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Agreement and Plans of Mergers - Accoona Corp., Skynet Communications Corp. and Zylonet Systems Inc.

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AGREEMENT AND PLANS OF MERGERS
 
dated
 
March 15, 2006
 
 
by and among
 
Accoona Corp., a Delaware corporation,
 
as the Parent,
 
SN Acquisition Corp., a Delaware corporation,
 
ZS Acquisition Corp., a Delaware corporation,
 
as the Merger Subs,
 
Skynet Communications Corp.
a New York corporation,

Zylonet Systems Inc.
a New York corporation,

as the Companies,

the Shareholders named herein

and

Allen Benzaken,
as Representative
 

TABLE OF CONTENTS
 
 
 
Page 
     
ARTICLE I     DEFINITIONS
 
1
 
1.1.
 
Definitions
     
1
       
ARTICLE II     THE CLOSINGS
 
8
           
  
2.1.
     
Effective Time of the Mergers
 
8
 
2.2.
 
Closings .
 
9
 
2.3.
 
Effects of the Mergers.
 
9
 
2.4.
 
Effect on Capital Stock
 
10
 
2.5.
 
Computation of Merger Consideration
 
11
 
2.6.
 
Procedure to Establish Net Profits, Indebtedness, Tangible Personal Property and Minimum Required EBITDA.
 
14
       
ARTICLE III     REPRESENTATIONS AND WARRANTIES OF THE COMPANIES AND SHAREHOLDERS
 
16
           
 
3.1.
 
Corporate Existence and Power
 
16
 
3.2.
 
Corporate Authorization.
 
16
 
3.3.
 
Charter Documents; Legality
 
17
 
3.4.
 
Capitalization and Ownership of the Companies
 
17
 
3.5.
 
Subsidiaries
 
17
 
3.6.
 
Affiliates
 
17
 
3.7.
 
Assumed Names
 
18
 
3.8.
 
Governmental Authorization
 
18
 
3.9.
 
Consents
 
18
 
3.10.
 
Financial Statements.
 
18
 
3.11.
 
Accounts Receivable
 
20
 
3.12.
 
Books and Records.
 
20
 
3.13.
 
Absence of Certain Changes.
 
20
 
3.14.
 
Real Property.
 
21
 
3.15.
 
Tangible Personal Property.
 
21
 
3.16.
 
Intellectual Property.
 
22
 
3.17.
 
Inventory.
 
22
 
3.18.
 
Suppliers and Business Relationships.
 
23
 
3.19.
 
Litigation
 
24
 
3.20.
 
Contracts.
 
24
 
3.21.
 
Licenses and Permits
 
26
 
3.22.
 
Compliance with Laws
 
26
 
3.23.
 
Pre-payments
 
26
 
3.24.
 
Employees
 
26
 
3.25.
 
Compliance with Labor Laws and Agreements
 
26
 
3.26.
 
Pension and Benefit Plans
 
27
 
3.27.
 
Employment Matters
 
27
 
3.28.
 
Tax Matters
 
28
 
3.29.
 
Finders’ Fees
 
28
 
3.30.
 
Investment Representations.
 
29
 
i

 
 
 
 
 
 
Page
           
 
3.31.
 
Software.
 
33
 
3.32.
 
Business Operations; Servers.
 
34
 
3.33.
 
Powers of Attorney and Suretyships
 
35
 
3.34.
 
Other Information
 
35
       
ARTICLE IV     REPRESENTATIONS AND WARRANTIES OF PARENT
 
35
           
 
4.1.
 
Due Incorporation
 
35
 
4.2.
 
Corporate Authorization
 
35
 
4.3.
 
Governmental Authorization
 
36
 
4.4.
 
No Violation
 
36
 
4.5.
 
Charter Documents
 
36
 
4.6.
 
Consents
 
36
 
4.7.
 
Issuance of Parent Class C Common Stock
 
37
 
4.8.
 
Finders’ Fees
 
37
 
4.9.
 
Other Information
 
37
       
ARTICLE V     COVENANTS OF THE COMPANIES AND THE SHAREHOLDERS PENDING CLOSING
 
37
           
 
5.1.
 
Conduct of the Business
 
37
 
5.2.
 
Access to Information.
 
40
 
5.3.
 
Notices of Certain Events
 
40
       
ARTICLE VI     COVENANTS OF THE COMPANIES AND THE SHAREHOLDERS
 
40
           
 
6.1.
 
Confidentiality
 
40
 
6.2.
 
Conduct of the Business
 
41
 
6.3.
 
Exclusivity
 
42
 
6.4.
 
Reporting and Compliance With Law
 
42
 
6.5.
 
Injunctive Relief
 
42
 
6.6.
 
Covenants with respect to Parent Class C Common Stock.
 
43
       
ARTICLE VII     COVENANTS OF ALL PARTIES HERETO
 
45
           
 
7.1.
 
Best Efforts; Further Assurances
 
45
 
7.2.
 
Confidentiality of Transaction
 
45
 
7.3.
 
Best Efforts to Obtain Consents
 
45
 
7.4.
 
Tax Matters.
 
46
       
ARTICLE VIII     CONDITIONS TO CLOSING
 
47
           
 
8.1.
 
Condition to the Obligations of Parent, Merger Subs and the Companies
 
47
 
8.2.
 
Conditions to Obligations of Parent and Merger Subs
 
48
 
8.3.
 
Conditions to Obligations of Companies
 
50
 
ii

 
     
 Page
       
ARTICLE IX     RELIANCE ON REPRESENTATIONS AND WARRANTIES
 
51
           
 
9.1.
 
Reliance on Representations and Warranties of each Company and the Shareholders
 
51
 
9.2.
 
Reliance on Representations and Warranties of Parent
 
51
       
ARTICLE X     INDEMNIFICATION
 
52
           
 
10.1.
 
Indemnification of Parent, Merger Subs and Surviving Corporations.
 
52
 
10.2.
 
Indemnification of Shareholders
 
53
 
10.3.
 
Procedure
 
53
 
10.4.
 
Periodic Payments
 
55
 
10.5.
 
Right of Set Off
 
55
 
10.6.
 
Payment of Indemnification by Shareholders
 
55
 
10.7.
 
Insurance
 
56
 
10.8.
 
Survival of Indemnification Rights
 
56
       
ARTICLE XI     DISPUTE RESOLUTION
 
56
           
 
11.1.
 
Arbitration.
 
56
 
11.2.
 
Waiver of Jury Trial; Exemplary Damages
 
58
 
11.3.
 
Attorneys' Fees
 
58
       
ARTICLE XII     TERMINATION
 
58
           
 
12.1.
 
Termination Without Default
 
58
 
12.2.
 
Termination Upon Default.
 
58
 
12.3.
 
Survival
 
59
       
ARTICLE XIII     MISCELLANEOUS
 
59
           
 
13.1.
 
Notices
 
59
 
13.2.
 
Amendments; No Waivers.
 
60
 
13.3.
 
Ambiguities
 
60
 
13.4.
 
Publicity
 
60
 
13.5.
 
Expenses
 
60
 
13.6.
 
Successors and Assigns
 
61
 
13.7.
 
Governing Law
 
61
 
13.8.
 
Counterparts; Effectiveness
 
61
 
13.9.
 
Entire Agreement
 
61
 
13.10.
 
Severability
 
61
 
13.11.
 
Captions
 
61
 
13.12.
 
Construction.
 
61
 
13.13.
 
Shareholders’ Representative.
 
62

 
 
iii

 
 
 
AGREEMENT AND PLANS OF MERGERS, dated as of March 15, 2006 (this “Agreement”), made by and among Accoona Corp., a Delaware corporation (“Parent”), SN Acquisition Corp., a Delaware corporation and wholly owned subsidiary of Parent (“SN Merger Sub”), ZS Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of Parent (“ZS Merger Sub” and together with SN Merger Sub, “Merger Subs” and each individually a “Merger Sub”), Skynet Communications Corp., a New York corporation (“Skynet”), Zylonet Systems Inc., a New Jersey corporation (“Zylonet” and together with Skynet, the “Companies”, and each individually a “Company”), the persons listed on Schedule I hereto (each individually a “Shareholder” and collectively, the “Shareholders”) and Allen Benzaken (“Benzaken”), in his capacity as Representative (as hereinafter defined). Each of Parent, Merger Subs, the Companies and the Shareholders may be individually referred to herein as a “Party”, or collectively, the “Parties”.
 
ARTICLE I
 
DEFINITIONS
 
1.1. Definitions. The following terms, as used herein, have the following meanings:
 
  “Accounts Receivable” has the meaning set forth in Section 3.11.
 
  “Action” means any legal action, suit, investigation, hearing or proceeding, including any audit for taxes or otherwise.
 
  “Additional Agreements” means each of the Employment Agreements and Restrictive Covenants Agreements.
 
  “Adjusted Tangible Personal Property” means all Tangible Personal Property plus any cash and cash equivalents, including any marketable securities (equal to the closing price on the third business day prior to the Closing Date) (except for common stock of Dynamic Marketing, Inc.), prepaid expenses, deposits and accounts receivable (including credit card receivables but excluding any loans payable and net of a reserve for doubtful accounts of 1%).
 
  “Affiliate” means, with respect to any Person, any Person directly or indirectly controlling, controlled by, or under common control with such other Person. With respect to any natural person, the term Affiliate shall also include any member of said person's immediate family, any family limited partnership for said person and any trust, voting or otherwise, of which said person is a trustee or of which said person or any of said person's immediate family is a beneficiary. For avoidance of any doubt (i) with respect to all periods prior to the Closing, each Shareholder and Buyer's Edge is an Affiliate of the Companies, and (ii) with respect to all periods subsequent to the Closing, Parent is an Affiliate of the Companies.
 
  “Arbitrator” has the meaning set forth in Section 11.1.
 
  “Asset Purchase Agreement” means the Asset Purchase Agreement, dated as of the date hereof by an among, Parent, BE Acquisition Corp., Buyer's Edge and the Members.
 

 
  “Authority” shall mean any governmental, regulatory or administrative body, agency or authority, any court or judicial authority, any arbitrator, or any public, private or industry regulatory authority, whether international, national, Federal, state, or local.
 
  “Books and Records” means all books and records, ledgers, employee records, customer lists, files, correspondence, and other records of every kind (whether written, electronic, or otherwise embodied) owned or used by a Company or in which a Company's assets, business, or transactions are otherwise reflected.
 
  “Business” means all services engaged in by the Companies including, internet retail sales and related services.
 
  “Business Day” means any day other than a Saturday, Sunday or a legal holiday on which commercial banking institutions in New York are not open for business.
 
  “Buyers Edge” means Internet Media Group, LLC, a New York limited liability company.
 
  “Charter Documents” has the meaning set forth in Section 3.3.
 
  “Closings” has the meaning set forth in Section 2.2.
 
  “Closing Date” has the meaning set forth in Section 2.2.
 
  “Code” means the Internal Revenue Code of 1986, as amended.
 
  “Collection Period” has the meaning set forth in Section 2.5(a).
 
  “Companies” has the meaning set forth in the Preamble.
 
  “Company” has the meaning set forth in the Preamble.
 
  “Company Consents” has the meaning set forth in Section 3.9.
 
  “Contingent Payment” has the meaning set forth in Section 2.5(c).
 
  “Contingent Payment Period” has the meaning set forth in Section 2.3.
 
  “Contracts” means Real Property Leases and all the other contracts, agreements, leases (including equipment leases and capital leases), licenses, commitments, client contracts, sales and purchase orders and other instruments to which each respective Company is a party or by which any of any Company's assets are bound and all rights and benefits thereunder, including all rights and benefits thereunder with respect to all cash and other property of third parties under such Company's dominion or control.
 
  “Constituent Corporations” has the meaning set forth in Section 2.3(a).
 
2

 
  “EBITDA” means earnings with respect to any Person before interest income and expense, income Taxes (whether federal, state or local, and domestic or foreign), depreciation and amortization, and in each case shall be determined pursuant to GAAP on a consolidated basis (but after subtracting any minority interests) consistent with Parent's accounting practices; provided, that in making such determinations advertising costs shall be expensed as incurred and neither the proceeds from nor any dividends or refunds with respect to, nor any increases in the cash surrender value of, any life insurance policy under which such Person, or any subsidiary thereof, is the named beneficiary or otherwise entitled to recovery, shall be included as income, and the premium expense related to any such life insurance policy shall not be treated as an expense; provided further that the amount of earnings for the relevant period shall only be from the sale of electronic products and other goods through the Websites and telephone orders, and, in the case of Skynet, its retail store, amounts paid for services related to the foregoing, including for coverage for repairs or warranties, special handling charges, restocking fees, supplier rebates, spiffs and co-op and marketing funds from suppliers, payments for advertising received by such Person, net of all factoring charges and commissions, other rebates, discounts, refunds, credits, cancellations and similar items and shall not include: any amounts until the cash with respect thereto is received, or, in the case of checks or money orders, until such amounts have cleared (provided such cash is collected within, or within 30 days after the termination of, the applicable earnings period); reserves released by banks or credit card companies; commissions, fees or similar payments made by banks or credit card companies, whether for signing up customers or otherwise; cancellation fees; any sales until the expiration date for the return period has passed and no notice of return had been given (provided once such return period has passed without notice of return then the sale will be counted as of the date of the sale, rather than the date of the expiration of the return period); and sales tax and any other pass through items and shall be after subtracting all costs and expenses paid or payable by the Companies with respect to the transactions contemplated by this Agreement.
 
  “Effective Time” has the meaning set forth in Section 2.1.
 
  “Employment Agreements” has the meaning set forth in Section 8.2(1).
 
  “ERISA” means the Employment Retirement Income Security Act of 1974, as amended from time to time.
 
  “Exchange Act” means the Securities Exchange Act of 1934, as amended.
 
  “Excluded Persons” has the meaning set forth in Section 6.5.
 
  “Financial Statements” has the meaning set forth in Section 3.10.
 
  “GAAP” means U.S. generally accepted accounting principles.
 
  “GCL” means the General Corporation Law of the State of Delaware, as amended.
 
  “Holdback Amount” has the meaning set forth in Section 2.3(i).
 
3

 
  “Indebtedness” means with respect to any Person, (a) all obligations of such Person for borrowed money, or with respect to deposits or advances of any kind (including amounts by reason of overdrafts and amounts owed by reason of letter of credit reimbursement agreements) including with respect thereto, all interests, fees and costs, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person under conditional sale or other title retention agreements relating to property purchased by such Person, (d) all obligations of such Person issued or assumed as the deferred purchase price of property or services (other than accounts payable to creditors for goods and services incurred in the ordinary course of business), (e) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any lien or security interest on property owned or acquired by such Person, whether or not the obligations secured thereby have been assumed, (f) all obligations of such Person under leases required to be accounted for as capital leases under GAAP, and (g) all guarantees by such Person other than intercompany guarantees.
 
  “Indemnification Notice” has the meaning set forth in Section 10.3.
 
  “Indemnified Parties” has the meaning set forth in Section 10.3.
 
  “Indemnifying Party” has the meaning set forth in Section 10.3.
 
  “Initial Payment” is the aggregate of the consideration paid to the Shareholders, pursuant to Sections 2.5(a)(i) and (ii) and (b)(i) and (ii).
 
  “Initial Public Offering” means the registration of any class of Parent’s securities with the SEC under the Act or the Securities Exchange Act of 1934, as amended.
 
  “Intellectual Property Right” means any trademark, service mark, registration thereof or application for registration therefor, trade name, license, invention, patent, patent application, trade secret, trade dress, know-how, copyright, copyrightable materials, copyright registration, application for copyright registration, software programs, data bases, the “Skynet” or “Zylonet” name and all derivations thereof, u.r.l.s, and any other type of proprietary intellectual property right, and all embodiments and fixations thereof and related documentation, registrations and franchises and all additions, improvements and accessions thereto, in each case which is owned or licensed or filed by the respective Company or used or held for use in the Business, whether registered or unregistered or domestic or foreign.
 
  “Interim Balance Sheets” has the meaning set forth in Section 3.10.
 
  “Interim Parent Balance Sheet” has the meaning set forth in Section 4.8.
 
  “Labor Agreements” has the meaning set forth in Section 3.26(a).
 
  “Law” means any domestic or foreign Federal, state, municipality or local law, statute, ordinance, code, rule or regulation or common law.
 
  “Lien” means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, including any agreement to give any of the foregoing and any conditional sale and including any voting agreement or proxy.
 
  “Loss(es)” has the meaning set forth in Section 10.1.
 
4

 
  “Material Adverse Change” means a material adverse change in the business, assets, condition (financial or otherwise), liabilities, and results of operations or prospects of the Business individually or as a whole; provided, however, without prejudicing whether any other matter qualifies as a Material Adverse Change, any matter involving a loss or payment in excess of $200,000 shall constitute a Material Adverse Change, per se.
 
  “Material Adverse Effect” means a material adverse effect on the business, assets, condition (financial or otherwise), liabilities, results of operations or prospects of the Business individually or as a whole; provided, however, without prejudicing whether any other matter qualifies as a Material Adverse Effect, any matter involving a loss or payment in excess of $200,000 shall constitute a Material Adverse Effect, per se.
 
  “Members” means each of the holders of membership interests of Buyer's Edge.
 
  “Merger” has the meaning set forth in Section 2.3(a).
 
  “Merger Consideration” means the aggregate of the SN Merger Consideration and the ZS Merger Consideration.
 
  “Minimum Required EBITDA” means the cumulative EBITDA of the Companies plus Buyer's Edge, taken as a whole, for the period of October 1, 2005 through the Closing Date.
 
  “Net Profit” means, with respect to the Surviving Corporations, on a combined basis and after eliminating all intercompany transactions between them, and in each case determined pursuant to GAAP on a consolidated basis consistent with Parent's practice, revenues minus, without duplication, (i) all operating expenses, (ii) interest expense, fees and other charges on all borrowings, advances and intercompany balances, (iii) salaries, bonuses, amounts payable or to be contributed under all employee plans and other compensation and benefits, including commissions, finder's fees, referral fees and other incentive payments paid to employees and consultants, (iv) rent and other occupancy expenses and general administrative costs, (v) depreciation and amortization, (vi) Taxes (other than Taxes payable with respect to the net income of the Business whether federal, state or local, and domestic or foreign), (vii) charges for any services performed by Parent or any of its Affiliates, but only to the extent consented to by the Representative, (viii) any write-offs, writedowns, reserves and adjustments and (ix) minus all minority interests; provided, that in making such determinations the proceeds from any increases in the cash surrender value of, any life insurance policy under which the Surviving Corporations, or any subsidiary thereof, is the named beneficiary or otherwise entitled to recovery, shall be included as income, and the premium expense related to any such life insurance policy shall not be treated as an expense; provided, further, that the amount of earnings for the relevant period shall only be from the sale of electronic products and other goods through the Websites and telephone orders, payments for advertising received by the Surviving Corporations, and, in the case of SN Merger Sub, Skynet's retail store, amounts paid for any services related to the foregoing, including for coverage for repairs or warranties, special handling charges, restocking fees, supplier rebates, spiffs and co-op and marketing funds from suppliers, net of all factoring charges and commissions, other rebates, discounts, refunds, credits, cancellations and similar items and shall not include: any amounts until the cash with respect thereto is received, or, in the case of checks or money orders, until such amounts have cleared (provided such cash is collected within, or within 30 days after, the termination of, the applicable earnings period); reserves released by banks or credit card companies; commissions, fees or similar payments made by banks or credit card companies, whether for signing up customers or otherwise; cancellation fees; any sales until the expiration date for the return period has passed and no notice of return had been given (provided once such return period has passed without notice of return then the sale will be counted as of the date of the sale, rather than the date of the expiration of the return period); and sales tax and any other pass through items and shall be after subtracting all costs and expenses paid or payable by the Companies with respect to the transactions contemplated by this Agreement; it being understood that no accounts receivable as of the Closing Date (including the payment thereof) are taken into account in calculating Net Profit.
 
5

 
  “Orders” means any decree, order, judgment, writ, award, injunction, rule or consent of or by an Authority.
 
  “Outside Closing Date” has the meaning set forth in Section 12.1.
 
  “Parent Class C Common Stock” means the Class C Common Stock, $.0001 par value per share, of Parent.
 
