SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
------------------
For Quarter Ended December 31, 1999 Commission File No. 33-28562
AUTHORISZOR INC.
(Exact name of registrant as specified in charter)
Delaware 75-2661571
- - - - --------------------------------------------------------------------------------
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation)
1 Justin Road
Natick, MA 01760-5565
- - - - --------------------------------------------------------------------------------
(Address of princ (Postal Code)
executive offices)
Registrant's telephone number, including area code: (508) 650-3916
- - - - --------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
------- -------
As of February 22, 2000, there were 17,414,081 shares of the common stock, $0.01
par value, of the registrant issued and outstanding.
Transitional Small Business Disclosure Format (check one)
YES NO X
------ ------
<PAGE>
AUTHORISZOR INC.
December 31, 1999
INDEX
PART I. FINANCIAL INFORMATION Page No.
--------
Item 1. Financial Statements
Consolidated Balance Sheets as of December 31, 1999
(unaudited) and June 30, 1999...........................................F-1
Consolidated Statements of Operations for the three
and six months ended December 31, 1999, and 1998
(unaudited) and for the period January 15, 1997
(date of inception) to December 31, 1999 (unaudited)....................F-2
Consolidated Statement of Stockholders' Equity for
the six months ended December 31, 1999 (unaudited)......................F-4
Consolidated Statements of Cash Flows for the six
months ended December 31, 1999 and 1998 (unaudited)
and for the period January 15, 1997 (date of inception)
to December 31, 1999 (unaudited)........................................F-5
Notes to Consolidated Financial Statements (unaudited)..................F-6
Item 2. Management's Discussion and Analysis or Plan
of Operation.....................................................1
PART II. OTHER INFORMATION...............................................5
Item 1. Legal Proceedings................................................5
Item 2. Changes in Securities ...........................................5
Item 3. Defaults Upon Senior Securities..................................6
Item 4. Submission of Matters to a Vote of
Security Holders.................................................6
Item 5. Other Information................................................6
Item 6. Exhibits and Reports on Form 8-K................................10
SIGNATURES...............................................................12
i
<PAGE>
AUTHORISZOR INC
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
<S> <C> <C>
December 31, 1999 June 30, 1999
(unaudited)
$ $
ASSETS
Cash 394,505 698
VAT recoverable and other assets 82,269 2,498
---------------- ----------------
Total current assets 476,774 3,196
Advance receivable (Note C) 160,800 -
Investment in securities 346,500 -
Investment in subsidiary held-for-sale (Note D) 1,707,398 -
Computer and office equipment, net of accumulated
depreciation 155,928 21,594
Intangible assets (Note E) 30,000 -
---------------- ----------------
2,400,626 21,594
---------------- ----------------
2,877,400 24,790
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable to related parties 27,906 -
Accounts payable and other liabilities 155,968 100,670
---------------- ----------------
Total current liabilities 183,874 100,670
Stockholders' equity (deficit) (Note F)
Preferred stock, par value $.01 per share; authorized: 2,000,000
shares; issued and outstanding: none - -
Common stock, $.01 par value per share; authorized:
30,000,000 shares; issued and outstanding: 14,316,808 shares and
60 shares respectively 143,168 9
Additional paid-in capital 6,403,499 -
Accumulated other comprehensive income (5,354) 2,846
Accumulated deficit during the development stage (3,847,787) (78,735)
---------------- ----------------
2,693,526 (75,880)
---------------- ----------------
2,877,400 24,790
================ ================
</TABLE>
The accompanying notes are an integral part of these statements.
F-1
<PAGE>
AUTHORISZOR INC
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the periods ended
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
January 15, 1997
For the three months ended For the six months ended (inception) to
December 31, December 31, December 31, December 31, December 31,
1999 1998 1999 1998 1999
$ $ $ $ $
Net sales - 32,682 - 32,682 37,001
Cost of sales - 8,962 - 8,962 10,559
--------------- --------------- -------------- --------------- -----------------
Gross profit - 23,720 - 23,720 26,442
Operating expenses
Professional fees 660,405 2,494 696,399 5,071 701,470
Financing costs (Note F) 2,345,680 - 2,345,680 - 2,345,680
Marketing and advertising 183,720 - 212,229 - 212,229
Administrative 359,482 15,672 715,549 30,449 815,655
--------------- --------------- -------------- --------------- -----------------
Total operating costs and expenses 3,549,287 18,166 3,969,857 35,520 4,075,034
Operating (loss) income (3,549,287) 5,554 (3,969,857) (11,800) (4,048,592)
Other income
Interest income 1,296 - 1,526 - 1,526
Gain on sale of investments - - 199,279 - 199,279
--------------- --------------- -------------- --------------- -----------------
Total other income 1,296 - 200,805 - 200,805
--------------- --------------- -------------- --------------- -----------------
Net (loss) earnings (3,547,991) 5,554 (3,769,052) (11,800) (3,847,787)
=============== =============== ============== =============== =================
Weighted average shares
outstanding
Basic and Diluted 13,907,193 13,765,808 12,801,720 13,765,808
=============== =============== ============== ===============
</TABLE>
F-2
<PAGE>
AUTHORISZOR INC
(A DEVELOPMENT STAGE ENTERPRISE)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Net (loss) income per common share
Basic and Diluted $ (0.26) $ 0.01 $ (0.29) $ (0.01)
=============== =============== ============== ================
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
AUTHORISZOR INC
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
For the period ended
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulated
other
Additional compre- Compre-
Preferred Stock Common Stock paid-in Accumulated hensive hensive
Shares Amount Shares Amount capital deficit income Total income
$ $ $ $ $ $ $
Balance at July 1, 1999 - - 60 9 - (78,735) 2,846 (75,880)
Issuance of common stock
($0.16 per share) - - 17,835 2,828 - - - 2,828
Recapitalization - - 13,747,913 134,821 3,097,172 - - 3,231,993
Issuance of common stock - - 551,000 5,510 3,306,327 - - 3,311,837
Comprehensive income:
Foreign currency
translation adjustment - - - - - - (8,200) (8,200) (8,200)
Net loss during the
period - - - - - (3,769,052) - (3,769,052) (3,769,052)
Total comprehensive
loss (3,777,252)
--------- -------- ---------- --------- --------- ------------ --------- ------------ =============
Balance at
December 31, 1999 - - 14,316,808 143,168 6,403,499 (3,847,787) (5,354) 2,693,526
(unaudited) ========= ======== ========== ========= ========= =========== ========= ============
</TABLE>
The accompanying notes are an integral part of this statement.
F-4
<PAGE>
AUTHORISZOR INC
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the periods ended
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Jan. 15, 1997
(inception) to
Six months ended December 31, December 31,
1999 1998 1999
$ $ $
Net cash flows (used in) provided by operating
activities
Net loss during the period (3,769,052) (11,800) (3,847,787)
Adjustments to reconcile net loss
to net cash (used in) provided by operating
activities:
Fair value of shares in exchange for services 406,600 - 406,600
Non-cash compensation expense 52,849 - 52,849
Non-cash financing costs 2,345,680 - 2,345,680
Gains on sale of investments (199,279) - (199,279)
Depreciation 27,901 604 38,296
Receivables and other assets (80,766) (18,944) (83,354)
Accounts payable and accrued liabilities 83,570 39,261 184,240
-------------- -------------- --------------
2,636,555 20,921 2,745,032
Net cash (used in) provided by operating
activities (1,132,497) 9,121 (1,102,755)
Net cash flows (used in) provided by investing
activities
Acquisition of equipment (161,740) (1,027) (194,515)
Sale of investments in securities 1,360,579 - 1,360,579
Advance in WRDC (160,800) - (160,800)
Purchase of intangible assets (30,000) - (30,000)
-------------- -------------- --------------
Net cash flows (used in) provided by investing
activities 1,008,039 (1,027) 975,264
Net cash flows provided by financing activities
Proceeds from issuance of stock 506,708 - 506,717
Recapitalization 711 - 711
-------------- -------------- --------------
Net cash flows provided by financing activities 507,419 - 507,428
Effect of exchange rate changes on cash 10,846 (590) 14,568
-------------- -------------- --------------
Net increase in cash 393,807 7,504 394,505
Cash at beginning of period 698 624 -
Cash at end of period 394,505 8,128 394,505
============== ============== ==============
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest - - -
Income taxes - - -
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
AUTHORISZOR INC
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
A summary of significant accounting policies consistently applied in the
preparation of the accompanying financial statements follows.
NOTE A - BASIS OF PREPARATION
The consolidated financial statements of Authoriszor Inc. and subsidiaries (the
"Company") contained herein have been prepared by the Company pursuant to the
rules and regulations of the Securities and Exchange Commission. In the opinion
of management, all adjustments necessary for a fair presentation of the
consolidated financial position as of December 31, 1999 and the consolidated
results of operations and cash flows for the six months then ended have been
made. All such adjustments, in the opinion of management, are of a normal
recurring nature. The results of operations for the periods presented are not
necessarily indicative of the results to be expected for the full fiscal year.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to the interim reporting rules of the
Securities and Exchange Commission. The interim consolidated financial
statements should be read in conjunction with the audited consolidated financial
statements and related notes as of June 30, 1999, included in the Company's Form
8/K/A.
NOTE B - RECAPITALIZATION OF SHARES
On July 22, 1999, Toucan Gold Corporation (Toucan) acquired all of the
outstanding capital stock of Authoriszor Limited (formerly known as ITIS
Technologies Ltd) a UK company, in exchange for restricted shares of common
stock of Toucan (the Exchange) pursuant to a Share Exchange Agreement between
Toucan and Authoriszor Limited. Toucan exchanged 4,680,375 shares of common
stock for all of Authoriszor Limited's issued and outstanding shares of common
stock. At June 30, 1999, Toucan had disposed of all of its operations. For
accounting purposes, the Exchange has been treated as a recapitalization of
Authoriszor Limited. The accompanying financial statements are those of
Authoriszor Limited. Also, Toucan changed its name to Authoriszor Inc. and its
fiscal year end to June 30, that of Authoriszor Limited. Immediately after the
Exchange, Authoriszor Limited's former shareholders owned approximately 34% of
the outstanding common stock of Toucan.
NOTE C- ADVANCE RECEIVABLE
The Company has advanced $160,800 ((pound)100,000) to a private company, WRDC
Limited (WRDC) at December 31, 1999. The advance is part of a formal agreement
dated January 27, 2000 wherein the Company has agreed to purchase 25.1% of the
share capital of WRDC for a total cost of $960, 800 with an option to acquire
the balance of the issued share capital of WRDC after October 31, 2001 at a
price based on the revenue and profits of WRDC for the previous accounting
period at the relevant time. The Company will receive 840,000 "D" ordinary
shares of one penny each in WRDC for a price of $604,800 ((pound)378,000) and
will make a further advance to WRDC of $195,200 ((pound)122,000). The total
advances of $356,000 ((pound)222,000) will be converted into a note repayable to
the Company over a five year period bearing interest at 6% with quarterly
principal and interest payments of (pound)18,500 beginning on the second
anniversary date of the first drawdown.
NOTE D - INVESTMENT IN SUBSIDIARY HELD - FOR - SALE
The Company had previously announced a spin-off of Toucan Mining plc, formerly
known as Toucan Mining Limited (Toucan Mining), a wholly owned subsidiary of the
Company to its stockholders, subject to the satisfaction of certain conditions,
including the registration of the shares of Toucan Mining pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). Toucan Mining
had filed with the Securities and Exchange Commission a registration statement
on Form 20-F to register its shares under the Exchange Act but had not completed
the registration process. In light of the Company's need to dispose of its
mining interest (except for the retained ordinary shares of Minmet plc and
certain warrants to subscribe for additional ordinary shares of Minmet plc) in a
timely
F-6
<PAGE>
AUTHORISZOR INC
(A DEVELOPMENT STAGE ENTERPRISE)
fashion in order to be able to pursue its current internet security business,
the Company determined to sell Toucan Mining rather than completing the
registration process and pursuing the proposed spin-off of Toucan Mining.
On January 28, 2000, the Company completed the sale (the "sale") of all of the
share capital of Toucan Mining for an aggregate consideration of $809,750
((pound)500,000). The sale of Toucan Mining was made to Golden Ridge Group
Limited, a company registered in the British Virgin Islands, pursuant to a Share
Sale Agreement, dated January 28, 2000 ( the "Agreement").
On the same date, and prior to the aforementioned sale of Toucan Mining, Toucan
Mining transferred to the Company for a consideration of (pound)1.00 the
beneficial interest in 2 million ordinary shares, (the "Minmet Shares"). The
Minmet Shares cannot be sold by the Company without the consent of Minmet plc
until January 6, 2001. In addition, Toucan Mining transferred to the Company for
a consideration of (pound)1.00 warrants to subscribe for a further 7.7 million
ordinary shares of Minmet plc at an exercise price of (pound)0.08 (the "Warrant
Shares"). The Company is not contractually restricted from selling the Warrant
Shares.
Accordingly, at the time of the Sale, the assets of Toucan Mining consisted
primarily of certain mining claims in Brazil, the right to acquire certain
additional mining claims in Brazil, and 8,030,000 shares of Minmet plc, 8
million shares of which cannot be sold without the consent of Minmet plc until
January 6, 2001.
At December 31, 1999 the investment in subsidiary held-for-sale is carried at
the lower of cost or market.
NOTE E - INTANGIBLE ASSETS
On July 22, 1999 the Company acquired the unregistered intellectual property
rights to the Authoriszor computer software from Messrs James Jackson and David
Wray, Directors of the Company and David Blanchfield, Director of Authoriszor
Limited for consideration of $30,000 ((pound)19,032).
NOTE F - GRANT OF STOCK OPTIONS AND STOCK TRANSACTIONS
In October 1999, the Authoriszor Inc. 1999 Stock Plan (the "Plan") was ratified
by the Company's Board of Directors. Pursuant to the Plan, the Company may grant
Incentive Stock Options to any employee, officer or director of the Company or
of any parent or subsidiary of the Company and may grant Non-qualified Stock
Options to any person eligible to receive Incentive Stock Options, and also to
consultants or advisors of the Company or its subsidiaries. The maximum number
of shares that may be subject to Options and issued under the Plan is 1,000,000
shares of Common Stock. As of December 31, 1999, individuals have been granted
options to acquire 282,214 shares of Common Stock that vest periodically through
January 2008. The options have been granted at prices ranging from $2.00 to
$4.67.
The Company has entered into Stock Option Agreements outside of the Plan. As of
December 31, 1999, individuals have been granted options to acquire 480,000
shares of Common Stock that vest periodically through October 2002. The options
have been granted at prices ranging from $1.00 to $3.00.
In August 1999, the Company entered an agreement with a consultant wherein the
consultant is to be issued 120,000 shares of common stock for services. At
December 31, 1999, 100,000 shares had been earned through services rendered.
Expense equivalent to the trading value of the shares of common stock at the
point in time when the shares were earned has been recorded at $406,600 and is
included in professional fees. The 100,000 shares have been reflected as being
issued in the Statement of Stockholders' Equity and Earnings per share
calculation. The additional 20,000 shares were earned by the consultant in
January 2000.
In October 1999, the Company repaid a $41,415 ((pound)25,000) loan from an
employee/director with $16,566 ((pound)10,000) cash consideration and 15,000
shares of Common Stock at a 20% discount from the market price at the date of
the transaction. Compensation cost of $6,600 was recorded and is included in
administrative expenses.
<PAGE>
AUTHORISZOR INC
(A DEVELOPMENT STAGE ENTERPRISE)
In December 1999, warrants were exercised by unrelated parties to purchase
436,000 shares of Common Stock. Each of the warrants had original exercise
prices of $1.50. As an incentive to the holders of the warrants to exercise
their warrants, the Company reduced the exercise price from $1.50 to $1.00 if
the warrants were exercised prior to December 20, 1999. Each of the warrants
were exercised by December 20, 1999 and the shares of common stock have been
reflected as being issued in the Statement of Stockholders' Equity and Earnings
per share calculation. The trading value of the shares of common stock at the
date of agreement was $6.38. The difference between the trading value and the
new exercise price multiplied by the 436,000 shares amounted to $2,345,680 and
has been recorded as a financing cost in the current period.
F-8
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
The following description of "Management's Discussion and Analysis or
Plan of Operation" constitutes forward- looking statements for purposes of the
Securities Act of 1933, as amended (the " Securities Act" ), and the Securities
Exchange Act of 1934, as amended (the " Exchange Act"), and as such involves
known and unknown risks, uncertainties and other factors that may cause the
actual results, performance or achievements of the Company to be materially
different from future results, performance or achievements expressed or implied
by such forward-looking statements. The words "expect," "estimate," anticipate,"
"predict," "believes," "plan," "seek," "objective" and similar expressions are
intended to identify forward-looking statements. Important factors that could
cause the actual results, performance or achievement of the Company to differ
materially from the Company's expectations include the following:
o one or more of the assumptions or other cautionary factors discussed in
connection with particular forward-looking statements or elsewhere in
this Form 10-QSB prove not to be accurate;
o the Company is unsuccessful in securing sales through its anticipated
sales and marketing efforts;
o errors in cost estimates and cost overruns;
o the Company's inability to obtain financing for general operations
including the marketing of the Company's products;
o non-acceptance of one or more products of the Company in the market-
place for whatever reason;
o the Company's inability to supply any product to meet market demand;
o generally unfavorable economic conditions that would adversely effect
purchasing decisions by distributors, resellers or end-users;
o development of a similar competing product at a similar price point;
o the inability to successfully integrate one or more acquisitions, joint
ventures or new subsidiaries with the Company's operations (including
the inability to successfully integrate businesses that may be diverse
as to type, geographic area, or customer base and the diversion of
management's attention among several acquired businesses) without
substantial costs, delays, or other problems;
o if the Company experiences labor and/or employment problems such as the
loss of key personnel, inability to hire and/or retain competent
personnel, etc.;
o if the Company experiences unanticipated problems and/or force majeure
events (including but not limited to accidents, fires, acts of God
etc.), or is adversely affected by problems of its suppliers, shippers,
customers or others;
o a slowing of the growth of the acceptance and use of the Internet as a
source of information and a vehicle for commerce and business;
o if the Company encounters difficulties in expanding and conducting
business in foreign markets;
o if larger and more established competitors successfully employ their
greater financial, marketing and sales resources, name recognition,
customer contacts and/or relationships with business and technology
partners to gain significant advantages over the Company; and/or
o the risk factors set forth in the Company's Form 10-QSB for the quarter
ended June 30, 1999.
All written or oral forward-looking statements attributable to the
Company are expressly qualified in their entirety by such factors. The Company
undertakes no obligation to publicly release the result of any revisions to
these forward-looking statements that may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
1
<PAGE>
The following discussion should be read in conjunction with the
Consolidated Financial Statements, including the notes thereto.
Review of Operations
The Company is a provider of a patent-pending security solution that
secures corporate Web-related information while enabling businesses to provide
secure access to their corporate Web Site and Applications and to conduct secure
communications over computer networks and the Internet. The Company's products
and processes enable a corporation to provide secure access to the information
on its Web Server to its customers, suppliers, employees and public visitors
from the Internet, according to their pre-determined security profile.
The Company believes that its solution is innovatively different from
any current security solution available today. The Company's solution provides
security by securing a customer's Website, corporate information assets and
contents off- line, thereby making this information completely inaccessible,
except through the Authoriszor Protected Server. This eliminates any direct
contact between the requestor and the corporate information assets.
The benefit of the Authoriszor product suite is that it has been
designed to provide an added dimension of security to existing security
products, such as firewalls, virtual private networks, encryption, security
tokens, smart cards and biometrics. Customer investments in these other security
technologies can be retained.
As reported in a Form 8-K filed with the Securities and Exchange
Commission on August 6, 1999 and in order to begin its operations as an
Internet-based company, the Company, which was previously conducting operations
as a mineral development company, on July 22, 1999 acquired Authoriszor Ltd.,
United Kingdom Internet-based company. Following this acquisition, the name of
the Company was changed to Authoriszor Inc., and the trading symbol for the
Company's common stock on the OTC Bulletin Board was changed to "AUOR."
The principal elements of the Company's strategy to achieve a leading
position in the worldwide electronic security solutions market are as follows:
Technological leadership. The Company believes that it offers one of
the most innovative and best Web security solutions available in the market
today. The Company intends to maintain this technological lead by devoting
substantial resources to product research and development, and, if appropriate,
by acquiring new products and technologies. In addition, the Company intends to
increase the current functionality of its solutions which management of the
Company anticipates will create further sales opportunities and additional
technological barriers for others. The Company will continue to focus on open,
flexible and scalable solutions while broadening the scope of its electronic
security solutions.
Global presence. The Company intends to be a leading provider of Web
security solutions to large enterprises in Europe and North America and other
high growth markets by expanding its sales and marketing and support
organizations. To this end, the Company has increased its staff to 17 employees,
including Richard A. Langevin, the Company's Chief Executive Officer, President
and Interim Chief Financial Officer. See Part II. Item 5. Other Information in
this Form 10-QSB for more information. The Company also intends to create a
network of resellers, systems integrators and other security application vendors
as clients and sales channel partners of the Authoriszor products.
Target new industry sectors and commercial certificate authorities. The
Company plans to continue to focus its sales and marketing efforts on industries
where Web security is essential. These markets are currently financial services,
healthcare services, government branches and large enterprises. The Company
intends to target leading companies in these markets and will also target
digital certificate service providers, known as commercial certificate
authorities or trusted third parties.
Develop strategic partnerships and customer relationships. The Company
is working to establish strategic relationships with leading partners to broaden
and accelerate the market acceptance of its Web security solutions. It will
strategically target relationships with companies and other organizations that
it expects to play a critical role in the future of electronic business. These
relationships should facilitate broad market acceptance of the Company's
electronic security solutions and management believes that they will help
achieve the Company's goal of becoming a leading global provider of Web security
products and services.
2
<PAGE>
Pursue selective growth opportunities. The Company intends to grow
through both organic expansion as well as through selected acquisitions which
management of the Company considers will accelerate the product, customer and
geographic penetration.
In January 2000, the Company secured a contract with Univentures
International Limited to implement a secure Web application for use throughout
nine universities located in Northern England.
The Company's business plan and business are described in more detail
in the Company's Form 10-QSB for the quarter ended June 30, 1999. Certain
specific activities implementing the Company's business plan are set forth in
Part II. Item 5. Other Information in this Form 10-QSB.
Results of Operations
The following is a discussion of the results of operations for the
quarter ended December 31,1999 compared with the quarter ended December 31,
1998.
The operating loss increased to $3,549,287 for the three months ended
December 31, 1999 compared to income from operations of $5,554 in 1998. This
increase was attributable primarily to financing costs of approximately
$2,350,000 incurred when the Company agreed to reduce the exercise price on
436,000 warrants for the Company's common stock held by individuals. The
original exercise price of the warrants was $1.50. As an incentive to the
holders of the warrants to exercise their warrants, the Company reduced the
exercise price from $1.50 to $1.00 if the warrants were exercised by December
20, 1999. Each of the warrants were exercised by December 20, 1999. Other
expenses incurred during this period are a result of the Company entering into
an agreement with a consultant wherein the consultant is to be issued 120,000
shares of the Company's Common Stock for services rendered. At December 31,
1999, 100,000 shares had been earned and expenses equivalent to the trading
value of the shares of Common Stock at the point in time when the shares were
earned has been recorded at approximately $407,000. The remaining increase
between the two periods is attributable to costs incurred in setting up the
Company's development center, preparing for the opening of the sales office,
recruiting employees, legal and professional fees in connection with the
recapitalization transaction (Note B to the Financial Statements) and costs in
connection with being a public company.
The following is a discussion of the results of operations for the six
months ended December 31, 1999.
The Company did not have any sales in the six months ended December 31,
1999 compared to $32,682 for the comparative period in 1998.
In the six months ended December 31, 1999, the Company recognized a
gain on the sale of investment securities in the amount of $199,279. These
securities had been received in connection with the aforementioned
recapitalization transaction.
In January 2000, the Company agreed to reduce the exercise price on
options held by certain individuals, including Robert P. Jeffcock, former
officer and current Director of the Company, Robert A. Pearce, former officer
and Director and L. Clark Arnold, former officer and Director, from the original
exercise price of $1.00 to a new exercise price of $0.66 provided the option
holders exercised their options on or prior to 31 January 2000. Each of the
individuals exercised their options by the above deadline. The Company will
record financing costs of approximately $2,965,000, which will be reflected in
the quarter ended March 31, 2000.
Financing Management's Plan of Operation
Following the acquisition of Authoriszor Ltd. in July 1999, the Company
had approximately $1,600,000 in cash and other liquid assets, including
securities of Minmet Plc. ("Minmet"). Following the acquisition of Authoriszor
Ltd., the Company sold in the quarter ended September 30, 1999 10.5 million
Minmet shares with Minmet's consent at the price of 8 pence (sterling) per
share. These transactions resulted in net cash proceeds to the Company of
approximately $1,360,000. Pursuant to its agreement with Minmet, the Company may
not sell any of its remaining Minmet shares until January 6, 2001 without
Minmet's prior approval; provided, however, that Minmet plc has agreed that the
Minmet Shares may be placed through Minmet plc's brokers with Minmet plc's
consent at any time, and Minmet plc has undertaken to act reasonably in respect
of any requests with regard to such sales of Minmet shares.
3
<PAGE>
The Company has provided loans to Authoriszor Ltd. through December 31,
1999 of approximately $1,200,000.
In December 1999, the Company engaged Beeson Gregory of London, England
as its financial advisor and investment banker to raise a substantial amount of
capital for the Company in a placement in Europe and the United Kingdom. To
raise funds on a short term basis to permit the Company to continue its
operations and to make a loan to WRDC Limited ("WRDC") in the principal amount
of $160,800 as part of its investment agreement with WRDC, the Company
considered various alternatives. The Company proposed to Minmet Plc that the
Company be permitted to sell additional Minmet shares, but Minmet refused to
consent to such further sales. The Company sought to raise additional short term
capital by offering an incentive to holders of warrants to purchase 436,000
shares of common stock to exercise such warrants in December by reducing the
exercise price of such warrants from $1.50 to $1.00 per share if the warrants
were exercised by December 20, 1999. The warrant holders exercised their
warrants by December 20, 1999. See Part II. Item 2. Changes in Securities.
Similarly, in January 2000, the Company offered a similar incentive to holders
of options to purchase 350,000 shares of common stock by reducing the exercise
price of such options from $1.00 to $.66 per share if such stock options were
exercise by January 31, 2000. All of such stock options were exercised by
January 31, 2000. See Part II, Item 5. Other Information
In addition, in January 2000 the Company sold the stock of its subsidiary
Toucan Mining Plc (formerly Toucan Mining Limited) for $809,750 ((pound)500,000)
in cash. This transaction was undertaken because of the Company's need to
dispose of its mining interests (except for the retained Minmet securities) in a
timely fashion to be able to pursue its current Internet security business and
to facilitate the proposed placement that was being arranged by Beeson Gregory.
Prior to the sale, Toucan Mining Plc transferred to the Company warrants to
purchase 7.7 million shares of Minmet Plc at an exercise price of 8 pence
(sterling) per share and 2 million Minmet Shares. The shares of Minmet Plc to be
acquired on exercise of the warrants are not subject to any contractual
restrictions with Minmet Plc; however, the Minmet Shares cannot be sold until
January 2001 without the consent of Minmet Plc. See Part II. Item 5. Other
Information.
In February 2000, the Company placed (the "Placement") 2,727,273 shares
of common stock ("Placing Shares") at $11.00 per share. The Placement was made
pursuant to Regulation S under the Securities Act in the United Kingdom and
Europe. The gross proceeds of the Placement were $30,000,003. In addition, the
Company granted an option to Beeson Gregory, the placement agent, to purchase
136,363 shares of common stock at an exercise price of $11.00 per share for a
term of two years. The Company has granted certain registration rights to the
purchasers and future holders of the Placing Shares. See Part II. Item 5. Other
Information.
Beeson Gregory received a commission of 5% of the total gross proceeds. The
Company has also appointed Beeson Gregory as its financial advisor and has
agreed to pay Beeson Gregory an annual financial advisory fee of $40,000
((pound)25,000). The Company estimates that the proceeds of the offering, net of
expenses and commissions, will result in cash available to the Company of
approximately $28,335,000. The Company intends to use such net proceeds to
provide working capital to the Company and its subsidiaries and to fund
strategic investments, acquisitions and research and development.
Subsequent to completion of the Placement, the Company, through Authoriszor
Holdings Limited, has acquired 25.1% of the stock of WRDC for an aggregate
subscription price of $604,800 ((pound)378,000) . In addition, on making the
subscription, the Company made a loan in the principal amount of $195,200
((pound)122,000) to WRDC, repayable (with interest) over a five year period
beginning on the second anniversary date of the first drawdown. The Company has
converted the terms of the existing interest free loan to WRDC in the principal
amount of $160,800 ((pound)100,000) to similar terms. The Company also has the
option to purchase the remaining 74.9% of WRDC at a pre-determined price, over
the next five years. See Part II. Item 5. Other Information.
As the result of these transactions, management considers that the cash
resources of the Company are adequate for its working capital requirements for
approximately the next twelve months.
Year 2000 Compliance
The Year 2000 issue results from the historical use in computer
software programs and operating systems of a two digit number to represent the
applicable year. Marketplace concerns arose as to whether certain software and
hardware would fail to properly function when confronted with dates that contain
"00" as a two digit year. To address the potential risk of disruption of
operations, the Company reviewed its own software products and conducted an
impact analysis. The Company determined that all of the Company's products were
designed to record, store, and process calendar dates occurring before and after
January 1, 2000 with the same full-year accuracy (i.e. four numeric characters
instead of two) and the impact analysis identified no major risk of failure
within the Company's in-house computer systems, which include the accounting and
management information systems.
4
<PAGE>
To date, the Company has not experienced any material problems relating
to the Year 2000 issue. However, the Company has not yet experienced all factors
(such as the February leap year date and future shipments from suppliers) that
might have Year 2000 readiness implications. The Company will continue to
monitor and evaluate internal Year 2000 compliance.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities.
(a) None
(b) None
(c) On October 6, 1999, the Company repaid a $41,415 ((pound)25,000) loan from
James L. Jackson with $16,566 ((pound)10,000) in cash consideration and
15,000 shares of the Company's common stock, $.01 par value (the "Common
Stock"), at a 20% discount from the then current market price. James
Jackson subsequently transferred 7,500 shares of the Common Stock to an
assignee. These shares of Common Stock were issued pursuant to the
exemption from registration under the Securities Act of 1933, as amended
(the "Securities Act") set forth in Section 4(2) of the Securities Act.
In December 1999, (i) Zalcany Limited exercised a warrant to purchase
124,667 shares of Common Stock at an exercise price of $1.00 per share;
(ii) Zalcany Limited, as nominee for Richard Harris, exercised a warrant to
purchase 70,000 shares of Common Stock at an exercise price of $1.00 per
share; (iii) Roy Williams exercised a warrant to purchase 68,000 shares of
Common Stock at an exercise price of $1.00 per share; (iv) Igor
Mousasticoshvily exercised a warrant to purchase 133,333 shares of Common
Stock at an exercise price of $1.00 per share; and (v) Mustardseeds Estates
Limited exercised a warrant to purchase 40,000 shares of Common Stock at an
exercise price of $1.00 per share. As an incentive to the holders of the
warrants to exercise their warrants, the Company reduced the exercise price
from $1.50 to $1.00 if the warrants were exercised prior to December 20,
1999. Certificates evidencing these shares have not yet been issued but the
shares are included in the number on the cover page indicating the total
number of currently issued and outstanding shares of Common Stock. These
shares of Common Stock will be issued by the Company pursuant to the
exemption from registration under the Securities Act set forth in Section
4(2) of the Securities Act.
The Company has agreed to issue 120,000 shares of Common Stock to a
consultant in compensation for services rendered. Certificates evidencing
these shares have not yet been issued and the shares are included in the
number on the cover page indicating the total number of currently issued
and outstanding shares of Common Stock. The shares of Common Stock will be
issued pursuant to the exemption from registration under the Securities Act
set forth in Section 4(2) of the Securities Act.
The Company has agreed to grant certain options (the "Options") to purchase
shares (the "Option Shares") of the Common Stock to certain employees of
the Company pursuant to the 1999 Stock Plan and to certain consultants,
officers and directors of the Company by separate agreements. See Part II.
Item 5. Other Information. It is contemplated that the 1999 Stock Option
Plan will be registered under the Securities Act on Form S-8.
5
<PAGE>
Item 3. Default Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information.
The following significant events have occurred during the quarter ended
December 31, 1999 or subsequent thereto:
1. Effective October 1, 1999, Sir Malcolm Rifkind was appointed as a
consultant to Authoriszor Limited. Pursuant to his Consulting Agreement,
Sir Malcolm Rifkind was granted stock options to acquire 200,000 shares of
the Common Stock at an exercise price of $1.00 per share. On January 12,
2000, Sir Malcolm Rifkind was appointed to the Company's Board of
Directors.
2. On December 1, 1999, Barry Jones was appointed as the Marketing Director of
Authoriszor Limited and was also appointed to the Board of Directors of
Authoriszor Ltd. In connection therewith, Barry Jones was granted stock
options to acquire 131,214 shares of the Common Stock at an exercise price
of $2.00 per share.
3. On December 1, 1999, Raymond Seitz, former United States ambassador to the
United Kingdom and currently Vice Chairman - Lehman Brothers Europe, was
named Chairman of the Board of the Company. The Company granted Mr. Seitz
stock options to acquire 200,000 shares of the Common Stock at an exercise
price of $3.00 per share.
4. At a meeting of the Company's Board held on January 12, 2000, Richard A.
Langevin was elected to the Board and his appointment as Chief Executive
Officer and President of the Company was ratified. Mr. Langevin had
replaced Robert Jeffcock as Chief Executive Officer and President of the
Company effective January 1, 2000. Mr. Langevin is based in the Boston,
Massachusetts area at the Company's new headquarters located at 1 Justin
Road, Natick, Massachusetts 01760-5565. Mr. Langevin entered into an
Executive Employment Agreement with the Company, dated as of January 1,
2000, under which he has been appointed Chief Executive Officer of the
Company. The term of this Agreement is four (4) years, expiring December
31, 2003, and terminable immediately for cause by either the Company or Mr.
Langevin. Mr. Langevin is entitled to compensation of (i) a base salary of
$225,000 (the "Salary"); (ii) a minimum annual bonus of $125,000, payable
in pro rata quarterly increments, provided that certain quarterly
Management-By-Objectives targets are achieved (the "Bonus"); and (iii)
stock options to purchase a cumulative total of 500,000 shares of the
Common Stock in increments of (A) 200,000 shares exercisable on or after
January 1, 2001, (B) 100,000 shares exercisable on or after January 1,
2002, (C) 100,000 shares exercisable on or after January 1, 2003 and (D)
100,000 shares exercisable on or after January 1, 2004, all at an exercise
price of $6.75 per share (the "Langevin Options"). In the event of a sale
of the Company during the term of the Agreement, all Salary payments and
Bonus payments under the Agreement would become immediately due and payable
and all of the Langevin Options would become immediately exercisable. If
not terminated due to certain other events listed, each of the Langevin
Options terminates on December 31, 2009.
5. Robert P. Jeffcock resigned from the offices of President and Secretary of
the Company and remained a Director of the Company. Effective January 28,
2000, James L. Jackson was elected Vice President and Secretary of the
Company.
6. Andrew M. Cussons was appointed as Financial Director of Authoriszor
Limited and commenced his duties on January 1, 2000.
7. Pursuant to an agreement, dated January 12, 2000, between the Company and
Authoriszor Holdings Limited ("AHL"), the Company transferred its entire
holding of shares in Authoriszor Limited to AHL. The consideration payable
for this transfer was the issue and allotment of 100,000 fully paid shares
in AHL to the Company.
6
<PAGE>
8. Robert A. Pearce and L. Clark Arnold resigned from the Company's Board of
Directors and from their offices.
9. In February 2000, the Company placed (the "Placement") 2,727,273 shares of
the Common Stock the ("Placing Shares") at $11.00 per share. The Placement
was made pursuant to Regulation S under the Securities Act in the United
Kingdom and Europe. The gross proceeds of the Placement were $30,000,003.
In addition, the Company granted an option to Beeson Gregory, the placement
agent, to purchase 136,363 shares of common stock at an exercise price of
$11.00 per share for a term of two years. Beeson Gregory also received a
commission of 5% of the total gross proceeds, the reimbursement of certain
of its expenses, and has been appointed as the Company's financial advisor
at an annual advisory fee of $40,000 ((pound)25,000). The Placing Agreement
contained warranties, representations, indemnities, undertakings, covenants
and other agreements on the part of the Company and certain of the
Directors. In connection with the Placement, the Directors of the Company
entered into an agreement with the Company and Beeson Gregory on January
28, 2000 whereby each Director agreed that, except in certain specified
events, he will not, without the prior written consent of Beeson Gregory,
dispose of any of his shares of Common Stock, including shares that are the
subject of options or warrants during the six month period following the
date of this agreement.
The offering of such securities in the Placement has not been registered
under the Securities Act pursuant to Regulation S, and the shares were not
offered, sold, or delivered in the United States or for the account or
benefit of any United States Person (as such terms are defined in
Regulation S). Such securities may not be reoffered or resold in the United
States absent registration under the Securities Act or pursuant to an
applicable exemption from such registration requirements. Hedging
transactions in the common stock may not be engaged in unless in compliance
with the Securities Act.
10. The Company has agreed to grant certain registration rights to the holders
(the "Holders") of the Placing Shares pursuant to a Registration Rights
Agreement entered into at the completion of the Placement. The Registration
Rights Agreement provides that the Company shall prepare and shall file
with the Securities and Exchange Commission (the "SEC") as soon as
reasonably practicable, but in any event not later than that date which is
thirty calendar days after the completion of the Placement, a Registration
Statement (the "Reoffer Registration Statement") with respect to the offer
and sale of the Placing Shares by the Holders from time to time, in
brokerage transactions, over a stock exchange, utilizing the facilities of
an inter-dealer quotation system, in an underwritten offering or in
privately negotiated off-market transactions. The Company shall cause the
Reoffer Registration Statement to become effective under the Securities Act
not later than that date which is sixty days after the Reoffer Registration
Statement is filed; provided that if the placement agent of the Placing
Shares determines, such determination to be made reasonably, that the
Company is acting in good faith to cause the Reoffer Registration Statement
to be declared effective, such date will be extended to ninety days after
filing thereof.
The Company is obligated to use its best efforts to keep the Reoffer
Registration Statement continuously effective in order to permit the
Prospectus forming part thereof to be usable by Holders for a period of two
years from the date the Reoffer Registration Statement is declared
effective by the SEC.
If, (i) for any reason the Reoffer Registration Statement is not filed with
the SEC or the Reoffer Registration Statement is not declared effective, in
each instance, within the time periods described above or (iii) the Reoffer
Registration Statement ceases to be effective so that the Prospectus
contained therein is not usable by the Holders during the time period
described above; or (iii) any of the securities remain "restricted
securities" as defined in Rule 144 promulgated by the SEC under the
Securities Act following the time when the Reoffer Registration Statement
is effective, then if any holder so requests the following will apply:
The Company shall as promptly as practicable (but in no event not more than
30 days after so requested by any holder) file with the SEC and thereafter
shall cause to be declared effective under the Securities Act, a
registration statement (which may be at the election of the holder so
requesting a "shelf" registration statement) relating to the offer and sale
of the Placing Shares by the requesting holder from time to time in
accordance with the methods of distribution elected by such holder and set
forth in such registration statement; provided, that if permitted under the
Securities Act and by the SEC, the Company may file a pre- or post
effective amendment or supplement to the Reoffer Registration Statement if
such action would completely fulfil its obligations.
The Company shall bear all expenses incurred in connection with any
registration statement and will reimburse the holders whose Placing Shares
are included in any registration statement for the reasonable fees and
disbursements of one firm or counsel (in addition to one local counsel in
each relevant jurisdiction) designated by the holders of a majority of
shares included in such registration statement to act as counsel for
Holders in connection therewith up to $20,000.
In the event that the Company fails to comply with any provision of the
Registration Rights Agreement, the Company shall within thirty days after
the date on which the Company was required to take any action or, if such
date is undeterminable, the date of the receipt by the Company of a demand
from any holder (in either case, the
7
<PAGE>
"Initial Date"), purchase from each Holder all securities which could have
been included in any registration statement held by each respective holder
for a purchase price (the "Purchase Price") equal to the product of (a) the
average Market Value Per Share (as defined below) during the period
beginning on the Initial Date and ending on the date of payment of the
Purchase Price multiplied by (b) the number of securities being purchased
from such holder. The Company shall also pay all reasonable costs
(including all transfer taxes, stamp duty or SDRT) and fees associated with
such purchase by the Company. Each holder may, in its sole discretion,
waive its right, in whole or in part, to have the Company repurchase such
securities held by him and retain the ownership of such securities. For
purpose of calculating the Purchase Price, "Market Value Per Share" at any
date shall be (i) the highest reported sale price on that date with respect
to each type of security in question listed on an international securities
exchange or admitted to unlisted trading privileges on such an exchange or,
if applicable, (ii) the highest reported sale price on that date with
respect to each type of security in question quoted or traded on the NASD
OTC Bulletin Board or NASDAQ National Market System ("NASDAQ NMS") or the
European Association of Securities Dealers Automated Quotation System
("EASDAQ") or, if applicable, (iii) if no such sale is made on such day,
the mean of the closing bid and asked prices for such day on such exchange
or reported by NASD OTC Bulletin Board or NASDAQ NMS or EASDAQ.
In the event that the resale of the Placing Shares pursuant to the Reoffer
Registration Statement is not effected pursuant to an underwritten
offering, certain holders of piggyback registration rights with respect to
the Company's securities may be entitled to include their shares of Common
Stock in the Reoffer Registration Statement.
11. On January 28, 2000, the Company completed the sale of all of the share
capital of Toucan Mining Plc ("Toucan Mining"), a wholly owned subsidiary
of the Company, for an aggregate consideration of $809,750
((pound)500,000). The sale of Toucan Mining was made to Golden Ridge Group
Limited, a company registered in the British Virgin Islands, pursuant to a
Share Sale Agreement, dated January 28, 2000. On the same date, and prior
to the aforementioned sale of Toucan Mining, Toucan Mining transferred to
the Company for a consideration of(pound)1.00 the beneficial interest in 2
million ordinary shares of Minmet plc (the "Minmet Shares"). The Minmet
Shares cannot be sold by the Company without the consent of Minmet plc
until January 6, 2001. In addition, Toucan Mining transferred to the
Company for a consideration of(pound)1.00 warrants to subscribe for a
further 7.7 million ordinary shares of Minmet plc at an exercise price
of(pound)0.08 (the "Warrant Shares"). The Company is not contractually
restricted from selling the Warrant Shares. The Company had previously
announced a spin-off of Toucan Mining to its stockholders, subject to the
satisfaction of certain conditions, including the registration of the
shares of Toucan Mining pursuant to the Securities Exchange Act of 1934, as
amended. Toucan Mining had filed with the Securities and Exchange
Commission a registration statement on Form 20-F to register its shares
under the Exchange Act but had not completed the registration process. In
light of the Company's need to dispose of its mining interests (except for
the retained Minmet Shares and Warrant Shares) in a timely fashion in order
to be able to pursue its current Internet security business, the Company
determined to sell Toucan Mining rather than completing the registration
process and pursuing the proposed spin-off of Toucan Mining.
12. On January 27, 2000, AHL, a wholly owned subsidiary of the Company, entered
into an agreement (the "WRDC Agreement") pursuant to which AHL subscribed
for 840,000 "D" Ordinary Shares of one penny each in WRDC Limited ("WRDC"),
a company organized pursuant to United Kingdom law, for an aggregate
subscription price of $604,800 ((pound)378,000), conditioned upon the
completion of the Placement prior to April 30, 2000. The WRDC Agreement
contains the terms of an option pursuant to which AHL has the right to
acquire the balance of the issued share capital of WRDC after October 31,
2001, at a price based on the revenue and profits of WRDC for the previous
accounting period at the relevant time. In addition, on making the
subscription, the Company made a loan of $195,200 ((pound)122,000) to WRDC,
repayable (with interest) over a five year period beginning on the second
anniversary date of the first drawdown, and Authoriszor Limited had
converted the terms of an existing interest free loan to WRDC for $160,800
((pound)100,000) to similar terms. WRDC offers professional services in
information technology focused on core technologies of messaging,
directories, network security and data communications. Technology underpins
all WRDC projects, ranging from strategic and operational consultancy,
through the design and implementation of systems integration projects, to
the provision of fully managed information technology services.
13. In December 1999, the Company entered into a letter of intent to acquire an
application service provider in the United Kingdom. The letter of intent
contained certain conditions which had to be met in order to complete the
contemplated arrangements and, as these conditions were not met by January
31, 2000, the Company withdrew from the contemplated transaction.
8
<PAGE>
14. The Authoriszor Inc. 1999 Stock Plan (the "Plan") was ratified by the
Company on October 4, 1999. Pursuant to the Plan, the Company may grant
Incentive Stock Options to any employee, officer or director of the Company
or of any parent or subsidiary of the Company, and may grant Non-qualified
Stock Options to any person eligible to receive Incentive Stock Options,
and also to consultants or advisors of the Company or its subsidiaries. The
maximum number of shares that may be subject to Options and issued under
the Plan is 1,000,000 shares of Common Stock. The following table describes
Options that the Company has granted or agreed to grant under the Plan:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
No. of Option Vesting Vesting
Name Options Exercise Date Start Date End Vesting Conditions
Price
Andrew 25,000 $2.50 1/1/2001 1/1/2008 Up to a maximum of 6,250 per year
Llewellyn starting on the vesting date.
Christopher 25,000 $4.67 12/1/2000 12/1/2007 Up to a maximum of 6,250 per year
Noble starting on the vesting date.
Clifford Gladwin 25,000 $3.45 12/1/2000 12/1/2007 Up to a maximum of 6,250 per year
starting on the vesting date.
Frank 25,000 $2.50 1/1/2001 1/1/2008 Up to a maximum of 6,250 per year
Majkowski starting on the vesting date.
Shaun Summers 1,000 $3.00 12/1/2000 12/1/2007 Up to a maximum of 250 per year
starting on the vesting date.
Andrew 25,000 $6.75 1/1/2001 12/31/2008 Up to a maximum of 6,250 per year
Cussons starting on the vesting date.
Andrew 75,000 $6.75 4/1/2001 4/1/2008 Options vest subject to certain
Cussons performance conditions up to a
maximum of 18,750 per year.
Andrew Cole 25,000 $7.10 2/1/2001 2/1/2008 Up to a maximum of 6,250 per year
starting on the vesting date.
Barry Jones 131,214 $2.00 10/1/2000 9/30/2007 Up to a maximum of 25% per year
starting on the vesting date.
David Blain 25,000 $10.31 2/1/2001 2/1/2008 Up to a maximum of 6,250 per year
starting on the vesting date.
Ian 40,000 $10.31 2/1/2001 2/1/2008 Up to a maximum of 10,000 per year
Weatherhogg starting on the vesting date.
Ian Joyce 2,000 $10.31 2/1/2001 2/1/2008 Up to a maximum of 500 per year
starting on the vesting date.
Shaun Summers 1,500 $10.31 2/1/2001 2/1/2008 Up to a maximum of 375 per year
starting on the vesting date.
Paul 2,500 $10.31 2/1/2001 2/1/2008 Up to a maximum of 625 per year
Leivesley starting on the vesting date.
John Pitt 2,500 $10.31 2/1/2001 2/1/2008 Up to a maximum of 625 per year
starting on the vesting date.
</TABLE>
15. The Company has entered into Stock Option Agreements outside of the Plan
with certain individuals in the fiscal quarter ending December 31 and
thereafter, the details of which are described below:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
No. of Option Vesting Vesting
Name Options Exercise Date Start Date End Vesting Conditions
Price
Henry 20,000 $3.00 11/1/99 9/30/2002 None
Bellingham+
Richard 20,000 $3.00 11/1/99 9/30/2002 None
Roscoe+
Richard A. 500,000 $6.75 1/1/2001 12/31/2009 Shares vest on schedule detailed in
Langevin* paragraph 4 of this Item 5.
Raymond 200,000 $3.00 11/1/99 10/30/2002 None
Seitz*
Beeson 136,364 $11.00 2/11/2000 2/1/2002 None
Gregory
Limited+
</TABLE>
9
<PAGE>
*An employee, director or officer of the Company.
+Advisor or consultant to the Company.
16. On January 10, 2000, the Company filed a Registration Statement on Form S-8
covering the issuance of 350,000 shares of Common Stock underlying options
held by David Carmichael, L. Clark Arnold, Robert P. Jeffcock and Robert A.
Pearce (the "Option Holders") pursuant to certain stock option agreements
between these individuals and the Company. As an incentive to the holders
of these options to exercise their options on or before January 31, 2000,
the Company reduced the exercise price from $1.00 per share to 66.66 cents
per share of Common Stock, provided that the Option Holders exercised their
options on or prior to January 31, 2000. Each Option Holder exercised in
January 2000 at the discounted exercise price.
Item 6. Exhibits and Reports on Form 8-K.
EXHIBITS
The following exhibits are furnished in accordance with Item 601 of Regulation
S-B.
