including the overallotment option has been duly authorized by the general shareholders’ resolution passed on April 15, 2004, authorizing the board of directors to execute the share capital increase. The shareholders’ preemptive right to subscribe for the ordinary shares issued has been validly waived in accordance with the provisions of Spanish law.

Under a plan established by Abengoa, certain members of our senior management team purchased our ordinary shares from Abengoa. See “Management – Stock Compensation Plan.”

We registered with the Madrid Companies Registry at Volume 15,370, Book 0, Section 8^a, Page 164, Sheet M-257,879, 1^st entry. Our corporate purpose is as follows:


	•	To provide engineering and information services in the Internet and telecommunications markets.

	•	To manufacture, develop, market, maintain, repair and install all kinds of information, control, protection, monitoring and security devices and systems.

	•	To improve buildings that are specifically designed to house computer systems and equipment, and/or to house communications network operating systems and equipment owned by third parties.

	•	To develop, construct, assemble, operate, repair, maintain, import, export, sell and lease all kinds of (i) machines, devices, installations, units, sub-units, individual parts and materials for all computer, electronic, electromechanical and electrical applications, and (ii) scientific devices for control, measurement and installation, repair and maintenance.

	•	To obtain, purchase, sell, transfer and operate concessions, rights and patents.

	•	To acquire, promote, dispose of, use and encumber all types of movable assets and real estate and intangible rights without restriction of any kind and any other commercial activities directly or indirectly related to the above-mentioned corporate purposes.

Our ordinary shares are of the same class and series and, in accordance with Article 9 of our by-laws, each share confers on its holder the right to attend general shareholders’ meetings, to vote, to challenge company resolutions, and to participate in the distribution of company earnings and in any surplus assets resulting from liquidation, as well as other rights inherent in the holder’s status as shareholder. According to Article 27 of our by-laws, after a general shareholders’ meeting has been called at which the annual accounts will be approved, any shareholder may obtain from us, immediately and free of charge, those documents that will be submitted for the approval of the shareholders as well as the auditors’ report. In addition, shareholders may request, pursuant to Spanish law, other information relating to those items on the agenda, which we must provide to any shareholder owning 25% of our share capital and which we must provide to any other shareholder, unless delivery of those documents could be deemed detrimental to our corporate interest. In accordance with Article 148 of the Spanish Corporation Law, in order to change the rights of a class of shares, a shareholder resolution passed at a shareholder meeting with the favorable vote of the majority of all the shares and of the affected shares is required.

Each ordinary share entitles its holder to one vote. Any share may be voted by written proxy, and proxies may be given to any individual. Proxies are valid only for a single meeting.

Pursuant to our by-laws and Spanish law, general meetings of shareholders may be either ordinary or extraordinary. Ordinary general meetings must be convened within the first six months of each fiscal year on a date fixed by the board of directors. As a general rule, extraordinary general meetings may be called from time to time by our board of directors at its discretion or at the request of shareholders representing at least 5% of our share capital. See “Risk Factors – Abengoa will be in a position to control matters requiring a shareholder vote and this ownership concentration may adversely affect the market price of our ordinary shares.” Unless all shareholders attend, notices of all shareholders’ meetings must be published in the Mercantile Registry Official Gazette (Boletin Oficial del Registro Mercantil) and in a local newspaper within the province of Madrid at least fifteen days prior to the date fixed for the meeting. In addition, we have agreed with the underwriters to furnish notices of our regular annual meetings to holders of our ordinary shares.

At ordinary general meetings, shareholders are asked to approve the actions of our management, the financial statements for our previous fiscal year and the allocation of our profit or loss. After our financial statements are approved, we must file them with the Mercantile Registry of Madrid. If our shareholders do not approve our financial statements, we cannot file our annual accounts with the Mercantile Registry of Madrid. If the annual accounts are not registered within one year from the end of the relevant fiscal year, we would be precluded from registering any other resolution with the Mercantile Registry until we have filed the annual accounts. All other matters may be addressed at extraordinary general meetings called for such purpose. Shareholders can vote on these matters at an ordinary general meeting if such items are included on the meeting’s agenda.

Our by-laws provide that, on the first call of a general shareholders’ meeting, a duly constituted general meeting of shareholders requires a quorum of at least 25% of our subscribed share capital. On the second call, the meeting is validly convened regardless of the share capital attending. Notwithstanding the above, certain major corporate actions (such as issuing additional ordinary shares increasing or decreasing share capital, issuing ordinary bonds, amending the by-laws or mergers) that require shareholder approval can only be approved at a meeting in which 50% of the subscribed share capital is present or represented on the first call and 25% of the subscribed share capital is present or represented on the second call. When the shareholders attending a meeting represent less than 50% of the subscribed share capital, resolutions on any of these major corporate actions must be adopted by the affirmative vote of at least two-thirds of the share capital present or represented at such meeting. A shareholders’ meeting at which 100% of the capital stock is present or represented is validly constituted even if no notice of such meeting was given, and, upon unanimous agreement, shareholders may consider any matter at such meeting.

A resolution passed in a general meeting of shareholders by a majority of the shares represented in person or by proxy is binding on all shareholders, subject to Spanish law. In certain circumstances, such as

Under Spanish law, shareholders who voluntarily aggregate their shares so that they are equal to or greater than the result of dividing the total capital stock by the number of directors have the right to appoint a corresponding proportion of the members of the board of directors. Shareholders who exercise this right may not vote on the appointment of other directors.

Pursuant to the Spanish Corporation Law and our by-laws, shareholders have preemptive rights to subscribe for any new shares issued by us, including our ordinary shares. These preemptive rights may be voluntarily waived by the shareholders or may be abolished in certain circumstances if our shareholders pass a resolution at a shareholders’ meeting in accordance with Article 159 of the Spanish Corporation Law. Our existing shareholders have waived their preemptive rights in respect of our issuance of the ordinary shares in this offering through a general shareholders’ resolution passed on April 15, 2004, which approved the issuance of the ordinary shares subject to this offering and the sale of ordinary shares including the overallotment option to the underwriters.

Prior to this offering, our share register was maintained by one of our officers at our headquarters in Spain. From the date of the offering, our share register will be kept by American Stock Transfer & Trust Company in New York, New York, which will act as transfer agent and registrar. The share register will reflect only record owners of our shares; beneficial owners of ordinary shares holding their shares through The Depository Trust Company, to which we refer as DTC, will not be recorded in our share register. Ordinary shares held through DTC will be registered in our share register in the name of DTC’s nominee. We are entitled to accept only those persons as shareholders or nominees who have been recorded in our share register, and to make dividend payments and perform other obligations only to our shareholders of record, including DTC. A shareholder of record must notify American Stock Transfer & Trust Company of any change in address. Until notice of a change in address has been given, all of our written communication to our shareholders of record shall be deemed to have validly been made if sent to the address recorded in the share register. We expect that all of our ordinary shares being sold in this offering will initially be held through DTC.

Beneficial owners of our ordinary shares may transfer their shares through participants in the book-entry system of DTC. Ordinary shares held of record represented by share certificates may be transferred only by delivery of the share certificates representing those ordinary shares duly endorsed or accompanied by an executed stock power. A transferee who wishes to become a shareholder of record must deliver the duly executed certificate in a form proper for transfer to our transfer agent and registrar, American Stock Transfer & Trust Company, in order to be registered in our share register.

The ordinary shares will be issued in certificated form. American Stock Transfer & Trust Company will be the transfer agent and registrar for our ordinary shares.

Pursuant to Spanish Law 18/1992 on Foreign Investments (Ley 18/1992, de 1 de julio) and Royal Decree 664/199 (Real Decreto 664/1999, de 23 de abril), foreign investors may freely invest in shares of Spanish companies, except in the case of certain strategic industries, including air transportation, radio and

We must report to the Spanish Registry of Foreign Investments our ordinary shares held by foreign investors.

Summary Comparison of Other Corporate Governance and Shareholders’ Rights Matters Under Spanish Corporation Law and Delaware Corporation Law

The following comparison between Spanish corporation law, which applies to us, and Delaware corporation law, the law under which many corporations in the United States are incorporated, discusses additional matters not otherwise described in this prospectus. While we believe this summary is materially accurate, the summary is subject to the complete text of the Spanish Corporation Law of 1989, as it has been subsequently amended, and Delaware corporation law, including the Delaware General Corporation Law.

Spain. The board of directors bears the ultimate responsibility for managing the business and affairs of a corporation. In discharging this function, directors of a Spanish corporation owe specific fiduciary duties of care, loyalty and confidentiality to the corporation. In general terms, Spanish corporation law requires directors to perform their duties with the diligence of a responsible businessman and a loyal representative complying with the duties set forth in the law and the by-laws of the corporation. In addition, directors are required to keep themselves informed of the corporation’s business. In addition, Spanish corporation law has been recently modified by Law 26/2003 of July 17, 2003, in order to provide for specific duties of directors in connection with loyalty, conflict of interest, information and confidentiality, as detailed below.

Delaware. The board of directors bears the ultimate responsibility for managing the business and affairs of a corporation. In discharging this function, directors of a Delaware corporation owe fiduciary duties of care and loyalty to the corporation and to its shareholders. Delaware courts have decided that the directors of a Delaware corporation are required to exercise an informed business judgment in the performance of their duties. An informed business judgment means that the directors have informed themselves of all material information reasonably available to them. Delaware courts have imposed a heightened standard of conduct upon directors of a Delaware corporation who take any action designed to defeat a threatened change in control of the corporation. In addition, under Delaware law, when the board of directors of a Delaware corporation approves the sale or break-up of the corporation, the board of directors may, in certain circumstances, have a duty to obtain the highest value reasonably available to the stockholders.

Spain. Directors have a duty of loyalty which requires that they comply with the duties imposed by the law and the by-laws with loyalty to the corporation’s interest and that they put the interests of the corporation before their own. This duty of loyalty requires that directors:


	•	do not use the corporation’s name or involve their status as director to carry out transactions for their personal benefit,

	•	refrain from taking advantage of business opportunities, unless the corporation has refused to carry out the business without the influence of the involved director,

	•	obtain shareholder approval prior to competing in any business with the corporation of which they are a member of the board of directors,

	•	notify the corporation of any potential conflicts of interests, including the holding of any interest in competitors,

	•	refrain from disclosing confidential information obtained while serving as a member of the board, and


	•	may not take advantage of any information they may have as a consequence of being a member of the board.

Delaware. Transactions involving a Delaware corporation and an interested director of that corporation are generally permitted if:


	•	the material facts as to the interested director’s relationship or interest are disclosed and a majority of disinterested directors approve the transaction,

	•	the material facts are disclosed as to the interested director’s relationship or interest and the stockholders approve the transaction, or

	•	the transaction is fair to the corporation at the time it is authorized by the board of directors, a committee of the board of directors or the stockholders.

Spain. Under Spanish corporation law, directors may be elected for a maximum term of five years that may be renewed without limit. When shareholders elect directors for multiple-year terms, the terms of the directors may start and end at the same time. The terms are not required to be staggered.

Delaware. The Delaware General Corporation Law generally provides for a one-year term for directors, but the directorships may be divided into up to three classes with up to three-year terms, with the years for each class expiring in different years, if permitted by the certificate of incorporation, an initial by-law or a by-law adopted by the stockholders. There is no limit on the number of terms a director may serve.

Spain. Shareholders representing 5% of the share capital are permitted to request the call of a general shareholders’ meeting and to propose the matters for vote.

Delaware. Delaware law does not specifically grant stockholders the right to bring business before an annual or special meeting. If a Delaware corporation is subject to the SEC’s proxy rules, a stockholder who owns at least $2,000 in market value, or 1% of the corporation’s securities entitled to vote, may propose a matter for a vote at an annual or special meeting in accordance with those rules.

Spain. Spanish corporation law does not permit shareholder action without calling a meeting.

Delaware. Unless otherwise provided in the certificate of incorporation, any action required or permitted to be taken at any annual or special meeting of stockholders of a corporation may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action to be so taken, is signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted.

Spain. Shareholders of a Spanish corporation do not have the right to demand payment in cash of the judicially-determined fair value of their shares in connection with a merger or consolidation involving the corporation.

Delaware. The Delaware General Corporation Law affords stockholders in certain cases the right to demand payment in cash of the judicially-determined fair value of their shares in connection with a merger or consolidation involving their corporation, subject to certain exceptions.

Spain. Any shareholder may bring suit against the corporation challenging as void resolutions approved by the general shareholders’ meeting when they are contrary to law. They may also challenge as voidable resolutions that are contrary to the provisions of the by-laws, harm the interests of the corporation or are to the benefit of one or more shareholders or third parties provided they have (i) attended the meeting and opposed the challenged resolution, (ii) not attended the meeting or (iii) been unlawfully prevented from exercising the voting rights. The limitation period for actions for challenging resolutions as void is one year, and the limitation period for actions for challenging resolutions as voidable is forty days.

Shareholders representing 5% of the share capital may bring suit against the corporation challenging void and voidable resolutions approved by the board of directors within thirty days of becoming aware of the resolutions, provided that a year or more has not elapsed since their passing. In addition, directors may challenge void and voidable resolutions of the board of directors or any other governing body within thirty days of the passing of a resolution.

Delaware. Subject to certain requirements that a stockholder make prior demand on the board of directors or have an excuse not to, a stockholder may bring a derivative action on behalf of the corporation to enforce the rights of the corporation against officers, directors and third parties. An individual may also commence a class action suit on behalf of himself and other similarly-situated stockholders if the requirements for maintaining a class action under the Delaware General Corporation Law have been met. Subject to equitable principles, a three-year period of limitations generally applies to such stockholder suits against officers and directors.

Spain. Subject to certain exceptions, a corporation may purchase its own shares if:


	•	the purchase has been authorized by the general shareholders’ meeting by means of a resolution establishing the terms of the purchase, including the maximum number of shares to be purchased, the minimum and maximum purchase price and the duration of the authorization, which shall not exceed 18 months;

	•	the aggregate nominal value of the shares purchased, together with that of those shares already held by the corporation and its affiliates, does not exceed 10% of the share capital of the corporation;

	•	the purchase enables the corporation to create a special reserve equal to the purchase price of its own shares without decreasing its share capital and reserves; and

	•	the shares to be purchased are fully paid.

Generally, shares that are not purchased in accordance with the above must be disposed of within one year from the date of the first purchase or redeemed, or the purchase would be declared void.

Delaware. A corporation may purchase or redeem its own shares unless the capital of the corporation is impaired or the purchase or redemption would cause an impairment of the capital of the corporation. A Delaware corporation may, however, purchase or redeem out of capital any of its preferred shares or, if no preferred shares are outstanding, any of its own shares if such shares will be retired upon acquisition and the capital of the corporation will be reduced in accordance with specified limitations.

Spain. Section 60 of Spanish Law 24/1988, dated as of July 28, and Royal Decree 1197/1991, dated as of July 26, regulate takeover bids in an attempt to ensure the equal treatment of all shareholders. These laws regulate mechanisms and institute procedures for acquiring a control position within a corporation for reorganizing a corporation’s structure. These laws only apply to those companies that are listed on a Spanish stock exchange and therefore do not apply to us.

Delaware. In addition to other aspects of Delaware law governing fiduciary duties of directors during a potential takeover, the Delaware General Corporation Law also contains a business combination statute that protects Delaware companies from hostile takeovers and from actions following the takeover by prohibiting some transactions once an acquirer has gained a significant holding in the corporation.

Section 203 of the Delaware General Corporation Law prohibits “business combinations,” including mergers, sales and leases of assets, issuances of securities and similar transactions by a corporation or a subsidiary with an interested stockholder that beneficially owns 15% or more of a corporation’s voting stock, within three years after the person becomes an interested stockholder, unless:


	•	the transaction that will cause the person to become an interested stockholder is approved by the board of directors of the target prior to the transactions;

	•	after the completion of the transaction in which the person becomes an interested stockholder, the interested stockholder holds at least 85% of the voting stock of the corporation not including shares owned by persons who are directors and also officers of interested stockholders and shares owned by specified employee benefit plans; or

	•	after the person becomes an interested stockholder, the business combination is approved by the board of directors of the corporation and holders of at least 66.67% of the outstanding voting stock, excluding shares held by the interested stockholder.

A Delaware corporation may elect not to be governed by Section 203 by a provision contained in the original certificate of incorporation of the corporation or an amendment to the original certificate of incorporation or to the bylaws of the company, which amendment must be approved by a majority of the shares entitled to vote and may not be further amended by the board of directors of the corporation. This amendment is not effective until twelve months following its adoption.

Sales of substantial amounts of our ordinary shares in the public market could adversely affect prevailing market prices of our ordinary shares.

When the offering is completed, and after giving effect to the stock split of 200 to 1 effected on April 15, 2004, but assuming that the underwriters do not exercise the overallotment option, we will have a total of 28,700,000 ordinary shares outstanding. The ordinary shares sold by the selling shareholders and us in the offering will be freely tradeable without restriction under the Securities Act of 1933 except for any such ordinary shares that are acquired by one of our “affiliates” (as that term is defined in Rule 144 under the Securities Act). The aggregate of 18,201,000 ordinary shares that are held by Telvent Corporation and Siema (each a wholly-owned subsidiary of Abengoa) constitute “restricted securities” within the meaning of Rule 144 and will be eligible for sale in the open market after the offering, subject to contractual lockup provisions with the underwriters and the applicable requirements of Rule 144 or Regulation S under the Securities Act, which are described below. In addition, the shares held by Mr. Sánchez and the other members of management will be subject to Rule 144, to the extent any of such persons are deemed to be our “affiliates” under Rule 144, and their shares are subject to additional restrictions under the terms of their share purchase agreements with Abengoa. See “Management – Stock Compensation Plan.”

Generally, Rule 144 provides that an affiliate of the issuer who has beneficially owned restricted securities for at least one year will be entitled to sell on the open market in brokers’ transactions within any three-month period a number of shares that does not exceed the greater of:


	•	1% of the then outstanding shares, and

	•	the average weekly trading volume in the shares on the open market during the four calendar weeks preceding the sale.

Due to its controlling ownership position in our shares, Abengoa will be deemed to be our affiliate under Rule 144.

Sales under Rule 144 are also subject to certain post-sale notice filing requirements and the availability of current public information about us.

Regulation S provides generally that sales made in offshore transactions are not subject to the prospectus-delivery requirements of the Securities Act of 1933. Offshore transactions are not subject to the requirements of Rule 144.

Sales of substantial amounts of our ordinary shares on the open market, or the availability of such shares for sale, could adversely affect the price of our ordinary shares.

We, our directors, executive officers, and shareholders have generally agreed not to sell or transfer any of our ordinary shares for 180 days after the date of this prospectus without first obtaining the written consent of the representatives. See “Underwriting – No Sales of Similar Securities.”

Payment for the ordinary shares will be made in U.S. Dollars by the closing of the offering. Delivery of the ordinary shares will be made to the underwriters, subject to the required registration by the Mercantile Registry of Madrid of the capital increase associated with our issuance of shares in this offering.

If the registration of the capital increase does not occur before , 2004, the closing will not occur, you will not receive any ordinary shares, and any payment you have made for the shares will be returned to you promptly without interest. The underwriters will advance us funds to facilitate our registration of the capital increase. We are required by Spanish law to deposit this amount in a financial institution and we will not be able to use these funds until the offering closes.

The following is a summary of the material Spanish and United States federal income tax consequences of the acquisition, ownership and disposition of our ordinary shares. This summary is not a complete analysis or listing of all the possible tax consequences of such transactions and does not address all tax considerations that may be relevant to all categories of potential investors, some of whom may be subject to special rules. Accordingly, prospective investors in our ordinary shares should consult their own tax advisors as to the tax consequences of their purchase, ownership and disposition of ordinary shares, including the effect of tax laws of any other jurisdiction, based on their particular circumstances. The statements regarding Spanish and United States federal tax laws set out below are based on laws and relevant interpretations thereof in effect as of the date of this prospectus, all of which are subject to change, and any such change may have retroactive effect.

The following discussion applies to you if you are a “nonresident holder.” As used in this particular section, the term “nonresident holder” means a beneficial owner of our ordinary shares:


	•	that is an individual or corporation not resident in Spain for Spanish tax purposes;

	•	whose ownership of our ordinary shares is not for Spanish tax purposes effectively connected with either a permanent establishment in Spain through which such owner carries on or has carried on business or a fixed base in Spain from which such owner performs or has performed independent personal services; and

	•	that is not treated as owning or having owned at any time, directly or indirectly 10% or more of our ordinary shares.

This discussion is based on Spanish tax laws currently in effect, which laws are subject to change at any time, perhaps with retroactive effect. This discussion does not consider all aspects of Spanish taxation that may be relevant to particular nonresident holders, some of whom may be subject to special rules. In particular this discussion does not address the Spanish tax consequences applicable to partnerships or other “look-through” entities or investors who hold ordinary shares through partnerships or such entities. Each nonresident holder should consult with its own tax advisor as to the particular tax consequences to it of the purchase, ownership or disposition of our ordinary shares.

Income Taxes — Taxation of Dividends. We do not anticipate paying any cash dividends on our ordinary shares in the foreseeable future. See “Dividend Policy.” In the event, however, that we pay dividends on our ordinary shares, under Spanish law, the dividends are subject to Spanish Non-Residents Income Tax, withheld at source on the gross amount of the dividends, currently at a 15% tax rate, unless you are entitled to an exemption or a reduced rate under a Convention for the Avoidance of Double Taxation (“CADT”) between Spain and your country of residence. Nonresident holders should consult their tax advisors with respect to the applicability and the procedures under Spanish law for obtaining the benefit of an exemption or a reduced rate under a CADT.

Income Taxes — Rights. Distributions to you of preemptive rights to subscribe for new shares made with respect to our ordinary shares are not treated as income under Spanish law and, therefore, are not subject to Spanish Non-Residents Income Tax. The exercise of such preemptive rights subscribing for new shares is not considered a taxable event under Spanish law and thus is not subject to Spanish Non-Residents Income Tax. The tax treatment of disposals of preemptive rights depends on whether the underlying shares to which such rights relate are listed on a stock exchange of a European Union member. If our ordinary shares are listed on a stock exchange of a European Union member, the amount you receive from the disposal of preemptive rights will reduce the acquisition value of the underlying shares and will be taxable to you, as a capital gain, only to the extent that the amount you receive exceeds the acquisition value of the underlying shares. If our ordinary shares are not listed on a stock exchange of a European Union member, the amount you receive from the disposal of preemptive rights will be considered as taxable capital gain. See “— Spanish Taxation – Income Taxes – Taxation of Capital Gains” below. Our ordinary shares are not currently listed on a European Union member stock exchange and we do not anticipate that they will be listed on any of these exchanges in the future.

Income Taxes — Taxation of Capital Gains. Under Spanish Non-Residents Income Tax Law, any capital gain derived from the sale or exchange of our ordinary shares are considered to be Spanish source income and, therefore, are taxable in Spain. Spanish Non-Residents Income Tax is currently levied at a 35% tax rate on capital gains obtained by nonresident holders who are not entitled to the benefit of an exemption or a reduced rate under an applicable CADT.

However, capital gains realized by you on the sale or exchange of our ordinary shares will be exempt from Spanish Non-Residents Income Tax in the following cases:


	•	If you are a resident of another European Union Member State, you will be exempt from Spanish Non-Residents Income Tax on capital gains, provided that (i) our assets do not mainly consist of, directly or indirectly, Spanish real estate, and (ii) the gain is not obtained through a country or territory statutorily defined as a tax haven. In respect of requirement (i), above, our assets currently do not, and we do not expect them in the foreseeable future to, mainly consist of, directly or indirectly, Spanish real estate.

	•	If you are entitled to the benefit of an applicable CADT, capital gains realized by you will, in the majority of cases, be exempt from Spanish Non-Residents Income Tax (since most CADTs provide for taxation only in the nonresident holder’s country of residence).

As a general rule, in the event a capital gain derived by you from the disposition of our ordinary shares is exempt from Spanish Non-Residents Income Tax, in accordance with the Order of December 23, 2003, you will be obliged to file with the Spanish tax authorities the corresponding tax Form 210 evidencing that you are entitled to the exemption and provide the Spanish tax authorities with a certificate of tax residence issued by the tax authorities of the country of residence, within the meaning of a CADT, if applicable.

Spanish Wealth Tax. Unless an applicable CADT provides otherwise, individual nonresident holders who hold ordinary shares located in Spain are subject to the Spanish Wealth Tax (Spanish Law 19/1991), which imposes a tax on property located in Spain on the last day of any year. Therefore, if you are an individual and you hold ordinary shares on the last day of any year, you will be subject to the Spanish Wealth Tax for such year at marginal rates varying between 0.2% and 2.5% of the average market value of such ordinary shares during the last quarter of such year. Nonresident holders should consult their tax advisors with respect to the applicability of the Spanish Wealth Tax.

Spanish Inheritance and Gift Taxes. Unless an applicable CADT provides otherwise, transfers of ordinary shares on death or by gift to individuals are subject to Spanish Inheritance and Gift Taxes, respectively (Spanish Law 29/1987), if the transferee is a resident of Spain for Spanish tax purposes, or if the ordinary shares are located in Spain, regardless of the residence of the transferee. Spanish tax authorities will consider our ordinary shares to be located in Spain for Spanish tax purposes. The applicable tax rate, after applying all relevant factors, ranges between 7.65% and 81.6%. Gifts granted to corporate nonresident holders

Spanish Transfer Tax. A transfer by a nonresident holder of our ordinary shares will be exempt from any Spanish Transfer Tax (Impuesto sobre Transmisiones Patrimoniales) and Value Added Tax if, at the time of such transfer, real estate in Spain does not amount to more than 50% of our assets. Real estate located in Spain currently does not, and we do not expect that Spanish real estate will in the foreseeable future, amount to more than 50% of our assets. Additionally, no Stamp Duty will be levied on a transfer by a nonresident holder of our ordinary shares.

The following discussion is based on the Internal Revenue Code of 1986, as amended, its legislative history, existing and proposed regulations, published rulings and court decisions, all as currently in effect and all subject to change at any time, perhaps with retroactive effect. This discussion applies to you only if you are a U.S. holder, as defined below.

As used herein, “U.S. holder” means a beneficial owner of our ordinary shares that is, for United States federal income tax purposes:


	•	an individual citizen or resident of the United States;

	•	a corporation (or other entity classified as a corporation for such purposes) created or organized in or under the laws of the United States or any state or political subdivision thereof;

	•	an estate, the income of which is subject to United States federal income taxation regardless of its source; or

	•	a trust, if (1) a United States court can exercise primary supervision over the trust’s administration and one or more United States persons (within the meaning of the United States Internal Revenue Code) are authorized to control all substantial decisions of the trust or (2) the trust has a valid election in effect under applicable Treasury regulations to be treated as a United States person.

The discussion does not consider all aspects of United States federal income taxation that may be relevant to particular U.S. holders by reason of their particular circumstances, including potential application of the alternative minimum tax, or any aspect of state, local or non-United States federal tax laws. In addition, this summary is directed only to U.S. holders that hold our ordinary shares as capital assets and does not address the considerations that may be applicable to certain classes of U.S. holders, including financial institutions, insurance companies, broker-dealers, tax-exempt organizations, U.S. holders of our ordinary shares as part of a “straddle,” “hedge” or “conversion transaction,” U.S. holders, directly, or indirectly or through attribution, of 10% or more of our outstanding ordinary shares, and persons who own our ordinary shares through a partnership or other pass-through entity. Each U.S. holder should consult with its own tax advisor as to the particular tax consequences to it of the purchase, ownership and disposition of our ordinary shares, including the effects of applicable state, local, foreign or other tax laws and possible changes in tax laws.

If a partnership (or other entity classified as a partnership for U.S. federal income tax purposes) is the beneficial owner of our ordinary shares, the U.S. federal income tax treatment of a partner in the partnership will generally depend on the status of the partner and the activities of the partnership. If you are a partnership holding our ordinary shares, or a partner in such a partnership, you should consult your tax advisor regarding the U.S. federal income tax consequences of the acquisition, ownership and disposition of our ordinary shares.

Taxation of Dividends in General. The gross amount of any distribution paid on our ordinary shares out of our current or accumulated earnings and profits, as determined for United States federal income tax purposes, before reduction for any Spanish income tax withheld by us, will be included in your gross income as a dividend when actually or constructively received. Accordingly, the amount of dividend income that will be included in your gross income may be greater than the amount actually received or receivable by you. Distributions in excess of our current and accumulated earnings and profits will be treated first as a tax-free

If you are a corporate U.S. holder, you generally will not be eligible for the dividends-received deduction generally allowed United States corporations in respect of dividends received from United States corporations. If you are a non-corporate U.S. holder, and meet certain eligibility requirements, dividends paid to you in taxable years beginning before January 1, 2009, will qualify for United States federal income taxation at a reduced rate of 15% or lower if we are a “qualified foreign corporation.” We generally will be a “qualified foreign corporation” if either (i) we are eligible for benefits under the Convention between the United States and the Kingdom of Spain for the Avoidance of Double Taxation and the prevention of Fiscal Evasion With Respect to Taxes on Income, together with its related Protocol (the “U.S.-Spain Treaty”) or (ii) our ordinary shares are listed on an established securities market in the United States. As we are eligible for benefits under the U.S.-Spain Treaty and as we expect that our ordinary shares will be traded on the Nasdaq National Market, we presently are a “qualified foreign corporation,” and we generally expect to be a “qualified foreign corporation” during all taxable years before 2009, but no assurance can be given that a change in circumstances will not affect our treatment as a “qualified foreign corporation” in any of such taxable years. If you are a non-corporate U.S. holder, you nevertheless will not be eligible for the reduced rate (a) if you have not held our ordinary shares for at least 61 days of the 120-day period beginning on the date which is 60 days before the ex-dividend date, (b) to the extent you are under an obligation to make related payments on substantially similar or related property or (c) with respect to any portion of a dividend that is taken into account by you as investment income under Section 163(d)(4)(B) of the United States Internal Revenue Code. Any days during which you have diminished your risk of loss with respect to our ordinary shares (for example, by holding an option to sell our ordinary shares) are not counted towards meeting the 61-day holding period. Non-corporate U.S. holders should consult their own tax advisors concerning whether dividends received by them qualify for the reduced rate.

We anticipate that any dividends that we pay will be declared in Euros as required by Spanish law but will be paid in U.S. Dollars. See “Dividend Policy.” However, if we pay any dividends in Euros, the dividends will be included in your gross income in a U.S. Dollar amount calculated by reference to the exchange rate in effect on the date the dividends are actually or constructively received by you, regardless of whether the dividend payments are actually converted into U.S. Dollars. You will have a tax basis in any Euros distributed by us equal to the U.S. Dollar value of the Euros on the date they are actually or constructively received by you. Generally, any gain or loss resulting from currency exchange fluctuations during the period from the date you include the dividend payment in income to the date you convert the payment into U.S. Dollars will be treated as ordinary income or loss and will be United States source income or loss for United States foreign tax credit purposes.

Dividends paid by us generally will be foreign source passive income for United States foreign tax credit purposes or, if you are a financial services entity, financial services income. However, there are currently pending in the U.S. Congress legislative proposals that, if enacted in their current proposed form, generally would treat income that constitutes financial services income as general category income, along with other income that is not passive income, for United States foreign tax credit purposes for taxable years beginning after December 31, 2006. It is not possible to know if, and we express no opinion as to whether, these legislative proposals will be enacted in their current proposed form. Subject to certain limitations, you may elect to claim as a foreign tax credit against your United States federal income tax liability the Spanish income tax withheld from dividends received on our ordinary shares. If you do not elect to claim a foreign tax credit, you may instead claim a deduction for Spanish income tax withheld. In addition, special rules apply in determining the foreign tax credit limitation with respect to dividends received by non-corporate U.S. holders that are subject to United States federal income taxation at the reduced rate (discussed above). The calculation of foreign tax credits and, in the case of a U.S. holder that elects to deduct foreign taxes, the

Sale or Exchange of Ordinary Shares. Upon a taxable sale or exchange of ordinary shares, you will recognize a capital gain or loss for United States federal income tax purposes equal to the difference, if any, between the U.S. Dollar value of the amount realized on the sale or exchange and your adjusted tax basis determined in U.S. Dollars in the ordinary shares. This gain or loss will be long-term capital gain or loss if your holding period in the ordinary shares exceeds one year at the time of the sale or exchange. Any gain or loss will generally be United States source gain or loss for United States foreign tax credit purposes. You should consult your own tax advisor regarding the United States federal income tax treatment of capital gains, which may be taxed at lower rates than ordinary income for individuals and certain other non-corporate U.S. holders, and capital losses, the deductibility of which is subject to limitations. See “– Spanish Taxation – Income Taxes – Taxation of Capital Gains” for a description of how you may be able to obtain an exemption from Spanish capital gains tax upon a sale or other disposition of ordinary shares. You should also consult your own tax advisor regarding the source of such gain or loss, which in certain instances may be foreign source.

If you receive Euros upon the sale of our ordinary shares, you will realize an amount equal to the U.S. Dollar value of the Euros on the date of the sale (or, if our ordinary shares are traded on an established securities market and you are a cash basis taxpayer or an electing accrual basis taxpayer, the settlement date). You will have a tax basis in the Euros received equal to the U.S. Dollar amount realized. Generally, any gain or loss you realize upon a subsequent disposition of the Euros (including upon an exchange for U.S. Dollars) will be ordinary income or loss and will be United States source income or loss for United States foreign tax credit purposes.

Passive Foreign Investment Company. We believe that we are not a “passive foreign investment company” (“PFIC”) for United States federal income tax purposes for the current taxable year. We intend to conduct our business and investment activities in a manner that avoids classification as a PFIC in future taxable years and, based on our current projections and forecasts, we do not expect to become a PFIC in the foreseeable future. However, because our PFIC status must be determined on an annual basis based on the composition of our assets and income during a taxable year, there can be no assurance that we will not be considered a PFIC for the current taxable year or any future taxable year. If we were considered a PFIC for any taxable year, certain adverse consequences could apply to U.S. holders. The PFIC rules are complex, and you should consult your own tax advisor regarding our status as a PFIC for the current taxable year and any subsequent taxable years and the eligibility, manner and advisability of making a “mark to market” election if we are treated as a PFIC for any of these taxable years.

Backup Withholding and Information Reporting. Any dividend paid on our ordinary shares to you may be subject to United States federal tax information reporting requirements and to United States backup withholding (the backup withholding rate currently is 28%). In addition, the proceeds of your sale of ordinary shares may be subject to United States federal tax information reporting and to United States backup withholding. Backup withholding will not apply if you (i) are a corporation or other exempt recipient or (ii) you provide a United States taxpayer identification number, certify both that you are a United States person and as to no loss of exemption from backup withholding and otherwise comply with any applicable backup withholding requirements. Any amounts withheld under the United States backup withholding rules will be allowed as a refund or a credit against your U.S. federal income tax, provided the required information is furnished to the United States Internal Revenue Service. You should consult your own tax advisor as to your qualification for exemption from backup withholding and the procedure for obtaining such an exemption.

Merrill Lynch, Pierce, Fenner & Smith Incorporated, Lehman Brothers Inc. and SG Cowen & Co., LLC are acting as representatives of the underwriters named below. Subject to the terms and conditions contained in the underwriting agreement by and among us, the selling shareholders and the underwriters, we have agreed to sell to the underwriters, and the underwriters severally have agreed to purchase from us, the number of shares listed opposite their names below. The address of each of the representatives is: Merrill Lynch, Pierce, Fenner & Smith Incorporated, 4 World Financial Center, New York, New York 10080; Lehman Brothers Inc., 745 Seventh Avenue, New York, New York 10019; and SG Cowen & Co., LLC, 1221 Avenue of the Americas, New York, New York 10020.

The underwriters have agreed to purchase all of the ordinary shares sold under the underwriting agreement if any of the ordinary shares are purchased. If an underwriter defaults, the underwriting agreement provides that, in certain circumstances, the purchase commitments of the non-defaulting underwriters may be increased or the underwriting agreement may be terminated.

We and the selling shareholders have agreed to indemnify the underwriters against certain liabilities, including liabilities under the U.S. Securities Act of 1933, as amended, or to contribute to payments the underwriters may be required to make in respect of those liabilities, to the extent set forth in the underwriting agreement.

The underwriters are offering the ordinary shares, subject to prior sale, when, as and if issued to and accepted by them, subject to the approval of legal matters by their counsel, including the validity of the ordinary shares, and other conditions contained in the underwriting agreement, such as the receipt by the underwriters of officer’s certificates and legal opinions.

We and the selling shareholders have granted to the underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase up to 1,197,100 and 107,900 additional ordinary shares, respectively, at the public offering price on the cover page of this prospectus, less the underwriting discount. The underwriters may exercise such option initially with respect to the selling shareholders’ ordinary shares on a pro rata basis and then with respect to additional ordinary shares from us to purchase solely for the purpose of covering overallotments, if any, incurred in the sale of the ordinary shares offered hereby. If the underwriters exercise such option, each will become obligated, subject to conditions contained in the underwriting agreement, to purchase a number of additional ordinary shares proportionate to that underwriter’s initial amount reflected in the above table. We will not receive any proceeds of the sale of any ordinary shares by the selling shareholders.

The underwriters have advised us that the underwriters propose initially to offer the ordinary shares to the public at the public offering price on the cover page of this prospectus, and to certain dealers at that price less a concession not in excess of $ per ordinary share. The underwriters may allow, and the dealers may reallow, a concession not in excess of $ per ordinary share to other dealers. After the initial public offering, the public offering price, concession and discount may be changed.

The following table shows the per share initial public offering price, underwriting discount and proceeds before expenses to us and the selling shareholders. The information assumes either no exercise or full exercise by the underwriters of their overallotment options.

The expenses of the offering, not including the underwriting discount, are estimated at € 3.7 million. Abengoa has agreed to fully reimburse these expenses.

We, our executive officers, directors and all of our other shareholders have agreed not to sell or transfer any of our ordinary shares for 180 days after the date of this prospectus without first obtaining the written consent of the representatives. Specifically, we and these other individuals have generally agreed not to directly or indirectly:


	•	offer, pledge, sell or contract to sell any ordinary shares;

	•	sell any option or contract to purchase any ordinary shares;

	•	purchase any option or contract to sell any ordinary shares;

	•	grant any option, right or warrant for the sale of any ordinary shares;

	•	lend or otherwise dispose of or transfer any ordinary shares;

	•	request or demand that we file a registration statement related to the ordinary shares; or

	•	enter into any swap or other agreement that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of any ordinary shares whether any such swap or transaction is to be settled by delivery of shares or other securities, in cash or otherwise.

This lock-up provision applies to the ordinary shares and to securities convertible into or exchangeable or exercisable for or repayable with the ordinary shares. It also applies to the ordinary shares owned now or acquired later by the person executing the agreement or as to which the person executing the agreement later acquires the power of disposition.

We have applied to have our ordinary shares quoted in the Nasdaq National Market under the symbol “TLVT.” Our ordinary shares will not be listed on any exchange or otherwise quoted for trading in Spain.

Before this offering, there has been no public market for our ordinary shares and our ordinary shares have not been approved for listing or quotation. The public offering price will be determined through negotiations among us and the representatives. In addition to prevailing market conditions, the factors to be considered in determining the initial public offering price are:


	•	the valuation multiples of publicly traded companies that the representatives believe to be comparable to us;

	•	our financial information;

	•	the history of, and the prospects for, our company and the industry in which we compete;

	•	an assessment of our management, our past and present operations, and the prospects for, and timing of, our future revenues;


	•	the present state of our business; and

	•	the above factors in relation to market values and various valuation measures of other companies engaged in activities similar to ours.

An active trading market for the ordinary shares may not develop. It is also possible that after the offering the ordinary shares will not trade in the public market at or above the public offering price.

The underwriters do not expect to sell more than 5% of the ordinary shares in the aggregate to accounts over which they exercise discretionary authority.

Until the distribution of the ordinary shares is completed, SEC rules may limit underwriters and selling group members from bidding for and purchasing our ordinary shares. However, the representatives may engage in transactions that stabilize the price of the ordinary shares, such as bids or purchases to peg, fix or maintain that price.

If the underwriters create a short position in the ordinary shares in connection with the offering, i.e., if they sell more shares than are listed on the cover of this prospectus, the representatives may reduce that short position by purchasing the ordinary shares in the open market. The representatives may also elect to reduce any short position by exercising all or part of the overallotment option described above. The underwriters may sell more ordinary shares than could be covered by exercising all of the overallotment option, in which case, they would have to cover these sales through open market purchases. Purchases of ordinary shares to stabilize their price or to reduce a short position may cause the price of the ordinary shares to be higher than it might be in the absence of such purchases.

The representatives may also impose a penalty bid on underwriters and selling group members. This means that if the representatives purchase ordinary shares in the open market to reduce the underwriters’ short position or to stabilize the price of such ordinary shares, they may reclaim the amount of the selling concession from the underwriters and selling group members who sold those ordinary shares. The imposition of a penalty bid may also affect the price of the shares in that it discourages resales of those ordinary shares.

Neither we nor any of the underwriters makes any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the ordinary shares. In addition, neither we nor any of the underwriters makes any representation that the representatives will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice.

This prospectus does not constitute an offer of, or an invitation by or on behalf of us, or by or on behalf of the underwriters, to subscribe for or purchase, any of the ordinary shares in any jurisdiction to any person to whom it is unlawful to make such an offer or solicitation in that jurisdiction. The distribution of this prospectus and the offering of the ordinary shares in certain jurisdictions may be restricted by law. We and the underwriters require persons into whose possession this prospectus comes to inform themselves about and to observe any such restrictions.

Each underwriter has also acknowledged and agreed that it is aware that the ordinary shares may not be offered, advertised or sold in Spain except in accordance with the requirements of the Spanish Securities Market Law and Royal Decree 291/1992, on issues and Public Offering of Securities as amended or restated by Royal Decree 2590/1998 of 7 December (the “R.D. 291/92”). The prospectus is not verified nor registered in the administrative registries of the National Stock Exchange Commission (“CNMV”) in Spain, and therefore a public offer for subscription of the ordinary shares shall not be promoted in Spain. Notwithstanding the above, the ordinary shares may be offered in Spain subject to the requirements set forth in R.D. 291/92, and, in particular, in Article 7.1.a if a private placement of the ordinary shares is addressed exclusively to institutional investors. The institutional investors will be subject to the restriction on the transmission of the ordinary shares to the other investors in Spain that are not institutional investors set forth in Article 7.1.a of R.D. 291/92.

The representatives will be facilitating Internet distribution for this offering to certain of their Internet subscription customers. The representatives intend to allocate a limited number of ordinary shares for sale to their online brokerage customers. An electronic prospectus is available on the Internet Web sites maintained by the representatives. Other than the electronic prospectus, the information on the representatives’ Web sites is not part of this prospectus.

In connection with the registration with the Mercantile Registry of Madrid of the ordinary shares sold by us in the offering, the underwriters have agreed to advance us the funds to facilitate the registration of our capital increase. The underwriters have agreed to reimburse certain expenses of this offering.

Our estimated expenses for the issuance and distribution of our ordinary shares in this offering are as follows:

The validity of the ordinary shares being offered by this prospectus and other legal matters with respect to Spanish, U.S. federal and New York laws in connection with this offering will be passed upon for us and the selling shareholders by Squire, Sanders & Dempsey L.L.P. Squire, Sanders & Dempsey L.L.P. represents Abengoa and Inversión Corporativa in connection with certain legal matters. Certain legal matters with respect to U.S. federal and New York laws in connection with this offering will be passed upon for the underwriters by Fried, Frank, Harris, Shriver & Jacobson LLP. Certain legal matters with respect to Spanish law in connection with this offering will be passed upon for the underwriters by Uría, Menéndez y Cia, Abogados, S.C., Madrid, Spain.

Our consolidated financial statements as at and for the years ended December 31, 2003 and 2002 included in this prospectus have been so included in reliance on the audit report of PricewaterhouseCoopers Auditores, S.L., independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting. PricewaterhouseCoopers Auditores, S.L. is a member firm of the Instituto de Contabilidad y Auditoria de Cuentas.

The combined financial statements of Metso Automation SCADA Solutions Ltd. and Metso Automation SCADA Solutions Inc. as at and for the years ended December 31, 2002 and 2001 included in this prospectus have been so included in reliance on the audit report of the Canadian firm of PricewaterhouseCoopers LLP, independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting. The Canadian firm of PricewaterhouseCoopers LLP is a member firm of the Canadian Institute of Chartered Accountants.

We are incorporated in Spain and our constituent documents do not contain provisions requiring that disputes, including those arising under the securities laws of the United States, between us, our officers, directors and shareholders be arbitrated.

We have appointed CT Corporation System, 111 Eighth Avenue, New York, New York 10011, as our agent upon whom process may be served in any action brought against us under the securities laws of the United States. None of our directors or officers is a national or resident of the United States and substantially all of their assets are located outside the United States. As a result, it may be difficult for a shareholder to

Our counsel, Squire, Sanders & Dempsey L.L.P., has advised us that there is uncertainty as to whether the courts of Spain would:


	•	Recognize or enforce judgments of United States courts obtained against us or our directors or officers predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States; or

	•	Entertain original actions brought in Spain against us or our directors or officers predicated upon the securities laws of the United States or any state in the United States.

We have filed with the SEC a registration statement on Form F-1 under the Securities Act of 1933, including relevant exhibits and schedules under the Securities Act with respect to the ordinary shares to be sold in this offering. This prospectus, which constitutes a part of the registration statement, does not contain all of the information contained in the registration statement. You should read the registration statement and its exhibits for further information with respect to us and our ordinary shares. Some of these exhibits consist of documents or contracts that are described in this prospectus in summary form. You should read the entire document or contract for the complete terms. You may read and copy the registration statement and its exhibits at the SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet Web site at www.sec.gov, from which you can electronically access the registration statement and its exhibits.

After the offering, we will be subject to the reporting requirements of the Securities Exchange Act of 1934 applicable to foreign private issuers. As a “foreign private issuer,” we will be subject to reduced reporting obligations as compared with U.S. domestic issuers. Because we are a foreign private issuer, the SEC’s rules do not require us to deliver proxy statements or to file quarterly reports on Form 10-Q, among other things. In addition, our “insiders” are not subject to the SEC’s rules that prohibit short-swing trading. Our annual consolidated financial statements will be certified by an independent public accounting firm.

Even though we are a foreign private issuer, we have agreed with the underwriters:


	•	no later than the last date upon which such document is required to be filed, or as soon before as is reasonably practicable, to file with the SEC and post on our website for at least three years a Form 20-F, which filing will include financial statements prepared and presented in U.S. GAAP;

	•	no later than 60 days following the end of each of the first three fiscal quarters of each fiscal year, or as soon thereafter as is reasonably practicable, to quarterly furnish to the SEC and post on our website for at least three years a Form 6-K, which submission will include financial statements prepared and presented in U.S. GAAP and will include substantially the same information as required by a Form 10-Q including Management’s Discussion and Analysis of Financial Condition and Results of Operations;

	•	to mail to our shareholders an English-language version of the notices of our annual meetings that we are required to publish under Spanish law; and

	•	to furnish to the SEC and post on our website for at least three years, within 10 business days, or as soon thereafter as is reasonably practicable, of when a Form 8-K would be required to be filed by a U.S. reporting company, a Form 6-K relating to any of the following: (a) entry into or termination of material agreements not made in the ordinary course of business, (b) creation of a material direct financial obligation or a material obligation under an off-balance sheet arrangement, as well as triggering events that accelerate or increase direct or off-balance sheet obligations,


		(c) material costs associated with exit or disposal activities, (d) material impairments, (e) notice of delisting or failure to satisfy listing standards, (f) non-reliance on previously-issued financial statements, related audit reports or completed interim reviews, (g) resignations of a director for any reason, (h) the election of a new director, (i) the appointment or departure of a principal officer, (j) any change in our fiscal year, (k) any amendments to our by-laws, (l) any unregistered sales of our equity securities, (m) any material modifications to rights of holders of our securities, (n) our bankruptcy, insolvency or “concurso”, (o) completion of an acquisition or disposition of assets, (p) any release of material information regarding results of operation and financial condition, (q) any change in control of us, (r) any change in our accountant, (s) any amendment or waiver of our code of ethics and (t) any financial statements of acquired businesses and pro forma financial information (provided that such information is not required to be presented in U.S. GAAP).

To the extent any filing requirements of the SEC are modified in the future, we have also agreed to endeavor to provide such documents as are appropriate given the change in filing requirements. Our agreement with the underwriters does not subject us to SEC enforcement action in the event of our non-compliance.

We also maintain an Internet Web site at www.telvent.com. Information contained in or connected to our Web site is not a part of this prospectus.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

The consolidated statement of operations includes the following income and (expense) items from transactions with related parties:

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

As a result of the new bilateral credit agreement signed in 2004 and described in Note 7 to these Unaudited Condensed Consolidated Financial Statements, there was a direct netting of € 24,357 of balances due to and from related parties.

The ICX acquisition has a deferred contingent payment of € 837 that was accounted for as an account payable.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Effective April 15, 2004, the shareholders approved a 200 for 1 split of the Company’s ordinary shares, which caused shares to increase from 100,000 to 20,000,000. The nominal value of the shares decreased accordingly from € 601.01 to € 3.005.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

Telvent GIT, S.A. (“Telvent” or the “Company”) is an information technology company that provides value-added real-time products and services solutions to customers in targeted industrial sectors (Energy, Environment, Traffic, Transport) primarily in Spain, North America, Latin America (including Mexico) and China. These products and services solutions enable its customers to more efficiently manage their core operations and business processes.

The accompanying condensed consolidated financial statements (the “Unaudited Condensed Consolidated Financial Statements”) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC).

The Unaudited Condensed Consolidated Financial Statements are unaudited but include all adjustments (consisting of normal recurring adjustments) which the Company’s management considers necessary for a fair presentation of the financial position as of such dates and the operating results and cash flows for those periods. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the U.S. have been condensed or omitted pursuant to such SEC rules and regulations. The results of operations for the six months ended June 30, 2004 may not necessarily be indicative of the operating results that may be expected for the entire year. The Unaudited Condensed Consolidated Financial Statements contained herein should be read in conjunction with the financial statements and notes thereto for the years ended December 31, 2003 and 2002.

The Company applies Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (“APB 25”), and related interpretations in accounting for its formula based stock purchase plan. Compensation expense is recognized in earnings at the balance sheet date based on a formula with the exception of shares granted after January 1, 2003, where compensation expense has been recognized based on the excess, if any, of the fair-value of the Company’s stock at the grant date of the award over the amount an employee is required to pay to acquire the stock. The Company discloses pro forma earnings and earnings per share to reflect compensation costs in accordance with the methodology prescribed under SFAS No. 123, Accounting for Stock-Based Compensation (“SFAS 123”).

requirements of SFAS 148 have been provided below for the six months ended June 30, 2004 and June 30, 2003:

The Company has adopted the provisions of Emerging Issues Task Force Issue 00-21 “Accounting for Revenue Arrangements with Multiple Deliverables” (“EITF 00-21”) as of January 1, 2004. EITF 00-21 addresses the accounting treatment for an arrangement to provide the delivery or performance of multiple products and/or services where the delivery of a product or system or performance of services may occur at different points in time or over different periods of time. The Emerging Issues Task Force reached a consensus regarding, among other issues, the applicability of the provisions regarding separation of contract elements in EITF 00-21 to contracts where one or more elements fall within the scope of other authoritative literature, such as SOP 81-1. EITF 00-21 does not impact the use of SOP 81-1 for contract elements that fall within the scope of SOP 81-1, such as the implementation or development of an information technology system to client specifications under a long-term contract. EITF 00-21 did not have a material impact on our financial position or results of operations for the six months ended June 30, 2004.

In January 2003, the FASB issued FIN 46 Consolidation of Variable Interest Entities, as an interpretation of Accounting Research Bulletin No. 51, Consolidated Financial Statements. This was revised in December 2003 and re-issued as FIN 46-R.

FIN 46-R addresses consolidation of variable interest entities (“VIEs”) by parties holding variable interests in those entities. An entity is considered a VIE if the equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support or if the equity investors lack one of the following three characteristics of a controlling financial interest. First, the equity investors lack the ability to make decisions about the entity’s activities through voting rights or similar rights. Second, they do not bear the obligation to absorb the expected losses of the entity if they occur. Lastly, they do not claim the right to receive expected returns of the entity if they occur, which is compensation for the risk of absorbing the expected losses.

2003; see Note 3 to these Unaudited Condensed Consolidated Financial Statements. The Company adopted FIN 46-R for all remaining VIEs from January 1, 2004.

The Company has calculated the income tax expense (credit) based on the estimated tax charge for the full year in accordance with APB 28. The variations in the relationship between income tax expense and pre-tax accounting income are primarily due to the effect of research and development expenditures that are a permanent deduction for tax purposes.

The Company participates in joint venture arrangements or Union Temporal de Empresas (“UTEs”) in connection with its share of certain long-term service contracts.

These joint ventures are variable interest entities as they have no equity and are operated through a management committee comprised of equal representation from each of the venture partners, which makes decisions about the joint venture’s activities that have a significant effect on its success. Transfer restrictions in the agreements establish a de facto agency relationship between all venture partners. In accordance with FIN 46-R, the Company consolidates those joint ventures where it is the partner most closely associated with the joint venture.

In accordance with transition provisions of FIN 46-R, the Company applied FIN 46-R to all variable interest entities created prior to February 1, 2003 as of January 1, 2004. Prior period financial statements have not been restated. Because these entities were previously accounted for under the equity method of accounting, the impact of consolidation of certain of these variable interest entities (where the Company is either the primary beneficiary or the partner most closely associated with the joint venture) did not result in any cumulative effect of a change in accounting principle upon adoption of FIN 46-R as of January 1, 2004.

As of June 30, 2004 the increase of total assets from these consolidated entities amounts to € 16,372. Total revenue recognized during the six months ended June 30, 2004 with respect to these consolidated joint ventures was € 17,407, including € 10,032 of revenues of other venture partners in these arrangements. A corresponding cost due to other venturers of € 9,485 is recognized in cost of revenues. These revenues and equivalent cost of revenues were recognized based on the billings of the other venturers to the UTE. There are no consolidated assets that are collateral for the UTEs’ obligations. The enterprise’s maximum exposure to loss as a result of its involvement with the UTEs that are not consolidated is € 544.

As of June 24, 2004, the Company sold its investment in Xfera and transferred the associated guarantee obligations to a company within Abengoa, Telvent Investments S.L. The sale price for this investment was the

carrying value at that date of € 26,358. The amount of the guarantee obligations that were transferred was € 35,819. No gain or loss on sale was recorded. For further information on the investment in Xfera, see Note 6 to the Consolidated Financial Statements.

As of March 31, 2004, Telvent Canada was in breach of one of the quarterly covenant requirements in the credit facilities it has with LaSalle Bank. As of June 11, 2004 it received a waiver for the covenant breach as of March 31, 2004. The waiver also included a reduced covenant requirement as of June 30, 2004, which Telvent Canada satisfied. However, as of June 30, 2004, Telvent Canada would have been in breach of the original covenant, if applicable. As of September 30, 2004 the original covenant requirement will be applicable and will remain in place for the duration of the credit facility. The Company believes that it is not probable that Telvent Canada will fail to meet the covenant requirement at September 30, 2004 and at other measurement dates within the next 12 months. The Company has reached this conclusion based upon current budgets and forecasts. The Company continues to monitor and revise its internal forecasts periodically.

On April 20, 2004, the Company established a new bilateral credit arrangement with Abengoa which replaced the prior credit arrangements that the Company and its subsidiaries had with Abengoa. Under this new arrangement, the Company and Abengoa may borrow funds from or lend funds to each other, from time to time and upon not less than twenty-four hours’ notice, up to a maximum of € 45,000 (or the equivalent amount in any other currency quoted in the Spanish currency market). The bilateral contract allows the Company to net the amounts outstanding between borrowers and lenders. Borrowings under this credit arrangement bear interest at EURIBOR, or LIBOR for borrowings other than in Euros, plus 75 basis points per year for a period not to exceed one year, with interest added to the outstanding balance. Each borrowing matures on the last date of the fiscal year in which such borrowing was made, without requiring any earlier payment of principal. This credit arrangement is optional and either the Company or Abengoa may elect not to make loans to the other. This arrangement has an initial term ending December 31, 2004, and renews for annual one-year terms until terminated by either party. Our indebtedness under this arrangement as of June 30, 2004 was € 1,853, after giving effect to the use of € 25,624 of proceeds from our disposition of our Xfera investment, and € 43,147 remained available to us as of this date.

The terms of the prior arrangements with members of the Abengoa Group were substantially the same as this arrangement except the prior arrangements involved many of the Company’s subsidiaries, were € 90,000 in aggregate and created firm, and not optional, lending commitments from all involved parties.

In the normal course of business the Company provides performance guarantees in the form of performance bonds to customers that obligate the Company to fulfill the terms of the underlying contract. These bonds are for a fixed monetary amount and match the duration of the underlying contract that is generally between 18 and 36 months. The Company requests similar bonds from sub-contractors to mitigate this risk. The guarantees are generally not drawn upon as the Company will usually successfully complete the contract or renegotiate contract terms.

On May 28, 2002, Abengoa entered into a syndicated loan facility in the amount of € 500,000 that is guaranteed by members of the Abengoa Group including two of the Company’s subsidiaries. The facility, which expires in 2008, is used to finance projects and other investments in the business and activities of the Abengoa Group.

The Company has provided € 1,735 of other financial guarantees given to companies within Abengoa. Included in that amount is a guarantee in the amount of € 593 given by the Company in connection with its investment commitments acquired by the Company in relation to a radio or “LMDS” license.

The maximum potential payments represent a “worse-case scenario,” and do not necessarily reflect expected results. Estimated proceeds from collateral and recourse represent the anticipated value of assets that could be liquidated or received from other parties to offset the Company’s payments under guarantees.

The Company provides warranties in connection with all of its sales contracts except for housing, hosting and maintenance contracts. Warranties typically range from one to two years depending on the contract and cover factors such as non-conformance to specifications and defects in materials and workmanship. Based on its historical experience, the Company has not incurred any material costs associated with servicing its warranties, and therefore does not accrue for such costs.

During the six months ended June 30, 2004, the Company incurred costs of € 2,152 in connection with the preparation for its initial public offering. These costs were professional fees relating to accounting advice and legal costs associated with the registration statement. Telvent’s parent company, Abengoa, has agreed to fully reimburse these costs. As of June 30, 2004 these costs have been capitalized in the interim consolidated financial statements of Telvent.

In March 2004, certain of the Company’s employees, including members of its management team, were granted additional shares under the stock compensation plan established by Abengoa. All shares were sold at a post-split price of € 3.005 per share (€ 601.01 pre-split). The estimated fair value on the date of grant was € 12.37, the midpoint of the estimated offering price range (€ 2,475 pre-split). The total number of shares acquired by these employees was 140,000, which increased the total share capital ownership of employees to 9.236%. The Company recorded € 1,312 of deferred compensation in relation to the sale of shares at the date of grant.

At May 21, 2004, the Company purchased 100% of the shares of ICX Sistemas, S.A. (“ICX”). ICX is engaged in the development of applications and services for the public administration and health care sector. The aggregate purchase price was € 1,778 in cash, including acquisition expenses of € 104. The Company paid 50% of the total consideration at closing, with the remainder to be paid six months thereafter. The remaining 50% was held to cover the possibility of any additional contingencies arising in that six-month period. The Company acquired ICX in order to take advantage of potential synergies with Telvent’s current health care solutions in public health management systems. The Company has not yet performed a formal purchase price allocation, however, as the purchase price was negotiated to reflect the carrying values of the assets and liabilities of ICX, the Company does not believe that the amount of any goodwill associated with this acquisition will be significant.

For management reporting purposes, the Company’s segment results and geographic information are reported to management under Spanish GAAP. The differences between Spanish GAAP and US GAAP applicable to the segment information are described in Note 22 to the Consolidated Financial Statements.

The Company has five reportable operating segments. The segments are grouped with reference to the types of services provided and the types of clients that use those services. The Company assesses each segment’s performance based on net revenues and gross profit or contribution margin. The five reportable operating segments are Energy, Traffic, Transport, Environment and Other. There are no inter-segment revenues. All revenues and costs recorded by segment represent direct costs. Indirect and corporate costs are included in “other corporate operating expenses” and are not allocated to the segments.


•	Energy comprises three principal areas focusing on oil, gas and electricity markets. It offers flow systems and services such as flow measurement applications, applications for leak detection systems, and revenue accounting programs.

•	Traffic provides services such as traffic management systems, incident detection, intersection control and city access management systems.

•	Transport focuses on ticketing systems for railways and public transportation systems, such as automated toll solutions for highways and access control and payment systems for parking.

•	Environment provides water and wastewater management applications, as well as meteorological information system services and solutions.

In addition to the targeted market sectors described in the four segments above, some of the business historically has been derived from other operations mainly related to our real-time process outsourcing activities and is included in the Other segment.

Unallocated assets include certain financial investments and other assets held for the benefit of the entire Company.

As of June 30, 2004 and June 30, 2003, sales outside of Spain comprised 48.3% and 47.7% of the Company’s revenues, respectively, under Spanish GAAP. Net revenue consists of sales to customers in the following countries or areas:

The most significant investments included in long-lived assets, net of depreciation, outside of Spain are located in:

At July 31, 2004, the Company purchased the western region business unit of Xwave Solutions Inc. Formerly part of the Halifax-based Aliant Company, Xwave specializes in customized IT solutions for a variety of sectors including Oil & Gas, primarily focused in Alberta, Canada. The aggregate purchase price was € 1,877. The purchase price has two components:

A payment of € 1,583, being the amount of € 1,877 minus an estimated working capital adjustment, calculated based on a pro-forma balance sheet as of July 31, 2004, in the amount of € 295 and a contingent, deferred payment in the amount of € 626 that is payable 18 months from the closing date provided that certain conditions have been met.

As of May 21, 2004, the Company requested that two of its subsidiaries be released as guarantors and obligors of a € 500,000 syndicated loan facility, which is also guaranteed by members of the Abengoa Group. As of July 9, 2004, the syndicate loan agent accepted the request and waived the guarantees given by the Company’s subsidiaries in respect of this loan, subject to the closing of the initial public offering and the addition of other guarantors and obligors other than Telvent companies.

In August 2004, Telvent sold additional minority interests to Telvent Investments for a net amount of € 9,771.


	Paseo de la Castellana, 43
	28046 Madrid
	Tel. +34 915 684 400
	Fax +34 913 083 566

We have audited the accompanying consolidated balance sheets of Telvent GIT, S.A. and its subsidiaries as of December 31, 2003 and December 31, 2002, and the related consolidated statements of operations, shareholders’ equity and cash flows for the years then ended. In connection with our audits of the consolidated financial statements, we have also audited the related financial statement Schedule I. These consolidated financial statements and the financial statement Schedule I are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and the financial statement Schedule I based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Telvent GIT, S.A. and its subsidiaries at December 31, 2003 and December 31, 2002 and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the related financial statement Schedule I presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.

PricewaterhouseCoopers Auditores, S. L. - R. M. Madrid, hoja 87.250-1, folio 75, tomo 9.267, libro 8.054, sección 3^a

The accompanying notes are an integral part of these consolidated financial statements.

The consolidated statement of operations includes the following income and (expense) items from transactions with related parties (see Note 21 to the consolidated financial statements):

The accompanying notes are an integral part of these consolidated financial statements.

Telvent Sistemas y Redes, S.A. was incorporated on April 4, 2000 and is registered in the Madrid Registry of Companies, Volume 15,370, Folio 164, Sheet No. M-257879, 1st entry, C.I.F. No. A-82631623. Their corporate headquarters are located in Madrid, Spain. At the general shareholders’ meeting held on January 23, 2003, Telvent Sistemas y Redes, S.A. changed its name to Telvent GIT, S.A. (“Telvent” or “the Company”). Telvent is a majority owned subsidiary of Abengoa, S.A. (“Abengoa Group”).

Telvent is an information technology company that provides value-added real-time products and services solutions to customers in targeted industrial sectors (Energy, Environment, Traffic, Transport) primarily in Spain, North America, Latin America (including Mexico) and China. These products and services solutions enable its customers to more efficiently manage their core operations and business processes.

Telvent’s mission-critical real-time products and services solutions collect raw data at the field level, transform that data into operational information, and convert the operational information into business intelligence. Telvent is capable of providing solutions that link this business intelligence to its customers’ enterprise information technology systems.

The configuration of the Group, with Telvent as the parent company, was completed on January 1, 2001, with the contribution of Sainco, and its dependent companies as a subsidiaries of Telvent. The transaction was completed through a capital increase fully subscribed and paid to Abengoa, S.A. Abengoa provided the Company with 1,624,624 shares of Telvent Energía y Medio Ambiente (formerly named Sainco) for € 39,066. Subsequently, on January 19, 2001, at the General Shareholders’ Meeting it was agreed to increase the share capital (9,057 shares, € 5,443), an increase that was fully subscribed and paid by Telvent AG by means of capitalizing its credit held against the Company at the time.

Within these financial statements, “Abengoa” refers to Abengoa, S.A. and its subsidiaries, but excluding Telvent and its subsidiaries. The “Abengoa Group” refers to Abengoa, S.A. and its subsidiaries, including Telvent and its subsidiaries.

The consolidated financial statements of Telvent, together with its subsidiaries, include the accounts of all majority-owned domestic and foreign subsidiaries and variable interest entities that are required to be consolidated. All intercompany profits, transactions and balances have been eliminated in consolidation. Investments in joint ventures and other entities for which the Company does not have control, but does have the ability to exercise significant influence over the operating and financial policies, are accounted for under the equity method. Accordingly, the Company’s share of net earnings and losses from these ventures is included in the consolidated statements of operations. Non-marketable equity investments in which the Company does not exercise control or have significant influence over the operating and financial policies are accounted for using the cost method subject to other-than-temporary impairment.

During 2001 the Company sold Telvent Housing, Telvent Factory, and Telvent Portugal to a company under common control as part of a transaction which was structured in order to receive preferential tax treatment on a potential sale to a third-party investor. The parties did not reach an agreement on the sale conditions and these companies were subsequently repurchased on December 31, 2002 as a part of a reorganization of companies under common control. These companies were sold back to Telvent in order to take advantage of synergies of companies within the same core technology business. The assets and liabilities transferred between Telvent and these companies were accounted for at historical cost in a manner similar to a pooling of interest as required by SFAS 141.

The results of operations of Telvent Housing, Telvent Factory and Telvent Portugal have been combined with the results of operations of Telvent for the year ended December 31, 2002 as though the repurchase of those assets and liabilities had occurred on January 1, 2002 in a manner similar to a pooling of interest. No gains or losses were recognized at the date of these transfers because each transfer was recorded on a historical cost basis between companies under common control. The impact of combining the results of operations of these entities with Telvent was to reduce the consolidated net income of Telvent by € 2,126 in the year ended December 31, 2002.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

The cash balance represents the Company’s cash in bank accounts and cash on hand. For the purposes of the consolidated statements of cash flows, the Company does not have any cash equivalents. At December 31, 2002, the Company maintained € 49,681 in restricted cash held as a security deposit in relation to guaranties given for the Company’s 3.71% investment in Xfera Móviles S.A (“Xfera”). The restricted cash was held in escrow until July 2003, at which point the conditions requiring restriction were satisfied and the restriction was released.

The allowance for doubtful accounts is used to provide for impairment of receivables on the balance sheet. The balance represents an estimate of probable but unconfirmed losses in the collection of accounts receivable balances. A specific receivable is reviewed for impairment when, based on current information and events, it is deemed probable that contractual amounts will not be fully collected. Factors considered in assessing uncollectability include a customer’s extended delinquency and filing for bankruptcy. An impairment allowance is recorded based on the difference between the carrying value of the receivable and the expected amount of collection.

The Company classifies all debt and marketable equity securities as available-for-sale. These are reported at fair value on the balance sheet with unrealized gains and losses reported as a component of accumulated other comprehensive income within shareholders’ equity.

The Company regularly performs a review of each individual security to determine whether any evidence of impairment exists and which is other-than-temporary. This review considers factors such as the duration and amount at which fair value is below cost, the credit standing and prospects of the issuer, and the intent and ability of the Company to hold the security for such sufficient time to allow for any anticipated recovery in fair value.

All derivative instruments are recognized in the financial statements and are measured at fair value regardless of the purpose or intent for holding them. The Company, as part of its foreign currency risk management program, has entered into numerous forward exchange contracts to protect against fluctuations in foreign currency exchange rates on long-term projects and anticipated future transactions. In addition, the Company has entered into interest rate caps in order to manage interest rate risk on certain long-term variable rate financing arrangements.

Although the forward exchange contracts and interest rate caps are used as economic hedges, these transactions are currently recorded at fair value within the balance sheet with related gains and losses recorded in earnings, as the Company could not apply hedge accounting under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities for these transactions on a retroactive basis.

The Company enters into certain long-term binding contracts that are denominated in a currency that is neither the functional or local currency of either party. This feature of the contracts is analogous to an embedded derivative that is bifurcated from the underlying host contract at inception of the contract and similar to freestanding derivatives, is recorded at fair value within the balance sheet with related gains and losses recorded in earnings.

The Company has entered into several accounts receivable factoring arrangements that provide for the accelerated receipt of approximately € 51,856 of cash for the year ended December 31, 2003 and € 44,410 for the year ended December 31, 2002 on available trade accounts receivable. Under the factoring agreements, the Company sells on a revolving and non-recourse basis, certain of its trade accounts receivable (“Pooled Receivables”) to various financial institutions. These transactions are accounted for as sales because the Company has relinquished control of the Pooled Receivables and the Company does not maintain any continuing involvement with the sold assets. Accordingly, Pooled Receivables sold under these facilities are excluded from receivables in the accompanying balance sheet. The Company incurs commissions of approximately 0.15% to 0.30% of the Pooled Receivable balance. The commission and interest expense are recorded as a charge to earnings in the period in which they are incurred as the commission and interest expense is in effect a loss on the sale of the asset. The total amount of commission expense included in interest expense as of December 31, 2003 and 2002 was € 1,220 and € 1,647, respectively.

Inventory is valued at the lower of cost or net realizable value and is determined using the average cost method. Inventory consists of raw materials, work-in-progress, which includes the cost of direct labor, materials and overhead costs related to projects.

Property, plant and equipment are recorded at historical cost and depreciated using the straight-line method over the following estimated useful lives:

Repairs and maintenance are expensed as incurred, while improvements, which increase the economic life of the asset, are capitalized and amortized accordingly. Gains or losses upon sale or retirement of property, plant and equipment are included in the consolidated statement of operations and the related cost and accumulated depreciation are removed from the consolidated balance sheet.

Software development costs incurred in the period from establishment of technological feasibility of the product up to when the product is available for general release to customers are capitalized. Capitalized costs are then amortized on a straight-line basis over the estimated product life, or on the ratio of current revenue to the total projected product revenue, whichever is greater. To date, the period between achieving technological feasibility, which the Company has defined as the establishment of a working model, which typically occurs when beta testing commences, and the general availability of such software has been short. As such, software development costs qualifying for capitalization have been insignificant.

Goodwill represents the excess of the purchase price of identifiable tangible and intangible net assets over the fair value of these assets as of the date of acquisition. Other intangible assets represent the fair value of intangible assets identified on acquisition. Goodwill is not amortized but is assessed for impairment at least annually using fair value measurement techniques.

Other intangible assets represent identifiable intangibles with a finite life and are recorded at fair value at the date of acquisition and are amortized using the straight-line method over the following estimated useful lives:

Maintenance costs in relation to software technology are expensed in the period in which they are incurred.

The Company has recorded an intangible for customer relationships due to the fact that the Company has historically experienced a high incidence of repeat business for system sales and ongoing service support. The Company identified non-contractual customer relationships (as distinct from contractual backlog) in its oil, gas and water, transit, electric utilities and RTU parts and repair businesses. The customer relationship intangible is being amortized over a ten-year period as the cash flows show strong and consistent net inflows over a ten-year period. Straight-line amortization was chosen for customer relationships because of relatively consistent expected cash flows over the ten-year useful life.

The Company reviews the carrying value of its long-lived assets, including property, plant and equipment, and finite life intangibles whenever events or changes in circumstances indicate that the carrying value may not be recoverable. To the extent the estimated undiscounted future cash inflows attributable to the asset, less estimated undiscounted future cash outflows, are less than the carrying amount, an impairment loss is recognized in an amount equal to the difference between the carrying value of such assets and fair value. Assets for which there is a committed disposition plan, whether through sale or abandonment, are reported at the lower of carrying value or fair value less costs to sell.

Revenues consist primarily of two types of revenues, products and services solutions and managed services.

The Company provides products and services solutions under short and long-term fixed-price contracts. The contracts periods range from 3 months to approximately 3 years in length. Income for these contracts is recognized following the percentage-of-completion method, measured by the cost-to-cost method. The revenue earned in a period is based on total actual costs incurred plus estimated costs to completion. Billings in excess of recognized revenues are recorded in “Billing in excess of cost and estimated earnings.” When billings are less than recognized revenues, the differences are recorded in “unbilled revenues.”

Contract costs include all direct material and labor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs, and depreciation costs. Selling, general, and administrative costs are charged to expense as incurred. In the event that a loss or lower profitability is anticipated on the contract, it is immediately recognized in income. Changes in job performance, job conditions, and estimated profitability, and changes to the job scope may result in revisions to costs and income and are recognized in the period in which the revisions are determined.

Managed services contracts include leasing arrangements, maintenance, monthly fixed-rate, and fixed-rate hourly contracts. The Company recognizes revenue earned on the leasing, maintenance, and monthly fixed-rate contracts on a straight-line basis over the term of the contract. For contract arrangements where there is a fixed-rate per hour charge, the income is recorded based on time incurred to date.

The Company receives funds under capital grants from government agencies and other third parties, primarily for the purposes of research and development projects. Amounts received from such parties have been included in unearned income in the balance sheet and are amortized into income during the period in which the services are performed and the revenue is earned.

Cost of revenues includes distribution costs, direct labor, materials and the applicable share of overhead expense directly related to the execution of services and delivery of projects.

General and administrative expenses include compensation, employee benefits, office expenses, travel and other expenses for executive, finance, legal, business development and other corporate and support-functions

personnel. General and administrative expenses also include fees for professional services, occupancy costs and recruiting of personnel.

Advertising costs are expensed as incurred. Advertising expense amounted to approximately € 954 and € 301 in 2003 and 2002, respectively.

Expenditures on research and development are expensed as incurred. The types of cost included in research and development expense include salaries, software, contractor fees, supplies and administrative expenses related to research and development activities. Cash received from government grants are netted against research and development expense in the period received.

A basic earnings per share measure is computed using the weighted average number of common shares outstanding during the period. There were no instruments outstanding during the years ended December 31, 2003 and 2002 that would have a dilutive impact on the earnings per share calculation and accordingly, a separate fully diluted earnings per share measure is not presented.

Effective April 15, 2004, the shareholders approved a 200 for 1 split of ordinary shares, resulting in an increase in the number of shares from 100,000 to 20,000,000. The par value of the shares decreased accordingly from € 601.01 to € 3.005. Related disclosures with these consolidated financial statements have been revised to retrospectively reflect the impact of this change.

The functional currency of the Company’s wholly owned subsidiaries is the local currency in which they operate; accordingly, their financial statements are translated into the Euro using the exchange rate at each balance sheet date for assets and liabilities and a weighted average exchange rate for revenues, expenses, gains and losses within the statement of operations. Translation adjustments related to the balance sheet are included in accumulated other comprehensive income as a separate component of shareholders’ equity.

Foreign currency transactions undertaken by the Company and its domestic subsidiaries are accounted for at the exchange rates prevailing on the related transaction dates. Assets and liabilities denominated in foreign currencies are translated to Euros using period-end exchange rates, and income and expense items are translated using a weighted average rate for the relevant period. Gains and losses resulting from the settlement of foreign currency transactions and from the translation of assets and liabilities denominated in foreign currencies are recognized in the consolidated statements of operations except for gains and losses arising from the translation of available-for-sale securities which are recorded in accumulated other comprehensive income as a separate component of shareholders’ equity.

Other comprehensive income (loss), which is reported in the accompanying statement of shareholders’ equity, consists of net income (loss) and other gains and losses affecting equity that are excluded from net income. For the years ended December 31, 2003 and 2002, the Company’s comprehensive loss consisted of unrealized gains on available for sale securities and the cumulative currency translation adjustment. The tax effect of these adjustments was € 575 and € nil, respectively.

Segments are identified by reference to the Company’s internal organization structure and the factors that management uses to make operating decisions and assess performance. The Company has five reportable segments consisting of Energy, Traffic, Transport, Environment and Other.

The Company expenses the costs of start-up activities, including formation costs, as incurred.

As allowed by SFAS 148, Accounting for Stock-Based Compensation – Transition and Disclosure the Company has elected to continue to utilize the accounting method prescribed by APB 25. The applicable disclosure requirements of SFAS 148 have been provided below for the years ended December 31, 2003 and 2002:

As the shares sold under the incentive plan consist of unvested stock, the fair value applied to arrive at the pro forma earnings and per share data was the estimated market value on the grant date.

During 2003 and 2002, the Company filed taxes as a part of the consolidated Abengoa Group using the separate return basis. Following the rules for tax consolidation in Spain, subsidiaries with less than 90% interest and foreign subsidiaries file taxes on a stand-alone basis. The income tax provision in the consolidated financial statements of the Company reflects Telvent’s portion of taxes from the Abengoa Group and any taxes incurred on its stand-alone filings. Such provisions differ from the amounts currently receivable or payable because certain items of income are recognized in different time periods for financial reporting purposes than for income tax purposes. Deferred income taxes reflect the net tax effects of temporary differences between the

carrying amount of assets and liabilities for financial statement and income tax purposes, as determined under enacted tax laws and rates. The Company records tax loss carry-forwards as deferred tax assets to the extent that they are more likely than not to be recovered in future periods. The Company’s temporary differences include allowances for research and development activities, employee training and export activities.

In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement Obligations (“SFAS 143”). SFAS 143 requires a provision to be raised for the legal obligation in relation to the other-than-temporary removal of a tangible fixed asset, at fair value, when incurred. The statement was effective for the Company from January 1, 2003. Adoption did not have a material effect on the Company’s financial condition, cash flows or results of operations.

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exits or Disposals (“SFAS 146”). SFAS 146 addresses the financial accounting and reporting for costs associated with exit or disposal activities and requires that the fair value of a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred and nullifies EITF 94-3 which requires the recognition of a liability at the date of an entity’s commitment to an exit plan. SFAS 146 is to be applied prospectively to exit or disposal activities initiated after December 31, 2002 and adoption of the statement did not have a material impact on the Company’s financial position, cash flows or results of operations.

FIN 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others

In November 2002, the FASB issued Interpretation No. 45 (“FIN 45”), Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others which clarifies the requirements of FAS 5, Accounting for Contingencies relating to a guarantor’s accounting for and disclosure of certain guarantees issued. FIN 45 elaborates on the disclosures to be made by the guarantor in its interim and annual financial statements about its obligations undertaken in issuing the guarantee. The disclosure requirements of FIN 45 are effective for interim and annual periods ending after December 15, 2002 and have been adopted in the financial statements. The recognition and initial measurement provisions of this interpretation are applicable on a prospective basis to guarantees issued or modified after December 31, 2002. The adoption of the recognition and initial measurement requirements of FIN 45 did not have a material impact on the Company’s financial position, cash flows or results of operations.

SFAS 148, Accounting for Stock-Based Compensation – Transition and Disclosure

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation – Transition and Disclosure (“SFAS 148”). SFAS 148 amends SFAS 123 to provide alternative methods of transition to SFAS 123’s fair value method of accounting for stock-based employee compensation. The Statement also amends the disclosure provisions of SFAS 123 and APB Opinion No. 28, Interim Financial Reporting to require disclosure in the significant accounting policies of the effects of an entity’s accounting policy with respect to stock-based employee compensation on reported net income and earnings per share in annual and interim financial statements. While SFAS 148 does not amend SFAS 123 to require companies to account for employee stock options using the fair value method, the disclosure provisions of SFAS 148 are applicable to all companies with stock-based employee compensation, regardless of whether they account for that compensation using the fair value method of SFAS 123 or the intrinsic value of APB 25. As allowed by SFAS 148, the

Company has elected to continue to utilize the accounting method prescribed by APB 25 and has adopted the disclosure requirements of SFAS 148 as of December 31, 2002.

In January 2003, the FASB issued FIN 46 Consolidation of Variable Interest Entities, as an interpretation of Accounting Research Bulletin No. 51, Consolidated Financial Statements. This was revised in December 2003 and re-issued as FIN 46-R.

FIN 46-R requires that VIEs are consolidated by its primary beneficiary, which is the interest holder exposed to the majority of the entity’s expected losses or residual returns. In accordance with the transition provisions of FIN 46-R, the Company adopted FIN 46-R immediately for all VIEs created or acquired after January 31, 2003 and as at December 31, 2003 consolidates certain joint ventures described in Note 7 to these Consolidated Financial Statements. The Company will adopt FIN 46-R for all remaining VIEs from January 1, 2004.

Disclosures in relation to the nature, size and potential maximum loss in relation to those joint ventures created or acquired before February 1, 2003 where it is reasonably possible the Company will consolidate these entities under FIN 46-R is provided in Note 7 to the consolidated financial statements.

In March 2003, the Emerging Issue Task Force (“EITF”) reached a consensus on Issue No. 00-21 (“EITF 00-21”), Revenue Arrangements with Multiple Deliverables. EITF 00-21 addresses certain aspects of the accounting by a vendor for arrangements under which the vendor will perform multiple revenue generating activities. EITF 00-21 will be effective for fiscal periods beginning after June 15, 2003. The Company is currently assessing the impact on the Company’s financial position, cash flows or results of operations.

SFAS 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity

In May 2003, the FASB issued SFAS 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. The Statement establishes standards for how an issuer classifies and measures certain financial instruments. The Statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The Statement requires that certain financial instruments that, under previous guidance, issuers could account for as equity be classified as liabilities (or assets in some circumstances) in the balance sheet as appropriate. The financial instruments within the scope of this other Statement are (i) mandatorily redeemable shares that an issuer is obligated to buy back some of its shares in exchange for cash or other assets; (ii) financial instruments that require or may require the issuer to buy back some of its shares in exchange for cash or other assets; and (iii) financial instruments that embody an obligation that can be settled with shares, the monetary value of which is fixed, tied solely or predominantly to a variable such as a market index, or that varies inversely with the value of the issuer’s shares (excluding certain financial instruments indexed partly to

the issuer’s equity shares and partly, but not predominantly, to something else). This Statement does not apply to features embedded in a financial instrument that is not a derivative in its entirety. The Statement also requires disclosures about alternative ways of settling the instruments and the capital structure of entities, all of whose shares are mandatorily redeemable. The adoption of SFAS 150 did not have a material impact on the Company’s financial position, cash flows or results of operations.

The following analysis details the changes in the Company’s allowance for doubtful accounts during the years ended December 31, 2003 and 2002:

The increase in allowance in 2003 represents mainly a provision against the full amount of receivables that were part of the Abentel group sold to Abengoa during 2001. For legal reasons these receivables were not sold to Abengoa but were guaranteed by Abengoa. Abengoa compensated the Company for the loss on these receivables in 2003. These amounts have been recorded net in the income statement within “General and Administrative.”

The following is a summary of the Company’s available-for-sale securities and other short-term investments as of December 31, 2003 and 2002:

Available-for-sale securities include a 12.01% equity investment in Viryanet, a NASDAQ listed company, which was acquired in 2003. As of December 31, 2003 the estimated fair value of this investment was € 2,652. This investment will be sold to a different company within Abengoa at book value in 2004.

The Company did not sell any available-for-sale securities during the years ended December 31, 2003 and 2002. Certain government debt securities matured in 2003.

Investments held at cost include certain non-marketable minority investments that the Company is planning to sell to another Abengoa subsidiary at book value in June and July 2004. The Company has therefore reclassified these investments in 2003 to current assets. The percentage ownership interest and carrying value of these reclassified investments as of December 31, 2003 is as follows:

On December 30, 2002, the Company acquired an investment in the UMTS license holder, Xfera. The Abengoa Group acquired Xfera primarily for two reasons. First, the Abengoa Group believed that the UMTS business area would experience rapid growth and profitability and therefore wanted to have a participation in

this business. Second, Abengoa also wanted to position itself with one of the UMTS businesses as it saw an opportunity to generate additional business from the investment. Due to the fact that Xfera was a start up operation that did not possess its own infrastructure, Abengoa saw opportunities to generate additional telecom engineering business and additional technology related business. Since Telvent represents the technological arm of Abengoa’s activities, the investment was transferred to Telvent. This interest was acquired from Abengoa’s majority shareholder, Inversión Corporativa. Inversión Corporativa acquired the interest through a forward sale and purchase agreement with a shareholder, Mercapital, that was entered into shortly after the Spanish Government sold the licenses in 2000. Telvent paid € 25,000 for the investment in Xfera and acquired 11,471,811 shares representing 3.71% of the outstanding shares. This investment represented the cumulative capital contributions plus related costs that Mercapital had made to Xfera. In addition to the shares in Xfera, Telvent held a guarantee from Inversión Corporativa to indemnify Telvent against any losses on the transaction until the commercial launch of Xfera’s third-generation mobile telephony business. Telvent has accounted for its investment in Xfera at cost as shares in Xfera do not represent marketable securities and Telvent does not have the ability to exercise significant influence over Xfera. Management of Telvent does not believe that they have the ability to exercise any significant influence over Xfera based the percentage of voting shares that they hold, the fact that they do not have the ability to appoint board members in Xfera, they do not have a significant participation in the policy making process, nor are they able to exercise significant influence via other means.

The following analysis shows the development of the holding of the investment from date of acquisition through the date when the investment will be transferred to another Abengoa subsidiary.

The recovery of costs of guarantees represents the fact that the policy of recharging the cost of guarantees entered into by Xfera directly to the other shareholders was changed and Xfera started to meet these costs directly.

As of June 2003, the Company acquired 5,390,876 shares in Xfera from Vivendi. Vivendi was unable to renew its guarantees under the more favorable conditions that had been set by the Spanish Government and, therefore, was in breach of the consortium agreement. The other consortium members agreed to meet the guarantee obligations of Vivendi. Vivendi left the consortium and distributed its shares to the other consortium members for no additional consideration. As a result of this transaction, the Company’s shareholding increased to 5.46%.

In January 2004, the Company acquired an additional 1,467,270 shares as part of a pro rata capital contribution to meet the working capital requirements of Xfera for 2004. This capital contribution was paid partly in cash. The Company has recorded a liability for the additional cash contribution to be made to Xfera.

Also in January 2004, the Company obtained an additional 575,250 shares for € 760 or € 1.32 a share. This price represented fair value at January 2001 as determined by an independent valuation, adjusted for certain

subsequent capital contributions, and approved by an arbitration decision for the disposal of its investment in Xfera held by Mannesman in connection with its acquisition by Vodafone.

During the period from January 2001 to December 30, 2002, the date of acquisition, Telvent believed that the fair market value of the shares of Xfera increased as a result of a reduction of the guarantee requirements and the investment, employment, and coverage requirements that would allow the business to achieve profitability. However, the Company did not perform a valuation of the shares to determine the fair value at the time they were transferred from Inversión Corporativa for purposes of determining if there was an other-than-temporary impairment. Rather, the shares were recorded at the value Inversión Corporativa paid to a third party. Similarly, as described below, the investment in Xfera will be transferred to another Abengoa subsidiary at the same price, adjusted for cash payments by the Company. The investment will be transferred to an Abengoa subsidiary as part of the reorganization of the Company. As part of this reorganization, minority investments that are held by the Company are expected to be sold to an Abengoa subsidiary so Telvent can focus on its core business activities. Any difference between the fair value and the amount paid to its parent company for Xfera shares would have been recorded directly to equity on December 31, 2002. Similarly, upon the transfer of the investment in Xfera to another Abengoa subsidiary, the difference, if any between the carrying value and the amount received will be recorded directly to equity. The Company does not believe that there was an other-than-temporary impairment of this investment at December 31, 2003 because during 2003, they believed that there were improved market conditions for the operation of 3G concessions in Spain, evidenced by the recovery of the valuations of telecom companies as a whole, the fact that Xfera has signed vendor financing agreements, the fact that Xfera is now able to enter into infrastructure sharing agreements with other operators that will reduce their overall investment requirements, and the fact that internal valuations of Xfera support the current carrying value. In addition as set out in the above table Telvent received an additional 5,390,876 shares with a zero-cost basis during 2003.

The Company regularly performs a review of all its non-marketable equity investments to determine whether any evidence of impairment exists. Based on the review performed as of December 31, 2003 and 2002 management determined that an impairment of € 1,589 and € 2,290, respectively, was other-than-temporary and has recognized this amount in the statement of operations as a charge through “Impairment charges”. This assessment reflects management’s best estimate of the fair value of these non-marketable investments as of those dates. These investments will also be sold at book value to another Abengoa subsidiary in 2004.

Investments accounted for under the equity method consists mainly of a 20% interest in the common stock of Nap de las Américas – Madrid S.A. The cost of this investment was € 379 and € 402 as of December 31, 2003

and 2002 respectively and includes the impact of a € 150 contribution in 2003. Share of net losses of the company of € 173 and € 154 for the years ended December 31, 2003 and 2002 respectively are recognized in earnings.

The Company participates in joint venture arrangements or Union Temporal de Empresas (“UTEs”) in connection with its share of certain long-term service contracts.

These joint ventures are variable interest entities as they have no equity and are operated through a management committee comprised of equal representation from each of the venture partners, which makes decisions about the joint venture’s activities that have a significant effect on its success. Transfer restrictions in the agreements establish a de facto agency relationship between all venture partners. In accordance with FIN 46-R, the Company consolidates those joint ventures created after January 31, 2003 where it is the partner most closely associated with the joint venture.

As of December 31, 2003 the total assets of these consolidated entities amounts to € 12 representing cash balances held by the joint ventures. Total revenue recognized during 2003 with respect to these consolidated joint ventures was € 6,395, including € 3,715 of revenues of other venture partners in these arrangements. An equivalent cost due to other ventures of € 3,715 is recognized in cost of revenues.

Joint ventures created before February 1, 2003 are accounted for using the equity method. The Company records an initial cost of investment in the joint venture reflecting cash injections into the vehicle upon formation. The Company invoices the joint venture, and records as revenue, the proportion of revenue earned as determined under the cost-to-cost method. Total amounts recognized in respect of these arrangements in revenue were € 21,470 and € 25,557 for the years ended December 31, 2003 and 2002 respectively.

The Company will apply FIN 46-R to these remaining joint ventures from January 1, 2004. It is reasonably possible the Company will consolidate joint ventures with total assets of € 7,562. The maximum exposure to loss of € 2,544 on these contracts is consistent with other contracts entered into directly with a customer. This represents the amount of performance bonds the Company would forfeit for failure to comply with project terms.

Total depreciation expense for property, plant and equipment other than leases for the years ended December 31, 2003 and 2002 was € 1,826 and € 3,113, respectively. This amount includes € 863 and € 1,012 of depreciation included in “Cost of revenues” for the years ended December 31, 2003 and 2002, respectively. Total depreciation expense for capitalized leases for the years ended December 31, 2003 and 2002 was € 1,219 and € 953, respectively.

As described in Note 11, goodwill of € 11,122 arises in 2003 at the date of acquisition of Metso Ltd. (now known as Telvent Canada Ltd.) and Metso Inc. (now known as Telvent U.S.A. Inc.). No impairment has been recognized on the goodwill balance of € 11,347 as of December 31, 2003.

Total amortization expense for other intangible assets for the years ended December 31, 2003 and 2002 was € 2,900 and € 62 respectively. There were no indefinite lived intangible assets as of December 31, 2003. Based on the amount of intangible assets subject to amortization at the end of 2003, the expected amortization for each of the next five years is as follows:

At January 31, 2003, the Company purchased 100% of the shares of Metso Automation SCADA Solutions Ltd. (“Metso Ltd.”) and Metso Automation SCADA Solutions Inc. (“Metso Inc.”), which were wholly owned subsidiaries of Metso Corporation, a Finnish corporation (“Metso Corp”). The results of operations of Metso Ltd. (now known as Telvent Canada Ltd.) and Metso Inc. (now know as Telvent U.S.A. Inc.) have been included in the consolidated financial statements since January 31, 2003. Metso Ltd. and Metso Inc. are engaged in the design, manufacture, sale and servicing of industrial automation systems and information management systems. The aggregate purchase price was approximately US$38.6 million (€ 35.7 million) in cash including both acquisition expenses of approximately US$3.5 million (€ 3.3 million), and a deferred purchase price component of US$5.6 million (€ 5.2 million). The deferred component was subject to reduction for any contingent claims payments to third parties that the Company might make for a period of one year from the date of acquisition. No contingent claims arose during the period and therefore the full amount of the deferred component was paid in January 2004.

Metso Ltd. and Metso Inc. have been collaborating with the Company on projects over the past nine years through an exclusive integration agreement between Spain and Latin America, which was previously established through Telvent Energia y Medio Ambiente S.A., a subsidiary of Telvent. The strategic acquisition allowed Telvent to increase their access to the energy and water markets as the acquired companies have distinct technologies designed for these industries.

The purchase price has been allocated to the tangible assets and identifiable intangible assets acquired and liabilities assumed (the “Net Assets”). The excess of the purchase price over the Net Assets has been allocated to Goodwill. The following is a summary of the purchase price allocation at the date of acquisition in Euros:

The amortization periods for major class of intangible assets are described in Note 2 to the consolidated financial statements.

Pro forma net revenues and income from operations, calculated using Metso’s audited financial statements, would have been as follows if the acquisition had occurred as of the beginning of the year ended December 31, 2003 and 2002, respectively:

The operations of Metso Inc. and Metso Ltd. are included in the Company’s Energy segment.

Notes payable include mainly the deferred payment to Metso in the amount of US$5.6 million, representing 20% of the purchase price, net of cash acquired, as a guarantee to satisfy any claims that could arise during the first year since acquisition and which was paid in 2004 (See Note 11 to the consolidated financial statements).

Short-term debt consists of amounts drawn down under credit facilities that the Company has with various financial institutions.

As of December 31, 2003 the most significant amount outstanding under these facilities relates to a line of credit with ABN Amro established in 2002 and drawn down in 2003. Abengoa, certain subsidiaries of Abengoa and the Company participate in this facility. The total amount of the ABN Amro credit facility is € 50,000. Of that overall maximum borrowing amount, the Company and its subsidiaries have a sub-limit of € 30,000. The Company may use the sub-limit for letters of credit, sureties, import financing, rebate financing, bank overdrafts and guarantees. The Company and its subsidiaries provide guarantees under this facility limited to amounts they have borrowed under the facility. The guarantee does not extend to any amounts borrowed by Abengoa or other Abengoa group companies. The Company has fully drawn down a credit line of € 11,148 that matured in January 2004. Interest is payable on a monthly basis at a rate of EURIBOR plus 0.95%, with principal due at maturity. The Company has also fully drawn a credit line of US $2,100 (€ 1,957) that matured on the same date. Interest is payable on a monthly basis at a rate of EURIBOR plus 0.95%, with principal due upon maturity. Both obligations were settled in January 2004.

As of December 31, 2002, the most significant amount outstanding under these facilities relates to a line of credit with Fortis Bank under which interest was paid at a rate of one-month EURIBOR plus 1.0%. This was refinanced in 2003 as long-term debt in connection with certain financing obligations described in Note 14 below.

The Company and its subsidiaries have drawn down on other credit lines on normal commercial terms. These facilities are for less than one year and pay interest based on EURIBOR plus a margin of between 0.6% and 1.2%.

The weighted average interest rate paid on short-term debt was 3.5% and 3.9% during the years ended December 31, 2003 and 2002.

The Company has entered in borrowing arrangements outstanding as of December 31, 2003 for working capital requirements, general corporate purposes and for financing certain hosting activities in Spain. The total

principal amount outstanding with each counterparty less the corresponding current portion at December 31, 2003 and 2002 is as follows:

Telvent Housing obtained a secured loan of € 10,000 from Fortis Bank in March 2003, which bears interest at twelve-month EURIBOR plus 1.25% and matures on September 2006. Abengoa guarantees the loan and Telvent Housing has granted a lien over certain of its assets to secure this loan.

Telvent Canada Ltd. has two separate credit facilities with LaSalle Bank obtained in May 2003 for working capital purposes and in part to finance the acquisition of the NMS division of Metso. The first facility (“Facility A”) is a secured revolving credit line up to US$8,000 (€ 6,334). Availability to funds under Facility A is based on a monthly borrowing base formula determined as a percentage of eligible accounts receivable and inventory of Telvent Canada Ltd. Amounts withdrawn under Facility A cannot exceed US$8,000. The second facility (“Facility B”) is a term loan in the amount of US$5,500 (€ 4,355). The second facility contains certain restrictive covenants including requirements to allocate excess cash flow of Telvent Canada Ltd. to reduce amounts owed under Facility B on an annual basis. Both facilities bear interest at a rate of LIBOR or a base rate index plus an applicable margin. Both facilities mature in March 2008. LaSalle Bank has a first security interest in all assets and equity of Telvent Canada Ltd and Telvent U.S.A. Inc. As part of the credit facilities agreement, Telvent Canada is restricted from paying dividends to the Company without prior written consent of the bank. As of December 31, 2003 the total restricted net assets under the agreement was € 7,023 before the push-down of purchase accounting adjustments under U.S. GAAP, and € 25,688 after the push-down of purchase accounting adjustments.

Telvent Energia y Medio Ambiente S.A. borrowed € 3,642 from Caja Madrid in October 2001. The loan bears interest at a rate of three-month EURIBOR plus 0.60% and matures in October 2008. Any future issuances of debt from Telvent Energia y Medio Ambiente S.A. will be subordinated debt to that agreement until its repayment.

Telvent Housing has entered into three financing arrangements, one with ING and two with Liscat. The first financing arrangement with Liscat of € 6,702 was established in December 2002 and matures in May 2006. Interest is payable monthly at a rate of twelve-month EURIBOR plus 1.10%. Abengoa guarantees this facility.

The financing arrangement with ING of € 10,854 was established in December 2002 and matures in June 2006. Interest is payable on a monthly basis at twelve-month EURIBOR plus 1.10%. Abengoa guarantees this facility.

The second financing arrangement with Liscat of € 3,296 was established in November 2003 and matures in April 2007. Interest is payable on a monthly basis at a twelve-month EURIBOR plus 1.10%. Abengoa guarantees this facility.

The Company receives interest-free five-year loans from the Spanish Science and Technology Ministry for research and development purposes. These loans also provide a two-year grace period before repayments of principal must begin. The current portion of government loans of € 1,882 and € 461, as of December 31, 2003 and 2002 respectively, is included within “Accrued and other liabilities”.

Long-term customer deposits represent security deposits from customers primarily in relation to long-term hosting contracts.

Other long-term obligations consist primarily of payments due to suppliers for the purchase of fixed assets. Interest is payable on these obligations based on variable rates.

The aggregate principal repayment of short-term debt, long-term debt and government loans, including amounts shown in current liabilities, required in each of the next five fiscal years and thereafter are as follows:

The € 1,882 of government loans is included in accrued and other current liabilities, and the remaining portion is included in other long-term liabilities.

Financial instruments that potentially subject the Company to concentration of credit risk consist of cash, securities and accounts receivable. The Company generally does not require collateral from its customers. During the years ended December 31, 2003 and 2002, no customer comprised greater than 10% of the accounts receivable balance or more than 10% of revenues.

The majority of the Company’s assets, liabilities, sales and costs are denominated in Euros. The Company enters into contracts where revenues and costs are denominated in other currencies, principally the US dollar. The Company’s foreign subsidiaries also enter into contracts principally denominated in local currencies, the US dollar or the Euro that are managed against the relevant functional currency or the Euro.

The Company manages foreign exchange exposures in accordance with internal policies and guidelines. This is performed on an individual contract basis using foreign exchange contracts that generally have maturities of three months to 12 months and which mature when the forecasted revenues or expenses are anticipated to occur. The counterparties to these contracts are highly rated financial institutions.

As described in Note 11 to the consolidated financial statements, the Company has also managed its foreign exchange exposure arising from the deferred component of the purchase price of US$5.6 million arising in connection with the acquisition of the NMS Division of Metso.

The following table provides quantitative information about the Company’s outstanding foreign exchange contracts by principal currency.

The above table includes embedded derivatives that the Company bifurcates from certain long-term binding contracts denominated in a different currency to the functional or reporting currency of either party. Similar to

freestanding derivatives, these are recorded at fair value within the balance sheet with related gains and losses are recorded in earnings.

The Company is also exposed to interest rate risk from its interest-bearing debt obligations. The interest rate on these instruments is based on a rate of three-month or one-year EURIBOR, plus the applicable margins. The Company manages certain specific exposures using interest rate caps to limit the impact of interest rate increases. These contracts mature between 2006 and 2008. The exposure of the Company is limited to the premiums paid to purchase the caps. Total premiums paid were € 72 and € 43 during the years ended December 31, 2003 and 2002, respectively. Outstanding notional values were € 20,171 and € 3,309 as of December 31, 2003 and 2002, respectively.

The fair value of the caps was € 39 and € 6 as of December 31, 2003 and 2002, respectively and is recorded within “Other Assets” in the consolidated balance sheet.

The Company does not use any other derivatives. These transactions are considered by the Company to be economic hedges. These are currently recorded at fair value within the balance sheet with related gains and losses are recorded in earnings, as the Company could not apply hedge accounting under SFAS No. 133 for these transactions on a retroactive basis.

For the years ended December 31, 2003 and 2002, the Company recognized net (losses) and gains of € (1,842) and € 42 in earnings, respectively.

Fair value is defined as the amount that a financial instrument could be bought or sold in an arm’s length transaction, other than in a forced or liquidation sale. The Company uses the following methods and assumptions in order to estimate the fair values of its financial instruments.

These determinations were based on available market information and appropriate valuation methodologies. Considerable judgment is required to interpret market data to develop the estimates and therefore, they may not necessarily be indicative of the amount the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

The carrying amounts for cash, accounts receivable and accounts payable approximate fair values due to the short maturity of these instruments, unless otherwise indicated.

The fair value for securities is based on independent market quotations, broker quotes or valuation models when quotations are not available.

Debt is primarily based on variable rates with fair value approximating carrying value.

The fair value of interest free loans received from the Spanish Science and Technology Ministry is estimated based on quoted market prices or current rates offered to the Company for debt of similar maturities.

Other long-term liabilities include payments due to suppliers. Interest is payable based on variable rates and therefore fair value approximates carrying value.

The fair value derived from market information and appropriate valuation methodologies reflects the estimated amounts the Company would receive or pay to terminate the transaction at the reporting date. The Company recognizes all forward exchange contracts and interest rate caps as either assets or liabilities in the balance sheet and measures those instruments at fair value.

The carrying value and estimated fair value of financial instruments are presented below:

The Company leases corporate buildings that it classifies as operating leases. Computer equipment and machinery used in the normal course of business are classified as capital leases. The capital leases generally require interest payments based on EURIBOR plus 1.1%.

Future minimum lease payments under non-cancelable operating and capital leases are as follows:

Total rent expense under operating leases for the years ended December 31, 2003 and 2002 was € 7,955 and € 7,587, respectively. Total rent expense under capital leases for the years ended December 31, 2003 and 2002 was € 1,179 and € 1,387, respectively. Total rent expense under related party leases was € 400 and € 418 for the years ended December 31, 2003 and 2002, respectively.

From time to time, the Company has been party to various litigation and administrative proceedings relating to claims arising from its operations in the normal course of business. Based on the information presently available, including discussion with counsel, management believes that resolution of these matters will not have a material adverse effect on the Company’s business, consolidated results of operations, financial condition, or cash flows.

The Company has provided € 2,009 in respect of guarantees given to companies within Abengoa. Included in that amount is a guarantee in the amount of € 600 given by the Company in connection with its investment commitments in relation to a radio or “LMDS” license.

The Company has provided a guarantee of € 33,251 in connection with the Xfera transaction described in Note 6 to the consolidated financial statements that guarantees that certain investment commitments acquired by the Company in relation to the UMTS licenses would be met. The guarantee only expires once the underlying commitments are met; however, as described in Note 23, the Company will fully transfer this obligation to another company within Abengoa in June 2004.

The maximum potential payments represent a “worse-case scenario”, and do not necessarily reflect expected results. Estimated proceeds from collateral and recourse represent the anticipated value of assets that could be liquidated or received from other parties to offset the Company’s payments under guarantees.

The Company provides warranties in connection with all of its sales contracts except for housing, hosting and maintenance contracts. Warranties typically range from one to two years depending on the contract and cover factors such as non-conformance to specifications and defects in materials and workmanship. Based on historical experience, the Company has not incurred any material costs associated with servicing its warranties and therefore, does not accrue for such costs.

The taxable results of the Company are included in the various domestic and foreign consolidated tax returns of Telvent or its subsidiaries. Also, in certain states, local and foreign jurisdictions, the Company files on a stand-alone basis.

Significant components of the Company’s net deferred tax assets/(liabilities) are as follows:

Spanish federal tax attribute carry-forwards as of December 31, 2003 consist of approximately €10,196.

If, as a result of a public sale of shares, Telvent no longer qualifies for inclusion in the consolidated tax group of Abengoa, Telvent will have the option to either compensate future loss carry-forwards by forming its own consolidated tax group or by continuing to compensate tax losses on a stand-alone basis. Management believes

that tax loss carry-forwards arising from periods prior to December 31, 2003 will be fully compensated against future taxable income before the tax losses expire.

If the net operating losses are not utilized, carry-forwards will expire in 15 years in the future after their effective generation date.

The following table shows increases in share capital of the Company since incorporation. Share capital amounts are shown in actual amounts rather than thousands of Euros:

In each transaction involving an increase in share capital, the new shares have the same rights and obligations as those previously in circulation.

On April 26, 2001, the Board of Directors of the Company agreed to a redenomination of share capital through a reduction in par value of €0.002104 per share for each of the 100,000 shares of the Company at that date.

As described in Note 23, in April 2004, the general shareholders approved a 200 for one split of the previous share capital of €601.01 per share that is now represented by 20,000,000 shares with a nominal value of € 3.005 per share, belonging to the same series and class.

Under a plan established by Abengoa, certain of the Company’s employees, including members of its management team, entered into agreements with the Company’s principal shareholders to buy ordinary shares in the Company. The shares purchased were already issued and outstanding on the date of sale. All shares were sold at a pre-split price of € 601.01 (€ 3.005 post-split), which is also the weighted-average purchase price of the shares. This par value represented a discount to fair value. The shares sold under the stock purchase plan contained certain performance and vesting features. The vesting period is 15% of the shares after three years, and the remaining 85% after five years for certain employees. For other employees, a portion of the shares sold have a vesting period of 15% after three years, 35% after five years, and the remaining 50% after seven years. The performance feature within the arrangement contains a clause whereby the seller can call

portions of the shares sold if the performance criteria are not met. The performance criteria are tied to the achievement of cumulative and individual annual budgets in the first three years of the plan. In the absence of a listing of Telvent, the plan participants can sell the shares back to the seller based on a formula value, which was based on the unconsolidated results of operations of Telvent. The formula was subsequently changed to a fixed amount plus an interest return. If Telvent becomes listed, the above repurchase feature expires.

The employees and management team have financed the purchase of the shares with a bank loan. The shares are pledged as collateral on the loan. Abengoa must bid for the shares if the share collateral is enforced.

The total number of shares purchased during the years ended December 31, 2002 and 2003 is below. No shares were forfeited during either year.

The shares were accounted for as a formula value stock plan in accordance with paragraphs 97 to 98 of EITF 00-23, with compensation expense being calculated as the difference between the purchase value (which was par value) and the formula value. Compensation expense for shares that were purchased after January 1, 2003, was calculated based on the midpoint of the expected IPO price range less a discount of 15%. Total compensation cost recorded under this plan was € 407 and € 467 for the years ended December 31, 2003, and December 31, 2002, respectively.

Stock compensation expense is being amortized over the vesting period and recorded as a liability, in accordance with SEC FRP 211. The total estimated amount of unamortized expense at December 31, 2003 and 2002 was € 2,350 and € 794, respectively.

