EXHIBIT 2.2
STOCK PURCHASE AGREEMENT
AMONG
XOOM CORPORATION,
WORLDQUEST NETWORKS, INC.
AND
WQN MERCURY INC.
JULY 26, 2004
TABLE OF CONTENTS
PAGE
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1. Definitions........................................................................................... 1
2. Purchase and Sale of Target Shares.................................................................... 5
(a) Basic Transaction............................................................................ 5
(b) Purchase Price............................................................................... 5
(c) The Closing.................................................................................. 5
(d) Deliveries at the Closing.................................................................... 5
3. Representations and Warranties Concerning the Transaction............................................. 6
(a) Representations and Warranties of the Seller................................................. 6
(b) Representations and Warranties of the Buyer.................................................. 7
4. Representations and Warranties Concerning the Target.................................................. 8
(a) Organization, Qualification, and Corporate Power............................................. 8
(b) Capitalization............................................................................... 9
(c) Noncontravention............................................................................. 9
(d) Brokers' Fees................................................................................ 9
(e) Title to Assets.............................................................................. 9
(f) Subsidiaries................................................................................. 9
(g) Financial Statements......................................................................... 9
(h) Events Subsequent to Most Recent Fiscal Year End............................................. 10
(i) Undisclosed Liabilities...................................................................... 12
(j) Legal Compliance............................................................................. 12
(k) Tax Matters.................................................................................. 12
(l) Real Property................................................................................ 14
(m) Intellectual Property........................................................................ 14
(n) Tangible Assets.............................................................................. 16
(o) Contracts.................................................................................... 16
(p) Notes and Accounts Receivable................................................................ 17
(q) Powers of Attorney........................................................................... 17
(r) Insurance.................................................................................... 17
(s) Litigation................................................................................... 17
(t) Warranty..................................................................................... 18
(u) Employees.................................................................................... 18
(v) Employee Benefits............................................................................ 18
(w) Guaranties................................................................................... 18
(x) Environmental Matters........................................................................ 18
(y) Certain Business Relationships with the Target............................................... 19
(z) Sufficient Deposits.......................................................................... 19
(aa) RBI Agreement................................................................................ 19
(bb) Due Diligence................................................................................ 19
(cc) Disclosure................................................................................... 19
5. Post-Closing Covenants................................................................................ 20
(a) General...................................................................................... 20
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(b) Litigation Support........................................................................... 20
(c) Transition................................................................................... 20
(d) Confidentiality.............................................................................. 20
(e) Covenant Not to Compete...................................................................... 21
(f) Access to the Seller's Customer Database..................................................... 21
(g) Right to Purchase Pre-Paid Telephone Cards................................................... 21
6. Remedies for Breaches of This Agreement............................................................... 21
(a) Survival of Representations and Warranties................................................... 21
(b) Indemnification Provisions for Benefit of the Buyer.......................................... 21
(c) Indemnification Provisions for Benefit of the Seller......................................... 22
(d) Matters Involving Third Parties.............................................................. 22
(e) Nature of Remedies........................................................................... 23
7. Tax Matters........................................................................................... 24
(a) Tax Sharing Agreements....................................................................... 24
(b) Returns for Periods Through the Closing Date................................................. 24
(c) Audits....................................................................................... 24
(d) Carrybacks................................................................................... 24
(e) Prior Ownership Changes...................................................................... 24
(f) Section 338(h)(10) Election.................................................................. 25
(g) Certain Taxes................................................................................ 25
8. Miscellaneous......................................................................................... 25
(a) Press Releases and Public Announcements...................................................... 25
(b) No Third-Party Beneficiaries................................................................. 25
(c) Entire Agreement............................................................................. 25
(d) Succession and Assignment.................................................................... 25
(e) Counterparts................................................................................. 26
(f) Headings..................................................................................... 26
(g) Notices...................................................................................... 26
(h) Governing Law................................................................................ 27
(i) Amendments and Waivers....................................................................... 27
(j) Severability................................................................................. 27
(k) Expenses..................................................................................... 27
(l) Construction................................................................................. 27
(m) Incorporation of Exhibits, Annexes, and Schedules............................................ 27
(n) Specific Performance......................................................................... 27
(o) Submission to Jurisdiction................................................................... 28
Exhibit A - Form of Buyer Note
Exhibit B - Form of Stock Purchase Warrant
Exhibit C - Form of Stock Pledge Agreement
Exhibit D - Financial Statements
Disclosure Schedule - Exceptions to Representations and Warranties
Concerning the Target
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") entered into on this 26th
day of July, 2004, by and among XOOM CORPORATION, a California corporation (the
"Buyer"), WORLDQUEST NETWORKS, INC., a Delaware corporation (the "Parent") and
WQN MERCURY INC., a Delaware corporation and a wholly-owned subsidiary of Parent
("WQN" and collectively with the Parent, the "Seller"). The Buyer, the Parent
and WQN are referred to collectively herein as the "Parties."
R E C I T A L S
The Parent owns all of the issued and outstanding capital stock of WQN,
which owns all of the issued and outstanding capital stock of xxxxxxxxxxxxxx.xxx
Inc. d/b/a Cash2, a Delaware corporation (the "Target").
This Agreement contemplates a transaction in which the Buyer will
purchase from the Seller, and the Seller will sell to the Buyer, all of the
outstanding capital stock of the Target in return for cash, the Buyer Note and
the Warrant.
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
A G R E E M E N T
1. DEFINITIONS.
"Accredited Investor" has the meaning set forth in Regulation D
promulgated under the Securities Act.
"Adverse Consequences" means all claims, damages, costs, Liabilities,
deficiencies, losses, and expenses, including court costs and reasonable
attorneys' fees and expenses relating to such claims, damages, costs,
Liabilities, deficiencies, losses and expenses.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the meaning of
Code Section 1504(a) or any similar group defined under a similar provision of
state, local or foreign law.
"Agreement" has the meaning set forth in the preface above.
"Basis" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or could form the basis for
any specified consequence.
"Buyer" has the meaning set forth in the preface above.
"Buyer Note" has the meaning set forth in Section 2(b) below.
"CERCLA" has the meaning set forth in Section 4(x) below.
"Closing" has the meaning set forth in Section 2(c) below.
"Closing Date" has the meaning set forth in Section 2(c) below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Competing Business" has the meaning set forth in Section 5(e) below.
"Confidential Information" means any information concerning the
businesses and affairs of the Target that is not already generally available to
the public.
"Deferred Intercompany Transaction" has the meaning set forth in Reg.
Section 1.1502-13.
"Disclosure Schedule" has the meaning set forth in Section 4 below.
"Employee Benefit Plan" means any "employee benefit plan" (as such term
is defined in ERISA Section 3(3)).
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
Section 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Section 3(1).
"Environmental Laws" shall mean all federal, state, local and foreign
statutes, regulations, ordinances and other provisions having the force or
effect of law, all judicial and administrative orders and determinations, and
all common law concerning public health and safety, worker health and safety,
and pollution or protection of the environment, including without limitation all
those relating to the presence, use, production, generation, handling,
transportation, treatment, storage, disposal, distribution, labeling, testing,
processing, discharge, release, threatened release, control, or cleanup of (i)
any petroleum, petroleum products, byproducts or breakdown products, radioactive
materials, asbestos-containing materials or polychlorinated biphenyls or lead or
(ii) any chemical, compound, material, substance or waste regulated pursuant to
any applicable Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Excess Loss Account" has the meaning set forth in Reg. Section
1.1502-19.
"Financial Statements" has the meaning set forth in Section 4(g) below.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
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"Indemnified Party" has the meaning set forth in Section 6(d) below.
"Indemnifying Party" has the meaning set forth in Section 6(d) below.
"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, domain names, pricing and cost information, and
business and marketing plans and proposals), (f) all computer software
(including data and related documentation, source code and web applications),
(g) all other proprietary rights, and (h) all copies and tangible embodiments
thereof (in whatever form or medium).
