EXHIBIT 10.1
JOINT VENTURE AGREEMENT
THIS JOINT VENTURE AGREEMENT (this "AGREEMENT") is made and entered into as of
this 1st day of June 2004, by and between Netfun Ltd., a company organized under
Israeli law and registered as company no. 513039982 (hereinafter "Netfun"), on
the first part; and Zone 4 Play Inc. a company organized under Nevada law
(hereinafter "Z4P") on the second part;
(Netfun and Z4P hereinafter each referred to as a "PARTY" and jointly referred
to as the "PARTIES").
WHEREAS: Netfun has developed a proprietary technology suite known as MiX
which includes software and hardware components and which enables
the seamless integration of various communication standards, which
include among others, mobile entertainment, online TV interactivity,
message board and lottery etc.; and
WHEREAS Z4P develops gaming software solutions for web, mobile phone and TV
applications;
WHEREAS In appreciation of the potential synergy between the activities of
the Parties, the parties wish to set up a joint venture through
which to pursue projects jointly, primarily in the field of
marketing, deployment and support of the MIX TV system; and
WHEREAS: The Parties wish to set forth in this Agreement their mutual
understandings in respect to the establishment, financing and
operation of the said activity, and their rights and obligations in
respect thereof;
NOW THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. GENERAL
1.1 The preamble and Exhibits to this Agreement constitute an integral part
thereof.
1.2 The titles and subtitles in this Agreement are for convenience purposes
only and shall not be used for the interpretation thereof.
2. ESSENCE OF AGREEMENT
The Parties shall establish a company limited by shares and liability, as
provided in Section 3 hereunder (the "COMPANY") for the purposes of
marketing, deployment and support of the MIX TV system and further
exploitation of the Netfun IP as defined herein (the "BUSINESS").
3. THE COMPANY
3.1 ESTABLISHMENT
3.1.1 The Parties shall establish and thereafter register the Company in
Israel under the name to be agreed upon between the Parties and
approved by the Companies Registrar.
3.1.2 The Parties may consider establishing subsidiary companies inside or
outside of Israel or transferring part or all of the Company's
Business activities to a foreign jurisdiction and/or entity.
SHARE CAPITAL
3.1.1 The registered and issued share capital of the Company shall consist
of common stock, each share of common stock being equal in all
respects and bearing those rights specified hereunder in Section 3.5
(herein referred to as "COMMON STOCK" or "ORDINARY SHARES"). Upon
the establishment and registration of the Company, each party shall
be entitled to an equity holding in Common Stock, as follows:
Netfun - 20% (twenty percent). Z4P - 50.1%(fifty point one percent).
29.9% to Adv. Avi ▇▇▇▇▇▇▇▇▇▇, in trust for Netfun, which shall be
released to Netfun upon the achievement of the milestones set out in
Section 3.1.2.
3.1.2 Notwithstanding the above, it is hereby agreed that upon the
achievement by the Company of the following milestones, Adv. Avi
▇▇▇▇▇▇▇▇▇▇ shall transfer to Netfun additional Company Ordinary
Shares, which shall at the time of issuance, afford Netfun, together
with the shareholding issued to Netfun under section 3.1.1 above,
but excluding the ESOP under Section 3.1.3 hereto, 49.9% of the
outstanding Company shares, on a fully diluted basis:
3.1.2.1 Milestone A - upon the Company reaching its operational
break-even point, i.e. the point at which current expenses are
equal to current revenues (and losses cease to increase)
consistently over a period of no fewer than three (3) months ,
10% of the Company's shares held in trust by Adv. ▇▇▇▇▇▇▇▇▇▇
will be released and transferred to Netfun.
3.1.2.2 Milestone B - upon repayment to Z4P of all the sums provided
to the Company as a shareholders loan, as per Sections 3.6.3
and 3.7.4.2 hereunder - the remaining 19.9% of the Company's
shares held in trust by Adv. ▇▇▇▇▇▇▇▇▇▇ will be released and
transferred to Netfun.