During the normal course of business, the Company has conducted operations with related parties, through the execution of projects, loan contracts and advisory services. The transactions were completed at market rates.

The Company and certain subsidiaries have entered into a contractual arrangement with Abengoa from which the Company receives certain administrative services. Such services include finance management, centralized asset management, legal advice, institutional support with international multilateral financing organizations, institutional commercial assistance, support in providing official global ratings, auditing and consolidation, tax advisory services, negotiation and optimization of global corporate insurance policies, provision of guarantees and endorsements, services including internal publicity, corporate image and institutional relations, human resource services and other specific support services upon request. Total amounts paid to Abengoa under the services agreement were €2,364 and €2,061 for the year ended December 31, 2003 and 2002, respectively.

The allocation of such expenses are based on anticipated annual sales. Management believes its allocation method is reasonable and properly reflects Telvent’s cost of doing business, as corporate expenses incurred are allocated based upon Telvent’s projected sales as a proportion of Abengoa’s total projected sales.

As of December 31, 2003, the Company has agreements with Group companies including Abengoa, whereby all excess cash received or paid by the Company is included in, or funded by, clearing accounts or international cash pools within Abengoa’s centralized cash management system. All of the arrangements are interest-bearing on an annual basis at a rate of EURIBOR plus 0.75% for international accounts and LIBOR plus 0.75% for US based accounts for group companies that are located in Spain, or EURIBOR plus 0.75% and LIBOR plus 0.75% for international and US based accounts respectively for group companies located outside of Spain. The average monthly balance of amounts (due to) or due from Abengoa affiliates was €(27,580) and €34,189 in 2003 and 2002, respectively. At each year-end, the creditor has the right to demand, or to give notice of its intention to demand repayment.

Details of transactions with group companies and related parties for the years ended December 31, 2003 and 2002 are as follows:

Details of balances with group companies and related parties as of December 31, 2003 and 2002 are as follows:

For management reporting purposes, the Company’s segment results and geographic information are reported to management under Spanish GAAP.

revenues and costs recorded by segment represent direct costs. Indirect and corporate costs are included in “other corporate operating expenses” and are not allocated to the segments.


•	Energy comprises three principal areas focusing on oil, gas and electricity markets. It offers flow systems and services such as flow measurement applications, applications for leak detection systems, and revenue accounting programs.

•	Traffic provides services such as traffic management systems, incident detection, intersection control and city access management systems.

•	Transport focuses on ticketing systems for railways and public transportation systems, such as automated toll solutions for highways and access control and payment systems for parking.

•	Environment provides water and wastewater management applications, as well as meteorological information system services and solutions.

The three most significant adjustments in reconciling our Spanish GAAP to revenues under U.S. GAAP revenues were:

(i) The consolidation of Telvent Housing, Telvent Factory and Telvent Portugal which were companies that were purchased from a company under common control during the year ended December 31, 2002. Under Spanish GAAP, the results of these companies were not included in the consolidated financial statements for the year ended December 31, 2002. Under U.S. GAAP, these companies were accounted for in a manner similar to a pooling of interests and their results of operations were combined with Telvent’s as from January 1, 2002 for the year ended.


	(ii) The difference in the application of the percentage-of-completion method of revenue. The main difference between the application of the percentage-of-completion method under U.S. GAAP and Spanish GAAP is that under Spanish GAAP, when performing the cost-to-cost calculation, the Company puts a ceiling on the amount revenue recognized at what has been billed to date, whereas under U.S. GAAP no ceiling would be applied.

	(iii) The adjustment of the temporary consortiums. See “— Off Balance Sheet Arrangements and Note 7 to our Consolidated Financial Statements.” Under Spanish GAAP such temporary consortiums are accounted for under the proportionate consolidation method. Under U.S. GAAP, such consortiums that were formed before February 1, 2003, are accounted for under the equity method. Those which were formed on or after February 1, 2003 and where the Company has an equal or larger percentage holding compared to the other venturers have been consolidated. This adjustment had a negative effect on the consolidated gross profit due to the fact that certain temporary consortiums do have an operating activity and therefore do produce a margin. The margin was eliminated when these entities were deconsolidated on a proportionate basis under Spanish GAAP to be recognized under the equity method under U.S. GAAP.

Several adjustments have been made to adjust total assets under Spanish GAAP to total assets under U.S. GAAP. These adjustments include adjustments arising from asset impairments, accounting for goodwill and intangible assets purchased in a business combination, and deferred tax assets arising from U.S. GAAP adjustments.

For the years ended December 31, 2003 and 2002, sales outside of Spain comprised 44% and 40% of the Company’s revenues, respectively. Net revenue consists of sales to customers in the following countries or areas:

The most significant investments included in long-lived assets, net of depreciation, outside of Spain, are located in:

In January 2004, as a result of arbitration between Vodafone and the other Xfera shareholders, Vodafone sold all of its shares in Xfera to the remaining shareholders. A sales price, including associated costs, of € 28,800 was agreed for Vodafone’s 6.986% stake in Xfera. This transaction increased Telvent’s shareholding from 5.46% to 5.643%.

In February 2004, the Company made an additional capital contribution to Xfera in order to comply with a capital request that was approved at the December 2003 General Shareholders’ Meeting.

The amounts paid were €760 relating to the transaction with Vodafone and € 733 representing 50% of paid share capital attributable the additional shares obtained from the arbitration settlement. The Company assumed additional guarantees in the amount of €1,256 in relation to the shares obtained through arbitration.

In March 2004, various employees, including managers of the Company were granted additional shares under the stock compensation plan. All shares were sold at a post-split price of € 3.005 per share (€ 601.01 pre-split). The estimated fair value on the date of grant was the midpoint of the estimated offering price range of € 12.37 (€ 2,475 pre-split). The midpoint of the estimated offering price range of € 12.37 was deemed to be the fair value of the shares at March 2004. The total number of shares acquired by these employees was 140,000, which increases the total share capital ownership of employees to 9.236%. The Company recorded € 1,312 of deferred compensation expense in relation to the sale of shares.

During 2004, certain minority investments will be sold to a different company within Abengoa at carrying value. Management does not believe the transfers will have a significant impact on the 2004 results. The minority investments to be transferred have a carrying value, which approximates fair value, of € 28,142 as of December 31, 2003 and are identified in Notes 5 and 6. The Company will also transfer its guarantee of € 33,251 in connection with the Xfera transaction described in Note 6 to the same company, which will then assume the obligations under the guarantee.

Effective April 15, 2004, the shareholders approved a 200 for 1 split of ordinary shares, resulting in an increase in the number of shares from 100,000 to 20,000,000. The nominal value of the shares decreased accordingly from €601.01 to €3.005.

On April 20, 2004, the Company established a new bilateral credit arrangement with Abengoa which replaced the prior credit arrangements that the Company and its subsidiaries had with Abengoa. Under this new arrangement, the Company and Abengoa may borrow funds from or lend funds to each other, from time to time upon not less than twenty-four hours’ notice, up to a maximum of €45.0 million (or the equivalent amount in any other currency quoted in the Spanish currency market). Borrowings under this credit arrangement bear interest at EURIBOR, or LIBOR for borrowings other than in Euro, in either case plus 0.75% per year for a period not to exceed one year, with interest added to the outstanding balance. Each borrowing matures on the last date of the fiscal year in which such borrowing was made, without requiring any earlier payment of principal. This credit arrangement is optional and either the Company or Abengoa may elect not to make loans to the other. This arrangement has an initial term ending December 31, 2004, and renews for annual one-year terms until terminated by either party.

The terms of the prior arrangements with members of the Abengoa Group were substantially the same as this arrangement except the prior arrangements involved many of the Company’s subsidiaries, were € 90.0 million in aggregate and created firm, and not optional, lending commitments from all involved parties.

The accompanying notes are an integral part of these condensed financial statements.

Telvent GIT, S.A. is the parent company of an information technology group that provides value-added real-time products and services solutions to customers in targeted industrial sectors (Energy, Environment, Traffic, Transport) primarily in Spain, North America, Latin America (including Mexico) and China.

Telvent GIT is a holding company whose principal purpose is to hold the shares/investment in the operating companies through which the group develops its activity. As the holding company, Telvent GIT provides financing to all its subsidiaries and collects dividends from them.

The accompanying condensed financial statements have been prepared in accordance with the accounting principles generally accepted in the United States.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the US have been condensed or omitted. The Company’s majority-owned subsidiaries are recorded using the equity basis of accounting. The footnotes disclosures contain supplemental information relating to the operations of Telvent GIT, S.A., as such, these statements should be read in conjunction with the notes to the consolidated statements of Telvent.

The Company has provided a guarantee of €25,541 in connection with the Xfera transaction, described in the notes to the December 31, 2003 financial statements, that guarantees that certain investment commitments acquired by the Company in relation to the UMTS licenses will be met. The guarantee only expires once the underlying commitments are met; however, the Company will transfer this obligation to another company within Abengoa in June 2004.

As of December 31,2003 short-term debt consists of amounts drawn down under credit facility that the Company has with the ABN AMRO. This facility relates to a line of credit with ABN AMRO established in 2002 and drawn down in 2003. Abengoa, certain subsidiaries of Abengoa and the Company participate in this facility. The total amount of the ABN AMRO credit facility is € 50,000. Of that overall maximum borrowing amount, the Company and its subsidiaries have a sub-limit of € 30,000.

The total amount the Company received as dividends from its subsidiary companies and equity investees in each last two fiscal years is as follows:

We have audited the combined balance sheets of Metso Automation SCADA Solutions Ltd. and Metso Automation SCADA Solutions, Inc. as at December 31, 2002 and 2001 and the combined statements of income and comprehensive income (loss), changes in stockholders’ equity and mandatorily redeemable preferred shares and cash flows for the years then ended. These combined financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States) and auditing standards generally accepted in Canada. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

In our opinion, these combined financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2002 and 2001 and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

PricewaterhouseCoopers refers to the Canadian firm of PricewaterhouseCoopers LLP and the other member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.


	Metso Automation SCADA Solutions Ltd. (“MASSL”) was incorporated under the Canada Business Corporations Act and is engaged in the design, manufacture, sale and servicing of industrial automation systems. On December 31, 2002, the Company was wholly owned by its ultimate parent company, Metso Corporation, a company incorporated in Finland.

	Metso Automation SCADA Solutions, Inc. (“MASSI”) (a Texas Corporation) is engaged in the design, manufacture, sale and servicing of industrial automation control and information management systems. On December 31, 2002, the Company, with offices located in Houston, Texas and Baltimore, Maryland, was ultimately owned by Metso Corporation, a company incorporated in Finland.

	On January 31, 2003, MASSL and MASSI were acquired by Telvent GIT S.A. of Spain and renamed Telvent Canada Ltd. and Telvent U.S.A., Inc. respectively.


	These financial statements combine the accounts of MASSL and MASSI (collectively, “the Company”) and have been prepared on the basis of accounting principles and disclosure standards generally accepted in the United States of America. All balances and transactions between the companies have been eliminated.


	Cash equivalents consist of highly liquid investments which are readily convertible into cash and have original maturities of three months or less.


	Accounts receivable includes amounts attributable to contracts that the Company expects to collect within the next fiscal period. Accounts receivable were recorded net of an allowance for doubtful accounts of $256 at December 31, 2002 (2001 — $242).


	The Company sells products to customers throughout the United States, Canada and the rest of the world. The Company’s normal credit terms for trade receivables are 30 days. In certain situations, credit terms may be extended to 60 days or longer. The Company performs ongoing credit evaluations of its customers and generally does not require collateral for its trade receivables.


	The Company regularly records intercompany receivable and payable transactions with its parent and affiliates. These transactions consist primarily of intercompany sales, allocations of corporate expenses and movement of cash between entities. The account “Due from affiliates, net” reflects all net intercompany activity recorded by the Company.


	Inventories of materials and finished goods are valued at the lower of cost, determined on a first-in, first-out basis and net realizable value. Work in process is recorded at cost less any provision required for anticipated losses. Inventories were recorded net of an allowance for obsolescence, shrinkage and slow moving materials of $357 at December 31, 2002 (2001 — $227).

Property, plant and equipment are stated at cost. Depreciation of property, plant and equipment is calculated using the straight-line method over the estimated useful lives, which generally range from three to eight years for machinery and equipment, furniture and fixtures and leasehold improvements. The costs of major improvements that extend the useful lives of the assets are capitalized. Expenditures for maintenance, repairs and minor improvements are expensed as incurred. When property and equipment are sold or retired, the cost and related accumulated depreciation are removed and the resulting gain or loss is included in the statement of income.


	Revenues resulting from long-term projects with identifiable segments or stages are accounted for using the percentage of completion method. Estimates of percentage of completion are based upon costs incurred to date compared to the forecasted costs of each contract. Where contracts extend over one or more years, revisions in the forecasted costs of each project are reflected in the accounting period in which the revisions become known. The entire amount of an estimated loss on a contract is accrued at the time the loss becomes known.

	Revenue from the sale of systems is otherwise recognized using the completed contract method.

	Revenue from the sale of parts is recognized upon shipment. Revenue and costs relating to service contracts are recognized and charged ratably over the term of the contract.

	“Costs and estimated earnings in excess of billings on uncompleted contracts” represent revenues recognized in excess of amounts billed under percentage of completion contracts. “Billings in excess of estimated revenues” represent billings in excess of revenues recognized under percentage of completion contracts.


	The financial statements of MASSL are translated from its functional currency, the Canadian dollar (“Cdn. $”), into U.S. dollars (the Company’s reporting currency) in accordance with SFAS No. 52, Foreign Currency Translation. All assets and liabilities are translated into U.S. dollars at the exchange rate prevailing on the balance sheet date. Revenues, costs and expenses are translated at average rates of exchange prevailing during the year. All translation gains and losses from the translation of the MASSL financial statements to U.S. dollars are reported separately as a component of other comprehensive income.

	The functional currency of MASSI is the U.S. dollar.

Transactions denominated in currencies other than the functional currencies have been remeasured into the functional currencies. Monetary assets and liabilities are remeasured using the rate of exchange in effect at the balance sheet date, whereas other non-monetary assets and liabilities are remeasured at the rate of exchange in effect on the date of the transaction. Exchange gains and losses resulting from the remeasurement of foreign currency transactions are included in the statement of income.


	The Company is entitled to investment tax credits granted by the Canadian government. Investment tax credits are earned on qualifying product research and development costs and are used to offset Canadian federal income taxes otherwise payable. These credits are recognized as a credit against the income tax expense in the statement of income.

The Company accounts for income taxes under the provisions of SFAS No. 109, Accounting for Income Taxes. Under the liability method specified by SFAS No. 109, a deferred tax asset or liability is calculated based on the difference between the financial statement and tax bases of assets and liabilities, as measured by the enacted tax rates. The carrying value of deferred tax assets is reduced, if necessary, by a valuation allowance for any tax benefits that exceed the portion for which future realization is more likely than not.


	The Company generally sells products under a one-year warranty. The estimated future cost under existing warranties has been provided for in the accompanying financial statements and is included in accrued expenses.


	Research and development costs are expensed as incurred.

	Software development costs incurred in the period from establishment of technological feasibility of the product up to when the product is available for general release to customers are capitalized. Capitalized costs are then amortized on a straight-line basis over the estimated product life, or on the ratio of current revenue to the total projected product revenue, whichever is greater. To date, the period between achieving technological feasibility, which the company has defined as the establishment of a working model, which typically occurs when beta testing commences, and the general availability of such software has been short. As such, software development costs qualifying for capitalization have been insignificant.


	The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the amounts of revenues and expenses for the period. Actual results could differ from those estimates.

	Specific estimates that have a material impact on these financial statements include revenue recognition under the percentage of completion method and investment tax credits recoverable (note 9).

In June 2002, the Financial Accounting Standards Board (“FASB”) issued SFAS 146 “Accounting for Costs Associated with Exit or Disposal Activities”. The standard requires that liabilities for exit or disposal activity costs be recognized and measured at fair value when the liability is incurred. This standard is effective for disposal activities initiated after December 31, 2002. The Company has not determined the impact the adoption of this standard will have on its operating results or financial condition.


	On April 30, 2003, FASB issued SFAS 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities”. The standard applies to derivative instruments and hedging contracts entered into or modified after June 30, 2003. Adoption of SFAS 149 is not expected to have a material impact on the Company’s operating results or financial position.


	In May 2003, FASB issued SFAS 150 “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity”. The standard focuses on the balance sheet classification (liability vs. equity) of mandatorily redeemable shares, forward contacts to purchase an entity’s own stock, and freestanding written options that enable the investor to put shares of stock to the issuer. Prior to SFAS 150, mandatorily redeemable shares were typically presented in the balance sheet between liabilities and equity, commonly referred to as the “mezzanine” section and many forward purchase contracts and written put options were presented as equity, if they could be net-share-settled by the issuer. Under this standard, such financial instruments will be classified as liabilities.

	For all financial instruments entered into or modified after May 31, 2003, this standard is effective immediately. For all other instruments, the standard goes into effect at the beginning of the first interim period beginning after June 15, 2003, except for mandatorily redeemable financial instruments of a non-public entity for which the standard is effective for fiscal years beginning after December 15, 2003. This new standard will affect the classification of the Company’s mandatorily redeemable preferred shares.

In December 2003, the FASB issued Interpretation Number 46R, “Consolidation of Variable Interest Entities, an interpretation of Accounting Research Bulletin No. 51”. The standard mandates that variable interest entities be consolidated by their primary beneficiary. The standard is effective the first reporting period ending after March 15, 2004 for all entities with the exception of special purpose entities as defined in prior accounting guidance. The standard is effective for the first period ending after December 15, 2003 for previously defined special purpose entities. At December 31, 2002, the Company did not have any variable interest in variable-interest entities.


	The Company recognizes revenues on certain long-term projects, the duration of which is typically one to three years, using the percentage of completion method. This method involves the use of estimates that have a material impact on these financial statements.

	As of December 31, 2002, the Company has recognized accumulated revenue of $114,578 (2001 — $110,316) on a cumulative basis since inception, on contracts that were uncompleted as of that date.


	Costs and estimated earnings on uncompleted contracts at December 31, 2002 and 2001 consisted of the following:


	Sales, cost of sales and gross profit reported in the combined statements of income and comprehensive income (loss), include the following amounts related to service contracts:


	Property, plant and equipment consisted of the following at December 31, 2002 and 2001:


	Metso Automation SCADA Solutions Ltd.

	Authorized


	Unlimited number of non-voting, 10%, non-cumulative, preferred shares, redeemable at the initial price of Cdn. $1,000, plus all declared and unpaid dividends.
	Unlimited number of common shares with no par value


	There were no movements in the Company’s share capital during the years ended December 31, 2002 and 2001. Because the preferred shares are mandatorily redeemable, they are presented on the combined balance sheet between liabilities and equity.

	Metso Automation SCADA Solutions, Inc.

	Authorized


	1,000 common shares, $10 par value


	The primary tax jurisdiction for MASSL, a Canadian company, is Canada. Prior to its acquisition on January 31, 2003 (see note 1), MASSI, a U.S. company, filed its U.S. federal income tax return as part of a consolidated return under a tax sharing agreement with other companies controlled by Metso Corporation.

	Following the January 31, 2003 acquisition, utilization of MASSI’s deferred income tax assets may be limited. A valuation allowance has been recorded against MASSI’s future income tax assets.


	Earnings before income taxes for the years ended December 31, 2002 and 2001 were generated in the Company’s two principal income tax jurisdictions as follows:


	Because of the impact of the MASSI valuation allowance on the U.S. income tax provision, the following analysis is based on the Canadian statutory income tax rate.

	The income tax expense for the years ended December 31, 2002 and 2001 differs from that computed using the Canadian statutory tax rate for the following reasons:


	As at December 31, 2002, the Company has investment tax credits available to reduce future Canadian federal income taxes payable. The amounts and expiry dates are as follows:


	Deferred income tax asset consists of the following as of December 31, 2002 and 2001:


	During the years ended December 31, 2002 and 2001, the Company had the following transactions in the ordinary course of business with its ultimate parent company and other affiliated companies under common control:


	The Company’s cash, approximately $7,157 at December 31, 2002 (2001 — $8,538), is maintained in master pooled accounts by Metso Canada Ltd. (for MASSL) and Metso USA, Inc. (for MASSI). Cash is swept to the master pooled accounts on a frequent basis and, accordingly, is included as a component of the balance sheet caption “Due from affiliates, net”.

	In March 2001, MASSI entered into a service agreement to receive services from an affiliate in Switzerland for research and development relating to process automation, supervisory control and data acquisition, information management, electronic commerce software products as well as administrative and marketing services. The agreement terminated on December 31, 2002 with automatic annual renewals unless either party terminates the agreement in writing within 90 days of the expiration date. The agreement renewed at December 31, 2002, however, the Switzerland affiliate was closed in 2003. In 2002, the Company incurred costs of $1,427 (2001 — $1,018) in connection with this agreement, which are included in other expenses.

	During 2002, the Company repaid all long-term loans from affiliates. The loans bore interest at LIBOR plus 0.25% and the Company incurred interest expense on the loans of $285 during 2002 (2001 — $398). Under the original terms of the loans, $1,716 was due to be repaid in 2002. The loans were uncollateralized.


	Financial instruments consist of accounts receivable, due from affiliates, costs and estimated earnings in excess of billings on uncompleted contracts, accounts payable and accrued expenses. The fair value of these instruments is approximately equal to carrying amount.


	As at December 31, 2002, the Company is committed under the terms of various operating leases, primarily for the rental of premises, to minimum annual lease payments which are approximately as follows:


	Rent expense was $2,495 during the year ended December 31, 2002 (2001 — $2,493).


	At December 31, 2002, the Company was contingently liable in respect of bank letters of credit totalling $3,827 relating to performance guarantees on the completion of certain system sale contracts.

The Company maintains two defined contribution benefit plans: a 401k plan and a Deferred Profit Sharing Plan (DPSP). Under these plans, employees may contribute a percentage of their annual compensation to the plan up to a certain maximum, as defined by the plan and the local tax authorities. The Company matches a percentage of employee contributions under the 401k plan and the DPSP. Expenses incurred in connection with the Company’s plans were $713 for 2002 (2001 — $718).

Through and including , 2004 (the 25^th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

Under Spanish law, our directors shall be liable to the company, the shareholders and the creditors of the company for any damage they cause through acts or omission contrary to the law or our by-laws, or through acts or omissions carried out breaching the duties inherent to holding a director position. Any other person acting as a director in fact shall be personally responsible on this basis as well. The registrant maintains an insurance policy that protects its officers and directors from liabilities incurred as a result of actions taken in their official capacities.

Reference is made to Section 6 and Section 7 of the form of Underwriting Agreement filed as Exhibit 1 to the registration statement which sets forth the registrant’s, selling shareholders’ and the underwriters’ respective agreements to indemnify each other and to provide contribution in circumstances where indemnification is unavailable.

(b) Condensed Statements of Operations for the year ended December 31, 2003 and 2002.

(a) The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

(b) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer, or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person against the registrant in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question


	(1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

	(2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for the filing on Form F-1 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Madrid, Kingdom of Spain, on this 30th day of September, 2004.

KNOW ALL MEN BY THESE PRESENTS that each individual whose signature appears below constitutes and appoints Manuel Sánchez, Jose Ignacio del Barrio and Ana María Plaza, and each of them, his or her true and lawful attorneys-in-fact and agents, with full power of substitution and re-substitution, for such individual and in such individual’s name, place and stead, in any and all capacities, to do any and all things and execute any and all instruments that such attorneys may deem necessary or advisable under the Securities Act of 1933, as amended (the “Act”), and any rules, regulations and requirements of the Securities and Exchange Commission in connection with the registration under the Act of the shares of Telvent GIT, S.A., and any securities or blue sky law of any of the states of the United States of America in order to effect the registration or qualification (or exemption therefrom) of said securities for issue, offer, sale, or trade under the blue sky or other securities laws of any such states and in connection therewith to execute, acknowledge, verify, deliver, file and cause to be published applications, reports, consents to service of process, appointments or attorneys to receive service of process and other papers and instruments which may be required by such laws, including specifically, but without limiting the generality of the foregoing the power and authority to sign his or her name in his or her capacity as officer, board member or authorized representative in the United States of Telvent GIT, S.A., as the case may be, this registration statement and/or such other form or forms as may be appropriate to be filed with the Commission or under or in connection with any blue sky law or other securities laws of any state of the United States of America or with such other regulatory bodies and agencies as any of them may deem appropriate in respect of the shares to any and all amendments, including post-effective amendments (and any related registration statements pursuant to Rule 462(b)), to this registration statement and to any and all instruments and documents filed as part of or in connection with this registration statement.

Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has been signed by the following persons in the capacities and on the dates indicated.


**	To be filed by amendment.

EX-2.1 2 l07997exv2w1.txt SHARE PURCHASE AGREEMENT EXHIBIT 2.1 SHARE PURCHASE AGREEMENT by and among Metso Automation Holding B.V. as "Metso Canada Seller" Neles-Jamesbury, Inc. as "Metso US Seller" Telvent Sistemas y Redes, S.A. as "Metso Canada Buyer" Metso Automation SCADA Solutions Ltd. as "Metso Canada" Metso Automation SCADA Solutions Inc. as "Metso US" January 31, 2003 SHARE PURCHASE AGREEMENT This Share Purchase Agreement (this "Agreement"), dated as of January 31, 2003, is by and among Telvent Sistemas y Redes, S.A. ("Metso Canada Buyer"), Metso Automation SCADA Solutions Ltd. ("Metso Canada"), Metso Automation Holding B.V. ("Metso Canada Seller"), Neles-Jamesbury, Inc. ("Metso US Seller") (collectively with Metso Canada Seller, the "Sellers") and Metso Automation SCADA Solutions Inc. ("Metso US") (collectively with Metso Canada, the "Companies") with the intent it be effective as of January 31, 2003. RECITALS A. Metso Canada Seller owns all of the issued and outstanding shares of Metso Canada; B. Metso US Seller owns all of the issued and outstanding shares of Metso US; C. Metso Canada Buyer desires to purchase from Metso Canada Seller, and Metso Canada Seller desires to sell to Metso Canada Buyer, the shares of Metso Canada representing 100% of the share capital owned by Metso Canada Seller upon the terms and subject to the conditions of this Agreement; and D. Upon the acquisition of the shares of Metso Canada by Metso Canada Buyer, Metso Canada desires to purchase from Metso US Seller, and Metso US Seller desires to sell to Metso Canada the shares of Metso US representing 100% of the share capital owned by Metso US Seller upon the terms and conditions of this Agreement. AGREEMENT NOW THEREFORE, in consideration of the mutual covenants and promises contained herein and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto agree as follows: ARTICLE 1 INTERPRETATION 1.1 DEFINED TERMS As used herein, the terms below shall have the following meanings. Any of such terms, unless the context otherwise requires, may be used in the singular or plural, depending upon the reference. 1.1.1 "Affiliate" shall have the meaning set forth in Section 2(1) of the Business Corporations Act (Alberta). 1.1.2 "Allowable Asbestos Claims" shall mean: (i) if any Action relating to an Asbestos Claim (as those terms are defined in the Asbestos Indemnity Agreement) is filed and the Indemnifying Parties (as that term is defined in the Asbestos Indemnity Agreement) defaults under its obligations contained in Section 2.4 of the Asbestos Indemnity Agreement, (x) the amount claimed under such Action or, if no amount is explicitly -2- claimed, the amount being claimed as estimated by the Metso Canada Buyer in good faith plus (y) the amount of fees and expenses estimated by the Metso Canada Buyer in good faith to be incurred in defending such Action; and (ii) if the Indemnifying Parties (as that term is defined in the Asbestos Indemnity Agreement) defaults on any payments due to Metso Canada Buyer or Metso Canada under the Asbestos Indemnity Agreement, the amount of such payments. 1.1.3 "Asbestos Claims" shall mean all currently existing and future Claims made against Metso US which relate to asbestos. 1.1.4 "Asbestos Indemnity Agreement" shall mean the agreement to be entered into at the Metso US Closing among Metso US Seller, MAI, Metso Canada and Metso Canada Buyer regarding certain matters relating to asbestos, as set forth in Schedule 1.1.3. 1.1.5 "Benefit Arrangement" shall mean any employment, consulting, severance or other similar contract, arrangement or policy and each plan, arrangement (written or oral), program, agreement, or commitment providing for insurance coverage (including without limitation any self-insured arrangements), workers' compensation, disability benefits, supplemental unemployment benefits, vacation benefits, retirement benefits, life, health, disability or accident benefits or for deferred compensation, profit sharing bonuses, stock options, stock appreciation rights, stock purchases or other forms of incentive compensation or post-retirement insurance, compensation or benefits which (i) is not a Pension Plan, (ii) is entered into, maintained, contributed to or required to be contributed to, as the case may be, by a Company or under which a Company may incur any liability, and (iii) covers any employee or former employee of either of the Companies. 1.1.6 "Canadian Employee Plans" shall mean all Benefit Arrangements and Pension Plans of Metso Canada. 1.1.7 "Canadian GAAP" shall mean generally accepted accounting principles in Canada. 1.1.8 "Companies" shall mean, collectively, Metso Canada and Metso US. 1.1.9 "Confidential Information" shall mean all information that is not generally known to the public, whether of a technical, business, or other nature (including, without limitation, trade secrets, know-how, and information relating to the technology, customers, business plans, products, services, promotional and marketing activities, finances, and other business affairs of such party), that is or was disclosed by or on behalf of either of the Companies to any of the Sellers, or the Sellers' Group prior to the Closing Date, or that is or was otherwise learned by any of the Sellers, or the Sellers' Group prior to the Closing Date in the course of its discussions or business dealings with either of the Companies, and that is sufficiently valuable to afford an actual or potential economic advantage to the Companies. Confidential Information includes, without limitation, software (including source code, object code, executables, and scripts), data, inventions, developments, algorithms, processes, products, documents, drawings, diagrams, images, and recordings, embodied or carried in any tangible or intangible medium. 1.1.10 "Contract" shall mean any agreement, contract, note, bond, mortgage, indenture, loan, evidence of indebtedness, lease, sublease, purchase order, letter of credit, franchise -3- agreement, undertaking, covenant not to compete, employment agreement, license, instrument, arrangement, obligation or commitment to which the Companies (or either of them) are parties or are bound, or to which their assets or properties are subject, whether oral or written. 1.1.11 "Deferred Payment Deadline" shall mean January 30, 2004. 1.1.12 "Encumbrance" shall mean any claim, lien, pledge, option, charge, easement, security interest, deed of trust, mortgage, option, right of first refusal, pre-emptive right, right-of-way, patent reservation, encroachment, building or use restriction, conditional sales agreement, encumbrance or other right of third parties, whether voluntarily incurred or arising by operation of law, and includes, without limitation, any agreement to give any of the foregoing in the future, and any contingent sale or other title retention agreement or lease in the nature thereof. 1.1.13 "Environment" shall mean soil, land surface or subsurface strata, surface waters (including navigable waters, ocean waters, streams, ponds, drainage basins, and wetlands), groundwaters, drinking water supply, stream sediments, ambient air (including indoor air), plant and animal life, and any other environmental medium or natural resource. 1.1.14 "Environmental Law" shall mean any Legal Requirement that requires or relates to the Environment, including: (i) advising appropriate authorities, employees, and the public of intended or actual releases of pollutants or Hazardous Substances, violations of discharge limits, or other prohibitions and of the commencements of activities, such as resource extraction or construction, that could have a significant impact on the Environment; (ii) preventing or reducing to acceptable levels the release of pollutants or hazardous substances or materials into the Environment; (iii) reducing the quantities, preventing the release, or minimizing the hazardous characteristics of wastes that are generated; (iv) assuring that products are designed, formulated, packaged, and used so that they do not present unreasonable risks to human health or the Environment when used or disposed of; (v) protecting resources, species, or ecological amenities; (vi) reducing to acceptable levels the risks inherent in the transportation of hazardous substances, pollutants, oil, or other potentially harmful substances; (vii) remediation of the environment and cleaning up pollutants that have been released, preventing the threat of release, or paying the costs of such clean up or prevention; or -4- (viii)making responsible parties pay for damages done to health or the Environment, or permitting self-appointed representatives of the public interest to recover for injuries done to public assets. 1.1.15 "Environmental Permits" shall mean all orders, permits, certificates, approvals, consents, registrations and licences issued by any authority of competent jurisdiction under Environmental Laws. 1.1.16 "ERISA" shall mean the United States Employee Retirement Income Security Act of 1974, as amended or any successor law, and the regulations and rules issued pursuant to ERISA or any successor law. 1.1.17 "Governmental Authorities" shall mean all applicable federal, state, provincial and municipal agencies, boards, tribunals, ministries and departments. 1.1.18 "Hazardous Substance" shall mean any waste or other substance that is listed, defined, designated, or classified as, or otherwise determined to be, hazardous, radioactive, or toxic or a pollutant or a contaminant under or pursuant to any Environmental Law, including any admixture or solution thereof, and specifically including petroleum and all derivatives thereof or synthetic substitutes therefor. 1.1.19 "including" shall mean including without limitation by reason of enumeration. 1.1.20 "Leased Real Property" shall mean all real property and improvements thereon leased, subleased or otherwise occupied under assignment or sub-assignment of a lease by either of the Companies, including all rights, easements and privileges appertaining or relating thereto. 1.1.21 "Legal Requirement" shall mean any applicable federal, state, provincial, local, municipal, foreign, international, multinational, or other administrative order, by-law, constitution, law, ordinance, principle of common law, regulation, statute, or treaty. 1.1.22 "MAI" shall mean Metso Automation USA Inc., a corporation incorporated pursuant to the laws of the State of Delaware, USA. 1.1.23 "Material Adverse Effect" or "Material Adverse Change" shall mean any material adverse effect or change in the condition (financial or other), business, results of operations, assets, liabilities or operations of the Companies, taken as a whole, or on the ability of the Sellers or the Companies to consummate the transactions contemplated hereby, or any event or condition or state of facts which could reasonably be expected, with the passage of time, to constitute a "Material Adverse Effect" or "Material Adverse Change" provided that a "Material Adverse Effect" or a "Material Adverse Change" shall not include any fact, event, change, development, circumstance or effect resulting from (i) the failure to obtain any required approval from any Governmental Authority in connection with a Special Contract, or (ii) any change in the general economic, financial, currency exchange or securities market conditions in Canada, the United States or elsewhere in the world. -5- 1.1.24 "Metso Canada" shall mean Metso Automation SCADA Solutions Ltd., a corporation incorporated pursuant to the laws of Canada. 1.1.25 "Metso Canada Buyer" shall mean Telvent Sistemas y Redes, S.A., a corporation incorporated pursuant to the laws of Spain. 1.1.26 "Metso Canada Seller" shall mean Metso Automation Holding B.V., a corporation incorporated pursuant to the laws of the Netherlands. 1.1.27 "Metso Canada Shares" shall mean all of the issued and outstanding shares of Metso Canada, consisting of 11,181,391 Common Shares and 5,000 Class A Shares, all of which are owned by Metso Canada Seller. 1.1.28 "Metso US" shall mean Metso Automation SCADA Solutions Inc., a corporation incorporated pursuant to the laws of the State of Texas, USA. 1.1.29 "Metso US Seller" shall mean Neles-Jamesbury, Inc., a corporation incorporated pursuant to the laws of the State of Massachusetts, USA. 1.1.30 "Metso US Shares" shall mean all of the issued and outstanding shares of Metso US, consisting of 100 common shares, all of which are owned by Metso US Seller. 1.1.31 "NMS Business" shall mean: (a) the global business carried on by Metso Canada; and (b) the global business carried on by Metso US and the predecessor companies, including Valmet, Inc. and Valmet Automation (USA), Inc., Remote Systems, Inc. and Tejas Controls, consisting of: (i) the development of SCADA Software and advance applications including pipeline simulation and modeling software; (ii) the supply of SCADA systems consisting of the Company's SCADA and applications software, third party systems and applications software, computer hardware and related electronic equipment pursuant to project contracts including design, assembly, development, testing, installation, commissioning, training, documentation and after sales warranty and maintenance support; (iii) the design, assembly, sales and service of remote terminal units ("RTUs") from the Metso US facilities in Houston, Texas; and (iv) software engineering consulting services related to SCADA systems. 1.1.32 "Pension Plan" shall mean any employee pension benefit plan which (i) a Company maintains, administers, contributes to or is required to contribute to, maintained, -6- administered, contributed to or was required to contribute to, or under which a Company may incur any material liability; and (ii) covers any employee or former employee of a Company. 1.1.33 "Permits" shall mean all licenses, permits, franchises, approvals, notifications, authorizations, consents or orders of, or filings with, any governmental agency or authority, whether foreign, federal, state, provincial or local, or any other person, necessary or desirable for the past, present or presently anticipated conduct of, or relating to the operation of, the Companies, their respective businesses or their respective assets. 1.1.34 "Person" shall mean any natural person, corporation, general or limited partnership, limited liability company, trust, sole proprietorship, or other entity, organization or association of any kind. 1.1.35 "Proven Claim" shall mean (i) a Claim, excluding Asbestos Claims (except for Allowable Asbestos Claims), made by Metso Canada Buyer, Metso Canada and/or Metso US against Metso Canada Seller and/or Metso US Seller that has been acknowledged in writing by the party against whom it is made, both as to liability and quantum, as a valid Claim; or (ii) an award of a court or tribunal of competent jurisdiction for a Claim made by Metso Canada Buyer, Metso Canada and/or Metso US against Metso Canada Seller and/or Metso US Seller for which all rights of appeal have expired or have been exhausted. 1.1.36 "Representative" shall mean any officer, director, principal, partner, manager, member, attorney, agent, employee or other representative. 1.1.37 "Securities Act" shall mean the United States Securities Act of 1933, as amended or any successor law, and the regulations and rules issued pursuant to the securities law or any successor law. 1.1.38 "Sellers" shall mean, collectively, Metso Canada Seller and Metso US Seller. 1.1.39 "Sellers' Group" shall mean the Sellers and all of their Subsidiaries, all companies of which each of the Sellers is a Subsidiary and all Subsidiaries of such companies, but excluding the Companies. 1.1.40 "Shares" shall mean, collectively, the Metso Canada Shares and the Metso US Shares. 1.1.41 "Special Claim" shall mean any claim made by the Metso Canada Buyer or either of the Companies for any Damages with respect to a breach of Section 4.6.3 or Section 4.17 (other than in respect of Asbestos Claims). 1.1.42 "Standby Letter of Credit" shall mean a standby letter of credit substantially in the form attached as Schedule 1.1.40 in the amount of Five Million Six Hundred Thousand Dollars ($5,600,000) and any replacement or amended letter or letters of credit permitted under the Purchase Price Holdback Escrow Agreement. 1.1.43 "Subcontracts" shall mean the subcontracts described in Schedule 6.7.2. -7- 1.1.44 "Subsidiary" shall mean with respect to any Person, any corporation or other Person ("Owner" for the purpose of this definition) of which securities or other interests having the power to elect the management of that corporation or other Person's board of directors or similar governing body (other than securities or other interests having such power only upon the happening of a contingency that has not occurred) are held by the Owner or one or more of its Subsidiaries. 1.1.45 "Transaction Bonus" shall mean the transaction bonus which is payable by Metso Canada to the six senior executives of Metso Canada within 60 days of completion of the sale of the shares of Metso Canada as described in Schedule "A" attached to the employment agreements, each dated June 17, 2002, between Metso Canada and each of such executives (the "Employment Agreements"). Metso Canada has agreed to amend Schedule "A" to the Employment Agreements so that the employees shall be entitled to be paid the bonus if the sale of the Shares is completed, as contemplated in this Agreement, regardless of the date of completion. 1.1.46 "Unproven Claim" shall mean a Claim, excluding Asbestos Claims (except for Allowable Asbestos Claims), made by Metso Canada Buyer, Metso Canada and/or Metso US against Metso Canada Seller and/or Metso US Seller which is not a Proven Claim. 1.1.47 "US Code" shall mean the United States Internal Revenue Code of 1986, as amended or any successor law, and the regulations issued by the US IRS pursuant to the US Code and any successor law. 1.1.48 "US Employee Plans" shall mean all Benefit Arrangements and Pension Plans that provide benefits to employees or former employees of Metso US. 1.1.49 "US GAAP" shall mean generally accepted accounting principles in the United States of America. 1.1.50 "US IRS" shall mean the United States Internal Revenue Service or any successor agency, and, to the extent relevant, the United States Department of Treasury. 1.1.51 "WARN Act" shall mean the United States Worker Adjustment and Retraining Notification Act, as amended. 1.2 OTHER DEFINED TERMS The following terms shall have the meanings ascribed to them in the Sections set forth below:

-8-

1.3 BEST OF KNOWLEDGE Any reference herein to "the best of the knowledge" of a party hereto will be deemed to mean the actual knowledge of such party without any inquiry or investigation and, with respect to the Companies, will be deemed to mean the actual knowledge of only David Jardine, Steve Aasen, Jackie Bohez, Cameron Demcoe, Kelly Flock, Phil Goulet and Larry Stack. 1.4 APPENDICES AND SCHEDULES The Appendices and Schedules attached to this Agreement are incorporated into this Agreement by reference and are deemed to be part hereof. -9- ARTICLE 2 PURCHASE AND SALE OF SHARES 2.1 TRANSFER OF SHARES 2.1.1 Metso Canada. Upon the terms and subject to the conditions contained herein, at the Metso Canada Closing, Metso Canada Seller will sell, convey, transfer, assign and deliver to Metso Canada Buyer, and Metso Canada Buyer will acquire from Metso Canada Seller, the Metso Canada Shares, free and clear of all Encumbrances, for the consideration specified in Section 2.2.1. 2.1.2 Metso US. Upon the terms and subject to the conditions contained herein, at the Metso US Closing, Metso US Seller will sell convey, transfer, assign and deliver to Metso Canada, and Metso Canada will acquire from Metso US Seller, the Metso US Shares, free and clear of all Encumbrances, for the consideration specified in Section 2.2.2. 2.1.3 Concurrent Closings. The Metso US Closing shall occur immediately following the Metso Canada Closing. The Metso Canada Closing shall not occur unless and until all conditions to the Metso US Closing have been satisfied or waived and the Metso US Closing is able to occur immediately following the Metso Canada Closing. 2.2 PURCHASE PRICE 2.2.1 Purchase Price for Metso Canada. The purchase price for the Metso Canada Shares shall be Twenty-Four Million Nine Hundred Sixteen Thousand Three Hundred Forty-Nine Dollars ($24,916,349) (the "Metso Canada Purchase Price"). 2.2.2 Purchase Price for Metso US. The purchase price for the Metso US Shares shall be Ten Million One Hundred Forty-Three Thousand Dollars ($10,143,000) (the "Metso US Purchase Price"). The Metso Canada Purchase Price and the Metso US Purchase Price are sometimes collectively referred to herein as the "Purchase Price"). 2.2.3 Metso Canada Payment. The Metso Canada Purchase Price shall be paid by the Metso Canada Buyer as follows: 2.2.3.1 Fourteen Million Four Hundred Eighty-Seven Thousand Two Hundred Sixty-Two Dollars ($14,487,262) to the Metso Canada Seller or its order by bank transfer on the Metso Canada Closing; 2.2.3.2 Six Million Two Hundred Twenty-Nine Thousand Eighty-Seven Dollars ($6,229,087) to Bennett Jones LLP in trust by bank transfer on the Metso Canada Closing for the benefit of the Metso Canada Seller on the terms and conditions of the Tax Holdback Escrow Agreement in the form attached as Schedule 2.2.3.2 (the "Tax Holdback Escrow Agreement"); and 2.2.3.3 Four Million Two Hundred Thousand Dollars ($4,200,000), less the amounts of Proven Claims and Unproven Claims Metso Canada Buyer elects to deduct in accordance with Section 9.4, to the Metso Canada Seller or its -10- order on or before the Deferred Payment Deadline (the "Metso Canada Deferred Payment"). 2.2.4 Metso US Payment. The Metso US Purchase Price shall be paid by Metso Canada as follows: 2.2.4.1 Eight Million Seven Hundred Forty-Three Thousand Dollars ($8,743,000) to the Metso US Seller or its order by bank transfer on the Metso US Closing; and 2.2.4.2 One Million Four Hundred Thousand Dollars ($1,400,000), less the amounts of Proven Claims and Unproven Claims Metso Canada elects to deduct in accordance with Section 9.4, to the Metso US Seller or its order on or before the Deferred Payment Deadline (the "Metso US Deferred Payment"). 2.2.5 Deferred Payment. Metso Canada Buyer on its own behalf and on behalf of Metso Canada will cause the Standby Letter of Credit to be delivered to Bennett Jones LLP in trust on the Metso US Closing on the terms and conditions of the Purchase Price Holdback Escrow Agreement in the form attached as Schedule 2.2.5 (the "Purchase Price Holdback Escrow Agreement") as security for the payment of the Metso Canada Deferred Payment and the Metso US Deferred Payment. 2.2.6 Post-Closing Adjustments 2.2.6.1 Within seven (7) days following the Closing Date, Metso Canada Seller shall deliver to Metso Canada Buyer and the Companies a statement (the "Adjustment Statement"), signed by a duly authorized representative of Metso Canada Seller, stating the aggregate operating profit for the Companies, taken together (the "January Operating Profit") or the aggregate operating loss for the Companies, taken together (the "January Operating Loss"), as the case may be, for the month ended January 31, 2003, which statement shall include true copies of the unaudited financial statements for the Companies for the such period, which financial statements shall be prepared in a manner consistent with current practices. Provided, however, that for the purpose of the calculation of "January Operating Profit" and "January Operating Loss" shall be made without taking into account the effect of the cancellation of the $148,798 owing from Metso Canada Buyer to Metso Canada pursuant to Trinidad Contract 108457. 2.2.6.2 The Adjustment Statement shall be final and binding upon the parties for the purposes of this Section 2.2.6. 2.2.6.3 Within seven (7) days following the receipt by Metso Canada Buyer of the Adjustment Statement, a cash payment shall be made as follows: (i) if the January Operating Profit, if any, is greater than $200,000, Metso Canada Seller shall pay Metso Canada Buyer an amount equal to the amount by which the January Operating Profit exceeds $200,000; and (ii) if the January Operating Loss, if any, is greater than $200,000, Metso Canada Buyer shall -11- pay Metso Canada Seller an amount equal to the amount by which the Operating Loss exceeds $200,000. 2.2.6.4 All payments made under this Section 2.2.6 shall be made by wire transfer and shall bear interest calculated from the Closing Date to the date of payment at the Royal Bank of Canada prime rate. 2.2.6.5 The determination and payment of any amounts due pursuant to the provisions of this Section 2.2.6 shall not limit or affect any other rights or causes of action any of the parties hereto may have hereunder with respect to the representations, warranties, covenants and indemnities in its favour contained herein. ARTICLE 3 CLOSING 3.1 CLOSING The closing of the purchase and sale of the Metso Canada Shares (the "Metso Canada Closing") shall take place at the offices of Bennett Jones LLP, solicitors for the Sellers, 4500 Bankers Hall East, 855 - 2nd Street SW, Calgary, Alberta, Canada, T2P 4K7, at 2:00 p.m. (Calgary time) on January 31, 2003 or at such other place, time and date as the parties shall mutually agree (the "Metso Canada Closing Date") and the closing of purchase and sale of the Metso US Shares (the "Metso US Closing") (the Metso Canada Closing and the Metso US Closing are sometimes collectively referred to as the "Closing") shall take place at the offices of Bennett Jones LLP, solicitors for Sellers, at the aforesaid address, immediately following the Metso Canada Closing or at such other place, time and date as the parties shall mutually agree (the "Metso US Closing Date") (the Metso Canada Closing Date and the Metso US Closing Date are sometimes collectively referred to as the "Closing Date"). 3.2 DELIVERIES AT CLOSING 3.2.1 Metso Canada Seller's Delivery Obligations. To effect the sale and transfer of the Metso Canada Shares, Metso Canada Seller will, at the Metso Canada Closing, execute (or cause to be executed by any other party thereto other than the Metso Canada Buyer) and deliver to the Metso Canada Buyer: 3.2.1.1 certificates evidencing the Metso Canada Shares, duly endorsed in blank for transfer or accompanied by stock powers duly executed in blank; and 3.2.1.2 all certificates and other documents described in Section 8.1. 3.2.2 Metso Canada Buyer's Delivery Obligations. To effect the sale and transfer referred to in Section 2.1 hereof, Buyer will, at the Metso Canada Closing, execute and deliver to Sellers: 3.2.2.1 the portion of the Metso Canada Purchase Price due on the Metso Canada Closing as set out in Section 2.2.3; and -12- 3.2.2.2 all certificates and other documents described in Section 7.1. 3.2.3 Metso US Seller's Delivery Obligations. To effect the sale and transfer of the Metso US Shares, Metso US Seller will, at the Metso US Closing, execute (or cause to be executed by any other party thereto other than the Metso Canada Buyer or Metso Canada) and deliver to Metso Canada: 3.2.3.1 certificates evidencing the Metso US Shares, duly endorsed in blank for transfer or accompanied by stock powers duly executed in blank; and 3.2.3.2 all certificates and other documents described in Section 8.2. 3.2.4 Metso Canada's Delivery Obligations. To effect the sale and transfer referred to in Section 2.1 hereof, Metso Canada Buyer will, at the Metso US Closing, execute and deliver to Metso US Seller: 3.2.4.1 the portion of the Metso US Purchase Price due on the Metso US Closing as set out in Section 2.2.4; and 3.2.4.2 all certificates and other documents described in Section 7.2. 3.2.5 Form of Instruments. To the extent that a form of any document to be delivered hereunder is not attached as a Schedule hereto, such document shall be in form and substance, and shall be executed and delivered in a manner, reasonably satisfactory to the recipient. ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF SELLERS Metso Canada Seller (with respect to itself and Metso Canada only), Metso US Seller (with respect to itself and Metso US only), Metso Canada (with respect to itself only) and Metso US (with respect to itself only) hereby jointly and severally, with respect to Sections 4.6.3 and 4.17, and otherwise severally and not jointly, represent and warrant for the benefit of the Metso Canada Buyer and the Companies as follows: 4.1 ORGANIZATION Each of the Companies is a corporation duly incorporated, organized and validly subsisting and, in the case of Metso US and Metso US Seller, in good standing, under the laws of the jurisdiction of its incorporation, and is duly licensed, registered and qualified as a corporation to do business in each jurisdiction in which the nature of its business makes such qualification necessary. 4.2 SUBSIDIARIES The Companies have no Subsidiaries. Metso US has a branch office and a liaison office in Turkey. -13- 4.3 AUTHORIZATION Except for the approval of the board of directors of Metso Canada to the acquisition of the Metso US Shares, each of the Sellers and each of the Companies has full power and authority (corporate, fiduciary or other) to enter into this Agreement and to carry out the transactions contemplated hereby, and each of the Sellers and each of the Companies has taken all action required by law, its charter or other governing documents, as the case may be, or otherwise, to be taken by it to authorize the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby. This Agreement is the legal, valid and binding obligation of each of the Sellers and each of the Companies enforceable against each of them in accordance with its terms, except as limited by: (a) bankruptcy, insolvency, reorganization resulting from said bankruptcy or insolvency, moratorium or other such laws concerning the rights of creditors or other obligees generally; and (b) the fact that equitable remedies, including the remedies of specific performance and injunction, may only be granted in the discretion of a court. 4.4 NO VIOLATION; CONSENTS None of the execution, delivery and performance of this Agreement nor the consummation of the transactions contemplated hereby will (i) violate any provision of the Articles of Incorporation, Bylaws or other governing documents of any of the Sellers or the Companies, (ii) violate, conflict with, result in a breach of or constitute a default (or an event which, with the giving of notice or lapse of time or both, would constitute a default) or, except as set forth in Schedule 4.4, require any consent under, or give to others any right of termination, amendment, acceleration, suspension, revocation or cancellation with respect to, any Contract to which either of the Companies is a party or by which any of the Shares, or any of the assets or properties of the Companies are bound or affected, (iii) result in the creation or imposition of any Encumbrance upon any of the Shares or (iv) violate, conflict with or result in the breach of any statute or law or any judgment, decree, order, regulation or rule of any court or Governmental Authority to which any of the Sellers or the Companies or any of their properties or assets are subject. Except as set forth in Schedule 4.4, no action, consent, approval or authorization by or filing with any person or entity, including, without limitation, any Governmental Authority, is required in connection with the execution, delivery and performance by each of the Sellers and the Companies of this Agreement or the consummation by each of the Sellers and the Companies of the transactions contemplated by each of them herein. 4.5 CAPITALIZATION 4.5.1 The authorized capital stock of Metso Canada consists of an unlimited number of Class A Shares without par value and an unlimited number of Common Shares without par value of which 11,181,391 Common Shares and 5,000 Class A Shares (and no more) are issued and outstanding. Metso Canada Seller is, of record and beneficially, the owner and holder of the Metso Canada Shares, free and clear of all Encumbrances. 4.5.2 There are no shares of capital stock of Metso Canada issued and outstanding or agreed or committed to be issued other than the Metso Canada Shares. All Metso Canada Shares: (i) are duly authorized, validly issued, fully paid and nonassessable; (ii) were issued in compliance with all legal requirements; and (iii) are free of Encumbrances. There are no -14- outstanding (i) securities convertible into or exchangeable or exercisable for any of the capital stock of Metso Canada; (ii) options, warrants, calls or other rights, including, without limitation, rights to demand registration or to sell securities in connection with any registration by Metso Canada under applicable securities legislation, with respect to the capital stock of Metso Canada or to purchase or subscribe for capital stock of Metso Canada or securities convertible into or exchangeable or exercisable for capital stock of Metso Canada; (iii) contracts, commitments, agreements, understandings or arrangements of any kind relating to the issuance, sale, transfer, or assignment of any capital stock, any convertible or exchangeable securities or any options, warrants or rights of Metso Canada; or (iv) Metso Canada Shares or other securities of Metso Canada pledged as collateral to secure any agreement or obligation of Metso Canada. There are no outstanding obligations of Metso Canada to redeem or otherwise acquire any of its securities. There are no voting trust agreements, unanimous shareholder agreements or other contracts, agreements, arrangements, commitments, plans, proxies or understandings restricting or otherwise relating to conveyance, voting or dividend rights with respect to the Metso Canada Shares. 4.5.3 The authorized capital stock of Metso US consists of 1000 common shares with a par value of $10 per share, of which 100 common shares (and no more) are issued and outstanding. Metso US Seller is, of record and beneficially, the owner and holder of the Metso US Shares, free and clear of all Encumbrances. 4.5.4 There are no shares of capital stock of Metso US issued and outstanding or agreed or committed to be issued other than the Metso US Shares. All Metso US Shares: (i) are duly authorized, validly issued, fully paid and nonassessable; (ii) were issued in compliance with all legal requirements; and (iii) are free of Encumbrances. There are no outstanding (i) securities convertible into or exchangeable or exercisable for any of the capital stock of Metso US; (ii) options, warrants, calls or other rights, including, without limitation, rights to demand registration or to sell securities in connection with any registration by Metso US under applicable securities legislation, with respect to the capital stock of Metso US or to purchase or subscribe for capital stock of Metso US or securities convertible into or exchangeable or exercisable for capital stock of Metso US; (iii) contracts, commitments, agreements, understandings or arrangements of any kind relating to the issuance, sale, transfer, or assignment of any capital stock, any convertible or exchangeable securities or any options, warrants or rights of Metso US; or (iv) Metso US Shares or other securities of Metso pledged as collateral to secure any agreement or obligation of Metso US. There are no outstanding obligations of Metso US to release or otherwise acquire any of its securities. There are no voting trust agreements, unanimous shareholder agreements or other contracts, agreements, arrangements, commitments, plans, proxies or understandings restricting or otherwise relating to conveyance, voting or dividend rights with respect to the Metso US Shares. 4.6 FINANCIAL STATEMENTS 4.6.1 Attached hereto as Schedule 4.6 are the balance sheet and statement of income of Metso Canada for the year ended December 31, 2002 (the "Metso Canada Financial Statements") and the balance sheet and statement of income of Metso US for the year ended December 31, 2002 (the "Metso US Financial Statements") (the Metso Canada -15- Financial Statements and the Metso US Financial Statements are collectively referred to as the "Financial Statements"). To the best of the knowledge of Sellers, the Financial Statements (i) are true, correct and complete in all material respects as at and for the periods then ended, (ii) are in accordance with the underlying books and records of the Companies, (iii) have been prepared in accordance with Canadian GAAP or US GAAP, as the case may be, consistently applied throughout the periods covered thereby, and (iv) fairly and accurately present the assets, liabilities and financial position of the Companies as of the respective dates thereof and the results of operations and changes in cash flows for the periods then ended. 4.6.2 No Undisclosed Liabilities. Except as set forth in Schedule 4.6.2, the Companies have no liabilities or obligations of any nature (whether absolute, accrued, contingent or otherwise) except for liabilities or obligations reflected or reserved against in the Financial Statements and liabilities and obligations not required by Canadian GAAP or US GAAP, as the case may be, to be disclosed in the Financial Statements. 4.6.3 No Non-NMS Business Liabilities. Excluding any matters relating to asbestos, neither of the Companies has any liabilities or obligations of any nature (whether absolute, accrued, contingent or otherwise) that do not relate to the NMS Business except for liabilities or obligations reflected in the Financial Statements. 4.7 NO CHANGE IN THE ASSETS Since December 31, 2002: 4.7.1 There has been no Material Adverse Change in the Companies; 4.7.2 Except in the ordinary course of business, there has not been any sale or other disposition of any material assets of the Companies or any Encumbrance placed on their assets; and 4.7.3 Each of the Companies has operated its business in the ordinary course consistent with its past practice. 4.7.4 Except in the ordinary course of business, there has been no payment or increase by the Companies of any bonuses, salaries, or other compensation to any director, officer, or (except in the ordinary course of business) employee or entry into any employment, severance, or similar Contract with any director, officer, or employee. 4.7.5 There has been no adoption of, or increase in the payments to or benefits under, any US Employee Plan. 4.7.6 Except in the ordinary course of business, there has been no damage to or destruction or loss of any asset or property of either of the Companies or any of their Subsidiaries, whether or not covered by insurance, that has had a Material Adverse Effect. -16- 4.7.7 There has been no cancellation or waiver of any claims or rights with a value to either of the Companies or any of their Subsidiaries in excess of $100,000 except Metso Canada has agreed in principle with Egyptian Natural Gas Company (GASCO) to waive Metso Canada's claim for compensation for delays caused by GASCO in exchange for GASCO releasing any potential claims for penalties for delays (which are limited to approximately $700,000, being 5% of the Contract value). 4.7.8 There has been no change in the accounting methods used by either of the Companies, except as requested by the Metso Canada Buyer in writing. 4.7.9 There has been no agreement, whether oral or written, by either of the Companies or any of their Subsidiaries to do any of the foregoing. 4.8 REAL PROPERTY Schedule 4.8 sets forth a complete and accurate list of all real property, leaseholds or other interests in real property owned by the Companies. All leases are in good standing and the Companies have not received any notice of termination or default under any lease nor do they know of any fact that would cause the lessor to terminate any lease or issue a notice of default. Each Company owns (with good and marketable title in the case of real property, subject only to the matters permitted by the following sentence) all the properties and assets (whether real, personal, or mixed and whether tangible or intangible) that it purports to own, including all of the properties and assets reflected in the Financial Statements (except for assets held under capitalized leases disclosed or not required to be disclosed in Schedule 4.8 and personal property sold or used since the date of the Financial Statements in the ordinary course of business), and all of the properties and assets purchased or otherwise acquired by such Company since the date of the Financial Statements (except for personal property acquired and sold or used since the date of the Financial Statements in the ordinary course of business and consistent with past practice). 4.9 BOOKS AND RECORDS 4.9.1 Metso Canada. The minute books of Metso Canada have been made available to the Metso Canada Buyer, and do not contain any misstatements (for the purposes of the foregoing statement, omissions are not misstatements). To the extent that there are records of meetings held and of corporate actions or written consents by the shareholders, board of directors and committees of the board of directors of Metso Canada, they are accurate records. The registers of shareholders and directors of Metso Canada is each an accurate and complete record showing the current shareholders of Metso Canada and the shares each shareholder owns and the directors of Metso Canada, respectively. 4.9.2 Metso US. The minute books of Metso US have been made available to the Metso Canada Buyer, and, to the extent that such minute books contain minutes of meetings of the shareholders, board of directors and any committees of the board of directors of Metso US, they contain accurate and materially complete records of all corporate actions or written consents by the shareholders, board of directors and committees of the board of directors of Metso US and no meeting has been held for which minutes have not been prepared and are not contained in such minute books. The stock books of Metso US -17- contain accurate and complete records of all transactions effected in the stock of Metso US through and including the date hereof. 4.10 LITIGATION Except as set forth in Schedule 4.10, there is no action, order, writ, injunction, judgment or decree outstanding or any claim, suit, litigation, proceeding, labor dispute, arbitral action, administrative proceeding, governmental audit or investigation (collectively, "Actions") which has been served upon either of the Companies or of which any of the Sellers or the Companies has knowledge, or, to the best of the knowledge of the Sellers and the Companies, threatened: (i) against, related to or affecting the Companies or their respective assets; or (ii) seeking to delay, limit or enjoin the transactions contemplated by this Agreement, which may have a Material Adverse Effect on the Companies (or either of them) or either of their respective businesses or assets. 4.11 COMPLIANCE WITH LAW; PERMITS To the best of the knowledge of the Sellers and the Companies, the Companies and the conduct of their respective businesses have not violated and are in compliance with all Legal Requirements and all Permits. The Companies have all Permits necessary for the operation of their businesses. 4.12 NO OTHER AGREEMENTS TO SELL THE COMPANIES None of the Sellers or the Companies has any commitment or legal obligation, absolute or contingent, to any Person other than the Metso Canada Buyer and Metso Canada to sell, assign, transfer or effect a sale of any of the Shares or any other shares of the Companies' capital stock (authorized or unauthorized), or to effect any merger, consolidation, liquidation, dissolution or other reorganization of the Companies, or to effect any sale of the Companies' assets (other than in the ordinary course of business of the Companies). 4.13 TAX MATTERS 4.13.1 United States. Appendix 4.13.1 sets forth the tax-related representations, warranties and covenants with respect to Metso US. 4.13.2 Canada. Appendix 4.13.2 sets forth the tax-related representations, warranties and covenants with respect to Metso Canada. 4.14 CANADIAN EMPLOYEES AND EMPLOYEE BENEFITS 4.14.1 Disclosure. Schedule 4.14.1 contains a complete list of all Canadian Employee Plans for the benefit of Metso Canada employees. In addition, Schedule 4.14.1 identifies those Canadian Employee Plans which are group plans (the "Canadian Group Plans"). -18- 4.14.2 Delivery of Copies of Relevant Documents. Metso Canada Seller has made available to the Metso Canada Buyer current, accurate and complete copies of all Canadian Employee Plans (including any amendments thereto), and all summary plan descriptions, and other material agreements, documents or instruments relating thereto. 4.14.3 All Remuneration Paid. Except as set forth in Schedule 4.14.3, to the best of the knowledge of Metso Canada Seller and Metso Canada, all staff salaries, remuneration, benefits, deductions, contributions, holiday or vacation pay (including sick leave) and workers' compensation payments for all employees of Metso Canada have been fully accrued or paid and satisfied as at the date of this Agreement. 4.14.4 Employees and Consultants. All employees have, and all former employees of Metso Canada since 1996 had, written employment contracts or written and accepted offers of employment in the forms provided on a compact disc delivered to Edwards, Kenny & Bray on or around December 16, 2002. All consultants, dependant and independent contractors have and all former consultants, dependant and independent contractors of Metso Canada since 1996 had written contracts in the forms provided on a compact disc delivered to Edwards, Kenny & Bray on or around December 16, 2002. There have been no amendments or changes to the provisions relating to the inventions and confidentiality in such agreements. Except for the foregoing and as set forth in Schedule 4.18, Metso Canada is not a party to any written contract: (i) for the employment of any officer or individual employee; or (ii) for consulting services on an ongoing basis which cannot be terminated without penalty or additional compensation within thirty (30) days of the Metso Canada Closing Date. 4.14.5 Pension Plans. Metso Canada does not have any Pension Plans. 4.14.6 Compliance with Law. Except as set forth in Schedule 4.14.6, to the best of the knowledge of Metso Canada Seller and Metso Canada, each Canadian Employee Plan has been established, qualified, invested and maintained in compliance with its terms and with the requirements prescribed by any and all Legal Requirements. 4.15 US EMPLOYEE AND EMPLOYEE BENEFITS 4.15.1 Disclosure. Schedule 4.15.1 contains a complete list of all US Employee Plans (including all US employee benefit plans, whether or not within the meaning of ERISA Section 3(3)) sponsored or maintained by (or to which contributions are made by) either (1) Metso US, or (2) any other organization which together with Metso US is treated as a single employer under US Code Sections 414(b) or (c) (an "ERISA Affiliate"), for the benefit of Metso US employees. There are no individuals who are entitled to retiree medical benefits and/or retiree life insurance under a US Employee Plan or otherwise by virtue of an employee's retirement from, or other employment with, Metso US or predecessor company of Metso US. In addition, Schedule 4.15.1 identifies those US Employee Plans which are sponsored by an ERISA Affiliate and in which employees of Metso US participate (the "US Group Plans"). 4.15.2 Delivery of Copies of Relevant Documents. Metso US Seller has made available to the Metso Canada Buyer (i) current, accurate and complete copies of all US Employee Plans -19- (including any amendments thereto), and all summary plan descriptions, and other material agreements, documents or instruments relating thereto; (ii) the most recent audited financial statement with respect to each US Employee Plan required to have an audited financial statement; (iii) copies of the most recent determination letters with respect to any US Employee Plan which is intended to qualify under US Code Section 401(a) (a "Qualified Plan"); and (iv) copies of the most recent annual reports (Forms 5500) with respect to each Employee Plan required to file an annual report. 4.15.3 Employees and Consultants. No employees have and no former employees of Metso US had written employment contracts. All employees have, and all former employees of Metso US had, signed written confidentiality and invention agreements in the forms provided on a compact disc delivered to Edwards, Kenny & Bray on or around December 16, 2002. All consultants, dependant and independent contractors have and all former consultants, dependant and independent contractors of Metso US had written contracts in the forms provided on a compact disc delivered to Edwards, Kenny & Bray on or around December 16, 2002. There have been no amendments or changes to the provisions relating to the inventions and confidentiality in such agreements. Except for the foregoing and as set forth in Schedule 4.18, Metso US is not a party to any written contract: (i) for the employment of any officer or individual employee; or (ii) for consulting services on an ongoing basis which cannot be terminated without penalty or additional compensation within thirty (30) days of the Metso US Closing Date. 4.15.4 Compliance with Law. Except as set forth in Schedule 4.15.4, to the best of the knowledge of Metso US Seller and Metso US, with respect to each US Employee Plan: (i) Metso US and each ERISA Affiliate has complied in all material respects with all provisions of such plan, all contributions that are required to have been paid to such plans on or before the Metso US Closing Date have been paid to such plans in a timely fashion and with ERISA, the US Code and other applicable statutes, orders, rules and regulations, and no act or omission by Metso US, each ERISA Affiliate, or any fiduciary of any such plan has occurred, no event has occurred and no condition exists that will or could reasonably be expected to give rise to material liability for a breach of fiduciary responsibilities under ERISA, or to any material fines, penalties, excise taxes, corrective payments, fees, sanctions or other payments under ERISA, the US Code or other applicable statutes, orders, rules and regulations; (ii) each such plan which is intended to be tax-qualified under Section 401(a) of the US Code has received from the US IRS a favorable determination letter as to its qualification under the US Code, and no event has occurred that could reasonably be expected to give rise to disqualification or loss of tax-exempt status of any such plan or related trust; (iii) other than routine applications, filings and amendments and modifications, there is no matter pending with respect to any of the plans before the US IRS, the US Department of Labor or the Pension Benefit Guaranty Corporation or any other federal, state or local governmental agency; -20- (iv) there are no actions, investigations, suits or claims (other than routine claims for benefits in the ordinary course) pending or threatened, which could subject Metso US to any material liability; and (v) none of Metso US Seller, Metso US, any ERISA Affiliate or any other person is engaged in a prohibited transaction (within the meaning of US Code Section 4975 or ERISA Section 406) which would subject Metso US to any material Taxes (as such term is defined in Appendix 4.13.1), penalties or other liabilities resulting from prohibited transactions under US Code Section 4975 or under ERISA Sections 409 or 502(i). 4.15.5 No ERISA Material Liability. To the best of the knowledge of Metso US Seller and Metso US, there does not now exist, nor do any circumstances exist that could reasonably be expected to result in, any material liability that could be imposed on Metso US under Title IV of ERISA, or US Code section 412. 4.15.6 Metso US Seller 401(k) Plan. Effective as of the Metso US Closing Date, Metso US and employees of the Companies will cease participation in the Metso US Seller 401(k) plan and Metso US Seller will fully vest all employees of the Companies in their account balances. As soon as is practicable after the Metso US Closing Date (or as the parties otherwise mutually agree), Metso US Seller will cause to be transferred to a retirement plan maintained by Metso US that is intended to be tax-qualified under Section 401(a) of the US Code, the respective account balances (including any related loans and qualified domestic relations orders) and related assets of the Companies' employees and former employees who maintain an account balance in the Metso US Seller 401(k) plan. Upon such transfer, the retirement plan of Metso US will assume the related liabilities. Employees who have outstanding participant loans under the Metso US Seller 401(k) plan will be permitted to continue making loan payments to the Metso US Seller 401(k) plan until such time as the loans are transferred to the retirement plan of Metso US. 4.15.7 Right to Amend US Employee Plans. With respect to each US Employee Plan, including, without limitation, plans that provide severance benefits, Metso US has the right to terminate any such plan, at any time, without the incurrence of any additional liability or any obligation to provide for benefits past the date of termination. 4.16 LABOR RELATIONS No collective bargaining or similar agreement is being negotiated by either Company or any member of the Sellers' Group in respect of either Company, there is no pending or, to the best of the knowledge of the Seller and the Companies, threatened labor dispute, strike, slowdown, lockout or work stoppage against either Company, no member of the Sellers' Group is a party to or bound by any collective bargaining or similar agreement with any union or work rules or practices agreed to with any labor organization or employee association applicable to employees of either Company and none of the employees of either Company are represented by any labor organization and, to the best of the knowledge of the Seller and the Companies, there are no current union organizing activities among the employees of any member of the Sellers' Group. Metso US has not (i) failed to comply in any material respect with the notice and other requirements of the WARN Act, effectuated (1) a "plant closing" (as defined in the WARN Act) -21- affecting any site of employment or one or more facilities or operating units within any site of employment or facility of Metso US covered by the WARN Act or (2) a "mass layoff" (as defined in the WARN Act) affecting any site of employment or facility of Metso US covered by the WARN Act; or (ii) engaged in layoffs or employment terminations sufficient to imply application of any foreign, state or local laws or regulations relating to plant closing or mass layoffs and requiring notice to employees in the event thereof without complying with such laws and regulations in each case with respect to which Metso US could reasonably be expected to have any liability. 4.17 ENVIRONMENTAL MATTERS 4.17.1 Compliance with Environmental Laws. Except as set out in Schedule 4.17: (i) each of the Companies and the operation of their respective businesses have been and are in compliance with all Environmental Laws; (ii) each of the Companies has complied in all material respects with all reporting and monitoring requirements under all Environmental Laws; and (iii) neither of the Companies has received any notice of any non-compliance with any Environmental Laws, and neither of the Companies has ever been convicted of an offence for non-compliance with any Environmental Laws or been fined or otherwise sentenced or settled such prosecution short of conviction. 4.17.2 Environmental Permits. Each of the Companies has obtained all Environmental Permits necessary to conduct its business. 4.18 CONTRACTS AND COMMITMENTS 4.18.1 Contracts. Schedule 4.18 sets forth a list of all Contracts of the Companies of the following categories: 4.18.1.1 Contracts not made in the ordinary course of either of the Companies' conduct of their respective businesses which involve expenditures or receipts of either of the Companies in excess of $100,000 or which otherwise are material to either of the Companies or which provide for an express undertaking by either of the Companies to be responsible for consequential damages; 4.18.1.2 Franchise agreements; 4.18.1.3 Agreements or indentures relating to the borrowing of money or to mortgaging, pledging or otherwise placing an Encumbrance on any of the assets of the Companies relating to liabilities in excess of $25,000 or, in the case of liabilities arising from equipment leases, $50,000; 4.18.1.4 Guarantees of any obligation for borrowed money or otherwise, other than endorsements made for collection; 4.18.1.5 Contracts, purchase orders or groups of related Contracts or purchase orders with the same party for the sale of products or services under which the undelivered balance of such products or services has a sales price in excess of $100,000; -22- 4.18.1.6 Contracts involving expenditures or liabilities, actual or potential, by either Company, in excess of $100,000 and not cancelable (without liability) within 30 calendar days; 4.18.1.7 Leases of real property not cancelable (without liability) within 30 calendar days; 4.18.1.8 Contracts containing covenants restricting the business activity or limiting the freedom of either of the Companies to engage in any line of business or compete with any Person; 4.18.1.9 License, reseller and OEM agreements made with third-party suppliers for the resale or sub-licensing by either of the Companies of third-party products; 4.18.1.10 Sales, marketing, distributorship, agency, representative and value-added reseller agreements made with any third party with respect to the sale or sublicensing by the third party of any of the products of the Companies; 4.18.1.11 Software licenses and other agreements granted by either of the Companies to third parties to use software developed or licensed by either of the Companies; 4.18.1.12 Agreements and closing books with respect to reorganizations, acquisitions or the purchase or sale of assets or capital stock of either of the Companies completed within the last 5 years; 4.18.1.13 Management and employment agreements; 4.18.1.14 Related party agreements; 4.18.1.15 Joint venture, partnership and any other contracts involving a sharing of profits, losses, costs or liabilities or either of the Companies with any other Person; 4.18.1.16 Except for Powers of Attorney related to specific projects, all outstanding Powers of Attorney that are material to the Companies or that are not in the ordinary course of the conduct of their respective businesses; and 4.18.1.17 Amendments, supplements and modifications in excess of $100,000 (whether oral or written) in respect of any of the foregoing, (collectively referred to as the "Material Contracts"). Sellers and the Companies have made available to Metso Canada Buyer true, correct and complete copies of all of the Material Contracts listed on Schedule 4.18. 4.18.2 Good Standing of Agreements. Except as set out in Schedules 4.10 and 4.18.2, to the best of the knowledge of Sellers and the Companies: (i) neither Company is in default or -23- in breach of any of its obligations under any Material Contract and there exists no state of facts which, after notice or lapse of time or both, would constitute such a default or breach; (ii) all Material Contracts are in full force and effect and the Companies are entitled to all material benefits thereunder and the other parties to such Material Contracts are not materially in default or in breach of any of their obligations thereunder; (iii) each other Person that has or had any obligation or liability under any Material Contract under which either of the Companies has or had any rights is, and at all times has been, in full compliance with all material applicable terms and requirements of such Material Contract; and (iv) neither the Sellers nor the Companies has given to or received from any other Person, at any time, any written notice or other written communication, or to the best of the knowledge of the Sellers and the Companies, any oral notice or communication, regarding any actual, alleged, possible, or potential violation or breach of, or default under any material Contract. 4.18.3 Bank Guarantees and Surety Bonds. Schedule 4.18.3 lists all bid, advance payment, performance and warranty bonds, bank guarantees and standby letters of credit currently in place, issued by any bank or surety company at the request of either of the Companies in favour of any customer of the Companies as beneficiary which are material to the Companies. 4.19 INTELLECTUAL PROPERTY 4.19.1 For purposes of this Agreement, "Intellectual Property" shall mean: (a) all inventions (whether patentable or unpatentable and whether or not reduced to practice) and all patent rights in same including patents and patent applications, together with all rights of priority and all reissuances, continuations, continuations-in-part, divisions, revisions, extensions and re-examinations thereof ("Patents"); (b) all trademarks, service marks and other marks, trade dress, corporate names, business names, trade names, and other trade rights, all whether or not registrable or the subject of applications for registration(s), including all goodwill associated therewith and all applications, registrations and renewals in connection therewith ("Trademarks"); (c) all copyrights in the Works (defined below), and all applications, registrations, and renewals in connection therewith ("Copyrights"); (d) all confidential information including as may relate to any of the following: improvements thereto, trade secrets and confidential business information, ideas, research and development, know-how, formulas, compositions, manufacturing and production processes and techniques, technical data, designs, drawings, specifications, customer and supplier lists, pricing and cost information, and business and marketing plans and proposals ("Trade Secrets"); (e) all computer software programs, scripts, interfaces, program specifications, charts, procedures, source codes (including annotations), object codes, diagnostic and other routines and report layouts and formats, record file layouts, diagrams, functional specifications and narrative descriptions and flow charts ("Software"); (f) all domain names, uniform resource locators and other names and locators associated with the Internet; (g) all databases, database layouts and data collections including all rights therein ("Databases"); (h) all works, including literary, artistic, musical, dramatic and audio visual works, performer's performances, sound recordings and broadcast signals, all whether or not registered or registrable (collectively, with Software and Databases, herein and hereinafter "Works"); (i) all moral rights or the benefits of all waivers of moral rights, in the Works ("Moral Rights") (j) all -24- mask works and mask work rights; (k) all industrial designs, whether or not patentable or registrable, patented or registered or the subject of applications for registration or patent, including all design patents, design registrations, pending applications and rights to file applications, including all rights of priority and rights in continuation, continuations-in-part, divisions, re-examinations, and reissues ("Design Rights"); (l) all integrated circuit topographies and integrated circuit topography products, whether or not registrable, registered or pending, including registrations, pending applications, and rights to file for any of same ("Topography Rights"); (m) all other intellectual and industrial property including all rights to enforce rights in the foregoing (a) to (l) ("Other Intellectual Property Rights"). 4.19.2 (a) Except as set forth separately on Schedule 4.19.2 or Schedule 4.19.4, the Companies are the exclusive owners of all right, title and interest in and to, and have good and marketable title to, the specific Intellectual Property listed on Schedule 4.19.2 free and clear of any Encumbrances. (b) Except as set forth separately on Schedule 4.19.2 all licenses or other rights or permission to use and which are material for the business of the Companies have been obtained by the Companies to any Third Party Intellectual Property (defined below) used by either of the Companies in their businesses. (c) Except as set forth separately on Schedule 4.19.2 each item of Intellectual Property owned or used by either or both of the Companies immediately prior to the Closing hereunder will be owned or available for use by such Companies on substantially the same terms and conditions immediately subsequent to the Closing hereunder. (d) Except as set forth separately on Schedule 4.19.2, Schedule 4.19.2 sets forth all registrations and applications therefore currently issued or pending in any jurisdiction for the Intellectual Property owned by either of the Companies, including registration or application numbers therefor and the jurisdiction in which registration or application has been obtained or made (collectively referred to herein and hereinafter as "Registered Intellectual Property"). (e) To the best knowledge of the Companies and except as set forth separately on Schedule 4.19.2, Schedule 4.19.2 sets forth a true and complete list of all Registered Intellectual Property that is owned by the Companies and the Registered Intellectual Property is valid, subsisting, and unexpired. (f) For the purposes of this Agreement "Third Party Intellectual Property" means any intellectual property rights of any Person other than either of the Companies, such intellectual property rights including any patent, industrial design, copyright, moral right, trademark or service mark (including any logo, design, business name, trade name or the like), mask work, trade secret, confidential information, right of privacy, data right, or any other analogous intangible proprietary right, whether registered or unregistered, anywhere in the world. 4.19.3 (a) Except as set forth on the attached Schedule 4.19.3 and to the best of the knowledge of the Sellers, each Company, the Companies have not, separately or together, infringed upon or misappropriated any Third Party Intellectual Property. (b) Except as set forth separately on Schedule 4.19.3 none of the Companies or the Sellers has ever received any written complaint, claim, demand, or notice that remains unresolved and that (i) alleges that either Company has infringed or misappropriated any Third Party Intellectual Property; or (ii) seeks to restrict in any manner the use, transfer, or licensing of any of any Intellectual Property owned by such Company. (c) To the best of the knowledge of the Sellers and each Company and except as provided separately in Schedule 4.19.3 no -25- third party to either of the Companies has infringed upon or misappropriated any Intellectual Property rights owned by either of the Companies. 4.19.4 Except as otherwise set forth separately on Schedule 4.19.2, with respect to each item of Intellectual Property identified on Schedule 4.19.2: (i) where the item is Registered Intellectual Property, the item remains pending or in force (as the case may be) with all maintenance fees and renewal fees that have fallen due on or prior to the Closing Date have been paid in a timely fashion; (ii) the item is not subject to any outstanding injunction, judgment, order, decree, or ruling by a Court of competent jurisdiction limiting its use by the Companies, (except for Registered Intellectual Property to the extent pending or registered in any government patent or trademark office, as the case may be); and (iii) no action, suit, proceeding, hearing, complaint, written claim, or written demand is pending or, to the best of the knowledge of Sellers and each Company, is threatened which challenges the subsistence, existence, validity, enforceability, use, or ownership of the item provided that nothing in this term extends to the prosecution of any Registered Intellectual Property to the extent pending or registered in any government patent or trademark office, as the case may be. 4.19.5 Except as set forth separately on Schedule 4.19.5, Schedule 4.19.5 identifies each license, sublicense, agreement or permission to use any Third Party Intellectual Property which is material for the business of the Companies other than off the shelf or similar Software and to the best of the knowledge of the Companies Schedule 4.19.5 identifies each license, sublicense, agreement or permission to use any Third Party Intellectual Property which are material for the business of the Companies for off the shelf or similar Software. With respect to each such license, sublicense, agreement or permission: (i) the license, sublicense, agreement, or permission covering the item is legal, valid, binding, enforceable against the respective Company, and in full force and effect; (ii) the license, sublicense, agreement, or permission will continue to be legal, valid, binding, enforceable against the respective Company, and in full force and effect on essentially the same terms following the Closing; (iii) none of the Companies, and to the best of the knowledge of Sellers, and each Company, no other party to the license, sublicense, agreement, or permission is in breach or default, and, to the best of the knowledge of Sellers and each Company, no event has occurred which with notice or lapse of time would constitute a material breach or material default or permit termination, modification, or acceleration thereunder; and -26- (iv) except as permitted by the applicable agreement, neither Company has granted any sublicense or similar right with respect to the listed license, sublicense, agreement, or permission. 4.19.6 Except as set forth separately on Schedule 4.19.6, Schedule 4.19.6 sets forth all material products that are licensed or sold by the Companies to unrelated third parties and which are or include either Software and/or Databases owned by either of the Companies and identifies specifically under separate headings in respect of the foregoing (1) Software as to which the source code is owned by either or both of the Companies ("Owned Software"), (2) third party Software which is licensed to each or either Company and as to which such Company is in possession of the source code; (3) third party Software which is licensed to each or either Company but as to which such Company does not have possession of the source code and which is bundled with or embedded in the Owned Software pursuant to reseller agreements; (4) third party Software purchased by or licensed to each or either Company solely for resale or sublicense to its customers other than off the shelf or similar Software; (5) third party Software not owned by either Company but in which each or either Company has any use, possessory or proprietary rights other than as set forth in clauses (1) through (4), above (such material Software described in the foregoing subsections (2) through (5) being referred to collectively as the "Third-Party Software"); and (6) all material Software development projects undertaken by either or both of the Companies, in whole or in part, within the past two years with persons other than employees, together with an identification of the persons undertaking such projects. In this Section 4.19 a reference to "source code" means a human readable version of any Software owned by one or both of the Companies that is not routinely or regularly provided to end users. With respect to the Owned Software and except as set forth separately on Schedule 4.19.6: (i) such Company has the sole and exclusive right to use the Owned Software, free and clear of any Encumbrances, except rights to market and/or use the Owned Software granted by such Company to customers of such Company pursuant to license agreements or sales, marketing, distributorship, agency, representative and value-added reseller agreements made with third parties with respect to the sale or sublicensing by the third party of any of the products of the Companies and which were entered into in the normal course of business; (ii) the source code with respect to the Owned Software is not in the possession of any party other than such Company and has been maintained as confidential by the Company and its Subsidiaries; and (iii) no contractual rights in favour of any party to any Software owned by the Companies (including Software which is the subject of escrow, payment terms or similar arrangements) will be immediately triggered or otherwise immediately materially adversely affected by the transactions contemplated hereby. 4.19.7 Except as set forth on the attached Schedule 4.19.7, neither Company has granted any exclusive license with respect to, any Intellectual Property of such Company to any third -27- party. Except as set forth on the attached Schedule 4.19.7, to the best knowledge of the Companies neither Company has in the past 365 days immediately preceding the Closing Date (the "Quiet Period"), by way of agreement or assignment made, entered into, prepared or executed in said Quiet Period, transferred ownership to any Intellectual Property that was owned by the Company to a third party. 4.19.8 Except as set forth on the attached Schedule 4.19.8, to the best knowledge of the Companies no material Trade Secrets are in the possession of any party other than such Company except pursuant to license or confidentiality agreements signed by such other party and all material Trade Secrets have been maintained as confidential by the Company and its Subsidiaries. 4.20 INSURANCE 4.20.1 Schedule 4.20 sets forth, by year, for the current policy year and each of the three (3) preceding policy years, a statement describing each claim under an insurance policy for an amount in excess of $25,000, which sets forth: (i) the name of the claimant; (ii) a description of the policy by insurer, type of insurance, and period of coverage; and (iii) the amount and a brief description of the claim; and (iv) a statement describing the loss experience for all claims that were self-insured, including the number and aggregate cost of such claims. 4.21 EMPLOYEES Schedule 4.21.1 contains a complete and accurate list of the following information for each employee or director of each Company and its Subsidiaries, including each employee on leave of absence, layoff status, or otherwise absent from employment because of sickness or accident, short or long term disability, vacation, military service, or any other reason: employer; name; job title; current compensation paid or payable and date and amount of most recent compensation adjustment; vacation accrued; and service credited for purposes of vesting and eligibility to participate under any US Employee Plan or Canadian Employee Plan. 4.22 COMPETITION ACT (CANADA) As at December 31, 2001, Metso Canada, together with its affiliates (as defined in the Competition Act (Canada)), did not either have assets in Canada or have gross revenues from sales in, from or into Canada that exceed Three Hundred Twenty Million Canadian Dollars ($320,000,000CDN) in aggregate value, as determined in accordance with the Notifiable Transactions Regulations promulgated under the Competition Act (Canada). Since December 31, 2001, neither Metso Canada nor any of its affiliates (as defined in the Competition Act (Canada)) has been a party to and has not otherwise been affected by a transaction or event the consequence of which, if taken into account, would affect the determination of whether notification is required -28- to be given under Part IX of the Competition Act (Canada) with respect to the transactions contemplated by this Agreement. 4.23 NEGATION Sellers make no representation or warranty except as and to the extent set forth in this Agreement and any Appendices and Schedules attached hereto and any certificate or other document required to be delivered pursuant to Section 3.2. Except to the extent provided for in this Agreement and any Appendices and Schedules attached hereto or any certificate or other document required to be delivered pursuant to Section 3.2, Sellers shall not be liable (whether in contract, in tort or otherwise howsoever) for any covenant, representation, warranty, opinion, advice or statement which may have been made in any document or instrument relative hereto, or otherwise communicated to the Metso Canada Buyer or Metso Canada in any manner. The Metso Canada Buyer and Metso Canada confirm that they have only relied on the representations and warranties contained in this Agreement and any certificate or other document required to be delivered pursuant to Section 3.2 and any Appendices and Schedules attached hereto and not on any other covenants, representations or warranties. The Metso Canada Buyer and Metso Canada acknowledge and confirm that they have performed their own due diligence and, except for reliance on the representations and warranties contained in this Agreement and any Appendices and Schedules attached hereto and any certificate or other document required to be delivered pursuant to Section 3.2, have relied, and will continue to rely, upon their own analysis and investigations. ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF METSO CANADA BUYER AND METSO CANADA The Metso Canada Buyer and, in its capacity as buyer of the Metso US Shares, Metso Canada, hereby severally, and not jointly, represent and warrant for the benefit of Sellers as follows: 5.1 ORGANIZATION The Metso Canada Buyer is a corporation duly incorporated, organized and validly subsisting under the laws of the jurisdiction of its incorporation, and is duly licensed, registered and qualified as a corporation to do business in each jurisdiction in which the nature of its business makes such qualification necessary. 5.2 AUTHORIZATION Each of the Metso Canada Buyer and Metso Canada has full power and authority (corporate, fiduciary or other) to enter into this Agreement and to carry out the transactions contemplated hereby, and each of the Metso Canada Buyer and Metso Canada has taken all action required by law, its charter or other governing documents, or otherwise, to be taken by it to authorize the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby. This Agreement is the legal, valid and binding obligation of each of the Metso Canada Buyer and Metso Canada enforceable against it in accordance with its terms, except as limited by: (a) bankruptcy, insolvency, reorganization resulting from said bankruptcy or insolvency, moratorium or other such laws concerning the rights of creditors or -29- other obligees generally; and (b) the fact that equitable remedies, including the remedies of specific performance and injunction, may only be granted in the discretion of a court. 5.3 NO VIOLATION; CONSENTS None of the execution, delivery and performance of this Agreement nor the consummation of the transactions contemplated hereby will (i) violate any provision of the Articles of Incorporation, Bylaws or other governing documents of the Metso Canada Buyer, or (ii) violate, conflict with or result in the breach of any statute or law or any judgment, decree, order, regulation or rule of any court or Governmental Authority to which the Metso Canada Buyer is subject. Except as set forth in Schedule 5.3, no action, consent, approval or authorization by or filing with any person or entity, including, without limitation, any Governmental Authority, is required in connection with the execution, delivery and performance by the Metso Canada Buyer and Metso Canada of this Agreement or the consummation by the Metso Canada Buyer and Metso Canada of the transactions contemplated herein. 5.4 LITIGATION No legal action is pending or, to the best of the knowledge of the Metso Canada Buyer, threatened against the Metso Canada Buyer which seeks to delay, limit or enjoin the transactions contemplated hereby. 5.5 INVESTMENT PURPOSE ONLY The Metso Canada Buyer and Metso Canada are acquiring the Shares for the purpose of investment only and not with a view to, or for sale in connection with, the distribution thereof within the meaning of the Securities Act. The Metso Canada Buyer and Metso Canada understand and agree that the Shares may not be sold, transferred, offered for sale, pledged, hypothecated or otherwise disposed of without registration under the Securities Act except pursuant to an exemption from such registration available under the Securities Act, and with compliance with state and local securities laws, in each case, to the extent applicable. The Metso Canada Buyer and Metso Canada acknowledge that any sale or other disposition of the Shares can only be done in compliance with all applicable securities laws in Canada. 5.6 COMPETITION ACT (CANADA) As at December 31, 2001, the Metso Canada Buyer, together with its affiliates (as defined in the Competition Act (Canada)), did not have any assets in Canada or any gross revenues from sales in, from or into Canada. Since December 31, 2001, neither the Metso Canada Buyer nor any of its affiliates (as defined in the Competition Act (Canada)) has been a party to and has not otherwise been affected by a transaction or event the consequence of which, if taken into account, would affect the determination of whether notification is required to be given under Part IX of the Competition Act (Canada) with respect to the transactions contemplated by this Agreement. - 30 - ARTICLE 6 COVENANTS The Metso Canada Buyer and Metso Canada (in its capacity as buyer of the Metso US Shares) covenant for the benefit of the Sellers; the Sellers covenant for the benefit of the Metso Canada Buyer, the Companies and Metso Canada (in its capacity as buyer of the Metso US Shares); Metso Canada covenants for the benefit of Metso Canada Buyer; and the Seller and Metso US covenant for the benefit of Metso Canada as follows: 6.1 FURTHER ASSURANCES Upon the terms and subject to the conditions contained herein, each of the parties hereto agrees, both before and after both the Metso Canada Closing and the Metso US Closing, (i) to use all commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective the transactions contemplated by this Agreement, (ii) to execute any documents, instruments or conveyances of any kind which may be reasonably necessary or advisable to carry out any of the transactions contemplated hereby, and (iii) to cooperate with each other in connection with the foregoing, including using their respective commercially reasonable efforts (A) to obtain all necessary Permits as are required to be obtained under any federal, state, provincial, local or foreign law or regulations, (B) to effect all necessary registrations and filings, including, without limitation, submissions of information requested by Governmental Authorities, and (C) to fulfill all conditions to this Agreement. 6.2 SELLERS' COVENANTS Sellers shall (i) comply in all material respects with all covenants applicable to them in this Agreement and shall use commercially reasonable efforts to cause the conditions to closing applicable to them to be satisfied, and (ii) use commercially reasonable efforts to ensure compliance by the Companies of their covenants and agreements hereunder and to cause them to satisfy the conditions to closing applicable to them, on or prior to the Closing Date. 6.3 METSO CANADA BUYER'S COVENANTS The Metso Canada Buyer shall comply in all material respects with all covenants applicable to it in this Agreement and shall use commercially reasonable efforts to cause the conditions to closing applicable to it to be satisfied on or prior to the Metso Canada Closing Date. 6.4 METSO CANADA'S COVENANTS Metso Canada, in its capacity as buyer of the Metso US Shares, shall comply in all material respects with all covenants applicable to it in this Agreement and shall use commercially reasonable efforts to cause the conditions to closing applicable to it to be satisfied on or prior to the Metso US Closing Date. 6.5 PUBLIC ANNOUNCEMENTS The parties hereto shall not issue any press release or public announcement, including announcements by any party for general reception by or dissemination to employees, agents, or - 31 - customers, with respect to this Agreement and the other transactions contemplated by this Agreement without the prior written consent of the other parties hereto (which consent shall not be unreasonably withheld); provided, however, that any party may make any disclosure or announcement of information it is obligated to make pursuant to applicable law or stock exchange rules, provided such party shall, to the extent possible, provide the other parties with notice (and the proposed text) of such press release or announcement prior to its release. Notwithstanding the foregoing, the Sellers and the Metso Canada Buyer shall be entitled to make a public announcement and issue a press release (without the prior consent of the other or the Companies) which indicates that the sale of the Companies has been completed, without specifying the Purchase Price (provided that for the purposes of any required stock exchange notifications with respect to this Agreement, Metso Canada Buyer, or its Affiliates, and Metso Corporation shall be entitled to disclose the Purchase Price). 6.6 CONFIDENTIALITY 6.6.1 Except as may be required pursuant to the Subcontracts, from and after the Metso Canada Closing Date, the Sellers shall not, and shall ensure that the Sellers' Group shall not, all for the benefit of the Companies and the Metso Canada Buyer, directly or indirectly disclose or otherwise communicate any Confidential Information to any Person without the prior written consent of the Companies or the Metso Canada Buyer. 6.6.2 Except as may be required pursuant to the Subcontracts, on and after the Metso Canada Closing Date, the Sellers shall not use or permit any Person to use, and shall ensure that the Sellers' Group shall not use or permit any Person to use, all for the benefit of the Companies and the Metso Canada Buyer, any Confidential Information without the prior written consent of the Companies or the Metso Canada Buyer which consent may be withheld in the sole discretion of Metso Canada Buyer. 6.6.3 The obligations in Sections 6.6.1 and 6.6.2 shall not apply to particular information that the Sellers can show: (a) is, or becomes, generally available to the public other than through a breach of this Agreement; (b) is disclosed after the Metso Canada Closing Date, lawfully and not in breach of any contractual or other legal obligation, to the Sellers on a non-confidential basis by a third party; or (c) is independently developed by the Sellers or any of their Affiliates after the Closing Date without any reference to or use of Confidential Information. Any combination of features shall not be deemed to be generally available to the public merely because individual features are separately in the public domain, unless the entire combination itself is in the public domain, without any breach of the terms or conditions of this Agreement. 6.6.4 The provisions of Section 6.6.3 shall not be construed to grant the Sellers or any of the Sellers' Group any intellectual property rights owned or controlled by or in the possession of either of the Companies on and after the Metso Canada Closing Date, and all such intellectual property rights are reserved by the Companies. 6.6.5 The Sellers agree that from and after the Closing Date, they shall, and shall cause each member of the Sellers' Group to, destroy or deliver to the Companies any discrete Confidential Information in tangible form relating solely to the Companies (or either of - 32 - them) that either of the Sellers or any member of the Sellers' Group may discover and possess from time to time. 6.7 TRANSITIONAL ARRANGEMENTS 6.7.1 Released Contracts. Metso Canada Buyer and Sellers shall use their respective commercially reasonable efforts to procure, as soon as reasonably practicable following the Closing Date, and in any event not later than 30 days following the Closing Date: (i) the release of all members of the Sellers' Group from all guarantees, indemnities, bonds, letters of comfort, undertakings, licenses, standby letters of credit and other arrangements to which any of them is a party in respect of the Companies as identified in Schedule 6.7.1; (ii) the release of all members of the Sellers' Group from all guarantees, letters of guarantee, bonds and standby letters of credit issued by any bank or other financial institution to which any of them is a party in respect of the Companies as identified in Schedule 6.7.1; and (iii) the release of all members of the Sellers' Group from all surety bonds (including without limitation, bid, performance, advance payment and labor and materials payment bonds) issued by any surety or insurance company to which any of them is a party in respect of the Companies as identified in Schedule 6.7.1; (the "Released Contracts") and to indemnify and to keep indemnifying on a continuing basis the Sellers and/or any of their Affiliates from all claims, liabilities, costs and expenses arising in respect or by reason thereof. 6.7.2 Special Contracts. The contracts described in Schedule 6.7.2 (the "Special Contracts") shall be dealt with in accordance with the provisions set out in Schedule 6.7.2. 6.7.3 Zug Research and Development Office. The Sellers shall, as soon as reasonably practicable following the Closing Date, close their research and development office located in Zug, Switzerland and shall be responsible for all expenses and obligations in connection with such closing. 6.7.4 Employee in Brazil. Metso Canada Buyer agrees to reimburse Metso Automation Brazil Ltd. ("Metso Brazil") for all employment costs and expenses incurred by Metso Brazil following the Closing Date with respect to the employment of Metso Brazil's engineer in Brazil until such employment is transferred to Metso Canada Buyer or its Affiliates or the employee otherwise ceases to be an employee of Metso Brazil. 6.8 DEBT Metso Canada Buyer and Sellers agree that all loans, debt and accounts payable between the Companies and any of their Affiliates, as well as all loans payable by the Companies to any third parties (excluding those advance payments described in Schedule 4.6.2), shall be paid in full prior to the Closing. - 33 - 6.9 CHANGE OF NAME Metso Canada Buyer and Metso Canada agree that not later than 14 days following the Metso US Closing Date, they shall change the names of the Companies to names that do not include the word "Metso" or any part thereof or any similar words. The Metso Canada Buyer and Metso Canada agree that from and after the Metso US Closing Date, neither the Metso Canada Buyer, the Companies, nor any of their Affiliates will use the name "Metso" or any part thereof or any similar words. Notwithstanding the foregoing, it is agreed the Companies shall have limited rights to use the tradename "Metso DNA" for a period of six months following the Metso US Closing Date in accordance with the provisions of the Interim Trademark License Agreement. 6.10 INSURANCE The Sellers will, on the request of the Metso Canada Buyer, use reasonable best efforts to extend until February 7, 2003 the current insurance policies covering the insurable risks of the Companies with respect to property, business interruption, extended all risk and workers' compensation only, and for such period will make the beneficiaries of such policies the Companies at the sole cost and expense of the Companies. Except as stated above, the Metso Canada Buyer and Metso Canada acknowledge that all insurance policies which cover the Companies are part of the corporate group insurance policies which cover the Companies and certain of their Affiliates ("Metso Group Insurance") and that the Metso Group Insurance shall cease to cover the Companies on the Metso Canada Closing and the Metso US Closing, respectively. Accordingly, the Metso Canada Buyer and Metso Canada agree that they must acquire, or cause the Companies to acquire, as at the Metso Canada Closing and the Metso US Closing, as appropriate, such policies of insurance as they deem appropriate for the Companies from and after the Metso Canada Closing and the Metso US Closing, as appropriate. Except as stated above and except for insurance claims which have been commenced prior to the Metso Canada Closing, the Metso Canada Buyer and Metso Canada covenant and agree that neither they, the Companies, nor any of their Affiliates, shall be entitled to make any claims against the Metso Group Insurance after the Metso Canada Closing or the Metso US Closing, as appropriate. 6.11 GROUP PLANS The Metso Canada Buyer and Metso Canada acknowledge that on the Metso Canada Closing Date and the Metso US Closing Date, respectively, the Canadian Group Plans and the US Group Plans will terminate with respect to the Companies and the Metso Canada and Metso US employees. 6.12 COMPUTER NETWORK The Metso Canada Buyer agrees that it shall cause the Companies to be severed from the computer network of the Sellers' Group at Closing or as soon as practicable after the Closing Date, and in any event not later than June 30, 2003, and the Metso Canada Buyer agrees that it shall, following receipt from the Sellers of itemized invoices from time to time, reimburse the Sellers for all reasonable costs incurred by them relating to the inclusion of the Companies in the computer network of the Sellers' Group during the period commencing on the day following the Closing Date and ending on the date on which the Companies are severed from such network. The Sellers agree that they will and will cause the Sellers' Group to delete all references to the - 34 - NMS Business from their respective web sites as soon as practicable after the Metso US Closing Date and will refer all enquiries regarding the NMS Business to the Companies. 6.13 TRANSACTION BONUS Sellers represent and warrant that the amount of the Transaction Bonus is Eight Hundred Ninety-Three Thousand Six Hundred Thirty-One Canadian Dollars ($893,631.00CDN). 6.14 DUTCH FILINGS The Metso Canada Seller shall, following the Metso Canada Closing, make the necessary filings with the Dutch Central Bank in accordance with the requirements of External Financial Relations Act 1994 (Netherlands) and the regulations promulgated thereunder. 6.15 BANK ACCOUNTS As of the close of business on January 31, 2003, all of the US dollar and Canadian dollar bank accounts of the Companies will be disconnected from the Metso cash pool and all cash balances in these accounts as at the close of business on January 31, 2003 ("Cash Balances") will be transferred to the Metso Master Account. At the opening of business on Monday, February 3, 2003, Metso US Seller shall cause all the Cash Balances (except for $3,255,549 (the "Retained Amount")) to be transferred back to the accounts of the Companies. The Retained Payment shall be considered payment of part of the Metso US Purchase Price required to be paid pursuant to section 2.2.4.1. 6.16 PATENT ASSIGNMENT Sellers shall cause GSE Process Solutions, Inc. to deliver to Metso Canada as soon after the Closing Date as practicable as assignment in recordable form of (i) U.S. utility patent 5,568,402. "Communication Server for communicating with a remote device" issued October 22, 1996; and (ii) U.S. utility patent, 5,583,793, "Communication Server for communicating with a remote device" issued December 10, 1996. ARTICLE 7 CONDITIONS TO SELLERS' OBLIGATIONS 7.1 CONDITIONS PRIOR TO METSO CANADA CLOSING Except as otherwise provided herein, the obligations of Sellers to consummate the transactions provided for hereby are subject to the satisfaction, on or prior to the Metso Canada Closing Date, of each of the following conditions, any of which may be waived by Sellers. 7.1.1 Representations, Warrants and Covenants. The representations and warranties of the Metso Canada Buyer contained in this Agreement or in any documents delivered in order to carry out the transactions contemplated hereby shall be true and accurate on the date hereof and of the Metso Canada Closing Date with the same force and effect as though such representations and warranties had been made as of the Metso Canada Closing Date (regardless of the date as of which the information in this Agreement or in any Schedule - 35 - or other document made pursuant hereto is given). In addition, the Metso Canada Buyer shall have complied with all covenants and agreements herein agreed to be performed or caused to be performed by it on or prior to the Metso Canada Closing Date. 7.1.2 Consents. All consents required to be obtained in order to carry out the transactions contemplated hereby in compliance with all laws and agreements binding upon the parties hereto shall have been obtained. 7.1.3 No Proceedings, Litigation or Laws. No Action by any Governmental Authority or other person shall have been instituted or threatened which questions the validity or legality of the transactions contemplated hereby and which could reasonably be expected to materially damage Sellers if the transactions contemplated hereunder are consummated. There shall not be any statute, rule or regulation that makes the purchase and sale of the Shares contemplated hereby illegal or otherwise prohibited. 7.1.4 Closing Documents. The Sellers shall have received from the Metso Canada Buyer the following documents: (i) a notarized copy of resolutions of the board of directors of the Metso Canada Buyer approving the execution and delivery of this Agreement and the completion of the transactions contemplated hereby and the power of attorney appointing an officer of Metso Canada Buyer as its attorney and if the original Certificate is not written in English, a translation of such certified to be a true and accurate translation; (ii) legal opinions of the Metso Canada Buyer's Canadian and Spanish counsel in form satisfactory to the Sellers; (iii) the Tax Holdback Escrow Agreement, duly executed by authorized signing officers of the Metso Canada Buyer; (iv) the Purchase Price Holdback Escrow Agreement, duly executed by the authorized signing officers of the Metso Canada Buyer; (v) confirmation that Bennett Jones LLP has received the Standby Letter of Credit; (vi) the Subcontracts; and (vii) such other documents as are reasonably required by the Metso Canada Seller to complete the Metso Canada Closing. 7.2 CONDITIONS PRIOR TO METSO US CLOSING Except as otherwise provided herein, the obligations of Sellers to consummate the transactions provided for hereby are subject to the satisfaction, on or prior to the Metso US Closing Date, of each of the following conditions, any of which may be waived by Sellers. - 36 - 7.2.1 Representations, Warrants and Covenants. The representations and warranties of the Metso Canada Buyer contained in this Agreement or in any documents delivered in order to carry out the transactions contemplated hereby shall be true and accurate on the date hereof and of the Metso US Closing Date with the same force and effect as though such representations and warranties had been made as of the Metso US Closing Date (regardless of the date as of which the information in this Agreement or in any Schedule or other document made pursuant hereto is given). In addition, the Metso Canada Buyer shall have complied with all covenants and agreements herein agreed to be performed or caused to be performed by it on or prior to the Metso US Closing Date. 7.2.2 No Proceedings, Litigation or Laws. No Action by any Governmental Authority or other person shall have been instituted or threatened which questions the validity or legality of the transactions contemplated hereby and which could reasonably be expected to materially damage Sellers if the transactions contemplated hereunder are consummated. There shall not be any statute, rule or regulation that makes the purchase and sale of the Shares contemplated hereby illegal or otherwise prohibited. 7.2.3 Closing Documents. The Sellers shall have received from Metso Canada the following documents: (i) a certified copy of resolutions of the board of directors of Metso Canada ratifying and confirming the entering into of this Agreement and the acquisition of the Metso US Shares; (ii) a legal opinion of Metso Canada's counsel in form satisfactory to the Metso US Seller; (iii) the Purchase Price Holdback Escrow Agreement, duly executed by the authorized signing officers of the Metso Canada Buyer and Metso Canada; (iv) the Asbestos Indemnity Agreement, duly executed by the authorized signing officers of the Metso Canada Buyer, Metso Canada, the Metso US Seller and MAI; (v) confirmation that Bennett Jones LLP has received the Standby Letter of Credit; and (vi) such other documents as are reasonably required by the Metso US Seller to complete the Metso US Closing. 7.3 WAIVER OR TERMINATION BY SELLERS The conditions contained in Sections 7.1 and 7.2 are inserted for the exclusive benefit of Sellers and may be waived in whole or in part by Sellers at any time. The Metso Canada Buyer and Metso Canada acknowledge that the waiver by Sellers of any condition or any part of any condition shall constitute a waiver only of such condition or such part of such condition, as the case may be, and shall not constitute a waiver of any covenant, agreement, representation or warranty made by the Metso Canada Buyer herein that corresponds or is related to such condition or such part of such condition, as the case may be. - 37 - ARTICLE 8 CONDITIONS TO METSO CANADA BUYER'S OBLIGATIONS 8.1 CONDITIONS PRIOR TO METSO CANADA CLOSING Except as otherwise provided herein, the obligations of the Metso Canada Buyer to consummate the transactions provided for hereby are subject to the satisfaction, on or prior to the Metso Canada Closing Date, of each of the following conditions, any of which may be waived by the Metso Canada Buyer. 8.1.1 Representations, Warranties and Covenants. The representations and warranties of Sellers contained in this Agreement or in any documents delivered in order to carry out the transactions contemplated hereby shall be true and accurate on the date hereof and of the Metso Canada Closing Date with the same force and effect as though such representations and warranties had been made as of the Metso Canada Closing Date (regardless of the date as of which the information in this Agreement or in any Schedule or other document made pursuant hereto is given). In addition, Sellers shall have complied with all covenants and agreements herein agreed to be performed or caused to be performed by them on or prior to the Metso Canada Closing Date. 8.1.2 Consents. All consents required to be obtained in order to carry out the transactions contemplated hereby in compliance with all laws and agreements binding upon the parties hereto shall have been obtained. 8.1.3 No Proceedings, Litigation or Laws. No Action by any Governmental Authority or other person shall have been instituted or threatened which questions the validity or legality of the transactions contemplated hereby and which could reasonably be expected to damage the Metso Canada Buyer if the transactions contemplated hereby are consummated, including, without limitation, any limitation or restriction on the right or ability of the Metso Canada Buyer to own the Metso Canada Shares after the Metso Canada Closing. There shall not be any statute, rule or regulation that makes the purchase and sale of the Shares contemplated hereby illegal or otherwise prohibited. 8.1.4 Closing Documents. The Metso Canada Buyer shall have received from the Sellers the following Documents: (i) a Certificate of Compliance issued by Industry Canada for Metso Canada and a Certificate of Good Standing issued by the Registrar of Corporations for the Province of Alberta for Metso Canada as an extra-provincially registered corporation in such province, each dated not later than two days prior to the Metso Canada Closing Date; (ii) certified copies of resolutions of the board of directors of Metso Canada and of Metso Canada Seller and a power of attorney for Metso Canada Seller approving the execution and delivery of this Agreement and the completion of the transactions contemplated hereby; - 38 - (iii) a certified copy of resolutions of the shareholder of the Metso Canada Seller approving the sale of the Metso Canada Shares contemplated hereby; (iv) a certified copy of the organizational or constating documents of each of the Companies; (v) a certificate of incumbency for each of the Sellers and the Companies; (vi) documentation satisfactory to the Metso Canada Buyer, acting reasonably, evidencing the consents described in Section 8.1.2; (vii) legal opinions of Metso Canada Seller's counsel and Metso Canada's counsel in form satisfactory to the Metso Canada Buyer; (viii) the Tax Holdback Escrow Agreement, duly executed by authorized signing officers of each of Metso Canada Seller, Metso Canada and Bennett Jones LLP; (ix) the Purchase Price Holdback Escrow Agreement, duly executed by the authorized signing officers of each of the Sellers and Metso Canada; (x) the interim transitional trademark license agreement dated January 31, 2003 (the "Interim Trademark License Agreement") among Metso Corporation, Metso Canada and Metso US, duly executed by authorized signing officers of each of Metso Corporation, Metso Canada and Metso US; (xi) the Subcontracts; (xii) the amending agreement dated January 31, 2003 between Metso Canada and Metso Automation Canada Ltd. amending certain of the terms of asset purchase agreement dated December 27, 1999 between such parties; and (xiii) such other documents as are reasonably required by the Metso Canada Buyer to complete the Metso Canada Closing. 8.2 CONDITIONS PRIOR TO METSO US CLOSING Except as otherwise provided herein, the obligations of Metso Canada to consummate the transactions provided for hereby are subject to the satisfaction, on or prior to the Metso US Closing Date, of each of the following conditions, any of which may be waived by the Metso Canada Buyer. 8.2.1 Representations, Warranties and Covenants. The representations and warranties of Sellers contained in this Agreement or in any documents delivered in order to carry out the transactions contemplated hereby shall be true and accurate on the date hereof and of the Metso US Closing Date with the same force and effect as though such representations and warranties had been made as of the Metso US Closing Date (regardless of the date as - 39 - of which the information in this Agreement or in any Schedule or other document made pursuant hereto is given). In addition, Sellers shall have complied with all covenants and agreements herein agreed to be performed or caused to be performed by them on or prior to the Metso US Closing Date. 8.2.2 No Proceedings, Litigation or Laws. No Action by any Governmental Authority or other person shall have been instituted or threatened which questions the validity or legality of the transactions contemplated hereby and which could reasonably be expected to damage Metso Canada if the transactions contemplated hereby are consummated, including, without limitation, any limitation or restriction on the right or ability of Metso Canada to own the Metso US Shares after the Metso US Closing. There shall not be any statute, rule or regulation that makes the purchase and sale of the Metso US Shares contemplated hereby illegal or otherwise prohibited. 8.2.3 Closing Documents. Metso Canada shall have received from the Metso US Seller the following Documents: (i) a Certificate of Good Standing for Metso US issued by the Secretary of State for each state in which Metso US is registered; (ii) certified copies of resolutions of the board of directors of each of Metso US Seller and Metso US approving the execution and delivery of this Agreement and the completion of the transactions contemplated hereby; (iii) a certified copy of resolutions of the shareholder of the Metso US Seller approving the sale of the Metso US Shares contemplated hereby; (iv) legal opinions of Metso US Seller's counsel and Metso US' counsel in form satisfactory to Metso Canada; (v) the Purchase Price Holdback Escrow Agreement, duly executed by the authorized signing officers of the Sellers and by Bennett Jones LLP; (vi) the Asbestos Indemnity Agreement, duly executed by the Metso US Seller, the Metso Canada Buyer, Metso Canada and MAI; (vii) the Interim Trademark License Agreement, duly executed by authorized signing officers of each of Metso Corporation, Metso Canada and Metso US; (viii) a non-foreign affidavit dated as of the Metso US Closing Date, sworn under penalty of perjury and in form and substance required under Treasury Regulations issued pursuant to Section 1445 of the US Code stating that the Metso US Seller is not a "Foreign Person" as defined in Section 1445 of the US Code; and (ix) such other documents as are reasonably required by the Metso Canada Buyer to complete the Metso US Closing. - 40 - 8.3 WAIVER OR TERMINATION BY METSO CANADA BUYER The conditions contained in Sections 8.1 and 8.2 are inserted for the exclusive benefit of the Metso Canada Buyer and may be waived in whole or in part by the Metso Canada Buyer at any time. Sellers acknowledge that the waiver by the Metso Canada Buyer of any condition or any part of any condition shall constitute a waiver only of such condition or such part of such condition, as the case may be, and shall not constitute a waiver of any covenant, agreement, representation or warranty made by Sellers or the Companies herein that corresponds or is related to such condition or such part of such condition, as the case may be. ARTICLE 9 REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 9.1 SURVIVAL OF REPRESENTATIONS, ETC. All statements contained in any certificate, Appendix, Schedule, exhibit, instrument or conveyance delivered by or on behalf of the parties pursuant to this Agreement shall be deemed to be representations and warranties by the parties hereunder. Except for Asbestos Claims and for the representations, warranties, covenants and agreements contained in Sections 4.6.3, 4.13.1, 4.13.2 and 4.17 and Articles 6, 9 and 10, the representations, warranties, covenants and agreements of Sellers, the Companies and the Metso Canada Buyer contained herein shall survive the completion of the transactions contemplated hereby, the Metso Canada Closing Date and the Metso US Closing Date, without regard to any investigation made by any of the parties hereto and, notwithstanding such completion, will continue in full force and effect for the benefit of Sellers, the Companies or the Metso Canada Buyer, as the case may be, for a period of one year following the Metso Canada Closing Date. The representations, warranties, covenants and agreements of Sellers and the Companies contained in Sections 4.13.1 and 4.13.2 shall survive the completion of the transactions contemplated hereby, the Metso Canada Closing Date and the Metso US Closing Date, without regard to any investigation made by Metso Canada Buyer and, notwithstanding such completion, will continue in full force and effect for the benefit of the Companies and the Metso Canada Buyer for a period commencing on the Closing Date and ending on the date that is 30 days following the expiry of the applicable statutory limitation period. The representations, warranties, covenants and agreements of Sellers and the Companies contained in Section 4.17 shall survive the completion of the transactions contemplated hereby, the Metso Canada Closing Date and the Metso US Closing Date, without regard to any investigation made by Metso Canada Buyer and, notwithstanding such completion, will continue in full force and effect for the benefit of the Companies and the Metso Canada Buyer for a period of five years following the Metso Canada Closing Date. The representations, warranties, covenants and agreements contained in Section 4.6.3 and Articles 6, 9 and 10 shall survive the completion of the transactions contemplated hereby, the Metso Canada Closing Date and the Metso US Closing Date, and shall continue in full force and effect for the benefit of Sellers, the Companies or the Metso Canada Buyer, as appropriate, without any limitation in time prescribed by this Agreement. If notice of a claim to be made against a party for (i) any breach of a representation or warranty, or the inaccuracy of any representation or warranty made by such party in or pursuant to this Agreement, or (ii) any breach of any covenant or agreement made by such party in or pursuant to this Agreement, is not received by such party prior to the expiry of the periods stated above, such party shall have no further liability under this Agreement with - 41 - respect to such representation, warranty, covenant or agreement. A notice of claim shall be sufficient if it is the form set out in Section 9.2.4. 9.2 INDEMNIFICATION 9.2.1 By Sellers. Subject to Section 9.3, Sellers shall indemnify, defend, save and hold harmless Metso Canada Buyer, its Affiliates and Subsidiaries (including the Companies), and its and their respective Representatives from and against any and all claims, damages, costs, losses, Taxes (as such term is defined in Appendices 4.12 and 4.13.2, as applicable), liabilities, judgments, penalties, fines, obligations, lawsuits, deficiencies, demands and expenses (whether or not arising out of third-party claims), including, without limitation interest, penalties, costs of mitigation, reasonable lawyers' fees (on a solicitor/client basis), reasonable experts' fees and all reasonable amounts paid in investigation, defense, audit or settlement of any of the foregoing (herein, "Damages"), incurred in connection with, arising out of, resulting from or incident to (i) any breach of any representation or warranty, or the inaccuracy of any representation or warranty, made by the Sellers or the Companies in or pursuant to this Agreement, (ii) any breach of any covenant or agreement made by the Sellers in or pursuant to this Agreement or (iii) any Special Claims. The Sellers indemnity shall be several (proportionate to their respective share allocation of the Purchase Price except with respect to subclause (iii) above, in respect of which the Sellers' indemnity shall be joint and several. The Sellers indemnity set forth in this Section 9.2.1 shall not apply to any matters relating to Asbestos Claims (which matters shall be dealt with exclusively by the Asbestos Indemnity Agreement). 9.2.2 By Metso Canada Buyer. Subject to Section 9.3, Metso Canada Buyer shall indemnify and save and hold harmless Sellers, their Affiliates and Subsidiaries (other than the Companies) and their Representatives from and against any and all Damages incurred in connection with, arising out of, resulting from or incident to (i) any breach of any representation or warranty, or the inaccuracy of any representation or warranty, made by Metso Canada Buyer in or pursuant to this Agreement, or (ii) any breach of any covenant or agreement made by Metso Canada Buyer in or pursuant to this Agreement. 9.2.3 Cooperation. In connection with third-party lawsuits or actions, the indemnified party shall cooperate in all reasonable respects with the indemnifying party and such lawyers in the investigation, trial and defense of such lawsuit or action and any appeal arising therefrom; provided, however, that the indemnified party may, at its own cost (except as provided in Section 9.2.5 hereof), participate in the investigation, trial and defense of such lawsuit or action and any appeal arising therefrom. The parties shall cooperate with each other in any notifications to insurers. 9.2.4 Defense of Claims. If a claim for Damages (a "Claim") is to be made by a party entitled to indemnification hereunder against the indemnifying party, the party claiming such indemnification shall give written notice (a "Claim Notice") to the indemnifying party as soon as practicable after the party entitled to indemnification becomes aware of any fact, condition or event which may give rise to Damages for which indemnification may be sought hereunder. The Claim Notice shall include the amounts the indemnified party believes in good faith are subject to indemnification and a brief basis of the claim. The indemnified party may revise its estimate of any claim by notice to the other party. - 42 - 9.2.5 Third-Party Claims. If any Action is filed against any party entitled to the benefit of indemnity hereunder, written notice thereof shall be given to the indemnifying party as promptly as practicable (and in any event within fifteen (15) calendar days after the service of the citation or summons). The failure of any indemnified party to give timely notice hereunder shall not affect rights to indemnification hereunder, except to the extent that the indemnifying party demonstrates actual damage caused by such failure. After such notice, if the indemnifying party shall acknowledge in writing to the indemnified party that the indemnifying party shall be obligated under the terms of its indemnity hereunder in connection with such lawsuit or action, then the indemnifying party shall be entitled, if it so elects, (i) to take control of the defense and investigation of such lawsuit or action, (ii) to employ and engage lawyers of its own choice (which shall be reasonably acceptable to the indemnified party) to handle and defend the same, at the indemnifying party's cost, risk and expense (unless the named parties to such Action or proceeding include both the indemnifying party and the indemnified party and the indemnified party has been advised in writing by counsel that there may be one or more legal defenses available to such indemnified party that are different from or additional to those available to the indemnifying party, in which case the indemnified party shall be able to retain its own counsel at the reasonable expense of the indemnifying party), and (iii) to compromise or settle such Claim, which compromise or settlement shall be made only with the written consent of the indemnified party, such consent not to be unreasonably withheld; provided, however, if the remediation or resolution of any such Claim could adversely affect or interrupt the indemnified party's ongoing business operations, then, notwithstanding the foregoing, the indemnified party shall be entitled to control such remediation or resolution, including, without limitation, to take control of the defense and investigation of such lawsuit or action, to employ and engage lawyers of its own choice to handle and defend the same, at the indemnifying party's cost, risk and expense, and to compromise or settle such Claim. If the indemnifying party fails to assume the defense of such Claim within fifteen (15) calendar days after receipt of the Claim Notice, the indemnified party against which such Claim has been asserted will (upon delivering notice to such effect to the indemnifying party) have the right to undertake, at the indemnifying party's cost and expense, the defense, compromise or settlement of such Claim on behalf of and for the account and risk of the indemnifying party. In the event the indemnified party assumes the defense of the Claim, the indemnified party will keep the indemnifying party reasonably informed of the progress of any such defense, compromise or settlement. The indemnifying party shall be liable for any settlement of any action effected pursuant to and in accordance with this Section 9.2.5 and for any final judgment (subject to any right of appeal), and the indemnifying party agrees to indemnify and hold harmless an indemnified party from and against any Damages by reason of such settlement or judgment. 9.2.6 No Legal Proceedings Against Companies. The Sellers acknowledge and agree that, following the Closing Date, neither they nor any of their Affiliates shall commence, continue or extend any legal proceedings against either of the Companies as a result of or in connection with (i) any breach of any representation or warranty, or the inaccuracy of any representation or warranty, made by either of the Companies in or pursuant to this Agreement, or (ii) any breach of any covenant or agreement made by either of the Companies in or pursuant to this Agreement, except for any covenant or agreement made by Metso Canada in connection with its acquisition of the Metso US Shares. - 43 - 9.3 LIMITATIONS 9.3.1 Limitation. Except for Special Claims, Asbestos Claims and Claims relating to the representations and warranties set forth in Section 4.13, none of the parties hereto shall be required to indemnify any other party pursuant hereto in respect of any matter or circumstance: (i) unless the Damages suffered by such party in respect of such matter or circumstance equal or exceed $50,000, but such indemnification shall then apply to all Damages suffered by such party in respect of such matter or circumstance; or (ii) to the extent that the Damages suffered by a party in respect of such matter or circumstance are caused by the party's negligence or willful misconduct. 9.3.2 Aggregate Limitation. Except for Special Claims, Asbestos Claims and Claims relating to the representations and warranties set forth in Section 4.13, a party hereto shall only be required to indemnify another party pursuant to this Agreement in respect of Damages suffered by the other party in the event that the aggregate of all of the Damages suffered by the other party to which the indemnification provisions of this Article 9 are applicable exceed $750,000, but such indemnification shall then apply to all Damages suffered by such party to which the indemnification provisions of this Article 9 are applicable. 9.3.3 Maximum Liability. Except for Special Claims, Asbestos Claims and Claims relating to the representations and warranties set forth in Section 4.13, which shall be excluded from the calculation of the total aggregate liability, the total aggregate liability of the Sellers or the Metso Canada Buyer for claims for indemnification arising under Sections 9.2.1 or 9.2.2, respectively, shall not in any event exceed $5,600,000. 9.3.4 No Consequential Damages. No party shall be liable to any other party for any loss of profits or any consequential damages suffered by the other howsoever caused or arising under this Agreement, even if the party that would otherwise be liable has been advised of the possibility of such damages or such damages were reasonably foreseeable. 9.4 SET OFF 9.4.1 Proven Claims. Metso Canada Buyer shall be entitled to set off the amount of any Proven Claim of Metso Canada Buyer, Metso Canada or Metso US against the Metso Canada Deferred Payment. Metso Canada shall be entitled to set off the amount of any Proven Claim of Metso Canada Buyer, Metso Canada or Metso US against the Metso US Deferred Payment. To the extent that a Proven Claim has been set off against one of the Metso Canada Deferred Payment or the Metso US Deferred Payment, it may not be set off against the other. 9.4.2 Unproven Claims. Metso Canada Buyer shall be entitled to deduct the amount of any Unproven Claim of Metso Canada Buyer, Metso Canada or Metso US from the Metso Canada Deferred Payment. Metso Canada shall be entitled to deduct the amount of any Unproven Claim of Metso Canada Buyer, Metso Canada or Metso US from the Metso - 44 - US Deferred Payment. To the extent that an Unproven Claim has been deducted from one of the Metso Canada Deferred Payment or the Metso US Deferred Payment, it may not be deducted from the other. 9.4.3 Payment of Unproven Claims. To the extent that Metso Canada Buyer and/or Metso Canada have deducted Unproven Claims, they shall pay the amount of the Unproven Claims to Bennett Jones LLP (in trust pending the eventual disposition of such Claims) as escrow agent under the Purchase Price Holdback Escrow Agreement on or before the Deferred Payment Deadline. 9.5 REMEDIES Without limiting the generality of Section 10.8, the parties agree that none of the Metso Canada Deferred Payment, the Metso US Deferred Payment, the Purchase Price Holdback Escrow Agreement or the Standby Letter of Credit: 9.5.1 limits the maximum liability of the Seller's, except as specifically set out in Sections 9.3.1 to 9.3.4; 9.5.2 limits the rights or remedies of Metso Canada Buyer, Metso Canada or Metso US to the set off rights set out in Section 9.4 or limits the rights to money held pursuant to the Purchase Price Holdback Escrow Agreement or implies that any such party must exercise its set off rights or any remedy under the Purchase Price Holdback Escrow Agreement prior to exercising any other rights or remedies in respect of this Agreement; or 9.5.3 implies that a Claim Notice or any other claim which may be made under this Agreement must be made within the time specified in the Purchase Price Holdback Escrow Agreement. ARTICLE 10 MISCELLANEOUS 10.1 NOTICES All notices, requests, demands and other communications which are required or may be given under this Agreement shall be in writing and shall be deemed to have been duly given when received if personally delivered; when transmitted if transmitted by telecopy, electronic or digital transmission method; the day after it is sent, if sent for next day delivery to a domestic address by recognized overnight delivery service (e.g., Federal Express); and upon receipt, if sent by certified or registered mail, return receipt requested. In each case notice shall be sent to: - 45 - If to Metso Canada addressed to: Metso Automation SCADA Solutions Ltd. Suite 200, 10333 Southport Road S.W. Calgary, Alberta, Canada T2W 3X6 Attention: Jose M. Flores Facsimile: (403) 212-2435 Email: josemaria.flores@sainco.abengoa.com and to: Telvent Sistemas y Redes, S.A. Valgrande, 6 28108 Alcobendas Madrid Spain Attention: Manuel Sanchez Facsimile: 34 91 714 70 01 Email: manuel.sanchez@telvent.abengoa.com and with a copy to: Squire Sanders & Dempsey LLP 4900 Key Tower 127 Public Square Cleveland, Ohio 44114-1304 USA Attention: Laura D. Nemeth Facsimile: (216) 479-8780 Email: lnemeth@ssd.com and to: Squire Sanders & Dempsey Abogados Calle Velazquez 108-110 28006 Madrid Spain Attention: Juan Picon Facsimile: 34 91 590 24 20 Email: jpicon@ssd.com - 46 - and to: Edwards, Kenny & Bray 19th Floor 1040 West Georgia Street Vancouver, British Columbia, Canada V6E 4H3 Attention: William L. Hartley Facsimile: (604) 689-5177 Email: whartley@ekb.com If to Metso US addressed to: Metso Automation SCADA Solutions Inc. c/o Suite 200, 10333 Southport Road S.W. Calgary, Alberta, Canada T2W 3X6 Attention: Jose M. Flores Facsimile: (403) 212-2435 Email: josemaria.flores@sainco.abengoa.com and to: Telvent Sistemas y Redes, S.A. Valgrande, 6 28108 Alcobendas Madrid Spain Attention: Manuel Sanchez Facsimile: 34 91 714 70 01 Email: manuel.sanchez@telvent.abengoa.com and with a copy to: Squire Sanders & Dempsey LLP 4900 Key Tower 127 Public Square Cleveland, Ohio 44114-1304 USA Attention: Laura D. Nemeth Facsimile: (216) 479-8780 Email: lnemeth@ssd.com - 47 - and to: Squire Sanders & Dempsey Abogados Calle Velazquez 108-110 28006 Madrid Spain Attention: Juan Picon Facsimile: 34 91 590 24 20 Email: jpicon@ssd.com and to: Edwards, Kenny & Bray 19th Floor 1040 West Georgia Street Vancouver, British Columbia, Canada V6E 4H3 Attention: William L. Hartley Facsimile: (604) 689-5177 Email: whartley@ekb.com If to Metso Canada Seller, addressed to: Metso Automation Holding B.V. c/o Tulppatie 1 P.O. Box 310 Fin-00811 Helsinki Attention: Eeva-Liisa Partanen Facsimile: 358 20 483 5888 Email: eeva-liisa.partanen@metso.com with a copy to: Bennett Jones LLP 4500 Bankers Hall East 855 - 2nd Street SW Calgary, Alberta, Canada T2P 4K7 Attention: Garnet M. Schulhauser Facsimile: (403) 265-7219 Email: schulhauserg@bennettjones.ca and to: Thelen Reid & Priest LLP 701 Pennsylvania Avenue NW - 48 - 8th Floor Washington DC 20004 Attention: Jerome P. Akman Facsimile: (202) 508-4321 Email: jakman@thelenreid.com If to Metso US Seller, addressed to: Neles-Jamesbury Inc. c/o Tulppatie 1 P.O. Box 310 Fin-00811 Helsinki Attention: Eeva-Liisa Partanen Facsimile: 358 20 483 5888 Email: eeva-liisa.partanen@metso.com with a copy to: Bennett Jones LLP 4500 Bankers Hall East 855 - 2nd Street SW Calgary, Alberta, Canada T2P 4K7 Attention: Garnet M. Schulhauser Facsimile: (403) 265-7219 Email: schulhauserg@bennettjones.ca and to: Thelen Reid & Priest LLP 701 Pennsylvania Avenue NW 8th Floor Washington DC 20004 Attention: Jerome P. Akman Facsimile: (202) 508-4321 Email: jakman@thelenreid.com - 49 - If to Metso Canada Buyer, addressed to: Telvent Sistemas y Redes, S.A. c/o Suite 200, 10333 Southport Road S.W. Calgary, Alberta, Canada T2W 3X6 Attention: Jose M. Flores Facsimile: (403) 212-2435 Email: josemaria.flores@sainco.abengoa.com and to: Telvent Sistemas y Redes, S.A. Valgrande, 6 28108 Alcobendas Madrid Spain Attention: Manuel Sanchez Facsimile: 34 91 714 70 01 Email: manuel.sanchez@telvent.abengoa.com and with a copy to: Squire Sanders & Dempsey LLP 4900 Key Tower 127 Public Square Cleveland, Ohio 44114-1304 USA Attention: Laura D. Nemeth Facsimile: (216) 479-8780 Email: lnemeth@ssd.com and to: Squire Sanders & Dempsey Abogados Calle Velazquez 108-110 28006 Madrid Spain Attention: Juan Picon Facsimile: 34 91 590 24 20 Email: jpicon@ssd.com - 50 - and to: Edwards, Kenny & Bray 19th Floor 1040 West Georgia Street Vancouver, British Columbia, Canada V6E 4H3 Attention: William L. Hartley Facsimile: (604) 689-5177 Email: whartley@ekb.com or to such other place and with such other copies as any party may designate as to itself by written notice to the others. 10.2 CHOICE OF LAW This Agreement and the rights and duties of the parties hereunder shall be governed by, and construed in accordance with, the laws of the Province of Alberta. In addition, each of the parties hereto, (i) consents to submit itself to the non-exclusive personal jurisdiction of the courts of Alberta in the event any dispute arises out of this Agreement or any transaction contemplated hereby, (ii) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court and (iii) waives any right to trial by jury with respect to any action related to or arising out of this Agreement or any transaction contemplated hereby. 10.3 ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS This Agreement, together with all Appendices and Schedules hereto and the agreements contemplated by this Agreement, constitutes the entire agreement among the parties pertaining to the subject matter hereof and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written, of the parties. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. No amendment, supplement, modification or waiver of this Agreement shall be binding unless executed in writing by the party to be bound thereby. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar), nor shall such waiver constitute a continuing waiver unless otherwise expressly provided. 10.4 MULTIPLE COUNTERPARTS This Agreement may be executed by facsimile and in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 10.5 EXPENSES Except as otherwise specified in this Agreement, including without limitation Section 6.13, each party hereto shall pay its own legal, accounting, out-of-pocket and other expenses incident to this Agreement, including any commissions referred to in Section 10.6, and to any action taken by - 51 - such party in preparation for carrying this Agreement into effect. Metso Canada Buyer shall pay all fees, costs and expenses of the issuing and advising banks relating to the Standby Letter of Credit and any replacements or substitutes therefor, as well as any fees payable to the issuing and advising banks listed in the Standby Letter of Credit. 10.6 BROKERAGE AND FINDER'S FEES Except for the Transaction Bonus, Sellers agree to indemnify Metso Canada Buyer hold it harmless in respect of any claim for brokerage or other commissions relating to this Agreement or the transactions contemplated hereby which is caused by actions of either of the Sellers or any of their Affiliates. Metso Canada Buyer will indemnify Sellers and hold them harmless in respect of any claim for brokerage or other commissions relating to this Agreement or to the transactions contemplated hereby which is caused by actions of Metso Canada Buyer or any of its Affiliates. 10.7 TITLES The titles, captions or headings of the Articles, Sections and subsections herein are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. 10.8 CUMULATIVE REMEDIES All rights and remedies of either party hereto, whether under or in respect of this Agreement or any document or instrument delivered pursuant to this Agreement (including the Purchase Price Holdback Escrow Agreement), are cumulative of each other and of every other right or remedy such party may otherwise have at law or in equity, and the exercise of one or more rights or remedies shall not prejudice or impair the concurrent or subsequent exercise of other rights or remedies. - 52 - 10.9 CURRENCY All references to currency herein (except where otherwise specified) are to lawful money of the United States of America. IN WITNESS WHEREOF, the parties hereto have executed or caused this Agreement to be duly executed, all as of the day and year first above written. TELVENT SISTEMAS Y REDES, S.A. METSO AUTOMATION SCADA SOLUTIONS LTD. By: /s/ Manuel Sanchez By: /s/ Eeva-Liisa Partanen -------------------------------- -------------------------------- Manuel Sanchez Eeva-Liisa Partanen -------------------------------- -------------------------------- (Name) (Name) Power of Attorney Director -------------------------------- -------------------------------- (Title) (Title) By: /s/ Antti Kaunonen -------------------------------- Antti Kaunonen -------------------------------- (Name) Power of Attorney & Senior Vice President Tech & Bus Dev. -------------------------------- (Title) METSO AUTOMATION SCADA SOLUTIONS INC. By: /s/ Eeva-Liisa Partanen -------------------------------- Eeva-Liisa Partanen -------------------------------- (Name) Director -------------------------------- (Title) By: /s/ Antti Kaunonen -------------------------------- Antti Kaunonen -------------------------------- (Name) Power of Attorney & Senior Vice President Tech & Bus Dev. -------------------------------- (Title) By: /s/ Steve Aasen -------------------------------- Steve Aasen -------------------------------- (Name) Vice President Business Controls -------------------------------- (Title) By: /s/ Larry W. Stack -------------------------------- Larry W. Stack -------------------------------- (Name) Vice President Marketing & Technology -------------------------------- (Title) METSO AUTOMATION HOLDING B.V. By: /s/ Eeva-Liisa Partanen -------------------------------- Eeva-Liisa Partanen -------------------------------- (Name) Director -------------------------------- (Title) By: /s/ Antti Kaunonen -------------------------------- Antti Kaunonen -------------------------------- (Name) Power of Attorney & Senior Vice President Tech & Bus Dev. -------------------------------- (Title) NELES-JAMESBURY, INC. By: /s/ Eeva-Liisa Partanen -------------------------------- Eeva-Liisa Partanen -------------------------------- (Name) Director -------------------------------- (Title) By: /s/ Antti Kaunonen -------------------------------- Antti Kaunonen -------------------------------- (Name) Power of Attorney & Senior Vice President Tech & Bus Dev. -------------------------------- (Title) APPENDIX 4.13.1 METSO US TAX MATTERS 1.1 In this Appendix 4.13.1, (i) "Applicable Tax Legislation" means any legislation pursuant to which Taxes are imposed by any Taxation Authority. (ii) "Assessment" means an assessment, reassessment or any other formal claim for, or in respect of, Taxes, which is made by any Taxation Authority. (iii) "Metso Canada Buyer Tax Indemnity Event" means an event deemed hereby to occur when a covenant of the Metso Canada Buyer in Section 1.3 of this Appendix 4.13.1 has been breached or has not been performed, but excludes any event which was directly caused by any action of the Seller. (iv) "Post-Closing Tax Period" shall mean any taxable period (or portion thereof) beginning after the Closing Date. (v) "Pre-Closing Tax Period" shall mean any taxable period (or portion thereof) ending on or before the Closing Date. (vi) "Seller Tax Indemnity Event" means an event deemed hereby to occur when a representation or warranty of Metso US Seller in Section 1.2.1 or 1.2.2 of this Appendix 4.13.1 is untrue, inaccurate or otherwise breached or a covenant of the Seller in Section 1.3 of this Appendix 4.13.1 has been breached or has not been performed, but excludes any event which was directly caused by any action of the Tax Indemnified Party. (vii) "Straddle Period" shall mean any period for which Taxes must be reported and paid by the Companies that includes (but does not end on) the Closing Date. (viii) "Tax Indemnified Party" means Metso US or Metso Canada Buyer, as the context requires. (ix) "Tax Indemnity Amount" means the amount determined in accordance with Section 1.5.4 of this Appendix 4.13.1. (x) "Tax Report" shall mean all returns, estimates, information statements and reports relating to Taxes. (xi) "Taxation Authority" means the United States federal government and any state, county, municipal or other governmental subdivision within the United States. -2- (xii) "Taxes" shall mean (i) any and all federal, state, provincial, local, foreign and other taxes, assessments and other governmental charges, duties, impositions and liabilities, including taxes based upon or measured by gross receipts, income, profits, sales, use and occupation, and value added, ad valorem, transfer, gains, franchise, capital stock, severance, withholding, payroll, recapture, employment, excise, unemployment insurance, social security, business license, occupation, business organization, stamp, environmental and property taxes, together with all interest, penalties and additions imposed with respect to such amounts; (ii) any liability for the payment of any amounts described in clause (i) as a result of being a successor to or transferee of any Person or a member of an affiliated, consolidated or unitary group for any period (including pursuant to US Treasury Regulation Section 1.1502-6 or comparable provisions of state, provincial, local or tax law of any applicable Governmental Authority); and (iii) any liability for the payment of amounts described in clause (i) or clause (ii) as a result of any express or implied obligation to indemnify any Person or as a result of any obligations under agreements or arrangements with any Person. 1.2 Tax Matters 1.2.1 Taxes. Except as set forth in Schedule 4.13.1(a), to the best of the knowledge of Metso US Seller and Metso US, Metso US has filed on a timely basis with the appropriate taxing authorities all Tax Reports required to be filed in the current year through the date hereof. The Tax Reports are complete and accurate in all material respects and were prepared and filed in accordance with applicable law. Except as set forth in Schedule 4.13.1(a), all Taxes owed by or with respect to Metso US (whether or not shown on any Tax Report) with respect to Tax Reports the due date of which precedes the date hereof have been paid. 1.2.2 US Tax Matters. Except as set forth in Schedule 4.13.1(b), (i) except for Sellers' affiliated group for US federal income tax purposes, Metso US is not and has not been a member of an affiliated group of corporations filing a consolidated US federal income tax return (or a group of corporations filing a consolidated, combined or unitary income tax return under comparable provisions of state, provincial, local or foreign tax law); (ii) Metso US has no obligation under any agreement or arrangement with any other person or entity with respect to Taxes of such other person or entity (including pursuant to US Treasury Regulation Section 1.1502-6 or comparable provisions of state, provincial, local or foreign tax law) and including any liability for Taxes of any predecessor entity; and (iii) Metso US Seller, with respect to Metso US, is not a "foreign person" within the meaning of Section 1445 of the US Code. -3- 1.3 Special Tax Covenants Relating to Allocation of Current Year Tax Costs; Preparation of Tax Reports 1.3.1 Allocation of Straddle Period Tax Costs. (iv) During the Pre-Closing Tax Period, Metso US Seller shall pay all Taxes attributable to the operations of Metso US. During the Post-Closing Tax Period, Metso Canada Buyer shall pay all Taxes attributable to Metso US' operations. If any party pays a Tax that another party has agreed to pay, the other party shall reimburse the paying party promptly after receipt of evidence of the payment. (v) For the purposes of any Tax based on receipts or income, the receipts or net income of Metso US during any tax period ending on the Closing Date will be determined by a closing of Metso US' books as of the close of business on the Closing Date, provided that any tax item resulting from any action not in the ordinary course of business taken by Metso US at the direction of the Metso Canada Buyer on the Closing Date after the time of the Closing but before the close of business shall be treated as occurring in the Post-Closing Tax Period. (vi) Real, personal, and intangible property Taxes of Metso US for the Pre-Closing Tax Period shall equal the amount of such property Taxes for the entire Straddle Period multiplied by a fraction, the numerator of which is the number of days during the Straddle Period that are in the Pre-Closing Tax Period and the denominator of which is the number of days in the Straddle Period. (vii) Metso US Seller's obligation to pay any amount owed by it pursuant to this Section 1.3.1 shall be conditional upon its right to withdraw the corresponding amount of income from Metso US for which such tax is due. 1.3.2 Tax Report Filings. (viii) For any Straddle Period of Metso US, Metso Canada Buyer shall timely prepare and file with the appropriate authorities all Tax Reports required to be filed and shall pay all Taxes due with respect to such Tax Reports; provided, however, that Metso US Seller shall reimburse Metso Canada Buyer for any amount owed by it pursuant to Section 1.3.1 with respect to the taxable periods covered by such Tax Reports. (ix) For all Pre-Closing Tax Periods, Metso US Seller shall include the tax items of Metso US in Metso US Seller's consolidated federal income tax return, and Metso US Seller or its representative shall timely prepare any other Tax Reports required to be filed, and Metso US Seller shall pay all Taxes due with respect to such Tax Reports. Any Tax Report described in the preceding sentence, including the portion of Metso US Seller's -4- consolidated federal income tax return relating to Metso US, shall be prepared on a basis consistent with Section 1.3.1 and the past practices of Metso US and in a manner that does not distort taxable income (e.g., by deferring income or accelerating deductions). Holdco US shall deliver to Metso Canada Buyer the original of each such Tax Report (other than Metso US Seller's consolidated federal income tax return) together with the amount of Tax shown as due thereon (by the Metso Canada Buyer or, after the Closing, Metso US) at least five business days prior to the due date for the filing of such Tax Report and upon receipt thereof the Metso Canada Buyer shall cause Metso US to file timely such Tax Report (as prepared by Metso US Seller) and pay the Tax shown as due thereon. 1.3.3 Cooperation. Metso Canada Buyer and Metso US Seller shall cooperate, and Metso Canada Buyer agrees to cause Metso US to cooperate with Metso US Seller with respect to amending any Tax Report or claiming any refund of Taxes payable by or with respect to Metso US. Metso US Seller, Metso US, and Metso Canada Buyer shall reasonably cooperate, and shall cause their respective Affiliates, officers, employees, agents, auditors and representatives to cooperate, in preparing, filing and amending all Tax Reports, including maintaining and making available to each other all records necessary in connection with Taxes and in resolving all disputes and audits with respect to all taxable periods relating to Taxes. 1.3.4 Refunds and Credits. Any refund or credit of Taxes of Metso US for any Pre-Closing Tax Period shall be for the account of Metso US Seller. Furthermore, Metso Canada Buyer shall waive the carryback from a taxable period beginning after the Closing Date of any items of loss, deductions, or other Tax items of Metso US, any subsidiary, or any of their respective Affiliates, including Metso Canada Buyer. Any refund or credit of Taxes of Metso US for any Post-Closing Tax Period shall be for the account of Metso Canada Buyer. Any refund or credit of Taxes of Metso US for any Straddle Period shall be equitably apportioned between Metso US Seller and Metso Canada Buyer. 1.3.5 Rights of Access Granted to Metso Canada Buyer. Metso US Seller shall grant to Metso Canada Buyer (or its designees) access at all reasonable times to all of the information, books and records relating exclusively to Metso US within the possession of Metso US Seller (including work papers and correspondence with taxing authorities), shall afford Metso Canada Buyer (or its designees) the right (at Metso Canada Buyer's expense) to take extracts therefrom and to make copies thereof, and shall provide Metso Canada Buyer reasonable access to Metso US Seller's employees who are knowledgeable regarding the relevant Tax matters to the extent reasonably necessary to permit Metso Canada Buyer (or its designees) to prepare Tax Reports and to conduct negotiations with taxing authorities, provided, however, that Metso Canada Buyer shall have no rights under this Section 1.3.5 to any information, books or records relating to Metso US Seller or its Affiliates (other than Metso US). 1.3.6 Rights of Access Granted to Metso US Seller. Metso Canada Buyer and its Affiliates shall grant, or cause Metso US to grant, to Metso US Seller (or its designee) access at all reasonable times to all of the information, books and records relating to Metso US -5- within the possession of Metso Canada Buyer or Metso US (including work papers and correspondence with taxing authorities), shall afford Metso US Seller (or its designee) the right (at Metso US Seller's expense) to take extracts therefrom and to make copies thereof, and shall provide Metso US Seller reasonable access to Metso Canada Buyer's employees who are knowledgeable regarding the relevant Tax matters to the extent reasonably necessary to permit Metso US Seller (or its designee) to prepare Tax Reports and to conduct negotiations with taxing authorities. Metso Canada Buyer shall, or shall cause Metso US to, accurately complete on a timely basis any reasonable or customary tax information package or questionnaire submitted to it by Metso US Seller for the purpose of enabling Metso US Seller to complete any Tax Report that it is required to prepare pursuant to this Agreement. 1.3.7 Audits and Assessments. Each of Metso Canada Buyer Metso US Seller shall promptly notify the other in writing within 10 days from its (or its affiliates') receipt of notice of any pending or threatened federal, state or local Tax audits or assessments of, or with respect to, any tax item of Metso US for which Metso US Seller is responsible under this Agreement. In the case of any tax audit or administrative or court proceeding for any taxable period ending on or prior to the Closing Date that relates to any Tax of Metso US for which Metso US Seller is responsible under this Section 1.3, Metso US Seller shall have the right to control the conduct and disposition of such audit or proceeding and to employ counsel of its choice at its expense and Metso Canada Buyer shall have the right to consult with Metso US Seller during such audit or proceeding at its own expense; provided that Metso US Seller shall not dispose of any such audit or proceeding in a manner that would purport to bind Metso US for taxable periods ending after the Closing Date without the prior written consent of Metso Canada Buyer, which consent shall not be unreasonably withheld. In the case of any tax audit or administrative or court proceeding for any taxable period beginning before the Closing Date and ending after the Closing Date that relates to any Tax for which Metso US Seller is responsible under this Section 1.3, Metso Canada Buyer shall have the right to control such audit or proceeding, provided that Metso Canada Buyer shall not accept any proposed adjustment or enter into any settlement or agreement in compromise which would result in a claim for indemnification against Metso US Seller pursuant to this agreement without the prior written consent of Metso US Seller, which consent shall not be unreasonably withheld. Metso Canada Buyer shall cooperate fully, and cause Metso US to cooperate fully, with Metso US Seller and its counsel in the defense against or compromise of any claim in any proceeding controlled by Metso US Seller pursuant to this Section 1.3.7. 1.3.8 Transfer Taxes, Etc. Metso Canada Buyer shall be responsible for the payment of all state, provincial and local transfer, sales, use or other similar Taxes resulting from the transactions contemplated by this Agreement. 1.3.9 Section 338(h)(10) Election. If requested by Metso Canada Buyer, Metso Canada Buyer and Metso US Seller shall make and shall cause their respective affiliates to make a joint election pursuant to Section 338(h)(10) of the US Code (and any corresponding provision of state or local law) with respect to the purchase and sale of -6- Metso US (the "SECTION 338(H)(10) ELECTIONS") in the manner described in this Section 1.3.9: (i) Except as otherwise provided in Section 1.3.9(iii), Metso Canada Buyer shall be responsible for the preparation of drafts of the Section 338 Forms. The "SECTION 338 FORMS" shall mean all forms and schedules required to be filed in connection with the Section 338(h)(10) Elections, including, without limitation, IRS Form 8023 and all attachments required to be filed therewith pursuant to the applicable Treasury Regulations. (ii) At least 90 days prior to the latest date for the filing of each Section 338 Form, Metso Canada Buyer shall furnish Metso US Seller with a draft of such Section 338 Form. Metso US Seller shall notify Metso Canada Buyer of any objection Metso US Seller may have to such draft Section 338 Form within 30 days after the receipt thereof from Metso Canada Buyer. At least 30 days prior to the latest date for the filing of each Section 338 Form, Metso Canada Buyer and Metso US Seller shall agree upon the final form and content of such Section 338 Form, Metso Canada Buyer shall deliver to Metso US Seller three copies of such agreed upon Section 338 Form, and each party shall execute such Form. If Metso Canada Buyer and Metso US Seller are unable so to agree, any matter of disagreement shall be resolved prior to 2 days before the due date of such Section 338 Forms by the third party accountants. Metso Canada Buyer shall file the agreed upon Section 338 Forms with the applicable taxing authority on or before the due date thereof. (iii) On or before the last day of the fourth month beginning after the month that includes the Closing Date, Metso Canada Buyer shall provide to Metso US Seller a proposed allocation of the "aggregate deemed sales price" for the deemed sale of assets resulting from the making of the Section 338(h)(10) Elections. If Metso Canada Buyer's proposed allocation for the deemed sale of assets is based on an appraisal by an independent appraiser, then the proposed allocation shall be treated as the agreed final allocation. If the proposed allocation is not based on an independent appraisal, Metso US Seller may object to the proposed allocation. However, if Metso US Seller does not object within 10 business days after its receipt of Metso Canada Buyer's proposed allocation, such allocation shall be treated as the agreed final allocation. If Metso US Seller objects in writing to Metso Canada Buyer's proposed allocation within 10 business days after the receipt thereof, Metso Canada Buyer and Metso US Seller shall use their best efforts to agree on an allocation. If the parties cannot, within 5 business days, agree to an allocation, such disagreement shall be resolved by third party accountants, provided that any such dispute shall be resolved in favor of Metso Canada Buyer unless the third party accountants determine that there is no reasonable basis for Metso Canada Buyer's position. Following the -7- resolution of any such dispute, such allocation shall be the final agreed allocation. (iv) Metso Canada Buyer and Metso US Seller agree that neither of them shall take any action to modify the Section 338 Forms following the execution thereof, or to modify or revoke the Section 338(h)(10) Elections following the filing of the Section 338 Forms, without the written consent of Metso US Seller or Metso Canada Buyer, as the case may be. (v) Metso Canada Buyer and Metso US Seller shall file all Tax Reports in a manner consistent with the information contained in the Section 338 Forms as filed and the final allocation. 1.4 Tax Sharing Agreements All Tax sharing agreements or similar agreements between Metso US and Metso US Seller or any of Metso US Seller's Affiliates shall be terminated not later than the Closing Date, and after the Closing Date Metso US shall not be bound or have any liability pursuant to any such agreement. 1.5 Seller Indemnifications. 1.5.1 Tax Indemnity. Metso US Seller hereby indemnifies and agrees to save harmless the Tax Indemnified Party from and against all losses, damages or expenses (including all professional fees incurred with respect to the enforcement by the Tax Indemnified Party of its rights under this Section 1.5.1), to the extent and on the basis hereinafter set forth, which are suffered by the Tax Indemnified Party as a result of the occurrence of a Seller Tax Indemnity Event. Metso US Seller shall have no liability in respect of the matters covered by this Appendix 4.13.1 except in respect of a Seller Tax Indemnity Event and except on the basis provided for in this Article. 1.5.2 Pre-Assessment Procedure. If the Tax Indemnified Party receives a notice or other communication (whether written or oral) from any Taxation Authority after the Closing Date to the effect that such Taxation Authority proposes to issue an Assessment to the Tax Indemnified Party, the basis of which is a Seller Tax Indemnity Event, the Tax Indemnified Party shall forthwith forward a copy of such notice to Metso US Seller, or otherwise notify Metso US Seller of the contents of such communication, and Metso US Seller shall have the right, at its own expense, including all legal fees, costs and expenses, to require the Tax Indemnified Party to make representations with respect to such proposed Assessment through counsel retained for this purpose by Metso US Seller. The Tax Indemnified Party shall be obligated to cooperate fully at all times with Metso US Seller and counsel so appointed, and to act in a timely manner, and in good faith, to make available all documents and records necessary to enable Metso US Seller to make representations with respect to, or otherwise contest, the proposed Assessment. If Metso US Seller, having received notice of, or other -8- communication in respect of, a proposed Assessment, as contemplated herein, decides not to require the Tax Indemnified Party to make representations with respect to such proposed Assessment, Metso US Seller shall promptly so inform the Tax Indemnified Party and thereafter the Tax Indemnified Party may do so on its own behalf, and at its own expense. Any decision by the Tax Indemnified Party not to make representations or any lack of success by the Tax Indemnified Party in such action shall not, in such event, relieve Metso US Seller of its obligation to indemnify the Tax Indemnified Party pursuant to the terms and conditions of this Article, except that such indemnity shall not, in such instance, extend to legal and other costs incurred by the Tax Indemnified Party in connection with such proposed Assessment at any time prior to the actual issuance of an assessment. 1.5.3 Procedure on Assessment. If any Taxation Authority should at any time issue an Assessment to the Tax Indemnified Party the basis of which is, in whole or in part, a Seller Tax Indemnity Event, Metso US Seller shall pay the Tax Indemnity Amount in relation to the Assessment to the Tax Indemnified Party, within thirty (30) days after the Tax Indemnified Party has received the assessment, the amount (including any interest and/or penalty) specified in such Assessment. 1.5.4 Tax Indemnity Amount. The Tax Indemnity Amount in relation to an Assessment shall mean the aggregate of: (i) the amount (including any interest and/or penalty) specified in such Assessment insofar as such amount is attributable to a Seller Tax Indemnity Event; (ii) an amount of interest from the date of mailing of such Assessment to the date of the payment by the Seller to the Tax Indemnified Party of the amount specified in Section 1.5.4 of this Appendix 4.13.1 calculated on the amount specified in Section 1.5.4 of this Appendix 4.13.1 at a rate equal to the prescribed interest rate for the purposes of the Applicable Tax Legislation pursuant to which the Assessment has been issued; and (iii) the amount necessary to compensate the Tax Indemnified Party for any tax payable in respect of the receipt of the Tax Indemnity Amount, subject to the duty of the Tax Indemnified Party to mitigate such tax amount payable. After Metso US Seller has paid the Tax Indemnity Amount in respect of an Assessment, the Tax Indemnified Party shall forthwith pay an amount (not exceeding the amount received from Metso US Seller) to the Taxation Authority sufficient to satisfy the obligation of the Tax Indemnified Party in respect of the Assessment to the Taxation Authority. 1.5.5 Objection/Appeal Procedure. The Tax Indemnified Party shall, within ten (10) working days after the receipt of an Assessment, send a copy of such Assessment -9- to Metso US Seller. Metso US Seller shall be entitled to undertake the carriage of any objection or appeal from such Assessment. Metso US Seller shall be entitled to retain its own counsel for that purpose and shall be responsible for all expenses, including legal fees and other costs associated therewith. The Tax Indemnified Party shall cooperate with Metso US Seller to the extent reasonably necessary if Metso US Seller wishes to object to or appeal any such Assessment. Metso US Seller shall be responsible for all expenses, including legal fees and costs, incurred by the Tax Indemnified Party in so cooperating. If such objection or appeal is successful in whole or in part, the Tax Indemnified Party shall pay to Metso US Seller within twenty (20) days of receipt, the amount of any refund received in respect of such Assessment (not exceeding the portion of the Tax Indemnity Amount in respect of such Assessment that Metso US Seller has paid to the Tax Indemnified Party as herein provided) together with the applicable portion of interest received on such refund, determined on an after-tax basis, and all legal costs to which the Tax Indemnified Party becomes entitled as a result of such successful objection or appeal. The Tax Indemnified Party shall join in and pursue any objection to or appeal of any such Assessment in a timely manner and in good faith, shall cooperate fully, at all times, with Metso US Seller and counsel that Metso US Seller retains and shall make available to Metso US Seller and such counsel all documents and records which may reasonably be necessary to enable Metso US Seller to contest such Assessment. 1.6 Metso Canada Buyer Indemnifications. Metso Canada Buyer hereby indemnifies and agrees to save harmless Metso US Seller, on an after-tax basis, from and against all losses, damages or expenses (including all professional fees incurred with respect to the enforcement by Metso US Seller of its rights under this Section 1.6), which are suffered by Metso US Seller as a result of the occurrence of a Metso Canada Buyer Tax Indemnity Event. APPENDIX 4.13.2 CANADIAN TAX MATTERS 1.1 Definitions. In this Appendix 4.13.2: (i) "Applicable Tax Legislation" means any legislation pursuant to which Taxes are imposed by any Taxation Authority; (ii) "Assessment" means an assessment, reassessment or any other formal claim for, or in respect of, Taxes, which is made by any Taxation Authority; (iii) "Company" means Metso Canada; (iv) "Deemed Year End" means the time that is immediately before the time that control of the Company is acquired by the Metso Canada Buyer, as more particularly described in paragraph 249(4)(a) of the Tax Act; (v) "GST" means goods and services tax imposed under the GST Legislation; (vi) "GST Legislation" means the Excise Tax Act (Canada); (vii) "Metso Canada Buyer Tax Indemnity Event" means an event deemed hereby to occur when a covenant of the Metso Canada Buyer in Section 4.1 of this Appendix 4.13.2 has been breached or has not been performed, but excludes any event which was directly caused by any action of the Seller; (viii) "Seller" means Metso Canada Seller; (ix) "Seller Tax Indemnity Event" means an event deemed hereby to occur when a representation or warranty of the Seller in Section 2.1 of this Appendix 4.13.2 is untrue, inaccurate or otherwise breached or a covenant of the Seller in Section 3.1 of this Appendix 4.13.2 has been breached or has not been performed, but excludes any event which was directly caused by any action of the Tax Indemnified Party; (x) "Tax Act" means the Income Tax Act (Canada), as amended to the Closing Date; (xi) "Tax Indemnified Party" means the Company or the Metso Canada Buyer, as the context requires; (xii) "Tax Indemnity Amount" means the amount determined in accordance with Section 5.1.4 of this Appendix 4.13.2; -2- (xiii) "Tax Returns" means all returns, reports, declarations, statements, bills, schedules or written information of, or in respect of, Taxes which are required to be filed with, or supplied to, any Taxation Authority; (xiv) "Taxation Authority" means the federal government of Canada and any provincial, county, municipal or other governmental subdivision within Canada; and (xv) "Taxes" means all taxes, including any interest, penalties, or other additions thereto, that are imposed by a Taxation Authority, and shall for greater certainty include, but not be limited to, federal and provincial income and capital taxes, payroll and employee withholding taxes, employment insurance premiums, Canada pension plan contributions, GST, sales and use taxes, ad valorem taxes, excise taxes, franchise taxes, gross receipts taxes, business licence taxes, occupation taxes, real and personal property taxes, stamp taxes, environmental taxes, transfer taxes, workers' compensation premiums, and all other amounts of the same or of a similar nature to any of the foregoing, whether or not such amounts are described as taxes, which are imposed by a Taxation Authority. 2.1 Seller's Representations. Except as set forth in Schedule 4.13.2, the Seller represents and warrants to the Metso Canada Buyer that, to the best of the knowledge of the Seller: 2.1.1 Filings. The Company has, or will have, duly, and in a timely manner, filed all Tax Returns which were required to be filed by it with any Taxation Authority on or before the Closing Date. Each such Tax Return has or will have been prepared in accordance with the Applicable Tax Legislation pursuant to which each such Tax Return is required to be filed and is, or will be, true, complete and correct in all material respects. 2.1.2 Withholdings. The Company has withheld, and will continue until the Closing Date to withhold, any Taxes which are required by any Applicable Tax Legislation to be withheld and has paid or remitted, and will continue until the Closing Date to pay and remit, on a timely basis, the full amount of any Taxes which have been or will be withheld, to the applicable Taxation Authority. 2.1.3 Payment and Accrual of Taxes. The Company has paid, on a timely basis, all Taxes, including any installments or prepayments of Taxes, which are required to have been paid to any Taxation Authority pursuant to any Applicable Tax Legislation or has recorded such amounts in the Metso Canada Financial Statements as a reserve for taxes payable, or taxes recoverable as the case may be. No deficiency with respect to the payment of any Taxes has been asserted against the Company by any Taxation Authority. 2.1.4 Outstanding Assessments. There are no outstanding Assessments against the Company. -3- 2.1.5 Extensions. The Company is not a party to any agreement, waiver or arrangement with any Taxation Authority which relates to any extension of time with respect to the filing of any Tax Return, any payment of Taxes or any Assessment. 2.1.6 Taxation Year End. The taxation year of the Company, for the purposes of the Tax Act, ends on December 31st in each year. 2.1.7 Residence. The Seller is a non-resident of Canada, for the purposes of the Tax Act, and a resident of the Netherlands, for the purposes of the Canada-Netherlands Income Tax Convention (1986). 2.1.8 Taxable Canadian Corporation. The Company is a taxable Canadian corporation, within the meaning of subsection 89(1) of the Tax Act. 2.1.9 Acquisition of Control of the Company. There has been no acquisition of control, for the purposes of the Tax Act, of the Company within the last six taxation years of the Company. 2.1.10 GST. The Company is duly registered under the GST Legislation and its GST registration number is 121751283. 3.1 Covenants of the Seller. The Seller covenants and agrees with the Buyer as follows: 3.1.1 Filing of Returns. The Seller will cause the preparation of all Tax Returns which relate to any period prior to the Closing Date but which are not required to be filed with the applicable Taxation Authority until after the Closing Date. For greater certainty, this covenant shall apply to the Tax Returns which are required by the Tax Act in respect of the fiscal period of the Company which ends on the Deemed Year End. 4.1 Covenants of the Metso Canada Buyer. The Metso Canada Buyer covenants and agrees with the Seller as follows: 4.1.1 Tax Return Filing. The Metso Canada Buyer shall ensure that all Tax Returns of the Company for any period ending after the Closing Date are prepared and filed on a basis consistent with the provisions of this Appendix 4.13.2 and shall further ensure that no Tax Returns of the Company for any period ending on or before the Closing Date are amended without obtaining the prior written consent of the Seller. The Metso Canada Buyer shall ensure that all Tax Returns prepared by Seller pursuant to Section 3.1.1 of this Appendix 4.13.2 will be filed on a timely basis, and will pay or cause to be timely paid all taxes of the Company shown as due on such Tax Returns. 4.1.2 Final Tax Return Filing. The Metso Canada Buyer will, or will cause the Company to, make available to the Seller such information as the Seller may -4- reasonably request in order to enable the Seller to comply with its obligations under Section 3.1.1 of this Appendix 4.13.2. 4.1.3 Refund of Taxes. If the Company receives or becomes entitled to receive a refund for, or in respect of, any taxation year ending prior to the Closing Date, other than any such refund which results from the carryback of a loss from a taxation year ending after the Closing Date, then the amount of such refund, inclusive of interest thereon, shall be applied to reduce the amount of any Tax Indemnity Amount that may become payable by the Seller hereunder. If any such Tax Indemnity Amount has been paid by the Seller hereunder, then the Tax Indemnified Party which has received such Tax Indemnity Amount shall, forthwith after the receipt of such refund, inclusive of interest thereon, by the Company, repay the amount which the Tax Indemnified Party has received from the Seller, to the extent of the amount of such refund, inclusive of interest thereon, together with interest on the amount so repaid at a rate equal to the Royal Bank of Canada prime rate on the date that such refund, inclusive of interest, is received by the Company. 5.1 Seller Indemnifications. 5.1.1 Tax Indemnity. The Seller hereby indemnifies and agrees to save harmless the Tax Indemnified Party from and against all losses, damages or expenses (including all professional fees incurred with respect to the enforcement by the Tax Indemnified Party of its rights under this Section 5.1.1), to the extent and on the basis hereinafter set forth, which are suffered by the Tax Indemnified Party as a result of the occurrence of a Seller Tax Indemnity Event. The Seller shall have no liability in respect of the matters covered by this Appendix 4.13.2 except in respect of a Seller Tax Indemnity Event and except on the basis provided for in this Article. 5.1.2 Pre-Assessment Procedure. If the Tax Indemnified Party receives a notice or other communication (whether written or oral) from any Taxation Authority after the Closing Date to the effect that such Taxation Authority proposes to issue an Assessment to the Tax Indemnified Party, the basis of which is a Seller Tax Indemnity Event, the Tax Indemnified Party shall forthwith forward a copy of such notice to the Seller, or otherwise notify the Seller of the contents of such communication, and the Seller shall have the right, at its own expense, including all legal fees, costs and expenses, to require the Tax Indemnified Party to make representations with respect to such proposed Assessment through counsel retained for this purpose by the Seller. The Tax Indemnified Party shall be obligated to cooperate fully at all times with the Seller and counsel so appointed, and to act in a timely manner, and in good faith, to make available all documents and records necessary to enable the Seller to make representations with respect to, or otherwise contest, the proposed Assessment. If the Seller, having received notice of, or other communication in respect of, a proposed Assessment, as contemplated herein, decides not to require the Tax Indemnified Party to make representations with respect to such proposed Assessment, the Seller shall -5- promptly so inform the Tax Indemnified Party and thereafter the Tax Indemnified Party may do so on its own behalf, and at its own expense. Any decision by the Tax Indemnified Party not to make representations or any lack of success by the Tax Indemnified Party in such action shall not, in such event, relieve the Seller of its obligation to indemnify the Tax Indemnified Party pursuant to the terms and conditions of this Article, except that such indemnity shall not, in such instance, extend to legal and other costs incurred by the Tax Indemnified Party in connection with such proposed Assessment at any time prior to the actual issuance of an assessment. 5.1.3 Procedure on Assessment. If any Taxation Authority should at any time issue an Assessment to the Tax Indemnified Party the basis of which is, in whole or in part, a Seller Tax Indemnity Event, the Seller shall pay the Tax Indemnity Amount in relation to the Assessment to the Tax Indemnified Party, within thirty (30) days after the Tax Indemnified Party has received the assessment, the amount (including any interest and/or penalty) specified in such Assessment. 5.1.4 Tax Indemnity Amount. The Tax Indemnity Amount in relation to an Assessment shall mean the aggregate of: (i) the amount (including any interest and/or penalty) specified in such Assessment insofar as such amount is attributable to a Seller Tax Indemnity Event; (ii) an amount of interest from the date of mailing of such Assessment to the date of the payment by the Seller to the Tax Indemnified Party of the amount specified in Section 5.1.4 of this Appendix 4.13.2 calculated on the amount specified in Section 5.1.4 of this Appendix 4.13.2 at a rate equal to the prescribed interest rate for the purposes of the Applicable Tax Legislation pursuant to which the Assessment has been issued; and (iii) the amount necessary to compensate the Tax Indemnified Party for any tax payable in respect of the receipt of the Tax Indemnity Amount, subject to the duty of the Tax Indemnified Party to mitigate such tax amount payable. After the Seller has paid the Tax Indemnity Amount in respect of an Assessment, the Tax Indemnified Party shall forthwith pay an amount (not exceeding the amount received from the Seller) to the Taxation Authority sufficient to satisfy the obligation of the Tax Indemnified Party in respect of the Assessment to the Taxation Authority. 5.1.5 Objection/Appeal Procedure. The Tax Indemnified Party shall, within ten (10) working days after the receipt of an Assessment, send a copy of such Assessment to the Seller. The Seller shall be entitled to undertake the carriage of any objection or appeal from such Assessment. The Seller shall be entitled to retain its own counsel for that purpose and shall be responsible for all expenses, -6- including legal fees and other costs associated therewith. The Tax Indemnified Party shall cooperate with the Seller to the extent reasonably necessary if the Seller wishes to object to or appeal any such Assessment. The Seller shall be responsible for all expenses, including legal fees and costs, incurred by the Tax Indemnified Party in so cooperating. If such objection or appeal is successful in whole or in part, the Tax Indemnified Party shall pay to the Seller within twenty (20) days of receipt, the amount of any refund received in respect of such Assessment (not exceeding the portion of the Tax Indemnity Amount in respect of such Assessment that the Seller has paid to the Tax Indemnified Party as herein provided) together with the applicable portion of interest received on such refund, determined on an after-tax basis, and all legal costs to which the Tax Indemnified Party becomes entitled as a result of such successful objection or appeal. The Tax Indemnified Party shall join in and pursue any objection to or appeal of any such Assessment in a timely manner and in good faith, shall cooperate fully, at all times, with the Seller and counsel that the Seller retains and shall make available to the Seller and such counsel all documents and records which may reasonably be necessary to enable the Seller to contest such Assessment. 6.1 Metso Canada Buyer Indemnifications. The Metso Canada Buyer hereby indemnifies and agrees to save harmless the Seller, on an after-tax basis, from and against all losses, damages or expenses (including all professional fees incurred with respect to the enforcement by the Seller of its rights under this Section 6.1), which are suffered by the Seller as a result of the occurrence of a Metso Canada Buyer Tax Indemnity Event. TABLE OF CONTENTS

