EXHIBIT 10.18
THIS SHAREHOLDERS AGREEMENT is made as of the day of February 2000
BETWEEN:-
1. OCEAN WONDER LIMITED, a company incorporated in the British Virgin
Islands whose registered office is situate at P.O. Box 957, Offshore
Incorporations Centre, Road Town, Tortola, British Virgin Islands
("CK-X");
2. ON TRACK INNOVATIONS LTD., a company incorporated in the State of
Israel whose registered office is situate at X.X.X. Xxxxxxxxxx Xxxx,
Xxxx Xxxx 00000, Xxxxxx ("OTI"),
(CK-X AND OTI ARE TOGETHER HEREINAFTER REFERRED TO AS THE
"SHAREHOLDERS" AND EACH A "SHAREHOLDER");
3. SAILOR GROUP LIMITED (to be renamed OTI ASIA PACIFIC LTD.), a company
incorporated in the British Virgin Islands whose registered office is
at, P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola,
British Virgin Islands (the "COMPANY"); and
4. THE PERSONS LISTED IN SCHEDULE A HERETO (HEREINAFTER TOGETHER REFERRED
TO AS THE "CONTROLLING PARTIES" AND EACH A "CONTROLLING PARTY").
RECITALS:-
(A) The Company has at the date hereof an authorised share capital of
US$50,000 divided into 50,000 shares of US$1 each of which 2 shares
have been issued and are legally and beneficially held by CK-X and OTI.
(B) The Shareholders have agreed to enter into this Agreement for the
purpose of regulating the relationship between the Shareholders as
shareholders of the Company, to set out the basis on which the business
and affairs of the Company and all members of the Group (as defined
below) would be managed and controlled and to provide for their rights
and duties between themselves and other matters herein set out.
(C) The Controlling Parties have agreed to enter into this Agreement to
procure and ensure that CK-X and OTI shall comply with the terms and
conditions of this Agreement respectively insofar as such terms and
conditions relate to CK-X and OTI.
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NOW IT IS HEREBY AGREED AS FOLLOWS:-
1. DEFINITIONS AND INTERPRETATION
1.1 In this Agreement, unless the context otherwise requires, the following
words and expressions shall have the respective meanings attributed to
them below:-
"AGREEMENT" this agreement (which expression shall be deemed
to include the Recitals and Schedules hereto) as
amended and/or supplemented from time to time in
accordance with the provisions herein;
"ARTICLES" the Articles of Association of the Company in
their present form, and as may be amended and/or
supplemented from time to time thereafter;
"ANNUAL BUSINESS PLAN" the annual business plan of the Company
described in Clause 4.14;
"AUDITED ACCOUNTS" the consolidated audited accounts of Smartco and
its subsidiaries prepared up to 31st December
1999, to be delivered by OTI to CK-X;
"AUDITORS" the auditors for the time being of the Company;
"BOARD" the board of Directors for the time being of the
Company;
"BUSINESS DAY" a day (not being a Saturday) on which banks are
officially open for business in Hong Kong and in
Israel;
"CK GROUP" the group of companies consisting of XXXXXX KONG
(HOLDINGS) LIMITED (a company incorporated under
the laws of Hong Kong) and HUTCHISION WHAMPOA
LIMITED (a company incorporated under the laws
of Hong Kong) together with their respective
subsidiaries from time to time;
"CK GROUP PROPRIETARY all the property, rights, title and interests of
CK Group in and to:-
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(a) all information of whatever kind or nature
on the policies, methodologies, procedures
and systems of operation devised for or
adopted in, any business or activity of CK-X
or any member of CK Group, whether in
tangible or documented form or communicated
orally and whether marked or identified in
an adequate manner as being proprietary or
under the control of CK-X or CK Group and
includes, without limitation, proprietary
information relating to strategic planning,
organisation and development, administration
and governance, business relations, planning
and budgeting, staffing, finance and
accounting, investment, procurement, sale,
marketing and products; and
(b) all names, logos or marks for the time being
and from time to time used by CK-X or any
member of CK Group in relation to the
business of the Group, whether or not
applied for registration (whether as a
service xxxx or trade xxxx);
"COMPANIES ORDINANCE" COMPANIES ORDINANCE (CAP.32 OF THE LAWS OF HONG
KONG);
"DILUTING LOAN" shall have the meaning given to that expression
in Clause 7.4.3(a);
"DIRECTOR" a director of the Company from time to time
appointed to the Board under the provisions of
this Agreement (and "DIRECTORS" shall be
construed accordingly);
"DISTRIBUTION AGREEMENT" the agreement to be entered into between OTI
and the Company (in substantially the form as
set out in SCHEDULE B) and as may be amended
and/or supplemented from time to time in
accordance with the provisions therein;
"ENCUMBRANCE" includes mortgages, charges, lien or any
encumbrance;
"EVENT OF DEFAULT" shall have the meaning given to that expression
in Clause 8.1;
"EXCLUSIVE TERRITORY" the countries and areas listed in ANNEX C to the
Distribution Agreement where the Company shall
be appointed exclusive distributor and retain
exclusive distribution rights under the
Distribution Agreement;
"FAIR MARKET VALUE" shall have the meaning given to that expression
in Clause 10.1;
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"FISCAL YEAR" the twelve calendar month fiscal period of the
Company commencing on 1st January and ending on
31st December of each year, as such Fiscal Year
may from time to time be changed in accordance
with the direction from the Board or the
Articles and applicable law;
"GAAP" accounting principles generally accepted in Hong
Kong at the relevant time;
"GROUP" the group of companies consisting of the Company
and the Subsidiaries and "MEMBER OF THE GROUP"
shall be construed accordingly;
"HONG KONG" the Hong Kong Special Administrative Region of
the People's Republic of China;
"LIBOR" the rate per annum equal to the arithmetic mean
(rounded up if necessary to the next 1/16 per
cent) of the respective offered quotations for
deposits in US$ for twelve months which appear
on the relevant display page on the Reuters
Monitor Money Rates Service for the purpose of
displaying London inter-bank offered rates of
leading banks in respect of US$ at or about 11
a.m. (London time) on the rate fixing day;
provided that if no such offered quotation
should appear on the relevant display page as
aforesaid, LIBOR shall be the rate as determined
and quoted by Citibank, N.A., Hong Kong Branch;
"LISTING" shall have the meaning given to that expression
in Clause 12.2;
"MANAGEMENT COMMITTEE" shall have the meaning given to that expression
in Clause 5.2;
"MCA" a mutual confidentiality agreement in the form
as set out in SCHEDULE D;
"MEMORANDUM" the Memorandum of Association of the Company in
its present form, and as may be amended and/or
supplemented from time to time thereafter;
"OFFICER" OR "OFFICERS" shall have the meaning given to that expression
in Clause 5.2;
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"OPTION" shall have the meaning given to that expression
in Clause 4.17.1;
"OTI INTELLECTUAL PROPERTY" all the property, rights, title and interests of
OTI in and to:-
(a) all the applications for patents and rights
of a similar nature and granted patents,
short particulars of which are set out in
PART 1 of SCHEDULE C;
(b) all the proprietary know-how, technologies
and/or trade secrets, whether in the form of
information, knowledge, formula, processes,
methodologies, data, plans and designs from
time to time owned by OTI and summarised on
the date hereof in PART 2 of SCHEDULE C and
all copyright in any written materials,
plans, designs, manuals or other works and
all designs, whether or not registered or
protected by copyright, devised, acquired or
held by OTI relating thereto;
(c) all names, logos or marks for the time being
and from time to time used by OTI in
relation to the OTI Products, whether or not
applied for registration (whether as a
service xxxx or trade xxxx) including,
without limitation, applications, the
particulars of which are set out in PART 3
of SCHEDULE C; and
(d) all industrial and intellectual property
rights relating to all the foregoing and
subsisting therein;
"OTI PRODUCTS" means the products set out in ANNEX A to the
Distribution Agreement and includes products
manufactured by or by the order of OTI or its
related companies pursuant to or by applying or
utilizing the OTI Intellectual Property or any
part thereof;
"PERSON" includes an individual, a corporate body,
partnership or any entity or body of persons;
"QUARTER" a Gregorian calendar quarter (i.e., one of the
four periods of three consecutive months each,
beginning on the first day of January, April,
July and October of each Fiscal Year, as the
case may be);
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"SHARES" the shares of US$1 each in the issued share
capital of the Company from time to time and
"SHARE" shall be construed accordingly;
"SHAREHOLDER'S LOAN" in relation to a Shareholder, a loan to the
Company or any member of the Group now or at any
time hereinafter made or procured to be made by
that Shareholder and for the time being
outstanding and due and owing from the Company
or the member of the Group (as the case may be)
(and together with interest, if any, thereon)
and the expression "SHAREHOLDERS' LOANS" in
relation to all or some of the Shareholders
shall be construed accordingly;
"SMARTCO" CITY SMART LIMITED, a company incorporated in
Hong Kong and wholly-owned by OTI prior to the
execution of this Agreement;
"SUBSIDIARY" any of the subsidiaries for the time being of
the Company;
"SUBSIDIARY" or "HOLDING COMPANY" shall mutatis mutandis have
the respective meanings given to such
expressions in the Companies Ordinance of Hong
Kong;
"US$" or
"UNITED STATES DOLLARS" the lawful currency of the United States of
America;
"VALUATION DATE" in respect of the determination of the Fair
Market Value for the purposes of Clause 7, the
date of the Relevant Resolution, and for the
purposes of Clause 8, the date of the written
notice of the Non-Defaulting Shareholder to the
Defaulting Shareholder as described therein, and
for the purposes of Clause 9, the Transfer
Notice Date.
1.2 References to any statute or statutory provisions shall, where the
context so admits or requires, be construed as references to those
provisions as respectively amended, consolidated, extended, or
re-enacted from time to time, and shall, where the context so admits or
requires, be construed as including reference to the corresponding
provisions of any earlier legislation (whether repealed or not)
directly or indirectly amended, consolidated, extended, or replaced
thereby or re-enacted therein, which may be applicable to any relevant
tax year or other period, and shall include any orders, regulations,
instruments or other subordinate legislation made under the relevant
ordinance.
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1.3 Headings in this Agreement are for convenience only and shall not
affect the construction of this Agreement or any part thereof.
1.4 Unless the context otherwise requires:-
1.4.1 words importing the singular only shall include the plural and
vice versa;
1.4.2 words importing natural person shall include individuals,
companies, corporations, firms, partnerships, consortiums,
joint ventures, associations, organisations, and
un-incorporated bodies of persons, trusts, any government or
state or any instrumentality, agency or political sub-division
thereof or authority, board or body created or constituted
thereby (in each case, whether or not having separate legal
personality) and vice versa; and
1.4.3 words importing the masculine gender only shall include the
feminine gender and the neuter gender and vice versa.
1.5 Save as otherwise expressly provided herein, references to Clauses and
Schedules are to clauses of and schedules to this Agreement and
references to sub-clauses and paragraphs are to sub-clauses of the
Clauses and paragraphs of the sub-clauses in which they respectively
appear, and the Schedules shall be deemed to form part of this
Agreement.
2. SHARE CAPITAL
2.1 Within 7 Business Days after the execution of this Agreement, CK-X and
OTI shall subscribe in cash (save and except that for OTI, US$500,000,
being part of the subscription by OTI (the "DEFERRED AMOUNT"), shall
become due and payable on the earlier of the date which is twelve
months after the execution of this Agreement and the date of exercise
of the Option by the Company under Clause 4.17.1(a) when the Deferred
Amount shall be paid by OTI or (as the case may be) satisfied by way of
a set-off against the Exercise Price set out in Clause 4.17.1(a) and
payable by the Company to OTI upon the exercise by the Company of the
Option) for and hold Shares in such numbers and at such subscription
prices respectively provided in the third and fourth columns below (as
the case may be) set opposite to its name so that, immediately after
the allotment of Shares to CK-X and OTI, the aggregate number of Shares
held by each of CK-X and OTI shall be as stated in the fifth column
below and their respective proportions (expressed in terms of
percentage) of shareholding in the Company shall be as stated in the
sixth column below:-
NUMBER OF NUMBER OF NUMBER OF
SHARES BEFORE SHARES TO SUBSCRIPTION SHARES AFTER PROPORTION OF
SHAREHOLDER SUBSCRIPTION BE ALLOTTED PRICE ALLOTMENT SHAREHOLDING
----------- ------------- ----------- ------------ ------------ -------------
CK-X 1 24,999 US$3,600,000 25,000 50%
OTI 1 24,999 US$3,600,000 25,000 50%
----------- --- ------ ------------ ------ ----
Total : 2 49,998 US$7,200,000 50,000 100%
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2.2 Each Shareholder warrants and undertakes to the other Shareholder that
it has acquired and shall subscribe for and hold the Shares for its own
absolute beneficial ownership and not on behalf of any other person.
2.3 Decisions of the Shareholders may be made by written resolutions or by
resolutions passed on a poll in meetings. All written resolutions of
the Shareholders shall be signed by all Shareholders in order to be
valid and subsisting.
2.4 The Shareholders shall have a Chairman for the meetings of the
Shareholders. Such Chairman shall be nominated and appointed by CK-X.
Questions arising at any meeting of the Shareholders shall be decided
by a majority of votes.
3. BUSINESS OF THE GROUP
3.1 The business of the Group shall be:-
3.1.1 the implementation of the Distribution Agreement;
3.1.2 the purchase, marketing, distribution, sale, applications and
after-sale maintenance and support of the OTI Products in
connection with the Distribution Agreement or products
complementary and, subject to the provisions of Clause 4.13,
similar to the OTI Products which may be supplied by
manufacturers or obtained through sources (other than from or
through OTI) upon terms that are more competitively priced or
favourable than the OTI Products;
3.1.3 the incorporation or establishment of any subsidiary or joint
venture company by the Company for the purposes of developing,
promoting, enhancing or improving the efficiency and cost
effectiveness of the business of the Group;
3.1.4 such other business as may be decided by the Board from time
to time; and
3.1.5 the doing of such acts, matters and things as may be
consistent with, necessary for or incidental to the attainment
of the objects set out above.
For the avoidance of doubt, unless otherwise agreed between the parties
in writing, the distribution, sale, applications and after-sale
maintenance and support of the Group's products shall be limited to the
Exclusive Territory.
3.2 Save as otherwise herein provided, the business and affairs of the
Company shall be managed by the Board in accordance with this Agreement
and without any obligation to seek approval from the Shareholders. The
Shareholders shall exercise their voting rights and powers of control
in relation to the Company (and therefore indirectly in relation to the
Group) and in the respective boards of the members of the Group so as
to ensure that:-
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3.2.1 the members of the Group shall carry on and conduct its
business and affairs in a proper and efficient manner;
3.2.2 full effect shall be given to the terms and conditions of this
Agreement (including, where appropriate, the carrying into
effect of such terms and conditions as if they were embodied
in the Memorandum and Articles and in the respective
memorandum and articles of association, bye-laws or analogous
constitution of the members of the Group); and
3.2.3 the business and affairs of the Group shall be carried on
pursuant to policies laid down from time to time by the Board.