  “Parent Consents” means the consents, waivers and amendments to be obtained by Parent and its Affiliates with respect to the execution, delivery and performance by Parent and its Affiliates of this Agreement and all related matters between Parent and its Affiliates and the Shareholders.
 
  “Parent Financial Statements” has the meaning set forth in Section 4.8.
 
  “Permits” has the meaning set forth in Section 3.20.
 
  “Person” means an individual, a corporation, a partnership, a limited liability company, an association, a trust or other entity or organization, including a government, domestic or foreign, or political subdivision thereof, the Companies or an agency or instrumentality thereof.
 
  “Purchaser Indemnitees” has the meaning set forth in Section 10.1.
 
  “Publicly Traded” has the meaning set forth in Section 6.6(f).
 
  “Real Property” means, collectively, all real properties and interests therein (including the right to use), together with all buildings, fixtures, trade fixtures, plant and other improvements located thereon or attached thereto; all rights arising out of use thereof (including air, water, oil and mineral rights); and all subleases, franchises, licenses, permits, easements and rights-of-way which are appurtenant thereto.
 
  “Real Property Leases” means the leases with respect to each Company's office, retail and warehouse space at 481/485 Kings Highway, Brooklyn, New York 11223, 1530 MacDonald Avenue, Brooklyn, New York and 1907 Highway 35, Oakhurst, New Jersey 07750, together with all fixtures and improvements erected on the premises leased thereby.
 
6

 
  “Receiving Persons” has the meaning set forth in Section 6.6(f)(ii).
 
  “Representative” means Benzaken, as appointed pursuant to Section 13.13., by the Shareholders as their true and lawful agent and attorney-in-fact.
 
  “Restrictive Covenants” has the meaning set forth in Section 6.7.
 
  “Restrictive Covenants Agreements” has the meaning set forth in Section 8.1(k).
 
  “Rights Shares” has the meaning set forth in Section 6.6(f)(ii).
 
  “SEC” means the Securities and Exchange Commission.
 
  “Securities Act” means the Securities Act of 1933, as amended.
 
  “Shares” means the issued and outstanding shares of capital stock of the Companies.
 
  “Shareholder” and “Shareholders” have the respective meanings set forth in the Preamble.
 
  “Shareholder Indemnitees” has the meaning set forth in Section 10.2.
 
  “Skynet Common Stock” has the meaning set forth in Section 2.5(a).
 
  “Skynet Share” means seventy-five percent (75%).
 
  “SN Merger” has the meaning set forth in Section 2.3(a).
 
  “SN Merger Consideration” has the meaning set forth in Section 2.4(a)(i).
 
  “Stock Certificate” has the meaning set forth in Section 2.3(a).
 
  “Surviving Corporation” has the meaning set forth in Section 2.3(a).
 
  “Tangible Personal Property” shall mean all tangible assets owned by either Company, including inventories, machinery, equipment, trucks, automobiles, furniture, supplies, spare parts, computers, hardware, tools, stores and other tangible personal property or interest therein (including the right to use), other than the Books and Records.
 
  “Tax(es)” means any federal, state, local or foreign tax, charge, fee, levy, deficiency, or other assessment of any kind or nature imposed by any governmental authority (including without limitation any income (net or gross), alternative minimum, gross receipts, profits, sales, use, ad valorem, franchise, license, withholding, employment, social security, workers compensation, unemployment compensation, transfer, excise, import, real property, personal property, intangible property, occupancy, recording, minimum, environmental or estimated tax), including any liability therefor as a transferee (including without limitation under Section 6901 of the Code or similar provision of applicable law), as a result of Treasury Regulation Section 1.1502-6 or similar provision of applicable law or as a result of any Tax sharing indemnification or similar agreement, together with any interest, penalty and additions to tax imposed with respect thereto.
 
7

 
  “Tax Return” means any return, declaration, information return, claim for refund or credit, report or any similar statement, and any amendment thereto, including any attached schedule and supporting information filed or required to be filed with any governmental authority in connection with the determination, assessment, collection or payment of a Tax or the administration of any law, rule or regulation relating to any Tax.
 
  “Third Party Claim” has the meaning set forth in Section 10.3.
 
  “UCC” shall mean the Uniform Commercial Code of the State of New York, or any corresponding or succeeding provisions of Laws of the State of New York, or any corresponding or succeeding provisions of Laws, in each case as the same may have been and hereafter may be adopted, supplemented, modified, amended, restated or replaced from time to time.
 
  “Underlying Parent Stock” means the Common Stock, $.0001 par value per share, of Parent issued or issuable upon conversion of Parent Class C Common Stock.
 
  “Website(s)” shall mean all of the internet domain names for the Companies set forth on Schedule 3.7.
 
  “ZS Merger” has the meaning set forth in Section 2.3(a).
 
  “ZS Merger Consideration” has the meaning set forth in Section 2.4(b)(i).
 
  “Zylonet Common Stock” has the meaning set forth in Section 2.5(b).
 
  “Zylonet Share” means twenty-five percent (25%).
 
ARTICLE II
 
THE CLOSINGS
 
2.1. Effective Time of the Mergers. Subject to the provisions of this Agreement, as early as practicable on the Closing Date and assuming that all conditions precedent to the obligations of each of the Parties to comply with the provisions of this Section 2.1 have been met, and immediately following delivery of the documents referred to in Article VIII, Parent shall (i) cause the SN Certificate of Merger in the form attached hereto as Exhibit 2.1-A to be submitted to the New York Secretary of State in accordance with the provisions of Article 9 of the New York Business Corporation Law and to the Delaware Secretary of State in accordance with the provisions of Section 252 of the GCL, and (ii) cause the ZN Certificate of Merger in the form attached hereto as Exhibit 2.1-B to be submitted to the New Jersey Secretary of State in accordance with the provisions of Section 14A of the New Jersey Business Corporation Act and to the Delaware Secretary of State in accordance with Section 252 of the GCL, and the Mergers shall become effective (the “Effective Time”) upon the last to occur of such filings. For accounting purposes the Parties agree to treat the transactions as effective as of 12:01 a.m. on __________, 2006. 
 
8

 
2.2. Closings  The closings of the transactions contemplated by this Agreement (the “Closings”) shall take place at the offices of Parent in New Jersey, commencing at 10:00 a.m. local time on the day following the date on which all the conditions set forth in Article VIII have been satisfied or waived (other than conditions with respect to actions the respective Parties will take at the Closings itself) or such other date as the Parties may mutually determine and on which the Closings actually occur (the “Closing Date”); provided, however that the Closings shall not take place subsequent to the Outside Closing Date.
 
2.3. Effects of the Mergers. 
 
(a) At the Effective Time, (i) the separate existence of the Companies will cease and Skynet will be merged with and into SN Merger Sub with SN Merger Sub being the survivor (the “SN Merger”) and Zylonet will be merged with and into ZS Merger Sub with ZS Merger Sub being the survivor (the “ZS Merger”) (the Merger Subs and the Companies are sometimes referred to herein as the “Constituent Corporations”; with respect to periods after the Effective Time, each Merger Sub is sometimes referred to herein as the “Surviving Corporation”; and each such merger is referred to individually herein as the “Merger” and collectively as the “Mergers”); (ii) the Certificate of Incorporation of each Merger Sub in effect immediately prior to the Effective Time shall be the Certificate of Incorporation of that Surviving Corporation, provided, however, that the name of the Surviving Corporation in the SN Merger shall be changed to SN Commerce Corp. upon the filings of the SN Certificate of Merger and the name of the Surviving Corporation in the ZS Merger shall be changed to ZS Commerce Corp. upon the filings of the ZS Certificate of Merger; and (iii) the By-laws of each Merger Sub as in effect immediately prior to the Effective Time shall be the By-laws of the applicable Surviving Corporation, except that they shall each automatically be amended to reflect said new name of the Surviving Corporation.
 
(b) At and after the Effective Time, title to all property owned by the applicable Constituent Corporations shall vest in the applicable Surviving Corporation without reversion or impairment, and the applicable Surviving Corporation shall automatically have all of the liabilities of the applicable Constituent Corporations
 
(i) Immediately after the Effective Time, the members of the Board of Directors of each Surviving Corporation shall be the same as immediately prior to the Effective Time; provided, that immediately after the Effective Time, Benzaken shall be appointed to the Board of Directors of each Surviving Corporation.
 
(c) Immediately after the Effective Time, the Board of Directors of each Surviving Corporation shall name the following persons as officers of each Surviving Corporation, provided however, subject only to the Employment Agreements, neither Parent nor either Surviving Corporation is under any obligation to maintain any person in any such position:
 
(i) Benzaken - President and Chief Operating Officer;
 
(ii) Such other persons as the Board of Directors of the Merger Subs or the Surviving Corporations shall designate.
 
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(d) For federal income tax purposes it is intended that each Merger qualify separately as a reorganization within the meaning of Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code and that this Agreement constitutes with respect to each Merger a separate plan of reorganization for such purposes. The Parties acknowledge and agree that the fair market value of a share of the Parent Class C Common Stock as of the date hereof and the Closing Date is $3.50 and shall report it as such for all purposes with respect to the transactions contemplated hereby, including for tax purposes. Each of the parties shall treat each Merger consistently with the foregoing, including filing the information and maintaining the records required by Treasury Regulations  1.368-3, and shall not take any position inconsistent therewith.
 
2.4. Effect on Capital Stock. 
 
(a) As of the Effective Time, by virtue of the SN Merger and without any action on the part of the holder of any shares of Skynet Common Stock or capital stock of SN Merger Sub: 
 
(i) Capital Stock of Skynet. Each issued and outstanding share of Skynet Common Stock shall be converted into the right to receive (i) the Initial Consideration, and (ii) the Contingent Payment, if applicable, as shall be determined pursuant to Section 2.5(a) (the “SN Merger Consideration”). All such Skynet Common Stock shall be cancelled, and each holder of a certificate representing any such Skynet Common Stock shall thereafter cease to have any rights with respect to such Skynet Common Stock except the right to receive the SN Merger Consideration pursuant to the terms hereof. Any shares of Skynet Common Stock held as treasury shares shall be canceled and not be converted into the right to receive any consideration.
 
(ii) Capital Stock of SN Merger Sub. Each issued and outstanding share of the capital stock of SN Merger Sub shall remain outstanding.
 
(b) As of the Effective Time, by virtue of the ZS Merger and without any action on the part of the holder of any shares of Zylonet Common Stock or capital stock of ZS Merger Sub:
 
(i) Capital Stock of Zylonet. Each issued and outstanding share of Zylonet Common Stock shall be converted into the right to receive (i) the Initial Consideration, and (ii) the Contingent Payment, if applicable, as shall be determined pursuant to Section 2.5(b) (the “ZS Merger Consideration”). All Zylonet Common Stock shall be cancelled, and each holder of a certificate representing any Zylonet Common Stock shall thereafter cease to have any rights with respect to such Zylonet Common Stock except the right to receive the ZS Merger Consideration pursuant to the terms hereof. Any shares of Zylonet Common Stock held as treasury shares shall be canceled and not be converted into the right to receive any consideration.
 
(ii) Capital Stock of ZS Merger Sub. Each issued and outstanding share of the capital stock of ZS Merger Sub shall remain outstanding.
 
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2.5. Computation of Merger Consideration.
 
(a) Conversion of Skynet Common Stock. At the Effective Time, each share of the common stock of Skynet, no par value (the “Skynet Common Stock”), outstanding immediately before the Effective Time, by virtue of the SN Merger and without any further action on the part of the holders thereof, shall be converted into the right to receive:
 
(i) An amount in cash equal to the Skynet Share multiplied by $2,000,000 and such product divided by the number of shares of Skynet Common Stock outstanding immediately before the Effective Time;
 
(ii) A number of shares of Parent Class C Common Stock equal to the Skynet Share multiplied by 2,285,712 and such product divided by the number of shares of Skynet Common Stock outstanding immediately before the Effective Time; and
 
(iii) Such portion of both of the cash and Parent Class C Common Stock constituting the Contingent Payment, when and if payable, in accordance with Section 2.5(c) as equals in each case such amount of cash and such number of shares of Parent Class C Common Stock multiplied by the Skynet Share and each such products divided by the number of shares of Skynet Common Stock outstanding immediately before the Effective Time.
 
(b) Conversion of Zylonet Common Stock. At the Effective Time, each share of the common stock of Zylonet, no par value (the “Zylonet Common Stock”), outstanding immediately before the Effective Time, by virtue of the ZS Merger and without any further action on the part of the holders thereof, shall be converted into the right to receive:
 
(i) An amount in cash equal to the Zylonet Share multiplied by $2,000,000 and such product divided by the number of shares of Zylonet Common Stock outstanding immediately before the Effective Time;
 
(ii) A number of shares of Parent Class C Common Stock equal to the Zylonet Share multiplied by 2,285,712 and such product divided by the number of shares of Zylonet Common Stock outstanding immediately before the Effective Time; and
 
(iii) Such portion of both of the cash and Parent Class C Common Stock constituting the Contingent Payment, when and if payable, in accordance with Section 2.5(c) as equals in each case such amount of cash and such number of shares of Parent Class C Common Stock multiplied by the Zylonet Share and each such products divided by the number of shares of Zylonet Common Stock outstanding immediately before the Effective Time.
 
(c) Contingent Payment.
 
(i) Subject to the remaining provisions of this Section 2.5, if the Surviving Corporations achieve aggregate Net Profits:
 
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(A) of exactly $1,500,000 for the twelve-month period beginning on the first day of the month immediately following the Closing Date (except if the Closing Date is the first day of the month, in which case, the Closing Date), the Shareholders shall be entitled to receive in the aggregate with respect to the shares of Skynet Common Stock and Zylonet Common Stock held immediately prior to the Effective Time: (1) $1,000,000 in additional cash plus (2) an additional 285,714 shares of Parent Class C Common Stock, such amount to be allocated between the two Mergers and payable per share of Skynet Common Stock and Zylonet Common Stock as set forth in Sections 2.5(a)(iii) and 2.5(b)(iii), respectively; or
 
(B) greater than $1,500,000 but less than $2,400,000 for the twelve-month period beginning on the first day of the month immediately following the Closing Date (except if the Closing Date is the first day of the month, in which case the Closing Date), the Shareholders shall be entitled to receive in the aggregate with respect to the shares of Skynet Common Stock and Zylonet Common Stock held immediately prior to the Effective Time: (1) (x) $1,000,000, plus (y) $1,000,000 multiplied by the quotient of (I) such aggregate Net Profits less $1,500,000 divided by (II) $900,000 plus (2) (x) an additional 285,714 shares of Parent Class C Common Stock, plus (y) such number of shares of Parent Class C Common Stock as equals 285,714 multiplied by the quotient of (I) such aggregate Net Profits less $1,500,000 divided by (II) $900,000, such amount to be allocated between the two Mergers and payable per share of Skynet Common Stock and Zylonet Common Stock as set forth in Sections 2.5(a)(iii) and 2.5(b)(iii), respectively; or
 
(C) of at least $2,400,000 for the twelve-month period beginning with the first day of the month immediately following the Closing Date (except if the Closing Date is the first day of the month, in which case the Closing Date), the Shareholders shall be entitled to receive in the aggregate with respect to the shares of Skynet Common Stock and Zylonet Common Stock held immediately prior to the Effective Time: (1) $2,000,000 in additional cash plus (2) an additional 571,428 shares of Parent Class C Common Stock, such amount to be allocated between the two Mergers and payable per share of Skynet Common Stock and Zylonet Common Stock as set forth in Sections 2.5(a)(iii) and 2.5(b)(iii), respectively; provided, that, if the Surviving Corporations achieve aggregate Net Profits of less than $1,500,000 for the twelve-month period beginning on the first day of the month immediately following the Closing Date, the Shareholders shall not be entitled to receive any further payments as part of the Merger Consideration;
 
(ii) The payment described in this Section 2.5(c) is referred to herein as the “Contingent Payment.” The period for which performance for the Contingent Payment is made is referred to as the “Contingent Payment Period”. The Contingent Payment shall be paid by April 15, 2007.
 
(d) All payments due to each Shareholder hereunder for the cash portion of the Merger Consideration, shall be payable in United States Dollars and shall be delivered by wire transfer of immediately available funds to an account of such Shareholder in New York City as shall have been designated in writing by such Shareholder to Parent at least two Business Days prior to the scheduled payment date therefor. The stock portion of the Merger Consideration shall be evidenced by certificates registered in the names of the Shareholders and dated the issuance date. No interest shall accrue on or be payable with respect to the Contingent Payment. All Contingent Payments are made subject to confirmation based on Parent's subsequent review of the financials for the applicable payment period.
 
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(e) No Fractional Shares. No certificates or scrip representing fractional shares of Parent Class C Common Stock will be issued, and such fractional share interests will not entitle the owner thereof to vote or to any rights of a stockholder of Parent. Any fractional shares will be rounded to the nearest whole share.
 
(f) Parent Class C Common Stock Transfer Restrictions; Registration. Any Parent Class C Common Stock distributed as Merger Consideration shall be subject to the restrictions contained in Sections 3.30(v) and (w).
 
(g) All cash payments as part of the Merger Consideration will be rounded to the nearest whole dollar.
 
(h) (i) In the event that Parent waives its conditions to Closing set forth in Section 8.2(o) and (p) herein, then, notwithstanding such waiver, to the extent that as of the Closing the Companies and Buyer's Edge, taken as a whole, have Indebtedness or the Companies' and Buyer's Edges' aggregate Adjusted Tangible Personal Property, taken as a whole, do not exceed their aggregate liabilities by at least the Minimum Required EBITDA, the Shareholders jointly and severally shall pay to Parent within five (5) Business Days of the notification of the calculation an aggregate amount in cash equal to such Indebtedness or the shortfall against the Minimum Required EBITDA; provided, however, Parent, may at its option, subject to Section 2.3(h)(ii), reduce the amount of the Merger Consideration by the amount equal to such Indebtedness and/or such shortfall (such reduction to be applied first to the Initial Payment and then to the Contingent Payment and, in each case, first to the cash portion hereof and in proportion between the SN Merger Consideration and the ZS Merger Consideration in proportion to the Skynet Share and the Zylonet Share).
 
(ii) The initial determination of whether any payment or withholding is due under Section 2.3(h) or (i) shall be made by Parent in good faith and, subject to Section 2.6, absent manifest error, shall be binding and conclusive on all parties hereto.
 
(i) Holdback. Notwithstanding anything to the contrary and subject to the conditions set forth below and in any event subject to Article X, Parent shall hold in escrow 100,000 shares of Parent Class C Common Stock (together with any dividends or other distributions with respect thereto, the “Holdback Amount”) of the Merger Consideration (allocated among the Shareholders on a pro rata basis based upon their percentage interests in the Companies) and shall issue but not deliver the same to the Shareholders at Closing. The Shareholders shall deliver at Closing duly endorsed stock powers to Parent for such Holdback Amount. For the purposes of determining the release and payment, if any, of any portion of the Holdback Amount to the Shareholders the following shall apply:
 
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(i) Fifty percent (50%) of the Holdback Amount not retained to satisfy any Companies' or any Shareholders' obligations pursuant to Section 10.1 hereof shall be delivered to the Shareholders on January 2, 2008 unless prior to such time a Purchaser Indemnitee has delivered an Indemnification Notice pursuant to Section 10.3 below.
 
(ii) Any remaining balance of the Holdback Amount shall be delivered to the Shareholders on January 2, 2009 unless prior to such time a Purchaser Indemnitee has delivered an Indemnification Notice pursuant to Section 10.3.
 
(iii) In the event any Holdback Amount remains in escrow after January 2, 2009 due to the delivery of an Indemnification Notice prior to such time, any such remaining balance of the Holdback Amount, less any shares retained to satisfy any Companies' or any Shareholders' obligations pursuant to Section 10.1 hereof, shall be delivered to the Shareholders upon the final resolution and satisfaction of any such Losses (as such term is defined in Section 10.1).
 
