Document:

ex10-2.htm

Exhibit 10.2

 

ASSET SALE AGREEMENT

 

 BETWEEN

 

THE WELL GROUP, INC. AND SALON MEDIA GROUP, INC.

 

 

1.             Parties

 

This is an agreement between SALON MEDIA GROUP, INC., a Delaware Corporation (“Seller”) and THE WELL GROUP, INC., a California Corporation (“Buyer”).

 

2.             Purpose of Agreement

 

Seller is selling to Buyer and Buyer is purchasing from Seller the assets described below constituting The Well, an online discussion forum (the “Business”). The purpose of this agreement is to transfer the ownership of those assets unique to the Business from Seller to Buyer, along with all property owned by Seller required to operate the Business as a going concern.

 

3.             Assets Being Sold; Liabilities Being Assumed

 

A.            Seller hereby agrees to sell the following assets of the Business, effective as of the closing:

 

1.             The goodwill of the Business, including the current business name.

 

2.             All right, title, and ownership, in the form of membership units, in that entity known as The WELL, LLC, a California Limited Liability Company.

 

3.             The domain name “well.com” and all URLs associated with it.

 

4.             All contracts and agreements with third parties listed on Exhibit A (the “Assumed Contracts”).

 

5.             All of Seller's right, title, and interest in and to the trade names, logos, copyrights, service marks, trademarks, licenses, and other Intellectual Property as detailed in Exhibits B1 and B2.

 

6.             The property and materials required to operate the Business as a going concern, as detailed in Exhibit C.

 

  

  

  

 

Except as expressly set forth in this Section 3, no assets of Seller will be transferred pursuant to this Agreement to Buyer.

 

B.             Buyer hereby agrees to assume all obligations of Seller under any Assumed Contracts, effective as of the closing.

 

Except as expressly set forth in this Section 3, Buyer assumes no other liabilities of Seller.

 

4.             Purchase Price and Allocation

 

A.            The purchase price for the assets listed in this section is Four Hundred Thousand Dollars ($400,000.00).

 

B.             Buyer shall prepare, in consultation with Seller, an allocation of the purchase price by category in accordance with Section 1060 of the Internal Revenue Code and Treasury regulations, and any similar provision of state, local or foreign law, as appropriate.  Provided such allocation is reasonable and that Seller has had an opportunity to review and comment on the allocation, such allocation shall be binding upon Seller.  Buyer shall deliver a preliminary draft of such allocation no later than November 30, 2012 and final notice of determination of such allocation to Seller by December 31, 2012.  Buyer and Seller shall file required tax documents, including IRS Form 8594, in a manner consistent with such allocation.  Seller shall timely and properly prepare, execute, file and deliver all such documents, forms and other information as Buyer may reasonably request to prepare such allocation.  Neither Buyer nor Seller shall take any position, whether in audits, tax returns or otherwise, that is inconsistent with such allocation unless required to do so by applicable law.

 

  

  

  

 

5.             Payment at Closing

 

At closing, Buyer will pay Seller the total amount of the sale price specified in Section 4, subject to any adjustments provided for in the next section.  The payment will be made by wire transfer to the following account:

Silicon Valley Bank

Salon Media Group

Acct No. 3300254202

Routing No. 121140399.

 

6.             Adjustment of Purchase Price

 

In accordance with generally-accepted accounting standards, Seller shall be entitled to revenues ratably accrued for service up to and including the date of closing, and Buyer thereafter.  Revenue received by Seller prior to closing for services to be rendered by Buyer after the closing will be deducted from the purchase price paid by Buyer at the closing.  Revenue received by Seller after the closing for services to be rendered by Buyer after the closing will be paid to Buyer within 30 days of Seller’s receipt of the same.

 

With respect to the Business's vendor contract transferred in connection with this agreement, including Amazon Web Services, Seller shall be responsible for payment for services provided up to and including the date of closing, and Buyer thereafter.  Liabilities accrued by Seller under such contracts for conduct occurring prior to the closing shall be paid by Seller.  Correspondingly, payments made in advance of the closing by Seller to vendors for future services that will be provided to Buyer after the closing will be added to the aggregate purchase price paid by Buyer at the closing.

 

At closing, all adjustments described above will be calculated on a “net” basis and the aggregate purchase price paid by Buyer at the closing will be adjusted accordingly.

 

7.             Covenant; Liabilities and Indemnity

 

Buyer hereby covenants and agrees that it will operate the Business after the closing in substantially the same manner as Seller has operated the Business to date, and will use the personal information of members of the Well community consistent with the purposes for which Seller collected such information.

 

  

  

  

 

Seller will indemnify, defend, and hold Buyer harmless from and against any and all debts, liabilities, claims, charges, demands, or complaints, whether presently known or unknown, arising out of the Seller's ownership or use of the assets transferred before closing. Seller will pay all debts and other liabilities, whether now known or unknown, that are or may become a lien or encumbrance on the assets being bought by Buyer, and take all actions necessary to exonerate the assets, to the extent such debts or other liabilities relate to, or such liens or encumbrances result directly and proximately from, Seller’s operation of the Business prior to the closing.  Buyer agrees that it will not settle any claims from any third party for which indemnification is sought without the prior written consent of Seller, which consent shall not unreasonably be withheld.

 

Buyer will indemnify, defend, and hold Seller harmless from and against any and all debts, liabilities, claims, charges, demands, or complaints, whether presently known or unknown, arising out of Seller’s execution and performance of this Agreement, Buyer’s breach of any covenant’s herein, Seller’s transfer of personal information of members of the Well community to Buyer pursuant to this Agreement and Buyer’s ownership or use of the assets transferred pursuant to this Agreement, including without limitation the personal information of members of the Well community.  Buyer will pay all debts and other liabilities that result directly and proximately from Buyer’s operation of the Business at and after the closing.  Seller agrees that it will not settle any claims from any third party for which indemnification is sought without the prior written consent of Buyer, which consent shall not unreasonably be withheld.

 

Buyer and Seller waive compliance with the provisions of the bulk sales law of the state of California.

