DATED 2001
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AUTHORISZOR HOLDINGS LIMITED (1)
WRDC LIMITED (2)
XXXXXX XXXXXX AND XXXXX XXXXXXXXX (3)
And
AUTHORISZOR INC. (4)
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SUBSCRIPTION AGREEMENT
relating to WRDC Limited
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CONTENTS
1 DEFINITIONS............................................................................................1
2 SUBSCRIPTION AND COMPLETION............................................................................5
3 CONTINUING AND FURTHER OBLIGATIONS.....................................................................6
4 THE BOARD OF DIRECTORS.................................................................................8
5 BUYOUT TERMS...........................................................................................8
6 BUYER EVENT............................................................................................9
7 price.................................................................................................10
8 SET OFF...............................................................................................11
9 GuarantEE.............................................................................................12
10 ASSIGNMENT AND TRANSFER...............................................................................12
11 NOTICES...............................................................................................13
12 GENERAL...............................................................................................13
SCHEDULE 1...................................................................................................16
Letter of Representation..............................................................................16
SCHEDULE 2...................................................................................................18
General Undertakings..................................................................................18
SCHEDULE 3...................................................................................................19
The Resolutions.......................................................................................19
SCHEDULE 4...................................................................................................21
Shareholders..........................................................................................21
SCHEDULE 5...................................................................................................22
(Completion Board Minutes)............................................................................22
SCHEDULE 6...................................................................................................24
Deed of Undertaking...................................................................................24
SCHEDULE 7 Deed of Adherence.................................................................................25
i
DATE OF SUBSCRIPTION AGREEMENT 2001
PARTIES
(1) AUTHORISZOR HOLDINGS LIMITED (Company Number 3873915) whose registered
office is at Windsor House Cornwall Road Harrogate HG1 2PW ("Authoriszor");
(2) WRDC LIMITED (Company Number 2945379) whose registered office is at First
Floor Ebor Court Westgate Leeds LS1 4ND (the "Company");
(3) THOSE PERSONS whose names and addresses and shareholdings in the Company
are set out in Schedule 4 ("Shareholders"); and
(4) AUTHORISZOR INC. a public company registered under the laws of the state of
Delaware whose principal executive offices are situated at Xxx Xxx xx
Xxxxxx Xxxxx Xxxxx 000 Xxxxxxxxxx XX 00000 XXX ("Inc.").
RECITALS:
A The Company is a private limited company incorporated in England and Wales
on 4 July 1994. Prior to Completion, the authorised share capital of the
Company is (pound)33,400 and the issued share capital of the Company is
comprised as follows:
Xxxxxx Xxxxxx 1,125,000 A Ordinary Shares
Xxxxx Xxxxxxxxx 1,125,000 B Ordinary Shares
Authoriszor 840,000 D Ordinary Shares
B Following Completion, the Shareholders and Authoriszor have agreed to
co-operate in the management of the Business through the Company as
provided in, and in accordance with, this Agreement.
C Inc. has agreed to guarantee the obligations of Authoriszor under the terms
of this Agreement.
IT IS XXXXXX AGREED as follows:
1 DEFINITIONS
1.1 In this Agreement and the Recitals and the Schedules the following terms
shall have the following meanings:
"the Agreed Form" in relation to any document, that document initialled for
the purposes of identification by or on behalf of the parties hereto.
""A" Ordinary Shares" the "A" ordinary shares of 1 xxxxx each in the
capital of the Company.
"AL" Authoriszor Limited, Company Number 3302620.
1
"Articles of Association" means the Articles of Association of the Company
to be adopted pursuant to the Resolutions in the Agreed Form.
"Authoriszor's Solicitors" Xxxxxxx Suddards Edge of 0 Xxxx Xxxx Xxxxx XX0
0XX.
"Average Closing Price" shall be the average of:
(a) if the Common Stock is listed on any established stock exchange or a
national market system, including without limitation the NASDAQ
National Market or the NASDAQ SmallCap Market of the NASDAQ Stock
Market, the closing sales price for such stock (or the closing bid, if
no sales were reported)] as quoted on such exchange or systemas
reported in The Wall Street Journal or such other source as Inc.
acting reasonably deems reliable;
(b) if the Common Stock is regularly quoted on the OTC Bulletin Board or
any similar system or automated dissemination of quotations of
securities prices or by a recognised securities dealer, the average
between the closing bid and closing asked prices for the Common Stock
on the last market trading day prior to the day of determination.
for each of the immediately preceding 5 Trading Days prior to the tenth
Business Day following the earliest Trigger Event.
"Blocked Account" shall mean a bank account in the joint names of Xxxxxxxx
and Xxxxxxx Suddards Edge to be operated in accordance with the agreed
terms relating thereto.
"the Board" the board of directors of the Company from time to time.
""B" Ordinary Shares" the "B" ordinary shares of 1 xxxxx each in the
capital of the Company.
"Business" means the business of selling consulting, systems integration,
systems development and managed services related business.
"Business Plan" the business plan relating to the strategy and business of
the Company in the Agreed Form.
"Business Day" means a day (other than Saturday or Sunday) when the
clearing banks are open for business in the City of London.
"Buyer Event" shall have the meaning ascribed to such expression in Clause
6.
"Buyer's Group" means Inc. and any company which is from time to time a
Holding Company of Inc. or a Subsidiary of Inc., or such Holding Company.
"Charge" means the mortgage to be given by Inc to the Shareholders in the
Agreed Form.
"Common Stock" means the Common Stock of Inc., par value $0.01 per share.
2
"Completion" the completion of this Agreement by the parties in accordance
with Clause 2.
"Completion Date" the date of Completion.
"Control " or "Controlled" shall be determined by reference to the
provisions of Section 416 TA 1988 and a "Change of Control" when applied to
any party shall be deemed to have occurred if any person or persons who
Control such party at the date of execution of this Agreement (or the date
such party becomes bound by the terms of this Agreement (if later))
subsequently cease to Control it or if any person or persons subsequently
acquire Control of it.
""D" Director" means a director of the Company for the time being appointed
or deemed to have been appointed pursuant to Clause 4.1 or the Articles of
Association by Authoriszor as holder of the "D" Ordinary Shares.
