AGREEMENT AND PLAN OF REORGANIZATION BY AND AMONG MIDWAY GAMES INC. GTDD INC. SURREAL SOFTWARE INC. AND THE SHAREHOLDERS SIGNATORIES HERETO APRIL 5, 2004 Table of Contents

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Exhibit 99.1

AGREEMENT AND PLAN OF REORGANIZATION

BY AND AMONG

MIDWAY GAMES INC.

GTDD INC.

SURREAL SOFTWARE INC.

AND

THE SHAREHOLDERS SIGNATORIES HERETO

         APRIL 5, 2004

Table of Contents

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AGREEMENT AND PLAN OF REORGANIZATION

        This AGREEMENT AND PLAN OF REORGANIZATION (this " Agreement ") is made and entered into as of April 5, 2004 by and among MIDWAY GAMES INC., a Delaware corporation (" Parent "), GTDD INC., a Washington corporation (" Merger Sub ") and wholly owned subsidiary of Parent, SURREAL SOFTWARE INC., a Washington corporation (" Target "), the Principal Shareholders of Target and the Minority Shareholders of Target.

W I T N E S S E T H:

         WHEREAS , the Boards of Directors of Target, Parent and Merger Sub believe it is in the best interests of their respective companies and the shareholders of their respective companies that Target and Merger Sub combine into a single company through the statutory merger of Merger Sub with and into Target (the " Merger ") with Target as the surviving corporation of the Merger and, in furtherance thereof, have approved the Merger.

         WHEREAS , the parties intend, by executing this Agreement, to adopt a plan of reorganization within the meaning of Section 368 of the Code (as hereafter defined), and to cause the Merger to qualify as a reorganization under the provisions of Section 368(a)(1)(A) of the Code as a statutory merger.

         NOW, THEREFORE , in consideration of the covenants and representations set forth herein, and for other good and valuable consideration, the parties agree as follows:

        1.      Definitions.     As used in this Agreement, the following terms shall have the following meanings:

        " Additional Escrow Shares " has the meaning set forth in Section 8.1.2.

        " Articles of Merger " means the Articles of Merger and Plan of Merger attached hereto as Exhibit A.

        " Cap " means $4,000,000.

        " CERCLA " has the meaning set forth in Section 3.20.11.

        " Closing " has the meaning set forth in Section 2.2.

        " Closing Date " has the meaning set forth in Section 2.2.

        " Closing Date Balance Sheet " means the statement of all assets and liabilities of Target as of the Closing Date certified by the Principal Shareholders.

        " Closing Price " has the meaning set forth in Section 2.6.3.

        " COBRA " has the meaning set forth in Section 3.22.5.

        " Code " means the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder.

        " Confidential Information " means any and all confidential and proprietary information relating to the trade secrets, technology, services, business and financial affairs of Target or the Parent and its Subsidiaries, including any and all customer lists, purchase and sales records, marketing plans, software, game development techniques, financial information, and other confidential and proprietary information relating to the business of Target, Parent or any of Parent's Subsidiaries, or the Merger, other than such information as may at any time (i) be or become lawfully available to the general public through no fault of the disclosing party, or (ii) be or become available to a Shareholder, on a non-confidential basis from another source, not subject to a confidentiality obligation.

        " Copyrights " has the meaning set forth in Section 3.12.13.

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        " Damages " has the meaning set forth in Section 8.3.1.

        " Disclosure Materials " means the following: letter to the Shareholders of Target dated March 15, 2004 from Parent enclosing Parent's annual report on Form 10-K and a description of Parent's Common Stock; confidential letter to the Shareholders of Target dated April 1, 2004 from Parent and Target describing the Merger with Exhibits 1 through 7 attached, this Agreement and the SEC Reports.

        " Effectiveness Deadline " has the meaning set forth in Section 6.9.6.

        " Effective Time " means the effective time of the Merger as set forth in the Articles of Merger.

        " Environmental Laws " has the meaning set forth in Section 3.20.11.

        " ERISA " has the meaning set forth in Section 3.22.1.

        " ERISA Affiliate " has the meaning set forth in Section 3.22.1.

        " Escrow Agent " means initially, Shack Siegel Katz & Flaherty P.C., and any person or entity who replaces such firm as Escrow Agent with the consent of Parent and the Principal Shareholders.

        " Escrow Agreement " means the Escrow Agreement in the form of Exhibit B and any replacements thereof.

        " Escrow Fund " has the meaning set forth in Section 8.1.1

        " Escrow Shares " has the meaning set forth in Section 2.6.6.

        " Exchange Act " means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

        " Failure Days " has the meaning set forth in Section 6.9.6.

        " Filing Deadline " has the meaning set forth in Section 6.9.6.

        " Governmental Authority " has the meaning set forth in Section 3.2.

        " Hazardous Materials " has the meaning set forth in Section 3.20.12.

        " HIPAA " has the meaning set forth in Section 3.22.5.

        " Holder " has the meaning set forth in Section 6.9.1.

        " Holder Indemnitee " has the meaning set forth in Section 6.9.5.

        " Indemnified Person " has the meaning set forth in Section 6.9.8.

        " Indemnifying Person " has the meaning set forth in Section 6.9.8.

        " Individuals " has the meaning set forth in the definition of Privacy Statements.

        " Intellectual Property " has the meaning set forth in Section 3.12.1.

        " Issued Patents " has the meaning set forth in Section 3.12.11.

        " Investor Suitability Questionnaire " means the questionnaire in the form of Exhibit C-1 attached hereto.

        " Limitation " has the meaning set forth in Section 8.3.4.

        " Merger " has the meaning set forth in the first WHEREAS clause.

        " Merger Consideration " has the meaning set forth in Section 2.6.1.

        " Merger Sub " has the meaning set forth in the introductory paragraph.

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        " Minority Shareholders " means each of the shareholders of Target who are signatories hereto other than the Principal Shareholders.

        " NYSE " means the New York Stock Exchange.

        " Officer's Certificate " has the meaning set forth in Section 8.5.

        " Parent " has the meaning set forth in the introductory paragraph.

        " Parent Common Stock " means the common stock, $.01 par value, of Midway Games Inc.

        " Parent Indemnified Person " and " Parent Indemnified Persons " have the meanings set forth in Section 8.3.1.

        " Parent Indemnitee " has the meaning set forth in Section 6.9.6.

        " Patent Applications " has the meaning set forth in Section 3.12.12.

        " Patents " has the meaning set forth in Section 3.12.12.

        " Principal Shareholders " means Stuart Denman, Michael R. Nichols, Alan R. Patmore and Nicholas J. Radovich, each of whom is a signatory hereto.

        " Principal Shareholders Agent " means Nicholas J. Radovich.

        " Privacy Statements " means, collectively, any and all of Target's privacy policies published on the Target Sites or otherwise made available by Target regarding the collection, retention, use and distribution of the personal information of individuals, including, without limitation, from visitors of any of the Target Sites (" Individuals").

        " Registrable Securities " means the shares of Parent Common Stock issued as the Merger Consideration and any shares of Parent Common Stock issued pursuant to Section 6.3, and the rights associated therewith.

        " Registration Statement " has the meaning set forth in Section 6.9.1.

        " Registration Statement Questionnaire " means the questionnaire in the form of Exhibit C-2 attached hereto.

        " Release Date " has the meaning set forth in Section 8.4.2.

