Document:

EX-10.1

 

PARTY CITY CORPORATION

INDEMNIFICATION AGREEMENT

     This
Indemnification Agreement (“Agreement”) is effective
as of May 26, 2005 by
and between PARTY CITY CORPORATION, a Delaware corporation (the “Company”), and
____________(“Indemnitee”).

     WHEREAS, the Company desires to attract and retain the services of highly qualified
individuals, such as Indemnitee, to serve the Company and its related entities;

     WHEREAS, in order to induce Indemnitee to continue to provide services to the Company, the
Company wishes to provide for the indemnification of, and the advancement of expenses to,
Indemnitee to the maximum extent permitted by law;

     WHEREAS, the Amended and Restated Certificate of Incorporation of the Company (the
“Charter”) provides for the indemnification of the Company’s officers, directors, agents,
and employees to the maximum extent authorized by law;

     WHEREAS, the Charter and Section 145 of the Delaware General Corporation Law, by their
non-exclusive nature, permit contracts between the Company and the members of its Board of
Directors, its officers and its employees;

     WHEREAS, the Company and Indemnitee recognize the continued difficulty in obtaining liability
insurance for the Company’s directors, officers, employees, agents and fiduciaries, the significant
increases in the cost of such insurance and the general reductions in the coverage of such
insurance;

     WHEREAS, the Company and Indemnitee further recognize the substantial increase in corporate
litigation in general, subjecting directors, officers, employees, agents and fiduciaries to
expensive litigation risks at the same time as the availability and coverage of liability insurance
has been severely limited; and

     WHEREAS, in view of the considerations set forth above, the Company desires that Indemnitee
shall be indemnified and advanced expenses by the Company as set forth herein;

     NOW, THEREFORE, the Company and Indemnitee hereby agree as set forth below.

     1. Certain Definitions.

          (a) “Board of Directors” shall mean the Board of Directors of the Company.

          (b) “Change in Control” shall mean:

               (1) the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3)
or 14(d)(2) of the Securities Exchange Act of 1934, as amended) (each a “Person”) of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Securities Exchange
Act of 1934, as amended) of 15% or more of either (i) the then

 

 

outstanding shares of common stock of the Company (the “Outstanding Company Common
Stock”) or (ii) the combined voting power of the then outstanding Voting Securities (the
“Outstanding Company Voting Securities”); provided, however, for as long as
Tennenbaum Capital Partners, LLC and its affiliates beneficially own 15% or more of the Outstanding
Company Common Stock or Outstanding Company Voting Securities, such ownership or any acquisition or
disposition of such securities shall not be deemed a Change of Control hereunder; or

               (2) individuals who, as of the date hereof, constitute the Board of Directors (the
“Incumbent Board”) cease for any reason to constitute at least a majority of the Board of
Directors; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the stockholders, was approved by a
vote of at least a majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or removal of directors or other actual or
threatened solicitation of proxies of consents by or on behalf of a Person other than the Board of
Directors; or

               (3) consummation of a reorganization, merger or consolidation or sale or other disposition of
all or substantially all of the assets of the Company (a “Business Combination”), in each
case, unless, following such Business Combination, (i) the Persons who were the beneficial owners
of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior
to such Business Combination, respectively, beneficially own, directly or indirectly, more than 50%
of the then outstanding shares of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of directors,
respectively, of the corporation resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction owns the Company or all or
substantially all of the Company’s assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior to such Business
Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities,
respectively, (ii) no Person (excluding any corporation resulting from such Business Combination or
any employee benefit plan (or related trust) of the Company or such corporation resulting from such
Business Combination) beneficially owns, directly or indirectly, 15% or more of, respectively, the
then outstanding shares of common stock of the corporation resulting from such Business Combination
or the combined voting power of the then outstanding voting securities of such corporation except
to the extent that such ownership existed prior to the Business Combination, and (iii) at least a
majority of the members of the Board of Directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board of Directors, providing for such Business Combination; or

               (4) approval by the stockholders of a complete liquidation or dissolution of the Company.

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          (c) “Claim” shall mean, with respect to a Covered Event, any threatened, pending or
completed action, suit, proceeding or alternative dispute resolution mechanism, or any hearing,
inquiry or investigation that Indemnitee in good faith believes might lead to the institution of
any such action, suit, proceeding or alternative dispute resolution mechanism, whether civil,
criminal, administrative, investigative or other.

          (d) “Covered Event” shall mean any event or occurrence related to the fact that
Indemnitee is or was a director, officer, employee, consultant, agent or fiduciary of the Company,
or any subsidiary of the Company, or is or was serving at the request of the Company as a director,
officer, employee, consultant, agent or fiduciary of another corporation, partnership, joint
venture, trust or other enterprise, or by reason of any action or inaction on the part of
Indemnitee while serving in such capacity.

          (e) “Disinterested Director” shall mean a director of the Company who is not and was
not a party to the matter in respect of which indemnification is sought by the Indemnitee.

          (f) “Expenses” shall mean any and all expenses (including attorneys’ fees and all
other costs, expenses and obligations incurred in connection with investigating, defending, being a
witness in or participating in (including on appeal), or preparing to defend, to be a witness in or
to participate in, any action, suit, proceeding, alternative dispute resolution mechanism, hearing,
inquiry or investigation), judgments, fines, penalties and amounts paid in settlement (if such
settlement is approved in advance by the Company, which approval shall not be unreasonably withheld
or delayed), actually and reasonably incurred, of any Claim, and any federal, state, local or
foreign taxes imposed on the Indemnitee as a result of the actual or deemed receipt of any payments
under this Agreement.

          (g) “Expense Advance” shall mean, pursuant to Section 3, a payment to
Indemnitee of Expenses in advance of the settlement or final judgment of a Claim.

          (h) “Independent Legal Counsel” shall mean a law firm, a member of a law firm or an
independent practitioner that is experienced in matters of corporate law and shall include any
person who, under the applicable standards of professional conduct then prevailing, would not have
a conflict of interest in representing either the Company or the Indemnitee in an action to
determine the Indemnitee’s rights under this agreement.

          (i) References to “other enterprises” shall include employee benefit plans; references
to “fines” shall include any excise taxes assessed on Indemnitee with respect to an
employee benefit plan; and references to “serving at the request of the Company” shall
include any service as a director, officer, employee, agent or fiduciary of the Company which
imposes duties on, or involves services by, such director, officer, employee, agent or fiduciary
with respect to an employee benefit plan, its participants or its beneficiaries.

     (j) “Reviewing Party” shall mean, subject to the provisions of Section 2(d),
any person or body appointed by the Board of Directors in accordance with applicable law to review
the Company’s obligations hereunder and under applicable law, which may include a

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member or members of the Board of Directors, Independent Legal Counsel or any other person or
body not a party to the particular Claim for which Indemnitee is seeking indemnification.

