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EXHIBIT 2.1A
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ASSET PURCHASE AGREEMENT
among:
▇▇▇▇▇▇ ISP, INC.
a Delaware corporation
and
ACG, INC.
a British Virgin Islands corporation
Dated February 10, 1999
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TABLE OF CONTENTS
Page
1. SALE OF ASSETS; RELATED TRANSACTIONS.....................................................................1
1.1 Sale of Assets..................................................................................1
1.2 Purchase Price..................................................................................1
1.3 Closing.........................................................................................1
1.4 Retention of Liabilities........................................................................2
1.5 Allocation......................................................................................3
1.6 Sales Taxes.....................................................................................3
2. REPRESENTATIONS AND WARRANTIES OF SELLER.................................................................3
2.1 Organization; Corporate Matters.................................................................3
2.2 Charter Documents; Records......................................................................3
2.3 Capitalization..................................................................................3
2.4 Financial Statements............................................................................4
2.5 Absence of Changes..............................................................................4
2.6 Title To Assets.................................................................................6
2.7 Bank Accounts...................................................................................6
2.8 Receivables.....................................................................................6
2.9 Customers.......................................................................................7
2.10 Inventory.......................................................................................7
2.11 Equipment, Etc..................................................................................7
2.12 Real Property...................................................................................7
2.13 Proprietary Assets..............................................................................7
2.14 Contracts.......................................................................................8
2.15 Liabilities; Accounts Payable...................................................................9
2.16 Compliance with Legal Requirements..............................................................9
2.17 Governmental Authorizations....................................................................10
2.18 Tax Matters....................................................................................10
2.19 Employee And Labor Matters.....................................................................11
2.20 Employee Benefit Plans.........................................................................12
2.21 Environmental Matters..........................................................................12
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TABLE OF CONTENTS
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2.22 Performance of Services........................................................................13
2.23 Insurance......................................................................................13
2.24 Certain Payments, Etc..........................................................................13
2.25 Proceedings; Orders............................................................................14
2.26 Authority; Binding Nature of Agreements........................................................14
2.27 Non-Contravention; Consents....................................................................15
2.28 Brokers........................................................................................15
2.29 Intercompany Agreements........................................................................15
2.30 Full Disclosure................................................................................15
2.31 Dormant Subsidiaries...........................................................................16
3. REPRESENTATIONS AND WARRANTIES OF PURCHASER.............................................................16
3.1 Authority; Binding Nature of Agreements........................................................16
3.2 Organization, Standing and Power...............................................................16
3.3 Non-Contravention; Consents....................................................................16
3.4 Legal Proceedings..............................................................................17
3.5 Capitalization.................................................................................17
4. CERTAIN COVENANTS OF SELLER.............................................................................17
4.1 Required Actions...............................................................................17
4.2 Prohibited Actions.............................................................................19
4.3 No Termination or Modification.................................................................20
4.4 No Negotiation.................................................................................20
5. CERTAIN COVENANTS.......................................................................................20
5.1 Further Assurances.............................................................................20
5.2 Accounts Receivable Payment....................................................................21
5.3 Restrictions on Transfer.......................................................................21
5.4 Bridge Loan and Voting Agreement...............................................................21
5.5 Shutdown of Dormant Subsidiaries...............................................................21
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER........................................................21
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TABLE OF CONTENTS
CONTINUED
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6.1 Accuracy of Representations....................................................................21
6.2 Performance of Covenants.......................................................................21
6.3 Agreements and Documents.......................................................................21
6.4 No Restraints..................................................................................22
6.5 No Legal Proceedings...........................................................................22
6.6 Satisfactory Completion of Pre-Acquisition Review..............................................22
6.7 Financing......................................................................................22
6.8 No Material Adverse Change.....................................................................22
6.9 Actions Satisfactory...........................................................................22
6.10 Resolution of Obligations to ▇▇▇▇▇▇ ▇▇▇▇.......................................................22
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER...........................................................23
7.1 Accuracy of Representations....................................................................23
7.2 No Restraints..................................................................................23
7.3 Agreements and Documents.......................................................................23
7.4 No Legal Proceedings...........................................................................23
7.5 Actions Satisfactory...........................................................................23
7.6 Shareholder Approval...........................................................................24
8. TERMINATION.............................................................................................24
8.1 Termination Events.............................................................................24
8.2 Termination Procedures.........................................................................24
8.3 Effect of Termination..........................................................................24
9. INDEMNIFICATION AND OTHER REMEDIES......................................................................25
9.1 Survival of Representations and Covenants......................................................25
9.2 Indemnification by the Seller..................................................................26
9.3 Indemnification by the Purchaser...............................................................27
10. MISCELLANEOUS PROVISIONS................................................................................27
10.1 Certain Disclaimers............................................................................27
10.2 Fees and Expenses..............................................................................28
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TABLE OF CONTENTS
CONTINUED
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10.3 Attorneys' Fees................................................................................28
10.4 Notices........................................................................................28
10.5 Time of the Essence............................................................................28
10.6 Headings.......................................................................................28
10.7 Counterparts...................................................................................28
10.8 Governing Law and Choice of Forum..............................................................29
10.9 Successors and Assigns; Parties in Interest....................................................29
10.10 Waiver.........................................................................................29
10.11 Amendments.....................................................................................29
10.12 Severability...................................................................................29
10.13 Entire Agreement...............................................................................29
10.14 Construction...................................................................................30
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LIST OF EXHIBITS
Exhibit A.........Certain Definitions
Exhibit B.........Purchased Assets
Exhibit C.........Escrow Agreement *
Exhibit D.........Voting Agreement *
Exhibit E.........▇▇▇▇ of Sale *
Exhibit F.........Opinion of ▇▇▇▇▇▇ Westwood and Riegels *
Exhibit G.........Form of Legal opinion of ▇▇▇▇▇▇ Godward LLP *
Exhibit H.........Stockholder Representation Statement *
Exhibit I.........Disclosure Schedules *
Exhibit J.........Assignment Agreement *
* Exhibit omitted -- will be provided supplementally to the Commission upon
request.
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "AGREEMENT") is entered into as of
February 10, 1999 by and between (i) ▇▇▇▇▇▇ ISP, INC., a Delaware corporation
("PURCHASER") and (ii) ACG INC., a British Virgin Islands corporation
("SELLER"). Certain defined terms used herein shall have the meanings given to
them on Exhibit A attached hereto.
RECITAL
1. Seller, either directly or through the other members of the Seller
Group, is engaged in the business of providing internet access and associated
related services in Asia.
2. Seller wishes to provide for the sale of all of the assets of Seller
relating to such business to Purchaser on the terms and conditions set forth in
this Agreement.
AGREEMENT
The parties to this Agreement, intending to be legally bound, agree as
follows:
1. SALE OF ASSETS; RELATED TRANSACTIONS
1.1 SALE OF ASSETS. At the Closing (as hereinafter defined), Seller
shall cause to be sold, assigned, transferred, conveyed and delivered to
Purchaser good, valid and marketable title to the all of the assets of the
Seller, including the Purchased Assets listed on Exhibit B but excluding the
Excluded Assets, free and clear of any and all Encumbrances, on the terms set
forth in this Agreement.
1.2 PURCHASE PRICE. As consideration for the sale of the Purchased
Assets to Purchaser, Purchaser shall at the Closing:
(a) pay to the Seller US $3,200,000 by wire transfer to an account
specified by Seller;
(b) pay US $800,000.00 (the "Holdback Funds"), by wire transfer at
the Closing to an account at Norwest Bank to be held until released pursuant to
the terms of an Escrow Agreement substantially in the form attached hereto as
Exhibit C; and
(c) issue to Seller's designees an aggregate of 1,250,000 shares
of Series A Preferred Stock of Purchaser (the "▇▇▇▇▇▇ ISP Shares"); and
1.3 CLOSING.
(a) The consummation of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of ▇▇▇▇▇▇ Godward LLP,
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ as soon as all closing
conditions set forth in Sections 6 and 7 are satisfied or properly waived, or at
such other place, time or date as the parties may mutually
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designate, including by facsimile transmission (the "Scheduled Closing Time").
(The date on which the Closing actually takes place is referred to in this
Agreement as the "Closing Date.")
(b) At the Closing:
(i) Seller shall execute and deliver to Purchaser a
certificate (the "Closing Certificate") setting forth the Seller's
representation and warranty that (A) each of the representations and warranties
made by the Seller in this Agreement were accurate in all respects as of the
date of this Agreement, (B) except as expressly set forth in the Closing
Certificate, each of the representations and warranties made by the Seller are
accurate in all respects as of the Closing Date as if made on the Closing Date,
(C) each of the covenants and obligations that the Seller is required to have
complied with or performed pursuant to this Agreement at or prior to the Closing
have been duly complied with and performed in all respects, and (D) except as
expressly set forth in the Closing Certificate, each of the conditions set forth
in Sections 6.2, 6.3, 6.4 and 6.5 have been satisfied in all respects;
(ii) Seller shall execute and deliver to Purchaser the
Assignment and Assumption Agreement and ▇▇▇▇ of Sale in the form attached as
Exhibit E transferring title to the Purchased Assets to Purchaser;
(iii) Seller shall cause to be executed and delivered to
Purchaser (A) such other documents evidencing the transfer of the Purchased
Assets to Purchaser as are reasonably requested by Purchaser, including without
limitation any stock certificates representing shares of any other member of the
Seller Group to be transferred by Seller, duly endorsed for transfer, (B)
evidence that any notices or filings required to have been given to or made with
Governmental Bodies in connection with the Transactions have been given and made
and that all Consents required to have been obtained in connection with the
Transactions have been obtained and (C) a legal opinion of BVI counsel, counsel
to Seller, substantially in the form attached hereto as Exhibit F;
(iv) Purchaser shall pay the purchase price in the amount and
in the manner set forth in Section 1.2;
(v) Seller and Purchaser shall enter into an Escrow
Agreement, substantially in the form attached hereto as Exhibit C and Purchaser
shall deposit the Holdback Funds in the escrow account; and
(vi) Purchaser shall deliver to Seller a legal opinion of
▇▇▇▇▇▇ Godward LLP in substantially the form attached hereto as Exhibit G.
1.4 RETENTION OF LIABILITIES. Seller and its parent, Asia
Communications Global Limited (Bermuda), shall retain all of their existing
Liabilities. Each direct or indirect subsidiary of the Seller acquired by the
Purchaser pursuant to this agreement shall also retain its Liabilities.
Notwithstanding the foregoing, the retention of liabilities shall not be
interpreted so as to modify either parties obligations to indemnify pursuant to
Section 9 hereof for breaches of the representations and warranties or covenants
of this Agreement.
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1.5 ALLOCATION. The consideration referred to in Section 1.2 is to be
allocated among the Purchased Assets in accordance with the mutual agreement of
the parties. Such allocation shall thereafter be, conclusive and binding upon
Purchaser, each member of the Seller Group for all purposes, and no party to
this Agreement shall file any tax return or other document with, or make any
statement or declaration to, any Governmental Body that is inconsistent with
such allocation.
1.6 SALES TAXES. Seller shall bear and pay, and shall reimburse
Purchaser for, any sales taxes, use taxes, stamp duty, transfer taxes,
documentary charges, recording fees or similar taxes, charges, fees or expenses
that are or that may become payable in connection with the sale of the Purchased
Assets to the Purchaser or in connection with any of the other Transactions.
2. REPRESENTATIONS AND WARRANTIES OF SELLER
Except as specifically set forth on the Disclosure Schedules, attached
hereto as Exhibit I, the schedules of which are numbered to correspond to the
Section numbers of this Agreement, Seller represents and warrants to, and for
the benefit of, the Purchaser Indemnitees, as follows. For purposes of the
representations and warranties set forth below, the parties acknowledge and
agree that the term "Seller" shall include the Seller and each other member of
the Seller Group. Further, the matters identified on the Disclosure Schedules
are organized so as to disclose each such matter by reference to the specific
member of the Seller Group to which such matter relates.
