EXHIBIT 2.1 STOCK PURCHASE AGREEMENT

Stock Purchase Agreement

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HEALTHSTREAM INC

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Title: EXHIBIT 2.1 STOCK PURCHASE AGREEMENT
Governing Law: Tennessee Date: 3/29/2005
Industry: Schools Law Firm: Byrd, Proctor & Mills, P.C Sector: Services

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EXHIBIT 2.1

STOCK PURCHASE AGREEMENT

This Stock Purchase Agreement (the "Agreement"), dated as of March 28,

2005, is by and among HealthStream, Inc., a Tennessee corporation ("Buyer"), Mel

B. Thompson (the "Seller") and Data Management & Research, Inc., a Tennessee

corporation (the "Company"). Capitalized terms used in this Agreement are

defined as set forth in Annex A attached hereto. Buyer, Seller and the Company

are sometimes referred to individually as a "Party" and collectively as the

"Parties."

WHEREAS, Seller owns 100 shares of common stock of the Company (the

"Shares"), which Shares constitute all of the issued and outstanding shares of

capital stock of the Company;

WHEREAS, Seller desires to sell, and Buyer desires to purchase, all of the

Shares, for the consideration and on the terms set forth in this Agreement; and

WHEREAS, the Company, in consideration of the anticipated benefits to be

received by the Company in connection with the closing of the transactions

contemplated hereby, and in order to induce Buyer to enter into this Agreement,

has agreed to be a Party to this Agreement for certain purposes as set forth

herein.

NOW, THEREFORE, in consideration of the mutual benefits to be derived from

the Agreement, the representations, warranties, conditions and promises

hereinafter contained, and other consideration, the receipt and sufficiency of

which consideration are hereby acknowledged, each of the Parties hereby agrees

as follows:

ARTICLE I

SALE AND TRANSFER OF SHARES; CLOSING

Section 1.1. Sale and Transfer of Shares. Subject to the terms and

conditions of this Agreement, at the Closing, Seller shall sell and transfer the

Shares to Buyer, and Buyer shall purchase the Shares from Seller.

Section 1.2. Purchase Price. The purchase price (the "Purchase Price") for

the Shares shall be $10,550,000, adjusted initially by the Estimated Closing

Adjustment Amount and finally by the Closing Adjustment Amount. In accordance

with Section 1.4(b), at the Closing, the Purchase Price, prior to adjustment by

the Closing Adjustment Amount, shall be delivered as follows:

(a) $8,950,000, adjusted by the Estimated Closing Adjustment Amount,

if applicable, payable in cash by Buyer to Seller by wire transfer of

immediately available funds (the "Cash Consideration");

(b) $100,000, payable in cash by Buyer to the Escrow Agent by wire

transfer of immediately available funds to be held pursuant to the Escrow

Agreement (the "Cash Escrow");

$500,000, with the value of each share of HealthStream Stock to be equal to the

Average Price (such HealthStream Stock delivered to Seller at the Closing, the

"Closing Stock"); and

(d) the number of shares of HealthStream Stock having a value equal to

$1,000,000, with the value of each share of HealthStream Stock to be equal to

the Average Price (such HealthStream Stock delivered to the Escrow Agent to be

held pursuant to the Escrow Agreement, the "Escrow Stock").

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The Closing Adjustment Amount shall be paid by Buyer or Seller, as the case may

be, following the Closing in accordance with Section 1.6.

Section 1.3. Closing. The closing of the transactions contemplated by this

Agreement (the "Closing") will take place at the offices of Bass, Berry & Sims

PLC, 315 Deaderick Street, Suite 2700, Nashville, Tennessee 37238-3001 at 2:00

p.m. (local time) on the later of (i) the satisfaction or waiver of all the

closing conditions set forth in Article V of this Agreement, or (ii) March 28,

2005, or at such other time and place as Buyer and Seller may agree in writing

(the date of the Closing, the "Closing Date"). Subject to the provisions of

Article VI, failure to consummate the purchase and sale provided for in this

Agreement on the date and time and at the place determined pursuant to this

Section 1.3 will not result in the termination of this Agreement and will not

relieve any Party of any obligations under this Agreement. In such event, the

Closing will occur as soon as practicable, subject to Article VI.

Section 1.4. Closing Obligations. In addition to any other documents to be

delivered under other provisions of this Agreement, at the Closing:

(a) Seller shall deliver, or cause to be delivered, to Buyer:

(i) certificates representing the Shares, duly endorsed (or

accompanied by duly executed stock powers), for transfer to Buyer;

(ii) releases in substantially the form attached hereto as

Exhibit A, executed by Seller and the Company Key Employees (the

"Releases");

(iii) a consulting agreement in substantially the form attached

hereto as Exhibit B, executed by Seller (the "Consulting Agreement");

(iv) employment agreements in substantially the form attached

hereto as Exhibit C, executed by the Company Management Employees (the

"Employment Agreements");

(v) a noncompetition, nondisclosure and nonsolicitation agreement

in substantially the form attached hereto as Exhibit D, executed by Seller

(the "Noncompetition Agreement");

(vi) an escrow agreement relating to the Cash Escrow in

substantially the form attached hereto as Exhibit E, executed by Seller and

the Escrow Agent (the "Cash Escrow Agreement"); and

(vii) an escrow agreement relating to the Escrow Stock in

substantially the form attached hereto as Exhibit F, executed by Seller and

the Escrow Agent (the "Stock Escrow Agreement").

