EXHIBIT 2.1
EXECUTION COPY
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
GREENFIELD ONLINE, INC.
GREENFIELD ACQUISITION SUB, INC.
AND
ZING WIRELESS, INC.
Dated as of February 8, 2005
TABLE OF CONTENTS
PAGE
ARTICLE I THE MERGER
1.1 Effective Time of the Merger..........................................................................1
1.2 Closing...............................................................................................1
1.3 Effects of the Merger.................................................................................1
1.4 Conversion of Company Securities......................................................................1
1.5 Merger Consideration and Adjustments..................................................................3
1.6 Escrow................................................................................................3
1.7 Delivery of Consideration.............................................................................4
1.8 Dissenting Shares.....................................................................................4
1.9 No Further Ownership Rights in Company Securities.....................................................5
1.10 Withholding...........................................................................................5
ARTICLE II REPRESENTATIONS AND WARRANTIES
2.1 Organization and Qualification........................................................................5
2.2 Articles of Incorporation and Bylaws..................................................................5
2.3 Capital Structure.....................................................................................6
2.4 No Conflict; Required Filings and Consents............................................................7
2.5 Permits; Compliance...................................................................................7
2.6 Financial Statements..................................................................................8
2.7 No Undisclosed Liabilities............................................................................8
2.8 Absence of Certain Changes or Events..................................................................8
2.9 Absence of Litigation................................................................................10
2.10 Brokers..............................................................................................10
2.11 Tax Matters..........................................................................................10
2.12 Real Property........................................................................................12
2.13 Intellectual Property................................................................................13
2.14 Tangible Assets......................................................................................16
2.15 Inventory............................................................................................16
2.16 Contracts and Policies...............................................................................16
2.17 Electronic Records; Powers of Attorney...............................................................18
2.18 Powers of Attorney...................................................................................18
2.19 Insurance............................................................................................18
2.20 Employees............................................................................................19
2.21 Employee Benefits....................................................................................20
2.22 Guaranties...........................................................................................21
2.23 Environment, Health and Safety.......................................................................21
2.24 Certain Business Relationships with the Company......................................................21
2.25 Customers............................................................................................21
2.26 Product, Information and Service Warranties..........................................................22
2.27 Product, Information and Service Liability...........................................................22
2.28 Privacy, Security and Identity Theft Etc.............................................................22
2.29 Panel................................................................................................24
2.30 Disclosure...........................................................................................25
ii
ARTICLE III REPRESENTATIONS OF PARENT AND SUB
3.1 Organization and Qualification.......................................................................25
3.2 Authority............................................................................................25
3.3 No Conflict; Required Filings and Consents...........................................................25
3.4 Absence of Certain Changes or Events.................................................................26
3.5 Disclosure...........................................................................................26
3.6 Capitalization of Sub................................................................................26
3.7 Absence of Litigation................................................................................26
ARTICLE IV COVENANTS OF COMPANY
4.1 Ordinary Course......................................................................................27
4.2 Preparation of Audited Historical Financial Statements...............................................28
4.3 Preparation of Stockholder Consent Materials.........................................................28
4.4 Exclusivity; Acquisition Proposals...................................................................29
4.5 Benefits; Compensation...............................................................................29
4.6 Claims...............................................................................................30
4.7 Access to Properties and Records.....................................................................30
4.8 Breach of Representations and Warranties.............................................................30
4.9 Consents.............................................................................................30
4.10 Releases.............................................................................................30
4.11 Termination of Contracts.............................................................................30
4.12 Notice of Events.....................................................................................30
4.13 Communications.......................................................................................30
4.14 Tax Returns..........................................................................................31
4.15 Commercially Reasonable Efforts......................................................................31
ARTICLE V COVENANTS OF PARENT AND SUB.........................................................................31
5.1 Breach of Representations and Warranties.............................................................31
5.2 Consents.............................................................................................31
5.3 Commercially Reasonable Efforts......................................................................31
5.4 Employee Matters.....................................................................................31
5.5 Maintenance of Directors and Officers Indemnification................................................32
5.6 Access to Information................................................................................32
ARTICLE VI ADDITIONAL AGREEMENTS
6.1 Legal Conditions to the Merger.......................................................................33
6.2 Employee Benefits....................................................................................33
6.3 Expenses.............................................................................................33
6.4 Additional Agreements................................................................................33
6.5 Public Announcements; Confidentiality................................................................33
6.6 Preparation and Filing of Returns and Payment of Taxes...............................................34
ARTICLE VII CONDITIONS PRECEDENT
7.1 Conditions to Each Party's Obligation to Effect the Merger...........................................36
7.2 Conditions of Obligations of Parent and Sub..........................................................37
7.3 Conditions of Obligation of Company..................................................................39
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ARTICLE VIII INDEMNIFICATION
8.1 First Party Claims...................................................................................39
8.2 Third Party Claims...................................................................................40
8.3 No Waiver............................................................................................41
8.4 Binding Effect.......................................................................................41
8.5 Remedies.............................................................................................41
8.6 Basket...............................................................................................41
8.7 Contribution.........................................................................................41
8.8 Shareholder Representative...........................................................................41
ARTICLE IX TERMINATION
9.1 Mutual Agreement.....................................................................................42
9.2 Termination by Parent................................................................................42
9.3 Termination by Company...............................................................................43
9.4 Outside Date.........................................................................................43
9.5 Effect of Termination................................................................................43
9.6 Company Break-up Fee.................................................................................43
ARTICLE XI MISCELLANEOUS
11.1 Entire Agreement.....................................................................................47
11.2 Governing Law........................................................................................47
11.3 Notices..............................................................................................47
11.4 Severability.........................................................................................49
11.5 Assignment...........................................................................................49
11.6 Counterparts.........................................................................................49
11.7 Amendment............................................................................................49
11.8 Extension, Waiver....................................................................................49
11.9 Construction.........................................................................................49
11.10 Arbitration..........................................................................................49
11.11 Prevailing Party Attorneys' Fees.....................................................................50
11.12 Tax Treatment of Transactions........................................................................50
11.13 Survival.............................................................................................50
iv
LIST OF EXHIBITS
Exhibit A Merger Documents
Exhibit B Escrow Agreement
Exhibit C Letter of Transmittal
Exhibit D Shareholder Release
Exhibit E Employment Agreements
Exhibit F Non-Competition Agreements
Exhibit G Legal Opinion of Bryan Cave LLP
Exhibit H Legal Opinion of Preston Gates Ellis LLP
LIST OF SCHEDULES
Schedule
Number Description
1.4(a) Outstanding Company Securities and Base Consideration
Company Disclosure Schedule
2.4 Compliance with Laws; Conflicts; Consents
2.6 Company Financial Statements
2.11(a) Tax Elections
2.11(b) Tax Matters
2.12(b) Real Property Leases
2.13(c) Intellectual Property Owned by the Company
2.13(d) Information Assets and Intellectual Property Licensed
to the Company
2.13(f) Exclusivity Obligations
2.14 Tangible Assets
2.15 Inventory
2.16 Contracts and Policies
2.19 Insurance
2.20 Employees
2.21 Employee Benefit Plans
2.25 List of Customers
2.26 Product, Information and Service Warranties
2.29 Panel
4.10 Releases
4.11 Contracts to be Terminated/Modified
6.2 Retained Employees
8.5 Surviving Obligations
v
INDEX OF DEFINED TERMS
PAGE
Acquisition Transaction............................29
Affiliate..........................................44
Agreement...........................................1
Assets.............................................44
Audited 2004 Financial Statements...................3
Audited Historical Financial Statements............28
Authority..........................................14
Base Consideration..................................2
Baseline Data......................................24
Basis..............................................44
Closing.............................................1
Closing Date........................................1
Closing Payment.....................................3
COBRA Coverage.....................................21
Code...............................................44
Common Shares.......................................2
Common Stock........................................6
Company.............................................1
Company Disclosure Schedule.........................5
Company Employee Benefit Plans.....................20
Company Material Adverse Effect....................44
Company Options.....................................6
Company Permits.....................................7
Company Securities..................................2
Company Shares......................................2
Contract...........................................44
Control............................................44
Current Accounts Receivable.........................3
D&O Insurance Policies.............................32
DGCL................................................1
Dissenting Shares...................................4
EBITDA..............................................3
EBITDA Adjustment...................................3
EBITDA Escrow.......................................3
Effective Time......................................1
Employee Benefit Plan..............................44
Employee Pension Benefit Plan......................45
Employee Welfare Benefit Plan......................45
Employment Agreements..............................37
Encumbrances.......................................45
Environmental, Health and Safety Laws..............45
ERISA..............................................45
ERISA Affiliate....................................45
Escrow Agreement....................................3
Excepted Claims....................................41
Exchange Act.......................................45
Executives.........................................29
Exercised Options...................................2
Extremely Hazardous Substance......................45
GAAP...............................................45
GLBA...............................................22
Governmental Entities...............................7
Handling...........................................22
HIPAA..............................................22
Information........................................44
Information Assets.................................44
Intellectual Property..............................45
Inventory..........................................16
IRS................................................11
know...............................................46
knowledge..........................................46
known..............................................46
Laws................................................7
LCM.................................................3
Liabilities.........................................8
Liability...........................................8
Lien...............................................46
Loss...............................................39
Management Shareholders.............................4
Merger..............................................1
Merger Agreement....................................1
Merger Consideration................................2
Merger Consideration Adjustments....................3
Merger Documents....................................1
Multiemployer Plan.................................46
Non-Competition Agreements.........................37
Option Exercise Payment.............................2
Ordinary Course of Business........................46
Panel..........................................24, 46
Panel Member.......................................24
Parent..............................................1
Parent Material Adverse Effect.....................46
Participating Shareholders..........................4
Paying Agent........................................4
Permitted Encumbrance..............................46
Person.............................................46
PII................................................23
Preferred Shares....................................2
vi
Preferred Stock.....................................6
Primary Escrow......................................3
Private Placement..................................38
Rejected Address(es)...............................24
Return Periods.....................................10
Returns............................................10
SEC................................................47
Securities Act.....................................47
Security Interest..................................47
Series A Preferred Stock............................6
Shareholder Representative.........................41
Stock Plan..........................................6
Straddle Period....................................34
Sub.................................................1
Subsidiaries.......................................47
Subsidiary.........................................47
Superior Proposal..................................29
Surviving Corporation...............................1
Surviving Obligations..............................41
Tax................................................11
Tax Contest Representative.........................41
Taxes..............................................11
Third Party Claim..................................40
Transaction........................................47
Transaction Expenses...............................33
Transfer Taxes.....................................36
Transgressed.......................................13
Unaudited Balance Sheet.............................8
Valid..............................................24
Working Capital.....................................3
Working Capital Adjustment..........................3
Working Capital Ratio...............................3
vii
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION, dated as of February 8, 2005
(this "AGREEMENT"), is made by and among Greenfield Online, Inc., a Delaware
corporation ("PARENT"), Greenfield Acquisition Sub, Inc., a wholly owned
subsidiary of Parent and a California corporation ("SUB"), and Zing Wireless,
Inc., a California corporation ("COMPANY"). Eric Garfield is also joined as a
party to this Agreement solely to accept the duties herein of the "SHAREHOLDER
REPRESENTATIVE" defined and set forth in Section 8.8. Certain capitalized terms
used herein are defined in Article X. An index of defined terms can be found
commencing on page v of this Agreement.
INTENDING TO BE LEGALLY BOUND, and in consideration of the premises and
the mutual representations, warranties, covenants and agreements contained
herein, Parent, Sub and Company agree as follows:
ARTICLE I: THE MERGER
1.1. EFFECTIVE TIME OF THE MERGER. Subject to the provisions of this
Agreement, Sub will be merged with and into the Company (the "MERGER"). A Merger
Agreement (the "MERGER AGREEMENT") and Officers Certificate (collectively, the
"MERGER DOCUMENTS") substantially in the forms attached as EXHIBIT A will be
duly prepared, executed and acknowledged by the Company and Sub, and thereafter
delivered to the Secretary of State of the State of California for filing as
provided in the California General Corporation Law (the "CGCL") on the Closing
Date. The Merger will become effective at such time as the Merger Documents have
been filed with the Secretary of State of California or at such time thereafter
as is provided in the Merger Documents (the "EFFECTIVE TIME").
1.2. CLOSING. The closing of the Merger (the "CLOSING") will take place
at 10:00 a.m., California time, as soon as practicable (but no more than five
business days) after satisfaction or waiver of the last to be fulfilled of the
conditions set forth in Article VII that by their terms are not to occur at the
Closing (the "CLOSING DATE"), at the offices of the Bryan Cave LLP at 120
Broadway, Suite 300, Santa Monica, California, unless another time, date, or
place is agreed to in writing by the parties. Any party to this Agreement,
including such party's representative(s), may participate in the Closing
telephonically.
1.3. EFFECTS OF THE MERGER. At the Effective Time, (i) Sub will be
merged with and into the Company (the Company after the Merger is sometimes
referred to herein as the "SURVIVING CORPORATION"), (ii) the Articles of
Incorporation of Sub will become the Articles of Incorporation of the Surviving
Corporation, (iii) the bylaws of the Company will be the bylaws of the Surviving
Corporation until duly amended, (iv) the directors of Sub will be the directors
of the Surviving Corporation, (v) the officers of Sub will be the officers of
the Surviving Corporation, (vi) the issued and outstanding certificates for the
capital stock of Sub will be the issued and outstanding certificates for the
capital stock of the Surviving Corporation, and (vii) the Merger will, from and
after the Effective Time, have all the effects provided by applicable law.
1.4. CONVERSION OF COMPANY SECURITIES.
(A) Conversion of Capital Stock. As of the Effective Time, each of
the issued and outstanding shares (other than Dissenting Shares) of Company
common stock ("COMMON
SHARES"), Company options deemed exercised by meeting the requirements
of Section 1.2(b) ("EXERCISED OPTIONS"), and outstanding Series A Preferred
Stock ("PREFERRED SHARES"), by virtue of the Merger, without any action on the
part of the holders thereof, will be converted into the right to receive the
Merger Consideration set forth in Section 1.5 in the following proportions:
$22,127,175 of Merger Consideration will be allocated among the Common Shares
and Exercised Options (net of the aggregate amount of the applicable exercise
price of the options so exercised) less any amount attributable to holders of
Common Shares who perfect their dissenters rights under Section 1.8, and
$7,872,825 of Merger Consideration will be allocated among the Preferred Shares
(less any amount attributable to holders of Preferred Shares who perfect their
dissenters rights under Section 1.8). The Preferred Shares and Common Shares are
sometimes referred to together as "COMPANY SHARES," and together with the
Exercised Options, as "COMPANY SECURITIES." The amount of any Merger
Consideration Adjustments (as defined below) shall be allocated to the holders
in the following proportions: 73.75725% pro rata to the Common Shares and
Exercised Options (net of aggregate amount of the applicable exercise price),
and 26.24275% pro rata to the Preferred Shares. A table indicating the amount of
Merger Consideration allocable to each holder of Company Securities assuming no
dissenters and no Merger Consideration Adjustments is set forth on Schedule
1.4(a). At the Closing, an updated Schedule 1.4(a) will be prepared and attached
that sets forth all Merger Consideration Adjustments, the Closing Payment, and
the amounts retained in escrow.
(B) Exercise of Company Options.
(i) At the Effective Time, each of the then outstanding
Company Options (as defined in Section 2.3) for which the holder thereof has
given proper notice as provided in the next paragraph will, by virtue of the
Merger and at the Effective Time, and without any further action on the part of
any holder thereof, be deemed to be exercised for Common Stock according to
their terms with the right to receive Merger Consideration on the same basis as
Common Shares.
(ii) To be considered exercised on or before the Effective
Time, the holder of a Company Option must execute all required notices of
exercise (which may be conditioned on the closing of the Merger) and other
instruments required by the Company and deliver the same to the Company. As a
condition to the exercise of a Company Option, the holder of such option shall
agree that Parent shall reduce the amount of Merger Consideration payable to
such holder as described in this Section. Any such option shall be deemed to be
conditionally exercised effective immediately prior to the closing. For a holder
who properly elects to conditionally exercise Company Options, the Company and
Parent agree that Parent will reduce the amount of Merger Consideration
otherwise payable to such holder by an amount equal to the aggregate amount of
the applicable exercise price of the options so exercised together with any
amounts that the Company is obligated to withhold pursuant to applicable state
and federal withholding requirements (the "OPTION EXERCISE PAYMENT"), and pay to
the Company the Option Exercise Payment. For purposes of the foregoing
conditional exercise, any such amount of Merger Consideration withheld from the
exercising option holder pursuant to this Section will be deemed to be paid by
the holder to the Company.
(iii) All Company Options not exercised prior to the Effective
Time will be cancelled at and as of the Effective Time.
2
1.5. MERGER CONSIDERATION AND ADJUSTMENTS.
(A) Merger Consideration. The "MERGER CONSIDERATION" consists of
$30,000,000 cash (the "BASE CONSIDERATION"), as adjusted by the Working Capital
Adjustment and EBITDA Adjustment (and which together are referred to as "MERGER
CONSIDERATION ADJUSTMENTS") less amounts attributable to Dissenting Shares in
accordance with Section 1.8. The portion of Merger Consideration payable at
Closing (the "CLOSING PAYMENT") is equal to the Base Consideration as adjusted
by the Merger Consideration Adjustments, less the amounts withheld in escrow as
set forth at Section 1.6 and less amounts attributable holders of Company
Securities that perfect their rights pursuant to Section 1.8.
(B) Working Capital Adjustment. The Base Consideration will be
reduced or increased, as the case may be, by the amount that Working Capital of
the Company as of January 31, 2005 is less or greater than, respectively, the
amount of Working Capital that would result in a Working Capital Ratio of 1.4/1
calculated, in each case, using the amounts set forth on the Unaudited Balance
Sheet delivered pursuant to Section 2.6 (such amount, the "WORKING CAPITAL
ADJUSTMENT"). For purposes hereof, "WORKING CAPITAL" means the sum of cash, cash
equivalents and Current Accounts Receivable less the sum of total liabilities
(including liabilities referred to in Section 6.6(a)(ii)) on and as of the date
of determination; "WORKING CAPITAL RATIO" means the ratio of the sum of cash,
cash equivalents and Current Accounts Receivable to the sum of the Company's
total liabilities as of the date of determination; and "CURRENT ACCOUNTS
RECEIVABLE" means only those accounts receivable that are fewer than 90 days old
as of the date of determination and that the Company has no reason to believe
are not collectible at their full recorded amounts in accordance with their
terms. The Working Capital Adjustment will be based upon the Unaudited Balance
Sheet described at Section 2.6.
