THIS SHARE PURCHASE AGREEMENT made as of February 10, 2004 by and among
ZIM Corporation, a company incorporated pursuant to the Canada Business
Corporations Act (the "Purchaser"), and the parties listed in Schedule "A"
hereto (each, a "Shareholder" and collectively, the "Shareholders" with those
Shareholders shown in Part 1 of Schedule A being the "Principal Shareholders");
WHEREAS EPL Communications Limited, is a company incorporated pursuant to
the Companies Xxx 0000 under company number 04878654 having a registered office
at Unit 21 City Business Centre, St' Xxxx'x Xxxxx, Xxxxx Xxxx, Xxxxxx XX00 0XX
("Communications") and E-Promotions Limited is a company incorporated pursuant
to the Companies Xxx 0000 under company number 03774847 and having a registered
office at Xxxxx Xxxxx, 000 Xxxx Xxxx, Xxxxxx, Xxxx XX00 0XX ("Promotions" and,
collectively Promotions and Communications being termed "the Companies")
AND WHEREAS the Shareholders are the registered and beneficial owners of
an aggregate of 2 ordinary shares in Communications (the "Communications
Shares"), being all of the issued shares in the capital stock of Communications,
which Communications Shares are held by the Shareholders as set forth beside
each Shareholder's name on Schedule "A" hereto;
AND WHEREAS the Shareholders are the registered and beneficial owners of
an aggregate of 11,246 ordinary shares in Promotions (the "Promotions Shares")
being all of the issued shares in the capital stock of Promotions, which
Promotions Shares are held by the Shareholders as set forth beside each
Shareholder's name on Schedule "A" hereto (the Communications Shares and the
Promotions Shares being collectively termed the "Purchased Shares");
AND WHEREAS each of the Shareholders has agreed to sell to the Purchaser
and the Purchaser has agreed to purchase from each respective Shareholder all of
the Purchased Shares such sale and purchase to be completed (subject to the
terms of this Agreement) on February 10, 2004 or such other date as the
Purchaser and the Principal Shareholders may agree (the "Completion Date");
AND WHEREAS the Shareholders, and the Purchaser have entered into a letter
of intent dated as of January 22, 2004 (the "Term Sheet") setting forth the
general terms in respect of the purchase and sale of the Purchased Shares, which
general terms are fully defined under the herein Agreement;
NOW THEREFORE, THIS AGREEMENT WITNESSES as follows:
1. PURCHASE AND SALE.
As of the Completion Date, subject to the terms hereof, each of the Shareholders
hereby agrees to sell their respective Purchased Shares to the Purchaser with
full title guarantee and the Purchaser agrees to purchase from each Shareholder
their respective Purchased Shares as set forth opposite the name of such
Purchaser on Schedule "A" hereto on the Completion Date (as hereinafter
defined). The sale of the Purchased Shares by the Shareholders to the Purchaser
shall be completed by the parties on the Completion Date, by delivery by the
Shareholders to the Purchaser of the documents set forth in Section 3 hereof
against delivery by the Purchaser of the consideration specified in Section 2
hereof.
2. PURCHASE PRICE AND PAYMENT.
2.1 In full consideration for the purchase by the Purchaser of the Purchased
Shares, the purchase price (the "Purchase Price") shall be the amount set
forth in Section 2.2 hereof and shall be paid by the Purchaser to the
Shareholders at the times set forth therein.
2.2 The consideration for the Purchased Shares shall be the aggregate sum of
two hundred and fifty thousand U.S. dollars (US$250,000) (the "Cash
Consideration") together with the issue by the Purchaser to the
Shareholders of a total of four million (4,000,000) common shares in the
capital of the Purchaser (the "Share Consideration").
2.3 On the Completion Date, the Purchase Price shall be paid and satisfied as
follows:
(a) the Cash Consideration by way of immediately available certified
funds in the amount of two hundred and fifty thousand U.S. dollars
(US$250,000), shall be paid to Lithgow Pepper & Xxxxxxxx (the
"Shareholders' Solicitors") by electronic transmission of funds to
the Shareholders' Solicitors Clients' Account at National
Westminster Bank Plc, Regents Street Branch, Sort Code 56 00 27,
Account Number 00000000, and allocated among the Shareholders in the
manner set forth on Schedule "B" hereto; the receipt of such funds
by the Shareholders' Solicitors shall be sufficient discharge of the
Purchaser's obligations to the Shareholders under this Section
2.3(a);
(b) the Share Consideration by way of
(i) share certificates representing ninety percent (90%) of each
Shareholder's respective Share Consideration shall be released
to each such Shareholder, as allocated among the Shareholders
in the manner set forth on Schedule "B" hereto on the
Completion Date;
(ii) share certificates representing ten percent (10%) of each
Shareholder's respective Share Consideration (collectively,
the "Escrow Shares"), as allocated among the Shareholders in
the manner set forth on Schedule "B" hereto, shall be held
pursuant to the provisions of an escrow agreement to be
entered into by and among the Purchaser and the Shareholders
substantially in the form attached at Schedule C hereto (the
"Escrow Agreement"), pursuant to which Escrow Agreement, any
remaining Escrow Shares on the first anniversary of the
Completion Date after any transfers made pursuant to the
Escrow Agreement, shall be released to each Shareholder in the
same proportions to which they originally contributed to the
Escrow Shares at such date;
2.4 The Cash Consideration and the Share Consideration shall be allocated as
between the Communications Shares and the Promotions Shares in the manner
set forth on Schedule "B" hereto.
3. COMPLETION.
3.1 Time of the Essence. Time shall be of the essence of this Agreement.
3.2 Completion. The Completion of the transactions contemplated by this
Agreement (the "Completion") shall take place at 2.00 p.m. (Greenwich
mean time) on the Completion Date contemporaneously by facsimile and/or
e-mail delivery at the offices of (i) solicitors to the Purchaser,
XxXxxxx Xxxxxxxxx LLP, at 000 Xxxxxx Xxxxx, Xxxxx 000, Xxxxxx, Xxxxxxx,
Xxxxxx, and (ii) the Shareholders' Solicitors, at 00 Xxxxxxx Xxxxxx,
Xxxxxx X0X 0XX, or at such other place(s) and at such other time as may
be approved in writing by the parties hereto.
3.3 Completion Procedures. At or prior to the Completion, the Shareholders
and the Purchaser shall take or cause to be taken all actions, steps and
corporate proceedings necessary or reasonably desirable to validly and
effectively approve or authorize the completion of the transactions
herein provided for; and, upon fulfillment of all of the conditions set
forth in Sections 4 and 5 hereof which have not been waived in writing as
provided for therein:
(a) the Shareholders shall deliver or cause to be delivered to the
Purchaser all documents required to be delivered hereunder,
including, but not limited to the following:
(i) all of the certificates representing all of the Purchased
Shares together with duly signed stock transfer forms
transferring the same into the name of the Purchaser;
(ii) a certified copy of any power of attorney or other instrument
under which this Agreement, any transfer of any Shares or any
related document is executed on behalf of any Shareholder;
(iii) a letter in the form attached at Schedule D from the Auditors
addressed to the Company in which they resign as auditors of
the Company, confirm that they have no claim against the
Company for professional fees or otherwise and make a
statement to the effect that there are no circumstances
commented with their ceasing to hold office which they
consider should be brought to the attention of the members of
the Company pursuant to section 394(1) of the Companies Act;
(iv) confirmations in a form reasonably satisfactory to the
Purchaser in respect of the balances on each bank account of
the Company at the close of business on the Business Day
before the Completion Date;
(v) certificates of incorporation, certificates of incorporation
on change of name, cheque books, bank mandates and books and
records of each Company, and all certificates and documents of
title relating to all the investments of each Company;
(vi) resignation letters from the present directors and secretary
of each Company in the form attached at Schedule E;
(vii) the minute books and other statutory books (in each case
written up to, but not including the Completion Date) and
corporate seals (if any) of each of the Companies;
(viii)the Escrow Agreement executed by each of the parties thereto;
(ix) non-competition and non-solicitation agreements in favour
of the Companies and the Purchaser in the forms attached as
Schedule "F", from Xxxxx Xxxxxxx and Xxxxxxx Xxxxxx;
(x) an enforceability opinion of solicitors to each of the
Companies and the Shareholders addressed to the Purchaser in
the form attached as Schedule "G" hereto;
(xi) a certificate dated with the Completion Date executed by each
Shareholder attesting to the truth and accuracy of each of the
representations and warranties of the Shareholders set forth
in Section 7 hereof as if each such representation and
warranty were made on and as of the Completion Date;
(xii) all such other assurances, certificates, consents, agreements,
documents and instruments as may reasonably be required by the
Purchaser to complete the transactions contemplated by this
Agreement or arising as a result of the conduct by the
Purchaser of its due diligence on the Companies the Purchaser
giving the Shareholders reasonable notice of such other
documentation as may be required under this sub-Section to
enable the Shareholders to obtain and (if required) execute
the same prior to Completion; and
(xiii) Xxxxx Xxxxxxx and Xxxxxxx Xxxxxx each enter into a consulting
agreement with the Purchaser in the form attached as Schedule
"H"; and
(b) the Shareholders shall procure that:
(i) the directors of the Companies approve for registration the
transfers of the Purchased Shares subject to their being duly
stamped;
(ii) the persons nominated by the Purchaser (the Purchaser giving
the Shareholders reasonable notice of such nomination to
enable appropriate documentation to be prepared and executed)
are duly appointed as directors of the Companies (and, where
necessary, any limit on the number of directors under any
Companies' articles is increased);
(iii) each of the present directors and secretary of each Company
resigns from his offices and/or employments with the Companies
and delivers a letter in the approved form set out in Schedule
E executed by him as a deed addressed to each relevant Company
and the Purchaser acknowledging that neither he nor any
Connected Persons (as defined in section 839 of the Income and
Corporation Taxes Act 1988) has any claim against the relevant
Company in respect of breach of contract, compensation for
loss of office, redundancy, unfair or wrongful dismissal or
for any other reason whatsoever and that no agreement or
arrangement is outstanding under which the relevant Company
has or could incur any obligation or liability to him or any
such Connected Persons;
(iv) the persons nominated by the Purchaser are appointed
secretaries of the Companies;
(v) revised bank mandates for each Company are obtained from
National Westminster Bank plc (the "Bank") and completed as
far as required by the former signatories to reflect the
resignations and appointments referred to above provided
nothing in this clause shall require the Shareholders to
undertake any steps required by the Bank which are within the
control of the Purchaser;
(vi) any liability of any Shareholder or a Connected Person of a
Shareholder to any of the Companies (whether due for payment
or not) is fully discharged in cash, with all interest accrued
up to the date of Completion; and
(vii) the Purchaser's Accountants are appointed auditors of each
Company with immediate effect;
and upon the fulfillment of the foregoing provisions of this Section 3
and of the completion conditions in Section 5 hereof, the Purchaser shall
pay the Purchase Price on the terms and conditions specified in Section 2
hereof and deliver to the Shareholders an executed copy of the Escrow
Agreement and certificates (issued in favour of the Shareholders or as
they may in writing direct), which together shall represent the Share
Consideration.
3.4 Each Shareholder hereby gives any waiver of any pre-emption or other
right, and any consent, which may be necessary under the Companies'
articles of association or otherwise in connection with the matters
contemplated by this Agreement, and the Shareholders shall at Completion
pass (or ensure that there is passed) any resolution of any Company which
the Purchaser may reasonably require (giving reasonable notice thereof)
for the purpose of carrying any provision of this Agreement into effect.
4. DUE DILIGENCE.
4.1 The parties hereto acknowledge that as at the date of this Agreement the
Purchaser's due diligence enquiries into the Companies remain to be
completed, and as such this Agreement is conditional upon such enquiries
being completed to the Purchaser's reasonable satisfaction in accordance
with the following provisions of this Section 4:
(a) the Shareholders shall make available to the Purchaser its agents
and advisers on a strictly confidential basis subject to at all
times the terms of the Non-Disclosure Agreement between the parties
dated 21st January 2004 (the "Non-Disclosure Agreement") such
documentation as the Purchaser may request with regard to the
Companies, including (but not limited to) Financial Statements,
financial and accounting records, contracts (with both suppliers and
customers of the businesses of the Companies) employment contracts
and records, filing documents with Companies House, HM Inland
Revenue tax returns, tax calculations and assessments, HM Customs
and Excise VAT records and returns, employee and company National
Insurance records and returns;
(b) the Purchaser shall be entitled to take copies of such documentation
as it shall reasonably require except only the agreement dated 1st
September 2002 between T-Mobile (UK) Ltd. and Promotions (in which
case the Purchaser shall still be entitled to inspect such document)
and the Purchaser shall be entitled to raise any reasonable and
proper enquiries on such documentation inspected and/or requested or
such other information provided by the Shareholders to the
Purchaser;
(c) the Shareholders will respond to all enquiries raised by the
Purchaser in connection with such due diligence enquiries with all
reasonable expedition and in reasonable and proper detail as would
be expected in connection with a transaction of the nature
anticipated by this Agreement;
(d) the Purchaser's due diligence enquiries and the Shareholders
responses thereto shall be completed by February 10, 2004 (or such
later date as the parties may mutually agree) when the Purchaser
shall state in writing to the Shareholders that (i) the Purchaser
shall be satisfied as to its enquiries with regard to the Companies
and the remaining provisions of this agreement shall remain in full
force and effect unconditionally or (ii) that the Purchaser shall
have determined, at its entire discretion that it does not wish to
proceed with the purchase of the Purchased Shares on the terms and
conditions of this Agreement in which case the respective parties
shall be released of their obligations to the other hereunder and
the terms and conditions of this Agreement shall be released in
their entirety with no obligation on the part of either party to the
other save for (i) ongoing obligations of confidentiality pursuant
to the Non-Disclosure Agreement and (ii) the Purchaser's obligation,
if applicable pursuant to the Term Sheet, to deliver to the
Shareholders' Solicitors the sum referred to under the heading "Deal
Protection" within the Term Sheet, such sum to be paid, if
applicable, within two working days of the date of the Purchaser's
notification that they do not intend to proceed.
