Disclosure
Schedule
This
Disclosure Schedule is annexed to the Agreement and Plan of Merger (the
“Agreement”) dated as of February 28, 2006 by and among Israel Technology
Acquisition Corp. (“Parent”), IXI Mobile, Inc. (“Company”) and ITAC Acquisition
Subsidiary Corp. (“Merger Sub”). Any disclosure under any section in this
Disclosure Schedule is deemed to be a disclosure under, and incorporated
into,
any other section of the Agreement (whether or not specifically referenced
herein). Capitalized terms used in this Disclosure Schedule, unless otherwise
specified, have the same meanings given them in the Agreement.
SCHEDULE
1.1
List
of Bridge Financings Entered into Prior to the Date of the
Agreement
An
amount
of approximately $4,000,000, in a form of a guarantee, or any other form
of
Bridge Financing, provided and to be provided by Gemini Israel Funds and
Landa
Ventures Ltd. Such Bridge Financing will be entitled to receive the same
terms
and conditions as shall be concluded with external
lenders/investors.
SCHEDULE
2.19
List
of Company “Affiliates” Receiving Shares of Parent Common
Stock
Amit
Haller
Gideon
Barak
Yossi
Sela
Gemini
Israel III LP
Gemini
Partner Investors LP
Gemini
Partner Investors LP
Gemini
Israel III Overflow Fund LP
KB
(CI)
Nominees as nominee to Tlcom I L.P.
KB
(CI)
Nominees as nominee to Tlcom I B L.P.
KB
(CI)
Nominees as nominee to Tlcom I C L.P.
KB
(CI)
Nominees as nominee to Tlcom I D L.P.
Landa
Ventures Ltd.
Concord
Ventures II (Cayman) L.P
Concord
Ventures II (Israel) L.P
Concord
Ventures Advisors II (Cayman) L.P
Concord
Ventures Advisors II (Israel) L.P
Schedule
3.1 - Organization and Qualification
(a)
The
Company’s subsidiary, IXI Mobile (R&D) Ltd. (“IL Subsidiary”), has not
obtained certain governmental permits required for import of R&D and
marketing related OGO devices.
The
IL
Subsidiary has licensed its IXI-Connect OS software to Sasken Communication
Technologies Ltd pursuant to that certain IXI Software License Agreement
dated
October 3, 2005 (“Sasken
Agreement”).
This
grant of license does not comply with the terms of the grant received by
the IL
Subsidiary from the OCS.
(b)
A
Company’s employee is working out of his home in New-York. The Company is not
qualified to do business in New-York.
IXI
Mobile, Inc. - California
IXI
Mobile (R&D) Ltd. - Israel
IXI
Mobile (Europe) Ltd. - Europe
IXI
Mobile (Asia Pacific) Ltd. - South Korea
IXI
Mobile (East Europe) SRL. - Romania
(d)
Reference
is made to the “Pay-to-Play” provision in that certain Convertible Bridge Loan
dated as of July 11, 2005, pursuant to which some non-participating preferred
stockholders’ stock has been converted into common stock of the Company. Ledger
was amended and the Company is in the process of collecting and distributing
share certificate so as to effect the aforementioned conversion and reverse
stock split.
Reference
is made to the September 2005 30:1 reverse stock split in the Company’s
capitalization. The new stock certificates resulting from such split have
not
yet been issued by the Company. Ledger already amended.
Company
is committed to issue option to new employees pursuant to their offer letters
or
employment agreements. Such grants have not yet been approved by the
compensation committee. As of February 27, 2006 the following
employees/consultants and options are pending approval by the
Board:
Andre
Dahan, Romanian R&D employees, Tamar Pinto, Yoram Hirsch and Shmuel Knoll
details of which were provided to Parent's Counsel.
The
exercise prices of the options issued to the above employees are below fair
market value as of today and the Company will need to record an expense in
its
financial statements in accordance with US GAAP. Said expense not to exceed
$350,000 over 5 calendar years (not linier). This calculation was made assuming
the Parent’s price per share at the date of signing, and might vary according to
fluctuations in the Parents share value).
(a)
Reference
is made to that certain Loan and Security Agreement dated as of August 8,
2003
and that certain Loan and Security Agreement dated as of October 22, 2004
with
Venture Lending and Leasing III, Inc. and Venture Lending and Leasing IV,
Inc.
(Collectively “VLL”
and “VLL Loan Agreements”)
pursuant to which the Company granted VLL a blanket lien on all of the Company’s
assets and the assets of the IL Subsidiary, such lien including 65% shares
in
IXI Mobile (R&D) Ltd. And 100% of the shares of Neo Mobile Inc.
3.3
Capitalization
(a)
(i)
For
outstanding options, reference is made to the attached pre-merger
capitalization
table
attached hereto and made part of this Schedule of Exceptions.
(ii)
For
outstanding warrants, reference is made to the attached pre-merger
capitalization table attached hereto and made part of this Schedule of
Exceptions.
Mr.
Barak’s options will accelerate so that 50% of any unvested options shall vest
upon a Liquidation Event (as such term is defined in the Company’s 7th
Amended
and Restated Certificate of Incorporation). Immediately prior to the Closing
Mr.
Barak shall waive such acceleration benefit.
Mr.
Haller’s 1,228,073 options will accelerate so that 50% of any unvested options
shall vest upon a Liquidation Event (as such term is defined in the Company’s
7th
Amended
and Restated Certificate of Incorporation). Immediately prior to the Closing
Mr.
Haller shall waive such acceleration benefit.
Mr.
Haller’s 45,997 early exercised common stock shares are subject to full
acceleration in an event of a Change of Control (as such term is defined
in the
Company’s option plan) followed by termination of employment. Immediately prior
to the Closing Mr. Haller shall waive such acceleration benefit.
Options
of Company’s following members (employees/consultants) are subject to full
acceleration in an event of a Change of Control (as such term is defined
in the
Company’s option plan) followed by termination of employment:
Dror
Liwer
Joe
Kopp
Michael
Ayon
Daniel
Eizips
Terence
Yopung Ty
Lihi
Segal
Yoran
Hirsch
Shai
Farkash
Gadi
Meroz
Tal
Reisid
Guy
Moskovich
Options
of Company’s following members (employees/consultants)are subject to full
acceleration in an event of a Change of Control (as such term is defined
in the
Company’s option plan):
Peter
Fornell
Andre
Dahan
Robert
Eckelman
Gilles
Delfassy
(b)
Company
is committed to issue option to new employees pursuant to their offer letters
or
employment agreements. Such grants have not yet been approved by the
compensation committee. As of February 27, 2006 the following
employees/consultants options are pending approval by the Board:
Andre
Dahan, Romanian R&D employees, Yoram Hirsch Tamar Pinto, and Shmuel
Knoll
The
exercise prices of the options issued to the above employees are below fair
market value as of today and the Company will need to record an expense in
its
financial statements in accordance with US GAAP. Said expense not to exceed
$350,000 over 5 calendar years (not linier). This calculation was made assuming
the Parent’s price per share at the date of signing, and might vary according to
fluctuations in the Parents share value).
According
to its engagement letter with the Company dated December 12, 2000, Wilson,
Sonsini, Goodrich & Rosati (“WSGR”)
indicated it had the right to purchase a 1% equity stake in the Company on
the
same terms as the Founders. In a letter to the Company dated June 21, 2001,
WSGR
acknowledged that in connection with the terms of its engagement letter,
it was
entitled to no more than 288,894 (9,630 after the reverse stock split of
September 2005) shares of Common Stock of the Company at a per share purchase
price of $0.01.
With
reference to pre-emptive, and
other
shareholders rights and obligations, reference is made to the Company’s
8th
Amended
and Restated Certificate of Incorporation, Bylaws and Amended and Restated
Investor Rights Agreement dated August 24, 2004, as amended by the Voting
Agreement dated July 11, 2005 which was amended on August 5, 2005 and the
Stockholders Agreement dated August 24, 2004 ,2004, Management Rights Letters
provided to investors, Warrants Granted to Venture Lending & Leasing III,
Inc. and Venture Lending & Leasing IV, Inc., Addendum to Series C Preferred
Stock Purchase Agreement dated December 9, 2002
(c)
With
reference to registration rights, voting rights and other shareholders rights
and obligations, reference is made to the Company’s 8th
Amended
and Restated Certificate of Incorporation, Bylaws and oAmended and Restated
Investor Rights Agreement dated August 24, 2004, as amended by the Voting
Agreement dated July 11, 2005 which was amended on August 5, 2005 and the
Stockholders Agreement dated August 24, 2004 ,2004, Management Rights Letters
provided to investors, Warrants Granted to Venture Lending & Leasing III,
Inc. and Venture Lending & Leasing IV, Inc., Addendum to Series C Preferred
Stock Purchase Agreement dated December 9, 2002
The
following individuals and entities have signed a proxy agreement in favor
of
Amit Haller/Gideon Barak entitling Amit or Gideon to vote on their
stead:
Gal
Investments LLC
|
Galshan
Investments LLC
|
Yam
Investments LLC
|
Futurenet
LLC (Ziv Haparnas-CTO)
|
Ron
Shpilman
|
Shmuel
Buchinski
|
Merits
(Nati Baratz)
|
Eli
David
|
Hanse
Resigd
|
Orit
Hayon
|
In
addition, Employees / Consultants who have been granted / exercised options
have
signed similar proxies. Exercised shares of Israeli employees are being held
by
a Yuli Yardeni (a CPA) of Yardeni Gelfand & Co., CPA as trustee pursuant to
S. 102 of the Israeli Tax Ordinance.
3.4
Authority Relative to this Agreement.
As
of the
signing date of the Agreement, the Company has only obtained its Board of
Directors’ consent to the execution of this Agreement and only shareholders
Gemini Israel Venture Funds (and related entities) , Concord venture Funds
and
Landa Ventures Ltd. have entered into the Support Agreement. Except for the
foregoing shareholders, upon signing of the Agreement no other shareholder
of
the Company has agreed to vote in favor of the conversion of any Preferred
Stock
it holds and/or may be entitled to receive (e.g. pursuant to the exercise
of any
Warrant that Person may hold) and no other shareholder has agreed to vote
in
favor of the Merger.
