AMENDED AND RESTATED MEMORANDUM OF UNDERSTANDING
This Amended and Restated Memorandum of Understanding (this "Memorandum")
is entered into as of this 31st day of July, 2004, among DDS Technologies USA,
Inc. ("DDS US"), Haras Engineering Corp. ("HEC"), High Speed Fragmentation B.V.
("HSF"), Intel Trust S.A. ("Intel"), Giancarlo Lo Fiego ("Lo Fiego"), and
Adriano Zapparoli ("Zapparoli"). Each of DDS US, HEC, HSF, Intel, Lo Fiego, and
Zapparoli, are sometimes referred to herein as a "Party" and sometimes
collectively referred to herein as "Parties."
For the purposes of this Memorandum various other entities or persons may
be involved with the transaction and they are as follows: Umberto Manola
("Manola"), D.D.S. Technologies Ltd. ("DDS UK"), and Shagen Holdings, S.A.
("SHS"). Each of Manola, DDS UK and SHS, are sometimes referred to herein as a
"Transaction Party" and sometimes collectively referred to herein as
"Transaction Parties." RECITALS A. Manola is the inventor of the technology
known as "dry disaggregation" (the "Technology") represented by patent no.
02425336-1 filed with the European Patent Office on May 28, 2002 (together will
patents and patent applications filed anywhere else, the "Patent").
B. On July 8, 2002, Manola, Lo Fiego, Giuseppe Perrotta and SHS entered
into a Private Deed pursuant to which the parties agreed to form a company
called D.D.S. Technologies Ltd. (UK) to which Manola would transfer all
exploitation rights relative to the Patent. Manola owned 60% of the shares and
was a director of DDS UK.
C. On August 29, 2002, DDS UK and DDS US entered into an agreement
pursuant to which DDS UK granted to DDS US an exclusive license to the
Technology in North America, South America, Central America, and the Caribbean
(excluding Cuba); DDS US paid DDS UK US$500,000 and issued to DDS UK 3,500,000
shares of common stock of DDS US; DDS UK represented that it had all rights to
grant the license; DDS US agreed to purchase machines which embody the
Technology from DDS UK and DDS UK agreed to sell such machines to DDS US at a
price equal to DDS UK's cost.
D. Under the August 29, 2002 agreement, DDS UK was entitled to nominate
one director to the board of directors of DDS US and in August 2002, Manola
became a director of DDS US as DDS UK's nominee, with full fiduciary, regulatory
and statutory obligations.
E. Effective January 6, 2003, DDS UK and DDS US entered into an amendment
to the August 29, 2002 agreement pursuant to which the parties agreed that the
proper legal name of the licensor was D.D.S. Technologies, Ltd. rather than DDS
Technology, Inc. and the geographic area of the license was extended to include
Africa and DDS US paid DDS UK an additional US$200,000 and issued and additional
500,000 shares of DDS US common stock.
F. A dispute has arisen among the Parties and the Parties desire to
resolve their dispute upon the terms set forth herein.
G. DDS US has commenced litigation against the other Parties and the
Transaction Parties in order to resolve their dispute relating to (i) the
ownership of the technology described in the application for the Patent, (ii)
the accounting for the funds paid by DDS US to HSF and (iii) various related
matters.
H. Certain of the Parties entered into a Memorandum of Understanding dated
as of the 27th day of July, 2004 (the "July 27 MOU"). This Amended and Restated
Memorandum of Understanding amends, replaces and supersedes the July 27 MOU in
its entirety.
I. Lo Fiego and Zapparoli are the beneficial owners of an aggregate of 55%
of the equity interests in each of HSF and HEC.
