ACQUISITION AGREEMENT AND OPTION AGREEMENT

Exhibit 10.1

ACQUISITION AGREEMENT AND OPTION AGREEMENT

ACQUISITION AGREEMENT AND OPTION AGREEMENT ("Agreement") dated as of ______________, 2006 by and among US Wireless Online, Inc., a Nevada corporation ("Company) and Sutioc Enterprises, Inc., a Nevada corporation ("SUTIOC").

RECITALS

A.

The Boards of Directors of the Company and SUTIOC have each determined that the acquisition of a majority interest in the Company by SUTIOC is advisable, fair and in the best interests of their respective corporations and stockholders;

B.

SUTIOC shall acquire 50.1% (fifty point one percent) equity interest in the Company;

C.

IElement Corporation ("IElement") is the 98% stockholder of SUTIOC;

D.

SUTIOC owns and controls 30 Million shares of IElement Corporation;

E.

The acquisition shall be accomplished by the Company issuing to SUTIOC, in exchange for 30 Million shares of IElement Corporation restricted common stock, $0.001 par value (the "IElement Shares"), 5,010,000 shares of its newly issued restricted Series B preferred stock (the "Company Shares"), with such rights and preferences as designated on Exhibit A attached hereto and made a part hereof, representing 50.1% of the Company’s then issued and outstanding capital stock (the "Stock Purchase");

F.

The Boards of Directors of the Company and SUTIOC have each determined that it would be advisable, fair and in the best interests of their respective corporations and stockholders to grant to SUTIOC the right, for a period of two years, to purchase up to 95% interest in the Company, in accordance with the terms and conditions specified in Section 1.2, (the "Top-Up Option"); and

G.

The Boards of Directors of the Company and SUTIOC have each adopted this Agreement and approved the Acquisition and Option upon the terms and subject to the conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the foregoing premises and the representations, warranties, covenants and agreements herein contained, and intending to be legally bound hereby, the Company, SUTIOC hereby agree as follows:

ARTICLE I

THE STOCK PURCHASE AND OPTION AGREEMENT

Section 1.1

Sale and Purchase of Company Shares.

(a)

Sale of Shares.  On the Closing Date (as defined below), the Company shall sell to SUTIOC the Company Shares and SUTIOC shall purchase the Company Shares for the purchase price described in (b), below.

Purchase Price.  The aggregate purchase price for the Company Shares is 30 million restricted IElement Common Shares.  Certificates evidencing IElement Shares delivered hereunder shall bear a legend in substantially the following form:

THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SUCH ACT OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.

(b)

The Purchase Price shall be paid by SUTIOC as follows:

(i)

on the Closing Date, SUTIOC shall transfer to the Company 28,991,810 IElement Shares.  All of such shares shall be held by the Company, as an asset of the Company, for the sole purpose of payment of debt to third party creditors which debt payments shall be made in accordance with Exhibit B attached hereto and made a part hereof; and

(ii)

on the Closing Date, the IEW shall pay the balance of the Purchase Price by delivering to the Escrow Agent, on behalf of the Company, stock certificates representing 1,008,190 IElement Shares (the "Escrow Shares").  The Escrow Agent shall administer the Escrow Shares pursuant to the terms of the Escrow Agreement, which Agreement shall be in the form attached hereto as Exhibit 1.1(b)(ii) . The Escrow Shares shall be used as a source of funding to satisfy certain liabilities of the Company as set forth in the Escrow Agreement.

(c)

Closing; Closing Date.  The closing of the sale and purchase of the Shares contemplated hereby (the "Closing") shall take place upon satisfaction of the conditions precedent in Sections 6.1 and __ on _________, 2006, or such other time or date as the parties agree in writing.  The date upon which the Closing occurs is herein called the "Closing Date."

(d)

Authorizations.  The Company and SUTIOC hereby represent and warrant that each of their respective Boards of Directors has (i) adopted this Agreement and approved the Stock Purchase and the Option, and (ii) determined that this Agreement and the transactions contemplated hereby, are at a price and on terms that are advisable and fair to and in their best interests and their respective stockholders.

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Section 1.2

Top-Up Option.

(a)

The Company grants to SUTIOC an assignable and irrevocable option (the "Top-Up Option") to purchase from the Company the number of newly-issued shares of Company common stock and preferred stock equal to the lesser of: (i) the number of shares of Company common stock and preferred stock that, when added to the number of shares of Company common stock and preferred stock owned by SUTIOC at the time of exercise of the Top-Up Option, constitutes 95% of the number of shares of Company common stock and preferred stock that would be outstanding immediately after the issuance of all shares of Company common stock and preferred stock subject to the Top-Up Option or (ii) the aggregate number of shares of Company common stock and preferred stock that the Company is authorized to issue under its articles of incorporation but that are not issued and outstanding (and are not subscribed for or otherwise committed to be issued) at the time of exercise of the Top-Up Option.

(b)

In the event that the number of shares the Company is authorized to issue under its articles of incorporation would not constitute 95% of the total outstanding immediately after issuance, the Company shall take the necessary steps to increase the authorized shares in order to issue the full amount of the Top-Up Option equal to 95% of the outstanding immediately after issuance.

(c)

The Top-Up Option may be exercised by SUTIOC, in whole or in part, at any time and up to two years after the Closing.  The aggregate purchase price payable for the shares of Company common stock and preferred stock being purchased by SUTIOC pursuant to the Top-Up Option shall be determined as set forth in Section 1.2(d) herein. Such purchase price may be paid by SUTIOC, at its election, either entirely in cash or shares of common stock, valued at no less than the closing share price on the day immediately preceding the day Top-Up Option is exercised by SUTIOC, of an entity trading on the over the counter bulletin board or a recognized exchange and which entity is subject to the reporting requirements of the Securities Exchange Act of 1934 and is current in all such reports which shares are owned and held by SUTIOC.

