LICENSE AGREEMENT
This License Agreement is entered into as of this 15 day of February, 2006
(the "Effective Date"), by and between TraceGuard Technologies Ltd., a company
organized under the laws of the State of Israel, having a place of business at 6
Ravnitzki St., Petach Tikva, Israel ("Licensee") and Tracetrack Technology Ltd.,
a company organized under the laws of Israel, having a place of business at 94
Yigal Alon Street, Tel-Aviv, Israel ("Licensor").
WHEREAS, Licensor is the owner of rights in the Licensed Technology (as
hereinafter defined); and
WHEREAS, Licensee wishes to obtain an exclusive license with respect to
such Licensed Technology, and Licensor wishes to grant Licensee a license with
respect to such Licensed Technology, all in accordance with and subject to the
terms and conditions of this Agreement.
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Definitions.
The capitalized terms defined in this Section 1, whether used in the
singular or the plural, shall have the meanings specified below:
"Affiliate" shall mean, with respect to a party, any person, organization
or entity controlling, controlled by or under common control with, such party.
For purposes of this definition only, "control" of another person, organization
or entity shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the activities, management or policies of such
person, organization or entity, whether through the ownership of voting
securities, by contract or otherwise. Without limiting the foregoing, control
shall be presumed to exist when a person, organization or entity (i) owns or
directly controls fifty percent (50%) or more of the outstanding voting stock or
other ownership interest of the other organization or entity, or (ii) possesses,
directly or indirectly, the power to elect or appoint fifty percent (50%) or
more of the members of the governing body of the organization or other entity.
"Calendar Quarter" shall mean the respective periods of three (3)
consecutive calendar months ending on March 31, June 30, September 30 or
December 31, for so long as this Agreement is in effect.
"Dollars" or "$" shall mean United States Dollars.
"Fair Market Value" shall mean the fair market value as determined by a
recognized appraisal or accounting firms with experience in appraising assets in
similar industries mutually agreed to by Licensee and Licensor.
"First Commercial Sale" means the first sale by Licensee or its Affiliate
for use of the Product in the United States, the State of Israel or any Major
Country.
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"Grant Amount" shall mean as defined in Section 9.1 below.
"ISA" shall mean the Israel Security Agency or other Israeli government
body serving a purpose similar thereof.
"License" shall mean the license granted pursuant to Section 2.
"Licensed Know-How" shall mean any know-how, discoveries, improvements,
inventions (whether or not patentable) and methods, instructions, techniques,
practices, procedures, data, results, processes, formulas and other information,
to the extent relating to collection of traces developed, owned or controlled by
Licensor or its Affiliates as of the Effective Date; and all improvements,
updates, modification and enhancements to same, to the extent relating to
collection of traces, developed, owned or controlled by Licensor or its
Affiliates subsequent to the Effective Date.
"Licensed Patents" shall mean (i) the Patents and/or Patent applications
set forth on Exhibit A hereto, and all additions, divisions, continuations,
continuations-in-part, reissues, reexaminations, supplementary protection
certificates and extensions thereof, and any patents that issue thereon, and
(ii) any other current or future Patents of Licensor or its Affiliates to the
extent relating to the Licensed Know-How. Exhibit A shall include and shall be
updated from time to time to reflect inclusion of new Licensed Patents as
provided under (ii) herein.
"Major Country" shall mean any one of the following countries: Canada,
Japan, Australia, India, China, Singapore and any country in the European Union.
"Product" shall mean any product, product component and/or product
supplement, device or method that comprises, contains or incorporates in any
manner whatsoever, any part of the Licensed Technology.
"Licensed Technology" shall mean, collectively, the Licensed Patents and
the Licensed Know-How.
"OCS Grants" shall mean grants received by Licensor from the Office of the
Chief Scientist of the Israeli Ministry of Industry and Trade for the
development of Licensed Technology, including, without limitation, pursuant to
File Nos. 32181 and 28435.
"Milestones" shall mean the milestones set forth in Section 7.2.
