MEMORANDUM OF UNDERSTANDING AND SHAREHOLDER AGREEMENT DATED 18TH MAY 2006 PARTIES TO THE AGREEMENT
Exhibit
99.1
MEMORANDUM
OF UNDERSTANDING AND SHAREHOLDER AGREEMENT DATED 18TH
MAY 2006
PARTIES
TO THE AGREEMENT
Sistech
Corporation Limited, Room no.301,Kam On Building,176A Queen Road, Central,
Hong
Kong, hereinafter referred to as ‘Sistech’ and represented by the Directors,
Xxxxxxxx Xxxxxxxxx, Indian Passport Holder or her Power of Attorney Holder
Xxxxxxx Xxxxxxxxx and Xxxxxx Xxxxxxxxxx Somaya (Xxxx) Indian Passport
Holder.
And
New
Medium Enterprises Inc, a USA, Nevada based corporation, headquartered in
London, 000, Xxx Xxxx, Xxxxxx X0 0XX hereinafter referred to as NME and
represented by Xxxxxx X. Xxxxxxxxxxx, Chief Executive Officer of the company,
British passport holder -000000000
This
agreement is executed at the Representative office of ‘Sistech’ in
China
Sistech
Corporation LTD. Dong Le Plaza,10th floor,1001.Near Guangshen Hotel, Shennan
Xxxx Xxxx,0000,Xxxxx,Xxxxxxxx-000000,Xxxxx.:
Purpose
of the Agreement
The
purpose of this agreement is for the parties to create a new company in Hong
Kong for the sole purpose of promoting the business interest of
NME.
The
new
company will be named New Medium Enterprises China Ltd.
The
shareholders agree that
·
|
NME
will hold 51% of the issued share
capital.
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·
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Sistech
will hold 49% of the issued share
capital.
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Objective
of the New Business
The
objective of the new company is
a)
|
to
license VMD technology to explicators and electronic manufacturers
in
China
|
b)
|
to
promote, market and sell VMD products to overseas buyers in Europe
etc.
|
In
specific the company will carry out the following activities:
Electronics
a)
|
Licensing
of VMD technology to OEMs, ODMs in China and South East Asia. This
is a
very big job as Licensing is the main feature of our activity and
these
guys have a lot of experience in this
field.
|
b)
|
Sales
& Marketing to European customers. Support US Sales
operations
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c)
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Supervise
all logistics and customer care of all shipments
abroad
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d)
|
Collection
of licensing fees.
|
e)
|
Organise,
coordinate and participate in relevant trade fairs in China and
South East
Asia
|
f)
|
Aggressively
promote VMD in the press etc.
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g)
|
Coordinate
our activities in Taiwan with Drive manufacturers etc.
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h)
|
Take
care of Taiwan as well in a similar capacity.
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Optics
a)
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Researching
and appointing licensing for optic
replication
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b)
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Sales
of VMD discs and coordinate with content
providers
|
c)
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Collection
of licensing fees
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d)
|
Aggressively
promote VMD optic in the press etc.
|
General
Liaison office for China and South East Asia on behalf of NME.
It
is agreed henceforth
This
agreement is made between the shareholders of the company and its directors
to
stipulate and clarify key issues in the running of the company and its
relationship to, and the rights of its, shareholders above the legal
requirements of the Companies Xxx 0000. It is a confidential internal company
document and not available for public inspection. It complements the Memorandum
and Articles of Association and covers only the shareholders who have signed
up
to it.
The
directors and shareholders agree that without the written permission of
shareholders representing 51% of the ordinary equity of the company, or as
specifically stated otherwise in this agreement, the directors and shareholders
will:
1.
The Directors shall not:
·
|
Change
the original shareholding structure of the company i.e. NME holds
51% and
Sistech holds 49%
|
·
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Open
any new bank accounts other than to be opened by the new company
at the
time of establishment.
|
·
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Enter
any new loan agreements, debentures or provide any guarantees or
indemnities
|
·
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Deviate
materially from the business plan or enter any new area of
business
|
·
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Transfer,
lease, assign, grant any license over any company property other
than the
sale of current assets in the normal course of
trading
|
·
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Establish
any subsidiary
|
·
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Authorise
any increase in the authorised share capital of the
company
|
·
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Agree
the sale or takeover of the
business
|
·
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Authorise
any share option schemes or revise director
emoluments
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2.
The directors shall:
·
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Hold
a monthly board meeting, with a maximum of 30 days between meetings,
and a
minimum of 10 board meetings per calendar
year.
|
·
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At
each board meeting, the time, date and place for the next meeting
shall be
agreed and each director and investor representative shall be notified
at
least 4 days prior to it.
|
·
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Circulate
an agenda a week in advance of the meeting, including minutes from
the
last board meeting for approval. The agenda will include a review
of
trading activities and financial status, as well as any other material
issues that are proposed for inclusion by directors and/or shareholders
representing 51% of issued shares. Proposed agenda items should
be
proposed to the chairman at least 4 days prior to the
meeting.
|
·
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Present
a brief monthly management report, including a set of management
accounts,
covering progress in relation to plan, prospects for the business,
and
highlighting any key or material issues faced by the company.
|
3.
