AGREEMENT AND PLAN OF MERGER

This Agreement and Plan of Merger (this " Agreement ") is entered into as of September 30, 2009 by and among KIT digital, Inc., a Delaware corporation (“ KIT ”), KIT Acquisition Corporation, a Delaware corporation and wholly-owned subsidiary of KIT (the “ Merger Sub ”), The FeedRoom, Inc., a Delaware corporation (the " Company "), the Participating Stockholders (as defined in Article I of this Agreement) and (solely for purposes of Article IX), NewSpring Ventures II, L.P., a Delaware limited partnership, as stockholder representative (in such capacity, the “ Stockholder Representative ”).

A.           The Company, located in New York, New York, conducts a business offering online video solutions for corporations, government agencies, and media companies; services, such as broadband video distribution for Web, search engines, and podcasting; broadband video encoding, management, and delivery; broadband video application design and development; performance reporting; media advertising services; subscription and registration tools; (the " Business ") and the Company owns certain assets used in the conduct and operation of the Business.

B.           The Persons listed on Schedule 3.17   are the owners of all of the issued and outstanding capital stock of the Company (each, a “ Stockholder ” and collectively, the “ Stockholders ”).

C.           Each of the Board of Directors of Merger Sub, KIT and the Company have determined that it is in the respective best interests of Merger Sub and the Company for Merger Sub to acquire the Company through the merger of Merger Sub with and into the Company upon the terms and subject to the conditions set forth herein, and in furtherance hereof have approved the Merger.

D.           Prior to the date of this Agreement, the Board of Directors of the Company adopted and approved and the Stockholders approved the Ninth Amended and Restated Certificate of Incorporation attached hereto as Exhibit A (the “ Restated Certificate ”).

E.           The aggregate liquidation preferences of the Series F Preferred Stock (as defined in Article I of this Agreement) as set forth in Section 3 of the Restated Certificate exceed the Merger Consideration.

In consideration of the foregoing and the mutual covenants, representations, warranties, and agreements contained in this Agreement and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

1.1         “ Affiliate ” means, as applied to any Person, (i) any entity controlling, controlled by or under common control with such Person, (ii) any other Person that owns or controls 10% or more of any class of equity securities (including equity securities issuable upon the exercise of any option or convertible security) of that Person or any of its Affiliates or (iii) any director, partner, officer, manager, agent, employee or relative of such Person.  For purposes of the definition of Affiliate, "control" (including with correlative meanings, the terms "controlling", "controlled by", and "under common control with") as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through ownership of voting securities or by contract or otherwise.

1.2         “ August Net Working Capital ” shall be the net working capital of the Company as of 11:59 pm local time on August 31, 2009   which amount shall   be   calculated as the sum, accumulated in the normal course of business, of (i) all cash, cash equivalents (including certificates of deposits, money market account balances, bank account balances and government backed investment grade securities), accounts receivable, unbilled receivables, prepaid expenses, prepaid commissions, and deposits (collectively, the " Balance Sheet Assets "), minus (ii) the sum of all accounts payable, accrued expenses, deferred revenue, current portion of leases then accrued and payable, the Restructuring Costs, indebtedness for borrowed money and any other liabilities of the Company  (collectively the " Balance Sheet Liabilities "), in all cases in (i) and (ii) as incurred in the ordinary course of business consistent with past practice (in terms of both frequency and magnitude) and reflected on the balance sheet of the Company as of August 31, 2009   (excepting only the Restructuring Costs).

1.3         " Available Excess " has the meaning ascribed to such term in Section 8.6.

1.4         " Balance Sheets "" has the meaning ascribed to such term in Section 3.1(a). " Financial Statements " has the meaning ascribed to such term in Section 3.1(a).

1.5         " Balance Sheet Assets " has the meaning ascribed to such term in Section 1.3.

1.6         " Balance Sheet Liabilities " has the meaning ascribed to such term in Section 1.3.

1.7         “ Business ” has the meaning ascribed to that term in the recitals.

1.8         “ Business Day ” shall mean each day that is not a Saturday, Sunday or holiday on which banking institutions located in New York, New York are authorized or obligated by law or executive order to close.

1.9         “ Cancelled Shares ” has the meaning ascribed to such term in Section 2.4.

1.10        “ Certificate ” has the meaning ascribed to such term in Section 2.4.

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

1.12        “ Closing ” has the meaning ascribed to such term in Section 2.2.

1.13        “ Closing Date ” means the calendar day on which the Closing occurs.

1.14        “ Common Stock ” means the common stock of the Company.

1.15        “ Company ” means The FeedRoom, Inc., a Delaware corporation.

1.16        “ Company Assets ” means the properties and assets, real and personal, tangible and intangible, now owned or used by the Company in the operation of the Business, including without limitation the assets set forth on Schedule 1.16.  The parties hereby acknowledge that Schedule 1.16 sets forth certain assets that have been disposed of or discarded in the ordinary course of business.

1.17        “ Company Board ” means the Company’s board of directors.

1.18        “ Company Capital Stock ” means (i) the Common Stock and (ii) the Preferred Stock.

1.19        “ Company Options ” means the options and any other rights to purchase shares of Common Stock, excluding the Company Warrants.

1.20        “ Company Option Plan ” means has the meaning specified in Section 2.4(c).

1.21        “ Company Warrants ” has the meaning specified in Section 2.4(d).

1.22        “ Consent Indemnity ” shall be with respect to each of Hewlett-Packard Company and Intel Corporation only and in each case shall equal 2.0 times the trailing twelve month contracted, recurring revenues received by the Company as of August 31, 2009 from such entity, which in the case of Hewlett-Packard Company shall equal $712,766 and in the case of Intel Corporation shall equal $352,500; provided that such indemnity shall not be applicable where (i) within 120 days following the Closing Date, the Company, KIT or Surviving Corporation has received from Intel Corporation and/or Hewlett-Packard Company the consent to the change of control of the Company required under such customer’s contract with the Company; or (ii) in the event that the consent described under section (i) is not received, Hewlett-Packard Company or Intel Corporation, as applicable, is still a customer of the Company 180 days following the Closing Date.

