Exhibit 4.1
DATED 1999
XXXX XXXXXX AND OTHERS (1)
THE DIALOG CORPORATION PLC (2)
MUSCAT LIMITED (3)
XXX XXXXXXXX AND OTHERS (4)
----------------------------------------
AGREEMENT FOR THE SALE OF
SHARES AND RELEASE OF OPTIONS
----------------------------------------
CONTENTS
Clause
------
1. Sale and Purchase
2. Consideration
3. Release of Options
4. Completion Conditional
5. Completion
6. Deferral of Completion
7. Matters Pending Completion
8. Options
9. Notices
10. General
SCHEDULES
1. Sellers
2. Optionholders
3. Inter-Company Charging Agreement
4. Amendments required to Company 1996 and 1998 Option Scheme
5. Limits of Authority
6. Business Plan
7. Form of Undertaking from Xxxxxxxx Xxxxxxx
8. IPR Position for Muscat
9. Observer Confidentiality Provisions
10. Form of Option Rollover for 1998 option holders
11. Indemnity
2
AGREEMENT dated
PARTIES:
(1) THE PERSONS whose names and addresses are set out in column (1) of
Schedule 1 (Sellers);
(2) THE DIALOG CORPORATION PLC a company registered in England under number
1890236 whose registered office is at Xxx Xxxxxxxxxxxxxx Xxxxxxxx, 00
Xxxxxxxxx Xxxxxx, Xxxxxx XX0X 0XX (Purchaser);
(3) MUSCAT LIMITED a company registered in England under number 2345573
whose registered office is at St Mary's House, 00 Xxxx Xxxxxx,
Xxxxxxxxxxx, Xxxxxxxxx XX0 0XX (Company)
(4) THE PERSONS whose names and addresses are set out in column (1) of
Schedule 2 (Optionholders).
INTRODUCTION:
(A) The Sellers are the registered holders and beneficial owners of the
numbers of ordinary shares of 1 xxxxx each in the capital of the
Company set opposite the Sellers' names in column (2) of Schedule 1
(Shares).
(B) The Sellers have conditionally agreed to sell and the Purchaser has
agreed to buy the Shares for the consideration set against each
Seller's name in column (3) of Schedule 1 (Consideration).
(C) The Optionholders are holders of options to subscribe for the number of
ordinary shares of 1 xxxxx each in the capital of the Company set
opposite the Optionholders' names in column (2) of Schedule 2
(Options).
(D) The Optionholders have conditionally agreed to release their Options in
return for the consideration set opposite each Optionholder's name in
column (3) of Schedule 2 (Option Consideration).
IT IS AGREED as follows:
1. SALE AND PURCHASE
1.1 The Sellers shall with effect from Completion sell the number of Shares
shown opposite their names in column (2) of Schedule 1 and the
Purchaser shall purchase such Shares on the terms set out in this
Agreement.
1.2 The Sellers shall with effect from Completion sell the Shares with full
title guarantee and free from all claims, liens, charges, equities,
options and encumbrances (Encumbrances) and with all rights now and in
the future attaching to them, save for
3
any Encumbrance formally notified to the Purchaser in writing by a
Seller prior to the date of this Agreement.
1.3 The Sellers severally warrant and represent to the Purchaser that the
Sellers are entitled to sell and transfer to the Purchaser the full
legal and beneficial ownership of the Shares on the terms of this
Agreement.
1.4 Each of the Sellers and the Purchaser waives, and agrees to procure the
waiver of, any restrictions on transfer (including pre-emption rights)
which may exist in relation to the Shares under the existing articles
of association of the Company or otherwise.
1.5 Despite any other term of this Agreement, the parties agree that all
legal and beneficial interest in and title to the Shares shall remain
with the Sellers until Completion when such interests shall pass to the
Purchaser.
2. CONSIDERATION
2.1 Subject to the Purchaser's compliance with Clause 2.4 and 2.5 below,
the Consideration payable to the Sellers under this Agreement shall be
satisfied, at the Purchaser's option, by the issue to the Sellers of
Consideration Shares (as defined in Clause 2.2 below) and/or the
payment of a cash sum, provided that the total value of such
Consideration Shares and/or cash sum delivered to the Sellers is equal
to the sums set opposite the Sellers' names in column (3) of Schedule
1.
2.2 If the Purchaser elects to satisfy the Consideration in whole or in
part by Consideration Shares, the Purchaser shall issue to each of the
Sellers credited as fully paid such number of ordinary shares of 1
xxxxx each in the capital of the Purchaser whose value (as ascertained
in accordance with Clause 2.3 below) shall be nearest to but not less
than the sum specified in column (3) of Schedule 1 (or such part of
that sum as specified in the Notice (as defined below)) (Consideration
Shares).
2.3 For the purpose of Clause 2.2, the value of each of the Consideration
Shares shall be a sum equal to the average middle market quotation on
the London Stock Exchange (Exchange) (ascertained by reference to the
Daily Official List of the Exchange) of an ordinary share of 1 xxxxx in
the capital of the Purchaser for the five days on which the Exchange is
open for business immediately preceding the date of Completion.
2.4 The Purchaser shall not less than fourteen days prior to Completion
give to the Sellers written notice (Notice) specifying the proportion
of the sum set opposite each of the Sellers' names in column (3) of
Schedule 1 which shall be satisfied by the issue of Consideration
Shares (if any) and/or the proportion of such sum to be satisfied by
payment of a cash sum (if any) and the date of Completion.
2.5
2.5.1 The Consideration Shares shall be issued credited as fully paid up,
shall be admitted to quotation on the London Stock Exchange and shall
rank pari passu in all respects with the existing ordinary shares in
the capital of the Purchaser and quoted on the London Stock Exchange.
4
2.5.2 The Purchaser shall give to the Sellers all reasonable assistance
(without the Purchaser incurring any liability or cost) both before and
after Completion to allow the Sellers to place some or all of the
Consideration Shares through the Purchaser's broker.
2.6 In respect of any of the Consideration Shares issued to the Seller
under this Agreement the Purchaser warrants that neither the issue of
Consideration Shares by the Purchaser or the entering into of this
Agreement by the Purchaser would contravene any provision of the
Companies Xxx 0000 or any rule, regulation or other requirement of the
Exchange or NASDAQ or the Memorandum or Articles of Association of the
Purchaser and has been duly authorised by the board of directors of the
Purchaser and that the entry into by the Purchaser of this Agreement
and the Completion of the arrangements envisaged by this Agreement does
not, subject to the provisions of clause 4.1, require the consent of
any third party.
3. RELEASE OF OPTIONS
3.1 Each of the Optionholders severally warrants to the Purchaser that he
is the beneficial owner of his Option which is held free from all
Encumbrances. For the avoidance of doubt all parties shall treat all
Options as valid and subsisting for the purposes of Completion
notwithstanding any other matter.
3.2 Each of the Optionholders agrees not to assign the benefit of or
encumber or otherwise dispose of any interest in his Option nor
exercise or seek to exercise any rights under his Option pending
Completion (as defined below).
3.3 In consideration of the Option Consideration each of the Optionholders,
with effect from Completion, irrevocably releases:
3.3.1. all of his rights and interests in or arising from his Option;
and
3.3.2. releases the Company from all of its obligations in respect of
his Option.
3.4 Subject to the Purchaser's compliance with Clause 3.7 below, the Option
Consideration shall be satisfied, at the Purchaser's option, by the
issue of Option Consideration Shares (as defined in Clause 3.5 below)
and/or by payment of a cash sum, provided that the total value of such
Option Consideration Shares and/or cash sums is equal to the sums set
opposite the Optionholders' names in column (3) of Schedule 2.
3.5 If the Purchaser elects to satisfy all or any part of the Option
Consideration by the issue of Option Consideration Shares (as defined
below), the Purchaser shall issue to each Seller credited as fully paid
such number of ordinary shares of 1 xxxxx each in the capital of the
Purchaser whose value (as ascertained in accordance with Clause 3.6
below) shall be nearest to but not less than the sum specified opposite
that Seller's name in column (3) of Schedule 2 (or such part of that
sum specified in the Option Notice (as defined below)) (Option
Consideration Shares).
3.6 For the purpose of Clause 3.5, the value of each of the Option
Consideration Shares shall be a sum equal to the average middle market
quotation on the Exchange (ascertained by reference to the Daily
Official List of the Exchange) of an ordinary share of 1 xxxxx in
5
the capital of the Purchaser for the five days on which the Exchange is
open for business immediately preceding the date of the Option Notice
(as defined below)
3.7 The Purchaser shall not less than fourteen days prior to Completion
give to the Optionholders written notice (Option Notice) specifying the
proportion of the sum set opposite each of the Optionholders' names in
column (3) of Schedule 2 which shall be satisfied by the issue of
Option Consideration Shares (if any) and/or the proportion of such sum
to be satisfied by way of a cash sum (if any) and the date of
Completion.
3.8 The Option Consideration shall be paid or, as the case may be,
satisfied net of PAYE (if applicable) the cash amount of which the
Purchaser shall deduct from the value of the Option Consideration and
account for it to the Inland Revenue.
3.9
3.9.1 The Consideration Shares shall be issued credited as fully paid up,
shall be admitted to quotation on the London Stock Exchange and shall
rank pari passu in all respects with the existing ordinary shares in
the capital of the Purchaser and quoted on the London Stock Exchange
3.9.2 The Purchaser shall give the Optionholders all reasonable assistance
(without the Purchaser incurring any liability or cost) both before and
after Completion to allow the Optionholders to place some or all of the
Consideration Shares through the Purchaser's broker.
3.10 In respect of any of the Consideration Shares issued to the
Optionholders under this Agreement the Purchaser warrants that neither
the issue of Consideration Shares by the Purchaser or the entering into
of this Agreement by the Purchaser would contravene any provision of
the Companies Xxx 0000 or any rule, regulation or other requirement of
the Exchange or NASDAQ or the Memorandum or Articles of Association of
the Purchaser and has been duly authorised by the board of directors of
the Purchaser.
3.11 If any Optionholder shall before Completion exercise his rights under
the Muscat Limited Unapproved Executive Share Option Scheme 1996 and
become a shareholder in the Company then such Optionholder shall be
treated as a Seller in all respects.
4. COMPLETION CONDITIONAL
4.1 Completion of the sale of the Shares and the Options and the
performance by the parties of their obligations under Clauses 5.2, 5.3
and 5.4 (Completion) is conditional upon the following conditions being
satisfied on or before 30 December 1999 (or such earlier date as may be
required under the terms of this Agreement or such later date as the
parties may agree in writing) (Conditions):
4.1.1. the consent of the Purchaser's bankers to Completion of this
Agreement where such consent is required from them and the
Purchaser confirms that it has given all of its bankers who
are party to the Purchaser's senior debt facility a copy of
this Agreement and at the date hereof has received no negative
comments. The Purchaser shall forward any comments received
from its bankers to the Sellers and Optionholders as soon as
practicable and all parties shall use their reasonable
6
endeavours to amend this Agreement to reflect any reasonable
comments received but so that the underlying commercial nature
of the deal as set out in this Agreement shall not be changed.