3.5
No Conflict; Required Filings and Consents.
(a)(i)
Under
the
terms of the OCS grant, the Company's IL Subsidiary is required to obtain
the
OCS’ approval to the Merger. Such approval has not been obtained as of the date
hereof but the Company anticipates obtaining same prior to Closing.
Additionally, reference is made to the disclosure regarding the OCS grant
under
Section 3.1(a) above.
As
an
"Approved Entity" the Company's IL Subsidiary is required to obtain the Israeli
Investment Center’s approval to the Merger. Such approval has not been obtained
as of the date hereof but the Company anticipates obtaining same prior to
Closing.
Some
Material Company Contracts require obtaining the consent of the other party
to
such Material Company Contracts to an assignment of the Contract on a merger
or
acquisition. It is the Company’s position that, given that the Company is the
surviving entity in the Merger, and given that pursuant to the Agreement
all
the
property, rights, privileges, powers and franchises of Company and all
liabilities and duties of the Company remain with the Company following the
Merger, there will be no assignment of any Company Contract by virtue of
the
Merger and therefore there is no need to solicit the approval of the Merger
from
any party to any Company Contract. Notwithstanding the foregoing, three Material
Company Contracts between the IL Subsidiary and Microsoft Corporation (the
“Three
Microsoft Agreements”)
require
Microsoft’s approval to an assignment and define the term assignment to include
a change of control and/or a change in the beneficial ownership of the assignor.
Although the IL Subsidiary will not go through a direct change of control
by
virtue of the Merger, the Company believes that it would be prudent to obtain
Microsoft’s consent to the Merger. Such consent has not been obtained as of the
date hereof and the Company cannot guaranty that it will be successful in
obtaining it prior to Closing.
Pursuant
to the loan documents with VLL, the Company is required to obtain VLL’s approval
to the Merger. Such approval has not been obtained as of the date hereof
but the
Company anticipates obtaining same prior to Closing.
As
of the
date of signing the Agreement, the Company has only obtained its Board of
Directors’ consent to the execution of this Agreement and only shareholders
Gemini Israel Venture Funds (and related entities) , Concord venture Funds
and
Landa Ventures Ltd. have entered into the Support Agreement . Except for
the
foregoing shareholders, upon signing of the Agreement no other shareholder
of
the Company has agreed to vote in favor of the conversion of any preferred
stock
it holds and/or may be entitled to receive (e.g. pursuant to the exercise
of any
Warrant that Person may hold) and no other shareholder has agreed to vote
in
favor of the Merger.
Reference
is made to acceleration of options as per the disclosure under Section
3.3(a)(ii) above.
(b)
Reference
is made to the disclosure under Section 3.5(a)(i) above.
3.6
Compliance
(a)
In
July
2005 The Company closed its IXI-Connect OS division. As a consequence, the
Company may be in violation of the following Company Contracts relating to
said
division: to be completed:
Intel
Corporation
Sanyo
North America Corporation
On
August
10, 2005 the Company received a letter from Intel Corporation claiming the
monies ($300,000) are owed to Intel under a certain IXI Software License
Agreement dated August, 2004.On August 24, 2005 the company replied with
a
letter rejecting all such claims.
The
Company has received a demand letter from an employee whose employment with
the
Company has been terminated as a result of the closure of the IXI-Connect
OS
division claiming an amount of 50KNIS + 6 months pay for settlement purposes.
The letter was received on August 24, 2005 and answered on October 20, 2005
by
Company’s legal advisors. As of signing date there has been no further
correspondence initiated by said employee.
On
December 4, 2005 a former employee of the company filed a claim in the Tel-Aviv
Employment Tribunal claiming a sum of NIS123,000. On January 22, 2006 the
Company filed, through its external legal counsel, its defense to said Tribunal.
The
Company reserved what it believes are sufficient funds, in its financial
statements, for the referenced two employee claims.
Reference
is made to letters received from e-Sim Ltd. dated September 18, 2005 and
September 27, 2005 with certain alleged claims of breach of contracts with
respect to non-compete, breach of confidentiality, lack of making reasonable
commercial efforts to keep e-Sim as its only MMI development solution and
infringement of rights granted under license. The Company, through its external
legal counsel (in corresponding letters dated September 22, 2005 and October
20,
2005) has categorically rejected all such claims.
Reference
is made to the disclosure made under Sections 3.1(a) above and 3.8 below
with
respect to the Sasken Agreement and the implications to the OCS
grant.
The
Company is under the Investment Center approved enterprise scheme. The Company
is not in full compliance under the scheme regarding the headcount target
requirement and has invested more than the amount approved by said
authority.
Due
to
Company’s financial condition, the Company is unable to timely meet all its
payment obligations as reflected in the Company’s Unaudited Financial Statements
and the disclosures in Sections 3.8 and 3.10 below. To date the Company has
received legal demand letters for outstanding debts amounting to no more
than
US$40K in the aggregate.
The
Company received a letter from Mr. Gary Bush, General Manager of the Law
offices
of Joseph P. Graziano, retained by attorney Recovery Systems, Inc. assignee
of
Smart Modular Technologies (“Smart”),
with a
request to recover an alleged debt. The alleged debt mentioned is $1,368,009.87.
The Company and Smart have a long lasting commercial dispute and it seems
that
Smart have assigned their alleged debt to the above mentioned collection
agency.
Reference
is made to the disclosure made in Section 3.1 (a) above.
Reference
is hereby made to the disclosure under Section 3.5(a)(i) above regarding
lack of
need to solicit consent to assignment of Material Company Contracts and the
Three Microsoft Agreements.
The
Company’s Ogo device contains the following encryption technologies which may
require a permit from the Israeli government for their development and
export:
Algorithm
|
Key
length (bits)
|
DES
|
40,
56
|
3DES
|
168
|
RC2
|
40,
128
|
RC4
|
40,
128
|
RSA
|
512,
1024
|
DH
|
512,
768
|
RC5
|
|
SHA-1
|
20
|
DHE-DSA
|
2048
|
MD5
|
16
|
Rijndael
(AES)
|
128
|
The
Company has obtained a general permit from the Israeli government for its
Ogo/CT-12 product. In addition, the Company may need to apply for additional
permits in the future to export products currently under development that
include encryption technologies. There can be no guarantee that the Israeli
government will grant such permits. Furthermore, the laws or regulations
governing the export of encryption technologies may change and the Company
may
be required to comply with more stringent requirements. The Company also
conducts some of its research and development activities in Romania and may
be
subject to regulations regarding export of technologies. The Company is not
currently aware of the scope of, or its compliance with such
regulations.
(b)
The
IL
Subsidiary has received a status of an Approved Enterprise, and thus will
require said authority’s approval for the Closing..
The
IL
Subsidiary has received a grant of approximately US$2,8000,000 from the OCS,
and
thus will require said authority’s approval for the Closing..
Reference
is made to the disclosure under Section 3.1(a) regarding such OCS
grant.
3.7
Financial Statements
(a)
The
Audited Financial Statements of December 31, 2004 were prepared according
to
IFRS. The Unaudited Financial Statements of September 30, 2005 were prepared
according to Israeli GAAP and include a restatement to reflect the closure
of
the OS division and further include comparative numbers for the years 2003-2004.
The Company intends to change its accounting methods principles or practices
to
US GAAP.
(b)
The
exercise prices of the options issued to the above employees are below fair
market value as of today and the Company will need to record an expense in
its
financial statements in accordance with US GAAP. Said expense not to exceed
$350,000 over 5 calendar years (not linier). This calculation was made assuming
the Parent’s price per share at the date of signing, and might vary according to
fluctuations in the Parents share value).
(c)
Reference
is made to the disclosure in Section 3.1(d) above.
(d)
To
the
extent that the revenue received from Intel Corporation is reflected on the
Company’s balance sheet included in the Audited Financial Statements and the
Unaudited Financial Statements, reference is made to Section 3.10 below.
(e)
Reference
is made to Section 3.7(a) above
3.8
No Undisclosed Liabilities
Credit
line from Bank Leumi Le’Israel Ltd. in the amount of US$2,000,000. This credit
line is guaranteed by the Gemini Israel Funds and Landa Ventures Ltd. The
Company is in negotiations with Gemini Israel Funds and Landa Ventures Ltd
as to
the related compensation with respect to this guarantee.
Software
License Agreement dated December 23, 2004 with ART Advance Recognition
Technologies, Inc. (a/k/a Nuance the “ART Agreement”) - Payment of US$150,000+
Local Tax (8.25%).
Under
that certain Logistics and Related Services Agreement Dated October 11, 2004
with ATC Logistics and Electronics, L.P. the company is obligated to pay
Approximately US$35,000 for storage and other services related to the Ogo
device. Until full payment ATCLE is withholding approximately 18,000 Ogo
device
unites stored in its warehouses.
Agreement
with Cellcom Israel Ltd. for the purchase of 500 GPRS SIM cards. Total
obligation of approximately US$77,000 over 36 months.
Reference
is made to the Company's marketing contribution undertaking in Section 2.5
of
that certain Cooperation Agreement with 1&1 Internet AG, dated December 15,
2005 (“1&1
Agreement”).
o |
Accumulated
liabilities to employees (salary, taxes, benefits, etc.) - $440K
|
o |
Known
liabilities for which bills have not yet been received -
$900K
|
o |
Allowance
for debt to Gideon Barak - $253K
|
o |
Venture
Lending & Leasing III, Inc. and Venture Lending & Leasing IV, Inc
- $2.2M
|
o |
Bank
Leumi credit line guaranteed by shareholders - $2.0M (compensation
to
shareholders for providing the guarantee has not yet been
agreed)
|
Reference
is made to the disclosure in Section 3.1(a) with respect to the OCS grant.