"Knowledge" means actual knowledge after reasonable investigation.
"Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"Material Adverse Effect" means, for purposes of this Agreement, any
change, event or effect that is, or would reasonably be expected to be,
materially adverse to the business, operations, assets (including intangible
assets), condition (financial or otherwise), results of operations or prospects
of the Target, the Parent, WQN or the Buyer, as applicable.
"Most Recent Balance Sheet" means the balance sheet contained within
the Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth in Section
4(g) below.
"Most Recent Fiscal Month End" has the meaning set forth in Section
4(g) below.
"Most Recent Fiscal Year End" has the meaning set forth in Section 4(g)
below.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Parent" has the meaning set forth in the preface above.
"Parties" has the meaning set forth in the preface above.
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"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"Purchase Price" has the meaning set forth in Section 2(b) below.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for Taxes not yet due and payable or for Taxes that
the taxpayer is contesting in good faith through appropriate proceedings, (c)
purchase money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business and
not incurred in connection with the borrowing of money.
"Seller" has the meaning set forth in the preface above.
"Subsidiary" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.
"SWDA" has the meaning set forth in Section 4(x) below.
"Target" has the meaning set forth in the recitals above.
"Target Share" means any share of the common stock, par value $0.01 per
share, of the Target.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Section
59A), customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning set forth in Section 6(d) below.
"Warrant" has the meaning set forth in Section 2(b) below.
"Working Capital Amount" means the amount by which (i) the total dollar
amount of cash, accounts receivable and prepaid expenses on the Most Recent
Balance Sheet (which figure
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shall not include the $100,000 that the Target has on deposit with the Punjab
National Bank) exceeds (ii) the total dollar amount of those liabilities
identified in accordance with GAAP as "current liabilities" on the Most Recent
Balance Sheet, which amount shall be agreed upon by the Buyer and the Seller in
writing prior to or as of the date of this Agreement.
"WQN" has the meaning set forth in the preface above.
2. PURCHASE AND SALE OF TARGET SHARES.
(a) BASIC TRANSACTION. On and subject to the terms and conditions of
this Agreement, the Buyer agrees to purchase from the Seller, and the Seller
agrees to sell to the Buyer, all of the Target Shares for the consideration
specified below in this Section 2.
(b) PURCHASE PRICE.
(i) The Buyer agrees to pay to the Seller at the Closing
$1,200,000 (the "Purchase Price") by delivery of (A) $500,000 in cash
payable by wire transfer or delivery of other immediately available
funds, (B) its promissory note (the "Buyer Note") in the form of
Exhibit A attached hereto in the aggregate principal amount of $700,000
and (C) a common stock warrant to purchase 100,000 shares of Buyer's
common stock, no par value, pursuant to the terms of that certain Stock
Purchase Warrant (the "Warrant") in the form of Exhibit B attached
hereto. The Buyer and the Seller agree that the loan evidenced by the
Buyer Note is a "Qualified Commercial Loan" as such term is defined in
Section 306.001(9) of the Texas Finance Code.
(ii) In addition to the Purchase Price set forth in Section
2(b)(i) above, the Buyer agrees to pay to the Seller at the Closing the
Working Capital Amount in cash payable by wire transfer or delivery of
other immediately available funds.
(c) THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Xxxxx & Xxxxxx, LLP
in Costa Mesa, California, commencing at 9:00 a.m. local time on the date first
written above (the "Closing Date").
(d) DELIVERIES AT THE CLOSING. As of the date of this Agreement:
(i) the Seller has delivered to the Buyer the following:
(A) all consents, authorizations, filings,
notifications or approvals required from any government,
governmental agency or third party required in connection with
or in order to consummate the transactions contemplated by
this Agreement;
(B) the fully executed resignations, effective as of
the Closing Date, of each director and officer of the Target;
and
(C) the fully executed Warrant.
(ii) the Buyer has delivered to the Seller the following:
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(A) the fully executed Warrant, Stock Pledge
Agreement (in the form of Exhibit C attached hereto) and Buyer
Note.
3. REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION.
(a) REPRESENTATIONS AND WARRANTIES OF THE SELLER. Each of the Parent
and WQN jointly and severally represents and warrants to the Buyer that the
statements contained in this Section 3(a) are correct and complete as of the
Closing Date with respect to itself, unless such statements by their terms speak
as of an earlier date, in which case they shall be correct and complete as of
such date.
(i) ORGANIZATION OF SELLER. Each of the Parent and WQN is a
corporation, duly organized, validly existing, and in good standing
under the laws of the jurisdiction of its incorporation.
(ii) AUTHORIZATION OF TRANSACTION. Each of the Parent and WQN
has all requisite corporate power and authority to execute and deliver
this Agreement and to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of each of the
Parent and WQN, enforceable in accordance with its terms and
conditions, subject, as to enforceability, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or
affecting creditors' rights and to general principles of equity.
Neither the Parent nor WQN need give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any
government or governmental agency in order to consummate the
transactions contemplated by this Agreement.
(iii) NONCONTRAVENTION. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions
contemplated hereby, will (A) violate any provision of the charter or
bylaws of the Parent or WQN, (B) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge,
approval, or other restriction of any government, governmental agency,
or court to which either the Parent or WQN is subject or the
beneficiary, or (C) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the
right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, instrument, or
other arrangement to which either the Parent or WQN is a party or by
which either the Parent or WQN is bound or to which any of the assets
of either the Parent or WQN is subject, except in the case of clause
(B) or clause (C) for any such violations as would not, individually or
in the aggregate, be reasonably expected to have a Material Adverse
Effect.
(IV) BROKERS' FEES. The Seller has no Liability or obligation
to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement for which
the Buyer could become liable or obligated.
(v) INVESTMENT. The Parent (A) understands that the Buyer Note
and the Warrant Agreement have not been, and will not be, registered
under the Securities Act, or under any state securities laws, and are
being offered and sold in reliance upon federal
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and state exemptions for transactions not involving any public
offering, (B) is acquiring the Buyer Note and the Warrant solely for
its own account for investment purposes, and not with a view to the
distribution thereof, (C) is a sophisticated investor with knowledge
and experience in business and financial matters, (D) has received
certain information concerning the Buyer and has had the opportunity to
obtain additional information as desired in order to evaluate the
merits and the risks inherent in holding the Buyer Note and the
Warrant, (E) is able to bear the economic risk and lack of liquidity
inherent in holding the Buyer Note and the Warrant, and (F) is an
Accredited Investor.
(vi) TARGET SHARES. WQN holds of record and owns beneficially
all of the Target Shares free and clear of any restrictions on transfer
(other than any restrictions under the Securities Act and state
securities laws), Taxes, Security Interests, options, warrants,
purchase rights, contracts, commitments, equities, claims, and demands.
WQN is not a party to any option, warrant, purchase right, or other
contract or commitment that could require WQN to sell, transfer, or
otherwise dispose of any capital stock of the Target (other than this
Agreement). WQN is not a party to any voting trust, proxy, or other
agreement or understanding with respect to the voting of any capital
stock of the Target.
(b) REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents
and warrants to the Seller that the statements contained in this Section 3(b)
are correct and complete as of the Closing Date unless such statements by their
terms speak as of an earlier date, in which case they shall be correct and
complete as of such date.
(i) ORGANIZATION OF THE BUYER. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
(ii) AUTHORIZATION OF TRANSACTION. The Buyer has all requisite
corporate power and authority to execute and deliver this Agreement and
to perform its obligations hereunder. This Agreement constitutes the
valid and legally binding obligation of the Buyer, enforceable in
accordance with its terms and conditions, subject, as to
enforceability, to bankruptcy, insolvency, reorganization and other
laws of general applicability relating to or affecting creditors'
rights and to general principles of equity. The Buyer need not give any
notice to, make any filing with, or obtain any authorization, consent,
or approval of any government or governmental agency in order to
consummate the transactions contemplated by this Agreement.