        " Resumption Notice " has the meaning set forth in Section 6.9.3.

        " RCRA " has the meaning set forth in Section 3.20.11.

        " Returns " has the meaning set forth in Section 3.21.2.

        " SEC " means the Securities and Exchange Commission.

        " SEC Reports " means Parent's Annual Report on Form 10-K for the year ended December 31, 2003 and its current report on Form 8-K dated March 22, 2004.

        " Securities Act " means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

        " Shareholder Agreements " means the agreements among or between one or more Shareholders relating to Target and/or Target Common Stock as identified in Section 3.7 of the Target Disclosure Schedule.

        " Shareholders " means collectively the Principal Shareholders and the Minority Shareholders.

        " Subsidiary " of a person or entity means any entity, the beneficial or record ownership of which is at least 50% owned directly or indirectly by such person or entity.

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        " Surviving Corporation " means Target as the surviving corporation of the Merger.

        " Suspension Notice " has the meaning set forth in Section 6.9.3.

        " Suspension Right " has the meaning set forth in Section 6.9.3.

        " Target " has the meaning set forth in the introductory paragraph.

        " Target Common Stock " means the common stock, no par value per share, of Target.

        " Target Disclosure Schedule " has the meaning set forth in Section 3.

        " Target Employee Plans " has the meaning set forth in Section 3.22.1.

        " Target Financial Statements " has the meaning set forth in Section 3.6.

        " Target Indemnified Person " and " Target Indemnified Persons " shall have the meaning set forth in Section 8.3.2.

        " Target Intellectual Property " has the meaning set forth in Section 3.12.4.

        " Target Option Plan " means the Surreal Software Inc. 1998 Stock Option Plan.

        " Target Options " means options granted under the Target Option Plan.

        " Target Products " has the meaning set forth in Section 3.12.32.

        " Target Sites " means all of Target's public sites on the World Wide Web.

        " Target Software " has the meaning set forth in Section 3.12.11.

        " Target's Current Facilities " has the meaning set forth in Section 3.20.2.

        " Target's Facilities " has the meaning set forth in Section 3.20.2.

        " Tax " and " Taxes " have the meanings set forth in Section 3.21.1.

        " Termination Date " has the meaning set forth in Section 8.4.1.

        " Terms and Conditions " means any and all of the visitor terms and conditions published on the Target Sites governing Individuals' use of and access to the Target Sites.

        " Third Party Intellectual Property " has the meaning set forth in Section 3.12.4.

        " Trademarks " has the meaning set forth in Section 3.12.14.

        " U.S. Person " has the meaning set forth in Section 7.1.7.

        " Value " means the closing price of Parent Common Stock on the NYSE.

        " Voting Agreements " means the voting agreement and irrevocable proxies given by each of the Minority Shareholders as identified in Section 3.7 of the Target Disclosure Schedule.

        " Washington Law " means the Revised Code of Washington.

        2.      The Merger.     

        2.1      The Merger.     At the Effective Time, subject to and upon the terms and conditions of this Agreement, the Articles of Merger, the applicable provisions of the Washington Law, and Section 368(a)(1)(A) of the Code, Merger Sub shall be merged with and into Target in a statutory merger, the separate corporate existence of Merger Sub shall cease and Target shall continue as the Surviving Corporation.

        2.2      Closing; Effective Time.     The closing of the transactions contemplated hereby (the " Closing ") shall take place concurrently herewith (the " Closing Date "). The Closing shall take place

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at the offices of Midway Games Inc., 2704 West Roscoe Street, Chicago, Illinois 60618, or at such other location as the parties hereto agree. In connection with the Closing, the parties hereto are causing the Merger to be consummated at the Effective Time by filing the Articles of Merger, together with any required certificates, with the Secretary of State of the State of Washington, in accordance with the relevant provisions of Washington Law.

        2.3      Effect of the Merger.     At the Effective Time, the effect of the Merger shall be as provided in this Agreement, and the applicable provisions of Washington Law. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the property, rights, privileges, powers and franchises of Target and Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities and duties of Target and Merger Sub shall become the debts, liabilities and duties of the Surviving Corporation.

        2.4      Articles of Incorporation; Bylaws.     

        2.4.1    The Articles of Incorporation of Merger Sub immediately prior to the Effective Time shall be the Articles of Incorporation of the Surviving Corporation except that the Articles of Incorporation of Merger Sub shall be amended to reflect the name of the Surviving Corporation as Surreal Software Inc.

        2.4.2    The Bylaws of Merger Sub, as in effect immediately prior to the Effective Time, shall be the Bylaws of the Surviving Corporation.

        2.5      Directors and Officers.     The directors of Merger Sub immediately prior to the Effective Time shall be the directors of the Surviving Corporation, to serve until their respective successors are duly elected or appointed and qualified. The officers of Target immediately prior to the Effective Time shall be the officers of the Surviving Corporation immediately after the Effective Time.

        2.6      Effect on Capital Stock.     At the Effective Time, by virtue of the Merger and without any further action on the part of Merger Sub, Target or any of the Shareholders:

        2.6.1     Conversion of Target Common Stock.     Each share of Target Common Stock issued and outstanding immediately prior to the Effective Time shall be converted and exchanged into the right to receive the following (the " Merger Consideration "): (a) that number of validly issued, fully paid and nonassessable shares of Parent Common Stock which equal the amount obtained by dividing (i) (a) $3,987,500 divided by (b) the closing price of Parent Common Stock as reported on the NYSE on the business day immediately prior to the Effective Date by (ii) the number of shares of Target Common Stock issued and outstanding immediately prior to the Effective Time (the " Exchange Ratio "), subject to Section 2.6.3 and (b) any shares issued pursuant to Sections 6.3 and 6.9.6;

        2.6.2     Capital Stock of Merger Sub.     At the Effective Time, each share of common stock of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and exchanged for one validly issued, fully paid and nonassessable share of common stock of the Surviving Corporation.

        2.6.3     Fractional Shares.     No fraction of a share of Parent Common Stock will be issued, but in lieu thereof, the number of shares of Parent Common Stock to be issued to each holder of shares of Target Common Stock who would otherwise be entitled to a fraction of a share of Parent Common Stock (after aggregating all fractional shares of Parent Common Stock to be received by such holder) shall be rounded up or down to the nearest whole share.

        2.6.4     Certificate Legends.     The shares of Parent Common Stock being issued pursuant to this Section 2.6 shall not have been registered and shall be characterized as "restricted securities" under the federal securities laws, and under such laws such shares may not be

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resold without registration under the Securities Act or pursuant to an applicable exemption from registration under the Securities Act. Each certificate evidencing shares of Parent Common Stock issued pursuant to this Section 2.6 or otherwise pursuant to this Agreement shall bear the following legends:

Certificates evidencing shares of Parent Common Stock subject to the restrictions of Section 6.2 shall bear the following legend:

All certificates shall also bear any legends required by state securities laws.

        2.6.5     Exchange Procedures.     Concurrently herewith, each Shareholder is delivering the certificates representing his shares of Target Common Stock as set forth in Schedule 2.6.5 and is being issued in exchange therefor the shares of Parent Common Stock set forth opposite such Shareholder's name on Schedule 2.6.5.