NOW, THEREFORE, the Parties intending to be legally bound hereby agree as
follows:
1. HSF acknowledges that it is holding approximately 1,000,000 euros
previously paid by DDS US. HSF agrees that within five (5) business days of the
date of this Agreement it will reimburse 610,000 euros of such funds to DDS US
by wire transfer of immediately available funds. The remaining 390,000 euros
will be retained by HSF and applied in the amounts and in the manner determined
by HSF in accordance with law; provided that HSF shall pay Manola 100,000 euros
upon his execution of this Memorandum, his confirmation that he has taken and
will take such actions as necessary to confirm ownership of the Patent in DDS
US, and such other matters as DDS US and HSF may reasonably require from Manola
in order to give effect to this Memorandum. If Manola does not execute those
documents and take those actions within ten (10) days of the execution of this
Memorandum, HSF shall pay DDS US 50,000 euros.
2. The obligations of the Parties under the provisions of this Memorandum
other than Section 1 hereof are subject to satisfaction of the following
conditions:
(a) HSF shall take all necessary and desirable actions to cause the
ownership of the Patent and all related intellectual property and technology to
be transferred to DDS US, free and clear of any claim or lien, and shall have
delivered to DDS US evidence reasonably satisfactory to DDS US confirming that
DDS US is the owner of the Patent and such related intellectual property and
technology free and clear of any claim or lien; and
(b) HSF shall have obtained (i) a valid and nonappealable award of
an arbitrator confirming that HSF is the beneficial owner of the 4,000,000
shares (the "Shares") of DDS US common stock previously issued to DDS UK and
(ii) a judgment of a Federal Court of the United States affirming, confirming
and enforcing such arbitrator award.
3. Subject to the provisions of Section 2 above, DDS US and an entity to
be designated by HSF ("Newco") will enter into a license agreement pursuant to
which Newco shall receive an irrevocable license to the Technology which will
permit Newco to sell, license, rent, and distribute products embodying the
Technology throughout Europe, Asia and Oceania (the "Territory") on the
following terms:
(a) DDS US and Newco will each use its reasonable commercial efforts
to ascertain commercially viable new products that may be manufactured or
derived through the use of the Technology and that may be sold for value
anywhere in the world (a "Valuable Product"). Upon discovery of such Valuable
Product, either Newco or DDS US, as the case may be (the "Notifying Party"),
shall promptly (but in no event more than thirty (30) days after the discovery)
notify the other Party (the "Receiving Party") in writing of such discovery,
providing reasonable detail. Thereafter, for a period of ninety (90) days, the
Notifying Party shall have the exclusive right to enter into a bona fide binding
agreement for the sale of the Valuable Product embodying the Technology in the
Territory, and an exclusive license to market such Valuable Product in the
Territory for such ninety (90) day period. Thereafter, either of Newco or DDS
may market the Valuable Product or the Technology for deriving the Valuable
Product in the Territory;
(b) DDS US shall have exclusive rights to market such Valuable
Product outside the Territory and, after the lapse of the 90-day period referred
to above when Newco is the Notifying Party, non-exclusive rights to market such
Valuable Product in the Territory; and
(c) Each Party shall pay to the other royalties equal to five
percent (5%) of the gross revenues from the sale or lease of Products by such
Party in the Territory.
4. Subject to the provisions of Section 2, all of the Parties will execute
and deliver mutual general releases on behalf of themselves, their officers and
directors, affiliates and shareholders.
5. Subject to the provisions of Section 2 above, DDS US will reissue the
Shares in such name(s) as HSF shall designate in writing.