4. BOARD OF DIRECTORS AND RELATED MATTERS
4.1 Composition
4.1.1 The Company shall have a Board of Directors and at all times
whilst this Agreement remains in force and subject to any
contrary agreement in writing of the Shareholders, the Company
shall have a Board of six (6) Directors and each Shareholder
shall procure by a written notice to the Company (with a copy
to the other Shareholder) that (subject as otherwise expressly
provided in this Agreement) CK-X shall be entitled to appoint,
remove or replace 3 Directors and OTI shall be entitled to
appoint, remove or replace 3 Directors.
4.1.2 Notwithstanding Clause 4.1.1, if, at any time before Listing,
the proportion of the number of Shares legally and
beneficially owned by:-
(a) CK-X; or
(b) OTI
in the entire issued share capital of the Company is reduced
(otherwise than as a result of a transfer of Shares permitted
under Clause 9.2.1) by a portion representing an integral
twenty percent (20%) (such portion being called the "THRESHOLD
PORTION") of the entire issued share capital of the Company
held by the relevant party as above-mentioned in Clauses
4.1.2(a) or 4.1.2(b) (as the case may be) immediately prior to
such reduction, then:-
(a) CK-X; or
(b) OTI (as the case may be)
in relation to every Threshold Portion and upon notice being
given by the other party to which the Threshold Portion does
not relate, shall cease to be entitled to nominate and appoint
one Director under Clause 4.1.1 and one Officer under Clause
5.2 and if such Director or Officer is appointed it shall be
removed from office forthwith.
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4.1.3 To the extent that the right originally exercisable by a
Shareholder under Clause 4.1.1 to appoint, remove or replace a
Director is extinguished under Clause 4.1.2, it shall become
exercisable by such new Shareholder which has acquired the
Threshold Portion. To the extent that the right originally
exercisable by a Shareholder under Clause 5.2 to appoint,
remove or replace an Officer is extinguished under Clause
4.1.2, it shall become exercisable by such Shareholder which
holds the largest proportion of the issued share capital of
the Company immediately after the application of Clause 4.1.2.
4.2 Quorum
4.2.1 The quorum necessary for the transaction of business in a
meeting of the Board shall be four (4) Directors, of which
(unless the Shareholders otherwise agree in writing in any
particular case) one of whom shall be a Director appointed by
CK-X and the other one shall be a Director appointed by OTI
under Clause 4.1.1. No decision may be made or right exercised
by the Board otherwise than at a meeting of the Board at which
a quorum is present throughout.
4.2.2 If at any meeting of the Board the quorum necessary for the
transaction of business is not present, the meeting shall
stand adjourned to the same day in the following week (or the
next following Business Day if that day is a non-Business
Day), at the same time and place (the "ADJOURNED MEETING") and
if at the Adjourned Meeting a quorum is not present within
half an hour from the time appointed for the meeting any two
Directors present (notwithstanding all of the Directors
present are nominated by the same Shareholder) shall be a
quorum.
4.3 Voting
Subject to Clauses 4.12 and 4.13, questions arising at any meeting of
the Board shall be determined by a majority of votes.
4.4 Chairman and Deputy Chairman
The Chairman of the Board shall be nominated and appointed by CK-X. The
Deputy Chairman of the Board shall be nominated and appointed by OTI.
Such Chairman and Deputy Chairman shall be counted in calculating the
number of Directors to be appointed by CK-X and OTI under Clause 4.1.1.
4.5 Alternate
4.5.1 Subject to the approval in writing of the nominating
Shareholder, any Director may at any time and from time to
time by a notice in writing to the Company (with a copy to the
other Shareholder) (both to be received not less than 48 hours
prior to the relevant Board meeting provided that where there
is a force majeure event or emergency beyond the reasonable
control of the Director, such notice may be given in other
possible mode and time as permitted by the prevailing
circumstances) appoint any person (who should be competent,
possess relevant business knowledge, qualifications and
experience and be eligible to be so appointed under the
Articles and all applicable laws) to be his alternate Director
and, where appropriate, to be the acting Chairman or the
acting Deputy Chairman, as the case may be, in his place and
may at any time terminate such appointment from the time
stated in the notice (which shall not be earlier than the time
when such notice is lodged with the Company) or, if no such
time is stated, from the time such notice is so lodged. The
appointment of an alternate Director, the acting Chairman or
the acting Deputy Chairman shall terminate on the termination
of office of the Director, the Chairman or the Deputy
Chairman, as the case may be, who appointed him. A Director or
his alternate can act as alternate of one or more other
Directors.
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4.5.2 The alternate Director shall (except as regards the power to
appoint an alternate Director pursuant to this Clause 4.5) be
subject in all respects to the terms and conditions existing
with reference to the other Directors of the Company. Every
alternate Director shall be entitled to receive any notice of
meeting of the Directors, to attend and vote as a Director and
perform the functions of a Director at any such meeting at
which the Director appointing him is not personally present,
to sign any resolution in writing of the Board and otherwise
to generally perform the functions of a Director in the place
of the Director appointing him.
4.5.3 For the purpose of reckoning a quorum under Clause 4.2, an
alternate Director shall be regarded as being nominated by the
Shareholder which has under Clause 4.1 nominated the Director
for whom he acts as his alternate Director for the time being
and in case such alternate is also a Director he shall be
regarded as participating in any Board meeting on his own
behalf and on behalf of any other Director for whom he is
appointed as alternate.
4.6 Convening a meeting
The Board shall meet at such place or time as the business of the
Company requires or as the Directors think fit. Any Board meeting may
be convened by the Chairman or the Deputy Chairman. Not less than 7
Business Days' prior written notice of each meeting of the Board
specifying the date, time and place of the meeting and the business to
be transacted thereat shall be given to each Director (other than a
meeting reconvened following an adjournment, in respect of which no
further notice shall be required), unless short notice is consented to
or notice is waived by such Director.
4.7 Written resolutions
A resolution in writing or by telecopier approved or signed as all the
Directors shall unanimously agree in writing, shall be effective for
all purposes as a resolution duly passed at a meeting of the Board duly
constituted. Any such resolution may be approved or signed in
counterpart.
4.8 Minutes
Minutes of all meetings of the Board together with the relevant Board
papers shall be sent to each Director as soon as practicable after the
holding of the relevant meeting whether or not such Director was
present thereat. The minutes of any Board meeting shall be approved at
the next Board meeting.
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4.9 Subsidiary
The provisions contained in Clauses 4.1 to 4.8 (inclusive) shall apply
mutatis mutandis to and in relation to the board of directors of each
Subsidiary.
4.10 Shareholders' actions
Each of the Shareholders undertakes to each other of them that
notwithstanding any other provisions herein, it will procure or vote to
remove any person nominated by it as Director, if such nominee shall
become liable to be removed or disqualified as Director in accordance
with the provisions of this Agreement, the Articles or the applicable
laws. The provisions of this Clause 4.10 shall not be interpreted as
derogating from a Shareholder's right to appoint a Director in place of
the removed or disqualified Director in accordance with the terms of
this Agreement.
4.11 Delegation
Subject to Clause 5, the Board may, by a resolution adopted by at least
two Directors respectively nominated by CK-X and OTI (subject to Clause
4.2.2), from time to time delegate any of their powers to such persons
or committees consisting of such one or more members of the Board as
they think fit. Any committee so formed shall in the exercise of the
powers so delegated conform to such regulations and limits of authority
as may from time to time be set by the Board.
4.12 Casting vote by Chairman
In the case of equality of votes on any of the following matters or
issues requiring determination at a Board meeting and while CK-X
(including for this purpose its permitted assign under Clause 9.2.1)
remains the beneficial owner of not less than 50% of the entire issued
share capital of the Company, the Chairman shall have a casting vote
which will be applied in good faith:-
4.12.1 the approval or alteration of the Annual Business Plan in
accordance with the scope of the business of the Group;
4.12.2 the creation of any Encumbrance over any part of the
undertaking, property or assets of the Group (excluding the
Distribution Agreement), the borrowing of any monies by the
Group from any person, or the giving of any guarantee or
indemnity by the Company or any member of the Group to secure
the liabilities or obligations of any person; and
4.12.3 the taking of any action or measure to avoid, amend or nullify
any action taken or to be taken by the Group which deviates,
has deviated or may deviate from the approved Annual Business
Plan or is, has been, or may be detrimental to the interest of
CK-X.
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The Chairman shall not exercise his casting vote unless the parties
have discussed the relevant matters and issues at least 7 Business Days
before such exercise. For the avoidance of doubt, it is hereby agreed
that the casting vote of the Chairman shall not apply to Clauses 3.1.4,
6 and 7.4.3(b) and accordingly any other business of the Group (other
than those contemplated in Clause 3.1.1, 3.1.2, 3.1.3 and 3.15) and
additional investment by the Company and the Shareholders in connection
with such other business, and any issue of Shares pursuant to Clause 6
or 7.4.3(b) shall be subject to the unanimous approval of the
Shareholders.
4.13 Veto by Deputy Chairman
In the event that the Board should consider the use or implementation
by the Group of any smart card technology other than that adopted by
OTI or other products similar to the OTI Products and while OTI
(including for this purpose its permitted assign under Clause 9.2.1)
remains the beneficial owner of not less than 50% of the entire issued
share capital of the Company, the Deputy Chairman shall be entitled to
veto any resolution passed by the Board on such use or implementation
of such other smart card technology or other products similar to the
OTI Products by the Group (such veto right shall be applied in good
faith) provided that the validity and effectiveness of such veto right
shall be conditional upon OTI being able to in a timely manner
4.13.1 provide to the Group such other smart card technology or other
products similar to the OTI Products at competitive prices; or
4.13.2 obtain for the Group such other smart card technology or
purchase such other products similar to the OTI Products from
any other source or manufacturer and re-sell the same to the
Group at a price determined in accordance with the following
formula:
(a) at direct cost price of the products plus 7.5%
thereof (or such other percentage as may be agreed
between OTI and the Company in writing) plus US$0.10
as handling cost per product, if the direct cost
price is US$3.00 or more; and
(b) at direct cost price of the products plus 9.5%
thereof (or such other percentage as may be agreed
between OTI and the Company in writing) without the
additional handling cost, if the direct cost price is
less than US$3.00.
The Deputy Chairman shall not exercise his veto right unless the
parties have discussed the relevant matters and issues at least 7
Business Days before such exercise.
4.14 Annual Business Plan
4.14.1 The Board shall procure the first draft Annual Business Plan
to be prepared and approved as soon as practicable after the
execution of this Agreement. The financial portions of the
draft Annual Business Plan shall be prepared in accordance
with GAAP and shall contain a detailed monthly financial
budget. Such budget shall at least be accompanied by a review
of the projected business, a statement of all capital and
recurrent expenditure to be incurred, an estimate of the
working capital requirements of the Company incorporated
within a cashflow statement and prudent transfers of
distributable profits to reserve during such Fiscal Year
together with a projected profit and loss account, and shall
be supported by explanations, notes and information upon which
the projections underlying such Annual Business Plan have been
based.
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4.14.2 The draft Annual Business Plan shall become the Annual
Business Plan for such Fiscal Year on approval by the Board.
In the event that the Board is unable to settle and approve
the draft Annual Business Plan in whole or in part prior to
the commencement of a Fiscal Year, the expenditure programme
contained in the existing Annual Business Plan shall mutatis
mutandis continue to apply until a complete Annual Business
Plan is approved by the Board.
4.14.3 The framework of the projected Annual Business Plan of the
Company for the Fiscal Years 2000-2003, inclusive, is attached
as SCHEDULE E for reference.
4.15 Corporate Distributions
4.15.1 Subject to Clauses 4.15.2 and 4.16, the audited consolidated
net profits after taxation of the Company (including, for
clarification purpose, all Subsidiaries) in any Fiscal Year
(the "DISTRIBUTABLE PROFITS") may be distributed by way of
dividend or other means deemed by the Board as distributions
for the purposes of this Clause 4.15 (collectively referred to
as the "DISTRIBUTIONS") in such proportion and on such basis
as is determined by the Board to be in the best interests of
the Company provided that whatever the form of Distribution,
it shall be made in accordance with the proportionate interest
of each Shareholder.
4.15.2 Subject to the availability of cashflow in the Company and any
transfer to reserve according to prudent business practice and
other budgeted investment set out in the Annual Business Plan
or unless otherwise decided by the Board, not less than 50% of
Distributable Profits will be paid to the Shareholders as
Distributions and Distributions shall, where possible, be made
at least annually.
4.15.3 Subject to the provisions of this Agreement and applicable
law, the Shareholders shall vote their Shares and take all
other actions in a manner consistent with the determinations
of the Board in matters relating to Distributions. The policy
with respect to distributions from the Subsidiaries to the
Company shall be that as set out in this Clause 4.15.
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4.16 Payment prior to Distributions
The Board shall procure that the following payments will be made in
priority to any distribution of the Distributable Profits under Clause
4.15 and any repayment of the Shareholders' Loans:
4.16.1 conditional upon the payment by CK-X of the full subscription
price in accordance with Clause 2.1, in the event that the
Company's annual gross profit (as defined in SCHEDULE F) in
any Fiscal Year shall exceed US$750,000, CK-X shall be
entitled to receive from the Company yearly management fees
for that Fiscal Year, free of any taxation, in an amount equal
to 20% of the Company's annual gross profit in that Fiscal
Year, up to an aggregate maximum of US$5,050,000;
4.16.2 conditional upon the payment by OTI of the full subscription
price partly by cash under Clause 2.1 and partly by a set-off
of the Exercise Price against the Deferred Amount on a
transfer of the entire issued share capital or assets of
Smartco under Clause 4.17.1 or payment of the Deferred Amount
in accordance with Clause 2.1 and in consideration of the
granting by it of the distribution rights and limited use
rights of the OTI Products to the Company pursuant to the
Distribution Agreement, OTI shall be entitled to receive from
the Company the amount of US$1,550,000 at the end of the first
Quarter of the Fiscal Year 2000, the amount of US$1,550,000 at
the end of the second Quarter of the Fiscal Year 2000 and an
amount of US$170,000 at the end of each of the Fiscal Years
2001, 2002 and 2003.
4.17 The Option and Related Matters
4.17.1 In consideration of HK$1.00 paid by the Company to OTI
(receipt thereof is hereby acknowledged by OTI), OTI hereby:-
(a) irrevocably grants to the Company the option (the
"OPTION") which may be exercisable within a six-month
period commencing on the date which is 6 months from
the date hereof (the "OPTION PERIOD") at the exercise
price of US$500,000 (the "EXERCISE PRICE") which
shall be settled upon the exercise of the Option by
the Company by way of a set-off against the Deferred
Amount due from OTI to the Company as set out in
Clause 2.1 to either:-
(i) acquire from OTI the entire issued, paid-up
and voting share capital of Smartco; or
(ii) require OTI to procure Smartco and its
subsidiaries to sell to the Company all the
assets of Smartco and its subsidiaries
(including without limitation all rights,
titles, interests and benefits in the
software, hardware, tangible assets,
intellectual property rights and other
properties all free from Encumbrances).
The Option shall be exclusively exercisable by CK-X
on behalf of the Company at its discretion.