1.23        “ Contract ” means any contract, mortgage, agreement, arrangement, bond, commitment, franchise, indemnity, indenture, instrument, lease, license, instrument, note, guaranty, indemnity, representation, warranty, deed, assignment, power of attorney, certificate, purchase order, work order, statement of work, insurance policy, commitment, covenant, in each case, whether or not in writing.

1.24        “ Damages ” has the meaning ascribed to such term in Section 8.1.

1.25        “ DGCL ” means the General Corporation Law of the State of Delaware.

1.26        “ Disclosure Materials ” has the meaning ascribed to such term in Section 4.6.

1.27        “ Dissenting Share Payments ” has the meaning ascribed to such term in Section 2.6.

1.28        “ Dissenting Shares ” has the meaning ascribed to such term in Section 2.6.

1.29       " E-Fax " means any system used to receive or transmit faxes electronically.

1.30       " E-Signature " means the process of attaching to or logically associating with an Electronic Transmission an electronic symbol, encryption, digital signature or process (including the name or an abbreviation of the name of the party transmitting the Electronic Transmission) with the intent to sign, authenticate or accept such Electronic Transmission.

1.31       “ Effective Date ” has the meaning ascribed to such term in Section 2.2.

1.32       “ Effective Time ” has the meaning ascribed to such term in Section 2.2.

1.33       " Electronic Transmission " means each document, instruction, authorization, file, information and any other communication transmitted, posted or otherwise made or communicated by e-mail or E-Fax.

1.34       " Employee Benefit Plan " shall mean each ERISA Plan and each other pension, profit sharing, retirement, bonus, incentive, change in control, equity compensation, health, welfare, disability, loan or loan guaranty, fringe benefit, vacation, sick pay, salary continuation, deferred compensation, stock option, stock purchase, severance pay or other insurance plan, arrangement or practice, whether written or otherwise, for current or former officers, directors, or employees, which currently is, or within the immediately preceding six years was, established, maintained, contributed to or legally obligated to be contributed to by the Company or by a current or former ERISA Affiliate, or with respect to which the Company or any ERISA Affiliate otherwise have any liability or obligation.

1.35       “ Employee List ” has the meaning ascribed to such term in Section 3.9.1.

1.36       " Environmental Damages " means all claims, judgments, damages, losses, penalties, fines, liabilities (including strict liability), encumbrances, liens, costs and expenses of defense of a claim (whether or not such claim is ultimately defeated), good faith settlements of judgment, and costs and expenses of reporting, investigating, removing and/or remediating Hazardous Materials, of whatever kind or nature, contingent or otherwise, matured or unmatured, foreseeable or unforeseeable, including without limitation reasonable attorney's fees and disbursements and consultants' fees, any of which are incurred at any time arising out of, based on or resulting from (i) the presence or release of Hazardous Materials into the environment, on or prior to the Closing, upon, beneath, or from any Real Property, Former Real Property or other location (whether or not owned by the Company) where the Company conducted operations or generated, stored, sent, transported, or disposed of Hazardous Materials, (ii) any violation of Environmental Requirements by the Company on or prior to the Closing.

1.37       " Environmental Requirements " means all applicable statutes, regulations, rules, ordinances, codes, policies, advisories, guidance, actions, licenses, permits, orders, approvals, plans, authorizations, concessions, franchises and similar items of all Governmental Authorities and all applicable judicial and administrative and regulatory decrees, judgments and orders and all covenants running with the land that relate to: (A) occupational health or safety; (B) the protection of human health or the environment; (C) the treatment, storage, disposal, handling, Release or Remediation of Hazardous Materials; or (D) exposure of persons to Hazardous Materials.

1.38       “ ERISA ” shall mean the Employee Retirement Income Security Act of 1974, as amended, and the regulations and rules issued thereunder.

1.39       “ ERISA Affiliate ” shall mean any corporation which is a member of a controlled group of corporations with the Company within the meaning of Section 414(b) of the Code, a trade or business (including a sole proprietorship, partnership, trust, estate or corporation) which is under common control with the Company within the meaning of Section 414(c) of the Code or a member of an affiliated service group with the Company within the meaning of Section 414(m) or (o) of the Code.

1.40       “ ERISA Plan ” shall mean any Pension Plan and any Welfare Plan.

1.41       “ Escrow Agent ” means Continental Stock Transfer & Trust Company, a New York corporation.

1.42       “ Escrow Agreement ” has the meaning ascribed to such term in Section 5.3(b).

1.43       “ Escrow Fund ” means the aggregate of the Primary Escrow Amount and the Legal Proceedings, Intellectual Property and Tax Escrow Amount, held by the Escrow Agent pursuant to the Escrow Agreement and this Agreement.

1.44       “ Exchange Act ” has the meaning ascribed to such term in Section 4.6.

1.45       " Financial Statements " has the meaning ascribed to such term in Section 3.3.1(a).

1.46       " Former Real Property " means any real property in which the Company heretofore held but no longer holds a fee, leasehold or other legal, beneficial or equitable interest.

1.47       “ Funding Amount ” is an amount equal to $4,000,000.

1.48       “ Funding Transactions ” means the transactions entered into between the Company and the Participating Stockholders prior to the Closing pursuant to which the Funding Amount is provided to the Company by the Participating Stockholders.

1.49       “ GAAP ” has the meaning ascribed to such term in Section 3.3.1(b).

1.50       “ General Claims” means all claims for indemnification, other than Specific Claims, made by or for a KIT Indemnified Party pursuant to Article VIII.

1.51       " Governmental Authority " means any governmental agencies, departments, commissions, boards, bureaus, instrumentalities, courts or tribunals of the United States, the states and political subdivisions thereof.

