EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
Among
ZOI INTERACTIVE TECHNOLOGIES, INC.,
CET SERVICES INC., a California corporation,
INTERACTIVE ACQUISITION CORPORATION
and
CET SERVICES OF NEVADA, INC., a Nevada corporation
Dated as of February 16, 2007
TABLE OF CONTENTS
ARTICLE I DEFINITIONS 1
SECTION 1.01. Certain Defined Terms 1
ARTICLE II THE MERGER 9
SECTION 2.01. The Merger 9
SECTION 2.02. Effective Time; Closing 10
SECTION 2.03. Effect of the Merger 10
SECTION 2.04. Articles of Incorporation; Bylaws of
Surviving Corporation 10
SECTION 2.05. Directors and Officers 10
SECTION 2.06. Effect on Securities 10
SECTION 2.07. Dissenting Shares 11
SECTION 2.08. Surrender of Certificates 12
SECTION 2.09. No Further Ownership Rights in Zoi Common
Stock 14
SECTION 2.10. Lost, Stolen or Destroyed Certificates 14
SECTION 2.11. Taking of Necessary Action; Further Action 14
SECTION 2.12. Tax Consequences 14
SECTION 2.13. Reincorporation Merger 15
ARTICLE III REPRESENTATIONS AND WARRANTIES OF Zoi 16
SECTION 3.01. Organization, Authority and Qualification of
Zoi 16
SECTION 3.02. Capital Stock of Zoi; Ownership of the Shares 17
SECTION 3.03. Subsidiaries 17
SECTION 3.04. Corporate Books and Records 19
SECTION 3.05. No Conflict 19
SECTION 3.06. Governmental Consents and Approvals 19
SECTION 3.07. Financial Information/Books and Records 19
SECTION 3.08. No Undisclosed Liabilities 20
SECTION 3.09. Receivables; Inventory 20
SECTION 3.10. Conduct in the Ordinary Course; Absence
of Certain Changes, Events and Conditions 21
SECTION 3.11. Litigation 23
SECTION 3.12. Certain Interests 23
SECTION 3.13. Compliance with Laws 24
SECTION 3.14. Environmental and Other Permits and
Licenses; Related Matters 24
SECTION 3.15. Material Zoi Contracts 25
SECTION 3.16. Intellectual Property 27
SECTION 3.17. Real Property 30
SECTION 3.18. Tangible Assets 30
SECTION 3.19. Customers 31
SECTION 3.20. Employee Benefit Plans; Employment Agreements 31
SECTION 3.21. Labor Matters 32
SECTION 3.22. Key Employees 32
SECTION 3.23. Taxes 33
SECTION 3.24. Insurance 34
SECTION 3.25. Brokers 34
SECTION 3.26. Approval Requirements 34
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY, 35
MERGER SUB AND CET-NEVADA
SECTION 4.01. Organization and Good Standing 35
SECTION 4.02. Charter Documents 35
SECTION 4.03. Capital Structure 35
SECTION 4.04. Subsidiaries 37
SECTION 4.05. Authority 37
SECTION 4.06. Conflicts 37
SECTION 4.07. Consents 38
SECTION 4.08. SEC Filings; Financial Statements 38
SECTION 4.09. Absence of Certain Changes or Events 40
SECTION 4.10. Taxes 43
SECTION 4.11. Intellectual Property 44
SECTION 4.12. Compliance; Permits; Restrictions 45
SECTION 4.13. Litigation 46
SECTION 4.14. Brokers' and Finders' Fees 46
SECTION 4.15. Employee Benefit Plans 46
SECTION 4.16. Title to Properties 48
SECTION 4.17. Environmental Matters 49
SECTION 4.18. Agreements, Contracts and Commitments 50
SECTION 4.19. The Proxy Statement; Other Filings 51
SECTION 4.20. Board Approval 51
SECTION 4.21. State Takeover Statutes 51
SECTION 4.22. Transactions with Affiliates 51
SECTION 4.23. Insurance 52
ARTICLE V CONDUCT PRIOR TO THE CLOSING DATE 52
SECTION 5.01. Conduct of Business 52
SECTION 5.02. Access to Information 53
SECTION 5.03. Regulatory and Other Authorizations; Notices
and Consents 53
SECTION 5.04. Notice of Developments 54
SECTION 5.05. No Solicitation or Negotiation by the Company 54
SECTION 5.06. No Solicitation or Negotiation by Zoi 55
SECTION 5.07. Further Action 55
SECTION 5.08. Conduct of Business by Zoi 55
ARTICLE VI ZOI STOCK OPTIONS, WARRANTS AND CONVERTIBLE DEBT 56
SECTION 6.01. Zoi Stock Options 56
ARTICLE VII ADDITIONAL AGREEMENTS 56
SECTION 7.01. Securities Filings 56
SECTION 7.02. Zoi Shareholder Approval. 56
SECTION 7.03. Company Proxy Statement; Other Filings 56
SECTION 7.04. Company Meeting of Shareholders 57
SECTION 7.05. AMEX Listing 58
SECTION 7.06. Exemption from Registration 58
SECTION 7.07. Form S-8 58
SECTION 7.08. 10-KSB 58
SECTION 7.09. Directors' and Officers' Indemnification 58
SECTION 7.10. Time and Responsibility Schedule 58
SECTION 7.11. Reserved 58
SECTION 7.12. Board of Directors and Officers 58
SECTION 7.13 Resale Restriction Agreements 59
SECTION 7.14. Agreement Not to Dissent 59
ARTICLE VIII CONDITIONS TO CLOSING 59
SECTION 8.01. Conditions to Obligations of Each Party 59
SECTION 8.02. Conditions to Obligations of Zoi 60
SECTION 8.03. Conditions to Obligations of the Company and
Merger Sub 62
SECTION 8.04 Disclosure Schedule Updates 63
ARTICLE IX TERMINATION AND WAIVER 63
SECTION 9.01. Termination 64
SECTION 9.02. Effect of Termination 64
SECTION 9.03. Waiver 65
ARTICLE XI GENERAL PROVISIONS 65
SECTION 10.01. Non-Survival of Representations and Warranties 65
SECTION 10.02. Expenses 65
SECTION 10.03. Notices 65
SECTION 10.04. Public Announcements 66
SECTION 10.05. Headings 66
SECTION 10.06. Severability 66
SECTION 10.07. Entire Agreement 67
SECTION 10.08. Assignment 67
SECTION 10.09. No Third Party Beneficiaries 67
SECTION 10.10. Amendment 67
SECTION 10.11. Governing Law 68
SECTION 10.12. Counterparts 68
Exhibit A Form of Voting Agreement
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of February 16, 2007 (the
"Agreement"), among CET Services, Inc., a California corporation (the
"Company"), Interactive Acquisition Corporation, a Nevada corporation and
wholly owned subsidiary of the Company ("Merger Sub"), Zoi Interactive
Technologies, Inc, a Nevada corporation ("Zoi"), and CET Services of Nevada,
Inc., a Nevada Corporation ("CET-Nevada").
RECITALS
A. The Boards of Directors of Zoi and the Company have each
determined that it is in the best interests of their respective shareholders
for the Company and Zoi to enter a business combination transaction pursuant
to which Merger Sub will merge with and into Zoi (the "Merger"), with Zoi
continuing after the Merger as the surviving corporation and wholly owned
subsidiary of the Company.
B. The parties desire that prior to the Merger the Company
reincorporate from the State of California to the State of Nevada by merging
with and into CET-Nevada, as set forth in Section 2.13 of this Agreement.
C. The Board of Directors of the Company (i) has approved this
Agreement, the Merger, the Reincorporation Merger and the other transactions
contemplated by this Agreement and (ii) has determined to recommend the
approval of this Agreement, the Merger, the Reincorporation Merger and the
issuance of shares of Company Common Stock to the shareholders of Zoi
pursuant to the terms of the Merger.
D. The Board of Directors of Zoi (i) has approved this Agreement,
the Merger and the other transactions contemplated by this Agreement and (ii)
has determined to recommend the approval of this Agreement and the Merger by
the shareholders of Zoi.
E. Concurrently with the execution and delivery of this Agreement,
and as a condition and inducement to the willingness of Zoi to enter into
this Agreement, Steven Davis, the Company's Chief Executive Officer, is
entering into a Voting Agreement in substantially the form attached hereto as
Exhibit A (the "Voting Agreement").
F. The parties hereto intend, by executing this Agreement, to adopt
a plan of reorganization within the meaning of Section 368 of the Code (as
defined herein).
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Zoi, the Company, Merger Sub and CET-Nevada hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
"Action" means any claim, action, suit, arbitration, inquiry,
proceeding or investigation by or before any Governmental Authority.
"Affiliate" means, with respect to any specified Person, any other
Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, such specified
Person.
"Agreement" or "this Agreement" means this Agreement and Plan of
Merger, dated as of February 16, 2007, among Zoi, the Company and CET-Nevada
and all amendments hereto made in accordance with the provisions of Section
10.10.
"AMEX" or "ASE" means the American Stock Exchange.
"Articles of Merger" has the meaning specified in Section 2.02.
"California Common Stock" has the meaning specified in Section
2.12(c).
"California Law" means the California Corporations Code.
"California Reincorporation Articles of Merger" Section 2.12(a).
"California Stock Option" has the meaning specified in Section
2.12(d).
"Certificates" has the meaning specified in Section 2.08(c).
"CET-Nevada" has the meaning specified in the recitals to this
Agreement.
"Closing" has the meaning specified in Section 2.02.
"Closing Date" has the meaning specified in Section 2.02.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning specified in the recitals to this
Agreement.
"Company Balance Sheet" has the meaning specified in Section
4.08(b).
"Company Common Stock" means the common stock of the Company.
"Company Disclosure Schedules" has the meaning specified in Article
4.
"Company Employee" has the meaning specified in Section 4.15(a).
"Company Equity Incentive Plan" means the Company's 2007 Equity
Incentive Plan, which has been approved by the Company's Board of Directors
and that will become effective upon satisfaction of both (i) approval of the
Company's shareholders of the Company Equity Incentive Plan and (ii) the
occurrence of the Closing.
"Company Financials" has the meaning specified in Section 4.08(b).
"Company Intellectual Property" has the meaning specified in
Section 4.11(a).
"Company Lease" has the meaning specified in Section 4.16(a).
"Company Leased Property" has the meaning specified in Section
4.16(a).
"Company Permits" has the meaning specified in Section 4.12(b).
"Company Plans" has the meaning specified in Section 4.15(a).
"Company Registered Intellectual Property" has the meaning
specified in Section 4.11(a).
"Company Returns" has the meaning specified in Section 4.10.
"Company SEC Reports" has the meaning specified in Section 4.08(a).
"Company Shareholders' Meeting" has the meaning specified in
Section 7.03.
"Company Options" means the all options to purchase, acquire or
otherwise receive shares of Company Common Stock (whether or not vested) held
by current or former employees or directors of or consultants to the Company
and excluding all Company Warrants.
"Company Non-Plan Options" means Company Options other than Company
Plan Options.
"Company Plan Options" means Company Options granted pursuant to
the Company Stock Option Plan.
"Company Stock Option Plan" means the Company's Incentive Stock
Option Plan.
"Company Warrants" means all warrants to purchase, acquire or
otherwise receive shares of Company capital stock (whether or not vested)
other than Company Options.
"Control" (including the terms "controlled by" and "under common
control with"), with respect to the relationship between or among two or more
Persons, means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the affairs or
management of a Person, whether through the ownership of voting securities,
as trustee or executor, by contract or otherwise, including, without
limitation, the ownership, directly or indirectly, of securities having the
power to elect a majority of the board of directors or similar body governing
the affairs of such Person.
"Dissenting Shares" has the meaning specified in Section 2.07(a).
"Effective Time" has the meaning specified in Section 2.02.
"Effective Time Price" means the average of the last reported sales
price of the Company's Common Stock as reported by the Trading Market for the
10 consecutive trading days up to and including the trading day immediately
preceding the date of the Effective Time.
"Encumbrance" means any security interest, pledge, mortgage, lien
(including, without limitation, environmental and tax liens), charge,
encumbrance, adverse claim, preferential arrangement or restriction of any
kind, including, without limitation, any restriction on the use, voting,
transfer, receipt of income or other exercise of any attributes of ownership.
"Environment" means surface waters, groundwaters, soil, subsurface
strata and air.
"Environmental Claims" means any and all administrative, regulatory
or judicial actions, suits, demands, demand letters, claims, liens, notices
of non-compliance or violation, notice of liability or potential liability,
investigations, proceedings, consent orders or consent agreements relating in
any way to any Environmental Law, any Environmental Permit or Hazardous
Materials or arising from alleged injury or threat of injury to health,
safety or the Environment, including, without limitation, (a) by Governmental
Authorities for enforcement, cleanup, removal, response, remedial or other
actions or damages and (b) by any Governmental Authority or any Person for
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief.
"Environmental Laws" means any Law, now or hereafter in effect and
as amended, and any judicial, administrative or otherwise binding
interpretation thereof, including any judicial or administrative order,
consent decree or judgment, relating to the environment, health, safety or
Hazardous Materials, including, without limitation, the CERCLA; the Resource
Conservation and Recovery Act, 42 U.S.C. SS6901 et seq.; the Hazardous
Materials Transportation Act, 49 U.S.C. SS 6901 et seq.; the Clean Water
Act,33 U.S.C. SS 1251 et seq.; the Toxic Substances Control Act, 15 U.S.C. SS
2601 et seq.; the Clean Air Act, 42 U.S.C. SS 7401 et seq.; the Safe Drinking
Water Act, 42 U.S.C. SS 300f et seq.; the Atomic Energy Act, 42 U.S.C. SS
2011 et seq; the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C.
SS 136 et seq.; and the Federal Food, Drug and Cosmetic Act, 21 U.S.C. SS 301
et seq.
"Environmental Permits" means all permits, approvals,
identification numbers, licenses and other authorizations required under any
applicable Environmental Law.
"ERISA" has the meaning specified in Section 3.20(a).
"Exchange Act" means the Securities and Exchange Act of 1934, as
amended, or any successor statute thereto.
"Exchange Agent" has the meaning specified in Section 2.08(a).
"Exchange Ratio" means an amount equal to the quotient of (A) the
Merger Shares divided by (B) the number of outstanding shares of Zoi Common
Stock immediately prior to the Effective Time.
"Financial Statements" has the meaning specified in Section
3.07(a).
"Governmental Authority" means any United States federal, state or
local or any foreign government, governmental, regulatory or administrative
authority, agency or commission or any court, tribunal, or judicial or
arbitral body.
"Governmental Order" means any order, writ, judgment, injunction,
decree, stipulation, determination or award entered by or with any
Governmental Authority.
"Hazardous Materials" means (a) petroleum and petroleum products,
radioactive materials, asbestos-containing materials, urea formaldehyde foam
insulation, transformers or other equipment that contain polychlorinated
biphenyls, and radon gas, and (b) any other chemicals, materials or
substances defined or regulated as "hazardous" or "toxic" or words of similar
import, under any applicable Environmental Law.
"Hazardous Material Activities" has the meaning specified in
Section 4.17(b).
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"Indebtedness" means, without duplication with respect to any
Person, (a) all indebtedness of such Person for borrowed money, (b) all
obligations of such Person for the deferred purchase price of property or
services (other than trade payables created in the ordinary course of
business), (c) all indebtedness created or arising under any conditional sale
or other title retention agreement with respect to property acquired by such
Person (even though the rights and remedies of the seller or lender under
such agreement in the event of default are limited to repossession or sale of
such property), (d) all obligations of such Person as lessee under leases
that have been or should be, in accordance with U.S. GAAP, recorded as
capital leases, (e) all obligations, contingent or otherwise, of such Person
under acceptance, letter of credit or similar facilities, (f) all obligations
of such Person to purchase, redeem, retire, defease or otherwise acquire for
value any capital stock of such Person or any warrants, rights or options to
acquire such capital stock, valued, in the case of redeemable preferred
stock, at the greater of its voluntary or involuntary liquidation preference
plus accrued and unpaid dividends, (g) all Indebtedness of others referred to
in clauses (a) through (e) above guaranteed directly or indirectly in any
manner by such Person, or in effect guaranteed directly or indirectly by such
Person through an agreement (i) to pay or purchase such Indebtedness or to
advance or supply funds for the payment or purchase of such Indebtedness,
(ii) to purchase, sell or lease (as lessee or lessor) property, or to
purchase or sell services, primarily for the purpose of enabling the debtor
to make payment of such Indebtedness or to assure the holder of such
Indebtedness against loss, (iii) to supply funds to or in any other manner
invest in the debtor (including any agreement to pay for property or services
irrespective of whether such property is received or such services are
rendered), and (h) all Indebtedness referred to in clauses (a) through (e)
above secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any Encumbrance on
property (including, without limitation, accounts and contract rights) owned
by such Person, even though such Person has not assumed or become liable for
the payment of such Indebtedness.
"Intellectual Property" means all of the following: (i) U.S. and
foreign registered and unregistered trademarks, trade dress, service marks,
logos, trade names, corporate names and all registrations and applications to
register the same (the "Trademarks"); (ii) issued U.S. and foreign patents
and pending patent applications, patent disclosures, and any and all
divisions, continuations, continuations-in-part, reissues, reexaminations,
and extension thereof, any counterparts claiming priority therefrom, utility
models, patents of importation/confirmation, certificates of invention and
like statutory rights (the "Patents"); (iii) U.S. and foreign registered and
unregistered copyrights (including, but not limited to, those in computer
software and databases) rights of publicity and all registrations and
applications to register the same (the "Copyrights"); (iv) U.S. and foreign
rights in any semiconductor chip product works or "mask works" as such term
is defined in 17 U.S.C. 901, et seq. and any registrations or applications
therefor ("Mask Works"); (v) all categories of trade secrets as defined in
the Uniform Trade Secrets Act including, but not limited to, business
information; (vi) all License and agreements pursuant to which the Company
has acquired rights in or to any Trademarks, Patents, Copyrights or Mask
Works, or Licenses and agreements pursuant to which the Company has Licensed
or transferred the right to use any of the foregoing ("Licenses").
"IRS" means the Internal Revenue Service of the United States.
"Law" means any federal, state, local or foreign statute, law,
ordinance, regulation, rule, code, order, other requirement or rule of law.
"Liabilities" means any and all debts, liabilities and obligations,
whether accrued or fixed, absolute or contingent, matured or unmatured or
determined or determinable, including, without limitation, those arising
under any Law (including, without limitation, any Environmental Law), Action
or Governmental Order and those arising under any contract, agreement,
arrangement, commitment or undertaking.
"Material Adverse Effect when used with reference to an entity
means any change, event, violation, inaccuracy, circumstance or effect that
is materially adverse to the business, assets (including intangible assets),
capitalization, financial condition or results of operations of such entity
and its Subsidiaries taken as a whole; provided, however, that a Material
Adverse Effect will not exist as a result of circumstances that are
demonstrated to have resulted directly from the public announcement of the
Merger.
"Material Company Contracts" has the meaning specified in Section
4.18(b).
"Material Zoi Contracts" has the meaning specified in Section
3.15(a).
"Merger Consideration" has the meaning specified in Section
2.06(a).
"Merger Shares" means a number of shares of Company Common Stock
equal to the product of (i) 34,899,236 shares of Company Common Stock and
(ii) the quotient obtained by dividing (A) the number of outstanding shares
of Company Common Stock immediately prior to the Effective Time plus the
number of shares of Company Common Stock that are repurchased by the Company
from the date of this Agreement through time immediately prior to the
Effective Time by (B) the number of outstanding shares of Company Common
Stock at the close of business on the date of this Agreement.
"Multiemployer Plan" has the meaning specified in Section 3.20(b).
"Multiple Employer Plan" has the meaning specified in Section
3.20(b).
"Nevada Common Stock" has the meaning specified in Section 2.12(c).
"Nevada Law" means the General Corporation Law of the State of
Nevada.
"Nevada Reincorporation Articles of Merger" has the meaning
specified in Section 2.12(a).
"Permitted Encumbrances" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding shall have
been commenced: (a) liens for taxes, assessments and governmental charges or
levies not yet due and payable or for taxes, assessments and governmental
charges or levies that are being contested in good faith; (b) Encumbrances
imposed by law, such as materialmen's, mechanics', carriers', workmen's and
repairmen's liens and other similar liens arising in the ordinary course of
business securing obligations that (i) are not overdue for a period of more
than 30 days and (ii) are not in excess of $10,000 in the aggregate at any
time; (c) pledges or deposits to secure obligations under workers'
compensation laws or similar legislation or to secure public or statutory
obligations; and (d) minor survey exceptions, reciprocal easement agreements
and other customary encumbrances on and imperfections to title to real
property and other Encumbrances that (i) do not render title to the property
encumbered thereby uninsurable and (ii) do not, individually or in the
aggregate, materially adversely affect the value or use of such property for
its current purposes; and (e) Encumbrances related to purchase money
mortgages and conditional sales contracts entered into in the ordinary course
of business.
"Person" means any individual, partnership, firm, corporation,
association, trust, unincorporated organization or other entity, as well as
any syndicate or group that would be deemed to be a person under Section
13(d)(3) of the Exchange Act.
"Principal Shareholder" means Michael Calderone.
"Proxy Statement" has the meaning specified in Section 7.03.
"Receivables" means any and all accounts receivable, notes and
other amounts receivable by the Company or any of its Subsidiaries from third
parties, including, without limitation, customers, arising before the
Effective Time, whether or not in the ordinary course, together with all
unpaid financing charges accrued thereon.
"Regulations" means the Treasury Regulations (including Temporary
Regulations) promulgated by the United States Department of Treasury with
respect to the Code or other federal tax statutes.
"Reincorporation Effective Time" has the meaning specified in
Section 2.12(a).
"Reincorporation Merger" has the meaning specified in Section
2.12(a).
"Release" means disposing, discharging, injecting, spilling,
leaking, leaching, dumping, emitting, escaping, emptying, seeping, placing
and the like into or upon any land or water or air or otherwise entering into
the Environment.
"Sarbanes-Oxley Act" has the meaning specified in Section 4.08(c).
"SEC" means the United States Securities and Exchange Commission,
or any successor agency thereto.
"Securities Act" means the Securities Act of 1933, as amended, or
any successor statute thereto.
"Shareholder Representation Letter" means a letter, in form and substance
reasonably satisfactory to the Company, to be executed by the shareholders of
Zoi containing provisions addressing stock ownership, securities law
investment representations and such other matters consistent with this
Agreement as the Company may reasonably request.
"Subsidiary" means, with respect to any Person, all corporations,
partnerships, joint ventures, associations and other entities controlled by
the Person directly or indirectly through one or more intermediaries.
"Surviving Corporation" has the meaning specified in Section 2.01.
"Tax" or "Taxes" means any and all taxes, levies, duties, tariffs,
imposts, and other similar fees or charges of any kind, foreign or domestic,
(together with any and all interest, penalties, additions to tax and
additional amounts imposed with respect thereto), imposed by any government
or taxing authority, including, without limitation: taxes on or with respect
to income, franchises, windfall or other profits, gross receipts, property,
sales, use, capital stock, payroll, employment, social security, workers'
compensation, unemployment compensation, or net worth; taxes or other charges
in the nature of excise, withholding, ad valorem, stamp, transfer, value
added, or gains taxes; license, registration and documentation fees; and
customs duties and tariffs.
"Trading Market" means the market or exchanges on which the Company
Common Stock is listed or quoted for trading on the date in question.
"U.S. GAAP" means United States generally accepted accounting
principles and practices as in effect from time to time and applied
consistently throughout the periods involved.
"Zoi Common Stock" means the Common Stock, par value of $0.001 per
share, of Zoi.
"Zoi Convertible Debt" means any debt of Zoi that is convertible by
its terms into capital stock of Zoi.
"Zoi Convertible Note" means each instrument that provides the
terms and the obligations of the Zoi Convertible Debt.
"Zoi Disclosure Schedules" has the meaning specified in Article
III.
"Zoi Employee Plans" has the meaning specified in Section 3.20(a).
"Zoi ERISA Affiliate" has the meaning specified in Section 3.20(a).
"Zoi Financial Statements" has the meaning specified in Section
3.07(a).
"Zoi Interim Balance Sheet" has the meaning specified in Section
3.07(a).
"Zoi Interim Financial Statements" has the meaning specified in
Section 3.07(a).
"Zoi Material Tangible Assets" has the meaning specified in Section
3.18(a).
"Zoi Options" shall mean all options to purchase, acquire or
otherwise receive shares of Zoi Common Stock (whether or not vested) held by
current or former employees, directors or consultants of Zoi and excluding
Zoi Warrants.
"Zoi Permits" has the meaning specified in Section 3.14(a).
"Zoi Plan Options" shall mean Zoi Options granted pursuant to the
Zoi Stock Option Plan.
"Zoi Real Property" has the meaning specified in Section 3.14(b).
"Zoi Stock Option Plan" means the 2005 Equity Incentive Plan of Zoi.
"Zoi Warrants" shall mean all warrants to purchase, acquire or otherwise
receive shares of Zoi Common Stock (whether or not vested) other than Zoi
Options.
ARTICLE II
THE MERGER
SECTION 2.01. The Merger. At the Effective Time (as defined in Section
2.02) and subject to and upon the terms and conditions of this Agreement and
the applicable provisions of California Law and Nevada Law, Merger Sub shall
be merged with and into Zoi, the separate corporate existence of Merger Sub
shall cease, and Zoi shall continue as the surviving corporation after the
Merger. As the surviving corporation after the Merger, Zoi is hereinafter
sometimes referred to as the "Surviving Corporation."
