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Eidos plc
Wimbledon Bridge House
1 Hartfield Road
Wimbledon
GB-London SW 19 3RU
(the “Buyer”)
WHEREAS, the Buyer, a company
listed on the London Stock Exchange, desires to purchase all of the issued
and to be issued shares (“the Shares”) of IO Interactive A/S
(CVR No. 24246209), having its head office at Kalvebod Brygge 35-37,
1560 Copenhagen V (the “Company”);
WHEREAS Seller 1, Seller 2 and
the Key Employees desire to sell their Shares representing the nominal value
of respectively DKK 250,000.00, DKK 250,000.00 and the aggregate nominal
value of DKK 51,620.00 as specified in Schedule 2.1 or in total DKK
551,620.00 to the Buyer;
WHEREAS, the Buyer at Completion
will be the owner of more than 90 per cent of the Shares through purchase
of the Sellers Shares and through a directed issue of B-shares in the
Company to the Buyer between Signing and Completion;
WHEREAS the Buyer following Completion will offer the Residual Shareholders to sell their Shares against their proportionate share of the purchase price by way of Compulsory Buy-Out; and
WHEREAS the shareholders of
Seller 1 and the Key Employees also own shares within the Employee Share
Plan, in respect of which the shareholders of Seller 1 and the Key Employees
form
part of the Residual Shareholders.
NOW THEREFORE, it is hereby
agreed as follows:
1.
Definitions
1.1
Definitions
In this Agreement, the following
terms and expressions shall have the following meanings:
1.1.1
“Annual Accounts” shall
mean the audited annual accounts for the Company for the financial years
2001-2003.
1.1.2
“Business Day” shall
mean a day other than Saturday and Sunday on which banks are open for business
in Copenhagen and London for the transaction of normal banking business.
1.1.3
“Buyer” shall have
the meaning set forth in the head of this Agreement.
1.1.4
“Company” shall
mean IO Interactive A/S, CVR. No. 24216209, Kalvebod Brygge 35-37,1560 Copenhagen
V.
1.1.5
“Completion” shall
mean the parties’ performance of their deliverables as laid down in Clause
5.
“Compulsory Buy-Out” shall mean the Buyer’s purchase of the Residual Shareholders’ Shares upon Completion in accordance with Sec. 20(b)–(c)
of the Danish Act on Public Companies.
1.1.7
“Control” shall
mean owing directly or indirectly more than 50 per cent of the share capital
and the voting rights or over whom a company has the management control.
1.1.8
“Dividend” shall
have the meaning set out in Clause 3.1.2.
1.1.9
“Due Diligence Documentation” shall
have the meaning set out in Clause 6.14.1
1.1.10
“Eidos Shares shall
mean shares issued by the Buyer.
The Eidos Shares shall rank
pari passu in all respects with the existing ordinary shares in the capital
of the Buyer and any dividend declared or paid by reference to a record
date falling on or after the date of the registration in the statutory
register of members of the Buyer shall rank as if they had been issued
fully paid on the beginning of the period in which such dividend is paid.
The Eidos Shares shall be allotted
and issued to the relevant Sellers on Completion and the names of the relevant
Sellers shall be entered (with effect from Completion) into the Buyer’s statutory
register of members as the holder of such number of Eidos Shares issued to
them under this Agreement.
The Buyer shall use its best
endeavours to procure that the Eidos Shares are admitted to the official
list of the UK Listing Authority and to trading on the London Stock Exchange
as soon as reasonable practicable after Completion.
The entry in the statutory
register of members of the Buyer and the certificates in respect of the Eidos
Shares shall (when made or issued) carry an endorsement that the Eidos Shares
are subject to the restrictions set out in this Agreement and the terms of
the Security Deposit Agreement.
1.1.11
“Escrow Agreement” shall
mean the agreed form set out in Schedule1.1.11
1,1.12
“Final Management Accounts” shall
mean Initial Management Accounts updated per 26 March 2004 to be attached
to this Agreement as Schedule 1.1.12.
1.1.13
“Initial Management
Accounts” shall mean the un-audited management accounts for the Company
for the period 1 January – 31
January 2004 including balance sheet, cash flow and profit and loss account
prepared in accordance with the continuous use of the accounting principles
applied by the Company in its audited statutory annual accounts for the financial
year ended 31 December 2003 with the exception of IO Interactive Hungary
Kft which should be shown as an investment attached to this Agreement as Schedule
1.1.13.
“Intellectual Property Rights” shall
mean the rights specified in Clause 6.5.2.4.
1.1.15
“Interest Payment” shall
have the meaning specified in Clause 3.1.1.
1.1.16
“Ivory Employee Share
Plan” shall mean the employee share plan under which the Residual
Shareholders have subscribed for Shares in the Company in accordance with
the existing Danish Act on Tax Assessment (in Danish “Ligningsloven”).
1.1.17
“Management Accounts” shall
mean the Initial Management Accounts and the Final Management Accounts
jointly.
1,1.18
“Notice” shall
have the meaning set forth in Clause 16.1.1.
1.1.19
“Party” and/or “Parties” shall
mean the parties of this Agreement.
1.1.20
“Purchase Price” shall
mean the amount referred to in Clause 3.1.1.
1.1.21
“Residual Shareholders” shall
mean all current and former employees owning Shares under the Employee
Share Plan as listed in Schedule,1.1.21. For the purposes
of this Agreement, the Key Employees and the individual shareholders of
Seller 1 are to be considered Residual Shareholders to the extent they
own Shares under the Employee Share Plan.
1.1.22
“Security Deposit Agreement”
shall have the meaning set forth in Clause 4.4 and Schedule 4.4.
“Sellers” shall
have the meaning set forth in the head of this Agreement.
1.1.24
“Sellers Knowledge” shall
have the meaning set forth in Clause 6.15.3
1.1.25
“Sellers' Representations
and Warranties” shall
mean the representations and warranties of the Sellers as set out in Clause
6.
1.1.26
“Shareholders” shall
mean any and all of the Company’s direct shareholders at the execution
and Completion of this Agreement with the exception of the Buyer itself.
1.1.27
“Shares” shall
mean shares issued by the Company of an aggregate nominal value of DKK
616,580.00 whereas the shares in the Company owned by the Buyer at Completion
are not to be included.
1.1.28
“Signing” shall
mean the signing of this Agreement representing a binding conditional exchange
of contracts.
1.1.29
“Warrants” shall
mean the warrants issued by the Company of an aggregate nominal value of
DKK 4,210.00.
2.
Sale and Purchase, Pre-Completion
Issuance of Shares
2.1
Sale and Purchase
Subject to the conditions
and terms of this Agreement, the Sellers hereby sell their respective block
of Shares as specified in Schedule 2.1 of the aggregate nominal
value of DKK 551,620.00 to the Buyer.
The sale and transfer of the Sellers’ Shares shall comprise any and all rights pertaining to these shares, including, without limitation, the title, the voting rights and the right to receive dividends except from the Dividend referred to in Clause 3.1.2 below.
2.2
Title
At Completion, the Buyer
receives title to the Sellers’ Shares.
2.3
Pre-Completion
Issuance and Subscription of Shares
Upon Signing, the Company
shall convene for a general meeting with an agenda in the agreed form set
out in Schedule 2.3 (i). At the general meeting, the Sellers shall
vote in favor of the resolutions set forth in Schedule 2.3 (ii), including
without limitation a directed issuance of B–shares of a nominal value
of DKK 40,000 to the Buyer at a share price of 105, and the Buyer shall
subscribe and pay in the subscribed share capital in accordance herewith.
3.
Purchase
Price
3.1
Purchase
Price
3.1.1
The purchase price for the
Shares shall be GBP 23.0 million, in words twenty-three million British
sterling pounds, equivalent to a share price of app. GBP 370.495658 per
share of nominal DKK 10.0. In addition to the Purchase Price the Sellers
are entitled to receive an additional payment equivalent to interest
on the cash part of the Purchase Price cf. Clause 4.1 calculated from
the date of registration of the new shares of the Company to be issued
to the Buyer in accordance with
Clause 2.3 and until Completion
(the “Interest Payment”). The interest rate shall amount to 3.66
per cent per year.