2.6. Procedure to Establish Net Profits, Indebtedness, Adjusted Tangible Personal Property and Minimum Required EBITDA.  
 
(a) Within 90 days after the end of the Contingent Payment Period, Parent will notify the Representative of the amount of Net Profits for such period, confirmed by the regular independent public accountants of Parent, as calculated in accordance with this Agreement. The Representative shall have the right, at its sole expense, to cause the relevant portions of the books and records of the Surviving Corporations for such fiscal period to be reviewed by one independent certified public accounting firm of its choosing to verify or dispute the Net Profits amount set forth in the Parent notice. The Representative must dispute the Net Profits calculation within fifteen (15) days of receiving such calculation from Parent. If such calculation is not disputed within such period, the Representative will be deemed to have accepted the calculation. If by the 120th day after the end of such fiscal period the accountants for Parent and for the Representative are unable to agree upon a Net Profits calculation, the accountants for Parent and the Representative shall provide their calculation of Net Profits to a third-party accountant mutually agreed upon by the accountants for Parent and the Representative who shall make a determination as to the amount of Net Profits, which determination shall be final and binding on all parties. The expenses for such accountant shall be paid for by the party whose calculation of Net Profits was most different from the calculation of such third-party accountants, as determined by such third-party accountant in its reasonable discretion.
 
(b) With respect to Net Profits, if any Contingent Payment is received by the Shareholders, but Parent's accountants determine, based on a review of the Surviving Corporation's books and records, that the Shareholders were not entitled to have received such payment, Parent shall give notice to the Representative of such determination by Parent's accountants, which will include the related calculations on which such determination was based and a demand for the return of the Contingent Payment. The Representative shall have the right, at its sole expense, to cause the relevant portions of the books and records of Surviving Corporations for such fiscal period to be reviewed by one independent certified public accounting firm of its choosing to verify or dispute whether or not the Shareholders were entitled to receive the Contingent Payment. The Representative must dispute the Net Profits calculation within fifteen (15) Business Days of receiving such calculation from Parent. If such calculation is not disputed within such period, the Representative will be deemed to have accepted the calculation as of the end of such period. If by the 30th day after the Representative has received notice of the determination by Parent's accountants, the accountants for Parent and for the Representative are unable to agree upon the correct calculation, the accountants for Parent and the Representative shall provide their calculation of Net Profits to a third-party accountant mutually agreed upon by the accountants for Parent and the Representative, who shall make a determination as to the amount of Net Profits, which determination shall be final and binding on all parties. The expenses for such accountant shall be paid for by the party whose calculation of Net Profits was most different from the calculation of such third-party accountants, as determined by such third-party accountant in its reasonable discretion. The Shareholders shall repay and return the Contingent Payment to Parent in the form in which it was received within ten (10) Business Days of the date that the Representative accepted the calculation of the Surviving Corporations' accountants or the date on which it has been finally determined that the Shareholders were not entitled to the Contingent Payment. Each of the Shareholders and the Representative will be jointly and severally liable for any repayment to be made pursuant to this Section 2.6(b).
 
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(c) Any adjustments to the Merger Consideration in connection with Section 2.3(h) shall adhere to the procedures set forth in Section 2.6 (a) and (b) for the purposes of determining Indebtedness, Adjusted Tangible Personal Property and Minimum Required EBITDA. In accordance with Section 2.3(h), Parent will notify the Representative of the amount of Indebtedness and/or shortfall of Adjusted Tangible Personal Property by which the Merger Consideration has been reduced, confirmed by the regular independent public accountants of Parent, as calculated in accordance with this Agreement. The Representative shall have the right, at its sole expense, to cause the relevant portions of the books and records of the Surviving Corporations for the relevant fiscal period to be reviewed by one independent certified public accounting firm of its choosing to verify or dispute the Indebtedness and/or Adjusted Tangible Personal Property and/or Minimum Required EBITDA amounts set forth in the Parent notice. The Representative must dispute the Indebtedness and/or Adjusted Tangible Personal Property and/or Minimum Required EBITDA calculation within fifteen (15) days of receiving such calculation from Parent. If such calculation is not disputed within such period, the Representative will be deemed to have accepted the calculation. If by the 90th day after Closing the accountants for Parent and for the Representative are unable to agree upon a Indebtedness and/or Adjusted Tangible Personal Property and/or Minimum Required EBITDA calculation, the accountants for Parent and the Representative shall provide their calculation of Indebtedness and/or Adjusted Tangible Personal Property and/or Minimum Required EBITDA to a third-party accountant mutually agreed upon by the accountants for Parent and the Representative who shall make a determination as to the amount of Indebtedness and/or Adjusted Tangible Personal Property and/or Minimum Required EBITDA, which determination shall be final and binding on all parties. The expenses for such accountant shall be paid for by the party whose calculation of Indebtedness and/or Tangible Personal Property and/or Minimum Required EBITDA was most different from the calculation of such third-party accountants, as determined by such third-party accountant in its reasonable discretion. To the extent the downward adjustment of Merger Consideration, due to such Indebtedness and/or the shortfall against the Minimum Required EBITDA, has been deemed to exceed the determination of the accountant as set forth in this Section 2.6(c), Parent shall pay to Shareholders an amount equal to such excess by wire transfer of immediately available funds as soon as commercially practicable and the Merger Consideration shall be adjusted accordingly to reflect such determination of the accountant. In connection with the calculations set forth in this Section 2.6, the Members shall make available, or shall cause Buyer's Edge to make available, the Books and Records (as such term applies to Buyer's Edge) of Buyer's Edge for the purposes of calculating Indebtedness, Adjusted Tangible Personal Property and/or Minimum Required EBITDA.
 
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ARTICLE III
 
REPRESENTATIONS AND WARRANTIES OF
THE COMPANIES AND THE SHAREHOLDERS
 
The Companies and the Shareholders, jointly and severally, hereby represent and warrant to Parent and Merger Subs that:
 
3.1. Corporate Existence and Power. Each of Skynet and Zylonet is a corporation duly organized, validly existing and in good standing under and by virtue of the Laws of the State of New York and New Jersey, respectively, and has all power and authority, corporate and otherwise, and all governmental licenses, franchises, permits, authorizations, consents and approvals required to own and operate its properties and assets and to carry on its business as now conducted and as proposed to be conducted. None of the Companies is qualified to do business as a foreign corporation in any jurisdiction, except as set forth on Schedule 3.1, and there is no jurisdiction in which the character of the property owned or leased by any Company or the nature of its activities make qualification of such Company in any such jurisdiction necessary and in which such Company is not so qualified. The only office, warehouse or business location of Skynet is located at 481/485 Kings Highway, Brooklyn, New York 11223 and 1530 MacDonald Avenue, Brooklyn, New York; and the only office or business location of Zylonet is located at 1907 Highway 35, Oakhurst, New Jersey 07755 (collectively, the “Office”). Neither of the Companies has taken any action, adopted any plan, or made any agreement in respect of any merger, consolidation, sale of all or substantially all of its respective assets, reorganization, recapitalization, dissolution or liquidation. 
 
3.2. Corporate Authorization. 
 
(a) The execution, delivery and performance by each of the Companies of this Agreement and each of the other Additional Agreements to which such Company is named as a party and the consummation by each of the Companies of the transactions contemplated hereby and thereby are within the corporate powers of each of the Companies and have been duly authorized by all necessary action on the part of each Company, including, without limitation, the unanimous approval of the Shareholders. This Agreement constitutes, and, upon their execution and delivery, each of the Additional Agreements will constitute, a valid and legally binding agreement of each Company, enforceable against each Company in accordance with their respective terms.
 
(b) Each Shareholder has full legal capacity, power and authority to execute and deliver this Agreement and the Additional Agreements to which such Shareholder is named as a party, to perform such Shareholder's obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. This Agreement and the Additional Agreements to which each Shareholder is named as a party have been, or at Closing will be, duly executed and delivered by each Shareholder and are, or upon their execution and delivery will be, valid and legally binding obligations of each Shareholder, enforceable against each Shareholder in accordance with their respective terms.
 
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3.3. Charter Documents; Legality. Each Company has previously delivered to Parent true and complete copies of its Articles of Incorporation and By-laws, minute books and stock books (the “Charter Documents”), as in effect or constituted on the date hereof. The execution, delivery, and performance by each Company and each Shareholder of this Agreement and any Additional Agreement to which such Company or such Shareholder is to be a party has not violated and will not violate, and the consummation by such Company or the Shareholders of the transactions contemplated hereby or thereby will not violate, any of the Charter Documents or any Law. 
 
3.4. Capitalization and Ownership of the Companies. Schedule 3.4 sets forth, with respect to each Company, (i) such Company's authorized capital stock, (ii) the number of shares of such Company's stock that are outstanding, (iii) each shareholder of such Company's stock and the number of shares of such stock owned by such shareholder, and (iv) each security convertible into or exercisable or exchangeable for such Company's stock, the number of shares of stock such security is convertible into, the exercise or conversion price of such security and the holder of such security. No person other than the Shareholders owns any securities of any of the Companies. None of the Companies' Charter Documents authorizes a class of preferred stock having preference over any other class of stock. Each Shareholder owns the Shares set forth in Schedule 3.4, free and clear of any Lien. There is no Contract (other than this Agreement) that requires or under any circumstance would require (a) any Company to issue, or grant any right to acquire, any capital stock of such Company, or any security or instrument exercisable or exchangeable for or convertible into, the capital stock or membership interest of any Company or to merge, consolidate, dissolve, liquidate, restructure, or recapitalize any Company or (b) any holder of the capital stock of any Company to transfer or grant any rights with respect to any capital stock of such Company. The issuance of all the outstanding capital stock of each Company has been duly authorized, and all such capital stock is validly issued, fully paid and nonassessable.
 
3.5. Subsidiaries. None of the Companies owns, and since their formation none of the Companies has owned, directly or indirectly, securities or other ownership interests in any other entity, other than in the case of Skynet, securities which are and have been held in Skynet's account with U.S. Securities International Corp. and one share of common stock in Dynamic Marketing, Inc. None of the Companies is a party to any agreement relating to the formation of any joint venture, association or other entity.
 
3.6. Affiliates. Other than the Shareholders, none of the Companies is controlled by any Person and none of the Companies is in control of any other Person. Except as set forth in Schedule 3.6, none of the Shareholders (x) engages in any business, except through the Companies or Buyer's Edge, or is an employee of or provides any service for compensation to, any other business concern or (y) owns any equity security of any business concern, except for publicly traded securities. Schedule 3.6 lists each Contract, arrangement, or understanding to which at least one of the Companies and any Shareholder or any Affiliate of any Shareholder is a party. Except as disclosed in Schedule 3.6, none of the Shareholders or any Affiliate of the Shareholders (i) own, directly or indirectly, in whole or in part, any tangible or intangible property (including Intellectual Property Rights) that any Company uses or the use of which is necessary for the conduct of any of the Companies' business, or (ii) have engaged in any transaction with any of the Companies.
 
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3.7. Assumed Names. Schedule 3.7 is a complete and correct list of all assumed or “doing business as” names currently or formerly used by each of the Companies, indicating which respective Company uses or used such name, including names on any Websites other than the name “LizMadison.com,” which name Skynet has agreed to cease using. No Company has used any name other than the names listed on Schedule 3.7 to conduct its business. The Companies have filed appropriate “doing business as” certificates in all applicable jurisdictions.
 
3.8. Governmental Authorization. None of the execution, delivery or performance by any Company or any Shareholder of this Agreement or any Additional Agreement requires any consent, approval, license or other action by or in respect of, or registration, declaration or filing with, any Authority other than the filing of the certificates of merger.
 
3.9. Consents. The Contracts listed on Schedule 3.9 are the only agreements, commitments, arrangements, contracts or other instruments binding upon any Company or any of their respective properties or any Shareholder requiring a consent, approval, authorization, order or other action of or filing with any Person as a result of the execution, delivery and performance of this Agreement or any of the Additional Agreements or the Asset Purchase Agreement or the consummation of the transactions contemplated hereby or thereby (each of the foregoing, a “Company Consent”). The Company's have heretofore delivered to Parent, true, correct and complete copies of each Contract requiring a Company Consent.
 
3.10. Financial Statements
 
(a) Attached hereto as Schedule 3.10 are an unaudited balance sheet of each of the Companies as of September 30, 2005 and the unaudited balance sheets of the Companies as of December 31, 2005 and December 31, 2004 and of Skynet as of December 31, 2003, and statements of operations and retained earnings and cash flow (only for period ended December 31, 2005) of each of the Companies for the nine months ended September 30, 2005 and the years ended December 31, 2005 and December 31, 2004 and of Skynet as of December 31, 2003 (collectively, the “Financial Statements”). The balance sheets contained in the Financial Statements as of the nine months ended September 30, 2005 are referred to herein as the “Interim Balance Sheets”. The Financial Statements (i) were prepared from the books and records of each Company, as applicable; (ii) were prepared in accordance with GAAP consistently applied, subject in the case of the September 30, 2005 financial statements to normal year end adjustments; (iii) fairly and accurately present each Company's financial condition and the results of its operations as of their respective dates and for the periods then ended; (iv) contain and reflect all necessary adjustments and accruals for a fair presentation of each Company's financial condition as of their dates; and (v) contain and reflect adequate provisions for all reasonably anticipated liabilities for all material income, property, sales, payroll or other Taxes applicable to each Company with respect to the periods then ended. Notwithstanding Schedule 3.10, the profits of the Companies are accurate when the profits of the Companies over the periods covered by all of the Financial Statements are aggregated. Each Company has heretofore delivered to Parent complete and accurate copies of all “management letters” received by it from such Company's accountants and all responses during the last three years by lawyers engaged by any Company to inquiries from such Company's accountant or any predecessor accountants.
 
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(b) Schedule 3.10(b) sets forth for each of the Companies the first nine months of 2005, for calendar year 2005 and for calendar year 2004 the amount of revenues derived from sales of products and services from the Websites (on a per Website basis), advertising revenues from the Websites (on a per Website basis) and in the case of Skynet, revenues from the retail store.
 
(c) Except as specifically disclosed, reflected or fully reserved against on the Interim Balance Sheets and for liabilities and obligations of a similar nature and in similar amounts incurred in the ordinary course of business since the date of the Interim Balance Sheets, there are no liabilities, debts or obligations of any nature (whether accrued, absolute, contingent, liquidated or unliquidated, unasserted or otherwise) relating to any Company. All debts and liabilities, fixed or contingent, which should be included under GAAP on an accrual basis on the Interim Balance Sheets are included therein.
 
(d) The Interim Balance Sheet of each Company accurately reflects the outstanding Indebtedness of each such Company as of the date thereof. Except as set forth on Schedule 3.10, none of the Companies has any Indebtedness.
 
(e) All accounts, books and ledgers of each Company have been properly and accurately kept and completed in all material respects, and there are no material inaccuracies or discrepancies of any kind contained or reflected therein. None of the Companies has any of its records, systems controls, data or information recorded, stored, maintained, operated or otherwise wholly or partly dependent on or held by any means (including any mechanical, electronic or photographic process, whether computerized or not) which (including all means of access thereto and therefrom) is not under the exclusive ownership (excluding licensed software programs) and direct control of the Companies and which is not located at the Office.
 
(f) Attached hereto as Schedule 3.10(f) is a true, correct and complete schedule setting forth the amounts paid by each of the Companies for direct-response advertising for each of the periods covered by the Financial Statements.
 
(g) All financial projections delivered by or on behalf of the Companies or the Shareholders to Parent were prepared in good faith using assumptions that the Shareholders believe to be reasonable and neither either of the Companies nor any Shareholder is aware of the existence of any fact or occurrence of any circumstance that is reasonably likely to have an adverse impact on said projections.
 
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3.11. Accounts Receivable. Schedule 3.11 sets forth as of a date within three (3) days of the date hereof all accounts, notes and other receivables, whether or not accrued, and whether or not billed, of each Company, in accordance with GAAP (“Accounts Receivable”). Except as set forth in Schedule 3.11, all Accounts Receivable represent bona fide sales of inventory of each Company in the ordinary course of their respective businesses through means of the Websites and, in the case of Skynet, of the retail storefront and are fully collectible, net of any reserves shown on the Interim Balance Sheets. At the Closing, each Company shall provide Parent with an updated Schedule 3.11 as of a date within five days of the Closing.
 
3.12. Books and Records.
 
(a) Each of the Company's Books and Records accurately and fairly, in reasonable detail, reflect such Company's transactions and dispositions of assets. Each Company maintains a system of internal accounting controls sufficient to provide reasonable assurance that:
 
(i) transactions are executed in accordance with management's authorization;
 
(ii) access to assets is permitted only in accordance with management's authorization; and
 
(iii) recorded assets are compared with existing assets at reasonable intervals, and appropriate action is taken with respect to any differences.
 
(b) Each of the Companies has heretofore made all of such Company's Books and Records available to Parent for its inspection and has heretofore delivered to Parent complete and accurate copies of documents referred to in the Schedules or Parent otherwise has requested. All Contracts, documents, and other papers or copies thereof delivered to Parent by or on behalf of the Companies in connection with this Agreement and the transactions contemplated herein are accurate, complete, and authentic.
 
(c) Schedule 3.12 is a complete and correct list of all savings, checking, brokerage or other accounts pursuant to which any of the Companies has cash or securities on deposit. Schedule 3.12 indicates which such Company owns each such account and the signatories therefor.
 
3.13. Absence of Certain Changes. 
 
(a) Except as set forth in Schedule 3.13, since September 30, 2005, each of the Companies has conducted its business in the ordinary course consistent with past practices, and there has not been:
 
(i) any Material Adverse Change or any event, occurrence, development or state of circumstances or facts which could reasonably be expected to result individually or in the aggregate in a Material Adverse Change or on the Companies' ability to consummate the transactions contemplated herein or upon the value to Parent or either Merger Sub of the transactions contemplated hereby;
 
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(ii) any transaction, contract, agreement or other instrument entered into, or commitment made, by any Company relating to such Company's business or any relinquishment by any Company of any Contract or other right, in either case other than transactions and commitments in the ordinary course of business consistent in all respects, including kind and amount, with past practices and those contemplated by this Agreement;
 
(iii) any bonus, salary or other compensation paid or agreed to be paid to any employee except in accordance with Schedule 3.13;
 
(b) Except as set forth in Schedule 3.13, since September 30, 2005, through and including the date hereof, none of the Companies has taken any action nor has had any event occur which would have violated any covenant of the Companies set forth in Article V hereof if such action had been taken or such event had occurred between the date hereof and the Closing Date.
 
3.14. Real Property.
 
(a) None of the Companies owns any Real Property. Each of the Companies has delivered to Parent true, correct, and complete copies of each lease for Real Property to which each such Company is a party, and all amendments thereto. Each such lease, together with all amendments, is listed in Schedule 3.14 and is valid and enforceable by such Company with respect to the other party thereto. None of the Companies has breached or violated and none are in default under any lease or any local zoning ordinance, and no notice from any Person has been received by any Company or served upon any Company of Shareholder claiming any violation of any lease or any local zoning ordinance.
 
(b) The Companies have not experienced any material interruption in the delivery of adequate quantities of any utilities (including, without limitation, electricity, natural gas, potable water, water for cooling or similar purposes and fuel oil) or other public services (including, without limitation, sanitary and industrial sewer service) required by each Company in the operation of its respective business.
 
3.15. Tangible Personal Property
 
(a) Each piece of Tangible Personal Property has no defects, is in good operating condition and repair and functions in accordance with its intended use (ordinary wear and tear excepted), has been properly maintained, and is suitable for its present uses. Schedule 3.15 sets forth a complete and correct list of the Tangible Personal Property owned by each Company, setting forth a description of such property and its location, as of a date within five days of the date of this Agreement.
 
(b) Each Company has, and upon consummation of the transactions contemplated hereby the Surviving Corporations will have, good, valid and marketable title in and to, each piece of Tangible Personal Property listed on Schedule 3.15 hereto, free and clear of all Liens, except as set forth on Schedule 3.15(b).
 
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(c) Except as indicated on Schedule 3.15, all Tangible Personal Property is located at the offices, retail property or warehouses located at 481/485 Kings Highway, Brooklyn, New York, and 1530 MacDonald Avenue, Brooklyn, New York, and, in the case of Tangible Personal Property owned by Zylonet, 1907 Highway 35, Oakhurst, New Jersey.
 