        2.6.6     Escrow.     Concurrently herewith, each of the Principal Shareholders are depositing with the Escrow Agent pursuant to Section 8.1, certificates representing 10% of the shares of Parent Common Stock issued to the Principal Shareholders (the "Escrow Shares") as set forth on Schedule 8.1, together with duly executed stock powers endorsed in blank. Such shares shall be held in escrow under the Escrow Agreement as security for the obligations of the Principal Shareholders under Section 8.

        2.7      No Further Ownership Rights in Target Common Stock.     The Merger Consideration delivered upon the surrender and exchange of shares of Target Common Stock in accordance with the terms hereof shall be deemed to have been issued in full satisfaction of all rights pertaining to such shares of Target Common Stock, and there shall be no further registration or transfers on the records of the Surviving Corporation of shares of Target Common Stock which were outstanding immediately prior to the Effective Time.

        2.8      Tax Consequences.     It is intended by the parties hereto that the Merger shall constitute a reorganization within the meaning of Section 368(a)(1)(A) of the Code as a statutory merger. The parties shall use all reasonable efforts not to take any action inconsistent with this treatment and shall report the tax treatment of this Agreement and the transactions contemplated hereby consistent with this tax treatment.

        2.9      Taking of Necessary Action; Further Action.     Each of Parent, Merger Sub, Target and the Principal Shareholders will take all such reasonable and lawful action as may be necessary or desirable in order to effectuate the Merger in accordance with this Agreement as of the Effective Time. If, at any time after the Effective Time, any further action is necessary or desirable to carry out the purposes of this Agreement and to vest the Surviving Corporation with full right, title and possession to all assets, property, rights, privileges, powers and franchises of Target and Merger Sub, the officers and directors of Target and Merger Sub are fully authorized in the name of their

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respective corporations or otherwise to take, and will take, all such lawful and necessary action, so long as such action is not inconsistent with this Agreement.

        3.      Representations and Warranties of the Principal Shareholders.     Each of the Principal Shareholders, jointly and severally, represents and warrants to Parent and Merger Sub that the statements contained in this Section 3 are true and correct, except as disclosed in a document of even date herewith and delivered by the Principal Shareholders to Parent on the date hereof referring to the representations and warranties in this Agreement (the "Target Disclosure Schedule"). The Target Disclosure Schedule will be arranged in numbered and lettered sections corresponding to the numbered and lettered sections contained in this Section 3, and the disclosure in any such numbered and lettered section of the Target Disclosure Schedule shall qualify only the corresponding subsection in this Section 3 (except to the extent disclosure in any numbered and lettered section of the Target Disclosure Schedule is specifically cross-referenced in another numbered and lettered section of the Target Disclosure Schedule).

        3.1      Organization, Standing and Power.     Target is a corporation duly organized and validly existing under the laws of the State of Washington. Target has the corporate power and authority to own its properties and to carry on its business as now being conducted and is duly qualified to do business and is in good standing (to the extent such status exists) or such qualification remains current and has not been revoked, where the conduct of its business or the ownership of its properties requires it to be qualified. Each of such jurisdictions is set forth in the Target Disclosure Schedule. Target has delivered to Parent a true, correct and complete copy of Target's Articles of Incorporation and Bylaws, each as amended to date. Target is not in violation of any of the provisions of its Articles of Incorporation or Bylaws. Target has no Subsidiaries. Target does not directly or indirectly own any equity or similar interest in, or any interest convertible or exchangeable or exercisable for, any equity or similar interest in, any corporation, partnership, joint venture or other business association or entity.

        3.2      Authority.     Target has all requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Target including, without limitation, the unanimous consent of all of the Shareholders. No further action or approval is necessary or required under Washington Law or any other law to approve the execution and delivery of this Agreement by Target and the consummation of the Merger and other transactions contemplated hereby. The Board of Directors of Target has unanimously (a) approved this Agreement and the Merger; and (b) determined that in its opinion the Merger is in the best interests of Target, as contemplated by Section 23B.08.300(1)(c) of the Washington Law.

        3.3      Enforceable Agreement.     This Agreement has been duly executed and delivered by Target and each of the Principal Shareholders and constitutes the legal, valid and binding obligation of Target and each Principal Shareholder, enforceable against Target and each Principal Shareholder in accordance with its terms.

        3.4      No Conflicts.     The execution and delivery of this Agreement by Target and the Shareholders does not, and the Merger and consummation of the transactions contemplated hereby will not, conflict with, or result in any violation of, or default under (with or without notice or lapse of time, or both), or give rise to a right of termination, cancellation or acceleration of any obligation or loss of any benefit under (a) any provision of the Articles of Incorporation or Bylaws of Target; or (b) any mortgage, indenture, lease, contract or other agreement or instrument, permit, concession, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to Target or any of the Principal Shareholders or to any of their respective properties or assets. No consent, approval, order or authorization of, or registration, declaration or

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filing with, any court, administrative agency or commission or other governmental authority or instrumentality (" Governmental Authority ") is required by or with respect to Target or any Principal Shareholder in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby, except for (a) the filing of the Articles of Merger, as provided in Section 2.2; and (b) filings required under Regulation D of the Securities Act.

        3.5      Governmental Authorization.     Target has obtained each federal, state, county, local or foreign governmental consent, license, permit, grant, or other authorization of a Governmental Authority (a) pursuant to which Target currently operates or holds any interest in any of its properties; or (b) that is required for the operation of Target's business or the holding of any such interest and all of such authorizations are in full force and effect.

        3.6      Financial Statements.     

        3.6.1    Set forth in Section 3.6 of the Target Disclosure Schedule, are the unaudited balance sheets of Target dated December 31, 2003, 2002 and 2001, together with the related statements of profit and loss for each of the fiscal years then ended, and Target's unaudited balance sheet as at April 5, 2004, and the related statement of profit and loss for the period from January 1, 2004 through such date (collectively, the " Target Financial Statements "). The Target Financial Statements have been prepared on a cash basis, applied on a consistent basis throughout the periods presented and consistent with each other. The Target Financial Statements are true, accurate and complete insofar as the information intended to be presented, have been prepared from Target's books and records, reflect all payments received or made and all purchases and sales and other operations (on a cash basis) of Target and fairly present the consolidated financial condition, operating results and cash flow of Target as of the dates, and for the periods indicated therein.

        3.6.2    Target maintains and has maintained through out the periods covered by the Target Financial Statements a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed with management's general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements of Target and to maintain accountability for assets; (iii) access to Target's assets is permitted only in accordance with management's authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Target is not party to or otherwise involved in any "off-balance sheet arrangements" (as defined in Item 303 of Regulation S-K under the Exchange Act).

        3.6.3    The Closing Date Balance Sheet has been prepared and compiled in accordance with accounting principles generally accepted in the United States, on an accrual basis, which includes reserves established for identified contingent liabilities, to reflect all assets and liabilities of Target as of the date hereof. Except as shown on the Closing Date Balance Sheet, Target has no liabilities attributable to periods on or before the Effective Time including, without limitations, obligations to any employees or Taxing authority. There are, in the aggregate, sufficient free cash balances in Target's bank accounts plus MHEI receivables to pay all unpaid liabilities of Target relating to any period or event on or prior to the Effective Time. The total amount and location of such free cash balances is set forth at Section 3.6.3 of Target Disclosure Schedule.