 

8.             Seller's Representations and Warranties

 

Seller represents and warrants that:

 

A.            The assets being sold pursuant to this agreement will be conveyed free of all claims, liens, restrictions, or encumbrances and no party other than Seller or The Well LLC, a California corporation, has any claims of ownership to the assets being sold pursuant to this agreement.

 

B.             Seller has paid all taxes, the failure to pay of which would materially and adversely affect the Business and the assets transferred.

 

  

  

  

 

C.             There are no judgments, claims, liens, or proceedings pending against Seller, the Business, or the assets being sold, and none will be pending at closing.  To the best of Seller's knowledge, there is no basis for any present or future action, suit, proceeding, hearing, investigation, charge, complaint, claim or demand against it or the Business, nor any pending or threatened claim or charge that would materially impair or prevent the Buyer’s operation of the Business, or materially impair the value of the assets transferred.

 

D.             There have been no material adverse changes in the conduct or condition of the Business since June 29, 2012 or the date of any disclosure of information by Seller to Buyer, whichever is more recent.

 

E.             All business and financial information previously given to Buyer with respect to the operation of the Business were accurate in all material respects as of the date on which such information was delivered.

 

F.             Until the conveyance of the assets to be sold hereunder, Seller will operate the Business in a manner consistent with past practice, and will use commercially reasonable efforts to maintain the goodwill of suppliers, customers, and all others having business relationships with the Business.

 

G.             Seller is a corporation in good standing under the laws of the state of Delaware, with the right to do business in the state of California, and has (and at closing will have) the authority to perform the obligations contained in this agreement.

 

H.            The corporate officer executing this agreement has the capacity and full authority to execute this agreement on the part of Seller, and all action required of Seller's Board of Directors required to give effect to this agreement has been taken.

 

I.              To the best of Seller's knowledge, the assets set forth on Exhibits A, B1, B2 and C represent all of the assets of Seller necessary for Buyer to operate the Business in substantially the manner in which it has been operated by Seller.

 

J.             Seller is in compliance in all material respects with all laws, ordinances, or regulations applicable to the operation of the Business.

 

K.            Seller is not delinquent or in default on any accounts or contracts related to the operation of the Business, or any other agreements or liabilities that could give rise to a claim creating a lien against, or a cloud on the title of, the assets transferred.

 

  

  

  

 

L.             Execution of this agreement does not conflict with, violate or constitute a default under the terms, conditions or provisions of any agreement to which Seller is a party, or violate any law, judgment, order or decree, and will not result in the creation of any liens or encumbrance on any of the assets transferred.

 

M.           The Business presently has no employees.  No employee, former employee, or independent contractor of Seller who participated in the operation of the Business has any outstanding claim for salary, wages, benefits, workers' compensation, or other compensation from Seller in connection with performing services for the Business prior to the closing.  In the event that such a claim arises and is made against Buyer by an employee, former employee or independent contractor of Seller relating to service to the Business prior to the closing, Seller will indemnify, defend, and hold Buyer harmless from and against any claim, regardless of merit.

 

N.             Intellectual Property

 

1.             The assets to be transferred hereunder include ownership of or a right to use pursuant to a valid and enforceable written license, sublicense, agreement or permission all Intellectual Property reasonably necessary for the operation of the Business as presently conducted.  Each item of Intellectual Property owned or used by Seller in connection with the operation of the Business immediately prior to closing will be transferred in connection with the closing and owned or available for use by Buyer on identical terms and conditions immediately after the closing.  As of the date hereof, Seller has taken all action reasonably necessary to maintain and protect each item of Intellectual Property that it owns or uses.

 

2.             To the knowledge of Seller, Seller has not interfered with, infringed upon, misappropriated, or otherwise come into conflict with any Intellectual Property rights of third parties, and no director, officer or employee with responsibility for Intellectual Property matters of the Seller has ever received any charge, complaint, claim, demand or notice alleging any such interference, infringement, misappropriation or violation, including any claim that Seller must license or refrain from using any Intellectual Property rights of any third party. To the knowledge of any director, officer or employee with responsibility for Intellectual Property matters of Seller, no third party has interfered with, infringed upon, misappropriated or otherwise come into conflict with any Intellectual Property rights of the Seller.

 

  

  

  

 

3.             Exhibit B1 identifies each registered or unregistered trademark, service mark, trade name, corporate name, Internet domain name, uniform resource locator (“URL”), computer software item (other than commercially available off-the-shelf software purchased or licensed for less than a total cost of $250 in the aggregate) and copyright used by Seller in connection with its business. With respect to each item of Intellectual Property required to be identified in Exhibit B1: (i) the item is free and clear of any Lien, license, or other restriction or limitation regarding use or disclosure; (ii) the item is not subject to any outstanding injunction, judgment, order, decree, ruling or charge; (iii) no action, suit, proceeding, hearing, investigation, charge, complaint, claim or demand is pending or threatened that challenges the legality, validity, enforceability, use or ownership of the item, and there are no grounds for the same; (iv) Seller has never agreed to indemnify any Person for or against any interference, infringement, misappropriation or other conflict with respect to the item; and (v) no loss or expiration of the item is threatened, pending or reasonably foreseeable, except for patents expiring at the end of their statutory terms, and not as a result of any act or omission by Seller, including without limitation, a failure by Seller to pay any required maintenance fees.

 

4.             Exhibit B2 identifies each item of Intellectual Property that any third party owns and Seller uses pursuant to license, sublicense, agreement or permission.

 

5.             To the Knowledge of any director, officer or employee with responsibility for Intellectual Property matters of the Seller: (i) Seller has not in the past and will not interfere with, infringe upon, misappropriate or otherwise come into conflict with any Intellectual Property rights of third parties as a result of the continued operation of its business as presently conducted and as presently proposed to be conducted; and (ii) no notices or demands to license regarding any of the foregoing have been received.

 

  

  

  

 

6.             Seller has taken all reasonably necessary and desirable actions to maintain and protect all of its Intellectual Property and will continue to use commercially reasonable efforts to maintain and protect all of its Intellectual Property so as not to adversely affect the validity or enforceability thereof.

