Exhibit 2.9
BUSINESS LINE PURCHASE
AGREEMENT
This Agreement is made on and shall be effective on this 16th day of February 2007
BY AND BETWEEN
Barun Electronics Co., Ltd, an entity duly authorized and validly exists under the laws
of Korea having its principal place of business at #000-0, Xxxxxxx-Xx, Xxxxx-Xxxx,
Xxxxxx-Xx Xxxxxx-Xx, Kyunggi-Do, Korea ("Seller")
And
On Track Innovations Ltd., a company duly authorized and validly exists under
the
laws of Israel having its principal place of business at ZHR Industrial Zone, XX Xxx 00
Xxxx Xxxx 00000, Israel.
("Buyer")
| Whereas |
Seller
is a leading engineering company and owns a business of manufacturing and selling smart
card modules including, but limited to, modules for contact smart cards, contactless
smart cards contact/contactless smart cards and SIM cards; and |
| Whereas |
Buyer
develops and is the sole owner of certain proprietary technology relating to the
manufacturing of contactless smart cards, readers and various products based thereon; and |
| Whereas |
The
Seller wishes to sell and the Buyer wishes to buy the Line of Business (as defined
hereunder) and Seller wishes to provide and Buyer wishes to obtain certain services of
the Seller; and |
| Whereas |
The
Parties wish to define by this Agreement the terms, conditions and other covenants
relating to the sale by the Seller and the purchase by the Buyer of the Line of Business. |
Now therefore the Parties have
agreed and signed the followings terms and conditions:
|
1.1 |
"Agreement" |
shall mean this agreement including all its annexes and schedules. |
|
1.2 |
"Line of Business" |
shall mean certain machinery, spare parts, jigs, supporting equipment and
Transfer Material all as detailed in Annex C hereto.
|
|
1.3 |
"Transfer Material" |
shall mean all the items specified in Annex C under the heading of "Transfer
Material". |
1
|
1.4 |
"OTI Shares" |
shall mean Ordinary Shares of the Buyer, par value NIS 0.10 per share, which
are not yet registered with the U.S. Securities and Exchange Commission and
are not yet registered for trading.
|
|
1.5 |
"Third Party" |
shall mean a person, firm, agent, corporation, government authority and/or any other legal entity.
|
|
1.6 |
"Liens" |
shall mean any lien (including any tax lien), mortgage, security interest,
obligations, restrictions, defect in title, rights of Third Parties (including
governmental or other agencies or authorities) or other encumbrance.
|
|
1.7 |
"Business Day" |
A day in which banks are open for business in both of South Korea and Israel.
|
|
1.8 |
"Buyer's Factory" |
shall mean On Track Innovations' joint smart card factory which is located at
FuTian free trade zone, Shenzhen China.
|
| |
2.1 |
Seller
hereby declares and undertakes to the Buyer that; |
| |
2.1.1 |
It
lawfully owns and has good title, clear and free from any Liens, in the Line of Business
and has no restrictions, whatsoever, to sell and transfer to the Buyer the Line of
Business and/or any of its components and/or any of its rights in its products under the
terms of this Agreement free and clear of any Liens; and |
| |
2.1.2 |
The
know-how, intellectual property, machinery and all other items which comprise the Line of
Business do not infringe any Third Parties’ rights, trademarks, patents, know how or
similar rights |
| |
2.1.3 |
All
the machinery and supporting equipment specified in Annex C except for article 2,
Spare Parts, Jigs, and supporting equipment and any software when upgrade is required are
fully compliant to their specifications attached in Annex C and can be fully operational
to manufacture their maximum manufacturing capacities for at least five (5) years from
the date hereof under the condition that all the machineries are maintained according to
the instructions provided by the Seller which such instructions shall be in compliance
with the original machinery manufacturer instruction; and |
| |
2.1.4 |
All
information contained in the Transfer Material is complete and accurate. |
2
| |
2.1.5 |
By
providing the Transfer Material, Seller hereby grants Buyer the irrevocable right to
manufacture, produce, license (including sub-license), sell, promote and/or distribute
modules which are identical, whether by design, shape or otherwise to the modules
produced by the Seller prior to the date hereof. For avoidance of doubt and except for
the consideration mentioned in this Agreement, Buyer shall not be required to pay any
license and/or consideration whatsoever to the Seller in lieu of the use of such
irrevocable right. |
| |
2.1.6 |
It
shall provide Buyer, as part of the Transfer Material, with all existing documentations,
drawings, records, instructions, manuals and other information in writing in connection
