OpenTV Corp. Contracts
Sample Business Contracts
Principal Share Purchase Agreement - Media & Technology Group Ltd., Paul Bustin and OpenTV Corp.
Stock Purchase Forms
___________________________________________
PRINCIPAL SHARE
PURCHASE AGREEMENT
___________________________________________
By and Among
THE VENDORS
And
MR. PAUL BUSTIN
And
THE PURCHASER
DATED as of 13 June 2001
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
Clauses Pages
<S> <C>
1. Definitions and Interpretation.................................................................................... 1
2. Sale of Sale Shares............................................................................................... 12
3. Consideration..................................................................................................... 13
4. Conditions........................................................................................................ 17
5. Conduct of the Group's business pending Completion................................................................ 20
6. Completion........................................................................................................ 24
7. United States Securities Law Compliance........................................................................... 30
8. Lock up for New OpenTV Shares..................................................................................... 31
9. Escrow............................................................................................................ 33
10. Completion Accounts............................................................................................... 35
11. Restriction of Vendors and Mr. Bustin............................................................................. 37
12. Warranties........................................................................................................ 39
13. Covenant in Respect of Tax........................................................................................ 46
14. Covenant from the Purchaser....................................................................................... 56
15. Restriction on Announcements...................................................................................... 58
16. Access............................................................................................................ 58
17. Confidentiality of Information Received by the Vendors............................................................ 58
18. Guarantee and Indemnity by Mr Bustin.............................................................................. 59
19. Costs............................................................................................................. 61
20. General........................................................................................................... 62
21. Notices........................................................................................................... 64
22. Governing Law and Submission to Jurisdiction...................................................................... 66
SCHEDULE 1A - The Vendors............................................................................................... 68
SCHEDULE 1B - Non-Principal Shareholders and Optionholders.............................................................. 69
SCHEDULE 1C - Pro Forma example of the Total Consideration.............................................................. 73
SCHEDULE 2 - Details of the Company.................................................................................... 77
SCHEDULE 3 - The Subsidiaries......................................................................................... 79
SCHEDULE 4 - The Properties........................................................................................... 82
SCHEDULE 5 - Warranties............................................................................................... 92
SCHEDULE 6 - Purchaser's Warranties.................................................................................... 117
SCHEDULE 7 - Software.................................................................................................. 122
SCHEDULE 8 - Earn Out Provisions....................................................................................... 125
SCHEDULE 9 - Completion Accounts....................................................................................... 131
SCHEDULE 10 - 14.2 Documents............................................................................................ 132
</TABLE>
<PAGE>
DATE: 13 June 2001
PARTIES:
(1) The persons whose names are set out in column 1 of Schedule 1A (the
"Vendors").
(2) Mr Paul Bustin of 4 Chiddingstone Street, London SW6 3TG England ("Mr
Bustin").
(3) OpenTV Corp., an international business company incorporated under the laws
of British Virgin Islands having its registered office at the offices of
Havelet Trust Company (BVI) Limited, P.O. Box 3186, Road Town, Tortola,
British Virgin Islands (the "Purchaser").
RECITALS:
(A) The Vendors are the registered holders and beneficial owners of some of the
issued shares in the capital of Static 2358 Holdings Limited (the
"Company"). Particulars of the Company are set out in Schedule 2.
(B) The remaining shareholders of the Company are selling and the Purchaser
proposes to buy their shareholdings and certain of the Optionholders
propose to surrender their Options on the terms and conditions set out in
the Non-Principal Share Purchase Agreement and Option Surrender Agreements
(both as defined below).
(C) The Vendors wish to sell and the Purchaser wishes to purchase the said
shares on the terms and conditions set out in this Agreement.
TERMS AGREED:
1. Definitions and Interpretation
------------------------------
1.1 In this Agreement where the context so admits the following words and
expressions shall have the following meanings:
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"Accounting Date" 30 June 1999;
"Accounts" the audited consolidated financial
statements of the Company and of
each of the Subsidiaries for the
accounting reference period which
ended on the Accounting Date (each
such financial statement comprising
a balance sheet, profit and loss
account, cash flow statement, notes
and directors' and auditors'
report) and the consolidated profit
and loss account and consolidated
balance sheet of the Company and
the Subsidiaries as at and for the
period ending on the Accounting
Date copies of which are annexed to
the Disclosure Letter;
"Adjusted Spreadsheet" the meaning given to that term in
clause 3.4.1;
"Agreed Claim" a Notified Claim which has been
settled between the Vendors and the
Purchaser either by written
agreement between them or pursuant
to the determination of an
arbitrator in accordance with this
Agreement;
"Associate" the meaning given to that term in
section 430E(4) of the Companies
Act 1985;
"Auditors" Ernst & Young;
"BSB" British Sky Broadcasting Limited, a
company registered in England with
number 2906991 whose registered
office is at Grant Way, Isleworth,
Middlesex TW7 5QD or its
subsidiaries and Associates;
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"Business" the business of interactive digital
television games, interactive
digital television-broadcasting,
interactive digital television
development and broadcast design
and related applications and
related software development;
"Business Plan" the business plan for the Group in
the approved terms;
"Cash Component" the aggregate amount of Pounds
Sterling payable on Completion as
part of the Consideration as set
out in column (3) of Schedule 1A;
"Companies Acts" the Companies Act 1985, Part V of
the Criminal Justice Act 1993, the
Companies Consolidation
(Consequential Provisions) Act 1985
and the Companies Act 1989;
"Company" Static 2358 Holdings Limited,
details of which are set out in
Schedule 2;
"Company Shares" all issued shares in the capital of
the Company, including the Sale
Shares;
"Completion" completion of the sale and purchase
of the Sale Shares as specified in
clause 6;
"Completion Date" the later of 1 July 2001 and the
date of satisfaction of the
Conditions and the Purchaser
Conditions (or, subject to clause
4, such later date as the parties
may agree);
"Completion Schedules and the meaning given to that term in
Calculations" clause 3.6.1;
"Conditions" the conditions specified in clause
4.1;
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"Confidential Information" know-how, trade secrets and other
information of a confidential
nature, wherever in the world
protectable;
"Consideration" aggregate of the consideration for
the Sale Shares to be sold by the
Vendors, being as calculated in
accordance with clause 3 and
Schedule 1C;
"Directors" the persons listed as directors of
the Company in Schedule 2;
"Disclosure Bundle" the bundle of documents listed on
the index in the approved terms
which are referred to in the
Disclosure Letter;
"Disclosure Letter" the letter of today's date from the
Vendors to the Purchaser in the
approved terms together with such
supplemental Disclosure Letter as
is permitted by clause 6.2.1.6;
"Earnout Component" shall take its meaning from
paragraph 1 of Schedule 8;
"Employees' Bonuses" the payments of bonuses specified
in the Excel spreadsheet produced
pursuant to clause 3.2 to certain
Optionholders who would otherwise
receive no consideration for the
cancellation for their Options,
subject to all lawful deductions
and withholdings required to be
made by the Group;
"Environment" all or any of the following media,
namely, the air, water and land;
and the medium of air includes the
air within buildings and the air
within other natural or man-made
structures above or below ground;
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"Environmental Law" all and any laws, common law,
statutes, directives, regulations,
notices, standards having force of
law, codes of practice, guidance
notes, by-laws, judgments, decrees
or orders whether of the European
Community or the United Kingdom or
any other relevant jurisdiction,
relating to (1) pollution,
contamination or protection of the
Environment or (2) the storage,
labelling, handling, release,
treatment, manufacture, processing,
deposit, transportation or disposal
of Hazardous Substances or (3) the
responsibility or duty of care for
waste;
"Environmental Licence" any permit, licence, authorisation,
consent or other approval, that may
be required by any Environmental
Law;
"Escrow Shares" shall take its meaning from
clause 9.1;
"Exchange Act" the United States Securities
Exchange Act of 1934, as amended;
"Former Properties" all land and premises previously
used by any member of the Group or
under the past ownership,
occupation or control of any member
of the Group and shall exclude the
Properties;
"Founders" each of Mark Rock and Jasper Smith;
"Group" the group of companies comprising
the Company and its Subsidiaries.
The expression "member of the
Group" shall be construed
accordingly;
"Group's Intellectual Property" the rights to Intellectual Property
owned by any member of the Group or
used by it in its Business;
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"Hazardous Substances" all substances of whatever
description which may cause or have
a harmful effect on the Environment
or the health of man or any other
living organism including, without
limitation, all poisonous, toxic,
noxious, dangerous and offensive
substances;
"HSBC" HSBC Investment Bank plc, a company
registered in England with number
976092 whose registered office is
at Thames Exchange, 10 Queen Street
Place, London EC4R 1BL;
"HSBC Notes" (a) the 2,450,000 zero coupon
convertible unsecured loan
notes 2002 issued by the
Company to HSBC on 26 May 2000
pursuant to the terms of a
loan note instrument made by
the Company on such date; and
(b) the 1,200,000 zero coupon
convertible unsecured loan
notes 2002 issued by the
Company to HSBC on 24 October
2000 pursuant to the terms of
a loan note instrument made by
the Company on such date;
"Intellectual Property" includes Confidential Information,
patents, registered designs,
copyrights, rights in databases,
design rights, topography rights,
trade marks, business names,
registrations of and applications to
register any of the aforesaid items,
rights in the nature of any of the
aforesaid items in any country,
rights in the nature of unfair
competition rights and rights to sue
for passing off, in each case
wherever in the world enforceable;
6
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"Interim Bridge Loan" the loan of (Pounds)1m and further
funding to be advanced of (Pounds)
2,050,664 made or to be made by the
Purchaser to the Company pursuant to
loan documentation in the approved
terms;
"Management Accounts" the unaudited monthly management
balance sheet of the Company and the
Subsidiaries and the unaudited
monthly management profit and loss
account of the Company and of each
of the Subsidiaries for each month
from 30 April 2000 up to 30 April
2001;
"Material" with respect to any entity or group
of entities means any material
event, change, condition or effect
related to the condition (financial
or otherwise), properties, assets
(including intangible assets),
liabilities, business, operations,
results of operations or prospects
of such entity or group of entities;
"Material Adverse with respect to any entity or group
Event" of entities means any event, change
or effect that, when taken
individually or together with all
other adverse changes and effects,
is or is reasonably likely to be
materially adverse to the condition
(financial or otherwise),
properties, assets (including
intangible assets), liabilities,
business, operations, results of
operations or prospects of such
entity and its subsidiaries, taken
as a whole, or to prevent or
materially delay consummation of the
transactions contemplated under this
Agreement (including the sale of
shares by other shareholders of the
Company to the Purchaser on the date
of Completion) or otherwise to
prevent
7
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such entity and its subsidiaries
from performing their obligations
under this Agreement;
"M&TG" Media & Technology Group Limited
(one of the Vendors);
"New OpenTV Shares" new OpenTV Shares issued pursuant to
this Agreement;
"Non-Principal Shareholders all holders of shares in the capital
and Optionholders" of the Company (other than the
Vendors as set out in column (1) of
Schedule 1A) and the Optionholders
as set out in column (1) of Schedule
1B;
"Non-Principal Share Purchase the Non-Principal Share Purchase
Agreement" Agreement in the approved terms
between the Purchaser and the Non-
Principal Shareholders and
Optionholders of the Company to be
dated on the date hereof;
"Notified Claim" a claim made for breach of the
Warranties or a claim under the Tax
Covenant or for breach of clause
19.2, in either case, during the
period one year after the Completion
Date;
"OpenTV Shares" Class A Ordinary Shares in the share
capital of the Purchaser;
"Optionholder" a holder of Options;
"Options" all the options, warrants and
convertible securities over unissued
shares in the capital of the Company
as set out in column (3) of Schedule
1B;
"Option Surrender Agreements" agreements in the approved terms
between the Optionholders and the
Company for the surrender of
Options;
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"Projected Completion Balance the consolidated balance sheet for the
Sheet" Group as the Vendors are projecting
for 30 June 2001 in the approved
terms;
"Properties" the properties short particulars of
which are set out in Schedule 4;
"Purchaser's Accountants" PricewaterhouseCoopers;
"Purchaser's Conditions" the conditions in clause 4.4;
"Purchaser's Group" the group of companies comprising the
Purchaser and its Associates;
"Purchaser's Solicitors" Baker & McKenzie of 100 New Bridge
Street, London EC4V 6JA;
"Registration Rights Agreement" the Registration Rights Agreement
between the Purchaser and the Vendors
and the Non-Principal Shareholders and
Optionholders in the approved terms;
"Retirement Benefits Scheme" a retirement benefits scheme within
the meaning given to that term in
Section 611 of the Taxes Act;
"Sale Shares" in aggregate, those shares in the
capital of the Company and set out in
column (2) of Schedule 1A opposite
each of the names of the Vendors;
"Securities Act" means the US Securities Act of 1933,
as amended;
"Shareholders' Agreement" the subscription and shareholders'
agreement dated 4 February 2000 made
between Jasper Smith, Mark Rock, Paul
Bustin, Media & Technology Group
Limited, BSB, Sky and Static 2358
Limited, as amended by supplemental
agreements dated 7 April 2000, 7
August 2000
9
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and 25 August 2000 respectively;
"Shares Component" the aggregate number of New OpenTV
Shares payable as part of the
Consideration on Completion, including
the Escrow Shares, as set out in
column (4) of Schedule 1A;
"Software" means all of the computer programs
identified and briefly described in
Schedule 7 including all related
source code and object code, user and
other manuals, tapes, indices,
descriptive memoranda, original
listings, development working papers,
calculations and all other relevant
documents, media and confidential
information;
"Subsidiaries" the subsidiaries and subsidiary
undertakings of the Company, all of
which are listed in Schedule 3;
"subsidiary undertaking" the meaning given to that term in
section 258 Companies Act 1985;
"Tax" all forms of taxation, withholdings,
duties, imposts, levies, social
security contributions and rates
imposed by any local, municipal,
governmental, state, federal, or other
body in the United Kingdom or
elsewhere and any interest, penalty,
surcharge or fine in connection
therewith;
"Taxes Act" the Income and Corporation Taxes Act
1988;
"Tax Warranties" the warranties in paragraph 3 of
Schedule 5;
"Total Consideration" the total consideration payable in
Pounds Sterling and New OpenTV Shares
for the entire share capital of the
Company (comprising the Company Shares
and the surrender of the Options)
pursuant to this Agreement, the Non-
Principal Share
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Purchase Agreement and
the Option Surrender Agreements as
adjusted in accordance with the
provisions of clause 3;
"Vendors' Solicitors" Berwin Leighton Paisner of Adelaide
House, London Bridge, London, EC4R
9HA;
"Warranties" the representations, warranties and
undertakings contained or referred to
in clause 12 and Schedule 5.
1.2 Save where the context otherwise requires words and phrases the
definitions of which are contained or referred to in Part XXVI of the
Companies Act 1985 shall be construed as having the meaning thereby
attributed to them.
1.3 Any references, express or implied, to statutes or statutory provisions
shall be construed as references to those statutes or provisions as
respectively amended or re-enacted or as their application is modified
from time to time by other provisions (whether before or after the date
hereof) and shall include any statutes or provisions of which they are re-
enactments (whether with or without modification) and any orders,
regulations, instruments or other subordinate legislation under the
relevant statute or statutory provision, except to the extent that the
liability of any party is thereby increased or extended. References to
sections of consolidating legislation shall wherever necessary or
appropriate in the context be construed as including references to the
sections of the previous legislation from which the consolidating
legislation has been prepared.
1.4 References in this Agreement to clauses and schedules are to clauses in
and schedules to this Agreement (unless the context otherwise requires).
The recitals and schedules to this Agreement shall be deemed to form part
of this Agreement.
1.5 Headings are inserted for convenience only and shall not affect the
construction of this Agreement.
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1.6 The expression "the Vendors" includes their respective personal
representatives in the case of the Founders and successors and assigns in
the case of M&TG and the expression "the Purchaser" includes its
successors and assigns.
1.7 References to "persons" shall include bodies corporate, unincorporated
associations and partnerships (whether or not having separate legal
personality).
1.8 References to writing shall include any methods of reproducing words in a
legible and non-transitory form.
1.9 The masculine gender shall include the feminine and neuter and the
singular number shall include the plural and vice versa.
1.10 All warranties, representations, indemnities, covenants, agreements and
obligations given or entered into by more than one person are given or
entered into severally only and not jointly and the respective liability
of the Vendors shall be several and proportionate to their respective
entitlements to the Consideration.
1.11 A document expressed to be "in the approved terms" means a document the
terms of which have been approved by or on behalf of the parties to this
Agreement and a copy of which has been signed for the purposes of
identification by or on behalf of those parties.
1.12 Each reference to "(Pounds)10.43" in this Agreement is to the exact amount
in Pounds Sterling arising from the division of 15.00 by 1.438.
2. Sale of Sale Shares
-------------------
2.1 Subject to the terms of this Agreement and with effect from the Completion
Date, each of the Vendors shall sell with full title guarantee and the
Purchaser shall purchase, free from all liens, charges and encumbrances
and together with all rights now or hereafter attaching to them, including
all rights to any dividend or other distribution declared, made or paid
after the date of this Agreement, the number of Sale Shares set opposite
his or its name in column (2) of Schedule 1A.
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2.2 Each of the Vendors hereby waives and agrees to procure the waiver of any
restrictions on transfer (including pre-emption rights) which may exist in
relation to the Company Shares and HSBC Notes, whether under the articles
of association of the Company, the Shareholders' Agreement, the
instruments constituting the HSBC Notes or otherwise.
2.3 The Purchaser undertakes following Completion to procure that the Company
pays to the Inland Revenue the sums equal to the amounts on account of
National Insurance Contributions and Income Tax which have been withheld
from the Optionholders who are employees pursuant to the provisions of the
Option Surrender Agreements.
3. Consideration
-------------
3.1 Subject to the provisions of this clause, the Consideration for the Sale
Shares attributable to each Vendor shall be that amount of the Cash
Component and the Shares Component as shall be set out in columns (3) and
(4) of Schedule 1A, as calculated in accordance with Schedule 1C and, if
due pursuant to this Agreement, the Earnout Component.
3.2 A pro forma example (extracted from the attached Excel spreadsheet in the
approved terms) of the allocation of the Cash Component, Shares Component,
Escrow Shares and Earnout Component among each of the Vendors, Non-
Principal Shareholders and Optionholders is set out in Schedule 1C. The
basis used to calculate the numbers in that pro-forma example is set out
in that Schedule. The sale of the Company Shares, other than the Sale
Shares, is dealt with by the Non-Principal Share Purchase Agreement and
not this Agreement.
3.3 At any time prior to the date two days before the Completion Date, the
Purchaser may give notice to the Vendors' Solicitors in writing that,
instead of delivering New OpenTV Shares at Completion, it will deliver
cash in Pounds Sterling in lieu of such New OpenTV Shares, in relation to
any proportion of such New OpenTV Shares up to and including 100% of such
New OpenTV Shares. If the Purchaser delivers such notice, the Purchaser's
obligations to deliver such New OpenTV Shares (and, if
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applicable, the Escrow Shares) shall be replaced with an obligation to
deliver cash in Pounds Sterling for the relevant number of New OpenTV
Shares on the basis of the (Pounds)10.43 for each New OpenTV Share (or
such other Pounds Sterling amount as the Purchaser's Accountants determine
to be fair and reasonable in the event of any consolidation, sub-division,
stock split or reclassification or reduction of the share capital of the
Purchaser or any rights issue, taking place after the date of this
Agreement). If the Purchaser exercises its rights under this clause 3.3,
the additional cash payable in accordance with this clause 3.3 shall be
allocated amongst the Vendors in proportion to that part of the Total
Consideration payable to them respectively.
3.4 The Purchaser shall deliver to the Vendors' Solicitors following the close
of the NASDAQ National Market on the day prior to Completion:
3.4.1 a schedule in the form of the pro-forma example in Schedule 1C,
together with the supporting Excel spreadsheet, but with the
insertion of the final amounts of all figures stated to be the
variables and all the adjustments to be made as a result of the
variables and adjusted for any assumptions of fact expressly used
in the Excel spreadsheet which prove to be incorrect at Completion
and any errors in calculations in the Excel spreadsheet ("Adjusted
Spreadsheet"); and
3.4.2 a form of Schedules 1A and 1B showing the Total Consideration and
the allocation of the Cash Component, Shares Component and Escrow
Shares amongst each of the Vendors, Non-Principal Shareholders and
Optionholders by reference to the Adjusted Spreadsheet.
3.5 Together, the Adjusted Spreadsheet, Schedules 1A and 1B and the
calculations of the Total Consideration, Cash Component, Shares Component
and Escrow Shares are referred to in this Agreement as the "Completion
Schedules and Calculations".
3.6 The Consideration shall be payable on Completion in accordance with clause
6.3 on the basis of the Completion Schedules and Calculations and shall be
adjusted in accordance with clause 3.8.
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3.7 The parties acknowledge that it will not be possible to finalise the
Completion Schedules and Calculations until the Completion Date as a
result of adjustments of variables which can only be known immediately
prior to the Completion Date. The Purchaser shall have control over the
Completion Schedules and Calculations (although the Purchaser shall
consult with Jasper Smith as representative of the Vendors in relation to
their preparation) and Completion shall be effected on the basis of the
Completion Schedules and Calculations prepared by the Purchaser in
accordance with the provisions of Schedule 1C, PROVIDED THAT the Vendors'
sole and exclusive remedy in relation to a breach of that obligation to
prepare the Completion Schedules and Calculations shall be the remedies
set out in the remainder of this clause 3.7. The Vendors (for and on
behalf of themselves and/or the Non-Principal Shareholders and
Optionholders) and the Purchaser shall have the right to object to the
Completion Schedules and Calculations used to effect Completion during the
period expiring on the date fifteen (15) days after the Completion Date by
notice to each other. For the avoidance of doubt, the Non-Principal
Shareholders and Optionholders shall not have any right to object to such
Completion Schedules and Calculations directly, but may do so through the
Vendors. Any matter not objected to by the Vendors (either for themselves
and/or on behalf of the Non-Principal Shareholders and Optionholders) or
the Purchaser within such fifteen (15) day period shall be deemed to be
agreed between the parties and final and binding on the Non-Principal
Shareholders and Optionholders. The parties shall use their best
endeavours to resolve any disagreements between them no later than five
(5) business days after such date of notification. Should disagreements
still exist at such time, the parties shall appoint an expert (acting as
an expert not an arbitrator) to resolve such disagreements (and failing
agreement on the appointment of the expert, the President of the Institute
of Chartered Accountants in England and Wales shall make such appointment)
with a view to the resolution of all disagreements no later than thirty
five (35) business days after the Completion Date. The decision of such
expert shall, save in the case of manifest error, be final and binding on
the parties.
3.8 Upon the agreement of, or resolution of any disagreements in relation to,
the adjustments to the Completion Schedules and Calculations, the Adjusted
Spreadsheet, Total Consideration, Cash Component, Shares Component, Escrow
Shares and Schedules 1A and 1B shall be adjusted accordingly.
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3.9 The Vendors acknowledge that their respective Consideration for their
Sale Shares as set out in Schedule 1A shall be adjusted to reflect:
3.9.1 the effect of any notice served by the parties in accordance with
clause 3.3; and
3.9.2 the revised Schedule 1A which arises from clause 3.8.