(iii) NONCONTRAVENTION. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions
contemplated hereby, will (A) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge,
approval or other restriction of any government, governmental agency,
or court to which the Buyer is subject or the beneficiary, or any
provision of its charter or bylaws or (B) conflict with, result in a
breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify, or
cancel, or require any notice under any agreement, contract, lease,
license, instrument, or other arrangement to which the Buyer is a party
or by which it is bound or to which any of its
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assets is subject, except in the case of clause (B) for any such
violations as would not, individually or in the aggregate, be
reasonably expected to have a Material Adverse Effect.
(iv) BROKERS' FEES. The Buyer has no Liability or obligation
to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement for which
the Seller could become liable or obligated.
(v) INVESTMENT. The Buyer is not acquiring the Target Shares
with a view to or for sale in connection with any distribution thereof
within the meaning of the Securities Act.
(vi) FINANCING. The Buyer has immediately available funds in
U.S. dollars (through cash or cash equivalents and existing committed
credit arrangements) sufficient to pay that portion of the Purchase
Price that is payable in cash, the Working Capital Amount and any other
amounts payable in cash pursuant to this Agreement and to consummate
the transactions contemplated by, and otherwise satisfy the obligations
of the Buyer under, this Agreement.
4. REPRESENTATIONS AND WARRANTIES CONCERNING THE TARGET.
The Parent and WQN jointly and severally represent and warrant to the
Buyer that the statements contained in this Section 4 are correct and complete
as of the Closing Date unless such statements by their terms speak as of an
earlier date, in which case they shall be correct and complete as of such date,
except as set forth in the disclosure schedule delivered by the Seller to the
Buyer on the date hereof and initialed by the Parties (the "Disclosure
Schedule"). The Disclosure Schedule will be arranged in paragraphs corresponding
to the lettered and numbered paragraphs contained in this Section 4.
(a) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. The Target is a
corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation. The Target is duly authorized to
conduct business and is in good standing as a foreign corporation under the laws
of each jurisdiction in which it conducts business, or in which the nature of
the business or the operation, ownership or leasing of its properties makes such
qualification necessary, except where the failure to be so authorized would not
have a Material Adverse Effect. The Target has full corporate power and
authority and all material licenses, permits, and authorizations necessary to
carry on the businesses in which it is engaged and in which it presently
proposes to engage and to own, lease and use the properties owned, leased and
used by it. Section 4(a) of the Disclosure Schedule lists the directors and
officers of the Target. The Seller has delivered to the Buyer correct and
complete copies of the charter and bylaws of the Target (as amended to date).
The minute book (containing the records of meetings of the stockholders, the
board of directors, and any committees of the board of directors), the stock
certificate book, and the stock record book of the Target are correct and
complete. The Target is not in default under or in violation of any provision of
its charter or bylaws.
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(b) CAPITALIZATION. The entire authorized capital stock of the Target
consists of 1,000 Target Shares, of which 1,000 Target Shares are issued and
outstanding and no Target Shares are held in treasury. All of the issued and
outstanding Target Shares were duly authorized, validly issued, fully paid, and
nonassessable, and are held of record by WQN. There are no outstanding or
authorized options, warrants, purchase rights, subscription rights, conversion
rights, exchange rights, or other contracts or commitments that could require
the Target to issue, sell, or otherwise cause to become outstanding any of its
capital stock. There are no outstanding or authorized stock appreciation,
phantom stock, profit participation, or similar rights with respect to the
Target. There are no voting trusts, proxies, or other agreements or
understandings with respect to the voting of the capital stock of the Target.
(c) NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any provision of the charter or bylaws of the Target, (ii) violate
any constitution, statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge, approval or other restriction of any government,
governmental agency, or court to which the Target is subject or the beneficiary
(foreign or domestic) or (iii) conflict with, result in a breach of, constitute
a default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
the Target is a party or by which it is bound or to which any of its assets is
subject (or result in the imposition of any Security Interest upon any of its
assets), except in the case of clause (ii) or clause (iii) for any such
violations as would not, individually or in the aggregate, be reasonably
expected to have a Material Adverse Effect. The Target does not need to give any
notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency (foreign or domestic) in order
for the Parties to consummate the transactions contemplated by this Agreement
and for the Buyer to operate the business of the Target consistently with how it
is being operated as of the Closing Date.
(d) BROKERS' FEES. The Target has no Liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement.
(e) TITLE TO ASSETS. Except as set forth in Section 4(e) of the
Disclosure Schedule, the Target has good and marketable title to, or a valid
leasehold interest in, the properties and assets used or held for use in its
business, or shown on the Most Recent Balance Sheet or acquired after the date
thereof, free and clear of all Security Interests, except for (i) properties and
assets disposed of in the Ordinary Course of Business since the date of the Most
Recent Balance Sheet, (ii) Security Interests for Taxes not yet due and payable
and (iii) such imperfections of title and encumbrances, if any, that do not
materially detract from the value or interfere with the present use of the
property subject thereto or affected thereby.
(f) SUBSIDIARIES. The Target has no Subsidiaries.
(g) FINANCIAL STATEMENTS. Attached hereto as Exhibit D are the
following financial statements (collectively the "Financial Statements"): (i)
unaudited balance sheets and statements of income, changes in stockholders'
equity, and cash flow as of and for the fiscal years ended December 31, 2002 and
2003 (December 31, 2003 is referred to herein as the "Most Recent
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Fiscal Year End") for the Target; and (ii) unaudited balance sheets and
statements of income, changes in stockholders' equity, and cash flow (the "Most
Recent Financial Statements") as of and for the six months ended June 30, 2004
(the "Most Recent Fiscal Month End") for the Target. The Financial Statements
(including the notes thereto) have been prepared in accordance with GAAP applied
on a consistent basis throughout the periods covered thereby, present fairly the
financial condition of the Target as of such dates and the results of operations
of the Target for such periods, are correct and complete, and are consistent
with the books and records of the Target (which books and records are correct
and complete).
(h) EVENTS SUBSEQUENT TO MOST RECENT FISCAL YEAR END. Since the Most
Recent Fiscal Year End, there has not been any material adverse change in the
business, financial condition, operations, results of operations, or future
prospects of the Target. Without limiting the generality of the foregoing, since
that date:
(i) the Target has not sold, leased, transferred, or assigned
any of its assets, tangible or intangible, other than for a fair
consideration in the Ordinary Course of Business;
(ii) the Target has not entered into any agreement, contract,
lease, or license (or series of related agreements, contracts, leases,
and licenses) either involving more than $5,000 or outside the Ordinary
Course of Business;
(iii) neither the Target nor, to the Knowledge of the Seller
or the officers and directors of the Target, any other party has
accelerated, terminated, modified, or cancelled any agreement,
contract, lease, or license (or series of related agreements,
contracts, leases, and licenses) involving more than $5,000 to which
the Target is a party or by which it is bound;
(iv) the Target has not imposed any Security Interest upon any
of its assets, tangible or intangible;
(v) except as set forth in Section 4(h)(v) of the Disclosure
Schedule, the Target has not made any capital expenditure (or series of
related capital expenditures) either involving more than $5,000 or
outside the Ordinary Course of Business;
(vi) the Target has not made any capital investment in, any
loan to, or any acquisition of the securities or assets of, any other
Person (or series of related capital investments, loans, and
acquisitions) outside the Ordinary Course of Business;
(vii) the Target has not issued any note, bond, or other debt
security or created, incurred, assumed, or guaranteed any indebtedness
for borrowed money or capitalized lease obligation;
(viii) the Target has not delayed or postponed the payment of
accounts payable and other Liabilities outside the Ordinary Course of
Business;
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(ix) the Target has not cancelled, compromised, waived, or
released any right or claim (or series of related rights and claims)
either involving more than $5,000 or outside the Ordinary Course of
Business;
(x) the Target has not granted any license or sublicense of
any rights under or with respect to any Intellectual Property;
(xi) there has been no change made or authorized in the
charter or bylaws of the Target;
(xii) the Target has not issued, sold, or otherwise disposed
of any of its capital stock, or granted any options, warrants, or other
rights to purchase or obtain (including upon conversion, exchange, or
exercise) any of its capital stock;
(xiii) the Target has not declared, set aside, or paid any
dividend or made any distribution with respect to its capital stock
(whether in cash or in kind) or redeemed, purchased, or otherwise
acquired any of its capital stock;
(xiv) the Target has not experienced any material damage,
destruction, or loss (whether or not covered by insurance) to its
property;
(xv) the Target has not made any loan to, or entered into any
other transaction with, any of its directors or officers outside the
Ordinary Course of Business;
(xvi) the Target has not entered into any employment contract
or collective bargaining agreement, written or oral, or materially
modified the terms of any existing such contract or agreement;
(xvii) the Target has not granted any material increase in the
base compensation of any of its directors or officers outside the
Ordinary Course of Business;
(xviii) the Target has not adopted, amended, modified, or
terminated any bonus, profit-sharing, incentive, severance, or other
plan, contract, or commitment for the benefit of any of its directors
or officers (or taken any such action with respect to any other
Employee Benefit Plan);
(xix) the Target has not made any other change in employment
terms for any of its directors and officers outside the Ordinary Course
of Business;
(xx) the Target has not made or pledged to make any charitable
or other capital contribution outside the Ordinary Course of Business;
(xxi) to the Knowledge of Seller or the officers and directors
of the Target, there has not been any other material occurrence, event,
incident, action, failure to act, or transaction outside the Ordinary
Course of Business involving the Target; and
(xxii) the Target has not committed to any of the foregoing.
