exv10w33



 





EXECUTION COPY




Exhibit 10.33




ASSET PURCHASE AGREEMENT




By and Between




StayOnline, Inc.,




a Delaware corporation




as Seller




and




LodgeNet Entertainment Corporation,

a Delaware corporation




as Buyer




 









 





TABLE OF CONTENTS




	 	 	 	 	 
	 	 	Page No.
	Article 1 Defined Terms
	 	 	1	 
	 
	 	 	 	 
	Article 2 The Transaction
	 	 	6	 
	2.1 Sale and Purchase of Acquired Assets
	 	 	6	 
	2.2 Excluded Liabilities
	 	 	7	 
	 
	 	 	 	 
	Article 3 Purchase Consideration
	 	 	7	 
	3.1 Purchase Price
	 	 	7	 
	3.2 Deposit
	 	 	8	 
	3.3 Working Capital Adjustment
	 	 	9	 
	3.4 Adjustments for Delays in Closing
	 	 	11	 
	3.5 Allocation of Purchase Price
	 	 	11	 
	3.6 Escrow
	 	 	11	 
	 
	 	 	 	 
	Article 4 Representations and Warranties of Seller
	 	 	12	 
	4.1 Organization
	 	 	12	 
	4.2 Effect of Agreement
	 	 	12	 
	4.3 Financial and Corporate Records
	 	 	12	 
	4.4 Compliance with Law
	 	 	13	 
	4.5 Financial Statements
	 	 	13	 
	4.6 Acquired Assets; Sufficiency
	 	 	13	 
	4.7 Absence of Undisclosed Liabilities
	 	 	14	 
	4.8 Operations Since December 31, 2005
	 	 	14	 
	4.9 Accounts Receivable
	 	 	14	 
	4.10 Tangible Property
	 	 	14	 
	4.11 Real Property
	 	 	14	 
	4.12 Software
	 	 	15	 
	4.13 Intellectual Property Assets
	 	 	16	 
	4.14 Significant Contracts
	 	 	17	 
	4.15 Employees and Independent Contractors
	 	 	18	 
	4.16 Employee Benefit Plans
	 	 	19	 
	4.17 Customers, Prospects and Suppliers
	 	 	19	 
	4.18 Taxes
	 	 	20	 






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	 	 	Page No.
	4.19 Proceedings and Judgments
	 	 	20	 
	4.20 Insurance
	 	 	21	 
	4.21 Questionable Payments
	 	 	21	 
	4.22 Related Party Transactions
	 	 	21	 
	4.23 Brokerage Fees
	 	 	22	 
	4.24 Full Disclosure
	 	 	22	 
	4.25 Litigation
	 	 	22	 
	4.26 Environmental Matters
	 	 	22	 
	 
	 	 	 	 
	Article 5 Representations and Warranties of Buyer
	 	 	23	 
	5.1 Organization
	 	 	23	 
	5.2 Effect of Agreement
	 	 	23	 
	5.3 Brokerage Fees
	 	 	23	 
	5.4 Litigation
	 	 	23	 
	5.5 Availability of Funds
	 	 	23	 
	 
	 	 	 	 
	Article 6 Covenants of Seller Prior to Closing
	 	 	23	 
	6.1 Access And Investigation
	 	 	23	 
	6.2 Operation of the Business of Seller
	 	 	24	 
	6.3 Negative Covenant
	 	 	24	 
	6.4 Notification
	 	 	25	 
	6.5 Monthly Financial Statements
	 	 	25	 
	6.6 Change of Name
	 	 	25	 
	6.7 Payment of Liabilities
	 	 	25	 
	6.8 Shareholder Meeting
	 	 	25	 
	 
	 	 	 	 
	Article 7 Covenant of Buyer Prior to Closing
	 	 	26	 
	 
	 	 	 	 
	Article 8 Conditions to Buyer’s Obligation to Close
	 	 	26	 
	8.1 Accuracy of Representations
	 	 	26	 
	8.2 Seller’s Performance
	 	 	26	 
	8.3 Consents
	 	 	26	 
	8.4 Additional Documents
	 	 	26	 
	8.5 No Proceedings
	 	 	28	 
	8.6 Permits
	 	 	28	 
	8.7 No Material Adverse Effect
	 	 	28	 
	8.8 Financial Statements
	 	 	28	 
	8.9 Deliveries
	 	 	28	 






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	 	 	Page No.
	Article 9 Conditions To Seller’s Obligation To Close
	 	 	29	 
	9.1 Accuracy of Representations
	 	 	29	 
	9.2 Buyer’s Performance
	 	 	29	 
	9.3 Consents
	 	 	29	 
	9.4 Shareholder Approval
	 	 	29	 
	9.5 Additional Documents
	 	 	29	 
	9.6 No Proceedings
	 	 	30	 
	9.7 Purchase Price
	 	 	30	 
	9.8 Deliveries
	 	 	30	 
	 
	 	 	 	 
	Article 10 Termination
	 	 	30	 
	10.1 Termination Events
	 	 	30	 
	10.2 Effect of Termination
	 	 	30	 
	10.3 Termination in Response to Superior Proposal
	 	 	31	 
	 
	 	 	 	 
	Article 11 Additional Covenants
	 	 	31	 
	11.1 Employees and Employee Benefits
	 	 	31	 
	11.2 Payment of All Taxes Resulting from Sale of Assets by Seller
	 	 	33	 
	11.3 Restrictions on Seller Dissolution and Distributions
	 	 	33	 
	11.4 Removing Excluded Assets
	 	 	33	 
	11.5 Reports and Returns
	 	 	33	 
	11.6 Assistance In Proceedings
	 	 	33	 
	11.7 Customer and Other Business Relationships
	 	 	33	 
	11.8 Retention of and Access to Records
	 	 	33	 
	11.9 Further Assurances
	 	 	33	 
	11.10 Reconciliations and Allocations
	 	 	34	 
	11.11 Tax Matters
	 	 	34	 
	11.12 Confidentiality
	 	 	35	 
	11.13 Announcement
	 	 	36	 
	11.14 Exclusivity
	 	 	36	 
	11.15 Audit Fees
	 	 	37	 
	11.16 Auditor’s Consent and Audit Preparation
	 	 	37	 
	 
	 	 	 	 
	Article 12 Closing
	 	 	38	 
	12.1 Closing
	 	 	38	 
	 
	 	 	 	 
	Article 13 Indemnification
	 	 	38	 
	13.1 Seller’s Indemnification
	 	 	38	 






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	 	 	Page No.
	13.2 Buyer’s Indemnification
	 	 	38	 
	13.3 Indemnification Procedures
	 	 	39	 
	13.4 Survival Periods
	 	 	41	 
	13.5 Shareholder/Partner Suits
	 	 	42	 
	13.6 Limitations on Indemnification Obligation
	 	 	42	 
	13.7 Insurance and Tax Benefits
	 	 	42	 
	13.8 Exclusive Remedy
	 	 	42	 
	 
	 	 	 	 
	Article 14 Other Provisions
	 	 	42	 
	14.1 Fees and Expenses
	 	 	42	 
	14.2 Notice
	 	 	43	 
	14.3 Entire Understanding
	 	 	43	 
	14.4 Parties in Interest
	 	 	43	 
	14.5 Waivers
	 	 	43	 
	14.6 Severability
	 	 	44	 
	14.7 Counterparts; Facsimile
	 	 	44	 
	14.8 Section Headings
	 	 	44	 
	14.9 References
	 	 	44	 
	14.10 Controlling Law
	 	 	44	 
	14.11 No ThirdParty Beneficiaries
	 	 	44	 
	14.12 Neutral Construction
	 	 	44	 
	14.13 Dispute Resolution
	 	 	44	 
	14.14 Schedules
	 	 	45	 






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LIST OF SCHEDULES




	 	 	 
	Schedule 1.1

	 	Accounts Receivable
	Schedule 1.2

	 	Excluded Contracts
	Schedule 1.9

	 	Excluded Assets
	Schedule 2.1(b)(ii)(A)

	 	Trade Accounts Payable – Current
	Schedule 2.1(b)(ii)(B)

	 	Trade Accounts Payable – Past Due
	Schedule 2.1(b)(iii)

	 	Assumed Obligations
	Schedule 2.2

	 	Excluded Liabilities
	Schedule 4.1

	 	Qualified to do Business; Corporate Name; Subsidiaries
	Schedule 4.2

	 	Effect of Agreement
	Schedule 4.3

	 	Exceptions to Financial and Corporate Records
	Schedule 4.4

	 	Permits Relating to Business
	Schedule 4.5

	 	Internal Control Matters and Seller’s NAICS Codes
	Schedule 4.6

	 	Exceptions to Title; Encumbrances
	Schedule 4.7

	 	Undisclosed Liabilities
	Schedule 4.8

	 	Conduct of Business; Material Adverse Effects
	Schedule 4.11

	 	Facilities
	Schedule 4.12

	 	Software
	Schedule 4.13(a)

	 	Intellectual Property Assets
	Schedule 4.13(b)

	 	Encumbrances on Intellectual Property
	Schedule 4.14

	 	Significant Contracts
	Schedule 4.15

	 	Officer Terminations; Employees
	Schedule 4.16

	 	Employee Benefit Plans
	Schedule 4.17

	 	Fifteen Largest Customers
	Schedule 4.18

	 	Taxes
	Schedule 4.19

	 	Proceedings and Judgments
	Schedule 4.20

	 	Insurance
	Schedule 4.22

	 	Related Party Transactions
	Schedule 4.23

	 	Brokerage Fees
	Schedule 8.3

	 	Buyer’s Consents
	Schedule 9.3

	 	Seller’s Consents






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LIST OF EXHIBITS




	 	 	 
	Exhibit 3.1

	 	Wire Transfer Instructions
	Exhibit 3.2(a)

	 	Escrow Agreement
	Exhibit 4.13(b)(ii)

	 	Form of Employee Confidentiality Agreement
	Exhibit 8.4(a)

	 	Bill of Sale
	Exhibit 8.4(b)

	 	Assignment and Assumption Agreement
	Exhibit 8.4(c)

	 	Assignment of Trademark
	Exhibit 8.4(g)

	 	Non-Competition Agreement






vi









 





ASSET PURCHASE AGREEMENT




     This Asset Purchase Agreement (this “Agreement”), is made as of November 14, 2006, by
and between StayOnline, Inc., a Delaware corporation with its principal executive offices at 120
Interstate North Parkway, Suite 160, Atlanta, Georgia 30339 (“Seller”), and LodgeNet
Entertainment Corporation, a Delaware corporation with principal executive offices at 3900 West
Innovation Street, Sioux Falls, South Dakota 57107 (“Buyer”).



RECITALS




     A. Seller is in the business of developing, marketing, selling, installing and servicing
wireless broadband Internet access systems and related products and services to hotels and other
locations (the “Business”).



     B. Seller desires to sell to Buyer, and Buyer desires to purchase from Seller, the Business
and substantially all of the assets associated therewith, in exchange for the consideration
specified in this Agreement, and in accordance with the terms and conditions set forth herein.



AGREEMENT




     NOW, THEREFORE, in consideration of the covenants, representations, warranties and agreements
contained herein, and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:



ARTICLE 1

DEFINED TERMS




     In addition to certain terms defined elsewhere in this Agreement, the following capitalized
terms shall have the meanings set forth as follows:



     1.1 “Accounts Receivable” means all trade accounts receivable and other rights to
payment from customers of Seller, including but not limited to all trade accounts receivables
listed on Schedule 1.1 and all trade accounts receivable representing amounts receivable in
respect of goods shipped or products sold or services rendered to customers of Seller.



     1.2 “Assumed Contracts” means all of the Contracts to which Seller is a party or by
which Seller is bound, including, unless otherwise designated, the Contracts listed on Schedule
4.14; but excluding (a) Contracts of Seller evidencing Indebtedness other than capital leases
listed on Schedule 4.14, (b) Contracts that constitute Employee Benefit Plans listed on
Schedule 4.16, (c) oral Contracts with employees for “at will” employment, (d) Contracts
that constitute Insurance Policies listed on Schedule 4.20, (e) Contracts that relate to
Seller’s equity securities, including any buy-sell agreements, stock option and warrant agreements,
(f) this Agreement and all Related Agreements entered into or to be entered into between Seller and
Buyer, or among Seller, Buyer and other parties in connection herewith, (g) at the election of
Buyer, any Contract which violates a representation or warranty contained in this Agreement, and
(h) the Contracts listed on Schedule 1.2 attached hereto.



 









 





     1.3 “Contract” means any written or oral contract, agreement, instrument, order,
arrangement, commitment or understanding of any nature, including, but not limited to, sales
orders, purchase orders, leases, subleases, data processing agreements, maintenance agreements,
license agreements, sublicense agreements, loan agreements, promissory notes, security agreements,
pledge agreements, deeds, mortgages, guaranties, indemnities, warranties, employment agreements,
consulting agreements, sales representative agreements, joint venture agreements, buy-sell
agreements, options or warrants.



     1.4 “Employee Benefit Plan” means any employee benefit plan as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), or any other
plan, program, policy or arrangement for or regarding bonuses, commissions, incentive compensation,
vacation, deferred compensation, pensions, profit sharing, retirement, payroll savings, stock
options, stock purchases, stock awards, stock ownership, phantom stock, stock appreciation rights,
medical/dental expense payment or reimbursement, disability income or protection, sick pay, group
insurance, self insurance, death benefits, employee welfare or fringe benefits of any nature.



     1.5 “Encumbrance” means any lien, security interest, pledge, mortgage, easement,
covenant, restriction, reservation, conditional sale, prior assignment, or other encumbrance,
claim, burden or charge of any nature.



     1.6 “Environmental Claims” means any and all administrative, regulatory or judicial
actions, suits, demands, demand letters, directives, claims, liens, investigations, proceedings or
notices of noncompliance or violation (in each case in writing) by any Person (including any
Governmental Authority), alleging noncompliance, violation or potential liability (including
potential responsibility or liability for costs of enforcement, investigation, cleanup,
governmental response, removal or remediation, for natural resources damages, property damage,
personal injuries or penalties or for contribution, indemnification, cost recovery, compensation or
injunctive relief) arising out of, or related to the presence, release or threatened release of any
Hazardous Substances at any location, whether or not owned or operated by Seller.



     1.7 “Environmental Laws” means any federal, state, local or foreign statute, law,
ordinance, regulation, rule, code, treaty, writ or order and any enforceable judicial or
administrative interpretation thereof, including any judicial or administrative order, consent
decree, judgment, stipulation, injunction, permit, authorization, policy, opinion or agency
requirement, in each case having the force and effect of law, relating to the pollution,
protection, investigation or restoration of the environment, health and safety as affected by the
environment or natural resources, including, without limitation, those relating to the use,
handling, presence, transportation, treatment, storage, disposal, release, threatened release or
discharge of Hazardous Substances or noise, odor, wetlands, pollution or contamination (including
any and all National Environmental Protection Act requirements).



     1.8 “Escrow Agent” means U.S. Bank, National Association.



     1.9 “Excluded Assets” means (a) all rights of Seller under its Insurance Policies; (b)
cash; (c) Seller’s Employee Benefit Plans; and (d) those assets identified on Schedule 1.9
attached hereto.



2









 





     1.10 “GAAP” means generally accepted accounting principles in the United States as set
forth in the opinions and pronouncements of the Accounting Principles Board (and its predecessors),
the Financial Accounting Standards Board, the American Institute of Certified Public Accountants,
and the Securities and Exchange Commission (“SEC”) that are applicable to the circumstances as of
the date of determination.



     1.11 “Governmental Authority” means any nation or government, any state, municipality
or other political subdivision thereof and any entity, body, agency, commission or court, whether
domestic, foreign or multinational, exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government and any executive official thereof.



     1.12 “Hazardous Substances” means any substance, waste, contaminant, pollutant or
material that has been determined by any United States federal government authority, or any state
or local government authority having jurisdiction over Seller’s Real Property, to be capable of
posing a risk of injury or damage to health, safety, property or the environment, including, but
not limited to (a) all substances, wastes, contaminants, pollutants and materials defined or
designated as hazardous, dangerous or toxic pursuant to any Law of any state in which any of
Seller’s Real Property is located or any United States Law, and (b) asbestos, polychlorinated
biphenyls (“PCBs”) and petroleum.



     1.13 “Indebtedness” means, with respect to any Person, without duplication (a) every
liability of such Person (i) for borrowed money, including all amounts that may be payable in order
to extinguish the debt, including items such as prepayment penalties, breakage costs, early
termination fees and cost reimbursements required to obtain releases from lenders, and amounts
payable on termination of any interest rate swap arrangements, (ii) evidenced by notes, bonds,
debentures or similar instruments (whether or not negotiable), (iii) capital leases, or (iv) any
contingent reimbursement obligations or amounts outstanding pursuant to any letters of credit or
similar facilities issued for the account of such Person, and (b) every liability of any other
Person of the kind described in the preceding clause (a) that such Person has guaranteed.



     1.14 “Information Technology Systems” means any combination of computer software,
firmware, computer hardware (whether general or special purpose), telecommunications capabilities
(including all voice, data and video networks) and/or other similar or related items of automated,
computerized, and/or software systems and any other networks or systems and related services that
are used or relied on by Seller for operations.



