AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into as of the 13th
day of March, 2000, by and among ITES - Imaging Technologies Enterprise Systems
Ltd., an Israeli company ("ITES"), Net2Wireless Corporation, a Delaware
corporation ("NET2"), and Partner Communications Company Ltd., an Israeli
company ("Partner").
WHEREAS, ITES has entered into a Memorandum of Understanding, dated October
6, 1999, with Partner (including its Exhibits, the "MOU"), relating, among other
things, to the proposed evaluation by Partner of a system developed by ITES
delivering over wireless multi media streaming video of (i) real time view of
streaming video (public TV channels, video broadcast from private sources), (ii)
recorded time streaming video for later playback, and/or (iii) view of
pre-recorded media clips (movie trailers and music video clips), all as
described in the attached Exhibit A (the "Video Platform"); and
WHEREAS, on December 15, 1999, ITES sold, transferred and assigned to NET2 and
its wholly-owned subsidiary substantially all of the assets of its wireless
business, including but not limited to all of ITES' rights and interests under
all contracts and commitments entered into by ITES and all liabilities and
obligations of ITES pertaining to such contracts and commitments (the
"Transfer"); and
WHEREAS, as part of the Transfer, ITES has assigned to NET2 all of ITES' rights
and obligations under the MOU; and
WHEREAS, on December 8, 1999, NET2 has entered into a loan and option agreement
(the "Loan and Option Agreement") with Sensar Corporation ("Sensar"), relating,
among other things, to an option granted to Sensar to call for a merger of
Sensar and NET2; and
WHEREAS, Partner desires to purchase the Video Platform from NET2; and
WHEREAS, the parties hereto desire to amend the terms of their previous
understandings and to set forth herein the agreements reached in connection
therewith.
NOW, THEREFORE, in consideration of their mutual representations and
obligations, the parties hereto have hereby agreed as follows:
1. THE PILOT
1.1 NET2 declares that as of the date hereof, NET2 has completed the first
stage of development of the Video Platform and that the Video Platform has been
installed at Partner's site. NET2 and Partner shall jointly conduct certain
tests (including alpha tests) as agreed upon between NET2 and Partner, which
tests are expected to be completed within 30 days from the date hereof.
1.2 Within 5 business days following completion of the tests referred to in
Section 1.1 above in accordance with the specifications agreed to by Partner and
NET2, Partner shall deliver a notice of acceptance of the alpha test stage and
the commencement of the pilot of the Video Platform (the "Pilot") to NET2.
Following delivery of such notice of acceptance, NET2 shall commence the Pilot
at one of Partner's sites in accordance with the specifications set forth in
Exhibit A. The Pilot shall continue for a period of no longer than 6 months
(the "Pilot Period"), during which Pilot Period, Partner shall complete its
technology due diligence applicable to its proposed engagement with NET2.
Within 5 business days following the completion of the Pilot in accordance with
the specifications set forth in Exhibit A and any reasonably necessary
developments of the Video Platform, Partner shall submit a final notice of
acceptance of the Video Platform to NET2. During the Pilot Period, Partner
shall assist NET2 in adjusting the Video Platform to the Orange systems. For the
removal of doubt it is hereby clarified that the Pilot shall be conducted at
NET2's sole costs and expenses.
1.3 During the period of three (3) years from the date hereof (the "Right of
First Offer Period"), Partner shall have the right of first offer (the "Right of
First Offer") with respect to any other activity of NET2 (i.e., the development
by NET2 of any new technology, service, product, platform or application)
relating to the cellular communication business, in each case, other than with
respect to the Video Platform (the "New Product") in accordance with the
following provisions:
1.3.1 In the event that NET2 shall develop or offer to the market any New
Product, it shall deliver a written notice thereof to Partner (the "Right of
First Offer Notice"), which Right of First Offer Notice shall describe the New
Product (including all information which is reasonably necessary for
determination whether or not to exercise the right hereunder) and NET2's price
list for such New Product. Partner shall notify NET2, during a period of 30
days from delivery of the Right of First Offer Notice (the "Exercise Period")
whether or not it shall have elected to exercise the Right of First Offer and to
beta test the New Product.
