Document:

ex10_1.htm

    
      
        

      

    

    Exhibit
      10.1

    

    
 

    STOCK
      PURCHASE AGREEMENT

     

    BY
      AND AMONG

     

    INX
      INC.,

     

    DANA
      ZAHKA,

     

    AND ALL
      OTHER SHAREHOLDERS

     

    OF

     

    SELECT,
      INC.

     

    dated
      August 31, 2007

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
       

      STOCK
        PURCHASE AGREEMENT

       

    

    This
      STOCK PURCHASE AGREEMENT (this “Agreement”) is made and entered into as
      of August 31, 2007 (the “Effective Date”), by and among INX Inc., a
      Delaware corporation with offices at 6401 Southwest Freeway, Houston, Texas
      77074 (“Acquiror”), Dana Zahka (the “Major Shareholder”) and
      the remaining shareholders as set forth on Schedule 1.0 (together with
      the Major Shareholder, the “Shareholders”).

     

    RECITALS

     

    A.  Select,
      Inc., is a Massachusetts corporation with offices at 780 Dedham St., Canton,
      MA 02021 (the “Target”).

     

    B.  Target
      has issued and outstanding 112,990 shares, no par value per share, of its common
      stock (the “Shares”) which constitute all of the outstanding capital
      stock and voting securities of Target and are all owned by the
      Shareholders.

     

    C.  Acquiror
      wishes to acquire Target and wishes to purchase from the Shareholders, and
      the
      Shareholders wish to sell to Acquiror, all of the Shares, upon the terms and
      subject to the conditions set forth herein.

     

    D.  The
      Board
      of Directors of Target has determined that it is in the best interests of the
      Shareholders and Target that the Shareholders sell the Shares to
      Acquiror.

     

    NOW,
      THEREFORE, in consideration of the covenants and representations set forth
      herein, and for other good and valuable consideration, the receipt and
      sufficiency of which are hereby acknowledged and affirmed, the parties hereto
      hereby agree as follows:

     

    ARTICLE
      I

     

    PURCHASE
      AND SALE OF SHARES

     

    1.1  Purchase
      and Sale of the
      Shares.  Upon the terms and subject to the
      conditions set forth in this Agreement, Acquiror agrees to purchase from each
      Shareholder, and each Shareholder agrees to sell, assign, transfer and deliver
      to Acquiror, all of the Shares set forth opposite such Shareholder’s name on
Schedule 1.1 hereto, in each case free and clear of all liens, pledges,
      claims, charges, restrictions or other encumbrances, for the aggregate purchase
      price of $8,500,000 (the “Initial Purchase
      Consideration”).  The Initial Purchase Consideration shall be
      allocated among the Shareholders, pro rata, based on each Shareholder’s
      ownership of the Shares and the Acquiror shall pay each Shareholder the portion
      of the Initial Purchase Consideration set forth opposite such Shareholder’s name
      on Schedule 1.1 hereto. Each Shareholder’s portion of the Initial
      Purchase Consideration set forth opposite their respective name on Schedule
      1.1 hereto shall be paid by Acquiror to such Shareholder on the Closing Date
      as follows:

     

    (a)  $6,250,000
      of the Initial Purchase Consideration (the “Cash Portion”) shall be
      paid in cash, by wire transfer, less the Escrow Amount provided for in Section
      1.1(b) below), to the Shareholders and each Shareholder will receive the pro
      rata portion of the Cash Portion of the Initial Purchase Consideration set
      forth
      opposite such Shareholder’s name on Schedule 1.1;

    
       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

    

    (b)  $1,000,000
      of the Cash Portion of Initial Purchase Consideration (the “Escrow
      Amount”) shall be placed in escrow by wire transfer of immediately
      available funds as provided in Section 1.5 below in order to assure the
      satisfaction of any obligations of the Shareholders arising under Article VI
      hereof; and

     

    (c)  236,843
      shares of common stock, $0.001 par value per share of Acquiror, or such lesser
      number of shares as determined in accordance with this Section 1.1(c), (the
      “Stock Consideration”), shall be issued to the Shareholders in full
      satisfaction of the remaining portion of the Initial Purchase Consideration
      and
      each Shareholder will receive the number of shares of Stock Consideration set
      forth opposite such Shareholder’s name on Schedule 1.1.

     

    The
      aggregate number of shares of Stock Consideration shall be determined on the
      Closing Date and shall be calculated based upon the greater of (A) the average
      of the closing price per share for the common stock, $0.001 par value per share
      of Acquiror, as reported by the Nasdaq Stock Exchange (the “NASDAQ”)
      for the five (5) consecutive trading days ending prior to the second day before
      the Closing Date and (B) $9.50 per share.

     

    1.2  Contingent
      Purchase Consideration. As further consideration for
      the Shares, the Shareholders shall be entitled to receive the following
      additional amounts of consideration (the “Contingent Purchase Price”)
      based upon the financial performance of the Acquiror’s business unit that is
      comprised, after the Closing Date, solely of the Target’s business acquired in
      pursuant to this Agreement (the “Company Business”):

     

                                    (a)       If
      beginning on the Closing Date and ending on the date twelve calendar months
      thereafter (the “First Measurement Period”) Revenue for such period is
      greater than $44,000,000 and Operating Profit Contribution for such period
      is
      greater than or equal to $1,760,000, then Acquiror shall pay the Shareholders
      additional Contingent Purchase Consideration equal to $600,000 and will pay
      the
      Shareholders an additional $50,000 for each $145,000 of Operating Profit
      Contribution in excess of $1,760,000 of Operating Profit Contribution for such
      period up to a maximum of $600,000 with aggregate maximum of $1,200,000 in
      additional Contingent Purchase Consideration for the First Measurement
      Period.

     

                    (b)       If
      beginning on the one year anniversary of the Closing Date and ending on the
      date
      twelve calendar months thereafter (the “Second Measurement Period”),
      Revenue for such period is greater than $53,000,000 and Operating Profit
      Contribution for such period is greater than or equal to $3,710,000, then
      Acquiror shall pay the Shareholders additional Contingent Purchase Consideration
      equal to $600,000 and will pay an additional $50,000 for each $150,000 of
      Operating Profit Contribution in excess of $3,710,000 of Operating Profit
      Contribution for such period up to a maximum of $600,000 with an aggregate
      maximum of $1,200,000 in additional Contingent Purchase Consideration for the
      Second Measurement Period.

    
       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

                 

                   (c)       All
      Contingent Purchase Consideration shall be calculated and paid to the
      Shareholders within ninety (90) days of the end of the First Measurement Period
      and the Second Measurement Period, respectively, in each case in proportion
      to
      each Shareholder’s respective pro rata ownership interest of the Shares. In
      addition, fifty percent (50%) of all Contingent Purchase Consideration shall
      be
      paid by the Acquiror to the Shareholders in cash and the remainder shall be
      paid
      by the Acquiror to the Shareholders, at the Acquiror’s option, by either cash or
      the issuance to each Shareholder of such number of shares of Acquiror’s common
      stock, $0.001 par value per share (the “Contingent Stock
      Consideration”), determined by dividing fifty percent (50%) of the portion
      of the Contingent Purchase Consideration payable to such Shareholder by the
      price of Acquiror’s common stock, $0.001 par value per share (the “Acquiror
      Common Stock”), using the average closing price per share for the Acquiror
      Common Stock as reported by the NASDAQ for the five (5) consecutive trading
      days
      ending prior to the second day before the date of funding such payment of
      Contingent Stock Consideration.

     

    1.3  Closing.  The
      closing of the purchase and sale of the Shares shall take place at the offices
      of the Acquiror located at 6401 Southwest Freeway, Houston, Texas 77074 on
      August 31, 2007 (the “Closing Date”), irrespective of where this Agreement is
      executed by the various parties to the Agreement, and shall be effective as
      of
      midnight on August 31, 2007 so long as all of the conditions to closing have
      been met (the “Closing”).

     

    1.4  Deliveries
      at the Closing.  At the Closing, each of the
      Shareholders and Acquiror shall take such actions and execute and deliver such
      agreements and other instruments and documents as necessary or appropriate
      to
      effect the transactions contemplated by this Agreement in accordance with its
      terms, including, without limitation, those provided for in Article V
      hereof.

     

    1.5  Escrow.  Notwithstanding
      any investigation of the business of Target made by or on behalf of Acquiror
      and
      in order to assure further satisfaction of any obligations of the Shareholders
      arising under Article VI hereof, the Escrow Amount shall be delivered by
      Acquiror directly to Amegy Bank N.A. (the “Escrow Agent”), for deposit
      in accordance with the terms of the Escrow Agreement to be entered into by
      and
      among Acquiror, the Select Shareholders Nominee Trust and the Escrow Agent
      substantially in the form attached hereto as Exhibit A (the “Escrow
      Agreement”).

     

    1.6  No
      Further Ownership Rights in Shares.  Payment of the
      Initial Purchase Consideration in respect of the surrender for exchange of
      the
      Shares in accordance with the terms of this Agreement shall be deemed to be
      full
      satisfaction of the Shareholders’ rights pertaining to such Shares.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    ARTICLE
      II

     

    REPRESENTATIONS
      AND WARRANTIES

    OF
      THE SHAREHOLDERS

     

    Except
      as
      set forth on the Disclosure Schedule attached to this Agreement as Exhibit
      B (the “Disclosure Schedule”), the Shareholders, jointly and
      severally, represent and warrant to Acquiror as of the date hereof as
      follows:

     

    2.1  Organization,
      Standing and Power.  Target is a corporation duly
      organized and validly existing under the laws of the Commonwealth of
      Massachusetts.   Target has no subsidiaries and does not own any
      equity interest or other voting securities of any other
      entity.  Target has the corporate power to own its properties and to
      carry on its business as now being conducted and as proposed to be conducted
      and
      is duly qualified to do business and is in good standing in each jurisdiction
      in
      which the failure to be so qualified and in good standing would have a Material
      Adverse Effect on Target.  Target has delivered to Acquiror a true and
      correct copy of Target’s Articles of Organization and Bylaws or other comparable
      governing documents, as amended to date.  Target is not in violation
      of any of the provisions of its Articles of Organization or Bylaws (or other
      comparable governing documents).

     

    2.2  Authority;
      No Violations and No Consents.

     

    (a)  Target
      has all requisite corporate power and authority to enter into this Agreement
      and
      each of the other agreements contemplated hereby (the “Ancillary
      Agreements”) to which Target is a party and to consummate the transactions
      contemplated hereby and thereby.  The execution and delivery of this
      Agreement and the Ancillary Agreements to which Target is a party and the
      consummation of the transactions contemplated hereby and thereby have been
      duly
      authorized by all necessary corporate action on the part of Target.

     

    (b)  Each
      Shareholder owns, beneficially and of record all of the Shares set forth
      opposite such Shareholder’s name on Schedule 1.1 hereto.

     

    (c)  This
      Agreement and each of the Ancillary Agreements to which a Shareholder is a
      party
      have been duly executed and delivered by each Shareholder and constitute the
      legal, valid and binding obligations of each Shareholder, enforceable against
      each in accordance with their respective terms.  The execution and
      delivery of this Agreement and each of the Ancillary Agreements to which they
      are a party by each  Shareholder does not, and the consummation of the
      transactions contemplated hereby and thereby will not, conflict with, or result
      in any violation of, or default under (with or without notice or lapse of time,
      or both), or give rise to a right of termination, cancellation or acceleration
      of any obligation or loss of any benefit under (i)  any provision of
      Target’s Articles of Organization or Bylaws (or other comparable governing
      documents) or (ii) any material mortgage, indenture, lease, contract or other
      agreement or instrument, permit, concession, franchise, license, judgment,
      order, decree, statute, law, ordinance, rule or regulation applicable to any
      Shareholder, Target or any of their respective properties or
      assets.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (d)  No
      consent, approval, order or authorization of, or registration, declaration
      or
      filing with, any court, administrative agency or commission or other
      governmental authority or instrumentality (“Governmental Entity”) is
      required by or with respect to Target or any Shareholder in connection with
      the
      execution and delivery of this Agreement or any other Ancillary Agreement or
      the
      consummation of the transactions contemplated hereby or thereby.

