RESTRUCTURING AGREEMENT
This Restructuring
Agreement (the
"Agreement") is
entered into as of
this 4th day of January 2007 (the "Execution Date") by and
between:
(1) TRUE PRODUCT ID, INC. ("TPID"), a Delaware corporation, formerly known as
OnTV, Inc.
("ONTV"), with an address at 2600 Centre
Square West, 1515
Market
Street, Philadelphia, PA 19102; and
(2) SURE TRACE
SECURITY CORPORATION ("SSTY"), a Utah corporation, with an
address at 1615 Walnut Street, 3rd Floor, Philadelphia, PA 19102;
and
(3) SURE TRACE ASIA
LIMITED, later
renamed and also known
as True Product ID
Technology Limited ("STA"), a Hong Kong company, with an address at Suite 1005,
Allied Kajima Building 138, Gloucester Road, Hong Kong; and
(4) WILLIAM CHAN, also
known as CHAN WAI KEUNG, an adult individual and Hong
Kong citizen,
with an address
at Suite 1005, Allied Kajima Building 138,
Gloucester Road, Hong Kong.
SSTY and TPID are
hereinafter
collectively referred
to as the "Parties,"
and
individually referred to as a "Party."
RECITALS:
WHEREAS, SSTY (whether directly by itself and/or indirectly through
its
affiliates, STA
and William Chan) currently holds a forty percent (40%)
ownership interest in
a Chinese joint
venture company
called True Product
ID
Technology (Beijing) Limited (the "Chinese Joint Venture") (All of
SSTY's and/or
STA's and William Chan's current or future interest in the Chinese
Joint Venture
are hereinafter collectively referred to as "SSTY's Chinese JV
Interest");
WHEREAS, in March 2006
SSTY acquired the controlling interest in ONTV
(subsequently renamed
TPID) through, inter
alia, the purchase of ONTV stock in
exchange for
cash and the
grant to ONTV of a
license from SSTY to certain
technology and contractual rights held by SSTY (the
"Acquisition");
WHEREAS, SSTY
received approximately 200 million shares of TPID
(formerly ONTV) as a
result of the
Acquisition
and subsequent increase in
authorized shares and forward split, which SSTY issued to its
shareholders as a
dividend, and which
the Parties
explicitly
agree is, by itself, more than
adequate consideration for the Acquisition;
WHEREAS, as of the
Execution Date, SSTY owes the former owners of ONTV
a balance of funds
(excluding interest
and penalties) in
connection with
the
acquisition of ONTV (the "Owed Acquisition-Related Balance"), in the amount of
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approximately
Two Hundred
Eighty-Five
Thousand
United
States Dollars
(US$285,000), in
addition to the six million common shares of TPID described in
subsection 4.3(c) below;
WHEREAS, SSTY and ONTV
entered into a licensing agreement dated March
16, 2006 (the "March 16, 2006 Licensing Agreement"), in which SSTY licensed to
ONTV, inter alia,
certain contractual rights of SSTY in exchange for,
inter
alia, a royalty, a monthly fee, and repayment;
WHEREAS, SSTY and ONTV
entered into an agreement dated March 17, 2006
(the "March 17, 2006
Agreement"), in which
ONTV acquired a
license to certain
technology owned by SSTY in exchange for, inter alia, 52,349,249 shares of ONTV
common stock and 16,000 shares of ONTV Series B Preferred
Stock (collectively,
the "Subject Shares");
WHEREAS, in May 2006 ONTV subsequently changed its name to True
Product
ID, Inc. ("TPID");
WHEREAS, as a result
of the above
transactions,
TPID is no longer
a
subsidiary of,
or in any way affiliated with, SSTY. Rather, TPID is an
independent entity separate from SSTY, which does not own any
interests in TPID;
WHEREAS, the Parties,
STA, and William Chan have agreed to restructure
their contractual
arrangements
in accordance with the
terms and conditions of
this Agreement;
WHEREAS, in
connection
with, as part of, and
to induce the execution
of, this Agreement,
the Parties have
agreed to certain
restrictive
covenants
regarding confidentiality, non-solicitation, and non-competition. Without the
Parties' complete
agreement to adhere to
these restrictive
covenants and the
provisions of Section
4 of this Agreement,
the Parties would not
have entered
into this Agreement;
NOW, THEREFORE, in
consideration of the payments and other benefits as
set forth herein, the
mutual covenants and
promises herein
contained and for
other good and valuable consideration, the receipt and sufficiency of
which is
hereby acknowledged, the Parties, STA, and William Chan agree as
follows:
ARTICLE I
TRANSFER OF SSTY'S CHINESE JV INTEREST TO TPID
1.0. Subject to the
terms and conditions of this Agreement, in return
for the consideration set forth in Article IV of this Agreement, on the
effective date defined in Section 9.17 below of this Agreement (the "Effective
Date"), SSTY,
STA, and/or William Chan shall transfer and/or cause to be
transferred SSTY's
Chinese JV Interest (as defined above) to TPID (the
"Transfer").