Completion of such acquisition of the shares in
Smartco or sale of the assets of Smartco and its
subsidiaries (the "COMPLETION") shall be on a date
(the "COMPLETION DATE") within 1 month from the date
on which the Company serves a notice in writing on
OTI within the Option Period specifying the
Completion Date, a place in Hong Kong at which
Completion shall take place and the businesses to be
conducted at Completion;
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(b) agrees to procure each of Smartco and its
subsidiaries (the "SMARTCO GROUP") to account to and
hold in trust for the Company all income and proceeds
to be received by the Smartco Group arising out of
any contracts for supply of goods and/or services to
which any member of the Smartco Group is a party on
and after the date hereof (and in respect of any
prepayments to the Smartco Group for income and
proceeds arising on and after the date hereof, a pro
rata amount thereof to be paid by the Smartco Group
to the Company) and for such purpose to execute an
assignment in favour of the Company in the form as
attached as SCHEDULE G provided that the Company will
after such assignment pay the Smartco Group at the
end of each month an amount by way of management fees
which equal the aggregate amount of operating,
administrative and office expenses of the Smartco
Group (comprising payroll expenses, rental and
management charges for office premises, utility
charges, advertising and all other reasonable office
expenses) for the relevant month and accepted by the
Company; and
(c) undertakes and agrees that it shall procure the
Smartco Group and its management and employees to act
in accordance with the instructions and directions of
the Company on all aspects of its businesses and
operations, it being agreed that on and after the
date hereof:-
(i) the Smartco Group will no longer take on any
new business, and will refer any new
business to the Company;
(ii) its existing employees will be transferred
to the Company in a manner to be agreed
between CK-X and OTI;
(iii) all existing employees of the Smartco Group
and employees transferred to the Company
under sub-paragraph those (ii) above may be
deployed by the Company to work primarily on
the businesses and operations of the
Company, but they may also be assigned by
the Company to work on the existing business
of the Smartco Group until the latter has
been fully performed, all in such manner as
directed by the Company.
4.17.2 In consideration of CK-X procuring the Company to accept and
the Company accepting the grant of the Option by OTI, OTI
hereby represents, warrants and undertakes to the other
parties in this Agreement that:-
(a) OTI shall deliver and procure Smartco to deliver the
Audited Accounts to CK-X on or before 31st March
2000;
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(b) the Audited Accounts are true, accurate and correct
and represent the true financial position of Smartco
as at the date of such accounts in all material
respects;
(c) in the event of the exercise of the Option by the
Company under 4.17.1(a)(i), there has been no and
will not be any material adverse change in the
financial position of the Smartco Group between the
date of Audited Accounts and the date of transfer of
Smartco to the Company under Clause 4.17.1(a)(i) save
and except for the arrangement set out in Clause
4.17.1(b) and any changes arising under the
provisions of this Agreement.
4.17.3 In the event the Company exercises the Option, the Company
agrees that any source code being the subject matter of the
Option shall be jointly owned and may be used by any of the
Company and OTI for their respective businesses. For the
avoidance of doubt, it is agreed that:-
(a) OTI shall not use or permit the use of the source
code for the manufacture of any products in or
shipment or sale of any products into the Exclusive
Territory;
(b) the Company shall not use or permit the use of the
source code for the manufacture of any products in or
shipment or sale of any products into any place other
than the Exclusive Territory;
(c) OTI shall in its use of the source code change its
user interface to differentiate it from the original;
(d) neither the Company nor OTI shall transfer, or
license the use of, the source code to any person.
4.18 Indemnities relating to Smartco
4.18.1 Subject to Clause 4.18.2, OTI will indemnify and keep CK-X and
the Company (acting for itself and the Smartco Group for this
purpose) fully indemnified against all losses, damages, costs
and expenses arising in connection with any claims, demands,
actions, proceedings and liabilities that may be made against,
suffered or incurred by the Smartco Group, CK-X or the Company
in respect of any event or matter arising or accruing prior to
the date of this Agreement or any contract for supply of goods
or services to the Smartco Group's customers which was entered
into by the Smartco Group before the date of acquisition of
Smartco by the Company under Clause 4.17.1(a)(i) (all such
contracts being the "SMARTCO CONTRACTS").
4.18.2 No claim shall be brought by CK-X or the Company against OTI
under Clause 4.18.1 unless notice in writing of any such claim
(specifying in reasonably sufficient detail the nature of the
claim and so far as practicable the amount claimed in respect
thereof) has been given to OTI (a) on or prior to the date
being two (2) years after the date of this Agreement; or (b)
where such claim relates to any of the Smartco Contracts, on
or prior to the expiry of such contract if such contract
expires and is renewed by the Company in consideration of a
fee to be paid by the relevant customer to the Company before
the end of the said 2-year period from the date of this
Agreement; or (c) where such claim relates to any of the
Smartco Contracts, on or prior to the expiry of such contract
if such contract expires after the end of the said 2-year
period from the date of this Agreement (the last date on which
any claim is to be brought against OTI under Clause 4.18.2 is
hereinafter called the "CLAIM DATE").
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4.18.3 Any claim under Clause 4.18.1 which has been made against OTI
on or before the Claim Date shall, if it has not been
previously satisfied, settled or withdrawn, be deemed to have
been withdrawn and become fully barred and unenforceable on
the expiry of the period of one (1) year commencing on the
Claim Date unless legal proceedings in respect thereof shall
have been commenced against OTI and for this purpose
proceedings shall not be deemed to have been commenced unless
they shall have been issued and served upon OTI.
4.19 After the execution of this Agreement,
4.19.1 CK-X shall as soon as is practicable conduct and complete all
appropriate and satisfactory legal, accounting and financial
due diligence review of Smartco;
4.19.2 OTI shall as soon as is practicable deliver to CK-X and the
Company but in any event no later than 28th February 2000a
legal opinion acceptable to CK-X issued by a firm of lawyers
qualified to practise in Germany (to be instructed at OTI's
cost), confirming, among other things, the arrangement set out
in Clause 4.17.1(b), the proposed transfer of the entire
issued share capital or the assets of Smartco pursuant to the
Option do not result in any breach of any German law or
requirements under or in connection with the Neuer Markt of
the Frankfurt Stock Exchange. In the event that the Company
has exercised the Option and acquired the shares of Smartco
pursuant to Clause 4.17.1(a)(i) but CK-X is not satisfied with
any of the matters set out in Clauses 4.19.1 to 4.19.2, CK-X
may require the Smartco Group to be liquidated at the cost of
OTI in such manner as will cause the minimal disruption to the
business of the Group and allow an orderly transfer of the
assets, business and employees of the Smartco Group to any
other subsidiary of the Group notwithstanding any other
provisions in this Agreement.
5. MANAGEMENT OF THE GROUP
5.1 Immediately following the execution of this Agreement, the Board will
hold one or more meetings to settle all organisational matters relating
to the Group including the Group's day to day operations, management
(including the terms of employment of the Officers) and accounting
procedures, duties and responsibilities of the Officers, and
appointment of the Management Committee as referred to in Clause 5.2.
5.2 5.2.1 Immediately after the execution of this Agreement, the Board
will procure that the Management Committee is constituted and
the Officers are appointed.
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5.2.2 The Management Committee (the "MANAGEMENT COMMITTEE") shall
comprise 4 members (individually a "COMMITTEE MEMBER" and
collectively "COMMITTEE MEMBERS"). As long as the proportion
of shareholding of CK-X and OTI in the Company remains as
provided in Clause 2.1, each of CK-X and OTI shall be entitled
to appoint two Committee Members. Only Directors and Officers
are eligible to be appointed Committee Members.
5.2.3 The following Officers shall be appointed and act in
accordance with the directions of the Management Committee:
(a) the President ("PRESIDENT");
(b) the Chief Executive Officer ("CEO");
(c) the Chief Operating Officer ("COO"); and
(d) the Chief Financial Officer ("CFO"),
(the President, CEO, COO and CFO being collectively called the
"OFFICERS" and each an "OFFICER").
5.2.4 Subject to Clause 4.1.3, OTI shall be entitled to appoint,
remove or replace the President and the CEO while CK-X shall
be entitled to appoint, remove or replace the COO and the CFO
as long as the proportion of shareholding of OTI and CK-X in
the Company remains as provided in Clause 2.1. Each
Shareholder shall effect any appointment or removal of any of
its relevant Officer by sending written notice to the other
and a copy thereof to the Company. Each Officer should be
competent, possess all relevant knowledge, qualifications and
business experience and be eligible to be so appointed under
the Articles and all applicable laws.
5.3 The Management Committee shall meet at such regular intervals as are
required or it may determine from time to time. Any of the Committee
Members may convene a meeting of the Management Committee provided that
not less than 3 Business Days' notice of each meeting, specifying the
business to be transacted thereat, shall be given to each Committee
Member, unless waived by that Committee Member.
5.4 The quorum for each Management Committee meeting shall be 2 with at
least 1 from OTI and 1 from CK-X. If a meeting is not quorate within 30
minutes of the time for which it was convened and due to commence, it
shall be deemed to be adjourned automatically to the same time and
place on the next Business Day following and no further notice is
required for such adjourned meeting. At such adjourned meeting any
Committee Member present shall comprise the quorum. No decision may be
made or right exercised by the Management Committee otherwise than at a
meeting of the Management Committee at which a quorum is present
throughout.
5.5 The CFO (if he is a Committee Member, but otherwise any Committee
Member appointed by CK-X) shall act as the meeting co-ordinator and
shall prepare an agenda for each meeting to which each Committee Member
shall have the right to add. Such agenda and related papers shall be
sent to each Committee Member at least 2 Business Days before the
meeting. Matters and proposals arising at any meeting shall be decided
by a majority vote of the Committee Members present. Each Committee
Member shall have the right to appoint another Committee Member to
represent him at the meeting. Each Committee Member at the Management
Committee meeting shall have one vote and such number of votes
corresponding to the number of other Committee Members he may have been
authorised to represent. If a deadlock as to any matter which requires
decision arises at any meeting of the Management Committee, it shall be
referred to the Board for resolution.
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5.6 The business of the Management Committee may be conducted either at a
meeting or in any manner approved by the Management Committee which
(except as herein otherwise expressly provided) shall have full
authority to fix its own rules and procedures. The minutes of meeting
of the Management Committee shall be kept in a file which is available
for inspection at all times by authorised representatives of any
Shareholder. The minutes of a meeting shall be prepared and copies
delivered to all Committee Members within 5 Business Days of that
meeting. The minutes of any Management Committee meeting shall be
approved at the next Management Committee meeting.
5.7 The functions of the Management Committee shall be as follows:-
5.7.1 to prepare a draft Annual Business Plan for each Fiscal Year
for consideration by the Board no later than one calendar
month prior to the beginning of such Fiscal Year;
5.7.2 to procure the preparation of monthly written reports on the
business and performance of the Group (each including
management financial statements of the Group and a financing
plan stating the times and accounts of the Group's cash and
financing requirements for the next 2 months) within 10
Business Days from the end of the month in question for
despatch to each Shareholder;
5.7.3 to oversee the carrying on of the business of the Group within
the scope of the Annual Business Plan as approved (subject to
any adjustment of 10% thereto on an annual basis);
5.7.4 to arrange for or enter into any interim financing or credit
facilities to be extended to the Group and/or to provide any
indemnity, guarantee or undertaking in respect thereof within
the scope of the applicable Annual Plan or as approved by the
Board;
5.7.5 to procure each member of the Group to keep timely and
accurate books of accounts and records relating to the
business of the Group and to provide each Officer and Director
access thereto; and
5.7.6 to determine the terms of employment of any executive or
senior employee (other than the Officers).
The Management Committee may from time to time refer any matter to the
Board for advice.
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5.8 Each of the Shareholders shall procure that the Committee Members
appointed by it shall exercise their voting rights in good faith for
the implementation of the Group's business and in the interests of the
due performance of the provisions of this Agreement. No Director or
Officer shall be personally responsible for acting bona fide and in
good faith in respect of any of his acts or omissions.
5.9 The Management Committee may, at its absolute discretion and on the
basis of its opinion on the requirements of the business and affairs of
the Group, nominate and appoint such persons as the Management
Committee considers to be appropriate to provide services in relation
to the business and affairs of the Group and the services of such
persons may be made available in any or both of the following modes:-
5.9.1 employed by any member of the Group which shall pay salary
directly to such employee, and/or
5.9.2 seconded by CK-X or any party within the CK Group to any
member of the Group to provide services to the Group in
consideration of which the member of the Group shall pay to
CK-X or such party within the CK Group (as the case may be) an
appropriate fee within the scope of the applicable Annual Plan
or as approved by the Management Committee and in accordance
with invoices issued to the member of the Group,
and such persons as referred to above may provide the services either
on a full-time or part-time basis. The services of the Officers shall
be paid for by the Group and their remuneration shall be considered and
recommended by the Management Committee and determined by the Board.
For the Fiscal Years 2000 and 2001, the Shareholders shall agree a
budget for the remuneration (including salaries and benefits under any
bonus and option plan) payable to the Officers. In the event that the
remuneration payable to any Officer shall exceed the amount as provided
in the said agreed budget, the amount in excess shall be borne by and
may be deducted from any dividend declared and payable by the Company
or amounts payable under Clause 4.16 to the relevant Shareholder
appointing that Officer.
5.10 It is hereby agreed and acknowledged by the parties hereto that all the
operations of the Company and of all other members of the Group
(including, without limitation, the production, marketing, sale and
other operational activities) shall be under the direction of the
Management Committee which may from time to time be given if considered
expedient by the Management Committee, and the Directors and the
parties hereto shall procure and ensure that the operations of the
Company and other members of the Group shall be conducted in accordance
with such direction of the Management Committee.
5.11 The Auditors of the Company shall be MESSRS. DELOITTE TOUCHE TOHMATSU,
Certified Public Accountants, or such other firm of certified public
accountants as may from time to time be appointed by the Board.
5.12 All bank accounts of and contracts to be concluded by any member of the
Group shall be operated or signed by two Officers jointly, one of whom
shall be an Officer appointed by OTI and the other shall be an Officer
appointed by CK-X.
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5.13 In the event that any Director or Officer nominated by any Shareholder
commits any misconduct or default or acts in any manner not conducive
to the interests of the Group, the other Shareholder may require the
nominating Shareholder to replace the Director or Officer.
6. PROPORTIONAL ISSUE OF NEW SHARES
The Shareholders shall exercise their respective voting rights for the
time being in the Company or in any other member of the Group and shall
take all such other steps as for the time being lie within their
respective powers to procure that, save for the Shares to be allotted
pursuant to Clause 2 or otherwise subject to the provisions of this
Agreement, the Company shall not allot or issue any Shares without the
unanimous approval of the Shareholders and without first offering to
each Shareholder which is for the time being a member of the Company
that proportion of the Shares ("PROPORTIONAL SHARES") to be issued as
will enable such Shareholder (if it so accepts such offer within 3
Business Days from the date of such offer) to maintain its percentage
holding (measured in nominal value) of the issued share capital of the
Company in the same proportion as existing immediately prior to such
offer provided that if any Shareholder refuses to accept the offer to
it of the Proportional Shares pursuant to this Clause, such unaccepted
Proportional Shares shall then be offered to the other Shareholders (in
the proportion that the number of Shares then held by each such other
Shareholder bears to the aggregate number of Shares held by all such
other Shareholders) which shall be entitled (but not obliged) to accept
such offer in addition to the offer of the Proportional Shares
originally offered to it pursuant to this Clause. The procedure, timing
and manner of any such offer and issue shall from time to time be
determined by the Board.