     1.15 “Insurance Policy” means any public liability, product liability, general
liability, comprehensive, property damage, vehicle, life, hospital, medical, dental, disability,
worker’s compensation, key man, fidelity bond, theft, forgery, errors and omissions, directors’ and
officers’ liability, or other insurance policy of any nature.



     1.16 “Intellectual Property Assets” means any name, corporate name, assumed fictitious
business name, trade name, trade dress, brand, slogan, design, logo, registered and unregistered
trademark, service mark and application for the registration of any of the foregoing (collectively,
“Trademarks”); all patents (including all provisional, divisionals, continuations,
continuations in part, and reissues), patent applications and inventions and discoveries that may
be patentable or unpatentable and whether or not reduced to practice (collectively,
“Patents”); all



3









 







registered and unregistered copyrights in both published works and unpublished works,
copyright applications, and copyrightable subject matter (collectively, “Copyrights”); all
rights in mask works; all know-how, trade secrets, confidential or proprietary information,
customer and vendor lists, Proprietary Software, Software, technical information, data, process
technology, plans, drawings and blue prints, processes, methods and techniques, research and
development information, industry analyses, drawings, algorithms, etherware, specifications,
proposals, models, financial and accounting data, business and marketing plans, business method,
product right, or other intangible asset of any nature (collectively, “Trade Secrets”); and
all rights in internet web sites and internet domain names (collectively “Net Names”).



     1.17 “Judgment” means any order, writ, injunction, citation, award, decree or other
judgment of any nature of any Governmental Authority or arbitration tribunal.



     1.18 A party to this Agreement shall be deemed to have “Knowledge” of a fact or other
matter only if an officer of such party has or had actual awareness of such fact or other matter or
reasonably ought to have actual awareness of such fact or other matter in the ordinary course of
the performance of his duties as an officer, without any duty to inquire or investigate.



     1.19 “Law” means any provision of any federal, state or local law, statute, ordinance,
charter, constitution, rule or regulation.



     1.20 “Material Adverse Effect” means any change, event or effect that, individually or
in the aggregate, is materially adverse to the financial condition, financial performance or
business prospects of the Business or the Acquired Assets or materially increases Seller’s
Obligations under any of the Assumed Liabilities, regardless of whether such effect (i) was
reasonably foreseeable; or (ii) is of a type or nature inherent in the business or operations of
the party; other than any such effect attributable to or resulting (a) directly and solely from the
public announcement or consummation of the transactions contemplated by this Agreement, including
loss of vendors, customers or employees resulting directly therefrom, (b) from the compliance by
any party with its obligations under the Agreement, or (c) from any act or omission taken at the
specific written request of the other party to this Agreement.



     1.21 “Multiemployer Plan” means a multiemployer plan as defined in Section 3(37) or
Section 4001(a)(3) of ERISA.



     1.22 “Multiple Employer Plan” means any employee pension benefit plan (as defined in
Section 3(2) of ERISA) sponsored by more than one employer, at least two of whom are not under
common control as described in Sections 4063 of ERISA or 4064 of ERISA or Section 413(c) of the
Code.



     1.23 “Obligation” means any debt, liability or obligation of any nature, whether
secured, unsecured, recourse, nonrecourse, liquidated, unliquidated, accrued, absolute, fixed,
contingent, ascertained, unascertained, known, unknown or otherwise.



     1.24 “Permit” means any license, permit, approval, waiver, order, authorization, right
or privilege of any nature, granted, issued, approved or allowed by any foreign, federal, state or
local governmental body, administrative agency or regulatory authority.



4









 





     1.25 “Permitted Encumbrances” shall mean (i) liens for current Taxes not yet due and
payable, (ii) mechanics’, carriers’, workers’, repairers’, materialmen’s, warehousemen’s and other
similar liens arising or incurred in the ordinary course of the Business or which are not material
in amount, and (iii) any Encumbrances set forth on Schedule 4.6.



     1.26 “Person” means any individual, sole proprietorship, joint venture, partnership,
limited liability company, corporation, association, cooperative, trust, estate, governmental body,
administrative agency, regulatory authority or other entity of any nature.



     1.27 “Proceeding” means any demand, claim, suit, action, litigation, investigation,
arbitration, administrative hearing or other proceeding of any nature.



     1.28 “Proprietary Software” means Software (whether general or special purpose) that
is used or relied on by Seller for its operations that it (either directly or through a third
party) has developed, customized or enhanced or is in the process of doing the same, to the extent
of Seller’s proprietary interest therein.



     1.29 “Real Property” means any real estate, land, building, structure or other real
property of any nature and all appurtenant and ancillary rights thereto, including, but not limited
to, easements, covenants, water rights, sewer rights and utility rights.



     1.30 “Software” means any computer program, operating system, applications system,
firmware or software of any nature, including all object code, source code, technical manuals, user
manuals and other documentation therefor, whether in machine-readable form, programming language or
any other language or symbols, and whether stored, encoded, recorded or written on disk, tape,
film, memory device, paper or other media of any nature.



     1.31 “Superior Proposal” means any bona fide written Acquisition Proposal (as defined
in Section 11.14) that the Board of Directors of Seller determines in good faith, after
consultation with its legal and financial advisers, to be more favorable to Seller than the
transaction contemplated by this Agreement, taking into account (i) all financial and strategic
considerations, including legal, financial, regulatory and other aspects of such Acquisition
Proposal and the transaction contemplated by this Agreement, deemed relevant by the Board of
Directors, and (ii) all the terms and conditions of such Acquisition Proposal and of the
transaction contemplated by this Agreement.



     1.32 “Tangible Property” means any furniture, fixtures, leasehold improvements,
vehicles, office equipment, computer equipment, other equipment, machinery, tools, forms, supplies
or other tangible personal property of any nature.



     1.33 “Tax” means any foreign, federal, state or local income, earnings, profits, gross
receipts, franchise, capital stock, net worth, sales, use, occupancy, general property, real
property, personal property, intangible property, transfer, fuel, excise, payroll, withholding,
unemployment compensation, social security or other tax of any nature, or any deficiency, interest
or penalty imposed with respect to any of the foregoing.



     1.34 “Tax Return” means any return (including any information return), report,
statement, schedule, notice, form, declaration, claim for refund or other document or information
filed with or submitted to, or required to be filed with or submitted to, any Governmental



5









 







Authority in connection with the determination, assessment, collection or payment of any Tax
or in connection with the administration, implementation or enforcement of or compliance with any
Law relating to any Tax.



ARTICLE 2

THE TRANSACTION




     2.1 Sale and Purchase of Acquired Assets. On the Closing Date (as defined in Section
12.1), effective to the fullest extent possible at 5:00 p.m. Eastern time on the Closing Date,
and subject to the other terms and conditions of this Agreement, Seller shall sell, transfer,
assign and convey to Buyer, and Buyer shall purchase, all right, title and interest in and to the
Acquired Assets (as defined in Section 2.1(a)), free and clear of all Encumbrances other
than Permitted Encumbrances, and Seller shall assign to Buyer, and Buyer shall assume, the Assumed
Liabilities.




     (a)  Acquired Assets. The “Acquired Assets” means all assets,
properties and Intellectual Property Rights of Seller other than the Excluded Assets,
including, without limitation, all assets used by Seller in or for its Business, wherever
located and whether or not reflected on Seller’s books and records, including, but not
limited to, the following assets:




     (i) All of the assets reflected on Seller’s balance sheet, as of the Closing
Date, including but not limited to, Seller’s Accounts Receivable, prepaid expenses,
security deposits, rent escrows, and other prepayments, deposits and escrows,
provided that if Closing occurs on or prior to January 15, 2007 Seller may retain
any cash or cash equivalents on Seller’s balance sheet.




     (ii) All of Seller’s Tangible Property and Intellectual Property Assets,
including, but not limited to, all Proprietary Software and all rights in and to the
name “StayOnline” and all derivations thereof, but excluding Seller’s rights as
licensee in and to commonly available off-the-shelf Software licensed by Seller, to
the extent the same are not transferable.




     (iii) All rights of Seller under the Assumed Contracts.




     (iv) All of Seller’s rights under any noncompetition, nondisclosure or other
restrictive covenant made for the benefit of Seller in any Contract with current or
former employees of Seller, regardless of whether any such current employee accepts
an offer of employment from Buyer pursuant to Section 11.1(b).




     (v) All transferable rights under all of Seller’s Permits granted or issued to
Seller or otherwise held by Seller relating to or for the benefit of Seller, and all
transferable rights to the Software used in the Business.




     (vi) All of Seller’s rights in Real Property as specified in Section
4.11.




     (vii) All of Seller’s rights with respect to telephone numbers, telephone
directory listings and advertisements.



6









 






     (viii) All of Seller’s goodwill and customer lists, prospect lists, supplier
lists, data bases, computer media, sales and marketing materials, invoices,
correspondence, files, books and records relating to the Acquired Assets or the
Business.




     (ix) All of Seller’s claims, causes of action and other legal rights and
remedies, whether or not known as of the Closing Date, relating to Seller’s
ownership of the Acquired Assets and/or the operation of the Business.




     (x) All of Seller’s claims, causes of action, contract rights, powers and
remedies and other legal rights and remedies, whether or not known as of the Closing
Date, arising under the Assumed Contracts and all indemnification rights under such
Assumed Contracts.




     (b) Assumed Liabilities. Buyer shall assume and pay, perform and discharge
only the following liabilities of Seller and not any of the Excluded Liabilities (as defined
in Section 2.2), in accordance with the respective terms and subject to the
respective conditions thereof (collectively, the “Assumed Liabilities”):




     (i) The Obligations of Seller under those Assumed Contracts to which Seller is
a party solely to the extent such liabilities accrue or arise from and after the
Closing.




     (ii) All trade accounts payable and normal recurring accrued liabilities that
are not Excluded Liabilities that arose in the ordinary course of business and that
are included as a current liability on Seller’s books and records as consistently
maintained and that are listed on Schedule 2.1(b)(ii)(A) other than those
accounts payable and accrued liabilities for which the original payment due date is
past, unless such accounts are listed on Schedule 2.1(b)(ii)(B).




     (iii) Any Obligation of Seller described on Schedule 2.1(b)(iii).



     2.2 Excluded Liabilities. Buyer shall not assume, and shall have no liability for, any
Obligations of Seller including but not limited to those set forth on Schedule 2.2 other
than the Assumed Liabilities (the “Excluded Liabilities”). The Excluded Liabilities shall
remain the sole responsibility of Seller. Seller shall promptly pay, discharge and perform all
Excluded Liabilities in accordance with their terms.



ARTICLE 3

PURCHASE CONSIDERATION




     3.1 Purchase Price. In consideration of the sale and transfer by Seller to Buyer of the
Acquired Assets, Buyer shall pay to Seller Fifteen Million and No/100 Dollars ($15,000,000),
subject to adjustment pursuant to Section 3.1(b), Section 3.3 and Section
3.4 (the “Purchase Price”), payable as follows:




     (a) Concurrently with the execution and delivery of this Agreement, Buyer shall deliver
to Escrow Agent One Million Dollars ($1,000,000) (the “Deposit”), by wire



7









 







transfer
of immediately available funds to the Escrow Account in accordance with the Escrow Agreement
(as such terms are defined in Section 3.2(a));




     (b) At the Closing, Buyer shall (i) pay an amount equal to Twelve Million Dollars
($12,000,000), plus or minus (1) an amount equal to the Closing Purchase Price Adjustment,
as defined in Section 3.3(b), plus (2) an amount equal to the Audit Fees, as defined
in Section 11.15, plus (3) an amount equal to the Delay Adjustment, if any, as
defined in Section 3.4, minus (4) an amount equal to the Deposit plus income
actually earned thereon from the date hereof to the Closing Date, in the aggregate, by wire
transfer of immediately available funds, in the amounts and to the accounts of those Persons
identified on Exhibit 3.1, and (ii) pay Three Million Dollars ($3,000,000) (the
“Escrow Amount”) by wire transfer of immediately available funds to the Escrow
Account pursuant to Section 3.6. Seller shall provide Buyer with written wire
transfer instructions for the payment of the Purchase Price, or shall update Exhibit
3.1 to include such instructions, at least forty-eight (48) hours prior to the Closing.


Notwithstanding the foregoing, Seller shall have the option, exercisable by notice to Buyer not
later than ten (10) business days prior to the Closing Date, to permit certain stockholders of
Seller and/or their affiliates who have guaranteed Seller’s obligations to Technology Investment
Capital Corp. (the “Guarantors”) to, by separate written agreement reasonably acceptable to
Buyer and the Guarantors, jointly and severally guarantee Seller’s indemnity obligations to Buyer
under Section 13.1 of this Agreement up to the Escrow Amount and for the period
contemplated by the Escrow Agreement (as hereinafter defined) rather than having Buyer pay the
Escrow Amount into the Escrow Account as contemplated by Section 3.1(b)(ii). In that
event, (i) to support such guarantee, the Guarantors and Buyer will either enter into an escrow
agreement, containing substantially the same principal terms and provisions as the Escrow
Agreement, provided that the Guarantors shall designate a representative to act on behalf of the
Guarantors under the Agreement, and deposit Three Million Dollars ($3,000,000) cash into escrow
under such new agreement, or provide irrevocable, clean letter of credit arrangements with a term
of not less than eighteen (18) months from the Closing Date (“Letters of Credit”) in the
amount of $3,000,000, which arrangements are satisfactory in form and substance to Buyer in its
sole discretion, not later than the Closing Date; (ii) the deposit of the Escrow Amount into the
Escrow Account by Buyer, as contemplated by Section 3.1(b)(ii), will not be made; and (iii)
the portion of the Purchase Price payable by Buyer at Closing pursuant to Section 3.1(b)(i)
will be increased by Three Million Dollars ($3,000,000).




     3.2 Deposit.




     (a) Concurrently with the execution and delivery of this Agreement, Seller and Buyer
shall execute and deliver an escrow agreement substantially in the form of Exhibit
3.2(a) attached hereto, by and among Seller, Buyer and Escrow Agent (the “Escrow
Agreement”). The Deposit shall be held in escrow in an account (the “Escrow
Account”) of immediately available funds in accordance with the applicable terms and
conditions of this Agreement and of the Escrow Agreement and will be disbursed as provided
herein and in the Escrow Agreement.




     (b) If the transactions contemplated by this Agreement are consummated, then the
Deposit plus income actually earned thereon as contemplated by the Escrow



8









 







Agreement shall be
released from escrow and paid to Seller by Escrow Agent and credited against the Purchase
Price payable by Buyer to Seller at the Closing pursuant to Section 3.1(b).




     (c) If the transactions contemplated by this Agreement are not consummated by reason of
a default by Buyer under the terms of this Agreement, then Seller shall be entitled to
retain the Deposit, plus income actually earned thereon, as liquidated damages for such
default. For purposes of this Section 3.2(c), Buyer shall be deemed in default if
Buyer (i) shall fail to materially perform any of the covenants or agreements of Buyer
contained in this Agreement, (ii) shall fail to satisfy any of the conditions set forth in
Sections 9.1, 9.2, 9.7, or 9.8 within ten (10) business days
after Seller has satisfied the conditions set forth in Sections 8.1, 8.2,
8.3, 8.4, 8.7, 8.8, and 8.9, or (iii) shall refuse
to consummate, or have insufficient funds to consummate, the transactions contemplated by
this Agreement when Seller has shown itself able and willing to consummate such transactions
and has performed all the covenants and agreements required to have been performed by Seller
hereunder; provided, however, that Buyer shall not be deemed to be in default under clause
(ii) or (iii) of this sentence until one hundred eighty (180) days have elapsed from the
date of this Agreement. The parties agree that time is of the essence for the consummation
of the transactions contemplated by this Agreement and that the amount of damages caused by
a default by Buyer hereunder would be very difficult to calculate. Accordingly, the parties
agree that the provision for liquidated damages contained in this Section 3.2 shall
not be construed as a penalty provision. The retention by Seller of the Deposit plus income
actually earned thereon shall be Seller’s sole and exclusive remedy hereunder.




     (d) If the transactions contemplated by this Agreement are not consummated for reasons
that do not entitle Seller to retain the Deposit pursuant to Section 3.2(c), then
Buyer shall be entitled to an immediate return of the Deposit plus income actually earned
thereon through the date of such return, which shall be Buyer’s sole and exclusive remedy
hereunder unless Seller has committed a breach or default under this Agreement and the
transactions contemplated by this Agreement are not consummated as a result of Seller’s
willful and wrongful failure to consummate such transactions under circumstances under which
all conditions to the obligations of Seller set forth in Article 9 have been
satisfied or waived (other than any conditions that have not been satisfied as a result of
any action or inaction on the part of Seller), in which event Buyer shall be entitled to
pursue any rights or remedies existing at law or in equity with respect to such default.