(d)

The aggregate purchase price SUTIOC will be required to pay to Company when exercising the Top-Up Option will be calculated as 2.5 times the then trailing ninety days annualized revenue, plus current and fixed assets and less any debt, accounts payable and other liabilities exceeding one million dollars ($1,000,000) with the minimum aggregate purchase price being two million dollars ($2,000,000) plus current and fixed assets and less debt, accounts payable and other liabilities.  In the event that the Company’s debt, accounts payable and other liabilities is below $1,000,000, then in such a case, the aggregate purchase price shall be calculated as 3 times the then trailing ninety days annualized revenue, plus current and fixed assets and less debt, accounts payable and other liabilities.

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(e)

In the event SUTIOC wishes to exercise the Top-Up Option, SUTIOC shall deliver to the Company a notice setting forth (i) the number of shares of Company common stock and preferred stock that SUTIOC intends to purchase pursuant to the Top-Up Option, (ii) the manner in which SUTIOC intends to pay the applicable exercise price and (iii) the place and time at which the closing of the purchase of such shares of Company common stock by SUTIOC is to take place. At the closing of the purchase of such shares of Company common stock and preferred stock, SUTIOC shall cause to be delivered to the Company the consideration required to be delivered in exchange for such shares, and the Company shall cause to be issued to SUTIOC a certificate representing such shares. The obligation of the Company to issue such shares will be subject to compliance with all applicable regulatory requirements.

(f)

Certificates evidencing Top-Up Option Shares delivered hereunder shall bear a legend in substantially the following form:

THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SUCH ACT OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.

Section 1.3

Directors.  

At Closing, SUTIOC shall be entitled to designate such number of directors, rounded up to the next whole number, on the Company Board as shall give SUTIOC majority  representation on the Company Board.  The Company shall, upon request by SUTIOC, promptly increase the size of the Company Board or exercise its best efforts to secure the resignations of such number of directors as is necessary to enable SUTIOC's designees to be appointed to the Company Board in accordance with the terms of this Section 1.3 and shall cause SUTIOC's designees to be so appointed.  At Closing, or as soon thereafter as practicable, the Board of Directors shall be comprised of a total of five (5) members, three (3) of which shall be SUTIOC designees.

Section 1.4

Anti-Dilution Rights.

In consideration of this Agreement and the mutual covenants and promises contained herein, as of the Closing of the Acquisition, the Company agrees to assure that SUTIOC shall have and maintain at all times, weighted average anti-dilution protection rights as to the total number of issued and outstanding shares of common stock and preferred stock of the Company from time to time, at the rate of 50.1%.  In the event that the Company issues any shares of common stock, preferred stock or any security convertible into or exchangeable for common stock or preferred stock to any person or entity, the Company agrees to undertake all necessary measures as may be necessary or expedient to accommodate its performance under this Agreement, including, without limitation, the amendment of its articles of incorporation to the extent necessary to provide for a sufficient number of shares of authorized common stock or preferred stock to be issued to SUTIOC so as to maintain in SUTIOC the minimum interest in the common stock and preferred stock of the Company consistent with this Agreement.

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ARTICLE II

ASSET PURCHASE OPTION

Section 2.1

Definitions

(a)

"Bankruptcy" means, with respect to any Person or Entity, a "Voluntary Bankruptcy" or an "Involuntary Bankruptcy".  A "Voluntary Bankruptcy" means, with respect to any Person or Entity, the inability of such Person or Entity generally to pay its debts as such debts become due, or an admission in writing by such Person or Entity of its inability to pay its debts generally or a general assignment by such Person or Entity for the benefit of creditors; the filing of any petition or answer by such Person or Entity seeking to adjudicate it bankrupt or insolvent, or seeking for itself any liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of such Person or Entity or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking, consenting to, or acquiescing in the entry of an order for relief or the appointment of a receiver, trustee, custodian, or other similar official for such Person or Entity or for any substantial part of its property; or corporate action taken by such Person or Entity to authorize any of the actions set forth above.  An "Involuntary Bankruptcy" means, with respect to any Person or Entity, without the consent or acquiescence of such Person or Entity, the entering of an order for relief or approving a petition for relief or reorganization or any other petition seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution, or other similar relief under any present or future bankruptcy, insolvency or similar statute, law, or regulation, or the filing of any such petition against such Person which petition shall not be dismissed within ninety (90) days, or, without the consent or acquiescence of such Person or Entity, the entering of an order appointing a trustee, custodian, receiver, or liquidator of such Person or Entity or of all or any substantial part of the property of such Person or Entity which order shall not be dismissed within sixty (60) days.

(b)

"Depreciation" means, for each Fiscal Year, an amount equal to the depreciation, amortization or other cost recovery deduction allowable with respect to an asset for such Fiscal Year.

(c)

" Book Value" means the original cost of an asset less depreciation or amortization.

Section 2.2

Purchase Upon Bankruptcy.

Upon the Bankruptcy of the Company or any of its subsidiaries, SUTIOC shall have the right to purchase all of the equipment, furniture, personal property and certain intangible assets, including customer lists, customer purchase history and supplier lists (collectively the "Assets"), from the Company and its subsidiaries.  The purchase price for such purchase shall be as set forth in Section 2.3 below.  The Closing of the purchase shall take place at the principal office of the Company, or at such other place set by mutual consent, and the purchase price shall be paid at the Closing via wire transfer.  The Closing shall take place within 30 days of the Bankruptcy or such earlier day as agreed by SUTIOC and the Company.

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Section 2.3

Purchase Price

The purchase price for the Assets shall be calculated as 49.9% of the net Book Value of the tangible assets being purchased (furniture, equipment and personal property) plus the amount of the trailing thirty (30) days of revenue of the Company.  

