Joint Venture Agreement Dated As Of 5/21/97

EXHIBIT 10.2
JOINT VENTURE AGREEMENT
-----------------------


THIS AGREEMENT is made as of this 21st day of May, 1997 between SLIGOS/MARBEN S.A. (on behalf of itself and MARBEN S.A.), a French limited liability company having its registered office at 1 avenue Newton, 92142 Clamart, France and represented by Gilles Arditti, as authorized signatory (hereinafter "Sligos/Marben") and DSET CORPORATION, a New Jersey corporation having its principal office at Bridgewater, New Jersey, U.S.A., and represented by its President, William McHale (hereinafter "DSET").


RECITALS
--------


Sligos/Marben and DSET are engaged, among other things, in the manufacture, development, sale and distribution of the communications and telephone network management products described in Annex 1 hereto (the "Products"). DSET and
------- Sligos/Marben wish to combine their resources and efforts in order to promote the distribution of the Products in Europe and Israel (as further defined below, the "Territories") on the terms and conditions set forth in this Agreement. In furtherance thereof, DSET and Sligos/Marben have agreed to form a French societe
------- anonyme (the "Company") on the terms and conditions set forth herein. - -------


NOW, THEREFORE, IT IS AGREED as follows:


ARTICLE I
---------
DEFINITIONS
-----------


As used in this Agreement, the following terms shall have the following meanings unless the context requires otherwise:


1. Affiliate as applied to any party, or any other person or entity,
--------- shall mean any person or entity controlling, controlled by or under common control with such person or entity. For purposes hereof "control" shall mean ownership of more than 50% of the voting rights of another entity, or the power to designate a majority of the directors of or the principal manager of another entity, or an contract or other arrangement by which one person or entity is able to substantially determine the policies or actions of another person or entity.


2. Board shall mean the board of directors (conseil d'administration) of
----- ------------------------ the Company.


3. Breach shall mean the material breach by any party of any of its
------ obligations hereunder, and in addition shall be deemed to include for purposes hereof (a) any act, or omission to act, in bad faith that results in a Deadlock or that prevents the resolution of an existing Deadlock, and (b) any Change of Control of either party.


4. Change of Control of a party means whenever any person or entity or
----------------- group of persons or entities acting together shall acquire, beneficially or otherwise, equity securities of any party that represent in excess of fifty percent (50%) of the voting power of all outstanding equity securities of such party generally entitled to vote for the election of directors (whether by merger, consolidation, sale, assignment, lease, transfer or otherwise, in one transaction or any related series of transactions).


5. Closing Date shall mean the date on which the last to occur of the
------------ following actions has occurred:


(a) formation of the Company and contribution of the capital by the Shareholders, as provided in Article II of this Agreement; and


(b) signature of the Distribution Agreements by all parties thereto


6. Company shall mean the company formed pursuant to Article II of this
------- Agreement.


7. Deadlock shall have the meaning given to such term in Article III.2
-------- and Article VIII.1.


8. Distribution Agreements shall mean the distribution agreement
----------------------- between DSET and the Company and the distribution agreement between Sligos/Marben and the Company as provided in Article V.5 of this Agreement;


9. Effective Date shall mean the date this Agreement becomes effective
-------------- which, upon signature by the parties, shall be the date first appearing above.


10. FF shall mean the legal currency of the Republic of France.
--


11. Initial Term shall mean the period commencing on the Effective Date
------------ and ending on the second anniversary of such Effective Date.


12. Products shall mean the products as described in Annex 1 and Joint
-------- ------- Product shall mean the Joint Product described therein, the definitive terms of which shall be agreed by the parties not later than 60 days after the date hereof.


13. Service Agreement shall mean the management and administrative
----------------- services agreement between Sligos/Marben and the Company as described in Article V.1 of this Agreement.


14. Shares and Shareholders shall mean respectively the issued and
------ ------------ outstanding shares of the capital stock of the Company and the holders of the Shares.

