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EXHIBIT 10.1
Dated 17 September 2007
ZAP
and
YOUNGMAN AUTOMOBILE CO.,
LTD.
and
EV HOLDINGS LIMITED
SHAREHOLDERS’ AGREEMENT
LI & PARTNERS
SOLICITORS
22
nd
Floor, World Wide House
19
Des Voeux Road Central
Hong
Kong
Tel.
No.: (852) 2501 0088 Fax No.:
(852) 2501 0028
Our Ref : TC/TC/TC/4321/01/07
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CONTENTS
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Clause
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Heading
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Page
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1.
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DEFINITIONS
AND INTERPRETATION
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1
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2.
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CONDITIONS
PRECEDENT
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4
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3.
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SHARE
CAPITAL
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5
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4.
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MANAGEMENT
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5
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5.
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FUNDING
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7
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6.
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BUSINESS
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7
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7.
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ACCOUNTING
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9
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8.
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DIVIDENDS
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9
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9.
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BOARD
OF DIRECTORS
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10
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10.
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MATTERS
REQUIRING SPECIAL APPROVAL
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11
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11.
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REPRESENTATIONS,
WARRANTIES AND CONVENANTS
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12
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12.
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INDEMNIFICATION
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15
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13.
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TRANSFER
OF SHARES
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15
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14.
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DEADLOCK
RESOLUTION
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17
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15.
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TERMINATION
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18
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16.
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CONSEQUENCES
OF NOTICES UNDER CLAUSE 15
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19
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17.
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CONFIDENTIALITY
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20
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18.
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RESTRICTIVE
COVENANTS
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21
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19.
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SPECIFIC
ENFORCEMENT
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22
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20.
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MISCELLANEOUS
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22
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SHAREHOLDERS’ AGREEMENT
THIS AGREEMENT is made on the 17th day
of September 2007
BETWEEN:
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(1)
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ZAP , a corporation incorporated under the laws of
California, the United States having its registered office at 501
Fourth Street, Santa Rosa, California 95401, United States of
America (“ ZAP ”); and
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(2)
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YOUNGMAN AUTOMOBILE CO., LTD. , a
company incorporated with limited liability under the laws of the
People’s Republic of China having its registered office at
501 Bada Road Jinhua City Zhejiang China. PC
321016 (“ Youngman
”);
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(3)
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EV HOLDINGS LIMITED
(環保發展有限公司)
, a company incorporated with limited liability under the laws of
Hong Kong having its registered office situate at Unit A, 14/F Shun
On Commercial Building, 112-114 Des Voeux Road Central, Hong Kong
(the “ Company ”).
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WHEREAS :
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(A)
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The
Company was incorporated in Hong Kong on 3 August
2007 with an authorised capital of HK$10,000.00 divided into 10,000
shares of HK$1.00 par value each. As at the date hereof, one share
has been issued as fully paid to ZAP.
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(B)
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ZAP
and Youngman have agreed to enter into this Agreement for the
purposes of regulating their relationship with each other and
certain aspects of the affairs of and their dealings with the
Company.
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(C)
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The
Company has agreed with ZAP and Youngman that it will comply with
the terms and conditions of this Agreement insofar as they relate
to the Company.
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NOW IT IS HEREBY AGREED as follows:
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1.