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ARTICLE II
TERMINATION OF THE MARCH 16, 2006 LICENSING AGREEMENT
2.0. Subject to the
terms and conditions of this Agreement, in return
for the consideration set forth in Article IV of this Agreement,
SSTY agrees as
of the Effective Date to terminate, negate, rescind and/or void in its
entirety
and totality the March 16, 2006 Licensing Agreement (as defined above) and
any
and all past (or accrued), current, and future obligations required by or of
TPID under the March 16, 2006 Licensing Agreement.
2.1. Included
amongst, without limitation, the obligations of TPID
under the March 16, 2006 Licensing Agreement to be completely
terminated are any
and all past and/or accrued obligations which TPID may have had to
SSTY prior to
the Effective
Date, including, but not limited to, any and all royalties,
monthly fees, and
repayment which TPID may have owed SSTY
under the March 16,
2006 Licensing
Agreement prior to the
Effective Date. For the sake of clarity,
as of the Effective
Date, TPID shall not
have any obligations at all or in any
form or manner to SSTY under the March 16, 2006 Licensing
Agreement.
ARTICLE III
MODIFICATION OF THE MARCH 17, 2006 AGREEMENT
3.0. The March 17,
2006 Agreement, including, but not limited to,
Article I of the March 17, 2006 Agreement (entitled "Agreement To Issue Stock
For Technology
License") and Article V, Section 5.02 of the March 17, 2006
Agreement (entitled
"Shares and
License"),
shall be amended and
modified to
completely eliminate and negate any and all obligations (past,
accrued, current,
and future) owed by TPID (formerly ONTV) as of the Execution Date to
issue any
additional common shares of TPID, include, but not limited to, the issuance
of
the Subject Shares on or after the Execution Date, to SSTY.
3.1. For the sake of clarity, as of the Execution Date, TPID shall
have
no obligations
(past, current, or future) at all or in any form
to issue any
additional shares of
TPID, including the
Subject Shares (as defined above), to
SSTY, and SSTY forever waives, relinquishes, and releases TPID from
any claim in
any form or manner
arising from or
related in any way to the issuance of the
Subject Shares on or after the Execution Date.
3.2. The Parties
explicitly acknowledge
that the Subject
Shares have
not been issued as of
the Execution
Date and that even
without the Subject
Shares there is adequate consideration for the Acquisition (as
defined above).
3.3. SSTY agrees to fully assist TPID and not to oppose any
reasonable
modification or
amendment that TPID
may wish to make to any filings to reflect
the provisions of this Article III.
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<PAGE>
3.4. To the extent that the provisions of the March 17, 2006
Agreement
(other than Article I and Article V, Section 5.02 thereto) are not
contradicted
by or are not
inconsistent with
Article III of this
Agreement or the Parties'
intent underlying Article III of this Agreement, those provisions
shall remained
unchanged and in full
effect. This Section 3.4 only shall supersede all
provisions contained
in any and all
agreements
(oral or written) the
Parties
entered or may have entered prior to, up to, and including the Effective
Date,
which are inconsistent with the provisions of Article III of this
Agreement. For
the sake of clarity, any provisions contained in any and all
agreements (oral or
written) the Parties
entered or may have entered prior to, up to, and including
the Effective Date,
which are not
inconsistent with the
provisions of Article
III of this Agreement, shall remain in effect.