        3.7      Capital Structure.     The authorized capital stock of Target consists of 1,000,000 shares of Target Common Stock, of which there were issued and outstanding as of the close of business on the date hereof, 623,728 shares to the Shareholders as set forth in Schedule 2.6.5. All outstanding shares of Target Common Stock are duly authorized, validly issued, fully paid and non-assessable and are not subject to preemptive rights or rights of first refusal created by statute, the Articles of

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Incorporation or Bylaws of Target or any agreement to which Target or any Principal Shareholder is a party or by which it is bound. The record owners of Target's outstanding securities is set forth in Schedule 2.6.5. Each of the Principal Shareholders owns the number of shares of Target Common Stock set forth opposite such Principal Shareholder's name in Schedule 2.6.5, free and clear of any liens or encumbrances or any voting restrictions or agreements. There are no shares of Target Common Stock reserved for issuance. There are no options, warrants, calls, rights, commitments or agreements of any character to which Target or any Principal Shareholder is a party or by which it or any of them is bound, obligating Target or any Principal Shareholder to issue, deliver, sell, repurchase or redeem or cause to be issued, delivered, sold, repurchased or redeemed, any shares of Target Common Stock or any other security or agreement obligating Target to grant, extend, accelerate the vesting of, change the price of, or otherwise amend or enter into any such option, warrant, call, right, commitment or agreement. There are no contracts, commitments or agreements relating to voting, purchase or sale of Target Common Stock or other securities of Target (a) between or among Target and any other person or entity; or (b) to which any Principal Shareholder is a party. All shares of outstanding Target Common Stock and any rights to acquire Target Common Stock including any options, were issued and the cancellation of all Target Options was effected in compliance with all applicable federal and state securities laws.

        3.8      Absence of Certain Changes.     Since December 31, 2003, Target has conducted its business only in the ordinary course consistent with past practice and there has not occurred (a) any change, event or condition (whether or not covered by insurance) that has resulted in, or could reasonably be expected to result in, a material adverse effect on the business, assets, financial condition or prospects of Target; (b) any acquisition, sale or transfer of any asset of Target; (c) any change in accounting methods or practices (including any change in depreciation or amortization policies or rates) by Target or any revaluation by Target of any of its assets; (d) any declaration, setting aside, or payment of a dividend or other distribution with respect to the Target Common Stock or any direct or indirect redemption, purchase or other acquisition by Target of any of its shares of capital stock; (e) any contract entered into by Target, or any amendment or termination of, or default under, any contract to which Target is a party or by which it is bound; (f) any amendment or change to the Articles of Incorporation or Bylaws of Target; (g) any increase in or modification of the compensation or benefits payable or to become payable by Target to any of its directors, employees or Shareholders; or (h) any negotiation or agreement by Target to do any of the things described in the preceding clauses (a) through (g) (other than negotiations with Parent and its representatives regarding the transactions contemplated by this Agreement). At the Effective Time, there will be no accrued but unpaid dividends on shares of Target's capital stock and except as disclosed in the Closing Date Balance Sheet and as contemplated by Sections 6.11 and 6.12, no amounts owing by Target to any Shareholder.

        3.9      Absence of Undisclosed Liabilities.     Target has no obligations or liabilities of any nature (matured or unmatured, fixed or contingent) other than those set forth or adequately provided for in the Closing Date Balance Sheet. The expenses incurred by Target in connection with the negotiation of this Agreement and consummation of the transactions contemplated thereby, including fees and expenses of counsel, whether incurred and/or billed before or after the Effective Time, shall for all purposes of this Agreement constitute liabilities of Target accrued prior to the Effective Time and have been fully reserved for on the Closing Date Balance Sheet.

        3.10      Litigation.     There is no private or governmental action, suit, proceeding, claim, arbitration or investigation pending before any Governmental Authority, foreign or domestic, or, to the knowledge of the Principal Shareholders, threatened against Target or any of its properties or any of its officers or directors (in their capacities as such) or against any of the Principal Shareholders. There is no judgment, decree or order against Target, or any of its respective directors or officers (in their capacities as such) or any of the Principal Shareholders, that could

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prevent, enjoin, alter or delay any of the transactions contemplated by this Agreement. All pending or threatened litigation to which Target or any Principal Shareholder is a party is described in Section 3.10 of the Target Disclosure Schedule.

        3.11      Restrictions on Business Activities.     There is no agreement, judgment, injunction, order or decree binding upon Target or any of the Principal Shareholders that has or could reasonably be expected to have the effect of prohibiting or impairing any current or future business practice of Target, any acquisition of property by Target or the conduct of business by Target as currently conducted or as proposed to be conducted by the Surviving Corporation.

        3.12      Intellectual Property.     

        3.12.1    For purposes of this Agreement, " Intellectual Property " means:

        1      all issued patents, reissued or reexamined patents, revivals of patents, utility models, certificates of invention, registrations of patents and extensions thereof, regardless of country or formal name (collectively, " Issued Patents ");

        2      all published or unpublished nonprovisional and provisional patent applications, reexamination proceedings, invention disclosures and records of invention (collectively " Patent Applications " and, with the Issued Patents, the " Patents ");

        3      all copyrights, copyrightable works, semiconductor topography and mask work rights, including all rights of authorship, use, publication, reproduction, distribution, performance transformation, moral rights and rights of ownership of copyrightable works, semiconductor topography works and mask works, and all rights to register and obtain renewals and extensions of registrations, together with all other interests accruing by reason of international copyright, semiconductor topography and mask work conventions (collectively, " Copyrights ");

        4      trademarks, registered trademarks, applications for registration of trademarks, service marks, registered service marks, applications for registration of service marks, trade names, registered trade names and applications for registrations of trade names (collectively, " Trademarks ") and domain name registrations;

        5      all technology, ideas, inventions, designs, proprietary information, manufacturing and operating specifications, know-how, formulae, trade secrets, technical data, computer programs, hardware, software and processes; and

        6      all other intangible assets, properties and rights (whether or not appropriate steps have been taken to protect, under applicable law, such other intangible assets, properties or rights).

        3.12.2    Target owns and has good and marketable title to, or possesses legally enforceable rights to use, all Intellectual Property used or currently proposed to be used in the business of Target as currently conducted or as proposed to be conducted by Target. The Intellectual Property owned by and licensed to Target collectively constitutes all of the Intellectual Property necessary to enable Target to conduct its business as such business is currently being conducted and is set forth in Section 3.12 of the Target Disclosure Schedule. No current or former officer, director, shareholder, employee, consultant or independent contractor has any right, claim or interest in or with respect to any Target Intellectual Property.

        3.12.3    With respect to each item of Intellectual Property incorporated into any product of Target or otherwise used in the business of Target (except "off the shelf" or other software widely available through regular commercial distribution channels at a cost not exceeding

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$5,000 on standard terms and conditions, as modified for Target's operations) (" Target Intellectual Property "), Section 3.12 of the Target Disclosure Schedule lists:

        1      all Issued Patents and Patent Applications, all registered Trademarks, and pending trademark registrations and all registered Copyrights, including the jurisdictions in which each such Intellectual Property has been issued or registered or in which any such application for such issuance and registration has been filed; and

        2      the following agreements relating to each of the products of Target (the " Target Products ") or other Target Intellectual Property: all (A) agreements granting any right to distribute or sublicense a Target Product on any exclusive basis; (B) any exclusive licenses of Intellectual Property to or from Target; (C) agreements pursuant to which there are amounts actually paid or payable under firm commitments to Target; (D) joint development agreements; (E) any agreement by which Target grants any ownership right to any Target Intellectual Property; (F) any order relating to Target Intellectual Property; (G) any option relating to any Target Intellectual Property; and (H) agreements pursuant to which any party is granted any rights to access source code or to use source code to create derivative works of Target Products.

