QUOTA PURCHASE AGREEMENT
Dated as of April 13, 1999
by and among
STARMEDIA NETWORK, INC.,
STARMEDIA DO BRASIL LTDA.,
QUOTAHOLDERS OF KD SISTEMAS
DE INFORMACAO LTDA.,
KD SISTEMAS
DE INFORMACAO LTDA.
and
INDIVIDUALS LISTED HEREIN
THIS QUOTA PURCHASE AGREEMENT (with Schedules and Exhibits attached hereto
and made part of, this "Agreement"), dated as of April 13, 1999, is by and among
STARMEDIA NETWORK, INC., a Delaware corporation (the "Parent"), STARMEDIA DO
BRASIL LTDA., a Brazilian sociedade por quotas de responsabilidade limitada (the
"Buyer"), KD SISTEMAS DE INFORMACAO LTDA., a Brazilian sociedade por quotas de
responsabilidade limitada (the "Company"), GGV2000 SISTEMAS DE INFORMACAO LTDA.,
a Brazilian sociedade por quotas de responsabilidade limitada ("GGV2000"),
GUSTAVO GUILLERMO VIBERTI, resident and domiciled in the city of Rio de Janeiro,
state of Rio de Janeiro at Av. Nossa Senhora de Copacabana n(0) 827, suite 1101,
bearer of Identity Card R.G. No. 0.997.199 and enrolled with the C.P.F. under
No. 885.816.757-00 ("Viberti"), FABIO GONCALVES DE OLIVEIRA, resident and
domiciled in the city of Rio de Janeiro, state of Rio de Janeiro at Praia de
Botafogo, 526, suite 1402 Rio de Janeiro, bearer of Identity Card R.G. No.
06.619.743-5 and enrolled with the C.P.F. under No. 822.139.607-72 ("Oliveira,"
together with GGV2000 and Viberti, each a "Seller" and collectively, the
"Sellers"), GUILLERMO JOSE VIBERTI, resident and domiciled in the city of Rio de
Janeiro, state of Rio de Janeiro, at Rua Barao de Mesquita n(0) 850, suite 203,
bearer of Identity Card R.G. No. W 549.579-U and enrolled with the C.P.F. under
No. 527.932. 577, ROTHKO EMPREENDIMENTOS PARTICIPACOES E ASSESSORIA LTDA., a
limited liability company with headquarters in the City of Rio de Janeiro, State
of Rio de Janeiro, at Averida Passos n. 101-11(0) andar-parte, enrolled with
Taxpayers' General Registry (CGC-MF) under the number 35.794.346/0001-93, herein
represented by its managing partner, MARCOS SPINOLA MONTENEGRO, Brazilian
citizen, single, engineer, resident and domiciled in the City of Rio de Janeiro,
State of Rio de Janeiro, at rua Afranio de Melo Franco, n(0) 70 - apto. 101,
bearer of Identity Card R.G. No. W 79-1-04372-0 issued by CREA-RJ, and enrolled
with Individual Taxpayers' Registry (CPF-MF) under the number 627.685.737-87,
CARLOS AUGUSTO MONTENEGRO, resident and domiciled in the city of Rio de Janeiro,
state of Rio de Janeiro, at Epitacio Pessoa, n(0) 2244, suite 801, bearer of
Identity Card R.G. No. 2.894.894 and enrolled with the C.P.F. under No.
316.943.147-15, LUIS PAULO SAADE MONTENEGRO, resident and domiciled in the city
of Rio de Janeiro, state of Rio de Janeiro, at Rua Barao de Jaguaribe n(0) 313,
suite 102, bearer of Identity Card R.G. No. W 4.008.913-8 and enrolled with the
C.P.F. under No. 630.578.917-72 and JOSE CAETANO PAULA DE LACERDA, resident and
domiciled in the city of Rio de Janeiro, state of Rio de Janeiro, at Rua General
Tasso Fragoso n(0) 33, Bl 01, suite 301, bearer of Identity Card R.G. No. W
774.383 SSP/BA and enrolled with the C.P.F. under No. 111.439.085-20 (each,
including Viberti and Oliveira, a "Former Quotaholder," and collectively along
with Viberti and Oliveira, the "Former Quotaholders"). Each of the Former
Quotaholders and the Sellers shall hereinafter sometimes be referred to
individually as a "Quotaholder" and collectively as the "Quotaholders."
WHEREAS, the Buyer, the Parent, the Former Quotaholders and the Company
have entered into a Quota Purchase Agreement, dated as of March 14, 1999 (the
"Former Quota Purchase Agreement"), pursuant to which the Former Quotaholders
have agreed to sell to the Buyer, and the Buyer has agreed to purchase from the
Former Quotaholders, all of the issued and outstanding quotas of the Company
(the "Company Quotas");
WHEREAS, Section 11.11 of the Former Quota Purchase Agreement permits the
Former Quotaholders to transfer, in one or a series of transfers (a "Transfer"),
the Company Quotas to any Brazilian company which is wholly owned, directly or
indirectly, by the Former Quotaholders, provided that, such transferees shall be
obligated to sell the Company Quotas to the Buyer;
WHEREAS, pursuant to Section 11.11 of the Former Quota Purchase Agreement,
the Former Quotaholders have transferred, or caused to be transferred, to the
Sellers, the Company Quotas and the Sellers are the beneficial and record
holders of the Company Quotas; and
WHEREAS, the Sellers desire to sell to the Buyer, and the Buyer desires to
purchase from the Sellers, the Company Quotas, upon the terms and subject to the
conditions of this Agreement; and
NOW, THEREFORE, in reliance upon the representations, warranties and
covenants made herein and in consideration of the mutual agreements herein
contained, the parties hereto agree as follows:
SALE AND PURCHASE OF QUOTAS
Sale and Purchase of Quotas.
At the closing provided for in Section 2.01 (the "Closing") and upon
the terms and subject to the conditions of this Agreement, the Sellers shall
sell to the Buyer, and the Buyer shall purchase from the Sellers, the Company
Quotas in consideration of a purchase price (the "Purchase Price") equal to:
Six Million U.S. Dollars (US$6,000,000), subject to adjustments,
if any, as set forth in Sections 1.02(b) and (d), payable to the Sellers as
provided in Section 1.02(a) (the "Guaranteed Payment"); and
the additional amounts specified in Schedule 1.01(b) attached
hereto, subject to the conditions and adjustments set forth therein and in
Section 1.02(d), payable to the Sellers as provided in Section 1.02(c) (the
"Additional Payments"), which amounts shall be calculated by the Buyer no later
than March 15, 2000 (the "Calculation Date"). The sale and purchase of the
Company Quotas hereunder and the other transactions contemplated by this
Agreement and the Transaction Agreements (as defined in Section 1.04) shall
hereinafter be referred to collectively as the "Transactions."
Payment of Price.
The Parent and the Buyer shall pay to the Sellers the Purchase Price as
set forth in this Section 1.02.
Closing Payment. (i) At the Closing, the Buyer shall deliver to
the Sellers Five Million U.S. Dollars (US$5,000,000) in immediately available
funds by check or by wire transfer to an account designated by the Sellers no
less than two (2) business days prior to the Closing Date (as defined in Section
2.01).
(ii)The balance of the Guaranteed Payment, an amount equal to
One Million U.S. Dollars (US$1,000,000), subject to adjustment, if any, as
set forth in Sections 1.02(b) and (d) (the "Balance Payment"), shall be
paid to the Sellers out of the Escrow Funds (as hereinafter defined) as
provided in Section 1.02(b)(ii) on March 31, 2000 (the "Balance Payment
Date").
Escrow Deposit. At the Closing, the Parent shall deposit with
the Chase Manhattan Bank, a New York state chartered bank (the "Escrow Agent"),
an amount equal to Four Million U.S. Dollars (US$4,000,000) (together with any
additional amounts added thereto or subtracted therefrom, the "Escrow Funds") to
secure the Balance Payment, the Additional Payments and the Quotaholders'
obligation to indemnify the Buyer Indemnitees (as defined in Section 9.01) under
this Agreement. The Escrow Funds shall be held by the Escrow Agent pursuant to
the terms of an escrow agreement substantially in the form of Exhibit C attached
hereto (the "Escrow Agreement"). In addition, if the amount of the Additional
Payments, as calculated by the Buyer pursuant to Schedule 1.01(b), exceeds Three
Million U.S. Dollars (US$3,000,000), the Parent shall, no less than ten (10)
business days after the Calculation Date, deposit such excess amount with the
Escrow Agent, which amount shall be added to the Escrow Funds. In the
alternative, if the amount of the Additional Payments, as calculated by the
Buyer pursuant to Schedule 1.01(b), is less than Three Million U.S. Dollars
(US$3,000,000), the Parent and the Sellers shall, and hereby agree to, execute
and deliver to the Escrow Agent, no less than ten (10) business days after the
Calculation Date, a joint written instruction, instructing the Escrow Agent to
release and distribute immediately to the Parent an amount equal to the
difference between the amount of the Additional Payments as calculated by the
Buyer pursuant to Schedule 1.01(b) and Three Million U.S. Dollars
(US$3,000,000).
Subject to Sections 1.02(b)(iv) and 1.02(d), the Parent and
the Sellers shall, and hereby agree to, execute and deliver to the Escrow
Agent, no less than five (5) business days prior to the Balance Payment
Date, a joint written instruction, instructing the Escrow Agent to release
and distribute to the Sellers on the Balance Payment Date, the Balance
Payment or that amount of the Balance Payment available in the event that
the Escrow Funds have been reduced pursuant to either Section 1.02(b)(iv)
or Section 1.02(d).
Subject to Sections 1.02(b)(iv) and 1.02(d), the Parent and
the Sellers shall, and hereby agree to, execute and deliver to the Escrow
Agent, no less than five (5) business days prior to each Additional
Payment Date (as hereinafter defined), a joint written instruction,
instructing the Escrow Agent to release and distribute to the Sellers, on
the respective Additional Payment Date, that amount of the Additional
Payments due and payable on such date or that amount of such Additional
Payment available in the
event that the Escrow Funds have been reduced pursuant to either Section
1.02(b)(iv) or Section 1.02(d).
In the event that a Buyer Indemnitee believes that he is
entitled to indemnification by the Quotaholders under this Agreement and
such Buyer Indemnitee has complied with the notice provisions set forth in
Sections 9.05, 9.06 or 9.07, the Sellers and the Parent shall, and hereby
agree to execute and deliver to the Escrow Agent, no more than ten (10)
business days after receipt by the Quotaholders of a notice of such claim
from a Buyer Indemnitee, a joint written instruction, instructing the
Escrow Agent to release and distribute immediately to such Buyer
Indemnitee, the amount of such claim or the remaining balance of the
Escrow Funds in the event that the amount of such claim exceeds the amount
of the Escrow Funds then available. Amounts paid to a Buyer Indemnitee out
of the Escrow Funds pursuant to this Section 1.02(b)(iv), shall first be
deemed to come from the Balance Payment and then from the Additional
Payments, which amounts shall constitute an adjustment to the Balance
Payment or the Additional Payments, as the case may be, and with respect
to which the Parent and the Buyer shall have no further obligation to the
Sellers.
Additional Payments. The Buyer shall pay to the Sellers the
Additional Payments, if any, in three (3) equal installments on March 31, 2000,
March 31, 2001 and March 31, 2002 (each an "Additional Payment Date"). The
Additional Payments, if any, shall be delivered to the Sellers in immediately
available funds by wire transfer to an account designated by the Sellers no less
than two (2) business days prior to such dates.
Adjustment to Balance Payment and Additional Payments. (i) If
either Viberti or Oliveira breach his respective employment agreement entered
into with the Buyer pursuant to Section 1.04 of this Agreement, the entire
amount of the Balance Payment and the Additional Payments shall be reduced by
twenty-one and six tenths percent (21.6%). If both Messrs. Viberti and Oliveira
breach their employment agreements, the entire amount of the Balance Payment and
the Additional Payments shall be reduced by forty-three and two tenths percent
(43.2%).