5. CONDITIONS FOR THE BENEFIT OF THE PURCHASER.
5.1 The Purchaser shall not be obliged to complete the purchase of the
Purchased Shares unless, at or prior to the Completion Date, each of the
following conditions shall have been satisfied, it being understood that
the said conditions are included for the exclusive benefit of the
Purchaser and may be waived in writing by the Purchaser at any time, and
the Shareholders jointly and severally covenant and agree with the
Purchaser to use their respective best efforts to ensure that such
conditions are fulfilled at or prior to the Completion:
(a) Representations and Warranties. The representations and warranties
set forth in Section 7 hereof shall be true and correct in all
respects at Completion.
(b) Compliance. All of the terms, covenants and agreements set forth in
this Agreement to be complied with or performed at or prior to the
Completion Date shall have been complied with or performed at or
prior to Completion.
(c) Due Diligence Investigation. The Purchaser shall be satisfied in all
respects with the results of its due diligence investigation of each
of the Companies and, shall have determined to proceed with the
transactions contemplated in this Agreement in accordance with the
provisions as set out in Section 4.
(d) Company Options. All employee stock options issued by either Company
shall have been cancelled on a basis reasonably acceptable to the
Purchaser.
(e) Material Adverse Change. During the period from the date of the Term
Sheet to the Completion Date, there shall have been no material
adverse change to the business of either of the Companies.
(f) Good Title. Each Shareholder shall have good and marketable title to
the Purchased Shares being tendered by such Shareholder, free and
clear of any and all claims, commitments, rights, options, liens,
charges, encumbrances and security interests of any nature and kind
whatsoever (each, a "Lien")
(g) Consents and Approvals. All consents and approvals (the "Shareholder
Consents and Approvals") required to be obtained by each Shareholder
in connection with the execution and delivery of this Agreement and
the completion of the transactions contemplated by this Agreement by
such Shareholder shall have been obtained. All consents and
approvals required from third parties (including T-Mobile (UK) Ltd.,
Vodafone Limited and BBC Technology Ltd) together with such other
customers of the Companies, (if applicable) required to be obtained,
in the reasonable judgment of the Purchaser, from any third party in
connection with the execution and delivery of this Agreement shall
have been obtained the Purchaser giving reasonable notice of any
consents it shall require (in addition to those set out herein) to
enable the Shareholders to obtain such consents prior to Completion.
(h) Employee Matters.. Each of Xxxxx Xxxxxxx and Xxxxxxx Xxxxxx shall
have resigned from their employment with each of the Companies as at
the Completion Date and shall have (i) provided each Company and the
Purchaser with a release, as contained in the form of resignation
set out at Schedule "E", of any claims against either Company or the
Purchaser in respect of their prior employment, and (ii) shall have
entered into a consulting agreement with the Purchaser, in the form
set out in Schedule "H" hereto.
(i) Notices. All notices (the "Shareholder Notices") required to be
given by each Shareholder in connection with the execution and
delivery of this Agreement and the completion of the transactions
contemplated hereby by such Shareholder shall have been given.
(j) Banking Facility. The Purchaser, Promotions and the Principal
Shareholders shall have obtained the agreement, in a form reasonably
satisfactory to the Purchaser, from the Bank (referred to in
Schedule 7.20) for the Committed Overdraft Facility presently
available to Promotions from the Bank to remain in place following
Completion with a release of the personal guarantees issued by the
Principal Shareholders, or, if such agreement can not be obtained
then and in such a situation at Purchaser's election (i) such
facility shall be repaid and terminated by the Purchaser, (with the
Bank's agreement to release all associated security) or (ii) the
Purchaser shall indemnify the Shareholders in a manner reasonably
satisfactory to the Principal Shareholders, for any liability
arising under such guarantees until such time as the events
specified in Clause 6.1(f) shall have occurred.
(k) Waiver of Investment Right. T-Mobile (UK) Ltd. will have finally and
irrevocably waived in writing, in a form reasonably satisfactory to
Purchaser, its rights to purchase shares of Promotions, as referred
to in Schedule 7.10 hereto.
(l) Premises. Arrangements will have been made (the Purchaser having
complied with its obligations in Section 6.1(h)) with the Principal
Shareholders and/or with the landlord of the leased premises
referred to in Schedule 7.32 hereof, to the reasonable satisfaction
of the Purchaser, to permit the Companies to continue to occupy such
premises for a reasonable period of time after Completion.
(m) Shareholder Loans. All Shareholder loans to or from any Company will
have been repaid or cancelled at Completion and the Purchaser shall
have received evidence reasonably satisfactory to it of such
repayment or cancellation. It is agreed between the parties that the
sums due from the Principal Shareholders to the Companies may be
properly treated as salary accrued due and paid to such Principal
Shareholders and shall be properly recorded as such in the
accounting reference books of the Companies.
(n) Rectification Resolutions. The Shareholders shall have delivered a
written resolution for each Company ratifying the previous actions
of the Shareholders and directors of the Company in respect of all
of the prior actions or matters on behalf of each Company which
would have required Shareholders or directors consent (and in
particular matters relating to the issue of the shares of each
Company including without limitation any disapplication of
pre-emption rights under s95 of the Companies Xxx 0000 (the "Act"),
increase in share capital under s121 of the Act, authority to issue
shares under s80 of the Act and allotment by the directors).
(o) Waivers of Shareholders. Each Shareholder shall have delivered a
deed of release, in a form reasonably satisfactory to the Purchaser,
executed by each Shareholder and addressed to each Company and the
Purchaser in which the relevant Shareholder unconditionally releases
each Company and its officers and employees from all claims,
liabilities and obligations to the relevant person or any of its
Connected Persons (as defined in section 839 of the Income and Taxes
Act 1992) and confirms that no agreement or arrangement is
outstanding under which such a claim, liability or obligation could
arise at a future date or in certain events.
(p) Deliveries. The Shareholders shall have executed and delivered to
the Purchaser the documents contemplated in Section 3.3 hereof and
otherwise pursuant to this Agreement.
In case any of the foregoing conditions shall not have been fulfilled at or
prior to the Completion, the Purchaser in its sole discretion may either: (A)
terminate this Agreement by notice in writing to the Shareholders, in which
event the Purchaser shall be released from all obligations under this Agreement,
and unless the Purchaser can show that the condition for which the Purchaser has
terminated this Agreement could reasonably have been performed or complied with
or caused to have been performed or complied with by the Shareholders, then the
Shareholders shall also be released from all obligations hereunder; or (B) waive
compliance with any such condition if it shall see fit to do so, without
prejudice to its right of termination in the event of non-fulfillment of any
other condition hereof in whole or in part.
6. CONDITIONS FOR THE BENEFIT OF THE SHAREHOLDERS.
6.1 The Shareholders shall not be obliged to complete the sale of the
Purchased Shares unless, at or prior to the Completion, each of the
following conditions shall have been satisfied, it being understood that
the said conditions are included for the exclusive benefit of the
Shareholders and may be waived in writing by the Shareholders at any
time, and the Purchaser covenants and agrees with each Shareholder to use
its best efforts to ensure that such conditions are fulfilled at or prior
to the Completion:
(a) Representations and Warranties. The representations and warranties
set forth in Section 8 hereof shall be true and correct in all
respects at the Completion.
(b) Compliance. All of the terms, covenants and agreements set forth in
this Agreement to be complied with by or performed by the Purchaser
at or prior to the Completion Date shall have been so complied with
or performed by the Purchaser.
(c) Deliveries. The Purchaser shall have delivered the Purchase Price on
the terms and conditions specified in Section 2 hereof and all such
other documents as the Shareholders consider reasonably necessary or
desirable to complete the transactions contemplated hereby.
(d) Good Title. Each of the respective Shareholders shall receive a good
and marketable title to the shares in the Purchaser comprising that
part of the Share Consideration to be received by such Shareholder,
free and clear of any and all claims, commitments, rights, options,
liens, charges, encumbrances and security interests of any nature
and kind whatsoever (other than pursuant to the Escrow Agreement),
such shares being issued on a fully paid basis without any
obligation on the part of the Shareholders or any of them to make
financial contribution as an obligation of the holding of such
shares.
(e) Consents and Approvals. All consents and approvals required to be
obtained by the Purchaser in connection with the issue of the shares
comprising the Share Consideration shall have been obtained by the
Purchaser.
(f) Banking Facilities. The Principal Shareholders shall either have
been (i) released from their personal guarantees to the Bank
referred to in Section 5.1(j) above or (ii) where such facilities
shall remain as a consequence of Section 5.1(j) the Purchaser shall
have agreed to indemnify the Principal Shareholders, in a manner
reasonably satisfactory to the Principal Shareholders, of any and
all liability arising under such personal guarantees. Where such
indemnity as opposed to release shall arise the Purchaser shall
following Completion
(a) use all reasonable endeavours to maintain such facilities with
the Bank whilst securing the release of the Principal
Shareholders from their obligations under their personal
guarantees (including the Purchaser entering into such cross
company guarantee or other security as the Bank may require)
within the period of one calendar month from the date of
Completion and if the agreement of the Bank shall not have
been obtained within such period the facility shall be repaid
by the Purchaser in full; and
(b) whilst the personal guarantees of the Principal Shareholders
shall remain the Purchaser shall not take any steps which
shall increase the amount owing to the Bank under such
facilities to a sum in excess of the debit balance due to the
Bank on Completion; and
(c) the Purchaser shall within two business days following the
expiry of the period in sub-Section (a) above state in writing
(with reasonable documentation in support) whether the
facility continues with the Principal Shareholders being
released from their personal guarantees (in which case written
confirmation from the Bank shall be provided) or whether the
facility has been repaid.
(g) Equipment Leasing/hire. The Purchaser shall on Completion (at the
Purchaser's option) either (i) repay the sums due under the
equipment lease agreements specified at Schedule 7.16 providing the
Principal Shareholders of reasonable evidence thereof or (ii)
procure the agreement of the finance companies in respect of each
such lease/hire agreement to the transfer of all such agreements to
the Purchaser with the release of the personal guarantees of the
Principal Shareholders or the continuation of such agreements in the
name of Promotions with the Purchaser being substituted as guarantor
in the place of and with the release of the Principal Shareholders.
Where such agreement shall not have been obtained at Completion the
Purchaser shall (a) use all reasonable endeavours to obtain such
agreement within one month from the date of Completion the Purchaser
having agreed to indemnify the Principal Shareholders, in a manner
reasonably satisfactory to the Principal Shareholders, of any and
all liability arising under such personal guarantees within such
period and (b) if such agreement shall not have been obtained within
such one month period the Purchaser shall repay all equipment
leasing agreements specified at Schedule 7.16. The Purchaser shall
within two business days following the expiry of the said two
calendar month period state in writing (with reasonable
documentation in support) whether the equipment leasing agreements
continue with the Principal Shareholders being released from their
personal guarantees (in which case written confirmation from the
leasing companies shall be provided) or whether the agreements have
been repaid.
(h) Premises. The Purchaser having complied with reasonable requests of
the landlord of the leased premises in connection with information
properly requested in connection with the transfer of the tenancy at
will of the leased premises described at Schedule 7.32 to the
Purchaser and/or the grant of a new tenancy at will in the
Purchaser's favour as from Completion (i) the Purchaser shall
execute such documentation as such landlord shall properly require
to give effect to such grant and/or transfer or (ii) if the
agreement of the Landlord shall not have been obtained by Completion
the Purchaser shall enter into such documentation as the Principal
Shareholders may reasonably require indemnifying the Principal
Shareholders in respect of liability arising from the Purchaser's
continued occupation following Completion.
In case any of the foregoing conditions shall not have been fulfilled at or
prior to the Completion, the Principal Shareholders in their sole discretion may
either: (A) terminate this Agreement by notice in writing to the Purchaser, in
which event the Shareholders shall be released from all obligations under this
Agreement, and unless the Shareholders can show that the condition for which the
Shareholders have terminated this Agreement could reasonably have been performed
or complied with or caused to have been performed or complied with by the
Purchaser, then the Purchaser shall also be released from all obligations
hereunder; or (B) waive compliance with any such condition if they shall see fit
to do so, without prejudice to their right of termination in the event of
non-fulfillment of any other condition hereof in whole or in part.
7. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS.
As a material inducement to the Purchaser's entering into this Agreement and
completing the transactions contemplated by this Agreement and acknowledging
that the Purchaser is entering into this Agreement in reliance upon the
representations and warranties of the Shareholders set forth in this Section 7,
and notwithstanding any investigation made by or on behalf of the Purchaser in
connection with the transactions herein contemplated, (i) the Shareholders,
severally and not jointly, in respect of the representations and warranties set
out in Sections 7.1 to 7.7 and 7.42 below, and (ii) the Principal Shareholders,
jointly and severally, in respect of the remaining representations and
warranties in this Section 7, hereby represent and warrant to the Purchaser as
follows (such representations and warranties being repeated at the Completion
Date by reference to the facts and circumstances existing at that time)
7.1 Authorization by Shareholders. Each of the Shareholders has (i) the
individual capacity to enter into this Agreement and all other agreements
and instruments to be executed by such Shareholder as contemplated by
this Agreement and (ii) collectively the capacity to carry out such
Shareholder's obligations under this Agreement and such other agreements
and instruments. The execution and delivery of this Agreement and such
other agreements and instruments and the completion of the transactions
contemplated by this Agreement and such other agreements and instruments
have been duly authorized by each such Shareholder
7.2 Enforceability of Shareholders' Obligations. This Agreement constitutes a
valid and binding obligation of each of the Shareholders enforceable
against such Shareholders in accordance with its terms subject, however,
to limitations on enforcement imposed by bankruptcy, insolvency,
reorganization or other laws affecting the enforcement of the rights of
creditors and others and to the extent that equitable remedies such as
specific performance and injunctions are only available in the discretion
of the court from which they are sought. None of the Shareholders is an
insolvent person within the meaning of the Insolvency Xxx 0000 or similar
laws of any other applicable jurisdiction and none will become an
insolvent person as a result of Completion
7.3 Residence of Shareholders. Each of the Shareholders is a resident of the
jurisdiction noted beside such Shareholder's name on Schedule "A" hereto
7.4 Ownership of the Purchased Shares. Each of the Shareholders is, and at
the Completion Date will be, the registered and beneficial owner of their
respective Purchased Shares set forth next to such Shareholder's name on
Schedule "A" hereto, with good and marketable title thereto, free and
clear of all Liens. No person other than the Purchaser has any agreement,
option, right or privilege capable of becoming an agreement for the
purchase from such Shareholders of any of the Purchased Shares. The
delivery of share certificates in respect of the Purchased Shares (with
any required Shareholder Consents and Approvals and Shareholder Notices)
with the executed Stock Transfer Form drawn in favour of the Purchaser by
the respective Shareholders to the Purchaser pursuant to the provisions
of this Agreement will transfer good and valid title to the Purchased
Shares to the Purchaser free and clear of all Liens
7.5 Consents and Approvals. All of the Shareholder Consents and Approvals are
listed in Schedule 7.5 hereto. Except for such Shareholder Consents and
Approvals, no consent or approval of any person is required in connection
with the execution and delivery of this Agreement and the completion of
the transactions contemplated by this Agreement or to permit either
Company to carry on the respective business of such Company after the
Completion Date substantially and in all material respects as such
business is currently carried on by such Company
7.6 Notices. All of the Shareholder Notices are listed in Schedule 7.6
hereto. Except for such Shareholder Notices, no notice is required to be
delivered to any person in connection with the execution and delivery of
this Agreement and the completion of the transactions contemplated by
this Agreement or to permit either Company to carry on the respective
business of such Company after the Completion Date substantially and in
all material respects as such business is currently carried on by such
Company
7.7 Absence of Conflicting Agreements. The execution, delivery and
performance of this Agreement by each of the Shareholders and the
completion (with any required Shareholder Consents and Approvals and
Shareholder Notices) of the transactions contemplated by this Agreement
do not and will not result in or constitute any of the following:
(a) a default, breach or violation or an event that, with notice of
lapse or time or both, would be a default, breach or violation of
any of the terms, conditions or provisions of the articles,
memorandum of association or by-laws of either Company;
(b) an event which, pursuant to the terms of any contract, license or
permit, causes any right or interest of either Company to come to an
end or be amended in any way that is detrimental to the respective
business of either Company or entitles any other person to terminate
or amend any such right or interest;
(c) the creation or imposition of any Lien on any asset of either
Company or on any of the Purchased Shares; or
(d) the violation of any applicable law by any of the Shareholders or
either Company
7.8 Organization of Communications and Promotions. Each Company is a
corporation duly incorporated and validly subsisting under the laws of
its jurisdiction of incorporation. Neither Company has any subsidiaries
or agreements of any nature to acquire any subsidiary or to acquire or
lease any business operation. Except as set forth in Schedule 7.8 each
Company is licensed (where applicable), registered and qualified to
conduct business in the United Kingdom, which jurisdiction is the only
jurisdiction in which the respective business of such Company is
conducted, and neither the character nor the location of the properties
owned by such Company nor the nature of the business conducted by it
requires licensing, registration or qualification under the laws of any
other jurisdiction. Each Company has full corporate power to carry on its
respective business and to own and operate its respective assets,
properties and business as now carried on and owned and operated.
Schedule 7.8 hereto sets forth details of the Companies registrations
numbers with Companies House in England, a copy of their respective
certificates of incorporation and a complete list of officers, and
directors of each Company and Schedule A sets forth a complete list of
all shareholders of each Company and each of its respective subsidiaries.
7.9 Communications Share Capital. The authorized capital of Communications
consists of ordinary shares, of which there are 2 ordinary shares issued
as fully paid as to their nominal value. There are no outstanding
securities of Communications convertible into or exchangeable for any
shares of capital stock or any rights (either pre-emptive or other) to
subscribe for or to purchase, or any options, rights or warrants for the
purchase of, or any agreements providing for the issuance of, or any
calls, commitments or claims of any character relating to the issuance
of, any securities in the capital of Communications. Except as set forth
in Schedule 7.9 hereto, Communications has not, since the date of its
incorporation, declared or made any payment of any dividend or other
distribution in respect of its shares and has not redeemed, purchased or
otherwise acquired any shares. There are no outstanding securities
convertible into or exchangeable for any shares of capital stock or any
rights (either pre-emptive or other) to subscribe for or to purchase, or
any options, rights or warrants forth purchase of, or any agreements
providing for the issuance of, any securities in the capital stock of any
of the subsidiaries of Communications.
7.10 Promotions Share Capital. The authorized capital of Promotions consists
of ordinary shares, of which there are 11,246 ordinary shares issued as
fully paid as to their nominal value. There are no outstanding securities
of Promotions convertible into or exchangeable for any shares of capital
stock or any rights (either pre-emptive or other) to subscribe for or to
purchase, or any options, rights or warrants for the purchase of, or any
agreements providing for the issuance of, or any calls, commitments or
claims of any character relating to the issuance of, any securities in
the capital of Promotions. Except as set forth in Schedule 7.10 hereto,
Promotions has not, since the date of its incorporation, declared or made
any payment of any dividend or other distribution in respect of its
shares and has not redeemed, purchased or otherwise acquired any shares.
There are no outstanding securities convertible into or exchangeable for
any shares of capital stock or any rights (either pre-emptive or other)
to subscribe for or to purchase, or any options, rights or warrants forth
purchase of, or any agreements providing for the issuance of, any
securities in the capital stock of any of the subsidiaries of Promotions
7.11 Corporate Records. Except as set forth in Schedule 7.11 the respective
minute books of each Company contains true, correct and complete copies
of its respective articles, memoranda of association, by-laws, minutes of
every meeting of its respective boards of directors and every committee
thereof and of its respective shareholders and every written resolution
of its respective directors and shareholders since its respective dates
of incorporation. The respective share certificate books, registers of
shareholders, registers of transfers and registers of directors and
officers of each Company are complete and accurate in all material
respects. The Principal Shareholders acknowledge that the disclosure of
the deficiencies in the corporate records referred to in Schedule 7.11 is
for information purposes only, and that any liability to either Company
arising as a result of such deficiency may constitute a breach of this
Section 7.11 notwithstanding such disclosure and that the Principal
Shareholders shall be fully accountable for any such breach (subject to
the limitation of liability provisions within Section 10).
7.12 Legal Matters. The respective businesses of each Company have at all
times been conducted in all material respects in accordance with
applicable laws, regulations and by-laws in the England and Wales.
Neither Company conducts any material business outside of England and
Wales. Except as set out in Schedule 7.12 there has been no notice to
either Company or to any Shareholder of any, and to the best of each of
the Shareholders knowledge there is no, investigation or inquiry, order,
decree or judgment of any court of competent jurisdiction or any
governmental agency or regulatory body outstanding or to the best of any
of the Shareholders' knowledge and belief no such event is anticipated
against either Company and/or any subsidiary thereof which may have a
material adverse effect upon the respective business of either Company.
Unless otherwise noted, references in this Agreement to "the Shareholders
knowledge", "the Shareholders belief" or words to similar effect mean to
the knowledge or belief, as applicable, of the Principal Shareholders
after appropriate inquiries and investigations including but not limited
to inquiry of all and any Shareholders not comprising the Principal
Shareholders.
7.13 Fair Trading and Restrictive Practices. To the best knowledge of each
Company and each Shareholder, neither Company is a party to any
agreement, arrangement or concerted practice or is carrying on any
practice which in whole or in part contravenes Articles 81(1) or 82 of
the Treaty of Rome, or the Competition Xxx 0000 or any other anti-trust,
anti-monopoly or cartel legislation or regulations or which has been
notified to the Commission of the European Communities for an exemption
or in respect of which an application has been made to the Commission of
the European Communities for a negative clearance and neither Company has
received any notification that proceedings under any applicable
anti-trust law have been initiated nor are there any proceedings
contemplated by either of the Companies in connection with its business,
nor to the best of each Shareholders knowledge has any claim been made or
threatened alleging any anti-trust law contravention against either of
the Companies.
7.14 Bankruptcy. Neither Company is insolvent or has committed an act of
insolvency within the meaning of the Insolvency Xxx 0000 or the similar
laws of any other applicable jurisdiction to which either of the
Companies may be subject and has not made any arrangement in favour of
its creditors nor made a proposal for winding up or any voluntary or
other arrangement to its creditors or any class thereof nor had any
petition for a winding up order presented in respect of it. Neither
Company has initiated proceedings with respect to a compromise or
arrangement with its creditors or for its winding up, liquidation or
dissolution. No receiver has been appointed in respect of either Company
or any of its respective assets or the Purchased Shares and no execution
or distress has been levied on any of such assets or the Purchased
Shares.
7.15 Financial Statements. The Shareholders have furnished the Purchaser with
the unaudited financial statements for Promotions for the periods ended
31st January, 2001, 2002 and 2003 (the "Promotions Financial Statements"
and the unaudited financial statements for both Companies (prepared on a
collective basis) for the period ended 31st December 2003 collectively,
the "Financial Statements"), true and complete copies of which are
annexed to Schedule 7.15 hereto. The Financial Statements have been
prepared in accordance with accounting principals generally accepted in
the England and Wales. The balance sheets contained in such Financial
Statements fairly present in all material respects the financial position
(or forecasted financial position, as applicable) of Promotions in
connection with the Promotions Financial Statements and of each Company
in respect of the financial statements to 31st December 2003, as may be
applicable, as of their respective dates and the statements of earnings
and retained earnings contained in the Financial Statements fairly
present in all material respects the results (or forecasted results, as
applicable) of operations for the periods indicated. Since December 31,
2003, each Company has carried on its respective businesses in the
ordinary course and to the best of each Shareholders knowledge there has
been no material adverse change in the business, financial condition,
assets, results of operations of either Company.
7.16 Title to Assets. Except as disclosed in Schedule 7.16 hereto, each
Company has good and marketable title to all of its respective assets,
free and clear of any and all Liens. All machines, machinery, equipment,
tools or other moveable or mechanical property forming part of such
assets are in good operating condition and are in a state of repair and
maintenance, reasonably considered by the Shareholders as sufficient to
permit the continued operation of the business of each Company in
substantially the same manner as conducted in the year immediately prior
to the date of this Agreement. There is no agreement, option or other
right or privilege outstanding in favour of any person for the purchase
from either Company and/or any Shareholder of the business of such
Company or of any of such assets out of the ordinary course of business.
7.17 Lease Premises. Schedule 7.17 sets forth a description of each of the
leased premises of each of Company, and the general terms of each such
premises lease.
7.18 Material Contracts. Schedule 7.18 hereto lists all the contracts to which
each Company is a party which are material to the operation of the
business of each Company ("Material Contracts"). Neither Company is in
material default under any Material Contract and neither the Shareholders
nor either Company have received any notice that there has occurred any
event, which, with the lapse of time or giving of notice or both, would
constitute a material default under any Material Contract by such Company
or any other party to such a Material Contract. Each Material Contract
except where set out in Schedule 7.18 is in full force and effect,
unamended by written or oral agreement, and each Company, as may be
applicable, is entitled to the full benefit and advantage of each
Material Contract in accordance with its terms. Each Material Contract is
in good standing and neither Company nor any Shareholder has received any
notice of a default by any party under any Material Contract or notice of
any dispute between such Company and any other party in respect of any
Material Contract. Schedule 7.18 lists all Material Contracts which
contain a clause which requires a consent to the change of control of a
Company.