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APPENDICES Appendix 4.13.1 Metso US Tax Matters Appendix 4.13.2 Metso Canada Tax Matters SCHEDULES Schedule 1.1.3 Asbestos Indemnity Agreement Schedule 1.1.40 Standby Letter of Credit Schedule 2.2.3.2 Tax Holdback Escrow Agreement Schedule 2.2.5 Purchase Price Holdback Escrow Agreement Schedule 4.4 Consents Schedule 4.6 Financial Statements Schedule 4.6.2 Undisclosed Liabilities Schedule 4.8 Real Property Schedule 4.10 Litigation Schedule 4.13.1(a) Tax Reports Schedule 4.13.1(b) Consolidated US Tax Returns Schedule 4.13.2 Canadian Tax Matters Schedule 4.14.1 Canadian Employee Plans Schedule 4.14.3 Metso Canada Remuneration Schedule 4.14.4 Metso Canada Employment Contracts Schedule 4.14.6 Canadian Employee Plan Compliance Schedule 4.15.1 US Employee Plans Schedule 4.15.3 Metso US Employment Contracts Schedule 4.15.4 US Employee Plans Compliance Schedule 4.15.6 Former Employees Schedule 4.17 Environmental Matters Schedule 4.18 Contracts Schedule 4.18.2 Good Standing of Agreements Schedule 4.18.3 Bank Guarantees and Surety Bonds Schedule 4.19.2 Intellectual Property Rights Schedule 4.19.3 Infringement or Misappropriation of Intellectual Property Schedule 4.19.5 Third Party Owned Intellectual Property Schedule 4.19.6 Software -iv- Schedule 4.19.7 Transfer of Ownership of Intellectual Property and Exclusive Licensing Arrangements Schedule 4.19.8 Disclosure of Trade Secrets Schedule 4.20 Insurance Obligations Schedule 4.21.1 Employee and Director Information Schedule 5.3 Buyer's Consents Schedule 6.7.1 Released Contracts Schedule 6.7.2 Special Contracts Schedule 6.9 Terms of Use of Trademark EX-2.2 3 l07997exv2w2.txt CONTRACT OF SALE OF SHARES EXHIBIT 2.2 CONTRACT OF SALE OF SHARES OF THE COMPANY XFERA MOVILES, S.A. NUMBER ONE THOUSAND FOUR HUNDRED AND THIRTY EIGHT In Madrid, my residence, on June twenty third two thousand and four. Before me, JUAN ALVAREZ-SALA WALTHER, Notary of this Capital and its Notaries' Association, APPEAR OF THE ONE PART: MS. ANA ISABEL MORALES RODRIGUEZ, of legal age, with the abode for these purposes in Alcobendas (Madrid) at Calle Valgrande, 6, with DNI (National Identity Document) and NIF (Tax Identification Number) 28738501-R. OF THE OTHER: MR. MANUEL FERNANDEZ MAZA, of legal age, married, with abode for these purposes in Alcobendas (Madrid) at Calle Valgrande, 6, with DNI and NIF number 51356303-V. AND OF THE OTHER: MR. FRANCISCO MONTORO ALEMAN, of legal age, married, with abode for these purposes in Madrid at Calle Jose Ortega y Gasset, number 29, with DNI and NIF number 5404195-T. WITNESSETH A) Ms. Ana Isabel Morales Rodriguez, for and on behalf of the limited liability company called "TELVENT INVESTMENTS S.L." (hereinafter the "Purchaser"), as authorized representative thereof, a company with CIF (Company Tax Identification Number) B-84/023373, with registered office in Alcobendas (Madrid) at Calle Valgrande, 6, set up for an open-ended time by means of a public deed 1 executed before the Notary of Madrid, Mr. Ignacio Paz-Ares Rodriguez on 8 June 2004 under the number 1430 of his protocol and entered in the Mercantile Register of Madrid in volume 20,155, sheet 84, section 8, page M-355,841, entry 1. Her powers of representation derive from the power of attorney severally conferred thereon by said company's joint directors under the agreement dated 16 June 2004, placed on public record by means of a deed executed before the Notary of Madrid, Mr. Ignacio Paz-Ares Rodriguez on 18 June 2004 with the number 1544 of his protocol. An authorized copy of this deed has been shown to me and I have extracted therefrom an authenticated copy attached hereto. Ms. Morales Rodriguez declares that the legal personality and capacity of the company she represents have undergone no change and remain in full force and that the powers she exercises have not been revoked, suspended or limited in any way whatsoever, that she is following the instructions of the company she represents in this contract and that this transaction forms part and parcel of the company's normal business as an act in pursuit of the corporate purpose and under the aegis thereof. B) Mr. Manuel Fernandez Maza intervenes as authorized representative of the public limited company called "TELVENT GIT, S.A." (hereinafter the "Seller"), with CIF A-82/631623, with registered office in Alcobendas (Madrid), at Calle Valgrande, 6, set up for an open-ended time under the name of "Telvent Desarrollos, S.A." by a deed executed before the Notary of Madrid, Mr. Carlos Perez Baudin on 4 April 2000 under the number 1199 of his protocol and entered in the Mercantile Register of Madrid in volume 15,370, book 0, sheet 164, section 8, page M-257, 879, entry 1. The called-up capital pending in the deed of foundation was paid by means of another deed authorized on 11 October 2000 by the Notary of Madrid, Mr. Carlos Perez Baudin, with the number 3284 of his protocol. Its share capital has been increased several times by virtue of other deeds authorized by said Notary, Mr. Carlos Perez Baudin, on the following dates: 12 December 2000 with the protocol number 3989 and 1 January 2001 with the protocol number 1. Its trade name was 2 changed from "Telvent Desarrollos, S.A" to "Telvent Sistemas y Redes, S.A" by means of another deed authorized by the Notary of Madrid, Mr. Carlos Perez Baudin, on 12 February 2001, protocol number 516, and its share capital was re-denominated in euros by another deed before said Notary, Mr. Carlos Perez Baudin, on 8 May 2001, protocol number 1596. The company then changed the name of "Telvent Sistemas y Redes, S.A." to its current one of "TELVENT GIT, S.A" by a deed executed before the Notary of Madrid, Mr. Carlos Perez Baudin, on 1 April 2003, with the number 1030 of his protocol, leading to entry number 29 in the company's register page. His powers of representation derive from the power of attorney severally conferred on him by agreement of the Board of Directors of the Company he represents in the board meeting held on 15 April 2004, then executed by means of a deed before the Notary of Madrid, Mr. Ignacio Paz-Ares Rodriguez on 18 June 2004 with the number 1543 of his protocol. I have been shown an authorized copy thereof and extracted therefrom an authenticated copy attached hereto. Mr. Fernandez Maza declares that the legal personality and capacity of the company he represents have undergone no change and remain in full force and that the powers he exercises have not been revoked, suspended or limited in any way whatsoever, that he is following the instructions of the company he represents in this contract and that this transaction forms part and parcel of the company's normal business as an act in pursuit of the corporate purpose and under the aegis thereof. C) Mr. Francisco Montoro Aleman intervenes herein as authorized representative of "Citibank International Plc" (hereinafter "Citibank") a company limited by shares founded in Great Britain under the Companies Acts 1948 to 1967, registered in London (England) on 21 December 1972 and re-registered as a public limited company under article 43 of the Companies Act 1985 on 1 March 1993. Its registered head office and main business office is currently at 336 Strand, London 3 WC2R 1HB and it has been entered in the Mercantile Register of England and Wales under the number 1088249. His powers of representation derive from a power of attorney conferred without individual distinction on him by means of a deed executed before the Notary of Madrid, Mr. Ignacio Martinez-Gil Vich on 3 March 2004 under the number 772 of his protocol. Mr. Montoro has shown me, the Notary, the authorized copy of this power of attorney, from which I have taken an exact and complete photocopy attached hereto, hereby certifying that it is an exact reproduction. Mr. Montoro declares that his principal exists and that the powers he exercises have not been revoked, suspended or limited in any way. In fulfillment of the obligation established by article 98.1 of the Law 24/2001, and with the effects provided for in paragraph two thereof, I hereby declare that I consider and adjudge the persons attending to have sufficient legal standing for, with the representation indicated, deeming in my opinion, from the entire contents of the above-mentioned empowering documents, particularly the whole range of powers conferred, that they have sufficient authorization to grant this present deed of sale-purchase of shares of the Company XFERA MOVILES, S.A., under the terms and conditions establish therein. The persons appearing HAVE, in my opinion, in the capacity they appear, sufficient legal standing to grant this present deed and, therefore, THEY DECLARE: I. That the Seller is shareholder of the Company Xfera Moviles, S.A, with registered office in Madrid, Edificio A.P.O.T., c/Ribera del Sena s/n, Campo de las Naciones; formed for an open-ended period of time by means of deed dated January 4, 2000, granted before the Notary of Madrid Mr. Juan Alvarez-Sala Walther, with number 4 30 of his Protocol, recorded in the Madrid Mercantile Register, at Volume 14805, Sheet 140, Section 8, Page M-246116. With Tax Identification Number 5Q1976091. The Seller is holder of one million four hundred and sixty seven thousand two hundred and seventy (1,467,270) registered shares numbered from 329,886,929 to 331,354,198, both inclusive, of the company Xfera Moviles S.A. (hereinafter, the "Shares", entirely subscribed and fifty percent (50%) paid in. The Seller and Purchaser hereby declare that they are aware of the fact that on 10 June 2004 the Official Gazette of the Mercantile Register ("BORME" in Spanish initials) published the capital call agreed by the Board of Directors of Xfera Moviles, S.A. corresponding to the shares of Xfera Moviles S.A. numbered 309,000,001 to 335,000,000 (the "Call"), as a result of which the total capital call corresponding to the subscribed shares (the "Capital Call") has to be paid to Xfera Moviles, S.A. between 23 and 30 June 2004. Certificate. The shares were acquired by the Purchaser by virtue of its subscription of the capital increase agreed by the Board of Directors of Xfera Moviles, S.A on 15 December 2003, ratified by the General Shareholders' Meeting of said company on 7 January 2004, declared to be wholly subscribed and fifty percent (50%) paid up by said company's Board of Directors of 9 March 2004, placed on public record by virtue of the deed executed on 1 June 2004 before the Notary of Madrid, Mr. Cruz-Gonzalo Lopez- Muller Gomez with the number 1432 of his protocol, entered in the Mercantile Register of Madrid in volume 18,362, book 0, sheet 76, section 8, page M-246,116, entry 30 (the "Share Increase"). The ongoing validity of this tenure is accredited by exhibition of a certificate issued by the Secretary of the Board of Directors of Xfera Moviles, S.A, Jose Perez Santos, whose signature I am familiar with and hereby certify as genuine. This certificate, dated 22 June 2004 has been shown to me and I have obtained therefrom a photocopy, attached hereto, which I, the Notary, hereby certify to be an exact copy. 5 These shares, except for the pledge to be dealt with in declaration IV below, are free of all charges and encumbrances, as asserted by the Seller, notwithstanding which I, the Notary, make the due legal caveat. The representative of the Selling party declares that the valuation of the aforementioned shares is ONE MILLION THREE HUNDRED AND TWELVE THOUSAND ONE HUNDRED AND THREE EUROS (1,312,103 euros). The representative of the Purchasing party declares itself to be in agreement with the valuation, calculated on the basis of the net book value of the investment in Xfera Moviles, S.A registered on the date of executing this deed in Telvent GIT, S.A. II. The parties hereby declare that there is no legal or judicial impediment nor is there any unfulfilled statutory covenant that prevents or restricts the free transferability of the aforementioned securities. They nevertheless state for the record that the aforementioned certificate issued by Mr. Perez Santos confirms that there is no any statutory restriction for the transfer of the aforementioned shares, without detriment to the limitation laid down in the Shareholders' Agreement of Xfera Moviles, S.A. For all due effects and purposes the parties hereto place on record the fact that the companies represented herein belong to the same company group and that all shareholders and the parent company are familiar with this transaction and approve same. III. The share transfer to be effected hereunder does not fall within the set of circumstances included in numbers 1 and 2 of article 108 of the Stockmarket Law 24/1988 of 28 July (Ley del Mercado de Valores). IV. Diverse public instruments have placed on public record the Maximum Share Pledge Contract, to which the parties are the companies Xfera Moviles, S.A 6 ("Xfera"), Nortel Networks International Finance and Holding BV ("Nortel"), Ericsson Credit AB ("Ericsson"), Citibank and the shareholders of Xfera (The "Pledge Contract" or "Share Deed). All these public instruments were executed before the Notary of Madrid, Mr. Juan Alvarez-Sala Walther under the numbers 2200, 2213, 2214, 2221 and 2644 of his general protocol of public-instruments corresponding to 2001. The Purchaser hereby declares that it is completely familiar with the Pledge Contract and accepts it without reserve. The Purchaser also declares its full familiarity with and acceptance of the following: (i) the pledge deeds executed before the Notary of Madrid, Mr. Jesus Roa Martinez on 18 July 2002 under the numbers 222, 223, 224 and 225 of his protocol (the "Pledge Issuing Deeds of 2002"), (ii), the Pledge Confirmation Deed executed before the Notary of Madrid, Mr. Jesus Roa Martinez on 30 June 2003 under the number 758 of his protocol (the "Confirmation Deed") and (iii), the pledge deed executed before the Notary of Madrid, Mr. Cruz-Gonzalo Lopez Muller Gomez on the same date in relation to the shares of Xfera Moviles, S.A issued to cover the Share Increase (the "Pledge Extension Deed of 2004" and, together with the Pledge Issuing Deeds of 2002, the "Pledge Issuing Deeds"). All this refers to the financial documents placed on public record by means of the deed executed before the Notary of Madrid, Mr. Juan Alvarez Sala Walther on 27 August 2001, with the number 2374 of his protocol and the subsequent amendments thereto. The Purchaser hereby declares itself to be familiar with all of them. V. Clause six of the Pledge Contract deals with the transfer of Xfera shares after the setting up of the Pledge (as defined in the Pledge Contract), laying down a series of requisites for the fulfillment thereof. VII. That diverse public instruments placed on public record the Subordination Contract, to which the parties are the companies Xfera, Nortel, Ericsson, Citibank, the shareholders of Xfera and the Entities Associated with the Shareholders (as defined in said contract) (the "Subordination Contract"). These public instruments were all executed before the Notary of Madrid, Mr. Juan Alvarez Sala Walther, 7 under the numbers 2201, 2215, 2217 and 2219 of his general protocol of public-instruments corresponding to 2001. The executor declares itself to be fully familiar therewith and accepts same. All this refers to the financial documents placed on public record by means of the deed executed before the Notary of Madrid, Mr. Juan Alvarez Sala Walther on 27 August 2001, with the number 2374 of his protocol and the subsequent amendments thereto. The Purchaser hereby declares itself to be familiar with all of them. XI. That the Seller and the Purchaser have agreed to grant this present deed of sale-purchase of shares and adhesion to contracts of pledge and of subordination, and pursuant to the above, the parties as appearing above grant it subject to the following: CLAUSES: ONE.- The Seller hereby sells to the Purchaser, which purchases, the Shares, described in recital I of this deed. The Purchaser acquires the above-indicated Shares in their current condition in respect of charges and encumbrances, which the Seller states are detailed in Recital IV. The Purchaser hereby makes a commitment to the Seller to pay to Xfera Moviles, S.A. the full amount of the Capital Calls under the terms provided for in the Application published in the Mercantile Register Official Gazette (BORME), and to indemnify the Seller for any damages, losses and liabilities that may be incurred by the latter due to breach or defective performance of this obligation, in particular those resulting from the possible application of article 46 of the Spanish Corporations Law. 8 TWO.- The Price for this present sale-purchase, for the entirety of the Shares indicated in Recital I, is established at ONE MILLION THREE HUNDRED AND TWELVE THOUSAND, ONE HUNDRED AND THREE EUROS (1,312,103 euros). The share price, as the parties hereto declare, has been calculated on the basis of the net book value of the investment in Xfera Moviles, S.A, registered on the date of executing this deed in Telvent GIT, S.A. The deadline for making the payment by the Purchaser is set at 30 June 2004. THREE. The Purchaser recognizes, confirms and accepts that the shares acquired hereunder have already been pledged under the terms of the Pledge Contract, the Pledge Issuing Deeds and the Confirmation Deed and, in relation to said shares, ratifies as far as may be necessary the contents of the Pledge Contract, the Pledge Issuing Deeds and the Confirmation Deed. The Purchaser also declares that it is party to the Subordination Contract by virtue of having adhered thereto before the execution of this deed. Insofar as it may be necessary it hereby ratifies the Subordination Contract with respect to any debt it may have to take on as a result of the contract of sale being formalized hereunder, in particular in relation to the debt denominated as "Subordinated Debt" in said deed. The Purchaser declares that the fact of being party to the Pledge Contract, the Pledge Issuing Deeds, the Confirmation Deed and the Subordination Contract does not entail any exceeding of the Purchaser's capacity for incurring debts or furnishing guarantees nor a breach of any of the Purchaser's legal or contractual obligations. The Purchaser also declares that each and every one of the documents relating thereto handed over to Citibank and each and every one of the declarations made by 9 the Purchaser under the aegis of or in relation to the Pledge Contract and the Subordination Contract are correct and complete and that the contents thereof are fully in force on today's date. FOUR. The Parties declare that the Shares have been pledged in favor of Nortel and Ericsson and represented in a multiple certificate. For that purpose and for the purpose of any possessory displacement and execution of the lien, the multiple certificate comprising the shares has been deposited in Citibank as the agent of Nortel and Ericsson. Citibank hands over to me, the Notary, said original multiple certificate corresponding to the shares owned by the Seller. The following procedures are then carried out with relation to said certificate. (i) I, the Notary, hand over the multiple certificate to the Seller, requiring the latter to endorse it in favor of the Purchaser so that it may be returned to Citibank once endorsed. (ii). The Seller endorses said multiple certificate in favor of the Purchaser, after which it hands it back to me, the Notary. (iii). I, the Notary, hand over to Citibank the certificate endorsed in favor of the Purchaser, leaving a copy thereof attached hereto. FIVE. The Purchaser asks me, the Notary, to issue the first authorized copy of this deed corresponding to the Purchaser and hand it over to Citibank. I, the Notary, accept the request. SIX. The parties will collaborate in as many communications, notifications and arrangements as may be necessary for entering the shares in the Purchaser's name in 10 Xfera Moviles, S.A's Book of Registered Shares, notification to the pledgees and any other arrangements that may prove necessary. SEVEN. All costs and taxes arising from the formalization of this deed will be met by the Purchaser. EIGHT. The parties, hereby waiving any jurisdiction that might otherwise correspond to them, hereby submit themselves to the courts of law of Madrid. This deed, drawn up according to the draft furnished by the parties hereto, is hereby formalized in the above terms. The parties hereto hereby declare that this deed documents a transaction that aims to restructure the corporate makeup of the group to which the companies represented herein belong, and that it is fully in keeping with the shareholders' agreement of Xfera, S.A and does not damage any third party whatsoever. Data Processing. Pursuant to the provisions laid down in the Spanish Personal-Data Protection Law 15/1999, the parties are hereby informed that their data will be fed into the computer files of the notaries' office and they accept same. This information will be kept on a confidential basis and will be used only for the purposes of remittances that are compulsory by law. The legal caveats have been made, especially those of a fiscal character. The parties hereto state and execute the above. I, the Notary, read this deed out to them, after informing them of their right to read it for themselves, which right they waive, and then they ratify the execution and sign the deed with me. I, the Notary, hereby certify the following: that I have identified the parties hereto on the basis of the abovementioned documentation, pursuant to the Spanish Notaries 11 Law (Ley Organica del Notariado), that, in my judgment, they have the capacity to intervene herein and are eligible to do so, that this deed has been executed in due accordance with the law and the duly informed will of the executors and everything contained in this public instrument, issued on nine sheets of stamped paper for the exclusive use of notarial documents; series 5M, numbers 8346262, 8346263, 8346264, 8346265, 8346266, 8346267, 8346268, 8346269 and the present one. Signed by: Ana Isabel Morales, Manuel Fernandez, Francisco Montoro. Signed. Juan Alvarez-Sala Walther. Tariff Application. Additional Provision 3, Law 8/89 Duty: agreed fees. Rule 8. ATTACHED DOCUMENTS ATTACHED DOCUMENT NUMBER ONE 12 FORMALISATION OF COMPANY AGREEMENTS: POWER OF ATTORNEY AT THE BEHEST OF THE COMPANY "TELVENT INVESTMENTS, S.L." NUMBER ONE THOUSAND FIVE HUNDRED AND FORTY FOUR In Madrid, my residence, on June eighteenth two thousand and four. Before me, IGNACIO PAZ-ARES RODRIGUEZ, Notary of this Capital and member of its Notaries' Association APPEARS MS. ANA ISABEL MORALES RODRIGUEZ, of legal age, Spanish, married and with the abode for these purposes in Alcobendas (Madrid) at Calle Valgrande, 6. with DNI and NIF 28738501-R WITNESSETH For and on behalf, as authorized representative of the limited liability company, currently being set up, called "TELVENT INVESTMENT S.L" with CIF B-84/023373, with registered office in Alcobendas (Madrid), Calle Valgrande, number 6 set up for an open-ended time by means of a public deed executed before the Notary of Madrid, Mr. Ignacio Paz-Ares Rodriguez on 8 June 2004 under the number 1430 of his protocol and entered in the Mercantile Register of Madrid in volume 20,155, sheet 84, section 8, page M-355841, entry 1. Her powers of representation derive from the power of attorney conferred thereon by the company's joint but not several directors by virtue of the deed executed before the Notary of Madrid, Mr. Ignacio Paz-Ares Rodriguez on 8 June 2004 with 13 the number 1435 of his protocol, an authorized copy of which was entered in the company's register page as entry 2. The party hereto declares that the company she represents exists and that the powers she exercises have not been revoked, suspended or limited in any way whatsoever. In compliance with the mandate laid down in article 98.1 of Law 24/2001 and with the effects laid down in paragraph 2 thereof, I hereby judge the party hereto to have sufficient representational powers to execute this deed for formalizing company agreements, basing this judgment on the entire contents of the aforementioned deed of empowerment, particularly the set of powers conferred: power of attorney at the behest of the company "Telvent Investments S.L", on the terms and conditions laid down therein. The party hereto has in my judgment the necessary legal capacity, as she intervenes herein, to execute this deed, as specified above, and to that effect: SHE HEREBY STATES AND EXECUTES That, she hereby formalizes, as she intervenes herein, the agreements adopted by the joint but not several directors of the company "TELVENT INVESTMENTS, S.L" on 16 June 2002 and places them on public record, in such terms as are expressed in the certificate that she hereby hands over to me and which I, the Notary, attach hereto to be henceforth included in its copies and transfers, declaring that it has been issued by the joint directors of the company, at that time being Manual Sanchez Ortega and Jose Ignacio del Barrio Gomez, whose signatures I represent as legitimate. By virtue thereof a special power of attorney is conferred on favor of MS. ANA ISABEL MORALES RODRIGUEZ, MR. MANUEL SANCHEZ ORTEGA, MS. ANA MARIA PLAZA ARREGUI, MR. JOSE IGNACIO DEL BARRIO GOMEZ 14 and MR. MANUEL FERNANDEZ MAZA so that any one of them, severally and without distinction between them, on behalf of the company, is entitled to exercise the powers that are exhaustively detailed in the attached certificate, together with the personal details of the aforementioned authorized representatives, so they are hereby taken to have been wholly reproduced for all legal purposes and are not repeated here to avoid unnecessary duplication. The due legal caveats have been made. The party hereto states and executes the above. At her choice, I, the Notary, read this deed out to her, after informing her of her right to read it for herself, which right she waives, and then ratifies and signs the deed with me, the Notary. I, the Notary, hereby certify that I have identified the party hereto on the basis of the abovementioned documentation and everything else contained in this public instrument, issued on two sheets of stamped paper for the exclusive use of notarial documents; series 5M, numbers 8346042 and this sheet. Signed. Ana Isabel Morales Rodriguez. Signed. Ignacio Paz-Ares. Sealed and with notary's paraph. Tariff Application. Additional Provision 3, Law 8/89 DOCUMENT OF NO ESTABLISHED AMOUNT ATTACHED DOCUMENT 15 TELVENT Mr. Manuel Sanchez Ortega, of legal age, married, with the abode for these purposes at Avenida Valgrande 6, Alcobendas (Madrid), and with DNI 2601273 and Mr. Jose Ignacio del Barrio Gomez, of legal age, married, Spanish, with the abode for these purposes at Calle Valgrande 6, Alcobendas (Madrid), and with DNI 51343948-J, Joint Directors of the company "Telvent Investments S.L", with registered office at Calle Valgrande 6, Alcobendas (Madrid), and with CIF B 84023373 (the "Company") hereby agree: To confer a special power of attorney on favor of Ms. Ana Isabel Morales Rodriguez, of legal age, Spanish, and with the abode for these purposes in Alcobendas (Madrid) at Calle Valgrande, 6, with DNI 28738501-R; Mr. Manuel Sanchez Ortega, of legal age, married, engineer by profession, with the abode for these purposes at Avenida Valgrande 6, Alcobendas (Madrid), and with DNI 2601273; Ms. Ana Maria Plaza Arregui, of legal age, Spanish, and with the abode for these purposes in Alcobendas (Madrid) at Calle Valgrande, 6, with DNI 12374150N; Mr. Jose Ignacio del Barrio Gomez, of legal age, married, Spanish, and with the abode for these purposes in Alcobendas (Madrid) at Calle Valgrande, 6, with DNI 51343948-J and Mr. Manuel Fernandez Maza, Spanish by nationality, of legal age, married and with the abode for these purposes in Alcobendas (Madrid) at Calle Valgrande, 6, with DNI 28603055-W, ratifying where applicable previous actions to the same purpose, so that any of them severally and without distinction between them can perform the following: - - Acquisition by the Company of all or part of the shares held now or in the future by the company Telvent GIT, S.A in the company Xfera Moviles, S.A, as a single or repeated transaction and in such proportion, terms, deadlines, prices and conditions as may be deemed fitting. 16 - - - - Execute any public or private documents that might be necessary for including the Company in the Shareholders' Agreement of Xfera Moviles, S.A of 2 January 2000 (the "Agreement") and any documents developing the latter, in particular the following: (i) Supplemental agreement number 1 of said agreement, dated 1 August 2000. (ii) Supplemental agreement number 2 of said agreement, dated 24 October 2000. (iii) Amendment of the Agreement and of Supplementary Agreement number 1 thereof. (iv) Agreement for the Proportional Distribution of Liability, dated 22 October 2001. (v) Agreement for the Proportional Distribution of Liability deriving from the Enforcement of the Spectrum Fee Guarantees, dated 3 April 2002 (vi) Agreement for the Proportional Distribution of Liability deriving from the Enforcement of the Spectrum Fee Guarantees for year 2002. Each one of the authorized representatives will be entitled to make any declaration of intent required under said agreement or any document developing same or related thereto, doing so on behalf of the company. - - Make as many notifications and requirements to the governing body of Xfera Moviles, S.A or any third parties or entities as may prove necessary for registering the tenure of the shares of Xfera Moviles, S.A in the latter company's Registered Share Book and issuing the share certificates in the Company's name. - - Execute as many public or private documents as may be necessary for the Company to adhere to or ratify the following: 17 (i) The Maximum Share Pledge Contract, to which the parties are Xfera Moviles, S.A, Nortel Networks International Finance and Holding BV, Ericsson Credit AB, Citibank International Plc and the shareholders of Xfera Moviles, S.A. This contract was placed on public record in diverse public instruments executed before the Notary of Madrid, Mr. Juan Alvarez-Sala Walther under the numbers 2200, 2213, 2214, 2221 and 2644 of his general protocol of public-instruments corresponding to 2001 (ii) The pledge deeds executed before the Notary of Madrid, Mr. Jesus Roa Martinez on 18 July 2002 under the numbers 222, 223, 224 and 225 of his protocol and (iii) The Pledge Confirmation Deed executed before the Notary of Madrid, Mr. Jesus Roa Martinez on 30 June 2003 under the number 758 of his protocol. All the above refers to the financial documents placed on public record by the public deed executed before the same Notary on 27 August 2001 with the number 2374 of his protocol, subsequently amended. The authorized representative will be entitled to execute as many public and private documents and make as many written notifications and declarations of intent as may prove to be necessary in accordance with or in relation to the Maximum Share Contract Pledge and in particular for the purposes of implementing the requirements laid down therein; the authorized representative will also be entitled to make as many communications, summonses and requests as may be necessary for the full effectiveness of the aforementioned adhesion, including, not exhaustively, those sent to the governing body of Xfera Moviles, S.A and Citibank International Plc. - - To execute as many public or private documents as may be necessary for the Company's adhesion to the Subordination Contract, the parties to which are Xfera Moviles, S.A, Nortel Networks International Finance and Holding BV, Ericsson Credit AB, Citibank International Plc, the shareholders of Xfera and the Entities Associated with the Shareholders (as defined in said Subordination 18 Contract). The Subordination Contract was placed on public record by means of several public instruments all executed before the Notary of Madrid, Mr. Juan Alvarez Sala Walther, under the numbers 2201, 2215, 2217 and 2219 of his general protocol of public-instruments corresponding to 2001, in relation to the financial documents placed on public record by means of the deed executed before the same Notary on 27 August 2001, with the number 2374 of his protocol, subsequently amended. The authorized representative will be entitled to execute as many public and private documents and make as many written notifications and declarations as may prove to be necessary in accordance with or in relation to the Subordination Contract and in particular for the purposes of implementing the requirements laid down therein; the authorized representative will also be entitled to make as many communications, requirements and requests as may be necessary to ensure full effectiveness of the aforementioned adhesion, including, not exhaustively, those sent to the governing body of Xfera Moviles, S.A and Citibank International Plc. - - Pledge in favor of "Nortel Networks International Finance and Holding B.V." and "Ericson Credit A.B" such shares of the Spanish company Xfera Moviles, S.A as Telvent Investments S.L. may acquire in the future under any legal title. - - Issue and receive any declarations, execute as many public or private documents as may be necessary and also carry out any related or complementary action (including endorsement of the multiple certificates representing such shares of Xfera Moviles, S.A as Telvent Investments, S.L. may be the owner of at each moment and authorization of Xfera Moviles, S.A to cancel and/or issue multiple certificates representing shares of Xfera Moviles, S.A) that may prove to be necessary for ensuring the full legal efficacy of the powers and acts laid down herein, including the powers of clarification, amendment or rectification, all in such terms as may be deemed to be necessary. 19 For the above purposes each authorized representative will be entitled to sign as many public or private documents as may be necessary, including those of rectification, correction and amendment, to put the above into effect. The authorized representative will be entitled to exercise the aforementioned powers even at the same time as an action on its own behalf or on behalf of third parties, in the same act. The principal assumes said risk of any clash of interests with the authorized representative and even, therefore, if said authorized representative should carry out any actions legally definable as self dealing or multi-representation. In witness whereof we issue this document in Madrid on 16 June 2004 The joint (but not several) director: Manuel Sanchez Ortega; the joint (but not several) director: Jose Ignacio del Barrio Gomez. Notaries' paraphs. THIS IS A COPY, which faithfully matches its original kept in my protocol of public instruments. At the behest of the company granting the power, I hereby issue same on four pages of paper for the exclusive use of notarial documents, series 5M, numbered as the present page and the three preceding ones in correlative order, which I hereby sign, seal and add my notary's paraph to, in Madrid on 18 June 2004. AUTHENTICATION. I, JUAN ALVAREZ-SALA WALTHER, NOTARY OF MADRID, HEREBY CERTIFY: that these photocopies are an exact reproduction of their originals, which I have been shown and returned, and are issued on four sheets of special paper for the Notaries' Associations of Spain, to all of which I add my seal and notaries' paraph, bearing the numbers NW2845585, the two immediately preceding ones in correlative order and this one. Madrid, 23 June 2004. LEGITIMATION AND LEGALISATION STAMP 20 ATTACHED DOCUMENT NUMBER TWO 21 FORMALISATION OF COMPANY AGREEMENTS: POWER OF ATTORNEY AT THE BEHEST OF THE COMPANY TELVENT GIT, S.A NUMBER ONE THOUSAND FIVE HUNDRED AND FORTY THREE In Madrid, my residence, on June eighteenth two thousand four. Before me, IGNACIO PAZ-ARES RODRIGUEZ, Notary of this Capital and member of its Notaries' Association APPEARS MS. ANA ISABEL MORALES RODRIGUEZ, of legal age, married, with abode for these purposes in Alcobendas (Madrid) at Calle Valgrande, number 6, with DNI and NIF 28738501-R. WITNESSETH On behalf of the public limited company called "TELVENT GIT, S.A." with CIF A-82/631623, with registered office in Alcobendas (Madrid), at Calle Valgrande, number 6, set up for an open-ended time under the name "Telvent Desarrollos, S.A." by a deed executed before the Notary of Madrid, Carlos Perez Baudin on 4 April 2000 under the number 1199 of his protocol and entered in the Mercantile Register of Madrid in volume 15,370, book 0, sheet 164, section 8, page M-257,879, entry 1. The called-up capital pending in the deed of foundation was paid by means of another deed authorized on 11 October 2000 by the Notary of Madrid, Mr. Carlos Perez Baudin, with the number 3284 of his protocol. Its share capital has been increased several times by virtue of other deeds authorized by said Notary, Mr. Carlos Perez Baudin, on the following dates: 12 December 2000 with the protocol number 3989 and 1 January 2001 with the protocol number 1. Its 22 trade name was changed from "Telvent Desarrollos, S.A" to "Telvent Sistemas y Redes, S.A" by means of another deed authorized by the Notary of Madrid, Mr. Carlos Perez Baudin, on 12 February 2001, protocol number 516 and its share capital was re-denominated in euros by another deed before said Notary, Mr. Carlos Perez Baudin, on 8 May 2001, protocol number 1596. Lastly, the company then changed its name of "Telvent Sistemas y Redes, S.A." to its current one of "TELVENT GIT, S.A" by a deed executed before the Notary of Madrid, Mr. Carlos Perez Baudin, on 1 April 2003, with the number 1030 of his protocol, leading to entry number 29 in the company's register page. Her representational powers derive from her post as Secretary of the Company's Board of Directors, which appointment was made by means of agreements adopted by the same Board of Directors on 15 April 2004, placed on public record by a public deed executed before the Notary of Madrid, Mr. Ignacio Paz-Ares Rodriguez on 21 April 2004 with the number 886 of his protocol and duly entered in the Mercantile Register of said capital city as entry 42 of the company's page. The party hereto assures me that she still holds the post as of today's date. She is especially empowered for executing this document as a result of the agreements adopted by the Company's Board of Directors in its meeting held on 15 April 2004, as vouched for by a certificate issued by the secretary to the Board of Directors at that time, the party hereto Ms. Ana Isabel Morales Rodriguez herself, with the approval of the chairman of that time, Mr. Manuel Sanchez Ortega, both of said Board of Directors. I hereby certify their signatures and leave this certificate attached hereto for inclusion in any future copies or transfers thereof. Of the Chairman. The party hereto declares that the aforementioned Mr. Manuel Sanchez Ortega was appointed member of the Company's Board of Directors for the statutory term of five years by means of a deed executed before the Notary of Madrid, Mr. Luis J. Ramayo Garcia on 24 February 2004 with the number 540 of his protocol, leading to entry 38 in the 23 company's register page, declaring also that this appointment is still in force. He was then appointed Chairman of said Board of Directors by virtue of the agreements of the board meetings held on 15 April 2004, placed on public record by means of the deed executed before the Notary of Madrid, Mr. Ignacio Paz-Ares Rodriguez on 21 April 2004 with the number 885 of his protocol, duly entered in the Mercantile Register of the company's head-office area, as asserted by the party hereto. In my judgment the party hereto, as she intervenes herein, has the sufficient legal capacity to execute this deed, as qualified in the preceding paragraph, and to that purpose HEREBY STATES AND EXECUTES That she intervenes herein to place on public record the agreements adopted by the Board of Directors of the Company she represents "TELVENT GIT, S.A" in its board meeting held on 15 April 2004, by virtue of which a special power of attorney is conferred on favor of MR. MANUEL SANCHEZ ORTEGA, MS. ANA MARIA PLAZA ARREGUI, MR. MANUEL FERNANDEZ MAZA, MS. ANA ISABEL MORALES RODRIGUEZ and MR. JOSE IGNACIO DEL BARRIO GOMEZ so that any one of them, severally and without distinction between them, on behalf of the company, is entitled to exercise the powers that are exhaustively detailed in the attached certificate, together with the personal details of the aforementioned authorized representatives, so they are hereby taken to have been wholly reproduced for all legal purposes and are not repeated here to avoid unnecessary duplication. The due legal caveats have been made. The party hereto states and executes the above. At her own choice, I, the Notary, read this deed out to her, after informing her of her right to read it for herself, which right she waives, and then ratifies and signs the deed with me, the Notary. I, the Notary, hereby certify that I have identified the party hereto on the basis of the abovementioned documentation and everything else contained in this public instrument, issued on three 24 sheets of stamped paper for the exclusive use of notarial documents; series 5M, numbers 8349974, 8349975 and this sheet. Signed. Ana Isabel Morales. Signed. Ignacio Paz-Ares. Sealed and with notary's paraph. Tariff Application. Additional Provision 3, Law 8/89 DOCUMENT OF NO ESTABLISHED AMOUNT ATTACHED DOCUMENT 25 TELVENT Certification of the Board Meeting Ms. Ana Isabel Morales Rodriguez, secretary to the Board of Directors of the Company "Telvent GIT, S.A" with registered head office and tax domicile in Alcobendas (Madrid) at Calle Valgrande, 6, entered in the Mercantile Register of Madrid in volume 15,370, sheet 164, section 8, page M-257879, with CIF A-82631623. Hereby certifies That a board meeting was held on 15 April 2004, at 17.00 hours in Madrid, in Calle General Martinez Campos 53, validly convened in accordance with the Company's company bylaws with the attendance of the following board members: HRH Mr. Carlos de Borbon Dos Sicilias, Mr. Javier Salas Collantes, Mr. Manuel Sanchez Ortega, Mr. Jose B. Terceiro Lomba, Mr. Eduardo Punset Casals, Mr. Candido Velazquez-Gaztelu Ruiz, Mr. Miguel Cuenca Valdivia. Once the meeting had been validly set up, the members unanimously agreed to hold it and to follow the proposed agenda. They also adopted unanimously, among others, the following agreements, as reflected in the minutes of the meeting, read out and unanimously approved at the end thereof and signed by the Secretary with the approval of the Chairman: - - To confer a special power on Mr. Manuel Sanchez Ortega, Spanish, of legal age, married, with the abode for these purposes at Calle Valgrande 6, Alcobendas (Madrid), and with DNI 2601273-L; Ms.Ana Maria Plaza Arregui, of legal age, single, Spanish, and with the abode for these purposes in Alcobendas (Madrid) at Calle Valgrande, 6, with DNI 12374150-N; Mr. Manuel Fernandez Maza, Spanish, of legal age, married and with the abode for these purposes in Alcobendas (Madrid) at Calle Valgrande, 6. and with DNI 28603055-W; Ms. Ana Isabel Morales Rodriguez, of legal age, Spanish, and with the abode for these purposes in 26 Alcobendas (Madrid) at Calle Valgrande, 6, with DNI 28738501-R; and Mr. Jose Ignacio del Barrio Gomez, of legal age, married, Spanish, and with the abode for these purposes in Alcobendas (Madrid) at Calle Valgrande, 6, with DNI 51343948-J, ratifying where applicable previous actions to the same purpose, so that any of them severally and without distinction between them can perform the following: a) Sale by the Company of all or part of the shares it holds in the company Xfera Moviles, S.A, to the company Telvent Investments, S.L., once said company's articles of incorporation has been executed, as a single or repeated transaction and in such proportion, terms, deadlines, prices and conditions as may be deemed fitting. b) Endorse and commit themselves to endorsing multiple certificates representing shares of Xfera Moviles, S.A under such terms as are deemed fitting, and c) Authorise Xfera Moviles, S.A to cancel and issue multiple certificates representing shares of Xfera Moviles, S.A under such terms as are deemed fitting, And to sign for that purpose as many private or public documents as may be necessary, including those of rectification, correction and amendment, where applicable, to carry out all of the above. Each authorized representative will be entitled to exercise the aforementioned powers even at the same time as an action on its own behalf or on behalf of third parties, in the same act. The principal assumes said risk of any clash of interests with the authorized representative and even, therefore, if said authorized representative should carry out any action legally definable as self dealing or multi-representation. - - The Chairman, Mr. Manuel Sanchez Ortega, the Secretary Ms. Ana Isabel Morales Rodriguez and the Vice-secretary Ms. Ana Maria Plaza Arregui are hereby 27 empowered so that any of them without distinction may appear before a Notary and proceed to totally or partially enter in the Mercantile Register such agreements as must legally be so registered, formalizing as many documents as may be necessary in fulfillment of said agreements, including the correction and rectification thereof, doing so as a special delegate of this Board of Directors. This power of attorney is to be understood in the most ample sense under law and as necessary within the specific ends mentioned". The insertion tallies with the Minutes Book, to which I refer. For all due effects and purposes I sign this deed on 16 June 2004 with the approval of the Chairman of the Board of Directors. The secretary: Ms. Ana Isabel Morales Rodriguez. Approval of the Chairman, Mr. Manuel Sanchez Ortegas. Notaries' paraph THIS IS A COPY, which faithfully matches its original kept in my protocol of public instruments. At the behest of the company granting the power, I hereby issue same on five sheets of paper for the exclusive use of notarial documents, series 5M, numbered as this page and the four preceding ones in correlative order, which I hereby sign, seal and add my notary's paraph to, in Madrid on 18 June 2004. AUTHENTICATION. I, JUAN ALVAREZ-SALA WALTHER, NOTARY OF MADRID, HEREBY CERTIFY: that these photocopies are an exact reproduction of their originals, which I have been shown and returned, and are issued on five sheets of special paper for the Notaries' Associations of Spain, to all of which I add my seal and notaries' paraph, bearing the numbers NW2845594, the three immediately preceding ones in correlative order and this one. Madrid, 23 June 2004. LEGITIMATION AND LEGALISATION STAMP 28 ATTACHED DOCUMENT NUMBER THREE 29 POWER OF ATTORNEY EXECUTED BY THE COMPANY "CITIBANK INTERNATIONAL PLC" NUMBER SEVEN HUNDRED AND SEVENTY TWO. IN MADRID, on March third two thousand and four. Before me, IGNACIO MARTINEZ-GIL VICH, Notary of Madrid, APPEARS: MR. JESUS-GREGORIO CASAS CARDENAL, of legal age, single, resident of Madrid, calle Jose Ortega y Gasset, 29, with National Identity Card number 810.653-H. He takes part on behalf of the Corporation known as "CITIBANK INTERNATIONAL PLC", a public limited company, founded in Great Britain in accordance with the Companies Law 1948, for 1967, registered in London (England) on December 21, 1972 and reregistered as a Public Limited Company, in accordance with Section 43 of the Companies Act of 1985, on March 1, 1993. Its registered headquarters and main office of business is currently at 336 Strand, London WC2R 1HB and it has been entered in the Mercantile Register of England and Wales under the number 1088249. To intervene herein he is making use of the power of attorney in his favor granted by the aforementioned Company before the Notary public of London, Sophie Jane Jenkins on 21 February 2003, entered in the Mercantile Register of Madrid in volume 17,136, sheet 28, page M-271272, entry 27. I have before me an authentic copy of said power of attorney, legalized by the Apostille, according to which, in my judgment and under my responsibility, the authorized representative has sufficient representational powers for this act, being 30 empowered, among other things, for running, negotiating and managing general mercantile banking activities in the Company's name, even with the Bank of Spain, for pledging securities, dealing with securities, deposit transactions and delegating all or part of his powers on Company employees. He declares all the above to be still in force. In my judgment he is sufficiently empowered as he intervenes herein for carrying out this act and by virtue thereof HEREBY EXECUTES That he confers a power of attorney on FRANCICSO MONTORO ALEMAN and MARIA DE LAS NIEVES REDONDO LAFUENTE, both of legal age, married, with the abode for these purposes in Madrid at Calle Jose Ortega y Gasset 29, with DNIs 5404195-T and 18590819-B respectively, employees of the principal company, so that without distinction they can exercise the following powers on behalf of "CITIBANK INTERNATIONAL PLC". 1. Appear before notaries public for the following purposes: (i) ratify, amend, cancel and/or confirm, as agent bank, a public share pledge deed of the company XFERA MOVILES, S.A (hereinafter "Xfera) executed in July 2001 before the Notary Mr. Juan Alvarez-Sala Walther in favor of the companies "NORTEL NETWORKS INTERNATIONAL FINANCE AND HOLDING B.V." and "ERICSSON CREDIT A.B" (hereinafter the "Pledge Deed"; (ii) also to ratify, amend, cancel and confirm any other pledge deed on newly issued Xfera shares that has been or might be executed in relation to said Pledge Deed and (iii) execute the deeds of adherence to the Pledge Deed or the subordination agreement signed between Xfera, Nortel, Ericsson, the Company, the shareholders of Xfera and the group companies as defined in said agreement, which was placed on public record on 27 August 2001 before the Notary Mr. Juan Alvarez Sala-Walther. 31 2. Apply for, receive and hand over the certificates representing the shares of Xfera and any other certificate or document related thereto for their endorsement, cancellation or deposit before the Company or any other party. 3. Issue and receive as many declarations or execute or ratify as many documents, private or public, that the Company deems to be fitting for exercising its agent-bank functions deriving from the loan contract dated 19 December 2000 between Xfera, Nortel and the Company, and also the Pledge Deed. 4. Likewise carry out as many related or complementary acts as may be necessary for the proper performance of the actions assigned thereto. 5. Appear before the Spanish government authorities and sign, on the Company's behalf, as many documents as may be necessary for the validity of the Pledge Deed and such related agreements as may finally be made. 6. Appear before the judicial, administrative and civil Spanish authorities and carry out, on the Company's behalf, all such actions as may be necessary for the total or partial cancellation or execution of such pledge deeds as are finally executed. 7. In exercising the abovementioned powers, determine the terms and conditions that he deems to be fitting and issue and receive all types of declarations of intent and other declarations. 8. Execute as many public or private documents as may be necessary for exercising the powers bestowed thereon including, if necessary, deeds of amendment or ratification. The abovementioned powers should be understood as a guideline rather than as an exhaustive list. The enumeration thereof does not limit the power granted, so it will not be possible to base any claim on any defect or imprecision in this power of attorney, which should be interpreted in the widest sense. Drawn up from a draft. The party hereto thus executes, ratifies and signs this deed, after a perusal thereof and having been informed by me of all due legal caveats and reserves. 32 I, the Notary, do hereby certify that I know the party hereto, that his consent has been freely given and that this deed has been executed in due accordance with the law and with the duly informed free will of the party intervening in this public document. I do hereby certify the contents thereof, issued on three sheets of notarial class paper, with the number of this one and the two previous ones in descending correlative order. There follow the signature of the party and the authorizing Notary. Sealed and given the notary's paraph. 33 NOTARIAL FEE. ACCRUED DUTIES. Applicable tariff, numbers 1,4. DOCUMENT OF NO ESTABLISHED AMOUNT. TOTAL (excluding tax) THIS IS A COPY OF ITS ORIGINAL, kept in my general record of public instruments under the aforementioned order number and duly noted therein. At the behest of the company, I hereby issue same on four pages of paper for the exclusive use of notarial documents, the present page and the three preceding ones in ascending correlative order and of the same series. In Madrid on 3 March 2004. I DO HEREBY CERTIFY SAME. ATTACHED DOCUMENT NUMBER FOUR 34 Xfera Mr. Jose Perez Santos, secretary of the Board of Directors of Xfera Moviles, S.A, with registered head office in Madrid at Edificio A.P.O.T, Calle Ribera del Sena s/n, Campo de las Naciones, set up for an open-ended time by means of a deed dated 4 January 2000, executed before the Notary Mr. Juan Alvarez Sala Walther with the number 30 of his protocol, entered in the Mercantile Register of Madrid in volume 14,805, sheet 140, section 8, page M-246116, entry 1 and with Tax Identification Number A-82/528548 (hereinafter, the "Company"), with his post of secretary duly entered in the Mercantile Register of Madrid in volume 14,805, book 0, sheet 146, section 8, page M-246116, entry 3. HEREBY CERTIFIES I. That according to the Company's Registered Share Book, Telvent GIT, S.A is currently the holder of 1,467,270 Company shares, numbered from 329,886,929 to 331,354,198, inclusively. These shares are 50% paid in. II. That on the date of writing the Company's company bylaws contain no restrictions on the free transferability of the shares. III. That Telvent GIT, S.A is party to the Shareholders' Agreement of Xfera Moviles, S.A, clause 11.2(i) of which lays down the following: "The shares in the Company shall be freely transferable among entities of the same Group (as defined in 11.2.10(i) below)". IV. That clause 11.2.10(i) of the Shareholders' Agreement of Xfera Moviles, S.A lays down the following: 35 Entities shall be considered as belonging to the same "Group" if they constitute a single decision-making unit, because any of them controls or may control, directly or indirectly, the decisions of the others. It shall be understood in any case that one entity has "Control" over another in any of the following circumstances: (a) When the controlling entity holds the majority of the voting rights of the controlled entity, either directly or by means of agreements with other shareholders. (b) When the controlling entity has the right to appoint or remove the majority of the members of the governing bodies of the controlled entity, either directly or by means of agreements with other shareholders. (c) When at least one half plus one of the directors of the controlled entity are directors or top executives of the controlling entity or of another entity controlled by the latter. For the purpose of the provisions contained in the preceding paragraphs, the rights to vote or of appointment or removal possessed by the controlling entity through controlled entities or through other persons acting on behalf of the controlling entity or on behalf of the other entities controlled by the latter shall be added to the rights to vote or of appointment or removal referred to in said paragraphs". IN WITNESS WHEREOF, I hereby issue this certificate in Madrid on 22 June 2004. The Secretary of the Board of Directors of Xfera Moviles, S.A Mr. Jose Perez Santos 36 ATTACHED DOCUMENT NUMBER FIVE 37 Company Name XFERA MOVILES, S.A REGISTERED HEAD OFFICE: Edificio A.P.O.T, Calle Ribera del Sena s/n, Campo de las Naciones, 28042 Madrid CIF A-82528548 Set up for an open-ended time by means of a public deed authorized by the Notary of the Notaries' Association of Madrid______________________________________________ ______________________ Mr. Juan Alvarez Sala Walther ________________________ on 4 January 2000, entered in the Mercantile Register of Madrid in page M-246116, sheet 140, volume 14,805, book 0, section 8 of the Companies Book, entry 1. SHARE CAPITAL: 335,000,000 euros Represented by 335,000,000 registered shares (i) of a single series with a face value each one of 1 euro, totally subscribed and paid in, except (+) and numbered correlatively from 1 to 335,000,000, inclusively. CERTIFICATE No. 98 Comprising 1,467,270 shares numbered (see footnote ++) single series in favor of (2) Telvent GIT, S.A. Date 23 June 2004-06-28 (+) Shares from 309,000,001 to 335,000,000 (both inclusive) (50% paid in) (++) Numeration: 329,886,929 to 331,354,198 (both inclusive). Signed 38 (1) Bearer stock or registered shares. (2) Holder's name, where applicable. NW2845784 39 Handwritten portion: "I HEREBY ENDORSE this pledging arrangement in the terms laid down in the share pledging deed of the Spanish company Xfera Moviles, S.A, authorized today by the Notary of Madrid Mr. Cruz-Gonzalo Lopez- Muller Gomez on today's date signed by the holder's representatives as mentioned in the aforementioned deed. Madrid, June 23, 2004 Signed (illegible signature) I hereby transfer the shares comprised in this Multiple Certificate to Mr./Ms. With my intervention in terms of this pledge endorsement and express faith of what contains section 17.bis of the Notaries' Rules. Madrid, 23 June 2004 Date (Illegible signature)" I hereby transfer the shares comprised in this Multiple Certificate to Mr./Ms. Telvent Investments, S.L. in due accordance with the deed of this same date before the Notary Mr. Juan Alvarez-Sala Walther of Madrid Date: June 23, 2004 I hereby transfer the shares comprised in this Multiple Certificate to Mr./Ms. Date I hereby transfer the shares comprised in this Multiple Certificate to Mr./Ms. 40 Date I hereby transfer the shares comprised in this Multiple Certificate to Mr./Ms. Date I hereby transfer the shares comprised in this Multiple Certificate to Mr./Ms. Date I hereby transfer the shares comprised in this Multiple Certificate to Mr./Ms. Date 41 THIS IS A FIRST COPY, which faithfully matches its original kept in my protocol of public instruments. At the behest of the company "TELVENT INVESTMENTS, S.L.", I hereby issue same on twenty four sheets of paper for the exclusive use of notarial documents, series 5Q, the present page and the twenty three preceding ones in correlative order, which I hereby sign, seal and add my notary's paraph to, in Madrid on 25 June 2004. 42 EX-2.3 4 l07997exv2w3.txt SALE OF SHARES AND ADHERENCE TO PLEDGE AND SUBORDINATION AGREEMENT EXHIBIT 2.3 SALE OF SHARES OF THE COMPANY XFERA MOVILES, S.A. AND ADHERENCE TO PLEDGE AND SUBORDINATION AGREEMENTS. NUMBER ONE THOUSAND FOUR HUNDRED AND ONE. In Madrid, my residence, on June eighteenth two thousand and four. Before me, JUAN ALVAREZ-SALA WALTHER, Notary of this Capital and its Distinguished Association. APPEAR: OF THE ONE PART: MS. ANA ISABEL MORALES RODRIGUEZ, of legal age, residing for this purpose in Alcobendas (Madrid), at calle Valgrande, number 6. With National and Tax Identification Card number 28.738.501-R. OF THE OTHER: MR. MANUEL FERNANDEZ MAZA, of legal age, married, and residing for this purpose in Alcobendas (Madrid), at calle Valgrande, number 6. With National and Tax Identification Card number 28.603.055-W. AND OF THE OTHER: MR. FRANCISCO MONTORO ALEMAN, of legal age, married and residing for this purpose in Madrid at calle Jose Ortega y Gasset, number 29. With National and Tax Identification Card number 5.404.195-T. WITNESSETH: A) Ms. Ana Isabel Morales Rodriguez, as Legal Representative, in the name and on behalf of the limited liability company, under formation, called "TELVENT INVESTMENTS, S.L." (hereinafter referred to as the "Buyer"), with Tax Identification Number B-84/023373, with registered offices in Alcobendas (Madrid), calle Valgrande, number 6. Founded indefinitely by means of the deed executed before the Notary of Madrid, Mr. Ignacio Paz-Ares Rodriguez, on June 8, 2004, under his protocol number 1,430, and on file in the Register of Companies of Madrid in volume 20,155, sheet 84, section 8, page M-355-841, entry 1. Her powers derive from the power of attorney granted jointly and severally in her favor by the Joint Directors of the aforementioned Company, by virtue of the agreement dated June 16, 2004, converted into a public document by means of the deed executed before the Notary of 1 Madrid, Mr. Ignacio Paz-Ares Rodriguez, on June 18, 2004, under his protocol number 1,544, an executed copy of which will be attached to the first copy issued of this document. Ms. Morales Rodriguez states that neither the capacity nor legal personality of her representation has varied and continues to be complete, and that the powers she exercises have in no way been revoked, suspended or limited, that in this agreement she is following the instructions of her representation, and that this transaction falls within the company's trade or commerce in that it constitutes an act related to the performance or development of its corporate purpose and which is under the aegis thereof. B) Mr. Manuel Fernandez Maza takes part, as Legal Representative, of the corporation called "TELVENT GIT, S.A.", (hereinafter referred to as the "Seller"), with Tax Identification Number A-82/631623, with registered offices in Alcobendas (Madrid), calle Valgrande, number 6. Incorporated indefinitely under the name of "Telvent Desarrollos, S.A." by means of the deed executed before the Notary of Madrid, Mr. Carlos Perez Baudin, on April 4, 2000, under his protocol number 1,199. It is on file in the Register of Companies of Madrid in volume 15,370, book O, sheet 164, section 8, Page M-257.879, entry 1. The capital call pending payment at the time of the deed of incorporation was made by means of another deed executed on October 11, 2000 by the Notary of Madrid Mr. Carlos Perez Baudin, under his protocol number 3,284. Its share capital has been increased several times by other deeds executed before the aforementioned Notary, Mr. Perez Baudin, on December 12, 2000, protocol number 3,989 and January 1, 2001, protocol number 1. The name "Telvent Desarrollos, S.A." was changed to "Telvent Sistemas y Redes, S.A." by another deed executed by the Notary of Madrid, Mr. Perez Baudin, on February 12, 2001, protocol number 516, and the conversion of its capital to euros took place by means of another deed before the aforementioned Notary, Mr. Perez Baudin, on May 8, 2001, under his protocol number 1,596. The company changed its name of "Telvent Sistemas y Redes, S.A." to the current one of "TELVENT GIT, S.A.", by means of the deed executed before the Notary of Madrid, Mr. Carlos Perez Baudin on April 1, 2003, under his protocol number 1,030, which led to entry 29 on the company's registration sheet. His powers derive from the power of attorney that the Board of Directors of his represented Company granted jointly and severally to him, in execution of the resolution passed in its session dated April 15, 2004, by means of the deed executed before the Notary of Madrid 2 Mr. Ignacio Paz-Ares Rodriguez, on June 18, 2004 under his protocol number 1,543. A copy thereof will be attached to the first copy issued of this document. Mr. Fernandez Maza states that neither the capacity nor legal personality of his representation has varied, and continues to be complete, and that the powers he exercises have in no way been revoked, suspended or limited, that in this agreement he is following the instructions of his representation, and that this transaction falls within the company's trade or commerce in that it constitutes an act related to the performance or development of its corporate purpose and which is under the aegis thereof. C) And Mr. Francisco Montoro Aleman takes part, as Legal Representative, in the name and on behalf of "Citibank International Plc" (hereinafter referred to as "Citibank"), a public limited company, founded in Great Britain in accordance with the Companies Act of 1948, for 1967, registered in London (England) on December 21, 1972, and reregistered as a Public Limited Company, pursuant to section 43 of the Companies Act of 1985, on March 1, 1993. Its registered headquarters and main office of business is currently at 336 Strand, London WC2R 1HB. It is on file in the Register of Companies of England and Wales as company number 1088249. His powers derive from the power of attorney granted indistinctly in his favor by the aforementioned company, by means of the deed executed before the Notary of Madrid Mr. Ignacio Martinez-Gil Vich, on March 3, 2004, under his protocol number 772, an authorized copy of which is hereby shown to me by Mr. Montoro from which I obtain a complete and exact photocopy attached hereto, and I, the Notary, attest to the exact reproduction thereof. Mr. Montoro states that his representation exists and that the powers that he exercises have in no way been revoked, suspended or limited. In fulfillment of the mandate set forth in section 98.1 of Act 24/2001 and with the effects envisaged in paragraph 2 thereof, I hereby state for the record that I deem and qualify those appearing as sufficiently legitimated in the aforementioned representations because, on the basis of the integral content of the aforementioned power of attorney documents, particularly in terms of the powers granted, I judge them to hold sufficient representation to execute this Xfera Moviles, S.A. share sale deed and adherence to the Pledge and Subordination Agreements, in the terms and conditions stipulated therein. 3 The entirety of the aforementioned powers is shown to me, the Notary, and I judge them as sufficient for the execution of this deed. Those appearing before me HAVE, in my judgment and as they take part, sufficient legal capacity for the execution of this deed whereby they declare the following RECITALS: I. Whereas Buyer is a shareholder of Xfera Moviles, S.A., with registered offices in Madrid, Edificio A.P.O.T., calle Ribera del Sena, s/n, Campo de las Naciones; incorporated for an indefinite period by means of the deed executed on January 4, 2000 before the Notary of Madrid Mr. Juan Alvarez-Sala Walther, under his protocol number 30. It is on file in the Register of Companies of Madrid in Volume 14,805, Sheet 140, Section 8, Page M-246.116. Its Tax Identification Number is A82528548. Seller is holder of seventeen million four hundred and thirty-seven thousand nine hundred and thirty seven (17,437,937) registered shares, numbers 193,788,378 through 200,060,102; 272,862,879 through 278,062,964; 280,759,642 through 286,078,461; 304,478,166 through 305,000,000; 306,061,674 through 306,115,088; 306,391,287 through 306,418,307; 308,303,521 through 308,338,547; 308,959,737 through 308,969,744 all of them inclusive, subscribed and paid up in their entirety and which accredit its stake in the share capital of Xfera Moviles, S.A. (hereinafter, the "Shares"). Certificate. These belong to it by virtue of the following concepts: A) The shares numbered 193,788,378 through 200,060,102; and 272,862,879 through 278,062,964 were acquired from Inversion Corporativa I.C., S.A. by means of the Share Sale Deed executed before the Notary Mr. Manuel Aguilar Garcia on December 30, 2002, under his protocol number 2,464. B) The shares numbered 280,759,642 through 286,078,461; 306,391,287 through 306,418,307; 308,303,521 through 308,338,547; and 308,959,737 through 308,969,744 were acquired from Venditelecom Espana, S.L. and Vivendi Telecom Internacional, S.A. by means of the Share Sale Deed executed before the Notary Mr. Jesus Roa Martinez on September 16, 2003, under his protocol number 1,160. C) The shares numbered 304,478,166 through 305,000,000; 306,061,674 through 306,115,088 were acquired from Vodafone Holding GmbH by means of the Share Sale Deed 4 executed before the Notary Mr. Jesus Roa Martinez on March 4, 2004, under his protocol number 274. Authorized copies of the three aforementioned deeds are not shown to me, whereby I formulate the corresponding warnings. Both parties nevertheless insist upon the execution of these deeds. The validity of such ownership is accredited by virtue of the certificate issued by the Secretary of the Board of Directors of Xfera Moviles, S.A., Mr. Jose Perez Santos, whose signature I legitimize because it is known by me. Such certificate, dated June 16, 2004, is hereby shown to me and I obtain a photocopy of it for incorporation hereto, of which it comes to form an integral part thereof and I, the Notary, attest to its exact reproduction. The aforementioned shares, with the exception of the pledge later referred to in recital IV, are free of charges and encumbrances, as affirmed by Seller. I, the Notary, nevertheless formulate the corresponding legal warning. Seller's representative states, which is confirmed and endorsed by Buyer's representative, that the aforementioned shares are valued at twenty four million three hundred and twelve thousand eight hundred and eleven Euros, calculated on the basis of the net accounting value of the investment in Xfera Moviles, S.A. recorded in Telvent GIT, S.A. at the date of the execution of this deed. II. Whereas, as those appearing state, no legal or judicial impediment exists, nor is there any unfulfilled statutory covenant that prevents or restricts the free transferability of the aforementioned securities. They nevertheless state for the record that the aforementioned certificate issued by Mr. Perez Santos establishes the non-existence of any statutory restriction for the transfer of the aforementioned shares, without prejudice to the limitation contained in the Xfera Moviles Shareholders Agreement. For the appropriate purposes those appearing state for the record that the companies represented herein belong to the same corporate group, and that all respective parties, as well as the parent company, are aware of and have approved this transaction. III. Whereas the transfer that is to take place by virtue of this deed is not contained in the cases set forth in numbers 1 and 2 of section 108 of the Securities Market Act 24/1988 dated July 28. 5 IV. Whereas by means of various public instruments, all of which were executed before the Notary of Madrid, Mr. Juan Alvarez-Sala Walther, under numbers 2200, 2213, 2214, 2221 and 2644 of his general protocol of public instruments for the year 2001, the Maximum Shares Pledge Agreement was converted into a public deed, of which Xfera Moviles, S.A. ("Xfera"), Nortel Networks International Finance & Holding BV ("Nortel"), Ericsson Credit AB ("Ericsson"), Citibank and the Xfera shareholders are a party (hereinafter the "Pledge Agreement" or "Deed of Pledge"). Buyer states that it is fully aware of this and accepts the Pledge Agreement. On the other hand , Buyer also states that it is fully aware of this and accepts: (i) the deeds of pledge executed before the Notary of Madrid Mr. Jesus Roa Martinez on July eighteenth two thousand and two under his protocol numbers 222, 223, 224 and 225 (the "Deeds of Extension"), and (ii) the Deed of Pledge Confirmation executed before the Notary of Madrid Mr. Jesus Roa Martinez on June thirtieth two thousand and three under his protocol number 758 (the "Deed of Confirmation"). All of which is with regard to the financial documents converted into public documents by the deed executed before the Notary of Madrid Mr. Juan Alvarez-Sala Walther on August 27, 2001 under his protocol number 2,374, and its subsequent modifications, of whose content Buyer states it is aware. V. Whereas Clause Six of the Pledge Agreement regulates the transfer of Xfera shares following the establishment of the Pledge (as defined in the Pledge Agreement), establishing the fulfillment of a series of requirements for such purpose, including that the buyer or buyers take the necessary measures to adhere to the Pledge as Pledgor or Pledgors. VI. Whereas, in compliance with the contents of the Pledge Agreement described in Recital IV, Buyer wishes to adhere and become a party to (i) such Pledge Agreement, (ii) the Deeds of Extension, and (iii) the Deed of Confirmation; thus becoming bound by all obligations thereunder for Xfera Shareholders, for which purpose it has decided to execute this deed. VII. Whereas by means of various public instruments, all of which were executed before the Notary of Madrid, Mr. Juan Alvarez-Sala Walther, under numbers 2201, 2215, 2217 and 2219 of his general protocol of public instruments for the year 2001, about which the party executing states it is fully aware and accepts, the Subordination Agreement was converted into a public document, of which Xfera, Nortel, Ericsson, Citibank, the Xfera shareholders and the Companies Affiliated with the Shareholders (as defined in such agreement) are a party (hereinafter, the "Subordination Agreement"). All of which is with regard to the financial 6 documents converted into public documents by the deed executed before the Notary of Madrid Mr. Juan Alvarez-Sala Walther, on August 27, 2001 under his protocol number 2374, and its subsequent modifications, of whose content Buyer states it is aware. VIII. Whereas clause 14.4 of the Subordination Agreement regulates the transfer or assignment of Subordinated Debt (as defined in the Subordination Agreement), establishing for those purpose the fulfillment of given requirements by the assignee of the Subordinated Debt, which includes the assumption by the assignee of the Subordinated Debt of part of the Subordination Agreement as Subordinated Creditor, by means of the conclusion and delivery to the Credit Agent of an adherence agreement documented in the form of public deed. IX. Whereas in fulfillment of the contents of the Subordination Agreement described in Recital VII, Buyer wishes to adhere and become a party to such Subordination Agreement, thus becoming bound by all obligations thereunder for Xfera Shareholders, for which purpose it has decided to execute this deed. X. Whereas as a result of the acquisition of Shares in this deed, Buyer intends to acquire, as assignee, from Seller, as assignor, the Subordinated Debt from the latter. XI. Whereas Seller and Buyer have agreed upon the execution of this share sale deed and adherence to the pledge and subordination agreements and, in accordance with the foregoing, the parties execute this pursuant to the following CLAUSES ONE. Seller hereby sells to Buyer, which buys, the Shares described in Recital I of this deed. Buyer acquires the aforementioned Shares in their current status of charges and encumbrances which, according to Seller, are those set forth in Recital IV. The shares are sold with all rights inherent therein, to which Buyer subrogates, and which include those deriving from the letter dated April 30, 2004 (that is not shown to me, the Notary), sent by Inversion Corporativa, I.C., S.A. to Telvent GIT, S.A. Its content, according to those appearing, is known by the respective companies represented here and, by virtue thereof, the latter would become the creditor of the obligations assumed in that letter by Inversion Corporativa, I.C., S.A., in order to ensure the indemnity of its position as buyer in the sale of shares listed in paragraph A) of the "Certificate of Title" section. Those appearing state that they 7 will notify the possible debtor Inversion Corporativa, I.C., S.A. of this subrogation in favor of Telvent Investments, S.L. TWO. The price of the sale of the entirety of the Shares indicated in Recital I is established at TWENTY FOUR MILLION THREE HUNDRED AND TWELVE THOUSAND EIGHT HUNDRED AND ELEVEN EUROS. The price of the shares, as stated by those appearing, was calculated in accordance with the net accounting value of the investment in Xfera Moviles, S.A. recorded in Telvent GIT, S.A. at the date of the execution of this deed. The payment of the aforementioned quantity has been deferred and should be satisfied by Buyer no later than June 30, 2004. THREE. By means of this Pledge Agreement, Buyer adheres to the Deeds of Extension and Deed of Confirmation, ratifying the contents thereof insofar as is necessary, consenting fully thereto and recognizing that the Shares are pledged in the terms resulting from (i) the public instruments executed before the Notary of Madrid, Mr. Juan Alvarez-Sala Walther, under numbers 2200, 2213, 2214, 2221 and 2644 of his general protocol of public instruments corresponding to 2001, (ii) the Deeds of Extension, and (iii) the Deed of Confirmation. By means of this Pledge Agreement, Buyer likewise adheres to the Subordination Agreement, ratifying the content thereof insofar as is necessary and fully consenting thereto. Buyer states that the adherence to and assumption of part of the Pledge Agreement and Subordination Agreement does not involve exceeding any limits for its debt capacity or granting of guarantees, nor does it breach any legal or contractual obligation of Buyer. Buyer likewise states that each and every one of the documents incorporated into this deed or for whose delivery to Citibank I, the Notary, have been requested by virtue thereof, and all representations and warranties made herein by Buyer, are correct and complete and, as of this date, the contents thereof are fully in force. Buyer likewise states that, as indicated in the power of attorney deed, evidence of which has been incorporated hereto, Ms. Ana Isabel Morales Rodriguez, of legal age, of Spanish nationality, residing for this purpose in Alcobendas (Madrid), calle Valgrande no. 6 and with National Identity Card number 28.738.501-R; Mr. Manuel Sanchez Ortega, of legal age, married, engineer, residing for this purpose at Avda. Valgrande, 6, Alcobendas (Madrid) and with National Identity Card number 2601273; Ms. Ana Maria Plaza Arregui, of legal age, of Spanish 8 nationality, residing for this purpose in Alcobendas (Madrid), calle Valgrande, no. 6 and with National Identity Card number 12.374.150-N; Mr. Jose Ignacio del Barrio Gomez, of legal age, married, of Spanish nationality, residing for this purpose in Alcobendas (Madrid), calle Valgrande, no. 6 and with National Identity Card number 51.343.948-J; and Mr. Manuel Fernandez Maza, of Spanish nationality, of legal age, married, residing for this purpose in Alcobendas (Madrid) at calle Valgrande, 6, and with National Identity Card number 28.603.055-W may jointly and severally, and in the name and on behalf of Buyer, sign and/or issue any documents or notices that should be signed and/or issued by it in accordance with or in relation to the Pledge Agreement and the Subordination Agreement, as well as in accordance with or in relation to Buyer's adherence to the Pledge Agreement and Subordination Agreement. FOUR. The Parties state that the Shares are pledged in favor of Nortel and Ericsson, and represented in three multiple certificates, numbers 76, 90 and 92 and, for such purpose and for the transfer of possession and legal validity of the pledge, the aforementioned multiple certificates containing the Shares are on deposit in Citibank, as agent of Nortel and Ericsson. Citibank delivers to me, the Notary, the three original multiple certificates numbers 76, 90 and 92 corresponding to Seller's Shares. The following is performed with respect thereto: (i) I, the Notary, delivery the multiple certificates to Seller, requesting that the latter endorse these in favor of Buyer so that, once endorsed, they may be returned to Citibank. (ii) Seller endorses such multiple certificates in favor of Buyer and, once endorsed, delivers them to me the Notary. (iii) I, the Notary, deliver the certificates endorsed in Buyer's favor to Citibank, leaving a copy thereof attached hereto. FIVE. Buyer hereby delivers the following documents to Citibank: - Evidence of Buyer's deed of incorporation, duly filed in the Register of Companies of Madrid. - Evidence of the National Identity Cards of Ms. Ana Isabel Morales and Mr. Manuel Fernandez Maza, undertaking to provide Buyer as soon as possible with evidence of the other persons empowered in Buyer's name and behalf to sign and/or issue documents and notices with regard to the Pledge Agreement and Subordination Agreement. The latter is to be subsequently delivered to me. 9 Buyer likewise requests that I, the Notary, issue the first authorized copy of this deed corresponding to Buyer, and delivers it to Citibank. I, the Notary, accept the request. SIX. In addition, Buyer undertakes to execute as many public or private documents as may be necessary or advisable in order to, as appropriate, complete its adherence to the Pledge Agreement and Subordination Agreement, at the request of Citibank. SEVEN. The Parties will collaborate on any communications, notices and procedures that may be required or advisable for the entry of the Shares in Buyer's name in the Xfera Moviles, S.A. Book of Registered Shares, notice to secured creditors and any other procedures that may be necessary. EIGHT. All expenses and taxes arising from this execution will be met by Buyer. NINE. The Parties, expressly waiving any other jurisdiction that may be available to them, submit to the Courts and Tribunals of Madrid. In whose terms this deed is hereby executed, which was drafted in accordance with the document furnished to me by those appearing, as they take part. Those appearing state for the record that this deed records a transaction aimed at the corporate restructuring of the group to which the companies represented here belong, and that it is in accordance with the Xfera S.A. shareholders agreement and is not damaging to any third party whatsoever. PROCESSING OF DATA. In accordance with the provisions of Organic Act 15/1999, those appearing are hereby informed of and accept the incorporation of their data into the automated files of the Notary Office, where they will be maintained confidentially, without prejudice to remissions of obligatory compliance. The legal reservations and warnings are made, particularly that are currently in force of a tax nature. They so state and execute. I, the Notary, read this deed, after advising them of their right to do so themselves, which they waive, whereby they ratify their execution and sign with me. Having identified them by means of the aforementioned documentation, I, the Notary, attest in accordance with the Organic Notary Act that in my judgment they have sufficient capacity and legitimacy, that the execution complies with legality and the duly-informed will of those executing, and of everything contained in this public instrument issued on ten sheets of 10 stamped paper for the exclusive use of notarial documents, series 5M, numbers 83460776, 8346077, 8346078, 8346079, 8346080, 8346081, 8346096, 8346097, 8346098 and this one. Signed. Ana Isabel Morales - Manuel Fernandez - Francisco Montoro. Signed. Juan Alvarez-Sala. Signed and sealed. Fee Application. Additional Provision 3. Act 8/89 Basis for calculation: as indicated in the deed Applicable Fee numbers: 2, 4, 5, 6 and 7 Regulation no. 8 Duty: Per document ATTACHED DOCUMENTATION ATTACHED DOCUMENT NUMBER ONE POWER OF ATTORNEY DEED, EXECUTED BY "CITIBANK INTERNATIONAL, PLC" NUMBER SEVEN HUNDRED AND SEVENTY TWO. IN MADRID, on March third two thousand and four. Before me, IGNACIO MARTINEZ-GIL VICH, Notary of Madrid, APPEARS: MR. JESUS-GREGORIO CASAS CARDENAL, of legal age, single, resident of Madrid, calle Jose Ortega y Gasset, 29, with National Identity Card number 810.653-H. He takes part on behalf of the Corporation known as "CITIBANK INTERNATIONAL PLC", a public limited company, founded in Great Britain in accordance with the Companies Law 1948, for 1967, registered in London (England) on December 21, 1972 and reregistered as a Public Limited Company, in accordance with Section 43 of the Companies Act of 1985, on March 1, 1993. Its registered headquarters and main office of business is currently at 336 Strand, London WC2R 1HB. It is on file in the Register of Companies of England and Wales as company number 1088249. For this proceeding he makes use of the powers granted in his favor by the aforementioned Company, with the intervention of Ms. Sophie Jane Jenkins, Notary Public of London, on February 21, 2003, on file in the Register of Companies of Madrid in volume 17,136, sheet 28, page M-271.271, entry 27. 11 I have an authentic copy of the aforementioned power of attorney before me, sealed with The Hague Apostille and which, in my judgment and under my responsibility, determines that the legal representative has sufficient representational powers for this proceeding in that, among other things, he is empowered to manage, negotiate and direct, in general, on behalf of the Company, general commercial Banking activities, even with the Bank of Spain, to pledge securities, acts on securities, deposit transactions and to delegate all or a part of his powers in favor of Company employees. He asserts the validity of the foregoing. He has, in my judgment and as he takes part, sufficient capacity for this proceeding whereby, HE EXECUTES: His granting of a power of attorney in favor of MR. FRANCISCO MONTORO ALEMAN and MS. MARIA DE LAS NIEVES REDONDO LAFUENTE, of legal age, married, residing for this purpose in Madrid, calle Jose Ortega y Gasset, 29, with National Identity Card numbers 5.404.195-T and 18.590.819-R, respectively, EMPLOYEES OF THE PRINCIPAL COMPANY so that, in representation of "CITIBANK INTERNATIONAL PLC", they may INDISTINCTLY exercise the following powers: I. To appear before a Notary to: (i) ratify, modify, cancel and/or confirm as Agent Bank, a Public Deed of Pledge on the XFERA MOVILES, S.A. (hereinafter, "Xfera") shares executed in July of 2001 before the Notary Mr. Juan Alvarez-Sala Walther in favor of the companies "NORTEL NETWORKS INTERNATIONAL FINANCE & HOLDING B.V." and "ERICSSON CREDIT A.B." (hereinafter, the "Deed of Pledge"), (ii) to likewise ratify, modify, cancel and confirm any other deed of pledge on newly-issued Xfera shares that have or may be executed with regard to the aforementioned Deed of Pledge, and (iii) to execute the deeds of adherence to the Deed of Pledge or the agreement of subordination executed between Xfera, Nortel, Ericsson, the Company, the Xfera shareholders and the companies of its group as defined in such agreement, which was converted into a public deed on August 27, 2001 before the Notary Mr. Juan Alvarez Sala-Walther. 2. To request, receive and deliver the certificates of shares representing the Xfera shares as well as any other shares, document or certificate relative thereto for endorsement, cancellation or deposit before the Company or any other party. 12 3. To issue and receive any representations and statements, or to execute and ratify any documents, whether public or private, that the Company deems advisable for the exercise of its duties as Agent Bank deriving from the Loan Agreement dated December 19, 2000 among Xfera, Nortel and the Company, as well as the deed of Pledge. 4. To likewise carry out any related or complementary proceedings as may be necessary in order to bring the actions entrusted to a favorable conclusion. 5. To appear before the Spanish administrative authorities and sign, in the name of the Company, any documents that may be necessary for the validity of the Deed of Pledge and any related agreements that may ultimately be executed. 6. To appear before Spanish judicial, administrative and civil authorities and undertake, in the name of the Company, all those actions necessary for the total or partial cancellation and for the execution of any deeds of pledge that may ultimately be executed. 7. In the exercise of the authority granted in the preceding paragraphs, to establish the terms and conditions deemed appropriate and to issue and receive all types of declarations of will and representations. 8. To execute any public or private documents that may be necessary for the exercise of the powers received including, if necessary, deeds of modification or ratification. The list of the foregoing powers should be understood to be for illustrative purposes and not limited thereto, whereby it is not possible to oppose any defect or imprecision in this power of attorney, which should be broadly interpreted. Drafted as per the minute. They so execute, ratify and sign, after reading the document and having been given the appropriate legal warnings and reservations by me, the Notary. I, the Notary, state for the record that I know the person appearing, that his consent has been given freely and that execution adapts to legality and to the duly-informed will of the executor of this public instrument, whose contents I attest, and which is issued on three sheets of paper for notarial documents, this number and the two that precede it in descending chronological order. The signature of the person appearing and of the authorizing Notary follow. Signed and stamped. 13 Notarial Fee. ACCRUED FEES. Applicable Fee numbers: 1, 4 DOCUMENT WITHOUT BASE AMOUNT. TOTAL (*illegible) IT IS A COPY OF ITS ORIGINAL that, under the order number indicated in the heading, is in my general protocol of public instruments, where it is duly noted. And for the company, I issue it on four sheets of paper for the exclusive use of notarial documents, this one and the three that precede it in chronological order, of the same series. In Madrid on March third two thousand and four. I ATTEST. (illegible signature) ATTACHED DOCUMENT NUMBER TWO. Mr. Jose Perez Santos, Secretary of the Board of Directors of Xfera Moviles, S.A., with registered offices in Madrid, Edificio A.P.O.T., calle Ribera del Sena s/n, Campo de las Naciones, incorporated indefinitely by means of the deed dated January 4, 2000, executed before the Notary Mr. Juan Alvarez-Sala Walther, under his protocol number 30. It is on file in the 14 Register of Companies of Madrid in volume 14,805, sheet 140, Section 8, page M-246.116 and its Tax Identification Number is A82528548 (hereinafter, the "Company"), and whose position is on file in the Register of Companies of Madrid in volume 14,805, Book O, Sheet 146, Section 8, Page M-246.116, entry 3. CERTIFIES I. That, as recorded in the Company's Book of Registered Shares, at this date, Telvent GIT, S.A. holds 17,437,937 shares of the Company, numbered 193,788,378 through 200,060,102; 272,862,879 through 278,062,964; 280,759,642 through 286,078,461; 304,478,166 through 305,000,000; 306,061,674 through 306,115,088; 306,391,287 through 306,418,307; 308,303,521 through 308,338,547; 308,959,737 through 308,969,744 all of them inclusive. II. That, as of this date, the Company's Bylaws contain no restrictions to the free transferability of the shares. III. That Telvent GIT, S.A. is party to the Xfera Moviles, S.A. Shareholders Agreement, whose clause 11.2.(i) states as follows: "The shares in the Company shall be freely transferable, among entities of the same Group (as defined in 11.2.i(ii) below)" IV. That clause 11.2.i(ii) of the Xfera Moviles, S.A. Shareholders Agreement provides as follows: "Entities shall be considered as belonging to the same "Group" if they constitute a single decision-making unit, because any one of them controls or may control, directly or indirectly, the decisions of the others. It shall be understood, in any case, that one entity has "Control" over another in any of the following circumstances: (a) When the controlling entity holds the majority of the voting rights of the controlled entity, either directly or by means of agreements with other shareholders. (b) When the controlling entity has the right to appoint or remove the majority of the members of the governing bodies of the controlled entity, either directly or by means of agreements with other shareholders. (c) When at least one-half plus one of the directors of the controlled entity are directors or top executives of the controlling entity or of another entity controlled by the latter. For the purpose of the provisions contained in the preceding paragraphs, the rights to vote or of appointment or removal possessed by the controlling entity through controlled entities or through other persons acting on behalf of the controlling entity or on behalf of other entities controlled by the latter shall be 15 added to the rights to vote or of appointment or removal referred to in said paragraphs". This Certificate refers solely to the controlling ownership of the Shares on the indicated date, and not to any other aspects relative thereto recorded in the Company's Book of Registered Shares. AND FOR THE RECORD, I issue this Certificate, in Madrid, on June 16, 2004. The Secretary of the Board of Directors of fera Moviles, S.A. (illegible signature) Mr. Jose Perez Santos ATTACHED DOCUMENT NUMBER THREE COMPANY NAME XFERA MOVILES, S.A. REGISTERED OFFICES: EDIFICIO A.P.O.T. C/RIBERA DEL SENA, S/N, CAMPO DE LAS NACIONES, 28042 MADRID TAX IDENTIFICATION NUMBER: A-82528548. Incorporated indefinitely by means of the public deed executed before the Notary of the Distinguished Association of MADRID MR. JUAN ALVAREZ-SALA WALTHER On JANUARY 4, 2000. On file in the Register of Companies of MADRID, page number M-246116, sheet 140, volume 14.805, book O, Section 8 of the Corporations Book, entry 1. SHARE CAPITAL: 309,000,000 EUROS 16 Represented by 309,000,000 REGISTERED 1 SHARES ONE SOLE Series with a face value of 1 Euro each one, totally subscribed and paid up IN THEIR ENTIRETY And consecutively numbered from 1 through 309,000,000, both inclusive. SHARES NO. 76 Comprised of 11,471,811 shares, numbers SEE FOOTNOTE BELOW, of one SOLE series, in favor of (2) TELVENT GIT, S.A. Date: Madrid, June 30, 2003 Signed (Illegible signature) (*) Numbering: 193,788,378 through 200,060,102; and 272,862,879 through 278,062,964, all of them inclusive. THE TRANSFER OF THE SHARES IN THIS CERTIFICATE IS SUBJECT TO THE FULFILMENT OF SECTION 8 OF THE CORPORATE BYLAWS: Transfers the shares contained in this Multiple Certificate in favor of Mr. Mr.__________________, Date.________________________________ Transfers the shares contained in this Multiple Certificate in favor of Mr. Mr.__________________, Date.________________________________ Transfers the shares contained in this Multiple Certificate in favor of Mr. Mr.__________________, Date.________________________________ Transfers the shares contained in this Multiple Certificate in favor of Mr. Mr.__________________, Date.________________________________ Transfers the shares contained in this Multiple Certificate in favor of Mr. Mr.__________________, Date.________________________________ Transfers the shares contained in this Multiple Certificate in favor of Mr. Mr.__________________, Date.________________________________ Transfers the shares contained in this Multiple Certificate in favor of Mr. Mr.__________________, Date.________________________________ Handwritten portion: (left margin) I endorse, in guarantee of the pledge in the terms foreseen in the deed executed by the Notary Jesus Roa Martinez on June 30, 2003 under his protocol number 758. Madrid, June 30, 2003 (illegible signature) - --------------------------------------- (1) To the bearer or nominative shares (2) Holder's name, where appropriate 17 (right margin): Endorsed all the shares object of this multiple certificate in favor of Telvent Investments, S.L. in accordance with the deed executed before the Notary of Madrid, Mr. Juan Alvarez-Sala Walther, on June 18, 2004. Madrid, June 18, 2004 (illegible signature) TELVENT GIT, S.A. COMPANY NAME XFERA MOVILES, S.A. REGISTERED OFFICES: EDIFICIO A.P.O.T. C/RIBERA DEL SENA, S/N, CAMPO DE LAS NACIONES, 28042 MADRID TAX IDENTIFICATION NUMBER: A-82528548. Incorporated for an indefinite period by means of the public deed executed by the Notary of the Distinguished Association of MADRID MR. JUAN ALVAREZ-SALA WALTHER On JANUARY 4, 2000. On file in the Register of Companies of MADRID, page number M-246116, sheet 140, volume 14.805, book O, Section 8 of the Corporations Book, entry 1. SHARE CAPITAL: 309,000,000 EUROS Represented by 309,000,000 REGISTERED (1)SHARES ONE SOLE Series with a face value of 1 Euro each one, totally subscribed and paid up IN THEIR ENTIRETY And consecutively numbered from 1 through 309,000,000, both inclusive. TITLE NO. 90 Comprised of 390,876 shares, numbers *, one SOLE series, in favor of 2 TELVENT GIT, S.A. Date: Madrid, March 4, 2004 (*) 280,759,642 through 286,078,461; 306,391,287 through 306,418,307; 308,303,521 through 308,338,547; 308,959,737 through 309,969,744 inclusive. Signed (illegible signature) Handwritten portion: - -------------------------------------- (1) To the bearer or nominative shares (2) Holder's name, where appropriate 18 I endorse, in guarantee of the pledge in the terms envisaged in the deed executed by the Notary Mr. Jesus Roa Martinez on June 30, 2003 under his protocol number 758. By Mr. Jose Ignacio del Barrio Gomez. Madrid, March 4, 2004 (illegible signature) Transfers the shares contained in this Multiple Certificate in favor of Mr. Mr.__________________. Date.________________________________ Transfers the shares contained in this Multiple Certificate in favor of Mr. Mr.__________________. Date.________________________________ Transfers the shares contained in this Multiple Certificate in favor of Mr. Mr.__________________. Date.________________________________ Transfers the shares contained in this Multiple Certificate in favor of Mr. Mr.__________________. Date.________________________________ Transfers the shares contained in this Multiple Certificate in favor of Mr. Mr.__________________. Date.________________________________ Transfers the shares contained in this Multiple Certificate in favor of Mr. Mr.__________________. Date.________________________________ Transfers the shares contained in this Multiple Certificate in favor of Mr. Mr.__________________. Date.________________________________ Handwritten portion: (left margin) Endorsed all the shares object of this multiple certificate in favor of Telvent Investments, S.L. in accordance with the deed executed before the Notary of Madrid, Mr. Juan Alvarez-Sala Walther, on June 18, 2004. Madrid, June 18, 2004 (illegible signature) TELVENT GIT, S.A. COMPANY NAME XFERA MOVILES, S.A. REGISTERED OFFICES: EDIFICIO A.P.O.T. C/RIBERA DEL SENA, S/N, CAMPO DE LAS NACIONES, 28042 MADRID TAX IDENTIFICATION NUMBER: A-82528548. Incorporated indefinitely by means of the public deed executed before the Notary of the Distinguished Association of MADRID MR. JUAN ALVAREZ-SALA WALTHER On JANUARY 4, 2000. On file in the Register of Companies of MADRID, page number M-246116, sheet 140, volume 14.805, book O, Section 8 of the Corporations Book, entry 1. SHARE CAPITAL: 309,000,000 EUROS 19 Represented by 309,000,000 REGISTERED(1) SHARES ONE SOLE Series with a face value of 1 Euro each one, totally subscribed and paid up IN THEIR ENTIRETY And consecutively numbered from 1 through 309,000,000, both inclusive. TITLE NO. 92 Comprised of 575,250 shares, numbers *, one SOLE series, in favor of 2 TELVENT GIT, S.A. Date: Madrid, March 4, 2004 (*) 304,478,166 through 305,000,000; 306,061,674 through 306,115,088, all of them inclusive. Signed (illegible signature) Handwritten Portion: I endorse, in guarantee of the pledge in the terms envisaged in the deed executed by the Notary Mr. Jesus Roa Martinez on June 30, 2003 under his protocol number 758. Madrid, March 4, 2004 (illegible signature) Jose Ignacio del Barrio Gomez Transfers the shares contained in this Multiple Certificate in favor of Mr. Mr.__________________. Date.________________________________ Transfers the shares contained in this Multiple Certificate in favor of Mr. Mr.__________________. Date.________________________________ Transfers the shares contained in this Multiple Certificate in favor of Mr. Mr.__________________. Date.________________________________ Transfers the shares contained in this Multiple Certificate in favor of Mr. Mr.__________________. Date.________________________________ Transfers the shares contained in this Multiple Certificate in favor of Mr. Mr.__________________. Date.________________________________ Transfers the shares contained in this Multiple Certificate in favor of Mr. Mr.__________________. Date.________________________________ Transfers the shares contained in this Multiple Certificate in favor of Mr. Mr.__________________. Date.________________________________ Handwritten portion: (left margin) - ------------------------------------------- (1) To the bearer or nominative shares (2) Holder's name, where appropriate 20 Endorsed all the shares object of this multiple certificate in favor of Telvent Investments, S.L. in accordance with the deed executed before the Notary of Madrid, Mr. Juan Alvarez-Sala Walther, on June 18, 2004. Madrid, June 18, 2004 (illegible signature) .. TELVENT GIT, S.A. THIS FIRST COPY, which correctly and faithfully reflects the original in the protocol of my colleague, Juan Alvarez-Sala Walther. And I, Ignacio Paz-Ares Rodriguez issue it for the Buyer Company, in substitution of my colleague on account of his impossibility to do so, on eighteen sheets of paper for the exclusive use of notarial documents, series 5M, numbers: this one and the seventeen that precede it in chronological order, that I sign, stamp and seal in Madrid, on June eighteenth two thousand and four. Attached sheet number 510099386. (illegible signature) ATTACHED SHEET to the authentic copy of the instrument executed by MR. JUAN ALVAREZ-SALA WALTHER, under number 1401 on June 18, 2004, for the recording of notes by Public Registers and Offices. 21 EX-3.1 5 l07997exv3w1.txt DEED OF INCORPORATION Exhibit 3.1 PAPER EXCLUSIVELY FOR NOTARIAL DOCUMENTS 4T4365448 11/2002 Government revenue stamp [NOTARY'S STAMP CARLOS PEREZ BAUDIN] TESTIMONY FOR EXHIBITION. I, CARLOS PEREZ BAUDIN, Notary Public of Madrid and of the Madrid Notaries' Association, resident of the capital, ATTEST: that I am being shown the documents that copied verbatim state as follows: NUMBER 1199 - DAY 4 of April of the year 2000. DEED OF INCORPORATION OF THE SPANISH CORPORATION: "TELVENT DESARROLLO, S.A." NUMBER ONE THOUSAND ONE HUNDRED AND NINETY-NINE. IN MADRID; on April 4, 2000. Before me, CARLOS PEREZ BAUDIN, Notary Public of Madrid and of the Madrid Notaries' Association, APPEARING: MR. JOSE LUIS BERGOS DE LA MAZA, of legal age, married, of Spanish nationality, and inhabitant of Seville, calle Valparaiso, numero 21. Holder of his National Identity Document no. 28363147-F. MR. PEDRO BERNAD HERRANDO, of legal age, of Spanish nationality, and inhabitant of Madrid, calle Covarrubias, numero 28. Holder of his National Identity Document no. 17228150-T. MR. JOAQUIN CORONADO GALDOS, of legal age, married, of Spanish nationality, and inhabitant of Seville, calle Eduardo Dato, numero 37. Holder of his National Identity Document no. 28854279-C. MR. JAVIER MOLINA MONTES, of legal age, married, of Spanish nationality, and inhabitant of Seville, calle San Salvador, numero 5, bajo C. Holder of his National Identity Document no. 29754087-E. ACTING: a) The last two, for themselves and in their own name and on their own behalf, solely for the purposes of accepting the positions to which they will be appointed in this instrument. b). Mr. Jose Luis BURGOS DE LA MAZA, as authorized representative, for and on behalf of the Company of Swiss nationality "TELVENT, A.G.", with legal and tax residence in Poststrasse 4, 6300 Zug, Switzerland, and RECORDED in the Zug Mercantile Register with number CH- 1703023234-4. PAPER EXCLUSIVELY FOR NOTARIAL DOCUMENTS 4T4365447 11/2002 Government revenue stamp [NOTARY'S STAMP CARLOS PEREZ BAUDIN] He makes use of the power of attorney, which he declares has not expired, which was granted to him by Dr. Suzanne Wettenschwiler and Dr. Raoul Bussmann, in a document signed in Zug, on January 4, 2000, the signatures of whom were legitimized by the Notary Public of the Canton of Zug, and duly legalized by the Hague Apostil method. I attach a photocopy of testimony thereof, realized by the Seville Notary Public, Mr. Luis Vivancos Escobar, checked by myself, to this document as ATTACHED DOCUMENT NUMBER ONE (1). c) And Mr. Pedro Bernad Herrando, in his own name and on his own behalf and also as Chief Executive Officer, for and on behalf of "SOCIEDAD ANONIMA DE INSTALACIONES DE CONTROL", in anagram SAINCO, with registered office in Madrid, calle Los Vascos, numero 17; incorporated for an open-ended duration in a deed authorized by the Madrid Notary Public, MR. EDUARDO LOPEZ PALOP, on January 22, 1963, with number 49 in order of his record; its Company bylaws have been adapted to the current Spanish Corporations Law by means of deed authorized by the Madrid Notary Public MR. JUAN ALVAREZ-SALA WALTER on January 22, 1991, with number 162 in order of his record, RECORDED in the Madrid Mercantile Register, at Volume 1612 general, 1036 of the 3rd Section of the Book of Companies, folio 1, sheet no. 7367, 1st entry; and its adaptation is recorded in the above-mentioned Mercantile Registry at volume 1337, folio 92, sheet no. M-25013, 86th entry. With Tax Identification Code no. A- 28114981. REAPPOINTED in his role as Director of the Company, FOR A TERM OF OFFICE OF TWO YEARS, by resolution adopted by the Universal and General Shareholders' Meeting of the Company, in its meeting of June 25, 1999; and ratified in his position as Chief Executive Officer by resolution of the Board of Directors in a meeting of the same day of July 15, 1999; both these resolutions were recorded in a public deed authorized BEFORE ME, on July 20, 1999, number 2430 of my record, BEING RECORDED in the Madrid Mercantile Registry, at volume 12887, folio 218, 8th section, sheet no. M-25013, 140th entry. PAPER EXCLUSIVELY FOR NOTARIAL DOCUMENTS 4T4365446 11/2002 Government revenue stamp [NOTARY'S STAMP CARLOS PEREZ BAUDIN] From a copy of the above-mentioned instrument, which I have before me, I transcribe hereinafter that part of it that pertains to this document: "... DOCUMENT ATTACHED: that the Ordinary General Shareholders' Meeting... The Meeting adopted unanimously the following resolutions: 1) To appoint for a period of two years, from the holding of this Meeting, the following persons: MR. PEDRO BERNAD HERRANDO.............. That the Board of Directors...likewise unanimously adopted the following resolutions: .............FOUR - To ratify the delegation of powers to Mr. Pedro Bernad Herrando on June 11, 1986 before the Madrid Notary Public Mr. Ramon Fernandez Puron, no. of his record 2766....." From a copy of deed number 2766 of the record of the Madrid Notary Public, Mr. Ramon Fernandez Puron, dated June 11, 1986, which I have before me and which was RECORDED in the Madrid Mercantile Registry at volume 67 general, 61 of the 3rd section, of the Book of Companies, folio 52, sheet number 7367, 53rd entry, I transcribe below the part that is pertinent to this document: "... DOCUMENT ATTACHED: That in the Board of Directors of the Company held on April 24, 1986, ...the following resolutions among others were adopted unanimously: 1) to delegate to the Chairman of the Board, Mr. PEDRO BERNAD HERRANDO, ... so that he may exercise without any limitation whatsoever the following powers: "Each and every power that may be necessary to agree and resolve whatever is appropriate for the company's business and interests, being able to verify and realize any act or contract of acquisition, obligation, disposal or charge, and any others allowed by law, under the conditions and with the prices and clauses deemed convenient, and likewise to exercise all rights and actions in court and out-of-court ... the above-mentioned powers are merely for illustrative purposes and therefore are not limited hereto...." PAPER EXCLUSIVELY FOR NOTARIAL DOCUMENTS 4T4365445 11/2002 Government revenue stamp [NOTARY'S STAMP CARLOS PEREZ BAUDIN] The above-mentioned transcriptions coincide exactly with their respective original documents, which I have had in front of me and I have checked, without anything having been omitted being a limitation or condition thereof. I assure myself that his position and powers of attorney remain in force, and likewise of the legal subsistence of the company he represents, without any evidence to the contrary. In my opinion those appearing, in the capacity in which they appear, have the necessary legal standing to grant this present Deed of Incorporation of a Spanish Corporation, which they carry out pursuant to the contents of the following CLAUSES: ONE. With the name "TELVENT DESARROLLOS, S.A." the companies "TELVENT A.G." represented in these proceedings by Mr. Burgos de la Maza, and "SOCIEDAD ANONIMA DE INSTALACIONES DE CONTROL, S.A.", represented in this document by Mr. Bernad Herrando, form a Spanish corporation (Sociedad Anonima), the corporate purpose, registered office, duration, capital stock, governing bodies and representation and other circumstances of which are shown in bylaws which the representatives show to me. They read for themselves these bylaws, and I, the Notary Public, repeat the reading; they ratify the contents thereof, they sign it at the end, to show their agreement there with, and THEY REQUIRE ME, the Notary Public, to record them in a public deed, attaching them hereto. I, the Notary Public, accept the request made of me and attach hereto AS ATTACHED DOCUMENT NUMBER TWO (2) the bylaws referred to, which I hereby record in a public deed, complemented by the granting hereof. The above-mentioned bylaws are set forth on 10 sheets of normal paper typed on one side and only and numbered from 1 to 10, both inclusive. TWO.- The Capital Stock of the Company formed amounts to ONE THOUSAND MILLION PESETAS (1,000,000,000 ptas, equivalent to 6,010,121.04 euros), PAPER EXCLUSIVELY FOR NOTARIAL DOCUMENTS 4T4365444 11/2002 Government revenue stamp [NOTARY'S STAMP CARLOS PEREZ BAUDIN] is represented by 10,000 SHARES, OF ONE HUNDRED THOUSAND PESETAS (100,000 Ptas, equivalent to 601.012104 E) each, numbered consecutively from 1 to 10,000, both inclusive, the shares being REGISTERED, and totally paid in, in the following proportion: The entity "TELVENT A.G", represented in this document by Mr. Burgos, subscribes to 9999 shares, numbered from 1 to 9999, both inclusive, for the total value thereof of 999,900,000 Ptas, equivalent to 6,009,520.03 euros. And the entity "SOCIEDAD ANONIMA DE INSTALACIONES DE CONTROL, S.A." represented by Mr. Bernad, subscribes to the remaining share, numbered 10,000, for its value of 100,000 Ptas, equivalent to 601.01 euros. Those appearing declare that they have paid in, prior to these proceedings, in cash, 25 percent of the total par value of the shares they are respectively subscribing to, by payment thereof into the current account number 0049-0611-41-2610542121 opened in the company's name, on being formed, in the BANCO SANTANDER CENTRAL HISPANO, Branch 0611 of Madrid, Avenida Reina Victoria, numero 53. Likewise evidence the TWO bank certificates that they deliver to me and I attach hereto AS ATTACHED DOCUMENTS NUMBERS THREE AND FOUR (3 and 4). The unpaid capital will be paid in with the form and by the deadlines determined by the company's governing body and in cash, exclusively, and within a maximum of five years. THREE.- The name of this Company is not used by any other as shown to me by the relevant certificate, which is delivered to me by those appearing and I attach hereto so that it shall form an integral part hereof AS ATTACHED DOCUMENT NUMBER FIVE (5). FOUR.- Recorded expressly is the prohibition on exercising roles within the Company of persons who are declared incompatible by Law 12/95 of May 11; Law 14/1995 of April 21 of the Madrid Autonomous Community; and any persons falling foul of the provisions of article 124 of the Spanish Corporation's Law. PAPER EXCLUSIVELY FOR NOTARIAL DOCUMENTS 4T4365443 11/2002 Government revenue stamp [NOTARY'S STAMP CARLOS PEREZ BAUDIN] FIVE.- The shareholders, represented as shown above and giving to these proceedings the character of a meeting of the Universal Shareholders Meeting of the Company unanimously decide to APPOINT the following persons AS DIRECTORS of the Company, FOR A PERIOD OF FIVE YEARS: MR. PEDRO BERNAD HERRANDO MR. JOAQUIN CORONADO GALDOS Mr. JAVIER MOLINA MONTES MR. CANDIDO VELAZQUEZ-GAZTELU RUIZ MR. CARLOS MORENO BERMEJO MR. JESUS PEREZ RODRIGUEZ. THE FIRST THREE persons appointed, here present, accept their respective appointments, and declare that they are not subject to any incompatibility and prohibitions referred to by the Laws listed in the Clause preceding this one. The last three appointed shall accept their positions in a separate document. SIX.- The founding shareholders reciprocally confer power of attorney on each of them and in addition on all the appointed Directors such that any one of them (shareholders and/or directors), in representation of the others, may correct or rectify this present deed and the bylaws attached hereto, provided that such corrections or rectifications are limited to accepting the verbal or written qualification of the relevant Mercantile Registrar. SEVEN. The above-mentioned Mercantile Registrar is requested to record this present deed in the books in his charge, and likewise, as the case may be, proceed to partial recording thereof, pursuant to the provisions of article 63 of the Mercantile Registry Regulations, in the event that some of the content of this instrument that is recordable suffers from some defect that prevents recording thereof. I, the Notary Public, warn the person appearing of the provisions of articles 82 and 83 of the current Mercantile Registry Regulations, relating to the mandatory nature of the recording of this instrument in the Mercantile Registry and of the deadlines for application thereof. PAPER EXCLUSIVELY FOR NOTARIAL DOCUMENTS 4T4365442 11/2002 Government revenue stamp [NOTARY'S STAMP CARLOS PEREZ BAUDIN] EIGHT.- The approximate cost, both prior to this deed and those arising from the payment of expenses, taxes and other related costs until the recording of this instrument has been obtained, amounts to the sum of ELEVEN MILLION PESETAS, 11,000,000 Ptas, equivalent to 66,111.33 euros. NINE. - IN RELATION TO FOREIGN INVESTMENTS The first person appearing, acting as shown above, declares: That the PESETAS with which the company "TELVENT A.G." carries out the subscription to and payment in of the shares that it subscribes to in this instrument, are in the NATURE OF FOREIGN INVESTMENTS, because they have been realized by means of transfer from the subscribing Company which is a foreign company. That it is planned to make the communication to the Directorate-General for Foreign Transactions, the Ministry of the Economy and Finance, of the INVESTMENT for the subscribing to shares granted in this instrument by "TELVENT A.G." by means of Form MC-1A, number 01/A- 0171936. A copy of said form, duly completed, I attach hereto AS ATTACHED DOCUMENT NUMBER SIX (6). However, I, the Notary Public, warn the person appearing, pursuant to Royal Decree 664/99 of April 23, that it is obligated to declare the investment to the Registry of Investments of the Ministry of the Economy and Finance, warning expressly that breach of the obligations established in said Royal Decree shall constitute an infringement, for the purposes of the provisions of law 40/79 of the Legal Regime for Exchange Control. GRANTING AND AUTHORIZATION Thus do they state and grant, after having read for themselves this public instrument set forth on the sheets that shall be identified below, advised by me of their rights to do so and choosing to do so. To all of which, having given the opportune legal reservations and warnings, having identified those appearing by being shown their documents of identity, first indicated above, that have photographs and signatures that coincide with their respective PAPER EXCLUSIVELY FOR NOTARIAL DOCUMENTS 4T4365441 11/2002 Government revenue stamp [NOTARY'S STAMP CARLOS PEREZ BAUDIN] appearances and signatures, and having drafted this public instrument in eight sheets of government revenue paper for exclusive use of Notaries Series 3F, numbers 7978918, 7978917, 7978916, 7978915, 7978914, 7978913, 7978912, and this present sheet, I, the Notary Public, attest. THIRD ADDITIONAL PROVISION OF LAW 8/1989 OF APRIL 13 BASIS OF CALCULATION IN PESETAS: 1,000,000. Redenomination in EUROS (Law 46/1998): 6,101,1201. FEE APPLICABLE, nos. 2, 4, 5, 6, 7. FEES CHARGEABLE IN PESETAS: 403125. Redenomination in EUROS (Law 46/1998): 2442.83. The signatures and initials of those appearing are here. SIGNED - signed: Carlos Perez Baudin, initialed and sealed. NOTE: On April 4, 2000 and at the instance of the Company "TELVENT DESARROLLO, S.A." I, CARLOS PEREZ BAUDIN, issue a first copy in EIGHTEEN sheets of government revenue paper for exclusive use of Notaries, series 3H, numbers: 6156002, 6156003, 6156004, 6156005, 6156006, 6156007, 6156008, 6156009, 6156710, 6156956, 6156955, 6156954, 6156953, 6156952, 6156951, 6156950, 6156949, 6156948, 6156947 and this present sheet. And in a further sheet of series 5C, number 5643639 to contain the Annotations in the Registries and Public Offices. I ATTEST. Perez Baudin, initialed. DOCUMENT ATTACHED EX-3.2 6 l07997exv3w2.txt FORM OF THE BY-LAWS EXHIBIT 3.2 BYLAWS OF THE SPANISH CORPORATION "TELVENT GIT, S.A." TITLE I ARTICLE 1. COMPANY NAME. The Company's name is "Telvent GIT, S.A." ARTICLE 2. DURATION The duration of the Company shall be indefinite. The Company commenced trading on the same day as the grant of the articles of incorporation, and shall be dissolved on grounds established by Law. ARTICLE 3. REGISTERED OFFICE. The registered office of the Company is in Alcobendas (Madrid) Calle Valgrande 6. The Board of Directors is entitled to create, close down or transfer branches, agencies, offices or delegations, in any location nationally or abroad. ARTICLE 4. CORPORATE PURPOSE The corporate purpose of the Company Telvent GIT, S.A. is: I. To manufacture, develop, market, maintain, repair and install all kinds of information and control, protection, monitoring and security devices and systems by means of physical, computer, electronic, electromechanical, electrical, visual, magnetic, luminous, acoustic or instrumental devices and systems for security, monitoring, protection and control especially in relation to equipment, signaling and runway lighting, civil works, protection against fire, environmental monitoring, energy control, electrical monitoring, meteorological monitoring, the control of access of persons or things, tolls, notes/tickets, parking, information systems, applied engineering and systems for the ordinance, regulation, monitoring, supervision and measurement of signal systems for road and rail traffic throughout the entire extension thereof. II. To develop, construct, assemble, operate, repair, maintain, import, export, sell and lease all kinds of machines, devices, installations, units, sub-units, individual parts and materials for all computer, electronic, electromechanical and electrical applications, and likewise of scientific devices for control, measurement and installation, repair and maintenance thereof. 1 III. Engineering and services in the Internet market and new developments in telecommunications. Within the services are included consultancy, engineering, systems integration, software development, marketing of computer and telecommunications equipment, marketing of software applications, licenses and products, operating of buildings designed to house computer and telecommunications equipment of third parties, provision of Internet access, marketing of telecommunications services such as re-selling of broadband, number portability, outsourcing of telecommunications and computer systems, electronic commerce and in general any other service with value added dedicated to the development of new businesses in the telecommunications, Internet and electronic commerce areas, and likewise the creation of companies and making of investments in companies by taking on shares and debt. IV. To exploit for lucrative gain buildings that are specifically designed to house computer systems and equipment, and/or to house communications network operating systems and equipment owned by third parties, such as: switching centers, transmission equipment, network management systems, satellite or radio stations, etc., together with the necessary associated installations. Consequently, to provide services relating to the design, operation and maintenance of such equipment and systems, together with the carrying out of works to adapt premises to house the electronic, electromechanical, electrical installations and telecommunications equipment. V. To obtain, purchase, sell, transfer and operate concessions, rights and patents; VI. To acquire, promote, dispose of and use and encumber all types of movable assets and real estate related to the activities detailed in the paragraphs above and rights attachable on its own account without restriction of any kind and any other commercial activities directly or indirectly relating to those of the above-mentioned corporate purpose. Such activities may be carried out by the Company wholly and directly or partially and indirectly by means of the holding of shares in Companies with identical or comparable corporate purpose. TITLE II ON CAPITAL STOCK AND DIVISION THEREOF INTO SHARES ARTICLE 5. CAPITAL STOCK Capital stock is sixty million one hundred and one thousand euros (60,101,000. euros), represented by twenty million (20,000,000) shares of three euros and zero point five zero five euro cents (3.00505 euros) par value each, integrated into one class and series only and numbered consecutively from one (1) to twenty million (20,000,000) inclusive. All such shares shall confer equal rights and shall be represented by registered share certificates, which may be issued as multiple certificates, although shareholders will be entitled, at any moment, to demand their individualization. 2 Capital stock is fully subscribed and one hundred percent (100%) paid in. ARTICLE 6. INCREASE AND REDUCTION OF CAPITAL STOCK. Capital stock may be increased or reduced by resolution of the General Shareholders' Meeting convened for this purpose, with the requirements and the quorum of attendance provided for in Article 103 of the Spanish Corporations Law. The General Shareholders' Meeting shall specify the deadlines and conditions for each new issue and the governing body shall have the necessary powers to comply with the resolutions adopted in this respect by the General Shareholders' Meeting. The General Shareholders' Meeting may authorize the governing body to increase capital stock, once or various times, up to the figure freely decided thereby, that may not exceed one half of the Company's par value, to the extent and in the amount thereby decided, without prior consultation with the General Shareholders' Meeting, by means of cash contribution, within the deadlines specified by Law and likewise authorizing the governing body to amend article five of these Bylaws, adapting it to the successive capital increases. ARTICLE 7. PREEMPTIVE RIGHT. The shareholders shall have preemptive rights vis-a-vis any other person to subscribe, in proportion to the certificates they may hold, to any new shares issued. ARTICLE 8. SHARE TRANSFER Shares are transferable, without restriction of any kind, by all methods allowed by Law. Foreign legal entities and individuals may subscribe to or acquire shares of the Company under the terms and conditions established by current legislation or any legislation passed in the future. ARTICLE 9. SHAREHOLDERS' RIGHTS Each share shall confer on its holder the right to attend General Shareholders' Meetings and to issue a vote, to challenge company resolutions, to participate in the distribution of company earnings and in any surplus assets resulting from liquidation and other rights inherent in the holder's status as shareholder. ARTICLE 10. APPLICATION FOR CERTIFICATES. Certificates representing the shares must be drawn up in the form and with the contents determined by current laws. They shall be authorized by signing by one or more Directors, which may be reproduced by mechanical means. 3 Whilst no certificates are issued, provisional vouchers for the shares can be delivered to the shareholders. TITLE III ON GOVERNANCE OF THE COMPANY ARTICLE 11. GOVERNANCE AND ADMINISTRATION OF THE COMPANY Governance and administration of the Company pursuant to the provisions of these Bylaws is entrusted to the General Shareholders' Meeting, to the Governing Body, and if appointed, to the Executive Committee and to the Chief Executive Officer. Governance of the Company is entrusted to a Board of Directors, and if the latter is so resolved, to an Executive Committee and one or more Chief Executive Officers. The General Shareholders' Meeting, following amendment of the bylaws, may amend the structure of the Governing Body and entrust governance thereof to: i) a sole director; ii) to various joint and several directors (administradores solidarios) and iii) to two joint but not several directors (administradores conjuntos o mancomunados). SECTION ONE GENERAL SHAREHOLDERS' MEETINGS ARTICLE 12. GENERAL SHAREHOLDERS' MEETINGS The General Shareholders' Meeting, duly convened and formed, represents the entirety of the shareholders, and the resolutions thereof, adopted as per bylaws, shall be obligatory for all, including those abstaining, dissenters blank voters and absentees. ARTICLE 13. CLASS OF GENERAL SHAREHOLDERS MEETING The General Shareholders' Meeting, made up potentially of all shareholders including holders of nonvoting shares, may be Ordinary and Extraordinary, and must be convened by the Directors of the Company. The Ordinary General Shareholders' Meeting shall be held once a year within the first six months of the year, to scrutinize corporate management, approve as the case may be the financial statements of the previous year and decide on the distribution of income or losses. The Extraordinary General Shareholders' Meeting shall meet when the Company's Board of Directors so resolves, or where such is requested by a number of shareholders representing at least five percent of capital stock and expressing in said request the matters to be dealt with by the Meeting. In this latter case the Meeting must be called to be held within the thirty days following the date on which the directors have been required via notary to call it. The directors shall draw up the Agenda, and shall be obliged to include the items included in the request. 4 In the absence of the necessary call, the shareholders may, the Board of Directors having a right to be heard and such being recorded in the Minutes, apply to a Madrid First Instance Judge for application of the provisions of article 102 of the Law. With regard to possible special Meetings, which shall be made up of the holders of the shares that are affected by the special resolution in question, this shall be in accordance with the Law. ARTICLE 14. CALL NOTICE Both the Ordinary and Extraordinary General Shareholders' Meetings shall be held at the place and on the date and at the time indicated in the call. Call notices for the General or Special Shareholders' Meetings shall be published in the Official Gazette of the Mercantile Register and in one of the highest-circulation newspapers in the province, with at least 15 days' notice prior to the date indicated for the meeting. The announcement shall detail all the matters that are to be dealt with, and may state the date on which the Meeting shall meet at second call, if necessary. The call shall make mention, as appropriate, of the shareholders' rights to information pursuant to Article 212 of the Spanish Corporations Law. Notwithstanding the provisions of the previous paragraphs, the Meeting shall be deemed called and shall be validly convened to deal with any matter where all the capital stock is present or duly represented, and those attending unanimously agree to hold the Meeting. ARTICLE 15. MAKEUP AND QUORUM OF THE SHAREHOLDERS' MEETING The General Shareholders' Meeting shall be validly convened at first call when the shareholders, present or duly represented, possess twenty-five percent of subscribed voting stock. At second call the Meeting shall be validly convened regardless of the stock attending. For the Ordinary or Extraordinary General Shareholders' Meeting to be able to validly agree the issue of shares, increase or reduction of capital, transformation, merger or spin-off of the Company, and in general any amendment of the Bylaws, the attendance of shareholders in person or duly represented possessing at least 50 percent of subscribed voting stock shall be necessary at first call. At second call the attendance of twenty-five percent of said stock shall be sufficient. Where the shareholders attending represent less than fifty percent of the voting capital subscribed, the adopting of resolutions shall require the affirmative vote of at least two thirds of capital present or represented at the Meeting. 5 ARTICLE 16. RIGHT TO ATTEND Each shareholder shall have the right to attend all the General Shareholders' Meetings, either in person or by proxy, and shall have one vote for each one of the shares that it holds. Proxy representation may be conferred by means of a normal letter signed by the shareholder, especially for each Meeting, subject to the provisions of the Law, and without prejudice to the provisions of Articles 107 and 108 thereof. Directors shall be obliged to attend the General Shareholders' Meetings. Managers, technical personnel and other persons with an interest in the proper progress of Company matters may attend, where their presence has been approved by the Meeting itself. ARTICLE 17. METHOD OF DELIBERATION AND ADOPTION OF RESOLUTIONS The Chairman of the Board of Directors or in his absence the Deputy Chairman shall preside over all General Shareholders' Meetings. Otherwise, the Meeting shall be presided over by the Shareholder that the shareholders attending the meeting elect for said Meeting. The Secretary of the Board of Directors, if any, shall act as Secretary of the Shareholders' Meeting. In default, or in his/her absence, the shareholders attending the Meeting shall appoint the Secretary. The Chairman shall direct the deliberations, giving the floor to the shareholders or the representatives who have requested it in writing, in the strict order in which the requests have been received, and then those that so request verbally. Each of the items forming part of the agenda provided for in the call shall be voted on separately, the resolution being passed if so decided by one half plus one of the voting shares present or represented. The results shall be recorded in the Minutes, with whatever else is appropriate. In all other matters, the relevant provisions of the Law shall be applicable. ARTICLE 18. AGENDA The Agenda shall be drawn up by the Board of Directors. No proposition may be discussed that is not included in the Agenda. The shareholders may request in advance of the Shareholders' Meeting in writing, or likewise verbally, the reports or clarifications they deem appropriate in relation to the matters included on the Agenda. ARTICLE 19. POWERS AND REMIT OF THE ORDINARY GENERAL SHAREHOLDERS' MEETING The Ordinary General Shareholders' Meeting is authorized: (a) To examine and approve, as the case may be, the financial statements of the previous year - the Balance Sheet, the Income Statement and the Notes to Financial 6 Statements; the management report - filed by the governing body, and to scrutinize company governance. (b) To agree, as the case may be, to constitute voluntary and special reserves as deemed appropriate. (c) To decide what redemptions/amortizations to make in accordance with the proposal made by the governing body. (d) To resolve on distribution of income/losses. (e) To appoint auditors for the year in progress on the date that the Shareholders' Meeting is held for the minimum term and until the maximum term allowed by Law, upon proposal by the Auditing Committee. (f) To examine and approve the Consolidated Management Report and Financial Statements, if any. ARTICLE 20. POWERS AND REMIT OF THE GENERAL SHAREHOLDERS' MEETINGS. The General Shareholders' Meeting, whether Ordinary or Extraordinary, is authorized: (a) To appoint and remove Directors, as and when appropriate, pursuant to these Bylaws and to the Law, establishing conditions for taking up the positions as seen fit, and also to fix the guarantees they must give or relieve them of them. (b) To agree the increase in or reduction of capital stock and the methods and conditions for carrying this out. (c) To agree amendment of the Bylaws and dissolution and liquidation of the Company. (d) To deliberate and resolve as deemed appropriate, within the rules of the bylaws and legal provisions applicable, on the questions included in the Agenda, and likewise on any other matter that by Law or by these Bylaws falls within the remit of the General Shareholders' Meeting. ARTICLE 21. MINUTES The deliberations of the Extraordinary and Ordinary General Shareholders' Meetings shall be recorded in minutes drawn up pursuant to legal requirements and shall be signed by the Chairman and by the Secretary, or persons acting in their stead. The Minutes may be approved by the Shareholders' Meeting itself subsequent to the Meeting having been held, and in default and within 15 days, by the Chairman and two scrutineers, one representing the majority and the other the minority. ARTICLE 22. BOARD OF DIRECTORS 7 The Company is governed and managed collectively by a Board of Directors, which is also entrusted with the representation of the Company in court and otherwise. Representation extends to all the acts deemed within the corporate purpose, conferring the widest possible powers to contract in general, to carry out all kinds of acts and business, and meet obligations or provisions of ordinary or extraordinary administration in relation to strict ownership, without exception but for those matters that by Law are the responsibility of the General Shareholders' Meeting. ARTICLE 23. MANDATE, TERMINATION AND CO-OPTATION Directors shall be appointed for a period of five years, calculated from acceptance of the position. Directors may be reappointed once or more than once for periods of the same maximum duration. Reelection and also co-optation situations shall involve the person remaining in the position in the Board occupied by the reelected person or that was produced by the vacancy, provided these were those of the Chairman, Deputy Chairman, Secretary and Deputy Secretary, if any, or Director. The provisions of article 137 of the Spanish Corporations Law shall be respected in the appointment of the Directors. Directors shall cease as such on expiry of the term of their mandate, if they are not reelected, and in the case of cessation due to death, resignation, incapacity or removal, by resolution of the General Shareholders' Meeting, or if the latter resolves to exercise the action for Directors' liability, or to settle in relation thereto. In the event of vacancies arising in the Board during the term of the mandate, the Board shall immediately appoint a new director who must be a shareholder pursuant to the provisions of Article 138 of the Spanish Corporations, and who shall occupy the position until the first General Shareholders' Meeting meets, at which either the appointment shall be ratified, or if not a different person shall be appointed. In the case of co-operation, the new director shall occupy the same position as the one that is going to be replaced due to vacancy, except where this person was the Chief Executive Officer. ARTICLE 24. COMPOSITION OF THE BOARD OF DIRECTORS The Board of Directors shall be formed by no less than seven and no more than ten Directors. The Board of Directors shall choose a Chairman and as the case may be a Deputy Chairman from among its number. It shall also appoint a Secretary and as the case may be a Deputy Secretary, who need not be Directors, in which case they will not have a vote. The Board shall meet when it is in the interests of the Company, and at least once a year. It shall be called by order of the Chairman, or in his absence or incapacity, the Deputy Chairman. The call shall be to the members of the Board personally by mail, telegram, telefax or by telephone with 15 days' prior notice. 8 However, the Board shall be deemed validly convened, without the need for call, if all Directors attend it or they agree to it in writing. The Board shall be deemed validly convened where one half plus one of the directors attend in person or duly represented. Any Director may by writing have another Director represent him/her. In relation to the method for deliberations and the adopting of resolutions, the following rules shall be observed: once the valid convening of the Board concerned has been determined, the Chairman shall bring the meeting to order and shall proceed to read the Agenda. Each item contained thereon shall be dealt with separately. The Chairman shall express his opinion where he so deems appropriate in relation to the resolutions of the Board, giving the opportunity for three speakers in favor and three against, as a minimum, at the end of which he shall give a summary of what has been said, then proceeding to the relevant vote, the result of which shall be recorded in the Minutes, with whatever else may be appropriate. With regard to all other matters, the provisions of the Law shall be applicable. Resolutions shall be adopted where approved by: (a) One half plus one of the Directors present or represented, where general matters are concerned; and (b) Two thirds of the Directors, where the items provided for in Article 141 of the Spanish Corporations Law are concerned. The position of Director is remunerated. Remuneration of Directors shall consist of a fixed amount agreed by the General Shareholders' Meeting of the Company. Remuneration of Directors need not necessarily be equal for all of them. Regardless of this remuneration, travel expenses incurred by actions entrusted by the Board shall be reimbursed. ARTICLE 24 BIS.- COMMISSIONS OF THE BOARD OF DIRECTORS 1. The Board of Directors may designate, pursuant to its own predictions established by Law, commissions with delegated powers, and designate from among the Directors the persons who will form them. To this end, it may draw up the regulations or internal rules that shall on an internal basis govern the functions thereof and scope of application, composition, functioning etc. 2. The Board of Directors shall set up and maintain an Audit and Monitoring Commission or an Audit Committee, which shall be mandatory. The Audit Committee shall on a permanent basis be made up by three non-executive Directors designated by the Board of Directors. 3. The functions entrusted to the Audit Committee which cannot be delegated are: a. To prepare the Financial Statements, together with half-yearly and quarterly financial statements, that must be sent to governing or market supervision bodies, making mention of internal monitoring systems, of control of monitoring thereof and compliance by means of internal audit, and likewise, where appropriate, of the accounting criteria applied. 9 b. To report to the Board of Directors any change in accounting criteria, and of balance sheet and other risks. c. To report to the General Shareholders' Meeting on questions raised by the shareholders in such Meeting where it is within the competence thereof. d. To propose the appointment of external auditors to the Board of Directors for submission thereof to the General Shareholders' Meeting. e. To supervise internal audit services. The Committee shall have full access to the internal audit, and shall report during the process of selection, designation, renewal and removal of the director thereof and in the fixing of the remuneration of the latter, being obliged to report on the budget of this department. f. To inform itself of the Company's financial information processing and internal monitoring systems. g. To be in touch with the external auditors in order to receive information on those questions that may put at risk the independence of the latter and any others relating to the process of carrying out the audit. h. To call those Directors deemed pertinent to the Committee meetings to report on the lines agreed by the Audit Committee itself. i. To draw up an annual report on the activities of the Audit Committee, which must be included in the management report. 4. Organization and functioning. The Audit Committee shall meet as many times as is necessary to fulfill its functions and at least once every quarter. The Audit Committee shall be deemed validly convened where the majority of its members are present. Attendance may only be delegated to a non-executive Director. ON THE INVENTORY, BALANCE SHEET, BUSINESS YEAR AND DISTRIBUTION OF EARNINGS ARTICLE 25. BUSINESS YEAR The business year shall commence on January 1 and shall end on December 31 precisely. As an exception, in the first year, the business year shall commence on the date of granting of the articles of incorporation of the Company. On said date the Company shall also commence trading. RTICLE 26. BALANCE SHEET 10 Each year, as at December 31, the Financial Statements comprising the Balance Sheet, Income Statement and the Notes to Financial Statements shall be closed. For this purpose, the Directors of the Company must within a maximum period of three months from closing of the business year formulate the Financial Statements, the Management Report and the proposal for distribution of income/loss, and likewise the Consolidated Management Report and Financial Statements, if any. ARTICLE 27. RIGHT TO INFORMATION From the calling of the General Shareholders' Meeting any shareholder may obtain from the Company, immediately and free of charge, those documents that must be subject to the approval thereof and the Auditor's Report. Mention of this right shall be made in the calling of the Shareholders' Meeting. ARTICLE 28. DISTRIBUTION OF INCOME The Company's net income shall be distributed pursuant to resolution of the General Shareholders' Meeting pursuant to legal requirements. ARTICLE 29. TRANSFORMATION, MERGER AND SPIN-OFF Transformation, merger and spin-off of the Company shall be governed by the provisions of the Spanish Corporations Law. ARTICLE 30. DISSOLUTION The Company shall be dissolved on the grounds provided for by the Law. The General Shareholders' Meeting, at the Directors' proposal, shall decide in accordance with the Law on the method of carrying out the liquidation, division and payment of the company's surplus assets. 11 EX-4 7 l07997exv4.txt FORM OF STOCK CERTIFICATE Exhibit 4 (FORM OF STOCK CERTIFICATE - FRONT SIDE) Shareholder Certificate Titulo de las acciones NUMBER ORDINARY SHARES Numero de certificado Acciones Ordinarias CUSIP E90215 10 9 [Telvent Logo] TELVENT GIT, S.A. INCORPORATED UNDER THE LAWS OF SPAIN CONSTITUIDA CON ARREGLO A LEY ESPANOLA ------------------------------------ is the owner of / es titular de ------------------------------------ shares of fully paid and non-assessable registered ordinary shares, with a par value of 3.00505 euros each, of Telvent GIT, S.A., integrated into the sole existing class and series and numbered consecutively from _____ to _____, both included. This certificate is transferable on the books of the Company by the holder hereof in person or by duly authorized attorney upon surrender of this certificate properly endorsed. This certificate is not valid unless countersigned and registered by the Transfer Agent and Registrar. acciones ordinarias nominativas integramente desembolsadas, con un valor nominal de 3,00505 euros cada una, de Telvent GIT, S.A., integradas en la unica clase y serie existentes y numeradas correlativamente del _____ al _____, ambos inclusive. La transmision de este titulo es inscribible en los libros de la Sociedad, por el titular del mismo en persona o por apoderado debidamente autorizado, por cesion del presente certificado correctamente endosado. Este certificado no es valido sin el visto bueno y registro por el Agente y Registrador de Transmisiones. Dated: [ ] - -------------------------- -------------------------- Signature of Director Signature of Secretary Firma del Vocal del Consejo de Administracion Firma del Secretario - -------------------------- Signature of Chairman of the Board Firma del Presidente del Consejo de Administracion COUNTERSIGNED/Firmado: AMERICAN STOCK TRANSFER & TRUST COMPANY AS REGISTRAR AND TRANSFER AGENT como agente de registro y transmisiones - -------------------------- AUTHORIZED SIGNATURE Firma autorizada (FORM OF STOCK CERTIFICATE - BACK SIDE) Telvent GIT, S.A. will furnish without charge to each shareholder who so requests a statement of the powers, designations, preferences and relative, participating, optional or other special rights of each class of shares or series thereof of Telvent GIT, S.A., and the qualification, limitations or restrictions of such preferences and rights. Such request may be made to the Transfer Agent. The presentation of the share certificate or other proof of ownership will be required for the exercise of shareholders' rights. Telvent GIT, S.A. suministrara sin coste alguno a cada accionista que lo solicite un informe de los poderes, nombramientos, derechos de preferencia y relativos, de participacion, opcionales u otros derechos especiales de cada clase de acciones o serie de ellas de Telvent GIT, S.A., y los requisitos, limitaciones o restricciones de tales preferencias y derechos. Dicha solicitud puede dirigirse al agente de transmisiones. Para el ejercicio de los derechos del accionista se requerira la exhibicion del titulo de la accion o cualquier otro medio acreditativo de dicha titularidad. REGISTERED OFFICE: Calle Valgrande 6, Alcobendas (Madrid). C.I.F.: A-82/631623. Incorporated on April 4, 2000 by means of a public deed before the Notary of Madrid, Mr. Carlos Perez Baudin, with the name of Telvent Desarrollos, S.A. Its name was modified by virtue of a deed granted before the Notary of Madrid, Mr. Carlos Perez Baudin, on April 1, 2003, by deed number 1.030 and its registered office was transferred to its current site by means of deed number 3.631 granted before the Notary of Madrid, Mr. Carlos Perez Baudin, on October 24, 2001. Registered before the Madrid Mercantile Registry under Volume 15,370, of the 8th Section of the Companies Book, Sheet 164, Page M-257.879. DOMICILIO SOCIAL: Calle Valgrande 6, Alcobendas (Madrid). C.I.F. A-82/631623. Constituida el dia 4 de abril de 2000 ante el Notario de Madrid, Don Carlos Perez Baudin, con la denominacion de Telvent Desarrollos, S.A. Adoptada su actual denominacion en escritura otorgada ante el Notario de Madrid, Don Carlos Perez Baudin, el dia 1 de abril de 2003, con el numero 1.030 de protocolo y trasladado su domicilio a su actual emplazamiento mediante escritura otorgada ante el Notario de Madrid, Don Carlos Perez Baudin, el dia 24 de octubre de 2001, con el numero 3.631 de protocolo. Inscrita en el Registro Mercantil de Madrid en el Tomo 15.370, de la Seccion 8a del Libro de Sociedades, al Folio 164, Hoja M-257.879. (FORM OF STOCK CERTIFICATE - BACK SIDE CONTINUED) The following form of endorsement is intended for share transfers in the United States of America and may be used in other jurisdictions where accepted as a valid endorsement. La siguiente forma de endoso esta dirigida a la transmision de acciones en los Estados Unidos de America y puede ser utilizada en otra jurisdiccion en la que sea aceptada como un endoso valido. For value received, _______________________hereby sell, assign and transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE - -------------------------------------------------------------------------------- (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ____________________________________________________________________ shares of the capital stock represented by the within Certificate, and do hereby irrevocably constitute and appoint ____________________________________________ attorney-in-fact to transfer the said stock on the books of the within named Company with full power of substitution in the premises. Dated: _____________________ Signature:_______________________________________ The signature to this assignment must correspond with the name as written Notice: upon the face of the certificate in every particular, without alteration or enlargement or any change whatsoever. Signature(s) Guaranteed:_____________________________________ The signature must be guaranteed by an Eligible Guarantor Institution such as a commercial bank, trust company, securities broker/dealer, credit union or a savings association participating in a Medallion program approved by the Securities Transfer Association, Inc. The following form of endorsement is intended for share transfers in Spain and may be used in other jurisdictions where accepted as a valid endorsement. La siguiente forma de endoso esta dirigida a la transmision de acciones en Espana y puede ser utilizada en otra jurisdiccion en la que sea aceptada como un endoso valido. ENDOSO: En virtud del presente ENDOSO se transmiten a D. ___________________ las __________ acciones incorpordadas a este titulo. Lugar y fecha: _______________, a ____ de ___________ de_____________ Firma __________________ D. EX-5 8 l07997exv5.txt OPINION OF SQUIRE, SANDERS & DEMPSEY L.L.P. EXHIBIT 5 ____________, 2004 Telvent GIT, S.A. Valgrande, 6 28108 Alcobendas, Madrid Spain Ladies and Gentlemen: We are familiar with the proceedings taken and proposed to be taken by Telvent GIT, S.A., a sociedad anonima organized under the laws of the Kingdom of Spain (the "Company"), in connection with the registration under the Securities Act of 1933, as amended (the "Act"), of _________ Ordinary Shares (the "Shares"). As your counsel, we have collaborated in the preparation of the Registration Statement on Form F-1 (the "Registration Statement") to be filed by you with the Securities and Exchange Commission as of the date hereof to effect the registration pursuant to the Act of the Shares. In this connection, we have examined such Company records, certificates and all other documents, and have made such examination of law, which we deem necessary to render the opinions set forth below. Each capitalized term used herein, unless otherwise defined herein, has the meaning ascribed to it in the Registration Statement. Attorneys involved in the preparation of this opinion are admitted to practice law only in the Kingdom of Spain and the State of New York and we express no opinion herein concerning any law other than the federal laws of the United States of America and the Kingdom of Spain. Based upon and subject to the foregoing, we are of the opinion that, when the Registration Statement has become effective and the capital increase associated with the issuance of the Shares has been registered with the Mercantile Registry of Madrid, the Shares, when issued and paid for as set forth in the Prospectus constituting a part of the Registration Statement, will have been legally issued by the Company and will be fully paid and nonassessable. The opinions set forth herein are rendered as of the date hereof, and we assume no obligation to update such opinions to reflect any facts or circumstances which hereafter may come to our attention or any changes of law which hereafter may occur. We consent to the reference to our Firm wherever appearing in the Registration Statement and to the inclusion of this opinion as an exhibit to the Registration Statement. In giving such consent, we do not admit hereby that we come within the category of persons whose consent is required under Section 7 of the Act or the rules and regulations promulgated thereunder. Very truly yours, /s/ Squire, Sanders & Dempsey L.L.P. SQUIRE, SANDERS & DEMPSEY L.L.P. EX-8.1 9 l07997exv8w1.txt OPINION OF SQUIRE, SANDERS & DEMPSEY L.L.P. EXHIBIT 8.1 _____________, 2004 Telvent GIT, S.A. Valgrande, 6 28108 Alcobendas, Madrid Spain Ladies and Gentlemen: We are familiar with the proceedings taken and proposed to be taken by Telvent GIT, S.A., a sociedad anonima organized under the laws of the Kingdom of Spain (the "Company"), in connection with the registration under the Securities Act of 1933, as amended (the "Act"), of _________ Ordinary Shares (the "Shares"). As your counsel, we have collaborated in the preparation of the Registration Statement on Form F-1 (the "Registration Statement") to be filed by you with the Securities and Exchange Commission as of the date hereof to effect the registration pursuant to the Act of the Shares. Attorneys involved in the preparation of this opinion are admitted to practice law only in the States of New York and Ohio and we express no opinion herein concerning any law other than the federal laws of the United States of America. In connection therewith, we prepared the discussion set forth under the caption "Taxation - United States Taxation" in the Prospectus forming a part of the Registration Statement. All statements of legal conclusions contained under the caption "Taxation - United States Taxation," unless otherwise noted, are our opinion with respect to the matters set forth under such caption. In addition, we are of the opinion that the U.S. federal income tax discussions under the caption "Taxation - United States Taxation" with respect to those matters as to which no legal conclusions are provided is an accurate discussion of such matters (except for the representations and statements of fact of the Company included in such discussion, as to which we express no opinion). The opinions set forth herein are based on statements of fact and representations of the Company included in the discussion under the caption "Taxation - United States Taxation," which statements and representations we assume to be true, correct and complete. The opinions set forth herein are rendered as of the date hereof, and we assume no obligation to update such opinions to reflect any facts or circumstances which hereafter may come to our attention or any changes of law which hereafter may occur. We consent to the reference to our Firm wherever appearing in the Registration Statement and to the inclusion of this opinion as an exhibit to the Registration Statement. In giving such consent, we do not admit hereby that we come within the category of persons whose consent is required under Section 7 of the Act or the rules and regulations promulgated thereunder. Sincerely, /s/ Squire, Sanders & Dempsey L.L.P. Squire, Sanders & Dempsey L.L.P. EX-8.2 10 l07997exv8w2.txt OPINION OF SQUIRE, SANDERS & DEMPSEY L.L.P. EXHIBIT 8.2 _____________, 2004 Telvent GIT, S.A. Valgrande, 6 28108 Alcobendas, Madrid Spain Ladies and Gentlemen: We are familiar with the proceedings taken and proposed to be taken by Telvent GIT, S.A., a sociedad anonima organized under the laws of the Kingdom of Spain (the "Company"), in connection with the registration under the Securities Act of 1933, as amended (the "Act"), of _________ Ordinary Shares (the "Shares"). As your counsel, we have collaborated in the preparation of the Registration Statement on Form F-1 (the "Registration Statement") to be filed by you with the Securities and Exchange Commission as of the date hereof to effect the registration pursuant to the Act of the Shares. Attorneys involved in the preparation of this opinion are admitted to practice law only in the Kingdom of Spain and we express no opinion herein concerning any law other than the federal laws of the Kingdom of Spain. In connection therewith, we prepared the discussion set forth under the caption "Taxation - Spanish Taxation" in the Prospectus forming a part of the Registration Statement. All statements of legal conclusions contained under the caption "Taxation - Spanish Taxation," unless otherwise noted, are our opinion with respect to the matters set forth under such caption. In addition, we are of the opinion that the Spanish tax discussions under the caption "Taxation - Spanish Taxation" with respect to those matters as to which no legal conclusions are provided is an accurate discussion of such matters (except for the representations and statements of fact of the Company included in such discussion, as to which we express no opinion). The opinions set forth herein are based on statements of fact and representations of the Company included in the discussion under the caption "Taxation - Spanish Taxation," which statements and representations we assume to be true, correct and complete. The opinions set forth herein are rendered as of the date hereof, and we assume no obligation to update such opinions to reflect any facts or circumstances which hereafter may come to our attention or any changes of law which hereafter may occur. We consent to the reference to our Firm wherever appearing in the Registration Statement and to the inclusion of this opinion as an exhibit to the Registration Statement. In giving such consent, we do not admit hereby that we come within the category of persons whose consent is required under Section 7 of the Act or the rules and regulations promulgated thereunder. Sincerely, /s/ Squire, Sanders & Dempsey Squire, Sanders & Dempsey L.L.P. EX-10.1 11 l07997exv10w1.txt RECIPROCAL LOAN AGREEMENT Exhibit 10.1 RECIPROCAL LOAN AGREEMENT In Seville, on April 20, 2004 APPEARING On the one hand, Mr. Jose Antonio Moreno Delgado, of legal age, inhabitant of Seville, with domicile for these purposes at Avda. de la Buhaira, 2 and with National Identity Document 00114321-B and Mr. Jose Marcos Romero, of legal age, inhabitant of Seville, with domicile for these purposes at Avda. de la Buhaira, 2, and with National Identity document no. 27883847-G, for and on behalf of the Company ABENGOA S.A. (hereinafter "Abengoa"), with registered office and address for tax purposes in Seville, Avda. de la Buhaira, 2 recorded in the Mercantile Register of said city, sheet 2921, folio 107, Company volume 47 and with Corporate Tax Identification Code A- 41002288. And on the other hand, Ms. Ana Maria Plaza Arregui, inhabitant of Madrid, of legal age, with National Identity Document number 12374150-N, for and on behalf of the Company TELVENT GIT, S.A. (hereinafter "Telvent"), with registered office and address for tax purposes in Madrid, C/Valgrande 6, Company recorded in the Madrid Mercantile Register, sheet M-257879, folio 164, Companies volume 15370, with Corporate Tax Identification Code no. A- 82631623. Hereinafter, Abengoa and Telvent shall jointly be referred to as the "Parties". In the capacity in which they appear, they acknowledge that each other has the necessary legal capacity to contract and be bound thereby on behalf of the companies they represent RECITALS Sole Recital.- By needs or convenience of cash flow and for the purposes of meeting financial commitments, and to take advantage of any surplus cash that both Parties may have whilst this Agreement is in force, the Parties have agreed to grant a reciprocal commercial loan, for the purposes of regulating their respective interests, pursuant to the following CLAUSES One.- Each of the Parties grants to and opens for the other Party, which accepts and receives, a current account credit facility of up to a maximum amount of 45 MILLION EUROS (45,000,000 EUROS) or equivalent thereof in any other currency admitted to trading on Spain's currency exchange. Two.- 1. Drawdown of funds (hereinafter, Request for Funds) by ABENGOA shall be subject to express approval by TELVENT. Once approval by TELVENT of the Request for Funds has been obtained, ABENGOA shall communicate with sufficient advance notice the planned date of the transaction so that it can be processed in due time and form. Therefore, and except for occasional exceptions that shall be dealt with on an individual basis, no Request for Funds received later than 1200 hrs on the working day prior to the planned date of the transaction shall be dealt with. The working timetable of Telvent in Madrid shall be used for the purposes of determining working days. 2. Drawdown of funds (hereinafter, Request for Funds) by TELVENT shall be subject to express approval by ABENGOA. Once approval by ABENGOA of the Request for Funds has been obtained, TELVENT shall communicate with sufficient advance notice the planned date of the transaction so that it can be processed in due time and form. Therefore, and except for occasional exceptions that shall be dealt with on an individual basis, no Request for Funds received later than 1200 hrs on the working day prior to the planned date of the transaction shall be dealt with. The working timetable of Abengoa in Seville shall be used for the purposes of determining working days. 3. The LENDER shall charge to the account of the BORROWER those amounts that the latter draws down, paying into said account the payments that the latter makes in repayment of the funds drawn down. The balance resulting on a daily basis in the account shall accrue annual interest in favor of the LENDER equivalent to the arithmetic mean of the EURIBOR INTEREST RATE AT ONE MONTH FOR LOANS IN EUROS AND LIBOR AT ONE MONTH FOR THE REST OF CURRENCIES plus a differential of 0.75 % and shall be calculated by the Hamburg method. Liquidation and payment of interest shall be made at the end of each financial year and at the time the loan matures. 4. If in turn the LENDER draws down (after giving the relevant advance notice) funds of the BORROWER, said funds shall be applied first of all to offset any credit balance held by the former and the surplus shall be deemed the balance which, from that moment, it owes the above BORROWER, now becoming the LENDER. The interest arrangements established in the previous paragraph shall be applied to the above-mentioned balance. Three.- The final deadline for maturity of the loan is established as December 31, 2004. However, this present Agreement shall be deemed automatically extended for annual periods if, with one week's notice prior to the date of the initial maturity or of the extension thereof, neither of the Parties gives notice in writing of their intention to not extend it. Four.- THE BORROWER, whichever this may be at that time, may make early settlement of the loan, fully or partially, without suffering for this reason any penalty. Five.- All rights of any kind, taxes, contributions and any expenses derived as a result of this transaction shall be paid for by the Parties in proportion to the amount and time for which they have been BORROWER. However, the BORROWER shall pay for the expenses arising from any collection and enforcement procedure or formality, if any. Six.- Either of the Parties may terminate this Agreement in the following circumstances: a) Upon breach by the other Party of any of the clauses of this present Agreement. b) The Party that is at that time LENDER, in the event of any bill accepted from the Party that is at that time BORROWER having been protested, or that any judicial or administrative procedure has been instigated against the latter that could give rise to seizure or attachment of its assets. c) If the Party that is at this time the BORROWER files for suspension of payments, creditors' arrangements, bankruptcy or public insolvency. Any of the grounds for termination of this Agreement shall give rise to early maturity of the loan automatically and without the need for advance notice, the Party that is such time the LENDER being entitled to require performance of the obligation or the termination of this present Agreement, without prejudice to any other actions that may in law correspond to it. Seven. - The Parties agree that the clauses of this present Agreement shall apply, as they are and inasmuch as they are relevant, to any loans and credit facilities that have been granted by one to the other in advance of these proceedings, producing novation and extinction thereof (novatorio extintivo). Eight.- The Parties, for any question that may arise in respect of interpretation, fulfillment and/or execution of this Agreement subject themselves, waiving any other forum that may correspond to them, to the courts and tribunals of Seville. And in witness whereof and of their agreement with everything stated above, the Parties sign this Agreement, in two counterparts, at the place and on the date first indicated above. For Abengoa, S.A. For Telvent GIT, S.A. /s/ Jose Antonio Moreno Delgado /s/ Ana Maria Plaza Arregui - ---------------------------------------- --------------------------- Signed: Mr. Jose Antonio Moreno Delgado Ms. Ana Maria Plaza Arregui /s/ Jose Marco Romero - --------------------- Signed: Mr. Jose Marcos Romero. EX-10.2 12 l07997exv10w2.txt RECIPROCAL CREDIT AGREEMENT Exhibit 10.2 RECIPROCAL CREDIT AGREEMENT In Seville, on January 2, 2003 THE PARTIES Of the one part, Abengoa, S.A., with registered offices in Seville on Avenida de la Buhaire, no. 2, 41018 Seville (Spain), on file in the Mercantile Register of Seville in volume 47, sheet 2921, folio 107, with Tax Identification Number A41002288, represented in this proceeding by Mr. Jose Antonio Moreno Delgado, of age, married, residing for this purpose at Avenida de la Buhaire, no. 2, 41018 Seville and with National Identity Card number 00114321-B, and by Mr. Jose Marcos Romero, of age, married, residing for this purpose at Avenida de la Buhaire, no. 2, 41018 Seville and with National Identity Card number 27883847-G. Hereinafter Abengoa. And of the other part, Telvent Sistemas y Redes, S.A., with registered offices at calle Valgrande, 6, Alcobendas (Madrid. It is on file in the Mercantile Register of Madrid in volume 15,370, folio 164, sheet number M-257879, with Tax Identification Number A-82631623, represented in this proceeding by Mr. Manuel Sanchez Ortega, of age, residing for this purpose at calle Valgrande, 6, Alcobendas (Madrid) and with National Identity Card number 02601273-I. Hereinafter Telvent. Both parties mutually recognize sufficient legal capacity with which to execute this Agreement and bind the Companies they represent, whereby they declare the following RECITALS Sole: Whereas, on the basis of the needs or advisability of the cash and bank situation and in order to attend to financial commitments and take advantage of any cash surpluses that both Parties may have during the term of this Agreement, they have agreed to reciprocally grant a commercial credit which, in order to regulate their respective interests, is set forth in accordance with the following CLAUSES ONE. Each one of the Parties grants and opens to the other Party, which accepts and receives, a credit to the checking account up to a maximum amount of Forty five million Euros (45,000,000.00 Euros), or the equivalent thereof in any other currency admitted to quotation on the Spanish currency market, without prejudice to the contents of clause 2.4. TWO. 1. The drawdown of quantities (hereinafter, Request for Funds) by either of the Parties (the "Borrower") should be notified sufficiently in advance to the other Party (the "Lender") so that it may be processed in due time and form. Therefore, and barring occasional exceptions that will be addressed individually, any Request for Funds that is received after 12:00 hours on the business day prior to the date scheduled for the transaction will not be admitted. The professional calendar of Abengoa, S.A. in Seville will be considered for the determination of business days. 2. Lender will charge Borrower's account with those sums that the latter draws, crediting any payments that the latter makes to repay the funds drawn. The balance that results daily in the account will accrue an annual interest in favor of Lender equivalent to the arithmetic mean of the Euribor interest rate at one month for credits in Euros and the Libor at one month for other currencies, plus a differential of 0.75%, and will be calculated using the Hamburger Method. The settlement and credit of interest will take place at the end of each financial year and upon the maturity of the credit. 3. If Lender in turn draws (following the appropriate prior notice) funds of the Borrower, such funds will first be applied toward compensating any credit balance that the former may have, and the excess will be calculated as the balance which, as of that time, will be owed to the former Borrower, which will become Lender. The interest set forth in the preceding paragraph will be applied to such balance. 4. If the Request for Funds is for an accumulated amount that surpasses the maximum limit established, Lender may, at its own discretion, charge the amount up to the maximum limit exclusively or charge the total amount requested by Borrower, in which case the maximum limit of the credit will be understood as modified by common consent of the Parties. THREE. The maximum date for maturity of the credit is December 31, 2003. Nevertheless this Agreement will be understood as tacitly extended for annual periods if, one week prior to the date of its initial expiration or that of any of its extensions, neither Party provides written notice to the other of its intention not to extend. FOUR. The Borrower that is such at the time may cancel the credit totally or partially in advance, without incurring any penalty whatsoever. FIVE. All fees of any type, taxes, contributions and any expenses incurred on the occasion of this transaction will be the responsibility of the Parties in proportion to the amount and time during which they shall have been Borrower. Nevertheless, where appropriate, Borrower will be responsible for any expenses incurred on the occasion of any enforcement and collection processes or procedures. SIX. Either Party may discharge this Agreement in the following cases: a) For the breach by the other Party of any of the clauses of this Agreement. b) The Party that is Lender at the time, for having noted any trade bill accepted from the party that is Borrower at the time, or for having brought any legal or administrative proceeding against the latter that could lead to the attachment or enforcement of its goods. c) When the Party that is Borrower at the time guarantees or allows debts to be guaranteed by the establishment of mortgages, pledges or any other charges, encumbrances or guarantees on all or part of its goods, rights, activities or income, whether present or future, without the prior consent of the Party that is Lender at the time. d) If the Party that is Borrower at the time files for temporary receivership, creditors' meeting, bankruptcy or notorious insolvency. Any of the grounds for discharge of this Agreement will lead to the early maturity of the credit, automatically and without the need for prior notice, whereby the Party that is Lender at the time may demand compliance with the obligation or the discharge of this Agreement, without prejudice to any other actions that may correspond to it by Law. SEVEN. The Parties agree that the clauses of this Agreement will likewise be applied, where appropriate, to any loans or credits that have been granted previously to the other Party, with novatory discharge effects. EIGHT. For any matter that may arise with respect to the interpretation, performance and/or execution of this Agreement, the Parties submit to the Courts and Tribunals of Seville, expressly waiving any other jurisdiction that may be available to them. And in witness whereof, the Parties hereby sign this Agreement in duplicate originals, in the place and on the date appearing in the heading. For Abengoa, S.A. For Telvent Sistemas y Redes, S.A. /s/ Jose Antonio Moreno Delgado /s/ Manuel Sanchez Ortega - ---------------------------------------- ---------------------------------- Signed: Jose Antonio Moreno Delgado Signed: Manuel Sanchez Ortega /s/ Jose Marcos Romero - ------------------------------ Signed: Jose Marcos Romero EX-10.3 13 l07997exv10w3.txt FORM OF SERVICES AGREEMENT Exhibit 10.3 SERVICES AGREEMENT In Seville, on January 1, 2004. APPEARING On the one hand Mr. Miguel Angel Jimenez de Velasco-Mazarlo, of legal age, inhabitant of Seville, with domicile for these purposes in Avda. De la Buhaira, 2, and with National Identity Document no. 28874696 J and Mr. Jose Marcos Romero, of legal age, inhabitant of Seville, with domicile for these purposes in Avda. De la Buhaira, 2, and with National Identity Document no. 27883847, for and on behalf of the Company ABENGOA, S.A. (hereinafter "Abengoa" or "supplier of services"), with registered office and tax domicile in Seville, Avda. De la Buhaira, 2, recorded in the Mercantile Register of this city, sheet 2921, folio 107, Companies volume 47 and with Corporate Tax Identification no. A-41-002288. And on the other hand Mr. [ ], of legal age, with National Identity Document no. [ ], acting for and on behalf of [ ] (hereinafter "Telvent" or "receiver of services"), with registered office and tax domicile in [ ] ([ ]) in [ ], recorded in [ ] and with Corporate Tax Identification no [ ]. Hereinafter, Abengoa and Telvent shall jointly be termed the "Parties". Acknowledging that each other has the necessary legal capacity to enter into contract and be bound thereby on behalf of the Companies that they represent, acting as stated above: RECITALS I. Telvent has as its principal activity [ ] and requires for carrying out said activity the professional services (hereinafter the "Services") described in clause 1 of this Agreement. II. "Abengoa" has at its disposal the means, structure, institutional connections and resources to aid in the realization of the aforementioned Services. III. Thus, Telvent is interested in contracting the services provided by Abengoa and Abengoa is interested in providing said services. IV. Therefore, it being in the interest of both parties to regulate their mutual relations, both parties formalize the present services agreement (hereinafter "the Agreement") with Abengoa subject to the following CLAUSES One. - Purpose The purpose of this Agreement consists of the rendering of consulting, cooperation and technical support services by Abengoa to Telvent in the activities carried out by the latter, which have been generically described in Recital I above, in order to improve and expand its business capacity both in Spain and abroad in accordance with the terms and conditions of this Agreement. In particular, and merely by way of example, Abengoa's services include: 1.1 Generic Services: - - Finance management: Global negotiation of Telvent's funding lines: long and short term credit loans, factoring, deferred payment, underwriting and other financial instruments. Assistance in the processes of analysis and contracting of project finance. If necessary, all these lines are backed by the guarantee of the parent company. - - Centralized asset management: Possibility of placing surplus cash, at market values. - - Legal advice, legal assistance for the governing body and shareholders' meeting of Telvent, international legal support in countries in which the presence of Telvent is not extant. - - Institutional support with international multilateral financing organizations (IDB, World Bank etc.) - - Institutional commercial assistance through services rendered to Telvent in the commercial offices of Abengoa in those countries in which Telvent is not represented. - - Support in providing official global ratings. - - Tax advisory services: Assistance in special situations (inspections) and coordination of contacts with third parties. Elaboration of the consolidated corporation tax for the tax group. Elaboration of tax consultancy in complex processes (acquisitions). - - Negotiation and optimization of global corporate insurance policies covering Telvent's risks. - - Providing of guarantees and endorsements in favor of Telvent. - - Services including internal publicity, corporate image and institutional relations. - - Human resource services: Analyses and reports on comparative wages. 1.2. Specific support services upon request Comprising those not expressly included in the previous section, for which Telvent shall commission Abengoa explicitly and punctually those specific services which Abengoa shall provide within the scope of global assistance to which this Agreement binds both Parties. Two. - Price 2.1. Abengoa shall receive as compensation for the services indicated in clause 1.1., applicable for the year 2004, the sum of [ ] Euros ([ ] Euros), in relation to which the corresponding VAT shall be calculated in accordance with the applicable regulations in force at the given time, and which shall be billed each quarter in advance in four equal parts within the first fifteen days of the relevant quarter. For collection of the agreed price and associated expenses, Abengoa will present Telvent with bills, which shall be paid by the latter to Abengoa within the calendar quarter. For services rendered upon request as indicated in clause 1.2, the parties shall agree to, in each case at market values, the consideration to be paid by Telvent to Abengoa for each specific service requested and rendered during the term of this Agreement. 2.2. Ordinary expenses for travel, business stays and maintenance shall be paid by Telvent to Abengoa upon the presentation of the corresponding receipts up to the maximum agreed upon for each case. 2.3. Special expenses must be previously approved by Telvent as a condition for reimbursement to Abengoa. 2.4. Determination of the consideration fixed in point 2.1 above has been established in accordance with the current volume and expected growth of Telvent's activity for the present tax/business year, accepted by the Parties as the most adequate reference amount given that the services have been requested of the supplier of services by the receiver of services based on said activity. Notwithstanding, should the receiver of services request additional and/or special services, the Parties may agree to compensation for each specific case. 2.5. The prices agreed upon in clause 2.1 above will be revisable annually from the 1st of January of 2005 in accordance with the variations of the Consumer Price Index (IPC) published by the National Institute of Statistics or any body replacing it, or by means of updating criteria freely determined by the Parties for each annual period and which in each case will be included as a Schedule to this Agreement, forming an integral part of the same. Three.- Duration. This Agreement shall enter into force on January 1, 2004, and shall have an initial duration of one year. However, it shall be extended for periods of one year provided neither of the Parties communicates to the other with a minimum prior notice of 30 days its intention to terminate it, and if such communication is made Telvent shall pay any amounts pending payment, without any indemnification becoming due between the Parties. This Agreement represents the entire agreement between the Parties and cancels all prior agreements, arrangements and communications between the Parties, whether verbal or in writing, in relation to the purpose of this Agreement. Thus do the Parties in these proceedings rescind, terminate and render null and void the previous services agreement that they had entered into, at the same time declaring that they have no claim in relation thereto. Four.- Rendering of the Service 4.1. For the performance of the functions entrusted to it, Abengoa shall facilitate to Telvent any documentation necessary and the presence, as deemed appropriate, of its own technicians and specialists, whenever this is deemed appropriate. For its part, Abengoa shall employ all material and human resources necessary for such ends. 4.2. The Parties shall on a regular basis hold meetings in which Abengoa shall inform on the management, planning, monitoring and control, together with the work carried out in the period leading up to this. Such meetings shall take place either in the registered office of Telvent or of Abengoa, on a monthly, quarterly or other basis as is convenient, by agreement of the Parties. 4.3. Abengoa shall inform Telvent on a timely basis of the progress and results of the services entrusted to it. Five. Confidentiality 5.1. The Parties undertake to respect the confidential nature of the information received from the other Party, not being entitled to reveal the commercial knowledge and/or secrets thereof, even after the Agreement has ended, and shall be liable for any breaches of such obligation whether directly or by the employees thereof. 5.2. At the end of the Agreement, for any reason, Abengoa shall deliver any documentation and information (technical or commercial) that it has received from Telvent. 5.3. This Agreement is based on the principle of loyalty, and therefore the Parties may deem it to be terminated if, in their opinion, the other Party breaches such commitments. Six. Ownership of Documentation All documentation generated whilst this Agreement remains in force or as a consequence thereof and that is related to the purpose thereof shall be the property of Telvent, and therefore use thereof for any purposes by Abengoa must be authorized in advance by Telvent. Seven. Assignment The Parties may not subrogate any third party to the rights and obligations of this Agreement unless written agreement is obtained in advance. Eight. Termination of the Agreement In addition to the events in this Agreement, the following shall be grounds for termination of the Agreement: a) Breach by either of the Parties of any of its clauses. b) Insolvency, bankruptcy, creditors' arrangements, suspension of payments or court-ordered or amicable liquidation of either of the Parties. c) By mutual agreement, with the effects thereby established. Without prejudice to the above, Telvent may at any time, and with sixty (60) days' advance notice, reduce or eliminate any of the services mentioned above expressly in clause 1.1. Nine. Jurisdiction This Agreement shall be governed by Spanish law, and any differences arising between the Parties with respect to the interpretation, performance, execution or termination thereof in whole or in part shall be resolved by means of arbitration at law subject to Law 60/2003, of December 23, 2003, and supplementary provisions, which shall be held in Seville (Spain). Each Party shall assign an arbitrator, and the third shall be designated by the arbitrators thus appointed, and shall act as Chairman of such Arbitration. The arbitration award shall be binding on the Parties and shall be issued within two months following establishing of the arbitration. If the Parties are not able to agree the appointment of the arbitrators, they shall submit to the jurisdiction of the courts of Seville for the judicial establishment of the arbitration. And in witness whereof of all the foregoing, the Parties sign this Agreement in two counterparts and making one sole agreement, in the place and on the date first mentioned above. For For Abengoa, S.A. Telvent Signed: Mr. Miguel Angel Jimenez de Velasco-Mazario Signed: Mr. [ ] Signed: Mr. Jose Marcos Romero Appendix 1 The following chart illustrates the material terms of the services agreements that have been entered into:

EX-10.4 14 l07997exv10w4.txt SHARE PURCHASE AGREEMENT Exhibit 10.4 4NO659855 7/2002 01022464 [STAMPED: NOTARY'S OFFICE OF MR. MANUEL AGUILAR GARCIA] NUMBER TWO THOUSAND FOUR HUNDRED AND SIXTY-FOUR In Seville, on December thirtieth, two thousand and two Before me, MANUEL AGUILAR GARCIA, Notary Public of the Seville Notaries' Association, resident of Seville. APPEARING ON THE ONE HAND: MR. JOSE MARCOS ROMERO, of legal age, married, economist, resident of Seville, with registered office for these purposes in Avenida de la Buhaira, 2 and with National Identity Document no. 27883847 - G. ACTING: in representation of "INVERSION CORPORATIVA, I.C.S.A.", with registered office in Madrid, calle General Martinez Campos 53, with Corporate Tax Identification Number A-41/105511. Incorporated for an indefinite period of time, with the name "Servicios de Prensa e Imprenta, S.A." by public deed granted in Seville on February seventeenth, nineteen eighty-one, before the Notary Public lately of Seville Mr. Alfonso Cruz Aunon, on February seventeenth, nineteen eighty-one. RECORDED in the Mercantile Register of the Province of Madrid in Volume 155 General ,145 of Section Three of the Book of Companies, folio 53, sheet no. 61831-1. IT ADAPTED its Bylaws to current legislation by means of public deed granted in Madrid on July 21, 1990, before the Notary Public of Madrid, Mr. Felix Pastor Ridruejo, recorded in the above-mentioned Mercantile Register and volume 400, folio 143, sheet no. M-7821, twenty-first entry. IT CHANGED its registered trade name to the present registered trade name shown above by resolution of the Extraordinary Shareholders' Meeting of the Company on December twenty-seventh, nineteen ninety-one. The Certificate of the aforementioned resolution was notarized by deed granted in Madrid on January twenty-ninth, nineteen ninety-two, before the Notary Public of Madrid, Mr. Felix Pastor Ridruejo. 4NO659854 7/2002 [STAMPED: NOTARY'S OFFICE OF MR. MANUEL AGUILAR GARCIA] RECORDED in the aforementioned Mercantile Register in volume 457, folio 171, sheet no. M-7821, 26th entry. Authorization for these proceedings is given by power of attorney granted by deed formalized before me on December 26, 2002, protocol number 2439. I have in front of me the aforementioned deed, the legal standing of which for these proceedings is sufficiently accredited, the representative having in my judgment the necessary authorization on an individual basis and without restriction to grant the present sale-purchase deed contained in the present deed, the person appearing declaring that the aforementioned powers of attorney have not been waived or restricted and that the legal personality of the business represented remains in force. AND ON THE OTHER HAND: MR. MANUEL SANCHEZ ORTEGA, of legal age, inhabitant of Alcobendas, (Madrid), with domicile in calle Valgrande numero 6, and with National Identity Document No. 2601273-L. APPEARING: for and on behalf of the Spanish Corporation "TELVENT SISTEMAS Y REDES, S.A.", and as such in representation of said company, with registered office in Alcobendas (Madrid), in calle Valgrande numero 6, with Corporate Tax Identification No. A- 82631623. IT was formed with the Name "Telvent Desarrollos, S.A.", for an indefinite period of time by virtue of the deed authorized by the Notary Public of Madrid Mr. Carlos Perez Baudin, on April 4, 2000, with protocol no. 1199. It changed its registered trade name for the registered trade name recorded above by virtue of deed granted by the aforementioned Notary Public Mr. Carlos Perez Baudin on February 12, 2001, with protocol number 516. Recorded in the Madrid Mercantile Register in volume 15370, folio 164, section eight, sheet M-257879, first entry. He is specially authorized for these proceedings by resolution of the Board of Directors dated November 28, 2002, pursuant to the certificate issued by Mr. Miguel Angel 4NO659853 7/2002 [STAMPED: NOTARY'S OFFICE OF MR. MANUEL AGUILAR GARCIA] Jimenez Velasco Mazario, as Secretary of the Board of Directors, with the Approval of the Chairman Mr. Pedro Bernad Herrando, the signatures of whom I recognize and to which I attest. I attach the aforementioned certificate to this document. ATTESTATION: They are known to me. In my judgment they have full legal standing and capacity to grant this SALE-PURCHASE deed and, RECITALS I. Inversion Corporativa I.C., S.A. is the legal and beneficial owner of eleven million, four hundred and seventy-one thousand eight hundred and eleven (11,471,811) registered shares, numbered 193788378 to 200060102 and 272862879 to 278062964 all inclusive, with a par value of one euro (1 euro), all fully paid, in the Company "Xfera Moviles, S.A." with Corporate Tax Identification no. A-18252548, recorded in the Madrid Mercantile Register in Volume 14805, Book 0, 8th section, folio 140, sheet 246116. The aforementioned ownership is accredited by virtue of a deed of sale-purchase, dated December 5, 2002, granted in the presence of the Notary Public of Madrid Mr. Andres de la Fuente O'Connor (the Shares). II. There is no legal impediment nor clause in the bylaws that has not been complied with that would prevent or restrict the free transfer of the indicated securities. III. The transfer to be made does not fall within the circumstances of numbers one and two of article 8 of Law 24/1988, on July 28, of the Stock Exchange. IV. The Shares are encumbered by means of a pledge, described in the purchase deed in favor of the seller party, which the purchasing party is aware of and accepts. V. By virtue of the provisions of the Purchase/Call Option Contract between Inversion Corporativa I.C., S.A. and Abengoa, S.A. of October 13, 2000, and pursuant to clause seven thereof (Option Transferability) the parties have agreed to the present sale- 4NO659852 7/2002 [STAMPED: NOTARY'S OFFICE OF MR. MANUEL AGUILAR GARCIA] purchase of the shares indicated, and proceed to the granting thereof subject to the following CLAUSES ONE.- Mr. Jose Marcos Romero, on behalf of Inversion Corporativa I.C., S.A., sells to Mr. Manuel Sanchez Ortega, on behalf of Telvent Sistemas y Redes, S.A., which purchases, in its current state of liens and charges, the Shares owned by it indicated in Recital I above, and which are here deemed repeated. TWO.- the price of this sale-purchase, for the entirety of the shares indicated in Recital I, is established at TWENTY-FIVE MILLION (25,000,000) euros. Payment of said amount will be made by the Purchaser no later than March 31, two thousand and three. THREE.- The Parties have agreed in a separate document that the purchasing party shall assume the obligations derived from the provision and maintenance of certain bank guarantee policies (contra-avales bancarios) given as security for the adjudication of the concession for exploitation of a UMTS mobile telephone license in the name of Xfera Moviles, S.A. FOUR.- It is considered that the present sale-purchase has been authorized in advance pursuant to the provisions of the Company Bylaws and/or Shareholders' Agreements of the company concerned; nonetheless, the Parties shall cooperate in whatever other communications, notifications and formalities may be necessary or appropriate for the recording of the Shares in the Share Register of Xfera Moviles, S.A. in the Purchaser's name, notification of the pledge creditors, and any other necessary formalities. FIVE.- EXPENSES: all expenses and costs derived from the formalizing, performance, execution or termination of the present sale-purchase, whether court-related or otherwise, shall be paid for by the purchasing party. 4NO659851 7/2002 [STAMPED: NOTARY'S OFFICE OF MR. MANUEL AGUILAR GARCIA] SIX. The Parties, expressly waiving any other forum that may correspond to them, submit to the courts and tribunals of Madrid. GRANT AND AUTHORIZATION. The legal warnings and reservations and, particularly, those of a tax nature, are given. I read to those appearing, as they so choose, the full contents of this deed, after which I inform them of their right to read it for themselves. The contents being ratified, they give their consent and sign with me, the Notary Public. I attest to the identification of those appearing by means of their identity documents shown to me. Likewise I attest in general and in respect of the entire contents of this instrument which I draw up in five sheets, this current page and the four consecutive prior pages of the same series. I, the Notary Public ATTEST. The signatures of those appearing follow. Signed: /s/ MANUEL AGUILAR GARCIA. Initialed and sealed. - -- DOCUMENT ATTACHED. -- 4NO659850 7/2002 [STAMPED: NOTARY'S OFFICE OF MR. MANUEL AGUILAR GARCIA] TELVENT SYSTEMAS Y REDES Certificate of the Board of Directors I, Miguel Angel Jimenez-Velasco Mazario, Secretary of the Board of Directors of the company "Telvent Sistemas y Redes, S.A.", with registered office and office for tax purposes in Alcobendas (Madrid) calle Valgrande, 6, recorded in the Madrid Mercantile Register, in Volume 15370, folio 164, section eight, sheet M-257879, with Corporate Tax Identification no. A-82631623. Certify: That at the meeting of the Board of Directors held on November 28, 2002, twelve of the fifteen Directors making up the Board of Directors, namely Mr. Jose Luis Aya Abaurre, Mr. Pedro Bernad Herrando, Mr. Jose A. Moreno Delgado, Mr. Jorge Guarner Munoz, Mr. Javier Salas Collantes, Mr. Manuel Sanchez Ortega, Mr. Pedro Soares Franco de Avillez, Mr. Jose B. Terceiro Lomba, Mr. Raoul Bussmann, Mr. Candido Velazquez-Gaztelu Ruiz, Mr. Alfonzo Gonzalez Dominguez, and Mr. Eduardo Punset Casals unanimously adopted, among others, the following resolutions, as shown from the Minutes of the meeting approved unanimously at the end of the session and signed by the Secretary with the approval of the Chairman. One.- "To grant special power of attorney, with as wide a scope in Law as necessary, to the Director Mr. Manuel Sanchez Ortega, of legal age, married, with Spanish nationality, with domicile for these purposes in Alcobendas (Madrid) C/Valgrande 6, and with National Identity Document no. 2601273-L; the Deputy Secretary of the Board Ms. Ana Maria Plaza Arregui, of legal age, with domicile for these purposes in Alcobendas (Madrid) C/Valgrande 6, unmarried, of Spanish nationality, with National Identity Document number 12374150-N; and the Secretary of the Board of Directors, Mr. Miguel Angel Jimenez-Velasco Mazario, of legal age, married, of Spanish nationality, with domicile in Seville, C/Amor de Dios, 1o, with National Identity Document no. 28874696-J, so that any of them, for and on behalf of this company, may exercise severally and with no distinction between them, and with the power of self-contracting and double representation, each and every one of the actions necessary in order to acquire up to 11,471,811 registered shares of Xfera Moviles, S.A. numbered 193788378 to 200060102 and 272862879 to 278062964 of one euro par value each, with the price and conditions that they are free to determine, signing for this reason all documents, public and private, that they deem appropriate." TELVENT SYSTEMAS Y REDES Two. "Lastly, authorization is given to Mr. Pedro Bernad Herrando, Mr. Manuel Sanchez Ortega, to Mr. Miguel Angel, Jimenez-Velasco Mazario and to Ms. Ana Maria Plaza Arregui so that any of them, with no distinction between them, and as special delegates of this Board, may appear before a Notary Public, grant the necessary public deeds, and proceed, as the case may be, to full or partial recording in the Mercantile Register of the resolutions adopted that are required by law, formalizing whatever documents may be necessary in performance of the aforementioned resolutions." What is stated above tallies with the Book of Minutes sent to me, and in witness whereof and with the relevant legal effects I issue this certificate in Madrid with the Approval of the Chairman of the Board of Directors in Alcobendas on December 16, 2002. Approved by the Chairman The Secretary /s/ Mr. Pedro Bernad Herrando /s/ Mr. Miguel Angel, Jimenez-Velasco Mazario I: MANUEL AGUILAR GARCIA, Notary Public of the Seville Notaries' Association, resident of Seville. ATTEST. That I attest to the signatures and initials of Mr. Pedro Bernad Herrando and Mr. Miguel Angel Jimenez-Velasco Mazario with National Identity Documents nos. 17228150-T and 28874696-J, Chairman and Secretary of the Board of Directors of the company TELVENT SISTEMAS Y REDES, who appear at the bottom of the second sheet of this Certificate. Seville, December twenty-seventh, two thousand and two. [STAMPED: EUROPEAN NOTARIES; GENERAL COUNCIL OF SPANISH NOTARIES 0037380782 NOTARY'S OFFICE OF MR. MANUEL AGUILAR GARCIA] A14167729 4NO659849 7/2002 This is a copy of the parent document hereof, number cited. And at the request of the purchasing party I bind it in seven folios, the present sheet and the eight subsequent sheets in consecutive descending order and of the same series, leaving a note in the original thereof. In SEVILLE, on February fifth, two thousand and three. I attest. [STAMPED: PUBLIC ATTESTATION: EUROPEAN NOTARIES; GENERAL COUNCIL OF SPANISH NOTARIES 0037381215] EX-10.5 15 l07997exv10w5.txt LEASEBACK AGREEMENT Exhibit 10.5 LISCAT LEASING CATALUNYA. E.F.C. S.A Grup CAIXA Catalunya MOVABLE GOODS LEASING CONTRACT NUMBER 032560 3 MODEL APPROVED BY DECISION OF THE GENERAL REGISTER DIRECTORATE DATED 22 MAY 2002 SPECIAL TERMS FORM NUMBER PAGE NUMBER 1. IDENTIFICATION AND REPRESENTATION OF THE PARTIES FINANCIAL LESSOR: LEASING CATALUNYA ESTABLECIMIENTO FINANCIERO DE CREDITO S.A. CIF (COMPANY TAX IDENTIFICATION NUMBER) A58255043 REGISTERED HEAD OFFICE: CALLE FONTANELLA, 5-7 1(a) PLANTA, 08010 BARCELONA MERCANTILE REGISTER OF BARCELONA, VOLUME 22,026 OF COMPANY BOOK 7098, SECTION TWO, FOLIO 22, PAGE B-30,593, ENTERED IN THE REGISTER OF THE BANK OF SPAIN WITH THE NUMBER 4779. REPRESENTED BY ITS EMPOWERED AGENT PERE ANTOLI CIURANS WITH DNI (NATIONAL IDENTITY DOCUMENT) 3851330Z UNDER A DEED OF EMPOWERMENT AUTHORIZED BY THE NOTARY PUBLIC OF BARCELONA, JOSE MARQUENO DE LLANO WITH THE NUMBER 2728 OF HIS PROTOCOL ORDER, DATED 20 OCTOBER 1999 FINANCIAL LESSEE (HEREINAFTER, CLIENT) NAME OR TRADENAME 01 - CARRIERHOUSE, S.A. CIF / NIF (TAX IDENTIFICATION NUMBER) 01 - A82232444B REGISTERED HEAD OFFICE 01 - VALGRANDE, 6, 28100 ALCOBENDAS 01 - REGISTER OF VOLUME OF BOOK FOLIO ENTRY REPRESENTED BY ITS JOSE IGNACIO DEL BARRIO GOMEZ with DNI 51343948J BY VIRTUE OF A DEED AUTHORIZED BY THE NOTARY PUBLIC OF Mr./Ms. DATED AND WITH THE PROTOCOL ORDER NUMBER . CLIENT'S GUARANTOR(S). NAME OR TRADENAME 01 - ABENGOA, S.A. CIF / NIF 01 - A41002288 REGISTERED HEAD OFFICE 01 - AVENIDA CARLOS V, 20, 41004 SEVILLE 01 - REGISTER OF VOLUME OF BOOK FOLIO ENTRY REPRESENTED BY ITS MIGUEL ANGEL FERNANDEZ MORENO with DNI 51356303V BY VIRTUE OF A DEED AUTHORIZED BY THE NOTARY PUBLIC OF Mr./Ms. DATED AND WITH THE PROTOCOL ORDER NUMBER. 2. CONTRACT TERM THIS LEASING CONTRACT WILL RUN FOR 42 MONTHS FROM THE DATE OF SIGNING SAME. 3. THIS CONTRACT REFERS TO THE FOLLOWING GOODS: DESCRIPTION OF THE GOODS: SEE ATTACHED NOTARY-CERTIFIED BILL DATED 30.12.02 VEHICLE IDENTIFICATION NUMBER: LICENSE NUMBER: SUPPLIER: CARRIERHOUSE, S.A. WITH CIF A8223244B AND REGISTERED HEAD OFFICE IN VALGRANDE, 6, 28100 ALCOBENDAS GOODS PURCHASE PRICE: 6,702,449.56 EUROS GOODS LOCATION SITE: ALCOBENDAS 4. PRICE AND FORM OF PAYMENT THE TOTAL PRICE TO BE PAID BY THE CLIENT, INCLUDING THE INTEREST PAYMENT AND INDIRECT TAX AMOUNTS TO: 8,398,453.43 EUROS TO BE PAID IN 42 INSTALLMENTS OF 1,166,226.04 EUROS EACH ONE. OF THIS SUM 1,005,367.28 EUROS CORRESPOND TO THE ROYALTY STRICTLY SPEAKING AND 160,858.76 EUROS TO THE VAT INCUMBENT THEREON, WITHOUT DETRIMENT TO SUCH ALTERATIONS AS MAY OCCUR IN SAID TAXES AS A RESULT OF THE ESTABLISHED INTEREST RATE REVIEW AGREEMENT OR ANY ALTERATIONS IN THE VAT RATE OR ANY In MADRID on 30 DECEMBER 2002 In BARCELONA (corrected to MADRID) on 30 DECEMBER 2002 LEASING CATALUNYA E.F.C. S.A. THE FINANCIAL LESSOR In MADRID on 30 DECEMBER 2002 THE GUARANTOR(S) I HEREBY CERTIFY SAME /s/ FEDERICO GARAYALDE NOTARY PUBLIC OF MADRID LISCAT LEASING CATALUNYA. E.F.C. S.A. Grup CAIXA Catalunya MOVABLE GOODS LEASING CONTRACT NUMBER 032560 3 MODEL APPROVED BY DECISION OF THE GENERAL REGISTER DIRECTORATE DATED 22 MAY 2002 SPECIAL TERMS FORM NUMBER PAGE NUMBER TAX THAT MAY REPLACE IT IN THE FUTURE. THE FIRST OF SAID INSTALLMENTS SHALL BE PAID ON THE DATE OF SIGNING THIS CONTRACT AND THE SUBSEQUENT ONES ON THE SAME DAY OF THE FOLLOWING MONTHS. THE AMORTIZATION TABLE SPECIFIES THE PRICE, THE AMOUNT OF EACH INSTALLMENT AND ALSO THE PART THEREOF CORRESPONDING TO THE FOLLOWING: AMORTIZATION OF THE CAPITAL ADVANCED BY THE LESSOR OR GOODS RECOVERY COST, THE INTEREST PAYMENT AND, WHERE APPLICABLE, THE INDIRECT TAX. 5. FINANCIAL DETAILS OF THE CONTRACT INVESTMENT 6,702,449.56 EUROS EXCEPTIONAL INSTALLMENT 0.00 EUROS RESIDUAL VALUE 1.00 EURO INDIRECT TAX (VAT) 16% INITIAL NOMINAL ANNUAL INTEREST RATE 4.1001% CASH GUARANTEE (**) 0.00 EUROS CONSTANT SPREAD 1.1 ARRANGEMENT FEE 16,756.12 EUROS ORIGINATION FEE 0.0 EUROS

