Execution Copy
INVESTMENT AGREEMENT
By and Among
Hanaro Telecom, Inc.
AIF II NT, Ltd.
AIG Asian Opportunity Fund L. P.
Newbridge Asia HT, L.P.
and
EACH OF THE OTHER INVESTORS NAMED ON SCHEDULE I
Dated as of September 9, 2003
ARTICLE I DEFINITIONS
1.1 Certain Definitions.....................................................1
1.2 Certain Rules of Construction..........................................15
Article II
ISSUANCE AND PURCHASE OF INVESTMENT SHARES
2.1 Closing Date Transactions..............................................16
ARTICLE III
CONDITIONS
3.1 Conditions of the Investors............................................17
3.2 Conditions of the Company..............................................22
3.3 Waiver of Closing Conditions...........................................22
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
4.1 Certain Representations and Warranties Regarding the Transactions......23
4.2 Organization, Qualification, and Corporate Power.......................26
4.3 Capitalization.........................................................26
4.4 Investment Shares......................................................27
4.5 Indebtedness...........................................................27
4.6 Subsidiaries...........................................................27
4.7 Corporate Records......................................................27
4.8 Financial Statements...................................................28
4.9 Company Reports........................................................29
4.10 Events Subsequent to Most Recent Fiscal Period End.....................29
4.11 Undisclosed Liabilities................................................32
4.12 Legal Compliance; Corporate Controls; No Breach........................32
4.13 Tax Matters............................................................32
4.14 Real Property; Environmental Matters...................................33
4.15 Intellectual Property..................................................35
4.16 Licenses; Requirements of Law..........................................37
4.17 Title to Property......................................................37
4.18 Insurance..............................................................38
4.19 Absence of Certain Interests of Affiliated Persons.....................38
4.20 Contracts..............................................................38
4.21 Litigation.............................................................40
4.22 Employees..............................................................40
4.23 Employee Benefit Matters...............................................42
4.24 Guaranties; Related Person Liabilities.................................44
4.25 Availability of Documents..............................................44
4.26 Restrictions...........................................................44
4.27 Dividends; Stock Repurchases, Etc......................................44
4.28 Key Employees..........................................................44
4.29 Officer Terms..........................................................44
4.30 Board of Directors.....................................................45
4.31 Suppliers..............................................................45
4.33 Disclosure.............................................................45
4.34 Business Plan..........................................................46
4.35 M-Commerce.............................................................46
4.36 Thrunet Investment.....................................................46
4.37 Dreamline..............................................................46
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF EACH INVESTOR
5.1 Organization...........................................................47
5.2 Power..................................................................47
5.3 Execution and Delivery; Authorization..................................47
ARTICLE VI
GOVERNANCE
6.1 Board Vacancies........................................................47
6.2 Representative Director................................................47
6.3 Chief Financial Officer................................................47
6.4 Outside Directors Nominating Committee.................................48
6.5 Director and Officer Indemnification...................................48
6.6 Continuing Veto Rights.................................................48
6.7 Rights to Information..................................................48
6.8 Management Rights Agreements...........................................48
ARTICLE VII
COVENANTS
7.1 Conduct of Business....................................................48
7.2 Shareholders' and Board of Directors' Meetings.........................51
7.3 Regulatory Payments....................................................51
7.4 Due Diligence..........................................................52
7.5 Reasonable Best Efforts................................................52
7.6 Access; Delivery of Financial Statements; Company Reports;
Shareholder Registry...................................................52
7.7 Publicity..............................................................53
7.8 Exclusivity............................................................53
7.9 Disclosure Schedule Update.............................................53
7.10 Notifications..........................................................54
7.11 Financing and Refinancing..............................................54
7.12 Maintenance of Existing Service Contracts..............................54
7.13 Use of Proceeds........................................................54
7.14 Employees..............................................................54
7.15 Nominees...............................................................54
7.16 Outside Director Candidate Nominating Committee Rules..................54
ARTICLE VIII
INDEMNIFICATION
8.1 Survival of Representations and Warranties; Qualifications.............55
8.2 Indemnification Provisions for Benefit of the Investors................55
8.3 Matters Involving Third Parties........................................57
8.4 Characterization as Price Adjustment...................................58
8.5 Cooperation on Tax Matters.............................................58
ARTICLE IX
TERMINATION
9.1 Termination of Agreement...............................................59
9.2 Effect of Termination..................................................59
ARTICLE X
MISCELLANEOUS
10.1 Investors' Representatives.............................................60
10.2 No Third Party Beneficiaries...........................................60
10.3 Entire Agreement.......................................................60
10.4 Succession and Assignment..............................................60
10.5 Counterparts...........................................................61
10.6 Notices................................................................61
10.7 Governing Law; Consent to Jurisdiction.................................62
10.8 Waiver of Jury Trial...................................................64
10.9 Amendments and Waivers.................................................64
10.10 Severability...........................................................64
10.11 Specific Performance...................................................65
10.12 Incorporation of Exhibits and Schedules................................65
SCHEDULES Item No
--------- -------
Schedule I List of Investors............................................1
Schedule 2.1(a) Hanaro Account Information
Schedule 3.1(m) Related Person Liabilities
Schedule 4.34 2003 Business Plan
EXHIBITS
--------
Exhibit A Form of Amended and Restated Articles of Incorporation......2
Exhibit B Company Disclosure Schedule.................................3
Exhibit C Form of Investors' Rights Agreement.........................4
Exhibit D Form of Non-Solicitation Agreement..........................5
Exhibit E-1 Form of Legal Opinion of Xxxxxxxx Chance....................6
Exhibit E-2 Form of Legal Opinion of Shin & Xxx.........................7
Exhibit F Shareholder Resolutions.....................................8
Exhibit G Board Resolutions...........................................9
Exhibit H Form of Management Rights Agreement.........................10
Exhibit I Agenda for Extraordinary General Shareholders' Meeting......11
Exhibit J Agenda for First Board Meeting .............................12
Exhibit K Agenda for Second Board Meeting.............................13
Exhibit L Agenda for Third Board Meeting..............................14
Exhibit M Outside Director Candidate Nominating Committee Rules.......15
ANNEX
Annex A-1 List of Key Employees ......................................16
Annex A-2 List of Key Employees entering into Non-Solicitation
Agreements..................................................17
INVESTMENT AGREEMENT
--------------------
INVESTMENT AGREEMENT, dated as of September 9, 2003, by and among
Hanaro Telecom, Inc., a chusik-hoesa duly organized and existing under the Laws
of Korea ("Hanaro" or the "Company"), AIF II NT, Ltd., a company duly organized
and existing under the Laws of Labuan on behalf of an entity or entities to be
formed for the purposes of entering into the Transactions (as defined herein)
("AIG AIF Sub"), AIG Asian Opportunity Fund L.P., a limited partnership duly
organized and existing under the Laws of the Cayman Islands on behalf of an
entity or entities to be formed for the purposes of entering into the
Transactions ("AOF"), and together with AIG AIF Sub, acting jointly, "AIG
Sponsor"), Newbridge Asia HT, L.P., an exempted limited partnership duly
organized and existing under the Laws of the Cayman Islands on behalf of an
entity or entities to be formed for the purposes of entering into the
Transactions ("Newbridge Sub", and together with AIG Sponsor, the "Sponsors")
and the investors named on Schedule I hereto (as such Schedule is amended from
time to time prior to the Closing Date by the Sponsors) that execute a signature
page hereto (each of AIG AIF Sub, AOF and Newbridge Sub and each such investor,
an "Investor" and collectively, the "Investors"). Hanaro and each Investor may
hereinafter be referred to from time to time as a "party" in their individual
capacities and as "parties" collectively.
WHEREAS, the Company and each Investor has determined to enter into
this Agreement pursuant to which the Investors have agreed to purchase from the
Company, and the Company has agreed to issue and sell to the Investors an
aggregate 182,812,500 shares of the common stock of the Company, par value Won
5,000 per share ("Common Stock") at the purchase price of Won 3,200 per share
having an aggregate value of Won 585,000 million; and
WHEREAS, the Company and the Investors desire to make certain
representations, warranties, covenants and agreements in connection with the
transactions contemplated by this Agreement;
NOW THEREFORE, in consideration of the representations, warranties, and
covenants herein contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Certain Definitions. As used in this Agreement, the following
capitalized terms shall have the following meanings:
"Active Subscribers" means, at any date, subscribers of the Company's
broadband (including ADSL, VDSL, cable modem, LMDS and wireless LAN), telephone
and leased line services that are currently being provided such services and are
current or not delinquent for more than one (1) three-month billing cycle in
their account with the Company.
"Affiliate" of any Person means any other Person that directly, or
indirectly through one or more intermediaries, Controls, is Controlled by, or is
under common Control with, such first Person.
"Agreement" means this Investment Agreement, including all Exhibits and
Schedules hereto, as the same may be amended from time to time in accordance
with the provisions hereof.
"AIG AIF Sub" has the meaning set forth in the preamble.
"AIG Sponsor" has the meaning set forth in the preamble.
"Amended and Restated Articles of Incorporation" means the articles of
incorporation of the Company as amended at or prior to the Extraordinary General
Shareholders' Meeting and in the form set forth as Exhibit A hereto.
"AOF" has meaning set forth in the preamble.
"Articles of Incorporation" means the articles of incorporation of the
Company, as amended from time to time.
"Assets" means, with respect to any Person, all properties and assets,
real and personal, tangible and intangible, of every type and description,
whether owned or leased or otherwise possessed, used, held for use or usable in
such Person's business, including contract rights, Licenses, Intangible Property
and, in the case of Company Parties, the Company Contracts.
"Audited Financial Statements" means (i) the audited consolidated
balance sheets and income statements, and statements of shareholders' equity and
cash flows, including the notes thereto, as of and for the years ended December
31, 2000, 2001 and 2002 for the Company (together with its Subsidiaries other
than Dreamline Corporation and Hanaro Dream Co., Ltd. with respect to the
audited consolidated income statements for the year ended December 31, 2001 and
2002), and (ii) the audited consolidated income statements of Dreamline
Corporation (together with Hanaro Dream Co., Ltd.) for the year ended December
31, 2001 and 2002.
"August 5th Extraordinary General Shareholders' Meeting" means the
extraordinary general shareholders' meeting of the Company held on August 5,
2003.
"Balance Sheet" means the audited consolidated balance sheet of the
Company (together with its Subsidiaries) as of December 31, 2002 included in the
2002 Audited Financials.
"Basket" has the meaning set forth in Section 8.2(a).
"Board of Directors" means the board of directors of the Company.
"Business Combination" means (i) a merger, consolidation, amalgamation,
share exchange, recapitalization (involving a business combination) or similar
business combination transaction involving the Company or a material Subsidiary
of the Company, (ii) any sale of all or a substantial portion of the assets of
any Company Party, (iii) an acquisition by any of the Company Parties of Control
of any other Entity, or (iv) an acquisition by any of the Company Parties of all
or a substantial portion of the assets of any other Entity.
"Business Day" means any day, other than a Saturday, Sunday or a day on
which banking institutions in the Republic of Korea or the State of New York are
authorized or obligated by Law or executive order to close.
"CEO" shall mean the President, chief executive officer and the
Representative Director ("sajang" and "daepyo isa") of the Company as of the
date hereof, and who shall be the sole Representative Director as of the Closing
Date.
"Charter Documents" means, with respect to any Entity, the articles of
incorporation, by-laws of the board of directors or other organizational
documents of such Entity.
"Closing" has the meaning set forth in Section 2.1(b).
"Closing Date" has the meaning set forth in Section 2.1(b).
"Closing Date Amount" means 279,322,680 plus the number of Investment
Shares issued and sold pursuant hereto.
"Collective Bargaining Agreement" has the meaning set forth in Section
4.22(c).
"Common Stock" has the meaning set forth in the recitals.
"Company" has the meaning set forth in the preamble.
"Company Contracts" has the meaning set forth in Section 4.20.
"Company Indemnified Parties" has the meaning set forth in Section
8.2(b).
"Company Intellectual Property" means the Owned Intellectual Property
and the Licensed Intellectual Property.
"Company Parties" means the Company and its Subsidiaries.
"Company Reports" has the meaning set forth in Section 4.9.
"Company Transaction" means any (i) direct or indirect acquisition or
purchase of any equity securities or Rights of any Company Party or any tender
offer or exchange offer, by any Person or Group (other than the Investors or
their Affiliates), (ii) Business Combination, recapitalization, liquidation,
dissolution or similar transaction involving any Company Party, or (iii) other
transaction by the Company or any of its Affiliates the consummation of which
would prevent or materially delay the Transactions.
"Contract" means any agreement, contract, commitment, indenture, lease,
license, instrument, note, bond, security, joint venture agreement, letter of
intent, undertaking, promise, covenant, arrangement or understanding, which are
in writing, or if oral, involve in excess of Won 100 million.
"Control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the affairs or management of a Person through
the ownership of voting securities or otherwise, including, without limitation,
having the power to elect a majority of the board of directors or other
governing body of such Person, and "Controlling" and "Controlled" have
correlative meanings.
"Convertible Bonds Subscription Agreement" has the meaning set forth in
the definition of "Hanaro-Thrunet Convertible Bonds."
"Copyrights" has the meaning set forth in the definition of
"Intellectual Property."
"Deposit Agreement" means the deposit agreement by and among the
Company, Deutsche Bank Trust Company Americas, as depositary, and the registered
holders and beneficial owners of the American depositary receipts of the
Company, as amended.
"Designee" means any grantor trust, voting trust, nominee, broker or
other person holding Investment Shares or other securities of the Company on
behalf of or for the benefit of any Investor or the Affiliate of any Investor.
"Disclosure Schedule" means the Company's Disclosure Schedule attached
as Exhibit B hereto and dated the date hereof, which Disclosure Schedule shall
be in English.
"Employee Benefit Plans" means any plan, program, arrangement,
agreement or commitment which is a deferred compensation agreement, or an
executive compensation, incentive bonus or other bonus, employee pension,
profit-sharing, savings, retirement, stock option, stock purchase, stock
appreciation rights, severance pay, vacation pay, scholarships or
reimbursements, sick leave, life, health, disability or accident insurance plan,
corporate-owned or key-man life insurance, or other employee or retiree benefit
or perquisite plan, program, arrangement, understanding, agreement or
commitment, whether written or unwritten, formally established or established by
custom or practice, including any multi-employer benefit plan or any employee
benefit plan that any of the Company Parties maintains or contributes to, or has
established (whether formally or by custom or practice) or has any obligation to
contribute to, or has or may have any Liability (including any liability arising
out of an indemnification, hold harmless or similar agreement).
"Employment Agreement" means any employment, consulting, change in
control or severance agreement or other similar arrangement between any Company
Parties, on the one hand, and any current director, officer or employee of any
Company Party or any former director, officer or employee of any Company Party,
on the other, if such agreement or arrangement involves any continuing
obligation or Liability or is in dispute.
"Entity" means a partnership, limited liability partnership,
corporation, limited liability company, association, joint stock company, trust,
estate, joint venture, or unincorporated organization or other legal person
established or existing pursuant to the Laws of any jurisdiction.
"Environmental, Health, and Safety Laws" means Korean Law, statutes,
regulations, ordinances, Judgments or binding agreements with any Korean
Governmental Authority concerning pollution or protection of the environment,
public health and safety, or employee health and safety, including Laws relating
to emissions, discharges, releases, or threatened releases of Hazardous
Materials into ambient air, surface water, ground water, or lands or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of Hazardous Materials.
"Environmental Studies" has the meaning set forth in Section 4.14(d).
"Exclusivity Period" has the meaning set forth in Section 7.8(b).
"Extraordinary General Shareholders' Meeting" means the extraordinary
general meeting of the shareholders of the Company, which shall be held on or
prior to the Closing Date for the purpose of approving the Amended and Restated
Articles of Incorporation, electing the Investors' Nominees to the Board of
Directors and approving the Share Issuance.
"Financial Statements" means the Audited Financial Statements and the
Unaudited Financial Statements.
"First Board Meeting" means the duly convened meeting of the Board of
Directors, which was held on August 29, 2003 for the purpose of (i) approving
the Transactions (ii) authorizing the execution, delivery and performance by the
Company of each Transaction Document to which it is a party and (iii) approving
the covening of and the agenda for the Extraordinary General Shareholders'
Meeting.
"First Letter Agreement" means the letter agreement dated as of the
date hereof by and among the parties hereto setting forth certain arrangements
in respect of the allocation of fees and expenses among the parties which have
been or will be incurred in connection with this Agreement, the other
Transaction Documents and the Transactions.
"FSS" has the meaning set forth in Section 4.9(a).
"GAAP" means, with respect to any jurisdiction, generally accepted
accounting principles as in effect from time to time in such jurisdiction,
applied on a consistent basis over the relevant periods.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, and any Person exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Group" means any "group" within the meaning of Section 13(d) of the
Securities Exchange Act.
"Hanaro" has the meaning set forth in the preamble.
"Hanaro-Thrunet Convertible Bonds" means the convertible bonds of
Hanaro issued and sold by Hanaro to each of the selling shareholders in
connection with the Thrunet Transaction pursuant to the Convertible Bonds
Subscription Agreement dated December 30, 2002 (the "Convertible Bonds
Subscription Agreement") by and among Hanaro and each of the Subscribers (as
defined therein).
"Hazardous Materials" means any chemical substance, including without
limitation any: pollutant; contaminant; chemical; raw material; intermediate,
product or by-product; industrial, solid, toxic or hazardous substance, material
or waste; petroleum or any fraction thereof; asbestos or
asbestos-containing-material; and polychlorinated biphenyls; including without
limitation all substances, materials or wastes; which are now regulated,
classified or considered to be hazardous, dangerous or toxic under any
Environmental, Health and Safety Law of Korea, now or hereafter enacted,
promulgated, or amended.
"ICC" has the meaning set forth in Section 10.7(b).
"Indebtedness" means, with respect to any Person, whether recourse is
to all or a portion of the assets of such Person, and whether contingent or
fixed (a) all indebtedness of such Person for borrowed money, (b) all
obligations of such Person evidenced by notes, bonds, debentures or other
similar instruments, (c) any obligation, issued or assumed as the deferred
purchase price (whether created or arising under any conditional sale or other
title retention agreement or otherwise), with respect to property, assets or
services acquired by such Person (even though the rights and remedies of the
sellers or lenders under such agreement in the event of default are limited to
repossession or sale of such property), (d) all obligations of such Person as
lessee under leases that have been or should be, in accordance with GAAP,
recorded as capital leases, (e) all obligations of such Person under banker's
acceptances, letters of credit, "documents against acceptance" or similar
facilities, (f) all obligations of such Person to purchase, redeem, retire,
defease or otherwise acquire for value any capital stock of such Person, valued,
in the case of redeemable preferred stock, at the greater of its voluntary or
involuntary liquidation preference plus accrued and unpaid dividends, (g) any
interest rate or currency swap or similar hedging agreement and (h) all
Indebtedness of others referred to in clauses (a) through (g) above guaranteed
directly or indirectly in any manner by such Person.
"Indemnified Parties" has the meaning set forth in Section 8.2(a).
"Insolvency Event" means (i) any Company Party commences a voluntary
case concerning itself under the Bankruptcy Act of Korea, the Corporate
Reorganization Act of Korea, the Composition Act of Korea and the Corporate
Restructuring Promotion Act of Korea, or any national, state, provincial, local,
foreign or other insolvency, liquidation, rehabilitation or similar statute or
any successor statutes thereto as now or hereafter in effect ("Insolvency
Statutes"); (ii) an involuntary case is commenced against any Company Party
under an Insolvency Statute; (iii) a custodian is appointed under any applicable
Insolvency Statute for, or takes charge of, all or any substantial part of the
property of any Company Party; (iv) any other proceeding under any
reorganization, arrangement, adjustment of debt, relief of debtors, dissolution
or similar Law of any jurisdiction, whether now or hereafter in effect relating
to any Company Party is commenced (a) by any Company Party or (b) by any other
Person; (v) any Company Party is adjudicated insolvent or bankrupt; (vi) any
order of relief or other order approving any such case or proceeding is entered;
(vii) any Company Party makes a general assignment for the benefit of creditors;
or (viii) any Company Party is unable to pay its debts, generally as they become
due.
"Insolvency Statutes" has the meaning set forth in the definition of
"Insolvency Event."
"Intangible Property" means, with respect to any Person, all
certificates of deposit, bank accounts, securities, partnership or other
ownership interests, rights to receive money or property by assignment, future
interests, claims and rights against third parties, accounts and notes
receivables owned or held directly or beneficially by or on behalf of the
account of such Person or any of its Subsidiaries, Licenses, Intellectual
Property and any other intangible property of any nature of such Person or any
of its Subsidiaries.
"Intellectual Property" means (a) any intellectual property or
proprietary rights in any jurisdiction, whether owned or held for use under
license, whether registered or unregistered, including such rights in (i) all
inventions, invention disclosures, all improvements thereto (whether patentable
or unpatentable and whether or not reduced to practice), and all issued patents,
pending patent applications, and any and all divisions, continuations,
continuations-in-part, reissues, continuing patent applications, reexaminations
and extensions thereof, any counterparts claiming priority therefrom, utility
models, design patents, utility models, patents of importation/confirmation,
certificates of invention, certificates of registration and similar rights
(collectively, "Patents"), (ii) all trademarks, service marks, certification
marks, trade dress, logos, trade names, and corporate names, including all
goodwill associated therewith, and all applications, registrations, and renewals
in connection therewith (collectively, "Trademarks"), (iii) all works of
authorship (whether or not copyrightable), all copyrights, all moral rights and
all applications, registrations, and renewals in connection therewith
(collectively, "Copyrights"), (iv) all trade secrets and confidential business
information and rights to limit the use or disclosure thereof by any Person
(including ideas, research and development, know-how, formulas, compositions,
manufacturing and production processes and techniques, technical data, designs,
drawings, specifications, customer and supplier lists, pricing and cost
information, and business and marketing plans and proposals) (collectively,
"Trade Secrets"), (v) all computer software, operating systems, data files,
source and object codes, user interfaces, manuals, databases, technical
specifications and documentation and (vi) mask works, designs and Internet
domain names, (b) all copies and tangible embodiments of any of the foregoing
(in whatever form or medium), (c) claims, causes of action or defenses relating
to the enforcement of any of the foregoing, and (d) the goodwill associated with
the foregoing.