<TABLE>
<S> <C>
+10.1* Executive Employment Agreement, dated as of January 1, 2000,
by and between the Company and Richard A. Langevin. (Exhibit 10.1)
+10.2* Authoriszor Inc. 1999 Stock Plan. (Exhibit 10.2)
+10.3* Form of Agreement under the 1999 Stock Plan and Schedule of
Agreements (Exhibit 10.3)
+10.4* Consulting Agreement, dated November 12, 1999, by and among
the Company and The Honorable Raymond G H Seitz (Exhibit 10.4)
+10.5* Consulting Agreement, dated September 23, 1999, by and among
the Company and The Rt. Hon. Sir Malcolm Rifkind KCMG QC
(Exhibit 10.5)
+10.6* Stock Option Agreement, dated as of September 23, 1999, by and
between the Company and Sir Malcolm Rifkind. (Exhibit 10.6)
10.7* Placing Agreement, dated as of January 28, 2000, by and among
the Company, Beeson Gregory Limited and certain Directors of
the Company. (Exhibit 10.7)
10.8* Supplemental Placing Agreement, dated as of February ___, 2000,
by and among the Company, Beeson Gregory Limited and certain
Directors of the Company. (Exhibit 10.8)
10.9* Registration Rights Agreement, dated February 16, 2000, by
and between the Company and Beeson Gregory Limited. (Exhibit 10.9)
10.10* Lock-up Agreement, dated January 2000, by and among the Company,
Beenon Gregory Limited and Raymond Seitz and Others. (Exhibit 10.10)
10.11* Deed of Covenant, dated as of February 22, 2000, by and among
Authoriszor Holdings Limited, WRDC Limited and certain persons
named in Schedule 1 to the Deed. (Exhibit 10.11)
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
10.12* Shareholders' Agreement, dated as of January 27, 2000, by
and among Authoriszor Holdings Limited, WRDC Limited, the
shareholders of WRDC Limited and the Company, relating to WRDC
Limited. (Exhibit 10.12)
10.13* Letter Agreement, dated February 22, 2000, by and between
Authoriszor Holdings Limited and WRDC Limited regarding credit
facility. (Exhibit 10.13)
10.14* Letter Agreement, dated February 22, 2000, by and between
Authoriszor Holdings Limited and WRDC Limited regarding credit
facility. (Exhibit 10.14)
10.18(a) Share Sale Agreement, dated as of January 28, 2000, by and
between the Company and Golden Ridge Group Limited. (Exhibit 2.1)
27* Financial Data Schedule. (Exhibit 27)
</TABLE>
- - - - ------------------
* Filed herewith
+ Compensation plan, benefit plan or employment contract or arrangement
(a) Incorporated by reference to the exhibit shown in parentheses from the
Company's Current Report on Form 8-K, filed on February 14, 2000 with
the Securities and Exchange Commission.
Reports on Form 8-K
1. The Company filed a Current Report on Form 8-K with the Securities and
Exchange Commission on December 15, 1999 reporting a change in the
Company's fiscal year end from December 31 to June 30.
2. On November 17, 1999, the Company filed an Amendment to the Current
Report on Form 8-K filed on August 6, 1999 with the Securities and
Exchange Commission providing certain financial statements related to
the Form 8-K filing.
3. The Company filed a Current Report on Form 8-K with the Securities and
Exchange Commission on February 14, 2000 describing the sale of Toucan
Mining Limited.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this Quarterly Report to be signed on
its behalf by the undersigned thereunto duly authorized.
AUTHORISZOR INC.
(Registrant)
Date: February 22, 2000 By: /s/ Richard A. Langevin
----------------------------------
Richard A. Langevin, President,
Chief Executive Officer and
Chief Financial Officer
(Principal Executive Officer and
Principal Financial and Accounting
Officer)
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INDEX TO EXHIBITS
<TABLE>
<S> <C>
Exhibit Description of Exhibit
10.1 Executive Employment Agreement, dated as of January 1, 2000,
by and between the Company and Richard A. Langevin. (Exhibit 10.1)
10.2 Authoriszor Inc. 1999 Stock Plan. (Exhibit 10.2)
10.3 Form of Agreement under the 1999 Stock Plan and Schedule of
Agreements (Exhibit 10.3)
10.4 Consulting Agreement, dated November 12, 1999, by and among
the Company and The Honorable Raymond G H Seitz (Exhibit 10.4)
10.5 Consulting Agreement, dated September 23, 1999, by and among
the Company and The Rt. Hon. Sir Malcolm Rifkind KCMG QC
(Exhibit 10.5)
10.6 Stock Option Agreement, dated as of September 23, 1999, by and
between the Company and Sir Malcolm Rifkind. (Exhibit 10.6)
10.7 Placing Agreement, dated as of January 28, 2000, by and among
the Company, Beeson Gregory Limited and certain Directors of
the Company. (Exhibit 10.7)
10.8 Supplemental Placing Agreement, dated as of February ___, 2000,
by and among the Company, Beeson Gregory Limited and certain
Directors of the Company. (Exhibit 10.8)
10.9 Registration Rights Agreement, dated February 16, 2000, by
and between the Company and Beeson Gregory Limited. (Exhibit 10.9)
10.10 Lock-up Agreement, dated January 2000, by and among the Company,
Beenon Gregory Limited and Raymond Seitz and Others. (Exhibit 10.10)
10.11 Deed of Covenant, dated as of February 22, 2000, by and among
Authoriszor Holdings Limited, WRDC Limited and certain persons
named in Schedule 1 to the Deed. (Exhibit 10.11)
10.12 Shareholders' Agreement, dated as of January 27, 2000, by
and among Authoriszor Holdings Limited, WRDC Limited, the
shareholders of WRDC Limited and the Company, relating to WRDC
Limited. (Exhibit 10.12)
10.13 Letter Agreement, dated February 22, 2000, by and between
Authoriszor Holdings Limited and WRDC Limited regarding credit
facility. (Exhibit 10.13)
10.14 Letter Agreement, dated February 22, 2000, by and between
Authoriszor Holdings Limited and WRDC Limited regarding credit
facility. (Exhibit 10.14)
27 Financial Data Schedule. (Exhibit 27)
</TABLE>
EXECUTIVE EMPLOYMENT AGREEMENT
This EXECUTIVE EMPLOYMENT AGREEMENT is made and entered into as of the
___ day of January, 2000, by and between Authoriszor Inc., a Delaware
corporation (hereafter the "Company"), and Richard A. Langevin, a resident of
the Commonwealth of Massachusetts (hereafter the "Executive").
COMPENSATION
1. The Company agrees to compensate the Executive on a salary basis at
the semi-monthly rate of $9,375 ($225,000 annually). The Executive's salary will
be reviewed by the Company's Board of Directors as of each January 1 occurring
during the term of this Agreement, taking into consideration the Executive's
performance and changes in competitive market conditions, and the Board may, in
its sole discretion, increase the Executive's base salary in such amount as the
Board may determine in its reasonable discretion. Both the Company and the
Executive acknowledge that such compensation and the compensation detailed in
Paragraphs 2, 3, 4, 5, 6, 7 and 8 of this Agreement is fair and adequate
compensation for the Executive's services, and for the mutual promises described
below.
2. The Company agrees to grant the Executive four (4) Nonqualified
Stock Options (collectively, the "Options" and individually, an "Option"),
pursuant to the terms of four (4) separate Stock Option Agreements, to purchase
a cumulative total of 500,000 shares of the Company's common stock, $.01 par
value (the "Company Common Stock"), in increments of (i) 200,000 shares
exercisable on or after January 1, 2001, (ii) 100,000 shares exercisable on or
after January 1, 2002, (iii) 100,000 shares exercisable on or after January 1,
2003, and (iv) 100,000 shares exercisable on or after January 1, 2004, all at an
exercise price of $6.75 per share, upon execution of this Agreement. Any
unvested Options will be void and shall not vest if (i) the Company terminates
this Agreement for "Cause," as defined in Paragraph 25 of this Agreement, (ii)
the Executive becomes physically or mentally disabled, as defined by 29 C.F.R.
Section 1630.2(g)(1), and cannot perform the essential functions of his
position, with reasonable accommodation, (iii) the death of the Executive, or
(iv) the expiration of the respective term of each Option.
3. In the event a Sale of the Company, as defined below, occurs during
the term of this Agreement, (a) all payments hereunder that would be payable
through the term hereof shall accelerate and become immediately due and payable,
including but not limited to then current base salary and bonus compensation
amounts as if the Company had achieved the Management-By-Objectives targets
hereunder, and (b) the Options shall automatically vest in full and become
immediately exercisable (collectively, the "Severance Compensation"). In the
event any payment or benefit due to the Executive under this Agreement
constitutes a payment or benefit in the nature of compensation that is made or
supplied to a "disqualified individual" as defined in Section 280G(c) of the
Internal Revenue Code of 1986 (a "Golden Parachute Payment"), such payment or
benefit shall be deferred and paid out by the Company to the Executive over a
period of time in order that such payment or benefit does not so qualify as a
Golden
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Parachute Payment. A "Sale of the Company" shall mean (i) a merger,
consolidation or other business combination of the Company with or into another
corporation pursuant to which the Company will not survive or will survive only
as a subsidiary of another corporation, (ii) a sale, lease, exchange or other
disposition of all or substantially all of the assets or capital stock of the
Company, or (iii) any combination of the foregoing or an event or transaction
having substantially the same economic effect. The Company shall provide the
Executive with prompt written notice of approval of a Sale of the Company by the
Company's Board of Directors.
4. The Company and the Executive agree that the Executive will be
eligible to receive, in his first year of service to the Company, total annual
bonus compensation in the amount of $125,000 in quarterly pro rata increments in
the event that the Company achieves each quarterly Management-By- Objectives
target mutually determined by the Company's Board of Directors, or its
Compensation Committee, and the Executive. The first quarterly
Management-By-Objectives target is attached hereto as Exhibit A. The Executive
shall be eligible for future bonuses which will be tied to quarterly Management-
By-Objectives targets and payable quarterly in pro rata amounts of the annual
bonus.
5. The Company will provide the Executive with a Company car (the
"Company Car") for use for business purposes during his employment under this
Agreement. The Company Car shall be a BMW or Mercedes. Upon the termination of
this Agreement for any reason, by the Company or the Executive, the Executive
will return the Company Car to the Company pursuant to the procedure outlined in
Paragraph 29 of this Agreement.
6. The Company and the Executive acknowledge and agree that the Company
shall promptly reimburse the Executive for any reasonable expenses, including,
but not limited to, travel expenses, lodging expenses, meals or entertainment
expenses, that the Executive may incur in the performance of his duties and
obligations under this Employment Agreement. PROVIDED, HOWEVER, that the
Executive shall be required to submit receipts or other acceptable documentation
to the Company to verify such expenses prior to any reimbursements.
7. The Executive shall be entitled to paid banking holidays, twenty
(20) paid vacation days per year and reasonable paid personal and sick days. Any
vacation days not taken during a given year may be carried over to subsequent
years without limitation, or may be paid out as additional compensation in
January for the preceding year; however, no more than ten (10) vacation days
from any calendar year can be carried over to subsequent years or paid out as
additional compensation.
8. The Executive acknowledges and agrees that, at the discretion of the
Company, certain employee benefits may be provided to the Executive incident to
the Executive's employment with the Company. The Executive acknowledges and
agrees that any employee benefits provided to the Executive by the Company
incident to the Executive's employment are governed by the applicable plan
documents, summary plan descriptions or employment policies, and may be
modified, suspended or revoked at any time, in accordance with the terms and
provisions of the applicable documents. The Executive acknowledges and agrees
that any employee benefits provided to the Executive by the Company incident
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<PAGE>
to the Executive's employment are not a part of this Employment Agreement.
PROVIDED, HOWEVER, that (a) the Executive shall be entitled to such employee
benefits maintained by the Company applicable to other senior executive
employees of the Company, (b) the Company shall reimburse the Executive for up
to $5,000 in annual premiums so that the Executive can personally seek to
procure and maintain a $5,000,000 life insurance policy for the benefit of the
Executive's designated beneficiaries, (c) the Company shall reimburse the
Executive for up to $3,000 in premiums so that the Executive can personally seek
to procure and maintain a long term disability policy for his own benefit, and
(d) the Company shall reimburse the Executive for the premiums on his current
COBRA medical plan until such time as the Company institutes standard medical
and dental benefit plans. The Company shall be in no way liable for any medical
or dental payments in addition to the Executive's COBRA premiums pursuant to
this Agreement.
DURATION
9. This Employment Agreement shall continue in full force and effect
for four (4) years, commencing on January 1, 2000, and will expire and terminate
by its own terms on December 31, 2003, unless this Employment Agreement is
terminated prior to December 31, 2003, in accordance with the TERMINATION
provisions set forth below in Paragraphs 24, 25, 26, 27 and 28.
RESPONSIBILITIES
10. The Company and the Executive agree that the Executive shall serve
as the Chief Executive Officer of the Company and shall be subject to the
general direction and control of the Board of Directors. In such capacity, the
Executive will report to the Board of Directors of the Company and perform such
duties on behalf of the Company as are directed by the Board of Directors of the
Company and as are consistent with the title and position of a chief executive
officer of a company that designs and markets internet-based security and
management systems for corporations and governments.
11. The Executive covenants and agrees that he will faithfully devote
his best efforts and all his working time to his duties and responsibilities
under this Agreement, unless the Company's Board approves any other use of his
efforts or working time. The foregoing shall not prevent the Executive from
performing a reasonable amount of service on the boards of directors of other
charitable entities, and reasonable investment activities, both subject to the
terms of the Employee's non-competition obligations under this Agreement, nor
from engaging in academic, religious, charitable, community and other non-profit
activities that do not impair his ability to fulfill his duties and
responsibilities under this Agreement.
12. The Executive acknowledges and agrees that he has a fiduciary duty
of loyalty to the Company, and that he will not engage in any activity which
will or could be reasonably expected to, in any way, harm the business, business
interests, or reputation of the Company.
13. The Executive acknowledges and agrees that he will not directly or
indirectly engage in competition with the Company at any time during the
existence of the employment relationship between the
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<PAGE>
Company and the Executive, and the Executive will not on his own behalf, or as
another's agent, employee, partner, shareholder or otherwise, engage in any of
the same or similar duties and/or responsibilities required by the Executive's
position with the Company, other than as an employee of the Company pursuant to
this Employment Agreement.
NONDISCLOSURE
14. The Executive acknowledges and agrees that the Company anticipates
developing significant relationships and goodwill between the Company,
prospective suppliers and prospective customers by providing superior products
and service, and that these relationships and goodwill will constitute a
valuable asset belonging solely to the Company.
15. The Executive acknowledges and agrees that as an employee and
representative of the Company, the Executive will be responsible for building
and maintaining business relationships and goodwill with current and future
customers and suppliers of the Company on a personal level. The Executive
acknowledges and agrees that this responsibility creates a special relationship
of trust and confidence between the Company, the Executive and the customers and
suppliers.
16. The Executive acknowledges and agrees that this special
relationship of trust and confidence between the Company, the Executive and the
customers and suppliers creates a high risk and opportunity for the Executive to
misappropriate the relationship and goodwill existing between the Company and
its customers and suppliers. The Executive acknowledges and agrees that it is
fair and reasonable for the Company to take steps to protect the Company from
the risk of such misappropriation.
17. The Executive acknowledges and agrees that the Company will make a
significant investment in the future success of the Executive by providing the
Executive with the following valuable assets: (i) confidential information
concerning the Company's intellectual property, products, techniques and
equipment; and (ii) confidential information relating to the identity and
special needs of the Company's current and prospective customers and the
Company's current and prospective suppliers, as well as their contacts, the
needs and preferences of the Company's current and prospective customers and
suppliers, the Company's current and prospective products and inventories, the
Company's business projections and market studies, the Company's business plans
and strategies, the Company's pricing studies and price lists, marketing plans,
sales techniques, and information concerning the technology unique to the
Company.
18. The Executive agrees that all information and know-how, whether or
not in writing, of a private, secret or confidential nature concerning the
Company's business or financial affairs (collectively, "Proprietary
Information") is and will be the exclusive property of the Company. By way of
illustration, but not limitation, Proprietary Information includes the
information identified in Paragraph 17 above, and information pertaining to: (i)
the Company's internet-based security and management systems; (ii) financial
statements and information; and (iii) special processes, procedures and services
of the Company. The Executive acknowledges and agrees that this investment has
substantial and significant value, and the
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<PAGE>
Company has a legitimate interest in protecting future misappropriation of this
investment by the Executive. The Executive will not disclose any Proprietary
Information to others outside the Company or use the Proprietary Information for
any unauthorized purposes without written approval by an officer of the Company,
either during or after his employment, unless and until such Proprietary
Information has become public knowledge without the fault of the Executive. The
Executive agrees that all files, letters, memoranda, reports, records, data,
sketches, drawings, notebooks, notes, specifications, programs, computer program
listings, or other written, photographic, or other tangible material containing
Proprietary Information, whether created by the Executive or others, which comes
into his custody or possession is the exclusive property of the Company, to be
used by the Executive only in the performance of his duties for the Company.
19. The breach of any provision of this Agreement by the Company shall not
excuse Executive's compliance with his obligations in Paragraph 18 above.
NON-COMPETITION; NON-INTERFERENCE
20. During the Employment Period and for a period of twelve (12) months
after that employment is terminated by the Company or the Executive for any
reason other than the cessation of business by the Company pursuant to a filing
for bankruptcy protection or liquidation initiated by the Company, the Executive
will not, without the Company's prior written approval, directly or indirectly:
(a) recruit, solicit or knowingly induce, or attempt to
recruit, solicit or induce, any employee, consultant, contract or temporary
worker of the Company to terminate his or her employment or consulting
relationship with, or otherwise cease his or her relationship with, the Company;
(b) solicit, contact, communicate with any person, company or
business that was a supplier or prospective supplier, customer or prospective
customer of the Company, and that the Executive personally solicited, contacted,
communicated with or accepted business from while he was an employee of the
Company at any time during the twelve (12) months preceding termination of this
Employment Agreement, for the purpose of distributing, marketing or selling any
product or service or the equivalent of any product or service developed,
produced, distributed, marketed or sold by the Company; or
(c) engage (whether for compensation or without compensation)
as an individual proprietor, partner, stockholder, officer, employee, director,
joint venturer, investor, lender, or in any other capacity whatsoever (otherwise
than as the holder of not more than five percent (5%) of the total outstanding
stock of a publicly-held company), in any business which provides products or
services being sold, licensed or provided (as the case may be) by the Company on
the date of termination of the Executive's employment by the Company or under
development by the Company for commercial release, sale or licensing within six
months after the Executive's termination of employment.
21. The Executive acknowledges and agrees that in exchange for the
execution of the noncompetition and non-interference agreements set forth at
Paragraph 20, the Executive will receive
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<PAGE>
substantial, valuable consideration including: (i) Proprietary Information; (ii)
employment; (iii) continued employment; and (iv) compensation and benefits as
described above in Paragraphs 1-8. The Executive acknowledges and agrees that
this constitutes fair and adequate consideration for the execution of the
noncompetition and non-interference agreements set forth in Paragraph 20.
22. The restrictions contained in Paragraph 20 are necessary for the
protection of the business and goodwill of the Company and are considered by the
Executive to be reasonable for this purpose. The Executive agrees that any
breach of Paragraph 20 will cause the Company substantial and irrevocable damage
which cannot be accurately calculated in monetary damages and, therefore, the
Executive acknowledges and agrees that the Company shall be entitled to
immediate injunctive relief, either by temporary or permanent injunction, to
prevent such a violation. The Executive acknowledges and agrees that this
injunctive relief shall be in addition to any other legal or equitable relief to
which the Company would be entitled. The Executive acknowledges and agrees that
the non-competition and non-interference agreements set forth in Paragraph 20
are ancillary to an otherwise enforceable agreement and supported by independent
valuable consideration. If any restriction set forth in this Paragraph is found
by any court of competent jurisdiction to be unenforceable because it extends
for too long a period of time or over too great a range of activities or in too
broad a geographic area, it will be interpreted to extend only over the maximum
period of time, range of activities or geographic areas to which it may be
enforceable.
23. The breach of any provision of this Agreement by the Company shall not
excuse Executive's compliance with his obligations in Paragraph 20 above.
TERMINATION
24. The Executive acknowledges and agrees that the Board of Directors
of the Company reserves the right to terminate this Executive Agreement without
cause in the sole discretion of the Board of Directors, by providing the
Executive with written notice of the termination, delivered in person, or by
registered U.S. mail to the Executive's last known address reflected in the
Company's personnel records. Such notice shall be effective upon personal
delivery or mailing. In the event that the Executive is terminated without cause
by the Company, the Company shall pay the Executive the Severance Compensation
and the Executive shall remain bound by the non-disclosure, noncompetition and
non- interference provisions of Paragraphs 18 and 20 of this Agreement.
25. The Company may terminate the Executive's employment with the
Company upon notice for Cause, whereupon all compensation and benefits under
this Agreement will cease effective as of the date of termination. For purposes
of this Agreement, "Cause" shall mean:
(a) the conviction of the Executive for, or the entry of a
pleading of guilty or nolo contendere by the Executive with respect to, any
felony offense or any crime involving money, other property of the Company or
moral turpitude;
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(b) any act of the Executive involving fraud or embezzlement;
(c) the failure of the Executive to substantially perform the
reasonable directives of the Company's Board of Directors which will not have
been corrected within 45 days after the Board of Directors, by majority vote,
will have notified the Executive in writing of its intention to terminate the
Executive's employment in accordance with the provisions of this Paragraph 25;
(d) any material breach of Paragraphs 12-23 of this Agreement
by the Executive which will not have been corrected within 45 days after the
Board of Directors, by majority vote, will have notified the Executive in
writing of its intention to terminate the Executive's employment in accordance
with the provisions of this Paragraph 25; or
(e) the Board unanimously determines and provides written
notice to the effect that the Executive has engaged in grossly negligent
execution of his duties, and the Executive fails to cure any such deficiency
after 45 days notice.
26. The Executive may terminate his employment with the Company for any
of the reasons which the parties agree shall be deemed a termination by the
Company without Cause, whereupon the Company shall pay Severance Compensation to
the Executive as of the date of termination:
(a) any substantial diminution, or any substantial change in a
manner adverse to the Executive, of (i) his title, office or position with the
Company, (ii) his salary, bonus, or other benefits, or (iii) his duties,
responsibilities or employment condition, which will not have been corrected
within 45 days after the Executive shall have notified the Board of Directors in
writing of such breach;
(b) any material breach of this Agreement by the Company which
will not have been corrected within 45 days after the Executive will have
notified the Board of Directors in writing of such breach, including without
limitation the failure of the Company to pay the Executive any portion of his
compensation; or
(c) the Company's requiring the Executive to be based at any
office or location more than 75 miles from the Company's current main office.
27. The Executive acknowledges and agrees that in the event of the
Executive's death, this Employment Agreement will terminate immediately, without
notice, on the date of the Executive's death whereupon all compensation and
benefits under this Agreement will cease effective as of the date of death other
than compensation and benefits that had been accrued or to which the Executive
was entitled at the time of death.
28. The Executive acknowledges and agrees that this Employment
Agreement will terminate immediately, without notice, in the event the Executive
becomes physically or mentally disabled, as defined by 29 C.F.R. ss.
1630.2(g)(1), and cannot perform the essential functions of his position, with
reasonable
7
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accommodation, whereupon all compensation and benefits under this Agreement will
cease effective as of the date of determination of such disability other than
compensation and benefits that had been accrued or to which the Executive was
entitled at the time of the determination of such disability.
29. The Executive acknowledges and agrees that in the event of
termination of this Employment Agreement, for whatever reason, whether at the
insistence of the Executive or at the insistence of the Company, the Executive
will return to the Company within five (5) business days of the time when notice
of termination is communicated by either party, the Company Car, any and all
equipment, literature, documents, data, information, order forms, memoranda,
correspondence, customer and prospective customer lists, customer's orders,
records, cards or notes acquired, supplier and prospective supplier lists,
compiled or coming into the Executive's knowledge, possession or control in
connection with his activities as an employee of the Company as well as all
other materials received from the Company or from any of its customers, agents
or suppliers, in connection with such activities.
30. Both parties mutually agree that neither will make disparaging,
defamatory or harmful remarks, either verbally or in writing, regarding each
other during or after termination of this Agreement.
INDEMNIFICATION
31. Notwithstanding any change in the Company's Certificate of
Incorporation or By-Laws, the Company will indemnify the Executive and hold him
harmless, at a minimum in accordance with the provisions in effect as of the
date of this Agreement in the Company's Certificate of Incorporation and By-
Laws, against any losses, claims, damages, liabilities, costs, expenses
(including advancing from time to time his attorney's fees and expenses in
advance of the final disposition of any claim, action, suit, proceeding or
investigation), judgments, fines and amounts paid in settlement in connection
with any threatened or actual claim, action, suit, proceeding or investigation,
whether civil, criminal or administrative, in which the Executive is, or is
threatened to be, made a party by reason of being or having been a director or
officer of the Company or serving or having served at the request of the Company
as a director, trustee, officer, employee or agent of another corporation or of
a partnership, joint venture, trust or other enterprise, including service with
respect to an employee benefit plan, whether the basis of such proceeding is
alleged action or failure to act in an official capacity as a director, trustee,
officer employee or agent, PROVIDED that the Company will have choice of counsel
in any such action. The obligations of the Company under this Paragraph will
survive the termination of this Agreement. Notwithstanding the foregoing, the
Company will not be obligated to indemnify the Executive beyond the extent
permissible under Section 145 of the Delaware General Corporation Law and other
applicable law, including, without limitation, applicable securities law.
SEVERABILITY
32. The Executive acknowledges and agrees that each covenant and/or
provision of this Employment Agreement shall be enforceable independently of
every other covenant and/or provision. Furthermore, the Executive acknowledges
and agrees that, in the event any covenant and/or provision of
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this Employment Agreement is determined to be unenforceable for any reason, the
remaining covenants and/or provisions will remain effective, binding and
enforceable.
WAIVER; NO DUTY TO MITIGATE
33. The Executive acknowledges and agrees that the failure of the
Company to enforce any provision of this Employment Agreement shall not
constitute a waiver of that particular provision, or of any other provisions of
this Employment Agreement.
34. The Executive will not be required to mitigate the amount of any
payment contemplated by this Agreement (whether by seeking new employment or in
any other manner), nor will any such payment be reduced by any earnings that the
Executive may receive from any other source.
SUCCESSORS AND ASSIGNS
35. Subject to Paragraph 3, the Executive acknowledges and agrees that
this Employment Agreement may be assigned by the Company to any
successor-in-interest, without the notice or consent of the Executive, and shall
inure to the benefit of, and be fully enforceable by, any successor and/or
assignee.
36. The Executive acknowledges and agrees that his obligations, duties
and responsibilities under this Employment Agreement are personal and shall not
be assignable. In the event of the Executive's death or disability, this
Employment Agreement shall be enforceable by the Executive's estate, executors
and/or legal representatives, to the extent provided herein.
ARBITRATION; CHOICE OF LAW
37. Both parties acknowledge and agree that the law of Massachusetts
will govern the validity, interpretation and effect of this Employment
Agreement, and any other dispute relating to, or arising out of, the employment
relationship between the Company and the Executive. The parties agree that any
controversy, claim or dispute arising out of or relating to Executive's
employment hereunder, or the termination of such employment will be settled by
arbitration before a mutually selected arbitrator to be held in the City of
Boston, Massachusetts in accordance with the Commercial Arbitration Rules of the
American Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction, and the parties consent to
the non-exclusive jurisdiction of the courts of Massachusetts for this purpose.
The arbitrator will determine whether and which party or parties will be
entitled to costs and expenses (including reasonable attorneys' fees) resulting
from such dispute or controversy. HOWEVER, if such controversy, claim or dispute
involves a claim for injunctive relief under the non- disclosure, noncompetition
or non-interference provisions at Paragraphs 18 and 20, both the Company and the
Executive shall have the express right to file and litigate such action in state
or federal court and disregard the arbitration provisions of this Paragraph 37.
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MODIFICATION
38. Both parties acknowledge and agree that this Employment Agreement
constitutes the complete and entire agreement between the parties; that the
parties have executed this Employment Agreement based upon the express terms and
provisions set forth herein; that the parties have not relied on any
representations, oral or written, which are not set forth in this Employment
Agreement; that no previous agreement, either oral or written, shall have any
effect on the terms or provisions of this Employment Agreement; and that all
previous agreements, either oral or written, are expressly superseded and
revoked by this Employment Agreement.
39. Both parties acknowledge and agree that the covenants and/or
provisions of this Employment Agreement may not be modified by any subsequent
agreement unless the modifying agreement: (i) is in writing; (ii) contains an
express provision referencing this Employment Agreement; (iii) is signed and
executed by the Chairman of the Board of the Company, as a representative of the
Company; (iv) is signed by the Executive; and (v) is approved by the Board of
Directors of the Company.
LEGAL CONSULTATION
40. The Executive and the Company acknowledge and agree that both
parties have been afforded a reasonable opportunity to review this Employment
Agreement with legal counsel prior to executing the agreement.
ENTERED INTO AS OF THIS ____ DAY OF JANUARY 2000.
EXECUTIVE
- - - - ---------------------------
Richard A. Langevin
AUTHORISZOR INC.
By:
- - - - ---------------------------
Name:
- - - - ---------------------------
Title:
- - - - ---------------------------
10
Authoriszor Inc.
1999 Stock Plan
1 Purposes of the Plan. The purposes of this Stock Plan are to attract and
retain the best available personnel for positions of substantial responsibility,
to provide additional incentive to Employees, Directors and Consultants and to
promote the success of the Company's business. Options granted under the Plan
may be Incentive Stock Options or Non-statutory Stock Options as determined by
the administrator at the time of grant.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or Committee as shall be administering the
Plan in accordance with Section 4 hereof.
(b) "Applicable Laws" means the requirements relating to the administration of
stock option plans under applicable state corporate laws, United States
federal and state securities laws, the Code, any stock exchange or
quotation system on which the Common Stock is listed or quoted and the
applicable laws of any foreign country or jurisdiction where Options are
granted under the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Change in Control Merger" shall mean a merger, consolidation, statutory
share exchange or sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially
all of the assets of the Company that requires the consent or vote of the
holders of Common Stock, other than a consolidation, merger or share
exchange of the Company in which the holders of Common Stock immediately
prior to the effective date of such transaction own more than fifty percent
of the common stock of the surviving corporation immediately after such
transaction.
(e) "Code" means the Internal Revenue Code of 1986, as amended.
(f) "Committee" means a committee of Directors appointed by the Board in
accordance with Section 4 hereof.
(g) "Common Stock" means the common stock of the Company, par value $.10 per
share.
(h) "Company" means Authoriszor Inc, a Delaware corporation.
(i) "Consultant" means any person who is engaged by the Company or any Parent
or Subsidiary to render Permitted Consulting or Advisory Services to such
entity.
(j) "Director" means a member of the Board.
(k) "Employee" means any person, including officers and Directors, employed by
the Company or any Parent or Subsidiary of the Company. An employee shall
not cease to be an Employee in the case of (i) any leave of absence
approved by the Company or (ii) transfers between locations of the Company
or between the Company, its Parent, any Subsidiary, or any successor. For
purposes of Incentive Stock Options, no such leave may exceed ninety days.
On the 91st day of such leave any Incentive Stock Option held by the
Optionee shall cease to be treated as an Incentive Stock Option and shall
be treated for tax purposes as a Non-
<PAGE>
statutory Stock Option. Neither service as a Director nor payment of a
director's fee by the Company shall be sufficient to constitute
"employment" by the Company.
(l) 'Exchange Act" means the Securities Exchange Act of 1934, as amended.
(m) "Fair Market Value" means, as of any date, the value of Common Stock
determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including
without limitation the NASDAQ National Market or the
NASDAQ SmallCap Market of the NASDAQ Stock Market, its
Fair Market Value shall be the closing sales price for
such stock (or the closing bid, if no sales were
reported) as quoted on such exchange or system for the
last market trading day prior to the time of
determination, as reported in The Wall Street Journal
or such other source as the Administrator deems
reliable;
(ii) If the Common Stock is regularly quoted on the OTC
Bulletin Board or any similar system of automated
dissemination of quotations of securities prices
(except for quotation systems covered by Section
2(m)(i) hereof) or is regularly quoted by a recognized
securities dealer, its Fair Market Value shall be the
average between the closing bid and closing asked
prices for the Common Stock on the last market trading
day prior to the day of determination; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall he
determined in good faith by the Administrator.
(n) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.
(o) "Non-statutory Stock Option" means an Option not intended to qualify as an
Incentive Stock Option.
(p) "Option" means a stock option granted pursuant to the Plan.
(q) "Option Agreement" means a written or electronic agreement between the
Company and an Optionee evidencing the terms and conditions of an
individual Option grant. The Option Agreement is subject to the terms and
conditions of the Plan.
(r) "Option Exchange Program" means a program whereby outstanding Options are
exchanged for Options with a lower exercise price.
(s) "Optioned-Stock" means the Common Stock subject to an Option,
(t) "Optionee" means the holder of an outstanding Option granted under the
Plan.
(u) "Parent" means a "parent corporation," whether now or hereafter existing,
as defined in Section 424(e) of the Code.
<PAGE>
(v) "Permitted Consulting or Advisory Services" means services that are bona
fide consulting and advisory services within the definition of an employee
benefit plan used in connection with the Instructions to Form S-8
Registration Statement under the Securities Act of 1933, as amended (the
"Securities Act").
(w) "Plan" means this 1999 Authoriszor Inc. Stock Plan.
(x) "Service Provider" means an Employee, Director or Consultant.
(y) "Share" means a share of the Common Stock, as adjusted in accordance with
Section 11 below.
(z) "Subsidiary" means a "subsidiary corporation," whether now or hereafter
existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 11 of the
Plan, the maximum aggregate number of Shares that may be subject to Options and
issued under the Plan is 1,000,000 Shares. The Shares may be authorized but
unissued, or re-acquired Common Stock.
If an Option terminates, is cancelled, expires or becomes unexercisable without
having been exercised in full, or is surrendered pursuant to an Option Exchange
Program, the unpurchased Shares that were subject thereto shall become available
for future grant or sale under the Plan (unless the Plan has terminated);
provided, however, that Incentive Stock Options may not be issued after
1,000,000 Shares shall have been issued under the Plan. However, Shares that
have actually been issued under the Plan, upon exercise of an Option, shall not
be returned to the Plan and shall not become available for future issuance under
the Plan.
4. Administration of the Plan.
(a) Administration of the Plan. The Plan shall be administered by the Board or
a Committee appointed by the Board, which Committee shall be constituted to
comply with Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the Plan and, in
the case of a Committee, the specific duties delegated by the Board to such
Committee, and subject to the approval of any relevant authorities, the
Administrator shall have the authority in its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options may
from time to time be granted hereunder,
(iii) to determine the number of Shares to be covered by
each such Option granted hereunder.,
(iv) to approve forms of Option agreement for use under the
Plan;
(v) to determine the terms and conditions, of any Option
granted hereunder not inconsistent with the Plan.
Such terms and conditions include, but are not
limited to, the exercise price, the time or times
when Options may be exercised (which may be based
on performance criteria), any vesting
<PAGE>
acceleration provisions, any forfeiture restrictions,
any other restrictions or limitations regarding any
Option, and to amend or waive any such terms and
conditions (unless otherwise prohibited by the Plan);
based in each case on such factors as the Administra-
tor, in its sole discretion, shall determine;
(vi) to determine whether and under what circumstances
an Option may be settled in cash under subsection 9(e)
instead of Common Stock;
(vii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of
the Common Stock covered by such Option has declined
since the date the Option was granted;
(viii) to initiate an Option Exchange Program;
<PAGE>
(ix) prescribe, amend and rescind rules and regulations
relating to the Plan including rules and regulations
relating to sub-plans established for the purpose of
qualifying for preferred tax treatment under foreign
tax laws;
(x) allow Optionees to satisfy withholding tax
obligations by electing to have the Company withhold
from the Shares to be issued upon exercise of an
Option that number of Shares having a Fair Market
Value equal to the amount required to be withheld.
The Fair Market Value of the Shares to be withheld
shall be determined on the date to be determined by
the Administrator. All elections by Optionees to have
Shares withheld for this purpose shall be made on
such forms and under such conditions as the
Administrator may deem necessary or advisable;
(xi) impose restrictions on the transfer of Shares issued
upon exercise of Options under certain
circumstances; and
(xii) construe and interpret the terms of the Plan and
awards granted pursuant to the Plan.
(c) Effect of Administrator's Decision. All decisions, determination and
interpretations of the Administrator shall be final and binding on all
Optionees.
(d) Liability of Administrator. No member of the Board or Committee serving as
Administrator shall be liable for any action taken or omitted to be taken
by him or by any other member of the Board or Committee with respect to the
Plan, and to the extent of liabilities not otherwise insured under a policy
purchased by the Company, the Company does hereby indemnify and agree to
defend and save harmless any member of the Board or Committee with respect
to any liabilities asserted or incurred in connection with the exercise and
performance of their powers and duties hereunder, to the full extent
permitted by applicable law. Such indemnification shall include attorney's
fees and all other costs and expenses reasonably incurred in defense of any
action arising from such act of commission or omission to the full extent
permitted by law. Nothing herein shall be deemed to limit the Company's
ability to insure itself with respect to its obligations hereunder.
5. Eligibility.
<PAGE>
(a) Non-statutory Stock Options may be granted to Service Providers. Incentive
Stock Options may be granted only to Employees.
(b) Each Option shall be designated in the Option Agreement as either an
Incentive Stock Option or a Non-statutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair
Market Value of the Shares with respect to which Incentive Stock Options
are exercisable for the first time by the Optionee during any calendar year
(under all plans of the Company and any Parent or Subsidiary) exceeds
$100,000, such Options shall be treated as Non-statutory Stock Options. The
Fair Market Value of the Shares for this purpose shall be determined as of
the time the Option with respect to such Shares is granted.
(c) Neither the Plan nor any Option shall confer upon any Optionee any right
with respect to continuing the Optionee's relationship as a Service
Provider with the Company, nor shall it interfere in any way with his or
her right or the Company's right to terminate such relationship at any
time, with or without cause,
6. Term of Plan. Subject to Section 17 of the Plan, the Plan shall become
effective upon its adoption by the Board. It shall continue in effect for a term
of ten (10) years from the date thereof unless sooner terminated under Section
13 of the Plan.
7. Term of Option. The terms of each Option shall be stated in the Option
Agreement; provided, however, that the term shall be no more thus ten (10) years
from the date of grant thereof. In the case of an Incentive Stock Option granted
to an Optionee who, at the time the Option is granted, owns stock representing
more than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, the term of the Option shall be five (5)
years from the date of grant or such shorter term as may be provided in the
Option Agreement.
8. Option Exercise Price and Consideration.
(a) The per Share exercise price for the Shares to be issued upon exercise of
an Option shall be such price as is determined by the Administrator, but
shall be subject to the following:
(i) In the case of an Incentive Stock Option:
(A) granted to an Employee who, at the time of
grant of such Option, owns stock representing
more than ten percent (10%) of the voting
power of all classes of stock of the Company
or any Parent or Subsidiary, the exercise
price shall be no less then 110% of the Fair
Market Value per Share on the date of grant.
(B) granted to any other Employee, the per Share
exercise price shall be no less than 100% of
the Fair Market Value per Share on the date of
grant.
(ii) In the case of a Non-statutory Stock Option, the
per Share exercise price shall be determined by the
Administrator.
(iii) Notwithstanding the foregoing, Options (other than
Incentive Stock Option) may be granted with a per
Share exercise price other than as required above
pursuant to a merger or other corporate transaction.
<PAGE>
(b) The consideration to be paid for the Shares to be issued upon exercise of
an Option, including the method of payment, shall be determined by the
Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant). Such consideration may consist of (1)
cash, (2) check, (3) promissory note (if permitted by applicable state
corporate law), (4) Shares, including Shares acquired upon exercise of the
Option, that have a Fair Market Value on the date of surrender equal to the
aggregate exercise price of the Shares as to which such Option shall be
exercised, (5) consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan, or
(6) any combination of the foregoing methods of payment. In making its
determination as to the type of consideration to accept, the Administrator
shall consider if acceptance of such consideration may be reasonably
expected to benefit the Company.
9. Exercise of Option
(a) Procedure for Exercise; Rights as a Shareholder. Any Option granted
hereunder shall be exercisable according to the terms hereof at such times
and under such conditions as determined by the Administrator and set forth
in the Option Agreement. Unless the Option Agreement provides otherwise,
vesting of Options granted hereunder shall be tolled during any unpaid
leave of absence; provided that with respect to Incentive Stock Options,
the maximum unpaid leave of absence shall be 90 days. Notwithstanding the
foregoing, the Administrator, in its sole discretion, may accelerate the
date in which all or any portion of an otherwise unexercisable Option may
be exercised. An Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company receives: (i) written
or electronic notice of exercise (in accordance with the Option Agreement)
from the person entitled to exercise the Option and (ii) full payment for
the Shares with respect to which the Option is exercised. Full payment may
consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares
issued upon exercise of an Option shall be issued in the name of the
Optionee or, if requested by the Optionee, in the name of the Optionee and
his or her spouse. Until the Shares are issued (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company), no right to vote or receive dividends or
any other rights as a stockholder shall exist with respect to the Shares,
notwithstanding the exercise of the Option. The Company shall issue (or
cause to be issued) such Shares reasonably promptly after the Option is
exercised. No adjustment will be made for a dividend or other right for
which the record date is prior to the date the Shares are issued, except as
provided in Section 11 of the Plan.
(b) Termination of Relationship as a Service Provider. If an Optionee ceases to
be a Service Provider, such Optionee may exercise his or her Option within
such period of time as is specified in the Option Agreement to the extent
that the Option is vested on the date of termination (but in no event later
than the expiration of the term of the Option as set forth in the Option
Agreement). In the absence of a specified time in the Option Agreement, the
Option shall remain exercisable for three (3) months following the
Optionee's termination. If on the date of termination the Optionee is not
vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option shall revert to the Plan. If after
<PAGE>
termination, the Optionee does not exercise his or her Option within the
time provided for herein, the Option shall terminate, and the Shares
covered by such Option shall revert to the Plan.
(c) Disability of Optionee. If an Optionee ceases to be a Service Provider as a
result of the Optionee's total and permanent disability, as defined in
Section 22(e)(3) of the Code, the Optionee may exercise his or her Option
within such period of time as is specified in the Option Agreement to the
extent the Option is vested on the date of termination (but in no event
later than the expiration of the term of such Option as set forth in the
Option Agreement). In the absence of a specified time in the Option
Agreement, the Option shall remain exercisable for twelve (12) months
following the Optionee's termination. If, on the date of termination, the
Optionee is not vested as to his or her entire Option, the Shares covered
by the unvested portion of the Option shall revert to the Plan. If after
termination, the Optionee does not exercise his or her Option within the
time provided for herein, the Option shall terminate, and the Shares
covered by such Option shall revert to the Plan.
(d) Death of Optionee. If an Optionee dies while a Service Provider, the Option
may be exercised within such period of time as is specified in the Option
Agreement (but in no event later than the expiration of the term of such
Option as set forth in the Notice of Grant), by the Optionee's estate or by
a person who acquires the right to exercise the Option by bequest or
inheritance, but only to the extent that the Option is vested on the date
of death. In the absence of a specified time in the Option Agreement, the
Option shall remain exercisable for twelve (12) months following the
Optionee's termination. If at the time of death, the Optionee is not vested
as to his or her entire Option, the Shares covered by the unvested portion
of the Option shall immediately revert to the Plan. The Option may be
exercised by the executor or administrator of the Optionee's estate or, if
none, by the person(s) entitled to exercise the Option under the Optionee's
will or the laws of descent or distribution. If the Option is not so
exercised within the time provided for herein, the Option shall terminate,
and the Shares covered by such Option shall revert to the Plan.
(e) Buyout Provisions. The Administrator may at any time offer to buy out for a
payment in cash or Shares, an Option previously granted, based on such
terms and conditions as the Administrator shall establish and communicate
to the Optionee at the time that such offer is made.
10. Non-Transferability of Options. Unless otherwise set forth in the Option
Agreement, Options may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee.
11. Adjustments Upon Changes in Capitalization, Merger or Asset Sale.
(a) Changes in capitalization. Subject to any required action by the
stockholders of the Company, the number of Shares of Common Stock covered
by each outstanding Option, and the number of Shares of Common Stock that
have been authorized for issuance under the Plan but as to which no Options
have yet been granted or that have been returned to the Plan upon
cancellation or expiration of an Option, as well as the price per Share of
Common Stock covered by each such outstanding Option, shall be
proportionately adjusted for any increase or decrease in the number of
issued shares of Common Stock resulting from a stock split,
<PAGE>
reverse stock split, stock dividend, combination or reclassification of the
Common Stock, or any other increase or decrease in the number of issued
shares of Common Stock effected without receipt of consideration by the
Company. The conversion of any convertible securities of the Company shall
not be deemed to have been "effected without receipt of consideration."
Such adjustment shall be made by the Board, whose determination in that
respect shall be final, binding and conclusive. Except as expressly
provided herein, no issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall he made with respect to,
the number or price of Shares of Common Stock subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed dissolution or
liquidation of the Company, the Administrator shall notify each Optionee as
soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an
Optionee to have the right to exercise his or her Option until fifteen (15)
days prior to such transaction as to all of the Optioned Stock covered
thereby, including Shares as to which the Option would not otherwise be
exercisable. In addition, the Administrator may provide that any Company
repurchase option applicable to any Shares purchased upon exercise of an
Option shall lapse as to all such Shares, provided the proposed dissolution
or liquidation takes place at the time and in the manner contemplated. To
the extent it has not been previously exercised, an Option will terminate
immediately prior to the consummation of such proposed action.
(c) Merger. In the event of a merger of the Company with or into another
corporation, the Option may be assumed or an equivalent option may be
substituted by such successor corporation or a parent or subsidiary of such
successor corporation without the consent of the Optionee. For the purposes
of this paragraph, the Option shall be considered assumed if, following the
merger, the option confers the right to purchase, for each Share of
Optioned Stock subject to the Option immediately prior to the merger, the
consideration (whether stock, cash, or other securities or property)
received in the merger by holders of Common Stock for each Share held on
the effective date of the transaction (and if holders were offered a choice
of consideration, the type of consideration chosen by the holders of a
majority of the outstanding Shares), provided, however, that if such
consideration received in the merger was not solely common stock of the
successor corporation or its Parent, the Administrator may, with the
consent of the successor corporation, provide for the consideration to be
received upon the exercise of the Option for each Share of Optioned Stock
subject to the Option to be solely common stock of the successor
corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger. In the
event of a Change in Control Merger, the Administrator may, be giving
written notice to an Optionee ("Cancellation Notice"), cancel, effective
upon the date of the consummation of the Change in Control Merger all or
any portion of an Option that remains unexercised on such date. Such
Cancellation Notice shall be given a reasonable period of time (but not
less than 15 days) prior to the date of such cancellation, and may be given
either before or after stockholder approval of such corporate transaction.
12. Time of Granting Options. The date of grant of an Option shall, for all
purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Administrator.
Notice of the determination shall be
<PAGE>
given to each Service Provider to whom an Option is so granted within a
reasonable time after the date of such grant.
13. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend, alter, suspend
or terminate the Plan.
(b) Stockholder Approval. The Board shall obtain stockholder approval of any
Plan amendment to the extent necessary to comply with Applicable Laws and
may seek stockholder approval of any Plan amendments it may deem desirable.
(c) Effect of Amendment or Termination. No amendment, alteration, suspension or
termination of the Plan shall impair in any material respect the rights of
any Optionee with respect to an Option previously granted to such Optionee
without the consent of such Optionee, unless mutually agreed otherwise
between the Optionee and the Administrator, which agreement must be in
writing and signed by the Optionee and the Company. Termination of the Plan
shall not affect the Administrator's ability to exercise the powers granted
to it hereunder with respect to Options granted under the Plan prior to the
date of such termination.
14. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to the exercise of an
Option unless the exercise of such Option and the issuance and delivery of
such Shares shall comply with Applicable Laws and shall be further subject
to the approval of counsel for the Company with respect to such compliance.
(b) Investment Representations. As a condition to the exercise of an Option,
the Administrator may require the person exercising such Option to
represent and warrant at the time of any such exercise that the Shares are
being purchased only for investment and without any present intention to
distribute such Shares within the meaning of the Securities Act if in the
opinion of counsel for the Company, such a representation is required.
15. Inability to Obtain Authority. The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.
16. Reservation of Shares. The Company, during the term of this Plan, shall at
all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
17. Stockholder Approval. If required under Applicable Laws, the Plan shall be
subject to approval by the stockholders of the Company within twelve (12) months
after the date the Plan is adopted. Such stockholder approval shall be obtained
in the degree and manner required under Applicable Laws. If the Plan is subject
to stockholder approval, all Options granted prior to the effective date of such
stockholder approval shall be subject to such stockholder approval and shall
become null and void if such stockholder approval is not obtained.
18. INTERPRETATION.
<PAGE>
(a) If any provision of the Plan is held invalid for any reason, such holding
shall not affect the remaining provisions hereof, but instead the Plan
shall be construed and enforced as if such provision had never been
included in the Plan.
(b) Headings contained in this Plan are for convenience only and shall in no
manner be construed as part of this Plan.
(c) Any reference to the masculine, feminine, or neuter gender shall be a
reference to such other gender as is appropriate.
February 22, 2000
Dear Optionee,
You will find enclosed with this letter a document setting out the terms of the
share options granted to you. The documents are:-
1. The Authoriszor Inc. 1999 Stock Plan Rules, which are common to all option
holders with options granted under this plan.
2. A Notice of Grant which is particular to you.
3. A sample exercise notice which you should use to exercise any options which
may have vested under the terms of grant.
4. An investment representation statement which you are required to sign when
exercising options to confirm that you understand the financial
implications of purchasing securities in a company.