SECTION 2.02. Effective Time; Closing. Upon the terms and subject to
the conditions set forth in this Agreement, the parties hereto shall cause
the Merger to be consummated by filing Articles of Merger (the "Articles of
Merger") with the Secretary of State of the State of Nevada in accordance
with the relevant provisions of Nevada Law (the time of such filing (or such
later time as may be agreed upon in writing by the parties hereto and
specified in the Articles of Merger) being referred to herein as the
"Effective Time") as soon as practicable on or after the Closing Date (as
defined below). The closing of the Merger (the "Closing") shall take place
at the offices of Weintraub Genshlea Chediak Law Corporation, 400 Capitol
Mall, Eleventh Floor, Sacramento, California 95814, at a time and date to be
specified by the parties hereto, which time and date shall be no later than
the second (2nd) business day after the satisfaction or waiver of the
conditions set forth in Article VIII hereof, or at such other location, time
and date as the parties hereto shall mutually agree in writing (the date upon
which the Closing actually occurs being referred to herein as the "Closing
Date").
SECTION 2.03. Effect of the Merger. At the Effective Time, the effect
of the Merger shall be as provided in this Agreement and the applicable
provisions of Nevada Law. Without limiting the generality of the foregoing,
and subject thereto, at the Effective Time all the property, rights,
privileges, powers and franchises of Zoi and Merger Sub shall vest in the
Surviving Corporation, and all debts, liabilities and duties of Zoi and
Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
SECTION 2.04. Articles of Incorporation; Bylaws of Surviving
Corporation.
(a) Articles of Incorporation. The Articles of Incorporation
of Merger Sub as in effect immediately prior to the Effective Time shall be
the Articles of Incorporation of the Surviving Corporation until thereafter
amended as provided by Nevada Law and the terms of such Articles of
Incorporation; provided, however, that the name of the Surviving Corporation
shall be changed to "Zoi Interactive Technologies, Inc." or some other name
mutually agreed upon by the Company and Zoi.
(b) Bylaws. The Bylaws of Merger Sub as in effect immediately
prior to the Effective Time shall be the Bylaws of the Surviving Corporation
until thereafter amended as provided by Nevada Law, the Articles of
Incorporation of the Surviving Corporation and such Bylaws.
SECTION 2.05. Directors and Officers. The directors of Zoi immediately
prior to the Effective Time shall continue to be the directors of the
Surviving Corporation immediately after the Effective Time, each to hold
office in accordance with the Articles of Incorporation and Bylaws of the
Surviving Corporation, and the officers of Zoi immediately prior to the
Effective Time shall continue to be the officers of the Surviving Corporation
immediately after the Effective Time, in each case until their respective
successors are duly elected or appointed and qualified.
SECTION 2.06. Effect on Securities. At the Effective Time, by virtue
of the Merger and without any action on the part of Zoi, the Company, Merger
Sub or the holders of any of the following securities, the following shall
occur:
(a) Conversion of Zoi Common Stock. Each share of Zoi Common
Stock issued and outstanding immediately prior to the Effective Time (other
than any such shares to be canceled pursuant to Section 2.06(b) or
constituting Dissenting Shares (as defined and to the extent provided in
Section 2.07(a)) shall be cancelled, extinguished and converted automatically
into the right to receive the number of shares of Company Common Stock equal
to the Exchange Ratio (such shares of Company Common Stock, and any cash paid
in lieu of fractional shares pursuant to Section 2.06(e), being collectively
referred to herein as the "Merger Consideration"), upon the surrender of the
certificate representing such share of Zoi Common Stock in the manner
provided in Section 2.08 (or in the case of a lost, stolen or destroyed
certificate, upon delivery of an affidavit (and bond, if required) in the
manner provided in Section 2.10).
(b) Cancellation of Treasury Stock. Each share of Zoi Common
Stock held in the treasury of Zoi, or owned by the Company, Merger Sub or any
direct or indirect Subsidiary of Zoi or the Company immediately prior to the
Effective Time shall be cancelled and extinguished without any conversion
thereof or consideration therefor.
(c) Assumption of Zoi Options and Warrants. Each Zoi Option
and each Zoi Warrant shall be assumed by the Company in accordance with
Article VI.
(d) Adjustments to Exchange Ratio. The Exchange Ratio shall be
adjusted to reflect appropriately the effect of any stock split, reverse
split, stock dividend (including any dividend or distribution of securities
convertible into Zoi Common Stock or Company Common Stock), extraordinary
cash dividends, reorganization, recapitalization, reclassification,
combination, exchange of shares or other like change with respect to Company
Common Stock or Zoi Common Stock occurring after the date hereof and prior to
the Effective Time.
(e) Fractional Shares. No fraction of a share of Company
Common Stock will be issued, but in lieu thereof each holder of shares of Zoi
Common Stock who would otherwise be entitled to a fraction of a share of
Company Common Stock in connection with the Merger (after aggregating all
fractional shares of Company Common Stock to be received by such holder)
shall receive from the Company an amount of cash (rounded to the nearest
whole cent), without interest, equal to the product of (i) such fraction,
multiplied by (ii) the Effective Time Price.
(f) Capital Stock of Merger Sub. Each share of Common Stock,
par value $0.001 per share, of Merger Sub ("Merger Sub Common Stock") issued
and outstanding immediately prior to the Effective Time shall be converted
into one (1) duly authorized and validly issued, fully paid and nonassessable
share of Common Stock, par value $0.001 per share, of the Surviving
Corporation. Each stock certificate of Merger Sub evidencing ownership of
any such shares shall thereafter evidence ownership of shares of capital
stock of the Surviving Corporation.
(g) Assumption of Zoi Convertible Debt. All Zoi Convertible
Debt will be assumed by the Company in accordance with Article VI.
SECTION 2.07. Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the
contrary, but subject to Section 2.07(b), any shares of capital stock of Zoi
held by a holder who has exercised dissenters' rights for such shares in
accordance with Nevada Law and who, as of the Effective Time, has not
effectively withdrawn or lost such dissenters' rights ("Dissenting Shares"),
shall not be converted into or represent a right to receive Merger
Consideration pursuant to Section 2.06, but the holder thereof shall only be
entitled to such rights as are granted by Nevada Law. Without limiting the
provisions of applicable Nevada Law, from and after the Effective Time
Dissenting Shares shall not be entitled to vote or to be paid dividends or
distributions declared after the Effective Time.
(b) Notwithstanding the provisions of Section 2.07(a), if any
holder of Dissenting Shares shall effectively withdraw or lose (through
failure to perfect or otherwise) his dissenters' rights, then, as of the
later of Effective Time or the occurrence of such event, such holder's shares
shall automatically be converted into and represent only the right to receive
the applicable Merger Consideration, without interest thereon, upon surrender
of the certificate or certificates representing such Dissenting Shares in
accordance with Section 2.08.
(c) The Company shall give Zoi (i) prompt notice of any written
demands received by the Company to make payments with respect to dissenting
shares of Company Common Stock in connection with the Merger, withdrawals of
such demands, and any other instruments served pursuant to California Law
and received by the Company and (ii) the opportunity to participate in all
negotiations and proceedings with respect to such demands. The Company shall
not, except with the prior written consent of Zoi, voluntarily make any
payment with respect to any such demands or offer to settle or settle any
such demands.
SECTION 2.08. Surrender of Certificates.
(a) Exchange Agent. Prior to the Effective Time, the Company
shall select U.S. Stock Transfer Corporation or any other institution
reasonably satisfactory to Zoi to act as the exchange agent (the "Exchange
Agent") for the Merger.
(b) Company to Provide Company Common Stock. Promptly
following the Effective Time, the Company shall make available to the
Exchange Agent for exchange in accordance with this Article II, (i) the
shares of Company Common Stock issuable pursuant to Section 2.06(a) hereof in
exchange for all outstanding shares of Zoi Common Stock, (ii) cash in an
amount sufficient to make all cash payments required to be made pursuant to
Section 2.06(e) hereof in lieu of issuing fractional shares of Company Common
Stock in connection with the Merger, and (iii) any dividends or other
distributions to which holders of shares of Zoi Common Stock may be entitled
pursuant to Section 2.08(d) hereof (such cash, shares of Zoi Common Stock,
cash in lieu of fractional shares and dividends and such other distributions
being referred to herein as the "Exchange Fund").
(c) Exchange Procedures. Promptly following the Effective
Time, the Company shall cause the Exchange Agent to mail or deliver to each
holder of record (as of the Effective Time) of a certificate or certificates
(the "Certificates") which immediately prior to the Effective Time
represented outstanding shares of Zoi Common Stock whose shares were
converted into the right to receive shares of Company Common Stock pursuant
to Section 2.06(a), the right to receive cash in lieu of any fractional
shares pursuant to Section 2.06(e) and any dividends or other distributions
pursuant to Section 2.08(d), (i) a letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the
Exchange Agent and shall be in such form and have such other provisions as
the Company and Zoi may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for the Merger
Consideration payable in respect of such Certificates and any dividends or
other distributions pursuant to Section 2.08(d). Upon surrender of
Certificates for cancellation to the Exchange Agent or to such other agent or
agents as may be appointed by the Company, together with such letter of
transmittal, duly completed and validly executed in accordance with the
instructions thereto, the holders of such Certificates shall be entitled to
receive in exchange therefor the Merger Consideration payable in respect of
such Certificates and any dividends or other distributions payable pursuant
to Section 2.08(d), and the Certificates so surrendered shall forthwith be
cancelled. Until so surrendered, outstanding Certificates shall be deemed
from and after the Effective Time, for all corporate purposes, subject to the
terms of Section 2.08(d) as to the payment of dividends, to evidence only the
right to receive Merger Consideration payable in respect of the shares of Zoi
Common Stock formerly represented thereby pursuant to the terms of this
Article II, and any dividends or distributions payable pursuant to Section
2.08(d).
(d) Distributions With Respect to Unexchanged Shares. No
dividends or other distributions declared or made after the Effective Time
with respect to Company Common Stock with a record date after the Effective
Time will be paid to any holders of any unsurrendered Certificates with
respect to the shares of Zoi Common Stock represented thereby until the
holders of record of such Certificates shall surrender such Certificates in
accordance with Section 2.08(c). Subject to applicable law, following
surrender of any such Certificates, the Exchange Agent shall deliver to the
record holders thereof, without interest, the amount of any such dividends or
other distributions with a record date after the Effective Time payable with
respect to such shares of Company Common Stock.
(e) Transfers of Ownership. If any certificate for shares of
Company Common Stock is to be issued in a name other than that in which the
Certificate surrendered in exchange therefor is registered, it will be a
condition to the issuance thereof that (i) the Certificate so surrendered
will be properly endorsed and otherwise in proper form for transfer, the
person requesting such exchange will have paid to the Company or any agent
designated by the Company any transfer or other taxes required by reason of
the issuance of a certificate for shares of Company Common Stock in any name
other than that of the registered holder of the Certificate surrendered, or
established to the satisfaction of Company or any agent designated by it that
such tax has been paid or is not payable, and (iii) the Company shall have
received, as reasonably requested by the Company, (a) written assurances
regarding federal and state securities law compliance and (b) written
agreements requiring any transferee of such shares to be bound by any
agreements with Zoi to which the transferor of such shares is bound.
(f) No Liability. Notwithstanding anything to the contrary in
this Section 2.08, none of the Exchange Agent, the Surviving Corporation or
any party hereto shall be liable to a holder of Zoi Common Stock or Company
Common Stock for any amount properly paid to a public official pursuant to
any applicable abandoned property, escheat or similar law.
(g) Distribution of Exchange Fund to Surviving Corporation.
Any portion of the Exchange Fund which remains undistributed to the holders
of the Certificates on the date that is six (6) months after the Effective
Time shall be delivered to Surviving Corporation upon demand, and any holders
of shares of Zoi Common Stock prior to the Merger who have not theretofore
surrendered their Certificates evidencing such shares of Zoi Common Stock for
exchange pursuant to this Section 2.08 shall thereafter look for payment of
the Merger Consideration payable in respect of the shares of Zoi Common Stock
evidenced by such Certificates solely to the Surviving Corporation, as
general creditors thereof, for any claim to the applicable Merger
Consideration to which such holders may be entitled pursuant to this Article
II.
SECTION 2.09. No Further Ownership Rights in Zoi Common Stock. The
Merger Consideration paid in accordance with the terms hereof shall be deemed
to have been paid in full satisfaction of all rights pertaining to such
shares of Zoi Common Stock, and there shall be no further registration of
transfers on the records of the Surviving Corporation of shares of Zoi Common
Stock which were outstanding immediately prior to the Effective Time. If,
after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be cancelled and exchanged as provided
in this Article II.
SECTION 2.10. Lost, Stolen or Destroyed Certificates. In the event any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent
shall issue in exchange for such lost, stolen or destroyed Certificates, upon
the making of an affidavit of that fact by the holder thereof, such shares of
Company Common Stock, cash for fractional shares, if any, as may be required
pursuant to Section 2.06(i) and the cash payable in the manner specified in
Section 2.06 hereof; provided, however, that Company may, in its discretion
and as a condition precedent to the issuance and payment thereof, require the
owner of such lost, stolen or destroyed Certificates to deliver a bond in
such sum as it may reasonably direct as indemnity against any claim that may
be made against Company or the Exchange Agent with respect to the
Certificates alleged to have been lost, stolen or destroyed.
SECTION 2.11. Taking of Necessary Action; Further Action. If, at any
time after the Effective Time, any such further action is necessary or
desirable to carry out the purposes of this Agreement and to vest the
Surviving Corporation with full right, title and possession to all assets,
property, rights, privileges, powers and franchises of Zoi and Merger Sub,
the officers and directors of the Company and Surviving Corporation (on
behalf of Merger Sub, Zoi, the Surviving Corporation or otherwise) are fully
authorized to take, and will take, all such lawful and necessary action.
SECTION 2.12. Tax Consequences. It is intended by the parties hereto
that the Merger constitute a "reorganization" within the meaning of Section
368 of the Code. In accordance therewith, the parties hereto hereby adopt
this Agreement as a "plan of reorganization" within the meaning of Sections
1.368-2(g) and 1.368-3(a) of the United States Income Tax Regulations. None
of the Company, Merger Sub or Zoi shall take any action that is inconsistent
with such treatment.
SECTION 2.13. Reincorporation Merger.
(a) On the terms and subject to the conditions set forth in
this Section 2.13, and in accordance with the California Law and the Nevada
Law, including without limitation following the requisite approval by the
Company's shareholders, immediately prior to the effective time, the Company
shall be merged with and into CET-Nevada (the "Reincorporation Merger"), and
CET-Nevada shall be the surviving corporation, and, will be referred to
throughout this Agreement as the "Company." The Reincorporation Merger shall
be effective as of the filing of (a) articles of merger (the "California
Reincorporation Articles of Merger") executed in accordance with the relevant
provisions of the California Law with the Secretary of State of the State of
California, (b) articles of merger (the "Nevada Reincorporation Articles of
Merger") executed in accordance with the relevant provisions of the Nevada
Law with the Secretary of State of the State of Nevada, and (c) any other
filings or recordings required under California Law and Nevada Law. The
Reincorporation Merger shall become effective at such time as the California
Reincorporation Articles of Merger are duly filed with the Secretary of State
of the State of California and the Nevada Reincorporation Articles of Merger
is duly filed with the Secretary of State of the State of Nevada, or at such
subsequent time as the parties hereto shall agree and specify in the
California Reincorporation Articles of Merger and the Nevada Reincorporation
Articles of Merger (the time the Reincorporation Merger becomes effective
being the "Reincorporation Effective Time").
(b) The Reincorporation Merger shall have the effects set
forth in Section 1107 of the California Law and Section 92A.250 of the Nevada
law. The articles of incorporation of CET-Nevada as in effect immediately
prior to the Reincorporation Effective Time shall be the articles of
incorporation of the Company until thereafter changed or amended as provided
therein or under the Nevada Law. The bylaws of CET-Nevada, as in effect
immediately prior to the Reincorporation Effective Time, shall be the bylaws
of the Company until thereafter changed or amended as provided therein or
under the Nevada Law. The directors of the Company immediately prior to the
Reincorporation Effective Time shall be the directors of CET-Nevada after
such time, until the earlier of their resignation or removal or until their
respective successors are duly elected and qualified, as the case may be. The
officers of the Company immediately prior to the Reincorporation Effective
Time shall be the officers of CET-Nevada after such time, until the earlier
of their resignation or removal or until their respective successors are duly
elected or appointed and qualified, as the case may be.
(c) At the Reincorporation Effective Time, by virtue of the
Reincorporation Merger and without any action on the part of the holder of
any shares of common stock, no par value, of the Company ("California Common
Stock"): (i) each issued and outstanding share of capital stock of California
Common Stock shall be converted into and become one fully paid and
nonassessable share of common stock, par value $0.001 per share, of CET-
Nevada Common Stock ("Nevada Common Stock"); (ii) each issued and outstanding
share of common stock, par value $0.001 per share of CET-Nevada owned by the
Company immediately prior to the Reincorporation Effective Time shall
automatically be canceled and cease to exist and no consideration shall be
delivered in exchange therefor; and (iii) each option, warrant, purchase
right or other security of the Company issued and outstanding immediately
prior to the Reincorporation Effective Time, if any, shall be converted into
and shall be an identical security of CET-Nevada. The same number of shares
of Nevada Common Stock shall be reserved for purposes of the exercise of such
options, warrants, purchase rights, units or other securities as is equal to
the number of shares of the California Common Stock so reserved as of the
Reincorporation Effective Time.
(d) The board of directors of the Company and/or CET-Nevada, or
the appropriate committee(s) thereof, shall take such action as is necessary
so that, at the Reincorporation Effective Time, each outstanding option to
purchase shares of California Common Stock (a "California Stock Option"),
whether or not vested, shall cease to represent a right to acquire shares of
California Common Stock, and shall thereafter constitute an option to
acquire, on the same terms and conditions as were applicable to such
California Stock Option prior to the Reincorporation Effective Time, a number
of shares of CET-Nevada Common Stock equal to the number of shares of
California Common Stock immediately prior to the Reincorporation Effective
Time. The exercise price or base price per share of Nevada Common Stock
subject to any such stock option at and after the Reincorporation Effective
Time shall be an amount equal to the exercise price or base price per share
of California Common Stock subject to such California Stock Option prior to
the Reincorporation Effective Time. The parties will make good faith efforts
to make equitable adjustments to ensure that the conversions of California
Stock Options contemplated by this Section 2.12(d) comply with Section 409A
of the Code.
(e) At and after the Reincorporation Effective Time, all of the
outstanding certificates which immediately prior thereto represented shares
of California Common Stock, options, warrants, purchase rights or other
securities of the Company, if any, shall be deemed for all purposes to
evidence ownership of and to represent the shares of the respective Nevada
Common Stock, options, warrants, purchase rights, or other securities of CET-
Nevada, if any. The registered owner of any such outstanding certificate
shall, until such certificate shall have been surrendered for transfer or
otherwise accounted for to CET-Nevada or its transfer agent, have and be
entitled to exercise any voting and other rights with respect to, and to
receive any dividends and other distributions upon, the shares of Nevada
Common Stock, options, warrants, purchase rights or other securities of CET-
Nevada, if any, as the case may be, evidenced by such outstanding
certificate, as above provided.
(f) Notwithstanding any other provision of this Agreement, if
(i) the Company and Zoi agree that the Company Common Stock will most likely
not be listed on AMEX following the Merger and (ii) Zoi instructs the Company
in writing ("Reincorporation Notice") that the Company shall not consummate
the Reincorporation Merger, then the Company and CET-Nevada shall not
consummate the Reincorporation Merger.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF Zoi
Zoi hereby represents and warrants to the Company and Merger Sub,
subject to the exceptions disclosed in writing in the disclosure letter,
dated as of the date hereof, delivered by Zoi to the Company concurrently
with the execution and delivery hereof (the "Zoi Disclosure Schedules"), as
follows:
SECTION 3.01. Organization, Authority and Qualification of Zoi. Zoi is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Nevada and has all necessary corporate power and
authority to own, operate or lease the properties and assets now owned,
operated or leased by it and to carry on its business as it has been and is
currently conducted. Except as set forth in Section 3.01 of the Zoi
Disclosure Schedules, Zoi is duly licensed or qualified to do business and is
in good standing in each jurisdiction in which the failure to be licensed or
qualified would have a Material Adverse Effect on Zoi. Zoi is not in
violation of any provision of its Articles of Incorporation or Bylaws. True
and correct copies of the Articles of Incorporation and Bylaws of Zoi, each
as in effect on the date hereof, have been made available or delivered by the
Zoi to the Company. This Agreement has been duly executed and delivered by
Zoi, and (assuming due authorization, execution and delivery by the Company,
Merger Sub and CET-Nevada) this Agreement constitutes a legal, valid and
binding obligation of Zoi enforceable against Zoi in accordance with its
terms except as such enforceability may be limited by principles of public
policy and subject to the laws of general application relating to bankruptcy,
insolvency and the relief of debtors and rules of law governing specific
performance, injunctive relief or other equitable remedies.
SECTION 3.02. Capital Stock of Zoi; Ownership of the Shares.
(a) The authorized capital stock of Zoi consists of 50,000,000 shares of
Zoi Common Stock. As of the date hereof, (i) 18,620,000 shares of Zoi
Common Stock are issued and outstanding, all of which are validly issued,
fully paid and non-assessable, (ii) 4,800,000 shares of Zoi Common Stock were
reserved for issuance under the Zoi Stock Option Plan, (iii) 2,352,000 shares
of Zoi Common Stock were reserved for issuance and issuable upon the exercise
of outstanding Zoi Options, and (iv) 2,448,000 shares of Zoi Common Stock
were available for future grant under the Zoi Stock Option Plan. None of the
issued and outstanding shares of Zoi Common Stock were issued in violation of
any preemptive rights. Except for the Zoi Stock Option Plan and except as
disclosed in Section 3.02(a)(i) of the Zoi Disclosure Schedules, there are no
options, warrants, convertible securities or other rights, agreements,
arrangements or commitments of any character relating to the capital stock of
Zoi to which Zoi is a party or obligating Zoi to issue or sell any shares of
capital stock of, or any other interest in, Zoi. There are no outstanding
contractual obligations of Zoi to repurchase, redeem or otherwise acquire any
shares of Zoi Common Stock or to provide funds to, or make any investment (in
the form of a loan, capital contribution or otherwise) in, any other Person.
Except as disclosed in Section 3.02(a)(ii) of the Zoi Disclosure Schedules,
there are no voting trusts, stockholder agreements, proxies or other
agreements or understandings in effect to which Zoi is a party or bound with
respect to the voting or transfer of any of Zoi Common Stock. All outstanding
shares of Zoi Common Stock have been issued in compliance in all material
respects with all applicable securities laws.
(b) Except as set forth in Section 3.02(b) of the Zoi
Disclosure Schedules, the stock register of Zoi accurately records: (i) the
name and last known address of each owner of record of shares of capital
stock of Zoi and (ii) the certificate number of each certificate evidencing
shares of capital stock issued by Zoi, the number of shares evidenced by each
such certificate, the date of issuance thereof and, in the case of
cancellation, the date of cancellation.
SECTION 3.03. Subsidiaries.
(a) Section 3.03(a) of the Zoi Disclosure Schedules sets forth
a true and complete list of all of Zoi's Subsidiaries, listing for each such
Subsidiary its name, type of entity, the jurisdiction and date of its
incorporation or organization, its authorized capital stock, partnership
capital or equivalent, the number and type of its issued and outstanding
shares of capital stock, partnership interests or similar ownership interests
and the current ownership of such shares, partnership interests or similar
ownership interests by Zoi and its Subsidiaries.
(b) There are no other corporations, partnerships, joint
ventures, associations or other similar entities in which Zoi owns, of record
or beneficially, any direct or indirect equity or other interest or any right
(contingent or otherwise) to acquire the same.
(c) Except as set forth in Section 3.03(c) of the Zoi
Disclosure Schedules, each Subsidiary of Zoi that is a corporation: (i) is a
corporation duly organized and validly existing under the laws of its
jurisdiction of incorporation, (ii) has all necessary corporate power and
authority to own, operate or lease the properties and assets owned, operated
or leased by such Subsidiary and to carry on its business as it has been and
is currently conducted by such Subsidiary and (iii) is duly licensed or
qualified to do business and is in good standing in each jurisdiction in
which the properties owned or leased by it or the operation of its business
makes such licensing or qualification necessary, except for, in each of
clauses (i), (ii) and (iii), such failures which, when taken together with
all other such failures, would not have a Material Adverse Effect on Zoi.
Each Subsidiary of Zoi is a corporation.
(d) All the outstanding shares of capital stock of each
Subsidiary of Zoi that is a corporation are validly issued, fully paid, non-
assessable and free of preemptive rights and are owned by Zoi, whether
directly or indirectly, free and clear of all Encumbrances.
(e) There are no options, warrants, convertible securities, or
other rights, agreements, arrangements or commitments of any character to
which Zoi or any of its Subsidiaries is a party obligating Zoi or any of its
Subsidiaries to issue or sell any shares of capital stock of, or any other
interest in, any of Zoi's Subsidiaries.
(f) No Subsidiary of Zoi has taken any action that in any
respect conflicts with, constitutes a default under or results in a violation
of any provision of its charter or by-laws (or similar organizational
documents) except for such actions which, when taken together with all other
such actions, would not reasonably be likely to have a Material Adverse
Effect on Zoi. True and complete copies of the charter and by-laws (or
similar organizational documents), in each case as in effect on the date
hereof, of each of Zoi's Subsidiaries have been made available or delivered
by Zoi to the Company.
(g) There are no voting trusts, stockholder agreements, proxies
or other agreements or understandings in effect with respect to the voting or
transfer of any shares of capital stock of or any other interests in any
Subsidiary of Zoi to which Zoi or any Subsidiary is a party or bound.
(h) The stock register of each Subsidiary of Zoi that is a
corporation accurately records: (i) the record owners of capital stock of
such Subsidiary and (ii) the number of shares of capital stock issued to each
such record owner and the date of issuance thereof.
SECTION 3.04. Corporate Books and Records. Complete and accurate
copies of all the minute books and of the stock register of Zoi and each of
its Subsidiaries have been provided or made available by Zoi to the Company.