     

    2.3  Capitalization;
      Subsidiaries; Title to the Shares.

     

    (a)  The
      authorized capital stock of Target consists of 150,000 shares of common stock,
      no par value per share.  The issued and outstanding capital stock of
      Target consists solely of the Shares.  All outstanding shares of
      capital stock of Target are duly authorized, validly issued, fully paid and
      non-assessable and are owned by the Shareholders free and clear of any liens
      or
      encumbrances and are not subject to preemptive rights or rights of first
      refusal.  All outstanding shares of capital stock and other securities
      of Target were issued in compliance with all applicable laws.

     

    (b)  Except
      as
      set forth on Schedule 2.3 of the Disclosure Schedule, there are no options,
      warrants, calls, rights, commitments or agreements of any character
      (i) obligating Target to issue, deliver, sell, repurchase or redeem any
      shares of capital stock or any other securities of Target; or
      (ii) obligating Target to grant, extend, accelerate the vesting of, change
      the price of, or otherwise amend or enter into any such option, warrant, call,
      right, commitment or agreement.  Except for this Agreement, there are
      no contracts, commitments or agreements of any nature relating to voting,
      purchase or sale of any of Target’s capital stock, including, without
      limitation, any commitments to issue voting securities, and no agreements to
      participate in any income of Target.

     

    (c)  The
      sale
      and delivery of the Shares as contemplated by this Agreement are not subject
      to
      any preemptive right, right of first refusal or other right or restriction,
      except for restrictions pursuant to federal securities laws and state “Blue Sky”
laws.  Upon delivery of the certificate(s) representing the Shares in
      accordance with this Agreement, Acquiror will acquire good and marketable title
      to the Shares, free and clear of all liens, pledges, claims, charges,
      restrictions or other encumbrances and with no title defects, and will be
      entitled to all the rights of a holder of such Shares.

     

    2.4  Financial
      Statements.  Target has delivered to Acquiror its
      consolidated audited financial statements for the fiscal years ended June 30,
      2006 and June 24, 2005 and a draft of the audited financial statement for the
      fiscal year ended June 29, 2007 (collectively, the “Financial
      Statements”).  The Financial Statements have been prepared in
      accordance with generally accepted accounting principles (“GAAP”)
      applied on a consistent basis throughout the periods indicated and with each
      other.  The Financial Statements fairly present the financial
      condition and operating results of Target as of the dates, and for the periods,
      indicated therein, subject to normal and recurring year-end audit
      adjustments.

     

    2.5  Absence
      of Undisclosed Liabilities.  Target has no material
      obligations or liabilities of any nature (matured or unmatured, fixed or
      contingent) other than (i) those set forth or adequately provided for in
      the balance sheet included in the latest audited Financial Statements (the
      “Target Balance Sheet”), (ii) those identified in the footnotes to
      the Financial Statements, (iii) those incurred in the ordinary course of
      business and not required to be set forth in the Target Balance Sheet under
      GAAP, (iv) those incurred in the ordinary course of business since the
      Target Balance Sheet Date (defined below) and consistent with past practice
      and
      (v) those incurred in connection with the execution of this
      Agreement.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    2.6  Accounts
      Receivable.  All Accounts Receivable shown on the Target
      Balance Sheet (net of reserves indicated on the Target Balance Sheet) or
      thereafter acquired until the date hereof (net of reserves accrued in the normal
      course of business and consistent with past practice) represent or will
      represent valid obligations arising from sales actually made or services
      actually performed in the ordinary course of business consistent with past
      practices.  The net values at which the Accounts Receivable are
      carried as a whole reflect the accounts receivable valuation policies of Target,
      which are consistent with its past practice and in accordance with GAAP applied
      on a consistent basis.  None of the Accounts Receivable is subject to
      any claim of offset, recoupment, set off, or counterclaim (other than as implied
      under applicable law or such claims for which Target has accrued reserves in
      the
      normal course of business and consistent with past practice), and there are
      not
      facts or circumstances (whether asserted or unasserted) that would give rise
      to
      any such claim (other than as implied under applicable law or such claims for
      which Target has accrued reserves in the normal course of business and
      consistent with past practice).  No person or entity has any lien,
      charge, pledge, security interest, or other encumbrance on any such Accounts
      Receivable, and no agreement for deduction or discount has been made with
      respect to any of such Accounts Receivable.

     

    2.7  Absence
      of Certain Changes.  Except as set forth on Schedule 2.7
      of the Disclosure Schedule, since the date of the latest unaudited Financial
      Statements (the “Target Balance Sheet Date”), Target has conducted its
      business in the ordinary course consistent with past practice and there has
      not
      occurred:  (i) any change, event or condition (whether or not
      covered by insurance) that has resulted in, or might reasonably be expected
      to
      result in, a Material Adverse Effect on Target; (ii) any acquisition, sale
      or transfer of any material asset of Target; (iii) any change in accounting
      methods or practices (including any change in depreciation or amortization
      policies or rates) or any revaluation of any of Target’s assets; (iv) any
      declaration, setting aside or payment of a dividend or other distribution with
      respect to any shares of Target, or any direct or indirect redemption, purchase
      or other acquisition by Target of any of its capital stock; (v) any
      material contract entered into by Target or any material amendment or
      termination of, or default under, any material contract to which Target is
      a
      party or by which it, they or any of its or their respective properties is
      bound; (vi) any amendment or change to the Articles of Organization or
      Bylaws (or other comparable governing documents) of Target; (vii) any
      increase in or modification of the compensation or benefits payable or to become
      payable by Target to its respective directors or employees; (viii) labor trouble
      or claim or wrongful discharge or other unlawful labor practice or action;
      (ix)
      any commencement or notice or, to Target’s knowledge or any Shareholder’s
      knowledge, threat of commencement of any lawsuit or proceeding against Target;
      (x) any acceleration, termination, material modification to, or cancellation
      of
      any material agreement, contract, lease, or license to which the Target is
      a
      party or by which it is bound; (xi) any grant or imposition of any claim, lien
      or other encumbrance upon any of Target’s assets, tangible or intangible, (xii)
      any material damage, destruction, or loss (whether or not covered by insurance)
      to Target’s assets, tangible or intangible, (xiii) any grant by Target of any
      license or sublicense of any material rights under or with respect to any of
      Target’s Intellectual Property; (xiv) notice to the Target of any claim of
      ownership by a third party of Target’s Intellectual Property or of infringement
      by Target of any third party’s Intellectual Property rights; or (xv) any
      negotiation or agreement by Target to do, cause or permit any of the things
      described in the preceding clauses (i) through (xiv) (other than negotiations
      with Acquiror and its representatives regarding the transactions contemplated
      by
      this Agreement).

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    2.8  Title
      to Property.  Target has good and marketable title to all
      of its respective properties, interests in properties and assets, real and
      personal, tangible and intangible, reflected in the Target Balance Sheet or
      acquired after the Target Balance Sheet Date (except properties, interests
      in
      properties and assets sold or otherwise disposed of since the Target Balance
      Sheet Date in the ordinary course of business), or, with respect to leased
      properties and assets, valid leasehold interests therein, free and clear of
      all
      mortgages, liens, pledges, charges or encumbrances of any kind or character,
      except (i) the lien of current taxes not yet due and payable, (ii) such
      imperfections of title, liens and easements as do not and will not materially
      detract from or interfere with the use of the properties subject thereto or
      affected thereby, or otherwise materially impair business operations involving
      such properties, (iii) liens securing debt which is reflected on the Target
      Balance Sheet and (iv) liens set forth on Schedule 2.8 of the Disclosure
      Schedule.  The offices, property and equipment of Target that are used
      in the operation of its business are in good operating condition and repair,
      ordinary wear and tear excepted.  All properties used in the
      operations of Target reflected in the Target Balance Sheet to the extent GAAP
      requires the same to be reflected.  Schedule 2.8 of the
      Disclosure Schedule sets forth a true, correct and complete list of all real
      property owned or leased by Target, the name of the lessor, the date of the
      lease and each amendment thereto and the aggregate annual rental and other
      fees
      payable under such lease.  Such leases are in good standing, are valid
      and effective in accordance with their respective terms, and there is not under
      any such leases any existing default or event of default (or event which with
      notice or lapse of time, or both, would constitute a default) by Target or,
      to
      the best knowledge of each Shareholder, the other parties
      thereto.  All facilities leased or subleased under such leases have
      received all approvals, to its best knowledge and belief, of governmental
      authorities (including material licenses and permits) required in connection
      with the operation thereof, and have been operated and maintained in accordance
      with applicable laws, rules, and regulations in all material
      respects.

     

    2.9  Intellectual
      Property.

     

    (a)  Target
      is
      the sole owner of, and of all rights of any nature with respect to the software
      products set forth on Schedule 2.9(a) of the Disclosure Schedule
      (including, without limitation, any and all translations or derivatives thereof,
      the “Software Products”), and is the sole owner of or is
      licensed or otherwise possesses legally enforceable rights to use all patents,
      trademarks, trade names, service marks, copyrights, and any applications
      therefor, maskworks, net lists, schematics, technology, know-how, trade secrets,
      inventory, ideas, algorithms, processes, computer software programs or
      applications (in source code and/or object code form), and tangible or
      intangible proprietary information or material (all of the foregoing,
      collectively, “Intellectual Property”) that are used or proposed to be
      used in the business of Target as currently conducted or as proposed to be
      conducted by Target.  Without limiting the foregoing and except as set
      forth on Schedule 2.9(a) of the Disclosure Schedule, Target has not
      (i) licensed any of its Intellectual Property in source code form to any
      third party or (ii) entered into any exclusive agreements relating to its
      Intellectual Property with any party.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (b)  Schedule
      2.9(b) of the Disclosure Schedule lists (i) all patents and patent
      applications and all registered and unregistered trademarks, trade names and
      service marks, registered and unregistered copyrights, and maskworks included
      in
      the Intellectual Property, including the jurisdictions in which each such
      Intellectual Property right has been acquired, issued or registered or in which
      any application for such issuance and registration has been filed, (ii) all
      licenses, sublicenses and other agreements to which Target is a party and
      pursuant to which any person is authorized to use any Intellectual Property
      and
      (iii) all licenses, sublicenses and other agreements as to which Target is
      a
      party and pursuant to which Target is authorized to use any third party patents,
      trademarks, tradenames, service marks or copyrights, including software
      (“Third Party Intellectual Property Rights”) which are incorporated in,
      are, or form a part of any product or service of Target.

     

    (c)  Except
      as
      set forth on Schedule 2.9(c) of the Disclosure Schedule, there is no
      unauthorized use, disclosure, infringement or misappropriation of any
      Intellectual Property rights of Target or any Intellectual Property right of
      any
      third party to the extent licensed by or through Target by any third party,
      including any employee or former employee of Target.  Target has not
      entered into any agreement to indemnify any person against any charge of
      infringement of any Intellectual Property, other than indemnification provisions
      contained in purchase orders, contracts, consulting agreements and licenses
      arising in the ordinary course of business, copies of which have been provided
      to Acquiror.

     

    (d)  Target
      shall not be, as a result of the execution and delivery of this Agreement or
      any
      of the Ancillary Agreements by any Shareholder, or the performance of
      Shareholders’ obligations hereunder or thereunder, in breach of any license,
      sublicense or other agreement relating to the Intellectual Property or Third
      Party Intellectual Property Rights.