7.19 Intellectual Property.
(a) Schedule 7.19(a)(i) hereto sets forth, with respect to each
Proprietary Asset (as hereinafter defined) owned by each Company and
registered with any governmental body or for which an application
has been filed with any governmental body, (i) a brief description
of each such Proprietary Asset, (ii) the names of the jurisdictions
covered by the applicable registration or application and (iii) the
application or registration number and date of issuance or filing.
Schedule 7.19(a)(ii) hereto identifies and provides a brief
description of each Proprietary Asset owned by each Company that is
material to the business of such Company. Schedule 7.19(a)(iii)
hereto identifies and provides a brief description of, and
identifies any ongoing license fee, royalty or payment obligations
which, either alone or in the aggregate, are or in the future may be
(based on their current terms), in excess of (pound)5,000 Sterling
with respect to, each Proprietary Asset that is licensed or
otherwise made available to or used by either Company by any person
and is material to the business of such Company, and identifies and
provides a description of (1) the agreement under which such
Proprietary Asset is being licensed or otherwise made available to
or used by such Company, (2) whether such Proprietary Asset is
embedded or bundled with a Proprietary Asset set out in Schedule
7.19(a)(ii) hereto or independently distributed by such Company (and
if so embedded or bundled, the specific Proprietary Asset set out in
Schedule 7.19(a)(ii) hereto with which such Proprietary Asset is
embedded or bundled), and (3) if so embedded or bundled or
independently distributed, any representations, warranties, support
obligations, indemnities or other commitments made by such Company
in respect of such Proprietary Asset which are not fully supported
by a similar commitment under the applicable agreement in favour of
such Company.
(b) Each Company has good and valid title to all of its Proprietary
Assets as identified or required to be identified in Schedules
7.19(a)(i) and (ii) hereto, free and clear of all Liens, except for
(i) the liens identified in Schedule 7.19(b), (ii) any Lien for
current taxes not yet due and payable, and (iii) minor Liens that
have arisen in the ordinary course of such Company's business and
that do not (individually or in the aggregate) materially detract
from the value of, or the ability of such Company to exploit, such
Proprietary Asset subject thereto or materially impair the
operations of such Company. Each Company has the exclusive right to
bring actions against any person that is infringing any of such
Company's Proprietary Assets as identified in Schedules 7.19(a)(i)
and (ii) hereto. Each of the Companies, as the case may be, being
the appropriate owner of such Proprietary Asset has a valid right to
use, license and otherwise exploit all of such Company's Proprietary
Assets as identified or required to be identified in Schedule
7.19(a)(iii) hereto. Under each agreement entered into in respect of
either Company's Proprietary Assets set out in Schedule 7.19(a)(iii)
hereto, such Company has except which specified in Schedule
7.19.(a)(iii) been provided with Source Code (as hereinafter
defined) to such Proprietary Asset or such Source Code has been
escrowed with an independent third party in respect of each
Proprietary Asset where access by such Company may be required in
order for such Company to embed, support or otherwise make use of
such Proprietary Asset. None of the Proprietary Assets identified in
Schedules 7.19(a)(i), (ii) or (iii) hereto are subject to any
outstanding order, judgment, decree, stipulation or agreement
restricting the use thereof or restricting the sale, transfer,
assignment or licensing thereof. Neither Company has developed
jointly with any other person any of such Company's Proprietary
Assets that is material to the business of such Company and with
respect to which such other person has any rights. There is no
agreement (with the exception of escrow agreements, end user license
agreements, support agreements, consulting agreements and other
customer contracts in the standard forms previously delivered by
either Company to the Purchaser) pursuant to which any person has
any right (whether or not currently exercisable) to use, license or
otherwise exploit any of either Company's Proprietary Assets.
(c) Each Company has taken reasonable measures and precautions
appropriate in the reasonable opinion of each of the Shareholders
bearing in mind the nature and manner of the conduct of each of the
Companies businesses prior to the date of this Agreement and the
industry common practices in regard to such matters, to protect and
maintain the confidentiality, secrecy and value of all of such
Company's material Proprietary Assets (except Proprietary Assets
whose value would be unimpaired by disclosure). Without limiting the
generality of the foregoing, (i) each current or former employee of
each Company who is or was involved in, or who has contributed to,
the creation or development of any of such Company's material
Proprietary Assets has executed and delivered to such Company an
agreement (containing no exceptions to or exclusions from the scope
of its coverage) with terms substantially identical those contained
in the employee agreements referred to in Schedule 19(c) hereto, and
(ii) each current and former consultant and independent contractor
to each Company who is or was involved in, or who has contributed
to, the creation or development of any of such Company's material
Proprietary Assets has executed and delivered to such Company an
agreement (containing no exceptions to or exclusions from the scope
of its coverage) that is substantially identical to the form of
consultant intellectual property assignment agreement previously
delivered to the Purchaser. No current or former employee, officer,
director, shareholder, consultant or independent contractor of
either Company has any right, claim or interest in or with respect
to any of such Company's Proprietary Assets.
(d) Each Company has obtained in writing except where stated in Schedule
7.19(d) appropriate waivers of moral rights in their favour and in
favour of their successors and assigns as well as copyright
assignments in writing, where necessary, from all persons whose
copyrightable work has been incorporated, in whole or in part, into
any of such Company's Proprietary Assets, and all such waivers are
irrevocable and without any limitations of any kind. To the best of
the knowledge of each Shareholder, no current employee or consultant
of such Company whose duties or responsibilities are important to
the business of such Company is obligated under any agreement
(including licenses, covenants or commitments of any nature) or
subject to any judgment, decree or order of any court or
administrative agency, or any other restriction that would
materially interfere with such employee or consultant's duties to
such Company in accordance with their contractual obligations, nor
to promote the interests of such Company in accordance with such
contractual obligations, in their current businesses or that would
conflict with the business of such Company in any manner whatsoever.
(e) All trade-marks, service marks and copyrights held by each Company
are valid, enforceable and subsisting. Neither Company has any
patents or applications for patents. Neither Company's Proprietary
Assets and no Proprietary Asset that is currently being developed by
such Company (either by itself or with any other person) infringes,
misappropriates or conflicts with any Proprietary Asset owned or
used by any other person. None of the products, systems, software,
hardware, computer programs, source code, object code, models,
algorithm, formula, compounds, inventions, designs, technology,
proprietary rights or other intellectual property rights or
intangible assets that is or has been designed, created, developed,
assembled, manufactured or sold by either Company is infringing,
misappropriating or making any unlawful or unauthorized use of any
Proprietary Asset owned or used by any other person, and none of
such products has at any time infringed, misappropriated or made any
unlawful or unauthorized use thereof. Neither Company has received
any notice, claim or other communication (in writing or otherwise)
of (i) any actual, alleged, possible or potential infringement,
misappropriation or unlawful or unauthorized use or misuse of, any
Proprietary Asset owned or used by any other person, or (ii)
suggesting that any other person has or may have any claim of legal
or beneficial ownership or other claim or interest in any of such
Company's Proprietary Assets. To the best of the knowledge of each
Shareholder, no other person is infringing, misappropriating or
making any unlawful or unauthorized use of, and no Proprietary Asset
owned or used by any other person infringes or conflicts with, any
of such Company's material Proprietary Assets
(f) There are no legal opinions, nor have there ever been any, in the
possession of either Company to the effect that any of the subject
matters of such Company's Proprietary Assets may be or are invalid
or unenforceable, or official actions or other notices from any
regulatory authority or governmental department, office or agency
that any of the subject matters or claims of pending applications
for registration constituting any of such Proprietary Assets are
unregistrable
(g) Neither Company has granted any person any right, license or
permission to use any of the marks which are part of such Company's
Proprietary Assets and none of such marks has been or is now
involved any opposition or cancellation proceedings, nor are any
such proceedings threatened to the knowledge of each Shareholder
(h) Each Company's Proprietary Assets constitute to the best of each
Shareholders belief all of the Proprietary Assets necessary to
enable such Company to conduct its business in the manner in which
such business has been or is being conducted or to deliver or
provide the products and services which have been or are offered by
or under such business. Neither Company has (i) licensed any of such
Company's Proprietary Assets to any person on an exclusive basis, or
(ii) entered into any covenant not to compete or agreement limiting
or purporting to limit the ability of such Company to exploit fully
any of such Company's Proprietary Assets or to transact business in
any market or geographical area or with any person.
(i) Neither Company has (save for disclosure pursuant to the terms of
this Agreement) disclosed or delivered to any person, or permitted
the disclosure or delivery to any escrow agent or other person, of
any of such Company's Source Code. No event has occurred, and no
circumstance or condition exists (including, without limitation, the
transactions contemplated hereby), that (with or without notice or
lapse of time) will, or could reasonably be expected to, result in
the disclosure or delivery to any person (other than the Purchaser
on Completion) of any of either Company's Source Code or the release
from any escrow of any of such Company's other Proprietary Assets.
Schedule 7.19(i)(i) hereto identifies each agreement pursuant to
which each Company has deposited or is required to deposit with an
escrowholder or any other person any of such Company's Source Code,
and additionally includes a description of the particulars of such
escrow agreements (including, without limitation, as to the parties
thereto, the dates thereof, the terms thereof and the addresses at
which such Company's Source Code has been deposited). Except
pursuant to such escrow agreements, none of either Company's Source
Code has been removed from the premises of such Company. Neither the
execution of this Agreement nor Completion could reasonably be
expected to result in the release or disclosure (except to the
Purchaser) of any of either Company's Source Code or the release
from any escrow of any of either Company's other Proprietary Assets.
Except for licensed customers of either Company, no person has been
provided with a copy of the object code of either Company's
Proprietary Asset.
(j) Except with respect to demonstration or trial copies, no product,
system, program or software module designed, developed, sold,
licensed or otherwise made available by either Company to any person
has been manufactured, designed or otherwise produced by the Company
to contain any "back door," "time bomb," "Trojan horse," "worm,"
"drop dead device," "virus" or other software routines and no
hardware components have been designed to permit unauthorized access
or to disable or erase software, hardware or data without the
consent of the user.
For the purposes of this Section 7.19, the following capitalized terms
have the following meanings:
(A) "Proprietary Asset" shall mean any: (1) patent, patent application,
trade-xxxx (whether registered or unregistered), trade-xxxx
application, trade name, fictitious business name, service xxxx
(whether registered or unregistered), service xxxx application,
copyright (whether registered or unregistered), copyright
application, maskwork, maskwork application, trade secret, know-how,
customer list, franchise, system, computer software, computer
program, source code, model, algorithm, formula, compound,
invention, design, blueprint, engineering drawing, proprietary
product, technology, proprietary right or other intellectual
property right or intangible asset; and (2) any and all rights to
use or exploit any of the foregoing; and
(B) "Source Code" shall mean any source code, or any portion, aspect or
segment of any source code, relating to any Proprietary Asset
7.20 Undisclosed Liabilities. Except as disclosed in Schedule 7.20 hereto,
neither Company has any liabilities, obligations, indebtedness or
commitments, whether accrued, absolute, contingent or otherwise, which
are not disclosed in such Company's Financial Statements or disclosed
herein, other than liabilities, obligations and indebtedness (i) incurred
in the normal course of business; and (ii) which do not in any one
individual transaction exceed five thousand pounds sterling (UK
(pound)5,000), and do not exceed, in the aggregate, fifteen thousand
pounds sterling (UK (pound)15,000)
7.21 Litigation. Except as disclosed in Schedule 7.21, there is no action,
suit, proceeding, claim, application, complaint or investigation in any
court or before any arbitrator or before any regulatory body or
governmental or non-governmental body pending or threatened by or against
either Company and/or any Shareholder related to their respective
business, operations or capital or the transactions contemplated by this
Agreement of which notice has been received by either Company or any
Shareholder (as the case may be), and to the best knowledge of each of
the Shareholders, there is no factual or legal basis which could give
rise to any such action, suit, proceeding, claim, application, complaint
or investigation
7.22 Employee Matters. Schedule 7.22 hereto lists all the employees and/or
consultants of each Company as of the date of this Agreement and the age,
position, status, length of service, compensation, vacation entitlement,
remaining vacation entitlement for 2004 and all other benefits of each of
them, respectively. The Purchaser has been provided with copies of all
employment and/or consultant agreements of each Company. Except as set
out in Schedule 7.22 hereto, neither Company is a party to or bound by
any contracts in respect of any of its employees or consultants or former
employees or former consultants, including:
(a) any contracts for the employment or statutorily required
re-employment of any employee; or
(b) any bonus, deferred compensation, profit sharing, stock option or
purchase, pension, retirement, hospitalization insurance or other
plans or arrangements providing employee benefits.
There is no labour strike, dispute, slowdown or stoppage actually pending
or involving or, to the knowledge of any Shareholder, threatened against
Communications with respect to the business of Communications or against
Promotions with respect to the business of Promotions. No union
representation question exists respecting the employees of either Company
in connection with its respective business and no collective bargaining
agreement is in place or currently being negotiated by either Company.