          (k) “Section” refers to a section of this Agreement unless otherwise indicated.

          (l) “Voting Securities” shall mean any securities of the Company that vote generally
in the election of directors.

     2. Indemnification.

          (a) Indemnification of Expenses. Subject to the provisions of Section 2(b),
the Company shall indemnify Indemnitee for Expenses to the fullest extent permitted by law if
Indemnitee was or is or becomes a party to or witness or other participant in, or is threatened to
be made a party to or witness or other participant in, any Claim (by reason of or arising in part
out of a Covered Event), including all interest, assessments and other charges paid or payable in
connection with or in respect of such Expenses.

          (b) Review of Indemnification Obligations. Notwithstanding the foregoing, in the
event any Reviewing Party shall have determined pursuant to a written legal opinion that Indemnitee
is not entitled to be indemnified hereunder under applicable law, (i) the Company shall have no
further obligation under Section 2(a) to make any payments to Indemnitee not made prior to
such determination by such Reviewing Party, and (ii) the Company shall be entitled to be reimbursed
by Indemnitee (who hereby agrees to reimburse the Company) for all Expenses theretofore paid in
indemnifying Indemnitee; provided, however, that if Indemnitee has commenced or
thereafter commences legal proceedings in a court of competent jurisdiction to secure a
determination that Indemnitee is entitled to be indemnified hereunder under applicable law, any
determination made by any Reviewing Party that Indemnitee is not entitled to be indemnified
hereunder under applicable law shall not be binding and Indemnitee shall not be required to
reimburse the Company for any Expenses theretofore paid in indemnifying Indemnitee until a final
judicial determination is made with respect thereto (as to which all rights of appeal therefrom
have been exhausted or lapsed). Indemnitee’s obligation to reimburse the Company for any Expenses
shall be unsecured and no interest shall be charged thereon.

          (c) Indemnitee Rights on Unfavorable Determination, Binding Effect. If any Reviewing
Party determines that Indemnitee substantively is not entitled to be indemnified hereunder in whole
or in part under applicable law, Indemnitee shall have the right to commence litigation seeking an
initial determination by the court or challenging any such determination by such Reviewing Party or
any aspect thereof, including the legal or factual bases therefor, and, subject to the provisions
of Section 17, the Company hereby consents to service of process and to appear in any such
proceeding. Absent such litigation, any determination by any Reviewing Party shall be conclusive
and binding on the Company and Indemnitee.

          (d) Selection of Reviewing Party; Change in Control. If requested by Indemnitee,
Independent Legal Counsel shall be the Reviewing Party with respect to all matters thereafter
arising concerning the rights of Indemnitee to indemnification of Expenses under this Agreement or
any other agreement or under the Charter or the Company’s Bylaws (the “Bylaws”), as now or
hereafter in effect, or under any other applicable law. If no such request is

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made by Indemnitee, any Reviewing Party shall be selected by (i) the Board of Directors, by a
majority vote of a quorum consisting of Disinterested Directors, or (ii) if a quorum of the Board
of Directors consisting of Disinterested Directors is not obtainable or, even if obtainable, such
quorum of Disinterested Directors so directs, by Independent Legal Counsel in writing to the Board
of Directors, a copy of which shall be delivered to the Indemnitee. In the event the Reviewing
Party shall be Independent Legal Counsel at the request of the Indemnitee, the Independent Legal
Counsel shall be selected by the Board of Directors unless a Change of Control shall have occurred
within two years prior to the date of the commencement of the action, suit or proceeding for which
indemnification is claimed, in which case the Independent Legal Counsel shall be selected by the
Indemnitee and approved by the Company (which approval shall not be unreasonably withheld or
delayed) unless the claimant shall request that such selection be made by the Board of Directors.
Such counsel, among other things, shall render its written opinion to the Company and Indemnitee as
to whether and to what extent Indemnitee would be entitled to be indemnified hereunder under
applicable law and the Company agrees to abide by such opinion. The Company agrees to pay the
reasonable fees of the Independent Legal Counsel referred to above and to indemnify fully such
counsel against any and all expenses (including attorneys’ fees), claims, liabilities and damages
arising out of or relating to this Agreement or its engagement pursuant hereto. Notwithstanding
any other provision of this Agreement, the Company shall not be required to pay Expenses of more
than one Independent Legal Counsel in connection with all matters concerning a single Indemnitee,
and such Independent Legal Counsel shall be the Independent Legal Counsel for any or all other
Indemnitees unless (i) the Company otherwise determines or (ii) any Indemnitee shall provide a
written statement setting forth in detail a reasonable objection to such Independent Legal Counsel
representing other Indemnitees.

          (e) Mandatory Payment of Expenses. Notwithstanding any other provision of this
Agreement other than Section 10, to the extent that Indemnitee has been successful on the
merits or otherwise, including, without limitation, the dismissal of an action without prejudice,
in defense of any Claim, Indemnitee shall be indemnified against all Expenses incurred by
Indemnitee in connection therewith.

     3. Expense Advances.

          (a) Obligation to Make Expense Advances. Upon receipt of a written undertaking by or
on behalf of the Indemnitee to repay such amounts if it shall ultimately be determined that the
Indemnitee is not entitled to be indemnified therefor by the Company, the Company shall make
Expense Advances to Indemnitee.

          (b) Form of Undertaking. Any written undertaking by the Indemnitee to repay any
Expense Advances hereunder shall be unsecured, shall not require any guarantee from any other
Person and no interest shall be charged thereon.

          (c) Determination of Reasonable Expense Advances. The parties agree that for the
purposes of any Expense Advance for which Indemnitee has made written demand to the Company in
accordance with this Agreement, all Expenses included in such Expense Advance that are represented
by Indemnitee’s counsel as being reasonable shall be presumed conclusively to be reasonable.

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     4. Procedures for Indemnification and Expense Advances.

          (a) Timing of Payment. All payments of Expenses (including, without limitation,
Expense Advances) by the Company to the Indemnitee pursuant to this Agreement shall be made to the
fullest extent permitted by law as soon as practicable after written demand by Indemnitee therefor
is presented to the Company, but in no event later than thirty (30) business days after such
written demand by Indemnitee is presented to the Company, except in the case of Expense Advances,
which shall be made no later than ten (10) business days after such written demand by Indemnitee is
presented to the Company.

          (b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a condition precedent to
Indemnitee’s right to be indemnified or Indemnitee’s right to receive Expense Advances under this
Agreement, give the Company notice in writing as soon as practicable of any Claim made against
Indemnitee for which indemnification will or could be sought under this Agreement. Notice to the
Company shall be directed to the General Counsel of the Company at the address shown on the
signature page of this Agreement (or such other address as the Company shall designate in writing
to Indemnitee). In addition, Indemnitee shall reasonably cooperate with the Company and shall give
the Company such information as it may reasonably require.