1.52        Hazardous Materials " means any substance:  (i) the presence of which requires reporting, investigation, removal or remediation under any Environmental Requirement; (ii) that is defined as a "hazardous waste," "hazardous substance" or "pollutant" or "contaminate" under any Environmental Requirement; (iii) that is toxic, explosive, corrosive, flammable, ignitable, infectious, radioactive, reactive, carcinogenic, mutagenic or otherwise hazardous and is regulated under any Environmental Requirement; (iv) the presence of which causes or threatens to cause a nuisance, trespass or other tortuous condition or poses a hazard to the health or safety of persons; (v) that contains gasoline, diesel fuel or other petroleum hydrocarbons, PCBs, asbestos or urea formaldehyde foam insulation.

1.53       “ Infringement ” (whether or not capitalized) and related verbs mean any or all uses that violate the rights of the Intellectual Property owner.

1.54       " Intellectual Property " means any and all of the following as existing under the laws of any jurisdiction throughout the world: patent disclosures, patent and design patent rights (including any and all continuations, continuations-in-part, divisionals, provisionals, reissues, reexaminations and extensions thereof), inventions, discoveries and improvements, whether patentable or not; trademarks, service marks, trade names, trade dress, and all goodwill symbolized by or associated with any of the foregoing; copyrights, works of authorship whether or not published and whether or not fixed in tangible form, moral rights, neighboring rights, performer’s rights, rights arising under any law or convention granting protection analogous to or in lieu of copyright protection (including but not limited to for the protection of phonograms); rights relating to trade secrets (including trade secrets as defined in both common law and applicable statutory law), confidential business, technical and know-how information; Internet domain names, World Wide Web URLs and addresses; software source codes and object codes, databases, database rights, and rights in data; rights of publicity, rights regarding the use of any person’s name, likeness, or biography, and rights regarding the use of any video or audio recording of any person; all rights acquired by license with respect to any of the foregoing; all registrations granted or pending with respect to any of the foregoing; and all causes of action against any person for the infringement of any of the foregoing.

1.55       " Interim Balance Sheet " has the meaning ascribed to such term in Section 3.1(a).

1.56       “ IRS ” means the Internal Revenue Service.

1.57       “ KIT ” means KIT digital, Inc., a Delaware corporation.

1.58       “ KIT Indemnified Parties ” has the meaning ascribed to such term in Section 8.1.

1.59       “ KIT Common Shares ” means shares of the common stock of KIT.

1.60       “ Last Balance Sheet Date ” has the meaning ascribed to such term in Section 3.3.1(a).

1.61       “ Law ” means any foreign, domestic, federal, state or local constitutional provision, statute or other law, rule, regulation, or interpretation of any Governmental Authority and any Order.

1.62       “ Leased Property ” has the meaning ascribed to such term in Section 3.6.1(a).

1.63        “ Legal Proceeding ” means any litigation, action, application, suit, investigation, hearing, claim, deemed complaint, grievance, civil, administrative, regulatory or criminal, arbitration proceeding or other similar proceeding, before or by any court, tribunal or Governmental Authority, and includes any appeal or review thereof and any application for leave for appeal or review;

1.64       “ Legal Proceedings, Intellectual Property and Tax Escrow Amount ” means nineteen and three-quarters percent (19.75%) of the Primary Consideration.

1.65       “ Lien ” means, with respect to any property or asset, any mortgage, lien, pledge, charge, security interest, adverse claim or other encumbrance in respect of such property or asset.

1.66       “ Lost Revenues ” shall mean with respect to any active customer as of August 31, 2009 listed in Schedule 3.18 other than Hewlett-Packard Company and Intel Corporation (which are subject to the Consent Indemnity) which terminates the Company or ceases utilizing the services of the Company (whether as a result of a termination or expiration of its Contract or otherwise)  within 60 days following the Closing Date an amount equal to the annual revenue represented by such customer, as annualized by reference to the one year period ended June 30, 2009.

1.67       “ Material Contract ” means a Contract which involves or may reasonably be expected to involve the payment to or by the Company of more than $25,000 per annum over the term of that Contract, a Contract or commitment relating to borrowed money, a Contract containing a non-competition or non-solicitation covenant or other provision that restricts the Business   or any other Contract that is otherwise material to the operation of the Business.

1.68       “ Material Adverse Effect ” means any change, event, development, effect or circumstance (i) that is, or is reasonably likely in the future to be, materially adverse to the business, operations, assets (including intangible assets), liabilities (including contingent liabilities), capitalization, earnings or other results of operations, or the condition (financial or otherwise) of the Company or (ii) that would reasonably be expected to prevent or materially delay or impair the ability of the Company to consummate the Transactions.

1.69       “ Measurement Period ” has the meaning ascribed to such term in Section 2.4(h).

1.70       “ Merger ” has the meaning ascribed to such term in Section 2.1.

1.71       “ Merger Consideration ” means the sum of the Primary Consideration and the Secondary Consideration.

1.72       “ Money Laundering Laws ” has the meaning ascribed to such term in Section 3.24.

1.73       " Multiemployer Plan " shall mean a plan as defined in Section 3(37) of ERISA.

1.74       “ NWC Statement ” has the meaning ascribed to such term in Section 2.4(i).

1.75       “ OFAC ” has the meaning ascribed to such term in Section 4.23.

1.76       “ Order ” means any decree, injunction, judgment, decision, order, ruling, assessment or writ.

1.77       “ Other Intellectual Property ” means Intellectual Property used in the Business that is not Owned Intellectual Property.

1.78       “ Owned Intellectual Property ” means Intellectual Property used in the Business that is owned by the Company.

1.79       “ Participating Stockholders ” means those Persons holding Series F Preferred Stock of the Company on the books and records of the Company at the Effective Time, which Persons are parties to this Agreement.

1.80       " Pension Plan " shall mean each employee pension benefit plan within the meaning of Section 3(2) of ERISA which is established, maintained or as to which there is an obligation to contribute by or on behalf of the Company or any ERISA Affiliate, or under which the employees of the Company or any ERISA Affiliate receives any benefits.

