EXHIBIT B
SHARE PURCHASE AGREEMENT
By and Among
Hanaro Telecom, Inc.
and
TriGem Computer, Inc.
Naray & Company Inc.
Naray D&C, Inc.
TriGem Ventures, Inc.
TriGem InfoNet, Inc.
Solvit Media Inc.
TG Information Consulting, Inc.
AI Leaders, Inc.
Dated as of December 30, 2002
SHARE PURCHASE AGREEMENT
SHARE PURCHASE AGREEMENT, dated as of December 30, 2002, by and among
Hanaro Telecom, Inc., a chusik-hoesa duly organized and existing under the Laws
of Korea ("Hanaro"), and the shareholders of the Company named on Schedule I
hereto (each such shareholder, a "Selling Shareholder" and collectively, the
"Selling Shareholders"). Hanaro and each Selling Shareholder may hereinafter be
referred to from time to time as a "party" in their individual capacities and as
"parties" collectively.
WHEREAS, the Selling Shareholders own the number of shares of Common
Stock (as defined below) set forth next to each Selling Shareholder's name in
Schedule II, representing in the aggregate approximately 40.51 percent of the
existing issued and outstanding Common Stock on a fully-diluted basis;
WHEREAS, the parties have determined to enter into this Agreement
pursuant to which Hanaro has agreed to purchase from the Selling Shareholders,
and the Selling Shareholders have agreed to sell to Hanaro, all of the
Transferred Shares in exchange for Hanaro Convertible Bonds, pursuant to the
terms and conditions set forth herein; and
WHEREAS, the parties 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:
"ABS Program" means any asset backed securitzation program involving
any Company Party.
"Active Subscribers" means, as of the end of each calendar month,
identification numbers ("ID 4") held by the subscribers of the Company's
broadband internet access services calculated in accordance with the criteria
set forth in Exhibit B. As of November 30, 2002, the number of Active
Subscribers is 1,090,996.
"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 Share Purchase Agreement, including all Exhibits
and Schedules hereto, as the same may be amended from time to time in accordance
with the provisions hereof.
"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, or held for use in such
Person's business, including contract rights, Licenses, Intangible Property and,
in the case of Company Parties, the Material Contracts.
"Audited Financial Statements" means the audited consolidated balance
sheets and income statements, and statements of shareholders' equity and cash
flows, including the notes thereto, as of the end of and for the year ended
December 31, 2001 for the Company and its subsidiaries.
"Balance Sheet" means the audited consolidated balance sheet of the
Company and its subsidiaries as of December 31, 2001 included in the 2001
Audited Financials.
"Basket Amount" has the meaning set forth in Section 7.2(a).
"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 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 (individually
or together with co-investors) of Control or thirty percent (30%) or more of the
shares 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 Korea are authorized or obligated by Law or
executive order to close.
"Capital Reduction" means the capital reduction of the Company
effectuated as of December 27, 2002 whereby two (2) out of three (3) outstanding
shares of Common Stock of the Company were redeemed and cancelled without
consideration.
"Charter Documents" means, with respect to any Entity, the articles of
incorporation, operating regulations of the board of directors and operation
regulations of the audit committee of such Entity.
"Closing Dates" means the First Closing Date and the Second Closing
Date.
"Closings" means the First Closing and the Second Closing.
"Common Stock" means shares of the common stock of the Company, par
value Won 2,500 per share.
"Company" means Korea Thrunet Co., Ltd., a chusik-hoesa duly organized
and existing under the Laws of Korea.
"Company Intellectual Property" means the Owned Intellectual Property
and the Licensed Intellectual Property.
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"Company Parties" means the Company and its Subsidiaries.
"Company Real Property" means all real property now or hereafter owned
or operated by, or leased to, any Company Party, all improvements located on any
such real property (including without limitation, buildings, storage facilities,
telecommunications facilities that are considered fixtures and other fixtures),
and all rights and interests appurtenant to the foregoing (including easements,
rights of way and similar rights and interests).
"Company Reports" has the meaning set forth in Section 4.9(a).
"Contract" means any binding agreement, contract, commitment,
indenture, lease, license, instrument, note, bond, security, joint venture
agreement, letter of intent, undertaking, promise, covenant, arrangement or
understanding, whether written or oral.
"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 Bond Subscription Agreement" means a convertible bond
subscription agreement to be entered into by and between Hanaro and the Selling
Shareholders for the issue and sale by Hanaro, and the subscription and purchase
by the Selling Shareholders, of the Hanaro Convertible Bonds.
"Copyrights" has the meaning set forth in the definition of
"Intellectual Property."
"Disclosure Schedule" means the Selling Shareholders' disclosure
schedule in English dated as of the First Closing Date, to be attached hereto as
Schedule III.
"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 with respect to which any of the Company Parties 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 or severance
agreement or other similar arrangement between any Company Party, on the one
hand, and any current director,
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officer or employee of the Company Parties 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(a).
"Exclusivity Period" has the meaning set forth in Section 6.9(b).
"Exchange Ratio" means, initially, one and thirteen-thirtieths (1 and
13/30) Transferred Shares for one (1) share of common stock of Hanaro, which is
subject to change upon implementation of the Purchase Price Adjustment, prior to
the Second Closing.
"Execution Date" means the date on which this Agreement is executed by
the parties hereto.
"Exercise Notice" has the meaning set forth in Section 8.3(b).
"Exercise Period" has the meaning set forth in Section 8.3(b).
"Extraordinary Shareholders' Meeting" has the meaning set forth in
Section 3.1(j).
"Financial Statements" has the meaning set forth in Section 4.7.
"Final Consideration" has the meaning set forth in Section 2.2(b).
"First Closing" has the meaning set forth in Section 2.1(c).
"First Closing Date" has the meaning set forth in Section 2.1(c).
"First Tranche Transferred Shares" means the shares of Common Stock to
be sold by the Selling Shareholders to Hanaro on the First Closing Date pursuant
to this Agreement as set forth in Schedule II, representing an aggregate of
approximately 17.91% of the outstanding capital stock of the Company on a
fully-diluted basis.
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"FSC" has the meaning set forth in Section 4.9(a).
"fully-diluted basis" means all outstanding shares of capital stock of
the Company and all rights, options, warrants and other securities (whether debt
or equity) that are directly or indirectly exercisable or exchangeable for, or
convertible into, or otherwise represent the right to purchase or otherwise
receive, directly or indirectly, any such capital stock, or other binding
arrangement, commitment or agreement to acquire, at any time or under any
circumstance, capital stock of the Company or any such other securities,
including all outstanding stock options granted to officers, directors,
employees and/or consultants under all agreements, plans or arrangements,
assuming that all shares of capital stock of the Company issuable upon full
exercise, exchange and/or conversion of such rights, options, warrants or
securities have been issued and are outstanding.
"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.
"Guarantors" has the meaning set forth in Section 6.11.
"Hanaro" has the meaning set forth in the preamble.
"Hanaro Convertible Bonds" means the convertible bonds of Hanaro to be
issued to the Selling Shareholders pursuant to the Convertible Bond Subscription
Agreement, the terms of which convertible bonds are set forth in Exhibit C.
"Hanaro Disclosure Schedule" means Hanaro's disclosure schedule in
English dated as of the date hereof, attached hereto as Schedule IV.
"Hanaro Indemnified Parties" has the meaning set forth in Section
7.2(a).
"Hanaro's Regulatory Approvals" has the meaning set forth in Section
5.4(b).
"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.
"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
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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.
"Indebtedness Restructuring" has the meaning set forth in Section 6.1.
"Indemnified Parties" means the Hanaro Indemnified Parties and/or the
Selling Shareholders Indemnified Parties.
"Indemnifying Party" has the meaning set forth in Section 7.3(a).
"Independent Appraiser" means Youngwha Accounting Company, an Ernst &
Young affiliate in Seoul, Korea.
"Initial Consideration" has the meaning set forth in Section 2.1(b).
"Insolvency Event" means, with respect to a Person, (i) the Person
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 the
Person 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 the Person; (iv) any other formal 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 the Person is commenced (a) by the Person or (b) by any other Person; (v) the
Person is adjudicated insolvent or bankrupt; (vi) any order of relief or other
order approving any such case or proceeding is entered; (vii) the Person makes a
general assignment for the benefit of creditors; or (viii) the Person 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
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owned or held directly or beneficially by or on behalf of the account of such
Person, Licenses, Intellectual Property and any other intangible property of any
nature of such Person.
"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, 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.
"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 executive officers ("isa" or above) of the
Company Parties.
"Korea" means the Republic of Korea.
"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.
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"Licenses" has the meaning set forth in Section 4.11(b).
"Lien" means (i) any mortgage, pledge, lien (statutory or other),
encumbrance, hypothecation, charge, security interest, demand, claim, Tax,
option, right to acquire, adverse interest, guarantee obligation, 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), or (ii) any pre-emptive rights,
option rights, warrants, voting agreements, proxies, trust arrangements,
buy-sell agreements, drag-along agreements, rights of first offer or first
refusal or other transfer restrictions, redemption agreements, or similar rights
of third parties, other than restrictions on transfer imposed by the Transaction
Documents and applicable Law.
"Losses" means all losses, penalties, charges, claims, damages, dues,
fines, interest, costs, diminution in value, 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.
"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, regulatory
status or prospects of the Company and its Subsidiaries (taken as a whole), (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 of the Selling
Shareholders, or the Company or any of its Subsidiaries to perform its material
obligations under any Transaction Document; provided, however, that (a) the
effects of changes that are generally applicable to the industries and markets
in which the Company or any of its Subsidiaries operates shall be excluded from
the determination of Material Adverse Effect and (b) the effect on the Company
or any of its Subsidiaries of the execution of this Agreement, any public
announcement relating to this Agreement or the Transactions or the consummation
of the Transactions shall not be taken into account in determining Material
Adverse Effect.
"Material Contracts" means any of the following Contracts to which any
Company Party is a party, or by which any Company Party or any of its Assets is
bound:
(i) Contracts which involve aggregate payments or receipts of more
than Won 500 million by any Company Party;
(ii) Contracts which relate to any Business Combination of any kind
of a Company Party;
(iii) Contracts which restrict or limit in any way the ability of any
Company Party to engage in certain businesses, to compete in any
manner generally or in any specific
8
geographical area, or oblige any Company Party to present any
business opportunity to any other Person;
(iv) Contracts to which any Related Person of any Company Party is
also a party;
(v) Contracts made with any of the suppliers listed in Section 4.24
of the Disclosure Schedule;
(vi) 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 100 million (or its
equivalent in any other currency) or more in any one case or in
the aggregate for all Contracts which are related;
(vii) Contracts outside the Ordinary Course of Business continuing
over a period of more than one (1) year from the date hereof
having a total value or involving total payments or costs of Won
100 million (or its equivalent in any other currency) or more in
any one case or in the aggregate for all Contracts which are
related;
(viii) 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 100 million (or its equivalent in any other
currency);
(ix) Contracts which evidence Indebtedness of any Company Party,
including any loan, credit agreement, bond, note, debenture,
letter of credit agreement, "document of acceptance" or similar
instrument or agreement, in excess of Won 500 million in
principal amount;
(x) Contracts with any labor union or labor representative;
(xi) bonus, pension, profit-sharing, retirement, stock purchase,
stock option or other deferred or incentive compensation, death
benefit, disability, severance, benefit plan, or similar plan,
program or Contract;
(xii) Contracts pursuant to which any Person has any right of first
offer, right of first refusal, tag-along, drag-along or similar
right with respect to any disposition or proposed disposition of
any equity interests in any Company Party;
(xiii) registration rights agreements (or similar agreements) entered
into by the Company in favor of any Person;
(xiv) guarantees by any Company Party of the obligations, indebtedness
or liabilities of any other Person;
9
(xv) material Contracts outside the Ordinary Course of Business
relating to the mortgaging, pledging or granting of a security
interest on any properties of any Company Party;
(xvi) Contracts which restrict or limit in any way the ability of any
Company Party to pay any dividends or make any other
distributions on, or to purchase, redeem or otherwise acquire
any of its securities;
(xvii) Contracts related to any ABS Program;
(xviii) Contracts under which the consequences of a default or
termination would have a Material Adverse Effect;
(xix) any other Contract (or series of Contracts) that could
reasonably be expected to be material to the Company Parties,
taken as a whole; and
(xx) any Contract described in any section of the Disclosure
Schedule.
"NASDAQ" means the National Association of Securities Dealers Automated
Quotation System.
"Ordinary Course of Business" means, with respect to the Company or a
Subsidiary of the Company, the ordinary day to day course of business of the
Company or such Subsidiary consistent with customary industry practices for a
company in businesses that the Company or such Subsidiary is engaged in as of
the date hereof.
"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."
"Permitted Liens" means (i) the Liens disclosed in the Financial
Statements; (ii) Liens for Taxes, assessments or other charges by Governmental
Authorities not yet due or delinquent; (iii) materialmen's, mechanics',
repairmen's, employees', contractors', operators' and other similar Liens
arising in the Ordinary Course of Business; and (iv) easements arising by
operation of Law, the effects of which, individually or in the aggregate, are
not reasonably likely to be material to the business of the Company.
"Person" means an individual, Entity, or Governmental Authority.
"Preferred Stock" means shares of non-voting preferred stock of the
Company.