SECTION 3.05. No Conflict. Subject to approval of the Merger and this
Agreement by Zoi's Board of Directors and Zoi's shareholders (which at a
minimum shall be provided by the written consent of the Principal
Shareholder), assuming that all consents, approvals, authorizations and other
actions described in Section 3.06 have been obtained and all filings and
notifications listed in Section 3.06 of the Zoi Disclosure Schedules have
been made, the execution, delivery and performance of this Agreement by Zoi
do not and will not (a) violate, conflict with or result in the breach of any
provision of the charter or by-laws (or similar organizational documents) of
Zoi or any of its Subsidiaries, (b) conflict with or violate any Law or
Governmental Order applicable to Zoi or any of its Subsidiaries (other than
conflicts and violations which could not reasonably be expected to have a
Material Adverse Effect on Zoi or as would occur solely as a result of the
identity or the legal or regulatory status of Zoi or any of its Affiliates),
or (c) except as set forth in Section 3.05(c) of the Zoi Disclosure
Schedules, conflict with, result in any breach of, constitute a default (or
event which with the giving of notice or lapse of time, or both, would become
a default) under, require any consent under, or give to others any rights of
termination, amendment, acceleration, suspension, revocation or cancellation
of, or result in the creation of any Encumbrance (other than a Permitted
Encumbrance) on any of the assets or properties of Zoi or its Subsidiaries
pursuant to, any material note, bond, mortgage or indenture, contract,
agreement, lease, sublease, license, permit, franchise or other instrument or
arrangement to which Zoi or any of its Subsidiaries is a party or by which
any of such assets or properties is bound or affected.
SECTION 3.06. Governmental Consents and Approvals. The execution,
delivery and performance of this Agreement by Zoi do not and will not require
any consent, approval, authorization or other order of, action by, filing
with or notification to any Governmental Authority, except (a) as described
in Section 3.06 of the Zoi Disclosure Schedules, (b) the notification
requirements of the HSR Act, (c) the filing of the Articles of Merger and (d)
such other consents, approvals, authorizations, orders, actions, filings and
notifications the absence of which would not reasonably be expected to result
in a Material Adverse Effect on Zoi.
SECTION 3.07. Financial Information/Books and Records.
(a) True and complete copies of (i) the audited consolidated
balance sheet of Zoi for December 31, 2005 and the related audited
consolidated statements of income, retained earnings, stockholders' equity
and cash flows of Zoi, together with all related notes and schedules thereto,
accompanied by the reports thereon of Zoi's accountants (collectively
referred to herein as the "Zoi Financial Statements") and (ii) the unaudited
consolidated balance sheet of Zoi as of September 30, 2006 (the "Zoi Interim
Balance Sheet"), and the related consolidated statements of income, retained
earnings, stockholders' equity and cash flows of Zoi, together with all
related notes and schedules thereto (collectively referred to herein as the
"Zoi Interim Financial Statements") have been made available or delivered by
Zoi to the Company. The Zoi Financial Statements and the Zoi Interim
Financial Statement (i) were prepared in accordance with the books of account
and other financial records of Zoi, (ii) present fairly in all material
respects the consolidated financial condition and results of operations of
Zoi and its Subsidiaries as of the dates thereof or for the periods covered
thereby, (iii) have been prepared in accordance with U.S. GAAP applied on a
basis consistent with the past practices of Zoi and (iv) include all material
adjustments (consisting only of normal recurring accruals) that are necessary
for a fair presentation of the consolidated financial condition of Zoi and
its Subsidiaries and the results of the operations of Zoi and its
Subsidiaries as of the dates thereof or for the periods covered thereby,
except that the unaudited Zoi Interim Financial Statements are subject to
normal and recurring year-end adjustments which are not expected to be
material in amount.
(b) The books of account and other financial records of Zoi and
its Subsidiaries: (i) reflect in all material respects all items of income
and expense and all assets and Liabilities required to be reflected therein
in accordance with U.S. GAAP applied on a basis consistent with the past
practices of Zoi and its Subsidiaries, respectively, (ii) are in all material
respects complete and correct, and do not contain or reflect any material
inaccuracies or discrepancies and (iii) have been maintained in accordance
with good business and accounting practices.
SECTION 3.08. No Undisclosed Liabilities. There are no Liabilities of
Zoi or any of its Subsidiaries required by U.S. GAAP to be recognized or
disclosed on a consolidated balance sheet of Zoi and its Subsidiaries in the
notes thereto, other than Liabilities (i) reflected or reserved against on
the Zoi Interim Balance Sheet, (ii) disclosed in Section 3.08 of the Zoi
Disclosure Schedules or (iii) incurred since the date of the Zoi Interim
Balance Sheet in the ordinary course of business, consistent with the past
practice, of Zoi and its Subsidiaries and which do not and could not
reasonably be expected to have a Material Adverse Effect on Zoi.
SECTION 3.09. Receivables; Inventory.
(a) Except to the extent, if any, reserved for on the Zoi
Interim Balance Sheet, all Receivables reflected on the Zoi Interim Balance
Sheet arose from the sale of inventory or services and in the ordinary course
of business consistent with past practice and, except as reserved against on
the Zoi Interim Balance Sheet, constitute, to Zoi's knowledge, only valid,
undisputed claims of Zoi or its Subsidiaries, not subject to material and
valid claims of set-off or other defenses or counterclaims other than normal
cash discounts accrued in the ordinary course of business consistent with
past practice. All Receivables reflected on the Zoi Interim Balance Sheet
(subject to the reserve for bad debts, if any, reflected on the Zoi Interim
Balance Sheet) have been collected or are or could reasonably be expected to
be collectible in the normal course, without resort to litigation or
extraordinary collection activity.
(b) All of the inventories of Zoi reflected on the Zoi Interim
Balance Sheet and the Zoi's books and records on the date hereof were
purchased, acquired or produced in the ordinary and regular course of
business and in a manner consistent with Zoi's regular inventory practices
and are set forth on Zoi's books and records in accordance with the practices
and principals of Zoi consistent with the method of treating said items in
prior periods. The presentation of inventory on the Zoi Interim Balance
Sheet conforms to U.S. GAAP and such inventory is stated at the lower of cost
(determined using the first-in, first-out method) or net realizable value.
SECTION 3.10. Conduct in the Ordinary Course; Absence of Certain
Changes, Events and Conditions. Since the date of the Zoi Interim Balance
Sheet, except as disclosed in Section 3.10 of the Zoi Disclosure Schedules,
the business of Zoi and its Subsidiaries has been conducted in the ordinary
course and consistent with past practice. Except as disclosed in Section
3.10 of the Zoi Disclosure Schedules, since the date of the Zoi Interim
Balance Sheet, neither Zoi nor any of its Subsidiaries has:
(i) permitted or allowed any of the material assets or material
properties (whether tangible or intangible) of Zoi or any of its Subsidiaries
to be subjected to any Encumbrance, other than Permitted Encumbrances and
Encumbrances that will be released at or prior to the Effective Time;
(ii) except in the ordinary course of business consistent with past
practice, discharged or otherwise obtained the release of any Encumbrance or
paid or otherwise discharged any Liability, other than current liabilities
reflected on the Zoi Interim Balance Sheet and current liabilities incurred
in the ordinary course of business consistent with past practice since the
date of the Zoi Interim Balance Sheet;
(iii) except in the ordinary course of business consistent with past
practice, made any loan to, guaranteed any Indebtedness of or otherwise
incurred any Indebtedness on behalf of any Person;
(iv) redeemed any of the capital stock or declared, made or paid any
dividends or distributions (whether in cash, securities or other property) to
the holders of capital stock of Zoi or any of its Subsidiaries or otherwise,
other than dividends, distributions and redemptions declared, made or paid by
any Zoi Subsidiary solely to Zoi;
(v) made any material changes in the customary methods of operations of
Zoi or any of its Subsidiaries, including, without limitation, practices and
policies relating to manufacturing, purchasing, inventories, marketing,
selling and pricing;
(vi) merged with, entered into a consolidation with or acquired an
interest of 5% or more in any Person or acquired a substantial portion of the
assets or business of any Person or any division or line of business thereof,
or otherwise acquired any assets material to Zoi and its Subsidiaries taken
as a whole, other than in the ordinary course of business consistent with
past practice;
(vii) made any capital expenditure or commitment for any capital
expenditure in excess of $250,000 individually or $3,000,000 in the
aggregate;
(viii) sold, transferred, leased, subleased, licensed or otherwise
disposed of any material properties or material assets, real, personal or
mixed material to Zoi and its Subsidiaries taken as a whole but excluding the
sale of inventories in the ordinary course of business consistent with past
practice;
(ix) except for exercises and conversions of securities outstanding on
the date of the Zoi Interim Balance Sheet and customary stock option grants
(covering no greater than 300,000 shares of Zoi Common Stock) for new hires
and existing employees consistent with past practice, issued or sold any
capital stock, notes, bonds or other securities, or any option, warrant or
other right to acquire the same, of, or any other interest in, Zoi or any of
its Subsidiaries;
(x) entered into any material agreement, arrangement or transaction
with any of its directors, officers, employees or shareholders (or with any
relative, beneficiary, spouse or Affiliate of such Person);
(xi) (A) other than as contemplated by this Agreement, granted any
material increase, or announced any material increase, in the wages,
salaries, compensation, bonuses, incentives, pension or other benefits
payable by Zoi or any of its Subsidiaries to any of its employees, including,
without limitation, any increase or change pursuant to any Zoi Employee Plan
or (B) established or increased or promised to increase any benefits under
any Zoi Employee Plan, in either case except as required by Law or any
existing agreement and/or involving ordinary increases consistent with the
past practices of Zoi or such Subsidiary;
(xii) materially written down or materially written up (or failed to
write down or write up in accordance with U.S. GAAP consistent with past
practice) the value of any inventories or Receivables or revalued any assets
of Zoi or any of its Subsidiaries other than in the ordinary course of
business consistent with past practice and in accordance with U.S. GAAP;
(xiii) amended, terminated, cancelled or compromised any material claims
of Zoi or any of its Subsidiaries or waived any other rights of substantial
value to Zoi or any of its Subsidiaries;
(xiv) made any change in any method of accounting or accounting practice
or policy used by Zoi or any Subsidiary of Zoi, other than such changes
required by U.S. GAAP;
(xv) allowed any Permit or Environmental Permit that was issued or
relates to Zoi or any Subsidiary of Zoi or otherwise relates to any asset to
lapse or terminate or failed to renew any such Permit or Environmental Permit
or any insurance policy that is scheduled to terminate or expire within 45
calendar days of the Effective Time, except for such lapses, terminations or
failures which could not reasonably be expected to have a Material Adverse
Effect on Zoi;
(xvi) materially amended, modified or consented to the termination of,
any Material Zoi Contract or Zoi's or any of its Subsidiaries' rights
thereunder;
(xvii) amended or restated the Articles of Incorporation or the Bylaws
(or other organizational documents) of Zoi or any of its Subsidiaries;
(xviii) terminated, discontinued, closed or disposed of any plant,
facility or other business operation, or laid off any employees (other than
layoffs of less than ten (10) employees in any six-month period in the
ordinary course of business consistent with past practice) or implemented any
early retirement, separation or program providing early retirement window
benefits within the meaning of Section 1.401(a)-4 of the Regulations or
announced or planned any such action or program for the future;
(xix) made any express or deemed election (other than an election
pursuant to Section 341(f) of the Code) or settled or compromised any
liability, with respect to Taxes of Zoi or any of its Subsidiaries;
(xx) suffered any casualty loss or damage with respect to any asset
which individually has a replacement cost of more than $100,000, whether or
not such loss or damage shall have been covered by insurance;
(xxi) received notice of any claim of ownership by a third party of Zoi
Intellectual Property or of infringement by Zoi of any third party's
Intellectual Property rights;
(xxii) materially changed the pricing or royalties set or charged by Zoi
to its customers or licensees or been the subject of a material change in
pricing or royalties set or charged with regard to the licensed Zoi
Intellectual Property; or
(xxiii) agreed, whether in writing or otherwise, to take any of the
actions specified in this Section 3.10 except as is expressly contemplated by
this Agreement.
SECTION 3.11. Litigation. Except as set forth in Section 3.11 of the
Zoi Disclosure Schedules (which, with respect to each Action disclosed
therein, sets forth: the parties, nature of the proceeding, date and method
commenced, amount of damages or other relief sought and, if applicable, paid
or granted), there are no Actions by or against Zoi or any of its
Subsidiaries (or by or against Zoi or any Affiliate thereof and relating to
Zoi or any of its Subsidiaries), or affecting any of their material assets,
pending before any Governmental Authority (or, to the knowledge of Zoi,
threatened to be brought by or before any Governmental Authority) that could
reasonably be expected to have a Material Adverse Effect on Zoi. None of the
matters disclosed in Section 3.11 of the Zoi Disclosure Schedules has or has
had a Material Adverse Effect on Zoi or could reasonably be expected to
materially adversely affect the legality, validity or enforceability of this
Agreement or the consummation of the transactions contemplated hereby.
Except as set forth in Section 3.11 of the Zoi Disclosure Schedules, none of
Zoi, the Subsidiaries of Zoi nor any of their material assets are subject to
any Governmental Order (nor, to the knowledge of Zoi are there any such
Governmental Orders threatened to be imposed by any Governmental Authority)
which has or has had a Material Adverse Effect on Zoi since the date of the
Zoi Interim Balance Sheet.
SECTION 3.12. Certain Interests.
(a) Except as disclosed in Section 3.12(a) of the Zoi
Disclosure Schedules, no officer or director of Zoi or any Subsidiary of Zoi
and no relative or spouse (or relative of such spouse) who resides with, any
such officer or director:
(i) has any material direct or indirect financial interest in any
competitor, supplier or customer of Zoi or any Subsidiary of Zoi, provided,
however, that the ownership of debt securities or the ownership of equity
securities representing no more than ten percent of the outstanding voting
power of any competitor, supplier or customer, shall not be deemed to be a
"financial interest" so long as the Person owning such securities has no
other material connection or relationship with such competitor, supplier or
customer;
(ii) owns, directly or indirectly, in whole or in part, or has any
other material interest in any material tangible or intangible property which
Zoi or any Subsidiary of Zoi uses or has used in the conduct of its business
or otherwise; or
(iii) has outstanding any material Indebtedness to Zoi or any
Subsidiary of Zoi.
(b) Except as disclosed in Section 3.12(b) of the Zoi
Disclosure Schedules, neither Zoi nor any Subsidiary of Zoi has any material
Liability or any other obligation of any nature whatsoever to any officer,
director or shareholder of Zoi or any Subsidiary of Zoi or to any relative or
spouse (or relative of such spouse) who resides with, or is a dependent of,
any such officer, director or shareholder.
SECTION 3.13. Compliance with Laws.
(a) Except as set forth in Section 3.13(a) of the Zoi
Disclosure Schedules, Zoi and its Subsidiaries have each conducted and
continue to conduct their business in substantial compliance with all Laws
and Governmental Orders applicable to Zoi or any of its Subsidiaries or any
of their material assets, and neither Zoi nor any Subsidiary of Zoi is in
material violation of any such Law or Governmental Order. To the knowledge
of Zoi, none of Zoi, any Subsidiary nor any officer, director, employee,
agent or representative of Zoi or any Subsidiary has, on behalf of Zoi,
furthered or supported any foreign boycott in violation of the Anti-Boycott
laws and regulations promulgated pursuant to the Export Administration Act of
1979 (50 U.S.C.A. Appx S 2407, and regulations promulgated thereunder).
(b) Section 3.13(b) of the Zoi Disclosure Schedules sets forth
a brief description of each material Governmental Order applicable to Zoi or
any Subsidiary of Zoi or any of their material assets, and no such
Governmental Order has or has had a Material Adverse Effect on Zoi.
SECTION 3.14. Environmental and Other Permits and Licenses; Related
Matters.
(a) Except as disclosed in Section 3.14(a)(i) of the Zoi
Disclosure Schedules, Zoi and its Subsidiaries currently hold all the health
and safety and other permits, licenses, authorizations, certificates,
exemptions and approvals of Governmental Authorities (collectively, "Zoi
Permits"), including, without limitation, Environmental Permits, which are
material to the operation of each material asset of Zoi and its Subsidiaries,
and all such Zoi Permits are in full force and effect. Section 3.14(a)(ii)
of the Zoi Disclosure Schedules sets forth those Zoi Permits the absence of
which would have a Material Adverse Effect on Zoi. Except as disclosed in
Section 3.14(a)(iii) of the Zoi Disclosure Schedules, to Zoi's knowledge,
there is no existing practice, action or activity of Zoi or any Subsidiary of
Zoi and, to Zoi's knowledge, no existing condition of the assets of Zoi or
any Subsidiary of Zoi which will give rise to any civil or criminal Liability
under, or violate or prevent compliance with, any health or occupational
safety or other applicable Law. None of Zoi or any Subsidiary of Zoi has
received any notice from any Governmental Authority revoking, canceling,
rescinding, materially modifying or refusing to renew any Zoi Permit or
providing written notice of violations under any Law. Except as disclosed in
Section 3.14(a)(iv) of the Zoi Disclosure Schedules, Zoi and each Subsidiary
of Zoi is in all material respects in compliance with the Zoi Permits and the
requirements of the Zoi Permits. Section 3.14(a)(v) of the Zoi Disclosure
Schedules identifies all Zoi Permits that are nontransferable or which will
require the consent of any Governmental Authority in the event of the
consummation of the transactions contemplated by this Agreement.
(b) Except as disclosed in Section 3.14(b) of the Zoi
Disclosure Schedules, (i) to the knowledge of Zoi, Hazardous Materials have
not been treated, stored, disposed of or transported to or from, or Released
on any real property owned or leased by Zoi or any of its Subsidiaries (the
"Zoi Real Property") or, to the knowledge of Zoi, any property adjoining any
such real property; (ii) Zoi and its Subsidiaries have disposed of all
wastes, including those wastes containing Hazardous Materials, in compliance
with all applicable Environmental Laws and Environmental Permits; (iii) there
are no past, pending or, to Zoi's knowledge, threatened Environmental Claims
against Zoi, any Subsidiary of Zoi, or any Zoi Real Property; (iv) no Zoi
Real Property or, to the knowledge of Zoi, any property adjoining any Zoi
Real Property, is listed or proposed for listing on the National Priorities
List under CERCLA or on the CERCLIS or any analogous state list of sites
requiring investigation or cleanup; and (v) to Zoi's knowledge, neither the
Zoi nor any Subsidiary of Zoi has transported or arranged for the
transportation of any Hazardous Materials to any location that is listed or
proposed for listing on the National Priorities List under CERCLA or on the
CERCLIS or any analogous state list or which is the subject of any
Environmental Claim.
(c) Except as disclosed in Section 3.14(c) of the Zoi
Disclosure Schedules, to Zoi's knowledge, there are no circumstances with
respect to any Zoi Real Property or other asset or the operation of Zoi's
business which could reasonably be anticipated (i) to form the basis of an
Environmental Claim against Zoi, any Subsidiary of Zoi or any Zoi Real
Property or asset of Zoi or (ii) to cause such Zoi Real Property or asset to
be subject to any restrictions on ownership, occupancy, use or
transferability under any applicable Environmental Law.
SECTION 3.15. Material Zoi Contracts.
(a) Section 3.15(a) of the Zoi Disclosure Schedules lists each
of the following contracts and agreements (including, without limitation,
oral and informal arrangements) of Zoi and its Subsidiaries (such contracts
and agreements, together with all contracts and agreements listed or
otherwise disclosed in Section 3.17(a) or 3.17(b) of the Zoi Disclosure
Schedules to which Zoi or any of its Subsidiaries is a party and all material
agreements relating to Intellectual Property set forth in Section 3.15(a) of
the Zoi Disclosure Schedules, being "Material Zoi Contracts"):
(i) each contract or agreement for the purchase of inventory,
spare parts, other materials or personal property with any supplier or for
the furnishing of services to Zoi or any Subsidiary of Zoi under the terms of
which Zoi or any Subsidiary of Zoi: (A) is likely to pay or otherwise give
consideration of more than $200,000 in the aggregate during the calendar year
ended December 31, 2006 or (B) is likely to pay or otherwise give
consideration of more than $500,000 in the aggregate over the remaining term
of such contract;
(ii) each contract and agreement for the sale of Inventory or other
personal property or for the furnishing of services by Zoi or any Subsidiary
of Zoi which: (A) is likely to involve consideration of more than $500,000 in
the aggregate during the calendar year ended December 31, 2006 or (B) is
likely to involve consideration of more than $2,000,000 in the aggregate over
the remaining term of the contract;
(iii) all material broker, distributor, dealer, manufacturer's
representative, franchise, agency, sales promotion, market research,
marketing consulting and advertising contracts and agreements to which Zoi or
any Subsidiary of Zoi is a party;
(iv) all management contracts and contracts with independent
contractors or consultants (or similar arrangements) to which Zoi or any
Subsidiary of Zoi is a party and which are not cancelable without penalty or
further payment and without more than 90 days' notice;
(v) all contracts and agreements relating to Indebtedness in
excess of $100,000 of Zoi or any Subsidiary of Zoi;
(vi) all material contracts and agreements with any Governmental
Authority to which Zoi or any Subsidiary of Zoi is a party;
(vii) all contracts and agreements to which Zoi or any Subsidiary
of Zoi is a party that limit or purport to limit the ability of Zoi or any
Subsidiary of Zoi to compete in any line of business or with any Person or in
any geographic area or during any period of time;
(viii) all contracts and agreements between or among Zoi and any
Affiliate of Zoi that will survive (in whole or in part) the Effective Time;
(ix) all contracts and agreements providing for benefits under any
Zoi Employee Plan, other than option agreement granted under the Zoi Stock
Option Plan;
(x) any material distribution, joint marketing or development
agreement currently in force under which Zoi or any of its Subsidiaries have
continuing material obligations to jointly market any product, technology or
service and which may not be canceled without penalty upon notice of ninety
(90) days or less, or any material agreement pursuant to which Zoi or any of
its Subsidiaries have continuing material obligations to jointly develop any
intellectual property that will not be owned, in whole or in part, by Zoi or
any of its Subsidiaries and which may not be canceled without penalty upon
notice of ninety (90) days or less;
(xi) all contracts and agreements under which Zoi has obtained or
will obtain Intellectual Property that is a material component of any of
Zoi's products or services or that is necessary to develop, test, support,
modify, maintain, reproduce, distribute, license or sell Zoi's products or
provide Zoi's services;
(xii) all contracts and agreements that in any way substantially
limit or restrict or would substantially limit and restrict Zoi's or,
immediately after the Effective Time, Zoi's or its subsidiaries' ability to
use, modify, display, reproduce, distribute, license or sell Zoi's products
or provide Zoi's services; and
(xiii) all other contracts and agreements whether or not made in
the ordinary course of business, which are material to Zoi, any Subsidiary of
Zoi or the conduct of Zoi's business or the absence of which would have a
Material Adverse Effect on Zoi.
For purposes of this Section 3.15 and Sections 3.16, 3.17 and 3.18,
the term "lease" shall include any and all leases, subleases, sale/leaseback
agreements or similar arrangements.
(b) Except as disclosed in Section 3.15(b) of the Zoi
Disclosure Schedules, each Material Zoi Contract: (i) is valid and binding
on Zoi any Subsidiary of Zoi which is a party thereto and, to the knowledge
of Zoi, the other parties thereto and is in full force and effect and (ii)
upon consummation of the transactions contemplated by this Agreement, except
to the extent that any consents set forth in Section 3.06 of the Zoi
Disclosure Schedules are not obtained, shall be in full force and effect
without material penalty or other material adverse consequence. Neither Zoi
nor any Subsidiary of Zoi is in material breach of, or default under, any
Material Zoi Contract.
(c) Except as disclosed in Section 3.15(c) of the Zoi
Disclosure Schedules, to Zoi's knowledge, no other party to any Material Zoi
Contract is in material breach thereof or default hereunder.
(d) Except as disclosed in Section 3.15(d) of the Zoi
Disclosure Schedules, there is no contract, agreement or other arrangement
granting any Person any preferential right to purchase, other than in the
ordinary course of business consistent with past practice, any of the
properties or assets of Zoi or any Subsidiary of Zoi which are material to
Zoi and its Subsidiaries.
SECTION 3.16. Intellectual Property.
(a) Section 3.16(a) of the Zoi Disclosure Schedules contains an
accurate and complete listing setting forth (x) all registered Trademarks,
Patents, Copyrights and registered Mask Works (as each such term is
hereinafter defined) which are owned by Zoi or any of its Subsidiaries and
(y) all Licenses to which Zoi or any of its Subsidiaries is a party (other
than shrink-wrap software and databases licensed to Zoi or to any of its
Subsidiaries under nonexclusive software Licenses granted to end-user
customers by third parties in the ordinary course of business of such third
parties' businesses) that are material to the business and properties of Zoi
or its Subsidiaries, such schedule indicating, as to each such License,
whether Zoi or any of its Subsidiaries is the licensee or licensor.
(b) Except as set forth in Section 3.16(b)(i) of the Zoi
Disclosure Schedules, neither Zoi nor any of its Subsidiaries is under any
obligation to pay any royalty or other compensation to any third party or to
obtain any approval or consent for the use of any Intellectual Property used
in or necessary for its business as currently conducted or as currently
proposed to be conducted. None of the Intellectual Property owned by Zoi or
by any of its Subsidiaries, or to Zoi's knowledge, licensed to Zoi or to any
of its Subsidiaries, is subject to any outstanding judgment, order, decree,
stipulation, injunction or charge. Except as set forth in Section
3.16(b)(ii) of the Zoi Disclosure Schedules, there is no complaint, action,
suit, proceeding, hearing, investigation or demand pending or, to Zoi's
knowledge, threatened, which challenges the legality, validity,
enforceability, or Zoi's or any of its Subsidiaries' use or ownership of any
of the Intellectual Property owned by Zoi or any of its Subsidiaries or, to
Zoi's knowledge, licensed to Zoi or to any of its Subsidiaries. Neither Zoi
nor any of its Subsidiaries has agreed to indemnify any person for or against
any interference, infringement, misappropriation, or other conflict with
respect to any Intellectual Property, except as may be contained within
agreements for the sale of Zoi's products in the ordinary course or the
Licenses set forth in Section 3.16(a) of Zoi Disclosure Schedules.