The Purchaser shall use its reasonable endeavours to obtain
the banks' consent as soon as practicable and shall keep the
other parties informed with all material details thereof; and
4.1.2. the compliance by the Purchaser with the "related party"
requirements of Chapter 11 of the Listing Rules of the
Exchange in relation to the transactions provided for in this
Agreement but so that the Purchaser shall use its reasonable
endeavours for the Exchange to approve as soon as practicable
the transaction set out in this Agreement as a small
transaction (within the meaning of paragraph 11.8 of the
Exchange Listing Rules) without the issue of a circular. The
Purchaser shall keep the other parties hereto promptly
informed with all material details of its progress with the
Exchange.
4.2 If any of the Conditions shall not have been fully satisfied by the
date mentioned in Clause 4.1, or if any of such conditions shall cease
to be capable of being satisfied by that date, then this Agreement
shall immediately lapse and cease to have effect and no party shall
have any claim against any other in respect of this Agreement except in
relation to any prior breach of this Agreement.
4.3 The conditions precedent set out in clause 4 shall be deemed to be
satisfied and this Agreement shall be deemed to become unconditional so
that the Purchaser shall be required to meet the terms of clauses 2 and
3 above (in full) in the event that:-
4.3.1 a third party acquires at least 90% of the entire issued
share capital of the Purchaser quoted on the Exchange; or
4.3.2 the Purchaser makes an announcement to the Exchange that its
financial restructuring has been completed involving the
refinancing of at least US $90 million (net of deal costs) of
the Purchaser's senior debt facilities as recorded in the
annual report of the Purchaser to 30 December 1998; or
4.3.3 the Purchaser shall sell or otherwise transfer the legal
and/or beneficial interest in any or all of its shares in the
Company.
In the event that the terms of this clause 4.3 become operational then
Completion shall take place no later than 14 days after the acquisition
or announcement or transfer referred to above.
5. COMPLETION
5.1 Subject to all the Conditions referred to in Clause 4.1 having been
satisfied or, as the case may be, waived pursuant to Clause 4.2,
Completion shall take place at the offices of the Purchaser's
solicitors Xxxxxxxx Xxxxxxx on 30 December 1999 or at such earlier or
later time or date as the Sellers and the Purchaser may agree in
writing or as otherwise provided for in this Agreement.
5.2 On Completion:
7
(a). the Sellers shall deliver or procure that there are delivered
to the Purchaser duly completed and signed transfers of the
Shares in favour of the Purchaser together with the relative
share certificates or an indemnity in respect thereof in the
form attached at Schedule 11;
(b). the Optionholders shall deliver to the Purchaser the option
certificates evidencing the Options or an indemnity in respect
thereof in the form attached at Schedule 11; and
(c). the parties shall (so far as they are able) procure that the
directors of the Company shall hold a board meeting at which
they will vote in favour of the registration of the Purchaser
(or its nominees) as holder of the Shares subject to the
production in due course of duly stamped and completed
transfers in respect of the Shares together with the relative
share certificates or an indemnity thereof in the form
attached at Schedule 11.
5.3 Against compliance with Clause 5.2(a), (b) and (c) but subject to
Clause 5.6 below, the Purchaser shall deliver to each Seller through
the Sellers' solicitors Xxxxx & Xxxxx client account (whose receipt
shall be a good and sufficient discharge of the Purchaser's payment
obligations and the Purchaser shall be under no obligation to make any
enquiry as to the distribution of such payment) in cleared funds his
proportion of the Consideration as shown in column (3) of Schedule 1
and/or allot the Consideration Shares.
5.4 Against compliance with Clause 5.2(b) the Purchaser shall deliver to
each Optionholder through the Optionholders' solicitors Xxxxx & Xxxxx
client account (whose receipt shall be a good and sufficient discharge
of the Purchaser's payment obligations and the Purchaser shall be under
no obligation to make any enquiry as to the distribution of such
payment) in cleared funds his proportion of the Option Consideration
and/or allot the Option Consideration Shares (net, in each case, of
PAYE if applicable).
5.5 Subject to clause 6, none of the parties to this Agreement shall be
required to complete the sale and purchase of any of the Shares or the
cancellation of the Options unless the sale and purchase of all of the
Shares and the cancellation of all of the Options is completed
simultaneously.
5.6 If any of the provisions of Clauses 5.2, 5.3 and 5.4 are not complied
with on the date fixed for Completion the party or parties not in
default may (without prejudice to its or their other rights and
remedies including the right to claim damages for the breach):
(a) defer Completion to a date not more than 30 days after such
date (and so that the provisions of this Clause 5.6, apart
from this Clause (a), shall apply to Completion as so
deferred) and if such deferral is made then, if the Purchaser
is in default, then the Purchaser shall pay interest on the
unpaid Consideration during the deferral period at a rate of
20% per annum ; or
(b) proceed to Completion so far as practicable (without prejudice
to his or their rights under this Agreement); or
8
(c) rescind this Agreement without liability to any other party;
or
(d) waive all or any of the obligations in question of the party
or parties in default.
5.7 If any Seller makes default in transferring the Shares in accordance
with Clause 5.2, the directors of the Company shall be entitled to
receive and give a good discharge for the Consideration for the Shares
on behalf of such Seller (but shall not be bound to earn any interest
on any cash consideration) and each Seller severally and irrevocably
appoints any one of the directors of the Company as his attorney to
execute on his behalf the transfer or transfers of the Shares in favour
of the Purchaser (or as the Purchaser may direct) and such other
documents as may be necessary to transfer title to the Shares to the
Purchaser (or as the Purchaser may direct) and authorises the directors
of the Company to approve the registration of such transfer or
transfers and such other documents.
5.8 On the execution of this Agreement the Sellers and the Optionholders
will deliver to the Purchaser's solicitors Xxxxxxxx Xxxxxxx against an
undertaking (in the form set out in Schedule 7 hereto) from the
Purchaser's solicitors to the Sellers' and Optionholders' solicitors
Xxxxx & Xxxxx the completed (save for date) stock transfer forms and
certificates relating to the Shares and the Options. The Sellers and
the Optionholders irrevocably and unconditionally instruct the
Purchaser's solicitors Xxxxxxxx Xxxxxxx to date and deliver such stock
transfer forms and certificates to the Purchaser on Completion in
accordance with this Agreement. If this Agreement shall lapse in
accordance with clause 4.2 or shall be rescinded in accordance with
clause 5.6 then the Company shall immediately return or procure that
there are returned to the Sellers and the Optionholders the stock
transfer forms and certificates to which they are entitled.
6. DEFERRAL OF COMPLETION
Notwithstanding any contrary provisions in this Agreement, if the restructuring
referred to in clause 4.3.2 hereof has not taken place then the following
provisions will apply in respect of Xx Xxxxxx and Xx Xxxxxx only:
6.1 the Purchaser may elect by notice in writing to Xx Xxxxxx and Xx Xxxxxx
given not less than 14 days prior to Completion to defer Completion in
respect of Shares representing the whole or any part of the excess of
the Consideration due to Xx Xxxxxx or Xx Xxxxxx above (pound)250,000 to
a date not exceeding six months following Completion instead of
Completion but so that any deferral shall apply equally to Xx Xxxxxx
and Xx Xxxxxx;
6.2. if the restructuring referred to in clause 4.3.2 hereof shall take
place during the period of any election under clause 6.1 then the date
of Completion shall be treated as shortened to 14 days after the date
of such restructuring.
6.3. if the Purchaser makes such an election as is described in Clause 6.1
either Seller concerned may elect by notice in writing to the Purchaser
at any time prior to Completion to have the payment or satisfaction of
the whole or any part of the Consideration due to him deferred to the
last day of the period of six months following
9
Completion and any such election made by a Seller shall supersede any
election made by the Purchaser under Clause 6.1;
6.4. the price payable for each Share in respect of which Consideration is
deferred shall be increased by a rate of 20% per annum or pro rata
thereto, to be paid when the deferred Consideration is payable;
6.5. the element of any deferred amount payable under Clause 6.3 may at the
option of the Purchaser be paid in cash or satisfied by the issue to
the Seller concerned credited as fully paid of such number of ordinary
shares of 1 xxxxx each in the capital of the Purchaser whose value
shall be nearest to but not less than the amount of such interest and
for such purpose the value of such an ordinary share shall be taken to
be a sum equal to the average middle market quotation on the Exchange
(ascertained by reference to the Daily Official List of the Exchange)
of an ordinary share of 1 xxxxx in the capital of the Purchaser for the
five day on which the Exchange is open for business immediately
preceding the date on which the deferred amount is payable;
6.6. if any deferred Consideration is to be paid to a Seller following
Completion, the provisions of Clause 7.1 below shall apply so that
various consents will be required by the Company from any Seller in
relation to whom any Consideration is deferred until due payment of
such deferred Consideration is made.
7. MATTERS PENDING COMPLETION
7.1 Subject to clause 7.2 and clause 7.3, the Company agrees and the
Purchaser undertakes to procure that (except with the prior written
consent of each of Xx Xxxxxx, Xx Xxxxxx and Cambridge Quantum Fund
Limited for so long as they hold any Shares, such consent not to be
unreasonably withheld or delayed) so far as it is able that from the
date of this Agreement until Completion
(a) the Company shall carry on its business in the ordinary
course;
(b) the Company shall not give or agree to give or allow to exist
or agree to allow to exist any Encumbrance over its assets or
undertaking except for Encumbrances existing at the date of
this Agreement;
(c) the Company shall not enter into or agree to enter into any
onerous contracts outside the ordinary course of its business;
(d) the Company shall not sell, transfer or otherwise dispose of
its business, undertaking or assets (including intellectual
property) or any significant part of it or them or agree so to
do otherwise than in the ordinary course of its business, but
so that no sales transfers or sales transfers or disposals of
any kind as contemplated in this clause shall be made to the
Purchaser or any Company associated with the Purchaser (and
"associate" shall be defined under section 417(3) of the
Income and Corporation Taxes Act 1988);
(e) the Company shall continue to maintain in force valid
insurances in respect of its assets and business;
10
(f) the Company shall not declare any dividends to be paid to its
members;
(g) the Company and the Purchaser shall comply with the provisions
and procedures contained in the Inter-company charging
agreement set out in Schedule 3;
(h) the Company will give to the Observer (as defined below)
reasonable notice of board meetings of the board of directors
of the Company accompanied by all information distributed to
the directors of the Company for the purpose of the relevant
board meeting;
(i) the Company shall not create any fixed or floating charge,
lien (other than a lien arising by operation of law) or other
encumbrance over the whole or any part of its undertaking,
property or assets;
(j) the Company shall not borrow from any person except the
Purchaser and in the case of the Purchaser on the terms set
out in Clause 7.1 (v) of this Agreement;
(k) the Company shall not give any guarantee on indemnity for a
sum in excess of (pound)5,000 except in the ordinary course of
business;
(l) the Company shall not issue any shares or create any new
shares;
(m) the Company shall not alter the Board make up which shall
consist of Xx Xxxxxx, Xx Xxxxxx, Xx Xxxxxx and Xx Xxxxxx of
whom Xx Xxxxxx shall be Chairman but shall have no casting
vote;
(n) the Company shall not appoint a committee of the Directors or
a local board or delegate any of the powers of the directors
to a committee or local board;
(o) the Company shall not alter the rights attaching to any class
of shares of the Company;
(p) the Company shall not consolidate, sub-divide or convert any
of the Company's share capital;
(q) the Company shall not issue renounceable allotment letters or
permit any person entitled to receive an allotment of shares
to nominate another person to receive the allotment;
(r) the Company shall not create or acquire a subsidiary or
dispose of any shares in a subsidiary;
(s) the Company shall not do or permit to be done any act or thing
whereby the Company may be wound up voluntarily;
(t) the Company shall not issue securities convertible into shares
in the Company or debentures in the Company, or share
warrants in the Company or Options in
11
the Company in respect of shares in the Company;
(u) the Company shall not acquire, purchase or subscribe for
shares, debentures, mortgages or securities ( or any interest
in any of them) in any person; and
(v) the Purchaser shall provide working capital to the Company of
at least (pound)70,000 per month which shall be treated as an
unsecured loan by the Purchaser to the Company repayable after
all sums are due to Sellers and Optionholders hereunder have
been repaid and shall otherwise be subject to the provisions
of the Intercompany Loan Facility Agreement dated 16th January
1998 entered into by the Company and the Purchaser which shall
apply mutatis mutandis and the parties agree and acknowledge
does apply mutatis mutandis to all borrowings outstanding by
the Company from the Purchaser;
(w) to the fullest extent permitted by law, neither the Company
nor its directors shall apply for an administration order;
(x) the Company shall hold board meetings at least monthly;
(y) the Company shall on the date hereof adopt new limits of
authority in the form set out in schedule 5;
(z) to the extent reasonably practicable, the Purchaser shall not
allow the Company to become insolvent (within the definitions
of insolvency set out in section 123(1) or (2) Insolvency Act
1986);
(aa) the Company shall comply with its business plan as set out in
Schedule 6.