Please study the documents carefully, and if you agree to abide by the terms and
conditions and wish to accept the options offered, then please sign the document
on Page 4, return a copy of the signature page to the Company's offices, and
keep the original in a safe place.
I would like to take this opportunity of welcoming you to the Authoriszor Inc.
Stock Plan and I trust that your association with the Company will be a
rewarding one.
Yours sincerely
Director
Authoriszor Inc.
<PAGE>
Authoriszor Inc.
1999 STOCK PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall have the
same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT ("Notice of Grant")
The undersigned Optionee has been granted an Option to purchase Common Stock of
the Company, subject to the terms and conditions of the Plan and this Option
Agreement, as follows:
Date of Grant:
Vesting Commencement Date:
Exercise Price per Share:
Total Number of Shares Granted:
Type of Option: ___ Incentive Stock Option
___ Non-statutory Stock Option
Term/Expiration Date:
Vesting Schedule:
This Option shall be exercisable, in whole or in part, according to the
following vesting schedule:
Up to a maximum of 25% of the total number of shares granted in each of the four
years commencing on the Vesting Commencement Date.
Notwithstanding the foregoing, the Administrator in its sole discretion, may
(but is not obligated to) accelerate the date on which all or any portion of an
otherwise unexercisable Option may be exercised.
Termination Period:
The vested portion of this Option shall be exercisable for three months after
Optionee ceases to be a Service Provider; except that upon Optionee's death or
Disability, this Option may be exercised for one year after Optionee ceases to
be a Service Provider. In no event may Optionee exercise this Option after the
Term/Expiration Date as provided above.
II. AGREEMENT
1. Grant Of Option.
The Administrator of the Plan hereby grants to the Optionee named in the Notice
of Grant (the "Optionee"), an option (the "Option") to purchase the number of
Shares set forth in the Notice of Grant, at the Exercise
<PAGE>
Price and subject to the terms and conditions of the Plan, which is incorporated
herein by reference. Subject to Section 13(c) of the Plan, in the event of a
conflict between the terms and conditions of the Plan and this Option Agreement,
the terms and conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock Option ("ISO"), this
Option is intended to qualify as an Incentive Stock Option as defined in Section
422 of the Code. Nevertheless, to the extent that it exceeds the $100,000 rule
of Code Section 422(d), this Option shall be treated as a Non-statutory Stock
Option ("NSO").
2. Exercise of Option
(a) Right to Exercise. This Option shall be exercisable during its term in
accordance with the Vesting Schedule set out in the Notice of Grant and
with the applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option shall be exercisable by delivery of an
exercise notice in the form attached as Exhibit A (the "Exercise
Notice"), which shall state the election to exercise the Option, the
number of Shares with respect to which the Option is being exercised,
and such other representations and agreements as may be required by the
Company. The Exercise Notice shall be accompanied by payment of the
aggregate Exercise Price as to all Exercised Shares. This Option shall
be deemed to be exercised upon receipt by the Company of such fully
executed Exercise Notice accompanied by the aggregate Exercise Price.
No Shares shall be issued pursuant to the exercise of an Option unless
such issuance and such exercise complies with Applicable Laws. Assuming
such compliance, for income tax purposes the Shares shall be considered
issued to the Optionee on the date on which the Option is exercised
with respect to such Shares.
(c) The Optionee may satisfy his withholding tax obligations by electing to
have the Company withhold from the Shares to be issued upon exercise of
the Options that number of Shares having a Fair Market Value equal to
the amount required to be withheld. The Fair Market Value of the Shares
to be withheld for this purpose shall be made on such forms and under
such conditions as the Administrator may deem necessary or advisable.
3. Optionee's Representations.
In the event the Shares have not been registered under the Securities Act of
1933, as amended (the "Securities Act") , at the time this Option is exercised,
the Optionee shall, if required by the Company, concurrently with the exercise
of all or any portion of this Option, deliver to the Company his or her
Investment Representation Statement in the form attached hereto as Exhibit B.
4. Market Stand Off Period.
Optionee hereby agrees that, if so requested by the Company or any
representative of the underwriters in connection with any registration of the
offering (the "Offering") of any securities of the Company under the Securities
Act, Optionee shall not sell or otherwise transfer any Shares or other
securities of the Company during the 180-day period (or such other period as may
be requested in writing by the Managing Underwriter with respect to the Offering
and agreed to in writing by the Company) (the "Market Standoff Period")
following the effective date of a registration statement of the Company filed
under the Securities Act. Such restriction shall apply only to the first
registration statement of the Company to become effective under the
<PAGE>
Securities Act after the effective date of the Plan that includes securities to
be sold on behalf of the Company to the public in an underwritten public
offering under the Securities Act. The Company may impose stop- transfer
instructions with respect to securities subject to the foregoing restrictions
until the end of such Market Standoff Period.
5. Method of Payment.
Payment of the aggregate Exercise Price shall be by any of the following, or a
combination thereof, at the election of the Optionee:
(a) cash or check; or
(b) consideration received by the Company under a formal cashless
exercise program adopted by the Company in connection with the
Plan;
(c) shares including Shares acquired upon exercise of the Option
that have a Fair Market Value on the date of surrender equal
to the aggregate Exercise Price of the Shares as to which such
Option shall be exercised; or
(d) any combination of the foregoing methods of payment.
6. Restrictions on Exercise.
This Option may not be exercised if the issuance of such Shares upon such
exercise or the method of payment of consideration for such shares would
constitute a violation of any Applicable Law.
7. Non-Transferability of Option.
This Option may not be transferred in any manner otherwise than by will or by
the laws of descent or distribution and may be exercised during the lifetime of
Optionee only by Optionee. The terms of the Plan and this Option Agreement shall
be binding upon the executors, administrators, heirs, successors and assigns of
the Optionee.
8. Term of Option.
This Option may be exercised only within the term set out in the Notice of
Grant, and may be exercised during such term only in accordance with the Plan
and the terms of this Option, subject to the right of the Administrator to amend
or waive certain terms and conditions of the Option and to accelerate the date
on which all or any portion of an otherwise unexerciable Option may be
exercised.
9. Tax Consequences.
Optionee understands that Optionee may suffer adverse tax consequences as a
result of Optionee's purchase or disposition of the Shares. OPTIONEE
REPRESENTS THAT OPTIONEE HAS CONSULTED WITH ANY TAX CONSULTANTS OPTIONEE
DEEMS ADVISABLE IN CONNECTION WITH THE PURCHASE OR DISPOSITION OF THE
SHARES AND THAT OPTIONEE IS NOT RELYING ON THE COMPANY FOR ANY TAX ADVICE.
<PAGE>
10. Entire Agreement. Governing Law.
The Plan is incorporated herein by reference. The Plan and this Option Agreement
constitute the entire agreement of the parties with respect to the subject
matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and Optionee with respect to the subject matter
hereof. This Option Agreement is governed by the internal substantive laws, but
not the choice of law rules, of Delaware.
11. No Guarantee of Continued Service.
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE
VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER OR
EMPLOYEE AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING GRANTED THIS
OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES
THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING
SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF
CONTINUED ENGAGEMENT AS A SERVICE PROVIDER OR EMPLOYEE FOR THE VESTING PERIOD,
FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE IN ANY WAY WITH OPTIONEE'S
RIGHT OR THE COMPANY'S RIGHT TO TERMINATE OPTIONEE'S RELATIONSHIP AS A SERVICE
PROVIDER OR EMPLOYEE AT ANY TIME, WITH OR WITHOUT CAUSE, SUBJECT TO ANY OTHER
CONTRACTUAL TERMS AND CONDITIONS OF ENGAGEMENT.
12. Interpretation.
(a) If any provision of this Option Agreement is held invalid for any
reason, such holding shall not affect the remaining provisions hereof,
but instead the Option Agreement shall be construed and enforced as if
such provision had never been included in the Option Agreement.
(b) Headings contained in this Option Agreement are for convenience only
and shall in no manner be construed as part of this Option Agreement.
(c) Any reference to the masculine, feminine, or neuter gender shall be
reference to such other gender as is appropriate.
Optionee acknowledges receipt of a copy of the Plan and represents that he or
she is familiar with the terms and provisions thereof, and hereby accepts this
Option subject to all of the terms and provisions thereof. Optionee has reviewed
the Plan and this Option in their entirety, has had an opportunity to obtain the
advice of counsel prior to executing this Option and fully understands all
provisions of the Option. Optionee hereby agrees to accept as binding,
conclusive and final all decisions or interpretations of the Administrator upon
any questions arising under the Plan or this Option. Optionee further agrees to
notify the Company upon any change in the residence address indicated below.
OPTIONEE Authoriszor Inc.
By:
Signature Name:
Title:
Print Name
Residence Address:
<PAGE>
EXHIBIT A
1999 STOCK PLAN
EXERCISE NOTICE
Authoriszor Inc.
[
]
Attention: Secretary
1. Exercise of option. Effective as of today, [ ] the undersigned ("Optionee")
hereby elects to exercise Optionee's option to purchase [ ] shares of the
Common Stock (the "Shares") of Authoriszor Inc. (the "Company") under and
pursuant to the Authoriszor Inc. 1999 Stock Plan (the "Plan") and the Stock
Option Agreement dated [ ] (the "Option Agreement").
2. Delivery of Payment. Purchaser herewith delivers to the Company the
Aggregate Exercise Price of the Shares, as set forth in the Option
Agreement, by the following means [fill in method of payment].
3. Representations of Optionee. Optionee acknowledges that Optionee has
received, read and understood the Plan and the Option Agreement and agrees
to abide by and be bound by their terms and conditions.
4. Rights as Shareholder. Until the issuance of the Shares (as evidenced by
the appropriate entry on the books of the Company or of a duly authorised
transfer agent of the Company), no right to vote or receive dividends or
any other rights as a stockholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Shares shall be
issued to the Optionee reasonably promptly after the Option is exercised.
No adjustment shall be made for a dividend or other right for which the
record date is prior to the date of issuance.
5. Tax Consultation. Optionee understands that Optionee may suffer adverse tax
consequences as a result of Optionee's purchase or disposition of the
Shares. Optionee represents that Optionee has consulted with any tax
consultants Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company
for any tax advice.
6. Restrictive Legends and Stop-Transfer Orders
(a) Legends. Optionee understands and agrees that the Company may cause the
legends set forth below or legends substantially equivalent thereto, to be
placed upon any certificate(s) evidencing ownership of the Shares together
with any other legends that may be required by the Company or by state or
federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED, SOLD
OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER THE ACT OR, IN THE OPINION OF COMPANY COUNSEL SATISFACTORY
TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR
HYPOTHECATION IS EXEMPT FROM REGISTRATION THEREUNDER.
<PAGE>
(b) Stop-Transfer Notices. Optionee agrees that, in order to ensure compliance
with the restrictions referred to herein, the Company may issue appropriate
"stop transfer" instructions to its transfer agent, if any, and that, if
the Company transfers its own securities, it may make appropriate notations
to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to transfer on
its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as
owner of such Shares or to accord the right to vote or pay dividends to any
purchaser or other transferee to whom such Shares shall have been so
transferred.
7. Successors and Assigns. The Company may assign any of its rights under this
Agreement to single or multiple assignees, and this Agreement shall inure
to the benefit of the successors and assigns of the Company. Subject to the
restrictions on transfer herein set forth, this Agreement shall be binding
upon Optionee and his or her heirs, executors, administrators, successors
and assigns.
8. Interpretation. Any dispute regarding the interpretation of this Agreement
shall be submitted by Optionee or by the Company forthwith to the
Administrator which shall review such dispute at its next regular meeting.
The resolution of such a dispute by the Administrator shall be final and
binding on all parties.
9. Governing Law; Severability. This Agreement is governed by the internal
substantive laws but not the choice of law rules, of Delaware.
10. Entire Agreement. The Plan and Option Agreement are incorporated herein by
reference. This Agreement, the Plan, the Option Agreement and the
Investment Representation Statement constitute the entire agreement of the
parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee
with respect to the subject matter hereof, and may not be modified
adversely to the Optionee's interest except by means of a writing signed by
the Company and Optionee.
Submitted By: Accepted By:
OPTIONEE Authoriszor Inc.
By:
Signature Name:
Title:
Print Name
Residence Address:
<PAGE>
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE:
COMPANY: Authoriszor Inc.
SECURITY: COMMON STOCK
NUMBER OF SHARES:
DATE:
In connection with the purchase of the above-listed Securities, the undersigned
Optionee represents to the Company the following:
(a) Optionee is aware of the Company's business affairs and financial condition
and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the Securities. Optionee is
acquiring these Securities for investment for Optionee's own account only
and not with a view to, or for resale in connection with any "distribution"
thereof within the meaning of the Securities Act of 1933, as amended (the
"Securities Act").
(b) Optionee acknowledges and understands that the Securities constitute
"restricted securities" under the Securities Act and have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of Optionee's investment intent as expressed herein. In this
connection, Optionee understands that, in the view of the Securities and
Exchange Commission, the statutory basis for such exemption may be
unavailable if Optionee's representation was predicated solely upon a
present intention to hold these Securities for the minimum capital gains
period specified under tax statutes, for a deferred sale, for or until an
increase or decrease in the market price of the Securities, or for a period
of one year or any other fixed period in the future. Optionee further
understands that the Securities must be held indefinitely unless they are
subsequently registered under the Securities Act or an exemption from such
registration is available. Optionee further acknowledges and understands
that the Company is under no obligation to register the Securities.
Optionee understands that the certificate evidencing the Securities will be
imprinted with a legend that prohibits the transfer of the Securities
unless they are registered under the Securities Act or such registration is
not required under the Securities Act in the opinion of counsel
satisfactory to the Company, and any other legend required under applicable
state or foreign securities laws.
(c) Optionee is familiar with the provisions of Rule 144 promulgated under the
Securities Act, which, in substance, permit limited public resale of
"restricted securities" acquired, directly or indirectly from the issuer
thereof, in a non-public offering subject to the satisfaction of certain
conditions.
(d) Optionee further understands that in the event all of the applicable
requirements of Rule 144 are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rule
144 is not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant
to Rule 144 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that
such persons and their respective brokers who participate in such
transactions do so at their own risk. Optionee understands that no
assurances can be given that any such other registration exemption will be
available in such event.
<PAGE>
Signature of Optionee:
Date:
<PAGE>
SCHEDULE OF STOCK OPTION AGREEMENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Name No. of Shares Date of Vesting Exercise Price Type of Expiration
Granted Grant Per Share Option Date
Glen A. R. M. Hirst 25,000 9/20/99 25% per yr for 4 $2.50 Non-statutory 9/30/07
yrs beg on 10/1/00
Paul Allan Swain 25,000 9/30/99 25% per yr for 4 $2.50 Non-statutory 9/30/07
yrs beg on 10/1/00
Patrick Burns 25,000 9/27/99 25% per yr for 4 $2.50 Non-statutory 9/30/07
yrs beg on 10/1/00
Barry Jones 131,214 10/6/99 25% per yr for 4 $2.00 Non-statutory 9/30/07
yrs beg on 10/1/00
Christopher Noble 25,000 11/29/99 25% per yr for 4 $4.67 Non-statutory 12/1/07
yrs beg on 12/1/00
Clifford Gladwin 25,000 11/22/99 25% per yr for 4 $3.45 Non-statutory 12/1/07
yrs beg on 12/1/00
Andrew Michael Cussons 25,000 1/1/00 25% per yr for 4 $6.75 Non-statutory 1/1/08
yrs beg on 1/1/01
Andrew Llewellyn 25,000 1/1/00 25% per yr for 4 $2.50 Non-statutory 1/1/08
yrs beg on 1/1/01
<PAGE>
Shaun Summers 1,000 11/8/99 25% per yr for 4 $3.00 Non-statutory 12/1/07
yrs beg on 12/1/00
Ian Joyce 2,000 2/1/00 25% per yr for 4 $10.31 Non-statutory 2/1/08
yrs beg on 2/1/01
Dale Andrew Cole 25,000 1/14/00 25% per yr for 4 $7.10 Non-statutory 2/1/08
yrs beg on 2/1/01
Ian Weatherhogg 40,000 2/1/00 25% per yr for 4 $10.31 Non-statutory 2/1/08
yrs beg on 2/1/01
David Blain 25,000 2/1/00 25% per yr for 4 $10.31 Non-statutory 2/1/08
yrs beg on 2/1/01
Frank Majkowski 25,000 9/20/99 25% per yr for 4 $2.50 Non-statutory 1/1/08
yrs beg on 1/1/01
Shaun Summers 1,500 2/1/00 25% per yr for 4 $10.31 Non-statutory 2/1/08
yrs beg on 2/1/01
John Pitt 2,500 2/1/00 25% per yr for 4 $10.31 Non-statutory 2/1/08
yrs beg on 2/1/01
Paul Leivesley 2,500 2/1/00 25% per yr for 4 $10.31 Non-statutory 2/1/08
yrs beg on 2/1/01
</TABLE>
AUTHORISZOR INC.
Birkett House
27 Albemarle Street
London W1X 4LQ
Telephone No: 0171 493 2843
Facsimile No: 0171 629 5356
12th November 1999
BY HAND
The Honorable Raymond G H Seitz
10 Pembridge Place
London W2 4XB
Dear Raymond,
I would like to say on behalf of the Directors of Authoriszor how pleased we are
that you will be joining the board as Chairman, subject to agreement on the
terms. May I suggest the following:
1. You will be appointed to the board of Authoriszor Inc and will serve as
Chairman.
2. The initial term of the agreement is to be for two years, after which
either side can give six months notice.
3. The appointment will be from 1st December 1999.
4. Your fee will be US $4,000 per month. You will also be granted a three year
option to acquire 200,000 Authoriszor common shares at US $3 per share.
5. You will be expected to devote an average of approximately two days per
month to Authoriszor affairs.
If you are happy with the above, I will instruct Jenkens & Gilchrist, our
American attorneys, to start work on the option agreement.
Yours sincerely,
Robert Jeffcock
Director
Authoriszor Limited
Windsor House
Cromwall Road
Harrogate
North Yorkshire
HG1 2PW
Telephone No: 44 1423 630300
23rd September 1999
The Rt. Hon. Sir Malcolm Rifkind KCMG QC
Eskgrove House
Inveresk
East Lothian
EH21 7TD
Dear Sir Malcolm,
This letter is to confirm the agreement we have reached with regard to the
consulting agreement with Authoriszor Ltd.
1. This agreement is between yourself and Authoriszor Ltd., though you will
also be consulting for the parent company Authoriszor Inc.
2. The initial term of the agreement is to be for 2 years, after which either
side can give 6 months notice.
3. The consulting agreement will commence as of 1st October 1999.
4. Your retainer will be(pound)2,500 per month plus VAT. You will also be
granted a 3 year option to acquire 200,000 Authoriszor Inc. common shares
at US $1 per share.
5. You will be expected to devote an average of approximately 2 days per month
on Authoriszor's affairs. Your responsibilities would include:
a. Helping the company with top level introductions in government, the armed
forces, banks etc.
b. Promoting Authoriszor and its software, to the media and business
community. This would include business lunches/seminars where you would be
one of the guest speakers.
c. Helping in the search for a suitable person to act for Authoriszor Inc. as
non-executive Chairman.
<PAGE>
If you could confirm that the above accurately reflects our agreement, I will
instruct Jenkens and Gilchrist, Authoriszor Inc.'s American Attorneys to start
work on the option agreement.
Yours sincerely
Robert Jeffcock
Director Authoriszor Ltd.
CEO & Chairman Authoriszor Inc.
STOCK OPTION AGREEMENT
AUTHORISZOR INC.
This unilateral grant by the Company (as hereinafter defined)
constitutes a valid Nonqualified Stock Option (the "Option") for a total of
200,000 shares (the "Shares") of common stock, par value $.01 per share (the
"Common Stock"), of Authoriszor Inc., a Delaware corporation (the "Company")
whose principal executive offices are situatated at 8201 Preston Road, Suite
600, Dallas, Texas 75225, is hereby granted to The Rt Hon Sir Malcolm Rifkind
KCMG QC of Eskgrove House, Inveresk, East London, Scotland, EH21 7TD (the
"Optionee") pursuant to a contract for consultancy services between the Company
and the Optionee constituted by exchange of letters between the parties and
their duly authorized intermediaries dated August 11, 1999 to September 24, 1999
and effective at and from October 1, 1999 and pursuant to the terms of this
Option Agreement (the "Option Agreement").
Section 1. Exercise Price. The exercise price of the Option is $1.00
for each Share.
Section 2. Exercise of the Option. This Option may be exercised at any
time and from time to time after the Date of Grant, subject to the provisions
contained in Sections 3 and 4 below.
(a) Method of Exercise. Options shall be deemed properly
exercised when:
(i) the Company has received written notice of such
exercise, stating the number of Shares which are being
purchased, delivered to the Company and signed by the person
or persons entitled to exercise the Option and, if the Option
is being exercised by any person or persons other than the
Optionee, be accompanied by proof, satisfactory to the
Company, of the right of such person or persons to exercise
the Option;
(ii) full payment of the exercise price of the
Shares as to which the Option is exercised has been tendered
to the Company; and
(iii) arrangements that are satisfactory to the Board
of Directors of the Company (the "Board") in its sole
discretion have been made for the Optionee's payment to the
Company of the amount, if any, that the Company determines to
be necessary for the Company to withhold in accordance with
applicable federal or state income tax withholding
requirements.
(b) Payment. The exercise price of any Shares purchased shall
be paid in cash, by certified or cashier's check, by money order or by
personal check (if approved by the Board).
(c) Restrictions on Exercise.
(i) This Option may not be exercised if the issuance
of the Shares upon such exercise would constitute a violation
of any applicable federal or state securities or other law or
valid regulation. As a condition to the exercise of this
Option, the Company may
<PAGE>
require the exercising person to make any agreements and
undertakings that may be required by any applicable law or
regulation.
(ii) Shares issued upon the exercise of this Option
without registration of such Shares under the Securities Act
of 1933, as amended (the "Act"), shall be restricted
securities subject to the terms of Rule 144 under the Act. The
certificates representing any such Shares shall bear an
appropriate legend restricting transfer and the transfer agent
of the Company shall be given stop transfer instructions with
respect to such Shares.
Section 3. Term of Option. This Option may not be exercised after
September 30, 2002 and is subject to earlier termination as provided in Section
4. In addition, this Option is subject to cancellation by the Company upon a
significant corporate event as provided in Section 4 below. This Option may be
exercised during such times only in accordance with the terms of this Option
Agreement.
Section 4. Termination of Option Period.
(a) The unexercised portion of this Option shall automatically
and without notice terminate and become null and void at the time of
the earliest to occur of the following:
(i) thirty (30) days after the date that the Optionee
ceases to be employed by the Company or a subsidiary of the
Company or ceases to be a director, consultant or advisor to
the Company or a subsidiary of the Company, as the case may
be, regardless of the reason therefor other than as a result
of such termination by reason of (x) death, (y) mental or
physical disability of the Optionee as determined by a medical
doctor satisfactory to the Company or (z) valid termination of
the Optionee's employment, status as director, or consulting
contract or advisory services, as the case may be, with the
Company or a subsidiary for Cause,
The term "Cause," for the purposes of this Agreement, shall
mean any one or more of the following:
w. Optionee's failure to observe or perform any
of the provisions of his Consulting
Agreement with the Company, dated September
23, 1999 (the "Consulting Agreement"), or
Optionee's failure to carry out lawful
directives of the Board.
x. Optionee's performance of any criminal acts
(excluding traffic violations and other
minor offenses);
y. Optionee's theft or embezzlement of property
including trade secrets, of the Company; or
<PAGE>
z. Optionee's negligence in the performance of
his duties under the Consulting Agreement.
(ii) one (1) year after the date on which the
Optionee suffers a mental or physical disability as determined
by a medical doctor satisfactory to the Company;
(iii) either (y) one (1) year after the date that the
Optionee ceases to be a director, consultant to or ceases to
be employed by, as the case may be, the Company or a
subsidiary of the Company, by reason of death of the Optionee,
or (z) six (6) months after the date on which the Optionee
shall die, if the Optionee's death shall occur during the
thirty (30) day period described in Section 4(a)(i) or the
one-year period described in Section 4(a)(ii);
(iv) the date that the Optionee ceases to be a
director, consultant to or ceases to be employed by, as the
case may be, the Company or a subsidiary as a result of a
valid termination for Cause; and
(v) September 30, 2002
(b) The Company in its sole discretion may, by giving written
notice (a "Cancellation Notice") prior to the consummation of any of
the transaction described in Section 4(b)(i) or 4(b)(ii), cancel,
effective upon the date of the consummation of any of such
transactions, all or any portion of this Option that remains
unexercised on such date. Such Cancellation Notice shall be given a
reasonable period of time (but not less than 15 days) prior to the
effective date of such cancellation, and may be given either before or
after stockholder approval of such transaction.
(i) Any transaction (which shall include a series of
related transactions occurring within 60 days or occurring
pursuant to a plan) that has the result that stockholders of
the Company immediately before such transaction cease to own
at least 51% of (x) the voting stock of the Company or (y) any
entity that results from the participation of the Company in a
reorganization, consolidation, merger, liquidation or any
other form of corporate transaction.
(ii) A sale, lease, exchange or other disposition of
all or substantially all the property and assets of the
Company to an unaffiliated third party.
<PAGE>
Section 5. Adjustment of Shares.
(a) If at any time while unexercised Options are outstanding
hereunder, there shall be any increase or decrease in the number of
issued and outstanding shares of Common Stock through the declaration
of a stock dividend or through any recapitalization resulting in a
stock split-up, combination or exchange of shares, then and in such
event proportionate adjustment shall be made in the number of Shares
and the exercise price per Share thereof then subject to this Option,
so that the same proportion of the Company's issued and outstanding
shares shall remain subject to purchase at the same aggregate exercise
price.
(b) Except as otherwise expressly provided herein, the
issuance by the Company of shares of its capital stock of any class, or
securities convertible into shares of capital stock of any class,
either in connection with direct sale or upon the exercise of rights or
warrants to subscribe therefor, or upon conversion of shares or
obligations of the Company convertible into such shares or other
securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to the number of or exercise price of Shares then
subject to this Option.
(c) Without limiting the generality of the foregoing, the
existence of this Option shall not affect in any manner the right or
power of the Company to make, authorize or consummate (i) any or all
adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business; (ii) any merger or
consolidation of the Company; (iii) any issue by the Company of debt
securities, or preferred or preference stock that would rank above the
Shares subject to this Option; (iv) the dissolution or liquidation of
the Company; (v) any sale, transfer or assignment of all or any part of
the assets or business of the Company; or (vi) any other corporate act
or proceeding, whether of a similar character or otherwise.
Section 6. Non-Assignability of Option. This Option may be transferred
or assigned by the Optionee only to family members, trusts or other entities for
the benefit of the Optionee or for the benefit of the Optionee's family members,
by will or by the laws of descent and distribution or by the laws regulating
testate or intestate succession applicable to the Optionee.
Section 7. Issuance of Shares. No person shall be, or have any rights
or privileges of, a stockholder of the Company with respect to any of the Shares
subject to this Option unless and until certificates representing such Shares
have been issued and delivered to such person. As a condition of an issuance of
a stock certificate for Shares, the Company may obtain such agreements or
undertakings, if any, as it may deem necessary or advisable to assure compliance
with any provision of this Option Agreement or any law or regulation, including,
but not limited to, the following:
(a) The Optionee's representation and warranty to the Company,
at the time the Option is exercised, that the Shares to be issued are
being acquired for investment and not with a view to, or for sale in
connection with, the distribution of any such Shares; and
<PAGE>
(b) the Optionee's representation, warranty or agreement to be
bound by any legends that are, in the opinion of the Company, necessary
or appropriate to comply with the provisions of any securities law
deemed by the Company to be applicable to the issuance of the Shares
and to be endorsed upon the certificates representing the Shares.
Section 8. Administration of this Option.
(a) The determinations and the interpretation and construc-
tion of any provision of this Option by the Company shall be final and
conclusive.
(b) Subject to the express provisions of this Option, the
Company shall have the authority, in its sole and absolute discretion,
to adopt, amend, and rescind administrative and interpretive rules and
regulations relating to this Option and to perform all other acts
necessary or advisable for administering this Option, including the
delegation of such ministerial acts and responsibilities as the Company
deems appropriate.
Section 9. Government Regulations. The granting and exercise of this
Option and the obligation of the Company to sell and deliver Shares under this
Option, shall be subject to all applicable laws, rules and regulations, and to
such approvals by any governmental agencies or national securities exchanges as
may be required.
Section 10. Law Governing. THIS OPTION IS INTENDED TO BE PERFORMED IN
THE STATE OF DELAWARE AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF SUCH STATE EXCEPT TO THE EXTENT DELAWARE LAW IS
PREEMPTED BY FEDERAL LAW.
Section 11. Notices. Whenever any notice is required or permitted under
this Option Agreement, such notice must be in writing and personally delivered
or sent by mail or delivery by a recognized courier service. Any notice required
or permitted to be delivered under this Option Agreement shall be deemed to be
delivered on the date on which it is personally delivered, or, if mailed,
whether actually received or not, on the third business day after it is
deposited in the mail, certified or registered, postage prepaid, addressed to
the person who is to receive it at the address that such person has previously
specified by written notice delivered in accordance with this subsection.
Notwithstanding the foregoing, the Cancellation Notice shall also be sent to
Optionee and his counsel set forth on his signature page by facsimile
transmission reasonably promptly after the original of the Cancellation Notice
is otherwise sent to the Optionee. The Company or the Optionee may change, at
any time and from time to time, by written notice to the other, an address, or
in the case of Optionee the name and address of his counsel, that was previously
specified for receiving notices. Until changed in accordance with this Option
Agreement, the Company and the Optionee shall specify as its or his address for
receiving notices the address set forth in this Option Agreement pertaining to
the Shares to which such notice relates.
<PAGE>
Section 12. Miscellaneous.
(a) The Company has full corporate authority to grant this
Option, and this Option is granted to the Optionee in implementation of
the Consulting Agreement describing such Option and is in addition to
any other stock option plans of the Company or other benefits with
respect to the Optionee's position with or relationship to the Company
or its subsidiaries. This Option shall not confer upon the Optionee the
right to continue as an employee, consultant or advisor, or interfere
in any way with the rights of the Company to terminate the Optionee's
status as an employee, consultant or advisor.
(b) The members of the Board shall not be liable for any act,
omission or determination taken or made in good faith with respect to
this Option, and members of the Board shall, in addition to all other
rights of indemnification and reimbursement, be entitled to
indemnification and reimbursement by the Company in respect of any
claim, loss, damage, liability or expense (including attorneys' fees,
the costs of settling any suit, provided such settlement is approved by
independent legal counsel selected by the Company, and amounts paid in
satisfaction of a judgment, except a judgment based on a finding of bad
faith) arising from such claim, loss, damage, liability or expense to
the full extent permitted by law and under any directors' and officers'
liability or similar insurance coverage that may from time to time be
in effect.
(c) Any issuance or transfer of Shares to the Optionee, or to
the Optionee's legal representative, heir, legatee, or distributee, in
accordance with the provisions of this Option, shall, to the extent
thereof, be in full satisfaction of all claims of such persons under
this Option. The Company may require the Optionee, or any legal
representative, heir, legatee or distributee as a condition precedent
to such payment or issuance or transfer of Shares, to execute a release
and receipt for such payment or issuance or transfer of Shares in such
form as it shall determine.
(d) Neither the Board nor the Company guarantees Shares from
loss or depreciation.
(e) All expenses incident to the administration, termination,
or protection of this Option, including, but not limited to, legal and
accounting fees, shall be paid by the Company; provided, however, the
Company may recover any and all damages, fees, expenses and costs
arising out of any actions taken by the Company to enforce its rights
under this Option.
(f) Records of the Company shall be conclusive for all
purposes under this Option, unless determined by the Board to be
incorrect.
(g) Any action required of the Company relating to this Option
shall be by resolution of the Board or by a person authorized to act by
resolution of the Board.
(h) If any provision of this Option is held to be illegal or
invalid for any reason, the illegality or invalidity shall not affect
the remaining provisions of this Option, but such provision shall
<PAGE>
be fully severable, and this Option shall be construed and enforced as
if the illegal or invalid provision had never been included in this
Option.
(i) Any person entitled to notice under this Option may
waive such notice.
(j) This Option shall be binding upon the Optionee, his legal
representatives, heirs, legatees and distributees upon the Company, its
successors, and assigns, and upon the Board and its successors.
(k) The titles and headings of Sections are included for
convenience of reference only and are not to be considered in
construction of this Option's provisions.
(l) Words used in the masculine shall apply to the feminine
where applicable, and wherever the context of this Option dictates, the
plural shall be read as the singular and the singular as the plural.
DATE OF GRANT: AUTHORISZOR INC.
September 23, 1999 By:
-----------------------------
Robert P. Jeffcock, President
ADDRESS:
Windsor House
Cornwall Road
Harrogate, North Yorkshire
United Kingdom
HG1 2PW
<PAGE>
Optionee hereby accepts this Option subject to all the terms and
provisions of this Option Agreement.
By:
-------------------------
Rt. Honorable Sir
Malcolm Rifkind
KCMG QC
Optionee
ADDRESS:
Eskgrove House
Inveresk
East Lothian
EH21 7TD
Facsimile number: 44-131-665-8118
Counsel:
H.J. Ross
Turcan Connell
Solicitors
Saltire Court
20 Castle Terrace
Edinburgh EH1 2EF
Facsimile number: 44-131-228-8118
DATED 28 January 2000
(1) AUTHORISZOR INC.
(2) THE PERSONS NAMED IN THE FIRST SCHEDULE
(3) BEESON GREGORY LIMITED
PLACING AGREEMENT relating to shares of common stock par value US$0.01 per share
in AUTHORISZOR INC.
TITMUSS SAINER DECHERT
2 Serjeants' Inn
London EC4Y 1LT
Date: 28.1.2000
Ref: C353/062581
<PAGE>
INDEX
Clause Page number
Recitals 1
1. Definitions and interpretation 2
2. Conditions 8
3. Agency 9
4. Placing 10
5. The Option 11
6. Allotment 12
7. Commissions and expenses 13
8. Warranties 14
9. Indemnities 15
10. Appointment of financial adviser 20
11. Further agreements of the Company 20
12. Termination 24
13. Remedies and enforcement 24
14. Further agreements regarding the Placing 25
15. Whole agreement 27
16. Time of the essence 28
17. Notices 28
18. Governing Law 29
Schedules
1. The Directors 32
2. Warranties 33
3. Documents to be delivered 53
4. Terms and conditions of the Option 52
Appendices
A. Selling restrictions for offers and
sales outside the USA 54
B Business Plan
<PAGE>
THIS AGREEMENT is made 28 January, 2000
BETWEEN:
(1) AUTHORISZOR INC. a company incorporated and registered in the State of
Delaware, USA and whose registered office is at 1209 Orange Street,
Wilmington, Delaware 19801 USA ("Company");
(2) THE SEVERAL PERSONS whose names and addresses are set out in the second
schedule (each a "Director" and together the "Directors"); and
(3) BEESON GREGORY LIMITED a company registered in England and Wales with
number 2316630 and whose registered office is at The Registry, Royal Mint
Court, London EC3N 4EY ("Beeson Gregory").
RECITALS
(1) The Company was originally registered as a Colorado corporation on 30
January 1989 under the name Starlight Acquisitions Inc. On 10 May 1996, the
Company acquired Toucan Mining Limited, the holding company of a mining
group operating in South America. On 29 July 1996, the Company was merged
into a newly formed holding company, which was registered as a Delaware
corporation on 22 July 1996 under the name Toucan Gold Corporation.
Effective as of 15 July 1999, Toucan Mining Limited sold its only operating
subsidiary to Minmet plc in consideration for the issue of Minmet plc
shares, the grant of certain warrants over Minmet plc shares and other
consideration. On 27 January 2000, the Company sold the whole of the issued
share capital of Toucan Mining plc (formerly Toucan Mining Limited) to
Golden Ridge Group Limited for an aggregate consideration comprising
(pound)500,000.
(2) On 22 July 1999, the Company acquired the whole of the issued share capital
ITIS Technologies Limited, whose business comprised the basis of the
Group's current business. On 25 August 1999, the name of the Company was
changed to Authoriszor Inc. and the name of ITIS Technologies Limited was
changed to Authoriszor Limited.
(3) On 12 January 2000, the Company's newly formed wholly owned subsidiary,
Authoriszor Holdings Limited, acquired the whole of the issued share
capital of Authoriszor Limited on the same date.
(4) On 27 January 2000, Authoriszor Holdings Limited agreed to subscribe for
25.1 per cent. of the issued share capital of WRDC Limited with an option
to acquire the balance of its issued share capital on the terms and subject
to the conditions of the Acquisition Agreement. The Acquisition Agreement
is conditional upon the Placing and is not otherwise capable of being
terminated by the parties to it (other than by Authoriszor Holdings
Limited).
1
<PAGE>
(5) The Company has agreed to issue 1,850,000 Shares to Placees who are not US
Persons (as defined in Regulation S) procured by Beeson Gregory at the
Placing Price and to issue the Investment Memorandum to such Placees (and
to other potential or proposed placees identified by Beeson Gregory).
Beeson Gregory has conditionally agreed to procure such Placees. The
Company shall apply the proceeds of the Placing as described in the
Investment Memorandum and (except with the prior approval in writing of
Beeson Gregory) substantially in accordance with the Business Plan.
(6) At the date of this agreement the Company has an authorised share capital
of 30,000,000 shares of common stock, par value US$0.01 each, and 2,000,000
shares of preferred stock, par value US$0.01 each, of which o shares of
common stock are in issue and, save for the outstanding warrants over o
shares of common stock and the outstanding options over o shares of common
stock disclosed in the Information Memorandum, has not granted or created
or agreed to grant or create any options or warrants or other rights in
respect of any part of its unissued share capital (save for the Option
referred to in clause 5 of this agreement).
1. DEFINITIONS AND INTERPRETATION
In this agreement (including the schedules hereto):
1.1 the following expressions shall, except where the context otherwise
requires, have the meanings set out below:
"Accountants" means Grant Thornton of St. Johns Centre, 110
Albion Street, Leeds, West Yorkshire LS2 8LA
"Accounts Date" means 30 June 1999;
"Acquisition" means the subscription for shares in WRDC Limited by
Authoriszor Holdings Limited pursuant to the Acquisition
Agreement;
"Acquisition Agreement" means an agreement dated 21 January 2000
between (1) Authoriszor Holdings Limited (2) WRDC Limited (3) the
shareholders of WRDC Limited and (4) the Company relating to the
subscription by Authoriszor Holdings Limited for shares in WRDC
Limited;
"Affiliate" means in relation to a specified person a person who,
directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with, the
person specified;
"Agreed Form" means, in relation to any document, in a form
previously agreed and signed or initialled by or on behalf of the
Company and Beeson Gregory for the purposes of identification;
"Allotment Date" means the date of allotment of the Placing Shares
which is currently expected to be 18 February 2000;
2
<PAGE>
"Audited Accounts" means the audited consolidated balance sheets
of the Group for the year ended on the Accounts Date and the
audited consolidated profit and loss accounts and audited cash
flow statements of the Group for the financial periods ended on
the Accounts Date (including all related notes and directors' and
auditors' reports);
"Beeson Gregory's UK Lawyers" means Titmuss Sainer Dechert of 2
Serjeants' Inn, London EC4Y 1LT;
"Board" means the board of directors of the Company;
"Business Day" means a day, other than a Saturday or Sunday, on
which banks are open for ordinary business in London;
"Business Plan" means the Company's business plan as at the date
of this agreement, a copy of which initialled by the Company and
Beeson Gregory is attached as appendix "B";
"Companies Act" means the UK Companies Act 1985 as amended;
"Company's UK Lawyers" means Hammond Suddards of 2 Park Lane,
Leeds LS3 1ES;
"Company's US Lawyers" means Jenkens and Gilchrest, l.p.c., of
1445 Ross Avenue, Suite 3200, Dallas Texas 75202;
"Condition Date" means the first date on which any of the events
referred to in clause 2.4 occurs;
"Conditions" the conditions set out in clause 2.1; and "Condition"
shall mean any one of them or, where so specified, any particular
one of them;
"control" means the possession, direct or indirect, of the power
to direct or cause the direction of the management and policies of
a person, whether through the ownership of voting securities, by
contract, or otherwise;
"Engagement Letter" means the engagement letter dated 14 December
1999 between Beeson Gregory and the Company;
"Engagement Term" has the meaning given to that expression in
clause 10.3;
"Exchange Act" means the US Securities Exchange Act of 1934, as
amended;
"FSA" means the UK Financial Services Act 1986;
"Group" means the Company and its Subsidiaries;
3
<PAGE>
"Group Company" means the Company or any of its Subsidiaries;
"Indemnified Persons" means Beeson Gregory and its group
undertakings and the respective directors, officers, agents and
employees of Beeson Gregory and its group undertakings and each
person who controls Beeson Gregory or any of its group
undertakings; and in this definition the expression "group
undertaking" shall have the meaning set out in section 259(5) of
the Companies Act;
"Information Memorandum" means the information memorandum to be
dated the same date as this agreement prepared by Beeson Gregory
in connection with the Placing;
"Intellectual Property" includes (i) patents, trade marks,
registered designs, database rights, domain names and any
applications for any of the foregoing, and (ii) copyright,
know-how, design rights and analogous rights, trade and business
names, rights in confidential information, in each case howsoever
arising and including any right or interest in any of the
foregoing;
"Legal Due Diligence Questionnaire" means the legal due diligence
questionnaire prepared by Beeson Gregory's UK Lawyers and all
supplemental written questions sent to the Company or its advisers
by Beeson Gregory's advisers;
"Listed Countries" means Belgium, France, Italy, Switzerland and
the United Kingdom;
"Lock-up Agreements" means the lock-up agreements in the Agreed
Form entered into by the Company and Beeson Gregory with those
directors of the Company who are directly or indirectly
beneficially interested in Shares as at the date of this
agreement;
"Management Accounts" means the unaudited consolidated monthly
balance sheets of the Group for the period from 30 June 1999 to 31
December 1999;
"NASD" the North American Association of Securities Dealers;
"Nasdaq NMS" means the NASD Automated Quotation National Market
System based in the USA;
"Option" has the meaning given to that expression in clause 5.1;
"Option Shares" has the meaning given to that expression in clause
5.1;
"Placees" means the institutional and other investors in the
Listed Countries selected by Beeson Gregory as subscribers for
Placing Shares under the Placing;
"Placing" means the placing by Beeson Gregory on behalf of the
Company of the Placing Shares with Placees on the terms of this
agreement and the Placing Documents;
4
<PAGE>
"Placing Date" means the date on which the Placing takes place
which is expected to be on or about 16 February 2000; "Placing
Documents" means the Information Memorandum, the Placing Letter
and the Press Announcement;
"Placing letter" means the letter from Beeson Gregory to each of
the Placees;
"Press Announcement" means the press announcement in the Agreed
Form relating to the Placing and the Acquisition;
"Placing Price" means the price per Placing Share notified to the
Company (after consultation therewith) by Beeson Gregory on or
before the Placing Date which shall be such price as may be
reasonably determined by Beeson Gregory based upon the indicative
price range and the other criteria set out in the Information
Memorandum;
"Placing Shares" means the 1,850,000 unissued Shares subject to
the Placing;
"Properties" means the properties identified as being owned or
occupied by the Group in the Information Memorandum;
"Registration Rights Agreement" means the registration rights
agreement in respect of the Placing Agreement in the Agreed Form
to be entered into by the Company pursuant to this agreement;
"Regulation S" means Regulation S (17 C.F.R. 230.901 through 905,
inclusive) promulgated by the SEC under the Securities Act;
"Regulations" means the UK Public Offers of Securities Regulations
1995, as amended;
"SEC" means the US Securities and Exchange Commission;
"Securities Act" means the US Securities Act of 1933, as amended;
"Shares" means shares of common stock, par value US$0.01 each, in
the Company, whether in issue as at the date of this agreement or
to be issued as Placing Shares under the Placing;
"Stock Plan" has the same meaning as in the Information Memorandum;
"Subsidiaries" means the Subsidiary Undertakings of the Company
referred to in the Information Memorandum; and "Subsidiary" shall
mean any of them;
5
<PAGE>
"Subsidiary Undertakings" means any "subsidiary undertaking" of
the Company from time to time (within the meaning given to that
expression by section 258 of the Companies Act); and the
expression "Subsidiary Undertaking" means any one or more of them;
"Tax" "Taxes" or "Taxation" has the meaning given to those
expressions in warranty 7.1;
"Termination Date" has the meaning given to that expression in
clause 12.4;
"UK" means the United Kingdom of Great Britain and Northern
Ireland;
"UK Legal Comfort Letter" means a letter dated as at the date of
this agreement from the Company's UK Lawyers addressed to Beeson
Gregory and the Company in the Agreed Form;
"US" or "USA" means the United States of America;
"US Legal Comfort Letter" means a letter dated as at the date of
this agreement from the Company's UK Lawyers addressed to Beeson
Gregory and the Company in the Agreed Form;
"US GAAP" means generally accepted accounting principles and
practices in the USA;
"Verification Notes" means the verification notes in the Agreed
Form dated 28 January 2000 in relation to the information
contained in the Information Memorandum;
"Warranties" means the warranties contained in clause 8 and in
the second schedule; and
"Warrantors" the Company and the Directors.
1.2 words and expressions defined in the Information Memorandum bear the same
meanings in this agreement unless otherwise defined in this agreement;
1.3 any reference to any recital, clause or schedule (other than to a schedule
to a statutory provision) is a reference to a recital, clause of or
schedule to this agreement and the recitals and schedules form part of and
are deemed to be incorporated in this agreement;
1.4 any reference to a statute or statutory provision includes a reference to
that provision as amended, re-enacted or replaced and any regulations or
orders made under such provisions from time to time, in each case before
the date of this agreement;
1.5 any reference to persons includes a reference to firms, corporations or
unincorporated associations;
6
<PAGE>
1.6 any reference to the singular includes a reference to the plural and vice
versa and any reference to any gender includes a reference to each other
gender;
1.7 any agreement, warranty, representation, indemnity, covenant or undertaking
on the part of two or more persons shall, save where expressly provided to
the contrary, be deemed to be given or made by such persons jointly and
severally;
1.8 if any statement is qualified by the expression "to the best of the
knowledge, information and belief" of any person, or "so far as the
Warrantors are aware" or by any similar expression or otherwise by
reference to a person's knowledge or awareness, that expression shall mean
the awareness of that person having made due and careful enquiry;
1.9 words and expressions defined in the Companies Act bear the same respective
meanings in this agreement;
1.10 headings and titles are used for ease of reference only and do not affect
the interpretation of this agreement;
1.11 reference to a certified copy of a document being a certified copy shall be
a reference to a copy of such document certified by any Director as being a
true and complete copy of the original; and
1.12 any reference to "material" means material in the context of the Group as a
whole or the Placing or material to any subscriber for or purchaser of
Placing Shares.
2. CONDITIONS
2.1 Subject as provided under clause 12, the obligations of the parties
hereunder (other than the obligations of the Warrantors under this clause 2
and of the Company under clauses 7, 10, 13, 15, 16, 17 and 18) are
conditional on the following matters being fulfilled:
2.1.1 the publication of the Press Announcement in accordance with the
requirements of NASD;
2.1.2 the Company having complied with all filing requirements of the SEC in
respect of the Placing and the Acquisition;
2.1.3 all board and shareholder approvals of the Placing having been obtained by
the Company on or before the date of the Information Memorandum;
2.1.4 the notice and filing requirements in the Listed Countries having been
complied with on or before the date of the Information Memorandum;
2.1.5 the obligations of Beeson Gregory not having been terminated pursuant to
clause 12;
7
<PAGE>
2.1.6 the fulfilment by the Company of its obligations under clauses 6.2 and
6.3;
2.1.7 the Warranties being true, complete and accurate in all material respects
on the date hereof and on every day up to and including the Allotment
Date;
2.1.8 book building with proposed Placees in respect of the Placing Shares
having been completed to the satisfaction of Beeson Gregory which Beeson
Gregory shall confirm to the Company prior to the Placing Date;
2.1.9 Beeson Gregory having received opinions of the Company's US Lawyers
confirming compliance of the Placing with Regulation S and US securities
law and all relevant US regulations all in a form satisfactory to Beeson
Gregory on or before the Placing Date;
2.1.10 all the documents listed in the third schedule having been delivered to
Beeson Gregory on or before the date of this agreement (or on or before
such later date as specified in the third schedule);
2.1.11 the Acquisition having become unconditional in all respects (save only
for any condition relating to receipt by the Company of proceeds of the
Placing); and
2.1.12 new stock certificates in respect of the Placing Shares being delivered
to Beeson Gregory on or before 29 February 2000; and
provided that Beeson Gregory may agree in writing to extend the date for
fulfilment of any Condition to a later date (not being later than 10
March 2000).
2.2 Any Condition may be waived in whole or in part by Beeson Gregory in its
absolute discretion by notice in writing to the Company.
2.3 The Company undertakes to Beeson Gregory to use all reasonable endeavours
at the Company's own expense to fulfil or procure the satisfaction of the
Conditions by the times and dates specified in clause 2.1.
2.4 Subject to the provisions of clause 11, if any Condition becomes incapable
of being satisfied (and such Condition is not waived by Beeson Gregory) or
if any Condition is not satisfied in accordance with clause 2.1 (or waived
by Beeson Gregory in accordance with clause 2.7), this agreement (other
than the obligations of the Warrantors under this clause 2.4 and under
clauses 7, 10, 13, 15, 16, 17 and 18 shall have no further effect and in
such event (and without prejudice to the terms of the Engagement Letter) no
party to this agreement shall have any claim whatsoever against any other
party to this agreement except in relation to any breaches prior to the
relevant date, except that the Company shall forthwith pay (or indemnify
Beeson Gregory to the extent that the same have been, or that it has been
agreed that the same shall be, incurred by Beeson Gregory against) the sums
set out in clause 7.2.