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(i) UNDISCLOSED LIABILITIES. The Target has no Liability (and there is
no Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against it giving rise to any
Liability), except for (i) Liabilities set forth on the face of the Most Recent
Balance Sheet (rather than in any notes thereto) and (ii) Liabilities which have
arisen after the Most Recent Fiscal Month End in the Ordinary Course of Business
(none of which results from, arises out of, relates to, is in the nature of, or
was caused by any breach of contract, breach of warranty, tort, infringement, or
violation of law).
(j) LEGAL COMPLIANCE. Except as set forth in Section 4(j) of the
Disclosure Schedule, each of the Target and its predecessors has complied in all
material respects with all applicable laws (including rules, regulations, codes,
plans, injunctions, judgments, orders, decrees, rulings, and charges thereunder)
of federal, state, local, and foreign governments (and all agencies thereof),
and the Target has not received any notices of and has no reason to believe that
any action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice has been filed or commenced or is being considered against the
Target alleging any failure so to comply.
(k) TAX MATTERS.
(i) The Target has filed all federal, and all material state,
local and foreign, Tax Returns that it was required to file. All such
Tax Returns accurately reflect all Tax liabilities required to be
reflected thereon. All material Taxes owed by the Target (whether or
not shown on any Tax Return) have been paid. The Target currently is
not the beneficiary of any extension of time within which to file any
Tax Return. No claim has ever been made by any authority in a
jurisdiction where the Target does not file Tax Returns that it is or
may be subject to taxation by that jurisdiction. There are no Security
Interests on any of the assets of the Target that arose in connection
with any failure (or alleged failure) to pay any Tax.
(ii) The Target has withheld and paid all material Taxes
required to have been withheld and paid in connection with amounts paid
or owing to any employee, independent contractor, creditor,
stockholder, or other third party.
(iii) Neither the Seller nor any director or officer of the
Target expects any authority to assess any additional Taxes for any
period for which Tax Returns have been filed. There is no dispute or
claim concerning any Tax Liability of the Target either (A) claimed or
raised by any authority in writing or (B) as to which the Seller and
the directors and officers of the Target have Knowledge based upon
personal contact with any agent of such authority. Section 4(k)(iii) of
the Disclosure Schedule lists all federal, state, local, and foreign
income Tax Returns filed with respect to the Target since December 6,
2001, indicates those Tax Returns that have been audited, and indicates
those Tax Returns that currently are the subject of audit. The Seller
has delivered to the Buyer correct and complete copies of all federal
income Tax Returns, examination reports, and statements of deficiencies
assessed against or agreed to by the Target since December 6, 2001.
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(iv) The Target has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a
Tax assessment or deficiency.
(v) The Target has not made any payments, is not obligated to
make any payments, and is not a party to any agreement that under
certain circumstances could obligate it to make any payments that will
not be deductible under Code Section 280G. The Target has not been a
United States real property holding corporation within the meaning of
Code Section 897(c)(2) during the applicable period specified in Code
Section 897(c)(1)(A)(ii). The Target is not a party to any Tax
allocation or sharing agreement. The Target has been a member and is a
member of an Affiliated Group filing a consolidated federal income Tax
Return the common parent of which has been and is the Seller and has
not been a member of an Affiliated Group filing a consolidated federal
income Tax Return other than a group the common parent of which was the
Seller.
(vi) The due and unpaid Taxes of the Target (A) did not, as of
the Most Recent Fiscal Month End, exceed the reserve for Tax Liability
(rather than any reserve for deferred Taxes established to reflect
timing differences between book and Tax income) set forth on the face
of the Most Recent Balance Sheet (rather than in any notes thereto) and
(B) do not exceed that reserve as adjusted for the passage of time
through the Closing Date in accordance with the past custom and
practice of the Target in filing its Tax Returns.
(vii) Each Affiliated Group has filed all income Tax Returns
that it was required to file for each taxable period during which the
Target was a member of the group. All income Taxes owed by any
Affiliated Group (whether or not shown on any Tax Return) have been
paid for each taxable period during which the Target was a member of
the group.
(viii) Neither the Seller nor any director or officer of any
of the Seller or its Subsidiaries expects any authority to assess any
additional income Taxes against any Affiliated Group for any taxable
period during which the Target was a member of the group. There is no
dispute or claim concerning any income Tax Liability of any Affiliated
Group for any taxable period during which the Target was a member of
the group either (A) claimed or raised by any authority in writing or
(B) as to which the Seller and any directors and officers of any of the
Seller and its Subsidiaries has Knowledge based upon personal contact
with any agent of such authority. Except as disclosed on Section
4(k)(viii) of the Disclosure Schedule, no Affiliated Group has waived
any statute of limitations in respect of any income Taxes or agreed to
any extension of time with respect to an income Tax assessment or
deficiency for any taxable period during which the Target was a member
of the group.
(ix) Except as set forth on Schedule 4(k)(ix), the Target has
no liability for the Taxes of any Person other than the Target (A)
under Reg. Section 1.1502-6 (or any similar provision of state, local,
or foreign law), (B) as a transferee or successor, or (C) by contract
(other than pursuant to customary indemnification provisions contained
in contracts entered into by Target in the Ordinary Course of Business.
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(l) REAL PROPERTY. The Target does not own, lease or sublease any real
property.
(m) INTELLECTUAL PROPERTY.
(i) The Target owns or has the right to use pursuant to
license, sublicense, agreement, or permission all existing Intellectual
Property necessary for the operation of the businesses of the Target as
presently conducted and as presently proposed to be conducted
including, but not limited to, those items of Intellectual Property
listed in Section 4(m)(i) of the Disclosure Schedule. Each item of
Intellectual Property owned or used by the Target immediately prior to
the Closing hereunder will be owned or available for use by the Target
on identical terms and conditions immediately subsequent to the Closing
hereunder. The Target has taken all necessary and desirable action to
maintain and protect each item of Intellectual Property that it owns or
uses. Section 4(m)(i) of the Disclosure Schedule lists all Intellectual
Property owned or used by the Target since December 6, 2001 and
indicates which items thereof are currently owned or used by the Target
for the operation of the business of the Target.