7.2.1. Subject to compliance with Clause 7.1, the business of the Company
shall be managed as the Purchaser shall direct for the period until the
sale of all of the Shares in whatever manner it sees fit consistent
with the best interests of the Company and with the intention of not
undermining the value of the Company.
7.2.2. The Sellers and the Optionholders undertake that they shall exercise
their voting rights and other rights as shareholders and optionholders
in the Company in such a way as not to prevent or hinder but where
necessary to assist the Purchaser from complying with its obligations
and exercising its rights under this Agreement.
7.2.3. The parties agree that the continued and intended exploitation of the
Company's intellectual property rights by the Purchaser in respect of
the projects more fully described in Schedule 8 known as K1 and Webtop
is consented to and the Purchaser shall not need any further consent of
any party under this Agreement.
7.3 In accordance with clause 7.1(d), intellectual property rights existing
at the date of this Agreement that are vested in the Company shall
remain vested in the Company. Subject to the foregoing all other
intellectual property shall be dealt with in accordance with
Schedule 8.
12
7.4 Each of the Sellers undertakes that he will do everything within his
power to assist the Purchaser in complying with Clause 7.1.
7.5 The Purchaser, the Company and the Sellers agree to Cambridge Quantum
Fund Limited having the right to appoint a representative as an
observer at Board Meetings of the Company (the "Observer") who will,
subject to signing a confidentiality agreement in the form set out in
Schedule 9, be entitled to attend and monitor all meetings of the
directors of the Company pending Completion in an observer capacity
with the sole purpose of monitoring that the provisions of this
Agreement are being abided by and with no right to vote but the right
to participate and speak in those meetings to the extent necessary for
the aforesaid purpose. The Purchaser agrees to pay to the Cambridge
Quantum Fund Limited in respect of the Representative's monitoring
services a fee of (pound)5,000 plus VAT such fee being payable the
earliest of Completion in respect of Cambridge Quantum Fund's shares or
on or before 30 December 1999..
8. OPTIONS
8.1 On the date hereof the parties hereto shall cause the amendment of the
1996 and 1998 share option schemes of the Company as set out in
Schedule 4 and so that all of the parties hereto who are shareholders
in the Company give consent to such amendments which consent shall be
treated as a written resolution under Section 381A Companies Xxx 0000.
8.2 As soon as reasonably appropriate and in any event by Completion, the
Purchaser shall, make an offer to the holders of options under the
Company's 1998 option scheme of options over shares of the Purchaser on
the terms of the said 1998 option scheme (as amended pursuant to clause
8.1 hereof) (provided they are at the time of the offer employees of
the Company or the Purchaser) which offer shall be substantially in the
form set out in Schedule 10 ("the Option Rollover").
9 NOTICES
----------------
9.1 All notices given under this Agreement shall be in writing and shall be
sent, in the case of a company, to its registered office from time to
time or, in the case of any other person, his address as given in this
Agreement or such other address as he may have notified to the other
parties in writing. Any such notice may be delivered personally or by
first class prepaid letter or facsimile transmission and shall be
deemed to have been served, if by delivery, when delivered, if by first
class post, 48 hours after posting and if by facsimile transmission
when despatched.
10 GENERAL
10.1 This agreement may not be assigned in whole or in part but is binding
upon the parties' successors and personal representatives.
10.2 The parties shall bear their own costs relating to the negotiation,
preparation and implementation of this Agreement except as follows:
13
(a) the Purchaser shall bear the stamp duty payable on the
transfers of the Shares; and
(b) the Purchasers shall bear the reasonable legal fees charged by
Xxxxx & Xxxxx for advice given to any of the Sellers or the
Optionholders in connection with this Agreement up to a
maximum aggregate of (pound)5,000 plus VAT.
10.3 This Agreement shall be governed by English law and the parties submit
to the non- exclusive jurisdiction of the English Courts.
10.4 Each party shall execute such further documents and perform and do such
further acts and things as any of the other parties may reasonably
request in writing in order to carry the provisions of this Agreement
into full effect. The costs and expenses incurred in carrying out any
such request will be paid by the party or parties making the request.
10.5 This Agreement may be executed in any number of counterparts and all
the counterparts when taken together will constitute one agreement.
Each party may enter into this Agreement by executing a counterpart.
10.6 None of the parties shall at any time make any announcement of this
transaction or disclose any term of this Agreement, or of any document
referred to in this Agreement, without the prior written approval of
the other parties except to the extent that such information is already
in the public domain. The parties shall each use their best endeavours
to keep the terms of this transaction which are not already in the
public domain from time to time strictly confidential. Despite the
above, a party shall be entitled to make any announcement or disclosure
which is imposed on that party by law or by the rules of the Exchange
or any other regulatory body to which that party is subject but the
parties shall, as far as practicable, consult with one another on the
form of such announcement or disclosure.
10.7.1 This Agreement together with any other documents entered into by the
parties in connection with the Agreement constitute the entire
agreement between the parties relating to its subject matter and
supersede all previous agreements between the parties relating to such
subject matter. In particular, the parties agree that all of their
rights and obligations under the Option Agreement dated 14 August 1997
made between the Sellers, the Purchaser and the Company shall be
suspended pending Completion, and shall terminate with effect from
Completion, and that the parties shall have no rights or remedies as a
result of such suspension and/or termination. If this Agreement shall
lapse in accordance with clause 4.3 or shall be rescinded in accordance
with clause 5.6 then the rights and obligations under such agreements
shall immediately revive.
10.7.2 The Purchaser and the Company agree that the Call Option Agreement
between them and others dated 10th July 1998 shall be null and void and
of no further effect in respect of these parties thereto who accept in
full the Option Rollover such acceptance to be in the form set out in
Schedule 10 or as may be otherwise agreed by the Purchaser in writing.
14
10.8 Each party confirms that, in agreeing to enter into this Agreement,
that party has not relied on any representation, warranty or other
assurance except those set out in this Agreement. To the extent any
previous representation, warranty or assurance was made to a party that
party waives all rights and remedies in respect of it. However, nothing
in this Clause shall limit or exclude liability for fraud.
EXECUTED as a Deed by the parties on the date specified at the beginning of this
Agreement.
15
EXECUTED and DELIVERED as a Deed by )
XXXX XXXXXX )
in the presence of: )
Signature of Witness:
Name of Witness:
Address of Witness:
Occupation of Witness:
EXECUTED and DELIVERED as a Deed by )
XXXXXX XXXXXX )
in the presence of: )
Signature of Witness:
Name of Witness:
Address of Witness:
Occupation of Witness:
EXECUTED and DELIVERED as a Deed by )
IAN BOSTON )
in the presence of: )
Signature of Witness:
Name of Witness:
Address of Witness:
Occupation of Witness:
16
EXECUTED and DELIVERED as a Deed by )
XXXXXXX BOSTON )
in the presence of: )
Signature of Witness:
Name of Witness:
Address of Witness:
Occupation of Witness:
EXECUTED and DELIVERED as a Deed by )
XXXXXXX XXXX )
in the presence of: )
Signature of Witness:
Name of Witness:
Address of Witness:
Occupation of Witness:
EXECUTED and DELIVERED as a Deed by )
XXX XXXXXXXX )
in the presence of: )
Signature of Witness:
Name of Witness:
Address of Witness:
Occupation of Witness:
17
EXECUTED and DELIVERED as a Deed by )
XXXXXX XXXXX )
in the presence of: )
Signature of Witness:
Name of Witness:
Address of Witness:
Occupation of Witness:
EXECUTED and DELIVERED as a Deed by )
XXXXXX XXXXXX )
in the presence of: )
Signature of Witness:
Name of Witness:
Address of Witness:
Occupation of Witness:
EXECUTED and DELIVERED as a Deed by )
XXXXXX XXXXXX )
in the presence of: )
Signature of Witness:
Name of Witness:
Address of Witness:
Occupation of Witness:
EXECUTED as a deed by ) Director:
18
THE DIALOG CORPORATION PLC )
and signed by two duly authorised )
officers on its behalf ) Director/Secretary:
EXECUTED as a deed by ) Director:
MUSCAT LIMITED )
and signed by two duly authorised )
officers on its behalf ) Director/Secretary:
EXECUTED as a deed by ) Director:
CAMBRIDGE QUANTUM FUND
LIMITED )
and signed by two duly )
authorised officers on its behalf ) Director/Secretary:
EXECUTED as a deed by ) Director:
PROVIDENCE INVESTMENT )
COMPANY LIMITED and signed by )
two duly authorised officers on its behalf ) Director/Secretary:
19
SCHEDULE 1
SELLERS
------------------------------------------------------------------------------------------------------------
(1) (2) (3)
(Sellers' names and addresses) (The Shares) (Consideration)
(pound)
------------------------------------------------------------------------------------------------------------
(1) Xxxx Xxxxxx ("Xx Xxxxxx") 1,592 1,024,514
0 Xxxxxxxxxx Xxxx, Xxxxxxxxx XX0 0XX
------------------------------------------------------------------------------------------------------------
(2) Xxxxxx Xxxxxx ( "Xx Xxxxxx") 1,592 1,024,514
00 Xxxx Xxxx, Xxxxxxx XX0 0XX
------------------------------------------------------------------------------------------------------------
(3) Cambridge Quantum Fund Limited 354 227,813
000 Xxxxxxx Xxxx, Xxxxxx Xxxx, Xxxxxxxxx XX0 0XX
------------------------------------------------------------------------------------------------------------
(4) Providence Investment Company Limited 62 39,899
La Xxxxx Xxxxxxxx, Xx Xxxxxx, Xxxxxx XX0 0XX
------------------------------------------------------------------------------------------------------------
(5) Ian Boston 62 39,899
Xxx Xxxxxxx, Xxxx Xxxxxx, Xxx Xxxxxxx, Xxxxx XX0
0XX
------------------------------------------------------------------------------------------------------------
(6) Xxxxxxx Boston 62 39,899
00 Xxxxxx Xxxx, Xxxxxx XX00 0XX
------------------------------------------------------------------------------------------------------------
(7) Xxxxxxx Xxxx 30 19,306
Xxxxxxx Xxxxx, Xxx Xxxxx Xxxx, Xxxxxxxxxxxx, Xxxxx
XX0 0XX
------------------------------------------------------------------------------------------------------------
20
SCHEDULE 2
OPTIONHOLDERS
--------------------------------------------------------------------------------------------------------------
(1) (2) (3)
(Optionholders' names and addresses) (The Option Shares) (Option Consideration)
(pound)
--------------------------------------------------------------------------------------------------------------
Xxx Xxxxxxxx 103 50,835
00 Xxxxxxxx Xxxxxx
Xxxxxxxxx
XX0 0XX
--------------------------------------------------------------------------------------------------------------
Xxxxxx Xxxxx 23 11,351
00 Xxxxxxxx Xxxxxxx
Xxxxxxxx
Xxxxxxxxxxxx
XX00 0XX
--------------------------------------------------------------------------------------------------------------
Xxxxxx Xxxxxx 23 11,351
0 Xxxxx Xxxx
Xxxxxxxxxx
Xxxxxxxxx
XX0 0XX
--------------------------------------------------------------------------------------------------------------
Xxxxxx Xxxxxx 23 11,351
00 Xxxxxx Xxxxxxx
Xxxxxxxxx
XX0 0XX
--------------------------------------------------------------------------------------------------------------
21
SCHEDULE 3
Inter-company Charging Agreement
Introduction
Recently The Dialog Corporation has started to draw on resources from Muscat
management and staff as part of the Web Solutions Division of its own business.