        3.12.4    Section 3.12 of the Target Disclosure Schedule contains an accurate list as of the date of this Agreement of all licenses, sublicenses and other agreements to which Target is a party and pursuant to which Target is authorized to use any Intellectual Property owned by any third party, excluding "off the shelf" or other software widely available through regular commercial distribution channels on standard terms and conditions (" Third Party Intellectual Property ").

        3.12.5    To the knowledge of the Principal Shareholders, there is no unauthorized use, disclosure, infringement or misappropriation of any Target Intellectual Property, including any Third Party Intellectual Property, by any third party, including any employee or former employee of Target. Target has not entered into any agreement to indemnify any other person against any charge of infringement of any Intellectual Property, other than indemnification provisions contained in standard publishing or development agreements arising in the ordinary course of business, the forms of which have been delivered to Parent or its counsel. There are no royalties, fees or other payments payable by Target to any Person by reason of the ownership, use, sale or disposition of Target Intellectual Property.

        3.12.6    Target is not in breach of any license, sublicense or other agreement relating to the Target Intellectual Property or Third Party Intellectual Property. Neither the execution, delivery or performance of this Agreement or any ancillary agreement contemplated hereby nor the consummation of the Merger or any of the transactions contemplated by this Agreement will contravene, conflict with or result in any limitation on the Parent's right to own or use any Target Intellectual Property, including any Third Party Intellectual Property.

        3.12.7    All Patents, registered Trademarks and registered Copyrights, if any, held by Target are valid and subsisting. All maintenance and annual fees have been fully paid and all fees paid during prosecution and after issuance of any Patent comprising or relating to such item have been paid in the correct entity status amounts. As of the Effective Time, Target is not infringing, misappropriating or making unlawful use of, or received any notice or other communication (in writing or otherwise) of any actual, alleged, possible or potential infringement, misappropriation or unlawful use of any proprietary asset owned or used by any third party. There is no proceeding pending or to the knowledge of any of the Principal Shareholders, threatened, nor has any claim or demand been made that challenges the legality, validity, enforceability or ownership of any item of Target Intellectual Property or Third Party Intellectual Property or alleges a claim of infringement of any Patents, Copyrights or Trademarks, or violation of any trade secret or other proprietary right of any third party.

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Target has not brought a proceeding alleging infringement of Target Intellectual Property or breach of any license or agreement involving Intellectual Property against any third party.

        3.12.8    All current and former officers and employees of Target have executed and delivered to Target an agreement (containing no exceptions or exclusions from the scope of its coverage) regarding the protection of proprietary information and the assignment to Target of any Intellectual Property arising from services performed for Target by such persons, the form of which is attached in the Target Disclosure Schedule. All current and former consultants and independent contractors to Target involved in the development, modification, marketing and servicing of any Target Products or Target Intellectual Property have executed and delivered to Target an agreement in the form included in the Target Disclosure Schedule (containing no exceptions or exclusions from the scope of its coverage) regarding the protection of proprietary information and the assignment to Target of any Intellectual Property arising from services performed for Target by such persons. To the knowledge of the Principal Shareholders, no employee or independent contractor of Target is in violation of any term of any patent disclosure agreement or employment contract or any other contract or agreement relating to the relationship of any such employee or independent contractor with Target. No current or former officer, director, stockholder, employee, consultant or independent contractor has any right, claim or interest in or with respect to any Target Intellectual Property.

        3.12.9    Target has taken all commercially reasonable and customary measures and precautions necessary to protect and maintain the confidentiality of all Target Intellectual Property (except such Target Intellectual Property whose value would be unimpaired by public disclosure) and otherwise to maintain and protect the full value of all Target Intellectual Property. All use, disclosure or appropriation of Intellectual Property not otherwise protected by patents, patent applications or copyright (" Confidential Information ") owned by Target by or to a third party has been pursuant to the terms of a written agreement between Target and such third party. All use, disclosure or appropriation of Confidential Information not owned by Target has been pursuant to the terms of a written agreement between Target and the owner of such Confidential Information, or is otherwise lawful.

        3.12.10    No product liability claims have been communicated in writing to Target or, to the knowledge of the Principal Shareholders, threatened against Target.

        3.12.11    A complete list of each of the Target Products and Target's proprietary software (" Target Software "), together with a brief description of each, is set forth in Section 3.12 of the Target Disclosure Schedule. The Target Software and Target Products conform in all material respects with any specification, documentation, performance standard, representation or statement provided with respect thereto by or on behalf of Target.

        3.12.12    Target is not subject to any proceeding or outstanding decree, order, judgment or stipulation restricting in any manner the use, transfer or licensing of any Target Intellectual Property by Target, or which may affect the validity, use or enforceability of such Target Intellectual Property. Target is not subject to any agreement that restricts the use, transfer, delivery or licensing by Target of the Target Intellectual Property or Target Products.

        3.12.13    Except as set forth in Section 3.12.13 of the Target Disclosure Schedule, none of the Target Products contains any software that may be subject to an open source or general public license.

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        3.13      Interested Party Transaction.     Target is not indebted to any director, officer, employee, agent or Shareholder of Target (except for amounts due as normal salaries and bonuses and in reimbursement of ordinary expenses), and no such person is indebted to Target. There have been no transactions during the two-year period ending on the date hereof that would require disclosure if Target were subject to disclosure under Item 404 of Regulation S-K under the Securities Act.

        3.14      Minute Books.     The minute books of Target contain all minutes and other records of all meetings of the Board of Directors, committees of the Board of Directors and shareholders of Target or actions by written consent in lieu of meetings by the Board of Directors, committees of the Board of Directors or shareholders of Target since the time of incorporation of Target through the date of this Agreement, and reflect all transactions referred to in such minutes accurately in all material respects.

        3.15      Complete Copies of Materials.     Target has delivered or made available true and complete copies of each document identified in the Target Disclosure Schedule or that has otherwise been requested by Parent or its counsel in connection with their due diligence review of Target.

        3.16      Contracts.     All of Target's contracts and agreements, written or oral, are listed in Section 3.16 of the Target Disclosure Schedule except for those contracts and agreements which, by their terms, have been fully completed or otherwise terminated so that no party thereto has any obligation thereunder after the Effective Time. With respect to each such contract: (a) the contract is legal, valid, binding and enforceable and in full force and effect with respect to Target, and is legal, valid, binding, enforceable and in full force and effect with respect to each other party thereto, in either case subject to the effect of bankruptcy, insolvency, moratorium or other similar laws affecting the enforcement of creditors' rights generally and except as the availability of equitable remedies may be limited by general principles of equity; (b) the contract will continue to be legal, valid, binding and enforceable and in full force and effect immediately following the Effective Time in accordance with its terms as in effect prior to the Effective Time, subject to the effect of bankruptcy, insolvency, moratorium or other similar laws affecting the enforcement of creditors' rights generally and except as the availability of equitable remedies may be limited by general principles of equity; and (c) neither Target nor, to the knowledge of the Principal Shareholders, any other party is in breach or default, and no event has occurred that with notice or lapse of time would constitute a breach or default by Target or, to the knowledge of the Principal Shareholders, by any such other party, or permit termination, modification or acceleration, under such contract.