(C) EBITDA Adjustment. After Closing, the Company will cause to be
prepared an audited balance sheet of the Company at and for the year ended
December 31, 2004, and the related statements of operations, statements of cash
flows and statements of stockholder equity for the period then ended, and the
notes and schedules thereto (the "AUDITED 2004 FINANCIAL STATEMENTS"), together
with the report thereon of LaRue, Corrigan and McCormick, LLP ("LCM"). For every
dollar that the Company's EBITDA calculated based on the Audited 2004 Financial
Statements is below $2,150,000, the Merger Consideration will be reduced by
$13.95 (the "EBITDA ADJUSTMENT"). For this calculation "EBITDA" means earnings
before income, taxes, depreciation and amortization, including an accrual for
executive bonus compensation paid or payable in accordance with Section 4.5, in
an amount up to $450,000, but excluding non-cash charges relating or
attributable to employee stock options or other equity compensation awards
issued prior to December 31, 2004. If the Audited 2004 Financial Statements
dictate an EBITDA Adjustment, Parent shall be entitled to be reimbursed for such
difference from the EBITDA Escrow first, and to the extent it is depleted or
insufficient to cover the entire amount of such difference, the Primary Escrow.
Upon receipt of Audited 2004 Financial Statements that do not require an EBITDA
Adjustment, Parent will promptly, but in any event within ten business days,
notify the Custodian under the Escrow Agreement to release the EBITDA Escrow to
the Shareholders.
1.6. ESCROW. The parties will enter into an escrow agreement
substantially in the form attached as EXHIBIT B (the "ESCROW AGREEMENT"). The
Escrow Agreement will provide for (1) a "PRIMARY ESCROW" initially consisting of
$3,000,000 withheld from the Merger Consideration at Closing") to secure claims
by Parent for indemnification pursuant to Article VIII and (2) an
3
"EBITDA ESCROW" initially consisting of $2,500,000 withheld from the Merger
Consideration at Closing to secure claims by Parent in respect of the EBITDA
Adjustment. The amounts in escrow will be released according to the terms and
procedures in the Escrow Agreement. Escrow amounts will be withheld from the
holders of Company Securities entitled to receive Merger Consideration (the
"PARTICIPATING SHAREHOLDERS") in the same proportion that they are entitled to
receive the Merger Consideration. In lieu of their percentage share of cash that
would be withheld from the Merger Consideration and placed in the Primary
Escrow, Matthew D. Dusig, Gregg B. Lavin and Lance H. Suder (together, the
"MANAGEMENT SHAREHOLDERS") may pledge Parent stock of equivalent value purchased
in the Private Placement contemplated by Section 7.2(q).
1.7. DELIVERY OF CONSIDERATION.
(A) On or before the Closing Date, Parent will cause to be
deposited with JP Morgan Chase Bank (the "PAYING AGENT") cash in an aggregate
amount equal to the Closing Payment. Upon or promptly after the Closing Date,
each holder of Company Securities will receive a letter of transmittal
substantially in the form of EXHIBIT C and instructions for its use in effecting
the surrender of such securities for payment therefor. Upon surrender of the
appropriate documents in respect of a security holder's Company Securities to
the Paying Agent, together with such letter of transmittal duly executed, such
holder will be entitled to receive in exchange therefor (as adjusted pursuant to
Section 1.5), such holder's pro rata portion of the Closing Payment, which
amount will be paid by the Paying Agent by check or wire transfer, and the
surrendered securities will be canceled. No interest will be paid or accrued on
the cash payable upon the surrender of such securities. The balance of the
Merger Consideration (if any becomes due) will be payable according to the terms
of the Merger Consideration Adjustments and the Escrow Agreement.
(B) If the payment is to be made to an individual, a partnership, a
joint venture, a limited liability company, a corporation, a trust, an
unincorporated organization or any other entity other than the security holder
in whose name a Company Security is registered, it will be a condition of
payment that (a) the documentation representing such Company Security so
surrendered will be properly endorsed or otherwise in proper form for transfer
and (b) the security holder requesting such payment or issuance will pay any
transfer or other Taxes required by reason of the payment or issuance to a
security holder other than the registered holder of the security surrendered or
establish to the satisfaction of the Sub that such tax has been paid or is not
applicable. Until surrendered in accordance with the provisions of this Section,
each Company Security will represent the right to receive the amount provided by
this Section without any interest thereon.
1.8. DISSENTING SHARES. Shares of Company stock outstanding
immediately prior to the Effective Time and held by a holder who has not voted
in favor of the Merger or consented thereto in writing and who is entitled to
demand and properly demands appraisal for such shares in accordance with the
CGCL (the "DISSENTING SHARES") will not be converted into a right to receive
their Merger Consideration, unless such holder fails to perfect or withdraws or
otherwise loses his or her right to appraisal. If, after the Effective Time,
such holder fails to perfect or withdraws or otherwise loses his or her right to
appraisal, such shares will be treated as if they had been converted as of the
Effective Time into the right to receive the Merger Consideration without any
4
interest thereon. Company will give Parent prompt notice of any demands received
by Company for appraisal of shares, and Parent will have the right to
participate in all negotiations and proceedings with respect to such demands.
Company will not, except with the prior written consent of Parent, make any
payment with respect to, or settle or offer to settle, any such demands. Any
amounts paid to a holder pursuant to a right of appraisal above such holder's
pro rata share of the Merger Consideration will be paid by Company out of its
own funds and will not be reimbursed by Parent or any affiliate of Parent.
1.9. NO FURTHER OWNERSHIP RIGHTS IN COMPANY SECURITIES. The cash
payments to be delivered on or after the Effective Time as described herein will
respectively be deemed to have been delivered in full satisfaction of all rights
pertaining to the Company Securities. After the Effective Time, there will be no
transfers on the stock transfer books of Company of the Company Shares and all
Company Options will be cancelled.
1.10. WITHHOLDING RIGHTS. Parent or the Paying Agent shall be
entitled to deduct and withhold from the Merger Consideration otherwise payable
pursuant to this Agreement to any Person who was a holder of Company Securities
immediately prior to the Effective Time, such amounts as Parent or the Paying
Agent is required to deduct and withhold with respect to the making of such
payment under the Code, or any provision of state, local, or foreign tax law.
Any such withheld amounts shall be timely paid over to the appropriate
Governmental Entity. To the extent that amounts are so withheld by Parent or the
Paying Agent, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the Company Securities in respect
of which such deduction and withholding was made by Parent or the Paying Agent.
ARTICLE II: REPRESENTATIONS AND WARRANTIES OF COMPANY
Except as disclosed in a document referring specifically to the
representations and warranties in this Agreement which identifies by section
number the section and subsection to which such disclosure relates and is
delivered by Company to Parent prior to or simultaneous with the execution of
this Agreement (the "COMPANY DISCLOSURE SCHEDULE"), the Company hereby
represents and warrants to Parent and Sub as follows as of the date of this
Agreement and as of the Closing Date:
2.1. ORGANIZATION AND QUALIFICATION. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California, has all requisite corporate or other power and authority to own,
lease and operate its Assets and to carry on its business as it is now being
conducted, electronically or non-electronically, and is duly qualified and in
good standing to do business in each jurisdiction in which the nature or level
of the business conducted by it, or the ownership, leasing or use of its Assets,
makes such qualification necessary. The Company has no Subsidiaries, and does
not, directly or indirectly, own or control any investment or interest (whether
in the form of debt or equity) in any other person.
2.2. ARTICLES OF INCORPORATION AND BYLAWS. The Company has provided to
Parent complete and correct copies of (i) the Company's Articles of
Incorporation and Bylaws or equivalent organizational documents, in each case as
amended or restated, as in effect as of the Closing Date, (ii) the minute books
relating to all meetings of stockholders, board of directors and committees of
the Company, (iii) stock certificate books of the Company, (iv) stock transfer
books of the Company, and (v) a list of the officers and directors of the
Company. The Company is not
5
in violation of any of the provisions of its Articles of Incorporation or Bylaws
or equivalent organizational documents, in each case as amended or restated. In
addition, the minute books (containing the record of meetings of the
stockholders, the board of directors and any committees of the board of
directors), the stock certificate books and the stock transfer books of the
Company are correct and complete.
2.3. CAPITAL STRUCTURE.
(A) The authorized capital stock of Company consists of (i)
50,000,000 shares of Company common stock ("COMMON STOCK") of which 17,190,551
shares are issued and outstanding, and (ii) 50,000,000 shares of Preferred Stock
("PREFERRED STOCK"), of which 4,550,000 have been designated as Series A
Preferred Stock ("SERIES A PREFERRED STOCK"), of which 4,455,904 are issued and
outstanding, and 4,000,000 which have been designated as Series B Preferred
Stock, of which none are issued and outstanding. As of the date hereof,
3,982,460 shares of Common Stock are reserved for issuance upon the exercise of
outstanding employee stock options under the Zing Wireless, Inc. Stock Plan
adopted May 10, 2000 ( the "STOCK PLAN") and options for 3,982,460 shares of
Common Stock have been granted and remain outstanding under the Stock Plan
("COMPANY OPTIONS"). There are no other outstanding options, warrants, rights or
other securities convertible into or exercisable for any equity securities of
the Company issued or outstanding and no Company Securities are held by Company
in its treasury. All Company Securities and any other securities of the Company
outstanding as of the date hereof have been offered and sold by the Company in
compliance with all applicable federal and state securities laws and are set
forth on Schedule 1.4(a). True and complete copies of the Stock Plan and the
forms of any other instruments setting forth the rights of all Company
securities as of the date hereof have been delivered to Parent or its counsel.
(B) All of the Company Shares are duly authorized, validly issued,
fully paid and non-assessable and not subject to preemptive rights created by
statute, the Company's Articles of Incorporation or Bylaws or any agreement to
which the Company is a party or bound. There are no bonds, debentures, notes or
other indebtedness, issued or outstanding which (i) have the right to vote (or
convertible or exercisable into securities having the right to vote) with
holders of Common Stock or Preferred Stock on any matter, or (ii) are or will
become entitled to receive any payment as a result of the execution of this
Agreement or the completion of the transactions contemplated hereby. There are
no options, warrants, calls or other rights (including subscription rights or
registration rights), agreements, proxies, voting rights agreements, voting
trusts, arrangements or commitments of any character, presently outstanding,
which (i) obligate the Company to issue, deliver or sell shares of its capital
stock or debt securities, (ii) obligate the Company to grant, extend or enter
into any such option, warrant, call or other such right, agreement, arrangement
or commitment, (iii) obligate the Company to repurchase, redeem or otherwise
acquire any shares of Company Common Stock, or (iv) relate to the issued or
unissued capital stock of, or other equity interests in, the Company
(C) AUTHORITY. The Company has all requisite corporate power and
authority to execute and deliver this Agreement and, assuming due authorization
by the Company's shareholders, to perform its obligations hereunder and to
consummate the Merger. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by the Company's Board of Directors and, except for submitting this Agreement to
the Company's shareholders for approval, no other
6
corporate proceeding or approval is required on the part of the Company to
consummate the Merger. This Agreement has been duly executed and delivered by
the Company and, assuming the due authorization, execution and delivery thereof
by the other parties, constitutes the legal, valid and binding obligation of the
Company enforceable in accordance with its terms.
2.4. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(A) Except as set forth in Schedule 2.4, the execution and delivery
of this Agreement by the Company does not, and the performance of this Agreement
by the Company will not (i) conflict with or violate the Company's Articles of
Incorporation or Bylaws or equivalent organizational documents, in each case as
amended or restated, (ii) conflict with or violate any federal, state, foreign
or local law, statute, ordinance, rule, regulation, order, guidance, policy,
judgment or decree (collectively, "LAWS") and applicable to the Company or by
which any of its properties is bound or subject to, or (iii) result in any
violation of or breach of or constitute a default (or an event that with notice
or lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration, suspension or cancellation of,
or require payment under, or result in the loss of, or result in the creation of
an Encumbrance (other than a Permitted Encumbrance) on, any of the properties or
Assets of the Company under or pursuant to, any note, bond, mortgage, security
agreement, indenture, contract, agreement, lease, license, right, permit,
franchise or other instrument or obligation to which the Company is a party or
by which the Company or any of its Assets is bound or subject.
(B) The execution and delivery of this Agreement by the Company
does not, and the performance of this Agreement by the Company will not, require
the Company to obtain any consent, approval, authorization or permit of, or to
make any filing with or notification to, any governmental, regulatory or
quasi-governmental authority, domestic or foreign ("GOVERNMENTAL ENTITIES")
based on Laws and other requirements of Governmental Entities except for the
filing of the appropriate Merger Documents with the California Secretary of
State.
2.5. PERMITS; COMPLIANCE.
(A) The Company is in possession of all franchises, grants,
authorizations, licenses, permits and permissions, easements, variances,
exemptions, consents, certificates, approvals, orders and other rights and
authorities necessary to own, lease, operate, use, access, disclose, and
exercise intellectual property or other rights in, its Assets and to carry on
its business as it is now being conducted electronically or non-electronically
(collectively, the "COMPANY PERMITS"), and there is no notice, claim, action,
proceeding or investigation pending or to the Company's knowledge threatened
regarding modification, suspension or cancellation of any of the Company Permits
or any lack of rights or authority (or exceeding rights or authorities) under
any of them. The Company is not in conflict with, or in default or violation of
(a) any Law applicable to the Company or which any of its Assets is bound by or
subject to or (b) any of the Company Permits. The Company has not received from
any Governmental Entity or any other person any notification in a record
alleging conflicts, defaults or violations of Laws.
(B) The Company is in compliance with (a) all applicable Laws that
apply to or are for the protection of consumers or individuals; (b) if
applicable, licensing of money services business and the Bank Secrecy Act (31
U.S.C. Section 5311 et. seq.) and all applicable laws relating
7
to the licensing of money services businesses, and (c) all applicable laws
regarding sweepstakes, incentives for Panel members or survey takers or the
like.
2.6. FINANCIAL STATEMENTS.
(A) Schedule 2.6 contains (or will contain as of the Closing) a
true, correct and complete copy of the unaudited balance sheet of the Company as
of January 31, 2005 (the "UNAUDITED BALANCE SHEET"). The Unaudited Balance Sheet
is and the Audited Historical Financial Statements when delivered in accordance
with Section 4.2(i) are and will be accurate and complete in all material
respects, in accordance with the assumptions and methodology set forth therein,
and consistent with the adjustments made by LCM to the Audited Financial
Statements, (ii) will have been prepared based on the books and records of the
Company in accordance with GAAP, and will present fairly the financial condition
and results of operations of the Company for the dates and periods indicated,
and (iii) contain and reflect all necessary adjustments, accruals, provisions
and allowances for a fair presentation of the Company's financial condition and
the results of its operations for the periods covered, except in the case of the
Unaudited Balance Sheet only, for the omission of notes thereto.
(B) The Company (a) makes and keeps accurate books and records and
(b) maintains internal accounting controls which provide reasonable assurance
that (i) transactions are executed in accordance with management's
authorization, (ii) transactions are recorded as necessary to permit preparation
of its financial statements and to maintain accountability for its assets, (iii)
access to its assets is permitted only in accordance with management's
authorization and (iv) the reported accountability for its assets is compared
with existing assets at reasonable intervals.
(c) To the knowledge of the Company, the Current Accounts
Receivable reflected on the Unaudited Balance Sheet are valid receivables
subject to no setoffs or counterclaims, have been outstanding receivables on the
Company's books and records for fewer than 90 days, and the Company has no
reason to believe such amounts will not be collected at their full recorded
amounts on or prior to 90 days following the Closing Date. On the Closing Date,
there are no receivables due from any of the Company's officers, directors or
shareholders or anyone claiming that they have been the victim of identity theft
including pursuant to 15 USC Section 1681c-2.
2.7. NO UNDISCLOSED LIABILITIES. The Company, to its knowledge, has no
liabilities or other obligations of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise including
liabilities for Taxes ("LIABILITY" or "LIABILITIES"), and there is no existing
condition, situation or set of circumstances that could reasonably be expected
to result in such a Liability, other than non-accruable contractual obligations
and Liabilities fully reflected or reserved against on the Unaudited Balance
Sheet and excluding Liabilities incurred in the Ordinary Course of Business
after the date of the Unaudited Balance Sheet.
2.8. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since January 31, 2005,
except for transactions contemplated by this Agreement:
(A) the Company has not entered in to any Transactions with respect
to its Assets or with its customers, other than for fair consideration in the
Ordinary Course of Business;
(B) the Company has not entered into any Transaction or any
agreement, contract, lease or license outside the Ordinary Course of Business;
8
(C) no party (including the Company) has accelerated, terminated,
modified or canceled any agreement, contract, lease or license (or series of
related agreements, contracts, leases and licenses) to which the Company is a
party or by which the Company is bound;
(D) the Company has not imposed, granted, allowed or consented to
any Security Interest upon any of its Assets;
(E) the Company has not made any capital expenditure (or series of
related capital expenditures) either involving more than an aggregate of $10,000
or outside the Ordinary Course of Business;
(F) the Company has not made any capital investment in, any loan
to, or any acquisition of the securities or Assets of, any other person (or
series of related capital investments, loans, and acquisitions);
(G) the Company has not issued any note, bond, or other debt
security or created, incurred, assumed, or guaranteed any indebtedness for
borrowed money or capitalized lease obligation;
(H) the Company has not delayed or postponed the payment of
accounts payable, accrued expenses or other Liabilities outside the Ordinary
Course of Business;
(I) the Company has not canceled, lost, compromised, waived, or
released any right or claim (or series of related rights and claims);
(J) the Company has not granted any license or sublicense of any
rights under or with respect to any Asset or Intellectual Property;
(K) there has been no change made or authorized in the Company's
Articles of Incorporation or Bylaws or equivalent organizational documents, in
each case as amended or restated prior to December 11, 2000;
(L) the Company has not issued, sold or otherwise disposed of any
of its capital stock, or granted any options, warrants, or other rights to
purchase or obtain (including upon conversion, exchange, or exercise) any of its
capital stock;
(M) the Company has not declared, set aside, or paid any dividend
or made any distribution with respect to its capital stock (whether in cash or
in kind) or redeemed, purchased, or otherwise acquired any of its capital stock;
(N) the Company has not experienced any damage, destruction, or
loss (whether or not covered by insurance and whether tangible or intangible) to
its Assets;
(O) the Company has not made any loan to, or entered into any other
transaction with, any of its directors, officers and employees;
(P) the Company has not entered into or modified the terms of any
employment contract or collective bargaining agreement, written or oral;
(Q) the Company has not granted any increase in the compensation of
any of its directors, officers and employees except as expressly permitted by
Section 4.5;
(R) the Company has not adopted, amended, modified or terminated
any bonus, profit-sharing, incentive, severance or other plan, contract or
commitment for the benefit of any
9
of its directors, officers and employees (or taken any such action with respect
to any other Employee Benefit Plan) except as expressly permitted by Section
4.5;
(S) the Company has not made any other change in employment terms
for any of its directors, officers and employees outside the Ordinary Course of
Business;
(T) the Company has not made any political contribution or pledged
to make any charitable contribution;
(U) the Company has not done any act, or failed to do any act which
it had a duty or obligation to perform, which has or could result in a breach of
any obligation of the Company; and
(V) the Company has not committed to any of the foregoing.