1.3.2 In the event that Partner shall have notified NET2 during the Exercise
Period that it shall have elected not to purchase the New Product, or in the
event that Partner shall not have responded to the Right of First Offer Notice
within the Exercise Period, NET2 shall be free to offer and sell the New Product
to any other cellular communication company without any restrictions, provided,
however, that any sale of the New Product to any other cellular communication
company in Israel consummated within a period of five (5) months following the
expiration of the Exercise Period shall be at a price per New Product and on
such other terms and conditions not more favorable to such other party than that
offered by NET2 to Partner in the Right of First Offer Notice, subject to any
discounts which may be offered to such other companies due to the volume of the
purchase transaction in accordance with NET2's then price list, provided,
further, however, and without derogating from Partner's rights for remedies of
such breach, that if NET2 shall have sold the New Product to any other cellular
communication company in Israel during such 5-month period at a price per New
Product or at such other terms and conditions more favorable to such other
cellular communications company and Partner shall have subsequently elected to
purchase the New Product, NET2 shall offer the New Product to Partner at the
same price and other terms and conditions offered to the other cellular
communication company.
Any purchase by Partner of the New Product at any time following such
5-month period, shall be at the most favorable price offered by NET2 to any
other cellular communications company in Israel in a purchase transaction,
subject to differences and/or adjustments resulting from volume discounts.
1.3.3 (a) In the event Partner shall have notified NET2 within the
Exercise Period of its election to exercise the Right of First Offer and to beta
test the New Product, NET2 shall make available to Partner, for no
consideration, the hardware and software necessary for the conduct of the beta
test with no more than 30 ports, which hardware and software shall be returned
to NET2 by Partner promptly upon the expiration of the beta test period. In the
event that Partner shall have elected to purchase the New Product for launching
purposes, Partner shall be obligated to purchase such New Product for the
support of at least 60,000 subscribers (the "Minimum Number of Subscribers") and
NET2 shall provide Partner free of charge with the software required to perform
the launching of the New Product for the support of 50,000 subscribers out of
the Minimum Number of Subscribers. Partner shall be obligated to pay any of
NET2's direct costs for any hardware supplied by NET2 to Partner for the
launching and/or commercialization of the New Product for the support of the
Minimum Number of Subscribers plus any costs and expenses (including cost of any
additional software and hardware) required for the support of any number of
subscribers in excess of the 50,000 subscribers out of the Minimum Number of
Subscribers at a price to be agreed upon between NET2 and Partner.
Notwithstanding anything contained herein to the contrary, Partner shall be
entitled to purchase any hardware necessary for the provision of the Video
Platform's services from any other suppliers, provided, however, that any such
purchase shall be in accordance with NET2's then technology requirements and
specifications submitted to Partner in writing upon Partner's request, provided,
further, however, that in the event of any purchase of hardware by Partner in
violation of this Section 1.3.3, NET2 shall not be responsible for any hardware
or software errors or malfunctions which shall be corrected at NET2's then price
list.
(b) In the event that Partner shall have purchased the New Product
within the expiration of five (5) months from delivery of notice of acceptance
test by Partner of the New Product in accordance with Section 1.3.4 herein, and
NET2 shall have during an additional period of three (3) months following such
5-month period, sold the New Product to any other cellular communication company
in Israel at a price per New Product lower than the price at which the New
Product was sold to Partner (subject to differences and/or adjustments resulting
from volume discounts), Partner shall be entitled to a refund in an amount equal
to the difference between Partner's price and such other lower price.
1.3.4 Notwithstanding anything contained herein to the contrary, NET2 shall
be entitled to offer any New Product to any other cellular communication
companies, to enter into a purchase agreement relating to the New Product with
any such other cellular communication companies and to conduct beta testing of
the New Product at any such other cellular communication companies' sites
concurrently with the conduct of the beta testing of the New Product at
Partner's site (if Partner shall have elected to conduct a beta testing of such
New Product), provided, however, that (i) any such other beta test at any such
other cellular communication company shall involve the use of no more than 30
ports which shall enable the support of services to no more than 100
subscribers, and (ii) the closing of any such purchase agreement for the sale of
the New Product with any such other cellular communication companies shall not
take place before the expiration of five months from delivery of notice of
acceptance test by Partner of the New Product in accordance with the terms of
the beta test agreement with Partner relating to such New Product, provided,
further, however, that Partner shall have completed the beta test of the New
Product during a period of 4 months and has delivered the notice of acceptance
thereof within 7 business days thereafter.
1.3.5 Notwithstanding anything contained in this Agreement to the contrary,
(i) the Right of First Offer granted to Partner under this Section 1.3 (and
under Section 2.8 below) shall not apply with respect to any offer and/or sale
of the New Product to the market outside Israel or to any other cellular
communications company outside of Israel provided, however, that any such sale
shall not have resulted in a violation of Partner's Right of First Offer in
Israel, and (ii) in the event that the Purchase Agreement (as defined in Section
2 below) shall not be consummated within 90 days from the date hereof (or, in
the event that a matter in dispute in connection therewith has been referred to
the Arbitrator as defined in and in accordance with Section 6.2 hereof, within
any extended period as required by the Arbitrator to reach a decision), the
Right of First Offer granted to Partner hereunder shall terminate and be of no
further force and effect.