2.1 ORGANIZATION; CORPORATE MATTERS. Part 2.1 of the Disclosure
Schedule identifies each member of the Seller Group and its jurisdiction of
incorporation or formation. Each member of the Seller Group is a corporation or
other similar organization duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation. No member of the Seller
Group owns, directly or indirectly, equity or debt instruments of any Entity nor
is any member of the Seller Group a participant in any joint venture,
partnership or similar arrangement. No member of the Seller Group is in
receivership or liquidation, no member of the Seller Group has taken steps to
enter liquidation, no petition has been presented for the winding up of any
member of the Seller Group and there are no grounds on which a petition or
application could be based for the winding up or appointment of a receiver of
any such member. Except as set forth in Part 2.1 of the Disclosure Schedule, no
member of the Seller Group is, or is required to be, qualified, authorized,
registered or licensed to do business as a foreign corporation in any
jurisdiction other than its jurisdiction of incorporation.
2.2 CHARTER DOCUMENTS; RECORDS. Seller has not received any notice of
any application or intended application for rectification of the Seller's or any
other member's of the Seller Group register. All annual or other returns
required to be filed with the appropriate Governmental Body by each member of
the Seller Group have been properly filed within any applicable time limit and
all Legal Requirements relating to the formation of such members, the issue of
shares and other securities have been complied with.
2.3 CAPITALIZATION. Part 2.3 of the Disclosure Schedule sets forth (i)
the total number of authorized, issued and outstanding shares of each member of
the Seller Group, (ii) the names of each shareholder of each member of the
Seller Group, and (iii) the number of shares held by
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each such shareholder of each member of the Seller Group. Except as set forth in
Part 2.3 of the Disclosure Schedule, the only shareholders of the members of the
Seller Group are other members of the Seller Group. The shares of each member of
the Seller Group have been duly authorized and validly issued, are fully paid in
cash and nonassessable and are free of preemptive rights. There are no
outstanding options, warrants, calls, rights or commitments or any other
agreements of any character relating to the sale, issuance or voting of any
shares of any member of the Seller Group, whether issued or unissued, or any
securities convertible into or evidencing the right to purchase any shares of
any member of the Seller Group. Part 2.3 of the Disclosure Schedule also sets
forth a complete and accurate organizational chart as of December 31, 1998,
indicating the name of each member of the Seller Group, its relationship to the
other members of the Seller Group and its jurisdiction of incorporation.
2.4 FINANCIAL STATEMENTS. The Seller has delivered to the Purchaser the
following financial statements (collectively, the "Financial Statements"): (a)
the audited balance sheets of Asia Communications Group Limited, a Hong Kong
corporation, Asia On-Line Limited, a Hong Kong corporation, Asia On-Line
(Philippines) Limited, a Philippine corporation, and Seller, as of June 30, 1998
and June 30, 1997, and the related statements of income and retained earnings
and cash flows for the years then ended, together with the notes thereto and the
reports of KPMG with respect to the review thereof; and (b) the balance sheets
of each of such entities as of December 31, 1998 (the "Unaudited Interim Balance
Sheets"), and the related profit and loss statement for the six months then
ended. The Financial Statements are accurate and complete in all respects except
as set forth on Part 2.4 of the disclosure schedule, have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered (except that the financial statements referred to in clause "(b)" of
this Section 2.4 do not have notes) and present fairly the financial position of
the each such member as of the respective dates thereof and the results of
operations and cash flows of each such member for the periods covered thereby.
2.5 ABSENCE OF CHANGES. Except as set forth in Part 2.5 of the
Disclosure Schedule, since December 31, 1998:
(a) there has not been any material adverse change in, and no
event has occurred that might have a material adverse effect on, the business,
condition, assets, liabilities, operations, financial performance, net income or
prospects of any member of the Seller Group;
(b) there has not been any material loss, damage or destruction
to, or any interruption in the use of, any of the assets of any member of the
Seller Group (whether or not covered by insurance);
(c) no Seller Group member has (i) declared, accrued, set aside or
paid any dividend or made any other distribution in respect of any shares of
capital stock or other securities, or (ii) repurchased, redeemed or otherwise
reacquired any shares of capital stock or other securities;
(d) no Seller Group member has issued any shares of capital stock
or any instrument convertible into or exchangeable for shares of capital stock;
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(e) no Seller Group member has purchased or otherwise acquired any
asset from any other Person, except for supplies or services acquired by the
Seller Group member in the Ordinary Course of Business;
(f) no Seller Group member has leased or licensed any asset from
any other Person;
(g) no Seller Group member has made any capital expenditure in
excess of US $10,000;
(h) no Seller Group member has sold or otherwise transferred, or
leased or licensed, any asset to any other Person;
(i) no Seller Group member has written off as uncollectible, or
established any extraordinary reserve with respect to, any account receivable or
other indebtedness;
(j) no Seller Group member has made any loan or advance to any
other Person;
(k) no Seller Group member has (i) established or adopted any
Employee Benefit Plan, or (ii) paid an amount in excess of $10,000 per person or
$50,000 in the aggregate for any bonus or made any profit-sharing or similar
payment to, or increased the amount in excess of $10,000 per person or $50,000
in the aggregate for wages, salary, commissions, fees, fringe benefits or other
compensation or remuneration payable to, any of its directors, officers,
employees or independent contractors;
(l) no Contract by which any member of the Seller Group or any of
the assets owned or used by any member of the Seller Group is or was bound, or
under which any member of the Seller Group has or had any rights or interest,
has been amended or terminated;
(m) no Seller Group member has incurred, assumed or otherwise
become subject to any Liability, other than accounts payable (of the type
required to be reflected as current liabilities in the "liabilities" column of a
balance sheet prepared in accordance with GAAP) incurred by any such member in
bona fide transactions entered into in the Ordinary Course of Business;
(n) no Seller Group member has discharged any Encumbrance or
discharged or paid any indebtedness or other Liability, except for accounts
payable that (i) are reflected as current liabilities in the "liabilities"
column of the Unaudited Interim Balance Sheet or have been incurred by such
member of the Seller Group since December 31, 1998, in bona fide transactions
entered into in the Ordinary Course of Business, and (ii) have been discharged
or paid in the Ordinary Course of Business;
(o) no Seller Group member has forgiven any debt or otherwise
released or waived any material right or claim;
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(p) no Seller Group member has changed any of its methods of
accounting or accounting practices in any respect;
(q) no Seller Group member has amended its charter documents;
(r) no Seller Group member has entered into any transaction or
taken any other action outside the Ordinary Course of Business; and
(s) no Seller Group member has agreed, committed or offered (in
writing or otherwise) to take any of the actions referred to in clauses "(c)"
through "(r)" above.
2.6 TITLE TO ASSETS. The Seller Group collectively, and each member of
the Seller Group individually owns, and has good, valid and marketable title to,
all of the assets purported to be owned by it, including: all assets reflected
on the Unaudited Interim Balance Sheet; all assets acquired by any member of the
Seller Group since December 31, 1998; all assets referred to in Parts 2.7
through 2.14 and Part 2.17 of the Disclosure Schedule; all rights of the Seller
Group under the Seller Contracts; and all other assets reflected in the books
and records of the Seller Group as being owned by any member of the Seller
Group. Except as set forth in Part 2.6 of the Disclosure Schedule, all of said
assets are owned by the applicable member of the Seller Group free and clear of
any Encumbrances. Part 2.6 of the Disclosure Schedule identifies all of the
assets that are being leased or licensed to any member of the Seller Group. All
of the aforementioned assets will collectively constitute, as of the Closing
Date, all of the properties, rights, interests and other tangible and intangible
assets necessary to enable the Seller Group, collectively, and each member of
the Seller Group, individually, to conduct its business in the manner in which
such business is currently being conducted and in the manner in which such
business is proposed to be conducted.
2.7 BANK ACCOUNTS. Part 2.7 of the Disclosure Schedule accurately sets
forth, with respect to each account maintained by or for the benefit of any
member of the Seller Group at any bank or other financial institution: (a) the
name and location of the institution at which such account is maintained; (b)
the name in which such account is maintained and the account number of such
account; (c) a description of such account and the purpose for which such
account is used; (d) the current balance in such account; (e) the rate of
interest being earned on the funds in such account; and (f) the names of all
individuals authorized to draw on or make withdrawals from such account. There
are no safe deposit boxes or similar arrangements maintained by or for the
benefit of any of the members of the Seller Group.
2.8 RECEIVABLES. Part 2.8 of the Disclosure Schedule provides an
accurate and complete breakdown and aging of all accounts receivable, notes
receivable and other receivables of each member of the Seller Group as of
December 31, 1998. Except as set forth in Part 2.8 of the Disclosure Schedule,
all existing accounts receivable of the Seller Group (including those accounts
receivable reflected on the Unaudited Interim Balance Sheets that have not yet
been collected and those accounts receivable that have arisen since December 31,
1998 and have not yet been collected): (i) represent valid obligations of
customers of the Seller Group arising from bona fide transactions entered into
in the Ordinary Course of Business; and (ii) are current and collectible in the
Ordinary Course of Business.
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2.9 CUSTOMERS. Part 2.9 of the Disclosure Schedule accurately
identifies, and provides an accurate and complete breakdown of the revenues
received from, each customer or other Person that (together which such
customer's or other Person's affiliates) accounted for more than US $10,000.00
of the gross revenues of the Seller Group in 1996, 1997, 1998. No member of the
Seller Group has received any notice or other communication (in writing or
otherwise), and no member of the Seller Group has received any other
information, indicating that any customer or other Person identified or required
to be identified in Part 2.9 of the Disclosure Schedule may cease dealing with
the Seller Group or may otherwise reduce the volume of business transacted by
such Person with the Seller Group below historical levels.
2.10 INVENTORY. The Seller Group has no material inventory.
2.11 EQUIPMENT, ETC. Part 2.11 of the Disclosure Schedule accurately
identifies all equipment, materials, prototypes, tools, supplies, vehicles,
furniture, fixtures, improvements and other tangible assets owned by each member
of the Seller Group. Part 2.11 of the Disclosure Schedule also accurately
identifies all tangible assets leased to each member of the Seller Group. Each
asset identified or required to be identified in Part 2.11 of the Disclosure
Schedule: (i) is structurally sound, free of defects and deficiencies and in
good condition and repair (ordinary wear and tear excepted); (ii) complies in
all respects with, and is being operated and otherwise used in full compliance
with, all applicable Legal Requirements; and (iii) is adequate and appropriate
for the uses to which it is being put. The assets identified in Part 2.11 of the
Disclosure Schedule are adequate for the conduct of the business of the Seller
Group in the manner in which such business is currently being conducted and in
the manner in which such business is proposed to be conducted.
2.12 REAL PROPERTY. The Seller Group does not own any real property or
any interest in real property, except for the leaseholds created under the real
property leases identified in Part 2.12 of the Disclosure Schedule. Part 2.12 of
the Disclosure Schedule provides an accurate and complete description of the
premises covered by said leases and the facilities located on such premises.
Each member of the Seller Group enjoys peaceful and undisturbed possession of
the premises leased by it.
2.13 PROPRIETARY ASSETS.
(a) Each member of the Seller Group has taken all reasonable
measures and precautions necessary to protect and maintain the confidentiality
and secrecy of all Seller Proprietary Assets (except Seller Group Proprietary
Assets whose value would be unimpaired by public disclosure) and otherwise to
maintain and protect the value of all Seller Group Proprietary Assets.