(b) Buyer shall deliver, or caused to be delivered, to Seller or the

Escrow Agent, as applicable:

(i) the Cash Consideration to Seller by wire transfer of

immediately available funds to an account specified in writing by Seller;

(ii) the stock certificates for the Closing Stock to Seller;

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(iii) the Cash Escrow Agreement, executed by Buyer and the Escrow

Agent, together with the delivery to the Escrow Agent of the Cash Escrow by

wire transfer to an account specified by the Escrow Agent;

(iv) the Stock Escrow Agreement, executed by Buyer and the Escrow

Agent, together with the delivery to the Escrow Agent of the stock

certificates for the Escrow Stock;

(v) the Consulting Agreement, executed by Buyer;

(vi) the Employment Agreements, executed by Buyer; and

(vii) the Noncompetition Agreement, executed by Buyer.

Section 1.5. Estimated Closing Adjustment Amount.

(a) The "Estimated Closing Adjustment Amount" (which may be a positive

or negative number) will be an amount equal to (i) the Working Capital of the

Company as reflected on the Estimated Closing Balance Sheet (as prepared and

delivered pursuant to Section 1.5(b) below), minus (ii) $0. If the Estimated

Closing Adjustment Amount is negative, such amount will be subtracted from the

cash portion of the Purchase Price payable by Buyer to Seller pursuant to

Section 1.4(b)(i). If the Estimated Closing Adjustment Amount is positive, such

amount will be added to the cash portion of the Purchase Price payable by Buyer

to Seller pursuant to Section 1.4(b)(i).

(b) No earlier than five (5) Business Days and no later than one (1)

Business Day prior to the Closing Date, Seller shall cause an estimated balance

sheet of the Company as of the Closing Date (the "Estimated Closing Balance

Sheet") to be prepared and delivered to Buyer, which will be accompanied by an

estimated calculation of the Working Capital of the Company as of the Closing

Date.

Section 1.6. Closing Adjustment Amount.

(a) The "Closing Adjustment Amount" will be an amount (which shall be

a positive number) equal to the difference between (i) the Working Capital of

the Company as reflected on the Closing Balance Sheet and (ii) the Working

Capital of the Company as reflected on the Estimated Closing Balance Sheet. If

the Working Capital of the Company as reflected on the Closing Balance Sheet is

greater than the Working Capital of the Company as reflected on the Estimated

Closing Balance Sheet, then the Closing Adjustment Amount will be paid by wire

transfer of immediately available funds by Buyer to Seller to the account

specified by Seller. If the Working Capital of the Company as reflected on the

Estimated Closing Balance Sheet is greater than the Working Capital of the

Company as reflected on the Closing Balance Sheet, then the Closing Adjustment

Amount will be paid to Buyer to an account specified by Buyer from and to the

extent of the Cash Escrow held by the Escrow Agent under the Cash Escrow

Agreement, and any remaining amount payable to Buyer by wire transfer of

immediately available funds by Seller to Buyer to an account specified by Buyer.

Within three (3) Business Days after the calculation of the Closing Adjustment

Amount becomes binding and conclusive on the Parties pursuant to Sections 1.6(c)

and 1.6(d), Seller or Buyer, as the case may be, will make the payment provided

for in this Section 1.6(a) and/or Buyer and Seller will deliver joint written

instructions to the Escrow Agent under the Cash Escrow Agreement directing that

the appropriate amount be paid to Buyer from the Cash Escrow with any remaining

amount of the Cash Escrow, if any, being distributed to Seller. If the payment

provided for in this Section 1.6(a) is not made within 10 Business Days after

such Closing Adjustment Amount becoming binding and conclusive on a Party,

interest at the rate of 5% per annum shall accrue and be payable on the Closing

Adjustment Amount.

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(b) Buyer shall prepare a balance sheet of the Company as of the

Closing Date (the "Closing Balance Sheet"), which will include a calculation of

the Working Capital of the Company as of the Closing Date. Buyer shall deliver

the Closing Balance Sheet to Seller within forty-five (45) days following the

Closing Date (the date of such delivery, the "Delivery Date").

has not given Buyer written notice of his objection to the Closing Balance Sheet

calculation (which notice must contain (i) a statement of Seller's calculation

of the Company's Working Capital as of the Closing Date and (ii) the basis of

Seller's objection), then the Working Capital amount reflected in the Closing

Balance Sheet will be binding and conclusive on the Parties and will be used in

computing the Closing Adjustment Amount.

(d) If Seller duly gives Buyer such notice of objection within fifteen

(15) days following the Delivery Date, and if Seller and Buyer fail to resolve

the issues outstanding with respect to the Closing Balance Sheet and the

calculation of the Working Capital reflected in the Closing Balance Sheet within

fifteen (15) days of Buyer's receipt of the objection notice from Seller, Seller

and Buyer shall submit the issues remaining in dispute to Lattimore Black Morgan

& Cain, PC (the "Independent Accountants") for resolution. If issues are

submitted to the Independent Accountants for resolution, (i) Seller and Buyer

shall furnish or cause to be furnished to the Independent Accountants such work

papers and other documents and information relating to the disputed issues as

the Independent Accountants may request and are available to that Party or its

agents and shall be afforded the opportunity to present to the Independent

Accountants any material relating to the disputed issues and to discuss the

issues with the Independent Accountants; (ii) the determination by the

Independent Accountants, as set forth in a notice to be delivered to Seller and

Buyer within thirty (30) days of the submission to the Independent Accountants

of the issues remaining in dispute, will be final, binding and conclusive on

Seller and Buyer; and (iii) Seller and Buyer shall pay equal percentages of the

fees and costs of the Independent Accountants in connection with such

determination, unless one Party's calculation of the Working Capital of the

Company as of the Closing Date differs from the calculation of the Working

Capital of the Company as of the Closing Date by the Independent Accountants by

more than 33.33% in which case such Party shall then pay one-hundred percent

(100%) of the Independent Accountant's fees and costs in connection with such

determination. In the event that both Parties' calculation of the Closing

Adjustment Amount differs from the determination of the Independent Accountant

by more than 33.33%, then the Party whose calculation differs from the

determination of the Independent Accountants by the greatest amount shall pay

one-hundred percent (100%) of the Independent Accountant's fees and costs.

