EXHIBIT 2.1 ASSET PURCHASE AGREEMENT

Exhibit 2.1

ASSET PURCHASE AGREEMENT

dated as of

SEPTEMBER 5, 2006

between

CLIENTLOGIC OPERATING CORPORATION

and

INNOTRAC CORPORATION

TABLE OF CONTENTS

Exhibits

Annexes

THIS ASSET PURCHASE AGREEMENT (this “ Agreement ”) is made and entered into as of September 5, 2006 by and between ClientLogic Operating Corporation, a Delaware corporation (“ Seller ”), and Innotrac Corporation, a Georgia corporation (“ Buyer ”) and joined in by ClientLogic Corporation, a Delaware corporation (“Parent”), for the limited purpose of being bound by Sections 7.07 (Non-Competition) and 7.08 (Exclusivity).

WHEREAS, Seller, among other things, is engaged in the business of providing certain letter shop services, pick, pack and ship services and warehouse management services, including, without limitation, consumer fulfillment, retail distribution, kitting and assembly, reverse logistics, inventory management, shipping induction, tilt tray package sortation, inbound/outbound freight management and vendor managed inventory services, as well as, variable laser digital printing, mailing label printing, digital printing, print-on-demand, distribution of stored value/data cards, cutting, scoring and inserting, finishing and bindery, labeling and tabbing and mail co-mingling/pre-sort services (through outside vendors), at Seller’s facility located at 3357 H Southpark Place, Grove City, Ohio 43123 (the “ Facility ”) (the “ Purchased Business ”); and

WHEREAS, Buyer desires to purchase from Seller, and Seller desires to sell to Buyer certain specific assets associated with the Purchased Business located at the Facility and assume certain of the liabilities relating to the Purchased Business, upon the terms and subject to the conditions set forth in this Agreement;

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

1 .01       Definitions . The following terms, as used herein, have the following meanings:

(a)       “ Affiliate ” means, with respect to any Person, any Person directly or indirectly controlling, controlled by, or under common control with such other Person.

(b)       “ Ancillary Agreements ” means the Transition Services Agreement, the Bill of Sale, the Sublease and the Assignment and Assumption Agreement.

(c)       “ Apportioned Obligations ” shall have the meaning set forth in Section 8.03(b) hereof.

(d)       “ Assignment and Assumption Agreement ” means the Assignment and Assumption Agreement dated the Closing Date (as defined below) in substantially the form attached hereto as Exhibit C .

(e)       “ Assumed Liabilities ” shall have the meaning set forth in Section 2.03 hereof.

(f)        “ Audit Rights ” shall have the meaning set forth in Section 2.06(f) hereof.

(g)       “ Bill of Sale ” means the Bill of Sale dated the Closing Date, substantially in the form attached hereto as Exhibit B , pursuant to which Seller shall transfer the Purchased Assets to Buyer.

(h)       “ Buyer Indemnified Parties ” shall have the meaning set forth in Section 10.02 hereof.

(i)         “ Buyer’s Damages ” shall have the meaning set forth in Section 10.02 hereof.

(j)         “ Buyer’s Indemnification Cap ” shall have the meaning set forth in Section 10.06(b) hereof.

(k)        “ Claimant ” shall have the meaning set forth in Section 10.05(a) hereof.

(l)         “ Closing ” means the consummation of the transactions contemplated in this Agreement in accordance with the provisions of Article III .

(m)       “ Closing Date ” means the date on which the Closing and the consummation of the transactions contemplated in this Agreement actually occurs.

(n)       “ Code ” shall have the meaning set forth in Section 8.01 hereof.

(o)       “ Contracts ” shall mean the contracts, agreements, commitments or leases to which Seller is a party listed on Annex 1.01(o) hereto as such annex may be amended for the addition of contracts entered into in the Ordinary Course of Business by Seller after the date hereof.

(p)       “ Customer Care Services ” shall have the meaning set forth in Section 2.02(i)(ii) hereof.

(q)         “ Damages ” shall have the meaning set forth in Section 10.03 hereof.

(r)        “ Defending Party ” shall have the meaning set forth in Section 10.05(a) hereof.

(s)       “ Earnout Contracts ” shall have the meaning set forth in Section 2.06(c)(iii) hereof.

(t)        “ Earnout Payments ” shall have the meaning set forth in Section 2.06(c) hereof.

(u)       “ Earnout Period ” shall have the meaning set forth in Section 2.06(c) hereof.

(v)       “ Employees ” shall have the meaning set forth in Section 9.01(a) hereof.

(w)       “ Environmental Costs ” means, any actual cleanup costs, remediation or removal costs, losses, liabilities or obligations (including, without limitation, liabilities or obligations under any lease or other contract), payments or damages (including, without limitation, any actual, punitive or consequential damages under any statutory laws, common law cause of action or contractual obligations or otherwise) arising out of or relating to or resulting from any Environmental Matters.

(x)        “ Environmental Laws ” means, the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. 9601 et seq.; the Resource Conservation and Recovery Act, 42 U.S.C. 6901 et seq.; the Toxic Substances Control Act, 15 U.S.C. 2601 et seq.; the Water Pollution Control Act, 33 U.S.C. 1251 et seq.; the Clean Air Act, 42 U.S.C. 7501 et seq.; the Occupational Safety and Health Act, 29 U.S.C. 655 et seq.; the Emergency Planning and Community Right-to-Know-Act of 1986, 42 U.S.C. 11001 et seq., Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. 136 et seq., the Safe Drinking Water Act, 42 U. S.C. 300f et seq., and the Hazardous Materials Transportation Act, 49 U.S.C. 1801, et seq., all rules and regulations promulgated pursuant to any of the above statutes, and any other analogous federal, state or local law, statute, rule or regulation governing Environmental Matters, as the same exist as of the Closing Date, including any common law cause of action relating to Environmental Matters or alleging liability to pay Environmental Costs.

(y)       “ Environmental Matters ” means any matter arising out of, relating to or resulting from pollution, contamination, protection of the environment, human health or safety, health or safety of employees, sanitation and any matters relating to emissions, discharges, disseminations, releases or threatened releases, of Hazardous Substances into the air, surface water, groundwater, soil, land surface or subsurface, buildings or facilities or otherwise arising out of, relating to, or resulting from the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Substances. 

(z)        “ Equipment ” shall mean all of Seller’s furniture, fixtures, machinery, equipment, computer hardware, servers, routers, operating systems, management systems, security systems, vehicles and other tangible personal property of Seller located at the Facility, except for those items listed on Annex 1.01(z) - Facility and including such other items of Seller located at Seller’s Buffalo facility listed on Annex 1.01(z) - Buffalo , together with all manufacturers’ warranties pertaining to the same, to the extent that such warranties may exist and be assignable.

(aa)      “ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended.

(bb)     “ Excluded Assets ” shall have the meaning set forth in Section 2.02 hereof.

(cc)      “ Excluded Liabilities ” shall have the meaning set forth in Section 2.04 hereof.

(dd)     “ Existing Customer Contracts ” shall mean the Contracts with Existing Customers listed on Annex 1.01(dd) as such annex may be amended for the addition of contracts entered into in the Ordinary Course of Business by Seller after the date hereof.

(ee)      “ Existing Customers ” shall mean the customers listed on Annex 1.01(ee) as such annex may be amended for the addition of new customers in the Ordinary Course of Business after the date hereof.

(ff)       “ Existing Customer Group ” shall have the meaning set forth in Section 2.06(c)(ii) hereof.

(gg)           “ GAAP ” means generally accepted accounting principles in the United States as promulgated by the Financial Accounting Standards Board or other applicable standard setting bodies.

(hh)          “ Governmental Entity ” means any government or any agency, bureau, board, commission, court, department, official, political subdivision, tribunal or other instrumentality of any government, whether federal, state or local, domestic or foreign.

(ii)             “ Hazardous Substances ” means any pollutants, contaminants, toxic or hazardous or extremely hazardous substances, materials, wastes, constituents or chemicals (including, without limitation, petroleum or any by-products or fractions thereof, any form of natural gas, asbestos and asbestos-containing materials, polychlorinated biphenyls (“PCBs”) and PCB-containing equipment, radon and other radioactive elements, infectious, carcinogenic, mutagenic or etiologic agents, pesticides, defoliants, explosives, flammables, corrosives and urea formaldehyde) that are regulated by, or may form the basis of liability under, any Environmental Laws.

(jj)       “ Independent Accounting Firm ” shall have the meaning set forth in Section 2.06(e) hereof.

(kk)      “ Initial Payment ” shall have the meaning set forth in Section 2.06(b)(i) hereof.

(ll)       “ Initial Payment Adjustment ” shall have the meaning set forth in Section 2.07(b) hereof.

(mm)         “ Intellectual Property ” means (i) all inventions (whether patentable or unpatentable and whether or not reduced to practice), all improvements thereto and all patents, patent applications and patent disclosures, together with all reissuances, continuations, continuations-in-part, revisions, extensions and reexaminations thereof; (ii) all copyrightable works, all copyrights and all applications, registrations and renewals in connection therewith; (iii) all mask works and all applications, registrations and renewals in connection therewith; (iv) all trade secrets and confidential business information (including ideas, research and development, know-how, formulas, compositions, manufacturing and production processes and techniques, technical data, designs, drawings, specifications, network configurations and architecture protocols, customer and supplier lists, pricing and cost information and business and marketing plans and proposals); (v) all computer software, software code (whether in object or source code form), subroutines and user interfaces (including, without limitation, data and related documentation) (collectively, “ Software ”); (vi) all other proprietary rights; (vii) all copies and tangible embodiments in any of the foregoing (in whatever form or medium); and (viii) all licenses, sublicenses and other assignments or permissions related to the property described in the foregoing clauses (i) - (vii).