3.16. Intellectual Property. 
 
(a) Schedule 3.16 sets forth a true and complete list of all Intellectual Property Rights, specifying as to each, as applicable: (i) the nature of such Intellectual Property Right; (ii) the owner of such Intellectual Property Right; (iii) the jurisdictions by or in which such Intellectual Property Right has been issued or registered or in which an application for such issuance or registration has been filed; and (iv) all licenses, sublicenses and other agreements pursuant to which any Person (including the Companies) is authorized to use such Intellectual Property Right.
 
(b) Except as set forth on Schedule 3.16, within the past three (3) years (or prior thereto if the same is still pending or subject to appeal or reinstatement), neither of the Companies has been sued or charged in writing with or been a defendant in any claim, suit, action or proceeding that involves a claim of infringement of any Intellectual Property Rights, and none of the Companies has any knowledge of any other claim of infringement by any Company, and no knowledge of any continuing infringement by any other Person of any Intellectual Property Rights.
 
(c) The current use by the Companies of the Intellectual Property Rights does not infringe, and the use by Surviving Corporations, Parent or any of its Affiliates of the Intellectual Property Rights after the Closing will not infringe, upon the rights of any other Person.
 
(d) Except as set forth on Schedule 3.16, all employees, agents, consultants or contractors (including any Shareholders) who have contributed to or participated in the creation or development of any copyrightable, patentable or trade secret material on behalf of any of the Companies or any predecessor in interest thereto either: (i) is a party to a “work-for-hire” agreement under which the respective Company is deemed to be the original owner/author of all property rights therein; or (ii) has executed an assignment or an agreement to assign in favor of such Company (or such predecessor in interest, as applicable) all right, title and interest in such material. All of the Companies’ Intellectual Property Rights are created on a “work-for-hire” basis and owned by the Companies.
 
3.17. Inventory.
 
(a) Schedule 3.17(a) contains a complete and correct list of the entire inventory of each Company as of no earlier than two (2) days prior to the signing of this Agreement. Except as set forth on Schedule 3.17(a), sales in the ordinary course of business, the inventories of each Company consist of items of quality and quantity usable and salable in the ordinary course of business of such Company at an aggregate value at least equal to the value at which such inventories are reflected in the Interim Balance Sheets as at the date of such financial statements. The method of valuing such inventories in such Interim Balance Sheets is consistent with past practice and in conformity with GAAP, consistently applied. The value of inventories known to be obsolete, slow moving or known to be below standard quality has been written down on the books of the respective Company to estimated realizable market value or reserves estimated to be sufficient therefor have been established on the Interim Balance Sheets. The amounts at which the inventories are carried on the Interim Balance Sheets reflect the inventory valuation policy of each Company of stating inventory at the lower of cost (FIFO method) or estimated realizable market value in accordance with GAAP, consistently applied. At the Closing the Companies shall deliver an updated Schedule 3.17(a) as of a date no earlier than five (5) days prior to the Closing.
 
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(b) Schedule 3.17(b) lists every model or version of every product currently in inventory or sold by each Company since January 1, 2005. Except as disclosed on Schedule 3.17(b), no Company is a party to any Contract prohibiting or giving any third party the right to prohibit such Company or any Affiliate thereof from selling any product, in any geographical area or otherwise. Each distribution, sales representative, or like Contract is listed on Schedule 3.17(b). No Company has exported any product in violation of any United States Law requiring an export license respecting export of such product.
 
(c) To the knowledge of each Company, the products listed on Schedules 3.17(a) and (b) perform materially free of bugs, viruses or other malicious code, programming errors, or manufacturing or design defects and otherwise in accordance with the specification of such product, end-user documentation or other information on which customers could reasonably be expected to rely.
 
3.18. Suppliers and Business Relationships.
 
(a) Schedule 3.18(a) is an accurate and complete and current list of each of Skynet's ten largest suppliers (in terms of sales volume) for each year, setting forth the amount of business done with each during such year, since January 1, 2003, setting forth the amount of business done with each during such year, since January 1, 2003. Except as disclosed in Schedule 3.18(a), no single supplier, either retail or resale, is material to Skynet and none are Affiliates of Skynet. Zylonet's sole supplier was Skynet until approximately 2006. The relationships of Skynet with its customers, distributors, sales representatives, and suppliers are good commercial working relationships; no supplier listed on Schedule 3.18(a) has terminated, changed, or threatened to terminate, the amount, rate, or nature of the business it conducts with, or the services or supplies provided to, Skynet or prices at which such business is conducted; and to the knowledge of each Company and each Shareholder, the execution, delivery, or performance of this Agreement, or the consummation of the transactions contemplated hereby will not affect adversely to the Parent or the Surviving Corporations or the amount, rate, or nature of the business conducted with any Person listed on Schedule 3.18(a) or the Parent's or the Surviving Corporation relationship with any such Person.
 
(b) Skynet is unaware of any impending changes in the rates at which materials or services are charged to it by any Person identified on Schedule 3.18(a). Schedule 3.18(b) sets forth a complete and correct description of Skynet's refund and return policies with each of its respective ten largest retail and resale suppliers, as set forth in Section 3.18(a)(i) and (ii), and Zylonet's refund and return policies with Skynet.
 
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(c) Except as listed on Schedule 3.18(c), the Companies do not outsource any of their respective operations.
 
(d) Schedule 3.18(d) is an accurate and complete and current list of each Company's ten largest customers (in terms of dollar amounts of sale) for each year and for the nine-month period ended September 30, 2005, setting forth the amount of business done with each Company during such year or period since January 1, 2002, in each case indicating whether the customer is a wholesale or a retail customer.
 
3.19. Litigation. Except as set forth on Schedule 3.19, there is no Action (or any basis therefor) pending against, or to the best knowledge of the Companies or the Shareholders, threatened against or affecting, any of the Companies, any of their respective officers or directors, any Shareholder, the business of any Company, or any Contract before any court or arbitrator or any governmental body, agency or official or which in any manner challenges or seeks to prevent, enjoin, alter or delay the transactions contemplated hereby. There are no outstanding judgments against any Company or any Shareholder. No Company is now, nor have they been in the past five years, subject to any proceeding with the Federal Trade Commission or the Equal Employment Opportunity Commission or any comparable body of any state or political subdivision.
 
3.20. Contracts.
 
(a) Each Contract to which any of the Companies is a party is a valid and binding agreement, and is in full force and effect, and none of the Companies nor, to the best knowledge of the Companies or the Shareholders, any other party thereto is in breach or default (whether with or without the passage of time or the giving of notice or both) under the terms of any such Contract. None of the Companies has assigned, delegated, or otherwise transferred any of its rights or obligations with respect to any Contracts, or granted any power of attorney with respect thereto. Each applicable Company has given a true and correct fully executed copy of each material Contract to Parent.
 
(b) Schedule 3.20 lists each material Contract of each Company, including, but not limited to:
 
(i) any Contract pursuant to which any Company is required to pay, has paid or is entitled to receive or has received an amount in excess of $10,000 during the current fiscal year or any one of the two preceding fiscal years (other than purchase orders for Inventory entered into in the ordinary course of business (excluding however any such purchase orders which are open for purchases in excess of $50,000);
 
(ii) all employment contracts and sales representatives contracts;
 
(iii) all material sales, agency, factoring, commission and distribution contracts to which any Company is a party;
 
(iv) all joint venture, strategic alliance, limited liability company and partnership agreements to which any Company is a party;
 
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(v) all significant documents relating to any acquisitions or dispositions of assets by any Company (other than of dispositions of Inventory in the ordinary course of business);
 
(vi) all material licensing agreements, including agreements licensing Intellectual Property Rights, other than “shrink wrap” licenses;
 
(vii) all secrecy, confidentiality and nondisclosure agreements restricting the conduct of any Company;
 
(viii) all Contracts relating to patents, trademarks, service marks, trade names, brands, copyrights, trade secrets and other Intellectual Property Rights of any Company;
 
(ix) all guarantees, with the terms and conditions and privacy policies and other provisions of the Websites indemnification arrangements and other hold harmless arrangements made or provided by any Company;
 
(x) all website hosting contracts or agreements;
 
(xi) all Contracts or agreements with or pertaining to any Company to which any Shareholder or any Affiliate of any Shareholder is a party;
 
(xii) all agreements relating to real property, including any real property lease, sublease, or space sharing, license or occupancy agreement, whether the Company is granted or granting rights thereunder to occupy or use any premises;
 
(xiii) all material agreements relating to Tangible Personal Property; and
 
(xiv) all agreements relating to outstanding Indebtedness.
 
(c) Neither of the Companies is subject to any Contract which prohibits, limits or restricts any use by any of the Companies of any information regarding their customers, including limiting the solicitation of or other communication by any of the Companies with their customers or providing any information regarding their customers to any third party. The Companies have acted in compliance in all material respects with all terms and conditions and privacy policies published on each Website (collectively, “Website Rules”), including with respect to their use of information regarding customers. Except as set forth in Schedule 3.20(c), the disclosure to the Surviving Corporations and Parent, and the use by them, of customer identities and information regarding them and communications with them by the Surviving Corporations and Parent, including offers to download Parent toolbars, will not violate any Contract or any Website Rules.
 
(d) The Companies are in compliance with all covenants, including all financial covenants, in all notes, indentures, bonds and other instruments or agreements evidencing any Indebtedness.
 
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3.21. Licenses and Permits. Schedule 3.21 is a complete and correct list of each material license, franchise, permit, order or approval or other similar authorization affecting, or relating in any way to, the business of any of the Companies, together with the name of the government agency or entity issuing the same (the “Permits”). Such Permits are valid and in full force and effect and, assuming the related Company Consents, if any, have been obtained prior to the Closing Date, are transferable by the Companies, and none of the Permits will, assuming the related Company Consents have been obtained or waived prior to the Closing Date, be terminated or impaired or become terminable as a result of the transactions contemplated hereby. Each Company has all Permits necessary to operate its respective business.
 
3.22. Compliance with Laws. None of the Companies is in violation of, or have violated, and to the best knowledge of the Companies and the Shareholders, are neither under investigation with respect to nor have been threatened to be charged with or given notice of, any violation or alleged violation of, any Law or Order, nor is there any basis for any such charge.
 
3.23. Pre-payments. No Company has received any payments with respect to any services to be rendered or goods to be provided after the Closing.
 
3.24. Employees. Schedule 3.24 sets forth a true and complete list of the names, titles, annual salaries or wage rates and other compensation, vacation and fringe benefits, claims under benefit plans, resident alien status (if applicable), residence addresses, social security numbers, relationship to any Shareholder and office location of all employees of each Company, indicating part-time and full-time employment and all changes in salaries and wage rates per employee since January 1, 2004. None of the Companies or the Shareholders has promised any employee, consultant or agent of any Company that he or she will be employed by or receive any particular benefits from the Parent or the Surviving Corporations on or after the Closing. Schedule 3.24 sets forth a true and complete list of the names, addresses and titles of the directors and officers of each Company.
 
3.25. Compliance with Labor Laws and Agreements. Each Company has complied in all material respects with all applicable Laws and Orders relating to employment or labor. To each Company's knowledge, no such Law or Order requires Parent or the Surviving Corporations to give any notice, make any filing, receive any approval, or take any other action to, with, or from or with respect to any Authority in connection with the transactions contemplated hereby. There is no legal prohibition with respect to the permanent residence of any employee of any of the Companies in the United States or his or her permanent employment by any Company or Parent or the Surviving Corporations. No present or former employee, officer or director of any Company has, or will have at the Closing Date, any claim against Surviving Corporation for any matter including, without limitation, for wages, salary, vacation, severance, or sick pay except for the same incurred in the ordinary course of business for the last payroll period prior to the Closing Date. There is no:
 
(a) unfair labor practice complaint against any of the Companies pending before the National Labor Relations Board or any state or local agency;
 
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(b) pending labor strike or other material labor trouble affecting any of the Companies;
 
(c) material labor grievance pending against any of the Companies;
 
(d) pending representation question respecting the employees of any Company; or
 
(e) pending arbitration proceeding arising out of or under any collective bargaining agreement to which any Company is a party.
 
In addition, to each Company's and each Shareholders' knowledge: (i) none of the matters specified in clauses (a) through (e) above is threatened against any Company; (ii) no union organizing activities have taken place with respect to any Company; (iii) no basis exists for which a claim may be made under any collective bargaining agreement to which any Company is a party; and (iv) each of the Shareholders is in good health.
 
3.26. Pension and Benefit Plans. All accrued obligations of each Company applicable to its employees, whether arising by operation of Law, by contract, by past custom or otherwise, for payments by any Company to trusts or other funds or to any governmental agency, with respect to unemployment compensation benefits, social security benefits or any other benefits for its employees with respect to the employment of said employees through the date hereof have been paid or adequate accruals therefor have been made on the Financial Statements. All reasonably anticipated obligations of the Companies with respect to such employees (except for those related to wages during the pay period immediately prior to the Closing Date and arising in the ordinary course of business), whether arising by operation of Law, by contract, by past custom, or otherwise, for salaries, vacation and holiday pay, sick pay, bonuses and other forms of compensation payable to such employees in respect of the services rendered by any of them prior to the date hereof have been or will be paid by such Company prior to the Closing Date.
 
3.27. Employment Matters. Schedule 3.27 sets forth a true and complete list of every employment agreement, commission agreement, employee group or executive medical, life, or disability insurance plan, and each incentive, bonus, profit sharing, retirement, deferred compensation, equity, phantom equity, option, equity purchase, equity appreciation right or severance plan of each Company now in effect or under which such Company has or might have any obligation, or any understanding between the Companies and any employee concerning the terms of such employee's employment that does not apply to such Company's employees generally (collectively, “Labor Agreements”). None of the Companies has any employee benefit plans within the meaning of Section 3(3) of ERISA. Each Company has delivered to Parent true and complete copies of each such Labor Agreement and, where applicable, the most recent Form 5500 filed for the plan. 
 
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3.28. Tax Matters. From its incorporation through and until September 30, 2005, Skynet was properly taxable as a subchapter S corporation for federal and New York State income Tax purposes. Since October 1, 2005, and at all times since then, Skynet is and has been properly taxable as a “C” corporation for federal, New York State and New York City income Tax purposes. Since its incorporation, and at all times since then, Zylonet is and has been properly taxable as a “C” corporation for federal and New Jersey State and local income Tax purposes. Within the times and in the manner prescribed by Law, each Company has filed all required Tax Returns, which accurately and completely reflected each respective Company's Tax liability for the respective periods covered thereby, has paid or provided for all Taxes shown thereon to be due and owing by it and has paid or provided for all deficiencies or other assessments of Taxes, interest or penalties owed by it; no Tax Authority has asserted any claim for the assessment of any additional Taxes of any nature with respect to any periods covered by any such Tax Returns; and, except as set forth on Schedule 3.28, all Taxes required to be withheld or collected by each Company have been duly withheld or collected and, to the extent required, have been properly reported and paid to the proper taxing Authority or properly segregated or deposited as required by Law. Each Tax Return filed by each Company fully and accurately reflects its liability for Taxes for such year or period and accurately sets forth all items (to the extent required to be included or reflected in such returns) relevant to its future liabilities for Taxes, including the Tax basis of its properties and assets. No audit of any Tax Return of any Company is in progress or, to the knowledge of any Company or any Shareholder, threatened. None of the Companies has waived or extended any applicable statute of limitations relating to the assessment or collection of any Taxes. No issue has been raised with any Company by any Tax Authority that is currently pending in connection with any Tax Return. No material issue has been raised in any examination by any Tax Authority with respect to any Company which, by application of similar principles, reasonably could be expected to result in a proposed deficiency for any other period not so examined. There are no unresolved issues or unpaid deficiencies relating to any such examination. Each Company has delivered to Parent true and correct copies of all of such respective Company's federal, state and local income Tax Returns for all periods from and after January 1, 2001. As a result of the Mergers, each Merger Sub will acquire at least 90% of the FMV of the net assets and at least 70% of the FMV of the gross assets held by the applicable Company immediately prior to the Mergers. For purposes of the immediately preceding sentence, amounts paid by either Company to dissenters, amounts paid by either Company to shareholders who receive cash or other property, Company assets used to pay its reorganization expenses, and all redemptions and distributions (except for regular, normal dividends) made by either Company immediately preceding the Mergers, will be included as assets of that Company immediately prior to the Mergers. The liabilities of such Company assumed by the applicable Merger Sub and the liabilities to which the transferred assets of such Company are subject were incurred by such Company in the ordinary course of business. The FMV of the assets of each Company transferred to a Merger Sub in the Mergers will equal or exceed the sum of the liabilities assumed by that Merger Sub plus the amount of liabilities, if any, to which the transferred assets are subject.
 
3.29. Finders Fees. There is no investment banker, broker, finder or other intermediary that has been retained by or is authorized to act on behalf of any Company, any Shareholder or any of their respective Affiliates who might be entitled to any fee or commission from either Surviving Corporation, Parent or any of its Affiliates upon consummation of the transactions contemplated by this Agreement.
 
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3.30. Investment Representations
 
(a) Each Shareholder recognizes that an investment in Parent involves a high degree of risk for many reasons, including, without limitation, that (i) an investment in the Parent Class C Common Stock is highly speculative and only investors who can afford the loss of their entire investment should consider purchasing the Parent Class C Common Stock; (ii) there may be no public market for the Underlying Parent Stock and an investor may not be able to liquidate its investment for the foreseeable future; (iii) Parent is an early stage company with limited operating history upon which to base its likelihood for success; (iv) transferability of the Parent Class C Common Stock is extremely limited; and (v) the Company's business plan involves conducting business in the Peoples Republic of China, which involves substantial risks. Each Shareholder acknowledges that Parent makes no representation that the effective price per share being paid by each Shareholder pursuant to this Agreement represents the fair market value for the Shares.
 
(b) Each Shareholder is an “accredited investor” as such term is defined in Rule 501 of Regulation D (“Reg. D”) promulgated under the Act by virtue of the fact that each Shareholder is a natural person whose individual net worth or joint net worth with that person's spouse exceeds $1,000,000; and or is a natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person's spouse is in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income in the current year. Each Shareholder acknowledges that Parent has the right to require evidence of Shareholder's status as an accredited investor, if necessary.
 
(c) Each Shareholder acknowledges that it has prior investment experience, including investments in non-listed and non-registered securities, or has employed the services of an investment advisory, attorney or accountant to evaluate the merits and risks of such an investment on its behalf, and each Shareholder represents that it understands the highly speculative nature of an investment in Parent Class C Common Stock which may result in the loss of the total amount of such investment.
 
(d) Each Shareholder has adequate means of providing for such Shareholder's current needs and possible personal contingencies, and each Shareholder has no need, and anticipates no need in the foreseeable future, for liquidity in such Shareholder's investment in the Parent Class C Common Stock. Each Shareholder is able to bear the economic risks of this investment and, consequently, without limiting the generality of the foregoing, each Shareholder is able to hold the Parent Class C Common Stock for an indefinite period of time and has a sufficient net worth to sustain a loss of the entire investment in the event such loss should occur.
 
(e) No Shareholder has made an overall commitment to investments which are not readily marketable that are disproportionate to such Shareholder's net worth, and such Shareholder's investment in the Parent Class C Common Stock will not cause such overall commitment to become excessive.
 
(f) Except as otherwise set forth in Article IV, Parent has not and is not making any representations or warranties to Shareholders or providing any advice or information to Shareholders at all. Each Shareholder acknowledges that it has retained its own professional advisors to evaluate the tax and other consequences of an investment in the Parent Class C Common Stock and Underlying Parent Stock.
 
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(g) Each Shareholder acknowledges that this offering of Parent Class C Common Stock has not been reviewed by the SEC because this is intended to be a non-public offering pursuant to Section 4(2) of the Act and Rule 506 under Regulation D of the Act. Each Shareholder acknowledges that it is not acquiring the Parent Class C Common Stock as a result of any general solicitation or advertising. The Parent Class C Common Stock and Underlying Parent Stock will be received by each Shareholder for such Shareholder's own account, for investment and not for distribution or resale to others.
 