     

    (e)  All
      patents, registered trademarks, service marks and copyrights held by Target
      are
      valid and subsisting.  Target (i) has not been sued or named in any
      suit, action or proceeding which involves a claim of infringement of any patent,
      trademark, service mark or copyright or violation of any trade secret or other
      proprietary right of any third party, (ii) has no knowledge that the
      manufacturing, marketing, licensing or sale of its products infringes any
      patent, trademark, service mark, copyright, trade secret or other proprietary
      right of any third party or (iii) has not brought any action, suit or proceeding
      for infringement of Intellectual Property or breach of any license or agreement
      involving Intellectual Property against any third party.

     

    (f)  Target
      has secured valid written assignments from all consultants and employees who
      contributed to the creation or development of Intellectual Property of any
      and
      all the rights to such contributions that Target does not already own by
      operation of law.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (g)  Target
      has taken all necessary and appropriate steps to protect and preserve the
      confidentiality of all Intellectual Property not otherwise protected by patents,
      patent applications or copyright (“Confidential
      Information”).  All use, disclosure or appropriation of
      Confidential Information owned by Target by or to a third party has been
      pursuant to the terms of a written agreement between Target, on the one hand,
      and such third party, on the other hand.  All use, disclosure or
      appropriation of Confidential Information not owned by Target has been pursuant
      to the terms of a written agreement between Target, on the one hand, and the
      owner of such Confidential Information, on the other hand, or is otherwise
      lawful.

     

    2.10  Interested
      Party Transactions.  Except as set forth on Schedule
      2.10 of the Disclosure Schedule, Target is not indebted to any director,
      officer, employee or agent of Target (except for amounts due as normal salaries
      and bonuses and in reimbursement of ordinary expenses, in each case in the
      ordinary course of business consistent with past practice), or any Shareholder,
      and no such person is indebted to Target.

     

    2.11  Taxes. Target
      has properly completed and timely filed all Tax Returns required to be filed
      by
      Target and has paid all Taxes shown thereon to be due.  Target has
      provided adequate accruals in accordance with GAAP in its Financial Statements
      for any Taxes that have not been paid, whether or not shown as being due on
      any
      Tax Returns.  There is (i) no material claim for Taxes that is a lien
      against the property of Target or is being asserted against Target, other than
      liens for current Taxes not yet due and payable and (ii) no audit of any Tax
      Return of Target is being conducted by a Tax Authority. Target is not a party
      to
      any tax sharing or tax allocation agreement. Target is in full compliance with
      all terms and conditions of any Tax exemptions or other Tax-sparing
      agreement or order of any foreign government and the consummation of the
      transactions contemplated hereby and by the Ancillary Agreements will not have
      any adverse effect on the continued validity and effectiveness of any such
      Tax
      exemptions or other Tax-sparing agreement or order.  Target has in its
      possession receipts for all Taxes paid to Tax
      Authorities.  

     

    2.12  Employment
      Matters.

     

    (a)  Schedule
      2.12 of the Disclosure Schedule lists all the employees of Target and, with
      respect to each, his/her date of hire, position, duties, salary and all major
      employment benefits.  No salary, pension or other major employment
      benefits have been granted to any such person on terms or conditions which
      are
      more favorable than those indicated in Schedule 2.12 of the Disclosure
      Schedule. Except as set forth on Schedule 2.12 of the Disclosure
      Schedule, Target has no employee benefit plans, programs, policies or
      agreements, including but not limited to any pension plans, multiemployer plans
      or 401(k) plans.

     

    (b)  No
      payments have been made or authorized by Target to its respective employees,
      officers or directors not dealing at arm’s length. Target has not entered into
      any agreement, undertaking or commitment with any of the foregoing which is
      not
      made in the ordinary course of business, which is not consistent with past
      practice or which is not normal and usual in the trade.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (c)  Target
      is
      in compliance with all laws, regulations, agreements and other commitments
      of
      Target, as applicable, with respect to employment practice terms and conditions
      of employment.  Target is not liable for any damages to any employee,
      officer or director of Target resulting from the violation of any applicable
      employment law or agreement.

     

    (d)  Except
      as
      set forth on Schedule 2.12(d) of the Disclosure Schedule, there are no
      outstanding, pending or, to the knowledge of any Shareholder, threatened:
      (i) claims, disputes or other controversies between Target and any of their
      respective employees, officers and directors or (ii) unfair labor practice
      complaints or other complaint or grievances against Target by such
      persons.

     

    2.13  Inventory;
      Contracts.  The inventory of Target (i) consists of items
      which are in all material respects free of any defect, fault, imperfection,
      impurity or dangerous propensity of any kind, (ii) is of a quality and quantity
      usable and salable in the ordinary and usual course of business and (iii) is
      owned by Target.

     

    2.14  Certain
      Agreements Affected by the Purchase.  Except as set forth
      on Schedule 2.14 of the Disclosure Schedule, neither the execution and
      delivery of this Agreement and the other Ancillary Agreements by Target nor
      the
      consummation of the transactions contemplated hereby and thereby will (i) result
      in any payment (including, without limitation, severance, unemployment
      compensation, golden parachute, bonus or otherwise) becoming due to any
      director, officer or employee of Target, (ii) materially increase any
      benefits otherwise payable by Target or (iii) result in the acceleration of
      the time of payment or vesting of any such benefits.  No payment or
      benefit which will or may be made by Target to any employee will be
      characterized as an “excess parachute payment” within the meaning of
      Section 280G(b)(1) of the Internal Revenue Code of 1986, as
      amended.

     

    2.15  Insurance.  Target
      has policies of insurance and bonds listed on Schedule 2.15 of the
      Disclosure Schedule.  There is no material claim pending under any of
      such policies or bonds as to which coverage has been questioned, denied or
      disputed by the underwriters or issuers of such policies or
      bonds.  All premiums due and payable under all such policies and bonds
      have been timely paid and Target is otherwise in compliance with the terms
      of
      such policies and bonds.  Target has no knowledge of any threatened
      termination of, or material premium increase with respect to, any of such
      policies.

     

    2.16    Litigation.  Except
      as set forth on Schedule 2.16 of the Disclosure Schedule, there is no
      private or governmental action, suit, proceeding, claim, arbitration or
      investigation pending before any agency, court or tribunal, foreign or domestic,
      or threatened against Target (whether instituted by or on behalf of any
      customer, employee, vendor, reseller of Target or any other Person), or any
      of
      their respective properties or their respective officers or directors (in their
      capacities as such).  There is no judgment, decree or order against
      Target or any of their respective properties or directors or officers (in their
      capacities as such) or any of Target’s customers, that could prevent, enjoin or
      materially alter or delay any of the transactions contemplated by this Agreement
      or any Ancillary Agreement, or that could reasonably be expected to have a
      Material Adverse Effect on Target.  Schedule 2.16 of the
      Disclosure Schedule lists and describes in reasonable detail all litigation,
      proceedings and investigations that Target has instituted or that are pending
      against or with respect to any other person or entity.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    2.17  Material
      Contracts.  Except for the material contracts identified
      and described in Schedule 2.17 of the Disclosure Schedule (collectively,
      the “Material Contracts”), Target is not a party to or bound by any
      material contract, including, without limitation:

     

    (a)      
      any
      agreement presently in effect relating to the sale of any securities, assets
      or
      business, by merger or otherwise;

     

    (b)  any
      trust
      indenture, mortgage, promissory note, loan agreement or other contract for
      the
      borrowing of money, any currency exchange, commodities or other hedging
      arrangement or any leasing transaction of the type required to be capitalized
      in
      accordance with GAAP;

     

    (c)  any
      contract with any person with whom Target does not deal at arm’s
      length;

     

    (d)  any
      contract limiting the freedom of Target to engage in any line of business or
      to
      compete with any other Person or any confidentiality, secrecy or non-disclosure
      contract;

     

    (e)      
      any
      distributor, sales, advertising, agency or publishing contract;

     

    (f)       
      any
      contract that expires, or may be renewed at the option of any person other
      than
      Target so as to expire, more than one year after the date of this
      Agreement;

     

    (g)  any
      continuing contract for the purchase of materials, supplies, equipment or
      services involving, in the case of any such contract, more than $50,000 over
      the
      life of the contract;

     

    (h)  any
      contract for capital expenditures in excess of $50,000 in the
      aggregate;

     

    (i)       
      any
      contract pursuant to which Target is a lessor of any machinery, equipment,
      motor
      vehicles, office furniture, fixtures or other personal property;

     

    (j)       
      any
      agreement of guarantee, support, indemnification, assumption or endorsement
      of,
      or any similar commitment with respect to, the obligations, liabilities (whether
      accrued, absolute, contingent or otherwise) or indebtedness of any other person
      or entity;

     

    (k)      
      any
      agreement to pay, discharge, settle or otherwise satisfy in an amount in the
      excess of $50,000 in any one case or $100,000 in the aggregate, any claim
      asserted or threatened against Target;

     

    (l)       
      any
      amendment, modification, or supplement to any of the foregoing; or

     

    (m)     
      any
      agreement to do, cause or permit any of the foregoing.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    2.18  No
      Breach of Material Contracts.  Target has provided
      Acquiror with an accurate and complete copy of each Material Contract and Target
      has performed all of the obligations required to be performed by it, and is
      entitled to all benefits, under each of the Material Contracts and, to the
      best
      knowledge of the Shareholder, Target is not alleged to be in default under
      or in
      respect of any Material Contract.  Each of the Material Contracts is
      in full force and effect and has not been amended (except as indicated on
Schedule 2.18), and there exists no material default or event of default
      or event, occurrence, condition or act, with respect to Target or, to the best
      knowledge and belief of Target, with respect to any other party thereto, which,
      with the giving of notice, the lapse of the time or both, or the happening
      of
      any other event or condition, would become a material default or event of
      default under any Material Contract.  True, correct and complete
      copies of all Material Contracts have been delivered to Acquiror.

     

    2.19  Restrictions
      on Business Activities.  There is no agreement, judgment,
      injunction, order or decree binding upon Target, or any of its properties or
      assets which has or could reasonably be expected to have the effect of
      prohibiting or impairing any current or future business practice of Target,
      any
      acquisition of property by Target or the conduct of any business by Target
      as
      currently conducted or as proposed to be conducted by Target.  Except
      as set forth on Schedule 2.19, Target has not entered into any agreement
      under which Target is restricted from selling, licensing or otherwise
      distributing any of its products to any class of customers, in any geographic
      area, during any period of time or in any segment of the market.

     

    2.20  Governmental
      Authorizations.  Target has obtained each governmental
      consent, license, permit, grant, or other authorization of any Governmental
      Entity that is required for the operation of the business of Target or the
      holding of any interest in any of its respective assets (the “Target
      Authorizations”).  All of such Target Authorizations are in full
      force and effect.

     

    2.21  Compliance
      with Laws.  Target has complied with all statutes, laws,
      and ordinances and all rules and regulations of all Governmental Entities,
      and
      is not in violation of and has not received any notice of violation with respect
      to any statute, law or ordinance or any rule or regulation of any Governmental
      Entity, with respect to the conduct of its business, or the ownership or
      operation of its business or use of its assets, except for such violations
      or
      failures to comply as could not reasonably be expected to have a Material
      Adverse Effect on Target.

     

    2.22  Minute
      Books.  The minute books of Target made available to
      Acquiror contain a complete and accurate summary of all meetings of the board
      of
      directors and the shareholders of Target and all actions by written consent
      of
      the board of directors and the shareholders of Target since the time of
      incorporation of Target through the date of this Agreement, and reflect all
      transactions referred to in such minutes or consents accurately in all material
      respects.

