Exhibit 10.1
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT
(the “ Agreement ”) is made as of
October 22, 2007, by and between IA
Global, Inc. , a corporation organized
and existing under the laws of the State of Delaware (the
“ Company ”) and LINC Media,
Inc. (the “Seller ”)
, a corporation
organized and existing under the laws of Japan.
P r e l i m i n a r y S t a t e m e n t
s
A.
Seller is engaged in the business of providing
large-scale personnel outsourcing services, particularly Help Desk
Engineers, Systems Administrators, and Network Engineers on long-
and short-term project-based contracts to an extensive client base
that includes a number of large multinational companies in its IT
Outsourcing Business Division (the “ Outsourcing Business
”);
B. On
the terms and subject to the conditions contained in this
Agreement, Seller desires to sell, transfer, and assign to the
Company, and the Company desires to purchase and acquire from
Seller, all of the Purchased Assets, and Seller desires to transfer
to the Company, and the Company is willing to accept from Seller,
the Assumed Liabilities (as such capitalized terms are defined
herein), all as more fully set forth herein; and
C. It
is the intention of the parties that the Outsourcing Business
shall, effective as of the Closing (as defined in Section 1.5
hereof), be conducted by the Company.
NOW, THEREFORE , for
and in consideration of the premises, covenants, and agreements
contained herein, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the
parties do covenant, agree, represent, warrant, and stipulate as
follows:
AGREEMENT
1.1
Purchase and Sale of Assets
. Upon the terms and subject to the conditions of
this Agreement, at the Closing, the Company shall purchase and
acquire from Seller, and Seller shall sell, assign and transfer to
the Company, free and clear of all liens, all of the following
assets of the Outsourcing Business (collectively, the
“ Purchased Assets
”).
(a)
Contracts . All
customer contracts and other agreements of Seller, or any portions
thereof, arising out of, relating to or entered into in connection
with the operation of the Outsourcing Business as of the Closing,
except as disclosed in Exhibit D hereto, as set forth on Section
1.1(a) of the Outsourcing Business Disclosure Schedule (as defined
in Article II), other than the Excluded Contracts (as defined in
Section 1.2(c)) (the “ Assumed
Contracts ”);
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(b)
Accounts Receivable .
All accounts receivable of the outsourcing Business accrued after
the Closing;
(c)
Books and Records . All
books and records, files and papers, including personnel files,
pricing and information manuals, sales literature or other sales
aids, computer data in the form it exists prior to the Closing and
customer lists, relating to the Outsourcing Business (collectively,
the “ Records ”). The Records shall remain at Seller’s offices
until one year after Closing; and
(d)
Other Assets . All
other assets or rights of Seller used in or relating to the
Outsourcing Business, as set forth on Section 1.1(d) of the
Outsourcing Business Disclosure Schedule.
1.2
Excluded Assets . Notwithstanding anything to the contrary provided for in this
Agreement, the Purchased Assets shall in no event include the
following assets (collectively, the “ Excluded Assets ”):
(a) All
accounts receivable of the Outsourcing Business accrued prior to
the Closing;
(b) All
books and records of Seller that are not related to the Purchased
Assets, the Outsourcing Business or the Assumed Liabilities (as
defined in Section 1.4(a)); and
(c) The
contracts listed on Section 1.2(c) of the Outsourcing Business
Disclosure Schedule (the “ Excluded
Contracts ”).
1.3
Purchase Price . The purchase price payable by the
Company for the Purchased Assets (the “ Purchase Price ”) shall consist
of:
(a) cash in
the amount of $80,000, payable on the Closing Date;
(b) notes
totaling $2,120,000, in the form attached hereto as
Exhibits A (“ Promissory Notes
”) to be delivered on the Closing Date;
and
Further, up to 5,394,736 shares of the
Company’s common stock, par value US$.001 per share (the
“ IAO Common Stock”
) may be separately earned by Seller, paid pursuant
to the Performance Agreement, in the form attached hereto as
Exhibit B (“Performance Agreement”).