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company hereby represents and warrants to SUTIOC, subject to the exceptions set forth in the Disclosure Letter which shall be delivered by the Company to SUTIOC (the "Disclosure Letter") prior to execution of this Agreement, and certified by a duly authorized officer of the Company (which exceptions shall specifically identify the Section, subsection or paragraph, as applicable, to which such exception relates), that:

Section 3.1

Organization and Qualification; Subsidiaries; Investments.

(a)

Section 3.1(a) of the Disclosure Letter sets forth, as of the date of this Agreement, a true and complete list of each person (as defined below) in which the Company owns, directly or indirectly, fifty percent (50%) or more of the voting interests or of which the Company otherwise has the right to direct the management (each, a "Subsidiary") together with the jurisdiction of incorporation or organization of each Subsidiary and the percentage of each Subsidiary's outstanding capital stock or other equity interests owned directly or indirectly by the Company. Except as set forth in Section 3.1(a) of the Disclosure Letter, all the outstanding capital stock or other ownership interests of each Subsidiary is owned by the Company, directly or indirectly, free and clear of any Lien (as defined below) or any other limitation or restriction. Each of the Company and the Subsidiaries is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted. The Company has delivered to SUTIOC's counsel accurate and complete copies of the Articles of Incorporation and bylaws or comparable governing documents, each as in full force and effect on the date hereof, of the Company and each Subsidiary. Other than as specified in Section 3.1(a) of the Disclosure Letter, the Company has no operating Subsidiaries other than those incorporated in a state of the United States.

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(b)

Each of the Company and the Subsidiaries is duly qualified or licensed and in good standing to do business in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification or licensing necessary, except in such jurisdictions where the failure to be so duly qualified or licensed and in good standing, individually or in the aggregate, does not have a Material Adverse Effect on the Company. For purposes hereof, the term "Material Adverse Effect on the Company" means any circumstance involving, change in or effect on the Company or any Subsidiary (i) that is, or is reasonably likely in the future to be, materially adverse to the business, operations, earnings or results of operations, assets or liabilities (including contingent liabilities), the financial condition or prospects of the Company and the Subsidiaries, taken as a whole, excluding from the foregoing any event, change or circumstance arising out of (A) the compliance by the Company, the Subsidiaries, or SUTIOC with the terms and conditions of this Agreement, (B) changes in applicable law or regulations or in United States generally accepted accounting principles ("GAAP") or (C)(x) changes in economic conditions in the telephone and wireless service business generally and (y) changes in regulatory conditions in the telephone and wireless business, except, in the case of clauses (C)(x) and (C)(y), to the extent such changes have a materially disproportionate effect on the Company relative to other participants in the telephone and wireless business, or (ii) that is reasonably likely to prevent or materially delay or impair the ability of the Company to consummate the transactions contemplated by this Agreement. Except as specifically set forth in this Agreement, all references to Material Adverse Effect on the Company or its Subsidiaries contained in this Agreement shall be deemed to refer solely to the Company and its Subsidiaries without including its ownership by SUTIOC after the Acquisition.

(c)

Section 3.1(c) of the Disclosure Letter sets forth a true and complete list, as of the date hereof, of each equity investment made by the Company or any Subsidiary in any person (including the percentage ownership, purchase price and any management rights granted to the Company or any such Subsidiary) other than the Subsidiaries ("Other Interests"). The Other Interests are owned directly or indirectly by the Company free and clear of all Liens.

Section 3.2

Capitalization of the Company and Subsidiaries.

The authorized capital stock of the Company consists of 300,000,000 shares of Company Common Stock, of which, as of December 8, 2006, 126,209,933 Shares were issued and outstanding, and twenty million (20,000,000) shares of preferred stock, of which, as of the date hereof, 4,250,000 were issued and outstanding. All of the outstanding Shares are, and the Shares issuable upon exercise of Company Stock Options, when issued would be, validly issued and fully paid, nonassessable and not subject to any preemptive rights. As of December 8, 2006, an aggregate of ____________ Shares were reserved for issuance pursuant to the Company's Equity Incentive Plan, or other outstanding warrants, options or convertible securities.  Except as set forth above, as of the date hereof, there are outstanding (i) no shares of capital stock or other voting securities of the Company, (ii) no securities of the Company or any Subsidiary convertible into, or exchangeable or exercisable for, shares of capital stock or voting securities of the Company or any Subsidiary, (iii) no options, warrants or other rights to acquire from the Company or any Subsidiary, and no obligations of the Company or any Subsidiary to issue, any capital stock, voting securities or securities convertible into or exchangeable or exercisable for capital stock or voting securities of the Company or any Subsidiary and (iv) no equity equivalent interests in the ownership or earnings of the Company or any Subsidiary or other similar rights.

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All of the outstanding Shares and Company Stock Options (collectively, the "Company Securities") were issued in compliance with the Securities Act and applicable state securities laws. As of the date hereof, there are no outstanding rights or obligations of the Company or any Subsidiary to repurchase, redeem or otherwise acquire any of its outstanding capital stock or other ownership interests. Except as set forth in Section 3.2(a) of the Disclosure Letter, there are no stockholder agreements, voting trusts or other arrangements or understandings to which the Company or any Subsidiary is a party or by which it or the Company Board is bound, and, to the Company's knowledge, there are no other agreements, voting trusts or other arrangements or understandings relating to the voting or registration of any shares of capital stock or other voting securities of the Company or any Subsidiary. No Shares are issued and held by the Company in its treasury as of the date hereof. Section 3.2(a) of the Disclosure Letter sets forth a true and complete list of all holders of outstanding Company Stock Options, the exercise or vesting schedule, the exercise price per share and the term of each such Company Stock Option, whether such option is a nonqualified stock option or incentive stock option and any restrictions on the Company's right to repurchase the Shares underlying the options. Except as set forth in Section 3.2 of the Disclosure Letter, none of the terms of the Company Stock Options provides for accelerated vesting or exercisability as a result of the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby. Except as set forth on Section 3.2 of the Disclosure Letter, each outstanding Company Stock Option has an exercise price per share no less than the fair market value per Share at the time of grant of such Company Stock Option.