15. Territories shall mean, collectively to the extent permitted by law,
----------- all member-states of the European Union and all other countries on the continent of Europe (but not including, with respect to any of the foregoing, the overseas territories or possessions of any such country which are not located on the European continent) and the State of Israel.


16. Technology Provider shall mean the party hereto (or its Affiliate as
------------------- the case may be) that is providing the Products and related services identified in this Agreement, as required by the context.


ARTICLE II
----------
FORMATION OF COMPANY
--------------------


1. Formation. As promptly as practicable after the date hereof, the
--------- parties shall cause the Company to be formed under the laws of France as a societe anonyme having the Articles of Association (statuts) attached hereto and - --------------- ------- made a part hereof as Annex 3 (the "Articles").
-------


2. Name. The Company shall be called "[_________________] S.A.", or such
---- other name as the parties shall agree.


3. Purpose. The purpose of the Company shall be the promotion,
------- distribution and sale of the Products in the Territories.


4. Commencement of Operations. The Company shall commence operations as a
-------------------------- company "in formation" upon the Effective Date of this Agreement, the parties having initialed and signed the Company's original French language Articles together with the signature of this Agreement. The parties agree that the Board and the shareholders, at the first duly called meeting of each such body, shall notify and approve all actions taken in good faith by the President and Chief Operating Officer (and any person acting under this authority) on behalf of the Company prior to the immatriculation of the Company with the Company Register.


5. Transition of Sales Opportunities. The Company shall make royalty
--------------------------------- payment to DSET in the amount of 80% of revenues earned by it for DSET products and maintenance sold to the following customers for the identified projects during May or June 1997.


Customer Country Project Expected
-------- ------- ------- --------

Origin NL ASN.1 Q2
Pirelli IT/USA CPM Q2
Siemens DE/TW M-CATS Q2
Efrat IL Q-Adapt Q2
Nicotra IT Q-Adapt Q2
Sodalia IT Manager Q2
Italtel* IT SBS Q2
Italtel* IT SBS2 Q2
Italtel* IT ATM-CC Q2
Teledata IL Win Q-A Q2/Q3
Thomson FR ATNSI Q3
Ericsson IT WLL (TR-303) Q3


Bosch DE SDH Q3
EniNet IT Q-Adapt Q3
Aselsan TR PABX Q3


* With respect to the Italtel projects referred to above, the parties agree that a reduced royalty rate to be reasonably determined will be payable in light of the prior contribution of Sligos/Marben to the sales effort.


ARTICLE III
-----------
CAPITAL AND SHAREHOLDER FINANCING
---------------------------------


1. Initial Capital.
---------------


(a) Initial Capital. The initial capital of the Company shall be Two
--------------- Million Seven Hundred and Fifty French Francs (FF 2,750,000) represented by Twenty Seven Thousand Five Hundred (27,500) Shares fully paid in cash of FF 100 each. The allocation of capital shall be (i) 14,000 Class A Shares subscribed by Sligos/Marben, and (ii) 13,750 Class B Shares subscribed by DSET. The rights of Class A and Class B Shares shall be as set forth in the Company Articles, including without limitation with respect to any dividends which, if declared, shall be distributed to the Shareholders on a pro rata basis in accordance with their percentage interest in the capital of the Company.


(b) Payment of Initial Capital. As promptly as practicable after the
-------------------------- date hereof and not later than May 30, 1997, Sligos/Marben and DSET each shall pay to the Company in cash and in full the amount set opposite its name below as payment for the foregoing Class A or Class B Shares being respectively purchased by them:


Sligos/Marben: FF 1,400,000 (approximately USD 250,000)
DSET: FF 1,375,000 (approximately USD 245,000)


2. Additional Capital.
------------------


If during the Initial Term, the Board unanimously agrees that the Company requires further capital and the parties hereto are unable to agree on the amount or manner of advancing such capital to the Company, either party may by notice to the other party within thirty (30) days of the Board meeting at which such deadlock is formally notified to the Board elect to treat such impasse as a "Deadlock" that will thereupon be subject to the provisions of Article VII.1.