          (c) No Presumptions, Burden of Proof.

               (1) In making a determination with respect to entitlement to indemnification hereunder, the
Reviewing Party shall presume that Indemnitee is entitled to indemnification under this Agreement
if Indemnitee has submitted a request for indemnification in accordance with Section 2(a),
and the Company shall have the burden of proof to overcome that presumption. Neither the failure
of the Company (including by its directors or Independent Counsel) to have made a determination
prior to the commencement of any action pursuant to this Agreement that indemnification is proper
in the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual
determination by the Company (including by its directors or Independent Counsel) that Indemnitee
has not met such applicable standard of conduct, shall be a defense to the action or create a
presumption that Indemnitee has not met the applicable standard of conduct.

               (2) If the Reviewing Party is selected by the Board of Directors and such Reviewing Party
shall not have made a determination within thirty (30) days after receipt by the Company of the
request therefor, the requisite determination of entitlement to indemnification shall be deemed to
have been made and Indemnitee shall be entitled to such indemnification, absent (i) a misstatement
by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s
statement not materially misleading, in connection with the request for indemnification, or (ii) a
final judicial determination that any or all such indemnification is expressly prohibited under
applicable law; provided, however, that such 30-day period may be extended for a
reasonable time, not to exceed an additional fifteen (15) days, if the Reviewing Party requires
such additional time for the obtaining or evaluating of documentation and/or information relating
thereto.

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               (3) For purposes of any determination of good faith, Indemnitee shall be deemed to have acted
in good faith if Indemnitee’s action is based on the records or books of account of the Company,
including financial statements, or on information supplied to Indemnitee by the other officers of
the Company in the course of their duties, or on the advice of legal counsel for the Company or on
information or records given or reports made to the Company by an independent certified public
accountant or by an appraiser or other expert selected by the Company. The provisions of this
Section 4(c)(3) shall not be deemed to be exclusive or to limit in any way the other
circumstances in which the Indemnitee may be deemed or found to have met the applicable standard of
conduct set forth in this Agreement.

               (4) For purposes of this Agreement, the termination of any Claim by judgment, order,
settlement (whether with or without court approval) or conviction, or upon a plea of nolo
contendere, or its equivalent, shall not create a presumption that Indemnitee did not meet any
particular standard of conduct or have any particular belief or that a court has determined that
indemnification is not permitted by this Agreement or applicable law.

          (d) Notice to Insurers. If, at the time of the receipt by the Company of a notice of
a Claim pursuant to Section 4(b), the Company has liability insurance in effect which may
cover such Claim, the Company shall give prompt notice of the commencement of such Claim to the
insurers in accordance with the procedures set forth in the respective policies. The Company shall
thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the
Indemnitee, all amounts payable as a result of such Claim in accordance with the terms of such
policies.

          (e) Selection of Counsel. In the event the Company shall be obligated hereunder to
provide indemnification for or make any Expense Advances with respect to the Expenses of any Claim,
the Company, if appropriate, shall be entitled to assume the defense of such Claim with counsel
approved by Indemnitee (which approval shall not be unreasonably withheld or delayed) upon the
delivery to Indemnitee of written notice of the Company’s election to do so. After delivery of
such notice, approval of such counsel by Indemnitee and the retention of such counsel by the
Company, the Company will not be liable to Indemnitee under this Agreement for any fees or expenses
of separate counsel subsequently employed by or on behalf of Indemnitee with respect to the same
Claim; provided that, (i) Indemnitee shall have the right to employ Indemnitee’s separate
counsel in any such Claim at Indemnitee’s expense and (ii) if (A) the employment of separate
counsel by Indemnitee has been previously authorized by the Company, (B) Indemnitee shall have
reasonably concluded that there may be a conflict of interest between the Company and Indemnitee in
the conduct of any such defense, or (C) the Company shall not continue to retain such counsel to
defend such Claim, then the fees and expenses of Indemnitee’s separate counsel shall be Expenses
for which Indemnitee may receive indemnification or Expense Advances hereunder.

          (f) Settlement by Company. The Company shall be permitted to settle any action,
except that it shall not settle any action or claim in any manner which may impose any penalty or
limitation or constitute any admission of wrongdoing or which may compromise, or may adversely
effect, the defense of the Indemnitee in any other proceeding, whether civil or criminal, without
Indemnitee’s prior written consent. Neither the Company nor Indemnitee will unreasonably withhold
or delay its consent to any proposed settlement.

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     5. Additional Indemnification Rights, Nonexclusivity.

          (a) Scope. The Company hereby agrees to indemnify the Indemnitee to the fullest
extent permitted by law, notwithstanding that such indemnification may not be specifically
authorized by the Charter, the Bylaws, or by statute as of the date hereof. In the event of any
change after the date of this Agreement in any applicable law, statute or rule which expands the
right of a Delaware corporation to indemnify a member of its board of directors or an officer,
employee, agent or fiduciary, it is the intent of the parties hereto that Indemnitee shall enjoy by
this Agreement the greater benefits afforded by such change. In the event of any change in any
applicable law, statute or rule which narrows the right of a Delaware corporation to indemnify a
member of its board of directors or an officer, employee, agent or fiduciary, such change, to the
extent not otherwise required by such law, statute or rule to be applied to this Agreement, shall
have no effect on this Agreement or the parties’ rights and obligations hereunder except as set
forth in Section 10(a).

          (b) Nonexclusivity. The indemnification and the payment of Expense Advances provided
by this Agreement shall be in addition to any rights to which Indemnitee may be entitled under the
Charter, the Bylaws, any other agreement, any vote of stockholders or Disinterested Directors, the
General Corporation Law of the State of Delaware, or otherwise. The indemnification and the
payment of Expense Advances provided under this Agreement shall continue as to Indemnitee for any
action taken or not taken while serving in an indemnified capacity even though subsequent thereto
Indemnitee may have ceased to serve in such capacity.

     6. No Duplication of Payments. The Company shall not be liable under this Agreement
to make any payment in connection with any Claim made against Indemnitee to the extent Indemnitee
has otherwise actually received payment (under any insurance policy, provision of the Charter or
Bylaws or otherwise) of the amounts otherwise payable hereunder.

     7. Partial Indemnification. If Indemnitee is entitled under any provision of this
Agreement to indemnification by the Company for some or a portion of Expenses incurred in
connection with any Claim, but not, however, for the total amount thereof, the Company shall
nevertheless indemnify Indemnitee for the portion of such Expenses to which Indemnitee is entitled.