"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
10
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 Won (5,000 x (3 / 4.3)) for each Transferred
Share; provided, however, that if the conversion price per share of Hanaro
Convertible Bonds is required to be greater than Won 5,000 under applicable Law,
then the number "5,000" in the above formula shall be replaced with such greater
conversion price per share.
"Purchase Price Adjustment" has the meaning set forth in Exhibit A.
"Put Right" has the meaning set forth in Section 8.3(b).
"Redeemable Equity" of any Person means any equity interest of such
Person that by its terms, 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.
"Redemption Right" has the meaning set forth in Section 8.3(b).
"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.
"Related Person" means,
(a) as to any natural Person,
(i) any of such Person's parents, children, siblings and
spouse, the parents and children of such Person's spouse, and the
spouses of such Person's children ("Relatives");
(ii) 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
(iii) 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
twenty percent (20%) or more of the issued and outstanding equity
interests of such Entity and the Related Persons of such Person;
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(ii) any Person in which such Entity owns twenty percent (20%)
or more of the issued and outstanding equity interests;
(iii) any director, executive 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.
"Relatives" has the meaning set forth in the definition of "Related
Person".
"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).
"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 Closing" has the meaning set forth in Section 2.2(c).
"Second Closing Date" has the meaning set forth in Section 2.2(c).
"Second Tranche Transferred Shares" means the shares of Common Stock to
be sold by the Selling Shareholders to Hanaro on the Second Closing Date
pursuant to this Agreement as set forth in Schedule II, representing an
aggregate of approximately 22.6% of the outstanding capital stock of the Company
on a fully-diluted basis.
"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.
"Sellers' Regulatory Approvals" has the meaning set forth in Section
4.3(b).
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"Selling Shareholders" has the meaning set forth in the preamble.
"Selling Shareholders Indemnified Parties" has the meaning set forth in
Section 7.2(b).
"Selling Shareholders' Knowledge" means the actual knowledge of the
directors or officers ("isa" level and above) of any (a) Selling Shareholder or
(b) Company Party (for the directors and officers ("isa" level and above) of a
Company Party, "actual knowledge" shall mean knowledge after reasonable
inquiry).
"Subsidiary" with respect to any Person, means any other Person which
is, directly or indirectly through one or more intermediaries, Controlled by
such first Person; provided, however, that with respect to the Company,
"Subsidiary" shall mean (i) Xxxxx.xxx Communications Co., Ltd., (ii) Nowcom Co.,
Ltd. and (iii) any other company which is, directly or indirectly through one or
more intermediaries, Controlled by the Company and, as of the end of the most
recently concluded fiscal year, had a net asset value of Won 10 billion or more.
"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, 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 Party Claims" has the meaning set forth in Section 7.3(a).
"Total Consideration" means the sum of the Initial Consideration and
the Final Consideration.
"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 and the Convertible Bond
Subscription Agreement 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.
13
"Transactions" means any and all of the transactions contemplated by
this Agreement or any of the other Transaction Documents, including the purchase
and sale of the Transferred Shares.
"Transferred Shares" means the First Tranche Transferred Shares and the
Second Tranche Transferred Shares, representing an aggregate of approximately
40.51% of the outstanding capital stock of the Company on a fully-diluted basis.
"Unaudited Financial Statements" means the unaudited, unconsolidated
(i) quarterly balance sheets and income statements, and statements of cash flows
for the Company and its subsidiaries for each quarter ended after December 31,
2001 and prior to the date hereof, and (ii) monthly management reports,
containing unaudited, unconsolidated balance sheets and statements of cash flow
and profit and loss, as of and for each month ended after September 30, 2002 and
prior to the date hereof for the Company and its subsidiaries.
"Updates" has the meaning set forth in Article IV.
"Warrant Sale and Purchase Agreement" means a warrant sale and purchase
agreement to be entered into between SB Thrunet Pte Ltd. and Hanaro for the sale
and purchase of the Warrants.
"Warrants" means the warrants held by SB Thrunet Pte Ltd. to subscribe
for (i) an aggregate of 17,370,892 shares of Common Stock of the Company, as
represented by Series 17 Warrant, Certificates Nos. 1 to 10, and (ii) an
aggregate of 8,685,446 shares of Common Stock of the Company, as represented by
Series 18 Warrant, Certificate No. 1.
"Won" means the lawful currency of Korea.
"2001 Audited Financials" means the audited consolidated financial
statements for the Company and its subsidiaries as of and for the year ended
December 31, 2001 contained in the latest annual report on Form 20-F filed by
the Company with the SEC.
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."
14
(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.
(ix) Number of Transferred Shares. Unless explicitly stated
otherwise, the number of shares of Common Stock set forth in this
Agreement represents the number of shares of Common Stock of the
Company after giving effect to the Capital Reduction.
(x) Joint and Several Obligation. Any obligation and
liability of a Selling Shareholder under the Transaction
Documents shall be joint and several obligation and liability of
all Selling Shareholders.
ARTICLE II
SALE AND PURCHASE OF TRANSFERRED SHARES
15
2.1 First Tranche Transferred Shares.
(a) Sale and Purchase of First Tranche Transferred 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 First
Closing Date, each Selling Shareholder agrees to sell to Hanaro, and Hanaro
agrees to purchase from the Selling Shareholders, the First Tranche Transferred
Shares (which shares are and shall be duly authorized, validly issued,
fully-paid and non-assessable and, as of the First Closing Date, free and clear
of all Liens).
(b) Purchase Price for the First Tranche Transferred Shares.
The total purchase price for the First Tranche Transferred Shares shall be the
product of the Purchase Price and the number of First Tranche Transferred Shares
(the "Initial Consideration"). The Initial Consideration shall be paid on the
First Closing Date.
(c) First Closing; First Closing Date and Place. The closing of
the purchase and sale of the First Tranche Transferred Shares (the "First
Closing") shall take place at the offices of Shin & Xxx, in Seoul, Korea before
4:00 p.m., Seoul time, on January 3, 2003, or on such other date as the parties
may agree (the "First Closing Date").
(d) First Closing Deliveries of Selling Shareholders. At the
First Closing, the Selling Shareholders shall deliver or cause to be delivered
to Hanaro the following, in form and substance reasonably satisfactory to Hanaro
and its counsel:
(i) a xxxx of sale evidencing the transfer of the First
Tranche Transferred Shares to Hanaro, provided that new share
certificates reflecting the Capital Reduction that will be issued
for the First Tranche Transferred Shares shall be delivered to
Hanaro as soon as they become available, but no later than
January 25, 2003;
(ii) a certificate from each Selling Shareholder
certifying that the conditions contained in Section 3.1 have been
satisfied in full and all of the covenants of the Selling
Shareholders herein that are to be performed prior to the First
Closing have been performed in all material respects;
(iii) a certificate from each Selling Shareholder attaching
copies, certified by such officer as true and complete, of the
resolutions of its board of directors and its shareholders, if
necessary, in connection with the authorization and approval of
the execution, delivery and performance of the Transaction
Documents and consummation of the Transactions; and
(iv) such other documents as Hanaro may reasonably
request.
16
(e) First Closing Deliveries of Hanaro. At the First Closing,
Hanaro shall deliver or cause to be delivered to the Selling Shareholders the
following, in form and substance reasonably satisfactory to the Selling
Shareholders and their counsel:
(i) the Initial Consideration;
(ii) a certificate from Hanaro certifying that the
conditions contained in Section 3.2 have been satisfied in full
and all of the covenants of Hanaro herein that are to be
performed prior to the First Closing have been performed in all
material respects;
(iii) a certificate of the Representative Director of
Hanaro attaching copies, certified by such officer as true and
complete, of the resolutions of its board of directors and its
shareholders, if necessary, in connection with the authorization
and approval of the execution, delivery and performance of the
Transaction Documents and consummation of the Transactions; and
(iv) such other documents as the Selling Shareholders may
reasonably request.
2.2 Second Tranche Transferred Shares.
(a) Sale and Purchase of Second Tranche Transferred 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 Second
Closing Date, each Selling Shareholder agrees to sell to Hanaro, and Hanaro
agrees to purchase from the Selling Shareholders, the Second Tranche Transferred
Shares (which shares are and shall be duly authorized, validly issued,
fully-paid and non-assessable and, as of the Second Closing Date, free and clear
of all Liens).
(b) Purchase Price for the Second Tranche Transferred Shares.
The total purchase price for the Second Tranche Transferred Shares (the "Final
Consideration") shall be the product of the Purchase Price less the Purchase
Price Adjustment pursuant to Section 2.3 and the number of Transferred Shares,
less the Initial Consideration. For purposes of clarification, the Final
Consideration shall be the higher of zero and ((PP - PPA) x TS) - IC, where:
PP = Purchase Price
PPA = Purchase Price Adjustment
TS = Transferred Shares
IC = Initial Consideration
The Final Consideration shall be paid on the Second Closing Date.
(c) Second Closing; Second Closing Date and Place. The closing
of the purchase and sale of the Second Tranche Transferred Shares (the "Second
Closing") shall take place at the offices of Shin & Xxx, in Seoul, Korea before
4:00 p.m., Seoul time, on February 7, 2003, or on
17
such other date as the parties may agree (the "Second Closing Date"); provided,
however, that if there is a delay in delivering the Disclosure Schedule to
Hanaro under Section 6.14, then the Second Closing Date as well as the date set
forth in Section 8.2(a) shall automatically be delayed by the number of days
that the delivery of the Disclosure Schedule has been delayed.
(d) Second Closing Deliveries of Selling Shareholders. At the
Second Closing, the Selling Shareholders shall deliver or cause to be delivered
to Hanaro the following, in form and substance reasonably satisfactory to Hanaro
and its counsel:
(i) stock certificates representing the Second Tranche
Transferred Shares;
(ii) a certificate from each Selling Shareholder
certifying that the conditions contained in Section 3.3 have been
satisfied in full and all of the covenants of the Selling
Shareholders herein that are to be performed prior to the Second
Closing have been performed in all material respects; and
(iii) such other documents as Hanaro may reasonably
request.
(e) Second Closing Deliveries of Hanaro. At the Second Closing,
Hanaro shall deliver or cause to be delivered to the Selling Shareholders the
following, in form and substance reasonably satisfactory to the Selling
Shareholders and their counsel:
(i) the Final Consideration;
(ii) a certificate from Hanaro certifying that the
conditions contained in Section 3.4 have been satisfied in full
and all of the covenants of Hanaro herein that are to be
performed prior to the Second Closing have been performed in all
material respects; and
(iii) such other documents as the Selling Shareholders may
reasonably request.
2.3 Purchase Price Adjustment. The Purchase Price Adjustment, if any,
shall be made at least seven (7) days prior to the Second Closing by the
Independent Appraiser in accordance with the formula set forth in Exhibit A. The
Independent Appraiser shall be jointly retained by Hanaro and the Selling
Shareholders within seven (7) days following the Execution Date for the purpose
of determining the Purchase Price Adjustment, if any. The Independent
Appraiser's determination of the Purchase Price Adjustment, if any, shall be
final and binding on Hanaro and the Selling Shareholders absent manifest error
and all costs of the Independent Appraiser shall be borne equally by Hanaro, on
the one hand, and the Selling Shareholders, on the other hand.
ARTICLE III
CONDITIONS
3.1 Conditions of Hanaro Relating to the First Closing. The
obligation of Hanaro to purchase and pay for the First Tranche Transferred
Shares as contemplated by this Agreement is
18
subject to the satisfaction, on or before the First Closing Date, of the
following conditions, any of which may be waived in writing by Hanaro in its
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 for
enactment, 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 Selling Shareholders 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 and as of the First
Closing Date (or, with respect to the representations and warranties that are
given as of a specific date, as of such date); and on or before the First
Closing Date, the Selling Shareholders shall have performed and complied with in
all material respects, and, on and as of the First Closing Date, the Selling
Shareholders shall not be in breach or default in any material respect 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 hereof) that are required to be performed
or complied with on or before the First Closing Date.
(c) Consents. All of Sellers' Regulatory Approvals and all
consents, waivers or approvals from any other Person 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 reasonably satisfactory to Hanaro, Hanaro shall have received 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 First Tranche Transferred Shares on the terms and conditions herein
provided shall not violate any Requirement of Law applicable to Hanaro, any
Selling Shareholder or any Company Party.
(e) Agreements. Each of the Transaction Documents (other than
the Disclosure Schedule) shall have been executed and delivered and shall be in
full force and effect. All filings required to be made by the Company and the
Selling Shareholders for the effectiveness of the Transaction Documents shall
have been made by the Company and the Selling Shareholders, and the Company and
the Selling Shareholders shall have furnished to Hanaro evidence of such
filings.
(f) Approvals. Each of Hanaro and the Selling Shareholders
shall have received the necessary and required approvals from its board of
directors for and in connection with the execution and delivery of the
Transaction Documents and the consummation of the Transactions.
19
(g) Proceedings. All corporate and other proceedings to be
taken by the Selling Shareholders and the Company in connection with the
Transaction Documents with respect to the Transactions and documents incident
thereto shall have been completed, and Hanaro shall have received certified or
other copies of the documents evidencing the completion of such proceedings as
it may reasonably request.
(h) No Material Adverse Change. Since the date hereof, there
shall not exist or has 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.
