DATE 18 January 2003
XXXXXXX XXXXXXXX
LIFETIME LEARNING LIMITED
XXXXX X'XXXXXXXXX AND OTHERS
ALCHEMY PARTNERS (GUERNSEY) LIMITED AND ANOTHER
HERTAL ACQUISITIONS PLC
HERTAL (INVESTMENTS) LIMITED
RBSM (INVESTMENTS) LIMITED and
BARCLAYS RVCF INVESTMENTS LIMITED
SHAREHOLDERS' AGREEMENT
CONTENTS
Clause Page
1 Interpretation 1
2 Conditions 8
3 Completion 9
4 Warranties 11
5 Certain undertakings 15
6 Financial information 17
7 Investor Directors and Board composition 18
8 Matters requiring consent 24
9 Shareholders and Deeds of Adherence 27
10 Share Transfers 28
11 Service Agreements 29
12 Announcements 29
13 Costs and fees 29
14 Sale or listing 30
15 Duration 33
16 General provisions 33
17 Further issue of shares and option schemes 35
18 Investors' Rights 35
19 Notices 37
20 Governing law and jurisdiction 37
Schedules
1 Part A: The Managers
Part B: Xxxxxxx XxXxxxxx
2 The Investors
3 Warranties
4 Details of the Company
Agreed Form Documents
A Articles of Association
B Accountants' Report
C Business Plan
D Acquisition Agreements
E Loan Note Instrument
F1 and F2 Management Rights Agreements
G1 and G2 Facility Agreements
H1 to H6 Service Agreements
I Form of Manager's Questionnaire
J1 and J2 Board Minutes of the Company and the Subsidiary
K Special Resolution of the Company
L Deed of Undertaking
M Legal Due Diligence Report
N Press Release
O Mezzanine Warrant Instrument
P Scope of reporting lines, responsibilities and authorisation of new
"operational" CEO
Q Principal terms of Clause 17 option scheme.
SHAREHOLDERS' AGREEMENT
DATE 18 January 2003
PARTIES
1 XXXXXXX XxXXXXXX of Xxxxxxxx Lodge, Kilsallaghan, Co Dublin ("Xx XxXxxxxx"
which expression shall, where the context so admits or requires, include
his legal personal representatives, heirs and estates)
2 LIFETIME LEARNING LIMITED, a company incorporated in the Isle of Man, the
registered office of which is at Burleigh Manor, Peel Road, Douglas, Isle
of Man ("LLT")
3 THE PERSONS whose names and addresses are set out in Part A of Schedule 1
(the "Managers" and each a "Manager" which expression shall, where the
context so admits or requires, include their legal personal
representatives, heirs and estates)
4 THE PERSONS whose names and addresses are set out in Schedule 2 (the
"Investors" and each an "Investor")
5 HERTAL ACQUISITIONS PLC, a company incorporated in Ireland (registered no.
364049) the registered office of which is at 00 Xxxxxxx Xxxxxx, Xxxxxx 0
(the "Company")
6 HERTAL (INVESTMENTS) LIMITED, a company incorporated in England (registered
no. 4619876) the registered office of which is at 00 Xxxxxxx Xxxxxx, Xxxxxx
XX0X 0XX (the "Subsidiary")
7 RBSM (INVESTMENTS) LIMITED, a company incorporated in Scotland (registered
no. SC177822) the registered office of which is at 00 Xx Xxxxxx Xxxxxx,
Xxxxxxxxx XX0 0XX and BARCLAYS RVCF INVESTMENTS LIMITED, a company
incorporated in England (registered no. 4002470), the registered office of
which is at 00 Xxxxxxx Xxxxxx, Xxxxxx XX0.
WHEREAS
A The Company and its wholly-owned subsidiary, the Subsidiary, have been
incorporated in order for the Company to acquire the shares of the Target
pursuant to the Offer (both expressions as hereinafter defined).
B This Agreement sets out the terms on which the Investors are willing to
invest in the Company and the Subsidiary.
AGREEMENT
1 Interpretation
1.1 In this Agreement:
Accountants' Report: means the report on the Target and the Target
Subsidiaries by KPMG in the Agreed Form marked "B" dated 15 January
2003;
Accounts: means the statutory audited consolidated accounts of the
Target for the year ended on the Accounts Date;
Accounts Date: means 30 June 2002;
Acquisition Agreements: means the acquisition agreements in the Agreed
Form marked "D" to be entered into between the Company (1) and each of
Xx XxXxxxxx, LLT and Xx X'Xxxxxxxxx (2) for the sale by Xx XxXxxxxx,
LLT and Xx X'Xxxxxxxxx to the Company of all of their respective
shareholdings in Target;
Alchemy: Alchemy Partners (Guernsey) Limited, a company incorporated
in Guernsey (registered no. 32060), the registered office of which is
at Trafalgar Court, Les Banques, St Xxxxx Port, Guernsey;
Alchemy Partners: means Alchemy Partners LLP of 00 Xxxxxxxxxxx Xxxxxx
XX0X 0XX;
Approved Budget: means the annual budget approved in writing by the
Nominated Alchemy Director pursuant to Clause 6.1.2 save that the
first Approved Budget shall be that contained in the Business Plan;
Articles of Association: means the articles of association of the
Company in the Agreed Form marked "A" to be adopted pursuant to the
special resolution in the Agreed Form marked "K" and, once adopted,
those articles of association as amended and/or replaced from time to
time, and a reference to an "Article" shall be to an article of the
Articles of Association;
Asset Sale: has the meaning set out in Clause 14.5.2;
the Board: the board of directors of the Company from time to time;
Business Days: means a day (other than a Saturday or Sunday) on which
banks and financial markets are open for business in both London and
Dublin;
Business Plan: means the business plan and profit and cash flow
projections in the Agreed Form marked "C" prepared by the Managers;
Completion: means the completion by the Parties of their obligations
under Clause 3;
the Completion Date: means the date on which the Conditions are (or
the last of them is) satisfied;
the Conditions: means the conditions set out in Clause 2.1;
connected person: has the meaning given to that expression in section
10 of the Taxes Consolidation Act, 1997;
2
Consumer Price Index: means the general index of retail prices for all
items which is published in Ireland in any Central Statistics Office
publication;
Deed of Undertaking: means the deed of undertaking in the Agreed Form
marked "L" pursuant to which Alchemy agrees to subscribe for
additional loan notes in the Subsidiary in the circumstances set out
in such deed;
Default: means (i) the Company receiving notification from the
Facility Agent under either of the Facility Agreements that an Event
of Default (as defined in the Facility Agreements) has occurred and
that notification requires that the Company takes action to remedy
such Event of Default and an Event of Default has occurred or (ii) an
Event of Default has occurred or (iii) the Company having failed to
remedy any breach of the financial covenants contained in the Facility
Agreements within 10 Business Days of such breach occurring (unless it
has obtained a waiver in respect thereof) or (iv) the Subsidiary
failing to redeem any Loan Notes when required to do so (whether or
not there were sufficient profits or other funds available out of
which such redemption could be made);
Disclosure Letter: means the letter of today's date from the Managers
to the Investors in relation to the Warranties as the same may be
deemed to be amended in accordance with Clause 4.13;
euro or(euro): means the lawful currency of Ireland;
Facility Agreements: means the Senior Facility Agreement and the
Mezzanine Facility Agreement;
Group: means the Company and its subsidiary undertakings from time to
time and "member of the Group" is to be construed accordingly;
Indemnified Person: the Investors, Alchemy Partners LLP, MSD Capital,
L.P. or any of their respective directors, members, partners, or
employees;
Inducement Fee Agreement: means the agreement defined in the Offer
Document as the "Non-Solicitation and Expenses Reimbursement
Agreement";
Investor Director: means a director appointed by an Investor under
Clause 7.1;
Irish Takeover Rules: the Irish Takeover Panel Act, 1997, Takeover
Rules, 2001 and the Irish Takeover Panel Act, 1997, Substantial
Acquisition Rules, 2001 or any of them as the context may require;
Legal Due Diligence Report: the legal due diligence report on the
Target and the Target Subsidiaries being in the Agreed Form marked
"M";
Listing: means the listing of the Company's, or any holding company's,
entire ordinary share capital on a recognised investment exchange in
respect of which a recognition order has been made under the Financial
Services and Markets Xxx 0000 of the United Kingdom, section 290 or a
listing of its ordinary shares (or of depositary receipts representing
the same) on any U.S. national securities exchange;
3
Loan Notes: means the discounted guaranteed unsecured loan notes
constituted by the Loan Note Instrument;
Loan Note Instrument: means the instrument in the Agreed Form marked
"E" to be granted by the Subsidiary constituting $231,094,256
discounted guaranteed unsecured loan notes 2009;
Look Forward Default: means the earlier of (i) a meeting of the Board
of the Company concluding that the Company would at a point within the
next six months be unable to meet payments of interest or principal
under either of the Facility Agreements or (ii) the Company receiving
notification from the Facility Agent under either of the Facility
Agreements that a Potential Event of Default (as defined in either of
the Facility Agreements) has occurred and that notification requires
that the Company takes action to remedy such Potential Event of
Default and that a Potential Event of Default has occurred;
Manager's Questionnaire: means, in respect of each Manager, the
questionnaire to be completed by him in the form of the document in
the Agreed Form marked "I", a copy of which is annexed to the
Disclosure Letter;
Management Accounts: means the unaudited management accounts of the
Target for the period from the Accounts Date to 30 November 2002;
Management Rights Agreements: means the agreements in the Agreed Form
marked "F1" and "F2" to be entered into at Completion between the
ERISA Partnerships (as defined therein) (1) and the Company (2);
Mezzanine Facility Agreement: means the agreement in the Agreed Form
marked "G2" to be entered into by the Company (1), the Subsidiary (2),
and RBS Mezzanine Limited and Barclays Leveraged Finance (as Joint
Lead Mezzanine Arrangers), RBS Mezzanine Limited (as Mezzanine
Facility Agent) and Barclays Bank PLC (as Security Agent) (3) and the
financial institutions listed therein (including Barclays Bank PLC and
RBS Mezzanine Limited) as Mezzanine Lenders (4) under which there is
made available to the Company a mezzanine facility of up to
$45,000,000 together with all documents to be delivered or executed in
connection therewith;
Mezzanine Warrant Instrument: means the warrant instrument constituted
by the Company in the Agreed Form marked "O";
Xx X'Xxxxxxxxx: means Xxxxx X'Xxxxxxxxx;
MSD Capital: means MSD Portfolio L.P. - Investments acting by its
general partner MSD Capital, LP. for its own account and as nominee
for other accounts managed by MSD Capital, L.P.;
the Nominated Alchemy Director: means the Alchemy Director designated
as such under Clause 7.1;
Offer: means the recommended offer by the Company to acquire all the
outstanding issued and to be issued share capital of the Target (other
than that beneficially owned by the Company at the date of despatch of
the Offer Document) including any amendment, revision or extension to
such offer;
4
the Offer Document: means the document setting out the terms of the
Offer as summarised in the Press Release;
Ordinary Shares: means ordinary shares of US$0.01 each in the capital
of the Company;
Panel: means the Irish Takeover Panel;
Parties: means the parties to this Agreement from time to time and
"Party" shall be construed accordingly;
Press Release: means the press release substantially in the Agreed
Form marked "N";
Principal Subsidiary: has the meaning set out in Clause 14.5.1;
Realisation: has the meaning set out in the Articles;
Realisation Date: has the meaning set out in the Articles;
Realisation Proceeds: has the meaning set out in the Articles;
Relevant Proportion: means in respect of an Investor that proportion
which the number of Ordinary Shares for the time being held by it (or
its nominee) bears to the total number of Ordinary Shares then held by
(i) for the purposes of Clause 14.8, all the Investors and (ii) for
the purposes of Clause 18, the Investors to whom the obligations in
question are owed;
Restricted Period: means the period commencing on the date of this
Agreement and expiring on the date on which all the Loan Notes have
been redeemed in full;
Return of Capital: has the meaning set out in the Articles;
Sale: has the meaning set out in the Articles;
Senior Facility Agreement: means the agreement in the Agreed Form
marked "G1" to be entered into by the Company (1), the Subsidiary (2)
and The Royal Bank of Scotland plc, Barclays Leveraged Finance (as
Joint Arrangers) and Barclays Bank PLC (as Facility Agent and Security
Agent) (3) and the financial institutions listed therein (including
Barclays Bank PLC and The Royal Bank of Scotland plc) as Lenders (4)
under which The Royal Bank of Scotland plc and Barclays Bank plc have
made available to the Company term loan and working capital facilities
of up to $135,000,000 together with all documents to be delivered or
executed in connection therewith;
the Service Agreements: means the agreements being in the Agreed Form
marked "H1" to "H6" to be entered into between each of the Managers
relating to their employment with Target and/or the Target
Subsidiaries;
Shareholder Associate: means, in the case of Xx XxXxxxxx, LLT and, in
the case of both Xx X'Xxxxxxxxx and Xx XxXxxxxx any person to whom
either may
5
have transferred shares pursuant to any of Articles 7.3 or 7.4 of the
Articles of Association;
Target: means Riverdeep Group Plc;
Target Shares: means ordinary shares of(euro)0.01 each in the capital
of Target;
Target Subsidiaries: means any subsidiary of Target;
Trigger Event: shall have the meaning set out in Clause 14.5;
Underwriting Arrangements: shall have the meaning set out in the
Articles of Association;
Value: means:
(a) in the event of a sale of shares as set out in Clauses 14.5.4.1,
14.5.4.4 or 14.5.4.5, the value of the entire issued share
capital of the company being sold calculated by:-
(i) multiplying the number of equity shares in issue by the
highest price per share paid or payable in cash by the
purchaser; and
(ii) adding to the amount so determined, the amount of any other
consideration (in cash or otherwise) which (having regard to
the substance of the transaction as a whole) can reasonably
be regarded as an addition to the price so paid or payable;
(b) in the event of an Asset Sale as set out in Clause 14.5.2 the
aggregate amount in cash or otherwise received by the Company or
any company which is a holding company of the Company or the
Principal Subsidiary in respect of the sale or transfer of the
assets the subject of the Asset Sale; and
(c) in the event of a Listing as set out in Clause 14.5.3, the value
of the entire issued share capital of the Company calculated by
multiplying the number of equity shares which will be in issue
immediately following the obtaining of the Listing (but
disregarding any shares to be issued by the Company for the
purpose of the Listing) by the price per share at which the
shares are to be introduced or placed or offered for sale
pursuant to the prospectus to be issued by the Company in
connection with the Listing;
(d) in the event of an issue of shares, the value of the entire
issued share capital of the company whose shares are being issued
calculated by:-
(i) multiplying the number of equity shares in issue by the
highest price per share paid or payable in cash by the
person to whom the shares are being issued in respect of
such issue; and
(iii)adding to the amount so determined, any other amount (in
cash or otherwise) which (having regard to the substance of
the
6
transaction as a whole) can reasonably be regarded as an
addition to the price so paid or payable;
Warrantors: means the Managers;
Warrantholders: means the holders of the Warrants (being, as at the
date hereof, RBSM (Investments) Limited and Barclays RVCF Investments
Limited);
Warrants: means the warrants to be issued pursuant to the Mezzanine
Warrant Instrument;
Warranty: means a warranty contained or referred to in Clause 4 and
Schedule 3 and "Warranties" means all those warranties.