     8. Mutual Acknowledgment. Both the Company and Indemnitee acknowledge that in certain
instances, federal law or applicable public policy may prohibit the Company from indemnifying its
directors, officers, employees, agents or fiduciaries under this Agreement or otherwise.
Indemnitee understands and acknowledges that the Company has undertaken or may be required in the
future to undertake with the Securities and Exchange Commission, or to submit the question of
indemnification to a court in certain circumstances for, a determination of the Company’s right
under public policy to indemnify Indemnitee.

     9. Liability Insurance. From the date hereof until the sixth anniversary of the date Indemnitee ceases to be an
officer or director of the Company, the Company shall maintain a directors’ and officers’ liability
insurance policy covering the Indemnitee, with coverage in amount and scope at least as favorable
to Indemnitee as any of the Company’s other directors and officers.

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     10. Exceptions. Notwithstanding any other provision of this Agreement, the Company
shall not be obligated pursuant to the terms of this Agreement:

          (a) Excluded Action or Omissions. To indemnify Indemnitee for Expenses resulting from
acts, omissions or transactions for which Indemnitee is prohibited from receiving indemnification
under this Agreement or applicable law; provided, however, that notwithstanding any
limitation set forth in this Section 10(a) regarding the Company’s obligation to provide
indemnification, Indemnitee shall be entitled under Section 3 to receive Expense Advances
hereunder with respect to any such Claim unless and until a court having jurisdiction over the
Claim shall have made a final judicial determination (as to which all rights of appeal therefrom
have been exhausted or lapsed) that Indemnitee has engaged in acts, omissions or transactions for
which Indemnitee is prohibited from receiving indemnification under this Agreement or applicable
law.

          (b) Claims Initiated by Indemnitee. To indemnify or make Expense Advances to
Indemnitee with respect to Claims initiated or brought voluntarily by Indemnitee and not by way of
defense, counterclaim or crossclaim, except (i) with respect to actions or proceedings brought to
establish or enforce a right to indemnification under this Agreement or any other agreement or
insurance policy or under the Charter or Bylaws now or hereafter in effect relating to Claims for
Covered Events, (ii) in specific cases if the Board of Directors has approved the initiation or
bringing of such Claim, or (iii) as otherwise required under Section 145 of the General Corporation
Law of the State of Delaware, regardless of whether Indemnitee ultimately is determined to be
entitled to such indemnification or insurance recovery, as the case may be.

          (c) Bad Faith. To indemnify Indemnitee for any Expenses incurred by the Indemnitee
with respect to any action instituted (i) by Indemnitee to enforce or interpret this Agreement, if
a court having jurisdiction over such action determines as provided in Section 15 that each
of the material assertions made by the Indemnitee as a basis for such action was made in bad faith
or was frivolous, or (ii) by or in the name of the Company to enforce or interpret this Agreement,
if a court having jurisdiction over such action determines as provided in Section 15 that
each of the material defenses asserted by Indemnitee in such action was made in bad faith or was
frivolous.

          (d) Claims Under Section 16(b). To indemnify Indemnitee for expenses and the payment
of profits arising from the purchase and sale by Indemnitee of securities in violation of Section
16(b) of the Exchange Act, or any similar successor statute; provided, however,
that notwithstanding any limitation set forth in this Section 10(d) regarding the Company’s
obligation to provide indemnification, Indemnitee shall be entitled under Section 3 to
receive Expense Advances hereunder with respect to any such Claim unless and until a court having
jurisdiction
over the Claim shall have made a final judicial determination (as to which all rights of
appeal therefrom have been exhausted or lapsed) that Indemnitee has violated said statute.

          (e) Illegal Remuneration. To indemnify Indemnitee in respect to remuneration paid to
Indemnitee if it shall be determined by final judgment or final adjudication that such remuneration
was in violation of law.

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          (f) Unauthorized Settlement. To indemnify Indemnitee for any amounts paid in
settlement of any action or claim without Company’s written consent.

     11. Contribution. If the indemnification provided for in this Agreement is
unavailable by reason of a Court decision based on grounds other than any of those set forth in
paragraphs (a) through (f) of Section 10, then in respect of any Claim in which the Company
is jointly liable with Indemnitee (or would be if joined in such Claim), the Company, in lieu of
indemnifying Indemnitee, shall contribute to the Expenses incurred by Indemnitee in connection with
any Claim relating to an indemnifiable event under this Agreement, in such proportion as is deemed
fair and reasonable in light of all of the circumstances of such Claim in order to reflect (i) the
relative benefits received by the Company, on the one hand, and Indemnitee, on the other hand, as a
result of the events(s) and/or transaction(s) giving cause to such Claim, and (ii) the relative
fault of the Company (and its directors, officers, employees and agents) on the one hand and
Indemnitee on the other hand in connection with such event(s) and/or transaction(s). The relative
fault of the Company on the one hand and of Indemnitee on the other shall be determined by
reference to, among other things, the parties’ relative intent, knowledge, access to information,
and opportunity to correct or prevent the circumstances resulting in such Expenses. The Company
agrees that it would not be just and equitable if contribution pursuant to this Section 11
were determined by pro rata allocation or any other method of allocation which does not take
account of the foregoing equitable considerations.

     12. Duration of Agreement. All agreements and obligations of the Company contained herein
shall continue during the period Indemnitee serves as a director, officer, employee, agent or
fiduciary of the Company or as a director, officer, employee, agent or fiduciary of any other
corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which
Indemnitee serves at the request of the Company and shall continue thereafter so long as Indemnitee
shall be subject to any possible Claim (including any rights of appeal thereto) by reason of a
Covered Event, whether or not he is acting in any such capacity at the time any liability or
expense is incurred for which indemnification can be provided under this Agreement.

     13. Counterparts. This Agreement may be executed in one or more counterparts, each of
which shall constitute an original.

     14. Binding Effect, Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the parties hereto and their respective successors,
assigns (including any direct or indirect
successor by purchase, merger, consolidation or otherwise to all or substantially all of the
business or assets of the Company), spouses, heirs and personal and legal representatives. The
Company shall require and cause any successor (whether direct or indirect, and whether by purchase,
merger, consolidation or otherwise) to all, substantially all, or a substantial part, of the
business or assets of the Company, by written agreement in form and substance reasonably
satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform if no such succession
had taken place. This Agreement shall continue in effect regardless of whether Indemnitee
continues to serve as a director, officer, employee, agent or fiduciary (as applicable) of the
Company or of any other enterprise at the Company’s request.