7. FUNDING ARRANGEMENT AND POSSIBLE DILUTION
7.1 CK-X shall or procure any third party to make available up to the end
of Fiscal Year 2002 a revolving credit facility of up to US$4,000,000
to the Company to meet its working capital requirements. Such facility
shall attract interest payable by the Company at the rate of LIBOR plus
1% per annum and may be used by the Company only upon the approval of
the Board. Repayment of the loan drawn under the facility shall be
subject to the order of priority set out in Clause 7.5. If and to the
extent required, each of CK-X and OTI shall provide its own corporate
guarantee for up to half (50%) of any such facility used by the
Company.
7.2 The Shareholders acknowledge and agree that if, subject to Clause 7.1,
the Company requires additional finance for the business and affairs of
the Group or for further lending by it to any Subsidiary for the
business and affairs of such Subsidiary, such additional finance shall
be met as far as practicable and based on reasonable endeavours by the
Company by borrowings from banks, financial institutions and other
similar sources on terms as to interest, repayment and security
reasonably obtainable in the market and in relation to a borrower
having similar standing as the Company.
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7.3 7.3.1 If in the opinion of the Board borrowings from a bank,
other financial institution or outside source are not
available to the Company or not appropriate or feasible on
terms and for the purposes as provided in Clause 7.2, the
Board may pass a resolution (the "RELEVANT RESOLUTION") for
the purpose of this Clause 7.3.1 that the business and affairs
of the Company requires additional funds from the Shareholders
as additional Shareholders' Loans in any amount (the
"ADDITIONAL AMOUNT") specified in such resolution.
7.3.2 In such event provided in Clause 7.3.1, the Additional Amount
shall be allocated by the Board amongst the Shareholders in
the proportion that the Shareholders' respective number of
Shares then held by the Shareholder bears to the aggregate
number of Shares in issue at the relevant time, and subject to
Clause 7.4 each Shareholder or its respective nominee shall
make loan to the Company in an amount or aggregate amount so
allocated (each the "ALLOCATED AMOUNT") in relation to it
within 30 days (the "CONTRIBUTION PERIOD") after the Board has
passed the Relevant Resolution to make such allocation and/or
to call upon the Shareholders to make loans pursuant to this
Clause 7.3.2.
7.4 If any Shareholder has any genuine problem in making loan to the
Company in the Allocated Amount within the Contribution Period, it may
consult and propose any feasible substitute methods of raising finance
to such other Shareholders who may consider such methods as they deem
appropriate, but this provision shall be without prejudice to the
remaining provisions of this Clause 7. Notwithstanding Clause 7.3, if
any Shareholder (the "UNWILLING SHAREHOLDER") fails to make loan to the
Company in the Allocated Amount pursuant to Clause 7.3, the Shareholder
(the "WILLING Shareholder") who is not itself an Unwilling Shareholder
shall be entitled at its sole discretion to do any one of the acts
respectively described in Clauses 7.4.1, 7.4.2 and 7.4.3:-
7.4.1 to ask the Directors nominated by the Willing Shareholder to
propose to the Board to cancel the call for the Additional
Amount altogether; OR
7.4.2 to contribute (by way of loan) the Allocated Amount in
relation to the Willing Shareholder only or (at the option of
the Willing Shareholder) to contribute (by way of loan) the
aggregate of the Allocated Amount in relation to itself and
all or any of the Allocated Amount in relation to all or any
of other Unwilling Shareholder(s), and the full amount
contributed under this Clause 7.4.2 by the Willing
Shareholder:-
(a) shall carry interest at such rate as determined
solely by the Willing Shareholder(s) from time to
time (but not less than LIBOR plus 2% per annum in
any event and not exceeding the interest which would
have been chargeable by the banks, other financial
institutions or outside sources as if borrowings from
such banks, other financial institutions or outside
sources had been available and had not been refused
by the Board under Clause 7.3.1); and
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(b) shall, together with interest thereon, be called the
"NON-DILUTING LOAN"; OR
7.4.3 (a) to contribute (by way of loan)
(i) the Allocated Amount in relation to itself
only (which shall carry the same rights and
status in all respects as, and be treated as
identical in all respects to, the
Non-Diluting Loan described in Clause
7.4.2); and
(ii) the Allocated Amount (the "RELEVANT
ALLOCATED AMOUNT") (in whole or in part) in
relation to any or all of the other
Unwilling Shareholder(s) (subject to Clause
7.4.4 in case of competition) (the loans
actually contributed by the Willing
Shareholder(s) under this paragraph 7.4.3
(a) (ii) is hereinafter called the "DILUTING
LOAN"); and
(b) subject to the unanimous approval of the
Shareholders, to subscribe for and be issued with
such number of new Shares in the Company calculated
as "S" in accordance with the following formula (in
consideration of and at the par value of such new
Shares):-
A
S = ____________________
F x 60%
where
"A" means the Diluting Loan;
"F" means the Fair Market Value with the
relevant Valuation Date being the
date of the Relevant Resolution
which leads to the application of
this formula in accordance with
Clauses 7.3 and 7.4; and
7.4.4 In case of competition amongst the Willing Shareholders to
contribute to the Relevant Allocated Amount, the amount shall
be allocated amongst the Willing Shareholders in the
proportion that the number of Shares held by each such Willing
Shareholder bears to the aggregate number of Shares held by
the Willing Shareholders respectively at the time immediately
prior to the Relevant Resolution, and upon such allocation the
relevant Willing Shareholder shall be entitled to contribute
its respective share of the Relevant Allocated Amount pursuant
to and for the purpose of Clause 7.4.3.
7.5 It is hereby agreed and declared between the parties hereto that
subject to Clause 4.16, the categories of debts in relation to or
arising out of the loans, indebtedness or matters described below shall
rank in the following order of priority and their payment or repayment
shall follow such order of priority:-
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(a) the Non-Diluting Loan;
(b) the loans made available under Clause 7.1;
(c) any other Shareholders' Loans (including those made under
Clause 7.3.2 and the Diluting Loan);
(d) any dividends that may be declared or distributed by the
Company.
7.6 The loans made or procured to be made to the Company by each
Shareholder pursuant to this Clause 7 shall be in the form of unsecured
loans subject to subordination in favour of the bankers or financiers
of the Company (if so required by such bankers or financiers) upon such
terms and conditions as may reasonably be required from such bankers or
financiers and approved by the Board from time to time.
7.7 Subject to Clauses 7.1 and 7.4.2, the loans made to the Company by the
Shareholders or their respective nominees pursuant to this Clause 7
shall not carry interest or otherwise shall carry interest from time to
time at such rate as shall be agreed between the Company and the
Shareholders from time to time.
7.8 Without prejudice and subject to Clause 7.5, the loans made to the
Company by the Shareholders or their respective nominees pursuant to
this Clause 7 shall be repayable (as to principal and as to interest,
where applicable) at such time as the Board may from time to time
resolve.
7.9 Until the time for the repayment of the loans made by the Shareholders
to the Company under this Clause 7 shall have been determined by the
Board, none of the Shareholders or their respective nominees shall have
any right to demand or enforce repayment of their respective
Shareholders' Loans to the Company made pursuant to this Clause 7.
8. SALE OR PURCHASE IN CASE OF EVENT OF DEFAULT
8.1 Each of the following events shall be an "EVENT OF DEFAULT" in relation
to a Shareholder or its Controlling Party if:-
8.1.1 (a) such Shareholder or Controlling Party commits any
material breach of or fails to observe any of its
undertakings or obligations in any material respect
under any provision of this Agreement and if any such
breach or failure is capable of remedy, the same
shall not have been fully remedied within 30 days of
such Shareholder or Controlling Party (as the case
may be) being notified in writing of such breach or
failure by any other party to this Agreement; or
(b) such Shareholder or Controlling Party stops or
suspends payment of its debts to any person or is
unable or admits inability to pay its debts to any
person as they fall due and such inability of such
Shareholder or Controlling Party (as the case may be)
has, in the opinion of any other Shareholders, a
material adverse effect on the ability of such
Shareholder or Controlling Party to perform its
obligations or comply with its agreements,
undertakings, representations and warranties under
this Agreement; or
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8.1.2 such Shareholder or Controlling Party or any other person
takes any bona fide action or any bona fide legal proceedings
are commenced or other bona fide steps are taken for:-
(a) such Shareholder or Controlling Party to be
adjudicated or found bankrupt, wound up or insolvent;
or
(b) the winding-up, liquidation or dissolution of such
Shareholder or Controlling Party; or
(c) the appointment of a liquidator, trustee, receiver,
manager, administrator or similar officer of such
Shareholder or Controlling Party or of the whole or a
material part of the business, undertaking,
properties, assets, rights or revenues of such
Shareholder or Controlling Party; or
(d) any event or circumstance under the law of any
relevant jurisdiction in any part of the world having
an effect analogous to any matter described in
sub-paragraphs (a), (b) or (c) of this Clause 8.1.2,
and any of such action, legal proceedings or steps is not
discharged, withdrawn or discontinued within 30 days from the
taking or commencement thereof.
8.2 A Shareholder in respect of which an Event of Default has occurred is
hereinafter called the "DEFAULTING SHAREHOLDER" and any of the other
Shareholders in respect of which an Event of Default has not occurred
is hereinafter called the "NON-DEFAULTING SHAREHOLDER".
8.3 Upon the occurrence of an Event of Default set out in Clause 8.1.2 (and
in addition to and without limiting any other rights, claims and
remedies of any of the Shareholders under this Agreement, applicable
laws or otherwise), then while such Event of Default continues, any
Non-Defaulting Shareholder (if it so elects at its discretion) shall
have the right, exercisable by notice in writing given by such
Non-Defaulting Shareholder to the Defaulting Shareholder and the
Company, to purchase from the Defaulting Shareholder all or any of the
Shares (the "PURCHASED SHARES") and all or any portion of the
Shareholder's Loan together with accrued interest (if any) thereon
(together the "PURCHASED LOAN") of the Defaulting Shareholder as may be
specified by the Non-Defaulting Shareholder in the notice for a
purchase price equal to 70% of the Fair Market Value of the Purchased
Shares and 70% of the face value of the total of the Purchased Loan
respectively, which purchase shall be completed at the date of
completion to be stipulated in the notice (which date shall not be more
than 30 days from the date of the notice) and otherwise in accordance
with the provisions of Clause 8.4 (provided that, in the exercise of
such right given in this Clause and in case of competition amongst the
Non-Defaulting Shareholders to purchase from the Defaulting Shareholder
the Purchased Shares or the Purchased Loan, the Purchased Shares or the
Purchased Loan (as the case may be) shall be allocated amongst the
Non-Defaulting Shareholders in the proportions that the number of
Shares held by each such Non-Defaulting Shareholder bears to the
aggregate number of Shares held by the Non-Defaulting Shareholders)
provided that after completion of such purchase, the Non-Defaulting
Shareholder shall immediately take all necessary action to change the
corporate name of all members of the Group to such names that do not
relate to the Defaulting Shareholder.
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8.4 On the date of completion referred to in Clause 8.3, the relevant party
required thereunder to sell or transfer (the "TRANSFEROR SHAREHOLDER")
the Shares and the Shareholder's Loan shall deliver to the other
relevant Shareholder which exercises the right given thereunder (the
"TRANSFEREE SHAREHOLDER") duly executed instruments of transfer of its
Shares to be sold to the Transferee Shareholder pursuant to Clause 8.3
together with the relevant certificates in respect of those Shares,
duly executed contract notes (if required) in respect thereof subject
to the full payment of the applicable price made by the Transferee
Shareholder in accordance with Clause 8.3 and deliver or procure the
delivery of assignments of the Shareholder's Loan to be sold to the
Transferee Shareholder pursuant to Clause 8.3 executed by the
Transferor Shareholder in favour of the Transferee Shareholder.
8.5 Upon the occurrence of any Event of Default set out in Clause 8.1.1
(and in addition to and without limiting any other rights, claims and
remedies of any of the Shareholders under this Agreement, applicable
laws or otherwise), the Non-Defaulting Shareholders and the Defaulting
Shareholder shall discuss in good faith among themselves with a view to
resolving the dispute or difference on the Event of Default provided
that if the Shareholders cannot resolve any such dispute or difference
within three (3) months of the occurrence of the Event of Default, any
of the Non-Defaulting Shareholders shall be entitled to liquidate the
Group and the Defaulting Shareholder shall vote at any meeting of the
Shareholders and Directors and take such other steps for the
liquidation of the Group pursuant to this Clause 8.5.
8.6 In the event that the Distribution Agreement is terminated for any
reason whatsoever, the parties shall take steps to liquidate the Group
subject to making appropriate provision or taking appropriate steps for
fulfilling any outstanding obligations to the Group's customers, and
complying with any outstanding obligations or exercising or pursuing
any rights and remedies under the Distribution Agreement.
8.7 Each of the Shareholders hereby undertakes to notify the other
Shareholders immediately upon the occurrence of an Event of Default or
any event which, with the giving of notice and/or the passage of time
and/or the fulfilment of any other condition, would be an Event of
Default.
8.8 Without prejudice and subject to Clause 7.5, any repayment in respect
of each category of Shareholders' Loans made pursuant to Clause 7 shall
be made to all Non-Defaulting Shareholders who have not committed or
suffered an Event of Default at the time of intended repayment pro rata
to the proportion of such advance or loan made by each of such
Non-Defaulting Shareholders at the time of repayment, and only
thereafter to the Defaulting Shareholders, pro rata among themselves as
aforesaid, mutatis mutandis.
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9. NO SALE, DISPOSAL OR CHARGING OF SHARES
9.1 Prior to Listing, no Shareholder may sell, transfer, dispose of,
charge, mortgage, encumber, assign or otherwise create or permit to
arise or subsist any Encumbrance over or in respect of all or any of
the Shares held by it and the relevant Shareholder's Loan granted by it
or any loan to any member of the Group made or to be made by it (such
Shares, Shareholder's Loan and loan to any member of the Group being
collectively called the "INTEREST") or purport to do so, without the
prior written consent of the other Shareholder (except by a transfer or
assignment pursuant to Clause 8, 9.2.1 or 18).
9.2 9.2.1 Notwithstanding other provisions in this Clause 9,
(a) CK-X may transfer all its Interest to any direct or
indirect subsidiary of the Controlling Party of
CK-X; and
(b) OTI may transfer all its Interest to any direct or
indirect subsidiary of OTI (provided that OTI shall
hold not less than 75% of the entire issued and
voting share capital of that subsidiary).
9.2.2 Subject to Clauses 9.1 and 9.2.1, in the event that a
Shareholder (the "TRANSFEROR") proposes to transfer or dispose
of all (but not less than all) its Interest, it shall give a
notice in writing (the "TRANSFER NOTICE") to the Company that
it desires to transfer or dispose of the same. The Transfer
Notice shall constitute the Company the agent of the
Transferor for the sale of the Transferor's Interest at the
price as hereinafter provided in this Clause 9 during the SALE
PERIOD (as hereinafter defined) to the other Shareholder and
shall not be revocable except with the consent of the
Directors.