(ii) The Sellers and the Parent shall, and hereby agree to execute
and deliver to the Escrow Agent, no more than ten (10) business days after
receipt of a written notice from the Buyer stating that either Mr. Viberti or
Mr. Oliveira or both, has breached his respective employment agreement, a joint
written instruction, instructing the Escrow Agent to release and distribute to
the Parent, that amount of the Escrow Funds by which the Balance Payment and the
Additional Payments have been reduced pursuant to Section 1.02(d)(i).
Late Payments. With respect to the Balance Payment or any
Additional Payment that is due and payable to the Sellers and not the subject of
any dispute, the payment of which is more than ninety (90) days late, the Buyer
shall pay to the Sellers a late fee equal to five tenths percent (0.5%) per
month for every month that such payment has not been paid after the date that
such payment became due and payable to the Sellers.
Delivery of Quotas.
At the Closing, the Sellers shall deliver to, or cause to be delivered to,
the Buyer all of the Company Quotas by means of executing the appropriate
amendment to the Company Articles (as defined in Section 3.01) in proper form
for transfer, and with all appropriate seals or stamps affixed, as required by
any applicable statute, law, ordinance, rule or regulation ("Applicable Law").
Transaction Agreements.
At the Closing, in addition to this Agreement and the Escrow
Agreement, the parties hereto shall execute and deliver, or cause to be executed
and delivered, the following agreements, which agreements are referred to herein
collectively as the "Transaction Agreements."
The Sellers shall cause each of the Company executives listed on
Schedule 1.04 attached hereto to execute and deliver an employment agreement
(the "Employment Agreements"), dated as of the Closing Date, by and between each
such executive and the Buyer or an Affiliate of the Buyer, substantially in the
form of Exhibit A attached hereto and (ii) each of the Former Quotaholders
listed on Schedule 1.04 shall execute and deliver a non-competition agreement
(the "Non-Competition Agreements") dated as of the Closing Date, by and between
each such Former Quotaholder and the Buyer, substantially in the form of Exhibit
B attached hereto; and
The Buyer shall execute and deliver the Non-Competition
Agreements and shall execute and deliver or cause to be executed and delivered,
the Employment Agreements.
CLOSING
Closing Date.
The Closing of the sale and purchase of the Company Quotas contemplated
hereby shall take place at the offices of Barbosa, Mussnich & Aragao, Avenida
Almirante Barroso 52, 32nd Floor, 20031-000 Rio de Janeiro, Brazil, at 4:00 p.m.
local time, on April 13, 1999, or such other place, time or date as the Buyer
and the Sellers may agree to in writing. The time and date upon which the
Closing occurs is hereinafter referred to as the "Closing Date."
Representations and Warranties of THE SELLERS AND the Company
The Sellers, the Former Quotaholders and the Company each represent and
warrant, jointly and severally, to the Buyer as follows:
Organization, Standing and Power.
The Company is duly organized, validly existing and in good
standing under the laws of the Federative Republic of Brazil and has full
corporate power and authority and possesses all governmental franchises,
licenses, permits, authorizations and approvals necessary to enable it to own,
lease or otherwise hold its properties and assets and to conduct its businesses
as currently conducted. The Company is duly qualified to do business in each
jurisdiction where the nature of its business or the ownership or leasing of its
properties make such qualification necessary and the failure to so qualify could
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect (as defined in Section 11.03(a)) on the Company. The Company has
delivered to the Buyer true and complete copies of the articles of association
of the Company, as amended to the date of this Agreement (as so amended, the
"Company Articles").
Each of GGV2000, CAPGV Sistemas de Informacao S/A ("CAPGV") and
Rothko Empreendimentos Participacoes e Assessoria Ltda. ("Rothko," together with
GGV2000 and CAPGV, each a "Transferee" and collectively, the "Transferees") is
duly organized, validly existing and in good standing under the laws of the
Federative Republic of Brazil and has full corporate power and authority and
possesses all governmental franchises, licenses, permits, authorizations and
approvals necessary to enable it to own, lease or otherwise hold its properties
and assets and to conduct its businesses as currently conducted. Each Transferee
is duly qualified to do business in each jurisdiction where the nature of its
business or the ownership or leasing of its properties make such qualification
necessary and the failure to so qualify could reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect on such
Transferee. The Sellers have delivered to the Buyer true and complete copies of
the articles of association of each Transferee, as amended to the date of this
Agreement.
Company Subsidiares; Equity Interests.
Except as set forth on Schedule 3.02 the Company has no Subsidiaries
(as defined in Section 11.03(a)) and does not own, directly or indirectly, any
quotas or capital stock, membership interest, partnership interest, joint
venture interest or other ownership interest in any Person (as defined in
Section 11.03(a)).
Capital Structure.
The capital of the Company is equivalent to One Hundred Ten
Thousand Reais (R$110.000,00) and is divided into One Hundred Ten Thousand
(110.000) quotas, each worth One Real (R$ 1,00), all of which are issued and
outstanding.
Except as set forth above, no quotas or other voting securities
of the Company have been issued, are reserved for issuance or are outstanding.
The Sellers are the record owners of all of the Company Quotas. All outstanding
quotas of the Company Quotas are duly authorized, validly issued, fully paid and
nonassessable and not subject to or issued in violation of any preemptive right,
subscription right or any similar right under any provision of any Applicable
Law, the Company Articles, or any contract to which any Seller or the Company is
a party or otherwise bound. There are not any bonds, debentures, notes or other
indebtedness
of the Company having the right to vote (or convertible into, or exchangeable
for, securities having the right to vote) on any matters on which the
quotaholders of the Company may vote ("Voting Company Debt"). There are not any
options, warrants, rights, convertible or exchangeable securities, commitments,
contracts, arrangements or undertakings of any kind to which the Company is a
party or by which it is bound (i) obligating the Company to issue, deliver or
sell, or cause to be issued, delivered or sold, additional quotas or other
equity interests in, or any security convertible or exercisable for or
exchangeable into any quotas of or other equity interest in, the Company, (ii)
obligating the Company to issue, grant, extend or enter into any such option,
warrant, call right, security, commitment, contract, arrangement or undertaking
or (iii) that give any Person the right to receive any economic benefit or right
similar to or derived from the economic benefits and rights accruing to holders
of any Company Quotas. There are not any outstanding contractual obligations of
the Company to repurchase, redeem or otherwise acquire any quotas of the
Company.
Each Seller represents and warrants that such Seller has good and
valid title to the number of Company Quotas set forth next to such Seller's name
on Schedule 1.01(a) attached hereto, free and clear of all pledges, liens,
charges, mortgages, encumbrances and security interests of any kind whatsoever
(collectively, "Liens"). GGV2000 represents and warrants that it acquired good
and valid title to the Company Quotas set forth next to its name on Schedule
1.01(a), pursuant to a cisao of CAPGV duly authorized by CAPGV's quotaholders in
compliance with Applicable Law and CAPGV's Articles of Association. Each Seller
further represents and warrants that, other than this Agreement, no Company
Quotas are or may become subject to any Lien or voting trust agreement or other
contract, agreement, arrangement, commitment or understanding, including any
such agreement, arrangement, commitment or understanding restricting or
otherwise relating to the voting, dividend rights or disposition of such quotas.
Upon the delivery of the Company Quotas in the manner contemplated under this
Agreement, the Buyer will acquire the beneficial and legal, valid and
indefeasible title to the Company Quotas, free and clear of all Liens.
Authority; Execution and Delivery; Enforceability.
The Company has all requisite corporate power and authority to
execute this Agreement and each of the Transaction Agreements to which it is a
party and to consummate the Transactions. The execution and delivery by the
Company of each Transaction Agreement to which it is a party and the
consummation by the Company of the Transactions has been duly authorized by all
necessary corporate action on the part of the Company. The Company has duly
executed and delivered this Agreement and each Transaction Agreement to which it
is a party, and this Agreement and each Transaction Agreement to which it is a
party constitutes its legal, valid and binding obligation, enforceable against
it in accordance with its terms.
Each Seller has all requisite power, corporate and otherwise, and
authority to execute this Agreement. The execution and delivery by the Sellers
of this Agreement and the consummation of the Transactions has been duly
authorized by all necessary corporate action on the part of GGV2000. Each Seller
has duly executed and delivered this Agreement and this Agreement constitutes
its legal, valid and binding obligation, enforceable against it in accordance
with its terms.
Each Former Quotaholder represents and warrants he has the
requisite capacity to enter into this Agreement and each Transaction Agreement
to which he is a party and to consummate the transactions contemplated by this
Agreement and each Transaction Agreement to which he is a party, and this
Agreement and the Transaction Agreements to which he is a party have been duly
executed and delivered by him and constitutes his valid and binding obligation,
enforceable against him in accordance with their terms.
No Conflicts; Consents.
The execution and delivery by the Company, the Sellers and the Former
Quotaholder of this Agreement and each Transaction Agreement to which such
person or entity is a party do not, and the consummation of the Transactions and
compliance with the terms hereof and thereof will not, conflict with, or result
in any violation of or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a material benefit under, or to
increased, additional, accelerated or guaranteed rights or entitlements of any
Person under, or result in the creation of any Lien upon any of the properties
or assets of the Company under, any provision of (i) the Company Articles, (ii)
any contract, lease, license, indenture, note, bond, agreement, permit,
concession, franchise or other instrument to which the Company is a party or by
which any of its properties or assets are bound or (iii) subject to the filings
and other matters referred to in the following sentence, any judgment, order or
decree ("Judgment") or any Applicable Law applicable to the Company or its
properties or assets, other than, in the case of clause (ii) above, any such
items that, individually or in the aggregate, have not had and could not
reasonably be expected to have a Material Adverse Effect on the Company. No
consent, approval, license, permit, order or authorization ("Consent") of, or
registration, declaration or filing with, any federal, state, local or foreign
government or any court of competent jurisdiction, administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign (a "Governmental Entity") is required to be obtained or made by or with
respect to the Company in connection with the execution, delivery and
performance of this Agreement or any Transaction Agreement to which it is a
party or the consummation of the Transactions.
Financial Statements; Undisclosed Liabilities.
Schedule 3.06 sets forth (i) the unaudited balance sheet of the
Company as at December 31, 1998 (the "Balance Sheet"), and the unaudited
statement of income and cash flows of the Company for the period ended December
31, 1998, together with the notes to such financial statements (collectively,
the "1998 Financial Statements"), and (ii) the unaudited balance sheet of the
Company as at February 28, 1999, and the unaudited statement of income and cash
flows of the Company for the period ended February 28, 1999, together with the
notes to such financial statements (the financial statements described in
clauses (i) and (ii) above, together with the notes to such financial
statements, collectively, the "Financial Statements"). The Financial Statements
have been prepared in conformity with generally accepted accounting principles
in Brazil ("GAAP") (except in each case as described in the notes thereto) and
on that
basis accurately present the financial condition and results of operations of
the Company as of the respective dates thereof and for the respective periods
indicated.
The Company does not have any liabilities or obligations of any
nature (whether accrued, absolute, contingent, unasserted or otherwise) except
(i) as disclosed, reflected or reserved against in the Balance Sheet and the
notes thereto, (ii) for items set forth in Schedule 3.06 and (iii) for
liabilities and obligations for Taxes (as defined in Section 3.08(a)).
Absence of Certain Changes or Events.