(ii) The Target has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of third parties, and neither the Seller nor the
directors and officers of the Target have since December 6, 2001 or, to
the Knowledge of the Seller and the directors and officers of the
Target prior to such date, ever received any charge, complaint, claim,
demand, or notice alleging any such interference, infringement,
misappropriation, or violation (including any claim that the Target
must license or refrain from using any Intellectual Property rights of
any third party). To the Knowledge of the Seller and the directors and
officers of the Target, no third party has interfered with, infringed
upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of the Target.
(iii) Section 4(m)(iii) of the Disclosure Schedule identifies
each patent or registration which has been issued to the Target with
respect to any of its Intellectual Property, identifies each pending
patent application or application for registration which the Target has
made with respect to any of its Intellectual Property, and identifies
each license, agreement, or other permission which the Target has
granted to any third party with respect to any of its Intellectual
Property (together with any exceptions). The Seller has delivered to
the Buyer correct and complete copies of all such patents,
registrations, applications, licenses, agreements, and permissions (as
amended to date) and has made available to the Buyer correct and
complete copies of all other written documentation evidencing ownership
and prosecution (if applicable) of each such item. Section 4(m)(iii) of
the Disclosure Schedule also identifies each trade name or unregistered
trademark used by the Target in connection with any of its businesses.
With respect to each item of Intellectual Property required to be
identified in Section 4(m)(iii) of the Disclosure Schedule:
(A) the Target possess all right, title, and interest
in and to the item, free and clear of any Security Interest,
license, or other restriction;
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(B) the item is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge;
(C) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending
or, to the Knowledge of the Seller and the directors and
officers of the Target, is threatened which challenges the
legality, validity, enforceability, use, or ownership of the
item; and
(D) the Target has never agreed to indemnify any
Person for or against any interference, infringement,
misappropriation, or other conflict with respect to the item.
(iv) With the exception of "shrink-wrap" or similar
widely-available commercial end-user licenses, Section 4(m)(iv) of the
Disclosure Schedule identifies each item of Intellectual Property that
any third party owns and that the Target uses pursuant to license,
sublicense, agreement, or permission. The Seller has delivered to the
Buyer correct and complete copies of all such licenses, sublicenses,
agreements, and permissions (as amended to date). With respect to each
item of Intellectual Property required to be identified in Section
4(m)(iv) of the Disclosure Schedule:
(A) the license, sublicense, agreement, or permission
covering the Target's use of the item is legal, valid,
binding, enforceable, and in full force and effect;
(B) the license, sublicense, agreement, or permission
will continue to be legal, valid, binding, enforceable, and in
full force and effect on identical terms following the
consummation of the transactions contemplated hereby;
(C) to the Knowledge of the Seller and the directors
and officers of the Target, no party to the license,
sublicense, agreement, or permission is in breach or default,
and no event has occurred which with notice or lapse of time
would constitute a breach or default or permit termination,
modification, or acceleration thereunder;
(D) to the Knowledge of the Seller and the directors
and officers of the Target, no party to the license,
sublicense, agreement, or permission has repudiated any
provision thereof;
(E) to the Knowledge of the Seller and the directors
and officers of the Target, with respect to each sublicense,
the representations and warranties set forth in subsections
(A) through (D) above are true and correct with respect to the
underlying license;
(F) the underlying item of Intellectual Property is
not subject to any outstanding injunction, judgment, order,
decree, ruling, or charge;
(G) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending
or, to the Knowledge of the Seller and the
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directors and officers of the Target, is threatened which
challenges the legality, validity, or enforceability of the
underlying item of Intellectual Property; and
(H) the Target has not granted any sublicense or
similar right with respect to the license, sublicense,
agreement, or permission.
(v) To the Knowledge of the Seller and the directors and
officers of the Target, the Target will not interfere with, infringe
upon, misappropriate, or otherwise come into conflict with, any
Intellectual Property rights of third parties as a result of the
continued operation of its businesses as presently conducted and as
presently proposed to be conducted.
(n) TANGIBLE ASSETS. The only tangible assets of the Target are listed
in Section 4(n) of the Disclosure Schedule. Each such tangible asset is free
from defects (patent and latent), has been maintained in accordance with normal
industry practice, is in good operating condition and repair (subject to normal
wear and tear), and is suitable for the purposes for which it presently is used
and presently is proposed to be used.
(o) CONTRACTS. Section 4(o) of the Disclosure Schedule lists all
contracts and other agreements to which the Target is a party (and for all oral
agreements, a detailed description thereof), including but not limited to the
following:
(i) any agreement (or group of related agreements) for the
lease of personal property to or from any Person;
(ii) any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products, or
other personal property, or for the furnishing or receipt of services;
(iii) any agreement concerning a partnership or joint venture;
(iv) any agreement (or group of related agreements) under
which it has created, incurred, assumed, or guaranteed any indebtedness
for borrowed money, or any capitalized lease obligation;
(v) any agreement concerning confidentiality or noncompetition
that restricts the Target's ability to operate any aspect of its
business;
(vi) any agreement with the Seller and its Affiliates;
(vii) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other plan or
arrangement for the benefit of its current or former directors,
officers, and employees;
(viii) any collective bargaining agreement;
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(ix) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis providing annual
compensation or providing severance benefits;
(x) any agreement under which it has advanced or loaned any
amount of money to any of its directors or officers; or
(xi) any agreement under which the consequences of a default
or termination could have a Material Adverse Effect.
The Seller has delivered to the Buyer a correct and complete copy of
each written agreement listed in Section 4(o) of the Disclosure Schedule (as
amended to date) and a written summary setting forth the terms and conditions of
each oral agreement referred to in Section 4(o) of the Disclosure Schedule. With
respect to each such agreement, except as set forth in Section 4(o) of the
Disclosure Schedule: (A) the agreement is legal, valid, binding, enforceable,
and in full force and effect; (B) the agreement will continue to be legal,
valid, binding, enforceable, and in full force and effect on identical terms
following the consummation of the transactions contemplated hereby; (C) neither
the Target nor, to the Knowledge of the Seller and the directors and officers of
the Target, any other party is in breach or default, and no event has occurred
which with notice or lapse of time would constitute a breach or default, or
permit termination, modification, or acceleration, under the agreement; and (D)
to the Knowledge of the Seller and the officers and directors of the Target, no
party has repudiated any provision of the agreement.
(p) NOTES AND ACCOUNTS RECEIVABLE. All notes and accounts receivable of
the Target are reflected properly on its books and records, are valid
receivables subject to no setoffs or counterclaims and, to the Knowledge of the
Seller and the directors and officers of the Target are current and collectible,
subject only to the reserve for bad debts set forth on the face of the Most
Recent Balance Sheet (rather than in any notes thereto) or on the books of the
Target.
(q) POWERS OF ATTORNEY. There are no outstanding powers of attorney
executed on behalf of or otherwise affecting the Target.
(r) INSURANCE. Since December 6, 2001, the Target has been covered by
insurance in scope and amount customary and reasonable for the businesses in
which it has engaged during the aforementioned period. All insurance policies to
which the Target is a party, a named insured or otherwise the beneficiary of
coverage are in full force and effect.
(s) LITIGATION. Section 4(s) of the Disclosure Schedule sets forth each
instance in which the Target (i) is subject to any outstanding injunction,
judgment, order, decree, ruling, or charge or (ii) is a party or, to the
Knowledge of the Seller and the directors and officers of the Target, is
threatened to be made a party to any action, suit, proceeding, hearing, or
investigation of, in, or before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or before any
arbitrator. None of the actions, suits, proceedings, hearings, and
investigations set forth in Section 4(s) of the Disclosure Schedule could
reasonably be expected to result in a Material Adverse Effect.
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(t) WARRANTY. Each service sold, performed or delivered by the Target
has been in material conformity with all applicable contractual commitments and
all express and implied warranties, and the Target has no Liability (and to the
Knowledge of the Seller and the officers and directors of the Target there is no
Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against the Target giving
rise to any Liability) for any damages in connection therewith.