     3.3 Working Capital Adjustment.




     (a) “Working Capital” as of a given date shall mean as recorded on the balance
sheet as of that date in accordance with GAAP the net of accounts receivable (net of reserve
for doubtful accounts) plus inventory (net of reserve for obsolescence) plus other current
assets minus Assumed Liabilities and minus other deferred revenue of Seller. The
anticipated Working Capital of Seller as of the signing of this Agreement shall be $250,000
(the “Target Working Capital”). Seller shall, not less than three (3) business days
prior to the Closing, estimate the Working Capital as of Closing, based on the balance sheet
of Seller as of the prior month-end, but brought forward to include any



9









 







known changes in the
components of Working Capital since such prior month-end, supporting documentation for all
of which shall be provided to Buyer for its review (the “Estimated Working
Capital”). Within sixty (60) days following the Closing, Buyer shall calculate the
Working Capital as of the date of the Closing (the “Actual Working Capital”). On or
prior to the thirtieth (30th) day after Seller receives Buyer’s calculation of the Actual
Working Capital, Seller may give Buyer a written notice that it objects (an “Objection
Notice”) to Buyer’s calculation. Any Objection Notice shall specify the dollar amount
of any objection and a reasonably detailed summary of the basis for objection. Except to
the extent Seller timely objects to a specific determination set forth in Buyer’s
calculation of the Actual Working Capital pursuant to an Objection Notice delivered to Buyer
within such thirty (30) day period, Buyer’s calculation of the Actual Working Capital will
be conclusive and binding upon the parties. If Seller delivers a timely Objection Notice,
then Buyer and Seller shall negotiate in good faith to resolve their disputes raised
pursuant to a timely Objection Notice. If Buyer and Seller are unable to resolve any
disputes related to the calculation of the Actual Working Capital within thirty (30)
business days following the delivery of the Objection Notice, then Buyer shall retain a
mutually-acceptable accounting firm (“Independent Accounting Firm”) to resolve the
dispute as soon as practicable, and in any event within thirty (30) days after Buyer retains
such firm. The Actual Working Capital as determined by the Independent Accounting Firm will
be conclusive and binding upon the Parties hereto and will constitute the Actual Working
Capital for all purposes of this Agreement. The fees and expenses of the Independent
Accounting Firm in connection with its review of the Actual Working Capital shall be paid
one-half by Seller and one-half by Buyer.




     (b) If, as of the Closing Date, the Estimated Working Capital is (i) less than the
Target Working Capital, the Purchase Price payable at the Closing will be reduced by the
difference between the Estimated Working Capital and the Target Working Capital or (ii) more
than the Target Working Capital, the Purchase Price payable at the Closing will be increased
by the difference between the Estimated Working Capital and the Target Working Capital (such
increase or decrease, the “Closing Purchase Price Adjustment”). If the Actual
Working Capital is (i) less than the Estimated Working Capital, the Purchase Price will be
reduced by the difference between the Estimated Working Capital and the Actual Working
Capital or (ii) more than the Estimated Working Capital, the Purchase Price will be
increased by the difference between the Estimated Working Closing and the Actual Working
Capital (the “Final Purchase Price Adjustment”). In the event of a reduction to the
Purchase Price pursuant to the Final Purchase Price Adjustment, Seller will be liable for
the amount of the reduction and will pay to Buyer, within five (5) business days of the
calculation of the Actual Working Capital being
declared final pursuant to Section 3.3(a) (the “Balance Sheet Date”),
the amount of such reduction plus interest accruing on such amount at a rate of six percent
(6%) per annum from the Closing Date until such amount is paid, in immediately available
funds to an account specified by Buyer. In the event of an increase to the Purchase Price
pursuant to the Final Purchase Price Adjustment, Buyer will pay to Seller, within five (5)
business days of the Balance Sheet Date, the amount of such increase plus interest accruing
on such amount at a rate of six percent (6%) per annum from the Closing Date until such
amount is paid, in immediately available funds to an account specified by Seller. Any
amount paid pursuant to this Section 3.3(b) will be treated as an adjustment to the
Purchase Price for all purposes. Notwithstanding the foregoing, in the event of a net



10









 








reduction to the Purchase Price pursuant to this Section 3.3(b), Seller’s
obligations will first be satisfied from the Escrow Account, with any additional payment
being made directly by Seller, and Buyer and Seller shall promptly execute the necessary
documents instructing Escrow Agent to make the applicable payment to Buyer.



     3.4 Adjustments for Delays in Closing. If the transactions contemplated by this Agreement
are not consummated by the later of (i) January 15, 2007 or (ii) five (5) business days after
Seller satisfies all of the conditions to closing under Article 8, for any reason other than the
failure by Seller to perform any of the covenants or agreements of Seller contained in this
Agreement ((i) or (ii), whichever occurs later, is hereinafter referred to as the “Trigger
Date”), then an amount equal to the aggregate of the Delay Adjustments (as defined below) shall
be added to the Purchase Price payable at Closing pursuant to Section 3.1(b). The Delay
Adjustment for each 30-day period that elapses after the Trigger Date, until the Closing Date shall
be equal to the lesser of (i) Two Hundred Fifty Thousand Dollars ($250,000) or (ii) the amount
invested in, contributed to or lent to Seller by its stockholders during such 30-day period.



     3.5
Allocation of Purchase Price. Buyer shall prepare an allocation of the Purchase Price
among each of the Acquired Assets and the Assumed Liabilities. Buyer shall deliver such allocation
to Seller within ninety (90) days after the Closing Date. Seller shall provide its consent to such
allocation within fifteen (15) days of delivery; such consent not to be unreasonably withheld.
Such allocation shall be reported by both Buyer and Seller on Internal Revenue Service Form 8594,
Asset Acquisition Statement, which will be filed with Buyer’s and Seller’s Federal Income Tax
Return for the tax year that includes the Closing Date. The agreed-upon allocation shall be
conclusive and binding upon Buyer and Seller for all purposes, and neither Buyer nor Seller shall
file any Tax Return or other document with, or make any statement or declaration to, any
Governmental Authority that is inconsistent with such allocation. If the Purchase Price is
adjusted pursuant to the applicable provisions of this Agreement, such allocation shall be revised
to reflect such adjustment in a manner mutually acceptable to Buyer and Seller.



     3.6 Escrow. Absent an election by Seller pursuant to Section 3.1 to permit Buyer and
the Guarantors to enter into a separate arrangement to secure the indemnity obligations of Seller,
the following provisions shall apply. On or prior to the Closing Date, Buyer shall deliver to
Escrow Agent the
Escrow Amount. The Escrow Amount will be held by Escrow Agent in the Escrow Account, to secure the
indemnity obligations of Seller under Section 13.1 of this Agreement, in accordance with
the applicable terms and conditions of this Agreement and of the Escrow Agreement. The Escrow
Amount will be held in the Escrow Account for such purpose for a period of eighteen (18) months
following the Closing Date or such shorter period as Buyer may agree, and at the end of such
period, all amounts not theretofore released to or upon the instruction of Buyer in respect of
Losses (as defined in Section 13.1) for which Seller is obligated to indemnify the Buyer
Indemnified Parties (as defined in Section 13.1), together with all income actually earned
thereon, shall be released to or upon the instruction of Seller, all in accordance with the
applicable terms and conditions of this Agreement and of the Escrow Agreement, provided that an
amount equal to the amount claimed by Buyer pursuant to any unresolved indemnification claims shall
remain in the Escrow Account until such claims are resolved. The fees and expenses of Escrow Agent
shall be paid first out of income actually earned on amounts held in the Escrow Account (including
the Deposit and the Escrow Amount), and to the extent such income is not sufficient therefor, such
fees and expenses shall be paid one-half by Seller and one-



11









 







half by Buyer. References in this
Article 3 to the release of amounts from the Escrow Account (including the application of
the Deposit to the Purchase Price pursuant to Section 3.1(b) and Section 3.2(b))
with income earned thereon shall be deemed to refer to the portion of such income, if any,
remaining after the satisfaction in full of the Escrow Agent’s fees and expenses in accordance with
the Escrow Agreement.



ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF SELLER




     As of the date hereof, Seller represents and warrants to and for the benefit of Buyer as
follows:



     4.1 Organization. Seller is a corporation duly organized, validly existing and in good
standing under the Laws of Delaware. Seller has full corporate power and authority to own the
Acquired Assets, conduct the Business as and where presently conducted, and enter into and perform
this Agreement and the Assignment and Assumption Agreement and all other agreements and documents
contemplated by this Agreement (the “Related Agreements”) to which Seller is a party.
Seller is duly qualified to do business in the jurisdictions listed on Schedule 4.1, and
Seller is not required to be qualified in any other jurisdiction except where the failure to be so
qualified would not have, and could not reasonably be expected to have, a Material Adverse Effect.
Schedule 4.1 states: (a) Seller’s exact legal name; and (b) all fictitious, assumed or
other names that are registered or used by it or under which it or its predecessors have done
business at any time. Accurate and complete copies of Seller’s certificate of incorporation and
bylaws, each as amended to date (“Organizational Documents”), have been delivered to Buyer.
Except as set forth on Schedule 4.1, Seller has no subsidiaries and does not own any
securities of any corporation or any other interest in any Person.



     4.2 Effect of Agreement. The execution, delivery and performance of this Agreement and the
Related Agreements by Seller and the consummation by Seller of the transactions contemplated hereby
and thereby:
(a) have been duly authorized by its Board of Directors and have been, or will be on or prior to
the Closing Date, duly authorized by its shareholders in accordance with Delaware law and Seller’s
Organizational Documents; (b) do not constitute a violation or default under the Organizational
Documents of Seller; (c) except as set forth on Schedule 4.2, do not constitute a default
or breach of (after the giving of notice, passage of time or both), or result in the termination of
any Assumed Contract to which Seller is a party or by which Seller is bound; (d) do not constitute
a material violation of any Law or Judgment applicable to Seller or the Acquired Assets; (e) except
as stated on Schedule 4.2, do not require the consent of any Person; (f) except as stated
on Schedule 4.2, do not result in the acceleration or adverse change in any material
Obligation of Seller; and (g) do not result in the creation of any Encumbrance upon, or give to any
other Person any interest in, any of the Acquired Assets. No Person has a right of first refusal
or other preemptive right to acquire the Business or the Acquired Assets. This Agreement and the
Related Agreements to which Seller is a party constitute the valid and legally binding agreements
of Seller, enforceable against Seller in accordance with their respective terms.



     4.3 Financial and Corporate Records. Seller’s books and records are and have been properly
prepared and maintained in accordance with GAAP and, except as set forth on Schedule 4.3,
are accurate and complete in all material respects.



12









 





     4.4 Compliance with Law. The operation of the Business and Seller’s ownership, possession
and use of the Acquired Assets comply in all material respects with all Laws applicable to Seller,
the Business or the Acquired Assets. Except as set forth on Schedule 4.4, Seller has
obtained and holds all Permits required for the lawful operation of the Business as and where the
Business is presently conducted, except where the failure to obtain and maintain such Permits would
not have a Material Adverse Effect. All Permits relating to the Business held by Seller are listed
on Schedule 4.4.



     4.5 Financial Statements. Seller has provided to Buyer a copy of the audited balance sheet
and notes thereto of Seller as of December 31, 2005, and the unaudited balance sheet of Seller as
of December 31, 2004, and unaudited statement of cash flows, statement of income and statement of
changes in stockholders equity, and notes thereto of Seller for the fiscal year ended December 31,
2005 (the “Annual Financial Statements”). Seller has provided to Buyer copies of the
unaudited balance sheet and statements of cash flows, income and changes in stockholders equity of
Seller as of and for the nine-month period ended September 30, 2006 (the “Interim Financial
Statements” and, together with Annual Financial Statements, the “Financial
Statements”). The Financial Statements were prepared in accordance with GAAP and present
fairly in all material respects the financial condition and results of operation of Seller as of
such dates and for such periods. The financial statements to be delivered by Seller to Buyer after
the date hereof pursuant to Sections 6.5 and 8.8 hereof will fairly present, in all
material respects, the financial position of Seller, as at the respective dates thereof and the
results of operations and cash flows for the respective periods then ended (subject in the case of
unaudited information to normal, recurring year-end
adjustments that will not be material either individually or in the aggregate and to any other
adjustments described therein) in conformity with GAAP. Except as set forth on Schedule 4.5,
Seller’s independent auditors have not advised Seller that they have identified any control
deficiency, significant deficiency or material weakness in the system of internal control over
financial reporting (each term as defined in Auditing Standard No. 2 of the Public Company
Accounting Oversight Board) utilized by Seller. Neither Seller nor, to Seller’s Knowledge , any of
its employees or Seller’s independent auditors have identified or been made aware of (i) any fraud,
whether or not material, that involves Seller’s management or other employees who have a role in
the preparation of financial statements or the internal control over financial reporting utilized
by Seller or (ii) any claim or allegation regarding the foregoing. Schedule 4.5 includes a
list of all of Seller’s revenues by NAICS codes for the years ended December 31, 2005 and December
31, 2002 in the format required by item 5 of the Hart-Scott-Rodino Notification and Report Form.



     4.6 Acquired Assets; Sufficiency. Seller has provided to Buyer a detailed list of the
Acquired Assets which is true and correct in all material respects. Except as set forth on
Schedule 4.6, Seller has good and marketable title to all of the Acquired Assets and has
the right to transfer all right, title and interest in the Acquired Assets to Buyer, free and clear
of any Encumbrance. The Acquired Assets, together with the rights related thereto, shall provide
Buyer with the means and capability to perform, in all material respects, the obligations of Buyer
with respect to the Assumed Liabilities in substantially the same manner as such obligations have
been performed by Seller prior to the Closing and otherwise to conduct the Business immediately
after the Closing in the ordinary course thereof and in accordance with past practices. Tangible
Property included in the Acquired Assets is in good and serviceable condition (subject to normal
wear and tear) and is suitable for the uses for which intended.



13









 





     4.7 Absence of Undisclosed Liabilities. Except as set forth on Schedule 4.7,
Seller has not incurred, and neither the Acquired Assets nor Seller is subject to, any material
Obligations (whether accrued, absolute, contingent or otherwise) which are not shown or reflected
on the Financial Statements.



     4.8 Operations Since December 31, 2005. Except as set forth on Schedule 4.8, from
December 31, 2005 (or such other date indicated below) to the date of this Agreement, Seller has
conducted its business in the ordinary course consistent with past practice and:




     (a) Seller has not (i) created or assumed any Encumbrance upon any of the Acquired
Assets; (ii) incurred any Obligation in excess of $50,000; (iii) made any loan or advance to
any Person (other than advances of travel expenses to employees in the ordinary course of
business); (iv) assumed, guaranteed or otherwise become liable for any Obligation of any
Person; (v) committed for any capital expenditure in excess of $50,000; (vi) purchased,
leased, sold, abandoned or otherwise acquired or disposed of any asset or property
identified within the Acquired Assets having a value in excess of $50,000; (vii) waived any
right or canceled any debt or claim; (viii) assumed or entered into any Significant
Contract, other than those included in the Significant Contracts listed
on Schedule 4.14, (ix) declared, set aside or paid any dividend or distribution
on any class of its equity securities, (x) since September 30, 2006, increased compensation
payable or to become payable to its officers or employees or any increase in any bonus,
insurance, pension or other benefit, payment or arrangement made to, for or with such
officers or employees, (xi) changed accounting methods, principles or practices except in
accordance with GAAP (all of which changes are set forth on Schedule 4.8), or (xii)
taken any action that, if taken during the period from the date hereof through Closing,
would constitute a breach of Sections 6.2 and 6.3 hereof.




     (b) There has been no Material Adverse Effect affecting Seller or the Acquired Assets.



     4.9 Accounts Receivable. All of Seller’s Accounts Receivable arose in the ordinary course
of business and are proper and valid accounts receivable. There are no material (individually or
in the aggregate) refunds, discounts or rights of setoff or assignment affecting any such Accounts
Receivable that are not reflected on the Financial Statements. Proper amounts of deferred revenues
appear on Seller’s books and records, in accordance with GAAP. None of the Accounts Receivable are
from Governmental Authorities subject to Assignment of Claims Act or any state law counterparts.



     4.10 Tangible Property. Except as set forth on Schedule 4.6, Seller has good and
valid title to all of its Tangible Property, free and clear of any Encumbrances other than
Permitted Encumbrances. All of Seller’s Tangible Property is located at the Facilities (as defined
in Section 4.11) or to the extent not material, is in the possession of Seller’s field
personnel, and Seller has the full and unqualified right to require the immediate return of any of
its Tangible Property that is not located at the Facilities.



     4.11 Real Property. Seller owns no Real Property. Schedule 4.11 lists all Real
Property leased by Seller (the “Facilities”), showing location, rental cost, landlord,
square footage and lease expiration date of each respective leased Real Property, together with
details of



14









 







any security deposit and other prepaid amounts made or owing in respect of each Real
Property lease. To Seller’s Knowledge, the Real Property is not subject to any rights of way,
building use restrictions, exceptions, variances, reservations, or limitations on use of any
nature, except for zoning laws and other land use restrictions, which would prohibit the operation
of Seller’s Business as presently conducted. Seller has heretofore delivered or made available to
Buyer true, correct and complete copies of all Real Property leases, including all modifications,
amendments and supplements thereto. Each Real Property lease is valid, binding and in full force
and effect, and as of the Closing all amounts currently owing pursuant to the Real Property leases
will have been paid in full. Seller is not in default or breach in any material respect under any
Real Property lease and no event or circumstance has occurred that, with notice or lapse of time or
both, would constitute any material event of default thereunder. Seller has not received notice
of, nor has there been any, threatened default by any landlord under any Real Property lease. All
required consents, approvals or authorization of, filing with, or notice to, any party to any Real
Property lease in
connection with the transactions contemplated by this Agreement have been completed or will be
obtained prior to Closing.