(h) Each Shareholder understands that there is no market for the Parent Class C Common Stock. Each Shareholder understands that even if a public market ultimately develops in the United States for the Underlying Parent Stock, Rule 144 (the “Rule”) promulgated under the Act requires, among other conditions, a one year holding period prior to the resale (in limited amounts) of securities acquired in a non public offering without having to satisfy the registration requirements under the Act. Each Shareholder understands that Parent makes no representation or warranty regarding its fulfillment in the future of any reporting requirements under the Securities Exchange Act of 1934, as amended, or its dissemination to the public of any current financial or other information concerning Parent, as is required by the Rule as one of the conditions of its availability.
 
(i) Each Shareholder understands that Parent may need to raise capital in the near term through private financings in order to develop its business as proposed, which may include the sale of equity securities. The issuance of these equity securities could result in dilution to each Shareholder. Each Shareholder understands that if Parent is unable to raise capital when needed, Parent may not be able to develop its business as planned and its inability to raise capital in the future could adversely affect its ability to operate.
 
(j) Each Shareholder understands that Armand Rousso is the co-founder and a consultant providing key services to Parent and that Parent's success is highly dependent upon retaining his services, as well as it being able to recruit and retain the services of qualified executive officers and management to manage its day-to-day business operations and to establish and maintain relationships with any future customers. Each Shareholder understands that Parent's success will also depend upon its ability to recruit and retain qualified technical personnel experienced in, among other things, website hosting and related services and network security. Competition is strong for the types of personnel Parent requires to operate its business as proposed and each Shareholder understands that there are no assurances that Parent will be able to hire, motivate and retain such persons.
 
(k) Each Shareholder recognizes that Parent will have to continue to develop proprietary information and other intellectual property in order to develop and operate its business and there are no assurances that such intellectual property will be developed in a timely manner, if at all. Parent may be unable to adequately protect its proprietary rights and other intellectual property and unauthorized parties may misappropriate or infringe on the trade secrets, copyrights, trademarks, service marks and similar proprietary rights of Parent. Parent may have to resort to litigation to protect its intellectual property rights, to protect trade secrets or to determine the validity and scope of the proprietary rights of others. Any litigation, regardless of its success, would be costly and require significant time and attention of management and technical personnel. Each Shareholder recognizes that any such litigation could force Parent to: refrain from selling, incorporating or using products that incorporate any challenged intellectual property; pay damages; enter into licensing or royalty agreements that may contain undesirable terms; or redesign products or services that eliminate infringing or potentially infringing technology.
 
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(l) Each Shareholder recognizes that Parent may also be the subject of litigation brought by third parties claiming that Parent is violating their intellectual property. These third parties may litigate to protect their intellectual property rights, to protect trade secrets or to determine the validity and scope of their proprietary rights. Defending against such litigation, regardless of its success, would be costly and require significant time and attention of management and technical personnel and could force Parent to: refrain from selling, incorporating or using products that incorporate any challenged intellectual property; pay damages; enter into licensing or royalty agreements that may contain undesirable terms; or redesign products or services that eliminate infringing or potentially infringing technology.
 
(m) Each Shareholder understands and acknowledges that the Parent's business will also depend upon its ability to protect its computer and software systems and data centers against damage from fire, power loss, hacker attacks, worms, trojan horses, viruses and other similar events. Each Shareholder understands and acknowledges that there can be no assurance that Parent will be successful in protecting such systems.
 
(n) Each Shareholder recognizes that the Parent's business will be highly dependent on its computer equipment and software systems and Parent will need to develop and maintain technological capabilities that enable it to meet customer demands. Each Shareholder understands and acknowledges that there can be no assurance that Parent can successfully undertake such endeavors.
 
(o) Each Shareholder understands that Parent does business in China, including pursuant to its contracts with China Daily Information d/b/a Chinadaily.com.cn, a Chinese corporation (“Chinadaily.com”). Each Shareholder understand that in doing business in China, Parent faces substantial risks, including: significant political and economic uncertainties, including changes in laws and regulations, or their interpretation and changes in government officials responsible for administering such matters; the imposition of confiscatory taxation; language barriers and other difficulties in staffing and managing foreign operations; legal uncertainties or unanticipated changes regarding regulatory requirements; the nationalization or other expropriation of private enterprises; restrictions on currency conversion and repatriation; devaluations of currency; uncertainties of laws and enforcement relating to the protection of intellectual property; potentially uncertain or adverse tax consequences; and the overall economic conditions in China.
 
(p) Each Shareholder understands that there is a risk that the government of China and any agency thereof may, with or without cause, prohibit, restrict or block access to the Parent's search engine throughout China. Each Shareholder understand that if the government of China or any agency thereof took such actions, there may be limited or no legal remedies available to Parent. Each Shareholder further understand that if access to Parent's search engine is in any way prohibited, restricted or blocked throughout China, even for a limited period of time, Parent's business as proposed would be materially adversely affected.
 
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(q) Each Shareholder understands that if Parent does business in China and other foreign countries as proposed, Parent could face foreign currency risks. Each Shareholder understand that to the extent future revenue of Parent is denominated in foreign currencies, it would be subject to increased risks relating to foreign currency exchange rate fluctuations that could have a material adverse effect on Parent's business and operations.
 
(r) Foreign companies may experience a lack of remedies and impartiality under the Chinese legal system. China has a civil law system based on written statutes in which judicial decisions have little precedence value. The Chinese government has enacted some laws and regulations dealing with matters such as corporate organization and governance, foreign investment, commerce, taxation and trade. However, their experience in implementing, interpreting and enforcing these laws and regulations is limited, and Parent's ability to enforce commercial claims or to resolve commercial disputes is unpredictable. These matters may be subject to the exercise of considerable discretion by agencies of the Chinese government, and forces unrelated to the legal merits of a particular matter or dispute may influence their determination. As such, each Shareholder understands that Parent may not be able to satisfactorily redress any grievances it may have against another party in China or which another party may have against it.
 
(s) Each Shareholder has been advised of the following. In The United States of America v. Marc Armand Rousso, etc, in the U.S. District Court, in New Jersey (the “Court”), CR. No. 99-512 Mr. Rousso entered into a plea agreement in 1999 whereby, inter alia, Mr. Rousso pleaded guilty to (A) one felony count of violating 15 U.S.C. 78j(b) and 78ff(a) and 17 C.F.R. 240.10b in connection with securities, and (B) one felony count involving the transportation, transmission and transfer of monetary instruments and funds to conceal proceeds of the aforesaid activities contrary to 18 U.S.C. 1956(a)(2)(B)(i), in violation of 18 U.S.C. 1956(h). The provisions of any Court sentencing could preclude Mr. Rousso from rendering services to Parent. At the same time, Mr. Rousso was convicted in France of, inter alia, stock fraud, and as part of the proceeding Mr. Rousso was credited with time served and was fined 120,000 euros. The case is titled The Government v. Rousso and Laroze, Case No. 9334769086.
 
(t) Although Parent has launched its search engine website, substantial upgrades and improvements to it are necessary in order for the website to perform according to Parent's standards and for Parent's search engine website to be successful and there is no assurance that any of the foregoing can or will be attained. Each Shareholder also understands that the Parent's business plan involves the possibility of making additional acquisitions, but that there is no certainty that Parent will be successful in doing so.
 
(u) Parent's business plan as envisioned is heavily dependent on the Parent's contract with Chinadaily.com, under which, among other things, Chinadaily.com is to endeavor to use its best efforts to deliver and update all or a majority of the data regarding China in its website. There is no guarantee that Chinadaily.com, respectively, will be able to effectively perform under its contract, if at all. In the event that Chinadaily.com fails to perform effectively under such contract, Parent's business as proposed will be materially adversely affected.
 
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(v) Each Shareholder understands and consents to the placement of a legend on any certificate or other document evidencing Parent Class C Common Stock and Underlying Parent Stock stating that such Parent Class C Common Stock and Underlying Parent Stock has not been registered under the Act and setting forth or referring to the restrictions on transferability and sale thereof. Each certificate evidencing the Shares shall bear the legends set forth below, or legends substantially equivalent thereto, together with any other legends that may be required by federal or state securities laws at the time of the issuance of the Parent Class C Common Stock and Underlying Parent Stock:
 
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL (I) REGISTERED UNDER THE ACT OR (II) (A) THE ISSUER OF THE SHARES (THE “ISSUER”) HAS RECEIVED AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER THAT SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE WITH THE ACT AND (B) THE CONSENT OF THE ISSUER IN ACCORDANCE WITH THE AGREEMENT AND PLANS OF MERGERS REFERRED TO BELOW.
 
THE SHARES REPRESENTED HEREBY ARE SUBJECT TO “DRAG ALONG” PROVISIONS AND OTHER RESTRICTIONS PURSUANT TO THAT CERTAIN AGREEMENT AND PLANS OF MERGERS BETWEEN, AMONG OTHERS, THE ISSUER AND THE ORIGINAL HOLDER. A COPY OF SAID AGREEMENT IS AVAILABLE FROM THE COMPANY UPON REQUEST
 
(w) Each Shareholder consents that Parent may permit the transfer of the Parent Class C Common Stock and the Underlying Parent Stock out of its name only (i) after the Contingent Payment Period (ii) when its request for transfer is accompanied by an opinion of counsel reasonably satisfactory to the Company that neither the sale nor the proposed transfer results in a violation of the Act or any applicable foreign securities or U.S. state “blue sky” laws (collectively “Securities Laws”) and (iii) to a transferee acceptable to Parent, so long as the Underlying Parent Stock is not Publicly Traded.
 
3.31. Software.
 
(a) Schedule 3.31(a) contains a true, correct, complete and accurate list of each Company's owned software (“Software”), except for “shrink wrap” software. Except as set forth on Schedule 3.31(a), the listed Company is the sole and exclusive owner of such Software.
 
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(b) All software used or held for use by the Companies that is not owned by the Companies (the “Third Party Software”) (including any commonly available “shrink wrap” Software copyrighted by third parties) is used pursuant to an agreement or license and each such agreement or license is valid and enforceable and in full force and effect and neither the Companies nor, to the knowledge of the Companies, any licensor is in material default under or in breach of any such license or agreement. Schedule 3.31(b) lists all of the material Third Party Software of the Companies.
 
(c) The Software and the Third Party Software and each Company's rights therein are sufficient and adequate to conduct the business of each Company to the full extent the business of each Company is conducted as of the date hereof and as such business will be conducted as of the Closing. Consummation of the transactions contemplated by this Agreement will not result in an impairment of the rights of any Company to any of the Software, or to any Third Party Software. Consummation of the transactions contemplated by this Agreement will not result in any increase of any license fees with respect to any of the Third Party Software. All Software and any Third Party Software that is incorporated into the Software perform in accordance with the documentation and other written material used in connection with the Software and Third Party Software, is in machine readable form and contains all current revisions of such Software and Third Party Software. The Software and, to the knowledge of each Company, the Third Party Software, is free of material defects in operations. The Software and, to the knowledge of each Company, the Third Party Software, contains no disabling devices.
 
(d) The source code for all Software will compile into object code or otherwise be capable of performing the functions described in the documentation pertaining to the Software in all material respects. All source code and other documentation concerning the Software is free of any defect which would prevent it from compiling or performing in all material respects.
 
3.32. Business Operations; Servers.
 
(a) Schedule 3.32(a) is a complete and correct list of the methods of payment (including specific types of credit cards accepted and whether or not personal checks, bank checks or money orders are accepted) that each of the Companies accepts for sales of merchandise from their respective Websites (and in the case of Skynet from its retail storefront) and from advertising. Schedule 3.32(a) also indicates the average amount of time taken for the applicable Company to receive payment on any form of payment and the likelihood of such Company not receiving payment based on the form of payment.
 
(b) The Companies each own all of their servers and other computer equipment (other than webservers) necessary to operate their respective businesses as conducted as of the date hereof and as such businesses will be conducted by such Company as of the Closing.
 
(c) The amounts payable and paid by the Companies each month to DataPipe and Devix for various hosting and bandwidth services provided to the Companies has been $500 and $950 per month, respectively. Consummation of the transactions contemplated by this Agreement will not result in any increase in fees or any change with respect to such services.
 
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(d) Schedule 3.32(d) is a complete and correct list of the websites owned and maintained by each Company and indicates which such Company operates each website. Except as indicated on Schedule 3.32(d), all websites are in good working order.
 
(e) Except as set forth on Schedule 3.32(e), since November 7, 2005, none of the Companies has declared or paid any dividends or made any distribution or bonus payment to any Shareholder or employee of any of the Companies except that notwithstanding the foregoing, but subject to the other provisions of this Agreement, the Companies may so payout in the aggregate an amount not in excess of all accrued but previously undistributed profits for periods ended prior to October 1, 2005.
 
3.33. Powers of Attorney and Suretyships. Neither Company has any general or special powers of attorney outstanding (whether as grantor or grantee thereof) or any obligation or liability (whether actual, accrued, accruing, contingent, or otherwise) as guarantor, surety, co-signer, endorser, co-maker, indemnitor or otherwise in respect of the obligation of any Person.
 
3.34. Other Information.  Neither this Agreement nor any of the documents or other information made available to Parent or its Affiliates, attorneys, accountants, agents or representatives pursuant hereto or in connection with Parent's due diligence review of the business of each Company or the transactions contemplated by this Agreement contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary in order to make the statements contained therein not misleading. To the best knowledge of each Company and each Shareholder each Company has provided Parent with all material information regarding the Business.
 
ARTICLE IV
 
REPRESENTATIONS AND WARRANTIES OF PARENT
 
Parent represents and warrants to each Company and each Shareholder as follows:
 
4.1. Due Incorporation. Parent is a corporation duly organized, validly existing and as of Closing will be in good standing under the Laws of the State of Delaware. Merger Subs are corporations duly organized, validly existing and in good standing under the Laws of the State of Delaware. Parent has all requisite power and authority, corporate and otherwise, and all governmental licenses, franchises, permits, authorizations, consents and approvals required to own, lease, and operate its assets, properties and businesses and to carry on its business as now conducted on the date hereof. Merger Subs have not conducted any business to date and has only engaged in certain activities relating to its organization. Parent has not adopted any plan, or made any agreement in respect of any merger, consolidation, sale of all or substantially all of its assets, reorganization, recapitalization, dissolution or liquidation.
 
4.2. Corporate Authorization. The execution, delivery and performance by Parent and Merger Subs of this Agreement and each of the other Additional Agreements to which it is a party and the consummation by Parent and Merger Subs of the transactions contemplated hereby and thereby are within the corporate powers of Parent and Merger Subs and have been duly authorized by all necessary corporate action on the part of Parent and Merger Subs. This Agreement constitutes, and upon their execution and delivery, each of the Additional Agreements will constitute, the valid and legally binding agreement of Parent or Merger Subs, as applicable, enforceable against each in accordance with their respective terms.
 
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4.3. Governmental Authorization. None of the execution, delivery or performance by Parent or Merger Subs of this Agreement or any Additional Agreement requires any consent, approval, license or other action by or in respect of, or registration, declaration or filing with, any Authority by Parent or Merger Subs, except for the filing of the certificate of amendment by the Parent to create the Parent Class C Common Stock, the respective certificates of merger and Form D with the SEC.
 
4.4. No Violation. Neither the execution and delivery of this Agreement or any Additional Agreement to be executed by Parent or Merger Subs hereunder nor the consummation of the transactions contemplated herein and therein will (a) violate any provision of Parent's or Merger Subs' Certificate of Incorporation, By-laws or other charter documents; or (b) violate any Laws or Orders to which either Parent or Merger Subs or their property is subject.
 
4.5. Charter Documents. Parent and Merger Subs have previously delivered to the Companies and Shareholders true and complete copies of its respective Articles of Incorporation and By-laws, as in effect or constituted on the date hereof
 
4.6. Consents. There are no agreements, commitments, arrangements, contracts or other instruments binding upon Parent or Merger Subs or any of their properties requiring a consent, approval, authorization, order or other action of or filing with any Person as a result of the execution, delivery and performance of this Agreement or any of the Additional Agreements or the consummation of the transactions contemplated hereby or thereby.
 
4.7. Capitalization of Parent and Merger Subs. Schedule 4.7 sets forth, with respect to Parent, (i) the Parent’s authorized capital stock, (ii) the number of shares of Parent’s common stock that is outstanding, (iii) each security convertible into or exercisable or exchangeable for Parent’s common stock, the number of shares of common stock such security is convertible into, and the exercise or conversion price of such security. The issuance of all the outstanding capital stock of Parent has been duly authorized, and all such capital stock is validly issued, fully paid and nonassessable.
 
4.8. Financial Statements.
 
(a) Attached hereto as Schedule 4.8 is an unaudited consolidated balance sheet of Parent as of December 31, 2005 and the audited balance sheet of Parent as of December 31, 2004, and statements of operations and retained earnings and cash flow statements of Parent for the years ended December 31, 2004 and December 31, 2005 (collectively, the “Parent Financial Statements”). The balance sheet contained in the Parent Financial Statements as of the twelve months ended December 31, 2005 is referred to herein as the “Interim Parent Balance Sheet”. The Parent Financial Statements (i) were prepared from the books and records of Parent; (ii) were prepared in accordance with GAAP consistently applied; (iii) fairly and accurately present Parent's financial condition and the results of its operations as of their respective dates and for the periods then ended; (iv) contain and reflect all necessary adjustments and accruals for a fair presentation of Parent's financial condition as of their dates; and (v) contain and reflect adequate provisions for all reasonably anticipated liabilities for all material income, property, sales, payroll or other Taxes applicable to Parent with respect to the periods then ended.
 
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(b) Except as specifically disclosed, reflected or fully reserved against on the Interim Parent Balance Sheet and for liabilities and obligations of a similar nature and in similar amounts incurred in the ordinary course of business since the date of the Interim Parent Balance Sheet, there are no liabilities, debts or obligations of any nature (whether accrued, absolute, contingent, liquidated or unliquidated, unasserted or otherwise) relating to Parent. All debts and liabilities, fixed or contingent, which should be included under GAAP on an accrual basis on the Interim Balance Sheets are included therein.
 
4.9. Litigation. There is no action, suit, investigation, hearing or proceeding (or any basis therefor) pending against, or to the best knowledge of Parent, threatened against or affecting, Parent, any of its officers or directors, or the business of Parent, before any court or arbitrator or any governmental body, agency or official which if adversely determined against Parent, has or could reasonably be expected to have a material adverse effect on the business, assets, condition (financial or otherwise), liabilities, results or operations or prospects of Parent, or which in any manner challenges or seeks to prevent, enjoin, alter or delay the transactions contemplated hereby. There are no outstanding judgments against Parent.
 
4.10. Issuance of Parent Class C Common Stock. The Parent Class C Common Stock, when issued in accordance with this Agreement, will be duly authorized and validly issued, fully paid and nonassessable.
 
4.11. Finders Fees. There is no investment banker, broker, finder or other intermediary which has been retained by or is authorized to act on behalf of Parent or Merger Subs or any of their Affiliates who might be entitled to any fee or commission from the Companies or the Shareholders or any of their respective Affiliates upon consummation of the transactions contemplated by this Agreement.
 
4.12. Other Information. Neither this Agreement nor any of the documents or other information made available to Shareholders or their Affiliates, attorneys, accountants, agents or representatives pursuant hereto or in connection with the Companies' and the Shareholders' due diligence review of the business of Parent, Merger Subs or the transactions contemplated by this Agreement contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary in order to make the statements contained therein not misleading.
 
ARTICLE V
 
COVENANTS OF THE COMPANIES AND THE SHAREHOLDERS PENDING CLOSING
 
Each Company and the Shareholders jointly and severally covenant and agree that:
 
5.1. Conduct of the Business. From the date hereof through the Effective Time, Shareholders shall cause each Company to, and each Company shall, conduct the Business only in the ordinary course (including the payment of accounts payable and the collection of accounts receivable), consistent with past practices, and shall not enter into any material transactions without the prior written consent of Parent, and shall use their respective best efforts to preserve intact each Company's business relationships with employees, advertisers, suppliers, customers and other third parties.
 