(u) EMPLOYEES. The Target has no employees. The Buyer shall be free to
hire any past employees, if any, on such terms and conditions of employment as
the Buyer shall determine in the exercise of its sole discretion, and nothing in
this Agreement shall establish any enforceable rights, legal or equitable, in
any person other than the Parties, including, without limitation, any employee
of the Target or the Seller or any beneficiary of such employee. The Target is
not a party to or bound by any collective bargaining agreement, nor has the
Target experienced any strikes, grievances, claims of unfair labor practices, or
other collective bargaining disputes. To the Knowledge of the Seller and the
directors and officers of the Target, the Target has not committed any unfair
labor practice.
(v) EMPLOYEE BENEFITS. The Target does not have any Employee Benefit
Plans or Employee Welfare Benefit Plans. The Target has never maintained,
established, sponsored, participated in, or contributed to, any Employee Pension
Benefit Plan that is subject to Title IV of ERISA or Section 412 of the Code.
The Target does not have any trusts or loans with or related to any employee or
employment matter.
(w) GUARANTIES. The Target is not a guarantor or otherwise liable for
any Liability or obligation (including indebtedness) of any other Person.
(x) ENVIRONMENTAL MATTERS.
(i) The Target has complied and is in compliance in all
material respects with all applicable Environmental Laws.
(ii) Without limiting the generality of the foregoing, the
Target has obtained and complied with, and is in compliance with, in
all material respects, all permits, licenses and other authorizations
that are required pursuant to Environmental Laws for the occupation of
its facilities and the operation of its business; a list of all such
permits, licenses and other authorizations is set forth on Section 4(x)
of the Disclosure Schedule.
(iii) The Target has not received any written or oral notice,
report or other information regarding any actual or alleged violation
of Environmental Laws or any liabilities or potential liabilities
(whether accrued, absolute, contingent, unliquidated or otherwise),
including any investigatory, remedial or corrective obligations,
relating to any of them or its facilities arising under Environmental
Laws.
(iv) None of the following exists at any property or facility
owned or operated by the Target: (1) underground storage tanks, (2)
asbestos-containing material in any form or condition, (3) materials or
equipment containing polychlorinated biphenyls, or (4) landfills,
surface impoundments, or disposal areas.
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(v) The Target has not treated, stored, disposed of, arranged
for or permitted the disposal of, transported, handled, or released any
substance, including without limitation any hazardous substance, or
owned or operated any property or facility (and no such property or
facility is contaminated by any such substance) in a manner that has
given or would give rise to any material liabilities, including any
liability for response costs, corrective action costs, personal injury,
property damage, natural resources damages or attorney fees, pursuant
to the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended ("CERCLA"), the Solid Waste Disposal Act, as
amended ("SWDA") or any other Environmental Laws.
(vi) The Target has not, either expressly or by operation of
law, assumed or undertaken any liability, including without limitation
any obligation for corrective or remedial action, of any other Person
relating to Environmental Laws.
(y) CERTAIN BUSINESS RELATIONSHIPS WITH THE TARGET. Except as disclosed
in the notes to the Most Recent Financial Statements or as set forth in Section
4(y) of the Disclosure Schedule, (i) neither the Seller nor its Affiliates has
been involved in any business arrangement or relationship with the Target within
the past 12 months, (ii) neither the Seller nor its Affiliates owns any asset,
tangible or intangible, which is used in the business of the Target and (iii)
the Target has no loans or other arrangements involving the lending or advancing
of money with the Seller, any of Seller's Subsidiaries or any Affiliate.
(z) SUFFICIENT DEPOSITS. The Target has sufficient funds and deposits
to meet all of its obligations and liabilities related to any money transmittals
then in process and any other liability of the Target set forth in the Financial
Statements.
(aa) RBI AGREEMENT. The Target is a third party beneficiary to that
certain Renewal of Approval for Conducting Money Transfer Services Scheme
Agreement by and between the Punjab National Bank ("PNB") and the Reserve Bank
of India ("RBI") dated July 9, 2002 (the "RBI Agreement"). Even though the RBI
Agreement states that it expired on or about May 3, 2003, RBI issued a
"continuation" letter waiving the expiration of the RBI Agreement and stating
that PNB has RBI's permission to continue to conduct the money transfer services
scheme business with the Target as previously conducted. The Target has no
Knowledge or reason to believe that such arrangement has changed or will change
in the future in any way. The Target is not aware of any reason or circumstance
to suggest that PNB or RBI intend to change their respective business
arrangements with each other or with the Target as it relates to the Target's
money transfer services scheme business. The Target shall be able to continue to
operate its money transfer services scheme business post-Closing materially in
the same manner in which it has operated such business pre-Closing.
(bb) DUE DILIGENCE. The Seller has complied in all material respects
with the Buyer's written due diligence requests.
(cc) DISCLOSURE. The representations and warranties contained in this
Section 4 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Section 4, in light of the circumstances under
which made, not misleading.
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5. POST-CLOSING COVENANTS.
The Parties agree as follows with respect to the period following the
Closing.
(a) GENERAL. In case at any time after the Closing any further action
is necessary or desirable to carry out the purposes of this Agreement, each of
the Parties will take such further action (including the execution and delivery
of such further instruments and documents) as any other Party reasonably may
request, all at the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under Section 6 below).
The Seller acknowledges and agrees that from and after the Closing the Buyer
will be entitled to possession of all documents, books, records (including Tax
records), agreements, and financial data of any sort relating to the Target.
(b) LITIGATION SUPPORT. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving the Target, each of the other Parties will
cooperate with it and its counsel in the contest or defense, make available its
personnel, and provide such testimony and access to its books and records as
shall be necessary in connection with the contest or defense, all at the sole
cost and expense of the contesting or defending Party (unless the contesting or
defending Party is entitled to indemnification therefor under Section 6 below).
(c) TRANSITION. The Seller will not take any action that is designed or
intended to have the effect of discouraging any lessor, licensor, customer,
supplier, or other business associate of the Target from maintaining the same
business relationships with the Target after the Closing as it maintained with
the Target prior to the Closing. The Seller will refer all customer inquiries
relating to the business of the Target to the Buyer from and after the Closing.
(d) CONFIDENTIALITY. The Seller will treat and hold as such all of the
Confidential Information, refrain from using any of the Confidential Information
except in connection with this Agreement or with the written consent of the
Buyer, which consent will not be unreasonably withheld, and deliver promptly to
the Buyer or destroy, at the request and option of the Buyer, all tangible
embodiments (and all copies) of the Confidential Information which are in its
possession. In the event that the Seller is requested or required (by oral
question or request for information or documents in any legal proceeding,
interrogatory, subpoena, civil investigative demand, or similar process) to
disclose any Confidential Information, the Seller will notify the Buyer promptly
of the request or requirement so that the Buyer may seek an appropriate
protective order or waive compliance with the provisions of this Section 5(d).
If, in the absence of a protective order or the receipt of a waiver hereunder,
the Seller is, on the advice of counsel, legally compelled to disclose any
Confidential Information, the Seller may disclose the Confidential Information;
provided, however, that the Seller shall use its reasonable efforts to obtain,
at the reasonable request of the Buyer, an order or other assurance that
confidential treatment will be accorded to such portion of the Confidential
Information required to be disclosed as the Buyer shall designate. The foregoing
provisions shall not apply to any
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Confidential Information which is generally available to the public immediately
prior to the time of disclosure.