ARTICLE IV
CONSIDERATION TO BE PAID BY TPID
4.0. Subject to the
terms and conditions of this Agreement, in return
for the promises,
covenants and benefits
given or provided by
SSTY under this
Agreement, as set
forth in more detail in this Agreement, TPID shall remit the
following consideration to SSTY (whether in cash or the assumption
of debt): (a)
the royalty
set forth in Section 4.1 of this Agreement; (b) the TPID
Post-Spinout Expenses
as set forth in
Section 4.2 of this
Agreement; (c) the
assumption by TPID of the Owed Acquisition-Related Balance subject
to and as set
forth in Section 4.3 of this Agreement; and (d) the cash payments set
forth in
Section 4.4 below of this Agreement.
4.1. Royalties. Subject to the terms and conditions of this
Agreement,
TPID agrees to pay SSTY a royalty in the amount of two percent (2%)
of its gross
receipts which TPID actually receives and collects from
customers outside the
People's Republic of
China, Hong Kong, and
Macau for a period of two (2) years
commencing as of the Execution Date of this Agreement
(the "Royalty"). Gross
receipts shall be
defined as the total
amount of funds
actually received
and
collected by TPID from
sales relating only to anti-counterfeiting/ product
authentication
products or services,
including sales from
its affiliates and
licensees and divisions, but not limited to (x) cash, money
orders, and cleared
checks less charges
imposed by banks for
clearing, deposits,
re-deposits
or
returns and (y)
cleared credit
cards charges less the bank discount rate.
Revenue received and
collected from foreign sources shall be at its value
in
U.S. dollars when received.
4.1.1. Audit.
For the purposes of
verifying the Royalty
set
forth in Section 4.1 above of this Agreement, SSTY shall have the
right, upon at
least fourteen
(14) days written notice and no more than twice per
calendar
year, to inspect
TPID's books and records and all other documents and material
in the possession
of or under the
control of TPID with
respect to the subject
matter of this
Agreement at the place or places where such records are
normally
retained by TPID. All books and records relative to TPID's
obligations hereunder
shall be maintained and kept accessible and available to SSTY for
inspection for
at least one (1) year after the date to which they pertain. In the
event that an
investigation of
TPID's books and
records is made,
certain confidential
and
proprietary business
information
of TPID related to the
Royalty payments
may
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<PAGE>
necessarily be
made available to the person or persons conducting such
investigation. It is
agreed that such
confidential and
proprietary
business
information shall be
retained in
confidence
by SSTY and shall not
be used by
SSTY or disclosed
to any third
party for a period of
five (5) years from
the
date of disclosure,
or without the prior
express written permission of TPID
unless required
by law. It is understood and agreed, however, that such
information may be
used in any proceeding
based on TPID's
failure to pay the
Royalty required under this Agreement.
4.2. Post-Spinout
Expenses. Subsequent to this Agreement and as an
explicit condition
of its execution by SSTY, the TPID agrees to resolve any
issues relating to any and all reasonable, direct out-of-pocket expenses SSTY
incurred and/or paid
on TPID's behalf after
TPID ceased being a subsidiary of
SSTY (the "TPID Post-Spinout Expenses"). As soon as practicably possible
after
the Execution Date, SSTY shall provide TPID with any and all
documentation
and
information related to
any claimed TPID
Post-Spinout Expenses.
SSTY and TPID
shall agree upon a
complete list of TPID
Post-Spinout
Expenses to be paid
by
TPID (the "List") no later than forty-five (45) days from the Execution
Date.