(b) All patents, trademarks, service marks and copyrights that are
registered with any Governmental Body and held by any member of the Seller Group
are valid and subsisting. None of the Seller Group Proprietary Assets infringes
or conflicts with any Proprietary Asset owned or used by any other Person.
Except as set forth on Part 2.13(b), no member of the Seller Group is
infringing, misappropriating or making any unlawful use of, and no such member
has at any time infringed, misappropriated or made any unlawful use of, or
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received any notice or other communication of any actual, alleged, possible or
potential infringement, misappropriation or unlawful use of, any Proprietary
Asset owned or used by any other Person. To the best of the knowledge of the
Seller, no other Person is infringing, misappropriating or making any unlawful
use of, and no Proprietary Asset owned or used by any other Person infringes or
conflicts with, any Seller Proprietary Asset.
(c) The Seller Group Proprietary Assets constitute all the
Proprietary Assets necessary to enable the Seller Group to conduct its business
in the manner in which such business is being conducted. No member of the Seller
Group has licensed any of the Seller Proprietary Assets to any Person on an
exclusive basis. No member of the Seller Group has entered into any covenant not
to compete or Contract limiting its ability to exploit fully any of the Seller
Proprietary Assets or to transact business in any market or geographical area or
with any Person.
2.14 CONTRACTS.
(a) Part 2.14 of the Disclosure Schedule identifies and provides
an accurate and complete description of each Seller Contract. The Seller has
delivered to (or made available for inspection by) the Purchaser accurate and
complete copies of all Contracts identified in Part 2.14 of the Disclosure
Schedule, including all amendments thereto. Each Seller Contract is valid and in
full force and effect.
(b) Except as set forth in Part 2.14 of the Disclosure Schedule:
(i) no Person has violated or breached, or declared or committed any default
under, any Seller Contract; (ii) no event has occurred, and no circumstance or
condition exists, that might (with or without notice or lapse of time) (A)
result in a violation or breach of any of the provisions of any Seller Contract,
(B) give any Person the right to declare a default or exercise any remedy under
any Seller Contract, (C) give any Person the right to accelerate the maturity or
performance of any Seller Contract, or (D) give any Person the right to cancel,
terminate or modify any Seller Contract; (iii) no member of the Seller Group has
received any notice or other communication (in writing or otherwise) regarding
any actual, alleged, possible or potential violation or breach of, or default
under, any Seller Contract; and (iv) no member of the Seller Group has waived
any right under any Seller Contract.
(c) To the best of the knowledge of the Seller, each Person
against which any member of the Seller Group has or may acquire any rights under
any Seller Contract is solvent and is able to satisfy all of such Person's
current and future monetary obligations and other obligations and Liabilities
thereunder.
(d) Except as set forth in Part 2.14 of the Disclosure Schedule,
no member of the Seller Group has ever guaranteed or otherwise agreed to cause,
insure or become liable for, and no member of the Seller Group has ever pledged
any of its assets to secure, the performance or payment of any obligation or
other Liability of any other Person.
(e) The performance of the Seller Contracts will not result in any
violation of or failure to comply with any Legal Requirement.
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(f) No Person is renegotiating, or has the right to renegotiate,
any amount paid or payable to the applicable member of the Seller Group under
any Seller Contract or any other term or provision of any Seller Contract.
(g) The Contracts identified in Part 2.14 of the Disclosure
Schedule collectively constitute all of the Contracts necessary to enable the
Seller Group to conduct its business in the manner in which such business is
currently being conducted and in the manner in which such business is proposed
to be conducted.
2.15 LIABILITIES; ACCOUNTS PAYABLE.
(a) Except as set forth in Part 2.15 of the Disclosure Schedule,
no member of the Seller Group has any Liabilities, except for: (i) liabilities
identified as such in the "liabilities" columns of the Unaudited Interim Balance
Sheet ; (ii) accounts payable (of the type required to be reflected as current
liabilities in the "liabilities" column of a balance sheet prepared in
accordance with GAAP) incurred by the members of the Seller Group in bona fide
transactions entered into in the Ordinary Course of Business since December 31,
1998; and (iii) obligations under the Contracts listed in Part 2.14 of the
Disclosure Schedule, to the extent that the existence of such obligations is
ascertainable solely by reference to such Contracts.
(b) Part 2.15 of the Disclosure Schedule: (i) provides an accurate
and complete breakdown and aging of the accounts payable of each member of the
Seller Group as of December 31, 1998; (ii) provides an accurate and complete
breakdown of any customer deposits or other deposits held by any member of the
Seller Group as of the date of this Agreement; and (iii) provides an accurate
and complete breakdown of all notes payable and other indebtedness of any member
of the Seller Group as of the date of this Agreement.
(c) No member of the Seller Group has, at any time, (i) made a
general assignment for the benefit of creditors, (ii) filed, or had filed
against it, any bankruptcy petition or similar filing, (iii) suffered the
attachment or other judicial seizure of all or a substantial portion of its
assets, (iv) admitted in writing its inability to pay its debts as they become
due, (v) been convicted of, or pleaded guilty or no contest to, any felony, or
(vi) taken or been the subject of any action that may have an adverse effect on
its ability to comply with or perform any of its covenants or obligations under
any of the Transactional Agreements.
2.16 COMPLIANCE WITH LEGAL REQUIREMENTS. Except as set forth in Part
2.16 of the Disclosure Schedule: (a) each member of the Seller Group is in full
compliance with each Legal Requirement that is applicable to it or to the
conduct of its business or the ownership or use of any of its assets; (b) each
member of the Seller Group has at all times been in full compliance with each
Legal Requirement that is or was applicable to it or to the conduct of its
business or the ownership or use of any of its assets; (c) no event has
occurred, and no condition or circumstance exists, that might (with or without
notice or lapse of time) constitute or result directly or indirectly in a
violation by any member of the Seller Group of, or a failure on the part of any
such member of the Seller Group to comply with, any Legal Requirement; and (d)
no member of the Seller Group has received, at any time, any notice or other
communication (in writing or otherwise) from any Governmental Body or any other
Person regarding (i) any actual, alleged,
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possible or potential violation of, or failure to comply with, any Legal
Requirement, or (ii) any actual, alleged, possible or potential obligation on
the part of such member of the Seller Group to undertake, or to bear all or any
portion of the cost of, any cleanup or any remedial, corrective or response
action of any nature. The Seller has delivered to the Purchaser an accurate and
complete copy of each report, study, survey or other document to which the
Seller Group has access that addresses or otherwise relates to the compliance of
the Seller Group with, or the applicability to the Seller Group of, any Legal
Requirement. To the best of the knowledge of the Seller, no Governmental Body
has proposed or is considering any Legal Requirement that, if adopted or
otherwise put into effect, (i) may have an adverse effect on the business,
condition, assets, liabilities, operations, financial performance, net income or
prospects of the Seller Group or on the ability of the Seller or any other
member of the Seller Group to comply with or perform any covenant or obligation
under any of the Transactional Agreements, or (ii) may have the effect of
preventing, delaying, making illegal or otherwise interfering with any of the
Transactions.
2.17 GOVERNMENTAL AUTHORIZATIONS. Part 2.17 of the Disclosure Schedule
identifies: (a) each Governmental Authorization that is held by each member of
the Seller Group; and (b) each other Governmental Authorization that, to the
best of the knowledge of the Seller, is held by any employee of any member of
the Seller Group and relates to or is useful in connection with the business of
the Seller Group. Each Governmental Authorization identified or required to be
identified in Part 2.17 of the Disclosure Schedule is valid and in full force
and effect. Except as set forth in Part 2.17 of the Disclosure Schedule: (i)
each member of the Seller Group is and has at all times been in full compliance
with all of the terms and requirements of each Governmental Authorization
identified or required to be identified in Part 2.17 of the Disclosure Schedule;
(ii) no event has occurred, and no condition or circumstance exists, that might
(with or without notice or lapse of time) constitute or result directly or
indirectly in a violation of or a failure to comply with any term or requirement
of any Governmental Authorization identified or required to be identified in
Part 2.17 of the Disclosure Schedule; (iii) no member of the Seller Group has
ever received any notice or other communication (in writing or otherwise) from
any Governmental Body or any other Person regarding any actual, alleged,
possible or potential violation of or failure to comply with any term or
requirement of any Governmental Authorization. The Governmental Authorizations
identified in Part 2.17 of the Disclosure Schedule constitute all of the
Governmental Authorizations necessary (i) to enable each member of the Seller
Group to conduct its business in the manner in which such business is currently
being conducted and in the manner in which such business is proposed to be
conducted, and (ii) to permit each member of the Seller Group to own and use its
assets in the manner in which they are currently owned and used and in the
manner in which they are proposed to be owned and used.
2.18 TAX MATTERS.
(a) Each tax required to have been paid, or claimed by any
Governmental Body to be payable, by any member of the Seller Group has been duly
paid in full on a timely basis. Any tax required to have been withheld or
collected by any member of the Seller Group
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has been duly withheld and collected; and (to the extent required) each such Tax
has been paid to the appropriate Governmental Body.
(b) Part 2.18 of the Disclosure Schedule accurately identifies
each examination or audit of any tax return of any member of the Seller Group
that has been conducted since any such member's inception. The Seller has
delivered to the Purchaser accurate and complete copies of all audit reports and
similar documents (to which the Seller Group has access) relating to such tax
returns.
(c) Except as set forth in Part 2.18 of the Disclosure Schedule,
no claim or other Proceeding is pending or has been threatened against or with
respect to any member of the Seller Group in respect of any tax. There are no
unsatisfied Liabilities for taxes (including liabilities for interest, additions
to tax and penalties thereon and related expenses) with respect to any notice of
deficiency or similar document received by any member of the Seller Group.
(d) The information contained in any tax returns of Seller Group
is accurate and complete in all material respects.
2.19 EMPLOYEE AND LABOR MATTERS.
(a) Part 2.19 of the Disclosure Schedule accurately sets forth,
with respect to each employee of each member of the Seller Group (including any
employee who is on a leave of absence or on layoff status): (i) the name and
title of such employee; (ii) the aggregate dollar amounts of the compensation
(including wages, salary, commissions, director's fees, fringe benefits,
bonuses, profit-sharing payments and other payments or benefits of any type)
received by such employee from the Seller with respect to services performed in
1998; and (iii) such employee's annualized compensation as of the date of this
Agreement.
(b) Part 2.19 of the Disclosure Schedule accurately identifies
each former employee of any member of the Seller Group who is receiving or is
scheduled to receive (or whose spouse or other dependent is receiving or is
scheduled to receive) any benefits from such member of the Seller Group relating
to such former employee's employment with such member; and Part 2.19 of the
Disclosure Schedule accurately describes such benefits.
(c) Except as set forth in Part 2.19 of the Disclosure Schedule,
no member of the Seller Group is a party to or bound by, and no such member has
ever been a party to or bound by, any employment contract or any union contract,
collective bargaining agreement or similar Contract.
(d) The employment of the employees of each member of the Seller
Group is terminable at will and no employee is entitled to severance pay or
other benefits following termination or resignation, except as otherwise
provided by law. The Seller has delivered to the Purchaser accurate and complete
copies of all employee manuals and handbooks, disclosure materials, policy
statements and other materials relating to the employment of the current and
former employees of the members of the Seller Group.
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(e) To the best of the knowledge of the Seller: (i) no employee of
any member of the Seller Group intends to terminate his or her employment; (ii)
no employee of any member of the Seller Group has received an offer to join a
business that may be competitive with the business of the Seller Group; and
(iii) no employee of any member of the Seller Group is a party to or is bound by
any confidentiality agreement, noncompetition agreement or other Contract (with
any Person) that may have an adverse effect on (A) the performance by such
employee of any of his or her duties or responsibilities as an employee of one
of the members of the Seller Group, or (B) the business of the Seller Group.