 

O.            Seller will indemnify, defend, and hold Buyer harmless from and against any financial loss, legal liability, damage, or expense arising from any material breach of the representations and warranties contained in this Section 8; provided that in no event shall such liability be triggered unless at least $10,000 of damages can be proven by Buyer; provided further that, except in the event of intentional fraud by Seller, no liability of Seller under this Agreement shall exceed the cash proceeds that Seller receives in connection with the consummation of the transactions contemplated by this agreement.

 

P.             These representations and warranties will survive the closing.

 

9.             Buyer's Representations and Warranties

 

Buyer explicitly represents and warrants that:

 

A.            Buyer is a corporation in good standing under the laws of the state of California, and has (and at closing will have) the authority to perform the obligations contained in this agreement.

 

B.             The corporate officer executing this agreement has the capacity and full authority to execute this agreement on the part of Buyer, and no additional previous or future action by Buyer's Board of Directors, Shareholders, or management is required to give effect to this agreement.

 

C.             Execution of this agreement does not conflict with, violate or constitute a default under the terms, conditions or provisions of any agreement to which Buyer is a party, or violate any law, judgment, order or decree, and will not result in the creation of any liens or encumbrance on any of the assets transferred.

 

D.             These representations and warranties will survive the closing.

 

  

  

  

 

10.           Items not Part of Agreement

 

Buyer and Seller agree that this agreement does not include any real property, tangible personal property (except miscellaneous items such as account books, log books, manuals, binders, keys, or paper records required to effect the agreement or evidence financial or other business information), leases or leaseholds, employees or employment contracts, or independent contractor or personal service contracts.

 

11.           Closing

 

The closing will take place as follows:

 

Date: Friday, September ____, 2012

Time: 12:00 Noon

Location: Seller's offices at 101 Spear Street, Suite 203, San Francisco, CA 94105

 

At closing, Buyer and Seller will sign the instruments of conveyance specified in this agreement and all other documents reasonably needed to transfer the assets of the Business to Buyer. Buyer will pay Seller the amount specified in Section 4 of this agreement, Seller will transfer to Buyer the assets of the Business specified in Section 3 and Buyer will assume the liabilities specified in Section 3.

 

  

  

  

 

12.           Documents of Conveyance

 

At closing, Seller will deliver to Buyer the following signed or otherwise appropriately executed documents:

 

A.            An assignment of the executory contracts set forth on Exhibit A, with evidence of the written consent of the counterpart to such assignment, if such consent is required.

 

B.             Documents effecting the transfer of all intellectual property, including trademarks, patents, and copyrights, that are part of this purchase and detailed in Exhibits B1 and B2, whether evidenced by contracts, licenses, letters, permissions, assignments, registrations, or letters patent.

 

C.             Instruments of transfer of all membership units of The Well, LLC, including capital accounts and record books. [TO BE DISCUSSED: Seller has filed or will file any notices required to be filed with any governmental authority, including tax returns for the LLC.]

 

At closing, Buyer will deliver to Seller an instrument of assumption of the executory contracts set forth on Exhibit A.

 

  

  

  

 

13.           Further Assurances

 

In connection with this agreement and the transactions contemplated hereby, each party will execute and deliver any additional documents and instruments and perform any additional acts that may be necessary or appropriate to effectuate and perform its obligations under this agreement and the transactions contemplated hereby.

 

14.           Disputes

 

A.            Negotiation

 

1.             The parties shall attempt in good faith to resolve any dispute arising out of or relating to this agreement promptly by negotiation between executives who have authority to settle the controversy. Any party may give the other party written notice of any dispute not resolved in the normal course of business. Within 15 days after delivery of the notice, the receiving party shall submit to the other a written response. The notice and response shall include with reasonable particularity (a) a statement of each party’s position and a summary of arguments supporting that position, and (b) the name and title of the executive who will represent that party and of any other person who will accompany the executive. Within 30 days after delivery of the notice, the executives of both parties shall meet at a mutually acceptable time and place.

 

2.             Unless otherwise agreed in writing by the negotiating parties, the above-described negotiation shall end at the close of the first meeting of executives described above (“First Meeting”). Such closure shall not preclude continuing or later negotiations, if desired.

 

3.             All offers, promises, conduct and statements, whether oral or written, made in the course of the negotiation by any of the parties, their agents, employees, experts and attorneys are confidential, privileged and inadmissible for any purpose, including impeachment, in arbitration or other proceeding involving the parties, provided that evidence that is otherwise admissible or discoverable shall not be rendered inadmissible or non-discoverable as a result of its use in the negotiation.

 

  

  

  

 

4.             At no time prior to the First Meeting shall either side initiate an arbitration or litigation related to this Agreement except to pursue a provisional remedy that is authorized by law or by JAMS Rules or by agreement of the parties. However, this limitation is inapplicable to a party if the other party refuses to comply with the requirements of Paragraph 1 above.

 

5.             All applicable statutes of limitation and defenses based upon the passage of time shall be tolled while the procedures specified in Paragraphs 1 and 2 above are pending and for 15 calendar days thereafter. The parties will take such action, if any, required to effectuate such tolling.

 

If the matter is not resolved by negotiation pursuant to Paragraphs 1 through 5 above, then the matter will proceed to mediation as set forth below.

 

B.            Mediation and Arbitration

 

The parties agree that any and all disputes, claims or controversies arising out of or relating to this agreement not resolved by negotiation as in section A above shall be submitted to JAMS, or its successor, for mediation, and if the matter is not resolved through mediation, then it shall be submitted to JAMS, or its successor, for final and binding arbitration pursuant to the clause set forth in Paragraph 5 below. Mediation and arbitration shall be held in San Francisco, California, or at such place as both parties agree.

 

	 	
1.

	
Either party may commence mediation by providing to JAMS and the other party a written request for mediation, setting forth the subject of the dispute and the relief requested.

 

	 	
2.

	
The parties will cooperate with JAMS and with one another in selecting a mediator from the JAMS panel of neutrals and in scheduling the mediation proceedings. The parties agree that they will participate in the mediation in good faith and that they will share equally in its costs.

 

	 	
3.

	
All offers, promises, conduct and statements, whether oral or written, made in the course of the mediation by any of the parties, their agents, employees, experts and attorneys, and by the mediator or any JAMS employees, are confidential, privileged and inadmissible for any purpose, including impeachment, in any arbitration or other proceeding involving the parties, provided that evidence that is otherwise admissible or discoverable shall not be rendered inadmissible or non- discoverable as a result of its use in the mediation.