1.81       " Permitted Liens " means (i) mechanics’, carriers’, workmen’s, repairmen’s or other like Liens arising or incurred in the ordinary course of business that are not material to the Business, operations or financial condition of the Company and that are not resulting from a breach, default of violation by the Company of any Material Contract or Law, (ii) Liens for Taxes that are not due and payable or that may thereafter be paid without penalty provided an appropriate reserve has been established therefor accordance with GAAP; (iii) Liens that are immaterial in character, amount, and extent and which do not detract from the value or interfere with the present or proposed use of the properties they affect; and (iv) the Liens set out in Schedule 1.82.

1.82       “ Person ” means an association, a corporation, an individual, a partnership, a trust or any other entity or organization, including a Governmental Authority.

1.83       “ Preferred Stock ” means the Series C Preferred Stock, the Series D Preferred Stock, the Series E Preferred Stock and the Series F Preferred Stock of the Company.

1.84       “ Primary Consideration ” means an aggregate of 948,364 KIT Common Shares or such lesser or greater number as may result from an adjustment pursuant to Section 2.4(h).

1.85       “ Primary Escrow Amount ” means nineteen and three-quarters percent (19.75%) of the Primary Consideration.

1.86       “ Pro Rata Portion ” means with respect to each Participating Stockholder, an amount equal to the fraction obtained by dividing (x) the amount of Merger Consideration payable to such Participating Stockholder pursuant to Section 2.4(a) divided by (y) the aggregate amount of Merger Consideration payable to all Participating Stockholders pursuant to Section 2.4(a).

1.87       “ Property Leases ” has the meaning ascribed to such term in Section 3.6.1.2.

1.88       “ Public Software ” has the meaning ascribed to such term in Section 3.6.2(i).

1.89       “ Real Property ” has the meaning ascribed to such term in Section 3.6.1(a).

1.90       “ Related Agreements ” means the Escrow Agreement and the Stockholders Agreement.

1.91       “ Restructuring Costs ” means $1,500,000.

1.92       “ Revenue ” has the meaning ascribed to such term in Section 2.4(h).

1.93       “ Revenue Statement ” has the meaning ascribed to such term in Section 2.4(h).

1.94       “ SEC Reports ” has the meaning ascribed to such term in Section 4.6.

1.95       “ Secondary Consideration ” means a number of KIT Common Shares determined by dividing (a) the Funding Amount by (b) $11.00.

1.96       “ Securities Act ” has the meaning ascribed to such term in Section 4.6.

1.97       “ Series F Preferred Stock ” means the Series F Preferred Stock of the Company.

1.98       “ Severance Costs ” means the aggregate of the maximum severance or termination payments the Company would be contractually obligated to pay as a result of the termination of employment of all individuals employed by the Company as of August 31, 2009 or at any time thereafter up to the Closing.  For avoidance of doubt, such maximum termination payments are set out in Schedule 3.9.2 .

1.99       “ Specific Claims ” means all claims for indemnification made by or for a KIT Indemnified Party pursuant to Section 8.1(a) as it relates to misrepresentations and breaches of warranties relating to Intellectual Property, Section 8.1(c) and Section 8.1(e) of Article VIII.

1.100     “ Statement of Expenses ” has the meaning ascribed to such term in Section 5.11.

1.101     “ Stockholders ” has the meaning ascribed to such term in the recitals.

1.102     “ Stockholders Agreement ” has the meaning ascribed to such term in Section 5.3(c).

1.103     “ Surviving Corporation ” has the meaning ascribed to such term in Section 2.1.

1.104     " Taxes " means any federal, state, local and foreign income or gross receipts tax, alternative or add-on minimum tax, sales and use tax, customs duty and any other tax, charge, fee, levy or other assessment, including, without limitation, property, transfer, occupation, service, license, payroll, franchise, excise, withholding, ad valorem, severance, documentary stamp, gains, premium, windfall profit, employment, rent or other tax, governmental fee or like assessment or charge of any kind whatsoever, together with any interest, fine or penalty thereon, addition to tax, additional amount, deficiency, assessment or governmental charge imposed by any federal, state, local or foreign taxing authority which are payable by the Company.

1.105     “ Tax Return ” includes any material report, statement, form, return or other document or information required to be supplied to a taxing authority in connection with taxes.

1.106     “ Transfer Taxes ” has the meaning ascribed to such term in Section 2.8.

1.107     “ Welfare Plan ” shall mean each employee welfare benefit plan within the meaning of Section 3(1) of ERISA which is established, maintained or to which there is an obligation to contribute by or on behalf of the Company or any ERISA Affiliate, or under which the employees of the Company or any ERISA Affiliate receives any benefits.

2.1          The Merger .  At the Effective Time, Merger Sub will merge with and into the Company, the separate corporate existence of Merger Sub shall cease (the “ Merger ”), and the Company will be the surviving corporation (the “ Surviving Corporation ”) and a subsidiary of KIT.  The separate corporate existence of the Company with all its rights, privileges, immunities, powers and franchises shall continue unaffected by the Merger and the Company shall succeed to all of the rights and properties of Merger Sub and shall be subject to all of the debts and liabilities of Merger Sub all in accordance with the applicable provisions of the DGCL.

2.2          Closing; Effective Time .  The closing of the transactions contemplated hereby (the “ Closing ”) shall take place (a) at the offices of Pedley & Gordinier, PLLC, 455 South 4 ^th Street, Louisville, Kentucky at such time as this Agreement is signed by all parties hereto or (b) at such other place and time or on such other date as KIT, Merger Sub and the Company may agree.  As soon as practicable following the Closing and in no event later than the end of the next Business Day, the Surviving Corporation shall file the Certificate of Merger with the Office of the Secretary of State of the State of Delaware.  The Merger shall thereupon become effective as of the date of filing in accordance with the DGCL; the time of such effectiveness is hereinafter referred to as the “ Effective Time ”; and the date of such effectiveness is hereinafter referred to as the “ Effective Date .”

