1
EXHIBIT 10.7
TBG
Technologie-Beteiligungs-Gesellschaft
m.b.H. of Deutsche Ausgleichsbank
Version 01.95
PARTNERSHIP AGREEMENT
Agreement concerning the establishment of an undisclosed
Partnership between
SCM Microsystems GmbH, Xxxxxxxxxxxxxxxxxx 0, 00000 Xxxxxxxxxxxx
-hereinafter: Technologieunternehmen (TU) [Technology Enterprise]-
and
Technologie-Beteiligungs-Gesellschaft m.b.H. [Technology Holding Company]
of Deutsche Xxxxxxxxxxxxxx, Xxxxxxxxxxxxxx 0, 53170 Bonn
- dormant partner, hereinafter: TBG -
SECTION 1
PURPOSE OF THE COMPANY, PARTNERS
1. Within the scope of the program "Investment Capital for Small
Technology Enterprises" carried through with the Federal Ministry for
Education, Science, Research and Technology (BMBF) and the Deutsche
Ausgleichsbank, TBG is supporting technology enterprises of the
business sector, provided they are not more than 10 years old and
satisfy the EU definition of small and medium-sized enterprises (KMU)
in the new Federal States and Berlin (East) or of small enterprises in
the rest of the Federal Territory, respectively, to wit:
- they do not employ more than 250 (50) employees and
- either
- have annual sales of not more than DM 40 million (DM 10
million) or
- show a balance sheet total of not more than DM 20 million (DM
4 million), and
- are at a maximum 25% owned by one or more enterprises which do not
satisfy this definition (exception: public holding companies, risk
capital companies and - provided no control is exercised -
institutional investors).
All three conditions must be satisfied simultaneously, i.e., an
enterprise is considered to be a KMU only when it demonstrates the
required independence, meets the preset number of employees and does
not exceed at least one of the limits for annual sales or balance sheet
total, respectively.
2
TBG effects investments for the financing of innovation projects within
the meaning of the investment principles of TBG, which constitute a
component of this agreement and which TU recognizes, to wit:
- for applied research and development until a logical point in time
prior to starting commercial production according to the
EU-definition, with the following delimitations:
Applied research includes research or experimental work with the aim
of gaining new findings, in order to facilitate the achievement of
specific, practical goals such as the creation of new products,
production processes or services. Normally, it can be said that it
ends with the creation of a first prototype.
3
Development includes work on the basis of applied research with the
aim of introducing new or substantially improved products,
production processes or services up to - but not including -
industrial application and commercial utilization. To this level
belong, normally, planning and demonstration projects, as well as
the additionally required development work, which finally ends in a
bundle of information which permits starting production.
- for investments for launching products on the market.
2. a) TU, recorded in the Commercial Register of the Munich Amtsgericht
[District Court] under No. HRB 91372, operates pursuant to the
articles of association in the valid version of March 29, 1990,
addendum of May 29, 1990, a commercial business with the purpose of:
Development, production and marketing of electronic components for
microsystems, electronic and electrical devices, data terminals and
processing installations, as well as trade with all the articles
connected with these.
b) Within the scope of this business purpose, TU is engaged in
1. development of the GSM-PCMCIA Card,
2. development of the hermetic Duraflash Card,
3. development of the PCMCIA smart card reader "PSR."
3. TBG acquires an interest in TU in the legal form of the undisclosed
partnership, in order to support the project described in paragraph 2b.
SECTION 2
CONTRIBUTION TO CAPITAL
1. Exclusively for the promotion of the innovation project described in
Section 1 para. 2b and on the basis of the data of TU in the partnership
application of January 30, 1995, TBG effects a contribution to capital
in the amount of DM 3,000,000 on condition that the cooperation partners
- Zweite Beteiligungs KG [Second Limited Partnership] of TVM Techno
Venture Management GmbH & Co. KG, Xxxxxxxxxxxxxx 00 X, 00000 Xxxxxx,
- XXX Eurotech Limited Partnership, 000 Xxxx Xxxxxx, Xxxxx 0000, Xxxxxx,
XX 00000, U.S.A.,
- KBL Founders Ventures S.C.A., 00, Xxxxxxxxx Xxxxx, 0-0000 Xxxxxxxxxx,
XXXXXXXXXX,
4
- APM International B.V, Gooimeer 3, NL-1411 DC Naarden, Netherlands,
- Vertex Investment (II) Pte. Ltd., 00 Xxxxxxx Xxxx Xxxxx, # 00-00/00, Xxx
Xxxx, Xxxxxxxxx Science Park, Singapore 0511,
- IntelliCard Systems Pte. Ltd., Block 000 Xxxxxxx Xxx # 00-00/00,
Xxxxxxxxx 1334, Singapore, and
- Xxxx Xxxx XxXxxx, Xxxxxx xxx Xxxxx, X-00000 Xxxxxxxx, Xxxxxx
as investors (hereinafter jointly: BG)
have concluded with TBG a cooperation agreement for the commitment to
TU. The BG will be advised regarding the servicing of the commitment to
TU by TVM Techno Venture Management GmbH & Co. KG, Xxxxxxxxxxxxxx 00 A,
00000 Xxxxxx, as servicing company.
5
The conditions for TBG entering the partnership are created, moreover,
by the fact that the BG will effect additional contributions to the
capital of JTU in the total amount of DM 189,300 with additional payment
of a premium totaling DM 3,592,800 and subject to additionally making
the commitment to bring in by waiver a loan repayment claim existing
against the company plus a claim for interest in the amount of DM
3,222,000.