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     15. Expenses Incurred in Action Relating to Enforcement or Interpretation. In the
event that any action is instituted by Indemnitee under this Agreement or under any liability
insurance policies maintained by the Company to enforce or interpret any of the terms hereof or
thereof, Indemnitee shall be entitled to be indemnified for all Expenses incurred by Indemnitee
with respect to such action (including without limitation attorneys’ fees), regardless of whether
Indemnitee is ultimately successful in such action, unless as a part of such action a court having
jurisdiction over such action makes a final judicial determination (as to which all rights of
appeal therefrom have been exhausted or lapsed) that each of the material assertions made by
Indemnitee as a basis for such action was not made in good faith or was frivolous;
provided, however, that until such final judicial determination is made, Indemnitee
shall be entitled under Section 3 to receive payment of Expense Advances hereunder with
respect to such action. In the event of an action instituted by or in the name of the Company
under this Agreement to enforce or interpret any of the terms of this Agreement, Indemnitee shall
be entitled to be indemnified for all expenses incurred by Indemnitee in defense of such action
(including without limitation costs and expenses incurred with respect to Indemnitee’s
counterclaims and cross-claims made in such action), unless as a part of such action a court having
jurisdiction over such action makes a final judicial determination (as to which all rights of
appeal therefrom have been exhausted or lapsed) that each of the material defenses asserted by
Indemnitee in such action was made in bad faith or was frivolous; provided,
however, that until such final judicial determination is made, Indemnitee shall be entitled
under Section 3 to receive payment of Expense Advances hereunder with respect to such
action.

     16. Notice. All notices, requests, demands and other communications under this
Agreement shall be in writing and shall be deemed duly given (i) if delivered by hand and signed
for by the party addressed, on the date of such delivery, or (ii) if mailed by domestic certified
or registered mail with postage prepaid, on the third business day after the date postmarked.
Addresses for notice to either party are as shown on the signature page of this Agreement, or as
subsequently modified by written notice.

     17. Consent to Jurisdiction. The Company and Indemnitee each hereby irrevocably
consent to the jurisdiction of the courts of the State of Delaware for all purposes in connection
with any action or proceeding
which arises out of or relates to this Agreement and agree that any action instituted under
this Agreement shall be commenced, prosecuted and continued only in the Court of Chancery of the
State of Delaware in and for New Castle County, which shall be the exclusive and only proper forum
for adjudicating such a claim.

     18. Severability. The provisions of this Agreement shall be severable in the event
that any of the provisions hereof (including any provision within a single section, paragraph or
sentence) are held by a court of competent jurisdiction to be invalid, void or otherwise
unenforceable, and the remaining provisions shall remain enforceable to the fullest extent
permitted by law. Furthermore, to the fullest extent possible, the provisions of this Agreement
(including without limitation each portion of this Agreement containing any provision held to be
invalid, void or otherwise unenforceable, which is not itself invalid, void or unenforceable) shall
be construed so as to give effect to the intent manifested by the provision held invalid, illegal
or unenforceable.

11

 

     19. Choice of Law. This Agreement, and all rights, remedies, liabilities, powers and
duties of the parties to this Agreement, shall be governed by and construed in accordance with the
laws of the State of Delaware without regard to principles of conflicts of laws.

     20. Subrogation. In the event of payment under this Agreement, the Company shall be
subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall
execute all documents required and shall do all acts that may be necessary to secure such rights
and to enable the Company effectively to bring suit to enforce such rights.

     21. Amendment and Termination. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless it is in writing signed by both the
parties hereto. No waiver of any of the provisions of this Agreement shall be deemed to be or
shall constitute a waiver of any other provisions hereof (whether or not similar), nor shall such
waiver constitute a continuing waiver.

     22. Integration and Entire Agreement. Without limiting any of the rights of
Indemnitee under the Charter or Bylaws, as they may be amended from time to time, this Agreement
sets forth the entire understanding between the parties hereto and supersedes and merges all
previous written and oral negotiations, commitments, understandings and agreements relating to the
subject matter hereof between the parties hereto.

     23. No Construction as Employment Agreement. Nothing contained in this Agreement
shall be construed as giving Indemnitee any right to be retained in the employ of the Company or
any of its subsidiaries or affiliated entities.

     IN WITNESS WHEREOF, the parties hereto have executed this Indemnification Agreement as of the
date first above written.

PARTY CITY CORPORATION

		
	By: 	

Name:

Title:

Address:

	 	 	 	 	 
	 	AGREED TO AND ACCEPTED

INDEMNITEE:

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 	
Address: 	 	 

12<PAGE>
                                                                   Exhibit 10.12

                          TECHNOLOGY LICENSE AGREEMENT

THIS TECHNOLOGY LICENSE AGREEMENT ("Agreement"), effective as defined in Section
10 below ("Effective Date"), is made and entered into by and between Visa
International Service Association, a Delaware corporation with principal offices
located at 900 Metro Center Boulevard, Foster City, California U. S. A. 94404
("Visa") and Net1 Holdings S.A.R.L., a Luxembourg corporation, and Net1
Investment Holdings (Pty) Ltd., a South African corporation, and which may be
contacted through general counsel at #3-21965 49th Avenue, Langley, British
Columbia, Canada, V3A 8J7 (individually and collectively called "Net1").

                                    RECITALS

WHEREAS, Net1 is the owner of certain "Technology Rights" (as later defined
herein), and has the right to grant licenses thereunder; and

WHEREAS, Visa desires to use the Technology Rights in commercial applications;
and

WHEREAS, Net1 is willing to grant, and Visa desires to obtain a license under
the Technology Rights for commercial applications thereof in accordance with the
terms and conditions set forth herein.

NOW, THEREFORE, for good and valuable consideration, the sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:

1. DEFINITIONS

For the purposes of this Agreement, the following words and phrases shall have
the following meanings:

      1.1 "COPAC-1" shall mean the first version of the chip offline
preauthorized credit product developed by Visa and being built by Net1 on behalf
of Visa.

      1.2 "EMV" shall mean the Europay, MasterCard and Visa smart card standards
established in January, 1995 to insure interoperability at smart card terminals,
as modified from time to time.

      1.3 "Enhancements" shall mean all extensions, updates, improvements,
modifications, releases, replacements and versions of the Products.

      1.4 "Financial Services Industry" shall mean persons or companies that are
directly or indirectly (i) making loans; (ii) taking deposits; (iii) selling,
brokering, or factoring (a) securities, (b) insurance, (c) mortgages or (d)
receivables; and (iv) providing payment services, such as issuing charge cards,
credit cards, payment cards, debit cards or any other system that could compete
with such payment methods.

      1.5 "Intellectual Property Rights" shall mean all current worldwide
patents and other patent rights, utility model copyrights, mask work rights,
trade secrets and all other intellectual property rights, including without
limitation all applications and registrations with respect thereto that exist to
the Effective Date.

                                       1
<PAGE>

      1.6 "Member" shall mean entities that are direct or indirect members of
the Visa International Service Association in accordance with Visa's Operating
Regulations.

      1.7 "Patents" shall mean all current worldwide patents and patent rights
of Net1, including Patent No. 5,171,416, including without limitation,
enhancements, improvements and expansions to all the foregoing and any foreign
patent applications corresponding to any patent associated with any Net1 product
or service using Relevant Technology.