8
<PAGE>
2.5 The Company shall deliver or procure the delivery to Beeson Gregory of the
documents listed in the third schedule on or before the date of this
agreement (or on or before such later date as specified in the third
schedule).
3. AGENCY
3.1 Beeson Gregory shall be entitled to offer the Placing Shares for
subscription or sale or to invite offers to subscribe for or purchase the
Placing Shares upon the terms and conditions set out in the Placing
Documents.
3.2 The Company irrevocably and unconditionally appoints Beeson Gregory as its
agent for the purposes of the Placing and procuring subscribers for or
purchasers of the Placing Shares on the terms and subject to the conditions
of this agreement and the Placing Documents. The Company confirms that this
appointment confers on Beeson Gregory all powers and authorities on behalf
of the Company which are necessary for or reasonably incidental to the
purpose for which it has been appointed as agent and agrees to ratify and
confirm everything which Beeson Gregory shall lawfully do in the exercise
of such powers and authorities.
4. PLACING
4.1 Beeson Gregory agrees with the Company that it shall use its reasonable
endeavours to procure subscribers for the Placing Shares at the Placing
Price on the terms of the Placing Documents. To the extent that Beeson
Gregory fails to procure subscribers for the Placing Shares at the Placing
price under the Placing, it shall itself subscribe as principal at the
Placing Price for such Placing Shares as are not subscribed at the Placing
Price by Placees under the Placing.
4.2 In full discharge of its obligations under this clause 4, Beeson Gregory
will not later than 3 pm on 25 February 1999 pay to the bank account
previously notified in writing by the Company to Beeson Gregory in
immediately available funds the aggregate Placing Price of those Placing
Shares, in respect of which either the Placing Price has been received by
Beeson Gregory from Placees (together with any interest received thereon),
or which Beeson Gregory has agreed pursuant to this clause 5 to subscribe
as principal, after deducting the commission of Beeson Gregory referred to
in clause 7.1, such of the amounts as are referred to in clause 7.2 as have
been or which it has been agreed are to be incurred by Beeson Gregory in
each case together with any VAT thereon.
4.3 Beeson Gregory agrees with the Company that it will not offer, sell or
deliver any Placing Shares as part of its distribution under the Placing or
otherwise, until one year after the later of (i) the time when the Placing
Shares are first offered to persons other than distributors in reliance
upon Regulation S or (ii) the date of closing of the Placing, within the
United States or to, or for the account or benefit of, a US Person (as
defined in the Securities Act) and that it will not engage in hedging
transactions in the Shares, in each case except in compliance with
9
<PAGE>
the Securities Act. Beeson Gregory also agrees that it will send to each
distributor, dealer or other person receiving a selling commission, fee or
other remuneration from Beeson Gregory in connection with the Placing to
which it sells Placing Shares a confirmation to the following effect:
"Prior to investing in the Placing Shares or conducting any transactions in
the Placing Shares, investors are advised to consult professional advisers
regarding the above restrictions on transfer."
4.4 Beeson Gregory agrees that it will only place Placing Shares in the Listed
Countries and will use all reasonable endeavours to ensure that such
placing will be in accordance with the laws of those jurisdictions.
5. OPTION
5.1 The Company grants to Beeson Gregory an option ("Option") to subscribe or
procure the subscription for 92,500 Shares (apart from the Placing Shares)
("Option Shares").
5.2 The Option may be exercised by Beeson Gregory by written notice to the
Company at any time beginning on the date of this agreement and ending 2
years following the date of this agreement.
5.3 The Option may be exercised in whole or on one or more occasion in parts.
Exercise notices shall state the number of Option Shares in respect of
which the Option is being exercised and shall designate the closing date
for the delivery to Beeson Gregory or as it may direct of such Option
Shares which shall be as set out in clause 6.5. Such closing date shall be
not less than 3 Business Days following the date of the relevant exercise
notice.
5.4 Any option notice may only be given on a Business Day and if given later
than 5 pm on any Business Day shall be deemed to have been given on the
next Business Day.
5.5 The price of the Option Shares shall be the Placing Price.
5.6 In full discharge of its obligations under this clause 5, Beeson Gregory
will not later than 3 pm on the Business Day following the date on which
any Option Shares are issued by the Company pursuant to clause 5.3 pay to
the bank account previously notified in writing by the Company to Beeson
Gregory in immediately available funds the aggregate Placing Price of such
Option Shares.
6. ALLOTMENT AND SALE
6.1 Subject to the terms and conditions of the Placing Documents, Beeson
Gregory shall determine all matters in respect of the Placing, including
(without limitation):
10
<PAGE>
6.1.1 the identity of the Placees provided that Beeson Gregory shall consult
with the Company in relation thereto; and
6.1.2 the allocation of the Placing Shares amongst such Placees.
6.2 The Company irrevocably undertakes to Beeson Gregory to allot Placing
Shares to Placees under the Placing (or to Beeson Gregory as appropriate)
with full title guarantee free from all liens, charges and encumbrances,
equities and other third party rights of any nature whatsoever and on terms
that they shall be fully paid and rank pari passu in all respects with the
existing Shares including the right to receive all dividends and other
distributions, the record date in respect of the payment of which shall
occur on or after the date of the Information Memorandum.
6.3 If not so duly held and convened prior to execution of this agreement, upon
execution of this agreement the Directors shall convene a meeting of the
Board for the purpose of considering and passing resolutions to allot the
Placing Shares to Placees under the Placing (or to Beeson Gregory as
appropriate) in accordance with clauses 6.1 and 6.2 and approve the issue
in compliance with Regulation S of new stock certificates to and the entry
in the Company's register of such persons as allottees.
6.4 The Company shall or shall procure that its transfer agents shall deliver
the relevant stock certificates in compliance with Regulation S in respect
of the Placing Shares to Placees in accordance with clauses 6.1 and 6.2 on
or before 29 February 2000.
6.5 On each occasion on which Beeson Gregory exercises the Option the Company
shall or shall procure that its transfer agents shall deliver the relevant
stock certificates in favour of Beeson Gregory or as it may direct in
respect of those Option Shares in respect of which the Option is exercised
to Beeson Gregory by 12 noon within 3 Business Days of the date the
relevant date of exercise.
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6.6 In order to facilitate the performance of the obligations of the Company
contained in clauses 6.2 to 6.4 inclusive, Beeson Gregory shall, if
reasonably required by the Company, provide the Company with a schedule of
the Placees subscribing for Placing Shares and the number of Placing Shares
for which each of them are subscribing.
6.7 Beeson Gregory shall be entitled to retain any interest earned on the sums
to be paid to the Company referred to in this clause 6 in respect of the
period from and including the receipt of such sums by Beeson Gregory until
and including the dates for payment of such sums to the Company.
7. COMMISSIONS AND EXPENSES
7.1 Beeson Gregory's fee in respect of its services to the Company in
connection with the Placing shall comprise a commission equal to 5 per cent
of an amount equal to the Placing Price multiplied by the aggregate number
of Placing Shares plus, to the extent that any value added tax is
chargeable on such commission, any value added tax thereon. Beeson Gregory
shall be entitled to deduct such fee from the proceeds of the issue of the
Placing Shares received by it. Beeson Gregory's fee shall also comprise the
Option.
7.2 The Company shall pay (whether or not this agreement becomes unconditional
pursuant to clause 2 or is terminated by Beeson Gregory pursuant to clause
12) all costs and expenses of whatever nature properly incurred by Beeson
Gregory in connection with the Placing including, without limitation, all
reasonable out of pocket expenses, travel and hotel costs, all costs
associated with the road show and marketing, the reasonable legal fees and
expenses of Beeson Gregory's UK Lawyers, Beeson Gregory's US Lawyers and
the lawyers responsible for the Foreign Lawyers Letters, the accounting
fees and expenses of Grant Thornton, printing and postage costs, public
relations costs and all the other costs and expenses arising from the
Placing (together with all value added tax properly charged on such costs
and expenses). Beeson Gregory shall be entitled to deduct such fees and
expenses from the proceeds of the issue of the Placing Shares received by
it.
7.3 Where any sum payable under this agreement is subject to value added tax,
such sum will be paid together with the relevant amount of properly
chargeable value added tax.
7.4 In the event of any inconsistency between this clause 7 and the Engagement
Letter, the terms of this clause shall prevail.
8. WARRANTIES
8.1 Each of the Warrantors jointly and severally warrants and represents to and
undertakes with Beeson Gregory that each of the Warranties set out in the
second schedule is now true complete and accurate and will be true complete
and accurate in all material respects on each
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day between the date of this agreement up to and including the Allotment
Date as if repeated on each such day with reference to the facts which
shall then exist.
8.2 Each of the Warrantors shall procure that (save only as may be necessary to
give effect to this agreement) neither it nor any company in the Group
shall do, allow or procure any act or omission which would constitute a
material breach of any of the Warranties upon the repetition of such
Warranties from and including the date of this agreement up to and
including the Allotment Date.
8.3 Each Warrantor undertakes to notify Beeson Gregory in writing upon becoming
aware of any facts or circumstances which constitute or would be likely to
constitute a material breach of any Warranty or which make or would be
likely to make inaccurate or misleading any Warranty in any material
respect.
8.4 If the Option is exercised after the Allotment Date each Warrantor
undertakes to notify Beeson Gregory in writing ("Notification") if that
Warrantor is or becomes aware of any facts or circumstances which
constitute or might be likely to constitute a material breach of any
Warranty or which make or would be likely to make inaccurate or misleading
any Warranty in any material respect as if such Warranty were repeated on
the date of exercise.
8.5 In this clause 8 and the second schedule, references to the Company shall,
except where the context otherwise requires, be deemed to include
additional and separate references also to each of the Subsidiary
Undertakings whether or not it was a Subsidiary Undertaking at the relevant
time.
8.6 The maximum liability of each Director under the Warranties and the
indemnities under clause 9.1 shall be an amount equal to the number of
Shares held by such Director at the date of this agreement (assuming all
warrants and options held by such Director have been exercised and all
Shares the subject thereof have been issued) multiplied by the Placing
Price. The Warranties in respect of a breach of Warranty of which he could
not reasonably have been aware, having made due and careful inquiry.
8.7 A Director shall, at his option, be entitled to satisfy any claim made
against him under the Warranties by transferring such number of shares to
Beeson Gergory (or as Beeson Gregory may direct) as shall, at the NASDAQ
quoted price of the shares at the date of the claim, be equal to the value
of the claim.
9. INDEMNITIES
9.1 To the extent permitted by law the Company and each Director agrees to
indemnify and hold harmless Beeson Gregory (for itself and as trustee for
each of the other Indemnified Persons) against all liabilities, demands,
claims, actions proceedings or judgments made, brought or established
against any losses, claims, costs, charges and expenses (including
reasonable legal fees and proper expenses) which the Indemnified Person as
a result of or arising out of or in connection with:
9.1.1 the issue or despatch of the Placing Documents (or any of them);
9.1.2 the allotment, issue and sale or re-sale of the Placing Shares;
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9.1.3 any breach or alleged breach of any of the Warranties or of any of the
other provisions of this agreement;
9.1.4the Placing Documents not containing, or being alleged not to contain, all
information material in the context of the Placing, whether required by
statute or not, or any statement therein being, or being alleged to be,
untrue, incorrect or misleading in any material respect;
9.1.5 any breach or alleged breach of the laws or regulations of any
jurisdiction resulting from the issue or distribution of the Placing
Documents or the offer or the allotment, issue and sale or re-sale of the
Placing Shares or the entering into or completion of this agreement;
9.1.6 the performance by Beeson Gregory of its services to the Company in
connection with the Placing or the preparation and distribution of any of
the Placing Documents;
9.1.7 any failure or alleged failure by the Company or any of its agents,
employees, officers or professional advisers (other than the Indemnified
Persons) to comply with any relevant statutory or regulatory requirements
in relation to the Placing;
9.1.8 any allegation that Beeson Gregory failed to comply with its obligations
pursuant to the any statutory or regulatory requirements in relation to the
Placing;
9.1.9 any of the transactions contemplated by this agreement.
9.2 The indemnities contained in clause 9.1:
9.2.1 shall not extend to any actions, liabilities, demands, losses, claims,
costs, charges and expenses to the extent that arise as a result of (i)
negligence or wilful default on the part of Beeson Gregory or (ii) a breach
by Beeson Gregory of its duties under the FSA or any other relevant
regulatory requirement or (iii) a material breach by Beeson Gregory of this
agreement; and
9.2.2shall not apply to the extent prohibited by law. 9.3 No claim shall be
made against any of the Indemnified Persons by any party to this agreement
(other than by Beeson Gregory) to recover any damage, cost, charge or
expense which the Company, any Subsidiary Undertaking, the Directors or any
subscriber for or purchaser of Placing Shares pursuant to the Placing or
any subsequent purchaser or transferee thereof may suffer or incur by
reason of or arising out of any underwriting and the placing of the Placing
Shares, the allotment, issue and sale or re-sale of the Placing Shares or
the publication or despatch of the Placing Documents, unless and except to
the extent that such damage, cost, charge or expense arises as a result of
(i) negligence or wilful default on the part of Beeson Gregory or (ii) a
breach by Beeson Gregory of its duties under the FSA or any other relevant
regulatory requirement or (iii) a material breach by Beeson Gregory of this
agreement.
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9.4 Should any amount paid or payable under clause 9.1 to Beeson Gregory or any
of the other Indemnified Persons ("Recipient") be itself subject to tax in
the hands of such Recipient or be required by law to be paid by the Company
or any of the Directors under any deduction or withholding, the Company or
the relevant Director (as the case may be) will pay to such Recipient such
sum as will after any such tax, deduction or withholding leave such
Recipient with the same amount as he would have received if no such tax had
been payable and no deduction or withholding had been made.
9.5 Beeson Gregory enters into this clause 9 for itself and as trustee for each
Indemnified Person on the following basis:
9.5.1 only Beeson Gregory may decide whether or not to enforce an Indemnified
Person's right under the trust (and only it may decide the terms and
conditions of that enforcement) and investigate a matter or give
information to an Indemnified Person, in connection with the trust;
9.5.2 notwithstanding the trust, Beeson Gregory may enter into an agreement,
arrangement or transaction with a person (including, without limitation,
the Company) and may deal with his or its rights under this agreement
without regard to an Indemnified Person's interest and is not liable to
account to an Indemnified Person for any benefit realised by that
agreement, arrangement, transaction or dealing; and
9.5.3 Beeson Gregory is not liable to another Indemnified Person for any of
its acts or omissions as trustee.
9.6 Beeson Gregory agrees to inform the Company on behalf of itself and the
Directors as soon as practicable about any claim brought or threatened
against any Indemnified Person of which it becomes aware and in respect of
which Beeson Gregory or any other Indemnified Person may seek indemnity
under this clause 9 and in connection therewith shall:
9.6.1consult with the Company in relation to all significant decisions
concerning any such claim and shall have due regard to any reasonable
request of the Company relating thereto; and
9.6.2 provide the Company with such information relating thereto and which it
may reasonably request;
except, in any such case, insofar as, in the reasonable opinion of Beeson
Gregory (having consulted with its insurers), to do so would prejudice its
own insurance arrangements in respect of any matter to which this clause 9
applies.
9.7 If Beeson Gregory makes a claim against any of the Directors for breach of
any of the Warranties or under the indemnity contained in clause 9.1, none
of the Directors shall have or pursue any claim or third party action to
join in, claim against, seek a contribution from or otherwise claim or seek
damages or compensation from the Company or any Subsidiary
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Undertaking or any associated company of the Company or any of their
respective directors (other than the Directors), officers or employees and
the Directors confirm to Beeson Gregory that no member of the Group has
entered into any agreement or arrangement concerning the liability of the
Directors or any of them for any breach of the Warranties or in relation to
any other covenant, term or condition set out in this agreement.
9.8 The parties to this agreement (other than Beeson Gregory) agree with and
acknowledge to Beeson Gregory that neither Beeson Gregory nor any of its
officers, directors, employees, agents or advisers are or shall be
responsible to such other parties for verifying the accuracy and/or
fairness of any information in any of the Placing Documents or any other
documents otherwise published or caused to be published in connection with
the Placing.
9.9 The Company agrees:
9.9.1 to indemnify and hold harmless Beeson Gregory, its directors, officers,
employees and agents and each person who controls Beeson Gregory within the
meaning of either the Securities Act or the Exchange Act against any and
all losses, claims, damages or liabilities, joint or several, to which they
or any of them may become subject under the Securities Act, the Exchange
Act or other US Federal or state statutory law or regulation, at common law
or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Information Memorandum (or in any supplement or amendment thereto) or any
information provided by the Company to any holder or prospective subscriber
for or purchaser of Shares, or in any amendment thereof or supplement
thereto, or arise out of or are based upon the omission or alleged omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under
which they were made, not misleading; and
9.9.2 to reimburse each such indemnified party, as incurred, for any legal or
other expenses reasonably incurred by them in connection with investigating
or defending any such loss, claim, damage, liability or action.
9.10 The Company will not be liable under clause 9.9 to the extent that any such
loss, claim, damage or liability arises out of or is based upon any such
untrue statement or omission or alleged omission made in the Information
Memorandum, or in any amendment thereof or supplement thereto, in reliance
upon and in conformity with written information furnished to the Company by
or on behalf of Beeson Gregory or to the extent that such damage, cost,
charge or expense arises as a result of (i) negligence or wilful default on
the part of Beeson Gregory or (ii) a breach by Beeson Gregory of its duties
under the FSA or any other relevant regulatory requirement or (iii) a
material breach by Beeson Gregory of this agreement.
9.11 The indemnity in clause 9.9 will be in addition to any liability which the
Company may otherwise have and in the event that it is unavailable to or
insufficient to hold harmless an
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Indemnified Person for any reason, the Company agree to contribute to the
aggregate losses, claims, damages and liabilities (including legal or other
expenses reasonably incurred in connection with investigating or defending
them) (collectively "Losses") to which Beeson Gregory may be subject in
such proportion as is appropriate to reflect the relative benefits received
by the Company on the one hand and by the Beeson Gregory on the other from
the offering of the Placing Shares. If the allocation provided by the
immediately preceding sentence is unavailable for any reason, the Company
shall contribute in such proportion as is appropriate to reflect not only
such relative benefits but also the relative fault of the Company in
connection with the statements or omissions which resulted in such Losses,
as well as any other relevant equitable considerations. Benefits received
by the Company shall be deemed to be equal to the total net proceeds from
the Placing received by it, and benefits received by Beeson Gregory shall
be deemed to be equal to the total fees and commissions referred to in
clause 8. Relative fault shall be determined by reference to, among other
things, whether any untrue or any alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates
to information provided by the Company on the one hand or Beeson Gregory on
the other, the intent of the parties and their relative knowledge, access
to information and opportunity to correct or prevent such untrue statement
or omission. The Company and Beeson Gregory agree that it would not be just
and equitable if contribution were determined by pro rata allocation or any
other method of allocation which does not take account of the equitable
considerations referred to above.
9.12 Notwithstanding the provisions of clauses 9.9 and 9.2, no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
10. APPOINTMENT OF FINANCIAL ADVISER
10.1 The Company hereby appoints Beeson Gregory as its exclusive financial
adviser, such appointment to be subject to 3 months written notice of
termination by either party.
10.2 The Company will pay to Beeson Gregory an annual fee of (pound)25,000 plus
VAT (if any) and reasonable disbursements payable quarterly in advance in
respect of the services which Beeson Gregory normally provides as a UK
financial adviser, the first payment being due on the Issue Date. Beeson
Gregory shall not be obliged to undertake any specific assignments and
shall be entitled to agree a separate fee with the Company in respect of
them.
10.3 For so long as Beeson Gregory continues to be engaged by the Company as
financial advisor ("Engagement Term"), the Company will consult with Beeson
Gregory before undertaking any action which would require the issue of an
announcement or circular or which would require shareholder approval or
which is material in the context of the Placing and would require board
approval or which would involve the issue of new securities or which would
require notice to any regulatory body.
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10.4 In relation to the appointment of Beeson Gregory as financial adviser, the
standard terms and conditions of business of Beeson Gregory for time to
time shall apply, except where the terms of this agreement and such
standard terms.
10.5 Except to the extent specifically excluded by this agreement, the
Engagement Letter shall remain in force and continue to bind the Company
and Beeson Gregory.
11. FURTHER AGREEMENTS OF THE COMPANY
11.1 The Company agrees with Beeson Gregory as follows:
11.1.1 that it will not issue any amendment or supplement to the Information
Memorandum of which Beeson Gregory shall not previously have been advised
and approved and furnished with a copy or to which Beeson Gregory shall
have reasonably objected in writing or which is not in compliance with any
applicable law or regulation;
11.1.2 that it will promptly notify Beeson Gregory in the event of, at any time
within the period of 90 days following the date of this agreement or, if
longer, during the Engagement Period, the receipt by the Company of notice
of the initiation or threatening of any proceeding for such purpose or any
request, inquiry or order issued, given or sent by Nasdaq or the SEC
relating to the Company, any of its Subsidiary Undertakings or any of their
respective officers, directors, employees, shareholders or affiliates.
11.1.3 that the Company will make every commercially reasonable effort to
prevent the issue of such any such order as is referred to in clause 11.1.2
and, if such an order shall at any time be issued, to obtain the withdrawal
thereof at the earliest possible moment;
11.1.4 that Beeson Gregory is authorised to use the Information Memorandum as
from time to time amended or supplemented in connection with the sale of
the Placing Shares;
11.1.5 that, during the Engagement Period, the Company will furnish to Beeson
Gregory 3 copies of all periodic and special reports furnished to
shareholders of the Company and of all information, documents and reports
filed with the SEC and/or Nasdaq;
11.1.6 that, without the prior written consent of Beeson Gregory, the Company
will not, directly or indirectly, issue, sell, offer, contract to sell,
pledge, grant any option to subscribe or purchase or otherwise dispose of,
or publicly announce any intention to issue, sell, offer, contract to sell,
pledge, grant any option to subscribe or purchase or otherwise dispose, of
any shares or any securities convertible into or exchangeable or
exercisable for or any rights to subscribe or purchase or acquire Shares or
other equity securities or enter into any material transaction for a period
of 10 Business Days following the Placing Date without the prior written
consent of Beeson Gregory, such consent not to be unreasonably withheld or
delayed;
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11.1.7 that the Company's US Lawyers have explained to each of the directors of
the Company the nature of their responsibilities and obligations as,
respectively, directors of a US public company and directors of a company
whose securities have been admitted to trading on Nasdaq;
11.1.8 that the net proceeds from the sale of the Placing Shares will be applied
as set out in the Information Memorandum and (except with the prior
approval in writing of Beeson Gregory) substantially in accordance with the
Business Plan.
11.1.9 that it has not taken and will not take, directly or indirectly, any
action which is designed to stabilise or manipulate, or which constitutes
or which might reasonably be expected to cause or result in stabilisation
or manipulation of, the price of any security of the Company in connection
with the Placing;
11.1.10 to do all such acts as may be required to vest the Placing Shares in
Placees (or Beeson Gregory as appropriate) and the Option Shares in Beeson
Gregory or as it may direct in accordance with the provisions of clause 6;
11.1.11 that it will not create any pre-emption right, lien, charge, encumbrance
or other adverse interest over any Placing Shares or Option Shares;
11.1.12 that the Placing Shares and the Option Shares will, as from the date
when they are issued and are fully paid up, rank pari passu in all respects
with, and be identical to, the existing Shares then in issue;
11.1.13 that it will register any transfer of Placing Shares or Option Shares
within 10 Business Days of receipt and will despatch share certificates in
compliance with Regulation S without delay;
11.1.14 that it will notify Beeson Gregory without delay of: (i) any major new
developments in its sphere of activity which are not public knowledge which
may by virtue of the effect of those developments on its assets and
liabilities or financial position or on the general course of its business
lead to a substantial movement in the price of the Shares in each case in
so far as it is aware of such matters and (ii) any change in the financial
condition of the Company or in the performance of its business or in the
Company's expectation of its performance, the knowledge of which change is
likely to lead to a substantial movement in the price of the Shares; and
11.1.15 that it will supply Beeson Gregory on a timely basis with copies of all
its filings with Nasdaq and the SEC.
11.2 The Company undertakes to Beeson Gregory that between the date of this
agreement and the date falling 90 days thereafter or, if this agreement is
terminated prior the Placing Date, 30 days after such termination, it shall
not without the prior written consent of Beeson Gregory, such
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consent not to be unreasonably withheld enter into or procure or permit
itself or any Subsidiary Undertaking to enter into any transaction or take
any action which would require shareholder approval.
11.3 Save as expressly required under this agreement or by applicable law or
regulation, the Company shall not, and the Company shall procure that no
Subsidiary Undertaking shall, make or despatch any public announcement,
statement or communication concerning the Company or any Subsidiary
Undertaking or any Affiliate in connection with the Placing (whether in
response to enquiries or otherwise) between the date of this agreement and
the date falling 90 days thereafter or, if longer, during the Engagement
Term or, if this agreement is terminated prior to the Placing Date, 30 days
after such termination, without the prior written consent of Beeson Gregory
(not to be unreasonably withheld or delayed).
11.4 The Company undertakes to Beeson Gregory that it will at all times during
the Engagement Term as soon as practicable:
11.4.1 notify Beeson Gregory in advance of, and discuss with Beeson Gregory the
content, timing and manner of, any announcement of profits, losses or
dividends in respect of any financial period of the Company or part of such
period or any other announcement concerning the financial position, affairs
or prospects of the Company or the Group and (to the extent practicable in
the circumstances) discuss with Beeson Gregory any other information which
is likely materially to affect the general character or nature of the
business of the Group; and
11.4.2 forward to Beeson Gregory for perusal and discussion as to the timing of
despatch and content of all proofs of all documents to be sent to holders
of the Company's shares including, without prejudice to the generality of
the foregoing, notices of meetings, forms of proxy and the directors'
report and annual accounts, and all documents relating to takeovers,
mergers, reorganisations or other schemes (including employee profit
sharing schemes or share option schemes) and all press announcements which
it is required to issue (other than trade announcements which are not of a
price-sensitive nature).
11.5 The Company shall take all reasonable steps to procure that employees of
the Company and the Subsidiary Undertakings and the advisers to and agents
of the Company and the Subsidiary Undertakings observe the restrictions set
out in clauses 11.2 to 11.4 (inclusive) as if they were parties to this
agreement.
11.6 The Company shall and the Directors shall procure that the Company shall
take all steps reasonably necessary to comply with all recommendations set
out in the letters from Grant Thornton listed in the third schedule.
12. TERMINATION
12.1 If, at any time on or prior to 8.30 am on the Placing Date:
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12.1.1 there shall have occurred, happened or come into effect any material
adverse change in national or international finance, economic, market or
political conditions and/or in the business, financial position or
prospects of the Company or any of the Subsidiary Undertakings or WRDC and,
in the reasonable opinion of Beeson Gregory, arrived at in good faith and
having consulted with the Company, the effect of such act or change is
likely to cause a substantial deterioration in the price or value of the
Placing Shares; or
12.1.2 there is a breach of any of the Warranties which Beeson Gregory
reasonably considers to be material.
then Beeson Gregory shall be entitled to terminate its obligations under
this agreement by giving notice in writing to the Company at any time prior
to 8.30 am on the Allotment Date.
12.2 If this agreement is terminated pursuant to clause 12, it shall cease and
determine and such termination shall be without prejudice to any accrued
rights or obligations of any party under this agreement and the provisions
of this clause 12.2 and clauses 7, 10, 13, 15, 16, 17 and 18 shall remain
in full force and effect.
12.3 The date of service of a notice under clause 12.1 is the "Termination
Date".
12.4 Notwithstanding any representations given by the Warrantors under this
agreement, Beeson Gregory shall not be entitled to rescind this agreement
except pursuant to clause 2 or this clause 12.
13. REMEDIES AND ENFORCEMENT
13.1 Each of the Warranties, and the undertakings and indemnities referred to in
clauses 8, 9, 11 and 14, shall remain in full force and effect
notwithstanding the completion of the purchase and/or subscription of the
Placing Shares and any Option Shares and the completion of the Placing
until 4 months following the date of publication of the Group's audited
accounts for the year ending 30 June 2002.
13.2 No neglect, delay or indulgence on the part of any party in enforcing any
term or condition of this agreement or their rights or remedies under this
agreement shall be construed as a waiver of any term or condition of this
agreement or of its rights or remedies under this agreement, and the
release or compromise by any party from or of the liability of any other
party or the grant to any of them of any time or other indulgence shall not
affect the liability of any other party.
13.3 This agreement shall be binding upon each of the parties hereto and its or
his assigns, successors in title or legal personal representatives as the
case may be.
13.4 If any amounts payable to any party under this agreement are overdue then
interest shall be payable on the overdue amount at the annual rate of 2
percentage points above the base rate
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of National Westminster Bank plc from time to time from the due date up to
and including the date of actual payment of such amounts compounded
quarterly.
14. FURTHER AGREEMENTS REGARDING THE PLACING
14.1 The Company will not, and will not permit any of its Affiliates to, resell
any Placing Shares or Option Shares to a US Person.
14.2 Neither the Company, nor any of its or their Affiliates, nor any person
acting on any of their behalves will, directly or indirectly, make offers
or sales of any security, or solicit offers to buy any security, under
circumstances that would require the registration of the Placing Shares
under the Securities Act.
14.3 Neither the Company, nor any of its Affiliates, nor any person acting on
any of their behalves will engage in any form of general solicitation or
general advertising (within the meaning of Regulation D of the Securities
Act) in connection with any offer or sale of the Placing Shares in the USA.
14.4 Neither the Company, nor any of its Affiliates, nor any person acting on
any of their behalves will engage in any directed selling efforts (as
defined in Regulation S) with respect to the securities.
14.5 The Company agrees to refuse to register any transfer of the Placing Shares
not made in accordance with the provisions of Regulation S, pursuant to
registration under the Securities Act, or pursuant to an available
exemption from registration supported by an opinion of counsel experienced
in securities laws acceptable to Beeson Gregory establishing the
availability of such exemption. The Company will give instructions to its
transfer agent to the foregoing effect. The certificates representing the
Placing Shares offered or sold in relation on Regulation S will bear the
following legend:
"THE COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN
REGISTERED UNDER THE US SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED EXCEPT (1) IN AN OFFSHORE TRANSACTION
MEETING THE REQUIREMENTS OF RULE 903 OR RULE 904 OF REGULATION S
UNDER THE SECURITIES ACT, (2) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144
THEREUNDER (IF AVAILABLE) OR (3) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN
ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS.
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HEDGING TRANSACTIONS INVOLVING THE COMMON STOCK OF THE
COMPANY MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE
SECURITIES ACT."
14.6 The Company will not take, directly or indirectly, any action designed to
or which has constituted or which might reasonably be expected to cause or
result, under the Exchange Act or otherwise, in stabilisation or
manipulation of the price of any security of the Company to facilitate the
sale or resale of the Placing Shares.
14.7 The Company represents and warrants to and agrees with Beeson Gregory that:
14.7.1 it has not offered or sold, and will not offer or sell, any Placing
Shares except in accordance with the restrictions set forth in Annex A
hereto; and
14.7.2 neither it nor any person acting on its behalf has made or will make
offers or sales of the Placing Shares in the USA by means of any form of
general solicitation or general advertising (within the meaning of
Regulation D) in the USA.
14.8 Beeson Gregory represents to the Company that it has offered and sold the
Placing Shares, and will offer and sell the Placing Shares, (i) as part of
their distribution at any time and (ii) otherwise until one year after the
later of the commencement of the offering of the Placing Shares to persons
who are not distributors, as defined in Regulation S, and the closing date
of the offering of the Placing Shares hereunder, only in accordance with
Rule 903 or 904 of Regulation S under the Securities Act. Accordingly,
Beeson Gregory further represents and agrees that, so far as it is aware,
all of the Placing Shares have been or will be sold in offshore
transactions, that none of the Placing Shares have been or will be sold to,
or for the account or benefit of, a US Person, that neither it, nor its
officers or employees nor any persons engaged to act on its behalf, have
engaged or will engage in any directed selling efforts with respect to the
Placing Shares, and that it and they have complied and will comply with the
offering restrictions requirement of Regulations S. Beeson Gregory agrees
to engage in hedging transactions in the Shares only in accordance with the
Securities Act. All terms in the above paragraph have the meanings ascribed
to them in Regulation S.
14.9 The Company agrees to file as soon as reasonably practicable after the date
of this agreement and in any event prior to the Placing Date an application
for the Shares to be included in the Nasdaq NMS. The Company will use its
best efforts to cause the NASD to accept such application and include the
Shares in the Nasdaq NMS no later than 42 days from the date hereof. In
fulfilling its obligation hereunder, the Company shall promptly respond to
all requests for information and further documentation from the NASD and
shall adopt such corporate governance measures as requested by the NASD."
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14.10 The Company agrees with Beeson Gregory to use its best efforts (including
disposing of investments) by no later than 14 July 2000 to cause the
Company not to be or be controlled by an "investment company" under the US
Investment Company Act of 1940.
15. WHOLE AGREEMENT
The parties to this agreement confirm that (save for any matters implied or
arising as a matter of law):
15.1 save for the Engagement letter, this agreement and the agreements and
documents referred to herein contain or refer to the whole of the terms of
the agreement and arrangements between the parties or any of them with
regard to the Placing;
15.2 this agreement may be executed as two or more documents in the same form
and execution by all of the parties of at least one of such documents will
constitute due execution of this agreement.
16. TIME OF THE ESSENCE
Time shall be of the essence of this agreement but any time, date or period
mentioned in any clause of this agreement may be extended by mutual
agreement between the Company and Beeson Gregory.
17. NOTICES
17.1 Any notice to be given under this agreement shall be in writing and shall
be served by sending it by hand, facsimile transmission or first class
post:
17.1.1 if to the Company or to any of the Directors, to the Company's registered
office for the time being, marked for the attention of the Chief Executive
Officer ; and
17.1.2 if to Beeson Gregory, to its registered office for the time being, marked
for the attention of the Head of Corporate Finance and Jonathan Freeman.
17.2 Any notice referred to in clause 17.1 shall be deemed to have been
received:
17.2.1 if delivered by hand, on the day of delivery and in proving service it
shall be necessary only to produce a receipt for the communication signed
by or on behalf of the addressee;
17.2.2 if sent by facsimile transmission, at the time of transmission or, if the
time of transmission is not during the addressee's normal business hours,
at 9.30 a.m. on the next Business Day and in proving service it shall be
necessary only for the communication or a confirmatory letter to have been
delivered by hand or sent by first class post on the same day but failure
of the addressee
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to receive such confirmation shall not invalidate the relevant
communication deemed given by facsimile transmission;
17.2.3 if sent by first class post, on the second Business Day after the day of
posting (or five Business Days after the day of posting in the case of
posting to an address outside the United Kingdom) and, in proving service,
it shall be necessary only to prove a communication was contained in an
envelope which was duly addressed and posted in accordance with this
clause.
18. GOVERNING LAW
18.1 This agreement shall be governed by and construed in all respects in
accordance with the laws of England.
18.2 In relation to any legal action or proceedings arising out of or in
connection with this agreement ("Legal Proceedings"), each of the parties
to this agreement (other than Beeson Gregory) who is not or who ceases to
be resident in England ("Relevant Parties") hereby irrevocably submits to
the exclusive jurisdiction of the English Courts and waives any objection
to Legal Proceedings in such Courts on the grounds of venue or on the
grounds that the Legal Proceedings have been brought in an inconvenient
forum. These submissions shall not affect the right of any other party to
take Legal Proceedings in any other jurisdiction, nor shall the taking of
Legal Proceedings in any jurisdiction preclude any party from taking Legal
Proceedings in any other jurisdiction.
18.3 Each of the Relevant Parties hereby undertakes to Beeson Gregory
irrevocably to appoint, and each hereby appoints, the Company's UK Lawyers
(Reference: SGG/KRP) to receive at its address set out at the beginning of
this agreement, for him and on his behalf, service of process in any Legal
Proceedings in England. Such service shall be deemed completed on delivery
to such address (whether or not it is forwarded to or received by the
relevant appointor).
EXECUTED as a DEED )
and DELIVERED by )
AUTHORISZOR INC. ) /s/ James L. Jackson
acting by )
JAMES LEONARD JACKSON )
Duly authorised signatory
Duly authorised signatory
SIGNED as a DEED and )
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DELIVERED by )
RICHARD LANGEVIN, )
ACTING BY HIS ATTORNEY ) /s/ James L. Jackson
JAMES, LEONARD JACKSON )
in the presence of: )
/s/
SIGNED as a DEED and )
DELIVERED by )
JAMES JACKSON ) /s/ James L. Jackson
in the presence of: )
/s/
SIGNED as a DEED and )
DELIVERED by )
DAVID WRAY ACTING BY )
HIS DULY AUTHORIZED ) /s/ James L. Jackson
ATTORNEY )
JAMES LEONARD JACKSON )
in the presence of: )
SIGNED as a DEED and )
DELIVERED by )
ROBERT JEFFCOCK ACTING BY )
HIS DULY AUTHORIZED ) /s/ James L. Jackson
ATTORNEY )
JAMES LEONARD JACKSON )
in the presence of: )
/s/
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EXECUTED as a DEED )
and DELIVERED by ) /s/
BEESON GREGORY LIMITED )
acting by: )
Director
Director
27
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THE FIRST SCHEDULE
THE DIRECTORS
Richard Langevin
1 Justin Road, Natick, Massachusetts, USA
James Jackson
2 Parklands, Studley Roger, Ripon, North Yorkshire HG4 3AY
David Wray
54 New Park Road, Queensbury, BradFord, BD13 1FP
Robert Jeffcock
42B Roc Fleuri, 1 Rue du Tenao, MC 9300 Monaco
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THE SECOND SCHEDULE
WARRANTIES
For the purpose of this second schedule, the term "Company" shall refer to the
Company and all of its predecessors, by merger or otherwise.
THE PLACING AND PLACING DOCUMENTS
1.1 The Information Memorandum contains all such information as investors
(including Beeson Gregory) and their professional advisers would reasonably
require and reasonably expect to find in the Information Memorandum for the
purpose of making an informed assessment of the assets and liabilities,
business, financial position, profits and losses and prospects of the Group
and of the rights attaching to the Placing Shares and the Option Shares.
1.2 All statements of fact in the Information Memorandum are true complete and
accurate and not misleading in any material respect and all expressions of
opinion, intention and expectation in the Placing Documents are truly and
honestly held and either fairly based upon facts within the knowledge of
the Directors or made on reasonable grounds.
1.3 The Information Memorandum contains the items of information required by
the relevant law and regulations including the FSA and the Securities Act.
1.4 No Group Company has distributed any offering material in connection with
the Placing other than the Placing Documents and other materials required
to be so distributed by applicable law.
1.5 All material supplied by the Warrantors in connection with the Verification
Notes and in response to the Legal Due Diligence Questionnaire was when
supplied and is now true complete and accurate in all material respects and
where such information was expressed as an opinion of the Group Company or
its directors such opinion was and continues to be honestly and reasonably
held by reference to the facts and circumstances now subsisting.
1.6 The Company has complied and will comply with all applicable laws and
regulations with respect to anything done by it in relation to the Shares
in, from or otherwise involving the United Kingdom.
1.7 Neither the Company nor any of its Affiliates, nor any person acting on any
of their behalves has, directly or indirectly, made offers or sales of any
security, or solicited offers to buy any security, under circumstances that
would require the registration of the offer and sale of the Placing Shares
or the Option Shares under the Securities Act.
1.8 Neither the Company nor any of its Affiliates, nor any person acting on any
of their behalves has engaged in any form of general solicitation or
general advertising (within the meaning of
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Regulation D) in connection with any offer or sale of the Placing Shares or
the Option Shares in the USA.
1.9 Neither the Company nor any of its or their Affiliates, or any person
acting on any of their behalves (i) has engaged nor will engage in any
directed selling efforts (as defined in Regulation S) and (ii) has complied
and will comply with the offering restrictions requirements of Rule 903 of
Regulation S, in each case, with respect to the Placing Shares or the
Option Shares.
1.10 The Company has not paid or agreed to pay to any person any compensation
for soliciting another to subscribe for or purchase any securities of the
Company, except as contemplated by this agreement.
1.11 The Company has not taken, directly or indirectly, any action designed to
cause or which has constituted or which might reasonably be expected to
cause or result, under the Exchange Act or otherwise, in the stabilisation
or manipulation of the price of any security of the Company to facilitate
the sale or resale of the Shares.
1.12 No consent, approval, authorisation, filing with or order of any court or
governmental agency or body is required in connection with the transactions
contemplated herein or the offer and sale of the Placing Shares and the
Option Shares under any law or regulation applicable in the USA or any of
the Listed Countries, except filings under the Securities Act, Exchange Act
and applicable state securities laws with respect to the Company's
obligations under the Registration Rights Agreement and filings, under the
Exchange Act to report the transactions contemplated herein or the offer
and sale of the Placing Shares and the Option Shares.
1.13 The issue and sale of the Placing Shares or the Option Shares, the
execution and delivery of this agreement, the consummation of any other of
the transactions contemplated in it and, the fulfilment of its terms will
not conflict with, result in a breach or violation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company or
any of its Subsidiaries pursuant to, (i) the certificate or incorporation
or bylaws of the Company or any of its Subsidiaries; (ii) the terms of any
indenture, contract, lease, mortgage, deed of trust, note agreement, loan
agreement or other agreement, obligation, condition, covenant or instrument
to which the Company or any of its Subsidiaries is a party or bound or to
which its or their property is subject; or (iii) any statute, law, rule,
regulation, judgement, order or decree applicable to the Company or any of
its Subsidiaries of any court, regulatory body, administrative agency,
governmental body, arbitrator or other authority having jurisdiction over
the Company or any of its Subsidiaries or any of its or their properties.
1.14 Provided the offer and sale of the Placing Shares and the Option Shares is
conducted in accordance with the provisions hereof, the offer and sale of
the Placing Shares and the Option Shares is exempt from registration under
the Securities Act by virtue of the exemption contained in Regulation S or
in the case of any offer or sale to a US Person, section 4(2) of the
Securities Act.
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1.15 The summaries of the Acquisition and the Acquisition Agreement and the sale
of Toucan Mining Limited set out in the Investment Memorandum are accurate
and not materially misleading, including by omission.
THE GROUP
2.1 Each of the Company and the Subsidiaries has been duly organised and is
validly existing (in the case of the Company as a corporation in good
standing) under the laws of the jurisdiction in which it is chartered or
organised with full corporate power and authority to own or lease, as the
case may be, and to operate its properties and conduct its business as
described in the Information Memorandum, and is duly qualified to do
business as a foreign corporation (and in the case of the Company is in
good standing) under the laws of each jurisdiction which requires such
qualification.
2.2 All the outstanding shares of capital stock of each Subsidiary have been
duly and validly authorised and issued and are fully paid and
non-assessable, and, except as otherwise set forth in the Information
Memorandum, all outstanding shares of capital stock of the Subsidiaries are
owned by the Company either directly or through wholly owned subsidiaries
free and clear of any perfected security interest or any other security
interests, claims, liens or encumbrances.
2.3 The Company is not required to register under the US Investment Company Act
of 1940, as amended as it is a transient investment company within the
meaning of Rule 3a-2 of the US Investment Company Act 1940, as amended.
2.4 The Company is subject to and in compliance in all material respects with
the reporting requirements of Section 13 or Section 15(d) of the Exchange
Act.
2.5 This agreement has been duly authorised, executed and delivered by the
Company and constitutes the legal, valid and binding obligations of the
Company, enforceable against each of them in accordance with its terms.
2.6 The Company and each of its Subsidiaries owns or leases all such properties
as are necessary to the conduct of their operations as presently conducted.
2.7 Neither the Company nor any Subsidiary is in violation or default of (i)
any provision of its certificate of incorporation or bylaws; (ii) the terms
of any indenture, contract, lease, mortgage, deed of trust, note agreement,
loan agreement or other agreement, obligation, condition, covenant or
instrument to which it is a party or bound or to which its property is
subject; or (iii) any statute, law, rule, regulation, judgement, order or
decree of any court, regulatory body, administrative agency, governmental
body, arbitrator or other authority having jurisdiction over the Company or
such subsidiary or any of its properties, as applicable in each case to an
extent which is material.
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2.8 The details of the Company and the Subsidiaries and WRDC set out in the
Information Memorandum are accurate and in particular the directors of each
Group Company are accurately identified as such in the Information
Memorandum and each such director has been validly appointed and consented
to act as a member of the board of each Group Company and the Subsidiaries
are the only Subsidiary Undertakings of the Company.
2.9 The recitals at the beginning of this agreement are accurate and not
misleading.
2.10 The Company currently satisfies the quantitative requirements for inclusion
of its Shares in the Nasdaq NMS.
THE SHARES
3.1 The Company's authorised equity capitalisation is as set forth in the
Information Memorandum; the outstanding Shares have been duly and validly
authorised and issued and are fully paid and non-assessable; the Placing
Shares and the Option Shares have been duly and validly authorised and,
when issued and delivered to and paid for pursuant to this agreement, will
be fully paid and non-assessable; the certificates for the Placing Shares
and the Option Shares are in valid and sufficient form; and the holders of
outstanding shares of capital stock of the Company are not entitled to
pre-emptive or other rights to subscribe for the Placing Shares or the
Option Shares. Except as set forth in the Information Memorandum, no
options, warrants or other rights to subscribe or purchase, agreements or
other obligations to issue, or rights to convert any obligations into or
exchange any securities for, shares of capital stock of or ownership
interests in the Company are outstanding; and the statements set forth in
the Information Memorandum relating to the description of capital stock of
the Company insofar as they purport to constitute a summary of the terms of
the Shares fairly summarise the matters therein described.
3.2 The creation, issue and allotment of the Placing Shares in the manner
proposed by the Placing Documents and the Option Shares will comply with US
law and all other relevant law and regulations.
3.3 The Company has power under its by laws and certificate of incorporation to
create, allot and issue the Placing Shares and to effect the Placing in the
manner proposed and to enter into and perform this agreement without any
further sanction or consent by members of the Company or any class of them
and there is no consent required by the Company for the issue of the
Placing Shares, to effect the Placing and to enter into this agreement and
to perform its obligations under this agreement which has not been
unconditionally and irrevocably obtained.
3.4 The Placing Shares and the Option Shares when issued and delivered against
payment therefor as provided herein, will be duly and validly issued, fully
paid and will not be subject to any restrictions upon voting or transfer
other than as set out in the Company's bye laws and articles or any other
agreement or instrument to which the Company is a party.
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3.5 All sums due in respect of the issued capital of each Group Company have
been paid to and received by the relevant Group Company and save as
disclosed in the Information Memorandum there are in force no options or
other agreements which call for the issue of, or accord to any person the
right to call for the issue of, any shares in or other securities of the
Group Company.
3.6 When the Placing Shares and the Option Shares are allotted or transferred
to Beeson Gregory or the Placees and paid for in accordance with the terms
of this agreement, Beeson Gregory or the Placees will receive valid title
to the Placing Shares and any Option Shares subscribed for or purchased by
them, and the Placing Shares and such Option Shares will be issued, in each
case, free and clear of all liens, charges, encumbrances and adverse
claims.
WORKING CAPITAL
4.1 The working capital projections for the Group referred to or set out in the
Working Capital Report have been approved by each Director after due and
careful enquiry and have been accurately compiled on assumptions reasonably
and honestly made which are believed by each Director to be reasonable.
4.2 The statements, forecasts, estimates and expressions of opinion or
intention which the directors of the Company have made or given as set out
in the Working Capital Report have been made after due and proper
consideration, are honest and represent reasonable expectations on the
basis of facts known or which could on reasonable enquiry have been known
to the Directors
ACCOUNTS AND MANAGEMENT ACCOUNTS
5.1 The consolidated historical financial statements of the Company and its
Subsidiaries included in the Information Memorandum present truly and
fairly in all material respects the consolidated financial position,
results of operations and cash flows of the Company as of the dates and for
the periods indicated, comply as to form with the applicable accounting
requirements of the Securities Act and have been prepared in conformity
with generally accepted accounting principles in the USA applied on a
consistent basis throughout the periods involved (except as otherwise noted
therein). The selected financial data set forth in the Information
Memorandum fairly presents, on the basis stated in the Information
Memorandum, the information included therein; the pro forma financial
statements included in the Information Memorandum includes assumptions that
provide a reasonable basis for presenting the significant effects directly
attributable to the transactions and events described therein, the related
pro forma adjustments give appropriate effect to those assumptions, and the
pro forma adjustments reflect the proper application of those adjustments
to the historical financial statement amounts in the financial statements
included in the Information Memorandum.
5.2 Grant Thornton, who have audited financial statements of the Company and
its consolidated Subsidiaries and delivered their report with respect to
the audited consolidated financial
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statements and schedules included in the Information Memorandum, are
independent public accountants with respect to the Company within the
meaning of the Securities Act and the applicable published rules and
regulations thereunder.
5.3 The Group maintains a system of internal accounting controls sufficient to
provide reasonable assurances that (i) transactions are executed in
accordance with management's general or specific authorisation, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and
to maintain accountability for assets, (iii) access to assets is permitted
only in accordance with management's general or specific authorisation; and
(iv) the recorded accountability for assets is compared with existing
assets at reasonable intervals and appropriate action is taken with respect
to any differences.
5.4 The Management Accounts have been prepared by the directors of the Company
with due care and attention in accordance with the same accounting policies
as the Audited Accounts and in the reasonable opinion of the directors of
the Company, having made due and careful enquiry, show a reasonably
accurate and fair view of the profit or loss of the Group as at the date
and for the period in respect of which they have been prepared and are not
affected by any exceptional or non-recurring items.