2. THE PURCHASE AGREEMENT
As soon as practicable following the date hereof, but in any event no later than
within 90 days from the date hereof (or, in the event that a matter in dispute
in connection therewith has been referred to the Arbitrator in accordance with
Section 6.2 hereof, within any extended period as required by the Arbitrator to
reach a decision), NET2 and Partner shall enter into a purchase agreement
regarding the purchase of the Video Platform by Partner (the "Purchase
Agreement"). The Purchase Agreement shall include, among other things, the
following terms and provisions:
2.1 NET2 shall provide Partner with the Video Platform supporting the
provision of services to at least the Minimum Number of Subscribers (i.e.,
60,000 subscribers). Any software necessary for the support of the Video
Platform's services to 50,000 subscribers out of the Minimum Number of
Subscribers shall be provided by NET2 free of charge. Any hardware necessary for
the support of the Video Platform's services to the Minimum Number of
Subscribers or to any additional subscribers in excess of the Minimum Number of
Subscribers and any software necessary for the support of the Video Platform's
services to any additional subscribers in excess of 50,000 subscribers out of
the Minimum Number of Subscribers shall be paid by Partner in accordance with
the prices to be agreed upon between Partner and NET2, provided, however, that
NET2 shall be responsible for the necessary integration of such software with
Partner's facilities for no additional consideration. Notwithstanding anything
contained herein to the contrary, Partner shall be entitled to purchase any
hardware necessary for the provision of the Video Platform's services from any
other suppliers provided, however, that any such purchase shall be in accordance
with NET2's then technologies requirements and specifications as shall be
submitted to Partner in writing upon Partner's request, provided, further,
however, that in the event of any purchase of hardware by Partner in violation
of this Section 2.1, NET2 shall not be responsible for any hardware or software
errors or malfunctions which shall be corrected at NET2's then price list.
2.2 Partner shall distribute the Video Platform's services to its
subscribers in Israel at its sole expense and discretion.
2.3 NET2 shall provide maintenance services to Partner with respect to the
Video Platform in accordance with a maintenance agreement to be entered into by
NET2 and Partner upon the execution of the Purchase Agreement (the "Maintenance
Agreement"). The maintenance fee shall be in accordance with Partner's then
price list for the maintenance of like systems. The Maintenance Agreement shall
include an undertaking by NET2 for the provision and installation at Partner's
site of new updates to the Video Platform software.
2.4 Partner and NET2 shall cooperate in the development of new applications
of the Video Platform.
2.5 Partner shall assist NET2 and, following the Merger (as hereinafter
defined), the Surviving Entity (as hereinafter defined), to introduce the Video
Platform to additional Orange and GSM operators in accordance with the
provisions of this Section 2.5. Such assistance shall include, in both cases,
the introduction of the Video Platform to other Orange and GSM operators in
conventions, trade show exhibits and such other appropriate forums in which
Partner shall participate and be permitted to introduce the Video Platform
and/or the use of Partner as a reference site for such other operators
(including the presentation of the Video Platform at Partner's site to such
Orange and GSM operators), provided, however, that in the case of the GSM
operators (other than the Orange operators), NET2 shall have requested Partner
in writing to furnish such assistance. In the event of any sale of the Video
Platform to any other Orange operator in the world (even if such sale shall have
been conducted without Partner's assistance), and in the event of any sale of
the Video Platform to any other GSM operator (only in the case that such sale
shall have been conducted with Partner's assistance in accordance with NET2's
prior written request as set forth in this Section 2.5), Partner shall be
entitled to receive a commission fee equal to 15% of the revenues of NET2 from
any such sale (including the sale of any services in connection therewith) (the
"Fee"). For the removal of doubt it is hereby clarified that any sale of the
Video Platform to GSM operators (other than Orange operators) which shall have
been consummated by NET2 without the assistance of Partner as provided in this
Section 2.5, or any sale of any other activity of NET2 or any other technology,
service or product or new platform or application of NET2 (other than the Video
Platform) to any Orange or other GSM operators, shall not entitle Partner to the
Fee or to any other consideration.
2.6 Partner shall be entitled to all revenues resulting from the provision
of the Video Platform's services to its subscribers in Israel.