6. Subject to the provisions of Section 2 above, HSF and any party to whom
it transfers any or all of the Shares will enter into a standstill agreement
pursuant to which each HSF and each such party will agree with DDS US that,
without the prior written consent of the Board of Directors of DDS US, for a
period of three years it will not:
(a) directly or indirectly seek, or permit any person over whom or
which such person has control (a "Controlled Person") to seek or encourage or
assist any associate, partner or affiliate of such person to seek representation
on the Board of Directors of DDS US or otherwise seek to participate in or
influence the management, management decisions, operating policies, or governing
corporate instruments of DDS US;
(b) instigate or join in any attempt to change the management,
management decisions, operating policies, governing corporate instruments or
conduct of business and affairs of DDS US;
(c) solicit or permit any Controlled Person to solicit, or encourage
or assist any associate, partner or affiliate of such person to solicit proxies
with respect to any shares of DDS Common Stock or other securities of DDS US
entitled to vote generally for the election of directors or otherwise ("Voting
Securities") under any circumstance, or become a "participant", or permit any
Controlled Person, or encourage or assist any associate, partner or affiliate of
such person to become a "participant", in any "election contest" relating to the
election of directors of DDS US, changes in governing corporate instruments or
otherwise (as such terms are used in Rule 14a-11 of Regulation 14A under the
Securities Exchange Act of 1934);
(d) deposit, or permit any Controlled Person, or encourage or assist
any associate, partner or affiliate of such person to deposit, any Voting
Securities in a voting trust or similar arrangement, or subject or permit any
Controlled Person, or encourage or assist any associate, partner or affiliate of
such person to subject any Voting Securities to a voting or similar agreement;
(e) take any action alone or in concert with any other person to
acquire or affect the control of DDS US or, directly or indirectly, participate
in, or encourage the formation of, any group seeking to obtain or take control
of DDS US; and
(f) directly or indirectly seek to influence any contractual
relationships of DDS US, whether orally, in writing or otherwise (including,
without limitation, contractual relationships of DDS US with its auditors, its
investment bankers and its lenders). In addition, pursuant to such standstill
agreement the parties will agree not to sell, transfer or otherwise dispose of
their shares of DDS Common Stock for a period of one year from the date of this
Memorandum of without the prior written consent of the Board of Directors of DDS
US.
7. The Parties will take all necessary and desirable actions to transfer
to and confirm ownership by DDS US of the two of the three prototype machines
incorporating the Technology, including the multi-tasking machines in Marani and
Poggio Rusco, free and clear of any claim or lien.
8 Upon satisfaction of the conditions set forth in Section 2, HSF shall no
longer be obligated to make any payments to Tecalit for the manufacture and
production of machines and embodying the Technology and DDS US will pay Tecalit
directly for such machines.
9. Each Party hereto confirms that it has the full right, power and
authority to enter into this agreement on behalf of itself or in the capacity in
which it is signing, has had the benefit of legal counsel, and has been fully
advised on the legal consequences of this Memorandum.
10. DDS US shall provide such cooperation to HSF to obtain the judgment
referred to in Subsection 2(b) hereof as HSF shall reasonably request.
11. Subject to the provisions of Section 2 above, DDS US will pay Newco
660,000 euros on or prior to December 31, 2005.
12. This Memorandum of Understanding shall be binding upon the Parties
hereto and their respective successors and assigns.
13. This Memorandum may be executed in counterparts.
14. This Memorandum shall be governed by and construed in accordance with
the laws of the State of Florida.
15. The Parties irrevocably submit to the exclusive jurisdiction of the
courts of the Eleventh Judicial Circuit of the State of Florida and of the
United States District Court for the Southern District of Florida, Miami
Division in either case sitting in Miami-Dade County, Florida. Each of the
Parties irrevocably and unconditionally waives, to the fullest extent permitted
by applicable law, any objection that it may now or hereafter have to the laying
of venue of any action or proceeding arising out of or relating to this
Memorandum of Understanding.
16. Lo Fiego and Zapparoli covenant that upon execution by DDS US and
them, this Memorandum will be binding upon them and each agrees to cause all of
the other Parties to execute this Memorandum.
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IN WITNESS WHEREOF, the parties hereto have each executed and delivered
this Amended and Restated Memorandum of Understanding as of the day and year
first above written.
Haras Engineering Corp. DDS Technologies USA, Inc.
By: By: /s/ Spencer Sterling
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Name: Name: Spencer Sterling
Title: Title: President and Chief Executive
Officer
High Speed Fragmentation B.V. Intel Trust S.A.
By: By:
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Name: Name:
Title: Title:
Giancarlo Lo Fiego Andreano Zapparoli
/s/ Giancarlo Lo Fiego /s/ Andreano Zapparoli
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