"Investment Shares" means an aggregate 182,812,500 shares of common
stock to be issued and sold by the Company to the Investors pursuant to this
Agreement at the Purchase Price having an aggregate value of Won 585,000
million.
"Investor Parent Companies" means AIG Asian Infrastructure Fund II,
L.P., a Bermuda limited partnership, Newbridge Asia III, L.P., a Cayman Islands
exempted limited partnership and the parent companies of each of the other
Investors as set forth opposite such Investor's name under the column titled
"Parent" on Schedule I.
"Investors' Representatives" has the meaning set forth in Section 10.1.
"Investors" has the meaning set forth in the preamble.
"Investors' Nominees" means the five (5) nominees designated by the
Investors for election as directors at the Extraordinary General Shareholders'
Meeting, of which (i) two directors will be non-standing directors and (ii)
three directors will be independent non-standing directors in accordance with
Korean Law.
"Investors' Rights Agreement" means the investors' rights agreement
between each Investor and the Company dated as of or prior to the Closing Date
substantially in the form set forth in Exhibit C hereto.
"Judgment" means any judgment, writ, order or decree of or by any
arbitrator, court, judge, justice or magistrate, including any bankruptcy court
or judge, and any order, ruling or action of or by any other Governmental
Authority.
"Key Employees" means the key employees of the Company Parties listed
on Annex A-1.
"Knowledge" means the actual knowledge of the Company's directors,
officers or Key Employees, after diligent inquiry.
"Law" means any law, treaty, statute, ordinance, code, rule,
regulation, judgment, decree, order, writ, award, injunction or determination of
any Governmental Authority.
"Liabilities" means all Indebtedness and other liabilities (whether
known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether fixed or unliquidated, and
whether due or to become due), including any such liability for Taxes.
"Licensed Intellectual Property" means Intellectual Property held for
use by any Company Party under license from any third party.
"Licenses" has the meaning set forth in Section 4.16.
"Lien" means any mortgage, pledge, lien (statutory or other),
encumbrance, hypothecation, charge, security interest, claim, option, right to
acquire, adverse interest, assignment, deposit arrangement, deed of trust,
easement, assessment, lease, adverse claim, levy, restriction, or preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever (including any conditional sale or other title retention
agreement, any financing lease involving substantially the same economic effect
as any of the foregoing and the filing of any financing statement under the
Uniform Commercial Code or comparable Law of any applicable jurisdiction).
"Losses" means all losses, penalties, charges, claims, damages, dues,
fines, interest, costs, diminution in value (including diminution in value
arising from payments made by the Company pursuant to Article VIII), amounts
paid in settlement, Liabilities, Taxes, expenses and fees (including court costs
and attorneys' fees and expenses) incurred by, imposed upon, or asserted against
any Person.
"Management Rights Agreement" means the management rights agreement
between the Company and each VCOC Investor dated as of or prior to the Closing
Date substantially in the form set forth in Exhibit H hereto.
"Material Adverse Effect" means any event, fact, circumstance or
occurrence that, individually or in the aggregate with any other events, facts,
circumstances or occurrences, results or could reasonably be expected to result
in a material adverse change in or a material adverse effect on any of (i) the
financial condition, results of operation, business, operations, business
strategy or regulatory status of the Company or its Subsidiaries or the
high-speed Internet access, local telephony, leased line, cable television,
wireless Internet access (excluding mobile phone access), Internet portal, data
and/or Internet data center service industries in Korea generally, or (ii) the
legality or validity as to the Company or enforceability as against the Company
of any Transaction Document or (iii) the ability of any Company Party to perform
its material obligations under any Transaction Document.
"Newbridge Sub" has the meaning set forth in the preamble.
"Non-Solicitation Agreement" has the meaning set forth in Section
3.1(t).
"Ordinary Course of Business" means in the ordinary day to day course
of business of the Company and its Subsidiaries consistent with customary
industry practices for a company providing high-speed Internet access, local
telephony, leased line, cable television, wireless Internet access (excluding
mobile phone access), Internet portal, data and/or Internet data center services
and the commercially reasonable business practices of a financially stable
Korean company.
"Outside Director Candidate Nominating Committee Rules" has the meaning
set forth in the definition of "Third Board Meeting".
"Outside Director Nominating Committee" has the meaning set forth in
Section 3.1(o).
"Owned Intellectual Property" means all Intellectual Property owned by
any Company Party.
"party" or "parties" has the meaning set forth in the preamble.
"Patents" has the meaning set forth in the definition of "Intellectual
Property."
"Person" means an individual, Entity, or Governmental Authority.
"Proprietary Software" means all computer software (other than
commercially available "shrink-wrap" software), source codes, object codes,
operating systems, data, databases, files, user interfaces, specifications,
documentation and other materials related thereto, sold, marketed or licensed by
the Company Parties to customers in connection with the business of the Company
or held for use or used in connection with the development of such computer
software, operating systems, data databases and files.
"Purchase Price" means the purchase price per share for the Investment
Shares, of Won 3,200.
"Redeemable Equity" of any Person means any equity interest of such
Person that by its terms or otherwise, absolutely, contingently or otherwise, is
or may be required to be redeemed or repurchased by such Person or is or may
become redeemable or repurchasable at the option of the holder thereof.
"Related Person" means,
(a) as to any natural Person,
(i) any of such Person's parents, children and spouse, the
parents and children of such Person's spouse, and the spouses of
such Person's children ("Relatives");
(ii) any Entity with respect to which such Person or any of
his or her Relatives serves as a director, officer, partner,
member or in a similar function;
(iii) any Entity in which such Person or any of his or her
Relatives, individually or collectively, owns or controls,
directly or indirectly, ten percent (10%) or more of the issued
and outstanding equity interests; and
(iv) any trust or estate in which such Person or any of his
or her Relatives has a substantial interest or serves as a
trustee or in a similar capacity; and
(b) as to any Entity,
(i) any Person that directly or indirectly owns or controls
ten percent (10%) or more of the issued and outstanding equity
interests of such Entity and the Related Persons of such Person;
(ii) any Person in which such Entity owns ten percent (10%)
or more of the issued and outstanding equity interests;
(iii) any director, officer, partner, member or similar
representative of such Entity or of any Related Person of such
Entity; and
(iv) with respect to the Company, any Entity (other than a
Company Party) that is an affiliate or a specially related party
of the Company under the Monopoly Regulation and Fair Trade Law.
"Regulatory Approvals" means (i) any and all certificates, permits,
licenses, franchises, concessions, grants, consents, approvals, orders,
registrations, authorizations, waivers, variances or clearances from, or filings
or registrations with, Governmental Authorities, and (ii) any and all waiting
periods imposed by applicable Laws.
"Relative" has the meaning set forth in the definition of "Related
Person".
"Representative Director" has the meaning set forth in the Korean
Commercial Code.
"Representatives" means, with respect to any Person, any officers,
directors, limited or general partners or members, employees, agents, attorneys,
accountants, consultants, equity financing partners or financial advisors of
such Person (or of such Person's successors or assigns) or other Person
associated with, or acting on behalf of, such Person (or such Person's
successors and assigns).
"Required Regulatory Approvals" means all Regulatory Approvals
necessary or required for or in connection with the execution and delivery of
the Transaction Documents and the consummation of the Transactions; provided,
that a Regulatory Approval shall be deemed to be a Required Regulatory Approval
if the failure to obtain such Regulatory Approval would materially reduce the
value of the Investment Shares to any Investor.
"Requirement of Law" means, as to any Person, the Charter Documents of
such Person, and all Laws, Judgments or other determinations of an arbitrator,
court or other Governmental Authority, applicable to or binding upon such Person
or any of its property or to which such Person or any of its property is
subject.
"Rights" means, with respect to any Person, any subscription, option,
warrant, convertible or exchangeable security or other right, however
denominated, to subscribe for, purchase or otherwise acquire any capital stock,
other equity interest or other security of any class or series and of any
issuer, with or without payment of additional consideration in cash or property,
either immediately or upon the occurrence of a specified date or a specified
event or the satisfaction or happening of any other condition or contingency.
"SEC" means the U.S. Securities and Exchange Commission.
"Second Board Meeting" means the duly convened meeting of the Board of
Directors, which is anticipated to be held on September 26, 2003 and in any case
no later than two weeks prior to the Extraordinary General Shareholders' Meeting
for the purpose of (i) approving the Investors' Nominees and (ii) approving the
Amended and Restated Articles of Incorporation to be submitted to the
shareholders of the Company for approval at the Extraordinary General
Shareholders' Meeting.
"Securities Act" means the U.S. Securities Act of 1933, as amended.
"Securities Exchange Act" means the U.S. Securities Exchange Act of
1934, as amended.
"Share Issuance" has the meaning set forth in Section 4.1(a)(i).
"Sponsors" has the meaning specified in the preamble.
"Subsidiary" means, when used with respect to any Person as of any
time, any other Person as to which any of the following statements is true as of
such time:
(i) such second Person is an Affiliate of such first Person
which is, directly or indirectly through one or more
intermediaries, Controlled by such first Person, or
(ii) such first Person owns or controls, directly or
indirectly through one or more intermediaries, 50% or more of the
outstanding equity interests in such second Person having
ordinary voting power to elect a majority of the members of the
board of directors or joint venture, partnership or other
management committee, trustees, managers or other Persons
ordinarily having the power, authority or responsibility for
managing or directing the management of such second Person, or
(iii) such first Person owns or controls, directly or
indirectly through one or more intermediaries, 30% or more of the
outstanding equity interests in such second Person and such first
Person (together with its Affiliates) is the largest single
shareholder of such second Person, including Dreamline
Corporation and Hanaro Dream Co., Ltd., or
(iv) such first Person, directly or indirectly through one
or more intermediaries, is entitled under ordinary circumstances
to 50% or more of the profits or losses of such second Person or
to receive upon dissolution and liquidation of such second Person
50% or more of the assets available for distribution to the
holders of equity interests in such second Person,
and in the case of any of clauses (i), (ii) (iii) and (iv),
disregarding any voting power, equity interests or other rights or
interests which any Person other than the first Person or another
Subsidiary of the first Person would or might have upon the happening
of any contingency, the satisfaction of any condition or the occurrence
of any event which has not happened, been satisfied or occurred as of
such time; provided, however, that none of M-Commerce, Dreamline
Corporation or Hanaro Dream Co., Ltd. shall be considered as a
Subsidiary of the Company for purposes of Sections 6.6, 7.1, 7.6 and
7.8 hereof.
"Tax" means all taxes, however denominated, including any interest,
additions to tax or penalties that may become payable in respect thereof,
imposed by any federal, state, local, foreign or Korean government or any agency
or political subdivision of any such government, which taxes shall include,
without limiting the generality of the foregoing, all income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental, customs duties, capital stock, franchise,
profits, withholding, social security (or similar), unemployment, disability,
worker's compensation, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated, or other
tax of any kind whatsoever, including any interest, penalty, or addition
thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof, required to be filed
under any statute, rule or regulation.
"Third Board Meeting" means the duly convened meeting of the Board of
Directors to be held on the same day as and immediately following the
Extraordinary General Shareholders' Meeting for the purpose of (i) confirming
the issuance of the Investment Shares, (ii) appointing an Investors' Nominee
designated by the Investors as the replacement Representative Director in
accordance with Article 31(2) of the Amended and Restated Articles of
Incorporation and (iii) approving an amendment to the Company's rules regarding
the delegation of powers by the Board of Directors to the Outside Directors
Nominating Committee and the operation thereof in the form attached hereto as
Exhibit M (the "Outside Director Candidate Nominating Committee Rules") and (iv)
appointing to a three-year term two Investors' Nominees as new members of the
Outside Director Nominating Committee and two Investors' Nominees as alternates.
"Third Party Claim" has the meaning set forth in Section 8.3(a).
"Third Party Software" has the meaning set forth in Section 4.15(h).
"Thrunet" means Korea Thrunet Co., Ltd. a chusik-hosea duly organized
and existing under the Laws of Korea.
"Thrunet Sellers" has the meaning ascribed to the term "Selling
Shareholders" in the Thrunet Share Purchase Agreement.
"Thrunet Share Purchase Agreement" means the Share Purchase Agreement
dated December 30, 2002 among the Company and the Thrunet Sellers.
"Thrunet Transaction" means any and all transactions contemplated by
the Thrunet Transaction Documents.
"Thrunet Transaction Documents" means the Thrunet Share Purchase
Agreement, the Convertible Bonds Subscription Agreement, the related offset
agreement, the Thrunet Warrant Purchase Agreement, and all related certificates,
instruments and agreements.
"Thrunet Warrant Purchase Agreement" means the Warrant Purchase
Agreement dated as of December 30, 2002 by and between SB Thrunet Pte Ltd. and
Hanaro.
"Total Consideration" means the sum of the amounts payable by Investors
to the Company in consideration of the Shares issued to the Investors pursuant
to this Agreement, as set forth in Schedule I.
"Trade Secrets" has the meaning set forth in the definition of
"Intellectual Property".
"Trademarks" has the meaning set forth in the definition of
"Intellectual Property".
"Transaction Documents" means this Agreement, the Investors' Rights
Agreement, the Non-Solicitation Agreements, the Amended and Restated Articles of
Incorporation, the First Letter Agreement, the Management Rights Agreements and
each other certificate, instrument or agreement executed and delivered by the
Company or any of its Subsidiaries pursuant to or in connection with the
transactions contemplated by any of the foregoing.
"Transactions" means any and all of the transactions contemplated by
this Agreement or any of the other Transaction Documents, including the
subscription of the Investment Shares by the Investors hereunder.
"Unaudited Financial Statements" means the unaudited (i) quarterly
unconsolidated balance sheets and income statements for the Company and each of
its Subsidiaries other than Hanaro Telecom America, Inc., for each quarter ended
after December 31, 2002, (ii) semi-annual unconsolidated balance sheets and
income statements for Hanaro Telecom America, Inc., for each semi-annual period
ended after December 31, 2002, and (iii) monthly operating results contained in
monthly management reports, including revenues and operating expenses, as of and
for each month ended after June 30, 2003 for the Company and Dreamline
Corporation.
"Won" means the lawful currency of the Republic of Korea.
"VCOC Investor" means any Investor or Investor Parent Company that
intends to qualify as a venture capital operating company within the meaning of
U.S. Department of Labor Regulation Section 2510.3-101.
"2002 Audited Financials" means (i) the audited consolidated financial
statements, including balance sheets and income statements, and statements of
shareholders' equity and cash flows, including the notes thereto, for the
Company (together with its Subsidiaries other than Dreamline Corporation and
Hanaro Dream Incorporated with respect to the audited consolidated income
statements) as of and for the year ended December 31, 2002 contained in the
relevant report on Form 6-K filed by the Company with the SEC and the audited
consolidated income statements of Dreamline Corporation (together with Hanaro
Dream Co., Ltd.) for the year ended December 31, 2002.
"2003 Annual Meeting" means the ordinary general shareholders' meeting
of the Company held on March 28, 2003.
"2003 Business Plan" has the meaning set forth in Section 4.34.
1.2 Certain Rules of Construction. This Agreement is to be interpreted
in accordance with the following rules of construction:
(i) Number and Gender. All definitions of terms apply
equally to both the singular and plural forms of the terms
defined. Whenever the context may require, any pronoun shall
include the corresponding masculine, feminine and neuter forms.
(ii) "Including," "Herein," Etc. The words "include,"
"includes" and "including" are deemed to be followed by the
phrase "without limitation". The words "herein", "hereof", and
"hereunder" and words of similar import refer to this Agreement
(including all Exhibits and Schedules) in its entirety and are
not limited to any part hereof unless the context shall otherwise
require. The word "or" is not exclusive and means "and/or."
(iii) Subdivisions and Attachments. All references in this
Agreement to Articles, Sections, subsections, Exhibits and
Schedules are, respectively, references to Articles, Sections and
subsections of, and Exhibits and Schedules attached to, this
Agreement, unless otherwise specified.
(iv) References to Documents and Laws. All references to any
Transaction Document are to such document as amended, modified or
supplemented from time to time in accordance with its terms. All
references to (x) any other agreement or instrument or (y) any
Requirement of Law, License or similar item are to it as amended
and supplemented from time to time (and, in the case of a Law, to
any corresponding provisions of successor Laws), unless otherwise
specified.
(v) References to Days. Any reference in this Agreement or a
Transaction Document to a "day" or number of "days" (without the
explicit qualification "Business") is a reference to a calendar
day or number of calendar days. If any action or notice is to be
taken or given on or by a particular calendar day, and such
calendar day is not a Business Day, then such action or notice
may be taken or given on the next Business Day.
(vi) Examples. If, in any provision of any Transaction
Document, any example is given (through the use of the words
"such as," "for example," "e.g." or otherwise) of the meaning,
intent or operation of any provision, such example is intended to
be illustrative only and not exclusive.
(vii) Participation in Drafting. The parties and their
respective legal counsel have participated in the drafting of
this Agreement, and this Agreement will be construed simply and
according to its fair meaning and without any presumption or
prejudice for or against any party.
(viii) Headings. The table of contents and section headings
contained in this Agreement are inserted for convenience only and
shall not affect in any way the meaning or interpretation of this
Agreement.
ARTICLE II
ISSUANCE AND PURCHASE OF INVESTMENT SHARES
2.1 Closing Date Transactions.
(a) Issuance and Purchase of the Investment Shares. Upon the terms and
subject to the conditions set forth in this Agreement, and in reliance upon the
representations and warranties set forth herein, on the Closing Date, the
Company agrees to issue to and each Investor agrees, severally, to subscribe for
at the Purchase Price, the shares of Common Stock set forth opposite its name on
Schedule I hereto for the purchase price set forth thereon (which shares shall
be duly authorized, validly issued, fully-paid and non-assessable and free and
clear of all Liens), by remitting payment of the purchase price therefore in
same-day funds to the account specified by Hanaro in Schedule 2.1(a) hereto, and
the Company shall acknowledge receipt from such Investor of payment in full for
such Investment Shares. The next day following the Closing Date, the Company
shall deliver to such Investor a certificate of the representative director,
reflecting the share issuance to such Investor. Promptly after the share
registry is re-opened, the Company shall deliver to such Investor a copy of the
shareholder registry of the Company reflecting the share issuance to such
Investor. As soon as practicable and no more than 30 days following the Closing
Date, the Company shall deliver a stock certificate or certificates representing
such Investment Shares to each Investor (or, if applicable, its Designee) and
such Investor (or, if applicable, its Designee) shall deposit such certificate
or certificates with the Korea Securities Depository for one (1) year following
the Closing Date and shall not withdraw such certificate or certificates or sell
such Investment Shares represented by such certificate or certificates during
such one year period unless permitted by applicable Law. Each Investor (or, if
applicable, its Designee) shall deliver to the Korea Securities Depository an
executed standard form of deposit agreement. Notwithstanding the foregoing, each
Investor may instruct the Company to issue the Investment Shares to a Designee
of such Investor, in which case the Company shall issue the Investment Shares
subscribed by such Investor to such Designee, and the certificate of the
Representative Director and the copy of the shareholder registry of the Company
shall reflect the share issuance to the Designee. For purposes of this
Agreement, any Investment Shares or other securities of the Company held by a
Designee on behalf of or for the benefit of an Investor or an Affiliate of an
Investor shall be deemed held by such Investor or Affiliate.
(b) Closing; Closing Date and Place. The closing of the purchase and
sale of the Investment Shares (the "Closing") shall take place at the offices of
Xxx & Xxxxx, in Seoul, Korea as soon as practicable following the Extraordinary
General Shareholders' Meeting (the "Closing Date"). If the Extraordinary General
Shareholders' Meeting occurs on October 21, 2003, and the shareholders
resolutions set forth in Exhibit F are approved, the parties will use their
reasonable best efforts to cause the Closing to occur on October 31, 2003.
ARTICLE III
CONDITIONS
3.1 Conditions of the Investors. The obligation of each Investor to
purchase and pay for the Investment Shares as contemplated by this Agreement is
subject to the satisfaction, on or before the Closing Date, of the following
conditions, any of which may be waived in writing by the Investors in their sole
discretion.
(a) Proceedings Not Restrained. No order or injunction shall have been
issued by a Governmental Authority that restrains, restricts, enjoins, prevents,
delays, prohibits, imposes substantial damages or penalties or otherwise makes
illegal the consummation of the Transactions; and no action, suit, proceeding or
investigation shall have been instituted or threatened that seeks to restrain,
restrict, enjoin, prevent, delay, prohibit, impose substantial damages or
penalties with respect to or otherwise make illegal such Transactions; and no
Law (or proposed Law) shall have been proposed, promulgated, adopted, enacted or
entered or otherwise made effective by any Governmental Authority that has or
would have such effect.
(b) Representations and Warranties; No Default. The representations and
warranties of the Company contained in the Transaction Documents shall have been
true and correct in all material respects (except that any representation or
warranty qualified by materiality or Material Adverse Effect shall be true and
correct in all respects) on the date of this Agreement and on and as of the
Closing Date; and the Company shall have performed and complied with all, and is
not in breach or a default under any, agreements, covenants, conditions and
obligations contained in this Agreement and the other Transaction Documents
(including, without limitation, the covenants contained in Articles VI and VII
hereof) that are required to be performed or complied with on or before the
Closing Date.
(c) Consents. All Required Regulatory Approvals and all consents,
waivers or approvals from any other Person (including, without limitation, under
any of the Company's debt or credit agreements, licensing agreements or other
Company Contracts) necessary or required for or in connection with the execution
and delivery of the Transaction Documents and the consummation of the
Transactions shall have been obtained or made on terms satisfactory to the
Investors, the Investors shall have received duly executed copies of all such
consents, waivers and approvals, and all waiting periods specified under
applicable Law, the expiration of which is necessary for such consummation,
shall have expired or been terminated.