3.1.2
Dividend
Prior to Completion, the
Shareholders shall be entitled to declare a dividend from the Company in
the fixed amount of GBP 850,000, in words eight-hundred-and-fifty-thousand
British sterling pounds, relating to the financial year of the Company
ended 31 December 2003 ( “the Dividend “) provided that the necessary
free reserves are available in the Company cf. Sec.110 of the Danish
Act on Public Companies. The Buyer shall procure that the Company not later
than 5 Business Days after Completion makes effective payment of the Dividend
to the Shareholders in accordance with their shareholdings at the time
of the Dividend being declared.
4.
Payment of
Purchase Price
4.1
Purchase Price
Settlement Components
Each of the Sellers have
been offered and the Residual Shareholders will be offered to receive their
proportionate share of the Purchase Price in either cash, Eidos Shares
or in a combination of cash and Eidos Shares but the Buyer has however
reserved the right to settle any part of the Purchase Price in cash only
at the full discretion of the Buyer. The Sellers have requested to receive
and the Buyer has agreed to settle their proportionate share of the Purchase
Price in cash and/or Eidos Shares in the proportions reflected in Schedule
4.1.
Eidos Shares will be valued
by way of reference to the 10 (ten) day mid-market completion price average
prior to 1 day before Signing.
4.3
Payment of the Purchase Price
and the Interest Payment
4.3.1
At Completion, the Purchase
Price shall, subject to Clauses 4.4-4.5, be settled as follows:
4.3.1.1
The Buyer shall to Seller 1 (i) pay into
Seller 1’s account with Nordea Bank Danmark
A/S, Corporate Banking Department Copenhagen, Vesterbrogade 8, PO Box 850, DK-0900
Copenhagen C, reg. no. 2191, account no. 5036057744, IBAN NO. DK8620005036057744
GBP
8,081,391.00
and (ii) 700,000 Eidos
Shares (281,955 shall be transferred to the Compensation Escrow) having
a value (as computed pursuant to Clause 4.2) equivalent to
GBP
931,000.00
and (iii) pay into Nordea
Bank Danmark A/S in accordance with the Escrow Agreement
GBP
250,000.00
4.3.1.2
The Buyer shall to Seller
2
pay in cash into Seller 2’s account with Nordea Bank Danmark A/S, account no.
5005-503368, IBAN NO 1920005005503368 and
(ii) pay into Nordea Bank
Danmark A/S in accordance with the Escrow Agreement
GBP
625,000.00
4.3.1.3
The Buyer shall to the Key
Employees (i) pay into Key Employees bank accounts as specified in Schedule
4.3.2.3 in total specified in accordance with Schedule 4.1 and (ii)
GBP
833,191.00
811,509 Eidos Shares as specified
in Schedule 4.1 having an aggregate value (as computed pursuant to clause
4.2) equivalent to
GBP
1,079,307.00
4.3.1.4
The Buyer shall to the holders
of the Warrants pay into Jyske Bank, reg. no. 7255, account no.
00 01 32 00 95
GBP
155,979.00
4.3.1.5
Remaining purchase price
payable to the Residual Shareholders in either cash and/or Eidos Shares
having a value (as computed pursuant to Clause 4.2) (subject to such discretion
reserved by the Buyer as provided for in Clause 4.1) in accordance with
Sec. 20(b)-(c) of the Danish Public Companies Act
GBP
2,406,740.00
4.3.1.6
The Purchase Price, total
GBP
23,000,000.00
In addition thereto the Interest
Payment shall be paid to the Sellers to Jyske Bank,
account no. 00 01 32 00 95, SWIFT-BIC: JYBADKKK (to be split between the Sellers in accordance with their proportionate cash part of the Purchase Price).
All cash payments shall be
effected by wire transfer of same day funds to the relevant accounts specified
in Clauses 4.3.2.1 - 4.3.2.4.
4.4
Eidos Share Retention Period
in respect of Seller 1 and its shareholders The Eidos Shares acquired by
Seller 1 in accordance with Clauses 4.1 and 4.3 shall be subject to retention
in accordance with Clause 4.6 until the Buyer’s announcement of its
30 June 2005 year-end results, which is anticipated to take place in September
2005,
subject to any sale effectuated by the Buyer in accordance with the Escrow
Agreement. In the event that Seller 1 is de-merged, the seven main shareholders
in Seller 1 as designated in Schedule 4.4 shall each take over Eidos
Shares in accordance with their proportionate shareholdings in Seller 1 subject
to the terms and conditions of this Agreement and the Security Deposit Agreement.
4.5
Eidos Share
Retention Period in respect of the Key Employees
The Eidos Shares acquired
by the Key Employees shall be subject to retention until 31 October 2004
except for 25,000 Eidos Shares per Key Employee. The latter block of Eidos
Shares (25,000 per Key Employee) shall be subject to retention until
1 April 2005 in accordance with Clause 4.6.
For the duration of the retention
period, the Eidos Shares referred to in Clauses 4.4-4.5 are placed in a security
deposit with Nordea Bank Danmark on terms set out in the Security Deposit
Agreement. Seller 1 and the Key Employees undertake to make sales of their
Eidos Shares following expiry of the retention period only through brokers
designated by the Buyer, subject to such brokers charging competitive commission
and providing best execution.
5.
Completion
5.1
Completion
Subject to the satisfaction
of the conditions precedent below in Clause 5.2, Completion shall take
place at a meeting (“the Completion Meeting”) at the offices
of Plesner Svane Grønborg, Amerika Plads 37, 2100 Copenhagen Ø,
on 31 March 2004 at 1 p.m. CET or such later date as the parties may agree.
In the event of any circumstances barring any of the conditions precedent
below from being fulfilled, both parties shall until 1 May 2004 be mutually
obliged to seek to remedy the hindrance in question. In the absence of
all conditions precedent being met by the relevant party by 1 May 2004
(or waived by the other party) this Agreement shall become null and void
and the parties shall be entitled to claim damages in accordance with applicable
Danish law (however the Buyer shall not be entitled to claim damages in
the event the Sellers can not fulfill the condition precedent set out in
Clause 5.2.1.18). At Signing, the Buyer shall sign a
Memorandum
thereby confirming that the Sellers’ deliveries set forth in Clauses
5.2.1.2, -5.2.1.4 – 5.2.1.7 and have been delivered, and the Sellers
shall sign a Memorandum thereby confirming that the Buyer’s deliveries set
out in Clauses 5.2.1.2 – 5.2.2.4
have been delivered.
5.2
Completion
Meeting
At the Completion Meeting, the Parties shall make the following deliveries or procure the following deliveries to be made (as the case may be) and perform or procure the performance of (as the case may be) the following actions:
5.2.1
At the Completion Meeting
the
Sellers shall
5.2.1.1
Deliver to the Buyer the Company’s
original register of shareholders evidencing the due registration of the
Buyer’s clear title to the Sellers’ Shares (except from their Shares under
the Employee Share Plan, the shares of which will be subject to the Compulsory
Buy-Out).
5.2.1.2
Deliver to the Buyer documentary
evidence of the due compliance with the board approval requirement in the
Company’s articles of association regarding the transfer of the Shares.
5.2.1.3
Deliver to the Buyer documentary
evidence of the resignation effective as at Completion by the Company’s
current members of the board of directors.
5.2.1.4
Deliver to the Buyer documentary
evidence of the Sellers’ due execution of the Escrow Agreement.
Deliver to the Buyer documentary
evidence of Seller 1’s and the Key Employees’ due execution of the
Security Deposit Agreement.
5.2.1.6
Deliver to the Buyer documentary
evidence that the employees of the Company listed in Schedule 5.2.1.6
(i) (including the Key Employees and the shareholders of Seller 1)
each have signed new employment contracts with the Company as set out
in Schedule 5.1.2.6 (ii).
5.2.1.7
Deliver documentary evidence
that the Warrants have been transferred to the Buyer.
5.2.1.8
Deliver documentary evidence
that the Danish Investment Fund for Central and Eastern Europe has waived
their right to demand that the Company acquires the Fund for Central
and Eastern Europe's shares in IO Interactive Hungary kft due to the
transfer of the Shares in the Company and signed the Addendum as set
out in Schedule 5.2.1.8.
