SETTLEMENT AGREEMENT AND RELEASE

Captive Audience, LLC, and its past, present and future officers, directors,
members, parents, subsidiaries, affiliates, predecessors in interest and
employees (hereinafter “Captive”) and PSI, Inc. (formerly known as Friendlyway,
Inc.), and its past, present and future officers, directors, members, parents,
subsidiaries, affiliates, predecessors in interest and employees (hereinafter
“PSI”) have reached the following agreement as of November 13, 2006 (the
“Settlement Agreement”).
 
WHEREAS, Captive and PSI are parties to a certain Asset Purchase Agreement (as
amended by an addendum, dated July 31, 2006, and a rider, dated August 10, 2006)
(hereinafter the “APA”) dated March 18, 2006, pursuant to which, on [August 22,
2006], PSI purchased from Captive the digital signage assets and contract rights
described on the schedules attached to the APA (the “Acquired Assets”) for a
purchase price of $2.4 million, consisting of (i) cash in the amount of $1.1
million payable in accordance with a payment schedule attached to the APA and
(ii) 5,909,091 shares of common stock of PSI having an agreed value of $1.3
million (the “Acquisition Shares”);
 
WHEREAS, in connection with the purchase of the Acquired Assets, PSI made
partial purchase price payments to Captive in the aggregate amount of $195,000
and other partial payments (the “Partial Payments”);
 
WHEREAS, certain disputes have arisen between the parties relating to Captive’s
sale, assignment and transfer of the Acquired Assets and PSI’s payment of the
purchase price therefor;
 
WHEREAS, on or about October 18, 2006, Captive advised PSI that it intended to
commence a lawsuit against the PSI and/or its affiliates, Pantel Systems, Inc.
and Ignition Media Group, Inc. (collectively with PSI, the “Purchaser Parties”),
in the United States District Court, District of New Jersey, seeking, among
other relief, a permanent injunction to prevent the Purchaser Parties from
impairing Captive’s use of the Acquired Assets as well as damages based on
allegations that the Purchaser Parties breached obligations owing to Captive
under the APA;
 

--------------------------------------------------------------------------------

 
WHEREAS, the action is currently pending under the caption Captive Audience, LLC
v. Pantel Systems, Inc. a/k/a Friendlyway, Inc. and Ignition Media Group, Inc.,
Civil Action No. 06-5020 (JAG) (the “Action”);
 
WHEREAS, the parties now wish to rescind the transactions contemplated by the
APA and settle this matter by resolving their differences amicably according to
the conditions set forth herein.
 
NOW, THEREFORE, in consideration of the following covenants and agreements and
for other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties have agreed as follows:
 
1. Upon the execution of this Settlement Agreement, PSI shall pay to Greenbaum,
Rowe, Smith & Davis LLP, as attorneys for Captive by either check from an
attorney trust account or by wire transfer of immediately available funds, the
amount of $90,000.00 (Ninety Thousand United States Dollars (the “Settlement
Sum”). Effective upon receipt of the Settlement Sum, the purchase and sale of
the Acquired Assets pursuant to the APA shall be deemed rescinded, terminated,
cancelled and null and void ab initio, and the APA and all ancillary agreements
executed in connection therewith or contemplated thereby (collectively with the
APA, the “Transaction Documents”) shall be deemed rescinded, terminated,
cancelled and null and void ab initio.
 
2

--------------------------------------------------------------------------------

 
2. Captive hereby agrees, for itself and on behalf of each of its members, that
it relinquishes all right, title and interest in and to the Acquisition Shares.
Likewise, PSI hereby agrees that it relinquishes all right, title and interest
in and to any and all contracts, assignments and/or any assets of any kind
whether or not included in the Acquired Assets that had anything to do with the
purchase of assets from Captive. Captive hereby agrees to assume, pay and
discharge any and all liabilities or obligations, regardless of when same shall
have accrued, under such contracts and does hereby further agree to indemnify,
defend and hold each Purchaser Party harmless from any losses, liabilities,
costs, suits, judgments, claims or damages, which any Purchaser Party may suffer
or incur in connection with any such contract. The parties further agree that
Captive shall be entitled to retain the Partial Payments and that certain
digital signage equipment of PSI currently in Captive’s possession or otherwise
under its control, which equipment consists of five installed 42-inch LCD video
screens and five 42-inch uninstalled LCD video screens.
 