        3.17      Accounts Receivable.     Subject to any reserves set forth therein, the accounts receivable shown on the Target Financial Statements are valid and genuine, have arisen solely out of bona fide sales and deliveries of goods, performance of services, and other business transactions in the ordinary course of business consistent with past practices in each case with persons other than affiliates, are not subject to any prior assignment, lien or security interest, and are not subject to valid defenses, set-offs or counter claims. The accounts receivable are collectible in accordance with their terms at their recorded amounts, subject only to the reserve for doubtful accounts on the Closing Date Balance Sheet.

        3.18      Employees and Consultants.     Section 3.18 of the Target Disclosure Schedule or a separate letter delivered to Parent by Target and initialed by the Principal Shareholders contains a list of the names of all employees (including without limitation part-time employees and temporary employees), leased employees, independent contractors and consultants of Target, together with their respective salaries or wages, other compensation, dates of employment and positions.

        3.19      Title to Property.     Target has good and marketable title to all of its properties, interests in properties and assets, real and personal, or with respect to leased properties and assets, valid leasehold interests therein, free and clear of all mortgages, liens, pledges, charges or encumbrances

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of any kind or character. The property and equipment of Target that are used in the operations of Target's business are in all respects in good operating condition and repair, subject to normal wear and tear. All properties used in the operations of Target are reflected in the Closing Date Balance Sheet to the extent required by generally accepted accounting principles. All leases to which Target is a party are in full force and effect and are valid, binding and enforceable in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting or relating to creditors' rights generally; and general principles of equity, regardless of whether asserted in a proceeding in equity or at law. Target owns no real property. All of Target's property is located at its offices at 701 North 34 ^th Street, Seattle, Washington 98103. A list of all of Target's fixed tangible assets and the cost and book value thereof is set forth in the Target Disclosure Schedule.

        3.20      Environmental Matters.     

        3.20.1     The following terms shall be defined as follows:

        1      " Environmental Laws " shall mean any applicable foreign, federal, state or local governmental laws (including common laws), statutes, ordinances, codes, regulations, rules, policies, permits, licenses, certificates, approvals, judgments, decrees, orders, directives, or requirements that pertain to the protection of the environment, protection of public health and safety, or protection of worker health and safety, or that pertain to the handling, use, manufacturing, processing, storage, treatment, transportation, discharge, release, emission, disposal, re-use, recycling, or other contact or involvement with Hazardous Materials (as defined in Section 3.20.12), including, without limitation, the federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. Section 9601, et seq., as amended (" CERCLA "), and the federal Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., as amended (" RCRA ").

        2      " Hazardous Materials " shall mean any material, chemical, compound, substance, mixture or by-product that is identified, defined, designated, listed, restricted or otherwise regulated under Environmental Laws as a "hazardous constituent," "hazardous substance," "hazardous material," "acutely hazardous material," "extremely hazardous material," "hazardous waste," "hazardous waste constituent," "acutely hazardous waste," "extremely hazardous waste," "infectious waste," "medical waste," "biomedical waste," "pollutant," "toxic pollutant," "contaminant" or any other formulation or terminology intended to classify or identify substances, constituents, materials or wastes by reason of properties that are deleterious to the environment, natural resources, worker health and safety, or public health and safety, including without limitation ignitability, corrosivity, reactivity, carcinogenicity, toxicity and reproductive toxicity. The term "Hazardous Materials" shall include without limitation any "hazardous substances" as defined, listed, designated or regulated under CERCLA, any "hazardous wastes" or "solid wastes" as defined, listed, designated or regulated under RCRA, any asbestos or asbestos-containing materials, any polychlorinated biphenyls, and any petroleum or hydrocarbonic substance, fraction, distillate or by-product.

        3.20.2     Target is and has been in compliance with all Environmental Laws relating to the properties or facilities used, leased or occupied by Target at any time (collectively, " Target's Facilities ;" such properties or facilities currently used, leased or occupied by Target are defined herein as " Target's Current Facilities "), and to the knowledge of the Principal Shareholders no discharge, emission, release, leak or spill of Hazardous Materials has occurred at any of Target's Facilities that may or will give rise to liability of Target under Environmental Laws. To the knowledge of the Principal Shareholders, there are no Hazardous Materials (including without limitation asbestos) present in the surface waters, structures, ground waters or soils of or beneath any of Target's Current Facilities. To the knowledge of the Principal Shareholders, there neither are nor have been any aboveground or underground storage tanks for Hazardous Materials at Target's Current Facilities. To the knowledge of the Principal

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Shareholders, no Target employee or other person has claimed that Target is liable for alleged injury or illness resulting from an alleged exposure to a Hazardous Material. No civil, criminal or administrative action, proceeding or investigation is pending against Target, or, to the knowledge of the Principal Shareholders, threatened against Target, with respect to Hazardous Materials or Environmental Laws; and Target is not aware of any facts or circumstances that could form the basis for assertion of a claim against Target or that could form the basis for liability of Target, regarding Hazardous Materials or regarding actual or potential noncompliance with Environmental Laws.

        3.21      Taxes.     

        3.21.1    As used in this Agreement, the terms " Tax " and, collectively, " Taxes " mean any and all federal, state and local taxes of any country, assessments and other governmental charges, duties, impositions and liabilities, including taxes based upon or measured by gross receipts, income, profits, sales, use and occupation, and value added, ad valorem, stamp transfer, franchise, withholding, payroll, recapture, employment, excise and property taxes, together with all interest, penalties and additions imposed with respect to such amounts and any obligations under any agreements or arrangements with any other person with respect to such amounts and including any liability for taxes of a predecessor entity.

        3.21.2    Target has prepared and timely filed all returns, estimates, information statements and reports required to be filed by Target with any taxing authority (" Returns ") relating to any and all Taxes concerning or attributable to Target or its operations with respect to Taxes with a due date, including extension, on or prior to the Closing Date and such Returns are true and correct in all material respects and have been completed in accordance with applicable law. Target and the Shareholders have made appropriate filings for Target to be treated as an S Corporation under the Code and for comparable treatment under all applicable state and local law. Target is and has had an S Corporation election in effect from January 1, 2003 through the end of the day that includes the Effective Time. Target has taken no actions nor delayed from taking any action that has resulted in the termination of the S corporation election status for any period ending on or before the end of the day that includes the Effective Time.

        3.21.3    Target, as of the Effective Time, (i) will have paid all taxes shown to be payable on such Returns covered by Section 3.21.2, and (ii) will have withheld with respect to its employees all Taxes required to be withheld.

        3.21.4    There is no Tax deficiency outstanding or assessed or, to the knowledge of the Principal Shareholders, proposed against Target that is not reflected as a liability on the Closing Date Balance Sheet, nor has Target executed any agreements or waivers extending any statute of limitations on or extending the period for the assessment or collection of any Tax.

        3.21.5    Target has no liabilities for unpaid Taxes that have not been accrued for or reserved on the Closing Date Balance Sheet, whether asserted or unasserted, contingent or otherwise and Target has no knowledge of any basis for the assertion of any such liability attributable to Target, its assets or operations.