9.2.3 If within 14 days after the date (the "TRANSFER NOTICE DATE")
on which the Transfer Notice was given, the Transferor and the
other Shareholder shall have agreed a price as representing
the fair value of the relevant Interest or as being acceptable
to the Transferor, then such transfer price shall be the price
(subject to the deduction therefrom of any dividend or other
distribution declared or made after such agreement and to be
retained by the Transferor) as agreed. Otherwise the Company
shall upon request by any Shareholder procure the Auditors to
determine and certify the Fair Market Value as at the Transfer
Notice Date.
9.2.4 If the price for transfer of the Interest was agreed as
aforesaid within 14 days of the Transfer Notice Date, the Sale
Period shall commence on the date when such agreement was
reached and expire 30 days thereafter. If the price was not so
agreed, the Sale Period shall commence on the date on which
the Auditors shall have notified the Company of their
determination of the Fair Market Value and expire 30 days
thereafter.
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9.2.5 The relevant Interest shall, immediately following
determination of the Fair Market Value, be offered by the
Company by notice in writing to the other Shareholder for
purchase at the Fair Market Value. Such offer shall be open
for acceptance at any time within the Sale Period.
9.3 If the offer under Clause 9.2.5 shall not be accepted by the other
Shareholder or if the other Shareholder shall fail to complete the
purchase of the relevant Interest under Clause 9.2.4 otherwise than by
reason of the default of the Transferor, then the Transferor for a
period of 30 days thereafter shall be at liberty to transfer or dispose
of all of the relevant Interest (but not any part thereof) to any
person on a bona fide sale at any price not being less than the Fair
Market Value or the agreed price pursuant to Clause 9.2.3 (as the case
may be) and provided that any such sale shall not include any terms or
conditions whether as to the terms of payment or otherwise which are
more favourable to the proposed purchaser than the terms contained in
the relevant Transfer Notice provided that no such sale shall be
effected to any person which is or whose holding company is a
competitor of the other Shareholder or its relevant Controlling Party.
9.4 If the other Shareholder does not accept any offer for sale of the
Transferor's Interest under Clause 9.2.5, the other Shareholder shall
be entitled to serve a written notice within the Sale Period on the
Transferor requiring the Transferor to procure an offer for purchase of
all of the Interest held by the other Shareholder to be made by any
purchaser to whom the Transferor may transfer its Interest under Clause
9.3. The offer for purchase of all of the Interest of the other
Shareholder shall be on the same terms and conditions as those offered
by the purchaser to the Transferor under Clause 9.3. Within 5 Business
Days from the receipt of the written offer for purchase made by the
purchaser to the other Shareholder, the other Shareholder shall be
entitled to accept the offer in which event the other Shareholder shall
be bound to sell its Interest to the purchaser, such sale to be
completed simultaneously with the completion of the purchase of the
Transferor's Interest by the purchaser. In the event the other
Shareholder does not accept or respond to the purchaser's offer for
purchase within the said period of 5 Business Days, the Transferor
shall be entitled to proceed with the sale of its Interest to the
purchaser under Clause 9.3.
10. FAIR MARKET VALUE
10.1 10.1.1 For purpose of this Agreement and subject to Clauses 10.1.2
and 10.1.3, "FAIR MARKET VALUE" means the price per Share,
determined by the Auditors, or an investment banker (the
"INVESTMENT BANK") as may be appointed by the Board pursuant
to this Clause as of the relevant Valuation Date and expressed
in terms of money or money's worth, that would be received
upon a sale of all of the issued and outstanding Shares in a
single transaction determined in an open and unrestricted
market between prudent parties, acting at arm's length and
under no compulsion to act, and having reasonable knowledge of
all relevant facts concerning the Company.
10.1.2 The determination of the Fair Market Value of the Shares shall
be made on the basis that the Company is a "GOING CONCERN"
(except to the extent that market, financial, economic,
business or other conditions shall dictate different criteria
in the reasonable judgement of the Auditors or Investment
Banker).
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10.1.3 There shall be no discount for a minority interest or any
premium for control. The value of the Shares shall not be
diminished because of the fact that the Shares are not
publicly traded.
10.1.4 The Auditors or Investment Banker shall be entitled to employ
a chartered surveyor or any appropriate professional person to
assist its determination and shall act hereunder as expert and
not as arbitrator and its determination shall, in the absence
of fraud or manifest error, be final and binding on the
parties.
10.1.5 The costs and expenses of the Auditors or Investment Banker
incurred in connection with the determination of the Fair
Market Value in accordance with this Clause 10 shall be borne
by the Unwilling Shareholder under Clause 7, the Defaulting
Shareholder under Clause 8 or the Transferor under Clause 9
(as the case may be) unless otherwise agreed by the parties
hereto.
10.2 The Shares and the Shareholder's Loan so transferred under this
Agreement shall be deemed to be sold by the relevant Transferor
Shareholder, and the relevant Transferor Shareholder shall so transfer
them or procure their transfer (as the case may be) as beneficial owner
free from all Encumbrances but with all rights attaching thereto on and
after the date of such transfer.
10.3 The Shareholders shall procure the passing of Board resolutions
approving the registration of the transfer of the Shares and
acknowledging notice of the assignment of the Shareholder's Loan.
11. REPRESENTATIONS AND UNDERTAKINGS
11.1 Each of the Controlling Parties hereby irrevocably and unconditionally
undertakes with each of the other parties to this Agreement that such
Controlling Party shall ensure and procure that the Shareholder whose
name is set opposite to the name of such Controlling Party in SCHEDULE
A will duly and punctually perform and observe all agreements,
conditions and provisions to be performed and observed by such
Shareholder in this Agreement.
11.2 Each of the Controlling Parties hereby agrees and undertakes with each
of the other parties of this Agreement that such Controlling Party
shall not transfer, sell or otherwise dispose of or create any
Encumbrance to and in favour of any person its beneficial interest or
rights (in each case whether direct or indirect) in any of its shares
in CK-X or OTI (as the case may be) or grant any option or enter into
any agreement, whether conditional or otherwise, to deal with or
regarding any of its such interests or rights in any of its shares in
CK-X or OTI (as the case may be) without the prior written consent of
the parties hereto provided that notwithstanding any provisions in this
Clause 11.2,
11.2.1 the Controlling Party of CK-X may transfer all its interest
and rights in any of its shares in CK-X to any of its direct
or indirect subsidiary; and
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11.2.2 the Controlling Party of OTI may transfer all its interest and
rights in any of its shares in OTI to any of its direct or
indirect subsidiary (provided that OTI shall hold not less
than 75% of the entire issued and voting share capital of such
subsidiary).
11.3 The Controlling Party of CK-X undertakes to OTI that during the
continuance of this Agreement, CK-X will remain its direct or indirect
subsidiary, and the Controlling Party of OTI undertakes to CK-X and the
Controlling Party of CK-X that during the continuance of this
Agreement, OTI will, subject to the provisions of Clause 11.2.2, remain
its direct or indirect subsidiary. If CK-X or OTI (as the case may be)
ceases to be the direct or indirect subsidiary of its respective
Controlling Party as aforesaid without the prior written consent of the
other parties hereto (other than as a result of any transfer or
disposal permitted under the proviso of Clause 11.2), the provisions
contained in Clause 8 shall be deemed to be applicable as if CK-X or
OTI (as the case may be) to which such Controlling Party is related had
committed an Event of Default set out in Clause 8.1.2 and the
provisions of Clause 8 shall mutatis mutandis apply to CK-X or OTI (as
the case may be) on the date of such change.
11.4 Each of CK-X, OTI and their respective Controlling Parties (the
"REPRESENTOR") represents and warrants to the other parties hereto
that:-
11.4.1 it is a corporation duly incorporated and validly existing
under the laws of its place of incorporation as a company
limited by shares, has power to own its property and assets
and to carry on its business as such business is now being
conducted and has complied with all material legal
requirements relative to such business in its place of
incorporation, Hong Kong or elsewhere;
11.4.2 this Agreement constitutes and, when executed, will constitute
valid, effective and legally binding obligations of the
Representor enforceable in accordance with its terms; and
11.4.3 the execution and delivery of the performance of its
obligations under, and compliance with the provisions of, this
Agreement by the Representor will not:-
(a) contravene any existing applicable law, enactment,
rule or regulation or any judgment, decree,
authorisation or permit to which the Representor is
subject or its memorandum and articles of association
or any applicable law; or
(b) conflict with, or result in any breach of any of the
terms of, or constitute a default under, any
agreement or other instrument or document to which
the Representor is a party or is subject or by which
its or any of its properties or assets is bound.
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12. LISTING
12.1 Subject to the decision of the Board, so soon as the criteria for
Listing on a Recognised Stock Exchange have been satisfied, an
application may be made by the Company or any holding company formed
for that purpose for Listing of the Company or any part thereof.
Subject to unanimous decision of the parties hereto, the shareholding
structure of the Company may be revised and this Agreement terminated
or varied to facilitate the Listing.
12.2 For the purpose of this Agreement, "LISTING" includes the granting of a
listing of and permission to deal in securities on a Recognised Stock
Exchange, and a "RECOGNISED STOCK EXCHANGE" means the Singapore Stock
Exchange (Foreign Board), The Stock Exchange of Hong Kong Limited
(including, without limitation, its Growth Enterprise Market), National
Association of Securities Dealer (commonly called NASDAQ) or such other
internationally recognised stock exchange as may be approved by the
parties hereto for trading or dealing in securities.
13. UNDERTAKINGS
13.1 Each of the Shareholders hereby undertakes to the other Shareholders:-
13.1.1 to perform and observe and, so far as it is able to do,
procure that the Company shall at all times act in accordance
with the provisions of this Agreement and any applicable laws;
13.1.2 to take all necessary steps to give full effect to the
provisions of this Agreement and any applicable laws and
regulations including, but not limited to, procuring that any
Director it has nominated shall act and vote in accordance
with such provisions and requirements;
13.1.3 to vote in relation to the Shares held by it so as to procure
that the provisions of this Agreement and any applicable laws
and regulations are observed and performed, notwithstanding
any provisions in the Articles;
13.1.4 (without prejudice to the generality of the foregoing) to
exercise and procure that every person for the time being
representing it shall exercise or refrain from exercising any
rights of voting at any meeting of the Shareholders or of the
Board so as to ensure the passing of any and every resolution
necessary or desirable so as to procure that the affairs of
the Group are conducted in accordance with this Agreement and
any applicable laws and regulations and otherwise to give full
effect to such provisions and requirements and likewise so as
to ensure that no resolution is passed which is inconsistent
with such provisions and requirements;
13.1.5 to procure the resignation of any Director nominated by it if
such Director does not support and implement any resolution
properly passed by the Board or at any general meeting of the
Shareholders of the Company for the proper development and
conduct of the business of the Company as contemplated in this
Agreement and to give full and complete effect in all respects
to the terms and conditions of this Agreement; and
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13.1.6 generally to use its reasonable endeavours to promote the
business and the interests of the Group.
13.2 13.2.1 OTI and its Controlling Party jointly and severally undertakes
to the other parties hereto that so long as it is directly or
indirectly beneficially interested in any Shares of the
Company (and, where OTI or its Controlling Party has committed
an Event of Default, for a period of 1 year after the
termination of this Agreement in connection with such Event of
Default or the Distribution Agreement, whichever shall occur
later), none of such Shareholder and its Controlling Party
will either on its own account or in conjunction with or on
behalf of or through any other person, firm, company or
organisation 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, employee or
otherwise, in any business activity which:-
(a) is competitive with or similar to any business
carried on in the Exclusive Territory by the Company
or any member of the Group at any time and from time
to time in respect of the target market in the
Exclusive Territory for which the OTI Products are
intended; or
(b) engages 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 any
product which would be sold in or imported into the
Exclusive Territory and is competitive with or similar
to the OTI Products in respect of the target market in
the Exclusive Territory for which the OTI Products are
intended,
or cause, assist, enable or ensure any of such activities to
be carried out by any third party except otherwise pursuant to
the Distribution Agreement (other than as holder of not more
than five per cent (5%) of the issued shares or debentures of
any company listed on any Recognised Stock Exchange).
13.2.2 (a) In this Clause 13.2.2:-
"OEM AGREEMENT" means an OEM or similar agreement
between any member of the OTI Group (excluding the
Group) and one or more third parties (any one of such
third parties is called an "OEM PARTY") pursuant to
which, inter alia, an OEM Party has the right to
manufacture products based on the OTI Products ("OEM
PRODUCTS");
"OTI GROUP" means the group of companies consisting
of OTI, its Controlling Party and any subsidiary or
related company of such Controlling Party from time
to time;
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"NET REVENUES" means gross revenues actually received
by OTI Group for Sold OEM Products, excluding, for
avoidance of doubt, any sales or other taxes, VAT
rebates, levies and duties and like payments and
after deduction of the costs of goods sold in
relation to such Sold OEM Products as calculated in
compliance with international accounting standards;
and
"SOLD OEM PRODUCTS" means OEM Products sold in the
Exclusive Territory other than through the Company or
a member of the Group.
(b) (i) OTI hereby undertakes that as long as and to the
extent that the Company shall have exclusive
rights to distribute the OTI Products in the
Exclusive Territory under the Distribution
Agreement, OTI shall use its best efforts to
persuade the OEM Party or any potential OEM Party
to establish cooperation with the Company in the
distribution of OEM Products in the Exclusive
Territory.
(ii) If and only if such cooperation shall not be
established, OTI shall credit the Company for
7.5% of the Net Revenues for Sold OEM Products
known to OTI to have been sold in the Exclusive
Territory at any time after the date on which any
of the parties has become aware of the sale of
the Sold OEM Products in the Exclusive Territory.
Such payment shall be made at such time and by
such method as may be agreed between CK-X and OTI
from time to time after reasonably sufficient
time has been allowed to OTI to investigate the
matter.
(c) Each of OTI, CK-X and the Company shall notify the
other parties as soon as it becomes aware that OEM
Products are being sold in the Exclusive Territory
not through the Company or any member of the Group.
In such event the parties shall cooperate to
ascertain, as promptly as possible, the relevant
details relating to such sale (it being clarified for
the avoidance of doubt that it is foreseen that OTI
may not, despite all reasonable efforts having been
made to obtain information and clarification from the
OEM Party, have the knowledge on whether the OEM
Products will be sold in any particular territory,
including the Exclusive Territory, or if sold, to
what extent they are sold).
13.2.3 Each and every obligation under this Clause 13.2 shall be
treated as a separate obligation and shall be severally
enforceable as such and in the event of any obligation or
obligations being or becoming unenforceable in whole or in
part such part or parts as are unenforceable shall be deleted
from this Clause 13.2 and any such deletion shall not affect
the enforceability of all such parts of this Clause 13.2 as
remain not so deleted.
13.2.4 The restrictions contained in this Clause 13.2 shall survive
for a period of one year after the termination of this
Agreement or the cessation of any or all of the Shareholders
and their respective Controlling Parties from being
beneficially interested in any Shares of the Company (except
for the restrictions contained in Clause 13.2.1 which shall be
governed by the terms in such Clause 13.2.1 accordingly).
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13.2.5 While the restrictions contained in this Clause 13.2 are
considered by the parties to be reasonable in all the
circumstances, it is recognised that restrictions of the
nature in question may fail for technical reasons unforeseen
and accordingly it is hereby agreed and declared that if any
of such restrictions shall be adjudged to be void as going
beyond what is reasonable in all the circumstances for the
protection of the interests of the parties hereto, the Company
or any member of the Group but would be valid if part of the
wording thereof were deleted or the periods thereof reduced or
the range of activities or area dealt with thereby reduced in
scope the said restriction shall apply with such modifications
as may be necessary to make it valid and effective.