2. The contribution of TBG is to be used for co-financing the
project-related planning listed in the appendix. The appendix shall
constitute a component of this Partnership Agreement.
To the extent that the costs of the project should decline as compared
to the above data, or if subsequently additional public funds are
solicited, TBG shall have the right to curtail its contribution in a
ratio corresponding to the reduction of the investment volume. The
reduction amount must be retransferred to TBG without delay.
3. TU may call in the contribution after the start of the company (cf.
Section 4 para. 1 ), subject to the condition its immediate use as
provided, and a proportionate use of funds together with the other
financing means provided in para. 2, and the total financing of the
investment project are ensured. The call must be accompanied by a
confirmation of the call conditions by the BG.
4. If the contribution is not called, at least partially by December 31,
1995 at the latest, this agreement is terminated.
5. On the occasion of the first partial call, TBG shall have the right to
retain a processing fee in the amount of 1% of the total contribution
agreed in this agreement.
6. TBG contribution must be kept by TU in a separate contribution account.
Withdrawals by TBG from this account are not allowed.
SECTION 3
PROOF OF USE
TU must confirm the use of the contribution funds as provided within 3 months
after expiration of a project schedule set forth in the appendix to this
agreement, subject to an extension of this time period by TBG to be confirmed on
the form also attached as an appendix. The proof of use must be submitted to TBG
by way of the BG. The use as provided must be substantiated to the BG and to TBG
upon request.
SECTION 4
START AND DURATION OF THE COMPANY
1. The undisclosed partnership shall begin as soon as this agreement is
signed by both parties.
6
2. The undisclosed partnership is fixed for a term ending December 31,
2005.
3. Upon termination of the corporate relationship, the contribution of TBG
and the unpaid dividends are due for payment to TBG.
7
4. Insofar as the funds kept by the BG are repaid before December 31, 2005,
the contribution of TBG shall be due for repayment at the same time and
in the same extent.
SECTION 5
MANAGEMENT
1. TBG does not participate in the management of TU, if nothing different
is provided hereinbelow.
2. TU shall require the consent of TBG for
a) any amendment of the articles of association, in particular any
amendment of the purpose of the enterprise, or the acceptance of
new partners or the agreement of new participations;
b) the appointment and dismissal of managers of TU;
c) conclusion, amendment and termination of the agreement on the
granting or the acquisition of licenses, patents, design
patents, trademarks or know-how, to the extent these concern the
innovation project supported with the participation of TBG;
d) conclusion, amendment and termination of essential marketing
agreements;
e) partial or total move, lease or sale of the operation;
f) conclusion and termination of control contracts and profit and
loss transfer agreements.
3. Consent pursuant toSection5 para. 2 must be obtained from TBG without
delay.
If within a period of 14 days after receipt of the notice on the measure
requiring consent TBG has not stated in writing its refusal to consent,
such consent shall be deemed to have been given.
SECTION 6
INFORMATION AND CONTROL RIGHTS
1. TU has to report to TBG semi-annually, namely by March 31 and September
30 of each year on the financial situation of TU and on the status of
the innovation project described in Section 1 para. 2b, so long as TBG
does not waive its right to these reports, because the BG simultaneously
exercises control of TU also on behalf of TBG. In addition, TBG receives
from TU a brief, monthly status report as per the attached appendix.
2. Irrespective of whether the BG exercises the control of TU
simultaneously also for TBG, TU
8
has to inform TBG directly and without delay about all measures going
beyond the scope of the usual business operation. Besides the measures
mentioned under Section 5 para. 2, particularly the following go beyond
the scope of usual business operations:
a) Partial or total shutdown of operations;
b) Discontinuance or substantial change of the innovation project
described in Section 1 para. 2b;
9
c) Any assumption of commitments, also for investments, which exceed
the amount of DM 250,000 per month, or if they result from leasing,
rental or tenancy agreements, if they exceed the amount of DM
100,000 per month.
3. In addition, TBG shall have the right of verification pursuant to
Section 716 BGB [Civil Code]. This applies also to the period after the
termination of the partnership, to the extent necessary for verification
of the aseets to which a partner is entitled upon his retirement from
the partnership.
TBG, furthermore has the right to examine at any time the records of TU
referring to the innovation project described in Section 1 para. 2b. To
exercise its verification right TBG may retain the services of third
parties.
4. TU grants the BMBF [Federal Ministry of Science and Research], and a
representative appointed by it, rights to receive presentations,
information and to effect examinations in the same extent as that
granted to TBG. TU declares its consent to the effect that TBG can
transmit to the BMBF or to an institute assigned by it to this effect,
the data on the scientific evaluation of the program mentioned
inSection1 para. 1 of this agreement which are obtained through its
enterprise and the supported innovation project. It declares itself
prepared, furthermore, to provide directly to the BMBF and an institute
assigned by it the information necessary for the scientific evaluation
of the program, and to do so also after the termination of the
undisclosed partnership. The BMBF has the right to pass on the data
provided to it to the EU Commission for the exercise of supervisory and
control powers. In the preparation and, if applicable, in the
publication of data about the program it shall be ensured that no harm
be caused to TU.
5. The Bundesrechnungshof [Federal Audit Office] has an examination right
regarding TU under Section 91 BHO [Federal Audit Office Regulations],
and all records which the Bundesrechnungshof deems necessary shall be
made available and appropriate information given.
SECTION 7
ADVISORY BOARD
TBG may at any time demand the formation of an advisory board.
TBG participates in this advisory board under reasonable consideration of the
amount of its contribution.
The advisory board shall advise TU in financial and technical matters,
particularly with regard to the project described in Section 1 para. 2b. It has
the same information and verification rights as those to which TBG is entitled
under this agreement.