Section 3.3

Authority Relative to this Agreement; Recommendation.

(a)

The Company has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations under this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by the Company Board, and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the transactions contemplated hereby, except the approval and adoption of this Agreement by the holders of a majority of the outstanding Shares. This Agreement has been duly and validly executed and delivered by the Company and, assuming the due authorization, execution and delivery hereof by SUTIOC, constitutes a valid, legal and binding agreement of the Company, enforceable against the Company in accordance with its terms, subject to any applicable bankruptcy, insolvency (including all applicable laws relating to fraudulent transfers), reorganization, moratorium or similar laws now or hereafter in effect relating to creditors' rights generally or to general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law).

(b)

The Company Board, at a meeting duly called and held, has (i) determined that this Agreement and the transactions contemplated hereby are fair to and in the best interests of Company's stockholders, (ii) approved and adopted this Agreement and the transactions contemplated hereby and (iii) resolved to recommend that Company's stockholders accept this Agreement and the transaction contemplated thereby if such stockholder approval is necessary in accordance with the Company, articles, bylaws of the laws of Nevada.

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Section 3.4

SEC Reports; Financial Statements.

(a)

The Company has not filed all required forms, reports and documents ("Company SEC Reports") with the SEC for the periods on and after January 1, 2006.  As further set forth in Section 6.1 regarding preconditions to Closing, prior to the Closing of this Agreement, the Company shall have filed all SEC reports through and including its Form 10K or 10K-SB for its 2005 fiscal year end and shall have proper records prepared and accessible for the completion and filing of its fiscal 2006 quarterly reports.  At the Closing, the Company shall represent and warrant that for all periods prior to and including December 31, 2005, the Company has filed all required forms, reports and documents and each of such Company SEC Reports complied at the time of filing in all material respects with all applicable requirements of the Securities Act and the Exchange Act, each as in effect on the dates such forms, reports and documents were filed. None of such Company SEC Reports, including any financial statements or schedules included or incorporated by reference therein, contained when filed any untrue statement of a material fact or omitted to state a material fact required to be stated or incorporated by reference therein or necessary in order to make the statements therein in light of the circumstances under which they were made not misleading, except to the extent superseded by a Company SEC Report filed subsequently and prior to the date hereof. Each of the consolidated financial statements (including, in each case, any related notes and schedules thereto) contained in the Company SEC Reports (the "Financial Statements") have been prepared in all material respects in accordance with GAAP consistently applied and maintained throughout the periods indicated, except where noted therein, and fairly present the consolidated financial condition of the Company and the Subsidiaries at their respective dates and the results of their operations and changes in financial position for the periods covered thereby, in each case in conformity with GAAP (subject, in each case, to normal year-end adjustments and except that unaudited financial statements do not contain all footnotes required for audited financial statements).

(b)

The Company has delivered to SUTIOC a complete and correct copy of any amendment or modification (that has not yet been filed with the SEC, but that the Company presently intends to file) to agreements, documents or other instruments previously filed by the Company with the SEC.

(c)

If the Company is at any time unable to timely compile and file the required reports, forms and documents necessary for the Company to regain or maintain its compliance with all regulations and its listing on the Pink Sheets, the Company will deliver within ten business days to SUTIOC a complete and correct set of records by which SUTIOC will be able to compile and file any required reports, forms and documents with the SEC, NASD and any other agency for which it will be necessary for the Company to file with in order to become fully-compliant and have its stock re-listed on the OTCBB.

Section 3.5

Information Supplied.

None of the information supplied or to be supplied by the Company will contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading.

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Section 3.6

Consents and Approvals; No Violations.

Except for filings, permits, authorizations, consents and approvals as may be required under applicable requirements of the Securities Act, the Exchange Act, state securities or "blue sky" laws, no filing with or notice to and no permit, authorization, consent or approval of any United States or foreign court or tribunal, or administrative, governmental or regulatory body, agency or authority (each, a "Governmental Entity") is necessary for the execution and delivery by the Company of this Agreement or the consummation by the Company of the transactions contemplated hereby. Except as set forth in Section 3.6 of the Disclosure Letter, neither the execution, delivery and performance of this Agreement by the Company nor the consummation by the Company of the transactions contemplated hereby will (i) conflict with or result in a breach of any provision of the respective Certificates of Incorporation or bylaws (or similar governing documents) of the Company or any Subsidiary; (ii) result in a violation or breach of or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, amendment, cancellation or acceleration or Lien) under any of the terms, conditions or provisions of any Material Contract (as defined below) to which the Company or any Subsidiary is a party or by which any of them or their respective properties or assets are bound; (iii) result in a violation or breach of or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, amendment, cancellation or acceleration or Lien) under any of the terms, conditions or provisions of any Contract (as defined below), other than any Material Contract, to which the Company or any Subsidiary is a party or by which any of them or their respective properties or assets are bound; or (iv) violate any order, writ, injunction or decree to which the Company or a Subsidiary is subject, or any law, statute, rule or regulation applicable to the Company or any Subsidiary or any of their respective properties or assets, except, in the case of the foregoing clauses (iii) and (iv), for violations, breaches or defaults that, individually or in the aggregate, would not result in a Material Adverse Effect on the Company.

Section 3.7

No Default.