Except as set out in Schedule 7.22 hereto, there are no wages, salaries
or bonuses owing or promised to any of the employees of either Company
other than wages accruing and unpaid commissions in the normal course of
business for the most recent pay period to the Completion Date and in
respect of accrued vacation. No notice has been received by either
Company or any Shareholder of any complaint which has not been resolved,
filed by any of its employees claiming that either Company has violated
applicable employment standards or human rights or similar legislation or
policies in any jurisdiction in which such Company operates, or of any
complaints or proceedings which have not been resolved of any kind
involving either Company or, to any of the Shareholders' knowledge, after
due inquiry, any of the employees of either Company before any employment
or industrial Tribunal. Neither the Companies nor the Shareholders have
received notice of any outstanding orders or charges against either
Company under any applicable occupational and/or employment health and
safety legislation in the any jurisdiction in which such Company carries
on business. All levies, assessments and penalties made against either
Company pursuant to applicable legislation relating to employees in any
jurisdiction in which such Company carries on business have been paid by
such Company with the exception only of those accrued but not as yet
fallen due for payment (in respect of which appropriate provisions have
been taken in the accounts of each Company) and neither Company has been
reassessed under such legislation except with respect to any such
reassessments as have been resolved prior to the date hereof
7.23 Bonuses. Except as set forth in Schedule 7.23 hereto, since December 31,
2003 neither Company has paid any bonus, fee, distribution, remuneration
or other compensation to any person (other than salaries, wages or
bonuses paid to employees of such Company in the ordinary course of
business in accordance with current compensation levels and practices as
set forth in Schedule 7.23 hereto and fees to professional advisors in
the ordinary course of business)
7.24 Affiliated Transaction. Except in accordance with the matters set forth
in Schedule 7.24, neither Company is liable in respect of advances,
loans, guarantees to or on behalf of any shareholder, officer, director,
employee or subsidiary of such Company or any other person with whom such
Company does not deal with at arm's length
7.25 Tax Filings. Each Company has prepared and filed on time with all
appropriate taxing authorities all returns, declarations, remittances,
information returns, reports and other documents of every nature required
to be filed by on behalf of such Company in respect of any taxes or in
respect of any other provision in any domestic or foreign federal,
provincial, municipal, state, territorial or other taxing statute for all
fiscal period ending on or before the Completion Date. Except to the
extent as disclosed at Schedule 7.25 all such returns, declarations,
remittances, information returns, reports and other documents are correct
and complete in all material respects and no material fact has been
omitted therefrom. Save where disclosed at Schedule 7.25 no extension of
time in which to file any such returns, declarations, remittances,
information, reports as above or other documents is in effect. All taxes
shown on all such returns, or on any assessments or reassessments in
respect of any such returns have been paid in full. Except as set out at
Schedule 7.12 to each of the Shareholders' respective knowledge, no
action, proceeding or investigation has been threatened by any
governmental authority for the assessment or collection of any taxes for
which either Company would be liable. The Principal Shareholders
acknowledge that the disclosure of the audit referred to in Schedule 7.12
is for information purposes only, and that any tax or related liability
to either Company arising as a result of such audit may constitute a
breach of this Section 7.25 notwithstanding such disclosure and that the
Principal Shareholders shall be fully accountable for any such breach
(subject to the limitation of liability provisions within Section 10).
7.26 Taxes Paid. Each Company has paid in full all taxes required to be paid
on or prior to the date hereof and has made provision in such Company's
Financial Statements reasonably considered by the Shareholders to be
adequate and in line with and in accordance with accounting principles
generally accepted in England and Wales for the payment of all taxes in
respect of all accounting periods which have fallen due on or before the
Completion Date. Save at Schedule 7.26 neither Company has incurred any
tax liability since December 31, 2003 otherwise than in the ordinary
course of the Company's business or made or become liable to make any
payment or incurred or become liable to incur any expenditure which will
not be wholly deductible in computing its taxable profits. The Principal
Shareholders acknowledge that the disclosure of the audit referred to in
Schedule 7.26 is for information purposes only, and that any tax or
related liability to either Company arising as a result of such audit may
constitute a breach of this Section 7.25 notwithstanding such disclosure
and that the Principal Shareholders shall be fully accountable for any
such breach (subject to the limitation of liability provisions within
Section 10).
7.27 [Re]assessments of Taxes. Save as set out at Schedule 7.27, there are no
assessments or reassessments of either Company's respective taxes that
have been issued and are outstanding and there are no outstanding issues
which have been raised and communicated to either Company by any
governmental body for any taxation year in respect of which a tax return
of either Company has been submitted to HM Inland Revenue. No
governmental body has challenged, dispute or questioned either Company in
respect of any returns, filings or other reports filed under any statute
providing for taxes. Neither Company is negotiating or disputing any
draft assessment or reassessment with any governmental body. None of the
Shareholders is aware of any contingent liabilities for taxes (other than
in respect of current taxation years) or any grounds for assessment or
reassessment of either Company, including, without limitation in relation
to unreported benefits conferred on any shareholder of such Company, or
the treatment of income, expenses, credits or other claims for deduction
under any return or notice other than as disclosed in such Company's
Financial Statements. Neither Company nor any of the Shareholders has
received any indication from any governmental body that an assessment or
reassessment of either Company is proposed in respect of any taxes,
regardless of its merits. Neither Company has executed or filed with any
government body any agreement or waiver extending the period for
assessment, reassessment or collection of any taxes. All taxation years
up to and including the taxation year ended 31st January 2003 of each
Company have been submitted and are to the best of the Shareholders
knowledge considered closed by all governmental bodies for the purposes
of all taxes, subject only to reassessment within the applicable
limitation periods
7.28 Withholdings and Remittances.
(a) Except as stated in Schedule 7.28, each Company has duly deducted
and accounted for all amounts which it has been obliged to deduct in
respect of tax and in particular has withheld from each payment made
to any of its respective present or former employees, officers and
directors all amounts required by law to be withheld, including but
without limitation National Insurance Contributions and PAYE income
tax deductions and furthermore, has remitted all such withheld
amounts within the prescribed periods to the appropriate
governmental body or bodies except only sums presently withheld and
not as at the date hereof due for payment.
(b) Except as stated in Schedule 7.28 each Company has remitted all
contributions, National Insurance Contributions and PAYE income tax
payable by it in respect of its respective employees and has
remitted such amounts to the proper governmental body or bodies
within the time required under the applicable legislation. Each
Company has charged, collected and remitted on a timely basis all
taxes as required under applicable legislation on each respective
sale, supply or delivery whatsoever, made by such Company.
(c) Each Company has duly registered and is a taxable person for the
purposes of value added tax and neither of them has applied for
treatment as a member of any group for value added tax purposes.
(d) All documents in the enforcement of which either Company may be
interested have been duly stamped.
(e) The execution and completion of this Agreement will not result in a
profit or gain being deemed to accrue to either Company for tax
purposes.
(f) If each of the capital assets of each Company were disposed of for a
consideration equal to its book value in, or adopted for the
purposes of, the [last Accounts], no liabilities to corporation tax
on chargeable gains on balancing charge for capital allowances
purposes would arise
7.29 Absence of Certain Changes of Events.
Since December 31, 2003 neither Company has:
(a) suffered any material adverse change in its respective business,
financial condition, assets or results of operation in respect of
which the Purchaser is not adequately protected by the provisions of
Section 2.5;
(b) amended its respective articles and/or memorandum of association;
(c) declared or made any payment of any dividend or other distribution
in respect of its respective shares and has not redeemed, purchased
or otherwise acquired any shares;
(d) issued or sold any shares or other securities or issued, sold or
granted any option, warranty or right to purchase any of its shares
or other securities;
(e) disposed of any of assets reflected on its balance sheet forming
part of such Company's Financial Statements, except sales of assets
in the normal course of such Company's respective business;
(f) changed any accounting or costing systems or methods in any material
respect;
(g) except as set out at Schedule 7.29(g) incurred or assumed any
liabilities, obligations or indebtedness (whether accrued, absolute,
contingent or otherwise), except unsecured current liabilities,
obligations and indebtedness incurred in the normal course of
business and not in any individual case in excess of five thousand
pounds sterling (UK (pound)5,000);
(h) save where mentioned at Schedule 7.29(h) made or granted any bonus,
increased the compensation paid (other than for normal merit and
cost of living increases) or made loans or advances to any director,
officer or employee;
(i) mortgaged, pledged, granted a security interest in or otherwise
encumbered any of its assets, except in the normal course of
business and in amounts which, individually and in the aggregate are
not material to its financial condition or operation of it business;
(j) entered into any Material Contract or any other transaction that was
not in the normal course of business; or
(k) terminated, cancelled or modified in any material respect or
received notice or a request for termination, cancellation or
modification in any material respect of any Material Contract
7.30 Brokerage Fees. None of the Shareholders nor either Company has entered
into any agreement which would entitle any person to any valid claim
against such Company or the Purchaser for a broker's commission, finder's
fee or any like payment in respect of the purchase and sale of the
Purchased Shares or any other matters contemplated by this Agreement. For
greater certainty, all fees and expenses payable to Edengene Finance
Limited will be for the account of the Shareholders.
7.31 Personal Property. All personal property used by each Company for its
respective business is reasonably considered by the Shareholders as
sufficient to permit the continued operation of the business of each
Company in substantially the same manner as conducted in the year
immediately prior to the date of this Agreement
7.32 Real Property. Neither Company now owns or has ever owned leased,
licensed, occupied or otherwise used any real property except only the
holding of the leases of the Companies premises as set forth in Schedule
7.32
7.33 Property Leases. Save to the extent set out in Schedule 7.33 each
property lease covering property used by each Company is in full force
and effect and has not been amended, and each such Company is entitled to
the full benefit and advantage of each property lease in accordance with
its terms. Each such property lease is in good standing and there has not
been any material default by any party under any property lease nor any
dispute between either Company and any other party under any personal
property lease
7.34 Insurance. Save to the extent disclosed in Schedule 7.34 the business,
properties and assets of each Company are insured for the benefit of such
Company in amounts deemed adequate by such Company's management against
risk considered reasonably appropriate by each Shareholder bearing in
mind the business of each Company the manner in which such business has
been conducted prior to the date of this Agreement and the localities
where such properties and assets are located. All such insurance policies
are in full force and effect and neither Company is in material default,
whether as to payment of premiums or otherwise, under the terms of such
policies.
7.35 Receivables. The receivables as disclosed in the books of each Company at
the Completion Date are valid obligations which arose in the ordinary
course of its respective business and are enforceable and fully
collectable accounts in the ordinary course of business subject to the
reasonable allowance for doubtful accounts as recorded on the books and
records of such Company on or before the Completion Date and, to the
knowledge of the Shareholders, are not subject to any set off or
counterclaim. None of the receivables are due from a person with whom
either Company does not deal at arm's length save where specified in
Schedule 7.29(g).
7.36 Inventories. The fixed assets of the Companies consist of items of a
quality and quantity usable and saleable in the ordinary course of such
Company's respective business (bearing in mind the manner in which such
businesses have been conducted prior to the date of this Agreement) and,
in particular, without limiting the generality of the foregoing, as of
the date hereof, each fixed asset of the Companies is not obsolete and
has not been supplanted in any marketplace or geographic area in which
such item competes or in which either such Company or, to the best
knowledge of the Shareholders, the Purchaser does business. All fixed
assets of either Company are owned by such Company save where set out in
Schedule 7.16. No items included in the inventory are held by either
Company on consignment from others or have been pledged or are held as
collateral
7.37 Licenses and Permits. Schedule 7.37 hereto lists all the material
licenses and permits required for the lawful operation of each Company's
respective business and identifies the ones that, by their terms, are not
transferable. Each Company holds its respective such licenses and
permits, free and clear of any and all Liens. All such licenses and
permits are to the best of each Shareholders knowledge (not having
received any notice to the contrary) in good standing and in full force
and effect, neither Company is to the best of each Shareholders knowledge
(not having received any notice to the contrary) in material violation of
any term or provision or requirement of any of such Company's such
licenses and permits, and no person has threatened to revoke, amend or
impose any condition in respect of, or commenced proceedings to revoke,
amend or impose conditions in respect of, any such license or permit
7.38 Environmental Matters. The business of each Company and the respective
assets as carried on or used by such Company have been carried on and
used and are currently carried on and used to the best of each
Shareholders knowledge (not having received any notice to the contrary)
in compliance with all environmental laws save where specified in
Schedule 7.38. Neither Company is or has been subject to any proceedings
alleging the violation by such Company or its respective employees,
agents or others for whom it is respectively responsible of any
environmental law and in relation to the business or assets of such
Company. There are no proceedings nor, to the knowledge of the
Shareholders, any circumstances or material facts which could, if true,
give rise to any proceedings, in which it is alleged that either Company
is potentially responsible for a domestic or foreign federal, provincial,
state, municipal or local clean-up or remediation of lands contaminated
with hazardous substances or for any other remedial or corrective action
under an environmental law
7.39 Customers and Suppliers. Schedule 7.39 lists the five (5) largest
customers and the ten (10) largest suppliers of the Companies, taken
together (or such additional customers and/or suppliers of such Company
which were sufficient to constitute five percent (5%) or more of such
Company's total sales or purchases, as the case may be) for the six month
period ending December 31, 2003 and the aggregate amount which each such
customer was invoiced and each such supplier was paid during such period.