""D" Ordinary Shares" the "D" Ordinary Shares of 1 xxxxx each in the
capital of the Company.
"Deed of Undertaking" a deed in the form set out in Schedule 6.
"Further Subscription" means the subscription for 139,167 "D" Ordinary
Shares to be made by Authoriszor pursuant to Clause 3.8(e).
"the General Undertakings" the undertakings set out in Schedule 2.
"Initial Subscription" means the subscription for 139,168 "D" Ordinary
Shares to be made by Authoriszor on Completion pursuant to Clause 2.
"Insolvency Event" shall mean the date on which Inc.:
(a) makes an assignment for the benefit of creditors;
(b) files a voluntary petition in bankruptcy;
(c) files a petition seeking any reorganisation, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any
statute, law or regulation;
(d) seeks, consent to or acquiesces in the appointment of a trustee,
receiver or liquidator of the Inc. or of all or any substantial part
of its properties; or
(e) any proceeding shall be instituted against Inc. seeking to adjudicate
it a bankrupt or insolvent or seeking reorganisation, arrangement,
composition, readjustment, liquidation, dissolution or similar relief
under any statute, law or regulation relating to bankruptcy,
insolvency or relief of debtors, or seeking the appointment of a
receiver, custodian, trustee or other similar official for Inc. or a
substantial part of its properties, and the proceeding shall remain
undismissed for a period of 90 days, or if within 90 days after the
appointment without consent or acquiescence of a trustee, receiver or
liquidator of Inc. or of all or any substantial part of Inc's
properties, the appointment is not vacated or stayed, or within 90
days after the expiration of any such stay, the appointment is not
vacated.
3
"Issued Share Capital" shall mean the entire issued share capital of the
Company.
"Letter of Representation" means the letter in the form set out in Schedule
1 with such amendments or changes that may be required at the time of issue
of such letter under the rules of NASDAQ or US law (including federal and
state securities laws).
"Xx Xxxxxxxxx" means Xxxxx Xxxxxxxxx.
"Xx Xxxxxx" means Xxxxxx Xxxxxx.
"Old Agreement" means the shareholders agreement entered into by the
parties hereto dated 27 January 2000.
"Old Service Agreement" means the service agreement between the Company and
Xxxxxx Xxxxxx dated 22 February 2000.
"the Resolutions" the written resolutions of the Company to be passed at or
before Completion in the form set out in Schedule 3.
"Purchase Agreement" the sale and purchase agreement to be entered into on
Completion between each of Xxxxxx Xxxxxx, Xxxxx Xxxxxxxxx, Inc. and
Authoriszor in the Agreed Form.
"Secondary Fundraising Date" means the date of receipt of cleared funds by
Inc. pursuant to any secondary fundraising carried out by Inc. for which
Inc. raises net proceeds of at least $10 million from the issue of debt or
equity securities or a combination thereof in a single transaction or
series of transaction occuring within the period between the date hereof
and 1 January 2002.
"Security Interest" means any mortgage, charge assignment or assignation by
way of security, guarantee, indemnity, debenture, hypothecation, pledge,
declaration of trust, lien, right of set off or combination of accounts, or
any security interest whatsoever, howsoever created or arising.
"the Service Agreement" the new service agreement to be entered into
between AL and Xxxxxx Xxxxxx in the form initialled for the purpose of
identification by or on behalf of, XX and Xxxxxx Xxxxxx.
"Shares" shares in the share capital of the Company.
"Subscription" means the Initial Subscription and the Further Subscription
"Shareholders' Notice" means a notice served pursuant to Clause 6.2.
"Shareholders Solicitors" means Shulmans 00 Xxxx Xxxxx, Xxxxx, XX0 0XX.
"Subsidiary" and "Holding Company" have the meanings ascribed thereto by
Section 736 Companies Act 1985.
"Trading Day" means any day in which markets for public securities traded
in the United States are open for trading.
4
"Trigger Event" shall have the meaning ascribed to such expression in
clause 5.1.
1.2 References to the parties hereto include their respective successors in
title, assignees, estates and legal personal representatives.
1.3 References to the singular shall include a reference to the plural and vice
versa unless the context otherwise requires.
1.4 References to Recitals, Clauses, Sub-Clauses and Schedules shall be to
recitals and schedules to and clauses and sub-clauses of this Agreement.
1.5 References to statutes or statutory provisions and orders or regulations
made thereunder include that statute provision order or regulation as
amended, modified re-enacted or replaced from time to time before the date
hereof and to any previous statute, statutory provision order or regulation
amended modified re-enacted or replaced by such statute provision order or
regulation.
1.6 The clause headings shall not affect the construction of this Agreement.
2 SUBSCRIPTION AND COMPLETION
2.1 Subject to the terms and conditions of this Agreement, Authoriszor shall
make the Initial Subscription on Completion.
2.2 The Shareholders hereby waive all rights of pre-emption (if any) that they
may have now or at Completion over the Shares the subject of the
Subscription to which they may be entitled under the Articles of
Association of the Company or otherwise.
2.3 The Shareholders and Company agree that any sums due to the Company
pursuant to the Subscription shall be paid by Authoriszor to the
Shareholders' Solicitors whose receipt shall constitute a full discharge of
Authoriszor's obligations to make any such payment.
2.4 Completion shall take place at the office of the Authoriszor's Solicitors
when each of the events set out in Clause 2.5 shall occur.
2.5 At Completion:
(a) the parties shall enter into and complete the Purchase Agreement
(b) the Shareholders and Authoriszor shall procure that there shall be
duly convened and held a meeting of the board of Directors of the
Company to transact and unanimously resolve upon the business, set out
in Schedule 5 and shall procure the passing of the resolutions set out
in Schedule 3;
(c) in respect of the Initial Subscription Authoriszor shall deliver or
cause to be delivered to the Company an application for the allotment
to Authoriszor of 139,168 "D" Ordinary Shares ("Initial Subscription
Shares") duly signed on behalf of Authoriszor together with a bankers
draft (or such other form of payment as the Company may agree) in
respect of the total Subscription price for such Initial Subscription
Shares of (pound)250,000;
5
(d) the Company shall allot and issue the Initial Subscription Shares to
Authoriszor upon payment being received by the Company and the Company
shall register Authoriszor as the holder of the Initial Subscription
Shares, and shall prepare and deliver to Authoriszor share
certificates in respect thereof;
(e) AL and Xxxxxx Xxxxxx shall execute and exchange the Service Agreement;
(f) Xxxx Xxxxx shall be appointed a "D" Director pursuant to the Articles
of Association and on the terms set out in Clause 4;
(g) the statutory books of the Company shall be delivered to Authoriszor;
(h) Inc. shall procure that the sum of(pound)828,325 shall be paid into
the Blocked Account provided always that such sum shall be released to
Inc. upon a conditional on demand bank guarantee for such sum being
provided by Inc. to the Shareholders in terms reasonably satisfactory
thereto which Inc. shall use its reasonable endeavours to procure as
soon as reasonably possible.