2.9. ABSENCE OF LITIGATION. Except for administrative procedures
pursuant to prosecution or registration of Intellectual Property undertaken in
the Ordinary Course of Business, there is no claim, action, suit, litigation,
proceeding, arbitration or investigation of any kind, at law, in rem or in
equity (including actions or proceedings seeking injunctive relief), pending or
to the Company's knowledge threatened against the Company or any of its Assets.
The Company is not subject to any continuing order of, consent decree,
settlement agreement or other similar written agreement with or continuing
investigation by, any court or Governmental Entity, or any judgment, order,
writ, injunction, decree or award of any court, Governmental Entity or
arbitrator. To the knowledge of the Company there is no fact, event, condition,
circumstance or other matter which either has, or is reasonably likely to have
resulted in, an event or determination having a Company Material Adverse Effect.
2.10. BROKERS. No broker, finder or investment banker is entitled to any
brokerage, finder or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Company. The Company has furnished to Parent a correct copy of all
agreements between the Company and any broker, finder or investment adviser
pursuant to which such firm or individual would be entitled to any payment
relating to the Merger.
2.11. TAX MATTERS.
(A) The Company has timely filed (or caused to be filed) all
federal, state, local and foreign Tax returns, reports, elections and
information statements ("RETURNS") required to be filed by it, which Returns are
true, correct and complete in all respects. All Taxes required to be paid in
respect of the periods covered by such Returns ("RETURN PERIODS") have either
been paid or fully accrued on the books of the Company. The Unaudited Balance
Sheet contains adequate accruals for all unpaid Taxes, and all unpaid Taxes in
respect of periods prior to Closing will be fully accrued on the books and
records of the Company prior to Closing. The Company has no Liabilities for
Taxes, other than Liabilities which will be reflected on the Unaudited Balance
Sheet. The Company has not taken any position on any Tax Return or filing which
is subject to penalties under Section 6662 of the Code. The Company has not
requested or been granted any extension of time to file any Return that has not
yet been filed. There is no difference between the amounts of the book basis and
the Tax basis of any asset of the Company that is not reflected in an
appropriate accrual of deferred Tax liability on the books of the Company or
fully reflected on the Unaudited Balance Sheet. All material elections with
respect to Taxes made by or with respect to the Company are set forth on
Schedule 2.11(a).
10
The Company has provided or made available to Parent true and correct copies of
all Returns, all correspondence with any taxing authority, all tax work papers,
any Tax planning memoranda and other Tax data for taxable periods ending on or
after December 31, 2001.
(B) No deficiencies or adjustments for any Tax of the Company have
been claimed, proposed or assessed or, to the knowledge of the Company,
threatened. No written claim or, to the knowledge of the Company, any other
claim, has ever been made by an authority in a jurisdiction where the Company
does not file Returns that the Company is or may be subject to taxation by that
jurisdiction. Schedule 2.11(b) accurately sets forth the years for which the
Company's federal and state income tax returns, respectively, have been audited
and any years which are the subject of a pending audit by the Internal Revenue
Service ("IRS") and the applicable state taxing agencies. Except as so
disclosed, the Company is not subject to any pending or threatened Tax audit or
examination. The Company has not entered into any agreements, waivers or other
arrangements in respect of the statute of limitations in respect of its Taxes or
Tax Returns. Schedule 2.11(b) sets forth as of the date hereof a list of all
joint ventures, partnerships, limited liability companies or other business
entities (within the meaning of Treasury Regulation Section 301.7701-3) in which
the Company has an interest.
(C) For the purposes of this Agreement, the terms "TAX" and "TAXES"
shall include all federal, state, local and foreign taxes, assessments, duties,
tariffs, registration fees, and other governmental charges including all income,
franchise, property, production, sales, use, payroll, license, windfall profits,
severance, withholding, excise, gross receipts and other taxes, as well as any
interest, additions or penalties relating thereto and any interest in respect of
such additions or penalties.
(D) There are no liens for Taxes upon the assets of the Company
except for Taxes that are not yet payable. The Company has withheld all Taxes
required to be withheld in respect of wages, salaries and other payments to all
employees, officers and directors and any Taxes required to be withheld from any
other person and timely paid all such amounts withheld to the proper taxing
authority.
(E) The Company is not liable for any payment that would be
includible in the gross income of an employee, director, or independent
contractor of Company as a result of the application of Section 409A of the
Code.
(F) The Shareholders are not subject to withholding under Section
1445 of the Code with respect to any transaction contemplated hereby.
(G) The Company has not engaged in any "reportable transaction" as
defined in Treasury Regulation Section 1.6011-4(b)(1).
(H) No consent or agreement has been made under Section 341(f) of
the Code, by or on behalf of the Company or any predecessor thereof. The Company
is not and has not been a party to any Tax sharing or tax allocation agreement.
No item of income or gain reported by the Company for financial accounting
purposes in any pre-Closing period is required to be included in taxable income
in any post-Closing period. The Company has never been a member of any
affiliated group of corporations within the meaning of Section 1504 of the Code.
The Company has not participated in, or cooperated with, an international
boycott within the meaning of Section 999 of the Code. The Company is not
required to include in income any adjustment pursuant to Section 481(a) of the
Code (or similar provisions of other
11
law or regulations) in its current or in any future taxable period, by reason of
a change in accounting method; nor does the Company have any knowledge that the
IRS (or other taxing authority) has proposed, or is considering, any such change
in accounting method. The Company is not a party to any agreement, contract, or
arrangement that would result in the payment of any "excess parachute payment"
within the meaning of Section 280G of the Code ("EXCESS PARACHUTE PAYMENT"). The
Company does not have and has not had a "permanent establishment" (as defined in
any applicable income tax treaty) in any country other than the United States.
There are no outstanding rulings or requests for rulings from any taxing
authority with respect to the Company.
(I) The Company is not and has never been a real property holding
corporation within the meaning of Section 897 of the Code. None of the assets of
the Company is property that is required to be treated as owned by any other
person pursuant to the "safe harbor lease" provisions of former Section
168(f)(8) of the Code and in effect immediately prior to the enactment of the
Tax Reform Act of 1986 and none of the assets of the Company is "tax exempt use
property" within the meaning of Section 168(h) of the Code. None of the assets
of the Company secures any debt the interest on which is tax exempt under
Section 103 of the Code. The Company is not liable for Taxes under the
provisions of Treasury Regulation Section 1.1502-6(a).
(J) The Company has not constituted either a "distributing
corporation" or a "controlled corporation" in a distribution of stock qualifying
for tax-free treatment under Section 355 of the Code (i) in the two (2) years
prior to the date of this Agreement, or (ii) in a distribution which could
otherwise constitute part of a "plan" or "series of related transactions"
(within the meaning of Section 355(e) of the Code) in conjunction with the
transactions contemplated hereby.
(k) Notwithstanding anything in this Agreement to the contrary, no
representation is made as to whether any net operating losses, net capital
losses, built-in losses, built-in deductions (within the meaning of Section
382(h)(6) of the Code), unused foreign tax credits or unused investment or other
credits of the Company and carryovers with respect to the foregoing items are or
have been subject to any limitations under Section 382 or Section 383 of the
Code (or any similar provision of state, local or foreign Law).
2.12. REAL PROPERTY.
(A) The Company has never owned any real property.
(B) Schedule 2.12(b) lists and describes briefly all real property
leased or subleased to the Company. The Company has delivered to Parent correct
and complete copies of the leases and subleases listed in Schedule 2.12(b). With
respect to each lease and sublease listed in Schedule 2.12(b):
(i) the lease or sublease is legal, valid, binding,
enforceable and in full force and effect;
(ii) the consummation of the Merger will not affect the terms
or enforceability of the lease or sublease;
12
(iii) no party to the lease or sublease is in breach or
default, and no event has occurred which, with notice or lapse of time, would
constitute a breach or default or permit termination, modification, or
acceleration thereunder;
(iv) no party to the lease or sublease has repudiated any
provision thereof;
(v) there are no disputes, oral agreements or forbearance
programs in effect as to the lease or sublease;
(vi) the Company has not assigned, transferred, conveyed,
mortgaged, deeded in trust or encumbered any interest in the leasehold or
subleasehold;
(vii) all facilities leased or subleased thereunder have
received all approvals of Governmental Entities (including licenses and permits)
required in connection with the operation thereof and have been operated and
maintained in accordance with applicable laws, rules, and regulations; and
(viii) all facilities leased or subleased thereunder are
supplied with functional utilities and other services necessary for the normal
and usual operation of said facilities.
2.13. INTELLECTUAL PROPERTY.
(A) The Company owns or has rights pursuant to license, sublicense,
agreement or permission, applicable law or otherwise, to all Intellectual
Property and Information Assets necessary for the operation of the Company's
business as presently conducted and as required to be conducted in accordance
with applicable Law and Company obligations. To the Company's knowledge, each
Information Asset and each item of Intellectual Property owned, leased or used
by the Company is owned, leased or available for use by the Company on
identical terms and conditions immediately subsequent to the Closing Date.
(B) To the Company's knowledge, the Company has not interfered
with, infringed upon, misappropriated, converted, violated, trespassed upon,
exceeded authority or consent with respect to, disclosed without authority, or
otherwise come into conflict with (collectively "TRANSGRESSED") any
Intellectual Property rights or rights in Information Assets of any third
party. To the Company's knowledge, none of the directors, officers, employees
or agents of the Company has ever received any oral or written charge,
complaint, claim, demand or notice alleging any such Transgression (including
any claim that the Company must license or refrain from using any Intellectual
Property rights of any third party). To the Company's knowledge, no third
party has Transgressed any Intellectual Property rights or Information Assets
of the Company.
(C) Schedule 2.13(c) identifies each patent or registered
trademark, domain name and copyright registration that has been issued to the
Company or any Affiliate of the Company with respect to any of its
Intellectual Property or Information Assets, identifies each pending trademark
or copyright application that the Company or any Affiliate of the Company has
made with respect to any of its Intellectual Property or Information Assets,
identifies all domain names that are used by, registered to or held by the
Company or any Affiliate of the Company, and identifies each written license,
agreement, or other written permission which the Company or any Affiliate of
the Company has granted to any third party with respect to any of its
Intellectual Property or Information Assets (together with any exceptions).
The Company
13
has delivered to Parent correct and complete copies of all the items to be
listed on Schedule 2.13(c) (as such items are as amended to date). Schedule
2.13(c) also identifies each trade name or unregistered trademark used by the
Company or any Affiliate of the Company in connection with any of its
businesses. With respect to each item of Intellectual Property or Information
Asset required to be identified in Schedule 2.13(c):
(i) to the Company's knowledge, the Company possesses all (x)
right, title, and interest in and to the item, or (y) possesses all exclusive or
nonexclusive rights in the item such that no other person holds a rightful claim
to, or interest in, the Intellectual Property or Information Asset which could
interfere with Company's enjoyment of Company's interest, and the interest
described in (x) or (y) is free and clear of any Security Interest, license, or
other restriction, and, if such item was developed by an independent contractor,
the Company has provided Parent with an agreement in a written record relating
to such work, as identified in Schedule 2.13(c) no royalty or other remuneration
of any type is payable with respect to any such item of Intellectual Property or
Information Asset;
(ii) such item is not subject to any outstanding injunction,
judgment, order, decree or ruling that would materially interfere with Company's
business as presently conducted;
(iii) to the Company's knowledge, no action, suit, proceeding,
hearing, investigation, charge, complaint, claim or demand is pending or
threatened which challenges the legality, validity, enforceability, use or
ownership of or license or right in or to such item;
(iv) no consents are required for the exercise of any rights
in the item by Company as a result of the Merger; and
(v) the Company is not, nor as a result of the execution or
delivery of this Agreement, or performance of the Company's obligations
hereunder, will the Company be, in violation of any Transaction relating to the
Company's Intellectual Property or Information Assets to which the Company is a
party or otherwise bound.
(D) Schedule 2.13(d) identifies each Information Asset and each
item of Intellectual Property that any third party owns or that the Company or
any Affiliate of the Company uses pursuant to license, sublicense, agreement,
consent or permission, applicable Laws or other authority (collectively,
"AUTHORITY"), other than shrink-wrap licenses for personal computer software.
The Company has delivered to Parent correct and complete copies of documents
evidencing such Authority. With respect to each item of Intellectual Property
and Information Asset required to be identified in Schedule 2.13(d):
(i) the Authority covering such item is legal, valid, binding,
enforceable and in full force and effect;
(ii) the Authority will continue to be legal, valid, binding,
enforceable and in full force and effect on identical terms following the
Closing Date;
(iii) no party to the Authority, to the Company's knowledge,
is in violation of it or in breach or default, and no event has occurred which
with notice or lapse of time would constitute a violation, breach or default or
permit cancellation, modification or acceleration thereunder;
14
(iv) no party to the Authority, to the Company's knowledge,
has repudiated any provision thereof;
(v) no additional royalty or other remuneration of any type
will be made payable with respect to any such item as a result of the Merger;
(vi) to the Company's knowledge, with respect to each
sublicense, the representations and warranties set forth in items (i) through
(v) above are true and correct with respect to the underlying license;
(vii) the item is not subject to any outstanding injunction,
judgment, order, decree, ruling or charge;
(viii) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim or demand is pending or (to Company's knowledge)
threatened which challenges the legality, validity or enforceability of the
item;
(ix) no consents are required for the continued existence or
exercise of any rights in the item by Parent as a result of the Merger; and
(ix) the Company has not delegated any rights and has not
granted any sublicense or similar right with respect to the Authority.
(E) None of the directors and officers (nor any employees with
responsibility for matters regarding Intellectual Property or Information
Assets) of the Company have any actual knowledge of any new products,
inventions, Information procedures or methods that any competitors or other
third parties have developed which reasonably could be expected to supersede or
make obsolete any service, product, process, Information or aspect of the
Company or its business.
(F) None of the Company's products, websites, services or
Information Assets use, embed or incorporate any software that (1) is subject to
any "open source," "copyleft," or other similar types of license terms
(including any GNU General Public License, Library GNU General Public License,
GNU Lesser General Public License, Mozilla license, Berkeley Software
Distribution license, Open Source Initiative license, MIT, Apache, and Public
Domain licenses, or similar licenses); or (b) utilizes peer-to-peer file sharing
technology.
(i) The Company has no obligations to provide maintenance or
technical support.
(ii) The Company has obtained written agreements from all
employees and third parties with whom Company has shared Information (i) of
Company that it considers confidential, or (ii) received from others that
Company is obligated to treat, or has stated it will treat, as confidential or
as restricted under a privacy or similar policy, which agreements require such
employees and third parties to keep such information confidential or to use it
only in accordance with said restrictions.
(iii) The Company is not a member of any standards
organization (including any similar organizations, such as special interest
groups or associations).
(iv) Schedule 2.13(f) lists any obligations of exclusivity,
non-competition, non-solicitation, right of first refusal, or right of first
negotiation or the like to which the Company is subject under any agreement.
15
(v) No parties other than the Company possess any current or
contingent rights to any source code that is part of the Company's Intellectual
Property or Information Assets (including through any escrow account).
(G) To the Company's actual knowledge, the computer systems used in
the Company's services and operations are free from any Virus. "VIRUS" means any
computer code, programming instruction or set of instructions that is
intentionally and specifically constructed with the ability to damage, interfere
with or otherwise adversely affect computer programs, data files or hardware
without the consent or intent of the computer user. This definition includes,
but is not limited to, self-propagating programming instructions commonly called
viruses or worms and code or features designed to disable or permit unauthorized
access to computer programs, data files or hardware;
2.14. TANGIBLE ASSETS. Schedule 2.14 lists all the tangible Assets of
the Company that have a depreciated cost in excess of $10,000. Except as set
forth on Schedule 2.14, the Company owns and has good and marketable title to
all the tangible property and Assets necessary for the conduct of its business
as presently conducted and as proposed to be conducted, and as required to be
conducted in accordance with applicable Law and the Company's obligations,
including, but not limited to, those Assets listed on Schedule 2.14. The Company
has paid all Taxes due or incurred upon the purchase of such Assets. The Company
has no knowledge of any defects in any of the tangible Assets in accordance with
normal industry practice, and the tangible Assets are in good operating
condition and repair. There are no Security Interests on any of the Assets of
the Company.
2.15. INVENTORY. Schedule 2.15 lists all the inventory ("INVENTORY") of
the Company as of January 31, 2005. Except as specifically identified on
Schedule 2.15, all the Inventory of the Company consists of cellular phones, all
of which is merchantable and fit for the purpose for which it was procured or
manufactured, and none of which is slow-moving, obsolete, damaged or defective,
subject only to the reserve for inventory write-down set forth on the face of
the Unaudited Balance Sheet (rather than in any notes thereto) as adjusted for
the passage of time through the Closing Date in accordance with the past custom
and practice of the Company. There are no Security Interests on any of the
Inventory.