1.2 In this Agreement, a reference to:-
1.2.1 a "subsidiary" or "holding company" is to be construed in accordance
with section 155 of the Companies Xxx 0000;
1.2.2 a document in the "Agreed Form" is a reference to a document in the
form approved and for the purposes of identification signed by or on
behalf of Alchemy (on behalf of the Investors), the Managers and Xx
XxXxxxxx;
1.2.3 to any statute or statutory provision shall be construed as including
a reference to any modification, re-enactment or extension of such
statute or statutory provision for the time being in force, to any
subordinate legislation made under the same and to any former statutes
or statutory provisions which it consolidated or re-enacted provided
that no such amendment or modification shall apply for the purposes of
this Agreement to the extent that it would impose any new or extended
obligation, liability or restriction on, or otherwise adversely affect
the rights of, any Party;
1.2.4 a SSAP is to a Statement of Standard Accounting Practice adopted by
The Accounting Standards Board Limited and shall be construed as
including reference to: -
1.2.4.1 any Financial Reporting Standard issued by The Accounting
Standards Board Limited to amend, withdraw or supersede such
SSAP and any reference to an FRS is to a Financial Reporting
Standard issued by The Accounting Standards Board Limited;
and
1.2.4.2 any Urgent Issues Task Force abstracts issued by the
Accounting Standards Board to advise on and clarify the
interpretation of SSAPs and FRSs and any reference to an
UITF abstract is to an Urgent Issues Task Force abstract
issued by the Accounting Standards Board;
1.2.5 a person includes a reference to a body corporate, association or
partnership;
1.2.6 a person includes a reference to that persons legal personal
representatives and successors;
7
1.2.7 a Recital, Clause or Schedule, unless the context otherwise requires,
is a reference to a Recital, Clause or Schedule of or to this
Agreement; and
1.2.8 where any of the Managers and/or Xx XxXxxxxx are required under this
Agreement to exercise their powers as shareholders and/or directors to
procure a particular matter or thing, such obligation shall be deemed
only to be the obligation to exercise their powers as shareholders
and/or directors as the case may be and shall be deemed discharged by
the relevant Manager and/or Xx XxXxxxxx (as the case may be) joining
with the other Managers and/or Xx XxXxxxxx (as the case may be) in
convening meetings and proposing and voting for resolutions where such
matter or thing is proposed.
1.3 Save where otherwise expressly provided to the contrary words and
expressions defined in the Articles of Association have the same
meanings in this Agreement.
1.4 The index and headings in this Agreement do not affect its
interpretation.
2 Conditions
2.1 Completion is subject to and conditional upon the following conditions
being fulfilled:-
2.1.1 the making of the Offer by the Company on or before the date which is
28 clear days following the date on which the Press Release is issued
and the Offer having become or being declared unconditional in all
respects in accordance with the Irish Takeover Rules;
2.1.2 the execution of the Facility Agreements by the parties thereto and
the facilities under them becoming unconditionally available to the
Company subject only to Completion; and
2.1.3 save as contemplated pursuant to Clause 2.3, no amendment to the
Offer, Offer Documents or Facility Agreements having been made.
2.2 If all the Conditions are not fulfilled or waived on or before the
last day on which the Offer may become or be declared unconditional in
all respects or, if earlier, the date on which the Offer lapses or is
withdrawn, this Agreement shall cease to have effect except that:-
2.2.1 Clauses 12, 13.3 and 13.4, 19 and 20 shall continue to apply; and
2.2.2 the Parties' accrued rights and obligations shall not be affected.
2.3 Each of the Parties other than the Company undertakes to and covenants
with the others that they will exercise their respective votes as
shareholders in and directors of the Company so as to procure that
during the conduct of the Offer the actions listed below shall not be
taken without first obtaining the consent of Alchemy (save as required
by the Panel, the Irish Takeover Rules, law or by any regulator having
jurisdiction over the Company):-
2.3.1 waive any condition to the Offer or the Facility Agreements or amend
the Facility Agreements;
8
2.3.2 vary or revise the terms of the Offer including (but without
limitation) any extension of or increase to the Offer; or
2.3.3 release to any third party any document, advertisement, announcement
or other publication relating to or in connection with the Offer.
2.4 Each Manager undertakes not to (and to procure that any person who in
relation to any of him is a member of his immediate family shall not)
purchase any Target Shares without first obtaining the written consent
of Alchemy.
2.5 Each Manager to the extent that he is a director of the Company prior
to Completion undertakes, subject to his fiduciary duty as a director
of Target or other duties or obligations to the Target or its
subsidiaries, to inform Alchemy of any matter which might cause the
Company to revoke the Offer immediately upon the Manager becoming
aware of such matter.
2.6 Notwithstanding Clause 2.3 above, Alchemy shall be entitled to require
that the Company invokes as not having been satisfied any condition to
the Offer where the Company is entitled to do so provided that in so
doing the Company shall first (to the extent necessary or appropriate)
have obtained the consent of the Panel to such condition being invoked
(in relation to the obtaining of which the Company shall use all its
reasonable endeavours).
3 Completion
3.1 Completion shall take place on the Completion Date when:-
3.1.1 the Managers shall produce to the Investors represented by Alchemy,
such evidence as Alchemy may reasonably require to demonstrate that
each of the Conditions has been fully satisfied;
3.1.2 each of the Investors shall subscribe and pay for the number of
Ordinary Shares at par and the amount of Loan Notes set opposite the
name of its nominee in columns 2 and 3 respectively of Schedule 2 in
cash in the currency specified in columns 4 and 5 of Schedule 2;
3.1.3 the Company, the Subsidiary and each of the Managers shall (so far as
it is in their respective powers (in the case of the Managers as
shareholders and/or directors)) procure that resolutions set out in
the board minutes in the Agreed Form marked "J1" and "J2" are passed
by the directors of the Company at a duly convened board meeting
pursuant to which:-
3.1.3.1 the Company shall issue the Ordinary Shares to the Investors
and shall execute and deliver to each of the Investors
certificates representing the Ordinary Shares and register
the Ordinary Shares, in respect of those to be issued to
Alchemy, in the name of Alchemy Partners Nominees Limited,
and, in respect of those to be issued to other Investors, in
such name or names as shall be notified to the Company;
3.1.3.2 the Subsidiary shall allot and issue to each of the
Investors pursuant to a duly executed Loan Note Instrument
the Loan Notes subscribed for by it in accordance with
Clause 3.1.2 and
9
register those Loan Notes in the name of their respective
nominees (which in the case of Alchemy shall be Alchemy
Partners Nominees Limited) and issue certificates in respect
of the same, and, in respect of those to be issued to other
Investors, in such name or names as shall be notified to the
Company;
3.1.3.3 Xx X'Xxxxxxxxx, Xx XxXxxxxx, Xxxx Xxxxxx and such persons
as, pursuant to Clause 7.1, Alchemy and MSD Capital may
direct shall each be appointed as directors of the Company;
and
3.1.3.4 KPMG, Dublin shall be appointed to act as auditors to the
Company;
3.1.4 each Manager and the Company shall enter into his Service Agreement;
3.1.5 the Company shall execute and deliver to Alchemy the Management Rights
Agreements;
3.1.6 the Company shall execute and deliver the Mezzanine Warrant
Instrument, the warrants thereunder shall be constituted, the Company
shall allot and issue the Warrants to the Warrantholders in the
proportions notified to the Company prior to Completion (or, in
default of such notification, in equal proportions), shall register
those Warrants in the name of the Warrantholders and issue
certificates in respect of the same; and
3.1.7 the Company shall and each of the Managers shall (so far as it is
within its or his power as a director and/or shareholder) take or
procure to be taken such steps as are necessary to draw down the
facilities under the Facility Agreement and to complete the Offer.
3.2 Immediately following Completion:-
3.2.1 the Company shall pay:-
3.2.1.1 a financial arrangement fee of(euro)1,410,000 plus VAT where
applicable to Alchemy Partners;
3.2.1.2 a financial arrangement fee of (euro)470,000 plus VAT where
applicable to Adelaide Capital Corp. Limited; and
3.2.2 the Subsidiary shall pay all out-of-pocket expenses incurred by the
Investors (including those of Alchemy, Alchemy Partners and MSD
Capital, L.P.) in connection with the transaction, together with VAT
where applicable as are required to be paid by the Subsidiary pursuant
to Clause 13.
3.3 It is acknowledged by the Parties that:
3.3.1 up to US$31,375,000 may not be subscribed by Alchemy on Completion in
respect of its subscription for Loan Notes ("Subscription Shortfall");
3.3.2 to the extent that on Completion Alchemy does not subscribe for all of
the Loan Notes which it has agreed to subscribe pursuant to Clause
3.1.2, Barclays Bank Plc have agreed, pursuant to a facility letter
dated on or about the date of this
10
Agreement entered into with the Company and the Subsidiary (the
"Bridging Facility Letter"), to make a bridging loan facility
available to the Subsidiary upon the terms and subject to the
conditions set out therein in an amount equivalent to the Subscription
Shortfall;
3.3.3 Alchemy has agreed pursuant to the Deed of Undertaking to call on
investors in the Alchemy Plan on the Relevant Date (as defined in the
Deed of Undertaking) to provide funds to Alchemy in an amount of
US$31,375,000 and on receipt of such funds to subscribe for Loan Notes
in an amount equivalent to such Subscription Shortfall.
3.4 Each of the Parties agree that when Alchemy is required to make an
Equity Subscription pursuant to (and as such term is defined in) the
Deed of Undertaking, such Equity Subscription shall be made by way of
subscription for loan notes in a form identical to the Loan Notes
(save in respect of the date of issue of such notes and the redemption
date, the redemption date being extended by the number of days elapsed
between the date of issue of any Loan Notes to Alchemy and the date of
issue of any loan notes pursuant to the Equity Subscription) and each
of the Parties agrees that he or it shall use his or its powers as a
shareholder in the Company and/or as a director of the Company and the
Subsidiary to take all such action as may be required to effect such
subscription.
3.5 Forthwith following the execution of this Agreement the parties
thereto shall enter into the Acquisition Agreements.
3.6 Xx X'Xxxxxxxxx and Xx XxXxxxxx shall each use their respective votes
as directors of and shareholders in the Company to procure that each
of the issued 3,810,000 deferred redeemable ordinary shares of US$0.01
each in the Company are redeemed as soon as lawfully possible
following Completion at a price per share no more than the US Dollar
equivalent of (euro)0.01 and Alchemy, Xx X'Xxxxxxxxx and Xx XxXxxxxx
each consent to such redemption for the purpose of Clause 8.1.
4 Warranties
4.1.1 Subject to Clause 4.1.3, each of the Managers severally warrants to
the Investors that each Warranty is true and accurate as at the date
of this Agreement and (save as referred to in (iv) below) will remain
true and accurate at Completion except that (i) Xxx Xxxxxxx makes no
such warranty in respect of the Warranties set out at paragraphs 2, 3
or 9 of Schedule 3 (ii) Xxxx Xxxxxx makes no such warranty in respect
of Warranties 2 or 3 of Schedule 3 (iii) the Warranties at paragraphs
4 and 6.2 of Schedule 3 are made by Xx X'Xxxxxxxxx alone; and (iv) the
Warranty at paragraph 12 of Schedule 3 is given by Xx X'Xxxxxxxxx as
at the date of this Agreement only.
4.1.2 Xx XxXxxxxx warrants to the Investors in respect of himself and LLT
that as at the date of this Agreement the Target Shares set out
against his name and that of LLT in column 2 of Schedule 1 are (in the
case of the Target Shares registered in his name) legally and
beneficially owned by him and (in the case of the Target Shares
registered in the name of LLT) legally owned by LLT and beneficially
owned by him, in each case free from all liens, charges, equities,
encumbrances
11
or interests of any nature whatsoever, or any agreement, arrangement
or obligation to create any of the same, in favour of any other
person.
4.1.3 None of the Warranties set out at Schedule 3 are given by Xx XxXxxxxx
and no other warranty is given by Xx XxXxxxxx.
4.1.4 The Warranties set out at paragraphs 5, 7 and 12 of Schedule 3 are
given by each Manager in respect of himself only.
4.1.5 The Warranties set out in paragraphs 1.1, 1.2, 1.4, 1.5, 2, 3, 6, 8.1,
8.2, 10.1 and 10.2 of the Warranties are given by Messrs Bordon,
Xxxxxxxx and Xxxxxxx in respect of themselves only and in each case to
the extent only that such Warranties relate to the areas of the
business of Target and/or the Target Subsidiaries for which they have
executive responsibility.