 

  

  

  

 

	 	
4.

	
Either party may initiate arbitration with respect to the matters submitted to mediation by filing a written demand for arbitration at any time following the initial mediation session or at any time following 45 days from the date of filing the written request for mediation, whichever occurs first (“Earliest Initiation Date”). The mediation may continue after the commencement of arbitration if the parties so desire.

 

	 	
5.

	
At no time prior to the Earliest Initiation Date shall either side initiate an arbitration or litigation related to this Agreement except to pursue a provisional remedy that is authorized by law or by JAMS Rules or by agreement of the parties. However, this limitation is inapplicable to a party if the other party refuses to comply with the requirements of Paragraph 3 above.

 

	 	
6.

	
All applicable statutes of limitation and defenses based upon the passage of time shall be tolled until 15 days after the Earliest Initiation Date. The parties will take such action, if any, required to effectuate such tolling.

 

	 	
7.

	
The arbitration shall be administered by JAMS pursuant to its Streamlined Arbitration Rules and Procedures and in accordance with the Expedited Procedures in those Rules. Judgment on the Award may be entered in any court having jurisdiction. This clause shall not preclude parties from seeking provisional remedies in aid of arbitration from a court of appropriate jurisdiction.

 

15.           Entire Agreement

 

This is the entire agreement between the parties. It replaces and supersedes any oral agreements between the parties, as well as any prior writings.

 

  

  

  

 

16.           Modification

 

This agreement may be modified only by a written amendment signed by both parties.

 

17.           Governing Law

 

This agreement will be governed by and interpreted under the laws of the state of California, without giving effect to any choice of laws or conflict of laws provision or rule whether of the State of California, or any other jurisdiction, that would cause the application of the laws of any jurisdiction other than the State of California.

 

18.           Severability

 

If a court or arbitrator determines that a provision in this agreement is invalid or not enforceable, that determination will affect only that provision. The provision will be modified only to the extent needed to make it valid and enforceable. The rest of the agreement will be unaffected.

 

19.           Notices

 

All notices, requests, demands, claims and other communications under this agreement shall be in writing. Any notice, request, demand, claim or other communication shall be deemed duly given (a) when delivered personally to the recipient, (b) one business day after being sent to the recipient by overnight courier service (charges prepaid), (c) one business day after being sent to the recipient by facsimile transmission or electronic mail, or (d) four business days after being mailed to the recipient by certified or registered mail, return receipt requested and postage prepaid, and addressed to the intended recipient as set forth below:

 

	If to Seller:	With a copy to:	 
	 	 	 
	Cynthia Jeffers, CEO	Bradley J. Gersich, Esq.	 
	Salon Media Group, Inc. 	DLA Piper LLP	 
	101 Spear Street, Suite 203	2000 University Avenue	 
	San Francisco, CA 94105 	East Palo Alto, CA 94303	 
	Telephone:(917) 805-5987	Telephone: (650) 833-2000	 
	Fax: (415) 645-9202  	Fax: (650) 833-2001	 
	Email: cindy@salon.com 	Email: bradley.gersich@dlapiper.com	 

 

  

  

  

    

	If to Buyer:   	With a copy to:	 
	 	 	 
	Earl Crabb, CEO 	Michael C. Berch, Esq.	 
	The Well Group, Inc.  	Hemispheres Law Group	 
	1195 Park Avenue, #206 	548 Market St., #27340	 
	Emeryville, CA 94608 	San Francisco, CA 94104	 
	Telephone:	Telephone: (415) 894-5709	 
	Fax: 	Fax: (415) 795-1661	 
	Email: esoft@well.com 	Email: mcb@hemispheres.pro	 

 

 

 

IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of this 21 day of September, 2012.

 

	 
THE WELL GROUP, INC., a California Corporation

	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	By:	
/s/ Earl Crabb

	 	 	 	 
	 	 	 	 	 	 
	 	
 
Earl Crabb, CEO

	 	 	
 

	 

 

 

 

	 
 
SALON MEDIA GROUP, INC., a Delaware Corporation

	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	By:	
/s/ Cynthia Jeffers

	 	 	 	 
	 	 	 	 	 	 
	 	
 
 
Cynthia Jeffers, CEO

	 	 	
 

	 

 

  

  

  

 

EXHIBIT A

 

 

1.             Member Agreements between Seller and/or the Well, on the one hand, and its members, on the other hand.

 

2.             Master Subscription Agreement with Aria Systems, Inc., for billing, customer management, and related services.

 

  

  

  

 

EXHIBIT B1

 

 

1.             Word mark (service mark) “THE WELL”, USPTO Registration 3139015, and all related, subordinate, graphical or pictorial marks, registered or unregistered. Seller shall retain a non-exclusive, limited license to use the word mark “THE WELL” in government filings, announcements of the transaction, and factual or historical references on Salon.com.

 

2.             The Internet domain “well.com”, “thewell.org”, “thewell.com” and “well.net” registered with eNom, and all associated subdomains.  The host names “Zimbra”, “Newsmtp”, “www”, “well”, and “palantir”.

 

  

  

  

 

EXHIBIT B2

 

 

1.              To the extent and only to the extent transferable without the consent of Well Engaged, Inc., Seller’s interest in the Well Engaged Discussions software package (“Engaged”), owned by Well Engaged, Inc. and licensed to Seller.

 

2.              To the extent and only to the extent transferable without the consent of NETI, Inc., Seller’s interest in the Picospan conferencing program and database (“Picospan”) owned by NETI and licensed to Seller.

 

3.              License to Amazon Instances under the Amazon Web Services Agreement between Amazon, Inc. and Seller.

 

  

  

  

 

EXHIBIT C

 

 

1.             All  Amazon Web Services (AWS), Amazon Elastic Compute Cloud (EC2), or Amazon Storage instances and virtual hosts associated with the Business, including all computer files of all types thereon, and all backups and archives, wherever located, including all required access codes, passwords or passphrases, accounts, or other means of access thereto.