From the date of the Balance Sheet, the Company has conducted its business
only in the ordinary course, substantially and consistently in the same manner
as previously conducted, and during such period there has not been any:
event, change, effect or development that, individually or in the
aggregate, has had or could reasonably be expected to have a Material Adverse
Effect on the Company;
declaration, setting aside or payment of any dividend or other
distribution (whether in cash, quotas or property) with respect to the Company
Quotas or any repurchase for value by the Company of any of the Company Quotas;
split, combination or reclassification of the Company Quotas or
any issuance or the authorization of any issuance of any other securities in
respect of, in lieu of or in substitution for the Company Quotas;
(i) granting, or agreement to grant, by the Company to any
employee, director or executive officer of the Company of any increase in
compensation, except as was required under employment agreements in effect as of
the date of the Balance Sheet and delivered to the Buyer, or (ii) any granting
by the Company to any such employee, director or executive officer of any
increase in severance or termination pay, except as was required under any
employment, severance or termination agreements in effect as of the date of the
Balance Sheet and delivered to the Buyer;
any change in accounting methods, principles or practices by the
Company materially affecting the combined consolidated assets, liabilities or
results of operations of the Company, taken as a whole, except insofar as may
have been required by a change in GAAP;
any incurrence of Indebtedness (as defined in Section 11.03(a));
or
any capital expenditure or expenditures that, individually, is in
excess of R$20.000,00 or, in the aggregate, are in excess of R$40.000,00.
Taxes.
For purposes of this Agreement, (i) "Tax" or "Taxes" shall mean all
federal, state, local, foreign or other taxes (including, without limitation,
income (net or gross), gross receipts, profits, alternative or add on minimum,
franchise, license, capital, intangible, service,
premium, mining, ICMS, IPI, COFINS, PIS, CSLL, ISS, IPTU, IR, IOF, transfer,
sales, value added, use, ad valorem, occupation, property (real or personal),
windfall profits, import, excise, custom, stamp, withholding and similar taxes
or governmental charges of any kind whatsoever (including interest, penalties,
additions to taxes or additional amounts with respect to any of the foregoing);
(ii) "Pre-Closing Tax Period" shall mean all taxable periods ending on or before
the Closing Date and the portion ending on the Closing Date of any taxable
period that includes (but does not end on) the Closing Date; and (iii) "Returns"
shall mean returns, reports or forms, including information returns.
Except as disclosed on Schedule 3.08, the Company and each
Transferee has filed or caused to be filed in a timely manner (within any
applicable extension periods) all Returns required to be filed and each such
Return is true, complete and correct.
Except as disclosed on Schedule 3.08, the Company and each
Transferee has timely paid or adequately accrued, or has caused to be timely
paid or adequately accrued, all Taxes, whether or not shown to be due on any
such Return described in Section 3.08(b).
All Taxes that the Company and each Transferee is required to
withhold or collect have been duly withheld or collected and timely paid to the
appropriate Governmental Entity to the extent due and payable.
Except as set forth in Schedule 3.08, no deficiencies for any
Taxes have been proposed, threatened, asserted or assessed against the Company
or any Transferee, and no requests for waivers of the time to assess any Taxes
exist on any of the Company's or any Transferee's assets.
Except as disclosed in Schedule 3.08, there is no action, suit,
proceeding, investigation, audit or claim currently pending or threatened
regarding any Taxes of the Company or any Transferee or any group of which the
Company or any Transferee is a member.
There are no outstanding agreements or waivers extending the
statutory period of limitations applicable to any Returns required to be filed
by or on behalf of the Company or any Transferee, and neither the Company nor
any Transferee has requested any extension of time within which to file any
Return, which Return has not yet been filed.
Except as disclosed in Schedule 3.08, neither the Company nor any
Transferee is a party to any agreement with respect to Taxes.
Company Benefits Matters.
Except as set forth on Schedule 3.09, the employees of the
Company are not tenured, or entitled to any termination benefits in excess of
those provided for in the labor legislation, and all of them have opted for the
FGTS (Unemployment Compensation Fund). Except as set forth on Schedule 3.09,
through the Closing Date, the Company has not been served process or received
notice of any labor suits, claims or disputes between the Company and its
employees and those renderors of services, or between the Company and the unions
with
which its employees are affiliated. Schedule 3.09 sets forth a full list of all
the employees of the Company, with title or function, current salary and other
benefits (date granted), as well as their vacation status.
The Company has not established any retirement plan for any of
its employees. Except as set forth on Schedule 3.09, the Company has not
established any benefits, bonus or profit participation program for any of its
employees, including, but not limited to, any quota purchase or quota purchase
option plans or agreements.
All FGTS and INSS payments and withholdings were timely made
under applicable laws regarding the Company's employees for all periods ending
on or prior to the Closing Date.
Litigation.
There is no suit, action or proceeding pending or, to the knowledge of the
Company, threatened against or directly affecting the Company (and none of the
Sellers nor the Company is aware of any basis for any such suit, action or
proceeding) that, individually or in the aggregate, has had or could reasonably
be expected to have a Material Adverse Effect on the Company, nor is there any
Judgment outstanding against the Company that has had or could reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect on
the Company.
Compliance with Applicable Laws.
The Company is (and during the past five (5) years has been) in compliance
in all material respects with all Applicable Laws, including those relating to
occupational health and safety, except for instances of noncompliance that,
individually and in the aggregate, have not had and could not reasonably be
expected to have a Material Adverse Effect on the Company. The Company has not
received any written communication during the past three (3) years from any
Governmental Entity that alleges that the Company is not in compliance in any
material respect with any Applicable Law.
Environmental Matters.
The Company is not in violation of any applicable environmental
protection rules, permits, ordinances, normative rulings, laws, regulations and
requirements issued by the appropriate federal, state or local agencies
(collectively, the "Environmental Regulations"), and has all authorizations,
licenses, approvals, certificates, permits and municipal, state and federal
government authorizations required to operate and exercise its activities. To
the knowledge of the Company, there are no acts, facts, omissions and/or events
that may result in an action, proceeding or investigation as regards the
Company's compliance with the Environmental Regulations, nor is there any such
action, proceeding or investigation currently under way. All of the Company's
headquarters, manufacturing facilities, branches, agencies, offices, warehouses
and/or deposits (both bonded and otherwise), if any, are in compliance with the
Environmental Regulations. There has been no discharge, unloading, spill,
emission, injection, leakage, storage or release in any real property used by
the Company, or in the environment or third-party
properties, of any toxic or hazardous substances.
Real Property.
Schedule 3.13 sets forth each and every parcel of real property or
interest in real estate held under a lease or used by, or necessary for the
conduct of the business of, the Company (the "Real Property"). The Company owns
no real property and has no interest in any real estate other than the Real
Property. The Sellers have heretofore delivered to the Buyer complete and
correct copies of each and every of the following, if any, in the possession of
the Sellers or the Company: leases of the Real Property and all documents
relating thereto, including any amendments thereto and any assignment thereof.
Except as set forth in Schedule 3.13, the Company:
is in peaceful and undisturbed possession of the space
and/or estate under each lease under which it is a tenant, and there are
no defaults by it as tenant thereunder; and
has good and valid rights of ingress and egress to and
from all the Real Property from and to the public street systems for all
usual street, road and utility purposes and other purposes necessary or
incidental to the business of the Company.
None of the Sellers, the Company nor the Former Quotaholders has
received any notice of any appropriation, condemnation or like proceeding, or of
any violation of any applicable zoning law, regulation or other law, order,
regulation or requirement relating to or affecting the Real Property, and to the
best knowledge of the Company, no such proceeding has been threatened or
commenced.
All of the buildings, structures, improvements and fixtures used
by or useful in the business of the Company, owned or leased by the Company, are
in a good state of repair, maintenance and operating condition and, except as so
disclosed and, except for normal wear and tear, there are no defects with
respect thereto which would impair the day-to-day use of any such buildings,
structures, improvements or fixtures or which would subject the Company to
liability under Applicable Law.
The buildings and other improvements of each parcel included in
the Real Property do not encroach on any easements or on any land not included
within the boundary lines of such Real Property and there are no neighboring
improvements encroaching on such Real Property, except for such of the foregoing
as do not and will not individually or in the aggregate interfere with the
current and proposed use(s) of such Real Property in the business.
The current use of the Real Property does not violate or conflict
with (i) any covenants, conditions or restrictions applicable thereto, or (ii)
the terms and provisions of any contractual obligations relating thereto.
Intellectual Property.
Schedule 3.14 sets forth a true and complete list of all patents,
trademarks (registered or unregistered), trade names, service marks and
copyrights and applications therefor and other material intellectual property
and proprietary rights, whether or not subject to statutory registration or
protection (collectively, "Intellectual Property"), owned, used, filed by or
licensed to the Company. With respect to registered trademarks, Schedule 3.14
sets forth a list of all jurisdictions in which such trademarks are registered
or applied for and all registration and application numbers. Except as set forth
in Schedule 3.14, the Company owns, and the Company has the exclusive right to
use, execute, reproduce, display, perform, modify, enhance, distribute, prepare
derivative works of and sublicense, without payment to any other Person, all
Intellectual Property and the consummation of the transactions contemplated
hereby will not conflict with, alter or impair any such rights. The Company has
all rights to Intellectual Property as are necessary in connection with the
business of the Company as currently conducted.
The Company has not granted any options, licenses or agreements
of any kind relating to the Intellectual Property or the marketing or
distribution thereof. The Company is not bound by or a party to any options,
licenses or agreements of any kind relating to the Intellectual Property of any
other Person, except as set forth in Schedule 3.14 and except for agreements
relating to computer software licensed to the Company in the ordinary course of
business. Subject to the rights of third parties set forth in Schedule 3.14, all
Intellectual Property is free and clear of the claims of others and of all
Liens. The conduct of the business of the Company as currently conducted does
not violate, conflict with or infringe the Intellectual Property of any other
Person. Except as set forth in Schedule 3.14, (i) no claims are pending or, to
the knowledge of the Company, threatened, against the Company by any Person with
respect to the ownership, validity, enforceability, effectiveness or use of any
Intellectual Property and (ii) during the past two (2) years, the Company has
not received any communications alleging that the Company has violated any
rights relating to the Intellectual Property of any Person.
The Intellectual Property has been maintained in confidence in
accordance with protection procedures customarily used in the industries of the
Company to protect rights of like importance. All former and current members of
management and key personnel of the Company, including all former and current
employees, agents, consultants and independent contractors who have contributed
to or participated in the conception and development of software or other
Intellectual Property (collectively, "Personnel"), have executed and delivered
to the Company a proprietary information agreement restricting such Person's
right to disclose proprietary information of the Company, and its respective
clients. No former or current Personnel have any claim against the Company in
connection with such Person's involvement in the conception and development of
any Intellectual Property and no such claim has been asserted or is threatened.
None of the current officers and employees of the Company have any patents
issued or applications pending for any device, process, design or invention of
any kind now used or needed by the Company in the furtherance of its business
operations, which patents or applications have not been assigned to the Company,
with such assignment duly recorded in Brazil at the Brazilian Institute of
Industrial Property.
Contracts.