     

    2.23  Brokers’
      and Finders’ Fees.  Except as set forth on Schedule
      2.23 of the Disclosure Schedule, Target has not incurred, nor will Target
      incur, directly or indirectly, any liability for brokerage or finders’ fees or
      agents’ commissions or investment bankers’ fees or any similar charges in
      connection with this Agreement or any transaction contemplated
      hereby.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    2.24  Environmental
      Matters.

     

    (a)  Hazardous
      Material.  Except as would not be reasonably likely to result in a
      Material Adverse Effect on Target, Target is not aware of any underground
      storage tanks or any amount of any substance that has been designated by any
      Governmental Entity or by applicable federal, state or local law to be
      radioactive, toxic, hazardous or otherwise a danger to health or the
      environment, including PCBs, asbestos, petroleum, toxic mold, urea-formaldehyde
      and all substances listed as hazardous substances pursuant to the Comprehensive
      Environmental Response, compensation, and Liability Act of 1980, as amended,
      or
      defined as a hazardous waste pursuant to the United States Resource Conservation
      and Recovery Act of 1976, as amended, and the regulations promulgated pursuant
      to said laws, but excluding office and janitorial supplies (a “Hazardous
      Material”), that are present, as a result of the actions of Target, on any
      of the properties owned or leased by Target as of the date hereof, including
      the
      land and the improvements, ground water and surface water thereof.

     

    (b)  Hazardous
      Materials Activities.  To the Target’s best knowledge and belief,
      Target has not transported, stored, used, manufactured, disposed of, released,
      removed or exposed its employees or others to Hazardous Materials or
      manufactured any product containing a hazardous Material in violation of any
      applicable law.

     

    2.25  Representations
      Complete.  None of the representations or warranties made
      by Target or the Shareholders herein, in any Ancillary Agreement or in any
      schedule hereto, or any certificate or other document furnished by Target or
      the
      Shareholders pursuant to this Agreement, contains or will contain, at the date
      hereof or at the Closing Date, any untrue statement of a material fact, or
      omits
      or will omit, at the date hereof or at the Closing Date, to state any material
      fact necessary in order to make the statements contained herein or therein,
      in
      the light of the circumstances under which they were made, not
      misleading.

     

    ARTICLE
      III

     

    REPRESENTATIONS
      AND WARRANTIES

     

    OF
      ACQUIROR

     

    Acquiror
      represents and warrants to Shareholders as follows:

     

    3.1  Organization,
      Standing and Power.  Acquiror is a corporation duly
      organized and validly existing under the laws of Delaware.  Acquiror
      has the corporate power to own its properties and to carry on its business
      as
      now being conducted and as proposed to be conducted and is duly qualified to
      do
      business and is in good standing in each jurisdiction in which the failure
      to be
      so qualified and in good standing would have a material adverse effect on
      Acquiror.  Acquiror is not in violation of any of the provisions of
      its Certificate of Incorporation or Bylaws.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    3.2  Authority;
      No Violations and No Consents.

     

    (a)  Acquiror
      has all requisite corporate power and authority to enter into this Agreement
      and
      each of the Ancillary Agreement to which Acquiror is a party and to consummate
      the transactions contemplated hereby and thereby.  The execution and
      delivery of this Agreement and the Ancillary Agreements to which Acquiror is
      a
      party and the consummation of the transactions contemplated hereby and thereby
      have been duly authorized by all necessary corporate action on the part of
      Acquiror.

     

    (b)  This
      Agreement and each of the Ancillary Agreements to which it is a party have
      been
      duly executed and delivered by Acquiror and constitute the legal, valid and
      binding obligations of Acquiror, enforceable against it in accordance with
      their
      respective terms.  The execution and delivery of this Agreement and
      each of the Ancillary Agreements to which it is a party by Acquiror does not,
      and the consummation of the transactions contemplated hereby and thereby will
      not, conflict with, or result in any violation of, or default under (with or
      without notice or lapse of time, or both), or give rise to a right of
      termination, cancellation or acceleration of any obligation or loss of any
      benefit under (i)  any provision of its Certificate of Incorporation or
      Bylaws or (ii) any material mortgage, indenture, lease, contract or other
      agreement or instrument, permit, concession, franchise, license, judgment,
      order, decree, statute, law, ordinance, rule or regulation applicable to
      Acquiror or any of its properties or assets.

     

    (c)  No
      consent, approval, order or authorization of, or registration, declaration
      or
      filing with, any Governmental Entity is required by or with respect to Acquiror
      or in connection with the execution and delivery of this Agreement or any other
      Ancillary Agreement or the consummation of the transactions contemplated hereby
      or thereby, except for such consents, authorizations, filings, approvals and
      registrations which, if not obtained or made, would not have a material adverse
      effect on Acquiror and would not prevent, or materially alter or delay, any
      of
      the transactions contemplated by this Agreement or any of the Ancillary
      Agreements.

     

    3.3  Purchase
      Entirely for Own Account.  Acquiror understands that a
      purchase of the Shares involves substantial risks.  Acquiror is
      experienced in evaluating and participating in the purchase of securities of
      companies in a similar stage of development to that of Target and acknowledges
      that Acquiror is able to fend for itself.  Acquiror has such knowledge
      and experience in financial and business matters that Acquiror is capable of
      evaluating the merits and risks of the purchase of the
      Shares.  Acquiror can bear the economic risk of Acquiror’s purchase of
      the Shares and is able, without impairing Acquiror’s financial condition, to
      hold the Shares for an indefinite period of time.

     

    3.4  Investment
      Experience; Economic Risk. This Agreement is made with Acquiror in
      reliance upon Acquiror’s representation to the Shareholders, which by Acquiror’s
      execution of this Agreement Acquiror hereby confirms, that the Shares will
      be
      acquired for Acquiror’s own account, not as a nominee or agent, and not with a
      view to the resale or distribution of any part thereof, and that Acquiror has
      no
      present intention of selling, granting any participation in, or otherwise
      distributing the same.  By executing this Agreement, Acquiror further
      represents that Acquiror does not have any contract, undertaking, agreement
      or
      arrangement with any person to sell, transfer or grant participations to such
      person or to any third person with respect to any of the
      Shares.  Acquiror will not sell or otherwise dispose of the Shares
      (whether pursuant to a liquidating dividend or otherwise) without registration
      under the Securities Act of 1933, as amended (the “Securities Act”), or
      an exemption therefrom, and the certificate or certificates representing the
      Shares may contain a legend to the foregoing effect.  Acquiror
      understands that it may not sell or otherwise dispose of the Shares in the
      absence of either a registration statement under the Securities Act or an
      exemption from the registration provisions of the Securities Act.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    ARTICLE
      IV

     

    ADDITIONAL
      AGREEMENTS

     

    4.1  Public
      Disclosure.  The parties hereby agree that Acquiror, upon
      consultation with the Shareholders, shall issue all press releases and otherwise
      make all public statements and other public (or non-confidential) disclosures
      (whether or not in response to an inquiry) regarding the terms of this Agreement
      and the transactions contemplated hereby, and Shareholders shall not issue
      any
      such press release or make any such statement or disclosure without the prior
      written approval of Acquiror, except as may be required by law.

     

    4.2  Consents;
      Cooperation. Acquiror and the Shareholders shall promptly
      apply for or otherwise seek, and use their best efforts to obtain, all consents
      and approvals required to be obtained by them for the consummation of the
      transactions contemplated hereby and shall use commercially reasonable efforts
      to obtain all necessary consents, waivers and approvals under any of their
      Material Contracts in connection with the transactions contemplated hereby
      for
      the assignment thereof or otherwise.  The parties hereto will consult
      and cooperate with one another, and consider in good faith the views of one
      another, in connection with any analyses, appearances, presentations, memoranda,
      briefs, arguments, opinions and proposals made or submitted by or on behalf
      of
      any party hereto in connection with the foregoing.  Acquiror and the
      Shareholders shall use all commercially reasonable efforts to resolve such
      objections, if any, as may be asserted by any Governmental Entity with respect
      to the transactions contemplated by this Agreement.  In connection
      therewith, if any administrative or judicial action or proceeding is instituted
      (or threatened to be instituted) challenging any transaction contemplated by
      this Agreement as violative of any applicable law or agreement, each of parties
      hereto shall cooperate and use all commercially reasonable efforts vigorously
      to
      contest and resist any such action or proceeding and to have vacated, lifted,
      reversed, or overturned any decree, judgment, injunction or other order, whether
      temporary, preliminary or permanent (each an “Order”), that is in
      effect and that prohibits, prevents, or restricts consummation of the
      acquisition of the Shares or any such other transactions, unless by mutual
      agreement the parties hereto decide that litigation is not in their respective
      best interests.  The parties hereto shall use all commercially
      reasonable efforts to take such action as may be required to cause the
      expiration of all applicable waiting or notice periods under any and all
      applicable laws with respect to such transactions as promptly as possible after
      the execution of this Agreement.

     

    4.3  Best
      Efforts and Further Assurances.  Each of the parties to
      this Agreement shall use such party’s best efforts to effectuate the
      transactions contemplated hereby and to fulfill and cause to be fulfilled the
      conditions to closing under this Agreement.  Each party hereto, at the
      reasonable request of another party hereto, shall execute and deliver such
      other
      instruments and do and perform such other acts and things as may be necessary
      or
      desirable for effecting completely the consummation of this Agreement and the
      transactions contemplated hereby.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    4.4  Legal
      Requirements.  Each of the parties hereto will take all
      reasonable actions necessary to comply promptly with all legal requirements
      which may be imposed on them with respect to the consummation of the
      transactions contemplated by this Agreement and will promptly cooperate with
      and
      furnish information to any party hereto necessary in connection with any such
      requirements imposed upon such other party in connection with the consummation
      of the transactions contemplated by this Agreement and will take all reasonable
      actions necessary to obtain (and will cooperate with the other parties hereto
      in
      obtaining) any consent, approval, order or authorization of, or any
      registration, declaration or filing with, any Governmental Entity or other
      person, required to be obtained or made in connection with the taking of any
      action contemplated by this Agreement.

     

    4.5  Employment
      of Major Shareholder.  Upon the Closing Date the
      Acquiror, or any Affiliate of the Acquiror, and the Major Shareholder shall
      enter into the employment agreement in for form attached hereto as Exhibit
      C.

     

    4.6  Non-Compete
      and Non-Solicitation Covenants of the Major
      Shareholder.  In consideration for the non-competition,
      non-solicitation and non-interference covenants of the Major Stockholder
      contained in this Agreement and in order to induce the Acquiror to enter into
      this Agreement with the Shareholders, Acquiror shall pay the Major Shareholder
      $500,000 (the “Non-Competition Consideration”) which shall be in
      addition to the Major Shareholder’s portion of the Initial Purchase
      Consideration and the Contingent Purchase Consideration, if any, provided for
      above. Non-Competition Consideration shall be paid to the Major Stockholder
      by
      the Acquiror, or any Subsidiary of the Acquiror, on a monthly basis over two
      years, commencing on the first full calendar month following the Closing
      Date.

     

    (a)  Coverage.  Acquiror
      and the Major Shareholder hereby acknowledge that Acquiror, either directly
      or
      indirectly through one or more of its Affiliates, conducts or will conduct
      Company Activities throughout the Protected Area, and acknowledges that to
      protect adequately the interest of Acquiror in the operation of each Person
      through which it will engage in Company Activities after the date of this
      Agreement, it is essential that any non-compete covenant with respect thereto
      cover all Company Activities in the Protected Area.