(nn)          “ Inventory ” means the raw materials, manufacturing supplies, packaging materials, purchased products, finished goods, and work in progress owned by Seller and used or produced in the Purchased Business at the Facility.

(oo)           “ Item Processing Services ” shall have the meaning set forth in Section 2.02(i)(i) hereof.

(pp)           “ Licensed Intellectual Property ” means all Intellectual Property listed on Annex 1.01(pp) and used or held for use by or in connection with the Purchased Business.

(qq)           “ Lien ” means, with respect to any asset, any mortgage, lien, pledge, charge, security interest, restriction or encumbrance of any kind in respect of such asset.

(rr)             “ Material Adverse Change ” means any change, event, circumstance or effect that has resulted in or would reasonably be expected to result in a Material Adverse Effect.

(ss)           “ Material Adverse Effect ” means any change, event, circumstance or effect that, when considered individually or in the aggregate with all other adverse changes or effects is, or would reasonably be expected to be, materially adverse on the business, assets, financial condition or results of operations of the Purchased Business at the Facility taken as a whole; except for any effects on the Purchased Business resulting directly or indirectly from: (a) any adverse change in general economic or financial conditions to the extent equally impacting the Purchased Business and its competitors; or (b) any adverse changes in the industry in which the Purchased Business operates to the extent equally impacting its competitors.

(tt)             “ Monthly Net Revenue Statement ” shall have the meaning set forth in Section 2.06(d) hereof.

(uu)           “ Negative Indication ” shall have the meaning set forth in Section 11.01 hereof.

(vv)           “ Net Revenues ” shall have the meaning set forth in Section 2.06(c)(i) hereof.

(ww)          “ Objection Notice ” shall have the meaning set forth in Section 2.06(e) hereof.

(xx)            “ Ordinary Course of Business ” means an action taken by Seller in the ordinary course of the Purchased Business that is consistent with past customs and practices of Seller, including past practice with respect to quantity, amount, magnitude and frequency.

(yy)           “ Parent ” means ClientLogic Corporation, a Delaware corporation.

(zz)            “ Permits ” mean all permits, licenses, franchises, approvals, certificates or authorizations of any Governmental Entity required in order to permit Seller to carry on the Purchased Business, as more particularly described on Annex 1.01(zz) .

(aaa)         “ Person ” means an individual, corporation, partnership, association, trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.

(bbb)        “ Post-Closing Tax Period ” shall have the meaning set forth in Section 8.01 hereof.

(ccc)          “ Pre-Closing Tax Period ” shall have the meaning set forth in Section 8.01 hereof.

(ddd)        “ Purchase Price ” shall have the meaning set forth in Section 2.06(a) hereof.

(eee)          “ Purchased Assets ” mean the Contracts, the Equipment, the Inventory, the Permits, and the Records.

(fff)           “ Records ” mean the business books and records of Seller (except for any Tax records or other records expressed in the form of corporate minutes) maintained in connection with, and necessary to continue the operation of, the Purchased Business as it is currently operated.

(ggg)        “ Security Deposit ” means the $50,000 paid by Buyer to Seller concurrent with the execution of that certain non-binding indication of interest between the parties dated as of July 10, 2006, in consideration of Seller’s agreement to exclusively negotiate with Buyer concerning the sale of the Purchased Assets.

(hhh)         “ Seller Disclosure Schedule ” shall have the meaning set forth in Article V hereof.

(iii)             “ Seller Indemnified Parties ” shall have the meaning set forth in Section 10.03 hereof.

(jjj)            “ Seller’s Damages ” shall have the meaning set forth in Section 10.03 hereof.

(kkk)         “ Seller’s Knowledge ”, “ Known to Seller ” and words of similar import refer to matters actually known, after reasonable and prudent inquiry with respect to such matters prior to Closing, by the following executive officer of Seller: Thomas Harbison.

(lll)            “ Sublease ” means the Sublease Agreement dated the Closing Date, between Seller and Buyer in substantially the form attached hereto as Exhibit A .

(mmm)      “ Supplemental Schedule ” shall have the meaning set forth in Section 7.09 hereof.

(nnn)        “ Tax ” shall have the meaning set forth in Section 8.01 hereof.

(ooo)        “ Tax Legislation ” means, collectively, the Code and all federal, state, municipal, foreign, or other statutes imposing a Tax, including all treaties, conventions, rules, regulations, orders, and decrees of any jurisdiction.

(ppp)        “ Tax Return ” shall have the meaning set forth in Section 8.01 hereof.

(qqq)        “ Third Party Claim ” shall have the meaning set forth in Section 10.05(a) hereof.

(rrr)           “ Transition Services Agreement ” means the Transition Services Agreement dated the Closing Date between Buyer and Seller in substantially the form attached hereto as Exhibit D , pursuant to which Seller shall provide certain IT, contact center management and item processing services for the continued operation of the Purchased Business by Buyer.

(sss)         “ WARN Act Liabilities ” shall have the meaning set forth in Section 9.04 hereof.

2 .01        Purchase and Sale . Upon the terms and subject to the conditions of this Agreement, Buyer agrees to purchase from Seller and Seller agrees to grant, sell, convey, transfer, assign and deliver, or cause to be sold, transferred, assigned and delivered, to Buyer at Closing all right, title and interest in and to the Purchased Assets.

2. 02        Excluded Assets . Buyer expressly understands and agrees that the following assets and properties of Seller (the “ Excluded Assets ”) shall be excluded from the Purchased Assets:

(a)       all of Seller’s cash and cash equivalents on hand (including all un-deposited checks) and in banks;

(b)       all accrued or billed accounts, notes and other receivables of Seller (Buyer acknowledges and agrees that Seller shall, either at or promptly after Closing, invoice customers for any work performed on or prior to the Closing Date for Seller’s account);

(c)       the business books and records of Seller (except for the Records) including, without limitation, all books and records relating to any Excluded Asset or Excluded Liability;

(d)       all of Seller’s right, title and interest in any intellectual property including, but not limited to, the Licensed Intellectual Property and the name “ClientLogic” and all derivatives thereof;

(e)       all of Seller’s internal and external signage which contains any of Seller’s trademarks or trade names;

(f)        all order management systems except for the rights to COPS licensed under the Transition Services Agreement;

(g)       insurance policies relating to the Purchased Business and all claims made under such policies prior to Closing, and all credits, proceeds, causes of action or rights thereunder;

(h)       any Tax assets of Seller or Affiliate of Seller, including, but not limited to, net operating loss carrybacks and carryforwards and tax credits; and

(i)        any and all of Seller’s assets not located at the Facility, including, without limitation, those used to provide the following services:

  (i)       digital scanning, key from image/paper, rebates management, warranties management and payment processing (collectively, the “ Item Processing Services ”); and

  (ii)      in bound, multi-channel (voice, email, chat), customer service, order processing, technical support and sales retention (collectively, the “ Customer Care Services ”).

2. 03       Assumption of Liabilities . Upon the terms and subject to the conditions of this Agreement, Buyer agrees, effective as of the Closing, to assume the following liabilities (the “ Assumed Liabilities ”):

(a)       The liabilities and obligations of Seller arising under the Contracts including, without limitation, Seller’s obligation to reimburse or pay the Existing Customers for any Customer Inventory (as defined below) variance regardless of whether the actual amounts of such variance equate to the Aggregate Customer Inventory Variance Amounts (as defined below) which reduce the amount of the Initial Payment as set forth in Section 2.08;

(b)       The outstanding indebtedness, including all principal of Seller to Alliance Entertainment Corporation (“Alliance”) as of the Closing under that certain Agreement of Sale dated as of August 31, 2006 between Seller and Alliance for the carton erector located at the Facility;

(c)       Any other liabilities and obligations of Seller assumed pursuant to the Assignment and Assumption Agreement; and

(d)      Any and all liabilities and obligations of Seller otherwise arising out of Buyer’s operation and ownership of the Purchased Business and Purchased Assets from and after the Closing Date.

2 .04       Excluded Liabilities . Notwithstanding any provision in this Agreement or any other writing to the contrary, Buyer is assuming only the Assumed Liabilities and is not assuming any other liability or obligation of Seller, any Affiliate (or any predecessor owner of all or part of its business and assets) or any employee, business partner, contractor or agent of Seller of whatever nature whether presently in existence or arising or asserted hereafter. All such other liabilities and obligations (including, without limitation, any Seller’s Non-Transaction Related WARN Act Liabilities (as defined below) or Taxes arising from or related to Seller’s operation of the Purchased Business prior to Close) shall be retained by and remain obligations and liabilities of Seller, its Affiliates, employees, business partners, contractors or agents (all such liabilities and obligations not being assumed being herein referred to as the “ Excluded Liabilities ”).