(c) No material breach or material default (or event which with
notice or lapse of time or both would result in a material event of default)
by Zoi or any of its Subsidiaries exists or has occurred under any material
License or other material agreement pursuant to which Zoi or any of its
Subsidiaries uses any Intellectual Property owned by a third party or has
granted any third party the right to use its Intellectual Property, and the
consummation of the transactions contemplated by this Agreement will not
violate or conflict with or constitute a material default (or an event which,
with notice or lapse of time or both, would constitute a material default),
result in a forfeiture under, or constitute a basis for termination of any
such License or other agreement.
(d) Zoi and its Subsidiaries own or have the right to use all
items of Intellectual Property set forth in Section 3.16(a) of the Zoi
Disclosure Schedules and own or have the right to use each material item of
Intellectual Property necessary to provide, produce, use, sell and License
the services and products currently provided, produced, used, sold and
licensed by Zoi and its Subsidiaries and to conduct the business of Zoi and
its Subsidiaries as presently conducted, free and clear of all Encumbrances
(excluding licenses and related restrictions granted in the ordinary course),
provided that Zoi makes no warranty with respect to infringement of
intellectual property rights of third parties except as expressly provided in
Section 3.16(e) .
(e) To Zoi's knowledge, except as set forth in Section 3.16(e)
of the Zoi Disclosure Schedules, the conduct of Zoi's and its Subsidiaries'
business, the Intellectual Property owned or used by Zoi and its
Subsidiaries, and the products or services produced, sold or licensed by or
under development by Zoi and its Subsidiaries do not infringe any
Intellectual Property rights or any other proprietary right of any Person or
give rise to any obligations to any Person as a result of co-authorship,
coinventorship, or an express or implied contract for any use or transfer.
Except as set forth in Section 3.16(e) of the Zoi Disclosure Schedules, Zoi
and its Subsidiaries have received no notice or have any knowledge of any
allegations or threats that Zoi's and its Subsidiaries' use of any of the
Intellectual Property infringes upon or is in conflict with any Intellectual
Property or proprietary rights of any third party, and to Zoi's knowledge, no
basis exists for any such allegations or threats.
(f) Except as set forth on Section 3.16(f) of the Zoi
Disclosure Schedules, neither Zoi nor any of its Subsidiaries has sent or
otherwise communicated to any other person any notice, charge, claim or
assertion of any present, impending or threatened infringement by any other
Person of any Intellectual Property of Zoi and its Subsidiaries or any
Intellectual Property that Zoi has the right to use.
(g) None of Zoi's and its Subsidiaries' products or services
incorporate, are based upon or are derived or adapted from, any Intellectual
Property of any other person in violation of any statutory or other legal
obligation or any agreement to which Zoi and its Subsidiaries is a party or
by which it is bound.
(h) All of Zoi's and its Subsidiaries' Patents, Trademarks and
Copyrights that are material to the conduct of Zoi's business issued by,
registered with or filed with the United States Patent and Trademark Office
or Register of Copyrights or the corresponding offices of other countries
have been so duly registered, filed in or issued, as the case may be, have
been properly maintained and renewed in all material respects in accordance
with all applicable provisions of law and administrative regulations, and Zoi
and its Subsidiaries, as the case may be, are the record owners thereof. Zoi
and its Subsidiaries have taken reasonable steps in accordance with normal
industry practice to maintain the confidentiality of its trade secrets and
other confidential Intellectual Property, and, to Zoi's knowledge, there have
been no acts or omissions by Zoi or its Subsidiaries, the result of which
would be to compromise the rights of Zoi or its Subsidiaries to apply for or
enforce appropriate legal protection of such Intellectual Property.
(i) Except as described in Section 3.16(i) of the Zoi
Disclosure Schedules, substantially all of Zoi's and its Subsidiaries'
employees and agents and independent contractors retained by Zoi or any of
its Subsidiaries and each of Zoi's and its Subsidiaries' officers and
directors has entered into a written agreement with Zoi or any of its
Subsidiaries (x) providing that all of Zoi's and its Subsidiaries'
Intellectual Property is confidential and proprietary to Zoi or any of its
Subsidiaries, and (y) obligating the disclosure and transfer to Zoi or any of
its Subsidiaries, in consideration for no more than normal salary and
continued employment or consultant fees, as the case may be, of all
inventions, developments and work product which during the period of his or
her employment or consultancy with Zoi or any of its Subsidiaries, as the
case may be, such employee, officer, director or independent contractor made
or makes that related or relate to any subject matter with which such
employee's, officer's, director's or independent contractor's work for Zoi or
any of its Subsidiaries was concerned, or, in the case of employees,
officers, agents and directors, are made during such person's period of
employment (or contractual relationship) or in connection therewith. No
former employees, officers, directors or independent contractors of Zoi or
any of its Subsidiaries have asserted any claim, or, to Zoi's knowledge, have
any, valid claim or valid right to any of Zoi's or any of its Subsidiaries'
Intellectual Property used in or necessary for the conduct of Zoi's or its
Subsidiaries' business as now conducted. To Zoi's knowledge, no employee,
officer, agent or director of Zoi or any of its Subsidiaries is a party to or
otherwise bound by any agreement with or obligated to any other Person
(including, any former employer) which conflicts with any obligation or
commitment of such employee to Zoi or any of its Subsidiaries under any
agreement to which he or she is a party or otherwise.
(j) Section 3.16(j) of the Zoi Disclosure Schedules identifies
each person to whom Zoi or any of its Subsidiaries has sold or otherwise
transferred any interest or rights to any material Intellectual Property
(other than end user licenses for computer software and related documentation
transferred in the ordinary course of business) or purchased rights in any
Intellectual Property material to Zoi, and the date, if applicable, of each
such sale, transfer or purchase.
(k) Zoi and each of its Subsidiaries have taken reasonable
steps in accordance with normal industry practice to preserve and maintain,
reasonably complete notes and records (including, without limitation,
drawings, flow-charts and prototypes) relating to its know-how, inventions,
processes, procedures, drawings, specifications, designs, plans, written
proposals, technical data, works of authorship and other proprietary
technical information, sufficient to cause such proprietary information to be
readily identified, understood and available.
SECTION 3.17. Real Property.
(a) Zoi owns no real property, nor has it ever owned any real
property except as disclosed in Section 3.17(a) of the Zoi Disclosure
Schedules. Section 3.17(a) of the Zoi Disclosure Schedules sets forth a list
of all real property currently leased by Zoi, the name of the lessor, the
date of the lease and each amendment thereto and, with respect to any current
lease, the aggregate annual rental and/or other fees payable under any such
lease. To Zoi's knowledge, all such current leases are in full force and
effect, are valid and effective in accordance with their respective terms,
and to Zoi's knowledge, there is not, under any of such leases, any existing
default or event of default (or event which with notice or lapse of time, or
both, would constitute a default).
(b) Zoi has good and valid title to, or, in the case of
material leased properties and assets, valid leasehold interests in, all of
its material tangible properties and assets, real, personal and mixed, used
or held for use in its business, free and clear of any Encumbrances, except
as reflected in the Zoi Interim Financial Statements or in Section 3.17(b) of
the Zoi Disclosure Schedules and except for Permitted Encumbrances.
SECTION 3.18. Tangible Assets.
(a) Except as disclosed in Section 3.18 of the Zoi Disclosure
Schedules, either Zoi or a Subsidiary of Zoi, as the case may be, owns,
leases or has the legal right to use all the tangible properties and assets
material to the conduct of Zoi's business ("Zoi Material Tangible Assets").
Either Zoi or a Subsidiary of Zoi, as the case may be, has good title to, or,
in the case of leased or subleased Zoi Material Tangible Assets, valid and
subsisting leasehold interests in, all the Zoi Material Tangible Assets, free
and clear of all Encumbrances, except (i) as disclosed in Section 3.17(a),
3.17(b) or 3.18 of the Zoi Disclosure Schedules and (ii) Permitted
Encumbrances.
(b) At all times since the date of the Zoi Interim Balance
Sheet, Zoi has caused the Zoi Material Tangible Assets to be maintained in
accordance with good business practice.
(c) Immediately following the Effective Time, either Zoi or a
Subsidiary of Zoi, as the case may be, will continue to own, pursuant to good
and marketable title, or lease, under valid and subsisting leases, or
otherwise retain its respective interest in the Zoi Material Tangible Assets
without incurring any penalty or other adverse consequence, including,
without limitation, any material increase in rentals, royalties, or licenses
or other fees imposed as a result of, or arising from, the consummation of
the transactions contemplated by this Agreement. Immediately following the
Closing, either Zoi or a Subsidiary of Zoi, as the case may be, shall own and
possess all material documents, books, records, agreements and financial data
of any sort used by Zoi or such Subsidiary in the conduct of Zoi's business
or otherwise.
SECTION 3.19. Customers. Intentionally Omitted.
SECTION 3.20. Employee Benefit Plans; Employment Agreements.
(a) Section 3.20(a) of the Zoi Disclosure Schedules lists all
employee benefit plans (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), regardless of whether
ERISA is applicable thereto, all other bonus, stock option, restricted stock,
stock purchase, incentive, deferred compensation, supplemental retirement,
severance or termination pay, medical or life insurance, supplemental
unemployment benefits, change in control, non-competition, profit-sharing,
pension or retirement plans, programs, agreements or arrangements, including
any employee plans or arrangements that is not subject to United States law,
and any current or former employment, consulting or executive compensation or
severance agreements, written or otherwise, for the benefit of, or relating
to, any employee of Zoi, any trade or business (whether or not incorporated)
which is a member of the controlled group including Zoi or which is under
common control with Zoi (an "ERISA Affiliate") within the meaning of Section
414 of the Code, or any Subsidiary of Zoi, to which Zoi, an ERISA Affiliate,
or any Subsidiary of Zoi is a party, with respect to which Zoi, an ERISA
Affiliate, or any Subsidiary of Zoi could have a material obligation, as well
as each plan with respect to which Zoi or an ERISA Affiliate could incur
material liability if such plan has been or were terminated (together, the
"Zoi Employee Plans"), and a copy of each such written Zoi Employee Plan and
any related trust or other funding arrangement, summary, plan description and
actuarial report has been made available to the Company.
(b) Except as set forth in Section 3.20(b) of the Zoi
Disclosure Schedules, (i) none of the Zoi Employee Plans promises or provides
retiree medical or other retiree welfare benefits to any person and none of
the Zoi Employee Plans is a "multiemployer plan" as such term is defined in
Section 3(37) of ERISA; (ii) there has been no transaction or failure to act
with respect to any Zoi Employee Plan, which would result in any material
liability of Zoi or any of its subsidiaries; (iii) all Zoi Employee Plans are
in compliance in all material respects with the requirements prescribed by
any and all statutes, orders, or governmental rules and regulations currently
in effect with respect thereto, and Zoi and each of its subsidiaries have
performed all material obligations required to be performed by them under,
are not in any material respect in default under or violations of, and have
no knowledge of any default or violation by any other party to, any of the
Zoi Employee Plans except as to which non-compliance, non-performance or
default would not result in a Material Adverse Effect on Zoi; (iv) each Zoi
Employee Plan intended to qualify under Section 401(a) of the Code is the
subject of a favorable determination letter from the IRS, and nothing has
occurred which may reasonably be expected to impair such determination; (v)
all contributions (including premiums) required to be made to any Zoi
Employee Plan have been made on or before their due dates and a reasonable
amount has been accrued for contributions to each Zoi Employee Plan for the
current plans years, and except as disclosed in Section 3.20(b) of the Zoi
Disclosure Schedules, without limiting the foregoing, there are no material
unfunded liabilities under any Zoi Employee Plan; (vi) with respect to each
Zoi Employee Plan, no "reportable event" within the meaning of Section 4043
of ERISA (excluding any such event for which the thirty (30) day notice
requirement has been waived under the regulations of Section 4043 of ERISA)
nor has any event described in Section 4062, 4063 or 4041 of ERISA has
occurred; and (vii) neither Zoi nor any ERISA Affiliate has incurred, nor
reasonably expects to incur, any liability under Title IV of ERISA (other
than liability for premium payments to the Pension Benefit Guaranty
Corporation arising in the ordinary course).
(c) There are no pending or, to the knowledge of Zoi,
threatened litigation, suits, claims or enforcement actions against Zoi with
respect to any of the Zoi Employee Plans.
(d) Section 3.20(d) of the Zoi Disclosure Schedules sets forth
a true and complete list of each current or former employee, officer,
director of Zoi or any Subsidiary of Zoi or consultants, advisors or other
independent contractors to Zoi or any of its subsidiaries who holds any
option to purchase Zoi Common Stock as of the date hereof, together with the
number of shares of Zoi Common Stock subject to such option, the date of
grant of such option, the extent to which such option is vested, the option
price of such option (to the extent determined as of the date hereof),
whether such option is intended to qualify as an incentive stock option
within the meaning of Section 422 of the Code (an "ISO"), and the expiration
date of such option. All of Zoi's options are nonqualified options.
SECTION 3.21. Labor Matters. There are no disputes pending or, to
the knowledge of Zoi or any of its subsidiaries, threatened, between Zoi or
any of its subsidiaries and any of their respective employees, which disputes
have or may have a Material Adverse Effect on Zoi; neither Zoi nor any of its
subsidiaries is a party to a collective bargaining agreement or other labor
contract applicable to persons employed by Zoi or its subsidiaries nor does
Zoi know of any activities or proceedings of any labor union to organize any
such employees; and neither Zoi nor any of its subsidiaries has any knowledge
of any strikes, slowdowns, work stoppages, lockouts, or threats thereof, by
or with respect to any employees of Zoi or any of its subsidiaries.
SECTION 3.22. Key Employees. Section 3.22 of the Zoi Disclosure
Schedules lists the name, place of employment, the current annual salary
rates, bonuses, deferred or contingent compensation, pension, accrued
vacation, "golden parachute" and other like benefits paid or payable (in cash
or otherwise) in 2006, the date of employment and a description of position
and job function of each current salaried employee, officer, director,
consultant or agent of Zoi or any Subsidiary of Zoi whose annual compensation
exceeded (or, in 2006, is expected to exceed) $150,000.
SECTION 3.23. Taxes.
(a) Except as disclosed in Section 3.23 of the Zoi Disclosure
Schedules, (i) all returns and reports in respect of material Taxes required
to be filed with respect to Zoi and each of its Subsidiaries (including the
consolidated federal income tax return of Zoi and any state Tax returns that
includes Zoi or any Subsidiary of Zoi on a consolidated or combined basis)
have been timely filed or are under a valid extension of time to file; (ii)
all Taxes required to be shown on such returns and reports or otherwise due
have been timely paid or adequate reserves for their payment have been made;
(iii) no adjustment relating to such returns has been proposed formally or
informally by any Tax authority to Zoi or any Subsidiary of Zoi or
representative thereof and, to the knowledge of Zoi, no basis exists for any
such adjustment; (iv) there are no pending or, to the knowledge of Zoi,
threatened actions or proceedings for the assessment or collection of a
material amount of Taxes against Zoi or any Subsidiary of Zoi or any
corporation that was included in the filing of a return with Zoi on a
consolidated or combined basis; (v) there are no Tax liens on any assets of
Zoi or any Subsidiary of Zoi other than liens for Taxes not yet due and
payable; (vi) other than as set forth in Section 3.23(a) of the Zoi
Disclosure Schedules and other than as provided in Section 6.02, neither Zoi,
any Subsidiary of Zoi nor, to the knowledge of Zoi, any Affiliate of Zoi, is
a party to any agreement or arrangement that would result, separately or in
the aggregate, in the payment of any "excess parachute payments" within the
meaning of Section 280G of the Code (disregarding Section 280G(b)(4) of the
Code); (vii) other than as provided in Section 6.02, no acceleration of the
vesting schedule for any property that is substantially unvested within the
meaning of the regulations under Section 83 of the Code will occur in
connection with the transactions contemplated by this Agreement; (viii) from
and after June 9, 2005, Zoi and each Subsidiary has been and continues to be
a member of the affiliated group (within the meaning of Section 1504(a)(1) of
the Code) for which Zoi files a consolidated return as the common parent, and
has not been includible in any other consolidated return for any taxable
period for which the statute of limitations has not expired; (ix) neither Zoi
nor any Subsidiary of Zoi has been at any time a member of any partnership or
joint venture or the holder of a beneficial interest in any trust for any
period for which the statute of limitations for any Tax has not expired; (x)
neither Zoi nor any Subsidiary of Zoi has been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code
during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Code; and (xi) neither Zoi nor any Subsidiary of Zoi is subject to any
accumulated earnings tax or personal holding company tax.
(b) Except as disclosed with reasonable specificity in Section
3.23(b) of the Zoi Disclosure Schedules: (i) there are no outstanding
waivers or agreements extending the statute of limitations for any period
with respect to any Tax to which Zoi or any Subsidiary of Zoi may be subject;
(ii) neither Zoi nor any of its Subsidiaries (A) has been or is a passive
foreign investment company within the meaning of Section 1296 of the Code,
(B) has an unrecaptured overall foreign loss within the meaning of Section
904(f) of the Code or (C) has participated in or cooperated with an
international boycott within the meaning of Section 999 of the Code; (iii)
neither Zoi nor any Subsidiary of Zoi has any (A) income reportable for a
period ending after the Effective Time but attributable to a transaction
(e.g., an installment sale) occurring in or a change in accounting method
made for a period ending on or prior to the Effective Time which resulted in
a deferred reporting of income from such transaction or from such change in
accounting method (other than a deferred intercompany transaction), (B)
deferred gain or loss arising out of any deferred intercompany transaction or
(C) any excess loss account; (iv) there are no proposed reassessments of any
property owned by Zoi or any Subsidiary of Zoi or other proposals that could
materially increase the amount of any Tax to which Zoi or any Subsidiary of
Zoi would be subject which could reasonably be expected to have a material
Adverse Effect; (v) neither Zoi nor any of its Subsidiaries is obligated
under any agreement with respect to industrial development bonds or similar
obligations, with respect to which the excludability from gross income of the
holder for federal income tax purposes could be affected by the transactions
contemplated hereunder; and (vi) no power of attorney that is currently in
force has been granted with respect to any matter relating to Taxes that
could affect Zoi or a Subsidiary of Zoi.
(c) (i) Section 3.23 of the Zoi Disclosure Schedules lists all
income, franchise and similar tax returns (federal, state, local and foreign)
filed with respect to each of Zoi and its Subsidiaries for taxable periods
ended on or after December 31, 2003, indicates for which jurisdictions
Returns have been filed on the basis of a unitary group, indicates the most
recent income, franchise or similar tax return for each relevant jurisdiction
for which an audit has been completed or the statute of limitations has
lapsed and indicates all tax returns that currently are the subject of audit;
(ii) Zoi has made available to the Company correct and complete copies of all
federal, state and foreign income, franchise and similar tax returns,
examination reports, and statements of deficiencies assessed against or
agreed to by Zoi or any of its Subsidiaries since December 31, 2003; and
(iii) Zoi has made available to the Company a true and complete copy of any
tax-sharing or allocation agreement or arrangement involving Zoi or any of
its Subsidiaries.
SECTION 3.24. Insurance. Section 3.24 of the Zoi Disclosure Schedules
lists all insurance policies and fidelity bonds covering the assets,
business, equipment, properties, operations, employees, officers and
directors of Zoi. There is no material claim by Zoi pending under any of
such policies or bonds as to which coverage has been questioned, denied or
disputed by the underwriters of such policies and bonds. All premiums due
and payable under all such policies and bonds have been paid and Zoi is
otherwise in material compliance with the terms of such policies and bonds
(or other policies and bonds providing substantially similar insurance
coverage). Zoi has no knowledge of any threatened termination of, or
material premium increase with respect to, any of such policies.
SECTION 3.25. Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Zoi except as listed on Section 3.25 of the Zoi
Disclosure Schedules.
SECTION 3.26. Approval Requirements. The only actions by the
shareholders of Zoi necessary to approve this Agreement and the transactions
contemplated by this Agreement are the approval of a majority of the
outstanding shares of Zoi Common Stock. The approval of this Agreement and
the transactions contemplated hereby by all of the shares of Zoi Common Stock
owned by the Principal Shareholder (the "Principal Shareholder Approval")
will be sufficient to satisfy the required actions described in clauses of
the immediately preceding sentence. The Principal Shareholder has provided,
or will prior to the Effective Time provide, the Principal Shareholder
Approval by written consent pursuant to the Articles of Incorporation and
Bylaws of Zoi and to Nevada Law.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY, MERGER SUB AND CET-NEVADA
The Company, Merger Sub and CET-Nevada hereby jointly and severally
represent and warrant to Zoi, subject to the exceptions disclosed in writing
in the disclosure letter, dated as of the date hereof, delivered by the
Company, Merger Sub and CET-Nevada to Zoi concurrently with the execution and
delivery hereof (the "Company Disclosure Schedules"), as follows:
SECTION 4.01. Organization and Good Standing. The Company and each of
its Subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation, with
the corporate power and authority to own, lease and operate its assets and
property and to carry on its business as now being conducted and as proposed
to be conducted, and is duly qualified to conduct business and in good
standing as a foreign corporation in each jurisdiction in which the failure
to be so qualified and in good standing would reasonably be expected to have
a Material Adverse Effect on the Company.
SECTION 4.02. Charter Documents. The Company has delivered or made
available to Zoi a true and complete copy of the Articles of Incorporation
and Bylaws of the Company and similar governing charter instruments of each
of its Subsidiaries, each as amended to date, and each such instrument is in
full force and effect. Neither the Company nor any of its Subsidiaries is in
violation of any of the provisions of its Articles of Incorporation or Bylaws
or equivalent governing charter instruments.
SECTION 4.03. Capital Structure.
(a) As of the date hereof, the authorized capital stock of the
Company consists of 20,000,000 shares of Company Common Stock and 5,000,000
shares of Preferred Stock, no par value per share (the "Company Preferred
Stock"). As of the date hereof, (i) 5,554,489 shares of Company Common Stock
were issued and outstanding, all of which are validly issued, fully paid and
nonassessable, (ii) no shares of Company Common Stock were held in treasury
by the Company or its Subsidiaries, (iii) 52,500 shares of Company Common
Stock were reserved for issuance under the Company Stock Option Plan, (iv)
52,500 shares of Company Common Stock were reserved for issuance and issuable
upon the exercise of outstanding Company Plan Options, (v) no shares of
Company Common Stock were available for future grant under the Company Stock
Option Plan (vi) 20,000 shares were reserved for issuance and issuable upon
exercise of outstanding Company Non-Plan Options, and (vii) no shares of
Company Common Stock were reserved for issuance and issuable upon the
exercise of outstanding Company Warrants. Except as set forth in the
preceding sentence, as of the date hereof, the Company has no shares of
capital stock outstanding or securities exercisable or convertible into
shares of capital stock of the Company outstanding. As of the date hereof, no
shares of Company Preferred Stock were issued or outstanding. There are not
any notes or other indebtedness or securities of the Company having the right
to vote (or convertible into, or exchangeable for, securities having the
right to vote) on any matters on which the Company shareholders may vote.
Section 4.03(a) of the Company Disclosure Schedules sets forth the following
information with respect to each Company Stock Option and Company Warrant
outstanding as of the close of business on the date hereof: (i) the name and
address of the optionee or warrant holder, as applicable; (ii) whether such
security is a Company Plan Option, a Company Non-Plan Option or a Company
Warrant; (iii) the number of shares of Company Common Stock subject to such
securities; (iv) the exercise price of such securities; (v) the dates on
which such securities were granted; (vi) the applicable vesting schedule; and
(vii) the dates on which such securities expire. The Company has made
available to Zoi accurate and complete copies of (i) the Company Stock Option
Plan and the form of all stock option agreements evidencing Company Plan
Options and (ii) forms of each Company Non-Plan Option and Company Warrant.
All shares of Company Common Stock subject to issuance as aforesaid, upon
issuance on the terms and conditions specified in the instrument pursuant to
which they are issuable, would be duly authorized, validly issued, fully paid
and nonassessable. There are no commitments or agreements of any character to
which the Company is bound obligating the Company to accelerate the vesting
of any Company Stock Option or Company Warrant as a result of the Merger or
the transactions contemplated hereby.
(b) Except for securities the Company owns free and clear of
all liens, pledges, hypothecations, charges, mortgages, security interests,
encumbrances, claims, infringements, interferences, options, right of first
refusals, preemptive rights, community property interests or restriction of
any nature (including any restriction on the voting of any security, any
restriction on the transfer of any security or other asset, any restriction
on the possession, exercise or transfer of any other attribute of ownership
of any asset) directly or indirectly through one (1) or more Subsidiaries, as
of the date of this Agreement, there are no equity securities, partnership
interests or similar ownership interests of any class of equity security of
any Subsidiary of the Company, or any security exchangeable or convertible
into or exercisable for such equity securities, partnership interests or
similar ownership interests, issued, reserved for issuance or outstanding.
Except as set forth in Section 4.03(a) of the Company Disclosure Schedules,
as of the date hereof, there are no subscriptions, options, warrants, equity
securities, partnership interests or similar ownership interests, calls,
rights (including preemptive rights), commitments or agreements of any
character to which the Company or any of its Subsidiaries is a party or by
which it is bound obligating the Company or any of its Subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold, or repurchase,
redeem or otherwise acquire, or cause the repurchase, redemption or
acquisition of, any shares of capital stock, partnership interests or similar
ownership interests of the Company or any of its Subsidiaries or obligating
the Company or any of its Subsidiaries to grant, extend, accelerate the
vesting of or enter into any such subscription, option, warrant, equity
security, call, right, commitment or agreement. Except as set forth in
Section 4.03(b) of the Company Disclosure Schedules, as of the date of this
Agreement, there are no registration rights and there is, except for the
Voting Agreement, no voting trust, proxy, rights plan, antitakeover plan or
other agreement or understanding to which the Company or any of its
Subsidiaries is a party or by which they are bound with respect to any equity
security of any class of the Company or with respect to any equity security,
partnership interest or similar ownership interest of any class of any of its
Subsidiaries.