     

    (b)  Non-Competition.  During
      the Non-Compete Period, the Major Shareholder shall not in any manner, directly
      or indirectly, engage in or have an equity or profit interest in, or render
      services to any business that conducts any Company Activities in the Protected
      Area.  Notwithstanding anything herein to the contrary, nothing in
      this Agreement shall prevent or prohibit the Major Shareholder from owning
      up to
      5% of a class of equity securities issued by any entity listed on any national
      securities exchange or inter-dealer quotation system.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (c)  Non-Solicitation.  During
      the Non-Solicitation Period, the Major Shareholder shall not , in any manner,
      directly or indirectly:

     

                                                                   
       (i)         solicit
      or attempt to solicit, any business from any customers or prospective customers
      of Acquiror or any of its Affiliates for purposes of engaging in any Company
      Activities in any Protected Area;

     

                                                                    
      (ii)         recruit
      or hire away or attempt to recruit or hire away, on its behalf or on behalf
      of
      any other person, firm or corporation, any employee of Acquiror or any of its
      Affiliates; or

     

        
      (iii)        interfere with or otherwise
      attempt to affect Acquiror’s relationship with any employee, customer or vendor
      of Acquiror or any of its Affiliates.

     

    (d)  Acknowledgment.  The
      Major Shareholder and Acquiror each acknowledge and agree that the covenants
      set
      forth in Article IV are reasonable as to time, scope and territory given
      Acquiror’s need to protect its trade secrets, Confidential Information and its
      substantial investment its business, its employees, customers and vendors,
      particularly given the complexity and competitive nature of Acquiror’s and its
      Affiliate’s business.  The Major Shareholder and Acquiror further
      acknowledge that (a) it would be difficult to calculate damages to Acquiror
      and
      its Affiliates from any breach of the Major Shareholder’s obligations under
      Article IV; (b) that injuries to Acquiror and its Affiliates from any such
      breach would be irreparable and impossible to measure; and (c) that the remedy
      at law for any breach or threatened breach of the Major Shareholder’s
      obligations under Article IV of this Agreement would therefore be an inadequate
      remedy, and accordingly, Acquiror shall, in addition to all other available
      remedies (including without limitation seeking such damages as it can show
      it
      and its Affiliates have sustained by reason of such breach or the exercise
      of
      all other rights it has under this Agreement), be entitled to injunctive and
      other similar equitable remedies.  The Major Shareholder also
      acknowledges that she will be subject to separate non-compete and
      non-solicitation provisions in connection with her employment by Acquiror,
      or
      one of its Affiliates, following the Closing.  Accordingly, if the
      duration or scope of the non-compete or non-solicitation applicable to the
      Major
      Shareholder under the terms of the Employment Agreement is for any reason
      shorter than the duration of the Non-Compete Period or Non-Solicitation Period
      or narrower in scope than as set forth in this Agreement, the Major Shareholder
      hereby acknowledges that she shall be subject to the Non-Compete Period and
      Non-Solicitation Period set forth in this Agreement notwithstanding any of
      the
      terms of the Employment Agreement.

     

    4.7  Employees.  Except
      as provided in Section 4.5 above, Acquiror, and Target after consummation of
      the
      purchase of the Shares by Acquiror, shall have no obligation to make any offer
      of employment to or otherwise engage or continue to employ any person employed
      by Target.  All employees of Target selected by Acquiror, in its sole
      discretion, to continue to be employed by Target after the Closing Date shall
      enter into Acquiror’s standard form of employment agreement with Acquiror or an
      Affiliate of Acquiror upon terms satisfactory to Acquiror; which agreement
      shall
      provide for a minimum base salary, annual performance based bonus, fringe
      benefits comparable to those of similarly-situated managers of Acquiror and
      confidentiality, invention assignment, non-competition and non-solicitation
      covenants.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    4.8  Restricted
      Stock; Lock-Up Agreement.    Each Shareholder
      hereby acknowledge and agree that all stock of the Acquiror issued under this
      Agreement, including but not limited to the Stock Consideration and the
      Contingent Stock Consideration, if any,  to any Shareholder will not
      be registered under the Securities Act, or under the securities laws of any
      state and, therefore, cannot be resold, assigned, encumbered or otherwise
      disposed of unless such shares are subsequently registered under the Securities
      Act and under the applicable state securities laws or an exemption from such
      registration is available.  Each Shareholder further acknowledges and
      agrees that the certificate representing the shares of Acquiror Common Stock
      shall bear a legend in substantially the following form:

     

    
      	
               "THE
                SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
                UNDER
                THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR
                UNDER ANY STATE SECURITIES LAWS, AND MAY NOT BE SOLD, PLEDGED,
                HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
                REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION
                THEREUNDER AND COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS,
                SUCH
                COMPLIANCE, AT THE OPTION OF THE COMPANY, TO BE EVIDENCED BY AN OPINION
                OF
                COUNSEL ACCEPTABLE TO THE COMPANY, IN A FORM AND SUBSTANCE ACCEPTABLE
                TO THE COMPANY, THAT NO VIOLATION OF SUCH REGISTRATION PROVISIONS
                WOULD
                RESULT FROM ANY PROPOSED TRANSFER OR
                ASSIGNMENT";

            

    

     

    Acquiror
      shall be under no obligation to remove any such legend unless and until such
      Shareholder or Acquiror obtains a written legal opinion in form and substance
      reasonably acceptable to Acquiror from counsel acceptable to Acquiror, to the
      effect that such legend may be removed.  With a view to making
      available the benefits of certain rules and regulations of the Securities and
      Exchange Commission which may at any time permit the sale of the shares of
      Stock
      Consideration or Contingent Stock Consideration without registration pursuant
      to
      Rule 144 under the Securities Act, Acquiror hereby agrees to use reasonable
      commercial efforts to (i) obtain from its counsel a written legal opinion to
      the
      effect that such legend may be removed, (ii) to cooperate with each Shareholder
      to provide such information regarding the Acquiror that is necessary for such
      opinion to be delivered and (iii) to remove such restrictive legend promptly
      upon each Shareholder’s request, as the case may be, upon compliance with the
      terms of this Section 4.8.  Acquiror and each Shareholder shall enter
      into a the lock-up agreement in the form attached hereto as Exhibit D,
      pursuant to which such Shareholder agrees not to sell any of the shares of
      Stock
      Consideration or Contingent Stock Consideration until the date one year after
      the Closing Date, in the case of the Stock Consideration or, in the case of
      Contingent Stock Consideration, one year after the date of
      issuance.

     

    4.9  Confidentiality.  Acquiror,
      the Target and the Shareholders shall keep confidential the existence of this
      Agreement, the transactions described herein and all trade secrets and
      Confidential Information relating to the Acquiror or the Target; provided,
      however, that the Shareholders may, upon obtaining the prior written consent
      of
      Acquiror, disclose the existence of this Agreement and the terms hereof, but
      solely in the manner and subject to any reasonable restrictions or limitations
      imposed on such disclosure by Acquiror in connection with granting such prior
      written consent.  The provisions of this Section 4.9 shall not apply
      with respect to any information which (a) was already known by one party when
      such information was received from the other party, (b) was available to the
      general public at the time of such receipt, (c) subsequently becomes known
      to
      the general public through no fault or omission by a party hereto, (d) is
      subsequently disclosed by a third party which has the bona fide right to make
      such disclosure, (e) is disclosed by either party in confidence to its
      professional advisors or by Acquiror to potential lenders and investors who
      agree to keep such information confidential, (f) is required to be disclosed
      by
      law or a governmental agency, including for income tax reporting purposes,
      or
      (g) is required to be disclosed in order to enforce this Agreement.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    ARTICLE
      V

     

    CONDITIONS
      PRECEDENT

     

    5.1  Conditions
      to Obligations of Each Party.  The respective obligations
      of each party to this Agreement to consummate and effect the transactions
      contemplated hereby shall be subject to the satisfaction at or prior to the
      Closing of each of the following conditions, any of which may be waived, in
      writing, by agreement of all the parties hereto (to the extent permitted by
      law):

     

    (a)  No
      Injunctions or Restraints; Illegality.  No temporary
      restraining order, preliminary or permanent injunction or other order issued
      by
      any court of competent jurisdiction or other legal or regulatory restraint
      or
      prohibition preventing the consummation of the sale of the Shares hereunder
      shall be in effect, nor shall any proceeding brought by an administrative agency
      or commission or other governmental authority or instrumentality, domestic
      or
      foreign, seeking any of the foregoing be pending; nor shall there be any action
      taken, or any statute, rule, regulation or order enacted, entered, enforced
      or
      deemed applicable to the sale of the Shares hereunder, which makes the
      consummation of the sale of the Shares hereunder illegal.  In the
      event an injunction or other order shall have been issued, each party agrees
      to
      use its reasonable efforts to have such injunction or other order
      lifted;

     

    (b)  Governmental
      Approval.  Acquiror and Target shall have timely obtained
      from each Governmental Entity all approvals, waivers and consents, if any,
      necessary for consummation of or required in connection with the transactions
      contemplated hereby.

     

    5.2  Additional
      Conditions to Obligations of the Shareholders.  The
      obligations of the Shareholders to consummate and effect the transactions
      contemplated hereby shall be subject to the satisfaction at or prior to the
      Closing of each of the following conditions, any of which may be waived, in
      writing, by the Shareholders:

     

    (a)  Representations,
      Warranties and Covenants.  (i) The representations
      and warranties of Acquiror in this Agreement shall be true and correct in all
      material respects (except that those representations and warranties that are
      qualified by their terms as to materiality shall be true and correct in all
      respects) on and as of the Closing Date as though such representations and
      warranties were made on and as of such time and (ii) Acquiror shall have
      performed and complied in all material respects with all covenants, obligations
      and conditions set forth in this Agreement and required to be performed or
      complied with by it at or prior to the Closing.  For the purposes of
      this section and determining whether a provision has been breached in a material
      respect, any representation or warranty of a party that is qualified by a
      materiality standard shall be read without regard to any such materiality
      qualification as if such qualification were not contained herein.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (b)  No
      Proceedings or Litigation.  No material action, suit, or
      proceeding before any court, governmental or regulatory authority will have
      been
      commenced and be continuing, and no investigation by any governmental or
      regulatory authority will have been commenced and be continuing, and no action,
      investigation, suit, or proceeding will be threatened at the time of Closing,
      against Acquiror or any of its Subsidiaries, associates, officers, managers
      or
      directors, seeking to restrain, prevent, or change the transactions contemplated
      hereby, questioning the validity or legality of the transactions contemplated
      hereby, seeking damages in connection with the transactions contemplated
      hereby;

     

    (c)  Payment
      of Initial Purchase Consideration.  Acquiror shall have
      tendered delivery to the Shareholders of the Initial Purchase Consideration
      and
      shall have delivered to each Shareholder the Cash Portion of the Initial
      Purchase Consideration (less the Escrow Amount) and a certificate representing
      the number of shares of Stock Consideration set forth opposite such
      Shareholder’s name on Schedule 1.1 hereto; and

     

    (d)  Escrow
      Agreement.  Acquiror shall have executed and delivered
      the Escrow Agreement to the Escrow Agent; and

     

    (e)  Employment
      of Major Shareholder.  Acquiror, or any of its
      Subsidiaries, shall have executed and delivered to the Major Shareholder the
      Employment Agreement; and

     

    (f)  Employment
      of Other Employees.  Acquiror, or any of its
      Subsidiaries, shall have executed and delivered to each employee of Target
      (other than the Major Shareholder) that has been extended an offer of employment
      with Acquiror or a Subsidiary of Acquiror, Acquiror’s standard form of
      employment agreement, confidentiality agreement and invention assignment
      agreement and

     

    5.3  Additional
      Conditions to the Obligations of Acquiror.  The
      obligations of Acquiror to consummate and effect the transactions contemplated
      hereby shall be subject to the satisfaction at or prior to the Closing of each
      of the following conditions, any of which may be waived, in writing, by
      Acquiror:

     