2. 05       Assignment of Contracts and Rights . Anything in this Agreement to the contrary notwithstanding, this Agreement shall not constitute an agreement to assign any Purchased Asset or any claim or right or any benefit arising thereunder or resulting therefrom if an attempted assignment thereof, without consent of a third party thereto, would constitute a breach or other contravention thereof or in any way adversely affect the rights of Buyer or Seller thereunder. Seller and Buyer will use reasonable efforts (but without any payment of money by Seller or Buyer) to obtain the consent of the other parties to any such Purchased Asset or claim or right or any benefit arising thereunder for the assignment thereof to Buyer as Buyer may request. If such consent is not obtained, or if an attempted assignment thereof would be ineffective or would adversely affect the rights of Seller thereunder so that Buyer would not in fact receive all such rights, Seller and Buyer will cooperate in a mutually agreeable arrangement under which Buyer would obtain the benefits and assume the obligations thereunder in accordance with this Agreement, including subcontracting, sublicensing, or subleasing to Buyer, or under which Seller would enforce for the benefit of Buyer, with Buyer assuming Seller’s obligations, any and all rights of Seller against a third party thereto.

2. 06       Purchase Price; Earnout .

(a)        Purchase Price . Subject to adjustment as set forth herein, the purchase price for the Purchased Assets shall be one million eight hundred thousand dollars ($1,800,000) as adjusted and increased pursuant to Section 2.06(c) (Earnout Payments) and Section 2.07 (Initial Payment Adjustment) (as so adjusted and increased, the “ Purchase Price ”).

(b)        Payment of Purchase Price . Buyer shall pay the Purchase Price as follows:

  (i)      the sum of one million dollars ($1,000,000), less the Security Deposit, payable in cash or immediately available funds at the Closing (the “ Initial Payment ”), as such amount may be adjusted pursuant to Section 2.07(b);

  (ii)           eight hundred thousand dollars ($800,000) payable in cash or immediately available funds on or before January 2, 2007; and

  (iii)          the Earnout Payments shall be paid pursuant to the terms of Section 2.06(c), (d) and (e).

(c)       Earnout . In further consideration for the sale of the Purchased Assets, for the period commencing on or before April 1, 2007, as determined by Buyer, and continuing for a twelve (12) month period thereafter (the “ Earnout Period ”), Buyer shall pay to Seller monthly earnout payments in arrears (collectively, the “ Earnout Payments ”) in an amount equal to the sum of:

  (i)            ten percent (10%) of all gross revenues determined in accordance with GAAP generated from services performed during the applicable month (net of any pass through costs such as freight and supplies) (“ Net Revenues ”) under the Existing Customer Contracts or any amendments or extensions thereto or renewals or novations thereof; plus

  (ii)           five percent (5%) of all Net Revenues under new contracts (for business not historically performed by Seller) with the Existing Customers (and/or with existing purchasing groups or same business owners) or their Affiliates, subsidiaries, successors or assigns (the “ Existing Customer Group ”); plus

  (iii)          five percent (5%) of all Net Revenues under new contracts with the not more than three customers designated by Seller set forth on Annex 2.06(c)(iii) and reasonably acceptable to Buyer and which are otherwise not members of the Existing Customer Group. (The contracts referred to in subparts (i), (ii), and (iii) above are collectively referred to as the “ Earnout Contracts ”).

Notwithstanding the foregoing, Net Revenues generated under new contracts with Existing Customers covering the same business generated as of the Closing under Existing Customer Contracts shall be considered Net Revenues generated under Existing Customer Contracts pursuant to Section 2.06(c)(i).

(d)             Monthly Net Revenue Statement . Buyer shall deliver Seller a statement with respect to each month during the Earnout Period (the “ Monthly Net Revenue Statement ”) of Net Revenue under the Earnout Contracts as well as a detailed accounting of accrued Earnout Payments on or before the fifteenth (15 ^th ) day following the end of each month during the Earnout Period. Buyer shall pay Seller each Earnout Payment on or prior to the 30 ^th day of the month immediately following the month during which the Net Revenue of which the Earnout Payments are derived was generated. For example, for Net Revenue generated in September 2007, Buyer will deliver the Monthly Net Revenue Statement for September 2007 on or before October 15, 2007, and shall make the Earnout Payments for September 2007 on or before October 30, 2007.

(e)             Earnout Payments Dispute . The Monthly Net Revenue Statement shall be prepared in a manner to properly state Net Revenue and the applicable Earnout Payments and shall be certified by an appropriate officer of Buyer. Each Monthly Net Revenue Statement shall become final on the tenth business day after its receipt by Seller unless Seller provides written notice of its objections with respect to the Monthly Net Revenue Statement (the “ Objection Notice ”) to Buyer on or before such date, in which case Buyer shall make only the Earnout Payment in respect thereof not in dispute. Any Objection Notice shall specify in reasonable detail the nature of any objections so asserted, the specific dollar amount and the basis therefor. During the 10-business day period after receipt of an Objection Notice, Buyer and Seller shall work in good faith in an attempt to resolve, in writing, any differences that they may have with respect to any matter specified in the Objection Notice. If, at the end of such 10-business day period, Buyer and Seller have not reached agreement on such matters, the matters that remain in dispute shall be submitted to an independent regionally recognized firm of certified public accountants mutually agreed to by Buyer and Seller (and, failing such agreement between Buyer and Seller within five business days following the end of such 10-business day period, to an office of Crowe, Chizek and Company, LLP located in the United States) (the “ Independent Accounting Firm ”). Buyer and Seller will instruct the Independent Accounting Firm to provide its determination of the matters in dispute within 45 days after their submission to the Independent Accounting Firm. The Independent Accounting Firm shall not hear any oral testimony regarding the matters in dispute, but may request and accept written submissions. The decision of the Independent Accounting Firm will be final and binding upon the parties. The parties shall each be responsible for and pay one half of the fees and expenses of the Independent Accounting Firm. If an Objection Notice is timely received by Buyer, the Monthly Net Revenue Statement (as revised in accordance with the clause below), shall become final and binding upon the parties on the earlier of (x) the date the parties resolve in writing any differences they have with respect to all matters specified in the Objection Notice with respect to the statement in question or (y) the date all disputed matters with respect to the statement in question are finally resolved in writing by the Independent Accounting Firm. Within ten (10) days of the final determination of the Monthly Net Revenue Statement: (i) if the undisputed Earnout Payment made by Buyer is less than the Earnout Payment as finally determined, then Buyer shall pay to Seller, in immediately available funds, the amount of such deficiency; or (ii) if the undisputed Earnout Payment is greater than the Earnout Payment as finally determined, then such amount shall become a disputed amount and be subject to the dispute resolution procedures set forth in this Section 2.06(e).

(f)              Audit Rights . Buyer shall permit Seller and any of its representatives access during normal business hours and upon reasonable notice, to Buyer’s books, records and relevant employees, and will furnish any and all information reasonably necessary for the purpose of Seller’s review and/or audit (the “ Audit Rights ”) of any determination of Net Revenues and related Earnout Payments contemplated by this Section. Seller shall provide written notice to Buyer of Seller’s request to audit, unless an Objection Notice has been delivered, in which case such limitation shall not apply and Audit Rights shall be granted for the purpose of reviewing the applicable determination of Net Revenues and related Earnout Payments.

  (i)             take any action intended to reduce Net Revenues for the purpose of reducing the Earnout Payments;

  (ii)           permit to exist, take any action or enter into any agreement with lenders that would prohibit or otherwise restrict the Earnout Payments as contemplated herein;

  (iii)          take any action in bad faith that would be unfairly prejudicial or discriminatory to the interests of Seller in receiving the Earnout Payments;

  (iv)          take any action that would change, in any way, the manner in which the Net Revenues of the Purchased Business are calculated as of the Closing, unless required by GAAP;

  (v)           breach any Earnout Contract or other agreement directly or indirectly related to the provision of the Purchased Business, or take or fail to take any action, which, as a result of the passage of time, would cause a breach to any Earnout Contract;

  (vi)          cancel or otherwise terminate any Earnout Contract and subsequently reenter a new agreement with such customer to avoid or alter the applicable Earnout Payment; or

  (vii)         violate any applicable laws, authorizations, permits and licenses, except to the extent such violation would not have an adverse economic effect on the Earnout Payments.

(h)             Transfer of Purchased Assets or Contracts . In the event that Buyer sells or otherwise transfers any of the Purchased Assets or the Earnout Contracts during the Earnout Period, Buyer shall pay a one time payment to Seller concurrently with the consummation of the sale or transfer equal to ten percent (10%) of the product of the average monthly Net Revenue (based upon the prior twelve months actual revenue) attributable to such sold or transferred Purchased Asset or Earnout Contract multiplied by the number of remaining months (including portions thereof) in the Earnout Period at the time of such sale or transfer. Notwithstanding the foregoing, Buyer shall continue to pay any and all applicable Earnout Payments, as contemplated in Section 2.06(c), on the Purchased Assets or Earnout Contracts which are not transferred during the Earnout Period and only on such Purchased Assets or Earnout Contracts.

2 .07`       Prorations; Initial Payment Adjustment  

(a)             Except to the extent taken into account in the Purchased Assets purchased hereunder and in the calculation of the Purchase Price, all income and operating expenses pertaining to the conduct and operation of the Purchased Business shall be prorated as of the Closing, so that, as between Seller and Buyer, Seller shall receive all revenues related to the period prior to the Closing and be responsible for all expenses, costs and liabilities allocable to the period prior to the Closing and Buyer shall receive all revenues related to the period commencing on or after the Closing and be responsible for all expenses, costs and liabilities allocable on or after the Closing. For clarity, any prepayment of payroll and/or employee benefit costs by Seller and applicable to any period after the Closing Date shall be promptly reimbursed to Seller by Buyer on a pro-rata basis.