5.2.1.9
Deliver documentary evidence
that the transfer of Shares to the Buyer has not caused any of the Company’s
contracting parties listed in Schedule 5.2.1.9 to terminate their
contracts with the Company.
5.2.1.10
Deliver the draft annual
accounts of the Company for the financial year ended 31 December 2003.
5.2.1.11
Deliver the final annual
accounts of the Company for the financial year ended 31 December 2003
(in unchanged form compared to the draft cf. Clause 5.2.1.10) including
an unqualified report from the auditor of the Company and documentary
evidence that the annual accounts
of the Company for the
financial year ended 31 December 2003 have been approved by the board
of the Company and the general meeting and delivered to the Danish Commerce and Companies House
in due time.
5.2.1.12
Deliver documentary evidence
that the domain names HITMANCONTRACTS.COM, FREEDOMFIGHTERS2.COM and
FREEDOM
FIGHTER2.COM have
been transferred to the Company.
5.2.1.13
Deliver documentary evidence
that all Shareholders have been invited (in accordance with the articles
of association of the Company) to participate in an extraordinary general meeting
of the Company to take place on Completion for the purpose of election
of new board members of the Company.
5.2.1.14
Deliver documentary evidence
that the issuance of B-shares in the Company by nominally DKK 40,000
at a share price of 105 to the Buyer has been registered by the Danish
Commerce and Companies Agency including legal opinion from Asger Heine
Jensen and Vagn Thorup in the form set out in Schedule 5.2.1.14.
5.2.1.15
Deliver confirmation from
the Sellers that, in the period between Signing and Completion, there
have to the Sellers’ Knowledge occurred no material adverse change,
which is reasonably likely to result in (1) a material decrease of the
book equity value of the Company or (2) a material reduction of the operating
profits of the Company.
Deliver confirmation from
the Sellers’ that to the best of Sellers’ Knowledge, the
Seller’s Warranties are true and correct as of Completion.
5.2.1.17
Deliver the Final Management
Accounts prepared by the Company in accordance with the preparation of
the Initial Management Accounts and approved by the Buyer (the approval
of which can not be unreasonable withheld by the Buyer).
5.2.1.18
Deliver documentation
that the Company has no obligation to develop any games including additional
products (except from Freedom Fighters) to Electronic Arts Inc.
5.2.1.19
Deliver to the Buyer such
other documents and instruments as the Buyer may reasonably request in
order to properly perfect the Buyer’s rights under this Agreement.
5.2.2
At the Completion Meeting
the Buyer shall
5.2.2.1
Deliver to the Sellers
documentary evidence of the satisfaction of the Purchase Price as specified
in Clause 4.
5.2.2.2
Deliver to the Sellers
documentary evidence of its board approval of the transactions set out
in this Agreement;
5.2.2.3
Deliver to the Sellers
documentary evidence of the Buyer’s due execution of the Escrow Agreement.
Deliver to the Sellers
documentary evidence of the Buyer’s due execution of the Security Deposit
Agreement.
5.2.2.5
Deliver to the Sellers:
1. Board minutes of
the Buyer recording:
(a) the allotment and
issue of the Eidos Shares; and
(b) an instruction to
the Buyer's registrars that the names of the relevant Sellers be entered
into the statutory register of members of the Buyer; and
2. A copy of a letter
to the Buyer's brokers instructing them to apply for the Eidos Shares
to be admitted to the official list of the UK Listing Authority and
to trading on the London Stock Exchange.
5.2.2.6
Deliver to the Sellers
such other documents and instruments as the Sellers may reasonably request
in order to properly perfect the Sellers' rights under this Agreement.
6.
Sellers’ Representations
and Warranties
6.1
Representations and Warranties
By executing this Agreement,
the Sellers make the
following representations and warranties (“the Representations
and Warranties”) to the Buyer as of Signing which will be repeated and
restated as of Completion:
The Sellers have full power
and authority to enter into their obligations under this Agreement including
Schedules.
6.2.2
This Agreement including
Schedules constitutes a valid and binding obligation on part of
the Sellers and is enforceable in accordance with its terms.
6.2.3
The execution and performance
of this Agreement and the consummation of the transactions contemplated
hereby will not (i) violate any order, judgment, injunction, award, or
decree of any court, arbitrator, or governmental or regulatory body against,
or binding upon, the Sellers or the Company; or (ii) violate any statute,
law, or regulation applicable to the Sellers or the Company.
6.3
Corporate Matters
6.3.1
The Company is duly organized
and incorporated and validly existing under the laws of Denmark and the
name and the registration number of the Company is correctly set out
in the definition of the Company.
6.3.2
The Company is not in violation
of any corporate rules applicable and has the corporate power and lawful
authority to own, lease, and operate its assets and business and to
carry on its business as now being conducted.
6.3.3
The Company is duly qualified
or licensed in all material respects to conduct the business it is currently
conducting in Denmark and Hungary to the extent such qualification or
licensing is necessary and, in
particular, holds all authorizations, permits, and licenses to lawfully carry on such business.
6.3.4
Upon the B-Share issuance
in favor of the Buyer, the nominal share capital of the Company amounts to
DKK 616,580.00 A-Shares and DKK 40,000 B-Shares.
6.3.5
The Sellers’ Shares
excluding the Key Employees’ Shares under the Employee Share Plan not
forming part
of this Agreement represent 89.46 per cent of the nominal share capital of
the Company and are fully paid up. The Residual Shareholders’ Shares
are fully paid up.
6.3.6
The Sellers’ Shares are
ordinary
shares with equal voting rights.
6.3.7
No resolutions or decisions
have been made by the Board of Directors of the Company or by the Sellers
at a General Meeting of the Company which are not clearly reflected in the
Company’s Minute Books of the Board of Directors (last entry 18 December
2003) or the General Meetings (last entry 11 April 2003). The Company’s
Minute Books of the Board of Directors (last entry 18 December 2003) and
the General
Meetings (last entry 11 April 2003) accurately reflect all transactions referred
to in such minutes.
6.3.8
The Sellers have delivered
to the Buyer complete and correct copies of the constituent documents of
the Company as in effect on the date hereof. The share register of the Company
is complete and correct.
The Sellers have full title
to their Shares. The Sellers’ Shares are transferred free and clear of any
and all liens, charges, security interests, encumbrances and commitments
of any kind.
6.3.10
No third party has any subscription
rights, warrants, convertible bonds or the like issued or to be issued by
the Company and there is no outstanding security of any kind convertible
into such capital stock. At Completion there are no loans of whatever nature
issued or owed by the Company to the Sellers or third parties controlled
by the Sellers. No payments have to be made by the Company contingent upon
the sale of the Shares to the Buyer.
6.3.11
Without prejudice to Clause
3.1.2, no future dividend rights on any of the Shares have been disposed
of.
6.3.12
No shareholders’ agreements
or other agreements constraining the Buyer’s full and free title to the Shares
have been made between the Sellers, the shareholders of Seller I and/or any
third party.
6.3.13
With the exception of IO Interactive
Hungary kft, the Company is not a shareholder in any company, or party to
any joint ventures or partnerships.
6.4
Financial
Matters
6.4.1
The Company’s annual
accounts for the last three financial years (“the Annual Accounts”)
and the Management Accounts have been prepared in accordance with generally
accepted accounting principles in Denmark. The Annual Accounts and the Management
Accounts give a true and fair
view of the financial position, including the net asset value and earnings,
of the Company for the respective financial years and the period 1 January – 26
March 2004.
6.4.2
To the Sellers’ Knowledge Schedule
6.4.2 sets forth an exhaustive list of the Company’s contingent liabilities.
6.4.3
None of the Company’s
works in progress are included in the Annual Accounts/Management Accounts
with
a value in excess of such works’ ordinary (compared to the Company’s
past practice) part of the relevant contract sums, and no works in progress
are
expected to generate any loss for the Company due to circumstances within
the Company’s control.
6.4.4
The Company is in possession
of and has accurately kept and completed all accounts, books, ledgers, and
financial and other records as required by the applicable law.