(i) Inc. shall execute and deliver to the Shareholders the Charge.
(j) Inc. shall file a UCC-1 financing statement in relation to the Charge
and promptly file the same both in the place of Inc's incorporation
and at the place where it has its main office.
2.6 Following Completion the Company shall procure that all necessary documents
and returns are duly completed and delivered to the Registrar of Companies
in compliance with the Companies Act 1985.
2.7 The parties hereby agree that on Completion, the Old Agreement and the Old
Service Agreement shall be terminated with immediate effect.
3 CONTINUING AND FURTHER OBLIGATIONS
3.1 Each of the undertakings given by the parties hereto pursuant to this
Agreement shall continue in full force and effect notwithstanding
Completion.
3.2 The Company undertakes to Authoriszor and Inc. ("the A & I Party") and the
Shareholders in the terms of the General Undertakings and to comply so far
as is lawful with the terms of the General Undertakings;
3.3 The Shareholders undertake to A & I Party and the A & I Party undertakes to
the Shareholders to exercise any powers that they may have as shareholders
and to vote in person or by proxy their respective Shares in favour of any
resolutions proposed in general meetings necessary to give effect to the
General Undertakings and not to vote their respective Shares against any
resolution proposed in general meeting which would to its knowledge either
directly or indirectly give rise to a breach of the General Undertakings;
and
3.4 The Shareholders and the A & I Party undertake to each other to procure
that the Directors appointed by them in their capacity as a director of the
Company shall do all acts within their power to procure compliance by the
Company with the General Undertakings PROVIDED THAT nothing in this Clause
6
3.4 will impose an obligation to procure that any Director acts or omits to
act in a way which would be in excess of or in breach of his duties
(including his overriding duty to act in the best interests of the Company)
as a director of the Company or which would be unlawful.
3.5 The Company and each of the Shareholders and the A & I Party hereby
undertake to each other:
(a) to exercise their respective powers and votes (including such powers
and votes as may be vested in any nominee) to ensure that:
(i) the terms of this Agreement and the Articles of Association are
complied with;
(ii) all meetings of the Board and the Company shall be quorate;
(iii)generally to endeavour to promote the Company's business and its
interests;
(b) to execute any further documents, take all steps, exercise all voting
rights and other powers of control available to them in relation to
the Company or otherwise and generally to take any other such action
and do all other things as are required of them (including without
limitation amending the Articles of Association) at any time to give
full force and effect to the provisions of this Agreement.
3.6 Save as herein expressly provided, in the case of any conflict between the
terms of this Agreement and the provisions of the Articles of Association
of the Company or of any subsidiary of the Company, the terms of this
Agreement shall prevail on all the parties to this Agreement. The A & I
Party and each Shareholder agree that they will, if so requested by the
others procure to the extent of their respective rights to vote as a
shareholder of the Company any necessary amendment to the Articles of
Association or the articles of association of any subsidiary of the Company
(as the case may be) so as to remove such conflict.
3.7 The Shareholders and The A & I Party agree that whilst he remains an
employee and/or director of AL, Xxxxxx Xxxxxx will perform the duties of
Managing Director of the Company and have full responsibility for all
operational matters and will perform such activities as Operations Director
of AL and Chief Operating Officer of Inc., in accordance with the Service
Agreement;
3.8 Authoriszor and Inc. hereby agree with the Shareholders and the Company
that:
(a) it will reasonably consider providing further funds to the Company to
enable it to develop its business, provided that pre-agreed targets
and plans are met; and
(b) it will actively encourage the Company to seek appropriate
acquisitions and that all such proposals will be reasonably considered
by Authoriszor and Inc.
(c) the existing loan for (pound)122,000 owed by the Company to
Authoriszor under the terms of the agreement made 22 February 2000
("the Loan Agreement") will, if in the best interest of the Company,
be capitalised in due course.
7
(d) it and they will consult with Xxxxxx Xxxxxx with regard to any
proposed changes to the board of the Company and reasonably take into
account his opinions with regard to the same.
(e) Authoriszor will, within six (6) months of Completion in respect of
the Further Subscription deliver or cause to be delivered to the
Company an application for the allotment to Authoriszor of 139,167 "D"
Ordinary Shares ("Further Subscription Shares") duly signed on behalf
of Authoriszor together with a bankers draft (or such other form of
payment as the Shareholders may agree) in respect of the total
Subscription Price for such Further Subscription Shares
of(pound)250,000 and Authoriszor shall procure that the Company shall
allot and issue the Further Subscription Shares to Authoriszor upon
payment being received by the Company and Authoriszor shall procure
that the Company shall register Authoriszor as the holder of the
Further Subscription Shares and shall prepare and deliver to
Authoriszor share certificates in respect thereof.
3.9 Authoriszor hereby agrees that the terms of this Agreement are not intended
to restrict the management of the Company in the ordinary course and
Authoriszor acknowledges that the intention is for the Company to continue
to operate as an independent company wherever reasonably possible.
3.10 Inc agrees with the Shareholders that it shall make available to employees
of the Inc. options over at least 265,000 shares of Common Stock under
Inc's 2000 Omnibus Stock and Incentive plan (in addition to those options
to be granted to the Option Holders as a term of the Purchase Agreement)
such options to be granted as the Board of the Company (with a "D" Director
voting in favour) shall determine from time to time. Of these options,
100,000 shall be granted on the basis that they vest within 1 year of
issue.
