ASSET PURCHASE AGREEMENT
BY AND AMONG
STARMEDIA NETWORK, INC.,
AND
PAGECELL INTERNATIONAL HOLDINGS, INC.,
DATED AS OF
SEPTEMBER 18, 1999
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "AGREEMENT") is made as of the
18th day of September, 1999, by and between StarMedia Network, Inc., a Delaware
corporation ("PURCHASER"), and Page Cell International Holdings, Inc., a British
Virgin Islands company (the "COMPANY").
W I T N E S S E T H
WHEREAS, the Company is engaged, directly and indirectly through its
Subsidiaries, in the business of (i) creating, developing, marketing and
otherwise exploiting computer software applications enabling, facilitating or
otherwise relating to wireless transmissions of messages, text, data and other
content and (ii) creating, developing, marketing or otherwise providing services
that provide end-users of cellular phones and pagers with access to
Internet-based messages, text, data and other content (including without
limitation Internet-based "Portals") and/or internet-based interactive
applications (the "SPECIFIED BUSINESS").
WHEREAS, the Company wishes to sell to designees of Purchaser, and
Purchaser wishes to have its designees acquire from the Company, all rights of
the Company and SWV in the Acquired Assets (as hereinafter defined), for the
consideration as stated hereunder and on the terms and conditions as set forth
in this Agreement; and
WHEREAS, simultaneously with the execution of this Agreement, (i)
each of the Key Employee/Stockholders is entering into an Inducement Agreement
dated the date hereof with Purchaser (collectively, the "KEY
EMPLOYEE/STOCKHOLDERS INDUCEMENT AGREEMENTS") and an Employment Agreement dated
the date hereof with Purchaser (collectively, the "KEY EMPLOYEES/STOCKHOLDERS
EMPLOYMENT AGREEMENTS") and (ii) ▇▇▇▇▇▇ ▇▇▇▇▇▇ is entering into an Inducement
Agreement dated the date hereof;
NOW THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, and intending to be legally bound hereby, the parties
hereto hereby agree as follows:
ARTICLE I
GENERALLY
Section 1.1 CERTAIN DEFINITIONS. Certain capitalized terms used in
this Agreement, in any Exhibit hereto or in the Disclosure Letter have the
meanings specified in Exhibit 1.1 hereto (which is hereby incorporated by
reference into this Agreement).
Section 1.2 TERMS GENERALLY. (a) Words in the singular shall be held
to include the plural and vice versa and words of one gender shall be held to
include the other genders as the context requires, (b) the terms "hereof,"
"herein," "hereto" and "herewith" and words of similar import shall, unless
otherwise stated, be construed to refer to this Agreement as a whole (including
all of the Exhibits hereto) and not to any particular provision of this
Agreement, and Article, Section, paragraph and Exhibit references are to the
Articles, Sections, paragraphs and Exhibits to this Agreement unless otherwise
specified, (c) the word "including" and words of similar import when used in
this Agreement shall mean "including, without limitation," unless otherwise
specified, (d) the word "or" shall not be exclusive, (e) the phrases "DATE OF
THIS AGREEMENT" and "DATE HEREOF" and any other phrases of similar import shall
mean September 18, 1999, (f) the term "DOLLARS" or the character "$" shall,
unless otherwise expressly provided, mean United States dollars, (g) the term
"knowledge" means, as to the Company or any of its Subsidiaries, the collective
knowledge of the Key Employee/Stockholders and of the officers and directors of
the Company or the applicable Subsidiary, as the case may be, (h) provisions
shall apply, when appropriate, to successive events and transactions and (i)
defined terms not found in Exhibit 1.1 are defined elsewhere in this Agreement.
ARTICLE II
SALE AND PURCHASE OF ASSETS; ASSUMPTION OF OBLIGATIONS
Section 2.1. PURCHASE AND SALE. Upon the terms and subject to the
conditions of this Agreement, at the Closing, (i) the Company shall (x) sell,
assign, transfer, convey and deliver to the Specified Designee all of the
Company's right, title and interest in, to and under the Acquired Assets, free
and clear of all Liens other than Permitted Encumbrances, and (y) cause SWV to
sell, assign, transfer and convey to the Specified SWV Transferee all of SWV's
right, title and interest in, to and under the Acquired Assets, free and clear
of all Liens other than Permitted Encumbrances, and (ii) Purchaser agrees to
cause the Specified Designee and the Specified SWV Transferee to purchase,
acquire and accept from the Company and SWV, respectively, all such right, title
and interest of the Company and SWV, respectively, in, to and under the Acquired
Assets. Any term of this Agreement to the contrary notwithstanding, the Company
(1) may retain one copy of all financial, accounting and tax records, and
records of the Company and its Subsidiaries relating to the Company Employees,
PROVIDED that the originals thereof shall constitute "Acquired Assets" and (2)
the Company may retain cash and cash equivalents in an amount equal to the
aggregate current liabilities of the Company and SWV for accrued salaries and
reimbursable expenses of employees, and trade payables (other than trade
payables to Insiders and other than Transaction Expenses and Transfer Taxes),
incurred in the Ordinary Course of Business (collectively, "CLOSING CURRENT
LIABILITIES") (such retained cash, the "RETAINED CASH").
Section 2.2. ACQUIRED ASSETS; EXCLUDED ASSETS; COMPANY Employees.
(a) The term "ACQUIRED ASSETS" shall mean and include (i) subject to Section
2.2(b), all businesses (including the Specified Business) and Assets of the
Company and its Subsidiaries, as such businesses and Assets exist as of the date
hereof (other than any such Assets that are disposed of after the date hereof
and prior to the Closing Date in the Ordinary Course of Business and otherwise
in accordance with this Agreement) or as of the Closing Date, and all of the
goodwill and going-concern value related thereto, (ii) subject to Section
2.2(b), all of the Assets that are reflected on the Balance Sheet (other than
any such Assets that have been or are disposed of after the date of the Balance
Sheet and prior to the Closing Date in the Ordinary Course of Business and
otherwise in accordance with this Agreement) and (iii) in any event (but without
limiting the generality of clauses (i) and (ii)), the following:
(1) all of the Specified Software, each of the Systems (in
their entirety) and all development work in process relating to any of the
Specified Software;
(2) the Specified Copyright Registrations and the Specified
Patent Application;
(3) the Specified Trademarks (in any style or design), any
name or ▇▇▇▇ derived from or including any of the foregoing, and all goodwill
relating thereto;
(4) the Specified Contracts;
(5) all of the outstanding capital stock of (or other equity
interests in) the Specified Subsidiaries;
(6) the Specified Domain Name Registrations;
(7) all Specified Miscellaneous Assets;
(8) all books of account, general, financial, accounting and
personnel records, files, invoices, customers' and suppliers' lists (past,
present or future), correspondence, memoranda, forms, lists, plats, plans,
drawings and specifications, documents evidencing other Acquired Assets, new
product development materials, creative materials, advertising and promotional
materials, studies, reports, sales and purchase correspondence, records relating
to the Company Employees, photographs, research and development files, and other
books, records or data owned by the Company or any of its Subsidiaries; and
(9) all goodwill of the Company or any of its Subsidiaries
related to any other Acquired Asset.
(b) EXCLUDED ASSETS. The term "Excluded Assets" means:
(i) the consideration payable to the Company under this
Agreement and all rights of the Company under the Company Transaction Documents
and the Mutual Confidentiality Agreement;
(ii) any capital stock of, or other equity interest in, SWV;
(iii) the Retained Cash;
(iv) prepaid insurance premiums of the Company or SWV which
relate to insurance policies not assigned to the Specified Designee or the
Specified SWV Transferee;
(v) any insurance policies or rights thereunder maintained by
the Company or any Subsidiary with respect to the Specified Business, unless
otherwise specifically assigned to the Specified Designee or the Specified SWV
Transferee;
(vi) refunds or claims for refunds of Taxes relating to the
Specified Business for all periods prior to the Closing Date;
(vii) the Outstanding Key Employee/Stockholders Employment
Agreements;
(viii) the Excluded Domain Name Registrations;
(ix) the SupportComm Letter of Intent;
(x) the Intercompany Services Agreement; and
(xi) the corporate charter, qualifications to conduct business
as a foreign corporation, arrangements with registered agents relating to
foreign qualifications, taxpayer and other identification numbers, corporate
seals, minute books, stock transfer books, blank stock certificates, and other
documents relating to the organization, maintenance, and existence of the
Company or SWV as a corporation.
(c) COMPANY EMPLOYEES.
(i) The Company acknowledges and consents (on its behalf and
on behalf of SWV) that if the Closing occurs Purchaser and/or its Affiliates may
hire such of the Company Employees as Purchaser and/or its Affiliates desire,
upon such terms and conditions of employment or association as they desire, and
that Purchaser and/or its Affiliates has made, and/or from and after the date
hereof Purchaser and/or its Affiliates may make, such offers of such
post-Closing employment or association to the Company Employees as they desire.
From and after the date hereof, the Company will encourage the Company Employees
to accept any such offers of post-Closing employment or association that
Purchaser or any of its Affiliates may make to the Company Employees. Nothing in
this Section 2.2(c), and no such post-Closing employment or association of any
of the Company Employees by Purchaser or any of its Affiliates, shall modify
Section 2.4 or 7.3 hereof.
(ii) For the avoidance of doubt and without limitation of the
scope of the Acquired Assets, the Company irrevocably consents, confirms and in
any event agrees (on its behalf and on behalf of SWV) that (x) no action or
omission of any of the Company Employees after the Closing in connection with
any such individual's association (in any capacity) with Purchaser or any of its
Affiliates shall give rise to any Claim of the Company or SWV against, or any
Liability in favor of the Company or SWV by, such individual or any Purchaser
Indemnified Party, based upon or arising out of such individual's former
association (in any capacity) with the Company or SWV, any Non-Competition
Covenant or Technology Conveyance/Confidentiality Agreement, or other contract,
agreement or instrument, with or otherwise for the benefit of the Company or SWV
Affiliates, and the Company hereby irrevocably releases (on its behalf and on
behalf of SWV) any and all such Claims, liabilities or obligations, and (y)
neither the Company nor SWV shall have any right, title or interest in, to or
under, or any Claim against any of the Company Employees, or any Purchaser
Indemnified Party, relating to or arising out of, any Intellectual Property or
Software acquired, created or developed by any of the Company Employees during
or in connection with any such individual's association (in any capacity) with
Purchaser or any of its Affiliates, based upon or arising out of such
individual's former association (in any capacity) with the Company or any
Non-Competition Agreement or Technology Conveyance/Confidentiality Agreement, or
other contract, agreement or instrument, with or otherwise for the benefit of
the Company or SWV (all of which shall, as between the Company and SWV, on the
one hand, and Purchaser and its Affiliates, on the other hand, belong solely to
Purchaser and its Affiliates).
Section 2.3 ASSUMED OBLIGATIONS. Subject to the terms and conditions
of this Agreement (including Section 2.7), if the Closing occurs, Purchaser
will, effective as of the Closing Date, cause the Specified Designee (with
respect to obligations of the Company) or the SWV Specified Transferee (in the
case of obligations of SWV) to assume, and to agree to perform when due, (i) all
of the Company's or SWV's obligations under (x) the Specified Contracts (other
than the Mutual Confidentiality Agreement) and (y) any other Contract entered
into after the date hereof which Purchaser agrees in its discretion to assume,
in each case other than any such obligation (1) required by the terms of any
such Specified Contract or other Contract to have been discharged on or prior to
the Closing Date, (2) the existence of which constitutes a breach of any
representation or warranty of the Company or SWV contained in or made pursuant
to this Agreement, (3) arising out of a breach or default by the Company or SWV
on or prior to the Closing Date under such Specified Contract or other Contract
or any event occurring on or prior to the Closing Date that with the lapse of
time or the giving of notice, or both, would become such a breach or default or
based upon, resulting from or arising out of the Retained Liabilities or (4)
constituting a Closing Current Liability and (ii) the Liabilities expressly
listed on Exhibit 2.3 hereto (subject to any limitations or qualifications set
forth on such Exhibit). The obligations of the Company or SWV assumed by the
Specified Designee or the SWV Specified Transferee pursuant to this Section 2.3
are referred to herein as the "ASSUMED OBLIGATIONS". For the avoidance of doubt
and anything in this Section 2.3 above to the contrary notwithstanding, the
Assumed Obligations do not and shall not include any obligations of the Company
or SWV to any Insider (other than any Company Employees, as such), or any
obligation to pay Transfer Taxes, Transaction Expenses or any Liability
described in sub-clauses (ii)(3), (4), (5) or (6) of Section 2.4. It is
understood and agreed that Purchaser (as opposed to the Specified Designee
and/or the Specified SWV Transferee) will not assume, agree to or perform or
otherwise become liable to any extent for any of the Assumed Obligations.
Section 2.4 RETAINED LIABILITIES. (a) Anything in this Agreement or
any of the Transaction Documents (as hereinafter defined) to the contrary
notwithstanding, neither Purchaser nor the Specified Designee nor the SWV
Specified Transferee will assume or be bound by or be obligated or responsible
for (i) any duties, responsibilities, commitments, expenses, obligations or
liabilities of any kind or nature (fixed or contingent, known or unknown,
whether arising prior to or after the Closing) (collectively, "LIABILITIES") (x)
of the Company or SWV, actual or asserted, or (y) which may be asserted against
or imposed upon Purchaser or the Specified Designee or the SWV Specified
Transferee as a successor or transferee of the Company or SWV or as an acquirer
of the Acquired Assets or as a result of the Excluded Assets or the conduct by
the Company or SWV of its business (including the Specified Business) at any
time prior to or on the Closing Date, in each case other than the Assumed
Obligations, or (ii) without limitation of the foregoing, any of the following:
(1) any Liability of the Company or any of its Subsidiaries as
of the Closing Date arising out of, in connection with or as a result of
the ownership or operation of the Acquired Assets by the Company or any of
its Subsidiaries, other than the Assumed Obligations;
(2) any Liability (other than the Assumed Obligations) as of
the Closing Date under or in respect of the Specified Contracts or any
other Contract;
(3) any Liability of the Company or any of its Subsidiaries as
of the Closing Date incurred under or arising out of any Law;
(4) any Liability of the Company or any of its Subsidiaries as
of the Closing Date in respect of Taxes;
(5) any Liability in respect of the SupportComm Letter of
Intent or the Intercompany Services Agreement; and
(6) any Liability (A) arising out of the employment or
termination of employment of any officer, employee or independent
contractor by the Company or any of its Subsidiaries prior to the Closing
(including, but not limited to, any termination of employment as a result
of the consummation of the transactions contemplated by this Agreement),
including any Liability under the Outstanding Key Employee/Stockholders
Employment Agreements, or (B) arising out of or under any Benefit Plan or
any other employee benefit plan, arrangement or policy currently or
previously maintained or contributed to by the Company or any of its
Subsidiaries.
((i) and (ii) collectively, excluding Liabilities arising solely under this
Agreement, the "RETAINED LIABILITIES").
Section 2.5 PURCHASE PRICE. (a) If the Closing occurs, then the
Specified Designee shall be obligated to pay consideration to the Company for
the Acquired Assets (the "PURCHASE PRICE") as set forth in detail below in this
Section 2.5. All Purchase Price amounts that become due and payable pursuant to
this Section 2.5 shall be payable solely by the delivery to the Company of (i)
the number of shares of StarMedia Common Stock having a value (determined as set
forth below in this Section 2.5) equal to 75% of the particular Purchase Price
amount then due and payable and (ii) the number of shares of StarMedia Junior
Non-Voting Convertible Preferred Stock that (if such Preferred Stock was then
convertible into StarMedia Common Stock), would then be convertible into 1/3 of
the number of shares of StarMedia Common Stock determined pursuant to clause (i)
above. (The specification of dollar Purchase Price payments herein and in
Exhibit 2.5(c) is merely for the convenience of the parties, as the sole
consideration payable by Purchaser for the Acquired Assets shall be StarMedia
Capital Stock.)
(b) If the Closing occurs, then at the Closing the Specified
Designee shall pay to the Company, by delivery of StarMedia Capital Stock as
described in Section 2.5(a), $10,000,000. For purposes of this Closing payment,
a share of StarMedia Common Stock shall be valued at an amount equal to the
average Closing Market Price of StarMedia Common Stock on the thirty Trading
Days immediately prior to the Closing Date (such average, the "CLOSING SHARE
PRICE").
(c) Exhibit 2.5(c) sets forth nine possible additional Purchase
Price payments (collectively, the "POSSIBLE EARNOUT PAYMENTS") and the targets
which must be satisfied in order to earn each such Possible Earnout Payment (the
"EARNOUT TARGETS"). To the extent that any Earnout Target (other than the
Earnout Target for the December 31, 1999 End Date) is not met, the corresponding
Possible Earnout Payment shall be reduced on a pro rata basis as described in
greater detail in Exhibit 2.5(c), PROVIDED that if the actual performance does
not exceed 50% of such Earnout Target, then such corresponding Possible Earnout
Payment shall be forfeited in its entirety. If the Earnout Target for the
December 31, 1999 End Date is missed to any extent, then the corresponding
Possible Earnout Payment shall be forfeited in its entirety. No Possible Earnout
Payment is subject to increase to make up for any reduction or forfeiture of any
other Possible Earnout Payment. It is understood, as set forth in Exhibit
2.5(c), that to the extent that the Possible Earnout Payment for the end of the
calendar year 1999 actually is earned, the maximum Possible Earnout Payments
with respect to "Qualifying Contracts" at the end of the first and second
calendar quarters of calendar year 2000 each shall be reduced by an amount equal
to 50% of such earned calendar year 1999 Possible Earnout Payment.
(d) One Earnout Target is set forth in Exhibit 2.5(c) for the end of
the calendar year 1999, and two Earnout Targets are set forth in Exhibit 2.5(c)
for the end of each of the first, second, third and fourth calendar quarters of
the calendar year 2000. Purchaser shall (i) work with one or more of the Key
Employees/Stockholders to determine, and shall determine, the amount (if any) of
the applicable Possible Earnout Payment, and (ii) Purchaser shall give written
notice to the Company setting forth the amount of the applicable Possible
Earnout Payment (if any) and a reasonable description of the elements used in
calculation of such Possible Earnout Payment, in each case as soon as
practicable, and in any event within 30 days, following the last day of the
applicable calendar quarter. Any disagreement between the Company and Purchaser
as to the proper computation of any applicable Possible Earnout Payment,
including, without limitation, calculation of Qualifying Revenues or the
application of the Qualifying Products/Services and Qualifying Contract
definitions set forth on Exhibit 2.5(c) (an "Earnout Payment Dispute"), shall be
settled in accordance with the provisions of Section 2.5(k) hereof. When the
precise amount (if any) of any particular Possible Earnout Payment that has been
earned pursuant to Exhibit 2.5(c) and Section 2.5(c) has been determined, such
Possible Earnout Payment shall be paid by the Specified Designee to the Company,
by delivery by the Specified Designee of StarMedia Common Stock and StarMedia
Junior Non-Voting Convertible Preferred Stock as set forth in Section 2.5(a)
(valued as set forth below in this Section 2.5), not less than three, nor more
than five, business days following the date of such determination. Regardless of
when the actual date of determination occurs, subject to Section 2.5(e), a share
of StarMedia Common Stock with respect to any particular Possible Earnout
Payment shall be valued at an amount equal to the average Closing Market Price
on the twenty Trading Days immediately prior to the "End Date" set forth in
Exhibit 2.5(c) for determination of such Possible Earnout Payment (such average
closing price, the "EARNOUT SHARE PRICE").
(e) Anything in Section 2.5(d) to the contrary notwithstanding, (i)
if any particular Earnout Share Price is greater than 140%, but equal to or less
than 180%, of the Closing Share Price, then StarMedia Common Stock with respect
to the relevant Possible Earnout Payment or Payments, as the case may be, shall
be valued at an amount equal to 140% of the Closing Share Price, (ii) if any
particular Earnout Share Price exceeds 180% of the Closing Share Price (such
excess, the "UPPER LIMIT EXCESS"), then StarMedia Common Stock with respect to
the relevant Possible Earnout Payment or Payments, as the case may be, shall be
valued at an amount equal to the sum of (x) an amount equal to 140% of the
Closing Share Price plus (y) such Upper Limit Excess, (iii) if any particular
Earnout Share Price is less than 80%, but equal to or greater than 50%, of the
Closing Share Price, then StarMedia Common Stock with respect to the relevant
Possible Earnout Payment or Payments, as the case may be, shall be valued at an
amount equal to 80% of the Closing Share Price, and (iv) if any particular
Earnout Share Price is less than 50% of the Closing Share Price (such shortfall,
the "LOWER LIMIT SHORTFALL"), then StarMedia Common Stock with respect to the
relevant Possible Earnout Payment or Payments, as the case may be, shall be
valued at an amount equal to the excess of (x) an amount equal to 80% of the
Closing Share Price over (y) the Lower Limit Shortfall.
(f) No fractional share of StarMedia Common Stock shall be issued in
connection with the transactions contemplated herein. The Company shall be
entitled to receive in lieu of any fractional share of StarMedia Common Stock to
which the Company otherwise would have been entitled pursuant to this Section
2.5 a cash payment in an amount equal to the product of (i) the fractional
interest of a share of StarMedia Capital Stock to which the Company otherwise
would have been entitled and (ii) the amount per share at which StarMedia Common
Stock was valued pursuant to this Section 2.5 in relation to the particular
Purchase Price payment in question. Purchaser may, but need not, deliver (or
cause to be delivered) fractional shares of StarMedia Junior Non-Voting
Convertible Preferred Stock. If Purchaser elects not to deliver (or cause to be
delivered) any particular fractional share of StarMedia Junior Non-Voting
Convertible Preferred Stock, then the Company shall be entitled to receive in
lieu thereof a cash payment in an amount equal to the product of (x) the
fractional interest of a share of StarMedia Junior Non-Voting Convertible
Preferred Stock to which the Company otherwise would have been entitled, (y) the
number of shares of StarMedia Common Stock that a single share of StarMedia
Junior Non-Voting Convertible Preferred Stock would then be convertible into (if
such Preferred Stock was then convertible into StarMedia Common Stock) and (z)
the amount described in clause (ii) of the preceding sentence.
(g) If the StarMedia Common Stock or StarMedia Junior Non-Voting
Convertible Preferred Stock are converted into any securities or other property
(other than Conversion Stock), or any securities or other property (in each
case, other than cash or additional shares of StarMedia Capital Stock) are
distributed, issued or exchanged with respect to any shares of StarMedia Capital
Stock upon any recapitalization, reclassification, merger, consolidation, stock
split, stock dividend or the like (Purchaser being permitted to do all of the
foregoing), the parties hereto shall negotiate in good faith, and execute and
deliver, such modifications to this Section 2.5, and Sections 11.17 and 11.18,
hereof as are appropriate to account for such transactions, in accordance with
the principles underlying the provisions concerning such transactions set forth
in the certificate of designation for the StarMedia Junior Non-Voting
Convertible Preferred Stock. This Section 2.5(g) shall apply, MUTATIS MUTANDIS,
to successive transactions of the nature described in this Section 2.5(g).
(h) Purchaser shall take any and all actions necessary to cause the
Specified Designee to satisfy its obligation under this Section 2.5 to deliver
StarMedia Capital Stock to the Company. Purchaser shall at all times after the
Closing reserve for issuance hereunder a number of authorized shares of
StarMedia Common Stock sufficient to satisfy such obligation, PROVIDED that
Purchaser may assume for such purposes that all StarMedia Common Stock
deliverable after the Closing pursuant to this Section 2.5 shall be valued at
not less than 100% of the Closing Share Price. All shares of StarMedia Capital
Stock issued pursuant to this Section 2.5 shall, upon such issuance, be fully
paid and non-assessable.
(i) Notwithstanding anything in this Agreement to the contrary, 100%
of the number of shares of StarMedia Common Stock and StarMedia Junior
Non-Voting Convertible Preferred Stock (and cash in lieu of fractional shares)
otherwise to be delivered to the Company pursuant to this Section 2.5 (including
upon the Closing Date) shall instead be delivered to, and registered in the name
of, the Escrow Agent under the Escrow Agreement, as escrow agent thereunder, to
be held, released or disposed of in accordance with the terms of the Escrow
Agreement.
(j) In the event that any withholding Taxes are due with respect to
any delivery of StarMedia Capital Stock to the Escrow Agent as a Possible
Earnout Payment that is properly characterized as "interest" under applicable
Tax law, the Company shall pay to the Specified Designee upon such delivery an
amount required to satisfy such withholding tax liability and if it fails to do
so, the Specified Designee may withhold an appropriate amount of StarMedia
Capital Stock based upon the valuation method used to determine the taxable
"interest."