        3.21.6    Target is not a party to any tax-sharing agreement or similar arrangement with any other party, and Target has not assumed any obligation to pay any Tax obligations of, or with respect to any transaction relating to, any other person or agreed to indemnify any other person with respect to any Tax.

        3.21.7    Other than the audit for Washington Business and Occupancy and Sales and Use Taxes for the period January 1, 1998 through June 30, 2001, Target's Returns have never been

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audited by a Governmental Authority nor is any such audit in process or pending, and Target has not been notified of any request for such an audit or other examination.

        3.21.8    Target has never been a member of an affiliated group of corporations filing a consolidated federal income tax return.

        3.21.9    Target has disclosed to Parent (i) any Tax exemption, Tax holiday or other Tax-sharing arrangement that Target has in any jurisdiction, including the nature, amount and lengths of such Tax exemption, Tax holiday or other Tax-sharing arrangement; and (ii) any expatriate tax programs or policies affecting Target. Target is in compliance with all terms and conditions required to maintain such Tax exemption, Tax holiday or other Tax-sharing arrangement or order of any Governmental Authority and the consummation of the transactions contemplated hereby will not have any adverse effect on the continuing validity and effectiveness of any such Tax exemption, Tax holiday or other Tax-sharing arrangement or order.

        3.21.10    Target has made available to Parent copies of all Returns filed for all periods since January 1, 1998.

        3.21.11    Target has not filed any consent agreement under Section 341(f) of the Code or agreed to have Section 341(f)(4) apply to any disposition of assets owned by Target;

        3.21.12    Target has not been at any time a United States Real Property Holding Corporation within the meaning of Section 897(c)(2) of the Code; and

        3.21.13    Target is not a party to any contract, agreement, plan or arrangement, including but not limited to the provisions of this Agreement, covering any employee or former employee of Target that, individually or collectively, could give rise to the payment of any amount that would not be deductible pursuant to Sections 280G, 464 or 162(m) of the Code by Target or Merger Sub as an expense under applicable law.

        3.22      Employee Benefit Plans.     

        3.22.1    Section 3.22 of the Target Disclosure Schedule contains a complete and accurate list of each plan, program, policy, practice, contract, agreement or other arrangement providing for employment, compensation, retirement, deferred compensation, loans, severance, separation, relocation, repatriation, expatriation, visas, work permits, termination pay, performance awards, bonus, incentive, stock option, stock purchase, stock bonus, phantom stock, stock appreciation right, supplemental retirement, fringe benefits, cafeteria benefits or other benefits, whether written or unwritten, including without limitation each "employee benefit plan" within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (" ERISA "), which is or has been sponsored, maintained, contributed to, or required to be contributed to by Target and, with respect to any such plans which are subject to Code Section 401(a), any trade or business (whether or not incorporated) that is or at any relevant time was treated as a single employer with Target within the meaning of Section 414(b), (c), (m) or (o) of the Code, (an " ERISA Affiliate ") for the benefit of any person who performs or who has performed services for Target or with respect to which Target or any ERISA Affiliate has or may have any liability (including without limitation contingent liability) or obligation (collectively, the " Target Employee Plans ").

        3.22.2     Documents.     Target has furnished to Parent true and complete copies of documents embodying each of the Target Employee Plans and related plan documents, including without limitation trust documents, group annuity contracts, plan amendments, insurance policies or contracts, participant agreements, employee booklets, administrative service agreements, summary plan descriptions, compliance and nondiscrimination tests for the

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last three plan years, standard COBRA forms and related notices, registration statements and prospectuses and, to the extent still in its possession, any material employee communications relating thereto. With respect to each Target Employee Plan that is subject to ERISA reporting requirements, Target has provided copies of the Form 5500 reports filed for the last five plan years. Target has furnished Parent with the most recent Internal Revenue Service determination or opinion letter issued with respect to each such Target Employee Plan, and to The knowledge of the Principal Shareholders nothing has occurred since the issuance of each such letter that could reasonably be expected to cause the loss of the tax-qualified status of any Target Employee Plan subject to Code Section 401(a).

        3.22.3     Compliance.     (i) Each Target Employee Plan has been administered in accordance with its terms and in compliance with the requirements prescribed by any and all statutes, rules and regulations (including ERISA and the Code), except as could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Target; and Target and each ERISA Affiliate have performed all material obligations required to be performed by them under, are not in material respect in default under or violation of and have no knowledge of any material default or violation by any other party to, any of the Target Employee Plans; (ii) any Target Employee Plan intended to be qualified under Section 401(a) of the Code has either obtained from the Internal Revenue Service a favorable determination letter as to its qualified status under the Code, including all currently effective amendments to the Code, or has time remaining to apply under applicable Treasury Regulations or Internal Revenue Service pronouncements for a determination or opinion letter and to make any amendments necessary to obtain a favorable determination or opinion letter; (iii) none of the Target Employee Plans promises or provides retiree medical or other retiree welfare benefits to any person; (iv) there has been no "prohibited transaction," as such term is defined in Section 406 of ERISA or Section 4975 of the Code, with respect to any Target Employee Plan; (v) none of Target or any ERISA Affiliate is subject to any liability or penalty under Sections 4976 through 4980 of the Code or Title I of ERISA with respect to any Target Employee Plan; (vi) all contributions required to be made by Target or any ERISA Affiliate to any Target Employee Plan have been paid or accrued; (vii) with respect to each Target Employee Plan, no "reportable event" within the meaning of Section 4043 of ERISA (excluding any such event for which the thirty (30) day notice requirement has been waived under the regulations to Section 4043 of ERISA) nor any event described in Section 4062, 4063 or 4041 or ERISA has occurred; (viii) each Target Employee Plan subject to ERISA has prepared in good faith and timely filed all requisite governmental reports, which were true and correct as of the date filed, and has properly and timely filed and distributed or posted all notices and reports to employees required to be filed, distributed or posted with respect to each such Target Employee Plan; (ix) no suit, administrative proceeding, action or other litigation has been brought, or to the knowledge of Target is threatened, against or with respect to any such Target Employee Plan, including any audit or inquiry by the IRS or United States Department of Labor; and (x) there has been no amendment to, written interpretation or announcement by Target or any ERISA Affiliate that would materially increase the expense of maintaining any Target Employee Plan above the level of expense incurred with respect to that Plan for the most recent fiscal year included in the Target Financial Statements.

        3.22.4     No Title IV or Multiemployer Plan.     Neither Target nor any ERISA Affiliate has ever maintained, established, sponsored, participated in, contributed to, or is obligated to contribute to, or otherwise incurred any obligation or liability (including without limitation any contingent liability) under any "multiemployer plan" (as defined in Section 3(37) of ERISA) or to any "pension plan" (as defined in Section 3(2) of ERISA) subject to Title IV of ERISA or Section 412 of the Code. None of Target or any ERISA Affiliate has any actual or potential

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withdrawal liability (including without limitation any contingent liability) for any complete or partial withdrawal (as defined in Sections 4203 and 4205 of ERISA) from any multiemployer plan.

        3.22.5     COBRA, FMLA, HIPAA, Cancer Rights.     With respect to each Target Employee Plan, Target has complied with (i) the applicable health care continuation and notice provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985 (" COBRA ") and the regulations thereunder or any state law governing health care coverage extension or continuation; (ii) the applicable requirements of the Family and Medical Leave Act of 1993 and the regulations thereunder; (iii) the applicable requirements of the Health Insurance Portability and Accountability Act of 1996 (" HIPAA "); and (iv) the applicable requirements of the Cancer Rights Act of 1998. Target has no unsatisfied obligations to any employees, former employees or qualified beneficiaries pursuant to COBRA, HIPAA or any state law governing health care coverage extension or continuation.