6.4.5
Since the end of the 2003
fiscal year through the Completion Date, the Company:
(i)
has not suffered any material
adverse changes in its financial position, assets, or business, including,
but not limited to, the suffering of any damage, destruction or loss
by fire or other casualty;
(ii)
has conducted its
business in the ordinary course and has not made any unusual contracts, contract
changes or commitments
and has not sold, assigned, or transferred any tangible or intangible assets, except in the ordinary course of business;
(iii)
has to the Sellers’ Knowledge
not incurred any obligation or liability (absolute or contingent) except
from normal current liabilities incurred in the ordinary course of business
and
has not mortgaged, pledged, or subjected to a lien or encumbrance any of
its assets, tangible or intangible;
(iv)
has not made any declaration
(subject to Clause 3.1.2) or setting aside, or payment of any dividend or
any other distribution of profit not provided for in the Annual Accounts/Management
Accounts or any direct or indirect redemption, purchase, or other acquisition
of any shares of the Company; and
(v)
has not increased the total
compensation payable to its employees not provided for in the Management
Accounts (an increase of the number of employees above the number of employees
on which the budget is based is excluded from this warranty) and has not
adopted any profit-sharing plan, bonus plan, or new pension or benefit plan.
6.4.6
On basis of the Management
Accounts, the current working capital of the Company is sufficient for the
purpose of the operation of the Company as currently planned.
The shares in IO Interactive
Hungary Kft as specified in Schedule 6.5.2.3;
6.5.2.4
The intellectual property
rights listed in Schedule 6.5.2.4 (which
also includes all licenses to and from third parties for patents, trademarks/signs,
copyrights, software, or other intellectual property which are used by the
Company) and any trademarks/signs, trade names, copyrights, logos, service
marks, design rights, know-how, license rights, any applications for any
of the foregoing and any other industrial and intellectual property rights
identifying the Company as owner (“the Intellectual Property Rights”);
6.5.3
The Company has full title
to the Assets. The Assets are free and clear of any and all liens, charges,
security interests, encumbrances and commitments of any kind, except as specified
in Schedule 6.5.3.
6.5.4
In conjunction with the
assets leased by the Company as set out in Schedule 6.5.4, the Assets
comprise all assets that are necessary for the normal running of the present
business.
Since the end of the 2003
fiscal year, the Company has not disposed of or entered into any commitment
to dispose of any material assets.
6.5.6
To the Sellers’ Knowledge
the assets listed in Schedule 6.5.2.1 are in a good state of maintenance
and repair, taking into consideration normal wear and tear, and are
not significantly surplus to requirements.
6.6
Liabilities
and obligations
6.6.1
Since the end of the 2003
fiscal year, the Company has not to any unusual extent incurred or released
any debt or other liabilities and obligations, issued credit notes or renounced
any contractual rights.
6.6.2
The Company is not party
to any contracts of guarantee other than guarantees entered into in the
normal course of business in connection with fulfillment of orders, or
similar and has not signed or delivered any letters of intent, comfort,
awareness or similar which are not reflected in the latest Annual Accounts.
None of the Company’s rights
and interests under any contracts or agreements, including publishing,
supplier, distributor, confidentiality, non-disclosure, license and agency
agreements, leases, service agreements, commitments, orders and bids entered
into, accepted, made or submitted by the Company (the “Contracts”)
can be or will to the Sellers’ Knowledge be terminated or withdrawn
by the other party
due to this Agreement. No contractual party to any of the Contracts can claim a default thereunder due to this Agreement.
6.7.2
The Company is not in material
breach of any of the Contracts. No party to any of the Contracts is in
material breach of any of the Contracts. This warranty does not apply to
any of the Hitman agreements as specified in Schedule 6.7.2 between
the Company and the Buyer whereby the Company and the Buyer mutually declare
that to the Sellers’ Knowledge and to the best of the Buyer’s
knowledge, no such material default exists, let alone is anticipated.
6.7.3
The Contracts have been
entered into as part of the normal operations of the Company and do not
contain terms and conditions that are particularly onerous upon the Company.
The Company’s trading relations with publishers, distributors, agents and
suppliers have not changed or ceased within 12 (twelve) months prior to
the date hereof.
6.8
Intellectual Property Rights
6.8.1
The Intellectual Property
Rights are valid and enforceable. The Intellectual Property Rights are
not infringing upon any third party’s rights and no third party has
claimed or otherwise indicated that the Intellectual Property Rights are
infringing
upon any third party’s rights, or are not valid or enforceable. This
warranty does not apply to third parties’ independent creations and/or inventions.
6.8.2
Apart from commonly known
computer game piracy, the Intellectual Property Rights are not infringed
upon by any third party. The Buyer is aware that any enforcement under
the Company’s existing publishing
agreements shall be carried out by its publishers in their capacity of being exclusive licensees.
6.8.3
The Company has used its
best endeavours to preserve and maintain the Intellectual Property Rights
to the extent the enforcement of such rights lies with the Company.
6.8.4
Save co-existence rights
vested in independent third party creations and/or inventions, there are
no circumstances, which would entitle a third party to any rights in respect
of the Intellectual Property Rights.
6.8.5
The Company has kept confidential
all confidential information and the Company has no obligations to transfer
any information in respect of the Intellectual Property Rights to any third
party.
6.8.6
The Company has complete
ownership to and possession of the source code and object code relating
to the Intellectual Property Rights and the Company has not deposited or
provided any copies hereof with any third party.
6.8.7
The Company has not developed
by means of reverse engineering any of the Intellectual Property Rights.
6.8.8
The computer system of the
Company is fully effective and operational in all respects and has within
18 months prior to Signing not experienced any material failure and the
Company has all necessary maintenance and support agreements in respect
of its computer system.
All licences held by the
Company as specified in Schedule 6.5.2.4 are in full force and effect,
and
the Company is not in breach hereof.
6.8.10
The Company owns or
has adequate licensing rights to all software, know-how, trademarks, trade
names, including “IO Interactive”, copyrights and other intellectual
and industrial property rights that are necessary for the conduct of its
business as it is now conducted.
6.8.11
Schedule6.8.11 sets
forth an exhaustive list of the Company’s obligations to pay royalties,
fees or any other payment to third parties for the use of any intellectual
and industrial property rights or know-how.
6.9
Employees
6.9.1
The names of all the employees
of the Company are listed in Schedule 6.9.1 (the “Employees”).
Schedule 6.9.1 correctly and completely specifies each Employee’s name,
occupation, periods of employment, salary, general and special benefit.
The Company can terminate the contracts with the Employees with notices
usual within the business carried out by the Company.
6.9.2
None of the Employees
have given notice of termination of their employment, and the Sellers
are not aware of any of the Employees’ intending to give such notice
of termination.
6.9.3
None of the present or
former managers or members of the Board of Directors of the Company have – or
in connection with this Agreement
will have – any claim
against the Company except for remuneration entitlement of the present managers
of the Company pursuant to their respective employment contracts relating
to the period after Completion. No former employees of the Company have any
claims against the Company, which have not been fully provided for in the
Annual Accounts/Management Accounts.
6.9.4
The Employees have no pension
rights other than pension rights according to law and the Company’s Security
Scheme (in Danish “Tryghedsordning”). Allpension
obligations are fully provided or funded.
6.9.5
During the last three years
there have been no major work related accidents or illnesses with any of
the Company’s employees.
6.9.6
The Company has never experienced
any strikes or other material conflicts with its employees.
6.9.7
Except as listed in Schedule
6.9.7the Company does not have any outstanding offers of employment
or consultancy.
6.9.8
The Company does not have
any obligations towards consultants.
6.10
Tax Matters
6.10.1
The Company has not in the
last three years prior to Completion been in default and is not in default
with the payment of any governmental or municipal amounts due, including
corporate taxes, withholding taxes, real estate taxes, other taxes, VAT,
customs duties, duties on salaries (“arbejdsmarkedsbidrag”), contributions
to the Danish Labour
Market Supplementary Pensions
(“ATP”) and other governmental and municipal charges of whatever nature (“Taxes and Duties”).
To the extent that Taxes and Duties are not yet due for payment, Taxes and
Duties have been adequately reserved for in the Annual Accounts/Management
Accounts. In the manner required by the law, the Company has duly and timely
complied with its obligations to submit returns and other forms in relation
to Taxes and Duties and such returns and other forms have been prepared in
accordance with the applicable laws.
