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SMARTRAC and OTI sign asset and long term supply agreement
(EquityBites Via Acquire Media NewsEdge) Provider of RFID transponders SMARTRAC N.V (FSE:SM7) (XETRA:SM7) and On Track Innovations Ltd (OTI) (Nasdaq:OTIV), a provider of contactless microprocessor-based smart card solutions, today announced that the companies have signed binding agreements under which SMARTRAC will acquire the assets of OTI's subsidiary, Millennium Card's Technology Ltd (MCT), along with the machinery and inlay production intellectual property from OTI, for EUR8.5m in an asset deal.
Under the asset agreements, SMARTRAC acquires certain machinery and production intellectual property (IP) from OTI and MCT. SMARTRAC will pay an aggregate amount of EUR8.5m to be paid in multiple instalments, whereof EUR5.0m will be paid before year end and the balance will be paid in eight equal quarterly instalments starting the first quarter of 2010.
The companies have also signed a supply agreement will fully secure OTI's delivery of products and projects and SMARTRAC becomes OTI's exclusive supplier for wire-embedded and Dual Interface Inlays.
In addition, both parties will mutually accept and respect each other's patents, especially in the field of Wire-Embedding and Dual Interface technology.
As a part of the agreements, all patent litigations and in particular all patent infringement legal proceedings between SMARTRAC and OTI have been ceased.
As a result, OTI will cease to produce inlays and SMARTRAC will become OTI's exclusive supplier for wire embedded and Dual Interface inlays.
Under the agreement terms, OTI will be able to continue to fulfil its existing obligations and existing orders at the MCT site.
The parties have also signed a supply agreement by which OTI will get defined lead times, production allocation and pricing of SMARTRAC products. The supply agreement ensures OTI's ability to continue and support their customers with SMARTRAC's unique manufacturing technology and increased capacity.
SMARTRAC intends to finance the transaction by the company's existing syndicated credit facility or a capital increase by issuing new shares within the authorized capital stock.
OTI expects improved cash flow position and significant reduction in its operating expenses as a result of this transaction.
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