3.1.3 The Company shall allocate to an Employee Stock Option Pool a number
of shares equal to 10% of the Company's outstanding shares at the
time of incorporation. The pool shall be subject to an Employee
Stock Option Plan ("ESOP") which shall be administered as the
Company management sees fit, and shall include compensation on
account of brokerage fees in relation to the relationship between
the parties. Without derogating from the above, it is hereby agreed
that until the occurrence of the earlier of the following events
(each shall be referred to as an "ESOP INITIATION EVENT") the
Company shall not adopt or actively administer the ESOP and shall
not issue any option or securities as part of the ESOP: (i) an
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investment or other financing transaction in the Company in which
the proceeds actually transferred to the Company are at least equal
to the amount equal to the amount of financing made available to the
Company until such time by Z4P as per Section 3.6 hereunder; (ii) an
Initial Public Offering of the Company's shares; or (iii) an M&A
transaction. Immediately prior to the occurrence of an ESOP
Initiation Event, the Company shall adopt the ESOP and make the
grants thereunder. Until the ESOP Initiation Event occurs, any
undertaking of the Company to grant options or shares to an employee
or consultant of the Company, or to a third party on account of the
brokerage fees payable by the parties, as provided above, shall be
subject to the provisions set forth above.
3.2 SHAREHOLDERS MEETINGS
3.2.1 The legal quorum required for the convening of a shareholders
meeting shall be one or more shareholders representing alone
or together more than 50% of the voting power in the Company.
In the event that legal quorum is not present, the
shareholders meeting will be postponed and take place 7 days
later at the same place and time (a "Postponed Meeting").
3.2.2 Other than those resolutions specified hereunder in Section
3.4 requiring a special majority of one or more shareholders
representing alone or together more than 75% of the voting
power in the Company (a "Special Majority"), resolutions at
any shareholders meetings shall be approved by shareholder(s)
representing the majority voting power at any such
shareholders meeting.
3.2.3 Written notice stating the place, day and hour of each meeting
of the Company's shareholders shall be given not less than
seven (7) before the date of the meeting, by mail, personally,
or by other means of written communication and must be
provided to each shareholder at his address appearing in the
Company's records.
3.2.4 A shareholders meeting may be held without convening, and by
alternative means of communication, all as provided in the
Company's Articles of Association.
3.3 MANAGEMENT OF THE COMPANY
BOARD OF DIRECTORS ("BOD")
3.3.1 The Company's BOD shall consist of up to 4 Directors to be
appointed as provided herein: Until the achievement of
Milestone B, as provided in Section 3.1.2.2 above, Z4P shall
be entitled to appoint 2 (two) directors to the Company's BOD,
and Netfun shall be entitled to appoint 1 (one) director to
the Company's BOD. After the achievement of Milestone B, Z4P
and Netfun shall each be entitled to appoint 2 (two) directors
to the Company's BOD.
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3.3.2 The right to appoint a director includes the right to remove
any appointed director or to appoint an alternate director.
3.3.3 The legal quorum for the convening of the Board of Directors
shall be the majority of the appointed Directors.
3.3.4 Other than those resolutions, as specified hereunder in
Section 3.4, which require the consent of 75% of the Company's
appointed directors (a "BOD Special Majority"), all
resolutions in the Board of Directors meetings shall require a
majority vote of the Directors then present at any such
meeting.
3.3.5 Without derogating from any powers vested in the Board of
Directors by virtue of the prevailing law, the Board of
Directors shall be responsible for determining the Company's
policy, and supervising its execution.
3.4 SPECIAL RESOLUTIONS
The following resolutions shall require, as the case may be, a
Special Majority vote of the Company's shareholders (as provided in
Section 3.2.2) and/or a BOD Special Majority (as provided in Section
3.5.7). It is hereby agreed that resolutions regarding the following
matters will be made by the parties in good faith.
3.4.1 A material change in the Business of the Company, or the
entering into new businesses and activities;
3.4.2 Any change in the Company's association documents affecting
(i) the Company's share capital; (ii) the rights attached to
the Company's Shares; (iii) the right to appoint directors as
provided herein; (iv) the majority required to change the
provisions stated in this Section;
3.4.3 Any change in the Company's capital, including the issuance of
new securities of any kind or class or undertaking to do any
of the same;
3.4.4 A merger, consolidation or acquisition of the Company, or
otherwise sale, lease or other disposal of all or
substantially all of the Company's assets;
3.4.5 Any transaction other than such transactions that are
preformed in the Company's ordinary course of business
3.4.6 Transaction with any officer, director, shareholder or other
interested party of any other party related, directly or
indirectly, to any of them;
3.4.7 Liquidation, dissolution or winding up of the Company
3.4.8 Any resolution requiring additional contributions, funds or
guarantees of the Parties.
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3.4.9 Any change in the Company's signatory rights, other than
replacement of individuals in compliance with the terms of
section 3.7.3 herein.