with the Line of Business, which are sufficient for the assembly, construction and
maintenance of the Line of Business by a third party without prior experience with the
assembly, construction and maintenance of such machines. |
| |
2.1.7 |
To
Seller’s best knowledge, the Line of Business, including any of its produces, does
not infringe any enforceable intellectual property right where such infringement would
reasonably be expected to have a material adverse effect on the Line of Business or its
produces and Seller has not received any notice of such infringement. |
| |
2.1.8 |
There
is no pending action, suit, arbitration, litigation, inquiry, proceeding or investigation
by or before any court, governmental or other regulatory or administrative agency,
commission or tribunal (“Action”) , and, to Seller’s knowledge, no
one has threatened to commence any Action: (i) that involves the Line of Business or that
otherwise relates to or would materially adversely affect the Line of Business (whether
or not Seller is named as a party thereto); or (ii) that challenges, or that may have the
effect of preventing, delaying, making illegal or otherwise interfering with, any of the
transactions contemplated hereby. |
| |
2.1.9 |
There
is no judgments, orders, injunctions, decrees, stipulations or awards (whether rendered
by a court, administrative agency, arbitrator or other tribunal and whether imposed or
entered by consent) to which the Line of Business is subject. |
| 3 |
Execution
of the Agreement; |
| |
Seller
shall provide the Line of Business and all additional services strictly in accordance with
the provisions set forth in Annex A – Deliveries as attached hereto. |
3
| |
4.1 |
Seller
hereby guarantees to the Buyer, that the Line of Business is free from material defects,
is in good state of operation and repair (normal wear and tear excluded) and is fit for
the purposes for which it is intended to be used in the ordinary course of business by
Buyer and that all the machinery purchased under this Agreement can be fully operational
in their maximum manufacturing capacities, if maintained according to Seller’s
instruction, for a period of at least five (5) years commencing the date hereof. Seller
acknowledges that the guarantee mentioned in this Clause 4.1 serves as the basis upon
which Buyer is entering into this Agreement. |
| |
4.2 |
Seller
undertakes to the Buyer that during the period of 36 months commencing the date hereof,
it shall be responsible to fix, at Buyer’s Factory, or replace, all on its own
account, any malfunctioning machine that has become malfunctioned due to aging , although
such machine has been properly maintained by the Buyer pursuant to Seller’s
instructions (which such instructions shall be in compliance with the original machinery
manufacturer instructions). Seller shall not take any responsibility, nor shall it be
required to pay any fixing or replacement costs, when machinery is malfunctioned due to
the reasons other than aging such as, but not limited to, bad workmanship or , misuse,
improper maintenance, out-of-date software, any improper operation, and careless use. |
| |
5.1 |
Without
derogating from the provisions of Clause 8 below, commencing the date that the Seller
shall ship the machinery of the Line of Business to the Buyer, Seller shall cease to
engage in the manufacturing, distributing and selling of smart card modules. |
| |
5.2 |
Seller
hereby undertakes towards the Buyer to notify, within 30 days from the date hereof, its
existing customers that all orders of smart card modules shall be placed with the Buyer
from the date hereof and onwards. |
| |
5.3 |
Seller
shall assist the Buyer to convince all of Seller’s customers to purchase smart card
modules from the Buyer. Buyer shall make efforts to provide Seller’s customers the
same terms of purchase as such customers received from the Seller. |
| 6 |
Consideration
and Payment Terms; |
| |
6.1 |
Subject
to the terms of this Agreement and in consideration for the Line of Business and the
prompt and adequate performance by the Seller of all its obligations under this
Agreement, Buyer shall pay Seller a consideration comprised out of OTI Shares all as
stipulated in Annex B – Consideration and Payment Terms. The
consideration paid by the Buyer to the Seller under this Agreement shall be done in
accordance with the provisions set forth in Annex B. |
4
| |
6.2 |
Restrictions
on the OTI Shares; |
| |
6.2.1 |
It
is hereby clarified and agreed that at the date hereof, none of the OTI Shares issued to
the Seller under this Agreement have been registered pursuant to the United States
Securities Act of 1933 (the “Securities Act”) and that such OTI Shares
may not be sold, transferred or otherwise disposed of unless registered pursuant to