2.16. CONTRACTS AND POLICIES. Schedule 2.16 lists the following
Contracts and other agreements to which the Company is a party and policies that
the Company has adopted or otherwise made available to third parties:
(A) any agreement (or group of related agreements) for the lease of
personal property to or from any person providing for lease payments in excess
of $25,000 individually or $50,000 in the aggregate or for a term of more than
one year;
(B) any agreement (or group of related agreements) for the purchase
or sale of raw materials, commodities, supplies, products or other personal
property, or for the furnishing or receipt of services in excess of $25,000
individually or $50,000 in the aggregate or which has a term of any duration;
(C) any partnership or joint venture agreement;
(D) any agreement (or group of related agreements) under which it
has created, incurred, assumed or guaranteed any indebtedness for borrowed
money, or any capitalized lease
16
obligation, in any amount, or under which it has imposed a Security Interest
on any of its Assets, tangible or intangible;
(E) any agreement concerning confidentiality or non-competition,
exclusivity, non-solicitation, right of first refusal, or right of first
negotiation;
(F) any agreement with any shareholder;
(G) any agreement to supply goods or services or Information to any
party, whether a related party or an unrelated third party, or to receive
goods or services or Information from any party, whether a related party or an
unrelated third party;
(H) any agreement which has a covenant or condition relating to a
change of control, including any agreement to provide consideration or
accelerate options to purchase stock;
(I) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance or other material plan or
arrangement (including any Employee Benefit Plan) for the benefit of its
current or former directors, officers and employees;
(J) any collective bargaining agreement;
(K) any agreement for the employment of any individual on a
full-time, part-time, consulting or other basis;
(L) any agreement or policies regarding Company undertakings or
statements relating to privacy or security of Information, including
Information owned by third parties that is handled, controlled or possessed by
Company;
(M) any agreements regarding electronic: (1) advertising, marketing
or promotions; (2) linking; (3) use of search engines, metatags, metadata or
the like; and/or (4) insertion of any Information onto a device owned or
operated by third parties such as customers of Company, survey takers or Panel
members, whether any of the foregoing is done electronically in whole or in
part. As used herein, the term "electronic" means relating to technology
having electrical, digital, magnetic, wireless, optical, electromagnetic, or
similar capabilities, including but not limited to communications by
telephone, cellular phone, facsimile, email, mobile services, or Internet;
(N) all agreements with and policies concerning current members of
the Panel, including but not limited to those regarding: online and offline
recruitment of Panel members and survey takers; Panel membership; compensation
or other reward of or incentives for Panel members, survey takers or
recruiters, including agreements with third parties for the processing,
clearing and delivery of same and for the reporting of unclaimed property; all
privacy and security policies, online terms of use, incentive policies,
sweepstakes rules and any other terms and conditions used in connection with
the Panel and the Company's websites in effect as of the date of the Closing
and applicable to current Panel members; and all procedures (including online
screens) relating to obtaining agreement or consent to any of the foregoing,
or
(O) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $25,000.
The Company has delivered to Parent a correct and complete copy of each
written agreement or policy listed in Schedule 2.16 and a written summary
setting forth the terms and
17
conditions of each oral agreement or policy referred to in Schedule 2.16. With
respect to each such agreement or policy: (i) such is legal, valid, binding,
enforceable and in full force and effect; (ii) such will continue to be legal,
valid, binding, enforceable and in full force and effect on identical terms
following the consummation of the transactions contemplated hereby; (iii) to the
Company's knowledge, no party or other person is in noncompliance, breach or
default, and no event has occurred which with notice or lapse of time would
constitute an act of noncompliance, breach or default, or permit cancellation,
modification or acceleration, under such agreement or policy; and (iv) to the
Company's knowledge, no party has repudiated any provision of such agreement.
2.17. ELECTRONIC RECORDS.
(A) With respect to any Law requiring the Company to retain a
contract or other record relating to a Transaction, and with respect to any
Law requiring that a contract or record to be in a writing, if the Company
meets that requirement by retaining an electronic record of the information in
the contract or other record, then such record (a) accurately reflects the
information set forth in the contract or other record; and (b) remains
accessible to all persons who are entitled to access (or to retain a copy) by
Law, for the period required by such Law and in a form that is capable of
being accurately reproduced for later reference, whether by transmission,
printing, or otherwise.
(B) With respect to any contract or record formed electronically by
one or more electronic agents, Company can legally attribute the act of that
agent to the person to be bound.
(C) With respect to information that is subject to the consumer
disclosure rules of 15 U.S.C. Section 7001(c), Company has provided all
disclosures and has obtained all consents, required by said section, and
retains adequate records thereof.
2.18. POWERS OF ATTORNEY. There are no outstanding powers of attorney
executed on behalf of the Company.
2.19. INSURANCE. Schedule 2.19 sets forth the following information with
respect to each current insurance policy (including but not limited to policies
providing property, casualty, liability and workers' compensation coverage, bond
and surety arrangements and coverage for Information Assets and Intellectual
Property) to which the Company has been a party, a named insured, or otherwise
the beneficiary of coverage:
(A) the name, address, and telephone number of the agent;
(B) the name of the insurer, the name of the policyholder and the
name of each covered insured;
(C) the policy number, the period of coverage and the amount of the
annual premiums payable;
(D) the scope (including an indication of whether the coverage was
on a claims made, occurrence, or other basis) and amount (including a
description of how deductibles and ceilings are calculated and operate) of
coverage; and
(E) a description of any retroactive premium adjustments or other
loss-sharing arrangements.
18
With respect to each such insurance policy: (i) such policy is legal,
valid, binding, enforceable and in full force and effect; (ii) such policy will
continue to be legal, valid, binding, enforceable and in full force and effect
on identical terms following the consummation of the transactions contemplated
hereby; (iii) neither the Company nor to the Company's knowledge any other party
to the policy is in breach or default (including with respect to the payment of
premiums or the giving of notices), and no event has occurred which, with notice
or the lapse of time, would constitute such a breach or default, or permit
termination, modification, or acceleration, under such policy; and (iv) no party
to the policy has repudiated any provision thereof. The Company has been covered
during the past three years by insurance in scope and amount customary and
reasonable for the business in which it has engaged. Schedule 2.19 also
describes any self-insurance arrangements affecting the Company.
2.20. EMPLOYEES. Schedule 2.20 sets forth a true and complete list of
all employees of the Company, their respective positions, locations, salaries or
hourly wages, accrued vacation (in days and monetary value), bonus or other
compensation arrangements and severance arrangements, each as of the date hereof
and as of the Closing Date. To the knowledge of the Company, no executive, key
employee or group of employees has any plans to terminate employment with the
Company. Except as set forth in Schedule 2.20, each employee of the Company is
employed on an "at will" basis and has no right to any compensation following
termination of employment except for wages earned prior to termination. Each
employee of the Company has executed a proprietary information and inventions
agreement in the form provided to counsel for Parent. Except as set forth in
Schedule 2.20, no employee or former employee of the Company has had such
employee's employment with the Company terminated by the Company or has
voluntarily terminated such employee's employment with the Company during the
12-month period immediately preceding the Closing. The Company has no cause to
believe that any worker's compensation or other claims will be filed following
the Closing by any individuals who are, as of the Closing, former employees of
the Company that will, in the aggregate, cause the amount of the Company's
periodic payments (or the portion of Parent's periodic payments reasonably
allocable to the office locations of the Company) to any worker's compensation
insurance carrier(s) to increase. The Company has no cause to believe that any
claims for benefits, whether insured or otherwise (including, but not limited
to, workers' compensation, life insurance, medical and disability programs),
under the Company's employee benefit programs brought by, or in respect of, any
employees or former employees of the Company, which claims arise out of events
occurring on or prior to the Closing Date, will not be satisfied by the
insurance carriers who served as the Company's insurance carriers during the
periods prior to Closing, in accordance with the terms and conditions of such
programs or applicable workers' compensation statutes without interruption as a
result of the employment by Parent of any such employees after the Closing Date.
The Company is and has been in compliance in all material respects with all Laws
respecting employment practices, and no grounds exist for the assertion of any
claims or initiation of any proceedings against the Company in connection
therewith. The Company is not a party to or bound by any collective bargaining
agreement, nor has it experienced any strikes, grievances, claims of unfair
labor practices or other collective bargaining disputes. The Company has not
committed any unfair labor practice. There is no organizational effort presently
being made or threatened by or on behalf of any labor union with respect to
employees of the Company.
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2.21. EMPLOYEE BENEFITS.
(A) Except as set forth on Schedule 2.21, with respect to all
employees, former employees, directors and independent contractors of the
Company and their dependents and beneficiaries, neither the Company nor any
ERISA Affiliate presently maintains, contributes to or has any Liability under
or with respect to any Employee Benefit Plan. The plans, programs and
arrangements set forth on Schedule 2.21 are herein referred to as the "COMPANY
EMPLOYEE BENEFIT PLANS." Each Company Employee Benefit Plan (and each related
trust, insurance contract or other funding arrangement) complies in form and
in operation in all material respects with the applicable requirements of
ERISA, the Code, and other applicable Laws and governing documents and
agreements, and each Company Employee Benefit Plan intended to be qualified
under Section 401(a) or 423 of the Code (and its related trust, if applicable)
is so qualified and has been tax-qualified since its creation. Each Company
Employee Benefit Plan has been maintained and administered in material
compliance with its terms and with the requirements prescribed by ay and all
statutes, orders, rules and regulations, including ERISA and the Code, which
are applicable to such plans. With respect to each Company Employee Benefit
Plan, there has been no act or omission by the Company or any ERISA Affiliate
that would impair the right or ability of the Company or any ERISA Affiliate
to unilaterally amend in whole or part or terminate such Company Employee
Benefit Plan at any time, subject to the terms of any insurance contract or
other contractual arrangements with third parties, and the Company has
delivered to Parent true and complete copies of: (i) the plan documents,
including any related trust agreements, insurance contracts or other funding
arrangements, or a written summary of the terms and conditions of the plan if
there is no written plan document; (ii) the most recent IRS Form 5500; (iii)
the most recent financial statement and, if applicable, actuarial valuation;
(iv) all correspondence with the Internal Revenue Service, the Department of
Labor and other governmental agencies with respect to the past three plan
years other than IRS Form 5500 filings; and (v) the most recent summary plan
description.
(B) Neither the Company nor any of its directors, officers or
employees has any Liability with respect to any Company Employee Benefit Plan
for failure to comply with ERISA, the Code, any other applicable Laws or any
governing documents or agreements. No non-exempt "prohibited transaction," as
defined in ERISA Section 406 or Code Section 4975, has occurred with respect
to any Company Employee Benefit Plan.
(C) No Company Employee Benefit Plan has any unfunded Liability.
With respect to the Company Employee Benefit Plans, all applicable
contributions and premium payments for all periods ending prior to the Closing
Date (including periods from the first day of the then current plan year to
the Closing Date) will be made prior to the Closing Date in accordance with
past practice.
(D) Neither the Company nor any ERISA Affiliate maintains,
maintained, contributes to, or has any Liability (including, but not limited
to, current or potential withdrawal Liability) with respect to any current or
former employee benefit plan which is or has been subject to Title IV of
ERISA, including any Multiemployer Plan. No Company Employee Benefit Plan is a
multiple employer welfare arrangement as defined in Section 3(40) of ERISA.
(E) With respect to all employees and former employees of the
Company, neither the Company nor any ERISA Affiliate presently maintains,
contributes to or has any Liability under any funded or unfunded medical,
health or life insurance plan or arrangement
20
for present or future retirees or present or future terminated employees
except as required by the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended, or state continuation coverage laws. There has been no act
or acts which would result in a disallowance of a deduction or the imposition
of a tax pursuant to Section 4980B, or any predecessor provision, of the Code
or any related regulations. No event has occurred with respect to which the
Company or any Affiliates could be liable for a material Tax imposed by any of
Sections 4972, 4976, 4977, 4979 or 4980 of the Code, or for a material civil
penalty under Section 502(c) of ERISA.
(F) There is no pending, or to the knowledge of the Company,
threatened legal action, proceeding, audit, examination or investigation
against or involving any Company Employee Benefit Plan maintained by the
Company or any ERISA Affiliate (other than routine claims for benefits). To
the knowledge of the Company, there is no basis for, and there are no facts
which could give rise to, any such condition, legal action, proceeding or
investigation. Any bonding required with respect to any Company Employee
Benefit Plans in accordance with applicable provisions of ERISA has been
obtained and is in full force and effect.
(G) Except as set forth on Schedule 2.21, to the knowledge of the
Company it does not, have any obligation, or liability in connection with any
obligation, to provide health care continuation coverage under ERISA Section
608 and Code Section 4980B ("COBRA COVERAGE") to any individual whose
qualifying event (within the meaning of Code Section 4980B(f)(3)) occurred
prior to the Closing Date and who is, or whose qualifying event occurred in
connection with, a covered employee whose last employment prior to the
qualifying event was with the Company.
2.22. GUARANTIES. The Company is not a guarantor or otherwise is liable
for any Liability or obligation (including indebtedness) of any other person.
2.23. ENVIRONMENT, HEALTH AND SAFETY. The Company is and has been in
compliance in all material respects with all Environmental, Health and Safety
Laws. The Company has never received any written notice, claim, subpoena, or
summons, or been threatened in writing with any notice, claim, subpoena, or
summons, from any person alleging (i) any Liability of the Company under any
Environmental, Health and Safety Laws or (ii) any violation by the Company of
any Environmental, Health and Safety Law.
2.24. CERTAIN BUSINESS RELATIONSHIPS WITH THE COMPANY. No Management
Shareholder nor any Affiliates of any Management Shareholder has been involved
in any business arrangement or relationship with the Company within the past 12
months (other than employment by the Company), and no Management Shareholder nor
any Affiliates of a Management Shareholder owns any Asset which is used in the
business of the Company.
2.25. CUSTOMERS. Schedule 2.25 contains a list of the 15 largest
customers of the Company for the 12-month period immediately preceding January
31, 2005 (determined on the basis of the total dollar amount of net revenues)
showing the total dollar amount of net revenues from each such customer during
such 12-month period. The Company has received no information and is not in
possession of any facts indicating that any of the customers of the Company
listed on Schedule 2.25 will not continue (or are contemplating not continuing)
to be customers of the business of the Company after the Closing at
substantially the same level of purchases as heretofore.
21
2.26. PRODUCT, INFORMATION AND SERVICE WARRANTIES. Each product and all
Information licensed, sold, leased or delivered, and each service performed, by
the Company has been in conformity with all applicable Laws and contractual
commitments or policies and all express, implied or statutory warranties, and
the Company has no Liability (and there is no Basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint, claim or
demand against any of them giving rise to any Liability) for: the replacement or
repair of any product, the inaccuracy or inadequacy of any Information, the
substandard performance of any service or Panel or selection or composition or
adequacy of a Panel, or other damages in connection with the product,
Information or services provided by the Company, subject only to the reserve for
product and service warranty claims set forth on the face of the Unaudited
Balance Sheet (rather than in any notes thereto) as adjusted for the passage of
time through the Closing Date in accordance with the past custom and practice of
the Company. No product or Information sold, licensed leased or delivered, or
service performed, by the Company is subject to any guaranty, warranty or other
indemnity beyond the applicable standard terms and conditions of sale, license,
lease, service or performance. Schedule 2.26 includes copies of the Company's
standard terms and conditions of sale, license, lease, service or performance
(containing applicable guaranty, warranty and indemnity provisions).
2.27. PRODUCT, INFORMATION AND SERVICE LIABILITY. The Company has no
Liability and, to its knowledge, there is no Basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint, claim or
demand against the Company giving rise to any Liability) arising out of any
injury or damages (whether actual or alleged) to any person or its property
(including Intellectual Property), Information, privacy or its personal affairs
or its personal or business operations or prospects as a result of the
ownership, license, possession or use of (i) any product or Information sold,
licensed, leased, delivered or otherwise provided (directly or indirectly) by
the Company or (ii) any service performed by the Company.
2.28. PRIVACY, SECURITY AND IDENTITY THEFT ETC.
(A) The Company represents and warrants that it is in full
compliance with all Laws applicable to its business, the Panel, survey takers,
users of Company websites and/or service providers regarding: (1) privacy,
data protection or the security of Information, including but not limited to,
as applicable, the U.S. Children's Online Privacy Protection Act, the U.S.
Health Insurance Portability and Accountability Act of 1996 ("HIPAA"), the
U.S. Gramm Leach Bliley Act ("GLBA"), the European Union Data Protection
Directive, the Canadian personal Information Protection and Electronic
Documents Act, and all other Laws relating to privacy, data protection or
security of Information; (2) disposal of Information; (3) reporting or notice
of actual or attempted breaches in security or suspected criminal activity;
(4) identity theft; (5) "consumer reporting agencies," as defined in the U.S.
Fair Credit Reporting Act (FCRA) as amended by the Fair and Accurate Credit
Transactions Act, or users of consumer reports or furnishers of information to
consumer reporting agencies (all as defined in the FCRA); (6) the collection,
transmission, use, maintenance, storage, access to, disclosure, processing and
disposal (collectively "HANDLING" or variation) of personally identifying
information, including social security or other identification numbers and
account numbers; (7) telemarketing; (8) "spam," commercial email messages and
commercial mobile service messages; (9) direct marketing or sharing
Information for direct marketing purposes (with any third party, including
Affiliates); (10) advertising or other communications directed to particular
users based on Information about them; (11) "opt in or out" requests relating
to any
22
of the foregoing, including providing required opportunities to do so and
honoring such requests; and (12) consents, notices, disclosures, Internet
postings, and reports relating to any of the foregoing or Handling thereof.
(B) Regarding any subject matter referenced in Section 2.28(a), the
Company is in compliance in all material respects with all of its obligations
and all its statements wherever made (including without limitation, in
policies, on websites or electronically through P3P or other electronic
settings that communicate with browsers or the like) are consistent with each
other, accurate, not misleading and do not constitute an unfair act or
practice, including (without limitation) obligations or statements not
required by Laws.
(C) Regarding any subject matter referenced in Section 2.28(a) and
(b), the Company has not, to its knowledge, been the subject of and has not
received notice of any assessment or audit indicating any noncompliance, any
actual or attempted breach of security, or any claim that could give rise to a
Liability.
(D) The Company does not collect or use any personally identifiable
information from users of its or other websites, or insert (or cause to be
inserted) onto their computers or other access device, any Information that is
not described in a privacy policy posted on the site and that complies with
applicable Laws; the Company requires all users of its website, Panel members
and survey takers to agree to the privacy, security and/or identity theft
policy and terms of use or other agreements as relevantly listed in Schedule
2.16.
(E) The Company owns all right, title, and interest in and to all
data Company Handles regarding users of its website, Panel members and survey
takers, including all demographic data and other data supplied to the
Company's customers.