SECTION 4.04. Subsidiaries. Section 4.04 of the Company Disclosure
Schedules contains a complete and accurate list of each Subsidiary of the
Company, indicating the jurisdiction of incorporation of each such Subsidiary
and the Company's equity interest therein.
SECTION 4.05. Authority. The Company has all requisite corporate power
and authority to enter into this Agreement, to perform its obligations
hereunder, and to consummate the transactions contemplated hereby. The
execution and delivery by the Company and CET-Nevada of this Agreement, the
performance by the Company and CET-Nevada of their obligations hereunder, and
the consummation by the Company and CET-Nevada of the transactions
contemplated hereby, have been duly authorized by all necessary corporate
action on the part of the Company and CET-Nevada, subject only to the
approval and adoption of this Agreement and the approval of the Merger and
the Reincorporation Merger by the shareholders of the Company pursuant to
California Law. A vote of the holders of at least a majority of the
outstanding shares of the Company Common Stock is required for the
shareholders of the Company to approve and adopt this Agreement and approve
the Merger and the Reincorporation Merger. This Agreement has been duly
executed and delivered by the Company and, assuming the due authorization,
execution and delivery thereof by Zoi, constitute the valid and binding
obligations of the Company, Merger Sub and CET-Nevada, enforceable in
accordance with their respective terms, subject to (i) the effect of any
applicable Laws of general application relating to bankruptcy,
reorganization, insolvency, moratorium or other similar Laws affecting
creditors' rights and the relief of debtors generally, and (ii) the effect of
rules of law and general principles of equity, including, without limitation,
rules of law and general principal of equity governing specific performance,
injunctive relief and other equitable remedies (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
SECTION 4.06. Conflicts. The execution and delivery of this Agreement
by the Company and CET-Nevada do not, and the performance by the Company of
their obligations hereunder and the consummation of the transactions
contemplated hereby will not, (i) conflict with or violate the Articles of
Incorporation or Bylaws of the Company or the equivalent organizational
documents of any of its Subsidiaries, (ii) subject to obtaining the approval
and adoption of this Agreement and the approval of the Merger by the
shareholders of the Company or CET-Nevada as contemplated herein and
obtaining the consents, approvals, orders and authorizations, and making the
registrations, declarations and filings, described in Section 4.07 hereof,
conflict with or violate any Law, rule, regulation, order, judgment or decree
applicable to the Company or any of its Subsidiaries or by which any of their
respective properties and assets are bound or affected, or (iii) result in
any breach of, or constitute a default (or an event that with notice or lapse
of time or both would become a default) under, or require consent under, or
impair rights of the Company or alter the rights or obligations of any third
party under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a Encumbrance
on any of the properties or assets of the Company or any of its Subsidiaries
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which the
Company or any of its Subsidiaries is a party or by which the Company or any
of its Subsidiaries or any of their respective properties and assets are
bound or affected, except to the extent such conflict, violation, breach,
default, impairment or other effect would not, in the case of clauses (ii) or
(iii) above, individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect on the Company or have a material adverse affect on
the ability of the Company or CET-Nevada to consummate the transactions
contemplated hereby.
SECTION 4.07. Consents. Except as set forth in Section 4.07 of the
Company Disclosure Schedule, no consent, approval, order or authorization of,
or registration, declaration or filing with, any Governmental Authority is
required by or with respect to the Company or CET-Nevada in connection with
the execution and delivery by the Company and CET-Nevada of this Agreement,
the performance by the Company and CET-Nevada of their obligations hereunder,
or the consummation by the Company of the transactions contemplated hereby,
except for (i) the filing of the Nevada Reincorporation Articles of Merger
and the Articles of Merger with the Secretary of State of the State of
Nevada, (ii) the filing of the California Reincorporation articles of Merger
with the Secretary of State of California, (iii) the filing of the Proxy
Statement (as defined below) with the SEC in accordance with the Exchange
Act, (iv) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable state securities
laws, (v) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under the HSR Act and the laws of
any foreign country, and (vi) such other consents, approvals, orders,
authorizations, registrations, declarations and filings which, if not
obtained or made, would not reasonably be expected to have a Material Adverse
Effect on the Company or Zoi or have a material adverse effect on the ability
of the parties to consummate the Merger and the other transactions
contemplated by this Agreement in a timely manner.
SECTION 4.08. SEC Filings; Financial Statements.
(a) SEC Filings. The Company has filed all required
registration statements, prospectuses, reports, schedules, forms, statements
and other documents (including exhibits and all other information
incorporated by reference) required to be filed by it with the SEC since
January 1, 2003. The Company has made available to Zoi all such registration
statements, prospectuses, reports, schedules, forms, statements and other
documents in the form filed with the SEC that are not publicly available
through the SEC's EDGAR database. All such required registration statements,
prospectuses, reports, schedules, forms, statements and other documents are
referred to herein as the "Company SEC Reports." As of their respective
dates, the Company SEC Reports complied as to form in all material respects
with the requirements of the Securities Act or the Exchange Act, as the case
may be, and the rules and regulations of the SEC thereunder applicable to
such Company SEC Reports. The Company SEC Reports did not at the time they
were filed (or if amended or superseded by a filing prior to the date of this
Agreement then on the date of such filing) contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. None of the
Company's Subsidiaries is required to file any forms, reports or other
documents with the SEC. The Company has previously furnished to Zoi a
complete and correct copy of any amendments or modifications, which have not
yet been filed with the SEC but which are required to be filed, to
agreements, documents or other instruments which previously had been filed by
the Company with the SEC pursuant to the Securities Act or the Exchange Act.
As of the date hereof, there are no unresolved comments issued by the staff
of the SEC with respect to any of the Company SEC Reports.
(b) Financial Statements. Each of the consolidated financial
statements (including, in each case, any related notes thereto) contained in
the Company SEC Reports (as amended prior to the date of this Agreement) (the
"Company Financials"): (i) complied as to form in all material respects with
the published rules and regulations of the SEC with respect thereto, (ii) was
prepared in accordance with U.S. GAAP (except as may be indicated in the
notes thereto or, in the case of unaudited interim financial statements, as
may be permitted by the SEC on Form 10-QSB, 8-K or any successor form under
the Exchange Act), and (iii) fairly presented, in all material respects, the
consolidated financial position of the Company and its consolidated
Subsidiaries as at the respective dates thereof and the consolidated results
of the Company's operations and cash flows for the periods indicated
(subject, in the case of unaudited statements, to normal year-end audit
adjustments, as permitted by U.S. GAAP and the applicable rules and
regulations promulgated by the SEC, which are not expected to be material in
amount). The balance sheet of the Company contained in the Company SEC
Reports as of September 30, 2006, is hereinafter referred to as the "Company
Balance Sheet." Other than Liabilities (A) disclosed in the Company
Financials or (B) incurred since the date of the Company Balance Sheet in the
ordinary course of business consistent with past practice, neither the
Company nor any of its Subsidiaries has any Liabilities (absolute, accrued,
contingent or otherwise) of a nature required by U.S. GAAP to be disclosed on
a consolidated balance sheet or in the notes thereto which are, individually
or in the aggregate, material to the business, results of operations or
financial condition of the Company and its Subsidiaries, taken as a whole.
Neither the Company nor any of its Subsidiaries is a party to, or has any
commitment to become a party to, any "off-balance sheet arrangements" (as
defined in Item 303(a) of Regulation S-B promulgated by the SEC).
(c) Internal Controls and Procedures. The Company has
established and maintains disclosure controls and procedures and internal
control over financial reporting, as such terms are defined in, and as
required by, Rules 13a-15 and 15d-15 under the Exchange Act. The Company's
disclosure controls and procedures are reasonably designed to ensure that all
material information required to be disclosed by the Company in the reports
that it files or furnishes under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the rules and
forms of the SEC, and that all such material information is accumulated and
communicated to the Company's management as appropriate to allow timely
decisions regarding required disclosure and to make the certifications
required pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002
(the "Sarbanes-Oxley Act"). The Company's management has began its assessment
of the effectiveness of the Company's system of internal control over
financial reporting for purposes of the requirements of Section 404 of the
Sarbanes-Oxley Act for the fiscal year ending December 31, 2007. As of the
date hereof, there is no reason to believe that Company's outside auditors
and its principal executive officer and principal financial officer will not
be able to give the certifications and attestations required pursuant to the
rules and regulations adopted pursuant to Sections 302, 404 and 906 of the
Sarbanes-Oxley Act, without qualification (except to the extent expressly
permitted by such rules and regulations), when next due. The principal
executive officer and principal financial officer of the Company have made
all certifications required by the Sarbanes-Oxley Act and any related rules
and regulations promulgated by the SEC. The Company and each of its
Subsidiaries has established and maintains, adheres to and enforces a system
of internal controls over financial reporting, which are effective in
providing reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements (including the Company
Financials) for external purposes in accordance with U.S. GAAP, including
policies and procedures that (i) pertain to the maintenance of records that,
in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the Company and its Subsidiaries, (ii) provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with U.S. GAAP, and that
receipts and expenditures of the Company and its Subsidiaries are being made
only in accordance with appropriate authorizations of management and the
Board of Directors of the Company, and (iii) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use or
disposition of the Company's assets that could have a material effect on the
financial statements of the Company and its Subsidiaries. To the knowledge of
the Company, since the date of the Company's most recent Form 10-QSB filed
with the SEC, neither the Company nor any of its Subsidiaries (including any
employee of the Company or the Company's Subsidiaries, nor the Company's
independent auditors has identified or been made aware of (A) any significant
deficiency or material weakness in the design or operation of internal
control over financial reporting utilized by the Company and its
Subsidiaries, (B) any fraud, whether or not material, that involves the
Company's management or other Employees), or (C) any claim or allegation
regarding any of the foregoing. In connection with the periods covered by the
Company Financials, the Company has disclosed to Zoi all deficiencies and
weaknesses identified in writing by the Company or the Company's independent
auditors (whether current or former) in the design or operation of internal
controls over financial reporting utilized by the Company and its
Subsidiaries.
(d) Sarbanes-Oxley Act; AMEX. Except as disclosed in Section
4.08(d) of the Company Disclosure Schedule, the Company is in compliance in
all material respects with (i) the applicable provisions of the Sarbanes-
Oxley Act and (ii) the applicable listing and corporate governance rules and
regulations of AMEX. AMEX has informed the Company that no evaluations or
opinions regarding the terms of the Merger will be required by AMEX in order
to make their determination of whether the Company Common Stock will continue
to be listed and trading on AMEX following the Effective Time.
SECTION 4.09. Conduct in the Ordinary Course; Absence of Certain
Changes, Events and Conditions. Since the date of the Company Balance Sheet,
except as disclosed in Section 4.09 of the Company Disclosure Schedules, the
business of the Company and its Subsidiaries has been conducted in the
ordinary course and consistent with past practice and there has not been any
event, occurrence or condition that has had, or would reasonably be expected
to have, a Material Adverse Effect on the Company. Except as disclosed in
Section 4.09 of the Company Disclosure Schedules, since the date of the
Company Balance Sheet, neither the Company nor any of its Subsidiaries has:
(i) permitted or allowed any of the material assets or material
properties (whether tangible or intangible) of the Company or any of its
Subsidiaries to be subjected to any Encumbrance, other than Permitted
Encumbrances and Encumbrances that will be released at or prior to the
Effective Time;
(ii) except in the ordinary course of business consistent with past
practice, discharged or otherwise obtained the release of any Encumbrance or
paid or otherwise discharged any Liability, other than current liabilities
reflected on the Company Balance Sheet and current liabilities incurred in
the ordinary course of business consistent with past practice since the date
of the Company Balance Sheet;
(iii) made any loan to, guaranteed any Indebtedness of or otherwise
incurred any Indebtedness on behalf of any Person;
(iv) declared, set aside or paid any dividend on, or other distribution
(whether in cash, stock or property) in respect of, any of the capital stock
of the Company or any of its Subsidiaries, or purchased, redeemed or
otherwise acquired any capital stock of the Company or any other securities
of the Company or any of its Subsidiaries, or granted any options, warrants,
calls or rights to acquire any shares of capital stock of the Company or any
other securities of the Company or its Subsidiaries;
(v) made any material changes in the customary methods of operations of
the Company or any of its Subsidiaries, including, without limitation,
practices and policies relating to manufacturing, purchasing, inventories,
marketing, selling and pricing;
(vi) merged with, entered into a consolidation with or acquired an
interest of 5% or more in any Person or acquired a substantial portion of the
assets or business of any Person or any division or line of business thereof,
or otherwise acquired any assets material to the Company and its Subsidiaries
taken as a whole, other than in the ordinary course of business consistent
with past practice;
(vii) made any capital expenditure or commitment for any capital
expenditure in excess of $5,000 individually or $10,000 in the aggregate;
(viii) sold, transferred, leased, subleased, licensed or otherwise
disposed of any material properties or material assets, real, personal or
mixed material to the Company or its Subsidiaries taken as a whole;
(ix) entered into any material agreement, arrangement or transaction
with any of its directors, officers, employees or shareholders (or with any
relative, beneficiary, spouse or Affiliate of such Person);
(x) granted any increase in compensation or fringe benefits to any
employee of the Company or Subsidiary of the Company, or paid any bonus to
any employees of the Company or its Subsidiaries, or granted any increase in
severance or termination pay to any employees of the Company or its
Subsidiaries, or entered into any currently effective employment, severance,
termination or indemnification agreement or any agreement with any employees
of the Company or its Subsidiaries (or former employees) the benefits of
which are contingent or the terms of which are materially altered upon the
occurrence of a transaction involving the Company of the nature contemplated
by this Agreement;
(xi) materially written down or materially written up (or failed to
write down or write up in accordance with U.S. GAAP consistent with past
practice) the value of any inventories or Receivables or revalued any assets
of the Company or any of its Subsidiaries other than in the ordinary course
of business consistent with past practice and in accordance with U.S. GAAP;
(xii) amended, terminated, cancelled or compromised any material claims
of the Company or any of its Subsidiaries or waived any other rights of
substantial value to the Company or any of its Subsidiaries;
(xiii) made any change in any method of accounting or accounting
practice or policy used by the Company or any Subsidiary of the Company,
other than such changes required by U.S. GAAP;
(xiv) allowed any Company Permit or Environmental Permit that was issued
or relates to the Company or any Subsidiary of the Company or otherwise
relates to any asset to lapse or terminate or failed to renew any such
Company Permit or Environmental Permit or any insurance policy that is
scheduled to terminate or expire within 45 calendar days of the Effective
Time, except for such lapses, terminations or failures which could not
reasonably be expected to have a Material Adverse Effect on the Company;
(xv) materially amended, modified or consented to the termination of,
any Material Company Contract or the Company's or any of its Subsidiaries'
rights thereunder;
(xvi) amended or restated the Articles of Incorporation or the Bylaws
(or other organizational documents) of the Company or any of its
Subsidiaries;
(xvii) terminated, discontinued, closed or disposed of any plant,
facility or other business operation, or laid off any employees (other than
layoffs of less than ten (10) employees in any six-month period in the
ordinary course of business consistent with past practice) or implemented any
early retirement, separation or program providing early retirement window
benefits within the meaning of Section 1.401(a)-4 of the Regulations or
announced or planned any such action or program for the future;
(xviii) made any express or deemed election (other than an election
pursuant to Section 341(f) of the Code) or settled or compromised any
liability, with respect to Taxes of the Company or any of its Subsidiaries;
(xix) suffered any casualty loss or damage with respect to any asset
which individually has a replacement cost of more than $10,000, whether or
not such loss or damage shall have been covered by insurance;
(xx) received notice of any claim of ownership by a third party of the
Company Intellectual Property or of infringement by the Company of any third
party's Intellectual Property rights;
(xxi) materially changed the pricing or royalties set or charged by the
Company to its customers or licensees or been the subject of a material
change in pricing or royalties set or charged with regard to the licensed
Intellectual Property;
(xxii) split, combined or reclassified any capital stock of the Company
or any of its Subsidiaries; or
(xxiii) agreed, whether in writing or otherwise, to take any of the
actions specified in this Section 4.09 except as is expressly contemplated by
this Agreement.
SECTION 4.10. Taxes.
(a) The Company and each of its Subsidiaries have timely filed
all federal, state, local and foreign returns, estimates, information
statements and reports ("Company Returns") relating to Taxes required to be
filed by the Company and each of its Subsidiaries with any Tax authority,
except such Returns which are not material to the Company. The Company and
each of its Subsidiaries have paid all Taxes shown to be due on such Returns.
(b) As of the Effective Time, Company and each of its
Subsidiaries will have withheld with respect to its employees all federal and
state income taxes, Taxes pursuant to the Federal Insurance Contribution Act,
Taxes pursuant to the Federal Unemployment Tax Act and other Taxes required
to be withheld, except such Taxes which are not material to the Company.
(c) Neither the Company nor any of its Subsidiaries has been
delinquent in the payment of any material Tax nor is there any material Tax
deficiency outstanding, proposed or assessed against the Company or any of
its Subsidiaries, nor has the Company or any of its Subsidiaries executed any
unexpired waiver of any statute of limitations on, or extending the period
for, the assessment or collection of any Tax.
(d) No audit or other examination of any Return of the Company
or any of its Subsidiaries by any Tax authority is presently in progress, nor
has the Company or any of its Subsidiaries been notified of any request for
such an audit or other examination.
(e) No adjustment relating to any Returns filed by the Company
or any of its Subsidiaries has been proposed in writing formally or
informally by any Tax authority to the Company or any of its Subsidiaries or
any representative thereof.
(f) Neither the Company nor any of its Subsidiaries has any
Liability for any material unpaid Taxes which have not been accrued for or
reserved on the Company Balance Sheet in accordance with U.S. GAAP, which is
material to the Company, other than any Liability for unpaid Taxes that may
have accrued since the date of the Company Balance Sheet in connection with
the operation of the business of the Company and its Subsidiaries in the
ordinary course.
(g) There is no contract, agreement, plan or arrangement to
which the Company or any of its Subsidiaries is a party as of the date of
this Agreement (including, without limitation, this Agreement), covering any
employee or former employee of the Company or any of its Subsidiaries that,
individually or collectively, would reasonably be expected to give rise to
the payment of any amount that would not be deductible pursuant to Sections
280G, 404 or 162(m) of the Code. There is no contract, agreement, plan or
arrangement to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries is bound to compensate any
individual for excise taxes paid pursuant to Section 4999 of the Code.
(h) Neither the Company nor any of its Subsidiaries has filed
any consent agreement under Section 341(f) of the Code or agreed to have
Section 341(f)(2) of the Code apply to any disposition of a subsection (f)
asset (as defined in Section 341(f)(4) of the Code) owned by the Company or
any of its Subsidiaries.
(i) Neither the Company nor any of its Subsidiaries is party to
or has any obligation under any Tax-sharing, Tax indemnity or Tax allocation
agreement or arrangement.
(j) None of the assets of the Company or any of its
Subsidiaries are tax exempt use property within the meaning of Section 168(h)
of the Code.
SECTION 4.11. Intellectual Property
(a) For all purposes of and under this Agreement, the following
terms shall have the following respective meanings:
"Company Intellectual Property" means any Intellectual Property that is owned
by, or licensed to, the Company or any of its Subsidiaries other than
Intellectual Property widely available through regular commercial
distribution channels at a cost not exceeding Two Thousand Dollars ($2,000)
on standard terms and conditions.
"Company Registered Intellectual Property" means all of the Registered
Intellectual Property owned by, or filed in the name of, the Company or any
of its Subsidiaries.
(b) Section 4.11(b)(i) of the Company Disclosure Schedules
contains a complete and accurate list of all Company Registered Intellectual
Property and specifies, where applicable, the jurisdictions in which each
such item of Company Registered Intellectual Property has been issued or
registered. Section 4.11(b)(ii) of the Company Disclosure Schedules contains
a list of the Company Intellectual Property.
(c) No Company Intellectual Property or product or service of
the Company or any of its Subsidiaries is subject to any proceeding or
outstanding decree, order, judgment, contract, license, agreement, or
stipulation restricting in any manner the use, transfer, or licensing thereof
by the Company or any of its Subsidiaries, or which may affect the validity,
use or enforceability of such Company Intellectual Property.
(d) The Company owns and has good and exclusive title to, or
has a valid license to (sufficient for the conduct of its business as
currently conducted and as proposed to be conducted), each material item of
Company Intellectual Property or other Intellectual Property used by the
Company free and clear of any Encumbrance (excluding licenses and related
restrictions granted in the ordinary course), and the Company is the
exclusive owner of all trademarks and trade names used in connection with the
operation or conduct of the business of the Company and its Subsidiaries,
including the sale of any products or the provision of any services by the
Company and its Subsidiaries.
(e) The Company owns exclusively, and has good title to, all
copyrighted works that are the Company products or which the Company or any
of its Subsidiaries otherwise expressly purports to own.
(f) To the extent that any material Intellectual Property has
been developed or created by a third party for the Company or any of its
Subsidiaries, the Company has a written agreement with such third party with
respect thereto and the Company thereby either (i) has obtained ownership of,
and is the exclusive owner of, or (ii) has obtained a license (sufficient for
the conduct of its business as currently conducted and as proposed to be
conducted) to all such third party's Intellectual Property in such work,
material or invention by operation of law or by valid assignment, to the
fullest extent it is legally possible to do so.
(g) Neither the Company nor any of its Subsidiaries has
transferred ownership of, or granted any exclusive license with respect to,
any Intellectual Property that is or was material Company Intellectual
Property, to any third party.
(h) To the knowledge of the Company, the operation of the
business of the Company and its Subsidiaries as such business is currently
conducted, including the Company's and its Subsidiaries' design, development,
manufacture, marketing and sale of the products or services of the Company
and its Subsidiaries (including products currently under development) has
not, does not and will not infringe or misappropriate the Intellectual
Property of any third party or, to the knowledge of the Company, constitute
unfair competition or trade practices under the laws of any jurisdiction.
(i) Neither the Company nor any of its Subsidiaries has
received notice from any third party that the operation of the business of
the Company or any of its Subsidiaries or any act, product or service of the
Company or any of its Subsidiaries, infringes or misappropriates the
Intellectual Property of any third party or constitutes unfair competition or
trade practices under the laws of any jurisdiction.
(j) To the knowledge of the Company, no person has or is
infringing or misappropriating any Company Intellectual Property.
(k) The Company and each of its Subsidiaries has taken
reasonable steps to protect the rights of the Company and its Subsidiaries in
their confidential information and trade secrets that it wishes to protect or
any trade secrets or confidential information of third parties provided to
the Company or any of its Subsidiaries.
SECTION 4.12. Compliance; Permits; Restrictions.
(a) Neither the Company nor any of its Subsidiaries is, in any
material respect, in conflict with, or in default or violation of (i) any
Law, rule, regulation, order, judgment or decree applicable to the Company or
any of its Subsidiaries or by which any of their respective properties and
assets are bound or affected, or (ii) any material note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company or any of its Subsidiaries is a
party or by which the Company or any of its Subsidiaries or any of their
respective properties and assets are bound or affected. To the knowledge of
the Company, no investigation or review by any Governmental Authority is
pending or threatened against the Company or its Subsidiaries, nor has any
Governmental Authority indicated an intention to conduct the same. There is
no material agreement, judgment, injunction, order or decree binding upon the
Company or any of its Subsidiaries which has or could reasonably be expected
to have the effect of prohibiting or materially impairing any business
practice of the Company or any of its Subsidiaries, any acquisition of
material property by the Company or any of its Subsidiaries or the conduct of
business by the Company and any of its Subsidiaries as currently conducted.
(b) The Company and its Subsidiaries hold all permits,
licenses, variances, exemptions, orders and approvals from Governmental
Authorities which are material to the operation of the business of the
Company (collectively, the "Company Permits"). The Company and its
Subsidiaries are in compliance in all material respects with the terms of the
Company Permits.
SECTION 4.13. Litigation. Except as set forth in Section 4.13 of the
Company Disclosure Schedule, as of the date hereof, there are no Actions
pending, or as to which the Company or any of its Subsidiaries has received
any notice of assertion nor, to the knowledge of the Company, is there a
threatened Action against the Company or any of its Subsidiaries or affecting
any of its assets which would reasonably be expected to have a Material
Adverse Effect on the Company, or which in any manner challenges or seeks to
prevent, enjoin, alter or delay the Merger or any of the other transactions
contemplated by this Agreement.
SECTION 4.14. Brokers' and Finders' Fees. The Company has not
incurred, nor will it incur, directly or indirectly, any Liability for
brokerage or finders' fees or agents' commissions or any similar charges in
connection with this Agreement, the Merger or any other transactions
contemplated by this Agreement.
SECTION 4.15. Employee Benefit Plans.
(a) Section 4.15(a) of the Company Disclosure Schedules contain
a complete and accurate list of all employee compensation, incentive, fringe
or benefit plans, programs, policies, commitments, agreements or other
arrangements (whether or not set forth in a written document and including,
without limitation, all "employee benefit plans" within the meaning of
Section 3(3) of ERISA) covering any active or former employee, director or
consultant of the Company ("Company Employee" which shall for this purpose
mean an employee of the Company or a Code Affiliate of the Company), any
Subsidiary of the Company, or with respect to which the Company has or, to
its knowledge, may in the future have Liability (collectively, the "Company
Plans"). The Company has provided or will make available to Zoi prior to the
Closing: (i) true and complete copies of all documents embodying each Company
Plan including, without limitation, all amendments thereto, all trust
documents related thereto, and all material written agreements and contracts
relating to each such Company Plan; (ii) the most recent annual reports (Form
Series 5500 and all schedules and financial statements attached thereto), if
any, required under ERISA or the Code in connection with each Company Plan;
(iii) the most recent summary plan description together with the summary(ies)
of material modifications thereto, if any, required under ERISA with respect
to each Company Plan; (iv) all IRS determination, opinion, notification and
advisory letters relating to each Company Plan; (v) all material
correspondence to or from any Governmental Authority relating to each Company
Plan; (vi) all forms and related notices required under the COBRA; (vii) the
most recent discrimination tests for each Company Plan; (viii) the most
recent actuarial valuations, if any, prepared for each Company Plan; (ix) if
the Company Plan is funded, the most recent annual and periodic accounting of
the Company Plan assets; and (x) all communication to Company Employees
relating to any Company Plan and any proposed Company Plan, in each case,
relating to any amendments, terminations, establishments, increases or
decreases in benefits, acceleration of payments or vesting schedules, or
other events which would result in any material liability to the Company or
any Code Affiliate.