The
Company may be required to repay the entire grant amount of approximately
US$2.8M in a lump sum.
Reference
is made to Company's marketing contribution provided under the LOI with Swisscom
SA amounting to 250K CHF.
Reference
is made to the PO with AxisMobile Ltd. (the Company providing the Attachment
Server) The PO is for Setup of the AxisMobile server. The PO’s sum is US$50,000,
of which $35K have been paid. Reference is made to Section 3.18(a).
Reference
is made to payments required under the agreement with Followap,
Inc.
Reference
is made to the POs with Obigo AB (developing the Ogo web browser).
The
POs
are for software licenses, maintenance, integration services and workshop.
The
total aggregate sum of said POs is EURO 477,800 all of which is outstanding.
Reference is made to the disclosure under Section 3.18(a) below. In addition
for
the sale of Ogo in the USA, the Company will be required to pay an additional
license fee of approximately EURO30,000 per year.
The
Company is currently using an IM gateway provided by Comverse for e-Kolay’s
(Mobicom) end users. Terms of said use have not yet been concluded. Sum is
expected not to exceed US$210K.
Due
to
Company’s financial condition, the Company is unable to timely meet all its
payment obligations as reflected in the Company’s Unaudited Financial Statements
and the disclosures in Sections 3.6 above and 3.10 below.
Pursuant
to the Company’s roadmap the Company intends to develop next generation Ogo
devices in the total amount of up to US$3,000,000 in 2006.
Reference
is made to the POs issued to ChiMei Communication Systems, Inc. with respect
to
ongoing Ogo inventory which as of February 23, 2006 amounts to US$
583K.
The
Company’s aggregate liability for lease payment of real property amounts to
approximately US$720,000 annually (the lease in the USA is for three
years).
The
Company’s aggregate liability for leased cars amounts to approximately
US$270,000 annually (this amount may vary depending on the number of cars
leased
at each specific point of time).
The
Company is currently required to pay royalties to Redband, ESI and the OCS
third
parties which are contingent on certain events (mainly shipment of Ogo devices).
The
Company has a debt to its external legal advisors (Berkman, Wechsler, Sahar
Blum
& Co,) of approximately $80,000.
The
Company has debts in connection to its contemplated TASE IPO amounting in
the
aggregate to approximately $90,000
Reference
is made to the bonus and commissions undertakings of the Company to several
consultants and employees deriving from sales and marketing activities, listed
in a table which has been provided to Parent and Parent’s counsel on February
26, 2006.
The
Company expects to incur liabilities in connection with the execution of
this
Agreement and the consummation of the Merger in an amount of approximately
$1,000,000
Reference
is made to the agreement with Microsoft under which the Company has minimum
payment obligations to Microsoft of $180K in 2005,$3.63M in 2006 and $7.98M
in
2007.
Under
the
Agreement the Company is requested to maintain its D&O insurance for an
additional seven years after the Closing. Estimated premium for said insurance
is expected to be approximately $65K.
3.9
Absence of Certain Changes or Events.
(i)
The
Company’s distributor in Russia is not performing under the Agreement. The
Company does not anticipate any sales through this channel.
The
Company is exposed to fluctuations in exchange rates of the US Dollar and
EURO.
The Company currently is not engaged in hedging transaction.
(ii)
Company
is committed to issue option to new employees pursuant to their offer letters
or
employment agreements. Such grants have not yet been approved by the
compensation committee. As of February 27, 2006 the following
employees/consultants and options are pending approval by the Board:
Andre
Dahan, Romanian R&D employees, Tamar Pinto, Yoram Hirsch and Shmuel Knoll
details of which were provided to Parent's Counsel.
The
exercise prices of the options issued to the above employees are below fair
market value as of today and the Company will need to record an expense in
its
financial statements in accordance with US GAAP. Said expense not to exceed
$350,000 over 5 calendar years (not linier). This calculation was made assuming
the Parent’s price per share at the date of signing, and might vary according to
fluctuations in the Parents share value).
The
post
termination exercise period of Mr. Avi Yitzhak (former VP R&D) was extended
to be one year from date of termination.
The
post
termination exercise period of employees who have been terminated as part
of the
IXI Connect OS division closure was extended to be six months from date of
termination.
(iv)
On
January 1, 2006 Mr. Amit Haller’s salary has been increased from an annual
salary of US$150,000 to US$200,000.
The
post
termination exercise period of Mr. Avi Yitzhak (former VP R&D) was extended
to be one year from date of termination.
The
post
termination exercise period of employees who have been terminated as part
of the
IXI Connect OS division closure was extended to be six months from date of
termination.
With
respect to Israeli employees, upon termination, it is the Company’s common
practice to grant the terminated employee an advanced notice of termination
as
mandated by law. Following the closure of the IXI Connect OS division, the
Company granted a 30-day termination notice period to all remaining employees
regardless of whether or not such employees were eligible, at that time,
to such
notice period. Additionally, the following employees were granted an advanced
notice of termination as follows:
Guy
Moskowitz 120 days
Shai
Farkash 90 days
Gadi
Maroz 90 days
Lihi
Segal 90 days after six months of employment
Eitan
Yurman 60 days after six months of employment and 90 days after 24 months
of
employment
Avi
Golstein 60 days
Termination:
Due
to
the closure of the IXI Connect OS division, the employment of approximately
80
employees has been terminated, including the following executive team: Jonathan
Michael (CFO), Gil Livnah (VP Corporate Development and General Counsel),
Rony
Greenberg (VP Sales), Greg Stein (VP Operations), Ziv Haparnas (CTO and
founder), Avi Yitzhak (VP R&D) and Ram Fish (VP Software Product Marketing).
The
Company has entered into indemnification agreements with Ms. Lihi Segal (CFO)
and with Mr. Gadi Meroz (VP Corporate Development and General
Counsel).
The
Company hired new employees in the ordinary course of business according
to the
relevant need. Said employees received standard employment terms (including
options).
Reference
is made to the disclosure in Section 3.3(a)(ii) above with respect to
acceleration of options.
(v)
Reference
is made to the disclosure made under Section 3.1(a) above with respect to
the
Sasken Agreement.
(vi)
The
Audited Financial Statements of December 31, 2004 were prepared according
to
IFRS. The Unaudited Financial Statements of September 30, 2005 were prepared
according to Israeli GAAP. The Company intends to change its accounting methods
principles or practices to US GAAP.
(vii)
Company
is committed to issue option to new employees pursuant to their offer letters
or
employment agreements. Such grants have not yet been approved by the
compensation committee. As of February 27, 2006 the following
employees/consultants options are pending approval by the Board:
Andre
Dahan, Romanian R&D employees, Tamar Pinto, Yoram Hirsch and Shmuel Knoll
details of which were provided to Parent's Counsel.
The
exercise prices of the options issued to the above employees are below fair
market value as of today and the Company will need to record an expense in
its
financial statements in accordance with US GAAP. Said expense not to exceed
$350,000 over 5 calendar years (not linier). This calculation was made assuming
the Parent’s price per share at the date of signing, and might vary according to
fluctuations in the Parents share value).
(viii)
On
31.12.05 -The Company wrote down the value of Ogo device screens in inventory,
to reflect current market price. The aggregate value of the write down is
US$123.5K.
3.10
Litigation
In
July
2005 The Company closed its IXI-Connect OS division. As a consequence, the
Company may be in violation of the following Company Contracts
Intel
Corporation
Sanyo
North America Corporation
On
August
10, 2005 the Company received a letter from Intel Corporation claiming the
monies ($300,000) are owed to Intel under a certain IXI Software License
Agreement dated August, 2004.On August 24, 2005 the company replied with
a
letter rejecting all such claims.
The
Company has received a demand letter from an employee whose employment with
the
Company has been terminated as a result of the closure of the IXI-Connect
OS
division claiming an amount of 50KNIS + 6 months pay for settlement purposes.
The letter was received on August 24, 2005 and answered on October 20, 2005
by
Company’s legal advisors. As of signing date there has been no further
correspondence initiated by said employee
On
December 4, 2005 a former employee of the company filed a claim in the Tel-Aviv
Employment Tribunal claiming a sum of NIS123,000. On January 22, 2006 the
Company filed, through its external legal counsel, its defense to said
Tribunal.
The
Company reserved what it believes are sufficient funds, in its financial
statements, for the referenced two employee claims.
Reference
is made to letters received from e-Sim Ltd. dated September 18, 2005 and
September 27, 2005 with certain alleged claims of breach of contracts with
respect to non-compete, breach of confidentiality, lack of making reasonable
commercial efforts to keep e-Sim as its only MMI development solution and
infringement of rights granted under license. The Company, through its external
legal counsel (in corresponding letters dated September 22, 2005 and October
20,
2005) has categorically rejected all such claims.
The
Company received a letter from Mr. Gary Bush, General Manager of the Law
offices
of Joseph P. Graziano, retained by attorney Recovery Systems, Inc. assignee
of
Smart Modular Technologies (“Smart”),
with a
request to recover an alleged debt. The alleged debt mentioned is $1,368,009.87.
The Company and Smart have a long lasting commercial dispute and it seems
that
Smart have assigned their alleged debt to the above mentioned collection
agency.
Reference
is made to the disclosure made under Sections 3.1(a) and 3.8 above with respect
to the Sasken Agreement and the implications to the OCS grant.
Due
to
Company’s financial condition, the Company is unable to timely meet all its
payment obligations as reflected in the Company’s Unaudited Financial Statements
and the disclosures in Sections 3.6 and 3.8 above. To date the Company has
received legal demand letters for outstanding debts amounting to no more
than
$40K in the aggregate.
