SHAREHOLDERS AGREEMENT
----------------------
This Shareholders Agreement with respect to Edsoft Platforms (Canada),
Inc. , formerly Edsoft Development, Inc. , (the "Company"), effective as of
March __, 2000, is by and among Tengtu International Corp., a Delaware
corporation ("Tengtu"), Goodwill Technologies Ltd., a British Virgin Islands
("BVI") company ("Goodwill") and Wing Fat Hong, Ltd., a BVI company
("WFH")(collectively the "Shareholders"). The purpose of this Agreement is to
confirm the arrangements among the Shareholders and the Company relating to the
initial share issuance, as subsequently readjusted by the shareholders, the
management of the Company and to provide for restrictions upon the transfer of
Shares and repurchase of the Shares by the Company.
The Shareholders hereby agree as follows:
1. Distribution of Shares. The Company has 1000 shares of common stock
outstanding (the "Shares"). The ownership by the Shareholders is as
follows:
a. Tengtu 602 shares, for which Tengtu has contributed and is to
contribute its technology and software expertise, licenses to
certain software pursuant to a Licensing and Distribution
Agreement with Edsoft Platforms (H.K.) Limited (the
"Subsidiary") dated May __, 2000 (the "Licensing Agreement").
Tengtu has also caused U.S.$1.5 million to be invested in the
Company and has guaranteed the repayment of that U.S.$1.5
million obligation.
b. WFH 221 shares, for which WFH is to contribute the marketing,
management and capital raising expertise of its principal's
Celine Leung and Sunny Lee, on a full time basis, and which
also represents, in part, a finder's fee with respect to the
initial investment of H.K.$2,000,000 (U.S.$258,064) in the
Company by Goodwill.
c. Goodwill 177 shares, for which Goodwill invested
H.K.$2,000,000 in the Company in the form of a loan evidenced
by a Convertible Debenture dated as of July 27, 1999.
2. Corporate Structure. The Company shall initially act as a holding
company for its wholly owned Hong Kong subsidiary, Edsoft Platforms
(H.K.) Limited, formerly Edsoft Development (H.K.) Limited, (the
"Subsidiary").
<PAGE>
3. Rights as a Shareholder. Each shareholder acknowledges that by
becoming a shareholder of the Company and entering into this Agreement,
it is not entering into or forming a partnership relationship and that
the Shareholders of the Company shall not owe to one another the same
or substantially the same fiduciary duties that partners owe to one
another, notwithstanding that the Company may be a "close corporation."
Accordingly, except as expressly provided in this Agreement, each
shareholder acknowledges that it shall not, solely by virtue of its
acquisition or ownership of Shares, be entitled among other things:
a. to employment by the Company;
b. to serve as a director or officer of the Company;
c. to receive dividends or other distributions on its Shares,
except as the same may be declared from time to time by the
Board of Directors in its sole discretion;
d. to have its Shares redeemed by the Company when shares of
other Shareholders are being redeemed if the Board of
Directors shall have determined in good faith that there exist
special circumstances for redeeming the shares from such other
Shareholders;
e. to participate in or have preemptive rights with respect to
any issue of capital stock, or rights to acquire capital stock
of the company, unless the Board of Directors shall have
determined in their discretion to make such rights available;
or
f. to sell its Shares when another Shareholder is selling shares.
4. Board of Directors. The Company's Board of Directors shall consist
of five directors. Tengtu shall have three representatives, WFH one
representative and Goodwill one representative. Each Shareholder shall
appoint its own representatives. The members of the Company's Board of
Directors shall also function as the Subsidiary's Board of Directors.
5. Executive Officers.
a. The Company's Executive Officers and their compensation shall
be as follows:
<TABLE>
<CAPTION>
Name Title Compensation
---- ----- ------------
<S> <C> <C>
Pak Kwan Cheung Chairman and Bonus compensation as determined by the
Chief Executive Company's Board of Directors if and
Officer when sales and profit targets are met or if
U.S.$5 million is raised by the Company over
and above any amounts received directly or
indirectly from Top Eagle Holdings.
Simon Hui Vice President and Bonus compensation as determined by the
Controller Company's Board of Directors if and
when sales and profit targets are met or if
U.S.$5 million is raised by the Company over
and above any amounts received directly or
indirectly from Top Eagle Holdings.