    (a)  Representations,
      Warranties and Covenants.  (i) The representations
      and warranties of the Shareholders in this Agreement shall be true and correct
      in all material respects (except that those representations and warranties
      that
      are qualified by their terms as to materiality shall be true and correct in
      all
      respects) on and as of the Closing Date as though such representations and
      warranties were made on and as of such time and (ii)  the Shareholders
      shall have performed and complied in all material respects with all covenants,
      obligations and conditions set forth in this Agreement and required to be
      performed or complied with by the Shareholders at or prior to the
      Closing.  For the purposes of this section and determining whether a
      provision has been breached in a material respect, any representation or
      warranty of a party that is qualified by a materiality standard shall be read
      without regard to any such materiality qualification as if such qualification
      were not contained herein.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (b)  No
      Proceedings or Litigation.  No material action, suit, or
      proceeding before any court, governmental or regulatory authority will have
      been
      commenced and be continuing, and no investigation by any governmental or
      regulatory authority will have been commenced and be continuing, and no action,
      investigation, suit, or proceeding will be threatened at the time of Closing,
      against Target, any Shareholder, Acquiror or any of their subsidiaries,
      associates, officers, managers or directors, seeking to restrain, prevent,
      or
      change the transactions contemplated hereby, questioning the validity or
      legality of the transactions contemplated hereby, seeking damages in connection
      with the transactions contemplated hereby or seeking to limit or restrict (i)
      the conduct or operation of the business of Target or (ii) the use of its
      Intellectual Property;

     

    (c)  Third
      Party Consents.  Acquiror shall have been furnished with
      evidence of the consent or approval of those persons whose consent or approval,
      if any, shall be necessary for the consummation of or required in connection
      with the transactions contemplated hereby; and

     

    (d)  Employment
      of Major Shareholder.  The Major Shareholder shall have
      executed and delivered to Acquiror, or any of its Subsidiaries, the Employment
      Agreement; and

     

    (e)  Certificates
      Evidencing the Shares.  Each Shareholder shall have
      delivered to Acquiror the certificate(s) representing all of the Shares owned
      by
      such Shareholder, duly endorsed in blank for transfer or accompanied by stock
      powers in proper form duly endorsed in blank; and

     

    (f)  Escrow;
      Escrow Agreement.  The trustee of the Select Shareholders
      Nominee Trust shall have executed and delivered the Escrow Agreement to the
      Escrow Agent and Acquiror shall have deposited the Escrow Amount with the Escrow
      Agent; and

     

    (g)  Employment
      of Other Employees.  Each employee of Target (other than
      the Major Shareholder) that has been extended an offer of employment with
      Acquiror or a Subsidiary of Acquiror shall each have executed and delivered
      to
      Acquiror, or any of its Subsidiaries, Acquiror’s standard form of employment
      agreement, confidentiality agreement and invention assignment agreement;
      and

     

    (h)  Legal
      Opinion of Target’s Counsel.  Acquiror shall have
      received an opinion of Target’s legal counsel, Laredo & Smith, LLP, in a
      form acceptable to Acquiror; and

     

    (i)  Resignation
      of Directors.  The directors of Target in office
      immediately prior to the Closing shall have tendered their resignations as
      directors of Target effective as of or prior to the Closing Date.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    ARTICLE
      VI

     

    INDEMNIFICATION

     

    6.1  Survival
      of Representations and Warranties.  The
      representations and warranties of the Shareholders in this Agreement or in
      any
      Ancillary Agreement shall terminate on the second anniversary of the Closing
      Date (the “Escrow Termination Date”); provided, however,
      that (i) the representations and warranties relating to capitalization and
      title
      to the Shares set forth in Section 2.3 shall survive the date hereof and
      continue until the seventh anniversary of the Closing Date; (ii) the
      representations and warranties relating to Intellectual Property set forth
      in
Section 2.9 shall survive the date hereof and continue until the third
      anniversary of the Closing Date; (iii) the representations, warranties and
      covenants relating or pertaining to any Tax set forth in Section 2.11
      hereof shall survive until the expiration of all applicable statutes of
      limitations, or extensions thereof, governing such Tax; and (iv) if any claims
      for indemnification have been asserted with respect to any such representations
      and warranties prior to the Escrow Termination Date, the representations and
      warranties on which such claims are based shall continue in effect solely with
      respect to such claims until final resolution of such claims.  The
      parties hereby agree that (A) the maximum liability of each Shareholder, other
      than the Major Shareholder, pursuant to Section 6.2 below shall be limited
      to
      such Shareholder’s pro rata portion of the Escrowed Amount, (B) the maximum
      liability of the Major Shareholder pursuant to Section 6.2 below shall be
      limited to the Major Shareholder’s pro rata portion of the aggregate amount of
      the Initial Purchase Consideration and (C) no Shareholder shall be
      obligated to indemnify any Acquiror Indemnified Person pursuant to Section
      6.2 below unless and until the amount of all Losses incurred by the Acquiror
      Indemnified Persons, taken as a group, exceeds $50,000 in the aggregate, in
      which event the Shareholders shall indemnify the Acquiror Indemnified Persons
      for all Losses incurred by them in the aggregate from the first dollar of Losses
      in accordance with Section 6.2 below.

     

    6.2  Indemnification.

     

    (a) 
Subject
      to the limitations set forth in Section 6.1 above, the Shareholders,
      jointly and severally, hereby agree to indemnify, defend and hold harmless
      Acquiror, and its employees, officers, directors and shareholders and
      Subsidiaries (including Target after the Closing Date) (hereinafter referred
      to
      individually as an “Acquiror Indemnified Person” and
      collectively as “Acquiror Indemnified Persons”) from and
      against any and all losses, costs, damages, liabilities, expenses (including,
      without limitation, reasonable legal fees and expenses of investigation and
      defense), claims, demands, actions, judgments and causes of action (hereinafter
      individually, a “Loss” and collectively “Losses”) resulting,
      directly or indirectly, from or in connection with (i) any misrepresentation,
      or
      falsity, breach or inaccuracy, or default of or in connection with any of the
      representations, warranties, covenants and agreements given or made by a
      Shareholder in this Agreement or  the Ancillary Agreements, (ii)
      without limiting the generality of the preceding clause (i), any Losses incurred
      by Target or Acquiror after the Closing Date but prior to the Escrow Termination
      Date arising solely as the direct result of any intentional or grossly negligent
      act or omission by a Shareholder or Target that occurred prior to the Closing
      Date, or (iv) any claims for broker’s or finder’s fees arising out of the
      transactions contemplated hereby.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (b)      
      Indemnification Procedure.  Upon receipt by a Shareholder of a
      certificate signed by any officer of Acquiror (an “Officer's
      Certificate”):  (i) stating that Acquiror or Target has paid or
      properly accrued or reasonably anticipates that it will have to pay or accrue
      Losses and (ii) specifying in reasonable detail the individual items of Losses
      included in the amount so stated, the date each such item was paid or properly
      accrued, or the basis for such anticipated liability, and the nature of the
      inaccuracy or breach of warranty or covenant to which such item is related,
      the
      Shareholders shall have thirty (30) days to object in a written statement to
      the
      claim made in the Officer's Certificate, and such statement shall have been
      delivered to Acquiror prior to the expiration of such thirty (30) day
      period.

     

    (c) 
Resolution
      of Conflicts; Arbitration.

     

                                                                   
      (i)           In the
      event that the Shareholders shall object in writing to any claim or claims
      made
      in any Officer's Certificate within thirty (30) days after delivery of such
      Officer's Certificate, the parties shall attempt in good faith to agree upon
      the
      rights of the respective parties with respect to each of such
      claims.

    

                                                                    (ii)           If
      no such agreement can be reached after good faith negotiation, either party
      may
      demand arbitration of the matter unless the amount of Loss is at issue in
      pending litigation with a third party, in which event arbitration shall not
      be
      commenced until such amount is ascertained or both parties agree to arbitration,
      and in either such event the matter shall be settled by arbitration conducted
      by
      one arbitrator mutually agreeable to both parties.  In the event that
      within thirty (30) days after submission of any dispute to arbitration, the
      parties cannot mutually agree on one arbitrator, the Shareholders and Acquiror
      shall each select one arbitrator, and the two arbitrators so selected shall
      select a third arbitrator.  The arbitrator or arbitrators, as the case
      may be, shall set a limited time period and establish procedures designed to
      reduce the cost and time for discovery while allowing the parties an
      opportunity, adequate in the sole judgment of the arbitrator or majority of
      the
      three arbitrators, as the case may be, to discover relevant information from
      the
      opposing parties about the subject matter of the dispute.  The
      arbitrator or a majority of the three arbitrators, as the case may be, shall
      rule upon motions to compel or limit discovery and shall have the authority
      to
      impose sanctions, including attorneys' fees and costs, to the extent as a
      competent court of law or equity, should the arbitrators or a majority of the
      three arbitrators, as the case may be, determine that discovery was sought
      without substantial justification or that discovery was refused or objected
      to
      without substantial justification.  The decision of the arbitrator or
      a majority of the three arbitrators, as the case may be, as to the validity
      and
      amount of any claim in such Officer's Certificate shall be binding and
      conclusive upon the parties to this Agreement.  Such decision shall be
      written and shall be supported by written findings of fact and conclusions
      which
      shall set forth the award, judgment, decree or order awarded by the
      arbitrator(s).  Notwithstanding anything in this Section 6.2(c)
      to the contrary, the Escrow Agent shall be entitled to act in accordance with
      such decision and make or withhold payments from the Escrow Fund in accordance
      therewith.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

                                                                   
      (iii)           Judgment
      upon any award rendered by the arbitrator(s) may be entered in any court having
      jurisdiction.  Any such arbitration shall be held in Houston, Texas,
      under the rules then in effect of the American Arbitration Association for
      commercial disputes.  For purposes of this Section 6.2(c), in
      any arbitration hereunder in which any claim or the amount thereof stated in
      the
      Officer’s Certificate is at issue, Acquiror shall be deemed to be the
      nonprevailing party in the event that the arbitrators award less than the sum
      of
      one-half of the disputed amount plus any amounts not in dispute.  The
      nonprevailing party to an arbitration shall pay its own expenses, the fees
      of
      each arbitrator, the administrative costs of the arbitration and the expenses,
      including, without limitation, the reasonable attorneys’ fees and costs,
      incurred by the other party to the arbitration.

    

    (d)       Third-Party
      Claims.

    

                                                                   
      (i)           If any
      third party shall notify Acquiror with respect to any matter (hereinafter
      referred to as a “Third Party Claim”), which may result in Losses, then
      Acquiror shall give prompt notice to the Shareholders (and in any event within
      thirty (30) days) of Acquiror becoming aware of any such Third Party Claim
      or of
      facts upon which any such Third Party Claim will be based setting forth such
      material information with respect to the Third Party Claim as is reasonably
      available to Acquiror; provided, however, that no delay or failure
      on the part of Acquiror in notifying the Shareholders shall relieve any
      Shareholder from any obligation hereunder unless the Shareholder is thereby
      materially prejudiced (and then solely to the extent of such
      prejudice).  The Shareholders shall not be liable for any attorneys
      fees or expenses incurred by any Acquiror Indemnified Person prior to Acquiror
      and its officers, directors and affiliates giving notice to the Shareholders
      of
      a Third Party Claim.