1.4
Assumption of Liabilities by the
Company .
(a) The
Company shall assume at the Closing and agrees to pay, perform, or
otherwise discharge, as and when the same shall become due and
payable, only the following liabilities of Seller and only to the
extent that they arise from or relate to the operation of the
Outsourcing Business or the ownership, possession or use of the
Purchased Assets (the “ Assumed
Liabilities ”):
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i. all
accounts payable incurred after the Closing; and
ii. all
liabilities that arise from the ownership, possession or operation
of the Outsourcing Business or the Purchased Assets after the
Closing.
(b) The
Company shall not assume or be liable for any liabilities of Seller
other than the Assumed Liabilities (for which the Company shall be
liable). Liabilities not assumed by the Company hereunder are
referred to as the “ Retained
Liabilities ” and include without
limitation the following:
i. all
accounts payable incurred prior to the Closing;
ii. any
wages, salary, severance, bonuses commissions, vacation or holiday
pay, fringe benefits, any duties, obligations or liabilities
arising under any employee benefit plan relating to employees or
other amounts due to any employees of the Outsourcing Business
prior to Closing. Seller agrees to pay to the Company such expenses
incurred prior to Closing but to be paid after closing:
iii. any
liabilities for taxes incurred with respect to any taxable year
ending on or before the Closing Date or any portion thereof. Seller
agrees to pay to the Company such expenses, including consumption
tax and income taxes incurred prior to closing but to be paid after
closing;
iv. any
liabilities arising from any breach of any agreement or contract
prior to the Closing;
v. any
liabilities related to monies borrowed or guarantees entered into
prior to the Closing Date;
vi. any
liabilities related to the premises in which the Outsourcing
Business operated; and
vii. any
liabilities or obligations (whether fixed, contingent, or
otherwise) under or relating to any of the Excluded
Assets.
Seller shall remain liable for all Retained
Liabilities and shall pay or discharge, as and when the same become
due and payable, the Retained Liabilities.
1.5
The Closing . Consummation of the transactions
contemplated by this Article I (the “
Closing ”) shall
occur on October 31, 2007, or at such other time and on such other
date as the Company and Seller may mutually determine (the
“ Closing Date
”).
1.6
Other Transactions and
Agreements . At the Closing, the
Company and Seller shall execute and deliver the Performance
Agreement and an assignment and assumption agreement and bill of
sale in the form attached hereto as Exhibit C (the
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“ Assignment and
Assumption Agreement ”) providing
for the conveyance of the Purchased Assets and the assignment and
assumption of liabilities to the Company.
(a) In the
event the Company does not meet the amounts due under the
Promissory Note on November 30, 2007 and February 29, 2008
(“ Break-up ”), (i) the Company shall deliver a notice to Seller
regarding the Break-up (the “ Notice ”); (ii) Seller shall
automatically resume ownership of the Purchased Assets (and any new
business developed relating to the Outsourcing Business) after the
expiration of a ten (10) day cure period; and (iii) Seller shall
retain the cash amount of US$80,000; and (v) there shall be no
further obligations of the parties.
(b) In the
event the Break-up occurs after the November 30, 2007 payment,
Seller shall also return the US$720,000 without interest to the
Company, within fifteen (15) days of the Notice.
The Purchase Price shall be subject to adjustment
after the Closing Date as set forth in this Section 1.8.