Except as set forth in Schedule 3.15, the Company is not a party to or
bound by any:
employment agreement or employment contract that has an aggregate
future liability in excess of R$20.000,00 and is not terminable by the Company
by notice of not more than thirty (30) days for a cost of less than R$30.000,00;
employee collective bargaining agreement or other contract with
any labor union;
covenant of the Company not to compete (other than pursuant to
any radius restriction contained in any lease, reciprocal easement or
development, construction, operating or similar agreement) or other covenant of
the Company restricting the development, manufacture, marketing or distribution
of the products and services of the Company that materially impairs the
operation of the business of the Company, as currently conducted;
agreement, contract or other arrangement with (i) any quotaholder
or any Affiliate or (ii) any officer, director or employee of the Company, or
any Affiliate of any quotaholder (other than employment agreements covered by
clause (a) above);
lease, sublease or similar agreement with any Person under which
the Company is a lessor or sublessor of, or makes available for use to any
Person (i) any property owned, leased or used by the Company or (ii) any portion
of any premises otherwise occupied by the Company;
lease or similar agreement with any Person under which (i) the
Company is lessee of, or holds or uses, any machinery, equipment, vehicle or
other tangible personal property owned by any Person or (ii) the Company is a
lessor or sublessor of, or makes available for use by any Person, any tangible
personal property owned, leased or used by the Company, in any such case which
has an aggregate future liability or receivable, as the case may be, in excess
of R$10.000,00 and is not terminable by the Company by notice of not more than
thirty (30) days for a cost of less than R$15.000,00;
(i) continuing contract for the future purchase of materials,
supplies or equipment (other than purchase contracts and orders for inventory in
the ordinary course of business consistent with past practice), (ii) management,
service, consulting or other similar type of contract or (iii) advertising
agreement or arrangement, in any such case, which has an aggregate future
liability to any Person in excess of R$10.000,00 and is not terminable by the
Company by notice of not more than thirty (30) days for a cost of less than
R$15.000,00;
agreement, contract or other instrument under which the Company
has borrowed any money from, or issued any note, bond, debenture or other
evidence of indebtedness to any Person or any other note, bond, debenture or
other evidence of indebtedness issued to any Person in any such case which,
individually, is in excess of R$10.000,00;
agreement, contract or other instrument under which (i) any
Person
(including the Company) has directly or indirectly guaranteed indebtedness,
liabilities or obligations of the Company or (ii) the Company has directly or
indirectly guaranteed indebtedness, liabilities or obligations of any Person (in
each case other than endorsements for the purpose of collection in the ordinary
course of business), in any such case which, individually, is in excess of
R$10.000,00;
agreement, contract or other instrument under which the Company
has, directly or indirectly, made any advance, loan, extension of credit or
capital contribution to, or other investment in, any Person, in any such case
which, individually, is in excess of R$10.000,00;
mortgage, pledge, security agreement, deed of trust or other
instrument granting a Lien upon any property of the Company;
agreement or instrument providing for indemnification of any
Person with respect to material liabilities relating to any current or former
business of the Company or any predecessor Person; or
other agreement, contract, lease, license, commitment or
instrument to which the Company is a party or by or to which it or any of its
assets or businesses is bound or subject, which has an aggregate future
liability to any Person in excess of R$10.000,00 and is not terminable by the
Company by notice of not more than thirty (30) days for a cost of less than
R$15.000,00.
All agreements, contracts, leases, licenses, commitments or instruments of the
Company listed in the Schedules hereto (collectively, the "Contracts") are
valid, binding and in full force and effect and are enforceable by the Company
in accordance with its terms subject to applicable bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and other laws affecting
creditors' rights generally, general principles of equity and the discretion of
courts in granting equitable remedies. The Company has performed all material
obligations required to be performed by it to date under the Contracts and it is
not (with or without the lapse of time or the giving of notice, or both) in
breach or default in any material respect thereunder and, to the knowledge of
the Company, no other party to any of the Contracts is (with or without the
lapse of time or the giving of notice, or both) in breach or default in any
material respect thereunder.
Insurance.
The Company does not maintain any insurance policies in connection with
the Company. No insurance policies are required by Applicable Law and the
absence of such insurance has not had and will not in the future have a Material
Adverse Effect on the Company.
Employee and Labor Matters.
Except as set forth on Schedule 3.17, the Company is not a party to, or
engaged in negotiating, any collective bargaining agreement. The Company is not
the subject of any claim which is pending or, to the knowledge of the Company,
threatened, asserting that the Company
has committed an unfair labor practice or seeking to compel the Company to
bargain with any labor organization as to wages and conditions of employment. No
strike or other labor dispute involving the Company is pending or, to the
knowledge of the Company, threatened, and there is no activity involving any
employees of the Company seeking to certify a collective bargaining unit or
engaging in any other organization activity.
Customer Accounts Receivable.
All customer accounts receivable of the Company, whether reflected
on the Balance Sheet or subsequently created, have arisen from bona fide
transactions in the ordinary course of business. To the knowledge of the
Company, all such customer accounts receivable are good and collectible at the
aggregate recorded amounts thereof, net of any applicable reserves for doubtful
accounts reflected on the Balance Sheet. The Company has good and marketable
title to its accounts receivable, free and clear of all Liens. Since the date of
the Balance Sheet, there have not been any write-offs as uncollectible of any
notes or accounts receivable of the Company, except for write-offs in the
ordinary course of business and consistent with past practice which have not
had, either individually or in the aggregate, a Material Adverse Effect on the
Company.
Licenses; Permits.
The Company possesses all material licenses, permits and authorizations
issued or granted to the Company by Governmental Entities which are necessary or
desirable for the conduct of the business of the Company. All such licenses,
permits and authorizations are validly held by the Company, and the Company has
complied in all material respects with all terms and conditions thereof, and the
same will not be subject to suspension, modification, revocation or nonrenewal
as a result of the execution and delivery of this Agreement, the other
Transaction Agreements or the consummation of the Transactions. All such
licenses, permits and authorizations that are held in the name of any employee,
officer, director, quotaholder, agent or otherwise on behalf of the Company
shall be deemed included under this warranty.
Accounts; Safe Deposit Boxes; Powers of Attorney; Officers
and Directors.
Schedule 3.20 sets forth (i) a true and correct list of all bank and
savings accounts, certificates of deposit and safe deposit boxes of the Company
and those Persons authorized to sign thereon, (ii) true and correct copies of
all corporate borrowing, depository and transfer resolutions and those Persons
entitled to act thereunder, (iii) a true and correct list of all powers of
attorney granted by the Company and those Persons authorized to act thereunder
and (iv) a true and correct list of all officers and directors of the Company.
Transactions with Affiliates.
Other than the Transaction Agreements, after the Closing no Seller, Former
Quotaholder or Affiliate of the Company will have any interest in any property
(real or personal, tangible or intangible) or contract used in or pertaining to
the business of the Company. No Seller, Former
Quotaholder or Affiliate of the Company has any direct or indirect ownership
interest in any Person in which the Company has any direct or indirect ownership
interest or with which the Company competes or has a business relationship. No
Seller, Former Quotaholder or Affiliate of the Company provides any material
services to the Company.
Corporate Name.
The Company (i) has the exclusive right to use its name as the name of a
corporation in any jurisdiction in which the Company does business, and the only
jurisdiction in which the Company does business is Brazil and (ii) the Company
has not received any notice of conflict during the past two (2) years with
respect to the rights of others regarding the corporate name of the Company. No
Person is currently authorized by the Company to use the name of the Company.
Customers.
Except for the customers named in Schedule 3.23, the Company does not have
any customer to which it made more than five percent (5%) of its sales during
its most recent full fiscal year and the period ended on the date of this
Agreement. Except as set forth in Schedule 3.23, since the date of the Balance
Sheet, there has not been (i) any material adverse change in the business
relationship of the Company with any customer named in Schedule 3.23 or (ii) any
change in any material term (including credit terms) of the sales agreements or
related agreements with any such customer. During the past two (2) years, the
Company has not received any customer complaints concerning its products and
services, nor has it had any of its products returned by a purchaser thereof,
other than complaints and returns in the ordinary course of business which have
not, and are not likely to have, individually or in the aggregate, a Material
Adverse Effect.
Personal Property.
Schedule 3.24 sets forth (i) the tangible physical assets of the
Company that do not constitute Real Property (including machinery, equipment,
tools, dies, furniture, furnishings, leasehold improvements, vehicles, buildings
and fixtures) and that have a value in excess of R$10.000,00 per item or per
category of items and the location of such items; (ii) individual refundable
deposits, prepaid expenses, deferred charges and "other assets" in excess of
R$10.000,00 or R$20.000,00 in the aggregate; and (iii) all loans or advances
made by the Company to any Person in excess of R$10.000,00.
The Company has good title to all of the tangible physical assets
of the Company that do not constitute Real Property, free and clear of all
Liens. The Company has valid contractual rights to use, all of the assets,
tangible and intangible, used by, or necessary for the conduct of the businesses
of the Company as now being conducted.
The machinery, tools, equipment and other tangible physical
assets of the Company (other than items of inventory), taken as a whole, are in
good working order, normal wear and tear excepted, are being used or are useful
in the business of the Company at its present
level of activity and constitute all of the assets necessary to conduct the
business of the Company as now being conducted.
Brokers; Schedule of Fees and Expenses.
No broker, investment banker, financial advisor or other Person, is
entitled to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the Transactions based upon arrangements made by
or on behalf of the Company, any Seller or any Former Quotaholder.
Entire Business.
No Seller, Former Quotaholder or Affiliate of the Company owns any assets
that are used exclusively by the Company, or that are necessary for the conduct
of the Company's businesses as conducted on the date of this Agreement.
Liabilities.
There exists no debt, obligation or liability of, or with respect to, any
Transferee that, individually or in the aggregate, has had or could reasonably
be expected to have a Material Adverse Effect on any Transferee, nor is there
any Judgment outstanding against any Transferee that has had or could reasonably
be expected, individually or in the aggregate, to have a Material Adverse Effect
on any Transferee.
Disclosure.
No representations or warranties by the Sellers or the Company in
this Agreement, including the Schedules, and no statement contained in any
document furnished or to be furnished by any Seller, any Former Quotaholder or
the Company to the Buyer, the Parent or any representative of either, pursuant
to the provisions hereof or in connection with the transactions contemplated
hereby (including, without limitation, the Financial Statements, certificates,
or other writing), contains or will contain any untrue statement of material
fact or omits or will omit to state any material fact necessary, in light of the
circumstances under which it was made, in order to make the statements herein or
therein not misleading. There is no fact known to any Seller, any Former
Quotaholder, which has or could have a Material Adverse Effect on the Company
which has not been set forth in this Agreement, including the Financial
Statements (including the footnotes thereto), any schedule, exhibit, or
certificate delivered in accordance with the terms hereof or any document or
statement in writing which has been supplied by or on behalf of any Seller, any
Former Quotaholder, the Company or by any director or officer of the Company or
GGV2000 in connection with the transactions contemplated by this Agreement.
The Sellers, the Former Quotaholders and the Company have
furnished or caused to be furnished to the Buyer complete and correct copies of
all agreements, instruments and documents set forth on any Schedule or
underlying a disclosure set forth on any Schedule. Each of the Schedules is
complete and correct.
Knowledge.
The term "knowledge of the Company" shall mean the knowledge of any
director, officer, quotaholder or key employee of the Company, after due
inquiry.
Representations and Warranties of THE BUYER
The Buyer represents and warrants to the Sellers as follows:
Organization, Standing and Power.
The Buyer is duly organized, validly existing and in good standing under
the laws of the state of Delaware and has full corporate power and authority to
conduct its businesses as currently conducted.
Authority; Execution and Delivery; Enforeceability.
The Buyer has all requisite corporate power and authority to execute this
Agreement and each Transaction Agreement to which it is a party and to
consummate the Transactions. The execution and delivery by the Buyer of this
Agreement and each Transaction Agreement to which it is a party and the
consummation by it of the Transactions have been duly authorized by all
necessary corporate action on the Buyer. The Buyer has duly executed and
delivered this Agreement and each Transaction Agreement to which it is a party,
and each Transaction Agreement to which it is a party constitutes its legal,
valid and binding obligation, enforceable against it in accordance with its
terms.
Consents.
No Consent of, or registration, declaration or filing with, any
Governmental Entity is required to be obtained or made by or with respect to the
Buyer in connection with the execution, delivery and performance of this
Agreement or any Transaction Agreement to which the Buyer is a party or the
consummation of the Transactions, other than (i) compliance with and such
filings as may be required under applicable environmental laws, (ii) such
immaterial Consents as may be required under the laws of any jurisdiction in
which the Company is qualified to do business and (iii) those that may be
required solely by reason of the Company (as opposed to any third party's)
participation in the transactions contemplated hereby.
Covenants Relating to Conduct of Business
Conduct of Business by the Company.