The List shall be subsequently attached to this Agreement as
Attachment A. TPID
reserves the right not to pay any claimed TPID Post-Spinout Expense, which is
not substantiated by original invoices or other proper
documentation. Nothing in
this Agreement shall preclude SSTY from seeking repayment of the
reasonable TPID
Post-Spinout Expenses.
TPID acknowledges that there are, in fact, expenses that
have been paid on
TPID's behalf
by SSTY which were and will be either
made
solely on behalf of TPID or should be shared/allocated between the
Parties. TPID
agrees to pay the
amounts agreed upon in
this Section 4.2
within twelve (12)
months of the Effective Date hereof.
4.3. Assumption of Certain SSTY Debt. Subject to the terms and
conditions of this
Agreement,
TPID shall assume all outstanding payments
required of SSTY to the former owners of ONTV, Inc. (the "Former ONTV
Owners")
to acquire the ONTV corporate shell (the "ONTV Shell Payments"), in accordance
with the terms and conditions set forth in an amended payment
agreement between
the Former ONTV Owners and TPID (the "Amended ONTV Agreement"), which shall be
approved by SSTY. Pursuant to the Amended ONTV Agreement:
(a). Subject to the terms and conditions of this Agreement,
TPID shall
assume the outstanding
principal balance of Three Hundred Seventy Thousand U.S.
Dollars (US$285,000)
SSTY owed the Former
ONTV Owners as of August 2006 (the
"August 2006
SSTY-ONTV Balance"). TPID shall pay the Former
ONTV Owners One
Hundred Thousand U.S. Dollars (US$100,000) of the August 2006
SSTY-ONTV Balance
by January 31,
2007 or other
subsequent
date agreed to by the Former ONTV
Owners. TPID shall pay the Former ONTV Owners One Hundred
Eighty-Five
Thousand
U.S. Dollars (US$185,000) of the August 2006 SSTY-ONTV Balance by
March 31, 2007
or other subsequent
date agreed to by the
Former ONTV Owners.
In return for,
inter alia, waiving US$85,000 of the Owed Acquisition-Related
Balance as of May
2006 and any associated penalties related to the
US$85,000, in
accordance with
SSTY's pre-spin-out
May 2006 agreement with the Former ONTV Owners, TPID shall
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<PAGE>
issue the Former ONTV Owners Six Million restricted common shares of TPID, as
set forth in subsection 4.3(c) of this Agreement.
(b). Subject to the
terms and condition of this Agreement, TPID shall
assume any
penalties,
late
fees
or charges, interest payments,
collection-related
fees or charges, and
other payments
imposed by the
Former
ONTV Owners over and above the August 2006 SSTY-ONTV Balance
arising from SSTY's
failure to timely make the required payments to the Former ONTV Owners
related
to the ONTV corporate shell (collectively, the "ONTV Penalties").
Any and all
monies that TPID shall pay towards the ONTV Penalties shall be
deducted from the
amount of the Subject Payment (defined in Section 4.4 below of
this Agreement).
TPID shall pay the
amount of the ONTV
Penalties in full to the Former ONTV
Owners by June 30,
2007 or other
subsequent date agreed
to by the Former ONTV
Owners. SSTY shall remain jointly and severally liable to the
Former ONTV Owners
with respect to the ONTV Penalties; and
(c). After
SSTY's Acquisition of ONTV, but before the issuance of
acquired ONTV shares to SSTY's shareholders, SSTY defaulted on its agreements
associated with the
Acquisition
of ONTV and therefore
agreed with the
Former
ONTV Owners to issue them Six Million (6,000,000) restricted common shares of
TPID (the "ONTV Former Owners-Owed Restricted Shares"), in substitution of the
agreement to have paid Eighty-Five Thousand U.S. Dollars
(US$85,000) towards the
Owed
Acquisition-Related Balance. TPID agrees to issue the ONTV Former
Owners-Owed Restricted
Shares to the Former
ONTV Owners in compliance with an
available exemption
from registration under the Securities Act of 1933 and
applicable state law. In return, SSTY shall give TPID a credit
towards the cash
payments owed by TPID to SSTY under this Agreement in the amount of
Eighty-Five
Thousand U.S. Dollars (US$85,000), as further set forth in Section
4.4 below of
this Agreement.