4 THE BOARD OF DIRECTORS
4.1 Subject to clause 4.2 the majority of holders of the "D" Ordinary Shares
shall have the right to appoint at least two directors of the Company (the
"D" Director) and of such of its subsidiaries as it may specify from time
to time and to remove from office any such person so appointed and to
appoint another in his place. Any such appointment or removal shall be in
writing, served on the Company and signed by the majority of holders of the
"D" Ordinary Shares.
4.2 The Company shall not remove or purport to remove any "D" Director of the
Company without the prior written consent of the majority of holders of the
"D" Ordinary Shares (except in accordance with the provisions of Clause
4.2).
4.3 The "D" Directors shall be entitled to report back to the A & I Party such
information as may be necessary for the A & I Party to monitor its
investment in the Company. The "D" Directors shall be entitled to be paid a
reasonable directors fee as set out in the Business Plan and reasonable
expenses by the Company commensurate with the time spent and services
provided by him.
5 BUYOUT TERMS
5.1 Inc. and the Shareholders hereby agree that on the earlier of:
(a) the Secondary Fundraising Date;
8
(b) 1 January 2002; or
(c) the date on which a Shareholder Notice is served by a Shareholder;
or such earlier date as Inc. may agree with both Shareholders ("Trigger
Event"), Inc. will purchase from the Shareholders (or in the case of a
Shareholder Notice which is served by one Shareholder only from the
Shareholder serving the Shareholder Notice) in each case referred to as
"the Seller", and the Seller shall sell to Inc. the balance of the issued
share capital of the Company held by the Seller (or any person to whom a
Seller may have transferred his Shares) not already beneficially owned by
Inc. with full title guarantee, free from all liens, charges and
encumbrances and together with accrued benefits and rights ("Sale Shares")
at an acquisition price ("Price") of (pound)1.7964 xxxxx per Sale Share,
irrespective of the actual class of such share.
5.2 The completion of the purchase and sale referred to at Clause 5.1 shall
take place at the offices of Authoriszor's Solicitors on the tenth Business
Day after the Trigger Event when:
(a) the Seller holding Sale Shares shall deliver to Authoriszor's'
Solicitors certificates (or an indemnity for lost certificates in a
form reasonably satisfactory to Inc.) in respect of the Sale Shares
and duly completed and executed transfers of the Sale Shares in favour
of Inc. (if appropriate) Letters of Representation executed by each of
them; and
(b) Inc. shall pay or procure the payment of the Price in the manner set
out in Clause 7 below.
5.3 The Buyer agrees that in the event of a Buyer Event under clause 6.1(b)
below, the Buyer will use its reasonable best efforts to procure that any
Common Stock issued to the Shareholders in satisfaction of the Price is
also subject to the general offer made by the third party.
6 BUYER EVENT
6.1 For the purposes of this agreement a "Buyer Event" means
(a) the occurrence of an Insolvency Event;
(b) the making of a bona fide general offer by a third party to the
holders of Common Stock of Inc. to acquire all of the Common Stock
(other than Common Stock already owned by such third party);
(c) the disposal by Inc. (or by any of its Subsidiaries) of Shares to a
third party which results in such third party obtaining Control of the
Company.
6.2 If Inc. becomes subject to a Buyer Event the Shareholders may jointly or
individually serve a notice in writing upon Authoriszor and Inc.
("Shareholder Notice") requiring Authoriszor or at the Shareholder's option
Inc. to immediately purchase his "Sale Shares" at the Price as such
expressions are defined in Clause 7.1 in accordance with the provisions of
Clause 7.2;
9
7 price
7.1 Subject to clause 7.4 below, Inc. shall satisfy 55% of the Price by way of
procuring the issue and allotment of such numbers of fully paid shares of
Common Stock (excluding fractions but rounded up to the nearest share) at
the Average Closing Price as shall have a value nearest to, but not less
than, that sum to the relevant Shareholders as part satisfaction of
consideration payable to such relevant Shareholders subject to the
provisions of this Clause 7.
7.2 The balance of the price (45%) shall be payable in pounds sterling or such
other currency then adopted by the government of England which shall,
subject to Clause 8, be satisfied by a payment by Inc. of an amount equal
to that deposited in the Blocked Account pursuant to Clause 2.5 or by the
release to the Sellers of such sum from the Blocked Account. All payments
of Price (whether under this Clause or under Clause 7.3(a) or under Clause
7.4 or otherwise) made by Authoriszor in cash shall be paid to the
Shareholders by way of telegraphic transfer or bankers draft.
7.3 In addition:
(a) the Common Stock to be issued pursuant to Clause 7.1 shall rank pari
passu in all respects with the Common Stock of Inc. already in issue
and listed at the relevant time and so far as regards any dividend on
such stock declared or paid by reference to a record date falling on
or after the date of their registration in the register of members of
Inc. shall rank as if they had been issued (fully paid) on and from
the commencement of the period in respect of which such dividend is
declared or paid;
(b) it shall be a condition of the satisfaction of part of the Price by
Common Stock that the Common Stock shall be listed on NASDAQ (whether
on the OTC Bulletin Board or otherwise) or listed on such other
recognised and publicly quoted market in North America or Europe of
equivalent or better standing provided that if such Common Stock is
not so listed or such listing is prevented as a result of the trading
of Common Stock being suspended on the relevant date of issue, Inc.
shall have 30 Trading Days to procure such a listing, failing which
the Shareholders shall instead (if required by the Shareholders)
satisfy that part of the Price in respect of which such Common Stock
was issued by a payment in cash and such Common Stock shall (if
issued) be transferred back to Inc. (or its nominee) or cancelled at
the option of Inc.; and
(c) the conversion between United States Dollars to the pounds sterling or
the currency then adopted by the government of England shall be
calculated by reference to the average exchange rate for such
currencies specified in the Financial Times of England on the last
Business Day immediately prior to the date on which the relevant Sale
Shares are sold.