(a) By no
later than November 10, 2008, the Company shall prepare, and the
Company shall deliver to Seller: (i) the following unaudited
combined financial statements of the Outsourcing Business
(collectively, the “ Unaudited
Financial Statements ”): a balance
sheet as of September 30, 2008, and statement of operations for the
twelve month period ended as of September 30, 2008 (the
“ Current Fiscal Period
”); and (ii) the Company’s calculation
of the net profits of the Outsourcing Business for the Current
Fiscal Period, which shall be derived from the unaudited combined
statement of operations included in the Unaudited Financial
Statements (the “ Net Profit
Calculation ”). The Unaudited
Financial Statements shall in all material respects present fairly
the financial position and results of operations of the Outsourcing
Business as of and for the dates and periods presented therein and
shall have been prepared in conformity with Japanese GAAP as
historically applied the twelve (12) months prior to Closing by
Seller. The Unaudited Financial Statements and Net Profit
Calculation shall be deemed accepted by Seller upon the earliest of
(i) notification in writing by Seller to the Company of such
acceptance, (ii) the twentieth business day after the
Company’s delivery of the Unaudited Financial Statements and
Net Profit Calculation to Seller if Seller has not delivered to the
Company a Dispute Notice pursuant to Section 1.8(b), or (iii)
the date of the final resolution of all disputes reflected in any
Dispute Notice pursuant to this Section 1.8 (“
Acceptance Date ”). The Net Profit Calculation shall be calculated based
on net income before income tax as calculated on a Japanese GAAP
basis but free of any expenses or income booked by the Company,
including management service fees, and US GAAP entries for revenue
or amortization of intangible assets. The Parties agree that the
financial targets table attached as Exhibit F “Business
Objectives Table” hereto fairly establishes expectations of
the upper amount of costs to be applied to the income in the
calculation of the Net Profit. For
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elimination of doubt, Net Profit is referred to in
Exhibit F as “Income (loss) before income
taxes.”
(b) In the
event that Seller disagrees or otherwise disputes any calculation
or determination made regarding the Unaudited Financial Statements
or the Net Profit Calculation, Seller shall notify the Company in
writing (a “ Dispute
Notice ”) on or before the
twentieth business day after the Company’s delivery of the
Unaudited Financial Statements and Net Profit Calculation to
Seller. The Dispute Notice shall contain a description of each
disputed item, setting forth, in reasonable detail, the basis for
and amount of such dispute. In the event of such a dispute, the
Company and Seller, together with their respective outside Japanese
registered public accounting firms, shall in good faith attempt to
reconcile their differences, and any resolution by them as to any
disputed amounts shall be final, binding and conclusive on the
parties. If the Company and Seller are unable to resolve any such
dispute within twenty business days after receipt by the Company of
a Dispute Notice, the Company and Seller shall submit the remaining
disputed items to a nationally recognized firm of public
accountants selected jointly by the Company and Seller (any such
accounting firm being referred to herein as the “
Accounting Firm ”). The Company and Seller shall submit their positions
on the amounts in dispute to the Accounting Firm within ten
calendar days of its selection, and the Accounting Firm shall,
within thirty calendar days after such submission, determine and
report to Seller and the Company its resolution of the remaining
disputed items. The calculations and related determinations of the
Accounting Firm, the final Unaudited Financial Statements of the
Outsourcing Business for the Current Fiscal Period reflecting the
determination by the Accounting Firm of the Net Profit Calculation
for the Current Fiscal Period shall be final and binding upon the
parties.
(c) If the
Net Profit Calculation for the Current Fiscal Period as finally
determined under this Section 1.8 (the “
Fiscal Period Net Profit ”) is less than JPY 76,950,000, there shall be a
post-closing adjustment to the Purchase Price (the “
Purchase Price Adjustment ”) equal to the difference between JPY 76,950,000 and the
Fiscal Period Net Profit. Such Purchase Price Adjustment shall be
paid by Seller to the Company in cash within five days of
Acceptance Date.
(d) The
Company and Seller each shall pay 50% of the fees and disbursements
for an Accounting Firm approved by the Company and Seller relating
solely to the services contemplated by Section 1.8(b)
hereof.
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2.
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REPRESENTATION AND WARRANTIES OF
SELLER
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Except as set forth on the Outsourcing Business
Disclosure Schedule attached hereto as Exhibit D (the
“ Outsourcing Business Disclosure
Schedule ”), Seller represents and
warrants to the Company as follows:
2.1
Organization, Execution and Delivery; Valid
and Binding Agreements . Seller has duly executed and
delivered this Agreement and, assuming that this Agreement is the
legal, valid and binding agreement of the Company, this
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Agreement constitutes the valid and binding
obligations of Seller, enforceable against each such party, in
accordance with its terms.