So as to preserve the "asset" base of Muscat's own company, for the benefit of
all minority shareholders, both Dialog and Muscat will operate cross-charging
methods between the two companies. This will allow Dialog also to make
appropriate year-end planning decisions on how to integrate Muscat's accounts
within Dialog's consolidated accounts at the year-end. Currently Dialog is
loaning money to Muscat, so some of the charge back will offset the loans (and
inherent investment in staff and equipment) which Dialog is making via the
Muscat Limited vehicle.
For ease of accounting, only two charge bands have been created, so as not to
complicate the procedures too much.
There are two components to any Muscat technology sale:
. A licence to commercially exploit Muscat-owned intellectual property
. Professional services deployed to customise or bespoke Muscat software
to meet particular customer product requirements
For the purposes of this Schedule 3, "net selling price" shall mean the revenues
received by Dialog or any member of the Dialog group of companies.
22
Licence to commercially exploit software
Application Products
The Agreement between Muscat Limited and The Dialog Corporation (formerly
M.A.I.D. plc) of 14th August 1997 stipulated that Dialog could use Muscat
technology freely for developmental purposes, yet pay reseller prices for Muscat
products when commercially exploiting them. Therefore where Dialog sells a
Muscat product, Muscat expects to receive 65% of the net selling price, giving
Dialog a 35% margin.
Therefore by example:
. any sales of Muscat Empower by direct Muscat sales team would deliver
100% net selling price to Muscat Limited
. any sales of Muscat Empower by Dialog sales staff would deliver 65% net
selling price to Muscat and 35% net selling price to Dialog
The same margins exist for application products like Muscat fx, Muscat Empower
and Euroferret. A sale is made when a version of the application product is
distributed, as a working software package, either directly, or via resellers,
to a customer's own webserver, or a remote server managed by a third party on
the customer's behalf.
Embedded technology
Core Muscat is sold as an enabling technology for Third-Parties to embed (OEM)
within their own applications. Muscat's standard OEM agreement includes a 15%
royalty charged on net selling price of every Application Product sold by the
Third-Party that includes any part of Core Muscat. Typically the Third-Party OEM
buys product versions of the Muscat Empower Developer environment to assist
their own learning curve and commits to an advance royalty sum at the start of
the contract, from which future royalties revenues are offset against the
initial advance royalty sum.
For the purposes of K1, The Dialog Corporation needs to license Core Muscat at a
15% royalty on net selling price, with a minimum per server licence cost of 3000
GBP, whichever is higher. This means Dialog is not having to pay 65% of net
selling price, only a 15% royalty, but does need to pay for development costs
which write the application code above and around the Core Muscat system.
For the purposes of K1, The Dialog Corporation needs to license Core Muscat at a
15% royalty on net selling price, with a minimum per server licence cost of 3000
GBP, whichever is higher. Where Dialog allows distributors to sell its
technology under licence, including Fujitsu, the minimum server licence cost
payable to Muscat will be equal to 15% royalty on net selling price or 1,500 GBP
per server, whichever is higher.
For the purposes of WebTop, The Dialog Corporation can license Core Muscat (and
components of Euroferret) for a 15% royalty rate on net revenues, calculated as
gross revenues less advertising agency fees, less transactional fees related to
e-commerce billing, and less any relevant publisher
23
intellectual property costs. The Dialog Corporation will be required to pay
royalties on a quarterly basis, as part of an arms length trading relationship
between the two companies.
24
Types of service
A collection of services and inter-company charge rates are outlined below.
Professional Services
Developer resource that works on customer projects, adapting Empower
installations to meet customer requirements. Managed by Xxxx Xxxxxxx,
Professional Services work requires:
. Sale of Muscat technology and professional services agreed in principle
by sales person and customer
. Requirements document outlining required functionality (from Customer
and Muscat Pre-Sales)
. Agreed specification with customer
. Purchase order for consulting work
. Software bespoke work conducted by Professional Services team,
including test and installation
. All work timesheeted with weekly feedback to Customer on progress
Many Muscat customers require Professional Services of 1 to 20 days work. Usual
charge out rate is 000 XXX for few days, 000 XXX on larger projects. For example
the Reuters NewsExplorer involved well over 100 days consulting, and was charged
to the customer at the 000 XXX per day price. Muscat has supplied Dialog in the
past with Professional Services for DTI (TradeUK) projects at arms length at
rate of 000 XXX per day. This accords with the agreement between Muscat and MAID
plc where all consulting services are charged at commercial rates less 10%.
Inter-company rate: 000 XXX per day
-----------------------------------
Post-Sales
Testing and installation is charged at 000 XXX per day as standard rate to
customers, with reasonable travel expenses on top. Muscat will charge this to
the customer for any installation work of Muscat technology. Where Dialog calls
upon this resource for non-Empower installations, only then will a charge be
made to Dialog.
Inter-company rate: 600 GBP per day
-----------------------------------
Pre-Sales
Pre-sales assists the sale process by assessing customer need and Muscat's
ability to deliver. It is not charged out as a daily cost, but represents a cost
to Muscat. It is a valuable resource which Dialog may call upon if needing
Pre-Sales input to an InfoSort only sale. Where Pre-Sales resource is used with
a Muscat Empower product sale in mind, no charge will be made inter-company.
Where Pre-Sales resource is used to assist non-Empower sales (for example K1 or
InfoSort sales) an inter-company charge will be made.
Inter-company rate: 000 XXX per day
-----------------------------------
25
Developer, Tester & Support Desk
A bulk of Operations at Cambridge include system architects, developers, testers
and support desk. These people create and support the core Muscat technology and
are an internal cost. Dialog is calling upon Muscat staff to assist testing and
support of InfoSort, and possibly develop extra components for an InfoSort sale.
Already the support desk is capturing and responding to bugs and support issues
for InfoSort and LiveIntranet v2.0.
All people are required to use timesheets, and work on Dialog-only products will
be added from the timesheets, to be billed at the granularity of total days/half
day per month.
Inter-company rate: 000 XXX per day
-----------------------------------
Key Technical Staff
Senior and long-serving members of Muscat technical staff have much strategic
and productive value to Muscat, yet do conduct work on behalf of Dialog. For
example Xxxx Xxxxxx spends two days per week managing technical staff in London.
Many long-standing technical staff of Muscat work on detailed high profile
projects like Reuters News Explorer or K1. These personnel will be charged at
the higher rate for all Dialog-specific application projects. For avoidance of
doubt new recruits into K1 technical teams will be charged at the lower rate,
given they will be new to the Muscat technology and theoretically have less
immediate value to Muscat Limited.
Inter-company rate: higher rate: 000 XXX per day
------------------------------------------------
Lower rate: 000 XXX per day
------------------------------------------------
Marketing, Financial Support & HR
Muscat Limited already has various demands to create spreadsheets and analysis
of internal accounts. Some demand has been made for modelling revenue and cost
projections for the Web Solutions division that includes Dialog and Muscat
personnel and resources. On a project by project basis, Muscat's Human Resources
have had various demands to recruit new technical staff for Dialog and harmonise
the benefits packages across the Group. Where work requested has no relevance to
Muscat's own direct business, this work will be charged back to Dialog, as
recorded by timesheet and billed in units of day/ half-day on a monthly basis.
Examples include recruiting technical staff for Dialog's Leicester Square office
(on Dialog's payroll). Finance and HR Support will not be charged back to
Dialog, but Marketing costs incurred in the creation of k-working and the
identity and features of K1 will be charged at the lower inter-company rate.
Inter-company rate Marketing: 000 XXX per day
---------------------------------------------
Inter-company rate Finance & HR: zero rate
------------------------------------------
26
System Admin
This resource supports all the machines, network and e-mail systems in operation
at Muscat. Only a small amount of it may be called upon for integrating Muscat
and Dialog network systems. System Admin is supporting Muscat's ability to
deliver services to its staff and customers, including Dialog as one of many
customer interests. Therefore it will be charged at zero rate.
Inter-company rate: zero rate
-----------------------------
WebTop
WebTop is an activity of development owned by Dialog. All costs and salaries
will be recharged to Dialog at cost. Where possible Dialog will pay directly for
capital expenditure. Salaries of staff devoted 100% to WebTop will be recharged
from 1st July 1999, including an agreed fixed percentage allowance for office
overheads associated with employment of staff for WebTop.
Salaries at cost plus office overheads
--------------------------------------
27
SCHEDULE 4
Amendments required to Company 1996 and 1998 Option Scheme
A The Muscat Limited Unapproved Executive Share Option Scheme 1998 shall
be amended with effect from the date hereof by inserting in Rule 9.4
(line 5) between the words "the Companies Act 1985" and "the Company"
the words:
"or if a company already has control of the Company and has at least
51% of the issued share capital of the Company and Rule 9.1 does not
apply..."; and the words in line 7
"with the appropriate period......Schedule)" be deleted and replaced
"within the period of 4 weeks".
B The Muscat Limited Unapproved Executive Share Option Scheme adopted by
the Company in General Meeting on 11 September 1996 be and is hereby
amended with effect the date hereof by inserting in Rule 9.4 (line 5)
between the words "the Companies Act 1985" and "the Company" the words:
"or if a company already has control of the Company and has at least
51% of the issued share capital of the Company and Rule 9.1 does not
apply..."; and the words in line 7
"within the appropriate period.... Schedule) "be deleted and replaced
"within the period of 4 weeks".