Except as set forth in Section 3.7 of the Disclosure Letter, neither the Company nor any Subsidiary is in breach, default or violation (and no event has occurred that with notice or the lapse of time, or both, would constitute a breach, default or violation) of any term, condition or provision of (i) its Certificate of Incorporation or bylaws (or similar governing documents); (ii) any Material Contract; (iii) any other Contract or obligation to which the Company or any Subsidiary is now a party or by which it or any of its properties or assets may be bound; or (iv) any order, writ, injunction, decree, law, statute, rule or regulation applicable to the Company or any Subsidiary or any of its properties or assets, except, in the case of the foregoing clauses (iii) and (iv), for violations, breaches or defaults that, individually or in the aggregate, would not result in a Material Adverse Effect on the Company. Neither the Company nor any Subsidiary knows of, or has received notice of, the existence of any event or condition which constitutes, or, after notice or lapse of time or both, will constitute, a default, event of default or other breach on the part of the Company or any of its Subsidiaries under any such Contract, except where such breach, default or violation, either individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on the Company.

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Section 3.8

No Undisclosed Liabilities; Absence of Changes.

Except as disclosed by the Company; as contained in its SEC Reports filed prior to the date hereof (including through the end of fiscal 2005) and except as fully and completely disclosed to SUTIOC in Section 3.8 of the Disclosure Letter, neither the Company nor any of its Subsidiaries has any liabilities or obligations of any nature, whether or not accrued, contingent or otherwise, that would be required by GAAP to be reflected on a consolidated balance sheet of the Company and its consolidated Subsidiaries (including the notes thereto). Except as disclosed by the Company and except for liabilities incurred in connection with this Agreement or the transactions contemplated hereby, (i) the Company and its Subsidiaries have conducted their business only in the ordinary course; (ii) through the date hereof, there has not been any declaration, setting aside or payment of any dividend or other distribution in cash, stock or property in respect of the Company's capital stock; (iii) there has not been any action by the Company or any of its Subsidiaries during the period from December 31, 2005 through the date of this Agreement that, if taken during the period from the date of this Agreement through the Effective Time would constitute a breach of Section 5.1 hereof; and (iv) except as required by GAAP, there has not been any change by the Company in accounting principles, practices or methods. Except as disclosed by the Company, since December 31, 2005, there has not been a Material Adverse Effect on the Company.

Section 3.9

Litigation.

Except as set forth in Section 3.9 of the Disclosure Letter, there are no suits, claims, actions, proceedings or, to the Company's knowledge, investigations pending or, to the Company's knowledge, threatened against the Company, any Subsidiary or any of their respective properties or assets before any Governmental Entity as of the date hereof. No suits, claims, actions, proceedings or investigations set forth in Section 3.9 of the Disclosure Letter (if any) would, if decided adversely to the Company or any Subsidiary, individually or in the aggregate, result in any charge, assessment, levy, fine or other liability being imposed upon or incurred by the Company or any Subsidiary exceeding Ten Thousand Dollars ($10,000). Neither the Company nor any Subsidiary is subject to any outstanding order, writ, injunction or decree of any Governmental Entity.

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Section 3.10

Compliance with Applicable Law.

Except as set forth in Section 3.10 of the Disclosure Letter, each of the Company and the Subsidiaries holds all permits, licenses, variances, exemptions, orders and approvals of all Governmental Entities necessary for the lawful conduct of its business (collectively, the "Company Permits"), except for failures to hold such permits, licenses, variances, exemptions, orders and approvals that, individually or in the aggregate, would not result in a Material Adverse Effect on the Company and that have not resulted in, and could not reasonably be expected to result in, any injunction or other equitable remedy being imposed on the Company or any Subsidiary that, individually or in the aggregate, would result in a Material Adverse Effect on the Company. Each of the Company and the Subsidiaries is in compliance with the terms of the Company Permits held by it, except where the failure so to comply, individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect on the Company and that have not resulted in, and would not reasonably be expected to result in, any injunction or other equitable remedy being imposed on the Company or any Subsidiary that, individually or in the aggregate, would result in a Material Adverse Effect on the Company. The businesses of the Company and the Subsidiaries are being conducted in compliance with all applicable laws, ordinances and regulations of the United States or any foreign country or any political subdivision thereof or of any Governmental Entity, except for violations or possible violations of any such laws, ordinances or regulations that, individually or in the aggregate, do not and would not reasonably be expected to result in a Material Adverse Effect on the Company and that have not resulted in, and would not reasonably be expected to result in, any injunction or other equitable remedy being imposed on the Company or any Subsidiary that, individually or in the aggregate, would result in a Material Adverse Effect on the Company. Except as set forth in Section 3.10 of the Disclosure Letter, to the Company's knowledge, no investigation or review by any Governmental Entity with respect to the Company or any Subsidiary is pending nor has any Governmental Entity indicated an intention to conduct the same.

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Section 3.11

Employee Benefit Plans; Labor Matters.

(a)

