PATENT AND TECHNOLOGY AGREEMENT

 

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                                                                Exhibit 10.19

 

Commercial-in-Confidence

 

 

                         PATENT AND TECHNOLOGY AGREEMENT

 

 

 

 

 

 

                      Made and entered into by and between:

 

 

 

                  NET 1 INVESTMENT HOLDINGS (PROPRIETARY) LIMITED

 

 

                                       and

 

 

                    NET 1 APPLIED TECHNOLOGY HOLDINGS LIMITED

 

 

                                       and

 

 

                               NEDCOR BANK LIMITED

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This Patent and Technology Agreement (the "Agreement"), effective as of June

2000 (the "Effective Date"), is entered by and between:

 

1)     Nedcor Bank Limited located at 100 Main Street, Johannesburg 2000,

      Republic of South Africa;

 

2)     Net 1 Investment Holdings (Proprietary) Limited located at Fourth Floor

      North Wing, President Place, Cnr. Jan Smuts Avenue, Bolton Road, Rosebank,

      Johannesburg, Republic of South Africa;

 

3)     Net 1 Applied Technology Holdings Limited located at Fourth Floor North

      Wing, President Place, Cnr. Jan Smuts Avenue, Bolton Road, Rosebank,

      Johannesburg, Republic of South Africa.

 

The parties agree the following terms and conditions shall apply to the

licensing of certain patent and technology rights by Net 1.

 

1.     DEFINITIONS

 

      1.1.   The Clause headings of this Agreement are for reference purposes

            only and shall not be used in the interpretation thereof.

 

      1.2.   Unless the context clearly indicates a contrary intention:

 

            1.2.1. expressions which denote:

 

                  1.2.1.1. any gender shall include the other genders;

 

                  1.2.1.2. a natural person shall include an artificial person

                           and vice versa;

 

                  1.2.1.3. the singular shall include the plural;

 

            1.2.2. the following expressions shall have the following meanings:

 

                  1.2.2.1. "CPI" shall mean the 12 (twelve) month consumer price

                           index (all areas, all income groups) published by the

                           Central Statistical Services in the Government

                           Gazette of the Republic of South Africa from time to

                           time;

 

                  1.2.2.2. "Licensee" shall mean any entity incorporated within

                           the Territory and in whom Nedcor has an equity

                           interest of more than 5%;

 

                  1.2.2.3. "Nedcor" shall mean Nedcor Bank Limited (Registration

                           No. 51/00009/06) and all of its subsidiaries,

                           affiliates and its holding company;

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                  1.2.2.4. "Net 1" shall mean Net 1 investment Holdings

                           (Proprietary) Limited and Net 1 Applied Technology

                           Holdings Limited;

 

                   1.2.2.5. "Parties" shall mean the parties to this Agreement;

 

                  1.2.2.6. "Patent" shall mean South African Patent No. 90/7106

                           together with all patents of addition, if any,

                            granted to Net 1;

 

                  1.2.2.7. "Smart Card" shall mean the customer card which when

                           utilised in conjunction with any point of sale

                           terminals will allow the customer to access the UEPS;

 

                  1.2.2.8. "Territory" shall mean the Republic of South Africa

                           (as constituted on 31 May 1961), Namibia, Botswana,

                           Lesotho, Swaziland, Mozambique and Zimbabwe;

 

                  1.2.2.9. "UEPS" means the Universal Electronic Payment System

                           designed by Net 1, as described and detailed in the

                           complete specification to Net 1's application for the

                           Patent;

 

2.     PREAMBLE

 

      2.1.   Nedcor and Net 1 entered into an agreement dated 29 July 1997, (the

            "Original Agreement") whereby Net 1 granted Nedcor a license to use

            the Patent and whereby Net 1 agreed not to grant any rights under or

             relating to the Patent to any bank or subsidiary of a bank without

            Nedcor's prior written consent within the Territory.

 

      2.2.   The Parties have reached agreement as to the terms and conditions

            upon which Nedcor may can upon Net 1 to grant a non-exclusive

            licence within the Territory to a Licensee to use the Patent and the

            UEPS technology.

 

3.     DURATION

 

This Agreement shall commence on the Effective Date and shall endure for the

life of the Patent and any extensions thereto, unless terminated earlier as

provided for hereunder.

 

4.     GRANT OF RIGHTS

 

      4.1.   This Agreement supplements the Original Agreement which shall remain

            in full force and effect.

 

      4.2.   Net 1 shall not:

 

            4.2.1. grant any license or other rights under the Patent and the

                   UEPS to any bank or any subsidiary of any bank in the

                   Territory unless nominated in writing by Nedcor, nor in any

                   manner whatsoever, whether directly or indirectly and whether

                   by way of any act or omission on its part, permit or

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                   enable any licensee under the Patent, including any licensed

                   bank or any licensed subsidiary of any bank, to do so;

 

            4.2.2. offer or supply to any bank or any subsidiary of any bank or

                   any financial institution in the Territory system(s) that

                   would compete with or replace the UEPS, without the prior

                   written consent of Nedcor.