2.3          Formation Documents; Management .  Unless otherwise determined by Merger Sub prior to the Closing, (a) the Certificate of Incorporation of Merger Sub in effect immediately prior to the Closing shall be the Certificate of Incorporation of the Surviving Corporation as of the Closing (but for the name of the Surviving Corporation stated therein, which shall be changed to “The FeedRoom, Inc.” (ii) the bylaws of Merger Sub, as in effect immediately prior to the Closing, shall be the bylaws of the Surviving Corporation, at the Effective Time, (iii) the directors of Merger Sub shall be the directors of the Surviving Corporation, each to hold office until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Surviving Corporation’s certificate of incorporation and bylaws and applicable provisions of the DGCL, and (iv) the officers of Merger Sub shall be the officers of the Surviving Corporation, each to hold office in accordance with the provisions of the bylaws of the Surviving Corporation.

(a)           Company Capital Stock .  Subject to the terms of Section 2.6, at the Effective Time, by virtue of the Merger and without any action on the part of the Company, Merger Sub, or any of the Stockholders, each then outstanding share of Company Capital Stock shall be cancelled and extinguished, and automatically converted into the right to receive, upon surrender of the Certificate representing such share of Company Capital Stock in accordance with the terms of Section 2.5, the number of KIT Common Shares as set forth below in Section 2.4(b), subject to Section 2.4(f), Section 2.4(h) and 2.4(j), all upon the terms and subject to the conditions set forth in this Agreement and each of the Related Agreements, and the indemnification, escrow and other provisions set forth in this Agreement .   Notwithstanding anything to the contrary set forth herein, the aggregate amounts payable with respect to all outstanding shares of Company Capital Stock shall not exceed the Merger Consideration.  Any outstanding shares of the Company Capital Stock held by the Company or Merger Sub or their wholly owned subsidiaries at the Effective Time will be cancelled without payment of any consideration and cease to exist (the “ Cancelled Shares ”).  At and after the Effective Time, each holder of a certificate that represented issued and outstanding shares of the Company Capital Stock immediately prior to the Effective Time (each a “ Certificate ”) shall cease to have any rights as a stockholder of the Company, except for the right to surrender his Certificate in exchange for the consideration payable, if any, in respect of the shares of the Company Capital Stock represented by such Certificate pursuant to this Section 2.4. At the Effective Time, by virtue of the Merger and without any action on the part of KIT, Merger Sub or the Company, each share of Company Capital Stock that is outstanding and owned by the Company as treasury stock as of immediately prior to the Effective Time shall cease to be outstanding, shall be canceled without payment of any consideration therefor and shall thereupon cease to exist.

(b)          Series F Preferred Stock;   Partial Satisfaction of Liquidation Preference .   At the Effective Time, each outstanding share of Series F Preferred Stock shall be cancelled and extinguished, and automatically be converted into the right to receive upon surrender of the Certificate representing such share of Series F Preferred Stock 0.12559010 KIT Common Shares. Where the aggregate number of KIT Common Shares deliverable to any Person pursuant to this Agreement either pursuant to Section 2.5 or upon any release of the Escrow Fund is less than a whole share, then the number of KIT Common Shares issuable to such Person shall be rounded down to the next lower whole share.  As the Merger Consideration is insufficient to discharge the payments required to be made under the Restated Certificate to the holders of Series F Preferred Stock, no distributions of Merger Consideration will be made to the holders of the Common Stock or any other series of Preferred Stock of the Company and such Common Stock and all Preferred Stock other than the Series F Preferred Stock will be cancelled and extinguished at the Effective Time for no consideration as a result of the Merger.

(c)          Company Options .  No Company Options (whether vested or unvested) shall be assumed by the Surviving Corporation.   The Second Amended 2004 Stock Option And Restricted Stock Award Plan dated July 7, 2008   (including any sub-plans thereof) (the “ Company Option Plan ”) will be terminated at the Closing.

(d)          Company Warrants .  No outstanding warrants or other rights to acquire shares of Company Capital Stock or any other shares or securities of the Company (whether or not exercisable or vested) (“ Company Warrants ”) shall be assumed by the Surviving Corporation, and each such Company Warrant shall be canceled or terminated prior to the Closing. Prior to the Closing, and subject to the review and approval of Merger Sub, the Company shall take all actions necessary to effect the transactions contemplated by this Section 2.4(d) under all agreements relating to Company Warrants and any other plan or arrangement of the Company (whether written or oral, formal or informal), including delivering all required notices and obtaining any required consents.

(e)          Capital Stock of Merger Sub .  At the Effective Time, by virtue of the Merger and without any action on the part of the Company, Merger Sub, KIT, or any of the stockholders of Merger Sub, each share of common stock of Merger Sub issued and outstanding immediately prior to the Effective Time shall be cancelled and extinguished, and automatically converted into and exchanged for one validly issued, fully paid and nonassessable share of common stock of the Surviving Corporation.  Each stock certificate evidencing ownership of any such shares of common stock of Merger Sub shall thereafter evidence ownership of an equivalent number of shares of common stock of the Surviving Corporation.

(f)           Withholding Taxes . Each of Merger Sub and its agents shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement, to any Person such amounts as Merger Sub and/or its agents may determine it is required to deduct and withhold with respect to the making of such payment under the Code, or any other provision of Law.  To the extent that amounts are so withheld, such withheld amounts shall be treated for all purposes hereof as having been paid to such Person in respect of which such deduction and withholding was made.

(g)          No Further Ownership Rights in Company Capital Stock .  Subject to Section 2.6, all consideration paid in respect of the surrender for exchange of shares of the Company Capital Stock in accordance with the terms hereof shall be deemed to be full satisfaction of all rights pertaining to such shares of the Company Capital Stock, and there shall be no further registration of transfers on the records of the Surviving Corporation of shares of the Company Capital Stock which were outstanding immediately prior to the Effective Time.