(i) Insolvency Event. No Insolvency Event shall have occurred
or be reasonably likely to occur with respect to any Company Party.
(j) Board of Directors' Meeting of Company. The Company's
board of directors shall have had a meeting in order to convene an Extraordinary
General Meeting of the Shareholders of the Company (the "Extraordinary
Shareholders' Meeting") for the purposes of electing all of the directors and
statutory auditor of the Company nominated by Hanaro and amending the Articles
of Incorporation of the Company as requested by Hanaro, all of which shall take
effect on the Second Closing Date.
(k) Concurrent Closing. The first closing under the Convertible
Bond Subscription Agreement shall occur concurrently with the First Closing;
provided, however, that if such closing fails to occur concurrently with the
First Closing due to the breach or default of Hanaro, then the condition set
forth in this Section 3.1(k) shall be deemed to have been satisfied.
3.2 Conditions of the Selling Shareholders Relating to the First
Closing. The Selling Shareholders' obligation to sell the First Tranche
Transferred Shares to be sold to and purchased by Hanaro as contemplated by this
Agreement is subject to the satisfaction, on or before the First Closing Date,
of the following conditions, any of which may be waived in writing by the
Selling Shareholders 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 for
enactment, 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 contained in Article V of this Agreement 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 First Closing Date (or, with respect to the representations and
warranties that are given as of a
20
specific date, as of such date). On or before the First Closing Date, Hanaro
shall have performed and complied with in all material respects, and, on and as
of the First Closing Date, Hanaro shall not be in breach or default in any
material respect under, any agreements, covenants, conditions or obligations
contained in this Agreement and the other Transaction Documents (including,
without limitation, the covenants contained in Article VI hereof) that are
required to be performed or complied with on or before the First Closing Date.
(c) Consents. All of Sellers' Regulatory Approvals and all
consents, waivers or approvals from any other Person 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 reasonably satisfactory to the Selling Shareholders 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 First Tranche Transferred Shares on the terms and conditions herein
provided shall not violate any Requirement of Law applicable to Hanaro, any
Selling Shareholder or any Company Party.
(e) Agreements. Each of the Transaction Documents (other than
the Disclosure Schedule) shall have been executed and delivered and shall be in
full force and effect. All filings required to be made by Hanaro for the
effectiveness of the Transaction Documents shall have been made by Hanaro, and
Hanaro shall have furnished to the Selling Shareholders evidence of such
filings.
(f) Approvals. Hanaro shall have received the necessary and
required approvals from its board of directors for and in connection with the
execution and delivery of the Transaction Documents and the consummation of the
Transactions.
(g) Proceedings. All corporate and other proceedings to be
taken by Hanaro in connection with the Transaction Documents with respect to the
Transactions and documents incident thereto shall have been completed, and the
Selling Shareholders shall have received certified or other copies of the
documents evidencing the completion of such proceedings as they may reasonably
request.
(h) Insolvency Event. No Insolvency Event shall have occurred
or be reasonably likely to occur with respect to Hanaro.
(i) Concurrent Closing. The first closing under the Convertible
Bond Subscription Agreement shall occur concurrently with the First Closing;
provided, however, that if such closing fails to occur concurrently with the
First Closing due to the breach or default of the Selling Shareholders, then the
condition set forth in this Section 3.2(i) shall be deemed to have been
satisfied.
3.3 Conditions of Hanaro Relating to the Second Closing. The
obligation of Hanaro to purchase and pay for the Second Tranche Transferred
Shares as contemplated by this Agreement is
21
subject to the satisfaction, on or before the Second Closing Date, of the
following conditions, any of which may be waived in writing by Hanaro in its
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 for
enactment, 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 Selling Shareholders 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 the
First Closing Date and on and as of the Second Closing Date; and on or before
the Second Closing Date, the Selling Shareholders shall have performed and
complied with in all material respects, and, on and as of the Second Closing
Date, the Selling Shareholders shall not be in breach or default in any material
respect under, any agreements, covenants, conditions or obligations contained in
this Agreement and the other Transaction Documents (including, without
limitation, the covenants contained in Article VI hereof) that are required to
be performed or complied with on or before the Second Closing Date.
(c) Purchase Permitted by Applicable Laws. The purchase and
sale of the Second Tranche Transferred Shares on the terms and conditions herein
provided shall not violate any Requirement of Law applicable to Hanaro, any
Selling Shareholder or any Company Party.
(d) No Material Adverse Change. Since the First Closing Date,
there shall not exist or has 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.
(e) Disclosure Schedule. Hanaro shall have received a full and
complete set of the Disclosure Schedule and shall not have duly exercised its
right to terminate this Agreement pursuant to Section 8.2(f). In the event that
the Disclosure Schedule has been updated by the Selling Shareholders in
accordance with Article IV, such Updates shall not contain any items that have a
Material Adverse Effect.
(f) Insolvency Event. No Insolvency Event shall have occurred
or be reasonably likely to occur with respect to any Company Party.
(g) Resignation of Directors. The Company shall have received
letters of resignation addressed to the Company, effective as of a date no later
than the Second Closing Date, from all of the then-current directors (each in
his capacity as such) such that Hanaro's nominees may be elected at the
Extraordinary Shareholders' Meeting for a three-year term commencing on the
22
Second Closing Date, and the Selling Shareholders shall have delivered copies of
such letters to Hanaro.
(h) Convening of Shareholders' Meeting of Company. The
Extraordinary Shareholders' Meeting shall have been convened and all of Hanaro's
nominees shall have been elected as directors and statutory auditor of the
Company and the Articles of Incorporation of Company shall have been amended as
requested by Hanaro.
(i) Sale of First Tranche Transferred Shares by all Selling
Shareholders. The Selling Shareholders shall have sold to Hanaro the number (or
such other number as may have been agreed between Hanaro and the Selling
Shareholders) of the First Tranche Transferred Shares.
(j) Contracts. Hanaro shall have received all or substantially
all of the documents set forth in Section 6.13(a) on or prior to January 11,
2003.
(k) Concurrent Closing. The second closing under the
Convertible Bond Subscription Agreement and the closing under the Warrant Sale
and Purchase Agreement shall occur concurrently with the Second Closing;
provided, however, that if any such closing fails to occur concurrently with the
Second Closing due to the breach or default of Hanaro, the condition set forth
in this Section 3.3(k) shall be deemed to have been satisfied.
3.4 Conditions of the Selling Shareholders Relating to the Second
Closing. The Selling Shareholders' obligation to sell the Second Tranche Shares
to be sold to and purchased by Hanaro as contemplated by this Agreement is
subject to the satisfaction, on or before the Second Closing Date, of the
following conditions, any of which may be waived in writing by the Selling
Shareholders 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 for
enactment, 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 contained in Article V of this Agreement 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 Second Closing Date. On or before the Second Closing Date, Hanaro
shall have performed and complied with in all material respects, and, on and as
of the Second Closing Date, Hanaro shall not be in breach or default in any
material respect under, any agreements, covenants, conditions or obligations
contained in this Agreement and the other Transaction Documents (including,
without
23
limitation, the covenants contained in Article VI hereof) that are required to
be performed or complied with on or before the Second Closing Date.
(c) Purchase Permitted by Applicable Laws. The purchase and
sale of the Second Tranche Transferred Shares on the terms and conditions herein
provided shall not violate any Requirement of Law applicable to Hanaro, any
Selling Shareholder or any Company Party.
(d) Insolvency Event. No Insolvency Event shall have occurred
or be reasonably likely to occur with respect to Hanaro.
(e) Sale of First Tranche Transferred Shares by all Selling
Shareholders. The Selling Shareholders shall have sold to Hanaro the number (or
such other number as may have been agreed between Hanaro and the Selling
Shareholders) of First Tranche Transferred Shares.
(f) Concurrent Closing. The second closing of the Convertible
Bond Subscription Agreement shall occur concurrently with the Second Closing;
provided, however, that if such closing fails to occur concurrently with the
Second Closing due to the breach or default of the Selling Shareholders, the
condition set forth in this Section 3.4(f) shall be deemed to have been
satisfied.
3.5 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, absent express written agreement to the contrary.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE SELLING SHAREHOLDERS
Except as set forth in the Disclosure Schedule to be delivered to
Hanaro and updated pursuant to this Agreement, the Selling Shareholders jointly
and severally represent and warrant to Hanaro as follows as of each Closing Date
(or, with respect to the representations and warranties that are given as of a
specific date, as of such date), with the same force and effect as if made at
and as of such time. For purposes of the representations and warranties of the
Selling Shareholders contained herein, disclosure in any section of the
Disclosure Schedule of any facts or circumstances shall be deemed to be adequate
disclosure of such facts or circumstances with respect to all representations or
warranties made by the Selling Shareholders herein that such facts or
circumstances concern. In the Disclosure Schedule to be delivered to Hanaro
pursuant to Section 6.14, the Selling Shareholders shall be entitled to include
disclosures for any and all sections of this Article IV, regardless of whether
there is a reference to the Disclosure Schedule in such sections. Following such
delivery of the Disclosure Schedule to Hanaro, the Selling Shareholders may,
from time to time, update (but not correct, supplement with or newly insert
facts or circumstances that already existed prior to the First Closing Date)
(the "Updates") the Disclosure Schedule by delivering such updated information
to Hanaro in writing, expressly stating the sections of the Disclosure Schedule
that are to be so updated, and if so updated, the Disclosure Schedule as updated
by such Updates shall supersede any previous Disclosure Schedule as of the date
of such update; provided,
24
however, that if the Updates are submitted to Hanaro within three (3) days prior
to the Second Closing Date, then the Second Closing Date shall be automatically
delayed by three (3) days to allow Hanaro to review the then submitted Updates.
The inclusion of any information in any section of the Disclosure Schedule shall
not be deemed to be an admission or evidence of the materiality of such item,
nor shall it establish a standard of materiality for any purpose whatsoever.
Such representations, warranties, covenants and agreements have constituted a
material inducement to Hanaro to enter into this Agreement, to enter into the
other Transaction Documents to which it has become a party, to purchase the
Transferred Shares and to consummate the other Transactions.
4.1 Power; Authorization; Execution.
(a) Each of the Selling Shareholders has full power and
capacity to execute and deliver each Transaction Document to which it is a party
and to perform its obligations hereunder and thereunder.
(b) The execution, delivery and performance by each of the
Selling Shareholders of each Transaction Document to which it is a party have
been duly authorized by all necessary corporate action on the part of such
Entity, except for the approval of its board of directors, which shall be
obtained on or before the First Closing Date.
(c) Subject to the approval of its board of directors, each
Transaction Document to which each of the Selling Shareholders is a party,
assuming due authorization, execution and delivery of such Transaction Document
by the other parties thereto, will constitute the valid and legally binding
obligation of such Selling Shareholder, enforceable against such Selling
Shareholder in accordance with its terms, subject to applicable bankruptcy,
insolvency and similar Laws affecting creditor rights generally and to general
principles of equity.
4.2 Record and Beneficial Ownership. Except for the shares of Common
Stock held by SB Thrunet Pte Ltd., each of the Selling Shareholders has good and
marketable title to, and is the lawful record and beneficial owner of, the
shares of Common Stock listed next to such Selling Shareholder's name on
Schedule II and, as of the First Closing Date or the Second Closing Date, as
applicable, free and clear of all Liens. With respect to the shares of Common
Stock held by SB Thrunet Pte Ltd., as of the Second Closing Date, certain
Selling Shareholder(s) will have good and marketable title to, and will be the
lawful record and beneficial owner of, such shares of Common Stock, free and
clear of all Liens. The Selling Shareholders have, and upon consummation of the
transactions contemplated in Article 2 hereof, Hanaro shall have, legal,
uncontested and unrestricted title to the Transferred Shares. The Transferred
Shares represent, in the aggregate, approximately 40.51% of the issued and
outstanding equity interest in the Company on a fully-diluted basis.
4.3 No Conflict; Consents. (a) Except as set forth in Section 4.3(a)
of the Disclosure Schedule, 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
Selling Shareholder, any Company Party, or any of their Assets is subject or
bound, (ii) require any Regulatory Approval, (iii) conflict with, result in a
breach of, constitute a default under (with or without the giving of notice,
lapse of time or both), result in the acceleration
25
of, create in any party the right to accelerate, terminate or cancel, any
Material Contract or any License or (iv) impair or result in the imposition of
any Lien upon any of the material Assets of any Company Party.
(b) Section 4.3(a) of the Disclosure Schedule sets forth all
of the Regulatory Approvals required to be obtained by any Selling Shareholder
or Company Party in connection with the execution, delivery and performance of
this Agreement and the other Transaction Documents and the consummation of the
Transactions (the "Sellers' Regulatory Approvals"). All of the Sellers'
Regulatory Approvals shall have been obtained by the appropriate Selling
Shareholder or Company Party on or prior to the First Closing Date], shall be in
full force and effect on each Closing Date, shall not be subject to any material
restriction, condition, limitation, qualification, or unusual or onerous
requirement, obligation or term, and shall not be subject to revocation.
4.4 Organization, Qualification, and Corporate Power. (a) The Company
is a chusik-hoesa, duly organized and validly existing under the Laws 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.
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.
(b) Each of the Selling Shareholders is a corporation duly
organized and validly existing under the Laws of Korea.