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF SELLER AND THE COMPANY

Seller and the Company, jointly and severally, represent and warrant to

Buyer as follows:

Section 2.1. Organization and Good Standing.

(a) Schedule 2.1(a) contains a complete and accurate list of the

Company's jurisdiction of incorporation and any other jurisdictions in which it

is qualified to do business as a foreign corporation. The Company is a

corporation duly organized, validly existing and in good standing under the laws

of its jurisdiction of incorporation, with full corporate power and authority to

conduct its business as it is now being conducted, to own or use its properties

and assets and to perform all of its obligations under the Applicable Contracts.

The Company is duly qualified to do business as a foreign corporation and is in

good standing under the laws of each state or other jurisdiction in which either

the

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ownership or use of the properties owned or used by it, or the nature of the

activities conducted by it, requires such qualification.

(b) True and complete copies of the Charter and Bylaws of the Company,

as currently in effect, have been delivered to Buyer.

agreed to purchase or otherwise acquire, the capital stock or other equity

interests of, or any interest convertible into or exchangeable or exercisable

for capital stock or other equity interests of, any Person.

Section 2.2. Authority; No Conflict.

(a) This Agreement constitutes the valid and binding obligation of

each of Seller Parties, enforceable against each of Seller Parties in accordance

with its terms. Upon the execution and delivery by Seller or the Company,

respectively, of each document or instrument to be executed or delivered by

Seller and the Company at Closing pursuant to Section 1.4(a) or any other

provision of this Agreement (collectively, the "Seller Closing Documents"), each

of the Seller Closing Documents will constitute the valid and binding obligation

of Seller and the Company, as applicable, enforceable against Seller and the

Company, as applicable, in accordance with its terms. The Company has all

requisite corporate power and authority and Seller has all requisite power,

authority and capacity, to execute and deliver this Agreement and the Seller

Closing Documents and to consummate the transactions contemplated hereby and

thereby. The execution and delivery of this Agreement by the Company and the

consummation of the transactions contemplated hereby have been duly and validly

authorized and approved by the Company, and no other corporate action on the

part of the Company is necessary to authorize the execution and delivery of this

Agreement by the Company or the consummation of the transactions contemplated

hereby.

(b) Except as set forth in Schedule 2.2(b), neither the execution and

delivery of this Agreement by Seller Parties nor the consummation of the

transactions contemplated hereby will, directly or indirectly (with or without

notice or lapse of time):

(i) conflict with or violate the Charter or Bylaws of the

Company;

(ii) conflict with or violate, or give any Governmental Authority

or other Person the right to challenge any of the transactions contemplated

hereby or exercise any remedy or obtain any relief under, any Legal

Requirement or any Order to which any Seller Party, or any of the assets

owned or used by the Company, may be subject;

(iii) cause the Company to become subject to, or to become liable

for, the payment of any Tax;

(iv) breach any provision of any Applicable Contract, or give any

Person the right to declare a default under, exercise any remedy under,

accelerate the maturity or performance of or payment under, or cancel,

terminate or modify, any Applicable Contract; or

(v) result in the imposition or creation of any Lien upon or with

respect to any of the assets owned or used by the Company.

will be required to give any notice to or obtain any consent or approval from

(i) any Governmental Authority, (ii) any party

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to any Applicable Contract, or (iii) any other Person, in connection with the

execution and delivery of this Agreement or the consummation of the transactions

contemplated hereby.

Section 2.3. Capitalization. The authorized equity securities of the

Company consist of 1,000 shares of common stock, of which 100 shares are issued

and outstanding and are defined herein as the "Shares." Seller is and will be on

the Closing Date the record and beneficial owner of the Shares, free and clear

of any Liens. All of the Shares have been duly authorized and validly issued and

are fully paid and non-assessable. The Shares have not been issued in violation

of, and, except as set forth in Schedule 2.3, the capital stock of the Company

is not subject to, any preemptive or subscription rights or rights of first

refusal. None of the Shares were issued in violation of the Securities Act or

any other Legal Requirement. There are no options, warrants, calls,

subscriptions, convertible securities, or other rights, agreements or

commitments that obligate the Company to issue, transfer or sell any shares of

capital stock of the Company. Except as set forth in Schedule 2.3, there are no

outstanding or authorized stock appreciation, phantom stock, profit

participation, or similar rights with respect to the Company. There is no

obligation, contingent or otherwise, of the Company to repurchase, redeem or

otherwise acquire any Shares. There are no voting trusts, proxies or other

agreements to which any Seller is a party with respect to the voting or transfer

of any Shares.

Section 2.4. Financial Statements.