SECTION 8
FINANCIAL YEAR, ANNUAL STATEMENT OF ACCOUNTS
10
1. The financial year of the undisclosed partnership is the same as that of
TU. The financial year of TU ends on each December 31.
2. TU has to draw up its annual statement of accounts (balance sheet,
profit and loss account, appendix) in observance of SectionSection 238 -
289 HGB [Handelsgesetzbuch] [Commercial Code] within six months after
expiration of the financial year, and to forward it to TBG in an
original, signed copy and with the certificate of an auditor or of a
certified public accountant.
3. The annual statement of accounts must respect, insofar as permissible
under commercial law, the profit determination provisions of the Income
Tax Law. If, within the scope of the taxable profit determination or
based on a external tax audit, other data than those contained in the
original annual statement of account are deemed binding, such shall also
be determining in the relation of TU to TBG.
11
SECTION 9
PROFIT AND LOSS SHARING
1. TBG receives on its paid contribution a minimum compensation of 6% p.a.,
irrespective of the annual result of TU. This compensation is payable
semi-annually in retrospect by March 31 and September 30 of each year.
2. From the achieved annual surplus after the drawn contribution, TBG shall
receive 11% of the profit (amount conditional on profit) in a post-money
valuation of DM 21 million. If before the listing of TU on the stock
exchange additional capital is attracted, the compensation will be
adjusted accordingly. If the amount conditional on profit is small or
equal to the minimum compensation paid for the financial year pursuant
to No. 1, no compensation depending on profit will be due. Otherwise the
amount of the difference must be paid.
This profit sharing is payable within 2 weeks after adoption of the
annual statement of account (Section 8 para. 2).
3. Determining the calculation according to Para. 2 are the year's net
earnings, which are shown in the annual statement of account drawn up
according to Section 8 para. 3 prior to taking into account TBG share of
the profit pursuant to No. 2 above.
a) To the annual statement of account must be added
- paid income taxes, insofar as they have reduced the year's net
earnings as shown;
- interest charged to the partners in TU, provided the latter is a
partnership, without having flowed into the year's net earnings
of the co-entrepreneurs;
- extraordinary expenditures, insofar as they result from business
occasions which took place before the start of the undisclosed
partnership;
- losses from the sale or destruction of fixed assets, insofar as
the latter were already present at the time of the start of the
company.
b) To be deducted from the year's net earnings are
- amounts from writing back of tax-free reserves, which were formed
prior to the start of the undisclosed partnership;
- compensations for activities or interest credited to the partners
in TU, provided the latter is a partnership, without having
reduced the year's net earnings of the co-entrepreneurs;
- extraordinary income, insofar as it is based on business
occasions which took place
12
before the start of the undisclosed partnership;
- income from the sale of fixed assets, insofar as the latter were
already present at the time of the start of the company.
c) In the year the partnership is called off, the year's net earnings
for the calculation of the profit sharing pursuant to para. 2 shall
be deemed to have accrued evenly over the year.
4. TBG shall have the right to demand, as of the end of the partnership
period, a one-time compensation of 25% of the investment amount plus 6%
of the investment amount for each year after expiration of the fifth
full partnership year, in which TBG has received in minimum and
profit-dependent amounts less than 12% of its contribution.
13
TBG shall make use of this right only when in its opinion it appears to
be justified on the basis of the overall financial situation of TU, in
particular on the basis of its profits attained during the last three
years before the termination of the partnership and the undisclosed
reserves formed during the time of the partnership.
5. TBG does not share in the losses of TU.
SECTION 10
TAXES
TU shall be responsible for remitting the legally prescribed Capital Yield Tax
plus the solidarity surcharge in regard to the compensation for the undisclosed
contribution, and will deduct from the payments to TBG the Capital Yield Tax and
the solidarity surcharge and remit these directly to the appropriate tax office.
After the remittance, TU will issue to TBG confirmations according to Section
45a para. 2 EStG [Income Tax Law] on the forms made available by TBG.
SECTION 11
DISSOLUTION OF THE UNDISCLOSED PARTNERSHIP
1. In the event of the dissolution of TU, the undisclosed partnership shall
be dissolved. In this case, the undisclosed investment must be repaid.
2. Section 9 para. 4 shall also apply in this case.
SECTION 12
TERMINATION
1. TU has the right to redeem entirely or partially the participation of
TBG, subject to observing a notice period of 3 months as of June 30 or
December 31 of any year. If this redemption takes place at of the end of
the fifth partnership year, the contribution of TBG has to be repaid
with a premium in the amount of 25%. Beginning in the sixth partnership
year, the arrangements set forth in Section 9 para. 4 will apply. TBG
can waive the paymeNt of the premium, if the termination is effected
because of the suspension of the supported innovation project.
2. Moreover, the undisclosed partnership can be terminated with immediate
effect, by any of its partners upon existence of a weighty ground by
means of a written statement. To the extent that the contribution has
not or not yet been made in full, TBG shall by the notice of termination
be released from its contribution obligation.
TBG has the right to termination on weighty grounds, particularly, when
a) TU has made false statements in the partnership application;
14
b) it is determined that the conditions for granting or leaving intact
the partnership did not exist already originally or ceased to exist
subsequently, particularly if the innovation project described in
Section 1 para. 2b, proves to be impracticable or is abandoned or
substantially changed by TU. Should the innovation project described
in Section 1 para. 2 prove to be technically impossible or
financially unattainable, TBG can waive repayment of the investment
in full or in part, if the continued existence of TU is thereby made
possible;
15
c) TU fails to submit the proof of use pursuant to Section 3 not later
than 3 months after it was due, a reminder to this effect
notwithstanding;
d) notes accepted by TU go to protest, TU suspends its payments, files
for bankruptcy or a petition is filed for institutional court
settlement proceedings or insolvency is ascertained in some other
way;
e) the managerial know-how bearer(s) who was(were) active in such a
position at TU at the time the agreement on the undisclosed
partnership was concluded is(are) no longer active is his or their
main occupation in the management of TU;
f) one of the measures listed in Section 5 para. 2 has been carried
through without the prior consent of TBG.