Neither Company has received notice of any intention on the part of any
customer or any supplier of such Company to cease doing business with
such Company or to modify or change in any material manner any existing
arrangement with such Company. Save as specified in Schedule 7.39 the
relationships of each Company with each of its respective principal
customers and suppliers is in the considered opinion of each Shareholder
(having regard to the manner in which the Companies have conducted their
business prior to the date of this Agreement) satisfactory and none of
the Shareholders nor the Companies have notice of any unresolved disputes
with any such customers or suppliers.
7.40 Customer Warranties. No notice of any material claims against either
Company greater than one thousand pounds sterling (UK (pound)1,000) on
account of delivery of services to clients, product warranties or with
respect to the production or sale of defective or inferior products has
been received by either Company or any of the Shareholders prior to the
date of this Agreement.
7.41 Further Warranty. Neither of the Companies nor any of the Shareholders is
aware of nor have they received notice of any material defect in any item
produced, sold, leased, offered for testing or otherwise transferred by
either Company to any other party. Each item produced, sold, leased,
offered for testing or otherwise transferred by each Company to any third
party was to the best knowledge of each of the Shareholders, and remains
fit for the particular purpose for which such product was produced, sold,
leased, offered for testing or otherwise transferred by such Company to
such third party.
7.42 Full Disclosure. None of the foregoing representations and warranties and
no documents furnished by or on behalf of either Company or any of the
Shareholders to the Purchaser in connection with the negotiation of the
transactions contemplated by this Agreement knowingly contain any untrue
statement of a material fact or omit to state any material fact necessary
to make any such statement or representation not misleading.
7.43 Deemed Disclosure. There shall be deemed to be disclosed to the Purchaser
in respect of the warranties and representations within this Section 7
all matters appearing on the microfiche of the Companies obtainable from
the Companies Registry of England and Wales two business days prior to
Completion Date and each item disclosed in or with reference to this
Section (which shall include each item disclosed within a schedule to
this Agreement) shall be deemed to be a disclosure in respect of all the
warranties and representations to which it is appropriate, provided that,
to the extent of any conflict between (i) the information appearing on
such Microfiche and (ii) the representations and warranties of the
Shareholders contained herein and the Schedules attached hereto, the
information contained in the representations and warranties of the
Shareholders contained herein and the Schedules attached hereto shall be
determinative of the matter for the purposes of this Agreement, and the
Purchaser shall be deemed to have relied on such representations and
warranties and such Schedules in respect of any such information.
7.44 Acquisition of Share Consideration.
a) The Shareholders are acquiring the ZIM common shares (the "ZIM
Shares") comprising the Share Consideration for their own account for
investment only and not with a view toward the public sale or
distribution thereof and not with a view to or for sale in connection
with any distribution thereof.
b) Each Shareholder is an "accredited investor" as that term is defined
in Rule 501 of the General Rules and Regulations under the Securities
Act of 1933, as amended (the "Securities Act"), and each Shareholder
is (i) experienced in making investments of the kind described in this
Agreement and the related documents, (ii) able, by reason of his
business and financial experience of and the business and financial
experience of his professional advisors (if any) to protect his own
interests in connection with the transactions described in this
Agreement, and the related documents, and (iii) able to afford the
entire loss of their investment in the ZIM Shares.
c) All subsequent offers and sales of the ZIM Shares by the Shareholders
shall be made pursuant to registration of the ZIM Shares under the
Securities Act or pursuant to an exemption from registration.
d) The Shareholders acknowledge that the ZIM Shares are being offered and
sold to them in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and
that ZIM is relying upon the truth and accuracy of, and the
Shareholders' compliance with, the representations, warranties,
agreements, acknowledgments and understandings of the Shareholders set
forth herein in order to determine the availability of such exemptions
and the eligibility of the Shareholders to acquire the ZIM Shares.
e) The Shareholders and their advisors, if any, have been furnished with
materials relating to the business, finances and operations of
Purchaser and materials relating to the offer and sale of the ZIM
Shares which have been requested by the Shareholders. The Shareholders
and their advisors, if any, have been afforded the opportunity to ask
questions of Purchaser and have received complete and satisfactory
answers to any such inquiries.
f) The Shareholders understand that their investment in the ZIM Shares
involves a high degree of risk.
g) The Shareholders understand that no United States federal or state
agency or any other government or governmental agency has passed on or
made any recommendation or endorsement of the ZIM Shares.
h) The Shareholders acknowledge that: (i) the ZIM Shares have not been
and are not being registered under the provisions of the Securities
Act and may not be transferred unless (A) subsequently registered
thereunder or (B) the Shareholders shall have delivered to Purchaser
an opinion of counsel, reasonably satisfactory in form, scope and
substance to Purchaser, to the effect that the ZIM Shares to be sold
or transferred may be sold or transferred pursuant to an exemption
from such registration; and (ii) any sale of the ZIM Shares made in
reliance on Rule 144 promulgated under the Securities Act may be made
only in accordance with the terms of said Rule and further, if said
Rule is not applicable, any resale of such ZIM Shares under
circumstances in which the seller, or the person through whom the sale
is made, may be deemed to be an underwriter, as that term is used in
the Securities Act, may require compliance with some other exemption
under the Securities Act or the rules and regulations of the United
States Securities and Exchange Commission ("SEC") promulgated
thereunder.
i) The Shareholders acknowledge and agree that until such time as the ZIM
Shares have been registered under the Securities Act, the ZIM Shares
shall bear a restrictive legend in substantially the following form:
THESE SECURITIES (THE "SECURITIES") HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED
FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR THE SECURITIES OR AN OPINION OF COUNSEL OR OTHER EVIDENCE
ACCEPTABLE TO THE CORPORATION THAT SUCH REGISTRATION IS NOT
REQUIRED.
8. PURCHASER'S REPRESENTATIONS AND WARRANTIES.
As a material inducement to the Shareholders entering into this Agreement and
completing the transactions contemplated by this Agreement and acknowledging
that the Shareholders are entering into this Agreement in reliance upon the
representations and warranties of the Purchaser set forth in this Section 8, and
notwithstanding any investigation made by or on behalf of the Shareholders in
connection with the transactions herein contemplated, the Purchaser hereby
represents and warrants to the Shareholders as follows (such representations and
warranties being repeated at the Completion Date by reference to the facts and
circumstances existing at that time).
8.1 Incorporation of Purchaser. The Purchaser is a corporation incorporated
and validly subsisting under the laws of the jurisdiction of its
incorporation. The Purchaser has the corporate power and authority and is
qualified to purchase the Purchased Shares and to issue the Share
Consideration. No act or proceeding has been taken by or against the
Purchaser in connection with the dissolution, liquidation, winding up,
bankruptcy or reorganization of the Purchaser nor has the Purchaser made
any arrangement in favour of its creditors nor made a proposal for
winding up or any voluntary or other arrangement to its creditors or any
class thereof. The Purchaser has not initiated proceedings with respect
to a compromise or arrangement with its creditor. No receiver has been
appointed in respect of the Purchaser or any of its respective assets or
the Share Consideration and no execution or distress has been levied on
any of such assets of the Purchaser and/or the Share Consideration.
8.2 Authorization by Purchaser. The Purchaser has the corporate power,
authority and capacity to enter into this Agreement and all other
agreements and instruments to be executed by it as contemplated by this
Agreement and to carry out its obligations under the Agreement and such
other agreements and instruments. The execution and delivery of this
Agreement and such other agreements and instruments and the completion of
the transactions contemplated by this Agreement and such other agreements
and instruments have been duly authorized by all necessary corporate
action on the part of the Purchaser.
8.3 Enforceability of the Purchaser's Obligations. This Agreement constitutes
a valid and binding obligation of the Purchaser enforceable against the
Purchaser in accordance with its terms subject, however, to limitations
on enforcement imposed by bankruptcy, insolvency, reorganization or other
laws affecting the enforcement of the rights of creditors and others and
to the extent that equitable remedies such as specific performance and
injunctions are only available in the discretion of the court from which
they are sought. The Purchaser is not an insolvent person within the
meaning of the Bankruptcy and Insolvency Act (Canada) or similar laws of
any other applicable jurisdiction and will not become an insolvent person
as a result of Completion
8.4 Consents and Approvals. All consents and approvals required to be
obtained by the Purchaser in connection with the execution and delivery
of this Agreement and the completion of the transactions contemplated by
this Agreement have been obtained.
8.5 Notices. All notices required to be given by the Purchaser in connection
with the execution and delivery of this Agreement and the completion of
the transactions contemplated by this Agreement have been given
8.6 Litigation. There is no action, suit, proceeding, claim, application,
complaint or investigation in any court or before any arbitrator or
before any regulatory body or governmental or non-governmental body
pending or threatened by or against the Purchaser related to its
business, operations or capital or the transactions contemplated by this
Agreement, and to the best knowledge of the Purchaser, there is no
factual or legal basis which could give rise to any such action, suit,
proceeding, claim, application, complaint or investigation
8.7 Absence of Conflicting Agreements. The execution, delivery and
performance of this Agreement by the Purchaser and the completion (with
any required consents and approvals and notices) of the transactions
contemplated by this Agreement do not and will not result in or
constitute any of the following:
(a) a default, breach or violation or an event that, with notice or
lapse of time or both, would be a default, breach or violation of
any of the terms, conditions or provisions of the articles or
by-laws of the Purchaser;
(b) an event which, pursuant to the terms of any contract, license or
permit, causes any right or interest of the Purchaser to come to an
end or be amended in any way that is detrimental to the business of
the Purchaser or entitles any other person to terminate or amend any
such right or interest;
(c) the creation or imposition of any lien, charge, encumbrance or
security interest on any asset of the Purchaser; or
(d) the violation of any applicable law by the Purchaser
8.8 Common Shares. The common shares in the capital of the Purchaser
comprising the Share Consideration will, on Completion, be validly issued
and delivered by the Purchaser as fully paid and non-assessable shares in
the capital of the Purchaser.
8.9 Purchaser Reports. The Purchaser has previously made available to each of
the Shareholders complete and accurate copies of its annual financial
statements for the year ended May 31, 2003, as filed with the SEC and its
management information circular for the annual and special meeting of its
shareholders dated November 17, 2003 (collectively, the "Purchaser
Reports"). The Purchaser Reports did not contain any statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading. The
financial statements of the Purchaser contained in the Purchaser Reports
fairly present, in conformity with generally accepted accounting
principles in the United States applied on a consistent basis throughout
the periods covered thereby, in all material respects the financial
condition of the Purchaser on a consolidated basis at the dates of such
statements and the results of its operations and its cash flows for the
periods covered thereby. Such financial statements consisting in each
case of a balance sheet and the accompanying statements of income,
retained earnings and changes in financial position for the period then
ended and notes to such financial statements, together with the report of
the auditors thereon are complete and accurate in all material respects.
8.10 Timely Disclosure. All material facts and material changes regarding the
Purchaser or its securities, that have occurred since May 31, 2003 have
been publicly disclosed in accordance with all applicable laws and there
have been no material changes with respect to the Purchaser or its
securities that have not been disclosed since that date
8.11 Registration Status. The Purchaser is a registrant under the United
States Securities Exchange Act of 1934, as amended and is not required to
be registered under any other statutory provisions to either (1) trade
its shares and/or (2) conduct its business in both cases in the same
manner as have been traded/conducted prior to the date of this Agreement.
8.12 Listing of Consideration Shares. The Purchaser shall, at the Completion
Date, have obtained all regulatory consents necessary for the issue of
the common shares in the capital of the Purchaser comprising the Share
Consideration and shall arrange for the registration of such common
shares with the SEC and the listing and posting for trading of such
common shares on the Nasdaq Over the Counter Bulletin Board upon their
issue following the Completion Date. The Purchaser agrees to use its best
efforts to file with the SEC a registration statement under the
Securities Act of 1933, as amended, to register the ZIM Shares with the
SEC as soon as reasonably practicable following the closing of this
transaction. The Purchaser also agrees to use its best efforts to cause
such Registration Statement declared effective as soon as reasonably
practicable. The Purchaser confirms that there is no matter known to the
Purchaser which would prevent the ZIM Shares comprising the Share
Consideration from being registered with the SEC and listed and posting
for trading on the Nasdaq Over the Counter Bulletin Board.
8.13 No Cease Trade Order. No securities commission or other regulatory
authority has issued any order preventing or suspending the trading of
the Purchaser's securities or prohibiting the sale of the Consideration
Shares to be delivered hereunder, and, to the Purchaser's knowledge, no
proceedings for such purpose are pending or threatened.
8.14 No Material Fact or Matter. There is no fact, matter or anticipated event
in the knowledge of the Purchaser, whether or not the same may (in
accordance with all applicable legislation binding on the Purchaser) be
confidential to the Purchaser and whether or not the Purchaser is under
any obligation to disclose or make public knowledge, which would have the
effect of or is reasonably anticipated as being likely to have the effect
of materially reducing the share price of the Consideration Shares.
