**Exhibit2.1**

 

**ASSETPURCHASE AGREEMENT**

 

THIS ASSET PURCHASE AGREEMENT (“**Agreement**”)is made and entered into as of the 10th day of May,2010, by and among **XETA TECHNOLOGIES, INC.**,an Oklahoma corporation (“**Purchaser**”),**HOTEL TECHNOLOGY SOLUTIONS, INC.**,a Delaware corporation d/b/a *LoricaSolutions* (“**Seller**”)and **ENHANCED CAPITAL NEW YORK FUND III, LLC,ENHANCED CAPITAL NEW YORK FUND II, LLC**, **STONEHENGE CAPITAL FUND NEW YORK, LLC, SEABURY CAPITAL LLC**,****and**MARKHOLZBERG**(collectively, the “**Seller****Principals**”) (joining solely forpurpose of certain representations and warranties made by them pursuant to Article Vhereof).

 

**Recitals**:

 

A.                                   Seller isengaged in the design, installation and maintenance of converged managednetworks for hotels such as Starwood, Marriott, Hilton, Mandarin-Oriental,Choice, Intercontinental and Radisson, including deployment, monitoring,and support for wired and wireless high speed Internet and proactive managementof in-room legacy networks (the “**Business**”).

 

B.                                     Seller desiresto sell and convey to Purchaser, and Purchaser desires to purchase and acquirefrom Seller as a going concern all or substantially all of the assets of Sellerused or useful in the Business (including all accounts and notes receivable,chattel paper, inventory, software, pre-paid expenses, equipment, real propertyand leasehold estates, all subsisting service contracts and contract rights,intellectual property, permits, licenses and general intangibles, including the*Lorica Solutions* trade name, andall other material assets which are necessary to successfully operate theBusiness), together with all associated goodwill, on the terms moreparticularly hereinafter set forth.

 

**Terms andConditions**

 

In consideration of the foregoing premises, which are hereby incorporatedby reference herein as operative terms of this Agreement, and for other goodand valuable consideration the receipt and sufficiency of which are herebyacknowledged, Seller and Purchaser agree as follows:

 

**ARTICLE I**

**DEFINEDTERMS AND INTERPRETATION**

 

1.1                                 Definitions.  Capitalizedterms used in this Agreement shall have the following meanings:

 

“**Act**” means the Securities Act of 1933, as the same may beamended from time to time.

 

**Affiliate**” of, or “**Affiliated**” with, a specified person orentity means a person or entity that directly, or indirectly through one ormore intermediaries, controls, or is controlled by, or is under common controlwith, the specified person or entity.

 

----

 

“**Asserting Party**”****hasthe meaning set forth in Section 10.6.

 

“**Assets**” has the meaning set forth in Section 2.1.

 

“**Assumed Liabilities**” has the meaning assigned in Section 2.3.

 

“**Base Valuation Date**” means March 31, 2010.

 

“**Base Value Balance Sheet**” means Seller’s balance sheet datedas of the Base Valuation Date.

 

“**Business Day**” means a day other than a Saturday, Sunday orU.S. federal or Oklahoma or New York state holiday on which banks are generallyclosed for business.

 

“**Closing**” has the meaning set forth in Section 3.1.

 

“**Closing Date**” has the meaning set forth in Section 3.1.

 

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

 

“**Damages**” has the meaning set forth in Section 10.2.

 

“**Effective Time**” has the meaning set forth in Section 3.1.

 

“**Encumbrances**” means all liens, mortgages, pledges, securityinterests, conditional sales agreements, charges, options, preemptive rights,rights of first refusal, reservations, restrictions or other encumbrances ormaterial defects in title.

 

“**Escrow Amount**” has the meaning set forth in Section 2.2(a).

 

“**Excluded Assets**” means only such contracts, agreements andother assets and properties as identified in Schedule 1 hereto attached.

 

“**Final Determination**” has the meaning set forth in Section 10.8.

 

“**GAAP**” means generally accepted accounting principles in theUnited States, applied on a basis consistent with prior periods.

 

“**Governmental Authority**” means any federal, state, local orforeign government, political subdivision or governmental or regulatoryauthority, agency, board, bureau, commission, instrumentality or court orquasi-governmental authority.

 

“**Indemnification Period**” has the meaning set forth in Section 10.1.

 

“**Law**” or “**Laws**”means any and all federal, state, local or foreign statutes, laws, ordinances,proclamations, codes, regulations, licenses, permits, authorizations,approvals, consents, legal doctrines, published requirements, orders, decrees,judgments, injunctions and rules of any Governmental Authority, including,without limitation, those covering environmental, Tax, energy, safety, health,transportation, bribery, record keeping, zoning, discrimination, antitrust andwage and hour matters, in each case as amended and in effect from time to time.

 

“**Loss**” or “**Losses**”means all liabilities, losses, claims, damages, actions, suits, proceedings,demands, assessments, adjustments, fees, costs and expenses (includingspecifically, but without limitation, reasonable attorneys’ fees and costs andexpenses of investigation), net of (i) income Tax effects with respectthereto (including, without 

 

2

----

 

limitation, income Taxbenefits recognized in connection therewith and income Taxes upon anyindemnification recovery thereof) and (ii) insurance proceeds.

 

“**Material Contracts**” has the meaning set forth in Section 5.9.

 

“**Permitted Encumbrances**” means Encumbrances (a) for Taxesor other governmental charges not yet due and payable or which are beingcontested in good faith and by appropriate proceedings, (b) securingobligations incurred in the ordinary course of business which are not past dueand are included among the Assumed Liabilities (including those imposed by law,UCC-1 financing statements filed under the Uniform Commercial Code, mechanics’,materialmens’, landlords’, warehousemens’ and carriers’ liens) or are beingcontested in good faith, (c) that are reflected, reserved against orotherwise disclosed in the Required Financial Information and are includedamong the Assumed Liabilities, or which are created under the MaterialContracts or leases, (d)  purchase money security interests incurred inconnection with the purchase of assets in the ordinary course of business andare included among the Assumed Liabilities, (e) arising under zoning, building codes, and other land use lawsregulating the use or occupancy of such real property used by Seller or theactivities conducted thereon that are imposed by any Governmental Authorityhaving jurisdiction over such real property, excluding existing violations ofsuch codes, laws or regulations, (f) easements, covenants, conditions, restrictions, and other similarmatters of record affecting title to real property leased by the Seller andother title defects that do not or would not materially impair the value, useor occupancy of such real property, (g) that are related toimmaterial properties or assets or otherwise would not materially detract fromthe value, or interfere with the present use, of the property subject theretoor affected thereby, (h) rights and licenses granted to others in anyintellectual property or software of the Seller, or (ix) restrictionsplaced on any intellectual property or software of the Seller licensed by anythird party.

 

“**Purchase Consideration**” shall have the meaning assigned in Section 2.2hereof.

 

“**RDC**” means the Buffalo and Erie County Regional DevelopmentCorporation.

 

“**Required Financial Information**” shall have the meaningassigned in Section 5.6 hereof.

 

“**Responding Party**” has the meaning set forth in Section 10.6.

 

“**SEC**” means the United States Securities and ExchangeCommission.

 

“**Taxes**” means all taxes, charges, fees, levies or otherassessments including, without limitation, income, gross receipts, excise,property, sales, withholding, social security, unemployment, occupation, use,service, service use, license, payroll, franchise, transfer and recordingtaxes, fees and charges, imposed by the United States or any state, local orforeign government or subdivision or agency thereof, whether computed on aseparate, consolidated, unitary, combined or any other basis; and such termshall include any interest, fines, penalties or additional amounts attributableto or imposed with respect to any such taxes, charges, fees, levies or otherassessments.

 

“**UCC**” means the Uniform Commercial Code as the same is in forcein the jurisdiction implicated in any particular reference herein.

 

3

----

 

“**Valuation Review Period**” shall have the meaning assigned in Section 2.5.

 

“**Warrants**” shall have the meaning assigned in Section 2.2(c).

 

“**XETA Stock**” shall have the meaning assigned in Section 2.2(b).

 

1.2.                              Interpretation.  For all purposes of this Agreement, except asotherwise expressly provided or unless the context otherwise requires:

 

(a)                                  The termsdefined in Article I and elsewhere in this Agreement include theplural as well as the singular;

 

(b)                                 Words of themasculine gender in this Agreement shall be deemed and construed to includecorrelative words of the feminine and neuter genders and words of the neutergender shall be deemed and construed to include correlative words of themasculine and feminine genders;

 

(c)                                  The words “herein,”“hereof,” and “hereunder” and other words of similar import refer to thisAgreement as a whole, including all Schedules and Exhibits, and not to anyparticular Article, Section or other subdivision;

 

(d)                                 The terms “include,”“includes” and “including” are not limiting and the term “or” has, except whereotherwise indicated, the inclusive meaning represented by the phrase “and/or;”

 

(e)                                  The term “**material adverse effect**”, or any variationsthereof, shall mean any change, circumstance, fact, event or effect that isadverse and material (i) to the Business, the Assets (taken as a whole),the condition (financial or otherwise) or results of operations of Seller, orthe ability of Seller to perform its obligations hereunder, or (ii) theability of Purchaser to conduct the Business after the Closing Datesubstantially as the Business has been conducted by Seller prior to the ClosingDate; and

 

(f)                                    Whenever astatement of any party is qualified by that party’s knowledge, “**knowledge**” means the actual personalknowledge of the person making such statement at the time or times that suchstatement is made, and a knowledge or awareness of facts, circumstances orother matters contained or referred to in such statements of which the personmaking the statement would or should be aware with the exercise of reasonablecare. If the statement is made by a corporation, the knowledge of thecorporation’s officers and directors shall be imputed to the corporation.  Notwithstanding the foregoing, as used in Section 8.6with respect to the opinion of counsel to Seller, “knowledge” shall be asdefined in such opinion, and the definition in the foregoing sentence shall notapply thereto.  Such opinion will providethat when any opinion set forth therein is given to [such counsel’s] “knowledge,”“or to the best of [such counsel’s] knowledge,” or with reference to matters ofwhich [such counsel] is “aware” or which are “known” to [such counsel], or witha similar qualification, that knowledge is limited to the actual knowledge ofthe individual lawyers in the firm rendering such opinion who have participateddirectly and substantively in the specific transactions to which the opinionrelates and without any special or additional investigation undertaken for thepurposes of such opinion, other than reasonable reliance on representations andwarranties made by the Seller and the Seller Principals in the TransactionDocuments (as defined in Section 8.6(c) hereof) and statements andcertifications obtained, when [such counsel] has 

 

4

----

 

deemed it to be necessary,from public officials and officers of the Seller, including its Chairman andChief Executive Officer and its corporate secretary.