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DEFINITIONS AND INTERPRETATION
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1.1
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In
this Agreement and the Recitals, unless the context otherwise
requires:
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“
Affiliates ” means in respect of any
specified person, a person that directly or indirectly
controls such specified person, or is controlled by or is
under common control with such specified person;
“
Allotted Shares ” means 9,999 shares of
the Company to be allotted to each Shareholder upon execution
of this Agreement as provided under Clause 3.1;
“
Articles ” means the Memorandum and
Articles of Association of the Company in the form of Schedule
B attached hereto, which may be amended from time to
time;
“
Auditor ” means the auditors of the
Company appointed from time to time;
“
Board ” means the board of directors of
the Company or the directors present (personally or by their
alternates) at any meeting of the directors of the Company
duly convened and held;
“
Brand Name ” means the general brand
name selected by the Board and used by the
Company;
“
Business ” means the business of the
Company in relation to developing, producing, marketing and
sale of electric vehicles, electric-hybrid vehicles, and
battery/energy recharging infrastructure throughout the
Territories as set forth under Clause 6.1 and the Business
Plan;
“
Business Plan ” means the business plan
of the Company to be developed by the Company and agreed and
approved between the Shareholders, including any amendment and
supplement thereto from time to time;
“
Capital Loan ” means any loan to the
Company granted by any Shareholder as provided under Clause
6.3;
“
CEO ” means the chief executive officer
of the Company appointed from time to time under Clause
4.2;
“
Chairman of the Board ” means the
chairman of the Board appointed from time to time under Clause
4.3;
“
Companies Ordinance ” means the
Companies Ordinance (Chapter 32 of the Laws of
HKSAR);
“
Employment Agreement ” means the
Employment Agreement to be entered between the Company and its
Key Employees in the form acceptable to the
Shareholders;
“
Holding Company ” shall have the
meaning ascribed thereto in section 2 of the Companies
Ordinance;
“
Hong Kong ” means Hong Kong Special
Administrative Region;
“
Hong Kong Dollars ” or the sign
“HK$” means the lawfully currency of Hong
Kong;
“
Initial Capital Contribution ” means
initial contribution to the share capital of the Company by
each Shareholder upon the execution of this Agreement as set
forth under Clause 4.1;
“
Investment Schedule ” means the
schedule for Youngman to make a contribution of
US$51,000,000.00 and ZAP to make a contribution of
US$49,000,000.00 to the share capital of the Company by 31
December 2008 as set out in Schedule A hereto;
“
Key Employees ” means the Chief
Operating Officer, VP Engineering, VP Sales & Marketing,
VP Human Resources and VP Finance of the Company;
“
Licensing Agreement ” means the
agreements entered from time to time between the Company and
any other parties for the purpose of licensing the key
technology to be incorporated into the Products;
“
Management ” means the CEO, and such
other executives or managers as determined by the Board from
time to time;
“
Management Options ” means options of
Shares issued by the Company under the order of the Board to
any Key Employees approved by the Board upon terms and subject
to conditions as determined by the Board at its discretion as
set out in this Agreement or any other related documents
determined by the Board in accordance with Clause
14.1.
“
Marketing and Distribution Agreements ”
means the agreements to be entered between each Shareholder
and the Company after execution of this Agreement in the form
acceptable to such Shareholder and the Company with respect to
the marketing and distribution activities to be carried out by
the Shareholders within the Territory, which shall provide
that (i) ZAP shall have the exclusive right of marketing and
distribution of the Products in North America and South
America; (ii) Youngman shall have the exclusive right of
marketing and distribution of the Products in the Asia Pacific
Region (including the Japan); and (iii) the Company shall have
the exclusive right of marketing and distribution of the
Products in the remaining Territories other than those set out
in (i) and (ii) above;
“
PRC ” means the People’s Republic
of China,
which for purposes of this Agreement excludes Hong
Kong;
“
Products ” means the vehicles developed
and manufactured by the Company from time to time as provided
under the Business Plan;
“
Shares ” means shares of US$1.00 par
value each in the authorized capital of the
Company;
“
Shareholders ” means the holders of the
Shares; a “ Shareholder ” means
any of them;
“
Subsidiary ” shall have the meaning
ascribed thereto in section 2 of the Companies
Ordinance;
“
Territories ” means the United States,
Asia and all other countries, territories and jurisdictions
worldwide, without restriction;
“
Total Capital Contribution ” means the
aggregate amount of the contributions to the share capital of
the Company made by each Shareholder;
“
Transfer Notice ” means the notice to
transfer or otherwise dispose of any Shares or any interest in
such Shares as defined under Clause 13.2 (a);
“
United States ” means the United States
of America;
“
US Dollars ” or the sign “
US$ ” means the lawfully currency of
the United States;
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1.2
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Words
importing one gender include all other genders and words importing
the singular include the plural and vice versa.
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1.3
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References
to Recitals, Clauses and Schedules are references to recitals,
clauses and schedules of this Agreement.
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1.4
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Reference
to a person includes bodies corporate or
unincorporated.
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1.5
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The
headings are inserted for convenience only and shall not affect the
construction of this Agreement.
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1.6
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Reference
in this Agreement to any legislation shall include any legislation
which amends, consolidates or replaces the same or which has been
amended, consolidated or replaced by the same and shall include any
subsidiary and subordinate legislation made under the relevant
legislation.
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1.7
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“Including”
or similar expressions are not words of limitation.
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1.8
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Words
and expressions defined in the body of this Agreement (including
its schedules) shall have the meanings thereby attributed to them
whenever the context requires.