DENOMINATION OF REFERENCE INTEREST (*) = 12 MONTH EURIBOR COST EQUIVALENT ANNUAL RATE (TAEC IN SPANISH INITIALS) = 4.3186% (INCLUDING CASH GUARANTEE AND FEES) NOMINAL DELAYED-PAYMENT ANNUAL INTEREST RATE: 24.000% (*) ONLY FOR VARIABLE INTEREST-RATE CONTRACTS (**) THE GUARANTEE WILL BE RETURNED TO THE CLIENT AT THE END OF THE CONTRACT. EXPLANATION OF THE FINANCIAL DETAILS 1. FORMULA FOR ASCERTAINING THE COST EQUIVALENT ANNUAL RATE THE EQUIVALENCE (TAEC) IS OBTAINED BY APPLYING THE FORMULA CONTAINED IN THE BANK OF SPAIN CIRCULAR NUMBER 13 / 1993. IN THE CALCULATION THEREOF CONSIDERATION HAS BEEN GIVEN NOT ONLY TO THE INTEREST BUT ALSO THE ARRANGEMENT AND ORIGINATION FEES NOT INCLUDING THE COMPLEMENTARY COSTS OR ADVANCED PAYMENTS (STAMPS, BROKERAGE IN FAVOR OF THIRD PARTIES, NOTARIAL FEES, ETC). 2. FORMULA FOR ASCERTAINING THE INTEREST IN EACH INSTALLMENT PC * NIT / 100 K DEFINITIONS PC = PENDING CAPITAL IN EACH PERIOD (MINUS ANY GUARANTEE) NIT = ANNUAL NOMINAL INTEREST RATE K = NUMBER OF TIMES THE INSTALLMENT IS CHARGED DURING THE YEAR 3. FORMULA FOR ASCERTAINING THE DELAYED PAYMENT INTEREST FOR EACH UNPAID INSTALLMENT N x (Td x 12) x t --------- - 100 360 DEFINITIONS N: VALUE OF THE UNPAID INSTALLMENT (INCLUDING VAT) Td: MONTHLY DELAYED-PAYMENT INTEREST LAID DOWN IN THE GENERAL TERMS t: DAYS RUNNING FROM THE DUE DATE OF THE UNPAID INSTALLMENT UNTIL THE DATE OF RECEIVING SAME. 4. OTHER FEES CHARGED TO THE CLIENT. THE CLIENT WILL BE RESPONSIBLE FOR PAYING SUCH FEES AS THE FINANCIAL LESSOR HAS PUBLISHED AND COMMUNICATED TO THE BANK OF SPAIN WHEN THE GROUNDS FOR CHARGING SAME OBTAIN. A LIST OF THOSE CURRENTLY IN FORCE IS HEREBY HANDED OVER TO THE CLIENT. 6. OTHER SPECIAL TERMS 6.1. ABODE OF FINANCIAL LESSOR FOR THE PURPOSES OF NOTIFICATIONS AND SUMMONSES: CALLE FONTANELLA, 5-7 1(a) PLANTA, 08010 BARCELONA 6.2. ABODE OF FINANCIAL LESSOR FOR THE PURPOSES OF GOODS RECOVERY: CALLE FONTANELLA, 5-7 1(a) PLANTA, 08010 BARCELONA 6.3. THE FINANCIAL LESSOR IS ENTITLED TO ASSIGN THE GOODS DEALT WITH HEREIN AND THE CONTRACT ITSELF TO ANY THIRD PARTY BUT WILL THEN BE BOUND TO INFORM THE CLIENT AND, WHERE APPLICABLE, THE GUARANTOR OF SUCH CIRCUMSTANCES, DOING SO IN A BONA FIDE WAY. THE ACQUIRING THIRD PARTY WILL THEN SUBROGATE INTO THE FINANCIAL LESSOR'S POSITION AND WILL BE BOUND TO RESPECT THE CLIENT'S RIGHTS, IN SPECIAL THOSE RELATING TO THE REVIEW OF THE INTEREST PAYMENT IF SUCH REVIEW ARRANGEMENTS HAVE BEEN MADE AND THOSE RELATING TO THE DURATION OF THE USE ASSIGNMENT PERIOD, THE PURCHASE OPTION AND THE RESIDUAL VALUE LAID DOWN AS THE PRICE IF THE OPTION IS EXERCISED. THIS SUBJECTIVE NOVATION WILL IN NO CASE AFFECT ANY GUARANTEE ARRANGEMENT. 6.4. LIFE INSURANCE 6.5. IMPORTATION THIS CLAUSE WILL BE APPLICABLE ONLY TO CONTRACTS INVOLVING IMPORTATION ONE. THE GOODS DEALT WITH IN THIS LEASING CONTRACT, FOLLOWING THE EXPRESS INSTRUCTIONS OF THE FINANCIAL LESSEE, WILL BE FURNISHED BY SUPPLIERS SPECIFICALLY CHOSEN BY THE FINANCIAL LESSEE. SHOULD THE GOODS NEED TO BE IMPORTED, THEREFORE, THE FINANCIAL LESSEE EXPRESSLY AUTHORIZES LEASING CATALUNYA E.F.C. S.A. TO MAKE SUCH ARRANGEMENTS AS MAY BE NECESSARY TO ENSURE SAID EFFECTIVENESS AND THE SCHEDULED PAYMENTS. TWO. AN INDICATION IS GIVEN BELOW OF THE ECONOMIC BASE USED FOR CALCULATING THE LEASING INSTALLMENTS, ALTHOUGH THE PARTIES HEREBY ACCEPT THAT SAID INSTALLMENTS MAY HAVE TO BE ALTERED IN LINE ESPECIALLY WITH ANY FLUCTUATION IN THE PRICE OF THE FOREIGN CURRENCY TAKEN AS THE BASE. THE REFERENCE BASE IS INDICATED BELOW: a) Value of the goods calculated on the basis of the conversion of the currency expressed in the supplier's bill into euros EUROS b) Bank costs EUROS c) Expected customs duties EUROS THREE. IF, DUE TO THE SPECIFIC NATURE OF THE LEASING CONTRACT, THE ECONOMIC BASE THEREOF HAS TO BE BROUGHT INTO LINE WITH ITS REAL COST, WITHOUT THIS BEING POSSIBLE ON THAT DAY'S DATE, THE PARTIES HERETO EXPRESSLY AGREE THAT ANY DIFFERENCES BETWEEN THE SUMS DESCRIBED IN THE ABOVE PARAGRAPH AND THE ACTUAL SUMS WILL BE SETTLED BETWEEN THE PARTIES IN DUE ACCORDANCE WITH RULING LAW. THE CUSTOMS COSTS ARE NOT DEEMED TO BE FIRM; THEY MAY BE REVISED BY THE CUSTOMS AUTHORITIES DURING THE FOUR YEAR PERIOD FOLLOWING THE CUSTOMS CLEARANCE. 1. THE EQUIVALENT VALUE IN EUROS OF THE GOODS WILL BE CALCULATED IN TERMS OF THE DATE OR DATES ON WHICH THE CHARGE IS MADE BY OR ON BEHALF OF LISCAT. 2. EXPENSES WILL INCLUDE ALL THOSE THAT HAVE TO BE PAID BY LISCAT FOR THE PURCHASE AND IMPORTATION OF THE GOODS, WITH SPECIAL CONSIDERATION BEING GIVEN TO CUSTOMS DUTIES. THE PROVISIONS LAID DOWN IN THE PREVIOUS PARAGRAPH ARE ALSO APPLICABLE THERETO. 3. TO AVOID ALTERING THE VALUE OF THE CONTRACTUAL ROYALTIES, WHICH ARE DEEMED TO BE AT ALL TIMES LIQUID AND PAYABLE, THE PARTIES HERETO WILL PROCEED TO MAKE THE CORRESPONDING SETTLEMENTS PURSUANT TO THE PROVISIONS LAID DOWN HEREIN AND TO MAKE THE CORRESPONDING CHARGES AND PAYMENTS. 4. THE RESULTING SUMS WILL BE PAID WITHIN FIFTEEN DAYS OF THE SETTLEMENT DATE. ANY SUM OWING TO LISCAT WILL BE ADDED TO THE CONTRACTUAL INSTALLMENTS AS AN EXTRA PAYABLE AMOUNT IN THE SAME CONTRACTUAL AND ENFORCEABLE TERMS. FOUR. THIS DOCUMENT IS AN INTEGRAL PART OF THE LEASING CONTRACT, ALSO BEING GOVERNED BY ITS SPECIAL AND GENERAL TERMS INSOFAR AS THEY HAVE NOT EXPRESSLY BEEN MODIFIED BY THIS DOCUMENT. 7. OWNERSHIP OF THE GOODS. PURCHASE OPTION AND RESIDUAL VALUE A. THE GOODS DEALT WITH HEREIN ARE THE PROPERTY OF THE FINANCIAL LESSOR. UNLESS EXPRESSLY AUTHORIZED OTHERWISE, THE CLIENT WILL NOT BE ENTITLED TO ASSIGN OR TRANSFER THE USE THEREOF TO THIRD PARTIES, TOTALLY OR PARTIALLY. THE CLIENT WILL BE BOUND TO DECLARE AND ACCREDIT ITS STATUS AS A MERE USER OF THE GOODS TO ANY THIRD PARTY THAT AIMS TO SEIZE OR DISTRAIN SAME. THE CLIENT WILL NOT BE ENTITLED TO INCLUDE THE GOODS IN THE ASSETS OF ITS BALANCE SHEET OR ITS NET WEALTH IN THE EVENT OF BANKRUPTCY, TEMPORARY RECEIVERSHIP OR CREDITORS' MEETING. THE CONTRACTING PARTIES EXPRESSLY AGREE TO ENTER THIS CONTRACT IN THE CORRESPONDING SECTION OF THE MOVABLE GOODS REGISTER, WITHOUT DETRIMENT TO THE FINANCIAL LESSOR'S PROPERTY RIGHT. THE LATTER AND THE CLIENT HEREBY AGREE THAT THE LEASED VEHICLES ARE TO BE ENTERED IN THE TRAFFIC REGISTER IN THE CLIENT'S NAME. B. PURSUANT TO THE PROVISIONS LAID DOWN IN ADDITIONAL PROVISION SEVEN OF ACT 26/1998 ON THE DISCIPLINE AND INTERVENTION OF CREDIT INSTITUTIONS (LEY 26/1988 SOBRE DISCIPLINA E INTERVENCION DE LAS ENTIDADES DE CREDITO), THE FINANCIAL LESSOR HEREBY GRANTS THE CLIENT A PURCHASE OPTION, FREE BY VIRTUE OF ITS LEGAL CHARACTER, ON THE GOODS AT THE END OF THE USE ASSIGNMENT PERIOD. SHOULD THE CLIENT DECIDE TO EXERCISE THIS OPTION, IT SHALL COMMUNICATE THIS DECISION TO THE FINANCIAL LESSOR WITHIN THE THIRTY DAY PERIOD RUNNING UP TO THE END OF THE USE ASSIGNMENT PERIOD. THE ESTABLISHED PURCHASE PRICE IS THE RESIDUAL VALUE AS DETERMINED IN THIS CLAUSE, WITH ADDITION OF ANY APPLICABLE INDIRECT TAX. TO BE ELIGIBLE FOR EXERCISING THE PURCHASE OPTION THE CLIENT MUST BE UP TO DATE IN THE PAYMENT OF THE INSTALLMENTS CORRESPONDING TO THE USE ASSIGNMENT PERIOD. C. THE CLIENT IS FORBIDDEN FROM ENCUMBERING, SELLING OR IN ANY OTHER WAY DISPOSING OF THE PURCHASE OPTION. D. IF THE PURCHASE OPTION IS EXERCISED, THE PURCHASE PRICE OF THE GOODS OR RESIDUAL VALUE IS FIXED AT THE SUM OF 1.00 EURO PLUS ANY CORRESPONDING INDIRECT TAX. THIS RESIDUAL VALUE SHALL BE PAID, IN THIS CASE, ON THE DAY FOLLOWING THE END OF THE USE ASSIGNMENT PERIOD. TERMINATION DATE OF THE USE ASSIGNMENT PERIOD: 30.06.2006. E. SHOULD THE CLIENT CHOOSE NOT TO EXERCISE THE PURCHASE OPTION, IT WILL BE BOUND TO RESTORE THE GOODS TO THE FINANCIAL LESSOR AT THE END OF THE USE ASSIGNMENT PERIOD OR TO PAY A SUM EQUAL TO THE VALUE OF THE LAST INSTALLMENT THEREOF FOR EACH MONTH OR FRACTION THEREOF THAT IT CONTINUES TO RETAIN POSSESSION, UNLESS BOTH PARTIES AGREE TO ENTER INTO A NEW LEASING CONTRACT ON SAID GOODS. 8. STANDING ORDER THE INSTALLMENTS OF THIS CONTRACT SHALL BE PAID INTO THE ACCOUNT BANK 2013 CAIXA D'ESTALVIS DE CATALUNYA BRANCH 0088 CHECK DIGIT 66 ACCOUNT NUMBER 0201178944 DESIGNATED BY THE CLIENT, TO WHICH END THE LATTER WILL MAKE OUT THE CORRESPONDING PAYMENT ORDER TO THE BANK IN QUESTION. THE CLIENT WILL NOT BE ENTITLED TO CHANGE THE AGREED STANDING ORDER ARRANGEMENTS WITHOUT THE PREVIOUS CONSENT OF THE FINANCIAL LESSOR. 9. MODIFICATION OF THE INTEREST PAYMENT DURING THE CONTRACT TERM THIS CLAUSE 9 WILL BE APPLICABLE ONLY TO VARIABLE INTEREST CONTRACTS. TO ENSURE THAT THE PRICE OF THIS LEASING ARRANGEMENT IS KEPT IN LINE WITH CURRENT FINANCIAL TRENDS, AND IN VIEW OF THE LEASING TERM, THE PARTIES HERETO AGREE ON THE FOLLOWING: DURING THE FIRST 12 MONTHS OF THE CONTRACT TERM THE ROYALTY VALUE WILL BE UNCHANGEABLE. AFTER THE FIRST 12 MONTHS OF THE CONTRACT TERM THE FINANCING INTEREST INCLUDED IN THE ROYALTIES DETAILED IN THE TABLE ATTACHED HERETO AND FORMING PART THEREOF WILL BE REVISED UPWARDS OR DOWNWARDS IN LINE WITH THE FOLLOWING RULES: 1. THE INTEREST RATE TO BE APPLIED TO SAID FINANCING, WITH RESPECT TO THE CAPITAL PENDING AMORTIZATION, BEFORE PAYING THE DUE INSTALLMENT RESULTING FROM THE COLUMN INDICATED AS PENDING CAPITAL, WILL BE THE RESULT OF INCREASING BY 1.1% THE 12 MONTH EURIBOR RATE IN THE MAXIMUM TIME-SPAN ACCORDING TO THE INFORMATION FURNISHED BY CAIXA CATALUNYA AND TAKEN FROM THE PUBLICATION CORRESPONDING TO THE MONTH PRIOR TO THE REVIEW DATE. TO THIS SUM WILL BE ADDED THE TAXES, FEES AND BROKERAGE CORRESPONDING TO TRANSACTIONS OF THIS TYPE. IF NO EURIBOR RATE HAS BEEN DECLARED FOR THAT DAY THE LAST RATE PUBLISHED WILL BE TAKEN AS REFERENCE. THE RESULTING RATE WILL BE APPLIED FOR THAT YEAR AND SO ON SUCCESSIVELY EACH YEAR UNTIL THE CONTRACT HAS RUN ITS TERM. FOR THE PURPOSES OF THIS CONTRACT EURIBOR IS UNDERSTOOD TO BE THE ANNUAL INTEREST RATE AT WHICH INTERBANK EURO DEPOSITS ARE OFFERED IN THE EUROPEAN MONETARY UNION BETWEEN PRIMARY LENDING INSTITUTIONS AND SAVINGS BANKS, FOR A 12 MONTH TERM, PUBLISHED THROUGH THE BRIDGE TELERATE ON REUTER'S "EURIBOR" AND "MIBOR" SCREENS. 2. SHOULD ANY IMPEDIMENT IN THE EURIBOR PUBLICATION OR CALCULATION PROCESS MAKE IT IMPOSSIBLE FOR THE LESSOR TO ASCERTAIN THE INTEREST RATE TO BE APPLIED, ACCORDING TO THE PROVISIONS LAID DOWN IN THE PRECEDING CLAUSE, THE FOLLOWING PROCEDURE WILL BE FOLLOWED: ONCE THE LESSOR HAS ESTABLISHED THE NEED TO ASCERTAIN AND APPLY A SURROGATE INTEREST RATE AND, IN ANY CASE, AFTER FIFTEEN DAYS WITHOUT PUBLICATION OF ANY REFERENCE EURIBOR RATE, THE EQUIVALENT NOMINAL INTEREST RATE WILL BE APPLIED TO THE LAST EFFECTIVE RATE PUBLISHED UNDER THE "INTEREST RATE" HEADING OF THE PRIVATE BANKING CREDIT SYSTEM OF THE STATISTICS BULLETIN OF THE BANK OF SPAIN FOR TRANSACTIONS OF CREDIT ACCOUNTS OF THREE MONTHS TO LESS THAN ONE YEAR. THE SURROGATE INTEREST RATE WILL BE APPLIED FOR AS LONG AS THE CIRCUMSTANCES THAT OCCASIONED ITS USE ENDURE. THE NORMAL INTEREST RATE WILL THEN BE RE-APPLIED AS SOON AS CIRCUMSTANCES ALLOW AND THE EURIBOR RATE CAN ONCE MORE BE CALCULATED AND PUBLISHED. NONETHELESS, IF THE SURROGATE INTEREST RATE HAS BEEN APPLIED TO ONE OF THE INTEREST PERIODS, THE SITUATION WILL BE MAINTAINED UNTIL THE END OF THIS INTEREST PERIOD. THE LESSOR WILL INFORM THE LESSEE OF THIS SITUATION AND THE PROCEDURE FOR CALCULATING THE APPLICABLE INTEREST RATE WILL BE REINITIATED. 3. COME THE DATE OF EACH REVISION, THE LESSOR WILL INFORM THE USER OF THE EURIBOR RATE AS SET FORTH ABOVE AND THE CONTRACTUAL INTEREST TO BE APPLIED. ACCORDING TO THE CORRESPONDING RULES FOR THAT SIX MONTH PERIOD, THE INTEREST RATES DETERMINED BY THE FINANCIAL LESSOR, AS SET FORTH ABOVE, WILL BE BINDING ON BOTH LESSOR AND LESSEE, UNLESS THERE IS AN OBVIOUS ERROR. 4. THE FINANCIAL LESSOR WILL ISSUE, CHARGED TO THE FINANCIAL LESSEE, THE CORRESPONDING RECEIPTS FOR THE INSTALLMENTS ARISING FROM APPLICATION OF THE ABOVE RULES, PLUS THE CORRESPONDING VAT, WHICH WILL CONSTITUTE PROOF OF PAYMENT OF THE INSTALLMENTS BY THE LESSEE. LISCAT LEASING CATALUNYA. E.F.C. S.A Grup CAIXA Catalunya MOVABLE GOODS LEASING CONTRACT NUMBER 032560 3 MODEL APPROVED BY DECISION OF THE GENERAL REGISTER DIRECTORATE DATED 22 MAY 2002 GENERAL TERMS FORM NUMBER PAGE NUMBER 1. NATURE OF THIS CONTRACT THIS LEASING CONTRACT IS TO BE FORMALIZED UNDER THE AEGIS OF THE STIPULATIONS LAID DOWN IN ADDITIONAL PROVISION SEVEN OF ACT 26/1988 OF 29 JULY. 2. OBJECT AND CHARACTERS 2.1. THE LESSEE WILL RECEIVE THE CONTRACT GOODS IN THE NAME OF LISCAT, THUS CONFIRMING THE OWNERSHIP STATUS OF THE LATTER. THE GOODS DEALT WITH IN THIS LEASING CONTRACT WILL BE ACQUIRED BY LISCAT IN COMPLIANCE WITH THE EXPRESS INSTRUCTIONS RECEIVED FROM THE LESSEE, WHO HAS CHOSEN NOT ONLY THE SUPPLIER OF THE LEASED GOODS BUT ALSO THE GOODS THEMSELVES, IN SUCH TERMS THAT LISCAT, UPON ACQUIRING THE DOMAIN OVER SUCH GOODS, DOES SO WITH THE EXCLUSIVE PURPOSE OF CONFERRING THE ENJOYMENT AND USE THEREOF ON THE LESSEE, WITH WHICH IT HAD ALREADY AGREED TO ENTER INTO THE LEASING CONTRACT HEREBY BEING FORMALIZED. THE LESSEE THEREFORE DECLARES AND HEREBY EXPRESSLY ACCEPTS THAT LISCAT WILL FULFILL ITS REMIT RECEIVED FROM THE LESSEE IN THE PROPER AND EXACT TERMS, FOR THE SIMPLE FACT OF HAVING ACQUIRED THE GOODS DEALT WITH HEREIN FOR ASSIGNMENT ON A LEASING BASIS, EXEMPTING LISCAT FROM ANY TYPE OF LIABILITY DUE TO THE SUBJECTIVE OR OBJECTIVE INADEQUACY THEREOF. THE LESSEE FORMALLY WAIVES THE RIGHT TO MAKE ANY SORT OF CLAIM AGAINST LISCAT, WITHOUT THEREBY BEING ABLE TO DESIST FROM PAYING THE INSTALLMENTS AND FULFILLING THE ESTABLISHED OBLIGATIONS. FOR ITS PART LISCAT ASSIGNS TO THE LESSEE AS MANY RIGHTS AND ACTIONS AS MAY CORRESPOND TO THE PURCHASER, ALLOWING THE LATTER EXPRESSLY TO SUBROGATE INTO THE EXERCISING THEREOF. BY VIRTUE THEREOF THE LESSEE WILL BE ABLE TO TAKE ACTION AGAINST THE SUPPLIER WITH SUCH ELIGIBILITY AS MAY BE CONFERRED ON THE PURCHASER BY LAW OR UNDER THE PURCHASE CONTRACT. THE LESSEE EXPRESSLY ACCEPTS THE FOLLOWING AS AN ESSENTIAL ELEMENT OF THE BUSINESS AT HAND: IF, BY VIRTUE OF THE CONTRACTUAL NATURE, THE DISCHARGE OF THE PREVIOUS PURCHASE ARRANGEMENT AS A RESULT OF EXERCISING SUCH ACTION SHOULD IN TURN LEAD TO THE DISCHARGING OF THE LEASING CONTRACT, ANY COMPENSATION TO BE MADE TO THE LESSEE BY LISCAT WILL BE SUBORDINATED TO AND CONDITIONAL ON THE PREVIOUS REFUND OBTAINED BY THE LATTER FROM THE SELLER OF THE GOODS OR WHOEVER WAS BOUND TO MAKE SUCH A REFUND. 2.2. LISCAT WILL BE THE OWNER OF THE GOODS DEALT WITH HEREIN BY VIRTUE OF BEING THE TITULAR PURCHASER THEREOF, CONSERVING FULL PROPERTY RIGHTS THEREOVER UNTIL SUCH TIME AS THE PURCHASE OPTION CONFERRED ON THE LESSEE IN SPECIAL TERM THREE MAY BE EXERCISED. IN ACKNOWLEDGEMENT OF THIS PROPERTY RIGHT THE LESSEE IS BOUND TO: A) REFRAIN FROM SETTING UP ANY CHARGE OR ENCUMBRANCE ON THE LEASED GOODS, SUCH AS MORTGAGES, LIENS OR ANY OTHER TYPE POSSIBLE IN LAW. B) DECLARE TO ALL THIRD PARTIES THAT INTEND TO DISTRAIN OR SEIZE THE LEASED GOODS THAT THEY ARE THE EXCLUSIVE PROPERTY OF LISCAT, SHOWING THIS CONTRACT FOR THAT PURPOSE. SHOULD THE ATTACHMENT PROCEEDINGS NONETHELESS BE BROUGHT, IT WILL DEMAND THAT ITS DECLARATIONS BE RECORDED IN THE WRITTEN PROCEEDINGS AND THAT MENTION BE MADE THEREIN OF THIS CONTRACT. IT WILL INFORM LISCAT FORTHWITH OF THESE CIRCUMSTANCES SO THAT THE LATTER CAN MAKE DUE ARRANGEMENTS IN DEFENSE OF ITS RIGHTS. C) TO REFRAIN FROM INCLUDING THE GOODS DEALT WITH HEREIN IN THE BALANCE OF ANY CREDITOR'S MEETING ARRANGEMENTS OR THE BANKRUPT'S ESTATE, BINDING ITSELF EXPRESSLY TO TAKE AS MANY MEASURES AS MAY BE NECESSARY VIS-A-VIS THE BANKRUPTCY AUTHORITIES TO COMPLY WITH THE LEGAL PROVISIONS LAID DOWN IN SUCH CASES FOR GOODS INCLUDED IN A LEASING CONTRACT. 3. INSTALLATION OF THE LEASED GOODS 3.1. THE COSTS DERIVING FROM THE ASSEMBLY, INSTALLATION AND COMMISSIONING OF THE LEASED GOODS WILL BE MET EXCLUSIVELY BY THE LESSEE, WHO WILL BE BOUND TO PAY SUCH BILLS AS MAY BE ISSUED FOR THAT PURPOSE BY THE SUPPLIER OR THIRD PARTIES TO COVER THE COSTS DERIVING THEREFROM. 3.2. THE OBTAINING OF SUCH GOVERNMENTAL AND ADMINISTRATIVE LICENSES OR AUTHORIZATION THAT MAY BE NECESSARY FOR INSTALLING, USING OR TRANSFERRING THE LEASED GOODS WILL BE THE RESPONSIBILITY OF THE LESSEE, WHO ACCEPTS EXCLUSIVE LIABILITY FOR SUCH PENALTIES AS MAY DERIVE FROM ANY BREACH OF SAID FORMALITIES. THE LESSEE ALSO HEREBY BINDS ITSELF TO PAY ANY FINES OR PENALTIES OF ANY ILK THAT MIGHT BE IMPOSED THEREON DUE TO THE USE AND ENJOYMENT OF THE GOODS DEALT WITH HEREIN, INCLUDING THOSE DERIVING FROM CIVIL, JUDICIAL OR ADMINISTRATIVE LIABILITY. SHOULD ANY BREACH BY THE LESSEE OF THE OBLIGATIONS LAID DOWN IN THE ABOVE PARAGRAPHS OBLIGE LISCAT TO PAY THE PENALTIES IMPOSED IN ONE OR THE OTHER CASE, THE LESSEE WILL IMMEDIATELY REIMBURSE THE VALUE OF SAID PENALTIES AND ANY SURCHARGES AND EXPENSES THAT MAY HAVE ARISEN THEREFROM, WITHOUT DETRIMENT TO LISCAT'S RIGHT TO DEMAND THE DISCHARGE OF THIS CONTRACT. 4. TERMINATION OF THE CONTRACT THIS LEASING ARRANGEMENT WILL CEASE AT THE END OF THE PERIOD LAID DOWN IN SPECIAL TERM 2 HEREOF. WHEN THE CONTRACT HAS RUN IT TERM, AND ON CONDITION THAT ALL CONTRACTUAL OBLIGATIONS HAVE BEEN FAITHFULLY COMPLIED WITH, THE LESSEE WILL BE ENTITLED TO EXERCISE THE PURCHASE OPTION, PROVIDING THIS HAS BEEN NOTIFIED WITH A MINIMUM OF TWO MONTH'S NOTICE BEFOREHAND. THE PURCHASE PRICE OF THE GOODS IS THE VALUE ESTABLISHED AS THE RESIDUAL VALUE IN THE SPECIAL TERMS, TO WHICH ANY TAX INCUMBENT THEREON WILL BE ADDED. IF THE LESSEE DOES NOT EXERCISE THIS RIGHT IT WILL BE ABLE TO OPT BETWEEN: 1. RESTORING THE POSSESSION OF THE LEASED GOODS TO LISCAT IN THE PLACE AND ON THE CONDITIONS DETERMINED BY THE LATTER. THE LESSEE WILL MEET ALL THE COSTS OF THIS POSSESSION-RESTORING PROCEDURE. SHOULD THERE BE ANY DELAY IN THE HANDOVER, THE LESSEE WILL PAY LISCAT A SUM CALCULATED AS FOLLOWS: THE RESULT OF DIVIDING THE PERIODICAL INSTALLMENT BY THE NUMBER OF DAYS OF THE PERIOD, THIS QUOTIENT THEN TO BE MULTIPLIED BY THE NUMBER OF DAYS OF DELAY IN THE HANDOVER. 2. TAKING OUT A NEW LEASING CONTRACT ON THE SAME GOODS, ON CONDITION THAT THE PARTIES COME TO AN AGREEMENT ON THE CONTRACT TERM, PRICE AND OTHER CONDITIONS, OTHERWISE THE PROVISIONS OF THE PRECEDING PARAGRAPH WILL BE APPLIED. 5. SPECIAL OBLIGATIONS OF THE LESSEE THE LESSEE BINDS ITSELF TO: A) PAY ALL AGREED INSTALLMENTS AS THEY FALL DUE AND THE HIGHEST AMOUNT OF ANY TAX INCUMBENT THEREON IN LIGHT OF THE PROVISIONS LAID DOWN IN SPECIAL TERM 4 AND GENERAL TERM 10 HEREOF. B) USE THE GOODS DEALT WITH IN THIS LEASING CONTRACT ONLY FOR THE FOLLOWING PURPOSES: AGRICULTURAL, INDUSTRIAL, COMMERCIAL, SERVICE OR PROFESSIONAL USES. C) USE THE LEASED GOODS WITH ALL DUE DILIGENCE AND CARE AS DICTATED BY THE USE THEY ARE PUT TO. KEEP THEM IN A PERFECT STATE OF USE AND OPERATION THROUGHOUT THE WHOLE TERM OF THIS CONTRACT, THE LESSEE ALWAYS MEETING THE COSTS DERIVING FROM ANY MAINTENANCE AND REPAIR WORK THEY MAY REQUIRE. D) NOT TO ALTER OR REPLACE THE ELEMENTS OR PIECES MAKING UP AN INTEGRAL PART OF THE LEASED GOODS, UNLESS DONE SO WITH OTHERS OF THE SAME CLASS AND MAKE AND FROM THE SAME MANUFACTURER, THEREBY ENSURING THAT THERE IS NO REDUCTION OF THEIR VALUE. SAID ELEMENTS WILL THEN FORM AN INTEGRAL AND INSEPARABLE PART OF THE LEASED GOODS WITHOUT ENTITLING THE LESSEE TO ANY REIMBURSEMENT OR COMPENSATION WHATSOEVER. E) ALLOW THE REPRESENTATIVES OF LISCAT TO ENTER THE SITE WHERE THE GOODS ARE KEPT AT ANY TIME TO CHECK ON THE STATE OF THEIR USE AND UPKEEP. 6. BREACH OF THE OBLIGATIONS TAKEN ON BY THE LESSEE 6.1. THE LESSEE WILL BE DEEMED TO HAVE FALLEN DOWN ON ITS OBLIGATIONS IN ANY OF THE FOLLOWING CIRCUMSTANCES: A) IF IT CEASES TO CARRY OUT ITS NORMAL MERCANTILE ACTIVITIES FOR LONGER THAN FOUR MONTHS IN ANY ONE YEAR PERIOD. B) IF AN APPLICATION IS MADE BY THE LESSEE ITSELF OR A LEGITIMATE CREDITOR FOR THE FILING OF ANY SORT OF BANKRUPTCY PROCEEDINGS ALLOWED FOR BY LAW OF IF ANY ACTION FOR PAYMENT AGAINST IT IS SUBSTANTIATED. C) IF ANY OF ITS OBLIGATIONS DERIVING HEREFROM ARE BREACHED, ESPECIALLY THE FAILURE TO PAY ANY RENTAL OR SIMILAR SUM. 6.2. FAILURE TO PAY ANY OF THE LEASING INSTALLMENTS UPON FALLING DUE WILL ACCRUE A MONTHLY DELAYED-PAYMENT INTEREST IN LISCAT'S FAVOR OF 2% PLUS ANY REFUND OR ADVANCED-PAYMENT EXPENSES. THE LESSEE WILL BE BOUND TO PAY THIS INTEREST UPON NO FURTHER REQUIREMENT. 6.3. FAILURE TO PAY ANY OF THE INSTALLMENTS UPON FALLING DUE WILL ENTITLE LISCAT TO CHOOSE BETWEEN: A) DEMANDING THE IMMEDIATE PAYMENT OF THE OVERDUE INSTALLMENTS PLUS THE DELAYED-PAYMENT INTEREST AT THE RATE ESTABLISHED HEREIN AND ALSO ANY COSTS THAT LISCAT MIGHT HAVE INCURRED AS A RESULT OF SAID FAILURE TO PAY AND ACTIONS FOR PAYMENT. B) CONSIDERING THE WHOLE CONTRACTUAL LEASING PRICE PLUS VAT OR EQUIVALENT CORRESPONDING TAX TO HAVE FALLEN DUE, THUS MAKING PAYABLE IN ADVANCE ALL THE SUMS TO BE PAID THROUGHOUT THE PART OF THE CONTRACT STILL TO RUN ITS TERM. PURSUANT TO ARTICLE 572.2 OF THE CIVIL PROCEEDINGS ACT (LEY DE ENJUICIAMIENTO CIVIL) IT IS EXPRESSLY AGREED THAT THE SUM PAYABLE WILL BE DETERMINED BY THE SIMPLE ARITHMETICAL OPERATION OF ADDING UP THE NOMINAL SUMS OF THE INSTALLMENTS FALLEN DUE AND NOT YET PAID, THE DELAYED-PAYMENT INTEREST ACCORDING TO THE CONTRACT, THE SUM OF THE CAPITAL PORTIONS OF ALL THE INSTALLMENTS STILL TO FALL DUE (WHOSE VALUE WILL ALWAYS BE TAKEN FROM THE TABLE ATTACHED HERETO) PLUS THE VAT OR CORRESPONDING EQUIVALENT TAX CALCULATED ON THIS LAST ITEM. FOR THE EXERCISING OF ANY ENFORCEMENT ACTION, THEREFORE, IT WILL SUFFICE TO PRESENT THIS POLICY OR THE PUBLIC DEED IN WHICH THE CONTRACT IS FORMALIZED, WITH THE CERTIFICATION LAID DOWN IN ARTICLE 517.2 SECTION 5 OF THE CIVIL PROCEEDINGS ACT IN THE CASE OF POLICIES AND ANOTHER CERTIFICATE FURNISHED BY LISCAT SHOWING THE BALANCE OWED BY THE LESSEE. THE COMMISSIONER OF OATHS INTERVENING AT THE BEHEST OF LISCAT WILL CERTIFY THAT THE NET AMOUNT PAYABLE IS THE RESULT OF THE SETTLEMENT MADE BY THE LESSOR IN THE FORM AGREED BY THE PARTIES IN THE CONTRACT ITSELF. C) DECLARING THE CONTRACT TO BE DISCHARGED, REQUIRING THE FINANCIAL LESSEE TO HAND OVER IMMEDIATELY THE GOODS DEALT WITH THEREIN. LISCAT IS THEREUPON EMPOWERED TO RECOVER THE GOODS FROM THE FINANCIAL LESSEE UPON SIMPLE REQUIREMENT. THE FINANCIAL LESSEE WILL IN ALL CASES BE EXCLUSIVELY RESPONSIBLE FOR MEETING THE COSTS OF DISASSEMBLY, EXTRACTION AND TRANSPORT. IN THIS CASE THE FINANCIAL LESSEE WILL ALSO BE BOUND TO PAY SUCH RENTALS AS HAD FALLEN DUE UP TO THE DATE OF THE EXTRACTION, PLUS AN ADDITIONAL SUM AS A PENAL CLAUSE, EQUIVALENT TO FIFTY PERCENT OF SUCH RENTALS STILL TO FALL DUE. THE FINANCIAL LESSEE WILL ALSO BE ESPECIALLY HELD LIABLE FOR ANY DETERIORATION IN THE GOODS APART FROM NORMAL WEAR AND TEAR. PURSUANT TO THE PROVISIONS LAID DOWN IN ADDITIONAL PROVISION ONE OF ACT 26/1998, THE ADDRESS FOR RETURNING THE POSSESSION OF THE GOODS BY THE FINANCIAL LESSEE IS UNDERSTOOD TO BE THE ADDRESS OF THE FINANCIAL LESSOR AS STATED IN SPECIAL TERM 6.2 HEREOF. 7. LIABILITY OF THE LESSEE. CO-OWNERSHIP THE LESSEE PERSONALLY RESPONDS WITH ALL ITS PRESENT AND FUTURE PROPERTY FOR COMPLIANCE WITH ALL THE OBLIGATIONS DERIVING HEREFROM AND ESPECIALLY THE OBLIGATION TO PAY THE AGREED MONTHLY SUMS. SHOULD THERE BE TWO OR MORE FINANCIAL LESSEES, THEY SHALL HOLD THEMSELVES JOINTLY AND SEVERALLY LIABLE FOR MEETING THE OBLIGATIONS, EXPRESSLY WAIVING ALL THE BENEFITS OF THE LEGAL EXCEPTIONS OF EXCUSSION AND DIVISION. 8. ASSIGNMENT OF RIGHTS THE LESSEE WILL NOT BE ENTITLED TO ASSIGN OR DISPOSE OF ITS RIGHTS AND OBLIGATIONS HEREUNDER, NOR ALLOW ANY THIRD PARTY TO SUBROGATE INTO THEM IN ANY WAY, WITHOUT THE EXPRESS CONSENT IN WRITING OF LISCAT. LISCAT IS ENTITLED TO ALLOW ANY THIRD PERSON TO SUBROGATE INTO ITS LEGAL POSITION, PROVIDING THAT SUCH LEGAL REQUISITES OBTAIN AS MAY BE APPLICABLE HEREUNDER, THEN BEING BOUND TO INFORM THE LESSEE IN WRITING OF THIS SUBROGATION. 9. INSURANCE ON THE LEASED GOODS THE LESSEE WHOLLY AND EXCLUSIVELY ASSUMES THE RISK OF THE TOTAL OR PARTIAL LOSS OF THE LEASED GOODS, WHATEVER THE CAUSE THEREOF, AND WILL ALSO BE HELD EXCLUSIVELY LIABLE FOR ALL MATERIAL DAMAGE OR BODILY HARM THAT MIGHT BE CAUSED TO THIRD PERSONS BY THE GOODS LEASED HEREUNDER. THE LESSEE BINDS ITSELF TO TAKE OUT AN INSURANCE POLICY AT ITS OWN COST AND ON ITS OWN RESPONSIBILITY TO COVER SAID RISKS, INCLUDING THOSE OF UNFORESEEN CIRCUMSTANCES OR FORCE MAJEURE. THE INSURANCE POLICY/IES TAKEN OUT WILL MAKE EXPRESS MENTION OF LISCAT AS THE BENEFICIARY OF ANY COMPENSATION THAT MIGHT DERIVE THEREFROM. LISCAT WILL BE ENTITLED AT ANY MOMENT TO ASK THE LESSEE TO PROVE THAT IT IS UP TO DATE IN THE PAYMENT OF THE PREMIUMS OF THE INSURANCE TAKEN OUT, WHEN THEY ARE PAID DIRECTLY BY THE LATTER. LISCAT WILL BE ENTITLED TO PAY THE PREMIUMS AND ACCESSORY COVERAGE TO THE INSURANCE COMPANY ON THE LESSEE'S ACCOUNT. 10. TAXES, FEES AND OTHER COSTS THAT CAN BE PASSED ON TO CLIENTS 10.1. THE LESSEE WILL BE RESPONSIBLE FOR PAYING ALL COSTS, COMMISSIONS, TAXES, DUTIES, FEES AND SPECIAL CONTRIBUTIONS INCUMBENT ON THE EXECUTION OF THIS CONTRACT, ON THE TENURE OF THE GOODS, THE USE THEREOF AND THE TERMINATION OF THE LEGAL RELATION HEREBY INAUGURATED. 10.2. EACH INSTALLMENT INTO WHICH THE TOTAL PRICE IS BROKEN DOWN WILL BE LIABLE TO VALUE ADDED TAX (VAT) AT THE RATE INDICATED IN SPECIAL TERM 5. IT IS THEREFORE HEREBY EXPRESSLY AGREED THAT, SHOULD THE FISCAL SYSTEM OBTAINING AT THE TIME OF SIGNING THIS CONTRACT BE CHANGED, THE NEGATIVE OR POSITIVE DIFFERENCE WILL BE PASSED ON TO THE LESSEE UNLESS NEW LEGISLATION FORBIDS IT. 10.3. ATTACHED HERETO IS A SCHEDULE SHOWING THE FEES, CONDITIONS AND EXPENSES THAT THE LESSOR IS ENTITLED TO PASS ON TO CLIENTS. 11. DESIGNATION OF ABODES THE LESSEES AND GUARANTORS DESIGNATE THEIR ABODE STATED AT THE HEAD HEREOF AS THE ADDRESS FOR RECEIVING ANY SUMMONSES AND NOTIFICATIONS THAT MAY ARISE HEREFROM. 12. AUTHORIZATION THE SIGNATORIES OR PARTIES TO THIS CONTRACT HEREBY AUTHORIZE LISCAT TO INCORPORATE THEIR PERSONAL DATA INTO COMPUTERIZED FILES FOR WHICH LISCAT ITSELF IS RESPONSIBLE, WITH THE PURPOSE OF CONTROLLING AND REGISTERING THE OPERATIONS IN THEIR NAME AND IN GENERAL TO FACILITATE CORRESPONDENCE BETWEEN THEM, THE OFFERING OF NEW PRODUCTS AND THEIR CONTRACTUAL RELATIONSHIP. THESE DATA MAY THEN BE ASSIGNED TO CAIXA D'ESTALVIS DE CATALUNYA, A GROUP TO WHICH IT BELONGS, AND THE OTHER COMPANIES OF ITS GROUP FOR THE SAME PURPOSES AND FOR ANY OTHER LEGITIMATE PURPOSE OF ASSIGNEE AND ASSIGNOR. THE DATA INCLUDED IN THIS DOCUMENT HAVE BEEN INCLUDED THEREIN PERFORCE AS ESSENTIAL DATA FOR MAINTAINING THE OPERATIONAL RELATIONSHIP WITH THE SIGNATORY OR PARTY THERETO, WHO WILL BE ENTITLED TO READ, RECTIFY AND ERASE THIS DATA. THE COMPANY WILL BE ENTITLED TO KEEP THEM UNTIL SUCH TIME AS THE ACTIONS DERIVING FROM THIS CONTRACT HAVE ENDED. 13. THIS CLAUSE WILL BE APPLICABLE ONLY FOR CONTRACTS FORMALIZED IN THE SELF-GOVERNING COMMUNITY OF CATALUNYA. THE LINGUISTIC POLICY ACT (LEY DE POLITICA LINGUISTICA) 1/98 OF 7 JANUARY. THE SIGNATORIES TO THIS CONTRACT EXPRESSLY AGREE THAT IT BE WRITTEN IN CASTILIAN SPANISH. THE PARTIES HEREBY EXPRESS THEIR CONFORMITY WITH THIS CONTRACT, WHICH THEY EXECUTE AND SIGN IN THE PLACE AND ON THE DATE INDICATED AT THE HEAD THEREOF, IN AS MANY COPIES AS THERE ARE PARTICIPANTS, EACH RECEIVING ONE COPY. In MADRID on 30 DECEMBER 2002 In BARCELONA (corrected to MADRID) on 30 DECEMBER 2002 LEASING CATALUNYA E.F.C. S.A. THE FINANCIAL LESSOR /s/ Pere Antoii Ciurans In MADRID on 30 DECEMBER 2002 /s/ Jose Ignucio del Barrio Gomez THE GUARANTOR(S) I HEREBY CERTIFY SAME I hereby certify that this contract comprises 14 pages, which I stamp and add thereto my notary's paraph. /s/ FEDERICO GARAYALDE NOTARY PUBLIC OF MADRID LISCAT GRUP CAIXA CATALUNYA CARRIERHOUSE, S.A. Valgrande, 6 28100 ALCOBENDAS Barcelona on 30 December, 2002 Dear Sirs, To round out the movable property leasing contract executed today, and to clear up some points that you have enquired about, we hereby inform you of the following: ONE. Obviously everything laid down as special terms in this contract, due to their special nature, overrides anything laid down as general terms thereof. In each case, therefore, the special terms will take precedence over the general terms. TWO. With reference to the provisions laid down in general term 5 e) of the contract, we inform you that LEASING CATALUNYA EFC SA is in all cases bound to give a minimum notice of 20 days. THREE. With reference to the provisions laid down in general term 6, we also inform you that in the event of a failure to pay any of the contractual installments, you will be given a grace period of thirty days to pay same, incurring the corresponding expenses and delayed payment interest. Only after this time has elapsed without the late payment being forthcoming will the procedure laid down in sections b) and c) come into effect. This in no way entails a novation or modification or specific modification of such powers. FOUR. In reference both to the special term 6.3. and the general term 8 hereof, it is hereby established that LEASING CATALUNYA EFC S.A. will be entitled to allow subrogation into its legal position only with the express authorization of the financial lessee, and on condition that the latter has faithfully complied with all its contractual obligations. In witness whereof, for such purposes as it may serve, we hereby sign this on the date and in the place indicated at the head thereof. LEASING CATALUNYA EFC SA. /s/ FEDERICO GARAYALDE NOTARY PUBLIC OF MADRID Fontanella, 5-7, 4degrees - 08100 Barcelona - Tel 933 172 016. Fax 933 172 638 EX-10.6 16 l07997exv10w6.txt LEASEBACK AGREEMENT Exhibit 10.6 LISCAT LEASING CATALUNYA. E.F.C. S.A Grup CAIXA Catalunya MOVABLE GOODS FINANCIAL LEASE CONTRACT NUMBER 034393 2 MODEL APPROVED BY DECISION OF THE GENERAL REGISTER DIRECTORATE DATED 22 MAY 2002 SPECIAL TERMS FORM NUMBER PAGE NUMBER 1. IDENTIFICATION AND REPRESENTATION OF THE PARTIES FINANCIAL LESSOR: LEASING CATALUNYA ESTABLECIMIENTO FINANCIERO DE CREDITO S.A. CIF (COMPANY TAX IDENTIFICATION NUMBER) A58255043 REGISTERED HEAD OFFICE: CALLE FONTANELLA, 5-7 1(a)PLANTA, 08010 BARCELONA MERCANTILE REGISTER OF BARCELONA, VOLUME 22,026 OF COMPANY BOOK 7098, SECTION TWO, FOLIO 22, PAGE B-30,593, ENTERED IN THE REGISTER OF THE BANK OF SPAIN WITH THE NUMBER 4779. REPRESENTED BY ITS EMPOWERED AGENT IGNASI MARTIN MORALES WITH DNI (NATIONAL IDENTITY DOCUMENT) 40975710Z UNDER A DEED OF EMPOWERMENT AUTHORIZED BY THE NOTARY PUBLIC OF BARCELONA, JOSE MARQUENO DE LLANO WITH THE NUMBER 362 OF HIS PROTOCOL ORDER, DATED 11 FEBRUARY 2003. FINANCIAL LESSEE (HEREINAFTER, CLIENT) NAME OR TRADENAME 01 - TELVENT HOUSING, S.A. CIF / NIF (TAX IDENTIFICATION NUMBER) 01 - A82232448 REGISTERED HEAD OFFICE 01 - VALGRANDE, 6, 28100 ALCOBENDAS 01 - REGISTER OF VOLUME OF BOOK FOLIO ENTRY REPRESENTED BY ITS EMPOWERED AGENT JOSE IGNACIO DEL BARRIO GOMEZ with DNI 51343948J BY VIRTUE OF A DEED AUTHORIZED BY THE NOTARY PUBLIC OF MADRID CARLOS PEREZ BAUDIN DATED 14 NOVEMBER 2000 AND WITH THE PROTOCOL ORDER NUMBER 3694. CLIENT'S GUARANTOR(S). NAME OR TRADENAME 01 - ABENGOA, S.A. CIF / NIF 01 - A41002288 REGISTERED HEAD OFFICE 01 - AVENIDA CARLOS V, 20*, 41004 SEVILLE (*corrected to: WE SAY AVENIDA DE LA BUHANEZ 2) 01 - REGISTER OF VOLUME OF BOOK FOLIO ENTRY REPRESENTED BY ITS MIGUEL ANGEL FERNANDEZ MORENO with DNI 51356303V BY VIRTUE OF A DEED AUTHORIZED BY THE NOTARY PUBLIC OF MADRID FERNANDO MOLINA STRANZ DATED 27 DECEMBER 2002 AND WITH THE PROTOCOL ORDER NUMBER. 1052 2. CONTRACT TERM THIS FINANCIAL LEASE CONTRACT WILL RUN FOR 42 MONTHS FROM THE DATE OF SIGNING SAME. 3. THIS CONTRACT REFERS TO THE FOLLOWING GOODS: DESCRIPTION OF THE GOODS: SEE ATTACHED BILL VEHICLE IDENTIFICATION NUMBER: LICENSE NUMBER: SUPPLIER: TELVENT HOUSING, S.A. WITH CIF A82232448 AND REGISTERED HEAD OFFICE IN VALGRANDE, 6, 28100 ALCOBENDAS GOODS PURCHASE PRICE: 3,296,257.65 EUROS GOODS LOCATION SITE: ALCOBENDAS 4. PRICE AND FORM OF PAYMENT THE TOTAL PRICE TO BE PAID BY THE CLIENT, INCLUDING THE INTEREST PAYMENT AND INDIRECT TAX AMOUNTS TO: 4,086,335.35 EUROS TO BE PAID IN 42 INSTALLMENTS OF 573,548.83 EUROS EACH. OF THIS SUM, 494,438.65 EUROS CORRESPOND TO THE ROYALTY STRICTLY SPEAKING AND 79,110.18 EUROS TO THE VAT INCUMBENT THEREON, WITHOUT DETRIMENT TO SUCH ALTERATIONS AS MAY OCCUR IN SAID TAXES AS A RESULT OF THE ESTABLISHED INTEREST RATE REVIEW AGREEMENT OR ANY ALTERATIONS IN THE VAT RATE OR ANY TAX THAT MAY REPLACE IT IN THE FUTURE. In MADRID on 7 NOVEMBER 2003 In MADRID on 7 NOVEMBER 2003 LEASING CATALUNYA E.F.C. S.A. THE FINANCIAL LESSOR In MADRID on 7 NOVEMBER 2003 THE GUARANTOR(S) I HEREBY CERTIFY SAME FERNANDO MOLINA STRANZ NOTARY PUBLIC OF MADRID LISCAT LEASING CATALUNYA. E.F.C. S.A Grup CAIXA Catalunya MOVABLE GOODS FINANCIAL LEASE CONTRACT NUMBER 034393 2 MODEL APPROVED BY DECISION OF THE GENERAL REGISTER DIRECTORATE DATED 22 MAY 2002 SPECIAL TERMS FORM NUMBER PAGE NUMBER THE FIRST OF SAID INSTALLMENTS SHALL BE PAID ON THE DATE OF SIGNING THIS CONTRACT AND THE SUBSEQUENT ONES ON THE SAME DAY OF THE FOLLOWING MONTHS. THE AMORTIZATION TABLE SPECIFIES THE PRICE, THE AMOUNT OF EACH INSTALLMENT AND ALSO THE PART THEREOF CORRESPONDING TO THE FOLLOWING: AMORTIZATION OF THE CAPITAL ADVANCED BY THE LESSOR OR GOODS RECOVERY COST, THE INTEREST PAYMENT AND, WHERE APPLICABLE, THE INDIRECT TAX. 5. FINANCIAL DETAILS OF THE CONTRACT INVESTMENT 3,296,257.65 EUROS EXCEPTIONAL INSTALLMENT 0.00 EUROS RESIDUAL VALUE 1.00 EURO INDIRECT TAX (VAT) 16% INITIAL NOMINAL ANNUAL INTEREST RATE 305185% CASH GUARANTEE (**) 0.00 EUROS CONSTANT SPREAD 1.1 EUROS ARRANGEMENT FEE 8,240.64 ORIGINATION FEE 0.0 EUROS

DENOMINATION OF REFERENCE INTEREST (*) = 12 MONTH EURIBOR COST EQUIVALENT ANNUAL RATE (TAEC IN SPANISH INITIALS) = 3.7152% (INCLUDING CASH GUARANTEE AND FEES) NOMINAL DELAYED-PAYMENT ANNUAL INTEREST RATE: 24.000% (*) ONLY FOR VARIABLE INTEREST-RATE CONTRACTS (**) THE GUARANTEE WILL BE RETURNED TO THE CLIENT AT THE END OF THE CONTRACT. EXPLANATION OF THE FINANCIAL DETAILS 1. FORMULA FOR ASCERTAINING THE COST EQUIVALENT ANNUAL RATE THE EQUIVALENCE (TAEC) IS OBTAINED BY APPLYING THE FORMULA CONTAINED IN THE BANK OF SPAIN CIRCULAR NUMBER 13 / 1993. IN THE CALCULATION THEREOF CONSIDERATION HAS BEEN GIVEN NOT ONLY TO THE INTEREST BUT ALSO TO THE ARRANGEMENT AND ORIGINATION FEES NOT INCLUDING THE COMPLEMENTARY COSTS OR ADVANCED PAYMENTS (STAMPS, BROKERAGE IN FAVOR OF THIRD PARTIES, NOTARIAL FEES, ETC). 2. FORMULA FOR ASCERTAINING THE INTEREST IN EACH INSTALLMENT PC * NIT / 100 K DEFINITIONS PC = PENDING CAPITAL IN EACH PERIOD (MINUS ANY GUARANTEE) NIT = ANNUAL NOMINAL INTEREST RATE K = NUMBER OF TIMES THE INSTALLMENT IS CHARGED DURING THE YEAR 3. FORMULA FOR ASCERTAINING THE DELAYED PAYMENT INTEREST FOR EACH UNPAID INSTALLMENT N x (Td x 12) x t --------- - 100 360 DEFINITIONS N: VALUE OF THE UNPAID INSTALLMENT (INCLUDING VAT) Td: MONTHLY DELAYED-PAYMENT INTEREST LAID DOWN IN THE GENERAL TERMS t: DAYS RUNNING FROM THE DUE DATE OF THE UNPAID INSTALLMENT UNTIL THE DATE OF RECEIVING SAME. 4. OTHER FEES CHARGED TO THE CLIENT. THE CLIENT WILL BE RESPONSIBLE FOR PAYING SUCH FEES AS THE FINANCIAL LESSOR HAS PUBLISHED AND COMMUNICATED TO THE BANK OF SPAIN WHEN THE GROUNDS FOR CHARGING SAME OBTAIN. A LIST OF THOSE CURRENTLY IN FORCE IS HEREBY HANDED OVER TO THE CLIENT. 6. OTHER SPECIAL TERMS 6.1. ABODE OF FINANCIAL LESSOR FOR THE PURPOSES OF NOTIFICATIONS AND SUMMONSES: CALLE FONTANELLA, 5-7 1(a) PLANTA, 08010 BARCELONA 6.2. ABODE OF FINANCIAL LESSOR FOR THE PURPOSES OF GOODS RECOVERY: CALLE FONTANELLA, 5-7 1(a) PLANTA, 08010 BARCELONA 6.3. THE FINANCIAL LESSOR IS ENTITLED TO ASSIGN THE GOODS DEALT WITH HEREIN AND THE CONTRACT ITSELF TO ANY THIRD PARTY BUT WILL THEN BE BOUND TO INFORM THE CLIENT AND, WHERE APPLICABLE, THE GUARANTOR OF SUCH CIRCUMSTANCES, DOING SO IN A BONA FIDE WAY. THE ACQUIRING THIRD PARTY WILL THEN SUBROGATE INTO THE FINANCIAL LESSOR'S POSITION AND WILL BE BOUND TO RESPECT THE CLIENT'S RIGHTS, IN PARTICULAR THOSE RELATING TO THE REVIEW OF THE INTEREST PAYMENT IF SUCH REVIEW ARRANGEMENTS HAVE BEEN MADE, AND THOSE RELATING TO THE DURATION OF THE USE ASSIGNMENT PERIOD, THE PURCHASE OPTION, AND THE RESIDUAL VALUE LAID DOWN AS THE PRICE IF THE OPTION IS EXERCISED. THIS SUBJECTIVE NOVATION WILL IN NO CASE AFFECT ANY GUARANTEE ARRANGEMENT. 6.4. LIFE INSURANCE 6.5. IMPORTATION THIS CLAUSE WILL BE APPLICABLE ONLY TO CONTRACTS INVOLVING IMPORTATION. ONE. THE GOODS DEALT WITH IN THIS FINANCIAL LEASE CONTRACT, FOLLOWING THE EXPRESS INSTRUCTIONS OF THE FINANCIAL LESSEE, WILL BE FURNISHED BY SUPPLIERS SPECIFICALLY CHOSEN BY THE FINANCIAL LESSEE. SHOULD THE GOODS NEED TO BE IMPORTED, THEREFORE, THE FINANCIAL LESSEE EXPRESSLY AUTHORIZES LEASING CATALUNYA E.F.C. S.A. TO MAKE SUCH ARRANGEMENTS AS MAY BE NECESSARY TO ENSURE SAID EFFECTIVENESS AND THE SCHEDULED PAYMENTS. TWO. AN INDICATION IS GIVEN BELOW OF THE ECONOMIC BASE USED FOR CALCULATING THE FINANCIAL LEASE INSTALLMENTS, ALTHOUGH THE PARTIES HEREBY ACCEPT THAT SAID INSTALLMENTS MAY HAVE TO BE ALTERED IN LINE ESPECIALLY WITH ANY FLUCTUATION IN THE PRICE OF THE FOREIGN CURRENCY TAKEN AS THE BASE. THE REFERENCE BASE IS INDICATED BELOW: a) Value of the goods calculated on the basis of the conversion of the currency expressed in the supplier's bill into euros EUROS b) Bank costs EUROS c) Expected customs duties EUROS THREE. IF, DUE TO THE SPECIFIC NATURE OF THE FINANCIAL LEASE CONTRACT, THE ECONOMIC BASE THEREOF MUST BE BROUGHT INTO LINE WITH ITS REAL COST, WITHOUT THIS BEING POSSIBLE ON THAT DAY'S DATE, THE PARTIES HERETO EXPRESSLY AGREE THAT ANY DIFFERENCES BETWEEN THE SUMS DESCRIBED IN THE ABOVE PARAGRAPH AND THE ACTUAL SUMS WILL BE SETTLED BETWEEN THE PARTIES IN DUE ACCORDANCE WITH RULING LAW. THE CUSTOMS COSTS ARE NOT DEEMED TO BE FIRM; THEY MAY BE REVISED BY THE CUSTOMS AUTHORITIES DURING THE FOUR YEAR PERIOD FOLLOWING THE CUSTOMS CLEARANCE. 1. THE EQUIVALENT VALUE IN EUROS OF THE GOODS WILL BE CALCULATED IN TERMS OF THE DATE OR DATES ON WHICH THE CHARGE IS MADE BY OR ON BEHALF OF LISCAT. 2. EXPENSES WILL INCLUDE ALL THOSE THAT HAVE TO BE PAID BY LISCAT FOR THE PURCHASE AND IMPORTATION OF THE GOODS, WITH SPECIAL CONSIDERATION BEING GIVEN TO CUSTOMS DUTIES. THE PROVISIONS LAID DOWN IN THE PREVIOUS PARAGRAPH ARE ALSO APPLICABLE THERETO. 3. TO AVOID ALTERING THE VALUE OF THE CONTRACTUAL ROYALTIES, WHICH ARE DEEMED TO BE AT ALL TIMES LIQUID AND PAYABLE, THE PARTIES HERETO WILL PROCEED TO MAKE THE CORRESPONDING SETTLEMENTS PURSUANT TO THE PROVISIONS LAID DOWN HEREIN AND TO MAKE THE CORRESPONDING CHARGES AND PAYMENTS. 4. THE RESULTING SUMS WILL BE PAID WITHIN FIFTEEN DAYS OF THE SETTLEMENT DATE. ANY SUM OWED TO LISCAT WILL BE ADDED TO THE CONTRACTUAL INSTALLMENTS AS AN EXTRA PAYABLE AMOUNT IN THE SAME CONTRACTUAL AND ENFORCEABLE TERMS. FOUR. THIS DOCUMENT IS AN INTEGRAL PART OF THE FINANCIAL LEASE CONTRACT, ALSO BEING GOVERNED BY ITS PARTICULAR AND GENERAL TERMS INSOFAR AS THEY HAVE NOT EXPRESSLY BEEN MODIFIED BY THIS DOCUMENT. 7. OWNERSHIP OF THE GOODS. PURCHASE OPTION AND RESIDUAL VALUE A. THE GOODS DEALT WITH HEREIN ARE THE PROPERTY OF THE FINANCIAL LESSOR. UNLESS EXPRESSLY AUTHORIZED OTHERWISE, THE CLIENT WILL NOT BE ENTITLED TO ASSIGN OR TRANSFER THE USE THEREOF TO THIRD PARTIES, TOTALLY OR PARTIALLY. THE CLIENT WILL BE BOUND TO DECLARE AND ACCREDIT ITS STATUS AS A MERE USER OF THE GOODS TO ANY THIRD PARTY THAT AIMS TO SEIZE OR DISTRAIN THE SAME. THE CLIENT WILL NOT BE ENTITLED TO INCLUDE THE GOODS IN THE ASSETS OF ITS BALANCE SHEET OR ITS NET WEALTH IN THE EVENT OF BANKRUPTCY, TEMPORARY RECEIVERSHIP, OR CREDITORS' MEETING. THE CONTRACTING PARTIES EXPRESSLY AGREE TO ENTER THIS CONTRACT IN THE CORRESPONDING SECTION OF THE MOVABLE GOODS REGISTER, WITHOUT DETRIMENT TO THE FINANCIAL LESSOR'S PROPERTY RIGHT. THE LATTER AND THE CLIENT HEREBY AGREE THAT THE LEASED VEHICLES ARE TO BE ENTERED IN THE TRAFFIC REGISTER IN THE CLIENT'S NAME. B. PURSUANT TO THE PROVISIONS LAID DOWN IN ADDITIONAL PROVISION SEVEN OF ACT 26/1998 ON THE DISCIPLINE AND INTERVENTION OF CREDIT INSTITUTIONS (LEY 26/1988 SOBRE DISCIPLINA E INTERVENCION DE LAS ENTIDADES DE CREDITO), THE FINANCIAL LESSOR HEREBY GRANTS THE CLIENT A PURCHASE OPTION, FREE BY VIRTUE OF ITS LEGAL CHARACTER, ON THE GOODS AT THE END OF THE USE ASSIGNMENT PERIOD. SHOULD THE CLIENT DECIDE TO EXERCISE THIS OPTION, IT SHALL COMMUNICATE THIS DECISION TO THE FINANCIAL LESSOR WITHIN THE THIRTY DAY PERIOD RUNNING UP TO THE END OF THE USE ASSIGNMENT PERIOD. THE ESTABLISHED PURCHASE PRICE IS THE RESIDUAL VALUE AS DETERMINED IN THIS CLAUSE, WITH ADDITION OF ANY APPLICABLE INDIRECT TAX. TO BE ELIGIBLE FOR EXERCISING THE PURCHASE OPTION, THE CLIENT MUST BE UP TO DATE IN THE PAYMENT OF THE INSTALLMENTS CORRESPONDING TO THE USE ASSIGNMENT PERIOD. C. THE CLIENT IS FORBIDDEN FROM ENCUMBERING, SELLING, OR IN ANY OTHER WAY DISPOSING OF THE PURCHASE OPTION. D. IF THE PURCHASE OPTION IS EXERCISED, THE PURCHASE PRICE OF THE GOODS OR RESIDUAL VALUE IS FIXED AT THE SUM OF 1.00 EURO PLUS ANY CORRESPONDING INDIRECT TAX. THIS RESIDUAL VALUE SHALL BE PAID, IN THIS CASE, ON THE DAY FOLLOWING THE END OF THE USE ASSIGNMENT PERIOD. TERMINATION DATE OF THE USE ASSIGNMENT PERIOD: May 7, 2007. E. SHOULD THE CLIENT CHOOSE NOT TO EXERCISE THE PURCHASE OPTION, IT WILL BE BOUND TO RESTORE THE GOODS TO THE FINANCIAL LESSOR AT THE END OF THE USE ASSIGNMENT PERIOD OR TO PAY A SUM EQUAL TO THE VALUE OF THE LAST INSTALLMENT THEREOF FOR EACH MONTH OR FRACTION THEREOF THAT IT CONTINUES TO RETAIN POSSESSION, UNLESS BOTH PARTIES AGREE TO ENTER INTO A NEW FINANCIAL LEASE CONTRACT ON SAID GOODS. 8. STANDING ORDER THE INSTALLMENTS OF THIS CONTRACT SHALL BE PAID INTO THE ACCOUNT ~~BANK 2013 CAIXA D'ESTALVIS DE CATALUNYA BRANCH 0088 CHECK DIGIT 66 ACCOUNT NUMBER 0201178944~~