ARTICLE IV
----------
MANAGEMENT OF COMPANY
---------------------


1. Board of Directors. The Company's Board shall consist of four (4)
------------------ directors (administrateurs), two (2) of whom shall be elected from among the candidates designated by the Class A Shareholder and two (2) of whom shall be elected from among the candidates designated by the Class B Shareholder. The directors shall be elected for a duration of


three (3) years. The President (President-Directuer General) of the Company shall be nominated by the Board from among the directors elected by the Class A Shareholder. The Board shall initially consist of Jean-Pierre Ansart, Valerie Ajzenberg, William McHale and Paul Lipari. Board meetings will be held not less often than once per quarter, shall be held in the English language, and shall be held in Paris, France unless otherwise agreed by all the members of the Board, except that one Board meeting per year will be held in Bridgewater, New Jersey if so requested in writing by the members of the Board designated by the Class B Shareholder. The agenda for such meetings shall include, but shall not be limited to, a presentation by the Chief Operating Officer of the Company on any lost sales from the previous quarter. The Board shall undertake an analysis of all lost opportunities in relation to the products being sold, and shall endeavor to provide the individual parties with any suggested product improvements or enhancements necessary to maintain product competitiveness.


2. Special Voting Requirements. The President of the Company shall
--------------------------- have the authority to commit the Company vis-a-vis third parties except for the actions described in Article 20 of the Articles and further listed below which shall each require the unanimous prior approval of the Board:


(a) the determination of the annual budget, including the investment budget and the financing plan, as well as any decision which has the effect of increasing the expenses of the Company in a given fiscal year beyond the budget set for such fiscal year;


(b) the approval of the annual accounts, including the distribution of any dividends;


(c) any acquisition or disposition of any interest in any company, partnership, trust or similar entity


(d) the hiring or dismissal of any employee whose annual gross remuneration exceeds or shall exceed FF 300,000 per year, as well as the establishment or modification of the Company's remuneration policy;

(e) any proposal to increase the Company's capital and, more generally, to modify the Company's Articles;


(f) any borrowings or loans in an aggregate amount (on a cumulative basis) in excess of FF 500,000 (or its currency equivalent);


(g) the purchase, sale or transfer of any kind to a third party of any of the Company's assets or property having a value in excess of FF 30,000 other than in the ordinary course of the Company's business;


(h) the issuance of any type of guarantee by the Company on behalf of a third party, and more generally, any agreement in which the Company guarantees the full performance of a third party's obligations;


(i) the entering into of any agreement between the Company and one or more of its Shareholders or an Affiliate of a Shareholder, other than the Service Agreement and the


Distribution Agreements, and any modifications or amendments thereto, including the Service Agreement and the Distribution Agreements;


(j) the modification of the Company's purpose of the undertaking of any activity other than those within the purpose of the Company as described in Article II.3;


(k) any decision relating to the use of any name or trademark as contemplated by Article VI.1;


(l) the selection and removal of the President or the Chief Operating Officer (Directeur General) of the Company; and


(m) the commencement or settlement of any litigation.


3. President and Management. The management of the day-to-day affairs
------------------------ of the Company shall be entrusted to the President and, in particular, the Chief Operating Officer. The management of the Company including the Chief Operating Officer will be selected by the President in consultation with and, where required by Article IV.2(d), subject to the approval of the Board. The initial Chief Operating officer shall be Karim Jammal. The President or the Chief Operating Officer shall meet (in person or via video conference) at least once per month with one director of the Company nominated by the Class B Shareholder in order to review operations.


4. Access to Information. Each member of the Board shall be entitled
--------------------- to receive such information relating to the Company's business, as he or she may reasonably request, and the President shall use his or her best efforts to respond promptly to any such request for information. The President shall, in addition, cause to be prepared and provided to each member of the Board and to each Shareholder a quarterly report on the activities of the Company in such form as the Board shall determine.