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Without limiting the generality of the foregoing, from the date hereof until the Effective Time, without Parent's prior written consent, none of the Companies shall:
 
(a) amend, waive any provision of, terminate prior to its scheduled expiration date, or otherwise compromise in any way, any Contract (including contracts described in clause (b) below), or any other right or asset of such respective Company;
 
(b) enter into any contract, agreement, lease, license or commitment, which (i) is with respect to real property, (ii) extends for a term of one year or more or (iii) obligates the payment of more than $200,000 (individually or in the aggregate);
 
(c) make any capital expenditures in excess of $50,000 (individually or in the aggregate);
 
(d) sell, lease, license or otherwise dispose of any assets or assets covered by any Contract except (i) pursuant to existing contracts or commitments disclosed herein and (ii) sales of inventory in the ordinary course consistent with past practice;
 
(e) accept returns of products sold from Inventory except in the ordinary course, consistent with past practice;
 
(f) pay, declare or promise to pay any dividends or other distributions with respect to its capital stock, or pay, declare or promise to pay any other payments to any Shareholder (other than payments of salary accrued in said period at the current salary rate set forth in Schedule 3.24) or any Affiliate of such Company; provided, however, that, notwithstanding the forgoing and subject to the other provisions of this Agreement, but without duplication, the Companies may so payout in the aggregate an amount not in excess of all accrued but previously undistributed profits for periods ended prior to October 1, 2005;
 
(g) authorize any salary increase of more than 10% for any employee making an annual salary of greater than $50,000 or in excess of $5,000 in the aggregate on an annual basis or change the bonus or profit sharing policies of such Company;
 
(h) obtain or suffer to exist any Indebtedness in excess of $25,000 in the aggregate;
 
(i) suffer or incur any Lien on any asset of such Company except for Liens existing as of the date hereof as set forth on Schedule 3.15(b);
 
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(j) suffer any damage, destruction or loss of property related to any assets of such Company, whether or not covered by insurance;
 
(k) delay, accelerate or cancel any receivables or Indebtedness owed to such Company or write-off or make further reserves against the same;
 
(l) merge or consolidate with or acquire any other Person or be acquired by any other Person;
 
(m) suffer any insurance policy protecting the assets of such Company to lapse;
 
(n) make any change in its accounting principles or methods or write down the value of any inventory or assets;
 
(o) change the place of business of such Company;
 
(p) extend any loans other than travel or other expense advances to employees in the ordinary course of business not to exceed $2,000 individually or $7,500 in the aggregate;
 
(q) issue, redeem or repurchase any shares of their respective capital stock or membership interests;
 
(r) effect or agree to any material changes in shipping practices, terms or rates;
 
(s) reduce the prices of products sold from Inventory for customers except in the ordinary course of business;
 
(t) effect or agree to any change in any practices or terms, including payment terms, with respect to customers or suppliers;
 
(u) hire any employees, consultants or advisors;
 
(v) make or rescind any election related to Taxes, file any amended income Tax Return or make any changes in its methods of Tax accounting; or
 
(w) agree to do any of the foregoing.
 
None of the Companies nor the Shareholders shall cause such Company to, (i) take or agree to take any action that might make any representation or warranty of such Company or any Shareholder hereunder inaccurate in any respect at, or as of any time prior to, the Closing Date or (ii) omit to take, or agree to omit to take, any action necessary to prevent any such representation or warranty from being inaccurate in any respect at any such time.
 
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5.2. Access to Information. 
 
(a) From the date hereof until and including the Closing Date, each Company shall, and each Shareholder shall cause each respective Company to, (a) continue to give Parent, its counsel and other representatives full access to the offices, properties, books and records of each respective Company, (b) furnish to Parent, its counsel and other representatives such information relating to the Business as such Persons may request and (c) cause the employees, counsel, accountants and representatives of each respective Company to cooperate with Parent in its investigation of the Business; provided that no investigation pursuant to this Section 5.2 (or any investigation prior to the date hereof) shall affect any representation or warranty given by any of the Companies or the Shareholders;
 
(b) Each Company and the Shareholders shall arrange for representatives of Parent to meet with or speak to the representatives of the three (3) largest suppliers of each Company.
 
5.3. Notices of Certain Events. Each Company and each Shareholder shall promptly notify Parent of:
 
(i) any notice or other communication from any Person alleging or raising the possibility that the consent of such Person is or may be required in connection with the transactions contemplated by this Agreement or that the transactions contemplated by this Agreement might give rise to any claims or causes of action or other rights by or on behalf of such Person or result in the loss of any rights or privileges of such Company to any such Person or any Lien or any of the Shares;
 
(ii) any notice or other communication from any Authority in connection with the transactions contemplated by this Agreement;
 
(iii) any actions, suits, claims, investigations or proceedings commenced or threatened against, relating to or involving or otherwise affecting any Shareholder, the Shares, any Company or the Business or that relate to the consummation of the transactions contemplated by this Agreement; and
 
(iv) the occurrence of any fact or circumstance which might make any representation made hereunder by any Company and/or any Shareholder false in any respect or result in the omission or the failure to state a material fact.
 
ARTICLE VI
 
COVENANTS OF THE COMPANIES AND THE SHAREHOLDERS
 
The Companies and the Shareholders jointly and severally covenant and agree that:
 
6.1. Confidentiality. Except as otherwise required by law, on and after the Closing, no Shareholder shall, without the prior written consent of Parent, or a person authorized thereby, disclose to any other Person or use (whether for the account of any Shareholder or any other party) any confidential information or proprietary work product of Parent, any Surviving Corporation or the Companies or any client of Parent, any Surviving Corporation or the Companies. In the event any Shareholder believes that it is required to disclose any such confidential information pursuant to applicable Laws, such Shareholder shall give timely written notice to Parent so that Parent may have an opportunity to obtain a protective order or other appropriate relief. All Shareholders shall cooperate fully in any such action by Parent.
 
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6.2. Conduct of the Business. From the Closing Date until the end of the Contingent Period, the Shareholders shall cause the respective Surviving Corporations to, and each Surviving Corporation shall, conduct the Business only in the ordinary course (including the payment of accounts payable and the collection of accounts receivable), consistent with past practices of the Companies, and shall not enter into any material transactions without the prior written consent of Parent or the approval of the board of directors of such respective Surviving Corporation, and shall use their respective best efforts to preserve intact the respective Surviving Corporations' business relationships with employees, advertisers, suppliers, customers and other third parties. Without limiting the generality of the foregoing, from the Closing Date through the end of the Contingent Payment Period, without Parent's prior written consent, or the approval of the board of directors of such Surviving Corporation, the Surviving Corporation shall not:
 
(a) enter into any contract, agreement, lease, license or commitment which is outside the ordinary course of business or, even if the ordinary course of business, involving payments in excess of $10,000 or having a term in excess of three months or involving any real property;
 
(b) make any capital expenditures;
 
(c) sell, lease, license or otherwise dispose of any of its assets, except sales of Inventory in the ordinary course consistent with past practice;
 
(d) accept returns of products sold from Inventory except in the ordinary course, consistent with past practice;
 
(e) obtain or suffer to exist any loan or other Indebtedness;
 
(f) suffer or incur any Lien on any of its assets;
 
(g) merge or consolidate with or acquire any other Person or be acquired by any other Person;
 
(h) issue, redeem or repurchase any shares of their respective capital stock;
 
(i) effect or agree to any material changes in shipping practices, terms or rates;
 
(j) reduce the prices of products sold from Inventory for customers except in the ordinary course of business; or
 
(k) agree to do any of the foregoing.
 
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6.3. Exclusivity. So long as this Agreement is in effect, neither of the Companies nor any Shareholder nor anyone acting on their behalf shall, directly or indirectly, (i) encourage, solicit, initiate or participate in discussions or negotiations with, or provide any information to or cooperate in any manner with any Person, other than Parent or its Affiliates (collectively “Excluded Persons”), or an officer, partner, employee or other representative of an Excluded Person, concerning the sale of all or any part of the business of any of the Companies or the capital stock or other securities of any of the Companies, whether such transaction takes the form of a sale of stock or assets, merger, consolidation or otherwise or any joint venture or partnership, or (ii) otherwise solicit, initiate or encourage the submission of any proposal contemplating the sale of all or any part of the business of any of the Companies or the capital stock or other securities of any Company, whether such transaction takes the form of a sale of stock or assets, merger, consolidation or otherwise or any joint venture or partnership or (iii) consummate any such transaction or accept any offer or agree to engage in any such transaction. The Companies or Shareholders shall promptly (within 24 hours) communicate to Parent the terms of any proposal, contract or sale which it may receive in respect of any of the foregoing and respond to any such communication in a manner reasonably acceptable to Parent. The Notice of the Companies or the Shareholders under this Section 6.3 will include the identity of the person making such proposal or offer, copies (if written) or a written description of the terms (if oral) thereof and any other such information with respect thereto as Parent may reasonably request.
 
6.4. Reporting and Compliance With Law. From the date hereof through the Closing Date, each Company shall duly and timely file all respective Tax Returns required to be filed with Authorities, pay any and all Taxes required by any Authority and duly observe and conform, in all material respects, to all applicable Laws and Orders. 
 
6.5. Injunctive Relief. If either Company or any Shareholder breaches, or threatens to commit a breach of, any of the covenants set forth in Section 6.1, Section 6.3, or Section 13.4 (the “Restrictive Covenants”), Parent shall have the following rights and remedies, which shall be in addition to, and not in lieu of, any other rights and remedies available to Parent by agreement (including those set forth in Section 11.1 hereof), under law or in equity:
 
(a) The right and remedy to have the Restrictive Covenants specifically enforced by any court having equity jurisdiction, all without the need to post a bond or any other security or to prove any amount of actual damage or that money damages would not provide an adequate remedy, it being acknowledged and agreed that any such breach or threatened breach will cause irreparable injury to Parent and that monetary damages will not provide adequate remedy to Parent; and
 
(b) The right and remedy to require the Companies and each Shareholder, jointly and severally, (i) to account for and pay over to Parent all compensation, profits, monies, accruals, increments or other benefits derived or received by the Companies, any Shareholder or any associated party as the result of any such breach; and (ii) to indemnify Parent against any other losses, damages (including special and consequential damages), costs and expenses, including actual attorneys fees and court costs, which may be incurred by it and which result from or arise out of any such breach or threatened breach.
 
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6.6. Covenants with respect to Parent Class C Common Stock.
 
(a) If the holders in the aggregate of more than 50% of the outstanding shares of the Underlying Parent Stock, as one class (“Selling Shareholders”), propose to sell, assign, mortgage, transfer, pledge, hypothecate or otherwise dispose of all, but not less than all, of their respective shares to a third party in one or a series of related transactions which is approved by a majority of the Parent's Board of Directors, then the Selling Shareholders may, at their option, require each Shareholder or any transferee (the “Holder”) to sell all of such Holder's capital stock of Parent in such transfer to the third party on the same terms and conditions, and for the same consideration, as the Selling Shareholders. The Holder shall take such necessary or desirable actions in connection with the consummation of such transaction as reasonably requested by Parent or the Selling Shareholders.
 
(b) From the Closing Date to the end of the Contingent Payment Period, the Shareholders may not transfer any shares of the Parent Class C Common Stock or the Underlying Parent Stock except (i) in accordance with Section 6.6(a) and with the consent of Parent, (ii) for estate-planning purposes of such Person to (A) a trust under which the distribution of the shares of Parent Class C Common Stock or the Underlying Parent Stock may be made only to beneficiaries who is such Person, his or her spouse, his or her parents, members of his or her immediate family or his or her lineal descendants, and provided that such trust may never make a distribution to anyone other than such persons, (B) a charitable remainder trust, the income from which will be paid to such Person during his or her life, (C) a corporation, the stockholders of which are only such Person, his or her spouse, his or her parents, members of his or her immediate family or his or her lineal descendants and whose stockholders will at all times remain such persons or (D) a partnership or limited liability company, the partners or members of which are only such Person, his or her spouse, his or her parents, members of his or her immediate family or his or her lineal descendants and whose partners or members will at all times remain such persons, and (iii) in case of his or her death, by will or by the laws of intestate succession, to his or her executors, administrators, testamentary trustees, legatees or beneficiaries, unless any class of Parent's common stock is Publicly Traded in which case the Shareholders may transfer their shares of Parent Class C Common Stock or the Underlying Parent Stock on the later of (x) the end of the Contingent Payment Period, and (y) six months after shares of the Parent Class C Common Stock or the Underlying Parent Stock first becomes Publicly Traded.
 
(c) Each Holder agrees that in connection with an underwritten public offering of capital stock of Parent, upon the request of Parent or the principal underwriter managing such public offering, the Parent Class C Common Stock and any Underlying Parent Stock (and any shares received directly or indirectly with respect thereto) may not be sold, offered for sale or similar financial effect or otherwise disposed of without the prior written consent of Parent or such underwriter, as the case may be, for a period not exceeding six months after the effectiveness of the registration statement filed in connection with such offering, but only to the extent that Parent's directors, executive officers and/or their immediate family are similarly bound. Each Holder agrees to sign such further documents as Parent may reasonably request to give this subsection (c) effect. The lock-up agreement established pursuant to this subsection (c) shall have perpetual duration.
 
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(d) Each Shareholder understands and agrees that if he should breach his Restrictive Covenant Agreement or his Employment Agreement, as the case may be, or be dismissed for “cause”, as such term is defined in his Employment Agreement (each, a “Repurchase Event”), then Parent shall have the right (but not the obligation) to repurchase all of such Shareholder's Parent Class C Common Stock and any outstanding Underlying Parent Stock (and any shares received directly or indirectly with respect thereto), for a period of one hundred and eighty (180) days, at its fair market value as such is determined on the date of the respective Repurchase Event.
 
(e) Each Shareholder understands that due to the fact that Parent Class C Common Stock and the Underlying Parent Stock cannot be readily purchased or sold in the open market, and for other reasons, the Parent and/or its existing shareholders may be irreparably damaged in the event that Sections 6.6(a) through (d) are not specifically enforced. Consequently, in the event of a breach or threatened breach of the terms, covenants and/or conditions of Sections 6.6(a) through (d), Parent is, in addition to all other remedies, entitled to a temporary or permanent injunction, without showing any actual damage or posting a bond, and/or a decree for specific performance, in accordance with the provisions hereof.
 
(f) Termination of Restrictions and Registration Rights
 
(i) The restrictions and rights provided for in Section 6.6(a), shall terminate in the event that the Parent Class C Common Stock or the Underlying Parent Stock becomes Publicly Traded. As used herein, common stock is “Publicly Traded” if stock of that class is (i) listed or admitted to unlisted trading privileges on a national securities exchange, the NASDAQ National Market or the NASDAQ Smallcap Market, the Hong Kong Exchange, the Hong Kong GEM, the London Stock Exchange, the London Stock Exchange Alternative Investors Market (AIM) or any other recognized foreign stock exchange or (ii) if sales or bid and offer quotations are reported for that class of stock in the automated quotation system operated by the National Association of Securities Dealers, Inc.
 
(ii) In the event that, prior to the earlier of the second anniversary of the date of this Agreement or the date the Underlying Parent Stock is Publicly Traded or the Initial Public Offering of Parent, Parent grants registration rights to any Person (the “Receiving Persons”), the Shareholders will, with respect to the shares (the “Rights Shares”) of Underlying Parent Stock issuable upon the conversion of the Parent Class C Common Stock distributed to them pursuant to this Agreement, receive “piggyback” registration rights on the same terms and conditions as the “piggyback” registration rights granted to the Receiving Persons.
 
(iii) Any registration rights granted pursuant to Section 6.6(f)(ii) will be subject to usual and customary cutbacks and limitations, including that the Parent will not be required to register any shares as to which the resale provisions of Rule 144 under the Act as well as all applicable Laws and rules of any exchange or automated quotation system on which the Underlying Parent Stock trades or may be listed.
 
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(iv) The Shareholders may only be granted, and may only exercise, registration rights one time pursuant to the provisions of Section 6.6(f)(ii).
 
(v) The number of Rights Shares pursuant to which registration rights under Section 6.6(f)(ii) may be granted for each Shareholder shall be limited to the number of Rights Shares equal to (X) the number of Rights Shares issuable upon conversion of all of the shares of Parent Class C Common Stock distributed to the Shareholder pursuant to this Agreement multiplied by (Y) the quotient of (i) the number of shares of capital stock of Parent with registration rights issued to the Receiving Person divided by (ii) the total number of shares of capital stock of Parent outstanding on a fully diluted basis.
 
ARTICLE VII
 
COVENANTS OF ALL PARTIES HERETO
 
The parties hereto covenant and agree that:
 
7.1. Best Efforts; Further Assurances. Subject to the terms and conditions of this Agreement, each Party shall use its best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary or desirable under applicable Laws, and in the case of the Companies and each Shareholder as reasonably requested by Parent, to consummate and implement expeditiously the transactions contemplated by this Agreement. The parties hereto shall execute and deliver such other documents, certificates, agreements and other writings and take such other actions as may be necessary or desirable in order to consummate or implement expeditiously the transactions contemplated by this Agreement.
 
7.2. Confidentiality of Transaction. Any information (except publicly available or freely usable material obtained from another source) respecting any party or its Affiliates will be kept in strict confidence by all other Parties to this Agreement and their agents. Except as required by Law, neither the Companies, any Shareholder nor any of their respective Affiliates, directors, officers, employees or agents will disclose the terms of the transactions contemplated hereunder at any time, currently, or on or after the Closing, regardless of whether the Closing takes place, except as necessary to their attorneys, accountants and professional advisors, in which instance such persons and any employees or agents of the Companies shall be advised of the confidential nature of the terms of the transaction and shall themselves be required by the Companies to keep such information confidential. Except as required by Law, each Party shall retain all information obtained from the other and their lawyers on a confidential basis except as necessary to their attorneys, accountants and professional advisors, in which instance such persons and any employees or agents of such Party shall be advised of the confidential nature of the terms of the transaction and shall themselves be required by such party to keep such information confidential.
 
7.3. Best Efforts to Obtain Consents. The Companies and each Shareholder hereby agree to use their best efforts to obtain each respective Company Consent as promptly as practicable hereafter.
 
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7.4. Tax Matters.
 
(a) The Shareholders shall prepare or cause to be prepared and, subject to Parent's review and approval, file or cause to be filed on a timely basis all Tax Returns with respect to each Company for taxable periods ending on or prior to the Closing Date. The Shareholders shall prepare or cause to be prepared such Tax Returns on a basis consistent with the similar Tax Returns for the immediately preceding periods and shall not make, amend, revoke or terminate any election or change any tax accounting method, practice or procedure without Parent's consent, except that Skynet has revoked its “subchapter S” status for federal and New York State income Tax purposes as of October 1, 2005. Shareholder shall give a copy of each such Tax Return to Parent prior to filing and shall not file the same without Parent's reasonable approval. The Shareholders shall timely pay the Taxes shown to be due and owing by the Companies on such Tax Returns.
 
(b) Parent shall include the Surviving Corporations or cause the Surviving Corporations to be included in its consolidated federal income Tax Return for the period that includes the day after the Closing Date.
 
(c) Subject to Section 7.4(a), Parent shall duly and timely file or cause to be filed all Tax Returns required to be filed by the Surviving Corporations after the Closing Date and shall pay or cause the Surviving Corporations to pay all Taxes required to be paid with respect to periods commencing after the Closing Date.
 
7.5. Management of the Surviving Companies. The following provisions shall govern the operations of each Surviving Corporation during the period commencing on the Closing Date through the Contingent Payment Period.
 
(a) Parent and the Shareholders agree that during the Contingent Payment Period, the Surviving Corporations together, will operate and be managed as a separate subsidiary from Parent and its other Affiliates, reporting to and subject to the authority of Parent.
 
(b) Management.
 
(i) The operations of each Surviving Corporation shall be conducted to: (i) comply on a timely basis with the financial reporting and budgeting procedures of Parent as from time to time in effect, which procedures require the approval of annual profit and capital expenditure plans; (ii) operate within any Parent policies as from time to time in effect, and (iii) operate generally within the parameters of the then current profit plan and capital expenditure budget of such Surviving Corporation as proposed by Benzaken and approved by Parent; provided, however, that if the parties are unable to agree upon the same in good faith, then Parent has the right to establish the same.
 