 

**ARTICLE II**

**TERMS OFPURCHASE**

 

2.1                                 Acquisition ofthe Assets.  Upon theterms and subject to the conditions of this Agreement, Seller agrees to sell,convey, transfer, assign and deliver to Purchaser at the Closing, and Purchaseragrees to purchase from Seller, free and clear of all Encumbrances other thanPermitted Encumbrances, all of the assets of Seller used or useful in theBusiness, which are not Excluded Assets (including all accounts and notesreceivable, instruments and chattel paper, all inventory, software, allpre-paid expenses (to the extent assignable), equipment, real property andleasehold estates, all subsisting service contracts and contract rights andopen orders (to the extent assignable), all intellectual property, permits,licenses and all general intangibles, including the *Lorica Solutions* trade name and related logos, and all othermaterial assets which are necessary to successfully operate the Business),together with all documents, files and records containing financial, Tax,technical support and other information pertinent to the operation of theBusiness, and all associated goodwill (collectively, the “**Assets**”), specifically including butlimited to:

 

(a)                                  all accountsand notes receivable, instruments and chattel paper identified or described in Schedule2.1 (a) hereto attached;

 

(b)                                 rights, titleand interest of the Business in, to and under all material existing contractsand agreements, written and verbal to which the Seller is a party, specificallyincluding but not limited to the service, support and maintenance agreementsmore particularly identified in Schedule 2.1(b) (the “**Major Assigned Contracts**”);

 

(c)                                  all inventory(including, without limitation, supplies, spare parts and components) listed inSchedule 2.1(c), including but not limited to all telephony systems,parts, components, implements and other tangible personal property of everykind and description specifically used in connection with the Business (“**Inventory**”);

 

(d)                                 all customerlists, sales records, credit data and other information relating to customersof the Business;

 

(e)                                  all equipmentidentified or described by item or type in Schedule 2.1(e) heretoattached;

 

(f)                                    all realproperty and leaseholds described in Schedule 2.1(f) heretoattached;

 

(g)                                 all softwareand intellectual property, including patents, trademarks and copyrights, andall permits and licenses, described in Schedule 2.1(g) heretoattached; and

 

(h)                                 copies of allrelevant books, records, papers and instruments of whatever nature and whereverlocated that relate to the Business or which are required or necessary forPurchaser to conduct the Business from and after the 

 

5

----

 

Closing in the manner inwhich it was being conducted by Seller before the Closing and all salesfunnels, open orders, files and records containing financial, Tax, technicalsupport and other information pertinent to the operation of the Business.

 

2.2                                 PurchaseConsideration.  The purchase consideration for theAssets shall be $2,750,000 (subject to the conditions and adjustmentshereinafter set forth) plus the amount of any and all Assumed Liabilities (the “**Purchase Consideration**”).  The portion of the Purchase Consideration tobe paid to Seller shall be comprised of the following components:

 

(a)                                  $1,000,000 incash, $850,000 of which shall be paid at Closing, less accrued amountsdisclosed to Purchaser as being payable to the RDC and to legal counsel toSeller, or either of them (which amounts shall be paid directly by Purchaser),via wire transfer of immediately available U.S. funds to an account(s) designatedby the Seller, with the $150,000 balance (“**EscrowAmount**”) to be deposited into escrow pursuant to the terms of anEscrow Agreement in the form of Exhibit B hereto attached, pendingfinal valuation of Acquired Assets net of Assumed Liabilities, as determined inaccordance with Sections 2.5(a) and (b) hereof, withpayment pursuant to Section 2.5 hereof;

 

(b)                                 $1,500,000, inPurchaser’s common stock (“**XETA Stock**”)valued at the “Previous Close Price” per share for such stock as reflected onthe nasdaq.com website as of the Closing Date ($3.83 per share as of the datehereof), which XETA Stock will be issued to Seller and shall be “restrictedstock”, as that term is defined in Rule 144 of the regulations to the Act:and

 

(c)                                  Warrants topurchase 150,000 shares of XETA Stock at an exercise price per share valued atthe “Previous Close Price” per share for such stock as reflected on thenasdaq.com website as of the Closing Date ($3.83 per share as of the datehereof) (the “**Warrants**”), whichWarrants will be issued to Seller in the form of Exhibit C heretoattached, and will be exercisable (subject to applicable SEC registration andholding period requirements and transfer restrictions) at any time after theClosing Date and prior to the fifth (5th) anniversary of the Closing Date.

 

Provided, however, thatSeller hereby acknowledges, represents and agrees that the issuance of suchXETA Stock and Warrants will be effected by Purchaser as a transaction exemptfrom registration under the Act and, accordingly, that the XETA Stock andWarrants will not have been registered under the Act at the time of Closing,nor shall XETA have any obligation to effect the registration thereof at anytime after Closing. Seller further acknowledges, represents and agrees, that itis acquiring the XETA Stock and Warrants for investment purposes only and notwith a view to or for resale in connection with any distribution of the XETAStock or Warrants, or with any present intention of distribution (within themeaning of the Act) of the XETA Stock or Warrants, or any portion thereof.  Seller understands that because none of theXETA Stock or the Warrants will have been registered under the Act, Purchaserwill not transfer any of the XETA Stock or the Warrants without registrationunder the Act, which is not contemplated by this Agreement, except upon theissuance to Purchaser of a favorable opinion from Purchaser’s counsel or uponthe submission to Purchaser of such other evidence as may be satisfactory toPurchaser’s counsel to the effect, in either case, that any such transfer,whether pursuant to Rule 144, or otherwise, shall not be in violation ofthe Act, and any applicable state 

 

6

----

 

securities laws, and allshare certificates and warrants representing the XETA Stock and the Warrants,or any portion thereof, will be issued with a restrictive legend affordingconspicuous notice of such restriction.

 

2.3                                 AssumedLiabilities.  As further consideration for thepurchase of the Assets to be effected hereby, Purchaser shall assume anddischarge only the following liabilities and obligations of Seller (the “**Assumed Liabilities**”):  those liabilities of Seller which areproperly reflected in Seller’s Closing Date Balance Sheet (as defined in Section 2.5)and, with respect to any Tax liabilities assumed, those which are not past dueor subject to any uncertain Tax positions within meaning of ASC 740, “IncomeTaxes.” The Assumed Liabilities shall include only (a) accounts payable(including commissions currently payable and sales taxes currently payable), (b) operatinglease obligations for property used by Seller in its conduct of the Business, (c) customerdeposit obligations that have not been applied towards inventory purchases orany other aspect of a customer installation and with respect to which Sellerhas not yet performed any services for the customer, and (d) any deferredrevenue under service contracts which are assignable and delegable and areassigned to and assumed by Purchaser (with any necessary consents from thecustomer-obligee****and any othernecessary third party); provided that the Assumed Liabilities shall expressly *exclude* (i) all undisclosed, unrecordedand unwritten liabilities of every type and character, (ii) all accountspayable owed to Littler Mendelson PC and (iii) any and all indebtednessfor borrowed funds, including indebtedness, obligations and liabilities, ifany, of Seller to (A) the RDC, (B)        *       ,(C) Seller’s investors, and (D) Seller’s capital option holders, orany of them.

 

2.4                                 Allocation ofPurchase Consideration.  Subject to any post-Closingadjustments required by Section 2.5 hereof, the parties to thisAgreement shall initially allocate the Purchase Consideration among the Assetsand associated goodwill, which allocation will be based upon the followingcategories:

 
| Accounts  Receivable & prepaid expenses |   | $ | *         |   |
|--------------------------------------------------|--------|---|-----------|--------|
| Inventory                                        |   | $ | *         |   |
| Equipment                                        |   | $ | *         |   |
| Goodwill                                         |   | $ | *         |   |
| Total ($2,750,000 +  Assumed Liabilities)        |   | $ | 3,769,000 |   |

 

The figures above are preliminary and based upon the Base Value BalanceSheet and will be updated after Closing (but not later than the close of theValuation Review Period) based upon the Closing Date Balance Sheet andadjustments, if any, made in accordance with Section 2.5hereof.  The parties agree to file anyand all applicable tax returns and other required related tax schedules inaccordance with such allocation and Section 1060 of the Internal RevenueCode and will not adopt or otherwise assert tax positions inconsistenttherewith.  Purchaser and Seller shalleach prepare and file its Form 8594 for the taxable year in which theClosing takes place, consistent with the requirements set forth in this Section 2.4.

 

2.5                                 PurchaseConsideration Adjustment; Valuation Review Period.  Within thirty (30) days after the ClosingDate, Seller will provide Purchaser with Seller’s balance sheet as of theClosing Date (“**Closing Date Balance Sheet**”),which Closing Date Balance Sheet shall have 

 

----

***The asterisk (*) indicates thatmaterial has been omitted pursuant to a request for confidentialtreatment.  The omitted material has beenfiled separately with the Securities and Exchange Commission pursuant to rule 24b-2of the rules to the Securities and Exchange Act of 1934, as amended.**

 

7

----

 

been prepared in accordance with GAAP, reviewed by Seller’s independentcertified public accountant (who must be satisfactory to Purchaser) andwarranted as accurate and materially complete by Seller, with contentsacceptable to Purchaser in reliance upon such warranties.  Purchaser shall have ninety (90) days afterthe Closing Date (the “**Valuation ReviewPeriod**”) to verify the existence, condition, value and status of theAssets and the Assumed Liabilities and to conduct such other valuation and duediligence procedures as Purchaser shall deem reasonably necessary to confirmthat the carrying values of the Assets and Assumed Liabilities as reflected inthe Base Valuation Date Balance Sheet were materially correct and that nomaterial adverse changes have occurred in the Assets or the Business since theBase Valuation Date.  The Escrow Amountwill be payable at the end of the Valuation Review Period; provided that suchcash component shall be reduced by:

 

(a)                                  the amount ofaccounts receivable included in the Assets which Purchaser determines, in itssole discretion, to be uncollectible (which uncollectible receivables will bere-assigned by Purchaser to Seller), and

 

(b)                                 the amount, ifany, by which, as of the Closing Date, Seller’s current liabilities included inthe Assumed Liabilities are determined by Purchaser to have exceeded the valueof its current assets as of the Closing Date by more than $170,000.

 

The balance of the Escrow Amount, if any, after payment of all fundsdue to Seller shall be returned to Purchaser.

 

2.6                                 TransitionItems.  The Assumed Liabilities shallbecome the responsibility of the Purchaser as of the Effective Time (which termis defined in Section 3.1 hereof) Seller and Purchaser hereby agree to the following terms in relation tothis transition of responsibility:

 

(a)                                  Seller willcooperate with Purchaser’s sales and service representatives to ensure a smoothtransition of the Business to Seller. This cooperation shall include but not be limited to participating injoint conference calls with customers and Purchaser’s sales and/or servicesrepresentatives as reasonably requested by Purchaser.

 

(b)                                 Purchaser willnot be responsible for any costs associated with discharging the dutiesinherent in the Assumed Liabilities until the Effective Time.