(f) No member of the Seller Group is engaged in any unfair labor
practice of any nature. There has never been any slowdown, work stoppage, labor
dispute or union organizing activity, or any similar activity or dispute,
affecting any member of the Seller Group or any of its employees, and no Person
has threatened to commence any such slowdown, work stoppage, labor dispute or
union organizing activity or any similar activity or dispute.
(g) Part 2.19 of the Disclosure Schedule sets forth the name of,
and a general description of the services performed by, each independent
contractor to whom any member of the Seller Group has made any payment since
December 31, 1998.
2.20 EMPLOYEE BENEFIT PLANS. Part 2.20 of the Disclosure Schedule
identifies and provides an accurate and complete description of each employee
benefit and employee welfare plans, contracts, agreements or obligations of any
kind in effect with regard to the employees of any of the Seller Group members.
Except as set forth on Part 2.20 of the Disclosure Schedule or otherwise
required by applicable law, there are no retirement, pension, provident,
superannuation or retirement benefit funds, schemes or arrangements under which
any member of the Seller Group is obligated, contractually or otherwise, to
provide retirement benefits of any kind (which expression shall include benefits
payable upon retirement, leaving employment, death, disability, and any other
benefits which are commonly provided for under provident or retirement schemes)
to any of their owners, employees or officers or former owners, employees or
officers or any spouse or other dependent of any of the same. Each such plan
required to be identified on Part 2.20 of the Disclosure Schedule is being and
has at all times been operated and administered in full compliance with the
terms thereof. Each contribution or other payment that is required to have been
accrued or made under or with respect to any such plan has been duly accrued and
made on a timely basis. Each such plan has at all times complied and been
operated and administered in full compliance with all applicable Legal
Requirements.
2.21 ENVIRONMENTAL MATTERS. Each member of the Seller Group is in
compliance with all existing applicable Environmental Laws, except where the
failure to be in compliance would not have a material adverse effect on the
business, condition, assets, liabilities, operations, financial condition, net
income or prospects of the Seller Group. No member of the Seller Group has
received any communication (written or oral), whether from a governmental
authority, citizens group, employee or otherwise, that alleges that any of
member of the Seller Group is not in such compliance, and to the knowledge of
the Seller, there are no circumstances that are reasonably likely to prevent or
interfere with such compliance in the future. All permits and governmental
authorizations required pursuant to the Environmental Laws have been obtained
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and are currently in force, and all such permits and other governmental
authorizations are identified in Part 2.21 of the Disclosure Schedule. There is
no Environmental Claim pending, or to the knowledge of the Seller, threatened
against or involving any member of the Seller Group or against any person or
entity whose liability for any Environmental Claim the Seller Group have or may
have retained or assumed either contractually or by operation of law, and there
are no past or present actions, activities, circumstances, conditions, events or
incidents, including, without limitation, the release, threatened release,
emission, discharge or disposal of any Material of Environmental Concern, that
would form the basis of any Environmental Claim against any member of the Seller
Group.
2.22 PERFORMANCE OF SERVICES. All services that have been performed by
any member of the Seller Group were performed properly and in full conformity
with the terms and requirements of all applicable warranties and other Contracts
and with all applicable Legal Requirements. The Purchaser will not incur or
otherwise become subject to any Liability arising directly or indirectly from
any services performed by the Seller Group prior to the date hereof. There is no
claim pending or being threatened against any member of the Seller Group
relating to any services performed by the Seller Group, and, to the best of the
knowledge of the Seller, there is no basis for the assertion of any such claim.
2.23 INSURANCE.
(a) Part 2.23 of the Disclosure Schedule accurately sets forth,
with respect to each insurance policy maintained by or at the expense of, or for
the direct or indirect benefit of, any member of the Seller Group: (i) the name
of the insurance carrier that issued such policy and the policy number of such
policy; (including all applicable coverage limits, deductible amounts and
co-insurance arrangements; and (ii) a description of any claims pending, and any
claims that have been asserted in the past, with respect to such policy or any
predecessor insurance policy. Each of the policies identified in Part 2.23 of
the Disclosure Schedule is valid, enforceable and in full force and effect, and
has been issued by an insurance carrier that, to the best of the knowledge of
the Seller, is solvent, financially sound and reputable. All of the information
contained in the applications submitted in connection with said policies was (at
the times said applications were submitted) accurate and complete, and all
premiums and other amounts owing with respect to said policies have been paid in
full on a timely basis.
2.24 CERTAIN PAYMENTS, ETC. No member of the Seller Group has, and no
officer, employee, agent or other Person associated with or acting for or on
behalf of any such member has, at any time, directly or indirectly: (a) used any
corporate funds (i) to make any unlawful political contribution or gift or for
any other unlawful purpose relating to any political activity, (ii) to make any
unlawful payment to any governmental official or employee, or (iii) to establish
or maintain any unlawful or unrecorded fund or account of any nature; (b) made
any false or fictitious entry, or failed to make any entry that should have been
made, in any of the books of account or other records of any member of the
Seller Group; (c) made any payoff, influence payment, bribe, rebate, kickback or
unlawful payment to any Person; (d) performed any favor or given any gift which
was not deductible for federal income tax purposes; (e) made any payment
(whether or not lawful) to any Person, or provided (whether lawfully or
unlawfully) any favor or
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anything of value (whether in the form of property or services, or in any other
form) to any Person, for the purpose of obtaining or paying for (i) favorable
treatment in securing business, or (ii) any other special concession; or
(f) agreed, committed or offered (in writing or otherwise) to take any of the
actions described in clauses "(a)" through "(e)" above.
2.25 PROCEEDINGS; ORDERS. Except as set forth in Part 2.25 of the
Disclosure Schedule, there is no pending Proceeding, and no Person to Seller's
Knowledge has threatened to commence any Proceeding: (i) that involves any
member of the Seller Group or that otherwise relates to or might affect the
business of any member of the Seller Group or any of the assets of any member of
the Seller Group (whether or not any member of the Seller Group is named as a
party thereto); or (ii) that challenges, or that may have the effect of
preventing, delaying, making illegal or otherwise interfering with, any of the
Transactions. Except as set forth in Part 2.25 of the Disclosure Schedule, no
event has occurred, and no claim, dispute or other condition or circumstance
exists, that might directly or indirectly give rise to or serve as a basis for
the commencement of any such Proceeding. Except as set forth in Part 2.25 of the
Disclosure Schedule, no Proceeding has ever been commenced by or against any
member of the Seller Group. The Seller has delivered to (or made available for
inspection by) the Purchaser accurate and complete copies of all pleadings,
correspondence and other written materials (to which the Seller has access) that
relate to the Proceedings identified in Part 2.25 of the Disclosure Schedule. To
Seller's Knowledge, there is no Order to which any member of the Seller Group,
or any of the assets owned or used by any member of the Seller Group, is
subject; or that relates to the Seller's business or to any of the assets of any
member of the Seller Group. There is no proposed Order that, if issued or
otherwise put into effect, (i) may have an adverse effect on the business,
condition, assets, liabilities, operations, financial performance, net income or
prospects of any member of the Seller Group or on the ability of the Seller or
any other member of the Seller Group to comply with or perform any covenant or
obligation under any of the Transactional Agreements, or (ii) may have the
effect of preventing, delaying, making illegal or otherwise interfering with any
of the Transactions.
2.26 AUTHORITY; BINDING NATURE OF AGREEMENTS. The Seller and each other
member of the Seller Group has the absolute and unrestricted right, power and
authority to enter into and to perform its obligations under each of the
Transactional Agreements to which it is or may become a party; and the
execution, delivery and performance by each member of the Seller Group of the
Transactional Agreements to which it is or may become a party have been duly
authorized by all necessary action on the part of such member and its
shareholders, board of directors and officers. This Agreement constitutes the
legal, valid and binding obligation of the Seller and each other member of the
Seller Group who is a party hereto, enforceable against the Seller and each such
member in accordance with its terms except to the extent that enforceability may
be limited by laws of general application related to bankruptcy, insolvency, and
the release of debtors, or other similar laws presently or hereafter in effect
relating to or affecting enforcement of creditors' rights generally and by rules
of law governing specific performance, injunctive relief and other general
principles of equity. Upon the execution of each of the other Transactional
Agreements at the Closing, each of such other Transactional Agreements to which
the Seller and each other member of the Seller Group is a party will constitute
the legal, valid and binding obligation of the Seller and each such member and
will be enforceable against each
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such entity in accordance with its terms except to the extent that
enforceability may be limited by bankruptcy, insolvency, moratorium or other
similar laws presently or hereafter in effect relating to or affecting
enforcement of creditors' rights generally and by general principles of equity.
2.27 NON-CONTRAVENTION; CONSENTS. Except as set forth in Part 2.27 of
the Disclosure Schedule, neither the execution and delivery of any of the
Transactional Agreements, nor the consummation or performance of any of the
Transactions, will directly or indirectly (with or without notice or lapse of
time):
(a) contravene, conflict with or result in a violation of, or give
any Governmental Body or other Person the right to challenge any of the
Transactions or to exercise any remedy or obtain any relief under, any Legal
Requirement or any Order to which any member of the Seller Group, or any of the
assets of any member of the Seller Group, is subject;
(b) contravene, conflict with or result in a violation of any of
the terms or requirements of, or give any Governmental Body the right to revoke,
withdraw, suspend, cancel, terminate or modify, any Governmental Authorization
that is held by any member of the Seller Group or any employee of any member of
the Seller Group;
(c) contravene, conflict with or result in a violation or breach
of, or result in a default under, any provision of any Contract listed on Part
2.14 of the Disclosure Schedule;
(d) give any Person the right to (i) declare a default or exercise
any remedy under any Contract listed on Part 2.14 of the Disclosure Schedule,
(ii) accelerate the maturity or performance of any Contract listed on Part 2.14
of the Disclosure Schedule, or (iii) cancel, terminate or modify any Contract
listed on Part 2.14 of the Disclosure Schedule; or
(e) result in the imposition or creation of any Encumbrance upon
or with respect to any of the Assets.
Except as set forth in Part 2.27 of the Disclosure Schedule, no member
of the Seller Group was, is or will be required to make any filing with or give
any notice to, or to obtain any Consent from, any Person in connection with the
execution and delivery of any of the Transactional Agreements or the
consummation or performance of any of the Transactions.
2.28 BROKERS. No member of the Seller Group has agreed or become
obligated to pay, or has taken any action that might result in any Person
claiming to be entitled to receive, any brokerage commission, finder's fee or
similar commission or fee in connection with any of the Transactions.
2.29 INTERCOMPANY AGREEMENTS. Part 2.29 of the Disclosure Schedule sets
forth all written agreements and obligations between any members of the Seller
Group.
2.30 FULL DISCLOSURE. None of the Transactional Agreements contains or
will contain any untrue statement of fact; and none of the Transactional
Agreements omits or will omit to state any fact necessary to make any of the
representations, warranties or other statements or
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information contained therein not misleading. All of the information set forth
in the Disclosure Schedule, and all other information regarding the Seller
Group, each member thereof and their respective business, condition, assets,
liabilities, operations, financial performance, net income and prospects that
has been furnished to the Purchaser or any of the Purchaser's Representatives by
or on behalf of any member of the Seller Group or by any Representative of any
member of the Seller Group, is accurate and complete in all respects.
2.31 DORMANT SUBSIDIARIES. The Dormant Subsidiaries have no existing
business operations and have no Liabilities.
3. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to, and for the benefit of, Seller as
follows:
3.1 AUTHORITY; BINDING NATURE OF AGREEMENTS. Purchaser has the absolute
and unrestricted right, power and authority to enter into and perform its
obligations under the Agreement. The execution, delivery and performance of the
Agreement by Purchaser have been duly authorized by all necessary action on the
part of Purchaser. The Agreement constitutes the legal, valid and binding
obligation of Purchaser and is enforceable against Purchaser in accordance with
its terms, subject to (i) laws of general application relating to bankruptcy,
insolvency and the relief of debtors and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies.