</TABLE>
<PAGE>
b. The Subsidiary's Executive Officers and their compensation shall be
as follows:
<TABLE>
<CAPTION>
Name Title Compensation
---- ----- ------------
<S> <C> <C>
Pak Kwan Cheung Chairman and Bonus compensation as determined by the
Chief Executive Company's Board of Directors if and
Officer when sales and profit targets are met or if
U.S.$5 million is raised by the Company over
and above any amounts received directly or
indirectly from Top Eagle Holdings.
Celine Leung Executive V.P. H.K.$60,000 per month for the period March,
2000 through August, 2000. An additional
bonus shall be payable if (1) U.S.$5 million
is raised for the Company or the Subsidiary
through the efforts of Ms. Leung or Mr. Lee
or (2) sales and profit targets are met.
Sunny Lee V.P. - Admin. and H.K.$40,000 per month for the period
Corporate March, 2000 through August, 2000. An
Development additional bonus shall be payable if (1)
U.S.$5 million is raised for the Company of
Subsidiary through the efforts of Ms. Leung
or Mr. Lee or (2) sales and profit targets
are met.
Simon Hui Vice President Bonus compensation as determined by the
("V.P.") and Company's Board of Directors if and
Controller when sales and profit targets are met
or U.S.$5 million is raised by the Company
over and above any amounts received directly
or indirectly from Top Eagle Holdings.
</TABLE>
6. Certain Employees' Duties Responsibilities.
a. Celine Leung shall devote no less than 40 hours per week to
the business of the Subsidiary and shall discharge the
following duties and responsibilities as well as other
executive responsibilities and offices as may be assigned to
her by the Subsidiary's Board of Directors from time to time:
i. management of the business of the Subsidiary and ensuring
that sales and profitability targets are achieved;
ii. development and implementation of marketing and
promotion strategies;
iii. development of markets for the Subsidiary's products in
Hong Kong and other regions of Southeast-Asia;
iv. capital raising for the Company and/or Subsidiary with a
short term goal of at least U.S.$5 million; and
v. development of new business and customer relations.
<PAGE>
b. Sunny Lee shall devote no less than 40 hours per week to the
business of the Subsidiary and shall discharge the following duties and
responsibilities as well as other executive responsibilities and
offices as may be assigned to him by the Subsidiary's Board of
Directors from time to time:
i. capital raising for the Company and/or Subsidiary with a
short term goal of at least U.S.$5 million;
ii. development of new business and customer relations;
iii. development and implementation of alliances with
strategic partners; and
iv. administrative and personnel functions.
c. Certain Actions on Behalf of the Subsidiary. Celine Leung and Sunny
Lee shall have the right, on behalf of the Subsidiary, to take the
following actions:
i. hire and fire non-executive employees;
ii. incur any indebtedness on behalf of the Subsidiary less
than U.S.$50,000;
iii. sign all checks on behalf of the Subsidiary for
payments in the ordinary course of business of less than
$50,000; and
7. Voting.
a. The consent of a a majority of the members of the Company's
Board of Directors shall be necessary for the following
corporate actions:
i. amendment of the Company's or Subsidiary's charter;
ii. issuance of additional stock in the Company or
Subsidiary;
iii. mergers, asset sales, consolidations or exchanges of
shares of Company stock;
iv. issuance of dividends or other distributions on the
Company's stock;
v. dissolution of the Company or Subsidiary;
vi. changes in the Company's or Subsidiary's accountant or
legal counsel;
vii. changes in corporate structure or reincorporation of
the Company or Subsidiary in different location;
viii. changes in the Subsidiary's lines of business;
ix. bonus and incentive compensation;
x. incurring indebtedness in excess of U.S.$50,000 ; and
xi. expenditures of the Subsidiary in excess of U.S.$ 50,000
in the ordinary course of the Subsidiary's business; and
xii. expenditures of the Subsidiary in excess of U.S.$ 1,000
not in the ordinary course of business.
<PAGE>
b. All actions, other than those set forth above, shall be approved by
a majority of the Company's Board of Directors.
8. Covenant against Competition. So long as they are employed by the Company or
Subsidiary or are a Shareholder in the Company, and for a period of one year
thereafter, WFH, Goodwill, Celine Leung and Sunny Lee, agree that he, she or it
will not, directly or indirectly, as an employee, consultant, partner, owner or
shareholder of, or in any other capacity with, any person, firm, corporation or
other organization, without prior written consent of the Company, (i) engage in
the development, marketing or sale or educational software in the following
territories: Hong Kong, Macau or Southeast-Asia, which territories shall not
include mainland China, (ii) otherwise engage in competition with the Company or
Subsidiary in any business in which the Company or Subsidiary is engaged (or has
taken preliminary steps to become engaged) at the time of termination of his,
her or its employment or ownership of Shares, as the case may be, or (iii)
induce any employee of the Company or Subsidiary to leave the employ of the
Company or Subsidiary. The foregoing shall not prevent WFH, Goodwill, Celine
Leung or Sunny Lee from owning as a passive investor less than 5% of the stock
of any corporation, which may be deemed competition to the Company or
Subsidiary.