 

2.             All current customer lists, contact information, and payment information (account status and means of payment, including credit or debit card numbers, electronic payment information such as ACH routing numbers and bank account numbers), along with evidence of the customer's consent for periodic charges.

 

3.             Copies of agreements with current users, whether in paper or electronic form.

 

4.             List of all persons currently having privileged access (“root”, “admin”, or equivalent) to the computer systems constituting the Business, including the conferencing system(s), web server(s), email server(s), accounting system(s), and network equipment.

 

5.             Account information, contact information, and passwords for the following vendor accounts:

 

	 	
a.

	
Amazon Web Services

 

	
  

	
b.

	
Aria Systems, Inc.ex10-5.htm

Exhibit 10.5

Loan Contract

Serial Number:Shou Jie Zi No. 2012LN0029

 

	Borrower: Altairnano, Inc. 

Business License Number: 14792 

Legal Representative/Principal: Stephen Huang

Address: 204 Edison Way, Reno NV 89502, U.S.A 

Beneficiary Financial Institute: East West Bank  

Phone No.: +1 4152721339              

	
 Zip code: 89502

Account No.: 8003008490

Fax: +1 7758561619

                                             

Lender: Bank of China Limited, Seoul Branch

Legal Representative/Principal: De Huang

Address: 2FL YOUNG-POONG BLDG, 33 SEOLIN-DONG, CHONGRO-GU, SEOUL, 110-752, KOREA

Zip code: 110-752

Phone: 822-3995939           Fax: 822-3995938

Through consulting on equal footing, Borrower and Lender reach an agreement on a transaction under which the Lender issues foreign currency-denominated loan to the Borrower, and hereby enter into this Contract.

I. Loan Currency & Amount

Loan Currency: US Dollar

Loan Amount: 1.98 Million

USD 1,980,000.00

 

II. Term of Loan

Term of Loan: ___day(s), calculated from the actual withdrawal day. If withdrawal is in installment, then use the actual withdrawal day of the first installment.

III. Loan Usage

Loan Usage: To fund the working capital

Unless Lender approves by writing, Borrower shall not change the desired usage of this Loan to other activities, including but not limited to investment in equity or other securities, projects prohibited by any law, legislation, regulation and state policy or projects not been legally approved, and projects or applications prohibited from being funded by bank loan.

  

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IV. Borrowing Interest Rate & Interest Settlement

1.    Interest Rate

Interest rate is determined by Method (3) listed below:

(1) Fixed rate, annual interest rate is   \   %. Interest rate stay fixed within the term of the loan contract.

(2) Floating rate, Floating Period is   \    month(s):

Starting from the actual withdrawal day (If withdrawal is in installment, then use the actual withdrawal day of the first installment), interest rate shall be reset every ____ month(s). Re-price day is the corresponding day of the actual withdrawal day in the re-price month, if there is no corresponding day for the actual withdrawal day in the re-price month, then use the last day in that month as the re-price day.

Starting from the actual withdrawal day (If withdrawal is in installment, then use the actual withdrawal day of the first installment), every   \    month(s):

A. for each withdrawal, the applicable interest rate shall be the   \   -year,   \   -month floating period annual floating loan rate announced by Bank of China Ltd. on the actual withdrawal day.

B. At the end of each floating period, the applicable interest for the next floating period shall be the   \   -year, same floating period floating loan rate announced by Bank of China Ltd on the re-price day.

(3) Floating rate, floating period is   three (3)   months.

Starting from the actual withdrawal day, the interest rate shall be reset every   three (3)   months. Re-price day is the corresponding day of the actual withdrawal day in the re-price month, if there is no corresponding day in the re-price month, then use the last day in that month as re-price day.

A. For each withdrawal, the applicable interest rate shall be the Thomson Reuters latest-announced ____-month _____ by 9:00 am Beijing time on the last business day prior to the actual withdrawal day plus _____ basis points.

B. At the end of each floating period, the applicable interest rate for the next floating period shall be the Thomson Reuters latest-announced   three (3)  -month   Libor   by 9:00 am Beijing time on the last business day prior to the re-price day plus   160   basis points.

2.   Interest Calculation

Interest shall be calculated from the actual withdrawal day, and shall base on the actual amount withdrawn and the number of day of use:

Formula of interest calculation: Interest = Principal × Number of day of use × Daily interest rate

The base for daily interest rate calculation is 360 day per year. Daily interest rate = annual interest rate/360

3.    Interest Settlement

Interest shall be settled using method   (5)   listed below:

(1) Interest in advance, interest will be deducted from the amount to be withdrawn on the withdrawal day.

(2) Interest is settled monthly, the 20th day of every month shall be the interest settlement day and the 21st day of every month shall be the interest payment day.

(3) Interest is settled quarterly, the 20th day of the last month every quarter shall be the interest settlement day and the 21st day of that month shall be the interest payment day.

(4) Interest is settled as a one-time payment upon the expiration of the term, together with the principle repayment.

(5) Each interest payment shall be settled and paid on the day the floating period ends; if this day is a non-business day, and then the interest shall be settled and paid on the next business day.

 

  

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If the last principal repayment day is not the same as the interest payment day, then the last principal repayment day shall be the interest payment day, borrower must pay all interest due in full on such day.

4.    Punitive Interest

(1) If Borrower does not repay the loan within the agreed period, for the overdue payment of loan, interest shall be calculated and charged at the rate of punitive interest for overdue payment of loan from the overdue date until the settlement of principal and interest.

(2) If Borrower does not use the loan as per the agreed usage, for the misappropriation of loan, interest shall be calculated and charged at the rate of punitive interest for misappropriation of loan from the misappropriation date until the settlement of principal and interest.

(3) For the overdue payment and misappropriation of loan, interest shall be calculated and charged at the rate of punitive interest for misappropriation of loan.

(4) For the interest and punitive interest that Borrower cannot pay on time, compound interest shall be calculated and charged at the rate of punitive interest as agreed in this Item based on the method of interest settlement as agreed in Paragraph 3 of this article.

(5) If the interest rate on loan as agreed herein is adjusted, punitive interest and compound interest shall be calculated and charged based on the segment calculation method from the adjustment date.