7.4
(a) In the event that the total amount of Common Stock or options over
Common Stock issued pursuant to Clause 2.5, 5 and 7.1 hereof, in
aggregate, at any time exceeds 19.9% of Inc's issued and outstanding
shares of Common Stock at the Completion Date, Inc. shall be entitled,
in its absolute discretion, to satisfy such part of the Price which
will cause such total amount of Common Stock to exceed the said 19.9%
10
in pounds sterling, or such other currency then adopted by the
government of England which shall be paid in accordance with Clause
7.2 above;
(b) In the event that a Shareholder Notice is served by a Shareholder
pursuant to the occurrence of an Insolvency Event, the Shareholders
shall be entitled to require that all or any Price payable to them
shall be payable in pounds sterling or such other currency then
adopted by the government of England which shall be paid in accordance
with Clause 7.2 above.
8 SET OFF
8.1 Save as hereinafter provided Inc. shall have no right of set off or
withholding or deduction against the Price payable to the Sellers pursuant
to Clause 7.
8.2 If prior to the Trigger Event, Inc shall notify the Sellers in writing of
any Actionable Claim (as hereinafter defined) then the provisions of
Clauses 8.3 to 8.6 below shall apply.
8.3 An Actionable Claim shall be a bona fide claim under the Sellers'
Warranties or under the Tax Deed (as each term is defined in the Purchase
Agreement) by Inc against the Sellers:
(a) which has been specified in reasonable detail with the supporting
evidence of the event matter or default which gives rise to the claim
and a reasonable estimate of the amount claimed;
(b) but shall only be an Actionable Claim to the extent of the balance of
the claim which may be made after taking into account the provisions
of Schedule 5 of the Purchase Agreement (Limitation on Sellers'
Liability), as appropriate.
8.4 An Actionable Claim (if it has not be previously satisfied settled or
withdrawn) shall be deemed to have been waived or withdrawn by Inc on the
expiry of 3 months after the date it was made unless Court proceedings in
respect of ot shall then have been issued and served on the Seller.
8.5 In the event of an Actionable Claim, notified in accordance with Clauses
8.2 and 8.4 Inc shall be entitled to set off the amount of the Actionable
Claim up to a maximum set off sum of (pound)500,000 against the Price
payable to the Seller pursuant to Clause 7 provided that:
(a) the maximum amount which Inc may set off against the Price payable to
Xx Xxxxxx under Clause 7.1 ("the Xxxxxx Share Element") shall be
(pound)125,000; and
(b) the maximum amount which Inc may set off against Xx Xxxxxx against the
Price payable to Xx Xxxxxx under Clause 7.2 ("the Xxxxxx Cash
Element") shall be (pound)125,000; and
(c) the maximum amount which Inc set off against Xx Xxxxxxxxx against the
Price payable to Xx Xxxxxxxxx under Clause 7.1 ("the Xxxxxxxxx Cash
Element") shall be (pound)125,000;
11
(d) the maximum amount which Inc may set off against Xx Xxxxxxxxx against
the Price payable to Xx Xxxxxxxxx under Clause 7.2 ("the Xxxxxxxxx
Cash Element") shall be (pound)125,000;
AND IN ANY EVENT the set off must be applied equally in relation to the
Xxxxxx Share Element, the Xxxxxx Cash Element, the Xxxxxxxxx Share Element
and the Xxxxxxxxx Cash Element so that no more than 25% of the set off may
be made against each such Element.
8.6 Upon any Actionable Claim having been settled or resolved and the amount
payable thereunder determined, Inc. shall be liable to pay to the Sellers
the amount set off by it pursuant to clause 8.5 in respect of that claim,
less the amount of the Actionable Claim agreed, settled or resolved to be
payable to Inc.
9 Guarantee
9.1 In consideration of the Shareholders and the Company entering into this
Agreement at the request of Inc. and in consideration of the payment
of(pound)1 to Inc. by each of the Shareholders and the Company (the receipt
of which is hereby acknowledged by Inc.), Inc. covenants with the
Shareholders and the Company;
(a) to procure and guarantee the performance of Authoriszor of all
obligations under this Agreement which are expressed to relate to
Authoriszor and of all obligations under any agreement ("Ancillary
Agreement") entered into by Authoriszor pursuant to this Agreement;
and
(b) to guarantee to the Shareholders and the Company the due payment by
Authoriszor of any monies due the Shareholders and/or the Company
under the terms of this Agreement or under any Ancillary Agreement and
this shall be a continuing guarantee until all monies due are paid.
9.1 The liability of Inc. shall not be discharged or impaired by any amendment
to or variation of this Agreement, any release of or granting of time or
other indulgence to Authoriszor or any third party or any act, event or
omission which but for this Clause would operate to impair or discharge the
liability of such party under this Clause.
10 ASSIGNMENT AND TRANSFER
10.1
(a) This Agreement shall be binding upon and shall enure for the benefit
of each party's personal representatives and successors in title (as
the case may be) but shall not be assignable save as provided in this
Clause 10;
(b) Notwithstanding the provisions in the Articles of Association of the
Company:
(i) no Shareholder shall be entitled to transfer any Shares without
the express written consent of Authoriszor and Inc. (which
Authoriszor and Inc. shall be entitled to refuse in its absolute
sole discretion as it sees fit); and
12
(ii) each member of the Buyer's Group shall be entitled to transfer
any Shares it may hold at any time to any other member of the
Buyer's Group, without the consent of either Shareholder.
10.2 If Authoriszor and/or Inc. transfer any Shares in the Company pursuant to
the Articles of Association, it shall be a condition of such transfer that
in each case such transferee shall execute a deed of adherence
substantially in the form set out in Schedule 7 and subject to executing
such deed of adherence, such assignee shall assume the obligations of such
Assignee (in addition to the Assignee) under Clauses 3.1 to 3.6 inclusive,
3.8 and 3.9.
10.3 If any Shareholder or Authoriszor ceases to hold Shares or ceases to be the
beneficial owner of shares in the Company, then it shall cease to have the
benefit of this Agreement.