(d) Purchase Permitted by Applicable Laws. The purchase and sale of the
Investment Shares on the terms and conditions herein provided shall not violate
any Requirement of Law applicable to any Investor, any Investor Parent Company
or any Company Party.
(e) Agreements. Each of the Transaction Documents shall have been
executed and delivered and shall be in full force and effect. All filings
required for the effectiveness of the Transaction Documents shall have been made
by the Company, and the Company shall have furnished to the Investors evidence
of such filings.
(f) Certain Documents. Each Investor shall have received the following,
each dated the Closing Date (except as otherwise specified below):
(i) a certificate of the CEO certifying that the conditions
contained in this Section 3.1 have been satisfied in full;
(ii) a certificate of the CEO (x) attaching copies,
certified by such officer as true and complete, of the
resolutions of the Board of Directors and the shareholders of the
Company in connection with the authorization and approval of the
execution, delivery and performance of the Transaction Documents
and consummation of the Transactions and of all other documents
evidencing all necessary corporate action taken in connection
therewith, (y) attaching copies, certified by such officer as
true and complete, of the Amended and Restated Articles of
Incorporation, and (z) that includes a representation by such
officer that the copies of the Charter Documents of each
Subsidiary of the Company, as previously provided to the
Investors, are true and complete in all respects;
(iii) opinions of counsel to the Company, in the forms set
forth in Exhibit E-1 and E-2, respectively, provided, that (x)
the Investors may require additional opinions satisfactory to the
Investors and (y) any modifications to such opinions requested by
the Company's counsel shall be satisfactory to the Investors;
(iv) a copy of a certificate of the representative director
of the Company dated as of one day after the Closing Date,
reflecting the issuance of Investment Shares to each Investor
(or, if applicable, its Designee) in accordance with Schedule I;
and
(v) such other documents as the Investors may reasonably
request.
(g) Investor Approvals; Purchase of Allotted Investment Shares.
(i) Each Investor and/or Investor Parent Company, shall have
received the necessary and required approvals from its or their
respective investment committees and/or boards of directors (and
in the case of AIG Asian Infrastructure Fund II, L.P. Sub, the
approval of certain of its key advisors) for or in connection
with the execution and delivery of the Transaction Documents and
the consummation of the Transactions. Notwithstanding anything to
the contrary herein, each of AIG AIF Sub, AOF and Newbridge Sub
shall determine for itself whether this condition is satisfied as
to itself and shall have the exclusive right to waive such
condition as to its own obligation to purchase Investment Shares.
(ii) Each Investor shall have purchased its allotment of
Investment Shares on the Closing Date (which allotments, in the
aggregate, shall reflect a full allocation of all of the
Investment Shares to Investors on terms and in amounts
satisfactory to the Sponsors); provided, that this condition
shall be deemed satisfied regardless of the failure of any
Investor to purchase Investment Shares if the aggregate purchase
price of Investment Shares not purchased does not exceed five
percent (5%) of the Total Consideration. No Investor shall have
any obligation to purchase any Investment Shares other than those
Investment Shares it is required to purchase as set forth in
Schedule I.
(h) Proceedings. All corporate and other proceedings to be taken by the
Company in connection with the Transaction Documents with respect to the
Transactions and documents incident thereto shall have been completed, and each
Investor shall have received all such counterpart originals or certified or
other copies of the Transaction Documents and such other documents as it may
reasonably request.
(i) No Material Adverse Change. Since January 1, 2003, the Company
shall have operated its business only in the Ordinary Course of Business and
there shall not exist or have occurred any condition, event or state of facts
that has had a Material Adverse Effect, whether or not arising in the Ordinary
Course of Business, provided, that an Insolvency Event with respect to Dreamline
Corporation shall not be deemed to have a Material Adverse Effect to the extent
that such Insolvency Event does not result in any direct or indirect Losses,
Liabilities or other obligations of the Company other than (i) a diminution in
the value of Dreamline Corporation shares held by the Company, including,
without limitation, diminution in value due to stock cancellation, capital
reduction or share transfer and (ii) Losses not exceeding Won 2,500 million
arising from failure to realize accounts receivable payable by Dreamline
Corporation to the Company.
(j) Due Diligence. The Investors shall have completed their due
diligence investigation regarding the Company and its Subsidiaries and been
fully satisfied with the results thereof in their sole discretion.
(k) Insolvency Event. Other than a potential Insolvency Event with
respect to Dreamline Corporation which has not and will not result in any direct
or indirect Losses, Liabilities or other obligations of any Company Party other
than (i) a diminution in the value of Dreamline Corporation shares held by the
Company, including, without limitation, diminution in value due to stock
cancellation, capital reduction or share transfer and (ii) Losses not exceeding
Won 2,500 million arising from the failure to realize accounts receivable
payable by Dreamline Corporation to the Company, no Insolvency Event shall have
occurred or be reasonably likely to occur.
(l) Credit Facilities; Defaults. No default shall exist (or occur upon
consummation of the Transactions) under any loan or other material financing
instrument of any Company Party or any other Company Contract, and no action
shall be taken or have been taken or deemed taken to accelerate any material
indebtedness of any Company Party or terminate or otherwise modify any Company
Contract in a manner unfavorable to any Company Party other than any such
default or acceleration (i) under any loan or financing instrument, or Company
Contract not involving any other Company Party, in each case under which
Dreamline Corporation is the sole obligor, and (ii) which does not result in any
direct or indirect Losses, Liabilities or other obligations of any Company Party
other than (i) a diminution in the value of Dreamline Corporation shares held by
the Company, including, without limitation, diminution in value due to stock
cancellation, capital reduction or share transfer and (ii) Losses not exceeding
Won 2,500 million arising from failure to realize accounts receivable payable by
Dreamline Corporation to the Company.
(m) Related Person Liabilities. Except as set forth in Schedule 3.1(m),
any Indebtedness and other material Liabilities (whether or not disclosed in the
Financial Statements) owed by any Company Party to any Related Person of any
Company Party or to any shareholder that is a member of a shareholder Group
beneficially owning, in the aggregate, five percent (5%) or more of the
outstanding equity securities of any Company Party (on an as-converted basis) or
any Related Person of any director, officer ("isa-daewoo" level or higher) or
Key Employee of any Company Party that did not arise in the Ordinary Course of
Business or were not negotiated on an arm's length basis shall have been
terminated, cancelled or otherwise extinguished or released in full without any
payment by or on behalf of any Company Party or recourse, direct or indirect, to
any Assets of any Company Party. Schedule 3.1(m) may be updated (but not
corrected or supplemented with information existing prior to the date hereof)
after the date hereof, as soon as reasonably practicable but not later than
fourteen (14) days prior to the Closing Date, with respect to any such
Indebtedness or other material Liabilities to the extent such additional
Indebtedness or other material Liabilities do not, in the aggregate, exceed Won
500 million. Except as set forth in Schedule 3.1(m), no such Liabilities shall
exist as of the Closing Date.
(n) Directors' Resignation. The Company shall have received letters of
resignation addressed to the Company, effective as of a date no later than the
Closing Date, from a sufficient number of then-current directors (each in his
capacity as such) to create sufficient vacancies on the Board of Directors such
that the Investors' Nominees may be elected at the Extraordinary General
Shareholders' Meeting for a three-year term commencing on the Closing Date, and
the Company shall have delivered copies of such letters to the Investors.
(o) Outside Directors Nominating Committee. At the Third Board Meeting,
the Outside Director Candidate Nominating Committee Rules shall be approved and
three new members of the Company's outside director nominating committee (the
"Outside Director Nominating Committee") together with their alternates shall be
appointed, each to a three (3) year term. Two (2) of such members and their
alternates shall be Investors' Nominees designated by the Investors. Such
appointments shall become effective as of the Closing Date. The Amended and
Restated Articles of Incorporation shall limit to three (3) the number of
members of the Outside Director Nominating Committee.
(p) Articles of Incorporation; Directors. The Amended and Restated
Articles of Incorporation shall be approved at the Extraordinary General
Shareholders' Meeting, shall become effective as of the Closing Date and shall
require that on the Closing Date, the number of directors of the Board of
Directors shall be eleven (11), five (5) of whom shall be the Investors'
Nominees, the maximum number of Representative Directors shall be one, who as of
such date shall be the CEO, and the maximum number of standing directors shall
be one, who as of such date will be the CEO.
(q) Election of Investors' Nominees. At the Extraordinary General
Shareholders' Meeting, the Investors' Nominees shall be elected to the Board of
Directors for a three (3) year term commencing on the Closing Date.
(r) Representative Director. (i) Sole Representative Director. No later
than the Closing Date, the CEO shall be the Sole Representative Director of the
Company.
(ii) Replacement Representative Director. At the Third Board
Meeting, the Board of Directors shall pass a resolution
appointing an Investors' Nominee designated by the Investors as
the replacement Representative Director in accordance with
Article 31(2) of the Amended and Restated Articles of
Incorporation. Such resolution shall not have been modified,
revoked, derogated from or superseded in any way without the
express prior written consent of the Investors.
(s) Chief Financial Officer. No later than the Third Board Meeting, the
CEO shall duly appoint the Investors' designee as the chief financial officer of
the Company effective as of the Closing Date. Such appointment shall not have
been modified, revoked, derogated from or superseded in any way without the
express prior written consent of the Investors. The Investors' designee shall be
a person of appropriate competence. The chief financial officer shall have
authority and responsibility for all financial matters related to the Company,
but shall not be a member of the Board of Directors.
(t) Key Employees. The Key Employees named in Annex A-2 hereto shall
have executed the Non-Solicitation Agreements (the "Non-Solicitation
Agreements") substantially in the form set forth in Exhibit D hereto or
otherwise on the terms satisfactory to the Investors.
(u) No Equity Issuances. Since the date of this Agreement, the Company
shall not have issued any equity securities or Rights other than the Investment
Shares pursuant hereto and shares of Common Stock to be issued pursuant to
existing agreements requiring issuance of such shares, including, without
limitation, stock option agreements, agreements for convertible bonds and bonds
with warrants, as set forth in Section 4.3(b) of the Disclosure Schedule.
(v) Definitive Documentation. The parties shall have executed and
delivered the definitive documentation for the Transaction Documents and any
such documentation that is not attached as an Exhibit hereto shall be in form
and substance satisfactory to the Investors in their sole discretion.
(w) Disclosure Schedules. The complete and final Disclosure Schedule
(subject to Section 7.9) shall have been delivered to the Investors on or before
the fourth day prior to the date hereof and shall be in form and substance
satisfactory to the Investors in their sole discretion (provided that the
Investors shall notify the Company of any objections they may have to such
complete and final Disclosure Schedule within seven (7) Business Days of receipt
thereof). The Investors shall have certified, in their sole discretion, that
they have no objection to the updates to the Disclosure Schedule made by the
Company in accordance with Section 7.9.
3.2 Conditions of the Company. The Company's obligation to sell the
Investment Shares to be sold to and purchased by the Investors as contemplated
by this Agreement is subject to the satisfaction of the following conditions,
which may be waived in writing by the Company:
(a) Proceedings Not Restrained. No order or injunction shall have been
issued by a Governmental Authority that restrains, restricts, enjoins, prevents,
delays, prohibits, imposes substantial damages or penalties or otherwise makes
illegal the consummation of the Transactions; and no action, suit, proceeding or
investigation shall have been instituted or threatened that seeks to restrain,
restrict, enjoin, prevent, delay, prohibit, impose substantial damages or
penalties with respect to or otherwise make illegal such transactions; and no
Law (or proposed Law) shall have been proposed, promulgated, adopted, enacted or
entered or otherwise made effective by any Governmental Authority that has or
would have such effect.
(b) Representations and Warranties. The representations and warranties
contained in Article V of this Agreement shall be true and correct in all
material respects (except that any representation or warranty qualified by
materiality or Material Adverse Effect shall be true and correct in all
respects) on the date of this Agreement and on and as of the Closing Date.
(c) Total Consideration. The Total Consideration shall have been paid
to the Company on the Closing Date.
3.3 Waiver of Closing Conditions. Waiver of conditions to Closing shall
not constitute a waiver of rights or remedies with respect to any breach of
representations, warranties, covenants or other obligations or duties, and all
rights with respect to any such breach shall continue, regardless of such
waiver, and the Investors shall be deemed separately indemnified with respect to
any Losses arising out of, based upon, or related or attributable to such
breach, absent express written agreement to the contrary.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to and covenants and agrees with
each Investor as follows as of the date hereof and, after giving effect to all
of the Transactions to be consummated on the Closing Date, as of the Closing
Date as if made on the Closing Date, subject to the exceptions set forth in the
section of the Disclosure Schedule that expressly corresponds to the relevant
specified section of this Article IV. No representation shall be deemed to
qualify any other representation. Such representations, warranties, covenants
and agreements have constituted a material inducement to each Investor to enter
into this Agreement, to enter into the other Transaction Documents to which it
has become a party, to purchase the Investment Shares and to consummate the
other Transactions.
4.1 Certain Representations and Warranties Regarding the Transactions.
(a) Power; Authorization of Transactions. The Company has full power
and authority to execute and deliver each Transaction Document to which it is a
party and to perform its obligations hereunder and thereunder.
(i) The execution, delivery and performance by the Company
of each Transaction Document to which it is a party has been duly
authorized by the Board of Directors and by all other necessary
corporate action on the part of the Company; provided, that (1)
the Investors' Nominees and the Amended and Restated Articles of
Incorporation are subject to approval by the Board of Directors
at the Second Board Meeting, (2) the Company's obligation to
issue the Investment Shares (the "Share Issuance"), to adopt the
Amended and Restated Articles of Incorporation, and to elect the
Investors' Nominees to the Board of Directors is subject to the
approval of the Company's shareholders, which approval will be on
the agenda at the Extraordinary General Shareholders' Meeting
which shall be held on or prior to the Closing Date and (3) the
issuance of the Investment Shares is subject to confirmation by,
the approval of the Outside Director Candidate Nominating
Committee Rules is subject to, and the new members of the Outside
Director Nominating Committee and their alternates shall be
appointed by, the Board of Directors at the Third Board Meeting.
(ii) Each Transaction Document to which the Company is a
party has been (or in the case of each of the Investors' Rights
Agreement, the Non-Solicitation Agreements and the Management
Rights Agreements, upon its execution will be) duly executed and
delivered by the Company, and constitutes (or, in the case of
each of the Investors' Rights Agreement, the Non-Solicitation
Agreements and the Management Rights Agreements, upon its
execution will constitute) the valid and legally binding
obligation of the Company, enforceable against the Company in
accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency or similar laws
affecting the enforcement of creditors' rights generally and by
principles of equity relating to enforceability.
(iii) The Board of Directors has duly and validly authorized
the execution, delivery and performance of this Agreement and
each of the other Transaction Documents and approved the
consummation of the Transactions, and taken all corporate actions
required to be taken by the Board of Directors for the
consummation of the Transactions, including the Share Issuance,
contemplated hereby (subject to its (1) approval of the
Investors' Nominees and the Amended and Restated Articles of
Incorporation at the Second Board Meeting and (2) confirmation of
the issuance of the Investment Shares, approval of the Outside
Director Candidate Nominating Committee Rules and appointment of
the new members of the Outside Director Nominating Committee and
their alternates at the Third Board Meeting, and the Board of
Directors has by resolution approved the Transactions. Such
resolutions shall be the only resolutions recommended by the
Board of Directors to the shareholders of the Company to be
approved and adopted at the Extraordinary General Shareholders'
Meeting.
(iv) The Board has directed that the resolutions set forth
in Exhibit F hereto be submitted to the shareholders of the
Company for their approval at a meeting to be held for that
purpose. The affirmative vote of no less than two-thirds of the
voting rights of the shareholders present at the Extraordinary
General Shareholders' Meeting and of at least one-third of the
total issued and outstanding voting stock of the Company (which
is comprised solely of the Common Stock) as of the record date
for the Extraordinary General Shareholders' Meeting is the only
vote of the holders of any class or series of capital stock of
the Company necessary to adopt such resolutions and approve the
Share Issuance. No other vote of the shareholders of the Company
is required by Law, the Articles of Incorporation or otherwise in
order for the Company to approve and adopt such resolutions or to
consummate the Transactions, and no vote of shareholders is
required to approve Article III, IV, V, VI, VII, VIII, IX or X of
this Agreement, the First Letter Agreement or to consummate the
transactions contemplated thereby. At the Third Board Meeting,
the Board of Directors will vote to adopt the resolutions set
forth in Exhibit G hereto, to confirm the issuance of the
Investment Shares, approve the Outside Director Candidate
Nominating Committee Rules and appoint the new members of the
Outside Director Nominating Committee and their alternates.
(b) Regulatory Approvals. Section 4.1(b) of the Disclosure Schedule
lists all of the Required Regulatory Approvals required to be obtained by the
Company or any of its Subsidiaries or Affiliates except for such Required
Regulatory Approvals which if not obtained would not, individually or in the
aggregate, result in Losses to the Company in excess of Won 500 million. All
such Required Regulatory Approvals will have been obtained by the Company
Parties on or prior to the Closing Date, and shall be in full force and effect
on the Closing Date, shall not be subject to any condition (other than the
occurrence of the Closing hereunder and compliance with mandatory applicable
Law), limitation or qualification, to any unusual or onerous requirement,
obligation or term, and shall not be subject to subsequent revocation. Except
for the Regulatory Approvals listed in Section 4.1(b) of the Disclosure
Schedule, no Company Party is required to give any notice, declaration, report
or statement to, make any registration disclosure, declaration or filing with,
or obtain any authorization, consent, declaration or approval of any
Governmental Authority or other third party in connection with the execution,
delivery or performance by the Company of the Transaction Documents, or the
consummation of the Transactions, or in order to preclude any termination,
suspension, modification or impairment of any of the Company Contracts or of any
material legal or contractual right, privilege, License or franchise that is
included in the Assets of any Company Party.
(c) Compliance and Noncontravention. Neither the execution, delivery or
performance of this Agreement or any other Transaction Document, nor the
consummation of any of the Transactions does or will (i) violate any Requirement
of Law to which any Company Party or any of its Assets is subject or bound, or
(ii) conflict with, result in a breach of, constitute a default under (with or
without the giving of notice, lack of time or both), result in the acceleration
of, create in any party the right to accelerate, terminate, suspend, modify, or
cancel, or require any notice under, any Company Contract or any legal or
contractual right, privilege, License or franchise which is included in the
Assets, or impair or result in the imposition of any Lien upon any of the Assets
of any Company Party except in cases where such conflict, breach, default,
acceleration, right to accelerate, terminate, suspend, modify or cancel,
impairment or imposition of Lien would not, individually or in the aggregate,
result in Losses to the Company in excess of Won 500 million. Except as set
forth in Section 4.1(c) of the Disclosure Schedule, the execution and delivery
of the Transaction Documents and the consummation of the Transactions will not
constitute a "Change of Control" or "Change in Control" (or similar concept) as
such term (or concept) is defined in any material contract, agreement,
indenture, mortgage, note, lease or other instrument to which any Company Party
is a party or by which any Company Party is bound or to which the properties of
any Company Party is subject or which "Change of Control" or "Change in Control"
would result in a default or incipient default by any Company Party, termination
or approval right by any Person or payment of fee, penalty or other amounts to
any Person under any such document or agreement.
(d) Financial Advisors and Brokers. Except for JPMorgan, no Person has
acted, directly or indirectly, as a broker, finder or financial advisor of the
Company in connection with the Transaction Documents or the Transactions, and no
Person is entitled to receive any broker's, finder's or similar fee or
commission in respect thereof based in any way on any agreement, arrangement or
understanding made by or on behalf of any Company Party or any of their
respective directors, officers or employees.
(e) Offerees. None of the Company, its directors and officers, its
Affiliates or any Person acting as agent for or on behalf of the Company has,
directly or indirectly, sold, offered for sale, or solicited offers to buy any
of the Investment Shares or other securities of the Company so as to bring the
offer, issuance or sale of the Investment Shares as contemplated by this
Agreement within the registration requirements of Section 5 of the Securities
Act, or within the registration or qualification requirements of any "blue sky"
or securities Laws of any state of the United States of America or Korea.
Neither the Company nor any of its Representatives has made any "directed
selling efforts" with respect to the Investment Shares as defined in Rule 902
under the Securities Act.
4.2 Organization, Qualification, and Corporate Power. (a) The Company
is a chusik-hoesa, duly organized and validly existing under the Laws of the
Republic of Korea. Each of the Company's Subsidiaries is a limited liability
company or a corporation duly organized and validly existing under the Laws of
the jurisdiction of its incorporation. Each of the Company Parties is duly
authorized, qualified and licensed to conduct business under the Laws of each
jurisdiction in which the property owned, leased or operated by it or the nature
of the business conducted by it makes such qualification or license necessary,
except in such jurisdictions where the lack of such qualification or license
would not have a Material Adverse Effect. Each of the Company Parties has full
corporate power and authority to carry on the businesses in which it is engaged
as such businesses are now being conducted and to own, lease and use the
properties currently owned, leased and used by it. Each jurisdiction in which
any Company Party is authorized to conduct business is identified in Section 4.2
of the Disclosure Schedule. Section 4.2 of the Disclosure Schedule also lists
the directors and officers ("isa-daewoo" level or higher) of each Company Party.
(b) The Company has delivered to the Investors true, correct and
complete copies of the Charter Documents of each Company Party (in each case as
currently in effect).