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
9.1 The representations, warranties and covenants of each Shareholder
contained in Section 7 and such representations, warranties and covenants
of the Purchaser contained in Section 8 hereof shall survive the
completion of the transactions contemplated herein and shall continue in
full force and effect for the benefit of the Purchaser and the
Shareholders (as the case may be) for a period of three (3) years
following the Completion Date, after which time each Shareholder and the
Purchaser shall be released from all obligations in respect of such
representations and warranties except with respect to any Claim (as
defined herein) attested to by a party in writing before the expiration
of such period, but the time limitations on the representations and
warranties set forth in (i) Section 7 hereof which relate to tax matters
which shall be time limited to six months following the statutory
expiration of Claims thereon and (ii) Section 7.4 hereof, which shall be
unlimited (save as prescribed by the Limitation Acts) as to their
duration.
10. INDEMNIFICATION
10.1 Indemnity. Each of the Purchaser, on the one hand, and/or the
Shareholders, jointly and severally, on the other hand (each such
party/person, an "Indemnifying Party"), shall indemnify and hold the
Purchaser and/or the Shareholders (as the case may be) and the
Shareholders or Purchaser's (as the case may be) affiliates and their
respective directors, officers, employees, agents and representatives
(the "Indemnified Parties") harmless in respect of any claim, demand,
action, cause of action, damage, loss, cost, liability or expense (each,
a "Claim") which may be made or brought against any of the Indemnified
Parties or which any of such Indemnified Parties may suffer or incur
directly or indirectly as a result of, in respect of or arising out of
any of the following (collectively, "Breaches"):
(a) any incorrectness in or breach of any representation or warranty of
the Purchaser or such Shareholder (as the case may be) contained in
this Agreement or under any other agreement, certificate or
instrument executed and delivered pursuant to this Agreement; or
(b) any breach of or any non-fulfillment of any covenant or agreement on
the part of the Purchaser or such Shareholder (as the case may be)
under this Agreement or under any other agreement, certificate or
instrument executed and delivered pursuant to this Agreement.
10.2 Notice of Claim. If an Indemnified Party becomes aware of a Claim in
respect of which indemnification is provided for pursuant to Section 10.1
hereof, such Indemnified Party shall promptly give written notice of the
Claim to the Indemnifying Parties. Such notice shall specify whether the
Claim arises as a result of a claim by a person against the Indemnified
Party (a "Third Party Claim") or whether the Claim does not so arise (a
"Direct Claim"), and shall also specify with reasonable particularity (to
the extent that such information is available):
(a) the factual basis for the Claim; and
(b) the amount of the Claim, if known.
The respective parties to this Agreement shall act in good faith and with
all reasonable expedition in the provision of information and/or
provision of such other assistance as shall be reasonably appropriate in
the circumstances of any and each Claim. If, through the fault of an
Indemnified Party, any Indemnifying Party does not receive notice of any
Claim in time effectively to contest the determination of any liability
susceptible of being contested, then the liability of such Indemnifying
Party to such Indemnified Party hereunder shall be reduced by the amount
of any losses incurred by such Indemnifying Party resulting from such
Indemnified Party's failure to give such notice on a timely basis.
10.3 Direct Claims. In the case of a Direct Claim, each Indemnifying Party
shall have thirty (30) days from receipt of notice of the Claim within
which to make such investigation of the Claim as such Indemnifying Party
considers necessary or desirable. For the purpose of such investigation,
the Indemnified Party shall make available to such Indemnifying Party the
information relied upon by the Indemnified Party to substantiate the
Claim, together with all such other information as such Indemnifying
Party may reasonably request, the Indemnified Party making the
Indemnifying Party, subject to court or other applicable rules or
legislation on disclosure, aware of any and all documentation information
and/or other matters within the actual knowledge of the Indemnified Party
which may be reasonably relevant to such Claim and/or the extent of loss
arising in connection with such Claim. If both parties agree at or before
the expiration of such thirty (30) day period (or any mutually agreed
upon extension thereof) to the validity and amount of such Claim, such
Indemnifying Party shall immediately pay to the Indemnified Party the
full agreed upon amount of the Claim, failing which the matter shall be
referred to binding arbitration under the Arbitration Xxx 0000.
10.4 Third Party Claims. In the case of a Third Party Claim, each Indemnifying
Party shall have the right, at its expense, to participate in or assume
control of the negotiation, settlement or defence of the Claim. If any
such Indemnifying Party elects to assume such control, such Indemnifying
Party shall reimburse the Indemnified Party for all of the Indemnified
Party's out-of-pocket expenses incurred as a result of such participation
or assumption. The Indemnified Party shall have the right to participate
in the negotiation, settlement or defence of such Third Party Claim to
retain counsel to act on its behalf, provided that the reasonable and
properly incurred fees and disbursements of such counsel shall be paid by
the Indemnified Party unless any such Indemnifying Party consents to the
retention of such counsel at its expense or unless named parties to any
action or proceeding include both such Indemnifying Party and the
Indemnified Party and a representation of both such Indemnifying Party
and the Indemnified Party by the same counsel would be inappropriate due
to the actual or potential differing interests between them (such as the
availability of different defences). The Indemnified Party shall
cooperate with any such Indemnifying Party as to permit such Indemnifying
Party to conduct such negotiation, settlement and defence and for this
purpose shall preserve all relevant documents in relation to the Third
Party Claim, allow such Indemnifying Party access on reasonable notice
and take copies of all such documents and require its personnel to
provide such statements as such Indemnifying Party may reasonably require
and to attend and give evidence at any trial or hearing in respect of the
Third Party Claim. The respective parties, subject to court or other
applicable rules or legislation on disclosure, shall make the other aware
of any and all documentation information and/or other matters within
their actual knowledge which may be reasonably relevant to such Claim
and/or the extent of loss arising in connection with such Claim. If
having elected to assume control of the negotiation, settlement or
defence of the Third Party Claim, any Indemnifying Party thereafter fails
to conduct such negotiation, settlement or defence with reasonable
diligence and/or expedition, then such Indemnified Party shall be
entitled to assume such control and such Indemnifying Party shall be
bound by the results obtained by the Indemnified Party with respect to
such Third Party Claim. If any Third Party Claim is of a nature such that
(i) the Indemnified Party is required by applicable law or the order of
any court, tribunal or regulatory body having jurisdiction, or (ii) it is
necessary in the reasonable view of the Indemnified Party acting in good
faith and in a manner consistent with reasonable commercial practices, in
respect of (A) a Third Party Claim by a customer relating to products or
services supplied by either Company or (B) a Third Party Claim relating
to any Material Contract which is necessary to the ongoing operations of
either Company or any material part thereof in order to avoid material
damage to the relationship between the Indemnified Party and any of such
Company's or the Indemnified Party's major customers or to preserve the
rights of such Company or the Indemnified Party under such a Material
Contract, to make a reasonable and proper payment to any person (a "Third
Party") with respect to the Third Party Claim before the completion of
settlement negotiations or related legal proceedings, as the case may be,
then the Indemnified Party may make such payment (after giving reasonable
notice appropriate in the circumstances of intention to do so) and each
Indemnifying Party shall, promptly after demand by the Indemnified Party,
reimburse the Indemnified Party of such payment. If the amount of any
liability of the Indemnified Party under the Third Party Claim in respect
of which such a payment was made, as finally determined, is less than the
amount which was paid by any such Indemnifying Party to the Indemnified
Party, the Indemnified Party shall, promptly after receipt of the
difference from the Third Party, pay the amount of such difference to
such Indemnifying Party. If such a payment, by resulting in settlement of
the Third Party Claim, precludes a final determination of the merits of
the Third Party Claim and the Indemnified Party and any such Indemnifying
Party are unable to agree whether such payment was unreasonable in the
circumstances having regard to the amount and merits of the Third Party
Claim, then such dispute shall be referred to and finally settled by a
binding arbitration under the Arbitration Xxx 0000.
10.5 Settlement of Third Party Claims. If any Indemnifying Party fails to
assume control of the defence of any Third Party Claim, the Indemnified
Party shall have the exclusive right to contest, settle or pay the amount
claimed.
10.6 Payment of Indemnification. The liability of any Indemnifying Party
pursuant to the provisions of this Section 10 shall be limited
(i) in the case of the Shareholders, in the aggregate, on the following
basis
(A) it is intended that the total liability of all of the
Shareholders pursuant to this agreement shall not exceed the
Purchase Price (here meaning the value thereof in the hands
of the Shareholders as at the Completion Date) but as a
proportion thereof is being paid by way of the Consideration
Shares the Shareholders shall be protected as against a fall
in the trading price of such shares. The Shareholders
liability therefore, shall not exceed:
(i) U.S.$250,000, plus
(ii) the value of the Consideration Shares at the Completion
Date, provided that such amount shall decline after
each Claim is settled, determined or otherwise agreed
from time to time, as provided in Section 10.6(i)(B)
below.
(B) Where a Claim or Claims are settled, determined or otherwise
agreed in accordance with the terms of this agreement which
exceed or in total the sum determined under sub-section
10.1(i)(A)(i) above then the following principles shall
apply
(C) On each occasion a Claim is settled determined or otherwise
agreed falling within the principles set out in sub-section
B above, there shall be undertaken the following calculation
(i) A multiplied by B = Y
(ii) the parties shall then undertake the calculation
Z minus [(A multiplied by D) minus (A multiplied by B)] = W
Where
A = the number of shares which the Shareholders would be
required to sell in the open market to produce funds to meet
such Claim; and
B = the price of Common shares of the Purchaser on the Over the
Counter Bulletin Board (or such other market upon which the
common shares of the Purchaser may be generally traded at such
time) on the day prior to the date when such Claim is finally
settled determined or otherwise agreed and
C = the number of Consideration Shares issued to the
Shareholders under this Agreement ie 4,000,000
D = the price of common shares of the Purchaser on the Over the
Counter Bulletin Board on the date of Completion of this
Agreement
Y = the value of the Claim and
W = the revised total liability of the Shareholders under
sub-Section 10.1(i)(A)(ii) of this Agreement; and
Z = (i) in the case of the first occasion the above calculation
is undertaken under this Section the value of the Consideration
Shares at the Completion Date (ie C multiplied by D) and (ii) on
any subsequent occasion this calculation is effected the sum
determined as being the revised liability of the Shareholders
(ie W from the above calculation) as at the immediately
preceding occasion the above calculation was effected.
And such calculation shall be undertaken on each and every date a
Claim is settled determined or otherwise agreed. For the avoidance
of doubt there shall be no increase in the liability of the
Shareholders if the market price of the Consideration Shares were
to increase beyond the value of the Consideration Shares at the
Completion Date.
(ii) in the case of the Purchaser, to US$3,000,000.
Any amount of the Purchase Price set off by the Purchaser against an
Indemnifying Party's pro rata share thereof shall be either returned to
the Purchaser for cancellation by the escrow agent under the Escrow
Agreement, if still then applicable, or with respect to any part of the
Share Consideration or Cash Consideration, paid in cash by the
Indemnifying Party to the Purchaser.
10.7 Valuation of Share Consideration in the Event of Indemnification or Set
Off. In the event that an Indemnified Party makes a Claim with respect to
a Breach pursuant to Section 10 hereof, the value of any common share in
the capital of the Purchaser comprising any portion of the Share
Consideration transferable to an Indemnified Party hereunder shall for
the purpose of determining value under Section 10.6 be adjusted to
reflect any reclassification, subdivision consolidation stock dividend or
other reorganization of the common shares in the capital of the
Purchaser.
10.8 Matters disclosed. None of the Principal Shareholders shall be liable in
respect of any claim under the Warranties and/or representations in
Section 7 to the extent that the matter or matters giving rise to such
claim are fully and fairly disclosed in the Schedules to this Agreement.
10.9 Minimal Claims. No party shall be liable under the provisions of this
Agreement in respect of any claim for breach of representation and/or
warranty unless the aggregate amount of such liability in respect of all
such claims shall exceed fifteen thousand pounds sterling ((pound)15,000)
in which event the Indemnified Party shall be entitled to recover the
whole amount of the claims and not merely the excess over (pound)15,000.