(b)             The Initial Payment shall be: (i) increased by the amount of any pre-paid expenses (most notably pass-through expenses), including, any Inventory on hand related to the Purchased Business and/or deposits related to the Purchased Assets; (ii) decreased by any deposits held by Seller pursuant to any Contracts; and (iii) decreased by the Aggregate Customer Inventory Variance Amount (as defined below), if any, determined for each Existing Customer pursuant to Section 2.08 hereof (the “ Initial Payment Adjustment ”). At or before the Closing, Buyer and Seller shall agree to a mutually acceptable calculation of the Initial Payment Adjustment, which shall be determined by the parties in good faith and in accordance with GAAP.

2 .08       Reconciliation of Customer Inventory

(a)            Buyer has previously selected and delivered or informed Seller of a representative mix of certain percentages of Seller’s SKU’s for the inventory owned by each Existing Customer and held for use in the Purchased Business by Seller at the Facility (with the exception of inventory owned by Supply Chain Alliance which inventory was reconciled in June 2006) (the “Customer Inventory”). Seller has cycle counted the Customer Inventory by Existing Customer attributable to such selected SKU’s. Based on such cycle count of each Existing Customer, Seller has determined in good faith the amount of any net shrinkage variance in the value of the counted SKU’s in excess of the applicable contractual shrinkage threshold established in the Existing Customer Contract for the selected SKU’s (the “Aggregate Sample SKU Variance”) on a per Existing Customer basis. The Aggregate Sample SKU Variance shall then be divided by the percentage of cost of goods sold (“COGS”) such SKU’s represent to determine the estimated amount of Customer Inventory variance across all of the Customer Inventory (the “Aggregate Customer Inventory Variance Amount”). The Initial Payment shall be reduced dollar for dollar by the Aggregate Customer Inventory Variance Amount, if any, determined for each Existing Customer and Buyer shall assume Seller’s obligation to reimburse or pay the Existing Customers for any actual Customer Inventory variance regardless of whether the actual amounts of such variances equate to the Aggregate Customer Inventory Variance Amounts which reduce the amount of the Initial Payment as provided above. The parties acknowledge and agree that the Aggregate Customer Inventory Variance Amount has been determined to be $362.00.

(b)            For greater clarity assume: (i) Microsoft’s applicable Customer Inventory has a value of $1,307,310; (ii) 5% of Microsoft’s SKUs selected by Buyer in the manner provided above have a value of $250,000 (the “COGS Amount”); (iii) the accounting of the selected Microsoft SKU’s concludes with an accuracy of 99.15%, equaling $247,875.00 of the COGS Amount (the “Representative Amount”); and (iv) Seller’s contractual obligation for Microsoft’s Customer Inventory pursuant to the Existing Customer Contract is 99.8%, which allows for a .2% variance and subtracting the allowable variance from the COGS Amount equals $500.00 (the “Allowable Variance Amount”).

(c)             For purposes of this example the Aggregate Customer Inventory Variance Amount for the Microsoft Customer Inventory would be calculated by subtracting the Representative Amount ($247,875) from the COGS Amount ($250,000) to equal $2,125.00. The Allowable Variance Amount ($500) would then be subtracted from such value to equal $1,625.00. Since the COGS Amount represents 19.12% of COGS for the Microsoft business, $1,625.00 would then be divided by 19.12% resulting in an Aggregate Customer Inventory Variance Amount for Microsoft equal to $8,498.95.

3 .01        The Closing . The Closing shall take place on the Closing Date at the offices of Frost Brown Todd LLC, Nashville, Tennessee, at 10:00 a.m., local time or at such other time and place to which the parties shall mutually agree.

3 .02         Items to Be Delivered at the Closing by Seller . At the Closing, Seller will sign and deliver or cause to be delivered to Buyer:

(a)             Each of the Ancillary Agreements;

(b)             An executed Non-Competition Agreement between Thomas Harbison and Buyer substantially in the form attached hereto as Exhibit E ;

(c)             Such other instruments of transfer necessary or appropriate to transfer to and vest in Buyer all of Seller’s right, title and interest in and to the Purchased Assets;

(d)             Such other instruments and documents as Buyer reasonably deems necessary to effect the transaction contemplated by this Agreement;

(e)             An executed certificate of Seller, certifying to Buyer: (i) the accuracy of the representations and warranties set forth in Article V hereof and compliance with Seller’s covenants set forth in this Agreement and (ii) that all of the applicable conditions contained in Article IV have been satisfied except those, if any, waived in writing by Buyer;

(f)              An executed certificate of the Secretary of Seller certifying to Buyer: (i) the incumbency of the officers of Seller on the date of this Agreement and the Closing Date and bearing the authentic signatures of all such officers who shall sign this Agreement, the Ancillary Agreements and any additional documents contemplated by this Agreement; and (ii) the duly adopted resolutions of the directors of Seller authorizing: (a) the transfer of the Purchased Assets and the Assumed Liabilities by Seller; and (b) the signing, delivery and performance of this Agreement, the Ancillary Agreements and all other documents and instruments by Seller, and that such resolutions have not been amended or rescinded and remain in full force and effect on the Closing Date;

(g)             An executed Master Services Agreement dated as of the Closing Date between Seller and Buyer, in form and substance satisfactory to Buyer and Seller setting forth the terms and conditions upon which Buyer is willing to provide to Seller and Seller is willing to acquire from Buyer, certain lettershop and related services to permit Seller to continue to service Earthlink and Gevalia (the “Earthlink/Gevalia Master Services Agreement”); and

(h)             An executed License Agreement dated as of the Closing Date between Buyer and Seller, in substantially the form attached hereto as Exhibit F which sets forth the terms and conditions upon which Seller is willing to grant to Buyer and Buyer is willing to accept from Seller, a perpetual license to use the Licensed Intellectual Property (the “License Agreement”).

(a)             The Initial Payment net of the Security Deposit, and as adjusted for the Initial Payment Adjustment;

(b)             The Assignment and Assumption Agreement;

(c)              The Sublease;

(d)             The Transition Services Agreement;

(e)             Such other instruments and documents as Buyer reasonably deems necessary to effect the transaction contemplated by this Agreement;

(f)              An executed certificate of Buyer, certifying to Seller: (i) the accuracy of the representations and warranties set forth in Article VI hereof and compliance with Buyer’s covenants set forth in this Agreement and (ii) that all of the applicable conditions contained in Article IV have been satisfied except those, if any, waived in writing by Seller;

(g)             An executed certificate of the Secretary of Buyer certifying to Seller: (i) the incumbency of the officers of Buyer on the date of this Agreement and the Closing Date and bearing the authentic signatures of all such officers who shall sign this Agreement, the applicable Ancillary Agreements and any additional documents contemplated by this Agreement; and (ii) the duly adopted resolutions of the directors of Buyer authorizing the signing, delivery and performance of this Agreement and all other agreements, documents and instruments contemplated herein by Buyer, and that such resolutions have not been amended or rescinded and remain in full force and effect on the Closing Date;

(h)             The Earthlink/Gevalia Master Services Agreement in form and substance satisfactory to the parties; and

(i)              The License Agreement.

4.01        Mutual Conditions . The obligations of the parties hereto to consummate the transactions contemplated hereby are subject to fulfillment of the following conditions:

(a)             No temporary restraining order, preliminary or permanent injunction or other order or decree which prevents the consummation of the transactions contemplated hereby shall have been issued and remain in effect, and no statute, rule or regulation shall have been enacted by any Governmental Entity which prevents the consummation of the transactions contemplated hereby.

(b)             No action, litigation or proceeding shall be instituted by any Governmental Entity that seeks to prevent consummation of the transactions contemplated hereby or seeking material damages in connection with the transactions contemplated herby that continued to be outstanding.

(c)             The Closing shall have occurred on or before September 30, 2006, unless otherwise mutually agreed to by the parties.

(d)            The parties shall have obtained all required written or other consents to the assignment of all Contracts and the Contract with Microsoft requiring bifurcation shall have been so bifurcated to the satisfaction of the Buyer and Seller in their sole discretion.

4.02        Conditions to Buyer’s Obligations . The obligations of Buyer to be performed under this Agreement are subject to the satisfaction at the Closing of each of the following conditions, unless otherwise waived in writing by Buyer:

(a)             The representations and warranties of Seller herein contained shall be true at the Closing Date with the same effect as though made at such time, Seller shall have performed all obligations and complied with all covenants and conditions required by this Agreement to be performed or complied with by it at or prior to the Closing Date, and Seller shall have delivered to Buyer the items set forth in Section 3.02.

(b)             Buyer shall be satisfied with the results of its due diligence investigations of the Purchased Business.

4.03       Conditions to Seller’s Obligations . The obligations of Seller to be performed under this Agreement are subject to the satisfaction at the Closing of each of the following conditions, unless otherwise waived in writing by Seller:

(a)             Buyer shall have delivered, or cause to be delivered, to Seller the Initial Payment as provided in Section 2.06; and

(b)             The representations and warranties of Buyer herein contained shall be true at the Closing Date with the same effect as though made at such time, Buyer shall have performed all obligations and complied with all covenants and conditions required by this Agreement to be performed or complied with by it at or prior to the Closing Date, and Buyer shall have delivered to Seller the items set forth in Section 3.03.