(b) Each Company Plan has been maintained and administered in
all material respects in compliance with its terms and with the requirements
prescribed by any and all Laws, including, without limitation, ERISA and the
Code, which are applicable to such Company Plans. No Action (excluding claims
for benefits incurred in the ordinary course of Company Plan activities) has
been brought, or to the knowledge of the Company, is threatened, against or
with respect to any Company Plan. There are no audits, inquiries or
proceedings pending or, to the knowledge of the Company, threatened by the
IRS or the DOL with respect to any Company Plans. All contributions,
reserves or premium payments required to be made or accrued as of the date
hereof to the Company Plans have been timely made or accrued. Any Company
Plan intended to be qualified under Section 401(a) of the Code and each trust
intended to qualify under Section 501(a) of the Code (i) has either obtained
a favorable determination, notification, advisory and/or opinion letter, as
applicable, as to its qualified status from the IRS or still has a remaining
period of time under applicable Treasury Regulations or IRS pronouncements in
which to apply for such letter and to make any amendments necessary to obtain
a favorable determination, and (ii) incorporates or has been amended to
incorporate all provisions required to comply with the Tax Reform Act of 1986
and subsequent legislation. To the knowledge of the Company, no condition or
circumstance exists giving rise to a material likelihood that any such
Company Plan would not be treated as qualified by the IRS. The Company does
not have any plan or commitment to establish any new Company Plan, to modify
any Company Plan (except to the extent required by applicable Law or to
conform any such Company Plan to the requirements of any applicable Law, in
each case as previously disclosed to Zoi in writing, or as required by the
terms of any Company Plan or this Agreement), or to enter into any new
Company Plan. Each Company Plan can be amended, terminated or otherwise
discontinued after the Effective Time in accordance with its terms, without
liability to Zoi, the Company or any of its Code Affiliates (other than
ordinary administration expenses).
(c) Neither the Company, any of its Subsidiaries, nor any of
their Code Affiliates has at any time ever maintained, established,
sponsored, participated in, or contributed to any plan subject to Title IV of
ERISA or Section 412 of the Code and at no time has the Company contributed
to or been requested to contribute to any "multiemployer plan," as such term
is defined under ERISA. Neither the Company, any of its Subsidiaries, nor any
officer or director of the Company or any of its Subsidiaries is subject to
any material Liability or penalty under Section 4975 through 4980B of the
Code or Title I of ERISA. No "prohibited transaction," within the meaning of
Section 4975 of the Code or Sections 406 and 407 of ERISA, and not otherwise
exempt under Section 4975 of the Code and Section 408 of ERISA, has occurred
with respect to any Company Plan which could subject the Company or its
Affiliates to material Liability.
(d) None of the Company Plans promises or provides retiree
medical or other retiree welfare benefits to any person except as required by
applicable Law, and neither the Company nor any of its Subsidiaries has
represented, promised or contracted (whether in oral or written form) to
provide such retiree benefits to any Company Employee, former employee,
director, consultant or other person, except to the extent required by
applicable Law.
(e) Neither the Company nor any of its Subsidiaries is bound by
or subject to (and none of its respective properties or assets is bound by or
subject to) any arrangement with any labor union. No employee of the Company
or any of its Subsidiaries is represented by any labor union or covered by
any collective bargaining agreement and, to the knowledge of the Company, no
campaign to establish such representation is in progress. There is no pending
or, to the knowledge of the Company, threatened labor dispute involving the
Company or any of its Subsidiaries and any group of its employees nor has the
Company or any of its Subsidiaries experienced any labor interruptions over
the past three (3) years, and the Company and its Subsidiaries consider their
relationships with their employees to be good. The Company is in compliance
in all material respects with all applicable material Laws respecting
employment, employment practices, terms and conditions of employment and
wages and hours.
(f) Neither the execution and delivery by the Company of this
Agreement, the performance by the Company of its obligations hereunder, nor
the consummation by the Company of the transactions contemplated hereby will
(i) result in any payment (including severance, unemployment compensation,
golden parachute, bonus or otherwise) becoming due to any shareholder,
director or Company Employee or any of its Subsidiaries under any Company
Plan or otherwise, (ii) increase any benefits otherwise payable under any
Company Plan, or (iii) result in the acceleration of the time of payment or
vesting of any such benefits. Section 4.15(f) of the Company Disclosure
Schedules contains a list of all current Company employees and their
respective compensation. The Company has provided Zoi with true, accurate
and complete copies of all (i) employment and consulting agreements with
respect to the Company's current employees and consultants and (ii)
outstanding employment offer letters. No employee, director, consultant or
independent contractor is entitled to severance, bonus, or any other payment
upon termination of such party's employment, consulting or independent
contractor relationship with the Company or any extraordinary payment upon a
change of control of the Company. Except as disclosed in Section 4.15(f) of
the Disclosure Schedule, all employees, consultants and independent
contractors provide such employment, consulting or independent contractor
services to the Company on an "at will" basis.
SECTION 4.16. Title to Properties.
(a) Leases. Section 4.16(a) of the Company Disclosure
Schedules sets forth a list of all material real property leases to which the
Company or any of its Subsidiaries is a party or by which any of them is
bound (each, a "Company Lease"). No party has a right to occupy any of the
premises subject to a Company Lease ("Company Leased Property") except for
the Company or its Subsidiaries. The Company has made available to Zoi a true
and complete copy of each Company Lease.
(b) Properties. Section 4.16(b) of the Company Disclosure
Schedules sets forth a list of all real property owned by the Company or any
of its Subsidiaries (the "Company Owned Property" and collectively with the
Company Leased Property, the "Company Real Property"). With respect to the
Company Owned Property, the Company has made available to Zoi copies of the
deeds and other instruments (as recorded) by which the Company or any of its
Subsidiaries acquired such parcel of property, and copies of all title
insurance policies, opinions, abstracts and surveys in the possession of the
Company or any of its Subsidiaries relating thereto. Except as would not
materially and adversely affect the ability of the Company or Subsidiary to
operate its business as now being conducted, there are no structural,
electrical, mechanical, plumbing, roof, paving or other defects in any
improvements located on any of the Company Owned Property. There are no
pending, or, to the knowledge of the Company, threatened condemnation or
eminent domain actions or proceedings, or any special assessments or other
activities of any public or quasi-public body that are reasonably likely to
adversely affect the Company Real Property.
(c) Valid Title. The Company and each of its Subsidiaries has
good and valid title to, or, in the case of leased properties and assets,
valid leasehold interests in, all of its tangible properties and assets,
real, personal and mixed, used or held for use in its business that are
material to the Company and its Subsidiaries, taken as a whole, free and
clear of any Encumbrances, except for (i) Encumbrances imposed by law in
respect of obligations not yet due which are owed in respect of Taxes, (ii)
Encumbrances listed in Section 4.16(c) of the Company Disclosure Schedule or
(iii) Encumbrances which are not material in character, amount or extent, and
which do not materially detract from the value, or materially interfere with
the present use, of the property subject thereto or affected thereby.
SECTION 4.17. Environmental Matters. Except as would not reasonably be
expected to be material to the Company and its Subsidiaries, taken as a
whole:
(a) except as set forth in Section 4.17(a) of the Company
Disclosure Schedules, no underground storage tanks and no amount of any
Hazardous Material are present as a result of the actions of the Company or
any of its Subsidiaries or any affiliate of the Company, or, to the knowledge
of the Company, as a result of any actions of any third party or otherwise,
in, on or under any property, including the land and the improvements, ground
water and surface water thereof, that the Company or any of its Subsidiaries
has at any time owned, operated, occupied or leased;
(b) neither the Company nor any of its Subsidiaries has
disposed of, transported, stored, sold, used, released, generated, exposed
its Employees or others to, or distributed, manufactured, sold, transported
or disposed of any product containing a Hazardous Material (collectively
"Hazardous Material Activities") in violation of any Environmental Law;
(c) no action or proceeding is pending or, to the Company's
knowledge, threatened against the Company or any of its Subsidiaries arising
out of Environmental Laws;
(d) neither the Company nor any of its Subsidiaries has
entered into any agreement that may require it to guarantee, reimburse,
pledge, defend, hold harmless or indemnify any other party with respect to
liabilities arising out of any Environmental Laws or the Hazardous Materials
Activities of the Company or any of its Subsidiaries; and
SECTION 4.18. Agreements, Contracts and Commitments.
(a) Except as set forth in Section 4.18 of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries is a
party to or is bound by:
(i) any employment or consulting agreement, contract or
commitment with any officer or director or higher level employee or member of
the Board of Directors of the Company, other than those that are terminable
by the Company or any of its Subsidiaries on no more than thirty (30) days'
notice without Liability or financial obligation to the Company;
(ii) any agreement or plan, including, without limitation,
any stock option plan, stock appreciation right plan or stock purchase plan,
any of the benefits of which will be increased, or the vesting of benefits of
which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of which
will be calculated on the basis of any of the transactions contemplated by
this Agreement;
(iii) any agreement of indemnification or any guaranty;
(iv) any agreement, contract or commitment containing any
covenant limiting in any respect the right of the Company or any of its
Subsidiaries to engage in any line of business or to compete with any person
or granting any exclusive distribution rights;
(v) any agreement, contract or commitment currently in
force relating to the disposition or acquisition by the Company or any of its
Subsidiaries after the date of this Agreement of a material amount of assets
not in the ordinary course of business or pursuant to which the Company has
any material ownership interest in any corporation, partnership, joint
venture or other business enterprise other than its Subsidiaries;
(vi) any dealer, distributor, joint marketing or
development agreement currently in force under which the Company or any of
its Subsidiaries have continuing material obligations to jointly market any
product, technology or service and which may not be canceled without penalty
upon notice of ninety (90) days or less, or any material agreement pursuant
to which the Company or any of its Subsidiaries have continuing material
obligations to jointly develop any intellectual property that will not be
owned, in whole or in part, by the Company or any of its Subsidiaries and
which may not be canceled without penalty upon notice of ninety (90) days or
less;
(vii) any agreement, contract or commitment currently in
force to license any third party to manufacture or reproduce any the Company
product, service or technology or any agreement, contract or commitment
currently in force to sell or distribute any the Company products, service or
technology except agreements with distributors or sales representative in the
normal course of business cancelable without penalty upon notice of ninety
(90) days or less and substantially in the form previously provided to Zoi;
(viii) any mortgages, indentures, guarantees, loans or
credit agreements, security agreements or other agreements or instruments
relating to the borrowing of money or extension of credit; or
(ix) any other agreement, contract or commitment that (i)
involves the receipt of, or Liabilities to make, payments in excess of Ten
Thousand Dollars ($10,000) or (ii) has a term of greater than one (1) year.
(b) Neither the Company nor any of its Subsidiaries, nor to the
knowledge of the Company, any other party to a Company Contract (as defined
below), is in breach, violation or default under, and neither the Company nor
any of its Subsidiaries has received written notice that it has breached,
violated or defaulted under, any of the material terms or conditions of any
of the agreements, contracts or commitments to which the Company or any of
its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound that are required to be disclosed in the Company
Disclosure Schedules pursuant to this Agreement (any such agreement, contract
or commitment, a "Material Company Contract") in such a manner as would
permit any other party to cancel or terminate any such Company Contract, or
would permit any other party to seek material damages or other remedies (for
any or all of such breaches, violations or defaults, in the aggregate).
SECTION 4.19. The Proxy Statement; Other Filings. None of the
information supplied or to be supplied by the Company for inclusion or
incorporation by reference in the Proxy Statement shall, on the date the
Proxy Statement is first mailed to the shareholders of the Company, at the
time of the Company Stockholders' Meeting and at the Effective Time, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not false
or misleading, or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the Company Stockholders' Meeting which has become false or
misleading. The Proxy Statement will comply as to form in all material
respects with the provisions of the Exchange Act and the rules and
regulations promulgated thereunder. Notwithstanding the foregoing, the
Company makes no representation or warranty with respect to any information
supplied by Zoi which is contained in any of the foregoing documents.
SECTION 4.20. Board Approval. The Board of Directors of the Company
has, as of the date of this Agreement, (i) determined that the Merger is fair
to, advisable and in the best interests of the Company and its shareholders,
(ii) duly approved this Agreement, the Merger and the other transactions
contemplated by this Agreement, and (iii) determined to recommend that the
shareholders of the Company approve and adopt this Agreement and approve the
Merger.
SECTION 4.21. State Takeover Statutes. No "fair price," "business
combination," "moratorium," "control share acquisition" or other similar
antitakeover statute is applicable to the Merger, this Agreement and the
transactions contemplated hereby, except for such statutes or regulations as
to which all necessary action has been taken by the Company and its Board of
Directors, to permit the consummation of the Merger in accordance with the
terms hereof.
SECTION 4.22. Transactions with Affiliates. Since the date the Company
filed with the SEC Amendment No. 1 to its Annual Report on Form 10-KSB for
the year ended December 31, 2005, no event has occurred as of the date hereof
that would be required to be reported by the Company pursuant to Item 404 of
Regulation S-B promulgated by the SEC.
SECTION 4.23. Insurance. The insurance policies covering the Company,
its Subsidiaries or any of their respective employees, properties or assets,
including policies of life, property, fire, workers' compensation, products
liability, directors' and officers' liability and other casualty and
liability insurance are set forth on Section 4.23 of the Company Disclosure
Schedule. All such insurance policies are in full force and effect, no notice
of cancellation has been received, and there is no existing default or event
which, with the giving of notice or lapse of time or both, would constitute a
default, by any insured thereunder, except for such defaults that would not,
individually or in the aggregate, have a Material Adverse Effect on the
Company. There is no material claim pending under any of such policies as to
which coverage has been questioned, denied or disputed by the underwriters of
such policies and there has been no threatened termination of, or material
premium increase with respect to, any such policies.
ARTICLE V
CONDUCT PRIOR TO THE CLOSING DATE
SECTION 5.01. Conduct of Business.
(a) The Company covenants and agrees that, except as described in
Section 5.01(a) of the Company Disclosure Schedules or as otherwise permitted
by this Agreement (and subject to the limitations on conduct set forth in
this Section 5.01), between the date hereof and the earlier to occur of the
termination of this Agreement pursuant to its terms or the Effective Time,
none of the Company or any of its Subsidiaries shall conduct their business
other than in the ordinary course and consistent with the Company's and such
Subsidiary's prior practice. Without limiting the generality of the
foregoing, except as described in Section 5.01(a) of the Company Disclosure
Schedules, the Company shall, and shall cause each of its Subsidiaries to,
(i) continue its advertising and promotional activities, and pricing and
purchasing policies, in accordance with past practice; (ii) not shorten or
lengthen the customary payment cycles for any of its payables or receivables;
(iii) use its reasonable efforts to (A) preserve intact its business
organizations and the business organization of the Company's business, (B)
keep available to the Company the services of the employees of the Company
and each of its Subsidiaries, (C) continue in full force and effect without
material modification all existing policies or binders of insurance currently
maintained in respect of the Company or its Subsidiaries, business or assets
and (D) preserve its current relationships with its customers, suppliers and
other persons with which it has significant business relationships; (iv)
exercise, but only after notice to Zoi and receipt of Zoi's prior written
approval, any rights of renewal pursuant to the terms of any of the leases or
subleases which by their terms would otherwise expire; (v) not make an offer
of employment to any Person without the approval of Zoi and (vi) not engage
in any practice, take any action, fail to take any action or enter into any
transaction with knowledge that it would or could reasonably be expected to
cause any representation or warranty of the Company to be untrue in any
material respect or result in a material breach of any covenant made by the
Company in this Agreement.
(b) Except as described in Section 5.01(b) of the Company
Disclosure Schedules, the Company covenants and agrees that, prior to the
Effective Time, without the prior written consent of Zoi, neither the Company
nor any of its Subsidiaries will do any of the things enumerated in the
second sentence of Section 4.09 (including, without limitation, clauses (i)
through (xxiii) thereof).
(c) The Company shall not engage in any action that could
reasonably be expected to cause the Merger to fail to qualify as a
"reorganization" under Section 368(a) of the Code, whether or not otherwise
permitted by the terms of this Article V.
SECTION 5.02. Access to Information.
(a) From the date hereof until the Effective Time, upon
reasonable notice, each party hereto ("Disclosing Party") shall, and shall
cause their Subsidiaries and each of their officers, directors, employees,
agents, representatives, accountants and counsel to: (i) afford the
officers, employees and authorized agents, accountants, counsel, and
representatives of the other party ("Requesting Party") reasonable access,
during normal business hours, to the offices, properties, plants, other
facilities, books and records of the Disclosing Party and its Subsidiaries
and to the Disclosing Party's officers, directors, employees, agents,
accountants and counsel of and of each of Disclosing Party's Subsidiaries who
have any knowledge relating to the Disclosing Party or its Subsidiaries or
business (ii) furnish to the officers, employees and authorized agents,
accountants, counsel, and representatives of the Requesting Party such
additional financial and operating data (including Tax returns and supporting
and supporting documentation) and other information regarding the assets,
properties and goodwill of the Disclosing Party, its Subsidiaries and
business (or legible copies thereof) as the Requesting Party may from time to
time reasonably request.
(b) Each of the parties hereto hereby agrees to keep such
information or knowledge obtained in any investigation pursuant to Section
5.02(a), or pursuant to the negotiation and execution of this Agreement or
the effectuation of the transactions contemplated hereby ("Confidential
Information"), confidential and not to use such Confidential Information
except as contemplated by this Agreement; provided, however, that the
foregoing shall not apply to information or knowledge which (a) a party can
demonstrate was already lawfully in its possession prior to the disclosure
thereof by the other party, (b) is generally known to the public and did not
become so known through any violation of law, (c) became known to the public
through no fault of such party, (d) is later lawfully acquired by such party
from other sources (and not in violation of an obligation of confidentiality
of such other sources with respect to such information), (e) is required to
be disclosed by order of court or government agency with subpoena powers, (f)
is disclosed in the course of any litigation between any of the parties
hereto or (g) is developed independently by either party without reference
to, or specific knowledge of, the other parties' Confidential Information.
Notwithstanding the foregoing, the Company hereby consents to Zoi's
disclosure of the Company's Confidential Information in the following
instances from the date hereof until the earlier of termination of this
Agreement pursuant to Section 9.01 and the Closing: if Zoi is seeking to
raise additional capital through the sale of Zoi's securities or the
securities of the Company, Zoi may disclose such Confidential Information to
prospective investors, so long as the recipient of such Confidential
Information is bound by confidentiality covenants.
SECTION 5.03. Regulatory and Other Authorizations; Notices and
Consents.
(a) Each of Zoi, the Company, Merger Sub and CET-Nevada shall take
all reasonable actions necessary or desirable to obtain (or cause their
Subsidiaries, as the case may be, to obtain) all authorizations, consents,
orders and approvals of all Governmental Authorities and officials that may
be or become necessary for execution and delivery of, and the performance of
obligations pursuant to, this Agreement and will cooperate fully with each
other in promptly seeking to obtain all such authorizations, consents, orders
and approvals. Each party hereto agrees to make an appropriate filing, if
necessary, pursuant to the HSR Act with respect to the transactions
contemplated by this Agreement as promptly as reasonably practicable and to
supply, as promptly as practicable to the appropriate Governmental
Authorities any additional information and documentary material that may be
requested pursuant to the HSR Act. The Company shall use its best efforts to
take such steps as may be necessary to comply with the securities and blue
sky laws of all jurisdictions which are applicable to the issuance of Company
Common Stock in connection with the Merger. Zoi shall use its commercially
reasonable best efforts to assist the Company as may be necessary to comply
with the securities and blue sky laws of all jurisdictions which are
applicable in connection with the issuance of Company Common Stock in
connection with the Merger.
(b) Each of Zoi and the Company shall, and shall cause their
Subsidiaries, as the case may be, to, give promptly such notices to third
parties and use its or their reasonable efforts to obtain such third party
consents and estoppel certificates as may be reasonably necessary in
connection with the transactions contemplated by this Agreement.
SECTION 5.04. Notice of Developments. Prior to the Effective Time,
each of Zoi and the Company shall promptly notify the other in writing, of
the occurrence, or the failure to occur, of all events, circumstances, facts
and occurrences arising subsequent to the date of this Agreement which could
reasonably be expected to cause (i) any representation or warranty contained
in this Agreement to be untrue or inaccurate, such that the conditions set
forth in Sections 8.01, 8.02 or 8.03, as the case may be, would not be
satisfied as a result thereof, or (ii) any material failure of The Company,
Merger Sub, CET-Nevada or Zoi, as the case may be, or of any officer,
director, employee or agent thereof, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it under this
Agreement.
SECTION 5.05. No Solicitation or Negotiation by the Company. The
Company agrees that between the date of this Agreement and the earlier of (i)
the Effective Time and (ii) the termination of this Agreement, none of the
Company, and its Subsidiaries nor any of their respective Affiliates,
officers, directors, representatives or agents will (a) solicit, initiate,
consider, encourage or accept any other proposals or offers from any Person
(i) relating to any acquisition or purchase of all or any portion of the
capital stock of the Company or any Subsidiary (other than the exercise or
conversion of outstanding options) or assets of the Company or any Subsidiary
(other than inventory to be sold in the ordinary course of business
consistent with past practice), (ii) to enter into any business combination
with the Company or any of its Subsidiaries or (iii) to enter into any other
extraordinary business transaction involving or otherwise relating to the
Company or any of its Subsidiaries, or (b) participate in any discussions,
conversations, negotiations and other communications regarding, or furnish to
any other Person any information with respect to, or otherwise cooperate in
any way, assist or participate in, facilitate or encourage any effort or
attempt by any other Person to seek to do any of the foregoing. The Company
immediately shall cease and cause to be terminated all existing discussions,
conversations, negotiations and other communications with any Persons
conducted heretofore with respect to any of the foregoing. The Company shall
notify Zoi promptly if any such proposal or offer, or any inquiry or other
contact with any Person with respect thereto, is made and shall, in any such
notice to Zoi, indicate in reasonable detail the identity of the Person
making such proposal, offer, inquiry or contact and the terms and conditions
of such proposal, offer, inquiry or other contact. The Company agrees not
to, and to cause each of its Subsidiaries not to, without the prior written
consent of Zoi, release any Person from, or waive any provision of, any
confidentiality or standstill agreement to which the Company or any of its
Subsidiaries is a party.
SECTION 5.06. No Solicitation or Negotiation by Zoi. Except as
otherwise contemplated by this Agreement, Zoi agrees that between the date of
this Agreement and the earlier of (i) the Effective Time and (ii) the
termination of this Agreement, none of Zoi and its Subsidiaries nor any of
their respective Affiliates, officers, directors, representatives or agents
will (a) solicit, initiate, consider, encourage or accept any other proposals
or offers from any Person relating to (i) the sale of any material portion of
the capital stock or assets of Zoi or its Subsidiaries (other than in the
ordinary course of business, in connection with the sale of capital stock in
a capital raising transaction or pursuant to the exercise of Zoi Options or
Zoi Warrants) or (ii) a transaction in which the primary purpose of the
transaction is to cause the holders of Zoi's capital stock to receive shares
of a class of capital stock of a Person that are registered under Section 12
of the Exchange Act, or (b) participate in any discussions, conversations,
negotiations and other communications regarding, or furnish to any other
Person any information with respect to, or otherwise cooperate in any way,
assist or participate in, facilitate or encourage any effort or attempt by
any other Person to seek to do any of the foregoing. Zoi immediately shall
cease and cause to be terminated all existing discussions, conversations,
negotiations and other communications with any Persons conducted heretofore
with respect to any of the foregoing. Zoi shall notify the Company promptly
if any such proposal or offer, or any inquiry or other contact with any
Person with respect thereto, is made and shall, in any such notice to the
Company, indicate in reasonable detail the identity of the Person making such
proposal, offer, inquiry or contact and the terms and conditions of such
proposal, offer, inquiry or other contact. Zoi agrees not to, without the
prior written consent of the Company, release any Person from, or waive any
provision of, any confidentiality or standstill agreement to which Zoi is a
party.
SECTION 5.07. Further Action. Subject to the respective rights and
obligations of the parties under this Agreement, each of the parties hereto
shall use all reasonable best efforts to take, or cause to be taken, all
appropriate action, do or cause to be done all things necessary, proper or
advisable under applicable Law, and execute and deliver such documents and
other papers, as may be required to carry out the provisions of this
Agreement and consummate and make effective the Merger and the other
transactions contemplated by this Agreement.
SECTION 5.08. Conduct of Business by Zoi. Except as set forth in
Section 5.07 of the Zoi Disclosure Schedules, during the period from the date
of this Agreement to the Effective Time of the Merger, Zoi shall not, and
shall not permit any of its Subsidiaries to:
(a) (i) declare, set aside or pay any dividends on, or make
any other distributions in respect of, any capital stock of Zoi or (ii)
split, combine or reclassify any of its capital stock or (iii) issue or
authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of Zoi's capital stock unless pursuant to
preemptive rights currently existing; or
(b) authorize any of, or commit or agree to take any of, the
foregoing actions.