2.2
Authority; No Breach or
Conflicts . Seller has all requisite power and authority to execute and
deliver this Agreement and to perform its obligations hereunder
(including all right, power, capacity and authority to sell,
transfer, and convey the Purchased Assets). The execution, delivery
and performance by Seller of this Agreement and the agreements
provided for herein, and the consummation by Seller of the
transactions contemplated hereby and thereby, will not, with or
without the giving of notice or the passage of time or both,
directly or indirectly contravene, conflict or result in a
violation of any provision of Seller’s organizational or
formation documents.
2.3
Corporate Matters
. Seller (i) is a
corporation, duly registered, validly existing, and in good
standing under the laws of its jurisdiction of organization; and
(ii) has full power and authority to carry on the businesses
in which it is engaged, and to own and use the properties owned and
used by it.
2.4
Financial Statements
. Section 2.4 of the
Outsourcing Business Disclosure Schedule sets forth true, correct
and complete copies of (i) the unaudited balance sheet of
Outsourcing Business as of March 31, 2007 and the related
statements of income for the year ended March 31, 2007
(“ March 31, 2007 Financial
Statements ”); (ii) the unaudited
balance sheet of Outsourcing Business as of June 30, 2007 and the
related statements of income for the periods ended June 30, 2007,
together with the March 31, 2007 Financial Statements, the
“ Outsourcing Business Financial
Statements ”). The Outsourcing
Business Financial Statements present fairly the financial position
of Outsourcing Business as of the dates thereof and its results of
operations for the periods covered thereby and, except as set forth
on Section 2.4 of the Outsourcing Business Disclosure Schedule, the
Outsourcing Business Financial Statements have been prepared in all
material respects in accordance with GAAP as adopted and in effect
within Japan consistently applied. Except as set forth in the
Outsourcing Business Financial Statements or Section 2.4 of the
Outsourcing Business Disclosure Schedule, (i) the Outsourcing
Business has no material liabilities, contingent or otherwise,
other than (a) liabilities incurred in the ordinary course of
business, and (b) under contracts and commitments incurred in
the ordinary course of business and not required under GAAP to be
reflected in the Outsourcing Business Financial Statements; (ii)
there has been no material adverse change in the assets, business,
liabilities, properties, prospects, condition (financial or
otherwise) or results of operations of Outsourcing Business; (iii)
neither the business, condition or operations of Outsourcing
Business or any of its properties or assets have been materially or
adversely affected as a result of any legislative or regulatory
change, any revocation or change in any franchise, license or right
to do business, or any other event or occurrence, whether or not
insured against; and (iv) Seller has not entered into any material
transaction outside of the Outsourcing Business’ ordinary
course of business.
2.5
Due Diligence Information
. The
due diligence information presented to the Company
by Seller in connection with the Company’s due diligence
investigation of the Outsourcing Business, including the
representations, warranties and covenants of
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Seller in this Agreement, is complete and accurate
in all material respects and does not contain any untrue statement
of a material fact or omit to state a material fact required to
make the statements made, in light of the circumstances under which
they were made, not misleading.
2.6
Litigation; Compliance with Law
. There is no (i)
action, suit, claim, proceeding or investigation pending or, to the
best of Seller’s knowledge, threatened against or affecting
the Outsourcing Business, at law or in equity, or before or by any
municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign; (ii)
arbitration proceeding relating to the Outsourcing Business pending
under collective bargaining agreements or otherwise; or
(iii) governmental inquiry pending or, to the best of
Seller’s knowledge, threatened against or affecting the
Outsourcing Business (including, without limitation, any inquiry as
to the qualification of Seller relating to the Outsourcing Business
to hold or receive any license or permit), and, to the best of
Seller’s knowledge, there is no reasonable basis for any of
the foregoing. Seller is not in default with respect to any
governmental order, writ, judgment, injunction or decree known to
or served upon the Outsourcing Business of any court or of any
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign. There is no action or suit by
Seller relating to the Outsourcing Business, pending or threatened
against others. Seller’s Outsourcing Business has complied in
all respects with all laws, rules, regulations and orders
applicable to businesses, operations, properties, assets, products
and services, and Seller has all necessary permits, licenses and
other authorizations required to conduct the Outsourcing Business
as conducted and as proposed to be conducted, except to the extent
failure to comply or obtain any such permits, licenses or
authorizations will not have a material adverse effect. There is no
existing law, rule, regulation or order, and Seller is not aware of
any proposed law, rule, regulation or order, which would prohibit
or materially restrict the Outsourcing Business from, or otherwise
materially and adversely affect the Outsourcing Business in
conducting its business in any jurisdiction in which it is now
conducting business or in which it proposes to conduct
business.