      1.8 "Payment System" shall mean any product or service offered by Net1
that utilizes the Technology Rights and replaces cash or other payment devices.

      1.9 "Product" shall mean any product or service the manufacture, use or
sale of which by an unlicensed third party would constitute an infringement of
the Technology Rights.

      1.10 "Relevant Technology" shall mean any technology that is (i) related
to financial services; or (ii) can be utilized in the Financial Services
Industry.

      1.11 "Sale" shall mean any sale, transfer, license or other disposition of
a Product to a third party.

      1.12 "Technology Rights" shall mean all current worldwide patent rights,
copyrights, mask work rights, trade secrets and any other Intellectual Property
Rights of Net1. This shall include, but is not limited to Net1's Electronic
Cheque, Electronic Cash - type 1; Electronic Cash - Card to Card; PC systems for
Personalization and Initialization; Card/Terminal Specifications; Megalink and
other technology and software, including source code and object code, developed
by or on behalf of Net1; and in general, other facilities as described in U. S.
Patent No. 5,171,416 (the "416 Patent") including without limitation,
enhancements, improvements and expansions to all of the foregoing. Patent rights
shall include any foreign patent applications corresponding to any patent
associated with any Net1 product or service using Relevant Technology.

      1.13 "Visa Competitor" shall include MasterCard, Europay, American
Express, Discover, Diners, Carte Blanche, JCB or their parents, subsidiaries and
affiliates.

2. GRANT OF RIGHTS

      2.1 Grant of License - Subject to the terms and conditions of this
Agreement, Net1 hereby grants to Visa a perpetual and irrevocable worldwide
royalty free license to the Technology Rights to make use of and to sublicense
Products.

      2.2 Right to Sublicense in Financial Services Industry - Visa shall have
the right to sublicense the rights granted in Section 2.1 to (i) Members and
(ii) any entity in the Financial Services Industry. Visa agrees not to grant a
sublicense to a Payment System to a non-Member entity in the Financial Services
Industry if such entity already has a right to use such Payment System from Net1
without first obtaining the prior written consent from Net1.

      2.3 Right to Sublicense Outside Financial Services Industry - Visa shall
have the right to sublicense the rights granted in Section 2.1 above to any
entity outside of the Financial Services

                                       2
<PAGE>

Industry for the sole purpose of providing Products to Visa or Visa's
sublicensees listed above in Section 2.2.

      2.4 Exclusivity of License - Subject to the rights reserved below, Net1
grants Visa exclusivity for the rights granted in Section 2.1, 2.2 and 2.3 above
with regard to Patents for the Financial Services Industry.

      Subject to the terms of this Agreement, with regard to all other
Technology Rights, the license shall be non-exclusive.

      2.5 License Back - Subject to the terms of this Agreement, Visa hereby
grants to Net1 an irrevocable, worldwide, perpetual, royalty-free license to the
Patents to make, use and sell Payments Systems and Net1 Products.

      2.6 Branding - While Net1 shall retain the rights to sell Payment Systems,
including Universal Electronic Payment Systems, (except as provided in Section
2.7), Net1 will prohibit any entity from using Payment Systems or any of Net1's
marks with any card or product that is branded with a mark owned or licensed by
a Visa Competitor. Net1 will restrict and enforce such restriction on any
licensees of its Payment Systems.

      2.7 Competitors - Notwithstanding anything to the contrary, Net1 shall not
license any Technology Rights to a Visa Competitor for the term of this
Agreement, plus eighteen (18) months if terminated pursuant to Section 7 herein.

      2.8 Waiver of claims - Net1 hereby waives any and all claims, whether
known or unknown, that it may have against Visa arising out of any activity of
Visa prior to the Effective Date.

      2.9 Covenant Not to Sue - Net1 hereby grants to Visa and its Members a
covenant not to sue either Visa, its Members, Visa's or its Members' third party
vendors or customers for infringement of Technology Rights of Net1 for their
manufacture, use or sale of any product or service offered by Visa unless Net1
has the right to terminate this Agreement pursuant to Section 7.2.

      2.10 Prior Agreements - Any contractual agreements (inclusive of licensing
agreements) relating to use of a Payment System entered into by Net1 prior to
July 20, 1996 shall be retained by Net1.

      2.11 Agents - Net1 will not enter into any agency or sublicensing
agreement (such as the agreement with BGS) which prohibits such agent from
acting as an agent or licensee of Visa.

3. CONSIDERATION

      3.1 License Fee - Visa will pay Net1 a total of One Million U.S. Dollars,
receipt of which is hereby acknowledged.

      3.2 Sublicensing Fees - Visa shall pay Net1 a fee of One Thousand Dollars
for each Member that is sublicensed by Visa to use Technology Rights and One
Thousand Dollars for each non-Member entity that is sublicensed by Visa to use
Technology Rights. This amount shall be paid

                                       3
<PAGE>

within thirty (30) days of the end of the calendar quarter in which Visa grants
a Member a license for such use. Along with such payment, Visa shall submit a
report identifying the number of licenses granted.

4. REPRESENTATIONS AND WARRANTIES

      4.1 Visa Warranties - Visa represents and warrants that Visa has full
power, right and authority to enter into and carry out its obligations under
this Agreement.

      4.2 Net1 Warranties - Net1 represents and warrants that:

            A. Net1 has full power, right and authority to enter into and carry
            out its obligations under this Agreement;

            B. Net1 owns all of the intellectual property rights necessary to
            grant the license described in Section 2.1 above;

            C. Other than the agreements listed in Exhibit 2, Net1 has not
            previously granted any rights in the Net1 Technology to any third
            party that are inconsistent with the rights granted to Visa herein;

            D. To the best of Net1's knowledge, the Net1 Technology does not and
            shall not infringe any copyright, trade secret rights, patent or
            other proprietary rights of any third party;

            E. Net1 is not currently involved in or aware of any litigation or
            potential claims involving Net1, Net1 Technology or Net1's Key
            Employees, other than has already been disclosed to Visa regarding
            European patent objection; and

            F. Net1 have no conflicting obligations with any third party.

5. CONFIDENTIALITY

      5.1 General - Except as otherwise expressly provided in this Agreement,
both parties shall hold in strict confidence and not use or disclose to any
third party (other than employees, consultants and advisors who are similarly
bound in writing) any product, technical, manufacturing, process, marketing,
financial, business or other information, ideas or know-how identified in
writing as confidential ("Confidential Information") of or used by the other
party; provided, however, that Confidential Information shall not include:

            A. Information which at the time of disclosure was previously known
            to the receiving party as demonstrated by written records;

            B. Information which at the time of disclosure is published or
            otherwise generally available to the public; or

            C. Information which, after disclosure, is published or otherwise
            becomes generally available to the public through no breach of this
            Agreement by the receiving party.