4.3 Capitalization.
(a) As of the date hereof, the authorized capital stock of the Company
consists solely of 480,328,800 authorized shares of Common Stock, of which
279,322,680 shares are issued and outstanding. As of the Closing Date, the
authorized capital stock of the Company shall consist solely of 1,000,000,000
authorized shares of Common Stock, of which the Closing Date Amount of shares
will be issued and outstanding. All outstanding shares of Common Stock were duly
authorized and validly issued and are fully paid and non-assessable. All Persons
that are members of a Group, beneficially owning, in the aggregate, greater than
five percent (5%) of the outstanding shares of Common Stock are named in Section
4.3(a) of the Disclosure Schedule. No shares are held in treasury. Other than
those listed in Section 4.3(a) of the Disclosure Schedule (and following the
Extraordinary General Shareholders' Meeting and the Board of Directors meeting
held to confirm the issuance of the Investment Shares), no shares of capital
stock of the Company of any class or series are reserved for issuance. Except as
set forth in Section 4.3(a) of the Disclosure Schedule, there are no voting
trusts or other Contracts, arrangements or understandings to which the Company
is a party or by which the Company is bound that directly, indirectly,
absolutely or contingently, relate to the issuance, ownership, pledge, transfer,
purchase, redemption or repurchase, voting or registration under the Securities
Act or the Korean Securities Exchange Act of, or any restrictions with respect
to, any shares of authorized, issued, or outstanding capital stock of the
Company of any class or series. No Redeemable Equity of the Company is
authorized, issued or outstanding. The Company has previously furnished to the
Investors a true, correct and complete copy of each registration rights
agreement entered into by the Company in favor of any Person.
(b) Section 4.3(b) of the Disclosure Schedule lists all outstanding or
authorized Rights or other Contracts, commitments, arrangements or
understandings that could require the Company to issue, sell, or otherwise cause
to become outstanding any shares of its capital stock, or stock appreciation,
phantom stock, profit participation, or similar rights with respect to the
Company. No capital stock or other securities of the Company have been issued in
violation of any preemptive rights.
4.4 Investment Shares. All of the Investment Shares to be issued
pursuant to this Agreement will have been duly authorized at or prior to the
Extraordinary General Shareholders' Meeting and, when so issued, will have been
validly issued and will be fully paid and non-assessable and will not be subject
to any preemptive or similar rights, restrictions on voting rights, or other
Liens, in each case other than as expressly set forth in this Agreement.
4.5 Indebtedness. Section 4.5 of the Disclosure Schedule contains a
list of all outstanding loan or credit agreements, notes, bonds, mortgages,
indentures, "documents against acceptance" and other similar agreements and
instruments pursuant to which any Company Party has borrowed money (other than
indebtedness for money borrowed by a wholly-owned Subsidiary of the Company from
the Company, in each case incurred in the Ordinary Course of Business) in excess
of Won 500 million, and (a) the respective amounts of principal and accrued and
unpaid interest outstanding thereunder as of August 31, 2003 for the Company and
(b) the respective amounts of principal outstanding thereunder as of August 31,
2003 for each of the Subsidiaries.
4.6 Subsidiaries.
(a) Section 4.6(a) of the Disclosure Schedule sets forth for each
Subsidiary of the Company (i) its name and jurisdiction of organization, (ii)
its form of organization and capital structure, and (iii) the capital stock or
other equity interests held of record or owned beneficially by the Company in
such Subsidiary. All such capital stock and other equity interests are held free
and clear of any restrictions on transfer, Taxes, Liens, options, warrants,
purchase rights, contracts, commitments, equities, claims, and demands of any
nature whatsoever.
(b) There are no outstanding or authorized Rights, Contracts,
arrangements or understandings that could require any Company Party to sell,
transfer, or otherwise dispose of any equity or ownership interest in any of the
Company's Subsidiaries or that could require any Subsidiary of the Company to
issue, sell, or otherwise cause to become outstanding any of its own shares of
capital stock or membership or other equity or ownership interests or any shares
of capital stock or other equity or ownership interests in any other Company
Subsidiary. There are no (i) authorized or outstanding stock appreciation,
phantom stock, profit participation, or similar rights with respect to, or
Redeemable Equity of, any Subsidiary of the Company or (ii) voting trusts,
proxies, or other agreements or understandings with respect to the voting of any
capital stock, or other equity or ownership interests of any such Subsidiary.
Except as set forth in Section 4.6(b) of the Disclosure Schedule, none of the
Company Parties controls directly or indirectly or has any direct or indirect
equity participation or other investment in any Person which is not a
Subsidiary.
4.7 Corporate Records. The minute books or similar records of each
Company Party, which have been made available to the Investors, contain true and
complete records in all material respects of all meetings of, or written
consents in lieu of meetings (if applicable) executed by, the respective boards
of directors (and all committees thereof) and shareholders or other equity
owners of such Company Party. All material actions and transactions taken or
entered into by any Company Party and requiring action by its board of directors
or shareholders or other equity owners have been duly authorized or ratified as
necessary and are evidenced in such minute books. The shareholder registry and
the share certificate issuance ledger of each Company Party, as made available
to the Investors (and as to be made available to the Investors pursuant to
Section 7.6(d)), shall be true and complete as of December 31, 2002, as of the
record date for the 2003 Annual Meeting, as of the record date for the August
5th Extraordinary General Shareholders' Meeting and as of the record date for
the Extraordinary General Shareholders' Meeting, as applicable.
4.8 Financial Statements.
(a) The Company has delivered true, accurate and complete copies of the
Financial Statements. The Financial Statements (including the notes thereto) are
complete and correct in all material respects and present fairly the financial
position of the Company and its Subsidiaries as of such dates and the results of
operations and cash flows of the Company and its Subsidiaries for such periods
in conformity with Korean GAAP applied on a consistent basis throughout the
periods covered thereby; provided, however, that the Unaudited Financial
Statements are subject to normal year-end adjustments, none of which will be
material in nature or amount, and lack footnotes; provided, further, that the
monthly operating results are not presented in conformity with Korean GAAP but
rather are presented on a consistent basis in accordance with the Company's
internal accounting procedures.
(b) Except as set forth in Section 4.8(b) of the Disclosure Schedule,
there are no unfulfilled contractual obligations of any Company Party for
capital expenditures involving more than Won 500 million that are not reflected
in the Financial Statements.
(c) The books of account of each Company Party are true, accurate and
complete in all material respects, have been maintained in accordance with good
business practices and fairly reflect all of the properties, Assets, liabilities
and transactions of each Company Party in conformity with Korean GAAP
consistently applied; provided, that the parties acknowledge and agree that, if
after the Closing the Company changes its depreciation method (including changes
to the estimated useful life of the relevant asset or to the method of
calculating the depreciation) in accordance with Korean GAAP with respect to
telecommunications equipment (including modems), such change shall not of itself
give rise to a claim for breach of this representation if, notwithstanding the
use of the previous depreciation method (including the previous estimated useful
life of the relevant asset, or the previous method of calculating the
depreciation), the books of account of each Company Party are true, accurate and
complete in all material respects, have been maintained in accordance with good
business practice and fairly reflect all of the properties, Assets (including
telecommunications equipment), liabilities and transactions of each Company
Party in conformity with Korean GAAP, consistently applied. The Financial
Statements have been prepared based on such books of account. The Financial
Statements and books and records, do not, because of the provision of services
or the bearing of costs and expenses by any Affiliate of the Company or for any
other reason, understate the true costs and expenses of conducting the
businesses of the Company Parties. The aggregate amount of the cash balance of
the Company together with the amount of short-term financial instruments and
liquid marketable securities beneficially owned by the Company, as of the day
prior to the Closing Date shall be at least Won 50 billion. (d) Except as set
forth in Section 4.8(d) of the Disclosure Schedule, all accounts receivable and
accounts payable of the Company Parties have arisen from bona fide transactions
in the Ordinary Course of Business and have been reflected on the Financial
Statements in accordance with Korean GAAP.
4.9 Company Reports. (a) The Company has timely filed or delivered, as
applicable, all required forms, reports and documents with the SEC and the
Financial Supervisory Services ("FSS") since December 31, 1999, each of which
has complied in all material respects with all applicable requirements of Laws
relating to securities, including, but not limited to, the Securities Act, the
Securities Exchange Act, the Xxxxxxxx-Xxxxx Act of 2002 (with respect to the
filing of any such forms, reports and documents since the date of the
Xxxxxxxx-Xxxxx Act of 2002) and the Korean Securities and Exchange Act, each as
in effect on the dates such forms, reports and documents were filed or
delivered. Except for Dreamline Corporation, no Company Subsidiary has filed, or
is required to file, any form, report or other document with the SEC or FSS. The
Company has heretofore delivered to the Investors, in the form filed with or
delivered to the SEC and FSS (including any amendments or supplements thereto),
(i) its annual reports for each of the fiscal years ended December 31, 2000,
2001 and 2002; and (ii) all other reports or registration statements filed or
delivered by the Company with the SEC and FSS since January 1, 2000 (the
"Company Reports"). None of such forms, reports or documents (as amended or
supplemented) filed with or delivered to the SEC or FSS, including, without
limitation, any financial statements, exhibits or schedules included or
incorporated by reference therein, contained, when filed or delivered, any
untrue statement of a material fact or omitted to state a material fact required
to be stated or incorporated by reference therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. For the avoidance of doubt, the Company has in all cases
delivered to, but not filed with, the SEC its reports on Form 6-K; provided,
that the parties acknowledge and agree that Rule 14A of the United States
Securities Exchange Act of 1934, as amended, is not applicable to proxy
materials distributed by the Company.
(b) The audited and unaudited consolidated financial statements of the
Company included (or incorporated by reference) in the Company Reports have
complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC and FSS with
respect thereto.
4.10 Events Subsequent to Most Recent Fiscal Period End. Since December
31, 2002 there has not been any event, fact, circumstance or occurrence that
constitutes a Material Adverse Effect on any Company Party and each Company
Party has conducted its business and affairs in the Ordinary Course of Business;
provided, that an Insolvency Event with respect to Dreamline Corporation shall
not be deemed to have a Material Adverse Effect to the extent such Insolvency
Event does not result in any direct or indirect Losses, Liabilities or other
obligations of the Company other than (i) diminution in the value of Dreamline
Corporation shares held by the Company, including, without limitation,
diminution in value due to stock cancellation, capital reduction or share
transfer and (ii) Losses not exceeding Won 2,500 million arising from failure to
realize accounts receivable payable by Dreamline Corporation to the Company.
Without limiting the generality of the foregoing, since December 31, 2002:
(a) except as set forth in Section 4.10(a) of the Disclosure Schedule,
none of the Company Parties has sold, leased, transferred, or assigned any of
its Assets, other than (i) immaterial Assets or (ii) Assets sold, leased,
transferred or assigned in the Ordinary Course of Business;
(b) except as set forth in Section 4.10(b) of the Disclosure Schedule,
none of the Company Parties has entered into any agreement, Contract or license
(or series of related Contracts) involving more than Won 500 million (or its
equivalent in any other currency) or outside the Ordinary Course of Business;
(c) except as set forth in Section 4.10(c) of the Disclosure Schedule,
none of the Company Parties has accelerated, terminated (other than upon the
expiration of its term), modified, or canceled any Contract (or series of
related Contracts) involving more than Won 500 million (or its equivalent in any
other currency) to which the Company or any of its Subsidiaries is or was a
party or by which it is or was bound;
(d) except as set forth in Section 4.10(d) of the Disclosure Schedule,
none of the Company Parties has imposed or suffered to exist any material Lien
upon any of the Assets except in the Ordinary Course of Business;
(e) except as set forth in Section 4.10(e) of the Disclosure Schedule,
none of the Company Parties has purchased, leased or acquired any Assets or made
any capital or non-recurring expenditure (or series of related capital or
non-recurring expenditures), capital addition or improvement, in each case
involving more than Won 500 million (or its equivalent in any other currency) in
expenditures; Section 4.10(e) of the Disclosure Schedule also sets forth the
aggregate of all capital and operating expenditures actually committed or
incurred by each Company Party from January 1, 2003 until the date hereof and
the aggregate of all capital and operating expenditures estimated to be
committed or incurred by each Company Party from January 1, 2003 until the
Closing Date;
(f) except as set forth in Section 4.10(f) of the Disclosure Schedule,
none of the Company Parties has made any capital investment in, any loan to, or
any acquisition of the securities of, or all or substantially all of the assets
of, any other Person (or series of related capital investments, loans, and
acquisitions) involving more than Won 500 million (or its equivalent in any
other currency); Section 4.10(f) of the Disclosure Schedule also sets forth the
aggregate of any such capital investments, loans, or acquisitions (or series of
related capital investments, loans, and acquisitions) actually committed or
incurred by each Company Party from January 1, 2003 until the date hereof and
estimated to be committed or incurred by each Company Party from January 1, 2003
until the Closing Date;
(g) except as set forth in Section 4.10(g) of the Disclosure Schedule,
none of the Company Parties has issued any note, bond or other debt security or
Redeemable Equity or created, incurred, assumed, or guaranteed any Indebtedness
involving more than Won 500 million (or its equivalent in any other currency)
(other than indebtedness for money borrowed by a wholly-owned Subsidiary from
the Company, in each case incurred in the Ordinary Course of Business) that
remains outstanding or is the subject of any dispute;
(h) except as set forth in Section 4.10(h) of the Disclosure Schedule,
there has been no amendment, modification, waiver or change made or authorized
in the Charter Documents of any Company Party other than the amendments included
in the Amended and Restated Articles of Incorporation;
(i) except as set forth in Section 4.10(i) of the Disclosure Schedule,
the Company has not declared, set aside, or paid any dividend or made any
distribution with respect to its capital stock (whether in cash, securities,
property or otherwise) or redeemed, purchased, or otherwise acquired any of its
capital stock, or granted any Rights to purchase or obtain (including upon
conversion, exchange, or exercise) any capital stock of any Company Party;
(j) except as set forth in Section 4.10(j) of the Disclosure Schedule,
none of the Company Parties has experienced any damage, destruction, or loss
(whether or not covered by insurance) to any material amount of its Assets;
(k) except as set forth in Section 4.10(k) of the Disclosure Schedule, none of
the Company Parties has (i) made any loan of more than Won 500 million (or its
equivalent in any other currency) to any of the Company's shareholders,
directors, officers, or employees, or (ii) entered into any other transaction
involving more than Won 500 million (or its equivalent in any other currency)
with or for the benefit of any shareholder that is a member of a shareholder
Group beneficially owning, in the aggregate, five percent (5%) or more of the
outstanding shares of Common Stock (on an as-converted basis), or with or for
the benefit of any director, officer, or employee ("isa-daewoo" level and above)
other than transactions granting benefits in the Ordinary Course of Business in
the context of such person's relationship to the Company as director, officer or
employee, as the case may be;
(l) except as set forth in Section 4.10(l) of the Disclosure Schedule,
none of the Company Parties has discharged or satisfied any Lien, or paid,
canceled, compromised or otherwise satisfied any obligation, indebtedness or
Liability (absolute or contingent) other than the payment in the Ordinary Course
of Business of current Liabilities shown on the Balance Sheet or incurred since
the date thereof in the Ordinary Course of Business;
(m) except as set forth in Section 4.10(m) of the Disclosure Schedule,
none of the Company Parties has (A) increased the compensation payable or to
become payable by it to any of its officers ("isa-daewoo" level or higher),
directors, employees or agents, except for increases in the Ordinary Course of
Business or required under the current terms of employment agreements, or (B)
granted, made or accrued any bonus, incentive compensation, service award or
other like benefit, contingently or otherwise, to or for the credit of any of
its officers, directors, employees or agents, other than in the Ordinary Course
of Business, or made or provided under any employee welfare, pension,
retirement, profit sharing or similar payment or benefit except pursuant to
regularly scheduled payments required pursuant to the current terms of the
Employee Benefit Plans described in Section 4.23(d) of the Disclosure Schedule
or (C) paid or granted any right to receive any severance or termination pay to
any officer ("isa-daewoo" level or higher), director, or agent;
(n) none of the Company Parties has made any material change in any
method of accounting or any accounting practice; and
(o) none of the Company Parties has entered into any Contract to do any
of the foregoing other than the Transaction Documents to which it is a party.
4.11 Undisclosed Liabilities. Section 4.11 of the Disclosure Schedule
lists all contingent and off-balance sheet Liabilities of any Company Party that
are not set forth on the face of the Balance Sheet and includes a listing of all
Liabilities disclosed in the notes to the Balance Sheet, and there is no
existing condition, situation or set of circumstances which could be expected to
result in any such contingent and off-balance sheet Liability or other
obligation which, singly or in the aggregate, would be required to be reflected
or reserved against in a balance sheet of the Company and its Subsidiaries and
which in the aggregate exceed Won 500 million with respect to any Company Party.
4.12 Legal Compliance; Corporate Controls; No Breach. (a) Except as set
forth in Section 4.12 of the Disclosure Schedule, each of the Company Parties
has complied in all respects with all applicable material Requirements of Law,
and no action, suit, proceeding, hearing, investigation, charge, complaint,
claim, demand, or notice has been filed or commenced against any of them
alleging any failure so to comply. Except as specifically set forth in part B of
Section 4.12 of the Disclosure Schedule, no Company Party has any continuing
Liability with respect to any past violations of any applicable material
Requirements of Law. No Company Party, or to the Company's Knowledge, any
director, officer, agent, employee or other person acting on behalf of any
Company Party, has used any corporate or other funds for unlawful contributions,
payments, gifts, or entertainment, or made any unlawful expenditures relating to
political activity to government officials or others or established or
maintained any unlawful or unrecorded funds in violation of Section 30A of the
Securities Exchange Act. No Company Party, or to the Company's Knowledge, any
director, officer, agent, employee or other person acting on behalf of any
Company Party, has accepted or received any unlawful contributions, payments,
gifts, or expenditures. To the Company's Knowledge, each Company Party that is
required to file reports pursuant to Section 12 or 15(d) of the Securities
Exchange Act is in compliance with the provisions of Section 13(b) of the
Securities Exchange Act.
(b) All representations and warranties of the Company contained in any
of the Transaction Documents are accurate and complete in all material respects.
(c) The Company is not in material breach of any agreement, covenant or
other obligation contained in this Agreement or the other Transaction Documents.
4.13 Tax Matters.
(a) Except as set forth in Section 4.13(a) of the Disclosure Schedule,
since January 1, 1998, each of the Company Parties has filed on a timely basis
all Tax Returns that it was required to file on or prior to the date hereof. All
such Tax Returns were, when filed, correct and complete in all material
respects. Except as set forth in Section 4.13(a) of the Disclosure Schedule, all
Taxes owed by the Company Parties (whether or not shown on any Tax Return) have
been paid if due taking into account any extensions, or if not yet due, such
Taxes have been properly accrued in accordance with Korean GAAP. None of the
Company Parties is currently the beneficiary of any extension of time for the
filing of any Tax Return. Since January 1 1998, no claim has ever been made by a
Governmental Authority in a jurisdiction where any of the Company Parties does
not file Tax Returns that it is or may be subject to taxation by that
jurisdiction. There are no Liens on any of the Assets of the Company Parties
that arose in connection with any failure (or alleged failure) to pay any Tax.
(b) Except as set forth in Section 4.13(b) of the Disclosure Schedule,
each Company Party has withheld and paid to the proper Governmental Authority
all Taxes required to have been withheld and paid in connection with amounts
paid or owing to any employee, independent contractor, creditor, shareholder, or
other third party.
(c) Except as set forth in Section 4.13(c) of the Disclosure Schedule,
there is no dispute or claim concerning any Tax Liability of any of the Company
Parties either claimed or raised by any Governmental Authority since January 1,
1998 or with any agent of any Governmental Authority. Section 4.13(c) of the
Disclosure Schedule also lists all Tax Returns that currently are the subject of
Tax dispute or claim related to Tax Liability.
(d) None of the Company Parties has waived any statute of limitations
in respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(e) The Company Parties have maintained the books and records required
to be maintained pursuant to the laws, rules and regulations of Korean tax law,
and comparable laws, rules and regulations of the countries, states, counties,
provinces, localities and other political divisions wherein it is required to
file Tax Returns and other reports relating to Taxes.
4.14 Real Property; Environmental Matters.
(a) Section 4.14(a) of the Disclosure Schedule identifies all real
property as to which any Company Party is the fee owner, operator or the lessee
under a lease described in Section 4.14(e). All of the land, premises and other
improvements comprising such real property are adequate for intended and actual
usage, and are without need for material repair, and the operation thereof as
conducted during the 12-month period prior to the date hereof and as presently
and proposed to be conducted is not in violation of any applicable building
code, zoning ordinance or other Law in any material respect. All of the land,
premises and other improvements comprising such real property as to which any
Company Party is the fee owner are in good operating condition. The Company has
secured effective and valid rights to use all the land and spaces through or on
which its telecommunications network facilities are installed and such rights
are not subject to revocation, termination or modification.
(b) There are no pending actions or proceedings (including condemnation
proceedings) concerning any such current or formerly owned, operated or leased
real property that, if adversely determined to any Company Party, can reasonably
be expected to have a Material Adverse Effect and, to the Company's Knowledge,
no such action or proceeding has been threatened.
(c) None of the Company Parties has received any written notice from
any Governmental Authority requiring the correction of any condition with
respect to any property by reason of a violation or alleged violation of any
applicable Law or regulation which could reasonably be expected to have a
Material Adverse Effect, other than notices with respect to violations or
alleged violations that have been cured.
(d) The Company has made available to the Investors complete copies of
any third party reports that are in the Company's possession or control, have
been prepared within the last five (5) years, and relate to the physical or
environmental condition of any of the real property currently or formerly owned,
operated, leased or occupied by any Company Party (the "Environmental Studies").
(e) Section 4.14(e) of the Disclosure Schedule contains a list of
all leases or other Contracts or arrangements pursuant to
which real property is leased to or otherwise occupied or used
by any Company Party requiring payments in excess of Won 500
million (or its equivalent in any other currency) per year.
With respect to each such Contract:
(i) if written, the Company has provided each Investor with
true, correct and complete copy thereof, as currently in effect
and as amended or modified or agreed to be amended or modified;
(ii) except as set forth in Section 4.14(e)(ii) of the
Disclosure Schedule, such Contract is in full force and effect
and is legal, valid, binding and enforceable against the parties
thereto, except as enforceability may be limited by applicable
bankruptcy, insolvency or similar laws affecting the enforcement
of creditors' rights generally and by principles of equity
relating to enforceability and each Company Party has taken all
commercially reasonable steps to secure any refund claims it may
have against any security deposits provided by it in connection
with such Contract; and
(iii) no Company Party is in default in its obligations to
pay rent under such Contract and no Company Party or any other
party thereto is in default in any of its other material
obligations thereunder.
(f) No Company Party has received any outstanding written notice or
request for information from any Governmental Authority regarding any release or
threatened release of any Hazardous Materials or any actual or alleged material
violation of Environmental, Health, and Safety Laws relating to such property or
its occupancy, operation or use by any Company Party and arising under
Environmental, Health, and Safety Laws.
(g) Except as described in the Environmental Studies, each of the
Company Parties has complied and is in compliance, with all Environmental,
Health, and Safety Laws and has obtained, has complied, and is currently in
compliance with, in each case in all material respects, all Licenses that are
required pursuant to Environmental, Health, and Safety Laws for the occupation
of its facilities or the operation of its business.
(h) To the Knowledge of the Company, there are no events, conditions or
circumstances, including but not limited to pending changes in any
Environmental, Health and Safety Law or License, that are likely to interfere
with or otherwise affect the business or operations of any Company Party in the
manner now conducted or which would interfere substantially with compliance or
continued compliance with any Environmental, Health and Safety Law or License.
4.15 Intellectual Property.
(a) Section 4.15(a) of the Disclosure Schedule sets forth a true and
complete list of the following Owned Intellectual Property: (i) registered and
unregistered Trademarks; (ii) Patents; (iii) registered Copyrights; (iv) all
Proprietary Software; and (v) all other Owned Intellectual Property (other than
Trade Secrets) that is material to the financial condition, results of
operation, business, operations, business strategy, regulatory status or
prospects of any of the Company Parties, in each case listing, as applicable,
the registration number, the registered owner and the jurisdiction of
registration. Section 4.15(a) of the Disclosure Schedule also sets forth a true
and complete list of (i) all agreements under which any Company Party uses
Licensed Intellectual Property and (ii) all agreements under which any Company
Party has licensed to others the right to use any Company Intellectual Property,
in each case specifying the parties to the agreements, the Intellectual Property
that is licensed, and whether the license is exclusive or non-exclusive. In each
case where a patent or registration or application for registration for
Intellectual Property listed in Section 4.15(a) of the Disclosure Schedule is
held by assignment, the assignment has been duly recorded with the Governmental
Authority from which the patent or original registration issued or before which
the application for registration is pending.
(b) Except as set forth in Section 4.15(b) of the Disclosure Schedule,
there is no pending or, to the Company's Knowledge, threatened assertion or
claim and there has been no such assertion or claim in the last five (5) years
asserting that the Company Parties use or exploitation of the Company
Intellectual Property or any conduct or operation of the business of the Company
Parties, or the provision of goods and services therein, infringes upon,
misappropriates, violates or conflicts in any way with the material rights of
any Person (including rights in Intellectual Property), and to the Company's
Knowledge, there are no grounds to support such an assertion or claim. None of
the Company Parties is a party to any action, proceeding or claim that involves
a claim of infringement or misappropriation of any Intellectual Property of any
Person.
(c) Except as set forth in Section 4.15(c) of the Disclosure Schedule,
no assertion or claim has been instituted or made or is pending (nor has any
such assertion or claim been threatened) against the Company Parties (or any of
them individually) challenging the validity or enforceability of or contesting
any Company Party's rights to or in the Company Intellectual Property or any
agreement relating to the Company Intellectual Property, and to the Company's
Knowledge, there are no grounds to support any such assertion or claim. To the
Knowledge of the Company Parties, no Person is engaging in any unauthorized use,
unauthorized disclosure or other activity that infringes or misappropriates the
Company Intellectual Property or the rights of the Company Parties. No Company
Party (i) is a party to any suit, action, or proceeding which involves a claim
of infringement or misappropriation of any Intellectual Property of any third
party or (ii) has, since January 1, 1998, brought any action, proceeding or
claim against any third party for infringement of, or breach of any license
agreement involving, any of the Company Intellectual Property.
(d) The Company Parties have taken all reasonable and appropriate steps
to register all material registrable Company Intellectual Property (other than
Copyrights not relating to computer source codes) with the applicable
Governmental Authorities in all jurisdictions in which such Company Party does
business, and all registrations for Owned Intellectual Property, including for
Patents, Trademarks, and Copyrights, are registered in the name of the
appropriate Company Party, and are valid and in full force and effect and no
actions are required with respect to such registrations (or any applications
therefor) in the next six (6) months. The Company Parties have taken all
reasonable and appropriate steps to protect their ownership of and rights to
their unregistered Copyrights.
(e) The Company Parties have not given or received any notice of
default or any event which with the lapse of time would constitute a default
under any material agreement relating to the Company Intellectual Property; to
the Knowledge of the Company Parties, neither the Company Parties nor any other
Person currently is in default in any material respect with regard to any
agreement relating to the Company Intellectual Property, and there exists no
condition or event (including the execution, delivery and performance of this
Agreement) which, with the giving of notice or the lapse of time or both, would
constitute a default by the Company Parties under any such agreement, or would
give any Person any right of termination, cancellation or acceleration of any
performance under any such agreement or result in the creation or imposition of
any Lien, in each case.
(f) With respect to pending applications of the Owned Intellectual
Property, the Company Parties are not aware of any reason that could reasonably
be expected to prevent any such application from being granted. The Owned
Intellectual Property has not been adjudged invalid or unenforceable, in whole
or part, and is valid and enforceable.
(g) The Company Parties own free and clear of all Liens, hold under
license or otherwise possess full, legally enforceable rights to use all the
Company Intellectual Property in all of the jurisdictions in which the Company
Parties conduct or may conduct a substantial amount of their business or where a
substantial amount of the goods and services of their business are or are
currently planned to be distributed, free and clear of conditions, adverse
claims or other restrictions or any requirements of any past, present or future
royalty payments. The Company Intellectual Property constitutes all of the
material Intellectual Property used or held for use by the Company Parties in
connection with the conduct of their business as currently conducted (and
proposed to be conducted) and all material Intellectual Property necessary in
the conduct of such business as currently conducted (and proposed to be
conducted), and the consummation of the Transactions will not alter or impair
any such rights.
(h) The Licensed Intellectual Property includes valid licenses under
all computer software, databases, data, and applications that are owned by third
parties and used by any Company Party in connection with its business ("Third
Party Software"), and the use by the Company Parties of such Third Party
Software complies with such licenses in all material respects. No rights in the
Proprietary Software or any Third Party Software have been transferred or
licensed to any third party except to the customers of the Company Parties to
whom the Company Parties have licensed or sublicensed such Proprietary Software
or Third Party Software in the Ordinary Course of Business.
(i) Each Company Party has taken all reasonable and appropriate steps
to maintain and protect the confidentiality of its Trade Secrets and other
confidential Company Intellectual Property, and to the Knowledge of the Company
Parties there has been no unauthorized use, disclosure or misappropriation of
any Trade Secrets or other confidential Intellectual Property by the Company
Parties in any material respects. All use by, and disclosure to any Person of
Trade Secrets that comprises the Company Intellectual Property has been made on
a confidential basis by such Person, and all use by the Company Parties of Trade
Secrets owned by another Person is lawful.
4.16 Licenses; Requirements of Law. Except as set forth in Section 4.16
of the Disclosure Schedule, each of the Company Parties possesses all material
authorizations, approvals, consents, licenses, permits, easements, certificates
and other rights and permissions necessary to conduct its respective business
and to own, lease and operate its respective properties as currently or proposed
to be conducted, owned, leased or operated (collectively for all Company
Parties, the "Licenses"). All of the Licenses are in full force and effect. The
Company is currently and has at all applicable times in the past been in
compliance with the terms and conditions of each such License in all material
respects and no material capital expenditures will be required to insure the
continued compliance by it with such Licenses. The Company has no reason to
believe that any of the Licenses will be revoked, canceled, rescinded, or not
renewed in the ordinary course and on similar or more favorable material terms,
other than any such revocation, cancellation, rescission, or non-renewal of any
License which is not individually or in the aggregate with one or more other
License(s), material to the business or operations of the Company and its
Subsidiaries taken as whole. There is not now pending any material complaint
nor, to the Knowledge of the Company, any basis for any such complaint, which
might have any of the results referred to in the immediately preceding sentence.
Each of the Company Parties is operating in all material respects in accordance
with the terms of the Licenses. Each of the Company Parties is, and has
conducted its business and affairs, in compliance with all material Requirements
of Law.
4.17 Title to Property. Except as set forth in Section 4.17 of the
Disclosure Schedule, each Company Party has good title to all of its properties
(including all Intangible Property and real property), free and clear of all
material Liens.
4.18 Insurance. The properties and operations of each Company Party are
insured under various policies of general liability and other forms of insurance
covering such risks as are customary for companies engaged in the businesses and
activities in which such Company Party is engaged, in amounts which are
customarily considered adequate in relation to the business and properties of
such Company Party, and all premiums to date have been paid in full. No Company
Party has been refused any insurance, nor has its coverage been limited, by an
insurance carrier to which it has applied for insurance or with which it has
carried insurance during the past five (5) years. Except as set forth in Section
4.18 of the Disclosure Schedule, there are no Liens on any insurance policies
held by any Company Party.
4.19 Absence of Certain Interests of Affiliated Persons. Except as set
forth in Section 4.19 to the Disclosure Schedule, no shareholder that is a
member of a shareholder Group beneficially owning, in the aggregate, five
percent (5%) or more of the outstanding shares of the equity securities of any
Company Party (on an as-converted basis) or partner, joint venturer, director,
officer ("isa-daewoo" level and above) or employee of any Company Party nor any
Related Person of any such partner, director or officer (i) owns or has any
proprietary, financial or other interest, direct or indirect, in whole or in
part, in any Intellectual Property or any other material asset or property which
any Company Party owns, possesses or uses in its business as now or proposed to
be conducted, or is involved in any business arrangement or relationship with
any Company Party which is material to the business and operations of the
Company Parties or (ii) is indebted to any Company Party, and no Company Party
is indebted or has any other Liability to any such Person, except Liabilities to
directors or officers or employees for compensation for services in such
capacity or Liabilities of less than Won 1.2 billion in the aggregate and less
than Won 60 million in respect of any individual.
4.20 Contracts. Section 4.20 of the Disclosure Schedule lists the
following contracts and other agreements to or by which the Company or any of
its Subsidiaries is a party or bound (the "Company Contracts"):
(i) Contracts with any shareholder that is a member of a
shareholder Group beneficially owning, in the aggregate, five
percent (5%) or more of its outstanding equity securities (on an
as-converted basis), director, officer ("isa-daewoo" level or
higher), or consultant or any Related Person of such director,
officer or consultant involving payments in excess of Won 500
million (or its equivalent in any other currency) per year,
including any Contract with any such Person which is not
terminable at will by the Company Party which is a party thereto
without any payment of any kind and except for (x) employment
contracts with shareholders who are employees of the Company and
(y) Contracts exclusively between and for the benefit of and
enforceable by Company Parties;
(ii) Contracts in which the value of such Contracts
individually exceed, or are reasonably anticipated to exceed, Won
500 million (or its equivalent in any other currency) for the
duration of such Contracts;
(iii) Contracts made with the suppliers disclosed in Section
4.31(a) of the Disclosure Schedule;
(iv) Contracts outside the Ordinary Course of Business for
the future purchase of, or payment for, equipment, inventory,
supplies, other goods or products or services having a total
value or involving total payments or costs of Won 500 million (or
its equivalent in any other currency) or more in any one case or
in the aggregate for all Contracts which are related or which are
with the same Person or group of affiliated Persons;
(v) Contracts outside the Ordinary Course of Business
continuing over a period of more than six (6) months from the
date hereof having a total value or involving total payments or
costs of Won 500 million (or its equivalent in any other
currency) or more in any one case or in the aggregate for all
Contracts which are related or which are with the same Person or
a group of affiliated Persons;
(vi) leases outside the Ordinary Course of Business under
which any Company Party is either lessor or lessee of any real
property or any material personal property having annual lease
payments in excess of Won 500 million (or its equivalent in any
other currency);
(vii) notes, debentures, bonds or other security or evidence
of indebtedness, equipment trust agreements, letter of credit
agreements, loan agreements, pledge or security agreements,
mortgages or other Contracts in each case pursuant to which any
material contingent obligation (or any other Liability) in excess
of Won 500 million (or its equivalent in any other currency) of
any Company Party to any other Person or of any other Person to
any Company Party was incurred or may be incurred in the future
or otherwise relating to any such obligation or other Liability;
(viii) Contracts (with sufficient specificity regarding the
following), limiting or restraining any Company Party from
engaging in any business or competing in any manner generally or
in any specific geographic area or obligating any Company Party
to present any business or other opportunity to any other Person
or grant or offer to grant any other Person any participation or
other interest in any business or other opportunity;
(ix) Contracts (with sufficient specificity regarding the
following), pursuant to which any Person has a right of first
offer, first refusal, a "tag-along" right, a "drag-along" right
or any similar right with respect to any proposed disposition by
any Company Party of any equity interest in any Company Party or
of any property of a Company Party;
(x) Contracts with any labor union or other labor
representative;
(xi) bonus, pension, profit-sharing, retirement, stock
purchase, stock option or other equity based, deferred or
incentive compensation, death benefit, disability, severance,
termination, retention, change in control, insurance, medical,
fringe or other benefit plan, or similar plan, program or
Contract in effect with respect to its employees or the employees
of others;
(xii) any Contract that provides for a "golden parachute",
"tin parachutes" or similar benefits;
(xiii) any material Contract outside the Ordinary Course of
Business relating to the mortgaging, pledging or other placing of
a Lien on any properties of any Company Party; and
(xiv) any Contract under which the consequences of a default
or termination would have a Material Adverse Effect.
The Company has made available to the Investors a correct and complete copy of
each written Contract (as amended to date) listed in Section 4.20 of the
Disclosure Schedule. Each Contract required to be identified in such section of
the Disclosure Schedule is in full force and effect and, to the Company's
Knowledge, is the legal, valid and binding obligation of the parties thereto and
enforceable in accordance with its terms. There is no material default under any
such Contract by any Company Party (other than Dreamline Corporation), or, with
respect to Contracts described in Section 4.20(xiv), to the Company's Knowledge,
by any other party thereto, and no event has occurred that with the lapse of
time or the giving of notice or both would constitute a material default
thereunder by any Company Party (other than Dreamline Corporation), or, with
respect to Contracts described in Section 4.20(xiv), to the Company's Knowledge,
any other party.
4.21 Litigation. Section 4.21 of the Disclosure Schedule sets forth
each Judgment entered against or specifically relating to any Company Party or
any of its Assets since December 31, 2001. No Company Party is a party to or
otherwise involved in or, to the Company's Knowledge, is threatened to be made a
party to or threatened to be involved in any material action, suit, proceeding,
hearing, or investigation of, in, or before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator in which the amount in dispute or potential judgment
exceeds Won 500 million.
4.22 Employees.
(a) Except as set forth in Section 4.22(a) of the Disclosure Schedule,
none of the Company Parties is a party to or bound by any collective bargaining
or similar labor agreement, nor has any Company Party experienced any strikes,
work stoppages, other material labor disputes, grievances, claims of unfair
labor practices, or other collective bargaining disputes since January 1, 2000.
(b) None of the Company Parties has committed any unfair labor practice
within the meaning of any applicable Requirement of Law, except for any such
practice that would not be reasonably likely to, individually or in the
aggregate, result in a material Liability to any Company Party.
(c) Attached hereto as Schedule 4.22(c) is a true and complete copy of
the collective bargaining agreement dated July 31, 2003 between the Company and
its labor union (the "Collective Bargaining Agreement"). The Collective
Bargaining Agreement has not been modified or amended in any way.
(d) The Company Parties have made available copies of any standard
Employment Agreement, and have described in reasonable detail (i) any Employment
Agreements that provide for terms or conditions of employment or compensation or
benefits that are materially different from the form of Employment Agreement and
(ii) any rules of employment generally applicable to employees of the Company
Parties.
(e) Except as set forth in Section 4.22(e) of the Disclosure Schedule,
no employee or consultant of the Company Parties is entitled to engagement or
continued employment or service for a definite term, or to the benefit of any
Contract that imposes materially more onerous requirements on termination than
those under applicable Laws.
(f) Except as set forth in Section 4.22(f) of the Disclosure Schedule,
the Company Parties are not parties to any Contract that would prevent them from
making, or limit their ability to make, reductions in their work force (other
than by application of Law).
(g) Except as set forth in Section 4.22(g) of the Disclosure Schedule,
and except as would not reasonably be likely to, individually or in the
aggregate, result in a material Liability to any Company Party, (i) the Company
Parties are in compliance with all material Requirements of Law relating to
employment, including terms and conditions of employment, termination of
employment, industrial relations, labor unions, mandatory severance benefits,
social insurance programs, equal employment, employment of veterans and the
handicapped, and prohibition of discrimination; (ii) there are no complaints,
charges or claims against the Company Parties pending or, to the Knowledge of
the Company Parties, threatened to be brought or filed with any Governmental
Authority in connection with any such Law; and (iii) there are no contributions
due and unpaid in material amounts under any such Law.
(h) Set forth in Section 4.22(h) of the Disclosure Schedule is a true
and complete list of all employees of the Company who since June 30, 1999 have
worked for the Company on a temporary basis. The Company does not have any
Liabilities arising from or relating to the employment of such temporary
employees, including Liabilities related to wages, hours, collective bargaining,
civil rights, safety and health and the collection and payments of withholding
of Taxes, other than Liabilities in respect of wages (and related Taxes) due to
currently employed temporary employees in respect of the current payment period.
(i) Except as set forth in Section 4.22(i) of the Disclosure Schedule,
there is no agreement or arrangement between any Company Party and any Company
Party employee or former employee of a Company Party with respect to his/her
employment, his/her ceasing to be employed or his/her retirement or separation
which is not included in the employment rules of the Company Parties, applicable
Law or any other applicable written terms of his/her employment or previous
employment.
(j) Except as set forth in Section 4.22(j) of the Disclosure Schedule,
no Company Party has provided, or agreed to provide, a gratuitous payment or
benefit to any of the Company Party employees or to his/her dependents other
than those provided for in the employment rules of the Company Parties.
(k) Except as set forth in Section 4.22(k) of the Disclosure Schedule,
none of the Company Parties has (i) incurred any Liabilities for breach or
unlawful termination of an employment contract with any of its employees or
former employees including severance payment, compensation for wrongful
termination, and failure to comply with an order for reinstatement or
reengagement and back pay, (ii) incurred a Liability for breach or termination
of a consultation agreement, or (iii) made or agreed to make a payment or agreed
to provided a benefit to any Company Party employee or former employee or any of
their dependents in connection with the actual or proposed termination or
suspension of employment or variation of an employment contract.
(l) On August 2, 2002, the Company sold all of its equity interest in
Hanaro Technology to OTC Tech Co., Ltd., OHC Ltd., and Mr. Hee Uhn Xxx. Except
as set forth in Section 4.22(l) of the Disclosure Schedule, the Company has no
outstanding obligations relating to any former employee of, or any other
outstanding Liabilities relating to, Hanaro Technology. The Company has filed
official notice with the KOSDAQ and the Financial Supervisory Commission of
Korea regarding its disaffiliation with Hanaro Technology.
4.23 Employee Benefit Matters.
(a) Except as set forth in Section 4.23(a) of the Disclosure Schedule
with respect to Employment Agreements in effect as of the date hereof or as of
the Closing Date, the Company Parties have no Employment Agreements that provide
for (i) a salary to a person of more than Won 100 million per year or (ii)
potential incentives (as estimated by the Company in good faith), benefits or
other payments to a person of more than Won 50 million per year or (iii)
potential payment to a person of more than Won 100 million upon severance or
termination.
(b) The consummation of the transactions contemplated by this Agreement
(alone or together with any other event) will not (i) entitle any Person to any
benefit under any Employee Benefit Plan; (ii) accelerate the time of payment or
vesting, or increase the amount, of any compensation due to any Person under any
Employment Agreement, Employee Benefit Plan or otherwise; (iii) result in any
"parachute payment" or excise tax or any other additional Tax or penalty under
applicable Law (whether or not such payment is considered to be reasonable
compensation for services rendered); or (iv) cause any compensation to fail to
be deductible under applicable Law.
(c) With respect to each of the Employee Benefit Plans, the present
value of the accrued benefits under each such Employee Benefit Plan, based upon
actuarial assumptions used for funding purposes in the most recent actuarial
report prepared by such Employee Benefit Plan's actuary with respect to such
Employee Benefit Plan, did not, as of its latest valuation date, exceed the
then-current value of the assets of such Employee Benefit Plan allocable to such
accrued benefits.
(d) Section 4.23(d) of the Disclosure Schedule lists all Employee
Benefit Plans of the Company Parties. The Company Parties have no Liability with
respect to, and have timely made all payments due to, and recorded on their
books all amounts properly accrued in respect of, all Employee Benefit Plans and
terminated employee benefit plans.
(e) The Company has delivered to the Investors with respect to each
Employee Benefit Plan for which the following exists:
(i) a copy of the most recent periodic governmental filing;
(ii) in respect of each Employee Benefit Plan for which
financial statements and/or actuarial reports are required to be
or are otherwise prepared, the most recent copy of such financial
statements or actuarial reports;
(iii) a copy of the summary plan description or similar
description of each Employee Benefit Plan, all material employee
communications relating to such Employee Benefit Plan, and,
unless the Employee Benefit Plan is embodied entirely in an
insurance policy to which any Company Party is a party, a true
and complete copy of such Employee Benefit Plan; and
(iv) if the Employee Benefit Plan is funded through a trust
or any third party funding vehicle (other than an insurance
policy), a copy of the trust or other funding agreement.
(f) Except as set forth in Section 4.23(f) of the Disclosure
Schedule, the Employee Benefit Plans conform to and are
administered in accordance with their terms and all applicable
Laws, and there are no proceedings pending with respect to the
Employee Benefit Plans, except for any failure or proceeding that
would not be reasonably likely to, individually or in aggregate,
result in a material Liability to any Company Party.
(g) The Company Parties do not provide, and have not agreed
to provide, any employee benefits or other payments other than as
provided under the Employee Benefit Plans or Employment
Agreements, and there are no obligations or commitments in force
that would bind the Company Parties to grant any incentive
compensation or pay for pension, early retirement or other
benefits relating to retirement or otherwise to current or former
employees or executives in excess of those provided under the
Employment Agreements and Employee Benefit Plans.
(h) The Company Parties have paid all interim severance
payments applicable to any of their employees pursuant to the
relevant Company Party's rules of employment and any applicable
Law.
(i) Since June 30, 1997, no Company Party or any entity
which is considered one employer with any Company Party under
Section 4001 of the U.S. Employment Retirement Income Security
Act of 1974, as amended, or Section 414 of the U.S. Internal
Revenue Code has maintained or contributed to, or has been
required to contribute to, any benefit plan subject to Title IV
or Section 302 of the U.S. Employment Retirement Income Security
Act of 1974, as amended.
4.24 Guaranties; Related Person Liabilities. (a) Except as set forth in
Section 4.24(a) of the Disclosure Schedule, none of the Company Parties is a
guarantor or co-borrower in respect of any Liability or obligation or is
otherwise liable for any Liability or obligation (including indebtedness) of any
other Person.
(b) As of the Closing Date there will be no Liability or obligation
owed by any Company Party to any Related Person of any Company Party (other than
obligations owed by one Company Party to another). Except as set forth in
Section 4.24(b) of the Disclosure Schedule, any such Liability, or obligation
that has not been satisfied between the date of this Agreement and the Closing
Date shall have been terminated, cancelled or otherwise extinguished or released
in full without any further payment obligation by or on behalf of any Company
Party or recourse, direct or indirect, to any Assets of any Company Party.
(c) Section 4.24(c) of the Disclosure Schedule sets forth a list of all
Liabilities owed to any Company Party by any other Company Party that,
individually or in the aggregate, exceed Won 1 billion.
4.25 Availability of Documents. The Company has made available to each
Investor copies of all documents, including all Contracts, insurance polices,
plans, and Licenses listed in the Disclosure Schedule or otherwise referred to
herein. Such copies are true and complete and include all amendments,
supplements and modifications thereto or waivers currently in effect thereunder.
4.26 Restrictions. None of the Company Parties is currently a party to
or bound by any Contract or subject to any restriction of any nature under any
Requirements of Law, which materially adversely affects or materially restricts
or, so far as the Company can now reasonably foresee, may in the future have a
Material Adverse Effect or materially restrict, the business, operations,
properties, results of operations, regulatory status or financial condition of
such Company Party.
4.27 Dividends; Stock Repurchases, Etc. Other than pursuant to the
Transaction Documents, or as restricted or limited by applicable Law, there are
no contractual or other restrictions or limitations on the ability of the
Company Parties to pay any dividends or make any other distributions on, or to
purchase, redeem or otherwise acquire any of its securities.
4.28 Key Employees. None of the officers or Key Employees of any
Company Party, to the Company's Knowledge, presently intends to terminate his or
her employment with such Company Party.
4.29 Officer Terms. Section 4.29 of the Disclosure Schedule sets forth
a list of all the officers of the Company as of the date of this Agreement and
their respective term expiration dates.
4.30 Board of Directors. (a) Section 4.30(a) of the Disclosure Schedule
sets forth a list of all the directors of the Company as of the date of this
Agreement, the date on which each director's term commenced and the date on
which each director's term will expire.
(b) Except as set forth in Section 4.30(b) of the Disclosure Schedule,
there are no committees of the Board of Directors.
4.31 Suppliers.
(a) Suppliers. Section 4.31(a) of the Disclosure Schedule sets forth
the 25 largest suppliers of the Company in terms of payments made (including
payments made under licenses of Intellectual Property) showing the approximate
payments made to each supplier as set forth on the Company's ledger dated
December 31, 2002. None of such suppliers has notified in writing any Company
Party that it intends to terminate or change significantly its sale or licensing
of products or services purchased or licensed by such party or any of the
material terms thereof. To the Knowledge of the Company Parties, none of such
suppliers is insolvent. None of the Contracts with such suppliers is terminable
at will by the supplier or may be terminated or modified unilaterally upon a
"Change of Control" (or similar concept as such term (or concept) is defined in
such Contract) or similar occurrence. No Company Party has granted or agreed to
grant any unusual credit, trade-in, free return, discount or other unusual sales
terms in the acquisition of its inventory. The Company Parties have taken all
necessary action to protect their rights under applicable warranties. There are
no material claims pending or, to the Knowledge of the Company, threatened by
any Company Party against any of their suppliers or by any such supplier against
any Company Party.
(b) Active Subscribers. As of June 30, 2003, the Company had
approximately 3,689,160 Active Subscribers, 1,104,558 for its ADSL broadband
services, 106,189 for its VDSL broadband services, 1,472,761 for its cable modem
broadband services, 31,057 for its LMDS broadband services, 201 for its wireless
LAN services, 967,427 for its telephone services and 6,967 for its leased line
services.
4.32 Regulatory Payments. (a) Except as set forth in Section 4.32(a) of
the Disclosure Schedule, the Company has complied with the Telecommunications
Business Law of Korea and the conditions of its network service provider and
specific service provider licenses in all respects, including the making of any
required contributions to the Informatization Promotion Fund as determined by
the Ministry of Information and Communications.
(b) Except as set forth in Section 4.32(b) of the Disclosure Schedule,
the Company has compensated any other network service provider that it is
required to compensate under the Standards for USO Compensation Payment
Calculation Method of the Telecommunication Business Law of Korea.
4.33 Disclosure. No representations or warranties made by the Company
in this Agreement, including the Schedules and Exhibits hereto, and no statement
contained in any document (including, without limitation, the Financial
Statements, certificates or other writing) furnished or to be furnished by the
Company to any Investor or any of its Affiliates or Representatives pursuant to
the provisions hereof or in connection with the transactions contemplated hereby
contains or will contain any untrue statement of material fact or omits to state
any material fact necessary, in light of the circumstances under which it was
made, in order to make the statements herein or therein, taken as a whole, not
misleading in any material respect.
4.34 Business Plan. Attached hereto as Schedule 4.34 is a true and
complete copy of the Company's business plan for the fiscal year 2003 reported
to the Board of Directors on May 9, 2003 (the "2003 Business Plan"). All
projections and other forward looking statements contained therein were prepared
in good faith based on reasonable assumptions. The 2003 Business Plan has not
been modified or amended in any way, and no modification or amendment has been
proposed to the Board of Directors, or in the reasonable judgment of the
Company, should be proposed to the Board of Directors or otherwise made.
4.35 M-Commerce. No Company Party has guaranteed any obligations of, or
is otherwise liable for, any Liability of M-Commerce Co., Ltd., and no Company
Party has any ongoing contractual or legal relationship with M-Commerce Co.,
Ltd., other than the legal relationship arising solely as a result of ownership
of the common shares of M-Commerce.
4.36 Thrunet Investment. (a) Each of the Thrunet Transaction Documents
has been terminated and the Company has no outstanding obligations or
Liabilities in respect thereof.
(b) The Company exercised its Put Right (as defined in the Thrunet
Share Purchase Agreement) on January 15, 2003, and the First Closing (as defined
in the Thrunet Share Purchase Agreement) has been fully unwound to place the
Company in the same position in which it existed immediately prior to the First
Closing. Such unwinding of the First Closing is not and shall not become subject
to challenge in any proceeding under any reorganization, arrangement, adjustment
of debt, relief of debtors, bankruptcy, dissolution or similar Law or Insolvency
Statute of any jurisdiction relating to Thrunet.
(c) Any Hanaro-Thrunet Convertible Bonds issued by the Company in
connection with the Thrunet Transaction have been canceled and the Company has
no continuing Liabilities with respect thereof.
4.37 Dreamline. Except as set forth in Section 4.37 of the Disclosure
Schedule, all transactions between Dreamline Corporation and any other Company
Party have been made on an arm's length and fair basis. No Insolvency Event or
potential Insolvency Event with respect to Dreamline Corporation has or will
give rise to any Losses, Liabilities or other obligations of any Company Party,
other than (i) a diminution in the value of the Dreamline Corporation shares
owned by the Company, including, without limitation, diminution in value due to
stock cancellation, capital reduction or share transfer and (ii) Losses not
exceeding Won 2,500 million arising from the failure to realize accounts
receivable payable by Dreamline Corporation to the Company.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF EACH INVESTOR
Each Investor, severally and not jointly, represents and warrants to
and covenants and agrees with the Company as follows as of the date hereof and,
after giving effect to all of the Transactions to be consummated on the Closing
Date, as of the Closing Date, with the same force and effect as if made at and
as of such time:
5.1 Organization. It is an Entity duly organized, validly existing and
in good standing under the Laws of the jurisdiction under which it was
incorporated, chartered, formed or otherwise organized.
5.2 Power. It has all requisite power to execute and deliver this
Agreement.
5.3 Execution and Delivery; Authorization. This Agreement has been, and
upon execution by it the other Transaction Documents will be, duly and validly
executed and delivered by it. The execution and delivery by it of this Agreement
has been duly and validly authorized by all necessary corporate action on its
part. Each of the Transaction Documents, when executed and delivered, will
constitute a legal, valid and binding obligation of it, enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency and
similar Laws affecting creditor rights generally and to general principles of
equity.
ARTICLE VI
GOVERNANCE
6.1 Board Vacancies. Vacancies on the Board of Directors occurring
after the election of the Investors' Nominees (other than vacancies occurring
because of the death, resignation, incapacity or other removal of any of the
Investors' Nominees) but prior to the Closing Date shall not be filled prior to
the Closing Date. Any vacancy that exists prior to the Closing Date on the Board
of Directors created as a result of the death, resignation, incapacity or other
removal of the Investors' Nominees shall be filled by a person designated by the
Investors at an extraordinary general meeting of the shareholders of the Company
to be held as soon as possible after such death, resignation, incapacity or
other removal.
6.2 Representative Director. (a) Sole Representative Director. No later
than the Closing Date, the CEO shall be the sole Representative Director of the
Company.
(b) Replacement Representative Director. At the Third Board Meeting,
the Board of Directors shall pass a resolution appointing an Investors' Nominee
designated by the Investors as the replacement Representative Director in
accordance with paragraph 31(2) of the Amended and Restated Articles of
Incorporation. Such resolution shall remain in full force and effect through the
Closing Date and shall not be modified, revoked, derogated from or superseded in
any way without the prior written consent of the Investors.
6.3 Chief Financial Officer. No later than the Third Board Meeting, the
CEO shall duly appoint the Investors' designee as the chief financial officer of
the Company, effective as of the Closing Date. The Investors' designee shall be
a person of appropriate competence. The chief financial officer shall have the
authority and responsibility for all financial matters related to the Company,
but shall not be a member of the Board of Directors.
6.4 Outside Directors Nominating Committee. At the Third Board Meeting,
the Outside Director Candidate Nominating Committee Rules shall be approved and
three (3) new members of the Outside Director Nominating Committee together with
their alternates shall be appointed, each to a three (3) year term, and two (2)
of such members together with their alternates shall be Investors' Nominees
designated by the Investors. Such appointments shall become effective as of the
Closing Date. The Amended and Restated Articles of Incorporation shall limit to
three (3) the number of members on the Outside Director Nominating Committee.
6.5 Director and Officer Indemnification. The Company will provide to
each Investors' Nominee upon his election to the Board of Directors,
indemnification and directors' insurance having terms and provisions reasonably
satisfactory to the Investors (including coverage for matters arising in whole
or in part out of any matter existing or occurring while such Investors' Nominee
was a director, even though such Investors' Nominee may no longer be a director
at the time any claim for indemnification or coverage under insurance is made).
6.6 Continuing Veto Rights. The Company shall not, and shall cause its
Subsidiaries not to, take any of the actions specified in Section 7.1(a)(iii)
without the consent of the Investors at any time when the Investors together
with their Affiliates hold an aggregate of fifteen percent (15%) or more of the
outstanding Common Stock.
6.7 Rights to Information. (a) After the Closing, the Company shall
provide to all directors nominated by the Investors all corporate, financial,
tax, accounting and other information provided to any other director and shall
give such directors nominated by the Investors complete access to examine all
such information on the same basis as any other director. Any such information
that (i) would be required to be provided to a member of the Board of Directors,
(ii) is outside the Ordinary Course of Business, or (iii) relates to any matter
involving in excess of Won one billion shall be provided in the English
language.
(b) While any Investor holds any Investment Shares, it shall have the
right to receive any and all information related to the financial condition,
business, prospects, results of operations and other information generally
provided to holders of Common Stock or Rights of the Company.
6.8 Management Rights Agreements. The Company shall enter into a
Management Rights Agreement with each VCOC Investor.
ARTICLE VII
COVENANTS
7.1 Conduct of Business. (a) From the date hereof until the Closing
Date the Company shall conduct its business and shall cause its Subsidiaries to
conduct their respective businesses in, and only in, the Ordinary Course of
Business and shall use, and shall cause its Subsidiaries to use, their best
efforts to preserve intact their respective present business organizations,
operations, goodwill and relationships with third parties (including, without
limitation, customers and suppliers) and (subject to Section 3.1 and Article VI)
to keep available the services of the present directors, officers and Key
Employees. Without limiting the generality of the foregoing, from the date
hereof until the Closing Date, without the prior written consent of the
Investors' Representatives (which consent shall not be unreasonably withheld),
except as expressly permitted or required by this Agreement:
(i) the Company shall not, and shall cause each of its
Subsidiaries not to take any of the actions or enter into any of
the agreements, commitments or transactions described in Xxxxxxx
0.00 (x), (x), (x), (x), (x) and (n) hereof (provided, that for
purposes of this Section 7.1(a)(i) only, the threshold in Section
4.10(b) shall be deemed to be Won 1 billion);
(ii) the Company shall not, and shall cause each of its
Subsidiaries not to, take any action that it knows or has reason
to believe would cause a representation or warranty of the
Company set forth herein to be untrue in any material respect if
made at such time, or a condition to fail to be satisfied as of
the Closing Date;
(iii) except as may be otherwise expressly permitted or
required by this Agreement, the Company shall not, and shall
cause each of its Subsidiaries not to, take any of the following
actions without the express prior written consent of the
Investors:
(A) adopt any annual business plan or any material
amendments thereto, or permit significant deviations therefrom;
(B) take any action or enter into any transactions that
could reasonably be expected to result in a material change in
the scope, nature and/or activities of the Company's business;
(C) enter into any binding or non-binding commitment in
respect of, or take any other action in furtherance of, any
actual or proposed acquisition, merger, investment (including
capital expenditures), divestiture or disposition of Assets or
other Business Combination of any kind, in which the fair value
of the assets being transferred, or the total consideration (in
the form of cash or property and including any contingent
consideration and any Indebtedness or other obligations assumed)
to be paid to or by any Company Party in one transaction or a
series of related transactions exceeds the lesser of (i) Won 50
billion (or the equivalent in any other currency) and (ii) five
percent (5%) of the net worth of the Company as set forth in the
last consolidated balance sheet of the Company filed with the
SEC;
(D) modify, amend, change or grant any waiver under any
Company Party's Charter Documents or authorize any such
modification, amendment, change or waiver, provided, that any
such action (x) undertaken exclusively by the shareholders of the
Company or (y) required to be undertaken as a result of a
shareholder resolution not proposed by the Company or the Board
of Directors, shall not be deemed to violate this Section
7.1(a)(iii)(D);
(E) take any action that would result in any material
changes to any Contract between any Company Party, on the one
hand, and any of its or their major shareholders, on the other,
or enter into any such Contract;
(F) enter into any Contract or transaction or series of
related transactions with or involving any Related Persons of any
Company Party, (x) that is not entered into in the Ordinary
Course of Business or in which the total consideration payable
thereunder, or fair market value of goods or services provided
thereunder, is in excess of (a) Won 100 million with respect to
the Contracts or transactions with or involving a natural Person,
(b) Won 1,000 million with respect to Contracts or transactions
with or involving an Entity other than Onse Telecom, Dacom
Corporation, LG Electronics Inc., LG Telecom Co., Ltd., Samsung
Electronics Co., Ltd., and SK Telecom, or (c) Won 5,000 million
(or in excess of Won 10,000 million in any calendar year) with
respect to Onse Telecom, Dacom Corporation, LG Electronics Inc.,
LG Telecom Co., Ltd., Samsung Electronics Co., Ltd., and SK
Telecom; or (y) that is not for fair market value;
(G) take any action that (x) would result in any material
increase or decrease of compensation payable or to become payable
by the Company (or any other Company Party) to any of its
officers or directors except for increases required under the
terms of employment agreements as in effect on January 1, 2003,
or (y) would result in the granting, making or accrual of any
bonus, incentive compensation, service award or other like
benefit, contingently or otherwise, to or for the credit of any
of its officers or directors, or (z) would result in the payment
or granting of any right to receive any severance or termination
pay to any officer or director;
(H) issue, guarantee, reschedule, rearrange or restructure
any note, bond, or other debt security or Redeemable Equity or
otherwise create, incur, assume, guarantee, reschedule, rearrange
or restructure any Indebtedness involving more than Won 100
million (or its equivalent in any other currency) other than (x)
indebtedness for money borrowed by a wholly-owned Subsidiary from
the Company, in each case incurred in the Ordinary Course of
Business, (y) promissory notes issued in the Ordinary Course of
Business of up to Won 30 billion per month, not to exceed Won 70
billion in the aggregate between the date hereof and the Closing
Date and (z) the restructuring of Indebtedness of Dreamline
Corporation;
(I) propose, declare, set aside, or pay any dividends or
make any other distributions or make any changes in the dividend
policy of the Company with respect to its (or their) capital
stock (whether in cash, securities, property or otherwise), or
redeem, purchase or otherwise acquire any of the Company's
capital stock, or grant any Rights to purchase or obtain
(including upon conversion, exchange, or exercise) any of the
capital stock of any Company Party, provided, that any such
action (x) undertaken exclusively by the shareholders of the
Company or (y) required to be undertaken as a result of a
shareholder resolution not proposed by the Company or the Board
of Directors, shall not be deemed to violate this Section
7.1(a)(iii)(I);
(J) take any action that would result in the issuance of any
equity securities or Rights of any Company Party, except for the
issuance of Common Stock pursuant to agreements or instruments
outstanding as of the date hereof that require the issuance of
such shares, as set forth in Section 4.3(b) of the Disclosure
Schedule; and
(K) make any decision or take any action similar to those
listed above in this Section 7.1(a)(iii).
(iv) the Company shall not remove or support the removal of
(i) the CEO, or (ii) the chief financial officer designated by
the Investors and appointed by the CEO in satisfaction of the
condition set forth in Section 3.1(s); and
(v) the Company shall not, and shall cause each of its
Subsidiaries not to, commit or agree to do any of the foregoing.
7.2 Shareholders' and Board of Directors' Meetings. (a) The Company
shall use its best efforts to duly convene the Extraordinary General
Shareholders' Meeting for the purpose of approving the Amended and Restated
Articles of Incorporation, electing the Investors' Nominees to the Board of
Directors and approving the Share Issuance on or before October 21, 2003.
(b) The agenda for the Extraordinary General Shareholders' Meeting is
set forth in Exhibit I hereto. Such agenda shall include no additional items
without the consent of the Investors.
(c) No extraordinary general meetings of the shareholders of the
Company shall be held other than the Extraordinary General Shareholders' Meeting
prior to the Extraordinary General Shareholders' Meeting and no extraordinary
general meetings of the shareholders of the Company held following the
Extraordinary General Shareholders' Meeting shall have a record date prior to
the Closing Date.
(d) The agendas for the First Board Meeting, Second Board Meeting and
the Third Board Meeting are set forth in Exhibit J, Exhibit K and Exhibit L,
respectively, hereto. Each agenda shall include no additional items without the
consent of the Investors.
7.3 Regulatory Payments. (a) The Company shall comply with all its
obligations under the conditions of its network service provider and specific
service provider licenses (unless otherwise waived in writing by the Ministry of
Information and Communications) and the Telecommunications Business Law of
Korea, including the making of any required contributions to the Informatization
and Promotion Fund.
(b) The Company shall compensate any other network service provider
that it is required to compensate under the Standards for USO Compensation
Payment Calculation Method of the Telecommunications Business Law of Korea.
7.4 Due Diligence. The Investors agree to use their best efforts to
complete, as promptly as practicable, their due diligence investigation
regarding the Company Parties. The Investors' shall provide written notice to
the Company, no less than fifteen (15) days prior to the Extraordinary General
Shareholders' Meeting, specifying any areas of their due diligence investigation
that at such time remain incomplete or that prior to such time have yielded
results unsatisfactory to them.
7.5 Reasonable Best Efforts. Each of the parties hereto agrees to use
its reasonable best efforts promptly to take or cause to be taken all actions
and promptly to do or cause to be done all things necessary, proper or advisable
under applicable Laws and regulations to consummate and make effective the
transactions contemplated by this Agreement in accordance with the terms of the
Agreement. Without limiting the foregoing, each Investor and the Company will
use its reasonable best efforts to make all filings with respect to, and to
obtain, all Regulatory Approvals necessary or, in the opinion of such Investor,
advisable, in order to permit the consummation of the Transactions.
7.6 Access; Delivery of Financial Statements; Company Reports;
Shareholder Registry. (a) Prior to the Closing, the Company Parties shall grant
to each Investor and its Representatives, or cause to be granted to such
Investor and its Representatives, full access to (i) the management of the
Company Parties in connection with the Investors' due diligence investigation
and otherwise in connection with the Transactions, and (ii) the Company Parties
and their respective Representatives, and to the properties, records, financial
and operating data of each Company Party and all other documents, information
and persons concerning the business and operations of the Company Parties as
such Investor or its Representatives may request in connection with the
Transactions.
(b) The Company shall promptly prepare and deliver to the Investors the
Unaudited Financial Statements with respect to each period ended after the date
hereof. The Unaudited Financial Statements in respect of any semi-annual or
quarterly period shall be delivered to the Investors within forty-five (45) days
after the end of such period. The Unaudited Financial Statements in respect of
any monthly period shall be delivered to the Investors within twenty (20) days
after the end of each such period.
(c) Concurrently with the delivery or filing of any Company Reports to
or with the SEC or the FSS on or after the date hereof, the Company shall
deliver such Company Report to the Investors.
(d) The shareholder registry and share certificate issuance ledger of
the Company and each of its Subsidiaries in respect of the Extraordinary General
Shareholders' Meeting shall be made available to the Investors promptly after
preparation thereof.
7.7 Publicity. Except as required by Law or by obligations pursuant to
any listing agreement with or requirement of any national securities exchange or
national quotation system on which the Common Stock is listed, admitted to
trading or quoted, none of the Company (or any of its Affiliates) or any
Investor (or any of its Affiliates) shall, without the prior written consent of
each other party hereto, which consent shall not be unreasonably withheld or
delayed, make any public announcement or issue any press release with respect to
the transactions contemplated by this Agreement. Prior to making any public
disclosure required by applicable Law or pursuant to any listing agreement with
or requirement of any relevant national exchange or national quotation system,
the disclosing party shall consult with the other parties hereto, to the extent
feasible, as to the content and timing of such public announcement or press
release.
7.8 Exclusivity. (a) Each Company Party shall immediately cease and
terminate, and cause its Representatives to cease and terminate, any existing
solicitation, initiation, encouragement, activity, discussion or negotiation
with any Persons conducted heretofore by any Company Party with respect to any
proposed, potential or contemplated Company Transaction.
(b) From the date hereof until the earliest of (i) the Closing Date,
(ii) one month after the termination of this Agreement, and (iii) the date after
the termination of this Agreement on which the Investors have unilaterally and
permanently ceased to make good faith efforts to negotiate a potential
transaction with the Company (the "Exclusivity Period"), the Company shall not
permit any of its Subsidiaries or Affiliates or any of its or their
Representatives to, directly or indirectly, (A) solicit or initiate, or
encourage the submission of, any offer with respect to, (B) participate in any
discussions or negotiations regarding, (C) furnish to any Person any
information, other than information made publicly available by the Company, with
respect to, or take any other action to facilitate any inquiries or the making
of any offer or proposal with respect to, or (D) authorize, engage in, or enter
into any agreement or understanding with respect to, any Company Transaction;
provided, however, that the Exclusivity Period shall be deemed to end upon the
earlier of (i) the Closing Date and (ii) the termination of this Agreement, in
respect of any Company Transaction that, regardless of the structure of such
Company Transaction, does not in any way directly or indirectly involve or
include an offer, sale, exchange (including exchanges effected by operation of
law) or other placement of any equity securities or Rights of any Company Party
(other than a placement of such securities or Rights with the public for the
purpose of obtaining equity financing or a placement of any equity securities or
Rights of a Subsidiary solely with the Company). The Company will promptly
notify each Investor of any proposal regarding a Company Transaction (which
notice shall identify the Person making the proposal and set forth the material
terms thereof) that the Company, any of its Subsidiaries or Affiliates or any of
its or their Representatives may receive during the Exclusivity Period.
7.9 Disclosure Schedule Update. After the date hereof, as soon as
reasonably practicable but not later than fourteen (14) days prior to the
Closing Date, the Company may update (but not correct or supplement with
information existing prior to the date hereof) sections of the Disclosure
Schedule (other than Sections 4.1, 4.2, 4.3, 4.4, 4.6, 4.12, 4.26, 4.27, 4.29,
4.30, 4.33 and 4.36) by delivering such updated information to the Investors, in
writing, expressly stating the sections of the Disclosure Schedule that are to
be so updated; provided, that any such updates of the Disclosure Schedule shall
require the express written consent of the Investors to be effective, which
consent shall be given or withheld at the Investors' sole discretion. If the
Investors give such consent, such updated Disclosure Schedule shall supersede
any previous Disclosure Schedule as of the date of such consent. This shall be
the exclusive means to update the Disclosure Schedule and no other modifications
thereof shall be permitted.
7.10 Notifications. At all times prior to the Closing Date, the Company
shall promptly notify the Investors in writing of any fact, change, condition,
circumstance or occurrence or nonoccurrence of any event, which will or could
reasonably be expected to, result in the failure to satisfy the conditions to be
complied with or satisfied by it hereunder, provided, however, that the delivery
of any notice pursuant to this Section 7.10 shall not limit or otherwise affect
the remedies available hereunder to any party receiving such notice.
7.11 Financing and Refinancing. The Company, together with the
Investors, shall exert its reasonable best efforts to arrange for new financing
or refinancing of existing Indebtedness for a target amount of US$600 million on
the terms and conditions (including final amount and terms related to use of
proceeds) mutually acceptable to the Investors and the Company.
7.12 Maintenance of Existing Service Contracts. The Company shall not,
and shall cause its Subsidiaries not to cancel, terminate or modify any
Contracts pursuant to which any Company Party provides goods or services to the
Company or any Subsidiary of the Company on terms at least as favorable to the
Company Parties as those the Company Parties could have obtained negotiating on
an arm's length basis. The Company shall not, and shall cause its Subsidiaries
not to, cancel, terminate or modify any Contracts pursuant to which any of its
Subsidiaries (other than the Company Parties) provides goods or services to any
Company Party on terms at least favorable to the Company Parties as those the
Company Parties could have obtained negotiating on an arm's length basis.
7.13 Use of Proceeds. The proceeds of the sale of the Investment Shares
pursuant to Section 2.1 shall be used by the Company to pay down certain
Indebtedness and to fund working capital and capital expenditures in the manner
agreed by the parties.
7.14 Employees. The Investors acknowledge and agree that the current
employees of the Company constitute an important asset of the Company.
Therefore, the Company shall not dismiss any of its current employees, except
for a just cause as expressly provided in the Labor Standards Act of Korea.
7.15 Nominees. The Investors shall provide a list of nominees to be
elected to the Board of Directors on or prior to the seventh day before the date
of the Second Board Meeting; provided, that such meeting shall not be held
before September 26, 2003.
7.16 Outside Director Candidate Nominating Committee Rules. From the
date hereof, until the Closing Date there shall be no modification or amendment
of any kind to the Outside Director Candidate Nominating Committee Rules, and no
modification or amendment shall be proposed by the Board of Directors.
ARTICLE VIII
INDEMNIFICATION
8.1 Survival of Representations and Warranties; Qualifications. (a) All
of the representations and warranties contained in this Agreement shall survive
the Closing hereunder and continue in full force and effect until two (2) years
after the Closing Date; provided, that the representations and warranties
contained in Sections 4.2, 4.3, 4.4 and 4.11 shall survive and remain in full
force and effect until four (4) years after the date hereof; provided, further,
that Section 4.13 shall survive and remain in full force and effect until six
(6) years after the date hereof (subject to any applicable statute of
limitations).
(b) No knowledge of any Investor relating to any Company Party or any
of the Assets thereof (actual, constructive or imputed) shall prevent or limit a
claim made by any Investor for breach of the Company's representations and
warranties (subject to the express qualifications of any such representation or
warranty set forth in the corresponding section of the Disclosure Schedule); and
unless set forth in the corresponding section of the Disclosure Schedule, which
schedule expressly modifies the relevant representation or warranty, the Company
may not invoke an Investor's knowledge (actual, constructive or imputed) of a
fact or circumstance that might make a statement untrue, inaccurate, incomplete
or misleading as a defense to a claim for breach of the Company's
representations and warranties.
8.2 Indemnification Provisions for Benefit of the Investors. (a) The
Company agrees to defend, indemnify and hold harmless each Investor, each of the
Investor Parent Companies, each of its and their respective Affiliates, and each
of the respective Representatives and successors and assigns of such Persons
(collectively, the "Indemnified Parties") from and against any and all Losses of
any kind or nature (including fees and disbursements of counsel and other costs
incurred in connection with any action, suit or proceeding initiated by any
Indemnified Party in connection with the assertion, exercise or enforcement of
such Indemnified Party's rights, benefits and privileges under any Transaction
Document), in any manner resulting from, arising out of, based upon or related
or attributable to:
(i) any breach or inaccuracy of any representation or
warranty made herein or in any Transaction Document;
(ii) any breach or failure to perform any covenant,
agreement or obligation of any Company Party (or a Representative
of a Company Party in any capacity) contained in any Transaction
Document;
(iii) any trademark or service xxxx infringement claims
against the Company, including in respect of the use by the
Company of "Hanaro", "Hanaro Tongshin", "Hananet", "Hanamang" and
related marks;
(iv) any breach by the Company of its obligations under the
conditions of its network service provider or specific service
provider licenses or the Telecommunications Business Law of
Korea, as applicable;
(v) any claim of infringement against any Company Party of
the Intellectual Property rights of any third party, including,
without limitation, in respect of the Company's VOIP service,
VRING service, the wiring method for the Company's e-Valley
service or the use by any Company Party of flash e-cards; and
(vi) Hanaro's use of the electricity poles of KEPCO and the
communication poles of Korea Telecom without either KEPCO's or
Korea Telecom's consent;
provided, that (x) the aggregate amount of the Company's liability for
indemnification to the Indemnified Parties shall be limited to an amount equal
to fifty percent (50%) of the Total Consideration and (y) no claim may be made
against the Company for any indemnification hereunder unless the aggregate
amount of all claims exceeds two percent (2%) of the Total Consideration or its
equivalent in any other currency (the "Basket"); provided, further, that in
aggregating any indemnification claims for purposes of the Basket, claims made
pursuant to Section 8.2(a)(i) shall be calculated disregarding any materiality
qualification or minimum threshold amount set forth in any representation or
warranty that has been breached or found to be inaccurate. In the event the
claims made exceed the Basket, the Company shall be responsible for the entire
indemnified amount from the first U.S. dollar of claims in excess of Won 3
billion. Each Indemnified Party shall be reimbursed for all Losses claimed
hereunder promptly after an arbitral award is rendered pursuant to Section 8.2;
provided, that each Indemnified Party shall be reimbursed for all Losses claimed
hereunder in respect of any Third Party Claim promptly after such claim for
Losses is made; provided, further, that, if reimbursement is not made within 15
Business Days after any such award is rendered, or claim made, as the case may
be, amounts owed shall accrue interest at the then applicable yield for
three-year corporate borrowings by Korean companies rated AA by Korean rating
agencies for any Won denominated Losses and eight percent (8%) for any U.S.
dollar denominated Losses; provided, further, that with respect to reimbursement
for Losses in respect of any Third Party Claims, if a final and non-appealable
arbitral award is rendered that such Indemnified Party is not entitled to be
indemnified for any Losses claimed hereunder, such Indemnified Party shall repay
to the Company the amount of Losses for which the Company shall have reimbursed
such Indemnified Party.
(b) Each Investor severally agrees to defend, indemnify and hold
harmless the Company, each of its Subsidiaries, and each of its and their
respective Representatives and successors and assigns of such Persons
(collectively, the "Company Indemnified Parties") from and against any and all
Losses of any kind or nature (including fees and disbursements of counsel and
other costs incurred in connection with any action, suit or proceeding initiated
by any Company Indemnified Party in connection with the assertion, exercise or
enforcement of such Company Indemnified Party's rights, benefits and privileges
under any Transaction Document), in any manner resulting from, arising out of,
based upon or related or attributable to: any breach or inaccuracy of any
representation or warranty contained in Article V; provided, that (x) the
aggregate amount of such Investor's liability for indemnification to the Company
Indemnified Parties shall be limited to an amount equal to fifty percent (50%)
of each such Investor's aggregate investment amount as set forth in Schedule I
and (y) no claim may be made against any Investor for any indemnification
hereunder unless the aggregate amount of such claim against such Investor
exceeds the Basket. In the event the claims made exceed the Basket, such
Investor shall be responsible for the entire indemnified amount from the first
U.S. dollar. Each Company Indemnified Party shall be reimbursed for all Losses
claimed hereunder promptly after an arbitral award is rendered pursuant to
Section 8.2; provided, that, if reimbursement is not made within 15 Business
Days after any such award is rendered, amounts owed shall accrue interest at the
then applicable yield for three-year corporate borrowings by Korean companies
rated AA by Korean rating agencies for any Won denominated Losses and eight
percent (8%) for any U.S. dollar denominated Losses.
(c) Limitations on Remedies; No Duplicative Remedies. In no event shall
a party be liable for any indirect, special, punitive or consequential damages,
except to the extent that such Losses arise out of such party's willful
misconduct. The parties agree that any recovery in respect of express remedies
set forth herein, or remedies available at law, in equity or otherwise, shall be
non-duplicative, provided, however, that all such remedies shall be
non-exclusive and may be exercised simultaneously.
8.3 Matters Involving Third Parties.
(a) If any third party shall notify any Indemnified Party in writing
with respect to any matter (a "Third Party Claim"), which may give rise to a
claim for indemnification against the Company under this Article VIII, then the
Indemnified Party shall notify the Company thereof in writing within fifteen
(15) Business Days of receipt of notice of such claim; provided, however, that
no delay on the part of the Indemnified Party in notifying the Company shall
relieve the Company of any obligation hereunder unless (and then solely to the
extent) the Company is thereby prejudiced.
(b) The Company shall have the right to defend the Indemnified Party
against the Third Party Claim with counsel of its choice reasonably satisfactory
to the Indemnified Party so long as (i) the Company irrevocably notifies the
Indemnified Party in writing within 30 calendar days after the Indemnified Party
has given notice of the Third Party Claim that the Company will indemnify the
Indemnified Party from and against the entirety of any Losses the Indemnified
Party may suffer resulting from, arising out of, relating to, in the nature of,
or caused by the Third Party Claim (it being understood by the parties that the
Indemnified Party may take such actions as are reasonable in connection with its
defense until it receives such notice from the Indemnifying Party), and (ii) the
Indemnifying Party conducts the defense of the Third Party Claim actively and
diligently.
(c) So long as the Company is conducting the defense of the Third Party
Claim in accordance with Section 8.3(b) above, (i) the Indemnified Party may
retain separate co-counsel at its sole cost and expense and participate in the
defense of the Third Party Claim; provided, that the Indemnified Party will have
the right to employ separate counsel to represent the Indemnified Party (the
fees and expenses of which will be borne by the Company if, in the Indemnified
Party's reasonable judgment, a conflict of interest between the Indemnified
Party and the Company exists with respect to such claim), (ii) the Indemnified
Party shall not consent to the entry of any Judgment or enter into any
settlement with respect to the Third Party Claim without the prior written
consent of the Company (not to be withheld unreasonably), and (iii) the Company
will not, without the prior written consent of the Indemnified Party (not to be
withheld unreasonably), consent to the entry of any Judgment or enter into any
settlement with respect to the Third Party Claim in which any relief other than
the payment of money damages is sought against any Indemnified Party, unless
such settlement, compromise or consent includes as an unconditional term thereof
the giving by the claimant, petitioner or plaintiff, as applicable, to such
Indemnified Party of a full release from all liability with respect to such
Third Party Claim satisfactory in form and substance to the Indemnified Party.
(d) Notwithstanding the foregoing, in the event any of the conditions
in Sections 8.3(b) and 8.3(c) above is or becomes unsatisfied, (i) the
Indemnified Party may defend against, and consent to the entry of any judgment
or enter into any settlement with respect to, the Third Party Claim in any
manner it may deem appropriate in its sole discretion (and the Indemnified Party
need not consult with, or obtain any consent from, the Company in connection
therewith), (ii) the Company shall reimburse the Indemnified Party promptly and
periodically for the costs of defending against the Third Party Claim (including
fees and disbursements of counsel and other costs reasonably incurred in
connection with such Third Party Claim), and (iii) the Company shall remain
responsible for any Losses the Indemnified Party may suffer resulting from,
arising out of, relating to, in the nature of, or caused by the Third Party
Claim to the fullest extent provided in this Article VIII.
(e) Cooperation. Whether or not the Company elects to defend any Third
Party Claim, the parties shall cooperate and exercise all reasonable efforts in
the defense or prosecution of any such claim and shall furnish one another with
such records, information and testimony, and attend such conferences,
proceedings, hearings, trials and appeals as may be reasonably by the other in
connection therewith.
8.4 Characterization as Price Adjustment. All amounts paid pursuant to
this Article VIII by one party to another party (other than interest payments)
shall be treated by such parties for tax purposes as an adjustment to the Total
Consideration (to the extent permitted under applicable Law).
8.5 Cooperation on Tax Matters. After the Closing, the Company Parties
will at their own expense, maintain and make available, as reasonably requested
by any Investor, to such Investor, and to any taxing authority, all information,
records or documents relating to the liability for Taxes or potential liability
of the Company Parties or any Investor (or its direct or indirect owners) for
Taxes (including without limitation any information, records or documents
required to comply with U.S. tax law) and will preserve such information,
records or documents until the expiration of any applicable statute of
limitations or extensions thereof.
ARTICLE IX
TERMINATION
9.1 Termination of Agreement. Subject to Section 9.2 hereof, this
Agreement may be terminated by notice in writing at any time prior to the
Closing by:
(a) The Investors or the Company, if the Closing shall not have
occurred on or before November 30, 2003; provided, however, that the right to
terminate this Agreement under this clause (a) shall not be available to any
party whose failure to fulfill any obligation hereunder, or failure to satisfy
any condition to Closing hereunder (as a result of such party's failure to use
its reasonable best efforts to satisfy such condition), has been the cause of,
or resulted in, the failure of the Closing to occur on or before such date;
(b) The Investors or the Company, if any Governmental Entity of
competent jurisdiction shall have issued any judgment, injunction, order, ruling
or decree or taken any other action restraining, enjoining or otherwise
prohibiting the consummation of the Transactions and such judgment, injunction,
order, ruling, decree or other action becomes final and non-appealable;
provided, that the party seeking to terminate this Agreement pursuant to this
clause (b) shall have used its best efforts to have such Judgment, injunction,
order, ruling or decree lifted, vacated or denied;
(c) The Investors and the Company, if the Investors and Company so
mutually agree in writing;
(d) The Investors, if any event occurs which would render impossible
prior to November 30, 2003 the satisfaction of one or more conditions to the
obligations of the Investors to consummate the transactions contemplated by this
Agreement as set forth in Section 3.1;
(e) The Company, if any event occurs which would render impossible
prior to November 30, 2003 the satisfaction of one or more conditions to the
obligation of the Company to consummate the transactions contemplated by this
Agreement as set forth in Section 3.2; and
(f) The Investors or the Company, if there has been a material
misrepresentation or material breach on the part of the other party of its
representations, warranties, covenants or other obligations set forth in the
Transaction Documents; provided, however, that if such breach or
misrepresentation is susceptible to cure, the Investors or the Company, as the
case may be, shall have thirty (30) days after receipt of notice from the other
party of its intention to terminate this Agreement pursuant to this Section 9.1
in which to cure such breach or misrepresentation before the other party may so
terminate this Agreement.
9.2 Effect of Termination. If this Agreement is terminated in
accordance with Section 9.1 hereof and the transactions contemplated hereby are
not consummated, this Agreement shall become null and void and shall be of no
further force and effect except that (i) the terms and provisions of this
Section 9.2, Section 7.8 and Articles VIII and X hereof shall remain in full
force and effect and (ii) any termination of this Agreement shall not relieve
any party hereto from any Liability for any breach of its obligations, or for
any misrepresentation under this Agreement or for any other Liability hereunder
existing at the time of such termination or be deemed to constitute a waiver of
any remedy (including specific performance if available) for any such breach or
misrepresentation. The First Letter Agreement shall survive any termination
hereof.
ARTICLE X
MISCELLANEOUS
10.1 Investors' Representatives. Each Investor authorizes and appoints
the Sponsors (acting jointly) (the "Investors' Representatives") as its sole
representative and attorney-in-fact with the power to sign, on each of their
behalf, all modifications, amendments, consents, notices and waivers related to
this Agreement and to act on the behalf of each of them and as the
representative hereunder. This appointment and grant of authority and power is
coupled with an interest and is in consideration of the mutual covenants made
herein, and is irrevocable and shall not be terminated by any act of any
Investor or by operation of law; provided, that such appointment shall terminate
upon termination of this Agreement. Each party agrees that the Investors'
Representatives shall have no obligation or liability to any Person as a result
of any action or omission taken or omitted by the Investors' Representatives in
good faith hereunder, and each Investor shall on a pro rata basis, based on its
proposed ownership of the Investment Shares, indemnify and hold harmless the
Investors' Representatives from any Losses incurred by it as a result of any
such action or omission of the Investors' Representatives. The actions and
decisions of the Investors' Representatives are hereby affirmed, ratified,
confirmed and approved in all respects. The Investors further agree that should
any Sponsor, together with its Affiliates, cease to hold at least five percent
(5%) of the fully-diluted share capital of the Company, this appointment shall
terminate with respect to such Sponsor, and the remaining Sponsor, if it,
together with its Affiliates, holds at least five percent (5%) of the
fully-diluted share capital of the Company, may exercise its powers as
Investors' Representative individually.
10.2 No Third Party Beneficiaries. This Agreement is for the sole
benefit of the parties hereto and their respective successors and assigns.
Except as expressly provided in Article VIII, nothing in this Agreement,
expressed or implied, is intended to confer upon any Person other than the
parties or their respective successors and permitted assigns any rights,
benefits, remedies, obligations or liabilities under or by reason of this
Agreement.
10.3 Entire Agreement. This Agreement and the Transaction Documents
collectively constitute the entire agreement among the parties with reference to
the matters set forth herein and therein and supersede any and all prior
understandings, negotiations, agreements, or representations by or among the
parties, written or oral, to the extent they relate in any way to the subject
matter hereof or thereof.