10.4 The Company and the Shareholders and Authoriszor and Inc. undertake to each
other that they will procure to the extent of their respective rights
(whether as directors or shareholders of the Company or otherwise) that:
(a) no person is registered as holder of any shares in the Company (whether
upon transfer or transmission or by issue) except in accordance with the
Articles of Association and this Agreement; and
11 NOTICES
Where notice is to be given in writing to any party hereto it may be served
by leaving it at the registered office or last known address of that party
or by sending it by prepaid first class post or facsimile to the party's
registered office or last known address within the United Kingdom supplied
by the party to the other parties to this Agreement for the giving of
notice to that party to the other or by airmail or facsimile to any address
outside the United Kingdom supplied by that party for the giving of notice
to that party. A properly addressed and prepaid notice sent by first class
post or airmail (as the case may be) shall be deemed to have been served at
an address within the United Kingdom at the expiry of two days after the
notice is posted (unless posted outside the United Kingdom when the period
shall be increased from two days to ten days) and shall be deemed to have
been served at an address outside the United Kingdom at the expiry of ten
days from the date of posting by airmail. Where a notice is given by
facsimile, service of the same shall be deemed to be effected upon receipt
of telephone or other confirmation of its receipt. Any notice sent to the
"D" Director must also be copied to Authoriszor at the same time.
12 GENERAL
12.1 Failure by any party hereto at any time or times to require performance of
any provision of this Agreement shall in no manner affect his or its right
to enforce such provision at a later time. No waiver by any party hereto of
any condition or the breach of any term, representation or warranty
contained in this Agreement whether by conduct or otherwise in any one or
more instances shall be deemed to be construed as a further or continuing
waiver of any such condition or breach or waiver of any other condition or
be deemed to be or construed as the breach of or a waiver of any other
term, covenant, representation or warranty in this Agreement.
13
12.2 This Agreement shall be governed by and construed in accordance with
English Law and all the parties hereto irrevocably submit to the
non-exclusive jurisdiction of the English Courts as regards any claim,
dispute or matter arising out of or relating to this Agreement or any of
the documents to be executed pursuant to it. The parties hereto agree that
service of any writ, notice or other document for the purpose of any
proceedings in such Court shall be duly served upon it if delivered or sent
by registered post in the manner provided by Clause 11. Nothing in this
Agreement shall prevent or restrict a party from enforcing any judgement or
order outside the said jurisdiction.
12.3 This Agreement may be entered into by each of the parties signing one or
more counterparts which, taken together, shall constitute a complete
agreement.
12.4 Except where the context otherwise requires, each of the restrictions
contained in this Agreement shall be construed as independent of every
other restriction and of every other provision of this Agreement to the
intent that if any such restriction or the application of any such
restriction to any person or to any circumstance shall be determined to be
invalid or unenforceable, then such determination shall not affect any
other restriction or provision of this Agreement or the application of such
restriction to any other person or circumstance.
12.5 Nothing contained in this Agreement and no action taken by any party
pursuant to this Agreement shall be deemed to constitute any party, a party
to a partnership, association, joint venture or other entity. None of the
parties hereto shall by virtue hereof have any authority to bind any other
party hereto in any way except where expressly provided herein.
12.6 This Agreement (together with the documents executed pursuant to it)
constitutes the entire agreement between the parties and supersedes and
revokes any previous shareholder agreement between any of the Shareholders
in relation to the Company.
12.7 Each Shareholders will at their own expense execute and do all such
assurances, acts and things as Inc. may require for perfecting the title of
Authoriszor (or its nominee) to the Sale Shares owned by the particular
Shareholder following the exercise of an Option.
12.8 The Shareholders hereby irrevocably by way of security for the performance
of their obligations under Clause 6.2 of this Agreement (within the meaning
of Section 4 of the Powers of Attorney Act 1971) appoints Authoriszor and
any person to whom Authoriszor delegates the exercise of the power of
attorney conferred by this Xxxxxx jointly and also severally to be the
attorney or attorneys of the Shareholders and in their name and on their
behalf and as their act and deed to sign, seal, execute and deliver, all
documents deeds and instruments, which may be required (or which the
attorney reasonably considers necessary) for carrying out any obligation
imposed on the Shareholders to execute any such documents, deeds or
instruments pursuant to Clause 6.2(a) of this Agreement.
12.9 The Shareholders will ratify and confirm all transactions entered into and
all things done by the attorney in the exercise or purported exercise of
their powers.
12.10No term of this Agreement shall be enforceable under the Contract (Rights
of Third Parties) Act 1999 by any person who is not a party to this
Agreement. The parties to this Agreement may rescind or vary the same
without the consent of any other person.
AS WITNESS the hands of the parties or their duly authorised representatives on
the date shown on the first page as a deed.
14
SCHEDULE 1
Letter of Representation
Authoriszor Inc.
0000 Xxxxxxx Xxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Xx. Xxxx Xxxxx
President
Gentlemen:
In connection with the issuance to the undersigned of ____________ shares (the
"Shares"), of common stock, par value $0.01 per share (the "Common Stock"), of
Authoriszor Inc., a Delaware corporation (the "Company"), the undersigned
warrants and represents that:
1. The undersigned is acquiring the Shares for investment solely for his own
account and not for distribution, transfer or resale to others.
2. The undersigned has such knowledge and experience in financial and business
matters that he is capable of evaluating the merits and risks of the
acquisition of the Shares.
3. The undersigned understands that the Shares to be acquired have not been
registered under the Securities Act of 1933, as amended (the "Securities
Act"), nor pursuant to the provisions of the securities laws or other laws
of any other applicable jurisdiction, in reliance upon exemptions for
private offerings contained in the Securities Act and the regulations
promulgated thereunder and in the applicable laws of such jurisdictions.
The undersigned is fully aware that the Shares subscribed for by the
undersigned are to be issued to the undersigned in reliance upon such
exemptions based upon the representations set forth herein. The undersigned
is also fully aware of the restrictions on sale, transferability and
assignment of the Shares.
4. The undersigned will be subject to the Company's xxxxxxx xxxxxxx policy
[and the Company's Regulation FD Policy as such policies may be amended]
from time to time.
Because the Shares have not been registered under any securities laws, they will
be "restricted securities" as defined in Securities and Exchange Commission Rule
144. Accordingly, the undersigned, as a stockholder, may not sell, transfer, or
otherwise dispose of them without registration under the Securities Act and
applicable securities laws or the applicability of an exemption from
registration (in which case the undersigned may be required to provide the
Company with a legal opinion, in form and substance satisfactory to the Company
and its counsel, that registration is not required).
5. The Shares are not being acquired directly or indirectly as nominee,
trustee, agent, or representative for any other person or persons.