(6) Rate of punitive interest

A.Within the term of loan, the rate of punitive interest for overdue payment of loan shall add 50% over the interest rate on loan as agreed in Paragraph 1 of this article, and the rate of punitive interest for misappropriation of loan shall add 50% over the interest rate on loan as agreed in Paragraph 1 of this article.

B.From the expiration date of term of loan, the rate of punitive interest for fixed rate loan shall be changed to the floating rate, and the floating period shall be twelve (12) months. Re-price Day is the corresponding day of the expiration date of term of loan in the Re-price Month, if there is no corresponding day in that month, then use the last day in that month as the Re-price Day.

Within the first floating period, the rate of punitive interest for overdue payment of loan shall add 50% over the interest rate on loan as agreed in Item 1 of this article, and the rate of punitive interest for misappropriation of loan shall add 50% over the interest rate on loan as agreed in Paragraph 1 of this article.

At the end of each floating period, the base interest rate for the next floating period shall be the one-year, same floating period loan rate announced and implemented by Bank of China Ltd on the Re-price Day. The rate of punitive interest for overdue payment of loan shall add 50% over this base interest rate, and the rate of punitive interest for misappropriation of loan shall add 50% over this base interest rate.

C.After the expiration of term of loan, the rate of interest for floating rate loan shall float based on the floating period and method as agreed in Paragraph 1 of this article. The rate of punitive interest for overdue payment of loan shall add  __\__% over this floating interest rate, and the rate of punitive interest for misappropriation of loan shall add __\__% over this floating interest rate.

V. Withdrawal Prerequisite

Withdrawal is conditioned upon the following requirements:

1. This Contract and its Attachment have already come into effect

2. Borrower has already provided guarantee according to the requirements of Lender. The guarantee contract has become effective and undergone the legal formalities for examination and approval, registration or filing.

 

  

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3. Borrower has already reserved its documents, bills, seals, personnel lists and sample signatures related to the conclusion and execution hereof for Lender and filled in relevant vouchers properly.

4. Borrower has already opened a necessary account for the execution hereof according to the requirements of Lender.

5. Borrower has already submitted to Lender the written withdrawal application and the supporting documents for loan usage and gone through relevant procedure for withdrawal __banking days prior to withdrawal.

6. Borrower has already submitted Board of Directors resolution or approvals for this loan from other governing authorities to the Lender; (This prerequisite is optional; please check whether the Borrower has already received relevant authorization before signing this contract.)

7. Other issue required by law or agreed upon by both parties

If the above withdrawal prerequisites are not met, Lender shall be entitled to refuse the withdrawal application from Borrower, with the exception that Lender agrees to grant loan.

VI. Withdrawal Date and Method

1. Borrower should use method (1) listed blow to withdraw:

(1) One-time withdrawal on Year 2012 Month__\   Day__\

(2) Withdrawal in full within 60 days from Year__\__ Month__\__Day __\__.

(3) Withdrawal in installment based on the following schedule:

	
Date/Time of Withdrawal

	
Amount of Withdrawal

	 	 
	 	 
	 	 

  

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2. For the amount that is not withdrawn beyond the above schedule, Lender shall be entitled to refuse the withdrawal application from Borrower.

3. Lender charges the financing arrangement fee according to the standard of      , which will be deducted on the date when the loan is granted.

VII. Repayment

1. Unless otherwise agreed between both parties, Borrower shall use repayment plan (1) listed below to repay the loan under this Contract:

(1) Repayment of loan in full under this Contract on the expiration date of term of loan.

(2) Repayment of loan under this Contract based on the following repayment plan:

	
Date/Time of Repayment

	
Amount of Repayment

	  	  
	  	  

If Borrower needs to change the above repayment plan, Borrower shall make a written application to Lender ten (10) banking days prior to the expiration of corresponding loan, and the change to repayment plan shall be confirmed by both parties in writing.

 2. Unless otherwise agreed between both parties, in case Borrower delays repaying the principal and interest of loan at the same time, Lender shall be entitled to determine the sequence of repayment for principal or payment for interest; in case the loan is repaid in installment, if there are many due loans and overdue loans under this Contract, Lender shall be entitled to determine the sequence of settlement by certain repayment of Borrower; in case there are many due loan contracts between Borrower and Lender, Lender shall be entitled to determine the execution sequence of contract by each repayment of Borrower.

3. Unless otherwise agreed between both parties, Borrower can break a loan only by giving a written notice to Lender ten (10) banking days in advance. The amount for breaking a loan is first used to repay the loan that expires at last, i.e., in reverse order.

For the amount for breaking a loan, Lender shall be entitled to calculate and charge compensation fee according to the standard of   \   .

4. Borrower shall use method (1) listed below to repay the loan.

(1) Borrower shall deposit adequate fund into the following repayment account for repayment of loan not later than ten (10) banking days prior to the expiration of each combination of principal and interest, and Lender shall be entitled to deduct corresponding amount from this account on its own initiative on the expiration date of each combination of principal and interest.

Repayment account name: _________________

Account number:                                                                                                                              

(2) Other repayment methods as agreed by both parties:                \              .

 

VIII. Guarantee

1. A standby Letter of Credit applied by and subsequently issued to the Borrower with serial No. GC0325312000193 shall provide guarantee to the interest and principal under this Contract.

2. In case of any event with Borrower or Guarantor that Lender considers may affect their ability for execution of Contract, or ineffectiveness, cancellation or rescission of guarantee contract, or possible influence on the ability for execution of Contract due to worsening financial conditions or involvement in major lawsuit or arbitration case of Borrower or Guarantor or other causes, or Guarantor's breach of guarantee contract or other contracts between Guarantor and Lender, or reduction or forfeiture of guarantee value caused by the devaluation, destruction, extinction or sequestration of security, Lender shall be entitled to request and Borrower shall be obligated to provide a new guarantee, change of the Guarantor, etc. so as to guarantee the liability under this Contract.

  

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IX. Insurance

The risks for equipment, engineering construction and goods transportation related to the project or trade herein as well as those during the operating period of project shall be covered by Borrower with an insurance company as agreed by Lender, with the insurance type in conformity with the requirements of Lender and the insurance amount not less than the principal of loan.