28
SCHEDULE 5
Limits of Authority
Authority of the Board
The table below summarises the matters that should be approved by the Board of
Directors
----------------------------------------------------------------------- ---------- ----------------- ----------------
Subject Board Remuneration Audit Committee
Committee
----------------------------------------------------------------------- ---------- ----------------- ----------------
Strategy and the financial plans that flow from the strategy. X
----------------------------------------------------------------------- ---------- ----------------- ----------------
Approval of any circular, business plan or prospectus that is sent to X
any third party or shareholders.
----------------------------------------------------------------------- ---------- ----------------- ----------------
Approval of, and any material changes, to annual budgets X
----------------------------------------------------------------------- ---------- ----------------- ----------------
Personnel
Appointment/removal of directors X
Appointment of any senior employee with guaranteed emoluments X
(more than)(pound)50,000
Dismissal of any senior employee, where compensation is (pound)50,000 X
Material variation of any contract of employment of a director or senior X
employee, whose salary is (more than)(pound)50,000.
Appointment of consultants whose annualised fees are (more than) X
(pound)50,000. X
Alteration to the executive bonus scheme X
Introduction of any Profit Related Pay scheme
----------------------------------------------------------------------- ---------- ----------------- ----------------
New Share Option Plans or amendment to existing share option plans X
----------------------------------------------------------------------- ---------- ----------------- ----------------
Authority Limits for various levels of managers X
----------------------------------------------------------------------- ---------- ----------------- ----------------
Contracts with customers/partners that:
Have a value greater than (pound)250,000. X
Subsist for more than 18 months X
Include technology not yet developed or owned by the company X
Onerous conditions
X
----------------------------------------------------------------------- ---------- ----------------- ----------------
Development Projects:
forecast to cost (more than)(pound)100,000. X
forecast to take longer than 18 months to complete X
----------------------------------------------------------------------- ---------- ----------------- ----------------
Commence litigation, where costs to completion could be greater than X
(pound)10,000.
----------------------------------------------------------------------- ---------- ----------------- ----------------
29
----------------------------------------------------------------------- ---------- ----------------- ----------------
Accounting, Finance and Regulatory:
Appointment of auditors X X
Change to accounting policies X
Review half yearly and annual financial statements before submission X
to the Board
Approval of statutory accounts X
----------------------------------------------------------------------- ---------- ----------------- ----------------
Subject to arrangements contemplated in this Agreement, approval of all
borrowing arrangements, (including lease HP finance) and the giving X
of any security over the company's assets.
----------------------------------------------------------------------- ---------- ----------------- ----------------
Subject to the arrangements contemplated in this Agreement, X
acquisition or disposal of any IPR (other than through non exclusive
licence agreements in the ordinary course of business).
----------------------------------------------------------------------- ---------- ----------------- ----------------
Subject to the arrangements contemplated in this Agreement, capital X
expenditure in any year cumulatively in excess of(pound)30,000
----------------------------------------------------------------------- ---------- ----------------- ----------------
Quality Policy X
----------------------------------------------------------------------- ---------- ----------------- ----------------
----------------------------------------------------------------------- ---------- ----------------- ----------------
Corporate Structure
Change to the Memorandum and Articles of Association X
Change in name of any company in group X
Sale of any business assets not in the normal course of X
business, eg disposal of subsidiary, business unit X
Investment in shares in group companies X
Investment in, or acquisition of shares in a third party X
Purchase of substantially all the assets of a third party
----------------------------------------------------------------------- ---------- ----------------- ----------------
----------------------------------------------------------------------- ---------- ----------------- ----------------
----------------------------------------------------------------------- ---------- ----------------- ----------------
----------------------------------------------------------------------- ---------- ----------------- ----------------
----------------------------------------------------------------------- ---------- ----------------- ----------------
30
SCHEDULE 6
Business Plan
1 Introduction.......................................................
2 The Knowledge Management Marketplace...............................
Background.........................................................
Current scope of knowledge management support......................
The Competitive Landscape..........................................
3 Marketing Objectives...............................................
Key objectives.....................................................
4.1 Sales Strategy.....................................................
Introduction.......................................................
USP's (Unique Selling Points)......................................
4.2 Sales Organisation (Building the team).............................
Multi-level selling................................................
Quality blend of sales force.......................................
A strategic account team...........................................
A major account team...............................................
An SME account team................................................
Telesales, and small direct sales..................................
Indirect Channel sales.............................................
4.3 Sales Targets......................................................
4.4 Strategy for territory expansion...................................
USA................................................................
Working with existing partners.....................................
Pre-Sales investment first.........................................
Localised Help Desk................................................
Europe (non-UK)....................................................
Focus on key territories of the market.............................
Drive revenue through partners.....................................
Implementation services performed from UK..........................
UK & Global Deals..................................................
5 Technology.........................................................
Application Product Development....................................
Core Muscat Development............................................
Direct Customer Support............................................
Pre-Sales Support..................................................
Post-Sales Implementation Services.................................
Help desk..........................................................
Channel Support....................................................
Computer Services..................................................
Inter-company charging of technical staff..........................
31
1 Introduction
Muscat Limited has been selling knowledge retrieval products for corporate
intranets and webservers for the past four years. Working autonomously from its
parent company to-date, it has licenced the Muscat fx and Muscat Empower
solutions to Dialog Corporation on a project-by-project basis. Dialog has been
one of the 250 customers to which Muscat has successfully delivered technology
products and solutions.
As Dialog Corporation grows the technology base of its company, and Muscat seeks
to expand its UK customer base to a global one, it seems sensible for Muscat to
use Dialog's potential market reach and Dialog to embrace Muscat's technology.
This plan outlines the main activities within Muscat's business over the next 12
months, as Dialog negotiates a complete acquisition of Muscat Limited.
In summary, Muscat Limited staff will work alongside Dialog staff to produce a
new generation product called K1, that will supersede the Muscat Empower product
set. K1 is an internal working title for a suite of modules to be delivered
under the brand identity of "k-working".
Dialog will market and sell K1 in both US and EMEA markets under the
brand-identity of "k-working" - an identity exclusive to Dialog and not owned by
Muscat. Muscat Limited will focus on the technical assistance required to
design, code, test and support the K1 product, on a consulting basis, whilst
continuing to sell and support the existing Muscat Empower product.
In effect Dialog is a customer similar in nature to any other (save special
commercial terms as agreed on 14th August 1997). For example Dialog's K1 product
requirement can be viewed alongside Muscat's commercial relationship with
Reuters, for which Muscat has designed, built, coded and supported a news
intranet product called Reuters NewsExplorer. All intellectual property of core
Muscat remains with Muscat Limited, and is only transferred to Dialog once a
100% acquisition has been completed in full.
Until the Muscat acquisition is complete, Muscat will continue to focus on its
core technology and provide as much assistance, at arms length, to assist the
sales of existing and new products in the global knowledge management market
place.
32
2 The Knowledge Management Marketplace
Background
Over the past year Muscat Limited has moved away from the Search engine market
(supply of search facilities to corporate websites) and started to sell
retrieval technology to corporate intranets where there is an emerging appetite
for knowledge management tools.
The knowledge management market place is predicted to grow to $5.6bn by the end
of 2000. Whilst the definition of this market is somewhat broad analysts are
agreed on a total available software market of $2bn by the end of 2001.
Muscat Limited could either raise extensive cash sums to try and propel itself
into this market using high cost direct marketing initiatives and gearing, or
leverage off Dialog Corporation's current global position as a premier business
information provider. Working as part of Dialog's Web Solutions Division has
been the Management Team's decision to get global visibility of Muscat's
technology in this market place.
Current scope of knowledge management support
Ovum has identified four groups of vendors who are taking the early ground of
the knowledge-management software market in addressing these areas:
. Information retrieval vendors
. Groupware vendors
. Document management
. Other start-ups with innovative and peripheral offerings
These vendors are identified as offering products that address the barriers to
knowledge sharing within the organisation:
. Collaboration tools to provide shared spaces and improve people's abilities
to make connections to knowledge sources
. Retrieval tools that can provide a uniform point of access to diverse
sources of unstructured information across the enterprise
. Tools that can help users classify and filter large amounts of unstructured
information
. Horizontal applications including customer relationship management
Rise of integrated KM
[GRAPH]
[***PLOT POINTS TO COME***]
33
Combining the retrieval of Muscat Empower with Dialog's auto-classification tool
InfoSort is a strong proposition to corporates who require both retrieval and
document management tools. The market will change shape with maturity, moving
from what is predominantly a knowledge retrieval focus through to one where
knowledge management is part of the infrastructure, and is addressed by an
integrated suite of products. This trend has been ratified by the recent
Microsoft announcement of layering KM capabilities with its Windows 2000 suites.
In licencing the core Muscat technology to Dialog, Muscat Limited will rely on
Dialog Corporation's Web Solution Division to develop a suite of KM tools for
that market.
[GRAPH]
The Competitive Landscape
-----------------------------
Probabilistic KR products Evolving market need
Muscat
Autonomy
Sovereign
Hill/Dataware
-----------------------------
-----------------------------
Sophistication Traditional KR products
of retrieval Verity
capability Excalibur -----------
Fulcrum Document
----------------------------- Management
--------------- Documentum
Internet search ---------------- OpenText
Yahoo Classification/ -----------
Excite mapping
Altivista Infosort ---------
--------------- ---------------- Groupware
---------- -------------- Lotus
Web search E-commerce Microsoft
engines products ----------
Firestone OpenMarket
Infoseek Office Shopper
---------- --------------
--------------------------------------------------------------------------------
Breadth of Application across the Enterprise
The diagram shows this mixed competitive landscape for a number of classes of
product. As the current knowledge management environment (46%) is dominated by
retrieval tools and capabilities, the y-axis shows the sophistication of the
retrieval paradigm for the class of product from search engine to groupware; and
the x-axis shows the enterprise applicability of the class of product.
Dialog Corporation's Web Solutions Division will focus on the application layer
that meets the market requirement, whilst Muscat will just focus on its core
technology, exploring OEM licences with other potential partners. Some of the
functional features evident in the k-working product
34
suite from Dialog Corporation will showcase Muscat's "linguistic inference"
technology and encourage direct OEM opportunities, for example with ICL Fujitsu.
3 Marketing Objectives
Key objectives
Until Muscat is acquired in full by The Dialog Corporation, it still needs to
maintain a presence in the marketplace. Concentrating exclusively on a web
presence, Muscat will showcase applications on customer websites, and
demonstrate the Empower product set.
Since Dialog Corporations own Marketing Department will concentrate on
communicating "k-working" to the US and EMEA markets, Muscat will no longer use
PR, direct marketing and trade exhibitions as part of a marketing communications
strategy. Dialog will assist Muscat Empower sales in the short-term, under the
"k-working" umbrella until K1 is finally released in Q1 2000.
4.1 Sales Strategy
Introduction
Large corporate companies around the world have bought into the idea of
"knowledge working" and many of them are spending considerable sums in both
research, and bringing forward practical applications. This is particularly
visible in the UK, Netherlands, Scandinavia and in the USA, from where the trend
is spreading globally. In addition, a number of quite high ranking (often Board
level) jobs are appearing under the heading "Knowledge Officer", CKO (Chief
Knowledge Officer), best Working Practice Directors and others with different
titles but similar roles. That role is to assist an organisation make productive
use of its knowledge (explicit - on paper) and (tacit - in the heads of staff).