3.2 ORGANIZATION, STANDING AND POWER. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Purchaser has all requisite corporate power and authority to own,
lease and operate its properties, to carry on its business as now being
conducted and to execute, deliver and perform this Agreement and all writings
relating hereto. Purchaser owns no debt or equity instruments of another Entity
(other than the Bridge Loan to Asia Online Inc.). Purchaser is not required to
be qualified to do business as a foreign corporation in any foreign
jurisdiction.
3.3 NON-CONTRAVENTION; CONSENTS. Neither the execution and delivery of
any of the Transactional Agreements, nor the consummation or performance of any
of the Transactions, will directly or indirectly (with or without notice or
lapse of time):
(a) contravene, conflict with or result in a violation of, or give
any Governmental Body or other Person the right to challenge any of the
Transactions or to exercise any remedy or obtain any relief under, any Legal
Requirement or any Order to which the Purchaser, or any of the assets of any
member of the Purchaser, is subject;
(b) contravene, conflict with or result in a violation of any of
the terms or requirements of, or give any Governmental Body the right to revoke,
withdraw, suspend, cancel, terminate or modify, any Purchaser Governmental
Authorization that is held by the Purchaser or any employee of any member of the
Seller Group;
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(c) contravene, conflict with or result in a violation or breach
of, or result in a default under, any provision of any Purchaser Contract; or
(d) give any Person the right to (i) declare a default or exercise
any remedy under any Purchaser Contract, (ii) accelerate the maturity or
performance of any Purchaser Contract, or (iii) cancel, terminate or modify any
Purchaser Contract.
3.4 LEGAL PROCEEDINGS. There is no claim, action, suit, proceeding,
investigation or inquiry pending before any federal, state or other court or
governmental or administrative agency or, to Purchaser's Knowledge, threatened
against Purchaser or any of Purchaser's properties, assets, operations or
businesses that might prevent or delay the consummation of the transactions
contemplated hereby.
3.5 CAPITALIZATION. The authorized capital stock of the Purchaser,
immediately prior to the Closing, will consist of (i) twenty million
(20,000,000) shares of Common Stock, par value $.001 per share, of which one
million seven hundred fifty thousand and ten (1,750,010) are issued and
outstanding, and (ii) eight million five hundred thousand (8,500,000) shares of
Preferred Stock, all of which are designated Series A Preferred Stock and five
million eight hundred fifty-seven thousand thirty-two (5,857,032) of which are
issued and outstanding. All issued and outstanding shares of the Purchaser's
Common Stock and Preferred Stock (a) have been duly authorized and validly
issued, (b) are fully paid and nonassessable and (c) were issued in compliance
with all applicable state and federal laws concerning the issuance of
securities. The Shares, when issued, sold and delivered in accordance with the
terms of this Agreement, will be (a) duly authorized and validly issued, (b)
fully paid and nonassessable and (c) issued in compliance with all applicable
state and federal laws concerning the issuance of securities. Except for one
million seven hundred fifty thousand (1,750,000) shares of Common Stock reserved
for issuance pursuant to the Purchaser's 1999 Equity Incentive Plan, there are
no outstanding options, warrants, rights (including conversion or preemptive
rights and rights of first refusal), proxy or stockholder agreements, or
agreements of any kind for the purchase or acquisition from the Purchaser of any
of its securities. When issued in compliance with the provisions of this
Agreement, the ▇▇▇▇▇▇ ISP Shares will be validly issued, fully paid and
nonassessable and will be free of any liens or encumbrances.
4. CERTAIN COVENANTS OF SELLER
4.1 REQUIRED ACTIONS. Between the date of this Agreement and the
Closing Date, the Seller covenants that it will (and shall cause each member of
the Seller Group to), in the conduct of the business of the Seller and the
Seller Group, except as otherwise agreed by Purchaser in writing:
(a) ACCESS TO INFORMATION. Give to Purchaser and its counsel,
accountants, consultants and other representatives, at their sole expense and
risk, reasonable access, during normal business hours, to such of the
properties, books, accounts, contracts and records of the Seller Group, and
furnish or otherwise make available to Purchaser all such information concerning
the business and operations of the Seller Group as Purchaser may reasonably
request;
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(b) CONDUCT OF BUSINESS. Operate the business of the Seller and
the Seller Group only in the usual, regular and ordinary manner as such business
was conducted prior to the date hereof and, to the extent consistent with such
operation, use its best efforts until the Closing Date to (i) preserve and keep
intact the business and operations of the Seller and the Seller Group, (ii) keep
available the services of the employees and independent contractors and (iii)
preserve its relationships with customers, suppliers and others having business
dealings with the Seller and the Seller Group;
(c) MAINTENANCE OF PROPERTIES. Maintain the properties and assets
of the Seller and the Seller Group, whether owned or leased, in good repair,
order and condition, in accordance with the Seller's and the Seller Group's past
practices, reasonable wear and tear excepted;
(d) MAINTENANCE OF BOOKS AND RECORDS. Maintain the books and
records in the usual, regular and ordinary manner, on a basis consistent with
past practice;
(e) COMPLIANCE WITH APPLICABLE LAW. Comply in all material
respects with all laws applicable to the Seller and the Seller Group, their
respective properties and assets;
(f) PERFORMANCE OF OBLIGATIONS. Perform all the material
obligations of the Seller and the Seller Group in accordance with the past
practices of the Seller and the Seller Group;
(g) APPROVALS, CONSENTS. Use its best efforts to obtain in writing
as promptly as possible all approvals and consents required to be obtained by
the ACGL, Seller and the Seller Group, including without limitation, the
approval of Seller's shareholders, in order to effectuate the transactions
contemplated hereby and deliver to Purchaser copies of such approvals and
consents;
(h) NOTICE OF MATERIAL DAMAGE. Give to Purchaser prompt written
notice of any material damage by fire or other casualty upon the Seller and the
Seller Group, their respective properties or assets;
(i) ADVISE OF CHANGES. Advise Purchaser promptly in writing of any
fact that, if it had been known at the date of this Agreement, would have been
required to be set forth or disclosed in or pursuant to this Agreement, or which
would result in the breach in any material respect by the Seller of any of its
representations, warranties, covenants or agreements hereunder;
(j) UPDATE SCHEDULES. Promptly disclose to Purchaser any
information contained in the representations and warranties of the Seller
contained in Section 2 or in the Schedules to this Agreement which is no longer
complete or correct (including furnishing updated financial statements).
Provided that no such disclosure shall be deemed to modify, amend or supplement
the Seller's representations and warranties until the Closing, at which time if
the Purchaser determines to proceed with the Closing notwithstanding a
modification to the Schedules, Purchaser shall be deemed to have accepted such
Schedules and only the updated
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Schedules shall be considered for purposes of determining any indemnification
obligations following Closing.
(k) COMPLIANCE WITH AGREEMENT. Not undertake any course of action
inconsistent with satisfaction of the conditions applicable to it set forth in
this Agreement, and use all reasonable efforts to do all such acts and take all
such measures as may be reasonably necessary to comply with the representations,
agreements, conditions and other provisions of this Agreement.
4.2 PROHIBITED ACTIONS. Between the date of this Agreement and the
Closing Date, the Seller shall not, and shall cause each other member of the
Seller Group to not, except as otherwise agreed by Purchaser in writing:
(a) SALE OF ASSETS. Sell, transfer, assign, lease, encumber or
otherwise dispose of any of the assets or properties of the Seller or the Seller
Group other than in the ordinary course of business consistent with past
practices;
(b) SALE OF SHARES. Directly or indirectly sell or otherwise
transfer, or offer, agree or commit (in writing or otherwise) to sell or
otherwise transfer, any of the outstanding equity securities of any member of
the Seller Group. Further, no member of the Seller Group shall issue or sell, or
otherwise commit to issue or sell, any shares of capital stock or other
securities of any member of the Seller Group or any other rights convertible
into or exchangeable for shares of capital stock or other securities of any
member of the Seller Group.
(c) NO DIVIDENDS; DISTRIBUTIONS. Declare, accrue, set aside or pay
any dividend or make any other distribution in respect of any shares of capital
stock of any member of the Seller Group, or repurchase, redeem or otherwise
reacquire any shares of capital stock or other securities.
(d) BUSINESS CHANGES. Change in any material respect the character
of the business and operations of the Seller Group;
(e) INCURRENCE OF MATERIAL OBLIGATIONS. Incur any material fixed
or contingent obligation or enter into any material agreement, commitment or
other transaction or arrangement that is not in the ordinary course of business
consistent with past practices;
(f) INCURRENCE OF LIENS. Subject to lien, security interest or any
other Encumbrance, other than Encumbrances which do not materially detract from
the value of the property subject thereto or materially impair the operations of
the Seller Group, any of the assets or properties of the Seller Group;
(g) CHANGE IN EMPLOYEE COMPENSATION AND BENEFITS. Increase the
rate of compensation paid, or pay any bonus, to any employee of or consultant to
any member of the Seller Group, except for those increase or bonuses planned, in
the ordinary course of business consistent with past practices, or establish or
adopt any new pension or profit-sharing plan,
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deferred compensation agreement or employee benefit arrangement of any kind
whatsoever covering or affecting employees;
(h) PUBLICITY; ADVERTISEMENT. Except as required by law,
publicize, advertise or announce to any third party, except as required pursuant
to this Agreement to obtain the consent of such third party, the entering into
of this Agreement, the terms of this Agreement or the transactions contemplated
hereby;
(i) NO RELEASE. Except in the ordinary course of business
consistent with past practices, cancel, release or relinquish any material debts
of or claims against others held by any member of the Seller Group or waive any
material rights of any member of the Seller Group; and
4.3 NO TERMINATION OR MODIFICATION. Terminate or materially modify any
material lease, contract, governmental license, permit or other authorization or
agreement of any member of the Seller Group or by which any member of the Seller
Group is bound.
4.4 NO NEGOTIATION. During the Pre-Closing Period, Seller shall not,
directly or indirectly:
(a) solicit or encourage the initiation of any inquiry, proposal
or offer from any Person (other than Purchaser) relating to a possible sale of
the Business, any of the Purchased Assets or any of the stock or assets of any
member of the Seller Group;
(b) participate in any discussions or negotiations or enter into
any agreement with, or provide any non public information to, any Person (other
than Purchaser) relating to or in connection with a possible sale of the
Business, any of the Purchased Assets or any of the stock or assets of any
member of the Seller Group; or
(c) consider, entertain or accept any proposal or offer from any
Person (other than Purchaser) relating to a possible sale of the Business, any
of the Purchased Assets or any of the stock or assets of any member of the
Seller Group.
(d) Seller shall promptly notify Purchaser in writing of any
material inquiry, proposal or offer relating to a possible sale of the Business,
any of the Purchased Assets or any of the stock or assets of any member of the
Seller Group that is received by Seller or any member of the Seller Group (or
any of their respective Representatives) during the Pre-Closing Period.
5. CERTAIN COVENANTS
5.1 FURTHER ASSURANCES. Prior to and after the Closing Date, the Seller
and its respective affiliates shall, at the request of Purchaser, execute,
acknowledge and deliver to Purchaser, without further consideration, all such
further assignments, conveyances, endorsements, deeds, special powers of
attorney, consents and other documents, and take such other action, as Purchaser
may reasonably request to consummate the transactions contemplated
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by this Agreement. Additionally, Seller shall take such actions as may be
necessary to satisfy the condition set forth in Section 6.10.
5.2 ACCOUNTS RECEIVABLE PAYMENT. In the event that any Party hereto at
any time receives any funds from any third party that are properly payable to
any other Party hereto, the Party receiving such funds shall promptly remit such
funds to the Party entitled to such funds.