     4.12 Software. Schedule 4.12 is an accurate and complete list and description of
all Software and Proprietary Software owned, marketed, licensed, used or under development by
Seller. Except as otherwise provided on Schedule 4.12, Seller has good and valid title to
all Proprietary Software listed on Schedule 4.12 and has the full right to use and transfer
to Buyer all of Seller’s Software and Proprietary Software listed on Schedule 4.12, free
and clear of any Encumbrance (except for restrictions contained in licensed commercially available
Software other than Proprietary Software). None of Seller’s Proprietary Software listed on
Schedule 4.12, or Seller’s uses of such Proprietary Software, has violated or infringed
upon, or is violating or infringing upon, any Software or other intellectual property of any
Person. To Seller’s Knowledge, no Person is violating or infringing upon, or has violated or
infringed upon at any time, any of Seller’s Proprietary Software listed on Schedule 4.12.
To the Knowledge of Seller, the documentation and source code with its embedded commentary,
descriptions, and indicated authorship, the specifications and the other informational materials
that describe the operation, functions, and technical characteristics applicable to the Proprietary
Software listed on Schedule 4.12 is complete in all material respects and sufficient to
permit Buyer to support and maintain the business of Seller as currently conducted. Seller has
taken reasonably prudent actions (determined by reference to the actions of companies of a similar
size in similar business lines) necessary to maintain the Proprietary Software as protectable trade
secrets. Seller has taken reasonably prudent actions (determined by reference to the actions of
companies of a similar size in similar business lines) to protect the data contained in its
Information Technology Systems related to its business and protect against the existence of (i) any
protective, encryption, security or lock-out devices that might in any way interrupt, discontinue,
or otherwise adversely affect the use of such Information Technology Systems; and (ii) any
so-called computer viruses, worms, trap or back doors, Trojan horses or any other instructions,
codes, programs, data or materials (collectively, “Malicious Instructions”) that could
improperly interfere with the operation or use of such Information Technology Systems. None of the
Information Technology Systems related to the business of Seller has experienced bugs, failures,
breakdowns, continued substandard performance, Malicious Instructions, data losses, data-integrity
problems, hacking attempts or security breaches since January 1, 2005, that have caused any
substantial disruption or interruption in, or to the use of, any such Information Technology
Systems. Seller has not provided the source code for any Proprietary Software to any other Person,
directly or indirectly,



15









 







by license, transfer, sale, escrow, or otherwise, or granted permission to
any other Person to reverse engineer, disassemble, or decompile the Proprietary Software.



     4.13 Intellectual Property Assets.




     (a) Schedule 4.13(a) contains a complete and accurate list and summary
description of all registered Trademarks, Patents, Copyrights and Net Names and all of
Seller’s Contracts relating to the Intellectual Property Assets, including any royalties
paid or received by Seller, and all material unregistered Intellectual Property Assets.
Seller has delivered to Buyer accurate and complete copies of any registrations for
Intellectual Property Assets and any such Contracts, except for any license implied by the
sale of a product and licenses for commonly available Software programs under which Seller
is
the licensee. All of Seller’s rights related to the Intellectual Property Assets are
valid and enforceable. There are no outstanding and, to Seller’s Knowledge, no threatened
disputes or disagreements with respect to any such registration or Contract. No allegations
have been asserted or, to Seller’s Knowledge, threatened that the Intellectual Property
Assets violate or infringe upon any intellectual property or other rights of any other
person. Seller has not received a notice that it is required to license any Person’s
intellectual property for which it does not currently have a license. No customer Contract
transfers ownership of any Intellectual Property Assets to the customer, and Seller has not
transferred ownership rights in any Intellectual Property Assets to (i) Hilton Hotels
Corporation under the Preferred Vendor Services Agreement, dated January 12, 2004 or (ii)
SITA Information Networking Computing USA Inc. (“SITA”), the City of Atlanta
Department of Aviation or the Hartsfield-Jackson Atlanta International Airport under the
Agreement with SITA described on Schedule 4.19.




     (b) Except as set forth in Schedule 4.13(b):




     (i) the Intellectual Property Assets are all those necessary for the operation
of the Business as it is currently conducted. Seller is the owner or licensee of all
right, title and interest in and to each of the Intellectual Property Assets, free
and clear of all Encumbrances, and has the right to use without payment to a third
party all of the Intellectual Property Assets, other than in respect of licenses
listed in Schedule 4.13(a).




     (ii) all current employees of Seller have executed, or will execute prior to
the Closing Date, written Contracts with Seller substantially in the form of
Exhibit 4.13(b)(ii) that assign to Seller all rights to any inventions,
improvements, discoveries or information relating to the Business.




     (iii) All of the Intellectual Property Assets (other than commonly available
Software licensed by Seller as licensee) are assignable to Buyer without the
requirement of any consent or the payment of any fees.




     (c) Trademarks.




     (i) The name “StayOnline” has been registered as a service mark with the United
States Patent and Trademark Office (the “PTO”), and such registration is
currently in compliance with all formal requirements of Law (including the



16









 







timely
post-registration filing of affidavits of use and incontestability and renewal
applications), is valid and enforceable and is not subject to any maintenance fees
or taxes or actions falling due within ninety (90) days after the Closing Date.




     (ii) Seller’s registered Trademark has not been and is not now involved in any
opposition, invalidation or cancellation Proceeding and, to Seller’s Knowledge, no
such action is threatened.




     (iii) To Seller’s Knowledge, there is no trademark registered with, or
trademark application pending with, the PTO of any other Person potentially
interfering with or infringing on Seller’s registered Trademark.




     (iv) All products and materials containing Seller’s registered Trademark bear
the proper federal registration notice where permitted by law.




     (d) Trade Secrets. Seller has taken reasonably prudent actions (determined by
reference to the actions of companies of a similar size in similar business lines) to
protect the secrecy, confidentiality and value of all Trade Secrets.




     (e) Net Names. All Net Names have been registered in the name of Seller and
are in compliance with all formal requirements of law. No Net Name has been or is now
involved in any dispute, opposition, invalidation or cancellation Proceeding and, to
Seller’s Knowledge, no such action is threatened with respect to any Net Name.



     4.14 Significant Contracts.




     (a) For the purposes of this Agreement, “Significant Contracts” means (a) all
of the Contracts to which Seller is a party or by which Seller is bound under which Seller’s
payment obligations, or Seller’s rights to receive payment, exceed $25,000 in any 12-month
period or $100,000 over the term of the Contract, or on which Seller is otherwise
substantially dependent in connection with the conduct of the Business, (b) any agreement
with a customer (including any master agreement pursuant to which Seller has entered into
multiple service agreements covering individual hotels) under which Seller’s right to
receive payment exceeds $25,000 in any 12-month period or $50,000 over the term of the
Contract, (c) any outstanding purchase order or group of purchase orders, or understandings
or commitments payable to the same payee pursuant to which the amount payable to Seller
exceeds $25,000, (d) any agreement governing a general or limited partnership, limited
liability company or other form of joint venture to which Seller is a party or by which
Seller is bound, (e) any agreement under which Seller has created, incurred, assumed or
guaranteed or may be obligated to create, incur, assume or guarantee any Indebtedness or any
capitalized lease obligation in an amount in excess of $25,000 or under which Seller has
imposed an Encumbrance on any of Seller’s assets having a book value in excess of $5,000,
(f) any agreement, arrangement or commitment under which Seller has agreed or committed to
advance or loan or has advanced or loaned any amount to any of its directors, officers or
employees or any family member thereof, other than advances with respect to reasonable and
customary business expenses incurred in the ordinary course of business, (g) any agreement,
arrangement or commitment entered into outside the ordinary course of business and pursuant
to which any obligations or liabilities (whether absolute, contingent or otherwise) remain
outstanding,



17









 







(h) any employment, bonus or consulting agreement, arrangement or commitment
involving potential payments in excess of $100,000, (i) any agreement that contains any
preferential or “most favored nations” provisions, (j) any agreements that guarantee any
person a particular amount of payment irrespective of such person’s performance of any of
its obligations under such agreement, (k) any agreement that contains a restriction on
assignment or that requires payment or results in a modification of the terms or termination
of the agreement on a change of control, (l) any agreement that prohibits the incurrence of
a lien on Seller’s assets, (m) any agreement involving indemnification for obligations of or
losses or damages incurred by third parties that are not otherwise included in an Assumed
Contract, or (n) any agreement pursuant to which Seller has acquired or is obligated to
acquire any material portion of the assets or business of any
other person since Seller’s date of incorporation, or any amendments, modifications or
supplements to any of the foregoing.




     (b) Each of the Significant Contracts constitutes a valid and binding obligation of
Seller, is in full force and effect and is enforceable against Seller in accordance with its
terms, subject to general equitable principles (regardless of whether such enforceability is
considered in a proceeding at equity or at law), and except as enforceability thereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws of general application relating to creditors’ rights. Set forth on Schedule
4.14 is an accurate and complete list of all Significant Contracts. Seller has provided
Buyer a true and complete copy of each Significant Contract. Except as set forth on
Schedule 4.14, with respect to each of the Significant Contracts, Seller is not in
default thereunder in any material respect nor would be in default thereunder in any
material respect with the passage of time, the giving of notice or both. Except as set
forth on Schedule 4.14, to Seller’s Knowledge, none of the other parties to any
Significant Contract is in default thereunder in any material respect or would be in default
thereunder with the passage of time, the giving of notice or both. Except as set forth on
Schedule 4.14, Seller has not given or received any notice of default or notice of
termination with respect to any Significant Contract. The Significant Contracts are all the
material Contracts necessary and sufficient to operate the Business as currently operated.
Except as set forth on Schedule 4.14, there are no currently outstanding proposals
or offers submitted by Seller to any customer, prospect, supplier or other Person which, if
accepted, would result in a legally binding Significant Contract of Seller.



     4.15 Employees and Independent Contractors. Except as limited by any employment Contracts
listed on Schedule 4.14 and except for any limitations of general application which may be
imposed under applicable employment Laws, Seller has the right to terminate the employment of each
of its employees at will and to terminate the engagement of any of its at will independent
contractors without payment to such employee or independent contractor other than for services
rendered through termination and without incurring any penalty or liability other than liability
for severance pay in accordance with the employment Contracts listed on Schedule 4.14.
Seller is in material compliance with all Laws respecting employment practices. Seller has not
been a party to or bound by any union or collective bargaining Contract, nor is any such Contract
currently in effect or being negotiated by or on behalf of Seller and, to Seller’s Knowledge, there
are no union organizing activities involving Seller’s employees. Seller has not experienced any
labor problem that was or is material to the Business. Seller’s relations with its



18









 







employees are
currently on a satisfactory and normal basis. Except as indicated on Schedule 4.15, no
officer of Seller has indicated to Seller an intention to terminate his employment with Seller. To
the Knowledge of Seller, no officer, employee or independent contractor of Seller is in violation
of any term of any contract, proprietary information agreement, noncompetition agreement or any
other agreement or any restrictive covenant or any other common law obligation to a former employer
relating to the right of any such person to be engaged by Seller or to the use of trade secrets or
proprietary information of any such former employer. Seller is not delinquent in payments to any
of its employees for any wages, salaries, commissions, bonuses, perquisites or any other form of
compensation for any services performed by them or amounts required to be reimbursed to such
employees. Schedule 4.15 sets forth a complete and accurate list of the following
information for each employee of Seller: name, job title, location in which employed, current
compensation paid or payable, and service credited for purposes of vesting and eligibility to
participate under any Employee Benefit Plan listed on Schedule 4.16.



     4.16 Employee Benefit Plans. Except as set forth on Schedule 4.16, Seller does not
sponsor, maintain or contribute to, or have any ongoing Obligations with respect to, any Employee
Benefit Plan, including, but not limited to, any employee benefit plan as defined in ERISA, with
respect to employees of Seller. Copies of all Employee Benefit Plans described on Schedule
4.16 have been delivered to Buyer along with copies of all summary plan descriptions, the most
recent determination letter received from the Internal Revenue Service, the two most recent years’
Form 5500s and financial reports, and any notices to or from the Internal Revenue Service or any
office or representative of the Department of Labor or any similar Governmental Authority. With
respect to each Employee Benefit Plan described on Schedule 4.16, Seller has operated and
currently operates such plan in compliance with the plan documents and all applicable Laws,
including without limitation ERISA and the Internal Revenue Code of 1986, as amended (the
“Code”). No liability or contingent liability under Title IV or Section 302 of ERISA has
been incurred by Seller or any ERISA Affiliate that has not been satisfied in full, and neither
Seller nor any ERISA Affiliate made, or was required to make, contributions to any Employee Benefit
Plan subject to Title IV of ERISA during the last six years ended prior to the Closing Date.
Neither Seller nor any ERISA Affiliate sponsors or ever has sponsored, maintained, contributed to
or incurred an obligation to contribute to any Multiemployer Plan or to a Multiple Employer Plan.
There are no actions, suits or claims pending or, to the Knowledge of Seller, threatened (other
than routine claims for benefits) in writing with respect to or relating to any Employee Benefit
Plan. To the Knowledge of Seller, no event has occurred and there currently exists no condition or
set of circumstances in connection with which Seller or any of its ERISA Affiliates could be
subject to any liability (other than routine claims for benefits) under the terms of any Employee
Benefit Plan, ERISA, the Code, or any other law applicable to Seller’s Employee Benefit Plans.
“ERISA Affiliate” means any entity which is part of a “controlled group” with Seller or is
under “common control” with Seller, or is treated as employed by a single employer with Seller
(within the meaning of Sections 414(b), (c), (m) or (o) of the Code).



     4.17 Customers, Prospects and Suppliers. Each of the fifteen (15) largest customers of
Seller (measured by the total amount paid during the nine (9) months ended September 30, 2006 by
such customers to Seller for its services and grouping as one customer multiple franchisees of a
single franchisor with which Seller has contracted) (the “Fifteen Largest Customers”) has
signed a Contract and is listed on Schedule 4.17. Seller has previously delivered to Buyer
a list



19









 







of Seller’s prospects and proposals with respect to its Business. Schedule 4.17
lists such prospects to which Seller has made a proposal that, if accepted, would reasonably be
expected to cause such prospect to become one of Seller’s fifteen (15) largest customers during the
first twelve (12) months of the resulting agreement. All of the proposals made to the prospects
listed on Schedule 4.17 are still pending and have not been rejected. Except as set forth
on Schedule 4.17, none of the Fifteen Largest Customers has given notice or otherwise
indicated to Seller that it will or intends to terminate or not renew any Significant Contract
before the scheduled expiration date or otherwise terminate
its relationship with Seller and since December 31, 2005, there has not been any material adverse
change in the business relationship of Seller with any of the Fifteen Largest Customers. To
Seller’s Knowledge, the transactions contemplated by this Agreement will not have a Material
Adverse Effect on Buyer’s relations with any of the Fifteen Largest Customers. There has not been
any Material Adverse Effect since December 31, 2005 in the business relationship of Seller with any
supplier from whom Seller purchased more that five percent (5%) of the goods and services which it
purchased during the same period.



     4.18 Taxes. Except as disclosed on Schedule 4.18, Seller has timely filed all Tax
Returns and reports required to be filed by it, all of which to Seller’s Knowledge were accurately
prepared, and, except as set forth in Schedule 4.18, Seller has timely paid all Taxes or
withholdings required to be paid by it with respect to such Tax Returns. Seller has properly
withheld from payments to its employees, contractors, salesmen, agents, representatives, vendors
and other Persons all amounts required by Law to be withheld, and Seller has timely filed all Tax
Returns to be filed by it with respect to such withholdings. Except as indicated on Schedule
4.18, (a) no audit or other Proceeding relating to Taxes is pending or threatened against
Seller; (b) no notice of deficiency or adjustment has been received by Seller, by or from any
governmental taxing authority, with respect to sales, use, excise, real property, payroll,
withholding or similar Taxes; (c) there are no agreements or waivers in effect that provide for an
extension of time for the assessment of any such Tax against Seller; (d) Seller has established on
its books and records reserves in accordance with GAAP that are adequate for the payment of all
Taxes of Seller not yet due and payable; and (e) there are no liens for Taxes upon the Acquired
Assets other than any liens for Taxes not yet due and payable.