SECTION 13
MATURING PAYMENTS
Payments due shall bear interest after occurrence of the delay and until receipt
by TBG at the rate of 3% above the discount rate of the Deutsche Bundesbank.
SECTION 14
GENERAL PROVISIONS
1. Amendments or supplements to this agreement must be in written form.
There exist no oral subsidiary understandings to this agreement.
2. Should one provision of this agreement be invalid, the remaining
provisions shall remain unaffected by this. TU and TBG are committed to
replace invalid provisions of the agreement by regulations that are
legally valid and correspond as far as possible to the meaning and
purpose of the invalid provisions.
3. Bonn has been agreed upon as venue for all legal disputes that may arise
from this agreement or its performance.
Bonn, June 8, 1995 Pfaffenhoven,
Technologie-Beteiligungs- SCM Microsystems GmbH
Gesellschaft m.b.H. of the
Deutsche Ausgleichsbank
[signature]
[two signatures]
XXX
00
Xxxxxxxxxxx-Xxxxxxxxxxxx-Xxxxxxxxxxxx
x.x.X. of the Deutsche Ausgleichsbank
PARTNERSHIP AGREEMENT
APPENDIX I
PROJECT-RELATED PLANNING
PLANNING PERIOD: April 1, 1995 to April 1, 1996
PROJECT-SPECIFIC EXPENDITURES
-----------------------------
AMOUNT IN DM (WITHOUT V.A.T.)
-----------------------------
I. FOR APPLIED RESEARCH AND DEVELOPMENT
1. INVESTMENTS SHOWN AS FIXED ASSETS ON
THE BALANCE SHEET
1.1 Laboratory equipment and installations 450,000
1.2 Machines and installations for prototype
production 1,240,000
1.3 Miscellaneous 2,025,000
2. NON-INVESTMENT R & D EXPENDITURES
2.1 Personnel 710,000
2.2 Materials 1,100,000
2.3 Third-party services (Order placement/Consulting) 300,000
2.4 Patents and permits 200,000
2.5 Travel expenses 165,000
2.6 Miscellaneous 585,000
II. FOR INVESTMENTS IN MARKET INTRODUCTION
TOTAL 6,775,000
PRODUCT-SPECIFIC FINANCING
--------------------------
AMOUNT IN DM (WITHOUT V.A.T.)
-----------------------------
1. CAPITAL RESOURCES
1.1 Retained earnings 775,000
1.2
2. EQUITY CAPITAL
2.1 of TBG 3,000,000
2.2 of the lead investor 3,000,000
2.3 of other investors
3. PUBLIC FUNDS
3.1 Subsidies, allowances, supports
3.2 Others
4. BORROWINGS
4.1 from the bank
4.2 Others
TOTAL 6,775,000
17
Fax Xx. 0000/000 00 00
XX: SCM Microsystems GmbH
Xxxxxxxxxxxxxxxxxx 0
00000 Xxxxxxxxxxxx
XXX 00107/01001
Brief statement for the month of* ........ 199..
ACTUAL AMOUNT in DM '000
Sales proceeds
Expenditures on materials
Expenditures on personnel
Preliminary result
Order backlog
Current account limit
of which used
Distinctive features of the preceding month:
Expectations of the management regarding future development:
Much better better same worse much worse
Date:
--------------------------------
(Signature of the management and
company stamp)
---------------------
* TO BE DELIVERED NOT LATER THAN BY THE END OF THE FOLLOWING MONTH.
18
PARTNERSHIP PRINCIPLES OF TBG Technologie Beteiligungs-
TECHNOLOGIE-BETEILIGUNGS-GESELLSCHAFT M.B.H. Gesellschaft m.b.H.
OF DEUTSCHE AUSGLEICHSBANK of Deutsche Xxxxxxxxxxxxxx
0. XXX AS GRANTOR OF PARTNERSHIPS
Technologie-Beteiligungs-Gesellschaft m.b.H. (TBG) is a subsidiary of
the Deutsche Ausgleichsbank. Within the scope of the program "Investment
Capital for Small Technology Enterprises" it enters into undisclosed
partnerships in technology enterprises (TU), as a rule without
participating in the management of TU.
An essential condition for entering a partnership is that an additional
partner (Lead Investor) invests in TU in at least an equal amount as TBG
and co-services the investment on the basis of a cooperation agreement.
2. PURPOSE OF THE INVESTMENT
The investments serve to finance innovation projects (cf. No. 3.1),
namely
- for applied research and development until a logical point in time
prior to the start of commercial production
- for investments for market introduction.
3. PRECONDITIONS FOR INVESTMENT
3.1 INNOVATION PROJECTS
- New techniques not yet in use in the enterprise are to be introduced
by means of the innovation project.
- The development shares which constitute the innovative core, are
contributed within the enterprise itself. When services are used for
development phases, the specifications have to be developed within
the enterprise itself.
- The new product (process/service) differs also in its essential
functions from the former products (process/service) of the
enterprise.
- Linked to the new product (process/service) are competitive
advantages (functions, quality, price) and marketing chances in the
market relevant to the enterprise (regional, national, European,
worldwide).