3. Upon receipt of the payment referred to in this Settlement Agreement, Captive
shall immediately withdraw and dismiss the Action with prejudice and immediately
deliver to PSI the original executed promissory note, dated August 21, 2006 (the
“Promissory Note”), included in the Transaction Documents, which Promissory Note
shall have been prominently marked “Cancelled” by an authorized officer of
Captive.
 
4. Captive, on behalf of its members, partners, shareholders, officers,
directors, successors and assigns, hereby fully and forever releases and
discharges each of the Purchaser Parties and all of their respective
representatives, agents, attorneys, consultants, shareholders, officers,
directors, employees, parents, subsidiaries, affiliates, successors and assigns
from any and all claims, demands, losses, costs, damages, rights and causes of
action, debts, liabilities and obligations whatsoever, at law or in equity,
which Captive ever had, now has or may have against them with respect to the
claims that were asserted or could have been asserted in the Action or that
arose out of the Transaction Documents from the beginning of the world to the
date hereof.
 
3

--------------------------------------------------------------------------------

 
5. PSI, on behalf of itself and the other Purchaser Parties, and their
respective successors and assigns, hereby fully and forever releases and
discharges Captive and all of its members, shareholders, officers, directors,
successors and assigns from any and all claims, demands, losses, costs, damages,
rights and causes of action, debts, liabilities and obligations whatsoever, at
law or in equity, which any Purchaser Party ever had, now have or may have
against them with respect to the claims that were asserted or could have been
asserted in the Action or that arose out of the Transaction Documents from the
beginning of the world to the date hereof.
 
6. Captive states to the best of its knowledge that other than the claims
asserted against the Purchaser Parties in the Action, it is not aware of the
existence of any other claims against any Purchaser Party. PSI states to the
best of its knowledge that is not aware of the existence of any claims of any
Purchaser Party or of any third party that may have claims against Captive.
 
7. Captive does hereby agree to indemnify, defend and hold harmless PSI, its
officers, directors and employees, from any and all claims presently asserted or
which may hereinafter be asserted by any person or entity, including but not
limited to, the New Jersey Department of Labor, the United States Department of
Labor, any present or former employee of Captive (each a “Captive Employee”) or
any former employee of PSI who may become an employee of PSI in connection with
the transactions contemplated under the APA (a “Transferred Employee”) (with the
exception of Emily McCann, Sara Schmidt and Lisa Smith) relating to either
Captive’s or PSI’s alleged failure to pay wages to any such Captive Employee or
Transferred Employee (hereinafter a “Wage Claim”). This indemnity and agreement
to hold PSI harmless includes but is not limited to, the costs of professional
fees, including legal, accounting, expert and related fees and costs which may
be incurred by PSI in the event PSI must institute a suit to enforce this
indemnity and/or in the event PSI must defend against any such claims because
Captive has refused to do so. If a claim is asserted against PSI that falls
within the indemnification contained in this paragraph, PSI will submit the
claim to Captive and request that Captive indemnify and defend PSI in accordance
with this paragraph.
 
4

--------------------------------------------------------------------------------

 
8. PSI agrees that in connection with the indemnity set forth above, PSI shall
be responsible for the first $1750.00 (One Thousand Seven Hundred and Fifty
United States Dollars), in the event that liability is assessed against Captive
and/or PSI in connection with a Wage Claim. PSI’s liability to make such payment
shall only arise in the event that, after diligent investigation and defense by
Captive, it is determined that liability exists, or after diligent defense of
such claim by Captive, liability is assessed against Captive and/or PSI. In no
event shall PSI’s aggregate liability exceed $1750.00 (One Thousand Seven
Hundred and Fifty United States Dollars), irrespective of the amount and/or
number of Wage Claims that are asserted against Captive and/or PSI as a
consequence of the APA and the Transaction Documents. In no event shall PSI have
any liability whatsoever for any Wage Claim asserted by any Captive Employee or
Transferred Employee with respect to any compensation after October 9, 2006.
 
9. All parties shall bear their own respective costs including, but not limited
to, attorneys fees, court costs, arbitration fees, litigation expenses, and
investigation expenses, incurred by such party on or prior to the date of this
Agreement or in relation to a party’s performance hereof.
 