Except as expressly permitted by this Agreement, from the date of this
Agreement to the Closing Date, the Sellers shall cause the Company to, and the
Company shall, conduct its business in the usual, regular and ordinary course,
in substantially the same manner as previously conducted and use all reasonable
efforts to preserve intact its current business organization, keep available the
services of its current officers and employees and keep its relationships with
customers, suppliers, licensors, licensees, distributors and others having
business dealings with them to the end that its goodwill and ongoing business
shall be unimpaired at the Closing Date. In addition, and without limiting the
generality of the foregoing, except as expressly permitted by this Agreement or
set forth in Schedule 5.01, from the date of this Agreement to the Closing Date,
the Company shall not do any of the following without the prior written consent
of Buyer:
(i) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its quotas, (ii) split, combine or
reclassify any of its quotas or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its quotas
or (iii) purchase, redeem or otherwise acquire any quotas of the Company or any
other securities thereof or any rights, warrants or options to acquire any such
quotas or other securities;
issue, deliver, sell or grant (i) any quotas of the Company (ii)
any Voting Company Debt or other voting securities or (iii) any securities
convertible into or exchangeable for, or any options, warrants or rights to
acquire, any such quotas, Voting Company Debt or voting securities or
convertible or exchangeable securities;
amend the Company Articles;
acquire or agree to acquire (i) by merging or consolidating with,
or by purchasing a substantial portion of the assets of, or by any other manner,
any business or any corporation, partnership, joint venture, association or
other business organization or division thereof or (ii) any assets that are
material, individually or in the aggregate, to the Company, except purchases of
inventory in the ordinary course of business consistent with past practice;
(i) grant to any employee or renderor of services, officer or
director of the Company any increase in compensation, except to the extent
required under employment agreements in effect as of the date of the Balance
Sheet, (ii) grant to any employee, officer or director of the Company any
increase in severance or termination pay, except to the extent required under
any agreement in effect as of the date of the Balance Sheet, (iii) enter into
any employment, consulting, indemnification, severance or termination agreement
with any such employee, officer or director, (iv) establish, adopt, enter into
or amend in any material respect any collective bargaining agreement or (v) take
any action to accelerate any rights or benefits, or make any material
determinations not in the ordinary course of business consistent with prior
practice, under any collective bargaining agreement;
make any change in accounting methods, principles or practices
materially affecting the reported combined consolidated assets, liabilities or
results of operations of the Company, except insofar as may have been required
by a change in GAAP;
except as set forth in Schedule 5.01 attached hereto, sell,
lease, license or otherwise dispose of or subject to any Lien any properties or
assets that are material, individually or in the aggregate, to the Company,
except sales of inventory and excess or obsolete assets in the ordinary course
of business consistent with past practice;
(i) incur any Indebtedness (except for short-term borrowings
incurred in the ordinary course of business consistent with past practice),
issue or sell any debt securities or warrants or other rights to acquire any
debt securities of the Company, guarantee any Indebtedness of another Person,
enter into any agreement to maintain any financial statement condition of
another Person or enter into any arrangement having the economic effect of any
of the foregoing, or (ii) make any loans, advances or capital contributions to,
or investments in, any other Person;
make or agree to make any new capital expenditure or expenditures
that, individually, is in excess of R$20.00,00 or, in the aggregate, are in
excess of R$50.000,00;
make any Tax election or settle or compromise any material Tax
liability or refund;
pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction, in the ordinary course of business
consistent with past practice or in accordance with their terms, of liabilities
reflected or reserved against in, or contemplated by, the Balance Sheet (or the
notes thereto), (ii) cancel any material Indebtedness (individually or in the
aggregate) or waive any claims or rights of substantial value or (iii) waive the
benefits of, or agree to modify in any manner, any confidentiality, standstill
or similar agreement to which the Company is a party; or
authorize any of, or commit or agree to take any of, the
foregoing actions.
Other Actions.
The parties hereto shall not take any action that would, or that could
reasonably be expected to, result in (i) any of the representations and
warranties of such party as set forth in this Agreement or any Transaction
Agreement to which it is a party, that are qualified as to materiality, becoming
untrue, or (ii) any of such representations and warranties that are not so
qualified becoming untrue in any material respect.
Advice of Changes.
The Sellers, the Company and the Former Quotaholders shall notify the
Buyer orally and in writing of (i) any representation or warranty made by them
contained in this Agreement that is qualified as to materiality, becoming untrue
or inaccurate in any respect or any such representation or warranty that is not
so qualified becoming untrue or inaccurate in any material respect or (ii) any
change or event or impending occurrence of any change or event of which
either of them has knowledge and which has resulted, or which, insofar as can
reasonably be foreseen, could result, in any of the conditions to the Closing,
set forth in Article VII, not being satisfied. No such notification given
pursuant to this Section 5.03 shall affect the representations, warranties,
covenants or agreements of the parties or the conditions to the obligations of
the parties under this Agreement.
Declarations; Certificates.
(a) With respect to each of GGV2000 and CAPGV, the Sellers, no more than
sixty (60) day after the Closing Date, shall deliver to the Buyer copies of: (i)
updated certificates issued by the notary public responsible for the
registration of unpaid debts in the administrative region(s) where each of
GGV2000 and CAPGV has maintained its establishments since its date of
organization (Certidao Negativa de Cartorios de Protesto de Titulos); (ii)
certificates attesting to the non-occurrence of any debt (Social Security
Contributions Clearance) issued by the Institute of Financial Administration of
Social Security (IAPAS), under the name of each of GGV2000 and CAPGV in each
city where each has maintained its respective establishment (Certidao Negativa
de Debitos - CND); (iii) certificates of payment of federal taxes and
contributions (Income Tax (IR), Excise Tax (tax on manufactured products (IPI),
social contribution on the net profit (CSL), National Institute of Social
Security Contribution (INSS), Government Severance Indemnity Fund for Employees
(FGTS), Tax for Social Security Financing (Social Contribution on Billings)
(COFINS), Contribution to Employee's Profit Participation Program (Certidao de
Quitacao de Tributos Federais - CQTF), state taxes and contributions, municipal
Taxes and tributes, Services Tax (ISS), issued under the name of each of GGV2000
and CAPGV (Certidao de Quitacao de Tributos Municipais); and (iv) certificates
of non-pending administrative and judicial lawsuits with respect to each of
GGV2000 and CAPGV (Certidao Negativa dos Distribuidores Civeis Estadual e
Federal ).
(b) In the event that the Sellers shall not have delivered to the Buyer
any declaration or certificate that they are required to deliver to the Buyer
pursuant to Section 5.04(a), by the date that is sixty (60) days after the
Closing Date, the Sellers shall pay to the Buyer an amount equal to Five
Thousand U.S. Dollars (US$5,000) per day for each day after such sixtieth (60th)
day that any such declaration or certificate has not been delivered.
Year 2000 Compliance.
As soon as reasonably possible after the Closing, the Buyer and the
Sellers will cooperate to ensure that the software and systems, including all
equipment used by the Company is Year 2000 Compliant. "Year 2000 Compliant"
means that neither the performance nor functionality of the software and
systems, including all equipment of the Company, will be adversely affected by
dates prior to, during or after the year 2000. The Buyer and the Sellers shall
ensure that the software and systems, including all equipment, used by the
Company, are capable of providing the following functions without any additional
processing, with the same degree of timeliness, efficiency and accuracy as on or
before December 31, 1999, and all software and systems have been tested to
verify that they are Year 2000 Compliant:
effectively process date information before, on and after January
1, 2000;
function accurately and without interruption before, on and after
January 1, 2000, without any change in operation associated with the advent of
the year 2000, the new century or the leap year in the year 2000;
respond to two-digit year input in a way that resolves the
ambiguity as to the century in a disclosed, defined and predetermined manner;
process two-digit year information in ways that are similarly
unambiguous as to century; and
store and provide output of date information in ways that are
similarly unambiguous as to century.
Additional Agreements
Access to Information; Confidentiality.
The Sellers shall cause the Company to afford to the Buyer and to the
officers, employees, accountants, counsel, financial advisors and other
representatives of the Buyer, reasonable access during normal business hours,
during the period prior to the Closing Date, to all the properties, books,
contracts, commitments, personnel and records of the Company and, during such
period, shall furnish promptly to the Buyer (i) a copy of each report, schedule
and other document filed by it during such period with any Governmental Entity
and (ii) all other information concerning its business, properties and personnel
as the Buyer may reasonably request. No investigation by the Buyer shall affect
the representations and warranties of any party hereto. Except as required by
law, the Sellers shall hold, and shall cause its respective officers, employees,
accountants, counsel, financial advisors and other representatives and
Affiliates to hold, any nonpublic information in confidence until such time as
such information becomes publicly available (otherwise than through the wrongful
act of any such Person) and shall use its best efforts to ensure that such
Persons do not disclose such information to others without the prior written
consent of the Buyer.
Best Efforts; Notification.
Upon the terms and subject to the conditions set forth in this Agreement,
each of the parties shall use its best efforts to take, or cause to be taken,
all actions, and to do, or cause to be done, and to assist and cooperate with
the other parties in doing, all things necessary, proper or advisable to
consummate and make effective, in the most expeditious manner practicable, the
Transactions, including (i) the obtaining of all necessary actions or
nonactions, waivers, consents and approvals from Governmental Entities and the
making of all necessary registrations and filings (including filings with
Governmental Entities, if any) and the taking of all reasonable
steps as may be necessary to obtain an approval or waiver from, or to avoid an
action or proceeding by, any Governmental Entity, (ii) the obtaining of all
necessary consents, approvals or waivers from third parties, (iii) the defending
of any lawsuits or other legal proceedings, whether judicial or administrative,
challenging this Agreement or any other Transaction Agreement or the
consummation of the Transactions, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed and (iv) the execution and delivery of any additional
instruments necessary to consummate the Transactions and to fully carry out the
purposes of the Transaction Agreements.
Right to Withdraw Funds.
The Company shall pay to the Sellers or an Affiliate of the Sellers
designated by them, an amount of money equal to the lesser of (i) US$320,000 and
(ii) the retained earnings reflected on the 1998 Financial Statements and
certified by one of the accounting firms generally referred to as the "big six;"
provided, however, that such date shall not be earlier than the date sixty (60)
days following the Closing Date, nor later than March 1, 2000.
Fees and Expenses.
All fees and expenses incurred in connection with the Transactions shall
be paid by the party incurring such fees or expenses, whether or not the
Transactions are consummated.
Public Announcements.
The Buyer, on the one hand, and the Company and the Sellers, on the other
hand, shall consult with each other before issuing, and provide each other the
opportunity to review and comment upon, any press release or other public
statements with respect to the Transactions and shall not issue any such press
release or make any such public statement prior to such consultation, except as
may be required by Applicable Law.
1999 Audit.
The Buyer shall cause the Company to contract with one of the accounting
firms generally referred to as the "big six" to audit the Company's 1999
financial statements in accordance with GAAP, which audit shall be completed not
later than March 15, 2000.
Conditions Precedent
Conditions to Each Party's Obligation to Consummate the
Transactions.
The respective obligation of each party to consummate the Transactions is
subject to the satisfaction or waiver on or prior to the Closing Date of the
following conditions:
No Injunctions or Restraints. No temporary restraining order,
preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal restraint or prohibition preventing the consummation
shall be in effect; provided, however, that, subject to Section 6.02, each of
the parties shall have used its best efforts to prevent the entry of any such
injunction or other order and to appeal as promptly as possible any such
injunction or other order that may be entered.
Transaction Agreements. All the Transaction Agreements shall have
been executed and delivered by the respective parties to such agreements and be
in full force and effect.
Conditions to Obligations of the Buyer and the Parent.
The obligations of the Buyer and the Parent to consummate the ent.
Transactions are further subject to the following conditions:
Representations and Warranties. The representations and
warranties set forth in Article III shall be true and correct as of the date of
this Agreement and as of the Closing Date as though made on the Closing Date.