9. Confidentiality. Each Shareholder, and Celine Leung and Sunny Lee, covenants
that while a shareholder or employee of the Company or Subsidiary, and
thereafter (except as required in the course of employment with the Company or
Subsidiary) he, she or it will not communicate or divulge to, or use for the
benefit of himself, herself or itself or any other person, firm, association or
corporation, without the consent of the Company or Subsidiary, any information
concerning any customers, products, processes or other confidential matters
(collectively, "Confidential Information") possessed, owned or used by the
Company or Subsidiary that may be communicated to, acquired by, or learned in
the course of or as a result of being a shareholder or employee of the Company
or Subsidiary, except information Tengtu is required to disclose in its filings
with the Securities and Exchange Commission. All Confidential Information shall
remain the sole property of the Company or Subsidiary.
10. Restrictions of Transfer of Shares.
a. Before any of the Shares may be sold or transferred, including
transfer by operation of law and by pledgees or holders of other
security interests desiring to exercise a power of sale, the holder of
such Shares proposing such sale or transfer (the "transferor") shall
first give written notice thereof to the Company and each other holder
of Shares stating the proposed transferee, the number of Shares
proposed to be transferred, the purchase price, if any, and the terms
of the proposed transaction. The Company shall thereupon have the
option, but not the obligation, to acquire some or all of the Shares
proposed to be transferred for the Purchase Price provided in Section
11 (the "Purchase Price"). Within 30 days after the giving of such
notice by the transferor, the Company shall give written notice to the
transferor and to the other holders stating whether or not it elects to
exercise the option to purchase, the number of Shares, if any, it
elects to purchase and a date and time (the "Closing Date") for
consummation of the purchase not less than 60 or more than 90 days
after the giving of such notice. Failure by the Company to give such
notice within such time period shall be deemed an election by the
Company not to exercise such option. The transferor shall not be
entitled to vote, either as a Shareholder or director, in connection
with the decision of the Company whether to exercise its option to
purchase its Shares, provided that if its vote is required for valid
corporate action he shall vote in accordance with the decision of the
majority of the other directors or Shareholders.
<PAGE>
b. If the Company fails to exercise such option with respect to all of
the Shares proposed to be transferred, each of the other holders of
Shares shall thereupon have the option, but not the obligation, to
purchase for the Purchase Price that portion of all of the Shares
proposed to be transferred as to which the Company has not exercised
its option in proportion to their then ownership of Shares. Within 45
days after the giving of the notice provided in subsection (a) hereof
by the transferor, each other holder shall give written notice to the
transferor, the other holders and the Company stating whether or not he
elects to exercise its option, the number of Shares, if any, which he
elects to purchase, and a date and time ("Closing Date") for
consummation of the purchase not less than 30 or more than 60 days
after the giving of such notice. Such Closing Date shall be the same
date as the Closing Date selected by the Company if it has exercised
its option provided in subsection (a). If any holder elects not to
exercise its option with respect to some or all of the Shares which it
is entitled to purchase, each of the other holders of Shares may elect
to purchase such Shares in the manner provided in this subsection.
Failure by any holder to give such notice within such time period shall
be deemed an election by it not to exercise its option.
c. Notwithstanding anything herein to the contrary, the transferor
shall in no event be required to sell hereunder less than all of the
Shares proposed to be transferred in accordance with its notice under
subsection (a).
d. If the Shares offered hereunder are not purchased within the
respective time periods stated above, the transferor may transfer such
Shares at any time during the 90-day period after the termination of
the applicable time period, but only upon the terms and to the
transferee stated in its notice under subsection (a). After such Shares
are so transferred, or if the transfer is not consummated within such
period, the Shares shall again become subject to the terms of this
Agreement.