the Securities Act (and, where required, under the laws of one or more other
jurisdictions), except in accordance with an applicable exemption from registration that
is available. |
| |
6.2.2 |
Seller
acknowledges and agrees that all certificates representing any of the OTI Shares
deposited with the Escrow Agent (as defined in Annex B) on behalf of the Seller under
this Agreement, may bear, and may be subject to, the restrictive legend, reading as
follows: “The shares represented by this certificate have not been
registered under the United States Securities Act of 1933 (the “Securities Act”)
and may not be transferred, sold or otherwise disposed of in the absence of an effective
registration statement with respect to such shares, filed and made effective under the
Securities Act, or an opinion of counsel satisfactory to OTI is obtained to the
effect that registration under the Securities Act is not required.” |
| |
6.2.3 |
Seller
undertakes not to engage in hedging transactions in the United States of America with
regard to the OTI Shares unless in compliance with the Securities Act. |
| |
6.2.4 |
Seller
acknowledges and undertakes that the sale by it, or by any other trustee it shall appoint
to execute the sale of the OTI Shares, shall be done strictly in accordance with OTI’s
Xxxxxxx Xxxxxxx policy which is attached hereto as Schedule B – Xxxxxxx Xxxxxxx
Policy. |
| |
6.2.5 |
Seller
shall verify that the sale of any of the OTI Shares in a free market action at the NASDAQ
stock exchange shall not exceed the amount of 5,000 OTI Shares per a single trading day. |
| |
6.2.6 |
Seller
understands that the OTI Shares have not been registered under the Securities Act. Seller
also understand that the OTI Shares are being offered and sold pursuant to an exemption
from registration contained in the Securities Act based in part upon Seller’s
representations contained in the Agreement. Seller hereby represents and warrants as
follows: |
| |
6.2.6.1 |
It
is acquiring the OTI Shares for its own account for investment only, and not with a view
towards their distribution. |
| |
6.2.6.2 |
It
represents that by reason of its, or of its management’s, business or financial
experience, it has the capacity to protect its own interests in connection with the
transactions contemplated hereunder. Further, it is aware of no publication of any
advertisement in connection with the transactions contemplated hereunder. |
5
| |
6.2.6.3 |
It
represents that it is an accredited investor within the meaning of Regulation D under the
Securities Act. |
| |
6.2.6.4 |
It
has had the opportunity to ask questions of and receive answers from, Buyer and its
management regarding the terms and conditions of its investment in Buyer and also to
conduct an independent due diligence by a representative thereof. |
| |
6.2.6.5 |
It
acknowledges and agrees that the OTI Shares must be held indefinitely unless it is
subsequently registered under the Securities Act or an exemption from such registration
is available. It has been advised or is aware of the provisions of Rule 144 promulgated
under the Securities Act as in effect from time to time, which permits limited resale of
shares purchased in a private placement subject to the satisfaction of certain
conditions, including, among other things: the availability of certain current public
information about Buyer, the resale occurring following the required holding period under
Rule 144 and the number of shares being sold during any three-month period not exceeding
specified limitations. |
| |
6.2.7 |
The
Seller is not a “U.S. person”, as such term is defined in Regulation S, his
principal address is outside the United States, and it was located outside the United
States at the time any offer to buy the OTI Shares was made to the Seller and at the time
that this agreement was entered into by the Seller. |
| |
6.2.8 |
At
no time was the Seller presented with or solicited by any leaflet, public promotional
meeting, newspaper or magazine article, radio or television advertisement or any other
form of general advertising or general solicitation concerning the OTI Shares. |
| |
6.2.9 |
The
Seller represents that it is not a broker or dealer, nor is it an affiliate of any broker
or dealer. For the purpose of this Sub-Section, the term “dealer” means any
person who engages either for all or part of his time, directly or indirectly, as agent,
broker, or principal, in the business of offering, buying, selling, or otherwise dealing
or trading in securities issued by another person; and the term “broker”means
any person engaged in the business of effecting transactions in securities for the
account of others. |
| |
6.2.10 |
The
Seller will not register any transfer of the OTI Shares not made in accordance with the