(ii) Subject to the provisions of clause (a) above and provisions of the Employment Agreement that Benzaken is executing and delivering on the date hereof, during the Contingent Payment Period, Benzaken, shall have primary responsibility and authority for the day-to-day operations of the Surviving Corporations and, together with Parent, the long-term planning of such Surviving Corporations. Subject to the foregoing, Benzaken shall be responsible for: (i) personnel selection and termination, and (ii) establishment of compensation levels for Surviving Corporation employees (excluding employees whose compensation is governed by an employment contract and any Affiliate of Benzaken), provided that all increases in compensation for any fiscal year shall be made only in accordance with the current budget of such Surviving Corporation as proposed by Benzaken and approved by Parent.
 
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(c) Restricted Activities. During the Contingent Payment Period, Parent agrees that it will not cause either Surviving Corporation to take or acquiesce in such Surviving Corporation taking any of the following actions without the prior written consent of the Representative:
 
(i) any sale, lease or disposition of all or a substantial portion of the assets or Business of such Surviving Corporation;
 
(ii) entering into any line of business not related to the Business of such Surviving Corporation;
 
(iii) any acquisition by such Surviving Corporation of the stock, assets or business of another Person;
 
(iv) the merger, consolidation or amalgamation of such Surviving Corporation with and into another Person or of another Person with and into such Surviving Corporation; or
 
(v) the adoption or amendment of any profit sharing or other employee benefit plan except for such amendments as may be required by law.
 
7.6. Changes in Management. The Parties hereto understand and agree that under the terms of the Employment Agreements by certain of the Shareholders, such Shareholder may be terminated with or without Cause (as defined therein). Accordingly, each of the parties hereto agrees that if (a) the employment of one or more of the Shareholders terminates during the Contingent Payment Period regardless of the reason therefor, (b) or there are changes in the composition of the Board of Directors of the Surviving Corporations, no Party to this Agreement shall have the right (x) to make a claim that Parent or such Surviving Corporation is in breach of this Agreement as a result of any such action, or (y) to make a claim against Parent or any of its Affiliates that as a result of any such action the Merger Consideration has been adversely affected.
 
ARTICLE VIII
 
CONDITIONS TO CLOSING
 
8.1. Condition to the Obligations of Parent, Merger Subs and the Companies. The obligations of Parent, Merger Subs and Companies to consummate the Closing are subject to the satisfaction of all the following conditions: 
 
(a) No provision of any applicable Law or Order shall prohibit or impose any condition on the consummation of the Closing or limit in any material way Parent's right to control or operate the Surviving Corporations or any material portion of the Businesses.
 
(b) There shall not be pending or threatened any proceeding by a third-party to enjoin or otherwise restrict the consummation of the Closing.
 
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8.2. Conditions to Obligations of Parent and Merger Subs. The obligation of Parent and Merger Subs to consummate the Closing is subject to the satisfaction, or the waiver at Parent's and Merger Subs' sole and absolute discretion, of all the following further conditions:
 
(a) (i) Each of the Companies and Shareholders shall have duly performed in all material respects all of their respective obligations hereunder required to be performed by them at or prior to the Closing Date, (ii) the representations and warranties of each Company and Shareholders contained in this Agreement, the Additional Agreements and in any certificate or other writing delivered by the respective Company or any Shareholder pursuant hereto, disregarding all qualifications and exceptions contained therein relating to materiality or Material Adverse Effect, shall be true and correct at and as of the Closing Date, as if made at and as of such date with only such exceptions as could not in the aggregate reasonably be expected to have a Material Adverse Effect, (iii) there shall have been no event, change or occurrence which individually or together with any other event, change or occurrence, could reasonably be expected to have a Material Adverse Change or a Material Adverse Effect, regardless of whether it involved a known risk, and (iv) Parent and Merger Subs shall have received a certificate signed by the President and Chief Financial Officer of each Company and all respective Shareholders to the effect set forth in clauses (i), (ii) and (iii) of this Section 8.2(a).
 
(b) No court, arbitrator or governmental body, agency or official shall have issued any Order, or have pending before it a proceeding for the issuance of any thereof, and there shall not be any provision of any applicable Law, statute, rule or regulation, restraining or prohibiting the consummation of the Closing or the effective operation or enjoyment by Parent or the Surviving Corporations of the Business after the Closing Date.
 
(c) Shareholders shall have delivered to Parent certificates representing the Shares.
 
(d) Parent shall have received all documents it may request relating to the existence of the Companies and the authority of each Company to enter into and perform its respective obligations under this Agreement, all in form and substance reasonably satisfactory to Parent and its legal counsel, including (i) a copy of the certificate of incorporation of each respective Company certified as of a recent date by the Secretary of State of its jurisdiction of organization, (ii) copies of such Company's bylaws as effective on the date hereof; (iii) copies of resolutions duly adopted by the Board of Directors of each Company and by the unanimous vote or consent of each Company's shareholders authorizing this Agreement and the Additional Agreements and the transaction contemplated hereby and thereby, (iv) a certificate of the Secretary of each Company certifying each of the foregoing and as to signatures of the officer(s) authorized to execute this Agreement and any certificate or document to be delivered pursuant hereto, together with evidence of the incumbency of such Secretary, and (v) a recent good standing certificate regarding each respective Company from the office of the Secretary of State of the State of New York or State of New Jersey, as the case may be, and each other jurisdiction in which such Company is qualified to do business.
 
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(e) Parent shall be fully satisfied, in its sole discretion which shall be exercised in good faith, with the results of its and its representatives' review of each Company and the Business (including any review of the assets, financial condition, and prospects of the Business); provided, that no such review shall affect any representation or warranty of the Companies or any Shareholder given hereunder or in any instrument related to the transactions contemplated hereby.
 
(f) Each of Buyer's Edge and the Members shall have duly performed all of their respective obligations under the Asset Purchase Agreement to be performed by them at or prior to the Closing Date thereunder and Parent shall be fully satisfied, in its sole discretion which shall be exercised in good faith, that all such conditions with respect to the Closing as defined thereunder shall have been fulfilled and satisfied.
 
(g) Certificates representing all of the issued and outstanding shares of the Skynet Common Stock and the Zylonet Common Stock shall be presented at the Closing for cancellation, together with the original stock ledgers and minute books of the Companies.
 
(h) Parent or either Merger Sub shall have reasonably determined that, after Parent or either Merger Sub has had the opportunity to meet or speak to representatives of the largest suppliers of each of the Companies pursuant to Section 5.2, all such suppliers will provide the Surviving Corporations terms for the purchase of products as favorable to the Surviving Corporations as the terms provided to each of the Companies.
 
(i) Each Merger Sub will have entered into an agreement, in form and substance satisfactory to it, with one or more banks and/or credit card companies, pursuant to which, from and after the Closing, said banks and/or credit card companies will process said Surviving Corporation's credit card arrangements for the Business or a letter (in form and substance satisfactory to each Merger Sub) from each existing bank or credit card company that said Merger Sub may continue to process credit card arrangements pursuant to the agreements of the Companies with respect thereto until such time as said Merger Sub enters into its own agreements with such banks and/or credit card companies.
 
(j) Parent shall have received all Company Consents (including any required consents of the landlords under the Real Property Leases), in form and substance reasonably satisfactory to Parent, and no such Company Consent shall have been revoked.
 
(k) Each of the Companies shall have delivered to Parent documents satisfactory to Parent to evidence the release of all Liens on any portion of the assets of the respective Company and the filing of appropriate UCC-3 Termination Statements, other than on behalf of Samsung respect with to its inventory of goods and merchandise and any proceeds thereof (including accounts receivable, promissory notes, installment contracts, contract rights, chattel papers and instruments arising therefrom).
 
(l) Each of Benzaken, Albert Esses and Rafael Chemtob shall have entered into and delivered to Parent an employment agreement with the Companies substantially in the form attached hereto as Exhibits A-1, A-2, A-3, respectively (collectively, the “Employment Agreements”), and the same shall be in full force and effect.
 
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(m) Each of the Shareholders shall have entered into and delivered to Parent a restrictive covenant agreements with the Companies substantially in the form attached hereto as Exhibits A-4, respectively (collectively, the “Restrictive Covenant Agreements”), and the same shall be in full force and effect.
 
(n) Parent shall have received an affidavit of Shareholders of non-foreign status in the form required by Section 1445 of the Code and the regulations thereunder.
 
(o) Neither the Companies nor Buyer's Edge shall have any Indebtedness, other than Indebtedness of Buyer’s Edge to Skynet.
 
(p) The aggregate Adjusted Tangible Personal Property of the Companies and Buyer's Edge shall exceed their aggregate liabilities by at least the amount of the Minimum Required EBITDA.
 
(q) Each officer and director of the Companies shall have tendered their resignation from such positions.
 
8.3. Conditions to Obligations of the Companies. The obligation of the Companies to consummate the Closing is subject to the satisfaction, or the waiver at the Companies discretion, of all the following further conditions:
 
(a) (i) Parent and each Merger Sub shall have performed in all material respects all of their respective obligations hereunder required to be performed by it at or prior to the Closing Date, (ii) the representations and warranties of Parent contained in this Agreement, the Additional Agreements and in any certificate or other writing delivered by Parent or Merger Sub pursuant hereto, disregarding all qualifications and expectations contained therein relating to materiality, shall be true and correct in all material respects at and as of the Closing Date, as if made at and as of such date, (iii) there shall have been no event, change or occurrence which individually or together with any other event, change or occurrence, could reasonably be expected to have a material adverse effect, regardless of whether it involved a known risk, on the business, assets, condition (financial or otherwise), liabilities, result of operations of prospects of the Parent or any Merger Sub, and (iv) each Shareholder shall have received a certificate signed by an authorized officer of Parent and Merger Sub to the foregoing effect.
 
(b) The Companies shall have received (i) a copy of the certificate of incorporation of the Parent and each Merger Sub, (ii) copies of the bylaws of each of Parent and each Merger Sub as effective on the date hereof; (iii) copies of resolutions duly adopted by the Board of Directors of Parent and Merger Sub and by the unanimous vote or consent of Merger Sub's shareholders authorizing this Agreement and the Additional Agreements and the transaction contemplated hereby and thereby, (iv) a certificate of the Secretary or Assistant Secretary of Parent and each Merger Sub certifying each of the foregoing and as to signatures of the officer(s) authorized to execute this Agreement and any certificate or document to be delivered pursuant hereto, together with evidence of the incumbency of such Secretary or Assistant Secretary, and (v) a recent good standing certificate regarding Parent and each Merger Sub from the office of the Secretary of State of its respective jurisdiction of organization and each other jurisdiction in which each Company is qualified to do business.
 
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(c) The Companies shall have delivered to each of the Shareholders a duly executed copy of their respective Employment Agreements.
 
(d) Parent shall have made a demand loan to the Companies in the amount equal to the lesser of (i) all accrued but previously undistributed profits of the Companies (as mutually agreed to by the Companies and Parent), and (ii) [$________].
 
(e) The transactions contemplated in the Asset Purchase Agreement shall have been consummated simultaneous with the Closing.
 
ARTICLE IX
 
RELIANCE ON REPRESENTATIONS AND WARRANTIES
 
9.1. Reliance on Representations and Warranties of each Company and the Shareholders. Notwithstanding any right of Parent to fully investigate the affairs of each Company and notwithstanding any knowledge of facts determined or determinable by Parent pursuant to such investigation or right of investigation, Parent shall have the right to rely fully upon the representations, warranties, covenants and agreements of each Company and the Shareholders contained in this Agreement.
 
9.2. Reliance on Representations and Warranties of Parent. Each Company and the Shareholders shall have the right to rely fully on Parent's representations, warranties, covenants and agreements herein, notwithstanding any investigation by the Companies or the Shareholders and notwithstanding any knowledge of facts determined or determinable by the Companies or the Shareholders pursuant to such investigation or right of investigation.
 
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ARTICLE X
 
INDEMNIFICATION
 
10.1. Indemnification of Parent, Merger Subs and Surviving Corporations.
 
(a) Prior to the Closing Date, each Company and each Shareholder, and subsequent to the Closing Date each Shareholder, hereby jointly and severally agrees to indemnify and hold harmless Parent, the Merger Subs and Surviving Corporations and their Affiliates (including, after the Closing, Buyer's Edge) and each of their respective directors, officers, employees, shareholders, attorneys and agents and permitted assignees (collectively, the “Purchaser Indemnitees,” provided, however, the term “Purchaser Indemnitees” shall not include any of the Shareholders regardless of their capacity), against and in respect of any and all loss, payments, demand, penalty, liability, judgment, damage, diminution in value, claim or out-of-pocket costs and expenses (including actual costs of investigation and attorneys' fees and other costs and expenses) (all of the foregoing collectively, “Losses”) incurred or sustained by any Purchaser Indemnitee as a result of (i) any breach, inaccuracy or nonfulfillment or the alleged breach, inaccuracy or nonfulfillment of any of the representations, warranties and covenants of any of the Companies or any of the Shareholders contained herein or in the Additional Agreements (but not the Employment Agreements) or any certificate or other writing delivered pursuant hereto or of Buyer's Edge or of the Members (ii) the failure to pay any claims by any third parties (including breach of contract claims, violations of warranties, trademark infringement, for “spamming”, privacy violations, torts or consumer complaints) with respect to the business of the Companies or Buyer's Edge for any period prior to the Closing Date, (iii) the violation of any Laws by any of the Companies or Buyer's Edge prior to the respective Closing, or (iv) the failure to pay any Taxes incurred prior to the Closing to any Tax Authority or to file any Tax Return with any Tax Authority; provided, that Losses in connection with Sections 10.1(ii), (iii) and (iv) shall be deemed to include any amounts payable after the Closing pursuant to or otherwise in connection with any of the matters listed on Schedule 3.19. The total payments made by the Companies and the Shareholders to the Purchaser Indemnitees with respect to Losses shall not exceed the sum of Merger Consideration plus the Purchase Price of the transactions contemplated under the Asset Purchase Agreement (the “Maximum Indemnification”); provided, however, that no Purchaser Indemnitee shall be entitled to indemnification pursuant to this Section 10.1 unless and until the aggregate amount of Losses to all Purchaser Indemnitees equals at least $50,000, at which time, subject to the foregoing cap on the maximum amount payable, the Purchaser Indemnitees shall be entitled to indemnification for the total amount of such Losses. Any indemnification obligation of the Shareholders or the Companies under this Article X shall be first applied against the Holdback Amount, if any, at $3.50 per shares. Notwithstanding anything set forth in this Section 10.1, any Loss incurred by any Purchaser Indemnitee: (i) arising out of any Company's or any Shareholder's breach of or failure to perform any covenant or obligation to be performed by any Company or any Shareholder at, or any Shareholder after, the Closing, including the failure to pay any Taxes, (ii) pursuant to or otherwise in connection with any of the matters listed on Schedule 3.19, or (iii) in connection with the Holdback Amount, shall not be subject to or applied against the minimum amount of Losses or the cap set forth in the previous sentence. Notwithstanding anything set forth in this Section 10.1, no Shareholder shall be liable for a Loss in connection with any other Shareholder's breach of any of the terms and conditions set forth under Article VII or any Additional Agreements.
 
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(b) Notwithstanding anything to the contrary, any amounts paid to a third party by Parent from the Holdback Amount shall not be considered a Loss for the purposes of Section 10.1; provided, further, that any amounts paid to the Shareholders from the Holdback Amounts, under the terms of Section 2.3(i), shall be eligible for the repayment by Shareholders to the Purchaser Indemnitee in connection with a Loss for the purposes of Section 10.1.
 
10.2. Indemnification of Shareholders. Parent and each Merger Sub hereby agrees to indemnify and hold harmless Shareholders (the “Shareholder Indemnitees”) against and in respect of any Losses incurred or sustained by Shareholder Indemnitees as a result of any breach, inaccuracy or nonfulfillment or the alleged breach, inaccuracy or nonfulfillment of any of the representations, warranties and covenants of Parent or either Merger Sub contained herein or any certificate or other writing delivered pursuant hereto. The total payments made by Parent and each Merger Sub to Shareholder Indemnitees with respect to Losses shall not exceed the Merger Consideration; provided, however, Shareholder Indemnitees shall not be entitled to indemnification pursuant to this Section 10.2 unless and until the aggregate amount of Losses to Shareholder Indemnitees equals at least $50,000, at which time, subject to the foregoing cap on the maximum amount payable, the Shareholder Indemnitees shall be entitled to indemnification for the total amount of such Losses. Notwithstanding anything set forth in this Section 10.2, any Loss incurred by any Shareholders arising out of Parent's or either Merger Subs' breach or failure to perform any covenant or obligation to be performed by Parent or either Merger Sub at or after the Closing Date, shall not be subject to or applied against the minimum amount of Losses or the cap set forth in the previous sentence.
 
10.3. Procedure. The following shall apply with respect to all claims by either a Purchaser Indemnitee or a Shareholder Indemnitee (together, “Indemnified Party”) for indemnification:
 
(a) An Indemnified Party shall give the Representative or Parent, or Merger Subs, as applicable (either, “Indemnifying Parties”), prompt notice (an “Indemnification Notice”) of any third-party claim, investigation, action, suit, hearing or proceeding with respect to which such Indemnified Party seeks indemnification pursuant to Section 10.1 or 10.2 (a “Third-Party Claim”), which shall describe in reasonable detail the loss, liability or damage that has been or may be suffered by the Indemnified Party. The failure to give the Indemnification Notice shall not impair any of the rights or benefits of such Indemnified Party under Section 10.1 or 10.2, except to the extent such failure materially and adversely affects the ability of the Indemnifying Parties to defend such claim or increases the amount of such liability.
 
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(b) In the case of any Third-Party Claims as to which indemnification is sought by any Indemnified Party, such Indemnified Party shall be entitled, at the sole expense and liability of the Indemnifying Parties, to exercise full control of the defense, compromise or settlement of any Third-Party Claim unless the Indemnifying Parties, within a reasonable time after the giving of an Indemnification Notice by the Indemnified Party (but in any event within 20 days thereafter), shall (i) deliver a written confirmation to such Indemnified Party that the indemnification provisions of Section 10.1 or 10.2 are applicable to such claim, investigation, action, suit, hearing or proceeding and the Indemnifying Parties will indemnify such Indemnified Party in respect of such claim, investigation, action or proceeding pursuant to the terms of Section 10.1 or 10.2 and, notwithstanding anything to the contrary, shall do so without asserting any challenge, defense, limitation on the Indemnifying Parties liability for Losses, counterclaim or offset, (ii) notify such Indemnified Party in writing of the intention of the Indemnifying Parties to assume the defense thereof, and (iii) retain legal counsel reasonably satisfactory to such Indemnified Party to conduct the defense of such Third-Party Claim.
 
(c) If the Indemnifying Parties assume the defense of any such Third-Party Claim then the Indemnified Party shall cooperate with the Indemnifying Parties in any manner reasonably requested in connection with the defense, compromise or settlement thereof. If the Indemnifying Parties so assume the defense of any such Third-Party Claim the Indemnified Party shall have the right to employ separate counsel and to participate in (but not control) the defense, compromise, or settlement thereof, but the fees and expenses of such counsel employed by the Indemnified Party shall be at the expense of such Indemnified Party unless (i) the Indemnifying Parties have agreed to pay such fees and expenses, or (ii) the named parties to any such Third-Party Claim (including any impleaded parties) include an Indemnified Party and an Indemnifying Party and such Indemnified Party shall have been advised by its counsel that there may be a conflict of interest between such Indemnified Party and the Indemnifying Parties in the conduct of the defense thereof, and in any such case the reasonable fees and expenses of such separate counsel shall be borne by the Indemnifying Parties.
 
(d) If the Indemnifying Parties elect to direct the defense of any Third-Party Claim, the Indemnified Party shall not pay, or permit to be paid, any part of any claim or demand arising from such asserted liability unless the Indemnifying Parties withdraw from or fail to vigorously prosecute the defense of such asserted liability, or unless a judgment is entered against the Indemnified Party for such liability. If the Indemnifying Parties do not elect to defend, or if, after commencing or undertaking any such defense, the Indemnifying Parties fail to prosecute or withdraw such defense, the Indemnified Party shall have the right to undertake the defense or settlement thereof, at the Indemnifying Parties' expense. Notwithstanding anything to the contrary, the Indemnifying Parties shall not be entitled to control, but may participate in, and the Indemnified Party (at the expense of the Indemnifying Parties) shall be entitled to have sole control over, the defense or settlement of (x) that part of any Third Party Claim (i) that seeks a temporary restraining order, a preliminary or permanent injunction or specific performance against the Indemnified Party, or (ii) to the extent such Third Party Claim involves criminal allegations against the Indemnified Party or (y) the entire Third Party Claim if such Third Party Claim could impose liability on the part of the Indemnified Party in an amount which is greater than the amount as to which the Indemnified Party is entitled to indemnification under this Agreement. In the event the Indemnified Party retains control of the Third Party Claim, the Indemnified Party will not settle the subject claim without the prior written consent of the Indemnifying Party, which consent will not be unreasonably withheld or delayed.
 