The Buyer and the Parent shall have received from each of the Sellers, the
Company and the Former Quotaholders, a certificate dated as of the Closing Date
and respectively signed by the Sellers, an appropriate officer of the Company
and the Former Quotaholders, to such effect.
Performance of the Obligations of the Sellers and the Company.
The Sellers, the Company and the Former Quotaholders (i) shall have performed in
all material respects all obligations (other than obligations pursuant to
Section 5.03) required to be performed by it under this Agreement at or prior to
the Closing Date and (ii) shall have performed all obligations pursuant to
Section 5.03, at or prior to the Closing Date. The Buyer shall have received
from each of the Sellers, the Company and the Former Quotaholders, a certificate
dated as of the Closing Date and respectively signed by the Sellers, an
appropriate officer of the Company and the Former Quotaholders, to such effect.
Absence of Material Adverse Effect. Since the date of this
Agreement, there shall not have been any event, change, effect or development
that, individually or in the aggregate, has had or could reasonably be expected
to have a Material Adverse Effect on the Company.
No Litigation. There shall not be pending or threatened any suit,
action or proceeding by any Governmental Entity or any other Person, in each
case, that has a reasonable likelihood of success, (i) challenging the
acquisition by the Buyer of the Company Quotas, seeking to restrain or prohibit
the consummation of the Transactions or seeking to obtain from any of the
parties hereto any damages that are material in relation to the Company, (ii)
seeking to prohibit or limit the ownership or operation by the Company or the
Buyer of any material portion of the business or assets of the Company or the
Buyer, or to compel the Company or the Buyer to dispose of or hold separate any
material portion of the business or assets of the Company or the Buyer, as a
result of the Transactions, (iii) seeking to impose limitations on the ability
of the Buyer to acquire or hold, or exercise full rights of ownership of, the
Company Quotas, including
the right to vote the Company Quotas on all matters properly presented to the
quotaholders of the Company, (iv) seeking to prohibit the Buyer from effectively
controlling in any material respect the business or operations of the Company or
(v) which otherwise is reasonably likely to have a Material Adverse Effect on
the Company.
Consents. All consents of third parties necessary on the part of
the Buyer, the Sellers or the Company, to the execution and delivery of this
Agreement and the consummation of the Transactions and to permit the continued
operation of the respective businesses of the Buyer and the Company in
substantially the same manner after the Closing Date as theretofore conducted,
other than routine post-closing notifications or filings, shall have been
obtained or effected.
Resignations. The resignations of each director and officer of
the Company that have been previously requested by the Buyers shall have been
delivered to the Buyer.
Opinions of Counsel. The Buyer shall have received (i) an opinion
dated the Closing Date of Escritorio Villemor Amaral Advogados, counsel to the
Former Quotaholders, the Sellers and the Company ("EVA"), substantially in the
form of Exhibit D attached hereto and with respect to such other matters as the
Buyer shall reasonably request and (ii) an opinion of EVA dated the Closing
Date, with respect to the legality and validity of the Transfers permitted under
Section 11.11 of the Former Quota Purchase Agreement, substantially in the form
of Exhibit E attached hereto.
Opinion of Arthur Andersen S/C. The Buyer shall have received an
opinion letter from Arthur Andersen S/C with respect to the validity of the
Transfers permitted under Section 11.11 of the Former Quota Purchase Agreement,
the form and substance of which are acceptable to the Buyer.
Satisfactory Investigation. The Buyer shall have completed its
investigation of (i) the business, assets and financial conditions of the
Company and it legal status, (ii) the terms and conditions of any Transfer
permitted under Section 11.11 of the former Quota Purchase Agreement and (iii)
the business, assets and financial conditions of the Transferees and legal
status of each, and in each case the Buyer shall have been satisfied with the
results thereof.
Declarations; Certificates. With respect to Rothko, the Sellers
shall have provided to the Buyer copies of: (i) updated certificates issued by
the notary public responsible for the registration of unpaid debts in each
administrative region where Rothko has maintained its establishments since its
date of organization (Certidao Negativa de Cartorios de Protesto de Titulos);
(ii) certificates attesting to the non-occurrence of any debt (Social Security
Contributions Clearance) issued by the Institute of Financial Administration of
Social Security (IAPAS), under the name of Rothko in each city where Rothko has
maintained its establishment (Certidao Negativa de Debitos - CND); (iii)
certificates of payment of federal taxes and contributions (Income Tax (IR),
Excise Tax (tax on manufactured products (IPI), social contribution on the net
profit (CSL), National Institute of Social Security Contribution (INSS),
Government Severance Indemnity Fund for Employees (FGTS), Tax for Social
Security
Financing (Social Contribution on Billings) (COFINS), Contribution to Employee's
Profit Participation Program (Certidao de Quitacao de Tributos Federais - CQTF),
state taxes and contributions, municipal Taxes and tributes, Services Tax (ISS),
issued under the name of Rothko (Certidao de Quitacao de Tributos Municipais);
and (v) certificates of non-pending administrative and judicial lawsuits with
respect to Rothko (Certidao Negativa dos Distribuidores Civeis Estadual e
Federal).
Conditions to Obligation of the Sellers.
The obligation of the Sellers to consummate the Transactions is further
subject to the following conditions:
Representations and Warranties. The representations and
warranties of the Buyer set forth in this Agreement that are qualified as to
materiality shall be true and correct (determined without regard for any
qualification as to materiality or Material Adverse Effect), and the
representations and warranties of the Buyer set forth in this Agreement that are
not so qualified shall be true and correct in all material respects, in each
case as of the date of this Agreement and on the Closing Date, as though made on
the Closing Date. The Sellers shall have received a certificate signed on behalf
of the Buyer by an appropriate officer of the Buyer to such effect.
Performance of Obligations of the Buyer. The Buyer shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date, and the Sellers shall
have received a certificate signed on behalf of the Buyer by an appropriate
officer of the Buyer to such effect.
Termination, Amendment and Waiver
Termination.
This Agreement may be terminated at any time prior to the Closing Date:
by mutual written consent of the Buyer and each of the Sellers;
by either the Buyer or each of the Sellers:
if the Transactions are not consummated on or before
April [30], 1999 (the "Outside Date"), unless the failure to consummate
the Transactions is the result of a material breach of this Agreement by
the party seeking to terminate this Agreement; or
if any Governmental Entity issues an order, decree or
ruling or takes any other action permanently enjoining, restraining or
otherwise prohibiting the
Transactions, and such order, decree, ruling or other action shall have
become final and nonappealable.
by the Buyer, if any condition to the obligation of the Buyer to
consummate the Transactions set forth in Section 7.02 becomes incapable of
satisfaction prior to the Outside Date and shall not have been waived by the
Buyer, or
by the Sellers, if any condition to the obligation of the Sellers
to consummate the Transactions, set forth in Section 7.03 becomes incapable of
satisfaction prior to the Outside Date and shall not have been waived by the
Sellers.
Effect of Termination.
In the event of termination of this Agreement by either the Buyer or the
Sellers as provided in Section 8.01, this Agreement shall forthwith become void
and have no effect, without any liability or obligation on the part of any party
hereto other than the last sentence of Section 6.01, Section 6.04, this Section
8.02 and Article IX and except to the extent that such termination results from
the material breach by a party of any representation, warranty or covenant set
forth in this Agreement.
Amendment.
This Agreement may be amended by the parties at any time. This Agreement
may not be amended except by an instrument in writing signed on behalf of each
of the parties hereto.
Extension; Waiver.
At any time prior to the Closing Date, the parties may (i) extend the time
for the performance of any of the obligations or other acts of the other
parties, (ii) waive any inaccuracies in the representations and warranties
contained in this Agreement or in any document delivered pursuant to this
Agreement or (iii) waive compliance with any of the agreements or conditions
contained in this Agreement. Any agreement on the part of a party to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party. The failure of any party to this Agreement to
assert any of its rights under this Agreement or otherwise shall not constitute
a waiver of such rights.
Indemnification
Tax Indemnification.
Each Quotaholder shall be jointly and severally liable for and
shall indemnify the Buyer and its Affiliates (including the Company) and each of
their respective officers, directors, employees, quotaholders, stockholders,
agents and representatives (the "Buyer Indemnitees") and hold them harmless from
and against (i) all liability for Taxes of the Company
for the Pre-Closing Tax Period, irrespective of whether any such liability was
disclosed by the Quotaholders or discovered by the Buyer prior to the Closing,
(ii) any liability for Taxes attributable to a breach by the Company, the
Sellers or the Former Quotaholders of their respective obligations under this
Agreement or any Transaction Agreement and (iii) all liability for reasonable
legal fees and expenses for any item attributable to any item in clause (i) or
(ii) above. Notwithstanding the foregoing, the Quotaholders shall not indemnify
and hold harmless the Buyer Indemnitees from any liability for Taxes
attributable to any action taken after the Closing by the Buyer or any of its
Affiliates (including the Company) (a "Buyer Tax Act").
In the case of any taxable period that includes (but does not end
on) the Closing Date (a "Straddle Period"):
real, personal and intangible property Taxes and any other
Taxes not measured in whole or in part by reference to income or revenues
of the Company ("Property Taxes") allocable to the Pre-Closing Tax Period
shall be equal to the amount of such Property Taxes for the entire
Straddle Period multiplied by a fraction, the numerator of which is the
number of days during the Straddle Period that are in the Pre-Closing Tax
Period and the denominator of which is the number of days in the Straddle
Period; and
the Taxes of the Company other than Property Taxes allocable
to the Pre-Closing Tax Period shall be computed as if such taxable period
ended as of the close of business on the Closing Date.
the Quotaholders' indemnity obligation in respect of Taxes
for a Straddle Period shall initially be fulfilled by the payment by the
Sellers to the Buyer of the excess of (A) such Taxes for the Pre-Closing
Tax Period over (B) the amount of such Taxes for the Pre-Closing Tax
Period paid by the Sellers or any of its Affiliates (other than the
Company) at any time, plus the amount of such Taxes for the Pre-Closing
Tax Period paid by the Company on or prior to the Closing Date. The
Sellers shall initially pay such excess amounts to the Buyer within thirty
(30) days after the Return with respect to the liability for such Taxes is
required to be filed (or, if later, is actually filed). If the amount of
such Taxes paid by the Sellers or any of their Affiliates (other than the
Company) at any time exceeds the amount payable by the Sellers pursuant to
the preceding sentence, the Buyer shall pay to the Sellers the amount of
such excess within thirty (30) days after the Return with respect to the
liability for such Taxes is required to be filed.
Other Indemnification by the Sellers.
Except as relates to Taxes, for which the sole indemnification is
provided in Section 9.01, each Quotaholder shall jointly and severally indemnify
the Buyer Indemnitees against and hold them harmless from any loss, liability,
claim, damage or expense (including reasonable legal fees and expenses) suffered
or incurred by any such indemnified party to the extent arising from:
any breach of any representation or warranty of the Sellers,
the Company or the Former Quotaholders contained in this Agreement, the
Transaction Agreements or in any certificate delivered pursuant hereto;
any breach of any covenant of the Sellers, the Company or
the Former Quotaholders contained in this Agreement or any Transaction
Agreement; or
any Transfer permitted under Section 11.11 of the Former
Quota Purchase Agreement.
Other Indemnification by the Buyer.
Except as relates to Taxes, for which the sole indemnification is provided
in Section 9.01, the Buyer shall indemnify the Sellers against and hold them
harmless from any loss, liability, claim, damage or expense (including
reasonable legal fees and expenses) suffered or incurred by any such indemnified
party to the extent arising from (i) any breach of any representation or
warranty of the Buyer contained in this Agreement or in any certificate
delivered pursuant hereto, or (ii) any breach of any covenant of the Buyer
contained in this Agreement.
Termination of Indemnification.