Section 3.11(a) of the Disclosure Letter lists, as of the date hereof, all employee benefit plans (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")), and all compensation, bonus, stock option, stock purchase, restricted stock, incentive, deferred compensation, pension, profit sharing, supplemental retirement, health, life or disability insurance, dependent care, severance, termination pay and other similar fringe or employee benefit plans, programs or arrangements and any current employment or executive compensation or severance agreements written or otherwise maintained, contributed to or been required to contribute to for the benefit of or relating to any current employee, officer or director of the Company or any trade or business (whether or not incorporated) that is a member of a controlled group including the Company or that is under common control with the Company within the meaning of Section 414 of the Code (an "ERISA Affiliate"), or with respect to which the Company or any ERISA Affiliate has or may have any liability or obligation (together, the "Employee Plans"). The Company has made available to SUTIOC a copy of (i) the two (2) most recent annual reports on Form 5500 filed with the Internal Revenue Service (the "IRS") for each disclosed Employee Plan where such report is required, (ii) the documents and instruments governing each such Employee Plan (including, without limitation, the plan document, summary plan description or other summary, most recent actuarial report and trust or other funding arrangement, where applicable) and (iii) all IRS determination, opinion, notification and advisory letters and rulings relating to each disclosed Employee Plan. Except as set forth in Section 3.11(a) of the Disclosure Letter: (A) each Employee Plan has been maintained in all material respects in accordance with its terms and each Employee Plan subject to ERISA and the Code has been maintained in all material respects in accordance with ERISA and the Code and (C) there has been no violation of any reporting or disclosure requirement imposed by ERISA or the Code. Each Employee Plan intended to be qualified under Section 401(a) of the Code, and each trust intended to be exempt under Section 501(a) of the Code, has been determined to be so qualified or exempt by the IRS, and there has been no event, condition or circumstance that has adversely affected or is likely to adversely affect such qualified status. With respect to each Employee Plan, there has been no transaction prohibited under Section 4975 of the Code or Section 406 of ERISA which is not exempt under Section 4975 of the Code or Section 408 of ERISA, respectively. With respect to any Employee Plan, (1) neither the Company nor any of its ERISA Affiliates has had asserted against it any claim for taxes under Chapter 43 of Subtitle D of the Code and Section 5000 of the Code, or for penalties under ERISA Section 502(c), (i) or (l), nor, to the Company's knowledge, is there a basis for any such claim and (2) no officer, director or employee of the Company has committed a breach of any fiduciary responsibility or obligation imposed by Title I of ERISA. Other than routine claims for benefits, there is no claim or proceeding (including any audit or investigation) pending or, to the Company's knowledge, threatened, involving any Employee Plan by any person, or by the IRS, the United States Department of Labor or any other Governmental Entity, against such Employee Plan or the Company or any ERISA Affiliate.

(b)

Section 3.11(b) of the Disclosure Letter sets forth a list as of the date hereof of all (i) employment agreements with officers of the Company or any ERISA Affiliate and (ii) agreements with consultants who are individuals obligating the Company or any ERISA Affiliate to make annual cash payments in an amount of Fifty Thousand ($50,000) or more and (iii) severance agreements, programs and policies of the Company with or relating to its employees, except such programs and policies required to be maintained by law. The Company has made available to SUTIOC copies of all such agreements, plans, programs and other arrangements.

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(c)

Except as provided in Section 3.11(c) of the Disclosure Letter, there will be no payment, accrual of additional benefits, obligation to fund benefits, acceleration of payments or vesting of any benefit under any Employee Plan or any other agreement or arrangement to which the Company or any ERISA Affiliate is a party, and no employee, officer or director of the Company or any ERISA Affiliate will become entitled to severance, termination allowance or similar payments, by reason of entering into or in connection with the transactions contemplated by this Agreement (either alone or upon the occurrence of any additional or subsequent events). Except as provided in Section 3.11(c) of the Disclosure Letter, no payment or benefit which will or may be made in connection with the transactions contemplated by this Agreement (either alone or in combination with any other events) by the Company, its ERISA Affiliates or SUTIOC or any of its respective affiliates with respect to any "disqualified individual" (within the meaning of Section 280G(c) of the Code) will be characterized as a "parachute payment" (within the meaning of Section 280G(b)(2) of the Code).

(d)

There are no controversies relating to any Employee Plan or other labor matters pending or, to the Company's knowledge, threatened between the Company or any ERISA Affiliate and any of its employees. Except as set forth in Section 3.11(e) of the Disclosure Letter, neither the Company nor any ERISA Affiliate is a party to any collective bargaining agreement or other labor union contract applicable to persons employed by the Company or any ERISA Affiliate nor does the Company nor any ERISA Affiliate know of any activities or proceedings of any labor union to organize any such employees. No strikes, work stoppage, grievance, claim of unfair labor practice or labor dispute against the Company or any ERISA Affiliate has occurred, is pending or, to the knowledge of the Company or any ERISA Affiliate, threatened, and, to the knowledge of the Company and its ERISA Affiliates, there is no basis for any of the foregoing. To the knowledge of the Company and its ERISA Affiliates, there is no organizational activity being made or threatened by or on behalf of any labor union with respect to any employees of the Company or any ERISA Affiliate.

(e)

Except as set forth in Section 3.11(e) of the Disclosure Letter, neither the Company nor any of its ERISA Affiliates sponsors or has ever sponsored, maintained, contributed to or incurred an obligation to contribute or incurred a liability (contingent or otherwise) with respect to, any employee benefit plan that is subject to Title IV of ERISA, any Multiemployer Plan or to a Multiple Employer Plan. For these purposes, "Multiemployer Plan" means a multiemployer plan, as defined in Section 3(37) and 4001(a)(3) of ERISA and "Multiple Employer Plan" means any Employee Benefit Plan sponsored by more than one employer, within the meaning of Sections 4063 or 4064 of ERISA or Section 413(c) of the Code.

(f)

Except as set forth in Section 3.11(f) of the Disclosure Letter, to the extent permitted by applicable law and the applicable Employee Plan, each Employee Plan (other than any stock option plan) can be amended or terminated at any time, without consent from any other party and without liability other than for benefits accrued as of the date of such amendment or termination (other than charges incurred as a result of such termination).

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(g)

To the knowledge of the Company and its ERISA Affiliates, no key employee, or group of employees, of the Company or any ERISA Affiliate has expressed to the Company any plan to terminate employment with the Company or any ERISA Affiliate. The Company and its ERISA Affiliates have complied in all material respects with all laws relating to the employment of labor, including provisions thereof relating to wages, hours, equal opportunity and collective bargaining.