3.2 INVESTMENT RECIPIENTS
19
Investments from TBG can be obtained by enterprises of the commercial
industry provided they meet the following characteristics:
SMALL ENTERPRISES
- business located in the Federal territory and
- not more than 50 employees and
- either annual sales of maximum DM 10 million or a balance sheet
total of maximum DM 4 million.
MEDIUM-SIZE ENTERPRISES
- business located in the new Federal States and Berlin (East) and
- not more than 250 employees and
- either annual sales of maximum DM 40 million or a balance sheet
total of maximum DM 20 million.
FINANCIAL INDEPENDENCE
Maximum 25% of the corporate capital may be held by enterprises which do
not meet the criteria for small or medium-size enterprises.
(Exception: public investment companies
risk capital companies and - provided that no control is
exercised institutional investors.)
AGE
Maximum 10 years.
TECHNICAL AND BUSINESS EXPERTISE
TU must be able to prove that it has the technical expertise necessary
to carry through the development work and production, as well as the
necessary sales expertise.
Business expertise can also be contributed by the use of external
parties - e.g., of the Lead Investor - provided that TU has not yet
reached a considerable volume of sales prior to filing the application.
3.3 COOPERATING PARTNER (LEAD INVESTOR)
Investment companies as well as individuals and legal entities which
make available equity
20
capital to enterprises can be Lead Investors cooperating with TBG.
The Lead Investor must participate with at least the same amount as TBG.
He has to advise and support the technology enterprise in all business
and financial matters and, if necessary, also be able to offer
management and marketing support. In principle, he should be ready and
in a position to make available additional financial resources.
Before making an investment the Lead Investor must examine the
investment conditions and comprehensibly document them, doing this at
the same time also for TBG. During the life of the partnership, he has
to supervise the management of TU and the development of the innovation
project and to inform TBG about the financial situation of TU and about
the innovation project. In addition, he will cooperate in drawing up the
proof of use (cf. No. 3.4). A cooperation agreement between the Lead
Investor and TBG settles the details.
3.4 FULL FINANCING
The full financing of the innovation project must be assured. The
investment funds may be used only for financing the innovation project
or projects for which the investment has been promised. The Lead
Investor must be informed without delay when the innovation project or
its financing is changed.
If the costs of the innovation project should subsequently be reduced or
if subsequently additional public funds are obtained for the financing
of the innovation project, so that financing in excess of 100% is
available, the investment funds may be called back. The investment
recipient is obligated to substantiate the correct use of the funds
immediately after the innovation project is completed. The proof of use
has to be submitted through the Lead Investor and be provided with his
audit certification.
21
3.5 BAN ON ACCUMULATION
The simultaneous investment in an innovation project within the scope of
this program by TBG and the KfW [Kreditanstalt fur Wiederaufbau =
Reconstruction Loan Corporation] is not permitted.
In the event that for the investment of the Lead-Investor financing
funds supported by public authorities are used, the Assistance
Regulations of the European Community must be observed.
4. INVESTMENT CONDITIONS
4.1 FORM OF INVESTMENT
TBG effects investments in TU as an undisclosed partner. Securities do
not have to be posted.
4.2 MAXIMUM AMOUNT
The investment of TBG serves as subsidiary financing of innovation
projects. It is limited to DM 3,000,000 to one TU. Several innovation
projects can be supported within the scope of this maximum amount.
4.3 PAYOUT
The investment is in principle made available in accordance with the
progress of the innovation project.
4.4 TERM
The term of the investment of TBG is up to 10 full calendar years and is
guided in principle by the term of the investment of the Lead-Investor.
4.5 TERMINATION
TBG may terminate investments on weighty grounds.
TU may be granted the right to terminate its investment prematurely
under observance of 3 months advance notice as at June 30 and December
31 of each year. In case of a notice as of the expiration of the fifth
investment year, the contribution of TBG must be repaid with a premium
currently amounting to 25%, provided the termination is not effected due
to the discontinuance of the supported innovation project.
4.6 PROCESSING FEE
Upon payout of its investment, TBG shall receive from the investment
recipient a one-time
22
processing fee currently in the amount of 1% of the amount of its
investment.
4.7 INVESTMENT CHARGE
TBG charges as a rule a compensation for its contribution currently
amounting to 6% p.a., which is independent of the investment recipient's
profit for the year, as well as a profit dependent investment
compensation to be guided by the condition of TU. At the end of the
investment period, TBG may demand a one-time compensation to satisfy the
reserves of TU formed during the investment period. Details are
specified in the contract between TBG and TU.
4.8 ASSUMPTION OF RISK
In the cooperation agreement the cooperating Lead Investor may be
granted the right to claim from TBG, until the expiration of 5 years
from the start of the investment of TBG in TU, a partial reimbursement
of a loss from its investment made in TU.
In such a case, the sum reimbursed may amount to maximum 50%, in the new
Federal States and Berlin (East) up to maximum 70% of the contribution
it had itself effected. TBG may then demand the full or partial transfer
of the Lead Investor's investment to it or to a third party. The
precondition for claiming the risk sharing is that
- bankruptcy proceedings or a total execution have been instituted
against the assets of TU or that the institution of proceedings has
been denied due to lack of an estate,
- a statutory declaration has been filed for TU, or
- the continued insolvency of TU is substantiated in another way,
- the claims of the Lead Investor from his investment in TU have
partially come to an end by virtue of a court composition or a
waiver.
The remaining risk of loss of the Lead Investor has to be borne by the
latter himself.