The obligations to indemnify and hold harmless a party hereto (i) pursuant
to Section 9.01, shall terminate ninety (90) days after the time the applicable
statutes of limitations with respect to the Tax liabilities in question expire
(giving effect to any extension thereof), (ii) pursuant to Sections 9.02(i) and
9.03, shall terminate when the applicable representation or warranty terminates
pursuant to Section 11.01 and (iii) pursuant to the other clauses of Sections
9.02 and 9.03 shall not terminate; provided, however, that as to clauses (i) and
(ii) above, such obligations to indemnify and hold harmless shall not terminate
with respect to any item as to which the Person to be indemnified or the related
party thereto shall have, before the expiration of the applicable period,
previously made a claim by delivering a notice of such claim (stating in
reasonable detail the basis of such claim) to the indemnifying party.
Procedures Relating to Indemnification for Third Party Claims
(other than Tax Claims).
In order for a party (the "indemnified party") to be entitled to any
indemnification provided for under this Agreement (other than indemnification
for a Tax Claim under Section 9.01 which shall be governed by Section 9.09) in
respect of, arising out of or involving a claim or demand made by any Person
against the indemnified party (a "Third Party Claim"), such indemnified party
must notify the indemnifying party in writing, and in reasonable detail, of the
Third Party Claim within five (5) business days after receipt by such
indemnified party of written notice of the Third Party Claim; provided, however,
that failure to give such notification shall not affect the indemnification
provided hereunder except to the extent the indemnifying party shall have been
actually prejudiced as a result of such failure. Thereafter, the indemnified
party shall deliver to the indemnifying party, promptly after the indemnified
party's
receipt thereof, copies of all notices and documents (including court papers)
received by the indemnified party relating to the Third Party Claim.
If a Third Party Claim is made against an indemnified party, the
indemnifying party shall be entitled to participate in the defense thereof and,
if it so chooses and acknowledges its obligation to indemnify the indemnified
party therefor, to assume the defense thereof with counsel selected by the
indemnifying party; provided that such counsel is not reasonably objected to by
the indemnified party. Should the indemnifying party so elect to assume the
defense of a Third Party Claim, the indemnifying party shall not be liable to
the indemnified party for legal expenses subsequently incurred by the
indemnified party in connection with the defense thereof. If the indemnifying
party assumes such defense, the indemnified party shall have the right to
participate in the defense thereof and to employ counsel, at its own expense,
separate from the counsel employed by the indemnifying party, it being
understood that the indemnifying party shall control such defense. The
indemnifying party shall be liable for the fees and expenses of counsel employed
by the indemnified party for any period during which the indemnifying party has
failed to assume the defense thereof.
If the indemnifying party so elects to assume the defense of any
Third Party Claim, all of the indemnified parties shall cooperate with the
indemnifying party in the defense or prosecution thereof. Such cooperation shall
include the retention and (upon the indemnifying party's request) the provision
to the indemnifying party of records and information which are reasonably
relevant to such Third Party Claim, and making employees available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder. Whether or not the indemnifying party shall have
assumed the defense of a Third Party Claim, the indemnified party shall not
admit any liability with respect to, or settle, compromise or discharge, such
Third Party Claim without the indemnifying party's prior written consent (which
consent shall not be unreasonably withheld).
Procedures Related to Indemnification for Other Claims (other
than Tax Claims under Section 9.01).
In the event any indemnified party should have a claim against any
indemnifying party under Section 9.02 or 9.03 that does not involve a Third
Party Claim being asserted against or sought to be collected from such
indemnified party, the indemnified party shall deliver notice of such claim with
reasonable promptness to the indemnifying party. The failure by any indemnified
party to notify the indemnifying party shall not relieve the indemnifying party
from any liability which it may have to such indemnified party under Section
9.02 or 9.03, except to the extent that the indemnifying party demonstrates that
it has been materially prejudiced by such failure.
Procedures Relating to Indemnification of Tax Claims.
If a claim shall be made to an indemnified party by any taxing
authority, which, if successful, might result in an indemnity payment pursuant
to Section 9.01 (a "Tax Claim") by any indemnifying party, the indemnified party
shall promptly notify the indemnifying party in writing of such Tax Claim.
Failure to give notice of a Tax Claim shall not affect the rights of the
indemnified party, any of its Affiliates or any of its respective officers,
directors, employees, stockholders, agents or representatives, to
indemnification unless the indemnifying party's position is materially
prejudiced as a result thereof.
With respect to any Tax Claim relating to a Pre-Closing Tax
Period (other than a Tax Claim relating solely to Taxes of the Company for a
Straddle Period), the Sellers shall control all audits or proceedings taken in
connection with such Tax Claim; provided, however, that the Buyer shall have the
right to participate in any such audit or proceeding to the extent that any such
audit or proceeding may affect the Tax liability of the Buyer, any of its
Affiliates or the Company for any period ending after the Closing Date and to
employ counsel of its choice at its own expense for purposes of such
participation. Notwithstanding anything to the contrary contained or implied in
this Agreement, without the prior written approval of the Buyer, neither the
Sellers nor any Affiliate of the Sellers shall agree or consent to compromise or
settle, either administratively or after the commencement of litigation, any
issue or claim arising in any such audit or proceeding, or otherwise agree or
consent to any Tax liability, to the extent that any such compromise,
settlement, consent or agreement may affect the Tax liability of the Buyer, any
of its Affiliates, or the Company for any period ending after the Closing Date.
Tax Matters
Responsibility for Preparation and Filing of Returns and
Amendments.
For any Straddle Period, the Buyer shall timely prepare and file or cause
to be timely prepared and filed with the appropriate authorities, all Returns
required to be filed by the Company and shall pay, or cause to be paid, all
Taxes shown to be due on such Returns; provided that, the Sellers or the Former
Quotaholders shall reimburse the Buyer (in accordance with the procedures set
forth in Section 9.01) for any amount owed by the Sellers pursuant to Section
9.01 with respect to the taxable periods covered by such Returns.
For any taxable period of the Company that ends on or before the
Closing Date, the Sellers shall timely prepare and file, or cause to be timely
prepared and filed, with the appropriate authorities, all Returns required to be
filed by the Company, and shall pay or cause to be paid, all Taxes shown to be
due on such Returns. To the extent that they relate to the Company, all such
Returns shall be prepared on a basis consistent with the past practice of the
Company and in a manner that does not distort taxable income (e.g., by deferring
income or accelerating deductions). The Buyer and the Sellers agree to cause the
Company to file all Returns for the period including the Closing Date on the
basis that the relevant taxable period ended as of the close of business on the
Closing Date, unless the relevant taxing authority will not accept a Return
filed on that basis.
Cooperation.
After the Closing Date, the Buyer and the Sellers shall provide each
other, and the Buyer
shall cause the Company to provide the Sellers, with such cooperation and
information relating to the Company as either party reasonably may request in
(i) filing any Return, amended Return or claim for refund, (ii) determining any
Tax liability or a right to refund of Taxes, (iii) conducting or defending any
audit or other proceeding in respect of Taxes or (iv) effectuating the terms of
this Agreement. The parties shall retain, and the Buyer shall cause the Company
to retain, all Returns, schedules and work papers, and all material records and
other documents relating thereto, until the expiration of the statute of
limitations (and, to the extent notified by any party, any extensions thereof)
of the taxable years to which such returns and other documents relate and,
unless such Returns and other documents are offered and delivered to the Sellers
or the Buyer, as applicable, until the final determination of any Tax in respect
of such years. Any information obtained under this Section 10.02 shall be kept
confidential, except as may be otherwise necessary in connection with filing any
Return, amended return, or claim for refund, determining any Tax liability or
right to refund of Taxes, or in conducting or defending any audit or other
proceeding in respect of Taxes. Notwithstanding the foregoing, neither the
Sellers nor the Buyer, nor any of their Affiliates, shall be required
unreasonably to prepare any document, or determine any information not then in
its possession, in response to a request under this Section 10.02.
Transfer Taxes.
All transfer, documentary, sales, use, value added, registration and other
such Taxes (including all applicable real estate transfer or gains Taxes) and
related fees (including any penalties, interest and additions to Taxes) incurred
in connection with this Agreement and the transactions contemplated hereby shall
be paid by the Sellers, and the Sellers and the Buyer shall cooperate in timely
making all filings, returns, reports and forms as may be required to comply with
the provisions of such Tax laws.
General Provisions
Survival of Representations and Warranties.
The representations and warranties in this Agreement or in any other
document delivered in connection herewith shall survive the Closing solely for
purposes of Section 9.02 and 9.03 of this Agreement and shall terminate at the
close of business on the date that is three (3) years after the Closing Date
except for (i) Section 3.08 which shall survive the Closing until ninety (90)
days after the expirations of the applicable statute of limitations (giving
effect to any extension thereof) and (ii) the representations and warranties set
forth in Section 3.01, 3.03, 3.04 or 3.28 which shall not terminate. This
Section 11.01 shall not limit any covenant or agreement of the parties which by
its terms contemplates performance after the Closing Date.
Notices.
All notices, requests, claims, demands and other communications under this
Agreement
shall be in writing, shall be delivered by hand or sent by telefax or sent
postage prepaid, by registered, certified or express mail or a reputable
overnight courier service and shall be deemed given when so delivered by hand or
telefax or if by mail, three (3) days after mailing (one (1) business day in the
case of express mail or overnight courier service) by the parties at the
following addresses or telefax numbers (or at such other address or telefax
numbers for a party as shall be specified by like notice):
if to the Buyer or the Parent, to:
StarMedia do Brasil Ltda.
Avenida dos Nacoes Unidas
12251 - 1508/1509
Sao Paolo, SP
Telefax: 5511-3043-7507
Attention: Indio Brasileiro Guerra Neto
with copy to:
StarMedia Network, Inc.
29 West 36th Street
New York, NY 10018
Telefax: (212) 631-9100
Attention: Steve Heller
and with a copy to:
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, NY 10004
Telefax: (212) 858-1500
Attention: Justin Macedonia, Esq.
if to the Sellers or the Former Quotaholders, to:
Fabio Goncalves de Oliveira
Av. Rui Barbosa 170, Bl 1, 4(0) floor
Rio de Janeiro - RJ
Telefax: 55 (021) 553.5777
with a copy to:
Gustavo Guillermo Viberti
Av. Rui Barbosa 170, Bl 1, 4(0) floor
Rio de Janeiro - RJ
Telefax: 55 (021) 553.5777
if to the Company, to:
KD Sistemas de Informacao Ltda.
Av. Rui Barbosa, 170-Bloco B1-4(degree) andar
22250-020-Flamengo
Rio de Janeiro - RJ
Telefax:55 (021) 553.5777
Attention: Gustavo Viberti and Fabio G. de Oliveira
with a copy to:
Escritorio Villemor Amaral Advogados
Rua da Gloria, No 290, 14(0) floor
Rio de Janeiro - RJ
Telefax:55 (021) 224.1608
Attention: Jose Roberto Faveret
Definitions
With respect to the defined terms used in this Agreement, the
singular shall include the plural and the masculine gender shall include the
feminine and the neuter, and vice versa, as the context requires.
"Affiliate" of any Person means (i) another Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first Person and (ii) that Person's spouse,
estate, personal representative as lineal descendants or any trust for the
benefit of such Person or such Person's spouse or such Person's lineal
descendants or any entities controlled by such Person.
"Indebtedness" means, with respect to any Person, without duplication, (i)
all obligations of such Person for borrowed money, or with respect to deposits
or advances of any kind, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (iii) all obligations of such Person
upon which interest charges are customarily paid (other than trade payables
incurred in the ordinary course of business), (iv) all obligations of such
Person under conditional sale or other title retention agreements relating to
property purchased by such Person, (v) all obligations of such Person issued or
assumed as the deferred purchase price of property or services (excluding
obligations of such Person to creditors for raw materials, inventory, services
and supplies incurred in the ordinary course of such Person's business), (vi)
all lease obligations of such Person capitalized on the books and records of
such Person, (vii) all obligations of others secured by a Lien on property or
assets owned or acquired by such Person, whether or not the obligations secured
thereby have been assumed, (viii) all obligations of such Person under interest
rate or currency hedging transactions (valued at the termination value thereof)
(other than forward or spot foreign currency exchange contracts entered into in
the ordinary course of business consistent with past practice), (ix) all letters
of credit issued for the account of such
Person (excluding letters of credit issued for the benefit of suppliers to
support accounts payable to suppliers incurred in the ordinary course of
business) and (x) all guarantees and arrangements having the economic effect of
a guarantee of such Person of any Indebtedness of any other Person.