(a) Attached as Schedule 2.4(a) are copies of (i) the unaudited

balance sheets of the Company as of December 31 in each of 2002, 2003 and 2004,

and the related unaudited income statements for the years then ended, (ii) an

unaudited balance sheet of the Company as of December 31, 2004 (the "2004

Balance Sheet"), and (iii) an unaudited balance sheet of the Company as of

February 28, 2005 and the related unaudited income statement for the two months

then ended (the financial statements referred to in clauses (i), (ii) and (iii)

above, including the notes thereto, if any, the "Financial Statements"), each of

which are true and correct in all material respects. The Financial Statements

fairly present in all material respects (and the financial statements to be

delivered pursuant to Section 4.7 will fairly present in all material respects)

the financial condition and results of operations of the Company as at the

respective dates of and for the periods referred to in such Financial

Statements. The 2004 Balance Sheet has been prepared in accordance with GAAP.

The Financial Statements have been prepared from the books and records of the

Company (which books and records are accurate and complete in all material

respects) and reflect the consistent application of accounting principles

throughout the periods involved, except as disclosed in the notes to the

Financial Statements.

(b) Attached as Schedule 2.4(b) is a copy of a management

representation letter, dated as of March 9, 2005, provided to Ernst & Young LLP

(the "Management Representation Letter"). The Management Representation Letter

is true and correct in all material respects.

Section 2.5. Real Property.

(a) The Company does not own any real property.

(b) Schedule 2.5(b) lists (i) all real property with respect to which

the Company holds a leasehold interest or subleasehold interest, or otherwise

has a license or other right to use (the "Leased Real Property"), and (ii) each

agreement, contract or other arrangement under which the Company leases or

otherwise has the right to use any such Leased Real Property (listing, with

respect to each such agreement, the date of the agreement and any amendments

thereto, any assignments thereof, the names of the parties to the agreement, the

address of the Leased Real Property, the rentable square footage and annual rent

thereunder, the expiration date, and the existence of any renewal terms). The

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Company enjoys peaceful and undisturbed possession of the Leased Real Property.

The Company has not entered into any subleases, arrangements, licenses or other

agreements relating to the use or occupancy of all or any portion of the Leased

Real Property by any Person other than the Company.

by the Company for the purposes for which it is currently being used, conforms

to all applicable fire, safety, zoning and building laws and ordinances, laws

relating to the disabled, and other applicable Legal Requirements. To the

Knowledge of Seller Parties, there are no pending or threatened eminent domain,

condemnation, zoning, or other Proceedings affecting the Leased Real Property

that would result in the taking of all or any part of the Leased Real Property

or that would prevent or hinder the continued use of the Leased Real Property as

currently used in the conduct of the Company Business. All Leased Real Property

has adequate rights of access to dedicated public ways and is served by water,

electric, sewer and other necessary facilities and services.

Section 2.6. Personal Property.

(a) Except for the personal property of Seller set forth on Schedule

2.6(a) that will be distributed to Seller prior to the Closing (the "Seller

Personal Property"), the Company has good and valid title to, or a valid and

enforceable right to use under a contract listed in Schedule 2.15(a), all

property and assets (whether tangible or intangible) used or held for use by the

Company in connection with its business, including all such assets reflected in

the 2004 Balance Sheet or acquired since December 31, 2004 (the "2004 Balance

Sheet Date"), free and clear of all Liens other than (i) any Lien for Taxes not

yet due and payable, (ii) any landlord's, carriers', warehousemen's, mechanics',

materialmen's or similar Liens arising or incurred in the ordinary course of

business with respect to obligations that are not yet due or delinquent, and

(iii) any Liens identified on Schedule 2.6(a) (the "Permitted Liens").

(b) Each item of machinery, equipment, furniture, and other tangible

personal property used or held for use by the Company in connection with its

business is in good repair and good operating condition, ordinary wear and tear

excepted, and is suitable for the purposes for which it is presently used. All

such tangible personal property is in the possession of the Company.

Section 2.7. Taxes.

(a) The Company has timely filed all Tax Returns required to be filed

by it in accordance with applicable Legal Requirements, other than any Tax

Returns in respect of which the Company has been the beneficiary of any

extension of time within which to file any such Tax Returns as disclosed on

Schedule 2.7(a). All such Tax Returns are true and complete. Except as set forth

in Schedule 2.7(a), no such Tax Return has been audited or examined by any

taxing authority, court or other Governmental Authority, and, to the Knowledge

of Seller Parties, no such audit or examination is threatened. True and complete

copies of such Tax Returns for the past three years and any examination reports

and statements of deficiencies relating thereto assessed against or agreed to by

the Company have been delivered to Buyer.

(b) All Taxes due and owing by the Company (whether or not shown on

any Tax Return) have been paid. All Taxes that the Company is or was required by

applicable Legal Requirements to withhold or collect have been withheld or

collected, and, to the extent required, have been properly paid on a timely

basis to the appropriate Governmental Authority or other Person. The (i) unpaid

Taxes of the Company (computed consistent with the Company's historical

accounting principles and practices provided that such principles and practices

are consistent with applicable Tax law) do not

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exceed the reserve for Taxes (rather than any reserve for deferred Taxes

established to reflect timing differences between book and tax income) set forth

on the face of the 2004 Balance Sheet (rather than in any notes thereto), and

(ii) reserve set forth on the 2004 Balance Sheet represents a reasonable

estimate of the Taxes due with respect to the periods ended December 31, 2004.