Except as set forth in the disclosure schedule (“ Seller Disclosure Schedule ”) dated as of the date hereof and delivered herewith to Buyer (which Seller Disclosure Schedule shall identify the section and subsection to which each disclosure therein relates), but updated by Seller as of the Closing, Seller hereby represents and warrants to Buyer, solely as such representations and warranties affect or relate to the Purchased Business and the Purchased Assets and not the other business and activities of Seller and its Affiliates, as of the date hereof and as of the Closing Date that:

5.01       Corporate Existence and Power . Seller is a corporation duly incorporated, validly existing and in good standing under the laws of Delaware, and has all corporate powers and all governmental licenses, authorizations, consents, permits and approvals required to carry on the Purchased Business as now conducted. Copies of all such licenses, authorizations, consents, permits and approvals shall be delivered to Buyer prior to the Closing. Seller is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where the character of the property owned or leased by it or the nature of its activities makes such qualification necessary.

5.02             Corporate Authorization . The execution, delivery and performance by Seller of this Agreement and each of the Ancillary Agreements, and the consummation by Seller of the transactions contemplated hereby and thereby are within Seller’s corporate powers and have been duly authorized by all necessary corporate action on the part of Seller. This Agreement and each Ancillary Agreement have been duly executed and delivered by Seller, as applicable, and constitute valid and binding agreements of Seller enforceable in accordance with their terms.

5.03              Non-Contravention . The execution, delivery and performance by Seller of this Agreement and each Ancillary Agreement, as applicable, and the consummation of the transactions contemplated hereby and thereby, do not and will not (a) contravene or conflict with the certificate of incorporation or bylaws of Seller; (b) contravene or conflict with any material provision of any law, regulation, judgment, injunction, order, permit or decree binding upon or applicable to Seller, the Purchased Assets or the Purchased Business; (c) constitute a default (with or without notice or lapse of time, or both) under or give rise to any right of termination, cancellation or acceleration of any right or obligation of Seller, or to a loss of any benefit, relating to the Purchased Assets or the Purchased Business to which Seller is entitled under any provision of any agreement, contract or other instrument binding upon Seller; (d) result in the creation or imposition of any Lien on any Purchased Asset; or (e) violate or conflict with or constitute a default under any agreement, instrument, or writing of any nature to which Seller is a party or to which Seller or any of the Purchased Assets or Assumed Liabilities is subject.

5.04              Title to and Condition of the Purchased Assets . Seller has good and marketable title to, or valid leasehold interests in, all of the Purchased Assets free and clear of all Liens. The fixed asset portion of the Purchased Assets used to support revenue of the Purchased Business (excluding any Purchased Assets in storage and not currently in use) is in good working order (ordinary wear and tear excepted).

5.05              Litigation . There is no claim, action, suit, investigation or proceeding (or any basis therefor) pending, or to Seller’s Knowledge, threatened against or affecting, the Purchased Business or any Purchased Asset or any Assumed Liability, or the transactions contemplated hereby before any court or arbitrator or any Governmental Entity or that in any manner challenges or seeks to prevent, enjoin, alter or materially delay the transactions contemplated hereby.

5.06             Material Contracts . Each Contract is a valid and binding agreement of Seller and is in full force and effect, and neither Seller nor, to Seller’s Knowledge, any other party thereto is in default in any material respect under the terms of any such Contract, nor, to Seller’s Knowledge, has any event or circumstance occurred that, with notice or lapse of time or both, would constitute an event of default thereunder. Seller has given or made available to Buyer true and correct copies of each Contract.

5.07              Finders’ Fees . There is no investment banker, broker, finder or other intermediary that has been retained by or is authorized to act on behalf of Seller who might be entitled to any fee or commission from Seller or any of its respective Affiliates or from Buyer upon consummation of the transactions contemplated by this Agreement.

5.08             Compliance with Laws . Seller has not received any written notice or, to Seller’s Knowledge, any oral notice, asserting any noncompliance in any material respect by it with any applicable statute, rule or regulation, whether federal, state, provincial, municipal, local, or foreign, from any Governmental Entity having jurisdiction over it with respect to the Purchased Business. Seller is not in default with respect to any judgment, order, injunction or decree of any Governmental Entity in any respect material to the transactions contemplated hereby.

5.09              Intellectual Property . To Seller’s Knowledge, there is no claim by any third party contesting the use or ownership of any of the Licensed Intellectual Property by Seller. To Seller’s Knowledge, the Licensed Intellectual Property and Intellectual Property to be used by Buyer pursuant to the Transition Services Agreement constitute all the Intellectual Property used by Seller in the operation of the Purchased Business as presently conducted. The Licensed Intellectual Property is not subject to any Liens. Neither Seller nor the Purchased Business has infringed, misappropriated, and the operation of the Purchased Business as currently conducted does not infringe, misappropriate or otherwise conflict with, any Intellectual Property of any third party. Seller has not received any written notices regarding any of the foregoing (including, without limitation, any demands or offers to license any Licensed Intellectual Property from any third party). To Seller’s Knowledge, no third party has infringed or misappropriated any of the Licensed Intellectual Property.

(a)             each Employee is an “at-will” employee and there are no collective bargaining agreements, commission, compensation or severance agreements of any kind between Seller and any of its employees;

(b)             there is no unfair labor practice charge, complaint or other action against Seller pending or, to Seller’s Knowledge, threatened before the National Labor Relations Board, and Seller is not subject to any order to bargain by the National Labor Relations Board;

(c)             there is no charge, complaint, dispute, grievance, arbitration or any discrimination, wage and hour, wrongful or constructive termination, or any other employment-related claim against Seller pending, or to Seller’s Knowledge threatened under any federal, state or local labor or employment laws or regulations, or based on contract, tort or other common law theories and none has occurred; and

(d)             there is no labor strike, dispute, request for representation, slowdown or stoppage that has occurred in the last two years that is currently pending or, to Seller’s Knowledge, threatened against Seller.

5.11               Absence of Certain Changes . Since June 29, 2006, there has not been, in each case only with respect to the Purchased Business:

(a)              any Material Adverse Change in the Purchased Business or any of the Purchased Assets;

(b)             any damage, destruction or loss, whether or not covered by insurance, materially affecting the Purchased Assets;

(c)              any increase in compensation payable or to become payable to any of the Employees, or any bonus payment made or promised to any Employee, or any change in personnel policies, insurance benefits or other compensation arrangements affecting the employees of Seller, except for increases or changes substantially in accordance with existing employment practices;

(d)             any sale, assignment, lease or other transfer of any property of Seller included among the Purchased Assets, except in the Ordinary Course of Business or in connection with the acquisition of similar property or assets; or

(e)             any sale, assignment, transfer, abandonment or lapse on the part of Seller of any material Permits or Licensed Intellectual Property.

5.12              Customers . Seller has not received from any Existing Customer a written statement or notice that such Existing Customer intends to discontinue or materially reduce its purchases of products or services under the Existing Customer Contracts.

5.13              Assets . To Seller’s Knowledge, the Purchased Assets and assets to be used and/or licensed by Buyer pursuant to the Transition Services Agreement and the License Agreement comprise substantially all of the assets, except for the Excluded Assets, used by Seller to conduct the Purchased Business in the manner presently conducted by Seller.

5.14              Environmental Matters . Seller has obtained all material permits, licenses, registrations, consents and other authorizations that are required with respect to the operation of the Purchased Business under any applicable Environmental Law, and all such permits are in full force and effect. To Seller’s Knowledge, all of the real property leased by Seller and subject to the Sublease is free of all contamination arising from, relating to, or resulting from any Hazardous Substances that could cause Seller to incur any Environmental Costs. To Seller’s Knowledge, there are no underground or aboveground storage tanks, incinerators or surface impoundments at, on, or about, under or within any real property or tangible assets owned, operated or controlled in whole or in part by Seller. Seller is now and has always been in material compliance with Environmental Laws applicable to the Purchased Business. Seller has not been requested or required in writing by any Governmental Entity at any time to perform any investigatory or remedial activity or other action in connection with any Environmental Matter. In addition, to Seller’s Knowledge, Seller has not been requested or required, in any unwritten communication, by any Governmental Entity at any time to perform any investigatory or remedial activity or other action in connection with any Environmental Matter.

5.15              Disclaimer of Other Representations and Warranties . Except as set forth in this Agreement, Seller makes no representation or warranty, whether express or implied, at law or in equity, with respect to the Purchased Business, Seller, or the Purchased Assets and all other representations or warranties are hereby expressly disclaimed. Without limiting the foregoing, all warranties or merchantability or fitness for a particular purpose are expressly disclaimed and BUYER ACKNOWLEDGES THAT SELLER HAS MADE NO REPRESENTATION OR WARRANTY CONCERNING: (I) ANY USE TO WHICH THE PURCHASED ASSETS MAY BE PUT; (II) ANY FUTURE REVENUES, COSTS, EXPENDITURES, CASH FLOW RESULTS OF OPERATIONS, FINANCIAL CONDITION OR PROSPECTS THAT MAY RESULT FROM THE OWNERSHIP, USE OR SALE OF THE PURCHASED ASSETS OR THE ASSUMPTION OF THE ASSUMED LIABILITIES; OR (III) EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, THE CONDITION OF THE PURCHASED ASSETS.

ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF BUYER

6.01              Organization and Existence . Buyer is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation.

6.02              Corporate Authorization . The execution, delivery and performance by Buyer of this Agreement, each of the Ancillary Agreements   and the consummation by Buyer of the transactions contemplated hereby and thereby are within the corporate powers of Buyer and have been duly authorized by all necessary corporate action on the part of Buyer. This Agreement and each of the Ancillary Agreements to which Buyer is a party have been duly executed and delivered by Buyer and constitute valid and binding agreements of Buyer.

6.03             Non-Contravention . The execution, delivery and performance by Buyer of this Agreement and each of the Ancillary Agreements to which Buyer is a party, and the consummation by Buyer of the transactions contemplated hereby and thereby do not and will not: (a) contravene or conflict with the articles of incorporation or bylaws of Buyer; or (b) contravene or conflict with any material provision of any law, regulation, judgment, injunction, order or decree binding upon or applicable to Buyer; (c) constitute a default (with or without notice or lapse of time, or both) under or give rise to any right of termination cancellation or acceleration of any right or obligation of Buyer; or (d) violate or conflict with or constitute a default under any agreement, instrument, or writing of any nature to which Buyer is a party or by which Buyer is bound.

6.04               Litigation . There is no action, suit, investigation or proceeding pending, or to the knowledge of Buyer threatened against or affecting, Buyer before any court or arbitrator or any Governmental Entity which in any manner challenges or seeks to prevent, enjoin, alter or materially delay the transactions contemplated hereby or which may have a material adverse effect on Buyer or its ability to purchase and operate the Purchased Assets.

6.05              Finders’ Fees . There is no investment banker, broker, finder or other intermediary that has been retained by or is authorized to act on behalf of Buyer who might be entitled to any fee or commission upon consummation of the transactions contemplated by this Agreement.

6.06              Financing . Buyer has sufficient funds available to purchase the Purchased Assets and to perform its obligations under the Ancillary Agreements.

6.07             Independent Investigation . Buyer acknowledges, represents and warrants that prior to Buyer’s execution of this Agreement: (a) Buyer has had an opportunity to fully examine and inspect the Purchased Assets; (b) Buyer has accepted the foregoing physical condition, value, financing status, use, operation, tax status, income and expenses of the Purchased Assets; and (c) Buyer has decided to purchase the Purchased Assets solely on the basis of its own independent investigation.

7.01             Conduct of Business Before Closing . Except as consented to in writing by Buyer, which consent shall not be unreasonably withheld, from the date of this Agreement and through the Closing, Seller shall:

(a)             conduct the affairs of the Purchased Business in the Ordinary Course of Business;

(b)            use commercially reasonable efforts to maintain existing relations and goodwill with its customers, landlords, Employees, consultants and other Persons having business relationships with the Purchased Business consistent with the conduct of the Purchased Business in the Ordinary Course of Business;

(c)             not sell or otherwise dispose of any of the Purchased Assets, except for the sales of Inventory in the Ordinary Course of Business;

(d)             not take any action that would have a Material Adverse Effect;

(e)             not take any action that, if taken on or before the date of this Agreement would have caused any of the representation and warranties contained in Article V to be untrue.

(f)              not agree to amend, modify or terminate any Contract that is included among the Purchased Assets (or waive any substantial right thereunder);

(g)            not grant any increase in compensation payable or to become payable to any of the Employees, or make or promise any material bonus payment to any such Employee, or make any material change in personnel policies, insurance benefits or other compensation arrangements affecting the Employees, except in the Ordinary Course of Business;

(h)             confer with Buyer before implementing operational changes of a material nature.

7.02              Customer Meetings . From the Date of this Agreement until the Closing Date, Seller shall cooperate in facilitating one introduction and meeting between Buyer and each Existing Customer; provided, however, that any and all communications between Buyer and such Existing Customers shall only take place in the presence of Seller. Notwithstanding the foregoing, Buyer shall be afforded a reasonable opportunity during such meeting to communicate in private with each Existing Customer.

7.03             Further Assurances . Subject to the terms and conditions of this Agreement, each party will use its best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary or desirable under applicable laws and regulations to consummate the transactions contemplated by this Agreement and the Ancillary Agreements. Seller and Buyer each agree to execute and deliver such other documents, certificates, agreements and other writings and to take such other actions as may be necessary or desirable in order to consummate or implement expeditiously the transactions contemplated by this Agreement and to vest in Buyer all of Seller’s rights and interests in and to the Purchased Assets.

7.04             Certain Filings . Seller and Buyer shall cooperate with each other: (a) in determining whether any action by or in respect of, or filing with, any Governmental Entity is required, or any actions, consents, approvals or waivers are required to be obtained from parties to any material contracts, in connection with the consummation of the transactions contemplated by this Agreement and the Ancillary Agreements; and (b) in taking such actions or making any such filings, furnishing information required in connection therewith and seeking timely to obtain any such actions, consents, approvals or waivers.

7.05             Public Announcements . The parties agree to consult with each other and obtain the other party’s written approval before issuing any press release or making any public statement with respect to this Agreement or the transactions contemplated hereby and will not issue any such press release or make any such public statement prior to such consultation and written approval.

7.06             Confidentiality . Seller and its Affiliates will hold, and will cause their respective officers, directors, employees, accountants, counsel, consultants, advisors and agents to hold, in confidence, unless compelled to disclose by judicial or administrative process or by other requirements of law, all confidential documents and information concerning Buyer furnished to Seller or its Affiliates, in connection with the transactions contemplated by this Agreement. Buyer and its Affiliates will hold, and will cause their respective officers, directors, employees, accountants, counsel, consultants, advisors and agents to hold, in confidence, unless compelled to disclose by judicial or administrative process or by other requirements of law, all confidential documents and information concerning Seller furnished to Buyer or its Affiliates, in connection with the transactions contemplated by this Agreement. All confidential documents and information furnished hereunder shall be held in confidence, except to the extent that such information can be shown to have been: (i) previously known on a nonconfidential basis by the receiving party; (ii) in the public domain through no fault of the receiving party; or (iii) later lawfully acquired by the receiving party from sources other than the disclosing party not in violation of any confidentiality obligation. Notwithstanding the foregoing, the terms and conditions of that certain Confidentiality Agreement between Seller and Buyer dated April 26, 2006 shall remain in full force and effect.

7.07             Non-Competition . Except for the provision of letter shop services to Earthlink, Gevalia and Philip Morris and except for services performed pursuant to the Transition Services Agreement, neither Parent nor Seller nor any Affiliate under the control of Parent or Seller will, for a period of three years after the Closing Date (the “Restricted Period”), provide services of the nature conducted as of the date of this Agreement in the Purchased Business in competition with the Purchased Business in the United States or invest equity capital in, or make any loan to, any Person that directly competes with the Purchased Business in the United States; provided, however, for clarity, nothing herein shall prohibit Parent or Seller or any Affiliate under the control of Parent or Seller from soliciting or bidding on or accepting any integrated customer proposal, contract or service offering which includes services of the nature conducted as of the date of this Agreement in the Purchased Business (collectively, the “Permitted Activities”) as long as Seller sends a written notice to Buyer (the “Offer Notice”) offering to Buyer the right (subject to acceptance by the ultimate customer and the terms set forth in the Offer Notice) to provide the fulfillment services portion of the Permitted Activities on terms described in the Offer Notice. Buyer shall have ten (10) business days after receipt of the Offer Notice to respond. Upon the earlier of the expiration of such 10-business day period or Buyer electing, in writing, not to provide the fulfillment services portion of the Permitted Activities on the terms set forth in the Offer Notice, then a Person other than Buyer may provide such fulfillment services on terms no more favorable than those set forth in the Offer Notice. For greater clarity, while a Person other than Buyer may provide such fulfillment services, neither Seller, Parent nor any Affiliate under the control of Seller or Parent shall (singularly or jointly with one another) provide such fulfillment services or subcontract for the performance of such fulfillment services. If any Person violates or attempts to violate the covenant set forth in this Section 7.07, Buyer will be entitled to have and obtain injunctive relief in any court having jurisdiction to enforce such covenants to prevent and terminate any violation or attempted violation hereof, and may have and recover from the violating party any appropriate damages for any violations of the covenants made herein. The parties expressly agree that the indemnity threshold and limitation of liability provisions of Article X shall not apply to restrictive covenants set forth in this Section 7.07. If the time or subject area limitations, or both, contained herein are held by any court of competent jurisdiction to be unreasonable or otherwise unenforceable, this covenant will nevertheless be enforceable for such lesser time or lesser area, or both, as the court shall find reasonable. In addition, during the Restricted Period, Seller shall not provide any Customer Care Services, Item Processing Services or order management services to any programs supported under the Earnout Contracts.   Seller and Parent each acknowledge that their covenants contained in this Section 7.07 are of a special, unique, unusual and extraordinary character, which give them peculiar value, the loss of which cannot be reasonably or adequately compensated in an action at law, and that, in the event there is a breach thereof by Seller, Parent or any of their respective Affiliates, Buyer will suffer irreparable harm, the amount of which will be impossible to ascertain. Accordingly, Buyer, shall be entitled, if it so elects, to institute and prosecute proceedings in any court of competent jurisdiction, either at law or in equity, to obtain damages for any breach or to enforce specific performance of the provisions or to enjoin Seller, Parent or any of their respective Affiliates from committing any act in breach of any covenant contained in this Section 7.07. If Buyer is obliged to resort to the courts for the enforcement of any of the covenants contained in this Section 7.07, each such covenant shall be extended for a period of time equal to the period of such breach, if any, which extension shall commence on the later of (i) the date on which the original (unextended) term of such covenant is scheduled to terminate or (ii) the date of the final court order (without further right of appeal) enforcing such covenant.