 

      4.3.   As of the Effective Date, world-wide title and intellectual property

            rights in all software relating to the operation of the UEPS

            (including the Megalink System) and any related user manuals and

            documentation is jointly owned by Nedcor and Net1.

 

      4.4.   Nedcor shall be entitled in writing to request and Net 1 agrees to

            grant a non-exclusive licence to any Licensee to use the Patent and

            all technology and know-how relating to the UEPS in the Territory.

 

      4.5.   Net 1 shall within 30 (thirty) days of receipt by it of the request

             pursuant to Clause 4.4, conclude a written licence Agreement with

            the Licensee upon the following terms:

 

            4.5.1. Net 1 shall provide all necessary documentation and know-how

                   to the Licensee in order for the Licensee to be able to use

                   the Patent and the UEPS;

 

            4.5.2. the Licensee shall pay an annual licence fee to Net 1 in the

                   sum of R100 000 (One hundred thousand rand) plus VAT, which

                   licence fee shall be paid annually in advance following the

                   commencement date of the licence agreement. The licence fee

                   may be increased annually after the expiry of the first year

                   of the licence agreement by agreement, or failing which, by

                   an amount not to exceed the percentage increase of the CPI

                   during the preceding 12 (twelve) months;

 

            4.5.3. the Licensee shall grant Net 1 the right to quote for the

                    supply of all of the Licensee's Smart Card requirements

                   provided that Net 1 undertakes to use its best efforts to

                   provide the Licensee with competitive prices for such Smart

                   Cards

 

             4.5.4. If the Licensee elects not to purchase Smart Cards from Net

                   1, and provided that Net 1's prices were no less competitive

                   than other third party suppliers, the Licensee shall pay to

                   Net 1, an amount equivalent to 3.5% (three point five

                   percent) of the purchase cost to it of such Smart Cards from

                   a third party supplier, and which amount shall be paid to Net

                   1 quarterly in arrears;

 

            4.5.5. the Licensee shall advise any third party supplier of its

                   said hardware requirements that such third party supplier may

                   be required to procure a licence from Net 1 in respect of the

                    supply of such hardware to the extent that the configuration

                   of such hardware might in itself infringe the Patent.

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5.     MAINTENANCE OF THE PATENT

 

      5.1.   Net 1 shall during the life of this Agreement pay all renewal fees

            and do all such acts and things that may be necessary to maintain

            and keep registered the Patent and shall produce to Nedcor the

            receipt for renewing the Patent and in default shall permit Nedcor

            to pay the same and shall credit the Licensee with the cost of such

            renewal against the licence fees.

 

      5.2.   Net 1 shall not during the life of this Agreement, save with the

            prior written consent of Nedcor, abandon the Patent or allow it to

            lapse, nor will it amend the specification of the Patent without

            first notifying Nedcor of its intention to do so.

 

6.     PATENT INFRINGEMENT

 

       6.1.   Upon the occurrence of any infringement or suspected or threatened

            infringement of the Patent, the Parties shall immediately consult to

            decide what steps shall be taken to prevent or terminate such

            infringement

 

      6.2.   Net 1 shall take all steps as may be agreed by the Parties pursuant

            to Clause 6.1 above including the institution of legal proceedings

            where necessary.

 

      6.3.   If Net 1 fails to take such steps as may be considered necessary or

            appropriate by Nedcor, Nedcor shall have the right and is hereby

            authorised by Net 1, to take those steps independently. In taking

            such steps Nedcor shall not be acting as the agent or in any way on

             behalf of Net 1 but Net 1 shall give all reasonable assistance to

            facilitate any such proceedings by Nedcor. Any costs and expenses

            incurred by Nedcor shall be borne by Net 1 and credited to the

            Licensee against any licence fees.

 

7.     IMPROVEMENTS

 

      7.1.   If Net 1 at any time files an application for any improvement to the

            Patent, Net 1 shall provide to Nedcor and the Licensee such

            information and explanations as Nedcor shall reasonably require to

            be able effectively to utilise such improvements. Net 1 shall grant

            an irrevocable, non-exclusive, royalty-free license to the Licensee

            for the use of such improvement throughout the Territory.

 

8.     WARRANTIES AND INDEMNITIES

 

      8.1.   Net 1 agrees that Nedcor entered into this Agreement in reliance

            upon Net 1's warranties. Accordingly, Net 1 warrants that:

 

            8.1.1. it is the sole owner of the Patent and the UEPS technology;

 

             8.1.2. it holds the Patent free of any security interests or

                   encumbrances;

 

            8.1.3. it is able to enter into this Agreement and to grant any

                   Patent license to the Licensee;

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            8.1.4. there has been no claim that the Patent or any part of UEPS

                   technology infringes the rights of any third party anywhere

                   in the world and that Net 1 is unaware of any pending claims

                   or actions against the Patent or the UEPs technology.