Company for additional Taxes, or (ii) any obligation of the Company to file Tax

Returns or pay Taxes in any jurisdiction in which it does not file Tax Returns

or pay Taxes, either (x) claimed or raised by any Governmental Authority in any

notice or other communication provided to the Company, or (y) as to which any

Seller Party has Knowledge. No assessment or other Proceeding by any taxing

authority, court or other Governmental Authority is pending, or to the Knowledge

of the Company, threatened, with respect to the Taxes or Tax Returns of the

Company. There are no Liens for Taxes (other than Taxes not yet due and payable)

upon any assets of the Company.

(d) There are no outstanding agreements, waivers or arrangements

extending the statutory period of limitations applicable to any claim for or the

period for the collection or assessment of Taxes due by the Company for any

taxable period.

(e) The Company does not have any liability for Taxes of any Person

other than the Company (i) under Treasury Regulations Section 1.1502-6 (or any

similar provision of applicable law); or (ii) as a transferee or successor by

contract or otherwise. The Company has not been a member of an "affiliated

group" within the meaning of Section 1504(a) of the Code. The Company is not a

party to any Tax allocation agreement, Tax sharing agreement, Tax indemnity

agreement or similar agreement.

(f) None of the assets of the Company is "tax-exempt use property"

within the meaning of Section 168(h) of the Code.

(g) The Company has not made any payments, is not obligated to make

any payments, and is not a party to any agreement that under certain

circumstances could obligate it to make payments, that (i) will not be

deductible under Section 280G of the Code (including any payments required to be

made in connection with the consummation of the transactions contemplated

hereby), or (ii) to any employee that would not be deductible under Section 162

of the Code.

(h) No closing agreement pursuant to Section 7121 of the Code or any

similar provision of applicable law has been entered into with respect to the

Company or any of its assets.

(i) The Company has been a validly electing S corporation within the

meaning of Sections 1361 and 1362 of the Code at all times during its existence,

and the Company will be an S corporation until the consummation of the Closing.

(j) There are no joint ventures, partnerships or other arrangements or

contracts to which the Company is a party that could be treated as a partnership

for federal income tax purposes.

(k) The Company has no potential liability for any Tax under Section

1374 of the Code. The Company has not, in the past ten years, (i) acquired

assets from another corporation in a transaction in which the Company's Tax

basis for the acquired assets was determined, in whole or in part, by reference

to the Tax basis of the acquired assets (or any other party) in the hands of the

transferor or (ii) acquired the stock of any corporation which is a qualified

subchapter S subsidiary.

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Section 2.8. Employees.

(a) Schedule 2.8(a) sets forth a complete and accurate list of (i)

each employee of the Company, including each employee on leave of absence or

layoff status, and (ii) each director of the Company, giving, with respect to

each such individual, name, job title, current annual salary with the Company,

any bonuses paid by the Company in addition to such annual salary during the

twelve (12) months preceding the date of this Agreement, vacation and sick leave

that is accrued but unused, and services credited for purposes of vesting and

eligibility to participate under any Employee Benefit Plan (in each case, to the

extent applicable).

(b) There is no collective bargaining agreement in effect between the

Company and any labor unions or organizations in respect of its employees. The

Company has not experienced any organized slowdown, work interruption strike or

work stoppage by its employees, and, to the Knowledge of Seller Parties, there

is no strike, labor dispute or union organization activities pending or

threatened affecting the Company.

has been, in compliance with all Legal Requirements regarding employment and

employment practices, terms and conditions of employment, wages and hours,

benefits, equal employment opportunity, anti-discrimination, immigration,

occupational health and safety, unfair labor practices and collective

bargaining, except where such noncompliance would not have a Material Adverse

Effect.

(d) Except as set forth in Schedule 2.8(d), the Company is not a party

to any employment, non-competition, severance or other contract or agreement

with any employee or director of the Company. To the Knowledge of Seller

Parties, no employee or director of the Company is bound by any contract or

agreement that purports to limit the ability of such director or employee to

engage in or continue or perform any conduct, activity, duties or practice

relating to the business of the Company, or that requires the employee to

transfer, assign, or disclose information concerning his work to anyone other

than the Company.

Section 2.9. Employee Benefits.

(a) Schedule 2.9(a) lists all employment, consulting, executive

compensation, bonus, deferred compensation, incentive compensation, stock

purchase, stock option or other equity-based, retention, change in control,

severance or termination pay, hospitalization or other medical, life, disability

or other insurance, supplemental unemployment benefits, profit-sharing, pension

or retirement plans, programs, agreements or arrangements, and each other fringe

or other employee benefit plan, program, agreement or arrangement (including any

"employee benefit plan", within the meaning of Section 3(3) of ERISA),

sponsored, maintained or contributed to or required to be contributed to by the

Company or by any ERISA Affiliate for the benefit of any employee or former

employee of the Company, or any beneficiaries thereof, or with respect to which

the Company may have any Liability (the "Employee Benefit Plans").