10. Each party agrees to keep confidential, and not disclose or make use of any
information contained in this Agreement including, without limitation, the
existence of this Agreement (the “Confidential Information”), without the prior
consent of all other parties hereto. To the extent that legal counsel to any
party advises that disclosure of any Confidential Information by such party is
required by law or in any legal proceeding, governmental investigation, or other
similar proceeding, such party shall provide sufficient prior notice to all
other parties to allow the other parties to seek a protective order or such
other relief to prevent such disclosure. Notwithstanding anything to the
contrary in this Section 8, in connection with PSI’s reporting obligations under
the Securities Exchange Act of 1934, as amended, PSI may, without the prior
consent of Captive, disclose any Confidential Information in its public
securities filings, including the public filing of a copy of this Settlement
Agreement, if so advised by legal counsel to PSI.
 
5

--------------------------------------------------------------------------------

 
11. No party hereto admits liability of any kind.
 
12. In the event of a claimed breach of any of the provisions of this Settlement
Agreement, the party claiming breach shall notify the alleged breaching party
(or parties) in writing (in accordance with the notice provisions hereof) of the
claimed breach and the alleged breaching party (or parties) shall have five
business days to cure said breach, if curable.
 
13. Each party agrees to take any and all steps, including without limitation,
the execution of instruments, assignments, powers or other documentation, which
may be reasonably requested by any other party hereto in order to carry out the
intent of this Settlement Agreement.
 
14. All notices, waivers and other communications hereunder shall be in writing
and shall be give by hand delivery to the other party, by reputable overnight
courier, or by certified mail, return receipt requested. All notices, waivers,
or other communications shall be deemed delivered when actually received if
delivered by hand, one day after mailing if sent by overnight courier and three
days after mailing if sent by certified mail and shall be addressed as follows:
 
6

--------------------------------------------------------------------------------

 
If to Captive:

Captive Audience, LLC
1 Wiebel Plaza
Sussex, New Jersey 07461
Attention: Paul Wiebel, Chairman
 
With a copy to:

Marc J. Gross, Esq.
Greenbaum, Rowe, Smith & Davis LLP
75 Livingston Avenue
Roseland, New Jersey 07068

If to any PSI:

PSI, Inc.
7222 Commerce Center Drive
Suite 240
Colorado Springs, Colorado 80919

With a copy to:

Edward C. Normandin, Esq.
Pryor Cashman Sherman & Flynn LLP
410 Park Avenue, 10th Floor
New York, New York 10022

15. This Agreement may be signed in counterparts and when executed by all
parties shall constitute one integrated agreement. A party’s signature delivered
by facsimile transmission shall be deemed an original and is binding on such
party.
 
16. Each of the signatories hereto represents and warrants to be duly authorized
to fully and completely resolve the disputes described in this Settlement
Agreement, make the release and indemnities contained in this Settlement
Agreement, and to bind the party on whose behalf the signatory has agreed to act
to the terms and conditions contained in this Settlement Agreement.
 
17. The parties hereto represent and warrant that they have not assigned,
transferred, conveyed or released and discharged, voluntarily or involuntarily,
or by operation of law, to any other entity an interest in the disputes which
are the subject of this Settlement Agreement.
 
7

--------------------------------------------------------------------------------

 
18. This Settlement Agreement represents the entire agreement concerning the
matters herein, supersedes any and all prior agreements concerning same, may not
be amended except in a writing referring specifically to this Agreement, and
shall be binding on the parties’ successors and assigns.
 
19. The parties each acknowledge that they have not executed this Agreement in
reliance on any representation, inducement, promise, agreement or warranty which
is not contained or referenced in this Agreement and that they have made such
independent investigation of the facts pertaining to the claims and this
Agreement, and of all matters pertaining to it, as it deems necessary, and that
they are relying solely upon their own investigation of the facts and are not
relying in any way (and acknowledges that it would be unreasonable to so rely)
upon any statement, silence, act or omission of any other party in entering into
this Settlement Agreement other than those representations specifically set
forth in writing herein.
 
20. This Agreement shall be construed and interpreted in accordance with the
laws of the State of New Jersey without regard to any conflicts of law.
 
21. The United States District Court for the District of New Jersey retains
jurisdiction over the performance and enforcement of this Settlement Agreement
and Release.
 

        CAPTIVE AUDIENCE, LLC  
   
   
    By:   /s/ Paul Wiebel  

--------------------------------------------------------------------------------

Name: Paul Wiebel
Title: Chairman 
   

        By:   /s/ Paul Wiebel  

--------------------------------------------------------------------------------

Name: Paul Wiebel
Title: Member
   

       
OTHER MEMBERS
 
PSI, INC.
 
   
   
    By:   /s/ Ken Upcraft  

--------------------------------------------------------------------------------

Name: Ken Upcraft
Title: Chief Executive Officer
   

8

--------------------------------------------------------------------------------