4.2 The Warranties are qualified by matters fairly and reasonably
disclosed in the Disclosure Letter and by any matter expressly
provided for under this Agreement or the Offer Document. No other
knowledge relating to the Company and the Target and its Subsidiaries
(actual, constructive or imputed) prevents or limits a claim made by
the Investors for breach of a Warranty. Neither the Warrantors nor Xx
XxXxxxxx may invoke the Investors' knowledge (actual, constructive or
imputed) of facts which might make a Warranty or the statement
referred to in Clause 4.1.2 untrue and inaccurate as a defence to a
claim for breach of a Warranty or Clause 4.1.2.
4.3 Each of the Warrantors waives and may not enforce a right which he may
have in respect of a misrepresentation, inaccuracy or omission in or
from information or advice supplied or given by any other Warrantor or
by an officer or employee of the Target or the Target Subsidiaries or
the Company for the purpose of assisting the Warrantor to make a
representation, give a Warranty or prepare the Disclosure Letter.
4.4 Each Warranty is to be construed separately and independently and
(except where this Agreement provides otherwise) is not limited by
another provision of this Agreement or another Warranty.
4.5 A reference in Schedule 3 or the Disclosure Letter to a person's
knowledge, information, belief or awareness is deemed to include
(except where stated) knowledge, information, belief or awareness the
person would have had if the person had made due and careful enquiries
of each of the Managers and of each of Xxxxx Xxxxxxxx, Xxxx Xxxxx,
Xxxxx Xxxxx, Xxxx Xxxxxxxx, Xxxxx Xxxxx, Xxxx Xxxxx, Xxxxx Xxxxx, Xxx
Xxxxx, Xxx Xxxxxxxxx and X X Xxxxxxxxx and the knowledge, information,
belief or awareness which that person ought reasonably to have known
or been aware of or reasonably believed having regard only to his
executive function with the Target or its subsidiaries.
4.6 Except for claims in respect of a breach of a Warranty arising or
being increased as a result of fraudulent or grossly negligent conduct
on the part of the relevant Warrantor or arising in relation to the
Warranty set out at paragraph 12 of Schedule 3:-
12
4.6.1 the aggregate liability of each Manager for all claims pursuant to the
Warranties (other than in respect of a claim under paragraph 12 of the
Warranties) shall not exceed the amount set opposite his name in
column 5 of Schedule 1; and
4.6.2 no Warrantor shall be liable in respect of any claim(s) for breach of
a Warranty unless the amount of such claim or claims exceeds 50% of
the amount set opposite his name in column 5 of Schedule 1 (except
when the claim relates to any statutory and/or criminal fine or
penalty) but if the liability in respect of such claim exceeds such
amount the Warrantor shall be liable for the whole claim and not
solely the excess.
4.7 Unless the Investors' discovery of the breach of the Warranty is
delayed to more than two years after Completion as a result of
fraudulent or grossly negligent conduct on the part of the relevant
Warrantor, no Warrantor shall be liable in respect of a claim for
breach of a Warranty unless he has been given written notice of the
claim within two years after Completion and proceedings in respect of
any such claim have been commenced by service of proceedings on him
within 9 months of the receipt of the notice.
4.8 The Warrantors shall have no liability in respect of any claim for
breach of a Warranty:-
4.8.1 to the extent that a provision or reserve in respect of the specific
liability or other matter giving rise to the claim in question was
made in the Accounts, Business Plan or the Management Accounts;
4.8.2 to the extent that the claim in question arises, or is increased,
wholly or partly as a result of any change in any accounting practice,
enactment, law, regulation, directive or practice of any government,
government department or agency or any regulatory body (including
changes in Revenue statements of practice or published interpretation
of tax statute or withdrawal of published revenue precedents) made
after the date of this Agreement whether or not having retrospective
effect.
4.9 If the Company or any of the Subsidiaries is or may be entitled to
recover from some other person any sum in respect of any matter giving
rise to a claim, the Company shall procure that all reasonable steps
are taken to enforce recovery and, if any sum is so recovered, then
either (i) the amount payable by the Warrantors in respect of that
claim shall be reduced by the amount by which the Investors' loss
arising from the breach of Warranty is so reduced or (ii) if any
amount shall already have been paid by the Warrantors in respect of
that claim such that the Investors shall have been compensated for a
loss, which loss is compensated through the sum recovered, there shall
be repaid to the Warrantors an amount equal to the lesser of (x) the
amount by which the Investors' loss arising from the breach of
Warranty is so reduced and (y) the amount paid by the Warrantors in
respect of the relevant claim.
4.10 The Warranties set out at paragraphs 1.6, 8, 10 and 11 of Schedule 3
apply to each of the Target Subsidiaries as well as to the Target as
if the word "Target" was defined to mean the Target and each of the
Target Subsidiaries.
4.11 Deliberately left blank
13
4.12 If the Investors make a claim against the Warrantors or Xx XxXxxxxx
(or any of them) under this Clause 4 none of the Warrantors or Xx
XxXxxxxx shall have or pursue any claim or third party action to join
in, claim against, seek a contribution from or otherwise claim or seek
damages or compensation from any member of the Group in respect of any
such claim and each of the Warrantors and Xx XxXxxxxx undertakes to
the Investors that the Company has not entered into any indemnity or
other agreement or arrangement concerning the liability of the
Warrantors or any of them for any breach of the Warranties or Xx
XxXxxxxx for any breach of Clause 4.1.2 or, in the case of any of them
for any breach of any other provision of this Agreement.
4.13 During the period beginning on the date of this Agreement and ending
on the Completion Date, each Warrantor shall fairly and reasonably
disclose in writing to Alchemy (on behalf of the Investors)
immediately on becoming aware of the same, any matter (including,
without limitation, any omission to act) which arises after the date
of this Agreement and before Completion which is inconsistent with or
constitutes a breach of any of the Warranties. If any such matter does
so arise and is notified as aforesaid the Disclosure Letter shall be
deemed to be amended so that such matter operates so as to qualify the
Warranties as given at Completion (but does not, for the avoidance of
doubt, qualify the Warranties that were given on the date hereof).
4.14 Xx X'Xxxxxxxxx shall, to the extent that he is required to make any
payment to satisfy any liability in excess of (euro)2,000,000 which he
may have in respect of a claim for a breach of Warranty pursuant to
this Clause 4, be permitted (but not obliged) to satisfy up to
(euro)1,000,000 from the proceeds of sale of part of his holding of
Ordinary Shares provided that such Ordinary Shares are transferred
pursuant to the provisions of Article 8 of the Articles (pre-emption
rights).
4.15 In the event that Xx X'Xxxxxxxxx shall fail to satisfy any adjudged or
agreed liability pursuant to a claim under the Warranties (which was
adjudicated as payable by a court of competent jurisdiction following
any appeal(s) or agreed by Xx X'Xxxxxxxxx as being payable) within a
period of three months from such liability being so adjudged or agreed
("the Unsatisfied Liability") then without prejudice to any other
right that the Investors may have (but only if (i) they commence the
exercise of such right within one month of the expiry of the said
three month period and (ii) they continue to require such transfer
despite the fact that the calculation or agreement of the market value
as referred to below shows that the aggregate value of Ordinary Shares
held by Xx X'Xxxxxxxxx and his Shareholder Associates is less than the
amount of the Unsatisfied Liability) the Investors shall be entitled
to require Xx X'Xxxxxxxxx (or any of his Shareholder Associates) to
transfer to the Investors (pro rata to the Investors' respective
holdings of Ordinary Shares) such number of Ordinary Shares whose
aggregate market value (assuming a willing seller to a willing buyer
and making an appropriate discount for the fact that such shares
represent a minority interest) is in the opinion of the Independent
Expert (as defined in this Clause 4.15) a sum equal to, or if the
entire holding of Ordinary Shares held by Xx X'Xxxxxxxxx and his
Shareholder Associates are to be transferred, a sum less than, the
Unsatisfied Liability. If Xx X'Xxxxxxxxx fails to deliver (or procure
delivery by his Shareholder Associates) of the stock transfer forms in
respect of such number of Ordinary Shares within three business days
of the delivery of the Independent Expert's opinion then Xx
X'Xxxxxxxxx hereby irrevocably authorises the Nominated Alchemy
Director to execute such transfer forms on his (and his
14
Shareholder Associates) behalf. Upon due transfer of all Ordinary
Shares required to be transferred hereunder there shall be deemed to
be a full and complete discharge of the Unsatisfied Liability. For the
purposes of this Clause 4.15 the expression "Independent Expert" shall
mean an independent firm of valuers (agreed by the Investors and Xx
X'Xxxxxxxxx) or, failing agreement within 3 days of the Investors
proposing a firm to Xx X'Xxxxxxxxx, such firm to be nominated (at the
request of the Investors or Xx X'Xxxxxxxxx) by the President for the
time being of the Institute of Chartered Accountants in Ireland. The
costs of such Independent Expert shall be borne as to 50% by the
Investors and 50% by Xx X'Xxxxxxxxx.
4.16 For the avoidance of doubt, the Investors shall not be entitled to
rescind this Agreement for breach of Warranty or under any other
provision of this Agreement and, other than pursuant to Clause 2.1,
shall not decline to proceed to Completion and comply with their
obligations under Clause 3.1.2. In particular, failure by a Manager to
comply with Clause 3.1.4 shall not entitle the Investors to decline to
proceed to Completion and comply with such obligations.
5 Certain undertakings
5.1 Each of the Managers (in consideration for inducing the Investors to
enter into this Agreement and to subscribe for Ordinary Shares and
Loan Notes) undertakes with each other, the Company and with the
Investors that, except (subject to Clause 5.3) with the written
consent of the Nominated Alchemy Director:-
5.1.1 the Manager shall not while employed or engaged by a member of the
Group, except in the course of his duties as an employee, nor after he
ceases to be an employee of a member of the Group, however his
employment ceases, use or disclose to any person any trade secrets or
confidential information concerning the business, customers or
financial or other affairs of a member of the Group (save for
confidential information in the public domain other than as a result
of a breach of this Agreement by the Manager or save as may be
required by law or regulation to be disclosed) and the Manager shall
make every effort to prevent the use or disclosure of such secrets,
trade secrets or confidential information;
5.1.2 for one year after ceasing to be employed by a member of the Group,
however his employment ceases, the Manager shall not (on his own
behalf or on behalf of any person, concern, firm or body corporate)
directly or indirectly in competition with a business of a member of
the Group as operated at the time his employment ceases:-
5.1.2.1 seek to procure orders from, seek employment or engagement
with, be employed or engaged by or do business with any
person who has been a customer of a member of the Group at
any time during the year before his employment ceases on
whose account or business he personally worked or was
responsible or in relation to whom he obtained confidential
information during the same period; or
5.1.2.2 engage, employ, solicit or contact with a view to his
engagement or employment any person known personally to him
(whether or not such person would commit a breach of the
terms of his contract of employment or engagement by leaving
the service of
15
the company concerned) who is or has been employed or
engaged by a member of the Group in a senior capacity at any
time during the year before his employment ceases or
knowingly employ, or assist in or procure the employment or
engagement by any other person, concern, firm or body
corporate of any such person;
5.1.3 for one year after ceasing to be employed by a member of the Group,
however his employment ceases, the Manager shall not within a
territory in which a member of the Group operates at the time his
employment ceases either alone or jointly with or as manager, adviser,
consultant, agent or employee of any person, concern, firm or body
corporate directly or indirectly carry on or be engaged in any
business in competition with the business of a member of the Group as
operated at the time his employment ceases and in which he has
personally worked or was responsible for or in relation to which he
obtained confidential information during the period of one year before
his employment or engagement terminates;
5.1.4 for one year after ceasing to be employed by a member of the Group,
however his employment ceases, the Manager shall not interfere or seek
to interfere so as to adversely affect the relations between any
member of the Group and any person, concern, firm or body corporate
who has within the previous one year been one of its or their
suppliers (or an introducer of prospective customers) and with which
he was involved personally in dealings or negotiations on behalf of
the Company or any member of the Group or in relation to which he
obtained confidential information at any time during that period;
5.1.5 at no time after ceasing to be an employee of a member of the Group,
however his employment ceases, shall the Manager directly or
indirectly carry on a business either alone or jointly with or as
manager, adviser, consultant, agent or employee of any person,
concern, firm or body corporate, whether or not the business is
similar to any business of a member of the Group, under a name
including the words "Riverdeep", "Riverdeep Interactive",
"Broderbund", "Logal", "Ed-Vantage", "Edmark", "Smartstuff Software",
"Teacher Universe" "The Learning Company" or "TLC" or any name likely
to be confused with a name used by a member of the Group at the time
his employment ceases; and
5.1.6 while employed by a member of the Group he shall, unless prevented by
illness, devote his whole time and attention to the business of the
Group and shall not without the prior consent of the Nominated Alchemy
Director:-
5.1.6.1 directly or indirectly engage or be interested in any other
business; or
5.1.6.2 hold any directorship of any company other as a director of
a member of the Group,
5.1.6.3 be concerned or interested in any business competing with
that carried on by a member of the Group or the business of
a supplier or customer of a member of the Group
provided that a Manager may be interested in securities which are for
the time being quoted on a recognised investment exchange (in respect
of which a
16
recognition order has been made under the Financial Services and
Markets Xxx 0000 of the United Kingdom section 290) if the Manager's
interest in the securities does not exceed five per cent. of the total
amount of the securities in issue.
5.1.7 The Managers agree that they consider the restrictions contained in
this Clause 5 are no greater than is reasonable and necessary for the
protection of the interests of the Company, the Group and the
Investors but if any such restriction shall be held to be void but
would be valid if deleted in part or reduced in application, such
restriction shall apply with such deletion or modifications as may be
necessary to make it valid and enforceable.