3.11
- Employee Benefit Plans
(a)
USA:
1. |
Medical
insurance: Health - Blue Cross of CA, Dental - Delta
Dental
|
2. |
Sec
125 (Spending Account) - Flex Plan
|
4. |
401(k)
in the U.S. 401k - Securian Retirement
Services
|
5. |
Short/Long
Term Disability - Reliance Standard
|
6. |
Life
& AD&D - Reliance Standard
|
7. |
The
IL Subsidiary maintains a Managers’ Insurance applicable to all IL
Subsidiary employees except for employees who have a Pension Plan
in
place.
|
Romania:
Social
security payments
Unemployment
Insurance
Health
Insurance
National
Paid Leave Fund
Korea:
Pension
Plan
Unemployment
Insurance
Health
Insurance
Uncovered
liabilities in such funds accumulate as at the date of signing to approximately
US$ 70K. No further outstanding liabilities to such plans.
(j)
Reference
is made to the disclosure in Section 3.3(a)(ii) above.
(k)
I-Tac
-
Yair Shapira - Israel
Flextronics
Ukraine
OrbitIQ
-
Gunter Kraft
Jim
Eun -
Korea
Hau
Wu -
David Chang - Taiwan
Daniele
Soviero - USA
TrippleJump
- Tal Baron - UK
SHR
-
Blaise Roulet
Euro
Software - Bunel Noise - Romania
Ken
Blaksly - USA
Tal
reside
Gil
Paz
Ronen
Moshel
Yatir
Shlomo
Henrigue
Vaz - South America - no agreement signed yet
Go
Market
- Alberto Giron - South America - no agreement signed yet.
3.12
- Labor Matters
Reference
is made to that certain Israeli Governmental Directive for the Metalwork,
Electricity, Electronics and Software Industry.
3.13
-
Restrictions on Business Activities
3.14
Title to Property
In
addition to the disclosure in the Unaudited Financial Statements, below is
list
describing leasehold in real property. Furthermore, reference is hereby made
to
the chart set forth in Section 3.18(k) below.
Property
Leased or Licensed
Real
Property
Location
and use of property
|
Size
(in sq/M)
|
Term
of lease
|
Monthly
rent payment including maintenance fee (in
US$)
|
|
|
|
|
Redwood,
California- Group H.Q
|
1,072
Sq/M
|
|
$21,349
First year
$21,989.47
Second year
$22,649.15
Third year
|
|
|
|
|
Ra'anana,
Israel R& D operation and management.
|
1,275
Sq/M + 60 parking spots
|
|
$18,870
+ $3,450 (for parking.
A
separate unit of 222 Sq/M has been subleased to Vivicon Israel
Ltd, under
the same financial terms as the original lease agreement (back
to
back).
|
|
|
|
|
Ra'anana,
Israel- R& D operation and management.
|
630
Sq/M + 12 parking spots
|
|
$10,000
property has been subleased to SAP Portals Israel Ltd, under the
same
financial terms as the original lease agreement (back to
back).
|
|
|
|
|
Bucharest
,Romania R&D operation
|
Approx
390 Sq/M
|
|
3,350
Euro (approx $3,972)
|
|
|
|
|
Bucharest-
Romania- service apartment
|
Approx
55 Sq/M
|
September
2005- September 2006
|
1,450Euro
(Approx $1,719)
|
|
|
|
|
Cars
for use
of the Israeli Subsidiary’s employees, pursuant to car lease agreement with
Hertz.
Office
accessories and appliances
in the
Company’s and Israeli Subsidiary’s offices.
Assets
Owned
2. |
Furniture,
appliances and accessories located in the Israeli Subsidiary’s
office.
|
List
of Charges/Liens
Name
of company and place of charge registration
|
Serial
number
|
Date
of creation of charge
|
Date
of registration of charge
|
Name
of Lender
|
Sum
secured by charge
|
Description
of charge and attached property
|
Special
terms
|
|
|
|
|
|
|
|
|
IXI
Mobile, Inc.
USA
|
32072844
|
-
|
August
11, .2003
|
Venture
Lending and Leasing III Inc.
|
Unlimited
|
|
-
|
|
|
|
|
|
|
|
|
IXI
Mobile, Inc.
USA
|
43052430
|
-
|
October
28, .2004
|
Venture
Lending and Leasing IV Inc.
|
Unlimited
|
|
-
|
|
|
|
|
|
|
|
|
IXI
Mobile (R&D) Ltd. USA
|
2003103454
|
-
|
|
Venture
Lending and Leasing III Inc.
|
Unlimited
|
All
of the mortgaging Company's assets
|
-
|
|
|
|
|
|
|
|
|
IXI
Mobile (R&D) Ltd. USA
|
2004150729
|
-
|
|
Venture
Lending and Leasing IV Inc.
|
Unlimited
|
All
of the mortgaging Company's assets
|
-
|
|
|
|
|
|
|
|
|
IXI
Mobile (R&D) Ltd
Israel
|
2
|
|
August
25, .2003
|
Venture
Lending and Leasing III Inc.
|
Unlimited
|
In
accordance with the related agreement
|
May
not be mortgaged or transferred without the consent of the charge
holder
|
|
|
|
|
|
|
|
|
IXI
Mobile (R&D) Ltd
Israel
|
3
|
|
|
First
International Bank, Israel
|
Unlimited
|
All
Company's rights to receive funds from the Bank on account of specified
deposits, including all incomes accrued in the First International
Bank of
Israel, Ltd
|
May
not be mortgaged or transferred without the consent of the charge
holder
|
|
|
|
|
|
|
|
|
IXI
Mobile (R&D) Ltd
Israel
|
4
|
|
|
Bank
Leumi Le Israel
|
Unlimited
|
All
rights and funds to the benefit of the accounts and deposits specified
in
annex A' and\or to the benefit of any substitute accounts and deposits,
as
well as all accrued income and benefits resulting from the deposit
account
|
May
not be mortgaged or transferred without the consent of the charge
holder
|
|
|
|
|
|
|
|
|
IXI
Mobile (R&D) Ltd
Israel
|
5
|
|
|
Venture
Lending and Leasing III Inc.
|
Unlimited
|
Floating
and standing charge on all of the Company's assets as detailed
in the
related mortgage agreement and subject to the terms of the 1984
law for
the encouragement of Industry
|
May
not be mortgaged or transferred without the consent of the charge
holder
|
|
|
|
|
|
|
|
|
3.15
Taxes
(b)
Under
the
Approved Enterprise scheme, the Company has invested more than the amount
approved under the scheme. Unless the Company receives approval of the
Investment Center for such additional investment, a certain part of its profits
may not be tax concession under the plan.
The
Company has not performed a change of control analysis under section 382
of the
Code. The outcome of such an analysis may effect the losses, for tax purpose,
of
the Company.
3.18
Intellectual Property
(a)
List
of Third Party Licenses:
Reference
to each agreement includes any exhibits, schedules or attachments
thereto:
1. |
Accelerated
Technology, Inc. (AT) License Agreement for NUCLEUS SOFTWARE IXI
- July
29, 2001
|
2. |
License
Agreement for AT Software with Mentor Graphics Corporation - February
7,
2003
|
4. |
AdventNet
Software License Agreement for AdventNET SMTP Adaptor for JMX -
May 4,
2004
|
7. |
A.I
Corporation Software License Agreement for EBSnet Software - October
29,
2004
|
10. |
BEA
System Distribution BV, Channel License Agreement - August 31,
2003
|
12. |
Microsoft,
Confidential Protocol Specification Implementation License Agreement
-
July 1, 2005
|
13. |
Microsoft
MSN Mobile Service Client Development Agreement, signed but
undated
|
14. |
Extended
Systems Software License Agreement with Extended Systems of Idaho,
Inc.,
dated February 18, 2001, including addendums thereto dated December
2002,
March 2004 and July 2004
|
15. |
Bluetooth
Specifications Early Adopters Agreement, dated April 19, 2000 and
related
Bluetooth agreements
|
16. |
License
Agreement with RedBend Ltd, dated October 3, 2002 and amendments
thereto
|
17. |
General
Terms of the Escrow Frame Agreement Specifically Amended for IXI
Mobile
(R&D) Ltd. with RedBend Ltd., and Escrow Europe (Israel) Ltd., dated
September 23, 2003
|
18. |
Software
License Agreement with XCE Co.,
Ltd.
|
19. |
Jataayu
Software Ltd, Software License and Distribution Agreement - November
21,
2002
|
21. |
NDS,
License Agreement - September, 2004
|
22. |
Newdeal
design, License Agreement - July, 2000 including letter of assignment
thereof
|
23. |
Openwave
Systems, Master License and distribution Agreement- June 26,
2005.
|
24. |
Oracle,
Partnernetwork Embedded Software License Distribution Agreement-
August 4,
2004
|
25. |
Swell
Software Inc, PEG Incorporation Agreement - January 8, 2001 including
letter of assignment thereof
|
26. |
Texas
instruments, Software Porting and Licensing Agreement- December
22,
2004
|
28. |
Unicoi
Systems, Fusuin Software License Agreement - March 29,
2004
|
As
of the
date of the Agreement, the Company is in discussions with the following
companies which may lead to agreements that contain, or mention the possibility
of, obligations or liabilities of the Company to make payments by way of
royalties, fees or otherwise with respect to the use of intangible
assets:
Pursuant
to that certain Addendum dated April 20, 2005, between the Company and New
Cingular Wireless Services, Inc. (respectively “Cingular”
and the
“Cingular
Addendum”),
terminating that certain Development and Supply Agreement (and amendments
thereto) dated December 2003 between AT&T Wireless Services, Inc.
(predecessor entity of Cingular) and the Company (the “AT&T
Supply Agreement”),
Cingular has undertaken to assign to the Company all right, title and interest
of Cingular in and to the OGO product, including without limitation the
materials listed in Section 2.4 of the Addendum, all pre-production materials,
marketing materials, the ogo.com and any other OGO-related URLs owned or
operated by Cingular, copyrights, patents, trademarks and other intellectual
property rights directly related to the Ogo product. Intellectual Property
which
is not directly related to the Ogo product will not be assigned to the
Company.
(b)
List
of Intellectual Property
.Parent
was given the opportunity to inspect documentation in Company’s possession
relating to the following patents, patent applications, trademarks and trademark
applications listed below.
