Exhibit 10.2
SHAREHOLDERS' AGREEMENT
THIS SHAREHOLDERS' AGREEMENT ("AGREEMENT") is made the 6 day of November 2007
BETWEEN:
TWO WAY MEDIA LIMITED, a company registered in England and Wales under number
4904168 and whose registered office is at 19 Bolsover Street, London W1W 5NA
("TWM"),
AND
ZONE 4 PLAY INC., a company registered under the laws of Delaware and whose
principal place of business is at 103 Foulk Road, Suite 202, Wilmington,
Delaware 19803 U.S.A ("Z4P");
(TWM and Z4P hereinafter each referred to as a "PARTY" and jointly referred to
as the "PARTIES").
WHEREAS: the Parties have incorporated a new entity in Alderney bearing
the name Two Way Gaming Limited (the "COMPANY") to conduct all
gambling activity undertaken by the Parties on interactive
television, mobile telephony, participation television and the
internet and to carry on the Business (as defined below); and
WHEREAS: the parties are the equal holders of all of the issued Shares;
and
WHEREAS: the Parties hereto desire to set forth certain matters and
agreements regarding the Company and the Shares.
NOW, THEREFORE, in consideration of the mutual promises and covenants set forth
herein, the parties hereby agree as follows:
ARTICLE 1
INTERPRETATION AND PURPOSE
1.01 BUSINESS
The Parties have established the Company for the purposes of undertaking
the Business (as defined below).
1.02 DEFINITIONS
In this Agreement:
"ACCOUNTANT" means the accountant(s) of the Company from time to time
appointed pursuant to this Agreement;
"ACT" means the Companies (Alderney) Law, 1994, as amended;
"AFFILIATE" a company shall be an "Affiliate" of another company if one of
them is the Subsidiary of the other or both are Subsidiaries of the same
Holding Company or each of them is controlled by the same person, and
"Affiliates" shall be construed accordingly, save that this definition
shall not in any way extend to Ingenius Media Active Capital Limited;
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"ARTICLES" means the articles of association of the Company as adopted from
time to time;
"BANK" means the bank or other financial institution at which the Company
from time to time maintains its general business account;
"BOARD" means the board of Directors of the Company from time to time;
"BUDGET" means the budget of the Company approved by the Board from time to
time in accordance with the provisions of this Agreement;
"BUSINESS" means the operation of the betting brand "Winner Channel" and
the conduct of gambling activity as currently undertaken by the Parties on
interactive television, mobile telephony, participation television and the
internet;
"BUSINESS DAY" means a day other than a Saturday, Sunday or statutory
holiday in the United Kingdom, Israel or Alderney;
"BUSINESS PLAN" means the business plan of the Company as set out in
Appendix A or as determined from time to time pursuant to Clause 3.01(5);
"DIRECTORS" means the directors of the Company (excluding the Managing
Director);
"HOLDING COMPANY" shall be as defined in Article 4 of Schedule 4 of the
Act;
"INTERESTED PARTY" means any company promoted by the Company, any
Subsidiary of the Company, any company in which the Company may be
interested as a shareholder or otherwise, any Affiliate of the Company, any
Affiliate of any Subsidiary of the Company, any Affiliate of any company in
which the Company may be interested as a shareholder or otherwise, any
Director or officer of the Company or any director or officer of any
Subsidiary of the Company, any Subsidiary or Affiliate of any officer or
Director of the Company, any Shareholder or any Subsidiary or Affiliate of
any Shareholder;
"IP" means any patents, inventions, know-how, trade secrets and other
confidential information, copyrights, database rights, design rights, trade
marks, service marks, logos, domain names, business names, trade names,
moral rights and all registrations or applications to register any such
rights and any other intellectual property rights in the nature of any such
rights in any country or jurisdiction;
"MANAGING DIRECTOR" shall be the managing director appointed from time to
time in accordance with the provisions of section 3.01(1) of this
Agreement;
"MIXTV" means the additional hardware and software supplied by Z4P and its
subsidiaries to TWM for the purpose of operating certain gambling products
at the time of execution of this Agreement and all subsequent derivations,
modifications and upgrades thereafter;
"PARTIES" means the parties to this Agreement and Party shall be construed
accordingly;
"SECURITIES" means shares of any class or a debt obligation of the Company
to a Shareholder and includes a certificate evidencing such a share or debt
obligation;
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"SERVICE LEVEL AGREEMENT" means the agreements setting out the services to
be provided by each of the Shareholders from time to time;
"SHARES" means ordinary shares of (pound)1.00 each in the share capital of
the Company;
"SHAREHOLDERS" means TWM and Z4P and their respective successors and
assigns, as appropriate, and "Shareholder" shall be construed accordingly;
"SUBSIDIARY" shall have the meaning given to it in Schedule 4 of the Act,
and "Subsidiaries" shall be construed accordingly;
"TRANSFER" means to sell, assign, surrender, gift, transfer, pledge,
mortgage, charge, create a security interest in, hypothecate or otherwise
encumber or deal with any interest, legal or beneficial, in the
subject-matter of the transfer;
"TRANSFER VALUE" means the fair market value of Shares to be transferred in
accordance with this Agreement as agreed between the vendor and the
purchaser or as determined in accordance with section 6.07 of this
Agreement;
"TRANSFER VALUATION DATE" means the date on which an event described in
this Agreement which initiates a right or obligation to purchase Shares
occurs;
"TWM CLIENT CONTRACTS" means the contracts listed at Appendix B;
"TWM DIRECTOR" means any one of the Directors appointed to the Board by TWM
in accordance with the provisions of section 3.04(1);
"WINNER CHANNEL" means the brand under which certain TWM gaming products
have been offered to consumers;
"Z4P DIRECTOR" means any one of the Directors appointed to the Board by Z4P
in accordance with the provisions of section 3.04(1);
"ZONEMAS" means the hardware and software systems supplied by Z4P currently
used by TWM for operating their gambling products at the time of this
agreement and all subsequent derivations, modifications and upgrades
thereafter.
ARTICLE 2
COMPANY AND CONDITIONS PRECEDENT
2.01 ESTABLISHMENT
(1) The Parties have established and registered the Company in Alderney on
25 July 2007.
(2) The Parties may consider establishing Subsidiaries in Alderney or
elsewhere or may consider transferring part or all of the Business to
a jurisdiction other than Alderney or to an entity other than the
Company.
(3) The Company obtained a Gaming Licence in Alderney on 31 August 2007.
The Parties agree that they shall do everything in their power to
ensure that the Company operates the Business within the provisions of
the aforementioned Gaming Licence.
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2.02 SHARE CAPITAL
(1) The authorised and issued share capital of the Company shall consist
of 10,000 Shares and each Share shall rank PARI PASSU in all respects
save as specified in the Articles and this Agreement. Each party has
an equity holding in Shares, as follows:
o TWM - 50.0% (fifty percent), being 5,000 Shares of
(pound)1.00 each;
o Z4P - 50.0% (fifty percent), being 5,000 Shares of
(pound)1.00 each.
(2) The Board of Directors of the Company may resolve to allocate to an
employee share option scheme a number of shares equal to ten (10%)
percent of the Company's authorised but unissued share capital. This
scheme shall be subject to an employee share option plan which shall
be administered and constituted as the Board determines from time to
time.
(3) Each Share shall, in addition to those rights conferred in the
Articles, entitle the Shareholder to:
o receive notice of and vote in, any general meeting of the
Shareholders of the Company;
o as determined by the Board, and as permitted by the Act, receive
a distribution by way of dividend or otherwise by the Company,
PRO RATA to the number of Shares held or as otherwise determined
at the time; and
o in the event of liquidation or winding up of the Company, receive
a PRO RATA share of the remaining assets of the Company following
satisfaction of all liabilities ranking in priority, or as
otherwise determined at the time.