5.5 Since the Accounts Date there has been no material adverse change in the
trading or financial position or prospects of any Group Company.
DIVIDENDS AND LOANS
6.1 Save as disclosed in the Information Memorandum, the Company has not paid
or made any payment or transfer to shareholders of any dividend, bonus,
loan or other distribution.
6.2 No Subsidiary of the Company is currently prohibited, directly or
indirectly, from paying any dividends to the Company, from making any other
distribution on such subsidiary's capital stock, from repaying to the
Company any loans or advances to such Subsidiary from the Company or from
transferring any of such Subsidiary's property or assets to the Company or
any other Subsidiary of the Company, except as described in or contemplated
by or reflected in the Information Memorandum.
TAXATION
7.1 For the purpose of this clause 7:
"Code" means the Internal Revenue Code of 1986, as amended.
"Governmental Body" means any foreign, federal, state, local or
other governmental authority or regulatory body.
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"Regulations" means the federal income tax regulations under the
Code, promulgated by the Treasury Department and contained in
Title 26 of the Code of Federal Regulations, including any
amendments or any substitute or successor provisions thereto.
"Tax" or "Taxes" or "Taxation" means any federal, state, local,
foreign or other net income, gross income, gross receipts,
windfall profits, severance, property, production, sales, use,
transfer, gains, license, excise, franchise, employment, payroll,
withholding (which includes, without limitation, income, payroll
tax, foreign withholding, backup withholding, and any other
withholding obligation imposed by the Code or a Governmental
Body), value added, estimated, alternative or add on minimum tax,
or any other tax, custom, duty, governmental fee or other like
assessment or charge of any kind whatsoever, together with any
interest or any penalty, addition to tax or additional amount
imposed by any Governmental Body; and
"Tax Return" means any return, report or similar statement
required to be filed with respect to any Taxes (including any
required schedules), including, without limitation, any
information return, claim for refund, amended return and
declaration of estimated Tax.
7.2 No Group Company has incurred, nor will incur, any liability in respect of
any Taxation in respect of the period since the Accounts Date to the date
hereof which is material in the context of the Placing, other than any such
liabilities arising in the ordinary course of its business since the
Accounts Date and any such liabilities arising since that date as a result
of any transactions entered into by and affecting it which are disclosed in
the Information Memorandum.
7.3 Each Group Company is registered for value added tax (of the equivalent) in
every country in which it is liable to pay value added tax.
7.4 The statements in the Information Memorandum under the heading "Taxation"
fairly summarise the matters therein described.
7.5 There are no stamp or other issuance or transfer taxes or duties or other
similar fees or charges required to be paid in connection with the
execution and delivery of this agreement or the issue by the Company of the
Placing Shares or the Option Shares or the issuance and sale of the Placing
Shares and the Option Shares.
7.6 Tax Returns that are required to have been filed by the Company and each
Subsidiary have been filed within the time and in the manner required by
law, and all such Tax Returns are true and correct and accurately reflect
the respective Tax liabilities of the Company and its Subsidiaries in all
respects. All Taxes of the Company and each Subsidiary that have become due
pursuant to such Tax Returns, or any assessments or demand for payment
received, have been paid. The provision for Taxes reflected on the
financial statements included in the Information Memorandum is adequate to
cover all Tax liabilities, whether or not disputed, of the Company and each
Subsidiary with respect to any taxable year or taxable period ending
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on or before the date thereof, and nothing has occurred subsequent to the
such date to make any such provision inadequate. All Taxes related to
taxable periods of the Company and each Subsidiary subsequent to the date
of the financial statements contained in the Information Memorandum have
been paid or are adequately reserved for on the books and records of the
Company and each Subsidiary. There are no current, pending or threatened
claims, assessments, notices, proposals to assess, deficiencies, or audits
with respect to any Taxes. No Governmental Body has claimed that the
Company or any Subsidiary is or may be subject to taxation by that
Governmental Body. The Company and each Subsidiary has withheld and paid
all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, shareholder, creditor, independent
contractor or other party. Neither the Company nor any Subsidiary has
executed any presently effective waiver or extension of any statute of
limitations against assessments and collections of Taxes. No Tax Returns of
the Company or any Subsidiary are presently subject to an extension of time
to file.
7.7 Neither the Company nor any Subsidiary has filed, or has had filed on its
behalf, an election under Section 341(f) of the Code that is applicable to
the Company, any Subsidiary or any of their respective assets. Neither the
Company nor any Subsidiary is a party to any Tax allocation or sharing
agreement. Neither the Company nor any Subsidiary, has been a member of an
affiliated group that elected to file or was required to file consolidated
returns for federal income tax purposes or consolidated, combined or
unitary tax returns for state or local income tax purposes.
7.8 Neither the Company nor any Subsidiary has an interest in any entity that
is treated as a partnership for federal income tax purposes.
7.9 Except to the extent disclosed in the Information Memorandum, neither the
Company nor any Subsidiary is a successor to any other business entity by
way of merger, reorganisation, liquidation or similar transaction.
7.10 There is no ruling issued to the Company or any Subsidiary (or closing
agreement or gain recognition agreement to which the Company or any
Subsidiary is a party) concerning Taxes from (or with) any Governmental
Body.
PROPERTIES
8. The Information Memorandum contains details of the only properties owned,
leased, licenced, or occupied by a Group Company or in respect of which the
Group has any material liability (contingent or otherwise) and so far as
the Warrantors are aware, there is no fact or circumstance as a result of
which any person may validly require the relevant Group Company to vacate
prematurely the Properties or to cease to carry on the business which it
presently carries on at the Properties, which is, in either case, material
in the context of the Placing.
ENVIRONMENT
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9. So far as the Warrantors are aware, the Company and its Subsidiaries are
(i) in compliance with any and all applicable foreign, federal, state and
local laws and regulations relating to the protection of human health and
safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants ("Environmental Laws"); (ii) have received and
are in compliance with all permits, licenses or other approvals required of
them under applicable Environmental Laws to conduct their respective
businesses; and (iii) have not received notice of any actual or potential
liability for the investigation or remediation of any disposal or release
of hazardous or toxic substances or wastes, pollutants or contaminants,
except where such non-compliance with Environmental Laws, failure to
receive required permits, licenses or other approvals, or liability would
not, individually or in the aggregate, have a material adverse change in
the condition (financial or otherwise), prospects, earnings, business or
properties of the Company and its Subsidiaries, individually or taken as a
whole, whether or not arising from transactions in the ordinary course of
business, except as set forth in or contemplated in the Information
Memorandum (exclusive of any amendment or supplement thereto); except as
set forth in the Information Memorandum, neither the Company nor any of the
Subsidiaries has been named as a "potentially responsible party" under the
Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended.
INSURANCE
10. The Company and each of its Subsidiaries are insured by insurers of
recognised financial responsibility against such losses and risks and in
such amounts as are reasonably prudent in the businesses in which they are
engaged; all policies of insurance and fidelity or surety bonds insuring
the Company or any of its Subsidiaries or their respective businesses,
assets, employees, officers and directors are in full force and effect; the
Company and its Subsidiaries are in compliance with the terms of such
policies and instruments in all material respects; and there are no claims
by the Company or any of its Subsidiaries under any such policy or
instrument as to which any insurance company is denying liability or
defending under a reservation of rights clause; neither the Company nor any
such Subsidiary has been refused any insurance coverage sought or applied
for; and neither the Company nor any such Subsidiary has any reason to
believe that it will not be able to renew its existing insurance coverage
as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost
that would not have a material adverse effect on the condition (financial
or otherwise), earnings, business or properties of the Company and its
Subsidiaries, taken as a whole, whether or not arising from transactions in
the ordinary course of business, except as set forth in or contemplated in
the Information Memorandum (exclusive of any amendment or supplement
thereto).
INTELLECTUAL PROPERTY
11.1 In this warranty 11, "Intellectual Property Rights" means all Intellectual
Property described or referred to in the Information Memorandum as owned or
used by the Company and/or which is necessary or desirable for the conduct
of its business as now or proposed to be
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conducted as described in the Information Memorandum or which otherwise
relates to the business of the Company.
11.2 The Company is the sole beneficial owner of all Intellectual Property
Rights owned by it ("Owned Rights") free from liens, charges and
encumbrances and full particulars of each of such Owned Rights are set out
in the written responses of the Company and its advisers to the Legal Due
Diligence Questionnaire. Each of such Owned Rights which is registered is
valid and enforceable.
11.3 The Warrantors have no reason to believe that any of the unregistered Owned
Rights capable of registration would not be registered or granted on an
application for such registration or grant and the Warrantors believe any
such registration or grant will be valid.
11.4 The details of the Intellectual property Rights described or referred to in
the Information Memorandum are true, complete and accurate in all material
respects.
11.5 All Intellectual Property Rights material to the existing or proposed
business of the Company other than the Owned Rights ("Licenced Rights") are
licenced to the Company on the terms of subsisting licences ("Licences")
which have been disclosed to Beeson Gregory's legal advisers. Each Licence
grants the Company adequate rights to use and sub-licence the relevant
Licenced Rights for the conduct of the business of the Group as now or
proposed to be conducted as described in the Information Memorandum in all
material respects. There are no agreements with third parties other than
the Licences whereby any member of the Group is authorised to use any
Intellectual Property.
11.6 The Licences are enforceable by the Company in accordance with their terms
and there has not been any material default (or any event which with notice
or lapse of time or both would constitute a default) under any of them by
any member of the Group or (as far as the Company is aware) by any other
party to such Licences.
11.7 Except as disclosed in writing to Beeson Gregory's legal advisers in
response to the Legal Due Diligence Questionnaire, the Company does not use
any Intellectual Property Rights which are capable of registration in
countries in which the Group carries on or proposes to carry on its
business other than in the countries where such rights have been registered
and (in the case of any trade and service marks which form part of such
Rights) other than in relation to the goods and services specified in the
registration.
11.8 There is no reason to believe that any Owned Rights which are capable of
registration in countries in which the Group carries on or proposes to
carry on its business but in respect of which the Company has not been
registered as proprietor cannot be registered by the Company, in each case
to the full extent to which the registration of such Intellectual Property
is possible in such countries. The Company has taken the steps referred to
in the Information Memorandum and the written responses to the Legal Due
Diligence Questionnaire to protect
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any Intellectual Property currently used by it which are or could through
registration or the taking of any other steps become its property and are
material to its business.
11.9 There has been no infringement by the Company of Intellectual Property held
by third parties which would have a material adverse effect on the
business, assets or prospects of the Group. So far as the Warrantors are
aware, there has not been any infringement by third parties of the Owned
Rights or the Licenced Rights which would have a material adverse effect on
the business, assets or prospects of the Group.
11.10The Company has not done or omitted to do any act, matter or thing in
respect of any Intellectual Property Rights which would impinge upon the
validity or enforceability of the same or upon the right of the Company to
use the same to an extent which is material in the context of the Group nor
are there any outstanding obligations of the Company whether as to payment
or otherwise which if left outstanding would so impinge.
11.11So far as the Warrantors are aware none of the Owned Rights is being used
by any person other than the Group. None of the Intellectual Property
Rights is the subject of any claim, opposition, assertion, infringement,
attack, right, action or other restriction or arrangement of whatsoever
nature which does or may impinge upon the validity, enforceability or
ownership of the same or the utilisation thereof by any Group Company to an
extent which is material in the context of the Group.
11.12So far as the Warrantors are aware, none of the activities of the Company
infringes any right of any other person relating to Intellectual Property
or gives rise to a liability for any royalty, compensation or similar
payment.
11.13All formulae, processes and other information forming part of Owned Rights
or the subject of any of the Licences (including in each case any know-how
and confidential information) are adequately documented and to the extent
that they are confidential or material in the context of the Group have not
been (and nor is there any agreement that they will or may be) disclosed to
any third party.
11.14 All documents material to the title to any Owned Rights and an original of
all Licences are in the Company's possession.
INDEBTEDNESS
12.1 No circumstances have arisen or so far as the Warrantors are aware are
likely to arise, such that any person is, or would with the giving of
notice and/or lapse of time become, entitled to require payment of any
material indebtedness (including, for the avoidance of doubt, pursuant to
finance leases) of any Group Company before its stated maturity and no
person to whom any material indebtedness of a Group Company which is
payable on demand is owed has indicated to the Group Company that it now
proposes to demand repayment.
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12.2 No event has occurred or so far as the Warrantors are aware is about to
occur by reason of the happening of which any secured or unsecured
borrowings of any Group Company have become or would with the giving of
notice or the lapse of time become repayable prior to maturity, and there
are no circumstances known to any Group Company which are reasonably likely
to lead to the occurrence of any such event.
MATERIAL CONTRACTS
13.1 No notice has been given to any of the Warrantors or action taken or is
expected to be given or taken whereby any material agreement, instrument or
arrangement to which any Group Company is a party would be terminated or
amended in any material respect. No event has occurred or is subsisting or
so far as the Warrantors are aware is about to occur, which constitutes or
results in, or would with the giving of notice and/or lapse of time,
constitute or result in, a default or the acceleration or breach of any
obligation under any agreement, instrument or arrangement to which any
Group Company is a party or by which it or any of its properties, revenues
or assets are bound or in the infringement by any Group Company of any
intellectual property rights held by third parties and which would, in any
such case, have a material adverse effect on the business, assets or
prospects of the Group.
13.2 The documents disclosed by the Company in response to the Legal Due
Diligence Questionnaire include complete copies of all material contracts
to which any Group Company is a party.
13.3 No Group Company has manufactured, sold or supplied products which are, or
were, or will become, in any material respect faulty or defective or which
do not comply in any material respect with any warranties or
representations expressly or impliedly made by any Group Company or with
all applicable regulations, standards and requirements.
INSOLVENCY
14. No Group Company has taken any action nor have any other steps been taken
or legal proceedings started or threatened against any Group Company for
its the winding-up or dissolution or for it to enter into any arrangement
or composition for the benefit of creditors, or for the appointment of a
receiver, administrator, administrative receiver, trustee or similar
officer of its properties, revenues, undertakings or assets.
LITIGATION
15.1 Except as disclosed in the Information Memorandum neither the Warrantors
nor any Group Company is engaged in any legal or arbitration proceedings or
enquiries by any governmental or regulatory bodies which, individually or
collectively, are material or may have or have had during the last 12
months a significant effect on the financial position or prospects of the
Group Company or the Group taken as a whole and, so far as the Warrantors
are aware, no such
40
<PAGE>
legal or arbitration proceedings are threatened or pending nor, so far as
the Warrantors are aware, are there any circumstances which are likely to
give rise to any such legal or arbitration proceedings.
15.2 The Group has adequate insurance in place in respect of any litigation
relating to the Group which is disclosed in the Information Memorandum.
EMPLOYMENT
16.1 The Warrantors are not aware that any executive, key employee or
significant group of employees of any Group Company plans to terminate
employment with such Group Company. For the purposes of this clause, "key
employee" means an employee whose annual salary is equal to or exceeds
$30,000.
16.2 Neither any Director, nor so far as the Warrantors are aware any key
employee, is subject to any non-compete, non-disclosure, confidentiality,
employment, consulting or similar agreement which would be violated by the
present or proposed business activities of any Group Company.
16.3 No labour problem or dispute with the employees of the Company or any of
its Subsidiaries exists or so far as the Warrantors are aware is threatened
or imminent.
LEGAL DUE DILIGENCE REPORT
17. The information supplied by the Group and its advisers in response to the
Questionnaire was, when provided, true and accurate in all material
respects and no further information has been withheld, the absence of which
would make misleading in any material respect the information so provided
or which is material to be known by Beeson Gregory or its advisers in
connection with the Placing and the information so supplied is accurate in
all material respects and any opinions attributed to any of the Warrantors
in such replies are honestly held and either fairly based upon facts within
the knowledge of the Warrantors or made on reasonable grounds.
VERIFICATION NOTES
18. The replies to the Verification Notes, are true and accurate in all
material respects and have been prepared or approved by persons reasonably
believed by the Warrantors to have appropriate knowledge and responsibility
to enable them properly to provide such replies and any statements of
opinion contained in the replies to the Verification Notes are honestly
held and either fairly based upon facts within the knowledge of the
Warrantors or made on reasonable grounds.
RELATED PARTIES
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19. The Information Memorandum contains details of all material agreements and
arrangements (whether written or unwritten) entered into outside the
ordinary course of business between a Group Company and any one or more of
the directors of the Group or any connected persons of any one or more of
such directors.
COMPLIANCE
20.1 No Group Company nor so far as the Warrantors are aware any of its officers
has committed or is liable for any criminal, illegal or unlawful act or
breach of any obligation or duty whether imposed by or pursuant to statute,
contract, the relevant Group Company's by-laws or otherwise, and to the
best of the knowledge, information and belief of the Warrantors no claim
that it has or is doing so remains outstanding against any such member.
20.2 No Group Company has received notification that any investigation or
enquiry is being or has been conducted by any governmental or other body in
respect of the affairs of any member of the Group and to the best of the
knowledge, information and belief of the Warrantors there are no
circumstances which would give rise to such investigation or enquiry.
20.3 The Company and its Subsidiaries possess all licenses, certificates,
permits and other authorisations issued by the appropriate federal, state
or foreign regulatory authorities necessary to conduct their respective
businesses, and neither the Company nor any such Subsidiary has received
any notice of proceedings relating to the revocation or modification of any
such certificate, authorisation or permit which, singly or in the
aggregate, if the subject of an unfavourable decision, ruling or finding,
would have a material adverse effect on the condition (financial or
otherwise), prospects, earnings, business or properties of the Company and
its subsidiaries, taken as a whole, whether or not arising from
transactions in the ordinary course of business.
20.4 The Company has offered and sold all of its issued and outstanding capital
stock in accordance with the Securities Act, the Exchange Act and all rules
and regulations promulgated thereunder, and the blue sky or other
securities laws of any state the laws of which would have been applicable
to any such offer or sale.
20.5 Since becoming subject to the Exchange Act, the Company has complied in all
material respects with the provisions of the Exchange Act and all rules
promulgated thereunder and has filed all reports required to be filed
pursuant to the Exchange Act and all rules and regulations promulgated
thereunder.
20.6 The Company and its officers, directors and Affiliates have never been the
subject of an injunction, order or decree of the SEC or any federal or
state court relating to US securities laws.
DIRECTORS' DETAILS
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21. The answers given by each Director to Beeson Gregory in his director's
questionnaire and the answers given by each Director in his declaration of
business activities are true and accurate in all material respects and no
further information has been withheld which would make such answers
misleading.
NO VIOLATION OF SECURITIES LAWS
22.1 No Group Company and no predecessor or affiliate or associate of any Group
Company has offered, sold or issued any of its securities in violation of
any US federal securities laws or the securities laws (blue sky laws) of
any state of the US.
22.2 Notwithstanding anything set forth herein, the Company's subsidiary, Toucan
Mining plc (formerly named Toucan Mining Ltd) filed a Form 20-F with the
SEC, which was withdrawn. The SEC issued a comment letter with respect to
such Form 20-F, a copy of which has been provided to Beeson Gregory. The
comments set forth in paragraphs 9, 10, 11, 12, 18, 19, 20, 21, 32, 33, 34,
35, 46 and 50 to 88 of the comment letter may be applicable to reports
filed by the Company with the SEC pursuant to the Exchange Act or with
respect to other matters relating to the Company's compliance with
applicable securities laws. Accordingly, any warranties set forth in this
second schedule relating to compliance with applicable securities laws is
qualified by reference to such comments.
DATA PROTECTION ACT
23. Each Subsidiary has complied with all requirements of the Data Protection
Act 1984 and in particular:
23.1 has registered as a data user under that Act for all purposes for which
registration is required by the business as carried on by that Subsidiary;
23.2 has complied with the data protection principles; and
23.3 no Group Company has received any notice letter or complaint alleging a
breach by a Subsidiary of the provisions of the Data Protection Act 1984
and has no reason to believe that circumstances exist which may give rise
to such a notice letter or complaint.
43
<PAGE>
THIRD SCHEDULE
DOCUMENTS TO BE DELIVERED
1. A copy of the Information Memorandum and (on the date of publication) any
supplemental memorandum required to be issued under the FSA signed by the
directors of the Company or their attorneys.
2. A copy of the board and board committee minutes of the Company in the
Agreed Form relating to the approval and issue of the Information
Memorandum and the Placing and copies of all documents referred to therein.
3. Such number of conformed copies of the Information Memorandum and (on the
date of publication) any supplementary information memorandum required to
be issued as Beeson Gregory shall reasonably request.
4. Two copies of each of the Press Announcement in the Agreed Form on the date
of its publication.
5. Duly executed Lock-up Agreements in the Agreed Form.
6. Duly executed Directors' Powers of Attorney in the Agreed Form.
7. Duly signed Directors' Responsibility Letters.
8. The following financial documents:
*8.1 the Company's Working Capital Letter in the agreed Form;
8.2 duly signed Accountants' Consent Letter in the agreed Form;
*8.3 duly signed Financial Information Comfort Letter in the agreed Form;
*8.4 duly signed Accountants Working Capital Comfort Letter in the agreed Form;
8.5 a copy of the Accounts, duly signed by the Accountants;
8.6 a copy of the Working Capital Report in the agreed Form; and
44
<PAGE>
8.7 a copy of the Management Accounts signed by a Director.
9. An original signed copy of the Verification Notes.
10. A copy of the certificate of incorporation and by-laws or memorandum and
articles of association of each Group Company current at the date of this
agreement and the Placing Date.
11. A copy of all board and shareholders' resolutions relating to creation,
conversion and issue of the Placing Shares and the Option Shares.
12. A copy of the leases and licences relating to the Properties.
13. The original questionnaires of the directors of the Company addressed to
Beeson Gregory duly signed by such directors
14. A copy of the signed service agreements and letters of appointment of the
directors of the Company.
15. A copy of each of the material contracts referred to in the Information
Memorandum.
*16. A duly signed copy of the UK Legal Comfort Letter.
*17. A duly signed copy of the US Legal Comfort Letter.
18. A duly executed copy of the Registration Rights Agreement.
19. The Acquisition Agreement and all agreements and documents referred to
therein or entered into in connection therewith or pursuant thereto.
20. The share sale agreement relating to the sale by the Company of Toucan
Mining Limited and all agreements and documents referred to therein or
entered into in connection therewith or pursuant thereto.
* to be re-delivered in an up to date version on the day before the Placing Date
45
<PAGE>
ANNEX A
Selling Restrictions for Offers and Sales outside the United States
Beeson Gregory acknowledges that the Placing Shares have not been and will not
be registered under the Securities Act and may not be offered or sold within the
USA or to, or for the account or benefit of, US persons except in accordance
with Regulation S under the Securities Act or pursuant to an exemption from the
registration requirements of the Securities Act. Except as permitted by Clause
21.9.1(i), Beeson Gregory represents that neither it nor, so far as it is aware,
any selling agent appointed by it in connection with the Placing have offered or
sold the Placing Shares or the Option Shares, and will not offer and sell the
Placing Shares or the Option Shares (i) as part of their distribution at any
time and (ii) otherwise until one year after the later of the commencement of
the offering and the Time of Delivery, except in accordance with Rule 903 of
Regulation S under the Securities Act. Accordingly, Beeson Gregory agrees that
it, its Affiliates and all persons acting on its or their behalf will not make
offers of the Placing Shares and the Option Shares to persons in the United
States and that at the time a buy order is originated, the buyer will be outside
the United States, or it or they will reasonably believe that the buyer is
outside the United States. Further, Beeson Gregory agrees that neither it, its
Affiliates nor any persons acting on its or their behalf have engaged or will
engage in any directed selling efforts in the United States with respect to the
Placing Shares or the Option Shares, and it and they have complied and will
comply with the offering restrictions requirement of Regulation S. Beeson
Gregory agrees to engage in hedging transactions in the Company's Class A common
stock only in accordance with the Securities Act. Beeson Gregory agrees that, at
or prior to confirmation of sale of Securities, it will have sent to each
distributor, dealer or person receiving a selling concession, fee or other
remuneration that purchases Securities from it during the distribution
compliance period a confirmation or notice to substantially the following
effect:
"The securities covered hereby have not been registered under the US Securities
Act of 1933 (the "Securities Act") and may not be offered and sold within the
United States or to, or for the account or benefit of, US persons (i) as part of
their distribution at any time or (ii) otherwise until one year after the later
of the commencement of the offering and the closing date, except in either case
in accordance with Regulation S under the Securities Act. Hedging transactions
in the Company's common stock may only be engaged in if in compliance with the
Securities Act. Terms used above have the meaning given to them by Regulation
S".
Terms used in this paragraph have the meanings given to them by Regulation S.
46
DATED 2000
(1) AUTHORISZOR INC.
(2) THE PERSONS NAMED IN THE SCHEDULE
(3) BEESON GREGORY LIMITED
- - - - -----------------------------------------
SUPPLEMENTAL PLACING AGREEMENT
relating to shares of common
stock par value US$0.01 per share
in AUTHORISZOR INC.
- - - - -----------------------------------------
TITMUSS SAINER DECHERT
2 Serjeants' Inn
London EC4Y 1LT
Date: 8.2.2000
Ref: C353/062581
<PAGE>
THIS AGREEMENT is made February 2000
- - - - --------------
BETWEEN:-
(1) AUTHORISZOR INC. a company incorporated and registered in the State of
Delaware, USA and whose registered office is at 1209 Orange Street,
Wilmington, Delaware 19801 USA ("Company");
(2) THE SEVERAL PERSONS whose names and addresses are set out in the schedule
(each a "Director" and together the "Directors"); and
(3) BEESON GREGORY LIMITED a company registered in England and Wales with
number 2316630 and whose registered office is at The Registry, Royal Mint
Court, London EC3N 4BL ("Beeson Gregory").
RECITALS
(1) This agreement is supplemental to the placing agreement made between the
parties hereto dated 28 January 2000 ("Placing Agreement").
(2) The Company has issued an information memorandum ("Information Memorandum")
dated 28 January 2000 relating to a proposed placing of up to 1,850,000
Placing Shares.
(3) In view of the indication of interest in such Shares received by the
Company since the publication of the Information Memorandum, the Company
wishes to issue up to 877,273 further Shares ("Further Placing Shares"). In
connection with the Placing, which for all purposes is to be treated as
increased by the offering of the Further Placing Shares, the Company
proposes to issue a supplementary information memorandum ("Supplementary
Information Memorandum") on or about 10 February 2000.
(4) It is now proposed that the Placing will be made on 11 February 2000 and
that the Placing Shares and the Further Placing Shares will be allotted on
11 February 2000.
(5) It is also proposed that Placing Shares and/or Further Placing Shares be
placed in Sweden in addition to the other Listed Countries.
(6) The parties have agreed that all obligations contained in the Placing
Agreement in relation to the Placing Shares shall apply to the Further
Placing Shares with any necessary amendments.
<PAGE>
(7) All words and expressions in this agreement which have been defined in the
Placing Agreement shall have the same meaning herein unless defined in this
agreement or the context otherwise requires.
1. AMENDMENTS TO PLACING AGREEMENT
References in the Placing Agreement to:-
1.1 the Information Memorandum and the Placing Documents shall be deemed to
include references to the Supplementary Information Memorandum;
1.2 the Placing Shares shall be deemed to include the Further Placing Shares
(other than in respect of commissions payable in respect of the Further
Placing Shares which are dealt with in clause 2.1 below);
1.3 the Option Shares shall be deemed to include the Further Option Shares
(other than in clause 5 of the Placing Agreement);
1.4 the Placing Documents shall be deemed to include this agreement;
1.5 the Listed Countries shall be deemed to include Sweden; and
1.6 the expected dates referred to in the definitions of Placing Date and
Allotment Date in the Placing Agreement shall be amended to reflect the
revised expected time table referred to in recital (4) above.
2. COMMISSIONS AND EXPENSES
2.1 Beeson Gregory's fee in respect of its services to the Company in
connection with placing the Further Placing Shares shall comprise an
additional commission payable in cash equal to 5 per cent of an amount
equal to the Placing Price multiplied by the aggregate number of Further
Placing Shares. It shall also comprise the grant of the Further Option
pursuant to clause 3 below.
2.2 The costs and expenses of placing the Further Placing Shares shall be borne
by the Company on the same basis (and Beeson Gregory shall be reimbursed by
the Company to the same extent) as set out in clause 7.2 of the Placing
Agreement.
2.3 Beeson Gregory shall be entitled to deduct the commissions referred to in
clause 2.1 and the costs and expenses incurred or to be incurred by it
referred to in clause 2.2 from the proceeds of the sale of the Further
Placing Shares.
<PAGE>
2.4 Where any sum payable under this agreement is subject to value added tax,
such sum will be paid together with the relevant amount of properly
chargeable value added tax.
2.5 The commissions, fees and expenses payable to Beeson Gregory pursuant to
this agreement shall be in addition to the commissions, fees and expenses
payable pursuant to the Placing Agreement.
3. OPTION
3.1 The Company grants to Beeson Gregory a further option ("Further Option") to
subscribe or procure the subscription for such number of Shares (apart from
the Placing Shares, the Further Placing Shares and the Option Shares) as
shall be equal to 5 per cent. of the total number of Further Placing Shares
subscribed for under the Placing (including by Beeson Gregory) rounded to
the nearest whole number ("Further Option Shares").
3.2 Clauses 5.2 to 5.6 of the Placing Agreement (inclusive) shall apply to the
Further Option.
4. GENERAL
Save as contained in this agreement, the provisions of the Placing
Agreement shall remain in full force and effect.
EXECUTED as a DEED )
and DELIVERED by )
AUTHORISZOR INC. )
acting by:- )
Duly authorised signatory
Duly authorised signatory
SIGNED as a DEED and )
DELIVERED by )
RICHARD LANGEVIN )
in the presence of:- )
<PAGE>
SIGNED as a DEED and )
DELIVERED by )
JAMES JACKSON )
in the presence of:- )
SIGNED as a DEED and )
DELIVERED by )
DAVID WRAY )
in the presence of:- )
SIGNED as a DEED and )
DELIVERED by )
ROBERT JEFFCOCK )
in the presence of:- )
EXECUTED as a DEED )
and DELIVERED by )
BEESON GREGORY LIMITED )
acting by:- )
Director
Director/Secretary
<PAGE>
THE FIRST SCHEDULE
THE DIRECTORS
Richard Langevin
1 Justin Road, Natick, Massachusetts, USA
James Jackson
2 Parklands, Studley Roger, Ripon, North Yorkshire HG4 3AY
David Wray
54 New Park Road, Queensbury, Bradford BD13 1PP
Robert Jeffcock
42B Roc Flevri, 1 Rue du Tenao, MC 9300 Monaco
EXECUTION COPY
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement ("Agreement") is entered into this ___ day of
_______ 2000, by and among Authoriszor Inc., a Delaware corporation (the
"Company") and Beeson Gregory Limited, a company registered in England and Wales
("BG").
WHEREAS, The Company has agreed to issue and sell to purchasers
arranged by BG upon the terms set forth in a placing agreement dated the date
hereof (the "Placing Agreement"), 2,727,273 shares (the "Securities") of common
stock, par value $.01 per share, of the Company ("Common Stock") (such
transaction being referred to as the Initia1 Placement"); and
WHEREAS, As an inducement to BG to enter into the Placing Agreement and
in satisfaction of a condition to its obligations thereunder, the Company agrees
with BG, (i) for BG's benefit and the benefit of any subsequent successors or
assigns of BG and (ii) for the benefit of the holders from time to time of the
Securities (including BG) (each of the foregoing a "Holder" and together the
"Holders"), to grant certain registration rights and to assume certain
obligations as contained in this Agreement; and
THEREFORE, in light of the mutual covenants contained herein and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto, intending to be legally bound, agree as
follows.
1. Definitions. Capitalized terms used herein without definition shall have
their respective meanings set forth in the Purchase Agreement. As used in
this Agreement, the following capitalized defined terms shall have the
following meanings:
"Act" means the Securities Act of 1933, as amended, and the rules and
regulations of the Commission promulgated thereunder.
"Affiliate" of any specified person means any other person which,
directly or indirectly, controls, is controlled by, or is under common
control with, such specified person. For purposes of this
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<PAGE>
definition, control of a person means the power, direct or indirect, to
direct or cause the direction of the management and policies of such
person whether by contract or otherwise; and the terms "controlling"
and "controlled" have meanings correlative to the foregoing.
"Closing Date" means the date on which the Securities are first issued
and sold by the Company.
"Commission" means the United States Securities and Exchange Commission
"Demand Registration Period" has the meaning set forth in Section 3(c).
"Demand Registration Statement" means a registration statement of the
Company on an appropriate form other than a Shelf Registration
Statement pursuant to the provisions of Section 3 hereof which
registers the offer and sale of some or all of the Securities in an
underwritten public offering thereof on an appropriate form, including
amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus
contained therein, all exhibits thereto and all material incorporated
by reference therein.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission promulgated thereunder.
"Final Memorandum" has the meaning set forth in the Placing Agreement.
"Holder" has the meaning set forth in the preamble.
"Holders, Counsel" has the meaning set forth in Section 5.
"Initial Placement" has the meaning set forth in the preamble hereto.
"Majority Holders" means the Holders of a majority of the total number
of Securities registered under a Registration Statement.
"Managing Underwriters" means the investment banker or investment
bankers and manager or managers that shall administer an underwritten
offering.
2
<PAGE>
"Prospectus" means the prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an
effective registration statement in reliance upon Rule 430A under the
Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Securities
covered by such Registration Statement, and all amendments and
supplements to the Prospectus, including post-effective amendments.
"Registrable Securities" means all shares of Common Stock owned by the
Holders, including the Securities; provided, however, that each share
of Common Stock shall cease to be a Registrable Security when (i) its
offer and sale has been effectively registered under the Securities Act
and it has been disposed of in accordance with the Registration
Statement covering it; (ii) it is distributed to the public pursuant to
Rule 144 promulgated under the Securities Act (or any similar
provisions then in force) under the Securities Act or otherwise if, as
a result of or following any sale referred to in this clause (ii), no
restriction on transfer exists under the Securities Act with respect to
such shares or (iii) it is eligible for resale under Rule 144
promulgated under the Securities Act (or other similar provisions then
in force under the Securities Act) and the aggregate number of shares
of Common Stock held by the holder thereof constitutes less than 1% of
the total number of shares of Common Stock then outstanding; provided
further, that for purposes of this definition "Common Stock" shall
include all shares of capital stock convertible into, exercisable for
or exchangeable into Common Stock.
"Registration Statement" means any Reoffer Registration Statement,
Demand Registration Statement or Shelf Registration Statement on an
appropriate form that covers any of the Securities pursuant to the
provisions of this Agreement, amendments and supplements to such
registration statement, including post-effective amendments, in each
case including the Prospectus contained therein, all exhibits thereto
and all material incorporated by reference therein.
"Reoffer Registration Period" means the period during which the Reoffer
Registration Statement is effective, exclusive of any period during
which any stop order shall be in effect suspending the effectiveness of
the Reoffer Registration Statement.
3
<PAGE>
"Reoffer Registration Statement" means a registration statement of the
Company on an appropriate form under the Act with respect to the offer
and sale of the Securities by the Holders, all amendments and
supplements to such registration statement, including post-effective
amendments, in each case including the Prospectus contained therein,
all exhibits thereto and all material incorporated by reference
therein.
"Securities" has the meaning set forth in the preamble.
"Shelf Registration" means a registration effected pursuant to Section
3 hereof.
"Shelf Registration Period" has the meaning set forth in Section 3(b)
hereof.
"Shelf Registration Statement" means a "shelf" registration statement
of the Company pursuant to the provisions of Section 3 hereof which
covers some or all of the Securities on an appropriate form under Rule
415 promulgated under the Act, or any similar rule that may be adopted
by the Commission, amendments and supplements to such registration
statement, including post-effective amendments, in each case including
the Prospectus contained therein, all exhibits thereto and all material
incorporated by reference therein.
"underwriter" means any underwriter of Securities in connection with an
offering thereof.
2. Reoffer Registration Statement.
(a) The Company shall prepare and shall file with the Commission as soon as
reasonably practicable, but in any event, not later than that date which is
thirty (30) calendar days after the Closing Date, the Reoffer Registration
Statement with respect to the offer and sale of the Securities by the
Holders thereof on such date from time to time, in brokerage transactions,
over a stock exchange, utilising the facilities of an inter-dealer
quotation system, in an underwritten offering or in privately negotiated
off-market transactions. The Company shall cause the Reoffer Registration
Statement to become effective under the Act not later than that date which
is sixty (60) days after the Reoffer Registration Statement is filed;
provided that if BG determines, such determination to be made reasonably,
that the
4
<PAGE>
Company is acting in good faith to cause the Reoffer Registration Statement
to be declared effective such date will be extended to 90 days after filing
thereof.
(b) The Company shall use its best efforts to keep the Reoffer Registration
Statement continuously effective in order to permit the Prospectus forming
part thereof to be usable by Holders for a period of two years from the
date the Reoffer Registration Statement is declared effective by the
Commission. The Company shall be deemed not to have used its best efforts
to keep the Reoffer Registration Statement effective during the requisite
period if it voluntarily takes any action that would result in Holders of
securities covered thereby not being able to offer and sell such securities
during that period, unless (i) such action is required by applicable law or
(ii) such action is taken by the Company in good faith and for valid
business reasons (not including avoidance of the Company's obligations
hereunder), including, without limitation, the acquisition or divestiture
of assets, so long as the Company promptly thereafter complies with the
requirements of Section 4(k) hereof, if applicable.
3. Demand Registration and Shelf Registration. If, (i) for any reason the
Reoffer Registration Statement is not filed with the Commission or the
Reoffer Registration Statement is not declared effective, in each instance,
within the time periods prescribed in Section 2(a) or (iii) the Reoffer
Registration Statement ceases to be effective so that the Prospectus
contained therein is not usable by the Holders for offers and sales of the
Securities during the time period prescribed in Section 2(b); or (iii) any
of the Securities remain Registrable Securities following the Reoffer
Registration Period, then if any Holder so requests with respect to
Securities which remain Registrable Securities the following will apply:
(a) The Company shall as promptly as practicable (but in no event
not more than 30 days after so requested by any Holder
pursuant to this Section 3) file with the Commission and
thereafter shall use its best efforts to cause to be declared
effective under the Act, at the election of the Holder so
requesting, a Demand Registration Statement or a Shelf
Registration Statement relating to the offer and sale of the
Securities or any other Registrable Securities by the
requesting Holder from time to time in accordance with the
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methods of distribution elected by such Holder and set forth
in such Demand Registration Statement or Shelf Registration
Statement; provided, that if permitted under the Act and by
the Commission, the Company may file a pre or post effective
amendment or supplement to the Reoffer Registration Statement
if such action would completely fulfil its obligations under
this Section 3.
(b) The Company shall use its best efforts to keep the Shelf Registration
Statement continuously effective in order to permit the Prospectus forming
part thereof to be usable by Holders for a period of two years from the
date the Shelf Registration Statement is declared effective by the
Commission or such shorter period that will terminate when all the
Securities or any other Registrable Securities covered by the Shelf
Registration Statement have been sold pursuant to the Shelf Registration
Statement (in any such case, such period being called the "Shelf
Registration Period"). The Company shall be deemed not to have used its
best efforts to keep the Shelf Registration Statement effective during the
requisite period if it voluntarily takes any action that would result in
Holders of securities covered thereby not being able to offer and sell such
securities during that period, unless (i) such action is required by
applicable law or (ii) such action is taken by the Company in good faith
and for valid business reasons (not including avoidance of the Company's
obligations hereunder), including, without limitation, the acquisition or
divestiture of assets, so long as the Company promptly thereafter complies
with the requirements of Section 4(k) hereof, if applicable.
(c) The Company shall use its best efforts to keep the Demand Registration
Statement continuously effective in order to permit the Prospectus forming
part thereof to be usable by Holders until all the Securities or any other
Registrable Securities covered by the Demand Registration Statement have
been sold pursuant to the Demand Registration Statement (in any such case,
such period being called the "Demand Registration Period"). The Company
shall be deemed not to have used its best efforts to keep the Demand
Registration Statement effective during the requisite period if it
voluntarily takes any action that would result in Holders of securities
covered thereby not being able to offer and sell
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such securities during that period, unless (i) such action is required by
applicable law or (ii) such action is taken by the Company in good faith
and for valid business reasons (not including avoidance of the Company's
obligations hereunder), including, without limitation, the acquisition or
divestiture of assets, so long as the Company promptly thereafter complies
with the requirements of Section 4(k) hereof, if applicable.
4. Registration Procedures. In connection with any Shelf Registration
Statement and, to the extent applicable, any Reoffer Registration Statement
and any Demand Registration Statement, the following provisions shall
apply:
(a) The Company shall furnish to BG and any applicable Holder,
prior to the filing thereof with the Commission, a copy of any
Registration Statement, and each amendment thereof and each
amendment or supplement, if any, to the Prospectus included
therein and shall use its best efforts to reflect in each such
document, when so filed with the Commission, such comments as
BG or the Majority Holders may reasonably and timely propose.
(b) The Company shall ensure that (i) any Registration Statement and any
amendment thereto and any Prospectus forming part thereof and any amendment
or supplement thereto complies in all material respects with the Act and
the rules and regulations thereunder, (ii) any Registration Statement and
any amendment thereto does not, when it becomes effective, contain an
untrue 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 and (iii) any Prospectus forming part of any Registration
Statement, and any amendment or supplement to such Prospectus, does not
include an untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements, in the light of the
circumstances under which they were made, not misleading.
(c) (1) The Company shall advise BG and the Holders of securities covered
thereby, and, if requested by BG or any such Holder, confirm such advice in
writing:
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(i) when a Registration Statement and any amendment thereto has been filed with
the Commission and when the Registration Statement or any post-effective
amendment thereto has become effective; and
(ii) of any request by the Commission for amendments or supplements to the
Registration Statement or the Prospectus included therein or for additional
information.
(2) The Company shall advise BG and the Holders of securities covered thereby,
and if requested by your or such Holder, confirm such advice in writing:
(i) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any proceedings
for that purpose;
(ii) of the receipt by the Company of any notification with respect to the
suspension of the qualification of the securities included therein for sale
in any jurisdiction or the initiation or threatening of any proceeding for
such purpose; and
(iii)of the happening of any event that requires the making of any changes in
the Registration Statement or the Prospectus so that, as of such date, the
statements therein are not misleading and do not omit to state a material
fact required to be stated therein or necessary to make the statements
therein (in the case of the Prospectus, in the light of the circumstances
under which they were made) not misleading (which advice shall be
accompanied by an instruction to suspend the use of the Prospectus until
the requisite changes have been made).
(d) The Company shall use its best efforts to obtain the withdrawal of any
order suspending the effectiveness of any Registration Statement at the
earliest possible time.
(e) The Company shall furnish to each Holder of securities included within the
coverage of any Reoffer Registration Statement or Shelf Registration
Statement, without charge, at least one copy of such Registration Statement
and any post-effective amendment thereto, including
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<PAGE>
financial statements and schedules, and, if the Holder so requests in
writing, any documents incorporated by reference therein and all exhibits
(including those incorporated by reference therein).
(f) The Company shall, during the Reoffer Registration Period and the Shelf
Registration Period, deliver to each Holder of securities included within
the coverage of any Reoffer Registration Statement or Shelf Registration
Statement, without charge, as many copies of the Prospectus (including each
preliminary Prospectus) included in such Registration Statement and any
amendment or supplement thereto as such Holder may request; and the Company
consents to the use of the Prospectus or any amendment or supplement
thereto by each of the Holders selling securities in connection with the
offer and sale of the securities covered by the Prospectus or any amendment
or supplement thereto.
(g) The Company shall furnish to each Holder of securities included within the
coverage of any Demand Registration Statement and to the Managing
Underwriter, without charge, at least one copy of such Registration
Statement and any post-effective amendment thereto, including financial
statements and schedules, and, if the Holder so requests in writing, any
documents incorporated by reference therein and all exhibits (including
those incorporated by reference therein).
(h) The Company shall furnish to each Holder of securities included within the
coverage of any Demand Registration Statement and to the Managing
Underwriter, without charge, as many copies of the Prospectus (including
each preliminary Prospectus) included in such Registration Statement and
any amendment or supplement thereto as such Holder or underwriter may
request; and the Company consents to the use of the Prospectus or any
amendment or supplement thereto by each of the selling Holders of
securities or underwriter in connection with the offer and sale of the
securities covered by the Prospectus or any amendment or supplement
thereto.
(i) Prior to any offering of securities pursuant to any Registration Statement,
the Company shall register or qualify or co-operate with the Holders of
securities included therein and
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<PAGE>
Holders' Counsel in connection with the registration or qualification of
such securities for offer and sale under the securities or blue sky laws of
such jurisdictions as any such Holder reasonably requests in writing and do
any and all other acts or things necessary or advisable to enable the offer
and sale in such jurisdictions of the securities covered by such
Registration Statement; provided, however, that the Company will not be
required to qualify generally to do business in any jurisdiction where it
is not then so qualified or to take any action which would subject it to
general service of process or to taxation in any such jurisdiction where it
is not then so subject.
(j) The Company shall co-operate with the Holders of Securities to facilitate
the timely preparation and delivery of certificates representing Securities
to be sold pursuant to any Registration Statement free of any restrictive
legends and in such denominations and registered in such names as Holders
may request prior to sales of securities pursuant to such Registration
Statement.
(k) Upon the occurrence of any event contemplated by paragraph 2(b), 3(b) or
4(c)(2)(iii) above, the Company shall promptly prepare a post-effective
amendment to any Registration Statement or an amendment or supplement to
the related Prospectus or file any other required document so that, as
thereafter delivered to purchasers of the securities included therein, the
Prospectus will not include an untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(1) Not later than the effective date of any such Registration Statement
hereunder, the Company shall provide a CUSIP number for the Securities, as
the case may be, registered under such Registration Statement, and provide
printed certificates for such Securities, in a form, if requested by the
applicable Holder or Holder's Counsel, eligible for deposit with The
Depository Trust Company.
(m) The Company shall use its best efforts to comply with all applicable rules
and regulations of the Commission to the extent and so long as they are
applicable to the Reoffer
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Registration Statement, any Demand Registration Statement or any Shelf
Registration Statement or the transactions contemplated thereby and will
make generally available to its security holders a consolidated earnings
statement (which need not be audited) covering a twelve-month period
commencing after the effective date of any Registration Statement and
ending not later than 15 months thereafter, as soon as practicable after
the end of such period, which consolidated earnings statement shall satisfy
the provisions of Section 11(a) of the Securities Act.
(n) Each Holder of Registrable Securities to be sold pursuant to any
Registration Statement shall furnish to the Company such information
regarding such Holder and the distribution of such securities as the
Company may from time to time reasonably require for inclusion in such
Registration Statement (and shall promptly correct any information
previously furnished if the inclusion of such information in such
Registration Statement would be materially misleading), and the Company may
exclude from such Registration Statement the Securities of any Holder that
fails to furnish such information after receiving a request therefor.
(o) The Company shall, if requested, promptly incorporate in a Prospectus
supplement or post-effective amendment to a Registration Statement, such
information as the Managing Underwriter, if applicable, and the Majority
Holders agree should be included therein and shall make all required
filings of such Prospectus supplement or post-effective amendment as soon
as notified of the matters to be incorporated in such Prospectus supplement
or post-effective amendment.
(p) In the case of any Registration Statement, the Company shall enter into
such agreements and take all other appropriate actions in order to expedite
or facilitate the registration or the disposition of the Securities, and in
connection therewith, if an underwriting agreement is entered into, cause
the same to contain indemnification provisions and procedures no less
favourable than those set forth in Section 6 hereof (or such other
provisions and procedures acceptable to the Majority Holders and the
Managing Underwriters, if any),
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<PAGE>
with respect to all parties to be indemnified pursuant to Section 6 hereof
from Holders of Securities to the Company.
(q) In the case of any Shelf Registration Statement or Demand Registration
Statement, the Company shall (i) make reasonably available for inspection
by the Holders of securities to be registered thereunder, any underwriter
participating in any disposition pursuant to such Registration Statement,
and any attorney, accountant or other agent retained by the Holders or any
such underwriter all relevant financial and other records, pertinent
corporate documents and properties of the Company and its subsidiaries;
(ii) cause the Company's officers, directors and employees to supply all
relevant information reasonably requested by the Holders or any such
underwriter, attorney, accountant or other agent in connection with any
such Registration Statement as is customary for similar due diligence
examinations; provided , however, that any information that is designated
in writing by the Company, in good faith, as confidential at the time of
delivery of such information shall be kept confidential by the Holders or
any such underwriter, attorney, accountant or other agent, unless such
disclosure is made in connection with a court proceeding or required by
law, or such information becomes available to the public generally or
through a third party without an accompanying obligation of
confidentiality; (iii) make such representations and warranties to the
Holders of securities registered thereunder and the underwriters, if any,
in form, substance and scope as are customarily made by issuers to
underwriters in primary underwritten offerings; (iv) obtain opinions of
counsel to the Company (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the Managing Underwriters,
or if there is no Managing Underwriter, the Majority Holders) addressed to
each selling Holder and the underwriters, if any, covering such matters as
are customarily covered in opinions requested in underwritten offerings and
such other matters as may be reasonably requested by such Holders and
underwriters; (v) obtain "cold comfort" letters (or, in the case of any
person that does not satisfy the conditions for receipt of a "cold comfort"
letter specified in Statement on Auditing Standards No. 72, an "agreed-upon
procedures letter") and updates thereof from the independent certified
public accountants of the Company (and, if necessary, any other independent
certified public accountants of
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<PAGE>
any subsidiary of the Company or of any business acquired by the Company
for which financial statements and financial data are, or are required to
be, included in the Registration Statement), addressed to each selling
Holder of securities registered thereunder and the underwriters, if any, in
customary form and covering matters of the type customarily covered in
"cold comfort" letters in connection with primary underwritten offerings;
and (vi) deliver such documents and certificates as may be reasonably
requested by the Majority Holders and the Managing Underwriters, if any,
including those to evidence compliance with Section 4(k) and with any
customary conditions contained in the underwriting agreement or other
agreement entered into by the Company. The foregoing actions set forth in
clauses (iii), (iv), (v) and (vi) of this Section 4(q) shall be performed
at (A) the effective date of such Registration Statement and each
post-effective amendment thereto and (B) each closing under any
underwriting or similar agreement as and to the extent required thereunder.