     4.19 Proceedings and Judgments. Except as described on Schedule 4.19, (i) no
Proceeding involving or related to the Acquired Assets or the Business is currently pending or
threatened, nor during the two (2) years preceding the date of this Agreement has any material
Proceeding occurred to which Seller is or was a party or by which the Acquired Assets are or were
affected in any material respect; (ii) no Judgment involving or related to Seller, the Acquired
Assets or the Business is currently outstanding, nor during the two (2) years preceding the date of
this Agreement has any material Judgment been outstanding against Seller, the Acquired Assets or
the Business or by which Seller, the Acquired Assets or the Business is or was affected, which
remains unsatisfied; and (iii) no breach of contract, material breach of warranty, tort,
negligence, infringement, product liability, discrimination, charge or complaint filed by an
employee or a union with a court of law, the National Labor Relations Board, the Department of
Labor, the Equal Employment Opportunity Commission, or any comparable Governmental Authority, or
any other labor or employment dispute against or affecting Seller or its premises, and including
but not limited to any claim or charge for wrongful termination, harassment, defamation, unfair
labor practices, wage and hour violations, or violation of any federal, state or local laws
governing employment, or other material claim of any nature



20









 







involving or related to Seller, the
Acquired Assets or the Business is currently being asserted or threatened by or against Seller, and
to Seller’s Knowledge there is no basis for any such claim. As to each matter described on
Schedule 4.19, accurate and complete copies of all pertinent pleadings, judgments, orders,
correspondence and other legal documents have been delivered to Buyer.



     4.20 Insurance. Schedule 4.20 is an accurate and complete list of all Insurance
Policies currently owned or maintained by Seller. Seller has not received notice of cancellation
with respect to any such current Insurance Policy, and to Seller’s Knowledge there is no basis for
the insurer thereunder to terminate any such current Insurance Policy. Each such Insurance Policy
is or was in full force and effect during the period(s) of coverage indicated on Schedule
4.20. All premiums payable by Seller under all such Insurance Policies have been timely paid,
and Seller otherwise has complied in all material respects with the terms and conditions of all
such Insurance Policies. Seller has not received notice of any threatened termination of, material
premium increase with respect to, or material alteration of coverage under, any of such Insurance
Policies. Except as described on Schedule 4.20 and except for claims by covered employees
under medial, dental and health insurance policies, there are no claims that are pending under any
of the Insurance Policies described on Schedule 4.20.



     4.21 Questionable Payments. To Seller’s Knowledge, neither Seller nor any of the current
or former directors, executives, officers, representatives, agents or employees of Seller (when
acting in such capacity or otherwise on behalf of Seller): (a) has used or is using any corporate
funds for any illegal contributions, gifts, entertainment or other unlawful expenses relating to
political activity; (b) has used or is using any corporate funds for any direct or indirect
unlawful payments to any foreign or domestic government officials or employees; (c) has violated or
is violating any provision of the Foreign Corrupt Practices Act of 1977; (d) has established or
maintained, or is maintaining, any unlawful or unrecorded fund of corporate monies or other
properties; (e) has made any false or fictitious entries on the books and records of Seller; (f)
has made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment of any
nature using corporate funds or otherwise on behalf of Seller; or (g) made any material favor or
gift that is not deductible for federal income tax purposes using corporate funds or otherwise on
behalf of Seller.



     4.22 Related Party Transactions. Except as described on Schedule 4.22 and except
for any employment Contracts listed on Schedule 4.14, (a) no director, officer, record or
beneficial owner of five percent (5%) or more of the equity securities of Seller, affiliate or
controlling Persons of Seller, (b) no immediate family member of any such director, officer, record
or beneficial owner of five percent (5%) or more of the equity securities of Seller, affiliate or
controlling Person, and (c) no entity controlled by any one or more of the foregoing (excluding
Seller) (collectively, the “Related Parties”): (i) owns, directly or indirectly, any
interest in (excepting not more than three percent (3%) stock holdings for investment purposes in
securities of publicly held and traded companies), or is an officer, director, employee or
consultant of, any Person that is engaged in business as a competitor of Seller, or as a lessor,
lessee, customer, distributor, sales agent, or supplier of any material amount of goods or services
to Seller; (ii) owns, directly or indirectly, in whole or in part, any material tangible or
intangible property that Seller uses or the use of which is necessary for the conduct of its
Business; (iii) has any cause of action or other claim whatsoever against Seller or its Business;
(iv) on behalf of Seller, has made any payment or commitment to pay any commission, fee or other
amount to, or



21









 







purchase or obtain or otherwise contract to purchase or obtain any goods or services
from, any corporation or other Person of which any officer or director of Seller, or an
immediate family member of the foregoing, is a partner or stockholder (excepting stock holdings
solely for investment purposes in securities of publicly held and traded companies). Schedule
4.22 contains a complete list of all material Contracts between Seller and any Related Party
relating to the Business, entered into on or prior to the date of this Agreement or contemplated to
be entered into before Closing.



     4.23 Brokerage Fees. Except for the fees payable to Daniels & Associates, L.P. as set
forth on Schedule 4.23, which fees and all other costs and expenses relating thereto shall
be paid by Seller, no Person acting on behalf of Seller is or shall be entitled to any brokerage,
finder’s or investment banking fee in connection with the transactions contemplated by this
Agreement.



     4.24 Full Disclosure. To Seller’s Knowledge, no representation or warranty made by Seller
in this Agreement: (a) contains any untrue statement of any material fact; or (b) omits to state
any fact that is necessary to make the statements made, in the context in which made, not false or
misleading in any material respect.



     4.25 Litigation. There is no litigation or other Proceeding pending or, to the Knowledge
of Seller, threatened against Seller that questions or challenges the validity of this Agreement or
any of the Related Agreements, the consummation of the transactions contemplated hereby or any
action taken or to be taken by Seller pursuant to this Agreement or any Related Agreement.



     4.26 Environmental Matters. Seller has obtained, or has timely applied for, all permits,
licenses, approvals, identification numbers and any other authorizations (collectively,
“Environmental Permits”) required under applicable Environmental Laws to conduct its
business and operations as currently conducted. Seller is in material compliance with all
applicable Environmental Laws and Environmental Permits, and Seller has not received any written
communication from any Person or Governmental Authority that alleges that Seller is not in such
compliance. There are no Environmental Claims pending or, to the Knowledge of Seller, threatened
in writing, against Seller. Seller (i) has not entered into or agreed to any consent decree or
order and is not subject to any judgment, decree or judicial order relating to compliance with
Environmental Laws, Environmental Permits or the investigation, sampling, monitoring, treatment,
remediation, removal or cleanup of Hazardous Substances, or (ii) is not an indemnitor in connection
with any claim asserted in writing or, to the Knowledge of Seller, threatened in writing against
Seller by any third-party indemnitee for any liability under any Environmental Law or relating to
any Hazardous Substances. Seller has not treated, stored, disposed of, arranged for or permitted
the disposal of, transported, handled, or released any substance, including any Hazardous
Substance, or owned or operated any property or facility in a manner, that has given, or to the
Knowledge of Seller reasonably could give, rise to any material liabilities pursuant to any
Environmental Laws.



22









 





ARTICLE 5

REPRESENTATIONS AND WARRANTIES OF BUYER




     As of the date hereof, Buyer represents and warrants to and for the benefit of Seller as
follows:



     5.1 Organization. Buyer is a corporation that is duly organized, validly existing and in
good standing under the Laws of the State of Delaware. Buyer has full corporate power and
authority to own its assets, conduct its business as and where such business is presently
conducted, and enter into this Agreement.



     5.2 Effect of Agreement. The execution, delivery and performance by Buyer of this
Agreement and the Related Agreements to which it is a party, and its consummation of the
transactions contemplated hereby and thereby, (a) have been duly authorized by all necessary
corporate actions by its Board of Directors; (b) do not constitute a violation of or default under
its charter or bylaws; (c) do not constitute a default or breach (after the giving of notice,
passage of time or both) under any Contract to which it is a party or by which it is bound; (d) do
not constitute a violation of any Law or Judgment that is applicable to it or to the transactions
contemplated by this Agreement; and (e) do not require the consent of any Person. This Agreement
and the Related Agreements to which Buyer is a party constitute the valid and legally binding
agreements of Buyer, enforceable against Buyer in accordance with their respective terms.



     5.3 Brokerage Fees. No Person acting on behalf of Buyer is entitled to any brokerage,
finder’s or investment banking fee in connection with the transactions contemplated by this
Agreement.



     5.4 Litigation. There is no litigation or other Proceeding pending or, to the Knowledge of
Buyer, threatened against Buyer that questions or challenges the validity of this Agreement or any
of the Related Agreements, the consummation of the transactions contemplated hereby or any action
taken or to be taken by Buyer pursuant to this Agreement or any Related Agreement.



     5.5 Availability of Funds. Buyer will have cash on hand sufficient to fund Buyer’s payment
of the entire Purchase Price at the Closing.



ARTICLE 6

COVENANTS OF SELLER PRIOR TO CLOSING




     6.1 Access And Investigation. Between the date of this Agreement and the Closing Date, and upon reasonable advance notice
received from Buyer, Seller shall (a) afford Buyer and its representatives (collectively,
“Buyer Group”) full and free access, during regular business hours, to Seller’s personnel,
properties, Contracts, Permits, books and records and other documents and data, such rights of
access to be exercised in a manner that does not unreasonably interfere with the operations of
Seller; (b) furnish Buyer Group with copies of all such Contracts, Permits, books and records and
other existing documents and data as Buyer may reasonably request; (c) furnish Buyer Group with
such additional financial, operating and other relevant data and information as Buyer may
reasonably request; and (d) otherwise cooperate and assist, to the



23









 







extent reasonably requested by
Buyer, with Buyer’s investigation of the properties, assets and financial condition of Seller.



     6.2 Operation of the Business of Seller. Between the date of this Agreement and the
Closing, Seller shall:




     (a) conduct its business only in the ordinary course consistent with past practice;




     (b) except as otherwise directed by Buyer in writing, and without making any commitment
on Buyer’s behalf, use its best efforts to preserve intact its current business
organization, keep available the services of its officers, employees and agents and maintain
its relations and goodwill with suppliers, customers, landlords, creditors, employees,
agents and others having business relationships with it;




     (c) confer with Buyer prior to implementing operational decisions of a material nature;




     (d) otherwise report periodically to Buyer concerning the status of its business,
operations and finances;




     (e) make no material changes in management personnel without prior consultation with
Buyer;




     (f) maintain the Acquired Assets in a state of repair and condition that complies with
legal requirements and is consistent with the requirements for the normal conduct of the
Business;




     (g) use its best efforts to keep in full force and effect, without amendment, all
material rights relating to the Business;




     (h) comply with all material requirements of Law and Contracts applicable to the
operations of Business;




     (i) continue in full force and effect the insurance coverage under the policies set
forth in Schedule 4.20 or substantially equivalent policies;




     (j) cooperate with Buyer and assist Buyer in identifying the Permits required by Buyer
to operate the Business from and after the Closing Date and either transferring
existing Permits of Seller to Buyer, where permissible, or obtaining new Permits for
Buyer; and




     (k) maintain all financial books and records of Seller relating to the Business in
accordance with GAAP.



     6.3 Negative Covenant. Except as otherwise expressly permitted herein, between the date of
this Agreement and the Closing Date, Seller shall not, without the prior written consent of Buyer,
(a) take any affirmative action, or fail to take any reasonable action within its control, as a
result of which any Material Adverse Effect or any of the changes or events listed in



24









 







Section 4.8(a) would be likely to occur; (b) make any modification to any Significant Contract or
terminate or cancel any Significant Contract; (c) enter into any compromise or settlement of any
Proceeding relating to the Acquired Assets, the Business or the Assumed Liabilities, (d) amend its
Certificate of Incorporation or Bylaws, except as contemplated by Section 6.6, (e) acquire
or agree to acquire by merging or consolidating with, or by purchasing a substantial equity
interest in or a substantial portion of the assets of, any Person, (f) enter into any agreement,
contract or lease that would constitute a Significant Contract, except in the ordinary course of
business, (g) incur or commit to any capital expenditure other than capital expenditures incurred
or committed to in the ordinary course of business, (h) adopt, commit to adopt, enter into,
terminate or amend any Employee Benefit Plan, (i) make or change any accounting method or tax
election or file an amended Tax Return, (j) enter into any agreement with any directors, employees,
or officers, or (k) grant any license or sublicense to any rights under the Intellectual Property
Assets.



     6.4 Notification. Between the date of this Agreement and the Closing, Seller shall
promptly notify Buyer in writing if it becomes aware of (a) any fact or condition that causes or
constitutes a breach of any of Seller’s representations and warranties made as of the date of this
Agreement or (b) the occurrence after the date of this Agreement of any fact or condition that
would be reasonably likely to (except as expressly contemplated by this Agreement) cause or
constitute a breach of any such representation or warranty had that representation or warranty been
made as of the time of the occurrence of, or Seller’s discovery of, such fact or condition. Should
any such fact or condition require any change to any Schedule hereto, Seller shall promptly deliver
to Buyer a supplement to the Schedule specifying such change. Such delivery shall not affect any
rights of Buyer under Section 10.2 and Article 12.



     6.5 Monthly Financial Statements. Until the Closing Date, Seller shall deliver to Buyer
within thirty (30) days after the end of each month a copy of the balance sheet, statement of
operations, change in stockholders’ equity and cash flow statement for such month prepared in a
manner and containing information in accordance with GAAP and certified by Seller’s Chief Financial
Officer as to compliance with Section 4.5.



     6.6 Change of Name. On or before the Closing Date, Seller shall (a) take all corporate action necessary to approve
and authorize the amendment of its certificate of incorporation to change its name to one
sufficiently dissimilar to Seller’s present name, in Buyer’s judgment, to avoid confusion and (b)
take all actions requested by Buyer or a subsidiary of Buyer to enable Buyer or a subsidiary of
Buyer to change its name to Seller’s present name after the Closing.



     6.7 Payment of Liabilities. Seller shall pay or otherwise satisfy in the ordinary course
all of its Obligations.



     6.8 Shareholder Meeting. Seller shall cause a meeting of its shareholders (the
“Shareholder Meeting”) to be duly called and held as soon as reasonably practicable after
the date hereof for the purpose of obtaining the approval contemplated by Section 9.4 of
this Agreement. In connection with the Shareholder Meeting, Seller shall (i) subject to the
provisions of Section 11.14(b) the Board shall recommend to the shareholders that the
shareholders approve this agreement and use all reasonable efforts to obtain the approval of its
shareholders of the transaction contemplated by this Agreement, and (ii) otherwise comply with all
legal



25









 







requirements applicable to such meeting. In lieu of holding the Shareholder Meeting, the
Seller, at its election, may cause the actions required hereunder to be approved by written consent
of its shareholders.



ARTICLE 7

COVENANT OF BUYER PRIOR TO CLOSING




     Buyer shall use its best efforts to cause the conditions in Article 9 to be satisfied
at or prior to the Closing.



ARTICLE 8

CONDITIONS TO BUYER’S OBLIGATION TO CLOSE




     Buyer’s obligation to purchase the Acquired Assets and to take the other actions required to
be taken by Buyer at the Closing is subject to the satisfaction, at or prior to the Closing, of
each of the following conditions (any of which may be waived by Buyer, in whole or in part):



     8.1 Accuracy of Representations.




     (a) The representations and warranties in Section 4.2 and each other
representation and warranty in this Agreement that contains an express materiality
qualification, shall have been accurate in all respects as of the date of this Agreement,
and shall be accurate in all respects as of the time of the Closing as if then made, without
giving effect to any supplement to any schedules hereto.




     (b) Each of Seller’s representations and warranties in this Agreement other than those
referred to in paragraph (a) of this Section 8.1 shall have been accurate in all
material respects as of the date of this Agreement, and shall be accurate in all material
respects as of the time of the Closing as if then made, without giving effect to any
supplement to any schedules hereto.



     8.2 Seller’s Performance. Each of the covenants and obligations that Seller is required to
perform or to comply with pursuant to this Agreement at or prior to the Closing shall have been
duly performed and complied with in all material respects.



     8.3 Consents. Each of the Consents identified in Schedule 8.3 shall have been
obtained and shall be in full force and effect.