2.7 During a period of two (2) years commencing on the date of consummation
of the Purchase Agreement, NET2 shall not be entitled, directly or indirectly,
to enter into any agreements with any other cellular communication companies in
Israel with respect to the Video Platform. For the purposes of this Section
2.7, an indirect engagement shall also include an engagement with an entity
which is not in itself a cellular communication company but which is affiliated
with or otherwise has business relationships with a cellular communication
company in Israel which may interfere with Partner's right to exclusivity
hereunder. In the application of the provisions of this Section 2.7, the
parties shall comply with the Restrictive Trade Practices Law of 1988 and if
necessary, will apply for the approval of this agreement by the Commissioner of
Restrictive Trade Practice under the Restrictive Trade Practices Law of 1988.
Notwithstanding anything contained herein to the contrary, in the event that
Partner shall not have launched the Video Platform within a period of 3 months
from the execution of the Purchase Agreement, NET2 shall be entitled to offer
and sell the Video Platform to any other cellular communication companies and
the restrictions on sale by NET2 provided for in this Section 2.7 shall not
apply.
2.8 During the Right of First Offer Period, Partner shall have the right of
first offer with respect to any New Product developed by NET2 in accordance with
the provisions of Section 1.3 above.
2.9 NET2 warrants to Partner that the Video Platform will operate
substantially in accordance with its specifications.
3 THE OPTION
3.1 In order to induce Partner to conduct the Pilot contemplated hereunder
but without derogating from any of Partner's rights hereunder, Partner is hereby
granted an option (the "Option") to purchase up to an aggregate of 2,777,778
shares of Common Stock (the "Option Shares") of NET2 (constituting 10% of the
issued and outstanding share capital of the surviving entity (the "Surviving
Entity") of the merger (the "Merger") contemplated by the Loan and Option
Agreement, calculated as of the date hereof on a fully diluted basis after
giving effect to the conversion into equity of all outstanding debt and assuming
8,000,000 issued and outstanding shares of Sensar but before giving effect to
(i) options to purchase an aggregate of 11,000,000 shares of Common Stock of
NET2 or the Surviving Entity, in accordance with a list previously furnished to
Partner; and (ii) any issuances of new securities of NET2 and/or the Surviving
Entity following the date hereof which shall dilute all shareholders of NET2 or
the Surviving Entity, on a pro rata basis and (iii) any issuances of shares upon
exercise of options to be granted to employees of the Surviving Entity or NET2
following the Merger or the initial public offering of NET2's securities (the
"IPO"), as applicable for an aggregate purchase price of up to $5,555,556 (Five
Million Five Hundred Fifty Five Thousand Five Hundred Fifty Six) (i.e., at an
exercise price of $2.00 per share) (subject to adjustment as set forth in
Sections 3.1.3 or 3.1.6 hereof) (the "Exercise Price") in accordance with the
following terms and conditions:
3.1.1 The Option shall be exercisable in whole or in part from time to time
during the period commencing on the date hereof and ending at the later of (i)
October 6, 2000, or (ii) two (2) months from the consummation of the Merger (the
"Option Exercise Period"). The Option Shares issuable upon exercise of the
Option will be free and clear of any liens, charges, encumbrances or any other
third party's rights. In the event of exercise in part, the provisions of this
Section 3 shall apply mutatis mutandis to the Options Shares not so exercised.