2.7
Proprietary Information of Third
Parties . No third party has claimed or has reason to claim that any
person employed by Seller relating to the Outsourcing Business or
affiliated with Outsourcing Business has (a) violated or may
be violating to any material extent any of the terms or conditions
of his employment, non-competition or non-disclosure agreement with
such third party, (b) disclosed or may be disclosing or
utilized or may be utilizing any trade secret or proprietary
information or documentation of such third party, or (c) interfered
or may be interfering in the employment relationship between such
third party and any of its present or former employees, or has
requested information from Seller that suggests that such a claim
might be contemplated. To the best of Seller’s knowledge, no
person employed by Seller affiliated with Outsourcing Business has
improperly utilized or proposes to improperly utilize any trade
secret or any information or documentation proprietary to any
former employer, and to the best of Seller’s knowledge, no
person employed by Seller affiliated with Outsourcing Business has
violated any confidential relationship which such person may have
had with any third party, in connection with the development,
manufacture or sale of any product or
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proposed product or the development or sale of any
service or proposed service of Outsourcing Business, and Seller has
no reason to believe there will be any such employment or
violation. To the best of Seller’s knowledge, none of the
execution or delivery of this Agreement and the other related
agreements and documents executed in connection herewith, or the
conduct or proposed conduct of the business of Outsourcing
Business, will materially conflict with or result in a material
breach of the terms, conditions or provisions of or constitute a
material default under any contract, covenant or instrument under
which any such person is obligated.
2.8
Title to Assets . Seller has valid and marketable
title to all of the Purchase Assets free of any liens charges or
encumbrances of any kind whatsoever, except such encumbrances and
liens that arise in the ordinary course of business and do not
materially impair Seller’s ownership or use of such property
or assets of the Outsourcing Business. Seller does not own any real
property relating to the Outsourcing Business. Seller is in
compliance in all material respects under all leases for property
and assets relating to the Outsourcing Business under which it is
operating, and all said leases are valid and subsisting and are in
full force and effect. Other than the Excluded Assets, there are no
assets that are material to the operation of the Business as
conducted by Seller that are not included within the Purchased
Assets.
2.9
Intellectual Property Assets
. Section 2.9 to
the Outsourcing Business Disclosure Schedule sets forth all
patents, patent rights, patent applications, trademarks, trademark
applications, service marks, service mark applications, trade names
or copyrights, intellectual property as specified in Excluded
Contracts and other intellectual property rights and similar rights
necessary or material for use in connection with the Outsourcing
Business (collectively, “ Outsourcing Business Intellectual Property
”). The Outsourcing Business Intellectual
Property is sufficient to permit Seller to conduct the Outsourcing
Business as presently conducted, without any conflict with or
infringement of the rights of others, and as proposed to be
conducted, and, except as disclosed in Section 2.9 to the
Outsourcing Business Disclosure Schedule, no claim is pending or,
to the best of Seller’s knowledge, threatened to the effect
that the operations of Outsourcing Business, infringe upon or
conflict with the asserted rights of any other person under any
Outsourcing Business Intellectual Property, and, to the best of
Seller’s knowledge, there is no basis for any such claim
(whether or not pending or threatened). Except as disclosed in
Section 2.9 to the Outsourcing Business Disclosure Schedule,
no claim is pending or, to the best of Seller’s knowledge,
threatened to the effect that any such Outsourcing Business
Intellectual Property owned or licensed by Seller, or which Seller
otherwise has the right to use, is invalid or unenforceable by
Seller, and, to the best of Seller’s knowledge, there is no
basis for any such claim (whether or not pending or threatened). To
the best of Seller’s knowledge, all material technical
information developed by and belonging to Seller relating to the
Outsourcing Business that has not been patented has been kept
confidential. Seller has not granted or assigned to any other
person or entity any right to manufacture, have manufactured or
assemble the products or proposed products or to provide the
services or proposed services of Outsourcing Business. Seller has
no material obligation to compensate any person for the use of any
Outsourcing Business Intellectual Property nor has
Seller
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granted to any person any license or other rights to
use in any manner any Outsourcing Business Intellectual
Property.