Borrower shall deliver the original of insurance policy to Lender within      \     days after this Contract becomes effective. Prior to the settlement of principal, interest and fees herein, Borrower shall not suspend the insurance for any reason. In case of any suspension of insurance by Borrower, Lender shall be entitled to renew the insurance or cover the insurance on Borrower’s behalf at the cost of Borrower.  Borrower shall take full responsibility for all losses incurred to Lender due to the suspension of insurance.

Borrower shall give a written notice to Lender within three (3) days after it is or shall be aware of the occurrence of covered accident, and claim from Insurer promptly according to relevant provisions as specified in the insurance policy; any loss incurred to Lender due to failure of prompt notice or claim or execution of obligations under the insurance policy shall be borne by Borrower.

Unless otherwise agreed, the insurance indemnity shall be first used to repay the principal and interest of loan as well as other due fees.

X. Declaration and Acknowledgement

1. Borrower declares as follows:

(1) Borrower registers and exists legally and has full civil right capacity and conduct capacity necessary for concluding and executing this Contract.

(2) The conclusion and execution of this Contract is based on the true meaning expression of Borrower, which has already obtained the legal and effective authorization according to the articles of association or other internal management documents, and will not breach any agreement, contract or other legal documents which are binding on Borrower; Borrower has already obtained or will obtain all relevant approval, permission, filing or registration necessary for the conclusion and execution of this Contract.

(3) All documents, financial statements, vouchers and other data provided by Borrower for Lender under this Contract are true, complete, accurate and effective.

(4) The transaction background that Borrower applies to Lender for business operation shall be true and legal and shall not be used for illegitimate purpose such as money laundering, etc.

(5) Borrower does not conceal any event from Lender that may affect the financial conditions and ability for execution of Contract of Borrower and Guarantor.

(6) Other matters declared by Borrower:                \              .

2. Borrower undertakes as follows:

(1) Borrower shall submit its financial statements (including but not limited to annual statement, quarterly statement and monthly statement) and other relevant data to Lender regularly or promptly upon requirements of Lender; Borrower shall ensure that it will continuously satisfy the following financial indicator requirements:        \       .

(2) If Borrower has already signed or will sign a counter guarantee agreement or similar agreement with the Guarantor of this contract with respect to its guarantee obligation, this agreement shall not impair any right of Lender herein.

(3) Borrower shall accept the credit inspection and supervision from Lender and give enough assistance and coordination.

 

  

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(4) In case of any circumstance that may affect the financial conditions and ability for execution of Contract of Borrower or Guarantor, including but not limit to the change in the mode of operation such as any type of spinoff, merger, affiliation, joint venture and cooperation with foreign investor, contracted operation, restructuring, system reform, planned listing, etc., reduction in registered capital, material asset or equity interest transfer, assumption of material liability or encumbrance of new material liability upon the mortgaged property, sequestration of security, breakup, cancellation or application for bankruptcy, etc., involvement in major lawsuit or arbitration case, occurrence of operating difficulty and worsening financial condition, breach event of Borrower under other contracts, Borrower shall notify Lender promptly; if any of the above action taken by Borrower will have adverse influence on the debt paying ability of the Borrower, Borrower shall obtain the prior consent of Lender.

(5) The sequence of settlement of debts that Borrower owes to Lender shall be superior to those that Borrower owes to its shareholders, and shall not be inferior to similar debts that Borrower owes to other creditors.

(6) If the net profit after tax in relevant accounting year is zero or a negative number, or the profit after tax is not enough to make up the accumulated loss in the previous accounting years, or the profit before tax is not used to settle the principal, interest and fees that Borrower shall settle in this accounting year, or the profit before tax is not enough to settle the principal, interest and fees of next accounting year, Borrower shall not allocate dividends and bonuses to the shareholders in any form.

(7) Borrower shall not dispose its own assets by reducing its debt paying ability, and shall undertake the total amount of its outside guarantee is not higher than     \      times of its own net assets and the total amount of its outside guarantee and amount of single guarantee do not exceed the limit as specified in its articles of association.

(8) Borrower shall promptly go to the Administration of Foreign Exchange to go through the foreign exchange loan registration, principal and interest repayment approval and other procedures.

(9) Other matters undertaken by Borrower:             \                        .

XI. Disclosure of Related Parties Transaction

Borrower is a group client as classified by Lender in accordance with the Guidelines on the Management of Risks of Credit Granted to Group Clients by Commercial Banks (hereinafter referred to as the “Guideline”). Borrower shall report the information about related transactions of over 10% of its net assets to Lender, including related relationship of parties of the transactions, transaction items and property of transaction, amount of transaction or corresponding proportion, pricing policy (including transaction without any amount or only with symbolic amount).

In case of any of the following conditions with Borrower, Lender shall be entitled to unilaterally decide to stop granting the loan that Borrower has not used and recover part or all of principal and interest of loan in advance:  extraction of bank funds or credit granting by using a false contract with the related party for discount or pledging of credit such as notes receivable, accounts receivable, etc. without real trading background; occurrence of circumstances such as major merger, acquisition, restructuring, etc. that Lender considers may affect the safety of loan; deliberate evasion of repayment of bank loans through related transactions; and other circumstances as specified in Article 18 of the Guideline.

XII. Breach of the Contract and Treatment

Any of the following matters shall constitute or be deemed as the breach event of Borrower under this Contract:

1. Borrower fails to fulfill the payment and settlement obligations in favor of Lender as stipulated in this Contract.

2. Borrower fails to use the available funds for the usage as stipulated in this Contract.

3. Borrower makes false statement or breaches its undertaking in this Contract.

4. In case of the circumstances as specified in Subparagraph (4), Paragraph 2, Article 10 of this Contract that Lender considers may affect the financial conditions and ability for execution of Contract of Borrower or Guarantor, Borrower fails to provide a new guarantee, change of the Guarantor, etc. as stipulated in this Contract.

5. The credit status of Borrower declines, or its financial indicators such as profitability, debt paying ability, operating capability and cash flow, etc. become worse, which break through the indicator limit stipulated in this Contract or other financial stipulations.

  

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6. Borrower has contract breach events under other contracts between Borrower and Lender or other institutions of Bank of China Ltd.