7.08             Exclusivity . From the date of this Agreement through the Closing, neither Seller or Parent nor any of their respective directors, officers, employees, agents or Affiliates shall directly or indirectly: (a) solicit, initiate, or encourage the submission of any proposal or offer from any person relating to, or enter into or consummate any transaction relating to, the acquisition of any of the Purchased Assets; or (b) participate in any discussions or negotiations regarding, furnish any information with respect to, assist or participate in, or facilitate in any other manner any effort or attempt by any Person to do or seek any of the foregoing.

7.09              Notification . Between the date hereof and the Closing Date, Seller will notify Buyer of any fact or condition that causes or constitutes a breach of any of Seller’s representations, warranties and/or covenants made as of the date of this Agreement. Seller shall deliver to Buyer prior to Closing a supplemental schedule specifying any such facts or conditions, as well as a revised supplemental Seller Disclosure Schedule (collectively, “ Supplemental Schedule ”). The delivery of a Supplemental Schedule shall not affect any rights of Buyer under Article XI ; provided, however, if subsequent to the receipt of a Supplemental Schedule, Buyer and Seller close the transaction contemplated by this Agreement, Buyer shall have no indemnity right under Article X hereof with respect to the items set forth on such Supplemental Schedule.

7.10              Retention of and Access to Records . For a period of five (5) years from and after the Closing Date, Buyer shall: (a) preserve all Records related to the Purchased Business for periods ending on or prior to the Closing Date: (b) provide the Seller and its representatives, at the Seller’s request and expense, reasonable access during normal business hours to the Records (and the right to make copies of the Records) relating to periods ending on or prior to the Closing Date; and (c) provide the cooperation of such employees, officers and directors of the Buyer as the Seller or any of its representatives may reasonably request, in each case as may be reasonably necessary for litigation, preparation of financial statements, Tax Returns, audits or other valid business purposes; provided that the foregoing actions do not materially interfere with the operation of the business of the Buyer. The Seller may retain copies of the Records as may be reasonably necessary for preparation of Tax Returns and audits or defense of litigation directly related to any of the foregoing, provided that an original copy of such documents shall remain in the Buyer’s possession.

8.01              Tax Definitions . The following terms, as used herein, have the following meanings:

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

“ Post-Closing Tax Period ” means any Tax period (or portion thereof) beginning after the Closing Date.

“ Pre-Closing Tax Period ” means any Tax period (or portion thereof) ending on or before the Closing Date.

“ Tax ” means any federal, state, local or foreign net income, alternative or add-on minimum, gross income, gross receipts, sales, use, value-added, ad valorem, franchise, capital, paid-up capital, profits, lease, service, transfer, greenmail, license, withholding, estimated, payroll, employment, excise, severance, stamp, occupation, premium, property, environmental or windfall profit tax, customs duty or other tax or governmental fee, together with any interest or any penalty, addition to tax or additional amount imposed by any governmental authority (domestic or foreign) responsible for the imposition of any such tax.

“ Tax Return ” means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

8.02          Allocation of Purchase Price . Within sixty (60) days of the Closing Date, Seller shall provide to Buyer a draft IRS Form 8594 and required exhibits thereto with the allocation of the Initial Payment (including fixed and determinable Assumed Liabilities set forth in the Assignment and Assumption Agreement) among the asset classes set forth on IRS Form 8594. Seller shall provide Buyer by January 31, 2008 and January 31, 2009, a draft of supplemental IRS Forms 8594 required by Treas. Reg. § 1.1060-1(e)(1)(ii)(B), which allocates all payments of Purchase Price and Earnout Payments made to Seller in 2007 and 2008, respectively, among the applicable asset classes set forth on IRS Form 8594. All IRS Forms 8594 required in connection with the transactions contemplated herein shall be prepared in a manner consistent with Section 1060 of the Code and the Treasury regulations thereunder. Within fifteen (15) days of receiving the draft IRS Form 8594, Buyer shall provide Seller comments to the draft IRS Form 8594. Seller and Buyer shall cooperate in agreeing to the allocations required by Section 1060 and the Treasury regulations thereunder. Seller and Buyer agree: (a) to file their federal and state income tax returns consistent with such agreed-to IRS Forms 8594; and (b) that neither shall thereafter take a Tax Return position inconsistent with such IRS Forms 8594 unless such inconsistent position shall arise out of or through an audit or other inquiry or examination by the Internal Revenue Service or other taxing authority.

8.03          Tax Cooperation; Allocation of Taxes .

(a)             Buyer and Seller agree to furnish or cause to be furnished to each other, upon request, as promptly as practicable, such information and assistance relating to the Purchased Assets and the Purchased Business as is reasonably necessary for the filing of all Tax Returns and making of any election related to Taxes, the preparation for any audit by any Governmental Entity, and the prosecution or defense of any claim, suit or proceeding relating to any Tax Return. Seller and Buyer shall cooperate with each other in the conduct of any audit or other proceeding related to Taxes involving the Purchased Business or the Purchased Assets and each shall execute and deliver such powers of attorney and other documents as are necessary to carry out the intent of this Section. In addition, Buyer and Seller agree to maintain or arrange for the maintenance of all records necessary to comply with this Section for a period of seven (7) years from the Closing Date (or such longer period as may be reasonably requested in writing by Buyer or Seller) and each party agrees to afford the other reasonable access to such records during normal business hours and upon reasonable notice.

(b)            All real property Taxes, personal property Taxes, intangible property Taxes and similar ad   valorem obligations levied with respect to the Purchased Assets for a taxable period which includes (but does not end on) the Closing Date (collectively, the “ Apportioned Obligations ”) shall be apportioned between Seller and Buyer as of the Closing Date based on the number of days of such taxable period included in the Pre-Closing Tax Period and the number of days of such taxable period included in the Post-Closing Tax Period, equitably adjusted if necessary to reflect changes in taxable assets as between the Pre-Closing Period and Post-Closing Period or portions thereof. Seller shall be liable   for the proportionate amount of such Taxes that is attributable to the Pre-Closing Tax Period. Buyer shall be liable for the proportionate amount of such Taxes that is attributable to the Post-Closing Tax Period. Such amount shall be paid by the party owing it to the other within 10 days after delivery of such statement. Thereafter, Seller shall notify Buyer upon receipt of any bill for real or personal property Taxes relating to the Purchased Assets, part or all of which are attributable to the Post-Closing Tax Period, and shall promptly deliver such bill to Buyer who shall pay the same to the appropriate governmental authority; provided that if a portion of such bill is attributable to the Pre-Closing Tax Period, Seller shall also remit prior to the due date of assessment to Buyer payment for the proportionate amount of such bill that is attributable to the Pre-Closing Tax Period. If either Seller or Buyer shall thereafter make a payment for which it is entitled to reimbursement under this Section 8.02(b) by reason of a portion of such ad valorem Taxes being attributable to either the Pre-Closing Tax Period or the Post-Closing Tax Period, the other party shall make such reimbursement promptly but in no event later than 30 days after the presentation of a statement setting forth the amount of reimbursement to which the presenting party is entitled along with such supporting evidence as is reasonably necessary to calculate the amount of reimbursement. Any payment required under this Section and not made within 10 days of delivery of the statement shall bear interest at the rate per annum determined, from time to time, under the provisions of Section 6621(a)(2) of the Code for each day until paid.

(c)             Any transfer, documentary, sales, use, stamp, or other Taxes assessed upon or with respect to the transfer of the Purchased Assets to Buyer and any recording or filing fees with respect thereto shall be borne and paid by Buyer when due, and Buyer shall promptly reimburse Seller for any such amounts paid by Seller and Buyer will, at its own expense, file all necessary Tax Returns and other documentation with respect to such Taxes.

(a)             Termination of Employees . Seller agrees to terminate the employment of the employees listed on Annex 9.01(a) (the “ Employees ”) immediately before the Closing.

(b)              Employment Offers . Subject to Section 9.01(c), Buyer shall make offers of at-will employment to all Employees (except for those Employees on long term disability) promptly after the Closing.

(c)             Drug Testing . Seller shall make commercially reasonable efforts to conduct drug testing on all employees on or before August 24, 2006. To the extent permitted by law or as otherwise advised by counsel, on or before the Closing, Seller shall terminate all Employees that do not pass their drug test and Buyer shall have no obligation to make an offer for employment to such Employee(s) after the Closing.

  (i)         Salary . Buyer agrees to provide the Employees with base hourly wage or annual base salary, as the case may be, no less favorable to each Employee than what each Employee was receiving from Seller on the date immediately prior to the Closing Date as listed on Annex 5.10 .

  (ii)       Benefits . Buyer agrees to give credit to each Employee for all applicable calculations of years of service, waiting periods and prerequisites so that eligibility for, or employee benefits provided to such person shall be substantially comparable as if such person had been employed by Buyer equal to his or her employment with Seller.