3.5 RIGHTS ATTACHED TO SHARES:
The Articles of Association of the Company shall provide that the
Company's Common Stock shall confer upon the holders thereof those
rights as mutually agreed between the Parties.
3.6 FINANCING
3.6.1 Z4P hereby undertakes to provide the Company an amount equal
to NIS 61,000 per month (plus applicable VAT, subject to Z4P
receiving an invoice) (the "MONTHLY WORKFORCE EXPENDITURE")
for a period of twelve (12) months to be expended by the
Company on employee salary and other employee costs during the
initial 12 months of activity of the joint venture (the "TOTAL
WORKFORCE EXPENDITURE"), and as further detailed in the work
plan to be adopted by the Company. The commencement date of
activity shall be June 1, 2004. Z4P shall transfer the Monthly
Workforce Expenditure for the first month of activity, on June
5th, 2004.
Unless the Agreement is earlier terminated under the terms
hereof, Z4P shall transfer to the Company an amount equal to
WORKFORCE EXPENDITURE on the 5th day of each subsequent month
for the following 11 months,
3.6.2 Z4P undertakes to provide the Company office space, overhead,
bookkeeping and legal services and related costs for the
functioning of the Company (the "SUPPORT SERVICES") for an
initial 12 month period from the initiation of activity by the
Company. The reasonable expenses in providing the above
Support Services (the "OPERATIONAL COSTS") shall be provided
at arms length terms and shall be accounted for in writing.
Z4P shall issue an invoice to the Company regarding the
Operational Costs once a quarter, and the Company shall pay
Z4P the VAT on the Operational Cost following receipt of such
invoice.
3.6.3 The funds advanced to the Company as Workforce Expenditure and
Operational Costs shall be deemed a shareholders loan by Z4P
and shall be repaid to Z4P from the first profits available to
the Company.
3.7 WORK PROCEDURES
3.7.1 WORK-PLAN. Upon the signing of this Agreement, or at any such
other time to be mutually agreed between the Parties, the
Parties shall approve the Company's work plan and budget for
its first 18 months of activity.
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3.7.2 EMPLOYEES. The Company shall initially employ ▇▇▇▇ ▇▇▇▇▇ and
Guy ▇▇▇-▇▇▇ on a full time basis and Yaacov Buchmitzky on a
50% basis. Thereafter , the Company shall employ such number
of employees as deemed necessary to conduct the Business, and
as shall be approved by the Company's BOD.
3.7.3 BANK ACCOUNT & SIGNATORY RIGHTS. Immediately after the
establishment of the Company, the Company shall open a bank
account with a bank to be agreed upon between the Parties. The
Company signatory rights shall be as follows:
For payments of up to NIS10,000, and for payments of
salary to the Company's employees, the Company's CEO
together with Z4P's CFO; and
For payments exceeding NIS10,000 (other than payments
of salary to the Company's employees), Z4P's CFO
together with Z4P's CEO.
Each of the Parties shall have the right to replace the
individual associated with such Party bearing the signatory
rights hereunder.
3.7.4 DISTRIBUTION OF PROFITS. Unless otherwise mutually agreed by
the Parties, any profits generated by the Company shall be
distributed to the Company's shareholders on a quarterly
basis, pro rata to their respective holdings in the Company at
that time and subject to the following, and in the following
order of priority:
3.7.4.1 Only such profits beyond the working capital required
for the day-to-day operation of the Business will be
distributed, such working capital to be determined by
Company's BOD, or in the absence of such determination,
such working capital shall be equal to the average of
the previous 4 month operating expenses of the Company;
3.7.4.2 Profits shall be distributed first to Z4P up to the
aggregate amount of the funds advanced by Z4P as per
Section 3.6. above, including linkage to the consumer
price index and interest at a rate of 8%;
3.7.4.3 After the profits distributed to Z4P, as per Section
3.7.4.2 above, have restored all funds advanced by Z4P
as per Section 3.6 above, the profits for distribution
shall be distributed at the ratio of 40% to Z4P and 60%
to Netfun, until to the receipt by Netfun of profits in
a sum equal to the sum paid to Z4P as per section
3.7.4.2 above, in consideration of the development costs
of the Netfun IP;
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3.7.4.4 After the receipt by Netfun, as per Section 3.7.4.3,
of profits in a sum equal to the sum paid to Z4P as per
section 3.7.4.2; profits shall be distributed to the
Company's shareholders pro rata to their respective
holdings in the Company at that time.
4 PARTIES' CONTRIBUTION TO THE COMPANY
Each Party undertakes to provide the following services and contribution
to the Company:
4.1 Netfun
4.1.1 Transfer of the Netfun intellectual property ("NETFUN
IP") as further detailed in the IP Schedule attached to this
Agreement as Attachment A.
4.1.2 Make available to the Company all the assets currently
utilized by Netfun in the course of development and the
provision of services, including software, PC's, Servers,
agreement with -YTV, sales pipeline, etc.
4.2 Z4P
4.2.1 Provision of the Financing and Support Services as set
out in Section 3.6 above.
4.2.2 Assistance in the marketing of the Company products and
services to Z4P customers, and inclusion of the Company
products and services in the Z4P website and all other
promotional and marketing material.
4.2.3 Assistance and cooperating in the servicing of clients,
including pre sale and after sale.
5 RESERVATION OF RIGHTS
Subject to the Netfun right to the Netfun IP under Section 7, and unless
expressively agreed otherwise and in writing, all and any intellectual
property rights, copyrights, trademarks, trade secrets, and other
proprietary rights of any kind in respect to or connection to the
Company's Business or assets (tangible and intangible) developed in
connection to the Company Business shall exclusively remain with and
belong to the Company.
6 CONFIDENTIALITY & NON COMPETITION
6.1 CONFIDENTIALITY. Subject to regulatory disclosure requirements, the
Parties hereto shall treat all matters relating to this Agreement
and the Business, with absolute confidentiality, and unless mutually
agreed by the Parties or otherwise required by law, shall not
disclose any information related thereto to any third party.
Furthermore each Party shall ensure that that any person acting on
their behalf shall also be bound by such confidentiality.
6.2 NON-COMPETITION. The Parties hereby undertake that for as long as
they are a shareholder in the Company or providing services to the
Company, they shall not engage in any way or manner, whether
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directly or indirectly, (including provision of any management or
consulting services) in any activity or business similar or
competing with the Company's activity or business. It is hereby
understood that a breach of this commitment is a fundamental breach,
and in addition to any remedy the Company or the other Party may
have against the breaching party, the Company shall be eligible to
attach and /or set off and/or garnish any rights such breaching
party may have towards the Company.
7 CESSATION OF BUSINESS ACTIVITIES OF THE COMPANY
7.1 Upon completion of the initial 12 month period from the initiation
of activity by the Company, or such other time mutually acceptable
to the Parties, the Parties may mutually agree to cease all business
activities of the Company, whereupon the Netfun IP transferred to
the Company under the terms of this Agreement shall be immediately
transferred to Netfun, subject to a first priority security interest
in favor of Z4P in an amount equal to the funds advanced by Z4P to
the Company and to be returned as provided in Section 3.7.4.2 above,
in whole or in part, which have not been repaid to Z4P at such time.
Z4P shall be entitled to register a first charge on the said Netfun
IP, provided however that all costs and expenses associated with the
registration of the said charge are borne by Z4P.
7.2 Either Party shall be entitled to purchase the interest in the
Company of the other Party under the following terms and conditions.
If a Party (the "Offeror") makes an offer (the "Offer") to purchase
the interest in the Company of the other Party (the "Offeree") for a
stated price (the "Offer Price"):
7.2.1 If the Offer is made during the first year of this Agreement,
the Offeree shall have the right to purchase the interest of
the Offeror at a per share price equal to 70% of the Offer
Price;
7.2.2 If the Offer is made during the second year of this Agreement,
the Offeree shall have the right to purchase the interest of
the Offeror at a per share price equal to 80% of the Offer
Price;
7.2.3 If the Offer is made during the third year of this Agreement,
the Offeree shall have the right to purchase the interest of
the Offeror at a per share price equal to 90% of the Offer
Price;
7.2.4 If the Offer is made during any subsequent year of this
Agreement, the Offeree shall have the right to purchase the
interest of the Offeror at a per share price equal to the
Offer Price.
8 REPRESENTATIONS OF THE PARTIES
8.1 MUTUAL. Each Party hereby represents, covenants, and warrants to the
other that: (i) it has the power to enter into this Agreement and to
grant the rights granted herein and otherwise perform its
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obligations hereunder; (ii) it is not a party to any agreement or
understanding and knows of no law or regulation that would prohibit
it from entering into and performing this Agreement or that would
conflict with this Agreement; and (iii) this Agreement constitutes a
legal, valid, and binding obligation of each Party, enforceable in
accordance with its terms.