5.1.8 The restrictions contained in each sub-clause of this Clause 5 shall
be construed as separate and individual restrictions and shall each be
capable of being severed without prejudice to the other restrictions
or to the remaining provisions of this Agreement.
5.2 Xx X'Xxxxxxxxx and Xx Xxxxxxxx agree that as soon as practicable and
in any event prior to 31 January 2004 the arrangements by which
Silverbank Limited provides the services of Xx X'Xxxxxxxxx and Xx
Xxxxxxxx respectively to the Target and/or the Target Subsidiaries
shall be discontinued so that, from 31 January 2004, Xx X'Xxxxxxxxx
and Xx Xxxxxxxx shall be employed directly by the Company or the
Target on terms which in all material respects reflect the terms on
which their services are currently provided and, so far as possible,
on terms which preserve their continuity of service. The Parties agree
to procure, so far as they are each able, that the Company or the
Target offer to employ Xx X'Xxxxxxxxx and Xx Xxxxxxxx on the terms
referred to above.
5.3 The consent of the Board (as opposed to the Nominated Alchemy
Director) shall be required in circumstances where it is intended that
the Manager concerned becomes an employee of another company in which
Alchemy has a shareholding interest exceeding 10%.
6 Financial information
6.1 The Company shall supply the Investors, Alchemy Partners, Xx XxXxxxxx
and Xx X'Xxxxxxxxx with the following information:-
6.1.1 the audited consolidated accounts of the Group for each financial year
as soon as practicable and at the latest by three months after the end
of that financial year;
6.1.2 no later than one month before the start of each financial year, an
annual budget for the Group for that financial year approved, during
the Restricted Period, in writing by the Nominated Alchemy Director;
6.1.3 monthly management accounts consisting of a balance sheet, profit and
loss account and cashflow statement and a forecast balance sheet,
profit and loss account and cashflow statement for the period from the
date of such management accounts to the end of the then current
financial year of the Company, as soon as practicable, and at the
latest by three weeks after the end of each month:-
6.1.3.1 on a consolidated basis for the Group;
17
6.1.3.2 for the Company and each trading subsidiary undertaking; and
6.1.3.3 containing appropriate comparisons with prior years and the
Approved Budget and a commentary thereon;
6.1.4 such other financial or management information relating to the Group
as any of the Investors, Alchemy Partners, Xx XxXxxxxx and Xx
X'Xxxxxxxxx may reasonably request from time to time.
6.2 Each of the Managers shall use reasonable efforts to procure full and
prompt performance by the Company of its obligations under this Clause
6.
6.3 The Investor Directors may pass any information received from the
Company to Alchemy, Alchemy Partners and MSD Capital and to any
adviser to, trustee or manager of, any fund advised or managed by
Alchemy Partners or MSD Capital and to Alchemy Partners' or MSD
Capital's other professional advisers on terms that such information
is kept confidential.
6.4 The Company shall provide such other information as shall be
reasonably requested by the Investors and/or Xx XxXxxxxx and/or Xx
X'Xxxxxxxxx including, without limitation in the case of Alchemy and
MSD Capital, such information as may be necessary or desirable to
enable investors in any funds advised by Alchemy Partners or MSD
Capital to make elections for US federal tax purposes in connection
with the Company.
6.5 The Company shall submit for review by the Nominated Alchemy Director
in the case of Xx X'Xxxxxxxxx prior to their reimbursement full
details of all expenses claimed for reimbursement by Xx X'Xxxxxxxxx.
The Company shall submit for review by the remuneration committee in
the case of the other Managers full details of all expenses reimbursed
to, each of the Managers on a monthly basis. On a monthly basis the
Company shall also send to the Nominated Alchemy Director in the case
of Xx X'Xxxxxxxxx and the remuneration committee in respect of the
other Managers full details of all expenses charged by each of Xx
X'Xxxxxxxxx or the Managers as the case may be to a corporate credit
card and/or corporate account.
7 Investor Directors and Board composition
7.1 The Investors shall be entitled to appoint and remove up to three
directors as Investor Directors of which two directors may be
appointed by Alchemy, of which one appointee shall be designated by
Alchemy Partners as the Nominated Alchemy Director; and the third of
which shall be designated by MSD Capital. The Nominated Alchemy
Director shall act as the initial Chairman of the Company until
another Chairman is appointed. Other than where the initial Chairman
is to be a partner of Alchemy Partners or where a replacement chairman
is a partner of Alchemy Partners the prior written consent of Xx
X'Xxxxxxxxx (such consent not to be unreasonably withheld) shall be
obtained to the appointment of the first Chairman or any change of
Chairman from the Nominated Alchemy Director. The initial appointment
of the Nominated Alchemy Director shall be made at the board meeting
referred to in Clause 3.1.3. Subsequent appointments and removals made
by either Alchemy or MSD Capital under this Clause 7.1 shall be made
by notice in writing to the Company.
18
7.2 Each of Xx X'Xxxxxxxxx and Xx XxXxxxxx shall be entitled to appoint
and remove one director. The initial appointments shall be Xx
X'Xxxxxxxxx and Xx XxXxxxxx themselves. Any subsequent appointments
and removals shall be made by notice in writing to the Company. Any
appointment by Xx X'Xxxxxxxxx who is other than Xx X'Xxxxxxxxx or by
Xx XxXxxxxx who is other than Xx XxXxxxxx shall be made with the prior
written consent of Alchemy, such consent not to be unreasonably
withheld or delayed.
7.3 Alchemy Partners shall be entitled to receive an annual fee of
(euro)100,000 plus VAT, payable quarterly in arrears on 1 January, 1
March, 1 June and 1 September of each year, in respect of the services
to be provided by it to the Company such fee to increase annually with
effect from the anniversary of the date hereof at a rate equal to the
increase in the Consumer Price Index. The Investor Directors shall be
entitled to be reimbursed all expenses reasonably incurred by them in
connection with their office as directors.
7.4 The Company shall effect directors and officers insurance with an
insurance company of good repute in respect of any directors appointed
in accordance with Clause 7.1 for not less than (euro)20 million, each
on terms approved by the Nominated Alchemy Director and to be
maintained and renewed for as long as such director holds office as a
director of any member of the Group and for a period of one year after
he ceases to be such a director.
7.5.1 The Board shall initially comprise the Investor Directors, Xx
XxXxxxxx, Xx X'Xxxxxxxxx, Xxxx Xxxxxx, Xxxx Xxxxxxxx and Xxxxx
XxXxxxxx.
7.5.2 Xx X'Xxxxxxxxx shall use his reasonable endeavours to procure Xxxx
Xxxxx'x attendance at Board meetings for so long as shall be
reasonably requested by the Nominated Alchemy Director.
7.5.3 As soon as practicable following Completion and in any event within
three months of Completion the Board shall appoint a new Chief
Financial Officer of the Group based in Novato, California. Such
person shall be appointed as a director of the Company and shall
adhere to this Agreement (other than in respect of Clause 4) as if he
was named herein as a Manager. If such appointment is not made within
a three month period aforesaid the Board shall appoint such person as
the remuneration committee shall recommend be appointed.
7.5.4 As soon as practicable following Completion and in any event within
six months of Completion the Board shall appoint a new operational
Chief Executive Officer of the Group based in Novato, California. The
document in the Agreed Form "P" sets out certain details regarding the
reporting lines, responsibilities and authorisations of such Chief
Executive Officer. Such person shall be appointed as a director of the
Company and shall adhere to this Agreement (other than in respect of
Clause 4) as if he was named as a Manager. If such appointment is not
made within the six month period aforesaid the Board shall appoint
such person as the remuneration committee shall recommend be
appointed. Upon the appointment of the new Chief Executive Officer of
the Group as referred to in this Clause 7.5.4, Xx X'Xxxxxxxxx shall be
given the title "Executive Chairman" and shall (in reporting line
terms) be the most senior executive of the Company. The director at
that time who is Chairman shall cease to use that title and shall be
29
known as the "Governing Director" but shall continue to fulfil the
role normally associated with the Chairman of the Board.
7.5.5 A schedule for the locations of meetings of the Board shall be drawn
up on a rolling annual basis, such schedule to be approved by the
Nominated Alchemy Director.
7.5.6 Unless agreed by the Nominated Alchemy Director, the following persons
shall attend all meetings of the Board in person:-
- Xx X'Xxxxxxxxx;
- Xxxx Xxxxxx or the new operational Chief Executive Officer;
- (if Xx X'Xxxxxxxxx is successful in using his reasonable
endeavours under Clause 7.5.2) Xxxx Xxxxx or the new Chief
Finance Officer.
7.6 The Parties shall procure that the Board shall, (i) on Completion or
immediately thereafter, form and maintain an audit committee, a
remuneration committee and a nominations committee and (ii)
immediately on the occurrence of a Default and/or a Look Forward
Default form and maintain for so long as such Default and/or Look
Forward Default remains outstanding, a restructuring committee, each
such committee having the following membership and duties:-
7.6.1 the membership of the audit committee shall comprise three persons
consisting of the Nominated Alchemy Director, one other Investor
Director selected by Alchemy and Xx X'Xxxxxxxxx. The purpose of the
audit committee is to monitor the accounting and other finance
functions of the Group and in such capacity the audit committee shall
be entitled to require persons responsible within the Group for such
duties to report direct to it and take such steps as the audit
committee may direct to improve the efficiency and robustness of such
accounting and other finance functions (including the production of
management accounts containing detailed business unit by business unit
information). If the audit committee acting reasonably considers there
to be a material deficiency in procedures and reporting, then the
audit committee may (at the cost of the Company) commission external
accountants to report on the situation and make recommendations or
require the chief executive officer and/or chief financial officer of
the Company to take such reasonable action to eliminate such financial
reporting and procedures deficiencies as the audit committee considers
appropriate. The audit committee may also (at the cost of the Company)
commission external accountants if they reasonably believe that the
Board should be properly informed as to whether a Look Forward Default
or Default is about to occur.
7.6.2 the membership of the remuneration committee shall comprise three
persons consisting of the Nominated Alchemy Director, one other
Investor Director selected by Alchemy and Xx X'Xxxxxxxxx provided that
a committee member shall withdraw from any meeting while his own
remuneration or position is considered. The senior executive officer
of the Company shall upon the committee's request prepare and deliver
a report and recommendation on remuneration. The Board shall follow
and enact the recommendations of the remuneration committee on:-
(i) the remuneration of all directors of the Company (other than
the Investor Directors appointed by Alchemy);
20
(ii) the terms of appointment or the terms of dismissal and the
remuneration (including any variations) of senior employees
or consultants of the Group who are not directors of the
Company and whose annual salary is in excess of
(euro)150,000 per annum (or such higher amount as the
remuneration committee may from time to time determine);
(iii) the issue of options to subscribe for up to 9,338,485
Ordinary Shares to new employees of Group;
(iv) whether in the event of gross misconduct on the part of Xx
X'Xxxxxxxxx, Xx X'Xxxxxxxxx'x Service Agreement shall be
terminated as a consequence in accordance with its terms;
and
(v) any other matter where authority is specifically delegated
to the remuneration committee under the provisions of
Clauses 6.5, 7.5.3 and 7.5.4 or under Articles 10.2, 10.4.1
and 10.8.
To the extent that Xx X'Xxxxxxxxx disagrees with any decision or
recommendation of the remuneration committee (falling within
sub-paragraphs (i) to (iii) or (v) above), he shall be entitled to
refer such matter to an independent expert for determination. The
remuneration committee shall consider the decision of such expert but
such decision shall not be binding on the remuneration committee. The
Company shall bear the cost of the independent expert.
The remuneration committee shall also make recommendations to the
Board on the issue of options to subscribe for up to 8,620,140
Ordinary Shares (in addition to the options referred to in Clause
7.6.2(iii) above) to existing employees of the Group and the Board
shall consider such recommendations in reaching its decision but the
Board shall not be bound to follow such recommendations.
7.6.3 the membership of the nominations committee shall comprise four
persons consisting of the Nominated Alchemy Director, one other
Investor Director selected by Alchemy, Xx X'Xxxxxxxxx and Xx XxXxxxxx.
The nominations committee shall nominate persons to be appointed as
directors of the Board (other than the Investor Directors). The
nominations committee shall consider the appointment of the Chairman
on an annual basis.
7.6.4 the membership of the restructuring committee shall comprise four
persons consisting of the Nominated Alchemy Director, one other
Investor Director selected by Alchemy (of whom the Nominated Alchemy
Director shall act as chairman and have a casting vote in the event of
deadlock), Xx X'Xxxxxxxxx and one further director selected by Xx
X'Xxxxxxxxx. The purpose of the restructuring committee is to consider
and make proposals to cure or otherwise address the Default and/or the
Look Forward Default and/or achieve a successful refinancing of the
Group or such other action which in each case is reasonable in the
circumstances which have given rise to the Default or the Look Forward
Default ("the Restructuring Committee Proposals"). The provisions of
Clauses 7.8 and 7.9 shall apply in respect of any proposal or
proposals made by the restructuring committee.
21
7.7 For the purposes of the committees referred to in Clause 7.6 above a
necessary quorum for each of the audit committee, the remuneration
committee and the restructuring committee shall be the attendance of
one Investor Director nominated by Alchemy pursuant to Clause 7.1 and
Xx X'Xxxxxxxxx and, in the case of the nominations committee, shall
consist of one Alchemy Director and one of Xx X'Xxxxxxxxx or Xx
XxXxxxxx. At the request of the Board, or at the request of any member
of any of the said committees, a committee meeting shall be held
within 14 Business Days (or within 5 Business Days in the
circumstances of a meeting of the restructuring committee) of any such
request or on such shorter notice period as would allow a quorate
committee meeting to be held. In the event that a duly convened
committee meeting is not quorate then such meeting shall be adjourned
to a later date within 7 Business Days of the originally convened
meeting (or 2 Business Days in the circumstances of a meeting of the
restructuring committee) and, notwithstanding the quorum requirements
referred to above, if two members of the relevant committee are
present such meeting shall be deemed to be quorate.