provisions of Regulation S, pursuant to registration under the Securities Act, or
pursuant to an available exemption from registration. |
6
| |
6.3 |
Registration
of the OTI Shares: |
| |
6.3.1 |
No
later than June 15, 2007, OTI shall prepare and file with the SEC a Registration
Statement on Form F-3 (or, if Form F-3 is not then available to OTI, on such form of
registration statement as is then available to effect a registration for resale of the
OTI Shares), covering the resale of the OTI Shares. |
| |
6.3.2 |
As
soon as practically possible, OTI hereby undertakes to deliver to Seller the notice
confirming that the OTI Shares have become tradable on NASDAQ (the “Notice of
Tradability”). The Notice of Tradability shall be issued by a professional
broker admitted to practice in a jurisdiction in which the Notice of Tradability is
issued. Alternatively, OTI, at its sole discretion, may deliver to the Seller the
Notice of Tradability issued by its Company Secretary. |
| |
6.4.1 |
Seller
hereby confirms that it shall be solely responsible and liable for any taxes arising out
of or in connection with the sale of the OTI Shares. |
| |
6.4.2 |
Seller
further acknowledges the existence of a tax treaty between the State of Israel and the
Republic of South Korea (“Tax Treaty”). Therefore, Seller hereby
irrevocably grants Buyer the right to deduct and transfer to any relevant competent
authority any tax amount it shall be required to deduct or withhold from any part of the
Consideration described in Annex B hereto, all according to the terms of the Tax Treaty.
Should the Buyer be required to deduct taxes according to the Tax Treaty, it shall issue
to the Seller a notice describing the amount deducted and other relevant information. and
the such taxed shall be withheld by the Buyer only to the extent required by law and
actually paid to the appropriate taxing authorities. the Buyer shall, within forty-five
(45)days following payment of any such taxes, provide proof to the Seller of payment of
such taxes (such proof including, but not limited to, official receipts in the name of
Buyer and photocopies of all forms filed by the Buyer with the appropriate taxing
authorities) together with certified English translations of such documentation (if not
in the English language). |
| |
6.4.3 |
Seller
hereby irrevocably waives, relinquishes and releases the Buyer from any and all claims,
rights, demands or causes of action asserted or non-asserted which Seller may have had,
now has or hereafter may have against the Buyer, its directors, officers, employees,
agents and/or consultants, in connection with the issuing and/or sale of the OTI Shares,
including without limitation, any fluctuations in the OTI Share price. |
7
| 7 |
Representations
and Warranties; |
| |
Each
party hereby represents and warrants to the other party that as of the date hereof: |
| |
7.1 |
It
is a legal entity, duly organized, validly existing and in good standing under the laws
of the place of its establishment or incorporation; its control has not changed in any
way since the 1st day of November, 2006; and |
| |
7.2 |
Its
legal representative is duly and fully authorized and empowered to sign, execute and give
effect, on its behalf, to this Agreement and any other agreements and documents referred
to in this Agreement and to which it is a party; and |
| |
7.3 |
The
execution, delivery and performance of this Agreement and any other agreements and
documents contemplated hereunder will not violate any of its constitution documents, any
other agreement or obligation of such party, any judgment or arbitral award binding such
party, or any currently effective law, regulation or decree of the jurisdiction in which
it is organized or incorporated under, that may be applicable to any aspect of the
transactions contemplated hereunder; and |
| |
7.4 |
It
has disclosed, in writing, all known material information in its possession relating to
the cooperation between the parties set out under this Agreement, which might have a
material adverse effect on its ability to fully perform its obligations hereunder, or
which if disclosed to the other party, could have a material effect on the other party’s
willingness to enter into this Agreement, and none of the information provided by it to
the other party, to the best of its knowledge, contains any statements which are false or
misleading; and |
| |
7.5 |
In
addition to the foregoing undertakings in Clause 2 above, no material lawsuit,
arbitration, other legal or administrative proceeding, or governmental investigation is
pending, or to the best of its knowledge, threatened, against it that would affect in any
way its ability to enter into or perform this Agreement. |
| |
7.6 |
It