13.3 13.3.1 Without in any way limiting the rights of CK-X and its
Controlling Party generally to undertake any business or enter
into any arrangement with any other person similar to the
transactions contemplated by this Agreement, CK-X and its
Controlling Party hereby jointly and severally undertakes to
OTI and the Company that it will use its reasonable efforts:-
(a) to assist the Company to market OTI Products to the
affiliated companies of the CK Group on mutually
beneficial commercial terms and basis;
(b) to procure its subsidiaries (other than those which
are publicly listed companies or otherwise prohibited
by virtue of any agreement, arrangement or otherwise)
to utilise the services of the Company or purchase
OTI Products from the Company on mutually beneficial
commercial terms and basis if the business of any
such subsidiaries involves the marketing,
distribution or sale of products similar to the OTI
Products;
(c) to persuade any of the affiliated companies of the CK
Group to co-operate and not to compete with the
Company in the Company's business of marketing,
distribution or sale of OTI Products under the
Distribution Agreement; and
(d) to provide the Company with system integration
services and organisational facilities (such as
office space and manpower) on favourable commercial
basis.
13.3.2 Where it comes to the knowledge of the Controlling Party of
CK-X that there is competition or likely to be competition by
any of the affiliated companies of the CK Group as described
in Clause 13.3.1(c), the parties hereto shall consult with
each other to seek ways to avoid or minimise such competition
or potential competition on mutually beneficial commercial
terms and basis. The steps that the parties may consider shall
include, without limitation, the exercise of reasonable
endeavours by the Controlling Party of CK-X to seek for the
Company the opportunity:-
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(a) to supply OTI Products to such affiliated company of
the CK Group ; or
(b) to enter into agreements with third parties on the
purchase of products similar to OTI Products which
are not otherwise manufactured by OTI.
14. ACCOUNTS
The accounts of the Company and the Subsidiaries shall be kept in
accordance with GAAP and be audited annually. The audited accounts and
report of the Auditors shall be made available to the Shareholders
within fifteen days after they are issued by the Auditors.
15. PREVALENCE OVER ARTICLES
If there is any conflict or inconsistency between the terms and
conditions of this Agreement and any provisions in the Memorandum and
Articles or the memorandum and articles of association (or analogous
bye-laws or analogous constitution) of any other member of the Group,
the terms and conditions of this Agreement shall prevail, and in such
event and upon the request of CK-X or OTI, the Shareholders shall also
procure that such provisions of the Memorandum and Articles or the
memorandum and articles of association (or analogous bye-laws or
analogous constitution) shall be appropriately amended or deleted to
remove such conflict or inconsistency.
16. ACCESSION AGREEMENT
16.1 Each Shareholder hereby undertakes that if it shall transfer any Shares
and Shareholder's Loan pursuant to Clause 9.2 or Clause 9.3 (as the
case may be), such Shareholder shall procure that the transferee of
such Shares and Shareholder's Loan shall have entered into an Accession
Agreement with the Shareholders (other than the transferring
Shareholder if it no longer holds any Share and Shareholder's Loan),
the Company and the Controlling Parties.
16.2 In this Agreement, "ACCESSION AGREEMENT" means an agreement between the
transferee of Shares and Shareholder's Loan, the Shareholders, the
Company and the Controlling Parties whereby the transferee of Shares
and the Shareholder's Loan, the Shareholders (other than the
transferring Shareholder if it no longer holds any Share and
Shareholder's Loan), the Company and the Controlling Parties of such
Shareholders shall unconditionally accede to and agree to observe and
perform and be bound by the terms and conditions of this Agreement and
the Controlling Parties of the said transferee shall unconditionally
guarantee and undertake to and in favour of CK-X the observance,
compliance and performance of (a) this Agreement (as subject to such
Accession Agreement) and (b) of the Accession Agreement, by the
Shareholders (other than CK-X) and all the Controlling Parties of such
Shareholders.
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16.3 It shall be a condition to any transfer of Shares and Shareholder's
Loan pursuant to Clause 9.2 that the transferee of the Shares and
Shareholder's Loan and the Controlling Parties of such transferee shall
have entered into an Accession Agreement with the Shareholders (other
than the transferring Shareholder if it no longer holds any Share and
any Shareholder's Loan), the Company and the Controlling Parties of
such Shareholders.
17. DURATION OF AGREEMENT
17.1 Subject to the provisions of this Agreement, this Agreement shall
continue in full force and effect so long as there is more than one
Shareholder and each of CK-X and OTI (or their respective permitted
transferees pursuant to Clause 9.2.1) remain as Shareholders in the
Company or until such time as all of the Shareholders shall agree in
writing to its termination.
17.2 The termination of this Agreement shall not prejudice or affect any
rights or liabilities of any party hereto arising under this Agreement
prior to such termination.
18. NON-ASSIGNABILITY
Subject to the provisions of this Agreement, none of the parties hereto
shall assign or transfer the benefits or the obligations under this
Agreement but, subject to aforesaid, the benefits and obligations under
this Agreement shall be binding on and shall enure for the benefit of
each party's successors and permitted assigns.
19. NO PARTNERSHIP
None of the provisions of this Agreement shall be deemed to constitute
a partnership between the parties hereto or any of them and save as
provided herein, none of them shall have any authority to bind any of
the other parties hereto in any way.
20. NO WAIVER
20.1 No failure or delay by any party hereto in exercising or enforcing any
right, power or remedy hereunder shall operate as a waiver thereof nor
shall any single or partial exercise or enforcement of any such right,
power or remedy preclude the exercise or enforcement of any other
right, power or remedy.
20.2 The rights, powers and remedies herein provided are cumulative and not
exclusive of any rights, powers or remedies provided by law.
20.3 The rights of any party shall not be prejudiced or restricted by any
indulgence or forbearance extended to any other party and, without
limiting the foregoing, no waiver by any party in respect of any breach
of any provision hereof shall operate as a waiver in respect of any
continuing or subsequent breach of that or other provision hereof.
A-37
21. SEVERABILITY
All the provisions hereof are severable and distinct from one another
and the invalidity, illegality or unenforceability of any such
provision shall not affect or impair the validity, legality or
enforceability of any of the other provisions hereof and any such
invalidity, illegality or unenforceability in any jurisdiction shall
not affect or impair the validity, legality or enforceability thereof
in any other jurisdiction.
22. ENTIRE AGREEMENT
This Agreement sets forth the entire agreement and understanding
between the parties in connection with the Company and the matters
referred to in this Agreement and supersedes and cancels all previous
letters of intent, correspondences, understandings, arrangements,
agreements and undertakings (if any) between the parties or any of them
with respect to the Company and such matters referred to herein,
whether written or oral.
23. AMENDMENT
No provision hereof may be amended or terminated except by an
instrument in writing and signed by all parties hereto. No breach of or
default under any of the provisions of this Agreement may be waived or
discharged unless expressly agreed in writing by all parties hereto.
24. NOTICES
24.1 All notices, requests, demands and other communications required to be
given or made pursuant to this Agreement or in connection herewith
shall be given or made to or upon the parties in writing and delivered
or sent by facsimile transmission, registered prepaid post (airmail if
outside the sender's country or territory) or by personal delivery to
the appropriate party at the address or facsimile number set out below
against its name:-
A-38
(a) To : CK-X
Address : x/x Xxxxxx Xxxx Xxxxxxxxxxxxxx Xxxxxxxx Xxxxxxx
00xx Xxxxx, Xxxxxx Xxxx Center,
0 Xxxxx'x Xxxx Xxxxxxx,
Xxxx Xxxx
Fax Number : (000) 0000 0000
Attention : Xx. Xxx Xxxx Xxx
(b) To : OTI
Address : Z.H.R. Industrial Xxxx
X.X. Xxx 00
Xxxx Xxxx 0000 Xxxxxx
Fax Number : 000-0-0000000
Attention : Xx. Xxxxxx Xxxxxx
(c) To : The Company
Address : x/x Xxxxxx Xxxx Xxxxxxxxxxxxxx Xxxxxxxx Xxxxxxx
00xx Xxxxx, Xxxxxx Xxxx Center,
0 Xxxxx'x Xxxx Xxxxxxx,
Xxxx Xxxx
Fax Number : (000) 0000 0000
Attention : Xx. Xxx Xxxx Xxx
(d) To : Xxxxxx Kong Infrastructure Holdings Limited
Address : 00xx Xxxxx, Xxxxxx Xxxx Xxxxxx,
0 Xxxxx'x Xxxx Xxxxxxx,
Xxxx Xxxx
Fax Number : (000) 0000 0000
Attention : Xx. Xxx Xxxx Xxx
24.2 Any such notice or other communication shall be deemed to have been
duly served (if delivered personally) when left at the addresses
mentioned in Clause 24.1 or (if sent by facsimile) one Business Day
after receipt of the correct transmission report or (in the case of
local post) on the date which is 2 Business Days after posting or (in
the case of overseas post) 5 Business Days after despatch Provided that
if any such notice or other communication is delivered or sent by
facsimile outside usual business hours it will not be deemed to have
been given until the commencement of the next succeeding Business Day
and such notice or other communication shall forthwith be confirmed by
post. The failure of the addressee to receive such confirmation shall
not invalidate the relevant notice given by facsimile.
A-39
24.3 Each of the parties shall give notice to the other in accordance with
this Clause 24 of change or acquisition of any address or telephone
telex fax or similar number as soon as practicable and in any event
within 48 hours of such change or acquisition.
25. COSTS
25.1 Each party shall bear its own legal, accountancy and other costs and
expenses in connection with the negotiations leading to this Agreement
and the preparation and execution of this Agreement and any related
documents.
25.2 The stamp duty (if any) payable in connection with any transfer of the
Shares or the Shareholder's Loan from any Shareholder to any other
Shareholder in accordance with Clause 8 of this Agreement shall be
wholly borne by the Transferor Shareholder.
26. TIME OF THE ESSENCE
Time shall be of the essence of this Agreement. Any date or period
mentioned herein may only be varied or extended by agreement in writing
between the parties hereto.
27. COUNTERPARTS
This Agreement may be executed in any number of counterparts, which
when taken together shall constitute one and the same instrument and is
binding on each and every party. Each counterpart so executed shall
thereafter be exchanged and countersigned to provide each party with a
fully executed copy of this Agreement.
28. DISCHARGE
Subject to any other provisions herein to the contrary, upon any
transfer by any Shareholder of all its Shares and all its Shareholder's
Loan in accordance with the provisions of this Agreement (but not
otherwise), such Shareholder and its Controlling Party shall cease to
be bound by the provisions herein and the rights of the Shareholder and
its Controlling Party under this Agreement so far as they relate to the
Company or the Group shall be extinguished, but without prejudice to
any rights accrued or any liabilities incurred as a result of any
previous breach of this Agreement by such Shareholder or by its
Controlling Party.
A-40
29. CONFIDENTIALITY
29.1 Each of the parties hereto shall at all times use its best endeavours
to maintain secret and confidential (and to procure that its respective
subsidiaries, holding company and affiliated companies and its and
their respective directors, employees, agents and consultants shall
maintain secret and confidential) all information obtained by it
pursuant to this Agreement and prior to and in contemplation of it, its
shareholding in the Company, the existence and contents of this
Agreement, all trade secrets, technical data, business, financial and
all other information of a confidential nature and any information
which it or they may acquire in the course of this Agreement or in
relation to the Company, the Subsidiaries or in relation to the
clients, business or affairs of every other party hereto or of the
Company or of any of the Subsidiaries whether or not expressly
identified as confidential and shall not use or disclose such
information except:
(a) with the prior written consent of every other party and/or of
the Company or the Subsidiary (as appropriate);
(b) in accordance with the order of a court of competent
jurisdiction;
(c) as may be required of any Shareholder pursuant to any rules
imposed by or agreements entered into with any relevant stock
exchange or the securities commission;
(d) to its legal or professional advisers and its employees,
officers, agents and representatives (and in turn their
respective legal and professional advisers) for the purposes
of protecting its rights in or enforcing or performing this
Agreement to whom and to the extent that such disclosure is
reasonably necessary for the purpose of this Agreement (and
which advisers, employees, officers, agents and
representatives (and in turn their respective legal and
professional advisers) shall be made aware of and required to
acknowledge these confidentiality arrangements in writing);
(e) where such information is already in the public domain without
any breach by any of the parties hereto of this Clause.
29.2 Without prejudice to the aforesaid, upon the signing of this Agreement,
the parties hereto shall also execute and enter into the MCA. In case
of direct conflict (but not otherwise) between the provisions of this
Clause 29 and the MCA in relation to property which forms part of the
OTI Intellectual Property or the CK Group Proprietary Information and
Rights, the provisions of the MCA shall prevail.
29.3 Each of the parties may, jointly or individually, issue a press release
on their cooperation under this Agreement and the Distribution
Agreement, after consulting with the other parties as to the contents
of such press release.
30. GOVERNING LAW AND JURISDICTION
30.1 This Agreement shall be governed by and construed in all respects in
accordance with the laws of England. Each party hereto irrevocably
agrees that the courts of Hong Kong shall have non-exclusive
jurisdiction to hear and determine any suit, action or proceeding, and
to settle any disputes which may arise out of or in connection with
this Agreement and for such purposes irrevocably submits to the
non-exclusive jurisdiction of such courts.
A-41
30.2 Nothing contained in this Clause 30 shall limit the right of any party
hereto to take legal or other proceedings against any other party in
any court of competent jurisdiction, nor shall the taking of
proceedings in one or more jurisdictions preclude the taking of
proceedings in any other jurisdiction, whether currently or not to the
extent permitted by the law of such other jurisdiction.
30.3 Each of CK-X and its Controlling Party hereby severally appoints XXXXXX
KONG CAPITAL LIMITED of 12th Floor, Xxxxxx Kong Center, 0 Xxxxx'x Xxxx,
Xxxxxxx, Xxxx Xxxx and each of OTI and its the Controlling Party hereby
severally appoints FIRMLEY COMPANY LIMITED of 00xx Xxxxx, Xxxxxxxxx
Xxxxx, Xxx Xxxxxxxx, Xxxxxxx, Xxxx Xxxx respectively as its or their
agent to receive and acknowledge on its or their behalf service of any
writ, summons, order, judgment or other notice of legal process in Hong
Kong. If for any reason any agent named above (or its respective
successor) no longer serves as agent of its principal for this purpose
the relevant Shareholder and Controlling Party shall promptly appoint a
successor agent and notify the other parties hereto thereof. Each
Shareholder and Controlling Party agrees that any such legal process
shall be sufficiently served on it if delivered to its agent for
service at its address for the time being in Hong Kong whether or not
such agent gives notice thereof to its principal.
IN WITNESS whereof this Agreement has been executed by the parties the day and
year first above written.