7.8 In the event of any Look Forward Default:-
7.8.1 the Board shall give all due consideration to the Restructuring
Committee Proposals; and
7.8.2 if following such due consideration the Board approves the
Restructuring Committee Proposals ("the Board's Remedies") then the
consent of neither Xx XxXxxxxx nor Xx X'Xxxxxxxxx shall be required
under Clause 8.1 in order to implement the Board's Remedies and
furthermore Xx X'Xxxxxxxxx and Xx XxXxxxxx agree on behalf of their
own shareholdings (and agree to procure in relation to the
shareholdings of their Shareholder Associates) to vote such shares in
favour of any shareholder resolutions proposed as a result of the
Board Remedies. In order to secure such obligations Xx XxXxxxxx and Xx
X'Xxxxxxxxx hereby irrevocably appoint the Chairman of any proposed
shareholder meeting required to be held to pass the said resolutions
to execute in his favour and vote on their behalf at any such meeting.
7.9.1 In the event of any Default the Board shall immediately take all steps
to enact the Restructuring Committee Proposals and if the Board (in
the opinion of Alchemy acting in good faith) shall fail to act as
aforesaid then the Company, Xx XxXxxxxx and the Managers each agree
that:-
7.9.1.1 Alchemy shall have the right by serving written notice on
the Company to appoint, for so long as Restructuring
Committee Proposals remain to be implemented (and the
Managers and the Company shall take all necessary steps to
ensure that such appointments become effective) such number
of additional directors as shall result in the directors
appointed pursuant to Clauses 7.9.1 and 7.1 being a majority
of the directors of the Company;
7.9.1.2 each shall (so far as it is within its or his power as a
director and/or shareholder) take or procure to be taken all
such steps as are necessary and act and vote in all matters
in accordance with the lawful instructions of Alchemy to
implement such Restructuring Committee Proposals; and
22
7.9.2 The consent of neither Xx XxXxxxxx nor Xx X'Xxxxxxxxx shall be
required to implement any action to be taken pursuant to Clause 7.9.1
and furthermore Xx X'Xxxxxxxxx and Xx XxXxxxxx agree on behalf of
their own shareholdings (and agree to procure in relation to the
shareholdings of their Shareholder Associates) to vote such shares in
favour of any such action. In order to secure such obligations Xx
XxXxxxxx and Xx X'Xxxxxxxxx hereby irrevocably appoint the Chairman of
any proposed shareholder meeting required to be held to pass the said
resolutions to execute in his favour and vote on their behalf at any
such meeting.
7.9.3 In the event that Alchemy does not exercise its rights under Clause
7.9.1.1 and 7.9.1.2, then, in the circumstances referred to in Clauses
7.9.1 and for so long as the Restructuring Committee Proposals remain
to be implemented, Investor Directors shall have the right to an
aggregate number of votes in respect of any resolution of the
directors which is one vote greater than the number of votes capable
of being cast on any relevant resolution by all other directors of the
Company including any casting vote which the Chairman, if not an
Investor Director, may have.
7.10 In the event that any of the Board Remedies under Clause 7.8 or
implementation of the Restructuring Committee Proposals under Clause
7.9 lead to any of the Investors investing further monies in the Group
whether by way of debt or equity financing each of Xx X'Xxxxxxxxx and
Xx XxXxxxxx shall have the right by serving notice on the relevant
Investor(s) within one month of the aforesaid investment ("the
Selldown Notice") to require to be transferred to them such percentage
of each such further investment by such Investor(s) as is calculated
from the following formula:-
B x 100
-
C
B equals the number of Ordinary Shares held by Xx X'Xxxxxxxxx (and his
Shareholder Associates) or Xx XxXxxxxx (and his Shareholder
Associates) as at the date of such further investment by the
Investor(s);
C equals the aggregate number of Ordinary Shares held by Xx
X'Xxxxxxxxx (and his Shareholder Associates), Xx XxXxxxxx (and his
Shareholder Associates) and the Investors as at the date of such
further investment by the Investor(s).
7.11 If either Xx X'Xxxxxxxxx or Xx XxXxxxxx exercises his right under
Clause 7.10 then completion shall occur at the registered office of
the Company within 7 Business Days of the date of the Selldown Notice
("the Completion Selldown Date") at which time (i) Xx XxXxxxxx or Xx
X'Xxxxxxxxx (as the case may be) shall pay to the relevant Investor(s)
an amount equal to the amount paid by such Investor(s) in respect of
the investment(s) being transferred plus an amount equal to the
accrued rights on such investment up to the Completion Selldown Date
and (ii) the relevant Investor(s) shall deliver duly executed
transfers in respect of the relevant individuals.
7.12 Wherever in this Clause 7 a right is granted specifically to Xx
X'Xxxxxxxxx, and Xx X'Xxxxxxxxx becomes unable for any reason to
exercise that right (other than on a temporary basis), including but
not limited to in the event of his long-term
23
injury or illness or his death, that right shall pass and devolve
fully and automatically to Xx XxXxxxxx and be exercisable by Xx
XxXxxxxx on the terms set out in this Agreement for the duration of
and in each instance of Xx X'Xxxxxxxxx'x absence or inability.
7.13 References in this Clause 7 to Xx X'Xxxxxxxxx and Xx XxXxxxxx shall
include their respective personal representatives and successors.
8 Matters requiring consent
8.1 Subject to the provisions of Clauses 7.8, 7.9 and 8.2 to 8.6, each of
the Managers, Xx XxXxxxxx and the Investors agree that the following
acts, unless required by this Agreement, shall not be carried out
without the explicit written consent of the Nominated Alchemy Director
and each of Xx XxXxxxxx and Xx X'Xxxxxxxxx and they shall each use
their respective rights and powers as a director and/or shareholder to
procure so far as he or it is able that no such act is carried out
unless such consent has been given:-
8.1.1 (other than as contemplated by the Acquisition Agreements, the Offer,
the Underwriting Arrangements or the Warrant Instrument) the variation
of the authorised or issued share capital of any member of the Group
or the creation, allotment or issue of any shares in the capital of
any member of the Group or of any other security or the granting of
any option or other right to subscribe in respect thereof or convert
any instrument into shares in the capital of any member of the Group
or the variation of the rights attaching to shares in the capital of
any member of the Group other than the issue of any options (or shares
granted thereunder) pursuant to the option scheme referred to in
Clause 17;
8.1.2 the alteration of the memorandum or articles of association (or
equivalent documents) of any member of the Group;
8.1.3 the declaration or distribution of any dividend or other payment out
of the distributable profits of the Company, other than as required by
the Articles of Association, or of any subsidiary undertaking of the
Company, other than a dividend or distribution by a wholly-owned
subsidiary of the Company or another of its wholly-owned subsidiaries;
8.1.4 the reduction of the share capital, share premium account, capital
redemption reserve or any other reserve of any member of the Group,
other than as required by the Articles of Association, the reduction
of any uncalled liability in respect of partly paid shares of the
Company or any redemption, purchase, or other acquisition by the
Company of any shares or other securities of the Company;
8.1.5 the taking of steps to wind up or dissolve any member of the Group;
8.1.6 (subject to Clause 7.1) the appointment or removal of any director of
any member of the Group;
8.1.7 the appointment of auditors of any member of the Group, other than the
reappointment of KPMG as existing auditors;
8.1.8 the disposal (including the lease to a third party) or acquisition by
any member of the Group in any Financial Year of:-
24
8.1.8.1 a significant asset (excluding disposals or acquisitions of
working capital assets);
8.1.8.2 the whole or a significant part of an undertaking; or
8.1.8.3 a subsidiary undertaking
the net assets of which represent more than 5% of the consolidated net
assets of the Group at the time, as shown by the latest management
accounts, and for the purpose of this sub-clause all disposals or
acquisitions in any one financial year shall be aggregated;
8.1.9 any material change in the nature of the business or cessation of any
significant business operation of any member of the Group;
8.1.10 the alteration of the year end date of any member of the Group or the
alteration of the accounting policies and bases upon which the annual
profit and loss account or balance sheet of any member of the Group
are prepared;
8.1.11 the entry into, termination or variation of any contract or
arrangement between (1) any member of the Group and (2) a Manager or a
person who in relation to a Manager is a connected person and (3)
employees with salaries in excess of (euro)150,000 other than where a
Service Agreement is terminated at the direction of the Nominated
Alchemy Director pursuant to Clause 11;
8.1.12 the variation of the remuneration or other benefits under a contract
or arrangement of a type referred to in Clause 8.1.11 or the payment
of bonuses or other emoluments other than as provided in existing
employment agreements; and the waiver of any breach of such a contract
or arrangement;
8.1.13 the delegation by the directors of any member of the Group of any of
their powers to a committee (other than as provided in Clauses 7.6 and
7.7);
8.1.14 the alteration, variation or waiver of any of the terms of or
conditions to or rights under any of the Offer Document, the Service
Agreements and the Facility Agreement other than where a Service
Agreement is terminated at the direction of the Nominated Alchemy
Director pursuant to Clause 11;
8.1.15 the incurring by any member of the Group of any borrowing or any other
indebtedness or liability in the nature of borrowing, other than
pursuant to the Facility Agreement which when aggregated with all
other borrowings of members of the Group (other than pursuant to the
Facility Agreement) would exceed (euro)5,000,000;
8.1.16 capital expenditure of any member of the Group which is greater than
(euro)250,000 or which would cause capital expenditure of the Group in
any financial year to exceed (euro)6,000,000 and in either case which
is not specifically provided for in the relevant Approved Budget;
8.1.17 the entering into by any member of the Group of any lease, licence or
similar obligation under which the rental and all other payments
exceed (euro)250,000 a year or which would make the Group liable for
payments exceeding (euro)1,000,000 a year
25
under all its leases, licences or similar obligations and in either
case which is not specifically provided for in the relevant Approved
Budget other than any licensing and/or co-development arrangements
entered into in the ordinary course of business of the Group;
8.1.18 the creation of any mortgage, charge or other encumbrance over any
asset of any member of the Group and the giving of any guarantee by
any member of the Group, other than pursuant to the Facility Agreement
or the creation of liens in the ordinary course of trading;
8.1.19 the entering into by any member of the Group of any contract or
arrangement outside the ordinary course of trading or otherwise than
at arms length;
8.1.20 the incorporation of a new subsidiary undertaking of the Company or
the acquisition by any member of the Group of an interest in any
shares in the capital of any body corporate;
8.1.21 the instigation or settlement of any litigation or arbitration
proceedings (other than debt collection in the ordinary course of
business) by any member of the Group when the amount claimed exceeds
(euro)500,000;
8.1.22 the adoption of any bonus or profit sharing scheme or any share option
or share incentive scheme or employee share trust or share ownership
plan (save for an option scheme as referred to in Clause 17 which
adheres to the principles set out in the document being in the Agreed
Form marked "Q");
8.1.23 the making of any loans or payments or the granting of any credit or
the giving of any guarantee or other commitment otherwise than in the
normal course of business, in the case of trade credit, credit
exceeding 12 months, and on an arm's length basis;
8.1.24 the entering into of any joint venture, partnership. consortium or
other similar arrangement other than operating relationships in the
ordinary course of business;
8.1.25 the entering into of any factoring agreement in respect of any debts
of any member of the Group;
8.1.26 the licensing, transfer, assignment or other dealing in any way with
any intellectual property of any member of the Group (other than in
the ordinary course of business);
8.1.27 the making of donations to a political party or similar organisation;
and
8.1.28 the filing of any registration statement under the United States
Securities Act of 1933 in respect of all or some of the Ordinary
Shares on a Realisation.
8.2 The provisions of Clause 8.1 shall not apply to the extent that
authority has been delegated to any of the committees of the Board the
constitution of which is referred to in Clauses 7.6 and 7.7 of this
Agreement.
8.3 Xx X'Xxxxxxxxx shall not have any consent right under Clause 8.1 to
the extent that such consent right would operate to veto any decision
by the Board (or by
26
the remuneration committee as referred to in sub-paragraph (iv) of
Clause 7.6) to validly terminate his Service Agreement.
8.4 The provisions of Clause 8.1 (other than in respect of Clause 8.1.15)
shall not prevent Alchemy preventing the Company from redeeming any
amounts due under the Loan Note Instrument.
8.5 Following repayment in full of all amounts due under the Facility
Agreements and pursuant to the Loan Notes unless agreed by Alchemy
that it should be a lower amount the Parties agree that the Company
shall pay an annual dividend to shareholders aggregating to not less
than 50% of the net consolidated profits of the Group as shown by the
consolidated accounts of the Company. Accordingly the provisions of
Clause 8.1 shall not apply to the payment of any such dividend.
8.6 The provisions of Clause 8.1 shall not prevent any reorganisation,
recapitalisation, reconstruction or refinancing of the Company or of
its share capital which has as an integral purpose the acquisition of
the Investors shares in the capital of the Company contemplated by
Article 9.2.3.
9 Shareholders and Deeds of Adherence
9.1 Save in respect of an issue of Ordinary Shares pursuant to the Offer
and/or pursuant to the Underwriting Arrangements and the Warrant
Instrument no shares in the capital of the Company shall be issued or
transferred to a person who is not already a Party unless, if required
by the Board, that person has executed a deed of adherence pursuant to
this Agreement on terms agreed by the Board. Any proposal of the Board
that a deed of adherence is not executed by a person to whom Ordinary
Shares are proposed to be transferred by either Xx XxXxxxxx (or his
Shareholder Associates) or Xx X'Xxxxxxxxx (or his Shareholder
Associates) pursuant to Articles 7.3, 7.4 or 7.8 of the Articles of
Association shall require the prior written consent of the Nominated
Alchemy Director.
9.2 All executed deeds of adherence shall be delivered to and held by the
Company.