(e) COVENANT NOT TO COMPETE. For a period of five years from and after
the Closing Date, the Seller will not engage directly or indirectly in any
business that the Target conducts as of the Closing Date (the "Competing
Business"); provided, however, that the foregoing provision shall not apply to
(i) ownership by the Seller of less than 5% of the outstanding stock of any
Person engaged in the Competing Business; (ii) the acquisition by the Seller of
all or any part of a business or Person (whether through the acquisition of
assets, securities or other ownership interests or the effecting of a merger,
consolidation, share exchange, business combination, reorganization or
recapitalization or other similar transaction) if and only if the engagement by
Person in the Competing Business represents either (x) less than 10% of the
revenues of such business or Person for its most recently completed fiscal year
or (y) less than $50 million of revenues of such business or Person for such
period; (iii) the operation of the Competing Business by any Person that
acquires the Seller, whether by merger, asset acquisition, stock acquisition or
otherwise, or (iv) sales by the Seller of its WorldQuest CashCard or its
WorldQuest Visa CashCard. If the final judgment of a court of competent
jurisdiction declares that any term or provision of this Section 5(e) is invalid
or unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
(f) ACCESS TO THE SELLER'S CUSTOMER DATABASE. Once per every calendar
quarter after the Closing Date (including the calendar quarter in which the
Closing Date falls) and upon request of the Buyer, the Seller shall forward, at
the Buyer's expense, marketing materials or other information provided by the
Buyer to those Persons in the Seller's customer database specified by the Buyer.
(g) RIGHT TO PURCHASE PRE-PAID TELEPHONE CARDS. At any time after the
Closing Date, the Buyer shall be entitled to purchase from the Seller any number
of the Seller's pre-paid telephone cards at the Seller's wholesale price (not
the retail price).
6. REMEDIES FOR BREACHES OF THIS AGREEMENT.
(a) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of the Parties contained in this Agreement shall
survive the Closing hereunder and continue in full force and effect for a period
of twenty-one (21) months from the Closing Date; provided, however, that the
representations of the Seller with regard to the Target contained in Sections
4(k) shall survive until the expiration of the statute of limitations applicable
thereto.
(b) INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE BUYER.
(i) In the event the Seller breaches any of its
representations, warranties, and covenants contained herein, and, if
there is an applicable survival period pursuant to
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Section 6(a) above, provided that the Buyer makes a written claim for
indemnification against the Seller pursuant to Section 8(g) below
within such survival period, then the Parent agrees to indemnify the
Buyer from and against the entirety of any Adverse Consequences the
Buyer may suffer through and after the date of the written claim for
indemnification (including any Adverse Consequences the Buyer may
suffer after the end of any applicable survival period that are related
to such written claim) resulting from, arising out of, relating to, in
the nature of, or caused by the breach.
(ii) The Parent agrees to indemnify the Buyer from and against
the entirety of any Adverse Consequences the Buyer may suffer resulting
from, arising out of, relating to, in the nature of, or caused by any
Liability of the Target (A) for any income Taxes of any Affiliated
Group filing a consolidated return that includes the Target with
respect to any Tax year or portion thereof ending on or before the
Closing Date (or for any Tax year beginning before and ending after the
Closing Date to the extent allocable to the portion of such period
beginning before and ending on the Closing Date), to the extent such
Taxes are not reflected in the reserve for Tax Liability (rather than
any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) shown on the face of the Most
Recent Balance Sheet (rather than in any notes thereto), and (B) any
other Taxes of the Target that are or were due and payable on or prior
to the Closing Date, to the extent such Taxes are not reflected in the
reserve for, or as a Tax liability in the Most Recent Balance Sheet,
and (C) for the due and unpaid Taxes of any Person (other than any of
the Target and its Subsidiaries) for any period ending on or before the
Closing Date under Reg. Section 1.1502-6 (or any similar provision of
state, local, or foreign law), as a transferee or successor or by
contract (other than customary indemnification provisions contained in
contracts entered into by the Target in the Ordinary Course of
Business).
(iii) The Seller agrees to indemnify the Buyer from and
against the entirety of any Adverse Consequences the Buyer may suffer
resulting from, arising out of, relating to, in the nature of, or
caused by any events or acts or omissions of the Seller or the Target
occurring before the Closing including, but not limited to, anything
set forth in Section 4(j) of the Disclosure Schedule arising prior to
the Closing.
(c) INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE SELLER. In the event
the Buyer breaches any of its representations, warranties, and covenants
contained herein, and, if there is an applicable survival period pursuant to
Section 6(a) above, provided that the Seller makes a written claim for
indemnification against the Buyer pursuant to Section 8(g) below within such
survival period, then the Buyer agrees to indemnify the Seller from and against
the entirety of any Adverse Consequences the Seller may suffer through and after
the date of the written claim for indemnification (including any Adverse
Consequences the Seller may suffer after the end of any applicable survival
period that are related to such written claim) resulting from the breach.
(d) MATTERS INVOLVING THIRD PARTIES.
(i) If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third Party Claim")
which may give rise to a claim for indemnification against any other
Party (the "Indemnifying Party") under this Section 6,
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then the Indemnified Party shall promptly notify each Indemnifying
Party thereof in writing; provided, however, that no delay on the part
of the Indemnified Party in notifying any Indemnifying Party shall
relieve the Indemnifying Party from any obligation hereunder unless
(and then solely to the extent) the Indemnifying Party thereby is
prejudiced.
(ii) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its
choice reasonably satisfactory to the Indemnified Party so long as (A)
the Indemnifying Party notifies the Indemnified Party in writing within
15 days after the Indemnified Party has given notice of the Third Party
Claim that the Indemnifying Party will indemnify the Indemnified Party
from and against the entirety of any Adverse Consequences the
Indemnified Party may suffer resulting from the Third Party Claim, (B)
the Indemnifying Party provides the Indemnified Party with evidence
reasonably acceptable to the Indemnified Party that the Indemnifying
Party will have the financial resources to defend against the Third
Party Claim and fulfill its indemnification obligations hereunder, (C)
the Third Party Claim involves only money damages and does not seek an
injunction or other equitable relief, (D) settlement of, or an adverse
judgment with respect to, the Third Party Claim is not, in the good
faith judgment of the Indemnified Party, likely to establish a
precedential custom or practice materially adverse to the continuing
business interests of the Indemnified Party, and (E) the Indemnifying
Party conducts the defense of the Third Party Claim actively and
diligently.
(iii) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with Section 6(d)(ii)
above, (A) the Indemnified Party may retain separate co-counsel at its
sole cost and expense and participate in the defense of the Third Party
Claim, (B) the Indemnified Party will not consent to the entry of any
judgment or enter into any settlement with respect to the Third Party
Claim without the prior written consent of the Indemnifying Party (not
to be withheld unreasonably), and (C) the Indemnifying Party will not
consent to the entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior written consent of
the Indemnified Party (not to be withheld unreasonably).
(iv) If the Indemnifying Party does not assume the defense of
the Third Party Claim, the Indemnified Party may control the defense of
such claim and may settle the claim on behalf of and for the account
and risk of the Indemnifying Party, who shall be bound by the result.
(e) NATURE OF REMEDIES. Except in the case of fraud or willful
misconduct, the indemnification rights of the Indemnified Party shall be the
sole and exclusive remedy of the Indemnified Party with respect to any
representation, warranty, covenant or agreement made by the Indemnifying Party
under this Agreement, provided that the Indemnifying Party's obligation to
indemnify the Indemnified Party pursuant to Section 6(b) or Section 6(c), as the
case may be, shall not exceed $500,000.
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7. TAX MATTERS.
The following provisions shall govern the allocation of responsibility
as between the Buyer and the Seller for certain tax matters following the
Closing Date:
(a) TAX SHARING AGREEMENTS. Any tax sharing agreement between the
Seller and the Target shall be terminated as of the Closing Date and will have
no further effect for any taxable year (whether the current year, a future year,
or a past year).
(b) RETURNS FOR PERIODS THROUGH THE CLOSING DATE. The Seller will
include the income of the Target (including any deferred income triggered into
income by Reg. Section 1.1502-13 and Reg. Section 1.1502-14, any Excess Loss
Accounts taken into income under Reg. Section 1.1502-19 and income and gain
attributable to any Section 338(h)(10) election made pursuant to Section 7(f)
below) on the Seller's consolidated federal income Tax Returns for all periods
through the Closing Date and pay any federal income Taxes attributable to such
income. The Target will furnish Tax information to the Seller for inclusion in
the Seller's federal consolidated income Tax Return for the period which
includes the Closing Date in accordance with the Target's past custom and
practice at the Seller's expense. Without the prior written consent of the
Buyer, Seller shall not make any election, adopt any accounting method, or take
any position in any such Tax Returns relating to the Target that is inconsistent
with any such election, accounting method, or position previously made, adopted
or taken with respect to the Target, if such election or adoption would have the
effect of increasing the Tax liability of the Target for any period ending after
the Closing Date or decreasing any Tax attribute of the Target existing on the
Closing Date. The income of the Target will be apportioned to the period up to
and including the Closing Date and the period after the Closing Date by closing
the books of the Target as of the end of the Closing Date.