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This
Agreement and everything contained herein are conditional upon
the fulfilment of all the following terms and conditions upon
execution of this Agreement:
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(a)
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each
Shareholder shall procure the authorized share capital of the
Company to be increased to US$100,000,000.00;
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(b)
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each
Shareholder shall subscribe the Allotted Shares and pay the Initial
Capital Contribution in accordance with Clause 3;
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(c)
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the
Shareholders shall procure that the persons named in Clauses
9.2 and 9.3 and not already directors are appointed
directors of the Company;
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(d)
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the
Shareholders shall procure adoption of the Articles by the Company;
and
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(e)
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meetings
of the Shareholders and the Board shall be held at which such
resolutions as are necessary to give effect to and implement the
provisions of this Agreement shall be passed.
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3.1
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Upon
execution of this Agreement and fulfilment of the condition under
Clause 2 (a), each Shareholder shall subscribe Shares as provided
under Clause 3.2 below and pay the consideration for subscription
of the Shares (the “ Initial Capital
Contribution ”).
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3.2
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After
subscription of the Allotted Shares in accordance with Clause 3.1,
the Shares shall be beneficially owned and registered as
follows:
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Shareholders
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No. of Shares
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Consideration
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ZAP
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4,899
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HK$4,899.00
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Youngman
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5,100
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HK$5,100.00
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3.3
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Unless
otherwise agreed between the Shareholders, the Initial Capital
Contribution shall be paid by Youngman by way of cash within 10
days from the date of this Agreement; and the Initial Capital
Contribution shall be paid by ZAP by way of cash within 10 days
from the date of this Agreement.
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3.4
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The
Shareholders shall make additional contributions to the share
capital of the Company from time to time in accordance with the
requirements of the Business Plan and the Investment Schedule by
way subscription of the Shares, so that the Total Capital
Contribution, if required, made by Youngman shall be
US$51,000,000.00 and ZAP shall be US$49,000,000.00 (which provides
the Company its share capital of US$100,000,000.00) by 31 December
2008. Each Shareholder shall be offered the right to participate in
each subscription of the Shares in proportion to its respective
percentage of the Shares at the time of the
subscription.
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3.5
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Save
as otherwise provided in Clause 5 or other provisions in this
Agreement, any further issuance of Shares shall be made as and when
the Board may so determine and in accordance with this Agreement
and the Articles. The parties hereto shall procure to each other
that any new shareholders shall first agree in writing in terms
acceptable to all the parties hereto to be bound by and observe the
provisions of this Agreement (including this Clause) so far as such
provisions are applicable.
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4.1
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The
Board shall be responsible for supervising the activities of the
Company and for determining, subject to the provisions of this
Agreement, the overall policies and objectives of the Company,
provided that all business of the Company shall be conducted in the
best interests of the Company on sound commercial
principles.
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4.2
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The
Company shall have a Chief Executive Officer (the “
CEO ”) who shall be responsible for the
day-to-day operation of the business of the Company. The
CEO shall be appointed on such terms as may be approved by the
Board and the first CEO shall be Mr. Albert Lam.
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4.3
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The
Company shall have a chairman of the Board (the “
Chairman of the Board ”) who shall be
responsible for chairing all meetings of the directors. The
Chairman of the Board shall be appointed on such terms as may be
approved by the Board and the first Chairman of the Board shall be
Mr. Albert Lam.
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4.4
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The
Board shall determine the remuneration, compensation and benefits
of the Management, which shall be reasonably in conformity with the
current local market standard adopted by other companies of similar
scale, expertise and nature of business to the
Company.
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4.5
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ZAP
shall procure and arrange its staff to be transferred to the
Company as necessary to carry on the Business by the Company. The
Company shall enter into employment agreements with such staff and
provide remuneration, compensation and benefits reasonably in
conformity with the prevailing market standard based on the working
hours, performance, experience and any other factors which the
Management may consider significant.
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4.6
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Appointment,
removal or replacement of any of the Key Employees of the Company
as well as their remuneration, compensation and benefits shall be
jointly decided by the Management.
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4.7
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Save
and except the matters requiring action, consent or agreement of
the Board as set out in Clause 5.11 and 5.12 below, the CEO shall,
subject to the supervision of and directions given from time to
time by the Board, be vested with overall responsibility and
authority for and control of the operation, management, maintenance
and administration of the Business, including but not limited
to:
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(a)
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soliciting
and negotiating business on behalf of the Company with size of the
deal up to amounts approved by the Board from time to
time;
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(b)
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dealing
with day-to-day staff (other than the Management) employment
issues;
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(c)
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recruiting
employees of the Company and setting benefit plans and programs for
the employees of the Company;
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(d)
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handling
routine banking relationships and treasury functions;
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(e)
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managing
day-to-day operations relating to the Business;
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(f)
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preparing
and implementing annual and three-year business plan, budget and
forecasts of the Company from time to time approved by the Board;
and
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(g)
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authorizing
capital expenditure of up to US$100,000.00 without approval of the
Board.