9.3 Each of Xx XxXxxxxx (including any Shareholder Associate of Xx
XxXxxxxx), Xx X'Xxxxxxxxx (including any Shareholder Associate of Xx
X'Xxxxxxxxx) and the Investors shall have the right to agree with any
person to whom he or it transfers part of his or its shares in the
capital of the Company the way in which certain of the transferor's
rights under this Agreement may be exercised.
10 Share Transfers
10.1 Each of the Managers and, during the period which ends on the fifth
anniversary of Completion or if longer the Restricted Period, Xx
XxXxxxxx undertakes with the Investors that (save with the prior
written consent of the Nominated Alchemy Director or transfers (or
deemed transfers) contemplated by Articles 7 or 9 or Clauses 4.14,
4.15, 10.4 or 10.5), he shall not, and shall procure that his
Shareholder Associates shall not, sell, transfer, mortgage, charge or
otherwise dispose of (or of any interest in) any of the Ordinary
Shares of which he or his Shareholder Associates is at the Completion
Date (or of which following the Completion Date he becomes) the
registered holder and/or beneficial owner other than by way of charge
in favour of a bank as security for the repayment of
27
monies originally lent by that bank to the Manager in question for the
purpose of subscribing for Ordinary Shares and provided that a copy of
this Clause 10.1 and of the Articles has been provided to that bank.
10.2 No holder of Ordinary Shares may transfer or otherwise dispose or
pledge, mortgage or otherwise encumber an Ordinary Share (or any
beneficial interest therein) other than in accordance with the
Articles of Association.
10.3 In the event that the Investors propose to transfer any of their
Ordinary Shares (other than pursuant to Articles 7 and 9 or Clause
10.5), prior to the registration of the transfer of such Ordinary
Shares, they shall procure that the proposed transferee has made an
offer in writing to each of the Warrantholders at the same time as an
offer to the Investors to buy a percentage of the Warrants held by
each of the Warrantholders equivalent to the Ordinary Shares which the
Investors (expressed as a percentage of their total holdings of
Ordinary Shares) each propose to transfer on terms that the
consideration for each Warrant Share (as such term is defined in the
Warrant Instrument) shall be the consideration (whether in cash,
securities or otherwise or in any combination) equivalent to and in
the same form as that which is proposed to be paid for each Ordinary
Share to be transferred by the Investors. The Warrantholders shall
have 21 days in which to accept any such offer.
10.4 Xx XxXxxxxx and Xx X'Xxxxxxxxx shall be entitled to transfer up to 20%
of their joint aggregate holding of Ordinary Shares. Any such transfer
may only be made with the prior written consent of the Nominated
Alchemy Director.
10.5 In the event that any Investor, Xx XxXxxxxx (or his Shareholder
Associates) or Xx X'Xxxxxxxxx (or his Shareholder Associates) acquires
more than 1% in aggregate of the issued Ordinary Shares pursuant to
Article 7.9 of the Articles of Association (a "7.9 Acquirer") then
such acquired shares shall be offered for sale by such person to any
Investor, Xx XxXxxxxx or Xx X'Xxxxxxxxx not acquiring such Ordinary
Shares pro rata to their respective holdings of Ordinary Shares at the
weighted price paid by the 7.9 Acquirer for his or its Ordinary Shares
pursuant to the said Article 7.9.
10.6 If a transfer of Ordinary Shares in accordance with Article 15 occurs
after the Restricted Period, none of the Investors or the
Warrantholders shall be entitled to assign any of the rights which it
has pursuant to this Agreement in respect of the Ordinary Shares
transferred by it pursuant to Article 15.
11 Service Agreements
Notwithstanding the provisions of the Service Agreements, each Manager
agrees that the Company or relevant subsidiary undertaking is entitled
to terminate his Service Agreement without notice and without
compensation if he knowingly commits a material breach of this
Agreement in circumstances where he knew that a material breach would
arise provided that the relevant Manager shall have a period of 10
days from notice of the breach to remedy it to the reasonable
satisfaction of Alchemy. For the purposes of this Clause 11, the
Parties agree that any termination by the Company of a Service
Agreement in the circumstances provided by this Clause 11 shall be
made at the request of the Nominated Alchemy Director.
28
12 Announcements
12.1 Subject to Clause 12.2, no announcement in relation to the
transactions contemplated by this Agreement or the Offer Document
shall be made without the written consent of Alchemy Partners, Xx
X'Xxxxxxxxx and Xx XxXxxxxx or, in relation to any part of the
announcement referring to it, its affiliates or investors by name, MSD
Capital or, in relation to any part of the announcement referring to
any of the Warrantholders by name, the Warrantholders.
12.2 The provisions of Clause 12.1 shall not apply to the matters set out
in the Press Release and any other announcement previously consented
to may be repeated by any of the Parties.
13 Costs and fees
13.1 The Company shall pay its own costs and expenses (including VAT where
applicable) in connection with the negotiation, preparation, execution
and performance of this Agreement and all documents referred to in it.
13.2 Save in the circumstances referred to in Clause 13.3 the Subsidiary
shall pay the costs and expenses (including VAT where applicable) of
the Investors, Alchemy Partners and MSD Capital, L.P. in connection
with the negotiation, preparation, execution and performance of this
Agreement and all documents referred to in it and in respect of the
Investors' subscription for Loan Notes.
13.3 If (i) following the execution of this Agreement the Offer is not
made, lapses or is withdrawn and accordingly this Agreement does not
proceed to Completion; and (ii) no fee is paid to the Company by the
Target under the Inducement Fee Agreement the Company shall pay all
the costs referred to in Clause 13.1 and, for the avoidance of doubt
Alchemy shall be responsible for settling the costs of Macfarlanes and
KPMG (London) and, in the event the aggregate of such costs is less
than(euro)500,000, then Alchemy shall pay an amount equal to the
amount of such shortfall to the Company.
13.4 If (i) following the execution of this Agreement the Offer is not
made, lapses or is withdrawn and accordingly this Agreement does not
proceed to Completion and (ii) a fee is paid by the Target to the
Company under the Inducement Fee Agreement:-
13.4.1 the Company shall forthwith pay to Alchemy the sum of US$1,500,000 and
shall procure that the Subsidiary shall pay to Alchemy an amount equal
to the costs of Macfarlanes and KPMG (London) which the Subsidiary is
liable to pay pursuant to Clause 13.2; and
13.4.2 the Company and the Subsidiary shall pay the other costs referred to
in Clauses 13.1 and 13.2 respectively
provided that if the amount received by the Company pursuant to the
Inducement Fee Agreement is not sufficient to meet all such costs, Xx
X'Xxxxxxxxx and Xx XxXxxxxx shall place the Company and the Subsidiary
in funds in order that the Company and the Subsidiary can pay all such
costs. Before finalising the amount of any such costs payable by the
Subsidiary pursuant to Clause 13.2 the Investors shall consult with Xx
XxXxxxxx and Xx X'Xxxxxxxxx as to the quantum of such costs,
29
in respect of which Xx XxXxxxxx and Xx X'Xxxxxxxxx shall be entitled
to make representations to the Investors. The Investors shall give due
consideration to any such representations.
14 Sale or listing
14.1 It is the Parties' intention that a Sale or a Listing be achieved
within five years of Completion. In the event that such Sale or
Listing is not achieved within such time, the Board shall take such
action as Alchemy may reasonably require to market the Company with a
view to obtaining a Listing or to lead to an offer being made to
purchase the whole of the issued share capital of the Company (or for
the whole or a substantial part of the undertaking or assets of any
Group Company). Alchemy shall not require such action in respect of
marketing the Company until the expiry of 60 days after the fifth
anniversary of Completion. During such 60 day period, each or both of
Xx XxXxxxxx and Xx X'Xxxxxxxxx shall be entitled to make an offer to
purchase the entire issued share capital of the Company. In the event
that the Company is marketed pursuant to this Clause 14, the Investors
shall not, on any Sale subsequently arising, seek to obtain any
payment for their holdings of Loan Notes which would be in excess of
the proceeds to which they would be entitled on redemption of such
Loan Notes at the time of the Sale in accordance with the terms of the
Loan Note Instrument.
14.2 The Parties acknowledge that the Investors and the Investor Directors
will not give any warranties or indemnities in respect of the Group on
a Sale or Listing.
14.3 Notwithstanding the provisions of Article 9.2.3 of the Articles, the
Investors shall not be required to transfer their Ordinary Shares in
accordance with such Article 9.2.3 unless prior to such transfer the
transferee enters into an agreement agreeing to abide by the terms of
Clauses 14.4 to 14.6.
14.4 In the event that the Investors are required to transfer their
Ordinary Shares in accordance with Article 9.2.3 ("an Original
Transfer") to a Connected Transferee or to a person who is not a
Connected Transferee but who subsequently becomes a Connected
Purchaser and there is a Trigger Event within the Trigger Period, the
Connected Transferee or the Connected Purchaser as the case may be
("the Original Transferee") shall pay, or procure the payment of, to
the Investors within 30 days of the relevant Trigger Event taking
place, an aggregate amount (if any) equal to:
(i) if the Trigger Event occurs within six months of the date of the
Original Transfer: 75% of (A% x B) x C%; or
(ii) if the Trigger Event occurs more than six months after the date
of the Original Transfer: 50% of (A% x B) x C%
in each case where:
A means the percentage of the issued share capital of the Company
immediately prior to the Original Transfer that the shares in the
Company held by the Investors which were the subject of the Original
Transfer comprised;
B means the Value at the time of the Trigger Event less the value of
the Company as at the time of the Original Transfer (using the price
paid in respect
30
of the Ordinary Shares at the time of the Original Transfer for the
purposes of calculating such value) save that if B is a negative
number B shall be deemed to be zero and, for the avoidance of doubt,
the Investors shall not be entitled to receive any amounts pursuant to
Clause 14.4; and
C means, in the case of a sale or an issue of shares or a Listing, the
percentage of the share capital of the Company or any holding company
of the Company which is being sold, issued or listed on the relevant
Trigger Event or, in the case of an Asset Sale, the percentage of the
business and assets of the Company being sold (not being less than 80%
and as agreed by the Investors and the Company or in default of
agreement by the auditors of the Company).
Such amount shall be apportioned amongst the Investors pro rata to
their respective holdings of Ordinary Shares at the time of the
Original Transfer and shall be paid by the Original Transferees pro
rata to their respective holdings of Ordinary Shares acquired at the
time of the Original Transfer.
14.5 For the purposes of Clause 14.4:-
14.5.1 the expression "a Connected Transferee" shall mean:-
14.5.1.1 a connected person of Xx XxXxxxxx and/or Xx X'Xxxxxxxxx;
14.5.1.2 the Company or any member of the Group;
14.5.1.3 any person with whom Xx XxXxxxxx, Xx X'Xxxxxxxxx or any
other person referred to in Clauses 14.5.1.1 and 14.5.1.2
has an agreement, arrangement or understanding of any nature
in relation to the subsequent sale of shares in the Company;
or
14.5.1.4 a person who is connected with Xx XxXxxxxx and/or Xx
X'Xxxxxxxxx;
14.5.2 the expression "a Connected Purchaser" shall mean a person who, within
the period of twelve months following the Original Transfer, is issued
with shares in the Company (other than pursuant to a rights issue or
an issue of shares which an independent investment bank certifies is
at market value) or acquires shares in the Company from Xx X'Xxxxxxxxx
and/or Xx XxXxxxxx or their permitted transferees (as defined in the
Articles);
14.5.3 the expression "the Trigger Period" shall mean a period of twelve
months from the Original Transfer;
14.5.4 the occurrence of any of the following events before the first
anniversary of the date of the Original Transfer shall constitute a
"Trigger Event":-
14.5.4.1 an agreement being entered into for a sale, transfer or
other disposal (of whatever nature) (or the entry into of
any agreement in connection therewith) of shares (or any
interest in shares) of the Company or any company which is a
holding company of the Company or a subsidiary of the
Company in which is held all or substantially all of the
assets of the Group ("the Principal Subsidiary")
constituting an aggregate of 50 per cent or more of
31
the issued share capital of the Company or any company which
is a holding company or the Principal Subsidiary; or
14.5.4.2 an agreement (not falling within Clause 14.5.1) being
entered into for a sale, transfer or other disposal by the
Company or any company which is a holding company of the
Company or the Principal Subsidiary of all, or substantially
all, of its assets ("Asset Sale"); or
14.5.4.3 the making of any application for a Listing; or
14.5.4.4 the sale of shares by a Connected Transferee, Xx X'Xxxxxxxxx
and/or Xx XxXxxxxx or their permitted transferees;
14.5.4.5 the sale of shares by Xx X'Xxxxxxxxx and/or Xx XxXxxxxx or
their permitted transferees or the issue of any shares in
the Company in any such case to any person who, as a result
of such sale or issue, becomes a Connected Purchaser or is a
Connected Transferee.
14.6 Until the first anniversary of the date of the Original Transfer, the
Company hereby undertakes to:-
14.6.1 provide the Investors with a copy of the consolidated audited accounts
of the Company and each of its subsidiaries for the time being in
respect of each financial year of the Company within 30 Business Days
of the date of their approval and adoption by the Company and/or its
subsidiaries for the time being;
14.6.2 notify the Investors as soon as reasonably practicable prior to the
occurrence of a Trigger Event; and
14.6.3 respond promptly to all reasonable requests for information from the
Investors in relation to the occurrence, or likely occurrence and the
terms of a Trigger Event.
14.7 In the event of any dispute arising between the Company and the
Investors as to:-
14.7.1 the amount of the Value;
14.7.2 the amount of any payment pursuant to Clause 14.4
then either the Investors or the Company may require an independent
firm of chartered accountants (to be agreed upon between the Company
and the Investors or (in default of such agreement within 15 Business
Days) to be nominated at the request of either the Company or the
Investors by the President for the time being of the Institute of
Chartered Accountants in Ireland) to determine the same. The
determination of such firm (which shall act as experts and not as
arbitrators and whose costs shall be borne by the Company and the
Investors in the proportions which it shall direct or in the absence
of such direction in equal proportions (and as between the Investors
in the Relevant Proportions in respect of the Investors' share of such
costs)) as to any matter referred to it as aforesaid shall be final
and binding on the Company and the Investors.