7. Guarantor breaches the stipulations of guarantee contract or has breach events under other contracts between Guarantor and Lender or other institutions of Bank of China Ltd.

8. Borrower stops operation or has breakup, cancellation or bankruptcy events.

9. Lender finds presence of the circumstances that may affect the financial conditions and ability for execution of Contract of Borrower and Guarantor when it audits the financial conditions and ability for execution of Contract of Borrower each year (i.e., each full year from the effective date of this Contract).

10. Borrower breaches other stipulations for its rights and obligations under this Contract.

In case of breach events as stipulated in the previous paragraph, Lender shall be entitled to take the following measures respectively and simultaneously, depending on the specific conditions:

1. Request Borrower and Guarantor to rectify their breach actions within limited time.

2. Reduce, suspend, cancel or terminate the credit line of Borrower in part or in whole.

3. Suspend or terminate acceptance of the business application for withdrawal and others under this Contract or other contracts between Borrower and Lender in part or in whole; for the loan that has not been granted and the trade financing that has not been handled, suspend, cancel or terminate the granting and handling in part or in whole.

4. Announce that the unpaid principal and interest of loan/trade financing and other payables under this Contract or other contracts between Borrower and Lender become due in part or in whole immediately.

5. Terminate or cancel this Contract or other contracts between Borrower and Lender in part or in whole.

6. Request Borrower to compensate Lender for the losses incurred due to its breach of Contract.

7. Only by prior or post notice, deduct an amount from the account that Borrower has opened in Lender and other institutions of Bank of China Ltd. so as to settle the debt that Borrower owes to Lender under this Contract in part or in whole. The undue amount in the account shall be deemed as an early expiration. If the account currency is different from the valuation currency for Lender’s business, it shall be converted according to the exchange rate quotation for exchange settlement and sale applicable to Lender upon deduction.

8. Exercise real right for security.

9. Request Guarantor to assume the guarantee liability.

10. Take other measures that Lender considers necessary and feasible.

XIII. Reservation of Rights

If one party does not exercise its rights under this Contract in part or in whole or request the other party to fulfill and assume its obligations and liabilities in part or in whole, it shall not constitute waiver of such rights or exemption of such obligations and liabilities by this party.

Any tolerance, extension or delay in exercising its rights under this Contract by one party to the other party shall not influence any rights that this party enjoys in accordance with this Contract, laws and regulations, and shall not be deemed as a waiver of such rights by this party.

XIV. Change, Modification and Termination

This Contract can be changed or modified in writing by consensus through consultation between both parties, and any change or modification shall constitute an integral part of this Contract.

Unless otherwise specified by laws and regulations or agreed between parties concerned, this Contract shall not be terminated prior to the completion of all their rights and obligations under this Contract.

Unless otherwise specified by laws and regulations or agreed between parties concerned, if any article under this Contract becomes ineffective, it shall not influence the legal effect of other articles.

  

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XV. Applicable Governing Laws, Resolution of Dispute

This Contract is governed by the laws of the People’s Republic of China.

After this Contract becomes effective, all disputes resulting from the execution of this Contract or in connection with this Contract shall be settled by both parties through consultation. If not, either party can take method 3 listed below to settle such disputes:

1. Submit such disputes to              \      Arbitration Committee for arbitration, which shall be conducted at       \    (venue of arbitration) in accordance with the Commission’s arbitration rules in effect at the time of applying for arbitration.

2. Lodge a lawsuit according to the law with the People’s Court at the place where Lender or other institutions of Bank of China Ltd. exercising their rights and obligations in accordance with this Contract or a single agreement are located.

3. Lodge a lawsuit according to the law with the People’s Court with jurisdiction.

During the settlement of such disputes, if such disputes do not influence the execution of other articles in this Contract, then other article shall continue to be executed.

XVI. Fee

Unless otherwise specified by laws or agreed between parties concerned, any fees incurred by the conclusion, execution and dispute settlement of this Contract (including but not limited to attorney fee) shall be borne by Borrower; if any tax is paid on the interest according to the requirements of tax law at the place where Borrower is located, then such tax shall be borne in full by Borrower.

XVII. Attachment

The Attachment listed below is the inseparable part of this Contract and is equally binding as this Contract.

1. Application for Withdrawal

XVIII. Other Covenants

1. Without written consent of Lender, Borrower shall not transfer any of its rights and obligations herein to a third party.

2. If Lender intends to entrust other institutions of Bank of China Ltd. with the execution of its rights and obligations herein due to the need of business or put the loan business herein under the undertaking and management of other institutions of Bank of China Ltd., Borrower shall represent its consent for such conditions. Other institutions of Bank of China Ltd. authorized by Lender or undertaking the loan business herein shall be entitled to exercise all rights under this Contract, lodge a lawsuit with the court or submit to the arbitration organ for arbitral decision or application for implementation with regard to any dispute herein in the name of such institutions.

3. Without prejudice to other stipulations herein, this Contract shall be legally binding upon both parties and their respective successors and assignees generated by law.

4. Unless otherwise stipulated, both parties shall designate their respective domiciles as indicated in this Contract as their communication and contact addresses and undertake to notify the other party in writing promptly in case of any change in their communication and contact addresses.

5. The transaction under this Contract is carried out on the basis of their respective profits.  If other parties of transaction constitute the related party or related personnel of Lender according to the requirements of relevant laws, regulations and supervisory management, neither party shall seek for any influence on the fairness of transaction by such related relationship.

6. The titles and business names in this Contract are only used for the convenience of reference, which shall not be deemed as an explanation for the contents of articles and rights and obligations of parties concerned.

  

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XIX. Effective Date

The Contract shall become effective on the date of signature and seal.

The Contract is in four copies equally effective, each party holds two copies as record.

 

 

	Borrower: Altairnano, Inc.	 	Lender: Bank of China Limited, Seoul Branch	 
	 	 	 	 
	 	 	 	 
	Authorized signatory: 	 	
Authorized signatory:

	 
	 	 	 	 
	
/s/ Stephen Huang

	 	
/s/ 

	 
	
Month/Date, Year

	 	
Month/Date, Year

	 
	
10/19/2012

	 	
10/19/2012

	 

 

 

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