(c) The Selling Shareholders shall have delivered to Hanaro on
or prior to the First Closing Date true, correct and complete copies of the
Charter Documents of each of the Selling Shareholders and of the Company Parties
(in each case as in effect as of the First Closing Date).
(d) Section 4.4(d) 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 all Liens.
(e) Section 4.4(e) of the Disclosure Schedule lists the
directors and officers ("isa" level and above) of the Company and each of its
Subsidiaries who hold such positions as of the First Closing Date.
4.5 Capitalization.
(a) As of the date hereof, the authorized capital stock of the
Company consists solely of 400,000,000 authorized shares, of which 77,635,260
shares of Common Stock are issued and outstanding. There is no Preferred Stock
issued and outstanding. All outstanding shares of
26
Common Stock were duly authorized and validly issued and are fully paid and
non-assessable. Except as set forth in Section 4.5(a) of the Disclosure
Schedule, no shares of capital stock of the Company of any class or series are
reserved for issuance and no Redeemable Equity of the Company is authorized,
issued or outstanding.
(b) Section 4.5(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.
4.6 Corporate Records. The minute books or similar records of each
Company Party, which shall have been made available to Hanaro on or prior to the
First Closing Date, 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 the Company Parties. 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, except where the failure to so authorize or
ratify such action or transaction does not have a Material Adverse Effect.
4.7 Financial Statements. The Selling Shareholders have delivered to
Hanaro true, accurate and complete copies of the following financial statements
(collectively, the "Financial Statements"): (i) the Audited Financial
Statements; and (ii) the Unaudited 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 the respective dates thereof and the results of
operations and cash flows of the Company and/or its Subsidiaries (as applicable)
for the relevant periods in conformity with U.S. GAAP (or, with respect to
Unaudited Financial Statements, 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.
4.8 Undisclosed Liabilities. Except as set forth in Section 4.8 of
the Disclosure Schedule and except as disclosed in the Financial Statements and
except for those incurred in the Ordinary Course of Business, the Company has
not incurred any liability or obligation of any nature, whether or not accrued,
contingent or otherwise, the effects of which, in the aggregate, exceed Won four
(4) billion.
4.9 Company Reports.
(a) The Company has timely filed or delivered, as applicable,
all required forms, reports and documents with the NASDAQ, SEC and the Financial
Supervisory Commission of Korea ("FSC") 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 and the Korean
Securities and Exchange Act, each as in effect on the dates such forms, reports
and documents were
27
filed or delivered. No Company Subsidiary has filed, or is required to file, any
form, report or other document with the NASDAQ, SEC or FSC. The Selling
Shareholders shall, on or prior to the First Closing Date, deliver to Hanaro, in
the form filed with or delivered to the NASDAQ, SEC and FSC (including any
amendments or supplements thereto), (i) the Company's Annual Reports for each of
the fiscal years ended December 31, 1999, 2000 and 2001; and (ii) all other
reports or registration statements filed or delivered by the Company with the
NASDAQ, SEC and FSC 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 FSC, 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.
(b) The audited and unaudited consolidated financial statements
of the Company included (or incorporated by reference) in the Company Reports
complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC and FSC with
respect thereto.
4.10 Events Subsequent to Most Recent Fiscal Period End. Except as set
forth in Section 4.10 of the Disclosure Schedule and except as disclosed in the
Financial Statements, since July 1, 2002 (a) there has not been any event, fact,
circumstance or occurrence that constitutes a Material Adverse Effect, (b) each
Company Party has conducted its business and affairs in the Ordinary Course of
Business and (c) no Selling Shareholder nor Company Party has taken any action
that, if taken after the date hereof, would constitute a breach of any
pre-closing covenants contained in this Agreement, including but not limited to
those contained in Article VI hereof.
4.11 Legal Compliance; Licenses; Corporate Controls.
(a) Each of the Company Parties is, and has conducted its
business and operations in compliance with all 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.
(b) Each of the Company Parties possesses all material
authorizations, approvals, consents, licenses, permits, easements, certificates,
franchises and other rights, privileges and permissions required under
applicable Law to conduct its respective business and to own, lease and operate
its respective properties as currently conducted, owned, leased or operated
(collectively for all Company Parties, the "Licenses"). All of the Licenses are
in full force and effect. Each of the Company Parties 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. The Selling
Shareholders have no reason to believe that any of the Licenses will be revoked,
canceled, rescinded, or not renewed in the ordinary course. There is not now
pending, or to the Selling Shareholders' Knowledge threatened, any material
complaint which might have any of the results referred to in the immediately
preceding sentence.
(c) Schedule 4.11(c) of the Disclosure Schedule sets forth a
list of all of the Licenses issued by a national (but not local or provincial)
agency, commission or other governmental
28
or regulatory authority, together with material terms thereof (including,
without limitation, conditions, expiration dates, renewal terms and any other
material restrictions or qualifications).
4.12 Tax Matters.
(a) Since January 1, 1997, 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. All Taxes owed by the Company Parties (whether or not
shown on any Tax Return) have been paid if due, or if not yet due (taking into
account any extensions), 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, 1997,
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) 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) There is no currently pending, or to the Selling
Shareholders' Knowledge threatened, dispute or claim concerning any Tax
Liability of any of the Company Parties raised by any Governmental Authority.
Section 4.12(c) of the Disclosure Schedule lists all Tax Returns that currently
are the subject of audit by any Governmental Authority.
(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, in all material
respects, 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.
4.13 Real Property.
(a) Section 4.13(a) of the Disclosure Schedule identifies in
reasonable detail all Company Real Property. All of the land, buildings,
premises and other improvements comprising the Company Real Property are in
normal operating condition and are adequate for intended and actual usage, and
the operation thereof as conducted during the 12-month period prior to the date
hereof and as presently conducted has not been and is not in violation of any
applicable building code, zoning ordinance or other Law in any material respect.
Except as disclosed in Section 4.13(a) of the Disclosure Schedule, to the
Selling Shareholders' Knowledge, 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.
29
(b) There are no pending actions or proceedings (including
condemnation proceedings) concerning any currently or formerly owned, operated
or leased Company Real Property that, if adversely determined to the Company or
its Subsidiaries, could reasonably be expected to have a Material Adverse Effect
and, to the Selling Shareholders' 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 real 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.
4.14 Environmental Matters.
(a) The Selling Shareholders have made available to Hanaro
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").
(b) 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
the Company Real Property or its occupancy, operation or use by any Company
Party and arising under Environmental, Health, and Safety Laws.
(c) To the Selling Shareholders' Knowledge, 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 substantially interfere with or otherwise substantially affect the business
or operations of the Company or any of its Subsidiaries 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 (i) all agreements under which any Company Party uses
Licensed Intellectual Property (other than licenses relating to commercially
available "shrink wrap" software) 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.
(b) There is no pending or, to the Selling Shareholders'
Knowledge, threatened assertion or claim 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
30
Selling Shareholders' 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) No assertion or claim has been instituted or made or is
pending (nor, to the Selling Shareholders' Knowledge, 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 Selling Shareholders' Knowledge,
there are no grounds to support any such assertion or claim. No Company Party 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.
(d) Each of the Company Parties owns free and clear of all
Liens, or holds under license or otherwise possesses full, legally enforceable
rights to use, all the relevant Company Intellectual Property, except where the
effects of the failure to own or hold or possess such rights, individually or in
the aggregate, could not reasonably be expected to cause a Material Adverse
Effect. The Company Intellectual Property constitutes all of the Intellectual
Property used or held for use by the Company Parties in connection with the
conduct of their business as currently conducted and all Intellectual Property
necessary in the conduct of such business as currently conducted.
(e) Each Company Party has taken reasonable steps to maintain
and protect the confidentiality of its Trade Secrets and other confidential
Company Intellectual Property.
4.16 Title to Property; Liens. Except as set forth in Section 4.16 of
the Disclosure Schedule, each Company Party (i) owns, leases or has the legal
right to use all Assets used in the conduct of its business, or otherwise owned,
leased or used by it; (ii) has good title, free and clear of all Liens (other
than Permitted Liens), to such Assets owned by it; and (iii) has valid and
subsisting leasehold interests in all such Assets leased by it, free and clear
of all Liens, except for Permitted Liens and except that against the properties
which are subject to such leasehold interests, there may exist mortgages or
other security interests held by third parties that have a rank or priority
which is higher than such Company Party's leasehold interests.
4.17 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 in such amounts as are customary for companies of
similar size engaged in the businesses and activities in which such Company
Party is engaged, and all premiums due and payable have been paid in full. All
such policies are in full force and effect and the Company is not in default
thereunder in any material respect. The Selling Shareholders will provide or
make available to Hanaro copies of such policies and of any claims outstanding
thereunder as of the date hereof on or prior to the First Closing Date. All
claims thereunder have been filed in a due and timely fashion. Except as set
forth in Section 4.17 of the Disclosure Schedule, there are no Liens on any
insurance policies held by any Company Party.
31
4.18 Absence of Certain Interests of Affiliated Persons. Except as set
forth in Section 4.18 to the Disclosure Schedule, (i) no Selling Shareholder, no
Person that, directly or indirectly Controls any Selling Shareholder, and none
of their Related Persons, and (ii) to the Selling Shareholders' Knowledge, no
director or officer of any Company Party: (x) 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 (y) 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 for compensation for services in such capacity.
4.19 Contracts. Each Material Contract is the legal, valid and binding
obligation of the relevant Company Party and, to the Selling Shareholders'
Knowledge, is the legal, valid and binding obligation of the other parties
thereto, enforceable in accordance with its terms, except as limited in each
case by applicable bankruptcy, insolvency, reorganization, moratorium or other
similar Law affecting creditors' rights generally. Except as set forth in
Section 4.19 of the Disclosure Schedule, to the Selling Shareholders' Knowledge,
no material breach or default has occurred and is continuing thereunder, and no
event has occurred that with the lapse of time or giving of notice would
constitute a material default thereunder.
4.20 Litigation. Section 4.20 of the Disclosure Schedule sets forth
each Judgment entered against or specifically relating to the Company or any of
the Assets of the Company since December 31, 2001. Except as set forth in
Section 4.20 of the Disclosure Schedule, no Company Party is a party to or
otherwise involved in or, to the Selling Shareholders' 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 action, suit, proceeding,
hearing or investigation the amount in dispute or potential judgment exceeds Won
100 million.
4.21 Employees.
(a) Except as set forth in Section 4.21(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,
2001.
(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.
32
(c) To the Selling Shareholders' Knowledge, there is no
organizational effort presently being made or threatened by or on behalf of any
labor union or other labor representative with respect to employees of any
Company Party.
(d) On or prior to the First Closing Date, the Selling
Shareholders shall have made available copies of any standard Employment
Agreement, and shall have described in reasonable detail (i) any Employment
Agreements that provide for terms or conditions of employment or method of
compensation or type of benefits that are materially different from the standard
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 4.21(e) of the Disclosure
Schedule, no employee or in-house 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 4.21(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 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
Selling Shareholders' Knowledge, 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 4.21(h) of the Disclosure Schedule is
a true and complete list of all employees of the Company who since June 30, 1999
have continuously worked for the Company on a temporary or contractual 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 Taxes, other than Liabilities due to currently
employed temporary employees in respect of wages and other compensation under
applicable employment agreements and other employment rules of the Company, and
any related Taxes.
(i) 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 or applicable Law.
33
(j) No Company Party has established practice of providing
gratuitous payments or benefits 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 or applicable Law.
(k) Except as set forth in Section 4.21(k) of the Disclosure
Schedule, (i) the Company has not 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) the Company has not incurred a Liability for
breach or termination of a consultation agreement with an in-house consultant or
(iii) the Company does not have any outstanding obligation to pay or provide a
benefit to any Company 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.
4.22 Employee Benefit Matters.
(a) Except as set forth in Section 4.22 of the Disclosure
Schedule, 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
incentive benefits or payments (as estimated by the Company in good faith) to a
person of more than Won 100 million per year.
(b) The consummation of the transactions contemplated by this
Agreement 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 current or former director, officer,
employee or in-house consultant under any Employment Agreement, Employee Benefit
Plan or otherwise; (iii) result in any "parachute payment" to any current or
former director, officer, employee or in-house consultant 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) Section 4.22(c) of the Disclosure Schedule lists all
Employee Benefit Plans of the Company Parties. The Company Parties have no
overdue 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.
(d) The Selling Shareholders shall have delivered to Hanaro on
or prior to the First Closing Date a copy of the summary plan description or
similar description of each Employee Benefit Plan, excluding the medical
insurance, unemployment insurance, industrial accident insurance and national
pension plan.
(e) 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
the aggregate, result in a material liability to any Company Party.
34
(f) 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.
(g) 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.
(h) The Company does not have and has never had any U.S
Subsidiaries or U.S.-based operations and no Company Party has, or ever has had,
any U.S.-based employees.
4.23 Guaranties; Inter-Company Liabilities.
(a) Except as set forth in Section 4.23(a) of the Disclosure
Schedule, (i) 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, and (ii) none of the
Selling Shareholders have provided any guarantee with respect to any Liability
or obligation of any Company Party.
(b) Section 4.23(b) 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 100 million.