ARTICLE V
---------
OPERATIONS OF COMPANY
---------------------
1. Services OF Sligos/Marben. On or prior to the Closing Date, the
------------------------- Company shall enter into an annual exclusive management and administrative service agreement with Sligos/Marben in the form of Annex 4 hereto (the "Service
------- Agreement") providing for rendering certain administrative services to the Company as provided therein.


2. Commercial Strategy. The Company's commercial strategy will be
------------------- determined by the Board upon the proposal of the President. The President shall inform the Board of the status of the Company's implementation of its strategy on a regular basis, and shall from time to time as may be appropriate under the circumstances provide written status reports with respect thereto.


3. Financial Goal. The parties confirm that their expectation is that
-------------- the Company will be self-sufficient and profitable, and will have achieved minimum annual revenues of FF 10,000,000 (before tax), by the end of the second year of the Initial Term.


4. Overhead Expenses. It is the parties' intention that overhead expenses
----------------- be kept as low as reasonably possible. General overhead expenses shall include all customary expenses of a general and administrative nature, and in particular shall include the cost of the Company's full-time employees responsible for business management, marketing and service, the negotiation of contracts and the organization of financial controls for the Company, and the cost of the Service Agreement. Legal expenses shall be included in overhead, and where such legal expenses of the Company are incurred by a party hereto for the benefit of the Company, they may be charged back to the Company by such party, provided that no such expenses in excess of FF 50,000 may be charged back by either party in any one year without the prior majority consent of the Board. Notwithstanding the foregoing, all reasonable operating expenses already incurred on behalf of the Company by the parties prior to its formation shall be charged back to the Company by and reimbursed to each party. However, legal expenses incurred by each party in connection with the preparation of this Agreement and otherwise in connection with the formation of the Company and the setting up of its activities shall be borne by the party concerned, except for expenses incurred for the incorporation of the Company which shall be borne in equal shares by the parties.


5. Distribution. On or prior to the Effective Date, the Company shall
------------ enter into with each of Sligos/Marben and DSET a distribution agreement (the "Distribution Agreements") substantially in the form of Annex 5 (with respect to
------- DSET, and on such terms, mutatis mutandis with respect to Sligos/Marben),
------- -------- pursuant to which the Company shall be granted to exclusive right to promote, distribute and sell the Products in the Territories for an initial term of two years renewable for a period of one year and on the terms provided therein. The parties agree that if at any time during the 10-month period following the Effective Date, DSET makes an acquisition of a company that is engaged in the manufacture and distribution of products similar to the Products hereunder, the parties will meet promptly to discuss what if any changes may be desirable to the provisions of this Agreement or to such Distribution Agreements (including the possibility that such Distribution Agreements should become non-exclusive), provided that the foregoing shall create no obligation on either party to agree to any such changes, it being understood that only such changes as may be negotiated in good faith and agreed in writing at the time of such discussions shall be binding on the parties.


6. Distributors/Systems Integration. The parties agree that the Company
-------------------------------- shall used its best efforts to enter into distribution agreements with DSET's and Sligos/Marben's existing distributors for the Products, and that such new distribution agreements shall replace any existing agreements with such distributors, provided that the Company shall not be required to assume any pre-existing obligation of either DSET or Sligos/Marben to such distributors. The parties agree that the Company shall actively recruit and enter into agreements with multiple distributors and systems integrators, and that all such distributors and systems integrators shall enter into agreements on substantially the same terms and conditions, as well as such product discounts, as the Board shall determine from time to time. The parties further agree that the Company shall not enter into any such agreement with an Affiliate of one of the parties except with the unanimous consent of the Board.


7. Maintenance Services. It is the intention of the parties that the
-------------------- Company will sell maintenance contracts, either directly or through its network of resellers (sub-distributors, agents or system integrators).