It is becoming clear that those organisations that are best place to exploit the
value of their knowledge - as we move into the new millenium - will be those
that rise most successfully to the challenges that lie ahead.
Dialog is well placed to introduce Muscat Empower and InfoSort as two enabling
technologies, that satisfy important internal corporate information needs.
USP's (Unique Selling Points)
Dialog's decision to move more significantly into this market gives us an almost
unique set of selling propositions:
. Dialog is of significant size compared to most of the other players in the
market, with staff or agents in many parts of the world.
. Dialog has the ability to combine access and control to both the internal
knowledge of an organisation, and also the vast quantity of external
knowledge tied up in the information that companies such as Dialog has been
selling successfully for some years.
Dialog has developed software for this market - principally the InfoSort
product, and through its controlling interest in Muscat, a leading UK based
supplier of advanced information retrieval and
35
knowledge search technology. Together, these products, (coming together in a
single suite) are already in advance of many of the existing products that will
form our competition. Dialog and Muscat have already united their product
development programmes into a single organisation for the new K1 product.
The Sales force has been revitalised with the appointment of Xxxx Xxxx (ex
Excalibur, Oracle) Director of Sales at Muscat. He has moved the main focus of
Muscat sales down to the London Bridge sales office at Dialog Corporation to
maximise a cross-fertilisation process with existing Dialog sales people who
sell business information to corporate accounts. Currently Xxxx Xxxx is building
a team, mostly under Muscat employment, which tackles the multi-level selling of
an enterprise-wide solution to corporates. In the US market, Xxxxxxx Xxxxxxxx
manages a sales force of 10 people, all Dialog employees, selling Muscat Empower
and InfoSort solutions. Therefore in the EMEA markets, Muscat recognises revenue
100%, whereas in the US, Dialog collects 35% reseller margin on Muscat Empower
(as per arms length trading terms) and Muscat receives 65% of Empower sales.
As the Empower and Infosort products are replaced by new product code (K1), all
revenues will be recognised by The Dialog Corporation, which has paid for
creation, marketing and sales of the product, with Muscat collecting 15% royalty
licences from product sales in both the US and EMEA. Any technical staff
employed by Muscat who work on the K1 product are charged to Dialog on arms
length consultancy terms (as per other customers like Reuters).
4.2 Sales Organisation (Building the team)
Multi-level selling
Working closely with Dialog, Xxxx Xxxx (Muscat Director of Sales) is building a
Web Solutions Division sales-plan that is flexible enough to allow us to attack
all the appropriate sectors of the "k-working" opportunity. These are:
. Direct selling to Multi-national and very large National organisations
. Direct selling to medium size rising up to emerging large national
organisations
. Direct selling to large content and technology companies seeking to OEM the
suite or parts thereof
. Direct selling to specialist smaller enterprises, e.g. web centric
information companies, service companies relying on information (i.e.
headhunters and recruitment companies), electronic shopping, charities,
government agencies, membership organisations, societies, local
authorities, community service bodies
. Channel - Indirect selling through Value Added Resellers
36
The sales plan is therefore based on successful sales at all levels as shown in
the diagram, where the higher in the triangle, the larger the value:
[GRAPH]
Multi-nationals Senior managers
OEMs Strategic Account Sales
Strategic Selling
------------------------------------------------
Major account sales Major accounts
Partners, Consultancy Strategic Selling
-------------------------------------------------
Account Managers
Medium to large accounts Integration Partners
--------------------------------------------------------
Junior Account
Sales SMEs
---------------------------------------------------------
Add-ons, training, extra licenses Telesales
Manual sets, days consulting
-----------------------------------------------
Quality blend of sales force
Muscat Limited has recruited heavily in the past few months to create a
multi-layer sales operation in the UK which Dialog US Enterprise Solutions (as a
reseller unit of Muscat Empower) has also mirrored:
A strategic account team
------------------------
Aimed at multi-nationals, very large corporates e.g. (Shell, BP, AT&T, Glaxo,
Novartis, BT and C&W)
A major account team
--------------------
Focused on large national companies e.g. Privatised Utilities, Banks, Building
Societies, Government Departments, Broadcasting and Media firms, Large
Retailers.
Both of the above must be in a position to leverage the existing Dialog
client-base and work with large consultancy companies, solution providers,
systems integrators
An SME account team
-------------------
Identifying technology aware and driven new businesses, companies seeking to
establish an edge, modern businesses that will grow to dominate electronic
market, local government, societies, membership organisations, government
agencies, libraries, museums, web developers
Telesales, and small direct sales
---------------------------------
Using junior sales people and presales staff where possible and selling the
lower value entry point or add-on product options, training days, consultancy
days and other services
37
Indirect Channel sales
----------------------
VARs, Master Distributors, Integrators, and OEM sales in various parts of the
world
4.3 Sales Targets
Muscat's annual target for 1999 is (pound)1.8million.
The Muscat-only revenue figures for early 1999 are poor, in part due to
distractions of the potential Muscat Dialog merger and unclear Sales team
management with the appointment and subsequent departure of a Sales Director in
early 1999. The revenue target for the end December remains at 1.8 million
target based on the growth in monthly revenues since Xxxx Xxxx'x (Muscat Sales
Director) appointment and the recent achievements of his team.
Muscat's Year 2000 targets have been consolidated with Dialog's Web Solutions
Division (WSD) as part of a Five Year Plan, on the assumption that the 100%
acquisition of Muscat is completed soon. A copy of this plan is available from
Xxxx Xxxxxxxx, Muscat's Financial Controller.
4.4 Strategy for territory expansion
USA
Working with existing partners
------------------------------
Muscat's growth in the US market, prior to release of K1 (Dialog's Knowledge
Working tool) is based on leveraging the partner relationship with existing
Dialog sales teams and other partner relationships (for example Teltech).
Pre-Sales investment first
--------------------------
Prior to the K1 launch, Dialog sales teams will be selling Infosort and Empower
product solutions, where all technical implementation is performed according to
agreed specifications from the UK (Cambridge and London). As part of Dialog's
own ramp up of US enterprise Solutions staffing levels, new Pre-Sales staff will
be trained by Muscat personnel to build up localised technical knowledge.
Localised Help Desk
-------------------
Multi-national customers headquartered in London will require help desk support
around the clock. Likewise growing US sales will also need localised support
responding within the same timezone. Muscat has therefore planned to technically
assist the training of a two person help desk support function at Dialog in
North Carolina, operating by Q1 2000, ahead of the release of K1 product late X0
0000.
Europe (non-UK)
Dialog's WSD approach for European territories is markedly different to the USA.
Language is an important barrier to a sale, not because our product cannot
handle it, but often customers require local language documentation, and local
language product support as part of an enterprise installation.
38
Focus on key territories of the market
--------------------------------------
Three key sales people will immediately be deployed by Dialog in the market
ready zones of Europe - Scandinavia, Benelux and Switzerland (to leverage off
the DataStar relationship). These three sales people will initially target
direct sales, but over time will work through a "k-working" approved network of
resellers which will deliver the product solutions.
Muscat will not employ any non-UK sales staff directly, as Dialog will be
controlling both marketing and sales strategy for Europe.
Drive revenue through partners
------------------------------
Simultaneous to the appointment of three direct sales staff by Dialog,
non-exclusive resellers will be identified and technically trained up by the UK
office, such that resellers and system integrators become the main vehicle for
selling a K1 installation. The three main sales people will be very mobile,
although attached to a strategic partner in each country. These partner offices
from which the Account Managers work may be Dialog offices, or those of a key
System Integrator.
Implementation services performed from UK
-----------------------------------------
Localised European Technical Operations staffed by WSD personnel will not be set
up by Q4 2000. Pre-sales support staff will operate out of UK office to service
particular customer opportunities with the three Sales personnel initially. The
European WSD Yr 2000 sales target (excluding UK) is just (pound)1 million
compared to UK's target of (pound)4.5 million. Only if direct sales really ramp
up in one country location will dedicated pre-Sales support be deployed locally.
The main thrust of the sales activity is through resellers where the Account
Manager assist the sales process on behalf of the reseller as an initial
learning curve process. Ultimately the reseller will be delivering sales and
some implementaion service without direct involvement from WSD staff.
UK & Global Deals
Since the Technology R&D centre is in Cambridge and London, many global
international deals will be brokered out of the UK.
As Muscat products are to be sold according to a "value pricing" model rather
than rigid price list, Infosort and Muscat technologies will be sold at higher
price premiums than before. Many of the existing Account Manager staff will be
mentored and trained up to deliver these higher value deals, such that revenue
can increase based on the character of the sales operation rather than by purely
doubling headcount. Hence only two new Account Managers are additionally
employed through Q3 1999 to Q4 2000 months. The headcount need not increase
dramatically to improve the sales results. The sales team requires quality, not
quantity.
39
5 Technology
Application Product Development
-------------------------------
Muscat Limited will continue to support the Muscat Empower product set. For K1,
much of the product life-cycle will happen in Muscat's Cambridge office, but an
additional number of Dialog programmers will contribute to the development of
K1. Dialog will own the title to K1 as an application product, as it will be
paying for Muscat development resource as consultants.
Core Muscat Development
-----------------------
Muscat Limited will therefore focus on Core Muscat, the underlying technology
that underpins Linguistic Inference, and intellectual property it exclusively
owns. A new "Object Muscat" team has been set-up under Xx. Xxxxxx Xxxxxx
(Founder of Muscat) to work on new algorithms and software code, embracing the
new distributed architectures of mobile computing and PDAs.
Direct Customer Support
-----------------------
Direct customer support i.e. support for end users of applications that have
been sold by the direct sales force, falls into 3 main areas:
. Pre-sales support.
. Post-sales implementation services.
. Help desk.
Pre-Sales Support
-----------------
Pre-sales support currently falls within the IT group's responsibility but is to
be moved into the Sales group and is thus the responsibility of the Sales
Director
Post-Sales Implementation Services
----------------------------------
Post-sales implementation services has 4 main components:
. Customised software development.
. Installation and configuration provided by Implementation Consultants.
. Rulebase development by Information Scientists.
. Training.
Initially all customised software development will be undertaken in the UK
(either Cambridge or London). This will work satisfactorily because the nature
of software development is that it occurs at a location that is physically
remote from the client site using a specification that has either been provided
by the client or produced as part of the pre-sales activity. Once the volume of
customised software destined for the US is large enough a US development team
will be established by Dialog. This team will only do customisation of the
standard applications and will not be involved in core product development. It
is anticipated that the Dialog US development team will be operational in the Q3
of 2000.
Over the next 2 years a greater number of high value sales will be achieved
((pound)100k plus) and these will require software customisation to achieve the
required level of integration with existing systems and business processes. This
will increase the number of developers needed for implementation services in
direct proportion to the number of direct sales staff.
40
Any new staff taken on by Muscat Limited to support the production and support
of K1 will be charged as a resource back to Dialog, for the purposes of arms
length inter-company trading until the acquisition of Muscat Limited is
complete.