(F) The Company has not and does not Handle personally or
individually identifying information, including health information
(collectively, "PII") other than in a manner consistent with Company's posted
privacy policy and standard industry privacy practices, and in compliance with
Laws. The Company is not a "covered entity", as that term is defined by 45
C.F.R.Section 160.103, and the Company is not subject as a "covered entity" to
the Standards for Privacy of Individually Identifiable Health Information
promulgated by the U.S. Department of Health and Human Services in accordance
with the Administrative Simplification provisions of HIPAA. The Company is
either not subject to or is in compliance in all respects with any similar
privacy laws in existence in any state or foreign jurisdiction. The Company is
in compliance with all obligations and responsibilities under any and all
agreements (including without limitation business associate agreements to
which the Company is a party that require the Company to protect the
confidentiality, integrity or security of health information relating to an
individual patient. The Company also complies with requirements of the Fair
Credit Reporting Act regarding medical information (as defined therein).
(G) The Company: (i) has no knowledge of any event or circumstance
that would constitute a default under any business associate, limited data
use, or other agreement with an entity subject to HIPAA or other Laws
regarding the subject matter of Section 2.28(a) or (b); (ii) has no knowledge
of any use or disclosure of PII that is not permitted by the applicable
agreement with the data source or applicable Laws or that is not required by
Laws; (iii) has no knowledge or any outstanding or unresolved complaint
regarding Handling by Company or its agents, customers or any other persons,
of PII or other information; (iv) has implemented appropriate and reasonable
safeguards to prevent use or disclosure of PII other than as provided
23
in applicable contracts with the data source or as required by Laws; (v) has
not disclosed or provided any subcontract or agent with access to PII without
first having obtained reasonable assurance, or contractual assurance where
required by Laws, that such subcontractor or agent will comply with the same
restrictions and conditions that apply to the Company with respect to the
information; and (vi) has (A) obtained or required data sources to obtain
authorizations compliant with requirements under HIPAA and other applicable
Laws for the disclosure of PII to the Company or (B) a system that maintains
information relating to the disclosure of PII appropriate to providing an
accounting of disclosures under HIPAA or other applicable Laws, including
without limitation, the date of the disclosure, the name and address (if
known) of the entity or person who received the information; a brief
description of the protected health information disclosed; and a brief
statement of the purpose of the disclosure that may reasonably informs an
individual of the basis for the disclosure.
(H) The Company has developed and implemented (or is so doing where
applicable Laws allow delayed implementation) appropriate safeguards
reasonably and appropriately: (i) to protect the confidentiality, integrity
and availability of individually identifiable health information maintained in
electronic form, which safeguards will be in place and operational on or
before April 20, 2005 and continuously thereafter; and (ii) to protect all PII
from unauthorized access, destruction, use, modification, or disclosure as
required by Laws or by Company obligations or policies.
2.29. PANEL.
(A) The GoZing online panel (the "PANEL") consists of the total
Valid email addresses of the individuals over the age of 13, and comprised of
the gender and survey history as shown on Schedule 2.29.
(B) On the Closing Date: (i) the Panel consists and will consist of
not less than the number of unique email addresses listed in Schedule 2.29;
(ii) each individual who is a member of the Panel ("PANEL MEMBER") has joined
voluntarily, has agreed to the privacy policy and incentive policy set forth
on Schedule 2.29 and has also double opted in by confirming their agreement to
said policies and their desire to participate in surveys by affirmatively
responding to a confirmatory email sent by the Company after joining; (iii) by
joining, all Panel members have agreed to receive continuing email
solicitations from Company to participate in online marketing research
surveys, but members have no obligation to participate in any particular
survey and may elect to unsubscribe at any time; and (iv) all emails to Panel
members comply with 15 U.S.C. Section 7701 et. seq. and all other Laws
regarding "spam," and all requests to "opt-out" of receipt of any or all
emails are timely honored by Company and no further commercial email messages
are sent to members so requesting.
(C) "VALID" addresses are email addresses that do not test as a
Rejected Address, and a "REJECTED Address(es)" shall mean an email address
that when sent an email provides a bounce-back-message as follows (i) mail box
does not exist, (ii) user unknown, (iii) message undeliverable, (iv) mailbox
unavailable, (v) destination server could not be found, or (vi) mailbox not
found.
(D) As of the date hereof, the demographic and statistical
information provided by the Company to Parent regarding the Panel as of such
date as set forth on Schedule 2.29 is true and accurate in all material
respects (the "BASELINE DATA"). At the Closing, the Company will deliver a
certificate of its president certifying that, as of a date not more than five
days
24
prior to the Closing, the Company re-tested the Baseline Data in respect of
the Panel as of such date and that there was not a decline of more than 2%
from any line item in the previously provided data.
2.30. DISCLOSURE. To the Company's knowledge, no representation or
warranty made by the Company, nor any document, written information, statement,
financial statement, certificate, schedule or exhibit prepared and furnished or
to be prepared and furnished by the Company or its representatives pursuant
hereto or in connection with the transactions contemplated hereby, contains or
will contain any untrue statement of a material fact, or omits or will omit to
state a material fact necessary to make the statements of facts contained herein
or therein not misleading in light of the circumstances under which they were
furnished. There is no fact known to the Company that has not been disclosed to
Parent in the schedules or otherwise in writing (whether as part of due
diligence or otherwise) that was or is, or so far as the Company can reasonably
foresee, will have a Company Material Adverse Effect or was or is or will have a
material adverse effect on the ability of the Company to perform its obligations
under this Agreement.
ARTICLE III: REPRESENTATIONS OF PARENT AND SUB
The Parent and Sub hereby represent and warrant, jointly and severally,
to the Company as follows as of the date of this Agreement and as of the
Closing Date:
3.1. ORGANIZATION AND QUALIFICATION. Each of Parent and Sub is a
corporation duly organized, validly existing and in good standing under the laws
of the state of its incorporation and has all requisite power and authority to
own, lease and operate its Assets and to carry on its business as it is now
being conducted electronically or non-electronically, and each is duly qualified
and in good standing to do business in each jurisdiction in which the nature or
level of the business conducted by it or the ownership or leasing or its
activities regarding its Assets or business makes such qualification necessary,
except for such failures to be so qualified or licensed and in good standing as
would not, individually or in the aggregate, have a Parent Material Adverse
Effect.
3.2. AUTHORITY. Parent and Sub each have all requisite corporate power
and authority to execute and deliver this Agreement, to perform its respective
obligations hereunder 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 authorized by all necessary
corporate action and no other corporate proceeding on the part of either Parent
or Sub is necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by Parent and Sub, respectively, and, assuming the due authorization,
execution and delivery thereof by the Company, constitutes the legal, valid and
binding obligations of Parent and Sub, respectively, enforceable in accordance
with its terms.
3.3. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(A) The execution and delivery of this Agreement by Parent and Sub
does not, and the performance of this Agreement by them will not, (i) conflict
with or violate the Articles of Incorporation or Bylaws of Parent or Sub, (ii)
conflict with or violate any Laws in effect as of the date of this Agreement
applicable to Parent or Sub or by which any of their respective properties is
bound, or (iii) result in any breach of or constitute a default (or an event
that with
25
notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of,
or require payment under, or result in the creation of a lien or Encumbrance
(other than a Permitted Encumbrance) on, any of the properties or Assets of
Parent or Sub pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Parent or Sub is a party or by which Parent or Sub or any of their
respective properties is bound by or subject to, except for breaches,
defaults, events, rights of termination, amendment, acceleration or
cancellation, payment obligations or Liens or Encumbrances that would not have
a Parent Material Adverse Effect.
(B) The execution and delivery of this Agreement by Parent or Sub
does not, and the performance of this Agreement by Parent or Sub will not,
require either to obtain any consent, approval, authorization or permit of, or
to make any filing with or notification to, any Governmental Entities, except
(i) for applicable requirements, if any, of the Exchange Act and (ii) where
the failure to obtain such consents, approvals, authorizations or permits, or
to make such filings or notifications, would not, either individually or in
the aggregate, prevent either Parent or Sub from performing its obligations
under this Agreement.
3.4. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as and to the extent
disclosed in filings with the SEC prior to the date of this Agreement or as
contemplated in this Agreement, since the end of the calendar period for which
Parent filed its most recent report, there has not been (a) a Parent Material
Adverse Effect or (b) any significant change by Parent in its accounting
methods, principles or practices.
3.5. DISCLOSURE. No representation or warranty made by Parent or Sub,
nor any document, written information, statement, financial statement,
certificate, schedule or exhibit prepared and furnished or to be prepared and
furnished by Parent or Sub or its representatives pursuant hereto or in
connection with the transactions contemplated hereby, contains or will contain
any untrue statement of a material fact, or omits or will omit to state a
material fact necessary to make the statements of facts contained herein or
therein not misleading in light of the circumstances under which they were
furnished. All statements and information contained in any certificate,
instrument, schedule or document delivered by or on behalf of Parent to Company
will be deemed representations and warranties by Parent or Sub. There is no fact
known to Parent that has not been disclosed in the schedules or otherwise in
writing (whether as part of due diligence or otherwise) that was or is, or so
far as the Parent can reasonably foresee, will have a Parent Material Adverse
Effect or was or is or will have a material adverse effect on the ability of
either Parent or Sub to perform its obligations under this Agreement.
3.6. CAPITALIZATION OF SUB. The entire authorized capital stock of Sub
consists solely of 100 shares of Common Stock, without par value, all of which
are issued and outstanding. Parent owns all issued and outstanding capital stock
of Sub, free and clear of any and all Liens.
3.7. ABSENCE OF LITIGATION. There is no claim, action, suit, litigation,
proceeding, arbitration or investigation, at law, in rem or in equity (including
actions or proceedings seeking injunctive relief), pending or to the Parent's
knowledge threatened against the Parent or any of its Assets that is reasonably
likely to affect the ability of Parent to consummate the transactions
contemplated hereby. The Parent is not subject to any continuing order of,
consent decree, settlement agreement or other written agreement with or
continuing investigation by, any court or
26
Governmental Entity, or any judgment, order, writ, injunction, decree or award
of any court, Governmental Entity or arbitrator.
ARTICLE IV: COVENANTS
During the period from the date of this Agreement (except as otherwise
indicated) and continuing until the earlier of the termination of this Agreement
or the Effective Time (or later where so indicated), Company agrees (except as
permitted by Parent's prior written consent or as specifically contemplated by
this Agreement):
4.1. ORDINARY COURSE. Company will carry on its business in the Ordinary
Course of Business in substantially the same manner as heretofore conducted and,
to the extent consistent with such business, use all reasonable efforts
consistent with past practice and policies to preserve intact its present
business organizations, keep available the services of its present officers,
consultants, and employees and preserve its relationships with customers,
suppliers, distributors, and others having business dealings with it. Company
will promptly notify Parent of any event or occurrence or emergency which is not
in the Ordinary Course of Business of Company and which is material and adverse
to Company's business condition. The foregoing notwithstanding, Company will
not:
(A) (i) increase the compensation payable to, or to become payable
to, any employee, director or executive officer (except as permitted by
Section 4.5); (ii) grant any severance or termination pay to, or enter into
any employment or severance agreement with, any director, officer or employee
(except as permitted by Section 4.5); (iii) establish, adopt, enter into,
amend, modify or terminate any Employee Benefit Plan or arrangement except as
may be required by applicable Law; or (iv) hire any person other than persons
to replace existing employees who cease to be employed with the Company prior
to the Closing, with such replacement persons being hired at the same total
cost and salary as the former whom they are replacing;
(B) declare or pay any dividend on or make any other distribution
in respect of, outstanding shares of its capital stock;
(C) (i) redeem, purchase or otherwise acquire any shares of its
capital stock or any securities or obligations convertible into or
exchangeable for any shares of its capital stock, or any options, warrants or
conversion or other rights to acquire any shares of its capital stock or any
such securities or obligations; (ii) effect any reorganization or
recapitalization; or (iii) split, combine or reclassify any of its capital
stock or issue or authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for, shares of its capital stock;
(D) (i) issue, deliver, award, grant or sell, or authorize or
propose the issuance, delivery, award, grant or sale (including the grant of
any Security Interests, Liens, claims, pledges, limitations in voting rights,
charges or other Encumbrances) of, any shares of any class of its capital
stock (including shares held in treasury), any securities convertible into or
exercisable or exchangeable for any other shares, or any rights, warrants or
options to acquire, any such shares; and (ii) amend or otherwise modify the
terms of any such rights, warrants or options the effect of which will be to
make such terms more favorable to the holders thereof;
27
(E) acquire or agree to acquire, by merging or consolidating with,
by purchasing an equity interest in, all or a portion of the Assets of, or by
any other manner, any corporation, partnership, association or other business,
organization or division thereof, or otherwise acquire or agree to acquire any
Assets of any other person (other than the purchase of Assets from suppliers
or vendors in the Ordinary Course of Business) which are material,
individually or in the aggregate, to the Company;
(F) sell, lease, license, exchange, mortgage, pledge, transfer or
otherwise dispose of, or agree to sell, lease, license, exchange, mortgage,
pledge, transfer or otherwise dispose of, any of its material Assets;
(G) propose or adopt any amendments to its Articles of
Incorporation or its Bylaws;
(H) change any of its methods of accounting except as may be
required by Law or GAAP;
(I) create, or permit the creation of, any Lien upon any Assets
outside the Ordinary Course of Business;
(J) enter into any employment Contract or collective bargaining
agreement, or modify the terms of any existing such Contract or agreement;
(K) sell, lease, license, transfer or assign any Assets;
(L) make any capital expenditures other than in the Ordinary Course
of Business, or make any capital expenditures which in the aggregate exceed
$10,000;
(M) amend or renew, or enter into any Contract involving operations
outside of the United States;
(N) enter into any Contract outside the Ordinary Course of
Business; or
(O) take or agree to take any action that would or is reasonably
likely to result in any representations and warranties of the Company set
forth in this Agreement being untrue or in any of the conditions to the Merger
not being satisfied.
4.2. PREPARATION OF AUDITED HISTORICAL FINANCIAL STATEMENTS. As soon as
reasonably practicable, but in any event, prior to the Effective Time, the
Company will deliver to Parent audited balance sheets of the Company as of
December 31, 2001, 2002 and 2003, and the related statements of operations,
statements of cash flows and statements of stockholders equity for the twelve
month periods then ended, and the notes and schedules thereto (the "AUDITED
HISTORICAL FINANCIAL STATEMENTS"), together with the unqualified report thereon
of LCM and the consent of LCM to include such Audited Historical Financial
Statements in the SEC filings of Parent. The Audited Historical Financial
Statements shall be in all respects reasonably acceptable to Parent in form and
substance.
4.3. PREPARATION OF STOCKHOLDER CONSENT MATERIALS.
(A) As promptly as practicable after the execution of this
Agreement (to the extent not done prior to the execution of this Agreement),
the Company will promptly submit for the approval of all of the holders of
Company Securities, information and documents relating to the terms of the
Merger and this Agreement in form and substance satisfactory to Parent and its
counsel, which will satisfy all requirements of the CGCL.
28
(B) On or prior to the Closing Date, the Company and the
Shareholders will take all action necessary under Section 280G of the Code and
the Treasury Regulations thereunder to ensure that no payment in connection
with the Merger constitutes an Excess Parachute Payment.
4.4. EXCLUSIVITY; ACQUISITION PROPOSALS. Unless and until this Agreement
shall have been terminated by either party pursuant to Article IX hereof,
Company shall not (and each shall use its commercially reasonable best efforts
to ensure that none of its officers, directors, agents, representatives or
affiliates) take or cause or permit any person to take, directly or indirectly,
any of the following actions with any party other than Parent and its designees:
(i) solicit, encourage, initiate or participate in any negotiations, inquiries
or discussions with respect to any offer or proposal to acquire all or any
significant part of its business, assets or capital shares whether by merger,
consolidation, other business combination, purchase of assets, tender or
exchange offer or otherwise (each of the foregoing, an "ACQUISITION
TRANSACTION"), (ii) disclose, in connection with an Acquisition Transaction, any
information not customarily disclosed to any person other than Parent or its
representatives concerning Company's business or properties or afford to any
person other than Parent or its representatives or entity access to its
properties, books or records, except in the Ordinary Course of Business and as
required by law or pursuant to a governmental request for information (and then
only after giving prior notice to Parent), (iii) enter into or execute any
agreement relating to an Acquisition Transaction, or (iv) make or authorize any
public statement, recommendation or solicitation in support of any Acquisition
Transaction or any offer or proposal relating to an Acquisition Transaction
other than with respect to the Merger; provided, however, that if, at any time
prior to the approval of the Merger by the stockholders of the Company, the
Board of Directors of Company determines in good faith, based on the advice of
outside counsel, that failure to do so would be reasonably likely to constitute
a breach of its fiduciary duties to the Company or the Company's stockholders
under applicable law, the Company, in response to a written proposal with
respect to an Acquisition Transaction that was (a) unsolicited or that did not
otherwise result from a breach of this Section, and (b) is reasonably likely to
lead to a Superior Proposal (as defined below), may (1) furnish non-public
information with respect to Company to the person who made such written proposal
with respect to an Acquisition and (2) participate in negotiations regarding
such written proposal with respect to an Acquisition Transaction. For purposes
hereof, a "SUPERIOR PROPOSAL" shall mean a proposal with respect to an
Acquisition Transaction that (x) the Board of Directors of Company, in good
faith, based on the advice of outside legal counsel, determines to be more
favorable than the Parent's offer, and (y) is already financed or readily
financeable. Company will notify Parent immediately if it is contacted by any
third party with respect to an Acquisition Transaction and provide Parent with
reasonably detailed information regarding such proposal, including the identity
of the party making such proposal, unless such disclosure would violate a
currently existing confidentiality agreement.
4.5. BENEFITS; COMPENSATION. The Company will not adopt or amend any
other Employee Benefit Plan or pay any pension or retirement allowance not
required by any existing Employee Benefit Plan. The Company will not enter into
or modify any employment contracts, increase the salaries, wage rates, severance
or fringe benefits of its officers, directors or employees or pay bonuses,
severance or other remuneration except for current salaries, severance and other
remuneration for which Company is obligated under arrangements existing prior to
the date hereof to which Company is a party and which have been disclosed on
Schedule 2.20; provided that Company intends to distribute compensation to Gregg
B. Lavin, Matthew D. Dusig,
29
and Lance H. Suder (the "EXECUTIVES") and to William Borzage of $450,000 under
the Company's 2004 Executive Management Bonus Plan.
4.6. CLAIMS. Company will not settle any claim, action or proceeding,
except in the Ordinary Course of Business consistent with past practice.
4.7. ACCESS TO PROPERTIES AND RECORDS. To the extent permitted by
applicable law and subject to the confidentiality agreement dated as of July 27,
2004 between Parent and the Company, throughout the period between the date of
this Agreement and the Closing, Company will give Parent and its representatives
full access, during reasonable business hours but in such a manner as not unduly
to disrupt the business of Company, to its premises, properties, contracts,
commitments, books, records, and affairs, and will provide Parent with such
financial, technical, and operating data and other information pertaining to its
business as Parent may request. Without limiting the foregoing, Company will
make available to Parent code, documents, outstanding contracts, personnel
records and such other information as reasonably requested so that Parent can
perform a full investigation of Company's technology, business and legal
conditions, including materials and information with respect to Company's
technology, design, and architecture, documentation, and representative sample
of source code. With Company's prior consent, which will not be unreasonably
withheld, Parent will be entitled to make appropriate inquiries of third parties
in the course of its investigation, including, without limitation, verification
of customer satisfaction via discussions with customer references and, at
Parent's sole discretion, an independent audit of Company's financial
statements. Company will cooperate with Parent in facilitating such discussions
and audit activities at appropriate times.
4.8. BREACH OF REPRESENTATIONS AND WARRANTIES. In the event of, and
promptly after becoming aware of, the occurrence of or the pending or threatened
occurrence of any event that would cause or constitute a breach or inaccuracy of
the representations and warranties in Article II, Company will give detailed
written notice thereof to Parent and will use its reasonable best efforts to
prevent or remedy promptly such breach or inaccuracy.
4.9. CONSENTS. The Company will promptly apply for or otherwise seek,
and use its best efforts to obtain, all consents and approvals, and make all
filings, required with respect to the consummation of the Merger.
4.10. RELEASES. The Company will use its commercially reasonable efforts
to secure full release of all claims in a form satisfactory to Parent from the
claimants, government agencies or potential claimants listed on Schedule 4.10,
including a release from all shareholders and optionholders of the Company in
the form of EXHIBIT D (the "SHAREHOLDER RELEASE").
4.11. TERMINATION OF CONTRACTS. Company will use its best efforts and
will take all steps as reasonably requested by Parent and its counsel to
terminate or modify to Parent's satisfaction those agreements listed on Schedule
4.11.
4.12. NOTICE OF EVENTS. Throughout the period between the date of this
Agreement and the Closing, the Company will promptly advise Parent of any and
all material events and developments concerning its financial position, results
of operations, assets, liabilities, or business or any of the items or matters
concerning Company covered by the representations, warranties, and covenants of
Company contained in this Agreement.
4.13. COMMUNICATIONS. The Company will work together with Parent to
develop appropriate communications to Company employees regarding the
transaction and a transition
30
plan in contemplation of the Closing. All employee communications pertinent to
employment matters connected with the transaction will be subject to the prior
approval of Company and Parent. Additionally, all external communications
regarding the transaction will be subject to the approval of Company and Parent.
4.14. TAX RETURNS. The Company shall promptly provide Parent with copies
of all Returns that have been filed or are filed prior to the Closing Date. The
Company shall properly and timely file all Returns with respect to the Company
required to be filed prior to the Closing Date and shall pay all Taxes required
to be paid prior to the Closing Date. All such Returns shall be prepared
consistent with past practice and shall be subject to the approval of Parent,
which approval shall not be unreasonably withheld or delayed. The Company shall
(i) notify Parent promptly if it receives notice of any Tax audit, the
assessment of any Tax, the assertion of any Tax lien, or any request, notice or
demand for Taxes by any taxing authority, (ii) provide Parent a description of
any such matter in reasonable detail (including a copy of any written materials
received from the taxing authority), and (iii) take no action with respect to
such matter without the consent of Parent. The Company shall not (i) make or
revoke any Tax election which may affect the Company, (ii) execute any waiver of
restrictions on assessment of any Tax, or (iii) enter into any agreement or
settlement with any taxing authority with respect to any Tax without the
approval of Parent, which approval shall not be unreasonably withheld or
delayed.
4.15. COMMERCIALLY REASONABLE EFFORTS. The Company will use its
commercially reasonable efforts to effectuate the transactions contemplated
hereby and to fulfill and cause to be fulfilled the conditions to Closing under
this Agreement.
ARTICLE V: COVENANTS OF PARENT AND SUB
During the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement or the Effective Time (or later
where so indicated), Parent and Sub agree (except as expressly contemplated by
this Agreement or with Company's prior written consent):
5.1. BREACH OF REPRESENTATIONS AND WARRANTIES. In the event of, and
promptly after becoming aware of, the occurrence of or the pending or threatened
occurrence of any event that would cause or constitute a breach or inaccuracy by
Parent or Sub of the representations and warranties set forth in Article III,
Parent will give detailed notice thereof to Company and will use its reasonable
best efforts to prevent or remedy promptly such breach or inaccuracy.
5.2. CONSENTS. Parent will promptly apply for or otherwise seek, and use
its commercially reasonable efforts to obtain, all consents and approvals, and
make filings, required with respect to the consummation of the Merger.
5.3. COMMERCIALLY REASONABLE EFFORTS. Each of Parent and Sub will use
its commercially reasonable efforts to effectuate the transactions contemplated
hereby and to fulfill and cause to be fulfilled the conditions to Closing under
this Agreement.
5.4. EMPLOYEE MATTERS. Parent agrees that to the extent it transfers any
employees of the Company to Parent's benefit plans, such employees shall be
credited to the extent such crediting is permitted under such plans, for their
years of service or periods of creditable coverage with the Company prior to the
Closing in determining eligibility and vesting thereunder, for health
31
plan deductible payments made prior to such transfer, and in determining the
amount of benefits under any applicable sick leave, vacation or severance plan.
5.5. MAINTENANCE OF DIRECTORS AND OFFICERS INDEMNIFICATION.
(A) Parent shall, to the fullest extent permitted by law, cause the
Surviving Corporation from and after the Effective Time to honor all the
Company's obligations to indemnify, defend and hold harmless (including any
obligations to advance funds for expenses) the current and former directors
and officers of the Company against all losses, claims, damages or liabilities
arising out of acts or omissions by any such directors and officers occurring
prior to the Effective Time to the maximum extent that such obligations of the
Company exist on the date of this Agreement, whether pursuant to the Articles
of Incorporation or Bylaws, as amended to date, or any indemnification
agreements between the Company and its directors in existence immediately
prior to the Effective Time and made available to Parent (each, a "Director
Indemnification Agreement") and such obligations shall survive the Merger and
shall continue in full force and effect in accordance with the terms of the
Articles of Incorporation or Bylaws, as amended to date, the Director
Indemnification Agreements or other contract, from the Effective Time until
the expiration of the applicable statute of limitations with respect to any
claims against such directors or officers arising out of such acts or
omissions.
(B) From and after the Effective Time and for a period of six years
thereafter, subject to the limitations set forth herein, Parent shall maintain
or shall cause the Surviving Corporation to maintain in effect policies of
directors' and officers' liability insurance with respect to claims arising
from facts or events which occurred at or before the Effective Time ("D&O
INSURANCE POLICIES") for the benefit of those persons who are currently
covered by the current policies of directors' and officers' liability
insurance maintained by the Company, with such D&O Insurance Policies
providing terms and conditions which are at least comparable to those
currently maintained by the Company and which are maintained with reputable
and financially sound carriers; provided, however, that in no event will
Parent or the Surviving Corporation be required to expend an annual premium
for such coverage in excess of 125% of the annual premium currently paid by
the Company. (Parent or the Surviving Corporation, as the case may be, will
notify the Executives at least 30 days in advance of canceling coverage due to
an increase in premiums above such 125% threshold.) Notwithstanding the
foregoing, Parent may substitute or cause the Surviving Corporation to
substitute for the current D&O Insurance Policies other policies with
reputable and financially sound carriers, which policies provide coverage of
the types, in the amounts and containing terms and conditions which are no
less advantageous than such initial policies, as long as any such substitution
does not result in gaps or lapses in coverage with respect to any claims
arising from or matters related to events occurring prior to the Effective
Time for which coverage is required pursuant to this Section 5.5.
5.6. ACCESS TO INFORMATION. From and after the Effective Time, Parent
shall (and shall cause the Surviving Corporation to), during normal business
hours and upon reasonable notice, make available and provide the Shareholder
Representative and its representatives (including, without limitation, counsel
and independent auditors) with access to the facilities and properties of the
Surviving Corporation and, subject to execution of a customary non-disclosure
agreement, to all information, files, documents and records (written and
computer) relating to the Surviving Corporation or its business or operations
for any and all periods prior to and including the Closing Date that it may
require with respect to any reasonable business purpose (including, without
limitation, any Tax matter) or in connection with any claim, dispute, action,
cause of action,
32
investigation or proceeding of any kind by or against any person, and shall (and
shall cause the Surviving Corporation) to cooperate fully with the Shareholder
Representative and its representatives (including, without limitation, counsel
and independent auditors) in connection with the foregoing, as applicable,
including, without limitation, by making tax, accounting and financial personnel
and other appropriate employees and officers of the Surviving Corporation
available to the Shareholder Representative and its representatives (including,
without limitation, counsel and independent auditors) with regard to any
reasonable business purpose.
ARTICLE VI: ADDITIONAL AGREEMENTS
In addition to the foregoing, Parent, Sub and Company each agree to take
the following actions after the execution of this Agreement.
6.1. LEGAL CONDITIONS TO THE MERGER. Each of Parent and Company will use
all reasonable efforts to take all actions necessary to comply promptly with all
legal requirements that may be imposed on it with respect to the Merger. Each of
Parent and Company will use all reasonable efforts to take all actions to obtain
(and to cooperate with the other parties in obtaining) any consent required to
be obtained or made by Company, or Parent in connection with the Merger, or the
taking of any action contemplated thereby or by this Agreement.
6.2. EMPLOYEES. The Company will use its best efforts to insure a smooth
transition of employees such that at least 90% of those listed on Schedule 6.2
remain with the Company following the Merger upon the terms set forth in
Schedule 6.2., and affirm in writing their intent to do so. The Company and
Parent will work together to developing appropriate communications to Company
employees regarding the transaction, and developing a transition plan in
contemplation of the Closing. All employee communications pertinent to
employment matters connected with the transaction shall be subject to the
approval of Parent. Nothing contained herein will be considered as requiring
Company or Parent and its subsidiaries to continue or provide any specific plan
or benefit, or to confer upon any employee, beneficiary, dependent, legal
representative or collective bargaining agent of such employee any right or
remedy of any nature or kind whatsoever under or by reason of this Agreement,
including without limitation any right to employment or to continued employment
for any specified period, at any specified location or under any specified job
category, except as specifically provided for in such employee's Offer Letter.
6.3. EXPENSES. Except as provided herein, each of the parties will bear
all costs and expenses, including, without limitation, fees and disbursements of
attorneys, accountants, consultants, and any other representative or agent
retained by such party, incurred by such party in connection with this Agreement
and the transactions contemplated hereby ("TRANSACTION EXPENSES").
6.4. ADDITIONAL AGREEMENTS. In case at any time after the Effective Time
any further action is reasonably necessary or desirable to carry out the
purposes of this Agreement or to vest the Surviving Corporation with full title
to all properties, assets, rights, approvals, immunities and franchises of
Company, the proper officers and directors of each corporation which is a party
to this Agreement will take all such necessary action.
6.5. PUBLIC ANNOUNCEMENTS; CONFIDENTIALITY. Except as required by
applicable SEC or Nasdaq disclosure requirements, neither Parent, Company nor
any of the foregoing party's
33
representatives or agents, will disseminate any press release or other
announcement concerning this Agreement or the transactions contemplated herein
to any third party (except to the directors, officers and employees of the
parties to this Agreement whose direct involvement is necessary for the
consummation of the transactions contemplated under this Agreement, to the
shareholders and optionholders of the Company, to the attorneys and accountants
of the parties hereto, or except as Parent determines in good faith to be
required by the federal securities laws after consultation with Company) without
the prior written consent of each of the other parties hereto, which consent
will not be unreasonably withheld. The existing confidentiality agreement dated
as of July 27, 2004, between the parties will remain in effect and govern the
parties' exchange of their respective confidential information.
6.6. PREPARATION AND FILING OF RETURNS AND PAYMENT OF TAXES.
(A) Tax Returns.
(i) Parent will prepare or cause to be prepared and file or
cause to be filed, at Parent's cost and expense, all Tax Returns other than
income Tax Returns for the Company described paragraph (b) below for all periods
ending on or prior to the Closing Date which are filed after the Closing Date.
Such Tax Returns will be prepared in a manner consistent with practices followed
in prior years with respect to similar Tax Returns except for changes required
by applicable Law. Parent will permit the Shareholder Representative at least 15
days prior to filing to review and comment on all such Tax Returns that reflect
a liability payable out of the Escrow. The Participating Shareholders shall be
liable and shall reimburse Parent for any Taxes of the Company with respect to
such periods within 15 days after payment by Parent of such Taxes to the extent
such Taxes are not taken into account for purposes of the Working Capital
Adjustment.
(ii) Parent will prepare or cause to be prepared and timely
file or cause to be filed all Tax Returns for the Company with respect to the
federal, state, or local income Taxes relating to the Company's final taxable
period ending on the Closing Date. All such Returns shall be prepared consistent
with past practice and, no later than 30 days prior to the filing of any such
Tax Returns, provided to Participating Shareholders for review and comment. The
cost and expense of preparing such Tax Returns shall be accrued as a liability
of the Company prior to Closing and taken into account by the Working Capital
Adjustment. The Participating Shareholders will be liable and will reimburse
Parent out of the Escrow for any Taxes of the Company with respect to such
periods to the extent such Taxes are not taken into account by the Working
Capital Adjustment.
(iii) Parent will prepare or cause to be prepared and file or
cause to be filed, at Parent's cost and expense, all Tax Returns for taxable
periods beginning prior to but ending after the Closing Date (each a "STRADDLE
PERIOD"); provided, however, that the foregoing will not be construed as
imposing any obligation on Parent to investigate whether any Tax Return has been
filed which the Company and the Participating Shareholders represent to having
filed in Section 2.11, or as otherwise limiting or modifying in any way the
rights of Parent to recover under Article VII for breaches of Section 2.11. Such
Taxes will be prepared in a manner consistent with practices followed in prior
years with respect to similar Tax Returns except for changes required by
applicable Law. The Participating Shareholders will pay (solely from the Escrow)
to the Company with respect to such Straddle Periods an amount equal to the
portion of such Taxes that relates to the Taxable period ending on the Closing
Date to the extent such Taxes
34
are not taken into account for purposes of the Working Capital Adjustment. To
the extent that such Tax Returns reflect a liability payable out of the Escrow,
Parent shall permit the Shareholder Representative at least 15 days prior to
filing to review and comment on all such Tax Returns. For purposes of this
Section, the portion of any such Tax that is allocable to the portion of the
period ending on the Closing Date shall be: (x) in the case of Taxes that are
either based upon or related to income or receipts, or imposed in connection
with any sale or other transfer or assignment of property (real or personal,
tangible or intangible), deemed equal to the amount which would be payable if
the taxable year ended with the Closing Date (except that, solely for purposes
of determining the marginal tax rate applicable to income or receipts during
such period in a jurisdiction in which such tax rate depends upon the level of
income or receipts, annualized income or receipts may be taken into account if
appropriate for an equitable sharing of such Taxes); and (y) in the case of
Taxes not described in clause (x) above that are imposed on a periodic basis and
measured by the level of any item, deemed to be the amount of such Taxes for the
entire period (or, in the case of such Taxes determined on an arrears basis, the
amount of such Taxes for the immediately preceding period) multiplied by a
fraction the numerator of which is the number of calendar days in the period
ending on the Closing Date and the denominator of which is the number of
calendar days in the entire period.
(iv) Parent will prepare or cause to be prepared and file or
cause to be filed, at Parent's cost and expense, any Tax Returns for the Company
for all periods beginning on or after the Closing Date.
(v) All refunds of Tax received by the Company from any taxing
authority in respect of a taxable period ending on or before the Closing Date,
or in the case of a refund of Tax in respect of a Straddle Period, the portion
of the refund determined pursuant to (iii) above, or in the case of Taxes not
assessed on a periodic basis to transactions or events occurring on or before
the Closing Date and not taken into account in determining the Working Capital
Adjustment, shall be (x) if received prior to the complete distribution of the
Escrow, credited to the Escrow and subject to the claims of Parent pursuant to
this Agreement and the Escrow Agreement, or (y) if received after the complete
distribution of the Escrow, available to Parent to satisfy any claims of Parent
pursuant to this Agreement and the Escrow Agreement, and the balance, if any,
paid over to the Participating Shareholders. Any amounts to be credited to
Escrow or paid over to the Participating Shareholders pursuant to this Section
6.6(a)(v) shall be net of any tax liability payable by Parent with respect to
the refund amount. For purposes of this paragraph (v), refunds shall include any
refunds reflected as a credit to the extent such credit is applied against Taxes
otherwise due from the Company in respect of a taxable period ending after the
Closing Date.
(B) Cooperation on Tax Matters.
(i) Parent, the Company and the Participating Shareholders
will cooperate fully, as and to the extent reasonably requested by the other
party, in connection with the filing of Tax Returns pursuant to this Section and
any audit, litigation or other proceeding with respect to the Taxes of the
Company. Such cooperation will include the retention and (upon the other party's
request) the provision of records and information, to the extent the Company and
the Participating Shareholders have not already turned over such records and
information to Parent pursuant to paragraph (c), below, which are reasonably
relevant to any such audit, litigation or other proceeding and making employees
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder; provided
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however, that Parent shall not provide to the Participating Shareholders any
copies of the Parent's Tax Returns. The Company and the Participating
Shareholders agree to provide Parent upon Closing with all books and records
with respect to Tax matters pertinent to the Company relating to any taxable
period before Closing (including any extensions thereof) and warrant that no
such books and records have been transferred, destroyed or discarded and that
the Company and the Participating Shareholders have abided by all record
retention agreements, if any, entered into with any taxing authority.
(ii) Parent and the Participating Shareholders further agree,
upon request, to use their best efforts to obtain any certificate or other
document from any governmental authority or any other person as may be necessary
to mitigate, reduce or eliminate any Tax that could be imposed (including, but
not limited to, with respect to the transactions contemplated hereby).