(b) Each Employee Benefit Plan is and has been maintained and

administered in compliance with its terms and with the applicable requirements

of ERISA, the Code and any other applicable Legal Requirements, except where

such noncompliance would not have a Material Adverse Effect. The Company has

timely paid all contributions, premiums and expenses payable to or in respect of

each Employee Benefit Plan under the terms thereof and in accordance with

applicable Legal Requirements. Neither the Company, nor, to the Knowledge of

Seller Parties, any other Person, has engaged in any transaction with respect to

any Employee Benefit Plan that would be reasonably likely to

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subject the Company or Buyer to any Tax or penalty (civil or otherwise) imposed

by ERISA, the Code or other applicable Legal Requirements with respect to any

Employee Benefit Plan.

delivered to Buyer complete copies of each of the following documents; (i) a

copy of each Employee Benefit Plan (including any amendments thereto); (ii) a

copy of the three most recent Form 5500 and annual report, if any, required

under ERISA or the Code; (iii) a copy of the most recent Summary Plan

Description, if any, required under ERISA; (iv) if the Employee Benefit Plan is

funded through a trust or any third party funding vehicle, a copy of the trust

or other funding agreement (including any amendments thereto); and (v) if the

Employee Benefit Plan is intended to be qualified under Section 401(a) of the

Code, the most recent determination letter received from the Internal Revenue

Service.

(d) No Employee Benefit Plan is a "multiemployer plan," as such term

is defined in Section 3(37) of ERISA or a plan that is subject to Title IV of

ERISA.

(e) None of the Employee Benefit Plans that are "welfare benefit

plans," within the meaning of Section 3(1) of ERISA, provide for continuing

benefits or coverage after termination or retirement from employment, except for

COBRA rights under a "group health plan" as defined in Section 4980B(g) of the

Code and Section 607 of ERISA.

(f) Each Employee Benefit Plan that is intended to be qualified under

Section 401(a) of the Code has received a determination from the Internal

Revenue Service that it is so qualified and, to the Knowledge of Seller Parties,

there are no facts or circumstances that would be reasonably likely to adversely

affect the qualified status of any such Employee Benefit Plan.

(g) Except as set forth in Schedule 2.9(g), the consummation of the

transactions contemplated hereby will not (i) result in an increase in or

accelerate the vesting of any of the benefits available under any Employee

Benefit Plan, or (ii) except for the Change in Control Payments, otherwise

entitle any current or former director or employee of the Company to any

severance pay, bonus payments or other payment from the Company.

(h) There are no pending or, to the Knowledge of Seller Parties,

threatened, Proceedings that have been asserted relating to any Employee Benefit

Plan by any employee or beneficiary covered under any Employee Benefit Plan or

otherwise involving any Employee Benefit Plan (other than routine claims for

benefits). No examination or audit of any Employee Benefit Plan by any

Governmental Authority is currently in progress or, to the Knowledge of Seller

Parties, threatened. The Company is not a party to any agreement or

understanding with the Pension Benefit Guaranty Corporation, the Internal

Revenue Service or the Department of Labor.

Section 2.10. Compliance with Legal Requirements. Except as set forth on

Schedule 2.10, the Company is, and at all times since the Compliance Date, has

been, in compliance with all Legal Requirements, including any Legal

Requirements related to escheat laws, that are or were applicable to the

operation of its business or the ownership or use of any of its assets, except

where such noncompliance would not have a Material Adverse Effect. The Company

has not received, at any time since the Compliance Date, any notice or other

communication from any Governmental Authority or other Person regarding any

actual, alleged or potential violation of or failure to comply with any Legal

Requirement.

Section 2.11. Governmental Authorizations. Schedule 2.11 contains a true

and complete list of each Governmental Authorization that is held by the

Company. Each such Governmental Authorization

<PAGE>

is valid and in full force and effect. Except as set forth in Schedule 2.11, the

Company is, and at all times since the Compliance Date, has been, in compliance

with each such Governmental Authorization. Except as set forth in Schedule 2.11,

the Company has not received, at any time since the Compliance Date, any notice

or other communication from any Governmental Authority or other Person regarding

(a) any actual, alleged or potential violation of or failure to comply with any

term or requirement of any such Governmental Authorization, or (b) any actual,

proposed, or potential revocation, suspension, cancellation or termination of,

or modification to, any such Governmental Authorization. The Governmental

Authorizations listed in Schedule 2.11 collectively constitute all of the

Governmental Authorizations necessary to permit the Company to lawfully conduct

and operate its business in the manner it is currently conducted.

Section 2.12. Legal Proceedings; Orders.

(a) Except as set forth in Schedule 2.12(a), there are no pending

Proceedings or claims, whether oral or in writing (i) by or against the Company

or that otherwise relate to or may affect the business of, or any of the assets

owned or used by, the Company, or (ii) that challenge, or that may have the

effect of preventing, delaying, making illegal or otherwise interfering with,

any of the transactions contemplated hereby. To the Knowledge of Seller Parties,

except as set forth in Schedule 2.12(a), no such Proceeding or claim, whether

oral or in writing, has been threatened, and no event has occurred or

circumstance exists that may give rise to or serve as a basis for the

commencement of any such Proceeding or claim. Except as set forth in Schedule

2.12(a), there have not been any orders, judgments or decrees rendered against,

or any settlements effected by, the Company in connection with any Proceedings

or claims, whether oral or in writing, brought by or against the Company or that

otherwise relate to or may affect the business of, or any of the assets owned or

used by, the Company.

(b) There are no Orders outstanding (i) against the Company or that

otherwise relate to or may affect the business of, or any of the assets owned or

used by, the Company; or (ii) that challenge, or that may have the effect of

preventing, delaying, making illegal or otherwise interfering with, any of the

transactions contemplated hereby. To the Knowledge of Seller Parties, no such

Order has been threatened, and no event has occurred or circumstance exists that

may give rise to or serve as a basis for the commencement of any such Order.

Section 2.13. Environmental Matters.