Maintenance is comprised of two components.


1. Technical support that can be accessed via the e-mail or phone to ask operational questions, request enhancements or to report bugs in the software. If technical support is required on-site by the customer, each party agrees to provide such support on standard terms but at a preferred rate of 25% off the then currently published rate.


2. Software updates (which include maintenance releases, point releases and major upgrades) that are automatically shipped to customers that have valid maintenance contracts.


Technical Support will be divided onto three levels:


Level 1: Provides answers to customers questions about the operation of
the software products.


Level 2: Provides a "debugging" process that assists in isolating the
problem area which will be reported to the Technology Provider
for resolution.


Level 3: The Technology Provider will generally be responsible to provide
solutions to problems reported above in accordance with its
standard procedures.


Financial transactions for Maintenance Contracts:


(a) The entity that sells the maintenance contract to the customer will be entitled to 20% of value of the maintenance contract. The entity that sells the contract could be the Company or one of its resellers.


(b) The provider of Level 1 and Level 2 support will be entitled to 30% of the value of the maintenance contract and will be the Company, unless otherwise agreed by the parties.


(c) The Technology Provider who provides Level 3 support receives the remaining 50% to implement Level 3 and the software update service.


8. Discounting Authority. If the Company needs to discount the published
--------------------- list price of the products by more than 30% to win new business, the parties agree it must first get approval from the party which is the Technology Provider of the respective products. If the Company plans to implement any specific marketing programs that require special discounts other than those in the ordinary course of business, it shall likewise obtain the prior approval from the appropriate Technology Provider.


9. Financial Reporting. The Company shall use all reasonable efforts
------------------- to provide profit/loss, balance sheet and cash flow statements to the Technology Providers within 15 business days of the close of each fiscal quarter. These quarterly reports do not need to be audited.


The Company shall use all reasonable efforts to provide audited profit/loss, balance sheet and cash flow statements to the Technology Providers within 35 business days of the close of a fiscal quarter.


ARTICLE VI
----------
INTELLECTUAL PROPERTY MATTERS
-----------------------------


1. Trademarks. The Products shall be sold by the Company in the
---------- Territories only under such trademarks or marks as will be decided by the Board that are not confusingly similar to any trademark currently owned by either party, or subsequently owned and notified by either party to the Company. All trademarks, brand names, trade names, and logos relating to the Products currently owned or used by either party (collectively, "Product Identification Rights", which for the avoidance of doubt do not include the Company name and logo and any trademarks approved by the Board as provided above), shall continue to be the sole and exclusive property of the party which makes such Product Indentification Rights available for use by the Company. The Company shall have the right to use the Product Indentification Rights in a responsible manner in connection with the commercialization of the Products free of charge during the term of this Agreement. The Company shall take all reasonable steps to protect the Producer Indentification Rights from infringement by third parties in the Territories.


2. Placement of Logos and Marks. The Products and all promotional
---------------------------- materials used by the Company in launching, promoting and advertising the Products in the Territories shall bear the name and logo of the party which has developed the respective Product, the words "manufactured by [applicable party]", and "marketed and distributed by (insert name of Company)", but the Company's name and logo shall be given prominence.


3. Rights to Other Intellectual Property.
-------------------------------------


(a) Each party will be the exclusive owner of any and all patents, know-how or other intellectual property relating to the development or manufacturing or registration of the Products developed or manufactured by such party, and shall not hereby convey any rights in such intellectual property to the Company. Each party shall make available to the Company free of charge during the term of this Agreement such client lists, market reports, promotional surveys, training materials, and other reports, data, or programs as it may have developed prior to the date of this Agreement in connection with the promotion, marketing, distribution and sale of its other such Products, but all such pre-existing materials shall remain the property of the party that developed such materials.


(b) Any intellectual property developed by the parties or their respective Affiliates jointly with or by the Company, including without limitation, promotional materials, market report ...