Granted
Patents:
US6845097:”Device,
system, method and computer readable medium for pairing of devices in a short
distance wireless network”
US6957045:
“Device, system, computer readable medium and method for providing status
information of devices in a short distance wireless network”
US6909878:
“Method, system and computer readable medium for providing an output signal
having a theme to a device in a short distance wireless network”
Pending
Patent Applications:
Europe:
“Device,
system, computer readable medium and method for providing status information
of
devices in a short distance wireless network”
“Device,
system, method and computer readable medium for pairing of devices in a short
distance wireless network”
“Method,
system and computer readable medium for providing an output signal having
a
theme to a device in a short distance wireless network”
“System,
device and computer readable medium for providing a managed wireless network
using short-range radio signals”
“System,
device and computer readable medium for providing networking services on
a
mobile device”
“Device,
system, method and computer readable medium for fast recovery of IP address
change”
“Method,
system and computer readable medium for making a business decision in response
to information from a short distance wireless network”
Japan:
“Device,
system, computer readable medium and method for providing status information
of
devices in a short distance wireless network”
“Device,
system, method and computer readable medium for pairing of devices in a short
distance wireless network”
“Method,
system and computer readable medium for providing an output signal having
a
theme to a device in a short distance wireless network”
“System,
device and computer readable medium for providing a managed wireless network
using short-range radio signals”
“System,
device and computer readable medium for providing networking services on
a
mobile device”
“Device,
system, method and computer readable medium for fast recovery of IP address
change”
“Method,
system and computer readable medium for making a business decision in response
to information from a short distance wireless network”
Korea:
“Device,
system, computer readable medium and method for providing status information
of
devices in a short distance wireless network”
“Device,
system, method and computer readable medium for pairing of devices in a short
distance wireless network”
“Method,
system and computer readable medium for providing an output signal having
a
theme to a device in a short distance wireless network”
“System,
device and computer readable medium for providing a managed wireless network
using short-range radio signals”
“System,
device and computer readable medium for providing networking services on
a
mobile device”
“Device,
system, method and computer readable medium for fast recovery of IP address
change”
“Method,
system and computer readable medium for making a business decision in response
to information from a short distance wireless network”
U.S.A.:
US2004000872290:
“Audio session management system and method for a mobile communication
device”
US2004000872289:
“Natural language for programming a specialized computing system”
US2004000872170:
“Volume control system and method for a mobile communication
device”
US2004000872576:
“Message recognition and display system and method for a mobile communication
device”
US2004000846197:
“Mobile router graceful shutdown system and method”
US2004000846179:
“Mobile communication device graceful shutdown system and method”
US2004000820682:
“Security key management system and method in a mobile communication
network”
US2004000817260:“Illumination
system and method for a mobile computing device”
US2004000797695:“Telephony
event management system and method in a communications network”
US2004000800381:“Power
management system and method for a wireless communications device”
US2004000774809:“Automatic
mobile device configuration system and method in a mobile communication
network”
US2004000755058:
Presence
status update system and method in a mobile communication network”
US2003000736927:
“control system and method for a communications interface”
US2003000706173:“Real
time system update in a mobile communication network”
US2003000664390:“Billing
and ordering system and method for services provided over communications
networks”
US2003000681758:
“Call management system and method for servicing multiple wireless communication
devices”
US2004000846187:“Message
aggregation system and method for a mobile communication device”
US2004000846186:“Priority
session management system and method for a mobile communication
device”
US2002000165150:“Wireless
device having a single processor in a short-range radio network”
US2005000123855:“Method,
system and computer readable medium for providing an output signal having
a
theme to a device in a short distance wireless network”
US2005000036589:“Device,
system, method and computer readable medium for pairing of devices in a short
distance wireless network”
US2004000809663:“Device,
system, method and computer readable medium obtaining a network attribute,
such
as a DNS address, for a short distance wireless network”
US2003000632665:“Device,
system, method and computer readable medium for identifying and authenticating
a
cellular device using a short-range radio address”
US2003000358693:“Method,
system and computer readable medium for adjusting output signals for a plurality
of devices in a short distance wireless network responsive to a selected
environment”
US2003000666776:“Device,
system, method and computer readable medium for attaching to a device identified
by an access point name in a wide area network providing particular
services”
US2003000619857:“Device,
system, method and computer readable medium for selectively attaching to
a
cellular data service”
US2003000435098:“Device,
system, method and computer readable medium for fast recovery of IP address
change”
US2002000298753:“Method,
system and computer readable medium for downloading a software component
to a
device in a short distance wireless network”
US2001000023525:“Method,
system and computer readable medium for making a business decision in response
to information from a short distance wireless network”
US2001000990424:“Device,
system, method and computer readable medium for pairing of devices in a short
distance wireless network”
US2001000932180:“System,
device and computer readable medium for providing networking services on
a
mobile device”
US2001000850399:“System,
device and computer readable medium for providing a managed wireless network
using short-range radio signals”
US2002000071588:“Handset
having a retractable keypad”
US2002000266007:“System,
method and processor readable medium for downloading information within a
predetermined period of time to a device in a network responsive to price
selection”
US2003000454967:“Wireless
device having dual bus architecture for interfacing with cellular signals
and
short-range radio signals”
International
Patent Applications (PCT):
WO2004IB0002878:
“BILLING
AND ORDERING SYSTEM AND METHOD FOR SERVICES PROVIDED OVER COMMUNICATIONS
NETWORKS”
WO2004IB0003100:
“CALL
MANAGEMENT SYSTEM AND METHOD FOR SERVICING MULTIPLE WIRELESS COMMUNICATION
DEVICES”
WO2004IB0003418:
“REAL
TIME
SYSTEM UPDATE IN A MOBILE COMMUNICATION NETWORK”
WO2004IB0003605:
“CONTROL
SYSTEM AND METHOD FOR A COMMUNICATIONS INTERFACE”
WO2004IB0003602:
“PRESENCE
STATUS UPDATE SYSTEM AND METHOD IN A MOBILE COMMUNICATION NETWORK”
WO2005IB0000157:“AUTOMATIC
MOBILE DEVICE CONFIGURATION SYSTEM AND METHOD IN A MOBILE COMMUNICATION
NETWORK”
WO2005IB0000152:
“POWER
MANAGEMENT SYSTEM AND METHOD FOR A WIRELESS COMMUNICATIONS DEVICE”
WO2005IB0000572:“TELEPHONY
EVENT MANAGEMENT SYSTEM AND METHOD IN A COMMUNICATIONS NETWORK”
WO2005IB0000760:“ILLUMINATION
SYSTEM AND METHOD FOR A MOBILE COMPUTING DEVICE”
WO2005IB0000885:“SECURITY
KEY MANAGEMENT SYSTEM AND METHOD IN A MOBILE COMMUNICATION NETWORK”
WO2005IB0001230:“MOBILE
COMMUNICATION DEVICE GRACEFUL SHUTDOWN SYSTEM AND METHOD”
WO2005IB0001240:“MOBILE
ROUTER GRACEFUL SHUTDOWN SYSTEM AND METHOD”
WO2005IB0001242:
”MESSAGE
AGGREGATION SYSTEM AND METHOD FOR A MOBILE COMMUNICATION DEVICE”
WO2005IB0001228:
“PRIORITY
SESSION MANAGEMENT SYSTEM AND METHOD FOR A MOBILE COMMUNICATION
DEVICE”
WO2005IB0001661:“NATURAL
LANGUAGE FOR PROGRAMMING A SPECIALIZED COMPUTING SYSTEM”
WO2005IB0001667:“MESSAGE
RECOGNITION AND DISPLAY SYSTEM AND METHOD FOR A MOBILE COMMUNICATION
DEVICE”
WO2005IB0001663:“AUDIO
SESSION MANAGEMENT SYSTEM AND METHOD FOR A MOBILE COMMUNICATION
DEVICE”
WO2005IB0001670:“VOLUME
CONTROL SYSTEM AND METHOD FOR A MOBILE COMMUNICATION DEVICE”
WO2004US0022466:“A
DEVICE, SYSTEM, METHOD AND COMPUTER READABLE MEDIUM FOR SELECTIVELY ATTACHING
TO
A CELLULAR DATA SERVICE”
WO2004US0030351:“A
DEVICE, SYSTEM, METHOD AND COMPUTER READABLE MEDIUM FOR ATTACHING TO A DEVICE
IDENTIFIED BY AN ACCESS POINT NAME IN A WIDE AREA NETWORK PROVIDING PARTICULAR
SERVICES”
WO2004US0024795:“A
DEVICE, SYSTEM, METHOD AND COMPUTER READABLE MEDIUM FOR IDENTIFYING AND
AUTHENTICATING A CELLULAR DEVICE USING A SHORT-RANGE RADIO ADDRESS”
WO2005US0009279:“A
DEVICE, SYSTEM, METHOD AND COMPUTER READABLE MEDIUM OBTAINING A NETWORK
ATTRIBUTE, SUCH AS A DNS ADDRESS, FOR A SHORT DISTANCE WIRELESS
NETWORK”
Registered
Trademarks:
U.S.A.:
“PMG”
in
Classes 009
“IXI”
in
Classes 009
“IXI”
(stylized) in Classes 009
Europe:
“PMG”
in
Classes 009
Japan:
“PMG”
in
Classes 009
Korea:
“PMG”
in
Classes 009
“IXI”
in
Classes 009
Singapore:
“PMG”
in
Classes 009
“IXI”
in
Classes 009
Taiwan:
“PMG”
in
Classes 009
“IXI”
in
Classes 009
China:
“IXI”
in
Classes 009
Hong
Kong:
“IXI”
in
Classes 009
Pending
Trademark Applications:
U.S.A.:
“IXI-CONNECTED”
in Classes 009, 042
“DESIGNED
FOR PMG” in Classes 009, 042
“IXI
MOBILE” in Classes 009
“IXI
MOBILE” (stylized) in Classes 009
“OGO”
Classes 009, 038
“NEO”
Class 009
“NEO”
(stylized) in Classes 009
China:
“PMG”
in
Classes 009
Europe:
“IXI”
in
Classes 009
“OGO”
Classes 009, 038
“NEO”
Class 009
“NEO”
(stylized) in Classes 009
Japan:
“IXI”
in
Classes 009
Turkey:
“OGO”
Classes 009, 038
Switzerland:
“NEO”
Class 009
Computer
Software:
Owned:
Company’s software used in its products and developed through its R&D
efforts.