4.24 Suppliers. Section 4.24 of the Disclosure Schedule sets forth the
15 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 for the one
(1) year period ended on December 31, 2001. Since July 1, 2002, none of such
suppliers has notified any Company Party that it intends to terminate or change
significantly its sale or licensing of products purchased or licensed by such
party or any of the material terms thereof. There are no material claims in
connection with goods or services provided to the Company by any of its
suppliers pending or, to the Selling Shareholders' Knowledge, threatened by the
Company against any of its suppliers or by any such supplier against the
Company.
4.25 Regulatory Payments. Except as disclosed in Section 4.25 of the
Disclosure Schedule, there is no overdue compensation payable by the Company to
any other network service provider under the Standards for USO Compensation
Payment Calculation Method of the Telecommunication Business Law of Korea.
4.26 Recent Dispositions. Section 4.26 of the Disclosure Schedule sets
forth a list of all asset or share dispositions made by any Company Party during
the 12-month period prior to the date hereof which involved aggregate
consideration in excess of Won 1 billion. Except as set forth in Section 4.26 of
the Disclosure Schedule, no Company Party has any material outstanding
obligations or Liabilities relating to such dispositions.
35
4.27 ABS Programs. Except as set forth in Section 4.27 of the
Disclosure Schedule, no Company Party has any (i) asset buy-back obligation
under any circumstances with respect to any ABS Program, or (ii) future
obligation to encumber any existing or future receivables of any Company Party
in connection with any ABS Program.
4.28 Financial Advisors and Brokers. Except for Xxxxxx Brothers, no
Person has acted, directly or indirectly, as a broker, finder or financial
advisor of the Selling Shareholders or the Company in connection with the
Transaction Documents or the Transactions, and no other Person is entitled to
receive any broker's, finder's or similar fee or commission from any of the
Selling Shareholders or the Company Parties in respect thereof based in any way
on any agreement, arrangement or understanding made by or on behalf of any of
the Selling Shareholders, or the Company or any of its Subsidiaries, or any of
their respective directors, officers or employees.
4.29 Offerees. None of the Selling Shareholders, the Company, their
respective directors and officers, their Affiliates or any Person acting as
agent for or on behalf of the Selling Shareholders or the Company has, directly
or indirectly, sold, offered for sale, or solicited offers to buy any of the
Transferred Shares or other securities of the Company so as to bring the offer
or sale of the Transferred 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 Selling
Shareholders, the Company nor any of their Representatives has made any
"directed selling efforts" with respect to the Transferred Shares as defined in
Rule 902 under the Securities Act.
4.30 Powercomm Commitment. The obligations of the Company to
contribute to the consortium led by Dacom Corporation for the acquisition of a
controlling block of shares in Powercomm Corporation shall not exceed Won 10
billion.
4.31 NO OTHER REPRESENTATIONS. EXCEPT FOR THE REPRESENTATIONS AND
WARRANTIES CONTAINED IN THIS ARTICLE IV, NEITHER THE SELLING SHAREHOLDERS NOR
ANY OTHER PERSON OR ENTITY ACTING ON BEHALF OF THE SELLING SHAREHOLDERS, MAKES
ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED.
36
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF HANARO
Hanaro represents and warrants to the Selling Shareholders as follows
as of the date hereof, and as of each Closing Date (or, with respect to the
representations and warranties that are given as of a specific date, as of such
date) with the same force and effect as if made at and as of such time. For
purposes of the representations and warranties of Hanaro contained herein,
disclosure in any section of the Hanaro Disclosure Schedule of any facts or
circumstances shall be deemed to be adequate disclosure of such facts or
circumstances with respect to all representations or warranties made by Hanaro
herein that such facts or circumstances concern. The inclusion of any
information in any section of the Hanaro Disclosure Schedule shall not be deemed
to be an admission or evidence of the materiality of such item, nor shall it
establish a standard of materiality for any purpose whatsoever.
5.1 Organization. Hanaro is a chusik-hoesa, duly organized and
validly existing under the Laws of Korea and 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. Hanaro 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.
5.2 Power. Hanaro has full power and capacity to execute and deliver
this Agreement and each other Transaction Document to which it is a party and to
perform its obligations hereunder and thereunder.
5.3 Execution and Delivery; Authorization. The execution, delivery
and performance by Hanaro of this Agreement and each other Transaction Document
to which it is a party has been duly and validly authorized by all necessary
corporate action on its part, except for the approval of its board of directors,
which shall be obtained on or before the First Closing Date. Subject to the
approval of its board of directors, each of the Transaction Documents, when
executed and delivered, will constitute a legal, valid and binding obligation of
Hanaro, enforceable against Hanaro in accordance with its terms, subject to
applicable bankruptcy, insolvency and similar Laws affecting creditor rights
generally and to general principles of equity.
5.4 No Conflict; Consents. (a) Except as set forth in Section 5.4(a)
of the Hanaro Disclosure Schedule, 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 Hanaro or any of its Assets is subject or bound, (ii) require
any Regulatory Approval, (iii) conflict with, result in a breach of, constitute
a default under (with or without the giving of notice, lapse of time or both),
result in the acceleration of, create in any party the right to accelerate,
terminate or cancel, any material contract to which Hanaro is a party or by
which Hanaro or any of its Assets is bound or any License held by Hanaro or (iv)
impair or result in the imposition of any Lien upon any of the material Assets
of Hanaro.
37
(b) Section 5.4(a) of the Hanaro Disclosure Schedule sets
forth all of the Regulatory Approvals required to be obtained by Hanaro in
connection with the execution, delivery and performance of this Agreement and
the other Transaction Documents and the consummation of the Transactions (the
"Hanaro's Regulatory Approvals"). All of the Hanaro's Regulatory Approvals shall
have been obtained by Hanaro on or prior to the First Closing Date, shall be in
full force and effect on each Closing Date, shall not be subject to any material
restriction, condition, limitation, qualification, or unusual or onerous
requirement, obligation or term, and shall not be subject to revocation.
5.5 NO OTHER REPRESENTATIONS. EXCEPT FOR THE REPRESENTATIONS AND
WARRANTIES CONTAINED IN THIS ARTICLE V, NEITHER HANARO NOR ANY OTHER PERSON OR
ENTITY ACTING ON BEHALF OF HANARO, MAKES ANY REPRESENTATION OR WARRANTY, EXPRESS
OR IMPLIED.
ARTICLE VI
COVENANTS
6.1 Conduct of Business by Company Parties. From the date hereof
until the Second Closing Date, so long as Hanaro has not transferred any of the
First Tranche Transferred Shares, the Selling Shareholders shall cause the
Company and each of their appointees to the Company board of directors to, and
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
commercially reasonable efforts to preserve intact their respective present
business organizations, operations, goodwill and relationships with third
parties (including, without limitation, customers and suppliers) and to keep
available the services of the Key Employees; provided, however, that
notwithstanding the foregoing, the Company may reschedule, rearrange or
restructure, or alter the terms of, any existing Indebtedness ("Indebtedness
Restructuring"), and may engage in discussions and negotiate with its creditors
for such purpose, except that any Indebtedness Restructuring upon terms less
favorable to the Company than those then available to similarly rated corporate
borrowers shall be subject to the prior written consent of Hanaro. Without
limiting the generality of the foregoing, from the date hereof until the Second
Closing Date, so long as Hanaro has not transferred any of the First Tranche
Transferred Shares, the following decisions or transactions of the Company
(other than those contemplated in this Agreement or other Transaction Documents)
shall be subject to the prior written approval of Hanaro:
(a) adopt any annual business plan or any material amendment
thereto or significant deviation therefrom;
(b) take any action or enter into any transaction that would
result in a material change in the scope, nature and/or activities of the
Company's business;
(c) enter into any binding commitment in respect of, or take
any further action in furtherance of, any actual or proposed acquisition,
merger, investment, purchase of assets
38
(including capital expenditure) exceeding Won 5 billion and/or disposition of
any kind, including assets of the Company, exceeding Won 1 billion;
(d) modify, amend, change or grant any waiver under any of the
Company Party's Charter Documents or propose or authorize any such modification,
amendment, change or waiver;
(e) take any action that would alter or change the general
rights or privileges, obligations or liabilities in respect of any class of
shares issued by the Company or dilute respective percentages of ownership of
any Selling Shareholder (other than transfers of shares of Common Stock among
the Selling Shareholders);
(f) take any action that would result in any material changes
to or agreement to additional contractual obligations between any Company Party
and any of its major shareholders (which shall be defined for the purposes of
this section as any shareholder (together with any Related Persons thereto)
holding 5% or more of the issued and outstanding shares of such Company Party on
a fully-diluted basis);
(g) enter into any or take any action that modify or amend any
existing commitment or transaction with Related Persons;
(h) take any action that would result in any material change in
compensation for any Company Party executives;
(i) incur, assume or guarantee any Indebtedness involving more
than Won 5 billion in principal amount (including off balance sheet items);
(j) take any action that would result in a default by any
Company Party in respect of any of its Indebtedness exceeding Won 500 million in
principal amount; and
(k) take any action that would result in the issuance of equity
or Rights of any Company Party.
6.2 Additional Covenants of the Selling Shareholders. From the date
hereof until the Second Closing Date, so long as Hanaro does not transfer any of
the First Tranche Transferred Shares, the Selling Shareholders shall:
(a) not acquire any additional shares of Common Stock or
Preferred Stock, other than the shares of Common Stock held by SB Thrunet Pte
Ltd. and other shares of Common Stock to comprise the Transferred Shares;
(b) not enter into any agreement to sell, transfer or otherwise
pledge or dispose of any of the Transferred Shares to any party other than
Hanaro;
(c) not exercise, transfer or otherwise dispose of any stock
options or warrants of the Company currently outstanding;
39
(d) not make any modifications or amendments to any
shareholders agreement between any of the Selling Shareholders inter-se or
between any of the Selling Shareholders and third parties to the extent such
modifications or amendments affect any rights or obligations of any Company
Party;
(e) cause each of its appointees to the Company board of
directors to take all actions and promptly do or cause to be done all things
necessary to consummate and make effective the transactions contemplated by this
Agreement, including convening a meeting of the Company's board of directors for
the purposes of calling the Extraordinary Shareholders Meeting; and
(f) vote its shares of Common Stock at the Extraordinary
Shareholders' Meeting in favor of the election of Hanaro's designated directors
and the amendment to the Articles of Incorporation of the Company as requested
by Hanaro.
6.3 Sale of the Transferred Shares by Hanaro. Hanaro shall not sell,
transfer or otherwise dispose of any of the First Tranche Transferred Shares
commencing on the First Closing Date until the earlier of (a) thirty (30) days
after termination of this Agreement in accordance with Section 8.2 or (b) the
Second Closing Date.
6.4 Hanaro's Designee. On the First Closing Date, the Selling
Shareholders shall cause the Company to provide an office (private room) to a
designee of Hanaro at the Company's head office and to allow such designee of
Hanaro access to all of the Company's books and other corporate records and
documents, subject to the Company's non-disclosure and confidentiality
obligations; provided that the use of such office and access to the
above-mentioned documents shall be allowed only during normal business hours of
the Company. In the event this Agreement is terminated pursuant to Section 8.2,
Hanaro's designee shall immediately vacate the office and shall no longer be
allowed such access to the Company's books and other corporate records and
documents.
6.5 Due Diligence. From the Execution Date until the Second Closing
Date, the Selling Shareholders and the Company agree to fully support and cause
the Company to fully support Hanaro in its due diligence investigation regarding
the Company Parties.
6.6 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, Hanaro, the Company, and the Selling
Shareholders will use its reasonable best efforts to make all filings with
respect to, and to obtain all Regulatory Approvals necessary in order to permit
the consummation of the Transactions.
6.7 Access. Commencing on the Execution Date and ending on the Second
Closing Date, the Selling Shareholders shall cause the Company Parties to grant
to Hanaro and its Representatives, or cause to be granted to Hanaro and its
Representatives, full access to (i) the management of the Company Parties in
connection with Hanaro' due diligence investigation and
40
otherwise in connection with the Transactions, and (ii) each Company Party's
properties, records, financial and operating data, and all other documents,
information and persons concerning the business and operations of the Company
Parties as Hanaro or its Representatives may reasonably request in connection
with the Transactions, in each case subject to confidentiality and
non-disclosure obligations of any Company Party.
6.8 Publicity. Except as required by Law or by obligations pursuant
to any applicable listing agreement with or requirement of any national
securities exchange or national quotation system, none of the Company (or any of
its Affiliates) or Hanaro (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.
6.9 Exclusivity.
(a) Each Selling Shareholder shall, and shall cause each
Company Party to, immediately cease and terminate, and cause its respective
Representatives to cease and terminate, any existing solicitation, initiation,
encouragement, activity, discussion or negotiation with any Persons conducted
heretofore by a Selling Shareholder or Company Party with respect to any
proposed, potential or contemplated transaction involving the sale of the shares
of the Company.
(b) From the date hereof until the earlier of (i) the Second
Closing Date or (ii) February 7, 2003 (the "Exclusivity Period"), the Selling
Shareholders shall not, 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 transaction involving
the sale of the shares of the Company. The Selling Shareholders will promptly
notify Hanaro of any such proposal received during the Exclusivity Period.
6.10 Notifications. At all times prior to each Closing Date, each
party shall promptly notify the other parties 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 6.10 shall not limit or
otherwise affect the remedies available hereunder to any party receiving such
notice.