Help desk
---------
The two main factors that influence location of a help desk are language and
time zones so a help desk will be established in each region to provide first
line customer support. Second line support will be provided from Cambridge. The
staffing numbers of the help desk are proportional to the installed customer
base. Support for software development kits will be routed through the help desk
but handled by software developers as this level of support requires detailed
programming knowledge. It is planned to locate a two person Help Desk function
in the USA in Q4 1999 prior to release of the K1 product in Q1 2000. All
Help-Desk staff currently supporting Dialog products (eg InfoSort) will be
charged as a cost item back to Dialog for purposes of arms-length inter company
trading until the Muscat acquisition is complete.
Channel Support
---------------
Channel support requires initial training and on-going second line support.
Support for resellers will be provided on a regional basis by the local help
desk (with third line escalation back to the Cambridge help desk). VARs and OEMs
will have more demanding support needs (they are more knowledgeable in the first
place so any problems they encounter will be more complex) and will be supported
directly from Cambridge.
Some strategic OEM deal will require K1 developers to work in situ at the
location of the OEM. In anticipation of this, four developers will be recruited
in Q4 1999 to join the main development team, but be available to fill the shoes
of any senior developer siphoned off to assist the strategic OEM partner.
Computer Services
-----------------
Computer services covers all machines (desktop and data centre), network and
communications services for office machines, the development environment and
external servers (web servers, hosted index servers). Muscat currently employs
it's own system administrator who operates the Cambridge office.
Inter-company charging of technical staff
Some of Muscat's technical staff will be charged to Dialog as consultants,
thereby not representing a total cost to Muscat Limited. As Dialog's projects
require more headcount, either they will be employed directly by Dialog, or
charged back to Dialog as consultants; so as to preserve the independent status
of Muscat until acquisition is complete.
41
SCHEDULE 7
Form of undertaking from Xxxxxxxx Xxxxxxx
[On Xxxxxxxx Xxxxxxx Notepaper]
To: Xxxxx & Xxxxx
Xxxxxxx Xxxxx
000 Xxxxx Xxxx
Xxxxxxxxx
XX0 0XX
Dear Sirs
This undertaking is given pursuant to the terms of an agreement ("the
Agreement") between Xxxx Xxxxxx and others (1), the Dialog Corporation PLC (2),
Muscat Limited (3) and Xxx Xxxxxxxx and others (4). Words and expressions used
in this undertaking shall bear the same meaning as in the Agreement.
This undertaking is referred to in clause 5.8 of (and set out in Schedule 7 to)
the Agreement. We undertake to you, as solicitors to the Sellers and
Optionholders, to hold all of the Stock transfer forms, share certificates and
option certificates in respect of the relevant Shares and/or Options
(collectively "the Documentation") strictly in accordance with this undertaking
pending Completion.
We are authorised to release the relevant Documentation to the Dialog
Corporation PLC only upon Completion being effected under the provisions of
clauses 5 or 6 of the Agreement (including without limitation, the payment of
all Consideration in respect thereof).
If Completion shall not take place in accordance with the terms of this
Agreement for any reason we shall promptly, at your request, return the
Documentation to you.
Pending Completion we shall hold the Documentation safely and securely in our
strong room and shall indemnify the Sellers and Optionholders against any loss
or damage thereto.
Yours faithfully
42
SCHEDULE 8
IPR Position for Muscat
IPR Position for Muscat
Core Muscat 43
Muscat fx 44
Muscat Empower 44
Euroferret 44
K145
WebTop 45
A) The following items represent documented products that are currently
sold and produced at Muscat Limited and are owned absolutely by
Muscat Limited. Each item is manufactured for a variety of operating
systems and hardware platforms, and rights itemised below relate to
all known versions, across all platforms, except for any third-party
products that are licenced by Muscat Limited and embedded within any
of the release versions; for avoidance of doubt such third party
products include the INSO filters for Word, Excel, Wordperfect and
other document formats
Core Muscat.......
Defined as:
. All software code and documentation relating to Muscat 3.6 and Muscat
3.7 on all operating platforms in interpreted and natively compiled
versions
. All software source code used for compiling Muscat 3.6 and Muscat 3.7
. Command-line, DOS-screen and C Application Programme Interfaces to
Muscat system, including Muscat Development Kit
. All components of the Core Muscat system which are embedded, under
licence, by third parties inside their own applications
. All new ideas, documentation, software source code relating to new
"Object Muscat" as written by staff under direct line-management of Xx.
Xxxxxx Xxxxxx
43
Muscat fx
Defined as:
. All software binaries and documentation relating to Muscat WebExplorer and
Muscat fx versions 1.0, 1.1, 1.2, 1.3 and 1.4 including various patch
releases and European language versions
. All software source code used for compiling the standard release versions
of Muscat fx1.x
. All adapted versions of software created for bespoke customer needs
including Reuters News Explorer Version 1 and Muscat vfx for Xxxxxx.Xxx
. All associated project literature, marketing collateral and product
documentation associated with Muscat fx
Muscat Empower
Defined as:
. All software code and documentation relating to Muscat Empower versions 1.x
and 2.x, including patches, sub-releases and European language versions
. All source code and documentation relating to Empower Alert, Empower
Discovery, and Empower Developer modules which make up a standard Empower
1.x or 2.x release
. All adapted versions of Empower software delivered indirectly via
resellers, including Muscat Europe BV, or direct to customers according to
bespoke needs, including Reuters NewsExplorer Version 2
. All associated project literature, marketing collateral and product
documentation associated with Muscat Empower, including "linguistic
inference" and associated white papers
For the avoidance of doubt, some customers like Reuters hold intellectual
property rights in some components of their bespoke Muscat products, which under
licence they are able to sell under their own brand.
Euroferret
Defined as:
. All software code, source and documentation relating to the Euroferret
indexing and retrieval system accessible at xxx.xxxxxxxxxx.xxx
------------------
. All versions and adaptations of the indexing and retrieval system,
including routines and monitoring programmes which aid the support and
maintenance of the Euroferret system
44
B). The following items represent products in the planning stage which have to
date involved collaboration with The Dialog Corporation, and which ultimately
will be marketed, sold and delivered by the Dialog Corporation. For the
avoidance of doubt the title and property of K1 and WebTop are owned absolutely
by The Dialog Corporation, except for any embedded third-party technologies
including the Core Muscat, INSO document filters and Adobe Acrobat technology.
K1
Defined as:
. The internal working name for a suite of products that combine Dialog and
Muscat technology as one market offering, under the banner "k-working"
. All software code and documentation relating to K1 product set as defined
by K1 Architecture Design Document 26th April 1999 and all subsequent
versions
. All source code and documentation relating to the re-engineered parts of
Alert, Discovery and Developer modules, which are different in design,
function or source code to the original Empower modules
. All source code and documentation for K1 produced by staff under employment
contracts of The Dialog Corporation, prior to date of this agreement
. All source code, project plans and documentation for K1 produced by Muscat
staff under consultancy terms between Muscat and The Dialog Corporation,
prior to the date of this agreement
. Any work undertaken by Muscat staff , under consulting contract to The
Dialog Corporation, for the K1 product which is expected to launch in Year
2000
. All associated project literature, marketing collateral and product
documentation associated with K1, including "k-working" and title to the k-
working trademark (upon payment by The Dialog Corporation of the
trademarking and brand purchasing costs of 27,000 pounds sterling excluding
VAT)
. For avoidance of doubt, Dialog does not have title to any part of Core
Muscat or components of Empower which are included within K1, yet Dialog
will have licence to distribute any part of Core Muscat or Muscat Empower
under sub-licence and OEM royalty terms.
WebTop
Defined as:
. Four phases of product roll-out as recently described in "XxxXxx.Xxx A
Working Document" Version 1.3 dated 19th August 1999
. All software code, source, documentation and literature produced by Muscat
staff under contract to The Dialog Corporation to effect the creation and
roll-out of WebTop's phases For avoidance of doubt, The Dialog Corporation
does not have title to any part of Core
Muscat or components of Euroferret which are included within WebTop. Dialog will
require a licence to distribute or commercially exploit any part of Core
Muscat or Euroferret under arms-length licence and OEM royalty terms.
45
SCHEDULE 9
OBSERVER CONFIDENTIALITY PROVISIONS
This Agreement is made by and between
(1) Muscat Limited (registered number 2345573) for itself and as agent for all
other companies in its group of companies, whose registered office is at St
Mary's House, 00 Xxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx XX0 0XX ("MUSCAT") and
(2) Cambridge Quantum Fund Limited of 000 Xxxxx Xxxx, Xxxxxxxxx, XX0 0XX
("RECIPIENT").
WHEREAS
(A) RECIPIENT has, under the provisions of an Agreement for the Sale of
Shares and Release of Options entered into between, inter alia, MUSCAT
and RECIPIENT (the Sale Agreement"), the right to appoint a
representative as an observer at Board Meetings of MUSCAT.
(B) Both parties agree and acknowledge that the RECIPIENT and its
representative will have access to information of a confidential and
proprietary nature and that this information should be kept strictly
confidential in accordance with the following provisions.
IT IS AGREED as follows:
1. RECIPIENT will have access to and have disclosed to it certain
proprietary and confidential information relating to MUSCAT and its
group of companies ("Information"). Such Information includes any and
all technical and non-technical information, including without
limitation, information concerning financial, accounting or marketing
reports, business plans, analyses, forecasts, predictions, projections,
intellectual property, trade secrets and know-how. Information may take
the form of documentation, drawings, specifications, software,
technical or engineering data, and other forms, and may be communicated
orally, in writing, by electronic or magnetic media, by visual
observation and by other means. Information includes any reports,
analyses, studies or other materials, whether prepared by RECIPIENT or
otherwise, that contain or are based upon proprietary Information
covered by this Agreement.
2. RECIPIENT wishes to receive such Information and MUSCAT discloses it to
the RECIPIENT for the purpose only of RECIPIENT observing and
evaluating whether or not it considers that the terms of the Sale
Agreement are being abided by (the "Purpose").
3. RECIPIENT shall and shall procure that its representative shall
3.1 use the Information only in connection with the Purpose and
shall reproduce such and shall reproduce such Information only
to the extent necessary for such Purpose;
46
3.2 at all times keep such Information in its possession and under
its control and RECIPIENT will limit access to the Information
to only those of its employees or legal advisers who have an
absolute need to know in relation to the Purpose and shall
notify such employees of RECIPIENT's obligations under this
Agreement and procure that they abide by them;
3.3 not announce or disclose the nature and extent of the Purpose
or any findings made during its involvement with the Purpose
without the prior written consent of all the parties; and
3.5 return to MUSCAT on demand all Information or, at MUSCAT's
option, destroy such Information.
4. RECIPIENT shall have no obligation with respect to such Information if
such Information:
4.1 is in the public domain at the time of disclosure or becomes publicly
known through no wrongful act of RECIPIENT; or
4.2 is known to RECIPIENT at the time of disclosure and RECIPIENT can prove
such fact to MUSCAT's reasonable satisfaction; or
4.3 is independently developed by RECIPIENT, provided RECIPIENT can show
that such development was accomplished by employees of RECIPIENT not
having access to and without the use of or any reference to the
Information; or
4.4 becomes known to RECIPIENT from a source other than MUSCAT having the
right to disclose such Information to RECIPIENT without breach of this
Agreement by RECIPIENT.