5. APPLICATION PROCEDURE
Applications by TU for investments must be addressed to
Technologie-Beteiligungs-Gesellschaft m.b.H.
der Deutschen Ausgleichsbank
Xxxxxxxxxxxxxx 0, Xxxx-Xxx Godesberg
Mail address: 53170 Bonn
on forms of TBG together with a statement of the cooperating Lead
Investors on effecting his own investment.
23
The examination of the application conditions is initially effected by
the Lead Investor (if needed, with the inclusion of outside experts,
e.g., technology consulting offices). TBG reserves the right to demand
additional documents, including expert opinion, if deemed necessary.
Before concluding an investment agreement between the Lead Investor and
TU, an investment application has to be submitted to TBG. A legal claim
for effecting an investment by TBG does not exist.
If the Lead Investor has not yet cooperated with TBG in any other case,
the documents necessary for the examination of his solvency must also be
submitted.
Additional information is available from TBG at telephone No. (0228)
831-2290.
Bonn, January 1, 1995
24
[Handwritten:] typ. undisclosed partnership
Version 02.93
PARTNERSHIP AGREEMENT
Agreement concerning the establishment of an undisclosed
Partnership between
SCM Xxxxxxxxx Microsysteme Entwicklungs- und Vertriebs
GmbH, Xxxxxxxxxxxxxxxxx 00X,
00000 Planegg
-hereinafter: Junges Technologie-Unternehmen (JTU)
[Young Technology Enterprise]-
and
Technologie-Beteiligungs-Gesellschaft m.b.H. [Technology Holding Company]
of Deutsche Ausgleichsbank, Xxxxxxxxxxxxxx 0, 0000 Xxxx 2
- dormant partner, hereinafter: TBG -
SECTION 1
PURPOSE OF THE COMPANY, PARTNERS
1. Within the scope of the program "Investment Capital for Young Technology
Enterprises" carried through with the Federal Ministry for Education,
Science, Research and Technology (BMFT) and the Deutsche Ausgleichsbank,
TBG is supporting young technology enterprises by entering into
partnerships to finance investments and operating funds
- for research and development work through production and testing
of prototypes (core phase) and
- for adjustment developments and the preparations of products,
including market introduction of new technical products,
processes or technical services (buildup phase).
2) a) JTU, recorded in the Commercial Register of the Munich
Amtsgericht [District Court] under No. HRB 91372, operates
pursuant to the articles of association in the valid version of
March 29, 1990, addendum of May 29, 1990, a commercial business
with the purpose of:
Development, production and marketing of electronic components
for microsystems, electronic and electrical devices, data
terminals and processing installations, as well as trade with all
the articles connected with these.
b) Within the scope of this business purpose, JTU is engaged in
the development of systems and software according to the PCMCIA
standard.
25
3. TBG acquires an interest in JTU in the legal form of the undisclosed
partnership, in order to support the project described in paragraph 2b.
SECTION 2
CONTRIBUTION TO CAPITAL
1. Exclusively for the promotion of the innovation project described in
Section 1 para. 2b and on the basis of the data of JTU in the
partnership application of May 26, 1993, TBG effects a contribution to
capital in the amount of DM 1,000,000 on condition that the cooperation
partners
26
Zweite Beteiligungs KG [Second Limited Partnership] of TVM
Techno Venture Management GmbH & Co. KG, Xxxxxxxxxxxxxx 00 X,
00000 Xxxxxx
XXX Eurotech Limited Partnership, 000 Xxxx Xxxxxx, Xxxxx 0000,
Xxxxxx, XX 00000, X.X.X.
APM International X.X., Xxxxxxxx 0, XX-0000 XX Xxxxxxx,
Xxxxxxxxxxx
KBL Founders Ventures SCA, 00, Xxxxxxxxx Xxxxx, X-0000
Xxxxxxxxxx, XXXXXXXXXX
Xxxxx Xxxxx & Sons Inc., 00 Xxxxx Xxxxxx, Xxx Xxxx, X.X.
00000, X.X.X.
as investors (hereinafter jointly: BG)
have concluded with TBG a cooperation agreement for the commitment to
JTU. BG will be advised regarding the servicing of the commitment to JTU
by TVM Techno Venture Management GmbH & Co. KG, Xxxxxxxxxxxxxx 00 A,
80802 Munich, (hereinafter: TVM) as servicing company.
The conditions for TBG entering the partnership are created, moreover,
by the fact that BG will effect additional contributions to the capital
of JTU in the total amount of DM 133,400 with additional payment of a
premium totaling DM 2,121,060.
The contribution of TBG is to be used for co-financing the
project-related planning listed in the appendix. The appendix shall
constitute a component of this Partnership Agreement.
To the extent that the costs of the project should decline as compared
to the above data, or if subsequently additional public funds are
solicited, TBG shall have the right to curtail its contribution in a
ratio corresponding to the reduction of the investment volume. The
reduction amount must be retransferred to TBG without delay.
3. JTU may call in the contribution after the start of the company (cf.
Section 3 para. 1 ), subject to the condition that its immediate use as
provided, and a proportionate contribution together with the other
financing means provided in para. 2 of the investment project are
ensured. The call must be accompanied by a confirmation of the call
conditions by BG.
4. If the contribution is not called, at least partially by March 31, 1994
at the latest, this agreement is terminated.
5. On the occasion of the first partial call, TBG shall have the right to
retain a processing fee in the amount of 1.00% of the total contribution
agreed in this agreement.
6. The TBG contribution must be kept by JTU in a separate contribution
account. Withdrawals by TBG from this account are not allowed.
27
SECTION 3
START AND DURATION OF THE COMPANY
1. The undisclosed partnership shall begin as soon as this agreement is
signed by both parties.