"Net Sales" shall mean the gross amounts invoiced and actually received by
or on behalf of Licensee and/or its Affiliates for the sale, supply or other
disposition of Products; less the following: (a) credits, refunds, rebates or
trade, quantity, or cash discounts to the extent actually allowed and taken; (b)
amounts repaid or credited by reason of actual rejection or return; (c)
commissions (including commissions paid to sales representatives and/or agents);
(d) any royalties, lump sums or monetary awards actually paid by the Licensee as
a result of the infringement by the Licensee of the rights of a third party by
the manufacture, use or sale of the Products, provided and to the extent that
such infringement of third party rights is the result of the infringement by the
Licensed Technology; (e) any taxes or other governmental charges directly levied
on the production, sale, transportation, import, export, delivery or use of a
Product; and (f) invoiced outbound transportation, packing and delivery charges,
as well as prepaid freight (including shipping insurance) actually incurred;
provided however, that:
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(i) In any transfers of Products between Licensee and its Affiliate,
Net Sales shall be only the total amount invoiced by such Affiliate on resale to
an independent third party purchaser, in each case, after appropriate deductions
as set forth above;
(ii) In the event that Licensee, or its Affiliate, receives
non-monetary consideration for any Products, Net Sales shall be calculated based
on the Fair Market Value of such consideration; and
(iii) In the event that Licensee or its Affiliate sells, supplies or
otherwise disposes of Product not on arm's-length equivalent terms (it being
acknowledged that there may be a range of prices at which Products are sold on
arms-length equivalent terms depending on the circumstances of such sale), Net
Sales shall be adjusted based on the Fair Market Value of such Products to
reflect consideration that would have been due on arms-length equivalent terms.
"Patent" shall mean (i) patents in any jurisdiction, (ii) patent
applications in any jurisdiction, foreign equivalents, provisional applications,
continuations, continuations-in-part, divisions, reissues, renewals, and all
patents granted thereon, and (iii) patents-of-addition, reissues, reexaminations
and extensions or restorations by existing or future extension or restoration
mechanisms, including, without limitation, supplementary protection certificates
or the equivalent thereof.
"Regulatory Force Majeure Event" shall mean a delay to the extent caused
by the TSA or ISA or similar governmental authority in any Major Country,
excluding any delay to the extent caused by Licensee's acts or omissions.
"R&D Law" shall mean the Israeli Law for the Encouragement of Research and
Development in Industry (1984) and related regulations, as may be in effect from
time to time.
"Royalty Payments" shall mean payments made pursuant to Section 8.2, as
defined therein.
"Sublicensee" shall mean a person or entity that receives a sublicense of
part or all of the rights granted to Licensee under the Licensed Technology as
referred to in Section 6.
"Sublicense Payments" shall mean payments made pursuant to Section 8.2, as
defined therein.
"Sublicense Proceeds" shall mean the actual cash income or other
consideration actually received by Licensee or its Affiliates in consideration
of any sublicense of the rights under the License, other than any sublicense
from Licensee to any Affiliate, and shall not include any amounts received by
Licensee or its Affiliates in respect of Net Sales. In the event that Licensee
or its Affiliates receives non-monetary consideration for any sublicense of
rights as aforesaid, Sublicense Proceeds shall be based on the Fair Market Value
of such consideration.
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"TSA" shall mean the United States Transportation Security Administration
or other federal body serving a purpose similar thereof.
2. License Grant.
2.1. Subject to the terms and conditions set forth in this Agreement,
Licensor hereby grants to Licensee an exclusive, worldwide,
perpetual license to Licensor's rights in the Licensed Technology to
make any and all uses of the Licensed Technology, including, without
limitation, the right to use the Licensed Technology for research
and development, to commercialize the Licensed Technology in any
manner, to research, have researched, develop, have developed,
manufacture, have manufactured, use, market, distribute, offer for
sale, sell, have sold, export and import Products and/or provide
services relating thereto, and to grant sublicenses and secondary
sublicenses to third parties (the "License"). For purposes of this
Section 2, the term "exclusive" means that Licensor shall not itself
nor shall it grant licenses or rights to any third party to engage
in any of the foregoing.
2.2. For the sake of clarity, Licensor shall refrain from using the
Licensed Technology in any manner whatsoever, including without
limitation development, research or manufacture thereof, or from
granting third party rights therein, other than pursuant to
Licensee's written instructions in relation to research programs of
the Product.
3. New Technology; Improvements.
Unless otherwise agreed to in writing by the parties with respect to
certain inventions or projects, (i) unless prohibited under the terms of
the OCS Grants all rights, title and interest in and to any and all
improvements, developments or inventions relating to Licensed Technology
or arising from the license of the Licensed Technology hereunder, that are
made, arrived at or discovered solely by or on behalf of Licensee or its
Affiliates, are and shall be owned solely and exclusively by Licensee; and
(ii) all rights, title and interest in and to any and all improvements,
developments or inventions relating to Licensed Technology that are made,
arrived at or discovered solely by or on behalf of Licensor (if and to the
extent Licensee requests Licensor to carry out same pursuant to the
provisions of Section 2.2 above) shall be automatically licensed to
Licensee on the terms hereof applicable to Licensed Technology. For the
avoidance of doubt, (x) any technology independently developed by or on
behalf of Licensee that is not based on or does not require the use of the
Licensed Technology, including all rights, title and interest therein and
thereto, shall be owned exclusively by Licensee, and (y) any technology
independently developed by or on behalf of Licensor that is not based on
or does not require the use of the Licensed Technology, including all
rights, title and interest therein and thereto, shall be owned exclusively
by Licensor.