5. In the event that the RECIPIENT or anyone to whom it transfers the
Information pursuant to this Agreement becomes legally compelled to
disclose any of the Information, it will provide MUSCAT with prompt
notice before such Information is so disclosed so that MUSCAT may seek
a protective order or other appropriate remedy and/or waive compliance
with the provisions of this Agreement. In the event that such
protective order or other remedy is not obtained, or that MUSCAT waives
compliance with the provisions of this Agreement, the RECIPIENT shall
furnish only that portion of the Information which it is advised by
written opinion of an independent legal counsel reasonably acceptable
to MUSCAT is legally required and will exercise all reasonable efforts
to obtain a protective order or other reliable assurance that
confidential treatment will be accorded to the Information.
6. All tangible forms of the Information, such as written documentation,
delivered by MUSCAT to RECIPIENT pursuant to this Agreement shall be
and remain the property of MUSCAT, and all such tangible Information
shall be promptly returned to MUSCAT upon written request, or destroyed
at MUSCAT's option.
47
7. MUSCAT makes no warranty regarding the accuracy of the Information
provided hereunder. MUSCAT accepts no responsibility for any expenses,
losses or action incurred or undertaken by RECIPIENT as a result of the
receipt of such Information.
8. RECIPIENT acknowledges that all intellectual property rights in and to
the Information shall at all times remain vested in MUSCAT. In
particular, but without limitation to the foregoing, nothing in this
Agreement shall be interpreted as granting to RECIPIENT, expressly or
impliedly, any rights in relation to the Information in respect of any
patent, copyright, design right or other intellectual or industrial
property in force at any time and belonging to MUSCAT or any of its
group of companies.
9. No rights or obligations other than those expressly recited herein are
to be implied from this Agreement. Nothing herein shall in any way
affect the present or prospective rights of the parties under the
patent laws of any country, or be construed as granting any license
under any present or future patent or application therefor of either
party, or preclude the marketing of any product of a party.
10. The obligations under this Agreement shall continue indefinitely from
the date of disclosure of Information. In the event of dispute as to
the date of actual disclosure the Information shall be deemed to have
been disclosed on the Effective Date (as defined in Clause 18 below)
hereof.
11. If MUSCAT discloses source code to RECIPIENT as part of the
Information, RECIPIENT shall not duplicate or reproduce such into any
medium.
12. Without prejudice to any other rights or remedies which MUSCAT may
have, the RECIPIENT acknowledges and agrees that damages would not be
an adequate remedy for any such breach by it of the terms, conditions
and provisions of this Agreement and MUSCAT shall be entitled to the
remedies of injunction, specific performance and other equitable relief
or equivalent relief in any jurisdiction for any threatened or actual
breach of any term, condition or provision of this Agreement by the
RECIPIENT and that no proof of special damages shall be necessary for
the enforcement of this Agreement. The RECIPIENT shall indemnify and
keep MUSCAT for itself and on behalf of its group of companies
indemnified from and against any and all costs, losses and expenses
(including legal expenses) arising from or connected with any breach or
non-performance of any or all of its undertakings, obligations and
liabilities under this Agreement.
13. Neither this Agreement, nor the disclosure of Information under this
Agreement, nor the ongoing discussions and correspondence by the
parties concerning the Purpose or any other matter, shall constitute or
imply any promise or intention by MUSCAT to enter into any arrangement
with the RECIPIENT or any other or future transaction.
14. The RECIPIENT may not assign or transfer any rights or obligations
under this Agreement without the prior written consent of MUSCAT.
15. This Agreement expresses the entire Agreement and understanding between
the parties and supersedes any previous understandings, commitments or
agreements, oral or written, pertaining to the subject matter of this
Agreement.
48
16. This Agreement shall be governed by and interpreted in accordance with
English Law. The RECIPIENT hereby agrees to submit itself to the
non-exclusive jurisdiction of the High Court, London, in the event of
any dispute.
17. This Agreement may be executed in one or more counterparts and by the
parties to this Agreement in separate counterparts, each of which, when
executed, shall be an original but shall together constitute one and
the same agreement.
18. The effective date of this Agreement shall be [ ] 1999 provided that
this Agreement shall cover all Information disclosed by one party to
the other whether before or after the effective date.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be executed
by their respective duly authorised representatives.
Signed for and on behalf of: Signed for and on behalf of:
MUSCAT LIMITED CAMBRIDGE QUANTUM FUND
LIMITED
for itself and as agent for its group of
companies
Signed: ......................... Signed: ........................
Title: ......................... Title: .........................
Name: ......................... Name: .........................
Date: ......................... Date: .........................
49
DATED 1999
--------------------------------------------------------------------------------
MUSCAT LIMITED
-AND-
CAMBRIDGE QUANTUM FUND
--------------------------------------------------------------------------------
CONFIDENTIALITY AGREEMENT
--------------------------------------------------------------------------------
50
SCHEDULE 10
-----------
Form of Option Rollover for 1998 option holders.
[on Dialog headed notepaper]
[name and address of optionholder]
[date]
Dear [name]
Please find enclosed a form of acceptance in respect of the "roll-over" of your
option[s] over Muscat shares into options over Dialog shares. I would be
grateful if you could sign and complete this form in the appropriate places to
indicate your acceptance of the terms and conditions of this offer. This form
must be returned to me as soon as possible and in any event before [4.00 pm] on
[date]. [If the form is not returned to me by this date the offer will lapse.]
For the purposes of this roll-over I confirm that the Dialog share price is
[insert price], the number of Dialog options per Muscat option will be [insert
number] and the option price will be [insert price] for your option granted on
[insert date]. In all other respects your option[s] will continue in accordance
with the rules of the Muscat scheme.
Yours
MUSCAT LIMITED UNAPPROVED EXECUTIVE SHARE OPTION SCHEME 1998
FORM OF ACCEPTANCE OF THE OPTION ROLL-OVER OFFER
To: Muscat Limited and Dialog Corporation plc
Name................................................
Address.............................................
....................................................
[insert details or ask employee to complete]
51
ACCEPTANCE OF ROLL-OVER
I hereby accept your offer to grant (an) exchange option(s) over ordinary shares
in Dialog Corporation plc under the terms of the Muscat Limited Unapproved
Executive Share Option Scheme 1998 [or 1996 if this is relevant in relation to
any of the options to be rolled over] and the terms and conditions attached to
this form in consideration of the cancellation of my existing option(s) over
ordinary shares in Muscat Limited, as indicated below.
Please enter a tick in the
box opposite the option(s)
to be exchanged.
--------------------------------------------------------------------------------
[Option over [insert number] shares granted to me on
20 October 1997]
--------------------------------------------------------------------------------
[Option over [insert number] shares granted to me on
1 October 1997]
--------------------------------------------------------------------------------
[Option over [insert number] shares granted to me on
1 January 1998]
--------------------------------------------------------------------------------
[Option over [insert number] shares granted to me on
1 April 1998]
--------------------------------------------------------------------------------
[delete boxes above which are not relevant]
SIGNED AND DELIVERED AS A DEED
..................................................
(Enter your signature)
Date..............................................
in the presence of:...............................
(enter signature of witness)
NAME..............................................
ADDRESS...........................................
OCCUPATION........................................
RETURN OF FORM
This form should be returned when completed to [The Company Secretary, The
Dialog Corporation plc, The Communications Building, 00 Xxxxxxxxx Xxxxxx, Xxxxxx
XX0X 0XX] as soon as possible and in any event no later than [4.00 p.m.] on
[date] [after which the roll-over offer will lapse].
NOTES
(1) Note (2) includes a summary of some of the UK taxation implications of
rolling over options if you are resident for taxation purposes in the UK.
The precise implications for you will depend on your particular
circumstances and, if you are in any doubt as to your taxation
52
position or you are subject to taxation in a jurisdiction other than the
UK, you should consult your professional adviser.
(2) If you roll-over your existing option(s) over Muscat Limited's shares into
option(s) over shares in The Dialog Corporation plc ("Dialog"), no
liability either to income tax or capital gains tax will arise at that
time. However, on the basis of current tax law, when you later exercise
your option(s) over shares in Dialog, income tax will be payable on the
difference between the exercise price of the replacement Dialog option(s)
and the market value of the Dialog shares at the date of exercise and you
may realise a chargeable gain for capital gains tax purposes when you
eventually dispose of your Dialog shares.
(3) When you exercise your option(s), Dialog (or Muscat Limited) will be
obliged to account to the Inland Revenue for any income tax due (as
described in note (2)) under the PAYE system. The relevant company will
also have to account to the Inland Revenue if any national insurance
contributions are due. The Muscat scheme rules make it clear that you are
responsible for any income tax or social security premiums (ie national
insurance contributions) due in respect of the option(s). Note (4) below
therefore provides that Dialog can either delay allotting or procuring the
transfer of shares to you until you have put Dialog (or other relevant
company) in funds to account for any income tax and social security due or,
as an alternative, arrange for the sale of shares on your behalf to cover
the income tax and social security payments.
(4) If, when you exercise an option over Dialog's shares, Muscat Limited
or Dialog or any other company is obliged under any applicable law to
withhold an amount in respect of tax, social security or any like sum
or to account for such an amount to any governmental or other
authority in respect of such exercise then:-
(a) Dialog shall not allot to you or procure the transfer to
you of the number of shares in respect of which the
option has been exercised until you have put Muscat
Limited, Dialog or such other company in funds to
account for such tax to such governmental or other
authority or otherwise entered into such arrangements as
are satisfactory to Muscat Limited, Dialog or such other
company with regard to the obligation to withhold or
account; and/or
(b) Muscat Limited or Dialog or such other company may
arrange for the sale of such number of shares subject to
the option as are necessary to realise funds to pay the
amount to be withheld and/or accounted for and Dialog
shall issue or procure the transfer of the balance to
you.
53
SCHEDULE 11
-----------
Indemnity
THIS DEED is made the day of 19
BETWEEN
(1) [________] of (`the owner') and
(2) [________] Limited whose registered office is at [________] (`the Company')
WHEREAS
The owner has held the certificate numbered [________] and dated [________]
(`the certificate') since issue thereof by the Company and has been continuously
without break since such issue and is at the date hereof the absolute owner of
the security (`the security') particulars whereof are set forth in the schedule
hereto (`the Schedule') free from any lien charge or adverse claim whatsoever
but after diligent search the certificate for the security cannot be found and
the owner has requested the Company to issue a replacement therefor and will
indemnify the Company as hereinafter appears
NOW THIS DEED WITNESSETH as follows
IN pursuance of the said agreement and in consideration of the Company issuing a
certificate (`the replacement certificate') at the request of the owner in place
of the certificate the owner HEREBY WARRANTS that the contents of the recital
hereof are true and accurate in all respects and COVENANTS so as to bind the
estate and personal representatives/successors and assigns of the owner to
indemnify and keep indemnified respectively the Company and its assigns and the
officers thereof without limit in amount or point of time against all costs
charges claims and expenses including but without limitation legal fees and
disbursements and payments whatsoever in connection with or arising from the
issue by the Company of the replacement certificate.
THE SCHEDULE hereinbefore mentioned
(the security)
Type Class Denomination Amount Registered Number(s)
IN WITNESS WHEREOF the Company and the owner have executed and delivered these
presents as a Deed the day and year first hereinbefore written
EXECUTED and DELIVERED by the said
LIMITED
by: director, and
by: company secretary
SIGNED SEALED and DELIVERED
by the said [the owner]
in the presence of:
54