(C) Within 30 days following the Closing Date, the Company and
Participating Shareholders will turn over to Parent all workpapers, documents,
records and information used in connection with or which support the
completion of all Tax Returns for the Company, as well as all original
invoices memorializing the purchase of Assets (and other documentation of any
type memorializing the incurrence and payment of any and all Taxes on the
purchase of such Assets) in connection with the purchase by the Company or
Participating Shareholders, as the case may be, of all Assets used in the
Company's operations, to the extent such invoices and other documentation are
not attached to Schedule 2.14.
(D) Any applicable transfer, documentary, sales, use, value added,
stamp, registration and other such taxes and fees (including any penalties and
interest) ("TRANSFER TAXES") which may be levied in connection with this
Agreement or the transactions contemplated hereby, regardless of whether the
same are separately stated by the Company and regardless of whether assessed
against the Company, the Participating Shareholders or Parent, shall be borne
50% by Parent and 50% by the Participating Shareholders. For the avoidance of
doubt, this Section 6.6(d) is not intended to cover Taxes based on income or
gross receipts, such as a Tax on net income taxes incurred by the
Participating Shareholders as a result of the transactions contemplated by
this Agreement, which shall remain the responsibility of the Participating
Shareholders.
ARTICLE VII: CONDITIONS PRECEDENT
7.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligations of each of the parties to effect the Merger will be
subject to the satisfaction prior to the Closing Date of the following
conditions:
(A) Governmental Approvals. There will not have been any action
taken, or any statute, law, ordinance, rule, regulation, injunction, judgment,
order or decree proposed, entered, enacted, enforced, promulgated, issued or
deemed applicable to the Merger by any Governmental Entity, and there will not
be pending any action, suit or proceeding by any Governmental Entity against
Parent, Company that is likely to (i) render Parent and/or Sub unable to
accept for payment or pay for some or all of the Company Securities, (ii)
impose material limitations on the ability of Parent effectively to exercise
full rights of ownership of the Company Securities, including, without
limitation, the right to vote the Company Securities purchased by it on all
matters properly presented to Company's stockholders, (iii) prohibit or
36
impose any limitations on Parent's direct or indirect ownership or operation
(or that of any of its affiliates) of all or a material portion of their or
Company's businesses or assets, (iv) compel Parent or its affiliates to
dispose of or hold separate any portion of the business or assets of the
Company or Parent and their respective Subsidiaries, or (v) oblige Company or
Parent to pay material damages in connection with the transactions
contemplated by this Agreement.
(B) No Restraints. No statute, rule, regulation, executive order,
decree, or injunction will have been enacted, entered, promulgated or enforced
by any United States court or Governmental Entity of competent jurisdiction
which enjoins or prohibits the consummation of the Merger.
7.2. CONDITIONS OF OBLIGATIONS OF PARENT AND SUB. The obligations of
Parent and Sub to effect the Merger are subject to the satisfaction of the
following conditions unless waived by Parent and Sub:
(A) Representations and Warranties of Company. The representations
and warranties of Company set forth in this Agreement will be true and correct
in all material respects as of the date of this Agreement and as of the
Closing Date as though made on and as of the Closing Date, except as otherwise
contemplated by this Agreement. Parent will have received a certificate signed
by the President and Chief Financial Officer of Company to such effect on the
Closing Date.
(B) Performance of Obligations of Company. Company will have
performed in all material respects all agreements and covenants required to be
performed by it under this Agreement prior to the Closing Date, and Parent
will have received a certificate signed by the President and Chief Financial
Officer of Company to such effect on the Closing Date.
(C) Approval by Stockholders. This Agreement and the Merger will
have been approved by not less than 95% of the voting power of the outstanding
Company Securities and no more than 5% of the Company Securities will have
exercised their appraisal rights under California law.
(D) Employment Agreements. At least 90% of the Company's employees
listed on Schedule 6.2 will affirm in writing their intent to remain with the
Company at their salaries indicated in thereon.
(E) Executive Agreements. The Executives will have executed and
delivered employment agreements (collectively, the "EMPLOYMENT AGREEMENTS") in
the forms attached as EXHIBIT E, and non-competition agreements (the
"NON-COMPETITION AGREEMENTS") in the form of EXHIBIT F.
(F) Opinion of Counsel. Parent will have received an opinion dated
as of the Closing Date of Bryan Cave LLP, counsel to Company, substantially in
the form attached as EXHIBIT G. Such opinion shall be in form and substance
reasonably acceptable to Parent's legal counsel.
(G) Consents/Terminations. Parent will have received duly executed
copies of all material third-party consents, approvals, assignments, waivers,
authorizations or other certificates contemplated by this Agreement or the
Company Disclosure Schedule or reasonably deemed necessary by Parent's legal
counsel to provide for the continuation in full force and effect of any and
all material contracts and leases of Company and for Parent to consummate the
transactions contemplated hereby in form and substance reasonably satisfactory
to Parent,
37
except for such thereof as Parent and Company will have agreed in writing will
not be obtained. Company will have taken such steps as reasonably requested by
Parent and its counsel to terminate or modify those agreements set forth on
Schedule 4.11.
(H) Assignments of Personal Rights to Company Intellectual
Property. Company and the employees and independent contractors (including
former employees and independent contractors) of Company will have executed
such assignments and other documentation as may be reasonably requested by
Parent to effectively transfer or confirm the transfer of all right, title and
interest to Company Intellectual Property or other Company Assets to Company.
(I) No Casualty. There will not have been any damage, destruction
or loss, whether or not covered by insurance, materially and adversely
affecting the proprietary software, documentation or other Company
Intellectual Property where there are no undamaged duplicate copies of such
proprietary software, documentation or other Company Intellectual Property in
the possession of Company.
(J) Company Material Adverse Effect. The Company will not have
become subject to any action or event which resulted in or may likely result
in a Company Material Adverse Effect.
(K) Source Code. At the Closing, Company will deliver to Surviving
Corporation copies of Company's source code and other Company Intellectual
Property as requested by Parent.
(L) Resignation. The directors and the Executives will have
delivered their resignations to Parent and Surviving Corporation.
(M) Satisfactory Completion of Due Diligence. Parent will have
completed its legal, financial and technical due diligence, the results of
which shall be reasonably satisfactory to Parent.
(N) Releases of Third Party Claims. Company will have obtained a
full release of all claims in a form satisfactory to Parent from the
claimants, government agencies or potential claimants listed on Schedule 4.10.
(O) Shareholder Release. Shareholders holding 95% of the
outstanding capital stock of the Company will have executed the Shareholder
Release.
(P) Financial Statements and Auditor Consent. Parent shall have
received the Audited Historical Financial Statements in form and substance
reasonably acceptable to Parent together with the unqualified audit report of
LCM thereon and the consent of LCM to include such audit report in Parent's
filings with the SEC. In addition, Parent shall have received the Unaudited
Balance Sheet that shall be in form and substance reasonably acceptable to
Parent.
(Q) Private Placement to Management Shareholders. Parent shall
simultaneously close a private placement sale of $1,500,000 of Parent common
stock to Gregg B. Lavin, $1,500,000 of Parent common stock to Matthew D. Dusig
and $600,000 of Parent common stock to Lance H. Suder, (the "PRIVATE
PLACEMENT") which shall be funded simultaneously with payment of the Merger
Consideration.
(R) Working Capital Limit. The Working Capital of the Company shall
not have been less than $1,274,710 as of January 31, 2005.
38
7.3. CONDITIONS OF OBLIGATION OF COMPANY. The obligation of Company to
effect the Merger is subject to the satisfaction of the following conditions
unless waived by Company:
(A) Representations and Warranties of Parent and Sub. The
representations and warranties of Parent and Sub set forth in this Agreement
will be true and correct in all material respects as of the date of this
Agreement and as of the Closing Date as though made on and as of the Closing
Date, except as otherwise contemplated by this Agreement, and Company will
have received a certificate signed on behalf of Parent by an officer of Parent
to such effect.
(B) Performance of Obligations of Parent and Sub. Parent and Sub
will have performed in all material respects all agreements and covenants
required to be performed by them under this Agreement prior to the Closing
Date, and Company will have received a certificate signed on behalf of Parent
by an officer of Parent to such effect.
(C) Opinion of Parent's Counsel. Company will have received an
opinion dated the Closing Date of Preston Gates & Ellis LLP, counsel to
Parent, substantially in the form attached as EXHIBIT H. Such opinion shall be
in form and substance reasonably acceptable to Company's legal counsel.
(D) Approval by Stockholders. This Agreement and the Merger will
have been approved by not less than 95% of the voting power of the outstanding
Company Shares and no more than 5% of the Company Shares will have exercised
their appraisal rights under California law.
ARTICLE VIII: INDEMNIFICATION
8.1. FIRST PARTY CLAIMS.
(A) Parent Claims. From and after the Effective Time, the Participating
Shareholders will, up to their respective pro-rata share of the Merger
Consideration, defend, indemnify and hold harmless the Surviving Corporation
and Parent from and against any and all losses, damages, Liabilities, claims,
demands, judgments, settlements, costs and expenses of any nature whatsoever
(including reasonable attorneys' fees) (collectively, "LOSS"), resulting from
or arising out of any: (i) breach of any representation or warranty or
agreement of the Company contained herein (other than breaches by the Company
after the Effective Time); (ii) any amounts due to Parent with respect to the
EBITDA Adjustment in accordance with Section 1.5(c); (iii) any amounts due by
Surviving Corporation or Parent, including costs and expenses, in respect of
Company shareholders who exercise dissenter rights over and above their
pro-rata share of the Merger Corporation had such holders not dissented; and
(iv) any Transaction Expenses of the Company not accrued on the Unaudited
Balance Sheet, where such Transaction Expenses would have resulted in an
adjustment to the Merger Consideration under Section 1.5(b) had such
Transaction Expenses been so accrued No claim for indemnification pursuant to
this Section 8.1 may be made subsequent to the date 18 months after the
Closing Date or in respect of a Loss for which Parent has otherwise been
previously reimbursed by the Participating Shareholders; provided, however,
that no such expiration period will apply to Surviving Obligations set forth
in Section 8.5(a).
(B) Claims of Participating Shareholders. From and after the Effective
Time, Parent will defend, indemnify and hold harmless the Participating
Shareholders from any Loss resulting from or arising out of any breach of any
representation or warranty or agreement of
39
the Parent, Sub or, post-Closing, the Surviving Corporation, contained herein.
No claim for indemnification pursuant to this Section 8.1(b) may be made
subsequent to the date 18 months after the Closing Date or in respect of a
Loss for which Parent has otherwise been previously reimbursed by the
Participating Shareholders; provided, however, that no such expiration period
will apply to Section 3.6 Capitalization of Sub, Section 5.6 Access to
Information, Section 6.6 Preparation and Filing of Returns and Payment of
Taxes, and provided further that the time limit for any claim pursuant to
Section 5.5 Maintenance of Directors and Officers Insurance is six years.
8.2. THIRD PARTY CLAIMS.
(A) If any third party notifies Parent or Surviving Corporation
with respect to any third party claim (a "THIRD PARTY CLAIM") that may give
rise to a Loss, then Parent will promptly notify in writing the Shareholder
Representative appointed pursuant to Section 8.8; provided, however, that no
delay on the part of Parent in notifying the Shareholder Representative will
relieve the Participating Shareholders from any obligation hereunder unless
(and then solely to the extent) the Shareholders are prejudiced by such delay.
(B) The Participating Shareholder, through the Shareholder
Representative, will have the right to defend Parent against the Third Party
Claim with counsel selected by the Shareholder Representative and reasonably
satisfactory to Parent, so long as: (i) the Shareholder Representative so
notifies Parent in writing within 15 days of the Third Party Claim becoming
known to the Participating Shareholders, acknowledging that such claim is in
respect of a Loss described in Section 8.1; (ii) the Third Party Claim
involves only money damages and does not seek an injunction or other equitable
relief; and (iii) the Participating Shareholders conduct the defense of the
Third Party Claim actively and diligently.
(C) So long as the Participating Shareholders are conducting the
defense of the Third Party Claim in accordance with Section 8.2(b), (i) Parent
may retain separate co-counsel at its sole cost and expense and participate in
the defense of the Third Party Claim; (ii) Parent will not consent to the
entry of any judgment or enter into any settlement with respect to the Third
Party Claim without the prior written consent of the Shareholder
Representative (which consent will not be withheld unreasonably); and (iii)
the Participating Shareholders will not consent to the entry of any judgment
or enter into any settlement with respect to the Third Party Claim without the
prior written consent of Parent (which consent will not be withheld
unreasonably).
(D) In the event that any of the conditions in Section 8.2(b) is or
becomes unsatisfied, (i) Parent may defend against the Third Party Claim in
any manner it reasonably may deem appropriate; provided, however, that Parent
will not consent to the entry of any judgment or enter into any settlement or
agreement to settle a Third Party Claim without the prior written consent of
the Shareholder Representative, which consent will not be unreasonably
withheld; (ii) Parent will be reimbursed by Participating Shareholders, or
Parent may deduct such amounts from the Primary Escrow, promptly and
periodically for the costs of defending against the Third Party Claim
(including reasonable attorneys' fees and expenses); and (iii) the
Participating Shareholders will remain responsible for any Loss that Parent
actually suffers resulting from, arising out of, relating to, in the nature
of, or caused by the Third Party Claim to the fullest extent provided in this
Section.
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(E) Notwithstanding any of the foregoing, Parent shall have the
sole right to conduct any Tax audit or other Tax contest ("TAX CONTEST")
relating to the however, that in respect of and to the extent a Tax Contest
relates to a taxable period ending on or before the Closing Date, Parent shall
designate the Shareholder Representative (or an individual designated by the
Shareholder Representative) as an attorney-in-fact of the Company on IRS Form
2848 or other applicable power of attorney document for state Tax purposes
only (the "TAX CONTEST REPRESENTATIVE") and allow the Tax Contest
Representative to be present at meetings with taxing authorities and to review
and comment on all correspondence with taxing authorities. Parent will consult
in good faith with the Tax Contest Representative regarding the conduct of any
such Tax Contest. Each of Company, the Tax Contest Representative and the
Participating Shareholder agrees to furnish or cause to be furnished to
Parent, upon request, as promptly as practicable, such information and
assistance relating to the Participating Shareholder as is reasonably
necessary for the preparation for any audit or Tax Contest and each shall
execute and deliver such powers of attorney and other documents as are
necessary to carry out the intent of this Section.
8.3. NO WAIVER. The occurrence of the Closing will not constitute a
waiver by Parent of its rights to indemnification hereunder, regardless of
whether Parent has knowledge of the breach, violation or failure of the
condition constituting the basis of the Loss at or before the Closing, and
regardless of whether such breach, violation or failure is deemed to be
"material" for purposes of Article IX.
8.4. BINDING EFFECT. The indemnification obligations of the holders of
Company Shares contained in Article VIII are an integral part of this Agreement
and Merger in the absence of which Parent would not have entered into this
Agreement.
8.5. REMEDIES. The sums held pursuant to the Escrow Agreement are the
sole remedy to satisfy claims by Parent for indemnification under this Article
VIII or otherwise, except for claims ("EXCEPTED CLAIMS") arising out of or based
on (i) fraud or willful misstatements or willful omissions by the Company, or
(ii) to the breach of any representation, warranty, covenant or agreement
identified in Schedule 8.5 (collectively, the "SURVIVING OBLIGATIONS"). In each
case of an Excepted Claim Parent will have all available remedies.
8.6. DEDUCTIBLE. Other than for Excepted Claims, which are not limited,
and claims for reimbursement of Transaction Expenses of the Company pursuant to
Section 8.1(a)(iv), Parent will not be entitled to seek indemnification under
this Article VIII unless and until the amount of all Losses has accumulated to a
threshold of $250,000, and Parent will not be entitled to amounts below such
threshold.
8.7. CONTRIBUTION. Holders of Company Shares will have no right of
contribution from the Surviving Corporation for liabilities for such holders'
breach hereunder.
8.8. SHAREHOLDER REPRESENTATIVE.
(A) By virtue of the approving this Agreement and accepting Merger
Consideration, the Participating Shareholders appoint Eric Garfield as
"SHAREHOLDER REPRESENTATIVE". The Shareholder Representative will be agent and
attorney-in-fact for and on behalf of each of the Participating Shareholders and
shall have full power and authority to represent all of the Participating
Shareholders and their successors with respect to all matters arising under this
Agreement. All actions taken by the Shareholder Representative hereunder
41
shall be binding upon all Participating Shareholders and their successors as if
expressly confirmed and ratified in writing by each of them, including, but not
limited to, resolving all claims relating the Escrow and any indemnification
claims and obligations. The Shareholder Representative shall take any and all
actions which he believes are necessary or appropriate under this Agreement for
and on behalf of the Participating Shareholders, as fully as if he were acting
on his own behalf, including, without limitation, consenting to, compromising or
settling issues with respect to the Escrow and all such indemnity claims with
Parent under this Agreement, taking any and all other actions specified in or
contemplated by this Agreement, and engaging counsel, or accountants in
connection with the foregoing matters. Without limiting the generality of the
foregoing, the Shareholder Representative shall have full power and authority to
interpret all the terms and provisions of this Agreement and to consent to any
amendment hereof on behalf of all Participating Shareholders and such
successors. The person designated to serve as the Shareholder Representative may
be changed by the Participating Shareholders who are entitled to receive a
majority of the Escrow when and if it becomes payable hereunder from time to
time upon not less than ten days prior written notice to Parent. No bond shall
be required of the Shareholder Representative, and the Shareholder
Representative shall receive no compensation for services but shall be entitled
to be reimbursed by the Participating Shareholders for reasonable expenses
incurred in the performance of his duties hereunder, including expenses of legal
counsel. All such expenses shall be payable from the Escrow, if sufficient.
(B) The Shareholder Representative shall not be liable to the
Participating Shareholders for any act done or omitted hereunder as Shareholder
Representative while acting in good faith and in the exercise of reasonable
judgment, and any act done or omitted pursuant to the written advice of counsel
shall be conclusive evidence of such good faith. The Participating Shareholders
shall severally indemnify the Shareholder Representative and hold his harmless
from and against any loss, liability or expense incurred without gross
negligence or bad faith on the part of the Shareholder Representative and
arising out of or in connection with the acceptance and administration of his
duties hereunder.
(C) The Shareholder Representative shall treat confidentially and not
disclose any nonpublic information from or about Parent or the Company to anyone
(except on a need to know basis to individuals who agree to treat such
information confidentially).