(h)          Adjustment of Primary Consideration . The Primary Consideration is premised upon the Company achieving “ Revenue ”, as that term is defined and calculated in accordance with U.S. GAAP and AICPA Statement of Position (SOP) No. 97-2, Software Revenue Recognition and the Securities and Exchange Commission (SEC) Staff Accounting Bulletin (SAB) No. 104, of $1,575,000.00 during June, July and August of 2009 (the “ Measurement Period ”). The Company shall deliver to the Merger Sub and KIT a “ Revenue Statement ” for the Measurement Period prior to the Closing Date, which Revenue Statement shall be acceptable to KIT and Merger Sub as to both form and substance in their reasonable discretion.  In the event that the Revenue Statement is within five percent, positive or negative, of $1,575,000.00 (e.g. between $1,496,251.00 and $1,653,749.00) then there shall be no adjustment to the Primary Consideration. In the event the Revenue reflected in the Revenue Statement is equal to or exceeds five percent, positive or negative, of $1,575,000.00, then the Primary Consideration shall be adjusted, up or down, by the same percentage deviation from the Revenue amount of $1,575,000.00. For purpose of example only, if the final agreed Revenue Statement discloses Revenue of $1,732,500.00 (ten percent positive) then the number of shares issued by KIT for the Primary Consideration shall be increased by 94,836 shares (ten percent of 948,364 shares) .

(i)           NWC Statement .   Prior to the Closing Date, the Company shall prepare and deliver to the Merger Sub and KIT a calculation of the August Net Working Capital (the “ NWC Statement ”).   The NWC Statement shall be prepared from the books and records of the Company and calculated in accordance with GAAP applied consistently with the preparation of the Company's historical financial statements and shall be subject to the approval of KIT and the Merger Sub, acting reasonably.

(j)           Reduction for Escrow Fund .  Each Participating Stockholder’s right to receive KIT Common Shares pursuant to Section 2.4(b) shall be reduced by a number of KIT Common Shares equal to such Participating Stockholder’s Pro Rata Portion of the Escrow Fund and shall be deposited with the Escrow Agent as provided herein.

2.5         Delivery of Merger Consideration . 

(a)          Merger Sub to Provide Consideration . Subject to the terms of this Agreement, including Section 2.6 , promptly after the Effective Time, KIT and Merger Sub shall deposit or cause to be issued and delivered to each of Participating Stockholders a number of KIT Common Shares equal its share of the Merger Consideration, less its share of the Escrow Fund and (ii) the Escrow Agent, an amount equal to the Escrow Fund.  Each Participating Stockholder’s Pro Rata Portion of the Escrow Fund shall be deemed contributed to the Escrow Fund.

(b)          Procedures .  Prior to the Closing, each of the Participating Stockholders shall deliver to counsel for KIT Certificate or Certificates representing shares of Company Capital Stock together with stock powers executed in blank, which Certificates shall be held in escrow pending the completion of the Closing.  If the Closing does not occur, the Certificates shall be promptly returned to the Participating Stockholders.  At and after the Effective Time, each holder of a Certificate that represented issued and outstanding shares of Company Capital Stock immediately prior to the Effective Time shall cease to have any rights as a stockholder of the Company, except for the right to surrender his or her Certificate in exchange for the Merger Consideration to be received by such Person, if any, and except as otherwise provided by applicable law, and no transfer of shares of the Company Capital Stock shall be made on the stock transfer books of the Surviving Corporation.  KIT shall issue and deliver stock certificates for the Merger Consideration in the names of the Participating Stockholders as promptly as possible following the Effective Time, subject only to confirmation from the Nasdaq Global Market that the listing application for the KIT Shares to be issued to the Participating Stockholders under the terms of this Agreement has been approved.

2.6         Dissenter Rights .

(a)          Dissenting Shares .  Any shares of the Company Capital Stock held by a holder who has, subject to Section 2.6(b), demanded and perfected  appraisal or dissenter’s rights for such shares in accordance with the DGCL and who, as of the Effective Date, has not effectively withdrawn, waived, surrendered or lost such appraisal or dissenter’s rights (“ Dissenting Shares ”), shall not be converted into or represent a right to receive a portion of the Merger Consideration pursuant to Section 2.5(a), but the holder thereof shall only be entitled to such rights as are granted by the DGCL (such payments pursuant to the DGCL, “ Dissenting Share Payments ”).

(b)         Notwithstanding the provisions of Section 2.6(a), if any holder of Dissenting Shares shall effectively withdraw, waive, surrender or lose (through the passage of time, failure to demand or perfect or otherwise) the right to demand and perfect appraisal or dissenter’s rights under the DGCL, then, as of the later of the Effective Time and the occurrence of such event, the shares of the Company Capital Stock theretofore constituting Dissenting Shares shall automatically be converted into and represent only the right to receive the consideration per share payable in respect of such Company Capital Stock pursuant to and subject to the terms and conditions of this Agreement upon surrender of the Certificate(s) representing such Company Capital Stock and delivery of a duly executed stock power, and any other items required by Section 2.5 or reasonably requested by counsel to the Surviving Corporation.

(c)         As soon as practicable prior to the Effective Date, the Company shall give Merger Sub (i) prompt written notice of any written demand for the purchase by the Company of any shares of the Company Capital Stock received by the Company pursuant to the applicable provisions of the DGCL regarding dissenter’s or appraisal rights and (ii) the opportunity to participate in all negotiations and proceedings with respect to such demands.  The Company shall not, except with the prior written consent of Merger Sub, voluntarily make any payment with respect to any such demands or offer to settle or settle any such demands.  After the Effective Date, Merger Sub shall solely control all negotiations and proceedings related to such demands.