11. Purchase Price.
a. The Purchase Price shall be determined as follows:
i. In the case of a proposed sale or transfer under Section
10 to a third party in a bona fide transaction for fair
value payable in cash or the equivalent currently or in
future installments, the Purchase Price for such Shares
shall be the value offered by such third party payable upon
the same terms.
ii. In all other cases, including without limitation a
proposed transfer or other disposition not constituting a
sale described in subsection (a)(i), the Purchase Price
shall be the "agreed value" determined in accordance with
subsection (b) subject to adjustment by the Company's
regularly retained independent accountant to reflect
material events and changes in circumstances occurring
subsequent to the date on which the agreed value was last
fixed.
b. Within 90 days following the close of each fiscal year of the
Company, beginning with the fiscal year ending June 30, 2000 or more
frequently as they may determine, the Shareholders and the Company
shall in a writing signed by all of them agree upon a value for the
Shares (the "agreed value"). In the event that the Shareholders and the
Company fail to agree upon a new value as of the end of any fiscal
year, the value shall be set by the Company's independent auditor.
12. Legend; Transfers of Record. Each certificate for Shares shall bear a legend
satisfactory to counsel for the Company reflecting this Agreement. No Shares
shall be transferred on the books of the Company except upon compliance with the
restrictions on transfer contained in this Agreement.
<PAGE>
13. Term and Termination. This Agreement shall remain in effect until:
a. terminated by unanimous vote of the Shareholders;
b. The Company's stock is publicly traded on a stock exchange or
inter-dealer quotation medium;
c. an additional investor is admitted as a shareholder of the Company;
or
d. An additional investment is received by the Company from one of the
Shareholders.
14. General.
a. Amendment. This Agreement may not be modified or amended except by
means of an instrument signed by each shareholder.
b. Successors and Assigns. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties.
c. Arbitration; Governing Law. Any dispute, disagreement, conflict of
interpretation or claim arising out of or relating to this agreement,
or its enforcement, shall be determined by arbitration pursuant to
National Arbitration and Mediation's ("NAM") Fast Track International
Rules in effect on the date the claim is filed with NAM. There shall be
one arbitrator, the location of the arbitration shall be New York and
the choice of law governing this Agreement, and any dispute hereunder
shall be the laws of New York.
d. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same agreement.
e. Headings. The headings and captions used in this Agreement are used
for convenience only and are not to be considered in construing or
interpreting this Agreement.
f. Severability. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, such provision(s) shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision(s) were so excluded and shall be
enforceable in accordance with its terms.
g. Entire Agreement. This Agreement constitutes the entire agreement
and understanding of the parties with respect to the subject matter
hereof and supersedes any and all prior negotiations, correspondence,
agreements, understandings duties or obligations between the parties
with respect to the subject matter hereof.
h. Notices. Any and all notices required or permitted to be given to a
party pursuant to the provisions of this Agreement will be in writing
and will be effective and deemed to provide such party sufficient
notice under this Agreement on the earliest of the following: (i) at
the time of personal delivery, if delivery is in person; (ii) at the
time of transmission by facsimile, addressed to the other party at its
facsimile number specified herein as to the Company (or hereafter
modified by subsequent notice to the parties hereto), with confirmation
of receipt made by both telephone and printed confirmation sheet
verifying successful transmission of the facsimile; (iii) one (1)
business day after deposit with an express overnight courier for
deliveries within a country, or three (3) business days after such
<PAGE>
deposit for international deliveries or (iv) three (3) business days
after deposit in mail by certified mail (return receipt requested) or
equivalent for deliveries within a country. All notices for
international delivery will be sent by facsimile or by express courier.
All notices not delivered personally or by facsimile will be sent with
postage and/or other charges prepaid and properly addressed to the
party to be notified at the address or facsimile number indicated for
such party, in the case of Tengtu, at 206-5050 Kingsway, Burnaby, BC,
Canada,V5H 4H2, Attention: Mr. Pak Cheung, Facsimile: (604) 439-9869,
with a copy to Hecht & Steckman, P.C., 60 East 42nd Street, Suite 5101,
New York, NY 10165-5101, Attention: Charles J. Hecht, Esq. or, in the
case of WFH to ___________________________________, or in the case of
Goodwill to _____________________________________________, or at such
other address or facsimile number as such other party may designate by
giving ten (10) days advance written notice by one of the indicated
means of notice herein to the other parties hereto. Notices by
facsimile shall be machine verified as received.
Any party hereto (and such party's permitted assigns) may by
notice so given change its address for future notices hereunder.
Notice shall conclusively be deemed to have been given in the manner
set forth above.
In Witness Whereof, the parties hereto have executed this Agreement as of
the ____ day of May, 2000.
TENGTU INTERNATIONAL CORP.
By:
Name:
Title:
WING FAT HONG, LTD.
By:
Name:
Title:
GOODWILL TECHNOLOGIES, LTD.
By:
Name:
Title:
---------------------------------
Celine Leung
---------------------------------
Sunny Lee
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