                                       4
<PAGE>

      5.2 Exceptions - A party may disclose Confidential Information;

      A. In connection with the order of a court or other governmental body;
      provided however, that written notice is provided promptly to the
      disclosed party to enable the disclosed party to seek a protective order
      or otherwise prevent disclosure of such information;

      B. As required by or in compliance with laws or regulations, provided,
      however, that written notice is provided promptly to disclosed party to
      enable the disclosed party to seek a protective order to otherwise prevent
      disclosure of such information;

      C. In confidence, to accountants, banks and financing sources and their
      advisors; or

      D. In confidence, in connection with a merger or acquisition or proposed
      merger or acquisition or the like.

      5.3 Remedies - Any breach of the restrictions contained in the Section 5,
8.14, or 8.15 is a breach of this Agreement that will cause irreparable harm to
the nonbreaching party entitling the nonbreaching party to injunctive relief in
addition to all legal remedies.

6. PATENT PROSECUTION, ENFORCEMENT AND DEFENSE,

      6.1

      A. Patent Prosecution - Visa shall have the right to assume and continue
      direction of the prosecution and maintenance of existing patents and
      patent applications in all jurisdictions. This right shall include the
      right to prepare and file any reissue, reexamination, interference,
      continuing application, opposition, or other action Visa deems necessary
      to secure or maintain Patent protection in any jurisdiction. Net1, at
      Visa's request, shall cooperate and support any actions needed to
      prosecute and maintain Patent rights in all jurisdictions.

      In the event that Net1 elects not to seek patent protection for a
      patentable Net1 invention, Visa shall have the right to file and prosecute
      such patent application, at Visa's expense, in all jurisdictions and shall
      be the assignee of any patent granted. Visa shall grant a license to Net1
      for such use of such patent consistent with this Agreement.

      B. Patent Enforcement - If any third party shall, in the reasonable
      opinion of either party, infringe any of the Technology Rights, such party
      shall promptly notify the other party. Visa shall then have the sole right
      to choose and initiate a strategy to enforce the Technology Rights against
      the third party in the Financial Services Industry, which choices may
      include: (1) initiating a legal or administrative proceeding for
      infringement against the third party, in Visa's own name and/or in the
      name of Net1 if necessary, together with the right to enforce and collect
      any judgment thereon; or (2) entering into a cross-license, settlement or
      other licensing agreement with the third party. Any monetary recovery in
      connection with such enforcement strategy shall be retained by Visa.

      C. Net1 Cooperation - Net1 shall, at Visa's request, take all appropriate
      or necessary actions to assist in the prosecution of such strategy
      (including consenting to be joined in any legal or administrative
      proceeding where required by law).

                                       5
<PAGE>

      D. Diligence - Should Visa unreasonably delay in taking action with
      respect to any such infringement, then Net1 shall have the right to
      initiate a legal proceeding for infringement, at its own expense, in its
      own name, and with the right to enforce and collect any judgment thereon.
      For the purposes of this subsection only, an "unreasonable delay" is a
      delay which impairs the ability to enforce the Technology Rights against
      an identified third party infringer, or against potential future third
      party infringers. If Net1 chooses to proceed under this subparagraph
      6.1(D), Net1 shall provide Visa with 90 days written notice setting forth
      details regarding the unreasonableness of the delay. Visa shall have a
      right to cure upon receipt of this written notice.

      E. Patent Marking - Net1 and Visa agree to mark all products made using
      the patented Technology Rights with the word "Patent" and the number or
      numbers of the patent(s) applicable thereto.

      6.2 Patent Defense - During the term of this Agreement, Net1 shall notify
Visa promptly in writing of any claim asserted against Net1 by any third party
alleging infringement of any patent owned by such third party in connection with
Visa's use of the Technology Rights.

      6.3 Cooperation - Visa shall have the sole discretion to file and manage
any suit, action or other proceeding in connection with enforcement and/or
defense of the Technology Rights in the Financial Services Industry. Visa shall
be solely responsible for all costs associated with such activities. Net1 agrees
to provide all reasonable and necessary cooperation at Visa's expense.
Similarly, Net1 shall have the sole discretion to file and manage any suit,
action or other proceeding in connection with enforcement of the Technology
Rights outside of the Financial Services Industry. Net1 shall be solely
responsible for all costs associated with such activities. Visa agrees to
provide all reasonable and necessary cooperation at Net1's expense. Visa may, at
its option, bring suit in its own name or, if required by law, jointly with Net1
, at its own expense and on its own behalf for infringement of the Technology
Rights in the Financial Services Industry.

7. TERM, TERMINATION AND REMEDIES

      7.1 Term - The term of this Agreement shall commence on the Effective Date
and shall continue in full force and effect in perpetuity, unless terminated
prior to such date pursuant to this Section 7.

      7.2 Termination of Cause - Either party shall have the right to terminate
this Agreement following any material breach or default in performance under
this Agreement by the other party upon thirty (30) days prior written notice by
certified mail to the breaching party specifying the nature of the breach or
defaut. Unless the breaching party has cured the breach or default prior to the
expiration of such thirty (30) day period the non-breaching party, at its sole
option may terminate this Agreement upon written notice to the breaching party.
Termination of this Agreement shall become effective upon receipt of such notice
by the breaching party.

      7.3 Effect of Termination - Termination of this Agreement shall not
relieve the parties of any obligation accruing prior to such termination.

      7.4 Survival - The following sections shall survive expiration or
termination of this

                                       6
<PAGE>

Agreement for any reason: Sections 2,3,4,5,6.2 and 8.

      7.5 Remedies - The parties agree that the rights granted hereby are of a
special unique and extraordinary nature which gives them a special and unique
value, the loss of which cannot be reasonably or adequately compensated for in
damages in an action in law and may cause irreparable injury and damages for
which the injured party is entitled to injunctive or other equitable relief. The
granting of any equitable relief shall not be construed to waive any other
rights which the injured party might have for damages in an action at law.

8. GENERAL PROVISIONS

      8.1 Further Assurances - During the term of this Agreement and at any time
or from time to time on and after the Effective Date, Net1 shall at the request
of Visa: (i) deliver to Visa such records, data or other documents consistent
with the provisions of this Agreement, (ii) execute, and deliver or cause to be
delivered, all such assignments, consents, documents or further instruments of
transfer or license, and (iii) take or cause to be taken all such other actions,
as Visa may reasonably deem necessary or desirable in order for Visa to obtain
the full benefits of this Agreement and the transactions contemplated hereby.