2. The undisclosed partnership is fixed for a term ending December 31,
2003.
3. Upon termination of the corporate relationship, the contribution of TBG
and the unpaid dividends are due for payment to XXX.
00
XXXXXXX 0
XXXXXXXXXX
0. XXX does not participate in the management of JTU, if nothing different
is provided hereinbelow.
2. JTU shall require the consent of TBG for
a) any amendment of the articles of association, in particular any
amendment of the purpose of the enterprise, or the acceptance of
new partners or the agreement of new participations;
b) the appointment and dismissal of managers of JTU;
c) conclusion, amendment and termination of the agreement on the
granting or the acquisition of licenses, patents, design
patents, trademarks or know-how, to the extent these concern the
innovation project supported with the participation of TBG;
d) conclusion, amendment and termination of essential marketing
agreements;
e) partial or total move, lease or sale of the operation;
f) conclusion and termination of control contracts and profit and
loss transfer agreements.
3. Consents pursuant toSection4 para. 2 must be obtained from TBG without
delay.
If within a period of 14 days after receipt of the notice on the measure
requiring consent TBG has not stated in writing its refusal to consent,
such consent shall be deemed to have been given.
SECTION 5
INFORMATION AND CONTROL RIGHTS
1. JTU has to report to TBG semi-annually, namely by March 31 and September
30 of each year on the financial situation of JTU and on the status of
the innovation project described in Section 1 para. 2b, so long as TBG
does not waive its right to these reports, because BG simultaneously
exercises control of JTU also on behalf of TBG. In addition, TBG
receives from JTU a brief, monthly status report as per the attached
appendix.
2. Irrespective of whether BG exercises the control of JTU simultaneously
also for TBG, JTU has to inform TBG directly and without delay about all
measures going beyond the scope of the usual business operation. Besides
the measures mentioned under Section 4 para. 2, particularly the
29
following go beyond the scope of usual business operations:
a) Partial or total shutdown of operations;
b) Discontinuance or substantial change of the innovation project
described in Section 1 para. 2 b;
c) Any assumption of commitments, also for investments, which
exceed the amount of DM 250,000 per month, or if they result
from leasing, rental or tenancy agreements, if they exceed the
amount of DM 100,000 per month.
3. In addition, TBG shall have the right of verification pursuant to
Section 716 BGB [Civil Code]. This applies also to the period after the
termination of the partnership, to the extent necessary for verification
of the assets to which a partner is entitled upon his retirement from
the partnership.
30
TBG has furthermore the right to examine at any time the records of JTU
referring to the innovation project described in Section 1 para. 2b. To
exercise its verification right TBG may retain the services of a third
party.
4. TBG is authorized to forward the information provided to it on the
innovation project of JTU exclusively to its parent company, the
Deutsche Ausgleichsbank, to the BMFT and to a third party retained by it
to evaluate the model tests. These parties are also obligated to observe
secrecy, except for permissible publications in a harmless form.
5. JTU grants the BMFT, and a representative appointed by it, the right to
receive presentations, information and to effect examinations in the
same extent as that granted to TBG. JTU declares its consent to the
effect that TBG can transmit to the BMFT or to an institute assigned by
it to this effect, the data on the scientific evaluation of the program
mentioned inSection1 para. 1 of this agreement which are obtained
through its enterprise and the supported innovation project. JTU
declares itself prepared, furthermore, to provide directly to the BMFT,
or an institute assigned by it, the information necessary for the
scientific evaluation of the model tests. In the preparation and in the
publication of data about the model test it shall be ensured that no
harm be caused to JTU.
6. JTU shall make available to TBG upon request all the records for
examination purposes, which the Bundesrechnungshof [Federal Audit
Office] deems necessary.
SECTION 6
ADVISORY BOARD
TBG may at any time demand the formation of an advisory board.
TBG participates in this advisory board under reasonable consideration of the
amount of its contribution.
The advisory board shall advise JTU in financial and technical matters,
particularly with regard to the project described in Section 1 para. 2b. It has
the same information and verification rights as those to which TBG is entitled
under this agreement.
SECTION 7
FINANCIAL YEAR, ANNUAL STATEMENT OF ACCOUNTS
1. The financial year of the undisclosed partnership is the same as that of
JTU.
2. JTU has to draw up its annual statement of accounts (balance sheet,
profit and loss account, appendix) in observance of SectionSection 238 -
285 HGB [Handelsgesetzbuch] [Commercial Code] within six months after
expiration of the financial year, and to forward it to TBG in an
original, signed copy and with the certificate of an auditor or of a
certified public accountant.
3. The annual statement of accounts must respect, insofar as permissible
under commercial law,
31
the profit determination provisions of the Income Tax Law. If, within
the scope of the taxable profit determination or based on a external tax
audit, other data than those contained in the original annual statement
of account are deemed binding, such shall also be determining in the
relation of JTU to TBG.
32
SECTION 8
PROFIT AND LOSS SHARING
1. TBG receives on its paid contribution a minimum compensation of 5% p.a.,
irrespective of the annual result of JTU. This compensation is payable
semi-annually in retrospect by June 30 and December 31 of each year.
2. From the achieved annual surplus after the drawn contribution, TBG shall
receive 9% of the profit provided it exceeds DM 100,000, but maximum 5%
p.a. of the actually paid-in contribution.
This profit sharing is payable within 2 weeks after adoption of the
annual statement of account (Section 7 para. 2).