     8.4 Additional Documents. Seller shall have caused the following documents to be delivered
to Buyer:




     (a) a bill of sale for all of the Acquired Assets that are Tangible Property in the
form of Exhibit 8.4(a) (the “Bill of Sale”), executed by Seller;




     (b) an assignment of all of the Acquired Assets that are Intellectual Property Assets
in the form of Exhibit 8.4(b), which assignment shall also contain Buyer’s
undertaking and assumption of the Assumed Liabilities (the “Assignment and Assumption
Agreement”), executed by Seller;



26









 






     (c) a separate assignment of Seller’s registration for the service mark “StayOnline”
(Registration No. 2665968) in the form of Exhibit 8.4(c), executed by Seller;




     (d) the assignments of the leases of the Facilities in a form reasonably acceptable to
Buyer and Seller (the “Assignments of Facilities”), executed by Seller;




     (e) such other bills of sale, assignments, certificates, documents and other
instruments of transfer and conveyance as may reasonably be requested by Buyer, each in form
and substance satisfactory to Buyer and executed by Seller;




     (f) an employment agreement in a form reasonably acceptable to Buyer executed by each
of Antonio DiMilia, Steven Berrey, Chris Medders and Ron Peterson (the “Employment
Agreements”);




     (g) a non-competition agreement in the form of Exhibit 8.4(g), executed by each
of Seller and William C. Newton (the “Non-Competition Agreements”);




     (h) a certificate executed by Chief Executive Officer of Seller as to the accuracy of
its representations and warranties as of the date of this Agreement and as of the Closing
in accordance with Section 8.1 and as to its compliance with and performance of its
covenants and obligations to be performed or complied with at or before the Closing in
accordance with Section 8.2;




     (i) a certificate of the Secretary of Seller certifying, as complete and accurate as of
the Closing, and attaching all requisite resolutions or actions of Seller’s Board of
Directors and shareholders approving the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby and the change of name contemplated
by Section 6.6 and certifying to the incumbency and signatures of the officers of
Seller executing this Agreement, any Related Agreement to which Seller is a party and any
other document relating to such contemplated transactions, and accompanied by the requisite
documents for amending Seller’s certificate of incorporation required to effect such change
of name in form sufficient for filing with the Secretary of State of Delaware;




     (j) the certificate of incorporation and all amendments thereto of Seller, duly
certified as of a recent date by the Secretary of State of Delaware;




     (k) recently dated lien search reports describing all security interests reflected in
the Uniform Commercial Code or similar records of such jurisdictions and the United States
Patent and Trademark Office as Buyer may reasonably request, indicating that any
Encumbrances on any of the Acquired Assets (including, without limitation, the security
interests previously granted by Seller to Technology Investment Capital Corp.), other than
those to which Buyer does not object and Permitted Encumbrances, have been discharged or
released before or simultaneously with the Closing;




     (l) if requested by Buyer, any Consents or other instruments that may be required to
permit Buyer’s qualification in each jurisdiction in which Seller is licensed or



27









 







qualified
to do business as a foreign corporation under the name “StayOnline” or any derivative
thereof;




     (m) opinion of counsel to Seller in a form reasonably acceptable to Buyer and Seller;




     (n) payoff letters for repayment in full of all Indebtedness secured by any of the
Acquired Assets, which set forth the terms and conditions for payment and satisfaction in
full of all such Indebtedness and release of all Encumbrances granted by Seller relating
thereto on and as of the Closing Date and release and termination of all Deposit Account
Control Agreements relating thereto;




     (o) evidence of payoff of all Obligations of Seller under the Employee Benefit Plans,
including, but not limited to, any salaries, bonuses, commissions, accrued vacation pay,
benefits or severance; and




     (p) the Escrow Agreement in the form of Exhibit 3.4, executed by each of Seller
and Escrow Agent.



     8.5 No Proceedings. There shall not have been commenced or threatened against Seller or
Buyer any litigation or other Proceeding (a) involving any challenge to, or seeking damages or
other relief in connection with, any of the transactions contemplated by this Agreement or (b) that
may have the effect of preventing, delaying, making illegal, imposing limitations or conditions on
or otherwise interfering with any of such contemplated transactions.



     8.6 Permits. Buyer shall have received such Permits as are necessary to allow Buyer to
operate the Acquired Assets from and after the Closing.



     8.7 No Material Adverse Effect. Since the date of this Agreement there shall not have
occurred a Material Adverse Effect nor shall there exist any facts or circumstances that could
reasonably be expected to cause such a Material Adverse Effect.



     8.8 Financial Statements. Not less than twenty days prior to Closing, Buyer shall have
received audited (including an audit report with no qualifications) and unaudited consolidated
financial statements of Seller and, to the extent necessary, its predecessor entities necessary for
Buyer to comply with any applicable requirements for filings under the Securities Exchange Act of
1934, as amended, and the rules and regulations of the SEC, promulgated thereunder, which shall be
certified by the Chief Financial Officer of Seller as fairly presenting in all material respects
the matters presented therein and otherwise as materially consistent with the Financial Statements
previously provided to Buyer.



     8.9
Deliveries. Buyer shall have received from Seller each item required to be delivered by
Seller pursuant to this Agreement.



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ARTICLE 9

CONDITIONS TO SELLER’S OBLIGATION TO CLOSE




     Seller’s obligation to sell the Acquired Assets and to take the other actions required to be
taken by Seller at the Closing is subject to the satisfaction, at or prior to the Closing, of each
of the following conditions (any of which may be waived by Seller in whole or in part):



     9.1 Accuracy of Representations. Each of Buyer’s representations and warranties in this
Agreement shall have been accurate in all material respects as of the date of this Agreement and
shall be accurate in all material respects as of the time of the Closing as if then made.



     9.2 Buyer’s Performance. Each of the covenants and obligations that Buyer is required to
perform or to comply with pursuant to this Agreement at or prior to the Closing shall have been
performed and complied with in all material respects.



     9.3 Consents. Each of the Consents identified in Schedule 9.3 shall have been
obtained and shall be in full force and effect.



     9.4 Shareholder Approval. Seller’s shareholders shall have approved and authorized the
execution and delivery of this Agreement and the Related Agreements by Seller and the consummation
of the transactions contemplated hereby and thereby in accordance with Delaware law and Seller’s
Organizational Documents.



     9.5 Additional Documents. Buyer shall have caused the following documents to be delivered
at Closing to Seller:




     (a) the Assignment and Assumption Agreement executed by Buyer;




     (b) the Assignments of Facilities executed by Buyer;




     (c) the Employment Agreements executed by Buyer;




     (d) a certificate executed by the Chief Executive Officer of Buyer as to the accuracy
of Buyer’s representations and warranties as of the date of this Agreement and as of the
Closing Date in accordance with Section 9.1 and as to Buyer’s compliance with and
performance of its covenants and obligations to be performed or complied with at or before
the Closing in accordance with Section 9.2;




     (e) a certificate of the Secretary of Buyer certifying, as complete and accurate as of
the Closing, and attaching all requisite resolutions or actions of Buyer’s Board of
Directors approving the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby and certifying to the incumbency and signatures of the
officers of Buyer executing this Agreement, and the Related Agreements to which Buyer is a
party and any other document relating to such contemplated transactions;




     (f) Opinion of counsel to Buyer in a form reasonably acceptable to Buyer and Seller;
and



29









 






     (g) the Escrow Agreement in the form of Exhibit 3.4, executed by each of Buyer
and Escrow Agent.



     9.6 No Proceedings. There shall not have been commenced or threatened against Buyer or
Seller any litigation or other Proceeding (a) involving any challenge to, or seeking damages or
other relief in connection with, any of the transactions contemplated by this Agreement or (b) that
may have the effect of preventing, delaying, making illegal, imposing limitations or conditions on
or otherwise interfering with any of such contemplated transactions.



     9.7 Purchase Price. Buyer shall have paid the Purchase Price as provided in Section
3.1.



     9.8 Deliveries. Seller shall have received from Buyer each item required to be delivered by Buyer pursuant to
this Agreement.



ARTICLE 10

TERMINATION




     10.1 Termination Events. By notice given prior to or at the Closing, subject to
Section 10.2, this Agreement may be terminated as follows:




     (a) by Buyer if a material breach of any provision of this Agreement has been committed
by Seller and such breach has not been waived by Buyer;




     (b) by Seller (i) if a material breach of any provision of this Agreement has been
committed by Buyer and such breach has not been waived by Seller, or (ii) at any time when
Seller is entitled to retain the Deposit as a result of a default by Buyer as provided in
Section 3.2(d);




     (c) by mutual consent of Buyer and Seller;




     (d) by Buyer if the Closing has not occurred on or before June 30, 2007, or such later
date as the parties may agree upon, unless Buyer is in material breach of this Agreement or
the reason for the delay is a failure by Buyer to comply with its obligations under this
Agreement;




     (e) by Seller if the Closing has not occurred on or before June 30, 2007, or such later
date as the parties may agree upon, unless Seller is in material breach of this Agreement or
the reason for the delay is a failure by Seller to comply with its obligations under this
Agreement; or




     (f) by Seller or Buyer if Seller’s Board of Directors determines in good faith,
pursuant to Section 11.14, that an unsolicited Acquisition Proposal constitutes a
Superior Proposal and authorizes a Change in Recommendation in response thereto.



     10.2 Effect of Termination. Each party’s right of termination under Section 10.1
is in addition to any other rights it may have under this Agreement or otherwise, and the exercise
of such right of termination will not be an election of remedies. If this Agreement is terminated
pursuant to Section 10.1, all obligations of the parties under this Agreement will
terminate,



30









 







except that the obligations of the parties in this Section 10.2 and Article
14 and the terms of the Confidentiality Agreement will survive, provided, however, that,
nothing in this Agreement shall relieve any party from liability for fraud or any intentional
breach of this Agreement.



     10.3 Termination in Response to Superior Proposal. If this Agreement is terminated
pursuant to Section 10.1(f), then on the earlier of (i) the date on which Seller enters
into a definitive written agreement providing for the consummation of a
transaction contemplated by the Superior Proposal or (ii) two (2) business days after the date of
termination, Seller shall pay to Buyer, by wire transfer of immediately available funds to an
account specified by Buyer, a termination fee of One Million Dollars ($1,000,000).



ARTICLE 11

ADDITIONAL COVENANTS




     11.1 Employees and Employee Benefits.




     (a) Information on Active Employees. For the purpose of this Agreement, the
term “Active Employees” shall mean all employees employed on the Closing Date by
Seller who are employed exclusively in the Business as currently conducted.




     (b) Employment of Active Employees by Buyer.




     (i) Buyer is not obligated to hire any Active Employee but may interview all
Active Employees. Buyer will provide Seller with a list of Active Employees to whom
Buyer has made an offer of employment that has been accepted to be effective on the
Closing Date (the “Hired Active Employees”). Subject to applicable legal
requirements, Buyer will have reasonable access to Seller’s Facilities and personnel
records (including performance appraisals, disciplinary actions, grievances and
medical records) for the purpose of preparing for and conducting employment
interviews with all Active Employees and will conduct the interviews as
expeditiously as possible prior to the Closing Date. Access will be provided by
Seller upon reasonable prior notice during normal business hours. Effective
immediately before the Closing, Seller will terminate the employment of all of the
Hired Active Employees.




     (ii) Seller shall not solicit the continued employment of any Active Employee
(unless and until Buyer has informed Seller in writing that the particular Active
Employee will not receive any employment offer from Buyer) or the employment of any
Hired Active Employee after the Closing. Buyer shall inform Seller promptly of the
identities of those Active Employees to whom it will not make employment offers, and
Seller shall comply with the Worker Adjustment and Retraining Notification Act (the
“WARN Act”) or similar state or local law, if applicable, as to those Active
Employees.




     (iii) It is understood and agreed that (A) Buyer’s expressed intention to
extend offers of employment as set forth in this section shall not constitute any
commitment, contract or understanding (expressed or implied) of any obligation on
the part of Buyer to a post-Closing employment relationship of any fixed term or
duration or upon any terms or conditions other than those that Buyer may



31









 







establish
pursuant to individual offers of employment, and (B) employment offered by Buyer is
“at will” and may be terminated by Buyer or by an employee at any time for any
reason (subject to any written commitments to the contrary made by Buyer or an
employee and applicable Law). Nothing in this Agreement shall be deemed to prevent
or restrict in any way the right of Buyer to terminate, reassign, promote or demote
any of the Hired Active Employees after the Closing or to change adversely or
favorably the title, powers, duties, responsibilities,
functions, locations, salaries, other compensation or terms or conditions of
employment of such employees.




     (c) Salaries and Benefits.




     (i) Seller shall be responsible for (A) the payment of all wages and other
remuneration due to Active Employees with respect to their services as employees of
Seller through the close of business on the Closing Date, including pro rata
commissions, bonus payments and all vacation pay earned prior to the Closing Date,
(B) the payment of any termination or severance payments and the provision of health
plan continuation coverage in accordance with the requirements of COBRA and sections
601 through 608 of ERISA; and (C) any and all payments to employees required under
the WARN Act or similar state or local law.




     (ii) Seller shall be liable for any claims made or incurred by Active Employees
and their beneficiaries through the Closing Date under the Employee Benefit Plans.
For purposes of the immediately preceding sentence, a charge will be deemed
incurred, in the case of hospital, medical or dental benefits, when the services
that are the subject of the charge are performed and, in the case of other benefits
(such as disability or life insurance), when an event has occurred or when a
condition has been diagnosed that entitles the employee to the benefit.




     (d) General Employee Provisions.




     (i) Seller and Buyer shall give any notices required by applicable Law and take
whatever other actions with respect to the plans, programs and policies described in
this Section 11.1 as may be necessary to carry out the arrangements
described in this Section 11.1.




     (ii) Seller shall provide Buyer with completed I-9 forms and attachments with
respect to all Hired Active Employees, except for such employees as Seller certifies
in writing to Buyer are exempt from such requirement.




     (iii) Buyer shall not have any responsibility, liability or obligation, whether
to Active Employees, former employees, their beneficiaries or to any other Person,
with respect to any employee benefit plans, practices, programs or arrangements
(including the establishment, operation or termination thereof and the notification
and provision of COBRA coverage extension) maintained by Seller.



32









 





     11.2 Payment of All Taxes Resulting from Sale of Assets by Seller. Seller shall pay in a
timely manner all Taxes resulting from or payable in connection with the sale of the Assets
pursuant to this Agreement, regardless of the Person on whom such Taxes are imposed by Law.



     11.3 Restrictions on Seller Dissolution and Distributions. Seller shall not dissolve, or make any distribution of the Escrow Amount released to it
pursuant to Section 3.1, until the later of (a) three (3) business days after the
completion of all adjustment procedures contemplated by Section 3.3; or (b) Seller’s
payment, or adequate provision for the payment, of all of its obligations pursuant to Section
11.2.



     11.4 Removing Excluded Assets. On or before the Closing Date, Seller shall remove all
Excluded Assets from all Facilities to be occupied by Buyer. Such removal shall be done in such
manner as to avoid any damage to the Facilities to be occupied by Buyer and any disruption of the
business operations to be conducted by Buyer after the Closing. Any damage to the Acquired Assets
or to the Facilities resulting from such removal shall be paid by Seller at the Closing or
thereafter.



     11.5 Reports and Returns. Seller shall promptly after the Closing prepare and file all
reports and returns required by applicable Law relating to the Business as conducted using the
Acquired Assets, to and including the Closing Date.



     11.6 Assistance In Proceedings. Seller will cooperate with Buyer and its counsel in the
contest or defense of, and make available its personnel and provide any testimony and access to its
books and records in connection with, any Proceeding involving or relating to (a) this Agreement or
the transactions contemplated hereby or (b) any action, activity, circumstance, condition, conduct,
event, fact, failure to act, incident, occurrence, plan, practice, situation, status or transaction
on or before the Closing Date involving Seller or the Business.



     11.7 Customer and Other Business Relationships. After the Closing, Seller will cooperate
with Buyer in its efforts to continue and maintain for the benefit of Buyer those business
relationships of Seller existing prior to the Closing and relating to the Business to be operated
by Buyer after the Closing, including relationships with lessors, employees, regulatory
authorities, licensors, prospects, customers, suppliers and others, and Seller will satisfy the
Excluded Liabilities in a manner that is not detrimental to any of such relationships. Seller will
refer to Buyer all inquiries relating to the Business after the Closing.



     11.8 Retention of and Access to Records. After the Closing Date, Buyer shall retain for a
period consistent with Buyer’s record-retention policies and practices those books and records of
Seller delivered to Buyer. Buyer also shall provide Seller and its representatives reasonable
access thereto, during normal business hours and on at least three days’ prior written notice, to
enable them to prepare financial statements or tax returns or deal with tax audits. After the
Closing Date, Seller shall provide Buyer and its representatives reasonable access to records that
are Excluded Assets, during normal business hours and on at least three days’ prior written notice,
for any reasonable business purpose specified by Buyer in such notice.



     11.9 Further Assurances. The parties shall cooperate reasonably with each other and with their respective
representatives in connection with any steps required to be taken as part of their respective
obligations under this Agreement, and shall (a) furnish upon request to each other such further
information; (b) execute and deliver to each other such other documents; and



33









 







(c) do such other acts
and things, all as the other party may reasonably request for the purpose of carrying out the
intent of this Agreement and the transactions contemplated hereby.



     11.10 Reconciliations and Allocations. At and after the Closing, all payments received by
Seller on account of Accounts Receivable in existence as of the Closing Date or arising after the
Closing Date under any of the Assumed Contracts and all other payments received by Seller with
respect to the operation of the Business after the Closing Date, shall be held in trust for Buyer
and shall be promptly paid to Buyer.



11.11 Tax Matters





     (a) Liability for Taxes




     (i) Taxable Periods Ending On or Before the Closing Date. Seller shall
be responsible for filing all Tax Returns required to be filed by or with respect to
Seller for any taxable year or taxable period ending on or before the Closing Date
and shall be liable for all Taxes for any taxable year or period ending on or before
the Closing Date which are due and payable by Seller or with respect to the Acquired
Assets or Assumed Liabilities.




     (ii) Taxable Periods Commencing On or After the Closing Date. Buyer
shall be responsible for filing all Tax Returns required to be filed by or with
respect to the Acquired Assets and the Assumed Liabilities for any taxable year or
period commencing after the Closing Date and shall be liable for and any and all
Taxes for any taxable year or period commencing on or after the Closing Date due or
payable by Buyer with respect to the Acquired Assets or Assumed Liabilities.