      8.2 Public-Announcements - Visa shall work with Net1 on developing the
content for public announcements relating to this Agreement and the Visa-Net1
relationship. Visa shall have sole authority and discretion to determine the
details and delivery of such announcements. Net1 agrees not to make any public
announcements without Visa's prior written approval.

      8.3 Governing Law - Agreement shall be governed by and construed and
interpreted in accordance with, the laws of the State of Washington, United
States of America, without reference to conflict of laws principles or statutory
rule of arbitration.

      8.4 Jurisdiction - In relation to any dispute arising out of or in
connection with this Agreement, the parties irrevocably consent to personal and
exclusive jurisdiction of and venue in the Federal Courts located in King
County, State of Washington, United States of America. The parties also
irrevocably waive any objection that they might now or hereafter have to such
courts being nominated and the forum to hear and determine any suit, action or
proceeding and to settle any dispute that may arise out of or in connection with
this Agreement. The parties further agree not to claim that any such courts are
an inappropriate or inconvenient forum save that the submission to the
jurisdiction of such courts shall not (and shall not be construed as to) limit
the right of either party to apply for provisional or interim relief in any
other court of competent jurisdiction whether concurrently or not.

      8.5 Process Agent - Net1 hereby appoints CT Corporation of Washington as
its process agent to receive on its behalf service of process of any suit,
action or proceeding in the State of Washington provided Visa reimburses Net1
for the expenses thereof. The service of process upon any process agent
appointed by or in accordance with this Section 8.5 shall be good service upon
Net1 whether or not it is forwarded to or received by Net1. Net1 irrevocably
agrees that if, for any reason, the process agent ceases to be able to act as
process agent on its behalf, or no longer has an address in Washington, it will
immediately appoint a substitute process agent with an address in Washington
acceptable to the other party and will deliver to Visa within fifteen

                                       7
<PAGE>

(15) days thereof, a copy of that, substitute process agent's acceptance of that
appointment. In the event that Net1 fails to appoint or notify Visa of a
substitute process agent, it shall be effective service for Visa to serve the
process upon the last known address in Washington of the last known process
agent for Net1 notified to Visa notwithstanding that such process agent is no
longer found at such address or has ceased to act.

      8.6 Waiver of Immunity - To the extent that either party may be entitled
in any jurisdiction to claim for itself or its assets immunity from any suit,
execution, attachment (whether provisional or final, in aid of execution, before
judgment or otherwise) or other legal process or to the extent that in any
jurisdiction such immunity (whether or not claimed) may be attributed to it or
its assets it irrevocably agrees not to claim and irrevocably waives such
immunity to the fullest extent permitted by the laws of such jurisdiction.

      8.7 Force Majeure - Neither party shall be liable for any loss, damage or
penalty resulting from delays or failures in performance resulting from acts of
God or other causes beyond its control; provided, that no such delay or failure
in performance shall continue for more than six (6) months. In the event that
such delay extends longer than six (6) months, the other party may terminate
this Agreement pursuant to Section 7.2. Each party agrees to notify the other
promptly of any circumstance delaying its performance and to resume performance
as soon thereafter as is reasonably practicable.

      8.8 Assignment - Net1 agrees that it may not assign any of its rights and
obligations under this Agreement to a third party without the prior written
consent of Visa which consent shall not be unreasonably withheld. It shall not
be unreasonable to withhold consent in the event the assignee is a competitor of
Visa or a company whom does not have a good reputation or does not have
financial responsibility. Any such assignment shall not relieve Net1 from its
obligations hereunder.

      8.9 Limitation of Liability - IN NO EVENT WILL EITHER PARTY BE LIABLE FOR
ANY SPECIAL INCIDENTAL, CONSEQUENTIAL OR INDIRECT DAMAGES ARISING IN ANY WAY OUT
OF THIS AGREEMENT, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY. THIS
LIMITATIQN WILL APPLY EVEN IF THE OTHER PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES.

      8.10 Modifications - No modification to the Agreement, nor any waiver of
any rights, shall be effective unless assented to in writing by the party to be
charged and the waiver of any breach or default shall not constitute a waiver of
any other right hereunder or any subsequent breach or default.

      8.11 Notices - Any required notices hereunder shall be given in writing at
the address of each party set forth above, or tough other address as either
party may substitute by written notice to the other in the manner contemplated
herein and shall be deemed served delivered or, if delivery is not accomplished
by reason or some fault of the addressee, when tendered.

      8.12 Descriptive Headings - The headings of the several sections of this
Agreement are intended for convenience of reference only and are not intended to
be a part of or to affect the meaning or interpretation of this Agreement.

                                       8
<PAGE>

      8.13 Severability - In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to either Net1 or
Visa. In the event that any provision of this Agreement becomes or is declared
by a court of competent jurisdiction to be illegal, unenforceable or void and
severability of such provision would materially change the economic benefit of
this Agreement to either Net1 or Visa, Net1 and Visa shall modify such provision
in accordance with Section 8.10 to obtain a legal, enforceable and valid
provision and provide an economic benefit to Net1 and Visa that most nearly
effect Net1's and Visa's intent in entering into this Agreement.

      8.14 EMV Compatibility - Net1 will make sure the terminals used in any of
its Payment System will be compatible with EMV within 18 months of this
Agreement, which compatibility must be certified by Visa.

      8.15 Disparagement - Neither Visa nor Net1 shall disparage the other party
but shall have the right to make fair and accurate comments upon the other's
profits. Both parties agree that a violation of this Section 8.15 shall be
deemed a material breach of this Agreement.

9. PREVIOUS AGREEMENTS

      9.1 Merger - All previous agreements between the parties, whether verbal
or written, including without limitation, Heads of Agreement dated May 30 1996,
but excluding the Development Agreement effective July 20, 1996 which shall
terminate upon the effective date of this Agreement, shall merge with this
document as of the effective date of this Agreement and all terms, conditions,
obligations, considerations, responsibilities, warranties, representations and
covenants shall be replaced by this document. This Agreement can only be amend
modified, superseded or terminated by a written document signed by all the
parties hereto.

10. EFFECTIVE DATE OF THIS AGREEMENT

This Agreement shall become effective in the event that Net1 delivers to Visa
the amended Deliverables described in Exhibit I on or before July 31, 1997.

IN WITNESS WHEREOF, the undersigned are duly authorized to execute this
Agreement on behalf of Net1 and Visa as applicable.

VISA INTERNATIONAL SERVICE               NET1 HOLDINGS S.A.R.L.
ASSOCIATION ("Visa")                     ("Net1")

By ___________________________________   By ___________________________________

Print Name ___________________________   Print Name ___________________________

Title ________________________________   Title ________________________________

Date _________________________________   Date _________________________________

                                       9
<PAGE>

NET1 INVESTMENT HOLDINGS

By ___________________________________

Print Name ___________________________

Title ________________________________

Date _________________________________

                                       10

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