DESIGNATED BY THE CLIENT, TO WHICH END THE LATTER WILL MAKE OUT THE CORRESPONDING PAYMENT ORDER TO THE BANK IN QUESTION. THE CLIENT WILL NOT BE ENTITLED TO CHANGE THE AGREED STANDING ORDER ARRANGEMENTS WITHOUT THE PREVIOUS CONSENT OF THE FINANCIAL LESSOR. 9. MODIFICATION OF THE INTEREST PAYMENT DURING THE CONTRACT TERM THIS CLAUSE 9 WILL BE APPLICABLE ONLY TO VARIABLE INTEREST CONTRACTS. TO ENSURE THAT THE PRICE OF THIS FINANCIAL LEASE ARRANGEMENT IS KEPT IN LINE WITH CURRENT FINANCIAL TRENDS, AND IN VIEW OF THE FINANCIAL LEASE TERM, THE PARTIES HERETO AGREE ON THE FOLLOWING: DURING THE FIRST 12 MONTHS OF THE CONTRACT TERM, THE ROYALTY VALUE WILL BE UNCHANGEABLE. AFTER THE FIRST 12 MONTHS OF THE CONTRACT TERM THE FINANCING INTEREST INCLUDED IN THE ROYALTIES DETAILED IN THE TABLE ATTACHED HERETO AND FORMING PART THEREOF WILL BE REVISED UPWARDS OR DOWNWARDS IN LINE WITH THE FOLLOWING RULES: 1. THE INTEREST RATE TO BE APPLIED TO SAID FINANCING, WITH RESPECT TO THE CAPITAL PENDING AMORTIZATION, BEFORE PAYING THE DUE INSTALLMENT AND RESULTING FROM THE COLUMN INDICATED AS PENDING CAPITAL, WILL BE THE RESULT OF INCREASING BY 1.1% THE 12 MONTH EURIBOR RATE IN THE MAXIMUM TIME SPAN ACCORDING TO THE INFORMATION FURNISHED BY CAIXA CATALUNYA AND TAKEN FROM THE PUBLICATION CORRESPONDING TO THE MONTH PRIOR TO THE REVIEW DATE. TO THIS SUM WILL BE ADDED THE TAXES, COMMISSIONS AND BROKERAGE FEES CORRESPONDING TO TRANSACTIONS OF THIS TYPE. IF NO EURIBOR RATE HAS BEEN DECLARED FOR THAT DAY, THE LAST RATE PUBLISHED WILL BE TAKEN AS REFERENCE. THE RESULTING RATE WILL BE APPLIED FOR THAT YEAR AND SO ON SUCCESSIVELY EACH YEAR UNTIL THE CONTRACT HAS RUN ITS TERM. FOR THE PURPOSES OF THIS CONTRACT EURIBOR IS UNDERSTOOD TO BE THE ANNUAL INTEREST RATE AT WHICH INTERBANK EURO DEPOSITS ARE OFFERED IN THE EUROPEAN MONETARY UNION BETWEEN PRIMARY LENDING INSTITUTIONS AND SAVINGS BANKS, FOR A 12 MONTH TERM, PUBLISHED THROUGH THE BRIDGE TELERATE ON REUTER'S "EURIBOR" AND "MIBOR" SCREENS. 2. SHOULD ANY IMPEDIMENT IN THE EURIBOR PUBLICATION OR CALCULATION PROCESS MAKE IT IMPOSSIBLE FOR THE LESSOR TO ASCERTAIN THE INTEREST RATE TO BE APPLIED ACCORDING TO THE PROVISIONS LAID DOWN IN THE PRECEDING CLAUSE, THE FOLLOWING PROCEDURE WILL BE FOLLOWED: ONCE THE LESSOR HAS ESTABLISHED THE NEED TO ASCERTAIN AND APPLY A SURROGATE INTEREST RATE AND, IN ANY CASE, AFTER FIFTEEN DAYS WITHOUT PUBLICATION OF ANY REFERENCE EURIBOR RATE, THE EQUIVALENT NOMINAL INTEREST RATE WILL BE APPLIED TO THE LAST EFFECTIVE RATE PUBLISHED UNDER THE "INTEREST RATE" HEADING OF THE PRIVATE BANKING CREDIT SYSTEM OF THE STATISTICS BULLETIN OF THE BANK OF SPAIN FOR TRANSACTIONS OF CREDIT ACCOUNTS OF THREE MONTHS TO LESS THAN ONE YEAR. THE SURROGATE INTEREST RATE WILL BE APPLIED FOR AS LONG AS THE CIRCUMSTANCES THAT OCCASIONED ITS USE PERSIST AND A RETURN TO THE NORMAL INTEREST RATE WILL THEN OCCUR AS SOON AS THE CIRCUMSTANCES ALLOW AND THE EURIBOR RATE CAN ONCE MORE BE CALCULATED AND PUBLISHED. NONETHELESS, IF THE SURROGATE INTEREST RATE HAS BEEN APPLIED TO ONE OF THE INTEREST PERIODS, THE SITUATION WILL BE MAINTAINED UNTIL THE END OF THIS INTEREST PERIOD. THE LESSOR WILL INFORM THE LESSEE OF THIS SITUATION AND THE PROCEDURE FOR CALCULATING THE APPLICABLE INTEREST RATE WILL BE REINITIATED. 3. COME THE DATE OF EACH REVISION, THE LESSOR WILL INFORM THE USER OF THE EURIBOR RATE AS SET FORTH ABOVE AND THE CONTRACTUAL INTEREST TO BE APPLIED. ACCORDING TO THE CORRESPONDING RULES FOR THAT SIX MONTH PERIOD, THE INTEREST RATES DETERMINED BY THE FINANCIAL LESSOR, AS SET FORTH ABOVE, WILL BE BINDING ON BOTH LESSOR AND LESSEE, UNLESS THERE IS AN OBVIOUS ERROR. 4. THE FINANCIAL LESSOR WILL ISSUE, CHARGED TO THE FINANCIAL LESSEE, THE CORRESPONDING RECEIPTS FOR THE INSTALLMENTS ARISING FROM APPLICATION OF THE ABOVE RULES, PLUS THE CORRESPONDING VAT, WHICH WILL CONSTITUTE PROOF OF PAYMENT OF THE INSTALLMENTS BY THE LESSEE. 5. FOR MORTGAGE PURPOSES AND WITH REGARD TO THIRD PARTIES, THE INTEREST RATE RESULTING FROM THE APPLICATION OF THE PRESENT CLAUSE SHALL NOT EXCEED BY MORE THAN 5.0 POINTS THAT INITIALLY AGREED UPON. NEVERTHELESS, WITH RESPECT TO THE PERSONAL RESPONSIBILITY OF THE FINANCIAL LESSEE OR ITS GUARANTORS, SAID LIMIT WILL NOT APPLY. LISCAT LEASING CATALUNYA. E.F.C. S.A Grup CAIXA Catalunya MOVABLE GOODS FINANCIAL LEASE CONTRACT NUMBER 034393 2 MODEL APPROVED BY DECISION OF THE GENERAL REGISTER DIRECTORATE DATED 22 MAY 2002 GENERAL TERMS FORM NUMBER PAGE NUMBER 1. NATURE OF THIS CONTRACT THIS FINANCIAL LEASE CONTRACT IS TO BE FORMALIZED UNDER THE AEGIS OF THE STIPULATIONS LAID DOWN IN ADDITIONAL PROVISION SEVEN OF ACT 26/1988 OF 29 JULY. 2. OBJECT AND CHARACTERS 2.1. THE LESSEE WILL RECEIVE THE CONTRACT GOODS IN THE NAME OF LISCAT, THUS CONFIRMING THE OWNERSHIP STATUS OF THE LATTER. THE GOODS DEALT WITH IN THIS FINANCIAL LEASE CONTRACT WILL BE ACQUIRED BY LISCAT IN COMPLIANCE WITH THE EXPRESS INSTRUCTIONS RECEIVED FROM THE LESSEE, WHO HAS CHOSEN NOT ONLY THE SUPPLIER OF THE LEASED GOODS BUT ALSO THE GOODS THEMSELVES, IN SUCH TERMS THAT LISCAT, UPON ACQUIRING THE DOMAIN OVER SUCH GOODS, DOES SO WITH THE EXCLUSIVE PURPOSE OF CONFERRING THE ENJOYMENT AND USE THEREOF ON THE LESSEE, WITH WHICH IT HAD ALREADY AGREED TO ENTER INTO THE FINANCIAL LEASE CONTRACT HEREBY BEING FORMALIZED. THE LESSEE THEREFORE DECLARES AND HEREBY EXPRESSLY ACCEPTS THAT LISCAT WILL FULFILL ITS REMIT RECEIVED FROM THE LESSEE IN THE PROPER AND EXACT TERMS, FOR THE SIMPLE FACT OF HAVING ACQUIRED THE GOODS DEALT WITH HEREIN FOR ASSIGNMENT ON A FINANCIAL LEASE BASIS, EXEMPTING LISCAT FROM ANY TYPE OF LIABILITY DUE TO THE SUBJECTIVE OR OBJECTIVE INADEQUACY THEREOF. THE LESSEE FORMALLY WAIVES THE RIGHT TO MAKE ANY SORT OF CLAIM AGAINST LISCAT, WITHOUT THEREBY BEING ABLE TO DESIST FROM PAYING THE INSTALLMENTS AND FULFILLING THE ESTABLISHED OBLIGATIONS. FOR ITS PART LISCAT ASSIGNS TO THE LESSEE AS MANY RIGHTS AND ACTIONS AS MAY CORRESPOND TO THE PURCHASER, ALLOWING THE LATTER EXPRESSLY TO SUBROGATE INTO THE EXERCISING THEREOF. BY VIRTUE THEREOF, THE LESSEE WILL BE ABLE TO TAKE ACTION AGAINST THE SUPPLIER WITH SUCH ELIGIBILITY AS MAY BE CONFERRED ON THE PURCHASER BY LAW OR UNDER THE PURCHASE CONTRACT. THE LESSEE EXPRESSLY ACCEPTS THE FOLLOWING AS AN ESSENTIAL ELEMENT OF THE BUSINESS AT HAND: IF, BY VIRTUE OF THE CONTRACTUAL NATURE, THE DISCHARGE OF THE PREVIOUS PURCHASE ARRANGEMENT AS A RESULT OF EXERCISING SUCH ACTION SHOULD IN TURN LEAD TO THE DISCHARGING OF THE FINANCIAL LEASE CONTRACT, ANY COMPENSATION TO BE MADE TO THE LESSEE BY LISCAT WILL BE SUBORDINATED TO AND CONDITIONAL ON THE PREVIOUS REFUND OBTAINED BY THE LATTER FROM THE SELLER OF THE GOODS OR WHOMSOEVER WAS BOUND TO MAKE SUCH A REFUND. 2.2. LISCAT WILL BE THE OWNER OF THE GOODS DEALT WITH HEREIN BY VIRTUE OF BEING THE TITULAR PURCHASER THEREOF, CONSERVING FULL PROPERTY RIGHTS THEREOVER UNTIL SUCH TIME AS THE PURCHASE OPTION CONFERRED ON THE LESSEE IN SPECIAL TERM THREE MAY BE EXERCISED. IN ACKNOWLEDGEMENT OF THIS PROPERTY RIGHT THE LESSEE IS BOUND TO: A) REFRAIN FROM SETTING UP ANY CHARGE OR ENCUMBRANCE ON THE LEASED GOODS, SUCH AS MORTGAGES, LIENS, OR ANY OTHER TYPE POSSIBLE IN LAW. B) DECLARE TO ALL THIRD PARTIES THAT INTEND TO DISTRAIN OR SEIZE THE LEASED GOODS THAT THEY ARE THE EXCLUSIVE PROPERTY OF LISCAT, SHOWING THIS CONTRACT FOR THAT PURPOSE. SHOULD THE ATTACHMENT PROCEEDINGS NONETHELESS BE BROUGHT, IT WILL DEMAND THAT ITS DECLARATIONS BE RECORDED IN THE WRITTEN PROCEEDINGS AND THAT MENTION BE MADE THEREIN OF THIS CONTRACT. IT WILL INFORM LISCAT FORTHWITH OF THESE CIRCUMSTANCES SO THAT THE LATTER CAN MAKE DUE ARRANGEMENTS IN DEFENSE OF ITS RIGHTS. C) REFRAIN FROM INCLUDING THE GOODS DEALT WITH HEREIN IN THE BALANCE OF ANY CREDITOR'S MEETING ARRANGEMENTS OR THE BANKRUPT'S ESTATE, BINDING ITSELF EXPRESSLY TO TAKE AS MANY MEASURES AS MAY BE NECESSARY VIS-A-VIS THE BANKRUPTCY AUTHORITIES TO COMPLY WITH THE LEGAL PROVISIONS LAID DOWN IN SUCH CASES FOR GOODS INCLUDED IN A FINANCIAL LEASE CONTRACT. 3. INSTALLATION OF THE LEASED GOODS 3.1. THE COSTS DERIVING FROM THE ASSEMBLY, INSTALLATION, AND COMMISSIONING OF THE LEASED GOODS WILL BE MET EXCLUSIVELY BY THE LESSEE, WHO WILL BE BOUND TO PAY SUCH BILLS AS MAY BE ISSUED FOR THAT PURPOSE BY THE SUPPLIER OR THIRD PARTIES TO COVER THE COSTS DERIVING THEREFROM. 3.2. THE OBTAINING OF SUCH GOVERNMENTAL AND ADMINISTRATIVE LICENSES OR AUTHORIZATION THAT MAY BE NECESSARY FOR INSTALLING, USING OR TRANSFERRING THE LEASED GOODS WILL BE THE RESPONSIBILITY OF THE LESSEE, WHO ACCEPTS EXCLUSIVE LIABILITY FOR SUCH PENALTIES AS MAY DERIVE FROM ANY BREACH OF SAID FORMALITIES. THE LESSEE ALSO HEREBY BINDS ITSELF TO PAY ANY FINES OR PENALTIES OF ANY ILK THAT MIGHT BE IMPOSED THEREON DUE TO THE USE AND ENJOYMENT OF THE GOODS DEALT WITH HEREIN, INCLUDING THOSE DERIVING FROM CIVIL, JUDICIAL, OR ADMINISTRATIVE LIABILITY. SHOULD ANY BREACH BY THE LESSEE OF THE OBLIGATIONS LAID DOWN IN THE ABOVE PARAGRAPHS OBLIGE LISCAT TO PAY THE PENALTIES IMPOSED IN ONE CASE OR THE OTHER, THE LESSEE WILL IMMEDIATELY REIMBURSE THE VALUE OF SAID PENALTIES AND ANY SURCHARGES AND EXPENSES THAT MAY HAVE ARISEN THEREFROM, WITHOUT DETRIMENT TO LISCAT'S RIGHT TO DEMAND THE DISCHARGE OF THIS CONTRACT. 4. TERMINATION OF THE CONTRACT THIS FINANCIAL LEASE ARRANGEMENT WILL CEASE AT THE END OF THE PERIOD LAID DOWN IN SPECIAL TERM 2 HEREOF. WHEN THE CONTRACT HAS RUN IT TERM, AND ON CONDITION THAT ALL CONTRACTUAL OBLIGATIONS HAVE BEEN FAITHFULLY COMPLIED WITH, THE LESSEE WILL BE ENTITLED TO EXERCISE THE PURCHASE OPTION, PROVIDING THIS HAS BEEN NOTIFIED WITH A MINIMUM OF TWO MONTH'S NOTICE BEFOREHAND. THE PURCHASE PRICE OF THE GOODS IS THE VALUE ESTABLISHED AS THE RESIDUAL VALUE IN THE SPECIAL TERMS, TO WHICH ANY TAX INCUMBENT THEREON WILL BE ADDED. IF THE LESSEE DOES NOT EXERCISE THIS RIGHT IT WILL BE ABLE TO OPT BETWEEN: 1. RESTORING THE POSSESSION OF THE LEASED GOODS TO LISCAT IN THE PLACE AND ON THE CONDITIONS DETERMINED BY THE LATTER. THE LESSEE WILL MEET ALL THE COSTS OF THIS POSSESSION-RESTORING PROCEDURE. SHOULD THERE BE ANY DELAY IN THE HANDOVER, THE LESSEE WILL PAY LISCAT A SUM CALCULATED AS FOLLOWS: THE RESULT OF DIVIDING THE PERIODICAL INSTALLMENT BY THE NUMBER OF DAYS OF THE PERIOD, THIS QUOTIENT THEN TO BE MULTIPLIED BY THE NUMBER OF DAYS OF DELAY IN THE HANDOVER. 2. TAKING OUT A NEW FINANCIAL LEASE CONTRACT ON THE SAME GOODS, ON CONDITION THAT THE PARTIES COME TO AN AGREEMENT ON THE CONTRACT TERM, PRICE AND OTHER CONDITIONS; OTHERWISE, THE PROVISIONS OF THE PRECEDING PARAGRAPH WILL BE APPLIED. 5. SPECIAL OBLIGATIONS OF THE LESSEE THE LESSEE BINDS ITSELF TO: A) PAY ALL AGREED INSTALLMENTS AS THEY FALL DUE AND THE HIGHEST AMOUNT OF ANY TAX INCUMBENT THEREON IN LIGHT OF THE PROVISIONS LAID DOWN IN SPECIAL TERM 4 AND GENERAL TERM 10 HEREOF. B) USE THE GOODS DEALT WITH IN THIS FINANCIAL LEASE CONTRACT ONLY FOR THE FOLLOWING PURPOSES: AGRICULTURAL, INDUSTRIAL, COMMERCIAL, SERVICE OR PROFESSIONAL USES. C) USE THE LEASED GOODS WITH ALL DUE DILIGENCE AND CARE AS DICTATED BY THE USE THEY ARE PUT TO. KEEP THEM IN A PERFECT STATE OF USE AND OPERATION THROUGHOUT THE WHOLE TERM OF THIS CONTRACT, WITH THE LESSEE ALWAYS MEETING THE COSTS DERIVING FROM ANY MAINTENANCE AND REPAIR WORK THEY MAY REQUIRE. D) NOT TO ALTER OR REPLACE THE ELEMENTS OR PIECES MAKING UP AN INTEGRAL PART OF THE LEASED GOODS, UNLESS DONE SO WITH OTHERS OF THE SAME CLASS AND MAKE AND FROM THE SAME MANUFACTURER, THEREBY ENSURING THAT THERE IS NO REDUCTION OF THEIR VALUE. SAID ELEMENTS WILL THEN FORM AN INTEGRAL AND INSEPARABLE PART OF THE LEASED GOODS WITHOUT ENTITLING THE LESSEE TO ANY REIMBURSEMENT OR COMPENSATION WHATSOEVER. E) ALLOW THE REPRESENTATIVES OF LISCAT TO ENTER THE SITE WHERE THE GOODS ARE KEPT AT ANY TIME TO CHECK ON THE STATE OF THEIR USE AND UPKEEP. 6. BREACH OF THE OBLIGATIONS TAKEN ON BY THE LESSEE 6.1. THE LESSEE WILL BE DEEMED TO HAVE FAILED TO KEEP ITS OBLIGATIONS IN ANY OF THE FOLLOWING CIRCUMSTANCES: A) IF IT CEASES TO CARRY OUT ITS NORMAL MERCANTILE ACTIVITIES FOR LONGER THAN FOUR MONTHS IN ANY ONE YEAR PERIOD. B) IF AN APPLICATION IS MADE BY THE LESSEE ITSELF OR A LEGITIMATE CREDITOR FOR THE FILING OF ANY SORT OF BANKRUPTCY PROCEEDINGS ALLOWED FOR BY LAW OF IF ANY ACTION FOR PAYMENT AGAINST IT IS SUBSTANTIATED. C) IF ANY OF ITS OBLIGATIONS DERIVING HEREFROM ARE BREACHED, ESPECIALLY THE FAILURE TO PAY ANY RENTAL OR SIMILAR SUM. 6.2. FAILURE TO PAY ANY OF THE FINANCIAL LEASE INSTALLMENTS UPON THEIR FALLING DUE WILL ACCRUE A MONTHLY DELAYED-PAYMENT INTEREST IN LISCAT'S FAVOR OF 2% PLUS ANY REFUND OR ADVANCED-PAYMENT EXPENSES. THE LESSEE WILL BE BOUND TO PAY THIS INTEREST WITH NO FURTHER REQUIREMENT. 6.3. FAILURE TO PAY ANY OF THE INSTALLMENTS UPON THEIR FALLING DUE WILL ENTITLE LISCAT TO CHOOSE BETWEEN: A) DEMANDING THE IMMEDIATE PAYMENT OF THE OVERDUE INSTALLMENTS PLUS THE DELAYED-PAYMENT INTEREST AT THE RATE ESTABLISHED HEREIN AND ALSO ANY COSTS THAT LISCAT MIGHT HAVE INCURRED AS A RESULT OF SAID FAILURE TO PAY AND ACTIONS FOR PAYMENT. B) CONSIDERING THE WHOLE CONTRACTUAL FINANCIAL LEASE PRICE PLUS VAT OR EQUIVALENT CORRESPONDING TAX TO HAVE FALLEN DUE, THUS MAKING PAYABLE IN ADVANCE ALL THE SUMS TO BE PAID THROUGHOUT THE PART OF THE CONTRACT STILL TO RUN ITS TERM. PURSUANT TO ARTICLE 572.2 OF THE CIVIL PROCEEDINGS ACT (LEY DE ENJUICIAMIENTO CIVIL) IT IS EXPRESSLY AGREED THAT THE SUM PAYABLE WILL BE DETERMINED BY THE SIMPLE ARITHMETICAL OPERATION OF ADDING UP THE NOMINAL SUMS OF THE INSTALLMENTS FALLEN DUE AND NOT YET PAID, THE DELAYED-PAYMENT INTEREST ACCORDING TO THE CONTRACT, THE SUM OF THE CAPITAL PORTIONS OF ALL THE INSTALLMENTS STILL TO FALL DUE (WHOSE VALUE WILL ALWAYS BE TAKEN FROM THE TABLE ATTACHED HERETO) PLUS THE VAT OR CORRESPONDING EQUIVALENT TAX CALCULATED ON THIS LAST ITEM. FOR THE EXERCISING OF ANY ENFORCEMENT ACTION, THEREFORE, IT WILL SUFFICE TO PRESENT THIS POLICY OR THE PUBLIC DEED IN WHICH THE CONTRACT IS FORMALIZED, WITH THE CERTIFICATION LAID DOWN IN ARTICLE 517.2 SECTION 5 OF THE CIVIL PROCEEDINGS ACT IN THE CASE OF POLICIES AND ANOTHER CERTIFICATE FURNISHED BY LISCAT SHOWING THE BALANCE OWED BY THE LESSEE. THE COMMISSIONER OF OATHS INTERVENING AT THE BEHEST OF LISCAT WILL CERTIFY THAT THE NET AMOUNT PAYABLE IS THE RESULT OF THE SETTLEMENT MADE BY THE LESSOR IN THE FORM AGREED BY THE PARTIES IN THE CONTRACT ITSELF. C) DECLARING THE CONTRACT TO BE DISCHARGED, REQUIRING THE FINANCIAL LESSEE TO HAND OVER IMMEDIATELY THE GOODS DEALT WITH THEREIN. LISCAT IS THEREUPON EMPOWERED TO RECOVER THE GOODS FROM THE FINANCIAL LESSEE UPON SIMPLE REQUIREMENT. THE FINANCIAL LESSEE WILL IN ALL CASES BE EXCLUSIVELY RESPONSIBLE FOR MEETING THE COSTS OF DISASSEMBLY, EXTRACTION AND TRANSPORT. IN THIS CASE THE FINANCIAL LESSEE WILL ALSO BE BOUND TO PAY SUCH RENTALS AS HAD FALLEN DUE UP TO THE DATE OF THE EXTRACTION, PLUS AN ADDITIONAL SUM AS A PENAL CLAUSE, EQUIVALENT TO FIFTY PERCENT OF SUCH RENTALS STILL TO FALL DUE. THE FINANCIAL LESSEE WILL ALSO BE ESPECIALLY HELD LIABLE FOR ANY DETERIORATION IN THE GOODS APART FROM NORMAL WEAR AND TEAR. PURSUANT TO THE PROVISIONS LAID DOWN IN ADDITIONAL PROVISION ONE OF ACT 26/1998, THE ADDRESS FOR RETURNING THE POSSESSION OF THE GOODS BY THE FINANCIAL LESSEE IS UNDERSTOOD TO BE THE ADDRESS OF THE FINANCIAL LESSOR AS STATED IN SPECIAL TERM 6.2 HEREOF. 7. LIABILITY OF THE LESSEE. CO-OWNERSHIP THE LESSEE PERSONALLY RESPONDS WITH ALL ITS PRESENT AND FUTURE PROPERTY FOR COMPLIANCE WITH ALL THE OBLIGATIONS DERIVING HEREFROM AND ESPECIALLY THE OBLIGATION TO PAY THE AGREED MONTHLY SUMS. SHOULD THERE BE TWO OR MORE FINANCIAL LESSEES, THEY SHALL HOLD THEMSELVES JOINTLY LIABLE FOR MEETING THE OBLIGATIONS, EXPRESSLY WAIVING ALL THE BENEFITS OF THE LEGAL EXCEPTIONS OF EXCUSSION AND DIVISION. 8. ASSIGNMENT OF RIGHTS THE LESSEE WILL NOT BE ENTITLED TO ASSIGN OR DISPOSE OF ITS RIGHTS AND OBLIGATIONS HEREUNDER, NOR ALLOW ANY THIRD PARTY TO SUBROGATE INTO THEM IN ANY WAY, WITHOUT THE EXPRESS CONSENT IN WRITING OF LISCAT. LISCAT IS ENTITLED TO ALLOW ANY THIRD PERSON TO SUBROGATE INTO ITS LEGAL POSITION, PROVIDING THAT SUCH LEGAL REQUISITES OBTAIN AS MAY BE APPLICABLE HEREUNDER, THEN BEING BOUND TO INFORM THE LESSEE IN WRITING OF THIS SUBROGATION. 9. INSURANCE ON THE LEASED GOODS THE LESSEE WHOLLY AND EXCLUSIVELY ASSUMES THE RISK OF THE TOTAL OR PARTIAL LOSS OF THE LEASED GOODS, WHATEVER THE CAUSE THEREOF, AND WILL ALSO BE HELD EXCLUSIVELY LIABLE FOR ALL MATERIAL DAMAGE OR BODILY HARM THAT MIGHT BE CAUSED TO THIRD PERSONS BY THE GOODS LEASED HEREUNDER. THE LESSEE BINDS ITSELF TO TAKE OUT AN INSURANCE POLICY AT ITS OWN COST AND ON ITS OWN RESPONSIBILITY TO COVER SAID RISKS, INCLUDING THOSE OF UNFORESEEN CIRCUMSTANCES OR FORCE MAJEURE. THE INSURANCE POLICY/IES TAKEN OUT WILL MAKE EXPRESS MENTION OF LISCAT AS THE BENEFICIARY OF ANY COMPENSATION THAT MIGHT DERIVE THEREFROM. LISCAT WILL BE ENTITLED AT ANY MOMENT TO REQUEST PROOF FROM THE LESSEE THAT IT IS CURRENT IN THE PAYMENT OF THE PREMIUMS OF SAID INSURANCE, WHEN THEY ARE PAID DIRECTLY BY THE LATTER. LISCAT WILL BE ENTITLED TO PAY THE PREMIUMS AND ACCESSORY COVERAGE TO THE INSURANCE COMPANY ON THE LESSEE'S ACCOUNT. 10. TAXES, FEES AND OTHER COSTS THAT CAN BE PASSED ON TO CLIENTS 10.1. THE LESSEE WILL BE RESPONSIBLE FOR PAYING ALL COSTS, COMMISSIONS, TAXES, DUTIES, FEES AND SPECIAL CONTRIBUTIONS INCUMBENT ON THE EXECUTION OF THIS CONTRACT, ON THE TENURE OF THE GOODS, THE USE THEREOF AND THE TERMINATION OF THE LEGAL RELATION HEREBY INAUGURATED. 10.2. EACH INSTALLMENT INTO WHICH THE TOTAL PRICE IS BROKEN DOWN WILL BE LIABLE TO VALUE ADDED TAX (VAT) AT THE RATE INDICATED IN SPECIAL TERM 5. IT IS THEREFORE HEREBY EXPRESSLY AGREED THAT, SHOULD THE FISCAL SYSTEM OBTAINING AT THE TIME OF SIGNING THIS CONTRACT BE CHANGED, THE NEGATIVE OR POSITIVE DIFFERENCE WILL BE PASSED ON TO THE LESSEE UNLESS NEW LEGISLATION FORBIDS IT. 10.3. ATTACHED HERETO IS A SCHEDULE SHOWING THE FEES, CONDITIONS AND EXPENSES THAT THE LESSOR IS ENTITLED TO PASS ON TO CLIENTS. 11. DESIGNATION OF ABODES THE LESSEES AND GUARANTORS DESIGNATE THEIR ABODE STATED AT THE HEAD HEREOF AS THE ADDRESS FOR RECEIVING ANY SUMMONSES AND NOTIFICATIONS THAT MAY ARISE HEREFROM PURSUANT TO ARTICLE 572.2 OF THE CIVIL PROCEEDINGS ACT. 12. AUTHORIZATION THE SIGNATORIES OR PARTIES TO THIS CONTRACT HEREBY AUTHORIZE LISCAT TO INCORPORATE THEIR PERSONAL DATA INTO COMPUTERIZED FILES FOR WHICH LISCAT ITSELF IS RESPONSIBLE, WITH THE PURPOSE OF CONTROLLING AND REGISTERING THE OPERATIONS IN THEIR NAME AND IN GENERAL TO FACILITATE CORRESPONDENCE BETWEEN THEM, THE OFFERING OF NEW PRODUCTS AND THEIR CONTRACTUAL RELATIONSHIP. THESE DATA MAY THEN BE ASSIGNED TO CAIXA D'ESTALVIS DE CATALUNYA, A GROUP TO WHICH THE LESSOR BELONGS, AND TO OTHER COMPANIES WITHIN THIS GROUP FOR THE PURPOSES DESIGNATED ABOVE AND FOR ANY OTHER LEGITIMATE PURPOSE OF ASSIGNEE AND ASSIGNOR. THE DATA INCLUDED IN THIS DOCUMENT HAVE BEEN INCLUDED THEREIN PERFORCE AS ESSENTIAL DATA FOR MAINTAINING THE OPERATIONAL RELATIONSHIP WITH THE SIGNATORY OR PARTY THERETO, WHO WILL BE ENTITLED TO READ, RECTIFY AND ERASE THIS DATA. THE COMPANY WILL BE ENTITLED TO KEEP THEM UNTIL SUCH TIME AS THE ACTIONS DERIVING FROM THIS CONTRACT HAVE ENDED. 13. THIS CLAUSE WILL BE APPLICABLE ONLY FOR CONTRACTS FORMALIZED IN THE SELF-GOVERNING COMMUNITY OF CATALUNYA. THE LINGUISTIC POLICY ACT (LEY DE POLITICA LINGUISTICA) 1/98 OF 7 JANUARY. THE SIGNATORIES TO THIS CONTRACT EXPRESSLY AGREE THAT IT BE WRITTEN IN CASTILIAN SPANISH. THE PARTIES HEREBY EXPRESS THEIR CONFORMITY WITH THIS CONTRACT, WHICH THEY EXECUTE AND SIGN IN THE PLACE AND ON THE DATE INDICATED AT THE HEAD THEREOF, IN AS MANY COPIES AS THERE ARE PARTICIPANTS, EACH RECEIVING ONE COPY. In MADRID on 7 NOVEMBER 2003 In MADRID on 7 NOVEMBER 2003 LEASING CATALUNYA E.F.C. S.A. THE FINANCIAL LESSOR In MADRID on 7 NOVEMBER 2003 /s/ Jose Ignacio del Barrio Gomez /s/ Ignasi Martin Morales THE GUARANTOR(S) I HEREBY CERTIFY SAME The parties and signatories of the present document agree to sign on this page only. I, the notary, hereby certify that each of the 3 copies comprises 14 pages, each one signed and sealed by me (Ministerial Order of 28 May 1998) FERNANDO MOLINA STRANZ NOTARY PUBLIC OF MADRID LISCAT GRUP CAIXA CATALUNYA TELVENT HOUSING, S.A. Valgrande, 6 28100 ALCOBENDAS Madrid on 7 November, 2003 Dear Sirs, To round out the movable property financial lease contract executed today, and to clear up some points that you have enquired about, we hereby inform you of the following: ONE. Obviously everything laid down as special terms in this contract, due to their special nature, overrides anything laid down as general terms thereof. In each case, therefore, the special terms will take precedence over the general terms. TWO. With reference to the provisions laid down in general term 5 e) of the contract, we inform you that LEASING CATALUNYA EFC SA is in all cases bound to give a minimum notice of 20 days. THREE. With reference to the provisions laid down in general term 6, we also inform you that in the event of a failure to pay any of the contractual installments, you will be given a grace period of thirty days to pay same, incurring the corresponding expenses and delayed payment interest. Only after this time has elapsed without the late payment being forthcoming will the procedure laid down in sections b) and c) come into effect. This in no way entails a novation or modification or specific modification of such powers. FOUR. In reference both to the special term 6.3. and the general term 8 hereof, it is hereby established that LEASING CATALUNYA EFC S.A. will be entitled to allow subrogation into its legal position only with the express authorization of the financial lessee, and on condition that the latter has faithfully complied with all its contractual obligations. In witness whereof, for such purposes as it may serve, we hereby sign this on the date and in the place indicated at the head thereof. LEASING CATALUNYA EFC SA. /s/ FERNANDO MOLINA STRANZ NOTARY PUBLIC OF MADRID Fontanella, 5-7, 4degrees - 08100 Barcelona - Tel 933 172 016. Fax 933 172 638. E-mail: liscat@liscat.com - www.liscat.com EX-10.7 17 l07997exv10w7.txt FINANCIAL LEASE CONTRACT FOR MACHINERY ING LEASE (SPAIN) E.G.C., LTD. EXHIBIT 10.7 FINANCIAL LEASE CONTRACT FOR MACHINERY 900334-FL-0 Madrid, December 30, 2002 ON THE ONE HAND, MR. JOSE IGNACIO DEL BARRIO GOMEZ, National Identity Document 28854279-C ON THE OTHER HAND, MS. CRISTINA PALENCIA JORGE, National Identity Document 416282-M MR. JOSE ANTONIO LOZANO MELLADO, National Identity Document 260-0079-K AND ON THE OTHER HAND, MR. MIGUEL ANGEL FERNANDEZ MORENO, National Identity Document 51356303-V APPEARING a) MR. JOSE IGNACIO DEL BARRIO GOMEZ, National Identity Document 28854279-C, for and on behalf of the Company CARRIERHOUSE, S.A., Tax Identification Number A- 82232448 with registered office in calle Isabel Collbrand no. 8, Madrid, recorded in the Madrid Mercantile Register, folio 81, volume 13891, sheet no. M-227370. He acts by virtue of power of attorney granted to him in a deed authorized by the Notary Public Mr. Carlos Perez Baudin, on November 14, 2000, protocol number 3694. Hereinafter, the financial lessee. MS. CRISTINA PALENCIA JORGE, National Identity Document 416282-M and MR. JOSE ANTONIO LOZANO MELLADO, National Identity Document 260-0079-K, for and on behalf of ING Lease (Espana) E.F.C., S.A., with Tax Identification Number A08350225, with registered office at Av. Diagonal 605, 9a Planta, Barcelona, RECORDED in the Barcelona Mercantile Register at folio 164, volume 27034, sheet no. B- 5378, entry number 104, and in the Special Register for Credit Entities for the Bank of Spain, with number 4709. ING LEASE (SPAIN) E.G.C., LTD. Authorized to make this grant are MS. CRISTINA PALENCIA JORGE, National Identity Document 416282-M and MR. JOSE ANTONIO LOZANO MELLADO, National Identity Document 2600079-K, by virtue of power of attorney granted in their favor on November 3, 1998, and authorized by the Notary Public Mr. Josep Alfons Lopez Tena (protocol number 2304), recorded in the Barcelona Mercantile Register, Volume 29851, Folio 9, Sheet B- 5378, entry 118. Hereinafter the financial lessor. MR. MIGUEL ANGEL FERNANDEZ MORENO, National Identity Document 51356303-V, for and on behalf of ABENGOA, S.A. (in its capacity as guarantor of CARRIERHOUSE, S.A.) with Tax Identification Number A41002288 with registered office in Avda. De la Buhaira, no. 2, Seville, by virtue of Special Power of Attorney for these proceedings granted in his favor and a COPY OF WHICH THE PARTIES ATTACH TO THIS AGREEMENT AS AN INSEPARABLE PART THEREOF. Those appearing acknowledge that each other has sufficient legal standing to enter into this Financial Lease Contract Deed ("lease") pursuant to the following standard and special conditions that have been duly acknowledged and accepted by the parties prior to these proceedings. SPECIAL CONDITIONS: ONE.- PURPOSE The financial lessee takes a financial lease ("lease") from the financial lessor of assets owned by the latter, details of which are shown in the invoice, a copy of which is attached hereto. TWO.- OWNERSHIP OF THE ASSETS The assets described above are the exclusive property of the financial lessor, who grants to the financial lessee by virtue of this contract the right to use them pursuant to the specifications of the manufacturer of the assets and pursuant to the conditions established herein. The financial lessee acknowledges that it has received the assets in perfect condition and entirely to its satisfaction, being responsible for all expenses of delivery, return, withdrawal and transport thereof, and likewise the expenses of assembly, installation and startup. THREE.- LOCATION OF THE ASSETS The assets that are the subject matter of this contract are located in the buildings in Calle Isabel Collbrand, Fuencarral, Madrid, Spain; at number 6 Calle Valgrande, Alcobendas, Madrid, Spain; and in Calle Acero, Barcelona, as detailed in the note included in the bill of sale. ING LEASE (SPAIN) E.G.C., LTD. The financial lessee must communicate any changes of location of the leased assets with the financial lessor in writing prior to any such change. FOUR.- DURATION OF THE CONTRACT The present contract is valid for the period extending from the present day until June 30, 2006, at which time it is provided for that, if so desired, the financial lessee shall be able to exercise the purchase option right conferred on it, the aforementioned deadline deemed to be fixed and irrevocable, without prejudice to any early termination thereof on any of the grounds outlined in this contract. FIVE.- COST The contractual price of the financial lease, excluding the residual value or the sales price in exercising the purchase option right shall be 10,854,063.77 Euros plus the corresponding VAT, without prejudice to interest rate revisions, to be discussed below. Under the present contract, the financial lessee is obligated to pay the financial lessor periodic installments, the initial amounts of which are detailed in Schedule 1 of this contract. The schedule shows the break down of, among other items: a) The portion of each installment that corresponds to the recovery of the cost of the asset on the part of the leasing agent, excluding the value of the purchase option, b) the agreed-upon financial charge, and c) the Value-added Tax. For each installment to be paid, the financial lessor will remit the corresponding bill which, once paid by the financial lessee, will constitute documentary proof of installment payment. The monetary amount of the first twelve (12) monthly installments will be fixed and invariable, equal to those specified for each one in the aforementioned schedule. The monetary amount of the remaining monthly payments will be variable and will be calculated anew according to the developments of the EURIBOR interest rate scale, the operation and functioning of which both parties are acquainted. The installment payments will be revised annually, with each revision affecting the installments for the following period. To this end, on the due date for the last installment payment from the period prior to that which is to be revised, or on the immediately preceding working day should the due-date be a holiday or Saturday, the financial lessor will obtain the current EURIBOR interest rate for that day and communicate the new installment payments to be made during the next period to the lessee. For the purpose of the aforementioned, the EURIBOR (Euro Interbank Offered Rate) is understood as the interest rate promoted by the European Banking Federation located in Brussels each day as valid for the contracting of deposits in EUROS and which constitutes the rate at which a primary lending bank is offered 12 month deposits within the area of the European Union by another primary bank. These rates are published at ING LEASE (SPAIN) E.G.C., LTD. 11:00 C.E.T. on page 248 of Telerate and on the EURIBOR01 screen of Reuters two working days prior to their effective date. To these rates will be added, if applicable, brokerage expenses or commissions and any other fees, expenses, or taxes. "Working day" is defined solely and exclusively herein as a day in which the TARGET system functions within the interbank market. If for any period the interest rates cannot be determined in accordance with the procedure described above, the interest rate offered by the primary banks within the European Banking Federation in deposits in EUROS will be used in lieu of the EURIBOR interest rate for a principal amount similar to that of the outstanding capital repayable under the leasing contract and for a period similar to that mentioned above. Should the EURIBOR reference disappear or no longer be published for any reason, the parties agree to adopt as a substitute index that which is legally established by the competent authorities in monetary matters within the European Union, or if applicable, the Bank of Spain or the Ministry of the Economy and Finance, in that order. To calculate the monetary amount of the variable installment payments corresponding to the period being revised, for each installment the amount that appears in the column marked "Recovery of Asset Cost" from the aforementioned schedule will be used and added to the financial charges resulting from the application of the new interest rate to the outstanding capital of the preceding period. The new interest rate will be equal to the EURIBOR (with the brokerage expenses and other items mentioned above), plus a margin or differential of 1.10 net percentage points. For this, the following formula will be used: FORMULA FOR CALCULATING VARIABLE INSTALLMENT PAYMENTS: r Ci = RCi + CP(i-1) * - , where n Ci = Installment payment number i. RCi = The amount of the recovery of the cost of the asset corresponding to payment number i, detailed in the list of payments and outstanding capital found in the accompanying schedule. CP(i-1) = The outstanding capital pending repayment under the present contract once the installment payment prior to installment number i, that is, installment number (i - 1), has been paid, as indicated in the aforementioned appendix. r = (EURIBOR + margin) * 365/360, rounded to the next highest multiple closest to 1/8 of one per cent, with EURIBOR and "margin" having the definitions given above. Should the period of interest refer to a leap year, the applicable formula will be as follows: ING LEASE (SPAIN) E.G.C., LTD. (EURIBOR + margin) * 366/360 , with the same rounding as described above. n = number of payments made annually. To the resulting payments will be added the VAT (or the equivalent applicable tax), according to the rate in force at that date. SIX.- FORM OF PAYMENT The financial lessee will make the payments and pay all other related monetary amounts in the conditions outlined in point FIVE in the following fashion: The financial lessor will present the corresponding bill as a direct debit to the FORTIS BANK branch office located in Calle Jose Ortega y Gasset no. 29, 6th floor; 28006 MADRID; account number 0167-0216-49-205401101. SEVEN.- FISCAL REGIME For the sole purpose of VAT, this contract is hereby considered to be a service rendered, with the financial lessee being obligated to pay the financial lessor the legally stipulated tax chargeable for said service at the moment it is due in the manner and at the rate provided for by law. EIGHT.- PURCHASE OPTION The financial lessor concedes the right to the option to purchase the assets which are the subject-matter of this contract to the financial lessee, who accepts. This option may be exercised by the financial lessee at the end of this contract, once the total of all payments detailed herein have been made by their respective deadlines, by paying a Residual Value tariff of 1 EUR plus the applicable taxes. In the case that the financial lessee is interested in exercising, at the proper time, the purchase option thus conceded, and without this involving any obligation on the part of the lessee to do so, the financial lessor will present for payment a bill due on JUNE 30, 2006 for the Residual Value amount of 1 EUR plus the applicable taxes, which will be considered null and void should the financial lessee not be interested in exercising his/her right to this option, subject to a certified notification on the part of the lessee to the financial lessor at least 30 days prior to the aforementioned deadline. The payment of the Residual Value does not necessarily presuppose that all payment installments have been made. In the case that the financial lessee pays the Residual Value without having previously made each and every installment payment in this contract along with the applicable fees and taxes, it will be considered a payment toward the existing debt, such that the purchase option as described in this clause cannot be thusly exercised. Should the financial lessee acquire the assets that comprise the object of this contract exercising the purchase option conceded herein, the lessee thus accepts from the present ING LEASE (SPAIN) E.G.C., LTD. time the current physical state of the said assets, the lessee having assumed total responsibility for their maintenance and upkeep. Should the financial lessee choose not to exercise the purchase option conceded herein, he or she will proceed to return the assets in good condition and without more wear than expected from normal use once the period of the contract has expired and at the location indicated by the financial lessor. The financial lessee is responsible for all expenses incurred by said return except in the case whereby both parties mutually decide to formalize a new financial leasing contract of the same assets in the conditions deemed appropriate by both parties. NINE.- COMMISSIONS APPLICABLE TO THE PRESENT CONTRACT The parties, by mutual agreement, agree to modify in part the commissions applied to the present contract in the manner indicated below: (a) Arrangement fee: 0.25% of the total amount of the calculated cost of the operation, to be paid once only at the beginning of the contract, amounting to a sum of 24,999.70 Euros, plus the corresponding VAT at the rate currently in force, namely 16%, which comes to a sum of 3,999.95 Euros __________________________________ _______________________________________________ (b) Origination fee: 0.20% of the amount corresponding to the outstanding capital at the beginning of the contract and 0.20% annually on each of the dates agreed upon for the revision of the applicable interest rates for the present contract as applied to the outstanding capital as of the said dates. This fee will be paid at the beginning of the contract and henceforth annually on the dates agreed upon in the present contract for revising the applicable interest rates. The financial lessee will pay at the beginning of the contract the first portion of said fee, i.e. 19,999.76 Euros, plus the corresponding VAT at the rate currently in force, namely 16%, which comes to a sum of 23,199.72 Euros _________________ To those items not modified by the present Specific Condition, the fees to be applied are those stipulated under the Standard Conditions and in the Brochure of Tariffs and Commissions included with the present contract. TEN. DISPUTES The parties expressly agree that in the event of dispute in relation to the provisions of these special conditions and the standard conditions attached, the provisions of the special conditions shall prevail. ELEVEN. EXPRESS SUBMISSION Waiving their own forum, the parties submit to the competent jurisdiction of the courts of the city of BARCELONA the settlement of any dispute between the parties concerning the interpretation or performance of this contract. TWELVE - UNDERWRITING ING LEASE (SPAIN) E.G.C., LTD. The company ABENGOA, S.A. underwrites without limitation and jointly and severally on a global basis and without any restrictions the performance by the financial lessee of all obligations vis-a-vis the financial lessor contracted by the lessee as a consequence of the financial lease contract, all of which with express waiver of the benefits of prior excussio/discussion, order of priority and division. ING LEASE (SPAIN) E.G.C., LTD. GENERAL CONDITIONS 1. NATURE AND PURPOSE OF THIS CONTRACT The parties accept the stipulations of this contract, within the framework established by Additional Provision 7 of Law 26/1988 of July 29, and by the Article 128 of Law 43/1995 of December 27, by which this present financial lease contract is commercial in nature, and its purpose is the grant of the use of the assets indicated in the special conditions of this contract, in exchange for consideration consisting of the periodic payment of the installments specified therein, including at the end thereof, a purchase option for the financial lessee. 2. CHARACTER AND TERM ING Lease (Spain), E.F.C., S.A., hereinafter the financial lessor, recorded at number 4709 of the Register of Credit Entities of the Bank of Spain, grants to the financial lessee the use and enjoyment of the assets specified in the special conditions of this contract, for the time specified in the above-mentioned special conditions and by means of payment of the installments specified in Schedule Number 1. The financial lessor has full ownership by purchase of the assets constituting this contract and has full legal and beneficial title to them until such time as such assets are transferred to the financial lessee by exercise of the purchase option granted to it. The assets granted under financial lease have been acquired by the financial lessor in fulfillment of express instructions received from the financial lessee, which has chosen both the supplier of the assets and the actual assets being the subject matter of the contract, with the sole and exclusive aim of proceeding to the granting thereof, the financial lessee declaring that it is fully in agreement with the receipt of the assets delivered to it. As a consequence, the financial lessee exonerates the financial lessor of all liability for any harm it may suffer as a consequence of the inappropriateness, malfunctioning, breakdown or any other foreseeable circumstance or condition of the assets acquired by the financial lessor and now assigned in financial lease. For its part, the financial lessor assigns to the financial lessee all rights and actions that legally correspond to the purchaser of the above-mentioned assets by reason of sale-purchase. This contract shall be for a duration that is equal to the period between the date of signing hereof and the date on which the exercise of the purchase option is provided for, such time period being deemed fixed and irrevocable, without prejudice to the provisions of section b) of Standard Condition 5 and that the financial lessor may deem it to be terminated in advance in the event of breach by the financial lessee of its obligations. 3. SPECIAL OBLIGATIONS OF THE FINANCIAL LESSOR AND THE FINANCIAL LESSEE 3.1. OBLIGATIONS OF THE FINANCIAL LESSOR ING LEASE (SPAIN) E.G.C., LTD. The financial lessee acknowledges that the provision of the financial lessor has been consummated by assignment to it of the use and enjoyment of the assets acquired by the latter in fulfillment of the instructions of the financial lessee, without prejudice to the provisions of Standard Condition 5. Upon completion of the acquisition and assignment of use and enjoyment of the assets, the financial lessor is exonerated from all obligation within the framework of the legal transactions which this contract gives rise, without other exceptions beyond: a) Ensuring the financial lessee's undisturbed and quiet enjoyment and uninterrupted possession of the assets making up the subject matter of this contract, inasmuch as this depends on the financial lessor. Any other disruptions caused by a third party shall be combated by the financial lessee either in its capacity as financial lessee and party in possession of the assets, or in its capacity as assignee of the rights and actions corresponding to the purchaser of the assets, by virtue of the provisions of the penultimate paragraph of Standard Condition 2. b) Transferring ownership of the assets if, pursuant to the contract, the financial lessee exercises the purchase option right. 3.2 OBLIGATIONS OF THE FINANCIAL LESSEE a) The financial lessee shall whilst this contract remains in force be obliged to take custody of, and maintain and keep, at its own expense, the assets making of the subject matter of the contract in a perfect state of repair and at the location specified in the special conditions of the contract. To this effect, it must take whatever measures are necessary with due diligence for the correct functioning of the assets at all times whilst this contract is in force. b) The financial lessee may not, save with express and written consent from the financial lessor, change or replace the pieces or parts making up the assets, with the sole exception that it does so by means of the use of other pieces or parts of the same type and brand and from the same manufacturer. It also shall not relocate the assets to a new address without express written authorization from the financial lessor. Any additional elements incorporated in any way to the assets making up the subject matter of this contract whilst the contract remains in force shall automatically become the property of the financial lessor, without the latter conferring on the financial lessee the right to receive financial compensation of any kind from the financial lessor. c) The financial lessee commits itself to employ the assets making up the subject matter of this contract for business or professional purposes and that the use thereof shall be by the financial lessee itself or by whoever is expressly authorized by it, in the business, always without prejudice to the direct liability of the financial lessee vis-a-vis the financial lessor for improper use, this being defined as a use that is not in accordance with the nature and design of the assets making up the subject matter of this contract. ING LEASE (SPAIN) E.G.C., LTD. Consequently, the financial lessee may not, without prior written authorization from the financial lessor, sublease, assign, transfer or in any way subrogate to any individual or legal entity the rights and obligations arising from this present contract. d) From the date of signing of this contract the financial lessee is obligated: * to arrange at its own expense with a prime insurance company those insurance policies insuring and protecting the assets making up the subject matter of this contract that are necessary to ensure against all risks threatening the upkeep and conservation of the assets, including those of inevitable accident and force majeure and civil liability arising from the holding thereof or the use thereof vis-a-vis third parties. For these purposes, the amount of the insurance must cover, as a minimum, the acquisition value of the assets making up the subject matter of this contract, including an automatic revaluation clause for the capital insured to keep it in line with the actual value of the assets. * To designate the financial lessor as the beneficiary of the insurance policies. Notwithstanding the above, the financial lessee assumes vis-a-vis the financial lessor any liability that may arise for loss, damage or injuries suffered by persons or things as a consequence of the use of the assets, together with the risks of damage and full or partial loss of the assets making up the subject matter of this contract, regardless of the cause thereof, inevitable accident or force majeure and regardless of whether or not they are covered by the insurance that the financial lessee is obligated to maintain, and likewise theft, fire, flood, robbery, despoilment thereof or deterioration or loss thereof or any other cause. In the event of a total/full loss, the financial lessor shall receive the corresponding indemnification, the financial lessee being obligated if necessary to make up the difference between the indemnification paid by the insurance company and the total amount of capital pending payment in the transaction. If, on the contrary, the indemnification is greater than the amount of capital pending receipt, the excess shall be delivered by the financial lessor to the financial lessee. In the event of partial loss, if the assets leased are rendered unusable for the use for which they are designed, the financial lessee has the option to terminate the lease contract, from such time as the financial lessor has received the indemnification and, where necessary, the above mentioned difference. * To take out insurance covering all personnel carrying out work in/on the leased assets. * To comply with all legal obligations relating to hiring of employees, worker health and safety etc., in relation to personnel carrying out work in/on the leased assets. * To notify the financial lessor within a period of 24 hours of any loss or damage incurred to the assets, the financial lessee being liable for any loss that could arise for the financial lessor if it breaches this obligation. * The financial lessee must justify compliance with the above-mentioned obligation and insure the assets, by means of sending to the financial lessor a copy of the insurance ING LEASE (SPAIN) E.G.C., LTD. policy entered into (or of any policies amending or replacing this policy in the future) and on an annual basis the receipts evidencing payment of the relevant premiums. e) The financial lessee must permit the representatives of the financial lessor to have access at any time to the place where the leased assets are located, with the aim of checking on their state of use and upkeep, provided that advance notice is given by the lessor of at least 48 working hours. f) The financial lessee is obligated to declare, before whoever it may concern, that the assets making up the subject matter of this contract are owned by the financial lessor and likewise to take the proper action to defend such ownership by the financial lessor and to avoid any dispossession in relation thereto. The financial lessee commits itself to notify within a maximum period of 24 hours of any challenge there may be to the proper legal title of the financial lessor. g) The financial lessee commits itself not to contract credits, loans or obligations of any kind secured on the leased assets, and likewise to refrain from including the assets making up the subject matter of this contract within its assets in the event of suspension of payments and to prevent them being included in the total assets held in the event of bankruptcy. h) The financial lessee commits itself to make express mention in the title when constituting any lien that it may arrange over the premises, warehouse or building where the leased assets are installed that the above-mentioned assets do not belong to the financial lessee, but rather to the financial lessor, and therefore under no circumstances can same be affected by any guarantee that is constituted. However, the financial lessee must notify the financial lessor in writing of the constitution of the above-mentioned guarantee within a period of 10 days from constitution thereof. 4. PAYMENT ARRANGEMENTS FOR THE FIRST PAYMENT INSTALLMENT In order to comply with the provisions of Article 128 of Law 43/1995, of December 27, (which establishes that the annual amounts recovered of the cost of a redeemable/amortizable asset must remain the same or increase throughout the period of the contract) if the amount of the first of the lease installments agreed for the price of the financial lease and indicated in the Special Conditions of this contract is greater than the rest of the ordinary installments, the amount of said initial installment, for the purposes of its declaration by the lessee party as a tax-deductible expense must be distributed among the installments still to be paid, such that a consistent or increasing amount is maintained in the figure for recovery of the cost of the asset. 5. BREACH OF THE OBLIGATIONS OF THE FINANCIAL LESSOR AND THE FINANCIAL LESSEE The parties reiterate that the financial lessor has already fully complied with its obligations in this present reciprocal contract, and therefore it is not legally possible to foresee any breach on its part, given that it has carried out all provisions that it was obliged to carry out, except those of ensuring that the financial lessee has quiet and ING LEASE (SPAIN) E.G.C., LTD. undisturbed enjoyment of the leased assets and of transferring ownership should the lessee exercise the purchase option right. It shall be understood that the financial lessee breaches its obligations in the following circumstances: a) If it does not pay when due the periodical installments agreed and the relevant insurance premiums and taxes that may accrue in relation thereto. b) If it ceases its normal activities for more than four months within the course of one year, if it is declared in a situation of suspension of payments, creditors' arrangement, in bankruptcy or in any insolvency or comparable situation. c) If it fails to fulfill any other of the obligations established in this contract. 6. CONSEQUENCES OF BREACH Failure to make payment of any one of the periodical installments and other items when due, where these are payable by the financial lessee, shall cause the accrual in favor of the financial lessor of late payment interest at the rate resulting from adding five percentage points to the current interest rate at any given time of this contract, where variable interest rate transactions are concerned. In the case of fixed interest rate transactions, the above-mentioned late payment interest shall be calculated by adding five percentage points to the interest rate agreed in the contract itself. Likewise, for each installment not paid, the financial lessee agrees to pay as an installment payment return fee, the amount stipulated in the tariff brochure which is attached to this contract, plus any taxes that may correspond to it. Such a fee shall be payable on a once only basis and the time of the devolution. If the financial lessee breaches any of its obligations, and in particular, that of paying the lease installments, the financial lessor may choose, without prejudice to the use of any other legal actions, between: a) Deem the financial lease contract to have expired. The amount being the subject matter of the claim from the financial lessee shall be that resulting from adding together the past-due and unpaid installments, the capital pending of the financial lease and the VAT or equivalent tax, thus bringing forward the maturity of the amounts that would be paid during the contractual period still to run. 20 percent of the capital pending repayment on said date shall be added to the amount resulting from said arithmetic calculation as a penalty clause. It is agreed that the amount payable in the event of enforcement shall be the amount specified in the certificate issued by the financial lessor, deeming to be past-due, liquid and payable, in its capacity as credit entity, the sum of the amounts owed, calculated pursuant to the indicated procedure, which shall accrue the late payment interest agreed in this contract. The financial lessee may avoid (enervar) the indicated early ING LEASE (SPAIN) E.G.C., LTD. repayment, bringing itself fully up to date in the payment or fulfillment of its obligations (including payment of late payment interest, notification expenses and return fee within a period of eight days from receipt of the authenticated notification. Likewise the financial lessor may choose to partially execute this present contract. In this event, and for execution thereof, it must attach the original thereof to the above-mentioned mandatory certificates and, for clarification purposes, the amount agreed as liquid and payable shall be that amount that results from adding together the amount of unpaid installments, with expenses thereof, return fee and late payment interest. b) Declare the financial lease agreement terminated. In this event, the financial lessee shall be required to return the assets to the financial lessor within a maximum period of eight days calculated from the receipt of the authenticated notice, instigating the contractual termination. To this effect, in the event that the financial lessee breaches the obligation to return the assets, it hereby authorizes the financial lessor to proceed directly to the withdrawal of said assets. Likewise, the financial lessor may claim from the financial lessee as a penalty clause 10 percent of the capital pending repayment on said date, and likewise obviously the past-due and unpaid installments and any other items that are payable by law. The financial lessee party may avoid (enervar) the indicated contractual termination by bringing itself fully up-to-date in payment or performance of its obligations (including payment of late payment interest, notification expenses and return fee) within a period of eight days from receipt of authenticated notice. At any time, and for any reason, the financial lessor may choose to terminate the contract, even after having chosen to require performance thereof, on the understanding that it may not simultaneously exercise both possibilities nor require termination of the contract once it has obtained performance thereof. The financial lessee shall be obligated to make payment of any expenses, costs, royalties, rights and taxes that the financial lessor must pay for exercise of the above-mentioned rights and actions, both via the courts or out-of-court, provided the financial lessor has not been guilty of bad faith or abuse of process in the exercise of its actions. 7. RESTITUTION OF POSSESSION. Upon the natural termination of the contract, without the financial lessee having exercised the purchase option right, or any of the grounds for termination thereof having occurred, the financial lessee shall deliver to the financial lessor possession of the assets making up the subject matter of the contract, in a good state of repair and upkeep. Contravening of this obligation shall entail, in addition to the exercise of any rights corresponding to the financial lessor by virtue of the provisions of this contract, the obligation on the financial lessee to pay to the latter, as indemnification for losses or damages, for each day of delay in delivery, an amount equivalent to double the amount of the last daily installment that it was obliged to pay. 8. AMENDMENT OF THE CONTRACT OR OF GUARANTEES THEREOF ING LEASE (SPAIN) E.G.C., LTD. Any variation in the contract requested by the financial lessee and accepted by the financial lessor referring to a change in any of the intervening parties thereof and early payment of installments, amendment of due dates, or of the amounts thereof, of payment instrument or any other that involves alteration of the contractual document initially signed, shall result in the accrual in favor of the financial lessor of a fee stipulated in the tariff brochure attached to this contract. For the calculation of said fee, capital pending payment shall be taken as the figure shown in the Pending Capital column of Schedule Number 1 in the line immediately prior to the line corresponding to the first installment being changed, and shall be payable on a once-only basis at the time of the amendment. 9. EARLY CANCELLATION Except for the provisions of Special Condition 6 of this contract, early cancellation hereof is not provided for, given that its duration has been agreed as fixed and irrevocable, however, in those cases in which at the request - with reasons - of the financial lessee the financial lessor agrees, the latter shall charge as early cancellation fee the fee established in the tariff brochure attached to this contract, a fee that shall be payable at the time the cancellation is made. a) Variable interest transactions: Without prejudice to the fee agreed, in the event that the early cancellation referred to in the previous paragraph occurs, said early cancellation must coincide with any one of the dates agreed in this contract for the revision of the applicable interest rates and the financial lessee must pay the financial lessor any financial cost, expense or charge borne by the financial lessor as a consequence of the above-mentioned early cancellation. b) Fixed interest transactions: Without prejudice to the fee agreed, in the event that the early cancellation referred to in the previous paragraph occurred, said early cancellation must coincide with the due-date of any installment and the financial lessee must pay the financial lessor any financial costs, expense or charge borne by the financial lessor as a consequence of the above-mentioned early cancellation. And in particular, all costs derived from changes in interest rates. 10. COOWNERSHIP AND LIABILITY. If there are two or more financial lessees, all of them shall be jointly and severally liable for the obligations arising from this agreement. 11. TAXES This contract is subject to value-added tax (VAT) by virtue of the provisions of Law 37/1992 of December 28, and Royal Decree 1624/1992 of December 29. The financial lessor shall facilitate to the financial lessee within the deadline and in the manner provided for by law the invoices or as appropriate comparable or authorized documents of the VAT charged. ING LEASE (SPAIN) E.G.C., LTD. In the event that during the duration of this contract the tax arrangements are modified, whether on a national, autonomous community or local basis, such alteration shall be borne by the financial lessee, regardless of its amount, i.e. by increase or decrease of the amount of periodic installments payable and the Residual Value amount.. 12. VALUATION RULES, EXPENSES AND FEES The fees that are applicable to this commercial financial lease contract and in particular those indicated in Standard Conditions Number 6, 7 and 8 of this contract, can be amended by the financial lessor within the maximum limits authorized by the Bank of Spain at any given time. By reason of their very nature, the fees shown in Schedule Number 1 of this contract are excluded from this amendment, given that they have become due once only at the time of application or formalization thereof. A brochure with maximum fee tariffs and chargeable expenses drawn up on normal paper is attached to this contract. The financial lessor shall communicate amendment of the fees upwards or downwards, as appropriate, in writing or by publication in any newspaper with a national circulation. The financial lessee shall be liable for all expenses and taxes incurred on the granting of this contract, including underwriting and any other guarantee, the holding of the assets, their use and the extinction of the legal relation that is now being initiated, together with expenses, royalties and costs occasioned to the financial lessor in the defense of its rights and the exercise of legal actions derived from this contract, including those associated with recovery of the assets, together with lawyers' and procurators' fees, even where their intervention is not mandatory. In relation to valuation rules, these shall be pursuant to the provisions of Bank of Spain circular number 8/1990 (Official State Gazette Number 226 of 09.20.90). 13. BREAKDOWN OF INSTALLMENT PAYMENTS AND INTEREST RATES Attached as Schedule Number 1 forming an integral part of this contract is a breakdown of the various items making up the financial lease installments. Calculation of the financial charge implicit in each lease installment is obtained by dividing the nominal interest-rate by the number of installments accruing in each year, i.e. 12 if the installments are on a monthly basis, 4 if they are quarterly, etc., and multiplying the results obtained, in percentage terms, by the capital pending prior to payment of the installment in question, as shown by the details in Schedule Number 1. For calculation of the Annual Percentage Rate, the system established by Bank of Spain circular number 8/1990 (Official State Gazette no. 226 of 09.20. 90) has been applied. The Annual Percentage Rate shown in Schedule Number 1 does not include any tax effect that may favor the financial lessee and nor does it include the expenses of Public Notary or similar, stamps, expenses of registry or recording, or any other that the financial lessor may charge to the financial lessee by virtue of the clauses of this contract, except for the origination and information fee and the arrangement fee shown in the above-mentioned Schedule. ING LEASE (SPAIN) E.G.C., LTD. The Annual Percentage Rate has been obtained prior to the establishing by the financial lessee of the exact due-dates for the installments, for which it has assumed, for the purposes of this calculation, that said installments are paid per exact periods, assuming likewise, that on the date of signing of the agreement the necessary funds for acquiring the assets making up the subject matter hereof are available to the supplier. 14. FINANCIAL INFORMATION With the aim of complying with Bank of Spain rules, the financial lessee is obligated to deliver each year to the financial lessor within a period of the first six months following the close of the accounting year (and whenever required to do so) all documentation and information necessary to disclose its economic and financial situation. 15. CONFIDENTIALITY IN THE PROCESSING OF PERSONAL DATA The persons appearing in this contract authorize the use by the Company "ING Lease (Espana), E.F.C., S.A." and by the companies of its group of the personal data used therein, in the manner and with the restrictions provided for in Organic Law 15/1999 of December 13 on Personal Data Protection and in Royal Decree 1332/1994 of June 20, Royal Decree 428/1993 of March 26, Royal Decree 994/1999 of June 11, where this does not run counter to the present Law. Likewise, the financial lessee, from this moment on, consents to the financial lessor being able to communicate any failure in performance of the payment obligations taken on that by virtue of this contract, to all public or private establishments with capacity to centralize this kind of data. And as a record of all of the above, the specific and standard conditions of this document being read by the parties, the parties sign it in witness of their agreement. EX-10.8 18 l07997exv10w8.txt COLLATERAL LOAN AGREEMENT EXHIBIT 10.8 AMOUNT: EUR 10,000,000 EXPIRATION: SEPTEMBER 1, 2006 NUMBER: 2003/FO134 COLLATERAL LOAN AGREEMENT This Policy is executed in Madrid on March 6, 2003, with the intervention of the Notary Public of Madrid Mr. Fernando Molina Stranz, being expressly requested by the parties. OF THE ONE PART, MR. IGNACIO GOROSTIZA SANTISTEBAN, with National Identity Card number 799.467-X and MR. AGUSTIN JIMENEZ DE PARGA MASEDA with National Identity Card number 7.227.464-J, on behalf of FORTIS BANK S.A., SUCURSAL EN ESPANA (hereinafter referred to as the "Bank"), with registered office in Madrid at Calle Jose Ortega y Gasset, 29-6 and Tax Identification Number A-0021127-F, duly empowered to enter into contracts pursuant to the power of attorney deed executed in their favor on June 7, 2001 before the Notary Public of Brussels, Mr. Jean-Philippe Lagae, and on file in the Mercantile Register of Madrid in Volume 10,509, Book 9,039, Folio 205, Section 3, Page 52996, Entry 61, and OF THE OTHER PART, MR. JOSE IGNACIO DEL BARRIO GOMEZ, with National Identity Card number 51.343.948-J, on behalf of "CARRIERHOUSE, S.A." (hereinafter referred to as the "Borrower"), with registered office at Calle Valgrande, 6, Alcobendas 28108 (Madrid) and Tax Identification Number A-82232448, on file in the Mercantile Register of Madrid in Volume 13,891, folio 81, Page M-227370, Entry 1, who states that he is duly empowered to enter into contracts by virtue of the certificate issued by the Borrower's Board of Directors dated January 23, 2003. MR. MIGUEL ANGEL FERNANDEZ MORENO, with National Identity Card number 51.356.303-V, on behalf of "ABENGOA, S.A." with Tax Identification Number A-41002288 (hereinafter referred to as the "SURETY" ). Such company has its registered offices in Seville, Avda. Buhaira number 2, and was incorporated by the deed executed by the Notary Public of Seville Mr. Francisco Monedero Ruiz on January 4, 1941. He states that he is duly empowered to enter into contract by virtue of the special power of attorney deed executed before the Notary Public of Seville Mr. Manuel Aguilar Garcia on March 3, 2003 and under his protocol number 393. RECITALS Whereas the Borrower, CARRIERHOUSE, S.A., has requested a Loan from FORTIS BANK, S.A. SUCURSAL EN ESPANA in the amount of TEN MILLION EUROS (EUR 10,000,000), in order to finance the partial acquisition of its fixed assets, and which is granted by the Bank subject to the following CLAUSES 1. LOAN AMOUNT The Bank hereby grants the Borrower, which accepts, a loan in the amount of TEN MILLION EUROS (EUR 10,000,000), delivered by the former to the latter in This agreement comprises of 10 pages, numbered 1 through 10, all of which are signed and stamped by the intervening NOTARY. this act by crediting the Borrower's checking account number 0167-0216-49-2054011001 open with the Bank. The Borrower hereby acknowledges the receipt of such amount to its entire satisfaction. The drawdown made against this Loan shall be allocated to its limit toward the settlement of the debit balance pending repayment to the Bank by CARRIERHOUSE, S.A., by virtue of the CREDIT FACILITY granted to a maximum limit of 13,522,772.35 Euros under the Bank order number 2002/F123 and which was executed by the parties with the intervention of the Notary Public of Madrid Mr. Carlos Perez Baudin on MAY 16, 2002. As of the date of execution of this Agreement, such debit balance amounts to THIRTEEN MILLION FOUR HUNDRED AND NINETY THOUSAND THREE HUNDRED AND NINETY SIX EUROS AND SIXTY SIX CENTS (EUR 13,490,396.66) plus any interest that may have accrued since the last settlement, and which the Borrower hereby recognizes as owed to the Bank. 2. TERM AND REPAYMENT 2.1 This Agreement, that is to take effect on the date hereof, shall be valid through SEPTEMBER 1, TWO THOUSAND AND SIX (2006) (hereinafter referred to as the "Final Expiration" date), without prejudice to possible termination or cancellation referred to herein. 2.2 The principal of this loan shall be repaid as from APRIL 1, 2003 in FORTY TWO (42) CONSECUTIVE MONTHLY INSTALLMENTS OF TWO HUNDRED AND SEVEN THOUSAND THREE HUNDRED AND SEVENTEEN EUROS AND SEVEN CENTS (EUR 207,317.07) EACH, with the exception of the last installment that shall be ONE MILLION FIVE HUNDRED THOUSAND EUROS AND THIRTEEN CENTS (EUR 1,500,000.13). These shall be paid on each of the following dates, whereby the Borrower is obliged to credit the Bank on such date with the quantities indicated as principal, in accordance with the payment schedule set forth below:
TOTAL AMOUNT OF INSTALLMENT CAPITAL REPAYMENT DATE REPAYMENT INTEREST FIRST AMOUNT FIRST PENDING INSTALLMENT NO. DAY 1 OF: (*) AMOUNT YEAR YEAR REPAYMENT - ----------------------------------------------------------------------------------------------------- 1 April 2003 207,317.07 26,137.22 233,454.29 9,792,682.93 2 May 2003 207,317.07 29,533.10 236,850.17 9,585,365.86 3 June 2003 207,317.07 29,871.46 237,188.53 9,378,048.79 4 July 2003 207,317.07 28,282.63 235,599.70 9,170,731.72 5 August 2003 207,317.07 28,579.31 235,896.38 8,963,414.65 6 September 2003 207,317.07 27,933.24 235,250.31 8,756,097.58 7 October 2003 207,317.07 26,406.93 233,724.00 8,548,780.51 8 November 2003 207,317.07 26,641.09 233,958.16 8,341,463.44 9 December 2003 207,317.07 25,156.46 232,473.53 8,143,146.37 10 January 2004 207,317.07 25,348.94 232,666.01 7,926,829.30 11 February 2004 207,317.07 24,702.86 232,019.93 7,719,512.23 12 March 2004 207,317.07 22,504.74 229,821.81 7,512,195.16
13 April 2004 207,317.07 7,304,878.09 14 May 2004 207,317.07 7,097,561.02 15 June 2004 207,317.07 6,890,243.95 16 July 2004 207,317.07 6,682,926.88 17 August 2004 207,317.07 6,475,609.81 18 September 2004 207,317.07 6,268,292.74 19 October 2004 207,317.07 6,060,975.67 20 November 2004 207,317.07 5,853,658.60 21 December 2004 207,317.07 5,646,341.53 22 January 2005 207,317.07 5,439,024.46 23 February 2005 207,317.07 5,231,707.39 24 March 2005 207,317.07 5,024,390.32 25 April 2005 207,317.07 4,817,073.25 26 May 2005 207,317.07 4,609,756.18 27 June 2005 207,317.07 4,402,439.11 28 July 2005 207,317.07 4,195,122.04 29 August 2005 207,317.07 3,987,804.97 30 September 2005 207,317.07 3,780,487.90 31 October 2005 207,317.07 3,573,170.83 32 November 2005 207,317.07 3,365,853.76 33 December 2005 207,317.07 3,158,536.69 34 January 2006 207,317.07 2,951,219.62 35 February 2006 207,317.07 2,743,902.55 36 March 2006 207,317.07 2,536,585.48 37 April 2006 207,317.07 2,329,268.41 38 May 2006 207,317.07 2,121,951.34 39 June 2006 207,317.07 1,914,634.27 40 July 2006 207,317.07 1,707,317.20 41 August 2006 207,317.07 1,500,000.13 42 September 2006 1,500,000.13 0