3.1.2 Partner shall have the right, during the period commencing 90 days
following the later of (i) the exercise of the Option or (ii) the consummation
of the Merger to one (1) demand registration (underwritten, if Partner so
request) and unlimited piggyback registrations (subject to underwriter's cut
backs), exercisable only in accordance with customary terms and provisions
(including customary rights and restrictions) of a registration rights agreement
to be entered into between NET2 and Partner as soon as practicable following the
date hereof, but in any event not later than within 90 days from the date hereof
(or, in the event that a matter in dispute in connection therewith has been
referred to the Arbitrator in accordance with Section 6.2 hereof, within any
extended period as required by the Arbitrator to reach a decision) (the
"Registration Rights Agreement"). In the event that Partner shall request NET2
to effect a registration statement covering the Option Shares under the
Securities Act of 1933, as amended (the "Act"), in accordance with the
Registration Rights Agreement, and NET2 shall determine that it would be
seriously detrimental to NET2 and its stockholders for such registration to be
effected at such time requested by Partner, NET2 shall have the right to defer
the filing of the registration statement for a period of not more than one
hundred twenty (120) days after receipt of the request of Partner. In the event
that Partner shall request the Company to effect the demand registration
pursuant to the Registration Rights Agreement and such registration shall be
subsequently withdrawn at the request of Partner, such registration shall count
towards the one demand registration to which Partner shall be entitled pursuant
to the Registration Rights Agreement, provided, however, that if Partner at its
sole discretion shall elect to bear all of the registration expenses of such
registration, such registration shall not be counted as a demand registration
under the Registration Rights Agreement. The registration rights granted to
Partner hereby will also be subject to such additional terms and conditions as
are customary, including cross indemnification and reporting obligations under
the US securities laws. In the event that any of NET2's stockholders existing as
of the date hereof shall be granted registration rights with respect to the
shares owned by it on the date hereof that are superior to Partner's
registration rights set forth herein, Partner shall be entitled to such superior
registration rights. In the event that NET2 shall effect a registration under
the Act covering the shares held on the date hereof by any of its stockholders
existing as of the date hereof, then Partner shall have the right to request
NET2 to include in such registration any Option Shares underlying the Option (on
a pro rata basis among all shares of the other stockholders included in such
registration) only if and to the extent that Partner shall have exercised the
Option with respect to such Option Shares prior to the time of such registration
in accordance with the terms of the Option hereof, provided, however, that if
such registration shall be underwritten, the inclusion of any of Partner's
Option Shares therein shall be subject to and conditional upon Partner's
agreement to be bound by the terms and conditions of such underwriting,
including lock-up and cut-back provisions to the extent applicable to all other
holders of Common Stock of NET2 whose shares have been included in such
registration.
3.1.3 In the event NET2 and, following the Merger, the Surviving Entity,
shall at any time change, by subdivision (split) or combination or by the
distribution of bonus shares, the number of shares of Common Stock then
outstanding into a different number of shares, then thereafter the number of
Option Shares issuable upon exercise of the Option and the Exercise Price
therefore shall be increased or decreased, as the case may be, in direct
proportion to the increase or decrease in the number of Option Shares by reason
of such change.
3.1.4 In the event that Partner shall desire to exercise the Option in whole
or in part during the Option Exercise Period, Partner shall deliver a written
notice of exercise to NET2 or the Surviving Entity, as the case may be, which
notice shall state the number of Option Shares for which the Option is being
exercised, accompanied by payment in cash of the Exercise Price for the number
of Option Shares being exercised. Payment of the Exercise Price shall be made in
US Dollars.
3.1.5 In the event that the Merger shall not be consummated, the terms of
the Option will be changed, so that, following such change, Partner shall have
an option to purchase at the Exercise Price (i.e., at an aggregate amount of
$5,555,556) 1,777,778 shares of Common Stock of NET2 (constituting 10% of the
issued and outstanding share capital of NET2, calculated as of the date hereof
on a fully diluted basis after giving effect to the conversion into equity of
all outstanding debt but before giving effect to the options to purchase an
aggregate of 11,000,000 shares of Common Stock of NET2 in accordance with a list
previously furnished to Partner), subject to Section 3.1.10.
3.1.6 In the event that the listed price per share in any stock exchange of
the Surviving Entity immediately following the Merger shall reflect a company's
valuation (before giving effect to the exercise of the Option) of less than
$50,000,000 (Fifty Million United States Dollars) or in any other event
(including in connection with the consummation of the Merger) pursuant to which
the valuation of the Surviving Entity immediately following the Merger (before
giving effect to the exercise of the Option) shall be less than $50,000,000
(Fifty Million United States Dollars), the Exercise Price to be paid by Partner
shall be adjusted by the ratio between $50,000,000 and the actual pre-money
valuation (prior to Partner's investment) of the Surviving Entity at such time.
3.1.7 NET2 undertakes that in the event the Merger shall be consummated,
NET2 shall cause the Surviving Entity to assume all of the obligations of NET2
to Partner under this Agreement, including without limitations, all of its
obligations under Section 3 of this Agreement relating to the Option (including
without limitation, the number of Option Shares underlying the Option, the
Exercise Price and the other terms and conditions of the Option). In addition,
upon execution of this Agreement, NET2 shall deliver to Partner a letter
agreement executed by Sensar in the form attached hereto as Exhibit B, pursuant
to which Sensar shall undertake to cause the Surviving Entity of the Merger to
assume all of the obligations of NET2 to Partner hereunder (including all of its
obligations with respect to the Option).