(a) The Company is and has been in compliance with all Environmental

Laws, and does not have any Liability under any Environmental Laws with respect

to the Leased Real Property or any other properties and assets (whether real,

personal, or mixed) in which the Company (or any predecessor) has or had an

interest, except where such noncompliance or Liability would not have a Material

Adverse Effect.

(b) There are no Hazardous Materials present on or in the environment

at the Leased Real Property. There has been no emission, disposal, discharge or

other release or, to the Knowledge of Seller Parties, threat of release, of any

Hazardous Materials at or from the Leased Real Property or, during the period of

the Company's ownership or lease thereof, at, on, under or from any property

formerly owned or leased by the Company.

communication from any Governmental Authority regarding any alleged, actual or

potential violation of any Environmental Law, or any alleged, actual or

potential obligation to undertake or bear the cost any Liabilities under any

Environmental Law.

<PAGE>

Section 2.14. Insurance. Schedule 2.14 contains a true and complete list of

(a) all policies of property, fire and casualty, products liability, workers'

compensation and other forms of insurance under which any of the assets or

properties of the Company are covered or otherwise relating to the business of

the Company, and (b) all life insurance policies covering the life of any

employee of the Company for which the Company or any employee of the Company has

paid any premiums. Such policies are in full force and effect, and the Company

or such employee have paid all premiums due, and have otherwise performed all of

its obligations under, all such policies of insurance. Neither the Company nor

any employee of the Company has received any notice of (a) cancellation or

intent to cancel, or (b) an increase or intent to increase premiums, with

respect to such insurance policies, and is not aware of any basis for any such

action. True and complete copies of such insurance policies have been made

delivered to Buyer.

Section 2.15. Contracts.

(a) Schedule 2.15(a) lists each contract, agreement or other

commitment to which the Company is a party or by which the Company is otherwise

bound, excluding the agreements disclosed in Schedule 2.5(b), Schedule 2.8(d)

and Schedule 2.16(c) (such contracts, agreements and obligations, together with

the agreements disclosed in Schedule 2.5(b), Schedule 2.8(d) and Schedule

2.16(c), the "Applicable Contracts"):

(b) Except as set forth in Schedule 2.15(b):

(i) Each Applicable Contract is valid and binding and in full

force and effect.

(ii) The Company and, to the Knowledge of Seller Parties, each

other party to any Applicable Contract is, and at all times since January

1, 2003, has been, in compliance with all applicable terms and requirements

of each Applicable Contract, except where such noncompliance would not have

a Material Adverse Effect.

(iii) Since January 1, 2003, the Company has not given to, or

received from, any other party to any Applicable Contract, any notice or

other communication regarding any actual or alleged breach of or default

under any Applicable Contract by the Company or any other party to such

Applicable Contract.

been delivered to Buyer.

Section 2.16. Intellectual Property.

(a) The term "Intellectual Property Assets" means all intellectual

property owned, licensed (as licensor or licensee) or used by the Company,

including:

(i) the Company's name, all fictional business names, trade

names, trade dress, registered and unregistered trademarks, registered and

unregistered service marks, and applications for any of the foregoing

(collectively, "Marks");

(ii) all patents, patent applications, and inventions and

discoveries that may be patentable or unpatentable worldwide (collectively,

"Patents");

<PAGE>

(iii) all registered and unregistered copyrights in both

published works and unpublished works, and copyright applications

(collectively, "Copyrights");

(iv) all rights in Internet web sites and Internet domain names

(collectively, "Internet Rights");

(v) all computer software (excluding off-the-shelf software

components licensed to the Company pursuant to non-negotiable standard

form, mass-market or "shrink wrap" licenses involving payments of less than

$3,000 on an annual basis) (the "Software");

(vi) all confidential or proprietary know-how, information,

customer lists, technical information, data, process technology, plans,

drawings, and blue prints pertaining to the business of the Company and

maintained by the Company as trade secrets (collectively, "Trade Secrets");

and

(vii) all general know-how, business information, customer and

supplier lists, technical information, data processing technology, plans,

drawings and blue prints pertaining to the business of the Company but

which are not Trade Secrets (collectively, "Business Knowledge").

(b) Schedule 2.16(b) contains a true and complete list of the

Intellectual Property Assets (other than the Trade Secrets) in each case

listing, as applicable, (i) the title of the application or registration, (ii)

the name of the applicant/registrant and current owner, (ii) the jurisdiction

where the application/registration is located, (iv) the application or

registration number, (v) filing date, and (vi) whether each such Intellectual

Property Asset is owned or licensed.

and contracts under which the Company licenses any Intellectual Property Assets

(as a licensor or licensee). The Intellectual Property Assets constitute all of

the intellectual property necessary to the conduct of the Company business as

currently conducted. The Company has good and valid title to, or a valid and

enforceable right to use under an agreement listed in Schedule 2.16(c), each of

the Intellectual Property Assets, free and clear of all Liens. The Company has

the right to use without payment to a third party each of the Intellectual

Property Assets, other than any payment required under any agreement listed in

Schedule 2.16(c). Neither this Agreement nor the transactions contemplated by

this Agreement, including the assignment to Buyer by operation of law or

otherwise of any contracts or agreements to which the Company is a party, will

result in (i) Buyer granting to any Person any right to or with respect to any

Intellectual Property Assets; or (ii) Buyer being bound by, or subject to, any

non-compete or other restriction on the operation or scope of its business.