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(e) If the Indemnified Party assumes the defense of any such Third-Party Claim pursuant to Section 10.1 or 10.2 and proposes to settle the same prior to a final judgment thereon or to forgo appeal with respect thereto, then the Indemnified Party shall give the Indemnifying Parties prompt written notice thereof and the Indemnifying Parties shall have the right to participate in the settlement, assume or reassume the defense thereof or prosecute such appeal, in each case at the Indemnifying Parties' expense. The Indemnifying Parties shall not, without the prior written consent of such Indemnified Party settle or compromise or consent to entry of any judgment with respect to any such Third-Party Claim (i) in which any relief other than the payment of money damages is or may be sought against such Indemnified Party or (ii) which does not include as an unconditional term thereof the giving by the claimant, person conducting such investigation or initiating such hearing, plaintiff or petitioner to such Indemnified Party of a release from all liability with respect to such Third-Party Claim and all other claims or causes of action (known or unknown) arising or which might arise out of the same facts.
 
10.4. Periodic Payments. Any indemnification required by Section 10.1 or 10.2 for costs, disbursements or expenses of any Indemnified Party in connection with investigating, preparing to defend or defending any claim, action, suit, hearing, proceeding or investigation shall be made by periodic payments by the Indemnifying Parties to each Indemnified Party during the course of the investigation or defense, as and when bills are received or costs, disbursements or expenses are incurred.
 
10.5. Right of Set Off. In the event that Parent or any Surviving Corporation is entitled to any indemnification pursuant to this Article, Parent or such Surviving Corporation shall be entitled to set off any amounts owed to (x) the Shareholders pursuant to Sections 2.3 and/or (y) the Members pursuant to Section 2.6(c) under the Asset Purchase Agreement against the amount of such indemnification. In the event of such a set-off, the set-off will first be allocated to: (i) any cash to which Shareholders are otherwise entitled pursuant to this Agreement and then to (ii) the shares of Parent Class C Common Stock to which Shareholders are otherwise entitled pursuant to this Agreement at $3.50 per share. Any such set-off will be treated as an adjustment to the Merger Consideration.
 
10.6. Payment of Indemnification by Shareholders. In the event that Parent or any Surviving Corporation is entitled to any indemnification pursuant to this Article and Parent or such Surviving Corporation are unable to set off such indemnification pursuant to Section 10.5, the Shareholders shall pay the amount of the indemnification (subject to the limitation set forth in Section 10.1) first from any available amounts under Section 2.5(i) (the Holdback Amount), and then in cash up to the amount of cash received by the Shareholders as part of the Merger Consideration, and then in shares of Parent Class C Common Stock at $3.50 per share. Any payments by Shareholders to a Purchaser Indemnitee will be treated as an adjustment to the Merger Consideration.
 
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10.7. Insurance. Any indemnification payments hereunder shall take into account any insurance proceeds or other third party reimbursement actually received.
 
10.8. Survival of Indemnification Rights. Except for the representations and warranties in (i) Sections 3.1, 3.2, 3.4, 3.9 and 3.10, which shall survive until the sixth anniversary of the Closing Date and (ii) Sections 3.22, 3.26, 3.28 and 3.29, which shall survive until the expiration of the statue of limitations with respect thereto, the representations and warranties of each Company, Shareholders and Parent shall survive until the fourth anniversary of the Closing Date. The indemnification to which any Indemnified Party is entitled from the Indemnifying Parties pursuant to Section 10.1 or 10.2 for Losses shall be effective so long as it is asserted prior to (x) the sixth anniversary of the Closing Date, in the case of Section 10.8(i); (y) the expiration of the applicable statute of limitations, in the case of Section 10.8(ii) and the breach or the alleged breach of any covenant or agreement of each Company or any Indemnifying Party; and (z) the fourth anniversary of the Closing Date, in the case of all other representations and warranties of each Company, Shareholders and Parent hereunder. The obligations of the Companies (but not of the Shareholders) in Articles V and VI shall terminate upon the Closing.
 
ARTICLE XI
 
DISPUTE RESOLUTION
 
11.1. Arbitration.
 
(a) The Parties shall promptly submit any dispute, claim, or controversy arising out of or relating to this Agreement, or any Additional Agreement (including with respect to the meaning, effect, validity, termination, interpretation, performance, or enforcement of this Agreement or any Additional Agreement) or any alleged breach thereof (including any action in tort, contract, equity, or otherwise), to binding arbitration before one arbitrator (“Arbitrator”). The Parties agree that binding arbitration shall be the sole means of resolving any dispute, claim, or controversy arising out of or relating to this Agreement or any Additional Agreement (including with respect to the meaning, effect, validity, termination, interpretation, performance or enforcement of this Agreement or any Additional Agreement) or any alleged breach thereof (including any claim in tort, contract, equity, or otherwise).
 
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(b) If the Parties cannot agree upon the Arbitrator, the Arbitrator shall be selected by the New York City chapter head of the American Arbitration Association upon the request of either side. The Arbitrator shall be selected within 30 days of request.
 
(c) The laws of the State of New York shall apply to any arbitration hereunder. In any arbitration hereunder, this Agreement and any agreement contemplated hereby shall be governed by the laws of the State of New York applicable to a contract negotiated, signed, and wholly to be performed in the State of New York, which laws the Arbitrator shall apply in rendering his decision. The Arbitrator shall issue a written decision, setting forth findings of fact and conclusions of law, within sixty (60) days after he shall have been selected. The Arbitrator shall have no authority to award punitive or other exemplary damages.
 
(d) The arbitration shall be held in New York City, New York in accordance with and under the then-current provisions of the rules of the American Arbitration Association, except as otherwise provided herein.
 
(e) On application to the Arbitrator, any party shall have rights to discovery to the same extent as would be provided under the Federal Rules of Civil Procedure, and the Federal Rules of Evidence shall apply to any arbitration under this Agreement; provided, however, that the Arbitrator shall limit any discovery or evidence such that his decision shall be rendered within the period referred to in Section 11.1(c).
 
(f) The Arbitrator may, at his discretion and at the expense of the Party who will bear the cost of the arbitration, employ experts to assist him in his determinations.
 
(g) The costs of the arbitration proceeding and any proceeding in court to confirm any arbitration award or to obtain relief as provided in Section 6.5, as applicable (including actual attorneys' fees and costs), shall be borne by the unsuccessful party and shall be awarded as part of the Arbitrator's decision, unless the Arbitrator shall otherwise allocate such costs, for the reasons set forth, in such decision. The determination of the Arbitrator shall be final and binding upon the Parties and not subject to appeal.
 
(h) Any judgment upon any award rendered by the Arbitrator may be entered in and enforced by any court of competent jurisdiction. The parties expressly consent to the exclusive jurisdiction of the courts (Federal and state) in New York City, New York to enforce any award of the Arbitrator or to render any provisional, temporary, or injunctive relief in connection with or in aid of the Arbitration. The Parties expressly consent to the personal and subject matter jurisdiction of the Arbitrator to arbitrate any and all matters to be submitted to arbitration hereunder. None of the Parties hereto shall challenge any arbitration hereunder on the grounds that any party necessary to such arbitration (including the Parties hereto) shall have been absent from such arbitration for any reason, including that such Party shall have been the subject of any bankruptcy, reorganization, or insolvency proceeding.
 
(i) The Parties shall indemnify the Arbitrator and any experts employed by the Arbitrator and hold them harmless from and against any claim or demand arising out of any arbitration under this Agreement or any agreement contemplated hereby, unless resulting from the willful misconduct of the person indemnified.
 
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(j) This arbitration clause shall survive the termination of this Agreement and any agreement contemplated hereby.
 
11.2. Waiver of Jury Trial; Exemplary Damages. ALL PARTIES HEREBY WAIVE THEIR RIGHTS TO TRIAL BY JURY WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS AGREEMENT OR ANY ADDITIONAL AGREEMENT. No Party shall be awarded punitive or other exemplary damages respecting any dispute arising under this Agreement or any Additional Agreement. 
 
11.3. Attorneys Fees. The unsuccessful Party to any court or other proceeding arising out of this Agreement that is not resolved by arbitration under Section 11.1 shall pay to the prevailing party all attorneys' fees and costs actually incurred by the prevailing party, in addition to any other relief to which it may be entitled. As used in this Section 11.3 and elsewhere in this Agreement, “actual attorneys' fees” or “attorneys' fees actually incurred” means the full and actual cost of any legal services actually performed in connection with the matter for which such fees are sought, calculated on the basis of the usual fees charged by the attorneys performing such services, and shall not be limited to “reasonable attorneys' fees” as that term may be defined in statutory or decisional authority.
 
ARTICLE XII
 
TERMINATION
 
12.1. Termination Without Default. In the event that the Closing of the transactions contemplated hereunder has not occurred by March 31, 2006 (the “Outside Closing Date”) and no material breach of this Agreement by the party seeking to terminate this Agreement shall have occurred or have been made (as provided in Section 12.2 hereof) Parent and Merger Subs or any four Shareholders, acting together, shall have the right, at its sole option, to terminate this Agreement without liability to the other side. Such right may be exercised by Parent and Merger Subs, on the one hand, or any four Shareholders on the other, as the case may be, giving written notice to the other at any time after the Outside Closing Date.
 
12.2. Termination Upon Default.
 
(a) Parent and Merger Subs may terminate this Agreement by giving notice to any of the Companies or any of the Shareholders on or prior to the Closing, without prejudice to any rights or obligations Parent and Merger Subs may have, if any of the Companies or any Shareholder shall have materially breached any representation or warranty or breached any agreement or covenant contained herein or in any Additional Agreement to be performed prior to Closing and such breach shall not be cured within the earlier of the Scheduled Closing Date and five (5) days following receipt by the Companies or Shareholders of a notice describing in reasonable detail the nature of such breach.
 
(b) The Representative may terminate this Agreement by giving prior written notice to Parent, without prejudice to any rights or obligations any Shareholder or the Companies may have, if Parent or Merger Subs shall have materially breached any of its covenants, agreements, representations, and warranties contained herein to be performed prior to Closing and such breach shall not be cured within the earlier of the Scheduled Closing Date and five (5) days following receipt by Parent of a notice describing in reasonable detail the nature of such breach.
 
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12.3. Survival. The provisions of Sections 7.2 and 10.4 shall survive any termination hereof pursuant to Article XII. 
 
ARTICLE XIII
 
MISCELLANEOUS
 
13.1. Notices. All notices, requests, demands and other communications to any party hereunder shall be in writing and shall be given to such party at its address or telecopier number set forth below, or such other address or telecopier number as such party may hereinafter specify by notice to each other party hereto:
 
if to Parent and Merger Subs (prior to the Closing) or Parent and Surviving Corporations (after the Closing), to:
 
c/o Accoona Corp.
101 Hudson Street
Jersey City, New Jersey 07302
Attn: President
Telecopy: 201-557-9377
 
with a copy to:
 
Loeb & Loeb LLP
345 Park Avenue
New York, New York 10154
Attention: Andrew M. Ross, Esq.
Telecopy: (212) 407-4990
 
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if to any Company or any Shareholder (prior to the Closing):

c/o Skynet
481/485 Kings Highway
Brooklyn, NY 11223
Attention: Allen Benzaken
Telecopy: (718) 234-9345
 
with a copy to:
 
Silverman Sclar Shin & Byrne PLLC
381 Park Avenue South
New York, New York 10016
Attention: John Shin, Esq.
Telecopy: (212) 779-8858


Each such notice, request or other communication shall be effective (i) if given by telecopy, when such telecopy is transmitted to the telecopy number specified herein and the appropriate answer back is received or, (ii) if given by certified mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, properly addressed or, (iii) if given by any other means, when delivered at the address specified herein.
 
13.2. Amendments; No Waivers. 
 
(a) Any provision of this Agreement may be amended or waived if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by each party hereto (or in the case of the Shareholder, the Representative), or in the case of a waiver, by the party against whom the waiver is to be effective.
 
(b) No failure or delay by any party hereto in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.
 
13.3. Ambiguities. The parties acknowledge that each party and its counsel has materially participated in the drafting of this Agreement and consequently the rule of contract interpretation that, and ambiguities if any in, the writing be construed against the drafter, shall not apply.
 
13.4. Publicity. Except as required by law, the parties agree that neither they nor their agents shall issue any press release or make any other public disclosure concerning the transactions contemplated hereunder without the prior approval of the other party hereto.
 
13.5. Expenses. All costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such cost or expense.
 
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13.6. Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided, that (i) neither the Companies nor any Shareholder may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the prior written consent of Parent; and (ii) in the event Parent assigns its rights and obligations under this Agreement to an Affiliate, Parent shall continue to remain liable for its obligations hereunder.
 
13.7. Governing Law. This Agreement has been entered into in the State of New Jersey. Notwithstanding the foregoing, this Agreement shall be construed in accordance with and governed by the laws of the State of New York, without giving effect to the conflict of laws principles thereof.
 
13.8. Counterparts; Effectiveness. This Agreement may be signed in any number of counterparts, each of which shall be an original and all of which shall be deemed to be one and the same instrument, with the same effect as if the signatures thereto and hereto were upon the same instrument.
 
13.9. Entire Agreement. This Agreement constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior agreements, understandings and negotiations, both written and oral, among the parties with respect to the subject matter of this Agreement. No representation, inducement, promise, understanding, condition or warranty not set forth herein has been made or relied upon by any party hereto. Neither this Agreement nor any provision hereof is intended to confer upon any Person other than the parties hereto any rights or remedies hereunder other than Indemnified Parties as set forth in Section 10.1 and 10.2 hereof, which shall be a third party beneficiary hereof.
 
13.10. Severability. If any one or more provisions of this Agreement shall, for any reasons, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement, but this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.
 
13.11. Captions. The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof.
 
13.12. Construction.
 
(a) All references in this Agreement to “including” shall be deemed to mean “including, without limitation”.
 
(b) For the avoidance of any doubt, all references in this Agreement to “the knowledge or best knowledge of the Companies” or similar terms shall be deemed to include the knowledge or best knowledge of any Shareholder.
 
(c) Where the context or construction requires, all words applied in the plural shall be deemed to have been used in the singular, and vice versa; the masculine shall include the feminine and neuter, and vice versa; and the present tense shall include the past and future tense, and vice versa.
 
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13.13. Shareholders Representative.
 
(a) Each Shareholder hereby appoints Benzaken, as such Shareholder's representative to act as Representative for all purposes of this Agreement and the transactions contemplated hereby, with the right, in such capacity, in his discretion, to do any and all things and to execute any and all documents in such Shareholder's place and stead, in any way which such Shareholder could do if personally present, in connection with this Agreement and the transactions contemplated thereby, including the authority on behalf of such Shareholder, without giving notice to such Shareholder, to take any of the following actions:
 
(i) to accept on such Shareholder's behalf any amount payable to such Shareholder under this Agreement;
 
(ii) to deliver such Shareholder's certificates representing Shares;
 
(iii) to negotiate and otherwise deal with Parent, in all respects;
 
(iv) to accept and give service of process and all other notices and other communications relating to this Agreement;
 
(v) to settle any dispute relating to the terms of this Agreement;
 
(vi) to execute any instrument or document that the Representative may determine is necessary or desirable in the exercise of his authority under this Agreement and power-of-attorney; and
 
(vii) to act in connection with all matters relating to this Agreement and the transactions contemplated thereby, including the power to employ auditors, attorneys and other Persons in connection therewith.
 
(b) Each Shareholder further agrees, as follows:
 
(i) such Shareholder recognizes the inherent conflict of interest of Benzaken as the Representative and as a continuing employee of the Companies and waives any claims with respect thereto;
 
(ii) the Representative (A) shall not incur any personal liability for acting in such capacity if in doing so he acts upon advice of counsel or otherwise acts in good faith, (B) shall not incur any personal liability for acting in such capacity in the absence of his willful misconduct, (C) may act upon any instrument or signature believed by him to be genuine and may assume that any Person purporting to give any notice or instruction under this Agreement or under any other related agreement or document believed by him to be authorized has been authorized to do so (D) shall not be responsible for the investment of any payments received from Parent for the benefit of the Shareholders, and (E) shall be promptly reimbursed by the Shareholders, pro rata in proportion to their ownership of Shares immediately prior to the Closing, for out-of-pocket expenses incurred by him in his capacity of Representative, and such expenses shall first be satisfied from any Initial Payment or Contingent Payment paid by Parent and received by the Representative for the benefit of the Shareholders, prior to distribution of such payments to the Shareholders; and
 
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(c) If Benzaken is unable to serve or resigns as the Representative, the Shareholders may appoint from among their ranks a substitute Representative to replace Benzaken which individual shall have all the powers and authority granted to Benzaken by this Section 13.13. Purchaser shall accept such substitute Representative without objection; provided, however, that Benzaken shall continue to serve as the Representative until such substitute Representative has been appointed by the Shareholders.
 
(d) At and after Closing, Purchaser shall be entitled to deal exclusively with the Representative on all matters relating to this Agreement and the transactions contemplated hereby involving the Shareholders, or any of them, and shall be entitled to rely conclusively (without further evidence of any kind whatsoever) on any statements made by the Representative or documents executed or purported to be executed on behalf of any Shareholder by the Representative, and on any other action taken or purported to be taken on behalf of any Shareholder by the Representative including, without limitation, the appropriate communication or delivery to the Shareholders.
 
  
 
[END OF PAGE]
 
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IN WITNESS WHEREOF, Parent, Merger Subs and the Companies have caused this Agreement to be duly executed by their respective authorized officers and the Shareholders and the Representative have executed this Agreement as of the day and year first above written.
 
     
  Accoona Corp.
 
 
 
 
 
 
  By:   /s/ Stuart Kauder
 
Stuart Kauder
Chief Executive Officer
 
     
  SN Acquisition Corp.
 
 
 
 
 
 
  By:   /s/ Stuart Kauder
 
Stuart Kauder
  Title 
 
 
     
  ZS Acquisition Corp.
 
 
 
 
 
 
  By:   /s/ Stuart Kauder
 
Stuart Kauder
  Title 
 
     
  Skynet Communications Corp.
 
 
 
 
 
 
  By:   /s/ Allen Benzaken
 
Allen Benzaken
President
  Title 
 
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  Zylonet Systems Inc.
 
 
 
 
 
 
  By:   /s/ Allen Benzaken
 
Allen Benzaken
President
  Title 
 
     
  Shareholders:
 
 
 
 
 
 
         /s/ Allen Benzaken
 
Allen Benzaken
 
     
         /s/ Raymnod Benzaken
 
Raymond Benzaken
 
     
         /s/ Jack Benzaken
 
Jack Benzaken
 
     
       /s/ Albert Esses
 
Albert Esses
 
     
       /s/ Charles Cytryn
 
Charles Cytryn
 
     
  Representative:
 
 
 
 
 
 
      /s/ Allen Benzaken
 
Allen Benzaken
 
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Schedule I
 

   
Skynet
   
         
Shareholders
 
Number of Shares
 
% of Merger Consideration
Allen Benzaken
 
50
 
25%
Raymond Benzaken
 
50
 
25%
Jack Benzaken
 
50
 
25%
Albert Esses
 
25
 
12.5%
Charles Cytryn
 
25
 
12.5%
         
   
Zylonet
   
         
Shareholders
 
Number of Shares
 
% of Merger Consideration
Allen Benzaken
 
50
 
25%
Raymond Benzaken
 
50
 
25%
Jack Benzaken
 
50
 
25%
Albert Esses
 
25
 
12.5%
Charles Cytryn
 
25
 
12.5%
  
 
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