(h)

The Company and its ERISA Affiliates have complied in all material respects with the laws of any foreign jurisdiction with respect to any employee benefit plan or arrangements maintained in such jurisdiction in which the employees of the Company or any ERISA Affiliate participate.

(i)

Except as provided in Section 3.11(i) of the Disclosure Letter, the Company has no commitment, intention or understanding to create, terminate or adopt any Employee Plan that would result in any additional liability to the Company. Since the beginning of the current fiscal year of any Employee Plan, no event has occurred and no condition or circumstance has existed that reasonably would be expected to result in a material increase in the benefits under or the expense of maintaining such Employee Plan from the level of benefits or expense incurred for the most recently completed fiscal year of such Employee Plan other than the cost of additional benefits accrued in accordance with the terms of such Employee Plan.

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Section 3.12

Environmental Laws and Regulations.

(a)

Except as set forth in Section 3.12(a) of the Disclosure Letter and except for matters which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on the Company, (i) no written notice, notification, demand, request for information, citation, summons, complaint or order has been received by, and no action, claim, suit, proceeding or review or, to the Company's knowledge, investigation is pending or, to the knowledge of the Company or any Subsidiary, threatened by any Person against, the Company or any Subsidiary with respect to any matters relating to or arising out of any Environmental Law (as defined below); (ii) the Company and its Subsidiaries are in compliance with all Environmental Laws, which compliance includes the possession by the Company and each Subsidiary of all material permits required under applicable Environmental Laws and compliance with the terms and conditions thereof, and the Company and its Subsidiaries reasonably believe that each of them will, without the incurrence of any material expense, timely attain and maintain compliance with all Environmental Laws applicable to any of their current operations or properties or to any of their planned operations; (iii) to the Company's knowledge, there has been no disposal, release or threatened release of any Hazardous Substance (as defined below) by the Company or any Subsidiary on, under, in, from or about any property currently or formerly owned or operated by the Company or any Subsidiary, or otherwise related to the operations of the Company or any Subsidiary, that has resulted or could reasonably be expected to result in any Environmental Claim against the Company or any Subsidiary; (iv) neither the Company nor any Subsidiary has entered into or agreed to or is subject to any consent decree, order or settlement or other agreement in any judicial, administrative, arbitral or other similar forum relating to its compliance with or liability under any Environmental Law; and (v) neither the Company nor any Subsidiary has assumed or retained by contract or otherwise any liabilities of any kind, fixed or contingent, under any applicable Environmental Law (including, without limitation, any liability from the disposition of any of its real property). There are no governmental agreements to which the Company or any of its Subsidiaries is a party relating to human health and the environment, including, without limitation, Hazardous Substances.

(b)

For purposes of this Agreement, (i) the term "Environmental Laws" means federal, state, local and foreign statutes, laws, judicial decisions, regulations, ordinances, rules, judgments, orders, codes, injunctions and permits relating to human health and the environment, including, without limitation, Hazardous Substances; (ii) the term "Hazardous Substances" means all substances, materials or wastes that are listed, classified or regulated pursuant to any Environmental Law or which may be the subject of regulatory action by any Governmental Entity pursuant to any Environmental Law, including, without limitation, petroleum, asbestos or polychlorinated biphenyls and, in the United States, all substances defined as Hazardous Substances, Oils, Pollutants or Contaminants in the National Oil and Hazardous Substances Pollution Contingency Plan, 40 C.F.R. section 300.5; and (iii) the term "Environmental Claim" means any claim, violation or liability, by any Person relating to liability (including liability for enforcement, investigatory costs, cleanup costs, governmental response costs, natural resource damages, property damage, personal injury, fines or penalties) arising out of, based on or resulting from (A) the presence, discharge, emission, release or threatened release of any Hazardous Substance at any location and any exposure of Persons to such Hazardous Substance at any location, (B) circumstances forming the basis of any violation or alleged violation of any Environmental Laws or permits or (C) otherwise relating to obligations or liabilities under any Environmental Law.

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Section 3.13

Taxes.

(a)

For purposes of this Agreement:

(i)

"Tax" (including "Taxes") means (A) all federal, state, local, foreign and other net income, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, license, lease, service, service use, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property, windfall profits, customs, duties and other taxes, governmental assessments, fees, duties or charges of any kind or nature whatsoever, together with any interest and any penalties, additions to tax or additional amounts with respect thereto, (B) any liability for payment of amounts described in clause (A), whether as a result of transferee or successor liability, joint and several liability for being a member of an affiliated, consolidated, combined or unitary group for any period, or otherwise by operation of law and (C) any liability for the payment of amounts described in clause (A) or (B) as a result of any tax sharing, tax indemnity or tax allocation agreement or any other express or implied agreement to pay or indemnify any other person; and

(ii)

"Tax Return" means any return, declaration, report, statement, information statement and other document filed or required to be filed with respect to Taxes, including any claims for refunds of Taxes and any amendments or supplements of any of the foregoing.

(b)

(i)   Within the times and in the manner prescribed by law, the Company and its Subsidiaries (and their predecessors) have properly prepared and filed all Tax Returns required by law. All Tax Returns filed by the Company and its Subsidiaries are true, correct and complete and accurately reflect the information pertaining to the tax attributes of the Company and its Subsidiaries, including tax basis in assets and net operating loss, capital loss and tax credit carryforwards. None of the Tax Returns filed by the Company or any of its Subsidiaries was required to contain (in order to avoid the imposition of a penalty and determined without regard to disclosure that may be made after the filing of the original Tax Return) a disclosure statement under Section 6662 of the Code (or any predecessor provision or comparable provision of state, local or foreign law). The Company and its Subsidiaries (and their predecessors) have complied in all material respects with all applicable laws relating to Taxes.