3.10 Within seven days of the determination of the Completion Schedules and
Calculations in accordance with clause 3.8:
3.10.1 if, according to the Completion Schedules and Calculations, any
Vendor has received too little Consideration, the Purchaser will,
for the account of the relevant Vendor:
3.10.1.1 pay to the Vendors' Solicitors (whose receipt shall be
an absolute discharge therefore) an amount in Pounds
Sterling equal to the Cash Component element of such
shortfall and, if applicable, interest thereon as
specified in clause 3.11; and
3.10.1.2 cause to be issued or transferred New OpenTV Shares
(valued at (Pounds)10.43 per New OpenTV Share) equal to
the Shares Component element of such shortfall (but
excluding any fractional entitlements) and cause OpenTV
Certificates representing such New OpenTV Shares (as
defined in clause 6.3.2 below) to be delivered to the
Vendors' Solicitors in accordance with the provisions
of clause 6.3.2, subject to clause 7.3.
3.10.2 if, according to the Completion Schedules and Calculations, any
Vendor has received too much Consideration, such Vendor will:
3.10.2.1 pay to the Purchaser an amount in Pounds Sterling equal
to the Cash Component element of such excess and, if
applicable, interest thereon as specified in clause
3.11; and
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3.10.2.2 transfer to the Purchaser New OpenTV Shares (valued at
(Pounds)10.43 per New OpenTV Share) equal to the Shares Component
element of such excess (but excluding any fractional entitlements)
and cause OpenTV Certificates (as defined in clause 6.3.2 below)
representing such New OpenTV Shares to be delivered to the
Purchaser as soon as practicable, having regard to the provisions
of clauses 6.3.2 and 7.3.
3.11 The interest payable on the amount of any excess or shortfall pursuant
to clause 3.10 shall accrue from day to day and be compounded at
monthly intervals at the Base Rate from time to time of National
Westminster Bank plc from and including the Completion Date to the date
of payment, save that if such interest payable by or to all parties is
less than (Pounds)1,000 in aggregate, then no interest shall be due or
payable.
4. Conditions
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4.1 The sale and purchase of the Sale Shares is conditional upon:
4.1.1 the Warranties remaining true and accurate and not misleading in
all material respects at Completion as if they were deemed repeated
at Completion;
4.1.2 each of the Vendors and Mr. Bustin having complied in all material
respects with the obligations specified in clause 5 and otherwise
having materially performed all of the covenants and agreements
required to be performed by him or it under this Agreement;
4.1.3 all consents, approvals or clearances which are necessary being
granted by governmental or official authorities and no statute,
regulation, court ruling or decision which would prohibit
materially, restrict or materially delay the sale and purchase of
the Sale Shares or the operation of the Company after Completion
having been proposed, enacted or taken by any governmental or
official authority;
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4.1.4 all Non-Principal Shareholders having satisfied the condition
precedent set out in clause 4.1.1 of the Non-Principal Share
Purchase Agreement and all steps for Completion under the Non-
Principal Share Purchase Agreement having been completed, save for
the obligations of the Purchaser under clauses 5.3.1 and 5.3.2 of
the Non-Principal Share Purchase Agreement;
4.1.5 the Optionholders identified in Schedule 1B entering into Option
Surrender Agreements and delivery to the Purchaser of the duly
executed Option Surrender Agreements;
4.1.6 obtaining and delivering to the Purchaser on or before Completion
written consent to the transfer of the Company Shares to the
Purchaser pursuant to this Agreement and to the Non-Principal Share
Purchase Agreement from TPS Services and Milgo Solutions Limited;
4.1.7 in the reasonable opinion of the Purchaser, there shall not have
occurred since the date of this Agreement any Material Adverse
Event in relation to the Company and/or its Subsidiaries, other
than a Material Adverse Event caused solely by a deterioration in
the general economic conditions of France or the UK;
4.1.8 the termination of employment of Wayne Thornhill, Paul Bustin,
Andrew Fearon and Christian Fernandez conditional upon Completion
occurring;
4.1.9 none of the HSBC Notes having been converted into shares in the
capital of the Company;
4.1.10 delivery to the Purchaser on or before Completion of a letter
between the Company and Canal Satellite S.A. confirming the
amendments to the contract between them in the terms disclosed to
the Purchaser;
4.1.11 the Vendors and Mr Bustin having given notice to the Purchaser that
there is to be no further disclosure against the Warranties beyond
the Disclosure Letter
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delivered as at the date of this Agreement or the Purchaser having
approved the terms of any supplemental Disclosure Letter
contemplated by clause 6.2.1.6, such approval to be at the
Purchaser's sole discretion;
4.1.12 the Purchaser receiving the May Management Accounts (as defined in
clause 6.2.1.13) which are prepared on a consistent basis with the
Management Accounts and which show a fair view of the assets and
liabilities and profits and losses of the Company and its
subsidiaries as at and to 31 May 2001;
4.1.13 an undertaking from the Vendors' Solicitors not to release to any
person the OpenTV Certificates (as defined in clause 6.3.2 below)
for a period of 40 days after the Completion Date; and
4.1.14 a letter dated the Completion Date from BSB to the Purchaser in the
approved terms relating to certain confirmation matters and a
letter between the Company, BSB and the other Shareholders amending
the Shareholders Agreement.
4.2 The Purchaser may waive all or any of such conditions at any time by
notice in writing to the Vendors' Solicitors, save that in the event that
the Purchaser waives Condition 4.1.4, it will complete under both this
Agreement and the Non-Principal Share Purchase Agreement.
4.3 The Vendors shall use their reasonable endeavours to procure the
fulfilment of the Conditions on or before the Completion Date.
4.4 The sale and purchase of the Sale Shares is conditional on:
4.4.1 the representations and warranties of the Purchaser set out in
Schedule 6 remaining true and accurate and not misleading in all
material respects at Completion as if they were deemed repeated at
Completion; and
4.4.2 in the reasonable opinion of the Vendors, there shall not have
occurred since the date of this Agreement any Material Adverse Event
in respect of the
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Purchaser's Group, other than any Material Adverse Event caused solely
by a deterioration in general worldwide economic conditions or
comprising any fluctuation in the price of OpenTV Shares on the NASDAQ
National Market (other than as a result of a Material Adverse Event).
4.5 The Vendors acting jointly (and not alone) may waive all or any of the
Purchaser's Conditions in clause 4.4 at any time by notice in writing to
the Purchaser's Solicitors.
4.6 The Purchaser shall use its reasonable endeavours to procure the
fulfilment of the Purchaser's Conditions on or before the Completion
Date.
4.7 In the event that any of the Conditions or Purchaser's Conditions shall
not have been fulfilled (or waived pursuant to clauses 4.2 or 4.5) prior
to 31 August 2001 then the Purchaser and the Vendors shall not be bound
to proceed with the sale or purchase of the Sale Shares, and this
Agreement shall cease to be of any effect except clauses 1, 17, 18, 19,
20, 21 and 22 which shall remain in force and save in respect of claims
arising out of any antecedent breach of this Agreement.
5. Conduct of the Group's business pending Completion
--------------------------------------------------
5.1 During the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement or Completion, the
Vendors and Mr. Bustin agree (except to the extent expressly contemplated
by this Agreement or as consented to in writing by the Purchaser), to
procure the Company to carry on its and its Subsidiaries' business in the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted and they will not knowingly do, or permit to be done
anything which would give rise to a material breach of the Warranties as
if they were deemed to be repeated by reference to the facts and
circumstances existing at any time up to Completion or to a claim under
the Tax Covenant.
5.2 Without limiting clause 5.1, except as expressly contemplated by this
Agreement, the Vendors and Mr. Bustin shall not permit or allow the
Company to do, cause or permit any of the following, or allow, cause or
permit any of its Subsidiaries to do, cause or permit any of the
following, without the prior written consent of the Purchaser:
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5.2.1 cause or permit any amendments to their Memorandum or Articles of
Association, by-laws or constitutions;
5.2.2 issue, deliver or sell or authorise or propose the issuance, delivery
or sale of, or purchase or propose the purchase of, any shares of its
capital stock or securities convertible into, or subscriptions,
rights, warrants or options to acquire, or other agreements or
commitments of any character obligating it to issue any such shares or
other convertible securities, other than the issuance of ordinary
shares pursuant to the exercise of stock options, warrants or other
rights therefor outstanding as of the date of this Agreement;
5.2.3 declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any of its capital
stock, or split, combine or reclassify any of its capital stock or
issue or authorise the issuance of any other securities in respect of,
in lieu of or in substitution for shares of its capital stock, or
repurchase or otherwise acquire, directly or indirectly, any shares of
its capital stock except from former employees, directors and
consultants in accordance with agreements providing for the repurchase
of shares in connection with any termination of service to it or its
Subsidiaries;
5.2.4 accelerate, amend or change the period of exercisability or vesting of
options or other rights granted under its stock plans or authorise
cash payments in exchange for any options or other rights granted
under any of such plans, other than for the purposes of the
satisfaction of the transactions contemplated hereby;
5.2.5 other than in the ordinary course of business, enter into any material
contract or commitment, or violate, amend or otherwise modify or waive
any of the terms of any of its material contracts;
5.2.6 transfer to any person or entity any rights to the Group's
Intellectual Property other than in the ordinary course of business
consistent with past practice;
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5.2.7 enter into or amend any agreements pursuant to which any other party
is granted exclusive marketing or other exclusive rights of any type
or scope with respect to any of the Group's Intellectual Property;
5.2.8 sell, lease, license or otherwise dispose of or encumber any of the
assets of the Group which are material, individually or in the
aggregate, to the Business, except in the ordinary course of business
consistent with past practice;
5.2.9 incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities or guarantee any
debt securities of others, other than the Interim Bridge Loan;
5.2.10 enter into operating lease in excess of (Pounds)10,000;
5.2.11 pay, discharge or satisfy in an amount in excess of (Pounds)10,000 in
any one case or (Pounds)100,000 in the aggregate, any claim, liability
or obligation (absolute, accrued, asserted or unasserted, contingent
or otherwise) arising other than in the ordinary course of business,
other than the payment, discharge or satisfaction of liabilities
reflected or reserved in the Disclosure Letter;
5.2.12 make any capital expenditures, capital additions or capital
improvements in excess of (Pounds)10,000;
5.2.13 materially reduce the amount of any material insurance coverage
provided by existing insurance policies;
5.2.14 terminate or waive any right of substantial value, other than in the
ordinary course of business;
5.2.15 adopt or amend any employee benefit or option plan, save for the
amendment of the Static 2001 employee bonus scheme in the approved
terms, or hire any new director or employee (except that it may hire a
replacement for any current director or employee if it first provides
the Purchaser advance notice regarding such hiring decision), pay any
special bonus or special remuneration
22
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to any employee or director, or increase the salaries or wage rates of
its employees;
5.2.16 grant any severance or termination pay (i) to any director or (ii) to
any other employee except those payments set out in the Disclosure
Letter or payments made in the ordinary course of business in
accordance with its standard past practice or pursuant to the
termination of employment of Wayne Thornhill, Paul Bustin, Andrew
Fearon or Christian Fernandez;
5.2.17 commence legal proceedings other than (i) for debt collection in the
ordinary course of the Business, (ii) in such cases where it in good
faith determines that failure to commence suit would result in the
material impairment of a valuable aspect of its business, provided
that it consults with the Purchaser prior to the filing of such a
suit, or (iii) for a breach of this Agreement;
5.2.18 acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, association or
other business organisation or division thereof, or otherwise acquire
or agree to acquire any assets which are material, individually or in
the aggregate, to its and its Subsidiaries' business, taken as a
whole;
5.2.19 other than in the ordinary course of business, make or change any
material election in respect of Taxes, adopt or change any accounting
method in respect of Taxes, file any material Tax Return or any
amendment to a material Tax Return, settle any claim or assessment in
respect of Taxes, or consent to any extension or waiver of the
limitation period applicable to any claim or assessment in respect of
Taxes;
5.2.20 fail to give any notices or other information required to be given to
the employees of the Company, any collective bargaining unit
representing any group of employees of the Company, and any applicable
government authority, and other applicable law in connection with the
transactions provided for in this Agreement;
23
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5.2.21 revalue any of its assets, including without limitation writing down
the value of inventory or writing off notes or accounts receivable
other than in the ordinary course of business;
5.2.22 use the Interim Bridge Loan other than for the purposes and in the
amounts described on Schedule 11; and
5.2.23 take, or agree in writing or otherwise to take, any of the actions
described in clauses 5.2.1 to 5.2.22 above.
5.3 The Purchaser shall procure that the Company pays the agreed termination
costs payable by the Company in relation to Paul Bustin, Andrew Fearon,
Wayne Thornhill and Christian Fernandez and those employees set out in
the Disclosure Letter, when such payments fall due, without any deduction
from the Consideration.
5.4 The Vendors shall procure that the Company shall use up the funds
available from the Interim Bridge Loan in their entirety for the purposes
permitted by the Interim Bridge Loan documentation. Should there be a
failure to comply with this clause completely prior to the Completion
Date, any cash sum held by the Company which is attributable to such
failure shall not be added to the amount of the cash at bank and in hand
of the Group for the purposes of Schedule 1C (reference (#6)).
6. Completion
----------
6.1 Subject to the provisions of clause 4, Completion shall take place on the
Completion Date at the offices of the Purchaser's Solicitors when all
(but not some only) of the events described in this clause 6 shall occur.
6.2 At Completion, the Vendors shall:
6.2.1 deliver to the Purchaser:
6.2.1.1 duly executed transfers of all of the Sale Shares in favour of
the Purchaser or its nominees together with the relative share
certificates;
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6.2.1.2 duly executed transfers in favour of the Company (or its
nominees) of such shares in the Subsidiaries as are registered in
the names of nominee holders, together with the relative share
certificates;
6.2.1.3 the resignation of the Auditors as the auditors of each member of
the Group which has appointed an auditor, such resignation to
contain a statement in accordance with Section 394 of the
Companies Act 1985 that there are no circumstances connected with
their ceasing to hold office which they consider should be
brought to the attention of the members or creditors of the
relevant member of the Group;
6.2.1.4 the leases to the Properties;
6.2.1.5 all the statutory and other books (duly written up to date) of
the Company and the Subsidiaries and their respective
certificates of incorporation, common seals and any other papers
and documents of the Company or the Subsidiaries in their
possession;
6.2.1.6 written confirmation that none of the Vendors or Mr Bustin is
aware of any matter or thing which is a material breach of or
materially inconsistent with any of the Warranties at the date of
this Agreement or at the Completion Date save to the extent that
any disclosures required to be made by the Vendors as a result of
events or omissions after the date of this Agreement (where such
events or omissions could not reasonably have been put in the
Disclosure Letter delivered as at the date of this Agreement) in
a supplemental Disclosure Letter in the approved terms;
6.2.1.7 certified copies of any powers of attorney under which any of the
documents referred to in this clause 6.2 is executed or evidence
satisfactory to the Purchaser of the authority of any person
signing on the Vendor(s) behalf;
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<PAGE>
6.2.1.8 a duly executed power of attorney in favour of the Purchaser, or
such person as may be nominated by the Purchaser, generally in
respect of the Sale Shares and in particular to enable the
Purchaser (or its nominees) to attend and vote at General
Meetings of the Company;
6.2.1.9 letters of resignation in the approved terms from each of the
Directors and the secretary of the Company and the directors and
secretary of each of the Subsidiaries, such resignations to take
effect from close of the meeting of the Board referred to in
clause 6.2.4 below;
6.2.1.10 releases duly executed as deeds in the approved terms, releasing
the Company and the Subsidiaries from any liability whatsoever
(whether actual or contingent) which may be owing to the Vendors
and Paul Bustin (other than in their capacity as Directors,
employees or consultants) by the Company or the Subsidiaries at
Completion;
6.2.1.11 a duly executed Registration Rights Agreement in the approved
terms;
6.2.1.12 a duly executed Escrow Agreement in the approved terms;
6.2.1.13 the unaudited monthly management balance sheet of the Company and
the Subsidiaries and the unaudited monthly management profit and
loss account of the Company and each of the Subsidiaries for the
month ending May 31, 2001 ("May Management Accounts");
6.2.1.14 written confirmation from the Vendors' Solicitors of receipt of
the cash referred to in clause 6.3.1; and
6.2.1.15 Service Agreements in the approved terms signed by Jasper Smith,
Mark Rock and a Consultancy Agreements in the approved terms
signed by Mr Bustin and Wayne Thornhill.
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<PAGE>
6.2.2 pay and shall procure that their respective Associates shall pay all
monies (if any) then owing by them to each member of the Group,
whether due for payment or not;
6.2.3 cause the Directors to hold a meeting of the Board of the Company and
cause the directors of the Subsidiaries to hold a meeting of the Board
of the Subsidiaries at which the Directors and the directors of the
Subsidiaries shall pass resolutions in the approved terms (inter alia)
to:-
6.2.3.1 approve the registration of the Purchaser or its nominees as
members of the Company subject only to the production of duly
stamped and completed transfers in respect of the Company Shares;
6.2.3.2 accept the resignation of all the Directors and the Company
Secretary in the approved terms;
6.2.3.3 appoint James Ackerman, Scott Ray and James Brown and/or such
other persons as the Purchaser may nominate as directors and as
secretary of the Company and the Subsidiaries;
6.2.3.4 revoke all authorities to the bankers of the Company relating to
bank accounts and to give authority to such persons as the
Purchaser may nominate to operate the same;
6.2.3.5 appoint PricewaterhouseCoopers as auditors of the Company and the
Subsidiaries; and
6.2.3.6 if requested by the Purchaser, approve amendments to the Static
2001 employee bonus scheme in the approved terms.
6.3 At Completion, the Purchaser shall:
6.3.1 pay the Cash Component, the Employees' Bonuses and the sums
contemplated by Schedule 1C as being paid to the Optionholders in
Pounds Sterling by
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CHAPS automated transfer to the Vendors' Solicitors (whose receipt
shall be an absolute discharge therefor and the Purchaser shall not be
concerned to see to the distribution of the moneys represented
thereby), such payment to be made simultaneously with the payment by
the Purchaser of the consideration or other amounts due and payable
under the Non-Principal Share Purchase Agreement;
6.3.2 deliver, if available, the certificates representing the Shares
Component (net of the shares to be deposited in the Escrow Fund as
required in clause 9.1 below) to the Vendors' Solicitors (the "OpenTV
Certificates") (whose receipt shall be an absolute discharge therefor
and the Purchaser shall not be concerned to see to the distribution of
the OpenTV Certificates represented thereby), failing which such
certificates shall be delivered as soon as reasonably practicable
after Completion and the provisions of clause 6.4 below shall apply;
6.3.3 deliver to the Vendors' Solicitors certified copies of any powers of
attorney under which any of the documents referred to in this clause
6.3 is executed or other evidence satisfactory to the Vendors'
Solicitors of the authority of the person signing on the Purchaser's
behalf;
6.3.4 sign and deliver the Registration Rights Agreement and the Escrow
Agreement;
6.3.5 deliver to the Vendors' Solicitors a copy of the Purchaser's
instructions to its Transfer Agent requesting the issue of the New
OpenTV Shares;
6.3.6 deliver to the Vendors' Solicitors the items set out in clauses 3.4.1
and 3.4.2; and
6.3.7 deliver to the Escrow Agent (as defined in Clause 9.1) the Escrow
Shares and/or cash in accordance with the provisions of clause 9.1.
6.4 In the event that, prior to the delivery of the OpenTV Certificates to the
Vendors' Solicitors, the Purchaser discovers a breach by any of the Vendors
of any of the Warranties or any provision of this Agreement, the Purchaser
undertakes and agrees
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not to withhold or delay delivery of any of the OpenTV Certificates to the
Vendors' Solicitors or to apply any form of set-off against the Vendors in
respect of the OpenTV Certificates.
6.5 Following Completion, the Purchaser shall make on a timely basis all
applicable or required filings for the New OpenTV Shares with the NASDAQ
National Market and the Amsterdam Stock Exchange.
6.6 Without prejudice to any other remedies available to the Purchaser, if in
any respect the provisions of clause 6.2 are not complied with by any of
the Vendors on the Completion Date the Purchaser may:
6.6.1 defer Completion to a date not more than 28 days after the Completion
Date (and so that the provisions of this clause 6.6 shall apply to
Completion as so deferred); or
6.6.2 proceed to Completion so far as practicable (without prejudice to its
rights under this Agreement); or
6.6.3 give notice to each defaulting Vendor specifying its failure to comply
and if such failure is not remedied within seven (7) business days it
shall be entitled to rescind this Agreement, subject to clause 19.1.1
provided that if each such defaulting Vendor remedies the relevant
breach within seven (7) business days of such request, the provisions
of clauses 6.6.1 and 6.6.2 shall then apply.
6.7 Without prejudice to any other remedies available to the Vendors, if in
any material respect the provisions of clause 6.3 are not complied with by
the Purchaser on the Completion Date the Vendors may:
6.7.1 defer Completion to a date not more than 28 days after the Completion
Date (and so that the provisions of this clause 6.7 shall apply to
Completion as so deferred); or
6.7.2 proceed to Completion so far as practicable (without prejudice to its
rights under this Agreement); or
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6.7.3 give notice to the Purchaser specifying its failure to comply and if
such failure is not remedied within seven (7) business days the
Vendors (or any one of them and the exercise of this right by one
Vendor shall operate as the exercise of this right by all Vendors)
shall be entitled to rescind this Agreement, subject to clause 19.1.2,
provided that if the Purchaser remedies the relevant breach within
seven (7) business days of such request, the provisions of clauses
6.7.1 and 6.7.2 shall apply.
6.8 Following Completion the Purchaser shall use its reasonable endeavours to
offer to employees of the Company options in the Purchaser in the aggregate
amount set out in the Excel spreadsheet referred to in clause 3.2.
7. United States Securities Law Compliance
---------------------------------------
7.1 The New OpenTV Shares to be issued pursuant to this Agreement shall not be
registered under the Securities Act, in reliance upon the exemption
contained in Section 4(2) of the Securities Act and/or Regulation S
promulgated thereunder and in reliance upon the representations and
warranties of the Vendors contained in paragraph 15.5 of Schedule 5.
7.2 The certificates representing the New OpenTV Shares issued pursuant to this
Agreement shall bear the following restrictive legend (and stop transfer
orders shall be placed against the transfer thereof with the Purchaser's
transfer agent):
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
TRANSFER RESTRICTIONS AS SET FORTH IN THE PRINCIPAL SHARE PURCHASE
AGREEMENT DATED AS OF JUNE 13, 2001 ENTERED INTO BY THE COMPANY AND
THE OTHER PARTIES NAMED THEREIN. A COPY OF SUCH IS ON FILE AT THE
PRINCIPAL OFFICE OF THE COMPANY",
and if necessary, a restrictive legend as required by the securities laws
of any state or any other jurisdiction.
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Provided that there have been no breaches of the transfer restrictions
contained in clause 8, following their expiry the Vendors may deliver any
relevant legended OpenTV Certificates to the Purchaser who shall effect
their replacement by certificates without the capitalised legend wording
set out above as soon as reasonably practicable.
7.3 Each Vendor due to receive New OpenTV Shares in accordance with the
provisions of this Agreement hereby severally undertakes to the Purchaser
and agrees not to, for a period of 40 days after the Completion Date
instruct the Vendors' Solicitors to release to any person any of the OpenTV
Certificates.
8. Lock up for New OpenTV Shares
-----------------------------
8.1 Each Founder hereby undertakes as follows, subject to the provisions of
clauses 7 and 9 and Schedule 8:
8.1.1 that he will not sell, transfer, pledge, charge or otherwise dispose
of any of the New OpenTV Shares or any beneficial or other interest
therein issued to him pursuant to this Agreement for the period of one
year after the Completion Date;
8.1.2 that, following the expiry of the one year period referred to in
clause 8.1.1:
8.1.2.1 he may sell, transfer, pledge, charge or otherwise dispose of up
to 50% of the New OpenTV Shares or any beneficial or other
interest therein issued to him pursuant to this Agreement;
8.1.2.2 the remaining 50% of the New OpenTV Shares or any beneficial or
other interest therein issued to him pursuant to this Agreement
may not be sold, transferred, pledged, charged or otherwise
disposed of PROVIDED THAT the obligations contained in this
clause 8.1.2.2 shall be released throughout the year following
the one year anniversary of the Completion Date over such 50% of
the New OpenTV Shares on a pro rata equal monthly basis.
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8.2 M&TG hereby undertakes as follows, subject to the provisions of clauses 7
and 9:
8.2.1 that it will not sell, transfer, pledge, charge or otherwise dispose
of any of the New OpenTV Shares or any beneficial or other interest
therein issued to it pursuant to this Agreement for the period of six
months after the Completion Date; and
8.2.2 that from the date after the six month period referred to in clause
8.2.1, M&TG may sell up to 50% of the New OpenTV Shares issued to it
pursuant to this Agreement PROVIDED THAT it will not sell, transfer,
pledge, charge or otherwise dispose of any beneficial or other
interest in the remaining 50% of the New OpenTV Shares issued to it
pursuant to this Agreement for a period of twelve (12) months after
the Completion Date.
8.3 The restrictions contained in clauses 8.1 and 8.2 (other than the
restrictions required by clauses 7 and 9) shall not apply to a transfer
by way of gift:
8.3.1 to a member of the family of the Vendor (meaning the wife, husband,
parents, widow, widower, cohabitee, adult child or grandchild
(including a child or grandchild by adoption) of the Vendor
concerned);
8.3.2 to any person or persons acting in the capacity of trustee or trustees
of a trust created by the Vendor or, upon any change of trustees of a
trust so created, to the new trustee or trustees, provided that the
trust is established for charitable purposes or there are no persons
beneficially interested under the trust other than the Vendor and
members of the family of the Vendor; or
8.3.3 by the trustee or trustees of a trust to which clause 8.3.3 applies to
any person beneficially interested under the trust;
provided that, prior to the making of any such transfer pursuant to
clause 8.3, the relevant Vendor or trustee or trustees has satisfied the
Purchaser that the transferee falls within one of the categories listed
in this clause 8.3 and the transferee has
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agreed in terms reasonably acceptable to the Purchaser to be bound by the
provisions of clauses 8.1 and 8.2 as if it were the relevant Vendor.
8.4 The restrictions contained in clauses 8.1 and 8.2 (other than the
restrictions required by clauses 7 and 9) shall not apply to a transfer
pursuant to an acceptance of a general offer (or giving an irrevocably
undertaking to accept an offer) for the share capital of the Purchaser or
by operation of law as part of a merger or reorganisation of the Purchaser
which has either been recommended by the Purchaser's directors or has
become unconditional as to acceptances and which causes a change in control
of the voting power of the Purchaser.
8.5 The restrictions contained in clause 8.1 (other than the restrictions
required by clauses 7 and 9) shall not apply to a transfer to the personal
representatives of any Vendor who shall die during the period of the
operation of the restrictions contained in clause 8.1. Such personal
representatives may sell such shares during such period in accordance with
the reasonable requirements of the Purchaser so as to ensure an orderly
market for the issued share capital of the Purchaser.
9. Escrow
------
9.1 On the Completion Date, the Purchaser shall transfer that number of New
OpenTV Shares (valued at (Pounds)10.43 per share) which is equal to 15% of
the Consideration payable on Completion on account of the Vendors in an
amount equal to their proportionate Consideration to be registered in the
name of, and be deposited with an escrow agent (the "Escrow Agent"), whose
receipt shall be an absolute discharge therefor, such deposit to constitute
the escrow fund (the "Escrow Fund") and to be governed by this Agreement
and the Escrow Agreement.
9.2 Such Escrow Shares together with any cash paid pursuant to clause 9.1 shall
constitute the "Escrow Fund". In the event that the Purchaser is entitled
to recover any amount under this agreement for an Agreed Claim, pursuant to
clause 10.7 or pursuant to clause 19.2, the Escrow Fund shall be used to
satisfy the liabilities of the Vendors.
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9.3 The Escrow Fund shall continue to be held by the Escrow Agent until its
termination which shall happen upon the latest to occur of the following:
9.3.1 one year after the Completion Date;
9.3.2 the date of the exhaustion of the Escrow Fund as a consequence of
transfers to the Purchaser as a result of Agreed Claims; and
9.3.3 where the Purchaser has made a Notified Claim during the period one
year after the Completion Date, the date when there is a final
determination of whether such claim becomes an Agreed Claim and such
claims (to the extent that they, in fact, become Agreed Claims) have
been fully satisfied out of the Escrow Fund.
9.4 The Purchaser shall not unreasonably withhold its consent to the release
of some of the Escrow Shares and cash in Pounds Sterling, if any, after
the expiry of the date one year after the Completion Date if, in the
Purchaser's reasonable opinion, the remaining Escrow Shares or cash held
after such release are reasonably adequate to cover potential liabilities
in relation to claims formerly notified. Any such Escrow Shares or cash
released shall be dealt with pursuant to clause 9.5 as if they had been
released upon a termination of the Escrow Fund.
9.5 Upon the Escrow Fund terminating, the Escrow Agent shall deliver to the
Vendors all Escrow Shares and other property remaining in the Escrow
Fund. Deliveries of Escrow Shares to Vendors pursuant to this clause 9.5
and the Escrow Agreement shall be made in proportion to their respective
original contributions to the Escrow Fund.
9.6 All Notified Claims shall be resolved by mutual agreement amongst the
parties within 90 days of notification, if possible, failing which by
arbitration in accordance with the rules of the London Court of
International Arbitration, with the seat of arbitration in London,
England.
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10. Completion Accounts
-------------------
10.1 The Vendors shall procure that within 30 days of Completion draft
consolidated accounts for the Group as at 30 June 2001 shall be
prepared in accordance with the provisions of Schedule 9.
10.2 Following the preparation of such draft accounts, the Company shall
submit them to the Purchaser's Accountants who shall conduct an audit
applying the same basis and principles referred to in Schedule 9. The
Vendors shall make the working papers available to the Purchaser's
Accountants if required by them in carrying out their review.
10.3 If the Purchaser's Accountants agree to the form and content of the
draft accounts within 60 days of the date on which the drafts were
submitted (or within such other period as the Vendors and the
Purchaser may agree), the accounts as so agreed shall be the
Completion Accounts, but such agreement shall be without prejudice to
the Purchaser's right to claim under the Warranties, the Tax
Warranties or otherwise in respect of any matter.
10.4 If the Purchaser's Accountants are not able to agree the form and
content of the accounts within 60 days of the date on which the drafts
were first submitted (or within such other period as the Vendors and
the Purchaser may agree), the matter may be referred by the Vendors or
the Purchaser to an independent firm of chartered accountants selected
by agreement between the Vendors and the Purchaser or, failing
agreement, nominated by the President for the time being of the
Institute of Chartered Accountants in England and Wales on the
application of either the Vendors or the Purchaser and:
10.4.1 such independent firm of chartered accountants shall be requested
to settle any matter in dispute, applying the same basis and
principles as are referred to in clause 10.1 and Schedule 9 and
(unless both the Vendors and the Purchaser shall otherwise direct
in writing) determine the form and content of the Completion
Accounts; and
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10.4.2 the decision of such firm of chartered accountants as to the
matter in dispute and their determination (if any) as to the form
and content of the Completion Accounts shall be final and binding
on the parties hereto and such chartered accountants shall be
deemed to act as experts and not as arbitrators.
10.5 The costs incurred by the Vendors in respect of the preparation and
determination of the Completion Accounts shall be borne by the Vendors
other than the costs of the Purchaser's Accountants which shall be an
adjustment to the Total Consideration (through the deduction of the
Interim Bridge Loan in accordance with Schedule 1C). The costs of the
independent chartered accountant, if any, shall be borne by the
Vendors and the Purchaser equally.
10.6 Within 7 days of the determination of the Completion Accounts in
accordance with clauses 10.3 or 10.4 if the amount of the net current
assets (being current assets less current liabilities) shown in the
Completion Accounts is less than the amount of the net current assets
as shown in the Projected Completion Balance Sheet ("Target Net
Current Assets"), the Vendors will pay in cash to the Purchaser,
subject to clause 10.7, an amount equal to their aggregate several
liability (as set out in clause 1.10) of such shortfall and interest
thereon as specified in clause 10.8. If the Completion Accounts
reflect a different treatment of employer's NIC liability and payments
in connection with the surrender of Options than do the draft accounts
provided by the Vendors pursuant to clause 10.1, such difference shall
be ignored for the purposes of determining the net current assets
shown in the Completion Accounts for purposes of this clause 10.6.
10.7 In the event that the shortfall and interest referred to in clause
10.6 is an amount less than or equal to 10% of the Target Net Current
Assets, the Vendors shall in accordance with the Escrow Agreement, on
demand by the Purchaser, authorise the Escrow Agent to transfer to the
Purchaser that number of Escrow Shares (ignoring fractional
entitlements) valued at the last sale price listed on the NASDAQ
National Market on the date prior to such transfer as is equal to
their aggregate several liability (as set out in clause 1.10) of such
shortfall and interest, but if the Escrow Fund is not sufficient to
cover such shortfall and interest, or, to the extent that the
shortfall and interest referred to in clause 10.6 is in excess of 10%
of the Target Net Current
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Assets, the Vendors shall be liable to pay their aggregate several
liability (as set out in clause 1.10) of such shortfall and interest
in cash.
10.8 The interest payable on the amount of any shortfall pursuant to clause
10.6 shall accrue from day to day and be compounded at monthly
intervals at the rate of the base rate from time to time of National
Westminster Bank Plc, from and including the Completion Date to the
date of payment.
11. Restriction of Vendors and Mr. Bustin
-------------------------------------
11.1 Each of the Vendors and Mr. Bustin undertakes with the Purchaser (for
itself and as trustee for the Company and each of the Subsidiaries)
that, except with the consent in writing of the Purchaser and subject
to the provisions of clause 11.4:
11.1.1 for the period of two years after Completion he will not within
any country in which any member of the Group has carried on
Business during the year preceding Completion either on his own
account or in conjunction with or on behalf of any person, firm
or company carry on or be engaged, concerned or interested,
directly or indirectly, whether as shareholder, director,
employee, partner, agent or otherwise in carrying on or
controlling any business which competes with the Business (other
than as a holder of not more than 3 per cent of the issued shares
or debentures of any company carrying on such a business listed
on a stock exchange);
11.1.2 for the period of two years after Completion he will not either
on his own account or in conjunction with or on behalf of any
other person, firm or company solicit or entice away from any
member of the Group the custom of any person, firm, company or
organisation who shall at any time within the year preceding
Completion have been a customer, representative, agent, or
correspondent of any member of the Group or in the habit of
dealing any member of the Group or enter into any contract for
sale and purchase or accept business from any such person, firm,
company or organisation in a business area directly related to
the Business in which any member of the Group competes;
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11.1.3 for the period of two years after Completion he will not either
on his own account or in conjunction with or on behalf of any
other person, firm or company employ, engage, solicit, entice
away or attempt to employ, engage, solicit or entice away from
any member of the Group any person employed in a managerial,
supervisory, technical or sales capacity by, or engaged as a
consultant to, any member of the Group at Completion or at any
time during the period of six months immediately preceding
Completion (whether or not such person would commit a breach of
contract by reason of leaving such employment or engagement);
11.1.4 he will not at any time hereafter make use of or disclose or
divulge to any person (other than to officers or employees of the
Company or any of the Subsidiaries whose province it is to know
the same) any information (other than any information properly
available to the public or disclosed or divulged pursuant to an
order of a court of competent jurisdiction) relating to any
member of the Group, the identity of its customers and suppliers,
its products, finance, contractual arrangements, business or
methods of business and shall use his best endeavours to prevent
the publication or disclosure of any such information by any
person, firm or company with which he is connected;
11.1.5 if, in connection with the business or affairs of any member of
the Group, he shall have obtained Confidential Information
belonging to any third party under an agreement purporting to
bind any member of the Group which contained restrictions on
disclosure he will not without the previous written consent of
the Board of Directors of the Purchaser at any time infringe such
restrictions;
11.1.6 he will not at any time hereafter in relation to any trade,
business or company use a name or trade mark including the word
"PlayJam" or any other business product name owned by any member
of the Group or any word confusingly similar thereto in such a
way as to be capable of or likely to be confused with the name or
any trade mark of any member of the Group and shall use his
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reasonable endeavours to procure that no such name or trade mark
shall be used by any person, firm or company with which he is
connected.
11.2 Each Vendor and Mr. Bustin shall procure that all companies and
businesses directly or indirectly owned or controlled by him shall be
bound by and observe the provisions of this clause 11 as if they were
parties covenanting with the Purchaser in the same terms.
11.3 While the restrictions contained in this clause 11 are considered by
the parties to be reasonable in all the circumstances, it is
recognised that restrictions of the nature in question may fail for
technical reasons and accordingly it is hereby agreed and declared
that if any of such restrictions shall be adjudged to be void as going
beyond what is reasonable in all the circumstances for the protection
of the interests of the Purchaser but would be valid if part of the
wording thereof were deleted or the periods thereof reduced or the
range of activities or area dealt with thereby reduced in scope the
said restriction shall apply with such modifications as may be
necessary to make it valid and effective.
11.4 The restrictions contained in clauses 11.1 and 11.2 shall not preclude
the Vendors and Mr. Bustin from owning OpenTV Shares.
12. Warranties
----------
12.1.1 Each of the Vendors severally represents, warrants and undertakes
to and with the Purchaser that each of the statements set out in
Schedule 5 (other than Warranty 15.1) is now true and accurate.
12.1.2 MT&G represents, warrants and undertakes to and with the
Purchaser that each of the statements set out in Warranty 15.1 is
now true and correct.
12.2 The Warranties are given subject to matters fairly disclosed in the
Disclosure Letter but no other information relating to the Company or
the Subsidiaries of which the Purchaser has knowledge (actual or
constructive) and no investigation by or on behalf of the Purchaser
shall prejudice any claim made by the Purchaser under the
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Warranties or operate to reduce any amount recoverable, and liability
of the Vendors in respect thereof shall not be confined to breaches
discovered before Completion. No letter, document or other
communication shall be deemed to constitute a disclosure for the
purposes of this Agreement unless it is contained in the Disclosure
Bundle.
12.3 The Vendors acknowledge that the Purchaser has entered into this
Agreement in reliance upon the Warranties and has been induced by them
to enter into this Agreement.
12.4 Any Agreed Claim shall first be satisfied from the Escrow Fund and the
Vendors shall in accordance with the Escrow Agreement, on demand by
the Purchaser, authorise the Escrow Agent to transfer to the Purchaser
that amount of Escrow Shares (ignoring fractional entitlements) valued
at the last sale price on the NASDAQ National Market on the date prior
to such transfer or cash held by the Escrow Agent (at the election of
the Purchaser) to satisfy such claim in accordance with clause 12.6,
but if the Escrow Fund is not sufficient to cover the Agreed Claim,
the Vendors shall be liable to pay the balance of such Agreed Claim in
cash. In any event, any Agreed Claim shall be paid out as promptly as
practicable but in no event more than 5 days following the Agreed
Claim Date (as defined in clause 12.5.1.2).
12.5 The maximum liability of each Vendor in the event of an Agreed Claim
is the following:
12.5.1.1 the sum total of the amounts for the Cash Component, Shares
Component and (if payable or paid) the Earnout Component
applicable to the relevant Vendor as set out Schedule 1A (or
Schedule 8 in the case of the Earnout Component); or, if lower,
12.5.1.2 the amount of the realised proceeds actually received by the
relevant Vendor in cash and from the sale of New OpenTV Shares
issued to the Vendor pursuant to this Agreement ("Prior Realised
Proceeds") prior to the date when the Notified Claim becomes an
Agreed Claim ("Agreed Claim Date") and if the Vendor has not sold
all such New OpenTV Shares on or before the Agreed Claim Date,
the aggregate of
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the Prior Realised Proceeds and the amount of the value of
the remaining New OpenTV Shares not sold by such Vendor at
the last sale price on the NASDAQ National Market on the
Agreed Claim Date, in either such case net of taxes paid or
payable PROVIDED THAT should the Vendor be able, as a
consequence of the liability to pay an Agreed Claim, to
reclaim taxes paid or to reduce the amount of taxes payable,
the Vendor's liability shall not be reduced to such extent
and the Vendor shall take all relevant steps in good faith
to reclaim such taxes or to reduce his or its liability to
repay taxes.
12.6 In the event that the Warranties are breached, the amount of the
Vendors' liability shall be calculated as:
12.6.1 the amount necessary to put the Purchaser, the Company and each
of the Subsidiaries into the position which would have existed if
the Warranties had not been broken or (as the case may be) had
been true and not misleading or otherwise hold harmless and
indemnify the Company, the Purchaser and each of the Subsidiaries
for any losses, claims, damages or other costs and expenses
arising out of or from such broken, untrue or misleading
Warranty; and
12.6.2 all costs and expenses incurred by the Purchaser, the Company and
each member of the Group as a result of such breach and any costs
(including legal costs on a solicitor and own client basis),
expenses or other liabilities which any of them may incur either
before or after the commencement of any action in connection with
(i) any legal proceedings in which the Purchaser claims that any
of the Warranties has been broken or is untrue or misleading and
in which judgment is given for the Purchaser or (ii) the
enforcement of any settlement of, or judgment in respect of, such
claim,
PROVIDED THAT notwithstanding the foregoing, and subject to the
following provisions of this clause 12.6, the Purchaser may not
receive any portion of the Escrow Fund or any other payment for breach
of the Warranties unless and until an aggregate amount in excess of
(Pounds)500,000 on account of indemnification, damages, costs or
losses is payable under this clause 12.6, in which case the Purchaser
shall be
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entitled to claim for and to receive the full amount of such
indemnification, damages, costs or losses or the like without
deduction. In determining the amount of any such indemnification,
damages, costs or losses or the like which is payable, the whole of
such amount shall be payable, and not just the part in excess of
(Pounds)500,000. The limitation of (Pounds)500,000 contained in this
clause does not apply in the case of a breach of the Tax Warranties or
Warranties 4.1, 4.2, 4.6, 15.1, 15.2 and 15.3.
12.7 Each of the Warranties shall be separate and independent and, save as
expressly provided to the contrary, shall not be limited by reference
to or inference from any other Warranty or any other term of this
Agreement.
12.8 Where any statement in the Warranties or any confirmation or
certificate given by any of the Vendors hereunder or pursuant hereto
is qualified by the expression "so far as the Vendors are aware" or
"to the best of the Vendors' knowledge and belief" or any similar
expression, that statement shall be deemed to include an additional
statement that it has been made after due and careful enquiry.
12.9 Each of the Vendors hereby agrees with the Purchaser (for itself and
as trustee for the Company and each of the Subsidiaries) to waive any
rights which he may have in respect of any misrepresentation or
inaccuracy in, or omission from, any information or advice supplied or
given by the Company or its Subsidiaries or its or their officers,
employees or advisers in connection with the giving of the Warranties
and the preparation of the Disclosure Letter.
12.10 Each of the Vendors hereby agrees to disclose promptly to the
Purchaser in writing as soon as reasonably practicable upon becoming
aware of the same, any matter, event or circumstance (including any
omission to act) which may arise or become known to it after the date
of this Agreement and before Completion which:-
12.10.1 constitutes a breach of or is inconsistent with any of the
Warranties in any material respect; or
12.10.2 is, or is likely to become, a Material Adverse Event.
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12.11 In the event of it becoming apparent on or before Completion that the
Vendors are in material breach of any of the Warranties or any other term
of this Agreement the Purchaser may (without any liability on its part)
rescind this Agreement by notice in writing to the Vendors' Solicitors in
which case the Purchaser's rights shall be limited as provided in clause
19.1.1.
12.12 The benefit of the Warranties (subject to the limitations contained in
this Agreement) may be assigned in whole or in part and without
restriction by the person for the time being entitled thereto provided
that the Purchaser provides notice to the Vendors thereof (but no such
notice is required if the Warranties are assigned to a direct or indirect
subsidiary of the Purchaser). Any assignee is bound by the provisions of
this clause 12.
12.12.1 The liabilities of the Vendors under the Warranties shall cease after
the date one year after the Completion Date in relation to all
Warranties (other than the Tax Warranties where the liabilities of the
Vendors shall cease seven years after the Completion Date or
Warranties 4.1, 4.2, 4.6 and 15.1, 15.2 and 15.3 where there shall be
no time limit), except (whether in relation to the Tax Warranties or
any other Warranties) in respect of matters which have been the
subject of a written claim made before such date by the Purchaser or
the Purchaser's Solicitors to any of the Vendors or the Vendors'
Solicitors unless in each case the relevant claim or claims has arisen
by reason of fraud, wilful concealment, dishonesty or deliberate non-
disclosure on the part of any of the Vendors or Mr. Bustin or on the
part of any officer or representative of or of any Vendor which is not
a natural person prior to the date of this Agreement, in which event
there shall be no limit on the amount recoverable by the Purchaser
from the Vendors or Mr. Bustin in respect of such claim or claims or
the time period within which such claims may be brought.
12.13 If any sum payable by the Vendors under this clause 12 shall be subject
to Tax (whether by way of deduction or withholding or direct assessment
of the person entitled thereto) such payment shall be increased by such
an amount as shall ensure that after deduction, withholding or payment of
such Tax the recipient shall have received a net amount equal to the
payment otherwise required hereby to be made
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provided that this clause shall not apply (a) if the payee is not the
original party to this Agreement and the deduction, withholding or
payment required to be made arises solely by reason of the change in the
identity of the payee or (b) to interest under clause 13.9 (default
interest).
12.14 The Purchaser shall use reasonable endeavours to obtain, and if the
Purchaser receives, a credit for or refund of any Tax payable by it by
reason of any deduction or withholding for or on account of Tax then, to
the extent that the Purchaser is satisfied (acting reasonably and in good
faith) it can do so without prejudice to the retention or any credit,
refund or similar benefit it receives, it shall reimburse to the Vendors
such part of any additional amounts paid by the Vendors under clause
12.15 as the Purchaser certifies to the Vendors will leave it (after such
reimbursement) in no better and no worse position than it would have been
if the Vendors had not been required to make such deduction or
withholding.
12.15 The Vendors shall have no liability in respect of a claim under the
Warranties (other than the Tax Warranties) for breach of Warranty to the
extent that it occurs or is increased as a result of:
12.15.1 legislation not in force at the date of this Agreement including,
without limitation, any legislation taking effect retrospectively
after the Completion Date;
12.15.2 any change after the Completion Date in generally accepted accounting
practices;
12.15.3 a voluntary act, omission, transaction or arrangement by a member of
the Purchaser or its subsidiaries (other than the Group) or their
respective employees, officers or agents at any time or by the Company
or its employees, officers or agents after Completion, in each case
where the act is outside the normal course of the Business; or
12.15.4 a breach of this Agreement by the Purchaser.
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12.16 The Vendors shall have no liability in respect of a claim for breach of
Warranty to the extent that:
12.16.1 the Purchaser or its subsidiaries actually recovers such liability
from an insurer or other third party;
12.16.2 a provision relating to the circumstance to which the claim relates
has been made in the Accounts or Management Accounts or details of the
same are set out fairly in the Disclosure Letter;
12.16.3 the breach in respect of which the claim is made is remedied by the
Vendors within 30 days of the date on which the Vendors are given
written notice by the Purchaser of the circumstances to which the
claim relates;
12.16.4 such breach is primarily attributable to the Vendors or the Company
having done (or omitted to do) something before Completion with the
Purchaser's prior written consent;
12.16.5 the matter is fairly disclosed in the Disclosure Letter or the
supplemental Disclosure Letter in the agreed terms described in Clause
6.2.1.6; and
12.16.6 the circumstances of such breach have already been the subject of a
payment pursuant to clause 10.6.
12.17 The Purchaser represents, warrants and undertakes to and with the Vendors
that each of the statements set out in Schedule 6 is now true and
accurate (the "Purchaser Warranties").
12.18 The liability of the Purchaser under the Purchaser Warranties to each
Vendor who has a claim against the Purchaser for breach of a Purchaser
Warranty shall be limited to the value of the Consideration due to that
Vendor as calculated in accordance with clause 3 and Schedule 1C.
12.19 The Purchaser may at its sole option satisfy any Purchaser Warranty claim
by cash in Pounds Sterling or with New OpenTV Shares valued at
(Pounds)10.43 (or such other Pounds
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Sterling amount as the Purchaser's Accountants determine to be fair and
reasonable in the event of any consolidation, sub-division, stock split
or reclassification or reduction of the share capital of the Purchaser or
any rights issue, taking place after the date of Completion) per share.
Any payment or delivery of an OpenTV Share under this clause shall be
made by the delivery of a certificate therefor in the name of the
relevant Vendor and delivered to the Vendors' Solicitors, whose receipt
shall be an absolute discharge therefor and the Purchaser shall not be
concerned to see the distribution of the moneys represented thereby.
12.20 The Purchaser acknowledges that, in relation to any Notified Claim, it
shall and shall procure that the Company shall comply with its duty at
law to mitigate its losses.
13. Covenant in Respect of Tax
--------------------------
13.1 In this clause unless the context otherwise requires:
13.1.1 "event" includes (without limitation) any omission, event, action or
transaction whether or not the Company or any of the Subsidiaries is a
party thereto, the death of any person, a change in the residence of
any person for any Tax purpose, a failure to make sufficient dividend
payments to avoid an apportionment or deemed distribution of income
and the entering into and completion of this Agreement and references
to the result of events on or before the Completion Date shall include
the combined result of two or more events one or more of which shall
have taken place on or before the Completion Date but only where the
event or events occurring after the Completion Date is or are:
13.1.1.1 the completion of the disposal by the Company of any capital
asset which was contracted to be sold by the Company before
Completion, outside the ordinary course of business of the
Company;
13.1.1.2 the satisfaction of a condition to which the disposal by the
Company of any capital asset pursuant to a contract entered into
before the Completion Date was subject (in which case the
disposal shall, for the purposes of this Agreement, be treated as
having been made before the
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Completion Date and any liability to Tax arising from such
disposal shall be treated as having arisen before Completion),
outside the ordinary course of business of the Company;
13.1.1.3 the service of any notice pursuant to Section 703 of the Taxes
Act;
13.1.1.4 the bringing into the United Kingdom of any document executed
prior to the Completion Date outside the United Kingdom;
13.1.1.5 the making of any chargeable payment (as defined in Section 214
of the Taxes Act);
13.1.1.6 the death of any individual who, in the seven years preceding his
death, was the donor of any asset owned by the Company at
Completion;
13.1.1.7 pursuant to a legally binding obligation of the Company incurred
prior to the Completion Date;
13.1.2 "relief" includes (without limitation) any relief, allowance, credit,
set off, deduction or exemption for any Tax purpose;
13.1.3 reference to income or profits or gains earned, accrued or received
shall include income or profits or gains deemed to have been or
treated as or regarded as earned, accrued or received for the purposes
of any legislation;
13.1.4 reference to any Tax liability shall include not only any liability to
make actual payments of or in respect of Tax but shall also include:
13.1.4.1 the loss or reduction in the amount, or the setting off against
income, profits or gains, or against any Tax liability for which
no provision has been made in preparing the Accounts, of any
relief which would (were it not for the said loss, reduction or
setting off) have been available to the Company or any of the
Subsidiaries and which has been taken into account in computing
(and so eliminating or reducing) any provision
47
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for deferred Tax which appears (or which but for such relief
would have appeared) in the Accounts;
13.1.4.2 the loss or reduction in the amount of, or the setting off
against any Tax liability for which no provision has been made in
preparing the Accounts, of a right to repayment of Tax which has
been treated as an asset of the Company or any of the
Subsidiaries in preparing the Accounts; and
13.1.4.3 the loss or reduction in the amount of, or the setting off
against income, profits or gains earned, accrued or received on
or before Completion, or against any Tax liability of any relief
which is not available before Completion but which arises in
respect of an event occurring after Completion in circumstances
where, but for such loss, reduction or setting off, the Company
or any of the Subsidiaries would have had a Tax liability in
respect of which the Purchaser would have been able to make a
claim under this clause 13;
and in such a case the amount of Tax which could otherwise be saved or
relieved, by the relief so lost, reduced or set off or the amount of
repayment which would otherwise have been obtained shall be treated as
the amount of a Tax liability which has arisen;
13.1.5 reference to a payment in respect of Tax includes (without limitation)
a payment for the surrender of losses or other amounts by way of group
relief (within the meaning of Section 402 of the Taxes Act) or for the
surrender of advance corporation tax or for the transfer of any other
relief, a repayment of any such payment and a payment by way of
reimbursement, recharge, indemnity or damages.
13.2 Subject as hereinafter provided, the Vendors hereby covenant with and
undertake to pay to the Purchaser (for itself and as trustee for its
successors in title) a sum equal to the amount of:
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13.2.1 any Tax liability of the Company or any of the Subsidiaries resulting
from or by reference to any income, profits or gains earned accrued or
received on or before the Completion Date or any event on or before
the Completion Date whether or not such Tax is chargeable against or
attributable to any other person; and
13.2.2 any Tax liability of any member of the Group that arises after
Completion as a result of an act, omission or transaction by any of
the Vendors or any person connected with them (other than any member
of the Group) and which Tax liability falls upon the relevant member
of the Group as a result of its having been in the same group for Tax
purposes as that person at any time before Completion; and
13.2.3 all reasonable costs and expenses which are properly incurred by the
Purchaser or any member of the Group in connection with any Tax
liability for which the Vendors are liable under this clause 13 (or
would have been liable but for any action taken by or on behalf of the
Purchaser in relation to which the costs and expenses have been
incurred) or any action taken in accordance with clauses 13.4, 13.11
or 13.19 (including, without prejudice to the generality of the
foregoing, all legal and other professional fees and disbursements).
13.3 The covenants contained in clause 13.2 do not apply to any liability and
the Vendors shall not be liable for a breach of a Tax Warranty:
13.3.1 to the extent that provision or reserve in respect thereof has been
made in the Accounts or to the extent that payment or discharge of
such liability has been taken into account therein;
13.3.2 in respect of which provision or reserve has been made in the
Accounts, which is insufficient only by reason of any increase in
rates of Tax made after the Completion Date with retrospective effect;
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13.3.3 to the extent the Tax liability arises as a result of or by reference
to any income profits or gains received by the Company or any of the
Subsidiaries, or as a result of an event or events (whether combined
with other events or not) actually occurring, after the Accounting
Date but on or before the Completion Date in each case in the ordinary
course of business of the Company or any of the Subsidiaries;
13.3.4 to the extent that the Tax liability arises as a result of a change in
legislation or case law or published practice of a Tax authority
announced after the Completion Date with retrospective effect;
13.3.5 to the extent that the Tax liability consists of penalties or interest
on Tax resulting from a failure by the Company or a Subsidiary to pay
Tax to a Tax authority promptly after the Vendors have satisfied such
liability to the Purchaser as it has in respect of that Tax under this
clause;
13.3.6 to the extent that the Tax liability would not have arisen or is
increased by the Purchaser, the Company or any of the Subsidiaries
failing to act in accordance with clauses 13.4, 13.5, 13.13 and 13.19
of this Agreement;
13.3.7 to the extent that the Tax liability would not have arisen but for a
change:
13.3.7.1 announced after Completion in applicable generally accepted
accounting practices or standards; or
13.3.7.2 a change after Completion which affects the way in which
statutory accounts of the Company or the Subsidiaries are
prepared, presented or compiled (except where such change is
necessary to ensure compliance with generally accepted accounting
principles as a result of non-compliance by the Company or the
Subsidiaries prior to Completion);
13.3.8 to the extent that the liability would not have arisen but for any
relief (other than a relief referred to in clause 13.1.4.1 or clause
13.1.4.3) or right to
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repayment of Tax (other than a right to repayment referred to in
clause 13.1.4.2) available to the Company or a Subsidiary at
Completion being utilised in respect of Tax resulting from any event
occurring or entered into after the Completion Date or resulting from
or calculated by reference to any income, profits or gains earned,
accrued or received deemed to have been earned, received or accrued
after the Completion Date;
13.3.9 which would not have arisen but for any voluntary act, transaction or
arrangement of the Purchaser or its employees or agents or any person
connected with the Purchaser at any time or of the Company or its
employees or agents or any person connected with the Company
(including the Subsidiaries assigns and successors in title) carried
out, or occurring after the Completion Date (other than an act,
transaction or arrangement (i) inside the ordinary course of business
or (ii) pursuant to an obligation entered on or before Completion) and
which the Purchaser knew or ought reasonably to have known would give
rise to the liability in question; or
13.3.10 to the extent that the Tax liability is, or can be, reduced, mitigated
or deferred by reliefs (other than a relief referred to in clause
13.1.4) available to the Company or the Subsidiaries at Completion
except for any reliefs which are taken into account in the Accounts in
computing (and so eliminating or reducing) any provision for deferred
Tax;
13.3.11 to the extent that the Tax liability arises as a result of the
surrender of the Options and has been a deduction used in calculating
the Consideration pursuant to Schedule 1C.
13.4 If the Purchaser shall become aware of any assessment, notice, demand or
other document issued or action taken by or on behalf of any person,
authority or body from which it appears that the Company or any of the
Subsidiaries has or may have a liability in respect of which a claim
could be made under this clause, it shall within 14 days give written
notice thereof to the Vendors and shall (if the Vendors shall indemnify
and secure the Purchaser and the Company and the Subsidiaries as
applicable to the Purchaser's reasonable satisfaction against any
liabilities, costs,
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damages or expenses which may be incurred thereby) (a) take such action
and procure that the Company and/or the relevant Subsidiary shall take
such action as the Vendors may reasonably request to dispute, resist or
compromise the liability; (b) ensure, at the request in writing of the
Vendors, that all reasonable steps are taken to place the Vendors in a
position to dispute any claim on behalf of the Company or a Subsidiary;
and (c) render, or cause to be rendered, to the Vendors, at the Vendors
expense, all reasonable assistance the Vendors may require in disputing
the claim;
13.5 If the Vendors take conduct of a claim for Tax under clause 13.4:
13.5.1 subject to the prior written approval of the Purchaser (not to be
unreasonably withheld or delayed), the Vendors are entitled, on behalf
of the Company or any of the Subsidiaries, to instruct solicitors or
other professional advisers, to act on behalf of the Company or any of
the Subsidiaries;
13.5.2 the Vendors shall ensure that no material correspondence, pleading or
other document in connection with the claim for Tax is sent,
transmitted, issued, entered into or in any way published by the
Vendors or its advisers without the prior written approval of the
Purchaser (not to be unreasonably withheld or delayed), and only after
incorporating all the Purchaser's reasonable comments;
13.5.3 the Vendors shall keep the Purchaser fully informed of all relevant
matters, dates and places of relevant meetings with the Tax authority
(which a representative of the Purchaser is entitled to attend) and
shall promptly forward, or procure to be forwarded, to the Purchaser
copies of relevant correspondence and other written communications and
notes of relevant telephone conversations; and
13.5.4 the Vendors shall make no settlement or admission of liability,
agreement or compromise of the subject matter of any claim for Tax,
and shall not agree any matter in the conduct of any claim for Tax
without the prior written approval of the Purchaser (not to be
unreasonably withheld or delayed).
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13.6 If any dispute arises between the Purchaser and the Vendors as to whether
the claim for Tax should be settled in full, or contested in whole or in
part, the dispute shall be referred to the determination of a senior tax
counsel, of at least ten years' standing (or his equivalent in any
foreign jurisdiction), appointed by agreement between the Purchaser and
the Vendors, or (if they do not agree) on the application by either party
to the president for the time being of the Law Society, whose
determination shall be final. The counsel shall be asked to advise
whether, in his opinion, contesting the claim for Tax has a reasonable
chance of success. The claim will only be contested if counsel advises
that it has a reasonable chance of success. The parties shall pay the
costs of the dispute in such proportions as counsel determines is fair
and reasonable.
13.7 The liability of the Vendors under this clause shall cease seven years
after the Completion Date except in respect of matters which have been
the subject of a written claim made within the said period by the
Purchaser to any of the Vendors or the Vendors' Solicitors unless the
claim in question has arisen by reason of fraudulent or negligent conduct
on the part of any of the Vendors or, prior to the Completion Date, on
the part of any member of the Group or on the part of any officer or
representative of any member of the Group in which event there shall be
no contractual limit on the time period within which such claim may be
brought. The liability of the Vendors under this clause 13 shall not
exceed the amount of the Consideration paid to the Vendors.
13.8 The due date for the making of payments under this clause 13 shall be the
later of the date five business days after the date on which the
Purchaser serves notice on the Vendors setting out details and the amount
of the claim and requesting payment and:
13.8.1 where the payment relates to a liability of the Company or any of the
Subsidiaries to make an actual payment of or in respect of Tax, the
date which is five business days before the date on which such actual
payment is due to be made to the relevant authority;
13.8.2 where the payment relates to a matter falling within clause 13.1.4.1,
the date five business days before the date on which Tax which would
otherwise have been saved comes due to the relevant authority;
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13.8.3 where the payment relates to a matter falling within clause 13.1.4.3,
the date five business days before the first date on which the Company
or the Subsidiary is due to make a payment of Tax which it would not
have had to make but for the loss, reduction or set off;
13.8.4 where the payment relates to a matter falling within clause 13.1.4.2
the date on which the repayment of Tax would otherwise have been due
to be made; and
13.8.5 in the case of costs and expenses within clause 13.2.4 the date which
is five business days before the date on which payment for such costs
and expenses is due to be made by the Purchaser, Company or Subsidiary
(as applicable).
13.9 If any payment due to be made by the Vendors under this clause is not
made on the due date for payment thereof the same shall carry interest
from such due date of payment until actual payment at the rate of 2 per
cent above the base rate from time to time of Barclays Bank PLC,
compounded on the last days of March, June, September and December in
each year provided that where a payment falls due in respect of a Tax
liability, the Purchaser shall not be entitled to interest under this
clause in respect of any period to the extent that the payment due from
the Vendors in respect of the Tax liability includes interest for late
payment of Tax for the same period.
13.10 If any sum payable by the Vendors under this clause 13 shall be subject
to Tax (whether by way of deduction or withholding or direct assessment
of the person entitled thereto) such payment shall be increased by such
an amount as shall ensure that after deduction, withholding or payment of
such Tax the recipient shall have received a net amount equal to the
payment otherwise required hereby to be made provided that this clause
shall not apply (a) if the payee is not the original party to this
agreement and the deduction, withholding or payment required to be made
arises solely by reason of the change in the identity of the payee or (b)
to interest under clause 13.9 (default interest).
13.11 The Purchaser shall use reasonable endeavours to obtain, and if the
Purchaser receives, a credit for or refund of any Tax payable by it by
reason of any deduction or
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withholding for or on account of Tax then, to the extent that the
Purchaser is satisfied (acting reasonably and in good faith) it can do so
without prejudice to the retention or any credit, refund or similar
benefit it receives, it shall reimburse to the Vendors such part of any
additional amounts paid by the Vendors under clause 13.10 as the
Purchaser certifies to the Vendors will leave it (after such
reimbursement) in no better and no worse position than it would have been
if the Vendors had not been required to make such deduction or
withholding.
13.12 If the Vendors have paid or are due to make payment to the Purchaser in
respect of a claim under this clause and the Company or a Subsidiary has
received a payment or obtained a credit or set-off from any person in
respect of the payment or has a right of reimbursement against any person
in respect of the Tax liability giving rise to the claim, the Purchaser
shall notify the Vendors in writing of such payment, credit, set off or
right of reimbursement.
13.13 In the case of a right to reimbursement under clause 13.12, the Purchaser
shall, if requested by the Vendors, take reasonable steps to procure that
the Company or the relevant Subsidiary enforces the right, provided that
the Vendors indemnify and secure the Purchaser, the Company and the
relevant Subsidiary (to the Purchaser's reasonable satisfaction) against
all liabilities, damages, costs and expenses which may be incurred by any
of them.
13.14 The "Relevant Amount" for the purposes of clause 13.17, arising under
clause 13.12 or 13.13, is the amount of any payment, credit or set-off
received or sum recovered by the Company under clause 13.12 or 13.13,
less an amount equal to all reasonable costs and expenses, incurred by
the Purchaser, the Company or Subsidiary in respect of or in consequence
of the payment, credit, set-off or reimbursement.
13.15 This clause will apply if the Vendors have paid an amount to the
Purchaser in respect of a claim under this clause and the Company's or
Subsidiaries' auditors certify (at the request and expense of the
Vendors) that the claim has given rise to a relief available to the
Company or a Subsidiary which would not have arisen but for the payment
by the Vendors ("Specified Saving").
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13.16 The "Relevant Amount" for the purposes of clause 13.17, arising under
clause 13.15, shall be the amount of the Specified Saving, less an amount
equal to all reasonable costs and expenses incurred by the Purchaser, the
Company or Subsidiary in respect of or in consequence of the Specified
Saving.
13.17 The Purchaser shall credit the Vendors for any Relevant Amount as follows:
13.17.1 first against any outstanding claim under this clause;
13.17.2 then, to the extent only of any balance, by reimbursement to the
Vendors of any sums paid by the Vendors in respect of a claim under
this clause, within ten business days of receipt by the Company of the
Relevant Amount; and
13.17.3 then, to the extent only of any balance, as a credit against any
future claims under this clause 13.
13.18 If the Company's or a Subsidiary's auditors certify (at the request and
expense of the Vendors) that a provision for Tax in the Accounts has
proved to be an over provision, then the amount of the over provision
shall be set off against any outstanding or future claims under this
clause 13.
13.19 To the extent that the Purchaser or its Associates suffer no adverse
financial consequences pursuant to the provisions of this clause, the
Purchaser shall use all reasonable endeavours to procure that the Company
and the Subsidiaries use all reliefs (other than a relief referred to in
clause 13.1.4) available to them and makes all elections, so as to reduce
or eliminate the liability of the Vendors under this clause.
14. Covenant from the Purchaser
---------------------------
14.1 The Purchaser shall pay to the Vendors an amount equal to any liability to
Tax of the Vendors arising pursuant to:
14.1.1 the provisions of section 189 or 191 TCGA by reason of the disposal by
the Company or a Subsidiary of any asset or of any interest in or
right over any
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asset or the Company or a Subsidiary ceasing to be resident in the
United Kingdom for any Tax purpose at any time after Completion;
14.1.2 the provisions of section 767A or 767AA Taxes Act but only in
circumstances where the Tax is directly or primarily attributable to
the Company or a Subsidiary and the Tax arises (i) in respect of
income, profits or gains earned accrued or received by the Company or
a Subsidiary in respect of any period after Completion or in the
ordinary course of business since the Accounts Date or (ii) as a
result of the failure by the Purchaser, the Company or a Subsidiary to
apply an amount paid by the Vendors to the Purchaser under this clause
to discharge a Tax liability to which the Tax relates or (iii) as a
result of the failure by the Purchaser, the Company or a Subsidiary to
apply an amount provided for in respect of such liability in the
Accounts; and
14.1.3 all reasonable costs and expenses properly incurred by the Vendors in
connection with the liability to Tax
14.2 The Purchaser shall pay any amounts due to the Vendors under this Clause
on the later of:
14.2.1 five business days before the last date on which the Tax could be paid
by the Vendors to the relevant authority in order to prevent a
liability to interest or a fine, charge, penalty or surcharge from
arising in respect thereof; and
14.2.2 five business days after the date on which the Vendors serve notice on
the Purchaser setting out details and the amount of the claim and
requesting payment.
14.3 The Vendors shall give all such assistance and provide such information
(at the cost of the Purchaser) as the Purchaser shall reasonably request
from time to time for the purpose of enabling the Purchaser or any member
of the Group to make returns and provide information as required to any
Tax authority and to negotiate any liability to Tax.
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15. Restriction on Announcements
----------------------------
Each of the Vendors and Mr. Bustin undertakes that he will not (save as required
by law or by any securities exchange or any supervisory or regulatory body to
whose rules any party to this Agreement is subject) make any announcement in
connection with this Agreement unless in the approved terms or the Purchaser
shall have given its consent to such announcement.
16. Access
------
As from the date of this Agreement, the Vendors shall give and shall procure
that the Purchaser and/or any persons authorised by it will be given such access
to the premises and all books, title deeds, records and accounts of the Company
and the Subsidiaries as the Purchaser may reasonably request and be permitted to
take copies of any such books, deeds, records and accounts and that the
Directors and employees of the Company and the Subsidiaries shall be instructed
to give promptly all such information and explanations to any such persons as
aforesaid as may be requested by it or them.
17. Confidentiality of Information
------------------------------
17.1 The parties undertake with each other that they shall treat as strictly
confidential all information received or obtained by them or their
employees, agents or advisers as a result of entering into or performing
this Agreement including information relating to the provisions of this
Agreement, the negotiations leading up to this Agreement, the subject
matter of this Agreement or, in the case of the Vendors or Mr. Bustin only,
the business or affairs of the Purchaser or any member of the Purchaser's
Group (post Completion) or the business and affairs of the Company (this
obligation shall not apply to the Purchaser post-Completion), and subject
to the provisions of clause 17.2 that they will not at any time hereafter
make use of or disclose or divulge to any person any such information and
shall use their best endeavours to prevent the publication or disclosure of
any such information.
17.2 The restrictions contained in clause 17.1 shall not apply so as to prevent
the parties from:
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17.2.1 making any disclosure required by law or by any securities exchange or
supervisory or regulatory or governmental body pursuant to rules to
which the relevant party is subject;
17.2.2 or making any disclosure to any professional adviser for the purposes
of obtaining advice or clearances or consents from a tax or
governmental authority (provided always that the provisions of this
clause 17 shall apply to, and the parties shall procure that, they
apply to and are observed in relation to, the use or disclosure by
such professional adviser of the information provided to him).
17.3 The restrictions contained in this clause 17 shall not apply in respect of
any information which was in the public domain before it was furnished to
the party or comes into the public domain otherwise than by a breach of
this clause 17 by any party.
18. Guarantee and Indemnity by Mr Bustin
------------------------------------
18.1 In consideration of the Purchaser entering into this Agreement Mr Bustin
hereby unconditionally and irrevocably guarantees to the Purchaser the due
and punctual performance and observance by M&TG of all its respective
obligations, commitments, undertakings, warranties, indemnities and
covenants under or pursuant to, and subject to the limitations contained
in, this Agreement and agrees to indemnify the Purchaser against all
losses, damages, costs and expenses (including legal costs and expenses)
which the Purchaser may suffer through or arising from any breach by M&TG
of such obligations, commitments, warranties, undertakings, indemnities or
covenants. The liability of Mr Bustin as aforesaid shall not be released
or diminished by any arrangements or alterations of terms (whether of this
Agreement or otherwise) or any forbearance, neglect or delay in seeking
performance of the obligations hereby imposed or any granting of time for
such performance.
18.2 If and whenever M&TG defaults for any reason whatsoever in the performance
of any obligation or liability undertaken or expressed to be undertaken by
it under or pursuant to this Agreement, Mr Bustin shall, subject to any
limitation applicable to
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M&TG pursuant to this Agreement, forthwith upon demand unconditionally
perform (or procure performance of) and satisfy (or procure the
satisfaction of) the obligation or liability in regard to which such
default has been made in the manner prescribed by this Agreement and so
that the same benefits shall be conferred on the Purchaser, the Company or
the Subsidiaries as it would have received if such obligation or liability
had been duly performed and satisfied by M&TG. Mr Bustin hereby waives any
rights which it may have to require the Purchaser to proceed first against
or claim payment from M&TG to the intent that as between the Purchaser and
Mr Bustin the latter shall be liable as principal debtor as if it had
entered into all undertakings, agreements and other obligations jointly and
severally with the other Vendors.
18.3 This guarantee and indemnity is to be a continuing security to the
Purchaser for all obligations, commitments, warranties, undertakings,
indemnities and covenants on the part of M&TG under or pursuant to this
Agreement notwithstanding any settlement of account or other matter or
thing whatsoever.
18.4 This guarantee and indemnity is in addition to and without prejudice to and
not in substitution for any rights or security which the Purchaser may now
or hereafter have or hold for the performance and observance of the
obligations, commitments, undertakings, covenants, indemnities and
warranties of M&TG under or in connection with this Agreement.
18.5 In the event of Mr Bustin having taken or taking any security from M&TG in
connection with this guarantee and indemnity, Mr Bustin hereby undertakes
to hold the same in trust for the Purchaser pending discharge in full of
all Mr Bustin's obligations under this Agreement. Mr Bustin shall not,
after any claim has been made pursuant to this clause 18, claim from M&TG
any sums which may be owing to him from M&TG or have the benefit of any
set-off or counter-claim or proof against or dividend, composition or
payment by M&TG until all sums owing to the Purchaser in respect hereof
shall have been paid in full.
18.6 As a separate and independent stipulation, Mr Bustin agrees that any
obligation expressed to be undertaken by M&TG under this Agreement
(including, without limitation, any moneys expressed to be payable under
this Agreement) which may not
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be enforceable against or recoverable from M&TG by reason of any legal
limitation, disability or incapacity of any of them or any other fact or
circumstance shall nevertheless be enforceable against or recoverable from
Mr Bustin as though the same had been incurred by Mr Bustin and Mr Bustin
were sole or principal obligor in respect thereof and shall be performed or
paid by Mr Bustin on demand.
19. Costs
-----
19.1 Each party to this Agreement shall pay its own costs of and incidental to
this Agreement and the sale and purchase hereby agreed to be made provided
that:
19.1.1 if the Purchaser shall lawfully exercise its right not to proceed with
the purchase of the Sale Shares pursuant to this Agreement, the Vendor
or Vendors whose breach has entitled the Purchaser to rescind this
Agreement shall, in proportion to their respective entitlements to the
Consideration, indemnify the Purchaser against all reasonable fees,
expenses and disbursements incurred by the Purchaser in the
preparation and negotiation of this Agreement and the Vendors shall
have no other liabilities to the Purchaser pursuant to this Agreement.
19.1.2 if the Vendors (or any one of them, and the exercise of the right by
one Vendor shall operate as the exercise of the right by all Vendors)
shall lawfully exercise their, his or its right not to proceed with
the sale of the Sale Shares pursuant to this Agreement, the Purchaser
shall indemnify the Vendors against all reasonable fees, expenses and
disbursements incurred by the Vendors in the preparation and
negotiation of this Agreement and the Purchaser shall have no other
liabilities to the Vendors pursuant to this Agreement.
19.2 The Vendors and Mr Bustin confirm that no expense of whatever nature
relating to the sale of the Sale Shares has been or is to be borne by any
member of the Group and agree that if any member of the Group in fact has
paid or pays such amount the Purchaser may in addition to obtaining such
amount from the Vendors or Mr. Bustin, obtain any such amount from the
Escrow Fund to cover any such payments in accordance with clause 9.2.
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20. General
-------
20.1 Save as expressly provided in clause 20.2 a person who is not a party to
this Agreement shall not have or acquire any right to enforce any term of
this Agreement (including but not limited to any right to enforce or have
the benefit of any exclusion or limitation of liability contained in this
Agreement). This clause shall override any other clause in this Agreement,
which is or may be inconsistent with it.
20.2 This Agreement shall be binding upon and enure for the benefit of the
estates, personal representatives or successors of the parties. No party
shall be entitled to assign the benefit of this Agreement save that the
Purchaser shall be entitled to assign the benefit of this Agreement in
whole or in part and without restriction.
20.3 This Agreement (together with any documents referred to herein or executed
contemporaneously by the parties in connection herewith) constitutes the
whole agreement between the parties hereto and supersedes any previous
agreements or arrangements between them (whether written or oral) relating
to the subject matter hereof; it is expressly declared that no variations
hereof shall be effective unless made in writing signed by duly authorised
representatives of the parties.
20.4 Each party waives its rights against the other in respect of warranties and
representations (whether written or oral) relating to the sale of the Sale
Shares not expressly set out or referred to in this Agreement, the
Registration Rights Agreement or the Escrow Agreement.
20.5 Unless and to the extent only expressly provided otherwise:
20.5.1 the Vendors give no promise, warranty, undertaking or representation
to the Purchaser;
20.5.2 to the extent allowable, all other warranties on the part of the
parties express or implied by law or otherwise are expressly excluded.
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20.6 Nothing in clauses 20.4 and 20.5 limit or exclude liability for fraud or
wilful misconduct, concealment or recklessness.
20.7 The Purchaser, Mr Bustin and the Vendors acknowledge that they have had
the benefit of legal advice on the effects of clauses 20.4, 20.5 and 20.6
and confirm that they consider such clauses to be reasonable in all the
circumstances of this Agreement.
20.8 All of the provisions of this Agreement shall remain in full force and
effect notwithstanding Completion (except insofar as they set out
obligations which have been fully performed at Completion).
20.9 If any provision or part of a provision of this Agreement shall be, or be
found by any authority or court of competent jurisdiction to be, invalid
or unenforceable, such invalidity or unenforceability shall not affect the
other provisions or parts of such provisions of this Agreement, all of
which shall remain in full force and effect.
20.10 If any liability of one or more but not all of the Vendors or Mr Bustin
shall be or become illegal, invalid or unenforceable in any respect, such
circumstance shall not affect or impair the liabilities of the other
Vendors under this Agreement.
20.11 Any right of rescission conferred upon a party hereby shall, subject to
clause 19.1 and to the remainder of this clause 20.11, be in addition to
and without prejudice to all other rights and remedies available to it
(and, without prejudice to the generality of the foregoing, shall not
extinguish any right to damages to which the Purchaser may be entitled in
respect of the breach of this Agreement) and no exercise or failure to
exercise such a right of rescission shall constitute a waiver by such
party of any such other right or remedy. No party shall have any right to
rescind this Agreement after Completion.
20.12 The Purchaser may release or compromise the liability of any of the Vendor
Mr Bustin hereunder or grant to any Vendor or Mr Bustin time or other
indulgence without affecting the liability of any other Vendor or Mr
Bustin (as the case may be) hereunder.
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20.13 No failure of the Purchaser to exercise, and no delay or forbearance in
exercising, any right or remedy in respect of any provision of this
Agreement shall operate as a waiver of such right or remedy.
20.14 Upon and after Completion the parties shall do and execute or procure to
be done and executed all such further acts, deeds, documents and things as
may be necessary to give effect to the terms of this Agreement and to
place control of the Company and the Subsidiaries in the hands of the
Purchaser and pending the doing of such acts, deeds, documents and things
the Vendors and Mr Bustin shall as from Completion hold the legal estate
in the Sale Shares in trust for the Purchaser.
20.15 This Agreement may be executed in one or more counterparts, and by the
parties on separate counterparts, but shall not be effective until each
party has executed at least one counterpart and each such counterpart
shall constitute an original of this Agreement but all the counterparts
shall together constitute one and the same instrument.
21. Notices
-------
21.1 Save as otherwise provided in this Agreement any notice, demand or other
communication to be served under this Agreement shall be in writing in the
English language and shall be served upon any party hereto only by posting
by first class post (if to an address in the same country) or air mail (if
to an address in a different country) or delivering the same by hand or by
courier, to its address given or referred to in this clause or sending the
same by facsimile transmission to the number given in this clause for the
addressee or at such other address or number as it may from time to time
notify in writing to the other parties hereto.
21.2 A notice, demand or other communication served by first class post shall
be deemed duly served on an address in the same country 48 hours
(disregarding days which are not business days) after posting, a notice,
demand or other communication served by air mail shall be deemed duly
served on an addressee in a different country five business days after
posting and a notice, demand or other communication sent by
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facsimile transmission shall be deemed to have been served at the time of
transmission (save that if the transmission occurs after 6.00 p.m. the
notice, demand or other communication shall be deemed to have been served
at 8.30 a.m. on the next business day following transmission) and in
proving service of the same it will be sufficient to prove, in the case of
a letter, that such letter was left at or delivered to the correct address
of the party to be served as provided in this Agreement or, in the case of
properly stamped or franked first class post or air mail, addressed to the
address of the party to be served given in this clause and placed in the
post and, in the case of facsimile transmission, that such facsimile was
duly transmitted to the number of the party to be served given in this
clause and an electronic acknowledgement was received.
21.3 All notices, demands or other communications given under this Agreement,
shall be given to the following addresses:
If to the Vendors' Representative
Berwin Leighton Paisner
Adelaide House
London Bridge
London EC4R 9HA
Fax Number: 020 7760 1111
Telephone Number: 020 7760 1000
For the attention of: Antony Grossman
If to the Purchaser: c/o Havelet Trust Company
(BVI) Limited
P.O. Box 3186
Road Town, Tortola
British Virgin Islands
For the attention of: General Counsel
Copy to:
(1) James Brown
OpenTV, Inc.
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401 East Middlefield Road
Mountain View,
California, USA 94043
Fax Number: +1 650 230 1206
Telephone Number: +1 650 424 5500
(2) Lawrence Kane
Orrick, Herrington & Sutcliffe LLP
Old Federal Reserve Bank Building
400 Sansome Street
San Francisco
CA 94111-3143
Fax Number: +1 415 773 5759
Telephone Number: +1 415 392 1122
If to Mr Bustin: c/o the Vendors' Representative
(as above)
21.4 For the purposes of this clause "business day" means a day (other than a
Saturday or a Sunday) on which banks are generally open for business in
London.
22. Governing Law and Submission to Jurisdiction
--------------------------------------------
This Agreement shall be governed by and construed in accordance with English
law. The parties submit to the non-exclusive jurisdiction of the English courts
for the purpose of enforcing any claim arising hereunder. The Purchaser hereby
appoints Baker & McKenzie of 100 New Bridge Street, London, EC4V 6JA to be its
agent for service of process in England. M&TG hereby appoints Mr Bustin to be
its agent for service of process in England. Should the agent for service
appointed pursuant to this clause, or should a party who has not appointed an
agent, leave England permanently, the appointor or party, as the case may be,
shall forthwith appoint another agent for service of process resident in
England, failing which its solicitors pursuant to this transaction shall become
such agent for service. Any change of
66
<PAGE>
the appointment of agent for service of process in England to any other such
agent resident in England may be made on notice to the other parties at any
time.
67
<PAGE>
SCHEDULE 1A
The Vendors
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
Name and Address Number of Cash Shares Escrow
of Vendor Sale Shares Component Component
(including Shares
Escrow
Shares)
<S> <C> <C> <C> <C>
Mr Jasper Smith 15,774,589 [TO BE COMPLETED PRIOR TO COMPLETION]
96 Oakley Street ordinary shares
London SW3 5NR * * *
England 3,183 "A"
ordinary shares
Mr Mark Rock 15,774,589
20 Berwyn Road ordinary shares
London SE24 9DB
England
Media & 11,771, 242
Technology Group ordinary shares
Limited
Tropic Isle
Building
PO Box 438
Road town
Tortola
British Virgin
Islands
</TABLE>
68
<PAGE>
SCHEDULE 1B
Non-Principal Shareholders and Optionholders
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
Name and Number Number of Options Cash Shares
Address of Vendor of Component Component
Company
Shares
<S> <C> <C> <C> <C>
James Beveridge 324,750 - [TO BE COMPLETED
Westwood PRIOR TO
Hedgerow COMPLETION]
Buckinghamshire * *
SL9 OHD
Howard Waterfall 955,148 19,102 Options (approved)
Flat 3 granted at (Pounds)0.157
50 Dorchester Road per share
London 159,191 Options
W2 6ET (approved) granted at
(Pounds)1.04 per share
Christian Fernandez 955,148 191,029 Options
Flat 10 (approved) granted at
24 Rathbone Street (Pounds)0.157 per share
London W1P 1NA 420,262 Options
(unapproved) granted at
(Pounds)0.157 per share
1,273,528 Options
(unapproved) granted at
(Pounds)1.04 per share
Noah Harris 716,361 19,102 Options (approved)
Flat 1 granted at (Pounds)0.157
6 King Edwards per share
Road
London Fields
London E9 7SF
Nicholas Briggs 716,361 19,102 Options (approved)
Unit 3 granted at (Pounds)0.157
6-12 Triangle Road per share
London E8 3RP
</TABLE>
69
<PAGE>
<TABLE>
<S> <C>
Wayne Thornill 477,600 Options
62A Clapham Common (unapproved) granted at
West Side (Pounds)0.157 per share
London SW4 9AV 159,200 Options
(unapproved) granted at
(Pounds)0.157 per share
Andrew Fearon - 608,144 Options
"Brooms" (unapproved) granted at
Langley Lower Green (Pounds)0.157 per share
Saffron Waldon
Essex
CB11 4JB
Sky New Media 5,969,677 -
Ventures Plc
Grant Way
Isleworth
Middlesex
TW7 5QD
HSBC Investment 2,654,058 -
Bank Plc
Thames Exchange
10 Queen Street
London
EC4R 1BL
Greenwood 4,807,692 -
Nominees Limited
(Account CNEAF)
</TABLE>
70
<PAGE>
<TABLE>
<CAPTION>
Name of Optionholders with Number of Sale Number of Cash
Approved Optionholders Shares Options Component
<S> <C> <C> <C>
Options granted at (Pounds)0.157
per share
D Park 57,308
T Swift 57,308
D Toll 57,308
N Scott 57,308
A McKechnie 57,308
S McCarthy 19,102
S Hollowell 114,617
S Lebreton 19,102
A Sandoz 19,102
A Wilcox 57,308
D McSweeney 318,381
N Garrigan 19,102
A Parker 19,102
A Welch 318,381
S Law 19,102
D Capstick 19,102
C Rose 19,102
N Wheeler 19,102
A Fox 19,102
C Cardwell 57,308
D Still 19,102
M Charras 19,102
C Biscoe 19,102
D Synnott 19,102
A Park 19,102
Jeff Zie 120,985
David Bishop 57,308
Phillippe Fau 57,308
Laurence Pasinisi 9,551
Lisa Howell 9,551
Options granted at
(Pounds)0.157per share
57,308
Eric Zie
19,102
Caroline Rominelli
57,308
Russell Haskins
114,617
Peter Lilley
31,828
Mark Fone
</TABLE>
71
<PAGE>
<TABLE>
<CAPTION>
Name of Number of Options
Approved (Approved Options
Optionholders granted at (Pounds)1.04 per
per share)
<S> <C>
Eric Zie 57,308
Caroline Rominelli 19,102
Russell Haskins 57,308
Peter Lilley 114,617
Mark Fone 31,828
</TABLE>
72
<PAGE>
SCHEDULE 1C
Pro Forma example of the Total Consideration
Calculation of the Consideration
Introduction
------------
(a) The cross-references (annotated (#)) in this Schedule are to the figures on
pages 76A and 76B of this Agreement. The references annotated * are the
variables referred to in clause 3.4.1 of the Agreement which are to be
reflected in the Adjusted Spreadsheet to be prepared pursuant to that
clause immediately prior to Completion.
(b) For the purposes of this calculation each New OpenTV share has a value of
US$15 and shall be converted into (Pounds)sterling at a rate of US$1.438:
(Pounds)1.
Consideration
-------------
The Total Consideration shall be calculated as follows:
1. The (Pounds)Sterling amount equal to employer's NIC payable by the Company
in relation to the surrender of all the Unapproved Options and 20% of the
Approved Options under the Option Surrender Agreements (#1*) (and
calculated in accordance with footnote 1) shall be deducted from the sum
equal to the aggregate of (Pounds)12,000,000 and the value of 3,451,200 New
OpenTV Shares in (Pounds)Sterling; the resulting sum being the "Gross
Consideration" (#2).
2. The Gross Consideration will be divided in the ratio 3:1 between a "Gross
Share Component" (#28) and a "Gross Cash Component" (#27) respectively or
in such ratio as is applied through the Purchaser exercising their right
under clause 3.3 of the Agreement (*).
3. The Gross Cash Component then has an amount equal to the sum of the
following (Pounds) sterling amounts deducted from it:
73
<PAGE>
(i) the monies owing by the Group to the Purchaser under the Interim
Bridge Loan (#3*) (such sum to be adjusted in accordance with
footnote 2);
(ii) the amount of the HSBC Loans at their maturity value, being
(Pounds)3,650,000 (#4);
(iii) the amount of the HSBC fee and expenses being (Pounds)1,047,983.34
(#5);
the resulting sum then has added back to it (subject to clause 5.4) an
amount equal to the sum of all cash at bank and in hand in the Group as
recorded in the Company's books of account as at 10 pm on the date
immediately proceeding Completion (#6*) together with a sum equal to the
exercise price that would be payable under the Option Schemes by the
holders of Approved Options over 20% of those options and by the holders of
Unapproved Options over all their options (#7);
the resulting figure being the "Net Cash Component" (#8).
4. The Gross Share Component then (i) has deducted from it the value of 94,550
New OpenTV Shares calculated at (Pounds)10.43 per share over which options
will be granted to existing Static Optionholders (#9), and (ii) the sum
equal to the excess of that figure over the value of 80% of the Approved
Options added to it (#10) (calculated in accordance with footnote 5);
the resulting figure being the "Net Share Component" (#11).
5. There shall then be calculated the amount payable to Approved Optionholders
(#12) and Unapproved Optionholders (#14) calculated on the basis of
footnotes 3 and 4.
6. An amount equal to (i) the liability of all the Optionholders to NIC* and
under PAYE* at the lesser of (a) market value as determined by the closing
price of OpenTV Shares on the NASDAQ National Market on the day prior to
Completion converted into (Pounds) sterling on that day and (b)
(Pounds)17.38 per OpenTV share as a result of the amounts payable to
Approved Optionholders and Unapproved Optionholders in accordance with the
proceeding paragraph (#13) together with (ii) an amount equal to
74
<PAGE>
the cash cancellation payment under the Option Surrender Agreements to the
holders of Approved Options (calculated in accordance with paragraph 5)
(#12) is then deducted from the Net Cash Component.
7. An amount equal to the exercise price that would be payable under the
Option Schemes by the holders of Approved Options over 20% of those options
and by the holders of Unapproved Options over all their options (#18) is
deducted from the Net Cash Component.
8. An amount equal to the value of the cancellation payments payable in shares
under the Option Surrender Agreements to the holders of Unapproved Options
is then deducted from the Net Share Component (calculated in accordance
with paragraph 5) (#14).
9. An amount equal to the cash cancellation payment under the Option Surrender
Agreements to the holders of Approved Options is added back (#15) to the
Net Cash Component and deducted from the Net Share Component, the resulting
sums being respectively the total cash component (#17) and the total share
component (#16).
10. The Vendors shall be entitled to the percentage of the total share
component and the total cash component in the proportions set out against
their names in the Excel spreadsheet, the aggregate of which is the
"Vendors' Total Share and Cash Component" (#19). There shall then be
deducted from the share component which otherwise would be payable to the
Vendors a sum equal to 25% of the value of the Vendors' Total Share and
Cash Component (which deduction constitutes "Z" for the purposes of the
earn-out calculation in Schedule 8) (#20), the aggregate of the Vendors'
net entitlement being the "Share Component" (#21) and the "Cash Component"
(#22) payable in respect of the Sale Shares on Completion, as defined under
this Agreement. The balance of the total share component (#23) and of the
total cash component (#24) shall be payable to the vendors under the Non-
Principal Share Purchase Agreement each of whom shall be entitled to the
percentage of the total share component and the total cash component in the
proportions set out against their names in the Excel spreadsheet. For the
avoidance of doubt, the cash and New OpenTV Share amounts payable to the
Optionholders under the Option Surrender Agreements are in the proportions
set out in the Excel spreadsheet) (#25 and #26).
75
<PAGE>
--------------------------------------------------------------------------------
Footnotes:
---------
1. The Company's liability for NIC will be calculated on the basis of the market
value of OpenTV Shares as quoted on NASDAQ at close of trading on the day prior
to Completion (converted into (Pounds)sterling at the exchange rate quoted by
Barclays Bank plc on that day) and calculated at the rate of 11.9%.
2. The amount recorded in the Company's books of record due to the Purchaser
under the Interim Bridge Loan will be the principal and accrued interest sums up
to close of business on the day prior to Completion less any amount drawn down
for the purposes of the Group's operational costs (not to exceed
(Pounds)560,000) in respect of the period after the date on which the Vendors
demonstrate their ability to satisfy clauses 4.1.5, 4.1.6, 4.1.8, 4.1.10, 4.1.12
and 6.2.1.15 of the Agreement such amount accruing proportionally during the
period between the date of this Agreement and Completion.
3. The value of the cash cancellation payments to Approved Optionholders is
calculated on the basis that 20% of the Approved Options have vested and are
exercisable i.e. the value attached to the fully diluted share capital of the
Company less the exercise price in respect of each Option less PAYE/NIC as paid
on their behalf by the Company.
4. The value of the Open TV share cancellation payments to Unapproved
Optionholders is calculated on the basis that 100% of the Unapproved Options
have vested and would be exercisable i.e. the value attached to the fully
diluted share capital of the Company less the exercise price in respect of each
Option less PAYE/NIC as paid on their behalf by the Company on the basis of a
(Pounds)17.38 per OpenTV Share price (or if less, the closing price of an OpenTV
Share on the NASDAQ National Market on the day prior to Completion converted
into (Pounds) sterling on that day).
5. The value of 80% of the Approved Options is calculated as if 80% of the
Approved Options had vested and had been exercisable i.e. the value attached to
the fully diluted share capital of the Company less the exercise price in
respect of each option.
76
<PAGE>
[Page 76 A, forming a portion of Schedule 1C, has been omitted pursuant to
Section 601(b)(2) of Regulation S-K and will be provided to the Securities and
Exchange Commission upon request.]
<PAGE>
[Page 76 B, forming a portion of Schedule 1C, has been omitted pursuant to
Section 601(b)(2) of Regulation S-K and will be provided to the Securities and
Exchange Commission upon request.]
<PAGE>
SCHEDULE 2
Details of the Company
THE COMPANY
-----------
1. Registered number: 03982630
2. Address of registered office: Static 2358 Holdings Limited
5 Old Street
London
EC1V 9HL
3. Date and place of incorporation: 28/04/2000 England and Wales
4. Authorised share capital: (Pounds)15,000,000
120,600,000 Ordinary Shares of 10p each
6,000,000 A Ordinary Shares of 10p each;
and
2,340,000 B Shares at (Pounds)1 each.
5. Issued share capital: 60,419,594 Ordinary Shares
3,183 A Ordinary Shares
6. First Series Zero Coupon
Convertible Unsecured Loan
Notes 2001: 2,450,000 (issued on 26 May 2000) in the
name of HSBC Investment Bank Plc
Second Series Zero Coupon
Convertible Unsecured Loan
Notes 2002: 1,200,000 (issued on 24 October 2000) in
the name of HSBC Investment Bank Plc
77
<PAGE>
7. Directors: Paul Bustin
Jasper Smith
Wayne Thornhill
8. Secretary: Andrew Fearon
9. Accounting Reference Date: 31 December
10. Auditors: Ernst & Young.
78
<PAGE>
SCHEDULE 3
The Subsidiaries
Name of Subsidiary: Static 2358 Limited
Registered Number: 03364451
Date and place of Incorporation: 28/04/1997 - England and Wales
Address of Registered Office: Static 2358 Limited
The Ground Floor, 5 Old Street
London
EC1V 9HL
Directors: Paul Bustin
Andrew Fearon
Mark Rock
Jasper Smith
Wayne Thornhill
Secretary: Andrew Fearon
Auditors: Ernst & Young
Accounting Reference Date: 30 June
Authorised Share Capital: 200,000 Ordinary Shares of 10p each
25,000 A Ordinary Shares of 10p each
Issued Share Capital: 174,670 Ordinary Shares of 10p each and 11 A Ordinary
Shares of 10p each
Registered Shareholders & identity of beneficial owners: The Company
79
<PAGE>
Company number: B430 085 191
Registered name: STATIC 2358 FRANCE SARL
Registered address: 48 rue Montmartre, 75002, Paris
Date of incorporation: 28 March 2000
Former name(s) (if any):
Date of name changes (if any):
Authorised share capital: 7,652,694 Euros
Shareholders: (1) STATIC 2358 Limited
(2) Andrew Fearon
Directors and Co. Sec: Jasper Smith
Wayne Thornhill
Andrew Fearon
Philippe Fau
Auditors: Ernst & Young
80
<PAGE>
Company number: 001432106
Registered name: STATIC 2358 (US) Inc
Former name(s) (if any): Static 2358 (US) Ltd Inc
Date of name changes (if any): 25 August 2000
Date of incorporation: 10 July 2000
Registered Office: 615 South Dupont Highway, City of Dover,
County of Kent, State of Delaware, 19901
Executive Office: 30 West 21/st/ Street, 5/th/ Floor, New York,
10020
Authorised share capital: 1,000 shares of common stock of the par value
of US$0.01 each
100 shares allocated
Shareholders: Static 2358 Limited
Directors and Co. Sec: Jasper Smith (Chairman, president CEO)
Wayne Thornhill (CFO and treasurer)
Andrew Fearon (General Counsel and Secretary)
Howard Waterfall (Chief Technology Officer)
Fiscal year: ends 31/st/ December
Auditors: Ernst & Young
81
<PAGE>
SCHEDULE 4
The Properties
Leasehold Properties
----------------------
Description Part First Floor (Block B)
of property: 5-23 Old Street, London EC1
Date and Term 31 January 2000
of Lease: Term of ten years commencing on and including 31 January
2000
Landlord: Derwent Valley Property Developments Limited
Tenant: Static 2358 Limited
Surety: n/a
Annual Rental: (Pounds)31,800
By way of further rent:
- Insurance Rent (a due and proper proportion of the
costs incurred by the Landlord in respect of insurance)
- Service Charge Rent
- Additional Rent (interest on all other sums whatever
payable by the Tenant to the Landlord under the
provisions of this Lease)
- VAT Rent (all VAT payable in respect of any sum
payable under this Lease)
Next Rent Review: 29 September 2004
82
<PAGE>
Present Use: Offices (within class B1 of the Schedule to the Town and
Country Planning (Use Classes) Order 1987
NOTE: This Lease is an underlease and is subservient to a superior lease dated
15 November 1956 between ARS Nutting and others (1) and Morelands
Buildings Limited (2) as varied by a Deed dated 21 September 1987 made
between The Wardens and Commonality of the Ministry of Fishmongers of the
City of London (1) Alpha Gamma Limited (2) and a Deed of Variation and
Licence for Alterations dated 16 February 1998 made between the said
Wardens (1) the Landlord (2) under which the Landlord holds the Estate.
Rent Deposit Deed
-----------------
Date: 31 January 2000
Initial Deposit: (Pounds)7,950 plus (Pounds)1,391.25 VAT
83
<PAGE>
Leasehold Properties
--------------------
Description First Floor (part), Block C,
of property: 5-23 Old Street, London EC1
Date and Term 31 January 2000
of Lease: Commencing on and including 12 May 1999 and expiring on
28 September 2009
Landlord: Derwent Valley Property Developments Limited
Tenant: Static 2358 Limited
Surety: n/a
Annual Rental: (Pounds)29,250
By way of additional rent:
- Insurance Rent (a due and proper proportion of the costs
incurred by the Landlord in respect of insurance)
- Service Charge Rent
- Additional Rent (interest on all other sums whatever
payable by the Tenant to the Landlord under the provisions
of this Lease)
- VAT Rent (all VAT payable in respect of any sum payable
under this Lease)
Next Rent Review: 29 September 2004
Present Use: Offices (within class B1 of the Schedule to the Town and
Country Planning (Use Classes) Order 1987
84
<PAGE>
NOTE: This Lease is an underlease and is subservient to a superior lease dated
15 November 1956 between ARS Nutting and others (1) and Morelands
Buildings Limited (2) as varied by a Deed dated 21 September 1987 made
between The Wardens and Commonality of the Ministry of Fishmongers of the
City of London (1) Alpha Gamma Limited (2) and a Deed of Variation and
Licence for Alterations dated 16 February 1998 made between the said
Wardens (1) the Landlord (2) under which the Landlord holds the Estate.
Rent Deposit Deed
-----------------
Date: 31 January 2000
Initial Deposit: (Pounds)7,312.50 plus (Pounds)1,279.69 VAT
85
<PAGE>
Leasehold Properties
--------------------
Description Part Ground Floor (Block B)
of property: 5-23 Old Street, London EC1
Date and Term 31 January 2000
of Lease: Term of ten years commencing on and including 29
September 1999
Landlord: Derwent Valley Property Developments Limited
Tenant: Static 2358 Limited
Surety: n/a
Annual Rental: A yearly rent: -
- from and including the date of this Lease (31 January
2000) until the day before the Rent Commencement Date
(26 February 2000) of one peppercorn (if demanded), and
then
- from the Rent Commencement date until the Review Date
(25/3/2003) of (Pounds)17,625; and then
- for the remainder of the Term the revised yearly rent
ascertained in accordance with the provisions of the
Fourth Schedule
By way of additional rent:
Insurance Rent (due and proper proportion of the costs
incurred by the Landlord in respect of insurance)
Service Charge Rent
Additional Rent (interest on all other sums whatever
payable by the Tenant to the Landlord under the
provisions of this Lease)
VAT Rent (all VAT payable in respect of any sum payable
under this Lease)
86
<PAGE>
Next Rent Review: 25 March 2003 (thereafter 25 March 2007)
Present Use: Offices (within class B1 of the Schedule to the Town and
Country Planning (Use Classes) Order 1987
NOTE: This Lease is an underlease and is subservient to a superior lease dated
15 November 1956 between ARS Nutting and others (1) and Morelands
Buildings Limited (2) as varied by a Deed dated 21 September 1987 made
between The Wardens and Commonality of the Ministry of Fishmongers of the
City of London (1) Alpha Gamma Limited (2) and a Deed of Variation and
Licence for Alterations dated 16 February 1998 made between the said
Wardens (1) the Landlord (2) under which the Landlord holds the Estate.
Rent Deposit Deed
-----------------
Date: 31 January 2000
Initial Deposit: (Pounds)4,406.25 plus (Pounds)771.09 VAT
87
<PAGE>
Leasehold Properties
--------------------
Description First Floor (part) Block D
of property: 5-23 Old Street, London EC1
Date and Term 7 June 2000
of Lease: Commencing on and including 7 June 2000 and
expiring on 28 September 2009
Landlord: Derwent Valley Property Developments
Limited
Tenant: Static 2358 Limited
Surety: n/a
Annual Rental: (Pounds)47,700
By way of further rent:
- Insurance Rent (due and proper proportion
of the costs incurred by the Landlord in
respect of insurance)
- Service Charge Rent
- Additional Rent (interest on all other
sums whatever payable by the Tenant to the
Landlord under the provisions of this
Lease)
- VAT Rent (all VAT payable in respect of
any sum payable under this Lease)
Next Rent Review: 29 September 2004
Present Use: Offices (within class B1 of the Schedule
to the Town and Country Planning (Use
Classes) Order 1987
NOTE: This Lease is an underlease and is subservient to a superior lease dated
15 November 1956 between ARS Nutting and others (1) and Morelands
88
<PAGE>
Buildings Limited (2) as varied by a Deed dated 21 September 1987 made
between The Wardens and Commonality of the Ministry of Fishmongers of the
City of London (1) Alpha Gamma Limited (2) and a Deed of Variation and
Licence for Alterations dated 16 February 1998 made between the said
Wardens (1) the Landlord (2) under which the Landlord holds the Estate.
89
<PAGE>
Leasehold Properties
--------------------
Description 48 rue Montmartre - 75002 Paris, France
of property:
Date and Term 4 May 2000
of Lease: Term from 22 May 2000 until 21 May 2009, for a duration of
3, 6 or 9 full and consecutive years, at the Tenant's choice
Landlord: Le Fonciere Vendome
Tenant: Static 2358 France
Surety: n/a
Annual Rental: 243,600.00 Francs excluding charges and excluding taxes (VAT
at present rate of 19.6%). There is an annual rate of index
variation
Next Rent Review: Rent is adjusted upward and downward at the end of each year
pursuant to the National Construction Cost Index.
Present Use: Offices
90
<PAGE>
Leasehold Properties
--------------------
Description Northwest Corner Office of 30 West 21/st/ Street,
of property: New York, USA
Date and Term 25 April 2000
of Lease: 6 months beginning 1 May 2000, ending 31 October 2000. The
lease remains in full force and effect but on a monthly
basis
Overtenant: Pratt Logic Incorporated
Undertenant: Static 2358 Limited
Surety: None
Half yearly Rental: $7,800
Use: Non-specified
91
<PAGE>
SCHEDULE 5
Warranties
In this Schedule unless the context otherwise indicates each of the Warranties
shall be deemed to be repeated mutatis mutandis in relation to each of the
Subsidiaries.
1. The Accounts
1.1 The Accounts have been prepared in accordance with the requirements of all
relevant statutes and Statements of Standard Accounting Practice (SSAPs)
and Financial Reporting Standards (FRSs) and with good and generally
accepted UK accountancy principles and practice consistently applied, show
a true and fair view of the state of affairs of the Company and of its
results and profits for the financial period ending on the Accounting Date,
and disclose and make proper provision or reserve for all liabilities
(whether actual or contingent and whether quantified or disputed or
otherwise).
1.2 All of the Company's book debts, whether shown in the Accounts or arising
since the Accounting Date, are valid and enforceable, and have realised or
will in aggregate realise the nominal amount thereof and will be
collectible in full within 90 days of the Completion Date.
2. Management Accounts
The Management Accounts have been prepared in accordance with the accounting
policies of the Company which are set out in the Disclosure Letter and on a
consistent basis with the monthly management accounts of the Company and show a
fair view of the assets and liabilities and profits and losses of the Company as
at and to the date of the relevant Management Accounts.
92
<PAGE>
3. Tax, Records and Returns
3.1 The Company has duly filed all returns, computations, notices and
information required to be made or provided by the Company for any Tax
purpose and the same have been made or given within the requisite periods
and on a proper basis and when made were true and accurate in all material
respects and are up to date and none of them is or so far as the Vendors
are aware, is likely to be the subject of any dispute with any Tax
authority.
3.2 The Company has paid, and has withheld, deducted and accounted to the
relevant Tax authorities for, all Tax which it has become liable to pay,
withhold, deduct or account for on or before the date hereof and within the
period of seven years prior to the date hereof neither the Company nor any
director or officer of the Company has paid or become liable to pay any
fine, penalty, surcharge or interest in relation to Tax.
3.3 Save as provided for in the Accounts there is no existing contingent or
deferred liability for Tax including liability for Tax which would arise on
the Company ceasing to trade or on its ceasing to use or occupy any asset
for the purposes of its trade or on its disposing of any asset at its book
value as shown in the Accounts or which might arise as a result of the
execution of this Agreement or Completion or by reason of the Company
otherwise ceasing to be a member of a group of companies (but excluding any
liability for Tax 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 Accounts have occurred since the Accounting Date which might
result in any such liability.
3.4 The Company is not and has never been a member of a group of companies for
Tax purposes other than the Group.
3.5 No act or transaction has been effected by the Company, the Vendors or any
other person (including the sale of the Sale Shares), in consequence of
which the Company is or may be held liable for Tax primarily chargeable
against some other person.
93
<PAGE>
3.6 Save to the extent disclosed in the Accounts, the Company has not made any
distribution for Tax purposes within the last six years.
3.7 The Company has not entered into or been engaged in or been a party to any
transaction or series of transactions or scheme or arrangement of which
the main purpose or one of the main purposes was the avoidance of Tax.
3.8 The Company has not entered into any transaction or arrangement in respect
of which the provisions of Section 770 or Section 770A of the Taxes Act
have been or could be applied.
3.9 The Company is registered for value added tax purposes, has complied fully
with all statutory requirements, orders, provisions, directions or
conditions relating to value added tax, maintains and has at all times
maintained complete correct and up to date records for the purposes of
such legislation and has preserved such records in such form and for such
periods as are required by the relevant legislation relating to value
added tax.
3.10 The Company is and has always been resident in the jurisdiction in which
it is incorporated and has never been resident for Tax purposes in any
other jurisdiction.
3.11 The Company carries on activities which are a trade for the purposes of
Tax and has not ceased and will not as a result of any agreement entered
into on or before Completion cease to carry on such activities. The
Company has never carried on a trade for Tax purposes other than the
trade, which the Company will be carrying on at Completion.
3.12 The Company has sufficient records to compute its capital allowance
position going forward.
3.13 Other than the shares in the Subsidiaries the Company does not hold
directly or indirectly any interest in a company which if it were subject
to a lower level of taxation in the territory in which it is resident
would be a controlled foreign company within Section 747 of the Taxes Act.
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3.14 The Company is not and has not at any time within the preceding period of
six years been liable to Tax in any jurisdiction other than that in which
it is incorporated.
3.15 All documents to which the Company is a party or which form part of the
Company's title to any asset or in the enforcement of which the Company is
or may be interested which are subject to stamp or similar duty have been
duly stamped.
3.16 The Company has not within the preceding period of six years made exempt
supplies of such amount that as a consequence thereof the Company has been
unable to obtain credit for any input tax paid or suffered by it.
3.17 The Disclosure Letter contains full particulars of all land in which the
Company has an interest and in relation to which an election has been made
to waive exemption from value added tax.
3.18 The Company has properly operated the payroll withholding, national
insurance contribution and social security systems by making such
deductions as are required by law from all payments made or deemed to be
or treated as made by it or on its behalf or for which it is otherwise
required to account and by duly accounting to the relevant Tax authority
for all sums so deducted and for all other amounts for which it is
required to account under those systems.
4. Corporate Matters
4.1 The Company has been duly incorporated and is validly existing and no
order has been made or petition presented or resolution passed for the
winding up of the Company or for an administration order in respect of the
Company and no distress, execution or other process has been levied on any
of its assets. The Company is not insolvent or unable to pay its debts for
the purposes of Section 123 of the Insolvency Act 1986 or equivalent
foreign legislation and no administrative receiver or receiver or receiver
and manager has been appointed by any person of its business or assets or
any part thereof and no power to make any such appointment has arisen.
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4.2 The Vendors are the beneficial owners of the Sale Shares set opposite
their names in column (2) of Schedule 1A, free and clear of any lien,
charge, option, right of pre-emption or other encumbrance or third party
right whatsoever. The Company Shares that are being sold to the Purchaser
hereunder and under the Non-Principal Share Purchase Agreement, when
issued, sold and delivered in accordance with the terms hereof or thereof
for the consideration expressed herein or therein, will be duly and
validly issued, fully paid and free of restrictions on transfer, and will
be sold in compliance with all applicable securities laws.
4.3 The information set out in Schedule 1A, columns (1) and (2) and Schedule
and 1B, columns (1), (2) and (3) is true, complete and accurate.
4.4 The Company has no, and never has had any, subsidiary or subsidiary
undertaking or any shares or participating interest in any company other
than the Subsidiaries. The Subsidiaries are entirely owned by the Company
(directly or indirectly) and no person has a right to acquire any shares
or securities in or over the Subsidiaries.
4.5 The Company has never reduced, repaid, redeemed or purchased any of its
share capital or agreed to do any of the same.
4.6 There are no options or other agreements outstanding which call for the
issue of or accord to any person the right to call for the issue of any
shares in the capital of the Company or loan capital or other securities
of the Company or the right to require the creation of any mortgage,
charge, pledge, lien or other security or encumbrance over the Company
Shares or any of the assets of the Company other than as set out in
Schedule 1A column (2) and Schedule 1B, columns (2) or (3).
4.7 The copies of the Memorandum and Articles of Association of the Company,
which are set out in the Disclosure Bundle, are accurate and complete in
all respects and have attached to them copies of all resolutions and
agreements, which are required to be so attached. The Company has complied
with its Memorandum and Articles of Association in all respects and none
of the activities, agreements, commitments or rights of the Company is
ultra vires or unauthorised.
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4.8 The Register of Members and all other statutory books of the Company are
up to date and contain true full and accurate records of all matters
required to be dealt with therein and the Company has not received any
notice of any application or intended application under the Companies Acts
or equivalent foreign legislation for rectification of the Company's
register and all legal requirements relating to the issue of shares and
other securities by the Company have been complied with. All Company
Shares and Options have been issued in compliance with all applicable
laws.
5. Trading and General Commercial Matters
5.1 The Company has good and marketable title to (with full power to sell) all
such assets as are necessary to enable it properly to conduct its business
as such business has been conducted prior to the date hereof. All such
assets are free from any liens, mortgages, charges, encumbrances, hire or
hire purchase or similar agreements or other third party rights and are in
the possession or under the control of the Company.
5.2 The Company is not a party to:
5.2.1 any contract not entered into in the ordinary course of business or
not on arm's length terms, nor any contract which cannot be terminated
without penalty or other compensation on less than twelve months'
notice;
5.2.2 any contract restricting the Company's freedom of action in relation
to its normal business activities;
5.2.3 any contract for the purchase or use by the Company of materials,
supplies or equipment which is in excess of the requirements of the
Company for its normal operating purposes or requires expenditure in
excess of (Pounds)50,000;
5.2.4 any material agency agreement and any distribution, marketing,
franchising, licensing (whether by or to the Company), joint venture,
shareholders' or partnership arrangement or agreement;
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5.2.5 any contract for the supply of goods or services requiring payments in
excess of (Pounds)50,000 that has not been entered into on the
Company's standard terms and conditions of sale, a copy of which is
attached to the Disclosure Letter.
5.3 The Disclosure Bundle contains true and complete copies of all contracts
material to the Business to which the Company is a party.
5.4 There are no contracts or obligations, agreements, arrangements or
concerted practices involving the Company and no practices in which the
Company is engaged which are void, illegal, unenforceable, registrable or
notifiable under or which contravene any anti-trust legislation or
regulations anywhere in the world, nor has the Company received any threat
or complaint or request for information or investigation in relation to or
connection with any such legislation or regulations. This Warranty shall
apply with the qualification "so far as the Vendors are aware" except in
relation to any contract between the Company and BSB and any contract to
which paragraph 5.3 above applies.
5.5 With respect to each contract, commitment, arrangement, understanding,
tender and bid involving the Company:
5.5.1 the Company has duly performed and complied in all material respects
with each of its obligations thereunder;
5.5.2 the Company is under no obligation, which cannot readily be fulfilled,
performed or discharged by it on time and without undue or unusual
expenditure or effort or loss;
5.5.3 there are no grounds for rescission, avoidance, repudiation or
termination and the Company has not received any notice of
termination; and
5.5.4 none of the other parties thereto is in default thereunder. This sub-
paragraph 5.5.4 shall apply or with the qualification "so far as the
Vendors are aware", except in relation to any contract between the
Company and BSB and any contract to which paragraph 5.3 above applies.
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5.6 No person has given any guarantee of or security for any liability of the
Company, nor has the Company given any guarantee of the liability of any
other person.
5.7 The execution, delivery and performance of this Agreement will not result
in the breach, cancellation or termination of any of the terms or
conditions of or constitute a default under any agreement, commitment or
other instrument affecting the Company or its property or assets may be
bound or affected or result in the acceleration of any obligation under
any loan agreement or the loss of the benefit of or liability to refund or
repay any financial concession or violate any law or any rule or
regulation of any administrative agency or governmental body or any order,
writ, injunction or decree of any court, administrative agency or
governmental body affecting the Company.
5.8 The Vendors are not aware of any circumstances whereby, following a change
in the control of the Company or in the composition of the Board of
Directors of the Company, any of the principal customers of or suppliers
to the Company would have the right to, or would, cease to remain
customers or suppliers to the same extent and of the same nature as prior
to the date hereof.
5.9 The Company has no liabilities except liabilities arising in the ordinary
course of business under contracts for service, purchase orders, supply
contracts or sale contracts, nor does it have any other liabilities direct
or indirect, absolute or contingent, not required by generally accepted
accounting principles to be referred to in the Accounts, including, but
not limited to, off-balance sheet financing arrangements.
5.10 The Company is not the subject of any official investigation or inquiry
and none of the Vendors is aware of any facts, which are likely to give
rise to any such investigation or inquiry.
5.11 So far as the Vendors are aware, the Company has complied with the
requirements or conditions of all statutes, treaties, regulations, bye-
laws, codes, orders and other obligations of whatsoever nature relating to
the Company and the carrying on of its business and has obtained and
complied with all registrations, licences and consents
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necessary or advisable for the carrying on of its business, and all such
registrations, licences and consents are valid and subsisting and none of
the Vendors has received notice that any of them is likely to be
suspended, cancelled or revoked (whether as a result of the sale and
purchase of the Sale Shares pursuant to this Agreement or otherwise). So
far as the Vendors are aware, neither the Company, nor any of its
directors, employees or agents in relation to the Company, has committed
any criminal offence or any tort or any breach of any such statute,
treaty, regulation, by-law or other obligation.
5.12 The Disclosure Letter sets out full and accurate details of each bank and
similar account of the Company.
5.13 No act or transaction has been effected by or on behalf of the Company
involving the making or authorising of any payment, or the giving of
anything of value, to any government official, political party, party
official or candidate for political office for the purpose of influencing
the recipient in his or its official capacity in order to obtain business,
retain business or direct business to the Company or any other person or
firm.
5.14 There is no transaction to which the Company is or has been a party which
may give rise to a claim for setting aside under the Companies Act 1985 or
the Insolvency Act 1986 or equivalent foreign legislation otherwise
howsoever.
6. The Properties
6.1 The Properties comprise all the land and premises owned or occupied or
otherwise used by the Company. Complete copies of the leases for the
Properties which have been validly granted and are all valid and
subsisting are in the Disclosure Bundle and there are no licences or
collateral arrangements or concessions which have been entered into or
granted save for the Rent Deposit Deeds which are listed in Schedule 4 and
which are valid and subsisting and are not subject to any current
breaches.
6.2 The Company has good title to, and is the legal and beneficial owner of,
the Properties which are free and clear of all encumbrances, claims,
mortgages, liens and
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tenancies or any covenants in the freehold title which would adversely
affect the permitted use and enjoyment of the Properties as provided for
by leases other than all matters in those leases for the Properties which
are in the Disclosure Bundle to which the Properties are expressly made
subject and any overriding interests (as defined in Section 70(1) of the
Land Registration Act 1925).
6.3 The Company has exclusive possession of the Properties.
6.4 So far as the Vendors are aware and save as disclosed in those leases for
the Properties which are in the Disclosure Bundle, there are no covenants,
restrictions, burdens, stipulations, wayleaves, easements, conditions,
outgoings, terms, overriding interests, rights or licences affecting any
of the Properties, which are of an unusual, or onerous nature or which
adversely affect the use of the Properties for which they are currently
used.
6.5 The present use of the Properties is the permitted use for the purposes of
Town and Country Planning Legislation and the use of each of the
Properties is permitted by such legislation, is not personal to the
Company, nor is the use a temporary use, nor subject to onerous or unusual
conditions adversely affecting the Company's use and enjoyment of the
Properties and the Properties comply with all statutes, regulations, bye
laws and other relevant legislation and the Company has not received
notice of any (and is not aware of any) breach of the Town and Country
Planning legislation.
6.6 So far as the Vendors are aware, there are no outstanding disputes and
notices or complaints whatsoever, which affect or might in the future
affect the use of any of the Properties for the purposes for which they
are now used.
6.7 So far as the Vendors are aware, no structural or other material defects
have appeared in respect of or affecting the buildings and structures on
or comprising any of the Properties or any parts thereof but no warranty
is given in respect of the state of repair and condition of the
Properties.
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6.8 The replies given by the Vendors' Solicitors in writing to enquiries (if
any) raised by the Purchaser's Solicitors were when given and remain true
and accurate in all respects.
6.9 The Company has not at any time assigned, underlet, parted with possession
or otherwise disposed of any property (including for the avoidance of
doubt the Properties) in respect of which it has a continuing liability
(contingent or otherwise) for payment of rent and/or for any other
liability nor has the Company had any other property vested in it apart
from the Properties.
6.10 The Company has under its control all the originals of the documents
referred to in Schedule 4 and all other deeds and documents necessary to
prove its title to the Properties; where any of the Properties is
leasehold, the title documents include all necessary consents for the
grant of the lease of the relevant Property and including all
reversioners' consents required under the lease of the relevant Property.
6.11 As far as the Vendors are aware and save as disclosed in the leases of the
Properties, no liberty, right, easement, licence or other arrangement is
enjoyed or is in the course of being acquired by or against the Properties
(and none is needed) for obtaining access to any land or for repair of any
premises or to comply with any fire regulations.
6.12 As far as the Vendors are aware and save as disclosed in the leases of the
Properties which are in the Disclosure Bundle, each of the Properties has
the benefit of all rights necessary for the continued present use and
enjoyment of the same such rights not being capable of withdrawal by any
person nor liable to be made subject to any charge therefor.
6.13 The Properties are not and will not at Completion be subject to any lien,
encumbrance or any lease or agreement for lease save as already disclosed
in this Schedule.
6.13.1 The Leases of the Properties are correctly summarised in the
particulars thereof set out in Schedule 4 specifying which of such
leases is a new tenancy for the purposes of the L&T Covenant Act.
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6.13.2 In respect of any of the leases of the Properties which are new
tenancies for the purposes of the L&T Covenants Act no person has made
a claim for an overriding lease under section 19 of the L&T Covenants
Act and no person is entitled to make such a claim and no notice has
been served under section 17 of the L&T Covenants Act which would give
rise to such entitlement and there have been no excluded assignments
as referred to in section 11 of the L&T Covenants Act.
6.14 The Company has not received any notice of breach and, to the best of the
Vendors' knowledge, all covenants, restrictions, stipulations, conditions
and other terms affecting the Properties have been observed and performed
and so far as the Vendors are aware, there are no circumstances which
would entitle or require any landlord under any lease of the Properties or
other person to exercise any powers of entry and taking possession or
which would otherwise give rise to restriction or termination of the
continued possession or occupation of any of the Properties.
6.15 All policies of insurance relating to the Properties effected by the
Company are current and valid and are not subject to any special or
unusual terms or restrictions or to the payment of any premium in excess
of the normal rate for policies of the same kind.
6.16 The Company has inspected all current policies of insurance relating to
any of the Properties (including fixtures fittings and contents) which
have been effected by a landlord under the terms of a lease of that
Property and warrants that they are current and valid and cover the full
reinstatement value of the relevant Property (including loss of rent cover
for a minimum of three years or more) and are not subject to any special
or unusual terms or restrictions or to the payment of any premium in
excess of the normal rate for policies of the same kind and that the
policy conforms in all respects with the requirements of the relevant
lease of the Property and the insurer has waived any rights of subrogation
it may have against the Company.
6.17 The Company is not the guarantor of or surety for any other party's
liability (contingent or otherwise) for any obligations under any lease or
tenancy or under any agreement relating to the assignment of any lease or
tenancy.
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7. Environmental Issues
7.1 So far as the Vendors are aware, no underground treatment or storage tanks
and sumps for which the Company has responsibility are or have ever been
located at the Properties or the Former Properties.
7.2 So far as the Vendors are aware, no discharge, release, leaching, emission
or escape into the Environment of any Hazardous Substance or any substance
regulated by Environmental Law has occurred or is occurring in the conduct
of the Business.
7.3 So far as the Vendors are aware, none of the Properties, nor any Former
Properties whilst in the ownership of the Company, is or has been
contaminated with any Hazardous Substance or any substance regulated by
Environmental Law. The Company is not in breach of any Environmental Law
which would have a Material Adverse Event.
7.4 So far as the Vendors are aware, no Hazardous Substances or substances
regulated by Environmental Law are or have been produced or used in the
course of the Business.
7.5 So far as the Vendors are aware, no Environmental Licences are required
for the carrying on of the Business.
7.6 There are no actual or contingent liabilities and no existing, or pending,
and, so far as the Vendors are aware, threatened civil or criminal
actions, notices of violations, investigations, remediation or other
notice, prohibitions, judgments, awards, demands, claims, enquiries,
arbitrations, administrative proceedings or written communications from
any governmental or regulatory authority or any other person under any
Environmental Laws against any member of the Group or in relation to any
of their assets (whether or not currently owned including any properties
formerly owned used or occupied) and, so far as the Vendors are aware,
there are no circumstances which may lead to any such matters.
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7.7 Copies of all environmental reports, surveys, audits, assessments and
investigations formally commissioned by the Company in respect of the
Properties and the Companies in the possession of the Vendors and/or the
Companies have been disclosed to the Purchaser and all necessary steps to
comply with all the recommendations contained in such reports, surveys,
audits, assessments and investigations have been completed.
8. Confidential Information and Intellectual Property
8.1 The Company is the sole unencumbered legal and beneficial owner, capable
of transferring with full title guarantee, and, where registered, the sole
registered proprietor, of all the Group's Intellectual Property, including
but not limited to the Intellectual Property listed in the Disclosure
Letter. The Disclosure Bundle contains a complete and accurate list of all
patents, copyrights and trademarks of the Company and its Subsidiaries.
The Group's Intellectual Property after Completion, will comprise all the
Intellectual Property rights which are necessary to enable the Group to
carry on its Business in the same manner and to the same extent as it has
been carried on at or prior to the Completion Date and to fulfil all
present contractual commitments of the Group and will not be adversely
affected by Completion.
8.2 As far as the Vendors are aware, neither the Group's Intellectual Property
nor the validity or subsistence of the Company's interest therein, is or
has during its existence been the subject of any current, pending or
threatened challenge, claim or proceedings, or infringed or misused by any
third and there are no facts or matters which might give rise to any of
the same. None of the Group's Intellectual Property has been unlawfully
acquired or will be adversely affected by the transaction contemplated by
this Agreement.
8.3 The carrying on of the Company's business does not require any
authorisations, permissions, licences or consents from, or the making of
royalty or similar payments to, any third party and, as far as the Vendors
are aware, the Company is not engaged in any activities which involve the
use of or which infringe any Intellectual Property belonging to any third
party.
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8.4 Neither the validity or subsistence of the Group's Intellectual Property,
nor any Company's right, title and interest in the Group's Intellectual
Property, is the subject of any current, pending or, so far as the Vendors
are aware, threatened challenge, claim or proceedings, including for
opposition, cancellation, revocation or rectification.
8.5 The Vendors are not aware of any actual, alleged or threatened misuse by
any person of the Confidential Information of any of the Company. So far
as the Vendors are aware, the Company has not disclosed to any person any
of the Company's Confidential Information except where such disclosure was
properly made in the normal course of the Group's business and was made
subject to an agreement under which the recipient is obliged to maintain
the confidentiality of such Confidential Information and is restrained
from further disclosing it or using it other than for the purposes for
which it was disclosed by the Company concerned. So far as the Vendors are
aware, there is no current or threatened breach of any such agreement by
any of the other contracting parties.
8.6 So far as the Vendors are aware, the Company is validly licensed to use
the software used in the business and will continue to do so after the
Completion;
8.7 The Company has in place all necessary notifications under the Data
Protection Act 1998.
8.8 The Company has not entered into any agreement, arrangement or
understanding (whether legally enforceable or not) for the licensing or
otherwise permitting the use or exploitation of the Group's Intellectual
Property which prevents, restricts or otherwise inhibits its freedom to
use and exploit the Intellectual Property. Copies of all agreements,
arrangements and understandings under which the Intellectual Property is
made available to third parties, and any legally enforceable options in
this regard, are contained in the Disclosure Bundle. There is no current
or threatened breach of any such agreement, arrangement or understanding
by any of the other contracting parties thereto.
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8.9 Copies of all agreements and arrangements under which Intellectual
Property belonging to any third party is made available to the Group for
purposes of its business are enclosed in the Disclosure Bundle. All such
agreements and arrangements are in full force and effect. The Company is
not in breach of any such agreement or arrangement and is not aware of the
existence of any circumstances under which its right to use such
Intellectual Property may be terminated.
8.10 The Company is not engaged in any activities involving the Business which
infringe or otherwise involve the misuse or unauthorised use of any
Intellectual Property belonging to any third party or which give any third
party the right to sue for passing off.
8.11 The Company has taken all reasonable steps open to it to protect and
preserve the Group's Intellectual Property.
8.12 No moral rights have been asserted or are capable of being asserted which
could materially affect the use or value of any of the Intellectual
Property and the Vendor is not engaged in any activities which infringe
any moral rights belonging to any third party.
8.13 All source codes, tapes, indices, descriptive memoranda, original
listings, development and working papers, calculations and any other
documents or media necessary conclusively to prove authorship and
ownership of copyright in the Software owned by the Company ("Company's
Software") are in the possession custody or control of the Company.
8.14 The Company is not a party to any agreement, arrangement or understanding
requiring the Company to place in escrow, or otherwise to permit any third
party to use or have access to, the source code to any of the Company's
Software.
9. Insurance
All assets of the Company of an insurable nature have at all times been and are
insured in amounts to the full replacement value thereof against such risks as
are in accordance with
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good commercial practice (associated with companies having a business similar in
nature to the Business) normally insured against. The Company has at all times
been adequately covered against accident, third party, public liability, product
liability and other risks normally covered by insurance and nothing, so far as
the Vendors are aware, has been done or omitted to be done by or on behalf of
the Company which would make any policy of insurance void or voidable or enable
the insurers to avoid the same and there is no claim outstanding under any such
policy and the Vendors are not aware of any circumstances likely to give rise to
such a claim or result in an increased rate of premium.
10. Litigation
Neither the Company nor any person for whose acts or defaults the Company may be
vicariously liable are engaged whether as plaintiff or defendant or otherwise in
any civil, criminal or arbitration proceedings or any proceedings before any
tribunal (save for debt collection by the Company in the ordinary course of
business) and, so far as the Vendors are aware, there are no proceedings
threatened or pending against the Company or any such person and, so far as the
Vendors are aware, there are no facts which are likely to give rise to any such
litigation or proceedings.
11. Employment and Pension Matters
11.1 There is no existing or pending or, so far as the Vendors are aware,
threatened industrial or trade dispute involving the Company and any of
its employees and there are no agreements or arrangements (whether oral or
in writing or existing by reason of custom and practice and whether or not
legally binding) between the Company and any trade union or other
employees' representatives or organisation concerning or affecting the
Company's employees.
11.2 The Company has neither given notice of any redundancies to the Secretary
of State nor started consultations with any independent trade union or
employees' representatives within the preceding period of one year in
relation to any of the Company's employees. No circumstances have arisen
under which the Company is likely to be required to pay damages for
wrongful dismissal or breach of contract, to make any contractual or
statutory redundancy payment or make or pay any
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compensation in respect of unfair dismissal, to make any other payment
under any employment protection or other employment statutes, treaties,
regulations, bye-laws, codes or orders or to reinstate or re-engage any
former employee.
11.3 The Vendors have disclosed to the Purchaser details of all employment
related litigation within the last five years including any ongoing and
anticipated claims and whether with employees, workers, trade unions or
employee representatives.
11.4 The Disclosure Letter contains (i) the names and dates of birth and
commencement of employment of all persons who will at the Completion Date
be employees or directors of the Company or consultants to the Company;
(ii) details of all remuneration payable (including any bonus or
commission entitlements) and any other benefits (including, for the
avoidance of doubt, permanent health insurance) provided or which the
Company is bound to provide (whether now or in the future) to all such
persons together with the terms on which such remuneration, emoluments and
benefits are payable; and (iii) details of any other material terms and
conditions of employment or engagement of such persons, all of which
information is true and complete.
11.5 There are no pension, share option, share incentive, life assurance,
disability or similar schemes, arrangements or obligations for any
employees or directors of the Company, and the Vendors and the Company
have no obligation (whether legally binding or established by custom) to
pay any pension or make any other payment after retirement or death or
otherwise to provide "relevant benefits" within the meaning of section 612
of the Taxes Act or to make any payment for the purpose of providing such
"relevant benefits" to or in respect of any person who is now or has been
an officer or employee of the Company and are not party to any scheme or
arrangement having as its purpose or one of its purposes the making of
such payments or the provision of such benefits.
11.6 There are no current submissions or referrals to the Pensions Ombudsman or
to the Occupational Pensions Advisory Service in respect of the Company.
11.7 No Retirement Benefits Scheme in which employees or former employees of
the Company participate or have participated has been or is in the process
of being (or is
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proposed to be) wound up (in whole or in part) or closed to new entrants
(in whole or in part).
11.8 There are no existing service or other agreements between the Company and
any of its employees, workers, agents or consultants which cannot be
lawfully terminated by three calendar months' notice or less without
giving rise to any claim for damages or compensation other than a
statutory redundancy payment, and the Company has complied in all
material respects with all their obligations under all legislation,
regulations, and other requirements having force of law (including,
without limitation, codes, orders and awards) in connection with their
employees.
11.9 Except in the ordinary course of business consistent with past practices,
the Company is not involved in negotiations to vary the terms and
conditions of employment of any of their employees, and have not made any
representations, promises, offers or proposals to any employees
concerning or affecting the terms and conditions of employment of any of
their employees.
11.10 The Company has paid or discharged its obligations in full in relation to
salary, wages, fees, commission, bonuses, overtime pay, holiday pay, sick
pay and all other benefits and emoluments relating to their employees in
respect of all periods up to and including the date of this Agreement.
11.11 There are no terms and conditions in any contract with any employee
pursuant to which such person will be entitled to receive any payment or
benefit or such person's rights will change as a direct consequence of
the transaction contemplated by this Agreement.
11.12 There are no amounts owing or agreed to be loaned or advanced by the
Company to any employees (other than amounts representing remuneration
accrued due for the current pay period, accrued holiday pay for the
current holiday year or for reimbursements of expenses).
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11.13 No employee has given or received notice to terminate his employment or
engagement, nor are the Vendors aware of any employee who is
contemplating the giving of such notice.
11.14 There are no enquiries or investigations existing, or as far as the
Vendors are aware pending or threatened, affecting the Company in
relation to any employee by the Equal Opportunities Commission, the
Commission for Racial Equality, the Disability Rights Commission or the
Health and Safety Executive, or any other bodies with similar functions
or powers in relation to workers.
11.15 The Company has maintained adequate and suitable records regarding the
service of its workers and in particular has maintained all records
required under the Working Time Regulations 1998. All such records comply
with the requirements of the Data Protection Act 1998.
12. Arrangements with connected persons etc.
The Company has not made any gift, loan or quasi loan to any Vendor or director
or former director or any other person connected with any of the foregoing nor
has it been a party to any transaction or arrangement with any of the foregoing
other than arm's length service contracts, and the Company's profits or
financial position have not at any time been adversely affected by any contract
or arrangement which is not of an entirely arm's-length nature.
13. Matters since 30 April, 2000
Since 30 April, 2000:
13.1 there has been no material interruption or alteration in the nature, scope
or manner of the Company's business which business has been carried on
lawfully and in the ordinary and usual course of business as previously
carried on and so as to maintain it as a going concern;
13.2 there has been no material adverse change in the customer relations of the
said business or in the financial condition or the position, prospects,
assets or liabilities of
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the said business or the Company as compared with the position disclosed
by the Accounts;
13.3 the Company has continued to pay its creditors in the ordinary course of
business and no unusual trade discounts or other special terms have been
incorporated into any contract entered into by the Company;
13.4 no substantial customer or supplier of the Company for the accounting
period ending on the Accounting Date has ceased or indicated that it is
likely to cease trading with or supply to the Company, or reduced or
indicated that it is likely to reduce substantially its trading with or
supplies to the Company, or changed or indicated that it is likely to
change substantially the terms upon which it is prepared to trade with or
supply the Company (other than normal price and minor changes);
13.5 the Company has not become bound or liable to be called upon to repay
prematurely any borrowed monies or repaid any borrowings other than
indebtedness to its bankers;
13.6 the Company has not cancelled, waived, released or discontinued any
rights, debts or claims or suffered any damage destruction or loss
(whether or not covered by insurance) affecting its business or assets;
13.7 the Company has not incurred any capital expenditure or made any capital
commitment of an amount in excess of (Pounds)20,000 or disposed of any
fixed assets having a value of more than (Pounds)50,000 in aggregate;
13.8 no dividends, bonuses or other distributions have been declared, paid or
made in respect of any of the Sale Shares.
14. Accuracy of Information Provided
14.1 All information contained in the Recitals to this Agreement and in the
Schedules to this Agreement is true and accurate in all respects and not
misleading in any respect.
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14.2 So far as the Vendors are aware, none of the documents listed in Schedule
10 contain any material mis-statement or material omission which would
make such documents materially misleading.
14.3 The assumptions used by the Vendors in the Business Plan are reasonably
believed by the Vendors to be appropriate. The Business Plan was compiled
with due care and attention, and no material factors known to the Vendors
at the time were omitted in compiling the Business Plan.
15. Power, Title, Authorisation and Regulation S
15.1 M&TG has all requisite legal and, to the extent applicable, corporate
power, and authority to enter into and perform its obligations under this
Agreement, the agreements contemplated hereby to which it is a party, and
to consummate the transactions contemplated hereby and thereby. The
execution, delivery and performance of this Agreement, the agreements
contemplated hereby, and the consummation of the transactions contemplated
hereby and thereby have been duly and validly approved and authorised by
all necessary action, including, if applicable, corporate action, by or on
behalf of M&TG. This Agreement and the agreements contemplated hereby to
which it is a party has been duly executed and delivered by M&TG and
constitutes a valid and binding obligation of M&TG, subject to the laws of
general application relating to bankruptcy, insolvency and the relief of
debtors and rules of law governing specific performance, injunctive relief
and equitable remedies. No consent, approval, order or authorisation of,
or registration, declaration or filing with, any governmental entity is
required by or with respect to M&TG in connection with the execution and
delivery of this Agreement by M&TG or the consummation by M&TG of the
transactions contemplated hereby.
15.2 Each Vendor represents that he or it has or will have, as at Completion,
full right, power and authority to sell, transfer and deliver such Sale
Shares to the Purchaser, and, upon delivery of the certificate or
certificates therefor to the Purchaser and the Purchaser's payment for and
acceptance thereof, will transfer to the Purchaser good, valid and
marketable title thereto with full title guarantee free and clear of any
restriction, claim, lien, charge, encumbrance or equity whatsoever. No
Vendor is
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party to any voting trust, agreement or arrangement affecting the exercise
of the voting rights of the relevant shares, other than as set out in the
Disclosure Letter. There is no action, proceeding, claim or, to any
Vendors' knowledge and belief, investigation against any Vendor or any
Vendor's assets, properties or, as applicable, any of the Vendors'
respective officers or directors, pending or, to Vendors' knowledge and
belief, threatened, at law or in equity, or before any court, arbitrator
or other tribunal, or before any administrative law judge, hearing officer
or administrative agency relating to or in any other manner impacting upon
the Sale Shares held by such Vendor.
15.3 The execution, delivery and performance of this Agreement, and the
consummation of the sale and purchase of the Company Shares and the other
transactions contemplated by this Agreement do not and will not conflict
with or result in a violation of the Memorandum or Articles of
Association, bylaws, partnership agreement or other applicable charter
document of M&TG, or conflict with, or (with or without notice or lapse of
time, or both) result in a termination, breach, impairment or violation
of, or constitute a default or result in the creation or imposition of any
lien, charge or encumbrance upon any of the Vendor's shares under, (a) any
instrument, indenture, lease, mortgage or other agreement or contract to
which the Vendor is a party or to which such Vendor or any of such
Vendor's assets or properties may be subject or (b) any judgment, writ,
decree, order, ordinance, statute, rule or regulation applicable to the
Vendor or the Vendor's assets or properties. The consummation of the
Purchase and the other transactions contemplated by this Agreement will
not require the consent of any third person with respect to the rights,
licenses, franchises, leases or agreements of the Vendor.
15.4 Each Vendor hereby acknowledges that he or it has read this Agreement and
the other documents to be delivered in connection with the consummation of
the transactions contemplated hereby and has made an independent
examination of the transactions contemplated hereby (including the tax
consequences thereof). Each Vendor acknowledges that he or it has had an
opportunity to consult with and has relied solely upon the advice, if any,
of the Vendors' legal counsel, financial advisors, or accountants with
respect to the transactions contemplated hereby to the extent such Vendor
has deemed necessary, and has not been advised or directed by the
Purchaser,
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the Company or their respective legal counsel or other advisors in
respect of any such matters and has not relied on any such parties in
connection with this Agreement and the transactions contemplated hereby.