2.7          Taking of Necessary Action; Further Action .  If, at any time after the Effective Time, any further action is necessary or desirable to carry out the purposes of this Agreement and to vest the Surviving Corporation with full right, title and possession to all assets, property, rights, privileges, powers and franchises of the Company and Merger Sub, the officers and directors of the Company and Merger Sub are fully authorized in the name of their respective corporations or otherwise to take, and shall take, all such lawful and necessary action.

2.8          Transfer Taxes .    All transfer, documentary, sales, use, stamp, registration and other substantially similar Taxes imposed on a Stockholder and incurred in connection with this Agreement (collectively, “ Transfer Taxes ”), if any, shall be borne by such Stockholder and shall be paid by such Stockholder when due.  Each Stockholder will, at its own expense, file all necessary Tax Returns and other documentation with respect to all such Transfer Taxes and, if required by Law, Merger Sub and the Surviving Corporation will join in the execution of any such Tax Returns and other documentation.  Upon Surviving Corporation’s request, such Stockholder shall provide Merger Sub with evidence satisfactory to Merger Sub that such Transfer Taxes have been paid by such Stockholder.

3.            Representations and Warranties of the Company .  The Company represents and warrants to the Merger Sub and KIT, as of the date hereof and as of the Closing, as follows: 

3.2.         Authority .  The Company has full power and authority to enter into this Agreement and to consummate the transactions contemplated hereby.  This Agreement and all other agreements to be executed in connection herewith by the Company have been duly executed and delivered by the Company, have been duly authorized by all necessary corporate action by the Company (including, without limitation, any required authorization by the board of directors and shareholders of the Company) and constitute legal, valid and binding obligations of the Company enforceable in accordance with their respective terms subject to applicable bankruptcy, insolvency, reorganization, moratorium, marshaling, fraudulent conveyance and other laws affecting rights of creditors, debtors or equity holders generally.

3.3.         Financial Condition .

3.3.1.      Financial Statements .

(a)           Set forth on Schedule 3.3.1 are copies of the following (collectively, the " Financial Statements "):  (i) the audited financial statements of the Company for the fiscal years ended December 31, 2008, December 31, 2007 and December 31, 2006, including balance sheets as at December 31, 2008, December 31, 2007 and December 31, 2006 (the " Balance Sheets " and December 31, 2008, the " Last Balance Sheet Date "); (ii) the related statements of income and of changes in financial position for the fiscal years then ended; (iii) the unaudited interim financial statements of the Company for the seven month period ended July 31, 2009, including a balance sheet as at July 31, 2009 (the " Interim Balance Sheet "); and (iv) the related statements of income and of changes in financial position for the seven month period then ended.

(b)          The Financial Statements:  (i) are correct and complete in all material respects and have been prepared in accordance with the books and records of the Company; (ii) have been prepared in accordance with United States generally accepted accounting principles (" GAAP ") consistently applied throughout the periods covered; (iii) reflect and provide reserves in respect of all known liabilities of the Company which in the opinion of the Company are adequate, including all known contingent liabilities, as of their respective dates; and (iv) present fairly the consolidated financial condition of the Company at such date and the results of its operations for the fiscal period then ended.

(c)          The Company (i) keeps books, records and accounts that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of assets of the Company.  Neither the Company nor any employee, agent or shareholder of the Company, directly or indirectly has made any payment of funds of any such entity or received or retained any funds in violation of any applicable law, rule or regulation.

3.3.2.      Absence of Certain Changes .  Except as set forth on Schedule 3.3.2 , since August 31, 2009, the Company has used commercially reasonable efforts to preserve the business organization of the Company intact, to keep available to the Company the services of all current officers and employees necessary to the Business and to preserve the goodwill of the customers and employees having business relations with the Company.  Since August 31, 2009, the Company has conducted its business in the ordinary course, has maintained its assets and properties in at least as good order and condition as existed on August 31, 2009 (other than wear as may be accounted for by reasonable use) and as is necessary to continue to conduct its business.  Except as set forth on Schedule 3.3.2 since August 31, 2009 the Company has not:

(a)          conducted the Business in any manner except in the ordinary course consistent with past practices, except as otherwise required by the terms of this Agreement or any Related Agreement; or

(b)          except as required by their terms, amended, terminated, renewed/failed to renew or renegotiated any Material Contract to which the Company is a party or by which it is bound, or defaulted (or taken or omitted to take any action that, with or without the giving of notice or passage of time, would constitute a default) in any of its obligations under any Material Contract or entered into any new Material Contract or taken any action that would reasonably be expected to result in the discontinuance of its material customer relationships, excepting only the indebtedness owed by the Company to BlueCrest Venture Finance Master Fund to be paid off at or in connection with the Closing in accordance with the payoff letter to be delivered at the Closing as contemplated by Section 6.3(f); or

(f)          incurred or agreed to incur any obligation or liability (absolute or contingent) that individually calls for payment by the Company of more than $5,000 in any specific case or $10,000 in the aggregate outside of the ordinary course of business; or

(g)         made any loan, guaranty or other extension of credit, or entered into any commitment to make any loan, guaranty or other extension of credit, to or for the benefit of any director Person; or

(h)         incurred any indebtedness, guaranteed any indebtedness of any Person or guaranteed any debt securities of any person or entity; or

(i)          other than in connection with the Funding Transactions, issued, sold, redeemed or acquired for value, or agreed to do so, any debt obligations or equity securities of the Company; or

(j)          sold, leased, licensed, transferred, mortgaged, encumbered or otherwise disposed of any assets or any liabilities, except (A) for dispositions of property not greater than $10,000 in the aggregate, or (B) in the ordinary course of business consistent with past practices; or

(k)         declared, issued, made or paid any dividend or other distribution of assets, whether consisting of money, other personal property, real property or other thing of value, to its stockholders, or split, combined, divided, distributed or reclassified any shares of its equity securities; or

 (l)        other than in connection with Funding Transactions, changed or amended its certificate of incorporation or bylaws; or

(m)        made special, accelerated or extraordinary payments to any Person in excess of $5,000 in the aggregate; or

 (n)        made any material investment, by purchase, contributions to capital, property transfers, or otherwise, in any other Person; or