(4) The Articles of Association of the Company shall be amended to reflect
relevant provisions of this Agreement. In the event of a conflict
between any provision of this Agreement and any provision of the
Articles, the provision of this Agreement shall prevail and, at the
request of any Shareholder, a resolution shall be proposed to amend
the Articles to remedy the conflict.
2.03 CONDITIONS PRECEDENT
The following shall be conditions precedent to the completion of this
Agreement:
(1) The termination of the Interactive Fixed Odds Betting Services
Agreement dated 22 February 2005 and entered into between Z4P, TWM and
Winner.com (UK) Limited (the "WINNER CHANNEL AGREEMENT"); and
(2) The receipt of TWM of an undertaking from Winner.com (UK) Limited
waiving and terminating any rights it has under the provisions of the
Winner Channel Agreement, in particular, but without prejudice to the
foregoing, in relation to TWM and the Company's use of the Winner
Channel brand or logo, and that Winner.com (UK) Limited waives any
rights it may have under the provisions of the Winner Channel
Agreement or otherwise to make any claim against TWM or the Company.
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ARTICLE 3
MANAGEMENT
3.01 BOARD OF DIRECTORS
(1) The Board shall consist of no more than five (5) Directors (of which
one shall be the Managing Director). Each shareholding comprising 25%
of the total issued share capital of the Company shall entitle the
holder to appoint one Director to the Board. Should a director who was
an appointee of a Shareholder die or resign from the Board, be removed
in accordance with the provisions of the Articles, or be removed by
such appointing Shareholder, the Shareholder in such case shall be
permitted to appoint a Director to replace the Director who died,
resigned or was removed. The Board shall from time to time appoint a
Managing Director who shall have the duties and obligations set out in
this Agreement. The Managing Director shall have no right to vote at
Board meetings, save where he or she is also a Director who was an
appointee of a Shareholder in which case he or she will retain their
one vote as a Director but will not have an additional vote as a
Managing Director. The Managing Director will form part of the quorum
for Board meetings of the Company.
(2) The Board shall meet at least once a month until otherwise determined
by unanimous resolution of the Board. The Board shall meet at the
registered office of the Company at least four times per year and if a
meeting of the Board is not held during any one month period (or other
period as determined by unanimous resolution of the Board), any
director may call a meeting of the Board on ninety six (96) hours'
prior written notice to the other members of the Board. At each
meeting of the Board, unless waived by unanimous resolution of the
Board, the Managing Director shall report fully to the Board with
respect to the current status of the operations of the Company and
with respect to all major developments or planned action involving the
Company and shall present to the meeting complete current financial
information with respect to the Company.
(3) A quorum for meetings of the Board shall be three, which must include
the Managing Director and a director representing each shareholder of
the Company. If a quorum is not obtained at any meeting, the meeting
shall be adjourned and may be reconvened upon seven (7) days' notice
to the Board, at which reconvened meeting the quorum shall be those
directors present at the meeting.
(4) Any or all directors may participate in a meeting of the Board or of
any committee of the Board by means of such telephone, electronic or
other communication facilities as permit all persons participating in
the meeting to hear and communicate with each other simultaneously and
a director participating in such a meeting by such means is deemed to
be present at the meeting.
(5) The Budget and the Business Plan shall be prepared annually by the
Managing Director and approved at the meeting of the Board first
following the beginning of the Company's financial year. The first
Business Plan for the Company is attached as Appendix A.
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3.02 SIGNING OFFICERS
The authorized signing officers of the Company shall be the Managing
Director and/or any delegates of the Managing Director (as approved by the
Board), unless or until decided otherwise by the Board.
3.03 EMPLOYEES
The Company initially will not have any employees, except for the Managing
Director. Upon Board decision the Company shall employ such number of
employees as are deemed necessary to conduct the Business.
3.04 APPROVAL OF MATTERS
(1) "MATERIAL ACTION" means any one or more of the following:
(a) any change in the Memorandum or Articles of Association of the
Company;
(b) any change in the authorized or issued share capital of the
Company;
(c) any alteration or change to the rights, preferences, or
privileges of the Shareholders;
(d) any increase in the number of Directors of the Company;
(e) any declaration or payment of any dividend or other distribution
of cash, shares, or other assets of the Company;
(f) taking a decision to cease all or a substantial part of the
Business;
(g) any decision that approves any transaction or loan exceeding
(pound)3,000 in value with or between the Company and any
officer, Director, or Shareholder of the Company or any
Interested Party;
(h) any decision that authorizes the disposal of more than 10% of the
Company's IP;
(i) any decision to acquire an entity or business;
(j) any decision to sell a material asset not in the ordinary course
of the Business;
(k) any decision that appoints or removes either of the Parties from
any position they may hold in the Company and/or that alters the
terms of that position;
(l) any withdrawal and/or transfer of money from the Company's bank
accounts, not in the ordinary course of the Business;
(m) any decision approving the Business Plan and the Budget and/or
effecting any material deviation therefrom;
(n) any decision determining, or effecting a change to, signatory
rights as specified in section 3.02;
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(o) any decision regarding the entry into any agreement or the making
of any offer or the granting of any right capable of becoming an
agreement to allot or issue any Shares;
(q) any action which may lead to or result in a material change in
the nature of the Business;
(r) any decision regarding the entry into any agreement by the
Company other than in the ordinary course of the Business;
(s) the taking of any steps to wind-up or terminate the corporate
existence of the Company or to strike off the Company;
(t) the sale, lease, exchange or disposition of all or a substantial
part of the undertaking or property or assets of the Company;
(u) the entering by the Company into an amalgamation, merger or
consolidation with any other body corporate;
(v) the redemption or purchase by the Company of its issued share
capital;
(w) the repayment of any loans owing by the Company to any
Shareholder, except as contemplated in section 5.03;
(x) the fixing, paying or changing of any salary, bonus or fee to any
party or any Director of the Company, except as specified in the
Budget;
(y) any agreement with or commitment entered into with any Party;
(z) the agreement, termination or amendment of a Service Level
Agreement;
(aa) any decision requiring the unanimous consent of the Board as set
out elsewhere in the provisions of this Agreement;
(bb) the appointment of and any change in the Managing Director;
(cc) the entry into loans or credit facilities of any kind not in the
ordinary course of the Business;
(dd) the provision of additional working capital as provided for in
section 5.01;
(ee) the giving or entry into any guarantees or indemnities by the
Company;
(ff) the initiation of any legal proceedings in any jurisdiction by
the Company or the defence or settlement of any legal proceedings
or actions commenced against the Company; and
(gg) any decision to set up an employee share option plan in
accordance with the provisions of Clause 2.02(2).
(2) "SPECIAL QUORUM ACTION" shall mean any of the following actions
undertaken by the Company:
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(a) effecting a transaction with any Interested Party (including,
without limitation, a transaction with any shareholder of the
Company, or in which such shareholder is an interested party);
(b) the approval of a contract with a customer, supplier or
contractor to the Company where the annual value to the Company
or cost to the Company or liability incurred by the Company
exceeds (pound)25,000; and
(c) the issue of loan notes as provided for in section 4.07.
(3) No Material Action shall be taken without the unanimous consent of the
Board. No Special Quorum Action shall be taken without the agreement
of one of the Directors appointed by each Shareholder.