6. The undersigned acknowledges and consents that certificates now or
hereafter issued for the Shares will bear a legend substantially as
follows:
15
"The shares of stock of Authoriszor Inc. (the "Company") represented
by this certificate have not been registered under the Securities Act
of 1933, as amended (the "Act"), and the holder hereof cannot make any
sale, pledge, hypothecation, assignment or other transfer of any
shares of such stock except pursuant to an offering of such shares
duly registered under the Act, and any applicable state securities
laws, or under other such circumstances which in the opinion of
counsel for the Company, at the time, does not require registration
under the Act or any applicable state securities laws. The shares
represented by this certificate are "restricted securities" within the
meaning of Rule 144 promulgated by the Securities and Exchange
Commission under the Act and may be subject to the limitations and
reporting requirements of said rule upon resale or other distribution
thereof."
7. The undersigned warrants that the information set forth in this
Investment Letter is true and correct, with the knowledge that the
Company is relying on the accuracy of the information and truth of the
representations contained herein in connection with the Company's
compliance with applicable securities laws. The undersigned further
agrees to indemnify and hold harmless the Company from any and all
liabilities, losses, costs, and expenses arising out of or related to
the resale or other distribution by the undersigned of all or any
portion of the Shares in violation of the Securities Act or of any
applicable state securities laws as well as any and all liabilities,
losses, costs, and expenses to which the Company may be put or that
the Company may incur by reason of or in connection with any
misrepresentation made by the undersigned, any breach of any of its
warranties, or its failure to fulfil any of the covenants or
agreements set forth herein. The representations and warranties
contained herein (i) are made from the date the Board of Directors
approved the issuance of the Shares to the undersigned, and (ii) are
binding upon the heirs, legal representatives, successors, and assigns
of the undersigned.
Executed as of this _______ day of _______________, 2001
[Shareholder]
Address (for purpose of the Company's stock transfer records):
16
SCHEDULE 2
General Undertakings
1 The Company will not and the Shareholders and Authoriszor shall not
(subject to paragraphs 2 and 3 below) consent or authorise without the
prior written consent of Authoriszor or the "D" Director and the
Shareholders and so far as is lawful:
1.1 create allot or issue any shares or other securities of the Company or
grant any right to require the allotment or issue of any such shares or
securities (other than the creation allotment or issue or the grant of any
right to require the allotment or issue of any shares or securities
pursuant to this Agreement);
1.2 permit the winding up of or the appointment of a receiver to the Company or
any of its subsidiaries unless on the written advice of a Licensed
Insolvency Practitioner for reasons of insolvency;
2 The Company will procure that each and every subsidiary of it shall give
effect to each of the undertakings contained in paragraphs 1 and 1 above as
if the undertakings contained therein had also been given individually by
each of such subsidiaries and the name of each such subsidiary had appeared
therein in substitution for "the Company" wherever it therein occurs.
3 Xx Xxxxxx and Xx Xxxxxxxxx shall not be removed as directors of the Company
prior to the completion of the sale and purchase of their Sale Shares
pursuant to Clause .
17
SCHEDULE 3
The Resolutions
THE COMPANIES ACT 1985
WRDC LIMITED
COMPANY NUMBER 2945379
WRITTEN RESOLUTION
___________ 2001
We, the undersigned, being the holders of the entire issued share capital of the
Company hereby pass the following resolutions as written resolutions of the
Company pursuant to Section 381A of the Companies Act 1985 with effect as if the
said resolutions of the Company had been passed as resolutions of the Company in
general meeting.
WRITTEN RESOLUTIONS
1 That:
1.1 the authorised share capital of the Company be increased from (pound)33,400
to (pound)36,400 by the creation of 300,000 "D" Ordinary Shares of
(pound)0.01 each, having the rights set out in the Articles of Association
of the Company;
1.2 the 582,500 "A" Ordinary Shares of (pound)0.01 each and 582,500 "B"
Ordinary Shares of (pound)0.01 each to be acquired by Authoriszor Inc.
today be each reclassified and re-designated as a "D" Ordinary Share.
2 That:
2.1 the Directors shall have unconditional authority to allot, grant options
over, offer or otherwise deal with or dispose of any relevant securities
(as defined in section 80(2) of the Companies Act 1985) of the Company to
such persons at such times and generally on such terms and conditions as
the Directors may determine. The authority hereby conferred shall be for a
period expiring five years from the date hereof unless previously renewed,
varied or revoked by the Company in General Meeting and the maximum of such
relevant securities as aforesaid which may be allotted pursuant to such
authority shall be the authorised but as yet unissued share capital of the
company at the date and time of passing of this Resolution and as increased
by the preceding Resolution;
2.2 the Directors shall be entitled under the authority hereby conferred or
under any renewal thereof to make at any time prior to the expiry of such
authority any offer or agreement which would or might require relevant
securities as aforesaid to be allotted after the expiry of such authority.
3 That subject to Resolution No 2 above being passed the Directors shall be
and are hereby empowered for a period expiring five years from the date
hereof to allot any equity securities (as defined in section 94(2) of the
Companies Act 1985 (the "Act")) of the Company pursuant to the authority
18
conferred by Resolution No 2 above as if section 89(1) of the Act and the
pre-emption rights contained in the Articles of Association of the Company
did not apply to such allotment and the Directors shall be entitled to make
at any time prior to the expiry of the power hereby conferred any offer or
agreement which would or might require equity securities to be allotted
after the expiry of such power provided that such power shall, subject as
aforesaid, cease to have effect when the said authority Is revoked or
would, if not renewed, expire or on the re-registering of the Company as a
public company but if that authority is renewed the said power may also be
renewed for a period not longer than that for which the authority itself is
renewed by Special Resolution of the Company in General Meeting.
4. That the Company adopt new articles of association in the form attached
hereto
.......................................................
Xxxxxx Xxxxxx
.......................................................