10.4 Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties named herein and their respective
successors and permitted assigns; provided, however, that neither this Agreement
nor any of the rights, interests or obligations of such party hereunder shall be
assigned or delegated by such party without the prior written consent of the
other parties, which consent may be withheld in the sole discretion of such
other parties; provided, further, that each Investor shall be permitted to
assign its rights and obligations hereunder to one or more of its Affiliates or
co-investors or Designees without obtaining such consent.
10.5 Counterparts. This Agreement and each other Transaction Document
may be executed in counterparts, each of which shall be deemed to be an original
and all of which together shall be deemed to constitute one and the same
agreement. In addition to any other lawful means of execution or delivery, this
Agreement and the other Transaction Documents may be executed by facsimile
signatures and may be delivered by the exchange of counterparts of signature
pages by means of telecopier transmission.
10.6 Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing, shall be effective upon receipt
and shall be delivered personally or by an internationally recognized express
courier or sent by facsimile as follows:
If to the Company:
Hanaro Telecom, Inc.
000, Xxxxxxxx-0xxxx
Xxxxx-xx, Xxxxxx, 000-000
Xxxxx
Telephone: (00-0) 0000-0000
Facsimile: (00-0) 0000-0000
Attention: Kyounglim Yun, Senior Vice President
with a copy to:
Xxxxxxxx Xxxxx
Xxxxxxxx Chance
29th Floor
Xxxxxxx Xxxxx
Xxx Xxxxxxxxx Xxxxx
Xxxx Xxxx,
Xxxxx
Telephone: (000) 0000-0000
Facsimile: (000) 0000-0000
Xxxxx Xxxx Xxxx
Shin & Xxx
C.P.O. Box 8261
Ace Tower, 4th Floor
1-170 Soonhwa-dong, Chung-ku
Xxxxx 000-000, Xxxxx
Telephone: (00 0) 000-0000
Facsimile: (00 0) 000-0000
If to the Investors, to the address or number set forth
below each Investor's name on Schedule I,
with a copy to:
Xxxx Xxxxxxxxx
Cleary, Gottlieb, Xxxxx & Xxxxxxxx
39th Floor, Bank of China Xxxxx
Xxx Xxxxxx Xxxx
Xxxx Xxxx,
Xxxxx
Telephone: (000) 0000-0000
Facsimile: (000) 0000-0000
Young Man Huh
Xxx & Xxxxx
2F, Northgate Building
00 Xxxxxx-Xxxx
Xxxxxxx-xx, Xxxxx
Xxxxx, 000-000
Telephone: (00 0) 0000-0000
Facsimile: (00 0) 0000-0000
Any party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
facsimile transmission, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other parties
notice in the manner herein set forth.
10.7 Governing Law; Consent to Jurisdiction. (a) This Agreement shall
be governed by and construed and interpreted in accordance with the law of the
State of New York, which shall govern this Agreement and any controversy or
claim arising out of or relating to this Agreement.
(b) Any controversy, claim or dispute arising out of or relating to or
in connection with this Agreement, including, without limitation, a dispute
regarding the breach, termination, enforceability or validity hereof shall be
finally settled by binding arbitration in Hong Kong before a panel of three
arbitrators. The arbitration shall be administered by the International Court of
Arbitration of the International Chamber of Commerce (the "ICC") under its Rules
of Arbitration as in effect at the time of the arbitration, except as they may
be modified herein by agreement of the parties and shall be conducted in the
English language. The Investors, on the one hand, and the Company, on the other,
shall each nominate one arbitrator, obtain its nominee's acceptance of such
nomination, and deliver written notification of such nomination and acceptance
to the other party within thirty (30) days after delivery of the request for
arbitration. In the event a party fails to nominate an arbitrator or deliver
notification of such nomination to the other party within this time period, upon
request of any party, such arbitrator shall instead be appointed by the ICC
within thirty (30) days of receiving such request. The two arbitrators nominated
in accordance with the above provisions shall nominate the third arbitrator,
obtain the nominee's acceptance of such nomination and notify the parties in
writing of such nomination and acceptance within thirty days of their
nomination. If the first two nominated arbitrators fail to nominate a third
arbitrator or notify the parties of that nomination within this time period,
then, upon request of either party, the third arbitrator shall be appointed by
the ICC within thirty (30) days of receiving such request. The third arbitrator
shall act as chair. For the sake of clarity, it is expressly understood that the
function of such chair is administrative only and shall not signify that such
chair has greater or different powers as arbitrator from the other arbitrators.
The award of the arbitrators shall be final and binding upon the parties, and
shall not be subject to any appeal or review. The parties agree to submit to the
non-exclusive personal jurisdiction of the federal and state courts sitting in
the City of New York, New York for the purpose of enforcing this agreement to
arbitrate.
(c) No provision of, nor the exercise of any rights under, this Section
10.7 shall limit the right of any party to request and obtain from a court of
competent jurisdiction in the City of New York (which shall have non-exclusive
jurisdiction for purposes of this Section 10.7(c)) before, during or after the
pendency of any arbitration, provisional or ancillary remedies and relief
including, but not limited to, injunctive or mandatory relief or the appointment
of a receiver. The institution and maintenance of an action or judicial
proceeding for, or pursuit of, provisional or ancillary remedies shall not
constitute a waiver of the right of any party, even if it is the plaintiff, to
submit the dispute to arbitration if such party would otherwise have such right.
Each of the parties hereby submits unconditionally to the non-exclusive
jurisdiction of the state and federal courts located in the City of New York,
County of New York for purposes of this provision, waives objection to the venue
of any proceeding in any such court or that any such court provides an
inconvenient forum and consents to the service of process upon it in connection
with any proceeding instituted under this Section 10.7(c) in the same manner as
provided for the giving of notice hereunder.
(d) Judgment upon the award rendered may be entered in any court having
jurisdiction. The parties hereby expressly consent to the non-exclusive
jurisdiction of the state and federal courts situated in the City of New York,
County of New York for this purpose and waive objection to the venue of any
proceeding in such court or that such court provides an inconvenient forum.
(e) Each of the parties participating in an arbitration pursuant to the
terms of this Agreement shall, subject to the award of the arbitrators, pay an
equal share of the arbitrators' fees. The arbitrators shall have the power to
award recovery of all costs (including reasonable attorneys' fees,
administrative fees, arbitrators' fees and court costs) to the prevailing party.
(f) Each of:
(i) the Company hereby irrevocably designates CT Corporation
System, with offices situated at present at 000 Xxxxxx Xxxxxx -
XX, Xxx Xxxx, XX 00000, X.X.X.; and
(ii) each Investor hereby irrevocably designates the party
set forth opposite its name under the column titled "Authorized
Agent" on Schedule I;
as its authorized agent, respectively, to accept and acknowledge on its behalf
service of any process which may be served in any proceeding in New York and
each party agrees that any process or other paper to be served in connection
with any action or proceeding under this Agreement, shall, if delivered, sent or
mailed in accordance with Section 10.6 of this Agreement, constitute good,
proper and sufficient service thereof.
10.8 Waiver of Jury Trial. Each of the parties hereto irrevocably and
unconditionally waives trial by jury in any legal action or proceeding relating
to this Agreement, the other Transaction Documents or the Transactions and for
any counterclaim therein.
10.9 Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
parties. Notwithstanding the foregoing, Schedule I hereto may be amended by the
Sponsors without the consent of any other party at any time, and from time to
time, prior to the Closing Date. No waiver by any party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent
default, misrepresentation or breach. No waiver shall be effective hereunder
unless contained in a writing signed by the party sought to be charged with such
waiver. No failure on the part of any party to exercise or delay in exercising
any right hereunder shall be deemed a waiver thereof, nor shall any single or
partial exercise preclude any further or other exercise of such or any other
right.
10.10 Severability. If any provision of this Agreement or any other
Transaction Document or the application thereof to any person or circumstance is
held by a court of competent jurisdiction to be invalid, void or unenforceable,
the remaining provisions hereof, or the application of such provision outside of
the jurisdiction of such court or to Persons or circumstances other than those
as to which it has been held invalid, void or unenforceable, shall remain in
full force and effect and shall in no way be affected, impaired or invalidated
thereby.
10.11 Specific Performance. The parties hereto specifically acknowledge
that monetary damages are not an adequate remedy for violations of this
Agreement, and that any party hereto shall be entitled to equitable relief,
including injunctive relief and specific performance, in addition to any other
remedies at Law or in equity that it may have, to enforce this Agreement or
prevent any violation hereof and, to the extent permitted by applicable Law and
to the extent the party seeking such relief would be entitled on the merits to
obtain such relief, each party waives any objection to the imposition of such
relief.
10.12 Incorporation of Exhibits and Schedules. The Exhibits and
Schedules attached to this Agreement are incorporated herein by reference and
made a part hereof.
[The remainder of this page intentionally left blank.]
IN WITNESS WHEREOF, the parties hereto have executed this Investment
Agreement as of the date first above written.
HANARO TELECOM, INC.
By
----------------------------------------
Name:
Title:
AIF II NT, LTD.
By
----------------------------------------
Name: Xxxxxxxx X. Xxxxxxxxxxxx
Title: Attorney-in-fact
AIG ASIAN OPPORTUNITY FUND L.P.
By: AIG Asian Opportunity G.P., L.L.C., its
General Partner
By
----------------------------------------
Name: Xxxxx Xxxxx
Title: Director
NEWBRIDGE ASIA HT, L.P.
By: Newbridge Asia HT, Ltd., its
General Partner
By
----------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Director
SCHEDULE I
List of Investors
Investor/Address and Parent of Total shares of Aggregate purchase price Authorized Agent
Contact Number of Investor Common Stock to of Common Stock to be of Investor
Investor be purchased purchased (Won)
AIF II NT, Ltd. AIG Asian Emerging Markets
Unit 3(1) Infrastructure Partnership
Main Office Tower Fund II L.P. 0000 Xxxxxxxxxxxx Xxxxxx
Financial Park Labuan NW, Suite 0000
Xxxxx Xxxxxxx Xxxxxxxxxx
0/000 Xxxxxx XX 00000
F.T. Labuan U.S.A.
Malaysia Tel: 0-000-000-0000
Tel: 00-00-000-000 /439-688 Fax: 0-000-000-0000
Fax: 00-00-000-000
AIG Asian Opportunity Fund, Emerging Markets
L.P. Partnership
x/x XXX Xxxxxx Xxxxxxxxxx 0000 Xxxxxxxxxxxx Xxxxxx
Xxxx. (Xxxx) Ltd. NW, Xxxxx 0000
Xxxxx 0000 Xxxxxxx Xxxxx Xxxxxxxxxx
00 Xxxxxxxxx XX 00000
Xxxx Xxxx X.X.X.
Tel: 000-0000-0000 Tel: 0-000-000-0000
Fax: 000-0000-0000 Fax: 0-000-000-0000
Newbridge Asia HT, L.P. Newbridge Newbridge Capital, LLC
c/o M&C Corporate Services Asia III, L.P. 000 Xxxxxxxx Xxxxxx
Ltd. Suite 0000
Xxxxxx Xxxxx Xxxx Xxxxx, XX 00000
X.X. Xxx 000 XXX
Xxxxxx Xxxx Tel: 0-000-000-0000
Grand Cayman Fax: 0-000-000-0000
With a copy to:
Newbridge Capital Limited
Korea Xxxxx Xxxx Xxxxxxxx,
00/X
000 Xxxxxxxxx-xxxx
Xxxxxx-xx
Xxxxx
Xxxxx 110-702
Tel: 000-000-0000
Fax: 000-000-0000
SCHEDULE 2.1(a)
Company's Account
Share Subscription (Byuldan) Account
Kukje Electronics Center Branch
Korea Exchange Bank
S.W.I.F.T. Code: XXXXXXXX
EXHIBIT A
Form of Amended and Restated Articles of Incorporation
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EXHIBIT B
Company Disclosure Schedule
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EXHIBIT C
Form of Investors' Rights Agreement
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EXHIBIT D
Form of Non-Solicitation Agreement
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EXHIBIT E-1
Form of Legal Opinion of Xxxxxxxx Chance
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EXHIBIT E-2
Form of Legal Opinion of Shin & Xxx
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1. We have acted as special Korean counsel to Hanaro Telecom, Inc. (the
"Company") in connection with the Investment Agreement, dated as of
[___________], by and among [PARTIES] (the "IA").
2. Capitalized terms used in this opinion and not defined herein shall have the
same meanings as given to them in the IA.
3. In rendering this opinion, we have examined originals or copies, certified or
otherwise, of the following documents:
(a) the Company Transaction Documents;
(b) the Articles of Incorporation of the Company as amended to date;
(c) the compliance certificate dated as of the date hereof which has been
sealed by the representative director of the Company and each other
certificate, instrument or agreement executed and delivered by the
Company;
(d) the minutes of the board of directors meeting, dated as of
[____________], 2003;
(e) the minutes of extraordinary general meeting of shareholders, dated as
of [_____________________], 2003 ("EGM");
(f) certified copy of commercial registry, dated as of [_______________],
2003; and
(g) such other documents as we have considered it necessary.
4. This opinion is based upon the following assumptions:
(a) Other than in relation to the Company, all documents are within the
capacity and power of, have been validly authorized, executed and
delivered by and are binding on, the parties thereto, and there has
been no breach of any of the terms thereof;
(b) The representations and warranties and other factual matters contained
in the Company Transaction Documents are true, accurate and complete.
As to any other matters of fact material to the opinion expressed
herein, we have relied upon certificates and statements of officers,
employees and other representatives of the Company;
(c) The authenticity of all signatures, seals, stamps and markings; and
(d) That all documents submitted to us as originals are authentic,
complete and up-to-date; that all documents submitted to us as copies
conform to the originals; and that all factual statements made in such
documents are correct.
5. This opinion is given with respect to the laws of the Republic of Korea
("Korea") as of the date hereof and we neither pass upon nor express any opinion
with respect to those matters governed by or construed in accordance with the
laws of any jurisdiction other than Korea.
6. Based on the above assumptions and subject to the qualifications set forth
below, we are of the opinion that:
(a) The Company is a corporation duly organized and validly existing under
the laws of Korea, has the corporate power and authority to own its
properties and conduct its business as presently conducted, and has
full corporate power to execute and deliver the IA, the Investors'
Rights Agreement, the First Letter Agreement, the Non-Solicitation
Agreement and the Management Rights Agreement (collectively, the
"Company Transaction Documents") and each other certificate,
instrument or agreement executed and delivered by the Company pursuant
to or in connection therewith and to perform its obligations
thereunder;
(b) The Company has taken all appropriate and necessary corporate actions
to approve the transactions contemplated by the Company Transaction
Documents;
(c) The Company Transaction Documents constitute valid and legally binding
obligations of the Company, enforceable against the Company in
accordance with their terms, except for provisions in the Company
Transaction Documents which provide additional rights to the Investors
as shareholders (such as Section 6.6 of the IA) may not be enforceable
under the Korean law as such provisions are contrary to the concept of
equal treatment among same class of shareholders as a generally
accepted principle under the Commercial Code;
(d) Based on our review of the minutes of the EGM, the shareholders of the
Company at the Extraordinary General Shareholders' Meeting have (i)
approved the Amended and Restated Articles of Incorporation (the
"AOI"), (ii) elected the Investors' Nominees to the Board of Directors
and (iii) approved the Share Issuance;
(e) The issuance of the Investment Shares have been duly authorized by the
Company and, when issued, will be duly and validly issued, fully paid
and non-assessable and free from preemptive rights irrespective of
whether the shares certificates representing the Investment Shares are
delivered to the Investors or the names of the Investors are
registered in the Company's shareholder registry and will have the
rights set forth in the AOI;
(f) The authorized capital stock of the Company as of the date hereof
consists of 480,328,800 shares of Common Stock. Of the authorized
capital stock of the Company, as of the date hereof, 279,322,680
shares of Common Stock, are issued and outstanding; and
(g) All authorizations, approvals, consents from, and filings with, all
legislative bodies of government or other authorities required by the
laws of Korea for the Company's execution, delivery and performance of
the Company Transaction Documents, to the extent obtainable by the
Company prior to or at the same time of the Closing, have been duly
obtained;
(h) The choice of New York law as the governing law of the Transaction
Documents will be recognized and given effect by the courts of Korea;
provided, however, that (a) the application of certain provisions of
New York law may be affected or limited by the general principles of
good morals and social order under Korean law; and (b) the mandatory
provisions under Korean law will be applied notwithstanding the
selection of the New York law as the governing law of the IA by the
parties to the IA;
(i) The execution and delivery of and the performance of the obligations
expressed to be assumed therein and the consummation of the
Transactions by the Company in the Company Transaction Documents (i)
will not result in a breach or violation of, or otherwise conflict
with or contravene, any of the terms and provisions of any applicable
Korean Requirement of Law or (ii) will not contravene or conflict with
the AOI, except for provisions in the Company Transaction Documents
which provide additional rights to the Investors as shareholders (such
as Section 6.6 of the IA) may not be enforceable under the Korean law
as such provisions are contrary to the concept of equal treatment
among same class of shareholders as a generally accepted principle
under the Commercial Code; and
(j) Based on review of the Laws and precedents in effect as of the date
hereof, any judgment obtained in a New York court or arbitral
decisions made by the arbitration panel as set forth in Section
10.7(b) of the IA arising out of, relating to, in connection with or
pursuant to the IA will be enforced by the Korean courts without
revisiting the merits thereof; provided, that (i) such judgment was
finally and conclusively given by a court having valid jurisdiction in
accordance with Korean laws or international treaties, (ii) the Korean
parties to the IA received service of process (otherwise than by
publication or other similar method) in conformity with New York law,
or responded to the action without being served with process, (iii)
recognition of the effectiveness of such judgment is not contrary to
the public policy of Korea, (iv) judgments of the courts of Korea are
accorded reciprocal treatment under New York law and (v) arbitral
decision does not fall under Article V of the Convention on the
Recognition and Enforcement of Foreign Arbitral Awards.
7. The above opinions are subject to the following qualifications:
(a) Enforcement may be limited or affected by the bankruptcy law, the
corporate reorganization law, the composition law and other similar
laws which generally affect the enforcement of creditors' rights.
(b) Enforcement may also be limited or affected by the general principles
of good morals and social order and the general principle of good
faith and fairness provided for in the Civil Code of Korea.
(c) Nothing in this letter should be taken as indicating that the remedies
of specific performance or injunction (being in some instances
discretionary remedies of the court) would necessarily be available
with respect to any particular provision in the documents for the
subject transaction.
(d) The enforceability of provisions releasing or exculpating a party
from, or requiring indemnification of a party for, liability for its
own action or inaction may be limited or affected where the action or
inaction involves unlawful conduct, willful misconduct or gross
negligence.
(e) Korean courts may exercise judicial discretion in determining such
matters as conclusiveness of certificates, application of mandatory
rules in the Commercial Code to contractual relationship, amount of
damages and entitlement to attorneys' fees and other costs.
(f) Under the Foreign Exchange Transaction Law, if the Minister of Finance
and Economy deems that certain emergency circumstances including, but
not limited to, special necessity to stabilize the balance of payments
arises, such Minister may require residents to obtain prior approval
from the Minister for any overseas payment.
8. This opinion is addressed to you and is solely for your own use and, except
with our express consent, is not to be transmitted to, nor to be relied upon by,
any other person or for any purpose other than in connection with the Company
Transaction Documents. This opinion is limited to the matters addressed herein
and is not to be read as an opinion with respect to any other matter.
Very truly yours,
SHIN & XXX
EXHIBIT F
Shareholder Resolutions
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1. Authorization, if required, and approval of the issuance by the Company of
the Investment Shares at below par value and determination of the minimum
issue price in accordance with applicable laws and regulations.
2. Approval of the amendments to the Company's articles of incorporation as
set forth in the Amended and Restated Articles of Incorporation.
3. Approval of the election of the Investors' Nominees as directors of the
Company.
EXHIBIT G
Board Resolutions
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1. Confirmation of the issuance by the Company of the Investment Shares.
2. Designation of the replacement Representative Director as provided under
Section 6.2 of the Investment Agreement.
3. Appointment of the new members of the Outside Director Nominating Committee
and their alternates, two of such members (and their alternates) being
Investors' Nominees designated by the Investors.(1)
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(1) Company to propose language of board resolutions.
EXHIBIT H
Form of Management Rights Agreement
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EXHIBIT I
Agenda for Extraordinary General Shareholders' Meeting
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1. Authorization, if required, and approval of the issuance by the Company of
the Investment Shares at below par value and determination of the minimum
issue price in accordance with applicable laws and regulations.
2. Approval of the amendments to the Company's articles of incorporation as
set forth in the Amended and Restated Articles of Incorporation.
3. Approval of the election of the Investors' Nominees as directors of the
Company.
EXHIBIT J
Agenda for First Board Meeting
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1. Approval of the Transactions.
2. Authorization of the execution, delivery and performance by the Company of
each Transaction Document to which it is a party.
3. Approval of the covening of and agenda for the Extraordinary General
Shareholders' Meeting.
EXHIBIT K
Agenda for Second Board Meeting
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1. Approval of the Investors' Nominees as directors of the Company.
2. Approval of the amendments to the Company's articles of incorporation as
set forth in the Amended and Restated Articles of Incorporation.
EXHIBIT L
Agenda for Third Board Meeting
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1. Confirmation of the issuance by the Company of the Investment Shares.
2. Appointment of an Investors' Nominee designated by the Investors as the
replacement Representative Director.
3. Approval of the Outside Director Candidate Nominating Committee Rules
4. Appointment of the new members of the Outside Director Nominating Committee
and their alternates, two of such members (and their alternates) being
Investors' Nominees designated by the Investors.
EXHIBIT M
Outside Director Candidate Nominating Committee Rules
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ANNEX A-1
Key Employees
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1. All employees of each Company Party (other than Dreamline Corporation and
Hanaro Dream Co. Ltd.) "isa-daewoo" level and above.
ANNEX A-2
Key Employees Entering into Non-Solicitation Agreements
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1. All employees of each Company Party (other than Dreamline Corporation and
Hanaro Dream Co. Ltd.) "sangmoo" level and above.