Used:
Reference is made to the software products licensed pursuant to the third
party
license agreement listed in Section 3.18(a) above.
Material
Unregistered Intellectual Property
Reference
is made to unregistered items of Intellectual Property covered by foregoing
third party license agreements pursuant to which the Company is licensing
rights
to such unregistered items of Intellectual Property.
Reference
is made to the disclosure regarding the Cingular assignment of Intellectual
Property in Section 3.18(a) above.
Cumulative
know-how, Copyrights and Trade Secrets f the Company.
Reference
is made to computer software covered by any of the foregoing third party
license
agreements pursuant to which the Company is licensing rights to such computer
software.
(c)
Reference
is made to the correspondence with e-Sim Ltd. disclosed in Section 3.6(a)
above.
One
opposition was submitted in the prosecution process (of Cingular) of the
OGO
trademark (which under the Cingular Addendum will be assigned to the
Company).
The
opposition was filed by Worldgate for its OJO trademark. To Company’s knowledge,
Worldgate develops video phones. Given that the OGO trademark has not yet
been
assigned to the Company, the Company has no standing to respond to the
opposition. Counsel for Company dealing with this matter has requested and
received an extension to file a response. The Company anticipates completing
the
assignment shortly. In addition, Counsel for Company is in negotiations with
counsel for Worldgate to reach a mutual understanding.
Company
Intellectual Property counsel ran a search for the mark OGO and closely similar
marks. The results of said search were provided to Parent’s
counsel.
(d)
Reference
is made to the disclosure under Section 3.18 (c).
(f)
Exclusive
License Agreements
The
Company and/or the IL Subsidiary are parties to the following agreements
that
contain certain exclusivity provisions:
International
Distributor Agreement with Mobicom, Inc., dated July 1, 2005 (the “Mobicom
Agreement”)
AT&T
Supply Agreement currently terminated by Addendum to Supply
Agreement.
International
Exclusive Distributor Agreement with JSC LogOlink, dated September 01, 2005
(the
“Logolink Agreement”)
1&1
Agreement
IXI
Software License Agreement with SK Telecom Co., Ltd. (“SK Telecom
Agreement”)
Frame
Agreement concerning the purchase of Handsets and Accessories with Swisscom
Mobile AG, dated February 24, 2005 (“Swisscom Framework Agreement”)
Hosted
Services Agreement with Followap Inc. (“Followap Hosted Services
Agreement”)
IXI
Software License Agreement with Samsung Electronic Co. Ltd., dated December
4,
2002 and amendment thereto (“Samsung License Agreement”)--- exclusivity expired
on December 31, 2004
Due
to
the Company’s financial condition, the Company currently does not maintain some
of its Patents and Trademarks.
(i)
Due
to
the Company’s financial condition, the Company currently does not maintain the
following Patents and Trademark:
The
Company did not file the European filing for the patent known as "A device,
System, Method and computer Readable Medium for Identifying and Authenticating
A
Cellular device using a short range radio address", In addition the Company
discontinued pursuing the trademark "NEO". The Company believes that on the
balance of cash needs and overall IP strategy, it was worth while continuing
to
pursue such patent and trademark and such protection is not material for
Company's current and contemplated business.
(k)
Reference
is made to the list of third party license agreements under section 3.18(a).
Pursuant to some of the listed agreements specified in Section 3.18(a), the
Company is obligated or may be obligated to make payments by way of royalties,
fees or otherwise with respect to the use by the Company of the Intellectual
Property of said parties.
Due
to
the Company’s financial condition the Company is late in payment of the
following royalties/licensing payments:
OCS
-
~US$14
ART
(a/k/a Nuance) - US$ 150K + tax
(m)
SQLite
was used in the IXI connect-OS version for Intel but it is not used in
Ogo. SQLite
was used as the DB of the Connect-OS and was used to store the phone's
persistent information. These items are no longer used in the Company's current
business.
Wbxml
and
Expat XML parser were used by WAP and MMS in the IXI connect-OS version for
Intel. Both parsers were used in order to decode Wbxml & XML content so it
can be further used by the MMS and WAP services. These items are no longer
used
in the Company's current business.
MySQL
and
Tomcat are used as part of the Up2Data system. At the moment the Company
sells
the service, not the software. The Up2Date system enables over the air version
update and provisioning of the Ogo devices. MySQL serves as the DB for the
system, holding the information on Ogos accessing it, their software versions,
and configuration. Tomcat serves as an application server for the system
running
the system's logic written in Java. Company will review condition and shall
purchase any necessary licenses if required.
Rijndael
Cipher used for encryption of user
passwords that
are
stored on the Ogo's
flash memory. Might be Open Source. Company will review condition and shall
purchase any necessary licenses if required.
Corporate
Documents
Agreements
relating to Securities
Warrants
to purchase shares of capital stock of the Company as reflected in the Company’s
capitalization table
Series
A
transaction documents
Series
B
transaction documents
Series
C
transaction documents
Series
D
transaction documents
Series
D-1 transaction documents
Evaluation
Agreements
Consulting
Agreements
1. |
Consulting
Agreement with Alex Usatch Consulting & Technologies, dated April 1,
2004
|
2. |
Consulting
Agreement with Alex Usatch Consulting & Technologies, dated April 29,
2004
|
3. |
Consent
to Assignment with Alex Usatch Consulting & Technologies, and
Flextronics Sales and Marketing (A-P) Ltd., dated June 24,
2004
|
4. |
Amendment
No. 1 to Consulting Agreement with Alex Usatch Consulting &
Technologies and Flextronics Sales and Marketing (A-P) Ltd, dated
March
20, 2005
|
7. |
Agreement
for Legal Services with Far-hadian & Associates, dated September 4,
2003
|
8. |
Agreement
for Legal Services with Far-hadian & Associates, dated June 7,
2004
|
9. |
Service
Management Agreement with Gideon Barak, dated March 1,
2005
|
11. |
Advisory
Agreement with Izhak Kirshenbaum, dated July 9,
2000
|
13. |
Letter
from Vierra Magen Marcus Harmon & DeNiro LLP re Intellectual Property
Legal Services, dated March 9, 2001
|
14. |
Letter
outlining legal services from Wilson Sonsini Goodrich & Rosati, dated
December 12, 2000, plus related
documents
|
15. |
Independent
Sub-Contractor Non-Disclosure, Invention Assignment and Non-Compete
Agreement with Flextronics Ukraine, dated July 15,
2004
|
16. |
Independent
Sub Contractor Agreement with Interobject Ltd., signed but undated
|
17. |
Independent
Sub Contractor Agreement with Eternety-T Ltd., dated September
13,
2005
|
18. |
Independent
Sub Contractor Agreement with Avi Yitzchak, dated September,
2005
|
21. |
Independent
Sub Contractor Agreement with Amir Glick, dated September
2005
|
22. |
Independent
Sub Contractor Agreement with Mrs. Golani Rama, dated September
12,
2005
|
24. |
Independent
Sub Contractor Agreement with Merits Ltd., dated October 1,
2005
|
Commercial
Agreements
1. |
Reference
is hereby made to the list of Third Party Licenses under Section
3.18(a)
|
2. |
Services
Agreement (After-Sales Services) with A Novo S.A., dated September
28,
2005
|
3. |
Development
Agreement with AL Communication Co. Ltd, dated April 1,
2005
|
4. |
Sales
Representative Agreement with Altgen Co. Ltd, dated March 13,
2003
|
5. |
IXI
Software License Agreement with Altgen Co. Ltd., dated April 28,
2003 and
amendment therto
|
7. |
AT&T
Supply Agreement and amendements thereto
|
10. |
IXI
Product License agreement with Chi Mei Communication Systems, Inc.
dated
February 5, 2002 and amendments thereto
|
11. |
Hardware
Development Agreement with Chi Mei Communication Systems, Inc.
dated April
10, 2003 and amendments thereto
|
12. |
Hardware
Development Agreement with Chi Mei Communication Systems, Inc.
dated March
15, 2004
|
13. |
Software
License Agreement with Chi Mei Communication Systems, Inc. dated
April 4,
2004
|
14. |
Memorandum
of Understanding with Dangaard Telecom A/S, dated May 13,
2003
|
15. |
Sales
Representative Agreement with Edom Technology Co., Ltd, dated November
20,
2001 ????