(c) AUDITS. The Seller will allow the Target and its counsel to
participate at its own expense in any audits of the Seller's consolidated
federal income Tax Returns to the extent that such returns relate to the Target.
The Seller will not settle any such audit in a manner which would adversely
affect the Target after the Closing Date.
(d) CARRYBACKS. The Buyer shall elect to forego the carryback of any
losses, credits or tax attributes if permitted to do so under applicable Tax
law. If the Buyer is not permitted under applicable Tax law to forego such
carrybacks and the Seller or the Target obtains a refund as a result of the
carryback of post-acquisition Tax attributes, then the Seller will immediately
pay to the Buyer any Tax refund (or reduction in Tax liability) resulting from a
carryback of a post-acquisition Tax attribute of the Target into the Seller's
consolidated Tax Return, when such refund or reduction is realized by the
Seller's group. The Seller will cooperate with the Target in obtaining such
refunds (or reduction in Tax liability), including through the filing of amended
Tax Returns or refund claims. The Buyer agrees to indemnify the Seller for (i)
the Seller's costs and expenses in obtaining such refund, (ii) any Taxes
resulting from the disallowance of such post-acquisition Tax attribute on audit
or otherwise and (iii) any increases in Taxes or reductions in Tax attributes
suffered by the Seller as a result of such carryback.
(e) PRIOR OWNERSHIP CHANGES. In the event that the Buyer does not make
a Section 338(h)(10) election as defined and described in Section 7(f) below and
it is determined that the
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Seller has undergone an ownership change (within the meaning of Section 382 of
the Code) during the period in which it owned the Target, the Seller will file a
timely election under Reg. Section 1.1502-95(f) to apportion $75,000 of the
Seller group's annual consolidated Section 382 limitation to the Target. At the
Seller's request, the Buyer will cause the Target to join with the Seller in
making any election required under Reg. Section 1.1502-95(f).
(f) SECTION 338(h)(10) ELECTION. At the Buyer's option, the Seller will
join with the Buyer in making an election under Section 338(h)(10) of the Code
(and any corresponding elections under state, local, or foreign tax law)
(collectively a "Section 338(h)(10) Election") with respect to the purchase and
sale of the stock of the Target hereunder.
(g) CERTAIN TAXES. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement (including any Texas Gains
Tax and any similar tax imposed in other states or subdivisions), shall be paid
by Seller when due, and Seller will, at its own expense, file all necessary Tax
Returns and other documentation with respect to all such transfer, documentary,
sales, use, stamp, registration and other Taxes and fees, and, if required by
applicable law, Buyer will, and will cause its affiliates to, join in the
execution of any such Tax Returns and other documentation.
8. MISCELLANEOUS.
(a) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the other Party, which
approval shall not be unreasonably withheld; provided, however, that any Party
may make any public disclosure it believes in good faith is required by
applicable law or any listing or trading agreement concerning its
publicly-traded securities (in which case the disclosing Party will use its best
efforts to advise the other Parties prior to making the disclosure).
(b) NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
(c) ENTIRE AGREEMENT. This Agreement (including the documents referred
to herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, to the extent they related in any way to the subject matter
hereof.
(d) SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Party, which approval shall not be unreasonably withheld; provided,
however, that the Buyer may (i) assign any or all of its rights and interests
hereunder to one or more of its Affiliates and (ii) designate one or more of its
Affiliates to perform its obligations hereunder (in any or all of which cases
the Buyer nonetheless shall
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remain responsible for the performance of all of its obligations hereunder), so
long as such transferee(s) agrees in writing to be bound by the terms of this
Agreement.
(e) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(f) HEADINGS. The Section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) NOTICES. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to the Seller: WorldQuest Networks, Inc.
00000 Xxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx, Chief Financial Officer
Facsimile: (000) 000-0000
Copy to: Xxxxx Xxxxx L.L.P.
0000 Xxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Facsimile: (000) 000-0000
If to the Buyer: Xoom Corporation
000 Xxxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxx, Chief Executive Officer
Facsimile: (000) 000-0000
Copy to: Xxxxx & Xxxxxx, LLP
000 Xxxxx Xxxxxxxxx, 00xx Xxxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxx X. Xxxxxxxx, Xx.
Facsimile: (000) 000-0000
Any Party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set forth above
using any other means (including personal delivery, expedited courier, messenger
service, telecopy, telex, ordinary mail, or electronic mail), but no such
notice, request, demand, claim, or other communication shall be deemed to have
been duly given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices, requests, demands,
claims, and
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other communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.
(h) GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of California without giving
effect to any choice or conflict of law provision or rule (whether of the State
of California or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of California.
(i) AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Seller. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
(j) SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(k) EXPENSES. Each of the Parties will bear its own costs and expenses
(including legal fees and expenses) incurred in connection with this Agreement
and the transactions contemplated hereby (and in the case of the costs and
expenses of the Target, such costs and expenses will be borne by the Seller).
The Seller agrees that the Target has not borne and will not bear any of the
Seller's costs and expenses (including any of its legal fees and expenses) in
connection with this Agreement or any of the transactions contemplated hereby.
(l) CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The Parties intend
that each representation, warranty, and covenant contained herein shall have
independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
(m) INCORPORATION OF EXHIBITS, ANNEXES, AND SCHEDULES. The Exhibits,
Annexes, and Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.
(n) SPECIFIC PERFORMANCE. Each of the Parties acknowledges and agrees
that the other Parties would be damaged irreparably in the event any of the
provisions of this Agreement
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are not performed in accordance with their specific terms or otherwise are
breached. Accordingly, each of the Parties agrees that the other Parties shall
be entitled to seek an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically this Agreement and the
terms and provisions hereof in any action instituted in any court of the United
States or any state thereof having jurisdiction over the Parties and the subject
matter of this Agreement (subject to the provisions set forth in Section 8(o)
below), in addition to any other remedy to which they may be entitled, at law or
in equity.
(o) SUBMISSION TO JURISDICTION. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in San Francisco County,
California, in any action or proceeding arising out of or relating to this
Agreement and agrees that all claims in respect of the action or proceeding may
be heard and determined in any such court. Each Party also agrees not to bring
any action or proceeding arising out of or relating to this Agreement in any
other court. Each of the Parties waives any defense of inconvenient forum to the
maintenance of any action or proceeding so brought and waives any bond, surety,
or other security that might be required of any other Party with respect
thereto. Any Party may make service on any other Party by sending or delivering
a copy of the process to the Party to be served at the address and in the manner
provided for the giving of notices in Section 8(g) above. Nothing in this
Section 8(o), however, shall affect the right of any Party to serve legal
process in any other manner permitted by law or at equity. Each Party agrees
that a final judgment in any action or proceeding so brought shall be conclusive
and may be enforced by suit on the judgment or in any other manner provided by
law or at equity.
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
BUYER: XOOM CORPORATION,
a California corporation
By:
-------------------------------------------------
Xxxxx X. Xxxxx, Chief Executive Officer
SELLER: WORLDQUEST NETWORKS, INC.,
a Delaware corporation
By:
-------------------------------------------------
Xxxxxx X. Xxxxxxxx, Vice President and
Chief Financial Officer
WQN: WQN MERCURY INC.,
a Delaware corporation
By:
-------------------------------------------------
Xxxxxx X. Xxxxxxxx, President and Treasurer
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