(r) In the case of the Reoffer Registration Statement, the Company shall (i)
make reasonably available for inspection by each Holder, and any attorney,
accountant or other agent retained by such Holder, all relevant financial
and other records, pertinent corporate documents and properties of the
Company and its subsidiaries; (ii) cause the Company's officers, directors
and employees to supply all relevant information reasonably requested by
such Holder or any such attorney, accountant or other agent in connection
with the Reoffer Registration Statement as is customary for similar due
diligence examinations; provided, however, that any information that is
designated in writing by the Company, in good faith, as confidential at the
time of delivery of such information shall be kept confidential by such
Holder or any such attorney, accountant or other agent, unless such
disclosure is made in connection with a court proceeding or required by
law, or such information becomes available to the public generally or
through a third party without an accompanying obligation of
confidentiality; (iii) make such representations and warranties to the
Holders, in form, substance and scope as are customarily made by issuers to
underwriters in primary underwritten offerings; (iv) obtain opinions of
counsel to the Company, which counsel and opinions (in form, scope and
substance) shall be reasonably
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<PAGE>
satisfactory to the Majority Holders and their counsel, addressed to all
Holders, covering such matters as are customarily covered in opinions
requested in underwritten offerings and such other matters as may be
reasonably requested by the Majority Holders or their counsel; (v) obtain
"cold comfort" letters and updates thereof front the independent certified
public accountants of the Company (and, if necessary, any other independent
certified public accountants of any subsidiary of the Company or of any
business acquired by the Company for which financial statements and
financial data are, or are required to be, included in the Registration
Statement), addressed to the Holders, in customary form and covering
matters of the type customarily covered in "cold comfort" letters in
connection with primary underwritten offerings, or if requested by the
Majority Holders or their counsel in lieu of a "cold comfort" letter, an
agreed-upon procedures letter under Statement on Auditing Standards No. 35,
covering matters requested by the Majority Holders or their counsel; and
(vi) deliver such documents and certificates as may be reasonably requested
by the Majority Holders or their counsel, including those to evidence
compliance with Section 4(k) and with conditions customarily contained in
underwriting agreements. The foregoing actions set forth in clauses (iii),
(iv), (v), and (vi) of this Section 4(r) shall be performed at the
effective date of the Reoffer Registration Statement and the effective date
of any post-effective amendment to the Reoffer Registration Statement.
5. Registration Expenses. The Company shall bear all expenses incurred in
connection with the performance of its obligations under Sections 2, 3 and
4 hereof and, in the event of the Reoffer Registration Statement and any
Shelf Registration Statement or Demand Registration Statement, will
reimburse the Holders for the reasonable fees and disbursements of one firm
or counsel (in addition to one local counsel in each relevant jurisdiction)
designated by the Majority Holders to act as counsel for Holders in
connection therewith ("Holders' Counsel") up to $20,000.
6. Indemnification and Contribution.
(a) In connection with any Registration Statement, the Company, jointly and
severally, agree to indemnify and hold harmless each Holder of securities
covered thereby, the directors, officers, employees and agents of each such
Holder and each other person, if any, who
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<PAGE>
(1) controls any such Holder within the meaning of Section 15 the Act or
Section 20 of the Exchange Act against any and all losses, claims, damages
or liabilities, joint or several, to which they or any of them may become
subject under the Act, the Exchange Act or other federal or state statutory
law or regulation, at common law or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement as originally filed
or in any amendment thereof, or in any preliminary Prospectus or
Prospectus, or in any amendment thereof or supplement thereto, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, and agrees to reimburse each such
indemnified party, as incurred, for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, however, that (i) the
Company will not be liable in any case to the extent that any such loss,
claim, damage or liability arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made
therein in reliance upon and in conformity with written information
furnished to the Company by or on behalf of any such Holder specifically
for inclusion therein and (ii) the Company shall not be liable to any
indemnified party under this indemnity agreement with respect to the
Registration Statement or Prospectus to the extent that any such loss,
claim, damage or liability of such indemnified party results solely from an
untrue statement of a material fact contained in, or the omission of a
material fact from, the Registration Statement or Prospectus which untrue
statement or omission was corrected in an amended or supplemented
Registration Statement or Prospectus, if the person alleging such loss,
claim, damage or liability was not sent or given, at or prior to the
written confirmation of such sale, a copy of the amended or supplemented
Registration Statement or Prospectus if the Company had previously
furnished copies thereof to such indemnified party and if delivery of a
prospectus is required by the Act and was not so made. This indemnity
agreement will be in addition to any liability which the Company may
otherwise have.
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(b) Each Holder of securities covered by a Registration Statement severally but
not jointly agrees to indemnify and hold harmless (i) the Company (ii) each
of the Company's directors, (iii) each of the Company's officers who signs
such Registration Statement and (iv) each other person, if any, who
controls the Company within the meaning of Section 15 of the Act or Section
20 of the Exchange Act to the same extent as the foregoing indemnity from
the Company to each such Holder, but only with reference to written
information relating to such Holder furnished to the Company by or on
behalf of such Holder specifically for inclusion in the documents referred
to in the foregoing indemnity. This indemnity agreement will be in addition
to any liability which any such Holder may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section 6 of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under
this Section 6, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party
(i) will not relieve it from liability under paragraph (a) or (b) above
unless and to the extent it did not otherwise learn of such action and such
failure results in the forfeiture by the indemnifying party of substantial
rights and defences and (ii) will not, in any event, relieve the
indemnifying party from any obligations to any indemnified party other than
the indemnification obligation provided in paragraph (a) or (b) above. The
indemnifying party shall be entitled to appoint as counsel one firm of
attorneys of the indemnifying party's choice at the indemnifying party's
expense, which counsel, together with one local counsel in each
jurisdiction, shall act on behalf of all the indemnified parties in any
action for which indemnification is sought (in which case the indemni-fying
party shall not thereafter be responsible for the fees and expenses of any
separate counsel retained by the indem-nified party or parties except as
set forth below); provided, however, that such counsel shall be reasonably
satisfactory to the indemnified party. Notwithstanding the indemnifying
party's election to appoint counsel to represent the indemnified party in
an action, the indemnified party shall have the right to employ separate
counsel (including local counsel), and the indemnifying party shall bear
the reasonable fees, costs and expenses of such separate
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counsel (and local counsel) if (i) the use of counsel chosen by the
indemnifying party to represent the indemnified party would present such
counsel with a conflict of interest, (ii) the actual or potential
defendants in, or targets of, any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have
reasonably concluded that there may be legal defences available to it
and/or other indemnified parties which are different from or additional to
those available to the indemnifying party, (iii) the indemnifying party
shall not have employed counsel reasonably satisfactory to the indemnified
party to represent the indemnified party within a reasonable time after
notice of the institution of such action or (iv) the indemnifying party
shall authorize the indemnified party to employ separate counsel at the
expense of the indemnifying party. No indemnifying party shall be liable
for any settlement of any such action effected without its written consent
(which consent shall not be unreasonably withheld), but if settled with its
written consent or if there be a final judgment for the plaintiff in any
such action, the indemnifying party agrees to indemnify and hold harmless
any indemnified party from and against any loss or liability by reason of
such settlement or judgment. An indemnifying party will not, without the
prior written consent of the indemnified parties, settle or compromise or
consent to the entry of any judgment with respect to any pending or
threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or
action) unless such settlement, compromise or consent includes an
unconditional release of each indemnified party from all liability arising
out of such claim, action, suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or (b) of this
Section 6 is unavailable to or insufficient to hold harmless an indemnified
party for any reason, then each applicable indemnifying party, in lieu of
indemnifying such indemnified party, shall have a joint and several
obligation to contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in
connection with investigating or defending same) (collectively "Losses") to
which such indemnified party may be subject in such proportion as is
appropriate to reflect the relative benefits received
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(1) by such indemnifying party, on the one hand, and such indemnified party, on
the other hand, from the Initial Placement and the Registration Statement
which resulted in such Losses; provided, however, that in no case shall any
Purchaser or any subsequent Holder of any Security be responsible, in the
aggregate, for any amount in excess of the purchase discount or commission
applicable to such Security as set forth on the cover page of the Final
Memorandum, nor shall any underwriter be responsible for any amount in
excess of the underwriting discount or commission applicable to the
securities purchased by such underwriter under the Registration Statement
which resulted in such Losses. If the allocation provided by the
immediately preceding sentence is unavailable for any reason, the
indemnifying party and the indemnified party shall contribute in such
proportion as is appropriate to reflect not only such relative benefits but
also the relative fault of such indemnifying party, on the one hand, and
such indemnified party, on the other hand, in connection with the
statements or omissions which resulted in such Losses as well as any other
relevant equitable considerations. Benefits received by the Company shall
be deemed to be equal to the total net proceeds from the Initial Placement
(before deducting expenses) as set forth on the cover page of the Final
Memorandum. Benefits received by BGs shall be deemed to be equal to the
total purchase discounts and commissions as set forth on the cover page of
the Final Memorandum, and benefits received by any other Holders shall be
deemed to be equal to the value of receiving Securities registered under
the Act. Benefits received by any underwriter shall be deemed to be equal
to the total underwriting discounts and commissions, as set forth on the
cover page of the Prospectus forming a part of the Registration Statement
which resulted in such Losses. Relative fault shall be determined by
reference to whether any alleged untrue statement or omission relates to
information provided by the indemnifying party, on the one hand, or by the
indemnified party, on the other hand. The parties agree that it would not
be just and equitable if contribution were determined by pro rata
allocation or any other method of allocation which does not take account of
the equitable considerations referred to above. Notwithstanding the
provisions of this paragraph (d), no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to
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(1) contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 6, each person who controls
a Holder within the meaning of either the Act or the Exchange Act and each
director, officer, employee and agent of such Holder shall have the same
rights to contribution as such Holder, and each person who controls the
Company within the meaning of either the Act or the Exchange Act, each
officer of the Company who shall have signed the Registration Statement and
each director of the Company shall have the same rights to contribution as
the Company, subject in each case to the applicable terms and conditions of
this paragraph (d).
(e) The provisions of this Section 6 will remain in full force and effect,
regardless of any investigation made by or on behalf of any Holder, the
Company or any of the officers, directors or controlling persons referred
to in Section 6 hereof, and will survive the sale by a Holder of securities
covered by a Registration Statement.
7. Miscellaneous.
(a) No Inconsistent Agreements. The Company has not, as of the date hereof,
entered into, nor shall it, on or after the date hereof, enter into, any
agreement with respect to its securities that is inconsistent with the
rights granted to the Holders herein or otherwise conflicts with the
provisions hereof.
(b) Amendments and Waivers. The provisions of this Agreement, including the
provisions of this sentence, may not be amended, qualified, modified or
supplemented, and waivers or consents to departures from the provisions
hereof may not be given, unless the Company has obtained the written
consent of the Holders of at least a majority of the then outstanding
Securities; provide that, with respect to any matter that directly or
indirectly affects the rights of any Holder hereunder, the Company shall
obtain the written consent of each such Holder against which such
amendment, qualification, supplement, waiver or consent is to be effective.
Notwithstanding the foregoing (except the foregoing proviso), a waiver or
consent to departure from the provisions hereof with respect to a matter
that relates exclusively to the rights of Holders whose securities are
being sold pursuant to a
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Registration Statement and that does not directly or indirectly affect the
rights of other Holders may be given by the Majority Holders, determined on
the basis of securities being sold rather than registered under such
Registration Statement.
(c) Notices. All notices and other communications provided for or permitted
hereunder shall be made in writing by hand-delivery, first-class mail, fax
or air courier guaranteeing overnight delivery:
(1) if to a Holder, at the most current address given by such holder to the
Company in accordance with the provisions of this Section 7(c), which
address initially is, with respect to each Holder, the address of such
Holder maintained by the Company's registrar, with a copy in like manner to
Beeson Gregory Limited;
(2) if to BG, initially at the respective addresses set forth in the Placing
Agreement; and
(3) if to the Company, initially at its address set forth in the Placing
Agreement.
All such notices and communications shall be have been duly given when
received. BGs or the Company by notice to the other may designate
additional or different addresses for subsequent notices or communications.
(d) Successors and Assigns. This Agreement shall inure to the benefit of and be
binding upon the successors and assigns of each of the parties, including,
without the need for an express assignment or any consent by the Company
thereto, subsequent Holders of Securities. The Company each hereby agrees
to extend the benefits of this Agreement to any Holder of Securities and
any such Holder may specifically enforce the provisions of this Agreement
as if an original party hereto.
(e) Counterparts. This agreement may be executed in any number of counterparts
and by the parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together
shall constitute one and the same agreement.
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(f) Headings. The headings in this agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law. This agreement shall be governed by and construed in
accordance with the internal laws of the State of New York (without regard
to the conflict of law provisions thereof).
(h) Severability. In the event that any one or more of the provisions contained
herein, or the application thereof in any circumstances. is held invalid,
illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect
and of the remaining provisions hereof shall not be in any way impaired or
affected thereby, it being intended that all of the rights and privileges
of the parties shall be enforceable to the fullest extent permitted by law.
(i) Securities Held by the Company. etc. Whenever the consent or approval of
Holders of a specified percentage of Securities is required hereunder,
Securities, as applicable, held by the Company or its Affiliates (other
than subsequent Holders of Securities if such subsequent Holder are deemed
to be Affiliates solely by reason of their holdings of such Securities)
shall not be counted in determining whether such consent or approval was
given by the Holders of such required percentage.
(j) Further Assurances. Each party shall cooperate and take such action as may
be reasonably requested by another party in order to carry out the
provisions and purposes of this Agreement and the transactions contemplated
hereby.
(k) Remedies. In the event of a breach or a threatened breach by any party to
this Agreement of its obligations under this Agreement, any party injured
or to be injured by such breach, in addition to being entitled to exercise
all rights granted by law, including recovery of damages, will be entitled
to specific performance of its rights under this Agreement, it being agreed
by the parties that the remedy at law, including monetary damages, for
breach of such provision will be inadequate compensation for any loss and
that any defence in any action for specific performance that a remedy at
law would be adequate is waived.
21
<PAGE>
(l) Company Repurchase. In the event that the Company fails to comply with any
provision of this Agreement, the Company shall within 30 days after the
date on which the Company was required to take any action or if such date
is undeterminable, the date of the receipt by the Company of a demand from
any Holder (in either case, the "Initial Date"), purchase from each Holder
all Registrable Securities held by each respective Holder for a purchase
price (the "Purchase Price") equal to the product of (a) the average Market
Value Per Share during the period beginning on the Initial Date and ending
on the date of payment of the Purchase Price multiplied by (b) the number
of Registrable Securities held by such Holder. The Company shall also pay
all reasonable costs (including all tranfer taxes, stamp duty or SDRT) and
fees associated with such purchase by the Company. Payment of the Purchase
Price shall be in immediately available funds. Each Holder may, in its sole
discretion, waive its right, in whole or in part, to have the Company
repurchase the Registrable Securities held by him and retain the ownership
of such Registrable Securities. "Market Value Per Share" at any date shall
be (i) the highest reported sale price on that date with respect to each
type of security in question listed on an international securities exchange
or admitted to unlisted trading privileges on such an exchange or, if
applicable, (ii) the highest reported sale price on that date with respect
to each type of security in question quoted on the National Association of
Securities Dealers Automated Quotations System ("NASDAQ") or the European
Association of Securities Dealers Automated Quotation System ("EASDAQ") or,
if applicable, (iii) if no such sale is made on such day, the mean of the
closing bid and asked prices for such day on such exchange or reported by
NASDAQ or EASDAQ.
22
<PAGE>
IN WITNESS WHEREOF, the parties have set their hands hereto as of the
date first above written.
AUTHORISZOR INC.
By:___________________
Name:________________
Title:_________________
BEESON GREGORY LIMITED
By:___________________
Name:________________
Title:_________________
23
DATED 2000
(1) AUTHORISZOR INC.
(2) BEESON GREGORY LIMITED
(3) RAYMOND SEITZ AND OTHERS
- - - - ------------------------
LOCK-UP AGREEMENT
- - - - -------------------------
<PAGE>
THIS AGREEMENT is made on January 2000
- - - - -------------- ---
BETWEEN:-
(1) AUTHORISZOR INC. a company incorporated and registered in the State of
Delaware, USA and whose registered office is at Suite 600, 8201 Preston
Road, Dallas Texas TX 75225, USA ("Company");
(2) BEESON GREGORY LIMITED a company registered in England and Wales with
registered number 2316630 whose registered office is at The Registry, Royal
Mint Court, London EC3N 4LB ("Beeson Gregory"); and
(3) those persons whose names and addresses are set out in the schedule to this
agreement ("Directors").
RECITALS
A. At the date of this agreement, the Company has authorised 30,000,000 shares
of common stock par value US0.01 each ("Shares") and 2,000,000 shares of
preferred stock par value US$0.01 each of which shares of common stock are
in issue and a further shares of common stock are subject to options and
warrants issued by the Company.
B. The Company proposes to issue ___________ new Shares under a placing
("Placing") to be made by Beeson Gregory on behalf of the Company to
institutional and other investors outside the USA.
C. The Company and Beeson Gregory (as financial adviser to the Company)
believe, and each of the Directors acknowledge that, because of the size of
their respective shareholdings and/or their relationship with the Company,
it is in the best interests of the Company and of protecting the market in
the Shares that the Directors refrain from disposing of Shares owned by
them or by persons connected with them for a period following the date of
this agreement.
NOW IT IS HEREBY AGREED as follows:-
1. LOCK-UP
Each Director undertakes separately with the Company and Beeson Gregory
that, except in the case of a Release Event (as defined in clause 2
below), it will not, without the prior written consent of Beeson
Gregory, transfer or otherwise dispose of any Shares in which he or a
person connected with him is directly or indirectly interested
<PAGE>
(including those Shares the subject of options or warrants in which he
or a person connected with him is directly or indirectly interested) on
the date of this agreement or any shares, receipts or securities of the
Company into which such Shares are sub-divided or converted (or any
direct or indirect interest in such shares, receipts or securities)
("Relevant Securities") during the period from and including the date
of this agreement until the date six months thereafter ("Restriction
Period"); provided that any Director shall be entitled to dispose or
procure the disposal of Shares in which he or a person connected with
him is directly or indirectly interested to the extent necessary to
meet any claim made by Beeson Gregory against such Director under the
terms of the placing agreement of even date and relating to the Placing
entered into between (1) the Company (2) certain of the Directors and
(3) Beeson Gregory.
2. RELEASE EVENTS
The restrictions contained in clause 1 shall not apply in the case of
any of the following events (each a "Release Event"):-
2.1 acceptance of a general offer for the whole of the issued equity share
capital of the Company (other than any equity share capital held by or
committed to the offeror and/or persons acting in concert with the
offeror) which has become unconditional in all respects; or
2.2 execution of an irrevocable commitment to accept a general offer for
the whole of the issued equity share capital of the Company (other than
any equity share capital held by or committed to the offeror and/or
persons acting in concert with the offeror) which has been or is
recommended by the board of directors of the Company or where the
irrevocable commitment is expressed to be conditional upon such general
offer being so recommended; or
2.3 an order of a court of competent jurisdiction requiring any Shares to
be sold or transferred or a consent order which has the same effect.
3. DEFINITIONS
Reference in clause 1 to:-
3.1 transfer or disposal shall be deemed to include sale, offer for sale,
pledge, mortgage or the grant of any option or other right to dispose
of Shares in which it is directly or indirectly interested on the date
of this agreement, or the announcement of any intention relating
thereto; and
<PAGE>
3.2 Shares shall include any securities or other financial instruments
which are convertible into or are exchangeable for Shares.
4. NOTICES
4.1 Any notice to be given under this agreement shall be in writing and
shall be served by sending it by hand, facsimile transmission or first
class post:-
4.1.1 if to the Company, to its registered office for the time being, marked for
the attention of The Chief Executive Officer;
4.1.2 if to Beeson Gregory, to its registered office for the time being,
marked for the attention of the Head of Corporate Finance and Jonathan
Freeman;
4.1.3 if to a Director, to the address set out opposite his or its name in
the relevant schedule (or to such other address as he or it shall have
last notified to Beeson Gregory in writing).
4.2 Any notice referred to in clause 4.1 shall be deemed to have been
received:-
4.2.1 if delivered by hand, on the day of delivery and in proving service it
shall be necessary only to produce a receipt for the communication
signed by or on behalf of the addressee;
4.2.2 if sent by facsimile transmission, at the time of transmission or, if
the time of transmission is not during the addressee's normal business
hours, at 9.30 a.m. on the next business day and in proving service it
shall be necessary only for the communication or a confirmatory letter
to have been delivered by hand or sent by first class post on the same
day but failure of the addressee to receive such confirmation shall not
invalidate the relevant communication deemed given by facsimile
transmission;
4.2.3 if sent by first class post, on the second business day after the day
of posting (or five business days after the day of posting in the case
of posting to an address outside the United Kingdom) and, in proving
service, it shall be necessary only to prove a communication was
contained in an envelope which was duly addressed and posted in
accordance with this clause.
<PAGE>
5. RELEVANT LAW
5.1 This agreement shall be governed by and construed in accordance with
English Law.
5.2 In relation to any legal action or proceedings arising out of or in
connection with this letter ("Legal Proceedings"), the parties hereby
irrevocably submit to the exclusive jurisdiction of the English Courts
and waive any objection to Legal Proceedings in such Courts on the
grounds of venue or on the grounds that the Legal Proceedings have been
brought in an inconvenient forum. These submissions shall not affect
the right of any other party to take Legal Proceedings in any other
jurisdiction, nor shall the taking of Legal Proceedings in any
jurisdiction preclude any party from taking Legal Proceedings in any
other jurisdiction.
EXECUTED as a DEED and DELIVERED )
by AUTHORISZOR INC. )
acting by:- )
Duly authorised signatory
Duly authorised signatory
EXECUTED as a DEED and DELIVERED )
by BEESON GREGORY LIMITED )
acting by:- )
Director
Director/Secretary
<PAGE>
SIGNED as a DEED and DELIVERED )
by RAYMOND GEORGE HARDENBERGH )
SEITZ in the presence of:- )
SIGNED as a DEED and DELIVERED )
by RICHARD ALBERT LANGEVIN )
in the presence of:- )
SIGNED as a DEED and DELIVERED )
by THE RIGHT HON. )
SIR MALCOLM LESLIE RIFKIND )
in the presence of:- )
SIGNED as a DEED and DELIVERED )
by JAMES LEONARD JACKSON )
in the presence of:- )
SIGNED as a DEED and DELIVERED )
by DAVID ROBERT WRAY )
in the presence of:- )
<PAGE>
SIGNED as a DEED and DELIVERED )
by ROBERT PARKYN JEFFCOCK )
in the presence of:- )
SIGNED as a DEED and DELIVERED )
by DON BOX )
in the presence of:- )
<PAGE>
SCHEDULE
DIRECTORS
Name and address Number of Shares held or the subject of
options and warrants held at the date of
this agreement
Raymond George Hardenbergh Seitz 200,000
Richard Albert Langevin 500,000
James Leonard Jackson 1,315,233
Of 2 Parklands,
Studley Roger,
Ripon HG4 3AY
United Kingdom
David Robert Wray 1,307,733
The Right Hon Sir Malcolm
Leslie Rifkind 200,000
Of 42B Roc Flevri,
1 Rue du Tenao MC 9800,
Monaco
Robert Parkyn Jeffcock
Don Box
THIS DEED OF COVENANT is made on 2000
BETWEEN:
(1) AUTHORISZOR HOLDINGS LIMITED (Company No. 3873915) whose registered office
is at Windsor House, Cornwall Road, Harrogate HG1 2PW ("Authoriszor");
(2) WRDC LIMITED (Company No. 2945379) whose registered office is at First
Floor, Ebor Court, Westgate, Leeds LS1 4ND (the "Company"); and
(3) THOSE PERSONS whose names and addresses are set out in Schedule 1 ("C Share
Option Holders").
RECITALS:
(A) The Company is a private limited company incorporated in England and
Wales on 4 July 1994. It has an authorised share capital of
(pound)33,400 divided into:
o 1,125,000 "A" Ordinary Shares of 1 penny each;
o 1,125,000 "B" Ordinary Shares of 1 penny each;
o 250,000 "C" Ordinary Shares of 1 penny each; and
o 840,000 "D" Ordinary Shares of 1 penny each.
(B) Of the authorised share capital, all "A" Ordinary Shares, all "B"
Ordinary Shares and all "D" Ordinary Shares are in issue as at close of
business today and are fully paid. No "C" Ordinary Shares are in issue
although the C Share Option Holders hold Options to purchase 132,500
"C" Ordinary Shares.
(C) This deed sets out the terms upon which the C Share Option Holders have
agreed to sell or waive any and all rights they may have over "C"
Ordinary Shares pursuant to the Options.
IT IS HEREBY AGREED as follows:
1. DEFINITIONS
1.1 In this Agreement and the Recitals and the Schedules the following terms
shall have the following meanings:
""A" Ordinary Shares" means the "A" Ordinary Shares of 1 penny each in
the capital of the Company;
1
<PAGE>
""B" Ordinary Shares" means the "B" Ordinary Shares of 1 penny each in
the capital of the Company; ""C" Ordinary Shares" means the non-voting
"C" Ordinary Shares of 1 penny each in the capital of the Company;
"Deed of Adherence" a deed in the form set out in Schedule 4;
"Letter of Representation" means the letter of representation in the
form set out in Schedule 5, as may be amended as required by the NASDAQ
rules or US law
"Options" the options granted to the C Share Option Holders (in the
numbers set out in Schedule 1) pursuant to the "WRDC Limited Number 1
Share Option Scheme", a copy of which is set out at Schedule 2 and
which give the C Share Option Holders certain rights to acquire "C"
Ordinary Shares;
"Issued Share Capital" shall have the meaning set out in the
Shareholders Agreement;
"Shareholders Agreement" means the agreement dated January 2000 between
Authoriszor (1), the Company (2) and Garcia Hanson and Brian Edmondson
("Other Shareholders") (3) and Authoriszor Inc. (4) , pursuant to which
Authoriszor has agreed to subscribe for 840,000 "D" Ordinary Shares and
pursuant to which Authoriszor has been granted certain rights to
acquire the "A" Ordinary Shares and the "B" Ordinary Shares.
1.2 References to the parties hereto include their respective successors in
title, assignees, estates and legal personal representatives.
1.3 References to the singular shall include a reference to the plural and
vice versa unless the context otherwise requires.
1.4 References to Recitals, Clauses, Sub-Clauses and Schedules shall be to
recitals and schedules to and clauses and sub-clauses of this
Agreement.
1.5 References to statutes or statutory provisions and orders or
regulations made thereunder include that statute provision order or
regulation as amended, modified re-enacted or replaced from time to
time before the date hereof and to any previous statute, statutory
provision order or regulation amended modified re-enacted or replaced
by such statute provision order or regulation.
1.6 The clause headings shall not affect the construction of this Agreement
2. COVENANT
2.1 The C Share Option Holders acknowledge that pursuant to the
Shareholders Agreement, the holders of the "A" Ordinary Shares and "B"
Ordinary Shares have granted certain rights to Authoriszor to acquire
all or some of the "A" Ordinary Shares and "B" Ordinary Shares in
issue.
2
<PAGE>
2.2 The C Share Option Holders and Authoriszor hereby covenant and agree
that in the event Authoriszor makes such an acquisition which will
result in Authoriszor owing at least 50% of the Issued Share Capital of
the Company ("Acquisition") the C Share Option Holders will sell, and
Authoriszor will acquire, their holdings of unexerised Options or
holdings of "C" Ordinary Shares (if any), in accordance with the terms
set out in this Deed.
3. PRICE AND PROCEDURE
In the event that Authoriszor makes an Acquisition pursuant to the
terms of the Shareholders Agreement then:
3.1 Authoriszor shall serve notice (in the form set out in Schedule 3)
("Notice") on any or all of the C Share Option Holders within 4 weeks
of the final agreement of the price payable for each share pursuant to
the Acquisition requiring them to sell to Authoriszor:
(a) any or all of their respective holdings of Options; and
(b) Any or all of their respective holdings if any of "C" Ordinary
Shares,
in each case, at a price per share not less than the price per share to
be paid by Authoriszor to the holders of the "A" Ordinary Shares and
"B" Ordinary Shares pursuant to the Acquisition ("Price").
3.2 The C Share Option Holders each agree that in the event that a Notice
is served on them in respect of any Options held by them, then they
shall:
(a) either exercise the number of Options specified in the Notice
immediately at the relevant Option exercise price and then
sell the resultant "C" Ordinary Shares to Authorizor as set
out above; or
(b) surrender the number of Options specified in the Notice
immediately to the Company, for nil value and in return,
Authoriszor shall pay to such C Share Option Holder or Holders
an amount equal to the sum they would have received had they
elected for option (a) above, LESS an amount equal to the
relevant exercise price that would have been payable had such
Options been exercised.
3.3
(a) As an alternative to selling or surrendering their holdings in
accordance with Clause 3.2 above, Authoriszor agrees that it
will use reasonable endeavours to offer those C Share Option
Holders who hold Options at the time that they receive a
Notice, the opportunity to receive share options in
Authoriszor's parent company, Authoriszor Inc.
3
<PAGE>
(b) The availability, terms, number and exercise price of such
share options over shares in Authoriszor Inc. shall be at the
discretion of Authoriszor, and will, if this option is chosen,
require the relevant C Share Option Holder to surrender the
number of Options stated in their Notice, to the Company in
consideration for such grant of share options in Authoriszor
Inc.
3.4 In the event of any failure by a C Share Option Holder to comply with
the provisions of this Clause 3 in respect of any Options held by them
that are the subject of Notice, such Options shall lapse 4 weeks after
service of the Notice.
3.5 Authoriszor confirms that the Price shall be clearly and accurately
stated in any Notice issued to a C Share Option Holder.
4. COMPLETION
4.1 The completion of acquisition or surrender referred to in Clause 3
above shall take place at the offices of Authoriszor's Solicitors
within 10 business days of service of the Notice when the events set
out below shall occur:
(a) The C Share Option Holders will transfer their "C" Ordinary
Shares and/or their Option rights with full title guarantee to
Authoriszor free from any and all security interests and
together with all accrued benefits and rights accruing thereto
or, as the case may be, surrender all their rights under their
Options and shall deliver to Authoriszor in respect of the "C"
Ordinary Shares or Option referred to in their respective
Notices:
(i) Duly completed and executed transfers in respect of
any such "C" Ordinary Shares held, together with
copies of any share certificates relating thereto or
a form of indemnity in respect of any lost or
destroyed certificates relating to such "C" Ordinary
Shares.
(ii) The relevant Option certificates in respect of any
Option held.
(iii) Duly executed Letters of Representation where
Authoriszor satisfies any of the price by way of
issue of shares in, or options over, Authoriszor Inc
shares accordance with Clause 3.3 above and 5.2
below.
(b) Authoriszor shall pay the Price in accordance with Clause 5
below.
5. PAYMENT OF PRICE
Subject to the rights set out at Clause 3.3 above,
5.1 On satisfaction of the provisions of Clause 4.1(a) above, Authoriszor
shall procure the payment of the Price to the relevant C Share Option
Holders.
4
<PAGE>
5.2 At the sole discretion of Authoriszor, Authoriszor may satisfy up to a
maximum of 40% of the Price by way of procuring the issue and allotment
of fully paid shares in Authoriszor Inc, to the relevant C Share Option
Holders as part satisfaction of consideration payable to such relevant
C Share Option Holders in accordance with the terms of this Deed.
6. ASSIGNMENT
6.1 This Agreement shall be binding upon and shall enure for the benefit of
each party's personal representatives and successors in title (as the
case may be) but shall not be assignable save as provided in this
Clause 6.
6.2 Each of the C Share Option Holders may assign the benefit of this Deed
to any person to whom they transfer any "C" Ordinary Shares in the
Company pursuant to the Articles of Association, in which case such
transferee shall execute a deed of adherence substantially in the form
set out in Schedule 4 and subject to executing such deed of adherence,
such assignee shall be entitled, and shall be assumed to have, all the
benefits of this Deed which would have been conferred it if it had been
a C Share Option Holder at the date hereof and thereafter all
references to the C Share Option Holder in this Deed shall be read and
construed as including such person as if it had been an original party
hereto.
6.3 All deeds of adherence executed pursuant to Clause 6.2 shall be
executed by the Company for itself and as attorney for all those
persons who are then parties. Such parties hereby (or, as the case may
be, by executing the relevant deed of adherence) appoint the Company as
such attorney.
7. NOTICES
Where notice is to be given in writing to any party hereto it may be
served by leaving it at the registered office or last known address of
that party or by sending it by prepaid first class post or facsimile to
the party's registered office or last known address within the United
Kingdom supplied by the party to the other parties to this Deed for the
giving of notice to that party to the other or by airmail or facsimile
to any address outside the United Kingdom supplied by that party for
the giving of notice to that party. A properly addressed and prepaid
notice sent by first class post or airmail (as the case may be) shall
be deemed to have been served at an address within the United Kingdom
at the expiry of two days after the notice is posted and served at an
address outside the United Kingdom at the expiry of ten days from the
date of posting by airmail. Where a notice is given by facsimile,
service of the same shall be deemed to be effected upon receipt of
telephone or other confirmation of its receipt.
8. GENERAL
8.1 Failure by any party hereto at any time or times to require performance
of any provision of this Deed shall in no manner affect his or its
right to enforce such provision at a later time. No waiver by any party
hereto of any condition or the breach of any term, representation or
warranty
5
<PAGE>
contained in this Agreement whether by conduct or otherwise in any one
or more instances shall be deemed to be construed as a further or
continuing waiver of any such condition or breach or waiver of any
other condition or be deemed to be or construed as the breach of or a
waiver of any other term, covenant, representation or warranty in this
Agreement.
8.2 This Deed shall be governed by and construed in accordance with English
Law and all the parties hereto irrevocably submit to the non-exclusive
jurisdiction of the English Courts as regards any claim, dispute or
matter arising out of or relating to this Deed or any of the documents
to be executed pursuant to it. The parties hereto agree that service of
any writ, notice or other document for the purpose of any proceedings
in such Court shall be duly served upon it if delivered or sent by
registered post in the manner provided by Clause 7.
8.3 This Deed may be entered into by each of the parties signing one or
more counterparts which, taken together, shall constitute a complete
deed.
8.4 Except where the context otherwise requires, each of the restrictions
contained in this Deed shall be construed as independent of every other
restriction and of every other provision of this Deed to the intent
that if any such restriction or the application of any such restriction
to any person or to any circumstance shall be determined to be invalid
or unenforceable, then such determination shall not affect any other
restriction or provision of this Deed or the application of such
restriction to any other person or circumstance.
8.5 Nothing contained in this Deed and no action taken by any party
pursuant to this Deed shall be deemed to constitute any party, a party
to a partnership, association, joint venture or other entity. None of
the parties hereto shall by virtue hereof have any authority to bind
any other party hereto in any way except where expressly provided
herein.
8.6 The C Share Option Holders hereby irrevocably by way of security for
the performance of its obligation under this Deed (within the meaning
of Section 4 of the Powers of Attorney Act 1971) appoints Authoriszor
and any person to whom Authoriszor delegates the exercise of the power
of attorney conferred by this Clause jointly and also severally to be
the attorney or attorneys of the Shareholders and in their name and on
their behalf and as their act and deed to sign, seal, execute, deliver,
perfect and do all deeds, instruments, acts and things which may be
required (or which the attorney reasonably considers necessary) for
carrying out any obligation imposed on the C Share Option Holders
pursuant to this Deed.
8.7 The C Share Option Holders will ratify and confirm all transactions
entered into and all things done by the attorney in the exercise or
purported exercise of their powers.
8.8 In the event of there being any conflict between the provision of this
Deed and those contained in either the articles of association of the
Company or the rules of the WRDC Limited Number 1 Share Option Scheme,
all parties to this Deed agree and confirm that the provisions of this
Deed shall prevail at all times.
6
<PAGE>
8.9 The Company agrees to be bound by the provisions of this deed
notwithstanding the provision of the articles of association of the
Company or the rules of the WRDC Limited Number 1 Share Option Scheme.
AS WITNESS the hands of the parties or their duly authorised representatives on
the date shown on the first page.
7
<PAGE>
SCHEDULE 1
C Share Option Holders
Name
Marc St John Bray
35 The Drive
Prestwich
Manchester M25 1BJ
Garry Ian Waddington
14 Tanfield Drive
Burley in Wharfedale
Ilkley LS29 7RT
Peter Hughes
3 Heslington Court
Heslington
York YO1 5EX
David Mark Clarke
The Elms
Little Carlton
Near Louth
Lincolnshire LN11 8HN
Antony Charles Dunford
22 Keystone Crescent
Islington
London N1 9DS
8
<PAGE>
SCHEDULE 2
WRDC Limited No.1 Share Option Scheme
9
<PAGE>
SCHEDULE 3
Form of Notice
From: Authoriszor Holdings Limited of Windsor House, Cornwall Road, Harrogate
HG1 2PW.
To:
Dear Sirs
_____ [Date]
OPTION NOTICE
We hereby give notice, pursuant to the Deed of Covenant dated [ ], of our
right to require you to:
(a) surrender [ ] options you hold over "C" Ordinary Shares in WRDC Limited;
and/or
(b) sell to us the [ ] "C" Ordinary Shares in WRDC Limited that you hold,
in each case in accordance with the terms of the Deed of Covenant.
We confirm that the Price for the Acquisition is [ ] per share of WRDC Limited.
- - - - ---------------------------------------
Duly authorised for and on behalf of
Authoriszor Holdings Limited
10
<PAGE>
SCHEDULE 4
Deed of Adherence
THIS DEED OF ADHERENCE is made on o 2000
BETWEEN:
(1) _______________ LIMITED (Registered in England No ____________ whose
registered office is at________________ (the "Covenantor"); and
(2) WRDC LIMITED (Registered in England No _________________ ("the Company")
for itself and as attorney for the other parties to the Deed of Covenant.
RECITAL
This Deed is supplemental to a Deed of Covenant made on _______________ between
___________________ ("the Agreement").
THIS DEED WITNESSES as follows:
1. The Covenantor hereby confirms that it has been supplied with a copy of
the Deed of Covenant and hereby covenants with each of the parties
hereto to observe, perform and be bound by all the terms of the Deed of
Covenant as if it were a party thereto or named therein as a C Share
Option Holder.
2. Each of the other parties hereto hereby covenants with the Covenantor
that the Covenantor shall be entitled to the benefit of the terms of
the Deed of Covenant as if it were a party thereto and named therein as
a C Share Option Holder.
3. The Covenantor hereby appoints Authoriszor Limited to be its attorney
for the purposes of clause 8 of the Agreement.
4. This Deed shall be governed by and construed in accordance with English
law.
IN WITNESS whereof this Deed has been executed by the Covenantor and the Company
for itself and as attorney for the other parties to the Agreement and is
intended to be and is hereby delivered on the date shown on the first page.
11
<PAGE>
SCHEDULE 5
Letter of Representation
Authoriszor Inc.
8201 Preston Road, Suite 600
Dallas, Texas 75225
Attention: Mr. Robert P. Jeffcock
President
Gentlemen:
In connection with the issuance to the undersigned of ____________ shares (the
"Shares"), of common stock, par value $.01 per share (the "Common Stock"), of
Authoriszor Inc., a Delaware corporation (the "Company"), the undersigned
warrants and represents that:
1. The undersigned is acquiring the Shares for investment solely for his own
account and not for distribution, transfer or resale to others.
2. The undersigned has such knowledge and experience in financial and business
matters that he is capable of evaluating the merits and risks of the
acquisition of the Shares.
3. The undersigned understands that the Shares to be acquired have not been
registered under the Securities Act of 1933, as amended (the "Securities
Act"), nor pursuant to the provisions of the securities laws or other laws
of any other applicable jurisdiction, in reliance upon exemptions for
private offerings contained in the Securities Act and the regulations
promulgated thereunder and in the applicable laws of such jurisdictions.
The undersigned is fully aware that the Shares subscribed for by the
undersigned are to be issued to the undersigned in reliance upon such
exemptions based upon the representations set forth herein. The undersigned
is also fully aware of the restrictions on sale, transferability and
assignment of the Shares.
4. Because the Shares have not been registered under any securities laws, they
will be "restricted securities" as defined in Securities and Exchange
Commission Rule 144. Accordingly, the undersigned, as a stockholder, may
not sell, transfer, or otherwise dispose of them without registration under
the Securities Act and applicable securities laws or the applicability of
an exemption from registration (in which case the undersigned may be
required to provide the Company with a legal opinion, in form and substance
satisfactory to the Company and its counsel, that registration is not
required).
5. The Shares are not being acquired directly or indirectly as nominee,
trustee, agent, or representative for any other person or persons.
12
<PAGE>
6. The undersigned acknowledges and consents that certificates now or
hereafter issued for the Shares will bear a legend substantially as
follows:
"The shares of stock of Authoriszor Inc. (the "Company") represented by
this certificate have not been registered under the Securities Act of
1933, as amended (the "Act"), and the holder hereof cannot make any
sale, pledge, hypothecation, assignment or other transfer of any shares
of such stock except pursuant to an offering of such shares duly
registered under the Act, and any applicable state securities laws, or
under other such circumstances which in the opinion of counsel for the
Company, at the time, does not require registration under the Act or
any applicable state securities laws. The shares represented by this
certificate are "restricted securities" within the meaning of Rule 144
promulgated by the Securities and Exchange Commission under the Act and
may be subject to the limitations and reporting requirements of said
rule upon resale or other distribution thereof."
7. The undersigned warrants that the information set forth in this Investment
Letter is true and correct, with the knowledge that the Company is relying
on the accuracy of the information and truth of the representations
contained herein in connection with the Company's compliance with
applicable securities laws. The undersigned further agrees to indemnify and
hold harmless the Company from any and all liabilities, losses, costs, and
expenses arising out of or related to the resale or other distribution by
the undersigned of all or any portion of the Shares in violation of the
Securities Act or of any applicable state securities laws as well as any
and all liabilities, losses, costs, and expenses to which the Company may
be put or that the Company may incur by reason of or in connection with any
misrepresentation made by the undersigned, any breach of any of its
warranties, or its failure to fulfil any of the covenants or agreements set
forth herein. The representations and warranties contained herein (i) are
made from the date the Board of Directors approved the issuance of the
Shares to the undersigned, and (ii) are binding upon the heirs, legal
representatives, successors, and assigns of the undersigned.
Executed as of this _______ day of _______________, 2000.
[Shareholder]
Address (for purpose of the Company's stock transfer records):
13
<PAGE>
EXECUTED (but not delivered until )
the date hereof) AS A DEED by )
AUTHORISZOR HOLDINGS )
LIMITED acting by: )
Director:
Director/Secretary
EXECUTED (but not delivered until )
the date hereof) AS A DEED by )
WRDC LIMITED acting by: )
)
Director:
Director/Secretary
EXECUTED (but not delivered until )
the date hereof) AS A DEED by )
MARK ST JOHN BRAY )
Witness signature:
Name:
Address:
Occupation:
14
<PAGE>
EXECUTED (but not delivered until )
the date hereof) AS A DEED by )
GARRY IAN WADDINGTON )
Witness signature:
Name:
Address:
Occupation:
EXECUTED (but not delivered until )
the date hereof) AS A DEED by )
PETER HUGHES )
Witness signature:
Name:
Address:
Occupation:
EXECUTED (but not delivered until )
the date hereof) AS A DEED by )
DAVID MARK CLARKE )
Witness signature:
Name:
Address:
Occupation:
15
<PAGE>
EXECUTED (but not delivered until )
the date hereof) AS A DEED by )
ANTONY CHARLES DUNFORD )
Witness signature:
Name:
Address:
Occupation:
16
<PAGE>
INDEX
1. DEFINITIONS........................................................1
2. COVENANT...........................................................1
3. PRICE AND PROCEDURE................................................2
4. COMPLETION.........................................................3
5. PAYMENT OF PRICE...................................................4
6. ASSIGNMENT.........................................................4
7. NOTICES............................................................4
8. GENERAL............................................................5
SCHEDULE 1.....................................................................7
C Share Option Holders.............................................7
SCHEDULE 2.....................................................................8
WRDC Limited No.1 Share Option Scheme..............................8
SCHEDULE 3.....................................................................9
Form of Notice.....................................................9
SCHEDULE 4....................................................................10
Deed of Adherence.................................................10
SCHEDULE 5....................................................................11
Letter of Representation..........................................11
<PAGE>
DATED________________________2000
(1) AUTHORISZOR HOLDINGS LIMITED
(2) WRDC LIMITED
(3) THE SEVERAL PERSONS REFERRED TO IN SCHEDULE 1
DEED OF COVENANT
relating to
WRDC Limited
THIS AGREEMENT is made on January 2000
BETWEEN:
(1) AUTHORISZOR HOLDINGS LIMITED (Company No. 3873915) whose registered office
is at Windsor House, Cornwall Road, Harrogate HG1 2PW ("Authoriszor");
(2) WRDC LIMITED (Company No. 2945379) whose registered office is at First
Floor, Ebor Court, Westgate, Leeds LS1 4ND (the "Company");
(3) THOSE PERSONS whose names and addresses and shareholdings in the Company
are set out in Schedule 7 ("Shareholders"); and
(4) AUTHORISZOR INC. a public company registered under the laws of the state of
Delaware whose principle executive offices are situated at 3201 Preston
Road, Suite 6000, Dallas Texas, 75225 (the "Guarantor").
RECITALS:
(A) The Company is a private limited company incorporated in England and Wales
on 4 July 1994. It has prior to the passing of the Resolutions an
authorised share capital of <25,000 divided into:
o 1,125,000 "A" Ordinary Shares of 1 penny each;
o 1,125,000 "B" Ordinary Shares of 1 penny each; and
o 250,000 non-voting "C" Ordinary Shares of 1 penny each;
(B) Of the authorised share capital, all "A" Ordinary Shares and all "B"
Ordinary Shares are issued and fully paid and held by Garcia Hanson and
Brian Edmondson respectively. No non-voting "C" Ordinary Shares are in
issue, but options have been granted to employees of the Company in respect
of 132,500 non-voting "C" Ordinary Shares.
(C) Following Completion the Shareholders and Authoriszor have agreed to
co-operate in the management of the Business through the Company as
provided in, and in accordance with, this Agreement.
(D) The Guarantor has agreed to guarantee the obligations of Authoriszor under
the terms of this Agreement.
IT IS HEREBY AGREED as follows:
1. DEFINITIONS
1.1 In this Agreement and the Recitals and the Schedules the following terms
shall have the following meanings:
"Additional Disclosure Letter" means a letter and its annexures dated
and delivered in accordance with the provisions of Clause 6.2 or
Schedule 10 and addressed from the Shareholders to Authoriszor;
"the Agreed Form" in relation to any document, that document initialled
for the purposes of identification by or on behalf of the parties
hereto;
"A" Ordinary Shares" the "A" ordinary shares of 1 penny each in the
capital of the Company;
"the Articles of Association" the new Articles of Association of the
Company to be adopted pursuant to the Resolutions in the Agreed Form
annexed hereto and marked "A";
"AL" Authoriszor Limited, Company Number 3302620;
"AL Loan Variation" the variation of the Initial Loan in the Agreed
form;
"Authoriszor's Solicitors" Hammond Suddards of 2 Park Lane, Leeds LS3
1ES;
"the Board" the board of directors of the Company from time to time;
""B" Ordinary Shares" the "B" ordinary shares of 1 penny each in the
capital of the Company;
"Business" means the business of communication consultants and related
business;
"Business Plan" the business plan relating to the strategy and business
of the Company in the Agreed Form;
"Business Day" means a day (other than Saturday or Sunday) when the
clearing banks are open for business in the City of London;
""C" Option Shares" means the options over "C" Ordinary Shares pursuant
to the WRDC Limited No. 1 Share Option Scheme;
<PAGE>
""C" Ordinary Shares" means the non-voting "C" Ordinary Shares of 1
penny each in the capital of the Company;
"Completion" the completion of this Agreement by the parties in
accordance with Clause 2;
"Completion Date" the date of Completion;
"Control" or "Controlled" shall be determined by reference to the
provisions of Section 416 TA 1988 and a "Change of Control" when
applied to any party shall be deemed to have occurred if any person or
persons who Control such party at the date of execution of this
Agreement (or the date such party becomes bound by the terms of this
Agreement (if later)) subsequently cease to Control it or if any person
or persons subsequently acquire Control of it;
""D" Director" means the director of the Company for the time being
appointed or deemed to have been appointed pursuant to Clause 4.1 or
the Articles of Association by Authoriszor as holder of the "D"
Ordinary Shares;
""D" Ordinary Shares" the "D Ordinary Shares of 1 penny each in the
capital of the Company;
"Disclosure Letter" means the letter and its annexures dated with
today's date delivered immediately before the execution of this
Agreement and addressed from the Shareholders to Authoriszor;
"Deed of Covenant" a deed in the agreed form;
"Deed of Undertaking" a deed in the form set out in Schedule 6;
"Fundraising" means the private placing currently being undertaken by
the Guarantor through its brokers Beeson Gregory;
"the General Undertakings" the undertakings set out in Schedule 1;
"Initial Loan" the initial loan of <100,000 made by AL to the Company
on 14 December 1999;
"Issued Share Capital" shall mean the entire issued share capital of
the Company;
<PAGE>
"Last Accounts" means the audited balance sheet of the Company as at
the Last Accounts Date and the audited profit and loss account of the
Company up to the Last Accounts Date and the auditor's and directors'
report and notes thereon;
"Last Accounts Date" 31 July 1999;
"Letter of Representation" means the letter in the form set out in
Schedule 11 with such amendments or changes that may be required at the
time of issue of such letter under the rules of NASDAQ or US law
(including federal and state securities laws);
"the Loan Agreement" the loan agreement to be made between Authoriszor
and the Company in the Agreed Form;
"NPBT" the net operating profit on ordinary activities of the Company
before interest and taxation, calculated in accordance with the
accounting conventions, policies, principles, methods and practices
adopted or applied by the Company and otherwise in accordance with the
generally accepted accounting principles of the UK, in respect of the
last financial year ended prior to the Option Period for which "NPBT"
is required to be calculated, based upon the Company's audited
financial statement for such financial year;
"Option" the options exercisable by Authoriszor under the provisions of
Clause 9;
"Option Period" shall mean the periods during which Authoriszor is
entitled to exercise an Option in accordance with Clause 9, PROVIDED
THAT in the event that the audited accounts for the last financial
period ended prior to any specified Option Period in Clause 9, are not
furnished to the Authoriszor within 3 months of the end of such
financial period, then such specified Option Period shall not commence
until the day following the date on which such audited accounts are
furnished to Authoriszor, and shall be deemed to end, 2 months
thereafter.