|
16. |
Heads
of Agreement between Follwap Inc. and IXI Mobile, dated June 29,
2005
|
17. |
MDIP
Member Agreement with Followap Telecommunications, dated October
26,
2004
|
18. |
Follwap
Inc. Hosted Services Agreement
|
19. |
Followap
Telecommunications iFollow MMG email & IM for IXI Technical Statement
of work, date updated: September 2005
|
20. |
Hosted
Mobile Instant Messaging & Mobile Email Service Level Agreement with
Followap, dated January 10, 2005
|
21. |
IXI
Trademark License Agreement with Game Park Inc., dated November
9,
2002
|
22. |
IXI
Product License Agreement with Game Park Inc., dated November 9,
2002 and
amendment thereto
|
23. |
IXI
Product License Agreement with GVC Corporation,
undated
|
24. |
IXI
Product License Agreement with HIT Incorporated, dated January
10,
2002
|
25. |
IXI
Trademark License Agreement with HIT Incorporated, dated October
1,
2002
|
26. |
Contract
for the Software License and Support of IXI Mobile (R&D) Ltd., with
Howin Technologies Corporation, dated March 4, 2003 and amendment
thereto
|
27. |
SyncML
Supporter Agreement with International Business Machines Corporation,
dated February 28, 2000
|
28. |
IXI
Product License Agreement with Infohand Incorporated, dated December
24,
2002 and amendment thereto
|
29. |
IXI
Product License Agreement with Intel Corporation, dated August
11,
2004
|
30. |
Agreement
between IXI Mobile, Inc., and IXI Mobile (Israel) Ltd., dated November
11,
2001
|
34. |
License
Agreement for AT Software Agreement Number AT8092, dated February
7,
2003
|
36. |
MSN
Mobile Services Reseller Agreement with Microsoft Corporation,
dated
September 27, 2005
|
40. |
Developers’
Forum Agreement with Orange Personal Communication Services Limited,
dated
June 19, 2001
|
41. |
Sales
Representative Agreement with OrbitIQ Inc., dated April 1,
2005
|
42. |
Sales
Representative Agreement with OrbitIQ Inc., dated March 1,
2005
|
43. |
Samsung
License Agreement
|
44. |
IXI
Software License Agreement with Samsung Electro Mechanics Co.,
Ltd., dated
December 2, 2003
|
45. |
IXI
Software License Agreement with Sanyo Technology Center, dated
April 1,
2003 and amendments thereto
|
46. |
Design
and Development Agreement with Seiko Instruments Inc., dated December
16,
2002
|
48. |
Trust
Agreement between IXI Mobile (R&D) Ltd., Normal Research and
Consultancy, Yitzhak and Yitzhak Achzakot A.S. Ltd., Ushia Achzakot
Ltd.
Uri Dekel, Airport Planning Ltd., Inter-Object Ltd., Eternity-T,
Ltd.,
Merits, Ltd., Shmuel Oved, Noam Rosenthal, Rama Golani, Amir Arbel-Kitov
Adv., dated December 1, 2005
|
49. |
Design
and Development Agreement with Seiko Instruments, Inc. dated December
16,
2002
|
50. |
Sales
Representative & Technical Collaboration Agreement with Shinhwa
Corporation, dated July __, 2002
|
51. |
Personalization
Partner Agreement with Neo Mobile Telecom, L.L.C, dated April 20,
2005
|
54. |
IXI
Software License Agreement with SK Teletech Co., Ltd, dated June
3,
2005
|
56. |
Swell
Software, Inc., PEG Incorporation License, dated August 1,
2001
|
57. |
Letter
of Intent Concerning the Purchase of IXI ogo ct-12 by Swisscom
Mobile AG,
dated August 11, 2005
|
58. |
Swisscom
Framework Agreement
|
61. |
Memorandum
of Understanding with Quanta Computer Inc., dated April 22,
2005
|
62. |
Sub-Dealer
Agreement with T-Mobile USA, Inc., dated November 20, 2005 (Agreement
not
yet received by T-mobile)
|
63. |
IXI
Trademark License Agreement with Teleca Systems AB, dated October
16,
2003, plus cover fax
|
64. |
IXI
development Software License Agreement with Teleca Systems AB,
dated
October 16, 2003
|
66. |
Agreement
on Intellectual Property Rights with TeleManagement Forum, dated
October
19, 1989
|
67. |
Sales
Representative Agreement with Torex Technologies Inc., dated September
19,
2003
|
69. |
Sales
Representative Agreement with Wavecom Representacoes S/C Ltda.,
dated
September 19, 2003
|
70. |
VLL
Loan Agreements and any and all attachments, exhibits, schedules
thereto
and ancillary documents related thereto.
|
1. |
Reference
is hereby made to the list of Third Party Licenses under Section
3.18(a)
|
2. |
Services
Agreement (After-Sales Services) with A Novo S.A., dated September
28,
2005
|
3. |
Development
Agreement with AL Communication Co. Ltd, dated April 1,
2005
|
4. |
Sales
Representative Agreement with Altgen Co. Ltd, dated March 13,
2003
|
5. |
IXI
Software License Agreement with Altgen Co. Ltd., dated April 28,
2003 and
amendment therto
|
7. |
AT&T
Supply Agreement and amendements thereto
|
10. |
IXI
Product License agreement with Chi Mei Communication Systems, Inc.
dated
February 5, 2002 and amendments thereto
|
11. |
Hardware
Development Agreement with Chi Mei Communication Systems, Inc.
dated April
10, 2003 and amendments thereto
|
12. |
Hardware
Development Agreement with Chi Mei Communication Systems, Inc.
dated March
15, 2004
|
13. |
Software
License Agreement with Chi Mei Communication Systems, Inc. dated
April 4,
2004
|
14. |
Memorandum
of Understanding with Dangaard Telecom A/S, dated May 13,
2003
|
15. |
Sales
Representative Agreement with Edom Technology Co., Ltd, dated November
20,
2001 ????
|
16. |
Heads
of Agreement between Follwap Inc. and IXI Mobile, dated June 29,
2005
|
17. |
MDIP
Member Agreement with Followap Telecommunications, dated October
26,
2004
|
18. |
Follwap
Inc. Hosted Services Agreement
|
19. |
Followap
Telecommunications iFollow MMG email & IM for IXI Technical Statement
of work, date updated: September 2005
|
20. |
Hosted
Mobile Instant Messaging & Mobile Email Service Level Agreement with
Followap, dated January 10, 2005
|
21. |
IXI
Trademark License Agreement with Game Park Inc., dated November
9,
2002
|
22. |
IXI
Product License Agreement with Game Park Inc., dated November 9,
2002 and
amendment thereto
|
23. |
IXI
Product License Agreement with GVC Corporation,
undated
|
24. |
IXI
Product License Agreement with HIT Incorporated, dated January
10,
2002
|
25. |
IXI
Trademark License Agreement with HIT Incorporated, dated October
1,
2002
|
26. |
Contract
for the Software License and Support of IXI Mobile (R&D) Ltd., with
Howin Technologies Corporation, dated March 4, 2003 and amendment
thereto
|
27. |
SyncML
Supporter Agreement with International Business Machines Corporation,
dated February 28, 2000
|
28. |
IXI
Product License Agreement with Infohand Incorporated, dated December
24,
2002 and amendment thereto
|
29. |
IXI
Product License Agreement with Intel Corporation, dated August
11,
2004
|
30. |
Agreement
between IXI Mobile, Inc., and IXI Mobile (Israel) Ltd., dated November
11,
2001
|
34. |
License
Agreement for AT Software Agreement Number AT8092, dated February
7,
2003
|
36. |
MSN
Mobile Services Reseller Agreement with Microsoft Corporation,
dated
September 27, 2005
|
40. |
Developers’
Forum Agreement with Orange Personal Communication Services Limited,
dated
June 19, 2001
|
41. |
Sales
Representative Agreement with OrbitIQ Inc., dated April 1,
2005
|
42. |
Sales
Representative Agreement with OrbitIQ Inc., dated March 1,
2005
|
43. |
Samsung
License Agreement
|
44. |
IXI
Software License Agreement with Samsung Electro Mechanics Co.,
Ltd., dated
December 2, 2003
|
45. |
IXI
Software License Agreement with Sanyo Technology Center, dated
April 1,
2003 and amendments thereto
|
46. |
Design
and Development Agreement with Seiko Instruments Inc., dated December
16,
2002
|
48. |
Trust
Agreement between IXI Mobile (R&D) Ltd., Normal Research and
Consultancy, Yitzhak and Yitzhak Achzakot A.S. Ltd., Ushia Achzakot
Ltd.
Uri Dekel, Airport Planning Ltd., Inter-Object Ltd., Eternity-T,
Ltd.,
Merits, Ltd., Shmuel Oved, Noam Rosenthal, Rama Golani, Amir Arbel-Kitov
Adv., dated December 1, 2005
|
49. |
Design
and Development Agreement with Seiko Instruments, Inc. dated December
16,
2002
|
50. |
Sales
Representative & Technical Collaboration Agreement with Shinhwa
Corporation, dated July __, 2002
|
51. |
Personalization
Partner Agreement with Neo Mobile Telecom, L.L.C, dated April 20,
2005
|
54. |
IXI
Software License Agreement with SK Teletech Co., Ltd, dated June
3,
2005
|
56. |
Swell
Software, Inc., PEG Incorporation License, dated August 1,
2001
|
57. |
Letter
of Intent Concerning the Purchase of IXI ogo ct-12 by Swisscom
Mobile AG,
dated August 11, 2005
|
58. |
Swisscom
Framework Agreement
|
61. |
Memorandum
of Understanding with Quanta Computer Inc., dated April 22,
2005
|
62. |
Sub-Dealer
Agreement with T-Mobile USA, Inc., dated November 20, 2005 (Agreement
not
yet received by T-mobile)
|
63. |
IXI
Trademark License Agreement with Teleca Systems AB, dated October
16,
2003, plus cover fax
|
64. |
IXI
development Software License Agreement with Teleca Systems AB,
dated
October 16, 2003
|
66. |
Agreement
on Intellectual Property Rights with TeleManagement Forum, dated
October
19, 1989
|
67. |
Sales
Representative Agreement with Torex Technologies Inc., dated September
19,
2003
|
69. |
Sales
Representative Agreement with Wavecom Representacoes S/C Ltda.,
dated
September 19, 2003
|
70. |
VLL
Loan Agreements and any and all attachments, exhibits, schedules
thereto
and ancillary documents related thereto.
|
Insurance
Policies
Reference
is hereby made to the insurance policies listed under Section 3.20
below.
(i)
Agreements
Relating to Borrowing of Money
Loan
and
Security Agreement with Western Technology Investment/Venture Lending &
Leasing III, Inc. dated as of August 8, 2003, as amended and all exhibits,
supplements and schedules thereto and ancillary documents relating
thereto
Loan
and
Security Agreement with Western Technology Investment/Venture Lending &
Leasing IV, Inc. dated as of October 22, 2004, as amended and all exhibits,
supplements and schedules thereto and ancillary documents relating
thereto
Line
of
Credit in the aggregate amount of US$2,000,000 from Bank Leumi LeIsrael (“BLL
LOC”).