The Shareholders
SIGNED by )
)
)
for and on behalf of )
OCEAN WONDER LIMITED )
in the presence of:- )
The Company
SIGNED by )
)
)
A-42
for and on behalf of )
ON TRACK INNOVATIONS LIMITED )
in the presence of:- )
The Controlling Parties
SIGNED by )
)
)
for and on behalf of )
SAILOR GROUP LIMITED (to be )
renamed OTI ASIA PACIFIC LTD.) )
in the presence of:- )
SIGNED by )
)
)
for and on behalf of )
ON TRACK INNOVATIONS LIMITED )
in the presence of:- )
SIGNED by )
)
)
for and on behalf of )
XXXXXX KONG INFRASTRUCTURE )
HOLDINGS LIMITED )
in the presence of:- )
A-43
SCHEDULE A
THE CONTROLLING PARTIES
Name of Controlling Party Name of Shareholder
1. ON TRACK INNOVATIONS
ON TRACK INNOVATIONS
LTD. (SEE NOTE) LTD. (SEE NOTE)
2. XXXXXX KONG INFRASTRUCTURE OCEAN WONDER LIMITED
HOLDINGS LIMITED
Note: As long as OTI is a Shareholder, it shall be deemed for the purposes of
this Agreement also as its Controlling Party. If OTI shall use its
rights under this Agreement to transfer and assign its Interest in the
Company to a subsidiary, OTI shall be deemed to be the Controlling
Party of such subsidiary.
A-44
SCHEDULE B
FORM OF DISTRIBUTION AGREEMENT
B-1
SCHEDULE C
OTI INTELLECTUAL PROPERTY
PART 1 - PATENT APPLICATIONS AND GRANTED PATENTS
The first group of OTI patents relates to OTI's core technology, specifically
the non-contact transmission of data between a station and a portable data
carrier (smart card) using matched antenna circuits. Patents have been granted
in the United States, Australia, South Africa, Israel, Europe, Canada and
Singapore.
Table I: Core OTI Patent--Method for the Non-Contact Transmission of Data
----------------------------------------------------------------------------------------------------------
Filed
Patent
Country Number Date Number Date Status
----------------------------------------------------------------------------------------------------------
X.X. 000000 6/7/92 5241160 13/8/93 Granted
Israel 100451 20/12/91 100451 10/10/96 Granted
Canada 2053830 23/12/91 2058330 0/0/00 Xxxxxxxxx
Xxxxxxxxx 0000000/0 23/12/91 9607564/3 28/9/98 Granted
Australia 90011/91 24/12/91 640843 0/0/00 Xxxxxxx
Xxxxx Xxxxxx 91/10164 27/12/91 91/10164 30/9/92 Granted
Hong Kong 97101652.1 12/8/97 Pending
EUROPE 91122099.4 23/12/91 0 492 569 4/11/98 Granted
Germany Europe 691-30-447-05-08 04/11/98 Granted
Italy Europe 192090E/99 13/1/99 Granted
Austria Europe 0 492 569 2/2/99 Granted
Denmark Europe P199801745 21/1/99 Granted
Sweden Xxxxxx 0 000 000 00/0/00 Xxxxxxx
Xxxxxxxxxxx Europe 0 492 569 4/11/98 Granted
Greece Europe 990400178 18/1/99 Granted
Switzerland Europe 0 492 569 4/11/98 Granted
Belgium Europe 0 492 569 4/11/98 Granted
Spain Europe ES 2125860 T3 4/11/98 Granted
France Europe 0 492 569 4/11/98 Granted
UK Europe
Luxembourg Europe
----------------------------------------------------------------------------------------------------------
C-1
EASY PARKTM PATENT Founded in 1991, Easy Park Ltd. is a subsidiary of OTI
dedicated to the marketing of parking applications of OTI's technology. At
present, OTI owns 92% of Easy ParkTM. Easy ParkTM is also the owner of a series
of patents related to the application of OTI's core technology in parking
systems. These patents seek protection against the use of other smart card
technologies in parking applications. Patents have been granted in the United
States, South Africa and Israel.
Table II: Easy ParkTM Patents
--------------------------------------------------------------------------------------------------------
PATENT APPLICATION PATENT
COUNTRY NUMBER DATE NUMBER DATE STATUS
--------------------------------------------------------------------------------------------------------
U.S. 916,389 20/7/92 5,339,000 16/8/94 Granted
Europe (EPC) 92 112339.4 20/7/92 Pending
Israel 98880 18/7/91 98880 6/10/96 Granted
South Africa 92/5434 20/7/92 925,434 28/4/93 Granted
--------------------------------------------------------------------------------------------------------
PATENTS FILED
MULTICARD - ANTENNA INTERFACE CONTACT AND CONTACTLESS SMART CARD This patent was
filed in Israel in December 1996 and to achieve worldwide coverage in December
1997. This technology enables simultaneous contact and contactless
bi-directional communication between a smart card with a single microprocessor
utilizing a single operating system and reading device. It is the only combined
card commercially available today where both contact and contactless modes
operate with a single microprocessor sharing an operating system and common
security features
Table III: Antenna Interface #1 Patents
--------------------------------------------------------------------------------------------------------
PATENT APPLICATION PATENT
COUNTRY NUMBER DATE NUMBER DATE STATUS
--------------------------------------------------------------------------------------------------------
Israel 119943 31/12/96 Pending
U.S. 09/001,240 29/12/97 Pending
PCT PCT/IL97/00436 29/12/97 Pending
Canada 2,276,132 29/12/97 Pending
Australia 78930/98 29/12/97 Pending
--------------------------------------------------------------------------------------------------------
ANTENNA INTERFACE #2 PATENT This patents was filed in Israel at the end of 1997
describe a means for using a single microprocessor and EEPROM for operation of
both a contact and contactless smart card. OTI's EYECON(TM) microprocessor-based
MultiCard uses this patent to offer both contact and contactless interfaces in
the same card realizing in a unique manner ISO14443 type A and Type B contact
less communication protocols
Table IV: Antenna Interface #2 Patents
--------------------------------------------------------------------------------------------------------
PATENT APPLICATION PATENT
COUNTRY NUMBER DATE NUMBER DATE STATUS
--------------------------------------------------------------------------------------------------------
Israel 122841 31/12/97 Pending
U.S. 09/221160 29/12/98 Pending
PCT PCT/IL98/00624 28/12/98 Pending
--------------------------------------------------------------------------------------------------------
C-2
LONG RANGE CONTACTLESS TECHNOLOGY This patent covers the technology to receive
and transmit data within several metres, utilizing an active card which emanates
inductive fields. Applications of this patent include hygiene control systems,
toll road schemes and remote supervision for car parking.
Table V: Long Range Contact less patents
--------------------------------------------------------------------------------------------------------
PATENT APPLICATION PATENT
COUNTRY NUMBER DATE NUMBER DATE STATUS
--------------------------------------------------------------------------------------------------------
Israel 123949 3/4/98 Pending
U.S. 09/093,390 9/6/98 Pending
PCT PCT/IL99/00180 29/3/99 Pending
Publication WO 99/52061 14/10/99 Pending
--------------------------------------------------------------------------------------------------------
ANTENNA MODULE This patent describes a mode to transform existing contact smart
card technologies into a contactless smart card device. OTI has developed an
integrated chip/antenna module of the same dimensions as the chip/contact module
used in a contact card and can therefore be inserted in standard contact card
cores. This permits the manufacture of contactless cards using existing
manufacturing capacity for contact cards, yielding significant cost savings.
Table VI: Antenna Module Patents
--------------------------------------------------------------------------------------------------------
PATENT APPLICATION PATENT
COUNTRY NUMBER DATE NUMBER DATE STATUS
--------------------------------------------------------------------------------------------------------
Israel 122250 19/11/97 Pending
PCT PCT/IL98/00543 9/11/98 Pending
--------------------------------------------------------------------------------------------------------
SECURED APPLICATION MODULE ("XXX") The XXX patent covers a method used to
separate the key elements of the electronics and information security in a smart
card reader from the non-secured part of the reader. The chip is physically
secured such that access is prohibited, while the non-secure area of the chip
remains accessible to operators for maintenance and upgrading. For example, the
chip or XXX is encased in concrete in a bus station, while the rest of the
contact/contactless card technology is available for upgrading. It is within the
XXX that the data is protected, regardless of theft or damage to the reader.
Table VII: Contact less XXX Patents
--------------------------------------------------------------------------------------------------------
PATENT APPLICATION PATENT
COUNTRY NUMBER DATE NUMBER DATE STATUS
--------------------------------------------------------------------------------------------------------
Israel 124008 8/4/98 Pending
PCT PCT/IL99/00192 6/4/99 Pending
USA 09/287,117 7/4/99 Pending
--------------------------------------------------------------------------------------------------------
"SUPER SMART CARD" - THIN CLIENT SMART CARD This patent describes future
generations of smart card technology incorporating input and display mechanisms.
This type of smart card would include an internal source of energy.
Table VIII:Super Smart Card Patents
--------------------------------------------------------------------------------------------------------
PATENT APPLICATION PATENT
COUNTRY NUMBER DATE NUMBER DATE STATUS
--------------------------------------------------------------------------------------------------------
Israel 124386 8/5/98 Pending
PCT PCT/IL99/00220 23/4/99 Pending
--------------------------------------------------------------------------------------------------------
C-3
"CAPLESS" FUEL INLET CAP This patent covers the design of a fuel inlet cap that
provides for capless operation with OTI's GMS system vehicle tag. The OTI
vehicle tag is incorporated into the capless fuel inlet cap, facilitatating
do-it-yourself customer installation of the system, which is simply screwed on
in place of the existing fuel cap.
Table IX: "Capless" Cap Patents
--------------------------------------------------------------------------------------------------------
PATENT APPLICATION PATENT
COUNTRY NUMBER DATE NUMBER DATE STATUS
--------------------------------------------------------------------------------------------------------
Israel 124424 11/5/98 Pending
PCT PCT/IL99/00219 23/4/99 Pending
.........................................................................................................
USA 09/306,407 6/5/99 Pending
--------------------------------------------------------------------------------------------------------
SMART TAG WRIST The Company has filed for a patent covering applications where
OTI contactless technology is embedded in a wrist watch design.
Table X: Smart Tag Wrist
--------------------------------------------------------------------------------------------------------
PATENT APPLICATION PATENT
COUNTRY NUMBER DATE NUMBER DATE STATUS
--------------------------------------------------------------------------------------------------------
Israel 125613 11/8/98 Pending
--------------------------------------------------------------------------------------------------------
PART 2 - DESCRIPTION OF KNOW-HOW, ETC.
Know-how, technologies and/or trade secrets that support multiple contactless
and dual interface contact/contactless (for the purpose of transiting to
contactless technology described below) smart card applications utilising a
multi-functioned microprocessor installed in a card and the process of magnetic
field induction for transmission of energy and data between a card and a reader.
At the reader level, OTI's principal technologies enable:-
* a smart transceiver microprocessor based to communicate with a
contactless microprocessor based smart card that can be programmed
repeatedly and can support multi applications;
* a single reader to support up to eight different antennae, eliminating
the need for a costly installation of a large number of readers to
support multiple transactions;
* the antenna of a reader, which interfaces on a contactless basis with
the smart card, to be installed at a distance of up to 35 meters from
the electronic circuitry of the reader, thus reducing maintenance
costs, risk of vandalism and electrical interference and providing the
ability to implement contactless technology in potentially explosive
environments such as gasoline stations;
* communication with the smart card is typically between 2 and 10 cm
dependent on antenna parameters and power requirements;
C-4
* a re-configuration of the antennae and cables supporting the smart card
system without the need to re-tune the entire system.
At the smart card level, OTI's principal technologies include:-
* a dual interface solution, which enables contact/contactless operation
on a single card using the same microprocessor for both the contact and
contactless interfaces;
* specialized methods of manufacturing contactless and dual interface
contact/contactless smart cards in a manner similar to contact smart
cards, thereby reducing the higher cost typically associated with
producing contactless cards.
PART 3 - SERVICE XXXX AND TRADE XXXX
TRADEMARKS Trademark applications have been filed in Israel for the name "OTI"
"Easy Park(TM)" and the xxxx "EYECON(TM)" as well as "OTI Insight". The Company
is filing priority applications for use of these trademarks in the United States
and Europe.
Table I:OTITM
--------------------------------------------------------------------------------------------------------
APPLICATION Registered
COUNTRY NUMBER DATE NUMBER DATE STATUS
--------------------------------------------------------------------------------------------------------
USA Registered
--------------------------------------------------------------------------------------------------------
Table II: Easy ParkTM
--------------------------------------------------------------------------------------------------------
APPLICATION Registered
COUNTRY NUMBER DATE NUMBER DATE STATUS
--------------------------------------------------------------------------------------------------------
Canada 72844-84 854249 12/8/99 Granted
--------------------------------------------------------------------------------------------------------
C-5
SCHEDULE D
FORM OF MUTUAL CONFIDENTIALITY AGREEMENT
MUTUAL CONFIDENTIALITY AGREEMENT
Made and signed as of the ______ day of February, 2000
BETWEEN
ON TRACK INNOVATIONS LTD., of X.X.X. - Xxxxxxxxxx Xxxx, Xxxx-Xxxx 00000 Xxxxxx
("OTI")
AND
XXXXXX KONG INFRASTRUCTURE HOLDINGS LIMITED of 12/F, Xxxxxx Kong Center,
0 Xxxxx'x Xxxx Xxxxxxx, Xxxx Xxxx ("CKI")
AND
SAILOR GROUP LIMITED (to be renamed as OTI ASIA PACIFIC LTD.), of P.O. Box 957,
Offshore Incorporations Centre, Road Town,
Tortola, British Virgin Islands ("OTIP")
WHEREAS OTI has developed and is the sole owner of certain proprietary
technology relating in particular to contact/contactless and
contactless smart cards and readers of which it is the sole
owner ("OTI'S TECHNOLOGY") as described in paragraph (c) in
the definition of "OTI INTELLECTUAL PROPERTY" in Clause 1.1 of
the Shareholders Agreement relating to OTip dated the date
hereof (the "SHAREHOLDERS AGREEMENT"); and
WHEREAS CKI is the sole owner of certain trade secrets relating to its
business ("CKI'S TRADE Secrets") as described in the
definition of "CK GROUP PROPRIETARY INFORMATION AND RIGHTS" in
Clause 1.1 of the Shareholders Agreement; and
WHEREAS CKI and OTI have established OTip and are its existing
shareholders, and OTip has entered into a distribution
agreement with OTI dated the date hereof, (the "DISTRIBUTION
AGREEMENT") pursuant to which it shall act as a distributor of
OTI in the Asia Pacific region; and
WHEREAS CKI and OTI, as shareholders of OTip shall be exposed to
confidential information of OTip, and OTip, as a distributor
of OTI, shall be exposed to confidential information of OTI;
D-1
NOW THEREFORE THE PARTIES HAVE AGREED AS FOLLOWS:
1. In this Agreement:
1.1 The term "DISCLOSER" means a party to this Agreement disclosing
Confidential Information to any of the other parties.
1.2 The term "RECIPIENT" means any party to this Agreement receiving
Confidential Information from any of the other parties.