ARTICLE VI
ZOI STOCK OPTIONS, WARRANTS AND CONVERTIBLE DEBT
SECTION 6.01. Zoi Stock Options and Warrants. At the Effective Time,
each outstanding Zoi Option and Zoi Warrant, whether or not vested, shall by
virtue of the Merger be assumed by the Company. The Company shall take all
corporate action necessary to reserve for issuance a sufficient number of
shares of Company Common Stock for issuance upon exercise of all Zoi Options
and Zoi Warrants assumed in accordance with this Section 6.01. Each Zoi
Option and Zoi Warrant so assumed by the Company under this Agreement shall
continue to have, and be subject to, the same terms and conditions of such
options immediately prior to the Effective Time (including, without
limitation, any repurchase rights or vesting provisions), except that (i)
each Zoi Option and Zoi Warrant shall be exercisable (or shall become
exercisable in accordance with its terms) for that number of whole shares of
Company Common Stock equal to the product obtained by multiplying (x) the
number of shares of Zoi Common Stock that were issuable upon exercise of such
Zoi Option or Zoi Warrant immediately prior to the Effective Time, by (y) the
Exchange Ratio, rounded down to the nearest whole number of shares of Company
Common Stock, and (ii) the per share exercise price for the shares of Company
Common Stock issuable upon exercise of such assumed Zoi Option or Zoi Warrant
shall equal to the quotient determined by dividing (x) the exercise price per
share of Zoi Common Stock at which such Zoi Option or Zoi Warrant was
exercisable immediately prior to the Effective Time, by (y) the Exchange
Ratio, rounded up to the nearest whole cent.
SECTION 6.02. Zoi Stock Options and Warrants. At the Effective Time,
all outstanding Zoi Convertible Debt and the obligations under the
corresponding Zoi Convertible Notes shall by virtue of the Merger be assumed
by the Company. The Company shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of Company Common Stock
for issuance upon conversion of all Zoi Convertible Debt assumed in
accordance with this Section 6.02. Each Zoi Convertible Note so assumed by
the Company under this Agreement shall continue to have, and be subject to,
the same terms and conditions of such Zoi Convertible Note immediately prior
to the Effective Time, except that immediately after the Effective Time, (i)
the debt obligation relating to the Zoi Convertible Note will become an
obligation of the Company, (ii) the class of security into which the Zoi
Convertible Note converts will be Company Common Stock and (ii) the
conversion price for each Zoi Convertible Note shall equal the quotient
obtained by dividing (A) the conversion price immediately prior to the
Effective Time by (B) the Exchange Ratio.
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.01. Securities Filings. The Company shall make all necessary
filings with respect to the Merger under the Securities Act and the Exchange
Act and the rules and regulations thereunder, under applicable Blue Sky or
similar securities laws, rules and regulations and shall use all reasonable
efforts to obtain required approvals and clearances with respect thereto.
SECTION 7.02. Zoi Shareholder Approval. Zoi shall use its best efforts
to obtain the written consent of the Principal Shareholder in favor of the
Merger, to notify all other shareholders of Zoi of such consent and to take
all other action necessary or advisable to secure the vote or consent of
shareholders required by Nevada Law to effect the Merger.
SECTION 7.03. Company Proxy Statement; Other Filings. Promptly after
the date hereof, the Company shall prepare and file with the SEC a proxy
statement (the "Proxy Statement") to be sent to the shareholders of the
Company in connection with the meeting of the shareholders of the Company to
consider the approval and adoption of this Agreement, the approval of the
Merger, the issuance of shares of Company Common Stock pursuant to the
Merger, the change of the Company's domicile to the State of Nevada, the
approval of the Company Equity Incentive Plan and the amendment of the
Company's Articles of Incorporation as provided herein (the "Company
Shareholders' Meeting"). The Company shall respond to any comments of the
SEC and cause the Proxy Statement to be mailed to its shareholders at the
earliest practicable time. As promptly as practicable after the date hereof,
the Company shall prepare and file any other filings required under the
Exchange Act, the Securities Act or any other Laws relating to the Merger and
the other transactions contemplated by this Agreement (the "Other Filings").
The Company shall notify the other promptly upon the receipt of any comments
from the SEC or its staff and of any request by the SEC or its staff or any
other Governmental Authority for amendments or supplements to the Proxy
Statement or any Other Filings or for additional information, and shall
supply Zoi with copies of all correspondence between such party or any of its
representatives, on the one hand, and the SEC, or its staff or any other
Governmental Authority, on the other hand, with respect to the Proxy
Statement, the Merger or any Other Filings. The Proxy Statement and the
Other Fillings shall comply in all material respects with all applicable
requirements of Law. Whenever any event occurs which is required to be set
forth in an amendment or supplement to the Proxy Statement or any Other
Filings, the Company shall promptly inform Zoi of such occurrence and
cooperate in filing with the SEC or its staff or any other Governmental
Authority, and/or mailing to shareholders of the Company, such amendment or
supplement.
SECTION 7.04. Company Meeting of Shareholders.
(a) The Company shall take all action necessary in accordance
with California Law and its Articles of Incorporation and Bylaws to convene
the Company Shareholders' Meeting to be held as promptly as practicable after
the date of this Agreement, for the purpose of voting upon this Agreement and
the Merger. The Company shall each use its commercially reasonable best
efforts to solicit from its stockholders proxies in favor of the adoption and
approval of this Agreement, the approval of the Merger, the issuance of
Company Common Stock pursuant to the Merger and the amendments to the
Company's Articles of Incorporation as contemplated herein, and shall take
all other action necessary or advisable to secure the vote or consent of
their respective stockholders required by the rules of California Law and all
other applicable legal requirements to obtain such approvals.
(b) (i) the Board of Directors of the Company shall recommend
that the stockholders of the Company vote in favor of the adoption and
approval of this Agreement and approval of the Merger at the Company
Shareholders' Meeting; (ii) the Proxy Statement shall include a statement to
the effect that the Board of Directors of the Company has recommended that
the stockholders of the Company vote in favor of approval and adoption of
this Agreement and approval of the Merger at the Company Shareholders'
Meeting; and (iii) neither the Board of Directors of the Company nor any
committee thereof shall withdraw, amend or modify, or propose or resolve to
withdraw, amend or modify in a manner adverse to Zoi, the recommendation of
the Board of Directors of the Company that the stockholders of the Company
vote in favor of the adoption and approval of this Agreement and the approval
of the Merger.
SECTION 7.05. AMEX Listing. Prior to the Effective Time, the Company
shall make all required filings with state regulatory authorities and AMEX
and shall use reasonable best efforts to obtain all regulatory approvals
needed to ensure that the shares of the Company Common Stock issuable to
Zoi's shareholders pursuant to this Agreement will be lawfully issued to the
shareholders of Zoi and the shares underlying the Zoi Options, when issued,
will be approved for listing on AMEX. The Company shall maintain its listing
on the AMEX through the Effective Time. Prior to the Effective Time, Zoi
shall use reasonable best efforts to take such actions as are required to
enable the Company's Common Stock to continue to be listed on AMEX
immediately following the Effective Time, including delivering to the Company
in a timely manner any documents and information reasonably requested by the
Company in furtherance thereof.
SECTION 7.06. Exemption from Registration. Zoi shall take all steps
reasonably necessary to assist the Company to comply with an exemption from
registration under the Securities Act of 1933, as amended, including, but not
limited to, obtaining completed Shareholder Representation Letters from Zoi's
shareholders.
SECTION 7.07. Form S-8. The Company agrees to file a registration
statement on Form S 8 for the shares of Zoi Common Stock issuable with
respect to assumed Zoi Options issued under the Zoi Stock Option Plan as soon
as is reasonably practicable following the Effective Time. Notwithstanding
the foregoing, the Company's obligation under this Section shall apply only
with respect to shares of Company Common Stock that are eligible to be
included on a Form S-8.
SECTION 7.08. 10-KSB. The Company and Zoi shall cooperate in preparing
the Company's annual report on Form 10-KSB for the fiscal year ended December
31, 2006 in order to enable the Company to make such filing with the
Commission by March 31, 2007.
SECTION 7.09. Directors' and Officers' Indemnification. Each of the
parties hereto specifically agree, without intending to limit any of the
forgoing, to indemnify and hold harmless each of the current and former
officers and directors of the Company to the extent permitted by applicable
law for any and all claims, costs and expenses incurred by them in connection
with any action that may be taken by the Environmental Protection Agency
pursuant to the investigation disclosed in the Company SEC Documents.
SECTION 7.10. Time and Responsibility Schedule. Zoi and the Company
shall use reasonable best efforts to complete the tasks listed in Section
7.10 of the Company Disclosure Schedule within the time frames listed
therein.
SECTION 7.11. Reserved.
SECTION 7.12. Board of Directors and Officers. The Company currently
has four (4) directors, which is the authorized number of directors of the
Company. The Company shall amend its Articles of Incorporation and bylaws,
as required, to authorize, effective no later than the Effective Time, four
(4) directors. The Company shall appoint, effective immediately after the
Effective Time, those directors and executive officers of Zoi described in
Section 2.05 hereof to serve as the directors and officers of the Company.
SECTION 7.13. Resale Restriction Agreements. The Company shall use its
best efforts to cause Craig C. Barto to execute an agreement ("Resale
Restriction Agreement") that provides that effective at the Effective Time,
Craig C. Barto will not sell, transfer, pledge or hypothecate any shares of
Company Common Stock until the first anniversary of the Closing Date.
SECTION 7.14. Agreement Not to Dissent. The Company shall use its best
efforts to cause, within five (5) days after the date of this Agreement, each
of the Company's executive officers and directors to enter into an agreement
reasonably satisfactory to Zoi pursuant to which such executive officers and
directors agree not to dissent at the Company Shareholders' Meeting with
respect to shares of Company Common Stock held beneficially or of record by
such executive officers or directors (or allow any other person to dissent
with respect to such shares) on any of the proposals described in the Proxy
Statement.
ARTICLE VIII
CONDITIONS TO CLOSING
SECTION 8.01. Conditions to Obligations of Each Party. The respective
obligations of each party to this Agreement to effect the Merger and to
consummate the transactions contemplated by this Agreement shall each be
subject to the fulfillment, at or prior to the Effective Time, of each of the
following conditions:
(a) Stockholder Approval. This Agreement shall have been
approved and adopted, and the Merger shall have been duly approved, by the
requisite vote under applicable law by the stockholders of Zoi and the
Company;
(b) No Order; HSR Act. No Governmental Authority shall have
enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, executive order, decree, injunction or other order (whether
temporary, preliminary or permanent) which is in effect and which has the
effect of making the Merger illegal or otherwise prohibiting consummation of
the Merger. Any waiting period (and any extension thereof) under the HSR Act
applicable to the Merger shall have expired or shall have been terminated;
(c) Consents and Approvals. Zoi and the Company shall have
received, each in form and substance reasonably satisfactory to the parties,
all authorizations, consents, orders and approvals of all Governmental
Authorities and officials and all third party consents required in order to
consummate the Merger;
(d) State Securities Law. The Company shall have obtained all
necessary permits and qualifications, if any, or secured an exemption
therefrom, required by any state in connection with the issuance of the
Company's securities in the Merger, unless the failure to obtain such permits
and qualifications or to secure such exemptions could not reasonably be
expected to have a Material Adverse Effect on the Surviving Corporation;
(e) Amendment to Articles. A certificate of amendment to the
Company's Articles of Incorporation in proper form shall have been duly
approved by the Company's Board of Directors and shareholders and been filed
with and accepted for filing by the Secretary of State of the Company's then
jurisdiction of incorporation, which certificate of amendment shall (i)
increase the authorized number of shares of Company Common Stock to allow for
the issuance of Company Common Stock in the Merger and upon exercise of
assumed Zoi Options and Warrants, (ii) provide for a reverse stock split of
the Company's outstanding Company Stock to the extent useful or necessary to
enable the Company Common Stock to continue to be listed on AMEX following
the Merger and (iii) change the name of the Company to "Zoi Interactive
Holdings" or such other name upon which the Company and Zoi may agree;
(f) Financing. The total of the following amounts shall equal
at least Seven Million Dollars ($7,000,000): (i) all amounts received by Zoi
from February 1, 2007 until the Closing Date through the sale and issuance of
Zoi's capital stock or debt instruments, (ii) all amounts raised by the
Company from the date hereof until the Effective Time through the sale and
issuance of Company capital stock or debt instruments, (iii) all amounts
committed to be issued in a capital stock or debt financing by the Company or
the Surviving Corporation that are conditioned solely upon the closing of the
Merger or the condition specified in Section 8.01(h) below and (iv) all
amounts for which Zoi has received a "best efforts" agreement from a
placement agent to raise financing for Zoi or the Company. The parties agree
that the agreement described on Section 8.01 of the Zoi Disclosure Schedule
shall be deemed to satisfy this condition to the extent provided on such
schedule;
(g) Tournament Games. The shareholders of Tournament Games,
Inc., a Florida corporation ("Tournament Games"), shall be obligated, subject
only to the completion of the Merger and payment to such shareholders of a
total of $400,000, to sell and transfer to Zoi all the outstanding capital
stock of Tournament Games; and
(h) Listing or Trading. The shares of the Company Common Stock
issuable to Zoi's shareholders pursuant to this Agreement shall have been
authorized for listing on the ASE or the Company Common Stock shall be
trading on the OTC Bulletin Board.
SECTION 8.02. Conditions to Obligations of Zoi. The obligations of Zoi
to consummate and effect the Merger shall be subject to the satisfaction or
fulfillment, at or prior to the Effective Time, of each of the following
conditions, any of which may be waived, in writing, exclusively by Zoi:
(a) Representations, Warranties and Covenants. The
representations and warranties of the Company, Merger Sub and CET-Nevada
contained in this Agreement shall have been true and correct in all material
respects when made and shall be true and correct in all material respects as
of the Effective Time, with the same force and effect as if made as of the
Effective Time, other than such representations and warranties as are made as
of another date, the covenants and agreements contained in this Agreement to
be complied with by the Company, Merger Sub and CET-Nevada on or before the
Effective Time shall have been complied with in all material respects, and
Zoi shall have received a certificate from the Company to such effect signed
by a duly authorized officer thereof.
(b) No Proceeding or Litigation. No Action shall have been
commenced by or before any Governmental Authority against either the Company
or Zoi, seeking to restrain or materially and adversely alter the
transactions contemplated by this Agreement which, in the reasonable, good
faith determination of Zoi, is likely to render it impossible or unlawful to
consummate such transactions; provided, however, that the provisions of this
Section 8.02(b) shall not apply if the Company or an affiliate thereof has
directly or indirectly solicited or encouraged any such Action.
(c) Legal Opinion. Zoi shall have received an opinion, dated
as of the Effective Time, from Krys Boyle, P.C., counsel to the Company, in
form and substance reasonably satisfactory to Zoi;
(d) Resale Restriction Agreement. The Company and Craig C.
Barto shall have entered into the Resale Restriction Agreement and the Resale
Restriction Agreement shall be in full force and effect.
(e) Resolutions. Zoi shall have received a true and complete
copy, certified by the Secretary or an Assistant Secretary of the Company, of
the resolutions duly and validly adopted by the Board of Directors of Zoi
evidencing their authorization of the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby.
(f) Valuation Opinion. Zoi shall have received an appraisal of
the real property holdings of the Company dated within 90 days of the
Effective Time.
(g) Reincorporation Merger. The Company shall have completed
the Reincorporation Merger, unless Zoi has delivered to the Company a
Reincorporation Notice.
(h) No Company Material Adverse Effect. No Material Adverse
Effect on the Company shall have occurred from the date of this Agreement.
Zoi shall have received a certificate with respect to the foregoing signed on
behalf of the Company by each of the Chief Executive Officer and Chief
Financial Officer of the Company.
(i) Limitation on Dissent. Holders of no more than five
percent (5%) of the outstanding shares of Company capital stock shall have
exercised, nor shall they have any continued right to exercise, appraisal,
dissenters' or similar rights under applicable law with respect to their
shares by virtue of the Merger.
(j) Termination of Certain Agreements. Each of the Agreements
set forth in Section 8.02(j) of the Company Disclosure Schedules shall have
been terminated, effective prior to or as of the day immediately preceding
the Closing Date, and Zoi shall have received evidence of such terminations
in form and substance reasonably satisfactory to Zoi.
(k) Third Party Consents. Zoi shall have been furnished with
evidence satisfactory to it that the Company has obtained the consents,
approvals and waivers set forth in Section 8.02(k) of the Company Disclosure
Schedules.
(l) Resolutions of Zoi. Zoi shall have received a true and
complete copy, certified by the Secretary or an Assistant Secretary of the
Company, of the resolutions duly and validly adopted by the Boards of
Directors of the Company and CET-Nevada evidencing their authorization of the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby.
(m) Shareholder Approval of Future Offering. The Company shall
have, if requested by Zoi prior to the filing of the Proxy Statement with the
Commission, sought approval from its shareholders of any proposed or
potential offerings of Company securities as required by AMEX listing
requirements to enable the Company to issue, at or after the Closing Date,
Company securities, including, but not limited to, shares of its preferred
stock, promissory notes convertible into Company capital stock and/or
warrants to purchase Company capital stock.
(n) Severance Agreement. The Company and each of Steven H.
Davis, Dale W. Bleck and Ann J. Heckler shall have entered into severance
agreements with the Company on terms reasonably acceptable to Zoi, which
severance agreements shall provide that (i) these individuals provide from
time to time, as requested by the Company, up to one hundred eighty (180)
hours of service to the Company from the Closing Date until the 30th day
following the Closing Date and (ii) Zoi place in escrow for each of these
individuals an amount equal to six (6) months of their base salaries as of
the date of this Agreement, which amounts will be payable to them out of
escrow on the 30th day following the Closing Date so long as they fulfill
their obligations set forth in (i) above.
(o) Stock Repurchase. The Company shall have repurchased at
least 1,000,000 shares of outstanding Company Common Stock held by Steven H.
Davis (any agreement to effect such transaction, a "Repurchase Arrangement")
or Steven H. Davis shall have entered into a resale restriction agreement
with the Company on terms substantially similar to those contained in the
Resale Restriction Agreement. The Company agrees that it will not amend the
Repurchase Agreement without the prior written consent of Zoi.
SECTION 8.03. Conditions to Obligations of the Company and Merger Sub.
The obligations of the Company and Merger Sub to consummate and effect the
Merger shall be subject to the satisfaction or fulfillment, at or prior to
the Effective Time, of each of the following conditions, any of which may be
waived, in writing, exclusively by the Company:
(a) Representations, Warranties and Covenants. The representations
and warranties of Zoi contained in this Agreement shall have been true and
correct in all material respects when made and, subject to Section 8.04,
shall be true and correct in all material respects as of the Effective Time
with the same force and effect as if made as of the Effective Time, other
than such representations and warranties as are made as of another date,
except in all cases for such breaches of, inaccuracies in or omissions from
such representations and warranties as do not have a Material Adverse Effect
on Zoi, the covenants and agreements contained in this Agreement to be
complied with in all material respects by Zoi on or before the Effective Time
shall have been complied with in all material respects, and the Company shall
have received a certificate of Zoi to such effect signed by a duly authorized
officer thereof.
(b) No Proceeding or Litigation. No Action shall have been
commenced or threatened by or before any Governmental Authority against
either the Company or Zoi, seeking to restrain or materially and adversely
alter the transactions contemplated hereby which in the reasonable, good
faith determination of the Company, is likely to render it impossible or
unlawful to consummate such transactions; provided, however, that the
provisions of this Section 8.03(b) shall not apply if Company or an affiliate
thereof has solicited or encouraged any such Action.
(c) Resolutions of Zoi. The Company shall have received a true and
complete copy, certified by the Secretary or an Assistant Secretary of Zoi,
of the resolutions duly and validly adopted by the Board of Directors of the
Zoi evidencing its authorization of the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby.
(d) Certificate of Non-Foreign Status. The Company shall have
received a certificate from Zoi that complies with Sections 1.1445-2(c)(3)
and 1.8972(a) of the Regulations certifying that the Company is not a United
States Real Property Holding Corporation for purposes of Section 897 of the
Code.
(e) Valuation Opinion. The Company shall have received a valuation
opinion with respect to Zoi from Don Drysdale, a certified public accountant
and business valuation expert.
(f) December 31, Audited Financials. True and complete copies of an
audited consolidated balance sheet as of December 31, 2005, and the related
audited consolidated statements of income, retained earnings, stockholders'
equity and cash flows of Zoi, together with all related notes and schedules
thereto, accompanied by the reports thereon of Zoi's accountants (the
"December 31 Financials") shall have been made available or delivered to the
Company, and the December 31, Financials shall satisfy the requirements of
the second sentence of Section 3.07(a).
(h) Legal Opinion. The Company shall have received an opinion,
dated as of the Effective Time, from Weintraub Genshlea Chediak, counsel to
Zoi, in form and substance reasonably satisfactory to the Company.
SECTION 8.04. Disclosure Schedule Updates. On February 12, 2007, Zoi
entered in to an Acquisition and Stock Purchase Agreement ("Purchase
Agreement") with Tournament Games and each of the shareholders of Tournament
Games, which provides for the purchase by Zoi of all the outstanding capital
stock of Tournament Games ("TG Acquisition"). The Company has reviewed the
Purchase Agreement and the schedules and exhibits relating thereto. In
addition, between the date of this Agreement and the Closing, Zoi may sell
shares of its capital stock, notes, or securities convertible into its
securities to raise funds ("Financings"). From time to time prior to
Closing (each such date, a "Schedule Update Date"), Zoi shall update the Zoi
Disclosure Schedule to include any information in the Zoi Disclosure Schedule
relating to the TG Acquisition and the Financings that would have needed to
be included the Zoi Disclosure Schedule if the representations and warranties
were made as each applicable Schedule Update Date. Such updates to the Zoi
Disclosure Schedule will be deemed to be part of the Zoi Disclosure Schedule
for purposes of satisfying the closing conditions set forth in Section 8.03
of this Agreement.
ARTICLE IX
TERMINATION AND WAIVER
SECTION 9.01. Termination. This Agreement may be terminated at any
time prior to the Closing Date:
(a) by the Company if, between the date hereof and the Closing
Date: (i) any representation or warranty of Zoi contained in this Agreement
shall have been breached such that the conditions set forth in Section
8.03(a) would or could not be satisfied by April 30, 2007 (or, in the event
(A) the SEC reviews the Proxy Statement, (B) AMEX has not provided Zoi and
the Company with reasonable assurances before April 30, 2007 that the Company
Common Stock will continue to be listed on AMEX following the Effective Time,
or (C) AMEX has not completed its review of the transactions contemplated
hereby before April 30, 2007, such date will be extended as necessary to
respond to SEC comments and/or to obtain such assurances and/or review from
AMEX, but no later than May 31, 2007), (ii) Zoi shall not have complied in
any material respect with any covenant or agreement to be complied with by it
and contained in this Agreement within 15 days after receipt of notice of
non-compliance from the Company; or (iii) Zoi or any of its Subsidiaries
makes a general assignment for the benefit of creditors, or any proceeding
shall be instituted by or against Zoi or any of its Subsidiaries seeking to
adjudicate any of them a bankrupt or insolvent, or seeking liquidation,
winding up or reorganization, arrangement, adjustment, protection, relief or
composition of its debts under any Law relating to bankruptcy, insolvency or
reorganization; or
(b) by either the Company or Zoi if the Closing Date shall not
have occurred by April 30, 2007 (or, in the event (A) the SEC reviews the
Proxy Statement, (B) AMEX has not provided Zoi and the Company with
reasonable assurances before April 30, 2007 that the Company Common Stock
will continue to be listed on AMEX following the Effective Time, or (C) AMEX
has not completed its review of the transactions contemplated hereby before
April 30, 2007, such date will be extended as necessary to respond to SEC
comments and/or to obtain such assurances and/or review from AMEX, but no
later than May 31, 2007); provided, however, that the right to terminate this
Agreement under this Section 9.01(b) shall not be available to any party
whose failure to fulfill any obligation under this Agreement shall have been
the cause of, or shall have resulted in, the failure of the Closing to occur
on or prior to such date and such failure to fulfill the obligation
constitutes a material breach of this Agreement; or
(c) by either Zoi or the Company in the event that any
Governmental Authority shall have issued a final, non-applicable order,
decree or ruling or taken any other action permanently, enjoining or
otherwise prohibiting the transactions contemplated by this Agreement and
such order, decree, ruling or other action shall have become final and
nonappealable; or
(d) by Zoi if, between the date hereof and the Closing Date,
(i) any representation or warranty of the Company, CET-Nevada or Merger Sub
contained in this Agreement shall have been breached such that the conditions
set forth in Section 8.02(a) would or could not be satisfied by April 30,
2007 (or, in the event (A) the SEC reviews the Proxy Statement, (B) AMEX has
not provided Zoi and the Company with reasonable assurances before April 30,
2007 that the Company Common Stock will continue to be listed on AMEX
following the Effective Time, or (C) AMEX has not completed its review of the
transactions contemplated hereby before April 30, 2007, such date will be
extended as necessary to respond to SEC comments and/or to obtain such
assurances and/or review from AMEX, but no later than May 31, 2007), (ii) the
Company or CET-Nevada shall not have complied in any material respect with
any covenant or agreement to be complied with by it and contained in this
Agreement within 15 days after receipt of notice of non-compliance from the
Zoi, or (iii) the Company makes a general assignment for the benefit of
creditors, or any proceeding shall be instituted by or against the Company
seeking to adjudicate it bankrupt or insolvent, or seeking liquidation,
winding up or reorganization, arrangement, adjustment, protection, relief or
composition of its debts under any Law relating to bankruptcy, insolvency or
reorganization; or
(e) by the mutual written consent authorized by the Boards of
Directors of the Company and Zoi.
SECTION 9.02. Effect of Termination. Any termination of this
Agreement pursuant to Section 9.01 hereof shall be effective immediately upon
the delivery of written notice of the terminating party to the other party
hereto. In the event of termination of this Agreement as provided in Section
9.01, this Agreement shall forthwith become void and there shall be no
liability on the part of either party hereto except (a) as set forth in
5.02(b), this Section 9.01 and Article X and (b) that nothing herein shall
relieve either party from liability for any willful breach of this Agreement.