32
14.8 The provisions of Clauses 14.3 to 14.7 (inclusive) shall apply to the
Warrantholders in respect of any Warrants which they transferred at
the same time as the Investors on the Original Transfer and the
Warrantholders shall be treated as if they were Investors and the
Warrants treated as if they were Ordinary Shares for the purposes of
calculating any payments due to the Investors in respect of such
clauses.
15 Duration
15.1 On a Sale or Listing, the provisions of this Agreement shall cease to
have effect except that the Parties' accrued rights and obligations
shall not be affected.
15.2 When a Manager ceases to be an employee of the Company or any
subsidiary undertaking and no longer holds any shares in the capital
of the Company, the Manager shall cease to be party to this Agreement
except that:-
15.2.1 Clauses 4 and 5 shall continue to bind him on the terms of such
Clauses; and
15.2.2 his accrued rights and obligations shall not be affected.
15.3 (Save for the provisions of Clauses 14.3 to 14.7, 18.4 and any other
provisions of this Agreement required to give due interpretation of
Clauses 14.3 and 14.7) when an Investor (or its nominee) or Xx
XxXxxxxx or his Shareholder Associates ceases to hold shares in the
capital of the Company, such Investor or Xx XxXxxxxx or his
Shareholder Associates, as the case may be, shall cease to be a Party
except that its respective accrued rights and obligations shall not be
affected.
15.4 Notwithstanding the foregoing, the provisions of Clause 18.4 shall
survive termination of this Agreement (other than in circumstances in
which the Offer is not made, lapses or is withdrawn) subject to the
time period referred to in Clause 18.4.3.
16 General provisions
16.1 A variation of this Agreement is valid only if it is in writing and
signed by or on behalf of each Party, except that any provision of
this Agreement relating to a Manager may be varied if it is in writing
signed by the Investors, Xx X'Xxxxxxxxx, Xx XxXxxxxx and such Manager.
16.2 The failure to exercise or delay in exercising a right or remedy
provided by this Agreement or by law does not constitute a waiver of
the right or remedy or a waiver of other rights or remedies. No single
or partial exercise of a right or remedy provided by this Agreement or
by law prevents further exercise of the right or remedy of the
exercise of another right or remedy.
16.3 The Investors' rights and remedies contained in this Agreement are
cumulative and not exclusive of rights or remedies provided by law.
16.4 Except to the extent that they have been performed and except where
this Agreement provides otherwise, the Warranties and obligations
contained in this Agreement remain in force after Completion.
33
16.5 Nothing contained in this Agreement is to be construed as creating a
partnership between any of the Parties.
16.6 If there is any conflict or inconsistency between the provisions of
this Agreement and the Articles of Association this Agreement
prevails.
16.7 The invalidity, illegality or unenforceability of any provision of
this Agreement does not affect the continuation in force of the
remainder of this Agreement.
16.8 The proceeds of the subscription by the Investors for Loan Notes and
Ordinary Shares shall be paid into the Company's and/or the
Subsidiary's bank account as appropriate (or otherwise as the Company
shall direct) and shall be applied by the Company towards payment of
the purchase price and other sums due to be paid by the Company under
the Offer to acquire the entire issued share capital of the Target and
for the payment of all costs and expenses incurred by the Company in
connection with the Offer and, as to any balance, in meeting the
working capital requirements of the business of the Group and for no
other purpose.
16.9 Each of the Managers and the Company acknowledges that:-
16.9.1 he or it has entered into this Agreement and the transactions
contemplated by it entirely on the basis of his or its assessment of
the risk and effect thereof;
16.9.2 none of Alchemy, MSD Capital or any of the Warrantholders has provided
to him or it any advice of a financial or other nature whatsoever and
is not under any obligation or duty whatsoever so to do and each of
the Managers and the Company hereby waives, to the extent permitted by
law, any rights which he or it may have in respect of any such
obligation or duty; and
16.9.3 the Investor Directors are not authorised to give advice on behalf of
the Investors.
16.10 This Agreement together with the documents being in the Agreed Form
constitutes the entire agreement between the Parties with respect to
the subject matter of this Agreement.
16.11 All obligations in this Agreement are several and not joint.
16.12 This Agreement may be executed in any number of counterparts each of
which when executed and delivered is an original, but all the
counterparts together constitute the same document.
16.13 The death or incapacity of any natural person who is a party hereto
shall not be deemed to frustrate or take effect as a frustration of
the purpose of this Agreement and the rights and obligations of the
remaining parties shall be unaffected thereby and may be enforced
accordingly.
16.14 The Warrantholders are Parties to this Agreement solely to ensure that
they enjoy the benefit of the following provisions of this Agreement
in addition to this Clause 16.14: Clause 3.1.6 (Completion) and Clause
10.3 (tag along rights), Clause 12 (announcements), Clause 14.8
(incorporating for these purposes Clauses 14.3 to 14.7 (inclusive)
(anti-embarrassment/on-sale following exit),
34
Clause 16.1 (to the extent only that any variation shall amount to a
variation of the Warrantholder's rights under the provisions set out
immediately above and immediately below), Clauses 16.9 to 16.13
(inclusive), Clause 19 and Clause 20. If any Warrantholder transfers
any Warrants held by it pursuant to the terms of the Warrant
Instrument it shall be entitled (provided that prior notice is given
to the other Parties to this Agreement) to transfer such rights that
it has under this Agreement as set out above which are proportionate
with the number of Warrants being transferred.
17 Further issue of shares and option schemes
After Completion, the Company shall set up an option scheme for the
benefit of employees or prospective employees of the Group and issue
further Ordinary Shares to such employees or prospective employees of
the Group pursuant to options granted under such scheme, such scheme
being on the terms in the Agreed Form marked "Q".
18 Investors' Rights
18.1 The Investors agree among themselves that the following provisions
shall (unless they subsequently agree amongst themselves to the
contrary) apply in relation to the enforcement of any of the
obligations of the Company and/or the Managers and or Xx XxXxxxxx and
his Shareholder Associate owed to the Investors under this Agreement:-
18.1.1 any claim in respect of any breach of such obligations shall only be
brought by Alchemy for itself and, at the request of any of the other
Investors, on behalf of such Investors;
18.1.2 the costs incurred by Alchemy in bringing any such claim shall be
borne by all of the Investors in the Relevant Proportions; and
18.1.3 any damages obtained as a result of any such claim will, after
deduction of all costs and expenses, be divided amongst the Investors
in the Relevant Proportions.
18.2 Any liability of the Managers, Xx XxXxxxxx or the Company under any of
the obligations of the Company and/or the Managers and/or Xx XxXxxxxx
to the Investors under this Agreement may in whole or in part be
released, compounded or compromised by the agreement of Alchemy or
time or indulgence may (without in any way affecting the rights of the
Investors against the Managers, Xx XxXxxxxx and his Shareholder
Associate, the Company or any of them) be given with such agreement as
regards any one of the Managers or the Company or Xx XxXxxxxx and his
Shareholder Associate.
18.3 The Investors further agree among themselves (unless they subsequently
agree among themselves to the contrary) that the execution of or
performance of or right to demand any performance of any right granted
or which are capable of being performed hereunder (other than the
rights which MSD Capital specifically has pursuant to Clauses 3.1.2,
6.1 to 6.4 and 7.1 hereunder) may be exercised only by Alchemy acting
on behalf of the Investors.
35
18.4.1 Subject to Clause 18.4.2, the Company hereby undertakes to each of the
Investors, to the extent it is lawfully able, to keep each and every
Indemnified Person fully and effectively indemnified against all or
any claims (whether or not successful, compromised or settled),
actions, liabilities, demands, proceedings or judgments (each a
"Claim") brought or established against any Indemnified Person in any
jurisdiction by any purchaser of, or subscriber for, the Ordinary
Shares pursuant to the Offer, or by any subsequent purchaser or
transferee thereof, or by any governmental agency or regulatory body
or any other person whatsoever and against all losses, damages, costs,
charges or expenses (each an "Expense") which any Indemnified Person
may suffer or incur (including, without limitation, all such Expenses
suffered or incurred in disputing any Claim and/or in establishing its
right to be indemnified pursuant to this Clause 18.4.1) and which in
any such case arises, directly or indirectly, out of the Offer
Document not containing, or being alleged not to contain, all
information relating to the Target and the Target Subsidiaries
required to be contained therein or any such statement therein being
or being alleged to be untrue, inaccurate, incomplete or misleading.
18.4.2 Neither Investor nor any other Indemnified Person shall be entitled to
be indemnified by the Company pursuant to Clause 18.4.1 in relation to
any Claim or Expense to the extent that such Claim or Expense relates
to information about an Indemnified Person contained in the Offer
Document or the Press Release the inclusion of which information was
approved in writing by such Indemnified Person, or for information
contained in the Offer Document for which such Investor is responsible
for the purposes of the Takeover Rules.
18.4.3 An Indemnified Person shall not be entitled to bring a claim under the
indemnity referred to in Clause 18.4.1 after the second anniversary of
Completion.
18.4.4 The Company's liability under the indemnity referred to in Clause
18.4.1 shall not exceed (euro)30,000,000.
18.4.5 As soon as reasonably practicable following him or it becoming aware
of a matter in respect of which the Company has indemnified it in
accordance with Clause 18.4.1, an Indemnified Person shall:-
18.4.5.1 give notice of that matter to the Company, specifying in
reasonable detail the nature of the relevant matter;
18.4.5.2 subject to the Company indemnifying the Indemnified Person
to the Indemnified Person's reasonable satisfaction against
any loss which may be incurred, take such action as the
Company may reasonably request to avoid, dispute, resist,
compromise or defend the relevant matter.
19 Notices
19.1 Any notice or other communication under or in connection with this
Agreement shall be in writing and shall be delivered personally or
sent by first class post in a pre-paid envelope (and air mail if
overseas) or by telefax, to the Party due to receive the notice or
communication at its address set out in this Agreement or such other
address as a Party may specify by notice in writing to the others.
36
19.2 In the absence of evidence of earlier receipt, any notice or other
communication shall be deemed to have been duly given:-
19.2.1 if delivered personally, when left at the address referred to in
Clause 19.1;
19.2.2 if sent by mail other than air mail, two days after posting it;
19.2.3 if sent by air mail, six days after posting it; and
19.2.4 if sent by telefax, on completion of its transmission.
19.3 A copy of every notice or other communication to Alchemy shall be
given at the same time to Alchemy Partners.
20 Governing law and jurisdiction
20.1 This Agreement is governed by the laws of Ireland.
20.2 The courts of Ireland have non-exclusive jurisdiction to hear and
decide any suit, action or proceedings, and to settle any disputes,
which may arise out of or in connection with this Agreement
(respectively, "Proceedings" and "Disputes") and, for these purposes,
each Party irrevocably submits to the jurisdiction of the courts of
Ireland .
20.3 Each Party irrevocably waives any objection which it might at any time
have to the courts of Ireland being nominated as the forum to hear and
decide any Proceedings and to settle any Disputes and agrees not to
claim that the courts of Ireland are not a convenient or appropriate
forum.
IN WITNESS whereof this Agreement has been executed as a Deed the day and year
first before written.
37
SCHEDULE 1
Part 1: The Managers
1 2 3 4 5
Name and Address No. of Target Number of Target Total Number of Maximum liability
Shares in Shares to be shares in the under the
issue at date sold under the Company to be Warranties per
of this Acquisition allotted in clause 4.6.1
Agreement Agreement exchange for ((euro))
Target Shares
Xxxxx X'Xxxxxxxxx 241,833,322 10,825,966 30,470,186 3,000,000
Avoca Lodge
17 Avoca Avenue
Blackrock
Co Dublin
Xxxx Xxxxxx - - - 350,000
000 Xxxxxxxxxxxx
Xxxxxx #0
Xxxxxx
XX 00000
XXX
38
Xxxx Xxxxxxxx - - - 350,000
00 Xxxxxxxxxxx Xxxx
Xxxxxx 0
Xxx Xxxxxxx - - - 350,000
00 Xxxxxxxx Xxxx
Xxxxxx
Xxxxxxxxxx 00000
XXX
39
Part 2: Xx XxXxxxxx
1 2 3 4
Name and Address No. of Target Shares in Number of Target Shares to be Total Number of shares in the
issue at date of this sold under the Acquisition Company to be allotted in exchange
Agreement Agreement for Target Shares
Xxxxxxx XxXxxxxx 241,833,322 45,814,407 27,727,870
Xxxxxxxx Lodge
Kilsallaghan
Co Xxxxxx
00
Shareholder Associates of Xx XxXxxxxx
1 2 3 4
Name and Address No. of Target Shares in issue at Number of Target Shares to be Total Number of shares in the Company
date of this Agreement sold under the Acquisition to be allotted in exchange for Target
Agreement Shares
Lifetime Learning Limited 241,833,322 4,300,000 2,742,317
Burleigh Manor
Peel Road
Xxxxxxx
Isle of Man
41
SCHEDULE 2
The Investors
1 2 3 4 5
Name and Address Nominal Number of Ordinary Amount to be paid for Amount to be paid for
Amount of Shares to be Loan Notes Ordinary Shares
Loan Notes subscribed
Alchemy Partners (Guernsey) Tranche 1: US$120,593,457 32,897,017 Tranche 1: US$55,986,030 US$328,970
Limited of Trafalgar Court, Tranche 2: US$ 67,582,574 Tranche 2: US$31,375,500
Les Banques, St Xxxxx Port,
Guernsey
(Ordinary Shares and Loan
Notes to be registered in
the name of Alchemy Partners
Nominees Limited)
MSD Capital US$ 42,918,225 7,502,983 US$19,924,970 US$ 75,030
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx
XX 00000-0000
Tranche 1 subscription for loan notes to be made by Alchemy in accordance with
Clause 3.1.2
Tranche 2 subscription for loan notes to be made by Alchemy in accordance with
Clause 3.3.3
42
SCHEDULE 3
Warranties
1 Information
1 In respect of each Manager, a1.1 ll information which has been given
by or on behalf of him to Alchemy or to the solicitors, accountants,
consultants, actuaries, insurance advisers or agents of Alchemy in the
course of the negotiations leading to this Agreement was to the best
of his knowledge, information and belief both when given and at the
date hereof true and accurate in all material respects.