 

      8.2.   Net 1 agrees to indemnify and hold harmless Nedcor and any Licensee

            from any and all losses, liabilities, damages, claims and all

            related costs and expenses (including all legal fees and

            disbursements) relating to a claim that the Patent infringes the

            intellectual property rights of a third party or that the use of the

            UEPS technology in any way infringes any third party rights. The

            indemnity in this Clause 8.2 shall be unlimited and shall cover all

            losses, costs, damage and expenses of Nedcor and any Licensee

            howsoever arising and to the fullest extent permitted by law.

 

      8.3.   If the Patent becomes or is likely to become the subject to an

            infringement claim, Net 1 shall, in addition to indemnifying Nedcor

            as provided in Clause 8.2 above, promptly at Net 1's expense use its

            best efforts to secure the right to continue using the Patent or

            replace or modify the Patent to make it non-infringing, provided

            that any such replacement or modification will not degrade the

             performance or quality of the Patent. If Net 1 is unable to make the

            Patent non-infringing, then Nedcor may terminate this Agreement

            without liability and without prejudice to any claims against Net 1

            which Nedcor or the Licensee may have, and Net 1 shall refund any

            licence fees paid by the Licensee.

 

9.     BREACH

 

Should either party commit a breach of any of the warranties and terms of this

Agreement, all of which are material and go to the root of this Agreement, and

fail to remedy such breach within a period of thirty (30) days of the date of a

written notice from the aggrieved party calling upon the defaulting party to

remedy such breach, then the aggrieved party shall have the right in addition to

such other rights as are available to it in law or in terms of this Agreement to

terminate this Agreement and claim damages, and in the case of Nedcor to

terminate any other agreement it has with Net 1.

 

10.    CONFIDENTIALITY

 

No Party shall any time divulge or disclose to any third party any information

concerning the affairs of the other Parties or the existence of this Agreement

without the prior written consent of the other Parties.

 

11.    WHOLE AGREEMENT

 

This Agreement constitutes the sole and exclusive record of the Agreement

between the Parties relating to the subject matters thereof, and no variation,

modification, consensual cancellation, novation or waiver of any provisions

thereof, or any consent to any departure therefrom by any party, shall be of any

force and effect or create any ESTOPPEL unless the same shall be confirmed in

writing, signed by or on behalf of that Party and any other Party affected

thereby and in any

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event the same shall be effective only in the specific instance and for the

specific purpose and to the extent for which made or given.

 

12.    SURVIVAL

 

The provisions of Clauses 8 and 10 shall survive termination of this Agreement.

 

13.    DOMICILIA

 

For all purposes under this Agreement or any amendment thereof, or with regard

to any matter arising thereout or in connection therewith, the Parties hereby

choose their DOMICILIA CITANDI ET EXECUTANDI at their respective addresses

specified below provided that the Parties shall be entitled to nominate a

substitute address in the Republic of South Africa, as their DOMICILIUM CITANDI

ET EXECUTANDI, by written notice to that effect given to the other Party in

accordance with Clause 14 and with effect from 7 (seven) days after receipt of

such notice;

 

      13.1. Net 1 at 4th Floor, West Wing, President Place, Jan Smuts Avenue,

            Rosebank, Johannesburg;

 

      13.2. Nedcor at 105 West Street, Sandton.

 

14.    NOTICES

 

Any notice required to be given or permitted to be given by any Party to the

other in terms of this Agreement shall be in writing addressed in the name of

the latter and shall be delivered to the addressee at the addressee's DOMICILIUM

CITANDI ET EXECUTANDI for the time being in terms of Clause 13 SUPRA.

Alternatively, such notice may be sent by telefacsimile to the addressee at its

undermentioned telefacsimile number, and such notice shall be deemed to have

been duly delivered on the first business day following the date of sending

thereof:

 

      Nedcor          -         (011) 881-4811

 

      Net 1           -         (011) 880-7080

 

15.    LAW TO APPLY

 

This Agreement shall in all respects be governed by and construed in accordance

with the laws of the Republic of South Africa, and all disputes, actions and

other matters in connection therewith shall be determined in accordance with

such law.

 

16.    INDULGENCE

 

No relaxation or indulgence granted by either Party to the other shall be deemed

to be a waiver of that Party's rights in terms hereof, nor shall any such

relaxation or indulgence be deemed to be a novation or waiver of any of the

terms and conditions of this Agreement.

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17.    ARBITRATION

 

      17.1. Unless otherwise provided for in this Agreement to the

            contrary, any dispute which arises in regard to:

 

            17.1.1. the interpretation of; or

 

            17.1.2. the carrying into effect of; or

 

            17.1.3. any of the Party's rights and obligations arising from; or

 

            17.1.4. the rectification or proposed rectification of this

                    Agreement

 

                    may, at the instance of either Party hereto, be referred for

                    deter