(D) A decision, act, consent or instruction of the Shareholder
Representative shall constitute a decision of all the Participating Shareholders
and shall be final, binding and conclusive upon each such Shareholder, and
Parent may rely upon any decision, act, consent or instruction of the
Shareholder Representative as being the decision, act, consent or instruction of
each and every such Shareholder. The Custodian under the Escrow Agreement,
Parent and the Company are hereby relieved from any liability to any person for
any acts done by them in accordance with such decision, act, consent or
instruction of the Shareholder Representative.
ARTICLE IX: TERMINATION
9.1. MUTUAL AGREEMENT. This Agreement may be terminated at any time
prior to the Effective Time by the written consent of Parent and Company.
9.2. TERMINATION BY PARENT. This Agreement may be terminated by Parent
alone, by means of written notice to Company in the following circumstances:
42
(A) if there has been a material breach by Company of any
representation, warranty, covenant or agreement set forth in the Agreement or
other ancillary agreements that constitutes a Company Material Adverse Effect,
which breach has not been cured within 10 business days following receipt by
Company of notice of such breach;
(B) the Company Board of Directors will have withdrawn or will have
materially amended or modified in any respect adverse to Parent its
recommendations in favor of the Merger; or
(C) the Company Board of Directors will have recommended to the
stockholders of the Company any proposal that would constitute a Acquisition
Transaction or will have resolved or announced an intention to do so.
9.3. TERMINATION BY COMPANY. This Agreement may be terminated by Company
alone, by means of written notice to Parent, if there has been a material breach
by Parent of any representation, warranty, covenant or agreement set forth in
the Agreement or other ancillary agreements, which breach has not been cured
within 10 business days following receipt by Parent of notice of such breach.
9.4. OUTSIDE DATE. This Agreement may be terminated by Parent alone or
by Company alone by means of written notice if the Effective Time does not occur
on or prior to March 31, 2005 (unless the failure to consummate the Closing by
such date will be due to the action of or failure to act by the party seeking to
terminate this Agreement).
9.5. EFFECT OF TERMINATION. In the event of termination of this
Agreement by either Company or Parent as provided in this Article, this
Agreement will forthwith become void and have no effect, and there will be no
liability or obligation on the part of Parent, Company, Sub or their respective
officers or directors, except that (i) the provisions of Section 6.5, Section
9.6 Break-up Fee and Article XI Miscellaneous, and any confidentiality agreement
will survive any such termination and abandonment, and (ii) no party will be
released or relieved from any liability arising from the willful breach by such
party prior to termination of any of its representations, warranties, covenants
or agreements as set forth in this Agreement.
9.6. COMPANY BREAK-UP FEE. The Company agrees to pay Parent a
termination fee in the amount of $1,750,000 if (i) this Agreement is terminated
by Parent pursuant to Section 9.2(b) (ii) or the Merger is not consummated
because the Company's shareholders reject the Merger after having receive a
proposal with respect to a Acquisition Transaction and within 12 months
following such date of termination the Company or its shareholders consummates
an Acquisition Transaction. To the extent that the Company becomes obligated to
pay a termination fee hereunder, the Company agrees to pay such fee to Parent
within 10 business days of the consummation of the Acquisition Transaction that
triggers such obligation. In such event, Parent shall, in addition to the amount
of such termination fee, be entitled to receive any additional costs and
expenses incurred to collect such amount, including attorneys fees, and any
unpaid amount shall bear interest at the maximum rate permitted by applicable
law.
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ARTICLE X: CERTAIN DEFINED TERMS
For purposes of this Agreement, the following terms will have the
meanings set forth below:
"AFFILIATE" means a person that directly or indirectly, through one or
more intermediaries, controls, is controlled by, or is under common control
with, the first mentioned person.
"ASSETS" means any and all: (1) properties, contract rights and other
assets; (2) Intellectual Property; (3) data, text, images, sounds, codes,
computer programs, software, databases, mask works or the like and including
collections and compilations of them (whether or not all or part of such is
Intellectual Property) and all other information (collectively, "INFORMATION");
(4) access or use rights; (5) all rights in Internet, worldwide web or similar
addresses, uniform resource locators, domain names or the like and all
applications and registrations therefor; and (6) other rights of every nature
whatsoever; of the Company or in which Company has rights, permissions or
possession or control of any nature, all whether proprietary, real, personal or
mixed, tangible or intangible. Nos. (3) through (5) are referenced herein as
"INFORMATION ASSETS."
"BASIS" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or could form the basis for
any specified consequence.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY MATERIAL ADVERSE EFFECT" means any change or effect relating
to the time prior to the Closing Date that, individually or when taken together
with all other such changes or effects, is or is reasonably likely to be
materially adverse to the business, properties, Assets, condition (financial or
otherwise), liabilities, operations or prospects of the Company at the time of
such change or effect. A Company Material Adverse Effect will be deemed to exist
if there will occur any event which relates to the time prior to the Closing
Date and which causes or may reasonably be expected to cause or result in
estimable monetary loss which, individually or when aggregated with all other
events, exceeds $250,000, provided in no circumstances shall (i) changes in
general economic conditions or economic conditions of the industry in which the
Company operates; (ii) the disclosure of the fact that Parent is the prospective
acquirer of the Company; (iii) the announcement or pendency of the transactions
contemplated by this Agreement; (iv) actions taken by Parent or any of its
affiliates; or (v) compliance with the terms of, or taking of any action
required by, this Agreement, be a Company Material Adverse Effect.
"CONTRACT" of any person means any contract, agreement, license or
instrument of any type whatsoever, whether written or oral, (i) to which such
person is a party and by which such person either has made a binding undertaking
to perform an obligation or is entitled to any property, information or right,
or (ii) by which any of the Assets of such person is bound.
"CONTROL" (including the terms "controlled," "controlled by" and "under
common control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the management or
policies of a person, whether through the ownership of stock or as trustee or
executor, by Contract or credit arrangement or otherwise.
"EMPLOYEE BENEFIT PLAN" means (a) any bonus, incentive compensation,
profit sharing, retirement, pension, group insurance, death benefit, group
health, medical expense
44
reimbursement, workers' compensation, dependent care, flexible benefits or
cafeteria, stock option, stock purchase, stock appreciation rights, savings,
deferred compensation, consulting, severance pay or termination pay, vacation
pay, life insurance, disability, welfare or other employee benefit or fringe
benefit plan, program or arrangement; or (b) any plan, program or arrangement
which is an Employee Pension Benefit Plan, Employee Welfare Benefit Plan or
Multiemployer Plan.
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in ERISA
Section 3(2).
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in ERISA
Section 3(1).
"ENCUMBRANCES" means any Security Interests, Liens, claims, pledges,
agreements, limitations on voting rights, charges or other encumbrances of any
nature whatsoever.
"ENVIRONMENTAL, HEALTH AND SAFETY LAWS" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Occupational Safety and Health
Act of 1970, each as amended, together with all other laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder) of federal, state, local, and foreign governments (and all
agencies thereof), concerning pollution or protection of the environment,
disposal of waste electronic materials and import or export of products
containing materials that will become subject to same upon disposal, public
health and safety, or employee health and safety, including laws relating to
emissions, discharges, releases, or threatened releases of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic substances, materials
or wastes into ambient air, surface water, ground water, or lands or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic substances, materials or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE" means each person (as defined in Section 3(9) of
ERISA) that together with the Company (or any person whose liabilities the
Company has assumed or is otherwise subject to) would be considered or has been
a single employer under Section 4001(b) of ERISA or would be considered or has
been a member of the same "controlled group," under common control, a member of
the same affiliated service group or otherwise a single employer within the
meaning of Section 414(b), (c), (m) and (o) of the Code (provided, however, that
when the subject of the provision is a Multiemployer Plan only subsections (b)
and (c) of Section 414 of the Code will be taken into account).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXTREMELY HAZARDOUS SUBSTANCE" has the meaning set forth in Section
302 of the Emergency Planning and Community Right-to-Know Act of 1986, as
amended.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"INTELLECTUAL PROPERTY" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
45
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (f) all computer software (including data and
related documentation), (g) databases; (h) rights of publicity, things in action
and choses in action, (i) all copies and tangible embodiments thereof (in
whatever form or medium); and (j) all other rights of like nature.
"KNOWLEDGE" "KNOW" or "KNOWN" means, with respect to a particular fact
or other matter, that (i) an individual is actually aware of such fact or other
matter or (ii) an individual conducting business in a prudent manner would be
expected to discover or otherwise become aware of such fact or other matter; a
person (other than an individual) will be deemed to have "knowledge" of a
particular fact or other matter if any individual who is serving, or who has at
any time served, as a director, officer, partner, executor or trustee of such
person (or in any similar capacity) has, or at any time had, knowledge of such
fact or other matter.
"LIEN" means any lien, charge, encumbrance, mortgage, conditional sale
agreement, title retention agreement, financing lease, pledge or Security
Interest of any kind or type and whether arising by Contract or under Law.
"MULTIEMPLOYER PLAN" has the meaning set forth in ERISA Section 3(37).
"ORDINARY COURSE OF BUSINESS" with respect to any entity, means the
ordinary course of business consistent with past custom and practice (including
with respect to quantity and frequency) of that entity.
"PANEL" means that certain database of distinct email addresses related
to the business of the Company, as such addresses may be supplemented and
deleted from time to time in the Ordinary Course of Business and as more fully
described in Section 2.29 and Schedule 2.29.
"PARENT MATERIAL ADVERSE EFFECT" will mean any change or effect that,
individually or when taken together with all such other changes or effects, is
or is reasonably likely to be materially adverse to the business, properties,
Assets, condition (financial or otherwise), liabilities, operations or prospects
of Parent and its Subsidiaries, taken as a whole at the time of such change or
effect. A Parent Material Adverse Effect will be deemed to exist if there will
occur any event which causes or may reasonably be expected to cause or result in
estimable monetary loss which, individually or when aggregated with all other
events, exceeds $5,000,000.
"PERMITTED ENCUMBRANCE" means (a) Encumbrances for Taxes or
governmental assessments, charges or claims the payment of which is not yet due;
and (b) statutory Encumbrances of landlords and Encumbrances of carriers,
warehousemen, mechanics, materialmen and other similar persons that arise in the
Ordinary Course of Business and other Encumbrances imposed by applicable Law
incurred in the Ordinary Course of Business for sums not yet delinquent.
"PERSON" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, a
46
Governmental Entity (or any department, agency, or political subdivision
thereof) or any other entity.
"SEC" means the U.S. Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITY INTEREST" means any mortgage, pledge, Lien, Encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar Liens, (b) Liens for Taxes not yet due and payable, (c) purchase
money Liens and Liens securing rental payments under capital lease arrangements,
and (d) other Liens arising in the Ordinary Course of Business and not incurred
in connection with the borrowing of money.
"SUBSIDIARY" or "SUBSIDIARIES" of a person, means any corporation,
partnership, joint venture or other legal entity of which the person (either
alone or through or together with any other subsidiary) owns, directly or
indirectly, 50% or more of the capital stock or other equity interests which the
holders thereof are generally entitled to vote for the election of the board of
directors or other governing body of such corporation or other legal entity.
"TRANSACTION" means an action or set of actions relating to the conduct
of business, consumer, commercial or governmental affairs between two or more
persons, including but not limited to any of the following types of conduct: (a)
the sale, lease, exchange, licensing, or other disposition or disclosure of (i)
personal property, including goods and intangibles, (ii) services, (iii) any
Asset; and/or (iv) any combination thereof; and (b) the sale, lease, license,
exchange, or other disposition of any interest in real property, or any
combination thereof.
ARTICLE XI: MISCELLANEOUS
11.1. ENTIRE AGREEMENT. This Agreement, including the exhibits and
schedules delivered pursuant to this Agreement, and any confidentiality
agreement between the parties, contain all of the terms and conditions agreed
upon by the parties relating to the subject matter of this Agreement and
supersede all prior agreements, negotiations, correspondence, undertakings, and
communications of the parties, whether oral or written, respecting that subject
matter.
11.2. GOVERNING LAW. The Merger will be governed by the law of the
State of California. All other aspects of this Agreement will be governed by,
and construed in accordance with, the laws of the State of Delaware as applied
to agreements entered into and entirely to be performed within that state.
Company and the Shareholder Representative consent to non-exclusive jurisdiction
and venue in New York, New York.
11.3. NOTICES. All notices and other communications given or made
pursuant hereto will be in writing and will be deemed to have been duly given or
made as of the date delivered, mailed or faxed, and will be effective upon
receipt, if delivered personally, mailed by registered or certified mail
(postage prepaid, return receipt requested), or delivered by overnight delivery
service (e.g., Federal Express), to the parties at the following addresses (or
at such other address for a party as will be specified by like changes of
address) or faxed to the fax number specified below:
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(A) If to Parent:
Greenfield Online, Inc.
21 River Road
Wilton, CT 06897
Attention: Jonathan Flatow, Corporate Secretary
Phone No.: (203) 846-5867
Fax No.: (203) 846-5749
with a copy to:
Preston Gates & Ellis LLP
925 Fourth Avenue, Suite 2900
Seattle, WA 98104-1158
Attention: Gary Kocher
Phone No.: (206) 623-7580
Fax No.: (206) 623-7022
(B) If to the Company:
Zing Wireless, Inc.
16501 Ventura Boulevard, Suite 250
Encino, CA 91436
Phone No.: (818) 255-7600
Fax No.: (818) 255-7626
with a copy to:
Bryan Cave, LLP
120 Broadway, Suite 300
Santa Monica, CA 90401
Attention: Mel Ziontz
Phone No.: (310) 576-2113
Fax No.: (310) 576-2200
(C) If to the Shareholder Representative:
Eric Garfield
9737 Charnock Ave
Los Angeles, CA 90034
Phone No.: (310) 837-8955
Fax No.: (310) 472-6729
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with a copy to:
ZCapital, Inc.
1015 Gayley Avenue, Suite 200
Los Angeles, CA 90024
Attention: Carlo Tabibi
Phone No.: (310) 888-8884
Fax No.: (310) 888-8887
Such addresses may be changed, from time to time, by means of a notice
given in the manner provided above.
11.4. SEVERABILITY. If any provision of this Agreement is held to be
unenforceable for any reason, it will be modified rather than voided, if
possible, in order to achieve the intent of the parties to this Agreement to the
extent possible. In any event, all other provisions of this Agreement will be
deemed valid and enforceable to the full extent.
11.5. ASSIGNMENT. No party to this Agreement may assign, by operation
of law or otherwise, all or any portion of its rights, obligations, or
liabilities under this Agreement without the prior written consent of Company,
Sub and Parent, which consent may be withheld in the absolute discretion of the
party asked to grant such consent, and provided further that after the Effective
Time, none of Company, Sub or Parent may so assign without the prior written
consent of the Shareholder Representative. Any attempted assignment in violation
of this Section 9.5 will be voidable and will entitle the other party to this
Agreement to terminate this Agreement at its option.
11.6. COUNTERPARTS. This Agreement may be executed in two or more
partially or fully executed counterparts each of which will be deemed an
original and will bind the signatory, but all of which together will constitute
but one and the same instrument.
11.7. AMENDMENT. This Agreement may be amended only by an instrument in
writing signed by Company, Parent, Sub and the Shareholder Representative.
11.8. EXTENSION, WAIVER. At any time prior to the Effective Time, any
party hereto may, to the extent legally allowed: (i) extend the time for the
performance of any of the obligations or other acts of the other party hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto, and (iii)
waive compliance with any of the agreements, covenants or conditions for the
benefit of such party contained herein. Any agreement on the part of a party
hereto to any such extension or waiver will be valid only if set forth in an
instrument in writing signed on behalf of such party.
11.9. CONSTRUCTION. All words used in this Agreement will be construed
to be of such gender or number as the circumstances require. Unless otherwise
expressly provided, the word "including" does not limit the preceding words or
terms.
11.10 ARBITRATION. All disputes arising under this Agreement will be
resolved by binding arbitration before a single arbitrator mutually acceptable
to the parties in Wilton, Connecticut under the Commercial Arbitration Rules of
the American Arbitration Association.
49
The decision of the arbitrator will be final and binding and judgment may be
entered therein in any court of competent jurisdiction.
11.11. PREVAILING PARTY ATTORNEYS' FEES. If any action or proceeding is
commenced to construe or enforce this Agreement or the rights and duties of the
parties hereunder, then the party prevailing in that action will be entitled to
recover its attorneys' fees and costs in that action or proceeding, as well as
all costs and fees of any appeal or action to enforce any judgment entered
therein.
11.12. TAX. TREATMENT OF TRANSACTIONS. The parties agree that all
transactions contemplated herein will be reported for tax purposes consistently
with the manner in which such transactions are characterized by this Agreement.
The parties agree that such transactions will be accounted for federal and
California income Tax purposes as a sale of shares and not as a sale of assets.
11.13. SURVIVAL. The representations, warranties and agreements in this
Agreement, other than the Surviving Obligations and the provisions of Article IX
and Article XI, will terminate on the date which is 18 months after the Closing
Date; provided, however, that no such expiration period will apply to Section
3.6 Capitalization of Sub, Section 5.6 Access to Information, Section 6.6
Preparation and Filing of Returns and Payment of Taxes, and provided further
that Section 5.5 Maintenance of Directors and Officers Insurance will terminate
six years from the Effective Time. The Surviving Obligations and the provisions
of Article IX and Article XI will terminate on the expiration date of the period
of limitation under applicable Laws (as such period of limitation may be
extended by waiver).
(signature page follows)
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SIGNATURE PAGE - AGREEMENT AND PLAN OF REORGANIZATION
IN WITNESS WHEREOF, the parties hereto have executed or caused
this Agreement and Plan of Reorganization to be executed as of the date first
written above by their respective officer thereunto duly authorized:
GREENFIELD ONLINE, INC. ZING WIRELESS, INC.
By: /s/ Jonathan A. Flatow By: /s/ Matthew D. Dusig
------------------------------ ----------------------------
Name: Jonathan A. Flatow Matthew D. Dusig
Title: Vice - President - Corporate President
Development, General Counsel
SHAREHOLDER REPRESENTATIVE: GREENFIELD ACQUISITION SUB, INC.
BY EXECUTING BELOW THE UNDERSIGNED
AGREES TO ACCEPT APPOINTMENT AS, AND TO
PERFORM THE FUNCTION OF, SHAREHOLDER
REPRESENTATIVE UNDER THIS AGREEMENT.
/s/ Eric Garfield
- ---------------------------------
Eric Garfield By: /s/ Jonathan A. Flatow
-----------------------------
Name: Jonathan A. Flatow
Title: Secretary
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