1.2 To the best of the knowledge, information and belief of each Manager
there is no fact, matter or circumstance concerning the business or
affairs of the Target and the Target Subsidiaries or relating to the
information contained or referred to in the Accountants' Report or the
Business Plan which he reasonably believes would be material for
disclosure to Alchemy and which has not been disclosed to Alchemy.
1.3 The Business Plan has been honestly and diligently prepared and is
honestly believed by the Managers to be reasonable in all respects.
The forecasts as to the future prospects of the business and affairs
of the Target and the Target Subsidiaries contained in the Business
Plan are based on assumptions which have been fully and carefully
considered by the Managers and the Managers have made all reasonable
and diligent enquiries to ascertain all information and conditions
relevant to the preparation of the forecasts.
1.4 To the best of the knowledge, information and belief of each Manager
the facts contained in the Accountants' Report are true and accurate
in all material respects and each Manager agrees with all statements
(whether of opinion, intention or otherwise) contained in the
Accountants' Report. There is no other matter, fact or circumstance
known to each Manager which relates to the Target and the Target
Subsidiaries which has not been disclosed in the Accountants Report,
the non-disclosure of which they are aware renders the Accountants'
Report misleading in any material respect.
1.5 Each Manager has read the Legal Due Diligence Report and confirms that
to the best of his knowledge, information and belief each and any of
the statements of belief, opinion or intention (or similar statements)
attributable to the Managers or to the Target management or to the
Target (or any of its subsidiaries) are reasonably held on valid
assumptions and are not materially misleading.
1.6.1 There have been no amendments, variations, waivers or collateral
contracts of material significance entered into in relation to the
agreement referred to in paragraph 22 of Section 6 of the Legal Due
Diligence Report, except as described in the Legal Due Diligence
Report.
1.6.2 All material considerations discussed by the Board in connection with
the decision taken in 2002 to delist the Company's ADS's from NASDAQ
are reflected in the relevant Board minutes, a copy of which is
attached to the Disclosure Letter.
1.7 Each Manager has read the Schedule of Disclosed Litigation Claims
attached to the Disclosure Letter ("the Litigation Schedule") and
confirms that the Litigation
43
Schedule has been honestly and diligently prepared and is honestly
believed by the Managers to be reasonable in all respects. The current
projection of the likely cash outflow to Target (as set out in the
Litigation Schedule) for each claim identified in the Litigation
Schedule is based on assumptions which have been fully and carefully
considered by the Managers and the Managers have made all reasonable
and diligent enquiries to ascertain that such projects are reasonable
in the circumstances.
2 Offer
There is nothing known to each Manager which he is aware (having made
no enquiry) would prevent the Offer becoming unconditional in all
respects.
3 Facility Agreements
So far as each Manager is aware (having made no enquiry), the Company
is not and immediately following Completion will not be, in breach of
any provision of the Facility Agreements.
4 The Company
4.1 Save as expressly provided in or contemplated by this Agreement, since
its incorporation the Company has not traded or incurred any liability
or entered into any contract, arrangement or commitment, no
shareholders' or directors' resolutions have been passed and the
Company:-
4.2 has no indebtedness, mortgages, charges, debentures, guarantees or
other commitments or liabilities actual or contingent;
4.2.1 has no employees;
4.2.2 is not party to any contract whatsoever;
4.2.3 has not given any power of attorney or other authority to any person;
4.2.4 is not the lessee of any property;
4.2.5 has no assets; and
4.2.6 has not prepared any audited or management accounts.
4.3 The issued share capital of the Company at the date of this Agreement
is US$38,100 comprising 3,809,400 A ordinary shares of US$ 0.01 each
and 600 Deferred Redeemable Ordinary Shares of US$ 0.01 each.
5 The Managers
5.1 There are no existing contracts or arrangements to which the Target or
any subsidiary is a Party and in which any of the Managers and/or any
person who is a connected person with him is interested.
44
5.2 None of the Managers is either alone or jointly with or as manager,
adviser, consultant, agent or employee of any person directly or
indirectly engaged in any business other than that of the Target and
the Target Subsidiaries.
5.3 None of the Managers is concerned or interested in any way in any
business competing with that carried on by the Target or any Target
Subsidiary or the business of any supplier or customer of the Target
or any Target Subsidiary.
5.4 None of the Managers has ever been charged with or convicted of any
criminal offence nor have bankruptcy or any analogous proceedings been
brought or threatened in respect of any of the Managers, and the
Managers are not aware of any facts or matters which they believe
might give rise to any such criminal or bankruptcy proceedings.
6 Brokerage or commissions
6.1 There is no agreement or arrangement or bonus under which any Manager
or any person who is a connected person with any Manager is to receive
from any person and, so far as the Managers are aware, no person is
entitled to receive from the Target or any subsidiary (i) any finder's
or other fee, brokerage or commission or (ii) any bonus or equivalent
payment, in each case in connection with this Agreement, the Offer
Document, the Facility Agreements or any of the matters contemplated
or referred to in those agreements.
6.2 There is no agreement or arrangement or bonus under which Xxxxx
Xxxxxxxx or any person who is a connected person of Xxxxx Xxxxxxxx is
to receive from any person (i) any finder's or other fee, brokerage or
commission or (ii) any bonus or equivalent payment, in each case in
connection with this Agreement, the Offer Document, the Facility
Agreements or any of the matters contemplated or referred to in those
agreements.
7 Managers' Questionnaires
The answers given by each Manager in his Manager's Questionnaire in
the agreed form are true, accurate and not misleading in any respect.
8 Trading
8.1 Since the acquisition of Broderbund :-
8.1.1 the business and activities of the Target and the Target Subsidiaries
have been carried on in the ordinary and usual course; and
8.1.2 there has been no material adverse change in the financial or trading
position or prospects of the Target and the Target Subsidiaries.
8.2 No Manager is aware of a reason why the revenues from the inward or
outward bound licensing agreements referred to in the Legal Due
Diligence Report should not be received (i) in full and (ii) at the
due time by the Target or the relevant Target Subsidiary.
45
9 Accounts and accounting records
9.1 The Accounts
The Accounts:-
9.1.1 comply with the requirements of the Companies Act 1963-2001;
9.1.2 have been prepared in accordance with US GAAP and in accordance with
accounting principles generally accepted in the US and on a basis
consistent with preceding accounting periods;
9.1.3 show a true and fair view of the state of affairs of the Target as at
the Accounts Date and of its profit (loss) for the financial year
ended on that date;
9.1.4 save as expressly disclosed in the Accounts, are not affected by any
extraordinary, exceptional or non-recurring items;
9.1.5 to the best of the knowledge, information and belief of the Managers
fully disclose all the assets and liabilities (whether ascertained,
contingent or otherwise and whether or not quantified or disputed) of
the Target as at the Accounts Date and make full provision and/or
reserve for all such liabilities; and
9.1.6 to the best of the knowledge, information and belief of the Managers
fully disclose all financial commitments of the Target in existence as
at the Accounts Date.
9.2 The Management Accounts
To the best of the knowledge, information and belief of the Managers,
the Management Accounts:-
9.2.1 were properly prepared in a manner consistent with that adopted in the
preparation of the Accounts and the management accounts of the Target
for all periods ended during the twelve months prior to the Accounts
Date; and
9.2.2 are not materially misleading and do not overstate the assets or
understate the liabilities of the Target as at the dates to which they
were drawn up and do not overstate the profits or understate the
losses during such periods to which they relate.
9.3 Accounting records
The accounting records of the Target:-
9.3.1 to the best of the knowledge, information and belief of the Managers
have at all times been fully, properly and accurately kept and
completed and contain due and accurate records of all matters required
by law to be entered in them; and
9.3.2 to the best of the knowledge, information or belief of the Managers
contain or reflect no material inaccuracies or discrepancies of any
kind.
46
10 Compliance with laws/licences
10.1 To the best of the knowledge, information and belief of the Managers
the Target is entitled to carry on the business now carried on by it
without conflict with any valid right of any person, firm or company
and the Target has conducted its business in all material respects in
accordance with all applicable laws and regulations of Ireland or any
foreign country and to the best of the knowledge, information and
belief of the Managers there is no violation of, or default with
respect to, any statute, regulation, order, decree or judgment of any
Court or any governmental agency of Ireland or any foreign country
which may have a material adverse effect upon the assets or business
of the Target.
10.2 To the best of the knowledge, information and belief of the Managers
all material licences, consents, permits and authorisations (public or
private) have been obtained by the Target to enable the Target to
carry on its business effectively in the places and in the manner in
which such business is now carried on and all such licences, consents,
permits and authorisations are valid and subsisting and the Managers
know of no reason why any of them should be suspended, cancelled or
revoked.
11 Litigation
To the best of the knowledge, information and belief of the Managers
neither the Company, the Target, nor any person for whose acts or
defaults the Company or the Target may be vicariously liable, is
involved in any civil, criminal or arbitration proceedings where the
value of the claim in question exceeds (euro)100,000 nor are such
proceedings pending or, so far as the Managers are aware, threatened
by or against the Company or the Target or any such person and, so far
as the Managers are aware, there are no facts or circumstances which
are likely to lead to any such proceedings.
12 Target Shares
The Target Shares set out against the relevant Warrantor's name in
column 2 of Schedule 1 are legally and beneficially owned by the
relevant Warrantor free from all liens, charges, equities,
encumbrances or interests of any nature whatsoever, or any agreement,
arrangement or obligation to create any of the same, in favour of any
other person.
47
Schedule 4
Details of the Company (immediately following Completion)
Authorised share capital US$1,474,789.98 made up of 143,668,998 Ordinary Shares
of US$0.01 each and 3,810,000 deferred redeemable ordinary shares of US$0.01
each.
Issued share capital US$1,295,203.73 made up of 125,710,373 Ordinary Shares of
US$0.01 each and 3,810,000 deferred redeemable ordinary shares of US$0.01 each
Ordinary Shareholders:-
Name No of shares held
Xx XxXxxxxx 27,727,870
LLT 2,742,317
Xx X'Xxxxxxxxx 30,470,186
Alchemy Partners Nominees Limited 32,897,017
MSD Capital 7,502,983
Shares reserved for further issue:-
Clause 17 options 17,958,625
Warrant shares 2,870,000
Directors: Xx XxXxxxxx
Xx X'Xxxxxxxxx
Xx Xxxxxxxx
Xx Xxxxxx
Xx XxXxxxxx
the Investor Directors
48
SIGNED SEALED AND DELIVERED )
by the said XXXXXXX XXXXXXXX )
in the presence of:- ) /s/ Xxxxxxx XxXxxxxx
/s/ Xxxxxx Xxxxxx
Xxxxxx 0
EXECUTED and delivered as a deed )
By LIFETIME LEARNING )
LIMITED acting by Xxxxx Xxxxx )
)
and Gethin Xxxxx Xxxxxx )
Director
Xxxxx Xxxxx
Director/Secretary
Gethin Xxxxx Xxxxxx
SIGNED SEALED AND DELIVERED )
by the said XXXXX X'XXXXXXXXX )
in the presence of:- ) /s/ Xxxxx X'Xxxxxxxxx
/x/ Xxxxxx Xxxxxx
Xxxxxx 0
SIGNED SEALED AND DELIVERED )
by the said XXXX XXXXXX )
in the presence of:- ) /s/ Xxxx Xxxxxx
/s/ Xxxxxx Xxxxxx
Dublin
SIGNED SEALED AND DELIVERED )
by the said XXXX XXXXXXXX )
in the presence of:- ) /s/ Xxxx Xxxxxxxx
/s/ Xxxxxx Xxxxxx
Xxxxxx 0
49
SIGNED SEALED AND DELIVERED )
by the said XXX XXXXXXX )
in the presence of:- ) /s/ Xxx Xxxxxxx
Xxxxxxx Xxxxxxxx
EXECUTED and delivered as a deed )
by ALCHEMY PARTNERS )
(GUERNSEY) LIMITED acting by ) /s/ Xxxx Xxxxxxxx
)
and )
Director
Secretary /s/ Xxxxx Xxxxxx
Present when the common seal of )
HERTAL ACQUISITION PLC )
acting by ) /s/ Xxxxx XxXxxxxx
and )
Director
Director/Secretary /s/ Xxxxxxx Xxxxxxxx
50
Executed and deliverd as a deed by )
HERTAL INVESTMENTS LIMITED )
acting by )
and )
Director /s/ Xxxx XxXxxxxx
Director/Secretary /s/ Xxxxxxx Xxxxxxxx
EXECUTED and delivered as a deed )
by MSD CAPITAL L.P. as general )
partner of MSD PORTFOLIO L.P. - )
INVESTMENTS )
and )
/s/ Xxxxx Xxxxxxx
Authorised Representative
/s/ Xxxxxx Xxxxxxxx
Authorised Representative
EXECUTED and delivered as a deed )
By RBSM (INVESTMENTS) )
LIMITED acting by ) /s/ Xxxxx Tsoromocos
)
and )
Director
Director/Secretary
51
EXECUTED and delivered as a deed ) /s/ Xxxxxx Xxxxxxx
By BARCLAYS RVCF )
INVESTMENTS LIMITED )
acting by )
and )
Director
Director/Secretary
52