Banking Arrangements/Transfer of Funds
·
|
The
Company shall have 2
authorised
signatories to all bank accounts, who must be directors, and shall
be
registered by the directors with the company’s
banks.
|
·
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In
the normal running of the business one ‘cheque book’/register of payments
shall be used and kept by the Financial Director who will usually
make
routine payments.
|
·
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Any
cheques or transfers in excess of $ 2,000 shall be required to
be signed /
authorised by two signatories, and any over $ 7,500 must additionally
be
approved by the board.
|
4.
Share Issues and Sale of Shares by the company or
shareholders:
·
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Transfer
of shares from an existing shareholder. Any transfer, other than
within
family members, or as a result of bereavement, or as a gift, must
be
approved by the board under the 51 % rule. Such consent shall not
be
unreasonably withheld.
|
·
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Any
sale of shares must be approved, such consent will not be reasonably
withheld, and existing shareholders shall have first refusal to
purchase
the shares under the same terms. Any issue/sale of shares by the
company
shall be offered to the existing shareholders under the same terms
and
they will have a pre-emption right to purchase such
shares.
|
5.
In the event of shareholder incapacity or
worse
·
|
The
shareholder shall nominate a representative, or nominate a member
of the
board, or the chairman, to vote on matters relating to the company
on
his/her behalf in the vent of their incapacity until he/she issues
written
instructions to the contrary or legal clarity is established between
his
estate and its benefactors. In the event of no such representative
being
available, then a spouse, or next of kin, shall be asked to act.
They
shall have the right to attend board meetings. This representative
shall
not be held liable by any party to this agreement, or any party
acting in
behalf of the shareholders benefactors, for any consequences of
their
decision-making.
|
·
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The
board and all shareholders will accept the representative’s authority to
vote on any matters of company
policy.
|
·
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The
normal management of the company shall continue to under the remaining
board based on normal board decision-making process. The directors
shall
be reasonable and consider the interests of the absent shareholder
and act
in good faith. They shall not be liable if decisions made were
not to the
maximum benefit of the absent
shareholder.
|
6.
Removal of Directors
In
addition to the provisions under the Articles of Association, a director
may be
removed from the office of director if:
·
|
2
other directors or major shareholders propose his/her removal in
writing,
this shall immediately be put to a vote and confirmed by a simple
majority
of over 50%.
|
·
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OR
by the unanimous decision of the other board members providing
there are
at least four members on the board.
|
·
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Under
such circumstances the severance rights in the director’s service contract
shall apply, as will their rights as shareholders under this
agreement.
|
7.
Right to appoint a Non Executive Director or Investor
Representative
·
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Any
investor, holding 50%
or
more of the company’s issued shareholder capital shall have the right to
appoint a non-executive director to the board, or to have a non-voting
representative present at board meetings. The Board of Directors,
acting
unanimously, shall have the right to veto the appointment of any
individual.
|
8.
Dividend Policy
·
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It
is not expected that the company will make a dividend for the next
one
year. After that any shareholder, or shareholders acting as one
through
written authority, representing at least 5% of the ordinary voting
equity
of the company shall have the right to insist that at least 10%
of profits
available for distribution (within the definitions of the Companies
Act
1985) in the accounting period, are distributed by way of cash
dividends
within 6 months of the end of that accounting period - providing
it is
lawful to do so.
|
9.
Shareholder and director confidentially obligations.
·
|
To
keep all matters relating to the company confidential except where
disclosure is required by law, or as part of the process of seeking
personal advice on the investment from professional advisers, whom
the
shareholder warrants will ensure
confidentiality.
|
·
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Each
parties obligations
|
Sistech
Obligations
Sistech
role will be to source and establish
a)
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optic
replicators in China to replicate VMD's in the
future
|
b)
|
electronic
2 and 3 tier manufacturers to adopt VMD in DVD
players
|
Further
a)
|
Provide
an office address with a dedicated Assistant to handle all J.V
matters
|
b)
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Provide
within Sistech office a showroom of our
products
|
c)
|
Aggressively
promote and market our products - optics and electronics to the
China
industry
|
d)
|
Aggressively
and market our product line to overseas customers who are current
Sistech
customers
|
e)
|
Aggressively
act as a global sourcing agent for NME.
|
The
new
company should work with and support all other NME JV's in China without
jeopardising NME relationships.
NME
Obligations
NME
will
give rights to license to third parties VMD technology.
Further
NME's obligation is to
a)
|
invest
$ 100k in J.V and the funds to be drawn down at $ 15k per month
to run all
expenses including your fees in the J.V ( this will not include
any
overseas travel or participation in any exhibitions etc,
marketing/advertisement etc which will be approved on a case by
case basis
by NME.)
|
b)
|
to
support VMD sales and provide l/c facilities for confirmed l/c
orders from
abroad if necessary
|
c)
|
provide
performance related bonuses to the Directors and management of
the J.V in
cash and NME shares as agreed by the board.
|
d)
|
to
permit the Directors and management of the new company to participate
in
any share incentive schemes of NME which will form part of the
Director
service contracts.
|
The
parties agree that should any item in this Agreement be construed to be in
breach or does not confirm with Hong Kong company law then such items will
be
waived from this agreement.
This
agreement will be governed by the laws of Hong Kong.
We
agree
to be bound by this agreement:
Director
/ Shareholder Name:
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Signature:
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Date:
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Witnessed
by the Company Secretary:
Company
Secretary:
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Signature:
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Date:
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An
original copy should be given to every shareholder / director party to this
agreement, plus one kept by the company secretary or the company’s lawyers in
the company file.