"Material Adverse Effect" means (i) for any party, a material adverse
effect on the business, assets, condition (financial or otherwise), prospects,
or results of operations of such party and its subsidiaries, taken as a whole
and (ii) in the case of the Company, also means a material adverse effect on the
ability of the Company to perform its obligations under the Transaction
Agreements to which it is a party or on the ability of the Company to consummate
the Transactions.
"Person" means any individual, firm, corporation, partnership, company,
limited liability company, trust, joint venture, association, Governmental
Entity or other entity.
"Subsidiary" of any Person means another Person, an amount of the voting
securities, other voting ownership or voting partnership interests of which is
sufficient to elect at least a majority of its board of directors or other
governing body (or, if there are no such voting interests, fifty (50%) percent
or more of the equity interests of which) is owned directly or indirectly by
such first Person.
The following terms have the meanings set forth in the Sections
set forth below:
Term Section
---- -------
Additional Payments 1.01(b)
Additional Payment Date 1.02(c)
Affiliate 11.03(a)
Balance Payment 1.02(a)
Balance Payment Date 1.02(a)
Balance Sheet 3.06(a)
Buyer Preamble
Buyer Indemnitees 9.01(a)
Buyer Tax Act 9.01(a)
Calculation Date 1.01(b)
Closing 1.01
Closing Date 2.01
Company Preamble
Company Articles 3.01
Company Quotas Preamble
Consent 3.05
Contracts 3.15
Employment Agreements 1.04
Environmental Regulations 3.12(a)
Escrow Agent 1.02(b)
Escrow Agreement 1.02(b)
Escrow Funds 1.02(b)
Financial Statements 3.06(a)
Former Quotaholders Preamble
GAAP 3.06
GGV2000 Preamble
Guaranteed Payment 101(a)
Governmental Entity 3.05
Indebtedness 11.03(a)
indemnified party 9.05
Intellectual Property 3.14(a)
Judgment 3.05
knowledge of the Company 3.29
Liens 3.03(c)
Material Adverse Effect 11.03
Newco 11.11
Newco Agreement 11.11
Non-Competition Agreements 1.04(a)
Outside Date 8.01(b)(i)
Parent Preamble
Person 11.03(a)
Personnel 3.14(c)
Pre-Closing Tax Period 3.08(a)
Property Taxes 9.01(b)(i)
Purchase Price 1.01
Real Property 3.13(a)
Returns 3.08(a)
Seller and Sellers Preamble
Straddle Period 9.01(b)
Subsidiary 11.03(a)
Tax and Taxes 3.08(a)
Tax Claim 9.07
Third Party Claim 9.05
Transactions 1.01
Transaction Agreements 1.05
Transfer Preamble
Transferee and Transferees 3.01
Quotaholder and Quotaholders Preamble
Year 2000 Compliant 5.05
Voting Company Debt 3.03(b)
1998 Financial Statements 3.06(a)
Interpretation.
When a reference is made in this Agreement to a Section, such reference
shall be to a
Section of this Agreement unless otherwise indicated. When a reference is made
in this Agreement to a Schedule, such reference shall be to a Schedule hereto.
The table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the words "include", "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation". Any matter disclosed in any Schedule shall be deemed disclosed only
for the purposes of the specific Sections of this Agreement to which such
section relates.
Severability.
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule or law, or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner, to the end that
transactions contemplated hereby are fulfilled to the extent possible.
Counterparts.
This Agreement may be executed in one or more counterparts, all of which
shall be considered one and the same agreement and shall become effective when
one or more counterparts have been signed by each of the parties and delivered
to the other parties.
Entire Agreement; No Third-Party Beneficiaries.
This Agreement and the other Transaction Agreements, taken together, (i)
constitute the entire agreement, and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
Transactions, (ii) except for the Former Quota Purchase Agreement and (iii)
except for the provisions of this Agreement and the other Transaction Agreements
that are not intended to confer upon any Person other than the parties any
rights or remedies.
Assignment.
Neither this Agreement nor any of the rights, interests or obligations
under this Agreement shall be assigned, in whole or in part, by operation of law
or otherwise by any of the parties without the prior written consent of the
other parties. Any other purported assignment without consent shall be void.
Subject to the preceding sentences, this Agreement will be binding upon, inure
to the benefit of, and be enforceable by, the parties and their respective
successors and assigns.
Governing Law.
This Agreement shall be governed and construed in accordance with the laws
of the
Federative Republic of Brazil, especially articles 639 and 640 of the Brazilian
Code of Civil Procedure, as well as articles 461 and 632 of the new wording
pursuant to Laws 8952 and 8953/94, in case of default on the obligations
provided for herein.
Enforcement.
The parties agree that irreparable damage would occur in the event that
any of the provisions of any Transaction Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of any Transaction Agreement and to enforce
specifically the terms and provisions of each Transaction Agreement in any Court
of the Judicial District of Rio de Janeiro, this being in addition to any other
remedy to which they are entitled at law or in equity. In addition, each of the
parties hereto (i) consents to submit itself to the personal jurisdiction of any
Court of the Judicial District of Rio de Janeiro in the event any dispute arises
out of any Transaction Agreement or any Transaction, (ii) agrees that it will
not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court and (iii) agrees that it will not bring
any action relating to any Transaction Agreement or any Transaction in any court
other than any Court of the Judicial District of Rio de Janeiro.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement,
all as of the date first written above.
STARMEDIA NETWORK, INC.
By:
Name: Fernando Espuelas
Title: CEO and Chairman
STARMEDIA DO BRASIL LTDA.
By:
Name: Fernando Espuelas
Title: CEO and Chairman
By:
Name: Indio Brasileiro Guerra Neto
Title: General Manager Brazil
KD SISTEMAS DE INFORMACAO LTDA.
By:
Name: Fabio Goncalves de Oliveira
Title: Director
By:
Name: Gustavo Guillermo Viberti
Title: Director
SELLERS
GGV2000 SISTEMAS DE INFORMACAO LTDA.
By:
Name: Fabio Goncalves de Oliveira
Title: Director
By:
Name: Gustavo Guillermo Viberti
Title: Director
Gustavo Guillermo Viberti
Fabio Goncalves de Oliveira
FORMER QUOTAHOLDERS
Gustavo Guillermo Viberti
Fabio Goncalves de Oliveira
Guillermo Jose Viberti
_________________________________________
Marcos Montenegro, individually
Carlos Augusto Montenegro
Luis Paulo Montenegro
Jose Caetano Lacerda
Rothko Empreendimentos Participacoes e
Assessoria Ltda.
By:
Name: Marcos Montenegro
Title: Managing Partner
WITNESS:
By:
Atademes Branco Pereira
RG. 98477069-4 IFP
CPF. 036.762.147-90
WITNESS:
By:
Paula Secaf Adde
RG. 08467069 SSP-SP
CPF. 049.623.868-08
TABLE OF CONTENTS
Page
----
ARTICLE I
SALE AND PURCHASE OF QUOTAS
Section 1.01 Sale and Purchase Quotas 2
Section 1.02 Payment of Purchase Price 2
Section 1.03 Delivery of Quotas 4
Section 1.04 Transaction Agreements
4
ARTICLE II
CLOSING
Section 2.01 Closing Date 5
ARTICLE III
Representations and Warranties of THE SELLERS AND the Company
Section 3.01 Organization, Standing and Power 5
Section 3.02 Company Subsidiaries; Equity Interests 6
Section 3.03 Capital Structure 6
Section 3.04 Authority; Execution and Delivery; Enforceability 7
Section 3.05 No Conflicts; Consents 7
Section 3.06 Financial Statements; Undisclosed Liabilities 8
Section 3.07 Absence of Certain Changes or Events 8
Section 3.08 Taxes 9
Section 3.09 Company Benefit Matters. 10
Section 3.10 Litigation. 10
Section 3.11 Compliance with Applicable Laws. 10
Section 3.12 Environmental Matters. 10
Section 3.13 Real Property. 11
Section 3.14 Intellectual Property. 12
Section 3.15 Contracts. 12
Section 3.16 Insurance. 14
Section 3.17 Employee and Labor Matters. 14
Section 3.18 Customer Accounts Receivable. 14
Section 3.19 Licenses; Permits. 15
Section 3.20 Accounts; Safe Deposit Boxes; Powers of Attorney;
Officers and Directors. 15
Section 3.21 Transactions with Affiliates. 15
Section 3.22 Corporate Name. 15
Section 3.23 Customers. 15
Section 3.24 Personal Property. 16
Section 3.25 Brokers; Schedule of Fees and Expenses. 16
Section 3.26 Entire Business. 16
Section 3.27 Liabilities. 16
Section 3.28 Disclosure. 16
Section 3.29 Knowledge. 17
ARTICLE IV
Representations and Warranties of THE BUYER
Section 4.01 Organization, Standing and Power. 17
Section 4.02 Authority; Execution and Delivery; Enforceability. 17
Section 4.03 Consents. 17
ARTICLE V
Convenants Relating to Conduct of Business
Section 5.01 Conduct of Business by the Company. 18
Section 5.02 Other Actions. 19
Section 5.03 Advice of Changes. 19
Section 5.04 Declarations; Certificates. 20
Section 5.05 Year 2000 Compliance. 20
ARTICLE VI
Additional Agreements
Section 6.01 Access to Information; Confidentiality. 21
Section 6.02 Best Efforts; Notification. 21
Section 6.03 Right to Withdraw Funds. 22
Section 6.04 Fees and Expenses. 22
Section 6.05 Public Announcements. 22
Section 6.06 1999 Audit. 22
ARTICLE VII
Conditions Precedent
Section 7.01 Conditions to Each Party's Obligation to Consummate
the Transactions. 22
Section 7.02 Conditions to Obligations of the Buyer and
the Parent. 22
Section 7.03 Conditions to Obligations of the Sellers. 24
ARTICLE VIII
Termination, Amendment and Waiver
Section 8.01 Termination. 25
Section 8.02 Effect of Termination. 25
Section 8.03 Amendment. 26
Section 8.04 Extension; Waiver. 26
ARTICLE IX
Indemnification
Section 9.01 Tax Indemnification. 26
Section 9.02 Other Indemnification by the Sellers. 27
Section 9.03 Other Indemnification by the Buyer. 27
Section 9.04 Terminiation of Indemnification. 27
Section 9.05 Procedures Relating to Indemnification for Third
Party Claims (other than Tax Claims). 28
Section 9.06 Procedures Related to Indemnification for Other
Claims (other than Tax Claims under Section 9.01). 28
Section 9.07 Procedures Relating to Indemnification of Tax Claims. 29
ARTICLE X
Tax Matters
Section 10.01 Responsibility for Preparation and Filing of
Returns and Amendments. 29
Section 10.02 Cooperation. 30
Section 10.03 Transfer Taxes. 30
ARTICLE XI
General Provisions
Section 11.01 Survival of Representations and Warranties. 30
Section 11.02 Notices. 30
Section 11.03 Definitions. 32
Section 11.04 Interpretation. 34
Section 11.05 Severability. 35
Section 11.06 Counterparts. 35
Section 11.07 Entire Agreement; No Third-Party Beneficiaries. 35
Section 11.08 Assignment. 35
Section 11.09 Governing Law. 35
Section 11.10 Enforcement. 35