(k) Each of Purchaser and the Company agrees that any Earnout
Payment Dispute shall be solely and finally settled by arbitration, which shall
be conducted in New York City or at such other locations as the parties may
agree in writing. The arbitrator shall conduct there the proceedings in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association, as supplemented by the American Arbitrators Association's
Supplementary Procedures for large, complex disputes (the "RULES"). The
arbitration proceeding shall be arbitrated in accordance with the Rules, and
shall be conducted before three arbitrators, chosen in accordance with the
Rules. The parties agree to arbitrate the arbitration by (i) making available to
one another and to the arbitrator for examination, inspection and extraction all
documents, books, records and personnel under their control determined by the
arbitrator(s) to be relevant to the dispute; (ii) conducting arbitration
hearings to the greatest extent possible on successive days; and (iii) observing
strictly the time periods established by the Rules, or by the arbitrator, for
submission of evidence or briefs. Each of Purchaser and the Company agree that
any arbitrator award shall be final, binding and subject to no judicial review,
and if necessary, any such award may be entered in any court having jurisdiction
over the subject matter or over the party against whom the judgment is being
enforced. The determination of which party (or combination of them) shall bear
the costs and expenses of such arbitration proceeding shall be determined by the
arbitrator. The arbitrator shall have the discretionary authority to award that
all, or a part, of the reasonable attorney's fees of one party in connection
with the arbitration shall be reimbursed by another party.
Section 2.6 CERTAIN COVENANTS IN RELATION TO THE EARNOUT Payment.
(a) Anything in the Specified Key Employees/Stockholders Employment Agreements
to the contrary notwithstanding, if Purchaser shall terminate the "Employment
Period" under the Specified Key Employees/Stockholders Employment Agreement of
either of the Specified Key Employees/Stockholders "Without Cause" (as defined
in the Specified Key Employees/Stockholders Employment Agreements) and the
effective date of such termination is prior to January 1, 2001, then the Earnout
Targets for each "End Date" set forth in Exhibit 2.5(c) occurring after such
termination effective date will be deemed to have been met on such End Date and
the corresponding Possible Earnout Payments shall be paid in accordance with
Sections 2.5 and 2.6.
(b) During the period commencing on the Closing Date and ending
December 31, 2001, the Specified Key Employees/Stockholders, pursuant to their
positions under their respective Key Employees/Stockholders Employment
Agreements (and subject to Purchaser's right to appoint another individual to
replace any Specified Key Employee/Stockholder who dies or that is terminated
for "Cause" or "Disability" (as defined in the Specified Key
Employees/Stockholders Employment Agreements)) collectively shall retain day to
day operational control of StarMedia Mobile, subject only to (i) the terms of
their respective Specified Key Employees/Stockholders Employment Agreements,
which also shall be complied with by Purchaser, and (ii) the directions which
may be given them in good faith from time to time by the board of directors or
senior management of Purchaser. The foregoing notwithstanding, (1) the Specified
Key Employees/Stockholders shall not be permitted, without prior approval of the
board of directors or senior management of Purchaser, to cause the Specified
Designee (i) to deviate from the Business Plan, (ii) to deviate from the Budget
or (iii) to cause StarMedia Mobile to take (x) any extraordinary action or any
other action of a nature that customarily would require the approval of the
board of directors of a comparably situated corporation (including without
limitation any incurrence of indebtedness for borrowed money (or other
comparable Liability), the entering into by StarMedia Mobile of any IP License
in favor of a third party other than on terms and conditions satisfying the
conditions for constituting a "Qualifying Contract" set forth in Exhibit 2.5(c)
hereto or any other sale, license or other disposition of any significant Assets
of StarMedia Mobile) or (y) without limitation of sub-clause (x), any action
listed or described in Exhibit 2.6(b)-1 hereto, and (2) legal, finance,
accounting and human resource functions shall not be administered by the
Specified Key Employees/Stockholders. If the net operating loss of StarMedia
Mobile on a consolidated/combined basis (determined on an accrual basis in
accordance with GAAP, but excluding any revenues attributable to extraordinary
transactions or charges attributable to extraordinary transactions (each
determined with reference to the definition of "extraordinary items" in
Accounting Principles Bulletin 30) and including a reasonable allocation by
Purchaser to StarMedia Mobile of all expenses incurred by Purchaser and its
Subsidiaries directly in connection with StarMedia Mobile and (without
duplication) of the expenses of Purchaser and its Subsidiaries in providing
administrative, accounting, book and recordkeeping, tax, legal, financial and
other like services) for the period from the Closing Date through the end of
calendar year 1999, or for any of the first three calendar quarters of the
calendar year 2000, exceeds $800,000, $500,000, $950,000 and $950,000,
respectively, then Purchaser may at any time thereafter terminate the Specified
Key Employees/Stockholders' operational control of StarMedia Mobile. For
purposes of this Section 2.6, charges attributable to "extraordinary
transactions" shall include, without limitation, any costs or charges directly
related to (i) the purchase of the Acquired Assets pursuant to this Agreement
(including, without limitation, the payment of the Purchase Price, payment of
any Possible Earnout Payments, transaction expenses and any payments pursuant to
Section 6.3 hereof), (ii) the granting of Purchaser stock options in connection
with the hiring of any former officers, directors or employees of the Company or
its Subsidiaries, or (iii) the acquisition of the assets or stock of other
businesses, unless (as to item (iii) only) otherwise agreed by both Purchaser
and the Company in advance of the closing of such acquisition. From and after
relieving the Specified Key Employees/Stockholders of operational control of
StarMedia Mobile pursuant to the third sentence of this Section 2.6 and through
December 31, 2000, Purchaser shall act in good faith with respect to StarMedia
Mobile in relation to the Possible Earnout Payments.
(c) If the Closing occurs, then thereafter, in accordance with the
Business Plan and the Budget (but in any event only to the extent such funds
actually are needed), Purchaser shall contribute or lend (or cause to be
contributed or loaned) to StarMedia Mobile from time to time up to an aggregate
amount of $5,000,000 to fund the cash needs of StarMedia Mobile through December
31, 2000. No such loan to StarMedia Mobile shall be required to be repaid prior
to January 1, 2001.
(d) This Section 2.6 shall cease to apply from and after either
Specified Key Employee/Stockholder failing in any material respect at any time
to carry out, perform, comply with, satisfy or discharge any of their respective
covenants, agreements, undertakings, liabilities or obligations set forth in
their Inducement Agreements or Specified Key Employees/Stockholders Employment
Agreements, if such failure either shall not be capable of being fully cured or
is in fact not fully cured within 10 days of notice thereof to the relevant
Specified Key Employee/Stockholder and to the Company.
(e) Except only as set forth in Section 2.6(a), the sole liability
of Purchaser for any breach by it of this Section 2.6 shall be for the Specified
Designee to pay to the Company (by delivery of StarMedia Capital Stock as set
forth above) any portion of the Possible Earnout Payments that could reasonably
be expected to have been earned but for such breach (but that were in fact not
earned as a result of such breach).
Section 2.7 THIRD PARTY CONSENTS.
(a) NONASSIGNABLE RIGHTS. Notwithstanding anything to the contrary
contained herein, neither this Agreement nor any Transaction Document shall
operate to transfer any Contract or Company Approval, or any claim, right or
benefit arising thereunder or resulting therefrom, as contemplated hereby if
such an attempted transfer thereof, without the consent of the other party
thereto (in the case of a Contract) or the relevant Governmental Entity (in the
case of a Company Approval) (the "OTHER PARTY"), would constitute, result in or
give rise to a "Default/Modification Right". (Any Asset that, but for this
Section 2.7(a), would be sold and assigned at the Closing shall otherwise remain
an "Acquired Asset" for purposes of this Agreement; any such Asset may be
referred to herein as a "Restricted Asset".)
(b) The Company will (and will cause SWV to) use its best efforts to
obtain as promptly as practicable all Consents and Approvals of Other Parties
required to transfer the Restricted Assets to the Specified Designee or the SWV
Specified Transferee, as appropriate, at the Closing as contemplated hereby and
in a manner that will avoid any Default/Modification Right. To the extent that
such Consents and Approvals required to transfer any particular Restricted Asset
to the Specified Designee or the SWV Specified Transferee, as appropriate, are
not obtained prior to the Closing, the Company will (and will cause SWV to)
continue its best efforts as described in the preceding sentence after the
Closing, and if and when all requisite Consents and Approvals of Other Parties
are obtained in respect of such Restricted Asset, all right, title and interest
of the Company and/or SWV, as appropriate, in, to and under such Restricted
Asset automatically shall be deemed to have been assigned to the Specified
Designee or the SWV Specified Transferee, as appropriate. In no event shall the
Company enter into, or permit any of its Subsidiaries to enter into, any adverse
amendment of any Restricted Asset in order to obtain any Consents and Approvals
described in this Section 2.7(b) without Purchaser's consent.
(c) Except as provided by Section 2.7(e), in the event that any and
all Consents and Approvals of Other Parties necessary for the transfer of any
Restricted Asset as contemplated hereby shall not have been obtained prior to
the Closing Date, then as of the Closing, this Agreement, to the extent
permitted by Law, shall constitute full and equitable assignment by the Company
and/or SWV, as appropriate, to the Specified Designee or the SWV Specified
Transferee, as appropriate, of all right, title and interest of the Company
and/or SWV, as appropriate, in and to, and all of the obligations (constituting
Assumed Obligations) of the Company and/or SWV, as appropriate under, such
Restricted Asset, and, in the case of Contracts, the Specified Designee and/or
the Specified SWV Transferee, as appropriate shall be deemed the agent of the
Company and/or SWV, as appropriate, for purpose of completing, fulfilling and
discharging all of obligations (constituting Assumed Obligations) of the Company
and/or SWV, as appropriate, under any such Contract. The parties shall take all
necessary steps and actions to provide the Specified Designee or the SWV
Specified Transferee, as appropriate, with the benefits of such Restricted
Asset, and, in the case of Contracts and subject to Section 2.7(e), to have the
Specified Designee or the Specified SWV Transferee, as appropriate, relieve the
Company and/or SWV, as appropriate, of obligations thereunder (constituting
Assumed Obligations), including entry into subcontracts for the performance
thereof.
(d) Except as provided by Section 6.2(a)(iv), in the event the
Company and/or SWV shall be unable to make the equitable assignment described in
Section 2.7(c), or if such attempted assignment would give rise to any
Default/Modification Right, or would otherwise adversely affect the rights of
the Company, SWV, the Specified Designee or the SWV Specified Transferee under
such Restricted Asset or would not assign all the Company's and/or SWV's rights,
as appropriate, thereunder at the Closing (and in any event to the extent
requested by Purchaser from time to time with respect to any Restricted Asset
title to which has not been assigned to the Specified Designee or the SWV
Specified Transferee, as appropriate), the Company shall continue (and shall
cause SWV to continue) to cooperate and use its best efforts to provide the
Specified Designee or the SWV Specific Designee, as appropriate with all such
rights. To the extent that any such Consents and Approvals are not obtained, or
until the impediments to such assignment are resolved (and in any event to the
extent requested by Purchaser from time to time with respect to any Restricted
Asset title to which has not been assigned to the Specified Designee or the SWV
Specified Transferee, as appropriate), the Company shall and shall cause SWV to
use its best efforts to (i) provide to the Specified Designee or the SWV
Specified Transferee, as appropriate, at the request of Purchaser, the benefits
of any such Restricted Asset, (ii) cooperate in any lawful arrangement designed
to provide such benefits to the Specified Designee or the SWV Specified
Transferee, as appropriate, and (iii) enforce, at the request of and for the
account of the Specified Designee or the Specified SWV Transferee, as
appropriate, any rights of the Company and/or SWV arising from any such
Restricted Asset against any third Person including the right to elect to
terminate in accordance with the terms thereof upon the advice of Purchaser.
(e) Subject to Section 6.2(a)(iv), any term of this Agreement or any
other Transaction Document now or hereafter delivered (other than Section
6.2(a)(iv)) to the contrary notwithstanding, to the extent, but only to the
extent, that after the Closing the Specified Designee or the SWV Specified
Transferee, as appropriate is provided the benefits of any Restricted Asset
(whether from the Company, SWV, or otherwise), the Specified Designee or SWV
Specified Transferee, as appropriate shall perform, when due, the obligations of
the Company and/or SWV thereunder constituting Assumed Obligations.
(f) Nothing in this Section 2.7 limits Section 6.2(a) or 8.3, or the
last sentence of Section 2.3, hereof.
(g) The parties agree that any Contract resulting from acceptance
after the Closing of any of the "Proposals" referenced in paragraph 1 of Exhibit
2.3 hereto shall be deemed to be a "Contract" and (if applicable) a "Restricted
Asset" solely for purposes of this Section 2.7 and Section 6.2(a)(iii).
ARTICLE III
CLOSING
Section 3.1 TIME AND PLACE OF CLOSING. The closing of the
transactions contemplated by Sections 2.1, 2.3 and 2.5(b) hereof (the "Closing")
shall take place on (i) September 30, 1999, (ii) such earlier date as the
parties may agree or (iii) such later date no later than the fifth business day
after satisfaction (or waiver) of the conditions to Closing set forth in
Articles VIII and IX hereof (other than those conditions which require the
delivery of any documents or the taking of other action at the Closing) (the
"CLOSING DATE") at 10:00 a.m., New York time at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ &
▇▇▇▇, LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇; PROVIDED,
HOWEVER, that the execution, delivery and acceptance of the instruments of
transfer described in Section 3.2(a) hereof with respect to the Acquired Assets
(except with respect to the Acquired Assets of SWV) and (except as the parties
otherwise may agree) the transfer and receipt of possession of the Acquired
Assets (except the Acquired Assets of SWV) shall take place at the offices of
O'▇▇▇▇ ▇▇▇▇▇▇▇ O'▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ Building, 30 ▇▇▇▇▇▇▇▇ Street,
Road Town, Tortola, BVI. In the event that at the Closing no party exercises any
right it may have to terminate this Agreement and no condition to the
obligations of the parties exists that has not been satisfied or waived, the
parties shall deliver to each other at the Closing the certificates and other
documents required to be delivered under this Article III.
Section 3.2 THE COMPANY CLOSING DELIVERIES. At the Closing, the
Company shall deliver to Purchaser the following:
(a) such appropriately executed deeds, bills of sale,
assignments and other instruments of transfer providing for the sale,
assignment, transfer, conveyance and delivery (including, to the extent
applicable, of record) of (i) the Acquired Assets (other than the Acquired
Assets owned by the Specified Subsidiaries or SWV) to the Specified
Designee, and (ii) the Acquired Assets owned by SWV (if any) to the
Specified SWV Transferee, in each case free and clear of all Liens other
than the Permitted Encumbrances, in form and substance reasonably
satisfactory to Purchaser and its counsel together with (x) resignations
as director of each director of each Specified Subsidiary if requested by
Purchaser, and (in any event) an irrevocable, general release from each
director or officer of a Specified Subsidiary in favor of the Specified
Subsidiary for which such person serves as a director or officer, duly
executed by each such person, and (y) an irrevocable, general release by
each of the Company and SWV, in favor of each of the Specified
Subsidiaries, duly executed by the Company, all in form and substance
satisfactory to Purchaser and its counsel;
(b) all Consents or Approvals to or in connection with the
assignment, transfer, conveyance or reissuance of Acquired Assets,
including but not limited to the Specified Contracts, to the Specified
Designee or the Specified SWV Transferee obtained or received at or prior
to the Closing;
(c) copies of resolutions adopted by each of the board of
directors (or comparable governing body) and the shareholders of each of
the Company and SWV, approving the execution and delivery by the Company
of this Agreement and the other Company Transaction Documents and the
performance by the Company of its obligations hereunder and thereunder,
all of the foregoing certified as of the Closing Date by the Company's
Secretary or Assistant Secretary;
(d) without limitation of Section 3.5, possession of the
Acquired Assets, in such manner as may reasonably be specified by
Purchaser, and, without limitation of the foregoing, all documents and
instruments evidencing the release of any Liens with respect to the
Acquired Assets;
(e) good standing (or comparable) certificates as of a recent
date, with respect to the Company, SWV and each of the Specified
Subsidiaries;
(f) two duly executed Internal Revenue Service Forms W-8 BEN;
and
(g) such other documents as Purchaser may reasonably request
in order to effectuate the transactions contemplated by this Agreement to
be consummated at the Closing.
Section 3.3 PURCHASER CLOSING DELIVERIES. At the Closing, Purchaser
shall cause the Specified Designee to deliver to the Company:
(a) subject to Section 2.5(i) hereof, stock certificates for
the StarMedia Capital Stock deliverable at the Closing pursuant to Section
2.5(b) hereof;
(b) such appropriately executed assumption agreements and
other instruments of assumption providing for (i) subject to Sections 2.7,
the assumption of the Assumed Obligations, and (ii) the agreement of the
Specified Designee and the SWV Specified Transferee to be bound by the
provisions of Section 2.7 hereof applicable to it, such agreements to be
in form and substance reasonably satisfactory to the Company and its
counsel; and
(c) such other documents as the Company may reasonably request
in order to effectuate the transactions contemplated by this Agreement to
be consummated at the Closing.
Section 3.4 MUTUAL CLOSING DELIVERIES. At the Closing, Purchaser and
the Company shall enter into an Escrow Agreement dated the Closing Date,
substantially in the form of Exhibit 3.4 hereto (with such changes therein as
the Escrow Agent may request and are agreed to by Purchaser and the Company,
such consent not to be unreasonably withheld or delayed) (the "ESCROW
AGREEMENT").
Section 3.5 FURTHER ASSURANCES. (a) From time to time prior to, at
and after the Closing, Purchaser and the Company shall execute and deliver or
cause to be executed and delivered (and the Company shall cause SWV to execute
and deliver) such further documents, certificates, instruments of conveyance,
assignment and transfer, and take such further action, as Purchaser or the
Company may reasonably request in order more effectively (i) to sell, assign,
convey, transfer, reduce to possession and record title to any of the Acquired
Assets (other than the Specified Subsidiary Acquired Assets) to the Specified
Designee or the Specified SWV Transferee (as requested by Purchaser), and (ii)
to transfer possession of the Specified Subsidiary Acquired Assets to the
Specified Subsidiaries. The Company agrees to cooperate with Purchaser and the
Specified Designee or the Specified SWV Transferee (as requested by Purchaser)
in all reasonable respects to assure to the Specified Designee or the Specified
SWV Transferee (as requested by Purchaser) the continued title to and in the
Acquired Assets (other than the Specified Subsidiary Acquired Assets) in the
condition and manner contemplated by this Agreement and otherwise to permit the
Specified Designee or the Specified SWV Transferee as appropriate, to realize
such title benefits. Each party shall cooperate and deliver such instruments and
take such action as may be reasonably requested by any other party hereto in
order to carry out the provisions and purposes of this Agreement and the
transactions contemplated hereby. Purchaser and the Company shall, and shall
cause their respective Affiliates, officers, employees, agents and
representatives to, for a period of three years after the Closing Date,
cooperate and take all reasonable actions requested by Purchaser reasonably
intended to ensure the complete and orderly transition of the business
activities of the Company and SWV, respectively, as previously conducted by the
Company and SWV, respectively, from the Company to the Specified Designee or the
Specified SWV Transferee as appropriate, and to minimize the disruption to such
business activities of the Company and SWV, respectively resulting from the
transactions contemplated hereby; PROVIDED, HOWEVER that Purchaser shall
reimburse the Company all reasonable out of pocket expenses incurred by the
Company in taking actions requested by Purchaser pursuant to this sentence.
(b) Without limitation of the generality of Section 3.5(a), the
Company shall (and shall cause SWV to), for a period of three years following
the Closing, render, and use reasonable efforts to cause its personnel to
render, all reasonable lawful assistance, execute and deliver any and all
assignments and other reasonably requested documents and instruments and give
written or oral in-person testimony as Purchaser may reasonably request from
time to time from and after the Closing, for the purpose of registering any
Acquired Intellectual Property, perfecting, continuing or renewing any such
right, recording any transfer of rights therein to the Specified Designee,
prosecuting or taking an assignment of any patent or patent application with
respect thereto (it being understood that neither the Company nor SWV nor any of
their respective personnel or Affiliates shall have the right to apply for any
such patents or prosecute any such applications except as requested by
Purchaser), or taking legal action against infringers; PROVIDED, HOWEVER that
Purchaser shall reimburse the Company all reasonable out of pocket expenses
incurred by the Company in taking actions requested by Purchaser pursuant to
this sentence.
(c) The Company will promptly refer and deliver (and cause SWV to
refer and deliver) to Purchaser all communications regarding the Acquired Assets
or the Specified Subsidiaries, including requests for information and orders,
received by the Company or SWV at any time within two years after the Closing
Date.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to and for the benefit of
each of Purchaser, the Specified Designee and the Specified SWV Transferee as
follows:
Section 4.1. INCORPORATION; AUTHORIZATION; CAPITALIZATION. (a) The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the Territory of the British Virgin Islands. The Company (i)
has all requisite corporate power and authority to own the Acquired Assets owned
by it and to carry on its business as it is now being conducted and (ii) is in
good standing and is duly qualified to transact business, and is in good
standing (to the extent such concept exists), in each jurisdiction in which the
nature of the Assets owned or leased by it or the conduct of its business
requires it to be so qualified. SWV is a corporation duly organized, validly
existing and in good standing under the laws of the State of Florida. SWV (i)
has all requisite corporate power and authority to own the Acquired Assets owned
by it and to carry on its business as it is now being conducted and (ii) is in
good standing and is duly qualified to transact business, and is in good
standing (to the extent such concept exists), in each jurisdiction in which the
nature of the Assets owned or leased by it or the conduct of its business
requires it to be so qualified. The Company has delivered to Purchaser prior to
the date hereof true and correct copies of its Memorandum of Association and
Articles of Association (or similar organizational documents) (collectively, the
"COMPANY ORGANIZATIONAL DOCUMENTS") and of the certificate of incorporation and
by-laws of SWV (the "SWV ORGANIZATIONAL DOCUMENTS"). The Company has no
Subsidiary other than the Specified Subsidiaries and SWV. Except as set forth on
Section 4.1(a) of the Disclosure Letter, the Company has no investments in, or
joint venture arrangements with, any other Person (other than the Specified
Subsidiaries and SWV). SWV is a wholly-owned subsidiary of the Company.
(b) Each Specified Subsidiary is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization and has the requisite corporate power and authority to own its
assets and to carry on its business as now being conducted. Each Specified
Subsidiary is duly qualified to transact business, and is in good standing (to
the extent such concept exists), in each jurisdiction in which the nature of the
Assets owned or leased by it or the conduct of its requires it to be so
qualified. The Company has delivered to Purchaser prior to the date hereof true
and correct copies of the governing instruments of each Specified Subsidiary.
Each Specified Subsidiary is a wholly-owned Subsidiary of the Company (and
EnTuMovil de Venezuela C.A. is a wholly-owned Subsidiary of In2Movil
International Corp.), except that CycleLogic Do Brasil, Ltda. is owned partially
by the Company's Brazilian legal counsel, as identified in Section 4.1(b) of the
Disclosure Letter. The authorized and issued capital stock of each Specified
Subsidiary is set forth in Section 4.1(b) of the Disclosure Letter. All of the
issued and outstanding capital stock of each Specified Subsidiary has been
validly authorized and issued, is fully paid and nonassessable and has not been
issued in violation of any preemptive rights or of any Law. There is no
security, option, warrant, right, call, subscription, agreement, commitment or
understanding of any nature whatsoever, fixed or contingent, that directly or
indirectly (i) calls for the issuance, sale, pledge or other disposition of any
shares of capital stock of any Specified Subsidiary or any securities
convertible into, or other rights to acquire, any shares of capital stock of any
Specified Subsidiary, (ii) obligates the Company or any Specified Subsidiary to
grant, offer or enter into any of the foregoing or (iii) relates to the voting
or control of such capital stock, securities or rights.
(c) Section 4.1(c) of the Disclosure Letter describes, separately
with respect to the Company, SWV and each of the Specified Subsidiaries, the
countries in which each such Person owns any Assets or otherwise conducts any
business, and a summary of the nature and location of the Assets that it owns,
and of the business that it conducts, in each such country. Except as described
in Section 4.1(c) of the Disclosure Letter, neither SWV nor any of the Specified
Subsidiaries owns any Assets.