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4. Patent Filing and Maintenance
4.1. The parties agree that their joint policy will be to seek
comprehensive patent protection for the Licensed Technology.
Licensee shall be responsible for the filing, prosecution, defense
and maintenance of the Licensed Patents as from the Effective Date,
including payment of all applicable costs and fees in connection
therewith. Licensor shall execute all documents and perform such
other acts as Licensee may reasonably request from time to time in
connection with the filing, prosecution, defense and maintenance of
the Licensed Patents.
4.2. Licensee shall deliver to Licensor copies of all documentation
relating to the filing, maintenance or prosecution of the Licensed
Patents.
4.3. Should Licensee decide not to file, maintain, prosecute and defend
the rights under the Licensed Patents as set forth in Section 4.1
above in Israel, the United States or any Major Country (the
"Excluded Country") and such decision shall cause Licensor to lose
the ability to file, maintain, prosecute or defend the rights of the
Licensed Patents at a later date, it shall notify Licensor in
writing no less than One hundred and twenty (120) days prior to the
last applicable date (the "Last Date") and Licensor shall be
entitled to enforce such rights at its own expense and for its own
benefit in such Excluded Country, provided however that Licensor
shall have rendered Licensee notice of its intention to do so no
less than sixty (60) days prior to the Last Date, during which
Licensee shall have the right to reconsider its decision and
undertake to pursue the enforcement of such rights; it being agreed
and understood that for as long as Licensor enforces in the Excluded
Country the rights under the Licensed Patents, Licensee's rights
under the License shall in the Excluded Country be non-exclusive.
5. Patent Litigation
5.1. Should any of the following events occur: (i) Licensee determines
that a third party is infringing any of the Licensed Patents or
misappropriating any of the Licensed Know-How, or (ii) Licensee or a
Sublicensee is sued on the grounds that its use of the Licensed
Patents and/or the Licensed Know-How is infringing upon the rights
of a third party, then Licensee or the Sublicensee shall be entitled
(but not obligated) to sue for such infringement or defend such
action (as the case may be), and, to the extent required by
applicable law, Licensor, at Licensee's request and expense, shall
consent to be named as a party in such litigation or proceedings
(and if not required as aforesaid, Licensor may, to the extent
permitted by law, elect to join as a party to such action) and shall
cooperate with Licensee in the prosecution or defense of such claim
or proceeding; provided that: (a) any expenses and/or costs incurred
in connection therewith and with such litigation (including
attorneys' fees, costs and other sums awarded to the counter party
in such action) shall be borne by Licensee, who shall indemnify
Licensor against any such expenses or costs; and (b) in the event
that Licensor shall be named as a party in any such litigation, the
selection of the legal counsel representing Licensee; and (c) no
settlement, consent order, consent judgment or other voluntary final
disposition of such action may be entered into without the prior
written consent of Licensee. Any monetary award in such proceeding,
if actually received by Licensee, shall first be applied to cover
costs and thereafter be treated as Net Sales.
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5.2. Should Licensee decide not to enforce its rights under the Licensed
Patents or with respect to the Licensed Know-How against an
infringing third party, it shall promptly notify Licensor in writing
and Licensor shall then be entitled to enforce such rights at its
own expense and for its own benefit. If Licensor shall decide that
it is interested in enforcing such rights at its own expense and for
its own account, it shall render Licensee 60 (sixty) days notice
during which Licensee shall have the right to reconsider its
decision and undertake to pursue the enforcement of its rights under
the Licensed Patents or with respect to the Licensed Know-How.
5.3. If Licensee initiates any action pursuant to Section 5.1 above or
becomes aware of any action initiated by any third party concerning
any alleged infringement, or discovers any allegation by a third
party of infringement resulting from the Licensed Patents, then
Licensee shall so notify Licensor promptly in writing, giving full
particulars thereof. Licensee shall promptly keep Licensor informed
and provide copies to Licensor of all documents regarding all such
actions or proceedings instituted by or against Licensee as
contemplated under any of the provisions of Section 5.1 and this
Section 5.4.