(e)         Retention Bonuses . Annex 9.01(e) sets forth the Employees (the “Eligible Employees”) and their respective retention bonus amounts (the “Retention Bonuses”) which such Eligible Employees are entitled to receive from Seller if they remain employed by Buyer at least ninety (90) days subsequent to the Closing Date (the “Payout Date”). Within ten (10) business days of the Payout Date, Buyer shall deliver to Seller a certificate of an officer certifying which Eligible Employees remained employees of Buyer on the Payout Date and are eligible to receive Retention Bonuses. Seller shall pay Buyer the aggregate amount of any earned Retention Bonuses within ten (10) business days following receipt of such officer’s certificate. Subsequently, Buyer shall pay the earned Retention Bonuses to all Eligible Employees who are still employed with Buyer as of the Payout Date as soon as administratively possible following receipt by Buyer of such funds and shall pay out of funds provided by Buyer all employer taxes attributable to such Retention Bonuses. Buyer shall further comply with all applicable tax withholding laws applicable to the payment of such Retention Bonuses and remit all withheld amounts promptly to appropriate tax authorities.

9.02             Employee Meetings . From the Date of this Agreement until the Closing Date, Seller shall cooperate in facilitating certain introductions and meetings between Buyer and such Employees as specifically agreed to by Seller; provided, however, that any and all communications between Buyer and such Employees shall only take place in the presence of Seller.

9.03               Indemnification for Employee Claims . Seller shall indemnify and hold harmless Buyer for all amounts due or accrued for wages, salaries, bonuses, vacation liabilities and benefits under any employee plans or other employment related claims concerning all employees at the Facility arising prior to the Closing Date.

9.04              Indemnity on WARN .

(a)              Seller Indemnity on WARN . Seller shall indemnify and hold harmless Buyer and its current and former directors, officers, employees, agents, representatives, Affiliates, successors and assigns from and against any and all losses, liabilities, damages, demands, claims, suits, actions, judgments or causes of action, assessments, reasonable costs and reasonable expenses (whether or not involving a third party claim), including, without limitation, reasonable attorney’s fees, any and all reasonable expenses incurred in investigating, preparing or defending against any actions and/or suits (commenced or threatened), demands, assessments, judgments, or any claim whatsoever, and any and all amounts paid in settlement of any of the aforementioned, asserted against, resulting to, imposed upon, or incurred or suffered by any of the aforementioned parties, directly or indirectly, as a result of, in respect of, connection with, or arising from any employee claims under the Worker Adjustment and Retraining Notification Act (“ WARN Act Liabilities ”) arising from Seller’s actions prior to Closing (other than Seller’s termination of Employees contemplated pursuant to Section 9.01) (“ Seller’s Non-Transaction Related WARN Act Liabilities ”)

(b)        Buyer Indemnity on WARN . Buyer shall indemnify and hold harmless Seller and its current and former directors, officers, employees, agents, representatives, Affiliates, successors and assigns from and against any WARN Act Liabilities arising from this Agreement or the transactions contemplated hereby including, without limitation Seller’s termination of Employees pursuant to Section 9.01 (“ Buyer’s WARN Act Liabilities ”).

(a)          All covenants and agreements contained in this Agreement and the Ancillary Agreements shall survive the Closing until fully performed. The representations and warranties of the parties hereto contained in this Agreement or the Ancillary Agreements or in any certificate or other writing delivered pursuant hereto or thereto or in connection herewith or therewith shall survive the Closing until the two (2) year anniversary of the Closing Date, provided, however:

  (i)         The representations and warranties contained in Sections 5.02 (Authorization), 5.04 (Title to Purchased Assets) and 5.07 (Finder’s Fee), shall survive the Closing and remain in full force and effect indefinitely;

  (ii)        The representations and warranties contained in Section 5.14 (Environmental Matters) shall survive the Closing and remain in full force and effect for the greater of two (2) years or the applicable statute of limitations period; and

  (iii)        The representations and warranties contained in Sections 6.02 (Authorization) and 6.05 (Finder’s Fee) shall survive the Closing and remain in full force and effect indefinitely.

Notwithstanding the preceding sentence, any covenant, agreement, representation or warranty in respect of which indemnity may be sought under Sections 10.02 or 10.03 shall survive the time at which it would otherwise terminate pursuant to the preceding sentence, if notice of the inaccuracy or breach thereof giving rise to such right to indemnity shall have been given to the party against whom such indemnity may be sought prior to such time.

(b)         All indemnification payments made under this Agreement shall be treated as adjustments to the Purchase Price.

10.02           Indemnity by Seller . Subject to the limitations in this Article X , Seller shall indemnify and hold harmless Buyer and its current and former directors, officers, employees, agents, representatives, Affiliates, successors and assigns (collectively, the “ Buyer Indemnified Parties ”), from and against any and all losses, liabilities, damages, demands, claims, suits, actions, judgments or causes of action, assessments, reasonable costs and reasonable expenses (whether or not involving a third party claim), including, without limitation, reasonable attorneys’ fees, any and all reasonable expenses incurred in investigating, preparing or defending against any actions and/or suits (commenced or threatened), demands, assessments, judgments, or any claim whatsoever, and any and all amounts paid in settlement of any of the aforementioned (collectively, the “ Buyer’s Damages ”), asserted against, resulting to, imposed upon, or incurred or suffered by any Buyer Indemnified Party, directly or indirectly, as a result of, in respect of, connected with, or arising from: (a) any inaccuracy in any representation or warranty of Seller contained in this Agreement; (b) any breach of any covenant or agreement by Seller contained in this Agreement or any Ancillary Agreement; (c) any noncompliance with any bulk sales or fraudulent transfer laws in respect of the transactions contemplated herein; (d) any Employee claim described in Section 9.03 or any Seller Non-Transaction Related WARN Act Liabilities indemnified by Seller pursuant to Section 9.04(a); (e) any Excluded Liabilities; (f) any Taxes payable by Seller pursuant to Section 8.03(b); or (g) the operation of Purchased Business prior to the Closing, except to the extent of an Assumed Liability.

10.03           Indemnity by Buyer . Subject to the limitations in this Article X , Buyer shall indemnify and hold Seller and its current and former directors, officers, employees, agents, representatives, Affiliates, successors and assigns (collectively, the “ Seller Indemnified Parties ”), from and against any and all losses, liabilities, damages, demands, claims, suits, actions, judgments or causes of action, assessments, reasonable costs and reasonable expenses (whether or not involving a third party claim), including, without limitation, reasonable attorneys’ fees, any and all reasonable expenses incurred in investigating, preparing or defending against any actions and/or suits (commenced or threatened), demands, assessments, judgments, or any claim whatsoever, and any and all amounts paid in settlement of any of the aforementioned (collectively, the “ Seller’s Damages ” and together with Buyer’s Damages, “ Damages ”), asserted against, resulting to, imposed upon, or incurred or suffered by any Seller Indemnified Party, directly or indirectly, as a result of, in respect of, connected with, or arising from: (a) any inaccuracy in any representation or warranty by Buyer contained in this Agreement; (b) any beach of any covenant or agreement by Buyer in this Agreement or any Ancillary Agreement; (c) any Taxes payable by Buyer pursuant to Section 8.03(b); (d) any Assumed Liabilities; (e) any of Buyer’s WARN Act Liabilities indemnified by Buyer pursuant to Section 9.04(b); or (f) the operation of the Purchased Business from and after the Closing, except to the extent of any Excluded Liability.

10.04           Reduction and Mitigation of Damages . For purposes of this Article X , all Damages shall be reduced dollar for dollar by: (a) the amount of any insurance proceeds actually received in connection with the circumstances giving rise to the claim for such Damages, in each case, which reduce such Damages that would otherwise be sustained; (b) the amount of any Tax benefits actually recognized (net of Tax costs incurred as a result of such indemnification payment) directly resulting from such Damages or expenses related thereto; and (c) the amount of any other payments made under this Article X that relate to the same facts and circumstances giving rise to the same claim for such Damages. In addition, Damages shall not under any circumstances include any consequential, punitive or exemplary damages, lost profits or damages determined as a multiple of income, revenue or the like. Any party entitled to indemnification hereunder shall take all reasonable steps to mitigate Damages upon and after becoming aware of any event that could reasonably be expected to give rise to such Damages. Buyer shall use commercially reasonable efforts to make claims under available insurance policies and to diligently pursue the collection of such amounts.

10.05           Claims Procedure .  

(a)         Any party (the “ Claimant ”) that intends to seek indemnification for Damages from the other party (the “ Defending Party ”) under this Agreement with respect to a Third Party Claim shall notify the Defending Party in writing in an expeditious manner after learning of such claim. The failure of the Claimant to notify the Defending Party will not relieve the Defending Party of any liability that it may have to the Claimant, except to the extent that the Defending Party demonstrates that the defense of such action is prejudiced by the Claimant’s failure to give such notice. For purposes of this Section the term “ Third Party Claim ” shall mean any claim, demand, suit, action or proceeding by any Person, other than Seller or Buyer which could reasonably give rise to a right of indemnification under this Article X .

(b)        The Defending Party may undertake the defense of a Third Party Claim as to which the Claimant has notified the Defending Party, by notice to the Claimant no later than fifteen calendar days after receipt by Defending Party of the Claimant’s notice of the claim. If the Defending Party undertakes the defense of any Third Party Claim, it shall control the invest