 

(c)                                  All salesfunnels, active quotations, and order backlogs are part of the Assets, andSeller will cooperate with Purchaser and customers to transition these assetsto Purchaser.

 

2.7                                 Warranty Work.  In the event that claims under outstandingwarranties are asserted by a customer of Seller, who, by virtue of thisAgreement, has become a customer of Purchaser, Purchaser and Seller shallcooperate in good faith with such customer to determine whether a validwarranty claim exists and, if so, whether it relates to labor and materialsfurnished by Seller or by Purchaser.  Ifby Purchaser, Purchaser will bear the responsibility for resolving such claim;if by Seller, then, Seller shall promptly resolve such claim to the customer’ssatisfaction, failing which Purchaser may do so and shall be entitled to promptreimbursement by Seller at the rate of $     *    per hour for labor, plus travel and expenses and replacement parts at cost.

 

----

***The asterisk (*) indicates thatmaterial has been omitted pursuant to a request for confidentialtreatment.  The omitted material has beenfiled separately with the Securities and Exchange Commission pursuant torule 24b-2 of the rules to the Securities and Exchange Act of 1934,as amended.**

 

8

----

 

**ARTICLE III**

**THE CLOSING**

 

3.1                                 Closing Timeand Place.  The consummation of the transactionscontemplated by this Agreement (“**Closing**”)shall take place as soon as reasonably practicable after every party to thisAgreement shall have indicated to the other that it has satisfied or standsready to satisfy all conditions of Closing for which it is responsible, or atsuch other time and place as Seller and Purchaser shall mutually agree, but notlater than May 24, 2010.  TheClosing shall take place at Purchaser’s offices in Broken Arrow, Oklahoma 74012or by the electronic delivery or other mutually agreeable transmission of allduly executed required documentation, and the date on which the Closing shalloccur is hereinafter called the “**Closing Date**”and the Closing shall be deemed effective for all purposes as of 12:01 a.m.,Eastern Daylight Time, on the Closing Date (“**EffectiveTime**”).

 

3.2                                 Seller’sDeliveries.  At the Closing, Seller will deliver toPurchaser all of the items described in Section 8.9 hereof.  At or after the Closing, Seller shall executeand deliver to Purchaser such other instruments of transfer as shall bereasonably necessary or appropriate to vest in Purchaser good title to theAssets, free and clear of all Encumbrances other than Permitted Encumbrancesand to comply with the purposes and intent of this Agreement.

 

3.3                                 Purchaser’sDeliveries.  At the Closing, Purchaser will deliverto Seller all of the items described in Section 9.4 hereof.

 

3.4                                 FurtherAssurances.  Seller and Purchaser agree that theyshall, at any time and from time to time after the Closing, upon request of theother party, do, execute, acknowledge and deliver, or will cause to be done,executed, acknowledged and delivered, all such further acts, deeds,assignments, transfers, conveyances, powers of attorney and assurances as mayreasonably be required to carry out the purposes and intents of thisAgreement.  No action taken or documentexecuted pursuant to this section shall increase the liability of Seller orPurchaser beyond that contemplated by any other provision of this Agreement.

 

3.5                                 Consents.  Tothe extent that the assignment or transfer of any Major Assigned Contract to beassigned or transferred to Purchaser as provided in this Agreement shallrequire the consent of another party thereto, this Agreement shall notconstitute an agreement to assign or transfer the same if any attemptedassignment would constitute a breach thereof. Seller agrees that it will use commercially reasonable efforts to obtainthe consent of the other parties to all Material Contracts to the assignment ortransfer thereof to Purchaser.  Sellershall have no liability to Purchaser for failure to obtain any such third-partyconsent provided Seller complies with its obligations under this section.  Purchaser will cooperate with and assistSeller in its efforts to obtain any such consents; provided, however, that inthe interim, pending such assignment or transfer with any necessary consents,Seller shall subcontract all work under each such contract to Purchaser so asto effectively transfer the economic benefit of such contract to Purchaser;provided further that should Purchaser determine prior to Closing that Sellerwill be unable to obtain and deliver any necessary consent to the assignment ofany Major Assigned Contract or any other Material Contract, then, Purchasershall have the right to terminate this Agreement pursuant to Section 11.1,without penalty or premium.

 

9

----

 

**ARTICLE IV**

**EMPLOYMENTMATTERS**

 

4.1                                 Employees.  NeitherPurchaser nor any of its Affiliates shall have any liability in respect of anysalary, severance, health, welfare, retirement, or any other benefits relatingto employment of such employees with Seller, its predecessors or successors,before or after Closing.  Purchaserand/or its Affiliates agrees to offer employment to all Sellers’ employeesdeemed by Purchaser as key to the successful continuation of the Business andlisted on Schedule 4.1 attached hereto, conditioned on the consummationof the sale of the Assets pursuant hereto. Seller hereby authorizes Purchaser to offer such employment to suchemployees, waives any rights Seller may have to prohibit such employees frombeing employed by Purchaser, and shall not offer new employment to any suchemployees who accept such employment with Purchaser.  Any employees of Seller hired by Purchaserafter the Closing will be hired as employees of Purchaser on such terms asPurchaser may elect in its sole discretion.  Nothing in this Section 4.1shall be deemed to be a contract for the benefit of any employee.

 

4.2                                 MedicalCoverage.  Seller shall retain, in accordance withits applicable employee plans, responsibility for and continue to pay allhospital, medical, life insurance, disability and other employee welfarebenefit plan expenses and benefits for each Seller employee to be hired byPurchaser to the extent of Seller’s responsibility to employees and theircovered dependents (or the applicable requirements under COBRA) for the periodprior to the Closing Date.

 

4.3                                 Indemnification.  Sellershall defend, indemnify and hold harmless Purchaser, its corporate affiliates,and their respective directors, officers and employees, successors and assignsagainst and in respect of any of the following, to the extent arising prior tothe Closing Date: (i) any claim for wrongful discharge or breach of anywritten employment contract or written plan or policy arising from anytermination of the employment of any employee by Seller; (ii) any claimfor severance benefits or termination pay or continued employment arising outof or resulting from any employee’s employment by Seller; (iii) any claimsrelating to Purchaser’s obligations as a “successor” to the Business and claimsfor withdrawal liability, each with respect to any multi-employer pensionplans; and (iv) any liability that may arise as a result of Seller or anyof its subsidiaries being a member of a “controlled group” or an “affiliatedservice group” (within the meaning of Sections 414(b), (c), (m) or (o) ofthe Code), or being under “common control” (within the meaning of Section 4001of the Employee Retirement Insurance Security Act).

 

**ARTICLE V**

**REPRESENTATIONSAND WARRANTIES**

**OF SELLERAND THE SELLER PRINCIPALS**

 

Seller and, solely withrespect to, and to the extent described in, Sections 5.9, 5.12, 5.13,5.17 and 5.20 hereof, the Seller Principals hereby represent andwarrant to Purchaser as follows:

 

5.1                                 Organizationand Qualification.  Seller is a corporation duly organized,validly existing and in good standing under the Laws of the State ofDelaware.  Attached as Schedule 5.1are true, correct, and complete copies of Seller’s Certificate of Incorporationand Bylaws, and all

 

10

----

 

amendments thereto.  Seller has the requisite power and authorityto own, lease and operate its assets and properties and to carry on theBusiness as currently being conducted, and is in good standing in the State ofNew York and in each other jurisdiction in which the operation of the Businessrequires it to be registered unless the failure to be so registered would nothave a material adverse effect on Seller.

 

5.2                                 Authority.  Sellerhas the requisite corporate power and authority to enter into this Agreementand to effect the transactions contemplated hereby.  The execution, delivery and performance ofthis Agreement have been duly approved by Seller’s Board of Directors and itsstockholders.  No additional corporateproceeding on the part of Seller is necessary to authorize the execution anddelivery of this Agreement and the consummation by Seller of the transactionscontemplated hereby.

 

5.3                                 Enforceability.  ThisAgreement has been duly and validly executed and delivered by Seller and,assuming the due authorization, execution and delivery hereof by Purchaser,constitutes, to the best of Seller’s knowledge, a valid and binding agreementof Seller, enforceable against Seller in accordance with its terms, subject toapplicable bankruptcy, insolvency, fraudulent conveyance, reorganization,moratorium and similar laws affecting creditors’ rights and remedies generallyand subject, as to enforceability, to general principles of equity.

 

5.4                                 Non-Contravention.  Theexecution and delivery of this Agreement by Seller do not, and the consummationby Seller of the transactions contemplated hereby will not, (i) violate orresult in a breach of any provision of, (ii) constitute a default under,(iii) result in the termination of, (iv) accelerate the performancerequired by, (v) result in a right of termination or acceleration under,or (vi) result in the creation of any Encumbrance (other than PermittedEncumbrances) upon any of the Assets under any of the terms, conditions orprovisions of, (X) Seller’s Certificate of Incorporation or Bylaws, (Y) anyLaws applicable to Seller or any of the Assets, or (Z) any materialinstrument or agreement to which Seller is now a party or by which Seller orany of the Assets may be bound or affected, other than violations that wouldnot result in a material adverse effect on Seller.

 

5.5                                 Consents.  Nodeclaration, filing or registration with, notice to, or authorization, consentor approval of, any Governmental Authority or third party is necessary for theexecution and delivery of this Agreement by Seller, or the consummation bySeller of the transactions contemplated hereby, except as set forth in Schedule 5.5and such authorizations, consents or approvals which, if not made or obtained,as the case may be, would not have a material adverse affect.

 

5.6                                 FinancialInformation.  Seller has delivered to Purchaser allfinancial information requested by Purchaser regarding the Business, includingbut not limited to Seller’s Base Value Balance Sheet and accompanying financialstatement for the period then ending and its financial statements for the yearsended December 31, 2007, 2008 and 2009 (“**RequiredFinancial Information**”).

 

11

----

 

5.7                                 Assets.  Exceptas set forth in Schedule 5.7, Seller has good and marketable titleto all of the Assets, whether real, personal, mixed, tangible orintangible.  All the Assets are free andclear of restrictions on or conditions to transfer or assignment, and free andclear of Encumbrances other than Permitted Encumbrances.  The Assets are all the assets and propertiesnecessary to permit the Seller to operate the Business as currently operated.

 

5.8                                 Inventories.  Theitems of Inventory being sold under this Agreement exist in fact, and werepurchased in the ordinary course of business, are in good and usable condition,and are not stale or obsolete.