        3.22.6     Effect of Transaction.     The consummation of the transactions contemplated by this Agreement will not (i) entitle any current or former employee or other service provider of Target or any ERISA Affiliate to severance benefits or any other payment (including without limitation unemployment compensation, golden parachute, bonus or benefits under any Target Employee Plan), except as expressly provided in this Agreement; or (ii) accelerate the time of payment or vesting of any such benefits or increase the amount of compensation due any such employee or service provider. No benefit payable or that may become payable by Target pursuant to any Target Employee Plan or as a result of or arising under this Agreement shall constitute an "excess parachute payment" (as defined in Section 280G(b)(1) of the Code) subject to the imposition of an excise Tax under Section 4999 of the Code or the deduction for which would be disallowed by reason of Section 280G of the Code. Each Target Employee Plan can be amended, terminated or otherwise discontinued after the Effective Time in accordance with its terms, without material liability to Acquirer or Target other than ordinary administration expenses typically incurred in a termination event.

        3.23      Employee Matters.     Target is in compliance with all currently applicable laws and regulations respecting terms and conditions of employment, including without limitation applicant and employee background checking, immigration laws, discrimination laws, verification of employment eligibility, employee leave laws, classification of workers as employees and independent contractors, wage and hour laws, and occupational safety and health laws. There are no proceedings pending or, to the knowledge of the Principal Shareholders, reasonably expected or threatened, between Target, on the one hand, and any or all of its current or former employees, on the other hand, including without limitation any claims for actual or alleged harassment or discrimination based on race, national origin, age, sex, sexual orientation, religion, disability, or similar tortious conduct, breach of contract, wrongful termination, defamation, intentional or negligent infliction of emotional distress, interference with contract or interference with actual or prospective economic disadvantage. There are no claims pending, or, to the knowledge of the Principal Shareholders, reasonably expected or threatened, against Target under any workers' compensation or long-term disability plan or policy. Target has no unsatisfied obligations to any employees, former employees, or qualified beneficiaries pursuant to COBRA, HIPAA, or any state law governing health care coverage extension or continuation. Target is not a party to any collective bargaining agreement or other labor union contract, nor does Target know of any activities or proceedings of any labor union to organize its employees. Target has provided all employees with all wages, benefits, relocation benefits, stock options, bonuses and incentives, and all other compensation that became due and payable through the Effective Time. As of the Closing Date, Target has paid to its employees all salary, benefits and other compensation due its employees for services rendered, work performed or otherwise attributable, to any period on or

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before the Effective Time including, without limitation, accrued and unused earned vacation pay, sick time or other time for which any employee may be entitled so that the Surviving Corporation shall have no liability immediately after the Effective Time to any of its employees. Target has made all applicable withholding from such amounts and paid all payroll and other taxes with respect thereto. Target is not paying and is not obligated to pay any employee or any former employee any disability or workers compensation payments or unemployment benefits.

        3.24      Insurance.     Target has policies of insurance and bonds of the type and in amounts customarily carried by persons conducting businesses or owning assets similar to those of Target, all of which are disclosed in the Target Disclosure Schedule. There is no claim pending under any of such policies or bonds as to which coverage has been questioned, denied or disputed by the underwriters of such policies or bonds. All premiums due and payable under all such policies and bonds have been paid and Target is otherwise in compliance with the terms of such policies and bonds. Target is not required to pay any deductibles, self-insured retentions or administration costs under any of such policies and there are no losses for which Target is not fully insured. No insurer is defending Target against any claim made under any such policies under a reservation of rights or has denied coverage for any such claim. No Principal Shareholder has any knowledge of any threatened termination of, or premium increase with respect to, any of such policies.

        3.25      Compliance with Laws.     Target has complied with, is not in violation of and has not received any notices of violation with respect to, any federal state, local or foreign statute, law or regulation with respect to the conduct of its business, or the ownership or operation of its business.

        3.26      Brokers' and Finders' Fee.     Neither Target nor any of the Principal Shareholders is required to pay any broker, finder or investment banker brokerage or finders' fees or agents' commissions or investment bankers' fees or any similar charges in connection with the Merger, this Agreement or any transaction contemplated hereby.

        3.27      Personally Identifiable Information.     Target has never, directly or indirectly through a third party, collected or stored any personally identifiable information of consumers or other individuals (e.g., first name, last name, physical address, email address or any other unique identifiers) through email, through any website it has owned, maintained, operated, sponsored, or endorsed or through any other means.

        3.28      Bank Accounts; Officers and Directors.     Section 3.6.3 of the Target Disclosure Schedule sets forth the following information:

        3.28.1    the name of each bank or other institution at which Target has an account or safe deposit box, brokerage or money market account, or standby letter of credit issued, the identifying numbers or symbols thereof and the names of all persons authorized to draw thereon or to have access thereto;

        3.28.2    the names and titles of all officers and directors of Target and of each trustee, fiduciary or plan administrator of each employee benefit plan of Target; and

        3.28.3    the free cash balances in all accounts. Cash balances shall not be deemed "free" for purposes of this Section 3.28 or Section 3.6.3 to the extent there are outstanding checks or drafts drawn against such funds.

        3.29      Credit Cards.     All credit cards of Target, including American Express and Bank of America credit cards are identified in the Target Disclosure Schedule together with who has possession of the cards and the unpaid balances on each card as of the date hereof. It is Target's policy that these credit cards may only be used for legitimate business expenses and that the user of the card is required to reimburse Target for any unauthorized charges.

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        3.30      Representations Complete.     None of the representations or warranties made by the Principal Shareholders herein or in any Schedule or Exhibit hereto, including the Target Disclosure Schedule, or certificates furnished by any Principal Shareholder pursuant to this Agreement or in the Disclosure Materials as they relate to Target, the Principal Shareholders on the Merger, when all such documents are read together in their entirety, contain, or will contain at the Effective Time, any untrue statement of a material fact, or omits or will omit at the Effective Time to state any material fact about Target or the Principal Shareholders necessary in order to make the statements contained herein or therein, in the light of the circumstances under which made, not misleading.:

        4.      Representations and Warranties of the Shareholders.     Each Shareholder hereby, as to himself only and for no other Shareholder, represents and warrants to Parent and Merger Sub as follows

        4.1    Organization; Authority.     Such Shareholder has the necessary power and capacity to execute and deliver this Agreement and perform his obligations hereunder. This Agreement has been duly executed and delivered by such Shareholder and constitutes the valid and binding obligation of such Shareholder, enforceable against him in accordance with its terms.

        4.2    Investment Intent.     Such Shareholder is acquiring the Parent Common Stock as principal for his own account, for investment purposes only and not with a view to or for distributing or reselling such Parent Common Stock or any part thereof, without prejudice, however, to such Shareholder's right, subject to the provisions of this Agreement, at all times to sell or otherwise dispose of all or any part of such Parent Common Stock pursuant to an effective registration statement under the Securities Act or under an exemption from such registration and in compliance with applicable federal and state securities laws. Nothing contained herein shall be deemed a representation or warran