1.3 The term "CONFIDENTIAL INFORMATION" means any and all information
relating to the Discloser's proprietary technology or business made
available by the Discloser to the Recipient including, without
limitation, information, data, know-how, formulae, tests, drawings,
specifications, applications, designs and trade secrets, information
and data relating to the Discloser's products, design methodology,
engineering and manufacturing processes and related equipment,
suppliers, sales, customers, business operations and plans, financial
situation, members, employees and investors and any notes, memoranda,
summaries, analyses, compilations or any other writings relating
thereto prepared by the Discloser or the Recipient or on such party's
behalf, provided that such information is in writing or other tangible
form and is clearly marked as "proprietary" or "confidential" when
disclosed to the Recipient; or if such information is not in tangible
form, that (i) such information is identified as "proprietary" or
"confidential" when disclosed and summarized in a written document
which is marked "proprietary" or "confidential" and is delivered to the
Recipient within 30 (thirty) days after date of disclosure; or (ii) is
deemed "proprietary" or "confidential" if such information is known or
reasonably should be known by the Recipient to be "confidential" or
"proprietary". Without derogating from the generality of the above, all
information, data and know-how relating to OTI's Technology shall be
deemed Confidential Information of OTI, and all information, data and
know-how relating to CKI's Trade Secrets shall be deemed Confidential
Information of CKI.
2. Recipient undertakes to maintain as secret and fully confidential:
2.1 all the Discloser's Confidential Information obtained by the Recipient
pursuant to this Agreement and prior to and in contemplation of it, and
not to disclose, divulge or use same, directly or indirectly, save
exclusively for the purposes for which it was disclosed to the
Recipient.
2.2 OTI's and CKI's shareholding in OTip and the existence of this
Agreement or of any other agreement between the parties, or any details
relating to the Discloser, its business or its Confidential
Information, or the fact that negotiations or discussions between the
parties have taken or are taking place, or the terms and conditions on
which any possible arrangements or agreements between the parties may
take or might have taken place, unless otherwise agreed in writing
between the parties.
3. The restrictions of use and disclosure set forth in this Agreement
shall not apply to any Confidential Information which, based on proof
by the Recipient,
D-2
3.1 the Discloser has approved for disclosure in advance and in writing;
3.2 was already known to the Recipient at the time such information was
received from the Discloser;
3.3 was already or became available to the general public, through no
breach of any confidentiality undertaking towards the Discloser;
3.4 was at any time lawfully obtained by the Recipient from any other
person, firm or company having no obligation not to disclose it.
3.5 is required to be disclosed by the Recipient by applicable law,
regulation or court order, or pursuant to any rules imposed by or
agreements entered into with any relevant stock exchange or the
securities commission; provided that the Recipient shall first give
prior prompt written notice to the Discloser of the requirement for
such disclosure and co-operate through all reasonable and legal means,
at the Discloser's expense, in any attempts by the Discloser to protect
or otherwise restrict disclosure of such Confidential Information.
4. In order to secure the confidentiality of the Confidential Information
the Recipient shall:
4.1 procure that its respective subsidiaries, holding company and
affiliated companies and their directors, employees, agents and
consultants shall maintain secret and confidential the Confidential
Information of the Discloser;
4.2 safeguard the Confidential Information of the Discloser with at least
the same degree of care as it uses for its own Confidential
Information, and without derogating from the generality of the above,
shall keep the Confidential Information in a safe and separate place;
4.3 limit access to the Confidential Information only to those of the
Recipient's directors, employees, agents and consultants to whom
disclosure is necessary for the purposes hereof provided that all such
directors, employees, agents and consultants which may have access to
the Confidential Information are under a confidentiality undertaking
towards the Recipient to maintain the Confidential Information as fully
confidential and not to disclose, divulge or use same, directly or
indirectly, but for the purposes of carrying out their duties towards
the Recipient. At the Discloser's request, the Recipient shall provide
the Discloser with an accurate list of all of its directors, employees,
agents and consultants which had or have access to the Confidential
Information. For avoidance of doubt, the Recipient will assume
responsibility for any breach of the terms of this Agreement by the
Recipient's directors, employees, agents and consultants, to whom
disclosure of the Confidential Information is permitted and made by the
Recipient under this Agreement.
5. At the Discloser's request, Recipient shall forthwith return to the
Discloser all Confidential Information in tangible form and not retain
any copies of it, including copies made by electronic forms save and
except to the extent where it is necessary for the Recipient to perform
its obligations under the Shareholders Agreement and Distribution
Agreement.
D-3
6. The disclosure of Confidential Information or its use hereunder shall
not be construed in any way as granting any party any right or license
with respect to the Confidential Information (or, in particular, to
OTI's Technology or CKI's Trade Secrets) other than the right to use
Confidential Information strictly for the purposes set forth in the
preamble of this Agreement.
7. Each party hereto reserves all rights in any inventions, patents,
copyrights, designs, and any other intellectual property invented or
devised by it in relation to Confidential Information of such party.
8. This Agreement shall survive the termination of the Shareholders
Agreement or Distribution Agreement (whichever shall later occur) and
shall be valid for a period of five years after such termination.
9. It is agreed that the unauthorized disclosure or use of any
Confidential Information will cause immediate or irreparable injury to
the Discloser, and that the Discloser cannot be adequately compensated
for such injury in monetary damages. Each party therefore acknowledges
and agrees that, in such event, the Discloser shall be entitled to any
temporary or permanent injunctive relief necessary to prevent such
unauthorized disclosure or use, or threat of unauthorized disclosure or
use.
10. No party shall be entitled to assign its rights and obligations
hereunder without the other parties' prior written approval.
11. If any condition, term or covenant of this Agreement shall at any time
be held to be void, invalid or unenforceable, such condition, covenant
or term shall be construed as severable and such holding shall attach
only to such condition, covenant or term and shall not in any way
affect or render void, invalid or unenforceable any other condition,
covenant or term of this Agreement, and this Agreement shall be carried
out as if such void, invalid or unenforceable term were not embodied
herein.
12. The laws of England shall govern this Agreement.
---------------------------------- ---------------------------------------------
On Track Innovations Ltd. XXXXXX KONG INFRASTRUCTURE HOLDINGS LIMITED
by: __________________ by: __________________
title: _________________ title: _________________
---------------------------------------------------
Sailor Group Limited (to be renamed OTI ASIA
PACIFIC LTD.)
by: __________________
title: _________________
D-4
SCHEDULE E
FRAMEWORK OF THE PROJECTED ANNUAL BUSINESS PLAN OF THE COMPANY FOR 2000-2003
See attachment under separate cover
SCHEDULE F
DEFINITION OF GROSS PROFIT
SCHEDULE G
FORM OF ASSIGNMENT
Dated the day of 2000
[ ] LIMITED
and
SAILOR GROUP LIMITED (to be renamed OTI ASIA PACIFIC LTD.)
-------------------------------------------------------
ASSIGNMENT OF PROCEEDS
-------------------------------------------------------
XXXXXXXXX & GRIST
SOLICITORS AND NOTARIES
HONG KONG
G-1
THIS ASSIGNMENT is dated the day of 2000
BETWEEN:-
(1) [ ] LIMITED, a company incorporated in Hong Kong
whose registered office is at [ ],
Hong Kong (the "ASSIGNOR"); and
(2) SAILOR GROUP LIMITED (to be renamed OTI ASIA PACIFIC LTD.), a company
incorporated in the British Virgin Islands whose registered office is
at P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola,
British Virgin Islands (the "ASSIGNEE").
RECITALS:-
(A) The Assignor is [a] [an indirectly] wholly owned subsidiary of ON TRACK
INNOVATIONS LIMITED ("OTI").
(B) OTI is obliged under a shareholders agreement in relation to the
Assignee entered into between OTI, the Assignee and other parties
therein dated February 2000 to procure the Assignor to execute in
favour of the Assignee an assignment of all monies, income and proceeds
(the "PROCEEDS") which the Assignor is entitled to receive under any
contracts for supply of goods and/or services to its customers (the
"RELEVANT CONTRACTS") to which the Assignor is a party.
NOW THIS ASSIGNMENT WITNESSES AS FOLLOWS:-
1. ASSIGNMENT
1.1 Assignment
In consideration of HK$1.00 paid by the Assignee to the Assignor
(receipt thereof is hereby acknowledged by the Assignor), the Assignor
as beneficial owner of the Proceeds hereby assigns to the Assignee:-
1.1.1 all its rights, title, interest and benefit to and in the
Proceeds; and
1.1.2 all other rights and benefits whatsoever accruing (whether now
or in the future) to the Assignor, in its capacity as a party
to all Relevant Contracts, whether present or future.
1.2 Notice to the other parties to the Relevant Contracts
The Assignor shall forthwith upon the request of the Assignee give
notice of this Assignment in such form as may be required by the
Assignee to all relevant parties (the "RELEVANT PARTIES") to the
Relevant Contracts who have an obligation thereunder to make payment to
the Assignor, and shall pay or procure that the Relevant Party will pay
all the Proceeds becoming due to the Assignor thereafter directly to
the Assignee or as the Assignee shall direct and if the Assignor shall
have received any such Proceeds, the Assignor shall forthwith pay the
same to the Assignee or as the Assignee shall direct.
G-2
2. The Assignor represents and warrants to the Assignee that:-
2.1. no charge or other encumbrance exists over or in respect of the
Relevant Contracts or the Assignor's rights thereunder; and
2.2 (unless otherwise expressly disclosed to the Assignee) each of the
Relevant Contracts currently subsisting is valid and in full force and
effect and is not void or voidable.
3. UNDERTAKINGS
3.1 General Undertakings
The Assignor undertakes and agrees with the Assignee throughout the
continuance of the Relevant Contracts that the Assignor shall, unless
the Assignee otherwise agrees in writing:-
3.1.1 promptly and diligently observe and perform all the
obligations on its part contained in any Relevant Contract;
3.1.2 take all necessary steps to procure the due performance by the
Relevant Parties of their respective obligations under the
Relevant Contracts including the institution and maintaining
of all such proceedings in respect of breaches by any Relevant
Party of any provision of the Relevant Contracts as may be
necessary to ensure that the interests of the Assignee are not
adversely affected;
3.1.3 take all steps which may be necessary or expedient to keep the
Relevant Contracts in full force and effect and preserve or
protect the interests of the Assignor and the Assignee in the
Proceeds;
3.1.4 do or permit to be done every act or thing which the Assignee
may from time to time require for the purpose of enforcing the
rights of the Assignee hereunder, and act and exercise its
rights under the Relevant Contracts in a manner consistent
with its obligations hereunder;
3.1.5 not create or attempt or agree to create or permit to arise or
exist any charge or encumbrance over all or any part of the
Relevant Contracts or any interest therein or otherwise
assign, deal with or dispose of all or any part of the
Relevant Contracts (except under or pursuant to this
Assignment);
G-3
3.1.6 not, without the prior written consent of the Assignee, waive,
release, settle, compromise or abandon any claim in respect of
the Proceeds or under the Relevant Contracts or do or omit to
do any other act or thing whereby the recovery in full of any
amounts in respect of the Proceeds as and when they become
payable may be impeded;
3.1.7 not do or cause or permit to be done anything which may in any
way depreciate, jeopardise or otherwise prejudice the value of
the Assignee's interest hereunder;
3.1.8 not amend, modify or vary or agree to amend, modify or vary
any provisions of any Relevant Contract so as to result in an
adverse effect on the interests of the Assignee under this
Assignment; and
3.1.9 promptly and diligently notify the Assignee of any default by
the Assignor or by any Relevant Party under any Relevant
Contracts.
3.2 Non-Assignment, etc.
The Assignor hereby further undertakes with the Assignee that the
Assignor will not without the prior consent in writing of the
Assignee:-
3.2.1 assign, transfer, charge, mortgage, pledge or create or permit
to arise any third party rights or encumbrance whatsoever over
any rights interest or benefits of the Assignor under any
Relevant Contract to anyone other than to the Assignee herein;
3.2.2 take or omit to take any action the taking or omission of
which might result in any alteration or impairment of any
Relevant Contract or this Assignment or of any of the rights
created by any Relevant Contract or this Assignment to an
extent which will adversely affect the interests of the
Assignee under this Assignment.
4. ASSIGNOR'S LIABILITY
Notwithstanding anything herein contained to the contrary, the Assignor
shall remain liable under all Relevant Contracts to perform all the
obligations assumed by it thereunder and the Assignee shall not be
under any obligation or liability thereunder by reason of this
Assignment or anything arising therefrom nor shall the Assignee be
required to assume or be under any obligation in any manner to perform
or fulfil any obligation of the Assignor under or pursuant to any
Relevant Contract or to make any payment thereunder or to enforce
against any Relevant Party any term or condition of any Relevant
Contract or to make any enquiries as to the nature or sufficiency of
any payment received by the Assignee by virtue of this Assignment.
5. GOVERNING LAW
This Assignment shall be governed by and construed in all respects in
accordance with the laws of the Hong Kong Special Administrative Region
of the People's Republic of China.
G-4
SEALED with the COMMON SEAL of )
)
the Assignor and SIGNED by )
)
)
)
for and on its behalf in the presence of:- )
G-5
Dated as of the day of February 2000.
PARTIES :
1. [OCEAN WONDER LIMITED ("CK-X")
2.
ON TRACK INNOVATIONS LTD. ("OTI")
(CK-X AND OTI ARE TOGETHER HEREINAFTER REFERRED
TO AS THE "SHAREHOLDERS" AND EACH A "SHAREHOLDER")
3. SAILOR GROUP LIMITED (TO BE RENAMED
OTI ASIA PACIFIC LTD.) (THE "COMPANY")
4. THE PERSONS LISTED IN THE SCHEDULE A HERETO
(HEREINAFTER TOGETHER REFERRED TO AS THE
"CONTROLLING PARTIES" AND EACH A
"CONTROLLING PARTY")
__________________________________________
SHAREHOLDERS AGREEMENT
IN RELATION TO
OTI ASIA PACIFIC LTD.
_________________________________________
XXXXXXXXX & GRIST BACH, ARAD, XXXXXX & CO.
6TH FLOOR MICRODAF HOUSE
PRINCE'S BUILDING 2 HASHALOM ROAD
CHATER ROAD TEL-AVIV 67892
HONG KONG ISRAEL
MC/ALF/St/C2842-6
SA-3 (02/02/2000)
CONTENTS
Dated as of the day of February 2000.
PARTIES :
1. [OCEAN WONDER LIMITED ("CK-X")
2.
ON TRACK INNOVATIONS LTD. ("OTI")
(CK-X AND OTI ARE TOGETHER HEREINAFTER REFERRED
TO AS THE "SHAREHOLDERS" AND EACH A "SHAREHOLDER")
3. SAILOR GROUP LIMITED (TO BE RENAMED
OTI ASIA PACIFIC LTD.) (THE "COMPANY")
4. THE PERSONS LISTED IN THE SCHEDULE A HERETO
(HEREINAFTER TOGETHER REFERRED TO AS THE
"CONTROLLING PARTIES" AND EACH A
"CONTROLLING PARTY")
__________________________________________
SHAREHOLDERS AGREEMENT
IN RELATION TO
OTI ASIA PACIFIC LTD.
__________________________________________
SCHEDULE E
FRAMEWORK OF THE PROJECTED ANNUAL BUSINESS PLAN OF THE COMPANY FOR 2000-2003
XXXXXXXXX & XXXXX XXXX, XXXX, XXXXXX & XX.
0XX XXXXX MICRODAF HOUSE
PRINCE'S BUILDING 0 XXXXXXXX XXXX
XXXXXX XXXX XXX-XXXX 00000
XXXX XXXX ISRAEL
MC/ALF/St/C2842-6
SA-3 (02/02/2000)