(o)         compromised, contested or otherwise settled any claims or threatened, commenced or settled any Legal Proceeding against or otherwise involving the Company; or

(p)          made or changed any Tax election, made any change in any method or period of accounting or in any accounting policy, practice or procedure, filed any amended Tax Return, entered into any closing agreement or similar agreement or arrangement with respect to Taxes, settled or contested any Tax claim, taken any action to surrender any right to claim a refund or credit of Taxes, or consented to any waiver or extension of the limitation period applicable to any claim for Taxes; or

(q)          disposed of or permitted to lapse any rights with respect to Intellectual Property or its use;

(r)           other than as contemplated by this Agreement or Related Agreements, made any declaration, payment or commitment or obligation of any kind for the payment (whether in cash or otherwise) of a severance payment or other, termination payment, bonus, special remuneration or other additional salary or compensation to any director, officer, or other current employee of the Company; or

(s)           made any capital expenditures or commitments with respect thereto; or

(t)           made any material change in the manner that the Company maintains its books and records;

(u)          adopted or changed accounting methods or practices (including any change in depreciation or amortization policies or rates) other than as required by GAAP; or

(v)           made any expenditures or entered into any commitment or transaction exceeding $5,000 individually or $10,000 in the aggregate outside of the ordinary course of business; or

(w)           revalued any of its assets (whether tangible or intangible), including without limitation writing down the value of inventory or writing off notes or accounts receivable; or

(x)          acquired or agreed to acquire by merging or consolidating with, or by purchasing any assets or equity securities of, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof, or otherwise acquired or agreed to acquire any assets which are material, individually or in the aggregate, to the business of the Company; or

(y)          adopted or amended any Employee Benefit Plan, entered into any employment Contract, paid or agreed to pay any bonus or special remuneration to any director or employee of the Company, or increase or modify the salaries, wage rates, or other compensation (including, without limitation, any equity-based compensation) of its employees;

(z)          entered into any strategic alliance, affiliate agreement or joint marketing arrangement or agreement; or

(aa)         other than as contemplated by this Agreement or Related Agreements, hired, promoted, demoted or terminated or otherwise changed the employment status or titles of any other employees, or encouraged any employees to resign from the Company; or

(bb)         entered into any lease of, or commitment to acquire or lease, any realty or any substantial item of machinery or equipment; or

(cc)         entered into any mortgage, pledge or permitted any Lien to be placed upon any of the Company Assets; or

(dd)         sent any written communications (including electronic communications) to the Company’s employees regarding this Agreement or the transactions contemplated hereby; or

(ee)         made any communications to the Company’s employees that are inconsistent with this Agreement or the transactions contemplated hereby; or

(gg)         agreed to or made any commitment to take any actions prohibited by this Section 3.3.2 or any other action that would (A) prevent the Company from performing, or cause the Company not to perform, their respective covenants or agreements hereunder, or (B) cause or result in any of its respective representations and warranties contained herein being untrue or incorrect.

3.3.3.        Indebtedness   The Company does not have any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) required by GAAP to be set forth on a consolidated balance sheet of the Company except:

(a)           as disclosed, reflected or reserved against in the Interim Balance Sheet;

(b)           for items set forth on Schedule 3.3.3 ;

(c)           for liabilities and obligations incurred in the ordinary course of business since the date of the Interim Balance Sheet; or

(d)           liabilities in respect of the Contracts.

3.4.          Tax Matters .

 3.4.1.       Tax Returns; Disputes .  Except as set forth on Schedule 3.4.1 , the Company has filed, within the time and in the manner prescribed by law, all federal, and all material state and local Tax Returns and reports required to be filed by it and has paid all Taxes shown to be due thereon.  All such Tax Returns were correct in all material respects.  There are no outstanding assessments or taxes otherwise due that if not paid on a timely basis would result, on or after the Closing Date, in any Liens for Taxes on any of the Company Assets.  There is no pending or threatened United States federal or applicable state or local tax audits involving either the Company, or any of its affiliates.

 3.4.2.       Section 168 .  None of the Company Assets owned or used by the Company is tax-exempt use property within the meaning of Section 168(h) of the Code.

 3.4.3.       FIRPTA .  None of the stockholders of the Company is a foreign person within the meaning of Section 1445(f)(3) of the Code.

3.5.          Legal Proceedings .

 3.5.1.       Legal Proceedings Pending or Threatened .  Except as set forth on Schedule 3.5.1 , there is no Legal Proceeding pending or to the knowledge of the Company, threatened before any Governmental Authority in which the Company is a party or which might affect the Company, the Company Assets or the Business.   Schedule 3.5.1 sets forth all Legal Proceedings to which the Company is party, or has been a party since January 1, 2006.

 3.5.2.       Business Enjoined .  Neither the Company, nor any employee, manager or agent of the Company has been permanently or temporarily enjoined by any order, judgment or decree of any court or tribunal or any other agency from engaging in or continuing any conduct or practice in connection with the Business.

 3.5.3.       Violation of Law; Permits .  The Company is not in violation of any provision of any law, decree, order or regulation applicable to the Company or its Business, properties or assets, including, without limitation, those relating to antitrust or other anticompetitive practices, to employment practices (such as discrimination, health and safety), and to minority business enterprises, except for such violations which, singly or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on the Company.  Except as set forth on Schedule 3.5.3 , the Company has all Permits required with respect to the Company Assets or in the conduct of the Business and the operation of the Real Property, all of which Permits are set forth on Schedule 3.5.3 , and has satisfied all bonding requirements pertaining to its operations under federal, state, local and foreign laws, rules and regulations.  No pending federal, state or local zoning or use regulation, restriction or compliance requirement materially and adversely affect the Company Assets or the Business.  The present conduct of the Business is not dependent upon any so-called "non-conforming use" exception nor based upon any zoning variance.

3.6.           Properties and Assets of the Company .  Except as set forth on Schedu