 

5.9                                 Contracts.  TheMajor Assigned Contracts, and the other contracts, leases, licenses andagreements set forth in Schedule 5.9 constitute all materialcontracts, agreements, instruments, leases and licenses relating to theBusiness and to which Seller is a party, or to which any of the Assets issubject (collectively, “**Material Contracts**”),all of which are valid and binding obligations of Seller in all material respectsand, to the best of Seller’s knowledge, of the other parties thereto inaccordance with their respective terms and conditions.  True and correct copies of all MaterialContracts have been made available or delivered to Purchaser.  Except as otherwise indicated in Schedule 5.5or Schedule 5.9, (i) neither Seller nor, to Seller’s or anySeller Principal’s knowledge based on reasonable inquiry, any other party toany such Major Assigned Contract or other Material Contract has given notice oftermination or taken any action inconsistent with the continuance of, is now inviolation or breach of, or in default in complying with, any material provisionthereof and (ii) the consent of any other party to such contract,agreement, instrument, lease or license is not required to validly effect theassignment, transfer or conveyance thereof from Seller to Purchaser.

 

5.10                           Permits.  Schedule 5.10contains an accurate list of all material licenses, franchises, permits andother governmental authorizations held by Seller (the “**Permits**”). The Permits are valid, and Seller has not received any written noticethat any Governmental Authority intends to cancel, terminate or decline torenew any such Permit.  The Permits areall the permits that are required by Law for the operation of the Business ascurrently conducted and the ownership of the Assets by Purchaser after theClosing Date, except any Permit the lack or loss of which to have would nothave a material adverse effect on the Business. Seller has conducted and is conducting the Business in substantialcompliance with the requirements, standards, criteria and conditions set forthin the Permits.

 

5.11                           TradeRestrictions and Confidentiality Agreements.  Schedule5.11 sets forth all agreements containing covenants not to compete orsolicit employees or to maintain the confidentiality of information to whichSeller or, to Seller’s knowledge, any of Seller’s employees, is bound or underwhich Seller has any rights or obligations.

 

5.12                           Litigation andLegal Compliance.  Except as set forth in Schedule 5.12,there is no material claim, action, suit or proceeding, pending or, to theknowledge of the Seller or the Seller Principals based on reasonable inquiry,threatened against or affecting Seller, at law or in equity, or before or byany Governmental Authority having jurisdiction over Seller which, ifsuccessful, would reasonably be expected to have a material adverse effect onSeller.  No written notice of any claim,action, suit or proceeding, whether pending or threatened, has been received bythe 

 

12

----

 

Seller and, to Seller’sknowledge, there is no basis therefor. Seller has conducted and is conducting the Business in compliance withall Laws applicable to Seller, the Assets or the operation of the Business,other than any noncompliance that would not reasonably be expected to have amaterial adverse effect on the Business.

 

5.13                           Taxes.  Seller has timely filed all requisite federal, state, local and other Taxreturns for all fiscal periods for which the applicable statute of limitationshas not expired, and has duly paid in full or made adequate provision in theBase Value Balance Sheet and other Required Financial Information for thepayment of all Taxes for all periods for which the applicable statute oflimitations has not expired.  Seller hasduly withheld and paid or remitted all Taxes required to have been withheld andpaid prior to the Closing Date in connection with amounts paid or owing to anyemployee, independent contractor, creditor, shareholder or other person orentity that required withholding under any applicable Law, including, withoutlimitation, any amounts required to be withheld or collected with respect tosocial security, unemployment compensation, sales or use Taxes or workers’compensation.  To the best of Seller’sand the Seller Principals’ knowledge, there are no examinations in progress orclaims against Seller relating to Taxes for any period or periods prior to andincluding the Closing Date and no written notice of any claim for Taxes,whether pending or threatened, has been received.  Seller has not granted or been requested togrant any extension of the limitation period applicable to any claim for Taxesor assessments with respect to Taxes. Seller is not a party to any Tax allocation or sharing agreement and isnot otherwise liable or obligated to indemnify any person or entity withrespect to any Taxes.

 

5.14                           Solvency.  Selleris currently able to pay, and is paying, its debts in general as they come due,and will not be rendered unable to pay such debts generally as they come due bythe transfer contemplated by this Agreement.

 

5.15                           Change of Nameand Location.  During the past five (5) years,except as described in Schedule 5.15, Seller has not conducted theBusiness under any name or been legally located at any location other than asfollows:

 
| Name                       | Legal Location          |
|----------------------------|-------------------------|
|                       |                    |
| Hotel Technology Solutions | 500 Brisbane Building   |
| or *Lorica Solutions*.     | 403 Main Street         |
|                       | Buffalo, New York 14203 |
|                       | 275 Northpointe Parkway |
|                       | Amherst, New York 14228 |

 

5.16                           Books andRecords.  The books of account, record books, and other records ofSeller, are complete and correct in all material respects, have been maintainedin accordance with sound business practices, and all of them have been madeavailable for inspection by Purchaser.

 

5.17                           Disclosure.  Seller has fully provided Purchaser or its representatives with all theinformation that Purchaser has requested in analyzing whether to consummate itspurchase of the Assets.  None of theinformation so provided nor any representation or warranty of Seller containedin this Agreement contains any untrue statement of a material fact, or omits tostate a

 

13

----

 

material fact necessary to make such representation, warranty orstatement, in light of the circumstances under which they were made, notmisleading.  To the best of Seller’s andthe Seller Principals’ knowledge based on reasonable inquiry, there is nothingwhich has not been set forth or disclosed in this Agreement and the attachedexhibits which currently materially adversely affects the Business or theAssets.

 

5.18                           Locations.  Exceptas to items that may be out for service or repair or with sales representativesfor marketing purposes, all tangible personal property included in the Assetsis currently found at the locations set forth in Schedule 5.15.

 

5.19                           Warranty Claims.  Exceptas set forth in Schedule 5.19, there are no material warranty claims fordefective work completed by the Business existing, pending or, to the bestknowledge of Seller, threatened against the Business or Seller.

 

5.20                           No OtherRepresentations.  Except forthe representations and warranties of Seller and the Seller Principalsspecifically contained in this Article V, Seller and the SellerPrincipals hereby make no representation or warranty of any kind whatsoever,express or implied, with respect to either the transactions contemplated herebyor the condition of, or any other matter involving, Seller or as to theaccuracy or completeness of any information regarding Seller furnished or madeavailable to Purchaser.  Seller shall nothave or be subject to any liability to Purchaser or any other person arising fromthe distribution to Purchaser, or Purchaser’s use or reliance upon, any suchinformation or any information, documents or materials made available toPurchaser in any “data rooms” (virtual or otherwise), management presentationsor in any other form in expectation of, or in connection with, the transactionscontemplated hereby.

 

**ARTICLE VI**

**REPRESENTATIONSAND WARRANTIES OF PURCHASER**

 

Purchaser represents andwarrants to Seller as follows:

 

6.1                                 Organization.  Purchaseris a corporation duly organized, validly existing and in good standing underthe Laws of the State of Oklahoma. Attached as Schedule 6.1 are true, correct, and complete copiesof Purchaser’s Certificate of Incorporation and Bylaws.

 

6.2                                 Authority.  Purchaserhas the full legal right, power and authority to enter into this Agreement andto consummate the transactions contemplated hereby.  Once approved by Purchaser’s Board ofDirectors, which is generally aware of the transactions contemplated by thisAgreement and the basic terms hereof as set forth in the Letter of Intentbetween Seller and Purchaser dated as of March 26, 2010, no additionalcorporate proceedings on the part of Purchaser will be necessary to authorizethe execution and delivery of this Agreement and the consummation by Purchaserof the transactions contemplated hereby. In executing this Agreement, Purchaser’s President and Chief ExecutiveOfficer has no reason to believe that such Board approval will not be obtained.

 

6.3                                 Enforceability.  ThisAgreement has been duly and validly executed and delivered by Purchaser, and,assuming the due authorization, execution and delivery by Seller and the valid 

 

14

----

 

and binding agreement ofPurchaser, enforceable against Purchaser in accordance with its terms, subjectto applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,moratorium and similar laws affecting creditors’ rights and remedies generallyand subject, as to enforceability, to general principles of equity.

 

6.4                                 Non-Contravention.  Theexecution and delivery of this Agreement by Purchaser do not, and theconsummation by Purchaser of the transactions contemplated hereby will not,violate or result in a breach of any provision of, or constitute a default (oran event which, with notice or lapse of time or both, would constitute adefault) under, or result in the termination of, or accelerate the performancerequired by, or result in a right of termination or acceleration under any ofthe terms, conditions or provisions of (i) Purchaser’s Certificate of Incorporationor Bylaws, (ii) any Law applicable to Purchaser or any of its propertiesor assets or (iii) any note, bond, mortgage, indenture, deed of trust,license, franchise, permit, concession, contract, lease or other instrument,obligation or agreement of any kind to which Purchaser is now a party or bywhich Purchaser or any of its properties or assets may be bound or affected.

 

6.5                                 Consents.  Nodeclaration, filing or registration with, or notice to, or authorization,consent or approval of, any Governmental Authority or other third party (exceptthe consent of Commerce Bank, N.A.) is necessary for the execution and deliveryof this Agreement by Purchaser or the consummation by Purchaser of thetransactions contemplated hereby. Commerce Bank, N.A. is aware of the transactions contemplated by thisAgreement and Purchaser has no reason to believe that its consent will not beobtained.

 

6.6                                 No ImpliedRepresentations.  Notwithstanding anything to thecontrary contained in this Agreement, Purchaser has not made any representationor warranty whatsoever, express or implied, other than those representationsand warranties of Purchaser expressly set forth in this Agreement.

 

6.7                                 Litigation.  Thereis no suit, action, administrative proceeding or other proceeding orgovernmental investigation pending, or to Purchaser’s knowledge, threatenedagainst Purchaser that, if adversely determined to Purchaser could have amaterial adverse effect on the ability of Purchaser to perform its obligationshereunder.

 

6.8                                 Disclosure.  Purchaserhas fully provided Seller or its representatives with all the information thatSeller has requested, and which, while not contained in publicly availabledocuments filed with the SEC, would otherwise be material to Seller in analyzingwhether to consummate this Agreement pursuant to the terms and conditions setforth herein.  None of the information soprovided nor any representation or warranty of Purchaser contained in thisAgreement contains any untrue statement of a material fact or omits to state amaterial fact necessary in order to make the statements herein or therein, inlight of the circumstances under which they were made, not misleading.  To Purchaser’s knowledge, there is nothingwhich has not been set forth or disclosed in this Agreement that could have amaterial adverse effect on Purchaser’s ability to perform its obligationshereunder.