6.10.2
No assessments for additional
Taxes and Duties have been made, proposed or indicated which have not been
provided for in the accounts of the Company nor will there be any additional
assessment of Taxes and Duties against the Company as a consequence of actions
or omissions by the Company prior to Completion.
6.10.3
The Company has not been notified
that any of its tax returns or tax reports are presently under audit, and
there have not been any other investigations by any tax authority during
the past 12 months prior to Completion.
6.11
Compliance and Litigation
6.11.1
The Company has obtained all
necessary consents, permits and approvals for conduct of its business and
is conducting its business in full compliance with the consents, permits,
approvals, rights, exemptions, national and EU laws, regulations, orders
and requirements and its articles of association.
The Company is not party to
any arrangement which would violate Danish or EU anti-trust laws, nor has
the Company in any manner acted or is in any other matter acting in violation
thereof. The Company has not received any indication or notice that it or
the industry in which it is doing business has been or is being investigated
by any anti-trust authorities.
6.11.3
Except as provided for in Schedule 6.11.3,the Company has not in the last three years prior to Completion been and is not currently party to any lawsuits, arbitration proceedings, action of damages, complaints, public investigations, administrative methods or proceedings or the like and such disputes are to the best knowledge and belief of the Sellers and the Company not to be expected.
6.11.4
The Company has not been
involved
in events of product liability.
6.12
Insurance
6.12.1
The Company has entered into
the insurance policies as set out in Schedule 6.12.1 (the “Insurance Policies”),
The Insurance Polices are adequate and normal within the business in relation
to insurance amounts, scope of coverage, and premium and the Insurance Policies
remain in place. The Company has paid the insurance premiums on the due dates
and has not received or given notice of termination of the insurance policies
or received notice of increase of premiums except increases generally applied
by Danish insurance companies.
6.12.2
The preceding three (3) years
the Company has not had such a loss experience as might affect the Company’s
changes of future
All real estates leased by the Company are set forth in Schedule
6.13 and are free of any contamination or other material which, based on the currently applicable legislation, could cause environmental authorities or any other governmental bodies or agencies to order the Company (as opposed to its landlord and any former owner or tenant) to be responsible for the removal of such material or to order the Company the execution of other measures to protect the environment. The Company has assumed no liability relating to contamination or otherwise with respect to any real estate previously leased by the Company.
6.14
Miscellaneous
6.14.1
To the Sellers’ Knowledge
the Sellers and the Company have openly and fully disclosed in good faith
and after due inquiry all information and documentation requested by the
Buyer in the due diligence list (Schedule 6.14.1) (the “Due
Diligence Documentation”).
6.14.2
To the Sellers’ Knowledge
there exist no material facts or circumstances concerning the past or present
business of the Company, which can be expected to materially and adversely
affect the Company.
No grants, subsidies or similar
benefits from any authority will become repayable in whole or in part due
to this Agreement.
6.14.4
Seller 1 and Seller 2 have
no claims against the Company. The Residual Shareholders, the shareholders
of Seller 1 and the Key Employees have no claims against the Company outside
the scope of their respective ordinary employment.
6.14.5
There exist no agreements
of whatever nature (except for ordinary employment contracts) between the
Company on the one side and the Sellers and the shareholders of Seller 1
on the other side, Persons related to the Sellers and the shareholders of
Seller 1 or members of the Board of Directors or Management of the Company
and such members’ related persons. For the purpose of this provision, “Persons” shall
mean spouses, cohabitants, children etc.
6.15
Qualifications of Representations
and Warranties
The Sellers’ Representations and Warranties are subject to the following qualifications:
6.15.1
The Representations and Warranties
are the Sellers’ complete representations and warranties regarding the Company
and its business, and consequently, the Buyer cannot rely on implied representations
and warranties, assumptions, etc.
6.15.2
The Buyer and its advisors
have prior to the execution of this Agreement conducted due diligence investigations
into the Due Diligence Documentation, The Buyer and its advisors have had
access to interview the Company’s management and Key Employees.
The “Sellers’ Knowledge” shall
be construed as a reference to the actual knowledge of the persons listed
in Schedule 6.15.3 at the execution of this Agreement and such knowledge that the persons listed in Schedule 6.15.3 ought to have after having made due inquiries required of their respective professional offices.
6.15.4
The Representations and Warranties
are subject to the disclosure letter annexed as Schedule 6.15.4, (“the Disclosure Letter”).
6.15.5
The Sellers shall not be liable
for any breach of the Representations and Warranties if the event or circumstance
making the Representations and Warranties incorrect, incomplete and/or misleading
is stated in the Disclosure Letter or has been fairly and fully disclosed
in the Due Diligence Documentation.
6.15.6
The Representations
and Warranties under Clauses 6.3 – 6.14 are in respect of the liability
of the Key Employees under this Agreement made subject to the actual knowledge
of the Key Employees. For the avoidance of doubt this Clause 6.15.6 does
not have any impact on the liability of Seller 1 and Seller 2 towards the
Buyer in relation to this Agreement.
6.15.7
During its due diligence
review, the Buyer has identified the matters, claims and contingent liabilities
set out in Schedule 6.15.7. In the event such matters, claims, and
contingent liabilities materialize, the Sellers agree
to indemnify the Buyer without the limitations found in Clause 7.6.
In the event of the Sellers’ breach of the Representations and Warranties set out in clause 6 and/or in the event of the Sellers’ failure to fulfill its agreements, obligations or covenants under this Agreement, the Sellers shall indemnify and hold the Buyer harmless from and against all loss, cost and expense (the “Loss”)
thereby suffered or incurred by the Buyer.
7.2
The Buyer’s Loss shall be
the Buyer’s net loss effectively sustained less tax allowances and insurance
sums. The Buyer’s Loss shall be calculated exclusive of any indirect or
consequential loss, consequential cost or consequential expense.
7.3
Subject to Clause 7.8, second
paragraph, the Sellers shall be liable for the Buyer’s Loss on a pro rata
basis. Each Seller’s liability shall be capped at his share of the Purchase
Price in accordance with Clause 7.6.3.
7.4
The Buyer shall
actively and in good faith seek to mitigate the Loss.
7.5
Subject to the pro rata
liability limitation in clause 7.3, any claim by the Buyer shall be made
and pursued against the Sellers as a litis consortium. This clause 7.5
shall however not apply with respect to the Key Employees.
Any Loss suffered by the Buyer
as a result of the Sellers’ breach of any of the Representations and
Warranties shall be subject to the following limitations:
7.6.1
The Sellers shall not be
liable for any Loss suffered by the Buyer as a result of a claim arising
out of a single breach or inaccuracy of the Representations and Warranties
unless each such Loss is in excess of GBP 10,000 (“the De Minimis
Threshold”).
7.6.2
The Sellers shall not be
liable for any Loss suffered by the Buyer unless the aggregate of all Loss
arising from claims, which are in excess of the De Minimis Threshold, is
in excess of GBP 100,000 (the “Basket”) in which case the Sellers
shall be obligated to pay indemnification from the first GBP of the Loss.
7.6.3
The Sellers shall not be
liable for any Loss exceeding 50 per cent of the Purchase Price.
7.6.4
The Sellers shall have no
obligation to indemnify the Buyer’s Loss unless the Buyer gives Notice
without undue delay and within 30 Business Days after the Buyer became
or should have become aware of the events or circumstances giving rise
to the claim and that such events and circumstances would give rise to
a claim. The Buyer’s Notice shall state the best available specific grounds
supporting the claim, the amount of the claim and shall to the extent possible
be accompanied by all written documentation necessary to support the claim.
The liability of the Sellers
for the Buyer’s Loss shall expire 18 months following Completion except for
claims in respect of which prior written Notice has been given. However,
the Warranties contained in Clause 6.10 (Tax Matters) shall not terminate
until two months after the expiry of the statute of limitation under which
claims of the competent tax authorities may be raised against the Company.