2.10
Assumptions, Guaranties, etc., of Indebtedness
of Other Persons .
Except as disclosed in Section 2.10 of the
Outsourcing Business Disclosure Schedule, Seller has not, relating
to the Outsourcing Business, assumed, guaranteed, endorsed or
otherwise become directly or contingently liable for any material
amount of indebtedness of any other person (including, without
limitation, any liability by way of agreement, contingent or
otherwise, to purchase, to provide funds for payment, to supply
funds to or otherwise invest in the debtor, or otherwise to assure
the creditor against loss).
2.11
No Brokers or Finders
. Except as
disclosed, no person has or will have, as a
result of the transactions contemplated by this Agreement, any
right, interest or valid claim against or upon Seller or
Outsourcing Business for any commission, fee or other compensation
as a finder or broker arising out of the transactions contemplated
by this Agreement. Seller shall pay a fee of 5% of $110,000. Seller
shall be solely liable for payment of Fee to Japan Inc., an
affiliate, based on the original preparation for sale and earlier
approaches to potential buyers, before the IA Global
discussion.
2.12
No Material Adverse Change
. Since the respective
dates as of which information was given in this Agreement or the
Outsourcing Business Disclosure Schedules, except as otherwise
stated therein: (i) there has been no material adverse change
in the financial condition, or in the results of operations,
affairs or prospects of Outsourcing Business, whether or not
arising in the ordinary course of business; and (ii) there
have been no transactions entered into by Outsourcing Business,
other than those in the ordinary course of business, which are
material to Outsourcing Business.
2.13
Material Contract Defaults
. Seller is not in
default in any material respect under the terms of any outstanding
contract, agreement, lease, or other commitment which is material
to the Outsourcing Business’ operations, properties, assets,
or financial condition, and there is no event of default or other
event which, with notice or lapse of time or both, would constitute
a default in any material respect under any such contract,
agreement, lease, or other commitment with respect to the
Outsourcing Business that Seller has not taken adequate steps to
prevent such a default from occurring.
2.14
Government Authorizations
. Seller has all
licenses, franchises, permits, and other governmental
authorizations that are legally required to enable it to conduct
the Outsourcing Business in all material respects as conducted on
the date of this Agreement. No authorization, approval, consent, or
order of, or registration, declaration, or filing with, any court
or other governmental body is required in connection with the
execution and delivery by Seller of this Agreement and the
consummation by Seller of the transactions contemplated
hereby.
2.15
Tax Matters . Seller has properly and timely
filed all federal, state, local and foreign tax returns and tax
reports required to be filed by it related to the
operation
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of the Outsourcing Business, all such returns and
reports are true, correct and complete, and all taxes, assessments,
fees and other governmental charges due from Seller, has been fully
paid or, if not yet due, will be timely paid. No audit of Seller
relating to the Outsourcing Business has been conducted by any
taxing authority within the last five years or otherwise with
respect to any tax year for which assessment is not barred by any
applicable statute of limitations, and Seller has not received
notice of any such audit or assessment.
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3.
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REPRESENTATIONS AND WARRANTIES OF THE
COMPANY .
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Except as set forth on the IAO Disclosure Schedule
attached hereto as Exhibit E (the &ld