     (iii) Taxable Periods Commencing Before the Closing Date and Ending After
the Closing Date. In the case of any taxable year or period which commences
before and would otherwise end after the Closing Date (the “Closing
Period”), Seller shall, to the extent required or permitted under applicable
Law, end its taxable year or period on the Closing Date. For purposes of paragraphs
(i) and (ii) of this Section 11.11(a), the Taxes related to the pre-Closing
Date portion of the Closing Period shall (1) in the case of Taxes other than Taxes
based upon or related to income, sales, gross receipts, wages, capital expenditures,
expenses or any similar Tax base, be deemed to be the amount of such Tax for the
entire Closing Period multiplied by a fraction the numerator of which is the number
of days in the Closing Period ending on the Closing Date and the denominator of
which is the number of days in the entire Closing Period, and (2) in the case of any
Tax based upon or related to income, sales, gross receipts, wages, capital
expenditures, expenses or any similar Tax base, be deemed equal to the amount which
would be payable if the relevant Tax period ended on the Closing Date.
Any credits relating to the Closing Period shall be taken into account as
though the relevant Tax period ended on the Closing Date.




     (iv) Mutual Cooperation. As soon as practicable, but in any event
within thirty (30) days after a request by either Seller or Buyer, the party to
which such request is made shall deliver to the requesting party such information
and



34









 







other data relating to the Tax Returns and Taxes of Seller or Buyer and shall
make available such knowledgeable employees of Seller or Buyer, as may be
appropriate, as the requesting party may reasonably request, including providing the
information and other data customarily required by the requesting party to cause the
completion and filing of all Tax Returns for which the requesting party has
responsibility or liability under this Agreement, or to respond to audits by any
taxing authorities with respect to any Tax Returns or taxable periods for which the
requesting party has any responsibility or liability under this Agreement or to
otherwise enable the requesting party to satisfy its accounting or tax requirements.




     (b) Resolution of Disagreements Among Seller and Buyer. If Seller and Buyer
disagree as to the amount of Taxes for which each is liable under this Agreement, such
dispute shall be resolved pursuant to Section 14.13. In no event shall the
arbitrators determine that a party’s liability for Taxes exceeds the maximum amount for
which both parties assert such party is liable or determine that a party’s liability for
Taxes is less than the minimum amount for which both parties assert such party is liable.
The parties’ Tax obligations as finalized by the arbitrators shall be deemed final and
conclusive with respect to the parties’ Tax obligations and shall be binding on Seller and
Buyer for such purposes. The fees and expenses of the arbitrators in resolving all such
objections shall be borne by Seller and Buyer in amounts equal to the proportion that the
arbitrator finds that each of Seller and Buyer is responsible to bear in relation to the
total amount at issue.



     11.12 Confidentiality. Subject to the obligations of Buyer to provide disclosure to comply
with federal securities laws, Buyer on the one hand, and Seller, on the other hand (the party
receiving confidential information and its Authorized Representatives, the “Receiving
Party”) will maintain in strict confidence, and will cause its respective directors, officers,
employees, subsidiaries, agents, and advisors (collectively, “Authorized Representatives”)
to maintain in strict confidence, any confidential information disclosed by any other party or its
Authorized Representatives (the party disclosing confidential information, the “Disclosing
Party”) pursuant to the letter agreement, dated as of April 12, 2006, between Buyer and Daniels
& Associates, L.P., for the benefit of Seller (the “Confidentiality Agreement”) or this
Agreement, unless (a) such information is already known to the Receiving Party or becomes generally
available to the public other than as a result of a disclosure in violation of the Confidentiality
Agreement or this provision or a disclosure by a Person owing a duty of confidentiality to the
Disclosing Party and known to the Receiving Party, (b) the use of such confidential information is
necessary to make a required filing or obtain any consent or approval required for the consummation
of the transactions contemplated by this Agreement, (c) such information is disclosed to the
Receiving Party’s financial and legal advisors, lenders and investors, solely for the purpose of
assisting in the consummation of the transactions contemplated by this Agreement and such Persons
are advised prior to such disclosure of the confidential nature of the information disclosed, or
(d) the
furnishing or use of such information is required by or necessary in connection with any
Proceeding, applicable requirements of any stock exchange, or applicable Law; provided, however
that if the terms of this Agreement and the transactions contemplated hereby or any confidential
information furnished by Seller must, in the reasonable judgment of Buyer’s counsel, be disclosed
pursuant to clause (b) or (d) above, then (i) the party proposing to disclose or cause the
disclosure of such information will notify the Disclosing Party whose confidential information may
be disclosed within a reasonable period of time prior to such disclosure being made, (ii) the party
proposing to disclose such information



35









 







will take all actions necessary or reasonably requested by
the Disclosing Party to ensure that such information is maintained confidential to the maximum
extent possible, (iii) the Disclosing Party will be given a reasonable opportunity to participate
in any process or Proceeding for the purpose of ensuring that such information is maintained
confidential to the maximum extent possible, and (iv) the party proposing to disclose such
information will reasonably cooperate with the Disclosing Party in any such process or Proceeding,
and otherwise take such actions as reasonably are requested to the end that such information is
maintained confidential to the maximum extent possible. The provisions of this Section
11.12 are intended to supplement and not to supersede or replace the provisions of the
Confidentiality Agreement, all provisions of which remain in full force and effect except as
modified above.



     11.13 Announcement. Subject to the obligations of Buyer to provide disclosure to comply
with federal securities laws, any public announcement, press release or similar publicity with
respect to this Agreement or the transactions contemplated by this Agreement will be issued only at
such time and in such manner as mutually determined by the parties. Buyer and Seller understand
and agree that Buyer will publicly disclose, by means of a press release and a report on Form 8-K
filed with the Securities and Exchange Commission, the execution and delivery of this Agreement and
the principal terms of the transaction contemplated hereby, including the Purchase Price, within
four business days after such execution and delivery and that Buyer may subsequently file a copy of
the Agreement with the Securities and Exchange Commission. Buyer and Seller will consult with each
other concerning the means by which the employees, customers, and suppliers of Seller and others
having dealings with Seller will be informed of the execution of this Agreement and the
consummation of the transactions contemplated by this Agreement. The provisions of this
Section 11.13 are intended to supplement and not to supersede or replace the provisions of
the Confidentiality Agreement.



     11.14 Exclusivity.




     (a) In recognition of the time that will be expended and the expense that will be
incurred by Buyer in connection with the transactions contemplated hereby, until such time,
if any, as this Agreement is terminated pursuant to Article 10, Seller will not and
will not cause its officers, directors, employees, attorneys, financial advisors, agents or
other representatives to, directly or indirectly, (a) encourage, solicit, engage in
negotiations or discussions about, or provide information with respect to, any inquiry or
proposal (an “Acquisition Proposal”) relating to (i) the possible direct or indirect
acquisition of all or any portion of the Business, whether through the acquisition of the
stock, other ownership interests in Seller, or all or substantially all of the assets of
Seller or any business or division of Seller, or (ii) any business combination with or
involving
Seller or (b) discuss or disclose the existence or terms of this Agreement (except as
may be required by Law, or is necessary in connection with the transactions contemplated
hereby, and except to the extent that such information becomes public other than as result
of a violation hereof) with or to any Person other than Buyer without the prior written
consent of Buyer. Nothing contained in this Agreement shall prohibit Seller or its Board of
Directors from disclosing to its stockholders any information which, after consultation with
its outside legal and financial advisors, is required to be disclosed in order for the Board
of Directors to comply with its fiduciary obligations in seeking approval of the
stockholders of this Agreement, or is otherwise required, under applicable Law.



36









 





     (b) Notwithstanding anything to the contrary contained in this Section 11.14,
if, at any time prior to the shareholder approval contemplated by Section 9.4 of
this Agreement, Seller receives an unsolicited Acquisition Proposal that the Board of
Directors of Seller determines in good faith, after receiving the advice of its financial
advisers and legal counsel, constitutes a Superior Proposal, then Seller shall be permitted
to (i) engage in negotiations regarding such Acquisition Proposal with the Person that has
submitted it (the “Bidder”), (ii) furnish to the Bidder confidential information
relating to Seller and the Business, subject to the execution and delivery of an appropriate
nondisclosure agreement with the Bidder at least as restrictive as Section 11.12 of
this Agreement, and (iii) if required by fiduciary duties, make a change in or withdraw the
recommendation of the Board of Directors to the shareholders of Seller (or decline to make
such a recommendation, if not previously made) with respect to the approval of the
transaction contemplated by this Agreement (a “Change in Recommendation”); provided,
however, that within five (5) business days after receipt of such Acquisition Proposal,
Seller shall provide to Buyer a summary of the material terms and conditions of such
Acquisition Proposal, including the identity of the Bidder, and the same confidential
information disclosed to the Bidder if such confidential information has not previously been
disclosed to Buyer. Seller shall give written notice to Buyer promptly after any decision
by Seller’s Board of Directors to make any Change in Recommendation, and Seller shall not
submit such Change in Recommendation to its shareholders for at least ten (10) business days
after the date of such notice, during which period Buyer shall have the opportunity to
propose revisions to the terms of this Agreement (or to make an alternative proposal) that
it believes would cause the Bidder’s Acquisition Proposal not to constitute a Superior
Proposal and, if Buyer makes such a proposal, Seller’s Board of Directors shall consider
such proposal in good faith. Seller shall be permitted to disclose to the Bidder a summary
of the material terms and conditions of any revised or alternative proposal submitted by
Buyer pursuant to this Section 11.14(b), subject to the terms of the nondisclosure
agreement contemplated by clause (ii) of the first sentence of this Section
11.14(b).



     11.15 Audit Fees. Buyer acknowledges that the requirement that Seller obtain an audit of
the Financial Statements is a result of Buyer’s reporting obligations under federal securities
laws. Accordingly, Buyer agrees to pay the fees and expenses of Seller’s independent public
accounting firm related to such audit and any additional audits that may be required in order to
satisfy the condition set forth in Section 8.8 of this Agreement, other than the audit of
the Annual Financial Statements, up to a maximum amount of Thirty-Five Thousand Dollars ($35,000)
(the “Audit Fees”). Such
amounts shall be payable by Buyer to Seller in the form of an adjustment to the Purchase Price
payable at the Closing pursuant to Section 3.1(b). Seller shall bear the costs of the
audit of the Annual Financial Statements.



     11.16 Auditor’s Consent and Audit Preparation. Seller shall cooperate with Buyer and shall
use its commercially reasonable efforts to cause its independent public accounting firm, at Buyer’s
expense, to deliver all necessary consents for inclusion of such firm’s audit report on Seller’s
consolidated financial statements to be included, to the extent required, in Buyer’s SEC filings
from time to time. Seller shall conduct an inventory observation at year-end that is observed and
recorded by its independent public accounting firm and shall take all such other steps necessary in
order for a subsequent audit of Seller’s financial statements as of and for the year ended December
31, 2006 to be conducted by an independent public accounting firm.



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ARTICLE 12

CLOSING




     12.1 Closing. The closing of the transactions contemplated by this Agreement (the
“Closing”) shall be held at the offices of Leonard, Street and Deinard, Professional
Association, at 10:00 a.m. (Eastern time) on the first business day after all conditions set forth
in Article 8 and Article 9 to be satisfied before Closing have been satisfied, or
such other time or location as is mutually agreeable to the parties (the “Closing Date”).
The Closing shall be considered to have been effective at 5:00 p.m. (Eastern time) on the Closing
Date.



ARTICLE 13

INDEMNIFICATION




     13.1 Seller’s Indemnification. From and after the Closing Date, Seller shall indemnify and
hold harmless Buyer and its directors, officers, and controlling persons (the “Buyer
Indemnified Parties”), from and against any and all actions, suits, claims, demands, debts,
liabilities, obligations, losses, damages, costs and expenses, including without limitation
reasonable attorney’s fees, expenses and court costs, arising out of or caused by, directly or
indirectly, any of all of the following (collectively, the “Losses”):




     (a) Misrepresentation. Any misrepresentation, breach, inaccuracy or failure of
any warranty or representation made by Seller in or pursuant to this Agreement or any
schedule, exhibit or other agreement or document contemplated by this Agreement.




     (b) Nonperformance. Any failure or refusal by Seller to satisfy or perform any
covenant, term or condition of this Agreement or any schedule, exhibit or other agreement or
document contemplated by this Agreement that is required to be satisfied or performed by it.




     (c) Non-Assumed Obligations. Any: (a) Excluded Liability; and (b) any
Obligation that may be imposed upon any of the Buyer Indemnified Parties as a result of any
Law under which any of the Buyer Indemnified Parties may have successor liability for any
Tax or other Obligations of Seller (collectively, the “Non-Assumed Obligations”).




     (d) Unasserted Claims. Any Proceeding arising out of, caused by or based upon
any act or omission of Seller at any time before the Closing other than the Assumed
Liabilities.




     (e) Intentional Misrepresentation, Fraud or Criminal Matter. Any intentional
misstatement, fraud or crime committed by Seller.




     (f) Proceedings by Employees. Any Proceeding against any of the Buyer
Indemnified Parties by or on behalf of any employee of Seller who is not hired by Buyer or
by or on behalf of any Hired Active Employee that relates to matters or events that occurred
prior to the Closing.



     13.2 Buyer’s Indemnification. From and after the Closing Date, Buyer shall indemnify and
hold harmless Seller and its directors, officers and controlling persons (the “Seller



38









 







Indemnified Parties”), from and against any and all Losses arising out of or caused by,
directly or indirectly, any of the following:




     (a) Misrepresentation. Any misrepresentation, breach, inaccuracy or failure of
any warranty or representation made by Buyer in or pursuant to this Agreement or any
schedule, exhibit or other agreement or document contemplated by this Agreement.




     (b) Nonperformance. Any failure or refusal by Buyer to satisfy or perform any
covenant, term or condition of this Agreement or any schedule, exhibit or other agreement or
document contemplated by this Agreement that is required to be satisfied or performed by
Buyer.




     (c) Assumed Liabilities. Any failure or refusal of Buyer to satisfy or perform
any of the Assumed Liabilities.




     (d) Unasserted Claim. Any Proceeding arising out of, caused by or based upon
any act or omission of Buyer at any time after the Closing Date.



     13.3 Indemnification Procedures. The following procedures shall be followed with respect
to each event, occurrence or matter (each, an “Indemnification Matter”) as to which any
Buyer Indemnified Party or Seller Indemnified Party (in either case, an “Indemnitee”) is
entitled to indemnification from Seller or Buyer, as the case may be (referred to, as the case may
be, as “Indemnitor”) under this Article 13.




     (a) Notice of Claims. If: (a) a claim is made by a third party against any
party that is subject to a right of indemnification hereunder, (b) any party hereto becomes
aware of facts or circumstances establishing that such party has experienced or
incurred Losses or will experience or incur Losses subject to indemnification under this
Article 13, or (c) any party becomes aware of any facts or events that could give
rise to indemnification by an Indemnitor hereunder, then such Indemnitee shall give to
Indemnitor written notice of such claim (“Indemnification Notice”) as soon as
reasonably practicable but in no event more than thirty (30) days after the Indemnitee has
received notice of or obtains actual knowledge of such claim (provided that failure to give
such notice shall not limit the Indemnitor’s indemnification obligation hereunder except to
the extent that the delay in giving, or failure to give, the notice adversely affects the
Indemnitor’s ability to defend against the claim). To the extent practicable, the
Indemnification Notice will describe with reasonable specificity (1) the nature of and the
basis for the indemnification claim, including any relevant supporting documentation, and
(2) an estimate of all Losses associated therewith.




     (b) Procedure in Event of Indemnification Claim. If an Indemnitee desires to
assert an indemnification claim pursuant to Section 13.1 or Section 13.2,
the Indemnitee promptly shall provide an Indemnification Notice to the Indemnitor in
accordance with the procedures set forth in Section 13.3(a) hereof. If the
Indemnitor does not object within twenty (20) days after receipt of the Indemnification
Notice to the propriety of the indemnification claims described as being subject to
indemnification pursuant to Section 13.1 or Section 13.2 or the amount of
Losses asserted in the Indemnification Notice, the indemnification claims described in the
Indemnification Notice shall be deemed final and binding upon the Indemnitor (the
“Permitted Indemnification Claims”).



39









 







If the Indemnitor contests the propriety of an
indemnification claim described on the Indemnification Notice and/or the amount of Losses
associated with such claim, then the Indemnitor shall deliver to the Indemnitee a written
notice detailing with reasonable specificity all specific objections the Indemnitor has with
respect to the indemnification claims contained in the Indemnification Notice
(“Indemnification Objection Notice”). If the Indemnitor and the Indemnitee are
unable to resolve the disputed matters described in the Indemnification Objection Notice
within fifteen (15) business days after the date the Indemnitee received the Indemnification
Objection Notice, the disputed matters will be subject to the dispute resolution procedures
set forth in Section 14.13 hereof. Any undisputed indemnification claims contained
in the Indemnification Notice shall be deemed to be final and binding upon the Indemnitor
and shall constitute a Permitted Indemnification Claim. If the procedures in Section
14.13 result in all or any portion of an indemnification claim properly being subject to
indemnification pursuant to Section 13.1 or Section 13.2 such claim or
portion thereof shall be final and binding upon Indemnitor and shall constitute a Permitted
Indemnification Claim.