    

                                                                    (ii)           In
      case any Third Party Claim is asserted against Acquiror or Target, and Acquiror
      notifies the Shareholders thereof pursuant to Section 6.2(d)(i) above,
      the Shareholders will be entitled, if a majority of such Shareholders so elect
      by written notice delivered to Acquiror within thirty (30) days after receiving
      Acquiror’s notice, to assume the sole defense thereof, at the expense of the
      Shareholders (independent of the Escrow Fund); provided, that (A) the Third
      Party Claim involves only money damages and does not seek an injunction or
      other
      equitable relief and (B) counsel selected by the Shareholders is reasonably
      acceptable to Acquiror.  If the Shareholders so assume any such
      defense, the Shareholders shall conduct the defense of the Third Party Claim
      actively and diligently. The Shareholders shall not compromise or settle such
      Third Party Claim or consent to entry of any judgment in respect thereof without
      the prior written consent of Acquiror (which shall not be unreasonably withheld
      or delayed).

     

                                                                   
      (iii)           In the
      event that the Shareholders assumes the defense of the Third Party Claim in
      accordance with Section 6.2(d)(ii) above, Acquiror may retain separate
      outside legal counsel and participate in the defense of the Third Party Claim,
      but the fees and expenses of such outside legal counsel shall be at the expense
      of Acquiror. Each Acquiror Indemnified Person will cooperate in the
      Shareholders’ defense of the Third Party Claim and will provide full access to
      documents, assets, properties, books and records reasonably requested by the
      Shareholders and material to the claim and will make available all officers,
      directors and employees reasonably requested by the Shareholders for
      investigation, depositions and trial.

    

                                                                   
      (iv)           In the
      event that the Shareholders fail or elect not to assume the defense of Acquiror
      against such Third Party Claim, which the Shareholders had the right to assume
      under Section 6.2(d)(ii) above, (a) Acquiror shall have the right to
      undertake the defense, (b) no Acquiror Indemnified Person shall compromise
      or
      settle such Third Party Claim or consent to entry of any judgment in respect
      thereof without the prior written consent of a majority of the Shareholders
      (which shall not be unreasonably withheld or delayed) and (c) the Shareholders
      may retain separate outside legal counsel and participate in the defense of
      the
      Third Party Claim, but the fees and expenses of such outside legal counsel
      shall
      be at the expense of the Shareholders. In the event that the Shareholders are
      not entitled to assume the defense of the Acquiror Indemnified Persons against
      such Third Party Claim pursuant to Section 6.2(d)(ii) above, Acquiror
      shall have the right to undertake the defense; provided, however, that no
      Acquiror Indemnified Person shall consent to the entry of any judgment or enter
      into any settlement with respect to the Third Party Claim without the written
      consent of a majority of the Shareholders (which shall not be unreasonably
      withheld or delayed).  In each case, Acquiror shall conduct the
      defense of the Third Party Claim actively and diligently, and the Shareholders
      will cooperate with Acquiror in the defense of that claim and will provide
      full
      access to documents, assets, properties, books and records reasonably requested
      by Acquiror and material to the claim and will make available all individuals
      reasonably requested by Acquiror for investigation, depositions and
      trial.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    ARTICLE
      VII

     

    GENERAL
      PROVISIONS

     

    7.1  Notices.  All
      notices and other communications required or permitted hereunder shall be in
      writing and shall be given and will be deemed received (i) if delivered by
      a
      nationally recognized overnight delivery service, one business day after being
      deposited with such service, (ii) if mailed (postage prepaid) by registered
      or
      certified mail (return receipt requested), three business days after being
      so
      mailed or (iii) if sent via facsimile upon confirmation of receipt, to the
      parties at the following address (or at such other address as a party as shall
      specify by notice):

     

    

     

    (a)  if
      to
      Acquiror, to:

     

    INX
      Inc.

    Attn:  James
      H. Long, Chairman & Chief Executive Officer

    6401
      Southwest Freeway

    Houston,
      Texas 77074

    Telecopy:
      (713) 795-2307

    Email:  jim.long@i-sector.com

    

    With
      a
      copy to:

    Mayer,
      Brown, Rowe & Maw LLP

    Attn:
      Robert F. Gray, Jr.

    700
      Louisiana Street

    Suite
      3600

    Houston,
      Texas 77002

    Telecopy:  (713)
      632-1867

    Email:  rgray@mayerbrownrowe.com

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (b)  if
      to the
      Shareholders to:

     

    Select,
      Inc.

    Attn:
      Ms.
      Dana Zahka

    780
      Dedham St.

    Canton,
      MA 02021

    Telecopy:
      339-502-6650

    Email:
      Dana.Zahka@Select.com

    

    with
      a
      copy to:

    GML
      Associates, P.C.

    Attn:
      Gary M. Locarno

    400
      Commonwealth Ave.

    Boston,
      MA 02215

    Telecopy:
      617-262-6651

    Email:
      gml@gmlassoc.com

     

    7.2  Expenses.   Whether
      or not the transactions contemplated by this Agreement are consummated, all
      fees
      and expenses incurred by the Shareholders or Target in connection with the
      negotiation and effectuation of the terms and conditions of this Agreement
      and
      the transactions contemplated hereby, including, without limitation, all legal,
      accounting, financial, advisory, consulting and all other fees and expenses
      of
      third parties engaged by the Shareholders or Target (collectively, the
“Transaction Expenses”) shall be borne by the Shareholders and shall
      not be the responsibility of Acquiror or  Target, except as otherwise
      set forth on Schedule 7.2 of the Disclosure Schedule.

     

    7.3  Remedies.  The
      Shareholders agree that, in addition to all other remedies to which Acquiror
      is
      entitled, Acquiror shall have the right to enforce the terms of this Agreement
      by a decree of specific performance, provided Acquiror is not in material
      default hereunder.  Except as otherwise provided herein, any and all
      remedies herein expressly conferred upon a party will be deemed cumulative
      with
      and not exclusive of any other remedy conferred hereby, or by law or equity
      upon
      such party, and the exercise by a party of any one remedy will not preclude
      the
      exercise of any other remedy.

     

    7.4   Assignment.  This
      Agreement shall not be assigned by operation of law or otherwise except by
      merger of Acquiror with and into another person or entity, by transfer by
      Acquiror to any affiliate or as otherwise specifically provided herein. No
      assignment of this Agreement will relieve the non-assigning parties of their
      obligations, responsibilities or liabilities hereunder.

     

    7.5  Amendment;
      Waiver. This Agreement may not be amended, modified, supplemented
      or terminated nor shall any waiver be effected except by a writing executed
      by
      the parties hereto. No failure or delay on the part of any party in exercising
      any right, power or privilege hereunder shall operate as a waiver thereof,
      nor
      any single or partial exercise of any such right, power or privilege, preclude
      any further exercise thereof.  In addition,  no waiver on
      the part of any party of any right, power or privilege hereunder shall operate
      as a waiver of  any other right, power or privilege.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    7.6  Entire
      Agreement.  This Agreement and the documents and
      instruments and other agreements specifically referred to herein or delivered
      pursuant hereto, including the Ancillary Agreements and the exhibits and
      schedules hereto and thereto, constitute the entire agreement among the parties
      with respect to the subject matter hereof and supersede all prior agreements
      and
      understandings, both written and oral, among the parties with respect to the
      subject matter hereof.

     

    7.7  Parties
      in Interest. This Agreement is binding upon and is for the benefit
      of the parties hereto.  This Agreement is not made for the benefit of
      any person not a party hereto, and no other person will acquire or have any
      benefit, right, remedy or claim under or by reason of this Agreement.

     

    7.8  Headings.  The
      table of contents and headings contained in this Agreement are for reference
      purposes only and shall not affect in any way the meaning or interpretation
      of
      this Agreement.

     

    7.9  Adverse
      Construction.  The parties hereto agree that they have
      been represented by counsel during the negotiation, preparation and execution
      of
      this Agreement and, therefore, waive the application of any law, regulation,
      holding or rule of construction providing that ambiguities in an agreement
      or
      other document will be construed against the party drafting such agreement
      or
      document.

     

    7.10 
Governing
      Law.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
      IN ACCORDANCE WITH THE LAWS OF TEXAS WITHOUT REFERENCE TO SUCH STATE’S
      PRINCIPLES OF CONFLICT OF LAWS.

     

    7.11  Consent
      to Jurisdiction; Service of Process. The parties
      hereby irrevocably submit to the exclusive jurisdiction of the federal courts
      of
      the United states of America located in Houston, Texas or the courts of the
      State of Texas located in the City of Houston for the purposes of any action,
      suit or proceeding arising out of or relating to this Agreement, any Ancillary
      Agreement or any transaction contemplated hereby or thereby (any agrees not
      to
      commence any action relating hereto or thereto except in such courts). Each
      party agrees not to assert, by way of motion, as a defense or otherwise, in
      any
      such action, suit or proceeding, any claim it may now or hereafter have that
      it
      is not subject personally to the jurisdiction of such courts, that the action,
      suit or proceeding is brought in an inconvenient forum, that the venue of the
      action, suit or proceeding is improper or that this Agreement or the subject
      matter hereof may not be enforced in or by such courts.  Any and all
      service of process and any other notice in any such action, suit or proceeding
      shall be effective against any party if given personally or by registered or
      certified mail, postage prepaid and return receipt requested, or by personal
      service on such party.

     

    7.12  Severability.  In
      the event that any provision of this Agreement, or the application thereof,
      becomes or is declared by a court of competent jurisdiction to be illegal,
      void
      or unenforceable, the remainder of this Agreement will continue in full force
      and effect and the application of such provision to other persons or
      circumstances will be interpreted so as reasonably to effect the intent of
      the
      parties hereto.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    7.13  Counterparts.  This
      Agreement may be executed in multiple counterparts, each of which shall be
      deemed an original, but all of which taken together shall constitute one and the
      same instrument, each of which may be delivered via facsimile.

     

    ARTICLE
      VIII

     

    DEFINITIONS

     

    For
      the
      purposes of this Agreement, the following terms shall have the following
      meanings:

     

    “Accounts
      Receivable” shall mean the accounts receivable of Target, net of reserves,
      as reflected on the Financial Statements or on the books and records of Target
      as of the Closing Date.

     

    “Affiliate”
      shall mean, with respect to any Person, any other Person that, directly or
      indirectly, through one or more intermediaries, controls, is controlled by,
      or
      is under common control with, such first-named Person.

     

    “Business
      Day” means any day except a Saturday, Sunday or a day on which banking
      institutions in the State of Texas are obligated or permitted by law, regulation
      or governmental order to close.

     

    “Company
      Activities” shall mean either (i) designing, installing, servicing or
      supporting computer data networks and / or IP based live communications systems,
      including systems such as IP telephony systems, video communications systems
      or
      instant messaging systems, and / or data storage systems and / or data security
      systems, (ii) promoting, marketing or selling computer data network equipment
      and / or IP based live communications systems such as IP telephony systems,
      video communications systems or instant messaging systems and / or data storage
      systems and / or data security systems, (iii) designing, implementing,
      promoting, marketing or selling software applications for IP telephony and
      / or
      computer telephony applications and / or data storage systems and / or data
      security systems, or (iv) engaging in any other business activities which are
      conducted, offered or provided by Acquiror or any Affiliate of Acquiror at
      any
      time during the 12-month period prior to the date of this
      Agreement.

     

     “GAAP”
      shall mean United States generally accepted accounting principles, as in effect
      from time to time.

     

    “knowledge”
      means (i) with respect to any natural person, the actual knowledge, after
      due and diligent inquiry, of such person or (ii) with respect to any
      corporation or other entity, the actual knowledge of such party’s officers,
      directors and other managers (and in the case of Target, the actual knowledge
      of
      Target’s officers and directors), provided that such persons shall have made due
      and diligent inquiry of those employees of such party whom such officers,
      directors and managers reasonably believe would have actual knowledge of the
      matters represented.

     

    “material”
      with respect to any entity or group of entities means any event, change,
      condition or effect related to the condition (financial or otherwise),
      properties, assets (including intangible assets), liabilities, business,
      operations, results of operations or prospects of such entity and its
      subsidiaries, taken as a whole.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    “Material
      Adverse Effect” shall mean any event, change or effect that is materially
      adverse to the current business, financial condition or assets of the Target
      and
      its Subsidiaries taken as a whole.