3.1.8 Notwithstanding the foregoing, NET2 undertakes that in the event of
any transfer of all or substantially all of NET2's technology to any other
entity (the "Transferee") prior to the Merger or to any other merger of NET2
with or into another corporation, such transfer of technology shall be subject
to the Transferee's agreement to assume all of the obligations of NET2 with
respect to the Option (with the necessary adjustments) so that after such
transfer, Partner shall have the option to purchase for the aggregate Exercise
Price the kind and number of the shares of the Transferee to which Partner would
have been entitled if it held the Option Shares issuable upon exercise of the
Option immediately prior to such transfer.
3.1.9 From and after the date on which Partner shall have exercised the
Option until the earlier of (i) the consummation of the Merger, or (ii) the IPO,
NET2 shall furnish to Partner (x) within 90 days from the end of each fiscal
year, audited consolidated financial statements of NET2 and its subsidiaries for
the fiscal year then ended, prepared in accordance with United States Generally
accepted accounting principals ("US GAAP"), (y) within 45 days after the end of
each quarterly accounting period in each fiscal year (other than the last
quarterly accounting period in each fiscal year), consolidated financial
statements of the Company and its subsidiaries, unaudited but prepared in
accordance with US GAAP, and (z) such other information as shall be reasonably
necessary for Partner to comply with its obligations as a public company, the
disclosure of which shall not adversely affect NET2's business.
3.1.10 In the event that prior to the consummation of the earlier of (i) the
Merger or (ii) the IPO, NET2 shall issue new securities to any Interested Party
(as such term is defined in the Companies Law, 1999) of NET2 at a price per
share lower than the fair market value of the shares, Partner shall be entitled
to participate in such offering and to purchase for cash, at the same price per
share and on such other terms offered to the Interested Party, a number of such
securities so that, after giving effect to such issuance, Partner will continue
to maintain the same proportionate equity ownership in NET2 held by it
immediately prior to the issuance of such new securities. Notwithstanding the
foregoing, Partner's right hereunder shall not apply to the issuance of shares
of NET2 (i) upon exercise of options to purchase 11,000,000 shares of Common
Stock granted and to be granted pursuant to a list previously provided to
Partner, and (ii) upon conversion of any outstanding convertible securities set
forth in Schedule 5.1.3.
3.1.11 NET2 and Partner acknowledge that Partner intends to conduct a
valuation of NET2 and NET2 hereby agrees to cooperate with Partner in such
process and to disclose to Partner prior to the consummation of the Merger such
documents and information as shall be reasonably necessary for the performance
of the aforesaid evaluation.
3.1.12 In the event that, immediately prior to the Merger, the number of
issued and outstanding shares of Sensar (including all outstanding options)
shall be in excess of 8,000,000 shares ("Sensar Shares"), the number of Options
Shares issuable upon exercise of the Option will be increased by an amount equal
to 10% of the difference between the number of the issued and outstanding shares
of Sensar at such time (including the number of any outstanding options) and the
Sensar Shares.
4. CONFIDENTIALITY, NON COMPETE AND CONFLICT OF INTERESTS
Concurrently with the execution of this Agreement, Partner and NET2 shall
execute and deliver a Confidentiality and Non-Disclosure Agreement in the form
attached hereto as Exhibit C. In addition, NET2 and Partner hereby agree as
follows:
4.1 The parties shall not use, disclose or otherwise transfer to any third
party any "Confidential Information" belonging to the other party hereto without
the prior written consent of such other party. As used in this Agreement, the
term "Confidential Information" shall have the meaning ascribed to it in Exhibit
C.
4.2 Each of NET2 and Partner undertakes to cause each of their employees who
shall have access to the Confidential Information of the other party, to execute
and deliver a confidentiality and non disclosure agreement with similar terms to
the obligations of the parties hereto.
4.3 Partner hereby agrees and acknowledges that NET2 and/or its subsidiaries
own and retain all rights, title, and interest in and to the Video Platform,
regardless of the form or media in or on which the original or other copies may
subsequently exist including, without limitation, (a) all inventions and
know-how (whether patentable or unpatentable and whether or not reduced to
practice), all improvements or modifications thereto, and all patents, patent
applications, and patent disclosures, together with all reissuances,
continuations, continuations in part, revisions, extensions and reexaminations
thereof, (b) all trademarks, service marks, logos, trade names, internet domain
names and corporate names, together with all translations, adaptations,
derivations and combinations thereof and including all goodwill associated
therewith, and all applications, registrations and renewals in connection
therewith (c) all copyrightable works, all copyrights, and all applications
registrations and renewals in connection therewith, (d) all computer software
and programs (including data and related documentation), and (e) all copies and
tangible embodiments thereof (in whatever form or medium) (collectively, the
"Intellectual Property"). Partner further agrees and acknowledge that nothing in
this Agreement shall be construed as granting to Partner a right or license by
implication or otherwise with respect to the Intellectual Property.