Xxxxx Xxxxxxxxx
.......................................................
for and on behalf of
Authoriszor Holdings Limited
Dated
19
SCHEDULE 4
Shareholders
Name No. of Shares
Xxxxxx Xxxxxx 1,125,000 "A" Ordinary Shares
00 Xx Xxxxx Xxxx
Xxxxxx
Xxxx Xxxxxxxxx
XX00 0XX
Xxxxx Xxxxxxxxx 1,125,000 "B" Ordinary Shares
Rosedean
00 Xxxxxxxxxxx Xxxx
Xxxxxxxxxx
Xxxxxxxxx
Xxxxx Xxxxxxxxx X00 0XX
20
SCHEDULE 5
(Completion Board Minutes)
WRDC Limited
MINUTES of a Meeting of the Directors of the Company held at on ____________
2001 commencing at am/pm
Present: [* ]
In attendance: [* ]
1 OPENING
Xxxxxx Xxxxxx took the Chair, noted that the meeting had been duly
convened and that a quorum was present.
2 DECLARATION OF DIRECTORS' INTERESTS
Each Director declared whether or not he had an interest in the
matters to be discussed for the purposes of Section 317 of the
Companies Act 1985.
3 There was then produced to the meeting a written resolution of the
Company, duly executed by its existing shareholders, increasing the
authorised share capital of the Company and adopting new articles of
association for the Company. IT WAS RESOLVED that the written
resolution be accepted and that the secretary of the Company be
authorised to file a copy of the written resolution, the new articles
of association of the Company and a duly completed form 123 at
Companies House.
4 TRANSFERS
4.1 There were then produced to the meeting the following transfers:
Transferor Transferee Shares
Xxxxx Xxxxxxxxx Authoriszor Inc. 582,500
Xxxxxx Xxxxxx Authoriszor Inc. 582,500
4.2 IT WAS RESOLVED that such transfers be approved and that, subject to
the transferee producing duly stamped stock transfer forms, such
transfers be registered in the statutory books of the Company.
5 ALLOTMENT OF SHARES
There was then produced to the meeting an allotment letter, issued by
AHL, requesting that the Company issue to AHL, 139,168 "D" Ordinary
Shares of (pound)0.01 each in the capital of the Company, at an
aggregate subscription price of (pound)250,000, together with a cheque
for that amount. IT WAS RESOLVED that it was in the best interests of
the Company to make the allotment of 139,168 "D" Ordinary Shares of
(pound)0.01 each to AHL, and that the secretary be authorised to write
21
up the Company's statutory books accordingly, to issue an appropriate
share certificate to AHL, and to file a duly completed form 88(2) at
Companies House.
6 IT WAS RESOLVED that Xxxx Xxxxx, having consented to act, be appointed
as an additional director of the Company with immediate effect.
7 IT WAS RESOLVED that the current accounting reference period of the
Company be shorted to end on 30 June 2001.
8 There was then produced a resignation letter from the Auditors of the
Company. IT WAS RESOLVED that the resignation be accepted and that
Xxxxx Xxxxxxxx be appointed as the new auditors of the Company
9 IT WAS RESOLVED that the existing bank mandates of the Company be
revoked and new mandates in a form acceptable to the Board be
implemented.
10 CLOSING
There being no further business, the meeting closed at _______________
am/pm.
...............................................................
Chairman
22
SCHEDULE 6
Deed of Undertaking
THIS DEED OF UNDERTAKING is made on [* ] 200[* ]
BETWEEN:
(1) [* ] LIMITED (Registered in England No [* ] whose registered office is
at [* ] (the "Subsidiary"); and
(2) [* ] and [* ] (the "Shareholders")
RECITAL
This Deed of Undertaking is executed pursuant to Clause ) of an agreement of
today's date between [* ] Limited (the "Company") (1)[* ] (2) and [* ](3) (the
"Agreement").
THIS DEED WITNESSES as follows:
The Subsidiary undertakes to each of the Shareholders that in any case where
under the terms of the Agreement:
(a) an obligation or restriction is imposed upon a "Group Company",
"Subsidiary" or "Member of the Group" (as therein defined); or
(b) an obligation is imposed upon the Company to procure that an obligation or
restriction is observed or performed by a "Group Company", "member of the
Group" or "Subsidiary" (as therein defined);
it will (so far as that obligation or restriction falls to be observed or
performed by or in respect of it) observe or perform such obligation or
restriction.
IN WITNESS whereof this Deed has been executed and delivered by each of the
parties the day and year first above written.
23
SCHEDULE 7
Deed of Adherence
THIS DEED OF ADHERENCE is made on [* ] 200[* ]
BETWEEN:
(1) [* ] of [* ] ("the Covenantor"); and
(2) WRDC LIMITED (Registered in England No. 2945) ("the Company") for
itself and as attorney for the other parties to the Agreement.
(3) XXXXXX XXXXXX of [ ] ("Xx. Xxxxxx") and XXXXX XXXXXXXXX of [ ] ("Xx.
Xxxxxxxxx") (Xx. Xxxxxx and Xx. Xxxxxxxxx are together referred to as
the "Relevant Party")
RECITAL
This Deed is supplemental to a Shareholders' Agreement made on [* ] between [* ]
("the Agreement").
THIS DEED WITNESSES as follows:
1. The Covenantor hereby confirms that it has been supplied with a copy of the
Agreement and hereby covenants with each of the parties hereto to observe,
perform and be bound by all the terms of the Agreement set out in Clauses
3.1 - 3.6, 3.8 and 3.9 as if it were a party thereto or named therein as a
Shareholder.
2. This Deed shall be governed by and construed in accordance with English
law.
IN WITNESS WHEREOF this Deed has been executed by the Covenantor and the Company
for itself and as attorney for the other parties to the Agreement and by the
Relevant Party and is intended to be and is hereby delivered on the date shown
on the first page.
24
EXECUTED (but not delivered until the date )
hereof) AS A DEED by )
AUTHORISZOR HOLDINGS )
LIMITED acting by: )
Director:
Director/Secretary
EXECUTED (but not delivered until )
the date hereof) AS A DEED by )
WRDC LIMITED acting by: )
Director:
Director/Secretary
EXECUTED (but not delivered until )
the date hereof) AS A DEED by )
XXXXXX XXXXXX )
Witness signature:
Name:
Address:
Occupation:
25
EXECUTED (but not delivered until )
the date hereof) AS A DEED by )
XXXXX XXXXXXXXX )
Witness signature:
Name:
Address:
Occupation:
EXECUTED (but not delivered until )
the date hereof) AS A DEED by AUTHORISZOR )
INC acting by: )
Director:
Director/Secretary
26