SECTION 9.03. Waiver. Either party to this Agreement may (a) extend
the time for the performance of any of the obligations or other acts of the
other party, (b) waive any inaccuracies in the representations and warranties
of the other party contained herein or in any document delivered by the other
party pursuant hereto or (c) waive compliance with any of the agreements or
conditions of the other party contained herein. Any such extension or waiver
shall be valid only if set forth in an instrument in writing signed by the
party to be bound thereby. Any waiver of any term or condition shall not be
construed as a waiver of any subsequent breach or a subsequent waiver of the
same term or condition, or a waiver of any other term or condition, of this
Agreement. The failure of any party to assert any of its rights hereunder
shall not constitute a waiver of any of such rights.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.01. Non-Survival of Representations and Warranties. The
representations and warranties of the Company, Merger Sub, Zoi and CET-Nevada
contained in this Agreement shall terminate at the Effective Time, and only
the covenants that by their terms survive the Effective Time shall survive
the Effective Time.
SECTION 10.02. Expenses. Except as otherwise specified in this
Agreement, all costs and expenses, including, without limitation, fees and
disbursements of counsel, financial advisors and accountants, incurred in
connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such costs and expenses, whether or not the
Effective Time shall have occurred.
SECTION 10.03. Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given or made
(and shall be deemed to have been duly given or made upon receipt) by
delivery in person, by courier service, by cable, by telecopy, by telegram,
by telex or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties at the following addresses (or at such
other address for a party as shall be specified in a notice given in
accordance with this Section 10.03):
(a) if to the Company, CET-Nevada or Merger Sub:
CET Services, Inc.
12503 E Euclid Dr #30,
Centennial, CO 80111
Telecopy: 720-875-9114
Attention: Steven Davis
with a copy to:
Krys Boyle, P.C.
600 17th Street, Suite 2700 South Tower
Denver, CO 80123
Telecopy: 303-893-2882
Attention: James P. Beck, Esq.
and
(b) if to Zoi:
Zoi Interactive Technologies, Inc.
3850 East Flamingo Road, #200
Las Vegas, NV 89121
Telecopy: (702) 431-8377
Attention: Mr. Michael Calderone
with a copy to:
Weintraub Genshlea Chediak
400 Capitol Mall, 11th Floor
Sacramento, CA 95814
Telecopy: (916) 446-1611
Attention: Chris Chediak, Esq.
SECTION 10.04. Public Announcements. No party to this Agreement shall
make, or cause to be made, any press release or public announcement in
respect of this Agreement or the transactions contemplated hereby or
otherwise communicate with any news media without prior consent of the other
parties, subject, in the case of the Company, to the Company's obligations to
comply with applicable securities laws and ASE listing requirements, and the
parties shall cooperate and consult with each other as to the timing and
contents of any such press release or public announcement before such press
release or public announcement is made, regardless of whether it is made in
order to comply with applicable securities laws and ASE listing requirements.
SECTION 10.05. Headings. The descriptive headings contained in this
Agreement are for convenience of reference only and shall not affect in any
way the meaning or interpretation of this Agreement.
SECTION 10.06. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any Law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any
manner materially adverse to any party. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced,
the parties hereto shall negotiate in good faith to modify this Agreement so
as to effect the original intent of the parties as closely as possible in an
acceptable manner in order that the transactions contemplated hereby are
consummated as originally contemplated to the greatest extent possible.
SECTION 10.07. Entire Agreement. This Agreement and the schedules and
exhibits referenced herein constitute the entire agreement of the parties
hereto with respect to the subject matter hereof and thereof and supersedes
all prior agreements and undertakings, both written and oral, between the
parties with respect to the subject matter hereof and thereof.
SECTION 10.08. Assignment. This Agreement may not be assigned by
operation of law or otherwise without the express written consent of the
Company and Zoi (which consent may be granted or withheld in the sole
discretion of the Company or Zoi). Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and permitted assigns.
SECTION 10.09. No Third Party Beneficiaries. This Agreement shall be
binding upon and inure solely to the benefit of the parties hereto and their
permitted assigns and nothing herein, express or implied, is intended to or
shall confer upon any other Person any legal or equitable right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement.
SECTION 10.10. Amendment. This Agreement may not be amended or
modified except (a) by an instrument in writing signed by, or on behalf of,
each of the parties hereto or (b) by a waiver in accordance with Section
9.03.
SECTION 10.11. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California applicable
to contracts executed in and to be performed entirely within that state.
SECTION 10.12. Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original
but all of which taken together shall constitute one and the same agreement.
[remainder of page intentionally left blank]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
CET SERVICES, INC., a California Corporation
By: /s/ Steven H. Davis
Name: Steven Davis
Title: Chairman of the Board and
Chief Executive Officer
CET SERVICES OF NEVADA, INC., a Nevada Corporation
By: /s/ Steven H. Davis
Name: Steven Davis
Title: President
INTERACTIVE ACQUISITION CORPORATION, a Nevada Corporation
By: /s/ Steven H. Davis
Name: Steven Davis
Title: President
ZOI INTERACTIVE TECHNOLOGIES, INC.
By: /s/ Michael Calderone
Name: Michael Calderone
Title: Chairman of the Board and
Chief Executive Officer
EXHIBIT A
VOTING AGREEMENT
THIS VOTING AGREEMENT (this "Voting Agreement") is made and entered into
as of February 16, 2007, between Zoi Interactive Technologies, Inc., a Nevada
corporation ("Target"), and the undersigned stockholder (the "Stockholder")
of CET Services, Inc., a California corporation ("Company").
RECITALS
A. Company, Interactive Acquisition Corporation, a wholly-owned
subsidiary of Company ("Merger Sub"), and Target have entered an Agreement
and Plan of Merger of even date herewith (the "Merger Agreement"), which
provides for the merger (the "Merger") of Merger Sub with and into Target.
Pursuant to the Merger, all outstanding capital stock of Target shall be
converted into common stock of Company or the Company's successor, as set
forth in the Merger Agreement;
B. Stockholder is the beneficial owner (as defined in Rule 13d 3
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"))
of such number of shares of the outstanding capital stock of Company and
shares subject to outstanding options and warrants as are indicated on the
signature page of this Voting Agreement; and
C. In consideration of the execution of the Merger Agreement by
Target, Stockholder (in his capacity as such) agrees to vote the Shares (as
defined below) and other such shares of capital stock of Company over which
Stockholder has voting power so as to facilitate consummation of the Merger.
NOW, THEREFORE, intending to be legally bound, the parties hereto agree
as follows:
1. Certain Definitions. Capitalized terms not defined herein shall
have the meanings ascribed to them in the Merger Agreement. For purposes of
this Voting Agreement:
(a) "Expiration Date" shall mean the earlier to occur of (i)
such date and time as the Merger Agreement shall have been terminated
pursuant to Article IX thereof, or (ii) such date and time as the Merger
shall become effective in accordance with the terms and provisions of the
Merger Agreement.
(b) "Person" shall mean any (i) individual, (ii) corporation,
limited liability company, partnership or other entity, or (iii) governmental
authority.
(c) "Shares" shall mean: (i) all securities of Company
(including all shares of Company Common Stock, and all options, warrants and
other rights to acquire shares of Company Common Stock) owned by Stockholder
as of the date of this Voting Agreement; and (ii) all additional securities
of Company (including all additional shares of Company Common Stock and all
additional options, warrants and other rights to acquire shares of Company
Common Stock) of which Stockholder acquires ownership during the period from
the date of this Voting Agreement through the Expiration Date (including by
way of stock dividend or distribution, split-up, recapitalization,
combination, exchange of shares and the like).
(d) "Transfer". A Person shall be deemed to have effected a
"Transfer" of a security if such person directly or indirectly: (i) sells,
pledges, encumbers, assigns, grants an option with respect to, transfers or
disposes of such security or any interest in such security; or (ii) enters
into an agreement or commitment providing for the sale of, pledge of,
encumbrance of, assignment of, grant of an option with respect to, transfer
of or disposition of such security or any interest therein. Stockholder and
the Company entered into that certain Stock Repurchase Agreement of even date
herewith ("Stock Repurchase Agreement"). Stockholder's entering into the
Stock Repurchase Agreement and the sale of Shares by Stockholder in
accordance with the terms of the Stock Repurchase Agreement shall not
constitute a "Transfer" for purposes of this Agreement.
2. Transfer of Shares.
(a) Transfer Restrictions. Stockholder agrees that, during the
period from the date of this Voting Agreement through the Expiration Date,
Stockholder shall not cause or permit any Transfer of any of the Shares to be
effected; provided that, notwithstanding the foregoing, Stockholder shall not
be restricted from effecting a Transfer of any Shares to any member of
Stockholder's immediate family or to a trust for the benefit of Stockholder
and/or any member of Stockholder's immediate family provided that (A) each
such transferee shall have (i) executed a counterpart of this Agreement and a
proxy in the form attached hereto as Exhibit A (with such modifications as
Target may reasonably request) and (ii) agreed in writing to hold such
Shares, or such interest therein, subject to all of the terms and conditions
set forth in this Agreement, and (B) the aggregate number of shares (whether
outstanding or underlying outstanding options and warrants) that may be so
Transferred by Stockholder may not exceed one percent (1%) of Company's
outstanding Common Stock as of the date hereof. For purposes of this
Agreement, "immediate family" means Stockholder's spouse, parents, siblings,
children or grandchildren.
(b) Transfer of Voting Rights. Stockholder agrees that, during
the period from the date of this Voting Agreement through the Expiration
Date, Stockholder shall not deposit (or permit the deposit of) any Shares in
a voting trust or grant any proxy or enter into any voting agreement or
similar agreement in contravention of the obligations of Stockholder under
this Voting Agreement with respect to any of the Shares.
3. Agreement to Vote Shares. At every meeting of the stockholders of
Company called, and at every adjournment thereof, and on every action or
approval by written consent of the stockholders of Company, Stockholder (in
his or her capacity as such) shall, or shall cause the holder of record on
any applicable record date to, vote the Shares:
(a) in favor of approval of the Merger and the adoption and
approval of the Merger Agreement, and in favor of each of the other actions
contemplated by the Merger Agreement and the Proxy and any action required in
furtherance thereof;
(b) in favor of any matter that could reasonably be expected to
facilitate the Merger; and
(c) against approval of any proposal made in opposition to, or
in competition with, consummation of the Merger or the transactions
contemplated by the Merger Agreement.
Stockholder further agrees that if a meeting is held Stockholder shall, or
shall cause the holder of record on any applicable record date to, appear at
such meeting or otherwise cause the Shares to be counted as present thereat
for purposes of establishing a quorum. Prior to the Expiration Date, the
Stockholder shall not enter into any agreement or understanding with any
person to vote or give instructions in any manner inconsistent with the terms
of this Section 3.
4. Agreement Not to Exercise Appraisal Rights. Stockholder agrees not
to exercise any rights (including, without limitation, under Chapter 13 of
the California Corporations Code) to demand appraisal of any Shares which may
arise with respect to the Merger.
5. Directors and Officers. Notwithstanding any provision of this
Voting Agreement to the contrary, nothing in this Voting Agreement shall
limit or restrict Stockholder from acting in Stockholder's capacity as a
director or officer of Company (it being understood that this Voting
Agreement shall apply to Stockholder solely in Stockholder's capacity as a
stockholder of Company) or voting in Stockholder's sole discretion on any
matter other than those matters referred to in Section 3.
6. Irrevocable Proxy. Concurrently with the execution of this Voting
Agreement, Stockholder agrees to deliver to Target a proxy in the form
attached hereto as Exhibit A (the "Proxy"), which shall be irrevocable to the
fullest extent permissible by law, with respect to the Shares.
7. No Ownership Interest. Nothing contained in this Voting Agreement
shall be deemed to vest in Target any direct or indirect ownership or
incidence of ownership of or with respect to any Shares. All rights,
ownership and economic benefits of and relating to the Shares shall remain
vested in and belong to Stockholder, and Target shall have no authority to
manage, direct, superintend, restrict, regulate, govern, or administer any of
the policies or operations of Company or exercise any power or authority to
direct Stockholder in the voting of any of the Shares, except as otherwise
provided herein.
8. Representations and Warranties of the Stockholder.
(a) Power; Binding Agreement. Stockholder has full power and
authority to execute and deliver this Voting Agreement and the Proxy, to
perform Stockholder's obligations hereunder and to consummate the
transactions contemplated hereby.
(b) No Conflicts. Except for filings under the Exchange Act, no
filing with, and no permit, authorization, consent, or approval of, any state
or federal public body or authority ("Governmental Entity") is necessary for
the execution of this Voting Agreement by Stockholder and the consummation by
Stockholder of the transactions contemplated by this Voting Agreement. None
of the execution and delivery of this Voting Agreement by Stockholder, the
consummation by Stockholder of the transactions contemplated by this Voting
Agreement or compliance by Stockholder with any of the provisions of this
Voting Agreement shall (i) result in a violation or breach of, or constitute
(with or without notice or lapse of time or both) a default (or give rise to
any third party right of termination, cancellation, material modification or
acceleration) under any of the terms, conditions or provisions of any note,
loan agreement, bond, mortgage, indenture, license, contract, commitment,
arrangement, understanding, agreement, or other instrument or obligation of
any kind to which Stockholder is a party or by which Stockholder or any of
its properties or assets may be bound, or (ii) violate any order, writ,
injunction, decree, judgment, order, statute, rule, or regulation applicable
to Stockholder or any of Stockholder's properties or assets.
(c) Ownership of Shares. Stockholder (i) is the beneficial
owner of the shares of Company Common Stock and the options and warrants to
purchase shares of Company Common Stock indicated on the signature page of
this Voting Agreement, which are free and clear of any liens, adverse claims,
charges, security interests, pledges or options, proxies, voting trusts or
agreements, understandings or agreements, or any other rights or encumbrances
whatsoever ("Encumbrances") (except any Encumbrances arising under securities
laws or arising hereunder); and (ii) does not beneficially own any securities
of Company other than the shares of Company Common Stock and options and
warrants to purchase shares of Company Common Stock indicated on the
signature page of this Voting Agreement.
(d) Voting Power. Stockholder has or will have sole voting
power, sole power of disposition, sole power to issue instructions with
respect to the matters set forth herein, and sole power to agree to all of
the matters set forth in this Voting Agreement, in each case with respect to
all of Stockholder's Shares, with no limitations, qualifications or
restrictions on such rights, subject to applicable federal securities laws
and the terms of this Voting Agreement.
(e) No Finder's Fees. No broker, investment banker, financial
advisor or other person is entitled to any broker's, finder's, financial
adviser's or other similar fee or commission in connection with the
transactions contemplated by this Voting Agreement based upon arrangements
made by or on behalf of Stockholder.
(f) Reliance by Target. Stockholder understands and
acknowledges that Target is entering into the Merger Agreement in reliance
upon Stockholder's execution and delivery of this Voting Agreement.
9. Certain Restrictions. Prior to the termination of this Voting
Agreement, Stockholder agrees not to, directly or indirectly, take any other
action that would make any representation or warranty of Stockholder
contained herein untrue or incorrect.
10. Disclosure. Stockholder agrees to permit Target to publish and
disclose in all documents and schedules filed with the Securities and
Exchange Commission or the California Department of Corporations, and any
press release or other disclosure document that Target, in its sole
discretion, determines to be necessary or desirable in connection with the
Merger and any transactions related to the Merger, Stockholder's identity and
ownership of Shares and the nature of Stockholder's commitments, arrangements
and understandings under this Voting Agreement.
11. Consents and Waivers. Stockholder hereby gives any consents or
waivers that are reasonably required for the consummation of the Merger under
the terms of any agreements to which the Stockholder is a party or pursuant
to any rights the Stockholder may have.
12. Additional Documents. Stockholder (in his or her capacity as such)
and Target hereby covenant and agree to execute and deliver any additional
documents necessary or desirable, in the reasonable opinion of Target, to
carry out the intent of this Voting Agreement.
13. Legending of Shares. If so requested by Target, Stockholder agrees
that the Shares shall bear a legend stating that they are subject to this
Voting Agreement and to an irrevocable proxy.
14. Termination. This Voting Agreement and the Proxy delivered in
connection herewith shall terminate and shall have no further force or effect
as of the Expiration Date. Nothing in this Section 14 shall relieve or
otherwise limit any party of liability for breach of this Voting Agreement.
15. Miscellaneous.
(a) Validity. The invalidity or unenforceability of any
provision of this Voting Agreement will not affect the validity or
enforceability of the other provisions of this Voting Agreement, which will
remain in full force and effect. In the event any Governmental Entity of
competent jurisdiction holds any provision of this Voting Agreement to be
null, void or unenforceable, the parties hereto will negotiate in good faith
and will execute and deliver an amendment to this Voting Agreement in order,
as nearly as possible, to effectuate, to the extent permitted by law, the
intent of the parties hereto with respect to such provision.
(b) Binding Effect and Assignment. This Voting Agreement and
all of the provisions hereof shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and permitted assigns,
but, neither this Voting Agreement nor any of the rights, interests or
obligations of the parties hereto may be assigned by either of the parties
without prior written consent of the other.
(c) Amendments; Waiver. This Voting Agreement may be amended
by the parties hereto and the terms and conditions hereof may be waived only
by an instrument in writing signed on behalf of each of the parties hereto,
or, in the case of a waiver, by an instrument signed on behalf of the party
waiving compliance.
(d) Specific Performance; Injunctive Relief. The parties
hereto acknowledge that Target shall be irreparably harmed and that there
shall be no adequate remedy at law for a violation of any of the covenants or
agreements of Stockholder set forth herein. Therefore, it is agreed that, in
addition to any other remedies that may be available to Target upon any such
violation, Target shall have the right to enforce such covenants and
agreements by specific performance, injunctive relief or by any other means
available to Target at law or in equity.
(e) Notices. All notices and other communications pursuant to
this Voting Agreement shall be in writing and deemed to be sufficient if
contained in a written instrument and shall be deemed given if delivered
personally, telecopied, sent by nationally-recognized overnight courier or
mailed by registered or certified mail (return receipt requested), postage
prepaid, to the parties at the following address (or at such other address
for a party as shall be specified by like notice):
If to Target: 3850 E. Flamingo Road
Las Vegas, CA 89121
Attention: Chief Executive Officer
Telecopy No.: (702) 804-1231
with a copy to: Weintraub Genshle Chediak Law Corporation
400 Capitol Mall, Suite 1100
Sacramento, CA 9581
Attention: Michael De Angelis, Esq.
Telecopy No.: (916) 446-1611
If to Stockholder: To the address for notice set forth on the
signature page hereof.
(f) No Waiver. The failure of any party to exercise any right,
power or remedy provided under this Voting Agreement or otherwise available
in respect of this Voting Agreement at law or in equity, or to insist upon
compliance by any other party with its obligation under this Voting
Agreement, and any custom or practice of the parties at variance with the
terms of this Voting Agreement, will not constitute a waiver by such party of
its right to exercise any such or other right, power or remedy or to demand
such compliance.
(g) No Third Party Beneficiaries. This Voting Agreement is not
intended to confer upon any person other than the parties hereto any rights
or remedies hereunder.
(h) Governing Law. This Voting Agreement shall be governed by
the laws of the State of Nevada, without reference to rules of conflicts of
law.
(i) Submission to Jurisdiction. All actions and proceedings
arising out of or relating to this Agreement shall be heard and determined
exclusively in any California state or federal court sitting in Sacramento.
The parties hereto hereby (a) submit to the exclusive jurisdiction of any
state or federal court sitting in Sacramento County for the purpose of any
action arising out of or relating to this Agreement brought by any party
hereto, and (b) irrevocably waive, and agree not to assert by way of motion,
defense, or otherwise, in any such action, any claim that it is not subject
personally to the jurisdiction of the above-named courts, that its property
is exempt or immune from attachment or execution, that the action is brought
in an inconvenient forum, that the venue of the action is improper, or that
this Agreement or the transactions contemplated hereby may not be enforced in
or by any of the above-named courts.
(j) Rules of Construction. The parties hereto agree that they
have been represented by counsel during the negotiation and execution of this
Agreement and, therefore, waive the application of any law, regulation,
holding or rule of construction providing that ambiguities in an agreement or
other document will be construed against the party drafting such agreement or
document.
(k) Entire Agreement. This Voting Agreement and the Proxy
contain the entire understanding of the parties in respect of the subject
matter hereof, and supersede all prior negotiations, agreements and
understandings, both written and oral, between the parties hereto with
respect to the subject matter hereof.
(l) Severability. If any term or other provision of this Voting
Agreement is invalid, illegal or incapable of being enforced by any rule of
law, or public policy, all other conditions and provisions of this Voting
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated herein are not
affected in any manner materially adverse to any party hereto. Upon such
determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith
to modify this Agreement so as to effect the original intent of the parties
as closely as possible in a mutually acceptable manner.
(m) Interpretation.
(i) Whenever the words "include," "includes" or
"including" are used in this Agreement they shall be deemed to be followed by
the words "without limitation." As used in this Agreement, the term
"affiliate" shall have the meaning set forth in Rule 12b-2 promulgated under
the Exchange Act.
(ii) The article and section headings contained in this
Agreement are solely for the purpose of reference, are not part of the
agreement of the parties hereto and shall not in any way affect the meaning
or interpretation of this Agreement.
(n) Expenses. All costs and expenses incurred in connection
with this Voting Agreement and the transactions contemplated hereby shall be
paid by the party incurring the expenses.
(o) Further Assurances. From time to time, at any other
party's request and without further consideration, each party shall execute
and deliver any additional documents and take any further lawful action as
may be necessary or desirable to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by this Voting
Agreement.
(p) Counterparts. This Voting Agreement may be executed in
several counterparts, each of which shall be an original, but all of which
together shall constitute one and the same agreement.
(q) No Obligation to Exercise Options. Notwithstanding any
provision of this Voting Agreement to the contrary, nothing in this Voting
Agreement shall obligate Stockholder to exercise any option, warrant or other
right to acquire shares of Company Common Stock.
[The remainder of this page has been intentionally left blank]
IN WITNESS WHEREOF, the parties have caused this Voting Agreement to be
duly executed on the day and year first above written.
ZOI INTERACTIVE TECHNOLOGIES, INC. STOCKHOLDER
By:________________________________ ____________________________________
Michael Calderone, Steven H. Davis
Chief Executive Officer
____________________________________
Print Address
Telephone __________________________
Facsimile No. ______________________
Shares beneficially owned:
_____ shares of Company Common Stock
_____ shares of Company Common Stock
issuable upon exercise of outstanding
options
______ shares of Company Common Stock
issuable upon exercise of outstanding
warrants
[Signature Page to Voting Agreement]
IRREVOCABLE PROXY
The undersigned stockholder ("Stockholder") of CET Services, Inc., a
California corporation ("Company"), hereby irrevocably (to the fullest extent
permitted by law) appoints Michael Calderone and Jeff Spear of Zoi
Interactive Technology, a Nevada corporation ("Target"), and each of them, as
the sole and exclusive attorneys and proxies of the undersigned, with full
power of substitution and resubstitution, to vote and exercise all voting and
related rights (to the full extent that the undersigned is entitled to do so)
with respect to all of the shares of capital stock of Company that now are or
hereafter may be beneficially owned by the undersigned, and any and all other
shares or securities of Company issued or issuable in respect thereof on or
after the date hereof (collectively, the "Shares") in accordance with the
terms of this Proxy until the Expiration Date (as defined below). Upon the
undersigned's execution of this Proxy, any and all prior proxies given by the
undersigned with respect to any Shares are hereby revoked and the undersigned
agrees not to grant any subsequent proxies with respect to the Shares until
after the Expiration Date.
This Proxy is irrevocable (to the fullest extent permitted by law), is
coupled with an interest and is granted pursuant to that certain Voting
Agreement of even date herewith by and among Target and the undersigned
stockholder (the "Voting Agreement"), and is granted in consideration of
Target entering into that certain Agreement and Plan of Merger of even date
herewith (the "Merger Agreement"), among Company, Interactive Acquisition
Corporation, a Nevada corporation and a wholly-owned subsidiary of Company
("Merger Sub"), CET Services of Nevada, Inc., a Nevada corporation, and
Target. The Merger Agreement provides for the merger of Merger Sub with and
into Target in accordance with its terms (the "Merger"). As used herein, the
term "Expiration Date" shall mean the earlier to occur of (i) such date and
time as the Merger Agreement shall have been validly terminated pursuant to
Article IX thereof or (ii) such date and time as the Merger shall become
effective in accordance with the terms and provisions of the Merger
Agreement.
The attorneys and proxies named above, and each of them, are hereby
authorized and empowered by the undersigned, at any time prior to the
Expiration Date, to act as the undersigned's attorney and proxy to vote the
Shares, and to exercise all voting, consent and similar rights of the
undersigned with respect to the Shares (including, without limitation, the
power to execute and deliver written consents) at every annual, special or
adjourned meeting of stockholders of Company and in every written consent in
lieu of such meeting (i) in favor of approval of the Merger and the adoption
and approval of the Merger Agreement, and in favor of each of the other
actions contemplated by the Merger Agreement and the Proxy and any action
required in furtherance thereof; (ii) in favor of any matter that could
reasonably be expected to facilitate the Merger; and (iii) against approval
of any proposal made in opposition to, or in competition with, the
consummation of the Merger or the transactions contemplated by the Merger
Agreement.
The attorneys and proxies named above may not exercise this Proxy on any
other matter. The undersigned stockholder may vote the Shares on all other
matters.
Any obligation of the undersigned hereunder shall be binding upon the
successors and assigns of the undersigned.
[Signature Page to Follow]
This Proxy is irrevocable (to the fullest extent permitted by law).
This Proxy shall terminate, and be of no further force and effect,
automatically upon the Expiration Date.
Dated: February 16, 2007
Signature of Stockholder: _______________________
Print Name of Stockholder: Steven H. Davis
[Signature Page to Irrevocable Proxy]