4.4 Partner hereby agrees that each subscriber introduced to the Video
Platform (the "User(s)") shall be required, prior to downloading the Video
Platform software, to acknowledge by means of a single click, the terms of a
reasonably acceptable license governing the use of the Video Platform. If the
parties cannot agree on the terms of the license, such dispute shall be referred
to the Arbitrator in accordance with Section 6.2 hereof."
4.5 Without derogating from the provisions of Section 2.7 hereof, during the
period commencing on October 6, 1999 and ending on the date of consummation of
the Purchase Agreement, NET2 shall not be entitled to enter into, directly or
indirectly, any agreement with any other cellular communication company in
Israel with respect to the sale of the Video Platform, provided, however, that
if the Purchase Agreement shall not have been consummated within 90 days from
the date hereof (or, in the event that a matter in dispute in connection
therewith has been referred to the Arbitrator in accordance with Section 6.2
hereof, within any extended period as required by the Arbitrator to reach a
decision), this Section 4.5 shall terminate and be of no further force and
effect.
5. REPRESENTATIONS AND WARRANTIES OF THE PARTIES
5.1 Representations and Warranties of NET2. NET2 hereby represents and
warrants to Partner as follows:
5.1.1 Organization and Good Standing. NET2 is a corporation duly organized
and validly existing under the laws of the State of Delaware and has full
corporate power and authority to own its properties and carry on its business as
now conducted. Copies of NET2's Certificate of Incorporation and Bylaws, as
amended to date, are attached hereto as Exhibits D and E, respectively.
5.1.2 Execution of Agreement; Validity. The execution and delivery by NET2
of this Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all requisite corporate action of NET2 and will not
violate the Certificate of Incorporation or Bylaws of NET2, or any provision of
agreement or other instrument to which NET2 is a party or conflict with, result
in a breach of or constitute a default under any such agreement or instrument.
This Agreement has been duly executed and delivered by NET2 and (assuming valid
execution and delivery thereof by the other parties hereto) constitutes legal,
valid and binding obligation of NET2, enforceable against it in accordance with
its terms.
5.1.3 Capitalization. The authorized share capital of NET2 as of the date
hereof consists of (i) 50,000,000 shares of Common Stock, par value $0.01 per
share, and (ii) 10,000,000 shares of Preferred Stock, par value $0.01 per share.
As of the date hereof, 12,480,482 shares of Common Stock have been issued and
outstanding and no shares of Preferred Stock have been issued. As of the date
hereof, except as set forth in Schedule 5.1.3, there is no existing option,
warrant, call, commitment or any other agreement, instrument or document which
requires, and there are no convertible or exchangeable securities outstanding
which upon conversion or exchange would require, the issuance of any additional
shares or other securities convertible or exchangeable for shares or other
equity securities of NET2.
5.2 Representations and Warranties of Partner. Partner hereby represents
and warrants to NET2 and ITES as follows:
5.2.1 Organization and Good Standing. Partner is a corporation duly
organized and validly existing under the laws of the State of Israel and has
full corporate power and authority to own its properties and carry on its
business as now conducted.
5.2.2 Execution of Agreement; Validity. The execution and delivery by
Partner of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all requisite corporate action of Partner
and will not violate the Memorandum of Association or Articles of Association of
Partner, or any provision of agreement or other instrument (including Partner's
license) to which Partner is a party or conflict with, result in a breach of or
constitute a default under any such agreement or instrument. This Agreement has
been duly executed and delivered by Partner and (assuming valid execution and
delivery thereof by the other parties hereto) constitutes legal, valid and
binding obligation of Partner, enforceable against it in accordance with its
terms.
5.2.3 Partner is an "accredited investor" within the meaning of the
Securities and Exchange Commission Rule 501 of Regulation D, as presently in
effect.
5.3 Representations and Warranties of ITES. ITES hereby represents and
warrants to Partner as follows:
5.3.1 Organization and Good Standing. ITES is a corporation duly organized
and validly existing under the laws of the State of Israel and has full
corporate power and authority to own its properties and carry on its business as
now conducted.
5.3.2 Execution of Agreement; Validity. The execution and delivery by ITES
of this Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all requisite corporate action of ITES and will not
violate the Memorandum of Association or Articles of Association of ITES, or any
provision of agreement or other instrument to which ITES is a party or conflict
with, result in a breach of or constitute a default under any such agreement or
instrument. This Agreement has been duly executed and delivered by ITES and
(assuming valid execution and delivery thereof by the other parties hereto)
constitutes legal, valid and binding obligation of ITES, enforceable against it
in accordance with its terms.