3. Determining for the calculation according to Para. 2 are the year's net
earnings, which are shown in the annual statement of account drawn up
according to Section 7 para. 3 prior to taking into account TBG share of
the profit pursuant to No. 2 above.
a) To the annual statement of account must be added
- paid income taxes, insofar as they have reduced the
year's net earnings as shown;
- interest charged to the partners in JTU, provided the
latter is a partnership, without having flowed into the
year's net earnings of the co-entrepreneurs;
- extraordinary expenditures, insofar as they result from
business occasions which took place before the start of
the undisclosed partnership;
- losses from the sale or destruction of fixed assets,
insofar as the latter were already present at the time of
the start of the company.
b) To be deducted from the year's net earnings are
- Amounts from writing back of tax-free reserves, which
were formed prior to the start of the undisclosed
partnership;
- compensations for activities or interest credited to the
partners in JTU, provided the latter is a partnership,
without having reduced the year's net earnings of the
co-entrepreneurs;
- extraordinary income, insofar as it is based on business
occasions which took place before the start of the
undisclosed partnership;
33
- income from the sale of fixed assets, insofar as the
latter were already present at the time of the start of
the company.
c) In the year the partnership is called off, the year's net
earnings for the calculation of the profit sharing pursuant to
para. 2 shall be deemed to have accrued evenly over the year.
4. TBG shall have the right to demand, as of the end of the partnership
period, a one-time compensation of 25% of paid-in contribution.
TBG shall make use of this right only when, in its opinion, it appears
to be justified on the basis of the overall financial situation of JTU,
in particular on the basis of its profits attained during the last three
years before the termination of the partnership and the undisclosed
reserves formed during the time of the partnership.
5. TBG does not share in the losses of JTU.
34
SECTION 9
TAXES
JTU shall be responsible for remitting the legally prescribed Capital Yield Tax
in regard to the compensation for the undisclosed contribution, and will retain
from the payments to TBG the Capital Yield Tax and remit these directly to the
appropriate tax office. After the remittance, JTU will issue to TBG
confirmations according to Section 45a para. 2 EStG [Income Tax Law] on the
forms made available by TBG.
SECTION 10
SALE AND ACQUISITION OF SHARES
1. TBG shall have the right to sell its investment at any time, in part or
in full, to the BG or to a cooperation partner succeeding it.
The cooperation partner shall have the right to demand, at the end of
each business year, to convert the undisclosed investment which it has
acquired from TBG, into a regular share of the company. The conversion
conditions shall be agreed between JTU and BG.
2. TBG shall have the right to acquire the investment of another enterprise
participating in JTU with which TBG has concluded a cooperation
agreement, or to demand the transfer to a third party to be named by
TBG.
SECTION 11
DISSOLUTION OF THE UNDISCLOSED PARTNERSHIP
1. In the event of the dissolution of JTU, the undisclosed partnership
shall be dissolved.
2. Section 3 para. 3 and Section 8 para. 4 shall also apply in this case.
SECTION 12
TERMINATION
1. JTU has the right to redeem entirely or partially the participation of
TBG, subject to observing a notice period of 3 months as of June 30 or
December 31 of any year. If this redemption takes place at of the end of
the fifth partnership year, the contribution of TBG has to be repaid
with a premium in the amount of 25%. Beginning in the sixth partnership
year, the arrangements set forth in Section 8 para. 4 will apply. TBG
can waive the payment of the premium, if the termination is effected
because of the suspension of the supported innovation project.
2. Moreover, the undisclosed partnership can be terminated with immediate
effect, by any of its
35
partners upon existence of a weighty ground by means of a written
statement. To the extent that the contribution has not or not yet been
made in full, TBG shall by the notice of termination be released from
its contribution obligation.
TBG has the right to termination on weighty grounds, particularly, when
a) JTU has made false statements in the partnership application;
36
b) it is determined that the conditions for granting or leaving
intact the partnership did not exist already originally, or
ceased to exist subsequently, particularly if the innovation
project described in Section 1 para. 2b, proves to be
impracticable or is abandoned or substantially changed by JTU.
Should the innovation project described in Section 1 para. 2
prove to be technically impossible or financially unattainable,
TBG can waive repayment of the investment in full or in part, if
the continued existence of JTU is thereby made possible;
c) notes accepted by JTU go to protest, JTU suspends its payments,
files for bankruptcy or a petition is filed for institutional
court settlement proceedings or insolvency is ascertained in
some other way;
d) the managerial know-how bearer(s) who was(were) active in such a
position at JTU at the time the agreement on the undisclosed
partnership was concluded is(are) no longer active in his or
their main occupation in the management of JTU;
e) one of the measures listed inSection4 para. 2 has been carried
through without the prior consent of TBG.
SECTION 13
MATURING PAYMENTS
Payments due shall bear interest after occurrence of the delay and until receipt
by TBG at the rate of 3% above the discount rate of the Deutsche Bundesbank.
SECTION 14
GENERAL PROVISIONS
1. Amendments or supplements to this agreement must be in written form.
There exist no oral subsidiary understandings to this agreement.
2. Should one provision of this agreement be invalid, the remaining
provisions shall remain unaffected by this. JTU and TBG are committed to
replace invalid provisions of the agreement by regulations that are
legally valid and correspond as far as possible to the meaning and
purpose of the invalid provisions.
3. Bonn has been agreed upon as the venue for all legal disputes that may
arise from this agreement or its performance.
Bonn, October 22, 1993 Planegg, October 21, 1993
Technologie-Beteiligungs- SCM Xxxxxxxxx Microsystems
37
Gesellschaft m.b.H. of the Entwicklungs- und Vertriebs-
Deutsche Ausgleichsbank GmbH
[signature]
[two signatures] [Stamp:] MICROSYSTEM GMBH
[illegible]