The
following current and former employees have executed notes in favor of the
Company pursuant to an early exercise of stock options:
Amit
Haller - note in the sum of US$ 110,392. This note is still
outstanding.
Jonathan
Michael - note in the sum of US$ 92,000. Upon termination of Mr. Michael’s
employment, Mr. Michael acknowledged that he would not make the payments
as
required by the note. As a result, and with Mr. Michael’s consent, the Company
foreclosed on the collateral in the form of all the shares of the Company’s
common stock subject to Mr. Michael’s stock options.
Rony
Greenberg - note in the sum of US$176,000. Upon termination of Mr. Greenberg’s
employment, Mr. Greenberg acknowledged that he would not make the payments
as
required by the note. As a result, and with Mr. Greenberg’s consent, the Company
foreclosed on the collateral in the form of all the shares of the Company’s
common stock subject to the options.
Mr.
Gideon Barak is entitled to a monthly consultant fee (and as of January 1,
2006,
monthly salary) in the total amount (i.e. total cost for Company taking into
consideration Management Insurance, Keren Hishtalmut, vacation pay, havraa
pay,
car deduction and its tax implications and any mandatory deduction under
applicable law) of US$17,500 but gets paid only US$10,000/month. Reference
is
made to the disclosure under Section 3.22 below regarding the Company’s debt to
entities controlled by Gideon Barak.
(ii)
Guaranties
Gemini
and Landa entered into a Keep Well Agreement with Swisscom AG a copy of which
has been provided to Parent’s counsel (the “Keep Well Agreement”).
Gemini
has guaranteed the Company’s obligations under the BLL LOC (the “Gemini BLL
Guaranty”).
(iii)
Employment
Agreements
The
Company has entered into employment agreements with the following current
employees:
US:
Dror
Liwer
|
Amit
Haller
|
Daniel
Eizips
|
Joseph
Kopp
|
Michael
Ayon
|
Peter
Fornell
|
Samantha
Tran
|
Terence
Ty
|
Israel:
Gideon
|
Barak
|
Gadi
|
Meroz
|
Avi
|
Goldstein
|
Shai
|
Farkash
|
Guy
|
Moskowitz
|
Lihi
|
Segal
|
Yael
|
Zidky
|
Yoram
|
Hirsch
|
Noam
|
Lando
|
Ofer
|
Dano
|
David
|
Shulman
|
Sivan
|
Gavish
|
Eitan
|
Yurman
|
Gil
|
Erlich
|
Tamar
|
Pinto
|
Lahav
|
Savir
|
Max
|
Polke
|
Tali
|
Kaiser
|
Tali
|
Shavit
|
Ilanit
|
Deutsch
|
Anat
|
Ifargan
|
Boaz
|
Avraham
|
Igal
|
Erez
|
Osnat
|
Ron
|
Guy
|
Nachumi
|
Shmuel
|
Knoll
|
|
Shapira
|
Tali
|
Strugo
|
Michal
|
Neuner
|
Tsachi
|
Kotek
|
Yuval
|
Or
|
David
|
Ganon
|
Guy
|
Nevo
|
Tali
|
Helfman
|
Arnon
|
Natan
|
Roi
|
Cohen
|
Assaf
|
Bata
|
Idit
|
Neuman
|
Shelly
|
Mandel
|
Vladimir
|
Holostov
|
Doron
|
Fisher
|
Boaz
|
Greenberg
|
Alon
|
Klein
|
Mali
|
Ben
Hamo
|
Adi
|
Lapin
|
Yehuda
|
Kasirer
|
Dudi
|
Olivenbaum
|
Yoni
|
Kalev
|
Udi
|
Alkabetz
|
Michael
|
Gurevich
|
Yitzchak
|
Ayzner
|
Alon
|
Cohen
|
Amir
|
Hadar
|
Amir
|
Even
Or
|
Irina
|
Sokirianski
|
Romania:
Dan
Valeriu
|
Mardele
|
Gabriel
|
Faceoru
|
Ion
|
Floarea
|
Catalin
|
Balaban
|
Bogdan
|
Marinescu
|
Cornel
|
Buza
|
Ciprian
|
Coman
|
Carmen
|
Lapuste
|
Gabriel
|
Preada
|
Daniel
|
Brosteanu
|
Marius
|
Gutoi
|
Corina
|
Ionescu
|
Gabriel
|
Tanislav
|
Laurentiu
|
Constantinescu
|
Korea:
TJ
Park
Alon
Shlomovich
(iv)
Out
of
Ordinary Course Agreements
Sasken
Agreement
Agreements
Providing for Rights to Distribute Company Products
As
part
of conducting its business in the ordinary course, the Company has granted
and
may continue to grant non-exclusive and/or non-exclusive rights to manufacture,
produce, license, market and sell products and services of the Company.
Reference is hereby made to the list of Commercial Agreements and Consulting
Agreements above.
Warrant
to Purchase Shares of Series C Preferred Stock of the Company issued to
VLL.
Warrant
to Purchase Shares of Series D Preferred Stock of the Company issued to
VLL.
(vii)
Collective
Bargaining Agreements
Reference
is hereby made to the Israeli Governmental Directive for the Metalwork,
Electricity, Electronics and Software Industry disclosed under Section 3.12
above.
(viii)
Lease
of Personal Property
Lease
Agreement with Hertz for cars used by IL Subsidiary’s employees.
Agreements
for the lease of office accessories and appliances in the Company’s and the IL
Subsidiary’s offices.
(ix)
Restricting
Agreements
Reference
is hereby made to the disclosure of exclusive license agreements under Section
3.18(f) above.
(x)
Lease
Agreement
Lease
agreements for the properties described in Section 3.14 above.
(xi)
Insider
Agreements
The
Company has entered into indemnification agreements with each of its directors
as well as with officers Gadi Maroz and Lihi Segal.
The
Company has entered into employment/consultancy agreements and stock option
grants and agreements with each of its officers.
Consulting
Agreement with Chairman of the Board, Mr. Gideon Barak (up to December 31,
2005)
Employment
Agreement with Chairman of the Board, Mr. Gideon Barak (as of January 1,
2006)
Transaction
documents relating to the purchase of the Company’s shares of preferred
stock.
Employment
Agreement with Ms. Lihi Segal, spouse of Mr. Gideon Barak, Chairman of the
Company’s Board of Directors.
The
Gemini BLL Guaranty
The
VLL
Guaranties
The
Keep
Well Agreement
3.20
- Insurance
The
Company maintains the following Insurance Policies:
2. |
Property
and Liability Insurance valid January 8, 2006 through January 8,
2007 with
Atlantic Specialty Insurance Company A.M. Best A XIV, including
crime,
general liability (including international), automobile, umbrella,
excess
liability, errors and omissions and terrorism
coverages.
|
4. |
Open
Cargo insurance policy with Indemnity Insurance Company of North
America,
policy # N01191834, covering all shipment, including transit to
and from
the vessel, of lawful goods and merchandise consisting principally
of
Instant Messaging Devices. Effective as of September 17, 2004 until
canceled by either party giving the other 30 days written notice.
|
5. |
Medical
insurance: Health - Blue Cross of CA, Dental - Delta
Dental
|
7. |
The
ILSubsidiary maintains an insurance policy with Migdal Insurance
Ltd.
(“Migdal”) for the period from July 1, 2005 to June 30, 2006,
covering:
|
8. |
Fire
damage to its office premises and contents. The policy excludes
business
interruption losses.
|
9. |
General
liability to third parties
|
10. |
Employer’s
liability insurance.
|
11. |
Electronic
equipment.
|
12. |
Theft
or loss of petty cash in the Israeli Subsidiary’s offices up to the amount
of US$5,000.
|
13. |
Professional
liability
|
Under
the
Microsoft MSN Mobile Service Client Development Agreement, the Company is
required to obtain an Error and Omission insurance. As of the date of the
Agreement, the Company is soliciting offers for said insurance.
3.21
- Governmental Actions/Filings
Reference
is made to the disclosure made under Sections 3.1(a) and 3.8 above with respect
to the Sasken Agreement and the implications on the OCS grant.
"Approved
Enterprise"
Reference
is made to the disclosure under Section 3.6(a) above regarding encryption
matters.
3.22
- Interested Party Transactions
Reference
is made to Section 3.19(i) above with respect to current and former officers
that have executed notes in favor of the Company pursuant to the early exercise
of stock options.
Carmit
Haller, wife of CEO was an employee of the Company.
As
of
February 15, 2006, the Company has a debt in the sum of approximatlt$253K
to
Gideon Barak and/or entities controlled by Gideon Barak, Chairman of the
Company’s Board, for sums unpaid under those certain Consultancy
Agreements.
The
Company has a debt in the sum of NIS50,130 to Lihi Segal, the Company’s CFO, for
sums unpaid under that certain employment agreement.
Reference
is hereby made to the Insider Agreements under Section 3.19(a)(ix)
above.
3.24
- Stockholder Approval
As
of the
date of signing of this Agreement, the Company has only obtained its Board
of
Directors’ consent to the execution of this Agreement and only shareholders
Gemini Israel Venture Funds (and related entities) and Landa Ventures Ltd.
have
entered into the Support Agreement. Except for the foregoing shareholders,
at
the date of signing of this Agreement no other shareholder of the Company
has
agreed to vote in favor of the conversion of any preferred stock it holds
and/or
may be entitled to receive (e.g. pursuant to the exercise of any Warrant
that
Person may hold) and no shareholder has agreed to vote in favor of the
Merger.
Pre-Merger
Capitalization Table
SCHEDULE
5.1
List
of Exceptions to Limitations on Conduct of Bushiness Prior to the
Effective
SCHEDULE
5.1 (j)
Exceptions
to Section 5.1(j) of the Agreement
See
schedule 1.1 above
SCHEDULE
5.1 (k)
Special
Remuneration
The
Company may need to amend its employee stock option plan in order to comply
with
this Agreement.