"Option Shares" shall have the meaning set out in Clause 9;
"Price" shall have the meaning set out in Clause 9.3;
"Relevant Share Capital" shall mean the entire issued share capital of
the Company plus those "C" Ordinary Shares that have not been issued
but over which options have been granted for the time being;
"the Resolutions" the written resolutions of the Company to be
passed at or before Completion in the form set out in Schedule 2;
<PAGE>
"the Revenue" the turnover of the Company calculated in accordance with
the accounting conventions, policies, principles, methods and practices
adopted or applied by the Company and otherwise in accordance with
generally accepted accounting principles of the UK, in respect of the
last financial year ended prior to the Option Period for which
"Revenue" is required to be calculated based upon the Company's audited
financial statement for such financial year;
"Security Interest" means any mortgage, charge assignment or
assignation by way of security, guarantee, indemnity, debenture,
hypothecation, pledge, declaration of trust, lien, right of set off or
combination of accounts, or any security interest whatsoever, howsoever
created or arising; "the Service Agreements" the new service agreements
to be entered into between the Company and each of Garcia Hanson, Brian
Edmondson and Marc Bray in the Agreed Form;
"Shares" shares in the share capital of the Company;
"Subscription" means the subscription for 840,000 "D" Ordinary Shares
to be made by Authoriszor on Completion pursuant to the terms of this
Agreement.
"Shareholders Solicitors" means Shulmans 21 York Place, Leeds, LS1 2EX;
"Subsidiary" and "Holding Company" have the meanings ascribed thereto
by Section 736 Companies Act 1985;
"Taxation" means all forms of taxation, charge, duty, impost
withholding, deduction, rate, levy and governmental charge (whether
national or local) in the nature of the tax (including without
limitation, national insurance and other similar contributions, stamp
duty and stamp duty reserve tax) whatsoever and whenever created,
enacted or imposed, and whether of the United Kingdom or elsewhere, and
any amount payable to any taxation authority or any other person as a
result of any enactment relating to any taxation authority or any other
person as a result of any enactment relating to taxation, together with
all fines, penalties, interest, costs, charges, surcharges and expenses
connected therewith and "Tax" shall be construed accordingly; and
"TA 1988" the Income and Corporation Taxes Act 1988.
"Warranties" shall mean the Warranties set out in Schedule 4, save
where the provisions of Clause 9.5 apply, when Schedule 4 shall be
deemed to be varied or supplemented as set out in Schedule 10.
<PAGE>
1.2 References to the parties hereto include their respective successors in
title, assignees, estates and legal personal representatives.
1.3 References to the singular shall include a reference to the plural and vice
versa unless the context otherwise requires.
1.4 References to Recitals, Clauses, Sub-Clauses and Schedules shall be to
recitals and schedules to and clauses and sub-clauses of this Agreement.
1.5 References to statutes or statutory provisions and orders or
regulations made thereunder include that statute provision order or
regulation as amended, modified re-enacted or replaced from time to
time before the date hereof and to any previous statute, statutory
provision order or regulation amended modified re-enacted or replaced
by such statute provision order or regulation.
1.6 The clause headings shall not affect the construction of this Agreement.
2. CONDITIONS PRECEDENT, SUBSCRIPTION AND COMPLETION
2.1 Subject to the terms and conditions of this Agreement, Authoriszor shall
make the Subscription on Completion.
2.2 The Shareholders hereby waive all rights of pre-emption (if any) that
they may have now or at Completion over the Shares the subject of the
Subscription to which they may be entitled under the Articles of
Association of the Company or otherwise.
2.3 The Shareholders and Company agree that any sums due to the Company
pursuant to the Subscription shall be paid by Authoriszor to the
Shareholders' Solicitors whose receipt shall constitute a full
discharge of Authoriszor's obligations to make any such payment.
2.4 Completion of the Subscription is conditional upon:
(a) completion of the Fundraising; and
(b) subject to the terms of the Disclosure Letter each of the
Warranties being true and accurate to the reasonable
satisfaction of Authoriszor as at Completion.
2.5 Authoriszor shall use all reasonable endeavours to ensure that the
condition at Clause 2.4(a) above is satisfied by the date specified in
Clause 2.8.
<PAGE>
2.6 Authoriszor shall promptly give notice to the Shareholders of the
satisfaction of the condition in Clause 2.4(a) within 2 Business Days of
becoming aware of such satisfaction.
2.7 if:
(a) the condition set out in Clause 2.4(a) has not been satisfied
or waived by Authoriszor in writing; and
(b) the condition set out in Clause 2.4(b) has not been waived by
Authoriszor in writing;
on or before 30 April 2000 this Agreement shall cease to have effect as
from such date and no party shall have any further or other obligation
to the other save in respect of any antecedent breach and for the
avoidance of doubt the provisions of Clause 6.3 shall apply.
2.8 Subject to the relevant satisfaction or waiver (as referred to in
clause 2.7) of the conditions set out in Clause 2.4 and the provisions
of Clause 6, Completion shall take place at the office of the
Authoriszor's Solicitors on 30 April 2000 or on such earlier date
(being not more than 5 Business Days after this Agreement shall have
ceased to be conditional under Clause 2.4) as Authoriszor may specify
in writing to the Shareholders when each of the events set out in
Clause 2.9 shall occur.
2.9 At Completion:
(a) the Shareholders shall procure that there shall be duly
convened and held a meeting of the board of Directors of the
Company to transact and unanimously resolve upon the business,
set out in Schedule 5 and shall procure the passing of the
resolutions set out in Schedule 2;
(b) Authoriszor shall deliver or cause to be delivered to the
Company an application for the allotment to Authoriszor of
840,000 "D" Ordinary Shares duly signed on behalf of
Authoriszor together with a bankers draft (or such other form
of payment as the Company may agree) in respect of the
Subscription price for the "D" Ordinary Shares of <378,000;
(c) the Company shall allot and issue the "D" Ordinary Shares to
Authoriszor upon payment being received by the Company and the
Company shall register Authoriszor as the holder of the "D"
Shares, and shall prepare and deliver to Authoriszor share
certificates in respect thereof;
<PAGE>
(d) the Company and Authoriszor shall execute the Loan Agreement
and Authoriszor shall pay to the Company the sum of <122,000
being the amount of the first draw down under the Loan
Agreement;
(e) the Company and Garcia Hanson, Brian Edmondson and Marc Bray
shall execute and exchange the Service Agreements;
(f) Ian McNeill shall be appointed the "D" Director pursuant to
the Articles of Association and on the terms set out in
Clause 4;
(g) The Company and AL shall enter into the AL Loan Variation; and
(h) Authoriszor and the Company shall execute the Deed of
Covenant.
2.10 Following Completion the Company shall procure that all necessary
documents and returns are duly completed and delivered to the Registrar
of Companies in compliance with the Companies Act 1985.
2.11 In the event that Authoriszor confirms in writing that the condition
set out in Clause 2.4(a) is satisfied and that it intends to confirm
that the condition set out in Clause 2.4(b) will be waived on
Completion then if any of the provisions of Clause 2.9 are not complied
with in all respects as required by the Shareholders and the Company on
the date of Completion, then Authoriszor shall be entitled in its
absolute discretion:
(a) to rescind this Agreement forthwith by notice in writing to
the Shareholders; or
(b) to effect Completion so far as is practicable having regard to
the defaults which have occurred without prejudice to any
other rights that Authoriszor may have against the
Shareholders and the Company in respect of such breach; or
(c) to specify a new date for Completion (being a Business Day not
more than 5 Business Days after the agreed date for Completion
pursuant to Clause 2.8 in which event the provisions of this
Clause 2.11 (except for this Clause 2.11 (c) shall apply to
Completion as so deferred.
2.12 In the event that Authoriszor confirms that the condition set out in
Clause 2.4(a) is satisfied and that it has waived the condition set out
in Clause 2.4(b), then if any of the provisions of Clause 2.9 which
require an action by Authoriszor are not complied with in all respects
as on the date of Completion, then the Shareholders and the Company
shall be entitled in their absolute unanimous discretion:
<PAGE>
(a) to rescind this Agreement forthwith by notice in writing to
Authoriszor; or
(b) to effect Completion so far as is practicable having regard to
the defaults which have occurred without prejudice to any
other rights they may have against Authoriszor in respect of
such breach; or
(c) to specify a new date for Completion (being a Business Day not
more than 5 business days after the agreed date for Completion
pursuant to Clause 2.8 in which event the provisions of this
Clause 2.12 (except for this Clause 2.12(c)) shall apply to
Completion as so deferred.
3. CONTINUING AND FURTHER OBLIGATIONS
3.1 Each of the undertakings given by the parties hereto pursuant to this
Agreement shall continue in full force and effect notwith- standing
Completion.
3.2 Subject to the provisions of Clause 3.4:
(a) the Company undertakes to Authoriszor and the Shareholders in
the terms of the General Undertakings and to comply so
far as is lawful with the terms of the General Undertakings;
(b) the Shareholders undertake to Authoriszor and Authoriszor
undertakes to the Shareholders to exercise any powers that
they may have as shareholders and to vote in person or by
proxy their respective Shares in favour of any resolutions
proposed in general meetings necessary to give effect to the
General Undertakings and not to vote their respective Shares
against any resolution proposed in general meeting which would
to its knowledge either directly or indirectly give rise to a
breach of the General Undertakings; and
(c) the Shareholders and Authoriszor undertake to each other to
procure that the Directors appointed by them in their capacity
as a director of the Company shall do all acts within their
power to procure compliance by the Company with the General
Undertakings PROVIDED THAT nothing in this Clause 3.2((c))
will impose an obligation to procure that any Director acts or
omits to act in a way which would be in excess of or in breach
of his duties (including his overriding duty to act in the
best interests of the Company) as a director of the company or
which would be unlawful.
3.3 If the Company fails to comply with its obligations under sub clause
3.2((a)) to supply information to Authoriszor or the Shareholders (as the
case may be) under the General Undertakings, and continues to fail to
comply 14 days following a written request from
<PAGE>
Authoriszor or the Shareholders (as the case may be) Authoriszor or the
Shareholders (as the case may be) shall be entitled to instruct a firm of
chartered accountants to prepare and submit to Authoriszor or the
Shareholders (as the case may be) and to the Company (at the cost of the
Company) such information as should have been supplied to Authoriszor or
the Shareholders (as the case may be) under the General Undertakings and
such other financial information concerning the Company (and any
subsidiaries) as Authoriszor or the Shareholders (as the case may be) shall
require and the Company shall (and shall procure that each subsidiary
shall) give such accountants access to its premises and financial records
and all the assistance which such accountants may request for this purpose.
3.4
(a) the Company shall only be entitled to act in breach of its obligations
pursuant to Clause 3.2((a)) with respect to paragraph 1 of Schedule 1 with
the written consent of Authoriszor and the Shareholders;
(b) the Shareholders and Authoriszor agree that on an annual basis, they shall
review, update or renew the Business Plan. The Shareholders and Authoriszor
agree that they will negotiate and discuss such matters in good faith and
that neither the Shareholders nor Authoriszor nor the "D" Director may
unreasonably withhold their respective consents to amend, vary or update
the Business Plan. The Shareholders agree that it will be reasonable for
Authoriszor to object to any amendment, variation or update of the Business
Plan if such amendment, variation or update would set the projected growth
in turnover of the Company at less than 50% and the increase net profits at
less than 5%. Authoriszor agrees that it will be reasonable for either
Shareholder to object to any amendment, variation or update of the Business
Plan if such amendment variation or update would set the projected growth
in turnover of the Company at more than 50% and the projected increase in
net profits at more than 5%.
3.5 The Company and each of the Shareholders and Authoriszor hereby undertake
to each other:
(a) to exercise their respective powers and votes (including such
powers and votes as may be vested in any nominee) to ensure
that:
(i) the terms of this Agreement and the Articles of
Association are complied with;
(ii) all meetings of the Board and the Company shall be
quorate;
(iii) generally to endeavour to promote the Company's
business and its interests;
<PAGE>
(b) to execute any further documents, take all steps, exercise all
voting rights and other powers of control available to them in
relation to the Company or otherwise and generally to take any
other such action and do all other things as are required of
them (including without limitation amending the Articles of
Association) at any time to give full force and effect to the
provisions of this Agreement.
3.6 Save as herein expressly provided, in the case of any conflict between
the terms of this Agreement and the provisions of the Articles of
Association of the Company or of any subsidiary of the Company, the
terms of this Agreement shall prevail on all the parties to this
Agreement. Authoriszor and each Shareholder agree that they will, if so
requested by the others procure to the extent of their respective
rights to vote as a shareholder of the Company any necessary amendment
to the Articles of Association or the articles of association of any
subsidiary of the Company (as the case may be) so as to remove such
conflict.
3.7 The Shareholders and Authoriszor agree that:
(a) whilst he remains an employee and/or director of the Company, Garcia Hanson
will be entitled to perform the duties of Managing Director of the Company
and have full responsibility for all operational matters;
(b) they will use reasonable endeavours to procure that agreements are entered
into between the Company and AL to deal with:
(i) AL providing technology, products and technical
support to the Company, and
(ii) the Company providing implementation support and
other services to the Authoriszor Inc and its
subsidiaries,
in each case on agreed commercial terms.
3.8 Authoriszor hereby agrees that the terms of this Agreement are not
intended to restrict the management of the Company in the ordinary
course and Authoriszor acknowledges that the intention is for the
Company to continue to operate as an independent company wherever
possible.
4. THE BOARD OF DIRECTORS
4.1 Subject to clause 4.2 Authoriszor shall have the right to appoint a
maximum of one director of the Company (the "D" Director) and of such
of its subsidiaries as it may specify from time to time and to remove
from office any such person so appointed and to appoint another in his
<PAGE>
place. Any such appointment or removal shall be in writing, served on
the Company and signed by Authoriszor. The first "D" Director shall be
Ian McNeill.
4.2 When Authoriszor wishes to appoint a replacement for Ian McNeill, it
shall supply the Shareholders with the name (and any other details
which the Shareholders may reasonably request) of the proposed new "D"
Director (the "Proposed Director"). The Shareholders shall be entitled
to reject up to three Proposed Directors on the first appointment after
Ian McNeill and following that be entitled to reject one Proposed
Director on each occasion of a new appointment of a new "D" Director
Authoriszor shall not be entitled to put forward as a Proposed Director
any person who has been previously rejected by the Shareholders unless
the Shareholders otherwise agree. The performance of the "D" Director
shall be reviewed at annual intervals (the first review to take place
on the first anniversary of the date of this Agreement) by the
Shareholders and if the Shareholders are not reasonably satisfied with
the performance of the "D" Director, then the Shareholders shall be
entitled to remove the "D" Director (without the consent of
Authoriszor) and Authoriszor undertakes to procure the removal of the
"D" Director in which event Authoriszor shall be entitled to appoint
another in his place in accordance with the provisions of this Clause
4.
4.3 The Company shall not remove or purport to remove any "D" Director of
the Company without the prior written consent of Authoriszor (except in
accordance with the provisions of Clause 4.2).
4.4 The "D" Director shall be entitled to report back to Authoriszor such
information as may be necessary for Authoriszor to monitor its
investment in the Company. The "D" Director shall be entitled to be
paid a reasonable directors fee as set out in the Business Plan and
reasonable expenses by the Company commensurate with the time spent and
services provided by him.
5. UNDERTAKINGS
5.1 In further consideration of the agreement of Authoriszor, the Guarantor
and the Company to enter into this Agreement and the Deeds of Covenant
(as appropriate), each of Garcia Hanson and Brian Edmondson hereby
undertakes to Authoriszor, the Guarantor and the Company that he shall
not at any time during the period up to the date on which he ceases to
be beneficially interested in any Shares of the Company or two years
following the date on which he ceases to be an employee of the Company
(whichever is earlier), do or permit any of the following without the
prior written consent of Authoriszor:
(a) either solely or jointly or on behalf of any person directly
or indirectly carry on or be engaged or interested in any
business competing with the business of the Company;
<PAGE>
(b) solicit the custom of any person who is or has been at any
time during the period set out above, a customer of the
Company for the purpose of offering to such customer goods or
services similar to or competing with those of the Company;
(c) solicit or entice away or endeavour to solicit or entice away
any Director or employee of the Company;
(d) cause or permit any person directly or indirectly under its
control to do any of the foregoing acts or things; or
(e) at any time (not withstanding the time limitations set out
above) divulge to any third party whatsoever (save to the
extent required by law or any regulatory requirement) or use,
take away, conceal, destroy or retain for his own or another's
advantage or to the detriment of the Company any of the trade
secrets, accounts, financial or trading information or other
confidential information which he may receive or obtain in
relation to the businesses, finances, dealings or affairs of
the Company including any information regarding the products,
processes or the customers, suppliers or agents of the Company
and including any papers or records howsoever recorded
(whether in writing or print or by photographic, electrical,
magnetic, symbolic or other means).
5.2 The undertakings in Clause 5.1 (a) to (d) shall not apply if Garcia
Hanson or Brian Edmondson (as the case may be) is removed as an
employee without good cause. For the purposes of this Clause 5.2 the
term "good cause" shall mean either (a) voluntary termination by the
employee in circumstances other than which the employee successfully
claims constructive dismissal or (b) lawful termination by the Company
of the relevant Service Agreement by reason of a breach of the relevant
Service Agreement on the part of the employee;
5.3 In further consideration of the agreement of the Company, Authoriszor
and the Shareholders to enter into this Agreement, Authoriszor and the
Guarantor hereby jointly and severally undertake with the Company and
separately with each of the Shareholders that it shall not at any time
whilst it is beneficially interested in any shares of the Company do or
permit any of the following without the prior written consent of the
Shareholders;
(a) (and it shall procure that no member of its group shall) solicit or entice
away or endeavour to solicit or entice away any director or employee of the
Company involved in management or technical matters or sales; or
(b) at any time (not withstanding the time limitations set out above) (and it
shall procure that no member of its group shall) divulge to any third party
whatsoever (save to the extent required by law or any regulatory
requirement) or use, take away, conceal,
<PAGE>
destroy or retain for his own or another's advantage or to the detriment of
the Company any of the trade secrets, accounts, financial or trading
information or other confidential information which it may receive or
obtain in relation to the businesses, finances, dealings or affairs of the
Company including any information regarding the products, processes or the
customers, suppliers or agents of the Company and including any papers or
records howsoever recorded (whether in writing or print or by photographic,
electrical, magnetic, symbolic or other means) or to use such information
to solicit the custom of any person who is or has been at any time during
the term of this Agreement a customer of the Company for the purpose of
offering to such customer goods or services similar to or competing with
those of the Company.
5.4 Nothing contained in Clauses 5.1(a) to (e) (inclusive) or Clauses
5.3(a) and (b) (inclusive) shall prevent Garcia Hanson or Brian
Edmondson or Authoriszor (or any member of its group) from being the
holder or beneficial owner of any class of securities in any company if
such class of securities is listed on a recognised stock exchange, and
he (together with his spouse and any issue) neither holds nor is
beneficially interested in more than a total of 3 per cent of any
single class of the securities in that company.
5.5 Each of the undertakings contained in each of Clauses 5.1(a) to (e)
(inclusive) and Clause 5.3(a) and (b) shall be, and is, a separate
undertaking by each of Brian Edmondson, Garcia Hanson and Authoriszor
and shall be enforceable by the Company, Authoriszor or the
Shareholders (as the case may be) separately and independently of the
right of the Company or Authoriszor (as the case may be) to enforce any
one or more of the other covenants contained in Clause 5 and in the
event that any of such undertakings shall be found to be void but would
be valid if some part thereof were deleted then such undertaking shall
apply with such deletion as may be necessary to make it valid and
effective.
6. WARRANTIES
6.1 Subject to matters disclosed in the Disclosure Letter, the Shareholders
warrant to Authoriszor in the terms set out in Schedule 4 at the date
of this Agreement and acknowledge that Authoriszor has entered into
this Agreement in reliance on the Warranties contained in Schedule 4.
The provisions of Schedule 9 shall apply to the Warranties.
6.2 Subject to matters disclosed in the Disclosure Letter or any Additional
Disclosure Letter (which shall, if deemed appropriate by the
Shareholders, inter alia, set out those Warranties which cannot be
given at Completion by the Shareholders due to there being a material
breach of such Warranties) the Warranties in the terms of Schedule 4
shall be repeated by the Shareholders to Authoriszor at Completion save
that reference in Schedule 4 to the Disclosure Letter shall be a
reference to both the Disclosure Letter and any such Additional
Disclosure Letter. Without prejudice to the generality of the foregoing
the Shareholders may
<PAGE>
in the Additional Disclosure Letter update or amend matters contained in
the Disclosure Letter. The provisions of Schedule 9 shall apply to the
Warranties to be given at Completion.
6.3 The Shareholders shall procure that any matters arising or notified to
them or the Company after the date of this Agreement but prior to
Completion which may reasonably constitute a breach of the Warranties
are notified to Authoriszor, by way of issue of an Additional
Disclosure Letter. If on Completion the Shareholders are unable to give
the Warranties in the same terms as the Warranties given on the date of
this Agreement, subject to the same disclosures made in the Disclosure
Letter, only, Authoriszor shall be entitled to terminate this Agreement
forthwith by notice in writing to the Shareholders PROVIDED THAT
Authoriszor shall not be entitled to claim damages or other
compensation from the Shareholders (whether in contract tort or
otherwise) in relation to the rescission of this Agreement for any
reason or in relation to any matter against which disclosure has been
made in the Additional Disclosure Letter or where the Shareholders
indicate that a Warranty can no longer be given in the Additional
Disclosure Letter.
6.4 The Shareholders hereby undertake to Authoriszor that they will not and
will procure that the Company will not intentionally take any action or
knowingly ornit to do any act which is reasonably likely to result in a
breach of the Warranties at Completion insofar as such matters are
within the knowledge and control of the Shareholders.
6.5 Where any Warranty is qualified by the words "so far as the
Shareholders are actually aware" then this shall be a reference to the
actual knowledge of the Shareholders at the time of giving the Warranty
without imputing the knowledge of any other person to the Shareholders
and the Shareholders shall not be deemed to have made any enquiries
whatsoever or taken any steps to ensure accuracy (without prejudice to
any enquiries actually made or steps actually taken).
6.6 Where any Warranty is qualified by the words "so far as the
Shareholders are aware", then this shall be a reference to the
knowledge the Shareholders, having been deemed to have made due and
careful enquiry into the subject matter of such Warranty of the
officers, legal advisors and auditors of the Company
7. BREACH BY SHAREHOLDERS
7.1 A breach by Shareholders shall be deemed to have occurred:
(a) in the event that any Shareholder shall exercise any right
that he may have as a shareholder or director of the Company
in a manner that would result in a breach by the Shareholder
of the provision of Schedule 1; or
<PAGE>
(b) if any Shareholder shall knowingly commit any substantial
breach of this Agreement and fail to remedy such breach within
30 days of the service of a notice from Authoriszor requesting
the same to be remedied (such notice to give adequate
particulars of the alleged breach) or if the breach is one
which requires more than 30 days to remedy, has not commenced.
the remedying thereof within 30 days and thereafter not
diligently made efforts to complete such rectification.
7.2 In the event of the occurrence of a breach by a Shareholder in
accordance with Clause 7.1 then (without prejudice to any of the
remedies that Authoriszor may have under law, or equity or pursuant
hereto): (a) then in relation only to that Shareholder, Authoriszor
shall be entitled to exercise its Option in accordance with
Clause 9.1 within 28 days of such breach, whether or not this
exercise falls with the Option Periods set out in Clause 9.3;
and
(b) prior to any such exercise of its Option, Authoriszor shall
notify each of the other Shareholders of its intention to
exercise the Option under this Clause 7 and the relevant
financial year for which the Price shall be calculated shall
be the last complete financial year ended prior to the
exercise of the Option; and
(c) in all other material respects, the provisions of Clause 9
shall apply in full to the exercise of Options pursuant to
this Clause 7, and in so far as clause 9.15 is concerned if
the exercise of the Option under this Clause 7 would have the
effect of giving Authoriszor a 50% interest or more in the
Relevant Share Capital, then the Shareholder who is not in
breach of this Agreement shall be entitled to require
Authoriszor to purchase his shares ("the Relevant Shares") at
the same time as acquiring the defaulting Shareholder's shares
and on the same terms and conditions as those applying to the
defaulting Shareholder; and
(d) if the Shareholder who is not in breach of this Agreement
serves notice on Authoriszor within 28 days of exercise of the
Option referred to in clause 7.2(a) Authoriszor shall become
bound to complete the purchase of the Relevant Shares in
accordance with the relevant provisions of Clause 9 adapted
accordingly.
7.3 In the event that Authoriszor is entitled to and exercises its Option in
accordance with Clause 7.2 above, prior to I November 2001, it is hereby
agreed that the Price per Option Share shall be calculated as:
1.25 x Revenue
----------------------
Relevant Share Capital
<PAGE>
based on the Revenue as evidenced in the most recent audited accounts
for a full financial year of the Company as are available at that time.
7.4 In the event of an Event of Default by Authoriszor or the Guarantor in
accordance with the provisions of Clause 12 then (without prejudice to
any of the remedies the Shareholders mayhave under law, equity or
pursuant hereto) the Shareholders shall have an option to acquire all
the Shares held by Authoriszor on like terms to those set out in
Clauses 7.2 and 7.3 above in favour of Authoriszor, and Clauses. 7.2
and 7.3 and the Price per Option Share shall be interpreted and
construed accordingly.
8. STAFF
8.1 The Company shall recruit and employ such staff as the Board shall from
time to time consider necessary for the proper conduct of the Business
in accordance with the Business Plan.
9. OPTION ARRANGEMENTS
9.1 Subject to clauses 9.14 9.15 and 12 Authoriszor shall have the Option
to require the Shareholders to sell any or all of the Shares not
already owned by Authoriszor and owned by them ("Option Shares") at the
Price (as hereinafter provided) per Option Share, and on the exercise
of any such Option, the Shareholders shall be bound to sell, with full
title guarantee (free from any liens, charges or encumbrances), and the
Authoriszor shall be bound to complete the purchase of the relevant
Option Shares on payment of the Price in accordance with the terms of
this Agreement.
9.2 Subject to clauses 9.14 9.15 and 12 an Option can only be exercised by
notice in writing by Authoriszor in the form similar to that set out in
Schedule 8 served on the Shareholders during an Option Period, and all
Options will lapse and cease to have any further effect as set out
below. An Option Notice once served may not be withdrawn without the
written consent of the Company and the Shareholders, save where
Authoriszor determines that it does not wish to proceed to complete the
exercise of the relevant Options by reason of the contents of
anyAdditional Disclosure Letter served on Authoriszor by the
Shareholders after Completion.
9.3 Subject to Clause 9.4 below, the Price per Option Share shall be calculated
as follows:
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Financial Year Option Period* Price (per Option Share)
(1) Period to 31 July None (a) None
2000
(2) period to 31 July 1/11/2001 to 31/12/2001 1.25 x Revenue
2001 --------------
Relevant Share Capital
(3) period to 31 July 1/11/2002 to 31/12/2002 (0.75 x Revenue) + (2.5 x NPBT
2002 ------------------------------
Relevant Share Capital
(4) period to 31 July 1/11/2003 to 31/12/2003 (0.5 x Revenue) + (5 x NPBT
2003 ---------------------------
Relevant Share Capital
(5) period to 31 July 1/11/2004 to 31/12/2004 10 x NPBT
2004 -----------------------
Relevant Share Capital
(6) period to 31 July None - Option lapses None
2005
</TABLE>
* See definition of Option Periodfor the possible extension of these periods and
Clause 7 in respect of the exercise of Options on breach.
9.4 If Completion takes place after 29 February 2000, the Price (per Option
Share), in relation to the Option Period of I November 2001 to 31
December 2001 (including any possible extension of that period) as set
out in the table at Clause 9.3 only, it shall be calculated as follows:
1.25 x Revenue
----------------------
Relevant Share Capital
plus
1.25 x Revenue x N
---------------------------
Relevant Share Capital x 80
Where "N" is the number of full calendar weeks, or part
thereof, that elapse between29 February 2000 and the actual
date of Completion.
<PAGE>
9.5 The completion of the exercise of an Option shall take place at the
offices of Authoriszor's Solicitors within 10 business days of final
determination of the Price in accordance with Clauses 9.6 to 9.9 below
when the events set out below shall occur:
(a) the Shareholders holding Option Shares shall deliver to Authoriszor's'
Solicitors certificates in respect of the Option Shares and duly completed
and executed transfers of the Option Shares in favour of the Authoriszor or
as it directs and Letters of Representation executed by each of them;
(b) Authoriszor shall pay or procure the payment of the Price multiplied by the
number of Option shares in accordance with Clause 10 below; and
(c) if the exercise of an Option has the effect of giving Authoriszor a 50%
interest or more in the Relevant Share Capital, then the Shareholders the
subject of the Option shall (subject to the provisions of Schedule 10)
warrant to Authorizsor in the terms set out in Schedule 4, as at the date
of completion of such Option, and acknowledge that Authorizsor will
exercise such Option in reliance on the Warranties.
9.6 The Company and Shareholders shall procure, that within 30 days of the
date of the service of the Option Notice the Company will prepare and
deliver to Authoriszor a draft statement setting out the Price
calculated by reference to the Option Period in respect of which the
Option Notice has been given and detailed working papers showing how
the Price has been calculated by the Company's accountants for the tune
being to ensure that the Price has been calculated in accordance with
the terms of this Agreement.
9.7 Within 30 days of receipt by Authoriszor of the draft statement of
Price, Authoriszor will inform the Shareholders in writing whether or
not it agrees or disagrees with such statement and, if it disagrees,
shall specify in writing the matters on which he disagrees. If
Authoriszor confirms in writing that it accepts the draft statement of
Price, or if it fails to inform the Shareholders within 30 days of
receipt whether or not it accepts that the draft statement of Price,
such draft statement shall be deemed to show the correct Price.
9.8 If Authoriszor informs the Shareholder, in accordance with Clause 9.7,
that it does not agree the draft Statement of Price, Authoriszor and
the Shareholders will hold discussions in good faith with a view to
agreeing the statement of Price. If such agreement is reached, and is
confirmed in writing by the parties, it shall be final and binding on
the parties.
9.9 The Company and Authoriszor and the Shareholders shall severally procure
that all records, working papers, and other information as may be
reasonably required for the purposes of this Clause 9 by the Company's
accountants (or the independent accountant referred to in Clause 9. 10
below) for the time being shall be made available on request and shall
generally render
<PAGE>
all reasonable assistance necessary for the preparation of the statement of
Price and the resolution of any dispute in relation to the same.
9.10 Any dispute about the Price which remains unresolved 45 days after
receipt by Authoriszor of the draft statement of Price shall, at the
request of either Authoriszor or the Shareholder, be referred to a firm
of chartered accountants nominated jointly by the Shareholders and
Authorizsor or, failing such nomination, within 14 days after request
by either of them, by the President for the time being of the Institute
of Chartered Accountants in England and Wales.Such independent firm
shall act as experts and not as arbitrators and its decisions shall (in
the absence of manifest error) be final and binding on the parties. In
relation to this Clause 9. 10 the fees of such independent firm shall
be payable by the Shareholders and Authorizsor in such proportions as
such firm determines or (failing such determination) in equal shares.
9.11 The Shareholders undertake to Authoriszor that until the lapse of all
possible Options, in order to preserve the rights of Authoriszor
hereunder, there does not currently exist, nor will they create or
permit to subsist any Security Interest over their respective Shares.
9.12 Notwithstanding and without prejudice to the provisions of the
remainder of this Agreement, the parties acknowledge that because they
wish to have flexibility to manage and develop the Business in the
future it is not practical in defining Revenue and NPBT to cater
adequately for each event that may occur which would or might adversely
affect the Revenue or NPBT and therefore the Price payable upon the
exercise of the Option. Accordingly, the parties have set out below
certain overriding principles in relation to the promotion and
development of the Business that the parties shall take account solely
for the purposes of the calculation of Revenue or NPBT and any
appropriate adjustments thereto resulting from any failure by either
party to observe the following overriding principles:
(a) the Business shall not be affected by any transaction or arrangement to the
extent not a bona fide commercial transaction or arrangement on arms length
terms;
(b) neither party shall do anything with the intention of adversely affecting
the value of Revenue or NPBT at any relevant time; and
(c) it is the intention of the Authoriszor and the Shareholders to promote and
develop the Business
9.13 The parties shall exercise all voting and other rights available to them to
ensure the implementation of the preceding provisions of this Clause and
that any provisions contained in the Articles of Association of the Company
restricting transfers of shares (including without limit the provisions of
article 8) shall be waived or suspended to allow such sales and
<PAGE>
purchases to proceed as provided above and the parties shall procure the
registration of any transfer of any shares in the Company pursuant to this
Agreement accordingly.
9.14 If Authoriszor wishes to exercise an Option then it shall be obliged to
exercise its Option for an equal number of "A" Ordinary Shares as "B"
Ordinary Shares and vice versa and Authoriszor shall treat such shares
the same in relation to the split of the price between cash and shares
as provided in clause 10.2 below
9.15 If the exercise of an Option will have the effect of giving Authorizsor
a 50% interest or more in the Issued Share Capital, then it shall be a
condition precedent of Authon'szor exercising its Option that
Authoriszor shall exercise the Option in relation to all the issued
shares in the capital of the Company not then held by Authoriszor (and
not part only) and in addition acquire from all persons holding 'C'
Share Option and/or 'C' Ordinary Shares the entire unexercised 'C'
Share Options and 'C' Ordinary Shares that are in issue on the terms of
the Deed of Covenant
10. PRICE
10.1 On Completion of an Option, Authoriszor shall procure the payment of
the Price multiplied by the number of Option Shares to the relevant
Shareholders who are selling Option Shares. The price shall be payable
in pounds sterling or such other currency then adopted by the
government of England.
10.2 At the sole discretion of Authoriszor, Authoriszor may satisfy up to a
maximum of 40% of the Price by way of procuring the issue and allotment
of such numbers of fully paid shares of common stock (excluding
fractions but rounded up to the nearest share) in Authoriszor Inc
("Consideration Shares") , its parent company as shall have a value
(ascertained by reference to Clause 10.2(a)) nearest to but not less
than that sum to the relevant Shareholders as part satisfaction of
consideration payable to such relevant Shareholders subject to the
provisions of this Clause 10. All payments of Price made by Authoriszor
in cash shall be paid to the Shareholders by way of telegraphic
transfer or bankers draft. In addition:
(a) for the purposes of Clause 10.2 the value of each of the Consideration
Shares shall be the average of the daily closing prices for the five (5)
consecutive days ending five (5) trading days before the date on which the
relevant Option is due to be completed in accordance with the provisions of
Clause 9.5 (as adjusted for any split, combination or reclassification that
took effect during such five (5) trading day period so as to not prejudice
the position of the Shareholders). The closing price for each day shall be
the last reported sale price or, in case no such reported sale takes place
on such day, the average of the last closing bid and asked prices, in
either case on the principal national
<PAGE>
securities exchange or NASDAQ on which the Consideration Shares are listed
or admitted to trading, or if not listed or admitted to trading.
(b) the consideration shares to be issued pursuant to Clause 10.2 shall rank
pari passu in all respects with the common stock of Authoriszor Inc.
already in issue and listed at the relevant time and so far as regards any
dividend on such stock declared or paid by reference to a record date
falling on or after the date of their registration 'in the register of
members of Authoriszor Inc shall rank as if they had been issued (fully
paid) on and from the commencement of the period in respect of which such
dividend is declared or paid;
(c) it shall be a condition of the satisfaction of part of the Price by
Consideration Shares that the Consideration Shares shall be listed on
NASDAQ or listed on such other recognised and publicly quoted market in
North America or Europe of equivalent or better standing; and
(d) the conversion between United States Dollars to the pounds sterling or the
currency then adopted by the government of England shall be calculated by
reference to the average exchange rate for such currencies specified in the
Financial Times of England on the last business day immediately prior to
the date on which the relevant Option is exercised.
11. DIVIDEND AND DISTRIBUTION POLICY
11.1 The Shareholders shall procure that the Company's profit available for
distribution in respect of each financial year during the term of this
Agreement shall be distributed by the Company to the Shareholders and
Authoriszor by way of dividend in accordance with the Business Plan.
12. EVENT OF DEFAULT
12.1 Notwithstanding any other provisions of this Agreement, the rights of
Authoriszor under Clause 9 shall irrevocably lapse if Authoriszor
and/or the Guarantor becomes subject of an Event of Default and this
provision shall be in addition to and without prejudice to any other
rights and remedies which the Company and/or the Shareholders may have
12.2 For the purposes of this Clause Event of Default means;
(a) a material breach the terms of this Agreement or of the Loan Agreement or
the Deed of Covenant or the AL Loan Variation which Authoriszor and/or the
Guarantor and/or AL fas to remedy within 30 days of the service of a notice
from the Shareholders requesting the same to be remedied (such notice to
give adequate
<PAGE>
particulars of the alleged breach) and without prejudice to the generality
of the foregoing a failure on the part of Authoriszor and/or the Guarantor
to honour any sum requested to be drawn down and required to be advanced to
the Company under the terms of the Loan Agreement shall be deemed to be a
material breach of the terms of the Loan Agreement;
(b) the cessation of the whole or a substantial part of Authoriszor's and/or
the Guarantor business or an act whether of Authoriszor and/or the
Guarantor or another person which by itself results in a formal step being
taken for the receivership administration liquidation dissolution or other
insolvency proceedings of or in respect of Authoriszor and/or the Guarantor
or their assets;
(c) if either Authoriszor or the Guarantor files or is served with any petition
for relief under the US Bankruptcy Code or any similar federal or state
statute and such is not dismissed or stayed within 60 days of such filing
or service;
(d) Authoriszor (or the relevant transferee under Clause 12.2 (d)) ceasing to
be a member of the same group as the Guarantor;.
(e) The transfer by Authoriszor or any member of the same group as the
Guarantor of any "D" Ordinary Shares to any entity outside the group of the
Guarantor.
13. GUARANTOR
13.1 In consideration of the Shareholders and the Company entering into this
Agreement at the request of the Guarantor and in consideration of the
payment of f I to the Guarantor by each of the Shareholders and the
Company (the receipt of which is hereby acknowledged by the Guarantor),
the Guarantor covenants with the Shareholders and the Company;
(a) to procure and guarantee the performance of Authoriszor of all
obligations under this Agreement which are expressed to relate
to Authoriszor and of all obligations under any agreement
("Ancillary Agreement") entered into by Authoriszor pursuant
to this Agreement (which shall include without limitation the
Loan Agreement); and
(b) to guarantee to the Shareholders and the Company the due
payment by Authoriszor of any monies due the Shareholders
and/or the Company under the terms of this Agreement or under
any Ancillary Agreement and this shall be a continuing
guarantee until all monies due are paid.
13.2 The liability of the Guarantor shall not be discharged or impaired by any
amendment to or variation of this Agreement, any release of or granting of
time or other indulgence
<PAGE>
to Authoriszor or any third party or any act, event or ornission which but
for this Clause would operate to impair or discharge the liability of such
party under this Clause.
14. ASSIGNMENT
14.1 This Agreement shall be binding upon and shall enure for the benefit of
each party's personal representatives and successors in title (as the
case may be) but shall not be assignable save as provided in this
Clause 14.
14.2 Except as provided in Clause 12.2 (d), when the Options shall lapse
each of the Shareholders and Authoriszor may assign the benefit of this
Agreement to any person to whom they transfer any Shares in the Company
pursuant to the Articles of Association, in which case such transferee
shall execute a deed of adherence substantially in the form set out in
Schedule 3 and subject to executing such deed of adherence, such
assignee shall be entitled, and shall be assumed to have, all the
benefits and obligations of this Agreement which would have been
conferred it if it had been a Shareholder or Authoriszor (as the case
may be) at the date hereof and thereafter all references to the
Shareholders in this Agreement shall be read and construed as including
such person as if it had been an original party hereto.
14.3 All deeds of adherence executed pursuant to Clause 14.2 shall be
executed by the Company for itself and as attorney for all those
persons who are then parties. Such parties hereby (or, as the case may
be, by executing the relevant deed of adherence) appoint the Company as
such attorney.
14.4 If any Shareholder or Authoriszor ceases to hold Shares or ceases to be
the beneficial owner of shares in the Company, then subject to the
provisions of Clause 14.2, it shall cease to have the benefit of this
Agreement and shall have no liability or obligations hereunder other
than any liability accrued at the date he ceases to hold any Shares or
ceases to be the beneficial owner of any Shares or in respect of
obligations hereunder expressed to survive any termination of this
Agreement including, but not limited to, those under Clause 5 hereof.
14.5 The Company and the Shareholders and Authoriszor undertake to each
other that they will procure to the extent of their respective rights
(whether as directors or shareholders of the Company or otherwise)
that:
(a) no person is registered as holder of any shares in the Company (whether
upon transfer or transmission or by issue) except in accordance with the
Articles of Association and this Agreement; and
(b) no person shall be so registered unless he enters into a deed of ad
substantially the form set out in Schedule 3.
<PAGE>
15. NOTICES
Where notice is to be given in writing to any party hereto it may be
served by leaving it at the registered office or last known address of
that party or by sending it by prepaid first class post or facsimile to
the party's registered office or last known address within the United
Kingdom supplied by the party to the other parties to this Agreement
for the giving of notice to that party to the other or by airmail or
facsimile to any address outside the United Kingdom supplied by that
party for the giving of notice to that party. A properly addressed and
prepaid notice sent by first class post or airmail (as the case may be)
shall be deemed to have been served at an address within the United
Kingdom at the expiry of two days after the notice is posted and served
at an address outside the United Kingdom at the expiry of ten days from
the date of posting by airmail. Where a notice is given by facsimile,
service of the same shall be deemed to be effected upon receipt of
telephone or other confirmation of its receipt. Any notice sent to the
"D" Director must also be copied to Authoriszor at the same time.
16. GENERAL
16.1 Failure by any party hereto at any time or times to require performance
of any provision of this Agreement shall in no manner affect his or its
right to enforce such provision at a later time. No waiver by any party
hereto of any condition or the breach of any term, representation or
warranty contained in this Agreement whether by conduct or otherwise in
any one or more instances shall be deemed to be construed as a further
or continuing waiver of any such condition or breach or waiver of any
other condition or be deemed to be or construed as the breach of or a
waiver of any other term, covenant, representation or warranty in this
Agreement.
16.2 This Agreement shall be governed by and construed in accordance with
English Law and all the parties hereto irrevocably submit to the
non-exclusive jurisdiction of the English Courts as regards any claim,
dispute or matter arising out of or relating to this Agreement or any
of the documents to be executed pursuant to it. The parties hereto
agree that service of any writ, notice or other document for the
purpose of any proceedings in such Court shall be duly served upon it
if delivered or sent by registered post in the manner provided by
Clause 15.
16.3 This Agreement may be entered into by each of the parties signing one or
more counterparts which, taken together, shall constitute a complete
agreement.
16.4 Except where the context otherwise requires, each of the restrictions
contained in this Agreement shall be construed as independent of every
other restriction and of every other provision of this Agreement to the
intent that if any such restriction or the application of any such
restriction to any person or to any circumstance shall be determined to
be invalid or
<PAGE>
unenforceable, then such determination shall not affect any other
restriction or provision of this Agreement or the application of such
restriction to any other person or circumstance.
16.5 Nothing contained in this Agreement and no action taken by any party
pursuant to this Agreement shall be deemed to constitute any party, a
party to a partnership, association, joint venture or other entity.
None of the parties hereto shall by virtue hereof have any authority to
bind any other party hereto in any way except where expressly provided
herein.
16.6 This Agreement (together with the documents executed pursuant to it)
constitutes the entire agreement between the parties and supersedes and
revokes any previous shareholder agreement between any of the
Shareholders in relation to the Company.
16.7 Each Shareholders will at their own expense execute and do all such
assurances, acts and things as Authoniszor may require for perfecting
the title of Authoriszor (or its nominee) to the Option Shares owned by
the particular Shareholder following the exercise of an Option.
16.8 The Shareholders hereby irrevocably by way of security for the
performance of its obligation under Clause 9 of this Agreement (within
the meaning of Section 4 of the Powers of Attorney Act 197 1) appoints
Authoriszor and any person to whom Authoriszor delegates the exercise
of the power of attorney conferred by this Clause jointly and also
severally to be the attorney or attorneys of the Shareholders and in
their name and on their behalf and as their act and deed to sign, seal,
execute and deliver, all documents deeds and instruments, which may be
required (or which the attorney reasonably considers necessary) for
carrying out any obligation imposed on the Shareholders to execute any
such documents, deeds or instruments pursuant to Clause 9 of this
Agreement.
16.9 The Shareholders will ratify and confirm all transactions entered into and
all things done by the attorney in the exercise or purported exercise of
their powers.
AS WITNESS the hands of the parties or their duly authorised representatives on
the date shown on the first page as a deed.
<PAGE>
SCHEDULE 1
General Undertakings
I . The Company will:
1.1 comply with the restrictions imposed upon the Company by the Articles of
Association;
1.2 develop the business of the Company in accordance with and within the scope
of the Business Plan (as reviewed by the Board from time to time);
1.3 convene at least one Board Meeting per quarter (unless otherwise agreed by
the Shareholders and Authoriszor);
1.4 furnish the Shareholders and Authoriszor with:
(a) monthly management accounts containing a balance sheet, profit and loss
statement and cash flow statement together with a commentary on the period
in question comparing the same with the current budget and the same period
in the previous year together with a rolling forecast of profits and cash
flow for the next 12 months, and such further management information which
is customarily prepared by the Company on a monthly basis within twenty-one
days of the end of each month; and
(b) audited accounts of the Company within four months of the end of each
financial year; and
(c) not less than seven days notice of all meetings of the Board and the
agendas for such meetings unless each of the directors agrees a shorter
period ; and
(d) such further information as may from time to time be reasonably requested
in writing by them as to all matters relating to the business, the
financial position and the affairs of the Company and any information
customarily required to run a business such as that of the Company,
including, for the avoidance of doubt, copies of the register of members of
the Company and full details of any share options granted or exercised;
1.5 not later than one calendar month before the end of each of its
financial years adopt detailed operating budgets for the Company in
respect of the next financial year of the Company PROVIDED THAT no such
budgets shall be approved without the approval of the Shareholders and
Authorizsor;
1.6 if requested in writing by Authoriszor, procure that the "D" Director is
appointed director of any subsidiary for the time being of the Company; and
<PAGE>
1.7 take action in respect of or enforce or comply with any provision of this
Agreement for which the consent of any other party is necessary immediately
upon receipt by the Company of that consent; and
2. The Company will not and the Shareholders and Authoriszor shall not
(subject to paragraphs 4 and 5 below) consent or authorise without the
prior written consent of Authoriszor or the "D" Director and the
Shareholders and so far as is lawful:
2.1 create allot or issue any shares or other securities of the Company or
grant any right to require the allotment or issue of any such shares or
securities (other than the creation allotment or issue or the grant of
any right to require the allotment or issue of any shares or securities
pursuant to this Agreement) other than pursuant to and in accordance
with the rules of the WRDC Limited No I Share Option Scheme;
2.2 increase, reduce, repay, redeem, subdivide, consolidate, reclassify,
cancel or otherwise vary the authon'sed or issued Share capital of the
Company or the rights attaching thereto or reduce the amount, if any,
standing to the credit of the share prenuium account or capital
redemption reserve other than pursuant to and in accordance with the
rules of the WRDC Limited No. I Share Option Scheme;
2.3 permit the winding up of or the appointment of a receiver to the Company or
any of its subsidiaries unless on the written advice of a Licensed
Insolvency Practitioner for reasons of insolvency;
2.4 merge, sell, transfer, lease, licence or in any way dispose of all or a
material part of its business, undertaking, property or other assets,
including shares in any subsidiary (other than a disposal of
stock-in-trade in the ordinary course of business) whether by a single
transaction or a series of transactions, related or not;
2.5 make or permit any material alteration (including cessation) to the
general nature of the business of the Company proposed to be carried on
after the date hereof except for the reasons referred to in paragraph
2.3 above;
2.6 enter into any contract or agreement for the acquisition of freehold or
leasehold property;
2.7 create any subsidiaries of the Company
2.8 enter into any transaction, arrangement or agreement with or for the
benefit of any director of the Company or any person connected with any
such director within the meaning of Section 839 TA 1988;
<PAGE>
2.9 incur any obligations in the nature of debt (including hire purchase,
lease finance or other quasi borrowings) in excess of those proposed in
the then current operating budget or give any guarantee or indemnity,
other than in relation to the supply of goods in the normal course of
business or as may be envisaged in the Business Plan;
2.10 create or issue any debenture, mortgage, charge or other security;
2.11 acquire any share capital or any loan capital of any other entity;
2.12 make any loans (other than intra-group, loans and credit given in the
normal course of trading);
2.13 incur capital expenditure in excess of the operating budget referred to in
the Business Plan or in paragraph 1.5 above (or any approved revision
thereof) or increase employment benefits of any director;
2.14 enter into any contract or arrangement, which:
(a) is outside the ordinary course of business of the Company; or
(b) is otherwise than at arms length.