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5.1
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Financing
for the business of the Company shall be provided by (i) cash
subscription for the Shares, (ii) loan(s) from the Shareholders
and/or (iii) external funding including loans from banks or other
third parties as provided under this Agreement.
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5.2
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In
the event that the Company in the course of carrying on the
Business requires funds in addition to the capital contributions
set forth in Clause 3.1 and 3.4, the Company may allot additional
Shares as necessary to raise sufficient funds for carrying on the
Business, and ZAP and/or Youngman may, but neither of them shall be
obliged to, subscribe such Shares as additional contribution to the
capital of the Company.
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5.3
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For
purposes of financing any acquisition of assets or properties by
the Company, it shall, with the approval of holders of a majority
of the Shares, obtain such financing as set forth in the Business
Plan of the Company. In the event that the financing
described in this Clause is not sufficient to enable the Company to
pursue the Business, then:-
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(i)
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ZAP
or Youngman may grant loans to the Company on terms and conditions
that are commercially reasonable under the circumstances and
approved by a majority of the Board (the “ Capital
Loan ”); or
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(ii)
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if
the Board considers that granting of the Capital Loan is unfeasible
or not in the best interests of the Company, the Company shall, to
the extent economically feasible, obtain loan or other financing
arrangement from other third party.
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5.4
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If
the Company shall obtain any loan from any third party, the
Shareholders agree to execute and deliver to such lender all
documents and instruments to pledge to such lender, and grant to
such lender security interests in, (i) the Shares; and/or (ii) the
assets and properties of the Company to the extent as permitted by
the existing financing arrangements of the Company, in order to
secure repayment of the loan by the Company.
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5.5
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All
costs of financing the Company mentioned in this Clause shall be
considered an expense of the Company, and shall be paid before any
dividends or distributions are made to any of the
Shareholders.
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6.1
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Subject
to other provisions in this Agreement, the Company shall engage
solely and exclusively in the business of developing, producing,
marketing and sale of electric vehicles, electric-hybrid vehicles,
and battery/energy recharging infrastructure throughout the
Territories, as provided under the business plan of the Company to
be developed and agreed between the Shareholders, which may be
supplemented or amended by the Shareholders from time to time (the
“ Business Plan ”).
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6.2
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(a)
All the products licensed to the Company or its subsidiaries
by Youngman and the products researched and developed by
the Company and its subsidiaries should be produced by the
manufacturer exclusively designated by Youngman. Without unanimous
approval of all the shareholders of each party, the Company and its
subsidiaries are not entitled to license or transfer to any other
party the right of manufacturing any of the above-mentioned
products. Youngman will consign the production to the enterprise
controlled by Youngman. The plants, land and equipments required
for the production should be invested or manufactured by such
enterprise designated by Youngman and the sites for production
should be determined by Youngman. The prices for the products sold
to the Company and its subsidiaries by the enterprise designated by
Youngman should be set in the Contract on Consigned Manufacturing
based on the following standards:
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(i)
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ex-work
price determined by Youngman;
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(ii)
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if
required to increase the exclusive parts of the electric vehicle,
the price shall be based on the ex-work price determined by
Youngman plus the purchasing costs for those exclusive parts of the
electric vehicle;
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(iii)
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if
there are any unnecessary parts, the price shall be based on the
ex-work price determined by Youngman minus the purchasing costs for
those unnecessary parts.
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(b)
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The
company and all its subsidiaries shall sell the products to
Youngman and ZAP for the exclusive distribution within defined
territories. Based upon the above guiding principle, the
distributor pricing and pricing structure shall be defined within
the related agreement.
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6.3
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Each
Shareholder shall use its best endeavour to assist the Company to
develop the Business and carry out the Business Plan.
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6.4
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The
Company may enter into any transactions with any Shareholder but,
save in respect of transactions expressly contemplated by this
Agreement, such Shareholder shall disclose to the Board any
interest which it may have in a transaction to be entered into by
the Company.
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6.5
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The
Company shall set up (i) its headquarter office in Hong Kong, (ii)
a project management office in the United Kingdom, (iii) research
and development centres in the United States (in or around San
Francisco), Malaysia and the PRC, and (iv) such other offices as
agreed between the Shareholders.