(d) Each of the Company and SWV has full power and authority
(corporate or otherwise) to execute, deliver and perform this Agreement, the
Escrow Agreement and all other agreements and instruments being executed, or
contemplated to be executed, by it pursuant hereto or in connection herewith
(collectively, together with this Agreement and the Escrow Agreement, the
"COMPANY TRANSACTION DOCUMENTS"). The execution, delivery and performance by the
Company or SWV, as applicable of this Agreement and the other Company
Transaction Documents have been duly authorized by all necessary action
(corporate or otherwise) on the part of the Company, SWV and their respective
shareholders. This Agreement has been duly executed and delivered by the Company
and the other Company Transaction Documents contemplated hereby to be executed
and delivered by the Company or SWV at the Closing will, as of the Closing Date,
been duly executed and delivered by the Company or SWV, as applicable. This
Agreement constitutes, and each other Company Transaction Document, when
executed and delivered by the Company or SWV, as applicable, will constitute,
the legal, valid and binding obligation of the Company or SWV, as applicable,
enforceable against the Company or SWV, as applicable, in accordance with its
terms, except as such enforceability may be limited by applicable laws relating
to bankruptcy, insolvency, fraudulent conveyance, reorganization or affecting
creditors' rights generally and except to the extent that injunctive or other
equitable relief is within the discretion of a court.
(e) The execution, delivery, and performance by the Company or SWV,
as applicable, of this Agreement and the other Company Transaction Documents,
the consummation by the Company or SWV, as applicable, of the transactions
contemplated hereby and thereby, and the execution, delivery and performance by
the Key Employees/Stockholders of the Inducement Agreements and the Key
Employees/Stockholders Employment Agreements, do not and will not (i) violate,
conflict with or result in the breach of any provision of the Company
Organizational Documents or the SWV Organizational Documents or (ii) except as
described in Section 4.1(e) of the Disclosure Letter, violate, conflict with,
result in a breach of, constitute a default (or an event which would, with the
passage of time or the giving of notice or both, constitute a default) under,
require any consent under, result in or permit the termination, amendment,
modification, acceleration, suspension, revocation or cancellation of, or result
in the creation or imposition of any Lien of any nature whatsoever upon, any of
the Acquired Assets or give to others any interests or rights therein under, (x)
any Specified Contract, any other Contract or any Company Approval, or (y) any
judgment, injunction, writ, award, decree, restriction, ruling, or order of any
court, arbitrator or Governmental Entity or any applicable constitution, or Law,
to which the Company, SWV or any of the Specified Subsidiaries is subject or
which is applicable to any of the Acquired Assets (any of the foregoing, a
"DEFAULT/MODIFICATION RIGHT").
(f) Section 4.1(f) of the Disclosure Letter contains a complete and
correct list of the record and beneficial ownership of all outstanding capital
stock of the Company. The Person within which the Company is included within
meaning of section 801.1 of the HSR Act rules does not have, and as of the
Closing Date will not have, "total assets" (within the meaning of, and as
measured under, the HSR Act) of $10,000,000 or more or annual net sales (within
the meaning of, and as measured under, the HSR Act) for its last fiscal year of
$10,000,000 or more.
Section 4.2. FINANCIAL STATEMENTS. (a) Attached as Section 4.2(a) of
the Disclosure Letter are true, correct and complete copies of the (i) unaudited
consolidated balance sheet of the Company as of December 31, 1998 and July 31,
1999 (such July 31, 1999 balance sheet being referred to herein as the "BALANCE
SHEET") and the related unaudited consolidated income and cash flow statements
for the Company for the twelve-month period ended December 31, 1998, for the
seven-month period ended July 31, 1999 and for the entire period of existence of
the Company. The foregoing financial statements are collectively referred to as
the "FINANCIAL STATEMENTS."
(b) The Financial Statements were prepared in accordance with the
books and records of the Company and in accordance with GAAP (except as may be
indicated therein or in the notes thereto), and fairly present in all material
respects the financial position of the Company as of the respective dates
thereof or the results of operations and cash flows of the Company for the
respective periods then ended, as the case may be, subject, in the case of
unaudited interim financial statements, to normal year-end audit adjustments
(which in the aggregate would not be material).
Section 4.3. UNDISCLOSED LIABILITIES. None of the Specified
Subsidiaries has any Liabilities, except as set forth in Section 4.3 of the
Disclosure Letter.
Section 4.4 ACQUIRED ASSETS. (a) Except as otherwise set forth in
Section 4.4(a) of the Disclosure Letter, the Acquired Assets include all Assets
(other than the Excluded Assets) which are necessary or required to conduct the
business of the Company, SWV and the Specified Subsidiaries (including the
Specified Business), as presently conducted, and in any event include
substantially all of the Assets formerly owned by CycleLogic Corporation. No
Software not included in the Acquired Assets is necessary for the use,
modification or maintenance of the Acquired Software, other than Shrink-Wrap
Software. The Company has good and valid title to all of the Acquired
Intellectual Property and all of the Acquired Software, and the Company or SWV
has good and valid title to all of the other Acquired Assets other than the
Specified Subsidiary Acquired Assets, in each case free and clear of any Lien
except for the Permitted Encumbrances. The Specified Subsidiaries have good and
valid title to all of the Specified Subsidiary Acquired Assets, free and clear
of any Lien except for the Permitted Encumbrances. At the Closing, the Company
will transfer to the Specified Designee at the Closing good and valid title to
all of the Acquired Intellectual Property and all of the Acquired Software, and
the Company or SWV will transfer to the Specified Designee or the SWV Specified
Transferee, respectively, good and valid title to all of the other Acquired
Assets other than the Specified Subsidiary Acquired Assets, in each case free
and clear of all Liens except for the Permitted Encumbrances.
(b) The Acquired Assets do not include, and neither the Company nor
SWV nor any of the Specified Subsidiaries owns or has ever owned, any interest
in real property other than as described in Section 4.4(b) of the Disclosure
Letter.
(c) Section 4.4(c) of the Disclosure Letter contains descriptions of
all items of tangible personal property of every kind or description included in
the Acquired Assets having a current net book value in excess of $1,000.
(d) All tangible assets of every kind or description owned or leased
by the Company or any of its Subsidiaries are in good operating condition and
repair, ordinary wear and tear excepted.
Section 4.5. ABSENCE OF CERTAIN CHANGES. Except as disclosed in
Section 4.5 of the Disclosure Letter, since July 15, 1999 and since the date
hereof, the business of the Company and its Subsidiaries (including the
Specified Business) has been conducted in the Ordinary Course of Business, and
there has been no:
(a) Material Adverse Effect;
(b) increase in compensation payable or to become payable to
any employee, independent contractor, consultant or director of the
Company, SWV or any of the Specified Subsidiaries, or any bonus payment
made or promised to any employee, independent contractor, consultant or
director of the Company, SWV or any of the Specified Subsidiaries, or any
material change in personnel policies, insurance benefits, Benefit Plans
or other compensation arrangements affecting the employees, independent
contractors, consultants or directors of the Company, SWV or any of the
Specified Subsidiaries (other than increases in wages and salaries or
bonus payments made in the ordinary course of business and consistent with
past practice, but in no event increases greater than 3% per annum);
(c) waiver of any rights by the Company, SWV or any Specified
Subsidiary under any Contract which waivers, individually or in the
aggregate, could have a Material Adverse Effect;
(d) sale or transfer of (i) any material Assets of the
Company, SWV or any of the Specified Subsidiaries or (ii) any Assets that
otherwise would constitute Acquired Intellectual Property or Acquired
Software; or
(e) material tax election or change in tax accounting by the
Company, SWV or any of the Specified Subsidiaries.
Since July 15, 1999, the cash and cash equivalents of the Company and its
Subsidiaries have been expended only in the Ordinary Course of Business and,
without limitation of the foregoing, (i) no cash or cash equivalents of the
Company or any of its Subsidiaries has been paid to any Insider (other than to
any Company Employee, as such) for any reason (including repayment of advances),
(ii) the Company has not declared or made any dividend or distribution on, or
repurchased or redeemed, any of its capital stock and (iii) no cash or cash
equivalents of the Company or any of its Subsidiaries has been expended to pay
any Transfer Taxes or Transaction Expenses.
Section 4.6. TAXES. (a) The Company and each Specified Subsidiary
(which, for purposes of this Section 4.6, shall include any predecessor to the
Company or any Specified Subsidiary, as the case may be) have timely filed
(taking into account timely filed extensions) all Returns which are required to
be filed, and all Taxes shown to be due on such Returns have been timely paid.
All such Returns are true, accurate and complete in all material respects. The
Company has provided Purchaser with complete and accurate copies of all Returns
filed by the Company and each Specified Subsidiary for periods for which the
statute of limitations is still open. The Company and each Specified Subsidiary
have paid all Taxes required to be paid by them, except where the failure to pay
would not have a Material Adverse Effect. Neither the Company nor any Specified
Subsidiary has been included in any consolidated, combined or unitary Returns.
(b) Except as described in Section 4.6(b) of the Disclosure Letter,
the Company and each Specified Subsidiary have complied with all applicable
laws, rules and regulations relating to information reporting with respect to
payments made to third parties and the withholding of and have timely withheld
from employee wages and other payments to third parties and paid over to the
proper taxing authorities all amounts required to be so withheld and paid over
for all periods under all applicable laws.
(c) There are no pending (by written notice to the Company or any
Specified Subsidiary) or, to the knowledge of the Company or any Specified
Subsidiary, proposed or threatened, audits, Actions, assessments or
deficiencies, asserted with respect to Taxes of the Company or any Specified
Subsidiary. There is no pending (by written notice to the Company or any
Specified Subsidiary) or, to the knowledge of the Company or any Specified
Subsidiary, proposed or threatened, claim by any Taxing Authority in any
jurisdiction in which the Company or any Specified Subsidiary does not pay Taxes
or file Returns that the Company or any Specified Subsidiary is required to pay
Taxes or file Returns in such jurisdiction.
(d) Neither the Company nor any Specified Subsidiary has any
liability under any tax sharing agreement or tax indemnity agreement or is
otherwise liable for Taxes of any other Person (except for withholding Taxes
where the Company or Specified Subsidiary is the withholding agent).
(e) All deficiencies asserted or assessments made as a result of any
examination of Returns referred to in Section 4.6(c) of the Disclosure Letter
have been paid in full.
(f) Neither the Company nor any Specified Subsidiary (other than
SWV) is or has been engaged in the conduct of a trade or business in the United
States for federal income tax purposes.
(g) Neither the Company nor any Specified Subsidiary has elected to
be treated as a partnership or disregarded entity for U.S. federal income tax
purposes.
Section 4.7 LITIGATION; ORDERS. There is no Action pending, or to
the knowledge of the Company, threatened, against or affecting the Company or
SWV, any of its Subsidiaries or any of the Acquired Assets. To the Company's
knowledge, there is no Action pending or threatened against any of the Key
Employees/Stockholders which relates to or arises out of his employment by the
Company or any of its Subsidiaries or which relates to any of the Acquired
Assets. There are no judgments, orders, injunctions, decrees, stipulations or
awards rendered by any Government Entity or arbitrator against or relating to
the Company or any of its Subsidiaries or any of the Acquired Assets.
Section 4.8. INTELLECTUAL PROPERTY. (a) Section 4.8(a)(i) of the
Disclosure Letter contains a true, accurate and complete list as of the date
hereof of all patents, patent applications, trademark and service marks and
corresponding registrations and applications for registration thereof, and
copyright registrations and applications for registration of copyrights,
worldwide, as are now owned, used or held for use by the Company or any of its
Subsidiaries (listed separately for each such Person). Section 4.8(a)(i) of the
Disclosure Letter further sets forth a true, accurate and complete list of all
Outstanding IP Licenses (other than for Shrink-Wrap Software having a per-user
license fee of less than $500), identifying the parties thereto and the subject
matter and date thereof, any royalty or other payment obligations, the term
thereof, and any exclusivity obligations. Except as set forth in Section
4.8(a)(ii) of the Disclosure Letter, the Company has sole and exclusive
beneficial and record ownership and legal title of, and the exclusive right to
use, all of the Acquired Intellectual Property and all of the Acquired Software,
free and clear of Liens (including any rights or claims of present or former
employees, consultants, officers and directors of the Company, any of its
Subsidiaries or any other Person) and of any obligations to pay royalties or
other remuneration to any Person. Neither the Company nor any of its
Subsidiaries is a party to or bound by, and none of the Acquired Intellectual
Property or the Acquired Software is subject to, any Non-Competition Covenant,
or any other contract, agreement or instrument, that restricts or purports to
restrict the use, licensing, marketing, reproduction, sale or distribution of
any of the Acquired Intellectual Property or Acquired Software, by the Company,
any of its Subsidiaries or any other Person. Except as expressly set forth in
Section 4.8(a)(iii) of the Disclosure Letter, neither the Company, nor any of
its Subsidiaries is obligated to provide to any Person any upgrade, enhancement
or similar modification to any of the Acquired Software.
(b) Section 4.8(b)(i) of the Disclosure Letter describes all of the
Acquired Software. Except as described in Section 4.8(b)(ii) of the Disclosure
Letter, no Source Code for any Program included in the Acquired Software, has
ever been deposited in escrow, or otherwise sold, licensed, leased, conveyed,
delivered, or disclosed or otherwise made available or known, in whole or in
part, to any Person outside of the Company. Section 4.8(b)(iii) of the
Disclosure Letter sets forth all of the Authors of the Acquired Software and the
entire content of each of the Programs included in the Acquired Software
represents the wholly original work product and authorship of such Persons. The
Company has obtained from each of the Authors , and the Authors are bound by,
the respective Technology Conveyance/Confidentiality Agreements attached as
Section 4.8(b)(iv) of the Disclosure Letter (collectively, the "AUTHOR
TECHNOLOGY CONVEYANCE/CONFIDENTIALITY AGREEMENTS").
(c) The Company and/or its Subsidiaries has good title to and
ownership of all Intellectual Property and Software other than Shrink-Wrap
Software (whether or not listed in Section 4.8(a)), and of all IP Licenses of
Shrink-Wrap Software, necessary for the conduct of the business of the Company
and its Subsidiaries (including the Specified Business), as now conducted and as
proposed to be conducted under the Business Plan without any conflict with or
infringement of the rights of others, and such rights will not be adversely
affected by the execution and delivery of this Agreement or the consummation of
the transactions contemplated hereby.
(d) Neither the Company (references in this Section 4.8(d) being
deemed also to include its predecessor, CycleLogic Corporation) nor any of its
Subsidiaries has been or is now interfering with, infringing upon,
misappropriating, or otherwise in conflict with or violating any Intellectual
Property of other Persons, nor has the Company or any of its Subsidiaries
received any communications alleging that the Company or any of its Subsidiaries
has violated or, by conducting its business as presently conducted and as
proposed to be conducted under the Business Plan, would violate any of the
Intellectual Property of any other Person, nor to the Company's knowledge, is
there any basis for the making of any such allegation. The sale, distribution,
marketing, reproduction, operating, use or other exploitation, by any Person, of
any of the Acquired Assets (or any component thereof) other than Shrink-Wrap
Software, after the Closing in accordance with the Business Plan will not (i)
interfere with, infringe upon, constitute misappropriation of, or otherwise
conflict or violate, any Intellectual Property of any Person (y) require, or
give rise to any obligation on the part of, any Purchaser Indemnified Party to
make any royalty or other similar payment to any Person. In their operation of
the Acquired Software, and the use of information collected in connection
therewith, the Company and its Subsidiaries have at all times complied with all
legal and contractual obligations under U.S. and other Laws worldwide in which
the Acquired Software is used regarding the privacy of end users who have used
the Acquired Software or supplied information to the Company or any of its
Subsidiaries, and the present use of the Acquired Assets and information
collection in connection therewith by the Company and its Subsidiaries and the
present conduct of their respective businesses continues to be in such
compliance.
(e) Section 4.8(e) of the Disclosure Letter sets forth a list of all
patents relating to any field of business or proposed business of the Company or
any of its Subsidiaries as to which the Company has either sought an opinion of
counsel or been advised that it should seek an opinion of counsel. The Specified
Patent Application has been duly filed with the United States Patent and
Trademark Office and has received the filing date of April 13, 1999 (and the
applicant with respect thereto is entitled to such filing date). The Specified
Patent Application contains enabling and best mode disclosures (as such terms
are understood under 35 U.S.C. ss. 112, first paragraph) as of said filing date
of the subject matter claimed therein, which subject matter covers a character
conversion system for electronic alphanumeric messages. The Company believes
said claimed subject matter to be novel and nonobvious over the prior art. The
Company expects the Specified Patent Application to issue with such claims
substantially intact, and, after reasonable search, knows of no reason why such
claims should be finally rejected, and no reason why any such claims when issued
in one or more U.S. patents would be invalid or unenforceable.
(f) There is not pending, nor to the Company's knowledge, has there
been threatened, any action or proceeding to contest, oppose, cancel or
otherwise challenge the validity, ownership or enforceability of any of the
Acquired Intellectual Property or Acquired Software.
(g) The Company has no knowledge that any Person has infringed, or
is infringing, any of the Acquired Intellectual Property.
(h) Except as set forth in Section 4.8(h) of the Disclosure
Schedule, neither the Company nor any of its Subsidiaries is a party to any
Technology Conveyance/Confidentiality Agreement or Non-Competition Agreement
(other than any of the foregoing for its benefit). The Company is not aware
after due inquiry of the Company Employees that any of the Company Employees are
subject to any Technology Conveyance/Confidentiality Agreement or
Non-Competition Covenant (other than any of the foregoing for the benefit of the
Company) or otherwise are obligated under any contract (including IP Licenses,
covenants or commitments of any nature) or other agreement, or subject to any
judgment, decree or order of any Governmental Entity, that would interfere with
the use of the best efforts of such Company Employee to promote the interests of
the Company or that would conflict with the business of the Company and its
Subsidiaries as presently conducted or as proposed to be conducted under the
Business Plan. The Company does not believe it is or will be necessary to
utilize any inventions of any of the Company Employees made prior to their
employment by the Company or any of its Subsidiaries.
(i) Section 4.8(i) of the Disclosure Letter sets forth a complete
list of all Internet domain names now used or registered by the Company or any
of its Subsidiaries. All such domain names are currently registered and in good
standing, and the Company is shown on the records of the registrar thereof as
the sole owner thereof. The Company has received no notice or communication
stating that any Person is challenging the right of the Company or any of its
Subsidiaries to use any such domain name. None of the Excluded Domain Name
Registrations are used or held for use in the business of the Company and/or its
Subsidiaries (including the Specified Business).
(j) All Software which has been used and which is now being used by
the Company or any of its Subsidiaries has and is being used in all material
respects in compliance with all applicable IP License requirements.
(k) Each of the Programs included in the Acquired Software is free
from any significant software defect or programming or documentation error and
operates and runs in a reasonable and efficient business manner and the
applications with respect to such Programs can be recreated from their
associated Source Code. No significant "bugs", and no "viruses" or "time bombs",
exist with respect to any of the Programs included in the Acquired Software. The
current versions of each of the Programs conforms in all material respects with,
and functions and performs in all material respects in accordance with, the
specifications, and other descriptions thereof (including of the functionality
or performance thereof), set forth in (i) the most recent versions of the
Documentation therefor and/or (ii) Section 4.8(k) of the Disclosure Schedule or
the documents attached thereto.
(l) The Company has, and will on the Closing Date deliver to
Purchaser or the Specified Designee, possession of at least one copy of the
Source Code and the Object Code for each Program included in the Acquired
Software.
(m) Each of the current versions of the Programs included in the
Acquired Software, and any other version of such Programs licensed by the
Company of its Subsidiaries to any third party is, "Year 2000 Compliant," which
term includes the following capabilities: (i) accurately processing date
information before, during and after January 1, 2000, including, but not limited
to, accepting date input, providing date output and performing calculations on
dates or portions of dates; (ii) functioning accurately and without interruption
before, during and after January 1, 2000, without any change in operations
associated with the advent of the new century; (iii) responding to two-digit
year date input in a way that resolves the ambiguity as to century in a
disclosed, defined and predetermined manner; and (iv) storing and providing
output of date information in ways that are unambiguous as to century.
Section 4.9. LICENSES, APPROVALS, OTHER AUTHORIZATIONS, CONSENTS,
REPORTS, ETC. (a) Each of the Company and its Subsidiaries has all Approvals
necessary to conduct the business of the Company and its Subsidiaries (including
the Specified Business) (collectively, the "COMPANY APPROVALS"). All Company
Approvals are in full force and effect. No Action is pending or, to the
knowledge of the Company, threatened seeking the revocation, modification or
limitation of any Company Approval. All of the Company Approvals are listed in
Section 4.9(a) of the Disclosure Letter, are in full force and effect and
complete copies thereof have been provided to Purchaser prior to the date
hereof.
(b) Except for any of the following in respect of Transfer Taxes or
other Taxes and except as described in Section 4.9(b)(i) of the Disclosure
Letter, no Consent or Approval is required to be made or obtained in connection
with the execution, delivery and performance by the Company of this Agreement or
the other Company Transaction Documents or the consummation of any of the
transactions contemplated hereby or thereby (for the avoidance of doubt,
disregarding Section 2.7 hereof). Except as set forth in Section 4.9(b)(ii) of
the Disclosure Schedule, all of the Consents or Approvals described in Section
4.9(b)(i) of the Disclosure Letter have been obtained and are in full force and
effect, and complete and correct copies thereof have been provided to Purchaser
prior to the date hereof.
Section 4.10. LABOR MATTERS.
(a) Section 4.10(a) of the Disclosure Letter sets forth separately
for each of the Company and SWV a complete and correct list of all directors,
officers and employees of each such Person, including for each such individual
his or her (i) name; (ii) job title; (iii) status as a full-time or part-time
employee; (iv) base salary or wage rate; and (v) 1998 bonus. Section 4.10(a) of
the Disclosure Letter also lists each Company Employee who is not actively at
work for any reason other than vacation, and the reason for such absence.
(b) Section 4.10(b) of the Disclosure Letter sets forth separately
for each of the Company and SWV a complete and correct list of all individuals
who perform services for each such Person as an independent contractor or a
leased employee, the services they perform, and their rate of compensation.
(c) None of the Specified Subsidiaries employs any employees or
independent contractors.
(d) No Company Employees are covered by a collective bargaining
agreement. No Company Employees are, or within the last three years have been,
represented by a union or other bargaining agent, and, to the knowledge of the
Company, no employee organizing efforts are pending with respect to Company
Employees. Within the last three years, there has been no strike, work slowdown
or other material labor dispute with respect to Company Employees, nor to the
knowledge of the Company, is any strike, work slowdown or other material labor
dispute pending. Neither the Company nor any of its Subsidiaries is involved in
nor, to the knowledge of the Company, threatened with any arbitration, lawsuit
or administrative proceeding relating to labor matters involving the Company
Employees (excluding any routine workers' or unemployment compensation claims).
Section 4.11. COMPLIANCE WITH LAWS. The conduct of the business of
the Company and its Subsidiaries (including the Specified Business) has complied
with, and the Company, its Subsidiaries and the Acquired Assets are in
compliance with, all Laws applicable thereto, with the exception of such
violations as would not, individually or in the aggregate, have a Material
Adverse Effect.
Section 4.12. INSURANCE. Section 4.12 of the Disclosure Schedule
lists all insurance policies owned or held by the Company or any of its
Subsidiaries. The Company's insurance policies afford coverage to the Company,
its Subsidiaries and the Acquired Assets in amounts and against all risks
normally insured against by Persons possessing similar assets or operating
similar businesses in similar locations. All such policies are in full force and
effect, all premiums with respect thereto have been paid to the extent due, and
no notice of cancellation or termination has been received with respect to any
such policy.
Section 4.13. CONTRACTS. Section 4.13 of the Disclosure Schedule
sets forth a list of all written, and a description of all oral, Contracts,
except for individual unrelated Contracts which could not involve the payment or
receipt by the Company or any of its Subsidiaries of more than $1,000 per
calendar year and do not relate to any of the Acquired Software; PROVIDED,
HOWEVER, that such Section also sets forth those Contracts which do not satisfy
the $1,000 threshold but are otherwise material to the Company or any of its
Subsidiaries. Except for all failures to be valid, binding and enforceable and
breaches, defaults, events, waivers and disputes which would not, individually
or in the aggregate, have a Material Adverse Effect, (i) all of the Contracts
(including all of the Author Technology Conveyance/Confidentiality Agreements)
are valid and binding on and enforceable against the parties thereto, except as
enforceability may be limited by bankruptcy, insolvency and equitable remedies,
(ii) neither the Company nor, to the knowledge of the Company, any other party
to any Contract, is in breach or default under any Contract, (iii) the Company
has not waived any material right under any Contract, (iv) no event has occurred
that, with the giving of notice or the lapse of time or both, would constitute a
breach or default under any Contract, and (v) there are no unresolved disputes
between the parties under any of the Contracts. True and complete copies of all
written, and accurate summaries of all oral, Contracts set forth on Section 4.13
of the Disclosure Letter have been provided to Purchaser.
Section 4.14. TRANSACTIONS WITH AFFILIATES. Section 4.14 of the
Disclosure Letter sets forth a complete and accurate (i) list of all Contracts
to which any Person that is, or at the time such Contract was entered into was,
an Insider, on the one hand, and the Company or any of its Subsidiaries on the
other hand, is a party, and (ii) description of all transactions which are not
the subject of the agreements described in clause (i) above (the "INSIDER
TRANSACTIONS") between the Company or any of its Subsidiaries, on the one hand,
and any Person that is, or at the time such Contract was entered into, an
Insider, on the other hand, that have occurred since July 1, 1998.
Section 4.15. ENVIRONMENTAL MATTERS. (a) The Company has made
available to Purchaser all material information which it possesses or controls
pertaining to the use, generation, storage, handling, treatment or disposal of
Hazardous Materials on any real property, used or leased by the Company or any
of its Subsidiaries and any sampling and test results obtained, samples, tests
and monitoring programs taken or conducted by the Company or any of its
Subsidiaries (or otherwise in its possession or control) at and around any real
property used or leased by the Company or any of its Subsidiaries with respect
to Hazardous Materials.
(b) The Company and its Subsidiaries have complied with, and the
Company, each of its Subsidiaries and any real property used or leased by the
Company or any of its Subsidiaries, is in compliance in all material respects
with, the provisions of all applicable Environmental Laws.
(c) Neither the Company nor any of its Subsidiaries has received any
written notice or is otherwise aware of any existing claim or the basis for any
claim by any Government Entity or any third party that the Company or any of its
Subsidiaries or the condition of any real properties used or leased by the
Company or any of its Subsidiaries has violated or is subject to liability
pursuant to any Environmental Law.
(d) There are no facts, events or conditions with respect to the
past or present operation of business of the Company or any of its Subsidiaries
or any environmental conditions at any of the real properties used or leased by
the Company or any of its Subsidiaries which could reasonably be expected to
interfere with or prevent continued compliance with, or could reasonably be
expected to give rise to any action, suit, claim or proceeding under,
Environmental Laws.
(e) To the knowledge of the Company, there are no underground
storage tanks on or under the real property used or leased by the Company or any
of its Subsidiaries.
(f) To the knowledge of the Company, no underground storage tanks
were located on or under the real property used or leased by the Company or any
of its Subsidiaries which were removed or filled.
(g) Neither the Company nor any of its Subsidiaries has caused
Hazardous Materials to be discharged, disbursed, released, stored, treated,
generated, disposed of, or allowed to escape on, in, over or under the real
property used or leased by the Company or any of its Subsidiaries.
(h) No asbestos or asbestos containing materials have been
installed, used, incorporated into or disposed of on the real property used or
leased by the Company or any of its Subsidiaries, by the Company or, any of its
Subsidiaries or, to the knowledge of the Company, any other Person.
(i) To the knowledge of the Company, no PCBs have been located on or
in the real property used or leased by the Company or any of its Subsidiaries,
whether in electrical transformers, fluorescent light fixtures with ballasts,
cooling oils, or otherwise.
Section 4.16. TOTALITY OF ASSETS. Section 4.16 of the Disclosure
Letter describes the material Assets (other than the Acquired Assets) of any
Person that is or, at any time during the 18 months prior to the date hereof
was, an Insider that are (or at any time during the 18 months prior to the date
hereof have been) used or held for use to any extent by the Company or any of
its Subsidiaries.
Section 4.17. EMPLOYEE BENEFITS. (a) Section 4.17(a) of the
Disclosure Letter sets forth a complete and correct list of (i) any "employee
benefit plan" within the meaning of Section 3(3) of ERISA, (ii) any other
employee benefit plan, arrangement or policy, including without limitation, any
stock option, stock purchase, stock award, stock appreciation, phantom stock,
deferred compensation, pension, retirement, savings, profit sharing, incentive,
bonus, health, life insurance, cafeteria, flexible spending, dependent care,
fringe benefit, vacation pay, holiday pay, disability, sick pay, workers
compensation, unemployment, severance, employee loan or educational assistance
plan, arrangement or policy, and (iii) any employment, indemnification,
consulting, severance or change-in-control agreement, in each case, which is
sponsored or maintained by the Company or any of its Affiliates, or to which the
Company or any of its Affiliates contributes or is required to contribute, on
behalf of current or former employees, consultants or directors of the Company
or any of its Subsidiaries or their beneficiaries or dependents, whether or not
written ("BENEFIT PLANS"). Neither the Company nor any of its Affiliates has
communicated to present or former employees of the Company or any of its
Subsidiaries or formally adopted or authorized any additional Benefit Plan or
any change in or termination of any existing Benefit Plan. No Benefit Plan
covers employees other than employees of the Company and its Subsidiaries (and
their family members).
(b) The Company has delivered to Purchaser complete and correct
copies of each Benefit Plan, or written summaries of any unwritten Benefit Plan,
any employee handbook applicable to employees of the Company or any of its
Subsidiaries, and, with respect to each Benefit Plan, the current summary plan
description, related trust agreements or insurance contracts, the latest IRS
determination letter, the last three annual financial statements, and the last
three annual reports on IRS Form 5500 (including all required Sections and
accountant's opinions).
(c) Each Benefit Plan is and has been operated and administered in
accordance with its terms and all applicable laws. Each Benefit Plan intended to
be tax-qualified under Section 401(a) of the Code has received a favorable
determination letter from the IRS as to its tax-qualified status under the Code
and nothing has occurred since the date of such favorable determination letter
which would adversely affect the qualified status of such plan.
(d) All contributions and premium payments required to have been
paid under or with respect to any Benefit Plan have been timely paid.
(e) No Benefit Plan provides health, life insurance or other welfare
benefits to retirees or other terminated employees of the Company or any of its
Subsidiaries, other than continuation coverage required by Section 4980B of the
Code or Sections 601-608 of ERISA ("COBRA"), and neither the Company nor any of
its Subsidiaries has any current or projected liability for any such benefits.
(f) Neither the Company nor any of its Subsidiaries has ever
maintained or contributed to a trust which is or was intended to be a voluntary
employees' beneficiary association under Section 501(c)(9) of the Code.
(g) Except as set forth in Section 4.17(g) of the Disclosure Letter,
no Benefit Plan is funded with, or provides for benefits in the form of, stock
or other securities of the Company.
(h) Since January 1, 1999, there has been no change in any Benefit
Plan, or its related funding vehicle, which would significantly increase the
cost, or the benefits payable, with respect to such plan.
(i) Section 4.17(i) of the Disclosure Letter lists each individual
who is receiving, or who is entitled to elect, COBRA continuation coverage under
any Benefit Plan which is a group health plan.
(j) Neither the Company nor any of its Subsidiaries has ever
maintained or contributed to, or had an obligation to contribute to, (i) a
"single-employer plan" within the meaning of Section 4001(a)(15) of ERISA, (ii)
a plan subject to Section 412 of the Code, (iii) a plan subject to Section 4063
or 4064 of ERISA, or (iv) a multiemployer plan within the meaning of Section
3(37) or 4001(a)(3) of ERISA.
(k) No event has occurred and no condition exists with respect to
any Benefit Plan which could subject any Benefit Plan, the Company, any of its
Subsidiaries or any of their respective employees, agents or directors directly
or indirectly (through an indemnification agreement or otherwise), to liability
for a breach of fiduciary duty, a "prohibited transaction," within the meaning
of Section 406 of ERISA or Section 4975 of the Code, or a tax, penalty or fine
under Section 502 or 4071 of ERISA or Subtitle D, Chapter 43 of the Code.
(l) There are no actions, suits, or claims (other than routine
claims for benefits in the ordinary course) with respect to any Benefit Plan
pending which could give rise to a material liability, or to the knowledge of
the Company threatened, and the Company has no knowledge of any facts which
could give rise to any such actions, suits or claims (other than routine claims
for benefits in the ordinary course). No Benefit Plan is currently under
governmental investigation or audit and, to the best knowledge of the Company,
no such investigation or audit is contemplated or under consideration.
(m) No event has occurred and no condition exists with respect to
(i) any terminated employee benefit plan or arrangement previously maintained or
contributed to by the Company or any of its Subsidiaries, or (ii) any employee
benefit plan or arrangement currently or previously maintained or contributed to
by any Affiliate of the Company (other than any of the Company's Subsidiaries)
which, in either case, could subject the Company, any of its Subsidiaries or any
of their respective employees, agents, or directors, directly or indirectly
(through an indemnification agreement or otherwise), to any liability,
including, without limitation, liability under Section 412, 4971 or 4980B of the
Code or Title IV of ERISA.
(n) Except as set forth on Section 4.17(n) of the Disclosure Letter,
neither the execution of this Agreement nor the consummation of the transactions
contemplated by this Agreement, will (i) increase the amount of benefits
otherwise payable under any Benefit Plan, (ii) result in the acceleration of the
time of payment, exercisability, funding or vesting of any such benefits, or
(iii) result in any payment (whether severance pay or otherwise) becoming due
to, or with respect to, any current or former employee, consultant, or director
of the Company or any of its Subsidiaries, other than as required by COBRA. No
payment or series of payments that would constitute a "parachute payment"
(within the meaning of Section 280G of the Code) has been made or will be made
by the Company or any of its Subsidiaries, directly or indirectly, to any
employee, consultant or director in connection with the execution of this
Agreement or as a result of the consummation of the transactions contemplated
hereby.
(o) Substantially adequate and complete records have been and are
maintained with respect to each Benefit Plan and are in the custody of the
Company or a third party service provider retained by the Company.
Section 4.18. BROKERS, FINDERS, ETC. No broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or commission in
connection with this Agreement or the transactions contemplated hereby based
upon any agreements, written or oral, made by or on behalf of the Company, any
of its Affiliates or by or on behalf of any of their respective directors,
officers, employees, agents.
Section 4.19. CONFIDENTIALITY AGREEMENTS. The Company and its
Subsidiaries have at all times in the past taken steps customary for companies
engaged in similar businesses to protect the confidential and proprietary status
of its Intellectual Property. All Persons who have or have had access to the
Source Code or Program or Design Documentation for any of the Systems ("SOFTWARE
CONFIDENTIAL INFORMATION") are identified on Section 4.19(i) of the Disclosure
Letter and each of such Persons have entered into written confidentiality
agreements with the Company with respect thereto set forth on Section 4.19(ii)
of the Disclosure Letter (the "CONFIDENTIALITY AGREEMENTS"), none of which is or
was in default or, to the Company's knowledge, has ever been violated in the
past. All such Software Confidential Information embodied in tangible form is at
the locations listed on Section 4.19(iii) of the Disclosure Letter, including
any escrow deposits and off-site storage locations.
Section 4.20 BANK ACCOUNTS. Section 4.20 of the Disclosure Letter
correctly sets forth, as of the date of this Agreement, a list of all banks in
which the Company or any of its Subsidiaries has an account or safety deposit
box and the names of all individuals authorized to draw thereon or have access
thereto.
Section 4.21. MATERIAL INFORMATION. Section 4.21 of the Disclosure
Letter includes copies of certain data and other information that has been
provided by the Company to Purchaser (collectively, the "SPECIFIED SUPPLIED
DATA"). The Specified Supplied Data is in accord with the books and records of
the Company, is accurate and complete and fairly presents the data and other
information it purports to present. No representation or warranty contained in
this Agreement or in the Company Transaction Documents, and no Section of the
Disclosure Letter, contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statements contained herein or
therein not misleading. All material facts presently known on the date hereof to
the Specified Key Employees/Stockholders with respect to the Specified Matters
which could reasonably be expected to affect the decision of Purchaser on the
date of this Agreement to acquire the Acquired Assets have been disclosed to
Purchaser by the Company. "Specified Matters" shall mean other providers of
products or services in Latin America comparable to the Qualifying
Products/Services (as defined in Exhibit 2.5(c)), deficiencies in the
functionality of the Acquired Software, existing and prospective customers in
Latin America who have been contacted by the Company, and end-user consumption
in Latin America of the Qualifying Products/Services.
Section 4.22. PRIVATE PLACEMENT.
(a) The Company has had the opportunity to review the SEC Documents
and to ask questions of and receive answers from Purchaser and its management
concerning the business and affairs of Purchaser. The Company has received all
information that the Company believes is necessary for the Company to evaluate
the transactions contemplated by this Agreement.
(b) All StarMedia Capital Stock acquired by the Company pursuant to
this Agreement will be acquired for the Company's own account and not with a
view to any distribution thereof within the meaning of the Securities Act.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to the Company as follows:
Section 5.1 INCORPORATION; AUTHORIZATION; CAPITALIZATION. (a)
Purchaser is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware. Purchaser has all requisite
corporate power and authority to own its respective properties and assets and to
carry on its business as it is now being conducted.
(b) Assuming that the representations and warranties of the Company
set forth in Section 4.1(f) are correct (and subject to receipt of board
approval as described below in this Section 5.1(b)), Purchaser has full power
and authority (corporate or otherwise) to execute, deliver and perform this
Agreement and all other agreements and instruments being executed, or
contemplated to be executed by it pursuant hereto or in connection herewith
(collectively, together with this Agreement the "PURCHASER TRANSACTION
DOCUMENTS"; the Company Transaction Documents and the Purchaser Transaction
Documents may be referred to herein collectively as the "TRANSACTION DOCUMENTS")
the other Transaction Documents to which Purchaser is a party. The execution,
delivery and performance by Purchaser of this Agreement and the other Purchaser
Transaction Documents have been duly authorized by all necessary action
(corporate or otherwise) on the part of Purchaser (other than the approval of
such matters by the board of directors of Purchaser). This Agreement has been
duly executed and delivered by Purchaser and the other Purchaser Transaction
Documents contemplated hereby to be executed and delivered by Purchaser at the
Closing will, as of the Closing Date, have been duly executed and delivered by
the Purchaser. This Agreement constitutes, and each other Purchaser Transaction
Document, when executed and delivered by Purchaser, will constitute, the legal,
valid and binding obligation of Purchaser, enforceable against it in accordance
with its terms, except as such enforceability may be limited by applicable laws
relating to bankruptcy, insolvency, fraudulent conveyance, reorganization or
affecting creditors' rights generally and except to the extent that injunctive
or other equitable relief is within the discretion of a court.
(c) The execution, delivery, and performance by Purchaser of this
Agreement, and the other Purchaser Transaction Documents, and the consummation
by Purchaser of the transactions contemplated hereby and thereby, do not and
will not, (a) violate, conflict with or result in the breach of any provision of
the certificate of incorporation or by-laws of Purchaser or (b) violate,
conflict with, result in a breach of, or constitute a default (or an event which
would, with the passage of time or the giving of notice or both, constitute a
default) under, require any consent under, or result in or permit the
termination, amendment, modification, acceleration, suspension, revocation or
cancellation of, (i) any indenture, mortgage, loan or credit agreement, license,
instrument, lease, contract, plan, permit or other agreement or commitment, oral
or written, to which Purchaser is a party, or (ii) any judgment, injunction,
writ, award, decree, restriction, ruling, or order of any court, arbitrator or
Governmental Entity or any applicable constitution, or Law, to which Purchaser
is subject, except for such violations, conflicts, breaches, defaults, failures
to obtain consents, terminations, modifications, accelerations, revocations and
cancellations as would not individually or in the aggregate have a material
adverse effect on Purchaser's ability to perform its obligations under the
Purchaser Transaction Documents.
(d) The shares of StarMedia Capital Stock delivered to the Company
in accordance with this Agreement, when so delivered in accordance with the
terms of this Agreement, will have been duly authorized, validly issued, fully
paid and non-assessable, and will not have been issued in violation of any
preemptive rights or any U.S. federal or state securities laws.
Section 5.2. CONSENTS, ETC. Assuming that the representations and
warranties of the Company set forth in Section 4.1(f) are correct and except for
any of the following in respect of Taxes or Transfer Taxes or securities Laws,
no filing, consent, approval or authorization of any United States Government
Entity or of any third party (other than a Government Entity) on the part of
Purchaser is required in connection with the execution, delivery and performance
by Purchaser of this Agreement and the other Purchaser Transaction Documents.
Section 5.3. SEC DOCUMENTS. Purchaser has made available to the
Company a true and complete copy of (i) Amendment No. 7 to Purchaser's S-1
Registration Statement relating to Purchaser's initial public offering, (ii)
Purchaser's report on Form 10-Q for the quarter ended June 30, 1999, and (iii)
Purchaser's reports on Form 8-K dated June 10, 1999, June 25, 1999 and August
10, 1999, filed by Purchaser with the Securities and Exchange Commission (the
"SEC") (collectively, the "SEC DOCUMENTS"). As of their respective dates, the
SEC Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC thereunder applicable to such SEC Documents, and did not,
as of their respective dates, contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The audited consolidated financial statements and
unaudited interim financial statements of Purchaser included in the SEC
Documents (collectively, the "PURCHASER FINANCIAL STATEMENTS") were prepared in
accordance with GAAP (except as may be indicated therein or in the notes
thereto) and fairly present in all material respects the financial position of
Purchaser as of the respective dates thereof, or the results of operations and
cash flows for the respective periods then ended, as the case may be, subject,
in the case of unaudited interim financial statements, to normal year-end audit
adjustments.
Section 5.4. BROKERS, FINDERS, ETC. No broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or commission in
connection with this Agreement or the transactions contemplated hereby and
thereby based upon any agreements, written or oral, made by or on behalf of
Purchaser or any of its Affiliates or by or on behalf of any director, officer,
employee, agent or Purchaser or any Affiliate of Purchaser.
ARTICLE VI
INDEMNIFICATION
Section 6.1. SURVIVAL. All of the representations, warranties,
covenants and agreements of the parties contained in this Agreement, or any
Exhibit hereto, or in any other Transaction Document, shall survive (and not be
affected in any respect by) the Closing, any investigation or inquiry conducted
(or omitted) by any party hereto and any information which any party may have
received or may at any time hereafter receive. Notwithstanding the foregoing,
the representations and warranties contained in or made pursuant to this
Agreement shall terminate on, and no claim or Action with respect thereto may be
brought after, the third anniversary of the Closing Date, except that (i) the
representations and warranties contained in Sections 4.6 and 4.17 shall survive
until the later of the third anniversary of the Closing Date or 30 days after
the expiration of the applicable statute of limitations (or extensions or
waivers thereof) and (ii) the representations and warranties contained in
Sections 4.1, 4.4(a), 4.8 and 5.1 shall survive indefinitely. The
representations and warranties which terminate on the third anniversary of the
Closing Date and the representations and warranties contained in Sections 4.6
and 4.17, and the liability of the Company with respect thereto, shall not
terminate with respect to any claim for indemnification (subject to Section
6.9), whether or not fixed as to liability or liquidated as to amount, with
respect to which the Company has been given written notice prior to the third
anniversary of the Closing Date, or the date that is the later of the third
anniversary of the Closing Date or 30 days after such expiration of the
applicable statute of limitations (or extensions or waivers thereof), as the
case may be.
Section 6.2 COMPANY INDEMNIFICATION OBLIGATION.
(a) The Company hereby indemnifies and holds harmless, and agrees to
indemnify and hold harmless, Purchaser, the Specified Designee, the Specified
SWV Transferee, the Specified Subsidiaries (from and after the Closing), the
respective Affiliates of Purchaser, the Specified Designee, the Specified SWV
Transferee and (from and after the Closing) the Specified Subsidiaries and the
respective directors, officers, employees and agents of the foregoing Persons
(collectively, the "PURCHASER INDEMNIFIED PARTIES") from and against any and all
Losses which exist, or which are imposed on, incurred by or asserted against any
one or more of the Purchaser Indemnified Parties, based upon, arising out of,
resulting from, or otherwise in respect of:
(i) any breach or inaccuracy of any of the representations and
warranties of the Company or any of the Key Employees/Stockholders
set forth in this Agreement, in any other Company Transaction
Document, in any Inducement Agreement or in any Key
Employee/Stockholder Employment Agreement, in each case (x) as made
and given on the date of this Agreement or (y) as if they were made
and given on the Closing Date exactly as written herein or therein,
as the case may be (including references to "the date hereof", "the
date of this Agreement" or other particular dates), it being
understood and agreed that, notwithstanding anything to the contrary
contained in this Agreement, any other Company Transaction Document,
any Inducement Agreement or any Key Employee/Stockholder Employment
Agreement, to determine if there has been an inaccuracy or breach of
a representation or warranty of the Company or any of the Key
Employees/Stockholders (other than the representation and warranty
set forth in the penultimate sentence of Section 4.21) and the
Losses arising from such inaccuracy or breach, such representation
and warranty shall be read as if it were not qualified by
materiality, including, without limitation, qualifications
indicating accuracy in all material respects, or accuracy except to
the extent any inaccuracy will not have a Material Adverse Effect;
(ii) any failure by the Company or any Key
Employee/Stockholder at any time to carry out, perform, comply with,
comply with satisfy and discharge any of their respective covenants,
agreements, undertakings, liabilities or obligations under this
Agreement, any other Company Transaction Document, the Inducement
Agreements or the Key Employees/Stockholders Employment Agreements
(regardless of whether or not any such covenant, agreement,
undertaking, liability or obligations is enforceable);
(iii) the Retained Liabilities, any Liability of any of the
Specified Subsidiaries other than those disclosed in Section 4.3 of
the Disclosure Letter, or any Permitted Encumbrances with respect to
any of the Acquired Assets; or
(iv) any failure to obtain by the Closing Date all Consents
(except with respect to the Contract specified in Section 6.2(a)(iv)
of the Disclosure Schedule) and Approvals described in Section
2.7(b) with respect to any Restricted Asset (after taking into
account the ameliorative effects, if any, of the alternative
arrangements described in Sections 2.7(c) and (d)).
(b) The Company acknowledges that the covenants, agreements,
undertakings, liabilities and obligations of the Key Employees/Stockholders
under the Inducement Agreements and the Key Employees/Stockholders Employment
Agreements are of the essence of the transaction to Purchaser, and that
Purchaser would not have entered into this Agreement if the Key
Employees/Stockholders were not willing to enter into the Inducement Agreements
and the Key Employees/Stockholders Employment Agreements. The Company further
acknowledges and agrees that it is intended that it will be obligated to
indemnify the Purchaser Indemnified Parties as set forth in Section 6.2(a) even
if the failure in question was with respect to a provision of an Inducement
Agreement or a Key Employee/Stockholder Employment Agreement that has been
determined to be unenforceable, the Company acknowledging that the Company not
indemnifying the Purchaser Indemnified Parties under such circumstances would
result in Purchaser not receiving the benefit of its bargain with the Company.
(c) No Purchaser Indemnified Party shall be required to make any
claim or demand against the Company or any other Person prior to the making of
any claim or demand for indemnification or at any other time. Without limitation
of the terms of the Escrow Agreement, Purchaser may apply the amounts to which
it or any other Purchaser Indemnified Party is entitled under this Section 6.2
against any payment to be made by or on behalf of Purchaser to the Company
pursuant to Section 2.5 hereof, by means of set-off, reduction or otherwise.
(d) The Company shall not be required to indemnify and hold harmless
any Purchaser Indemnified Party pursuant to Section 6.2(a)(i) until the
aggregate amount of the Purchaser Indemnified Parties' Losses subject to
indemnification under Section 6.2(a)(i) exceeds the Basket Amount, after which
the Company shall be obligated for all such Losses of the Purchaser Indemnified
Parties subject to indemnification under Section 6.2(a)(i) (disregarding the
Basket Amount) in excess, in the aggregate, of $50,000 (PROVIDED, HOWEVER, that
the provisions of this sentence shall not apply to any breach or inaccuracy of
the representations and warranties contained in Sections 4.1, 4.6 or 4.17, or
the last sentence of Section 4.5).
Section 6.3 PURCHASER'S INDEMNIFICATION OBLIGATION.
(a) Purchaser hereby indemnifies and holds harmless, and agrees to
indemnify and hold harmless, the Company and its Affiliates (excluding, for the
avoidance of doubt, the Specified Subsidiaries) and the respective directors,
officers, employees and agents of each of the foregoing Persons (collectively,
the "COMPANY INDEMNIFIED PARTIES") from and against any and all Losses which
exist, or which are imposed on, incurred by or asserted against any one or more
of the Company Indemnified Parties, based upon, arising out of, resulting from,
or otherwise in respect of:
(i) any breach or inaccuracy of any of the representations and
warranties of Purchaser set forth in this Agreement or in any other Purchaser
Transaction Document, in each case (x) as made and given on the date of this
Agreement or (y) as if they were made and given on the Closing Date exactly as
written herein or therein, as the case may be, (including references to "the
date hereof", "the date of this Agreement" or other particular dates), it being
understood and agreed that, notwithstanding anything to the contrary contained
in this Agreement or in any other Purchaser Transaction Document, to determine
if there has been an inaccuracy or breach of a representation or warranty of the
Purchaser and the Losses arising from such inaccuracy or breach, such
representation and warranty shall be read as if it were not qualified by
materiality, including, without limitation, qualifications indicating accuracy
in all material respects, or accuracy except to the extent any inaccuracy will
not have a material adverse effect; or
(ii) any failure by the Purchaser at any time to carry out, perform,
satisfy and discharge any of its covenants, agreements, undertakings,
liabilities or obligations under this Agreement or under any other Purchaser
Transaction Document (regardless of whether or not any such covenant, agreement,
undertaking, liability or obligations is enforceable); or
(iii) if the Closing occurs, any failure by the Specified Designee
and/or the SWV Specified Transferee to assume at the Closing the Assumed
Obligations as and to the extent contemplated by Section 3.3(b) hereof, it being
understood and agreed that Purchaser is not liable to any extent for any failure
of the Specified Designee and/or the SWV Specified Transferee to perform any
Assumed Obligations that it has so assumed.
(b) No Company Indemnified Party shall be required to make any claim
or demand against Purchaser or any other Person prior to the making of any claim
or demand for indemnification or at any other time.
(c) Purchaser shall not be required to indemnify and hold harmless
any Company Indemnified Party pursuant to Section 6.3(a)(i) until the aggregate
amount of the Company Indemnified Parties' Losses subject to indemnification
under Section 6.3(a)(i) exceeds the Basket Amount, after which Purchaser shall
be obligated for all such Losses of the Company Indemnified Parties subject to
indemnification under Section 6.3(a)(i) (disregarding the Basket Amount) in
excess, in the aggregate, of $50,000 (PROVIDED, HOWEVER, that the provisions of
this sentence shall not apply to any breach or inaccuracy of the representations
and warranties contained in Sections 5.1 or 5.4).
Section 6.4 PROCEDURE FOR INDEMNIFICATION CLAIMS.
(a) If any Purchaser Indemnified Party, on the one hand, or Company
Indemnified Party, on the other hand (the "INDEMNIFIED PARTY"), has a claim or
potential claim or receives notice of any claim, potential claim or the
commencement of any action or proceeding which could give rise to an obligation
on the part of the Company or Purchaser, as the case may be, to provide
indemnification (the "INDEMNIFYING PARTY") pursuant to Section 6.2 or 6.3,
respectively, the Indemnified Party shall promptly give the Indemnifying Party
written notice thereof (an "INDEMNIFICATION CLAIM"); PROVIDED, HOWEVER, that the
failure to give such prompt notice shall not prevent any Indemnified Party from
being indemnified hereunder for any Losses, except to the extent that the
failure to so promptly notify the Indemnifying Party actually damages the
Indemnifying Party and unless such claim is otherwise barred pursuant to the
terms of Section 6.1.
(b) In the event of a claim, a potential claim or the commencement
of any action or proceeding by a third party which could give rise to an
obligation to provide indemnification pursuant to Sections 6.2 or 6.3, the
Indemnified Party will give the Indemnifying Party prompt written notice thereof
(the "THIRD PARTY INDEMNIFICATION CLAIM"); PROVIDED, HOWEVER, that the failure
of the Indemnified Party to so promptly notify the Indemnifying Party shall not
prevent any Indemnified Party from being indemnified for any Losses, except to
the extent that the failure to so promptly notify actually damages the
Indemnifying Party and unless such claim is otherwise barred pursuant to the
terms of Section 6.1.
(c) If the Indemnifying Party confirms in writing to the Indemnified
Party within fifteen (15) days after receipt of the Third Party Indemnification
Claim the Indemnifying Party's responsibility to indemnify and hold harmless the
Indemnified Party therefor in accordance herewith and within such 15-day period
demonstrates to the Indemnified Party's reasonable satisfaction that, as of such
time, the Indemnifying Party has sufficient financial resources in order to
indemnify for the full amount of any potential liability in connection with such
claim, the Indemnifying Party may elect to compromise or defend, at such
Indemnifying Party's own expense and by such Indemnifying Party's own counsel,
which counsel shall be reasonably satisfactory to the Indemnified Party, any
such matter involving the asserted liability of the Indemnified Party. If the
Indemnifying Party elects to compromise or defend any such asserted liability in
accordance herewith, it shall within fifteen (15) days (or sooner, if the nature
of the asserted liability so requires) notify the Indemnified Party of its
intent to do so, and the Indemnified Party shall make available to the
Indemnifying Party or its representatives all records and other materials
reasonably required for its use in contesting such Third Party Indemnification
Claim and shall cooperate fully with the Indemnifying Party, in the compromise
of, or defense against, any such asserted liability, all at the expense of the
Company; PROVIDED THAT (i) the Indemnified Party may, if it so desires, employ
counsel at its own expense to assist in the handling of any such third party
claim, (ii) the Indemnifying Party shall keep the Indemnified Party advised of
all material events with respect to any such third party claim, (iii) the
Indemnifying Party shall obtain the prior written approval of the Purchaser (if
the Indemnified Party is the Company) or the Company (if the Indemnified Party
is the Purchaser) (which approval may not be unreasonably withheld), before
ceasing to defend against such third party claim or entering into any
settlement, adjustment or compromise of such third party claim involving
injunctive or similar equitable relief being asserted against any Indemnified
Party or any of its Affiliates (or which could result in Losses to any
Indemnified Party which are within the Basket Amount) and (iv) no Indemnifying
Party will, without the prior written consent of Purchaser (if the Indemnifying
Party is the Company) or the Company (if the Indemnifying Party is Purchaser),
settle or compromise or consent to the entry of any judgment in any pending or
threatened demand, claim, action or cause of action, suit or proceeding in
respect of which indemnification may be sought hereunder, unless such
settlement, compromise or consent includes an unconditional release of all
Purchaser Indemnified Parties (if the Indemnifying Party is the Company) or all
Company Indemnified Parties (if the Indemnifying Party is Purchaser) from all
liability arising out of such claim, action, suit or proceeding. Notwithstanding
anything contained herein to the contrary, the Indemnifying Party shall not be
entitled to have, and the Indemnified Party shall have, sole control over the
defense, settlement, adjustment or compromise of any third party non-monetary
claim that seeks an order, injunction or other equitable relief against any
Indemnified Party or its Affiliates which, if successful, could materially
interfere with the business, assets, liabilities, obligations, financial
condition or results of operations of the Indemnified Party or any of its
Affiliates. If the Indemnifying Party elects not to compromise or defend against
the asserted liability, or fails to notify the Indemnified Party of its election
as herein provided, the Indemnified Party may, at the Indemnifying Party's
expense, pay, compromise or defend against such asserted liability.
(d) Notwithstanding Section 6.4(c) above, as between the Purchaser
Indemnified Parties, on the one hand, and the Company, on the other hand,
Purchaser shall have the right to control the conduct of any audit or
administrative or court proceeding relating to Taxes of any Purchaser
Indemnified Party. Purchaser shall keep the Company informed on a current basis
of the progress of any such audit or proceeding the outcome of which could
require the Company to indemnify any Purchaser Indemnified Party (including,
without limitation, providing upon request copies of correspondence received
from the IRS or any taxing authority, domestic or foreign) and shall permit the
Company to participate at its own expense in the preparation of any briefs,
memoranda or other similar materials to be submitted in connection with such
audit or proceeding. Purchaser shall not agree to compromise or settle any such
audit or proceeding without the prior written consent of the Company, which
consent shall not be unreasonably withheld or delayed.
Section 6.5 NO CONTRIBUTION FROM SPECIFIED SUBSIDIARIES.
Notwithstanding anything contained in this Agreement or any other Company
Transaction Documents to the contrary, the Company acknowledges and agrees that
it does not have any right of contribution from or remedy against any of the
Specified Subsidiaries as a result of any indemnification it is required to make
under this Agreement or any other Company Transaction Document, and the Company
hereby releases, waives and forever discharges any right to indemnification,
reimbursement or contribution that they may have at any time against any of the
Specified Subsidiaries arising out of the representations, warranties, covenants
and agreements contained in this Agreement or any other Transaction Document.
Section 6.6 DISREGARD INSURANCE. The amount of any Loss for which
indemnification is provided hereunder shall be computed without regard to
insurance available to any Indemnified Party.
Section 6.7 TAX EFFECT. The liability of an Indemnifying Party with
respect to any Indemnification Claim or Third Party Indemnification Claim shall
be reduced by the tax benefit actually realized by the Indemnified Party as a
result of any Losses upon which such Indemnification Claim is based, and shall
include any tax liability or detriment actually suffered by the Indemnified
Party as a result of such Losses or the receipt or accrual of the resulting
indemnity payment.
Section 6.8 [INTENTIONALLY OMITTED.]
Section 6.9 INDEMNIFICATION EXCLUSIVE REMEDY. (a) If the Closing
occurs, then, except for remedies based upon fraud and except for equitable
remedies and subject to Section 6.9(c), the remedies provided in this Article VI
and the Escrow Agreement shall constitute the sole and exclusive remedies for
recovery against the parties hereto with respect to claims arising pursuant to
this Agreement or the other Transaction Documents.
(b) Further, except for remedies based upon fraud and except for
equitable remedies and subject to Section 6.9(c), if the Closing occurs, then
the sole recourse of the Purchaser Indemnified Parties against the Company with
respect to claims against the Company arising pursuant to this Agreement or the
other Transaction Documents shall be (subject to Section 6.9(a) hereof) their
respective rights and remedies under the last sentence of Section 6.2(c) hereof,
any rights and remedies of set-off or reduction (or similar rights) they may
have under Law (including common law) with respect to any Possible Earnout
Payments that subsequently become due and payable under Section 2.5, and the
respective rights and remedies of the Purchaser Indemnified Parties under the
Escrow Agreement. For the avoidance of doubt, the parties further specifically
agree that if (i) any indemnification payment to the Purchaser Indemnified
Parties is limited as a result of this Section 6.9 and (ii) the Company
subsequently becomes entitled to receive any Possible Earnout Payment(s) under
Section 2.5, Purchaser shall be entitled to reduce the amount of such subsequent
Possible Earnout Payment(s) by the aggregate amount by which the Company's prior
indemnification payments were so reduced as a result of this Section 6.9.
(c) Nothing in this Section 6.9 limits (i) the Company's
obligations, or the rights of the Purchaser Indemnified Parties, under Section
6.2(a)(iii), 7.5, 11.14, 11.15, 11.16, 11.17 or 11.18 hereof or under the Escrow
Agreement, or recourse against the Company in respect of any of the foregoing,
or (ii) subject to compliance with Section 6.4, the right of any Purchaser
Indemnified Party to bring and maintain any action, suit or proceeding against
the Company with respect to claims against the Company arising pursuant to the
Agreement or the other Transaction Documents (provided that recourse for money
damages in any such action described in this clause (ii) shall (subject to
clause (i) of this Section 6.9(c)) be limited as set forth in Sections 6.2(d)
and 6.9(b)). For the avoidance of doubt, nothing in this Section 6.9 limits
Purchaser's rights or recourse against any Person other than the Company.
ARTICLE VII
COVENANTS
Section 7.1. COVENANTS OF THE COMPANY. The Company agrees to observe
and perform the following covenants and agreements:
(a) CONDUCT OF THE BUSINESS PRIOR TO THE CLOSING DATE. Except as
contemplated in this Agreement, prior to the Closing, the Company will conduct,
and cause its Subsidiaries to conduct, their business (including the Acquired
Business) only in the Ordinary Course of Business, and, without limitation of
the foregoing (but subject to such exceptions as Purchasers may agree to upon
the Company's request therefor, which consent shall not unreasonably be withheld
or delayed), will:
(1) not, and will cause each of its Subsidiaries not to, make
or permit any material change in the general nature of its business of the
Company and the Subsidiaries (including the Specified Business) which
would in any way adversely effect the Acquired Assets;
(2) maintain the business of the Company and its Subsidiaries
(including the Specified Business) in accordance with prudent business
judgment and consistent with past practice and policy;
(3) preserve the Company and its Subsidiaries as an ongoing
business and use reasonable efforts to maintain the goodwill associated
with the Company and its Subsidiaries;
(4) preserve all of the Company Approvals;
(5) not, and will cause each of its Subsidiaries not to (in
each case, without the prior written consent of Purchaser), enter into any
IP License (other than any IP License to the Company or any of its
Subsidiaries of Shrink-Wrap Software), and will not, and will cause each
of its Subsidiaries not to (in each case, without the prior written
consent of Purchaser), enter into any other transaction or Contract
involving a total commitment by or to any party thereto of more than
$5,000 on an annual basis or more than $20,000 over its remaining term
which cannot be terminated on no more than 60 days' notice without penalty
or additional cost to the Company and its Subsidiaries as the terminating
party;
(6) not, and will cause each of its Subsidiaries not to, sell,
lease, dispose of or otherwise transfer, or subject to Lien, (i) any
material Assets of the Company or any of its Subsidiaries or (ii) any
Assets that otherwise would constitute Acquired Intellectual Property or
Acquired Software;
(7) comply, and shall cause its Subsidiaries to comply, in all
material respects with all applicable Laws and Company Approvals,
including without limitation those relating to the filing of reports and
the payment of Taxes due to be paid prior to the Closing, other than those
contested in good faith;
(8) not, and shall cause its Subsidiaries not to, adopt, amend
(other than amendments that reduce the amounts payable by the Company or
any of its Subsidiaries or amendments required by law) or assume an
obligation to contribute to any Benefit Plan or collective bargaining
agreement or enter into any employment, consulting, severance or similar
Contract with any Person (including without limitation, contracts with
management of the Company or any of its Affiliates that might require
payments be made upon consummation of the transactions contemplated
hereby) or amend any such existing contracts to increase any amounts
payable thereunder or benefits provided thereunder;
(9) not, and shall cause its Subsidiaries not to, grant any
increase or change in total compensation, benefits or pay any bonus to any
employee, independent contractor, director or consultant, except in the
ordinary course of business or as required by the terms of any existing
Contract or Benefit Plan;
(10) not, and shall cause each of its Subsidiaries not to,
amend any of their respective organizational documents; and
(11) not, and will cause each of its Subsidiaries not to,
enter into any Contract committing it to do any of the foregoing.
From and after date hereof and prior to the Closing, the cash and cash
equivalents of the Company and its Subsidiaries will be expended only in the
Ordinary Course of Business and, without limitation of the foregoing, (i) no
cash or cash equivalents of the Company or any of its Subsidiaries will be paid
to any Insider (other than any Company Employees, as such) for any reason
(including repayment of advances), (ii) the Company will not declare or make any
dividend or distribution on, or repurchase or redeem, any of its capital stock,
and (iii) no cash or cash equivalents of the Company or any of its Subsidiaries
will be expended to pay any Transfer Taxes or Transaction Expenses.
(b) ACCESS TO THE COMPANY'S OFFICES, PROPERTIES AND RECORDS;
UPDATING INFORMATION.
(1) From and after the date hereof and until the Closing Date,
the Company shall permit Purchaser and its representatives to have, on
reasonable notice and at reasonable times, reasonable access to such of
the offices, properties and employees of the Company and its Subsidiaries,
and shall disclose, and make available to Purchaser and its
representatives, all books, papers and records to the extent that they
relate to the ownership and Liabilities of or pertaining to the Company,
its Subsidiaries and their respective businesses, Assets and Liabilities.
Without limiting the application of the Confidentiality Agreement dated
July 19, 1999 between SWV and Purchaser (the "MUTUAL CONFIDENTIALITY
AGREEMENT"), all documents or information furnished by the Company under
this Section 7.1(b)(1) shall be subject to the Mutual Confidentiality
Agreement unless and until the Closing occurs.
(2) The Company will notify Purchaser as promptly as
practicable of any significant change in the operation of the Company or
any of its Subsidiaries and of any material complaints, investigations or
hearings (or communications indicating that the same may be contemplated)
by any Governmental Entity, or the institution or overt threat or
settlement of any material Action involving or affecting the Company, any
of its Subsidiaries or the transactions contemplated by this Agreement,
and shall use reasonable efforts to keep Purchaser fully informed of such
events and permit Purchaser's representatives access to all materials
prepared in connection therewith.
(3) As promptly as practicable after Purchaser's request, the
Company will furnish such financial and operating data and other
information pertaining to the Company, its Subsidiaries and their
respective businesses and Assets as Purchaser may reasonably request from
time to time.
(c) CONSENTS AND APPROVALS. The Company will use its reasonable best
efforts to obtain all necessary Consents or Approvals required in connection
with the transactions contemplated hereby.
(d) ACCOUNTING. The Company shall not, and shall cause each of its
Subsidiaries not to, make any changes in its accounting methods, principles or
practices except as required by law, rule, regulation or GAAP.
Section 7.2 ADDITIONAL AGREEMENTS.
(a) SATISFACTION OF CONDITIONS. Each of Purchaser and the Company
agrees to take all such reasonable and lawful action as may be necessary or
appropriate in order to effectuate the Closing in accordance with this Agreement
as promptly as possible, PROVIDED that nothing herein shall limit the discretion
of the board of directors of Purchaser as to whether to give its final approval
of the execution, delivery and performance of this Agreement by Purchaser as
described in Section 8.7 hereof.
(b) PUBLIC ANNOUNCEMENTS. From the date of this Agreement until (i)
in the case of the Company, the date of termination of this Agreement, or (ii)
in the case of Purchaser the earlier of the date of termination of this
Agreement or the Closing Date, neither the Company nor Purchaser will disclose
to any third parties (other than the Company's stockholders) the fact of the
proposed purchase and sale of the Acquired Assets contemplated hereby, issue any
press releases or otherwise make any public or other statements, or to release
any information intended for or reasonably likely to result in public or other
dissemination thereof, with respect to this Agreement and the transactions
contemplated hereby and thereby without the prior written consent of the other
party hereto, except in the case of Purchaser, as may be required, in the
opinion of Purchaser's counsel, by Law or by the rules of the National
Association of Securities Dealers, Inc. The Company will cause each of the
Insiders, and Purchaser will cause its Affiliates and its and its Affiliates
respective officers and employees, to comply with this Section 7.2(b) as if each
such other Person were the "Company" and "Purchaser", respectively.
(c) PURCHASER BOARD APPROVAL. Within five (5) business days
following the date hereof, Purchaser will give notice to the Company stating
whether the board of directors of Purchaser has formally given its final
approval of the execution, delivery and performance of this Agreement by
Purchaser (it being understood and agreed that no communication to the Company
shall be deemed to constitute the notice contemplated by this sentence unless
such communication expressly states that it is being given pursuant to this
sentence).
Section 7.3 EMPLOYEE MATTERS. Nothing in this Agreement shall be
construed to require Purchaser or any of its Affiliates (including without
limitation, after the Closing, the Specified Subsidiaries) to hire, or continue
the employment of, any Company Employee or to continue in effect any employee
benefit plan or arrangement.
Section 7.4 EXCLUSIVITY. From the date of this Agreement until the
earlier of the date of termination of this Agreement or the Closing Date, the
Company will not, and will cause the Insiders not to, take any action, directly
or indirectly, to encourage, solicit, initiate, engage in or continue
discussions or negotiations with, or provide any information to, any Person,
group or other entity, other than Purchaser, concerning any purchase of any
capital stock or Assets of the Company or any of its Subsidiaries or any merger
or similar transaction involving the Company.
Section 7.5 CORPORATE EXISTENCE. If the Closing occurs, then the
Company thereafter shall not dissolve or liquidate or distribute all its assets,
or adopt a plan to do so, or make an election to be treated as a partnership or
disregarded entity for U.S. federal income tax purposes, and otherwise shall
maintain its corporate existence, until at least the third anniversary of the
Closing Date, PROVIDED that if any claim for indemnification under Section 6.2
hereof shall be pending against the Company at such third anniversary of the
Closing Date, the Company shall maintain its corporate existence until such
claim is finally resolved. Nothing herein shall be construed as a consent by
Purchaser to any dividend or other distribution by the Company to its
stockholders or any other conveyance by the Company of any Assets (other than
the Acquired Assets
Section 7.6 DISCLOSURE DOCUMENT. Within five business days following
the date hereof, Purchaser and the Company shall cooperate with each other to
prepare a disclosure document intended to be sufficient for the Company to use
to meet the shareholder approval requirements set forth in Section 2(a) of each
of the Key Employees/Stockholders Agreements. Neither party hereto makes or
undertakes, or shall be deemed to have made or undertaken, any representation,
warranty or obligation to the other party or to any other Person (including in
particular any of the Key Employees/Stockholders) as to the sufficiency of such
disclosure document.)
ARTICLE VIII
CONDITIONS TO PURCHASER'S OBLIGATIONS TO CLOSE
Anything in the Purchaser Transaction Documents to the contrary
notwithstanding, Purchaser's obligation to consummate the Closing shall be
subject to the satisfaction at or prior to the Closing, or waiver by Purchaser,
of each of the following conditions (any of which may be waived by Purchaser, to
any extent, in its sole discretion):
Section 8.1. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
COMPANY. The representations and warranties of the Company contained in this
Agreement or in any other Company Transaction Document, or in any Exhibit,
certificate, document or instrument delivered in connection herewith, shall be
true and correct, with such exceptions as are not in the aggregate material, (i)
on and as of the date of this Agreement and (ii) on and as of the Closing Date
(with the same effect, with respect to this clause (ii), as though such
representations and warranties had been made exactly as written herein
(including references to "the date hereof", "the date of this Agreement" or
other particular dates) at and as of the Closing Date, in each case determined
disregarding for purposes of this condition any materiality qualification
(including without limitation any qualification indicating accuracy in all
material respects, or accuracy except to the extent any inaccuracy will not have
a Material Adverse Effect) set forth in such representations and warranties
(other than the representation and warranty set forth in the penultimate
sentence of Section 4.21). The Company shall have performed and complied in all
material respects with all covenants and agreements required by this Agreement
to be performed or complied with by the Company at or prior to the Closing.
Since December 31, 1998 and since the date hereof, there shall have been no
material adverse change in the Assets, Liabilities, operations, results of
operations, condition (financial or otherwise), business or prospects of the
Company and its Subsidiaries, considered as a whole. The Company shall deliver
to Purchaser a certificate, dated the Closing Date and signed by a senior
executive officer of the Company, to the effect that the conditions set forth in
this Section 8.1 have been satisfied.
Section 8.2. REPRESENTATIONS AND WARRANTIES OF THE KEY
EMPLOYEES/STOCKHOLDERS. The representations and warranties of the Key
Employees/Stockholders contained in the Inducement Agreements or the Key
Employees/Stockholders Employment Agreements shall be true and correct, with
such exceptions as are not in the aggregate material, on and as of the date of
this Agreement and on and as of the Closing Date (with the same effect as though
such representations and warranties had been made as written therein at and as
of the Closing Date, in each case determined disregarding for purposes of this
condition any materiality qualification (including without limitation any
qualification indicating accuracy in all material respects, or accuracy except
to the extent the inaccuracy will not have a Material Adverse Effect) set forth
in such representations and warranties). Each of the Key Employees/Stockholders
shall have delivered to Purchaser a certificate, dated the Closing Date and
signed by such Stockholder, to the effect that the conditions set forth in this
Section 8.2 have been satisfied with respect to such Stockholder.
Section 8.3. FILINGS; CONSENTS. All Consents and Approvals required
in connection with the consummation of the transactions contemplated hereby
(disregarding Section 2.7 hereof), including all Consents or Approvals required
in order effectively to transfer (or which Purchaser may request to confirm the
transfer of) all of the Acquired Assets to the Specified Designee or the
Specified SWV Transferee, as the case may be, without giving rise to any
Default/Modification Right, shall have been filed, made, obtained or received,
as the case may be, PROVIDED that obtaining the Consents described in Section
8.3 of the Disclosure Letter shall not (without limitation of Section 2.7 or
6.2(a)(iii) hereof) be a condition precedent under this Section 8.3.
Section 8.4. OFFICE RENTAL. The Company shall have made arrangements
satisfactory to Purchaser for the continued occupation by the SWV Specified
Transferee of the Miami office space currently occupied by SWV.
Section 8.5. NO INJUNCTION. (a) There shall be no injunction,
restraining order or decree of any nature of any court or other Government
Entity of competent jurisdiction that is in effect that restrains or prohibits
the consummation of the transactions contemplated hereby, (b) no Action shall
have been instituted by or before any court, panel, arbitrator or other
Government Entity or any other Person to restrain or prohibit, or to obtain
substantial damages in respect of, the consummation of the transactions
contemplated hereby, and (c) none of the parties hereto shall have received
notice from any Government Entity or any other Person of (i) its intention to
institute any Action to restrain or enjoin or nullify this Agreement or the
consummation of the transactions contemplated hereby or to commence any
investigation into the consummation of the transactions contemplated hereby or
(ii) the actual commencement of such an investigation.
Section 8.6. OPINION OF BVI COUNSEL. Purchaser will have been
furnished with the opinion of British Virgin Islands counsel reasonably
acceptable to Purchaser, dated the Closing Date and addressed to Purchaser, in
form and substance reasonably satisfactory to Purchaser, with respect to the
matters set forth in the first two sentences of Section 4.1(a) (other than with
respect to foreign qualifications), Section 4.1(d) (as to the Company and
assuming, with respect to the fourth sentence thereof, that New York law was the
same as British Virgin Islands law), Section 4.1(e)(i) (as to the Company), and
Section 4.1(e)(ii) (as to the Company and limited to violations of or conflicts
with British Virgin Islands Laws).
Section 8.7. EMPLOYEE TECHNOLOGY CONVEYANCE/CONFIDENTIALITY
AGREEMENTS. Each of the Company Employees other than the Key
Employees/Stockholders (and other than, in the case of clause (i) below, Company
Employees whose duties are solely of a secretarial or clerical nature) shall
have executed (i) an instrument, in form and substance reasonably satisfactory
to Purchaser, pursuant to which such Company Employee consents to the assignment
to the Specified Designee or the Specified SWV Transferee, as the case may be,
of any outstanding Technology Conveyance/Confidentiality Agreement of such
Company Employee to the Specified Designee or the Specified SWV Transferee, as
the case may be, effective as of the Closing, and (ii) without limitation of
clause (i), if such Company Employee is to become an employee of Purchaser or
any of its Subsidiaries, a new Technology Conveyance/Confidentiality Agreement,
in form and substance reasonably satisfactory to Purchaser, with respect to such
new employment relationship.
Section 8.8. BOARD OF DIRECTORS' APPROVAL. The board of directors of
Purchaser shall have given its final approval of the execution, delivery and
performance of this Agreement by Purchaser, it being understood and agreed that
such final approval shall in no event be deemed to have been given for any
purpose of this Agreement unless and until Purchaser shall have given the
Company the notice contemplated by Section 7.2(c) hereof.
Section 8.9 CERTAIN EMPLOYMENT AGREEMENTS. Each of ▇▇▇▇▇▇ ▇▇▇▇▇▇ and
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ shall have executed and delivered to Purchaser an
Employment Agreement in the form of Exhibit 8.9-a hereto, for the salaries and
option grants previously agreed.
Section 8.10. DOCUMENTS. The Company shall have delivered to
Purchaser at the Closing such other documents and instruments as shall be
reasonably necessary to effectuate the transactions contemplated by this
Agreement. The Company and the Key Employees/Stockholders shall have delivered
all the certificates, instruments, contracts and other documents specified to be
delivered by each such person hereunder.
ARTICLE IX
CONDITIONS TO THE COMPANY'S OBLIGATION TO CLOSE
Anything in the Company Transaction Documents to the contrary
notwithstanding, the Company's obligation to consummate the Closing is subject
to the satisfaction at or prior to the Closing, or waiver by the Company, of all
of the following conditions (any of which may be waived by the Company, to any
extent, in its sole discretion):
Section 9.1. REPRESENTATIONS, WARRANTIES AND COVENANTS OF Parent.
Each of the representations and warranties of Purchaser contained in this
Agreement or in any other Purchaser Transaction Document, or in any Exhibit,
certificate, document or instrument delivered in connection herewith, shall be
true and correct, with such exceptions as are not in the aggregate material, (i)
on and as of the date of this Agreement and (ii) on and as of the Closing Date
(with the same effect, with respect to this clause (ii), as though such
representations and warranties had been made exactly as written herein
(including references to "the date hereof", "the date of this Agreement" or
other particular dates, but disregarding the parenthetical clauses in each of
the first two sentences of Section 5.1(b) hereof) at and as of the Closing Date,
in each case determined disregarding for purposes of this condition any
materiality qualification (including without limitation any qualification
indicating accuracy in all material respects, or accuracy except to the extent
any inaccuracy will not have a material adverse effect) set forth in such
representations and warranties). Purchaser shall have performed and complied in
all material respects with all covenants and agreements required by this
Agreement to be performed or complied with by them at or prior to the Closing.
Purchaser shall deliver to the Company a certificate, dated the Closing Date and
signed by an officer of Purchaser, to the effect that the conditions set forth
in this Section 9.1 have been satisfied.
Section 9.2. NO INJUNCTION. There shall be no injunction,
restraining order or decree of any nature of any court or other Government
Entity of competent jurisdiction that is in effect that restrains or prohibits
the consummation of the Agreement and the other transactions contemplated
hereby.
ARTICLE X
TERMINATION
Section 10.1. TERMINATION. This Agreement may be terminated at
any time prior to the Closing by:
(a) the mutual written consent of the Company and Purchaser; or
(b) the Company or Purchaser, if the Closing has not occurred by the
close of business on September 30, 1999; PROVIDED, that (i) if the Closing has
not occurred by the close of business on September 30, 1999 by reason of a
failure to satisfy the conditions set forth in Section 8.3 or 8.4, as to the
Company, the first reference to "September 30, 1999" in this Section 10.1(b)
shall be deemed to be a reference to the date October 15, 1999, and (ii) in any
event, neither the Company, in the case of termination by the Company, or
Purchaser, in the case of termination by Purchaser, is in default hereunder.
Section 10.2. PROCEDURE AND EFFECT OF TERMINATION. In the event of
termination of this Agreement pursuant to Section 10.1, written notice thereof
shall forthwith be given by the terminating party to the other party or parties
hereto, and this Agreement shall thereupon terminate and become void and have no
effect, and the transactions contemplated hereby shall be abandoned without
further action by the parties hereto, except that the provisions of this Section
10.2 and of Article XI shall survive the termination of this Agreement;
PROVIDED, HOWEVER, that nothing contained herein shall relieve any party hereto
from liability for any knowing breach or knowing inaccuracy of any
representation or warranty contained herein or any willful failure to comply
with any covenant or agreement contained herein (and the terms of Article 6
shall apply to any such breach, inaccuracy or failure).
ARTICLE XI
MISCELLANEOUS
Section 11.1. ENTIRE AGREEMENT. This Agreement and the documents and
agreements referred to herein and to be delivered pursuant hereto constitute the
entire agreement between the parties hereto pertaining to the subject matter
hereof, and supersede all prior agreements, understandings, negotiations and
discussions of the parties, whether oral or written. The preceding sentence
notwithstanding, the Mutual Confidentiality Agreement shall remain in full force
and effect notwithstanding the execution and delivery of this Agreement,
PROVIDED that automatically upon the occurrence of the Closing, all obligations
of Purchaser and its Affiliates (but not the obligations of the Company) under
the Mutual Confidentiality Agreement shall cease to be of any further force or
effect.
Section 11.2. BENEFIT; ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors (whether by merger, sale of all or substantially all assets or
otherwise) and assigns and the provisions of Article 6 hereof shall inure to the
benefit of Indemnified Parties referred to therein; PROVIDED that this Agreement
shall not be assignable by the Company in whole or in part without the express
prior written consent of Purchaser. The Company's right to any Possible Earnout
Payment shall be evidenced by an appropriate entry in a register maintained by
the Specified Designee, and in no event shall the Company's right to receive any
Possible Earnout Payment be transferable except (if Purchaser consents to such
assignment) by means of an entry on such register evidencing such transfer. No
assignment by Purchaser of any of its rights hereunder shall relieve Purchaser
of any of its obligations hereunder.
Section 11.3. NO PRESUMPTION. Purchaser and the Company have
participated jointly in the negotiation and drafting of this Agreement. In the
event any ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by Purchaser and the Company
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.
The parties intend that each representation, warranty, and covenant 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, as the
case may be.
Section 11.4. NOTICES. All notices, requests, claims, demands and
other communications provided for herein shall be in writing and shall be deemed
given only if delivered to the party personally or sent to the party by
telecopy, by registered or certified mail (return receipt requested) with
postage and registration or certification fees thereon prepaid, or by any
nationally recognized overnight courier, addressed to the party at its address
set forth below:
If to Company: PageCell International Holdings, Inc.
▇▇▇▇▇▇▇▇▇▇ Plaza, 2nd Floor
Wickhams Cay 1
Road Town, British Virgin Islands
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇
With a copy to: PageCell International Holdings, Inc.
▇/▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and SWV
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP
1600 Atlanta Financial Center
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
If to Purchaser: StarMedia Network, Inc.
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Attn: General Counsel
With a copy to: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇
or to such other address as a party may from time to time designate in writing.
All notices, requests, claims, demands and other communications given to any
party hereto in accordance with the provisions of this Agreement shall be deemed
to have been given on the date of receipt; provided that any notice or
communication that is received other than during regular business hours of the
recipient shall be deemed to have been given at the opening of business on the
next business day of the recipient.
Section 11.5. COUNTERPARTS; HEADINGS; DELIVERY BY FACSIMILE. This
Agreement may be executed in one or more counterparts, and by the different
parties hereto in separate counterparts, each of which when executed shall be
deemed an original, but all of which taken together shall constitute one and the
same Agreement. The Article and Section headings in this Agreement are inserted
for convenience of reference only and shall not constitute a part hereof or
affect in any way the meaning or interpretation of this Agreement. Any
Transaction Document and any amendments hereto, to the extent signed and
delivered by means of a facsimile machine, shall be treated in all manner and
respects as an original agreement and shall be considered to have the same
binding legal effect as if it were the original signed version thereof delivered
in person. At the request of any party hereto or to any such agreement, each
other party hereto or thereto shall reexecute original forms thereof and deliver
them to all other parties. No party hereto or to any such agreement shall raise
the use of a facsimile machine to deliver a signature or the fact that any
signature or agreement was transmitted or communicated through the use of a
facsimile machine as a defense to the formation or enforceability of a contract
and each such party forever waives any such defense.
Section 11.6. SEVERABILITY. If any term, provision, clause or part
of this Agreement or the application thereof under certain circumstances is held
invalid, illegal or incapable of being enforced by any Law or public policy, all
other terms, provisions and parts of this Agreement shall nevertheless remain in
full force and effect so long as the economic and legal substance of the
transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term, provision or part
of this Agreement is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in an
acceptable manner in order that the transactions contemplated hereby are
consummated as originally contemplated to the greatest extent possible. To the
extent permitted by applicable Law, each party waives any provision of Law which
renders any provision of this Agreement invalid, illegal or unenforceable in any
respect. Nothing in this Section 11.6 is intended to, or shall, limit (1) the
ability of any party to such document to appeal any court ruling or effect of
any favorable relying on appeal, (2) the intended effect of Section 11.8 hereof
or (3) Article VIII or IX hereof.
Section 11.7. THIRD-PARTY BENEFICIARIES. This Agreement is not
intended to confer upon any other Person any rights or remedies hereunder,
except that the parties hereto agree and acknowledge that the agreements and
covenants contained in Section 6 hereof are intended for the direct and
irrevocable benefit of each Indemnified Party and that each Indemnified Party,
although not a party to this Agreement, shall be and is a direct and irrevocable
third-party beneficiary of such agreements and covenants and will have the right
to enforce such agreements and covenants against the Company or Purchaser, as
the case may be, in all respects fully and to the same extent as if such
Indemnified Party were a party hereto (except that any provision hereof
(including provisions of Article VI) may be amended without the consent of any
such third-party beneficiary not a signatory hereto).
Section 11.8. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS. It is intended that Section 5-1401 of the New
York General Obligations Law shall apply to the choice of law contained in the
preceding sentence.
Section 11.9. SUBMISSION TO JURISDICTION; WAIVERS. (a) The
parties hereto hereby irrevocably and unconditionally agree that:
(i) Except as otherwise expressly provided in Section 2.5(k) hereof
all suits, actions and proceedings arising out of or relating to this Agreement
shall be heard and determined in any New York state or Federal court sitting in
the City of New York and any appellate court from any thereof, and each of the
parties hereto hereby irrevocably submits to the exclusive jurisdiction of such
courts in any such suit, action or proceeding and irrevocably waives, to the
fullest extent it may effectively do so, the defense of an inconvenient forum to
the maintenance of any such suit, action or proceeding and any objection to any
such suit action or proceeding whether on the grounds of venue, residence or
domicile. A final judgment in any such suit, action, or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
any other manner provided by law.
(ii) Service of process in any such suit, action or proceeding may
be effected by mailing a copy thereof by registered or certified mail (or any
substantially similar form of mail), postage prepaid, to such party at its
address as provided in Section 11.4.
(b) Nothing in Section 11.9(a) limits the right of any Purchaser
Indemnified Party to bring or maintain any suit, action or proceeding against
any Person other than the Company in any court it desires.
Section 11.10. WAIVER. Any party to this Agreement may (i) extend
the time for the performance of any of the obligations or other acts of the
other parties, (ii) waive any inaccuracies in the representations and warranties
of the other parties contained herein or in any document delivered by the other
parties pursuant hereto or (iii) waive compliance with any of the agreements or
conditions of the other parties contained herein. Any such extension or waiver
shall be valid only if set forth in an instrument in writing signed by the party
to be bound thereby. Any waiver of any term or condition shall not be construed
as a waiver of any subsequent breach or a subsequent waiver of the same term or
condition, or a waiver of any other term or condition, of this Agreement. The
failure of any party to assert any of its rights hereunder shall not constitute
a waiver of any such rights.
Section 11.11. AMENDMENT. This Agreement may not be amended,
modified or supplemented except by an instrument in writing signed by, or on
behalf of, each of the parties hereto.
Section 11.12. SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity available (subject to Sections 6.4 and 6.9) to the
parties.
Section 11.13 EXCLUSIVITY OF REPRESENTATIONS. (a) THE
REPRESENTATIONS AND WARRANTIES MADE BY THE COMPANY AND PURCHASER, RESPECTIVELY,
IN THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS ARE IN LIEU OF AND ARE
EXCLUSIVE OF ALL OTHER REPRESENTATIONS AND WARRANTIES, INCLUDING, WITHOUT
LIMITATION, ANY IMPLIED WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR A
PARTICULAR PURPOSE AND ANY OTHER IMPLIED WARRANTIES, OF THE COMPANY AND
PURCHASER, RESPECTIVELY. THE COMPANY AND PURCHASER HEREBY DISCLAIMS ANY SUCH
OTHER OR IMPLIED REPRESENTATIONS OR WARRANTIES, NOTWITHSTANDING THE DELIVERY OR
DISCLOSURE BY THE COMPANY OR ANY OTHER PERSON TO PURCHASER OR ANY OF ITS
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES, OR BY PURCHASER OR
ANY OTHER PERSON TO THE COMPANY OR ANY OF ITS DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS OR REPRESENTATIVES, OF ANY DOCUMENTATION OR OTHER INFORMATION IN
CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
OTHERWISE.
(b) The Company represents and warrants to Purchaser that it has not
relied on any documents or information concerning Purchaser or its business or
affairs other than the express representations and warranties set forth herein.
(c) Nothing in this Section 11.13 limits or qualifies the express
representations or warranties set forth in this Agreement (including that set
forth in Section 4.21) or any of the other express terms of this Agreement
(including Article VI).
Section 11.14 EXPENSES. (a) As between the Company and its
Subsidiaries, on the one hand, and Purchaser, the Specified Designee, the
Specified SWV Transferee and the Specified Subsidiaries, on the other, the
Company shall pay, and that the Company shall indemnify and hold harmless
Purchaser, the Specified Designee, the Specified SWV Transferee and the
Specified Subsidiaries from and against, all transfer, documentary, sales, use,
registration, stamp, value-added and other similar Taxes (including all
applicable real property and other gains (but excluding federal and state
income) Taxes, including any penalties, interest and additions to Tax, paid or
payable by the Company, Purchaser, the Specified Designee, the Specified SWV
Transferee or any of the Specified Subsidiaries in connection with the
transactions contemplated hereby (i) to be taken (or taken) through the Closing
Date or (ii) to be taken (or taken) after the Closing Date under any provision
of Article II or III hereof ("TRANSFER TAXES"). The Company and Purchaser shall
cooperate in timely making and filing all reports and other filings as may be
required to comply with the provisions of any Transfer Taxes Laws.
(b) Except as otherwise expressly set forth in this Agreement
(including Section 11.14(a)) hereof, regardless of whether the Closing occurs,
each party hereto shall bear all of such party's expenses incurred in connection
with the negotiation or execution of, or the consummation of the transactions
contemplated by, this Agreement, including, without limitation, any accounting
and legal fees incurred in connection therewith.
(c) The Company covenants to Purchaser that any and all Transfer
Taxes or Transaction Expenses payable by the Company shall in fact be paid on
behalf of the Company by one or more of its stockholders.
Section 11.15 CONFIDENTIALITY. (a) The Company acknowledges that by
virtue of the Closing, all copies of Confidential Information should be
delivered to the Specified Designee or the Specified SWV Transferee and no such
copies shall be retained by the Company or SWV. Without limitation of the
foregoing, the Company will, within ten days after receipt thereof, cause its
stockholders and its and their respective Affiliates to (i) destroy all
Confidential Information in their possession or control, (ii) purge the same
from all files and storage media (wherever located, including all off-site
storage or disaster recovery facilities) retained or controlled by any of them
and (iii) deliver to Purchaser a certificate, signed by (or on behalf of) such
Person, certifying its compliance with such request.
(b) Without limitation of Section 11.15(a), if the Closing occurs,
then from and after the Closing the Company shall not, and it shall cause its
stockholders, its and its stockholders respective Affiliates and the respective
directors, officers, attorneys and representatives of each of the foregoing not
to, disclose any Confidential Information to any Person or use any Confidential
Information in any manner detrimental to Purchaser, except that such disclosure
may be made as may be required by Law or by order of any court or arbitrator of
competent jurisdiction. As used herein, the term "CONFIDENTIAL INFORMATION"
means all Acquired Software and all Acquired Intellectual Property, and all
other non-public information relating to the Assets or business of the Company,
SWV or any of the Specified Subsidiaries; PROVIDED, HOWEVER that with respect to
any particular Person, "Confidential Information" shall not include any
information that has become generally available to the public other than as a
result of a disclosure by such Person (or any Affiliate of such Person).
Section 11.16 BULK TRANSFER LAW. The parties hereby waive
compliance, in connection with the consummation of the Closing and the
transactions contemplated by Section 3.5 by the Company, SWV Purchaser, the
Specified Designee and the Specified SWV Transferee with the provisions of any
applicable bulk sales, fraudulent conveyance and other laws for the protection
of creditors. The Company agrees to indemnify and hold the Purchaser Indemnified
Parties harmless from and reimburse the Purchaser Indemnified Parties for, any
Losses which any of them may suffer or incur by virtue of any noncompliance by
the Company, SWV Purchaser, the Specified Designee or the Specified SWV
Transferee with such applicable laws.
Section 11.17 SECURITIES ACT COMPLIANCE. (a) The Company
acknowledges that the StarMedia Capital Stock acquired pursuant to this
Agreement (or upon any conversion of StarMedia Junior Non-Voting Convertible
Preferred Stock into StarMedia Common Stock) may not be sold, and agrees that it
will not directly or indirectly offer or sell any of such StarMedia Capital
Stock, other than in compliance with the Securities Act and all other applicable
state or foreign securities Laws.
(b) The Company acknowledges and agrees that the StarMedia Capital
Stock acquired pursuant to this Agreement has not been and will not be
registered under the Securities Act (or any state or foreign securities Laws).
(c) The Company acknowledges and agrees that the StarMedia Capital
Stock delivered pursuant to this Agreement and any Conversion Stock, will
contain a legend substantially in the form attached hereto as Exhibit 11.17(c)
hereto.
Section 11.18 LOCK-UP; INFORMATION REQUIREMENTS. (a) Without
limitation of Section 11.17, the Company covenants to Purchaser that it shall
not sell, assign or otherwise convey any StarMedia Capital Stock released to it
pursuant to Escrow Agreement or any Conversion Common Stock held by it (or any
interest in any of the foregoing), and the Company acknowledges and agrees that
it shall not be permitted to sell or cause to be sold any StarMedia Capital
Stock held in the Escrow Fund, except that any of the foregoing that is
StarMedia Common Stock (collectively, the "RESTRICTED COMMON STOCK") may be sold
by the Company as follows:
(i) Any shares of Restricted Common Stock delivered on the
Closing Date pursuant to Section 2.5(b) hereof may be sold at any
time after the first anniversary of the Closing Date, in accordance
with the procedures set forth in Section 11.18(b).
(ii) Any shares of Restricted Common Stock delivered pursuant
to Section 2.5(d) hereof may be sold at any time after the first
anniversary of the last day of the calendar quarter in respect of
which such Restricted Common Stock was so delivered (as specified in
Exhibit 2.5(c) hereto), in accordance with the procedures set forth
in Section 11.18(b).
For purposes of this Section 11.18(a), Restricted Common Stock that is
Conversion Stock shall be deemed to have been issued as of the date of delivery
of the StarMedia Junior Non-Voting Convertible Preferred Stock which was
converted into such Conversion Stock.
(b) Any Restricted Common Stock at any time held in the Escrow Fund
and (until the third anniversary of the Closing Date) any other Restricted
Common Stock, in each case that otherwise is permitted to be sold pursuant to
Section 11.18(a) may only be sold in accordance with the following restrictions:
(i) Restricted Common Stock may only be sold in compliance
with (x) all applicable provisions of Rule 144 under the Securities
Act of 1933, as amended, (y) in any event, paragraphs (f) and (g) of
Rule 144 as in effect on the date hereof (even if such paragraphs
otherwise would not be required to be complied with in connection
with such sale), and (z) all state or foreign laws applicable to
such sale.
(ii) Prior to the third anniversary of the Closing Date, (x)
the aggregate amount of shares of Restricted Common Stock sold
pursuant to Section 11.18(a) on any particular day shall not exceed
10% of the average daily volume of trading in StarMedia Common Stock
reported on all national securities exchanges and/or reported
through NASDAQ/NMS, over the immediately preceding five Trading Days
(determined excluding sales pursuant to this Section 11.18), and (y)
the aggregate amount of shares of Restricted Common Stock sold
pursuant to Section 11.18(a) during any particular five-day period
shall not exceed 10% of the volume of trading in StarMedia Common
Stock reported on all national securities exchanges and/or reported
through NASDAQ/NMS during the immediately preceding five Trading
Days (determined excluding sales pursuant to this Section 11.18).
(iii) All proceeds of any sale of Restricted Common Stock then
held in the Escrow Fund shall be deposited with the Escrow Agent and
shall thereafter be held by the Escrow Agent as part of the Escrow
Fund. Prior to any such sale, Purchaser, the Company and the Escrow
Agent shall agree upon arrangements satisfactory to both Purchaser
and the Escrow Agent to insure that all such proceeds will in fact
be deposited with the Escrow Agent prior to or simultaneously with
any delivery of the relevant shares of StarMedia Common Stock to the
Company to consummate such sale.
(iv) Prior to any sale of Restricted Common Stock, the Company
shall deliver to the Escrow Agent and Purchaser such opinions of
counsel (as to legal matters) and certifications (as to factual
matters) as either of them reasonably may request in connection with
such sale (including without limitation as to the limitations and
procedures set forth in this Section 11.18). For the avoidance of
doubt, both the identify of such counsel and the form and substance
of such opinions of counsel shall be reasonably satisfactory to
Purchaser.
(v) The Company shall indemnify and hold harmless the
Purchaser Indemnified Parties, the Escrow Agent, the Escrow Agent's
Affiliates and the respective directors, officers, employees and
agents of the Escrow Agent from and against any and all Losses which
are imposed on, incurred by or asserted against any of them, based
upon, arising out of, or resulting from or otherwise in respect of
any offer or sale of any shares of Restricted Common Stock then held
in the Escrow Fund.
(c) RULE 144 INFORMATION REQUIREMENTS. If the Closing occurs, then
until the 30th day after the earliest of (i) the termination of the Escrow
Agreement, (ii) the release (whether by reason of distribution or sale) of all
StarMedia Capital Stock held in the Escrow Fund and (iii) the third anniversary
of the Closing Date, (x) Purchaser shall file the reports required to be filed
by it under Section 13 or 15(d) of the Exchange Act, and (y) if at any time
Purchaser is not required to file such reports, it will, upon the request of the
Company, make publicly available the information described in Rule 144(c)(2) so
long as necessary to permit sales of shares of Restricted Common Stock pursuant
to Rule 144 under the Securities Act and this Section 11.18.
Section 11.19 CHANGE OF NAME; NON-USE OF NAME. Forthwith and in any
event within five days after the Closing, the Company shall, and shall cause SWV
to, change the corporate name of the Company and SWV, respectively, to a name
not containing the words "PageCell", "Smart Wireless" or any variation of either
thereof. From and after the Closing, the Company shall, and shall cause SWV
permanently to refrain from using the names "PageCell", "Smart Wireless",
"CycleLogic" or any variation of either thereof in any manner. As and to the
extent requested by Purchaser after the Closing, the Company shall, and shall
cause SWV to, file Approvals relinquishing any right of record that either of
them may have to use any of such names.
Section 11.20 ALLOCATION OF PURCHASE PRICE. Purchaser covenants that
(i) for United States federal income tax purposes, the Purchase Price will be
allocated only among the Acquired Assets, and (ii) if the representations and
warranties of the Company set forth in Section 4.1(c), and the third sentence of
Section 4.4(a), hereof are accurate, then it will not, for United States federal
income tax purposes, allocate to the Acquired Assets (other than any Specified
Domain Name Registrations, cash, cash equivalents or receivables owned by SWV at
the Closing) more than $145,000 of the Purchase Price.
[REST OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, this Agreement has been signed by or on behalf
of each of the parties as of the day first above written.
STARMEDIA NETWORK, INC.
By: /S/ ▇▇▇▇▇▇ ▇. MACEDONIA
----------------------------------
Name: ▇▇▇▇▇▇ ▇. Macedonia
Title: Senior Vice President and
General Counsel
PAGECELL INTERNATIONAL
HOLDINGS, INC.
By: /S/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: President
The undersigned hereby acknowledges, consents and agrees to the
foregoing Assets Purchase Agreement including without limitation the terms of
Section 2.2(c) thereof.
SMART WIRELESS VENTURES, INC.
By: /S/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
EXHIBIT 1.1
1. For purposes of this Agreement, the following terms shall have the
following meanings:
"ACQUIRED ASSETS" shall have the meaning set forth in Section
2.2(a).
"ACQUIRED INTELLECTUAL PROPERTY" shall mean all Intellectual
Property included in the Acquired Assets.
"ACQUIRED SOFTWARE" shall mean all Software included in the Acquired
Assets, other than Outstanding IP Licenses for Shrink-Wrap Software.
"ACTION" shall mean any actual or threatened action (at law or in
equity), suit, arbitration, review, inquiry, proceeding or investigation.
"AFFILIATE" (and, with a correlative meaning, "AFFILIATED") shall
mean, with respect to any Person, any other Person that directly, or through one
or more intermediaries, controls or is controlled by or is under common control
with such first Person. As used in this definition, "control" (including, with
correlative meanings, "controlled by" and "under common control with") shall
mean possession, directly or indirectly, of the power to direct or cause the
direction of management or policies (whether through ownership of securities or
partnership or other ownership interests, by contract or otherwise).
"APPROVAL" means any franchise, license, certificate of compliance,
authorization, consent, order, permit, waiver, approval or other action of, or
any filing, registration or qualification with, any Governmental Entity.
"ASSETS" shall mean all properties, assets, privileges, rights,
interests and claims, real and personal, tangible and intangible, of every type
and description (wherever located).
"ASSOCIATES" of a specified Person shall mean (i) a corporation or
other organization of which such Person is a director, officer or partner or is,
directly or indirectly, the beneficial owner of 5% of more of any class of
equity securities, (ii) any trust or other estate in which such Person has such
a substantial beneficial interest or as to which such Person serves as trustee
or in a similar capacity and (iii) any Relative of such Person who has the same
home as such Person.
"ASSUMED OBLIGATIONS" shall have the meaning set forth in Section
2.3.
"AUTHOR" means any Person involved in the creation or development of
any of the Systems, Programs, Object Code, Source Code or documentation included
in the Acquired Assets.
"AUTHOR TECHNOLOGY CONVEYANCE/CONFIDENTIALITY AGREEMENT" has the
meaning set forth in Section 4.8(b).
"BALANCE SHEET" has the meaning set forth in Section 4.2.
"BASKET AMOUNT" shall mean (i) until January 1, 2001, $250,000, and
(ii) from and after January 1, 2001 (and with retroactive effect to the Closing
Date), an amount equal to 1% of the aggregate amount of the Purchase Price
theretofore paid to the Company (computed based on the dollar amounts forming
the basis of the determination of the number of shares of StarMedia Capital
Stock to be delivered (subject to the Escrow Agreement) to the Company pursuant
to Section 2.5), it being understood and agreed that any portion of the Purchase
Price deposited in escrow pursuant to the Escrow Agreement (or against which
Purchaser has exercised its rights under the last sentence of Section 6.2(c))
shall be deemed to have been paid to the Company for purposes of this clause
(ii), PROVIDED THAT, for the avoidance of doubt, it is understood and agreed
that if the amount described in clause (ii) is less than in clause (i), the
Purchaser Indemnified Parties shall be entitled to be paid by the Company any
amounts that the Company theretofore would have been obligated to pay under
Section 6.2 but in fact did not pay due to the Basket Amount then in effect
equalling $250,000.
"BENEFIT PLAN" shall have the meaning set forth in Section 4.17(a).
"BUDGET" shall mean the budget for StarMedia Mobile prepared by the
Specified Key Employees/Stockholders. A copy of the Budget has been initialled
by the parties.
"BUSINESS PLAN" shall mean the business plan as of the date hereof
for StarMedia Mobile prepared by the Specified Key Employees/Stockholders. A
copy of the Business Plan has been initialled by the parties.
"CLAIM" shall mean any claim, cause of action or other right or
remedy.
"CLOSING" shall have the meaning set forth in Section 3.1.
"CLOSING CURRENT LIABILITIES" shall have the meaning set forth in
Section 2.1.
"CLOSING DATE" shall have the meaning set forth in Section 3.1.
"CLOSING MARKET PRICE" of StarMedia Common Stock for any day shall
mean the last reported sale price for such security on the principal exchange or
quotation system on which such security is listed or traded. If the security is
not admitted for trading on any national securities exchange or the NASDAQ
National Market, "Closing Market Price" shall mean the average of the last
reported closing bid and asked prices reported by the NASDAQ as furnished by any
member in good standing of the National Association of Securities Dealers, Inc.,
selected from time to time by Purchaser for that purpose, or as quoted by the
National Quotation Bureau Incorporated. In the event that no such quotation is
available for such day, the Closing Market Price shall be the average of the
quotations for the last five Trading Days for which a quotation is available
within the last 30 Trading Days prior to such day. In the event that five such
quotations are not available within such 30-Trading Day period, the Board of
Directors of Purchaser shall be entitled to determine the Closing Market Price
on the basis of such quotations as it reasonably considers appropriate.
"CLOSING SHARE PRICE" shall have the meaning set forth in Section
2.5(b).
"COBRA" shall have the meaning set forth in Section 4.17(e).
"CODE" shall mean the Internal Revenue Code of 1986, as amended, and
any successor thereto.
"COMPANY" shall have the meaning set forth in the preambles to
this Agreement.
"COMPANY APPROVALS" shall have the meaning set forth in
Section 4.9(a).
"COMPANY EMPLOYEES" shall mean any officers or employees of the
Company, SWV or the Specified Subsidiaries. For purposes of this Agreement only,
the term Company Employees shall also be deemed to include any independent
contractor of the Company, SWV or the Specified Subsidiaries.
"COMPANY INDEMNIFIED PARTIES" shall have the meaning set forth in
Section 6.3(a).
"COMPANY ORGANIZATIONAL DOCUMENTS" shall have the meaning set forth
in Section 4.1(a).
"COMPANY TRANSACTION DOCUMENTS" shall have the meaning set forth in
Section 4.1(d).
"CONFIDENTIAL INFORMATION" shall have the meaning set forth in
Section 11.15(b).
"CONFIDENTIALITY AGREEMENTS" shall have the meaning set forth in
Section 4.19.
"CONSENT" shall mean any consent or approval of, waiver by, or
notice, declaration, report or statement filed with or submitted to, any Person
(other than an Approval).
"CONTRACTS" shall mean all contracts, agreements, leases,
arrangements, commitments or understandings, whether oral or written, whether
existing as of the date hereof or arising prior to the Closing, to or by which
the Company, SWV or any of the Specified Subsidiaries is a party or is otherwise
bound.
"CONVERSION STOCK" means any StarMedia Common Stock issued upon
conversion of any StarMedia Junior Non-Voting Convertible Preferred Stock.
"DEFAULT/MODIFICATION RIGHT" shall have the meaning set forth in
Section 4.1(e).
"DISCLOSURE LETTER" means that certain letter from the Company to
Purchaser dated the date hereof and titled "Disclosure Letter", and acknowledged
by Purchaser's signature thereon to constitute the "Disclosure Letter" for
purposes of this Agreement.
"DOCUMENTATION" means, with respect to an item of Specified Software
or any computer program included in the Acquired Assets, all internal comments
to Source Code ("PROGRAM DOCUMENTATION"), all design specifications, logic
manuals, flow charts, diagrams, technical descriptions and other written,
printed or machine-readable materials containing any algorithms or descriptions
of operations relating to such Acquired Software or other computer program
("DESIGN DOCUMENTATION"), all instructions, manuals and other documents for
installers, trainers and maintenance personnel ("INSTALLATION AND TRAINING
DOCUMENTATION") and all guides and manuals for users, operators and system
administrators ("USER DOCUMENTATION").
"EARNOUT PAYMENT DISPUTE" shall have the meaning set forth in
Section 2.6(d).
"EARNOUT SHARE PRICE" shall have the meaning set forth in Section
2.5(d).
"EARNOUT TARGETS" shall have the meaning set forth in Section
2.5(c).
"ENVIRONMENTAL LAWS" shall mean all federal, state, local and
foreign statutes and codes or regulations, rules or ordinances issued,
promulgated, or approved thereunder (including those with respect to asbestos or
asbestos-containing material or exposure to asbestos or asbestos-containing
material) relating to (i) emissions, discharges, releases or threatened releases
of pollutants, contaminants, chemicals or industrial toxic or hazardous
constituents, substances or wastes, including any Hazardous Material, any
petroleum (including crude oil or any fraction thereof), any petroleum product
or any other waste, chemicals or substances regulated by any Government Entity,
into the environment (including ambient air, surface water, ground water, land
surface or subsurface strata), (ii) the manufacture, processing, distribution,
use, generation, treatment, storage, disposal, transport or handling of any
Hazardous Material, any petroleum (including crude oil or any fraction thereof),
petroleum product or any other waste, chemicals or substances regulated by any
Government Entity, and (iii) underground storage tanks and related piping, and
emissions, discharges and releases or, threatened any releases therefrom.
"ESCROW AGENT" shall mean a financial institution, or other Person,
designated by Purchaser prior to the Closing and reasonably acceptable to the
Company.
"ESCROW AGREEMENT" shall have the meaning set forth in Section 3.4.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, or any successor law, and regulations and rules issued by the SEC
pursuant to that act or any successor law.
"EXCLUDED ASSETS" shall have the meaning set forth in Section
2.2(b).
"EXCLUDED DOMAIN NAME REGISTRATIONS" shall mean
"▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇", "▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇", "▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇" and
"▇▇▇▇▇▇-▇▇▇▇▇▇▇▇.▇▇▇".
"FINANCIAL STATEMENTS shall have the meaning set forth in Section
4.2(a).
"GAAP" shall mean generally accepted accounting principles in the
United States as in effect from time to time, consistently applied.
"GOVERNMENTAL ENTITY" OR "GOVERNMENT ENTITY" shall mean (i) any
multinational, federal, provincial, state, municipal, local or other
governmental or public department, court, commission, board, bureau, agency or
instrumentality, domestic or foreign; (ii) any subdivision, agent, commission or
board of any of the foregoing; or (iii) any quasi-governmental or private body
exercising any regulatory, expropriation or taxing authority under or for the
account of any of the foregoing.
"HAZARDOUS MATERIALS" shall mean any substance, material or waste
that is regulated under any Environmental Law or is deemed or defined by any Law
or Governmental Entity to be "hazardous," "toxic," a "contaminant," "waste," a
"pollutant" or words with similar meaning and shall include, without limitation,
petroleum and petroleum products, PCBs, PCB wastes, asbestos, asbestos
containing products and radioactive substances.
"HSR ACT" shall mean the United States ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvement Act of 1976, as amended, and the rules and regulations promulgated
thereunder.
"INDEMNIFICATION CLAIM" shall have the meaning set forth in Section
6.4(a).
"INDEMNIFIED PARTY" shall have the meaning set forth in Section
6.4(a).
"INDEMNIFYING PARTY" shall have the meaning set forth in Section
6.4(a).
"INDUCEMENT AGREEMENTS" shall have the meaning set forth in the
preambles to this Agreement.
"INSIDER" shall mean (i) any Person that is, directly or indirectly,
the beneficial owner of 5% or more or any class of equity securities of the
Company, (ii) any director or officer of the Company, or (iii) any Affiliate,
Associate or Relative of any Person described in sub-clause (i) or (ii) (other
than SWV or a Specified Subsidiary).
"INSIDER TRANSACTION" shall have the meaning set forth in Section
4.14.
"INTERCOMPANY SERVICE AGREEMENT" shall mean the Services Agreement,
dated June 25, 1998, by and between the Company and SWV.
"IP LICENSE" shall mean any option, license, or agreement of any
kind relating to the exercise, use, non-use, registration, enforcement,
non-enforcement of or remuneration for any Intellectual Property or Software.
"IRS" shall mean the Internal Revenue Service.
"INTELLECTUAL PROPERTY" shall mean all (i) patents, copyrights,
trademarks, service marks, trade identification, trade dress, trade names,
copyrights, trade secrets, know-how, proprietary information (including without
limitation proprietary software algorithms and designs), mask work rights,
database rights, publicity rights, privacy rights, moral rights and other rights
of a similar nature for which legal protection may be obtained, in the United
States and/or any other country or jurisdiction; (ii) pending applications to
register or otherwise obtain legal protection for any of the foregoing; (iii)
rights to make application in the future to register or otherwise obtain legal
protection for any of the foregoing; (iv) rights of priority under national laws
and international conventions with respect to any of the foregoing; (v)
continuations, continuations-in-part, divisions, renewals, extensions, patents
of addition, reexaminations, or reissues of any of the foregoing and all related
applications therefor; (vi) goodwill associated with any of said trademarks,
service marks, trade identification, trade dress and trade names; and (vii)
rights to ▇▇▇ with respect to past and future infringements of any of the
foregoing.
"KEY EMPLOYEES/STOCKHOLDERS" shall mean ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇.
"KEY EMPLOYEES/STOCKHOLDERS EMPLOYMENT AGREEMENTS" shall have the
meaning set forth in the preambles to this Agreement.
"LAWS" shall mean all statutes, codes, ordinances, decrees, rules,
regulations, municipal by-laws, judicial or arbitral or administrative or
ministerial or departmental or regulatory judgments, orders, decisions, rulings
or awards, policies, voluntary restraints, guidelines, or any provisions or
interpretations of the foregoing, including general principles of common and
civil law and equity, binding on or affecting the Person referred to in the
context in which such word is used.
"LIABILITIES" shall have the meaning set forth in Section 2.4.
"LIEN" shall mean any lien (including, without limitation,
environmental and tax liens) charge, claim, pledge, security interest,
conditional sale agreement or other title retention agreement, lease, mortgage,
security agreement, right of first refusal or other purchase rights of third
parties, option, tenancy, license (other than the Specified Contracts), real
estate covenant, right of way or easement, any filing of, or agreement to give,
any financing statement under the Uniform Commercial Code or statute or law of
any jurisdiction, or any restriction on voting, transfer or receipt of income.
"LOSSES" shall mean and include (i) any losses, costs, expenses,
damages (including compensatory, exemplary, or punitive damages but excluding
(other than, for the avoidance of doubt, in the event of Third-Party Claims)
consequential damages), Taxes, penalties, fines, charges, demands, Liabilities,
obligations and claims of any kind (including interest, penalties and reasonable
attorneys' and consultants' fees, expenses and disbursements) and (ii) without
limitation of clause (i), any cost or expense reasonably incurred by a Purchaser
Indemnified Party or a Company Indemnified Party in enforcing its rights under
Section 6.2 or 6.3, respectively.
"LOWER LIMIT SHORTFALL" shall have the meaning set forth in Section
2.5(e).
"MATERIAL ADVERSE EFFECT" shall mean (i) a significant risk that
Purchaser, in any material respect, will not, commencing immediately after the
Closing and continuing indefinitely thereafter, be able to own, possess, use,
lease, hold, occupy and operate the Acquired Assets as currently and (in any
event) normally (in the Ordinary Course of Business) owned, possessed, used,
leased, held, occupied and operated by the Company and its Subsidiaries, (ii)
without limitation of clause (i), an effect that is materially adverse to, or a
material adverse change in, the business, operations, Assets, Liabilities,
financial condition or results of operations of (x) the Company and its
Subsidiaries taken as a whole or (y) the business of the Company and its
Subsidiaries (including the Specified Business) taken as a whole or (iii) a
significant risk of the imposition of criminal liability on Purchaser or any of
its Affiliates (prior to, at or after the Closing).
"MUTUAL CONFIDENTIALITY AGREEMENT" shall have the meaning set forth
in Section 7.1(b)(1).
"NON-COMPETITION COVENANT" shall mean, with respect to any Person,
any non-competition, confidentiality, non-use of information, non-solicitation
(of clients, individuals or otherwise) or similar covenant or restriction agreed
to by such Person (including, without limitation, any such covenant or
restriction for the benefit of the Company), and any related provision of the
contract, agreement or other instrument setting forth such covenant or
restriction.
"OBJECT CODE" shall mean (i) machine executable programming
instructions, substantially in binary form, which are intended to be directly
executable by a processor after suitable processing and linking but without the
intervening steps of compilation or assembly, or (ii) other executable code
(E.G., "byte code" and other intermediate code forms in connection with
interpretive languages).
"ORDINARY COURSE OF BUSINESS" shall mean in the ordinary course of
the normal day-to-day operations of the Company and its Subsidiaries (including
the Specified Business) and consistent with past practices of the Company and
its Subsidiaries and, in any event, without regard to the transactions
contemplated by this Agreement.
"OTHER PARTY" shall have the meaning set forth in Section 2.7(a).
"OUTSTANDING KEY EMPLOYEE/STOCKHOLDERS EMPLOYMENT AGREEMENTS" shall
mean (i) that certain Executive Employment Agreement dated March 1, 1999 between
SWV and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, (ii) that certain Employment Agreement dated January 1,
1999 between SWV and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, (iii) that certain Executive
Employment Agreement dated January 1, 1999 between SWV and ▇▇▇▇▇ ▇▇▇▇▇▇ and (iv)
that certain Employment Agreement dated January 1, 1999 between SWV and ▇▇▇▇▇▇
▇▇▇▇▇▇.
"OUTSTANDING IP LICENSE" shall mean any IP License by or to the
Company or any of its Subsidiaries or to which the Company or any of its
Subsidiaries is otherwise a party, or by which the Company or any of its
Subsidiaries or any of their respective Intellectual Property, Software or other
property is subject or bound.
"PERMITTED ENCUMBRANCES" shall mean any of the following as to which
no enforcement, collection, execution, levy or foreclosure proceeding shall have
been commenced and as to which appropriate reserves have been established and
provided for in the Financial Statements: (a) liens (arising as a matter of law)
for taxes, assessments and governmental charges or levies not yet due and
payable; (b) materialmens', mechanics', carriers', workmen's and repairmen's
liens and other similar liens, imposed by law and arising in the Ordinary Course
of Business, securing obligations that (i) are not overdue and (ii) are not in
excess of $1,000 in the case of a single property or $5,000 in the aggregate at
any time; and (c) pledges or deposits to secure obligations under workers
compensation laws or similar legislation or to secure public or statutory
obligations, all of which, collectively, do not materially adversely affect the
value or use of any of the Acquired Assets for its current and anticipated
purposes.
"PERSON" shall mean any individual, corporation, partnership,
limited liability company, joint venture, trust, unincorporated organization,
other form of business or legal entity or Government Entity.
"POSSIBLE EARNOUT PAYMENTS" shall have the meaning set forth in
Section 2.5(c).
"PROGRAM" shall mean, with respect to an item of Acquired Software,
the complete set of the machine-readable and executable computer instructions
and all related data files necessary to perform on a computer system one or more
of the functions performed by such item of Acquired Software.
"PURCHASE PRICE" shall have the meaning set forth in Section 2.5(a).
"PURCHASER" shall have the meaning set forth in the preambles to
this Agreement.
"PURCHASER FINANCIAL STATEMENTS" shall have the meaning set forth in
Section 5.3.
"PURCHASER INDEMNIFIED PARTIES" shall have the meaning set forth in
Section 6.2(a).
"PURCHASER TRANSACTION DOCUMENTS" shall have the meaning set forth
in Section 5.1(b).
"RESTRICTED COMMON STOCK" shall have the meaning set forth in
Section 11.18(a).
"RETAINED CASH" shall have the meaning set forth in Section 2.1.
"RETAINED LIABILITIES" shall have the meaning set forth in Section
2.4.
"RETURN" shall mean 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, filed or
required to be filed with any Taxing Authority in connection with the
determination, assessment or collection of any Tax or the administration of any
laws, regulations or administrative requirements relating to any Tax, or any
statement required to be furnished to any Person under any Tax law.
"RULES" shall have the meaning set forth in Section 2.6(a).
"SEC" shall mean the United States Securities and Exchange
Commission.
"SEC DOCUMENTS" shall have the meaning set forth in Section 5.3.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended,
or any successor law, and regulations and rules issued by the SEC pursuant to
that act or any successor law.
"SHRINK-WRAP SOFTWARE" shall mean the current shipping versions of
software applications and utilities generally available "off the shelf" on a
commercially reasonable basis.
"SOFTWARE" shall mean any and all (i) "computer programs" (as
defined in Section 101 of the U.S. Copyright Act), including any and all
software implementations of algorithms, models and methodologies, whether in
source code or object code; (ii) databases and compilations, including any and
all data and collections of data, whether machine readable or otherwise, (iii)
descriptions, flow-charts and other work product used to design, plan, organize
and develop any of the foregoing, and (iv) all documentation, including user
manuals and training materials, relating to any of the foregoing.
"SOFTWARE CONFIDENTIAL INFORMATION" shall have the meaning set forth
in Section 4.19.
"SOURCE CODE" shall mean the human readable form in which programs
have been written and related technical documentation, including comments
internal to such Code and descriptions external to such Code that are useful for
understanding and maintaining said programs (for example, logic manuals, flow
charts and principles of operation), and further includes without limitation all
associated header and make files.
"SPECIFIED ASSETS" shall mean and includes the Specified Contracts,
the Specified Copyright Registration, the Specified Domain Name Registrations,
the Specified Miscellaneous Assets, the Specified Patent Application, the
Specified Software, and all of the outstanding capital stock of the Specified
Subsidiaries, and the Specified Trademarks.
"SPECIFIED ASSETS EXHIBIT" shall mean EXHIBIT A to this Agreement.
"SPECIFIED BUSINESS" shall have the meaning set forth in the
preambles to this Agreement.
"SPECIFIED CONTRACTS" shall mean the Contracts listed or described
in the Specified Assets Exhibit under the heading "Specified Contracts".
"SPECIFIED COPYRIGHT REGISTRATIONS" shall mean the copyright
registrations and pending copyright registrations listed or described in the
Specified Assets Exhibit under the heading "Specified Copyright Registrations".
"SPECIFIED DESIGNEE" shall mean a British Virgin Islands company
designated by Purchaser prior to the Closing as the "Specified Designee" for
purposes of this Agreement.
"SPECIFIED DOMAIN NAME REGISTRATIONS" shall mean the domain name
registrations listed or described in the Specified Assets Exhibit under the
heading "Specified Domain Name Registrations".
"SPECIFIED KEY EMPLOYEES/STOCKHOLDERS" shall mean ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇.
"SPECIFIED KEY EMPLOYEES/STOCKHOLDERS EMPLOYMENT AGREEMENTS" shall
mean the Key Employees/Stockholders Employment Agreements of the Specified Key
Employees/Stockholders.
"SPECIFIED MATTER" shall have the meaning set forth in Section 4.21.
"SPECIFIED MISCELLANEOUS ASSETS" shall mean the Assets listed or
described in the Specified Assets Exhibit under the heading "Specified
Miscellaneous Assets".
"SPECIFIED PATENT APPLICATION" shall mean the pending patent
application listed or described in the Specified Assets Exhibit under the
heading "Specified Patent Application".
"SPECIFIED SOFTWARE" shall mean and include all current and previous
versions (including without limitation all such versions for particular hardware
platforms and/or operating environments) of (i) all Software now and/or
previously designed, developed (in whole or in part), under development (in
whole or in part), released, marketed, licensed to third parties, supported,
maintained, sold or distributed by or for the Company or any of its predecessors
or present or former Subsidiaries and (ii) without limitation of clause (i), the
Software listed or described in the Specified Assets Exhibit under the heading
"Specified Software".
"SPECIFIED SUBSIDIARIES" shall mean each of the companies listed in
the Specified Assets Exhibit under the heading "Specified Subsidiaries".
"SPECIFIED SUBSIDIARY ACQUIRED ASSETS" shall mean the Acquired
Assets (if any) owned by the Specified Subsidiaries.
"SPECIFIED SUPPLIED DATA" shall have the meaning set forth in
Section 4.21.
"SPECIFIED SWV TRANSFEREE" shall mean the Person designated by
Purchaser prior to the Closing as the "Specified SWV Transferee" for purposes of
this Agreement.
"SPECIFIED TRADEMARKS" shall mean the tradenames, trademarks or
servicemarks listed or described in the Specified Assets Exhibit under the
heading "Specified Trademarks", in any style or design, and any name or ▇▇▇▇
derived from or including any of the foregoing.
"STARMEDIA CAPITAL STOCK" shall mean StarMedia Common Stock and
StarMedia Junior Non-Voting Convertible Preferred Stock.
"STARMEDIA COMMON STOCK" shall mean the common stock, par value
$0.001 per share, of Purchaser.
"STARMEDIA JUNIOR NON-VOTING CONVERTIBLE PREFERRED STOCK" shall mean
a series of junior non-voting convertible preferred stock of Purchaser having
the principal terms and conditions set forth in Exhibit B hereto.
"STARMEDIA MOBILE" shall mean the operations of Purchaser and its
wholly-owned Subsidiaries focused on the implementation of the Business Plan.
"SUBSIDIARY" shall mean, with respect to any specified Person, any
other corporation, partnership, joint venture, association or other entity in
respect of which such specified Person directly, or indirectly through one or
more other subsidiaries, owns not less than 50% of the overall economic equity.
"SUPPORTCOMM LETTER OF INTENT" shall mean that certain letter
agreement dated May 7, 1999 between SupportComm Teleinformatica Ltda. and the
Company.
"SWV" shall mean Smart Wireless Ventures, Inc., a Florida
corporation.
"SWV ORGANIZATIONAL DOCUMENTS" shall have the meaning set forth in
Section 4.1(a).
"SYSTEM" shall mean all Programs and Documentation for a particular
version, and SYSTEMS means all Programs and Documentation for all versions, of
the Acquired Software.
"TAXES" shall mean (a) all taxes (whether federal, state, county,
local or foreign), fees, levies, customs duties, assessments, or charges of any
kind whatsoever, including without limitation gross income, net income, gross
receipts, profits, windfall profits, sales, use, occupation, value-added, AD
VALOREM, transfer, license, franchise, withholding, payroll, employment, excise,
estimated, stamp, premium, capital stock, production, net worth, alternative or
add-on minimum, environmental, business and occupation, disability, severance,
or real or personal property taxes, together with any interest, penalties, or
additions to tax imposed with respect thereto and (b) any obligations under any
tax sharing, tax allocation, or tax indemnity agreements or arrangements with
respect to any Taxes described in clause (a) above.
"TAXING AUTHORITY" shall mean any Government Entity having
jurisdiction over the assessment, determination, collection, or other imposition
of any Tax.
"TECHNOLOGY CONVEYANCE/CONFIDENTIALITY AGREEMENT" shall mean, with
respect to any Person, any provision pursuant to which such Person (i) transfers
or agrees to transfer, or acknowledges employer (or another Person's or
Persons') ownership of, Intellectual Property or Software acquired, owned,
created or developed by such Person (including, without limitation, any such
covenant or restriction for the benefit of the Company), or (ii) agrees to
maintain the confidentiality of, or not to use, any Intellectual Property or
Software (other than Shrink-Wrap Software), or other confidential information
of, another Person, and in each case any related provisions of the contract,
agreement or instrument setting forth such former provision.
"THIRD PARTY INDEMNIFICATION CLAIM" shall have the meaning set forth
in Section 6.4(b).
"TRADING DAY" shall mean any day on which the securities in question
are traded on the NYSE or, if such securities are not listed or admitted for
trading on the NYSE, on the principal national securities exchange on which such
securities are listed or admitted or, if not listed or admitted for trading on
any national securities exchange, on the NASDAQ National Market or, if such
securities are not quoted thereon, in the applicable securities market in which
the securities are traded.
"TRANSACTION DOCUMENTS" shall have the meaning set forth in Section
5.1(b).
"TRANSFER TAXES" shall have the meaning set forth in Section
11.15(a).
"UPPER LIMIT EXCESS" shall have the meaning set forth in Section
2.5(e).
EXHIBIT A
SPECIFIED ASSETS
A. SPECIFIED CONTRACTS
1. [Intentionally omitted]
2. Business Development Non-Disclosure Agreement, dated June 2, 1999 by and
between ADC NewNet and CycleLogic
3. [Intentionally omitted]
4. Agreement, dated March 25, 1999 by and between Miniphone S.A. and Smart
Wireless Ventures Inc.
5. Non-Disclosure Agreement, dated May 18, 1999 by and between Ericsson
Inc. and Smart Wireless Ventures Inc. (d/b/a CycleLogic) (the "Ericsson
Agreement")
6. Mutual Non-Disclosure Agreement, dated April 21, 1999 by and between
Telecomunicaciones Movilnet, C.A. and Smart Wireless Ventures Inc.
7. Confidential Disclosure Agreement, dated April 16, 1999 by and between
Smart Wireless Ventures, Inc. (d/b/a CycleLogic) and SupportComm
Teleinformatica Ltd.
8. Software Distribution Agreement, dated August 19, 1999 by and between
Ericsson Messaging Systems, Inc. and PageCell International Holdings, Inc.
(d/b/a CycleLogic) (the "Ericsson Agreement")
9. Letter Agreement, by and between PageCell International Holdings, Inc. and
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ for Consulting Services in ▇▇▇▇▇▇▇▇▇
▇▇. Invention and Secrecy Agreement by and between PageCell International
Holdings, Inc. and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
11. Letter Agreement, by and between PageCell International Holdings, Inc.
and ▇▇▇▇▇▇ ▇▇▇▇▇ for Consulting Services in ▇▇▇▇▇▇▇▇▇
▇▇. Invention and Secrecy Agreement by and between PageCell International
Holdings, Inc. and ▇▇▇▇▇▇ ▇▇▇▇▇
13. Letter Agreement, by and between PageCell International Holdings, Inc.
and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ for Consulting Services in ▇▇▇▇▇▇▇▇▇
▇▇. Invention and Secrecy Agreement by and between PageCell International
Holdings, Inc. and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
15. Invention and Secrecy Agreement by and between Smart Wireless Ventures
Inc. and ▇▇▇▇▇▇ ▇▇▇▇▇▇
16. Invention, Secrecy and Non-Competition Agreement by and between Smart
Wireless Ventures, Inc. and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
17. Invention and Secrecy Agreement by and between Smart Wireless Ventures,
Inc. and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
18. Invention and Secrecy Agreement by and between Smart Wireless Ventures,
Inc. and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
19. Invention, Secrecy and Non-Competition Agreement by and between Smart
Wireless Ventures Inc. and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
20. Invention and Secrecy Agreement by and between Smart Wireless Ventures,
Inc. and ▇▇▇▇▇▇▇ ▇▇▇▇▇
21. Invention and Secrecy Agreement by and between Smart Wireless Ventures.,
Inc. and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇. Invention and Secrecy Agreement by and between Smart Wireless Ventures,
Inc. and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
23. Invention and Secrecy Agreement by and between Smart Wireless Ventures,
Inc. and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇.
24. Invention Agreement by and between Smart Wireless Ventures, Inc. and
▇▇▇▇▇▇ ▇▇▇▇▇▇
25. Invention Secrecy and Non-Competition Agreement by and between Smart
Wireless Ventures, Inc. and ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
26. Invention and Secrecy Agreement by and between Smart Wireless Ventures,
Inc. and ▇▇▇▇ ▇▇▇▇▇▇▇
27. (a) Business Lease Agreement, dated June 15, 1999 by and between Smart
Wireless Communications and Compaq Capital
(b) Business Lease Agreement, dated June, 1999 by and between Smart
Wireless Communications and Compaq Capital
(c) Business Lease Agreement, dated July 30, 1999 by and between Smart
Wireless Communications and Compaq Capital
28. Lease Agreement, dated October 5, 1999, by and between Smart Wireless
Ventures, Inc. and Dell Financial Services
29. Lease Agreement, dated March 30, 1999, by and between Smart Wireless
Ventures, Inc. and Dell Financial Services
30. Lease Agreement, dated July 26, 1999, by and between Smart Wireless
Ventures, Inc. and Dell Financial Services
31. Lease Agreement, dated May 12, 1999, by and between Smart Wireless
Ventures, Inc. and Dell Financial Services
32. Lease Agreement, dated July 7, 1999, by and between Smart Wireless
Ventures, Inc. (d/b/a CycleLogic) and Micron Leasing
33. Lease Agreement, dated September 1, 1999, by and between Smart Wireless
Ventures, Inc. (d/b/a CycleLogic) and Micron Leasing
34. Lease Agreement, dated March 9, 1999, by and between Key International
848, Inc. and CycleLogic Corp. (as assigned to Smart Wireless Ventures
pursuant to letter dated September 16, 1999)
35. Lease Agreement, dated August 19, 1999, by and between Key International
848, Inc. and Trieste Management Corp. and CycleLogic (as assigned to
Smart Wireless Ventures pursuant to letter dated September 16, 1999)
36. Letter Agreement, by and between PageCell International Holdings, Inc. and
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ for Consulting Services in Argentina
37. Letter Agreement, by and between PageCell International Holdings, Inc. and
▇▇▇▇▇ ▇▇▇▇▇▇▇ for Consulting Services in Mexico
38. Invention and Secrecy Agreement dated September 7, 1999 by and between
Smart Wireless Ventures, Inc. and ▇▇▇▇▇ ▇▇▇▇▇▇▇
B. SPECIFIED COPYRIGHTS
1. COPYRIGHT REGISTRATIONS
VOLTAIRE v2.63
CERTIFICATE NO. TX ▇-▇▇▇-▇▇▇
OWNER: PageCell International Holdings, Inc.
2. PENDING COPYRIGHT REGISTRATIONS
Iridium Messaging Software v1.15
C. SPECIFIED DOMAIN NAME REGISTRATIONS
1. ▇▇▇▇▇▇▇▇▇▇.▇▇▇
REGISTERED TO: 5F Venture Capital Inc.
2. ▇▇▇▇▇▇▇▇▇▇.▇▇▇
REGISTERED TO: CycleLogic
3. ▇▇▇▇▇▇▇▇▇▇.▇▇▇
REGISTERED TO: CycleLogic
4. ▇▇▇▇▇▇▇▇.▇▇▇
REGISTERED TO: Smart Wireless Ventures, Inc.
5. ▇▇▇▇▇▇▇▇▇.▇▇▇
REGISTERED TO: Smart Wireless Ventures, Inc.
6. ▇▇▇▇▇▇▇▇▇▇.▇▇▇
REGISTERED TO: Smart Wireless Ventures, Inc.
7. ▇▇▇▇▇▇▇▇▇▇.▇▇▇
REGISTERED TO: Smart Wireless Ventures, Inc.
8. ▇▇▇▇▇▇▇▇.▇▇▇
REGISTERED TO: Smart Wireless Ventures, Inc.
9. ▇▇▇▇▇▇▇▇.▇▇▇
REGISTERED TO: Smart Wireless Ventures, Inc.
10. ▇▇▇▇▇▇▇.▇▇▇
REGISTERED TO: Smart Wireless Ventures, Inc.
11. ▇▇▇▇▇▇▇▇▇.▇▇▇
REGISTERED TO: Smart Wireless Ventures, Inc.
----------
Registrations in names other than the Company will be transferred to the
Company prior to Closing.
12. ▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
REGISTERED TO: Smart Wireless Ventures, Inc.
13. ▇▇▇▇▇▇▇▇.▇▇▇
REGISTERED TO: Smart Wireless Ventures, Inc.
14. ▇▇▇▇▇▇▇▇▇.▇▇▇
REGISTERED TO: Smart Wireless Ventures, Inc.
D. SPECIFIED MISCELLANEOUS ASSETS
1. All tangible personal property described in, or attached to, Section
4.4(c) of the Disclosure Letter
2. All rights of the Company or its Subsidiaries under the Proposals
described on Attachment A hereto
3. All Outstanding IP Licenses for the Shrink-Wrap Software described on
Attachment B hereto
E. SPECIFIED PATENT APPLICATION
MULTILINGUAL WIRELESS MESSAGING SYSTEM
FILING DATE: April 13, 1999
DOCKET NO. ▇▇▇▇▇-▇-▇▇▇▇
INVENTOR: ▇▇▇▇▇ ▇▇▇▇▇▇, et al.
F. SPECIFIED SOFTWARE
All Software listed or described in Section 4.8(b)(i) of the Disclosure
Letter
G. SPECIFIED SUBSIDIARIES
1. IN2MOVIL INTERNATIONAL CORP., a British Virgin Islands corporation
AUTHORIZED SHARES: 10,000
ISSUED SHARES: 10,000 shares to PageCell International Holdings, Inc.
2. ENTUMOVIL DE VENEZUELA S.A., a Venezuelan corporation AUTHORIZED SHARES:
1,000 ISSUED SHARES: 1,000 shares to In2movil International Corp.
3. CYCLELOGIC DO BRASIL, LTDA, a Brazilian company AUTHORIZED SHARES: 10,000
ISSUED SHARES: 9,999 shares to PageCell International Holdings, Inc. 1
share to Xavier, Bernardes e Braganca
H. SPECIFIED TRADEMARKS
1. TRADEMARKS
(a) CYCLELOGIC
(b) VOLTAIRE
(c) IN2MOVIL
(d) ENTUMOVIL
(e) INFOBUILDER
(f) PAGECELL
(g) SMART WIRELESS
2. TRADEMARK REGISTRATIONS
(a) CYCLELOGIC,
REGISTRATION NO. 2,065,670
Owner: PageCell International Holdings, Inc.
(b) VOLTAIRE
REGISTRATION NO. 2,157,221
Owner: PageCell International Holdings, Inc.
3. PENDING TRADEMARK REGISTRATIONS
(a) IN2MOVIL
SERIAL NO. 75/681,634
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United States Patent and Trademark Office.
United States Patent and Trademark Office.
(b) ENTUMOVIL
SERIAL NO. 75/681,388
4. PENDING TRADEMARK REGISTRATIONS
ENTUMOVIL
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Venezuela.
EXHIBIT 2.5(C)
POSSIBLE EARNOUT PAYMENT SCHEDULE
END DATE POSSIBLE EARNOUT EARNOUT VARIABLE EARNOUT TARGET
PAYMENT
1. December 31, $1,000,000 Qualifying Revenue $1,400,000 in calendar
31, 1999 1999 Qualifying Revenue
from the Closing Date
through the End Date.
2. March 31, $1,000,000 Qualifying Revenue $1,500,000 in calendar
2000 year 2000 YTD Qualifying
Revenue through the End
Date.
$2,000,000 less Qualifying As of the End Date,
an amount equal Contracts there are not less than
to 50% of any 8 outstanding Qualifying
Possible Earnout Contracts in not less
Payment earned than four of the
under 1. above following countries:
Argentina, Mexico,
Brazil, Colombia,
Venezuela.
3. June 30, $1,000,000 Qualifying Revenue $3,100,000 in calendar
2000 year 2000 YTD Qualifying
Revenue through the End
Date.
$2,000,000 less Qualifying As of the End Date,
an amount equal Contracts there are not less than
to 50% of any 12 outstanding
Possible Earnout Qualifying Contracts in
Payment earned not less than five of
under 1. above the following countries:
Argentina, Mexico,
Brazil, Chile,
Colombia, Venezuela.
4. September 30, $1,000,000 Qualifying Revenue $4,500,000 in calendar
2000 year 2000 YTD Qualifying
Revenue through the End
Date.
$2,000,000 Qualifying As of the End Date,
Contracts there are not less than
16 outstanding Qualifying
Contracts in not less
than six of the following
countries: Argentina,
Mexico, Brazil, Chile,
Spain, Colombia,
Venezuela, United States.
5. December 31, $2,000,000 Qualifying Revenue $7,000,000 in calendar
2000 year 2000 YTD Qualifying
Revenue through the End
Date.
$4,000,000 Qualifying As of the End Date,
Contracts there are not less than
22 Qualifying Contracts
in not less than six of
the following countries:
Argentina, Mexico,
Brazil, Chile, Spain,
Colombia, Venezuela,
United States.
For purposes of this Exhibit 2.5(c):
1. "Qualifying Revenue" means, with respect to any particular period,
revenues of StarMedia Mobile on a consolidated/combined basis (determined on an
accrual basis in accordance with GAAP, but excluding any extraordinary
transactions) directly derived from the provision of Qualifying
Products/Services, during such period.
2. "Qualifying Products/Services" means products and services of StarMedia
Mobile contemplated to be provided in the Business Plan.
3. "Qualifying Contract" means an outstanding definitive contract of
StarMedia Mobile (entered into after the Closing Date, unless otherwise agreed
by Purchaser and the Company) to provide Qualifying Products/Services in a
country specified in the foregoing table to a Person that is a Qualifying
Carrier in such country, which contract meets the requirements set forth in
Attachment I to this Exhibit 2.5(c), and otherwise is reasonably satisfactory to
Purchaser, or (ii) is agreed in writing by Purchaser to constitute a "Qualifying
Contract" for purposes of this Exhibit 2.5(c), which agreement may be granted or
withheld by Purchaser in its discretion (acting in good faith). For the
avoidance of doubt, there can not be more than one Qualifying Contract in any
particular country with any particular Qualifying Carrier.
4. A "Qualifying Carrier" means, with respect to any particular country
specified in the attached table, the cellular phone carriers specified in
Attachment II to this Exhibit 2.5(c) as "Qualifying Carriers" with respect to
such country, any successors to substantially all of the assets and business of
such companies, and any new companies and businesses that are agreed by the
Purchaser and the Company (each acting in good faith) to have the business and
other attributes to warrant being included as a "Qualified Carrier".
5. Section 2.5(c) of the Agreement provides that to the extent that any
Earnout Target is not met, the corresponding Possible Earnout Payment shall be
reduced on a pro rata basis, PROVIDED that if the actual performance does not
exceed 50% of such Earnout Target, then such corresponding Possible Earnout
Payment shall be forfeited in its entirety. Determinations of the extent to
which any particular "Qualifying Contracts" Earnout Target has been met shall be
made by taking whichever of the following ratios is lower: (i) the ratio of the
total number of Qualifying Contracts in the specified countries as of the
particular End Date to the total number thereof specified in the foregoing table
as the amount necessary to earn the relevant Possible Earnout Payment in full;
and (ii) the ratio of the total number of the specified countries for such End
Date in which one or more Qualifying Contracts is outstanding as of such End
Date to the minimum total number of countries specified for such End Date. For
example, if as of June 30, 2000, there are 12 total Qualifying Contracts in
three of the six specified countries (with the minimum number of specified
countries being five), then the Company shall be considered to have achieved
only 60% of the Earnout Target.
Attachment I
Certain Specifications for Qualifying Contracts
In order to be a "Qualifying Contract" a contract must contain all of the
following:
(i) the purchase by the Qualifying Carrier of Qualifying Product/Services
of the nature described in the section of the Business Plan entitled "Wireless
Internet Portal" for a term of not less than two years, Qualifying Revenues
(other than royalty payments) aggregating not less than US$150,000 for each year
of the term (pro-rated for partial years) and, in addition, royalty payments of
not less than US$.50 per each end-user of the Qualifying Product/Services from
such Qualifying Carrier per month;
(ii) the commitment of the Qualifying Carrier to commercially launch the
Qualifying Products/Services being provided under such contract to all of its
end-users within two months of contract signing;
(iii) the commitment of the Qualifying Carrier to use reasonable
commercial efforts to promote the Qualifying Products/Services being provided
under such contract to all of its end-users;
(iv) the agreement of the Qualified Carrier that the "Wireless Portal"
contemplated by such Qualifying Products/Services shall be a co-branded
StarMedia Mobile/Qualifying Carrier Wireless Internet portal hosted, maintained
and managed solely by StarMedia Mobile; and
(v) the agreement of such Qualified Carrier that during the term of such
contract, such Qualified Carrier shall not provide its end-users access to any
content/information (excluding Qualifying Carrier billing, customer service and
other like customer-specific account-related messages) other than
content/information agreed by the Qualifying Carrier and StarMedia Mobile to be
provided by StarMedia Mobile.
Attachment II
Qualifying Carriers
[SEE ATTACHED]
Country/Region Operators
ARGENTINA
Region II Movicom
Regions I and III Compania de Telefonos_del Interior (CTI)
Region III Telefonica Comunicaciones Personales (TCP)
Region I Compania de Comincaciones Personales del
Interior (CCPI)
BRAZIL
Region 1 - B Band BCP
Region 2 - B Band Tess
Regions 1 A-Band Telesp
Regions 2 A-Band Ceterp
Region 3 - A Band TeleSudeste
Region 3 - B Band Algar
Region 4 - A Band Telemig
Region 4 - B Band Maxitel
Region 5 - A Band Tele-Sul
Region 5 - B Band Global Telecom
Region 6 - A Band CRT
Region 6 - B Band Telet
Region 7 - A Band TeleCentro-Oeste
Region 7 - B Band Americel
Region 8 - A Band TeleNorte
Region 8 - B Band Splice
Region 9 - A Band TeleLeste
Region 9 - B Band Maxitel
Region 10 - A Band TeleNordeste
Region 10 - B Band BSP
CHILE
Nationwide Startel
Regions V and XIII BellSouth
Nationwide Entel Telefonia Personal
Nationwide Entel PCS
Nationwide Chilesat Telefonia Personal
COLOMBIA
Eastern Comcel S.A.
Eastern Celumovil de Colombia S.A.
Western Occel S.A.
Western Cocelco S.A.
Atlantic CelCaribe S.A.
Atlantic Celulmovil de la Costa S.A.
ESPANA
GSM 900 Airtel
NMT 450, GSM, TACS Telefonica
GSM 1800 Amena
NMT ▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇
800 MHZ
Regions 1 - 9 Telcel
Region 3 Norcel
Regions 5-7, 9 Iusacell
1900 MHZ
Regions 1-9 (Band A) SPC
Regions 1,2,4,6,9 Qualcomm (Pegaso)
(Band B)
Regions 1-9 (Band D) DIPSA (TELCEL)
Regions 3,5,7,8, Qualcomm (Pegaso)
(Band E)
Regions 1, 4 (Band E) Iusacell
Regions 2, 6, 9 Midicell
(Band E)
VENEZUELA
Nationwide Movilnet (CANTV)
Nationwide Telcel
Region II Digitel
USA
PCS OmniPoint
PCS PowerTel
PCS PrimeCo
PCS Aerial
PCS Airtouch
Cellular Alltel
Cellular Ameritech
Cellular AT&T Wireless
Cellular ▇▇▇▇ Atlantic
Cellular ▇▇▇▇ South
Cellular GTE
Cellular SBC Wireless
PCS Sprint PCS
▇▇▇ Iridium
▇▇▇ Globalstar
PCS Voice Stream
PCS US Cellular