10.10 Conclusion of Claims. Any Claim in respect of which notice shall have
been given in accordance with this Section 10 shall be deemed to have
been irrevocably withdrawn and lapsed (not having been previously
satisfied settled or withdrawn) if proceedings in respect of such Claim
have not been issued and served on Indemnifying Party not later than the
expiry date of the period of 9 months after the date of such notice of
Claim
10.11 General Provisions with regard to Claims.
a) If the Indemnifying Party pays an amount to the Indemnified Party in
discharge of a Claim and the Indemnified Party subsequently recovers
(whether by payment discount credit or otherwise) from a third party
a sum which is directly referable to the subject matter of the Claim
and which would not otherwise have been received by Indemnified
Party, Indemnified Party shall pay to the Indemnifying Party an
amount equal to
(i) the sum recovered from the third party less any reasonable
costs and expenses incurred in obtaining such recovery; or
(ii) if less the amount paid by Indemnifying Party to the
Indemnified Party in respect of such claim
b) The Principal Shareholders shall have no liability (or such
liability shall be reduced) in respect of any claim for breach of
any of the warranties:
(i) if and to the extent that provision or reserve for or in
respect of the liability or other matter giving rise to such
Claim has been made in the Financial Statements (as defined in
Section 7.5) and/or the latest accounts filed with Companies
House in England and Wales of the Companies or either of them
and is duly and properly recorded in the records of the
Company made available to the Purchaser prior to Completion or
where such provision or reserve is made and/or included in the
2004 Audited Financial Statements;
(ii) if and to the extent that such claim occurs or is increased as
a result of any change in legislation after the Completion
Date (or any legislation not in force at the Completion Date)
which takes effect retrospectively or the withdrawal after the
Completion Date of any published concession or published
general practice previously made by the Inland Revenue or
other taxing authority;
(iii) if and to the extent that such claim occurs or is increased as
a result of any increase in the rate of taxation in force at
the Completion Date; or
(iv) if and to the extent that such claim would not have arisen but
for a change of accounting policy or practice of the Company
after Completion.
(c) To the extent actually received and enjoyed, the amount of any Claim
for breach of the warranties shall take into account the amount of
any relief from Taxation received, on the one hand, by the
Companies, either of them and/or the Purchaser or, on the other
hand, by the Principal Shareholders or any of them, arising by
virtue of the loss or damage in respect of which the claim was made;
and
(d) Nothing within the provisions of this Agreement shall derogate from
a party's obligation to mitigate any loss which it suffers in
consequence of a breach of the warranties and representations made
for its benefit hereunder.
11. GENERAL
11.1 This Agreement, together with the delivery by the Shareholders of share
certificates representing the Purchased Shares, shall constitute the
actual conveyance of the Purchased Shares as of the Completion Date, but
each party agrees with each other party to do, execute, acknowledge and
deliver all such further documents, assignments, transfers, agreements
and other assurances as may be reasonably necessary or desirable to give
full effect to this Agreement
11.2 The parties hereto acknowledge that they have had an opportunity to
obtain independent financial and/or legal advice before signing this
Agreement and agrees that either such advice has been obtained or that
they do not wish to seek or obtain such independent advice. The parties
hereto acknowledge that they have read this Agreement and fully
understand the nature and effect of it and the terms contained herein and
that the said terms are fair and reasonable and correctly set out the
parties' understanding and intention. Each party acknowledges that they
are relying on advice received from their own professional advisers' in
connection with the terms of this Agreement.
11.3 Each party hereto shall be responsible for its own legal and other
expenses incurred in connection with the negotiation, execution, delivery
and performance of this Agreement and the transactions contemplated
hereby
11.4 This Agreement shall be governed by and construed and interpreted in
accordance with the laws of England and Wales. The parties hereto
irrevocably submit to the exclusive jurisdiction of the Superior Court of
England and Wales with respect to any and all matters relating to this
Agreement and the transactions contemplated hereby save only where the
specific provisions of this Agreement may require any matter to be
determined by Arbitration
11.5 This Agreement is for the benefit of the parties and shall be binding
upon their respective heirs, executors, administrators, successors and
assigns, as applicable
11.6 Any notice, certificate, consent, determination or other communication
required or permitted to be given or made under this Agreement shall be
in writing and shall be effectively given and made if (i) delivered
personally, (ii) sent by prepaid courier or mail, or (iii) sent prepaid
by fax or other similar means of electronic communication, in each case
to the applicable address set out below:
(a) if to the Shareholders, to
Xxxxxxx Xxxxx Xxxxxx
Xxx Xxxxxxxx 00
00000 Xxxxxxx (Xxxxxxx)
Xxxxx
Fax: x00 000000000
e-mail: xxxxxxx@xxxxxxxxxxxxxxxxx.xxx
With a copy to:
Lithgow Pepper & Xxxxxxxx
00 Xxxxxxx Xxxxxx, Xxxxxx, X0X 0XX
Attention:Xxxxxxx X Xxxxx
Telephone:000 0000 0000
Facsimile:020 7935 2688
(b) if to the Purchaser, to:
ZIM Corporation
00 Xxxxxxxxx Xxxx,
Xxxxx 000
Xxxxxx, Xxxxxxx
Xxxxxx X0X 0X0
Attention:Xxxxxxx Xxxxxxxx
Telephone:x0-000-000-0000
Facsimile:000-000-0000
With a copy to:
XxXxxxx Xxxxxxxxx LLP
000 Xxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxxxx, X0X 0X0, Xxxxxx
Attention:Xxxxxxx Xxxxxxxx
` Telephone:0(000) 000-0000, ext. 268
Facsimile:0 (000) 000-0000
Any such communication so given or made shall be deemed to have been
given or made and to have been received on the day of delivery if
delivered, or on the day of faxing or sending by other means of recorded
electronic communication, provided that such day in either event is a
business day and the communication is so delivered, faxed or sent before
5.00 p.m. (Greenwich mean time) on such day. Otherwise, such
communication shall be deemed to have been given and made and to have
been received on the next following business day following the mailing
thereof; provided, however, that no such communication shall be mailed
during any actual or apprehended disruption of postal services. Any such
communication given or made in any other manner shall be deemed to have
been given or made and to have been received only upon actual receipt
thereof. Any party may from time to time change its address under this
section by notice to the other party given in the manner provided by this
section.
11.7 A waiver of any default, breach or non-compliance under this Agreement
shall not be effective unless delivered in writing signed by the party to
be bound by the waiver. No waiver shall be inferred from or implied by
any failure to act or delay in acting by a party in respects of any
default, breach or non-observance or by anything done or omitted to be
done by the other party. The waiver by a party of any default, breach or
non-compliance under this Agreement shall not operate as a waiver of that
party's rights under this Agreement in respect of any continuing or
subsequent default, breach or non-observance (whether of the same or any
other nature)
11.8 Each party hereby agrees that all provisions of this Agreement, other
than (a) the conditions in Sections 4 and 5 hereof and (b) the
representations and warranties contained in Sections 7 and 8 hereof and
the related indemnities in Section 10 hereof (which shall be subject to
the special arrangements provided for in such section and in Section 9
hereof) shall forever survive the execution, delivery and performance of
this Agreement, Completion and the execution, delivery and performance of
any and all documents delivered in connection with this Agreement
11.9 Save in case of fraud or fraudulent misrepresentation, this Agreement and
the terms hereof shall constitute the entire agreement between the
parties hereto with respect to all of the matters herein and its
execution has not been induced by, nor do any of the parties hereto rely
upon or regard as material, any representations or writings whatsoever no
incorporated herein and made a part hereof. If any paragraph, section or
portion in this Agreement is determined to be unenforceable or invalid
for any reason whatsoever, that unenforceability or invalidity shall not
affect the enforceability or validity of the remaining portions of this
Agreement and such unenforceable or invalid paragraph, section or portion
of this Agreement shall be deemed to be severed from the remainder of
this Agreement. Upon execution of this Agreement, the Term Sheet shall be
terminated and cease to be of any force and effect except only where such
provisions of the Term Sheet are specifically incorporated herein.
11.10 Each party hereto shall promptly do, execute, deliver or cause to be
done, executed and delivered such further acts, documents and things in
connection with this Agreement that any other party hereto may reasonably
require for the purposes of giving effect to this Agreement
11.11 This Agreement shall inure to the benefit of, and be binding on, the
parties and their respective successors and permitted assigns. No party
may assign or transfer, whether absolutely, by way of security or
otherwise, all or any part of its respective rights or obligations
hereunder without the prior written consent of the other parties hereto
11.12 This Agreement may be signed by manual or facsimile signature in several
counterparts of like form, each of which when so executed shall be deemed
to be an original and such counterparts together shall constitute one and
the same instrument, which shall be sufficiently evidenced by any such
original counterpart.
11.13 a) Between the date hereof and February 28, 2004, or such earlier
date as this Agreement is terminated in accordance with its terms
(the "Expiration Date"), and subject to the Purchaser using
reasonable endeavours to progress with the carrying out of all due
diligence as soon as reasonably practicable, the Shareholders
shall not, and shall cause the Companies to not, directly or
indirectly, through any officer, employee, affiliate or agent of a
Company or otherwise, take any action to solicit, initiate, seek,
entertain, encourage, discuss or support any inquiry, proposal or
offer from, furnish any information to, or participate in any
negotiations with, any third party regarding any acquisition of a
Company, any merger or consolidation with or involving a Company,
or any acquisition of any material portion of the shares or assets
of a Company. The Shareholders agree that any such negotiations
(other than negotiations with the Purchaser) in progress as of the
date hereof will be suspended during such period and that, in no
event, shall either Company or any of the Shareholders accept or
enter into an agreement concerning any such third party
acquisition transaction during such period
(b) Each Shareholder will notify (and will cause the Companies to
notify) the Purchaser immediately after receipt by a Company (or any
of its officers, directors, employees, affiliates or agents) and/or
any such Shareholder of any unsolicited proposal for, or inquiry
respecting, any third party acquisition transaction involving a
Company or any request for non-public information in connection with
such a proposal or inquiry, or for access to the properties, books
or records of a Company by any person, or entity that informs a
Company and/or any such Shareholder that it is considering making,
or has made, such a proposal or inquiry. Such notice to the
Purchaser shall be in writing and shall indicate the identity of the
person making the proposal or inquiry but and the Shareholders shall
not be obliged to disclose to the Purchaser the terms and conditions
of such proposal and/or inquiry.
11.14 If the transactions contemplated by this Agreement are not Completed,
except as provided below, each party shall bear its own fees and expenses
incurred in connection therewith. If the transactions contemplated by
this Agreement are consummated,
(1) the Purchaser shall be responsible for (a) all fees and expenses of
the Purchaser's agents, representatives, advisors and counsel in
preparing this Agreement, the Escrow Agreement including the fees of
the Escrow Agent, and the other agreements and documents
contemplated hereby and thereby, and (b) all audit and other
accounting-related fees and expenses incurred by any party in
connection with this Agreement and the transactions contemplated
hereby, and
(2) the Shareholders shall be responsible for (a) all fees and expenses
of their and the Corporation's agents, representatives, advisors and
counsel in connection with this Agreement and the transactions
contemplated hereby, and (b) all other fees and expenses of the
Shareholders and the Corporation in connection with this Agreement
and the transactions contemplated hereby not otherwise expressed to
be payable by the Purchaser under this Section 11.14.
Notwithstanding the foregoing, it is understood that the Purchaser
has placed in escrow with its legal counsel the sum of US$35,000
which may be paid to Shareholders' Solicitor on account of the
Shareholders' costs in these transactions under the circumstances
described in the Term Sheet and the Direction referred to therein.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF this Agreement has been executed by the parties hereto
as of the date first written above.
SIGNED as a Deed by )
XXXXX XXXXXXX in the presence of )
)
/s/ Xxxxxx Xxxxx ) /s/ Xxxxx Xxxxxxx
------------------------- ) ------------------------
Witness ) XXXXX XXXXXXX
)
SIGNED as a Deed by )
XXXXXXX XXXXXX in the presence of )
)
/s/ Xxxxxxx Xxxxx ) /s/ Xxxxxxx Xxxxxx
------------------------- ) ------------------------
Witness ) XXXXXXX XXXXXX
)
SIGNED as a Deed by XXXXX XXXXXXX )
and XXXXXXX XXXXXX (as Trustees of )
Xxxxxx Xxxxxx) in the presence of )
)
/s/ Xxxxxxx Xxxxx ) /s/ Xxxxx Xxxxxxx Xxxxxxx Xxxxxx
------------------------- ) ------------------------
Witness ) XXXXX XXXXXXX AND
) XXXXXXX XXXXXX
SIGNED as a Deed by CHRISTIAN )
GOLDSBROUGH in the presence of )
)
/s/ Xxxxxxx Xxxxx ) /s/ Xxxxxxxxx Xxxxxxxxxxx
------------------------- ) ------------------------
Witness ) XXXXXXXXX XXXXXXXXXXX
)
EXECUTED as its Deed by
XXXXXXXX LIMITED acting by
Director: /s/ Xxxxxx Xxxxxxx
------------------------
Secretary: /s/ Xxxx Xxxxxxx
------------------------
ZIM CORPORATION
By: /s/ Xxxxxxx Xxxxxxxx
------------------------------
Name: Xxxxxxx Xxxxxxxx
------------------------------
Title: President and CEO
------------------------------
INDEX AND TABLE OF CONTENTS
1. PURCHASE AND SALE.............................................2
2. PURCHASE PRICE AND PAYMENT....................................2
3. COMPLETION....................................................3
4. DUE DILIGENCE.................................................6
5. CONDITIONS FOR THE BENEFIT OF THE PURCHASER...................8
6. CONDITIONS FOR THE BENEFIT OF THE SHAREHOLDERS...............11
7. REPRESENTATIONS AND WARRANTIES OF THE PRINCIPAL SHAREHOLDERS.14
8. PURCHASER'S REPRESENTATIONS AND WARRANTIES...................36
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES...................39
10. INDEMNIFICATION............................................40
11. GENERAL....................................................47
SCHEDULES