     (c) Defense of Third Party Claims. An Indemnitee against whom a third party
claim is made shall give the Indemnitor prompt notice of such claim so that the Indemnitor
shall have an opportunity to defend such claim, at the Indemnitor’s sole expense and with
counsel selected by the Indemnitor and reasonably satisfactory to the Indemnitee; provided,
however, that Indemnitee may participate in such defense through counsel selected by the
Indemnitee and reasonably satisfactory to Indemnitor and paid at Indemnitee’s sole expense.
Failure of an Indemnitor to give an Indemnitee written notice of its election to defend such
claim within twenty (20) days after receipt of notice thereof shall be deemed a waiver by
such Indemnitor of its right to defend such claim. If an
Indemnitor shall elect not to assume the defense of such claim (or if such Indemnitor
shall be deemed to have waived its right to defend such claim), the Indemnitee against whom
such claim is made shall have the right, but not the obligation, to undertake the defense of
the claim through counsel chosen by the Indemnitee, but shall not thereby waive any right to
indemnity therefor pursuant to this Agreement; provided, however, that if the Indemnitee
undertakes the defense of such claim, it shall defend such claim in good faith and shall
apprise the Indemnitor from time to time as the Indemnitee deems appropriate of the progress
of such defense. The Indemnitee shall not dispose of such claim or enter into any
settlement without first obtaining the written consent of the Indemnitor (which consent
shall not be unreasonably withheld), which settlement or other disposition shall include as
an unconditional term thereof the giving by the claimant to the Indemnitor against whom such
claim is made of a release from all liability in respect of such claim (which release shall
exclude only any obligations incurred in connection with any such settlement). The
Indemnitor shall be obligated to pay the reasonable attorney’s fees and expenses of the
Indemnitee to the extent such fees and expenses relate to claims as to which indemnification
is payable under Section 13.1 or Section 13.2. If one or more of the
Indemnitors assumes the defense of such claim, the obligation of such Indemnitor hereunder
as to such claim shall include taking all steps necessary in the defense or settlement of
such claim. The Indemnitor, in the defense of such claim, shall not consent to the entry of
any judgment or enter into any settlement (except with the written consent of the
Indemnitee, which shall not be unreasonably withheld) which does not include as an
unconditional term thereof the giving by the claimant to the Indemnitee against whom such
claim is made of a release from all



40









 







liability in respect of such claim (which release shall
exclude only any obligations incurred in connection with any such settlement). The
Indemnitor, then the Indemnitee shall make available, at the Indemnitor’s expense, all
information and assistance that the Indemnitor reasonably may request.




     (d) Payments. All amounts owed by the Indemnitor to the Indemnitee (if any)
shall be paid in full within fifteen (15) business days following such time as a claim or
portion thereof becomes final and binding upon the Indemnitor and constitutes a Permitted
Indemnification Claim.



     13.4 Survival Periods. For purposes of this Agreement, a “Survival Period” shall
be the period during which a claim for indemnification may be asserted under this Agreement by an
Indemnitee. The Survival Periods under this Agreement shall commence on the date of this Agreement
and shall terminate as follows:




     (a) The Survival Period for the representations, warranties, covenants and obligations
of Buyer and Seller set forth in this Agreement shall terminate eighteen (18) months
following the Closing Date; provided, however, that the Survival Period for (a)
representations, warranties, covenants and obligations arising under Section 4.1
(Organization), Section 4.2 (Effect of Agreement), Section 4.6 (Acquired
Assets; Sufficiency, other than the first and last sentences), Section 4.22 (Related
Party Transactions), Section 4.23 (Brokerage Fees), Section 5.1
(Organization), Section 5.2 (Effect of Agreement), and Section 5.3
(Brokerage Fees) (collectively, the “Fundamental 
Representations”) shall continue indefinitely except as limited by Law
(including any applicable statutes of limitation, extensions and tollings thereof); (b)
representations, warranties, covenants and obligations arising under Section 4.16
(Employee Benefit Plans), Section 4.18 (Taxes), Section 4.26 (Environmental
Matters) shall continue for a period specified in the applicable statute of limitations; and
(c) covenants and obligations that require performance after Closing shall continue until
performed. Notwithstanding the foregoing provisions or anything to the contrary in this
Agreement, a party’s rights to bring legal and equitable claims for fraud or intentional
misrepresentation shall survive for thirty (30) days after the expiration of the statute of
limitations applicable to (A) such fraud or intentional misrepresentation itself or (B) the
underlying matters with respect to which fraud or intentional misrepresentation was
committed, whichever is later.




     (b) No Indemnitor shall have any liability with respect to any Indemnification Matter
unless an Indemnitee gives an Indemnification Notice with respect thereto within the
Survival Period. Notwithstanding the foregoing, if prior to the close of business on the
last day of the applicable Survival Period, an Indemnitor shall have been properly notified
as provided hereunder of a claim for indemnity hereunder and such claim shall not have been
finally resolved or disposed of at such date, such claim shall continue to survive and shall
remain a basis for indemnity hereunder until such claim is finally resolved or disposed of
in accordance with the terms hereof.




     (c) The representations and warranties contained in this Agreement or in any
certificate or other writing delivered in connection with this Agreement shall survive for
the periods set forth in this Section 13.4 and shall in no event be affected by any
investigation, inquiry or examination made for or on behalf of any Party, or the



41









 







Knowledge
of any party’s Authorized Representatives or the acceptance by any party of any certificate
or opinion hereunder.



     13.5 Shareholder/Partner Suits. No party shall have any liability under this Article
13 or otherwise for suits brought by the other party’s shareholders or partners.



     13.6 Limitations on Indemnification Obligation. The indemnification obligations of this
Article 13 are subject to the following limitations:




     (a) No indemnification pursuant to Section 13.1 shall be made unless the
aggregate amount of Losses incurred by the Buyer Indemnified Parties exceeds One Hundred
Fifty Thousand and No/100 Dollars ($150,000.00) (the “Buyer Threshold Amount”), and,
in such event, indemnification shall be made only to the extent that the aggregate amount of
Losses incurred by the Buyer Indemnified Parties exceeds the Buyer Threshold Amount;
provided that, the Buyer Threshold Amount shall not limit indemnification with respect to
Losses related to breaches of the Fundamental Representations or any facts or circumstances
which constitute fraud or intentional misrepresentation or failure to perform or satisfy any
of the Non-Assumed Obligations.




     (b) In the absence of intentional misrepresentation, fraud or criminal matters on the
part of Seller or Losses related to breaches of the Fundamental Representations, in
no event shall Seller’s aggregate obligation to indemnify the Buyer Indemnified Parties
pursuant to Section 13.1 with respect to Indemnification Matters other than those
involving the Excluded Liabilities, exceed Three Million and No/100 Dollars ($3,000,000.00).




     (c) If any representation, warranty or covenant which is qualified by materiality or
Material Adverse Effect is breached, the amount of any Loss related to a breach of any such
representation or warranty shall be determined without regard to any materiality
qualification (including terms such as “material” and “Material Adverse Effect”) set forth
therein.



     13.7 Insurance and Tax Benefits. The amount of any Losses incurred by an Indemnitee shall
be reduced by any amount received by the Indemnitee with respect thereto under any insurance
coverage or pursuant to any tax benefit available to the Indemnitee relating thereto. The
Indemnitees shall use reasonable efforts to collect any amounts available under such insurance
coverage and shall take advantage of such tax benefit.



     13.8 Exclusive Remedy. The right of each party hereto to assert indemnification claims and
receive indemnification payments pursuant to this Article 13 shall be the sole and
exclusive right and remedy exercisable by such party with respect to any matter, except (a) for the
right to seek specific performance of any of the agreements and covenants contained herein, and (b)
in the event of fraud or intentional breach.



ARTICLE 14

OTHER PROVISIONS




     14.1 Fees and Expenses. Each party shall pay all of the fees and expenses incurred by it
in negotiating and preparing this Agreement (and all of the Related Agreements and other



42









 







documents
and instruments executed in connection herewith) and in consummating the transactions contemplated
by this Agreement and the Related Agreements. Seller shall be responsible for all fees paid or
payable to Daniels & Associates, L.P. in connection with the transactions contemplated by this
Agreement.



     14.2 Notice. All notices, consents or other communications required or permitted to be
given under this Agreement shall be in writing and shall be deemed to have been duly given: (a)
when delivered personally or (b) upon receipt of proof of delivery indicating the date of delivery
after being sent by a reputable overnight delivery service, postage or delivery charges prepaid, to
the parties at their respective addresses stated on the first page of this Agreement. Notices may
also be given by facsimile and shall be effective on the date transmitted if confirmed within
twenty four (24) hours thereafter by a signed original sent in the manner provided in the preceding
sentence. Notice to Seller at the address specified in the preamble to this Agreement or to
facsimile number (404) 592-4004 to the attention of Antonio DiMilia, shall suffice as notice to
Seller,
provided that a copy thereof is simultaneously sent to Carrington, Coleman, Sloman & Blumenthal,
L.L.P., 901 Main Street, Suite 5500, Dallas, Texas 75202, facsimile number (214) 855-1333,
attention Kenn W. Webb, Esquire.



     Notice to Buyer at the address specified in the preamble to this Agreement or to facsimile
number (605) 988-2910 to the attention of James G. Naro, shall suffice as notice to Buyer, provided
that a copy thereof is simultaneously sent to Leonard, Street and Deinard, Professional
Association, 150 South Fifth Street, Suite 2300, Minneapolis, MN 55402, facsimile number (612)
335-1657, attention Mark S. Weitz, Esquire. Any party may change its address for notice and the
address to which copies must be sent by giving notice of the new addresses to the other party in
accordance with this Section 14.2, except that any such change of address notice shall not
be effective unless and until received.



     14.3 Entire Understanding. This Agreement, together with the Exhibits and Schedules
hereto, states the entire understanding among the parties with respect to the subject matter
hereof, and supersedes all prior oral and written communications and agreements, and all
contemporaneous oral communications and agreements, with respect to the subject matter hereof,
including without limitation all letters of intent previously entered into between the parties
hereto. No amendment or modification of this Agreement shall be effective unless in writing and
signed by the party against whom enforcement is sought.



     14.4 Parties in Interest. Neither of the parties may assign this Agreement or any rights
or obligations under this Agreement without the prior written consent of the other party, provided
that Buyer may assign this Agreement or any rights or obligations under this Agreement to a
subsidiary of Buyer without the prior written consent of Seller and provided further that Buyer or
its assignee may make a collateral assignment of its rights, but not its obligations, under this
Agreement to any of its financing sources. This Agreement shall bind, benefit, and be enforceable
by and against the parties hereto, and their respective successors and permitted assigns.



     14.5 Waivers. Except as otherwise expressly provided herein, no waiver with respect to
this Agreement shall be enforceable unless in writing and signed by the party against whom
enforcement is sought. Except as otherwise expressly provided herein, no failure to exercise,
delay in exercising, or single or partial exercise of any right, power or remedy by any party, and



43









 







no course of dealing between or among any of the parties, shall constitute a waiver of, or shall
preclude any other or further exercise of, any right, power or remedy.



     14.6 Severability. If any provision of this Agreement is construed to be invalid, illegal
or unenforceable, then the remaining provisions hereof shall not be affected thereby and shall be
enforceable without regard thereto.



     14.7 Counterparts; Facsimile. This Agreement may be executed in any number of counterparts, and delivered by facsimile or
other form of electronic communication, each of which when so executed and delivered shall be an
original hereof, and it shall not be necessary in making proof of this Agreement to produce or
account for more than one counterpart hereof.



     14.8 Section Headings. The section and subsection headings in this Agreement are used
solely for convenience of reference, do not constitute a part of this Agreement, and shall not
affect its interpretation.



     14.9 References. All words used in this Agreement shall be construed to be of such number
and gender as the context requires or permits. Unless a particular context clearly requires
otherwise, the words “hereof” and “hereunder” and similar references refer to this Agreement in its
entirety and not to any specific section or subsection of this Agreement.



     14.10 CONTROLLING LAW. THIS AGREEMENT IS MADE UNDER, AND SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO AGREEMENTS MADE AND TO BE
PERFORMED SOLELY THEREIN, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.



     14.11 No Third-Party Beneficiaries. No provision of this Agreement is intended to or shall
be construed to grant or confer any right to enforce this Agreement, or any remedy for breach of
this Agreement, to or upon any Person other than the parties hereto, including, but not limited to,
any customer, prospect, supplier, employee, contractor, salesman, agent or representative of
Seller.



     14.12 Neutral Construction. The parties have negotiated this Agreement and all of the
terms and conditions contained in this Agreement in good faith and at arms’ length, and each party
has been represented by counsel during such negotiations. No term, condition, or provision
contained in this Agreement shall be construed against any party or in favor of any party: (a)
because such party or such party’s counsel drafted, revised, commented upon, or did not comment
upon, such term, condition, or provision; or (b) because of any presumption as to any inequality of
bargaining power between or among the parties. Furthermore, all terms, conditions, and provisions
contained in this Agreement shall be construed and interpreted in a manner which is consistent with
all other terms, conditions, and provisions contained in this Agreement.



     14.13 Dispute Resolution. If any dispute arises: (a) out of or relating to, this Agreement
or any alleged breach thereof; or (b) with respect to any of the transactions or events
contemplated hereby (a “Dispute”), the party desiring to resolve such Dispute shall deliver
a written notice describing such Dispute with reasonable specificity to the other party (the
“Dispute Notice”). If any party delivers a Dispute
Notice pursuant to this Section 14.13, or if



44









 







any Indemnifying Party delivers to any
Indemnitee an Indemnification Objection Notice pursuant to Section 13.3, the parties
involved in the Dispute shall meet at least twice within the twenty (20) day period commencing with
the date of the Dispute Notice or the Indemnification Objection Notice (as the case may be) and in
good faith shall attempt to resolve such Dispute.



     If the Dispute is not resolved pursuant to the above paragraph, the Dispute shall be settled
by arbitration conducted in Minneapolis, Minnesota, or such other place as mutually agreed to by
the parties, which shall be in accordance with the rules and procedures of the American Arbitration
Association then in effect with respect to commercial disputes; provided that discovery
shall be limited to depositions and interrogatories, document production and other written
discovery and provided that the arbitration shall be conducted by three arbitrators, with each of
Buyer and Seller selecting one arbitrator and the two so selected shall select a third (and if they
are unable to agree, such third arbitrator shall be appointed by AAA). The arbitration of such
issues, including the determination of any amount of damages suffered by any party hereto by reason
of the acts or omissions of any party, shall be final and binding upon all parties.
Notwithstanding the foregoing, the arbitrator shall not be authorized to award punitive damages
with respect to any such claim or controversy, nor shall any party seek punitive damages relating
to any matter under, arising out of or relating to this Agreement in any other forum, provided that
the arbitrator may award punitive damages in the event a third party claim for which a party is
seeking indemnification includes a punitive damages claim. Except as otherwise set forth in the
Agreement, the cost of any arbitration hereunder, including the cost of the record or transcripts
thereof, if any, administrative fees, and all other fees involved including reasonable attorneys’
fees incurred by the party determined by the arbitrator to be the prevailing party, shall be paid
by the party determined by the arbitrator not to be the prevailing party, or otherwise allocated in
an equitable manner as determined by the arbitrator. The parties shall use reasonable efforts to
enable the arbitrator to render its decision no later than sixty (60) days after the submission of
the Dispute or Indemnification Objection Notice to the arbitrator.



     14.14 Schedules. Seller’s disclosures contained in the schedules described in Section
2.1(b)(ii), Article 4 and Section 8.3 of this Agreement are made as of August
31, 2006. Not later than ten (10) days prior to the Closing, Seller shall supplement or amend all
schedules as may be necessary to update the disclosures contained therein and provide all
documentary materials referred to in such amended schedules and, as so updated, such disclosures
shall be deemed to be made as of the Closing Date. Such amended or supplemented schedules shall
not disclose the occurrence of any Material Adverse Effect or any material breach of this Agreement
on the date hereof or thereafter. For purposes of this Agreement, including without limitation for
purposes of determining whether the conditions set forth in Section 8.1 have been fulfilled
and for purposes of Section 13.1(a), such schedules shall be deemed to include all
information in the schedules as so supplemented or amended which are accepted by Buyer based on the
standard set forth in the preceding sentence. Information contained on any schedule to this
Agreement that is also responsive to the requirements of any other schedule shall also be deemed to
have been disclosed on such other schedule if it is reasonably apparent that such disclosure
relates to such other schedule, whether or not specifically set forth or cross-referenced therein.



[Remainder of Page Intentionally Blank]




45









 








     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the
date first written above.



	 	 	 	 	 
	 	SELLER:





StayOnline, Inc.

 	 
	 	By:  	 	 
	 	 	Antonio DiMilia, President and 	 
	 	 	Chief Executive Officer 	 
	 
	 	BUYER:





LodgeNet Entertainment Corporation

 	 
	 	By:  	 	 
	 	 	James G. Naro, Senior Vice President, 	 
	 	 	General Counsel, Secretary and Chief Compliance Officer 	 
	 




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