With the exception of the first year, these installments are comprised solely of capital. The interest shall accrue and be paid as set forth in Clause 3 below. (*) or the immediately subsequent business day. 3. INTEREST: 3.1 The Loan shall accrue interest in the Bank's favor on the amount pending repayment at any time, starting on the date of this agreement and until the sums owed by the Borrower are effectively returned to the Bank in accordance with the contents of Clause 2. Such interest shall accrue daily on the basis of a 360-day year, in accordance with the following formula: INTEREST = AMOUNT PENDING NOMINAL INTEREST DAYS OF THE REPAYMENT X (%) X SETTLEMENT PERIOD --------------------------------------------------------------------- 360 X 100 3.2 In order to determine the interest rate applicable at all times, this Loan is deemed to be divided into "Interest Periods" with respective durations of one year each, and each successive period shall commence the day after the conclusion of the preceding one. As an exception, the last Interest Period shall end on the date of the Loan's Final Expiration or early cancellation. Such interest shall be settled and paid monthly by the Borrower to the Bank on the same dates envisaged for repayment of the capital, which are set forth in Clause 2 above. It is hereby established that for the first Interest Period which, as an exception, commences on this date and ends on MARCH 1, 2004, the interest rate shall be THREE POINT SIX HUNDRED AND NINETEEN PERCENT (3.619%). (Equivalent Annual Rate (T.A.E.) 3.6796% as per Bank of Spain Circular 8/1990 dated September 7). From March 1, 2004 onwards, the annual interest rate to be applied shall be variable for each Interest Period in question and calculated by adding to the EURIBOR one-year rate a fixed Margin or Differential of ONE POINT TWENTY FIVE PERCENT (1.25%) PER ANNUM. For the purpose of this agreement, the European Interbank Market Interest Rate (EURIBOR) is understood to mean the European interest rate for one year deposits of an amount equal or similar to the capital pending repayment to Bank by Borrower, published on the REUTERS EURIBOR 01 SCREEN AT ELEVEN O'CLOCK IN THE MORNING (11:00 A.M.) MADRID TIME, as of the date on which each successive Interest Period commences. Such rate shall be expressed as a percentage of interest per annum. Any expenses, commissions and brokerage fees charged by the intermediaries that usually take part in this type of transaction, plus the Value Added Tax that may be levied on the intermediary's participation, shall also be added to the interest rate resulting from the aforementioned transaction, together with any tax, expense, commission or brokerage fee that may be directly or indirectly levied upon, caused or replaced by or added to the preceding ones. SUBSTITUTIVE INTEREST RATE: If for any reason it is impossible to determine the European Interbank Market interest rate as defined in the preceding paragraphs, a substitute interest rate consisting of the addition of the aforementioned differential to the arithmetic mean (average) of Reference Bank interest rates shall be applied. Reference interest rates are understood to be those applied by the Reference Banks on the fifth day of each calendar month to private sector clients on all types of three-month credit transactions, as quoted by the Reference Banks to the Bank of Spain at the time at which the substitutive interest rate is to be set. The Reference Banks are: Banco Popular Espanol, Banco Bilbao Vizcaya Argentaria and Banesto. If at any time one or more Reference Banks fail to notify their reference interest rates to the Bank of Spain, the arithmetic mean of those that have duly notified it to the Bank of Spain shall be used to calculate the reference interest rate. If only one of the Reference Banks has notified its rates then this shall be taken as the applicable reference rate. As soon as the circumstances giving rise to the application of the substitutive interest rate have ceased, the new European Interbank Market interest rate in force shall again be applied to any new drawdowns made thereafter. 3.3 On the first business day of each new Interest Period the Bank shall notify the Borrower of the new EURIBOR interest rate applicable for the said period prior to twelve a.m on that day. The Borrower shall in turn notify the Bank by facsimile or mail, prior to three p.m. on the first day of the new Interest Rate and by means of the document signed and drafted in accordance with Schedule I, whether it accepts or rejects such rate based on the interest rate applicable on the EURIBOR Market. If for any reason, including force majeure, the Bank fails to receive the said notice from the Borrower without just cause prior to the indicated time, it shall be fully understood that the Borrower accepts the interest rate applicable on the European Interbank Market for that period. 3.4 Any modifications to interest rates shall be applied automatically at the start of each interest period. If the Borrower rejects the interest rate notified by the Bank without just cause, it should repay the total amount of the loan to the latter on the date of interest rate renewal. 3.5 The Borrower may prepay upon the expiration of any Interest Period, provided that this is done in multiples of ONE THOUSAND EUROS. Such partial or total prepayment shall in all cases be applied to reduce the redemption installments set forth in Clause 2 above, and under no circumstances may the Borrower draw the capital that has been prepaid in this manner. Prepayment shall not incur any type of penalty. 3.6 This transaction is subject to regulations on actions with clientele established by Ministerial Order dated December 12, 1989 and regulated by Bank of Spain Circular 8/1990 dated September 7. 4. FEES: 4.1 The following fee is payable in relation to the granting of this loan: ZERO POINT TWENTY FIVE PERCENT PER ANNUM (0.25%) on the quantity of the loan pending repayment to the Bank. Such amount shall be paid by the Borrower on the date of execution of the agreement and each of the successive anniversaries thereof, and the Bank is empowered to obtain payment by debiting the Borrower's checking account. 5 PAYMENT 5.1 On any date that the Borrower must pay any amount under the Contract, without the need for the Bank to issue any demand at all, it shall pay the amount owed on the day in question at a branch of the Bank which shall be credited in the Loan account referred to in Clause 11 below. 5.2 In addition, and without prejudice to the above, the Borrower hereby irrevocably empowers the Bank to apply the payment of any amount owed to it by the Borrower under this Contract, any balance or balances that may exist in favor of the Borrower with the Bank (whether at its head office or any of its branches) proceeding from any type of accounts or deposits, as well as any amount or Loan belonging to the Borrower or that is in the power of the Bank or that the latter must satisfy. For this purpose, the Borrower also irrevocably empowers the Bank to carry out any credit or debit operations, foreign currency exchanges or acts that may be necessary in applying the said balances and credits for the payment of the amounts owed. 5.3 Those payments made by the Borrower shall go to pay off the amount owed in the following order: 1) commissions, 2) default interest, 3) taxes, 4) expenses 5) damages, 6) legal costs, 7) normal interest, and 8) the loan principal. 6 TAXATION AND EXPENSES 6.1 The Borrower shall pay all taxes, fees, brokers' fees, customs duties, stamp duties, and any other tax or expense of any other nature that the preparation, entering into and fulfillment of this Contract may entail. At the same time, and provided always that a final judgment exists, it shall repay to the Bank all the expenses, including the fees and expenses of lawyers and procuradores, which the Bank may incur in defending or enforcing its rights hereunder due to any breach of contract by the Borrower. 6.2 All amounts that the Borrower must pay to the Bank by virtue of this Contract must be paid in full without any deduction or retention at all. If for any reason the Borrower is obliged to make a deduction or retention, except in the event that such obligation was imposed by law on the Bank as recipient, it shall do so. However, it shall pay to the Bank those additional amounts that are necessary to ensure that the Bank receives a net amount equal to that which it would have received if such a deduction did not have to be made except where such an obligation is imposed on the bank as recipient by law or by an act of a competent administrative authority. 7. DELAY IN THE FULFILMENT OF OBLIGATIONS 7.1 Without prejudice to the Bank's rights under Clause 8, if the Borrower delays in the fulfillment of any of the payment obligations under this Contract for whatever reason, even where it is not the Borrower's fault, except where the delay is the fault of the Bank, it shall pay to the Bank default interest, without prejudice to any other liability which it may have as a result of such breach. The default interest rate shall be calculated by adding 2 percentage points (2%) to the interest rate defined in Clause 3 above, plus the margin agreed by the parties hereto. The default interest rate shall accrue on a daily basis and shall be paid on the basis of a 360-day year, on the overdue amounts, from the date on which payment should have been made and until the date of actual payment in full. Default interest shall be paid at the end of each month after the delay commences and in any even on the date when the delay ends. 7.2 The Borrower shall be liable for all loss and damage with the exception of indirect damage and loss of profit that are incurred by the Bank arising from the need to establish, take, renew or cancel third party deposits, in the event of the breach by the Borrower of any of its obligations hereunder. 7.3 For the purposes of Article 317 of the Spanish Commercial Code, the Bank may capitalize on a monthly basis interest due that remains unpaid, whether normal or default interest, which will in turn give rise to further interest payments, at the default rate referred to in Clause 7.1. 8. LOSS OF GRACE PERIOD 8.1 The Borrower shall lose the grace period if it breaches, for any reason, any of the obligations contained in this Contract following the granting in writing to the Borrower of a period of five days to make good any previous breach, except for any breach regarding payment. In the latter case, the Bank may terminate forthwith this Contract, and demand repayment of all amounts relating to the principal, interest, commission, or any other amount owed to it by the Borrower. At the same time, the Bank may declare due and payable all amounts that are owed by the Borrower for any other reason or under any other contract. By way of exception, in the event of the first failure to pay a monthly amount, in order for the Bank to be able to terminate this Contract it must send a demand for payment to the Borrower by burofax, telegram or notarial document, and grant the latter an additional period of ten days, such period to run from receipt of the demand, the Borrower having failed to make the said payment. This obligation to notify shall apply to failure to pay once during every twelve month period of the Contract. 8.2 In addition, given that the present Contract has been entered into on the basis of the current solvency of both the Borrower and the Surety, if the solvency of either should deteriorate markedly during the duration of the Contract the Borrower shall also lose the benefit of the grace period and the Bank may require immediate payment of all amounts of whatever nature that are owed to the Bank, without acceptance by the Bank of any subsequent acts by the Borrower in fulfillment of its contractual obligations being interpreted as a waiver of its rights contained in this Clause, which it may exercise at any time while the deterioration of the solvency of the Borrower or the Surety is continuing. 8.3 Additionally, in the event the Borrower has disposed of the assets listed in Clause 12 below, or otherwise, does not constitute a pledge as agreed in such Clause 12 below, upon the request of the Bank to such extent, the BANK shall be entitled to claim the prompt refund of all the amounts owed thereto under this document, for any reason, and, in any event, to terminate this Agreement and claim such amounts from the Borrower or the Joint Guarantor 9. OTHER OBLIGATIONS OF THE BORROWER 9.1 The Borrower undertakes to maintain insured all of its property that is essential for carrying out the object of the business. Further, it shall pay in time all the premiums and fulfill the remaining obligations contained in the insurance policy. In particular, it shall not make any company other than Fortis Bank SA, Branch in Spain a beneficiary of the goods set forth in Clause 12 below. 9.2 The Borrower shall inform the Bank immediately and in any event within a period of not more than three days if any of the situations take place that are provided for in the above clauses or other situations not mentioned therein, but whose effect was the significant reduction in its solvency. 9.3 The Borrower undertakes to fulfill punctually all of its obligations concerning tax and social security. 10. LOAN ACCOUNT 10.1 For the purposes of the present Loan Contract, the Bank will open an account in the Borrower's name in which all matters referring thereto shall be entered. In the `Credit' section of that account shall be stated all of the amounts which for any matter in relation to this Contract the Borrower pays to the Bank. In the `Debit' section shall be stated all of the amounts that, for any of the matters referred to in this Contract, the Borrower owes to the Bank. The said account shall indicate at any given moment the amounts that the Borrower owes to the Bank. 10.2 Once the due date has expired or, where appropriate, the contract has been terminated and the Borrower (or its sureties) have failed to comply with their payment obligations following receipt of a demand for that purpose the Bank may commence an action to enforce its rights under Article 517 of Law 1/2000 of Civil Procedure (Ley de Enjuiciamiento Civil). 10.3 For the purposes of Article 572 of Law 1/2000 of Civil Procedure (Ley de Enjuiciamiento Civil), it is expressly agreed by the parties hereto that the demandable amount in the event of enforcement will be that resulting from the settlement carried out by the Bank in the manner agreed by the parties in this Contract and for that amount stated in the balance of the Account on the day of closure. In this regard, for the purposes of enforcement it shall be sufficient to file the documents required under Law 1/2000 of Civil Procedure, together with the certification specified in Article 517 of the said Law 1/2000, and the delivery of a statement of final settlement issued by the Bank of the balance owed by the Borrower, contained in a notarised document that states that the liquidation of the debt has been carried out in the manner provided for by the parties to the Contract. 11. REPRESENTATIONS OF THE BORROWER 11.1 The Borrower warrants that all the data, documents, and information that it has supplied to the Bank which have been relied on by the latter when deciding to enter into this Contract are true and correct, and in addition they have not substantially changed in the time elapsing between their delivery to the Bank and the signature of this Contract. If this is not the case the Borrower shall be deemed to have breached one of its essential obligations under this Contract. 12. PROMISE OF REGISTERED CHARGE WHILE RETAINING POSSESSION 12.1 In guarantee of the obligations hereunder, without prejudice to its unlimited personal liability, and without prejudice to any other guarantee already or subsequently entered into, in accordance with the provisions of Law dated 16 December 1954 developed by Royal Decree dated 17 June 1955 the Borrower undertakes irrevocably to execute a Public Deed or a Charge while Retaining Possession (Poliza de Prenda sin Desplazamiento) (`the Charge') in the Bank's favor within a period of three days from the date on which the same was formally demanded by the Bank. The Bank may make such a demand at any time during the term of this Contract, without the need to state any grounds at all for so doing, in order to guarantee the loan, in particular the Borrower's obligations as regards the payment of principal and interest, whether normal or default, up to the amount of the security offered. 12.2 The Charge in question shall be over the properties situated in Alcobendas, Madrid, C/Valgrande 6, owned by the Borrower, being the following: 12.2.1 Installations 22200045 - 11/2000/12/0599 Sainco, whose value at the date hereof amounts to 450,094 euros. 12.2.2 Installations 22200047 - 20001219020027550 Iberdrola, whose value at the date hereof amounts to 452,153 euros. 12.2.3 Installations 22200063 - C-0057/01 Carrierhouse, whose value at the date hereof amounts to 76,105 euros. 12.2.4 Installations 22200073 - C-0111/01 Carrierhouse, whose value at the date hereof amounts to 6,987,588 euros. 12.2.5 Installations 22200096 - C-0078/02 Carrierhouse, whose value at the date hereof amounts to 57,883 euros. 12.2.6 Installations 22200103 - C-0104/02 Carrierhouse, whose value at the date hereof amounts to 14,573 euros. 12.2.7 Installations 22200106 - C-0108/02 Carrierhouse, whose value at the date hereof amounts to 1,958,674 euros. 12.3 The above-mentioned assets are insured under an Insurance Policy with number 0807/100095 issued by the Belgian insurance company ACE INSURANCE SA NV with Tax Identification Number (NIF) A-0021149-J and the Borrower shall appoint the Bank as the beneficiary of such insurance policy following receipt of the first demand issued by the Bank so requesting this. 12.4 The refusal of the Borrower to enter into the Charge including the requirements referred to above shall lead to the loss of the grace period referred to in Clause 8 above. All of the expenses and taxes resulting from the execution of the Charge shall be paid by the Borrower, in particular the notary and registration fees, as well as those of a taxation nature that may be applicable. 13. SURETYSHIP 13.1 Mr. Miguel Angel Fernandez Moreno, present in this act for and on behalf of ABENGOA S.A., whose personal details are stated on the first page hereof, jointly and severally guarantees with the Borrower the fulfillment of each and every obligation of the Borrower hereunder, without prejudice to the unlimited personal liability of the Borrower and without prejudice to any other guarantee, whether from Abengoa S.A. or another third party, that may be entered into in the future. In particular, he guarantees all payment obligations, whether of principal, ordinary or penalty interest, commissions and expenses that could arise under this loan. As a result, Abengoa S.A., as joint and several surety undertakes to fulfill, while the present loan is not totally unsatisfied, each and every one of the Borrower's obligations hereunder, and expressly waives the right to excussio (surety's right not to be obliged to pay while the debtor can cover the amount owed), and the right of priority and division, all of the above in accordance with the provisions of Articles 439 et seq of the Commercial Code, and Articles 1144, 1822, 1831 and 1837 and related provisions of the Civil Code. 13.2 The Surety expressly agrees that this suretyship shall not be prejudiced by the postponements or extensions that the Bank may grant to the Borrower, nor for the division of the debt or payment on account that the Bank may make before or after the due date. When the obligations hereunder are demandable the Bank may reclaim the amount from the Surety jointly and severally or alternatively enter it as a debt in the accounts which it maintains, in its own name or together with others. 14. APPLICABLE LAW AND JURISDICTION 14.1 This contract shall be governed by Spanish law. 14.2 The parties to the Contract expressly waive any right that they may have to any other jurisdiction and hereby agree to submit to the courts of Madrid for the resolution of any issues that may arise in relation to this Contract. 15. VARIOUS 15.1 For the purposes of this contract, working day shall mean a day on which banks are generally open to the public and in Madrid to carry out operations with deposits in euros. Saturday shall not be considered to be a working day. 15.2 Any period that ends on the date that is not a working day shall be carried over to end on the next working day, except where the next working day is not in the same month, in which case the last working day of the month in question shall apply. 15.3 The parties expressly agree that in the situations provided for in this Contract, correspondence by telegraph, or by telex or telefax shall have binding effect without the need for the notices to contain any type of conventional key or sign. This shall apply except in those cases where such notification could lead to a loss of the grace period, in which case it shall be necessary for such notification to be in one of the following forms: telegram, burofax, or notarial document. 15.4 The parties' addresses for the service of demands, and other notifications and communications, whether court or non-court, are those set forth in the heading of this Contract. 15.5 Any change to the address for service or telex or telefax numbers shall have no effect unless and until it is notified in a notarised document to the other party. 16. LEAFLET OF CONDITIONS The commissions and expenses arising under this Contract, together with the conditions of valuation, are detailed in the specific leaflet held by the Bank which is at the disposal of its clients. The Bank may amend the terms of the leaflet informing the Borrower by way of: A) Publication on the notice board of the Bank; if the Borrower does not make known to the Bank its opposition to such changes within two (2) months, they shall be deemed to be fully accepted, or alternatively B) Individualized information to the Borrower; the latter is deemed to accept the changes unless it opposes them within a period of fifteen (15) days. 17. NATURE OF THE CONTRACT The present contract is of a commercial nature, and constitutes a normal and typical operation of the Bank, for which reason it is expressly requested that it is not subjected to Capital Transfer Tax (Impuestos sobre Transmisiones Patrimoniales), being subject to VAT, although exempt therefrom. And in compliance with the above the parties hereby sign this Contract in four counterparts in the place and on the date stated in the heading hereof, and with the intervention of the Notary public who authenticates the content hereof as well as the legal capacity of the parties and the legitimacy of the signatures of the contracting parties. Signed The Bank The Borrower Signature illegible Signature illegible The Surety Seal of Notary Public Fernando Molina Stranz Signature illegible SCHEDULE I FORTIS BANK SA Branch in Spain Calle de Jose Ortega y Gasset 29 Madrid 28006 In......on.... of........ 20.. Dear Sirs In accordance with the provisions of Clause 3 of the loan agreement for the principal sum of TEN MILLION EUROS, entered into by yourselves the Bank and ourselves the Borrower, and dated ...... of .................. 2003, we confirm our acceptance of the proposed interbank interest rate of .... percent (...%) relating to the period of interest from .... of .... of 20.. to the ... of ........... 20.. and whose payment shall be made, together with the amount corresponding to the repayment of the capital, in accordance with the terms agreed in the Contract. Yours faithfully The Borrower Seal of Notary Public Fernando Molina Stranz EX-10.9 19 l07997exv10w9.txt LOAN POLICY EXHIBIT 10.9 LOAN POLICY BANK 5910 LOAN 659738392 In Madrid on October 25, 2001 PARTIES The "CAJA DE AHORROS Y MONTE DE PIEDAD DE MADRID" (Monte de Piedad Savings Bank of Madrid), hereinafter called the SAVINGS BANK, duly represented herein by Jordi Pera Matas with DNI (National Identity Document) 36.514.341R and Jesus Manuel Rubio Sanchez with DNI 8.693.011T, hereby loans the sum of THREE MILLION SIX HUNDRED AND FORTY TWO THOUSAND ONE HUNDRED AND THIRTY THREE POINT THREE FIVE EUROS (3,642,133.35 EUROS) to the BORROWER, "S.A. de Instalaciones de Control", with CIF (Corporate Tax Identification Code) A28114981 with registered office in Alcobendas (Madrid) C/ Valgrande, 6, duly represented herein by Pedro Bernad Herrando, with DNI 17.228.150. This commercial loan arrangement (under article 2 of the Commercial Code) has been overseen by the undersigned notary public, duly called in for that purpose, and the borrower hereby acknowledges receipt of the above sum. CLAUSES ONE. The loan capital will accrue an annual nominal interest of 4.95%, variable according to the procedure to be explained later. The loan will accrue an arrangement fee of 0.35% on the total loan sum, to be paid by the borrower in a single sum when formalizing this contract. TWO. The loan term will be 84 months, this time to run from the date of this contract. The loan will be paid back to the Savings Bank in 28 quarterly installments of 154,705.99 euros, each one comprising capital and interest, which will fall due successively and in the same periods as from the date of this contract. The value of the installments to be paid will be revised in the successive interest rate periods in line with the updating of the interest rate for the period in question, pursuant to the arrangement agreed upon in clause six. Should there be no equivalent day to the initial calculation day in any month when an installment falls due, the due date will be taken to be the last day of the month, without this entailing any modification whatsoever of the subsequent due dates. /s/ FERNANDO MOLINA STRANZ NOTARY PUBLIC OF MADRID For information purposes it is hereby put on record that the annual percentage rate (Tasa Annual Equivalente) (APR) corresponding to the agreed nominal rate is 5.15%. This APR has been calculated using the formula laid down in annex V of circular 8/1990 of 7 September of the Bank of Spain, published in the Official State Gazette (BOE) 226 of 20 September 1990 and modified by the Bank of Spain circular 13/1993 of 21 December, published in the Official State Gazette on 31 December 1993 and by circular 3/1996 of 27 February, published in the Official State Gazette on 13 March 1996. Pursuant to the provisions laid down in said Circular 8/90 the APR calculation has not taken into account such costs as the borrower might be bound to pay under the contractual arrangement and the payment terms thereof: a) Costs that the client might avoid by virtue of its contractual powers and in particular fund transfer costs; b) Costs to be paid to third parties, in particular: brokerage, notarial expenses, taxes, agency costs, valuation, registration; c) Insurance or guarantee costs, except for insurance premiums to guarantee repayment of the loan to the bank in the event of the death, invalidity or unemployment of the borrower and providing that the taking out of said insurance policy has been imposed by the bank as a credit-granting condition; e) (sic) Costs deriving from any breach of contractual terms by the borrower and in particular procedural costs, the fees of legal counsel and legal representatives. THREE. The total interest accrued in each period will be calculated according to the following formula: Interest = the capital pending at the beginning of each period multiplied by the annual nominal interest rate divided by the number of annual payments. FOUR. The sums to be paid by the borrower, pursuant to the agreements reached herein, will be increased by such taxes and costs as may be legally or contractually incumbent thereon. FIVE. The payments will be made by standing order into a current account or by means of a savings book opened in the Savings Bank. SIX. The agreed interest rate will be determined by quarterly periods, to run from the date of signing this contract. During the first quarter it will be the rate shown in clause one hereof. For successive periods the contracting parties will proceed to revise said interest rate and determine the interest rate for the following period, in due accordance with the procedure to be explained later. The rate to be applied for each quarterly period will be the three-month EURIBOR (monthly mean) in force at the moment of carrying out the revision, increased by 0.60 percentage points and rounded up or down to two-decimal places. For these purposes the three-month (monthly mean) EURIBOR (EURO INTERBANK OFFERED RATE) will be understood to be the average three month interest rate at which interbank deposits are offered within the Euro zone by a bank of high standing to another bank of high standing. This rate will be officially published by the Central European Bank on its main website and in its monthly newssheet, in the section headed "Interest rates of the money market". For the purposes of the revision consideration will be given to the rates published in either medium, whichever comes out earlier; if need be the publication thereof will be sought from the Central European Bank itself. In default of the publication thereof consideration will then be given to the replacement publication containing the same information. In default of said reference rate or the official publication thereof, the reference lending rate for savings banks at the time of the revision will be used instead for the identical time period. This rate is also published officially and periodically by the Bank of Spain in the BOE, for variable-rate house-buying mortgage loans. The application criterion used will be the same as for the initially envisaged reference rate. If legally bound to do so, the Savings Bank will inform the borrower of the variation in the interest rate, by mail, as from the day following the due date of each three-month period. The variation will automatically be applied twenty days after the date of said communication and with effect from said due date, without the borrower having declared any opposition whatsoever in the contract. The value of the aforementioned installments will thereby be modified. Should the borrower be opposed to this modification it will be entitled to cancel the transaction at the rate in force before the variation implemented, doing so within the same twenty-day period. SEVEN. The borrower will be entitled to make early repayments of the loaned capital. At its choice, this will have the effect either of reducing the repayment installment or the repayment term, the installment remaining the same in the latter case. If no overt choice is made at the time of making the advanced payment, it will be applied to a reduction of the repayment term. When making any advanced repayment of the loan capital, the borrower will be bound to pay a 1% commission on the value of the repaid capital. EIGHT. This loan has been conceded by the SAVINGS BANK on the basis of the current situation of the borrowing party in terms of solvency and normal compliance with its obligations taken on with said bank and with third parties and such guarantees as have been furnished both with the Savings Bank and by third parties. In view of this the parties hereto make special provision for the following agreements, any breach of which will be grounds for discharging the contract, with the same effects as those laid down for other contract-discharging grounds. A) Covenant of equal coverage: 1) The borrower undertakes not to furnish better guarantees in favor of third party creditors than those offered to the SAVINGS BANK herein, without previously obtaining the consent of the latter or granting identical guarantees in its favor. B) Maintenance of the shareholding structure In view of the fact that the current shareholding structure of the borrowing company was considered to be an especially important factor when deciding whether to grant this loan, SAINCO binds itself to continue to form part of the group of the parent company ABENBOA, S.A., as this relationship is defined in the corporation tax arrangements. To avoid the effects of said contractual discharge, therefore, the borrower, in light of its relation with said shareholders and its dependence thereon or association therewith, binds itself to inform them of everything agreed in the previous paragraph, in order to be able to assume and comply with the commitment taken on with the Savings Bank, and to inform the latter, with a month's notice, of any change to the shareholding structure affecting the stake of the aforementioned shareholders. C) Likewise, at the moment of formalizing this transaction, the borrowing company will furnish documents vouching for the amount of the investment to be made with this loan. NINE. The following will be grounds for discharging this contract: 1) Breach by the borrowers of any obligations taken on hereunder, and especially failure to pay any of the previously agreed debt-amortization installments and also breach of any of the obligations taken on by the borrowers under any contract entered into with the Savings Bank, especially the failure to pay any debt-amortization installments or the debt of a credit card. 2) In the event of any creditors' meeting, suspension of payments or bankruptcy of the borrowers, application for a standstill agreement, out-of-court agreement with its creditors, liquidation of part of its assets, application for a suspension of payments or bankruptcy or any similar action or procedure, judicial or private, of the borrowers against them, which might lead to identical results and also if all or part of the assets of any of them are seized or undergo a significant reduction of value. All the borrowers are jointly and severally bound to notify the bank of any of the above circumstances, otherwise incurring in the legally established liability for failure to do so. 3) The inaccuracy of any of the declarations or guarantees made by the borrower to the SAVINGS BANK or the concealing or falsifying of data or documents, whether accounting documents or any other type, furnished by the borrower and having a significant effect on its capacity to meet its obligations deriving herefrom. 4) If this contract and the rights deriving therefrom for the Savings Bank are not maintained at least with the same preferences, privileges and rank as those deriving for other financial creditors from any loan or credit or financing contracts entered into with the borrower(1). 5) If any other debt incurred by the borrower with respect to sums borrowed or funds raised in any other way should become liquid and payable or subject to being declared liquid and payable before its corresponding due date; if said debt is not paid on falling due; if any guarantee furnished by the borrower is not enforceable or proves not to be so when an enforcement application is made, or if any other encumbrance set up by the borrower on goods it owns should become enforceable.(2) 6) When, without any of the above grounds obtaining, all or part of the borrowers' property is seized or undergoes a significant reduction in its value vis-a-vis the declaration of property and solvency made in the loan application proceedings or is likely to occur in view of any change in the borrowers' economic situation, according to said declaration of property or solvency, due to the failure to pay bills, mortgages, the seizure or sale of 20% of the property formerly declared or subsequently added to the stock of wealth. 7) If the borrowing company leaves the registered head office whose construction work is the object of this loan. TEN. The borrower will fall in arrears on the day following the date stipulated for any payments mentioned in previous clauses. The borrower will then be bound to pay a nominal interest rate 4 percentage points higher than the rate in force at the time of the payment, this applied to the sums owed on any grounds. The delayed-payment interest will accrue by calendar days and the Savings Bank will be entitled to capitalize the unpaid delayed-payment interest as laid down in article 317 of the Commercial Code. This delayed payment interest will be paid over the same periods as are laid down herein for debt-repayment installments. As soon as there are any arrears in complying with the obligations arising herefrom, the place of compliance with said obligations will be understood for all legal purposes to be the registered head office of the Bank of Caja de Madrid that dealt with the transaction, as shown at the head hereof. ELEVEN. This contract may be discharged when any of the abovementioned grounds obtain or when the borrower breaches any of the obligations contractually incumbent thereon. Once the contract has been discharged, the Savings Bank will be entitled to take all such action, including legal action, as may correspond thereto against the borrower, who hereby expressly renounces the benefits of the legal exceptions of priority, division and excussion. This action may be taken to claim from the borrower the sums owed, both overdue and - -------------- (1) Pari passu clause (2) Cross default pending maturity, with their corresponding interest payment, including delayed-payment interest, procedural costs and expenses including the fees of legal counsel and legal representative. The mere act of the claim being brought by the Savings Bank will imply discharging of the contract. TWELVE. For exercising the legal action deriving herefrom, even in the case of enforcement, given that the sum loaned is liquid in origin, it will suffice for the claim to be accompanied with the original of this contract, with such formalities as may be laid down by law, including, where applicable, those especially required for enforcement action, all with the purpose of restoring to the Savings Bank the principal, interest and fees, plus such costs as may be incurred in the proceedings. Without thereby forfeiting its real nature and the concomitant preference, as expressly agreed by the parties, the SAVINGS BANK will be entitled to present its own determination of the debt settlement, a commissioner of oaths being called in by the latter to certify that the payable amount is the result of the Saving Bank's settlement and that this has been carried out in the form agreed by the parties hereto. THIRTEEN. For the purposes of repaying any sums owed, the Savings Bank will be empowered to apply thereto any sums deposited by the borrowers in other accounts currently open in the bank. The signing of this policy by the parties thereto entails express acceptance of these charges. Likewise the borrowers hereby authorize the Savings Bank to sell any securities of any type that the borrowers have deposited in the bank, with the purpose of applying the sum thereby raised towards repayment of the sums owing hereunder. FOURTEEN. The borrowers will be responsible for paying any costs and taxes that may be occasioned by this contract, including the notarial certification of this contract. The Savings Bank is authorized to charge these costs to the borrowers' account. FIFTEEN. In the event of any legal action, the parties hereto agree that the competent court will be determined in due accordance with the provisions laid down by the Spanish Civil Proceedings Law in view of the type of trial or action pursued. In the case of enforcement action the parties agree that the place of compliance with the obligation is the Branch of Caja Madrid in which the standing order arrangements have been made for the loan payments. SIXTEEN. Pursuant to the provisions laid down in the Personal Data Protection Law, the parties hereto are hereby informed and expressly agree that these data be entered in the personal data files run by CAJA MADRID and that they be processed, by computer or otherwise, by CAJA MADRID with commercial, financial, operative and statistical purposes. The parties hereto also give their express consent for the data to be communicated to other banks of Grupo Caja Madrid for the same purposes, so that they may be used by the latter in activities bound up with their corporate purpose in financial, real estate and insurance affairs. The parties hereby declare themselves to have been notified of said assignment. Likewise, CAJA MADRID and the banks of its group are authorized to use these data for sending to the parties hereto any commercial information on any goods, products or services it markets or finances, directly or otherwise, both now and in the future. This data communication will be made only with the abovementioned purposes and with such consequences as may derive from the law. The personal data furnished by the parties to the person running the file are a sine qua non of entering into this loan contract. CAJA MADRID guarantees that all the personal data contained herein will be used for the purpose, in the form and with the limitations and rights conceded by the Personal Data Protection Law 15/1999 (Ley Organica de Proteccion de Datos de Caracter Personal). This consent is given without forfeiting any of the rights pertaining thereto under the aforementioned law and especially the possibility of exercising without cost the rights of opposition, access and information, rectification, cancellation of these data and revocation of its authorization without retrospective effects. These rights may be exercised by means of a written communication sent to the General Register of Caja Madrid in Plaza de Celenque n(0) 2, 28013, Madrid or to any branch of this bank. The parties hereto expressly declare their conformity with and approval of the contents of this contract. In witness whereof, and after the due handover of the sum loaned, the parties sign this policy in quadruplicate. I intervene herein for all due purposes and especially those laid down in the Civil Proceedings Law. CAJA DE AHORROS Y MONTE S.A. DE INSTALACIONES DE DE PIEDAD DE MADRID CONTROL /s/ Jordi Pera Matas /s/ Jesus Manuel Rubio Sanchez /s/ Pedro Bernad Herrando EX-10.10 20 l07997exv10w10.txt CREDIT AGREEMENT Exhibit 10.10 - -------------------------------------------------------------------------------- CREDIT AGREEMENT (Dated: May 2, 2003) BETWEEN: -------------------- TELVENT CANADA LTD. -AND- LASALLE BUSINESS CREDIT, A DIVISION OF ABN AMRO BANK N.V., CANADA BRANCH -------------------- BAKER & MCKENZIE SUITE 2600 255 - 5TH AVENUE S.W. CALGARY, ALBERTA T2P 3G6 - ------------------------------------------------------------------------------ TABLE OF CONTENTS ARTICLE 1 INTERPRETATION............................................................. 1 SECTION 1.1 DEFINITIONS............................................ 1 SECTION 1.2 MEANING OF "CONTROL"................................... 24 SECTION 1.3 PER ANNUM CALCULATIONS................................. 24 SECTION 1.4 CURRENCY............................................... 24 SECTION 1.5 INTEREST ACT (CANADA).................................. 25 SECTION 1.6 APPLICATION OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES 25 SECTION 1.7 COMPUTATION OF TIME PERIODS............................ 25 SECTION 1.8 SCHEDULES.............................................. 25 ARTICLE 2 THE CREDIT FACILITY........................................................ 26 SECTION 2.1 THE CREDIT FACILITY.................................... 26 SECTION 2.2 MANNER OF BORROWING.................................... 26 SECTION 2.3 PURPOSE................................................ 26 SECTION 2.4 AVAILABILITY OF FACILITY A ADVANCES.................... 26 SECTION 2.5 AVAILABILITY OF FACILITY B ADVANCES.................... 26 SECTION 2.6 DRAWDOWN AND CONVERSION RESTRICTIONS................... 27 SECTION 2.7 NOTICE PERIODS FOR DRAWDOWNS, CONVERSIONS AND ROLLOVERS.............................................. 27 SECTION 2.8 BANK'S OBLIGATIONS WITH RESPECT TO CANADIAN PRIME RATE LOANS, BANKER'S ACCEPTANCES, U.S. BASE RATE LOANS AND LIBOR LOANS............................................ 27 SECTION 2.9 IRREVOCABILITY......................................... 27 SECTION 2.10 CANCELLATION OR REDUCTION OF CREDIT FACILITY........... 27 SECTION 2.11 NATURE OF CREDIT FACILITY.............................. 28 ARTICLE 3 SECURITY ............................................................... 28 SECTION 3.1 GRANT OF SECURITY...................................... 28 SECTION 3.2 INITIAL GUARANTEE SUBSIDIARY........................... 28 SECTION 3.3 GUARANTEES............................................. 28 SECTION 3.4 UNDERTAKING TO GRANT ADDITIONAL SECURITY............... 28 ARTICLE 4 CONDITIONS PRECEDENT TO DRAWDOWNS.......................................... 29 SECTION 4.1 CONDITIONS FOR FIRST DRAWDOWN.......................... 29 4.1.1 Drawdown Notice........................................ 29 4.1.2 Borrower's Constituent Documents....................... 29 4.1.3 Guarantee Subsidiary Constituent Documents............. 29 4.1.4 Borrowing Base Certificate............................. 29 4.1.5 Borrower's January 31, 2003 Unaudited Balance Sheet.... 29 4.1.6 Borrower's March 31, 2003 Unaudited Financial Statements............................................. 29 4.1.7 Borrower's Officer's Certificate....................... 29 4.1.8 Guarantee Subsidiaries' Officer's Certificate.......... 29 4.1.9 Copy of Purchase Agreement............................. 29 4.1.10 Field Audit............................................ 29 4.1.11 No Change of Ownership or Event of Default............. 29 4.1.12 Borrower's Counsel's Opinion........................... 30 4.1.13 No Litigation.......................................... 30 4.1.14 Cash Management Arrangements........................... 30 - i - 4.1.15 Payment of Fees........................................ 30 SECTION 4.2 SUBSEQUENT DRAWDOWNS................................... 30 4.2.1 Subsequent Drawdown Notices............................ 30 4.2.2 Subsequent Borrower's Representations Certificate...... 30 4.2.3 Subsequent Guarantee Subsidiaries' Representations Certificate............................................ 30 4.2.4 No Subsequent Change of Ownership or Change of Ownership.............................................. 30 4.2.5 Amended Constituent Documents.......................... 30 SECTION 4.3 WAIVER................................................. 31 ARTICLE 5 EVIDENCE OF DRAWDOWNS...................................................... 31 SECTION 5.1 ACCOUNT OF RECORD...................................... 31 ARTICLE 6 PAYMENTS OF INTEREST AND FEES.............................................. 31 SECTION 6.1 INTEREST ON CANADIAN PRIME RATE LOANS.................. 31 SECTION 6.2 INTEREST ON U.S. BASE RATE LOANS....................... 31 SECTION 6.3 INTEREST ON LIBOR LOANS................................ 32 SECTION 6.4 NO DEDUCTION ETC....................................... 32 SECTION 6.5 UNUSED LINE FEES AND OTHER FEES........................ 32 SECTION 6.6 LIMIT ON RATE OF INTEREST.............................. 33 ARTICLE 7 ROLLOVERS ................................................................ 33 SECTION 7.1 SELECTION OF INTEREST PERIODS.......................... 33 SECTION 7.2 PARTIAL ROLLOVERS...................................... 33 ARTICLE 8 BANKERS' ACCEPTANCES....................................................... 33 SECTION 8.1 BANKERS' ACCEPTANCES................................... 33 SECTION 8.2 FEES................................................... 33 SECTION 8.3 GENERAL PROVISIONS..................................... 34 SECTION 8.4 DRAWDOWNS.............................................. 35 SECTION 8.5 ROLLOVERS.............................................. 35 SECTION 8.6 CONVERSIONS............................................ 35 SECTION 8.7 ALTERNATIVE BORROWINGS................................. 36 ARTICLE 9 LETTER OF CREDIT FACILITY.................................................. 36 SECTION 9.1 OBLIGATION TO ISSUE LETTERS OF CREDIT.................. 36 SECTION 9.2 TYPES AND AMOUNTS...................................... 37 SECTION 9.3 CONDITIONS............................................. 37 SECTION 9.4 LETTER OF CREDIT FEES.................................. 37 SECTION 9.5 SPECIFIC AMENDMENTS TO THE MASTER LETTER OF CREDIT AGREEMENT....................................... 38 9.5.1 Bank................................................... 38 9.5.2 Section 1 - Certain Definitions........................ 38 9.5.3 Subsection 2.4 - Representations and Warranties........ 38 9.5.4 Section 7-Making of Payments........................... 38 9.5.5 Section 9 - Events of Default.......................... 39 9.5.6 Section 10 - Security.................................. 39 9.5.7 Subsection 11.5 - Governing Law........................ 39 9.5.8 Subsection 11.14-Jurisdiction.......................... 39 SECTION 9.6 PARAMOUNCY............................................. 39 - ii- ARTICLE 10 CONVERSION OPTIONS......................................................... 39 SECTION 10.1 CONVERSION OPTIONS..................................... 39 ARTICLE 11 REPAYMENT ............................................................... 40 SECTION 11.1 REPAYMENT OF EXCESS OVER CREDIT FACILITY OR BORROWING BASE................................................... 40 SECTION 11.2 OPTIONAL REPAYMENT OF PRINCIPAL........................ 40 SECTION 11.3 MANDATORY REPAYMENTS OF PRINCIPAL - FACILITY A......... 41 SECTION 11.4 MANDATORY REPAYMENTS OF PRINCIPAL - FACILITY B......... 41 ARTICLE 12 PLACE AND APPLICATION OF PAYMENTS.......................................... 41 SECTION 12.1 PLACE OF PAYMENT OF PRINCIPAL, INTEREST AND FEES....... 41 SECTION 12.2 FUNDS................................................... 41 SECTION 12.3 APPLICATION OF PAYMENTS................................ 42 ARTICLE 13 REPRESENTATIONS AND WARRANTIES............................................. 42 SECTION 13.1 REPRESENTATIONS AND WARRANTIES......................... 42 13.1.1 Corporate Status....................................... 42 13.1.2 Corporate Authority.................................... 42 13.1.3 Guarantee Subsidiary Corporate Status.................. 42 13.1.4 Guarantee Subsidiary Corporate Authority............... 43 13.1.5 Valid Authorization.................................... 43 13.1.6 Validity of Documents and Enforceability............... 43 13.1.7 Approvals.............................................. 43 13.1.8 Tax Examinations....................................... 44 13.1.9 Tax Returns............................................ 44 13.1.10 Taxes Paid............................................. 44 13.1.11 Titles and Liens....................................... 44 13.1.12 Security Documents..................................... 45 13.1.13 Purchase Agreement..................................... 45 13.1.14 Non-Default............................................ 45 13.1.15 Financial Condition.................................... 45 13.1.16 Borrower's Interim Financial Statements................ 45 13.1.17 Pro Forma Financial Statements......................... 45 13.1.18 Securities Activities.................................. 46 13.1.19 Absence of Litigation.................................. 46 13.1.20 Loss Contingencies..................................... 46 13.1.21 No Undisclosed Liabilities............................. 46 13.1.22 Solvency............................................... 47 13.1.23 Capital Structure...................................... 47 13.1.24 Employee Commitments................................... 47 13.1.25 Collective Agreements.................................. 47 13.1.26 Guarantees............................................. 47 13.1.27 Intellectual Property.................................. 47 13.1.28 Insurance.............................................. 51 13.1.29 Environmental Compliance............................... 51 SECTION 13.2 NATURE OF REPRESENTATIONS AND WARRANTIES............... 52 ARTICLE 14 COVENANTS ................................................................ 53 SECTION 14.1 AFFIRMATIVE COVENANTS OF THE BORROWER.................. 53 14.1.1 Punctual Payment....................................... 53 - iii - 14.1.2 Conduct of Business.................................... 53 14.1.3 Compliance with Laws................................... 53 14.1.4 Operation in Accordance with Environmental Legislation. 53 14.1.5 Environmental Authorizations........................... 53 14.1.6 Financial Statements and Other Information............. 53 14.1.7 No Default Certificate................................. 55 14.1.8 Compliance with Agreements............................. 56 14.1.9 Taxes.................................................. 56 14.1.10 Insurance.............................................. 56 14.1.11 Use of Proceeds........................................ 56 14.1.12 Maintain Business, Assets and Undertaking.............. 57 14.1.13 Rights of Inspection................................... 57 14.1.14 Notice of Major Change in Ownership or Material Default 57 14.1.15 Discharge Existing Security............................ 57 14.1.16 Registration of Security............................... 57 14.1.17 Further Assurances..................................... 57 SECTION 14.2 FINANCIAL RATIOS AND COVENANTS......................... 58 SECTION 14.3 DETERMINATION AND REPORTING OF BORROWING BASE.......... 58 SECTION 14.4 NEGATIVE COVENANTS OF THE BORROWER..................... 58 14.4.1 Nature of Business..................................... 58 14.4.2 Negative Pledge......................................... 58 14.4.3 Sale of Assets......................................... 58 14.4.4 Dividends.............................................. 59 14.4.5 Distributions of Collateral............................ 59 14.4.6 Distributions of Cash.................................. 59 14.4.7 No Modification to Material Agreement.................. 59 14.4.8 Expenditures........................................... 59 14.4.9 No Dissolution......................................... 59 14.4.10 Indebtedness........................................... 59 14.4.11 Intercompany Loans..................................... 60 14.4.12 Investments............................................ 60 SECTION 14.5 SUCCESSOR CORPORATION.................................. 61 ARTICLE 15 EVENTS OF DEFAULT AND ACCELERATION......................................... 61 SECTION 15.1 EVENTS OF DEFAULT...................................... 61 SECTION 15.2 ACCELERATION........................................... 64 SECTION 15.3 DEFAULT INTEREST....................................... 64 SECTION 15.4 REMEDIES CUMULATIVE AND WAIVERS........................ 65 SECTION 15.5 TERMINATION OF BANK'S OBLIGATIONS...................... 65 ARTICLE 16 CHANGE OF CIRCUMSTANCES.................................................... 65 SECTION 16.1 MARKET DISRUPTION...................................... 65 SECTION 16.2 CHANGE IN LAW.......................................... 66 SECTION 16.3 REPAYMENT OF AFFECTED LOAN............................. 66 SECTION 16.4 ILLEGALITY............................................. 67 ARTICLE 17 COSTS, EXPENSES AND INDEMNIFICATION........................................ 67 SECTION 17.1 COSTS AND EXPENSES..................................... 67 SECTION 17.2 INDEMNIFICATION BY THE BORROWER........................ 68 SECTION 17.3 INTEREST ON UNPAID COSTS AND EXPENSES.................. 69 - iv - ARTICLE 18 GENERAL ...................................................................69 SECTION 18.1 EXCHANGE AND CONFIDENTIALITY OF INFORMATION............ 69 SECTION 18.2 NOTICE................................................. 69 SECTION 18.3 GOVERNING LAW.......................................... 70 SECTION 18.4 CONSENT TO JURISDICTION................................ 71 SECTION 18.5 JUDGMENT CURRENCY...................................... 71 SECTION 18.6 BENEFIT OF THE AGREEMENT............................... 72 SECTION 18.7 ASSIGNMENT AND NOVATION................................ 72 SECTION 18.8 SEVERABILITY........................................... 72 SECTION 18.9 WHOLE AGREEMENT........................................ 72 SECTION 18.10 AMENDMENTS AND WAIVERS................................. 72 SECTION 18.11 FURTHER ASSURANCES..................................... 72 SECTION 18.12 BINDING EFFECT......................................... 73 SECTION 18.13 TIME OF THE ESSENCE.................................... 73 SECTION 18.14 COUNTERPARTS........................................... 73 - v - CREDIT AGREEMENT THIS AGREEMENT MADE as of May 2, 2003. BETWEEN: TELVENT CANADA LTD., a Corporation, incorporated under the Laws of Canada, and having an office in the City of Calgary in the Province of Alberta (herein referred to as the "BORROWER") OF THE FIRST PART - and - LASALLE BUSINESS CREDIT, A DIVISION OF ABN AMRO BANK N.V., CANADA BRANCH, a Canadian Branch of a Foreign Bank, under the Bank Act (Canada), and having an office in the City of Toronto in the Province of Ontario (herein referred to as the "BANK") OF THE SECOND PART WHEREAS the Borrower has requested the Credit Facility to partially finance the acquisition cost of the stock of the Borrower by way of distributions or loans from the Borrower, to Telvent, in an amount up to U.S. $ 28,000,000, or the Equivalent Amount in Canadian Dollars. Borrowings under Facility A will be used for working capital and general corporate purposes and borrowings under Facility B will be used to finance the Deferred Payment amount under the Purchase Agreement and for working capital and general corporate purposes and the Bank has agreed to provide the Credit Facility to the Borrower on the terms and conditions herein set forth; and NOW THEREFORE, in consideration of the terms, covenants, conditions and provisions hereof, given or made by each party hereto, to or in favor of all or any of the other parties hereto, and other good and valuable consideration (receipt and sufficiency whereof is hereby acknowledged by each party receiving the same) the parties hereto mutually covenant and agree as follows. ARTICLE 1 INTERPRETATION SECTION 1.1 DEFINITIONS In this Agreement, unless something in the subject matter or context is inconsistent therewith: - 6 - "ACCOUNT DEBTOR" means the account debtor or obligor with respect to any of the Eligible Receivables and/or the prospective purchaser with respect to any contract right, and/or any Person who enters into or proposes to enter into any contract or other arrangement with the Borrower or any of the Borrower's Subsidiaries. "ADDITIONAL COMPENSATION" has the meaning set out in Section 16.2. "ADVANCE" means an advance of funds made by the Bank to the Borrower pursuant to the provisions hereof. "AFFILIATE" of a Person shall mean any Person directly or indirectly controlling, controlled by or under common control with such Person and, for the purpose of this definition, a Person possessing, directly or indirectly, the right to direct, or cause the direction of, the management and policies of another Person by contract, through the ownership of voting securities or otherwise, is deemed to control such other Person. "AGREEMENT" means this agreement and all amendments made hereto in accordance with the provisions hereof. "ALTERNATE LOAN" means a loan referred to in Section 8.7. "APPLICABLE L/C FEE PERCENTAGE" means the factor for determining the fee to be charged by the Bank to the Borrower, calculated: (a) in the case of a standby Letter of Credit, a rate per annum equal to the following percentages:
APPLICABLE L/C FEE PERCENTAGE WHERE TOTAL NET DEBT/EBITDA IS (EXPRESSED AS A PERCENTAGE) greater than or equal to 2.00 3.25 greater than or equal to 1.50 and less than 2.00 3.00 greater than or equal to 1.00 and less than 1.50 2.50 greater than or equal to 0.50 and less than 1.00 2.00 less than 0.50 1.50
and (b) in the case of any other Letter of Credit, 0.25 percent of the face amount of the Letter of Credit at the time of issuance by the Bank. "ASSOCIATE," when used to indicate a relationship of one Person with another Person, means: (a) a Person (the "FIRST PERSON") of which the other Person (the "SECOND PERSON") beneficially owns or controls, directly or indirectly, voting securities entitling the - 7 - Second Person to more than 10% of the voting rights attached to outstanding securities of the First Person; or (b) any partner of a partnership; or (c) any trust or estate in which a Person has a substantial beneficial interest or in respect of which a Person serves as trustee or in a similar capacity; or (d) in the case of a Person who is an individual: (i) that person's spouse or child, or (ii) any relative of that person or of his spouse who has the same residence as that person. "BANKERS' ACCEPTANCE" means a draft in Canadian Dollars drawn by the Borrower, accepted by the Bank and issued for value pursuant to this Agreement. "BANKERS' ACCEPTANCE FEE" means a rate per annum equal to the face amount of the Bankers' Acceptance multiplied by the applicable B.A. Margin as determined below:
APPLICABLE B.A. MARGIN WHERE TOTAL NET DEBT/EBITDA IS (EXPRESSED AS A PERCENTAGE) FACILITY A FACILITY B greater than or equal to 2.00 3.25 3.75 greater than or equal to 1.50 and less than 2.00 3.00 3.50 greater than or equal to 1.00 and less than 1.50 2.50 3.00 greater than or equal to 0.50 and less than 1.00 2.00 2.50 less than 0.50 1.50 2.00
"BANK" means LaSalle Business Credit, a division of ABN AMRO Bank N.Y., Canada Branch. "BANKING DAY" means in respect of a Loan, other than a Libor Loan, a day on which banks are open for business in Calgary, Alberta, Toronto, Ontario and Chicago, Illinois and, in respect of a Libor Loan means a day on which banks are open in the foregoing cities, New York, New York, and London, England and for all other purposes shall mean a day on which banks are open in Chicago, Illinois, but does not in any event include a Saturday or a Sunday. "BASE RATE MARGIN" means an additional amount to be added to the Canadian Prime Rate or the U.S. Base Rate, as the case may be, for the purposes of calculating the amount of interest to be paid by the Borrower hereunder, such amount to be determined as follows: - 8 -
APPLICABLE APPLICABLE BASE CANADIAN PRIME RATE MARGIN RATE MARGIN (EXPRESSED AS A (EXPRESSED AS A WHERE TOTAL NET DEBT/EBITDA IS PERCENTAGE): PERCENTAGE): greater than or equal to 2.00 0.50 2.00 greater than or equal to 1.50 and less than 2.00 0.25 1.75 greater than or equal to 1.00 and less than 1.50 0.25 1.75 greater than or equal to 0.50 and less than 1.00 0.00 1.50 less than 0.50 0.00 1.50
"BORROWER" means Telvent Canada Ltd. "BORROWED FUNDS" means with respect to the Borrower and its Subsidiaries, without duplication, Indebtedness consisting of: (a) obligations for borrowed money, including, without limitation, subordinated indebtedness, (b) obligations representing the deferred purchase price of property or services rendered, including, without limitation earn-outs and other similar forms of contingent purchase prices (but excluding accounts payable arising in the ordinary course of such Person's business payable on terms customary in the trade), (c) obligations, whether or not assumed, secured by Liens or payable out of the revenues from property or assets now or hereafter owned or acquired by such Person, (d) obligations which are evidenced by notes, acceptances, other instruments or drafts drawn pursuant to a corresponding letter of credit or letter of guarantee, and (e) Capitalized Lease Obligations. "BORROWER'S FINANCIAL STATEMENTS" means the financial statements that the Borrower is required to deliver to the Bank pursuant to Section 14.1.6. "BORROWER'S 2002 FINANCIAL STATEMENTS" means the Borrower's unaudited consolidated financial statements as at November 30, 2002 as reviewed by the Borrower's auditor and Notes thereto. "BORROWER'S JANUARY 31, 2003 AUDITED BALANCE SHEET" means the Borrower's audited Balance Sheet as at January 31, 2003 and Notes thereto and the Guarantee Subsidiary's audited Balance Sheet as at January 31, 2003 and Notes thereto. "BORROWER'S JANUARY 31, 2003 UNAUDITED BALANCE SHEET" means the Borrower's unaudited Balance Sheet as at January 31, 2003 and Notes thereto and the Guarantee Subsidiary's unaudited Balance Sheet as at January 31, 2003 and Notes thereto. - 9 - "BORROWER'S MARCH 31, 2003 UNAUDITED FINANCIAL STATEMENTS" means the Borrower's unaudited consolidated financial statements as at March 31, 2003, as prepared by the Borrower, and Notes thereto. "BORROWER'S PROPERTY" means all lands and properties owned or occupied by the Borrower or any of its Subsidiaries. "BORROWING BASE" means the maximum amount in U.S. Dollars, or the Equivalent Amount in Canadian Dollars that the Borrower is permitted to draw down under the Credit Facility, being the sum of: (a) 85% of: (i) Domestic Receivables, and (ii) Foreign Receivables which are secured for payment by a letter of credit: (A) confirmed by a bank which is acceptable to the Bank, or (B) issued by a bank which is acceptable to the Bank if the letter of credit is not confirmed; and (b) 75% of other Foreign Receivables, to a maximum amount available under this clause of U.S. $1,000,000, or the Equivalent Amount in Canadian Dollars; and (c) 40% of Eligible Inventory. "BORROWING BASE CERTIFICATE" means an Officer's Certificate containing a detailed calculation substantially in the form of Schedule Q hereto, of the Borrowing Base. "CANADIAN DOLLARS" and "CDN. $" mean the lawful money of Canada. "CANADIAN PRIME RATE" means the prime lending rate of the Bank, such rate being a variable per annum reference rate of interest, as announced and adjusted by the Bank from time to time, for Canadian Dollar loans made by the Bank in Canada. "CANADIAN PRIME RATE LOAN" means an Advance in, or Conversion into, Canadian Dollars made by the Bank to the Borrower on which the Borrower has specified that interest is to be calculated by reference to the Canadian Prime Rate. "CAPITAL EXPENDITURES" means capital expenditures as that expression is defined by GAAP. "CAPITALIZED LEASE" means, with respect to any Person, any lease of property by such Person as lessee which would be capitalized on a balance sheet of such Persons prepared in accordance with GAAP. "CAPITALIZED LEASE OBLIGATIONS" means with respect to any Person, the amount of the obligations of such Person under Capitalized Leases which would be capitalized on a balance sheet of such Person prepared in accordance with GAAP. - 10 - "CAPITAL STOCK" means: (a) in the case of a corporation, shares in the capital of the corporation, (b) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of share capital, (c) in the case of a partnership, partnership interests (whether general or limited), and (d) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. "CASH EQUIVALENTS" means: (a) marketable direct obligations issued or unconditionally guaranteed by the United States government, or the Government of Canada and backed by the full faith and credit of the United States government, or the Government of Canada; (b) domestic and Eurodollar certificates of deposit and time deposits, bankers' acceptances and floating rate certificates of deposit issued by any commercial bank organized under the laws of the United States, any state thereof, the District of Columbia, the laws of Canada or any province thereof, any foreign bank, or its branches or agencies, the long-term indebtedness of which institution at the time of acquisition is rated A- (or better) by S&P or A3 (or better) by Moody's, and which certificates of deposit and time deposits, in currencies other than U.S. Dollars, are fully protected against currency fluctuations for any such deposits with a term of more than ninety (90) days; (c) shares of money market, mutual or similar funds having assets in excess of U.S. $100,000,000, or the Equivalent Amount in Canadian Dollars and the investments of which are limited to (i) investment grade securities (i.e., securities rated at least Baa by Moody's or at least BBB by S&P) and (ii) commercial paper of United States and foreign banks and bank holding companies and their subsidiaries and United States and foreign finance, commercial industrial or utility companies which, at the time of acquisition, are rated A-1 (or better) by S&P or P-l (or better) by Moody's (all such institutions being, "QUALIFIED INSTITUTIONS"); and (d) commercial paper of Qualified Institutions; provided that the maturities of such Cash Equivalents shall not exceed three hundred sixty-five (365) days from the date of acquisition thereof. "CHICAGO TIME" means local time in Chicago, Illinois on the date on which a determination is made or an event is to occur. "CLOSING DATE" means the date on which all conditions precedent to the initial Advance hereunder have been satisfied or waived and at which time the initial Advance has been made. - 11 - "COLLATERAL" means any and all property, assets and undertakings of the Borrower, and each Subsidiary, as the case may be, securing the Obligations as more particularly described in the Security Documents. "COMPUTATION PERIOD" means: (a) in respect of the Total Net Debt to EBITDA ratio in subsection 14.2.1, the annualized amounts based on results for the periods between the Closing Date and: (i) June 30, 2003, (ii) September 30, 2003, (iii) December 31, 2003, (iv) March 31, 2004, and thereafter a period of four consecutive Quarters, ending on the last day of the last Quarter for which the determination is being made. (b) in respect of the Fixed Charge Ratio pursuant to subsection 14.2.2, the periods from Closing Date until: (i) June 30, 2003, (ii) September 30, 2003, (iii) December 31, 2003, (iv) March 31, 2004, and thereafter a period of four consecutive Quarters, ending on the last day of the last Quarter for which the determination is being made. "CONSTITUENT DOCUMENTS" means as applied to any Person, the certificate of incorporation, articles of incorporation or certificate of formation, by-laws or operating agreement and any other applicable organizational document of such Person. "CONTROL" has the meaning set out in Section 1.2. "CONVERSION" means a conversion of a Loan pursuant to Section 10.1. "CONVERSION DATE" means the date specified by the Borrower as being the date on which the Borrower has elected to convert one type of Loan into another type of Loan and which shall be a Banking Day. "CONVERSION NOTICE" means a notice substantially in the form annexed hereto as Schedule B. "CREDIT FACILITY" means the credit facility consisting of Facility A and Facility B. - 12 - "DISCOUNT PROCEEDS" means the net cash proceeds from the sale of the Bankers' Acceptance pursuant to Article 8. "DOCUMENTS" means this Agreement and all certificates and other documents delivered or to be delivered to the Bank pursuant hereto or thereto and, when used in relation to any Person, the term "DOCUMENTS" shall mean and refer to the documents executed and delivered by such Person. "DOMESTIC RECEIVABLE" means an Eligible Receivable of the Borrower or any Subsidiary, payable by an Account Debtor resident in Canada or the United States. "DRAWDOWN" means an Advance of a Canadian Prime Rate Loan, a U.S. Base Rate Loan, a Libor Loan or the issuance of Bankers' Acceptances, as the case may be. "DRAWDOWN DATE" means the date on which a Drawdown is made by the Borrower pursuant to the provisions hereof and which shall be a Banking Day. "DRAWDOWN NOTICE" means a notice substantially in the form annexed hereto as Schedule A. "EBITDA" means, for any period, on a consolidated basis for the Borrower and its Subsidiaries, the sum of the amounts for such period, without duplication, calculated in each case in accordance with GAAP, of: (i) Net Income, plus (ii) Interest Expense to the extent deducted in computing Net Income, plus (iii) charges against income for foreign, federal, provincial, state and local cash taxes to the extent deducted in computing Net Income, plus (iv) depreciation expense to the extent deducted in computing Net Income, plus (v) amortization expense, including, without limitation, amortization of goodwill and other intangible assets to the extent deducted in computing Net Income, less (vi) gains on cash and non-cash items, plus (vii) non-cash losses. "ELIGIBLE INVENTORY" means inventory of the Borrower located in Canada or the United States and which is raw materials or finished goods in good condition, merchantable, not deemed by the Bank to be slow moving or stale and free and clear of all Liens. "ELIGIBLE RECEIVABLE" means a Receivable owed from any Person (including that Person's Affiliates and Associates) to the Borrower or any Subsidiary and which on the applicable Drawdown Date, Rollover Date or Conversion Date, as the case may be, is recorded on the books of account of the Borrower, Provided However, a Receivable shall not be an "ELIGIBLE RECEIVABLE" if the Bank, in its reasonable discretion determines that it is a Receivable: - 13 - (a) with respect to which more than 90 days have elapsed since the date of the original invoice therefore; (b) of such Person in respect of whom more than 25% in the aggregate amount of all Receivables owed to the Borrower by such Person, are in excess of 90 days from the respective dates of original invoice; (c) with respect to which Receivable (or any other Receivable due from such Account Debtor), in whole or in part, a check, promissory note, draft, trade acceptance or other instrument for the payment of money has been received, presented for payment and returned uncollected for any reason; (d) with respect to which any one or more of the following events has occurred to the Account Debtor on such Receivable: (i) death or judicial declaration of incompetency of an Account Debtor who is an individual; (ii) the filing by or against the Account Debtor of a request or petition for liquidation, reorganization, arrangement, adjustment of debts, adjudication as a bankrupt, winding-up, or other relief under the bankruptcy, insolvency, or similar laws of Canada or the United States, any state or territory thereof, or any foreign jurisdiction, nor or hereafter in effect; (iii) the making of any general assignment by the Account Debtor for the benefit of creditors; the appointment of a receiver or trustee for the Account Debtor or for any of the assets of the Account Debtor, including, without limitation, the appointment of or taking possession by a "CUSTODIAN", as defined in the U.S. Bankruptcy Code; (iv) the institution by or against the Account Debtor of any other type of insolvency proceeding (under the bankruptcy laws of Canada or the United States or otherwise) or of any formal or informal proceeding for the dissolution or liquidation of, settlement of claims against, or winding up of affairs of, the Account Debtor; (v) the sale, assignment, or transfer of all or any material part of the assets of the Account Debtor; the nonpayment generally by the Account Debtor of its debts as they become due; or the cessation of the business of the Account Debtor as a going concern; or (vi) such Account Debtor becomes unlikely to pay the Receivable due to financial inability, as determined by the Bank in the exercise of its good faith reasonable judgment; (e) owed by an Account Debtor which is an Affiliate or employee of the Borrower or any of its Subsidiaries; (f) if the Account Debtor thereon has disputed liability or made any claim with respect to any other Receivable due from such Account Debtor (including claims of setoff or recoupment); but in each such case only to the extent of such dispute or claim; (g) owed by the government of Canada or any Province thereof or the United States, any state or territory thereof, or any foreign jurisdiction, or by any state, political subdivision, department, agency or other instrumentality of any of the foregoing and as to which the Bank determines that its Lien therein is not perfected, but for - 14 - greater certainty, this subsection does not include Receivables owed by any municipality or public corporation; (h) which represents a sale on a bill-and-hold, guaranteed sale, sale and return, sale on approval, consignment, or other repurchase or return basis; (i) which arises out of a sale not made in the ordinary course of the applicable entity's business; (j) with respect to which the goods giving rise to such Receivable have not been shipped and delivered to and accepted by the Account Debtor or the services giving rise to such Receivable have not been performed, and, if applicable, accepted by the Account Debtor, or the Account Debtor revokes its acceptance of such goods or services; (k) which arises out of an enforceable contract or order which, by its terms, forbids, restricts or makes void or unenforceable the granting of a Lien by the Borrower to the Bank with respect to such Receivable; or (1) such other reasonable criteria of ineligibility, established by the Bank, as a result of information obtained in connection with any field audit of the Borrower. If any Receivable at any time ceases to be an Eligible Receivable, then such Receivable shall promptly be excluded from the calculation of Eligible Receivables. Notwithstanding the foregoing, the Bank may elect, in its sole discretion, to treat an Receivable as an Eligible Receivable even though it meets one or more of the applicable criteria for ineligibility. "ENVIRONMENTAL CONTAMINATION" means any discharge, abandonment, addition, deposit, dispersal, disposal, dumping, emitting, emptying, escape, leach, leak, migration, pouring, pumping, release or spill, (accidental or otherwise) of a hazardous material in violation of any environmental legislation originating on the Borrower's Property and capable of causing material injury to any Person or to the atmosphere, soil, surface or subsurface water, property, animal or plant life. "ENVIRONMENTAL LEGISLATION" means any and all statutes, rules, regulations, ordinances, standards, orders, bylaws, decisions, permits, licences, authorizations or consents of any federal, provincial, state, municipal or regulatory authority in force from time to time which regulate the environment, occupational safety, health, product liability or transportation, or impose a penalty or civil liability on any Person responsible for environmental contamination and which are applicable to the Borrower's or its Subsidiaries business, assets or undertaking, and includes any prosecution, order, decision, notice, direction, report, recommendation or request issued, rendered or made by any governmental authority in connection with environmental legislation. "EQUITY INTEREST" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock), but excluding any shares ownership, restricted shares, warrants, shares option, or shares appreciation rights plans, "phantom" shares plans, deferred compensation arrangements, employment agreements, non-competition agreements, subscription and shareholders agreements - 15 - and other incentive and bonus plans and similar arrangements made in connection with the retention of directors, executives, officers or employees of the Borrower and its Subsidiaries, or obligations or payments under any such excluded item. "EQUIVALENT AMOUNT" means, on any date, the equivalent amount in Canadian Dollars or United States Dollars, as the case may be, after giving effect to a conversion of a specified amount of Canadian Dollars to United States Dollars or of United States Dollars to Canadian Dollars, as the case may be, at the noon rate as quoted by the Bank of Canada or, if not so quoted, the simple average of the spot rates quoted for wholesale transactions by LaSalle Bank National Association, in Chicago, Illinois at approximately noon (Toronto time) on that date in accordance with their normal practice. "EVENT OF DEFAULT" means any of the events described in Section 15.1. "EXCESS CASH FLOW" means without duplication, an amount, for the Borrower and its consolidated Subsidiaries, equal to: (a) EBITDA for such period, minus (b) Cash Interest Expense for such period, minus (c) charges against income for foreign, federal, state and local taxes paid in cash for such period, minus (d) scheduled amortization of the principal portion of the Term Loans, prepayments of the Term Loans and scheduled amortization of the principal portion of all other Borrowed Funds of the Borrower and its Subsidiaries during such period; minus (e) permitted cash Capital Expenditures paid during such period, commencing with the fiscal year ending December 31, 2002, plus (minus) (f) reductions (additions) to Working Capital for such fiscal year exclusive of any change to Working Capital attributable to assets acquired in any acquisition permitted by the Bank, as determined by the Bank in its reasonable judgment, "FACILITY" means Facility A or Facility B and "FACILITIES" means Facility A and Facility B. "FACILITY A" means the secured revolving credit facility in the maximum aggregate principal amount not to exceed U.S. $8,000,000 or the Equivalent Amount in Canadian Dollars to be made available to the Borrower by the Bank in accordance with the provisions hereof, subject to any reduction in accordance with the provisions hereof. "FACILITY B" means the secured non-revolving delayed draw term Canadian Dollar credit facility in the maximum aggregate principal amount not to exceed U.S. $5,500,000 or the Equivalent Amount in Canadian Dollars which is to be made available to the Borrower by the Bank, as determined on the Drawdown Date, in accordance with the provisions hereof, subject to any reduction in accordance with the provisions hereof. - 16 - "FIXED CHARGE COVERAGE RATIO" means with respect to any Computation Period, the ratio of: (a) EBITDA, less (b) unfinanced Capital Expenditures, divided by the sum of: (c) amounts in respect of principal due on Borrowed Funds, plus (d) all accrued but unpaid interest on Borrowed Funds, plus (e) all cash dividends paid, plus (f) all cash taxes paid. "FOREIGN RECEIVABLE" means an Eligible Receivable of the Borrower, payable by an Account Debtor not resident in Canada or the United States. "GAAP" means generally accepted accounting principles in Canada in respect of entities operating in Canada ("CANADIAN GAAP") and generally accepted accounting principles in the United States in respect of entities operating in the United States of America or its territories and possessions ("U.S. GAAP"), as the case may be, as in effect at the date hereof. "GENERAL SECURITY AGREEMENT" means the general security agreement, in form and substance satisfactory to the Bank, to be entered into between the Borrower and the Bank, pursuant to which the Borrower will create and grant a security interest in all of the present and after acquired personal property of the Borrower, as those expressions are defined by the Personal Property Security Act (Alberta) and equivalent legislation in any other jurisdiction in which the Borrower carries on its business or in which it owns assets as security for its Obligations hereunder. "GOVERNMENTAL AUTHORITY" means any nation or government, any federal, provincial, state, local or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative authority or functions of or pertaining to government, including any authority or other quasi-governmental entity established to perform any of such functions. "GUARANTEE" means a guarantee of the Obligations, substantially in the form of Schedule G hereto. "GUARANTEE COLLATERAL SECURITY AGREEMENT" means the general security agreement, in form and substance satisfactory to the Bank, to be entered into between the Guarantee Subsidiary and the Bank, pursuant to which the Guarantee Subsidiary will create and grant a security interest in all of the present and after acquired personal property of the Borrower, as those expressions are defined by the Uniform Commercial Code in any other jurisdiction in which the Guarantee Subsidiary carries on its business or in which it owns assets, as collateral security for the Guarantee. - 17 - "GUARANTEE SUBSIDIARY" means a Subsidiary, which has executed and delivered a Guarantee to the Bank and shall initially include Telvent U.S. "GUARANTOR" means each Person which guarantees or otherwise acts as surety for the performance of the Obligations, including without limitation the Guarantee Subsidiary hereunder together with their respective successors and assigns. "HAZARDOUS MATERIALS" means any substance, class of substances or mixture of substances that is entering or capable of entering the environment in a quantity or concentration or under conditions that may constitute an immediate or long-term adverse effect, or which may be hazardous, toxic, injurious, or dangerous to persons, property, air, land, water, flora, fauna or wildlife, and includes a substance or thing containing such a substance, including, without limiting the generality of the foregoing, any contaminants, pollutants, dangerous substances, liquid wastes, industrial wastes, hauled liquid wastes, toxic substances, hazardous wastes, hazardous materials or hazardous substances as defined in or pursuant to any environmental legislation pursuant thereto. "INDEBTEDNESS" means, with respect to the Borrower and its Subsidiaries, indebtedness created, incurred, assumed or guaranteed by that Person which would, in accordance with GAAP, be classified upon a balance sheet (and the notes thereto) of that Person as liabilities (absolute or contingent), including for greater certainty all principal amounts and other amounts (other than interest) due hereunder; Provided However, that contingent liabilities under guarantees for borrowed money, to the extent of the lesser of the amount of the guarantee and the amount of the debt outstanding to which the guarantee relates, or for amounts that may be paid under a letter of credit issued for the account of that Person, and other contingent liabilities shall be included as Indebtedness only to the extent of any reserve or other amount that has been provided on the Borrower's Financial Statements in respect of the same. "INTELLECTUAL PROPERTY" means: (a) all inventions (whether patentable or unpatentable and whether or not reduced to practice) and all patent rights in same including patents and patent applications, together with all rights of priority and all reissuances, continuations, continuations-in-part, divisions, revisions, extensions and reexaminations thereof ("PATENTS"); (b) all trademarks, service marks and other marks, trade dress, corporate names, business names, trade names, and other trade rights, all whether or not registrable or the subject of applications for registration(s), including all goodwill associated therewith and all applications, registrations and renewals in connection therewith ("TRADEMARKS"); (c) all copyrights in the Works (defined below), and all applications, registrations, and renewals in connection therewith ("COPYRIGHTS"); (d) all confidential information including as may relate to any of the following: improvements thereto, trade secrets and confidential business information, ideas, research and development, know-how, formulas, compositions, manufacturing - 18 - and production processes and techniques, technical data, designs, drawings, specifications, customer and supplier lists, pricing and cost information, and business and marketing plans and proposals ("TRADE SECRETS"); (e) all computer software programs, scripts, interfaces, program specifications, charts, procedures, source codes (including annotations), object codes, diagnostic and other routines and report layouts and formats, record file layouts, diagrams, functional specifications and narrative descriptions and flow charts ("SOFTWARE"); (f) all domain names, uniform resource locators and other names and locators associated with the Internet; (g) all databases, database layouts and data collections including all rights therein ("DATABASES"); (h) all works, including literary, artistic, musical, dramatic and audio visual works, performer's performances, sound recordings and broadcast signals, all whether or not registered or registrable (collectively, with Software and Databases, herein and hereinafter "WORKS"); (i) all moral rights or the benefits of all waivers of moral rights, in the Works ("MORAL RIGHTS"); (j) all mask works and mask work rights; (k) all industrial designs, whether or not patentable or registrable, patented or registered or the subject of applications for registration or patent, including all design patents, design registrations, pending applications and rights to file applications, including all rights of priority and rights in continuation, continuations-in-part, divisions, re-examinations, and reissues ("DESIGN RIGHTS"); (1) all integrated circuit topographies and integrated circuit topography products, whether or not registrable, registered or pending, including registrations, pending applications, and rights to file for any of same ("TOPOGRAPHY RIGHTS"); (m) all other intellectual and industrial property including all rights to enforce rights in clauses 1.1.1(a) to 1.1.1(1) ("OTHER INTELLECTUAL PROPERTY RIGHTS"). "INTELLECTUAL PROPERTY ASSIGNMENTS" means those assignments of the Borrower's and its Subsidiaries' rights to certain Patents and Trade Marks, and the pledging of those assignments to the Bank as security for the Obligations of the Borrower hereunder. "INTEREST EXPENSE" means, for any period, the total cash interest expense of the Borrower and its consolidated Subsidiaries, (including the interest component of Capitalized Leases, commitment and letter of credit fees and the discount or implied interest component (or other fees or charges in securitization transactions) of Off-Balance Sheet Liabilities), Bankers' Acceptance Stamping Fees and net payments (if any) pursuant to hedging arrangements relating to interest rate protection, all as determined in conformity with GAAP. - 19 - "INTEREST PAID" means, for any specified period, the aggregate of (i) net interest actually paid by the Borrower and its Subsidiaries on Borrowed Funds, whether capitalized or Expanses, included on the Borrower's Financial Statements; and (ii) dividends paid by the Borrower on its outstanding preferred shares included on the Borrower's Financial Statements. "INTEREST PAYMENT DATE" means: (a) with respect to each Canadian Prime Rate Loan and each U.S. Base Rate Loan, on August 1, November 1, February 1 and May 1 in each year, commencing on August 1, 2003; and (b) with respect to each Libor Loan, the last day of each applicable Interest Period and, if any Interest Period is longer than three months the last Banking Day of each such three month period during such Interest Period. "INTEREST PERIOD" means, (a) with respect to each Canadian Prime Rate Loan and each U.S. Base Rate Loan, the period commencing on the applicable Drawdown Date, Rollover Date or Conversion Date, as the case may be, and terminating on the date ultimately selected by the Borrower hereunder for the Conversion of such Loan into another type of Loan or the repayment of such Loan; (b) with respect to each Libor Loan, the period selected by the Borrower and being of 30 days, 60 days, 90 days or 180 days duration commencing on the Drawdown Date, Rollover Date or Conversion Date of such Loan; and (c) with respect to the Bankers' Acceptance, the period selected by the Borrower hereunder and being of 30 to 180 days duration commencing on the Drawdown Date, Rollover Date or Conversion Date of such Loan, or such other duration as is determined by the Bank; Provided That, the last day of each Interest Period shall be a Banking Day and if the last day of an Interest Period selected by the Borrower is not a Banking Day the Borrower shall be deemed to have selected an Interest Period the last day of which is the Banking Day next following the last day of the Interest Period otherwise selected; and Further Provided, an Interest Period may not extend beyond the maturity date of the Facility to which it relates. "INTEREST RATE" means in respect of any Loan, the rate at which interest is calculated pursuant to the terms hereof, as the case may be. "INVESTMENT" means, with respect to any Person (the "FIRST PERSON"): (a) any purchase or other acquisition by the First Person of any Indebtedness, Equity Interests or other securities, or of a beneficial interest in any Indebtedness, Equity Interests or other securities, issued by any other Person (the "SECOND PERSON"), - 20 - (b) any purchase by the First Person of all or substantially all of the assets of a business (whether of a division, branch, unit operation, or otherwise) conducted by the Second Person, and (c) any loan, advance (other than deposits with financial institutions available for withdrawal on demand, prepaid expenses, accounts receivable, advances to employees and similar items made or incurred in the ordinary course of business) or capital contribution by the First Person to the Second Person, including all Indebtedness owing to the First Person arising from a sale of property by the Second Person other than in the ordinary course of its business. "JUDGMENT CONVERSION DATE" has the meaning set out in Section 18.5. "JUDGMENT CURRENCY" has the meaning set out in Section 18.5. "LIBOR LOAN" means an Advance in, or Conversion into, United States Dollars made by the Bank to the Borrower on which the Borrower has specified that interest is to be calculated by reference to the Libor Rate. "LIBOR MARGIN" means an additional amount to be added to the Libor Rate for the purposes of calculating the amount of interest to be paid by the Borrower hereunder, such amount to be determined as follows:
APPLICABLE LIBOR RATE MARGIN WHERE TOTAL NET DEBT/EBITDA IS (EXPRESSED AS A PERCENTAGE) FACILITY A FACILITY B greater than or equal to 2.00 3.25 3.75 greater than or equal to 1.50 and less than 2.00 3.00 3.50 greater than or equal to 1.00 and less than 1.50 2.50 3.00 greater than or equal to 0.50 and less than 1.00 2.00 2.50 less than 0.50 1.50 2.00
"LIBOR RATE" means, for each Interest Period applicable to a Libor Loan, the rate of interest per annum, expressed on the basis of a 360 day year, at which United States Dollars are quoted by the Bank for one, two, three and six month U.S. Dollar deposits in the London interbank market at approximately 11:00 a.m. (London, England time) on the third Banking Day prior to the first day of such Interest Period, in an amount similar to such Libor Loan and for a period comparable to such Interest Period. "L/C LIABILITIES" has the meaning given to the expression "LIABILITIES" in the Master Letter of Credit Agreement. "L/C OBLIGATIONS" means without duplication, an amount equal to the sum of: - 21 - (a) the aggregate of the amount then available for drawing under each of the issued and outstanding Letters of Credit, (b) the amount equal to the stated amount of all drafts drawn on the Bank pursuant to a corresponding Letter of Credit, which drafts have been accepted by the Bank, (c) the aggregate outstanding amount of all Reimbursement Obligations at such time, and (d) the aggregate amount equal to the stated amount of all Letters of Credit requested by the Borrower but not yet issued, unless the request for an unissued Letter of Credit has been denied. "LETTER OF CREDIT" means a letter of credit to be issued by the Bank pursuant to Section 9.1 hereof. "LIEN" means any mortgage, pledge, hypothec, assignment, transfer, security interest, encumbrance, lien or charge of any kind (including any agreement to give any of the foregoing or any conditional sale or other title retention agreement), Capitalized Lease or any other type of preferential arrangement. "LOAN" means a Canadian Prime Rate Loan, U.S. Base Rate Loan, Libor Loan or Bankers' Acceptance made to the Borrower. "MAJOR CHANGE IN OWNERSHIP" means, except where approved by the Bank, any transaction or series of transactions whereby Control of the Borrower shall as a result be held by a Person or group of Persons, and their respective Affiliates and Associates, acting together, other than one or more of the Persons their respective and Affiliates and Associates, who are the shareholders of the Borrower at the date hereof. "MASTER LETTER OF CREDIT AGREEMENT" means an agreement providing for the application for and issue of Letters of Credit, otherwise in accordance with the terms and conditions of this Agreement, by the Bank for the benefit of the Borrower on terms and conditions as set forth in Schedule E hereto. "MATERIAL ADVERSE EFFECT" means a material adverse effect upon (i) the business, assets, condition (financial or otherwise), operations, performance, properties, results of operations or prospects of the Borrower, any Guarantor, or the Borrower and its Subsidiaries in each case taken as a whole, (ii) the ability of the Borrower, any Guarantor or the Borrower and its Subsidiaries to perform their respective obligations under this Agreement or the Security Documents, (iii) the ability of the Bank to enforce the Obligations, (iv) the validity or enforceability of this Agreement, the Security Documents to which the Borrower or any Guarantor is a party, or the rights or remedies of the Bank hereunder and thereunder, (v) the value of a Substantial Portion of the Collateral, or (vi) the perfection or priority of the Bank's Liens with respect to a Substantial Portion of the Collateral. - 22 - "NET INCOME" means, for any period, an amount equal to the net earnings (or loss) after taxes of the Borrower and its Subsidiaries on a consolidated basis for such period taken as a single accounting period determined in conformity with GAAP. "OBLIGATIONS" means the obligations of the Borrower to repay the principal of, and to pay interest on, the Loans, all issued Bankers' Acceptances, all L/C Obligations and to pay all fees and other amounts from time to time due from the Borrower to the Bank hereunder. "OFF-BALANCE SHEET LIABILITIES" means, with respect to any Person, (i) any repurchase obligation or liability of such Person or any of its Subsidiaries with respect to Receivables sold by such Person or any of its Subsidiaries, (ii) any liability of such Person or any of its Subsidiaries under any sale and leaseback transaction which does not create a liability on the consolidated balance sheet of such Person (iii) any liability of such Person or any of its Subsidiaries under any financing lease or so-called "synthetic lease" or "tax ownership operating lease" transaction, or (iv) any obligations of such Person or any of its Subsidiaries arising with respect to any other transaction which is the functional equivalent of or takes the place of borrowing but which does not constitute a liability on the consolidated balance sheet of such Person and its Subsidiaries. "OFFICER'S CERTIFICATE" means a certificate signed by any one of the President, a Vice-President, the Treasurer or the Controller of the Borrower, setting forth the information or affirmations required for the purposes thereof. "PERMITTED ENCUMBRANCES" means in respect of any particular asset of either Borrower or any of its Subsidiaries, any of the following Liens, or restrictions as to sale or other disposition: (a) undetermined or inchoate Liens and charges incidental to construction, maintenance or operations which have not at the time been filed pursuant to law and any Liens and charges incidental to construction, maintenance or operation which, although filed, relate to obligations not overdue or to obligations the validity of which is being contested in good faith if the Borrower or the Subsidiary shall have made on its books provision reasonably deemed by it to be adequate therefor; (b) Liens for taxes and assessments for the then current year, Liens for taxes and assessments not at the time overdue, Liens securing workers' compensation assessments and Liens for specified taxes and assessments which are overdue but the validity of which is being contested at the time in good faith, if the Borrower or the Subsidiary shall have made on its books provision reasonably deemed by it to be adequate therefor; (c) liens for the excess of the amount of any taxes, rates, assessments or governmental charges or levies for which final assessments have not been received over and above the amount of such taxes, rates, assessments or governmental charges or levies as estimated by the Borrower or its Subsidiaries; - 23 - (d) pledges or deposits to secure obligations under workers' compensation or similar legislation, including Liens or judgments thereunder which are not currently dischargeable; (e) liens created or resulting from any litigation or legal proceeding which is currently being contested in good faith by appropriate proceedings diligently conducted; (f) liens or any rights of distress reserved in or exercisable under any lease for rent and for compliance with the terms of such lease; (g) easements, rights-of-way or similar rights in land granted to or reserved by other Persons which in the aggregate do not materially impair the usefulness of such land in the business of the Borrower or any of its Subsidiaries; (h) all rights reserved to or vested in any governmental body by the terms of any lease, license, franchise, grant or permit held by the Borrower or its Subsidiaries or by any statutory provision to terminate any such lease, license, franchise, grant or permit or to require annual or other periodic payments as a condition of the continuance thereof or to distrain against or to obtain a Lien on any property or asset of the Borrower or its Subsidiaries in the event of failure to make such annual or other periodic payments; (i) encumbrances resulting from the deposit of cash or obligations as security when the Borrower or its Subsidiaries is required to do so by governmental or other public authority or by normal business practice in connection with contracts, licences or tenders or similar matters in the ordinary course of business and for the purpose of carrying on the same, or to secure workers' compensation, surety or appeal bonds or to secure costs of litigation when required by law; (j) public and statutory obligations which are not due or delinquent, and security given to a public utility or any municipality or governmental or other public authority when required by such utility or other authority in connection with the operations of the Borrower or its Subsidiaries; (k) pledges or deposits to secure performance in connection with bids, tenders, contracts (other than contracts for the payment of money) or leases on real property to which the Borrower or any of its Subsidiaries is a party; (1) purchase money Liens, conditional sales agreements or other title retention mortgage, charge, hypothec, pledge, Lien or other encumbrance on a property or asset created, issued or assumed to secure the unpaid purchase price in respect of such property or asset ("PURCHASE MONEY MORTGAGES") (Provided That during the term of this Agreement, the Borrower and its Subsidiaries, collectively, shall only be permitted to have outstanding Purchase Money Mortgages in respect of Capital Assets for which the aggregate of the unpaid purchase price and Capitalized Lease Obligations, as the case may be, do not exceed U.S. $1,000,000 or the Equivalent Amount in Canadian Dollars, at anytime and from time to time); - 24 - (m) any lease or sublease granted by the Borrower or its Subsidiaries in the normal course of business, Provided That, any such lease or sublease will not materially adversely affect the enjoyment by the Borrower or its Subsidiaries of the assets of the Borrower and its Subsidiaries taken as a whole in the conduct of their business; (n) title defects or irregularities which are of a minor nature and in the aggregate will not materially impair the use of the property for the purposes for which it is held by the Borrower or its Subsidiaries; and (o) the Lien of the Security Documents; and (p) Liens identified as or associated with Permitted Existing Indebtedness and Permitted Refinancing Indebtedness. "PERMITTED EXISTING INDEBTEDNESS" means the Indebtedness of the Borrower and its Subsidiaries identified as such on Schedule O to this Agreement. "PERMITTED REFINANCING INDEBTEDNESS" means any replacement, renewal, refinancing or extension of any Borrowed Funds, permitted under Section 14.4.10 that: (a) does not exceed the aggregate principal amount (plus accrued interest and any applicable premium and associated fees and expenses) of the Borrowed Funds being replaced, renewed, refinanced or extended, (b) does not have a Weighted Average Life to Maturity at the time of such replacement, renewal, refinancing or extension that is less than the Weighted Average Life to Maturity of the Borrowed Funds being replaced, renewed, refinanced or extended, (c) does not rank at the time of such replacement, renewal, refinancing or extension senior to the Borrowed Funds being replaced, renewed, refinanced or extended, and (d) does not contain terms (including, without limitation, terms relating to security, amortization, interest rate, premiums, fees, covenants, subordination, events of default and remedies), taken as a whole, materially less favorable to the Borrower, its Subsidiaries or the Bank than those applicable to the Borrowed Funds being replaced, renewed, refinanced or extended. "PERSON" means an individual, partnership, corporation, body corporate, trust or other business or legal entity or any duly constituted government of or in any country and any minister, department, commission, board, bureau, agency, authority, instrumentality or court and the like of any such government. "PURCHASE AGREEMENT" means the agreement dated January 31, 2003, among Metso Automation Holdings B.V., Neles-Jamesbury, Inc., Telvent, Metso Automation SCADA Solutions Ltd. and Metso Automation SCADA Solutions Inc., whereby Telvent agreed to acquire all of the outstanding shares of the Borrower and Telvent U.S. - 25 - "QUARTER" means a three-month period ending on the last day of March, June, September or December in a year, as the case may be. "RECEIVABLE" means the Borrower's and its Subsidiaries' presently existing and hereafter arising or acquired accounts, accounts receivable, and all present and future rights of the Borrower or any Subsidiary to payment for goods sold, leased or licensed, or for services rendered (except those evidenced by instruments or chattel paper), whether or not they have been earned by performance, and all rights in any merchandise or goods which any of the same may represent, and all rights, title, security and guaranties with respect to each of the foregoing, including, without limitation, any right of stoppage in transit. "REIMBURSEMENT OBLIGATION" has the meaning given that expression in the Master Letter of Credit Agreement. "REPRESENTATION CERTIFICATE" means the certificate in the form of Schedule H annexed hereto. "REPAYMENT NOTICE" means a notice substantially in the form of Schedule C annexed hereto. "REQUIREMENTS OF LAW" means as to any Person, the Constituent Documents of such Person, and any law, rule or regulation, or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its business, assets and undertaking. "ROLLOVER" means a rollover of a Loan of one type into a Loan of the same type. "ROLLOVER DATE" means the date of commencement of a new Interest Period applicable to a Loan and which shall be a Banking Day. "ROLLOVER NOTICE" means a notice substantially in the form annexed hereto as Schedule D. "SECURITY DOCUMENTS" means, collectively, the Promissory Notes, the General Security Agreement, the Guarantees, the Guarantee Collateral Security Agreement, the Intellectual Property Assignments and any and all other security granted as collateral for the Obligations, including, without limitation, any security granted pursuant to Section 3.4 hereof. "SHAREHOLDERS' EQUITY" means, on any date, the total amount of shareholders' equity including (i) the stated capital of all shares, (ii) accumulated retained earnings, (iii) the amount of any contributed surplus and (iv) the amount of Subordinated Shareholders' Loans, but excluding deferred taxes, all as set forth in the Borrower's Financial Statements delivered pursuant to Section 14.1.6. "SOLVENT" means when used with respect to any Person, that at the time of determination: (a) the fair value of its assets (both at fair valuation and at present fair saleable value) is equal to or in excess of the total amount of its liabilities, including, without limitation, contingent liabilities; and (b) it is then able and expects to be able to pay its debts as they mature; and - 26 - (c) it has capital sufficient to carry on its business as conducted and as proposed to be conducted. With respect to contingent liabilities (such as litigation, guarantees and pension plan liabilities), such liabilities shall be computed at the present value of the amount which, in light of all the facts and circumstances existing at the time, represent the amount which can be reasonably be expected to become an actual or matured liability. "SUBORDINATED SHAREHOLDERS' LOANS" means loans or advances made to the Borrower by its shareholders or other persons that as at the date hereof are Subsidiaries or Affiliates of such shareholders and which loans or advances, by their terms, provide, in the opinion of counsel reasonably satisfactory to the Bank, that (i) the principal thereof and premium, if any, are postponed to and may not be repaid in whole or in part prior to the repayment of the Loans and all accrued and unpaid interest and fees thereon and other amounts under the Credit Facility; and (ii) upon the happening of an Event of Default or a Major Change in Ownership the principal thereof, premium, if any, and interest and fees thereon, and other amounts thereunder shall be subordinate and junior in right of payment to the Loans and accrued and unpaid interest and fees thereon and other amounts under the Credit Facility. "SUBSIDIARY" means with respect to any Person: (a) any corporation more than fifty percent (50%) of the outstanding securities having ordinary voting power of which shall at the time be owned or controlled, directly or indirectly, by such Person or by one or more of its Subsidiaries or by such Person and one or more of its Subsidiaries, or (b) any partnership, limited liability company, association, joint venture or similar business organization more than fifty percent (50%) of the ownership interests having ordinary voting power of which shall at the time be so owned or controlled. Unless otherwise expressly provided, all references herein to a "SUBSIDIARY" means a Subsidiary of the Borrower. "SUBSTANTIAL PORTION OF THE COLLATERAL" means as of any date of determination, Collateral having a book value (calculated in accordance with GAAP) greater than U.S. $500,000, or the Equivalent Amount in Canadian Dollars, in the aggregate. "TELVENT" means Telvent Sistemas y Redes, S.A. "TELVENT U.S." means Telvent USA, Inc. "TORONTO TIME" means local time in Toronto, Ontario on the date on which such determination is made. "TOTAL NET DEBT" means at any measurement point in respect of the Borrower and its Subsidiaries, the aggregate of all Borrowed Funds less cash and Cash Equivalents, as reported on the Borrower's Financial Statements. - 27 - "UNITED STATES DOLLARS" and "U.S. $" means the lawful money of the United States of America. "U.S. BASE RATE" means the prime lending rate of the Bank, expressed on the basis of a year of 360 days, being a variable per annum reference rate of interest, as announced and adjusted by the Bank from time to time, for United States Dollar loans in Canada. "U.S. BASE RATE LOAN" means an Advance in, or Conversion into, United States Dollars made by the Bank to the Borrower on which the Borrower has specified that interest is to be calculated by reference to the U.S. Base Rate. "UNUSED FACILITY A AMOUNT" means in respect of any day, the difference between the aggregate principal amount available under this Credit Facility in respect of Facility A (after giving effect to any cancellations or reductions pursuant to Section 2.10 hereof) and the sum of the principal amounts outstanding under Facility A and all L/C Obligations, on that day, in U.S. Dollars or the Equivalent Amount in Canadian Dollars. "UNUSED FACILITY B AMOUNT" means in respect of any day, the difference between the aggregate principal amount available under this Credit Facility in respect of Facility B (after giving effect to any cancellations or reductions pursuant to Section 2.10 hereof) and the principal amount outstanding under Facility B, on that day, in U.S. Dollars or the Equivalent Amount in Canadian Dollars. "UNUSED LINE FEE" means the fees calculated pursuant to subsections 6.5.2 and 6.5.3 hereof. "UNUSED LINE FEE RATE" means the annual factor by which the Unused Facility A Amount or the Unused Facility B Amount, as the case may be, is to be multiplied for the purposes of calculating the amount of the Unused Line Fee to be paid by the Borrower hereunder, such amount to be determined as follows:
APPLICABLE ANNUAL UNUSED LINE FEE WHERE TOTAL NET DEBT/EBITDA IS (EXPRESSED AS A PERCENTAGE) greater than or equal to 2.00 0.50 greater than or equal to 1.50 and less than 2.00 0.50 greater than or equal to 1.00 and less than 1.50 0.25 greater than or equal to 0.50 and less than 1.00 0.25 less than 0.50 0.25
"VOTING SHARES" means shares of any class of any corporation or other voting rights in respect of any limited liability company, limited liability partnership, limited partnership, general partnership or any other entity carrying voting rights under all circumstances Provided However, for the purpose of this definition, shares which only carry the right to vote conditionally on the happening of an event shall not be considered Voting Shares nor shall any shares be deemed to be Voting Shares solely by reason of a right to vote accruing to shares of another class or classes by reason of the happening of such event. - 28 - "WEIGHTED AVERAGE LIFE TO MATURITY" means when applied to any Borrowed Funds at any date, the number of years obtained by dividing: (a) the product obtained by multiplying: (i) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (ii) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment, by (b) the then outstanding principal amount of such Borrowed Funds. "WORKING CAPITAL" means as at any date of determination and in conformity with GAAP, the excess, if any, of: (a) the Borrower's consolidated current assets, over (b) the Borrower's consolidated current liabilities, except current maturities of long-term Indebtedness and Obligations under Facility A as of such date, and all accrued interest and fees, as of such date. SECTION 1.2 MEANING OF "CONTROL" For the purposes hereof, "CONTROL" (including with correlative meanings the terms "CONTROLLED BY" and "UNDER COMMON CONTROL WITH") means, as to any Person, the beneficial ownership of the right, whether such ownership is direct or through Affiliates or may be exercised pursuant to a right in contract and whether or not combined with the beneficial ownership of securities of a corporation to which are attached more than 10% of the votes that may be cast to elect directors, to elect a majority of the board of directors of the corporation or the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of Voting Shares or by contract or otherwise. SECTION 1.3 PER ANNUM CALCULATIONS Unless otherwise stated, wherever in this Agreement reference is made to a "PER ANNUM" rate of interest or otherwise, such expression shall be calculated on the basis of a calendar year of 365 days or 366 days, as the case may be. SECTION 1.4 CURRENCY All references to currency herein shall be to lawful money of the United States of America, unless otherwise expressly stated. - 29 - SECTION 1.5 INTEREST ACT (CANADA) For the purposes of this Agreement, whenever interest is calculated on the basis of a year of 360 days, each rate of interest determined pursuant to such calculation expressed as an annual rate for the purposes of the Interest Act (Canada) is equivalent to such rate (as so determined) multiplied by the actual number of days in the calendar year in which the same is to be ascertained and divided by 360. SECTION 1.6 APPLICATION OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES Except to the extent inconsistent herewith, or as otherwise agreed to in writing by the Bank and the Borrower, GAAP shall be adhered to and applied in respect of all financial and accounting matters herein in a consistent manner from period to period. SECTION 1.7 COMPUTATION OF TIME PERIODS In this Agreement, in the computation of periods of time from a specified date to a later specified date, unless otherwise expressly stated, the word "FROM" means "FROM AND INCLUDING" and the words "TO" and "UNTIL" each mean "TO BUT EXCLUDING." SECTION 1.8 SCHEDULES The following are the Schedules annexed hereto and incorporated by reference and deemed to be part hereof: Schedule A - Draw Down Notice Schedule B - Conversion Notice Schedule C - Repayment Notice Schedule D - Rollover Notice Schedule E - Master Letter of Credit Agreement Schedule F - Form of Promissory Notes Schedule G - Guarantee and Collateral Security Agreement Schedule H - Officers' Certificate Schedule I - Borrower's Counsel's Opinion Schedule J - Pro Forma Financial Statements Schedule K - Borrower's January 31, 2003 Unaudited Balance Sheet Schedule L - Statement of Liabilities Schedule M - Statement of Insurance Schedule N - Statement of Litigation Schedule O - Permitted Existing Indebtedness and Investments Schedule P - List of Guarantees and Indemnities Schedule Q - Borrowing Base Certificate - 30 - ARTICLE 2 THE CREDIT FACILITY SECTION 2.1 THE CREDIT FACILITY Subject to the terms and conditions of this Agreement, the Bank shall make available the amounts provided for under the Credit Facility. SECTION 2.2 MANNER OF BORROWING The Borrower may make Drawdowns under the Credit Facility of Canadian Prime Rate Loans, Bankers' Acceptances or Letters of Credit in Canadian Dollars and of U.S. Base Rate Loans, Libor Loans or Letters of Credit in United States Dollars. SECTION 2.3 PURPOSE The Credit Facility is being made available to the Borrower for general corporate purposes, including, without limitation, to partially finance the acquisition cost of the stock of the Borrower by way of distributions or loans from the Borrower, to Telvent, in an amount up to U.S. $28,000,000, or the Equivalent Amount in Canadian Dollars. Borrowings under Facility A will be used for working capital and general corporate purposes and borrowings under Facility B will be used to finance the Deferred Payment amount under the Purchase Agreement and for working capital and general corporate purposes. SECTION 2.4 AVAILABILITY OF FACILITY A ADVANCES Subject to the other terms, covenants and conditions hereof, the Borrower shall be entitled to make Drawdowns, Conversions and Rollovers in respect of Facility A; Provided That the aggregate amount of all Loans and L/C Obligations which may be outstanding in respect of Facility A shall not exceed, at any time, the amount permitted pursuant to Section 2.11 hereof. Notwithstanding the foregoing, the amount available in respect of the initial Advance at the Closing Date of Facility A hereunder shall not be greater than U.S. $5,000,000 or the Equivalent Amount in Canadian Dollars. SECTION 2.5 AVAILABILITY OF FACILITY B ADVANCES Subject to the other terms, covenants and conditions hereof, the Borrower shall be entitled to make Drawdowns, Conversions and Rollovers in respect of Facility B; Provided That Advances shall be made in an initial funding at the Closing Date of U.S. $3,400,000 or the Equivalent Amount in Canadian Dollars. Subsequent to final determination of the maximum deferred purchase price under the Purchase Agreement, the Bank will fund the lesser of: 2.5.1 37% of the deferred purchase price subsequent to Telvent funding its 63% equity portion of the deferred purchase price; and 2.5.2 the aggregate amount available in respect of Facility B. - 31 - Notwithstanding anything herein, the Bank shall not be obligated to make any subsequent Advance in respect of Facility B earlier than January 31, 2004. SECTION 2.6 DRAWDOWN AND CONVERSION RESTRICTIONS Drawdowns and Conversions under the Credit Facility shall be subject to the restriction that each Drawdown or Conversion in respect of a Canadian Prime Rate Loan, U.S. Base Rate Loan, Libor Loan or Banker's Acceptance shall be in a minimum principal amount of U.S. $100,000 or the Equivalent Amount in Canadian Dollars, and increments in excess thereof of U.S. $100,000 or the Equivalent Amount in Canadian Dollars, and integral multiples thereof (except where the remaining balance available for Drawdown or Conversion is less than U.S. $100,000 or the Equivalent Amount in Canadian Dollars, in which case the amount of the remaining balance shall be the minimum principal amount). SECTION 2.7 NOTICE PERIODS FOR DRAWDOWNS, CONVERSIONS AND ROLLOVERS The Borrower may make a Drawdown, Conversion or Rollover under the Credit Facility by delivering a Drawdown Notice, Conversion Notice or Rollover Notice, as the case may be, with respect to a specified type of Loan to the Bank not later than 11:00 a.m. (Toronto time) three Banking Days prior to the proposed Drawdown Date, Conversion Date or Rollover Date, as the case may be. SECTION 2.8 BANK'S OBLIGATIONS WITH RESPECT TO CANADIAN PRIME RATE LOANS, BANKER'S ACCEPTANCES, U.S. BASE RATE LOANS AND LIBOR LOANS The Bank shall, prior to 10:00 a.m. (Toronto time) on the Drawdown Date, Rollover Date or Conversion Date specified by the Borrower in a Drawdown Notice, Rollover Notice or Conversion Notice with respect to a Canadian Prime Rate Loan, U.S. Base Rate Loan, Libor Loan or Banker's Acceptance, make available the full amount of the amounts so credited to the Borrower. SECTION 2.9 IRREVOCABILITY A Drawdown Notice, Rollover Notice or Conversion Notice properly given by the Borrower hereunder shall be irrevocable and shall oblige the Borrower and the Bank to take the action contemplated on the date specified therein, except as provided in Section 8.7 or 16.1. SECTION 2.10 CANCELLATION OR REDUCTION OF CREDIT FACILITY The Borrower may, at any time, upon giving at least five days prior notice to the Bank, cancel in full or, from time to time, reduce in part the undrawn portion of any Facility; Provided That, any such reduction shall be in a minimum amount of U.S. $100,000, or the Equivalent Amount in Canadian Dollars, and reductions in excess thereof shall be in increments of U.S. $100,000, or the Equivalent Amount in Canadian Dollars, and integral multiples thereof - 32 - (except where the remaining balance available is less than U.S. $100,000, or the Equivalent Amount in Canadian Dollars, in which case the reduction shall be the amount of the remaining balance). SECTION 2.11 NATURE OF CREDIT FACILITY 2.11.1 Except in respect of a repayment under Section 11.1, when the Borrower has made any repayment on Facility B, the Facility shall be permanently reduced by the amount of the repayment. Rollovers and Conversions will not constitute repayments. 2.11.2 Except as provided for in Section 11.1, the maximum of: (a) all Loans and L/C Obligations under Facility A shall not exceed the lesser of: (i) U.S. $8,000,000 or the Equivalent Amount in Canadian Dollars, or (ii) the Borrowing Base; and (b) all Loans under Facility B shall not exceed U.S. $5,500,000 or the Equivalent Amount in Canadian Dollars; and (c) all Obligations under this Agreement shall not exceed the sum of the amounts permitted under clauses 2.11.2(a) and 2.11.2(b) ARTICLE 3 SECURITY SECTION 3.1 GRANT OF SECURITY Payment of the Obligations shall be secured by a perfected first security interest in the Collateral, subject only to Permitted Encumbrances, in accordance with the provisions of the Security Documents. SECTION 3.2 INITIAL GUARANTEE SUBSIDIARY The Borrower shall cause to be executed and delivered to the Bank on or before the Closing Date the Guarantee of Telvent U.S., as a Guarantee Subsidiary. SECTION 3.3 GUARANTEES The Borrower shall cause to be executed and delivered to the Bank as and when required hereunder the Guarantee of each Subsidiary forthwith upon such entity becoming a Subsidiary of the Borrower. - 33 - SECTION 3.4 UNDERTAKING TO GRANT ADDITIONAL SECURITY The Borrower shall, forthwith at the reasonable request of the Bank grant to the Bank and register or cause to be registered a first, fixed and specific mortgage, charge and security interest in favor of the Bank and in form and substance satisfactory to the Bank on all or such portion of the assets and undertaking of the Borrower as the Bank may determine, from time to time, subject only to Permitted Encumbrances. ARTICLE 4 CONDITIONS PRECEDENT TO DRAWDOWNS SECTION 4.1 CONDITIONS FOR FIRST DRAWDOWN On or before the first Drawdown of Facility A hereunder the following conditions must be satisfied by the Borrower proposing to make a Drawdown: 4.1.1 Drawdown Notice - the Bank shall have received a Drawdown Notice; 4.1.2 Borrower's Constituent Documents - the Borrower shall have delivered to the Bank certified copies of the Constituent Documents and by-laws of the Borrower, the resolutions of the directors authorizing the borrowings and certificates of incumbency of the officers of the Borrower, and any other Documents to be provided pursuant to the provisions hereof; 4.1.3 Guarantee Subsidiary Constituent Documents - the Borrower shall have delivered to the Bank certified copies of the Constituent Documents and by-laws of each Guarantee Subsidiary then in existence, the resolutions of the directors authorizing the Guarantee and certificates of incumbency of the officers of the Guarantee Subsidiary and any other Documents to be provided pursuant to the provisions hereof; 4.1.4 Borrowing Base Certificate - a Borrowing Base Certificate as at March 31, 2003. 4.1.5 Borrower's January 31, 2003 Unaudited Balance Sheet - the Borrower's January 31, 2003 Unaudited Balance Sheet 4.1.6 Borrower's March 31, 2003 Unaudited Financial Statements - the Borrower's March 31, 2003 Unaudited Financial Statements. 4.1.7 Borrower's Officer's Certificate - an Officer's Certificate from the Borrower confirming that the representations and warranties set forth in Section 13.1 are true and accurate in all material respects shall be delivered to the Bank; 4.1.8 Guarantee Subsidiaries' Officer's Certificate - the Borrower shall have delivered a Representation Certificate in respect of each Guarantee Subsidiary then in existence to the extent any Guarantees are then being delivered by such entities; - 34 - 4.1.9 Copy of Purchase Agreement - the Bank shall have received a duly executed copy of the Purchase Agreement; 4.1.10 Field Audit - the Bank shall have completed, and been satisfied in its sole determination with the results of, a field audit of the Borrower; 4.1.11 No Change of Ownership or Event of Default - a Major Change in Ownership shall not have occurred and no event shall have occurred which would constitute an Event of Default or which would constitute a Major Change in Ownership or an Event of Default with the giving of notice or lapse of time or both nor shall the Drawdown result in the occurrence of any such event; 4.1.12 Borrower's Counsel's Opinion - an opinion substantially in the form set out in Schedule I shall have been delivered to the Bank; 4.1.13 No Litigation - evidence satisfactory to the Bank shall have been received indicating that there is no litigation, including dissenting shareholder litigation, which would, or could be reasonably expected to, have a Material Adverse Effect, except as disclosed in Schedule N hereto; 4.1.14 Cash Management Arrangements - the Borrower shall have entered into and shall thereafter maintain cash management arrangements acceptable to the Bank and the Borrower; and 4.1.15 Payment of Fees - The Borrower shall have paid all amounts due under Section 6.5.1 hereof. SECTION 4.2 SUBSEQUENT DRAWDOWNS The following conditions shall be satisfied by the Borrower at or prior to the time of each Drawdown subsequent to the first Drawdown under this Agreement: 4.2.1 Subsequent Drawdown Notices - the Bank shall have received a Drawdown Notice from the Borrower; 4.2.2 Subsequent Borrower `s Representations Certificate - the Borrower shall have delivered to the Bank a Representation Certificate confirming that the representations and warranties set forth therein are true and accurate in all material respects; 4.2.3 Subsequent Guarantee Subsidiaries' Representations Certificate - the Borrower shall have delivered to the Bank a Representation Certificate in respect of each Guarantee Subsidiary confirming that the representations and warranties set forth therein are true and accurate in all material respects; 4.2.4 No Subsequent Change of Ownership or Change of Ownership - a Major Change of Ownership shall not have occurred and no event shall have occurred and be continuing which would constitute an Event of Default or which would constitute - 35 - a Major Change in Ownership or an Event of Default with the giving of notice or lapse of time or both nor shall the Drawdown result in the occurrence of any such event; and 4.2.5 Amended Constituent Documents - the Borrower shall have delivered to the Bank certified copies of any and all changes, amendments, additions to and deletions from the Constituent Documents and by-laws of the Borrower and each Guarantee Subsidiary then in existence since the last date on which such documents were delivered to the Bank hereunder and certificates of incumbency of the officers of the Borrower, and any other Documents to be provided pursuant to the provisions hereof. SECTION 4.3 WAIVER The conditions set forth in Sections 4.1 and 4.2 are inserted for the sole benefit of the Bank and may be waived by the Bank in whole or in part (with or without terms or conditions), in respect of any Drawdown without prejudicing the right of the Bank at any time to assert such conditions in respect of any subsequent Drawdown. ARTICLE 5 EVIDENCE OF DRAWDOWNS SECTION 5.1 ACCOUNT OF RECORD The Bank shall open and maintain separate books of account for each Facility evidencing all Loans and all other amounts owing by each of the Borrower to the Bank hereunder. The Bank shall enter in the foregoing accounts details of all amounts from time to time owing, paid or repaid by the Borrower hereunder. The information entered in the foregoing accounts shall constitute prima facie non-exclusive evidence of the obligations of the Borrower to the Bank hereunder with respect to the principal amount of all Loans owing by the Borrower to the Bank hereunder. ARTICLE 6 PAYMENTS OF INTEREST AND FEES SECTION 6.1 INTEREST ON CANADIAN PRIME RATE LOANS The Borrower shall pay interest on each Canadian Prime Rate Loan during each Interest Period applicable thereto in Canadian Dollars at a rate per annum equal to the Canadian Prime Rate in effect from time to time during such Interest Period, plus the Base Rate Margin. Each determination by the Bank of the Canadian Prime Rate applicable from time to time during an Interest Period shall, in the absence of error, be binding upon the Borrower. Such interest shall be payable in arrears on each Interest Payment Date for such Loan for the period from and including the Drawdown Date or the preceding Rollover Date, Conversion Date or Interest Payment Date, as the case may be, for such Loan to and including the day preceding the current Interest Payment Date and shall be calculated on the principal amount of the Canadian Prime Rate Loan outstanding during such period and on the basis of the actual number of days elapsed - 36 - in a year of 365 days or 366 days, as the case may be. Changes in the Canadian Prime Rate shall cause an immediate adjustment of the interest rate applicable to such Loan without the necessity of any notice to the Borrower. SECTION 6.2 INTEREST ON U.S. BASE RATE LOANS The Borrower shall pay interest on each U.S. Base Rate Loan during each Interest Period applicable thereto in United States Dollars at a rate per annum, expressed on the basis of a 360 day year, equal to the U.S. Base Rate applicable from time to time during an Interest Period, plus the Base Rate Margin. Each determination by the Bank of the U.S. Base Rate applicable from time to time during an Interest Period shall, in the absence of error, be binding upon the Borrower. Such interest shall be payable in arrears on each Interest Payment Date for such Loan for the period from and including the Drawdown Date or the preceding Rollover Date, Conversion Date or Interest Payment Date, as the case may be, for such Loan to and including the day preceding the current Interest Payment Date and shall be calculated on the principal amount of the U.S. Base Rate Loan outstanding during such period and on the basis of the actual number of days elapsed divided by 360. Changes in the U.S. Base Rate shall cause an immediate adjustment of the interest rate applicable to such Loan without the necessity of any notice to the Borrower. SECTION 6.3 INTEREST ON LIBOR LOANS The Borrower shall pay interest on each Libor Loan during each Interest Period applicable thereto in United States Dollars at a rate per annum, expressed on the basis of a 360 day year, equal to the Libor Rate with respect to such Interest Period plus the Libor Margin. Each determination by the Bank of the Libor Rate applicable to an Interest Period shall, in the absence of error, be binding upon the Borrower. Upon determination of the Libor Rate applicable to an Interest Period, the Bank shall notify the Borrower. Such interest shall be payable in arrears on each Interest Payment Date for such Loan for the period from and including the Drawdown Date or the preceding Rollover Date, Conversion Date or Interest Payment Date, as the case may be, for such Loan to and including the day preceding the current Interest Payment Date and shall be calculated on the principal amount of the Libor Loan outstanding during such period and on the basis of the actual number of days elapsed divided by 360. SECTION 6.4 NO DEDUCTION ETC. Interest payments hereunder shall be payable by the Borrower both before and after maturity and before and after default or judgment, if any, until payment thereof in full, and interest shall accrue on overdue interest, if any, at the rates described in this Agreement. SECTION 6.5 UNUSED LINE FEES AND OTHER FEES 6.5.1 At the Closing Date of the initial Advance of either Facility A or Facility B, whichever first occurs, LaSalle Bank National Association shall receive a fee equal to U.S. $135,000 in respect of its facilitating the Credit Facility. 6.5.2 From and after the date of execution hereof, the Borrower shall pay to the Bank in respect of Facility A, an Unused Line Fee in U.S. Dollars, based on the Unused - 37 - Line Fee Rate multiplied by the Unused Facility A Amount, expressed in U.S. Dollars, calculated on a daily basis and paid Quarterly on the last Banking Day for each Quarter in respect of which the calculation is made; Provided However, no such Unused Line Fee shall accrue and be payable during any period when the Bank, in accordance with Section 15.5, shall not be obligated to permit further drawdowns. 6.5.3 From and after the date of execution hereof, the Borrower shall pay to the Bank in respect of Facility B, an Unused Line Fee in U.S. Dollars, based on the Unused Line Fee Rate multiplied by the Unused Facility B Amount, expressed in U.S. Dollars, calculated on a daily basis and paid Quarterly on the last Banking Day for each Quarter in respect of which the calculation is made; Provided However, no such Unused Line Fee shall accrue and be payable during any period when the Bank, in accordance with Section 15.5, shall not be obligated to permit further drawdowns. SECTION 6.6 LIMIT ON RATE OF INTEREST Notwithstanding any provision contained herein, the Borrower shall not be obliged to make any payments of interest or other amounts payable to the Bank hereunder in excess of the amount or rate which would be prohibited by applicable law or would result in the receipt by the Bank of interest at a criminal rate (as such terms are construed under the Criminal Code (Canada)). ARTICLE 7 ROLLOVERS SECTION 7.1 SELECTION OF INTEREST PERIODS Prior to the expiration of each Interest Period of each Libor Loan and in accordance with Section 2.7 the Borrower shall, unless it has delivered a Conversion Notice pursuant to Section 10.1 or a Repayment Notice pursuant to Section 11.2 with respect to the aggregate amount of such Loan, deliver a Rollover Notice to the Bank selecting the next Interest Period applicable to the Libor Loan which next Interest Period shall commence on and include the last day of such prior Interest Period. If the Borrower fails to deliver a Rollover Notice to the Bank as herein provided the Borrower shall be deemed to have given a Conversion Notice to the Bank pursuant to Section 10.1 electing to convert the Libor Loan into a U.S. Base Rate Loan. SECTION 7.2 PARTIAL ROLLOVERS The Borrower may effect a Rollover of a part of a Libor Loan; Provided That, the portion which is not part of the Rollover is either repaid in accordance with Section 11.2 or converted in accordance with Section 10.1. - 38 - ARTICLE 8 BANKERS' ACCEPTANCES SECTION 8.1 BANKERS' ACCEPTANCES Bankers' Acceptances are permitted under Facility A and B of the Credit Facility in accordance with the provisions of this Article. SECTION 8.2 FEES Upon the acceptance by the Bank of Bankers' Acceptances, the Borrower shall pay or cause to be paid to the Bank, in advance, a fee in Canadian Dollars equal to the Bankers' Acceptance Fee. Such fee shall be calculated on the principal amount at maturity of each Bankers' Acceptance and for the period of time from and including the date of acceptance to but excluding the maturity date of each Bankers' Acceptance and calculated on the basis of the actual number of days elapsed in the year of 365 or 366 days, as the case may be, in which the Bankers' Acceptance is accepted. SECTION 8.3 GENERAL PROVISIONS 8.3.1 Upon receipt of a Drawdown Notice, Rollover Notice or Conversion Notice with respect to a Bankers' Acceptance, the Bank shall release drafts drawn by the Borrower upon the Bank in a principal amount at maturity equal to the amount of the proposed Bankers' Acceptances before 10:00 a.m. (Toronto time) on the Drawdown Date, Rollover Date or Conversion Date specified by the Borrower in its Drawdown Notice, Rollover Notice or Conversion Notice. Such drafts shall be properly drawn and executed by the Borrower on the Bank's standard form in effect at the time, subject as follows: (a) if the Borrower proposes to use facsimile signatories on Bankers' Acceptances, the Bank shall have received the appropriate authorizing resolutions and documentation from such Borrower; (b) the principal amount at maturity of each draft of the Bankers' Acceptance to be presented by the Borrower at any one time to the Bank shall be a minimum of Cdn. $1,000,000 and integral multiples of Cdn. $100,000 for amounts in excess of Cdn. $1,000,000; (c) the Bankers' Acceptance delivered by the Borrower to the Bank shall mature on the last day of the Interest Period with respect thereto; and (d) the provisions of this Agreement, and not the provisions contained in the Bank's standard form, shall govern the relationship between the Borrower and the Bank. 8.3.2 The Borrower shall not claim any days of grace for the payment at maturity of the Bankers' Acceptance. - 39 - 8.3.3 In anticipation of the maturity of Bankers' Acceptances the Borrower shall do one or a combination of the following: (a) deliver to the Bank prior to the maturity date and in accordance with the time periods set forth in Section 2.7, a Rollover Notice that the Borrower intends to draw and present for acceptance on the maturity date new Bankers' Acceptances; (b) deliver to the Bank a Conversion Notice pursuant to Section 10.1; or (c) on the maturity date of the maturing Bankers' Acceptances, make a payment to the Bank for the account of the Bank in an amount equal to the face amount of the maturing Bankers' Acceptances less the amounts dealt with under Sections 8.3.3(a) and 8.3.3(b). If the Borrower fails so to notify the Bank or make such payment, the Bank shall effect a Conversion into a Canadian Prime Rate Loan as if a Conversion Notice pursuant to 8.3.3(b) above had been given by the Borrower to the Bank. 8.3.4 To facilitate the acceptance of Bankers' Acceptances as aforesaid, the Borrower shall, upon execution of this Agreement and from time to time as required, provide to the Bank drafts drawn in blank by the Borrower upon the Bank in quantities sufficient for the Bank to fulfill its obligations hereunder. The Bankers' Acceptances shall be kept by the Bank with like care as if the Bankers' Acceptances were the property of the Bank. The Bank shall not be liable for its failure to accept the Bankers' Acceptance as required hereunder if the cause of such failure is, in whole or in part, due to the failure of the Borrower to provide such instruments to the Bank on a timely basis. SECTION 8.4 DRAWDOWNS The Bank, upon accepting Bankers' Acceptances on a Drawdown shall exchange the Bankers' Acceptance for the Bank draft, certified cheque or other medium of payment of the purchaser acceptable to the Bank equal in amount to the Discount Proceeds thereof. The Bank shall pay or credit to the account of the Borrower, an amount equal to the Discount Proceeds without deduction in same day funds. SECTION 8.5 ROLLOVERS In the case of a Rollover of the Bankers' Acceptance, the Bank shall exchange the Bankers' Acceptance for a bank draft, certified cheque or other medium of payment of the purchaser acceptable to the Bank for the Discount Proceeds thereof. In order to satisfy the continuing liability of the Borrower to the Bank for the principal amount of the maturing Bankers' Acceptance, the Bank shall receive for its own account the Discount Proceeds of such new Bankers' Acceptance and the Borrower shall on the maturity date of the maturing Bankers' Acceptance pay to the Bank an amount equal to the difference between the principal amount of - 40 - the maturing Bankers' Acceptance and the Discount Proceeds from the new Bankers' Acceptance. The Borrower shall assume the risk of non-payment on the purchasers' medium of payment for Bankers' Acceptances. SECTION 8.6 CONVERSIONS Subject to Section 10.1: 8.6.1 In the case of a Conversion into the Bankers' Acceptance, the Bank shall exchange the Bankers' Acceptance for the Bank draft, certified cheque or other medium of payment of the purchaser acceptable to the Bank for the Discount Proceeds thereof. In order to satisfy the continuing liability of the Borrower to the Bank for the amount of the converted Loan, the Bank shall receive for its own account the Discount Proceeds of the Bankers' Acceptance and the Borrower shall, on the Conversion Date, pay to the Bank the difference between the principal amount of the Bankers' Acceptance and the Discount Proceeds therefrom. 8.6.2 In the case of a Conversion of Bankers' Acceptances into another type of Loan, in order to satisfy the continuing liability of the Borrower to the Bank for the amount of the Bankers' Acceptances, the Bank shall record the obligation of the Borrower to the Bank as a Loan in the type into which the obligation has been converted. SECTION 8.7 ALTERNATIVE BORROWINGS 8.7.1 Where the Borrower requests a Loan by way of Bankers' Acceptances, the Bank may, at its option, make available to the Borrower prior to 10:00 a.m. (Toronto time) on the Drawdown Date, Rollover Date or Conversion Date, as the case may be, for such Loan by way of Bankers' Acceptances a Canadian Dollar loan (the "ALTERNATE LOAN") in a principal amount equal to the principal amount of such Loan by way of Bankers' Acceptance. Such Alternate Loan shall be funded in the same manner as a Loan is funded pursuant to Section 2.8. Such Alternate Loan shall have the same term as the Bankers' Acceptances for which it is a substitute and shall bear such rate of interest per annum as shall permit the Bank to obtain the same effective yield as if the Bank had accepted and purchased Bankers' Acceptances and furnished an amount equal to the Discount Proceeds in accordance with Section 8.2. Interest shall be calculated for such Alternate Loan in advance on the Drawdown Date, Rollover Date or Conversion Date, as the case may be, and the Bank shall deduct such calculated amount from the principal amount of such Alternate Loan. 8.7.2 On the Drawdown Date, Rollover Date or Conversion Date, as the case may be, the Borrower shall pay or cause to be paid to the Bank an amount equal to the Bankers' Acceptance Fee which would have been payable to the Bank if it had accepted Bankers' Acceptances. - 41 - 8.7.3 If the Bank intends to make a Loan by way of an Alternative Loan pursuant to Section 8.7.2, it shall give to the Borrower notice of the decision by the Bank to make Alternative Loans in lieu of or in addition to Loans by way of Bankers Acceptances, such notice to apply to all further Loans by the Bank in respect of Bankers' Acceptances until further notice is given by the Bank to the Borrower. ARTICLE 9 LETTER OF CREDIT FACILITY SECTION 9.1 OBLIGATION TO ISSUE LETTERS OF CREDIT Subject to the terms and conditions of this Agreement and the Master Letter of Credit Agreement, and in reliance upon the representations, warranties and covenants of the Borrower herein set forth, the Bank hereby agrees to issue for the account of the Borrower, one or more Letters of Credit in respect of Facility A, denominated in Canadian Dollars or U.S. Dollars in accordance with this Article, from time to time during the period, commencing on the Closing Date and ending on the 6th Banking Day prior to the termination of the obligation of the Bank to fund Advances hereunder. SECTION 9.2 TYPES AND AMOUNTS Notwithstanding the foregoing, the Bank shall not have any obligation to: 9.2.1 issue or amend any Letter of Credit if on the date of issuance or amendment, before or after giving effect to the Letter of Credit requested hereunder: (a) the amount of the Obligations at such time would exceed the amount permitted by Section 2.11, at such time, or (b) the aggregate outstanding amount of the L/C Obligations would exceed U.S. $2,000,000, or the Equivalent Amount in Canadian Dollars, calculated as of the date of issuance of any Letter of Credit; or 9.2.2 issue or amend any Letter of Credit which has an expiration date later than the date which is the earlier of: (a) 1 year after the date of issuance thereof, or (b) 5 Banking Days immediately preceding the termination of the obligation of the Bank to fund Advances hereunder; Provided, That any Letter of Credit with a one year tenor may provide for the renewal thereof for additional one year periods, which in no event shall extend beyond the date referred to in clause 9.2.2(b) above. - 42 - SECTION 9.3 CONDITIONS In addition to the terms and conditions of the Master Letter of Credit Agreement and in addition to being subject to the satisfaction of the conditions contained in Section 4.1 or 4.2, as the case may be, the obligation of the Bank to issue any Letter of Credit is subject to the condition that as of the date of issuance no order, judgment or decree of any court, arbitrator or Governmental Authority shall purport by its terms to enjoin or restrain the Bank from issuing such Letter of Credit and no law, rule or regulation applicable to the Bank and no request or directive, whether or not having the force of law, from a Governmental Authority with jurisdiction over the Bank shall prohibit or request that the Bank refrain from the issuance of Letters of Credit generally or the issuance of that Letter of Credit. SECTION 9.4 LETTER OF CREDIT FEES The Borrower agrees to pay pursuant to Section 5 of the Master Letter of Credit Agreement: 9.4.1 in respect of each standby Letter of Credit on each Interest Payment Date, in arrears, to the Bank, a letter of credit fee at a rate per annum equal to the Applicable L/C Fee Percentage for standby Letters of Credit, multiplied by the average daily outstanding amount available for drawing under the standby Letter of Credit; and 9.4.2 in respect of each other Letter of Credit on the date of issue, a letter of credit fee equal to the Applicable L/C Fee Percentage for other Letters of Credit, multiplied by the face amount of the Letter of Credit; and 9.4.3 to the Bank, all customary fees and other issuance, amendment, cancellation, document examination, negotiation, transfer and presentment expenses and related charges in connection with the issuance, amendment, cancellation, presentation of drafts drawn on the Bank pursuant to a corresponding Letter of Credit, negotiation, transfer and the like customarily charged by the Bank with respect to Letters of Credit, including, without limitation, standard commissions with respect to commercial Letters of Credit, payable at the time of invoice of such amounts. SECTION 9.5 SPECIFIC AMENDMENTS TO THE MASTER LETTER OF CREDIT AGREEMENT The following terms, covenants and conditions of the Master Letter of Credit Agreement are hereby specifically amended: 9.5.1 Bank - The "Bank" shall be "LaSalle Business Credit, a division of ABN AMRO Bank N.V., Canada Branch"; - 43 - 9.5.2 Section 1 - Certain Definitions - The following defined terms in the Master Letter of Credit Agreement are hereby amended as follows: (a) Prime Rate - is hereby amended to read: "means the Canadian Prime Rate if the Letter of Credit is denominated in Canadian Dollars or the U.S. Base Rate if the Letter of Credit is denominated in U.S. Dollars." (b) Credit Agreement - a defined term is hereby added as follows: "Credit Agreement means that Credit Agreement between the Bank and the Borrower dated May 2, 2003 under which Letters of Credit are provided for hereunder." 9.5.3 Subsection 2.4- Representations and Warranties - Section 2.4 is hereby amended to adding after the words "from such issuance" at the end of the paragraph and before the period, the following: "and (c) all of the representations and warranties of the Credit Agreement are true and correct as at the date of the Application and the Applicant is in full compliance with all of the covenants on the part of the Applicant under the Credit Agreement." 9.5.4 Section 7- Making of Payments - Section 7 is hereby amended as necessary to provide that all payments made in respect of Letters of Credit shall be made at the Bank's offices in Toronto, Ontario, or as the Bank otherwise directs and all amounts shall be paid in the currency in which the Letter of Credit was denominated. 9.5.5 Section 9 - Events of Default - Section 9 is hereby amended by adding as Clause 9.1.5 thereof: "9.1.5 Credit Agreement Default. An event of default shall have occurred and be continuing under the Credit Agreement." 9.5.6 Section 10 - Security - Section 10 is hereby amended to add as Subsection 10.3, the following: "10.3 Credit Agreement Security. The Applicant confirms and declares that the security given by it, as Borrower, to the Bank under the Credit Agreement shall extend to and secure the obligations of the Applicant hereunder and nothing herein shall limit or preclude the Bank from enforcing its rights thereunder in respect of any amounts owing to the Bank in connection with any Letter of Credit or otherwise arising hereunder." 9.5.7 Subsection 11.5 - Governing Law - Subsection 11.5 is hereby amended to read that the contract is made under and governed by the laws of the Province of - 44 - Alberta applicable to contracts made and to be performed entirely within such province. 9.5.8 Subsection 11.14 - Jurisdiction - Subsection 11.14 is hereby amended by changing all references to "Cook County, Illinois" and the "State of Illinois" to read "the Province of Alberta". SECTION 9.6 PARAMOUNCY If there shall be any conflict between the provisions of the body of this Agreement and those of the Master Letter of Credit Agreement, the provisions of the body of this Agreement shall be read as paramount thereto. ARTICLE 10 CONVERSION OPTIONS SECTION 10.1 CONVERSION OPTIONS 10.1.1 Subject to the provisions of this Agreement, the Borrower may convert the whole or any part of any type of Loan into any other type of Loan on the last day of the applicable Interest Period therefor, by giving the Bank a Conversion Notice in accordance with the time periods set forth in Section 2.7. The Bank shall, on the Conversion Date, continue to extend credit to the Borrower by way of the type of Loan into which the outstanding Loan or a portion thereof is converted in the aggregate principal amount or Equivalent Amount, as the case may be, of the outstanding Loan or the portion thereof which is being converted. 10.1.2 Where on a Conversion one type of Loan in one currency is being converted to another type of Loan in a different currency, the Borrower shall pay to the Bank the principal amount of the Loan or the portion thereof being converted and the Bank shall make a further Loan to the Borrower in the new currency in the aggregate principal amount of the Equivalent Amount of the outstanding Loan or the portion thereof which is being converted. ARTICLE 11 REPAYMENT SECTION 11.1 REPAYMENT OF EXCESS OVER CREDIT FACILITY OR BORROWING BASE If at any time, the Bank determines that all Obligations then outstanding under the Credit Facility, expressed in U.S. Dollars, exceeds the Credit Facility or the Borrowing Base, expressed in U.S. Dollars, the Bank shall notify the Borrower of the amount of such excess and the Borrower shall within four Banking Days after the receipt of such notice, repay to the Bank such excess in U.S. Dollars, together with accrued interest thereon in U.S. Dollars to the date of such payment. If, to make the repayment, it is necessary to repay a Bankers' Acceptance, the - 45 - Borrower shall not be required to repay such Bankers' Acceptance until the end of the Interest Period relating thereto. If, to make the repayment, it is necessary to repay a Libor Loan, the Borrower shall not be required to repay such Libor Loan until the end of the Interest Period relating thereto. In making such repayment the Borrower may designate which Loans are being repaid. In determining the amount of any excess hereunder which is to be repaid, the Bank may, in the case of any other forward exchange contracts of the Borrower with other financial institutions, take such forward exchange contracts into consideration. SECTION 11.2 OPTIONAL REPAYMENT OF PRINCIPAL 11.2.1 The Borrower may at any time and from time to time pay, without penalty, to the Bank for the account of the Bank, the whole or any part of any Loan (other than in respect of any Bankers' Acceptance) under the Credit Facility together with accrued and unpaid interest thereon to the date of such repayment; Provided That: (a) the Borrower shall give a Repayment Notice to the Bank at least five Banking Days prior to the date of repayment; and (b) each such repayment may only be made on the last day of the applicable Interest Period with regard to a Loan that is being repaid. 11.2.2 If any Loan is repaid on other than the last day of the applicable Interest Period the Borrower shall, within three Banking Days after notice is given and delivery of the certificate hereinafter described has been made by the Bank, pay to the Bank for the account of the Bank all costs, losses and expenses incurred by the Bank by reason of the liquidation or redeployment of deposits or other funds resulting from the repayment of such Loan or any part thereof on other than the last day of the applicable Interest Period. The Bank shall prepare a certificate of a duly authorized officer of the Bank setting forth the basis of calculation thereof and such certificate shall be delivered by the Bank to the Borrower. If pursuant to the provisions of this Section or any other provision hereof the Borrower becomes obliged to pay such costs, losses or expenses, the Bank shall use its reasonable best efforts to minimize such costs, losses and expenses. SECTION 11.3 MANDATORY REPAYMENTS OF PRINCIPAL - FACILITY A The entire amount of the Obligations outstanding in respect of Facility A shall be repaid by the Borrower on or before March 31, 2008. SECTION 11.4 MANDATORY REPAYMENTS OF PRINCIPAL - FACILITY B The principal amount of the Loans outstanding in respect of Facility B shall be repaid by the Borrower: - 46 - (a) in installments in the amount of U.S. $275,000 each, or the Equivalent Amount in Canadian Dollars, on August 1, November 1, February 1 and May 1 in each year, commencing on August 1, 2003; and (b) an amount equal to 50% of the Excess Cash Flow for each fiscal year of the Borrower, such payment to be made within 90 days after such fiscal year end; Provided However, the entire amount of the Obligations outstanding in respect of Facility B shall be repaid by the Borrower on or before March 31, 2008. ARTICLE 12 PLACE AND APPLICATION OF PAYMENTS SECTION 12.1 PLACE OF PAYMENT OF PRINCIPAL, INTEREST AND FEES All payments of principal, interest, fees and other amounts to be made by the Borrower to the Bank pursuant to this Agreement shall be made in the currency in which the Loan is outstanding or as otherwise required under this Agreement for value on the day such amount is due and if such day is not a Banking Day on the Banking Day next following by deposit or transfer thereof to the account of the Borrower maintained in accordance with this Agreement in Canada. SECTION 12.2 FUNDS Each amount advanced, made available, disbursed or paid hereunder shall be advanced, made available, disbursed or paid, as the case may be, for value on the date such amount is advanced, made available, disbursed or paid in such form of funds as may from time to time be customarily used for Canadian Dollars in Canada or for United States Dollars in the United States in the settlement of banking transactions similar to the banking transactions required to give effect to the provisions of this Agreement on the day such advance, disbursement or payment is to be made. SECTION 12.3 APPLICATION OF PAYMENTS If any Event of Default or a Major Change in Ownership shall occur and be continuing, all payments made by the Borrower hereunder shall be applied in the following order: 12.3.1 to amounts due hereunder as Unused Line Fees; 12.3.2 to amounts due hereunder as costs and expenses; 12.3.3 to amounts due hereunder as default interest; 12.3.4 to amounts due hereunder as Bankers' Acceptance fees; - 47 - 12.3.5 to amounts due hereunder as interest; and 12.3.6 to amounts due hereunder as principal. ARTICLE 13 REPRESENTATIONS AND WARRANTIES SECTION 13.1 REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants as follows to the Bank and acknowledges and confirms that the Bank is relying upon such representations and warranties: 13.1.1 Corporate Status - The Borrower is a corporation duly incorporated and validly existing under the laws of Canada and has all necessary corporate power and authority to own its respective properties and carry on its respective business as presently carried on and each is duly licensed, registered or qualified in all jurisdictions where a failure to be so licensed, registered or qualified would have a Material Adverse Effect. 13.1.2 Corporate Authority - The Borrower has full corporate power and authority to enter into this Agreement or any other Document to be delivered pursuant hereto, as the case may be, and to do all acts and things contemplated or desirable hereunder, and to execute and deliver all other Documents as are required hereunder or thereunder to be done, observed or performed by them in accordance with their terms. 13.1.3 Guarantee Subsidiary Corporate Status - The Guarantee Subsidiary is a corporation duly incorporated and validly existing under the laws of Texas and has all necessary corporate power and authority to own its respective properties and carry on its respective business as presently carried on and each is duly licensed, registered or qualified in all jurisdictions where a failure to be so licensed, registered or qualified would have a Material Adverse Effect. 13.1.4 Guarantee Subsidiary Corporate Authority - The Guarantee Subsidiary has full corporate power and authority to enter into and grant its Guarantee or any other Document, to which it is a party, to be delivered pursuant hereto, as the case may be, and to do all acts and things contemplated or desirable hereunder, and to execute and deliver all other Documents, to which it is a party, as are required hereunder or thereunder to be done, observed or performed by them in accordance with their terms. 13.1.5 Valid Authorization - (a) The Borrower has taken all necessary corporate action to authorize the creation, execution, delivery and performance of this Agreement, and each of the other - 48 - Documents to which it is a party and to observe and perform the provisions of each in accordance with its terms. (b) Each Guarantee Subsidiary has taken all necessary corporate action to authorize the creation, execution, delivery and performance of its Guarantee, and each of the other Documents to which it is a party and to observe and perform the provisions of each in accordance with its terms. 13.1.6 Validity of Documents and Enforceability - Assuming due execution by parties thereto other than the Borrower, and each Guarantee Subsidiary, as the case may be, this Agreement, or its Guarantee, as the case may be, constitutes valid and legally binding obligations of the Borrower, or its Guarantee Subsidiary, as the case may be, enforceable against it in accordance with its terms. Neither the execution and delivery thereof nor compliance with the terms and conditions hereof: (a) will result in a violation of the articles or the by-laws of the Borrower, or its Guarantee Subsidiary, as the case may be, or any resolutions passed by the Board of Directors or shareholders of the Borrower, or any Guarantee Subsidiary, as the case may be, or any applicable law, rule, regulation, order, judgment, injunction, award or decree; or (b) will result in a breach of, or constitute a default under, any loan agreement, indenture, trust deed or any other agreement or instrument to which the Borrower, or any Guarantee Subsidiary, as the case maybe, is a party or by which it is bound and which breach or default would, or could be reasonably expected to, have a Material Adverse Effect; or (c) requires any approval or consent of any government authority or agency having jurisdiction except such as has already been obtained. 13.1.7 Approvals - (a) No authorizations, approvals or consents of, and no filings, or registrations with, any governmental or regulatory authority or agency or any other Person are necessary for the execution, delivery or performance by the Borrower of the Documents, to which it is a party, or for the validity or enforceability thereof, or for the perfection of the Liens intended to be created by the Security Documents, to which it is a party, except, in the case of the General Security Agreement, the filing of a financing statement in the appropriate governmental offices of the Province of Alberta; and (b) No authorizations, approvals or consents of, and no filings, or registrations with, any governmental or regulatory authority or agency or any other Person are necessary for the execution, delivery or performance by the Guarantee Subsidiary, of the Documents to which it is a party, or for the validity or enforceability - 49 - thereof, or for the perfection of the Liens intended to be created by the Security Documents to which it is a party except, in the case of the Guarantee Collateral Security Agreement, the filing of a financing statement in the appropriate governmental offices of the State of Texas (and such other States as may be appropriate). 13.1.8 Tax Examinations - All deficiencies which have been asserted against the Borrower or any of the Borrower's Subsidiaries as a result of any federal, provincial, state, local or foreign tax examination for each taxable year in respect of which an examination has been conducted have been fully paid or finally settled or are being contested in good faith, and no issue has been raised by any taxing authority in any such examination which, by application of similar principles, could reasonably be expected to result in assertion by such taxing authority of a material deficiency for any other year not so examined which has not been reserved for in the Borrower's consolidated financial statements to the extent, if any, required by GAAP. Except as permitted pursuant to Section 14.1.9, neither the Borrower nor any of the Borrower's Subsidiaries anticipates any tax liability with respect to the years which have not been closed pursuant to applicable law that will have or could reasonably be expected to have a Material Adverse Effect. 13.1.9 Tax Returns - The Borrower, and each Guarantee Subsidiary, as the case may be, has filed all tax returns which are required to be filed by it and has paid all taxes due pursuant to such returns or pursuant to any assessment received by the Borrower, and each Guarantee Subsidiary, as the case may be. The charges, accruals and reserves on the books of the Borrower in respect of taxes and other governmental charges are, in the opinion of the Borrower adequate. 13.1.10 Taxes Paid - All tax returns and reports of the Borrower and its Subsidiaries required to be filed have been timely filed, and all taxes, assessments, fees and other governmental charges upon the tax returns and reports of the Borrower and its Subsidiaries and upon their respective property, assets, income and franchises which are shown in such returns or reports to be due and payable have been paid except those items which are being contested in good faith and have been reserved for in accordance with GAAP. The Borrower has no knowledge of any proposed tax assessment against the Borrower or any of its Subsidiaries that will have or could reasonably be expected to have a Material Adverse Effect. 13.1.11 Titles and Liens - The Borrower has good and merchantable title to each of the properties, assets and undertakings and all such properties, assets and undertakings are free and clear from all Liens other than Permitted Encumbrances, Minor Title Defects and the security granted pursuant to the Security Documents. 13.1.12 Security Documents - The Security Documents, when duly executed, recorded and delivered, will create a first, prior and recorded lien and charge in favor of the Bank in the Collateral as security for the payment of the Obligations, subject to no - 50 - subordinated, equal or prior lien or charge, other than the Permitted Encumbrances. 13.1.13 Purchase Agreement - The Borrower has heretofore furnished to the Bank a true and complete copy of the Purchase Agreement as it is in effect on the date hereof. 13.1.14 Non-Default - No Event of Default or Major Change in Ownership and no event in respect of any agreement, undertaking or instrument to which the Borrower or any Subsidiary is a party or to which the Borrower, any Subsidiary, or any of their respective assets may be subject has occurred which constitutes or which, with the giving of notice, lapse of time or other condition, would constitute a Major Change in Ownership or an Event of Default or which would or could reasonably be expected to have a Material Adverse Effect. 13.1.15 Financial Condition - The Borrower's 2002 Financial Statements fairly present the financial condition of the Borrower as at the date thereof and the results of the operations of the Borrower for the period then ending, and have been prepared in accordance with GAAP, consistently applied, except as otherwise noted therein, and no event has occurred which could reasonably be expected to have a Material Adverse Effect. 13.1.16 Borrower's Interim Financial Statements - (a) The Borrower's January 31, 2003 Unaudited Balance Sheet fairly presents the financial condition of the Borrower as at the date thereof, all in accordance with GAAP, consistently applied, except as otherwise noted, and no event has occurred which could reasonably be expected to have a Material Adverse Effect; and (b) Borrower's March 31, 2003 Unaudited Financial Statements fairly present the financial condition of the Borrower as at the date thereof and the results of the operations of the Borrower for the period then ending, all in accordance with GAAP, consistently applied, except as otherwise noted, and no event has occurred which could reasonably be expected to have a Material Adverse Effect 13.1.17 Pro Forma Financial Statements - The combined, projected pro forma balance sheet, income statements and statements of cash flow of the Borrower and its Subsidiaries, copies of which are attached hereto as Schedule J to this Agreement, present on a pro forma basis the financial condition of the Borrower and such Subsidiaries to December 31, 2003, and reflect on a pro forma basis those liabilities reflected in the notes thereto and resulting from consummation of Purchase Agreement and the other transactions contemplated by this Agreement, and the payment or accrual of all transaction costs payable on the Closing Date with respect to any of the foregoing. The projections and assumptions expressed in the pro forma financials referenced in this Section were prepared in good faith and represent management's opinion based on the information available to the Borrower at the time so furnished and, since the preparation thereof and up to the - 51 - Closing Date, there has occurred no change in the business, financial condition, operations, or prospects of the Borrower or any of its Subsidiaries, or the Borrower and its Subsidiaries taken as a whole which has had or could reasonably be expected to have a Material Adverse Effect. 13.1.18 Securities Activities - Neither the Borrower nor any of its Subsidiaries: (a) is in violation of any securities laws to which it or its activities are subject; and (b) is engaged in the business of extending credit for the purpose of purchasing or carrying Margin Stock (as that expression is defined in Regulation U of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor or other regulation or official interpretation of said Board of Governors relating to the extension of credit by banks, non-banks and non-broker lenders for the purpose of purchasing or carrying Margin Stock applicable to member banks of the Federal Reserve System). Margin Stock constitutes less than 25% of the value of those assets of the Borrower and its Subsidiaries which are subject to any limitation on sale, pledge, or other restriction hereunder. 13.1.19 Absence of Litigation - Except as set forth in Schedule N (the "DISCLOSED LITIGATION"), there is no action, suit, proceeding, arbitration or, to the Borrower's knowledge, investigation before or by any Governmental Authority or private arbitrator pending or, to the Borrower's knowledge, threatened against or affecting the Borrower or any of its Subsidiaries or any property of any of them. Neither any of the Disclosed Litigation nor any action, suit, proceeding, arbitration or investigation which has commenced since the Closing Date (or the most recent update of the Disclosed Litigation) (i) challenges the validity or the enforceability of any material provision of the Transaction Documents or (ii) has or could reasonably be expected to have a Material Adverse Effect Neither the Borrower nor any of its Subsidiaries is (x) in violation of any applicable Requirements of Law which violation will have or could reasonably be expected to have a Material Adverse Effect, or (y) subject to or in default with respect to any final judgment, writ, injunction, restraining order or order of any nature, decree, rule or regulation of any court or Governmental Authority which will have or could reasonably be expected to have a Material Adverse Effect. 13.1.20 Loss Contingencies - There is no material loss contingency within the meaning of GAAP which has not been reflected in the consolidated financial statements of the Borrower prepared and delivered pursuant to Section 14.1.6 for the fiscal period during which such material loss contingency was incurred. 13.1.21 No Undisclosed Liabilities - Except as set forth in Schedule L hereto, neither the Borrower nor its Subsidiaries has any liabilities or obligations of any nature (whether absolute, accrued, contingent or otherwise) except for liabilities or obligations reflected or reserved against in the Borrower's 2002 Financial - 52 - Statements and liabilities and obligations not required by GAAP, to be disclosed in the Borrower's 2002 Financial Statements. 13.1.22 Solvency - After giving effect to: (a) the Loans to be made on the Closing Date or such other date as Loans requested hereunder are made, (b) the other transactions contemplated by this Agreement, the Security Documents and the Purchase Agreement, and (c) the payment and accrual of all transaction costs with respect to the foregoing, and (d) the distribution of the proceeds of each of Facility A and Facility B to Telvent, the Borrower and its Subsidiaries taken as a whole are Solvent. 13.1.23 Capital Structure - All of the issued and outstanding Voting Shares of the Borrower are held by Telvent and all of the issued and outstanding Voting Shares of the Guarantee Subsidiary are held by the Borrower. 13.1.24 Employee Commitments - Neither the Borrower, nor any Subsidiary is a party to or bound by any written or oral pension, employee benefit agreement or other agreement with or respecting employees or is bound by or obligated to make any contributions under any pension plan or arrangement or any retirement income plan, deferred profit sharing plan or similar plan or arrangement, or any plan, program or other arrangement providing for medical services or coverage, dental care and life insurance which creates any obligations or commitments substantially different from those set for in Schedule 4.14.1 to the Purchase Agreement. 13.1.25 Collective Agreements - Neither the Borrower nor any of its Subsidiaries is subject to any union or other collective bargaining agreements with respect to any of its employees. 13.1.26 Guarantees - Except as set forth in Schedule P hereto neither the Borrower nor any Subsidiary (except as herein provided) is a party to or bound by any agreement of guarantee, indemnification, assumption or endorsement or any other like commitment of the obligations, liabilities (contingent or otherwise) or indebtedness of any person or other entity. 13.1.27 Intellectual Property - (a) Except as set for in Schedule 4.19.6 to the Purchase Agreement (the "PURCHASE AGREEMENT INTELLECTUAL PROPERTY SCHEDULE"), the Borrower and its Subsidiaries are the exclusive owners of all right, title and interest in and to, and have good - 53 - and marketable title to, the specific Intellectual Property listed in the Purchase Agreement Intellectual Property Schedule, free and clear of any Liens. (b) Except as set forth in the Purchase Agreement Intellectual Property Schedule all licenses or other rights or permission to use and which are material for the business of the Borrower or its Subsidiaries have been obtained by the Borrower and its Subsidiaries to any Third Party Intellectual Property (defined below) used by the Borrower and its Subsidiaries in their businesses. (c) Except as set forth in the Purchase Agreement Intellectual Property Schedule each item of Intellectual Property owned or used by the Borrower and its Subsidiaries immediately prior to the Closing hereunder will be owned or available for use by such Companies (as defined in the Purchase Agreement) on substantially the same terms and conditions immediately subsequent to the Closing hereunder. (d) Except as set forth therein, the Purchase Agreement Intellectual Property Schedule sets forth all registrations and applications therefore currently issued or pending in any jurisdiction for the Intellectual Property owned by the Borrower and its Subsidiaries, including registration or application numbers therefor and the jurisdiction in which registration or application has been obtained or made (collectively referred to herein and hereinafter as "REGISTERED INTELLECTUAL PROPERTY"). (e) To the best knowledge of the Borrower and except as set forth therein, the Purchase Agreement Intellectual Property Schedule sets forth a true and complete list of all Registered Intellectual Property that is owned by the Borrower and its Subsidiaries and the Registered Intellectual Property is valid, subsisting, and unexpired. (f) For the purposes of this Agreement "Third Party Intellectual Property" means any intellectual property rights of any Person other than Borrower and its Subsidiaries, including any patent, industrial design, copyright, moral right, trademark or service mark (including any logo, design, business name, trade name or the like), mask work, trade secret, confidential information, right of privacy, data right, or any other analogous intangible proprietary right, whether registered or unregistered, anywhere in the world. (g) Except as set forth in the Purchase Agreement Intellectual Property Schedule, and to the best of the knowledge of the Borrower, neither the Borrower nor any of its Subsidiaries has separately or together, infringed upon or misappropriated any Third Party Intellectual Property. (h) Except as set forth in the Purchase Agreement Intellectual Property Schedule, none of the Borrower or its Subsidiaries has ever received any written complaint, claim, demand, or notice that remains unresolved and that: - 54 - (i) alleges that the Borrower or its Subsidiaries has infringed or misappropriated any Third Party Intellectual Property; or (ii) seeks to restrict in any manner the use, transfer, or licensing of any Intellectual Property owned by Borrower or its Subsidiaries. (i) To the best of the knowledge of the Borrower and its Subsidiaries, and except as provided in the Purchase Agreement Intellectual Property Schedule, no third party to Borrower or its Subsidiaries has infringed upon or misappropriated any Intellectual Property rights owned by the Borrower or its Subsidiaries. (j) Except as otherwise set forth in the Purchase Agreement Intellectual Property Schedule with respect to each item of Intellectual Property identified therein: (i) where the item is Registered Intellectual Property, the item remains pending or in force (as the case may be) with all maintenance fees and renewal fees that have fallen due on or prior to the Closing Date having been paid in a timely fashion; (ii) the item is not subject to any outstanding injunction, judgment, order, decree, or ruling by a Court of competent jurisdiction limiting its use by the Borrower or its Subsidiaries (except for Registered Intellectual Property to the extent pending or registered in any government patent or trademark office, as the case may be); and (iii) no action, suit, proceeding, hearing, complaint, written claim, or written demand is pending or, to the best of the knowledge of the Borrower and its Subsidiaries, is threatened which challenges the subsistence, existence, validity, enforceability, use, or ownership of the item provided that nothing in this term extends to the prosecution of any Registered Intellectual Property to the extent pending or registered in any government patent or trademark office, as the case may be. (k) Except as set forth therein, the Purchase Agreement Intellectual Property Schedule identifies each license, sublicense, agreement or permission to use any Third Party Intellectual Property which is material for the business of the Borrower and its Subsidiaries other than off the shelf or similar Software and to the best of the knowledge of the Borrower and its Subsidiaries the Purchase Agreement Intellectual Property Schedule identifies each license, sublicense, agreement or permission to use any Third Party Intellectual Property which are material for the business of the Borrower and its Subsidiaries for off the shelf or similar Software. With respect to each such license, sublicense, agreement or permission: - 55 - (i) the license, sublicense, agreement, or permission covering the item is legal, valid, binding, enforceable against the Borrower and its Subsidiaries, respectively, and in full force and effect; (ii) the license, sublicense, agreement, or permission will continue to be legal, valid, binding, enforceable against the Borrower and its Subsidiaries, respectively, and in full force and effect on essentially the same terms following the Closing Date; (iii) none of the Borrower nor its Subsidiaries and to the best of the knowledge of the Borrower and its Subsidiaries, no other party to the license, sublicense, agreement, or permission is in breach or default, and, to the best of the knowledge of the Borrower and its Subsidiaries, no event has occurred which with notice or lapse of time would have a Material Adverse Effect or permit termination, modification, or acceleration thereunder; and (iv) except as permitted by the applicable agreement, none of the Borrower or its Subsidiaries has granted any sublicense or similar right with respect to the listed license , sublicense, agreement, or permission. (1) Except as set forth therein, the Purchase Agreement Intellectual Property Schedule sets forth all material products that are licensed or sold by the Borrower and its Subsidiaries to unrelated third parties and which are or include either Software and/or Databases owned by any of the Borrower or its Subsidiaries and identifies specifically under separate headings in respect of the foregoing: (A) Software as to which the source code is owned by the Borrower and its Subsidiaries ("OWNED SOFTWARE"), (B) third party Software which is licensed to each or any of the Borrower and its Subsidiaries and as to which the Borrower or its Subsidiaries are in possession of the source code; (C) third party Software which is licensed to any of the Borrower or its Subsidiaries but as to which the Borrower or its Subsidiaries do not have possession of the source code and which is bundled with or embedded in the Owned Software pursuant to reseller agreements; (D) third party Software purchased by or licensed to each or either Company solely for resale or sublicense to its customers other than off the shelf or similar Software; (E) third party Software not owned by the Borrower or its Subsidiaries but in which the Borrower or its Subsidiaries has any use, possessory or proprietary rights other than as set forth in clauses A) through D), above (such material Software described in the foregoing subsections B) through E) being referred to collectively as the "THIRD-PARTY SOFTWARE"); and (F) all material Software development projects undertaken by the Borrower and its Subsidiaries, in whole or in part, within the past two years with persons other than employees, together with an identification of the persons undertaking such projects. In this Section a reference to "source code" means a human readable version of any Software owned by one or both of the Companies that is not routinely or regularly - 56 - provided to end users. With respect to the Owned Software and except as set forth separately in the Purchase Agreement Intellectual Property Schedule: (i) the Borrower or its Subsidiaries have the sole and exclusive right to use the Owned Software, free and clear of any Encumbrances, except rights to market and/or use the Owned Software granted by the Borrower or its Subsidiaries to customers thereof pursuant to license agreements or sales, marketing, distributorship, agency, representative and value-added reseller agreements made with third parties with respect to the sale or sublicensing by the third party of any of the products of the Borrower and its Subsidiaries and which were entered into in the normal course of business; (ii) the source code with respect to the Owned Software is not in the possession of any party other than the Borrower or its Subsidiaries and has been maintained as confidential by the Borrower and its Subsidiaries; and (iii) no contractual rights in favor of any party to any Software owned by the Borrower and its Subsidiaries (including Software which is the subject of escrow, payment terms or similar arrangements) will be immediately triggered or otherwise immediately materially adversely affected by the transactions contemplated hereby. (m) Except as set forth in the Purchase Agreement Intellectual Property Schedule, neither the Borrower nor its Subsidiaries has granted any exclusive license with respect to, any Intellectual Property of Borrower or its Subsidiaries to any third party. Except as set forth in the Purchase Agreement Intellectual Property Schedule, to the best knowledge of the Borrower and its Subsidiaries they have in the past 365 days immediately preceding the Closing Date (the "QUIET PERIOD"), by way of agreement or assignment made, entered into, prepared or executed in said Quiet Period, transferred ownership to any Intellectual Property that was owned by the Borrower or its Subsidiaries to a third party. (n) Except as set forth in the Purchase Agreement Intellectual Property Schedule to the best knowledge of the Borrower and its Subsidiaries no material Trade Secrets are in the possession of any party other than the Borrower and its Subsidiaries except pursuant to license or confidentiality agreements signed by such other party and all material Trade Secrets have been maintained as confidential by the Borrower and its Subsidiaries. 13.1.28 Insurance - Schedule M to this Agreement accurately sets forth as of the Closing Date all insurance policies and programs currently in effect with respect to the respective properties and assets and business of the Borrower and its Subsidiaries, specifying, for each such policy and program, (A) the amount thereof, (B) the risks insured against thereby, (C) the name of the insurer and each insured party thereunder, (D) the policy or other identification number thereof, (E) the expiration date thereof, and (F) any reserves relating to any self-insurance - 57 - program that is in effect. Such insurance policies and programs reflect coverage that is reasonably consistent with prudent industry practice, and shall include, without limitation, property and liability (and, if appropriate, business interruption) insurance. 13.1.29 Environmental Compliance - Except as described in Schedule 4.17 to the Purchase Agreement: (a) All of the Borrower's Properties are in a condition that is clean and healthful and free of all Environmental Contamination (including latent Environmental Contamination) or other potentially harmful physical conditions including, without limitation, any patent or latent Environmental Contamination of the atmosphere, air, soil, subsoil, groundwater or surface waters within or adjacent thereto; (b) No Hazardous Materials and no other materials intended for use or generated by the Borrower or any of its Subsidiaries have been or are used, stored, treated or otherwise disposed of in violation of Environmental Legislation; (c) All Hazardous Materials removed or emitted from the Borrower's Properties were and are documented, transported and disposed of in compliance with all Environmental Legislation; (d) No materials including, without limitation, effluents, leachate, emissions or hazardous materials, generated on or emitted from the Borrower's Properties have caused or will cause in whole or in part any Environmental Contamination or injury to any atmosphere, air, soil, subsoil, groundwater, surface water, property or persons, including adjacent property and property through or to which such materials were shipped; (e) All of the facilities of the Borrower or any of its Subsidiaries that were or are used by any party for the disposal of solid or other waste have been and are properly permitted and operated in compliance with all applicable laws and regulations and have not produced and do not produce any Environmental Contamination; (f) There is no agreement or consent order to which the Borrower or any of its Subsidiaries is a party which relates to any environmental matter, and no such agreement or order is necessary for the continued compliance of the Borrower with applicable Environmental Legislation or any other laws and regulations applicable to the Borrower or any of its Subsidiaries; (g) There have been no orders issued, investigations conducted or other proceedings taken or threatened under or pursuant to any Environmental Legislation with respect to the business, assets or undertaking of the Borrower or any of its Subsidiaries. There are no circumstances or events that have any reasonable prospect of resulting in any claim, action or other proceeding with respect to - 58 - environmental damage or harm or in an order, investigation or other proceeding under or pursuant to the Environmental Legislation. All approvals, permits, certificates, licences, orders-in-council or other actions required under the environmental legislation applicable to the business, assets or undertaking of the Borrower or any of its Subsidiaries and to own and operate the same have been obtained; and (h) The use of, and operations relating to the business, assets and undertaking of the Borrower or any of its Subsidiaries do not constitute a nuisance nor has any claim of nuisance been made in respect of such use and operations by any adjoining landowner or other party. SECTION 13.2 NATURE OF REPRESENTATIONS AND WARRANTIES The representations and warranties set out in this Article shall survive the execution and delivery of this Agreement and the making of each Drawdown, notwithstanding any investigations or examinations which may be made by the Bank or counsel to the Bank. ARTICLE 14 COVENANTS SECTION 14.1 AFFIRMATIVE COVENANTS OF THE BORROWER The Borrower covenants and agrees with the Bank that so long as any amount payable hereunder is outstanding: 14.1.1 Punctual Payment - The Borrower shall duly and punctually pay the principal of all Loans made to it, all interest thereon and all fees and other amounts required to be paid by the Borrower hereunder at the dates and places, in the currency and in the manner mentioned herein. 14.1.2 Conduct of Business - The Borrower shall, and will cause its Subsidiaries to, maintain their respective corporate existences in good standing and do or cause to be done all things necessary to keep in full force and effect all properties, rights, franchises, licences and qualifications to carry on business where a failure to do so would have a material adverse effect on the business, operations or financial condition of the Borrower and its Subsidiaries taken as a whole. 14.1.3 Compliance with Laws - The Borrower shall, and shall cause its Subsidiaries to: (a) comply with all Requirements of Law and all restrictive covenants affecting such Person or the business, properties, assets or operations of such Person, and - 59 - (b) obtain as needed all permits necessary for its operations and maintain such permits in good standing unless failure to comply or obtain such permits could not reasonably be expected to have a Material Adverse Effect. 14.1.4 Operation in Accordance with Environmental Legislation - The Borrower shall and shall cause each of its Subsidiaries to, hold, maintain and operate all of its business, assets and undertaking in compliance with all applicable Environmental Legislation. 14.1.5 Environmental Authorizations - The Borrower shall and shall cause its Subsidiaries to, obtain and maintain in good standing all at all times all permits, licences, consents and approvals required under applicable Environmental Legislation, necessary for the ownership of its assets and undertaking and the conduct of its business. 14.1.6 Financial Statements and Other Information - The Borrower shall deliver to the Bank: (a) Annual Financial Statements - as soon as practicable and, in any event, within 120 days after the end of each of its fiscal years, copies of: (i) its unaudited annual financial statements of the Borrower, and (ii) the unaudited annual financial statements of each of its Subsidiaries, and (iii) the consolidated audited annual financial statements of the Borrower and each of its Subsidiaries, consisting of balance sheets, statements of earnings and retained earnings and statements of cash flow for each such year, expressed in U.S. Dollars, together with the notes thereto and any management report or audit letter, all prepared in accordance with U.S. GAAP consistently applied, except as otherwise noted (and accepted by the Bank), throughout the period and prior periods, together, in the case of the consolidated financial statements, with a report of the auditors of the Borrower; (b) Quarterly Financial Statements - as soon as practicable, and in any event within forty five (45) days after the end of each Quarter the consolidated and consolidating balance sheet of the Borrower and its Subsidiaries as at the end of such period and the related consolidated and consolidating statements of income, shareholders' equity and cash flows of the Borrower and its Subsidiaries for such fiscal quarter and cumulatively for the period from the beginning of the then current fiscal year to the end of such fiscal quarter, certified by the chief financial officer of the Borrower on behalf of the Borrower as fairly presenting the consolidated and consolidating financial position of the Borrower and its Subsidiaries as at the dates indicated and the results of their operations and cash - 60 - flows for the periods indicated in accordance with U.S. GAAP, subject to normal year-end audit adjustments, together with: (i) in comparative form: (A) the corresponding figures as set forth in the budget, if any, delivered pursuant to Subsection 14.1.6(e) for such period, and (B) the corresponding figures of the Borrower and its Subsidiaries for the period ending on the corresponding calendar quarter in the previous fiscal year if such corresponding calendar quarter began after the Closing Date, and (ii) any management discussion and analysis of such financial statements prepared for presentation to the Board of Directors of the Borrower. (c) Monthly Financial Statements - commencing as of the first day of the month following the initial Advance, as soon as practicable, and in any event within thirty (30) days after the end of each four-week fiscal period (other than the end of a fiscal quarter), the consolidated and consolidating balance sheet of the Borrower and its Subsidiaries as at the end of such period and the related consolidated and consolidating statements of income and statement of cash flow of the Borrower and its Subsidiaries for such fiscal period and cumulatively for the period from the beginning of the then current fiscal year to the end of such fiscal period, certified by the chief financial officer of the Borrower on behalf of the Borrower as fairly presenting the consolidated and consolidating financial position of the Borrower and its Subsidiaries as at the dates indicated and the results of their operations and cash flow for the fiscal periods indicated in accordance with U.S. GAAP, subject to normal year end adjustments, and in comparative form: (i) the corresponding figures as set forth in the budget delivered pursuant to Subsection 14.1.6(e) for such period, and (ii) the actual financial position of the Borrower and its Subsidiaries for the period ending on the corresponding fiscal period in the previous fiscal year. (d) Borrower's January 31, 2003 Audited Balance Sheet - not later than June 30, 2003, the Borrower's January 31, 2003 Audited Balance Sheet. (e) Budgets - as soon as practicable and in any event not later than: (i) the Closing Date of the initial Advance hereunder and thereafter not later than sixty (60) days after the beginning of each fiscal year commencing - 61 - with the fiscal year beginning on January 1, 2003, a copy of the Borrower's fiscal year operating budget for such fiscal year, and (ii) the Closing Date of the initial Advance hereunder and thereafter not later than ninety (90) days after the beginning of each fiscal year commencing with the fiscal year beginning on January 1,2003, a copy of the plan and forecast (including a projected balance sheet, income statement, a statement of cash flow and related footnotes) of the Borrower and its Subsidiaries for the upcoming five (5) fiscal years, in each case prepared in such detail as shall be reasonably satisfactory to the Bank; and (f) Other - at the request of the Bank, such other reports, certificates, projections of income and cash flow or other matters affecting the business affairs or financial condition of the Borrower and its Subsidiaries as the Bank may reasonably require and as may reasonably be available and subject to any contractual restrictions regarding confidentiality. 14.1.7 No Default Certificate - The Borrower shall deliver to the Bank, concurrently with furnishing the financial statements pursuant to clauses 14.1.6(a) and 14.1.6(b), an Officer's Certificate signed by its chief executive officer, president, chief financial officer, treasurer or other responsible officer of the Borrower acceptable to the Bank, certifying that: (a) such financial statements fairly present the financial condition and results of operations of the Borrower and its consolidated Subsidiaries, (b) no Major Change in Ownership has occurred, (c) no Event of Default has occurred and is continuing, (d) the Borrower is in compliance with all covenants, terms and conditions on its part to be performed pursuant to the Purchase Agreement, and (e) the Borrower is in compliance with its obligation to provide detailed calculations of its financial covenants to the Bank. 14.1.8 Compliance with Agreements - The Borrower shall duly perform and meet its obligations and duties under the Purchase Agreement and the Security Documents. 14.1.9 Taxes - The Borrower shall pay, and cause each of its Subsidiaries to pay when due: (a) all taxes, assessments and other governmental charges imposed upon it or on any of its properties or assets or in respect of any of its franchises, business, income or property before any penalty or interest accrues thereon, and - 62 - (b) all claims (including, without limitation, claims for labor, services, materials and supplies) for sums which have become due and payable and which by law have or may become a Lien (other than the Lien hereof and Permitted Encumbrances) upon any of the Borrower's or such Subsidiary's property or assets, prior to the time when any penalty or fine shall be incurred with respect thereto; Provided, However, that no such taxes, assessments and governmental charges referred to in clause 14.1.9(a) above or claims referred to in clause 14.1.9(b) above (and interest, penalties or fines relating thereto) need be paid if being contested in good faith by appropriate proceedings diligently instituted and conducted and if such reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor. 14.1.10 Insurance - The Borrower shall and shall cause each of its Subsidiaries to, keep insured its business, assets and undertaking in such amounts as the Bank may reasonably require against loss or damage by fire and such other risks as the Bank may from time to time specify, based on the opinion of an independent, recognized insurance broker with experience in arranging insurance for clients in businesses similar to the business of the Borrower, with insurers approved by the Bank. The Borrower shall whenever from time to time requested by the Bank provide the Bank with satisfactory evidence of such insurance and any renewal thereof which shall at all times be subject to mortgage clauses in a form approved by the Bank. Evidence satisfactory to the Bank of the renewal of every policy of insurance shall be left with the Bank at least 7 days before the termination thereof. Each policy of insurance entered into by the Borrower after the date hereof shall be in form and substance acceptable to the Bank and shall not, without the approval of the Bank, be subject to any co-insurance clause. 14.1.11 Use of Proceeds - The proceeds of the Loan shall be used for general corporate purposes, including, without limitation, to partially finance the acquisition cost of the stock of the Borrower by way of distributions or loans from the Borrower, to Telvent, in an amount up to U.S. $ 28,000,000, or the Equivalent Amount in Canadian Dollars. Borrowings under Facility A will be used for working capital and general corporate purposes and borrowings under Facility B will be used to finance the Deferred Payment amount under the Purchase Agreement and for working capital and general corporate purposes. 14.1.12 Maintain Business, Assets and Undertaking - The Borrower covenants and agrees with the Holder that the Borrower will hereafter for so long as there are Obligations outstanding, defend title to its assets and undertaking and those of its Subsidiaries against claims and demands of all Persons whomsoever and shall keep and maintain the same in good standing, order, condition and repair, subject to reasonable wear and tear of its assets. 14.1.13 Rights of Inspection - At any reasonable time and from time to time upon reasonable prior notice, the Borrower shall, and shall cause its Subsidiaries to, - 63 - permit the Bank or any representative thereof, at the expense and risk of the Bank, to examine the financial records and books of account of the Borrower or any of its Subsidiaries and to visit and inspect the premises and properties of the Borrower or any of its Subsidiaries and to discuss the affairs or finances and accounts of either of the Borrower or any of their respective Subsidiaries with any of the senior officers of the Borrower and as may reasonably be available and subject to any contractual restrictions regarding confidentiality. 14.1.14 Notice of Major Change in Ownership or Material Default - The Borrower shall deliver to the Bank, forthwith upon becoming aware of any Major Change in Ownership or any material default in the performance of any covenant, agreement or condition contained in this Agreement, an Officer's Certificate specifying the same. 14.1.15 Discharge Existing Security - The Borrower shall repay all outstanding Indebtedness that is secured by a Lien on the assets or undertaking of the Borrower, other than Indebtedness allowed under Permitted Encumbrances and the Indebtedness created pursuant hereto, and shall discharge any such Lien. 14.1.16 Registration of Security - The Borrower shall at its sole cost and expense register and renew any registration, filing or recording of the Lien created hereby and by the Security Documents and all instruments collateral, supplemental or ancillary hereto at every office and place where such registrations, filings or recordings may be required or permitted from time to time. 14.1.17 Further Assurances - The Borrower shall forthwith, and from time to time, hereafter, at its sole cost and expense, do or cause to be done all things and shall execute and register or cause to be executed and registered all public recordations, registrations and filings, security agreements, instruments supplemental hereto, deeds and documents (including without limitation, all Financing Statements, Financing Change Statements), which, in the reasonable opinion of the Bank, are necessary or advisable for giving the Bank (so far as may be possible under the local laws of the places where the assets and undertaking of the Borrower are situated) a valid Lien of the nature and kinds specified in 3.1 hereof, upon any and all undertaking, property or assets, whether now owned or hereafter acquired, to secure payment of moneys intended to be secured pursuant to this Agreement and the Security Documents and for better assuring, mortgaging, pledging, charging, assigning, transferring, hypothecating, granting a security interest in and confirming unto the Bank the such assets and undertaking, and for conferring upon the Bank such power of sale and other powers over such assets and undertaking as are hereby expressed to be conferred. - 64 - SECTION 14.2 FINANCIAL RATIOS AND COVENANTS The Borrower covenants and agrees with the Bank that the Borrower, together with its consolidated Subsidiaries, as at the end of each successive Computation Period shall have: 14.2.1 a ratio of Total Net Debt to EBITDA of not more than 3.00:1.00; 14.2.2 Fixed Charge Coverage Ratio of not less than 1.20:1.00; and 14.2.3 a minimum Net Income of not less than U.S. $1.00 per year. SECTION 14.3 DETERMINATION AND REPORTING OF BORROWING BASE The Borrower covenants and agrees with the Bank that so long as any amount payable hereunder is outstanding, as soon as practicable after the end of each month, and in any event within 30 days after the end of each month, or more frequently as reasonably required by the Bank if an Event of Default shall have occurred and be continuing, and otherwise as herein provided, the Borrower shall submit to the Bank a Borrowing Base Certificate for the purposes of determining the Borrowing Base, together with such supporting documents as the Bank reasonably deems desirable, all certified as being true and correct by an officer of the Borrower authorized to sign an Officer's Certificate. The Borrowing Base, once so redetermined and accepted by the Bank, shall remain in effect until redetermined pursuant to this Section and so on from time to time. The Borrower may update the Borrowing Base Certificate and supporting documents more frequently than required hereunder and the most recently delivered Borrowing Base Certificate shall be the applicable Borrowing Base Certificate for purposes of determining the Borrowing Base, at any time. SECTION 14.4 NEGATIVE COVENANTS OF THE BORROWER The Borrower covenants and agrees with the Bank that, unless the Bank otherwise consents in writing, so long as any amount payable hereunder is outstanding: 14.4.1 Nature of Business - The Borrower shall not make any material change in the nature of its business as carried on at the date hereof. 14.4.2 Negative Pledge - The Borrower shall not, nor will it permit any of its Subsidiaries to, create, issue, incur, assume or permit to exist any mortgage, charge, Lien on any of its undertaldngs or assets, other than Permitted Encumbrances and the Lien of the Security Documents. 14.4.3 Sale of Assets - The Borrower shall not, except as permitted by the provisions of the Security Documents, sell, lease, assign, transfer or otherwise dispose of (whether in one transaction or in a series of related transactions) all or any portion of the Collateral, other than sales of software licenses and equipment to customers - 65 - in the ordinary course of business or the sale or disposition of redundant or obsolete equipment. 14.4.4 Dividends - The Borrower shall not declare or pay any dividends on any of its shares without the prior written consent of the Bank. 14.4.5 Distributions of Collateral - The Borrower shall not, except as permitted by the provisions of this Agreement and the Security Documents, distribute any of the Collateral to any Person. 14.4.6 Distributions of Cash - Except as permitted in clause 14.4.12 hereof, and except as otherwise herein specifically provided, the Borrower shall not, without the prior written consent of the Bank, distribute any funds in any form to any Person. 14.4.7 No Modification to Material Agreement - The Borrower shall not modify any of the terms of the Purchase Agreement or any other agreement to which it is a party which could reasonably be expected to have a Material Adverse Effect without the prior written consent of the Bank, which may be withheld it the sole discretion of the Bank. 14.4.8 Expenditures - The Borrower shall not make any expenditures for fixed or capital assets in excess of U.S. $1,500,000, or the Equivalent Amount in Canadian Dollars, annually. 14.4.9 No Dissolution - The Borrower shall not, nor will it permit any Subsidiary to, liquidate, dissolve or wind-up or take any steps or proceedings in connection therewith. 14.4.10 Indebtedness - Neither the Borrower nor any of its Subsidiaries shall directly or indirectly create, incur, assume or otherwise become or remain directly or indirectly liable with respect to any Indebtedness, except: (a) the Obligations; (b) Permitted Existing Indebtedness and Permitted Refinancing Indebtedness in respect thereof; (c) Indebtedness in respect of obligations secured by Permitted Encumbrances; (d) subject to the terms of Section 14.4.11, Indebtedness arising from intercompany loans and advances: (i) from any Subsidiary to the Borrower or any wholly-owned Subsidiary or (ii) from the Borrower to any wholly-owned Subsidiary; - 66 - provided, that such Indebtedness shall be expressly subordinate to the payment in full in cash of the Secured Obligations on terms satisfactory to the Bank, (e) Indebtedness with respect to surety, appeal and performance bonds obtained by the Borrower or any of its Subsidiaries in the ordinary course of business, in the aggregate not exceeding U.S. $5,000,000, or the Equivalent Amount in Canadian Dollars, at any one time outstanding; and (f) trade payables incurred in the ordinary course of business and usual payables related to salaries of employees (including amounts payable for services rendered by consultants under contract to the Borrower), and related benefits and source deductions. 14.4.11 Intercompany Loans - Neither the Borrower nor any of its Subsidiaries shall make any loans to any other Subsidiary of the Borrower except to the extent any such loans shall be evidenced by promissory notes which provide that if any acceleration of the Obligations under this Agreement shall occur, the obligations under such promissory note shall immediately become due and payable without any election or action on the part of such Person. 14.4.12 Investments - Neither the Borrower nor any of its Subsidiaries shall directly or indirectly make or own any investment except: (a) Investments in cash and Cash Equivalents; (b) Investments consisting of trade receivables or received in connection with the bankruptcy or reorganization of suppliers and customers and in settlement of delinquent obligations of, and other disputes with, customers and suppliers arising in the ordinary course of business; (c) Investments consisting of deposit accounts maintained by the Borrower and its Subsidiaries in the ordinary course of business in connection with its cash management system; (d) Investments consisting of non-cash consideration from a sale, assignment, transfer, lease, conveyance or other disposition of property permitted hereunder or under the Security Documents; and (e) Investments consisting of: (i) intercompany loans from the Borrower to its Subsidiaries permitted under clause 14.4.11 hereof, and - 67 - (ii) a one time, demand, non-revolving loan by the Borrower to Telvent in an amount not to exceed U.S.$ 6,100,000, evidenced by a demand promissory note which provides that: (A) if any acceleration of the Obligations under this Agreement shall occur, the obligations under such loan shall immediately become due and payable without any election or action on the part of such Person, and (B) such promissory note shall be pledged to the Bank on terms satisfactory to the Bank, and (iii) Voting Shares and all warrants, options or other rights to acquire Voting Shares (but excluding any debt security that is convertible into, or exchangeable for, Voting Shares), excluding any incentive arrangements or obligations or payments thereunder. SECTION 14.5 SUCCESSOR CORPORATION The Borrower shall not, and shall not permit any Subsidiary to, enter into any transaction whereby all or substantially all of its undertaking, property and assets would become the property of any other corporation (herein called a "SUCCESSOR CORPORATION") whether by way of reconstruction, reorganization, recapitalization, consolidation, amalgamation, merger, transfer, sale or otherwise, unless: 14.5.1 prior to or contemporaneously with the consummation of such transaction the Borrower, or such Subsidiary, as the case may be, and the successor corporation shall have executed such instruments and done such things as, in the opinion of counsel, are necessary or advisable to establish that upon the consummation of such transaction: (a) the successor corporation will have assumed all the covenants and obligations of the Borrower, or such Subsidiary, as the case may be, under this Agreement, and (b) this Agreement will be a valid and binding obligation of the successor corporation entitling the Bank, as against the successor corporation, to exercise all its rights under this Agreement; 14.5.2 such transaction shall be on such terms and shall be carried out in such manner as to not be materially prejudicial to the rights and powers of the Bank hereunder; and 14.5.3 such transaction shall not result in the assets of the successor corporation being subjected to any encumbrances other than Permitted Encumbrances. - 68 - Wherever the conditions of this Section 14.5 shall have been duly observed and performed the successor corporation shall possess and from time to time may exercise each and every right and power of the Borrower under this Agreement in the name of the Borrower. ARTICLE 15 EVENTS OF DEFAULT AND ACCELERATION SECTION 15.1 EVENTS OF DEFAULT The occurrence of any one or more of the following events (each such event being herein referred to as an "EVENT OF DEFAULT") shall constitute a default under this Agreement: 15.1.1 if the Borrower defaults in payment of the principal of any Loan when due and payable and such default continues unremedied for four Banking Days after notice of such default by the Bank to the Borrower specifying such default and requiring the Borrower to put an end to the same (which said notice may be given by the Bank, in its discretion); 15.1.2 if the Borrower defaults in payment of (i) any interest (including, if applicable, default interest) due on any Loan, (ii) any fee with respect to the Bankers' Acceptance, (iii) any Unused Line Fee, or (iv) any other amount payable by either Borrower hereunder when due and payable and such default continues unremedied for four Banking Days after notice of such default by the Bank to the Borrower specifying such default and requiring the Borrower to put an end to the same (which said notice may be given by the Bank); 15.1.3 if the Borrower or any Guarantee Subsidiary neglects to observe or perform any other covenant or obligation contained in this Agreement, the Documents or the Security Documents (other than a covenant or condition whose breach or default in performance is elsewhere in this Section specifically dealt with) and such default continues unremedied for 15 Banking Days after notice of such default by the Bank to the Borrower specifying such default and requiring the Borrower to put an end to the same; 15.1.4 if any Guarantee of any Guarantee Subsidiary ceases to be enforceable against the Guarantor thereunder; 15.1.5 if any Guarantor fails to pay any amount when due under any Guarantee; 15.1.6 if the Borrower or any Guarantee Subsidiary is at any time not Solvent; 15.1.7 if in the sole judgment of the Bank, reasonably exercised, any party to the Purchase Agreement fails to fully perform the covenants, terms and conditions on its part to be performed pursuant to the Purchase Agreement which could reasonably be expected to have a Material Adverse Effect, and such failure - 69 - continues unremedied for 15 Banking Days after notice of such failure by the Bank to the Borrower specifying such failure; 15.1.8 if one or more events of default as defined in agreements, indentures or instruments evidencing, or under which, any indebtedness for borrowed money of the Borrower or any Guarantee Subsidiary for principal amounts aggregating in excess of U.S. $100,000, or the Equivalent Amount in Canadian Dollars, which are not payable on demand (unless demand has been made therefor), is outstanding and such indebtedness shall be capable of acceleration so that the same shall be or have become due and payable or subject to a right to become due and payable prior to the date on which the same would otherwise become due and payable; 15.1.9 if a decree or order of a court having jurisdiction in the premises is entered adjudging either Borrower or any Guarantee Subsidiary bankrupt or insolvent, or approving as properly filed a petition seeking the winding up of such party under the Companies' Creditors Arrangement Act (Canada), the Bankruptcy and Insolvency Act (Canada) or the Winding Up Act (Canada) or any other bankruptcy, insolvency or analogous laws or issuing sequestration or process of execution against, or against any substantial part of the assets of, such party or ordering the winding up or liquidation of its affairs, (or similar process or proceeding in any other jurisdiction) and any such decree or order continues unstayed and in effect for a period of 15 Banking Days; 15.1.10 if the Borrower or any Guarantee Subsidiary becomes insolvent, makes any assignment in bankruptcy or makes any other assignment for the benefit of creditors, makes any proposal under the Bankruptcy and Insolvency Act (Canada) or any comparable law, seeks relief under the Companies' Creditors Arrangement Act (Canada), the Winding Up Act (Canada) or any other bankruptcy, insolvency or analogous law in any other jurisdiction, is adjudged bankrupt, files a petition or proposal to take advantage of any act of insolvency, consents to or acquiesces in the appointment of a trustee, receiver, receiver and manager, interim receiver, custodian, sequestrator or other Person with similar powers of itself or of all or any substantial portion of its assets, or files a petition or otherwise commences any proceeding seeking any reorganization, arrangement, composition or readjustment under any applicable bankruptcy, insolvency, moratorium, reorganization or other similar law affecting creditors' rights or consents to, or acquiesces in, the filing of such a petition; 15.1.11 one or more final judgments for the payment of money in an amount in Canadian Dollars in the aggregate exceeding U.S. $100,000, or the Equivalent Amount in Canadian Dollars, shall be rendered by a court of record against the Borrower or any Guarantee Subsidiary in any jurisdiction or jurisdictions in which any such party has property or assets which are material to the business, operations or financial condition of the Borrower and its Subsidiaries taken as a whole and the Borrower or any such Subsidiary shall not discharge the same or provide for its - 70 - discharge in accordance with its terms, or procure a stay of execution thereof within 30 days from the date of entry thereof, and within said period of 30 days, or such longer period during which execution of such judgment shall have been stayed, appeal such final judgment and cause the execution thereof to be stayed during such appeal; 15.1.12 if any representation or warranty made by the Borrower in this Agreement, the Documents or any certificate or other document at any time delivered hereunder to the Bank shall prove to have been incorrect or misleading in any material respect in respect of the business, operations or financial condition of the Borrower and its Subsidiaries taken as a whole as of the date thereof, which could reasonably be expected to have a Material Adverse Effect; 15.1.13 if proceedings are commenced for the dissolution, liquidation or winding-up of either Borrower, any of its Guarantee Subsidiaries that are not wholly owned, or for the suspension of the operations of either Borrower or any of its Guarantee Subsidiaries that are not wholly owned unless such proceedings are being actively and diligently contested in good faith; 15.1.14 if Telvent shall fail to provide funds as contemplated by Section 2.5 hereof; or 15.1.15 if there are any differences between the Borrower's January 31, 2003 Unaudited Balance Sheet and the Borrower's January 31, 2003 Audited Balance Sheet for any item which could reasonably be expected to have a Material Adverse Effect. SECTION 15.2 ACCELERATION If a Major Change in Ownership or any Event of Default shall occur and be continuing, the entire principal amount of Loans then outstanding and all accrued and unpaid interest thereon and all other payments due hereunder, at the option of the Bank become immediately due and payable with interest thereon, at the rate or rates determined as herein provided, to the date of actual payment thereof, all without notice, presentment, protest, demand, notice of dishonor or any other demand or notice whatsoever, all of which are hereby expressly waived by the Borrower. In such event the Bank may, in its discretion, exercise any right or recourse, or proceed by any action, suit, remedy or proceeding against the Borrower, authorized or permitted by law for the recovery of all the indebtedness and liabilities of the Borrower to the Bank, or any combination of the foregoing, and proceed to exercise any and all rights hereunder and no such remedy for the enforcement of the rights of the Bank shall be exclusive of or dependent on any other remedy but any one or more of such remedies may from time to time be exercised independently or in combination. SECTION 15.3 DEFAULT INTEREST If an Event of Default or a Major Change in Ownership shall occur and be continuing, the Bank may convert, at the Equivalent Amount, if applicable, any or all Canadian Prime Rate Loans, Banker's Acceptances, Letters of Credit, L/C Liabilities or Libor Loans, at - 71 - any time, to U.S. Base Rate Loans. Interest shall accrue in respect of all Obligations outstanding at that time: 15.3.1 on each U.S. Base Rate Loan at the Interest Rate then in effect plus 2% per annum; and 15.3.2 on L/C Liabilities in respect of each Letter of Credit which is denominated in U.S. Dollars, and each Libor Loan, which the Bank has not then converted to a U.S. Base Rate Loan, at the Interest Rate then in effect for U.S. Base Rate Loans plus 2% per annum; and 15.3.3 on L/C Liabilities in respect of each Letter of Credit which is denominated in Canadian Dollars, Canadian Prime Rate Loan, Banker's Acceptance, which the Bank has not then converted to a U.S. Base Rate Loan, at the Interest Rate then in effect for Canadian Prime Rate Loans plus 2% per annum; together in each case with interest on all overdue interest at the same rate, from the date of the Event of Default or Major Change in Ownership in the case of each U.S. Base Rate Loan and Canadian Prime Rate Loan outstanding on the such date, or from the date of conversion in the case of any U.S. Base Rate Loan into which a Letter of Credit, L/C Liabilities or Banker's Acceptance is converted under this Section, for so long as such default shall continue, before and after judgment, such interest to be payable on demand. SECTION 15.4 REMEDIES CUMULATIVE AND WAIVERS For greater certainty, it is expressly understood and agreed that the respective rights and remedies of the Bank hereunder or under any other document or instrument executed pursuant to this Agreement are cumulative and are in addition to and not in substitution for any rights or remedies provided by law or by equity; and any single or partial exercise by the Bank of any right or remedy for a default or breach of any term, covenant, condition or agreement contained in this Agreement or other document or instrument executed pursuant to this Agreement shall not be deemed to be a waiver of or to alter, affect or prejudice any other right or remedy or other rights or remedies to which the Bank may be lawfully entitled for such default or breach. Any waiver by the Bank of the strict observance, performance or compliance with any term, covenant, condition or agreement herein contained and any indulgence granted, either expressly or by course of conduct, by the Bank shall be effective only in the specific instance and for the purpose for which it was given and shall be deemed not to be a waiver of any rights and remedies of the Bank under this Agreement or any other document or instrument executed pursuant to this Agreement as a result of any other default or breach hereunder or thereunder. SECTION 15.5 TERMINATION OF BANK'S OBLIGATIONS The occurrence of an Event of Default or a Major Change in Ownership shall relieve the Bank of all obligations to permit any further Drawdowns hereunder. - 72 - ARTICLE 16 CHANGE OF CIRCUMSTANCES SECTION 16.1 MARKET DISRUPTION In the event that at any time subsequent to the giving of a Drawdown Notice, Rollover Notice or Conversion Notice to the by the Borrower with regard to any Libor Loan but before the date of the Drawdown, Rollover or Conversion, as the case may be, the Bank make a determination, which shall be binding upon the Borrower, that: 16.1.1 by reason of circumstances affecting the London interbank market adequate and fair means do not exist for ascertaining the rate of interest with respect to a Libor Loan during the Interest Period selected; 16.1.2 the making or continuing of the Libor Loan by the Bank has been made impracticable by the occurrence of an event which materially or adversely affects the London interbank market; or 16.1.3 the cost to the Bank of funding the Libor Loan for the immediately following Interest Period does not accurately reflect the effective cost of the Bank' funding for that Interest Period, then the Bank shall give notice thereof to the Borrower and the Borrower shall, within one Banking Day after receipt of such notice, give the Bank a revised Drawdown Notice or a Conversion Notice, as the case may be, which specifies the Drawdown of a Canadian Prime Rate Loan, a U.S. Base Rate Loan, on the last day of the applicable Interest Period. In the event the Borrower fails to give, if applicable, a Conversion Notice, such Libor Loan shall be converted on the last day of the applicable Interest Period, to the extent possible, into a U.S. Base Rate Loan. SECTION 16.2 CHANGE IN LAW In the event of any change after the date hereof in any applicable law, rule, guideline, regulation, treaty or official directive (whether or not having the force of law) or in the interpretation or application thereof by any court or by any governmental agency, central bank or other authority or entity charged with the administration thereof in Canada or the United States of America which now or hereafter: 16.2.1 subjects the Bank to any tax (other than withholding tax) or changes the basis of taxation, or increases any existing tax, on payments of principal, interest, fees or other amounts payable by the Borrower to the Bank under this Agreement (except for taxes on the overall net income of the Bank); 16.2.2 imposes, modifies or deems applicable any reserve, special deposit or similar requirements against assets held by, or deposits in or for the account of or loans by or any other acquisition of funds by, an office of the Bank; or - 73 - 16.2.3 imposes on the Bank or expects there to be maintained by the Bank any capital adequacy or additional capital requirements in respect of any Loans or the Credit Facility hereunder, or any other condition with respect to this Agreement, and the result of any of the foregoing shall be to increase the cost to, or reduce the amount of principal, interest or other amount received or receivable by the Bank hereunder or its effective return hereunder in respect of making, maintaining or funding the Loan under the Credit Facility the Bank shall determine that amount of money which shall compensate the Bank for such increase in cost or reduction in income (herein referred to as "ADDITIONAL COMPENSATION"). Upon the Bank having determined that it is entitled to Additional Compensation in accordance with the provisions of this Section, the Bank shall, within 20 days, so notify the Borrower. The Borrower shall pay to the Bank within 10 Banking Days of the giving of such notice and receipt of the aforementioned certificate the Bank's Additional Compensation calculated to the date of such notification. The Bank shall be entitled to be paid such Additional Compensation from time to time to the extent that the provisions of this Section are then applicable. The Bank shall endeavor to limit the incidence of any such Additional Compensation, including seeking recovery for the account of the Borrower, by appealing any assessment at the expense of the Borrower upon the Borrower's request. The Bank shall eliminate such Additional Compensation should the cause of the same be rescinded, removed, repealed or withdrawn. SECTION 16.3 REPAYMENT OF AFFECTED LOAN Notwithstanding the provisions hereof, if the Bank gives the notice provided for in Section 16.2 with respect to any Loan (an "AFFECTED LOAN"), the Borrower may repay in full without penalty the full amount of the Affected Loan outstanding together with accrued and unpaid interest on the principal amount so prepaid up to the date of such prepayment, such Additional Compensation as may be applicable to the date of such payment and all costs, losses and expenses incurred by the Bank by reason of the liquidation or re-employment of deposits or other funds resulting from the repayment of such Affected Loan or any part thereof on other than the last day of the applicable Interest Period, and upon such payment being made that Bank's obligations to make such Affected Loans to the Borrower under this Agreement shall terminate. The Bank shall prepare a certificate of a duly authorized officer of the Bank setting forth the basis of calculation thereof and such certificate shall be delivered by the Bank to the Borrower. If pursuant to the provisions of this Section or any other provision hereof the Borrower become obliged to pay such Additional Compensation or such costs, losses or expenses, the Bank shall use its best efforts to minimize such Additional Compensation and such costs, losses or expenses. SECTION 16.4 ILLEGALITY If, in Canada or the United States of America the adoption of any applicable law, regulation, treaty or official directive (whether or not having the force of law) or any change therein or in the interpretation or application thereof by any court or by any governmental or other authority or central bank or comparable agency or any other entity charged with the interpretation or administration thereof or compliance by the Bank with any request or direction (whether or not having the force of law) of any such authority, central bank or comparable agency or entity, now or hereafter makes it unlawful or impossible for the Bank to make, fund or - 74 - maintain a Loan under the Credit Facility or to give effect to its obligations in respect of such Loan, the Bank may, by written notice thereof to the Borrower declare its obligations under this Agreement to be terminated whereupon the same shall forthwith terminate, and the Borrower shall repay within the time required by such law (or at the end of such longer period as the Bank at its discretion has agreed) the principal of the Loan together with accrued interest, such Additional Compensation as may be applicable to the date of such payment and all costs, losses and expenses incurred by the Bank by reason of the liquidation or re-employment of deposits or other funds resulting from the repayment of such Loan or any part thereof on other than the last day of the applicable Interest Period. The Bank shall prepare a certificate of a duly authorized officer of the Bank setting forth the basis of calculation thereof and such certificate shall be delivered by the Bank to the Borrower. If pursuant to the provisions of this Section or any other provision hereof the Borrower becomes obliged to pay such Additional Compensation or such costs, losses or expenses, the Bank shall use its best efforts to minimize such Additional Compensation and such costs, losses or expenses. If any such change shall only affect a portion of the Bank's obligations under this Agreement which is, in the opinion of the Bank severable from the remainder of this Agreement so that the remainder of this Agreement may be continued in full force and effect without otherwise affecting any of the obligations of the Bank or the Borrower hereunder, the Bank shall only declare its obligations under that portion so terminated. ARTICLE 17 COSTS, EXPENSES AND INDEMNIFICATION SECTION 17.1 COSTS AND EXPENSES The Borrower shall pay promptly upon receipt of written notice from the Bank all reasonable Out of pocket costs and expenses in connection with preparation, printing, execution and delivery of this Agreement and the other Documents to be delivered hereunder whether or not any Drawdown has been made hereunder, including, without limitation, the reasonable fees and reasonable out-of-pocket expenses of counsel to the Bank with respect thereto and with respect to advising the Bank as to its rights and responsibilities under this Agreement and the other documents to be delivered hereunder. The Borrower shall, in addition, pay promptly upon receipt of written notice from the Bank all out of pocket costs and expenses in connection with the Bank's annual collateral field audit expenses in connection with the Credit Facility. Except for ordinary expenses of the Bank relating to the day-to-day administration of this Agreement, the Borrower further agree to pay within 10 Banking Days of demand by Bank all reasonable costs and expenses in connection with the preparation or review of waivers, consents and amendments and questions of interpretation of this Agreement and in connection with the establishment of the validity and enforceability of this Agreement and the preservation or enforcement of rights of the Bank under this Agreement and other documents to be delivered hereunder, including, without limitation, all reasonable costs and expenses sustained by the Bank as a result of any failure by the Borrower to perform or observe their obligations contained in this Agreement and the other documents to be delivered hereunder. - 75 - SECTION 17.2 INDEMNIFICATION BY TUE BORROWER 17.2.1 In addition to any liability of the Borrower to the Bank under any other provision hereof, the Borrower and its Subsidiaries shall indemnify the Bank and hold the Bank harmless against any reasonable loss or expense incurred by the Bank to third parties as a result of any failure by the Borrower to fulfill any of its obligations hereunder including, without limitation, any cost or expense incurred by reason of the liquidation or re-employment in whole or in part of deposits or other funds required by the Bank to fund the Bankers' Acceptance or to fund or maintain any Loan as a result of the Borrower's failure to complete a Drawdown or to make any payment, repayment or prepayment on the date required hereunder or specified by it in any notice given hereunder; the Borrower's failure to provide for the payment to the Bank the full principal amount of the Bankers' Acceptance on its maturity date; the Borrower's failure to pay any other amount, including without limitation any interest or fee, due hereunder on its due date; the repayment or prepayment of a Libor Loan otherwise than on the last day of its Interest Period; the provision of funds for any outstanding Bankers' Acceptance before the maturity date of the Bankers' Acceptance; or the Borrower's failure to give any notice required to be given by it to the Bank hereunder. 17.2.2 The Borrower shall indemnify the Bank and each director, officer, employee and affiliate of the Bank (an "INDEMNIFIED PARTY") in connection with any expenses, losses, claims, damages or liabilities to which any such Indemnified Party may become subject insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or in any way relate or result from the actions of the Borrower or any of its Subsidiaries in connection with the use of Loans, and to reimburse such Indemnified Party for any legal or other expenses incurred in connection with the investigating, defending or participating in any such loss, claim, damage, liability or action. Notwithstanding the foregoing the Borrower shall have no obligation hereunder with respect to indemnified liabilities or expenses arising out of the negligence or willful misconduct of an indemnified party. 17.2.3 The Bank shall notify the Borrower of any claim to be made by the Bank pursuant to Articles 16 or 17 within a period of one year after the Bank first had knowledge of the facts giving rise to the claim and failing the giving of such notice within such time period the claim shall be extinguished and the Bank shall have no further claim thereon. SECTION 17.3 INTEREST ON UNPAID COSTS AND EXPENSES Subject always to the provisions of Section 15.3 hereof, unless the payment of interest is otherwise specifically provided for herein, where the Borrower fails to pay any amount required to be paid by it hereunder when due having received notice that such amount is due, the Borrower shall pay interest on such unpaid amount from the time such amount is due until paid at an annual rate equal to the Interest Rate then in effect in respect of Canadian Prime Rate Loans, - 76 - plus 2% per annum as regards amounts denominated in Canadian Dollars and at an annual rate equal to the Interest Rate then in effect in respect of U.S. Base Rate Loans, plus 2% per annum as regards amounts denominated in United States Dollars. ARTICLE 18 GENERAL SECTION 18.1 EXCHANGE AND CONFIDENTIALITY OF INFORMATION The Bank acknowledges the confidential nature of the financial, operational and other information and data provided and to be provided to them by the Borrower pursuant hereto (the "INFORMATION") and agree to use all reasonable efforts to prevent the disclosure thereof. Notwithstanding the foregoing, the Bank may disclose all or any part of the Information if, in its opinion, such disclosure is desirable or required in connection with any actual or threatened judicial, administrative or governmental proceeding or any investigation by any judicial authority, law enforcement agency or taxation authority, or any other process under which it is legally compelled or otherwise required to make to avoid standing liable for contempt or suffering other material censure or penalty, including any proceeding or investigation under or in respect of any rule or regulation promulgated by any banking regulatory authority, securities regulatory authority, stock exchange or securities commission, and it shall incur no liability in respect of any disclosure of information to any, or pursuant to any such requirement. The Bank agrees with the Borrower, however that it shall endeavor provide the Borrower with notice of any such anticipated disclosure of Information so that the Borrower may, at its sole expense, seek a protective order or other appropriate relief, or waive compliance with the provisions of this Section. If such protective order or other remedy is not obtained or the Borrower waives compliance with this Section, then the Bank will furnish only that portion of the Information which, in its sole opinion, it is legally required to furnish. Notwithstanding the foregoing, the Bank shall not be liable to the Borrower for any failure on the part of the Bank to give notice to the Borrower pursuant to this Section. SECTION 18.2 NOTICE The address for notices of each of the Parties shall be as follows: TO: Telvent Canada Ltd. Suite 200, 10333 Southport Road S.W. Calgary, Alberta, T2W 3X6 Attention: Steve Aasen and: Cameron Demcoe Telephone: (403) 212-2204 (Steve Aasen) (403) 212-22229 (Cameron Demcoe) Facsimile: (403) 212-2450 (Steve Aasen) (403) 212-2435 (Cameron Demcoe)