 

6.9                                 XETA Stock andWarrants.  The sharesof XETA Stock to be issued pursuant to Section 2.2(b) havebeen duly and validly reserved and, upon issuance in accordance with the 

 

15

----

 

terms of this Agreement,will constitute validly issued, fully paid and non-assessable shares of commonstock of Purchaser, free of restrictions ontransfer other than restrictions on transfer contained herein, or arising underor by virtue of applicable state and federal securities laws and Encumbrancescreated by or imposed by a recipient thereof. Purchaser has duly and validly reserved the shares of XETA Stock issuableupon exercise of the Warrants, and such shares shall, when issued pursuant tothe terms of the Warrants, constitute validlyissued, fully paid and non-assessable shares of common stock of Purchaser, free ofrestrictions on transfer, other than restrictions on transfer contained herein,or arising under or by virtue of applicable state and federal securities lawsand Encumbrances created by or imposed by a recipient thereof.  The Warrants,when issued, sold and delivered in accordance with the terms set forth in thisAgreement, will be validly issued, fully paid and nonassessable and free ofrestrictions on transfer other than restrictions on transfer contained herein,or arising under or by virtue of applicable state and federal securities lawsand Encumbrances created by or imposed by a recipient thereof.  Assuming the accuracy of the representationsin Section 2.2, the shares of XETA Stock to be issued pursuant to Section 2.2(b),the Warrants and the shares of XETA Stock issuable upon exercise thereof willbe issued in compliance with all applicable federal and state securities laws.

 

6.10                           Availability ofFunds.  Purchaser has cash availableor borrowing facilities that are sufficient to enable it to consummate thetransactions contemplated by this Agreement.

 

6.11                           No CompetingTransactions Pending.  Purchaseris not currently involved in negotiations for the acquisition, whether bypurchase of stock or of assets, of any other business engaged in the provisionof high speed internet access services or products to the lodging industry.

 

**ARTICLE VII**

**CERTAINCOVENANTS**

 

7.1                                 Conduct ofBusiness.  Seller shall conduct the Business up tothe Closing Date in its normal and regular manner, and will not enter into anycontract except as may be required in the ordinary course of business.  Except with respect to disclosure to theirrespective attorneys, financial advisors and officers and employees with a needto know, or as otherwise required by Law, the parties shall insure that theexistence of this Agreement is kept in strictest confidence prior to Closing,and no party shall disclose the terms hereof to any person, before Closing,without each other party’s prior written consent and prior review of suchproposed disclosure (including, but not limited to, Purchaser’s news releaseand SEC filings).

 

7.2                                 FutureCooperation; Tax Matters.  Seller and Purchaser shall eachdeliver or cause to be delivered to the other following the Closing suchadditional instruments as the other may reasonably request for the purpose of fullycarrying out this Agreement.  Seller willcooperate and use commercially reasonable efforts to cause its officers,directors and employees to cooperate with Purchaser at and after the ClosingDate in furnishing information, evidence, testimony and other assistance inconnection with any actions, proceedings, arrangements or disputes of anynature with respect to matters pertaining to all Tax periods prior to theClosing Date.  Purchaser will provideSeller with access to such of Seller’s books and records relative to 

 

16

----

 

the Business as may bereasonably requested by Seller in connection with federal, state and local Taxmatters relating to Tax periods ending prior to the Closing Date.  The party requesting cooperation, informationor actions under this Section 7.2 shall reimburse the other partyfor all reasonable out-of-pocket costs and expenses actually paid or incurredin connection therewith, which costs and expenses shall not, however, includeper diem charges for employees or allocations of overhead charges.

 

7.3                                 Access; DueDiligence Examination.  Between the date of thisAgreement and the Closing Date, Seller shall give Purchaser and its authorizedrepresentatives access upon reasonable notice during business hours and in suchmanner as shall not unduly to disrupt Seller’s normal business activities, toany and all premises, properties, contracts, commitments, books, records andaffairs of the Business and shall cause its officers and employees to furnishPurchaser any and all financial, technical and operating data, all accountingand business records and all legal documents and other information pertainingto the Business as Purchaser, its representatives and advisors, may from timeto time request to verify the existence, condition, value and ownership of theAssets, the amount, nature and scope of the Assumed Liabilities, and theprospects of the Business (“**Due DiligenceInformation**”).  Purchasershall be entitled to rely on the accuracy of all Due DiligenceInformation.  Purchaser shall also havethe right to interview Seller’s key employees, customers and vendors/suppliers,and to review all customer credit histories and profiles as Purchaser, itsrepresentatives and advisors may deem necessary.

 

7.4                                 Preservationand Continuity of Representations.  Seller herebycovenants with Purchaser that from and after the date of this Agreement****and through the Closing Date or theearlier termination of the Agreement, Seller shall use its best efforts to ensurethat all of its representations and warranties set forth in Article Vhereof shall be true in all material respects as of the Closing Date as ifrepeated at and as of such time, and shall notify Purchaser promptly of anymaterial adverse change or deviation in or from any of the representations andwarranties herein from the date of this Agreement through the Closing Date.

 

7.5                                 Effect ofPurchaser’s Due Diligence. Purchaser’s due diligence review shall not relieve Seller or a SellerPrincipal (as and to the extent applicable) of any duties concerning theirrespective representations, or warranties, or Seller’s covenants and agreementscontained in this Agreement.

 

7.6                                 Filings withSEC.  Between the date of thisAgreement and the Closing Date, or promptly thereafter, Purchaser may choose tomake certain news releases or filings with the SEC.  To the extent that information concerningSeller is required to be included in such filings as required by applicable Lawor SEC rules, Seller shall supply or cause Seller’s auditors and other advisorsto supply such information, in the manner and form reasonably requested byPurchaser, at Purchaser’s cost, promptly and in any event not later than twenty(20) days after receipt of such request. Until such time as Purchaser shall have filed its Current Report on Form 8-Kdisclosing the consummation of the transactions to be effected by thisAgreement, Seller shall be afforded the opportunity to review, in advance, andto propose for Purchaser’s consideration reasonable additions to, andmodifications in, the information and disclosures to be contained in any suchnews release or SEC filing relating to such transactions, and in furtherance ofsuch opportunity Seller shall be afforded reasonable notice and time (not to exceedone Business Day) to review drafts of

 

17

----

 

each such news release or filing, and to consult with Seller’s legalcounsel, auditors and other advisors relative thereto.

 

**ARTICLE VIII**

**CONDITIONSTO PURCHASER’S OBLIGATION TO CLOSE;**

**SELLER’SDELIVERIES**

 

Each and every obligation ofPurchaser under this Agreement that has to be performed on or after the datehereof shall be subject to the satisfaction or waiver by Purchaser on or beforethe Closing Date of the following conditions:

 

8.1                                 Representations.  Therepresentations and warranties made by Seller and the Seller Principals in thisAgreement shall be correct in all material respects on and as of the ClosingDate, except for representations and warranties that by their terms can speakonly as of a specified date, with the same force and effect as though suchrepresentations and warranties had been made on the Closing Date.  If requested by Purchaser, Seller and, asapplicable, the Seller Principals shall have delivered to Purchaser acertificate to that effect dated the Closing Date and signed by an officer ofSeller.

 

8.2                                 Performance.  Allthe terms, covenants and conditions of this Agreement to be complied with orperformed by Seller on or before the Closing Date shall have been fullycomplied with or performed in all material respects or waived by Purchaser.

 

8.3                                 WaitingPeriods; Governmental Approvals.  All othergovernmental or regulatory approvals the absence of which would have a materialadverse effect upon the conduct of the Business by Purchaser or Purchaser’sownership or control of the Assets or the Business shall have been obtained,and (x) no suit, action or proceeding by any Governmental Authority shallbe pending and (y) Purchaser shall not have been advised in writing by anyGovernmental Authority that such Governmental Authority intends to file orcommence any suit, action or proceeding, which, in either case, seeks toenjoin, restrain or prohibit the consummation of the transactions contemplatedby this Agreement or to impose limitations on the ability of Purchaser toexercise full rights of ownership of the Assets or require the divestiture byPurchaser of any of the Assets. Purchaser shall deliver to Seller copies of any writing referred to inthis section promptly upon receipt, but in no event less than ten (10) daysfollowing receipt.

 

8.4                                 Proceedings.  Priorto the Closing Date, no material litigation shall have been initiated orthreatened by any Governmental Authority or any other person questioning thelegality of the transactions contemplated by this Agreement or which, in thereasonable opinion of counsel to Purchaser, could have a material adverseeffect on the Business or make it undesirable to proceed with suchtransactions.

 

8.5                                 Business andLegal Matters.  Seller shall have furnished orPurchaser shall have obtained:

 

(a)                                  from each ofSeller’s customers which is a party to any of the Major Assigned Contracts,such customer’s written acknowledgement of and, where necessary to the validityand effectiveness of Purchaser’s contemplated acquisition and assumption 

 

18

----

 

of any such Major Assigned Contract, its consent to the assignmentthereof to Purchaser, which acknowledgment and consent shall have been soughtby Seller and Purchaser by means of letter notification introducing Purchaserto each such customer and notifying each of Seller’s intended assignment ofsuch Major Assigned Contract to Purchaser;

 

(b)                                 allcertificates, permits and approvals, if any, that may be required in connectionwith Purchaser’s acquisition and contemplated operation of the Business afterClosing;

 

(c)                                  acceptance ofemployment by Purchaser from all of Seller’s employees identified by Purchaseras key to the successful continuation of the Business and listed on Schedule4.1 attached hereto;

 

(d)                                 mutuallyacceptable extensions, as deemed reasonably necessary by Purchaser, of any andall contracts or agreements with all key suppliers and vendors of the Business;

 

(e)                                  legal authoritysatisfactory to Purchaser and its counsel, obtained by Purchaser or suchcounsel as they shall deem necessary, without cost to Seller, that the sale ofAssets to be effected by the Agreement is in compliance with the provisions ofany applicable bulk sales or similar law in effect in the State of New York;and

 

(f)                                    allgovernmental approvals and third-party consents (if any), including but notlimited to the consent of Commerce Bank, N.A., deemed reasonably necessary byPurchaser for Purchaser’s performance of its obligations under this Agreementor its continued operation of the Business after Closing; provided, thatPurchaser shall use its best efforts to obtain the consent of Commerce Bank,N.A. within not more than five (5) business days following the executionof this Agreement; and provided, further, that Purchaser agrees to give Sellerprompt notice of the giving of, or refusal to give, such consent.

 

8.6                                 Opinion ofCounsel.  Purchaser shall have beenprovided with an opinion, containing customary qualifications and otherlimitations, from counsel to Seller substantially to the effect that:

 

(a)                                  Seller is acorporation validly existing and in good standing under the laws of the Stateof Delaware.  Seller has all requisitecorporate power and authority to carry on its business operations and to ownand operate the business in which it is engaged.  Seller is duly qualified to transact thebusiness in which it is engaged and is in good standing as a foreigncorporation in the State of New York and, to such counsel’s knowledge, in eachother jurisdiction in which the operation of the Business requires it to beregistered unless the failure to be so registered would not have a materialadverse effect on Seller.

 

(b)                                 The authorizedand outstanding shares of capital stock of Seller, and the holders thereof, areas set forth in Schedule 2.2(c) hereof, and all of such outstandingshares of capital stock are validly authorized and issued, fully paid andnonassessable.

 

(c)                                  Seller has allrequisite power and authority to execute, deliver, and perform the Agreement,Bill of Sale and all other documents and instruments contemplated by theAgreement (“**Transaction Documents**”)to which Seller is a party, 

 

19

----

 

and to consummate thetransaction contemplated thereby.  Theexecution and delivery of the Transaction Documents to which Seller is a party,and the consummation of the transactions contemplated thereby, have been dulyand validly authorized by all requisite corporate action taken on the part ofSeller, its Board of Directors and stockholders, and no other corporateproceeding on the part of Seller, its Board of Directors or stockholders isnecessary to authorize the Transaction Documents or the consummation of thetransactions contemplated thereby.

 

(d)                                 Each of theTransaction Documents to which Seller is a party has been duly executed anddelivered by Seller, and such Transaction Documents constitute the valid andbinding obligations of Seller, to the extent Seller is a party thereto,enforceable against Seller in accordance with their respective terms, subjectto applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,moratorium and similar laws affecting creditors’ rights and remedies generallyand subject, as to enforceability, to general principles of equity.

 

(e)                                  The execution,delivery, and performance of the Transaction Documents by Seller will notviolate or result in a breach of any term of Seller’s Certificate ofIncorporation or Bylaws.  To such counsel’sknowledge, neither (i) the execution and delivery of the TransactionDocuments by Seller, nor (ii) its carrying out of the transactionscontemplated thereby, will result in a breach of any of the Major AssignedContracts set forth in Schedule 2.1(b) of the Agreement or otherMaterial Contracts identified in the Agreement.

 

(f)                                    To such counsel’sknowledge, the sale of Assets to be effected by the Agreement is in compliancewith the provisions of any applicable bulk sales or similar law in effect withthe State of New York, and neither the execution nor delivery of theTransaction Documents by Seller nor Seller’s compliance with the terms andprovisions thereof has violated or will violate (a) any law, statute,rule, or regulation of the United States or, to such counsel’s knowledge, theState of New York, nor (b) any injunction, order, or decree of any courtor governmental agency or authority binding upon Seller of which such counselhas knowledge.

 

(g)                                 Except asdisclosed in the Schedules to the Agreement, to such counsel’s knowledge, thereis not now pending any suit, action, claim, investigation, arbitration,administrative or legal or other proceeding or governmental inquiry of any kindagainst or relating to Seller not covered by insurance and which if adverselydetermined might have a material adverse effect on the Business nor, to suchcounsel’s knowledge, has any such suit, action, claim, investigation,arbitration or administrative, judicial or other proceeding or governmentalinquiry been threatened involving Seller.

 

(h)                                 To such counsel’sknowledge, Seller has not been cited for any violation or violations of anyorder, writs, injunction, judgment, or decree of any court or federal, state orlocal government department, official, commission, authority, board, bureau,agency or other instrumentality, which has been issued or is pending againstSeller and which could have a material adverse effect on the Business; and (b) suchcounsel has no knowledge of, nor has such counsel been consulted by Seller witha view to obtaining, substantive legal advice with regard to any matterinvolving, the violation or alleged

 

20

----

 

violation of any law bySeller, which violation or alleged violation, if proven, might have a materialadverse effect on the Business.

 

(i)                                     To such counsel’sknowledge, except as disclosed in Schedules to the Agreement, no authorization,approval or consent of any United States or State of New York government agencyor authority is required to be obtained by Seller in order to permitconsummation of the transactions contemplated by the Transaction Documents.

 

8.7                                 No MaterialAdverse Change.  Purchasershall have completed its due diligence examination and determined (a) thatthere has been no material adverse change in the Assets, Assumed Liabilities,Business condition or operation of the Business since the date of the BaseValue Balance Sheet, (b) that Seller has not made capital expendituressince the Base Valuation Date in the aggregate amount of more than $25,000, and(c) that the Escrow Amount will be sufficient to absorb any and alldeductions in the Purchase Price which are, in Purchaser’s reasonable opinion,likely to be required pursuant to Section 2.5.

 

8.8                                 CorporateApprovals.

 

(a)                                  Purchaser’sperformance of this Agreement and the transactions to be effected hereby shallhave been approved by Resolutions duly adopted by Purchaser’s Board of Directorsauthorizing the transactions to be effected by Purchaser pursuant to thisAgreement; and

 

(b)                                 Seller’sperformance of this Agreement and the transactions to be effected hereby shallhave been approved by Resolutions duly adopted by Seller’s Board of Directorsand stockholders authorizing the transactions to be effected by Seller pursuantto this Agreement.

 

8.9                                 Closing Items.  Seller shall have delivered the Escrow Amountinto escrow with a title company or bank mutually satisfactory to Purchaser andSeller, and Purchaser shall have received all of the following items:

 

(a)                                  a duly executedthe Bill of Sale and Assignment in the form of Exhibit A conveyingtitle to the Assets to Purchaser and any assignments of motor vehiclecertificates of title as shall be necessary to convey title to such vehicles toPurchaser;

 

(b)*                                *such documentsas Purchaser may reasonably request with respect the Major Assigned Contracts,executed by the Seller and reflecting the consent of the other parties theretoto the assignment each such contract to Purchaser;

 

(c)                                  evidencesatisfactory to Purchaser to the effect that all outstanding security interestsand other liens covering any of the Assets and all outstanding UCC financingstatements, amendments and assignments covering any of the Assets, have beenreleased and/or terminated as of the Closing Date, or will be promptlythereafter;

 

(d)                                 true andcorrect copies of Resolutions duly adopted and approved by Seller’s Board ofDirectors and its stockholders, authorizing the transactions to be effected bySeller pursuant to this Agreement ; and

 

(e)                                  all such othercertificates and documents consistent with this Agreement as Purchaser or itscounsel shall have reasonably requested.

 

21

----

 

**ARTICLE IX**

**CONDITIONSTO SELLER’S OBLIGATION TO CLOSE;**

**PURCHASER’SDELIVERIES**

 

Each and every obligation ofSeller under this Agreement to be performed on or after the date hereof shallbe subject to the satisfaction or waiver by Seller on or before the ClosingDate of the following conditions:

 

9.1                                 Representations.  Therepresentations and warranties made by Purchaser in this Agreement shall becorrect in all material respects on and as of the Closing Date, with the sameforce and effect as though such representations and warranties had been made onthe Closing Date. If requested by Seller, Purchaser shall have delivered toSeller a certificate to that effect dated the Closing Date and signed by anofficer of Purchaser.

 

9.2                                 Performance.  Allthe terms, covenants and conditions of this Agreement to be complied with orperformed by Purchaser on or before the Closing Date shall have been fullycomplied with or performed in all material respects or waived by Seller.  Purchaser shall have delivered to Seller acertificate to that effect dated the Closing Date and signed by an officer ofPurchaser.

 

9.3                                 Proceedings.  Priorto the Closing Date, no material litigation shall have been initiated orthreatened by any Governmental Authority or any other person questioning thelegality of the transactions contemplated by this Agreement which, in thereasonable opinion of counsel to Seller, makes it undesirable to proceed withsuch transactions.

 

9.4                                 ClosingDocuments.  Sellershall have received from Purchaser the following items:

 

(a)                                  In a form andcontent reasonably satisfactory to Seller, a certificate of the Secretary or anAssistant Secretary of Purchaser, dated as of the Closing Date and certifyingthe resolutions of Purchaser’s Board of Directors attached thereto dulyapproving and authorizing the execution, delivery and performance of thisAgreement and the transactions and agreements contemplated by or referred toherein;

 

(b)                                 the cashcomponent of the Purchase Consideration *minus*the Escrow Amount;

 

(c)                                  a certificateor certificates for the XETA Stock registered in Seller’s name

 

(d)                                 The Warrantsregistered in Seller’s name; and

 

(e)                                  all such othercertificates and documents consistent with this Agreement as Seller or itscounsel shall have reasonably requested.

 

**ARTICLE X**

**INDEMNIFICATION**

 

10.1                           Survival ofRepresentations and Warranties.  The partieshereto agree that their respective representations, warranties, covenants andagreements contained herein shall survive the Closing for a period oftwenty-four (24) months after the Closing Date, except that those

 

22

----

 

covenants, representativesand warranties made by Seller with respect to Taxes (Section 5.13)shall survive the Closing until the expiration of the applicable statute oflimitations (the “**Indemnification Period**”).

 

10.2                           Indemnificationby the Seller.  Subject to the other provisions of thisArticle X, Seller agrees to save and indemnify Purchaser against,and hold it harmless from, any and all liabilities, of every kind, nature anddescription, fixed or contingent, including without limitation reasonableattorney fees and expenses incurred in connection with any action, claim orproceeding relating to such liabilities (“**Damages**”),arising from the breach of any of Seller’s representations, warranties,covenants, or agreements, contained herein, a claim for which is asserted inwriting by Purchaser during the applicable Indemnification Period.

 

10.3                           Indemnificationby Purchaser.  Purchaser agrees to save and indemnifySeller against and to hold it harmless from any and all Damages arising fromthe breach of any of Purchaser’s representations, warranties, covenants oragreements contained herein or the Exhibits hereto or from the operation of theBusiness after the Closing Date, a claim for which is asserted in writing bySeller during the Indemnification Period.

 

10.4                           Limitations onRecoverable Damages.  Claims forDamages under Section 10.1 (a) may be made only with respectto claims arising during the applicable Indemnification Period; (b) mustbe made, if at all, by giving the written notice described in Section 10.6within ten (10) days after the close of the Indemnification Periodapplicable with respect to such claim; (c) may be made only after theaggregate amount of such Damages exceeds $   *   (the “**Basket**”);     *     ; provided, thatto the extent that such Damages shall exceed the sum of:

 

(A)                              that portion ofthe Purchase Consideration actually paid to Seller in cash at the Closing (i.e.$850,000), *plus*

 

(B)                                amountsreleased to Seller from the Escrow Amount (max. $150,000), *plus*

 

(C)                                amountsreceived by Seller from the sale of any XETA Stock issued to Seller (x) aspart of the Purchase Consideration, or (y) upon its exercise of theWarrants issued to Seller as part of the Purchase Consideration, then,

 

before pursuing Seller for further cash recovery, Purchaser shallprovide Seller, by written notice, the option to satisfy the balance of suchDamages not already satisfied by (A), (B) and (C), above, in cash, payablewithin three (3) Business Days after the giving of such notice (“**Option Period**”).  In the event that Seller elects not toexercise the option set forth in the preceding sentence, or fails to exerciseand consummate such option before the end of the Option Period, then, Purchasershall first satisfy the balance of such Damages not already satisfied by (A), (B) and(C), above, by cancellation of:

 

(I)                                    any unsoldshares of XETA Stock issued to Seller as part of the Purchase Consideration (“**Unsold Shares**”),

 

(II)                                any unexercisedportion of the Warrants issued to Seller as part of the Purchase Consideration(“**Unexercised Warrants**”), and

 

----

***The asterisk (*) indicates thatmaterial has been omitted pursuant to a request for confidentialtreatment.  The omitted material has beenfiled separately with the Securities and Exchange Commission pursuant torule 24b-2 of the rules to the Securities and Exchange Act of 1934,as amended.**

 

23

----

 

(III)                            any unsold sharesof XETA Stock issued upon exercise thereof (“**UnsoldWarrant Shares**”), or any or all thereof;

 

provided, that the aggregate fair market value at the time ofcancellation of such Unsold Shares, Unexercised Warrants and Unsold WarrantShares cancelled pursuant to this provision shall not exceed the aggregateamount of the balance of such Damages. If Purchaser shall have been unable to satisfy such Damages because theaggregate fair market value at the time of cancellation of such Unsold Shares,Unexercised Warrants and Unsold Warrant Shares proves insufficient to satisfythe balance of Purchaser’s Damages, Purchaser may then proceed to seek recoveryof the balance of such Damages from Seller in cash,       *      ,by such appropriate legal action as shall be necessary and available.