7.7
Exclusion of
Limitations
The limitations of the liability
of the Sellers set out in Clause 7.6 shall not apply to claims for breach
of the Representations and Warranties arising out of or as a result of
willful misrepresentation or gross negligence on the part of the Sellers
nor with respect to Clause 6.2 (Validity, Execution, No Breach), Clause
6.3 (Corporate Matters), Clause 6.5 and Clause 6.10 (Tax Matters).
7.8
Compensation
Escrow
At Completion, GBP 625,000
of each of Seller 1’s and Seller 2’s respective share of the Purchase Price
(in total GBP 1,250,000) shall be placed in escrow (“Compensation
Escrow”) in accordance with the terms of the Escrow Agreement. Seller
1 shall pay into the Compensation Escrow GBP 250.000 in cash and Eidos
Shares to the value of GBP 375,000. Seller 2 shall pay into the Compensation
Escrow GBP 625.000 in cash. Upon production of a performance guarantee
from a renowned bank in the agreed form set out in Schedule 7.8 at
Completion, both Seller 1 and Seller 2 may ask that their proportionate
cash share of the Compensation Escrow (i.e. GBP 625,000 regarding Seller
2 and GBP 250.000 regarding Seller 1) be released.
In
the event that the Buyer sustains one or more Losses that qualify for indemnification
or compensation in accordance with the above provisions and such claim is
made against the Sellers in due time as provided for in Clauses 7.6.4-7.6.5,
the Buyer shall be entitled to claim the amount in question to be paid and
released from the Compensation Escrow in accordance with the terms of the
Escrow Agreement. Such claims shall be satisfied from the Compensation Escrow
at par value irrespective of Clause 7.3. The Sellers may request that the
Compensation Escrow or any residual part hereof (including increase of the
value of the Eidos Shares transferred to the Escrow Compensation) be released
18 months following Completion. For the avoidance of doubt any increase of
the value of the Eidos Shares paid into the Escrow Compensation shall be
for the benefit of the Buyer in relation to satisfaction of claims made against
the Sellers.
7.9
The Buyer’s
Exclusive Remedies
The Buyer agrees that the
remedies specified in this clause are the Buyer’s exclusive remedies
in the event of any breach of the Representations and Warranties and/or
in
the event of the Sellers’ failure to fulfill any of its agreements,
obligations or covenants under this Agreement. In particular, the Buyer
expressly waives
the right to rescind this Agreement and to claim a proportionate price
reduction of the Purchase Price (in Danish:“forholdsmæssigt
afslag i købesummen”).
8
The Buyer’s
Representations and Warranties
8.1
The Buyer represents
and warrants as follows:
8.1.1
The Buyer (i) is a company
duly organized and validly existing under the laws of the United Kingdom
and (ii) has the full right, power and authority to enter into the Agreement
and to consummate all transactions contemplated thereby.
This Agreement (i) has been
duly approved and authorised by the relevant decision-making bodies of the
Buyer, (ii) is valid and binding on the Buyer, (iii) and enforceable against
the Buyer in accordance with its terms.
8.1.3
Neither the execution nor
the performance of the Agreement will (i) conflict with or constitute breach
or violation of the articles of association of the Buyer and/or applicable
law, (ii) conflict with or result in breach of any agreement concluded
by the Buyer, except for any such agreements whose breach will not adversely
affect this Agreement, (iii) conflict with or constitute violation of any
judgment, decision or order made by any court or administrative body against
or binding upon the Buyer, or (iv) conflict with or constitute a violation
of any law or regulation applicable to the Buyer.
8.1.4
No consent of any shareholder,
creditor or any other person, or notification to, registration with or
the consent or approval of any court of law or administrative body is required
in connection with the execution and performance by the Buyer of the Agreement
except for the permission of the listing authority of the London stock
exchange in relation to listing of the Eidos Shares.
No claims, lawsuits, legal
or other proceedings are pending or to the Buyer’s knowledge threatened against
the Buyer or its property before any court, arbitration tribunal, or administrative
body that, if adversely decided, will prevent or delay the Buyer’s consummation
of the transactions contemplated by the Agreement.
8.1.6
The Board and the Company
Secretary of the Buyer do not have knowledge of any information that according
to applicable rules/legislation should have been made public prior to Signing
and that may have a material adverse effect on the Eidos Share Price.
8.1.7
The pre-Completion shareholder
decision to declare the Dividend will not be cancelled, replaced, amended
or changed in any way by the Buyer upon Completion. The Dividend will be
settled by effective payment only.
8.1.8
The pre-Completion directed
issuance of B-shares as set out in Schedule 2.3.ii will be subscribed and
paid-in by the Buyer prior to Completion.
9
Post-Completion Compulsory Buy-Out Procedure
9.1
Upon Completion, the Buyer
will purchase Shares owned by the Residual Shareholders in accordance with
the compulsory buy-out procedure under Sec. 20(b)-(c) of the Danish Act on
Public Companies.
The Buyer shall in respect
of each Key Employee and Seller 1 execute and file the petition for roll-over
tax treatment in the form set out in Schedule 9.2 with the tax authorities.
The Buyer shall not be responsible for the outcome of the petition.
9.3
The effectuation of the
Compulsory Buy-Out procedure shall be the sole responsibility of the Buyer
unless otherwise stated in this Agreement. The Sellers agree to use their
reasonable best endeavors to enable the Buyer to receive the Residual Shareholders’
acceptance of the price offered In connection with the Compulsory Buy-Out
procedure
immediately after Completion.
9.4
The costs related to the effectuation
of the Compulsory Buy-Out procedure and its possible contest shall be borne
by the Buyer. If, however, the share price offered by the Buyer to the Residual
Shareholders in accordance with Sec. 20(b) of the Act on Public Companies
is contested and following an expert opinion and final court decision increased,
the Sellers shall on a pro rata basis indemnify the Buyer from the increase
in the share price in respect of the Residual Shareholders benefiting here
from. In the absence of an explicit agreement to the contrary effect, such
dispute with one or more Residual Shareholders shall, if necessary, be tried
before all court instances possible, and the Buyer shall be obliged to consult
the Sellers and their advisors prior to making any material decision throughout
the proceedings.
10
Earn Out
10.1
Earn
Out Scheme
On Completion the Sellers and
the Residual Shareholders (the “Earn Out Participants”) will subject
to the terms of this Clause be entitled to participate in a four-year earn
out scheme
(“Earn Out Scheme”)
under which they will receive cash payments based on sale of Full-Price New
Game Units.
For purposes of this Clause, the following definitions shall apply:
10.2.2
“Bad Leaver” shall
mean a Key Employee or a Residual Shareholder or a shareholder of Seller
1 who ceases to be an employee with the Company due to 1) his material breach
of his employment terms or 2) his own resignation without qualifying as a
Good Leaver.
10.2.2.1
“Earn Out Participant” shall have the meaning set out in Clause 10.1.
10.2.2.2
“Earn Out Term” shall
mean a four-year term commencing on the date of Completion.
10.2.2.3
“Full-Priced Unit” shall
mean any Unit of New Games published on XBOX, XBOX2 Play Station 2, Play
Station 3 or PC that upon launch is sold at at least 75 per cent of the recommended
retail price of the manufacturer.
10.2.2.4
“Good Leaver” shall
mean a Key Employee or a Residual Shareholder (including the shareholders
of Seller 1) who ceases to be an employee
of the Company due to; a) his
retirement upon reaching his retirement age in accordance with his terms
of employment and/or applicable law; b) his death; c) his permanent disability
to perform his job due to an accident, illness or otherwise; d) his resignation
due to material changes of his responsibilities; e) his dismissal except
where this is caused by the employees' breach of his employment terms; or
f) because he is employed in a business of the Company or the Buyer’s Group
which is sold or otherwise disposed of.
10.2.2.5
“New Game” shall
mean any of the Company’s new interactive computer games being released by
the Company during the Earn Out Term.
10.2.2.6
“Net Wholesale Price” shall
mean the price received by the Buyer net of any sales tax and net of 15 per
cent returns and any price protection provisions.
10.2.2.7
“Unit” shall
mean a copy of any of the New Games no matter in which form it may be sold
whether off-line or on-line and whether currently in existence or yet to
be invented.