     

    “Non-Compete
      Period” shall mean a period of five (5) years following the Closing
      Date.

     

    “Non-Solicitation
      Period” shall mean a period of five (5) years following the Closing
      Date.

     

     “Operating
      Profit Contribution” means the operating profit contribution attributable
      to the Company Business (as defined in Section 1.2) before any allocation of
      the
      Acquiror’s corporate-level operations and administrative expenses, all as
      determined by the Acquiror using its normal accounting methodologies and
      processes, and in accordance with GAAP.

     

    “Person”
      shall mean any individual, corporation, association, partnership, joint
      ventures, trust, estate, limited liability company, limited liability
      partnership, Governmental Authority or other entity or
      organization.

     

    “Protected
      Area” shall mean any state in the United States in which Acquiror or
      Target, or any Affiliate of either of them, conducted Company Activities at
      any
      time during the 12-month period immediately preceding the Closing
      Date.

     

    “Revenue”
      shall mean the net revenue, calculated in accordance with GAAP, attributable
      to
      the Target’s Company Business (as defined in Section 1.2).

     

    “Select
      Shareholders Nominee Trust” means the trust created for the benefit of the
      Shareholders pursuant to that certain Declaration of Trust, dated August 14,
      2007, among Dana Zahka, as Trustee, and each of the Shareholders.

     

     “Tax”
      (and, with correlative meaning, “Taxes” and “Taxable”) means
      (i) any net income, gross income, gross receipts, sales, use, ad valorem,
      transfer, profits, license, withholding, payroll, employment, excise, severance,
      stamp, premium, property, or windfall profit tax, custom, duty or other tax,
      governmental fee or other like assessment or charge of any kind whatsoever,
      together with any interest or any penalty, addition to tax or additional amount
      imposed by any governmental entity (a “Tax Authority”) responsible for
      the imposition of any such tax (domestic or foreign), (ii) any liability for
      the
      payment of any amounts of the type described in Section 2.11(i) as a
      result of being a member of an affiliated, consolidated, combined or unitary
      group for any Taxable period and (iii) any liability for the payment of any
      amounts of the type described in Sections 2.11(i) and (ii) as a
      result of any express or implied obligation to indemnify any other person or
      as
      a result of being a successor or transferee of any person.

     

    “Tax
      Return” shall mean any return, statement, report or form (including,
      without limitation, estimated Tax Returns and reports, withholding Tax Returns
      and reports and information reports and returns) required to be filed with
      respect to Taxes.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
       

      [SIGNATURE
        PAGE FOLLOWS]

       

      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF, Acquiror and each Shareholder have caused this Agreement to
      be
      executed and delivered all as of the date first above written.

     

    
      
        	 	
                INX
                  INC.

              

      

    

    
       

    

    
      
        	 	
                /s/
                  James H. Long

              
	 	
                James
                  H. Long

              
	 	
                Chairman
                  and Chief Executive Officer

              

      

    

     

    
      
        	 	
                SHAREHOLDERS:

              

      

    

     

    
      	 	
              /s/
                Dana Zahka

            
	 	
              Dana
                Zahka, individually

            

    

    

    

    
      	 	
              Ann
                M. Norton

            
	 	
              Ann
                M. Norton, Executrix of the Estate of Robert C.
                Norton

            

    

    

    

    
      	 	
              /s/
                Phyllis M. King

            
	 	
              Phyllis
                M. King, individually

            

    

    

    

    
      	 	
              /s/
                Phyllis E. Martin

            
	 	
              Phyllis
                E. Martin, individually

            

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    
      	 	
              /s/
                Cheryl Teebagy

            
	 	
              Cheryl
                Teebagy, individually

            

    

    

    

    
      	 	
              /s/
                Danielle Dooley

            
	 	
              Danielle
                Dooley, individually

            

    

    

    

    
      	 	
              /s/
                Christopher Dusio

            
	 	
              Christopher
                Dusio, individuallyex10_2.htm

    
      

    

    Exhibit
      10.2

    

    AMENDED
      AND RESTATED FINANCIAL COVENANTS AMENDMENT

    TO
      AMENDED AND RESTATED CREDIT AGREEMENT

    

    This
      Amended and Restated Financial Covenants Amendment to Amended and Restated
      Credit Agreement (“Amendment”) effective as of the 31st
      day of August 2007
      (the “Effective Date”), amends and restates that certain Financial
      Covenant Amendment to Amended and Restated Credit Agreement, amending that
      certain Amended and Restated Credit Agreement entered into by and between INX,
      INC. (“Dealer”) and CASTLE PINES CAPITAL LLC (“CPC”) on April 30,
      2007, as amended on August 1, 2007 (“Agreement”).

     

    WHEREAS,
      Reseller has requested that CPC extend credit to permit Reseller to
      effect an Approved Acquisition pursuant to the Agreement; and

     

    WHEREAS,
      CPC is willing to accommodate such request for credit upon and subject to the
      terms, conditions and provisions of this Amendment and the
      Agreement;

     

    NOW,
      THEREFORE, in consideration of the premises and for other good and
      valuable consideration, the receipt and sufficiency of which are hereby
      acknowledged, CPC and Reseller agree that the following paragraphs are
      incorporated into the Agreement as if fully and originally set forth therein
      (capitalized terms shall have the same meaning as defined in the Agreement
      unless otherwise indicated) and replace, in their entirety, such similarly
      entitled paragraphs in the Agreement:

    

    1.           “Current
      Ratio.  Reseller will at all times maintain on a
      consolidated basis a ratio of current assets to Current Liabilities of at least
      1.10:1.0.

    

    For
      purpose of this paragraph:  :‘Current Liabilities’ includes (a)
      all obligations classified as current liabilities under generally accepted
      accounting principles, plus (b) all principal amounts outstanding under
      revolving lines of credit, whether classified as current or long-term, which
      are
      not already included under (a) above; provided, however, that only scheduled
      principal payments in connection with the CPC Acquisition Loan for any 12 month
      period shall be deemed to be Current Liabilities for the purposes of compliance
      with this Current Ratio covenant and (ii) ‘CPC Acquisition Loan” means
      the acquisition loan made by CPC to Reseller on August 31, 2007 in the aggregate
      principal amount of Six Million Dollars ($6,000,000).  This ratio will
      be calculated at the end of each fiscal quarter, using fiscal year-to-date
      results on an annualized basis.”

    

    2.           “Tangible
      Net Worth.  Reseller will at all times maintain on a
      consolidated basis tangible net worth equal to at least Six Million Dollars
      ($6,000,000) through December 30, 2007 and at least Eight Million Dollars
      ($8,000,000) thereafter.

    

    For
      purpose of this paragraph:  (i) ‘Tangible Net Worth’ means as
      of any date the sum of Resellers’ (i) net worth as reflected on its last
      twelve-month consolidated fiscal financial statements, plus (ii) net
      earnings since the end of such fiscal year, both after provision for taxes
      and
      with Inventory determined on a first in, first out basis, plus (iii)
      Subordinated Debt, minus the sum of Reseller’s (A) intangible assets,
      including, without limitation, deposits, unamortized leasehold improvements,
      goodwill, deferred income taxes, franchises, licenses, patents, trade names,
      copyrights, service marks, brand names, covenants not to compete and any other
      asset which would be treated as an intangible under generally accepted
      accounting principles, plus (B) prepaid expenses (however such item shall
      not include prepaid inventory), plus (C) franchise fees, plus (D)
      notes, Accounts and other amounts owed to it by any Guarantor, affiliate or
      employee of any Reseller plus (E) losses since the end of such fiscal
      year, plus (F) interest in the cash surrender value of officer’s or
      shareholder’s life insurance policies; and (ii) ‘Subordinated Debt’ means
      liabilities subordinated to the Reseller’s obligations to CPC in a manner
      acceptable to CPC, using CPC’s standard form.  This covenant will be
      tested at the end of each fiscal quarter.”

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    3.           “Minimum
      Working Capital.  Reseller will at all times
      maintain a minimum working capital of Six Million Five Hundred Thousand Dollars
      ($6,500,000).  Working Capital shall be defined as Current Assets
      minus Current Liabilities.

    

    For
      purposes of this paragraph:  (i) ‘Current Assets’ includes all
      obligations classified as current assets under generally accepted accounting
      principles and (iii) ‘Current Liabilities’ includes (a) all obligations
      classified as current liabilities under generally accepted accounting
      principles, plus (b) all principal amounts outstanding under revolving lines
      of
      credit, whether classified as current or long-term, which are not already
      included under (a) above; provided, however, that only scheduled principal
      payments in connection with the CPC Acquisition Loan for any 12 month period
      shall be deemed to be Current Liabilities for the purposes of compliance with
      this Current Ratio covenant, (ii) ‘CPC Acquisition Loan’ means the
      acquisition loan made by CPC to Reseller on August 31, 2007 in the aggregate
      principal amount of Six Million Dollars ($6,000,000).  This ratio will
      be calculated at the end of each INX Accounting Period.”

    

    4.           “Total
      Liabilities to Tangible Net Worth Ratio.  Reseller will
      at all times maintain on a consolidated basis a ratio of Total Liabilities
      (excluding liabilities subordinated to the Reseller’s obligations to CPC in a
      manner acceptable to CPC, using CPC’s standard form) to Tangible Net Worth not
      exceeding 8.50 to 1.00 through December 30, 2007 and not exceeding 6.00:1.00
      thereafter.

    

    For
      purpose of this paragraph:  (i) ‘Total Liabilities’ means the
      sum of current liabilities plus long term liabilities; and (ii) ‘Tangible Net
      Worth’ means as of any date the sum of Resellers’ (i) net worth as reflected
      on its last twelve-month consolidated fiscal financial statements, plus
      (ii) net earnings since the end of such fiscal year, both after provision for
      taxes and with Inventory determined on a first in, first out basis, plus
      (iii) Subordinated Debt, minus the sum of Reseller’s (A) intangible
      assets, including, without limitation, deposits, unamortized leasehold
      improvements, goodwill, deferred income taxes, franchises, licenses, patents,
      trade names, copyrights, service marks, brand names, covenants not to compete
      and any other asset which would be treated as an intangible under generally
      accepted accounting principles, plus (B) prepaid expenses (however such
      item shall not include prepaid inventory), plus (C) franchise fees,
plus (D) notes, Accounts and other amounts owed to it by any Guarantor,
      affiliate or employee of any Reseller plus (E) losses since the end of
      such fiscal year, plus (F) interest in the cash surrender value of
      officer’s or shareholder’s life insurance policies.  This ratio will
      be calculated at the end of each fiscal quarter, using fiscal year-to-date
      results on an annualized basis.”

    

    Reseller
      waives notice of CPC’s acceptance of this Financial Covenants
      Amendment.  All other terms and provisions of the Agreement, to the
      extent not inconsistent with the foregoing, are ratified and remain unchanged
      and in full force and effect.

     

     

    (Signature
      Page(s) to Follow)

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF, Reseller and CPC have executed this Amended and Restated
      Financial Covenants Amendment on this 31st day of
      August,
      2007.

    

    

    
      	 	
              INX,
                INC.

            

    

     

    
      	 	
              By:   /s/
                Brian Fontana

            
	 	
              Name:
                Brian Fontana

            
	 	
              Title:
                Vice President and

            
	 	
              Chief
                Financial Officer

            

    

    

    

    
      	 	
              CASTLE
                PINES CAPITAL LLC

            

    

     

    
      	 	
              By:   /s/
                John Schmidt

            
	 	
              Name:
                John Schmidt

            
	 	
              Title:
                Managing Partner

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