4.4. Cash Payments. Subject to the terms and conditions of this
Agreement, including,
but not limited to,
Section 4.3 above of
this Agreement
and the further
provisions of this Section 4.4, within three (3) years from the
Effective Date, TPID shall remit to SSTY, on an interest-free basis, the total
sum of One Million One Hundred Thirty Thousand United States Dollars
(US$1,130,000) minus the amount of the ONTV Penalties paid by TPID
to the Former
ONTV Owners. (The
total amount of cash payments owed by TPID to SSTY under this
Section the
"Subject Payment"). For the sake of clarity, the US$1,130,000
referenced in the preceding sentence represents: (a) the parties' total payment
amount pre-deductions of US$1,500,000, MINUS (b) the US$85,000 credit set
forth
in Section 4.3(c) of this Agreement), MINUS (c) the remaining principal
balance
of the Owed
Acquisition-Related
Balance of $285,000
(which excludes
certain
interest and
penalties); the
US$1,130,000
does not include the
amount of the
ONTV Penalties paid by
TPID to the Former ONTV Owners, which are to be further
deducted from the
Subject Payment.
TPID shall
remit the Subject Payment in
accordance with the
terms, conditions
and payment
schedule set forth in
this
Section 4.4 and subsection 4.4.1 of this Agreement.
4.4.1. Subject to the
terms and conditions of this Agreement,
TPID shall
make mandatory prepayments of the Subject Payment under this
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Agreement equal to: (a) Fifty Thousand U.S. Dollars (US$50,000) upon receipt of
the first One Million U.S. Dollars of funding raised by TPID
through investment
after the Execution
Date (the "Initial $1 Million New
Investment");
and (b)
twenty-five percent (25%) of any funding raised by TPID through
investment after
the Initial $1 Million
New Investment.
TPID shall
remit such
payments on an
interest-free basis to SSTY, within seven (7) calendar days
(excluding holidays)
after receipt
by TPID of the applicable funding (after wire and other
transactional costs,
attorney fees, and
broker/ finder fees and/or commissions
are deducted) until
the Subject Payment is
paid in full. Amounts
unpaid after
said seven (7) calendar days (excluding holidays) shall bear interest (simple
interest) at an annual rate equal to the prime rate set forth in
the Wall Street
Journal on the date such amounts were due plus two percent
(2%).
4.5. Upon the Effective Date, title to SSTY's Chinese JV
Interest (as
defined above)
(whether in the form of shares, units or other indicia of
ownership) shall be
vested and held in and
by TPID, subject
to the security
interest discussed
in this Section 4.5. To secure the full payment of the
Subject Payment,
TPID hereby grants to SSTY a security interest in SSTY's
Chinese JV
Interest. TPID authorizes SSTY to file the appropriate UCC-1
financing statements
("UCC-1s") to perfect
SSTY's security
interest in SSTY's
Chinese Joint Venture Interest simultaneous with the closing in
all appropriate
jurisdictions,
together with any amendments, modifications, and substitutions
thereto. SSTY shall
prepare and submit any and all UCC-1s it intends to file to
TPID for TPID's review
prior to SSTY's
filing the UCC-1s. Upon receipt of
documentation that the Subject Payment and payment of the amounts
agreed upon in
Attachment A,
have been paid in full, SSTY shall: (a) immediately and
unconditionally
release any and all
claims by or of SSTY to SSTY's Chinese JV
Interest; and (b)
shall immediately extinguish, release, and/or otherwise
terminate any UCC-1s filed against TPID relating to SSTY's
Chinese JV
Interest.
TPID shall be as of the Effective Date the legal and beneficial
owners of SSTY's
Chinese JV Interest as to allow TPID to solely and fully
participate in and make
any and all decisions and engage in any and all activities
regarding the Chinese
Joint Venture. TPID shall not pledge, sell or otherwise transfer,
wi