(4) The Managing Director shall take all action within his power to ensure
that:
(a) the Company does not violate the terms of any credit facility it
has established with any lender;
(b) the Company complies, in all material respects with all
applicable laws, rules, regulations and orders applicable to the
Company, its assets, or the Business including, without
detracting from the generality of the foregoing, the maintenance
of any capital requirements or liquidity conditions imposed under
any licence to which the Company may be subject and/or to any
other regulatory or legal requirements or conditions to which the
Company may be subject at the time;
(c) the Company observes and conforms to all applicable requirements
of any governmental authorities relating to the conduct of the
Business or the property and assets of the Company;
(d) the Company maintains and keeps in full force and effect its
corporate existence and all licenses and permits necessary to
ensure the proper conduct of the Business, including without
limitation, preserving and maintaining all of its proprietary
rights;
(e) the Company maintains its useful assets in good working order and
condition, and makes all necessary and needful repairs, renewals,
replacements, additions and improvements thereto;
(f) the Company keeps proper books of records and accounts in which
full, true and correct entries in accordance with generally
accepted accounting principles will be made of all dealings or
transactions relating to its business and activities;
(g) the Company pays all of its obligations and liabilities when due,
including (without limitation) all taxes, assessments, annual
filing fees and governmental charges or levies imposed upon it or
upon its income or profits or upon any property securing any
obligations under this Agreement, and maintains appropriate
reserves for the payment of the same in accordance with generally
accepted accounting principles; provided, however, that (unless
and until foreclosure, distraint, sale or other similar
proceedings shall have been commenced) nothing in this section
shall require the Company to observe or conform to any
requirements of a governmental authority, or to pay any
obligation or liability, so long as the validity thereof shall be
contested in good faith by appropriate proceedings diligently
prosecuted and provided that provision is made for the eventual
payment thereof in the event it is found that such are payable by
the Company;
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(h) the Company maintains, with financially sound and responsible
companies, insurance in such form and in such amounts and against
such risks as is customarily carried by companies engaged in the
same or a similar business and operating like properties,
including without limitation: (a) insurance on its properties
against loss or damage by fire or other hazard, (b) adequate
insurance against liability on account of or damage or injury to
persons and property and under all applicable workman's
compensation laws, and (c) directors' and officers' liability
insurance in an amount consistent with applicable law;
(i) the Board of Directors of the Company furnishes to the
Shareholders prompt notice of all actions, suits and proceedings
before any court, tribunal or governmental department,
commission, board, bureau, agency or instrumentality, domestic or
foreign, materially affecting the Company or its business,
operations or properties;
(j) the Company complies with all of its obligations under this
Agreement;
(k) no capital or operating expenditures of the Company not included
in the Budget or the Business Plan are made without the unanimous
consent of the Board; and
(l) written notice is given to the Shareholders of any failure to
meet any of the obligations set forth in this section 3.04(3), as
soon as the Managing Director becomes aware of such failure.
(5) The Managing Director shall further take all action within his power
to:
(a) give prompt written notice of any material adverse change in the
Business, conditions or operations, financial or otherwise, of
the Company, with a statement setting forth details of such a
material adverse change and the action of which the Company
proposes to take with respect thereto to the Board;
(b) promptly after the request of a Director, furnish to such
Director such information regarding the conditions or operations,
financial or otherwise, of the Company as such Director may from
time to time reasonably request; and
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(c) give the Board written notice of any condition or event which has
resulted or would with passage of time result in:
(i) a material adverse change in the Business or the conditions or
operations of the Business or the Company, whether financial or
otherwise;
(ii) a material breach or non-compliance with any term, condition or
covenant of any material contract to which the Company is a party
or by which it or its property or assets may be bound;
(iii) any litigation or proceedings affecting any of the transactions
contemplated by this Agreement or affecting the Company which, if
adversely determined, might have a materially adverse effect upon
the financial conditions, business or operations of the Company;
and upon the Company's receipt of any notice or process service,
of any litigation or claims of any kind in excess of
(pound)25,000, initiated or asserted against the Company, which
might subject the Company to liability, whether covered by
insurance or not;
(iv) any dispute between the Company and any governmental regulatory
body or other party which might materially affect the
transactions contemplated by this Agreement or materially
interfere with the normal business operations of the Company; or
(v) the imposition of any lien, levy, attachment or execution on the
Business or the assets of the Company created or imposed by any
governmental entity or any creditor.
(6) The Managing Director shall have the sole authority and power to cause
the Company to do any action that is not a Material Action and to make
any decision on behalf of the Company that does not relate to a
Material Action or is specified as a decision for the Board of
Directors in this Agreement. Except as limited by this Agreement, the
Managing Director shall have the sole responsibility, authority and
power to manage the Business and affairs of the Company.
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ARTICLE 4
PARTIES' CONTRIBUTIONS TO THE COMPANY
4.01 General: All IP whether created for or currently being used by TWM and/or
the Winner Channel under the terms of the Winner Channel Agreement, and
whether owned by the Parties each in their own right or jointly, (including
customer data) shall be assigned, to the extent possible, or licensed
royalty free to the Company by the relevant Party for an initial term of
forty (40) years, and thereafter shall continue unless such license is
terminated by either side on ten (10) year's notice being given, provided
however that for the initial 40 year term Z4P shall not be entitled to
terminate said license. Further, any IP created by either Party under the
provisions of their respective Service Level Agreement or commissioned by
the Company from any third party shall be the property of the Company and
this shall, for the avoidance of doubt, include any derivations,
modifications, enhancements or updates to IP that has been licensed or
assigned by either Party to the Company.
4.02 TWM hereby agrees:
o to assign as far as is possible the TWM Client Contracts to the
Company;
o to assign the Winner Channel stylised logo, associated artwork and
trademarks or registrations, if any;
o to assign all personal customer data in its possession from or
relating to Winner Channel customers; and
o to exclusively transfer the benefit of the UK casino remote gambling
license currently operated by TWM to the Company.
For the avoidance of doubt, any license shall include any necessary access
to source and object code that would enable the Company, if necessary, to
support, update and operate such software without TWM's involvement and TWM
will at the request of the Company provide such source and object code to
the Company.
4.03 Z4P hereby agrees:
o to assign or license its Zonemas back office system and future
versions thereof on a non-exclusive basis;
o to assign or license the generic software, artwork and designs
embodied in all participation TV client-side betting applications on a
non-exclusive basis, subject always to the provisions of Clause 10.01
of this Agreement;
o to assign or license MixTV's Director and Entertainment Game server
and all middleware or other integration work for the provision of PTV
services to the Winner Channel on a non-exclusive basis, subject
always to the provisions of Clause 10.01 of this Agreement; and
o to assign all customer data in its possession.
For the avoidance of doubt, any license shall include all necessary access
to source and object code that would enable the Company, if necessary, to
support, update and operate such software without Z4P's involvement and Z4P
will at the request of the Company provide such source and object code to
the Company.
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4.04 Each Party undertakes to provide services and contributions to the Company
in the manner of that set out in the Service Level Agreements. Each Party
agrees that the Board may at their discretion determine to issue loan notes
at an interest rate of $US LIBOR plus 1.5% per annum, or such other rate as
shall be determined at the time by the Board, in consideration for the
payment of any fees owing to either Party under the provisions of the
Service Agreements. The issue of such loan notes shall be subject to the
obtaining of any required legal or regulatory consents by the Board in
advance of the issue of such loan notes, the maintenance of any capital
contribution requirements or liquidity conditions imposed under any licence
or regulation to which the Company may be subject and to any other
regulatory or legal requirements or conditions to which the Company may be
subject at that time.
4.05 The Company shall initially finance its own employees (initially the
Managing Director), and related overheads, and any other activity as
described in the Business Plan. The Company shall have the option at any
time to cease the services provided by the Parties, or either one of them,
and to receive such services from third parties.
4.06 In the event that any service is terminated by the Board in accordance with
the provisions of the relevant Service Level Agreement, the Party whose
service is terminated shall make a cash contribution to the Company of the
difference between the amount budgeted by the Company for the Party's
service and the cost of the service provided by a substitute service
provider.
ARTICLE 5
FINANCIAL MATTERS
5.01 CAPITAL
If the Company requires additional funds, the Board shall convene and
arrive at a satisfactory decision on the matter. Any such decision to
determine the mechanism under which additional funds are raised shall
require the unanimous consent of the Board. Each Party hereby covenants to
subscribe for sufficient capital or to provide sufficient funds to the
Company to enable the Company to comply with any financing or liquidity
ratios or licensing requirements imposed on the Company by any regulatory
authority, regulation or legislation to which the Company is subject, from
time to time.
5.02 PAYMENTS AND DISTRIBUTIONS
All funds from time to time available to the Company which in the unanimous
opinion of the Board are not otherwise required for the Company's purposes
and as are available for distribution in accordance with the provisions of
the Act and any other legal or regulatory provisions the Company may be
subject to at the time, including, without limitation, the maintenance of
any capital contribution requirements or liquidity conditions imposed by
any licence or regulation to which the Company may be subject from time to
time, shall be paid, applied and distributed as follows:
(1) first, to the making of any payments which are due from the Company to
any bank or lender other than a Shareholder;
(2) second, to the repayment of interest owing on loans from Shareholders
to the Company, such payments to be made PRO RATA in accordance with
the interest owing;
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(3) third, to the repayment of the principal amount of loans from
Shareholders to the Company, such payments to be made PRO RATA in
accordance with the principal amounts owing to each Shareholder; and
(4) fourth, but subject to the other provisions of this Agreement and the
Act, the balance shall be distributed to the Shareholders by way of
dividends.
5.03 ACCOUNTANTS
All of the Shareholders, by unanimous agreement on a yearly basis, shall
appoint the accountants of the Company and determine the remuneration of
the same. The accountants of the Company shall have access to all books,
accounts, records, vouchers, checks, papers and documents which relate to
the Company, including those of the Shareholders.
5.04 BOOKS OF ACCOUNT
Subject to all applicable laws, and the Act, proper books of accounts and
records shall be kept by the Company at the registered office of the
Company and all entries shall be made therein in accordance with generally
accepted accounting principles. Upon giving not less than 14 days' notice
to the Managing Director, each Shareholder may require a meeting with the
Managing Director during normal business hours at which meeting such
Shareholder or its nominee shall have free access to examine such books of
account and records, provided that any confidential information which is
obtained shall not be disclosed to others or used for any improper purpose.
Each Shareholder shall at all times, without any concealment or
suppression, furnish correct information, accounts and statements to the
Shareholders and the Company in respect of all transactions pertaining to
the Company.
5.05 FINANCIAL REPORTING
The Board shall cause the Managing Director to prepare and send to each
Shareholder:
(1) an un-audited profit and loss statement and balance sheet as at the
end of each calendar quarter, prepared in accordance with generally
accepted accounting principles applied on a consistent basis with
prior periods and setting forth in the statements in comparative form
figures for the corresponding calendar quarter in the preceding year -
such documents to be sent to the Shareholders within 30 days following
the end of each calendar quarter; and
(2) annual financial statements, prepared by the Accountants, containing:
(a) the balance sheet of the Company, prepared in accordance with
generally accepted accounting principles applied on a consistent
basis; and
(b) a statement of profit and loss and a statement of changes in
financial position, prepared in accordance with generally
accepted accounting principles applied on a consistent basis, by
the Company for such period;
such statements shall be audited, unless otherwise determined by
unanimous consent of all Shareholders, subject to the provisions of
the Act and any other legal or regulatory provisions the Company may
be subject to at the time, and shall be sent to the Shareholders
within 60 days after the end of each fiscal year of the Company.
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5.06 BUDGETS
The Company shall adopt and keep in place, by unanimous consent of the
Directors, a current operating budget and a current capital budget. Any
expenditure not permitted under an applicable budget may be made only with
the unanimous consent of the Directors.
5.07 SHAREHOLDER'S AUDIT
A Shareholder (the "AUDITING SHAREHOLDER") may from time to time (but not
more than once during any 12 month period) upon making a written request to
the Managing Director (the "AUDIT REQUEST"), at its own expense, cause an
audit to be made of the Company's books and accounts by a chartered
accountant or certified public accountant appointed by such Shareholder.
Such audit shall be conducted in the presence of the Managing Director
and/or his/her nominees at a place determined by the Managing Director.
Within 7 days of receiving an Audit Request, the Managing Director will
notify the Auditing Shareholder of the place and time at which such audit
may be conducted (which time shall be not later than the 21st day after the
Audit Request was delivered). Such auditor shall, for the purpose of
performing the audit, have access to all books, accounts, records,
vouchers, checks, papers and documents of or which relate to the Company's
business and shall be entitled to require from the Shareholders, directors,
officers and employees of the Company, such information and explanations as
in its opinion are necessary to enable him to make such an audit. The
results of the audit shall be disclosed to the Company and the
Shareholders. If the audit discloses that there are material irregularities
in the books and accounts of the Company, then the Shareholder who has
caused the audit to be made shall be reimbursed by the Company for all
[reasonable] costs and expenses incurred by him to have such audit
performed. If the audit report identifies material irregularities, the
Auditing Shareholder may cause a follow-up audit to be conducted to verify
that the Company has corrected the material irregularities; the cost of the
follow-up audit shall be borne by the Company.
5.08 BANK ACCOUNT
The Company shall maintain a bank account or bank accounts with a Bank
located in Guernsey. All bank accounts of the Company shall be kept in the
name of the Company. All monies received for the account of the Company
shall be paid immediately into a bank account of the Company in the same
drafts, checks, bills or cash in which they are received.
5.09 WIND-UP
(1) If the Shareholders unanimously agree to wind-up the Company, the
winding-up shall be conducted in the manner proposed by the Liquidator
appointed, the assets of the Company should be sold and the net
proceeds (after payment of all of the Company's debts and obligations
in the opinion of the liquidator) shall be divided between the
Shareholders on a PRO RATA basis having regard to the respective
number of Shares they own. The Liquidator may exercise all its powers
under the Act, and may distribute assets of the Company IN SPECIE.
(2) Upon the completion of the winding-up of the Company, the Shareholders
and their Affiliates shall not be restricted in any way from engaging
in the Company's former activities, unless the Parties mutually agree
otherwise.
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ARTICLE 6
DEALING WITH SECURITIES
6.01 NO TRANSFER OF SECURITIES OR RIGHTS
A Shareholder shall not transfer any Securities or rights under this
Agreement except as permitted by this Agreement or with the written consent
of all other Shareholders.
6.02 INITIATION OF SALE PROVISIONS
No Shareholder shall initiate a sale or purchase under this Section until
such time as any sale or purchase previously initiated under this Section
has been completed or otherwise ceased to be effective.
6.03 NEW SHAREHOLDERS
If a Transfer of Shares to a person who is not an existing Shareholder
under this Agreement (the "TRANSFEREE") is permitted in accordance with
this Agreement or by consent of all Shareholders, and subject to the
approval of any regulatory body by which the Company is licensed or
governed the Transferee shall as a condition of Transfer enter into an
agreement with the Company and the remaining Shareholders pursuant to which
the Transferee shall be entitled to all the benefits and shall assume all
of the obligations of the transferor under this Agreement.
6.04 DEFAULT PROVISIONS
(1) For the purposes of this section:
(a) an "Event of Default" occurs whenever:
(i) a Shareholder becomes bankrupt or insolvent or takes the
benefit of any statute for bankrupt or insolvent debtors;
(ii) a receiver, receiver and manager, administrator or other
officer with similar powers is appointed for all or any
material part of a Shareholder's property;
(iii) steps are taken or proceedings are initiated for the
dissolution, declaration en etat de desastre, winding-up or
other termination of a Shareholder or for the liquidation of
a Shareholder's assets;
(iv) a Shareholder is in material default under any provision of
this Agreement, provided that:
(aa) if such default is not capable of rectification then no
notice of such default need be given by any other
Shareholder; or
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(bb) if such default is capable of rectification then such
default shall not become an "Event of Default" until
another Shareholder has given notice of the default to
such Shareholder and such default remains un-rectified
for a period of 30 Business Days following the giving
of such notice (however if the default is of a nature
that it cannot be rectified within 30 Business Days,
such 30 Business Day period shall be extended as agreed
between the Parties provided that the rectification of
the default is begun promptly after receipt of such
notice and is pursued with due diligence to
completion).
(b) "Offeror" means the Shareholder referred to in SECTION 6.04(1)
and "Offeree" means the other Shareholder.
(2) If an Event of Default occurs, the Offeror shall be obliged to notify
the Offeree of the Event of Default, giving sufficient detail of the
Event, and the Offeree shall have the right to purchase all (but not
less than all) of the Shares owned by the Offeror (the "OFFERED
SHARES") at their Transfer Value as of the Transfer Valuation Date in
accordance with the provisions of this section.
(3) If the Offeree desires to purchase Offered Shares due to an Event of
Default, it shall notify the other Offeror of such desire within 30
days of receipt of notice of the Event of Default and shall proceed
with diligence to have the Transfer Value determined as soon as
reasonably possible. For the purposes of this section, an Offeree
shall be deemed to have learned of the Event of Default no later than
the date that it receives notice to that effect from the other
Shareholder.
(4) As soon as the Transfer Value is determined, the Company shall by
notice (the "VALUE NOTICE") advise both Shareholders of the
determination and provide reasonable particulars of such
determination.
(5) The Offeree may only purchase the Offered Shares by notice (the
"ACCEPTANCE") given to the other Shareholder to this Agreement within
30 days following receipt of the Value Notice (the "ACCEPTANCE
PERIOD"). If the Offeree gives its Acceptance within the Acceptance
Period, the transaction of purchase and sale shall be completed on the
90th day following the expiry of the Acceptance Period (or the next
Business Day thereafter if the 90th day is not a Business Day). If the
Offeree does not give its Acceptance within the Acceptance Period, the
right of the Offeree to purchase the Offered Shares shall forthwith
cease with respect to the Event of Default for which the Value Notice
was given.
(6) All definitions in this section apply to this section only.
6.05 RIGHT OF FIRST REFUSAL - MARKET LAST
(1) Either Shareholder (the "OFFEROR") who desires to sell part of its
Shares (the "OFFERED SHARES") pursuant to this section shall first
make a bona fide offer to sell the Offered Shares to the other
Shareholder (the "OFFEREE") by giving notice (the "OFFER") referring
to this section and stating the terms upon which the Offeror desires
to sell the Offered Shares.
(2) The Offer shall:
16
(a) be in sufficient detail and include details of the proposed
purchaser, if any at that stage, that it can reasonably be
accepted and completed by the Offeree;
(b) include a purchase price payable in cash on closing; and
(c) include the place, time and date of closing, reasonably
established.
(3) The Offeree may only accept the Offer by notice (the "ACCEPTANCE")
given to the Offeror within 14 days following receipt of the Offer
(the "ACCEPTANCE PERIOD"). If the Offeree gives its Acceptance within
the Acceptance Period, the transaction of purchase and sale shall be
completed on the 90th day following the expiry of the Acceptance
Period (or the next Business day thereafter if the 90th day is not a
Business Day).
(4) If the Offered Shares are not purchased by the Offeree in accordance
with the foregoing provisions in this section 6.05, the Offeror may
complete a sale of the Offered Shares to an incorporated entity (the
"PURCHASER") within 180 days after the expiry of the Acceptance Period
on terms no more favourable to the Purchaser than those stated in the
Offer, save that where the identity of the Purchaser has not been
notified to the Offeree in the Offer, the Offeror must notify the
Offeree of the identity of the Purchaser and the Offeree shall have
the rights set out in subsection (3) of this section 6.05 to accept
the Offer and purchase the Offered Shares in the place of the
Purchaser. If such sale is not completed to the Purchaser within the
180 day period, the rights of the Offeree under this section shall
again take effect.
(5) All definitions in this section apply to this section only.
6.06 THIRD PARTY OFFER FOR 100% OF SHARES
(1) A Shareholder (the "FIRST SHAREHOLDER") who desires to sell all (but
not less than all) of its Shares (the "FIRST SHAREHOLDER'S SHARES")
pursuant to this section shall first obtain a bona fide offer (the
"INITIAL THIRD PARTY OFFER") from a third party (the "INITIAL THIRD
PARTY"), which third party is an incorporated entity, for the purchase
of all the issued and outstanding Shares of the Company (the "OFFERED
SHARES").
(2) The Initial Third Party Offer shall:
(a) be in sufficient detail that it can reasonably be accepted and
completed by the Shareholders as vendors and either the Third
Party as purchaser for the Offered Shares or the other
Shareholder (the "SECOND SHAREHOLDER") as purchaser for the First
Shareholder's Shares;
(b) include a purchase price payable in cash on closing;
(c) be stated to be subject to the provisions of this section; and
(d) include the place, time and date of closing, reasonably
established.
(3) The First Shareholder shall then offer to sell the First Shareholder's
Shares to the Second Shareholder on the same terms as in the Initial
Third Party Offer by notice (the "OFFER") given to the Second
Shareholder referring to this section and including a copy of the
Initial Third Party Offer. Upon receiving the Initial Third Party
Offer, the First Shareholder must disclose to the Second Shareholder
any prior, existing or intended business or other connection, direct
or indirect, between the First Shareholder (and/or any of its
Affiliates of Subsidiaries) and the Initial Third Party; if the First
Shareholder fails to disclose such a connection, the Second
Shareholder shall have the right to terminate and void any sale of
Shares to the Initial Third Party.
17
(4) The Second Shareholder may within the 20 Business Day period (the
"ACCEPTANCE PERIOD") after receiving the Initial Third Party Offer:
(a) accept the Offer by notice (the "ACCEPTANCE") given to the First
Shareholder, in which case the Second Shareholder shall not be
required to provide a deposit prior to closing and the
transaction of purchase and sale shall be completed on the 20th
Business Day following the expiry of the Acceptance Period; or
(b) obtain a second bona fide offer (the "SUBSEQUENT THIRD PARTY
OFFER") from a third party (the "SUBSEQUENT THIRD PARTY"), which
third party is an incorporated entity, for the purchase of the
Offered Shares.
(5) If the Second Shareholder elects not to accept the Offer and obtains a
Subsequent Third Party Offer, which it desires to accept and which
yields greater net proceeds to the Shareholders than they would
receive under the Initial Third Party Offer, the Second Shareholder
shall provide a copy of the Subsequent Third Party Offer to the First
Shareholder and at that time must disclose to the First Shareholder
any prior, existing or intended business or other connection, direct
or indirect, between the Second Shareholder (and/or any of its
Affiliates of Subsidiaries) and the Subsequent Third Party; if the
Second Shareholder fails to disclose such a connection, the First
Shareholder shall have the right to terminate and void any sale of
Shares to the Subsequent Third Party. Subject to the foregoing, if the
Subsequent Third Party Offer does yield greater net proceeds to the
Shareholders than they would receive under the Initial Third Party
Offer, the Shareholders shall accept the Subsequent Third Party Offer
and sell the Offered Shares to the Subsequent Third Party on the terms
contained in the Subsequent Third Party Offer.
(6) If, within the Acceptance Period, the Second Shareholder does not
accept the Offer (to purchase the Shares of the First Shareholder at
the price per share contained in the Initial Third Party Offer) and
does not obtain a Subsequent Third Party Offer (that yields greater
net proceeds to the Shareholders than they would receive under the
Initial Third Party Offer), the Shareholders shall accept the Initial
Third Party Offer and sell the Offered Shares to the Initial Third
Party on the terms contained in the Initial Third Party Offer.
(7) All definitions in this section apply to this section only.
6.07 SELECTION OF VALUATOR
If this Agreement provides for the purchase and sale of Shares at their
Transfer Value and if the Shareholders cannot agree on the Transfer Value,
then upon the request of any Shareholder, the Company's Accountant shall
determine the Transfer Value as at the applicable Transfer Valuation Date.
In the remainder of this section the Accountant is also referred to as the
"Valuator". For the purpose of determining the Transfer Value, the Valuator
may appoint, at the expense of the Company, an independent valuator or
appraiser to assist in such determination. The Valuator and any valuator or
appraiser assisting the Valuator shall act as an expert and not as an
umpire or arbitrator and shall not be bound by the rules of natural justice
and may elect, at their discretion, to hear representations from any party
to this Agreement with respect to the Transfer Value. The determination of
the Transfer Value made by the Valuator shall, for the purposes of this
Agreement, be final and binding on the parties to this Agreement and no
appeal shall lie therefrom.
18
Notwithstanding the foregoing, if any Shareholder disagrees with the
determination of the Accountant as to the Transfer Value, such Shareholder
may, by notice in writing to the other Shareholders, require an independent
qualified business valuator, which must be a national accounting firm in
the United Kingdom who is not the accountant or auditor for any party to
this Agreement, to review the Accountant's determination of the Transfer
Value and the determination of such independent valuator, which shall be
final and binding on the parties to this Agreement. The fees and
disbursements of the independent valuator shall be borne by the Shareholder
requesting the review unless the value found by the independent valuator
varies by more than 10% from the valuation determined by the Accountants
and provided that such variation is in favour of the Shareholder requesting
the review, in which event the fees and disbursements of such independent
auditor shall be borne by the Company, subject to compliance with the Act.
6.08 DETERMINATION OF TRANSFER VALUE OF SHARES
If the Shareholders cannot agree on the Transfer Value, it shall be arrived
at by the Valuator by multiplying the fair market value of each issued and
outstanding Share (i.e. fair market value of all issued and outstanding
Shares divided by the number of issued and outstanding Shares) by the
number of Shares to be transferred.
6.09 TIMING FOR VALUATION
Such determination shall be made in writing and given to all Shareholders
and to the Company within 45 days of the date of the request made to the
Valuator to make such determination or as soon thereafter as may be
reasonably possible. If the Valuator fails to do so or is unwilling to do,
any party to the transaction of purchase and sale may apply to a court of
competent jurisdiction to have a substitute appointed for the Valuator.
6.10 COSTS OF VALUATION
All fees and disbursements charged by the Valuator shall be paid by the
parties to the transaction of purchase and sale or, at the Managing
Director's option, by the Company, subject to compliance with the Act.
6.11 CLOSING PROVISIONS
Unless otherwise provided for in this Agreement, the closing (the
"CLOSING") of any sale of Shares (the "TRANSFERRED SHARES") between
Shareholders (the seller of Transferred Shares being called the "VENDOR"
and the purchaser of Transferred Shares being called the "PURCHASER") shall
be held at the registered office of the Company at 11:00 a.m. on the date
provided for Closing and, at Closing:
(1) the Vendor shall:
(a) deliver to the Company signed resignations of the Vendor and the
Vendor's nominees, if any, as Directors, officers and employees
of the Company, as the case may be, such resignations to be
effective at Closing, to the extent Vendor is transferring all of
its Shares in the Company;
19
(b) transfer the Transferred Shares to the Purchaser free from all
mortgages, charges, security interests, claims, encumbrances and
restrictions whatsoever (except restrictions created under this
Agreement). If, at Closing, the Transferred Shares are subject to
any mortgage, charge, security interest, claim, encumbrance or
restriction, then the Purchaser may do such acts and things, and
make such payments, as seem necessary to the Purchaser, acting
reasonably, in order to discharge such mortgage, charge, security
interest, claim, encumbrance or restriction and the Purchaser
shall deduct from the purchase price for the Transferred Shares
all costs and expenses incurred in so doing; and
(c) pay any amount owing to the Company by the Vendor; and
(d) deliver to the Company all records and documents belonging to the
Company and which are in the Vendor's possession or control.
(2) the Purchaser shall pay for the Transferred Shares by wire transfer
into a bank account specified by the Vendor; and
(3) any amount owing by the Company to the Vendor shall be paid by the
Company.
6.12 FAILURE TO CLOSE
(1) If the Vendor fails to complete the transaction of purchase and sale,
then the amount which the Purchaser would otherwise be required to pay
to the Vendor at Closing may be deposited by the Purchaser into a
trust account in the name of the Vendor at the bank branch used by the
Company. Upon making the deposit and giving the Vendor notice that the
deposit was made, the purchase of the Transferred Shares by the
Purchaser shall be deemed to have been fully completed and the
Transferred Shares shall be conclusively deemed to have been
transferred to and vested in the Purchaser and the Secretary of the
Company shall cause the name of the Purchaser (or its nominee as
directed) to be entered in the share register of the Company as the
holder of the Transferred Shares. The Vendor shall be entitled to
receive the amount deposited in the trust account upon satisfying the
Vendor's obligations pursuant to SECTION 6.11.
(2) If the Purchaser fails to complete the transaction of purchase and
sale, the Vendor may, at its option (exercisable by giving written
notice thereof to the Vendor on or as soon as reasonably practicable
after the intended Closing) and in addition to any other rights it may
have at law including seeking an order for specific performance and/or
damages, terminate the transaction and the Purchaser's right at that
time to purchase the Transferred Shares shall be deemed to be null and
void.
(3) If any Transfer of Shares is subject to review under the provisions of
any statute, the Closing shall be conditional upon the consent or
allowance or deemed consent or allowance of the purchase of the Shares
by the applicable public authority, which consent or allowance shall
be on terms and conditions reasonably satisfactory to the Purchaser.
Notwithstanding any other provision in this Agreement, the Closing
shall be delayed until the receipt of such consent or allowance or
deemed consent or allowance.
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ARTICLE 7
TERMINATION
7.01 TERMINATION
This Agreement, excluding any non-competition and confidentiality
provisions in it, shall terminate upon:
(1) The written agreement of all Shareholders;
(2) The dissolution or bankruptcy, declaration en etat de desastre or
winding-up of the Company or the making by the Company of an
assignment under the bankruptcy laws of any applicable jurisdiction,
or
(3) One Shareholder becoming the beneficial owner of all of the Shares.
7.02 CONSEQUENCES OF TERMINATION
Upon termination of this Agreement, all other agreements between the
Parties will be terminated.
ARTICLE 8
REPRESENTATIONS AND WARRANTIES
8.01 MUTUAL REPRESENTATIONS
Each Shareholder represents and warrants that:
(1) it has been duly incorporated or created and is validly subsisting and
in good standing under the laws of its jurisdiction of incorporation;
(2) it has the corporate power and authority to enter into and perform its
obligations under this Agreement;
(3) this Agreement has been duly authorized, executed and delivered by it
and constitutes a valid and enforceable obligation enforceable against
it in accordance with its terms; and
(4) it is not a party to, bound or affected by or subject to any
indenture, mortgage, lease, agreement, instrument, charter or by-law
provision, statute, regulation, judgment, decree or law which would be
violated, contravened, breached by or under which default would occur
or under which any payment or repayment would be accelerated as a
result of the execution and delivery of this Agreement or the
consummation of any of the transactions provided for in this
Agreement.
8.02 SURVIVAL OF REPRESENTATIONS AND WARRANTIES
All of the representations and warranties made in this Agreement shall
survive the execution of this Agreement and shall be deemed to be
continuing.
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ARTICLE 9
GENERAL CONTRACT PROVISIONS
9.01 APPLICATION OF THIS AGREEMENT
The terms of article 6 shall apply MUTATIS MUTANDIS to any shares:
(1) resulting from the conversion, reclassification, redesignation,
subdivision or consolidation or other change of the Shares; and
(2) of the Company or any successor body corporate which may be received
by the Shareholders on a merger, amalgamation, arrangement or other
reorganization of or including the Company,
and prior to any such action being taken the parties shall give due
consideration to any changes which may be required to this Agreement in
order to give effect to the intent of this section.
9.02 FURTHER ASSURANCES
Each party shall sign such other documents and do and perform such other
acts as may, in the reasonable opinion of counsel for any other party, be
necessary or desirable in order to give full effect to this Agreement. Each
Shareholder agrees to vote and act as a shareholder of the Company to
fulfill the provisions of this Agreement and in all other respects to
comply with, and use all reasonable efforts to cause the Company to comply
with, this Agreement, and to the extent, if any, which may be permitted by
law, shall cause its respective nominee(s) as Directors to act in
accordance with this Agreement, subject always to the Directors' overriding
fiduciary duties.
9.03 ASSIGNMENT
Unless expressly permitted in this Agreement, no Party may assign such
Party's rights or obligations under this Agreement without the prior
written consent of all other Parties save as permitted by the terms of this
Agreement.
9.04 TIME OF THE ESSENCE
Time shall be of the essence in respect of every part of this Agreement.
9.05 CONFIDENTIALITY
Each party agrees not to, at any time or under any circumstances, without
the prior written consent of the other party to this Agreement, directly or
indirectly communicate or disclose to any third party any confidential
knowledge or information howsoever acquired by such party relating to or
concerning the customers, products, technology, trade secrets, systems,
operations, IP or other confidential and/or proprietary information
regarding the property, business and/or affairs of the Company or any of
its Affiliates or Shareholders, nor shall such party utilize or make
available any such knowledge directly or indirectly in connection with any
other business or activity in which such party is or proposes to be
involved, or in connection with the solicitation or acceptance of
employment with any person. Without limiting the generality of the
foregoing, each Shareholder agrees not to:
(1) permit any of its directors, officers, employees or agents to divulge
to any person, firm, association, syndicate, company or organization
the name of any customer, client or supplier of the Company, and
(2) interfere with, entice away or otherwise attempt to obtain the
withdrawal of any employee of the Company.
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9.06 BENEFIT OF THE AGREEMENT
This Agreement shall enure to the benefit of and be binding upon the
respective successors and permitted assigns of the parties.
9.07 NOTICES
Any demand, notice, request or other communication required or permitted to
be given in connection with this Agreement (referred to in this section as
a "NOTICE") shall be given in writing and delivered personally or by
next-day courier or by facsimile transmission. A notice shall be addressed
to the recipient as follows:
if to TWM at 19 Bolsover Street, London W1W 5NA and at fax no. +44
(0)20 7665 4401;
if to Z4P, at 104 Foulk Road, Wilmington, DE 19803 and at fax no. +972
364 72722;
if the Company, to the Managing Director at the registered office of
the Company with a copy to each Shareholder,
or to such other address as may be designated by written notice by any
Party to the others. Such notice shall be conclusively deemed to have been
given and received when so delivered, provided that delivery actually made
on a day after normal business hours or on a day which is not a Business
Day shall be deemed to have been made at the commencement of the next
Business Day, and further provided that any notice transmitted by facsimile
or other form of recorded communication shall be deemed given and received
on the first Business Day after its transmission.
9.08 INTERPRETATION
(1) All references in this Agreement to sections are references to
sections of this Agreement unless otherwise provided.
(2) Unless the context requires otherwise, words importing the singular
number shall include the plural and vice versa, words importing the
masculine gender shall include the feminine and neuter genders and
vice versa, and words importing persons shall include individuals,
partnerships, associations, trusts, unincorporated organizations and
corporations and VICE VERSA.
9.09 REFERENCES TO LAWS
Any references in this Agreement to any law, by-law, rule, regulation,
order or act of any government, governmental body or other regulatory body,
in whatever form, shall be construed as a reference to it as amended or
re-enacted from time to time or as a reference to any successor to it.
9.10 AMENDMENTS AND WAIVERS
No provision in this Agreement may be amended or waived except in writing.
23
9.11 SEVERABILITY
Any finding that a provision of this Agreement is invalid or unenforceable
shall apply only to such provision.
9.12 ENTIRE AGREEMENT
The parties expressly agree that in all respects pertaining to this
Agreement and its subject matter their rights, obligations and remedies
shall be governed exclusively by the terms of this Agreement and that this
Agreement supersedes any prior understandings and agreements between them
with respect to its subject matter. There are no representations,
warranties, terms, conditions, undertakings or collateral agreements,
express, implied or statutory, between the parties other than as expressly
made in this Agreement.
9.13 ATTORNEY'S FEES AND LEGAL COSTS
Should any dispute be commenced between the parties concerning any
provision of this Agreement or the rights and duties of any person in
relation thereto, the prevailing party or parties in such dispute shall be
entitled, in addition to such other relief as may be granted, to a
reasonable sum as and for their attorney's fees in such litigation which
shall be determined by the court in such litigation or in a separate action
brought for that purpose. For purposes of this section, the term
"prevailing party or parties" shall mean the party or parties who obtain
substantially the relief sought by such party or parties in such claim,
suit or other legal proceeding, whether by settlement, summary judgment,
judgment or otherwise.
9.14 CONSTRUCTION
The preparation of this Agreement has been a joint effort of the parties
and the resulting document shall not, solely as a matter of judicial
consideration, be construed more severely against one party than the other
parties.
9.15 COUNTERPARTS
This Agreement may be signed by the parties in separate counterparts each
of which when so signed and delivered shall be an original and all such
counterparts shall together constitute one instrument.
9.16 GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the
laws of Guernsey. Each party to this Agreement agrees to submit to the
exclusive jurisdiction of the courts of Guernsey.
ARTICLE 10
NON-COMPETITION
10.01 NON-COMPETITION
(1) Each of the Shareholders covenants and agrees that neither it nor any
of its Affiliates will (individually or collectively), for as long as
it holds more than 10% of the total issued share capital of the
Company and/or it has a Director on the Board and for a period of 12
months following the date on which it ceases to hold more than 10% of
the total issued share capital of the Company and/or it ceases to have
a Director on the Board, in any manner whatsoever carry on or be
engaged in or be concerned with or interested in or advise, lend money
to, guarantee the debts or obligations of or permit its name or any
part thereof to be used or employed by any person, firm, association,
syndicate, corporation or organization engaged in or concerned with or
interested in any business in the United Kingdom related to or
regarding products and services which are similar to or compete with
the Business in so far as the Business relates to activities requiring
a gambling license wherever or however the activities are undertaken
in the United Kingdom;
24
(2) The Shareholders further agree that the Company shall not undertake
any activities outside of "gambling"-related services that directly
compete with the activities of either Party. The Shareholders hereby
agree that prior to the Company undertaking non-"gambling" services or
supplying non-"gambling" products, the Shareholders shall have the
right to approve such activity.
(3) If a potential client is to approach any Shareholder with an intention
to acquire a "non-gambling" product or service that would include any
of the products or services comprised in the Business, the
Shareholders agree that no preference shall be given to the promotion
or sale of the products of the Shareholder concerned over the products
of the Company comprised in the Business. The Shareholders, however,
acknowledge the ability of an independent third party to choose one
product over another product.
(4) The restrictions of this Article 10 shall apply only to future
agreements and shall not retrospectively affect any current or past
agreement entered into by either of the Parties.
(5) The Shareholders hereby acknowledge that they have reviewed the
provisions of SECTION 10.01(1) above, each has turned its mind to the
reasonableness of its scope (both as to geographical area and time
period), consulted an independent lawyer who has explained the
implications of such section to it, fully understands the implication
of such section, and is entirely satisfied that the provisions of such
section in their entirety are necessary and reasonable for the
protection of the legitimate business interests of the Company and
each Shareholder and should be given full force and effect.
(6) The Shareholders agree that the remedy at law for any breach of the
provisions hereof by it or by an Affiliate of it may be inadequate and
that in the event of such breach the Company and/or the relevant
Shareholder shall be entitled to make an application to the
appropriate court granting the Company and/or the relevant Shareholder
temporary and/or permanent injunctive relief against the Company, the
relevant Shareholder and/or one or more of their Affiliates, without
the necessity of proving actual damage, for the purpose of preventing
the breaching party or parties from continuing such breach.
ARTICLE 11
DEADLOCK
11.01 Wherever the Shareholders or the Board are unable to arrive at a unanimous
decision on a matter by reason of disagreement between them then the
relevant meeting shall be adjourned and shall be reconvened at the same
time and place at the expiry of a period of not less than twenty-eight (28)
days from the date on which it was first held. In such period the
Shareholders shall consult together in good faith with a view to resolving
such disagreement, but if upon second convocation such resolution still
cannot be validly passed because there is parity of votes cast for and
against such resolution or for want of a quorum, deadlock shall be deemed
to have occurred in relation to that matter.
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11.02 In no circumstances shall any of the Shareholders create an "artificial
deadlock". For the purposes of this Clause 11.02 an "artificial deadlock"
shall be a deadlock caused by:
(1) any of the Shareholders or its respective representatives failing to
attend (or appoint a proxy or representative to attend in its place) a
duly convened general meeting or Board meeting which is necessary to
enable the Company to carry on the Business properly and efficiently;
or
(2) any of the Shareholders unreasonably refusing to exercise or failing
to exercise its respective powers under the Articles of Association to
appoint or remove a Director.
11.03 If and whenever a deadlock is deemed to have occurred any of the
Shareholders may at any time thereafter and for so long as such deadlock is
continuing serve a notice in writing to the other (such notice to be headed
"DEADLOCK NOTICE" and to refer to this Clause and the possibility that the
Company may be placed into liquidation) and if such deadlock shall not be
resolved within a further period of sixty (60) days following service of
such notice then at any time following expiry of the Deadlock Notice and
for so long a such deadlock is continuing:
(1) any of the Shareholders (the "OFFEROR") may offer in writing (the
"OFFER") to the others (the "OFFEREE") in the alternative either:
(a) to sell all (but not part only) of the Shares owned or held by
the Offeror (the "SALE OFFER") at the Price (as hereinafter
determined); or
(b) to purchase from the Offeree all (but not part only) of the
Shares owned or held by the Offeree (the "PURCHASE OFFER") at the
Price.
Only one set of Offers may be made and any purported Offer made by one
Shareholder shall be void and ineffective if at that time a valid
Offer shall then have been made by the other Shareholder. For this
purpose an Offer shall be deemed made when notice of it has been
served on the Offeree in accordance with the provisions of Clause 9.07
unless in consequence of the operation of such Clause two or more
offers sent by post of facsimile copy are deemed made at the same time
in which event the Offers shall rank in point of time by reference to
the time at which notice of them is actually posted or (as the case
may be) actually transmitted;
(2) any Offer must contain both a Sale Offer and a Purchase Offer;
(3) the "Price" in respect of the Shares comprised in each Offer shall
mean either such sum as the Offeror shall specify in the Sale Offer
and in the Purchase Offer (being the same sum in respect of both parts
of such Offer) or (if the Offer does not specify any such sum or if
the Offeror in the Offer so elects or if the Offeree within fourteen
(14) days after the Offer is made so elects by notice in writing to
the Offeror) such sum as the Independent Accountants (as hereinafter
defined) shall certify to be in their opinion the fair value of such
ordinary shares on a going concern basis as between a willing buyer
and a willing seller contracting on arms' length terms as at the date
of the Offer and on the basis that no account is taken of the fact
that the Shares comprised in the Offer are a particular proportion
(and in particular whether a minority or a majority) of the total
number of Shares in the Company). It shall be a fixed term of the
Offer that the Price shall be payable in cash on the date of
completion of he relevant sale;
26
(4) the Independent Accountants shall be a firm of chartered accountants
(not being the auditors for the time being or past auditors of the
Company) of international standing and repute agreed upon by the
Shareholders or in default of agreement within seven (7) days
nominated on the application of either such party on notice to the
other by the President for the time being of the Institute of
Chartered Accountants in England and Wales;
(5) the Independent Accountants in performing their duties pursuant to
this Clause:
(a) shall act as experts and not as arbitrators;
(b) may consult with and take such advice as in their opinion
desirable from such persons as they may determine;
(c) shall, before the issue of any certificate hereunder, offer the
opportunity to each of the Shareholders to review the information
on the basis of which such certificate is to be given and to
allow such parties to make representations of reasonable length
to the Independent Accountants in regard thereto;
(d) shall lay down such time limits for the provision of information
to them and for the making of such written representations as in
their discretion they consider reasonable; and
(e) shall endeavour to issue their certificate within 2 months of
their being instructed to do so and the Shareholders shall use
their best endeavours to procure that the certificate is issued
within such period;
(6) the cost and expenses of the Independent Accountants in performing
their duties pursuant to this Clause shall be borne equally between
the Shareholders.
(7) The Offer by the Offeror hereunder shall be irrevocable for a period
of ninety (90) days (the "OFFER PERIOD") from the date the offers are
duly given to the Offeree. During the Offer Period the Offeree may
either accept the Sale Offer or the Purchase Offer but the Offeree may
not accept both offers. Acceptance of either the Sale Offer or the
Purchase Offer shall be made by notifying the Offeror in writing of
the acceptance and specifying a date and time for completion of the
sale at the offices of the Company which date shall be not less than
30 days or nor more than 60 days after the date on which the Price is
determined. At completion the purchasing Shareholder shall pay the
Price to the selling Shareholder in cash in pounds sterling and the
selling Shareholder shall deliver a duly executed transfer in respect
of all of its Shares to the purchasing Shareholder together with the
supporting Share Certificates therefore (or an appropriate indemnity
in respect of any lost certificates) the Shares being sold by the
Selling Shareholder as beneficial owner (or its equivalent) and free
and clear from all liens charges encumbrances and security interests
together with all rights attaching thereto;
27
(8) in addition to acquiring the selling Shareholder's Shares the
purchasing shareholder shall upon completion of such purchase accept
the assignment of all loans made by the selling Shareholder to the
Company for a consideration equal to the aggregate nominal value
thereof then outstanding and interest (if any) accrued hereon but
unpaid and shall pay the consideration for cash assignment in cash in
the currency the said loans were given and shall procure the release
of all guarantees and indemnities given by the selling Shareholder in
respect of the liabilities and/or obligations of the Company or
failing such release the execution of an indemnity against all claims
costs demands expenses obligations and liabilities under such
guarantees or indemnities on such terms and from such person as the
selling Shareholder shall reasonably agree.
(9) at completion of the sale the Directors who were nominees of the
selling Shareholder shall forthwith resign (without any claims for
loss of office or otherwise) from their positions in the Company.
(10) completion of all matters referred to in Clauses 11.03(7) to 11.03(9)
above shall take place simultaneously.
(11) if after becoming bound to transfer its Shares the selling Shareholder
makes default in transferring such Shares (or any of them) the Company
may receive the purchase monies and the selling Shareholder shall be
deemed to have appointed any one Director or the secretary of the
Company its agent to execute a transfer of the relevant Shares to the
purchasing Shareholder and upon execution of such transfer the Company
shall hold the purchase monies in trust for the selling Shareholder.
The receipt of the Company for the purchase monies shall be a good
discharge for the purchasing Shareholder and after its name has been
entered in the register of members of the Company, the validity of the
proceedings shall not be questioned by any person.
11.04 If the Offeree does not accept either the Purchase Offer or the Sale Offer
before expiry of the Offer Period the Offeree will be deemed to have
accepted the Sale Offer and the amount which the Offeror would otherwise be
required to pay to the Offeree must be deposited by the Offeror into a
trust account in the name of the Offeree at the bank branch used by the
Company. Upon making the deposit and giving the Offeree notice that the
deposit has been made the purchase by the Offeror shall be deemed to have
been fully completed and the Offeree's Shares shall be conclusively deemed
to have been transferred to and vested in the Offeror and the Secretary of
the Company shall cause the name of the Offeror (or its nominee as
directed) to be entered into the Share register of the Company as the
holder of such Shares.
28
IN WITNESS WHEREOF THE PARTIES HAVE SIGNED THIS AGREEMENT:
)
) TWO WAY MEDIA LIMITED
)
) Per: /s/ Jean De Fougerolles
----------------------------
) Authorized Signing Officer
)
)
) ZONE4PLAY INC
)
) Per: /s/ Uri Levi, Acting CEO and CFO
-------------------------------------
) Authorized Signing Officer
)
)
29
APPENDIX A
BUSINESS PLAN
30
APPENDIX B
TWM CLIENT CONTRACTS
31