10.2.3
Earn Out Scheme Particulars
10.2.3.1
Total payments under
the Earn Out Scheme cannot exceed GBP 5 million. Total payments under the
Earn Out Scheme to Seller 1 can not exceed GBP 2 million, total payments
under the Earn Out Scheme to Seller 2 can not exceed GBP 2 million and total
payments under the Earn Out Scheme to the Key Employees and the Residual
Shareholders jointly cannot exceed GBP 1 million.
Any entitlement under the Earn
Out Scheme is based on an annual sale of Full-Priced Units above 2.1 million.
Any under performance against this threshold in a given year is carried over
to subsequent year(s) before any payment is made under the Earn Out Scheme,
e.g. if the Company sells 2 million Full-Priced Units in the first year of
the Earn Out Term then the Company must sell 2.2 million Full-Priced Units
in the second year before any payment is made under the Earn Out Scheme.
The following Full-Priced Unit thresholds of 2.55 and 3.5 million Full-Priced
Units (as referred to in Clauses 10.3.1, 10.4.1 and 10.5.1) respectively
shall consequentially be increased to 2.65 and 3.6 million Full-Priced Units
10.2.3.3
The Earn Out Scheme has been
structured under the assumption that the cost of production in the first
year of the Earn Out Term does not increase above the cost base set out in Schedule 10.2.3.3. The cost base for each of the following years of the Earn Out Term is to be determined on a yearly basis by the Buyer after prior consultation with the management team of the Company such consultation to include which components shall be included in the new cost base in relation to the Earn Out Scheme. In the event of any cost increase in excess hereof, the number of Units to be sold before any payment shall be made under the Earn Out Scheme will increase by a correspondingly percentage. For purposes of illustration, Schedule 10.2.3,3
sets forth an example.
The Earn Out Scheme
has been structured by the parties under the assumption that the New
Games are all published, marketed with the Buyer’s best endeavors and
sold as Full-Priced Units to the degree commercially possible within
the Earn Out Term. In the event that New Games are finally developed
by the Company and finally approved by Microsoft and Sony within the
last 2 months of the Earn Out Term the calculation of the payments under
the Earn Out Scheme shall include sales of Full-Priced Units of such
New Games within the first three months after release of such New Games.
However in no event shall any sales of Full-Priced Units later than three
months after the end of the Earn Out Term be included in calculation
of the payments under the Earn Out Scheme.
10.2.3.5
Payments under
the Earn Out Scheme shall be made within six months after the end of
each of the Earn Out Scheme years (i.e. six months after each year’s
Completion anniversary), however with no payment in year 3. In the event
of late payment, the Earn Out Participants shall be entitled to accrual
of statutory late payment interests in accordance with the Danish Act
on Interests.
10.2.3.6
The Buyer shall
be excluded from settling any payment payable under the Earn Out Scheme
to the Earn Out Participants by way of set-off. Any such payments shall
be paid effectively to the Earn Out Participants.
10.3
Earn
Out to Seller 1
Seller 1 and the Buyer
have agreed that Seller 1 shall participate in the Earn Out Scheme as
follows:
GBP 0.400 of each Full-Priced
Unit sold above 2.1 million Full-Priced Units
GBP 0.901 of each Full-Priced
Unit sold above 2,55 million Full-Priced Units
GBP 1.200 of each Full-Priced
Unit sold above 3.5 million Full-Priced Units.
10.3.2
In the event that
any individual shareholder in Seller 1 during the Earn Out Term ceases
to be an employee with the Company being a Bad Leaver, such person shall
be obliged to sell his shares in Seller 1 (or any such entity to which
the shareholders of Seller 1 have transferred their rights under the
Earn Out Scheme) to the other shareholders in Seller 1 at par value,
and the other shareholders shall be obliged to buy such person's shares
in Seller 1 at par value. The Buyer shall be a third party beneficiary
to the shareholders of Seller 1’s compliance with their obligation
to buy the Bad Leaver’s shares in Seller 1.
10.4
Earn
Out to Seller 2
Seller 2 and the Buyer
have agreed that Seller 2 shall participate in the Earn Out Scheme as
follows:
10.4.1
Seller 2 shall be
entitled to:
GBP 0.400 of each Full-Priced
Unit sold above 2.1 million Full-Priced Units
GBP 0.138 of each Full-Priced
Unit sold above 2.55 million Full-Priced Units
GBP 0.200 of each Full-Priced
Unit sold above 3.5 million Full-Priced Units.
Earn Out to the Key
Employees and the Residual Shareholders
10.5.1
The Key Employees
and the Residual Shareholders shall be entitled to (based on their earlier
proportionate shareholdings in the Company):
GBP 0.200 of each Full-Priced
Unit sold above 2.1 million Full-Priced Units
GBP 0.435 of each Full-Priced
Unit sold above 2.55 million Full-Priced Units
GBP 0.600 of each Full-Priced
Unit sold above 3.5 million Full-Priced Units.
10.5.2
Each Key Employee
shall cease to accrue any rights under the Earn Out Scheme when they
cease to be an employee with the Company by virtue of being a Bad Leaver.
Any rights accrued, but yet to be paid under the Earn Out Scheme will
be paid proportionally. Should one or more of the Key Employees cease
to be entitled to participate in the Earn Out Scheme, the other Key Employees’
eligibility to receive payments under the Earn Out Scheme will be increased
proportionately.
10.6
Earn Out to the Residual
Shareholders employed with the Company
10.6.1
The Residual Shareholders
shall be eligible to participate in the Earn Out Scheme on the same terms
and conditions as the Key Employees. The provisions in this Clause in
general and in Clause 10.5 in particular shall apply mutatis mutandis.
Seller 1’s, Seller
2’s, the Key Employees' as well the eligible Residual Shareholders’
participation in the Earn Out Scheme is illustrated in Schedule 10.7.
10.8
Sales of any other
Units at less than Full-Price (cf. the definition of Full Price Unit)
will, accrue a royalty at a rate of 15 per cent of the Net Wholesale
Price for any such Units sold during the Earn Out Term provided the annual
sale is above 2.1 million Full-Priced Units cf. Clause 10.2.3.2. For
the avoidance of doubt these payments shall be payments for the purpose
of the earn Out Scheme and Clause 10.2.3.1 shall apply. For inter-Sellers
apportionment purposes, it is agreed that the annual Earn Out amounts
payable to the Earn Out Participants (if any) shall be calculated on
basis of all Full-Priced Units sold in that particular Earn Out year
having been sold prior to the sales of any non-Full-Priced Units regardless
of the actual sequence of such sales. Furthermore, it is agreed that
any Earn Out amount payable under this Clause 10.8 shall be split between
the Earn Out Participants in the inter partes proportions set out under
the applicable Unit level.
10.9
The Sellers and the
Buyer are in agreement that the value of the Earn Out is capitalized
as set out in Schedule 10.9.
10.10
If one or
more of the Earn Out Participants disagree with respect to the
calculation of the payments to be made to the Earn Out Participants under
the Earn Out Scheme the Earn Out Participants shall give written notice
(“Notice of Disagreement”) to the Buyer specifying in reasonable
detail the nature of the disagreement asserted. The Notice of Disagreement
shall be given no later than 30 days after the Buyer
has send information to
the Earn Out Participants of the relevant payment under the Earn Out
Scheme. Failure by the Earn Out Participants to notify the Buyer within
the said time limit shall be deemed to constitute an agreement by the
Earn Out Participants to the calculation of such payment under the Earn
Out Scheme.
10.11
Following receipt
by the Buyer of the Notice of Disagreement, the Buyer and the Earn Out
Participants shall immediately attempt to resolve any disagreements,
which they may have with respect to any matters specified in the Notice
of Disagreement. If the Buyer and the Earn Out Participants have failed
to reach a written agreement within 15 days after the Buyer’s receipt
of the Notice of Disagreement with respect to all such matters, then
all such matters as specified in the Notice of Disagreement as to which
such agreement has not been reached (the “Disputed Matter”)
shall be submitted to and reviewed by KPMG who shall act as an independent
auditor. KPMG shall determine the Disputed Matter in accordance with
the principles set out in this Agreement with final and binding effect
on the Buyer and the Earn Out Participants.
11
Covenants
11.1
Further assurances
Each Party shall (i) deliver
such documentation, (ii) sign such supplementary declarations and certificates,
and (iii) take such other actions and do such other things as may be
reasonable or necessary for the proper and orderly consummation of this
Agreement.
The Buyer shall procure that
the Company keeps the Company’s books and other business records
relating to the period prior to Completion to the extent and for the period
prescribed
by the Danish Bookkeeping Act (in Danish: “Bogføringsloven”).
The Buyer shall further procure that during such period the Company allows
the Sellers and its advisors reasonable access to review and copy such
books and other business records within usual business hours at no extra
charge, provided that this information is required to fulfill the Sellers’
legal obligations towards public authorities.
12
Confidentiality
12.1
Confidentiality obligation
Subject to Clause 12.2 below,
the Parties shall treat as strictly confidential all information received
or obtained as a result of entering into or performing this Agreement relating
to (i) the existence and subject matter of this Agreement, (ii) the negotiations
relating to this Agreement, and (iii) the Company and the other Party.
12.2
Exceptions to Confidentiality
Obligation
Notwithstanding the provisions
of Clause 12, each Party may disclose information which would otherwise
be confidential in the event that
12.2.1
it is required by law or
by a court of competent jurisdiction;
12.2.2
it is required by any securities
exchange or regulatory or governmental body whether or not the requirement
for the information has the force of law;
the disclosure is made
as a normal part of the preparation of the accounts and/or other reports;
12.2.4
it is required by an entity
controlling the Party, provided always that a similar obligation to keep
such information secret and confidential is imposed on such entity controlling
the Party;
12.2.5
it is deemed necessary or
appropriate that the Party discloses such information to its advisors or
banks, provided always that a similar obligation to keep such information
secret and confidential is imposed on such advisors or banks;
12.2.6
the information has come
into the public domain through no fault of that Party or any authorised
recipient under Clauses 12.2.3-12.2.4;
12.2.7
the other Party has given
prior written approval to the disclosure, such approval not to be unreasonably
withheld or delayed.
12.3
Press
Release
The Parties are aware that
the publishing of the press releases must be made with the mutual consent
of the respective parties taking into due consideration that the Buyer is
listed on the London Stock Exchange. The Sellers are aware that the Buyer
will issue a compulsory stock exchange announcement to the London Stock Exchange
immediately after Signing.
Seller 1 and its shareholders
and the Key Employees (as opposed to Seller 2) shall not
13.1.1
for a period of 3 years from
Completion in respect of Seller 1 and its shareholders and for a period
of 1 year from Completion in respect of the Key Employees be engaged directly
or indirectly in any interactive computer games business of any nature
whatsoever (whether as holder of participating interests, employee, investor,
consultant or advisor or in any other way) anywhere in the world which
develops interactive computer games or otherwise carries on business that
competes with the Company as conducted prior to Completion.
13.1.2
The Sellers and the shareholders
of Seller 1 shall not
13.1.2.1
for a period of 3 years from
Completion solicit any of the Company’s business partners or customers at
the time of Completion or assist any third party in such solicitation in
relation to the businesses referred to in Clause 13.1.1 or seek to induce
the above business partners or customers to cease dealing with the Company,
and
13.1.2.2
for a period of 3 years from
Completion employ or offer employment to any of the Company’s employees.
13.1.3
The restrictive covenants
contained in Clauses 13.1.1- 13.1.2 shall not prevent the shareholders
of Seller 1 or the Key Employees from being employed by the Company.
Notwithstanding the obligations
under Clause 13, Seller 1 and its shareholders and the Key Employees shall
-be entitled to investments in listed companies, however maximized to five
(5) per cent of the share capital of the respective listed company.
13.3
Remedies for Breach of Restrictive
Covenant
In case of the Seller 1’s
or its shareholders’ or the Key Employees’ or Seller 2’s (“the Breaching
Party”) breach of its respective obligations under Clause 13 and if
such breach has not been fully remedied by the Breaching Party within ten
(10) Business Days from having received written notice from the Buyer alleging
that a breach has occurred, the Breaching Party shall notwithstanding the
limitations set forth in clause 7 pay the Buyer stipulated damages of DKK
1,000,000. The Buyer may claim actual damages only to the extent such actual
damages exceed the stipulated damages. Any payment of stipulated damages
shall not exempt the Breaching Party from its obligations under Clause
13. The Buyer shall further be entitled to apply for restraining injunction
against any such breach without provision of security. In the event of
violation of a continuing nature, each month of violation shall be deemed
to constitute a separate violation.
14
Joint and Several Liability
14.1
The persons listed in Schedule
4.4.i being the seven main shareholders of Seller 1 shall towards the
Buyer be jointly and severally liable for Seller 1’s fulfillment
of its obligations and covenants provided for in this Agreement, including,
but
not limited to Seller 1’s obligation to
indemnify the Buyer pursuant
to Clause 7. This Clause 14 shall remain in force and constitute a directly
enforceable obligation on the part of the.persons listed in Schedule 4.4
also in case that Seller 1 is de-merged, liquidated, declared bankrupt or
otherwise ceases to exist.
15
Choice of Law and Venue
15.1
Choice of Law
This Agreement shall be governed
by and construed in accordance with the laws of Denmark, excluding Danish
conflict of law rules.
15.2
Choice of Venue
Any dispute arising out of
or in connection with this Agreement shall be decided in accordance with
the Rules of Procedure of the Danish Institute of Arbitration (Copenhagen
Arbitration). Each Party shall appoint one arbitrator, and the Institute
shall appoint the chairman of the arbitration tribunal. If a Party has
not appointed an arbitrator within 20 (twenty) Business Days of having
requested or received notice of the arbitration, such arbitrator will be
appointed by the Institute in accordance with its Rules of Procedure. The
arbitration shall be conducted in English.
16
General Provisions
16.1
Notices
16.1.1
Any notice (a “Notice”)
given or made under or in connection with this Agreement shall be in writing.
Any Notice shall be addressed
as provided in Clause 16.1.3 or to such other address of which any Party
hereto may from time to time give Notice, and if so addressed shall be deemed
to have been duly given and made as follows
16.1.2.1
if sent by personal delivery,
upon delivery at the address of the relevant Party always provided that delivery
takes place during normal business hours on a Business Day;
16.1.2.2
if sent by first
class prepaid registered mail , at 10 a.m. five (5) Business Days after the
date of mailing; and
16.1.2.3
if sent by fax, four (4) hours
after its dispatch always provided (i) that the transmission is successful
according to usual fax receipt, (ii) that such time is within normal business
hours on a Business Day, (iii) that the recipient has not notified the sender
that the fax was illegible (provided that such Notice is given on the same
day), and (iv) that the Notice is at the same time forwarded by registered
mail to the relevant Party.
16.1.3
The relevant addresses and
fax numbers of each Party for the purpose of this Agreement are as follows:
Any amendment to this Agreement is valid only if made in writing and signed by duly authorised representatives of the Parties.
16.3
Assignment
This Agreement shall not be assigned or transferred by any Party without the prior written consent of the other Party. However, the Sellers and the Buyer may assign any of its rights and/or obligations to an entity Controlled by the Sellers or the Buyer respectively or Controlling the Sellers or the Buyer respectively, provided that the Sellers or the Buyer respectively shall remain jointly and severally liable with such entity for any and all obligations so assigned.
16.4
Entire agreement
This Agreement constitutes the whole and only agreement between the Parties relating to the transactions contemplated by the Agreement and supersedes any prior agreements, whether written or oral, relating to such transactions.
16.5
Interpretation
The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event of any ambiguity, or if a question of intent or interpretation should arise, this Agreement shall be construed as if drafted jointly by the Parties, and no presumption or burden of proof shall arise favouring or disfavouring any Party by virtue of the authorship of any of the provisions of this Agreement.
Any provision of this Agreement held to be invalid, illegal or unenforceable shall not affect the validity, legality or enforceability of the remaining provisions hereof. The Parties shall endeavour in good faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.
16.7
Counterparts
This Agreement may be executed in four (4) counterparts each of which shall constitute an original.
16.8
Cost and expenses
Each Party shall bear its own costs and expenses incurred in connection with the negotiation, preparation, and execution of this Agreement, including the fees of financial and legal advisors.