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6.6
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The
Company shall generally conduct business under its Brand Name,
provided that any products produced or manufactured by the Company
or the Shareholders may bear the respective brand name(s) of each
Shareholder, or such other brand name(s) as agreed between the
Shareholders.
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6.7
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The
Company shall use its best endeavour to enter into the Licensing
Agreement
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with
any other parties that own or control key technology to be
incorporated into the products being manufactured by the Company,
and shall (subject to approval of the Board from time to time) aim
to make equity investments in these technology firms.
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The
Company shall maintain accurate and complete accounting
records and the Shareholders or their respective appointed
representatives shall each have the right to inspect all
accounting and other records of the Company at all reasonable
times. The accounts of the Company shall be kept in
accordance with generally accepted international accounting
principles in Hong Kong and shall be audited
annually. The first Auditors shall be a firm to be
selected at the discretion of the Board, and successor
Auditors may be selected from time to time as determined by
the Board. The financial year of the Company shall
end on 31 December in each year commencing from 1 January or
such other date as may be determined by the
Board.
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8.1
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Upon
the sales of the products within the
defined territories, both shareholders have agreed to pay
2% of the sales revenue to the Company. The sum collected
from Zap shall be paid to Youngman and the sum collected from
Youngman shall be paid to Zap every year by the
Company.
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8.2
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If
in respect of any financial year the Company shall have net profits
after tax available for distribution, the parties hereto shall
procure that such profits shall be applied in the following manner
and order of priority:
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(a)
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provision
of working capital to finance the continuing operations and
internal growth of the Business;
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(b)
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repayment
of any interest accrued on the outstanding Capital
Loan;
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(c)
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repayment
of any outstanding principal of the Capital Loan;
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(d)
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transfer
to reserves consistent with the normal commercial requirements of
businesses similar to those carried on by the Company;
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(e)
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payment
of cash dividends to the Shareholders after deduction of the above
items within months after the end of such financial
year.
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8.3
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In
deciding whether in respect of any financial year, the Company had
or has profits available for distribution, the parties hereto shall
procure that the Auditors shall certify whether such profits are
available or not and the amount thereof (if any). In
giving such certificate the Auditors shall act as experts and not
arbitrators and their determination shall be final and binding on
the parties hereto, except in the case of manifest
error.
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9.1
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Unless
otherwise agreed by the Shareholders, the Board shall consist of
minimum of 3 and a maximum of 7 directors.
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9.2
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At
any time during the continuance in force of this Agreement, ZAP
shall be entitled to first appoint in office one (1) directors and
to appoint one additional director for every two directors added to
the Board subsequently and to remove any such director(s) so
appointed. For this purpose, the first directors
appointed by ZAP shall be Mr. Steven Schneider.
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9.3
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At
any time during the continuance in force of this Agreement,
Youngman shall be entitled to first appoint one (1) director and to
appoint one additional director for every two directors added to
the Board subsequently and to remove any such director(s) so
appointed. For this purpose, the first director appointed by
Youngman shall be Mr. Pang Qingnian.
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9.4
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Save
for the specific appointments made pursuant to Clauses 9.2 and 9.3 , any
exercise by any Shareholder of the power of appointment or removal
conferred on it pursuant to the above provisions shall be served
upon the other Shareholder and the Company whereupon the parties
hereto shall forthwith join in to take such action as is necessary
under the Articles to effect the appointment or removal (as the
case may be).
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9.5
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Any
Shareholder removing a director appointed by it shall indemnify the
other Shareholder and the Company against any claim by such
director for wrongful dismissal arising out of such
removal.
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9.6
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Each
director shall be entitled to appoint and remove from time to time
without the consent of any other director any person to act as his
alternate.
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9.7
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The
quorum necessary for the transaction of business at a Board meeting
shall be two (2) directors at least, and the two directors shall be
appointed by ZAP and Youngman respectively. Such quorum shall be
increased by one (1) director for every two directors added to the
Board subsequently.
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9.8
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Save
as otherwise provided in this Agreement, resolutions shall be
passed at a meeting of the Board by a simple majority vote of the
directors (or their respective alternates) present at the
meeting.
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9.9
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Unless
otherwise agreed or waived by all directors (or their respective
alternates), not less than 7 days’ notice of each
directors’ meeting specifying (wherever practicable) the
nature of the business to be transacted thereat, the time, the
place and the date shall be
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