5.3 RESTRICTIONS ON TRANSFER. Seller agrees not to make any transfer or
disposition of all or any portion of the ▇▇▇▇▇▇ ISP Shares unless and until such
transferee shall have returned the ▇▇▇▇▇▇ ISP Investor Representation Letter
attached as Exhibit H.
5.4 BRIDGE LOAN AND VOTING AGREEMENT. ▇▇▇▇▇▇ shall provide bridge
financing in an amount not to exceed $300,000. As conditions to funding the
bridge financing, ACGL shall have: (i) obtained a voting agreement in the form
attached hereto as Exhibit D executed by Skymaster Investments Limited, The
▇▇▇▇▇▇ Group II, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, as Trustee of The ▇▇▇▇ 1993 Irrevocable Trust
and ▇▇▇▇▇▇ ▇.▇. ▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇, as co-trustees of the ▇▇▇▇▇▇ ▇▇▇▇ Family
Trust and each of their respective affiliates and (ii) a duly executed
promissory note.
5.5 SHUTDOWN OF DORMANT SUBSIDIARIES. Purchaser hereby agrees to
facilitate the termination, dissolution or strike-off of the Dormant
Subsidiaries.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser to consummate the Transactions are subject
to the satisfaction, at or prior to the Closing, of each of the following
conditions:
6.1 ACCURACY OF REPRESENTATIONS. Each of the representations and
warranties made by the Seller in this Agreement and in each of the other
agreements and instruments delivered to Purchaser in connection with the
Transactions shall have been accurate in all material respects as of the date of
this Agreement and shall be accurate in all material respects as of the Closing
Date as if made at the Closing Date.
6.2 PERFORMANCE OF COVENANTS. All of the covenants and obligations that
Seller is required to comply with or to perform at or prior to the Closing shall
have been complied with and performed in all respects.
6.3 AGREEMENTS AND DOCUMENTS. Purchaser shall have received the
following agreements and documents, each of which shall be in full force and
effect:
(a) the ▇▇▇▇ of Sale in the form attached as Exhibit E
transferring title to the Purchased Assets to Purchaser;
(b) such other documents evidencing the transfer of the Purchased
Assets to Purchaser as are reasonably requested by Purchaser;
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(c) evidence that any notices or filings required to have been
given to or made with Governmental Bodies in connection with the Transactions
have been given and made and that all Consents required to have been obtained in
connection with the Transactions have been obtained;
(d) a legal opinion of BVI counsel, counsel to Seller,
substantially in the form attached hereto as Exhibit F;
(e) the Escrow Agreement;
(f) such other documents as Purchaser may reasonably request in
good faith for the purpose of (i) evidencing the accuracy of any representation
or warranty made by Seller, (ii) evidencing the compliance by Seller with, or
the performance by Seller of, any covenant or obligation set forth in the
Agreement, (iii) evidencing the satisfaction of any condition set forth in this
Section 6 or (iv) otherwise facilitating the consummation or performance of any
of the Transactions;
6.4 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the
Transactions shall have been issued by any court of competent jurisdiction and
remain in effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Transactions that makes consummation of the Transactions
illegal.
6.5 NO LEGAL PROCEEDINGS. No Person shall have commenced or threatened
to commence any Legal Proceeding challenging or seeking the recovery of a
material amount of damages in connection with the Transactions or seeking to
prohibit or limit the exercise by Seller of any material right pertaining to its
ownership of the Purchased Assets.
6.6 SATISFACTORY COMPLETION OF PRE-ACQUISITION REVIEW. Purchaser shall
have satisfactorily completed its pre-acquisition review of the Business and the
conditions, assets, liabilities, operations, financial performance, net income
and prospects of each member of the Seller Group, and shall be satisfied with
the results of that investigation and review.
6.7 FINANCING. Purchaser shall have received, on terms that shall be
satisfactory to Purchaser in its sole discretion, the proceeds of an equity
financing of at least $6,677,000.00.
6.8 NO MATERIAL ADVERSE CHANGE. There shall have been no material
adverse change in the business, condition, assets, liabilities, operations,
financing performance, net income or prospects of Seller or the Seller Group,
since the date of this Agreement.
6.9 ACTIONS SATISFACTORY. All actions and proceedings taken in
connection with the Transactions, and all documents relating to the
Transactions, shall be reasonably satisfactory in form and substance to
Purchaser and its counsel.
6.10 RESOLUTION OF OBLIGATIONS TO ▇▇▇▇▇▇ ▇▇▇▇. Seller, ACGL and their
affiliates shall have received a release from ▇▇▇▇▇▇ ▇▇▇▇ in favor of Seller
Group to the reasonable
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satisfaction of the Purchaser of obligations of the Seller Group to ▇▇. ▇▇▇▇, if
any (the "▇▇▇▇ Release"); provided that, in the event such release cannot be
obtained, the Seller and Purchaser shall amend this Agreement to establish an
additional cash purchase price holdback in the amount not to exceed $200,000,
which holdback shall provide for release to Seller upon the earlier of (i)
receipt of such ▇▇▇▇ Release following closing or (ii) 1 year.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
The obligations of Seller to consummate the Transactions are subject to
the satisfaction, at or prior to the Closing, of the following conditions:
7.1 ACCURACY OF REPRESENTATIONS. Each of the representations and
warranties made by Purchaser in this Agreement shall have been accurate in all
material respects as of the date of this Agreement and shall be accurate in all
material respects as of the Closing Date as if made at the Closing Date.
7.2 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the
Transactions shall have been issued by any court of competent jurisdiction and
remain in effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Transactions that makes consummation of any of the
Transactions illegal.
7.3 AGREEMENTS AND DOCUMENTS. Seller shall have received the following
agreements and documents, each of which shall be in full force and effect:
(a) Assignment Agreement in the form attached as Exhibit J;
(b) the Escrow Agreement;
(c) a legal opinion of ▇▇▇▇▇▇ Godward LLP, counsel to Purchaser,
substantially in the form attached hereto as Exhibit G.
(d) such other documents as Seller may reasonably request in good
faith for the purpose of (i) evidencing the accuracy of any representation or
warranty made by Purchaser, (ii) evidencing the compliance by Purchaser with, or
the performance by Purchaser of, any covenant or obligation set forth in the
Agreement, or (iii) evidencing the satisfaction of any condition set forth in
this Section 7.
7.4 NO LEGAL PROCEEDINGS. No Person shall have commenced or threatened
to commence any Legal Proceeding challenging or seeking the recovery of a
material amount of damages in connection with the Transactions.
7.5 ACTIONS SATISFACTORY. All actions and proceedings taken in
connection with the Transactions, and all documents relating to the
Transactions, shall be reasonably satisfactory in
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form and substance to Seller and its counsel, provided that, such condition
shall be deemed to have been waived upon execution of the bridge loan promissory
note referenced in Section 5.4.
7.6 SHAREHOLDER APPROVAL. Holders of a majority of the outstanding
shares of ACGL shall have approved the general terms and conditions of this
Agreement and the transactions contemplated thereby; provided that,
notwithstanding the foregoing, such shareholders shall not be required to have
approved each and every term hereof or any amendments or modifications hereto
that are approved by the members of the board of directors not having an
interest in the Purchaser, including but not limited to, any amendments
necessary to effect the terms of Section 6.10.
8. TERMINATION
8.1 TERMINATION EVENTS. This Agreement may be terminated prior to the
Closing:
(a) by Purchaser at or after the Scheduled Closing Time if any
condition set forth in Section 6 has not been satisfied by the Scheduled Closing
Time;
(b) by Seller at or after the Scheduled Closing Time if any
condition set forth in Section 7 has not been satisfied by the Scheduled Closing
Time;
(c) by Purchaser if the Closing has not taken place on or before
March 1, 1999 (other than as a result of any failure on the part of Purchaser to
comply with or perform any covenant or obligation of Purchaser set forth in this
Agreement);
(d) by Seller if the Closing has not taken place on or before
March 1, 1999 (other than as a result of the failure on the part of Seller to
comply with or perform any covenant or obligation set forth in this Agreement);
or
(e) by the mutual consent of Purchaser and Seller.
8.2 TERMINATION PROCEDURES. If Purchaser wishes to terminate this
Agreement pursuant to Section 8.1(a) or Section 8.1(c), Purchaser shall deliver
to Seller a written notice stating that Purchaser is terminating this Agreement
and setting forth a brief description of the basis on which Purchaser is
terminating this Agreement. If Seller wishes to terminate this Agreement
pursuant to Section 8.1(b) or Section 8.1(d), Seller shall deliver to Purchaser
a written notice stating that Seller is terminating this Agreement and setting
forth a brief description of the basis on which Seller is terminating this
Agreement.
8.3 EFFECT OF TERMINATION. If this Agreement is terminated pursuant to
Section 8.1, all further obligations of the parties under this Agreement shall
terminate; provided, however, that neither Seller nor Purchaser shall be
relieved of any obligation or Liability arising from any prior breach by such
party of any provision of this Agreement. If this Agreement is terminated for
any reason pursuant to this Section 8, each Party shall return to the other
Party all documents and copies thereof which shall have been furnished to it by
such other Party or, with the
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agreement of the other Party, shall destroy all such documents and copies
thereof and certify in writing to the other Party any such destruction.
9. INDEMNIFICATION AND OTHER REMEDIES
9.1 SURVIVAL OF REPRESENTATIONS AND COVENANTS.
(a) The representations, warranties, covenants and obligations of
each party shall survive the Closing, to the extent provided in this Section
9.1(a). If the Seller or Purchaser (i) had actual knowledge on or prior to the
Closing that it was in material breach of a representation or warranty made by
it, and (ii) allowed the Closing to occur, then the indemnification set forth in
this Section 9 will not terminate as specified in the third sentence of this
Section 9.1(a), but shall survive and continue indefinitely. All other
representations and warranties (as well as covenants and obligations to be
performed prior to the Closing Date) of the parties shall terminate on the
earlier to occur of (i) six (6) months of the Closing Date and (ii) the
expiration of the applicable statute of limitation period or periods legally
applicable to them; provided, however, that if a Claim Notice relating to any
representation or warranty is given to the other party on or prior to the date
identified in clause (i) or (ii) above, as applicable, then, notwithstanding
anything to the contrary contained in this Section 9.1(a), the representations
or warranties shall not so expire, but rather shall remain in full force and
effect until such time as all claims that are based upon the same general set of
facts are fully and finally resolved, either by means of a written settlement
agreement executed on behalf of the Seller and Purchaser or by means of a final,
non-appealable judgment issued by a court of competent jurisdiction.
(b) The representations, warranties, covenants and obligations of
the respective parties, and the rights and remedies that may be exercised by any
of them, shall not be limited or otherwise affected by or as a result of any
information furnished to, or any investigation made by or knowledge of, any of
the parties or any of their Representatives. Any investigation by such persons
shall be for their own protection only and shall not affect or impair any right
or remedy hereunder.
(c) For purposes of this Agreement, each statement or other item
of information set forth in the Disclosure Schedules shall be deemed to be a
representation and warranty of the Seller.
(d) For purposes of this Agreement, a "Claim Notice" relating to a
particular claim for indemnification shall be deemed to have been given if any
applicable indemnitee, acting in good faith, delivers to the other party a
written notice stating that such applicable indemnitee believes that it is
entitled to indemnification hereunder and setting forth (i) a brief description
of the circumstances supporting such Indemnitee's belief, and (ii) a
non-binding, preliminary estimate of the aggregate dollar amount of the Damages
that have arisen and may arise as a direct or indirect result of such possible
claim.
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9.2 INDEMNIFICATION BY THE SELLER.