shall timely and adequately perform any and all of its obligations hereunder. It is
further agreed that any non performance or breach of a party’s obligation hereunder
shall be cured within fourteen (15) Business Days upon receipt of a written notification
from the non breaching party. Failure to cure such non performance or breach within such
fourteen (15) Business Days period shall be considered as a material breach of this
Agreement. |
| |
Seller
undertakes towards the Buyer, and for its affiliates it guarantees as a separate
liability, that during a period of sixty (60) months commencing the date hereof neither
it, nor any of its affiliates, shall by itself or through its own account or in
conjunction with or on behalf of or through any other person, firm, company, entity or
organization and whether in the capacity of a trustee, nominee, beneficiary or principal
(as the case may be) carry on or be engaged, concerned or interested in any manner
directly or indirectly, whether as owner, partner, shareholder, director, consultant,
agent, service provider, employee or otherwise, in any business activity which:- |
8
| |
(a) |
Is
competing with or similar to any business carried on by the Buyer or any of
its affiliates, which involves the use of any part of the Line of
Business at any time and from time to time; or |
| |
(b) |
Engage
in manufacturing, marketing, renting, leasing, selling, offering to sell,
supplying, transferring, delivering, distributing, accepting or
transmitting orders for or dealing in or with in any manner or any
product which would be sold in or imported anywhere in the world and
is competing with (directly or indirectly), or similar to the
products manufactured by any of the components of the Line of
Business. |
| 9 |
Governing
Law and Dispute Resolution; |
| |
9.1 |
This
Agreement shall be governed by the laws of the State of New York, United States of
America. |
| |
9.2 |
In
the event that a dispute, between the parties, arises out of or in connection with this
Agreement, the parties shall endeavor, in good faith, to reach an amicable settlement of
the dispute through friendly negotiations. |
| |
9.3 |
If
no mutually acceptable settlement of the dispute is reached within sixty (60) days
following the date of the commencement of the settlement negotiation above, or if any
party refuses to engage in any settlement negotiation, any party may submit the dispute
for further legal proceedings in a competent court in New York City, United States of
America. Any legal proceedings shall be held exclusively in New York City by its
competent courts. |
| |
10.1 |
All
Annexes and Schedules attached hereto shall be considered as an integral part of this
Agreement as if such annexes and schedule were firstly written herein. |
| |
10.2 |
A
party’s failure to insist on strict and timely performance of any provision
hereunder shall not constitute a waiver of such right, nor shall a party’s waiver of
such right constitute a waiver with respect to subsequent breaches, similar or otherwise. |
| |
10.3 |
Notices
and other communications between the parties shall be prepared in English language,
and sent to the following: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
To Buyer; |
On Track Innovations Ltd. |
| |
|
Attention: Xx. Xxxx Xxxxxx |
| |
|
Fax: x000 0 0000000 |
| |
| |
To Seller; |
Barun Electronics Co., Ltd |
| |
|
Attention: Mr. Wan-Gyun Xxxx |
| |
|
Fax: x00 00-000-0000 |
9
| |
10.4 |
At
a date not later than the date hereof the parties shall sign the mutual non disclosure
agreement attached hereto as Schedule C – MNDA. The attached mutual non
disclosure agreement shall be an integral part of this Agreement but shall survive its
termination. |
| |
10.5 |
Except
for any non disclosure agreements and/or confidentiality agreements and/or price
quotations and/or business orders between the parties, this Agreement shall supersede all
memorandums, agreements and arrangements previously entered into between the parties on
the subject matter hereof and all such memorandums, agreements and arrangements shall
become void from the date of the execution of this Agreement. |
| |
10.6 |
Any
amendment to this Agreement shall be made only by the written consent of both parties. |
| |
10.7 |
Matters
not covered in this Agreement shall be handled in accordance with the laws of the state
of New York. |
IN WITNESS WHEREOF, the parties,
acting through their duly authorized representatives, have executed this Agreement, as of
the date first written above.
For and on Behalf of
Barun Electronics Co. Ltd.
/s/ Wan-Gyun Xxxx
——————————————
Mr. Wan-Gyun Xxxx
President |
For and on Behalf of
On Track Innovations Ltd.
/s/ Xxxx Xxxxxx
——————————————
Xx. Xxxx Xxxxxx
Chairman, President & CEO |
10