15.5 Each Vendor severally, and not jointly, represents that:
15.5.1 None of the New OpenTV Shares have been or will be registered under
the Securities Act, and such securities, to the extent offered, are
being offered to such Vendor outside the United States in reliance on
Regulation S under the Securities Act ("Regulation S");
15.5.2 No Vendor is a US person (as defined in Regulation S) and is not
acquiring the Shares for the account or benefit of any such US person;
15.5.3 Following Completion and subject to the provisions of clause 8, no
Vendor will resell the New OpenTV Shares except: (i) pursuant to
registration of the New OpenTV Shares under the Securities Act, (ii)
in offshore transactions outside the United States in accordance with
Rule 903 or 904 of Regulation S, or (iii) pursuant to another
available exemption from the registration requirements of the
Securities Act; and such Vendor will not engage in hedging
transactions with regard to the New OpenTV Shares unless in compliance
with the Securities Act;
15.5.4 Each Vendor acknowledges and accepts that the Purchaser is required
pursuant to Regulation S to refuse to register the transfer of any
Shares in violation of the restrictions stated in paragraph 15.5.3 of
this Schedule, as the case may be, and any certificate representing
the Shares may bear a legend containing the restrictions stated in
such paragraph 15.5.3.
16. Shareholders' Agreement
16.1 Each of the parties to the current shareholders' agreement amongst the
holders of the Company's Shares is in compliance with the terms thereof
and, so far as the Vendors
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are aware, no party to that agreement has threatened or indicated that
it is likely to breach the provisions of such shareholders' agreement
which are binding on it.
16.2 No claim has been made by BSB, HSBC or any other holder of Company
Shares against any member of the Group nor has any member of the Group
received notice of any such claim and, so far as the Vendors are aware,
no such claim is pending or threatened and there are no circumstances
known to the Vendors likely to give rise to any such claim.
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SCHEDULE 6
Purchaser's Warranties
1. The Purchaser and each subsidiary of the Purchaser which is a significant
subsidiary as such term is defined under Rule 1.02 of Regulation S-X
promulgated under the Exchange Act (collectively, the "Purchaser
Subsidiaries") has been duly organised and is validly existing and in good
standing under the laws of its jurisdiction of incorporation or
organisation, as the case may be, and has the requisite power and authority
and all necessary governmental approvals to own, lease and operate its
properties and to carry on its business as it is now being conducted. The
Purchaser and each Purchaser Subsidiary is duly qualified or licensed to do
business, and is in good standing, in each jurisdiction where the character
of the properties owned, leased or operated by it or the nature of its
business makes such qualification or licensing necessary, except for such
failures to be so qualified or licensed and in good standing that,
individually or in the aggregate, have not resulted and could not
reasonably be expected to result in a Material Adverse Event for the
Purchaser.
2. The copies of the Purchaser's Memorandum of Association and Articles of
Association, each as amended through the date of this Agreement, that are
available with the SEC, are current, complete and correct copies of those
documents. The Purchaser is not in violation of any of the provisions of
such Memorandum of Association and Articles of Association.
3. The authorized capital stock of the Purchaser consists of (i) 500,000,000
Class A Ordinary Shares, (ii) 200,000,000 Class B Ordinary Shares, and
(iii) 500,000,000 Preference Shares. As of 31 December, 2000 34,829,632
Class A Ordinary Shares, 30,631,746 Class B Ordinary Shares and no
Preference Shares were issued and outstanding, all of which issued and
outstanding Shares were validly issued and are fully paid, nonassessable
and, except as set forth in the Investor's Rights Agreement included as an
Exhibit to the Purchaser's SEC Reports (as defined in clause 9 below) to
the extent disclosed in Parent SEC Report, not subject to pre-emptive
rights.
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4. The New OpenTV Shares, upon issuance on the terms and conditions specified
in this Agreement (i) will be duly authorised, validly issued, fully paid,
nonassessable, (ii) will not be subject to pre-emptive rights, and (iii)
will be free and clear of all security interests, liens, claims, pledges,
options, rights of first refusal, agreements, charges and other
encumbrances or any nature whatsoever, other than as specifically
contemplated by this Agreement or by law.
5. The Purchaser has all necessary corporate power and authority to execute
and deliver this Agreement and to perform its obligations under this
Agreement and to consummate the transactions contemplated by this Agreement
to be consummated by the Purchaser. The execution and delivery of this
Agreement by the Purchaser and the consummation by the Purchaser of such
transactions have been duly and validly authorised by all necessary
corporate action and no other corporate proceedings on the part of the
Purchaser are necessary to authorise this Agreement or to consummate such
transactions. This Agreement has been duly authorised and validly executed
and delivered by the Purchaser and constitutes a legal, valid and binding
obligation of the Purchaser, enforceable against the Purchaser in
accordance with its terms.
6. The execution and delivery of this Agreement by the Purchaser does not, and
the performance of this Agreement by the Purchaser will not:
6.1 conflict with or violate any provision of the Purchaser's Memorandum of
Association or Articles of Association or any comparable organisational
documents of any Purchaser Subsidiary;
6.2 assuming that all relevant consents, approvals, authorisations and other
actions have been obtained and all relevant filings and obligations have
been made, conflict with or violate any law applicable to the Purchaser or
any Purchaser Subsidiary or by which any property or asset of the Purchaser
or any Purchaser Subsidiary is or may be bound or affected, except for any
such conflicts or violations that, individually or in the aggregate, have
not resulted and could not reasonably be expected to result in a Material
Adverse Event for the Purchaser; or
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6.3 result in any breach of or constitute a default (or an event which with or
without notice or lapse of time or both would become a default) under, or
give to others any right of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien on any property or
asset of the Purchaser or any Purchaser Subsidiary under, any contract to
which the Purchaser or any Purchaser Subsidiary is a party or by which any
of them or their assets or properties is or may be bound or affected,
except for any such breaches, defaults or other occurrences which,
individually or in the aggregate, have not resulted and could not
reasonably be expected to result in a Material Adverse Event for the
Purchaser.
7. The execution and delivery of this Agreement by the Purchaser does not, and
the performance of this Agreement by the Purchaser will not, require any
consent, approval, authorisation or permit of, or filing with or
notification to, any governmental entity except (i) for applicable
requirements of the Exchange Act, applicable requirements of the Securities
Act, applicable requirements of Blue Sky Laws, the rules and regulations of
the NASDAQ National Market and the Amsterdam Stock Exchange, applicable
requirements of takeover statutes, applicable notification requirements of
the anti-trust laws or any other laws, and (ii) where failure to obtain
such consents, approvals, authorisations or permits, or to make such
filings or notifications, individually or in the aggregate, have not
resulted and could not reasonably be expected to result in a Material
Adverse Event for the Purchaser.
8. Each of the Purchaser and the Purchaser Subsidiaries is in possession of
all franchises, grants, authorisations, licenses, permits, easements,
variances, exceptions, consents, certificates, approvals and orders of any
governmental entity necessary for the Purchaser or any Purchaser Subsidiary
to own, lease and operate its properties or to carry on its business as it
is now being conducted (collectively, the "Purchaser Permits"), except
where the failure to have, or the suspension or cancellation of, any of the
Purchaser Permits, individually or in the aggregate, has not resulted and
could not reasonably be expected to result in a Material Adverse Event for
the Purchaser, and, as of the date of this Agreement, no such suspension or
cancellation of any of the Purchaser Permits is pending or, to the
knowledge of the Purchaser, threatened, except where the failure to have,
or the suspension or cancellation of, any of the Purchaser Permits,
individually or in the aggregate, has not resulted and could not
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reasonably be expected to result in a Material Adverse Event for the
Purchaser. Neither the Purchaser nor any Purchaser Subsidiary is in
conflict with, or in default or violation of, (i) any law applicable to the
Purchaser or any Purchaser Subsidiary or by which any property or asset of
the Purchaser or any Purchaser Subsidiary is or may be bound or affected or
(ii) any Purchaser Permits, except for any such conflicts, defaults or
violations that, individually or in the aggregate, have not resulted and
could not reasonably be expected to result in a Material Adverse Event for
the Purchaser.
9. The Purchaser has filed all forms, reports, schedules, statements and other
documents (including all exhibits, annexes, supplements and amendments to
such documents) required to be filed by it under the Exchange Act and the
Securities Act (collectively, including any such documents filed subsequent
to the date of this Agreement, the "Purchaser SEC Reports"). The Purchaser
SEC Reports, including any financial statements or schedules included or
incorporated therein by reference, at the time they were filed, (i)
complied in all material respects with the requirements of the Exchange Act
or the Securities Act or both, as the case may be, applicable to those
Purchaser SEC Reports and (ii) did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated or
necessary in order to make the statements made in those Purchaser SEC
Reports, in the light of the circumstances under which they were made, not
misleading. No Purchaser Subsidiary is subject to the periodic reporting
requirements of the Exchange Act or is otherwise required to file any
documents with the SEC or any national securities exchange or quotation
service or comparable governmental entity.
10. Each of the consolidated balance sheets included in or incorporated by
reference into the Purchaser SEC Reports (including the related notes and
schedules) fairly presented, in all material respects, the consolidated
financial position of the Purchaser as of the dates set forth in those
consolidated balance sheets. Each of the consolidated statements of income
and of cash flows included in or incorporated by reference into the
Purchaser SEC Reports (including any related notes and schedules) fairly
presented, in all material respects, the consolidated results of operations
and cash flows, as the case may be, of the Purchaser for the periods set
forth in those consolidated statements of income and of cash flows, in each
case in conformity with US Generally Accepted Accounting Principles
("GAAP") consistently applied
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throughout the periods indicated. All of such balance sheets and statements
complied as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto; provided, however, that the quarterly and annual profit
and loss statements contained in those Purchaser SEC Reports made on Form
6-K and Form 6-K/A that have incorporated the Purchaser's quarterly
earnings press releases were accounted in accordance with GAAP but
presented in a format alternative to GAAP presentation.
11. Except as and to the extent set forth on the consolidated balance sheet of
the Purchaser as of December 31, 2000, including the related notes, neither
the Purchaser nor any Purchaser Subsidiary has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or
otherwise) that would be required to be reflected on a balance sheet or in
the related notes prepared in accordance with GAAP, except for liabilities
or obligations incurred in the ordinary course of business since December
31, 2000 that, individually or in the aggregate, have not resulted and
could not reasonably be expected to result in a Material Adverse Event for
the Purchaser.
12. Since 31 December, 2000 except as set forth in the Purchaser SEC Reports,
the Purchaser has conducted its business only in the ordinary course and in
a manner consistent with past practice and, since such date, there has not
been any Material Adverse Event for the Purchaser.
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SCHEDULE 7
Software
<TABLE>
<CAPTION>
OpenTV Status Dev effort
<S> <C> <C>
Big Night Out 100 average 3 months
Boogie Lights 100
Day Job 100
Dead Meat 100
East End Arrows (501) 100
Headfunk 2358 100
Hit and Hope (golf) (course 1) 100
Hit and Hope (golf) (course 2) 100
Lane 13 100
Push my Button 100
Push my Sporting Button 100
NUTZ 100
Pot the Lot 100
Route 1 100
Satan Claus 100
Senile Santa 100
Spin Cycle 100
Thievin Monkeys 100
Word Search Fridge 100
Double Toon 100
Pic'a'Nic Panic 100
Saw Point 100
Stink Bomb Alley 100
Gut Reaction 100
Punch My Lights Out 100
Route 1 100
Dominoes 50
Neon 80
Critical Mess 20
Dance Floor Mama 70
MediaHighway
Eurosports Push My Button 100 average 6 months
Forest Fire 100
Garcon 100
Go Voyage 100
Headfunk 2358 (Mister Memo) 100
Lane 13 (Bowling Maniac) 100
Pets in Peril 100
Poker 100
Quiz Game 100
Word Search Fridge 100
Bank It 80
Gobbler 80
</TABLE>
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<TABLE>
<S> <C> <C>
Lesley Merkin's 'Push my Button' 90
Route 1 90
Box Clever 60
MHEG
Forest Fire 100 average 3 months
Memory Junior 100
Quiztoast 100
Sunny Delight Basketball 100
Box Clever 30
East End Arrows 90
Push my Button 90
Route 1 90
Liberate
Blackjack 100 average 3 months
Box Clever 100
Box Clever: Easter Edition 100
East End Arrows (501) 100
Headfunk 2358 100
Lesley Merkin's 'Push my Button' 100
Lesley Merkin's Punch My Lights Out 100
Memory Senior 100
Paparazzi Pay Day 100
Pot the Lot 100
Route 1 100
Spin Cycle 100
Word Search Fridge 100
Zodiacs 100
A Question of Risk 50
Big Words 80
Safe Cracker 70
Box Clever 90
AOLTV
Memory 80 average 1 month (port)
Push My Button 80
Word Search 80
</TABLE>
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<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
Work in
Platform Pitch Design progress Complete Total
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Open TV 29 19 14 26 88
------------------------------------------------------------------------------------------------
Liberate 13 14 8 15 50
------------------------------------------------------------------------------------------------
Media Highway 1 2 6 10 19
------------------------------------------------------------------------------------------------
MHEG 1 1 4 4 10
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
Total 44 36 32 55 167
------------------------------------------------------------------------------------------------
</TABLE>
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SCHEDULE 8
Earn Out Provisions
1. Definitions
Earnout Component that part of the Consideration which is payable
to the Vendors depending on the levels of
Revenue and Net Income in Q3 and Q4 in
accordance with this Schedule;
Net Income net profits from operations after deduction of
depreciation but before interest and
amortization of goodwill;
Q3 the period beginning 1 July 2001 and ending on
30 September 2001;
Q4 the period beginning 1 October 2001 and ending
on 31 December 2001;
Revenue the invoiced value of services supplied net of
Value Added Tax and trade discounts as adjusted
for unearned and accrued income.
2.
2.1 The Earnout Component shall be equal to Z multiplied by the Factor, subject
to a minimum of zero and a maximum of 140% of Z.
Z = 25% of the value of the Vendors' Total Share and Cash Component as
calculated pursuant to paragraph 10 of Schedule 1C.
The Factor = A + B + C + D
Where:
A = the greater of (i) zero and (ii) (x) Q3 actual Revenue divided by
(Pounds)3,200,000 multiplied by (y) 0.185
B = the greater of (i) zero and (ii) the lesser of (x) 0.285 and (y) (a) Q3
actual Net Income divided by ((Pounds)319,850) multiplied by (b)
0.19; PROVIDED,
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HOWEVER, that if Q3 actual Net Income is greater than
((Pounds)319,850) but less than zero, B shall equal the lesser of
(i) 0.285 and (ii) (x) 2 minus (y) Q3 actual Net Income divided by
((Pounds)319,850)
C = the greater of (i) zero and (ii) (x) Q4 actual Revenue divided by
(Pounds)4,200,000 multiplied by (y) 0.31
D = the greater of (i) zero and (ii) the lesser of (x) 0.4725 and (y) (a)
Q4 actual Net Income divided by (Pounds)313,230 multiplied by (b)
0.315
3.
3.1 If the Earnout Component is less than Z then the Vendors shall be entitled
to that number of New OpenTV Shares as is equal to Z minus Earnout
Component divided by (Pounds)10.43.
3.2 If the Earnout Component is equal to or greater than Z then the Vendors
shall be entitled to all of the New OpenTV Shares (at an issue price of
(Pounds)10.43 per share or such other Pounds Sterling amount as the
Purchaser's Accountants determine to be reasonable in the event of any
consolidation, sub-division, stock split or reclassification or reduction
of the share capital of the Purchaser or any rights issue, taking place
after the date of this Agreement) equal to Z and shall be paid a cash
amount equal to the excess in the Earnings Component over Z.
4.
4.1 The Purchaser shall procure the preparation by the Purchaser's Accountants
of draft accounts for Q3 and draft certificates as to the Revenue and Net
Income during Q3 and the delivery of those drafts to the Vendors as soon as
reasonably practicable but no later than 30 calendar days following the end
of Q3.
4.2 The accounts for Q3 shall be prepared so as to comply with all legal and
regulatory requirements applying but otherwise in accordance with the same
accounting policies, standards, principles, bases and methods as are
applied by the Purchaser in accordance with US GAAP for the year ended 31
December 2000.
4.3 The Vendors shall review the drafts delivered by the Purchaser's
Accountants under paragraph 4.1 and shall instruct the Vendors' Accountants
to deliver to the Purchaser
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and the Purchaser's Accountants as soon as reasonably practicable but no
later than 30 calendar days of the delivery of the drafts a report setting
out any matters of disagreement with the drafts in sufficient detail to
enable the Purchaser to consider them. In the absence of a report within
that period, the drafts shall be deemed to be agreed by all parties. All
the items in the drafts (if no report is delivered within the applicable
time limit) or (if a report is delivered) all the items which are not
specified in the report as being subject to disagreement, shall be deemed
to be agreed by the parties.
4.4 If within 30 calendar days of the delivery to the Purchaser of the report
referred to in paragraph 4.3 there remains an outstanding dispute with
respect to the drafts the dispute shall be referred to a firm of chartered
accountants nominated jointly by the Vendors and the Purchaser or, failing
nomination within ten business days after request by either the Vendors or
the Purchaser, nominated at the request of either party by the President of
the Institute of Chartered Accountants in England and Wales. The firm
shall be instructed to prepare as soon as practicable a determination of
the Revenue and Net Income for Q3. The firm shall act as experts and not
as arbitrators and their decision (in the absence of manifest error) shall
be final and binding on the parties. Their fees shall be payable by the
Vendors and the Purchaser in such proportions as the firm determines.
4.5 Each party shall procure that the other party and its or their Accountants
are afforded reasonable access at reasonable times to the accounting
records required for the production and review of the drafts.
4.6 The provisions of this paragraph 4 shall apply as well as if Q3 were
substituted by Q4 throughout sub-paragraphs 4.1, 4.2 and 4.4.
5. Within ten business days of the Revenue and Net Income for Q4 being
determined in accordance with the provisions of this Schedule any further
consideration payable in New OpenTV Shares (issued at (Pounds)10.43 per
share or such other Pounds Sterling amount as the Purchaser's Accountants
determine to be reasonable in the event of any consolidation, sub-division,
stock split or reclassification or reduction of the share capital of the
Purchaser or any rights issue, taking place after the date of this
Agreement) or cash shall be issued or paid by the Purchaser to the Vendors
(and, in
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respect of any New Open TV shares, the Purchaser shall deliver Open TV
Certificates to the Vendors' Solicitors as soon as practicable).
6. The Purchaser acknowledges the interests of the Vendors in the trading of
the Group during the Period and that it is in the commercial interests of
both the Purchaser and the Vendors to use all reasonable endeavours to
ensure that the Group is in a position to maintain and increase
profitability. The Purchaser also acknowledges the interests of the
Vendors in monitoring, inter alia, the financial performance, assets and
obligations of the Group during the Earn-Out Period. The Founders
acknowledge that they will co-operate with the Purchaser and honour its
reasonable requests to revise the forms of the Group's third-party
contracts following Completion to assist the Purchaser to recognise the
Group's revenues in its financial statements with respect to third-party
contracts entered into following Completion pursuant to the US GAAP and
accounting policies adopted by the Purchaser.
7. The Purchaser covenants with the Vendors that during the Earn-Out Period it
shall comply with following provisions of this paragraph 7:
7.1 the Purchaser shall procure that the Business is financed in accordance
with the Business Plan;
7.2 the Purchaser will retain the beneficial ownership of the whole of the
issued share capital of the Company; and
7.3 the Purchaser shall act in good faith towards the Vendors in relation to
the Business insofar as its acts could affect the consideration payable to
the Vendors under this agreement.
8. The Purchaser shall procure that, except with the prior consent of Jasper
Smith, during the Earn-Out Period:
8.1 except as otherwise set out in this Agreement, the Founders shall be
entitled to participate in the management of the Group's operations;
8.2 the Group continues to operate the businesses carried on by it at
Completion;
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8.3 the nature and trading style of the Business as carried on at Completion is
not changed;
8.4 no member of the Group enters into any transaction which is not on a
commercial basis and on arms' length terms;
8.5 no member of the Group is required to provide or take credit, security,
services or goods on bases which are materially less advantageous to it
than those which are available on arms' length terms with third parties;
8.6 no member of the Group acquires or disposes of a subsidiary undertaking or
a business;
8.7 no part of the undertaking or assets of any member of the Group is disposed
of otherwise than in the ordinary course of its trading business and no
gift is made or other arrangement or transaction entered in to by any
member of the Group which could constitute a transaction at an undervalue
(assuming the relevant member of the Group had at all relevant times been
insolvent);
8.8 no member of the Group shall change its principal place of business from
London;
8.9 no charge shall be levied on any member of the Group for services provided
to it by the Purchaser (or any Associate of the Purchaser);
8.10 the rates of remuneration of employees of the Group are not increased
except for increases in the ordinary course of business consistent with
past practice or which, taken as a whole, are no greater than those awarded
to employees of the Purchaser generally and, in any event, no greater than
increases awarded to employees of comparable businesses;
8.11 the fees payable by members of the Group to auditors are not increased
above the fees paid by members of the Group to their auditors for audit
services for the year ended on 30 June 1999 (otherwise than for increases
which are reasonably necessary to reflect inflation or to reflect the
increased scope of the Business since 30 June 1999 or
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to reflect the fact that there is additional work involved as a consequence
of the extension of the Group's accounting reference date to 31 December);
9. No additional employees shall be employed by any member of the Group
without the prior consent of Mr. Jasper Smith.
10. The Purchaser undertakes to use all reasonable endeavours to operate the
Group in the manner and based on the assumptions set out in the Business
Plan PROVIDED THAT bandwidth costs may be treated as Costs of Sales rather
than as R&D and Computer Costs.
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SCHEDULE 9
Completion Accounts
The Completion Accounts shall be prepared in accordance with (a) generally
accepted United Kingdom accounting principles including all relevant Statements
of Standard Accounting Practice issued by the Accounting Standards Board; and
(b) in a manner consistent with the Accounting Policies (as defined in Schedule
10) and in the event of conflict between the principles referred to in (a) and
(b) above, generally accepted United Kingdom accounting principles shall
prevail, save that any liability of the company in respect of payments to
Optionholders under the Option Surrender Agreements (other than Employees NIC)
shall be disregarded in compiling the Completion Accounts.
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SCHEDULE 10
14.2 Documents
1. The Accounts.
2. The Management Accounts.
3. The May Management Accounts.
4. The Shareholders Agreement.
5. The Group's accounting policies as disclosed in the document referred to at
paragraph 2 of the index to the Disclosure Bundle ("Accounting Policies").
6. The contracts between any member of the Group and any of BSB, Canal
Satellite, TPS Services (or their affiliates) as disclosed in the
Disclosure Letter or contained in the Disclosure Bundle.
7. The Disclosure Letter (but for avoidance of doubt not documents in the
Disclosure Bundle save to the extent of documents referred to in this
Schedule 10).
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IN WITNESS WHEREOF the parties hereto have executed this document as a deed on
------------------
the date appearing at the head hereof.
SIGNED, SEALED )
AND DELIVERED by )
JASPER SMITH ) /s/ Jasper Smith
in the presence of )
/s/ Andrew Fearon )
SIGNED, SEALED )
AND DELIVERED by )
MARK ROCK ) /s/ Mark Rock
in the presence of )
/s/ Andrew Fearon )
SIGNED, SEALED )
AND DELIVERED by )
PAUL BUSTIN ) /s/ Paul Bustin
in the presence of )
Rebecca Reyes )
140 East Walton Place
Chicago, IL 60611
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SIGNED, SEALED )
AND DELIVERED by )
[ ] ) /s/ Paul Bustin
authorised signatory )
for and on behalf of )
MEDIA & TECHNOLOGY )
GROUP LIMITED )
and thereby executed by it)
as a Deed )
Signed by
/s/ Scott H. Ray
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for and on behalf of
OPENTV CORP
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