6. MISCELLANEOUS
6.1 Neither party shall be liable to the other for delays or failures in
performance resulting from causes beyond the reasonable control of that party,
including, but not limited to, acts of God, material shortages or rationing,
riots, acts of war, governmental regulations, or communications or utility
failures.
6.2 Any dispute or claim arising under or with respect to this Agreement or
the Purchase Agreement (including any disputes arising in connection with the
Purchase Agreement prior to the execution thereof by NET2 and Partner) will be
referred for resolution (the "Reference") by (i) Xxxx Xxxxxxx, acting as sole
arbitrator, or in the event that he is unable to serve as an arbitrator, by (ii)
any other arbitrator appointed by mutual agreement of NET2 and Partner, or in
the event that such person is unable to serve as an arbitrator, then (iii) by
that person to be appointed by the Chairman of the Israel Accounting Association
(the "Arbitrator"). The appointment of the Arbitrator pursuant to clause (ii) or
(iii) herein shall be made within not more than 14 days of the Reference. In
the event of any disagreements between NET2 and Partner relating to the Purchase
Agreement prior to execution thereof, the Arbitrator shall have 30 days to
resolve such matters. The Arbitrator shall be required to give reasons for his
decision or award and said decision or award shall be final and binding upon the
parties. Any arbitral award may be entered as a judgment or order in any court
of competent jurisdiction in Israel.
6.3 NET2 and Partner shall act as independent contractors and Partner shall
have no employer's obligations towards NET2 or its representatives or employees.
6.4 The engagement between Partner and NET2 is subject to the terms of
Partner's license.
6.5 This Agreement shall be governed by and construed in accordance with,
the laws of the state of Israel.
6.6 NET2 undertakes that the project shall comply with year 2000
capabilities and that any software incorporated into the Video Platform shall
have year 2000 capabilities.
6.7 Each party shall be responsible to pay any and all taxes imposed on it
in connection with this Agreement.
6.8 The Purchase Agreement shall be subject to the approvals of the required
corporate bodies of Partner and NET2. In the event that any of such approvals
has not been obtained for any reason whatsoever, NET2 and Partner shall refer
the matter to the Arbitrator, whose decision shall be final and binding upon
NET2 and Partner.
6.9 Effective as of the date hereof, the Memorandum of Understanding, dated
October 6, 1999, between ITES and Partner shall terminate and be of no further
force and effect.
6.10 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original and enforceable against the parties actually
executing such counterpart, and all of which together shall constitute one and
the same instrument.
6.11 No assignment of the rights and obligations of the parties hereunder
shall be permitted except (i) in the case of Partner, to a company controlled by
Partner, provided, however, that until the earlier of the consummation of the
Merger or the expiration of six (6) months from the date hereof, such company
shall be wholly-owned by Partner, except for any options which may be granted to
such company's employees, and (ii) in the case of NET2, to any other company
subject to such other company's agreement in writing to assume all of the
obligations of NET2 to Partner under this Agreement. Without derogating from
the foregoing, (A) Partner shall not be entitled to assign any of its rights or
obligations hereunder to any other company which competes directly with NET2's
wireless business and (B) NET2 shall not be entitled to assign any of its rights
and obligations hereunder to any other Israeli company which competes directly
with Partner's cellular business in Israel. For the avoidance of any doubt,
activities of a controlled company to which Partner has assigned its rights and
obligations in accordance with the terms hereof, relating to investments in and
cooperation with other companies, shall not be considered direct competition
with NET2's wireless business. As used herein, the term "controlled by" shall
have a meaning correlative to the meaning of "control" as defined hereinafter.
The term "control" with respect to any company shall mean the holding of shares
in excess of 50% of the voting securities of such company or the power to elect
the majority of the directors and management of such company.
6.12 Except for Section 3 hereunder and except where the context
specifically requires otherwise, as used in this Agreement, the term NET2 shall
mean (i) prior to the consummation of the Merger, NET2 and (ii) following the
consummation of the Merger, the Surviving Entity. The foregoing shall not
derogate from the obligations of the Surviving Entity under Section 3 hereof.
6.13 For purposes of this Agreement, the term "cellular" shall include MIRS
or other similar systems operating in Israel.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed on the
date set first above:
ITES - Imaging Technologies Net2Wireless Corporation
Enterprises Systems Ltd.
By: /s/ By: /s/
Name: Name:
Title: Title:
Partner Communications Company Ltd.
By: /s/
Name:
Title:
