EXHIBIT 10.9.2
TECHNICAL SERVICES AGREEMENT
THIS TECHNICAL SERVICES AGREEMENT ("Agreement") is made and entered into
as of the 7th day of March, 1998, between SOFTCHIP TECHNOLOGIES (3000) LTD., a
corporation organized under the laws of Israel ("SoftChip"), and AMERICAN CARD
TECHNOLOGY, INC., a Delaware corporation ("ACT").
WITNESSETH:
WHEREAS, ACT has entered into a Purchase and Sale Agreement (the "Purchase
Agreement") to purchase that certain DVK-1 Chip Operating System (the "DVK-1
System") and development environment from Softchip Israel Ltd. ("SoftChip
Israel"); and
WHEREAS, in connection with the purchase of the DVK-1 System, ACT desires
to engage SoftChip, and SoftChip desires to be so engaged, to provide technical
services to ACT with respect to the DVK-1 System.
NOW THEREFORE, in consideration of the foregoing and of the mutual
promises, covenants, and conditions set forth below, the parties hereby agree
as follows:
1. ENGAGEMENT. ACT hereby engages SoftChip, and SoftChip hereby accepts
such engagement, to assist ACT with the development, design, programming,
modification, upgrading, improvement, enhancement, and testing of Error
Corrections, Minor Enhancements (but not Major Enhancements) and Minor Mask
Releases of the DVK-1 System (collectively, "Technical Support") pursuant to
the terms and conditions contained herein. During the Term (as hereinafter
defined) of this Agreement, SoftChip (or an affiliate of SoftChip) shall
provide Technical Support as requested by ACT, which Technical Support shall be
provided by personnel of SoftChip reasonably acceptable to ACT.
For the purposes of this Agreement:
(a) "Error" shall mean any failure of the DVK-1 software to conform
with the functional specifications, as agreed in writing between the parties,
resulting from code developed by SoftChip, SoftChip Israel (or any affiliate
thereof), or on behalf of any of the foregoing (collectively, the "Developer"),
when used in an environment approved by the Developer, however, nonconformity
as a result of misuse, improper use, alteration, or damage of the DVK-1
software by ACT or the combination or merging of the DVK-1 software by ACT with
hardware or software not supplied by or identified by the Developer as
compatible shall not be an Error hereunder.
(b) "Error Correction" shall mean (i) a modification or addition
that, when made or added to the DVK-1 System, established material conformity
of the DVK-1 System with the functional specifications, or (ii) a procedure or
routine that, when observed in the regular operation of the DVK-1 System,
eliminates the practical adverse effect of such nonconformity.
(c) "Major Enhancement" shall mean a change to the DVK-1 silicon
mask ROM code that (i) adds functionality, (ii) changes communication protocols
or (iii) involves downloading EEPROM code of over one kilobyte that implements
(i) or (ii) above.
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(d) "Minor Enhancement" shall mean (i) any change to the software
drivers in the host computer, (ii) porting host computer software to a
different host computer operating system, (iii) porting host computer software
to a different host computer central processing unit ("CPU"), (iv) downloading
EEPROM code of less than one kilobyte that implements a Major Enhancement, or
(v) downloading any amount of code to EEPROM for technical feasibility tasks,
PROVIDED, HOWEVER, that if such amount is greater than one kilobyte, the
intellectual property rights of such downloaded code shall, unless otherwise
agreed to by the parties, remain those of SoftChip, and the results of any such
feasibility studies shall belong solely to ACT.
(e) "Minor Mask Release" shall mean porting the DVK-1 silicon mask
ROM code to another chip, either with the same or different CPU type or memory
configuration, provided protocols are preserved and functionality is preserved
or reduced.
2. COMPENSATION.
(a) ACT shall pay SoftChip an annual fee ("Fee") in the amount of
Two Hundred Twenty-five Thousand and 00/100 Dollars ($225,000.00) in payment of
the first two (2) years of Technical Support, payable annually in advance on
the Engagement Date, as hereinafter defined, and on the anniversary of the
Engagement Date. On the Engagement Date, ACT shall deposit the Fee due on the
anniversary of the Engagement Date with an escrow agent designated by the
parties (the "Escrow Agent"). Pursuant to an escrow agreement among ACT,
SoftChip and the Escrow Agent, the Escrow Agent shall release the Fee from
escrow in four (4) equal payments and distribute the Fee to SoftChip commencing
on the anniversary of the Engagement Date and continuing every three (3) months
thereafter, provided, however, in the event ACT has given notice to the Escrow
Agent that this Agreement has been terminated by reason of a material or
essential default by SoftChip, such Fee shall not be released from escrow. The
Escrow Agent shall send a copy of such notice received from ACT to SoftChip as
herein provided, and if SoftChip does not object within 45 days of such notice
being sent, the Escrow Agent shall return the unpaid Fee to ACT. Should
SoftChip claim within such period the termination of this Agreement by ACT was
wrongful, then failing agreement between the parties hereto, the Escrow Agent
shall file a Bill of Interpleader with the court having jurisdiction and serve
notice thereof on both parties. The Fee is nonrefundable after payment even if
this Agreement is terminated for any reason other than by reason of a material
or essential default by SoftChip, and in the event this Agreement is terminated
by reason of a material or essential default by SoftChip, then a pro-rated
portion of the Fee shall be refunded to ACT.
(b) As additional compensation, ACT shall pay to SoftChip a fee
(each a "Card Fee") of Twelve and one-half Cents ($0.125) for each (i) smart
card incorporating (A) a Motorola SC21 chip and (B) the DVK-1 System, or (ii)
smart card incorporating (A) a chip other than a Motorola SC21 chip and (B) the
DVK-1 System sold by ACT, up to a total of one million two hundred thousand
(1,200,000) of such smart cards sold during each annual period for which ACT
pays a Fee, and Twenty-five Cents ($0.25) for each additional such smart card
sold, during the period commencing on the Engagement Date and ending three (3)
years after the later of (A) the third anniversary of the Engagement Date or
(B) last Minor Mask Release prepared hereunder. Nothing herein shall obligate
ACT to pay Card Fees for smart cards sold by ACT which do not incorporate the
DVK-1 System, nor shall obligate ACT to incorporate the DVK-1 System in its
smart cards. For purposes hereof, smart cards subject to Card Fees shall be
considered as sold when payment for the same has been received by ACT. For
every One Hundred Fifty Thousand and 00/100 Dollars ($150,000.00) in Card Fees
paid to SoftChip, SoftChip shall provide one (1) additional year of Technical
Support.
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(c) ACT shall pay to SoftChip, within forty-five (45) days from that
date which is the end of each such annual period, the amount of Card Fees
accrued during such annual period.
(d) Within ten (10) days after receipt, ACT shall reimburse SoftChip
for travel and equipment expenses incurred in providing support requested by
ACT (other than Technical Support) at a rate of one hundred twenty percent
(120%) of the actual amount of such expense, upon submission of evidence of
such expense.
3. TERM OF AGREEMENT.
(a) Unless otherwise terminated or cancelled as provided herein, the
term of this Agreement shall commence on that date which is the closing of the
purchase of the DVK-1 System by ACT (such date is hereinafter referred to as
the "Engagement Date") pursuant to that certain Technology Purchase Agreement
of even date herewith between SoftChip Israel Ltd. and ACT of even date
herewith (the "Purchase Agreement") and shall continue for two (2) years
thereafter (the "Term"), unless terminated pursuant to Section 9 hereof.
(b) Upon termination of the Term of this Agreement, the Agreement
shall irrevocably expire and the parties hereto shall have no further rights
hereunder, excepting only the right of SoftChip to continue to receive Card
Fees pursuant to Sections 2(b), 2(c), 14, 15, and 20 hereof, which shall
continue to apply until the right of SoftChip to receive Card Fees lapses
pursuant to Section 2(b).
(c) Any termination of this Agreement whatsoever shall not affect
any accrued rights or liabilities of either party.
(d) In the event that the Purchase Agreement is terminated prior to
Closing thereunder for any reason, this Agreement shall terminate at the same
time and upon such termination neither party shall have any further rights or
obligations hereunder.
4. REPRESENTATIONS AND WARRANTIES.
(a) SoftChip represents and warrants to ACT as follows:
(i) SoftChip is a duly organized, validly existing corporation
in good standing under the laws of the State of Israel and has the corporate
power, authority and capacity to enter into this Agreement and to perform all
of its obligations hereunder. All corporate proceedings required to be taken
by SoftChip to authorize the execution and delivery of this Agreement and the
performance of Softchip's obligations hereunder have been duly taken, and this
Agreement constitutes the legal, valid and binding obligation of SoftChip,
enforceable against it in accordance with its terms. The execution, delivery
and performance of this Agreement by SoftChip does not and will not conflict
with, violate or result in the breach of any of the terms or conditions of, or
constitute a default under, the Articles of Incorporation or By-Laws of
SoftChip or any indenture, mortgage, pledge, note, bond, license, permit or
other agreement, commitment or lease to which SoftChip is a party or by which
SoftChip is bound, or any law, regulation, ordinance or decree to which
SoftChip is subject.
(ii) SoftChip holds all licenses, permits, and registrations
necessary to conduct its business as it is presently being conducted and to
carry out its obligations under the terms of
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this Agreement.
(iii) SoftChip shall render to ACT all Technical Support as
requested by ACT in a timely fashion, and shall dedicate adequate personnel and
resources to providing Technical Support to ACT
(b) ACT represents and warrants to SoftChip that ACT is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, and has the corporate power, authority and
capacity to enter into this Agreement and to perform all of its obligations
hereunder. ACT has duly taken all necessary action to approve this Agreement
and the performance of its obligations hereunder. This Agreement constitutes
the legal, valid and binding obligation of ACT enforceable against it in
accordance with its terms.
5. INDEMNIFICATIONS.
(a) SoftChip agrees to indemnify and hold harmless ACT from any and
all costs, debts, claims, demands, damages, losses, liabilities, actions or
causes of action, including legal fees, arising out of the breach of this
Agreement by SoftChip.
(b) ACT agrees to indemnify and hold harmless SoftChip from any and
all costs, debts, claims, demands, damages, losses, liabilities, actions or
causes of action, including legal fees, arising out of any breach of this
Agreement by ACT.
(c) Without limiting in any way the rights of ACT to be indemnified
under this Section 5, ACT shall have a right to offset against the amounts due
under Section 2 hereof for the amount of any such expenses incurred by ACT.
6. WAIVERS. A waiver (whether express or implied) by one of the parties
of any of the provisions of this Agreement or of any breach of or default by
the other party in performing any of those provisions shall not constitute a
continuing waiver and that waiver shall not prevent the waiving party from
subsequently enforcing any of the provisions of this Agreement not waived or
from acting on any subsequent breach of or default by the other party under any
of the provisions of this Agreement. Payment or acceptance of any sum shall
not constitute a waiver.
7. SEVERABILITY. The invalidity, illegality, or unenforceability of any
of the provisions of this Agreement shall not affect the validity, legality,
and enforceability of the remaining provisions of this Agreement.
8. RESTRICTIVE COVENANTS. Each of the parties hereto acknowledges that
during the course of this Agreement, the parties shall acquire confidential
information about the business, activities, operations, technical information,
and trade secrets of the other party, and the agreements and covenants
contained in this Section 8 are essential to protect the other party during the
Term and following termination of this Agreement. Accordingly, each party
covenants and agrees as follows:
(a) Each party shall keep secret and retain in strictest confidence,
and shall not use, in competition with or in a manner otherwise detrimental to
the interests of the other, for the benefit of itself or others other than the
other party hereto, any confidential information, including, without
limitation, any confidential technology, "know-how," trade secrets, processes,
designs, specifications, inventions, methods,
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developmental work, improvements, unpublished patent applications,
development tools, software programs, software source documents, licenses,
customer lists, customer personnel information, details of client or
consultant contracts, pricing policies, operational methods, marketing plans
or strategies, or product development techniques or plans related to the
DVK-1 System or the other party hereto ("Confidential Information").
Notwithstanding the foregoing, nothing herein shall prohibit Buyer from using
the DVK-1 System in any manner whatsoever so long as such use is not in
violation of this Agreement. The term "Confidential Information" does not
include, and there shall be no obligation hereunder with respect to, (i)
information concerning either SoftChip or ACT that becomes generally
available to the public other than as a result of a disclosure by the other
party or any agent or other representative thereof after the date hereof, and
(ii) general business methods applicable to the DVK-1 System. The parties
shall have no obligation hereunder to keep confidential any of the
Confidential Information to the extent disclosure of any thereof is required
by law, or determined in good faith by the party to whom the Confidential
Information was disclosed (the "receiving party") to be necessary or
appropriate to comply with any legal or regulatory order, regulation or
requirement; PROVIDED, HOWEVER, that in the event disclosure is required by
law, the receiving party shall use best efforts to provide the other party
with prompt advance notice of such requirement so that the other party may
seek an appropriate protective order.
(b) In the event a party breaches, or threatens to commit a breach
of, any of the provisions of this Section 8 (the "Restrictive Covenants"), the
non-breaching party may have the Restrictive Covenants specifically enforced by
any court of competent jurisdiction, it being agreed that any breach or
threatened breach of the Restrictive Covenants would cause irreparable injury
to the non-breaching party and that money damages would not provide an adequate
remedy to the non-breaching party. Such rights and remedies, shall be
independent of any others and severally enforceable, and shall be in addition
to, and not in lieu of, any other rights and remedies available to the non-
breaching party at law or in equity.
(c) Each party acknowledges and agrees that the Restrictive
Covenants are reasonable and valid in geographical and temporal scope and in
all other respects. If any court determines that any of the Restrictive
Covenants, or any part thereof, are invalid or unenforceable, the remainder of
the Restrictive Covenants shall not thereby be affected and shall be given full
effect, without regard to the invalid portions.
(d) The parties hereto intend to and hereby confer jurisdiction to
enforce the Restrictive Covenants upon the courts of the State of Georgia,
U.S.A. (and ACT and Softchip hereby consent to the jurisdiction of such
courts).
(e) Notwithstanding anything contained herein to the contrary, the
provisions of this Section 8 shall survive the termination of this Agreement
for any reason.
9. TERMINATION; BREACH. Notwithstanding anything to the contrary
herein, this Agreement may be terminated and the transactions contemplated
hereby may be abandoned:
(a) by ACT if there exists a breach of any material representation,
warranty, covenant or agreement made to ACT under this Agreement (which breach
cannot be cured or is not cured upon fifteen (15) days' written notice);
(b) by Softchip if there exists a breach of any material
representation, warranty, covenant or agreement made to Softchip under this
Agreement (which breach cannot be cured or is not cured upon fifteen (15) days'
written notice);
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(c) by Softchip or ACT, provided that the terminating party is not
then in breach of any of its material representations, warranties, covenants or
agreements set forth in this Agreement, if the Term has not commenced by the
later of (i) April 30, 1998 or (ii) the closing of the initial public offering
of securities of ACT, or such extended date as may be agreed to in writing by
the parties.
Upon the termination of this Agreement under Section 9(c), no party
hereto shall have any further liability or obligation to any other party
hereunder, except for the obligation of each party to pay its own expenses as
set forth in Section 11 hereof. Upon the termination of this Agreement under
Sections 9(a) or 9(b), the terminating party shall be entitled, in addition to
pursuing other remedies, to recover its actual damages (including costs of
enforcement and reasonable attorneys' fees), arising from the breach by the non-
terminating party. Notwithstanding any termination of this Agreement, the
right of SoftChip to receive Card Fees hereunder shall continue to apply until
such right lapses pursuant to Section 2(b) hereof.
10. LIMITATION ON LIABILITY. Notwithstanding anything contained herein
to the contrary, SoftChip's liability hereunder shall be limited to such
amounts as SoftChip has received from ACT under the terms of this agreement
during the twelve months preceding the claim, and shall have no liability
whatsoever with respect to any claim made two years or more after the date on
which the services which gave rise to the claim were last provided. The
foregoing limitation on liability shall not apply with respect to any fraud,
willful misconduct or intentional misrepresentation by SoftChip.
11. AMENDMENTS. This Agreement may be amended, modified and supplemented
only by written agreement of the parties hereto.
12. EXPENSES. Except as otherwise provided in this Agreement, each party
hereto shall bear all of its own expenses, including, without limitation, the
fees and disbursements of its counsel.
13. NOTICES, ETC. All notices, consents, demands, requests, approvals
and other communications which are required or may be given hereunder shall be
in writing and shall be deemed to have been duly given (a) when delivered
personally, (b) if sent by facsimile, when receipt thereof is acknowledged at
the facsimile number below, (c) the second day following the day on which the
same has been delivered prepaid to a national air courier service, or (d) three
(3) business days following deposit in the mails registered or certified,
postage prepaid, in each case, addressed as follows:
if to Softchip: Softchip Technologies (3000) Ltd.
38 Nerot Shabbat Street
Jerusalem, Israel
Attention: Mr. Mickey Cohen
with a copy to: Wine, Misheiker & Ernstoff Law Offices
12 Moshe Hess Street
94185 Jerusalem, Israel
Attention: Brian D. Wine, Advocate
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if to ACT: American Card Technology, Inc.
1355 Terrell Mill Road
Building 146, Suite 200
Marietta, Georgia 30067
Attention: President
with a copy to: Cohn & Birnbaum P.C.
100 Pearl Street, 12th Floor
Hartford, Connecticut 06103-4500
Attention: Richard J. Shea, Jr., Esq.
or to such other person or persons at such address or addresses as may be
designated by written notice hereunder.
14. ASSIGNMENT. No party may assign or convey this Agreement or any of
their respective rights or obligations hereunder to any other party, except
that ACT may assign or transfer its interests and obligations in this Agreement
to any affiliated entity or to any purchaser of substantially all of the assets
of ACT. Notwithstanding the foregoing, ACT shall not assign, transfer, or sell
the DVK-1 System unless such assignee or successor-in-interest undertakes to
make the payments due to SoftChip under Sections 2(b) and 2(c) hereof and will
be liable to SoftChip for any breach of such undertaking.
15. APPLICABLE LAW. This Agreement shall be governed by and construed
and interpreted in accordance with the laws of the State of Georgia without
giving effect to conflict of laws principles thereof.
16. CURRENCY. All sums of money payable hereunder are to be paid in U.S.
dollars.
17. ENTIRE AGREEMENT. This Agreement and all Exhibits hereto embody the
entire agreement and understanding of the parties hereto and supersede any
prior agreement or understanding between the parties.
18. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same document.
19. HEADINGS. Headings of the Sections in this Agreement are for
reference purposes only and shall not be deemed to have any substantive effect.
20. BINDING EFFECT; BENEFITS. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective heirs,
administrators, executors, successors and assigns; PROVIDED, HOWEVER, that
nothing in this Agreement, expressed or implied, is intended to confer on any
person other than the parties hereto or their respective successors and
assigns, any rights and remedies, obligations or liabilities under or by reason
of this Agreement.
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IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement
as of the date first above written.
SOFTCHIP TECHNOLOGIES (3000) LTD.
By /s/ Michael Cohen
-----------------------------
Its Managing Director
AMERICAN CARD TECHNOLOGY, INC.
By /s/ Raymond Findley, Jr.
------------------------------
Its President
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