(a) The Seller shall hold harmless and indemnify the Purchaser
Indemnitees, from and against, and shall compensate and reimburse each of the
Purchaser Indemnitees for, any Damages which are suffered or incurred by any of
the Purchaser Indemnitees or to which any of the Purchaser Indemnitees may
otherwise become subject at any time (regardless of whether or not such Damages
relate to any third party claim) and which arise from or as a result of, or are
directly or indirectly connected with:
(i) any Breach of any representation or warranty made by the
Seller in this Agreement or any of the other Transactional Agreements;
(ii) any Breach of any covenant or obligation of the Seller
contained in this Agreement or in any of the other Transactional Agreements;
(iii) any Liability of Seller;
(iv) any Liability to which Purchaser or any other Purchaser
Indemnitees may become subject and that arises directly or indirectly from or
related directly or indirectly to any services performed on or prior to the
Closing Date by or on behalf of Seller or any member of the Seller Group or the
operation by Seller or any member of the Seller Group of its business on or
prior to the Closing Date; or
(v) any Legal Proceeding relating directly or indirectly to
any Breach, alleged Breach, Liability or matter of the type referred to in
clauses (i) - (iv) above (including any Legal Proceeding commenced by any
Purchaser Indemnitee for the purpose of enforcing any of its rights under this
Section 9).
(b) The Seller shall not be required to make any indemnification
payment pursuant to this Section 9 unless a Claim Notice is delivered prior to
expiration of the applicable survival period set forth in Section 9.1(a).
(c) Subject to Section 9.2(a), the Seller shall not be required to
make any indemnification payment pursuant to Section 9, for any Breach of any of
their representations and warranties until such time as the total amount of all
Damages (including the Damages arising from such Breach and all other Damages
arising from any other Breaches of any representations or warranties) that have
been directly or indirectly suffered or incurred by any one or more of the
Purchaser Indemnitees or to which any one or more of the Purchaser Indemnitees
has or have otherwise become subject, exceeds $50,000 in the aggregate.
(d) The limitation on the indemnification obligations set forth in
Section 9.2(e) shall not apply to any Breach of any representation or warranty
made by the Seller or of any covenant or obligation of the Seller arising
directly or indirectly from any circumstance of which the Seller had actual
knowledge on or prior to the Closing Date.
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(e) The aggregate liability of Seller under this Section 9.2 shall
in no event exceed the amount of the Holdback Funds and the Holdback Funds shall
be held as collateral for the Seller's indemnification obligations under this
Section 9. Purchaser agrees that it shall seek any indemnification obligation
owed to it hereunder solely out of the Holdback Funds.
9.3 INDEMNIFICATION BY THE PURCHASER.
(a) Purchaser shall hold harmless and indemnify the Seller, from
and against, and shall compensate and reimburse each of the Seller for, any
Damages which are suffered or incurred by the Seller or to which the Seller may
otherwise become subject at any time (regardless of whether or not such Damages
relate to any third party claim) and which arise from or as a result of, or are
directly or indirectly connected with:
(i) any Breach of any representation or warranty made by the
Purchaser in this Agreement or any of the other Transactional Agreements; or
(ii) any Breach of any covenant or obligation of the
Purchaser contained in this Agreement or in any of the other Transactional
Agreements.
The Purchaser shall not be required to make any
indemnification payment pursuant to this Section 9.3(a) unless a Claim Notice is
delivered prior to expiration of the applicable survival period set forth in
Section 9.1(a).
(b) Purchaser shall hold harmless and indemnify the Seller or
ACGL, from and against, and shall compensate and reimburse each of the Seller
and ACGL for, any liability or Damages which are suffered or incurred by the
Seller or ACGL or to which the Seller or ACGL may otherwise become subject at
any time (regardless of whether or not such liability or Damages relate to a
third party claim) and that arises directly or indirectly from, or is related
directly or indirectly to, the operation by Purchaser and its subsidiaries of
their respective businesses on or after the Closing Date; including but not
limited to the performance of any services by the Purchaser and its
subsidiaries. Notwithstanding anything to the contrary, this covenant and the
related right to indemnification shall survive and continue indefinitely.
(c) The limitation on the indemnification obligations set forth in
Section 9.3(d) shall not apply to any Breach of any representation or warranty
made by the Purchaser or of any covenant or obligation of the Seller arising
directly or indirectly from any circumstance of which the Purchaser had actual
knowledge on or prior to the Closing Date.
(d) The aggregate liability of Purchaser under this Section 9.3,
other than Section 9.3(b), shall in no event exceed $220,000.
10. MISCELLANEOUS PROVISIONS
10.1 CERTAIN DISCLAIMERS. Seller acknowledges that, notwithstanding
anything to the contrary contained in this Agreement, Purchaser has not made or
provided, and Purchaser is not making or providing, any representation,
warranty, covenant or assurance of any nature (implied
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or otherwise) regarding the manner in which any of the Transactions will be
treated or characterized for Tax purposes, or the Tax consequences of any of the
Transactions to Seller.
10.2 FEES AND EXPENSES.
(a) Subject to the provisions of Section 9 (including the
indemnification and other obligations of Seller thereunder) each party shall
bear and pay all fees, costs and expenses (including all legal fees and expenses
payable to counsel to Seller) that have been incurred or that are in the future
incurred by, on behalf of such party in connection with:
(i) the negotiation, preparation and review of any letter of
intent or similar document relating to any of the Transactions;
(ii) the negotiation, preparation and review of this
Agreement (including the Disclosure Schedule), the other Transactional
Agreements and all bills of sale, assignments, certificates, opinions and other
instruments and documents delivered or to be delivered in connection with the
Transactions;
(iii) the preparation and submission of any filing or notice
required to be made or given in connection with any of the Transactions, and the
obtaining of any Consent required to be obtained in connection with any of the
Transactions; and
(iv) the consummation and performance of the Transactions.
10.3 ATTORNEYS' FEES. If any legal action or other Legal Proceeding
relating to any of the Transactional Agreements or the enforcement of any
provision of any of the Transactional Agreements is brought against any party to
this Agreement, the prevailing party shall be entitled to recover reasonable
attorneys' fees, costs and disbursements (in addition to any other relief to
which the prevailing party may be entitled).
10.4 NOTICES. Any notice or other communication required or permitted
to be delivered to any party under this Agreement shall be in writing and shall
be deemed properly delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by facsimile) to the
address or facsimile number set forth beneath the name of such party or the
signature page hereto (or to such other address or facsimile number as such
party shall have specified in a written notice given to the other parties
hereto).
10.5 TIME OF THE ESSENCE. Time is of the essence with respect to this
Agreement.
10.6 HEADINGS. The underlined headings contained in this Agreement are
for convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
10.7 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which, when
taken together, shall constitute one agreement.
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10.8 GOVERNING LAW AND CHOICE OF FORUM. The validity and interpretation
of this Agreement shall be construed in accordance with, and governed by the
internal laws of the State of California, without regard to conflicts of law
principles. All claims, disputes or causes of action relating to or arising out
of this Agreement shall be brought, heard and resolved solely and exclusively by
and in a federal or state court situated in Santa ▇▇▇▇▇ County, California. Each
of the parties hereto agrees to submit to the jurisdiction of such courts shall
be proper for all purposes of this Agreement.
10.9 SUCCESSORS AND ASSIGNS; PARTIES IN INTEREST. This Agreement shall
be binding upon Seller and Purchaser and their respective successors and
assigns. The Seller shall not be permitted to assign any rights or delegate any
obligations under this Agreement without Purchaser's prior written consent,
which will not be unreasonably withheld. Except for the provisions of Section 9,
none of the provisions of this Agreement is intended to provide any rights or
remedies to any Person other than the parties to this Agreement and their
respective successors and assigns, except with respect to the payment of the
consideration for the purchase of assets described herein.
10.10 WAIVER.
(a) No failure on the part of any Person to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of any
Person in exercising any power, right, privilege or remedy under this Agreement,
shall operate as a waiver of such power, right, privilege or remedy; and no
single or partial exercise of any such power, right, privilege or remedy shall
preclude any other or further exercise thereof or of any other power, right,
privilege or remedy.
(b) No Person shall be deemed to have waived any claim arising out
of this Agreement, or any power, right, privilege or remedy under this
Agreement, unless the waiver of such claim, power, right, privilege or remedy is
expressly set forth in a written instrument duly executed and delivered on
behalf of such Person; and any such waiver shall not be applicable or have any
effect except in the specific instance in which it is given.
10.11 AMENDMENTS. This Agreement may be amended, modified, altered or
supplemented only by means of a written instrument duly executed and delivered
on behalf of the Purchaser and the Seller.
10.12 SEVERABILITY. In the event that any provision of this Agreement,
or the application of any such provision to any Person or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of such provision
to Persons or circumstances other than those as to which it is determined to be
invalid, unlawful, void or unenforceable, shall not be impaired or otherwise
affected and shall continue to be valid and enforceable to the fullest extent
permitted by law.
10.13 ENTIRE AGREEMENT. The Transactional Agreements set forth the
entire understanding of the parties relating to the subject matter thereof and
supersede all prior
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agreements and understandings among or between any of the parties relating to
the subject matter thereof except for the Bridge Loan entered into between
Purchaser and Asia Online Ltd.
10.14 CONSTRUCTION.
(a) For purposes of this Agreement, whenever the context requires:
the singular number shall include the plural, and vice versa; the masculine
gender shall include the feminine and neuter genders; the feminine gender shall
include the masculine and neuter genders; and the neuter gender shall include
the masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
be applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "without
limitation."
(d) Except as otherwise indicated, all references in this
Agreement to "Sections" are intended to refer to Sections of this Agreement.
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37
IN WITNESS WHEREOF, the parties to this Agreement have caused this
Agreement to be executed and delivered as of February 10, 1999.
ACG INC.,
a British Virgin Islands corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------------------
Title: President & CEO
------------------------------------------
Address: ▇▇/▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇
▇▇▇-▇▇▇▇-▇▇▇▇
▇▇▇-▇▇▇-▇▇▇▇ (fax)
with a copy to:
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
Paul, Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
▇▇▇-▇▇▇-▇▇▇▇
▇▇▇-▇▇▇-▇▇▇▇ (fax)
▇▇▇▇▇▇ ISP, INC.
a Delaware corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
---------------------------------------------
Title: President
------------------------------------------
Address:
------------------------------------------
------------------------------------------
------------------------------------------
31
38
With a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
▇▇▇▇▇▇ Godward LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ (fax)
32
39
EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
AGREEMENT. "Agreement" shall mean the Asset Purchase Agreement to which
this Exhibit A is attached, as it may be amended from time to time.
BREACH. There shall be deemed to be a "Breach" of a representation,
warranty, covenant, obligation or other provision if there is or has been (a)
any inaccuracy in or breach of, or any failure to comply with or perform, such
representation, warranty, covenant, obligation or other provision, or (b) any
claim (by any Person) or other circumstance that is inconsistent with such
representation, warranty, covenant, obligation or other provision; and the term
"Breach" shall be deemed to refer to any such inaccuracy, breach, failure, claim
or circumstance.
BUSINESS. "Business" shall mean the internet access and associated
services business and operations conducted by the Seller Group.
CODE. "Code" shall mean the Internal Revenue Code of 1986, as amended.
▇▇▇▇▇▇ ISP SHARES. "▇▇▇▇▇▇ ISP Shares" shall have the meaning given to
such term in Section 1.2(c).
CONSENT. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental Authorization).
CONTRACT. "Contract" shall mean any written or oral agreement,
contract, subcontract, lease, understanding, arrangement, instrument, note,
warranty, insurance policy, benefit plan or legally binding commitment or
undertaking of any nature.
DAMAGES. "Damages" shall include any loss, damage, injury, decline
value, lost opportunity, Liability, claim, demand, settlement, judgment, award,
fine, penalty, Tax, fee (including any legal fee, expert fee, accounting fee or
advisory fee), charge, cost (including any cost of investigation) or expense of
any nature but not including consequential or incidental damages.
DISCLOSURE SCHEDULE. "Disclosure Schedule" shall mean the schedule
(dated as of the date of the Agreement) delivered to Purchaser on behalf of the
Seller Group.
DORMANT SUBSIDIARIES. "Dormant Subsidiaries" shall mean Worldlink
Communications Limited (HK), Evolution Limited (HK), Information Resources Group
Limited (HK), HK Internet Users Association Ltd. (HK) and Asia Communications
Global Ltd. (HK)
ENCUMBRANCE. "Encumbrance" shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, claim, infringement,
interference, option, right of first refusal, preemptive right, community
property interest or restriction of any nature (including any
40
restriction on the voting of any security, any restriction on the transfer of
any security or other asset, any restriction on the receipt of any income
derived from any asset, any restriction on the use of any asset and any
restriction on the possession, exercise or transfer of any other attribute of
ownership of any asset).
ENTITY. "Entity" shall mean any corporation (including any non profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any limited
liability company or joint stock company), firm or other enterprise,
association, organization or entity.
ENVIRONMENTAL CLAIM. Environmental Claim means any notice (written or
oral) by any Person or Entity alleging potential Liability arising out of, based
on, or resulting from (i) the presence or release into the environment of any
Material of Environmental Concern at any location, whether or not owned by any
member of the Seller Group, or (ii) circumstances forming the basis of any
violation, or alleged violation of any Environmental Law.
ENVIRONMENTAL LAWS. Environmental Laws shall mean all existing or past
statutes, regulations, ordinances, orders, actions, policies and common law of
the jurisdiction in which the Person in connection with which the term is used
is organized or operates, relating to pollution or protection of human health or
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws and regulations relating to emissions, discharges, disposal, releases or
threatened releases of Materials of Environmental Concern, or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Matters of Environmental Concern.
FINANCIAL STATEMENTS. "Financial Statements" shall have the meaning
given to such term in Section 2.4.
GAAP. "GAAP" shall mean generally accepted accounting principles in
Hong Kong.
GOVERNMENTAL AUTHORIZATION. "Governmental Authorization" shall mean
any: (a) permit, license, certificate or authorization issued, granted, given or
otherwise made available by or under the authority of any Governmental Body or
pursuant to any Legal Requirement; or (b) right under any Contract with any
Governmental Body.
GOVERNMENTAL BODY. "Governmental Body" shall mean any: (a) nation,
principality, state, commonwealth, province, territory, county, municipality,
district or other jurisdiction of any nature; (b) federal, state, local,
municipal, foreign or other government; (c) governmental or quasi-governmental
authority of any nature (including any governmental division, subdivision,
department, agency, bureau, branch, office, commission, council, board,
instrumentality, officer, official, representative, organization, unit, body or
Entity and any court or other tribunal); (d) multi-national organization or
body; or (e) individual, Entity or body exercising, or entitled to exercise, any
executive, legislative, judicial, administrative, regulatory, police, military
or taxing authority or power of any nature.
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HOLDBACK FUNDS. "Holdback Funds" shall have the meaning give to such
term in Section 1.2(b) of the Agreement.
KNOWLEDGE. An individual shall be deemed to have "Knowledge" of a
particular fact or other matter if:
(a) such individual is actually aware of such fact or other
matter; or
(b) a prudent individual could be expected to discuss or otherwise
become aware of such fact or other matter in the course of conducting a
diligent and comprehensive investigation concerning the truth or
existence of such fact or other matter.
Seller shall be deemed to have Knowledge of a particular fact or
other matter if any officer of Seller (or any other officer of the Seller Group)
has Knowledge of such fact or other matter.
LEGAL PROCEEDING. "Legal Proceeding" shall mean any action, suit,
litigation, arbitration, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding), prosecution, contest,
hearing, inquiry, audit, examination or investigation commenced, brought,
conducted or heard by or before, or otherwise involving, any court or other
Governmental Body or any arbitrator or arbitration panel.
LEGAL REQUIREMENT. "Legal Requirement" shall mean any federal, state,
local or municipal law, statute, constitution, rule, regulation, ruling or
requirement issued, enacted, adopted, promulgated, implemented or otherwise put
into effect by or under the authority of any Governmental Body.
LIABILITY. "Liability" shall mean any debt, obligation, duty or
liability of any nature (including any unknown, undisclosed, unmatured,
unaccrued, unasserted, contingent, indirect, conditional, implied, vicarious,
derivative, joint, several or secondary liability), regardless of whether such
debt, obligation, duty or liability would be required to be disclosed on a
balance sheet prepared in accordance with generally accepted accounting
principles and regardless of whether such debt, obligation, duty or liability is
immediately due and payable.
MATERIAL OF ENVIRONMENTAL CONCERN. "Material of Environmental Concern"
shall mean any substance: (i) the presence of which requires or may require
investigation or remediation of any kind under any statute, regulation,
ordinance, order, action or policy of the jurisdiction in which the Person in
connection with which the term is used is organized or operates; or (ii) which
is or becomes defined as "hazardous waste," "hazardous substance," pollutant or
contaminant under any such statute, regulation, rule or ordinance or amendments
thereto.
ORDER. "Order" shall mean any: (a) order, judgment, injunction, edict,
decree, ruling, decision, opinion, verdict, sentence, subpoena, writ or award
issued, made, entered, rendered or otherwise put into effect by or under the
authority of any court, administrative agency or other Governmental Body or any
arbitrator or arbitration panel; or (b) Contract with any Governmental Body
entered into in connection with any Proceeding.
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ORDINARY COURSE OF BUSINESS. An action taken by or on behalf of any
member of the Seller Group shall not be deemed to have been taken in the
"Ordinary Course of Business" unless:
(a) such action is recurring in nature, is consistent with the
past practices of such member and is taken in the ordinary course of the
normal day-to-day operations of such member;
(b) such action is taken in accordance with sound and prudent
business practices;
(c) such action is not required to be authorized by the
shareholders of the member of the Seller Group, the board of directors
of such member or any committee of the board of directors of such member
and does not require any other separate or special authorization of any
nature.
PERSON. "Person" shall mean any individual, Entity or Governmental
Body.
PROPRIETARY ASSET. "Proprietary Asset" shall mean any patent, patent
application, trademark (whether registered or unregistered and whether or not
relating to a published work), trademark application, trade name, fictitious
business name, service ▇▇▇▇ (whether registered or unregistered), service ▇▇▇▇
application, copyright (whether registered or unregistered), copyright
application, maskwork, maskwork application, trade secret, know-how, customer
list, franchise, system, computer software, invention, design, blueprint,
engineering drawing, proprietary product, technology, proprietary right or other
intellectual property right or intangible asset.
PURCHASED ASSETS. "Purchased Assets" shall have the meaning set forth
on Exhibit B hereto.
PURCHASER INDEMNITEES. "Purchaser Indemnitees" shall mean the following
Persons: (a) Purchaser; (b) Purchaser's current and future affiliates; (c) the
respective representatives of the Persons referred to in clauses "(a)" and "(b)"
above; and (d) the respective successors and assigns of the Persons referred to
in clauses "(a)", "(b)" and "(c)" above; provided, however, that in no event
shall Seller, any other member of the Seller Group or Affiliate thereof be
deemed to be a "Purchaser Indemnitee."
REPRESENTATIVES. "Representatives" shall mean officers, directors,
employees, agents, attorneys, accountants, advisors and representatives.
SECURITIES ACT. "Securities Act" shall mean the Securities Act of 1933,
as amended, and the rules and regulations promulgated thereunder.
SELLER CONTRACT. "Seller Contract" shall mean any Contract relating to
the Business: (1) to which any member of the Seller Group is a party; (2) by
which any member of the Seller Group or any of the Purchased Assets is or may
become bound or under which any member of
43
the Seller Group has, or may become subject to, any obligation; or (3) under
which any member of the Seller Group has or may acquire any right or interest.
SELLER GROUP. "Seller Group" means the group of companies consisting of
the Seller and each other company owned directly or indirectly, through one or
more subsidiaries by the Seller, as set forth in Part 2.1 of the Disclosure
Schedule, except for the Dormant Subsidiaries.
SELLER PROPRIETARY ASSET. "Seller Proprietary Asset" shall mean any
Proprietary Asset owned by or licensed to any member of the Seller Group, or
otherwise used by any member of the Seller Group, with respect to the Business.
TRANSACTIONAL AGREEMENTS. "Transactional Agreements" shall mean: (a)
the Agreement; (b) the ▇▇▇▇ of Sale; (c) the Escrow Agreement; and (d) the
Closing Certificate.
TRANSACTIONS. "Transactions" shall mean (a) the execution and delivery
of the respective Transactional Agreements, and (b) all of the transactions
contemplated by the respective Transactional Agreements, including: (i) the sale
of the Purchased Assets by the Seller to the Purchaser in accordance with the
Agreement; and (ii) the performance by the Seller, the other members of the
Seller Group and the Purchaser of their respective obligations under the
Transactional Agreements, and the exercise by the Seller, the other members of
the Seller Group and the Purchaser of their respective rights under the
Transactional Agreements.
UNAUDITED INTERIM BALANCE SHEET. "Unaudited Interim Balance Sheet"
shall have the meaning given to such term in Section 2.4.
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EXHIBIT B
PURCHASED ASSETS
Purchased Assets shall mean and include: (i) all of the properties, rights,
interests and other tangible and intangible assets of Seller (wherever located
and whether or not required to be reflected on a balance sheet prepared in
accordance with GAAP), including any assets acquired by Seller during the
Pre-Closing Period; and (ii) any other assets that are owned by Seller and that
are needed for the conduct of, or are useful in connection with, the business of
Seller and the Seller Group; provided, however, that the Purchased Assets shall
not include any Excluded Assets. Without limiting the generality of the
foregoing, the Purchased Assets shall include:
(1) all accounts receivable, notes receivable (including rights to
any intercompany loans or similar obligations between the Seller and
ACGL on one side and the Seller Group on the other) and other
receivables of Seller (including all accounts receivable identified in
Part 2.8 of the Disclosure Schedule and all accounts receivable of
Seller that have arisen since December 31, 1998);
(2) all work-in-progress of Seller, and all rights to collect from
customers (and to retain) all fees and other amounts payable, or that
may become payable, to Seller with respect to services performed on
behalf of Seller on or prior to the Closing Date;
(3) all equipment, materials, prototypes, tools, supplies,
vehicles, furniture, fixtures, improvements and other tangible assets of
Seller (including the tangible assets identified in Part 2.11 of the
Disclosure Schedule);
(4) all advertising and promotional materials possessed by Seller;
(5) all Proprietary Assets and goodwill of Seller and the
Proprietary Assets identified in Part 2.13 of the Disclosure Schedule;
(6) all rights of Seller under the Seller Contracts (including the
Seller Contracts identified in Part 2.14 of the Disclosure Schedule);
(7) all Governmental Authorizations held by Seller (including the
Governmental Authorizations identified in Part 2.17 of the Disclosure
Schedule);
(8) all claims (including claims for past infringement of
Proprietary Assets) and causes of action of Seller against other Persons
(regardless of whether or not such claims and causes of action have been
asserted by Seller), and all rights of indemnity, warranty rights,
rights of contribution, rights to refunds, rights of reimbursement and
other rights of recovery possessed by Seller (regardless of whether such
rights are currently exercisable);
(9) all books, records, files and data of Seller; and
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(10) 100% of the shares of capital stock of ACG International
Inc., a British Virgin Islands corporation, ACG Resources Inc., a
British Virgin Island corporation, and ACG China Inc., a British Virgin
Islands corporation.
EXCLUDED ASSETS shall mean the consideration paid to Seller
pursuant to this Agreement.