(d) To the Knowledge of Seller Parties, none of the Intellectual

Property Assets is infringed by any patent, proprietary right, trade name,

trademark, trade dress, service mark, copyright, domain name or other

intellectual property or proprietary right of any other Person or, to the

Knowledge of Seller Parties, has been challenged or threatened in any way. None

of the Intellectual Property Assets infringes or interferes with or is alleged

to infringe or interfere with any patent, trade name, trademark, trade dress,

service mark, copyright, domain name or other intellectual property right of any

other Person, or misappropriates any trade secret or proprietary rights of any

other Person.

(e) There are no pending or, to the Knowledge of Seller Parties,

threatened, Proceedings asserting that any of the Intellectual Property Assets

is infringed by the intellectual property

<PAGE>

rights of any other Person or that any of the Intellectual Property Assets

infringes or interferes with any intellectual property or proprietary rights of

any other Person, or otherwise relating to the Intellectual Property Assets.

(f) All Patents, Marks and Copyrights that have been registered, and

all Internet Rights, are in compliance with all formal Legal Requirements

(including the payment of any required maintenance fees), and are valid and

enforceable.

(g) The Company has taken all commercially reasonable precautions to

protect the secrecy, confidentiality and value of all Trade Secrets. The Trade

Secrets are not part of the public knowledge or literature, and, to the

Knowledge of Seller Parties, the Trade Secrets have not been used, divulged, or

appropriated either for the benefit of any Person (other than the Company) or to

the detriment of the Company. To the Knowledge of Seller Parties, the Business

Knowledge has not been appropriated either for the benefit of any Person (other

than the Company) or to the detriment of the Company.

(h) To the extent that any work, invention or material relating to the

business of the Company has been developed or created by any employee or third

party for the Company, the Company has entered into a written agreement with

such employee or third party with respect thereto and thereby has obtained

ownership of, and is the exclusive owner of, all intellectual property in such

work, including all Marks, Copyrights, Patents, Trademarks and Trade Secrets,

material or invention by operation of law or by valid assignment. The Company

has not licensed any computer software source code included in the Intellectual

Property Assets to any Person in source code format.

(i) Except as set forth in Schedule 2.16(i), all proprietary software

of the Company conforms in all material respects to the specifications and

documentation therefor and is otherwise in compliance with applicable law. No

open source, public source or freeware software, code or other technology, or

any modification or derivative thereof, including, without limitation, any

version of any software licensed pursuant to any GNU general public license or

limited general public license, was or is, used in, incorporated into,

integrated or bundled with, or used in the development or compilation (other

than generally available commercial compilers) of, any Intellectual Property

Assets.

(j) To the Knowledge of Seller Parties, the Company is not barred from

seeking patents on material potentially patentable inventions by "on-sale" or

similar bars to patentability or by failure to apply for a patent on such

inventions within the time required.

Section 2.17. Accounts Receivable. Attached as Schedule 2.17 are the

accounts receivable of the Company as of March 22, 2005, and such accounts

receivable and each account receivable that will be on the accounting records of

the Company as of the Closing Date represent or will represent valid obligations

arising from sales actually made or services actually performed by the Company

in the ordinary course of business. Except to the extent paid prior to the

Closing Date, such accounts receivable are or will be as of the Closing Date

current and collectible net of the respective reserves shown on Schedule 2.17 or

on the accounts records of the Company as of the Closing Date, as the case may

be (which reserves are adequate and calculated consistent with past practice

and, in the case of the reserve as of the Closing Date, will not represent a

greater percentage of the accounts receivable reflected as of the Closing Date

than the reserve reflected in Schedule 2.17 represented of the accounts

receivable reflected therein and will not represent a material adverse change in

the composition of such accounts receivable in terms of aging). Subject to such

reserves, each of such accounts receivable either has been or will be collected

in full, without any set-off, within ninety (90) days after the day on which it

first becomes due and payable. There is no contest, claim, defense or right of

set off, other than returns in the ordinary course of business, with any account

debtor of an account receivable relating to the amount or validity of such

account receivable.

<PAGE>

Section 2.18. Sufficiency of Assets. The assets of the Company constitute

all of the assets, other than the Seller Personal Property, tangible and

intangible, of any nature whatsoever, used in or necessary to operate the

business of the Company in the manner presently conducted by the Company.

Section 2.19. No Undisclosed Liabilities. Except as set forth in Schedule

2.19, the Company has no Liabilities except for Liabilities reflected or

reserved against in the 2004 Balance Sheet and current Liabilities incurred in

the ordinary course of business of the Company since the 2004 Balance Sheet

Date.

Section 2.20. Material Adverse Change. Since the 2004 Balance Sheet Date,

there has not been any material adverse change in the business, operations,

assets, results of operations or financial condition of the Company, and, to the

Knowledge of Seller Parties, no event has occurred or circumstance exists that

may reasonably be expected to result in such a material adverse change.

Section 2.21. Absence of Certain Changes and Events. Except as set forth in

Schedule 2.21, since the 2004 Balance Sheet Date, (i) the Company has conducted

its business in the ordinary course of business, and (ii) the Company has not

taken any action that, if taken during the period from the date of this

Agreement through the Closing Date, would require the prior consent of Buyer

pursuant to the provisions of Section 4.2(b).

Section 2.22. Material Customers. Schedule 2.22 sets forth a true and

complete list of (a) each of the top fifteen (15) customers of the Company (by

volume in dollars of sales to such customers), for the twelve-month period ended

December 31, 2004 (the "Material Customers"), and the amount of revenues

accounted for by the Material Customers during such period. Since December 31,

2004, there has been no material adverse change in the business relationship of

the Company with any Material Customer. The Company has not received any

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