 

Any cancellation pursuant tothis Section 10.4 shall, under such circumstances, be deemedautomatic, rendering such Unsold Shares and Unsold Warrant Shares immediatelynull and void, and such Unexercised Warrants of no further force oreffect.  Purchaser shall provide writtennotice to Seller of any Damages which Purchaser deems to count against theBasket.  Notwithstanding the foregoing,nothing herein shall prevent a party from bringing an action for fraud orintentional misrepresentation against the other party, where such fraud orintentional misrepresentation has caused such party to incur Damages withrespect to any claim or right to indemnification hereunder.

 

10.5                           Claims.  Allclaims for indemnification hereunder shall be computed net of the present valueof all readily ascertainable future Tax benefits associated therewith.  No claim for indemnification shall be madefor matters adequately covered by insurance.

 

10.6                           Defense ofClaims.  Each party asserting a right to indemnification under thisArticle X (the “**Asserting Party**”)agrees to notify the party putatively required to provide indemnification (the “**Responding Party**”) with reasonablepromptness of any claim for Damages asserted against it in respect of which theResponding Party may be liable under this Agreement, which notification shallbe accompanied by a written statement setting forth the basis of such claim andthe manner of calculation thereof.  TheResponding Party shall have the right, at its election, to defend or compromiseany such claim at its own expense with counsel of its choice; provided, however,that (i) such counsel shall have been approved by the Asserting Party,which approval shall not be unreasonably withheld or delayed; (ii) theAsserting Party may participate in such defense if it so chooses with its owncounsel and at its own expense; and (iii) any such defense or compromiseshall be conducted in a manner which is reasonable and not prejudicial to theAsserting Party’s interest in such matter. In the event the Responding Party does not undertake to defend orcompromise the claim, the Responding Party shall promptly notify the AssertingParty of its intention not to undertake to defend or compromise the claim, andthe Responding Party shall be bound by (a) the final decree of any courtof competent jurisdiction deciding the validity and amount of the claimasserted against the Asserting Party, and (b) any compromise of such claimmade with the prior consent of the Responding Party, which shall not beunreasonably withheld or delayed.

 

----

***The asterisk (*) indicates thatmaterial has been omitted pursuant to a request for confidentialtreatment.  The omitted material has beenfiled separately with the Securities and Exchange Commission pursuant torule 24b-2 of the rules to the Securities and Exchange Act of 1934,as amended.**

 

24

----

 

10.7                           Extension ofTime.  To the extent that an Asserting Party delivers writtennotice of a claim for Damages against a Responding Party prior to theexpiration of the applicable Indemnification Period, reasonably identifying thebasis for the claim and the amount of any reasonably ascertainable Damages, theIndemnification Period shall be extended for such claim until such claim isresolved by a Final Determination (as defined below).

 

10.8                           FinalDetermination.  For the purposes of this Agreement, a “**Final Determination**” shall exist when (i) theAsserting Party and the Responding Party agree in writing upon the amount, or (ii) acourt of competent jurisdiction shall have made a determination on the meritswith respect thereto and appeal therefrom shall not have been taken within atimely fashion from the date of such determination. The Asserting Party willassign to the Responding Party any claims against which the Asserting Party hasbeen indemnified and paid as provided herein, and the Responding Party shall inall respects be subrogated to the rights of the Asserting Party in connectiontherewith.

 

**ARTICLE XI**

**TERMINATION**

 

11.1                           General.  Anythingherein or elsewhere to the contrary notwithstanding, this Agreement may beterminated at any time prior to the Closing Date:

 

(a)                                  By mutualwritten consent of Seller and Purchaser;

 

(b)                                 By Purchaserif, through no fault of Purchaser, any of the conditions set forth in Article VIIIshall not have been fulfilled, or shall become incapable of fulfillment, on orprior to June 15, 2010, and shall not have been waived;

 

(c)                                  By Seller if,through no fault of Seller, any of the conditions set forth in Article IXshall not have been fulfilled, or shall become incapable of fulfillment, on orprior to June 15, 2010, and shall not have been waived;

 

(d)                                 By Purchaser orSeller, if the Closing Date shall not have occurred on or prior to June 15,2010 (or such later date as shall have been approved by the parties), unlesssuch failure of such occurrence shall be due to the failure of the partyseeking to terminate this Agreement to perform or observe in good faith thecovenants, agreements and conditions hereof to be performed or observed by suchparty at or before the Closing Date;

 

(e)                                  By Purchaser orSeller, if any court of competent jurisdiction or other Governmental Authorityshall have issued an order, decree or ruling or taken any other action restraining,enjoining or otherwise prohibiting the transactions contemplated by thisAgreement and such order, decree, ruling or other action shall not have beenwithdrawn within thirty (30) days after the date on which such order, decree,ruling or other action was first issued or taken, or by reason of anylitigation or proceeding pending or threatened to be instituted by any personor governmental body, which, in either case in the good faith judgment of itsBoard of Directors will in all likelihood result in an order, decree or rulingenjoining or otherwise prohibiting the transactions contemplated by thisAgreement; or

 

(f)                                    By Purchaser orSeller, if any representation or warranty given or made in this Agreement orany attachment by the other was untrue in any material respect as of the

 

25

----

 

Closing Date, or as of the date given, in light of the circumstancesunder which such representation or warranty was given or made, or if anycovenant given or made in or pursuant to this Agreement by one party, andperformable by the other before and as a condition to the Closing, is breachedand such breach is not promptly cured after notice.

 

11.2                           Effect.

 

(a)                                  In the event oftermination or abandonment by reason of Section 11.1, thisAgreement shall forthwith become void and there shall be no liability of oneparty to the other by reason of this Agreement unless the reason fortermination or abandonment was caused by the action, the failure to act, themisrepresentation, omission or breach by the party to be charged with suchliability with respect to a material aspect of the contemplated transaction.

 

(b)                                 In the eventthat this Agreement is terminated by Purchaser as the result of a failure byits Board of Directors to approve the transactions set forth in this Agreement(other than due to the failure by Seller to satisfy the conditions set forth inArticle VIII through no fault of Purchaser), then, Purchaser shallnot, within ninety (90) days after the effective date of such termination,enter into any agreement for the acquisition, whether by purchase of stock orof assets, of any other business engaged in the provision of high-speedinternet access services and products to the lodging industry.

 

**ARTICLE XII**

**MISCELLANEOUS**

 

12.1                           EntireAgreement.  This Agreement (including the Schedulesand Exhibits hereto) and the documents delivered pursuant hereto constitute theentire agreement and understanding among Seller, the Seller Principals andPurchaser, superseding any prior agreement and understanding relating to thesubject matter of this Agreement.  ThisAgreement may be modified or amended only by a written instrument executed bySeller, and Purchaser, acting through their respective officers and dulyauthorized by their respective Boards of Directors.

 

12.2                           Counterparts.  ThisAgreement may be executed simultaneously in two or more counterparts, each ofwhich shall be deemed an original and all of which together shall constitutebut one and the same instrument. Facsimile or e-mail transmission of any signed original document and/orretransmission of any signed facsimile or e-mail transmission will be deemedthe same as delivery of an original.  Atthe request of any party, the parties will confirm facsimile or e-mail transmissionsby signing a duplicate original document.

 

12.3                           Brokers andAgents.  Other than the Seller’s investment advisors, SeaCapSecurities, LLC, each party hereto represents and warrants that it employed nobroker or agent in connection with the transactions contemplated by thisAgreement.  Each party agrees toindemnify each other party against all loss, cost, damages or expense arisingout of claims for fees or commissions of brokers employed or alleged to have beenemployed by such indemnifying party. Purchaser represents that no such arrangements exist.

 

26

----

 

12.4                           Notices.  Anynotice or other communication hereunder may be sent by any means (includingfacsimile or email or other electronic means, provided that receipt thereof isacknowledged and confirmed by the recipient) and shall be effective uponreceipt; except that, if sent via domestic certified mail or via overnightcourier such as Federal Express, said notice shall be conclusively deemed to havebeen received by a party hereto and be effective on the earlier of (a) theactual date of receipt, or, if earlier, (b) the third Business Dayfollowing the date given to the post office or courier for delivery.  Such notices and communications shall be addressedto such party at the address set forth below:

 

If to Purchaser, addressedto them at:

 

XETA Technologies, Inc.

1814 West Tacoma

Broken Arrow, Oklahoma  74012-1406

*Attn:*  Greg D. Forrest, President and ChiefExecutive Officer

*Ph.:*   (918) 664-8200  *Fax:*(918) 664-6876

 

*With copyto*:                         Barber &Bartz, P.C.

525 S. Main, Suite 800

Tulsa, Oklahoma 74103-4511

Attention:  Robert L. Bearer, Esq.

*Phone: *(918) 599-7755  *Fax:*  (918) 599-7756)

 

If to Seller or the SellerPrincipals, addressed as follows:

 

c/o Hotel TechnologySolutions, Inc. d/b/a *Lorica Solutions*

Attn:                    Mr. Mark Holzberg,

Chairman and Chief ExecutiveOfficer

500 Brisbane Building

403 Main Street

Buffalo, New York 14203

*Phone:*  (201) 788-4880  *Fax:*  (716) 636-0727

 

*With copyto*:                         Andrew J.Merken, Esq.

Burns & LevinsonLLP

125 Summer Street

Boston, Massachusetts 02110

*Phone:*(617)345-3740  *Fax:*  (617) 345-3299

 

or such other address as anyparty hereto shall specify pursuant to this Section 12.4 from timeto time.

 

12.5                           Rights andRemedies.  Except as otherwise provided herein, nodelay of or omission in the exercise of any right, power or remedy accruing toany party as a result of any breach or default by any other party under thisAgreement shall impair any such right, power or remedy, nor shall it beconstrued as a waiver of or acquiescence in any such breach or default, or ofany similar breach or default occurring later; nor shall any waiver of anysingle breach or default be deemed a waiver of any other breach or defaultoccurring before or after that waiver.

 

27

----

 

12.6                           Reformation andSeverability.  In case any provision of this Agreementshall be invalid, illegal or unenforceable, it shall, to the extent possible,be modified in such manner as to be valid, legal and enforceable, but so as tomost nearly retain the intent of the parties, and if such modification is notpossible, such provision shall be severed from this Agreement, and in eithercase, the validity, legality and enforceability of the remaining provisions ofthis Agreement shall not in any way be affected or impaired thereby.

 

12.7                           Governing Law.  ThisAgreement shall be construed in accordance with the laws of the State ofOklahoma applicable to contracts to be entered into and fully performed in theState of Oklahoma.

 

12.8                           FurtherAssurances.  Each party will, upon reasonablerequest of the other party, from time to time after the Closing, execute anddeliver to the other all such further documents and instruments, and will do oruse its reasonable best efforts to cause to be done such other acts, as suchother party may reasonably request more completely to consummate and makeeffective the contemplated transactions.

 

12.9                           Expenses.  Eachparty shall pay its own expenses in connection with this Agreement and thetransactions contemplated by this Agreement. All sales, use or other Tax, duty or recording cost, if any, imposedupon the transfer of the Assets and Business to be acquired by Purchaserpursuant to this Agreement shall be paid by Seller.  The fees of the Escrow Agent shall be paidsolely by Purchaser.

 

12.10                     ConfidentialInformation.  Each party agrees that it and itsrepresentatives shall hold in strict confidence, and shall not use for its ownaccount or for the account of others, nor divulge or disclose to any personwithout a need to know, any information and documents received from the otherparty and, if the transactions herein contemplated are not consummated, eachparty will continue to hold such information and documents in strict confidenceand shall return to such other party all such documents then in such receivingparty’s possession (including the Schedules and Exhibits to this Agreement)without retaining copies thereof. Purchaser will use all information provided to it or gathered by itduring its due diligence review and evaluation of Seller and the Businesssolely for the purpose of such review and evaluation, and will disclose suchinformation only to such of its directors, officers, employees, representatives,advisors and agents as have a need to know the same in order to perform theirprofessional and managerial duties to Purchaser and for the purpose ofevaluating and consummating the transaction contemplated hereby.  In the event this transaction is not consummated,Purchaser will return to Seller all materials containing any such received fromSeller and will certify to Seller in writing that all copies of such materialshave been destroyed.  Purchaser will notuse any such information to compete with Seller in the event the transaction isnot consummated or for any purpose other than as set forth above.  The provisions of this Section 12.10,shall survive termination of this Agreement; provided, that each party’sobligations under this Section 12.10 to refrain from such use andto maintain such confidentiality shall not apply to any information ordocuments that are (a) in the public domain when furnished by the other,or (b) required to be disclosed by applicable Law, where the party whoseinformation is to be disclosed has had notice thereof and a reasonableopportunity to appear and object to such disclosure.

 

28

----

 

12.11                     Publicity.  Sellerand Purchaser each agree that, without the written consent of the other,neither will independently issue a news release or otherwise publicly disclosethe nature or existence of the transactions contemplated by this Agreement(including but not limited to the Purchase Consideration) except as may berequired by Law.  Any public announcementof this Agreement or the purchase of the Assets hereunder will be made byPurchaser and Seller jointly and simultaneously, and the wording of any suchannouncement will be mutually agreed upon unless, in the reasonable judgment ofcounsel for Purchaser, any laws, rules or regulations to which Purchaseris subject (including the rules of NASDAQ and of the SEC) mandate otherwording, in which event such other Laws, rules or regulations asinterpreted by Purchaser and its counsel shall control subject to Seller’sreasonable opportunity to review and propose changes as set forth in Section 7.6hereof

 

12.12                     EquitableRelief.  Each party recognizes that the other is likely to sufferirreparable damage if the provisions of Sections 12.10 or 12.11are not specifically enforced.  In theevent of a dispute concerning any of these sections, each party agrees that theother may, without posting bond or security, obtain an temporary or permanentinjunction restraining the consummation of any action or transaction prohibitedthereby pending determination of such dispute. The provisions of Sections 12.10 and 12.11 shall likewisebe enforceable by a decree of specific performance.  In the event of litigation relating to suchsections, if the court determines that either party or any of its employees,agents or representatives has breached any provisions thereof, the injuredparty shall be entitled to recover from the breaching party its reasonablefees, costs, and expenses (including reasonable attorneys’ fees) incurred inconnection with the prosecution of any equitable or legal proceedings and anyappeal therefrom.

 

12.13                     DisputeResolution.  Subject to Section 12.12,any dispute under this Agreement which is not settled by mutual agreement amongthe parties hereto, shall be finally settled by binding arbitration, conductedby and in accordance with the rules then in effect of the AmericanArbitration Association.  The costs ofthe arbitration, including administrative and arbitrators’ fees, shall beshared equally by the parties.  Eachparty shall bear its own expenses and attorneys’ and witness’ fees.  The prevailing party in any arbitration, asdetermined by the arbitration panel, shall be entitled to an award against theother party in the amount of the prevailing party’s costs and reasonableattorneys’ fees.  In making any suchaward, the arbitration panel shall take into consideration the outcome of theproceeding and the reasonableness of the conduct of each such party inconnection with the dispute, in light of the facts known to such party at thetime such party engaged in such conduct. The arbitration panel shall not have authority to award punitivedamages. The arbitration shall be held in Tulsa, Oklahoma.

 

12.14                     Captions.  Thecaptions and headings in this Agreement are for convenience only and will notbe considered in interpreting any provision of this Agreement.  Unless otherwise indicated, all article andsection references are to the articles and sections of this Agreement and allreferences to day are to calendar days. Whenever under the terms of this Agreement, the time for performance ofa covenant or condition falls upon a Saturday, Sunday or U.S. federal orOklahoma or New York state holiday, such time for performance will be extendedto the next Business Day.

 

12.15                     Pronouns andPlurals.  Whenever the context may require, any pronoun used in thisAgreement shall include the corresponding masculine, feminine or neuter forms,and the singular

 

29

----

 

form of nouns, pronouns and verbs shall include the plural and viceversa.

 

12.16                     Successors.  ThisAgreement and all of the provisions of this Agreement shall be binding upon andinure to the benefit of Purchaser, Seller, and their respective successors andpermitted assigns.  Neither thisAgreement nor any of the rights, interests or obligations under this Agreementmay be assigned by any of the parties to this Agreement without the priorwritten consent of the other parties. Nothing contained in this Agreement, express or implied, is intended toconfer upon any person or entity other than the parties to this Agreement andtheir successors in interest and permitted assignees (if any), any rights orremedies under or by reason of this Agreement.

 

12.17                     Waiver.  EitherPurchaser or Seller shall have the right to waive any one or more conditionsprecedent to Closing and to proceed with the transactions contemplated by thisAgreement, without, however, releasing the other of its obligations from any liabilityfor loss or damage sustained by reason of any such breach of anyrepresentation, warranty or covenant.

 

12.18                     Exhibits.  TheSchedules and Exhibits referred to in this Agreement are incorporated byreference into this Agreement.

 

[*Remainder of page left blank intentionally*.]

[*Signatures appear on next page*.]

 

30

----

 

IN WITNESS WHEREOF, theparties hereto have executed this Agreement as of the date first written above.

 
| “Purchaser”            |                           | “Seller”                        |
|----------------------------------|--------------------------------|-------------------------------------------|
|                             |                           |                                      |
| **XETA TECHNOLOGIES, INC.** | ** **                     | **HOTEL TECHNOLOGY SOLUTIONS, INC.** |
|                             |                           |                                      |
|                             |                           |                                      |
| By                               | /s/ Greg D. Forrest            |                                      | By | /s/ Mark Holzberg |
|                             | Greg D. Forrest, President and |                                      |   | Mark Holzberg, Chairman, President and |
|                             | Chief Executive Officer        |                                      |   | Chief Executive Officer |

 

 

“Seller Principals”

 

(joining solely with respectto, and to the extent described in, Sections 5.9, 5.12, 5.13, 5.17 and 5.20hereof)

 
| **ENHANCED CAPITAL**       | ** **            | **STONEHENGE CAPITAL FUND** |
|----------------------------|-----------------------|-----------------------------|
| **NEW YORK FUND II, LLC**  |                  | **NEW YORK, LLC**           |
|                       |                  |                        |
|                       |                  |                        |
| By                         | /s/ Michael Korengold |                        | By | /s/ David B. Webber |
| Its                        |                  |                        | Its | Vice President |
|                       |                  |                        |
| **ENHANCED CAPITAL**       | ** **            | **SEABURY CAPITAL LLC**     |
| **NEW YORK FUND III, LLC** |                  |                        |
|                       |                  |                        |
| By                         | /s/ Michael Korengold |                        | By | /s/ John Luth |
| Its                        |                  |                        | Its |   |
|                       |                  |                        |
| **MARK HOLZBERG**          |                  |                        |
|                       |                  |                        |
| /s/ Mark Holzberg          |                  |                        |

 

31

----

 

Listof Schedules and Exhibits

 
| Schedules        |   |                                               |
|------------------|--------|----------------------------------------------------|
|             |   |                                               |
| Schedule  1      |   | Excluded  Assets                                   |
| Schedule  2.1(a) |   | Accounts,  Notes Receivable, Etc.             |
| Schedule  2.1(b) |   | Major  Assigned Contracts                          |
| Schedule  2.1(c) |   | Inventory                                          |
| Schedule  2.1(e) |   | Equipment                                          |
| Schedule  2.1(f) |   | Real  Property and Leaseholds                      |
| Schedule  2.1(g) |   | Software  and Intellectual Property                |
|             |   |                                               |
| Schedule  2.2(c) |   | Outstanding  Ownership of Seller                   |
|             |   |                                               |
| Schedule  4.1    |   | Key  Employees                                     |
|             |   |                                               |
| Schedule  5.1    |   | Seller’s  Organization and Qualification      |
| Schedule  5.5    |   | Consents                                           |
| Schedule  5.7    |   | Assets                                             |
| Schedule  5.9    |   | Contracts                                          |
| Schedule  5.10   |   | Permits                                            |
| Schedule  5.11   |   | Trade  Restrictions and Confidentiality Agreements |
| Schedule  5.12   |   | Litigation  and Legal Compliance                   |
| Schedule  5.15   |   | Change  of Name and Location                       |
| Schedule  5.19   |   | Warranty  Claims                                   |
|             |   |                                               |
| Schedule  6.1    |   | Purchaser’s  Corporate Documents              |
|             |   |                                               |
| Exhibits         |   |                                               |
|             |   |                                               |
| Exhibit A   |   | Bill  of Sale and Assignment                       |
| Exhibit B   |   | Escrow  Agreement                                  |
| Exhibit C   |   | Common  Stock Purchase Warrant                     |

 

32

----