(ii)   (A) the Company and its Subsidiaries have timely withheld and paid all Taxes that were required to have been withheld or have become due or payable (whether or not shown on any Tax Return), respectively, and have adequately provided in accordance with GAAP in the Financial Statements included in the Company SEC Reports for all Taxes accrued through the date of such Company SEC Reports; and (B) all Taxes of the Company and its Subsidiaries accrued following the end of the most recent period covered by the Company SEC Reports have been incurred in the ordinary course of business of the Company consistent with past practices and have been paid when due in the ordinary course of business consistent with past practices. Neither the Company nor any of its Subsidiaries has been a party to a "reportable transaction," as such term is defined in Treasury Regulation § 1.6011-4(b)(1), or to a transaction that is substantially similar to a "listed transaction," as such term is defined in Treasury Regulation § 1.6011-4(b)(2), or any transaction similarly designated under comparable laws of any state, local or foreign jurisdiction.

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(iii)   Except as set forth in Section 3.13(b)(iii) of the Disclosure Letter, neither the Company nor any of its Subsidiaries (or any predecessor thereof) (A) has filed a consent or agreement pursuant to former Section 341(f) of the Code, (B) is a party to or bound by any closing agreement, offer in compromise, gain recognition agreement or any other agreement with any Tax authority or any Tax indemnity or Tax sharing agreement with any person, (C) is a party to an agreement that could give rise to an "excess parachute payment" within the meaning of Section 280G of the Code or to remuneration the deduction for which would be disallowed under Section 162(m) of the Code, (D) has issued options or stock purchase rights (or similar rights) that purported to be governed by Sections 421 or 423 of the Code that were or are not so governed or (E) has ever been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code.

(iv)   There are and have been no (A) proposed, threatened or actual assessments, audits, examinations or disputes as to Taxes relating to the Company or any Subsidiary (or their predecessors), (B) except as set forth in Section 3.13(b)(iv) of the Disclosure Letter, adjustments under Section 481 of the Code or any similar adjustments with respect to the Company or any Subsidiary (or their predecessors), (C) waivers or extensions of the statute of limitations with respect to Taxes for which the Company or any Subsidiary could be held liable following the date hereof or (D) grants of power of attorney to any person in effect with respect to Taxes for which the Company or any of its Subsidiaries would be liable. The Company does not know of any basis for the assertion by a Tax authority of a Tax deficiency against the Company or any Subsidiary (or their predecessors).

(v)   Except as set forth in Section 3.13(b)(v) of the Disclosure Letter, neither the Company nor any Subsidiary (nor any predecessor thereof) has been a "distributing corporation" or a "controlled corporation" in connection with a distribution governed or intended to be governed by Section 355 of the Code.

(vi)   There is currently no limitation on the utilization of tax attributes of the Company or any Subsidiary under Sections 269, 382, 383, 384 or 1502 of the Code (and comparable provisions of state, local or foreign law).

(vii)   Neither the Company nor any Subsidiary (nor any predecessor thereof) has been a member of an affiliated group of corporations, within the meaning of Section 1504 of the Code, or a member of a combined, consolidated or unitary group for state, local or foreign Tax purposes, other than an affiliated group the common SUTIOC of which is the Company.

(viii)   Except as set forth in Section 3.13(b)(viii) of the Disclosure Letter, none of the Company or any of its Subsidiaries is a party to any joint venture, partnership or other arrangement or contract that could be treated as a partnership for federal income tax purposes. Section 3.13(b)(viii) of the Disclosure Letter sets forth all elections pursuant to Treas. Reg. § 301.7701-3 that have been made by business entities in which the Company or any Subsidiary owns an equity interest. The Company was an "S corporation" as such term is defined in Section 1361(a)(1) of the Code at all times from January 1, 2002 until September 27, 2004.

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(ix)   Section 3.13(b)(ix) of the Disclosure Letter sets forth, on an entity-by-entity basis, all jurisdictions outside the United States in which the Company or any Subsidiary is subject to Tax. Neither the Company nor any Subsidiary is, has been or has owned (whether directly or indirectly) an interest in, a passive foreign investment company within the meaning of Section 1297 of the Code. No Subsidiary that is not a United States person (A) has engaged (or been treated as engaged) in the conduct of a trade or business within the United States or (B) has had an investment in "United States property" within the meaning of Section 956(c) of the Code. Neither the Company nor any Subsidiary is, or at any time has been, affected by (1) the dual consolidated loss provisions of the Section 1503(d) of the Code, (2) the overall foreign loss provisions of Section 904(f) of the Code or (3) the recharacterization provisions of Section 952(c)(2) of the Code.

Section 3.14

Intellectual Property.

(a)

As used herein, the term "Intellectual Property" means all intellectual property rights arising from or associated with the following, whether protected, created or arising under the laws of the United States or any other jurisdiction: (i) trade names, trademarks and service marks (registered and unregistered), domain names and other Internet addresses or identifiers, trade dress and similar rights and applications (including intent to use applications) to register any of the foregoing and registrations therefor (collectively, "Marks"); (ii) patents and patent applications, including continuation, divisional, continuation-in-part, reexamination and reissue patent applications and any patents issuing therefrom, and rights in respect of utility models or industrial designs (collectively, "Patents"); (iii) copyrights and registrations and applications therefor (collectively, "Copyrights"); (iv) non-public know-how, inventions, discoveries, improvements, concepts, ideas, methods, processes, designs, plans, schematics, drawings, formulae, technical data, specifications, research and development information, technology and product roadmaps, data bases and other proprietary or confidential information, including customer lists, but excluding any Copyrights or Patents that may cover or protect any of the foregoing (collectively, "Trade Secrets"); and (v) moral rights, publicity rights and any other proprietary, intellectual or indus