6.11 Release of Certain Guarantees. Following the Second Closing,
Hanaro shall (a) exert its reasonable efforts to terminate and release
outstanding personal guarantees of Yong Xxx Xxx and Hong Soon Xxx (collectively,
"Guarantors") that have been provided in respect of the Indebtedness of the
Company; (b) cause the Company not to increase the amount of Indebtedness of the
Company that is secured by any such personal guarantee; and (c) in the event any
Indebtedness of the Company
41
secured by any such personal guarantee is rolled over or the maturity of such
Indebtedness is otherwise extended, procure the termination and release of all
guarantee obligations of the Guarantors regarding such Indebtedness.
6.12 Employment. Hanaro acknowledges and agrees that the current
employees of the Company constitute an important asset of the Company. Hanaro
shall use its reasonable best efforts to cause the Company not to dismiss any of
its current employees for a period of one (1) year following the Second Closing,
except for a just cause as expressly provided in the Labor Standards Act of
Korea, provided that, for the purposes of this Section 6.12, the term "just
cause" shall not include dismissal for a restructuring of the Company or based
on an urgent management need.
6.13 Provision of Due Diligence Materials.
(a) On or prior to January 6, 2003, the Selling Shareholders
shall cause the Company to prepare and deliver to Hanaro: (i) a schedule of all
Material Contracts, and (ii) a complete and correct copy of each written
Material Contract (together with all amendments, modifications or supplements
thereto, and all waivers currently in effect thereunder) other than those
Material Contracts that contain a nondisclosure or confidentiality provision.
(b) With respect to any such Material Contract that contains a
nondisclosure or confidentiality provision, the Selling Shareholders shall use
their reasonable best efforts, and the Selling Shareholders shall cause the
Company to use its reasonable best efforts, to obtain the necessary consent or
approval to disclose such Material Contract to Hanaro. The Selling Shareholders
shall cause the Company to deliver a copy of such Material Contract to Hanaro as
soon as the necessary consent or approval has been obtained.
6.14 Provision of Disclosure Schedule. On or prior to January 6, 2003,
the Selling Shareholders shall prepare and deliver to Hanaro the Disclosure
Schedule.
ARTICLE VII
INDEMNIFICATION
7.1 Survival of Representations and Warranties; Qualifications.
(a) All of the representations and warranties contained in this
Agreement shall survive the Closings hereunder and continue in full force and
effect until one (1) year after the Second Closing Date; provided, that, (i) the
representations and warranties contained in Sections 4.7 and 4.8 shall survive
and remain in full force and effect until six (6) months after the Second
Closing Date, and (ii) the representations and warranties contained in Sections
4.2, 4.4(a) and (b), 4.5(a) and (b), 4.12 and 5.1 shall survive and remain in
full force and effect until four (4) years after the Second Closing Date
(subject to any applicable statute of limitations). None of the parties shall
have any Liability (for indemnification or otherwise) with respect to this
Article VII or any representation or warranty made by it in this Agreement
unless prior to the expiration of the applicable survival period the party
seeking indemnification notifies such party in writing of its claim specifying
the factual basis of that claim in reasonable detail.
(b) No knowledge of Hanaro relating to any Selling Shareholder
or Company Party or any of the Assets thereof (actual, constructive or imputed)
shall prevent or limit a claim
42
made by Hanaro for breach of the Selling Shareholders' representations and
warranties (subject to the express qualifications of any such representation or
warranty set forth in the Disclosure Schedule), except to the extent set forth
in the Disclosure Schedule, which schedule shall be deemed to expressly modify
the relevant representation or warranty. Except to the extent set forth in the
Disclosure Schedule, the Selling Shareholders may not invoke Hanaro'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 Selling Shareholders' representations and warranties.
(c) No knowledge of the Selling Shareholders relating to
Hanaro, its Subsidiaries or any of their respective Assets (actual, constructive
or imputed) shall prevent or limit a claim made by the Selling Shareholders for
breach of Hanaro's representations and warranties (subject to the express
qualifications of any such representation or warranty set forth in the
Disclosure Schedule), except to the extent set forth in the Hanaro Disclosure
Schedule, which schedule shall be deemed to expressly modify the relevant
representation or warranty. Except to the extent set forth in the Hanaro
Disclosure Schedule, Hanaro may not invoke the Selling Shareholders' 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 Hanaro's representations and warranties.
7.2 Indemnification Obligations of the Selling Shareholders and Hanaro.
(a) The Selling Shareholders jointly and severally agree to
defend, indemnify and hold harmless Hanaro and each of its Representatives and
successors and assigns of such Persons (collectively, the "Hanaro 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 Hanaro Indemnified Party in
connection with the exercise or enforcement of such Hanaro 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 by the Selling
Shareholders herein or in any Transaction Document; (ii) any breach or failure
to perform any covenant, agreement or obligation of any Selling Shareholder (or
Representative of a Selling Shareholder in any capacity) contemplated by any
Transaction Document; and (iii) notwithstanding any provision to the contrary
contained herein (including inclusion in the Disclosure Schedule), the pending
class action suit against the Company in connection with the initial public
offering of the Company's shares in the U.S.; provided, that no claim may be
made by any of the Hanaro Indemnified Parties against the Selling Shareholders
for any indemnification hereunder unless the aggregate amount of all claims
exceeds two percent (2%) of the Total Consideration (the "Basket Amount"), in
which case the Selling Shareholders shall be responsible for the excess of the
entire indemnified amount over such Basket Amount; provided, further, that in no
event shall the Hanaro Indemnified Parties recover, in the aggregate, more than
the Total Consideration; provided, further, that the amount of indemnification
to which a Hanaro Indemnified Party is entitled pursuant to this Section 7.2(a)
with respect to a Loss incurred by, imposed on or asserted against the Company
shall be calculated by multiplying (x) the amount of such Loss by (y) such
Hanaro Indemnified Party's shareholding in the Company on the Second Closing
Date (or, if this Agreement is terminated after the First Closing but prior to
the
43
Second Closing, such Hanaro Indemnified Party's shareholding in the Company on
the First Closing Date); and provided, further, that the amount of
indemnification for which the Selling Shareholders are liable under this Section
7.2(a) shall be determined based on the amount of a Loss actually incurred by
Hanaro, whether directly or indirectly through a Loss incurred by the Company,
without making reference to or otherwise taking into account the method of
calculating the Purchase Price Adjustment, including the multiples used to
arrive at the amount of such adjustment, set forth in Exhibit A. Each Hanaro
Indemnified Party shall be reimbursed for all Losses claimed hereunder promptly
after the decision rendered by the Seoul District Court pursuant to Section 9.7;
provided, that each Hanaro 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
fifteen (15) Business Days after any such award is rendered, or claim made, as
the case may be, amounts owed shall accrue interest at the rate equal to 12% per
annum.
(b) Hanaro agrees to defend, indemnify and hold harmless the
Selling Shareholders and each of their respective Representatives and successors
and assigns of such Persons (collectively, the "Selling Shareholders 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 Selling Shareholders Indemnified
Party in connection with the exercise or enforcement of such Selling Shareholder
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 by Hanaro herein or in any Transaction Document, (ii) any breach
or failure to perform any covenant, agreement or obligation of Hanaro (or any
Representative of Hanaro in any capacity) contemplated by any Transaction
Document; provided, that no claim may be made by any of the Selling Shareholders
Indemnified Parties against Hanaro for any indemnification hereunder unless the
aggregate amount of all claims exceeds the Basket Amount, in which case Hanaro
shall be responsible for the excess of the entire indemnified amount over such
Basket Amount; provided, further, that in no event shall the Selling
Shareholders recover, in the aggregate, more than the Total Consideration. Each
Selling Shareholders Indemnified Party shall be reimbursed for all Losses
claimed hereunder promptly after the decision rendered by the Seoul District
Court pursuant to Section 9.7; provided, that each Selling Shareholders
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 fifteen (15)
Business Days after any such award is rendered, or claim made, as the case may
be, amounts owed shall accrue interest at the rate equal to 12% per annum.
7.3 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 any other party hereto (the "Indemnifying
Party") under this Article VII, then the Indemnified Party shall notify the
Indemnifying Party thereof in writing within 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
44
Indemnifying Party shall relieve the Indemnifying Party of any obligation
hereunder unless (and then solely to the extent) the Indemnifying Party is
thereby prejudiced.
(b) The Indemnifying Party 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 Indemnifying
Party 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 Indemnifying Party 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 Indemnifying Party is conducting the defense
of the Third Party Claim in accordance with Section 7.3(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
Indemnifying Party if, in the Indemnified Party's reasonable judgment, a
conflict of interest between the Indemnified Party and the Indemnifying Party
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 Indemnifying Party
(not to be withheld unreasonably), and (iii) the Indemnifying Party 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.
(d) Notwithstanding the foregoing, in the event the
Indemnifying Party fails to conduct the defense of a Third Party Claim in
accordance with Section 7.3(b) above, (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 Indemnifying Party in connection therewith), (ii) the
Indemnifying Party 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 Indemnifying Party 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 extent provided in this Article VII.
(e) Cooperation. Whether or not the Indemnifying Party 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
45
testimony, and attend such conferences, proceedings, hearings, trials and
appeals as may be reasonably requested by the other party in connection
therewith.
7.4 Cooperation on Tax Matters. After the First Closing until the
Second Closing occurs, the Selling Shareholders shall cause the Company Parties
to, at their own expense, maintain and make available, as reasonably requested
by Hanaro, to Hanaro, and to any taxing authority, all information, records or
documents relating to the liability for Taxes or potential liability of the
Company Parties, the Selling Shareholders or Hanaro for Taxes and will preserve
such information, records or documents until the expiration of any applicable
statute of limitations or extensions thereof. After the Second Closing, Hanaro
shall cause the Company Parties to, at their own expense, maintain and make
available, as reasonably requested by any Selling Shareholder, to the Selling
Shareholders, and to any taxing authority, all information, records or documents
relating to the liability for Taxes or potential liability of the Company
Parties, the Selling Shareholders or Hanaro for Taxes and will preserve such
information, records or documents until the expiration of any applicable statute
of limitations or extensions thereof.
7.5 Limitations and Deductions.
(a) With respect to any Loss suffered by an Indemnified party,
the Indemnifying Party shall not be liable for, and the amount of
indemnification for which such Indemnifying Party would otherwise be liable
shall be reduced by, (i) the amount of any insurance proceeds paid to the
Indemnified Party or, to the extent the Company has suffered such Loss, the
Company, with respect to such Loss and (ii) any indemnity, contribution or other
similar payment paid by any third party to the Indemnified Party or, to the
extent the Company has suffered such Loss, the Company, with respect to such
Loss.
(b) Hanaro shall not be entitled to any payment under this
Article VII in respect of any Loss to the extent that such Loss has been
reflected in determining the Purchase Price Adjustment.
(c) To the extent that a Loss arises from or is attributable
to the negligence or willful misconduct of the Indemnified Party, no party
hereto shall have any liability or obligation to indemnify the Indemnified Party
against such Loss arising from or attributable to the negligence or willful
misconduct of such Indemnified Party. In no event shall a party be liable for
any indirect, special, incidental or consequential Losses, except to the extent
that such Losses arise out of such party's willful misconduct. The Indemnified
Party shall take all reasonable steps to mitigate a Loss upon and after becoming
aware of an event which, in the Indemnified Party's good faith judgment, is
reasonably likely to give rise to such Loss.
(d) Any liability for indemnification hereunder shall be
determined without duplication of recovery, including, by reason of the state of
facts giving rise to such liability constituting a breach of more than one
representation, warranty, covenant, agreement or obligation contained herein or
in the Convertible Bond Subscription Agreement.
(e) After the Second Closing or the termination of this
Agreement (but subject to Section 8.3), the Indemnified Party's rights to
indemnification as provided in this Article VII for any breach or inaccuracy of
any representation or warranty or any breach or failure to perform any
46
covenant, agreement or obligation shall constitute the Indemnified Party's sole
and exclusive remedy for such breach, inaccuracy or failure, and the
Indemnifying Party shall have no other Liability to the Indemnified Party in
connection with such breach, inaccuracy or failure. For the avoidance of doubt,
anything herein to the contrary notwithstanding, no such breach, inaccuracy or
failure shall give rise to any right on the part of the Indemnified Party to
rescind, revoke or terminate this Agreement or any of the Transactions after the
Second Closing.
ARTICLE VIII
TERMINATION
8.1 Termination of Agreement Prior to First Closing. This Agreement
may be terminated by notice in writing at any time prior to the First Closing
by:
(a) Hanaro or the Selling Shareholders (acting collectively as
a group), if the First Closing shall not have occurred on or before January 4,
2003; provided, however, that the right to terminate this Agreement under this
Section 8.1(a) shall not be available to any party whose failure to fulfill any
obligation or satisfy any condition to the First Closing under this Agreement
has been the cause of, or resulted in, the failure of the First Closing to occur
on or before such date;
(b) Hanaro or the Selling Shareholders (acting collectively as
a group), if any Governmental Authority 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
reasonable best efforts to have such Judgment, injunction, order, ruling or
decree lifted, vacated or denied;
(c) Hanaro and the Selling Shareholders (acting collectively as
a group), if Hanaro and the Selling Shareholders (acting collectively as a
group) so mutually agree in writing; and
(d) Hanaro and the Selling Shareholders (acting collectively as
a group), 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, Hanaro or the
Selling Shareholders, as the case may be, shall have fifteen (15) days after
receipt of notice from the other party of its intention to terminate this
Agreement pursuant to this Section 8.1 in which to cure such breach or
misrepresentation before the other party may so terminate this Agreement.