- 77 - TO: LaSalle Business Credit, a division Suite 1500 Maritime Life Tower, 79 Wellington of ABN AMRO Bank N.V., Canada Branch Street, P.O. Box 114, Toronto Dominion Centre Toronto Ontario M5K 1G8 Attention: Darcy Mack Telephone: (416) 367 7967 Facsimile: (416) 367 7943 WITH A COPY TO: 135 S. LaSalle Street Chicago, IL 60603 Attention: Amy Damitio LaSalle Bank National Association Telephone: (312) 904-2743 Facsimile: (312) 904-0870

Each of the Addressees may from time to time change their address for service herein by giving written notice to the other Addressee. Any notice, required or contemplated hereunder, may be served by personal service upon an officer or director of a Addressee or by telecopy, facsimile transmission or mailing the same, except during periods of actual or anticipated postal disruptions, by prepaid registered post in a properly addressed envelope addressed to the Addressee at its address for service hereunder, as the same may be amended from time to time in accordance herewith. Any notice given by service upon an officer or director of a Addressee shall be deemed to be given on the date of such service. Any notice given by mail shall be deemed to be given to and received by the addressee on the fifth Business Day after the mailing thereof. Any notice given by telecopy or facsimile transmission shall be deemed to be given to and received by the addressee on the next Business Day after the sending thereof. SECTION 18.3 GOVERNING LAW This Agreement shall be conclusively deemed to be a contract made under, and shall for all purposes be governed by and construed in accordance with the laws of the Province of Alberta and the federal laws of Canada therein applicable to contracts made in and to be wholly performed in such Province, without prejudice to or limitation of any other rights or remedies available under the laws of any jurisdiction where property or assets of the Borrower may be found. SECTION 18.4 CONSENT TO JURISDICTION 18.4.1 The Borrower hereby irrevocably submits to the jurisdiction of any Alberta court sitting in Calgary in any action or proceeding arising out of or relating to this Agreement and the Security Documents and hereby irrevocably agrees that all claims in respect of any such action or proceeding may be heard and determined in such Alberta court. The Borrower hereby consents to service upon it at its address set out in Section 18.2 of copies of the statement of claim and any process - 78 - issued in respect of any such action or proceeding. The Borrower agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. 18.4.2 Nothing in this Section shall affect the right of the Bank to serve legal process in any other manner permitted by law or affect the right of the Bank to bring any action or proceeding against the Borrower or its property in the courts of other jurisdictions. SECTION 18.5 JUDGMENT CURRENCY 18.5.1 If for the purpose of obtaining or enforcing judgment against the Borrower or any Subsidiary of the Borrower in any court in any jurisdiction, it becomes necessary to convert into any other currency (such other currency being hereinafter in this Section referred to as the "JUDGMENT CURRENCY") an amount due in Canadian Dollars or United States Dollars under this Agreement, the conversion shall be made at the rate of exchange prevailing on the Banking Day immediately preceding the date of actual payment of the amount due, in the case of any proceeding in the courts of any jurisdiction, including the Province of Alberta, if the courts thereof will give effect to such conversion being made on such date and otherwise on the date on which the judgment is given, (the date as of which such conversion is made pursuant to this Section being hereinafter in this Section referred to as the "JUDGMENT CONVERSION DATE"). 18.5.2 If, in the case of any proceeding in the court of any jurisdiction referred to in Section, there is a change in the rate of exchange prevailing between the Judgment Conversion Date and the date of actual payment of the amount due, the Borrower shall pay such additional amount (if any, but in any event not a lesser amount) as may be necessary to ensure that the amount paid in the Judgment Currency, when converted at the rate of exchange prevailing on the date of payment, will produce the amount of Canadian Dollars or United States Dollars, as the case may be, which could have been purchased with the amount of Judgment Currency stipulated in the judgment or judicial order at the rate of exchange prevailing on the Judgment Conversion Date. 18.5.3 Any amount due from the Borrower under the provisions of Section shall be due as a separate debt and shall not be affected by judgment being obtained for any other amounts due under or in respect of this Agreement. 18.5.4 The term "RATE OF EXCHANGE" in this Section means the noon rate of exchange for Canadian interbank transactions in Canadian Dollars or United States Dollars, as the case may be, in the Judgment Currency published by the Bank of Canada for the day in question, or if such rate is not so published by the Bank of Canada, such rate shall mean the simple average of the spot rates quoted for wholesale transactions by LaSalle Bank National Association, in Chicago, Illinois at - 79 - approximately noon (Toronto time) on that date in accordance with its normal practice. SECTION 18.6 BENEFIT OF THE AGREEMENT This Agreement shall enure to the benefit of and be binding upon the Borrower and the Bank, and their respective successors and assigns. SECTION 18.7 ASSIGNMENT AND NOVATION The Bank may not, without the prior written consent of the Borrower, assign their respective rights and obligations under this Agreement and novate the assignee into this Agreement, except that the Bank may, in consultation with the Borrower, at any time and from time to time, sell, assign, transfer or otherwise grant an interest in any Loan to a Subsidiary or Affiliate of the Bank. SECTION 18.8 SEVERABILITY Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall not invalidate the remaining provisions hereof and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. SECTION 18.9 WHOLE AGREEMENT This Agreement constitutes the whole and entire agreement between the parties hereto in connection with the borrowings contemplated herein and cancels and supersedes any prior agreements, undertakings, declarations, commitments, representations, written or oral, in respect thereof. SECTION 18.10 AMENDMENTS AND WAIVERS Except as otherwise specifically provided herein, any provision of this Agreement may be amended only by the Borrower and the Bank in writing and may be waived only if the Bank so agrees in writing. Any such waiver and any consent by the Bank under any provision of this Agreement may be given subject to any conditions thought fit by the Bank. Any waiver or consent shall be effective only in the instance and for the purpose for which it is given. SECTION 18.11 FURTHER ASSURANCES The Borrower, and the Bank shall promptly cure any default by it in the execution and delivery of this Agreement to which it is a party. The Borrower, at its expense, shall promptly execute and deliver to the Bank, upon request by the Bank, all such other and further documents, agreements, opinions, certificates and instruments in compliance with, or accomplishment of the covenants and agreements of the Borrower hereunder or more fully to - 80 - state the obligations of the Borrower as set out herein or to make any recording, file any notice or obtain any consent, all as may be reasonably necessary or appropriate in connection therewith. SECTION 18.12 BINDING EFFECT This Agreement shall become effective when it shall have been executed by the Borrower and the Bank and thereafter shall be binding upon and enure to the benefit of the Borrower and the Bank and their respective successors and assigns. The Borrower shall not assign its rights and obligations hereunder or any interest herein without the prior consent of all the Bank. SECTION 18.13 TIME OF TEE ESSENCE Time shall be of the essence of this Agreement. SECTION 18.14 COUNTERPARTS This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which taken together shall be deemed to constitute one and the same instrument, and it shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart. IN WITNESS WHEREOF the Parties hereto have duly executed this Agreement as of the date first above written. TELVENT CANADA LTD. LASALLE BUSINESS CREDIT, A DIVISION OF ABN AMRO BANK N.V., CANADA BRANCH /s/ Cameron Demcoe /s/ Keith Hughes - ------------------------------------ ------------------------------------- Cameron Demcoe Keith Hughes - ------------------------------------ ------------------------------------- (Name) (Name) Corporate Secretary Senior Vice President - ------------------------------------ ------------------------------------- (Title) (Title) /s/ Steve Aasen /s/ Darcy Mack - ------------------------------------ ------------------------------------- Steve Aasen Darcy Mack - ------------------------------------ ------------------------------------- (Name) (Name) Vice President Business Controls Vice President, Asset Based Lending - ------------------------------------ ------------------------------------- (Title) (Title) - 81 - EX-10.11 21 l07997exv10w11.txt FRAMEWORK AGREEMENT EXHIBIT 10.11 ABN - AMRO BANK Framework Agreement for the Granting of Banking Transactions to Abengoa - ----------------------------------------------------------------------- Abengoa, S.A. Avenida de la Buhaira, n(0)2 41018 Seville Madrid, July 17, 2002 Dear Sirs We are pleased to inform you that we have approved a Framework Agreement for the granting of banking transactions to Abengoa S.A (hereinafter "the Company") and the subsidiaries to be mentioned later (hereinafter "the Borrowers"), on the terms laid down herein. This Framework Agreement is discretional in character, so the transactions deriving therefrom will be established under the terms agreed between the parties for each individual transaction; there is no obligation or commitment for the parties to initiate any transaction. LIMIT. 50 million euros or the equivalent thereof in other currencies, as specified later. All balances taken up by each and every Borrower under each transaction will be added together for the calculation of this sum, plus the available balances of such credit or loan policies as may have been signed at each moment. VALIDITY: The Framework Agreement will remain in force until such time as either party informs the other of its intention to cancel it, without detriment to the validity of the contracts deriving therefrom and their guarantees. USE, AVAILABILITY AND SUBJECTION TO THE LAW: the transactions can be made available to the Company and/or the Borrowers by our branch and/or other branches or subsidiaries of the bank (hereinafter jointly termed as "Lending Branches" or, individually, "Lending Branch"). The term "sub-transaction" will be understood to be each banking transaction made available to each individual Borrower. The nature, terms and conditions of each type of sub-transaction that each Lending Branch makes available to a specific Borrower shall be mutually agreed between the Borrower and the Lending Branch in question. This condition shall apply in all the following cases: current account credits, letters of credit, stand-by letters of credit or any other type of guarantee or bonds, discount operations, foreign currency exchange rate contracts, coverage transactions or any other transactions that ABN AMRO Bank N.V. or its subsidiaries might make available to its clients. This document entails no commitment on our part or on the part of any of our Lending Branches to furnish you with any sub-transaction. The furnishing of any sub-transaction by any Lending Branch will be subject to the local availability of funds (both in local currency and foreign currency) and also the laws, regulations and applicable policies determined by each Lending Branch in each particular case. Furthermore, each sub-transaction will be subject to the applicable exchange control restrictions; it is the responsibility of the Borrower in question to obtain such permits and/or licenses as may be necessary for these affairs. 1. ESTABLISHMENT OF A SUB-TRANSACTION: Annex A details the initial Borrowers and the sub-transaction limits. Application must always be made in writing for the inclusion of any additional sub-transactions or any modifications to existing ones. Upon receipt of the application, the Bank will confirm its acceptance in writing, after having obtained the corresponding approval from the Risk Committees of ABN AMRO, where applicable. 2. PRICE. The price of each sub-transaction will be established by mutual agreement between the Borrower in question and the Lending Branch. In reply to your written application at the moment of designating a Borrower, the price structure agreed between the Borrower in question and the Lending Branch will be sent on to you for your approval before the sub-transaction goes ahead. 3. EXCHANGE RATE FLUCTUATIONS: The Framework Agreement and each individual sub-transaction can be used in one or more convertible currencies. If, due to the fluctuation of exchange rates, the sum of the debts of the Borrowers with the Lending Branches exceeds the maximum limit specified above (calculated by us at any given time, based on our cash exchange rates for each currency concerned), we will inform you of this circumstance, and you will be obligated to adopt the measures necessary to reduce the aggregate debt of all the Borrowers with the Lending Branches in order to adjust such to the Limit specified herein. You commit yourselves to making this reduction as soon as possible and in any event no later than five days following receipt of our communication. 4. DOCUMENTATION: Each Lending Branch shall decide on the documentation it requires for each Borrower, which shall include, without limitation, evidence of the Borrower's capacity to bind itself in the transaction and the capacity of the authorized representatives. Each Borrower shall facilitate to each Lending Branch concerned those financial statements that the latter reasonably requires. Prior to the establishing of each sub-transaction with a Borrower, ABN AMRO must receive the required guaranties, if appropriate in accordance with Annex A, in the form shown in Annexes B and C (with such amendments that the Bank or the Lending Branch may reasonably require). 5. NOTIFICATIONS: Any notification and communication relating to the Framework Agreement must be sent to the relevant party to the address set forth below: THE COMPANY: ABENGOA, S.A. Avda. de la Buhaira, no. 2 41018 Seville Attn.: Mr. Jesus Garcia Quilez Tel: 954 93 71 11 Fax: 954 93 70 15 ABN AMRO ABN AMRO BANK N.V., SUCURSAL EN ESPANA, C/Ortega y Gasset, 29- 5(a)planta 28006 Madrid Attn.: Emilio Gomez Tel: 91 423 69 47 Fax: 91 423 69 48 6. APPLICABLE LAW: The Framework Agreement and the Company's obligations shall be governed by Spanish Law. Each sub-transaction shall be governed by the law of the jurisdiction to which the relevant Lending Branch is subject, unless there is express agreement between the Lending Branch and the Borrower concerned. Best regards, ABN AMRO Bank, N.V. Sucursal en Espana /s/ Juan Martinez Aguilar /s/ Ignacio Madurga Garcia-Alegre - --------------------------------- ------------------------------------- Signed: Juan Martinez Aguilar Signed: Ignacio Madurga Garcia-Alegre Date: July 17, 2002 Date: July 17, 2002 Accepted, agreed: Abengoa, S.A. /s/ Felipe Benjumea Llorente - --------------------------------- Signed: Felipe Benjumea Llorente Date: July 17, 2002 ABN-AMRO ANNEX A
INITIAL SUB-TRANSACTIONS - ------------------------------------------------------------------------------------------------------------ BORROWERS LIMIT TRANSACTIONS GUARANTORS - ------------------------------------------------------------------------------------------------------------ 1. Abengoa, S.A. 20 million (Euro) Coverage of exchange rate None risks/ interest rate or others up to 20 million (Euro) Current Account Credit up to 5 million (Euro) - ------------------------------------------------------------------------------------------------------------ 2. Instalaciones Inabensa, S.A. 15 million (Euro) 'Avals' and Bank Each of the Borrowers Abener Energia, Ingenieria y Guarantees, coverage, contained in this Construccion Industrial, S.A. letters of credit, Import Point 2 jointly and Abentel Telecomunicaciones, S.A. Financing, discount, severally Current Account Credit (up to 2 million (Euro)) - ------------------------------------------------------------------------------------------------------------ 3. S.A. de Instalaciones de 30 million (Euro) `Avals' and Bank Guarantees, Each of the Borrowers Control (Sainco) coverage, letters of credit, contained in this Sainco Trafico, S.A. Import Financing, discount, point 3 jointly and Sainsel Sistemas Navales, S.A. Current Account Credit severally Telvent Interactiva, S.A. (up to 3 million (Euro)) Carrier House, S.A. - ------------------------------------------------------------------------------------------------------------
N.B.: The amount in the operations of coverage in order to estimate the risk of balancing item (riesgo de contrapartida) at any given time shall be calculated in accordance with ABN AMRO's internal procedures. ANNEX B ------- GUARANTEE --------- Pursuant to the Framework Agreement for the granting of banking transactions to Abengoa Group, dated July 17, 2002 (the "Framework Agreement") signed by Abengoa, S.A. and ABN AMRO BANK N.V., Sucursal en Espana (the "Bank"), the Bank and any other branches, offices or subsidiaries of ABN AMRO BANK N.V. can at any moment grant banking transactions in favor of Instalaciones Inabensa, S.A., Abener Energia, Ingenieria y Construccion Industrial, S.A. and Abentel Telecomunicaciones , S.A. (individually designated as a "Borrower" and jointly as the "Borrowers"). The undersigned, Instalaciones Inabensa, S.A., Abener Energia, Ingenieria y Construccion Industrial, S.A. and Abentel Telecomunicaciones, S.A (individually designated as a "Guarantor" and jointly as the "Guarantors"), all of them Borrowers and Guarantors, have been described in Annex A of the Framework Agreement or designated as such in subsequent amendments thereto. Furthermore, and in due accordance with the provisions laid down in the Framework Agreement, each and every one of the obligations of each Borrower with the Bank and with any Branch, office or subsidiary of ABN AMRO BANK, N.V. (the Bank and each Branch, Office or subsidiary, hereinafter "Lending Branch") under said Agreement has to be jointly and severally guaranteed by each and every Guarantor together with each Borrower. By virtue whereof: 1. The Guarantors, expressly waiving the benefits of priority, division and excussion, hereby guarantee jointly and severally and with each one of the Borrowers the total and punctual payment to each Lending Branch of all obligations of each Borrower with each Lending Branch, doing so irrevocably and unconditionally. This applies equally to existing transactions and such as may be formalized in the future and to all the following types of obligations: principal, interest, commission payments, redemption of debentures or any other sums deriving from any of the sub-transactions of the Framework Agreement, including any transaction effected under the aegis of an ISDA contract (hereinafter, each and every one of them to be designated as the "Obligations") and until such time as the Obligations guaranteed have been completely paid. The books and registers of the particular Lending Branch in each case, recording the sum of the Obligations of each Borrower, will certify the Borrower's Obligations guaranteed hereunder. The liability of each Guarantor under this guarantee will be joint and several with each other and with each Borrower. It will be absolute and unconditional regardless of any defect of authenticity, validity, legality or enforceability of any sub-transaction, document, agreement or instrument relating to the obligations or any assignment thereof or the occurrence of a "Country Risk Situation" or "New Currency Situation" (as defined later) so that each Guarantor binds itself jointly and severally to compensate each Lending Branch for any loss, cost or expense caused as a result of the aforementioned defect of authenticity, validity, legality or enforceability of any sub-transaction, document, agreement or instrument relative to the obligations or any assignment thereof. This guarantee is open-ended in term and will remain in force and oblige the Guarantors and their successors and assignees. The Guarantor's liability hereunder will never exceed the sum of thirty million euros (30,000,000 euros) or the equivalent thereof in other currencies at the exchange rate laid down by the Bank, plus accrued interest and any other charges, including, without limitation, monetary correction, where applicable, and all mentioned costs and expenses. For the purposes of this document: "Country Risk Situation" means the following: a) the adoption of any law, rule or regulation or action, or lack of action (de jure or de facto) by any authority in the country of any Borrower that (i) modifies the Borrower's obligations under the sub-transaction of said Borrower, (ii), modifies the Borrower's tenure or control over its business and assets or (iii) prevents or restricts the conversion or movement of the agreed currency, or b) the occurrence of grounds of force majeure or the like that directly or indirectly prevents or restricts the payment or transfer in the agreed currency of any sum due under the sub-transaction in question into the account designated by the Lending Branch in question or the free availability of said payments by the Lending Branch in question. "New Monetary Credit Situation" means any direct or indirect increase of a Lending Branch's risk with the Borrower in question as a result of any law, action or requirement by any authority (de jure or de facto). 2. ENCUMBRANCE OF ASSETS. The joint and several guarantors hereby guarantee the sound performance of this contract with all their present or future assets, especially those existing in their name in a Lending Branch. Should any or all of the Guarantors breach their payment obligations, the Lending Branch is hereby irrevocably authorized to offset pending payments against any cash deposits and all types of credit rights, bills or securities that might be deposited in the Lending Branch, as far as they may suffice for meeting the outstanding amounts. 3. INSOLVENCY OF THE BORROWER: This Guarantee shall remain in force if at any time the payment or performance of any or all of the obligations of any Borrower is terminated or the amount thereof is reduced as a consequence of insolvency, suspension of payments, bankruptcy or reorganization of the Borrower concerned. If by action of law the payment must be repaid or returned by the Lending Branch concerned, the Guarantee shall come into force as if such payment had not been made. 4. EXHAUSTING OF OTHER RESOURCES: Each Guarantor unconditionally waives any right to require that a Lending Branch (a) claim against the Borrower or any other debtor in relation to the Obligations, (b) claim against or exhaust any direct or indirect guarantee that exists that guarantees the Obligations or (c) attempt any other action to which the Lending Branch may have recourse. Absence or delay on the part of any Lending Branch in the exercise of its rights, faculties or privileges under this agreement does not signify a waiver thereof nor does the individual or partial exercise of any of them exclude or prevent the exercise of the remaining rights, faculties or privileges. 5. WAIVER OF NOTIFICATIONS: For all notifications, to which Article 573 of the Spanish Civil Procedure Law refers, the Guarantor or Guarantors indicate what has been already established, and accept the competent jurisdiction established by clause 8 of this agreement. The addresses indicated are deemed effective until such time as the Lending Branch is expressly notified in writing of any change. Pursuant to the provisions of Article 573 of the Spanish Civil Procedure Law on notifications, it is expressly agreed that such notifications can be given by any means, including telefax or telegram. 6. AMENDMENTS. No amendment or waiver of any provision of this Guarantee shall be effective without the consent in writing and the signature of the Bank. 7. PAYMENT OF EXPENSES: The Guarantor agrees to pay all legal fees reasonably incurred, and likewise other costs and expenses which the Lending Branch may reasonably incur in the execution of this Guarantee. 8. APPLICABLE LAW AND COURTS: This Guarantee and the rights and obligations of the Guarantor, the Bank and each Lending Branch shall be subject to Spanish law and any question derived therefrom shall be subject to the jurisdiction of the courts of the city of Madrid, each and every one of the Guarantors waiving any other forum that may correspond to them. 9. SUBROGATION. The Guarantor may not request repayment of any of the loans it holds vis-a-vis any Borrower, granted under the Framework Agreement, until all the obligations of this Borrower vis-a-vis any Lending Branch have been satisfied in full Seville, October 31, 2002 THE GUARANTORS Instalaciones Inabensa, S.A. Abener Energia, Ingenieria y Construccion Industrial, S.A. Abentel Telecomunicaciones, S.A. Accepted by ABN Amro Bank, N.V. ANNEX C ------- GUARANTEE --------- Pursuant to the Framework Agreement for the granting of banking transactions to Abengoa Group, dated July 17, 2002 (the "Framework Agreement"), as amended on January 13, 2003 and signed by Abengoa, S.A. and ABN AMRO BANK N.V., Sucursal en Espana (the "Bank"), the Bank and any other branches, offices or subsidiaries of ABN AMRO BANK N.V. can at any moment grant banking transactions in favor of S.A. Instalaciones de Control (Sainco), Sainco Trafico S.A., Telvent Interactiva, S.A., Telvent Sistemas y Redes, S.A., Sainsel Sistemas Navales, S.A. and Carrierhouse, S.A. (individually designated as a "Borrower" and jointly as the "Borrowers"). The undersigned, S.A. Instalaciones de Control (Sainco), Sainco Trafico S.A., Telvent Interactiva, S.A., Telvent Sistemas y Redes, S.A and Carrierhouse, S.A (individually designated as a "Guarantor" and jointly as the "Guarantors"), all of them Borrowers and Guarantors, have been described in Annex A of the Framework Agreement or designated as such in subsequent amendments thereto. Furthermore, and in due accordance with the provisions laid down in the Framework Agreement, each and every one of the obligations of each Borrower with the Bank and with any Branch, office or subsidiary of ABN AMRO BANK, N.V. (the Bank and each Branch, Office or subsidiary, hereinafter "Lending Branch") under said Agreement has to be jointly and severally guaranteed by each and every Guarantor together with each Borrower. By virtue whereof: 1. The Guarantors, expressly waiving the benefits of priority, division and excussion, hereby guarantee jointly and severally and with each one of the Borrowers the total and punctual payment to each Lending Branch of all obligations of each Borrower with each Lending Branch, doing so irrevocably and unconditionally. This applies equally to existing transactions and such as may be formalized in the future and to all the following types of obligations: principal, interest, commission payments, redemption of debentures or any other sums deriving from any of the sub-transactions of the Framework Agreement, including any transaction effected under the aegis of an ISDA contract (hereinafter, each and every one of them to be designated as the "Obligations") and until such time as the Obligations guaranteed have been completely paid. The books and registers of the particular Lending Branch in each case, recording the sum of the Obligations of each Borrower, will certify the Borrower's Obligations guaranteed hereunder. The liability of each Guarantor under this guarantee will be joint and several with each other and with each Borrower. It will be absolute and unconditional regardless of any defect of authenticity, validity, legality or enforceability of any sub-transaction, document, agreement or instrument relating to the obligations or any assignment thereof or the occurrence of a "Country Risk Situation" or "New Currency Situation" (as defined later) so that each Guarantor binds itself jointly and severally to compensate each Lending Branch for any loss, cost or expense caused as a result of the aforementioned defect of authenticity, validity, legality or enforceability of any sub-transaction, document, agreement or instrument relative to the obligations or any assignment thereof. This guarantee is open-ended in term and will remain in force and oblige the Guarantors and their successors and assignees. The Guarantor's liability hereunder will never exceed the sum of thirty million euros (30,000,000 euros) or the equivalent thereof in other currencies at the exchange rate laid down by the Bank, plus accrued interest and any other charges, including, without limitation, monetary correction, where applicable, and all mentioned costs and expenses. For the purposes of this document: "Country Risk Situation" means the following: a) the adoption of any law, rule or regulation or action, or lack of action (de jure or de facto) by any authority in the country of any Borrower that (i) modifies the Borrower's obligations under the sub-transaction of said Borrower, (ii), modifies the Borrower's tenure or control over its business and assets or (iii) prevents or restricts the conversion or movement of the agreed currency, or b) the occurrence of grounds of force majeure or the like that directly or indirectly prevents or restricts the payment or transfer in the agreed currency of any sum due under the sub-transaction in question into the account designated by the Lending Branch in question or the free availability of said payments by the Lending Branch in question. "New Monetary Credit Situation" means any direct or indirect increase of a Lending Branch's risk with the Borrower in question as a result of any law, action or requirement by any authority (de jure or de facto). 2. ENCUMBRANCE OF ASSETS. The joint and several guarantors hereby guarantee the sound performance of this contract with all their present or future assets, especially those existing in their name in a Lending Branch. Should any or all of the Guarantors breach their payment obligations, the Lending Branch is hereby irrevocably authorized to offset pending payments against any cash deposits and all types of credit rights, bills or securities that might be deposited in the Lending Branch, as far as they may suffice for meeting the outstanding amounts. 3. INSOLVENCY OF THE BORROWER: This Guarantee shall remain in force if at any time the payment or performance of any or all of the obligations of any Borrower is terminated or the amount thereof is reduced as a consequence of insolvency, suspension of payments, bankruptcy or reorganization of the Borrower concerned. If by action of law the payment must be repaid or returned by the Lending Branch concerned, the Guarantee shall come into force as if such payment had not been made. 4. EXHAUSTING OF OTHER RESOURCES: Each Guarantor unconditionally waives any right to require that a Lending Branch (a) claim against the Borrower or any other debtor in relation to the Obligations, (b) claim against or exhaust any direct or indirect guarantee that exists that guarantees the Obligations or (c) attempt any other action to which the Lending Branch may have recourse. Absence or delay on the part of any Lending Branch in the exercise of its rights, faculties or privileges under this agreement does not signify a waiver thereof nor does the individual or partial exercise of any of them exclude or prevent the exercise of the remaining rights, faculties or privileges. 5. WAIVER OF NOTIFICATIONS: For all notifications, to which Article 573 of the Spanish Civil Procedure Law refers, the Guarantor or Guarantors indicate what has been already established, and accept the competent jurisdiction established by clause 8 of this agreement. The addresses indicated are deemed effective until such time as the Lending Branch is expressly notified in writing of any change. Pursuant to the provisions of Article 573 of the Spanish Civil Procedure Law on notifications, it is expressly agreed that such notifications can be given by any means, including telefax or telegram. 6. AMENDMENTS. No amendment or waiver of any provision of this Guarantee shall be effective without the consent in writing and the signature of the Bank. 7. PAYMENT OF EXPENSES: The Guarantor agrees to pay all legal fees reasonably incurred, and likewise other costs and expenses which the Lending Branch may reasonably incur in the execution of this Guarantee. 8. APPLICABLE LAW AND COURTS: This Guarantee and the rights and obligations of the Guarantor, the Bank and each Lending Branch shall be subject to Spanish law and any question derived therefrom shall be subject to the jurisdiction of the courts of the city of Madrid, each and every one of the Guarantors waiving any other forum that may correspond to them. 9. SUBROGATION. The Guarantor may not request repayment of any of the loans it holds vis-a-vis any Borrower, granted under the Framework Agreement, until all the obligations of this Borrower vis-a-vis any Lending Branch have been satisfied in full Madrid, January 13, 2003 THE GUARANTORS S.A. Instalaciones de Control (Sainco) Sainco Trafico, S.A. Telvent Interactiva, S.A. Carrierhouse, S.A. Telvent Sistemas y Redes, S.A. Accepted by ABN Amro Bank, N.V. EX-10.12 22 l07997exv10w12.txt CONTRACT FOR SERVICES EXHIBIT 10.12 Contract for Services Telvent- GIRH TELVENT - GIRH CONTRACT FOR SERVICES MADRID, JANUARY 1, 2004 Contract for Services Telvent- GIRH In Madrid, on January 1, 2004 APPEARING On the one hand, Mr. Jose Montoya Perez, of legal age, with National Identity Document number 27179205, acting for and on behalf of Telvent Trafico y Transporte, S.A., as accredited by sufficient power of attorney for these proceedings granted before the Notary Public Mr. Juan Alvarez-Sala Walther, dated March 3, 2004, at number 471 in order of his protocol of the year 2004, a Company recorded in the Madrid Mercantile Register, sheet M-68400, first entry, volume 825 of Companies, with Corporate Tax Identification code A- 78107349. Mr. Manuel Sanchez Ortega, of legal age, with National Identity Document number 02601273-L, acting for and on behalf of Telvent Housing, S.A., as accredited by sufficient power of attorney for these proceedings granted before the Notary Public Mr. Carlos Perez Baudin, dated April 12, 2003, at Number 1201 in order of his protocol of the year 2002; a Company recorded in the Madrid Mercantile Register, sheet M-227370, folio (page) 81, volume 13891 of Companies, with Corporate Tax Identification code A- 82232448. Mr. Manuel Sanchez Ortega, of legal age, with National Identity Document number 02601273-L, acting for and on behalf of Telvent Servicios Compartidos, S.A., as accredited by sufficient power of attorney for these proceedings granted before the Notary Public Mr. Juan Alvarez-Sala Walther, dated December 23, 2003, at Number 3483 in order of his protocol of the year 2003; a Company recorded in the Madrid Mercantile Register, sheet M-286179, first entry, folio 109, volume 16752 of Companies, with Corporate Tax Identification code A- 83048553 Mr. Manuel Sanchez Ortega, of legal age, with National Identity Document number 02601273-L, acting for and on behalf of Telvent Interactiva, S.A., as accredited by sufficient power of attorney for these proceedings granted before the Notary Public Mr. Carlos Perez Baudin, dated April 26, 2001, at number 1498 in order of his protocol of the year 2001; a Company recorded in the Seville Mercantile Register, sheet SE-41024, 1st entry, folio 38, volume 3096 of Companies, with Corporate Tax Identification code A-91060178. Mr. Manuel Sanchez Ortega, of legal age, with National Identity Document number 02601273-L, acting for and on behalf of Telvent Outsourcing, S.A., as accredited by sufficient power of attorney for these proceedings granted before the Notary Public Mr. Carlos Perez Baudin, dated September 26, 2002, at number 2990 in order of his protocol of the year 2002; a Company recorded in the Seville Mercantile Register, sheet SE-20857, folio 213, volume 2062 of Companies, with Corporate Tax Identification code A-41696097. Mr. Manuel Sanchez Ortega, of legal age, with National Identity Document number 02601273-L, acting for and on behalf of Sainsel, Sistemas Navales, S.A., as accredited 2 Contract for Services Telvent- GIRH by sufficient power of attorney for these proceedings granted before the Notary Public Mr. Carlos Perez Baudin, dated May 5, 2003, at number 1422 in order of his protocol of the year 2003; a Company recorded in the Seville Mercantile Register, sheet SE-5201, folio 191, volume 1455 of Companies, with Corporate Tax Identification code A-41/513581. Mr. Manuel Sanchez Ortega, of legal age, with National Identity Document number 02601273-L, acting for and on behalf of Telvent Energia y Medio Ambiente, S.A., as accredited by sufficient power of attorney for these proceedings granted before the Notary Public Mr. Carlos Perez Baudin, dated February 13, 2002, at number 467 in order of his protocol of the year 2002; a Company recorded in the Madrid Mercantile Register, sheet M-7367, 1st entry, folio 1, with Corporate Tax Identification code A-28114981. And on the other hand, Mr. Alvaro Manuel Polo Guerrero, of legal age, with National Identity Document no. 28720078-R, appearing for and on behalf of Gestion Integral de Recursos Humanos, S.A. (hereinafter "GIRH"), as evidenced by the sufficient power of attorney for these proceedings granted before the Notary Public Mr. Manuel Aguilar Garcia, of Seville, at number 2045 in order of his protocol of the year 2002; a Company recorded in the Seville Mercantile Register, sheet SE-50384 , folio 157 , Companies volume 3577 , with Corporate Tax Identification code. A- 91241703. The parties mutually acknowledge sufficient legal standing and capacity to act and be bound as mentioned above, and state: RECITALS I. GIRH is a company dedicated to carrying out all kinds of activities for the management of employees, counseling on policies for professional development of employees and implementation thereof. II. Telvent Housing, S.A., Telvent Servicios Compartidos, S.A., Telvent Outsourcing, S.A., Telvent Interactiva, S.A., Sainsel, Sistemas Navales, S.A., Telvent Energia y Medio Ambiente, S.A., and Telvent Trafico y Transportes, S.A., and likewise all the subsidiary companies thereof, shall be deemed, hereinafter, for the purposes of this contract, as Telvent. III. Telvent is the Information Technology subsidiary of Abengoa. IV. Both Telvent and GIRH wish to establish by means of this Contract for Services the legal framework that shall govern the activities that Telvent wishes to contract from GIRH. 3 Contract for Services Telvent- GIRH On the basis of the foregoing, the parties enter into this Contract for Services, hereinafter the "Contract", on the basis of the following: CLAUSES 1.- PURPOSE Telvent shall contract the services of GIRH in order to carry out the activities of management of its employees, counseling on policies for professional development of employees and implementation thereof. GIRH shall offer Telvent an integrated and standardized management of its human resources. 2.-SCOPE AND DURATION OF THE WORK 2.1. Under this contract, GIRH offers Telvent the following services: - - Personnel Administration: administrative management of human resources, complying with legislation in relation thereto current at any given time and at any particular place. - - Selection: finding and incentivizing the best professionals in the market in relation to time and cost, incorporating those persons with the qualifications that are most appropriate for each job profile. - - Training: increasing the performance of Telvent personnel in order to attain business targets, by means of development of the skills (technical, generic and specific-technical) defined for each post. - - Development: to manage and optimize the Integral Human Resource Management model. - - Labor Relations: interrelation between each business and its employees, their unit representatives, trade union organizations, employers' organizations, establishing channels of communication and managing disputes, whether individual or collective, and likewise to counsel the executives and to direct and coordinate actions in relation to legal and administrative bodies. - - Risk prevention, Quality and the Environment: promoting safety and health at work for Telvent employees, by means of the integration of preventative measures as part of all activities and decisions, training and informing employees of general and specific risks of each activity. The parties may amend this Contract at any time by mutual agreement, even where its term of duration has not yet expired. 3. STRUCTURE AND FUNCTIONS 4 Contract for Services Telvent-GIRH The functions of coordination of the activities established in this present Contract shall be carried out by Mr. Javier Ramos Robledo, who shall to this effect be the representative of Telvent. In turn, Mr. Juan Bermudez Molina shall be the representative of GIRH in the performance of this Contract. 4.- COMMERCIAL CONDITIONS A. Price. The annual price of the contract is established at 1,233,249.22 euros, being billed on a quarterly basis in advance, with the following allocation per Company: Telvent Servicios Compartidos, S.A. 52,649.22 Telvent Housing, S.A. 55,500.00 Telvent Outsourcing, S.A. 45,800.00 Telvent Interactiva, S.A. 59,700.00 Sainsel, Sistemas Navales, S.A. 72,600.00 Telvent Energia y Medio Ambiente, S.A. 349,700.00 Telvent Trafico y Transportes, S.A. 597,300.00 This price includes the services provided to the companies, and likewise the respective subsidiaries of each of them. The duration of this present contract shall be one year from the date of signing thereof. The term of duration may be extended where both parties expressly declare it in writing, 60 days prior to the termination of the contract or of any of its extensions. The amount of this present contract shall be paid in euros 180 days from the date the invoices are approved and by means of bank transfer to the account indicated by GIRH for this purpose. B. Travel Expenses Telvent shall cover the travel expenses of personnel, for return fares in Spain and to other countries as required by the service. Telvent shall cover by means of reimbursement all expenses generated during the trips, such as airport tax, taxis, meals etc. C. Liability. Under no circumstances shall either of the parties be liable for indirect damages, lucrum cessans or loss of profit as a consequence of the formalizing/executing of this Contract or of the work derived therefrom. 5. OBLIGATIONS AND RESPONSIBILITIES OF GIRH A. Business liability. The employees of GIRH shall carry out entirely under GIRH's own legal and business responsibility each of the tasks entrusted by Telvent and carried out pursuant to this 5 Contract for Services Telvent- GIRH Contract and the Contracts associated therewith, and likewise GIRH commits itself to comply with all obligations imposed by Spanish legislation or by legislation of countries where it provides its services in relation to the above-mentioned employees. It shall be responsible for payment of penalties, settlements, fines and surcharges imposed for infringement of legal provisions and regulations applicable to the work carried out by them. In particular, it shall comply with whatever obligations are incumbent upon it in its capacity as employer, and in relation to the employees, due to tax, labor and occupational health and risk prevention legislation applicable in the countries in which it provides its services. The personnel of GIRH allocated to the tasks shall be registered in the social security system and shall be up to date in the relevant contributions and likewise in payment of payrolls. GIRH takes responsibility for the persons allocated to the service in relation to any occupational accident that they may suffer during the provision of the service in the countries designated as origin or country of relocation, assuming full legal responsibility for these persons, pursuant to current laws in the place where they are located. B. Insurance. GIRH agrees to take out insurance policies to cover losses and damages that may arise from the responsibilities taken on, and likewise death and accident insurance for its employees. C. Assignment The parties shall not fully or partially assign the rights and/or obligations arising from this present instrument, unless with prior and written authorization from the other party. Notwithstanding the above, the parties may assign, in full or in part, the payment obligations arising under this Contract. 6. CONFIDENTIALITY The parties agreed to treat as confidential all information, categorized by the parties as such, that they exchange due to the relationship established by means of this document or information that arises because of it. Therefore, neither of the parties may make such information public without the prior authorization in writing from the other party. The parties may not use the information arising as a result of this document for any purpose that is not established herein. The Recipient of the information is not obligated to keep confidential the Confidential Information that the Recipient can demonstrate with documentary evidence (i) is public or can be made public without infringing this Contract (ii) that publication thereof has been approved with the written authorization of the Issuer (iii) has been obtained lawfully from other party or from a party that is not subject to the confidentiality obligation (iv) has been revealed to a third party by the Issuer without confidentiality thereof being established (v) was known by the Recipient prior to receiving it (vi) has been developed independently by the Recipient, without using the Confidential Information of the Issuer and without breaching this Contract or (vii) where an authority with competent jurisdiction or a valid court order says so, provided that the Recipient 6 Contract for Services Telvent- GIRH has notified the Issuer in advance in writing of such requirement and provided that it cooperates with the Issuer to ensure that the publication is treated confidentially. The parties must give to their managers and/or employees and/or subsidiaries the directions and instructions they deem appropriate and convenient for the purposes of maintaining the secret, confidential and restricted character of the information. All the Confidential Information from this document shall be the exclusive property of the source producing it, unless the Parties agree to the contrary in advance and in writing. The application of this agreement does not grant to the Addressee more rights and nor does impose upon it more obligations than those established expressly in this Contract. Under no circumstances shall it be deemed that intellectual property rights or any other kind of right relating to the Confidential Information provided by the Source is granted to the Addressee. The parties agree to keep the information confidential for a period of one year following the end of this Contract. 7. SUSPENSION AND TERMINATION The services being the subject matter of this Contract can be suspended and/or terminated, without liability of any kind for the parties due to any of the following grounds: - - Mutual agreement between the contracting parties - - Serious breach of any of the obligations contracted by either the parties under this Contracts, which shall entitle the other party to terminate the contract, all rights and obligations corresponding to the subject matter of the contract being automatically null and void - - Force majeure events - - Any other reason that makes performance of the purpose of the Contract unviable. 8. LEGISLATION AND JURISDICTION This Contract is governed by Spanish legislation. The parties expressly agree that in order to resolve any differences that may arise in relation to this Contract they shall be submitted to arbitration of the Madrid Chamber of Commerce. The arbitration shall be resolved at law pursuant to Law 60/2003, of December 23. The arbitration finding shall be binding on the Parties. Each Party shall appoint an arbitrator and a third arbitrator shall be appointed by mutual agreement by the two prior arbitrators, and shall act as chairman of the court thus constituted. The arbitration finding shall be issued within a maximum period of two months following acceptance of the role by the chairman of the court. The fees of the arbitrators shall be paid for by the party whose arguments are not upheld. If they are upheld partially, they shall be paid in the proportion in which each 7 Contract for Services Telvent- GIRH party's arguments have been not upheld. In the event that the decision of the arbitrators is different from the arguments of each of the parties, the fees shall be paid for by the parties in equal parts. In any event, for the judicial formalizing of the arbitration and other purposes, and expressly waiving any forum that may correspond to them, the Parties submit to the courts of the capital city of Madrid and to Spanish legislation. 9. MISCELLANEOUS It is agreed that the non-validity or unlawfulness of one or more provisions of this Contract shall not affect the effectiveness of the rest of the provisions. Any publication of notices, public announcements, publicity or advertisements that any of the parties proposes to publish and that affects the other party must be subject to the prior written approval of the other party. This Contract contains the full understanding between the parties and replaces any other contract, understanding or agreement, whether in advance or in tandem, written or verbal, with respect to the subject matter of this document. All contracts signed between the parties within the framework of this Contract must respect each and every one of the clauses of this document and its annexes. The above having been agreed, the Parties hereby sign and grant this document through their duly authorized representatives, in two counterparts making one sole agreement, on January 1, 2004. For Telvent For GIRH /s/ Manuel Sanchez Ortega /s/ Alvaro Manuel Polo Guerrero - ------------------------------- ------------------------------------------ Name: Mr. Manuel Sanchez Ortega Name: Mr. Alvaro Manuel Polo Guerrero Gestion Integral de Recursos Humanos For Telvent /s/ Jose Montoya Perez Name: Mr. Jose Montoya Perez 8 EX-21.1 23 l07997exv21w1.txt SUBSIDIARIES . . . Exhibit 21.1
COUNTRY OF NAME OF SUBSIDIARY ORGANIZATION - ------------------ ------------ Telvent Energia y Medio Ambiente, S.A. Spain Telvent Trafico y Transporte, S.A. Spain Telvent Brasil S.A. Brazil Telvent Mexico, S.A. de C.V. Mexico Telvent Canada Ltd. Canada Telvent U.S.A., Inc. U.S.A. Telvent Interactiva, S.A. Spain Telvent Outsourcing, S.A. Spain Telvent Housing, S.A. Spain
EX-23.1 24 l07997exv23w1.txt CONSENT OF PRICEWATERHOUSECOOPERS AUDITORES, S.L. EXHIBIT 23.1 [PRICEWATERHOUSECOOPERS LOGO] ________________________________________________________________________________ Paseo de la Castellana, 43 28046 Madrid Tel. +34 915 684 400 Fax +34 913 083 566 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We hereby consent to the use in this Registration Statement on Form F-1 of our report dated May 10, 2004 relating to the financial statements and financial statement schedule I, of Telvent GIT, S.A. which appear in such Registration Statement. We also consent to the reference to us under the heading "Experts" in such Registration Statement. PricewaterhouseCoopers Auditores, S.L. /s/ PricewaterhouseCoopers Madrid, Spain September 30, 2004 PricewaterhouseCoopers Auditors, S.L. - R.M. Madrid, hoja 87.250-1, folio 75, tomo 9.267, libro 8.054, seccion 3a inscrita en el R.O.A.C. con el numero S0242 - - CIF: B-79031290 EX-23.2 25 l07997exv23w2.txt CONSENT OF PRICEWATERHOUSECOOPERS LLP EXHIBIT 23.2 [PRICEWATERHOUSECOOPERS LOGO] PricewaterhouseCoopers LLP Chartered Accountants 111 5th Avenue SW, Suite 3100 Calgary, Alberta Canada T2P 5L3 Telephone +1 (403) 509 7500 Facsimile +1 (403) 781 1825 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We hereby consent to the use in this Registration Statement on Form F-1 of our report dated April 16, 2004 relating to the combined financial statements of Metso Automation SCADA Solutions Ltd. and Metso Automation SCADA Solutions, Inc., which appear in such Registration Statement. We also consent to the reference to us under the heading "Experts" in such Registration Statement. /s/ PricewaterhouseCoopers LLP CHARTERED ACCOUNTANTS Calgary, Alberta, Canada September 30, 2004 PricewaterhouseCoopers refers to the Canadian firm of PricewaterhouseCoopers LLP and the other member firms of PricewaterhouseCoopers International Limited, each of which is a separate independent legal entity. 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Kingdom of Spain	7373	Not applicable
(State or Jurisdiction of Incorporation or Organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)


Laura D. Nemeth, Esq.		Valerie Ford Jacob, Esq.
Alan N. Waxman, Esq.		Timothy E. Peterson, Esq.
Squire, Sanders & Dempsey L.L.P.		Fried, Frank, Harris, Shriver & Jacobson LLP
350 Park Avenue		One New York Plaza
New York, New York 10022		New York, New York 10004
(212) 872-9800		(212) 859-8000




Title of each class of	Proposed Maximum Aggregate		Amount of
securities to be registered	Offering Price⁽¹⁾		Registration Fee


Ordinary Shares		$145,072,500		$18,381


	Per Share	Total

Public offering price	$	$
Underwriting discount	$	$
Proceeds, before expenses, to us	$	$



		June 30, 2004						June 30, 2004

					As						As
		Actual⁽¹⁾			Adjusted			Actual			Adjusted


		(In thousands)						(In thousands)
Unsecured and non-guaranteed short-term debt		$	1,184		$	1,184		€	972			€ 972
Secured long-term debt			16,571			16,571			13,607			13,607
Guaranteed long-term debt⁽²⁾			15,774			15,774			12,952			12,952
Unsecured and non-guaranteed long-term debt			2,977			2,977			2,444			2,444
Related party indebtedness			2,257			2,257			1,853			1,853

	Total debt		38,763			38,763			31,828			31,828

Common stock			73,197			105,038			60,101			86,245
Additional paid-in capital⁽³⁾			—			79,394			—			65,189
Cumulative other comprehensive income (loss)			(1,477	)		(1,477	)		(1,213	)		(1,213	)
Retained earnings			5,248			5,248			4,309			4,309

	Total shareholders’ equity		76,968			188,203			63,197			154,530

Total capitalization		$	115,731		$	226,966		€	95,025			€ 186,358


⁽¹⁾	Estimated solely for the purpose of computing the registration fee pursuant to Rule 457(o) under the Securities Act based on the registration of 10,005,000 ordinary shares, which includes 1,305,000 ordinary shares that are subject to an overallotment option.



Merrill Lynch & Co.		Lehman Brothers
SG Cowen & Co.


	Page

Prospectus Summary		1
Risk Factors		8
Forward-Looking Statements		19
Use of Proceeds		20
Dividend Policy		21
Capitalization		22
Dilution		23
Exchange Rate Information		24
Selected Consolidated Financial Data		25
Pro Forma Financial Information		29
Management’s Discussion and Analysis of Financial Condition and Results of Operations		31
Business		58
Management		76
Relationship Between Telvent and the Abengoa Group		82
Principal and Selling Shareholders		88
Description of Ordinary Shares		90
Shares Eligible for Future Sale		97
Settlement and Delivery		98
Taxation		98
Underwriting		103
Expenses of the Offering		107
Legal Matters		107
Experts		107
Enforceability of Civil Liabilities		107
Where You Can Find Additional Information		108
Index to Financial Statements		F-1
SHARE PURCHASE AGREEMENT
CONTRACT OF SALE OF SHARES
SALE OF SHARES AND ADHERENCE TO PLEDGE AND SUBORDINATION AGREEMENT
DEED OF INCORPORATION
FORM OF THE BY-LAWS
FORM OF STOCK CERTIFICATE
OPINION OF SQUIRE, SANDERS & DEMPSEY L.L.P.
OPINION OF SQUIRE, SANDERS & DEMPSEY L.L.P.
OPINION OF SQUIRE, SANDERS & DEMPSEY L.L.P.
RECIPROCAL LOAN AGREEMENT
RECIPROCAL CREDIT AGREEMENT
FORM OF SERVICES AGREEMENT
SHARE PURCHASE AGREEMENT
LEASEBACK AGREEMENT
LEASEBACK AGREEMENT
FINANCIAL LEASE CONTRACT FOR MACHINERY
COLLATERAL LOAN AGREEMENT
LOAN POLICY
CREDIT AGREEMENT
FRAMEWORK AGREEMENT
CONTRACT FOR SERVICES
SUBSIDIARIES
CONSENT OF PRICEWATERHOUSECOOPERS AUDITORES, S.L.
CONSENT OF PRICEWATERHOUSECOOPERS LLP


	•	approximately 60% of the oil and gas transmission pipeline mileage in North America, through, for example, the use of our SCADA (supervisory, control and data acquisition) systems and applications that monitor flow and detect leaks;

	•	the transmission and distribution of electricity to more than 80 million people around the world, through, for example, our applications that track network conditions and facilitate remote control of networks;

	•	the daily traffic flow at over 6,000 intersections in some of the largest cities in our core geographies through, for example, the use of our intelligent traffic systems that monitor and control urban traffic; and

	•	the transportation of passengers on trains and subways in major metropolitan areas, including Madrid and New York City, through, for example, the use of our applications for ticketing systems and for the monitoring and control of the network that supplies electrical power to train cars.


	•	Increased infrastructure spending in our key sectors;

	•	Infrastructure development in China; and

	•	Demand for new information technology products and services.


	•	Adverse economic conditions, particularly in Spain where we generated 56.6% of our 2003 core revenues, may reduce the demand for information technology services and solutions;

	•	We are particularly sensitive to uncertainties inherent in government and state-owned company contracts and information technology budgets;

	•	Our operations are expanding and we may not be able to manage this process in an effective manner;

	•	We may incur financial risk in connection with “Build-Operate-Transfer” programs; we have not yet made an equity investment in a “B-O-T” project;

	•	We may not be able to grow through extending our sales into our other geographies, selling more higher value-added solutions or developing our real-time process outsourcing program;

	•	We may not be able to acquire businesses, or integrate businesses we do acquire, in the manner in which we anticipate;


	•	Our relationships with our alliance partners may not be successful, which could adversely affect our business and the implementation of our growth strategy;

	•	Future movements in currency rates may adversely affect our results of operations;

	•	We may not be able to keep pace with rapidly changing technology and as a result we may not be able to compete effectively;

	•	Our majority shareholder has the ability to control matters requiring a shareholder vote, and, because we are a “controlled company” under Nasdaq rules, our board of directors is not required to have a majority of independent directors; and

	•	Abengoa’s credit facility places indirect restrictions on our ability to purchase or sell assets, merge with another company, make acquisitions and incur indebtedness.


Assumed initial public offering price			$	13.50
Net tangible book value at June 30, 2004	$	2.69
Increase in net tangible book value attributable to new investors		2.99

Net tangible book value per share, as adjusted for the offering				5.68

Amount of dilution in net tangible book value per share to new investors in this offering			$	7.82



	U.S. Dollars per Euro				Euros per U.S. Dollar

	Rate At				Rate At
Year Ended December 31,	Period End		Average		Period End		Average

1999		1.0070		1.0653		0.9930		0.9387
2000		0.9388		0.9232		1.0652		1.0832
2001		0.8901		0.8952		1.1235		1.1171
2002		1.0485		0.9454		0.9537		1.0578
2003		1.2597		1.1321		0.7938		0.8833



	U.S. Dollars per Euro				Euros per U.S. Dollar

Month	High		Low		High		Low

April 2004		1.2358		1.1802		0.8473		0.8092
May 2004		1.2274		1.1801		0.8474		0.8147
June 2004		1.2320		1.2006		0.8329		0.8117
July 2004		1.2437		1.2032		0.8311		0.8041
August 2004		1.2368		1.2025		0.8316		0.8085
September 2004		1.2417		1.2052		0.8297		0.8053



				For the Six Months Ended
				June 30,						For the Year Ended December 31,

				2004⁽¹⁾		2004		2003⁽²⁾		2003⁽¹⁾⁽²⁾		2003⁽²⁾		2002		2001⁽³⁾		2000⁽³⁾⁽⁴⁾		1999⁽³⁾⁽⁴⁾


				(In thousands, except per share data)
Consolidated Statement of Operations Data
Revenues:
	Core revenues			$	121,045	€	99,388	€	104,083	$	326,442	€	268,036	€	211,049	€	319,813	€	344,560	€	251,427
	Other operating revenues				34,907		28,662		20,935		33,758		27,718		14,768		16,775		27,268		19,383

			Total operating revenues		155,952		128,050		125,018		360,200		295,754		225,817		336,588		371,828		270,810
Operating expenses:
	Goods purchased				49,210		40,406		54,648		166,435		136,657		106,729		167,869		227,609		153,060
	Personnel expenses				54,615		44,844		30,623		72,293		59,359		49,189		65,706		59,909		52,000
	Depreciation and amortization				7,795		6,400		5,953		21,180		17,391		8,113		11,099		7,128		8,871
		Other operating expenses			36,641		30,085		29,777		82,114		67,423		51,365		81,094		64,014		47,077

			Total operating expenses		148,261		121,735		121,001		342,023		280,830		215,396		325,768		358,660		261,008

Income from operations					7,691		6,315		4,017		18,177		14,924		10,421		10,820		13,168		9,802
Amortization of goodwill					(550)		(452)		(388)		(1,101)		(904)		0		0		0		0
Financial income (expense), net					(3,068)		(2,519)		(3,116)		(8,240)		(6,766)		(1,165)		(3,634)		1,220		(737)
Extraordinary income (expense), net					1,699		1,395		998		19		16		(756)		(2,315)		7,056		1,549

			Total other income (expense)		(1,919)		(1,576)		(2,506)		(9,322)		(7,654)		(1,921)		(5,949)		8,276		812

Income before income taxes					5,772		4,739		1,511		8,855		7,270		8,500		4,871		21,444		10,614
Income tax (benefit) expense					(1,321)		(1,085)		919		203		167		(2,699)		1,642		6,034		2,560
Minority interest					532		437		(43)		(96)		(79)		(157)		609		(102)		(926)

Net income				$	7,625	€	6,261	€	549	$	8,556	€	7,024	€	11,042	€	3,838	€	15,308	€	7,128

Dividends per share⁽⁵⁾					—		—		—	$	0.38	€	0.31	€	0.42	€	0.14
Basic and diluted net income per ordinary share⁽⁶⁾				$	0.38	€	0.31	€	0.03	$	0.43	€	0.35	€	0.55	€	0.19
Weighted average ordinary shares outstanding⁽⁶⁾					20,000		20,000		20,000		20,000		20,000		20,000		20,000



	As of June 30,				As of December 31,

	2004⁽¹⁾		2004		2003⁽¹⁾⁽²⁾		2003⁽²⁾		2002⁽²⁾		2001⁽³⁾		2000⁽³⁾⁽⁴⁾		1999⁽³⁾⁽⁴⁾


	(Unaudited)

	(In thousands)
Consolidated Balance Sheet Data:⁽⁷⁾
Cash	$	16,735	€	13,741	$	34,535	€	28,356	€	33,364	€	15,863	€	29,624	€	25,116
Total assets		307,969		252,869		376,666		309,275		327,298		195,390		258,202		193,893
Total long-term obligations		36,533		29,997		43,771		35,940		26,335		12,146		2,302		3,089
Shareholders’ equity		81,272		66,731		73,062		59,990		61,183		59,987		42,901		35,731



		Year Ended December 31, 2003

				Historical
				NMS Division
				of Metso
		Historical		(January		Combined				Pro Forma
		Telvent⁽¹⁾		2003)⁽²⁾		2003		Adjustments		Telvent


		(In thousands, except per share data)
Consolidated Statement of Operations Data:
Revenues		€	257,732	€	2,979	€	260,711		—	€	260,711
Cost of revenues			202,149		1,832		203,981		—		203,981

	Gross profit		55,583		1,147		56,730		—		56,730

General and administrative			18,807		200		19,007		—		19,007
Sales and marketing			9,091		399		9,490		—		9,490
Research and development			11,278		244		11,522		—		11,522
Depreciation and amortization⁽³⁾⁽⁴⁾			5,943		143		6,086	€	173		6,259
Impairment charges			1,589		—		1,589		—		1,589
Other expenses			—		138		138		—		138

	Total operating expenses		46,708		1,124		47,832		173		48,005

Income from operations			8,875		23		8,898		(173)		8,725
Financial (expense) income, net⁽⁵⁾			(4,381)		12		(4,369)		(75)		(4,444)
Other (expense) income, net			(665)		2		(663)		—		(663)

	Total other income (expense)		(5,046)		14		(5,032)		(75)		(5,107)

Income before income taxes			3,829		37		3,866		(248)		3,618
Income tax (benefit) expense⁽⁶⁾			(809)		19		(790)		(87)		(877)

Net income before minority interest			4,638		18		4,656		(161)		4,495
Profit attributable to minority interest			(124)		—		(124)				(124)

Net income		€	4,514	€	18	€	4,532	€	(161)	€	4,371

Basic and diluted net income per share⁽⁷⁾			0.23								0.22

Weighted average number of shares outstanding⁽⁷⁾			20,000								20,000


		Six Months						Six Months
		Ended			Percentage			Ended			Percentage			Percentage
		June 30,			of			June 30,			of			Change
		2004			Revenues			2003			Revenues			2003-2004


		(Euros in thousands, except percentages)
Revenues⁽¹⁾		€	126,537			100.0	%	€	107,797			100.0	%		17.4	%
Cost of revenues⁽¹⁾			98,143			77.6			84,438			78.3			16.2

	Gross profit		28,394			22.4			23,359			21.7			21.6
General and administrative			11,355			9.0			11,806			11.0
Sales and marketing			4,346			3.4			3,617			3.3
Research and development			3,514			2.8			3,171			2.9
Depreciation and amortization			3,549			2.8			3,191			3.0

	Total operating expenses		22,764			18.0			21,785			20.2
Income from operations			5,630			4.4			1,574			1.5			257.7
Financial (expense), net			(1,894	)		1.5			(1,155	)		1.1
Other income, net			62			0.0			—			0.0

	Total other (expense)		(1,832	)		1.4			(1,155	)		1.1

Income before income taxes			3,798			3.0			419			0.4
Income tax expense (benefit)			110			0.0			(50	)		0.0
Net income		€	3,646			2.9		€	454			0.4			703.1


	*Comparison of Six Months Ended June 30, 2004, to Six Months Ended June 30, 2003*



	Six Months Ended June 30, 2004

											Spanish
							Environ-				GAAP		U.S. GAAP
	Energy		Traffic		Transport		ment		Other		Total⁽¹⁾		Adjustment⁽¹⁾		Total


	(Euros in thousands)
Core revenues	€	43,133	€	26,738	€	7,304	€	11,531	€	10,682	€	99,388	€	27,149	€	126,537
Gross profit⁽²⁾		10,749		8,737		1,300		2,345		4,039		27,170		1,224		28,394
Gross margin		24.9%		32.7%		17.8%		20.3%		37.8%		27.3%				22.4	%



	Six Months Ended June 30, 2003

											Spanish
							Environ-				GAAP		U.S. GAAP
	Energy		Traffic		Transport		ment		Other		Total⁽¹⁾		Adjustment⁽¹⁾		Total


	(Euros in thousands)
Core revenues	€	42,334	€	35,324	€	9,108	€	8,976	€	8,341	€	104,083	€	3,714	€	107,797
Gross profit⁽²⁾		11,254		7,397		1,404		2,055		1,730		23,840		(481)		23,359
Gross margin		26.6%		20.9%		15.4%		22.9%		20.7%		22.9%				21.7	%


⁽¹⁾	The two most significant adjustments we made to convert our Spanish GAAP core revenues to U.S. GAAP revenues were:



		Revenues by Geographic Region

				Percentage					Percentage
				of Six Months					of Six Months			Six Months
		Six Months		Ended June 30,			Six Months		Ended June 30,			Ended June 30,
		Ended		2004			Ended		2003			Percentage
		June 30,		Total Core			June 30,		Total Core			Change
		2004		Revenues			2003		Revenues			2003-2004


		(Euros in thousands)
Spain		€	51,426		51.8	%	€	54,487		52.3	%		(5.6	)%
Latin America			19,027		19.1			21,791		20.9			(12.7	)
North America			14,066		14.2			11,930		11.5			17.9
China			2,503		2.5			4,745		4.6			(47.2	)
Other			12,366		12.4			11,130		10.7			11.1

	Total Spanish GAAP	€	99,388		100.0	%	€	104,083		100.0	%


	*Comparison of Year Ended December 31, 2003, to Year Ended December 31, 2002*


		Year Ended		Percentage			Year Ended		Percentage			Percentage
		December 31,		of			December 31,		of			Change
		2003		Revenues			2002		Revenues			2002-2003


		(Euros in thousands, except percentages)
Revenues		€	257,732		100.0	%	€	219,435		100.0	%		17.5	%
Cost of revenues			202,149		78.4			180,752		82.4			11.8

	Gross profit		55,583		21.6			38,683		17.6			43.7
General and administrative			18,807		7.3			18,536		8.4
Sales and marketing			9,091		3.5			3,705		1.7
Research and development			11,278		4.4			5,772		2.6
Depreciation and amortization			5,943		2.3			3,116		1.4
Impairment charges			1,589		0.6			2,290		1.0

	Total operating expenses		46,708		18.1			33,419		15.2
Income from operations			8,875		3.4			5,264		2.4			68.6
Financial (expense), net			(4,381)		1.7			(1,463)		0.7
Other (expense) income, net			(665)		0.3			34		0.0

	Total other (expense)		(5,046)		2.0			(1,429)		0.7

Income before income taxes			3,829		1.5			3,835		1.7
Income tax benefit			(809)		0.3			(1,210)		0.6
Net income		€	4,514		1.8		€	4,671		2.1			(3.4)


Year Ended		Percentage of		Year Ended		Percentage of
December 31, 2003		2003 Revenues		December 31, 2002		2002 Revenues


(Euros in thousands)
€	202,149		78.4%	€	180,752		82.4%



	Year Ended December 31, 2002

											Spanish
							Environ-				GAAP		U.S. GAAP
	Energy		Traffic		Transport		ment		Other		Total⁽¹⁾⁽³⁾		Adjustment⁽¹⁾		Total


	(Euros in thousands)
Core revenues		€ 79,486		€ 86,579		€ 19,845		€ 15,552		€ 19,524		€ 220,986		€ (1,551)		€ 219,435
Gross profit⁽²⁾		11,212		17,245		1,838		2,817		4,649		37,761		922		38,683
Gross margin		14.1%		19.9%		9.3%		18.1%		23.8%		17.1%		—		17.6%


⁽¹⁾	The three most significant adjustments we made to convert our 2002 and 2003 Spanish GAAP core revenues to U.S. GAAP revenues were:



	As of June 30, 2004
	Payments Due by Period

			Less than						After 5
	Total		1 year		1-3 years		3-5 years		years


	(In thousands)
Contractual Obligations
Long-term debt		€ 29,003		€ 8,030		€ 17,535	€	3,438		€ —
Capital lease obligations		2,584		1,240		1,344		—		—
Operating lease obligations		37,595		8,087		16,592		12,916		—
Other long-term liabilities		8,991		3,703		2,796		2,457		35

Total contractual obligations		€ 78,173		€ 21,060		€ 38,267	€	18,811		€ 35



	As of December 31, 2003
	Payments Due by Period

			Less than						After 5
	Total		1 year		1-3 years		3-5 years		years


	(In thousands)
Contractual Obligations
Long-term debt		€ 34,617		€ 8,826		€ 19,835	€	4,548		€ 1,408
Capital lease obligations		1,793		879		914		—		—
Operating lease obligations		41,620		8,051		16,412		17,157		—
Other long-term liabilities		9,754		9,754		—		—		—

Total contractual obligations		€ 87,784		€ 27,510		€ 37,161	€	21,705		€ 1,408



		As of June 30, 2004

		Positive Fair				Negative Fair
		Value		Notional Amount		Value		Notional Amount


		(In thousands)
Euro / U.S. Dollars versus:
	U.S. Dollars		€ 1,265		€ 13,336	€	815	€	6,540
	Japanese Yen		37		6		243		—
	Brazilian Real		94		347		358		4,119
	Mexican Pesos		46		2,913		85		3,970
	Canadian Dollars		157		34,446		243		22,681

			€ 1,599		€ 51,048	€	1,744	€	37,310



		As of December 31, 2002

		Positive Fair				Negative Fair
		Value		Notional Value		Value		Notional Value


		(In thousands)
Euro / U.S. Dollars versus:
	U.S. Dollars		€ 2,920		€ 19,940		€ 2,495		€ 18,731
	Brazilian Reals		240		2,867		—		—

			€ 3,160		€ 22,807		€ 2,495		€ 18,731


		2003			2002

Spain			56.6	%		59.7	%
Latin America			18.3			29.7
North America			11.7			0.2
China			4.4			3.9
Other			9.0			6.5

	Total		100.0	%		100.0	%


		Square Meters		Square Feet
Location		(approx.)		(approx.)

Madrid, Spain			46,793		503,675
Seville, Spain			10,000		107,639
United States and Canada			13,743		147,928
Lisbon, Portugal			5,396		58,082
Mexico			1,521		16,372
Brazil and Argentina			800		8,611
China			1,000		10,766
Other Locations			14,161		152,427

	Totals		93,414		1,005,500


			Country of	Percentage
Name of Subsidiary			Organization	Ownership

Telvent Energía y Medio Ambiente, S.A.			Spain		100	%
	Telvent Tráfico y Transporte, S.A.		Spain		100	%
		Telvent Brasil S.A.	Brazil		100	%
	Telvent México S.A. de C.V.		Mexico		100	%
Telvent Canada Ltd.			Canada		100	%
	Telvent U.S.A. Inc.		U.S.A.		100	%
Telvent Interactiva, S.A.			Spain		100	%
Telvent Outsourcing, S.A.			Spain		100	%
Telvent Housing, S.A.			Spain		100	%


				Expiration
Name	Age		Position	of Director Term

Manuel Sánchez		41	Director, Chairman and Chief Executive Officer		2007
HRH Carlos de Borbón		66	Director		2008
Miguel Cuenca		55	Director		2005
Eduard Punset		67	Director		2005
Javier Salas		56	Director		2005
José B. Terceiro		61	Director		2005
Cándido Velázquez- Gaztelu		68	Director		2005
José Ignacio del Barrio		42	Vice President Business and Corporate Development
Ana María Plaza		37	Chief Financial Officer
Larry Stack		52	Chief Technology Officer
David Jardine		61	Vice President North America
Dai Yue		40	Vice President – China
Luis Rancé		62	Vice President – Mexico
Marcio Leonardo		52	Vice President – Brazil
José Montoya		58	Vice President – Traffic & Transport
Philip Goulet		52	Vice President – Oil & Gas
Ignacio González-Domínguez		37	Vice President – Electricity & Environment