8.2 BY NETFUN. Netfun represents and warrants to Z4P that: (i) it owns
or has sufficient rights in and to the Netfun IP to transfer the
Netfun IP to the Company and to perform its obligations hereunder,
and Netfun has secured all necessary, licenses, consents,
authorizations and waivers for the use of the Netfun IP by the
Company as contemplated by this Agreement; (ii) to the best of its
knowledge there are no adverse or conflicting claims(s) with respect
to Netfun's rights in the Netfun IP; (iii) the Company will be
operated in compliance with all applicable governmental laws, rules
and regulations during the Term; and (iv) to the best of its
knowledge the Netfun IP and any other content or materials provided
by Netfun to the Company in connection with this Agreement do not
and will not infringe upon or otherwise violate any copyright,
trademark, trade secret, patent, invention, privacy, non-disclosure,
or other intellectual property rights of any third party.
9 MISCELLANEOUS
9.1 SUCCESSORS AND ASSIGNS: Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assignees, heirs, executors and
administrators of the parties hereto. No assignment will be made
except with a transfer of the shares or as provided above in Section
3.1.2. Notwithstanding the above, it is agreed that once
incorporated, the Company shall be joined as party to this agreement
and the terms of this agreement shall be binding upon it.
9.2 ENTIRE AGREEMENT; AMENDMENTS: This Agreement constitutes the full
and entire understanding and agreement between the parties with
regard to the subject matters hereof and thereof and shall supersede
all prior agreements and understandings relating thereto. Neither
this Agreement nor any term hereof may be amended, waived,
discharged or terminated except by an instrument in writing signed
by the parties hereto.
9.3 DELAYS OR OMISSIONS: No delay or omission to exercise any right,
power or remedy, upon any breach or default under this Agreement,
shall impair any such right, power or remedy of such holder nor
shall it be construed to be a waiver of any such breach or default,
or an acquiescence therein, or of any similar breach or default
thereafter occurring.
9.4 DISPUTES. The Parties shall make their best efforts to resolve any
dispute arising in respect to or connection with this Agreement, its
interpretation, execution, performance or any other issue relating
to the Business and/or affecting the Parties hereto, or their
relationships, in an amicable manner. The courts of the State of
Israel shall determine any such dispute that remains un-resolved.
9.5 GOVERNING LAW. Any dispute arising in respect to or connection with
this Agreement, its interpretation, execution, performance or any
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other issue relating to the Business and/or affecting the Parties
hereto, or their relationships, shall be governed exclusively by the
laws of the State of Israel.
9.6 WAIVER OF DEFAULt: No waiver with respect to any breach or default
in the performance of any obligation under the terms of this
Agreement shall be deemed to be a waiver with respect to any
subsequent breach or default, whether of similar or different
nature. Any waiver, permit, consent or approval of any kind or
character on the part of any holder of any breach or default under
this Agreement, or any waiver on the part of any holder of any
provisions or conditions of this Agreement shall be effective only
if made in writing and only to the extent specifically set forth in
such writing. All remedies, either under this Agreement or by virtue
of law or otherwise afforded to any holder, shall be cumulative and
not alternative.
9.7 RIGHTS; SEVERABILITY: In case any provision of the Agreement shall
be invalid, illegal or unenforceable the validity, legality and
enforceability of the remaining provisions shall not in any way be
affected or impaired thereby. The parties hereto shall be obliged to
draw up an arrangement in accordance with the meaning and the object
of the invalid provision.
9.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
9.9 PUBLICITY. The Parties hereto shall not issue, and shall cause any
other person acting on their behalf any public statement or press
release concerning this transaction without the other Parties' prior
written approval to the issuance of any such statement or release
and to the substance and form of any such statement or release.
9.10 NOTICES: All notices and other communications required or permitted
to be given or sent hereunder shall be in writing and shall be
deemed to have been sufficiently given or delivered for all purposes
if mailed by registered mail, sent by fax or delivered by hand to
the respective addresses detailed herein until otherwise directed by
notice as aforesaid. All notices shall be deemed to have been
received: (i) within five (5) business days following the date on
which it was deposited postage prepaid; (ii) within one (1) business
day after it was transmitted by fax and confirmation of receipt has
been obtained; and (iii) if delivered by hand shall be deemed to
have been received at the time of actual receipt.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in one or
more counterparts as of the date first above-mentioned.
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NETFUN Z4P
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