8.2 Termination of Agreement After First Closing and Prior to Second
Closing. This Agreement may be terminated by notice in writing at any time after
the First Closing and prior to the Second Closing by:
(a) Hanaro or the Selling Shareholders (acting collectively as
a group), if the Second Closing shall not have occurred on or before February
15, 2003, subject to Section 2.2(c);
47
provided, however, that the right to terminate this Agreement under this Section
8.2(a) shall not be available to any party whose failure to fulfill any
obligation or satisfy any condition to the Second Closing under this Agreement
has been the cause of, or resulted in, the failure of the Second Closing to
occur on or before such date;
(b) Hanaro or the Selling Shareholders (acting collectively as
a group), if any Governmental Authority 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
reasonable best efforts to have such Judgment, injunction, order, ruling or
decree lifted, vacated or denied;
(c) Hanaro and the Selling Shareholders (acting collectively
as a group), if Hanaro and the Selling Shareholders (acting collectively as a
group) so mutually agree in writing;
(d) Hanaro or the Selling Shareholders (acting collectively as
a group), 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, Hanaro or the
Selling Shareholders, as the case may be, shall have fifteen (15) days after
receipt of notice from the other party of its intention to terminate this
Agreement pursuant to this Section 8.2(d) in which to cure such breach or
misrepresentation before the other party may so terminate this Agreement;
(e) Hanaro, if the adjusted Exchange Ratio, as determined in
accordance with Section 2.3, shall exceed 1.8, using the following formula:
Exchange Ratio = 5,000/[5,000/(4.3/3) - Purchase Price Adjustment per Share]
provided, however, that if the conversion price per share of Hanaro Convertible
Bonds is required to be greater than Won 5,000 under applicable Law, then the
number "5,000" in the above formula shall be replaced with such greater
conversion price per share; provided, further, that in order to terminate this
Agreement under this Section 8.2(e), Hanaro shall give written notice of
termination to the Selling Shareholders within five (5) days of its receipt of a
report from the Independent Appraiser; provided, further, that if Hanaro fails
to give such notice of termination within the above 5-day period, then the
Exchange Ratio shall be deemed to be 1.8 and Hanaro shall not have the right to
terminate this Agreement under this Section 8.2(e);
(f) Hanaro, if the Disclosure Schedule provided by the Selling
Shareholders pursuant to Section 6.14 is not satisfactory (as determined in its
sole discretion); provided, however, that in order to terminate this Agreement
under this Section 8.2(f), Hanaro shall give written notice of termination to
the Selling Shareholders within ten (10) days of its receipt of the Disclosure
Schedule; provided, further, that if Hanaro fails to give such notice of
termination within the above
48
10-day period, then Hanaro shall be deemed to have waived its right of
termination under this Section 8.2(f); and
(g) Hanaro, if the Updates that have been provided by the
Selling Shareholders pursuant to Article IV contain any items that have a
Material Adverse Effect since the First Closing Date.
8.3 Effect of Termination.
(a) If this Agreement is terminated in accordance with Section
8.1 or 8.2 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 Articles VII, VIII and IX
hereof shall remain in full force and effect and (ii) no termination of this
Agreement shall relieve any party hereto from any Liability for any breach of
its obligations, or for any misrepresentation under this Agreement or from 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.
(b) Notwithstanding anything to the contrary contained herein,
if this Agreement is terminated in accordance with Section 8.2, then (i) Hanaro
shall have the right, but not the obligation, to sell to the Selling
Shareholders, and, upon the exercise of such right by Hanaro, the Selling
Shareholders shall be required to purchase from Hanaro, all of the First Tranche
Transferred Shares in exchange for all of the Hanaro Convertible Bonds issued at
the First Closing (the "Put Right"), and (ii) the Selling Shareholders shall
have the right, but not the obligation, to require Hanaro to, and, upon the
exercise of such right by the Selling Shareholders, Hanaro shall be required to,
redeem all of the Hanaro Convertible Bonds issued at the First Closing in
exchange for all of the First Tranche Transferred Shares (the "Redemption
Right"). Hanaro and the Selling Shareholders (acting collectively as a group)
may exercise the Put Right or the Redemption Right, as the case may be, at any
time during the period of thirty (30) days (the "Exercise Period") from the date
of the termination of this Agreement in accordance with Section 8.2 by sending a
written notice to the other party (the "Exercise Notice"). Upon the expiry of
the Exercise Period, the Put Right and the Redemption Right shall lapse if not
previously exercised. The completion of the sale and purchase of the First
Tranche Transferred Shares and the redemption of the Hanaro Convertible Bonds
contemplated in this Section 8.3(b) shall take place as soon as practicable, but
in no event later than thirty (30) days from the date of the Exercise Notice.
ARTICLE IX
MISCELLANEOUS
9.1 Expenses. Hanaro, the Company and the Selling Shareholders shall
each be responsible for their respective legal and other costs incurred in
connection with this Agreement and the Transaction Documents.
9.2 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 VII,
49
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.
9.3 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 related in any way to the subject
matter hereof or thereof.
9.4 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.
9.5 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.
9.6 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 Hanaro:
Hanaro Telecom, Inc.
Kukje Electronics Center Xxxx., 00xx Xxxxx
Xxxxxx-xxxx 0000-0, Xxxxxx-xx
Xxxxx, Xxxxx 137-728
Telephone: 00-0-0000-0000
Facsimile: 00-0-0000-0000
Attention: Mr. Kyounglim Yun, Executive Director
If to the Selling Shareholders:
Trigem Computer, Inc.
Naray Xxxx.
000-0 Xxxxxxx-xxxx, Xxxxxxx-xx
Xxxxx, Xxxxx 135-080
Telephone: 00-0-0000-0000
50
Facsimile: 00-0-0000-0000
Attention: Mr. Ki Xxxx Xxx
Naray & Company Inc.
12th Floor, Big Way Xxxx.
000-00 Xxxxxxx-xxxx, Xxxxxxx-xx
Xxxxx, Xxxxx 135-080
Telephone: 00-0-0000-0000
Facsimile: 00-0-0000-0000
Attention: Xx. Xxx Xxx Xxx
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.
9.7 Governing Law; Jurisdiction. This Agreement shall be governed by
and construed and interpreted in accordance with the laws of Korea. Any dispute,
controversy or claim arising out of, relating to or in connection with the
execution, performance, interpretation and breach of this Agreement shall be
subject to the non-exclusive jurisdiction of the Seoul District Court as
competent court.
9.8 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. No waiver by any party of any default, misrepresentation, or breach of
warranty or covenant hereunder, whether intentional or not, shall be deemed to
extend to any prior or subsequent default, misrepresentation, or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent such occurrence. No waiver shall be effective
hereunder unless contained in a writing signed by the party sought to be charged
with such waiver.
9.9 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.
51
9.10 Incorporation of Exhibits and Schedules. The Exhibits and
Schedules attached to this Agreement are incorporated herein by reference and
made a part hereof.
9.11 Effectiveness of this Agreement. This Agreement shall come into
effect on the date on which the parties execute and deliver the Convertible Bond
Subscription Agreement.
[SIGNATURE PAGE FOLLOWS]
52
IN WITNESS WHEREOF, the parties hereto have executed this Share
Purchase Agreement as of the date first above written.
HANARO TELECOM, INC.
By /s/Yun-Xxx Xxxx
---------------------------------------
Name: Yun-Xxx Xxxx
Title: Representative Director
TRIGEM COMPUTER, INC.
By /s/Hong Soon Xxx
----------------------------------------
Name: Hong Soon Xxx
Title: Representative Director
NARAY & COMPANY, INC.
By /s/Sang Soon Jung
----------------------------------------
Name: Sang Soon Jung
Title: Representative Director
NARAY D&C, INC.
By /s/Xxxxx Xxx Xxxx
----------------------------------------
Name: Xxxxx Xxx Xxxx
Title: Representative Director
TRIGEM VENTURES, INC.
By /s/Jeong Xxx Xxx
----------------------------------------
Name: Jeong Xxx Xxx
Title: Representative Director
TRIGEM INFONET, INC.
By /s/Xxxxx Xxx Rhe
----------------------------------------
Name: Xxxxx Xxx Rhe
Title: Representative Director
SOLVIT MEDIA INC.
By /s/Uh Xxxxx Xxxx
----------------------------------------
Name: Uh Xxxxx Xxxx
Title: Representative Director
TG INFORMATION CONSULTING, INC.
By /s/Jeong Xxx Xxx
----------------------------------------
Name: Jeong Xxx Xxx
Title: Representative Director
AI LEADERS, INC.
By /s/Xxxxx Ok Suk
----------------------------------------
Name: Xxxxx Ok Suk
Title: Representative Director
2
LIST OF SCHEDULES
Schedule I List of and Information Regarding Selling Shareholders
Schedule II Shareholding Ratio of Selling Shareholders and Breakdown of
Transferred Shares to be Sold at First Closing and Second
Closing
Schedule III Disclosure Schedule
Schedule IV Hanaro Disclosure Schedule
LIST OF EXHIBITS
Exhibit A Purchase Price Adjustment
Exhibit B Definition of Active Subscribers
Exhibit C Terms of Convertible Bonds
1
SCHEDULE I
LIST OF AND INFORMATION REGARDING SELLING SHAREHOLDERS
1. TRIGEM COMPUTER, INC.
Address: Naray Xxxx.
000-0 Xxxxxxx-xxxx, Xxxxxxx-xx
Xxxxx, Xxxxx 135-080
Telephone: 00-0000-0000
Facsimile: 00-0000-0000
Attention: Mr. Ki-Xxxx Xxx
2. NARAY & COMPANY INC.
Address: 12th Floor, Big Way Xxxx.
000-00 Xxxxxxx-xxxx, Xxxxxxx-xx
Xxxxx, Xxxxx 135-080
Telephone: 00-0000-0000
Facsimile: 00-0000-0000
Attention: Xx. Xxx Xxx Xxx
3. NARAY D&C INC.
Address: Naray Xxxx.
0000-0 Xxxxxx-xxxx, Xxxxxxx-xx
Xxxxx, Xxxxx 157-010
Telephone: 00-000-0000
Facsimile: 00-000-0000
Attention: Xx. Xxxxx Xxx Xxxx
4. TRIGEM VENTURES, INC.
Address: 8th Floor, Seoul Venture Town
000-0 Xxxxxxx-xxxx, Xxxxxxx-xx
Xxxxx, Xxxxx 135-080
Telephone: 00-000-0000
Facsimile: 00-000-0000
1
Attention: Xx. Xxxxx Xxxxx Xxx
5. TRIGEM INFONET, INC.
Address: 6th Floor, Samjong Xxxx.
000-00 Xxxxxxxx-xxxx, Xxxxxxx-xx
Xxxxx, Xxxxx 135-010
Telephone: 00-0000-0000
Facsimile: 00- 000-0000
Attention: Mr. Ju Xxxxx Xxx
6. SOLVIT MEDIA INC.
Address: 0xx Xxxxx, Xxxxxxxx Xxxx.
000 Xxxxxx-xxxx, Xxxxxxx-xx
Xxxxx, Xxxxx 135-893
Telephone: 00-0000-0000
Facsimile: 00-000-0000
Attention: Mr. Hwa Xxx Xxxx
7. TG INFORMATION CONSULTING, INC.
Address: 5th Floor, Venture Castle Xxxx.
00-00 Xxxxxxxx-xxxx, Xxxxxxx-xx
Xxxxx, Xxxxx 150-010
Telephone: 00-0000-0000
Facsimile: 00-0000-0000
Attention: Xx. Xxxx Xxx Xxxx
8. AI LEADERS, INC.
Address: 4th Floor, Namjeon Xxxx.
000 Xxxxxxx-xxxx, Xxxxxxx-xx
Xxxxx, Xxxxx 135-080
Telephone: 00-000-0000
Facsimile: 00-000-0000
Attention: Xx. Xxx Xxxx Xxxxx
2
SCHEDULE II
SHAREHOLDING RATIO OF SELLING SHAREHOLDERS
AND BREAKDOWN OF TRANSFERRED SHARES
1. NUMBER OF SHARES AND SHAREHOLDING RATIO OF SELLING SHAREHOLDERS
NO. OF SHARES HELD AS OF SHAREHOLDING RATIO ON A
SELLING SHAREHOLDER THE EXECUTION DATE FULLY-DILUTED BASIS
------------------- ------------------------ -----------------------
TriGem Computer, Inc. 24,727,241 Approx. 17.93%
-----------------------------------------------------------------------------------------------------------
Naray & Company Inc. 17,713,006 Approx. 12.85%
-----------------------------------------------------------------------------------------------------------
Naray D&C Inc. 33,333 Approx. 0.02%
-----------------------------------------------------------------------------------------------------------
TriGem Ventures, Inc. 459,853 Approx. 0.33%
-----------------------------------------------------------------------------------------------------------
TriGem InfoNet, Inc. 245,000 Approx. 0.18%
-----------------------------------------------------------------------------------------------------------
Solvit Media, Inc. 6,666 Approx. 0.00%
-----------------------------------------------------------------------------------------------------------
TG Information Consulting, Inc. 66,666 Approx. 0.05%
-----------------------------------------------------------------------------------------------------------
AI Leaders, Inc. 12,666 Approx. 0.01%
-----------------------------------------------------------------------------------------------------------
SUB-TOTAL 43,264,431 Approx. 31.37%
-----------------------------------------------------------------------------------------------------------
SB Thrunet Pte Ltd. 12,600,000(1) Approx. 9.14%
-----------------------------------------------------------------------------------------------------------
TOTAL 55,864,431 Approx. 40.51%
-----------------------------------------------------------------------------------------------------------
(1) All of 12,600,000 shares of Common Stock held by SB Thrunet Pte Ltd.
will be acquired by Trigem Computer, Inc., and Naray & Company Inc.
and/or certain other Selling Shareholders on or prior to the Second
Closing Date.