2.15 give notice of any resolution to purchase its own shares;
2.16 capitalise any undistributed profits (whether or not the same are
available for distribution and including profits standing to any
reserve) or any sums standing to the credit of the Company's share
premium account or capital redemption reserve;
2.17 give notice of the passing of any elective resolution as defined and for
any of the purposes set out in Section 379A of the Companies Act 1985;
2.18 instigate, settle or compromise any litigation or similar process involving
an amount claimed in excess of(pound)25,000;
2.19 remove the auditors of the Company, change the year end of the Company
or make any material change to any accounting policy or principle
adopted or applied for the preparation of the audited or management
accounts of the Company;
2.20 exercise any discretion of the Board in respect of the provisions of the
Articles of Association relating to the transfer of shares;
<PAGE>
2.21 until the Options have all lapsed, enter into any negotiations concerning:
(a) the sale of a material number of Shares in the capital of the Company or of
any material part of the business undertaking or assets of the Company and
its Subsidiaries taken as a whole; or
(b) the refinancing of the Company or the making of any approach or application
or the submission of any business plan to any potential investor or
financier with a view to attracting additional or substitute finance for
the Company and its Subsidiaries; or
(c) the application for the admission of any of the Shares of the Company to
dealings on any recognised investment exchange (as that term is used in the
Financial Services Act 1986);
2.22 increase the number of directors of the Company beyond 6 or constitute a
committee of the directors of the Company;
2.23 make any changes to, or adopt a new, Business Plan (subject to the
provision of Clause 3.4(b) of this Agreement); and
2.24 not to permit any transfer of any "C" Ordinary Shares or any "C" Share
Option in relation thereto to any person without the transferee
entering into a deed of adherence in the form set out in the Deed of
Covenant.
3. The Company will procure that each and every subsidiary of it shall
give effect to each of the undertakings contained in paragraphs I and 2
above as if the undertakings contained therein had also been given
individually by each of such subsidiaries and the name of each such
subsidiary had appeared therein in substitution for "the Company"
wherever it therein occurs.
4. In the event that the Company and/or the shareholders have given
Authoriszor and the "D" Director notice of its/their wish or intent to
carry out any of the activities set out in paragraph 2 above and
neither Authoriszor nor the "D" Director has responded to any such
notice within 30 days of receipt of such notice, then the Company and
the Shareholders shall be entitled to carry out such activity as
detailed in the notice without the prior written consent of Authoriszor
or the "D" Director.
5. None of the restrictions set out in paragraph 2 above shall apply to the
extent that such matter is expressly provided for or dealt with in the
Business Plan.
<PAGE>
SCHEDULE 2
The Resolutions
THE COMPANIES ACT 1985
WRDC LIMITED
COMPANY NUMBER 2945379
WRITTEN RESOLUTION
__________ 2000
We, the undersigned, being the holders of the entire issued share capital of the
Company hereby pass the following resolutions as written resolutions of the
Company pursuant to Section 381A of the Companies Act 1985 with effect as if the
said resolutions of the Company had been passed as resolutions of the Company in
general meeting.
WRITTEN RESOLUTIONS
1. That the authorised share capital of the Company be increased from
L25,000 to 03,400 by the creation of 840,000 "D" ordinary shares of
LO.01 each, having the rights set out in the new Articles of
Association to be adopted by the Company today pursuant to resolution 2
below.
2. That the regulations contained the printed document annexed hereto be
adopted as the new Articles of Association of the Company in
substitution for and to the exclusion of all the existing articles of
association and in substitution for all existing rights and privileges
of the authorised share capital of the Company.
- - - - -------------------------
Garcia Hanson
- - - - -------------------------
Brian Edmondson
- - - - -------------------------
Dated
<PAGE>
SCHEDULE 3
Deed of Adherence
THIS DEED OF ADHERENCE is made on _____________199__
BETWEEN:
(1) ___________ of ___________ ("the Covenantor"); and
(2) WRDC LIMITED (Registered in England No. 2945) ("the Company") for itself
and as attorney for the other parties to the Agreement.
RECITAL
This Deed is supplemental to a Shareholders' Agreement made on
___________________ between _____________________("the Agreement")
THIS DEED WITNESSES as follows:
1. The Covenantor hereby confirms that it has been supplied with a copy of the
Agreement and hereby covenants with each of the parties hereto to observe,
perform and be bound by all the terms of the Agreement (other than Clause
2) as if it were a party thereto or named therein as a Shareholder.
2. Each of the other parties hereto hereby covenants with the Covenantor that
the Covenantor shall be entitled to the benefit of the terms of the
Agreement (other than Clause 2) as if it were a party thereto and named
therein as a Shareholder.
3. The Covenantor hereby appoints the Company to be its attorney for the
purposes of clause [ 14.3] of the Agreement.
4. This Deed shall be governed by and construed in accordance with English
law.
IN WITNESS WHEREOF this Deed has been executed by the Covenantor and the Company
for itself and as attorney for the other parties to the Agreement and is
intended to be and is hereby delivered on the date shown on the first page.
<PAGE>
SCHEDULE 4
The Warranties
1. CORPORATE
1.1 The information relating to the Company contained in the Recitals (A) and
(B) to this Agreement is true and complete in all respects -
1.2 Save as set out in this paragraph
(a) there are no agreements or arrangements in force, other than
this Agreement, which grant to any person the right to call
for the issue, allotment or transfer of any share or loan
capital of the Company; and
(b) there are no third party consents required by the Company to enter into or
perform the obligations set out in this Agreement
Name Number of C' Share Options held
P Hughes 50,000
M Bray 50,000
A Dunford 7,500
D Clarke 12,500
G Waddington 12,500
1.3 Save for immaterial errors the register of members and other statutory
books of the Company have been properly kept and contain an accurate
and complete record of the matters with which they should deal.
1.4 All returns, particulars, resolutions and documents required by any
legislation to be filed with the Registrar of Companies in respect of
the Company have been duly filed and were correct.
1.5 The Company has full power and authority to enter into and perform this
Agreement, which when executed will constitute valid and binding
obligations on the Company and Shareholders which are enforceable in
accordance with their respective terms.
1.6 The Company is validly incorporated as a private limited company under the
Companies Act 1985.
<PAGE>
1.7 No order has been made or petition presented, meeting convened or
resolution passed for the winding up of the Company nor has any
receiver been appointed or any distress, execution or other process
been levied in respect of its business or the assets.
1.8 No composition in satisfaction of the debts of the Company or scheme of
arrangement of its affairs or compromise or arrangement between it and
either or both of its creditors or members or any class of either or
both of its creditors or members has been proposed, sanctioned or
approved.
1.9 No distress, distraint, charging order, garnishee order, execution or
other process has been levied or applied for in respect of the whole or
any part of the Company's Business or the assets.
1.10 No event has occurred causing, or which upon intervention or notice by
any third party may cause, any floating charge created by the Company
to crystallise over its business or assets or any of them or any charge
created by it to become enforceable over the business or assets or any
of them nor has any such crystallisation occurred nor is such
enforcement in process.
2. ACCOUNTS
2.1 The Last Accounts have been prepared in accordance with the historical
cost convention, and the bases and policies of accounting adopted for
the purpose of preparing the Last Accounts are the same as those
adopted in preparing the audited accounts of the Company in respect of
the last three preceding accounting periods apart from changes required
to conform to current FRSs.
2.2 The Last Accounts:
(a) give a true and fair view of the assets and liabilities of the
Company at the Last Accounts Date and its profits or losses
for the financial period ended on that date;
(b) comply with the requirements of the Companies Acts;
(c) comply with all generally accepted United Kingdom accounting
principles and practices whic were applicable at the relevant
time to a United Kingdom company;
(d) to the extent required by the Companies Act and the relevant
FRS provided or reserved for all actual liabilities and
capital commitments of the Company outstanding at the Last
Accounts Date including contingent liabilities and provision
reasonably regarded as adequate for all bad and doubtful
debts;
<PAGE>
(e) provide or reserve in accordance with the principles set out
in the notes included in the Last Accounts for all Taxation to
the extent required by the relevant FRSs liable to be assessed
on the Company or for which it may be accountable in respect
of the period ended on the Last Accounts Date.
2.3 All the accounts, books, ledgers and financial records, of the Company
are in its possession, have been fully, properly and accurately kept
and completed and disclose with reasonable accuracy the financial
position of the company at that time.
3. FINANCIAL
3 1 The Company did not have any capital coninutments outstanding at the Last
Accounts Date and the Company has not, to any material extent since then,
incurred or agreed to incur any capital expenditure or commitments or
disposed of any capital assets.
3.2 Since the Last Accounts Date the Company has not paid or declared any
dividend or made any other payment which is, or is treated as, a
distribution for the purposes of ICTA Part VI Chapter II.
3.3 The Company has not, since the Last Accounts Date, repaid, or become
liable to repay, any indebtedness in advance of its stated maturity.
3.4 There are no liabilities (including contingent liabilities) which are
outstanding on the part of the Company other than those liabilities
disclosed in the Last Accounts or incurred in the ordinary and proper
course of trading. No liabilities have been discharged by the Company
since the Last Accounts Date other than in the ordinary course of
business.
3.5 No part of the amounts included in the Last Accounts as owing by any
debtor remains unpaid or has been released on terms that any debtor
pays less than the full book value of his debt.
3.6 There is not now outstanding in respect of the Company any guarantee, or
agreement for indemnity or for suretyship, given by, or for the
accommodation of, the Company.
3.7 So far as the Shareholders are actually aware there has been no material
adverse change in the financial position of the Company since the Last
Accounts Date.
4. TAXATION
4.1 Save as provided for in the Last Accounts there is no existing, material
contingent or deferred liability for Taxation including (but without
prejudice to the generality of the foregoing) liability for Taxation which
would arise:
<PAGE>
(a) on the Company ceasing to trade or;
(b) on its ceasing to use or occupy any asset for the purposes of its trade or;
(c) on its disposing of any asset at its book value as shown in the Last
Accounts or;
(d) which might arise as a result of the execution or Completion of this
Agreement or;
(e) which might arise if any other person fails to pay any tax charged,
assessed or payable by such other person (including any liability for
Taxation which might arise as a result of two or more such events);
but excluding any liability for Taxation which arises solely as the result
of the realisation by the Company of trading stock or work in progress in
the ordinary course of its business and no material changes in the assets
and liabilities as shown in the Last Accounts have occurred since the Last
Accounts Date which might result in any such liability.
4.2 So far as the Shareholders are actually aware the Company has duly complied
with all requirements imposed upon it by the Taxation Statutes -
4.3 The Company is not liable and has not since the Last Accounts Date been
liable to pay any interest, penalty, fine or sum of a similar nature in
respect of Taxation and there is in existence no Inland Revenue charge
over or in respect of any of the Company's assets.
4.4 The Company is not in dispute with the Inland Revenue, H.M. Customs and
Excise or any other fiscal authorities (whether of the UK or elsewhere)
and is not aware of any circumstances which may give rise to such a
dispute and in particular, (but without prejudice to the generality of
the foregoing) the Company has not withm. the last six years been a
party to, entered into, or been involved with any artificial scheme for
the avoidance or deferral of Taxation.
4.5 The Company is duly registered and is a taxable person for the purposes of
value added tax and is not a member of a group.
4.6 Since the Last Accounts Date no expenditure has been incurred or is or
has become liable to be incurred after that date which will not be
wholly deductible in computing the taxable profits of the Company
except for expenditure on the acquisition of an asset to be held
otherwise than as stock in trade.
5. TRADING
5.1 Since the Last Accounts Date the business of the Company has been
continued in the ordinary and normal course, and there has been no
deterioration in its turnover, trading position, or its prospects.
5.2 The Company is not nor has it agreed to become, a member of a Partnership
(as defined by the Partnership Act 1890).
5.3 The Company is not engaged in any litigation or arbitration
proceedings, as plaintiff or defendant or third party; there are no
such proceedings pending or threatened, either by or against the
Company and there are no circumstances of which the Shareholders are
actually aware which are likely to give rise to any litigation or
arbitration.
5.4 So far as the Shareholders are aware there is no dispute with any
government or any agency or body acting on behalf of such government or
any other authority in the United Kingdom or elsewhere, in relation to
the affairs of the Company and so far as the Shareholders are actually
aware there are no facts or circumstances which may give rise to any
such dispute.
5.5 There are no claims pending or threatened, against the Company, by an
employee, independent contractor or any other third party, in respect
of any accident, disease, illness or injury, which are not fully
covered by insurance.
5.6 So far as the Shareholders are aware the Company has conducted and is
conducting its business in all respects in accordance with all
applicable laws and regulations, of the United Kingdom.
5.7 There are no outstanding authorities (express or implied) by which any
person except a director may enter into any contract or commitment to do
anything on behalf of the Company.
5.8 The Company has not received notice of any unresolved complaints from
any customers with regard to the products or services provided by the
Company, save as disclosed in the Disclosure Letter.
5.9 The Company is not a party to, nor have its profits during the three
years prior to the date of this Agreement been affected by any contract
which is not of an entirely arm's length nature.
<PAGE>
6. PROPERTY
Save in respect of the leasehold premises at First Floor, Ebor Court,
Westgate, Leeds, WestYorkshire, the Company does not occupy and has no
obligations or liabilities in respect of any other property or
premises.
7. EMPLOYMENT
7.1 Save as set out in paragraph 1.2 above, there are no schemes (whether
contractual or discretionary) 'in operation by or in relation to the
Company under which any employee of the Company is entitled to any
benefits.
7.2 The terms and conditions of employment of each of Garcia Hanson, Brian
Edmondson and Marc Bray are fully contained within the Service Agreements
7.3 Save in respect of Garcia Hanson, Brian Edmondson and Marc Bray, all
employees of the Company are employed on the standard terms and conditions
of employment of the Company.
8. ASSETS
8.1 The Company owned at the Last Accounts Date, and had good and
marketable title to, and (except for current assets subsequently sold
or realised in the ordinary course of business) still owns and has good
and marketable title to, all the assets included in the Last Accounts
and to all assets acquired since the Last Accounts Date and not
subsequently sold or realised as mentioned.
8.2 The Company has not created or granted or agreed to create or grant any
mortgage, charge, encumbrance or other security interest in respect of
its undertaking or assets, and none of the undertaking or assets owned
absolutely by the Company is subject to any option or right of
pre-emption.
8.3 The plant, machinery, equipment, vehicles and other equipment used in
connection with the business of the Company are the absolute property of
the Company:
8.4 The schedule of the insurance polices held by the Company contained in the
Disclosure Letter in true and accurate and all premiums payable under such
policies have been paid in full.
8.5 No claim is outstanding, under any of such insurance policies
<PAGE>
9. GENERAL
The factual information set out in the schedules contained or referred to at
documents 9 to 15 of Schedule I of the Disclosure Letter is true and accurate
and not misleading to any material extent as at the date of this Agreement.
<PAGE>
SCHEDULE5
(Completion Board Minutes)
WRDC Limited
MINUTES of a Meeting of the Directors of the Company held at _______________ on
________________________, 2000 commencing at __________ am/pm
Present: _______________________________________________________________________
________________________________________________________________________________
In attendance: _________________________________________________________________
________________________________________________________________________________
OPENING
Garcia Hanson took the Chair, noted that the meeting had been duly convened and
that a quorum was present.
2. DECLARATION OF DIRECTORS' INTERESTS
Each Director declared whether or not he had an interest in the matters to
be discussed for the purposes of Section 317 of the Companies Act 1985.
There was then produced to the meeting a written resolution of the Company,
duly executed by its existing shareholders, increasing the authorised share
capital of the Company and adopting new articles of association for the
Company. IT WAS RESOLVED that the written resolution be accepted and that
the secretary of the Company be authorised to file a copy of the written
resolution, the new articles of association of the Company and a duly
completed form 123 at Companies House.
4. IT WAS NOTED that, pursuant to a shareholders agreement ("Agreement")
entered into on - January 2000 between Messrs Hanson and Edmondson (1), the
Company (2), Authoriszor Holdings Limited ("AHL") (3) and Authoriszor Inc.
(4), Authoriszor Inc. had completed its fundraising as contemplated in that
Agreement and that all parties had now agreed to proceed to complete the
Agreement.
<PAGE>
5. ALLOTMENT OF SHARES
5.1 There was then produced to the meeting an allotment letter, issued by AHL,
requesting that the Company issue to AHL, 840,000 "D" Ordinary Shares of
(pound) O.01 each in the capital of the Company, at an aggregate
subscription price of (pound) 378,000, together with a cheque for that
amount. IT WAS RESOLVED that it was in the best interests of the Company to
make the allotment of 840,000 "D" Ordinary Shares of E0.01 each to AHL, and
that the secretary be authorised to write up the Company's statutory books
accordingly, to issue an appropriate share certificate to AHL, and to file
a duly completed form 88(2) at Companies House.
DOCUMENTS
6.1 There were then produced to the meeting:
(a) a loan agreement between the Company and AHL setting out the terms on which
up to (pound) 122,000 could be drawn by the Company by way of loan from
AHL;
(b) a deed of covenant setting out the terms upon which AHL could compel
holders of options in "C" Ordinary Shares to sell their holdings to AHL,
(c) a loan agreement between the Company and Authoriszor Limited, varying the
terms of an existing loan of (pound) 100,000; and
(d) new service agreements for Messrs Hanson, Edmondson and Bray relating to
their terms of employment with the Company.
(together, "the Documents").
6.2 After careful consideration, IT WAS RESOLVED that it was in the best
interests of the Company to make and enter into the Documents and that
Garcia Hanson and/or Brian Edmondson and each other director of the
Company be authorised to further negotiate, agree any amendments to and
approve the Documents and any other document whatsoever that may fall
to be approved for, or is necessary or incidental to the Documents and
to execute the Documents and any other document whatsoever that may
fall to be signed or executed pursuant to them, whether as a deed or
otherwise.
7. IT WAS RESOLVED that Ian McNeill, having consented to act, be appointed
as an additional director of the Company with immediate effect.
8. CLOSING
<PAGE>
There being no further business, the meeting closed at ____________ am/pm.
- - - - ------------------------
Chairman
<PAGE>
SCHEDULE 6
Deed of Undertaking
THIS DEED OF UNDERTAKING is made on ________________ 99______________
BETWEEN:
(1) ______________________ LIMITED (Registered in England No._______________
whose registered office is at ______________________ (the "Subsidiary");
and
(2) [[A] and [B]] (the "Shareholders")
RECITAL
This Deed of Undertaking is executed pursuant to Clause [) ] of an agreement of
today's date between [Newcol Limited (the "Company") (1) [A] (2) and [B] (3)
(the "Agreement").
THIS DEED WITNESSES as follows:
The Subsidiary undertakes to each of the Shareholders that in any case where
under the terms of the Agreement:
(a) an obligation or restriction is imposed upon a "Group Company",
"Subsidiary" or "Member of the Group" (as therein defined); or
(b) an obligation is imposed upon the Company to procure that an obligation or
restriction is observed or performed by a "Group Company", "member of the
Group" or "Subsidiary" (as therein defined);
it will (so far as that obligation or restriction falls to be observed or
performed by or in respect of it) observe or perform such obligation or
restriction.
IN WITNESS whereof this Deed has been executed and delivered by each of the
parties the day and year first above written.
<PAGE>
SCHEDULE 7
Shareholders
Name No. of Shares
(1) Garcia Hanson 1. 125,000 "A" Ordinary Shares
38 St James Road
Ilkley
West Yorkshire
LS29 9PY
(2) Brian Edmondson 1. 1,125,000 "B" Ordinary Shares
Rosedean
86 Ecclesfield Road
Chapeltown
Sheffield
South Yorkshire
S35 ITE
<PAGE>
SCHEDULE 8
Form of Option Notice
From:Authoriszor Holdings Limited of Windsor House, Cornwall Road, Harrogate HG
I 2PW.
To: Garcia Hanson of 38 St James Road, Ilkley, West Yorkshire LS29 9PY,
Brian Edmondson of Rosedene, 84 Ecclesfield Road, Chapeltown, Sheffield,
South Yorkshire S30 4TR.
Dear Sirs
OPTION NOTICE
________________[Date]
We hereby give notice, pursuant to Clause 9 of the Shareholders Agreement
between us and WRDC Limited dated [ ], of our exercise of our option over the
following shares owned by the following individuals.
Number of Shares Registered Holder:
[ ] [ ]
Duly authorised for and on behalf of Authoriszor Holdings Limited
<PAGE>
SCHEDULE 9
Vendor Protection
I Notwithstanding anything to the contrary contained in Clause 6 of this
Agreement the Warranties shall be qualified by the provisions of this Schedule
and in the event of inconsistency between the provisions of this Schedule and
the Warranties and/or Clause 6, the provisions of this Schedule shall prevail.
2. The Shareholders shall not be liable in respect of any claim under the
Warranties to the extent that the matter or matters giving rise to such claim
are accurately disclosed in the Disclosure Letter and/or the Additional
Disclosure Letter..
3. The liability of the Shareholders in respect of breach of the Warranties
given by the shareholders under this Agreement shall be limited as follows:
The aggregate maximum liability of the Shareholders in respect of all and any
claims under the Warranties shall in any event not exceed (pound)378,000
5. The Shareholders shall not be liable in respect any claim under the
Warranties where the amount of such claim or a group of related claims does not
exceed (pound)5,000
6. The Shareholders shall not be liable in respect of all and any claims made by
Authoriszor under the Warranties unless and until the aggregate cumulative
liability of the Shareholders in respect of all and any such claims (ignoring
for those purpose all and any claims in respect of which the Shareholders do not
have liability pursuant to tile provisions of paragraph 5 of this Schedule)
exceeds (pound)30,000 in which event the Shareholders shall be liable for the
full amount (and not merely the excess) of the relevant claims.
7. The Shareholders shall not be liable in respect of any claim under the
Warranties unless it shall have been made in the case of the Warranties set out
in paragraph 4 of Schedule 4 to this Agreement before the expiry of 6 years from
the date hereof and in the case of all other Warranties before the expiry of 2
years from the date hereof.
8. The limitations on liability contained in this Schedule shall not apply to
any matters directly arising from the fraud and dishonesty of the Shareholder
involved in relation to that Shareholder.
<PAGE>
SCHEDULE 10
Changes to Warranties
1. In the circumstances where the provisions of this Schedule 10 apply,
Schedule 4 will be deemed to be amended as follows:
(a) The definition of "Last Accounts" shall mean the audited balance sheet of
the Company at, and the audited profit and loss account of the Company for,
the last financial period of the Company ended prior to the date on which
the Option was exercised.
(b) The Warranty at paragraph 9 of Schedule 4 shall be deleted.
2. The Warranties given to Authoriszor under the provisions of Clause 9.5(c)
of the Agreement shall be given subject to matters disclosed in the
Disclosure Letter or any Additional Disclosure Letter before completion of
such Option described in Clause 9.5(c) by the Shareholders to Authoriszor.
Without prejudice to the generality of the foregoing the Shareholders may
in the Additional Disclosure Letter update or amend matters contained in
the Disclosure Letter or previous Additional Disclosure Letter.
3. The provisions of Schedule 9 will be repeated in favour of the Shareholders
and applied to the Warranties given to Authoriszor under the provisions of
Clause 9.5(c) in addition to the application of Schedule 9 under the
provisions of Clauses 6.1 and 6.2 but amended as follows:
(a) The liability of the Shareholders under the Warranties shall be limited to
the actual amount paid for the Option shares at the relevant time and
paragraph 4 of Schedule 9 shall be amended accordingly.
(b) The threshold for Warranty claims set out in paragraph 6 of Schedule 9,
shall be amended to an amount equal to
(i) (pound) 30,000 plus
(ii) (pound) 30,000 multiplied by the percentage increase (if any) in the net
assets of the Company as stated in the Last Accounts as defined in Clause I
of the Agreement) and the Last Accounts (as defined at paragraph I of this
Schedule 10).
(c) The time periods for making Warranty claims set out in paragraph 4 of
Schedule 9 shall be deemed to commence on the date of completion of the
exercise of the Option under the provisions of Clause 9.5(c) and not the
date hereof.
<PAGE>
SCHEDULE 11
Letter of Representation
Authoriszor Inc.
8201 Preston Road, Suite 600
Dallas, Texas 75225
Attention: Mr. Robert P. Jeffcock
President
Gentlemen:
In connection with the issuance to the undersigned of shares (the "Shares"), of
common stock, par value $.01 per share (the "Common StocW'), of Authoriszor
Inc., a Delaware corporation (the "Company"), the undersigned warrants and
represents that:
1 The undersigned is acquiring the Shares for investment solely for his own
account and not for distribution, transfer or resale to others.
2. The undersigned has such knowledge and experience in financial and business
matters that he is capable of evaluating the merits and risks of the
acquisition of the Shares.
3. The undersigned understands that the Shares to be acquired have not been
registered under the Securities Act of 1933, as amended (the "Securities
Act"), nor pursuant to the provisions of the securities laws or other laws
of any other applicable jurisdiction, in reliance upon exemptions for
private offerings contained in the Securities Act and the regulations
promulgated thereunder and in the applicable laws of such jurisdictions.
The undersigned is fully aware that the Shares subscribed for by the
undersigned are to be issued to the undersigned in reliance upon such
exemptions based upon the representations set forth herein. The undersigned
is also fully aware of the restrictions on sale, transferability and
assignment of the Shares.
Because the Shares have not been registered under any securities laws, they will
be "restricted securities" as defined in Securities and Exchange Commission Rule
144. Accordingly, the undersigned, as a stockholder, may not sell, transfer, or
otherwise dispose of them without registration under the Securities Act and
applicable securities laws or the applicability of an exemption from
registration (in which case the undersigned may be required to provide the
Company with a legal opinion, in form and substance satisfactory to the Company
and its counsel, that registration is not required).
<PAGE>
5. The Shares are not being acquired directly or indirectly as nominee,
trustee, agent, or representative for any other person or persons.
6. The undersigned acknowledges and consents that certificates now or
hereafter issued for the Shares will bear a legend substantially as
follows:
"The shares of stock of Authoriszor Inc. (the "Company") represented by
this certificate have not been registered under the Securities Act of 1933,
as amended (the "Act"), and the holder hereof cannot make any sale, pledge,
hypothecation, assignment or other transfer of any shares of such stock
except pursuant to an offering of such shares duly registered under the
Act, and any applicable state securities laws, or under other such
circumstances which in the opinion of counsel for the Company, at the time,
does not require registration under the Act or any applicable state
securities laws. The shares represented by this certificate are "restricted
securities" within the meaning of Rule 144 promulgated by the Securities
and Exchange Commission under the Act and may be subject to the limitations
and reporting requirements of said rule upon resale or other distribution
thereof "
7. The undersigned warrants that the information set forth in this Investment
Letter is true and correct, with the knowledge that the Company is relying
on the accuracy of the information and truth of the representations
contained herein in connection with the Company's compliance with
applicable securities laws. The undersigned further agrees to indemnify and
hold harmless the Company from any and all liabilities, losses, costs, and
expenses arising out of or related to the resale or other distribution by
the undersigned of all or any portion of the Shares in violation of the
Securities Act or of any applicable state securities laws as well as any
and all liabilities, losses, costs, and expenses to which the Company may
be put or that the Company may incur by reason of or in connection with any
misrepresentation made by the undersigned, any breach of any of its
warranties, or its failure to fulfil any of the covenants or agreements set
forth herein. The representations and warranties contained herein (i) are
made from the date the Board of Directors approved the issuance of the
Shares to the undersigned, and (ii) are binding upon the heirs, legal
representatives, successors, and assigns of the undersigned.
Executed as of this ________________ day of _______________, 2000.
-------------------------------------------------------------------
[Shareholder]
<PAGE>
Address (for purpose of the Company's stock transfer records):
-------------------------------------------
-------------------------------------------
-------------------------------------------
EXECUTED (but not delivered until )
the date hereof) AS A DEED by ) )
AUTHORISZOR HOLDINGS LIMITED acting )
by:
Director:
Director/Secretary
EXECUTED (but not delivered until )
the date hereof) AS A DEED by )
WRDC LIMITED )
acting by:
Director:
Director/Secretary
EXECUTED (but not delivered until )
the date hereof) AS A DEED )
by GARCIA HANSON )
Witness signature:
Name:
Address:
Occupation:
<PAGE>
EXECUTED (but not delivered until )
the date hereof) AS A DEED by )
BRIAN EDMONDSON )
Witness signature:
Name:
Address:
Occupation:
EXECUTED (but not delivered until the )
date hereof) AS A DEED by )
AUTHORISZOR INC )
acting by:
Director:
Director/Secretary
Dallas1 571117 v 1, 29976.00001
To: WRDC Limited
First Floor, Ebor Court
Westgate
Leeds, LS1 4ND
From: Authoriszor Holdings Limited
Windsor House,
Cornwall Road
Harrogate, HG1 2PW
_____________ 2000
Dear Sirs
STERLING CREDIT FACILITY
Following recent discussions, we are pleased to offer you a sterling credit
facility on the terms and conditions set out in this Letter. Terms not defined
in the body of this Letter are set out at Clause 16.
1. PARTIES
(a) Authoriszor Holdings Limited (Company No: 3873915) of Windsor House,
Cornwall Road, Harrogate, HG1 2PW ("Authoriszor"); and
(b) WRDC Limited (Company No: 2945379) of Ebor Court, Leeds, LS1 4ND (the
"Company").
2. THE FACILITY
The facility offered in this Letter (the "Facility") is a sterling credit
facility of up to a maximum aggregate amount of (pound)122,000.
3. CONDITIONS PRECEDENT TO AVAILABILITY
Notwithstanding any other terms of this Letter, the drawdown of an Advance at
any time under the Facility shall be at the discretion of the Company. However,
the Company may not request drawdown under the Facility (an "Advance") until (i)
Authoriszor has received a copy of this Letter duly signed by the Company
accompanied by a copy, certified as true and complete, of the relevant minute of
a meeting of the Board of Directors of the Company authorising such signature or
if (ii) at any time prior to, or on, the proposed drawdown date for such
Advance, any of the events detailed in Clause 11 has occurred and is continuing
unremedied.
<PAGE>
4. THE ADVANCES
(a) Subject to the other provisions of this Letter, the Company may, by
delivering a notice to Authoriszor (substantially the form set out at the
Annex) at least five Business Days prior to the proposed drawdown date,
request that Authoriszor make an Advance.
(b) An Advance may not be requested if the proposed drawdown date for that
Advance is after the date that is one year after the date of this Letter
(the "Final Drawdown Date").
(c) The amount of an Advance shall be an integral multiple of(pound)5,000 or
equal to then unused and available Facility.
5. INTEREST
5.1 Subject to Clause 6, the rate of interest payable on an Advance (as well
after as before judgment) shall be 6% per annum. Such interest payable on
an Advance shall accrue rateably on a day to day basis for the period
during which any amount advanced under the Facility is outstanding.
5.2 Interest on the Advance shall be payable in arrears on each Interest
Payment Date in respect of the period (an "Interest Period") running from,
and including, the previous Interest Payment Date to, and excluding, that
Interest Payment Date, save that:
(a) the first Interest Period shall commence on and include the date of the
first Advance; and
(b) the last Interest Period in relation to any Advance not repaid prior to the
Final Repayment Date shall end on, and exclude, the Final Repayment Date.
6. DEFAULT INTEREST
(a) Interest shall accrue on a day to day basis, and shall be payable monthly
in arrear, at a rate of 2% per annum above the base lending rate from time
to time of Lloyds TSB Bank Plc on any sum (whether principal or interest)
which the Company shall fail to pay when due and may, at the discretion of
Authoriszor, be calculated on a compound basis.
(b) Unless the unpaid sum is of principal that became payable during an
Interest Period, in which case, the first Interest Period applicable to
that unpaid sum shall be equal to the unexpired portion of that Interest
Period, the Interest Periods applicable to such unpaid sum shall be the
successive periods of up to six months or less, as determined by
Authoriszor.
7. REPAYMENT
(a) Repayment of the aggregate of all Advances (the "Loan") shall commence on
the second anniversary of the date of first drawdown under the Facility
(the "First Drawdown Date").
<PAGE>
(b) Subject to Clause 7(c), the Company shall repay Advances by quarterly
payments of (pound)10,000 the first such payment to be made on the date on
the second anniversary of the First Drawdown Date (each date on which any
payment falls due being a "Repayment Date").
(c) The Company shall repay the Loan, all accrued and unpaid interest thereon,
and all other amounts outstanding in relation to the Facility on the date
that is five years after the First Drawdown Date (the "Final Repayment
Date").
8. PREPAYMENT
(a) The Company may, by giving Authoriszor at least five Business Days' notice
prepay the whole or any part (being an integral multiple of (pound)1,000)
of the Loan.
(b) Unless otherwise agreed, the Company shall not be entitled to reborrow any
amount prepaid under paragraph (a) above.
9. REPRESENTATIONS AND WARRANTIES
The Company by accepting the terms of this facility represents and warrants to
Authoriszor (and shall be deemed to so represent and warrant on the date of any
Advance and at the end of every Interest Period) that:
(a) Incorporated Company/Authority to Carry Out Business: it is duly
incorporated with limited liability under the laws of England and has the
corporate power to carry on its business as it is now being conducted;
(b) Power to Borrow: it has the necessary corporate power and authority to
borrow money on the terms and conditions set out in this Letter and to
perform and observe the obligations hereunder and does not require the
consent of any third party to enter into or perform its obligations
pursuant to this Letter;
(c) Non-Violation of Law/Obligations: by accepting the terms of this Loan, it
shall not violate in any material way any law or obligation to which it is
subject, nor any of the terms of any other corporate document, agreement,
deeds or documents to which it is a party or in any way affects or is
related to it.; and
(d) Events of Default: no Event of Default, as specified at Clause 11, has
occurred and remains unremedied.
10. COVENANTS
(a) Notice of Default: The Company will inform Authoriszor of the occurrence of
any of the events listed at Clause 11.
(b) Negative pledge: The Company will not create or permit to subsist any
Security Interest over all or any part of its present or future assets
other than one which was disclosed to Authoriszor in writing prior to the
date of this Letter or is granted in favour of Authoriszor.
<PAGE>
11. EVENTS OF DEFAULT
Each of the following events shall be an "Event of Default":
(a) Failure to pay: the Company fails to pay any sum due under this Letter on
the due date;
(b) Breach of other provisions: the Company fails to comply with any other
provision of this Letter and, if such failure is capable of remedy, is not
remedied within ten days of the occurrence of such breach;
(c) Representations: any representation of a material nature made by the
Company in or in connection with this Letter or any certificate, statement
or document delivered or made by the Company pursuant to this Letter proves
to have been incorrect or inaccurate when made;
(d) Insolvency: the cessation of the whole or a substantial part of the
Company's business or an act whether of the Company or another person which
by itself either constitutes or could directly result in a formal step
being taken for the receivership, administration, liquidation, dissolution
or analogous proceedings of or in respect of the Company or any of the
Company's assets;
(e) Cross Default: any financial indebtedness of the Company (i) becomes due
and payable prior to its specified maturity, (ii) the Company is in breach
of or default under any agreement or document evidencing or regulating such
indebtedness, (iii) the Company fails to pay any sum due to be paid by it
under any guarantee, indemnity or similar instrument, (iv) the Company is
unable or fails or admits its inability to pay its debts as they fall due;
otherwise than in the normal course of its business of the Company;
(f) Enforcement of Security Interest: any Security Interest over any asset of
the Company becomes enforceable or any execution or distress is levied
against, or any person is entitled to or does take possession of, the whole
or any part of the assets or undertaking of the Company; and
(g) Unlawfulness: it becomes unlawful for either the Company or Authoriszor to
perform or comply with all or any of its obligations under this Letter or
for it to remain a party to this Letter.
12. ACCELERATION
If any of the events listed at Clause 11 occurs, Authoriszor shall be under no
obligation to advance further monies under this Letter and may, by notice to the
Company either:
(a) cancel any part of the Facility then undrawn; and/or
<PAGE>
(b) require repayment (either immediately or otherwise as Authoriszor may
require) of any outstanding Advance with accrued interest thereon together
with any other sums then owed by the Company under this Letter.
13. COSTS
On written demand by Authoriszor the Company shall pay to Authoriszor all
expenses (including but not limited to any legal and valuation fees), stamp and
similar taxes and charges, and registration costs incurred by Authoriszor in
connection with the enforcement of the terms of this Letter in accordance with
the provisions of Clause 11 and 12 above.
14. PAYMENTS
Payments to be made by the Company to Authoriszor shall be made in sterling and
in immediately available cleared funds, free and clear of and without deduction
for or on account of (i) any set-off or counterclaim or (ii) (other than as
required by law) any tax or other matter, to such account as Authoriszor shall
have previously notified the Company for this purpose.
15. NOTICES
(a) Each notice, request, demand or other document to be given or made under
the this Letter shall be in writing, addressed to the Company or
Authriszor, as the case may be, at its registered office for the time being
or such other address of which it may inform the other party for this
purpose.
(b) Any notice, request, demand or other communication to be given or made
pursuant to this Letter shall be deemed made when left at the then current
address mentioned above or three Business Days after posting to such
address.
16. INTERPRETATION
(a) When used in this Letter, "this Letter" means and includes, as the context
so admits, both (a) the agreement resulting from the acceptance by the
Company of the terms and conditions set out in this offer and (b) any
variations, supplements or amendments thereto made from time to time.
(b) "Business Day" means any day other than Bank Holidays applicable within the
United Kingdom, any Saturday and any Sunday.
(c) "indebtedness" shall be construed so as to include any obligation (whether
incurred as principal or surety) for the payment or repayment of money,
whether present or future, actual or contingent.
(d) "Interest Payment Date" shall mean 31January, 30 April, 31 July and 31
October in each year, or if such date is not a Business Day the next
following Business Day.
<PAGE>
(e) "Security Interest" includes a mortgage, loan, pledge, encumbrance, charge,
hypothecation or other security interest or arrangement, the effect of
which is intended to prefer the beneficiary thereof over unsecured
creditors.
(f) "tax" shall be construed so as to include any tax, levy, impost, duty or
other charge of a similar nature (including without limitation any penalty
payable in connection with any failure to pay or any delay in paying any of
the same).
17. LAW
This Letter shall be governed by, and shall be construed in accordance with, the
laws of England.
THE OFFER CONTAINED IN THIS LETTER MAY BE ACCEPTED BY YOUR COUNTERSIGNING AND
RETURNING TO US THE ENCLOSED COPY OF THIS LETTER BUT WILL LAPSE IF WE HAVE NOT
RECEIVED SUCH COPY, DULY COUNTERSIGNED ON YOUR BEHALF BY ANY DULY AUTHORISED
DIRECTOR, BY __________ 2000.
Yours faithfully,
Signed by Ian McNeill, duly authorized
on behalf of Authoriszor Holdings Limited
We hereby acknowledge and accept the terms of this letter
Signed by Garcia Hanson, duly authorised
on behalf of WRDC Limited
<PAGE>
ANNEX
To: Authoriszor Holdings Limited
From: WRDC Limited Date: [ ]
Dear Sirs
We refer to the agreement (the "Agreement") constituted by our acceptance on [ ]
2000 of your letter to us of [ ] 2000.
We write to give notice that on [ ] 2000/1 we wish to draw under the Facility
granted to us in the Agreement the sum of(pound)[ ], which is to be made
available to us by credit to our account number [ ] with [ ] Bank PLC, of [ ],
sort code [ ].
We confirm that as at the date of this Letter, the representations and
warranties set out in Clause 9 of the Agreement remain true.
To: WRDC Limited
First Floor, Ebor Court
Westgate
Leeds, LS1 4ND
From: Authoriszor Limited
Windsor House,
Cornwall Road
Harrogate, HG1 2PW
_____________ 2000
Dear Sirs
STERLING CREDIT FACILITY
Following recent discussions, we are pleased to offer you a sterling credit
facility on the terms and conditions set out in this Letter. Terms not defined
in the body of this Letter are set out at Clause 15.
1. Parties
(a) Authoriszor Limited (Company No: 3302620) of Windsor House, Cornwall Road,
Harrogate, HG1 2PW (" Authoriszor"); and
(b) WRDC Limited (Company No: 2945379) of Ebor Court, Leeds, LS1 4ND (the
"Company").
2. The Facility
The facility offered in this Letter (the "Facility") is a sterling credit
facility of (pound)100,000.
3. Existing Loan
By signing this Letter, each of the parties agrees that the terms of the loan
granted by Authoriszor to the Company on 14 December 1999 for (pound)100,000
("the Advance") is hereby varied with effect from the date hereof so that such
Advance shall be subject to the terms of this Letter only and to the exclusion
of all previous terms and conditions upon which such was made.
4. Interest
4.1 Subject to Clause 5, the rate of interest payable on the Advance (as well
after as before judgment) shall be 6% per annum. Such interest payable on
an Advance shall accrue rateably on a day to day basis for the period
during which any amount advanced under the Facility is outstanding.
4.2 Interest on the Advance shall be payable in arrears on each Interest
Payment Date in respect of the period (an "Interest Period") running from,
and including, the previous Interest Payment Date to, and excluding, that
Interest Payment Date, save that:
(a) the first Interest Period shall commence on and include the date hereof;
and
(b) the last Interest Period in relation to any Advance not repaid prior to the
Final Repayment Date shall end on, and exclude, the Final Repayment Date.
5. Default Interest
(a) Interest shall accrue on a day to day basis, and shall be payable monthly
in arrear, at a rate of 2% per annum above the base lending rate from time
to time of Lloyds TSB Bank Plc on any sum (whether principal or interest)
which the Company shall fail to pay when due and may, at the discretion of
Authoriszor, be calculated on a compound basis.
(b) Unless the unpaid sum is of principal that became payable during an
Interest Period, in which case, the first Interest Period applicable to
that unpaid sum shall be equal to the unexpired portion of that Interest
Period, the Interest Periods applicable to such unpaid sum shall be the
successive periods of up to six months or less, as determined by
Authoriszor.
6. Repayment
(a) Repayment of the aggregate of all Advances (the "Loan") shall commence on
the second anniversary of the date hereof (the "First Drawdown Date").
(b) Subject to Clause 7(c), the Company shall repay Advances by quarterly
payments of (pound)8,500 the first such payment to be made on the date on
the second anniversary of the First Drawdown Date (each date on which any
payment falls due being a "Repayment Date").
(c) The Company shall repay the Loan, all accrued and unpaid interest thereon,
and all other amounts outstanding in relation to the Facility on the date
that is five years after the First Drawdown Date (the "Final Repayment
Date").
7. Prepayment
(a) The Company may, by giving Authoriszor at least five Business Days' notice
prepay the whole or any part (being an integral multiple of (pound)1,000)
of the Loan.
(b) Unless otherwise agreed, the Company shall not be entitled to reborrow any
amount prepaid under paragraph (a) above.
8. Representations and Warranties
The Company by accepting the terms of this facility represents and warrants to
Authoriszor (and shall be deemed to so represent and warrant on the date of any
Advance and at the end of every Interest Period) that:
(a) Incorporated Company/Authority to Carry Out Business: it is duly
incorporated with limited liability under the laws of England and has the
corporate power to carry on its business as it is now being conducted;
(b) Power to Borrow: it has the necessary corporate power and authority to
borrow money on the terms and conditions set out in this Letter and to
perform and observe the obligations hereunder and does not require the
consent of any third party to enter into or perform its obligations
pursuant to this Letter;
(c) Non-Violation of Law/Obligations: by accepting the terms of this Loan, it
shall not violate in any material way any law or obligation to which it is
subject, nor any of the terms of any other corporate document, agreement,
deeds or documents to which it is a party or in any way affects or is
related to it.; and
(d) Events of Default: no Event of Default, as specified at Clause 11, has
occurred and remains unremedied.
9. Covenants
(a) Notice of Default: The Company will inform Authoriszor of the occurrence of
any of the events listed at Clause 10.
(b) Negative pledge: The Company will not create or permit to subsist any
Security Interest over all or any part of its present or future assets
other than one which was disclosed to Authoriszor in writing prior to the
date of this Letter or is granted in favour of Authoriszor.
10. Events OF DEFAULT
Each of the following events shall be an "Event of Default":
(a) Failure to pay: the Company fails to pay any sum due under this Letter on
the due date;
(b) Breach of other provisions: the Company fails to comply with any other
provision of this Letter and, if such failure is capable of remedy, is not
remedied within ten days of the occurrence of such breach;
(c) Representations: any representation of a material nature made by the
Company in or in connection with this Letter or any certificate, statement
or document delivered or made by the Company pursuant to this Letter proves
to have been incorrect or inaccurate when made;
(d) Insolvency: the cessation of the whole or a substantial part of the
Company's business or an act whether of the Company or another person which
by itself either constitutes or could directly result in a formal step
being taken for the receivership, administration, liquidation, dissolution
or analogous proceedings of or in respect of the Company or any of the
Company's assets;
(e) Cross Default: any financial indebtedness of the Company (i) becomes due
and payable prior to its specified maturity, (ii) the Company is in breach
of or default under any agreement or document evidencing or regulating such
indebtedness, (iii) the Company fails to pay any sum due to be paid by it
under any guarantee, indemnity or similar instrument, (iv) the Company is
unable or fails or admits its inability to pay its debts as they fall due;
otherwise than in the normal course of its business of the Company;
(f) Enforcement of Security Interest: any Security Interest over any asset of
the Company becomes enforceable or any execution or distress is levied
against, or any person is entitled to or does take possession of, the whole
or any part of the assets or undertaking of the Company; and
(g) Unlawfulness: it becomes unlawful for either the Company or Authoriszor to
perform or comply with all or any of its obligations under this Letter or
for it to remain a party to this Letter.
11. ACCELERATION
If any of the events listed at Clause 10 occurs, Authoriszor shall be under no
obligation to advance further monies under this Letter and may, by notice to the
Company either:
(a) cancel any part of the Facility then undrawn; and/or
(b) require repayment (either immediately or otherwise as Authoriszor may
require) of any outstanding Advance with accrued interest thereon together
with any other sums then owed by the Company under this Letter.
12. COSTS
On written demand by Authoriszor the Company shall pay to Authoriszor all
expenses (including but not limited to any legal and valuation fees), stamp and
similar taxes and charges, and registration costs incurred by Authoriszor in
connection with the enforcement of the terms of this Letter in accordance with
the provisions of Clause 10 and 11 above.
13. Payments
Payments to be made by the Company to Authoriszor shall be made in sterling and
in immediately available cleared funds, free and clear of and without deduction
for or on account of (i) any set-off or counterclaim or (ii) (other than as
required by law) any tax or other matter, to such account as Authoriszor shall
have previously notified the Company for this purpose.
14. Notices
(a) Each notice, request, demand or other document to be given or made under
the this Letter shall be in writing, addressed to the Company or
Authriszor, as the case may be, at its registered office for the time being
or such other address of which it may inform the other party for this
purpose.
(b) Any notice, request, demand or other communication to be given or made
pursuant to this Letter shall be deemed made when left at the then current
address mentioned above or three Business Days after posting to such
address.
15. Interpretation
(a) When used in this Letter, "this Letter" means and includes, as the context
so admits, both (a) the agreement resulting from the acceptance by the
Company of the terms and conditions set out in this offer and (b) any
variations, supplements or amendments thereto made from time to time.
(b) "Business Day" means any day other than Bank Holidays applicable within the
United Kingdom, any Saturday and any Sunday.
(c) "indebtedness" shall be construed so as to include any obligation (whether
incurred as principal or surety) for the payment or repayment of money,
whether present or future, actual or contingent.
(d) "Interest Payment Date" shall mean 31January, 30 April, 31 July and 31
October in each year, or if such date is not a Business Day the next
following Business Day.
(e) "Security Interest" includes a mortgage, loan, pledge, encumbrance, charge,
hypothecation or other security interest or arrangement, the effect of
which is intended to prefer the beneficiary thereof over unsecured
creditors.
(f) "tax" shall be construed so as to include any tax, levy, impost, duty or
other charge of a similar nature (including without limitation any penalty
payable in connection with any failure to pay or any delay in paying any of
the same).
16. Law
This Letter shall be governed by, and shall be construed in accordance with, the
laws of England.
The offer contained in this Letter may be accepted by your countersigning and
returning to us the enclosed copy of this Letter but will lapse if we have not
received such copy, duly countersigned on your behalf by any duly authorised
director, by __________ 2000.
Yours faithfully,
Signed by James Jackson, duly authorised
on behalf of Authoriszor Limited
We hereby acknowledge and accept the terms of this letter
Signed by Garcia Hanson, duly authorised
on behalf of WRDC Limited
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<NAME> AUTHORISZOR INC.
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0
0
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