2. BREAKDOWN OF TRANSFERRED SHARES
(1) Number of the First Tranche Transferred Shares: 24,653,333 shares
(2) Number of the Second Tranche Transferred Shares: 31,211,098 shares
1
SCHEDULE IV
HANARO DISCLOSURE SCHEDULE
Schedule 5.4(a)
Filing of the business combination report by Hanaro with the Fair Trade
Commission pursuant to the Monopoly Regulation and Fair Trade Act.
1
EXHIBIT A
PURCHASE PRICE ADJUSTMENT PER SHARE
Given:
D1 = KRW 744,314,645,294 of Net Liabilities as set forth
in Exhibit[w] as of November 30, 2002
"Net Liabilities" is defined as (aggregate of total
debt, payables excluding notes payables, notes
payables, long-term payables, off-balance sheet
liabilities) less (cash and cash equivalents,
short-term investments and ABL subordinated loan)
D2 = Net Liabilities as determined as of November 30,
2002 by the Independent Appraiser
PP = KRW3488.37 of Purchase Price per Transferred Share
(equivalent to KRW5,000/(4.3/3))
EBITDA1 = KRW 7,200,000,000
EBITDA2 = The average of the monthly EBITDA determined by the
Independent Appraiser for the month of November
2002 ("Appraiser's November EBITDA") and the
monthly EBITDA for the month of December 2002 as
determined by the Independent Appraiser
("Appraiser's December EBITDA").
Appraiser's November EBITDA will be adjusted for
Non-Recurring Expense items, which shall include,
but shall not be limited to, the expense items as
stated in Exhibit [x] under "November 2002
(Sample)", Item 2 (Items 2a. to 2d.) which shall be
added back to the EBITDA as per accounts.
Appraiser's December EBITDA will be adjusted for
Advertisement Expense and shall also include any
other Non-Recurring Expense items. The value of the
actual Advertisement Expense for December 2002 will
be added to the Appraiser's December EBITDA and the
monthly average Advertisement Expense from January
2002 to November 2002 will be subtracted from the
Appraiser's December EBITDA.
The method of calculation of the average monthly
EBITDA is shown in Exhibit [x].
Subscribers1 = 1,090,996 as set forth in Exhibit [y] as of
November 30, 2002
Subscribers2 = The average of Active Subscribers (calculated on
the same basis as Subscribers1) as of November 30,
2002, as determined by the Independent Appraiser
("Appraiser's November Subscribers") and Active
Subscribers as of December 31, 2002 as determined
by the Independent Appraiser
1
("Appraiser's December Subscribers").
Non-Cash Assets1 = KRW 779,785,734,620 as set forth in Exhibit [z] as
(NCA1) of November 30, 2002.
"Non-Cash Assets" is defined as total assets less
cash and cash equivalents, short-term investments
and ABL subordinated loan.
Non-Cash Assets2 = Non-Cash Assets as of November 30, 2002 as
(NCA2) determined by the Independent Appraiser.
Subscriber Multiple = KRW 930,467, as set forth in Exhibit [xx]
(SM)
Total Shares Outstanding = 77,635,260 common shares
(TSO)
The Purchase Price Adjustment per share will be as follows:
EBITDA Purchase Price If EBITDA 2 >= 0.95*EBITDA1, then:
Adjustment per share
EBITDA Purchase Price Adjustment Per Share =
max (0,(D2-D1)/TSO)
If EBITDA 2 < 0.95*EBITDA1, then,
X = (0.95 - (EBITDA2/EBITDA1))*10; and
EBITDA Purchase Price Adjustment per share =
(PP-(5000/((4.3+x)/3))) + max (0,(D2-D1)/TSO)
Subscriber Purchase If Subscribers2 > or = 0.95*Subscribers1, then
Price Adjustment per Subscribers2 = Subscribers1. If Subscribers2
share < 0.95*Subscribers1, then Subscribers2 equals
Subscribers2.
Subscriber Purchase Price Adjustment per share =
PP - ((SM*Subscribers2 - max (D1,D2))/TSO).
Non-Cash Assets If (NCA1-NCA2) is less than or equal to
Adjustment per share KRW 15,000,000,000, then NCA2 equals NCA1;
provided that for each item constituting the NCA,
namely: (a) Current Assets (excluding Cash &
Equivalents, Short-term Investments and ABL
subordinated loan); (b) Tangible Assets; and (c)
Other Assets, which include Investment Assets and
Intangible Assets, there will be a maximum
deductible of KRW 8,000,000,000 that is allowed.
Else, if (NCA1-NCA2) is greater than KRW
15,000,000,000, then NCA2 equals (NCA2+KRW
15,000,000,000); provided that for each item
constituting the NCA: (a) Current Assets (excluding
Cash & Equivalents, Short-term Investments and ABL
subordinated loan); (b) Tangible Assets and (c)
Other Assets, there will be a maximum deductible of
KRW 8,000,000,000 that is allowed for the purpose
of calculating (NCA1-NCA2).
2
Non-Cash Assets adjustment per share = Max (0,
(NCA1- NCA2)/TSO)
Purchase Price = Non-Cash Assets Adjustment per share + Max (0,
Adjustment per share EBITDA Purchase Price Adjustment Per Share,
Subscriber Purchase Price Adjustment per Share)
Sample calculations of the different PPA items under various situations are
shown in Exhibit [xy].
EXHIBIT [W] - CALCULATION OF D1
All figures are in Korean Won, as of November 30, 2002
1. Total Debt 594,959,655,820
2. Payables excluding Notes payables 130,861,405,442
3. Notes payables 95,311,237,223
4. Long term payables 1,812,000,000(1)
5. Off balance sheet liabilities (Sum of 5a. to 5e.) 46,665,835,932
5a. SK Global 35,000,000,000
5b. Powercomm HFC 3,025,000,000
5c. Law suits 1,058,543,105
5d. Motorola 1,827,672,592
5e. Guarantee to subsidiaries 5,754,620,235
6. Cash and equivalent 89,533,793,514
7. Short-term investment (pledged) 12,723,127,097
8. ABL Subordinated Loan 23,038,568,512
D1 = Sum of items 1 to 5 less sum of items 6 to 8, equal to KRW 744,314,645,294.
EXHIBIT [X]- SAMPLE CALCULATION OF EBITDA2
For November 2002 (Sample)
All figures are in Korean Won
1. EBITDA as per accounts 4,794,253,965
2. Non-recurring expense items (Sum of 2a. to 2d.) 2,430,000,000
2a. One-time advisory fee 450,000,000
2b. One-time severance payment 260,000,000
2c. One-time marketing expense to Basketball team 470,000,000
2d. One-time payment to Powercomm 1,250,000,000
EBITDA for November 2002 = Sum of items 1 and 2, equal to KRW 7,224,253,965.
3
For December 2002 (Sample)
All figures are in Korean Won
1. EBITDA as per accounts 4,800,000,000
2. Non-recurring expense items (Sum of 2a.) 2,450,000,000
2a. December advertising expense 2,450,000,000
3. Average January-November advertising expense 700,000,000
EBITDA for December 2002 = Sum of items 1 and 2, less item 3, equal to KRW
6,550,000,000.
EBITDA2 = Average EBITDA for November and December 2002, equal to KRW
6,890,000,000.
EXHIBIT [Y] - CALCULATION OF SUBSCRIBERS1
As of November 30, 2002
1. Total Reported Ids 1,301,058
2. Cancellation of Delinquent Ids 115,792
3. Suspended IDs in November 2002 56,511
4. Temporarily Suspended Ids 20,473
5. Churned IDs in the middle of Collection of Modems 17,286
Subscribers1 = Sum of item 1 less sum of items 2 to 5 equal to 1,090,996.
EXHIBIT [Z] - CALCULATION OF NCA1
All figures are in Korean Won, as of November 30, 2002
1. Total Assets (Sum of 1a..to 1c.) 905,081,223,743
1a. Current assets 286,620,294,888
1b. Tangible Assets 520,003,843,735
1c. Other Assets (Sum of 1ca. to 1cb.) 98,457,085,120
1ca. Investment Assets 78,946,002,034
1cb. Intangible Assets 19,511,083,086
2. Cash and equivalent 89,533,793,514
3. Short-term investment (pledged) 12,723,127,097
4. ABL Subordinated Loan 23,038,568,512
NCA1 = Sum of item 1 less sum of items 2 to 4 equal to KRW 779,785,734,620
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EXHIBIT [XX] - CALCULATION OF SM
All figures in Korean Won, except Subscribers1, TSO and PP
1. Subscribers1 1,090,996
2. Enterprise value at Purchase Price (Sum of 2a. and 2b.) 1,015,135,157,220
2a. Equity Value (Multiply 2aa. and 2ab.) 270,820,511,926
2aa. PP (KRW per share) 3,488.37
2ab. TSO 77,635,260
2b. D1 744,314,645,294
SM = Item 2 divided by item 1 equal to KRW 930,467
EXHIBIT [XY] - SAMPLE CALCULATION OF VARIOUS PPA ITEMS
As given:
D1 = KRW 744,314,645,294
EBITDA1 = KRW 7,200,000,000
Subscribers1 = 1,090,996
NCA1 = KRW 779,785,734,620
PP = KRW 3,488.37 per share
Example of EBITDA Purchase Price Adjustment Per Share
Assume D1 = D2, then, EBITDA Purchase Price Adjustment Per Share for different
ratios of EBITDA2 to EBITDA1 are as follows:
EBITDA2/EBITDA1 X PPA (KRW per Share)
--------------- ---- -------------------
1.00000-0.95000 0.00 0
-------------------------------------------------------------------------------------------------
0.94000 0.10 79
-------------------------------------------------------------------------------------------------
0.93000 0.20 155
-------------------------------------------------------------------------------------------------
0.92000 0.30 228
-------------------------------------------------------------------------------------------------
0.91000 0.40 297
-------------------------------------------------------------------------------------------------
0.90000 0.50 363
-------------------------------------------------------------------------------------------------
0.89000 0.60 427
-------------------------------------------------------------------------------------------------
0.88000 0.70 488
-------------------------------------------------------------------------------------------------
0.87000 0.80 547
-------------------------------------------------------------------------------------------------
0.86000 0.90 604
-------------------------------------------------------------------------------------------------
0.85000 1.00 658
-------------------------------------------------------------------------------------------------
0.84000 1.10 711
-------------------------------------------------------------------------------------------------
0.83000 1.20 761
-------------------------------------------------------------------------------------------------
0.82000 1.30 810
-------------------------------------------------------------------------------------------------
0.81000 1.40 857
-------------------------------------------------------------------------------------------------
0.80000 1.50 902
-------------------------------------------------------------------------------------------------
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Example of Subscriber Purchase Price Adjustment Per Share
Assume D1=D2, then Subscriber Purchase Price Adjustment Per Share for different
ratios of Subscribers2 to Subscriber1 are as follows:
Subscribers2/Subscribers1 PPA (KRW per Share)
------------------------- -------------------
1.0000-0.95000 0
----------------------------------------------------------------------------------------
0.949 667
----------------------------------------------------------------------------------------
0.948 680
----------------------------------------------------------------------------------------
0.947 693
----------------------------------------------------------------------------------------
0.946 706
----------------------------------------------------------------------------------------
0.945 719
----------------------------------------------------------------------------------------
0.944 732
----------------------------------------------------------------------------------------
0.943 745
----------------------------------------------------------------------------------------
0.942 758
----------------------------------------------------------------------------------------
0.941 771
----------------------------------------------------------------------------------------
0.940 785
----------------------------------------------------------------------------------------
Example of Non-Cash Assets Adjustment Per Share
Assume NCA2 = KRW 759,785,734,620 as follows:
1. Total Assets (Sum of 1a. to 1c.) 905,081,223,743
1a. Current assets 276,620,294,888
1b. Tangible Assets 520,003,843,735
1c. Other Assets (Sum of 1ca. to 1cb.) 88,457,085,120
1ca. Investment Assets 68,946,002,034
1cb. Intangible Assets 19,511,083,086
2. Cash and equivalent 89,533,793,514
3. Short-term investment (pledged) 12,723,127,097
4. ABL Subordinated Loan 23,038,568,512
Then NCA1 - NCA2 = KRW 20,000,000,000,
Thus, NCA2 = KRW 759,785,734,620 + KRW 15,000,000,000 = KRW 774,785,734,620
Then, Non-Cash Assets Adjustment Per Share = Max (0, (NCA1 - KRW
774,785,734,620)/TSO) = 64.40
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