6. Sublicenses.
6.1. Right to Grant Sublicenses. Licensee shall be entitled to grant
sublicenses of the Licensed Technology to third parties, provided
however that Licensee shall remain responsible toLicensor for the
payment of Sublicense Payments due with respect to Licensee's or its
Affiliates' Sublicense Proceeds resulting from such sublicenses
pursuant to the provisions of Section 8.2 below and the other
provisions of this Section 6.
6.2. Sublicenses to Affiliates. Where Licensee sublicenses Licensed
Technology to an Affiliate, Sublicense Payments shall be made on the
Affiliate's Net Sales or Sublicense Proceeds.
6.3. Sublicense Agreements. Sublicenses shall be granted pursuant to
written agreements, which shall be in compliance and not
inconsistent with the terms and conditions of this Agreement.
Sublicenses shall be on bona fide arm's length commercial terms,
shall obligate Sublicensees to comply with the applicable provisions
of this Agreement, including, without limitation, protection of
Confidential Information, sales reporting and compliance with the
R&D Law and related regulations to the extent applicable.
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6.4. Termination of License. In the event of termination of the License
prior to the date contemplated by Section 14.1, any existing
agreements that contain a sublicense of, or other grant of right
with respect to, Licensed Technology shall terminate to the extent
of such sublicense or other grant of right; provided, however, that,
for each Sublicensee, upon termination of the sublicense agreement
with such Sublicensee, if Sublicensee is not then in breach of such
sublicense agreement with Licensee such that Licensee would have the
right to terminate such sublicense, Licensor shall be obligated, at
the request of such Sublicensee, to enter into a new agreement with
such Sublicensee on substantially the same terms as those contained
in such sublicense agreement.
6.5. Sublicenses by Sublicensees. Sublicensees shall be entitled to
sublicense rights under a sublicense agreement, provided that such
secondary sublicense shall be subject to a written agreement
consistent with the terms of this Section 6.
7. Development, Commercialization and Milestones
7.1. Development Plan. Licensee shall use commercially reasonable efforts
to develop and commercialize Products in accordance with the terms
and conditions of the Development and Commercialization Plan
attached hereto as Exhibit B (the "Plan").
7.2. Milestones. Licensee shall meet the performance dates set forth in
the Plan, including without limitation, the following milestones
(each a "Milestone"):
7.2.1. Milestone I: Submission/filing, by no later than
eighteen (18) months from the Effective Date, of a
prototype of Product with TSA, ISA or an equivalent
governmental body in any one of the Major Countries for
regulatory approval.
7.2.2. Milestone II: the effecting of a First Commercial Sale
by no later than forty-two (42) months from the
Effective Date.
Notwithstanding the aforesaid, it is hereby agreed that in the event
of a Strategic Transaction, the Milestones shall no longer apply.
For the purposes hereof, "Strategic Transaction" shall mean (i) a
commercial transaction between Licensee and a Strategic Partner
expected to generate, during the initial four (4) year period from
the closing thereof, proceeds to Licensee in an amount equal to or
exceeding Five Million (USD$5,000,000) US dollars or (ii) a merger
with or acquisition of Licensee or its Affiliate by a Strategic
Partner for the purpose of which the valuation of Licensee or its
Affiliate are set at no less than Fifty Million (USD$50,000,000) US
dollars. For the purposes of this Agreement, "Strategic Partner"
shall mean a large-scale manufacturing, marketing or integration
company).
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7.3. Professional Support. Licensor shall for a period of two (2) years
from the Effective Date provide professional assistance by providing
the services of Mr. Fredy Ornath as reasonably required by Licensee
to assist it in utilizing the License granted hereunder, against a
service fee at a rate to be agreed upon .
7.4. Regulatory Approvals. Licensee shall be responsible for completing
the necessary filings to obtain, under Licensee's name and at
Licensee's cost, any regulatory approvals by ISA and/or TSA or
similar governmental authority in any other country, to sell, market
and otherwise distribute the Product in the USA, Israel and any
other country, and Licensor shall reasonably assist Licensee in
obtaining same. Licensee shall reimburse Licensor for its costs
associated with such assistance, provided that such costs have been
approved in writing by Licensee prior to their being incurred by
Licensor.
8. Consideration.
In consideration of the License, Licensee shall pay Licensor the following
amounts:
8.1. Up Front Payment. Licensee and Licensor herby acknowledge that
Licensee has paid Licensor a non-refundable fee of One Hundred
Thousand U.S. Dollars ($100,000), prior to the Effective Date,.
8.2. Royalties; Sublicense Payments. Licensee shall pay to Licensor (i) a
royalty payment (the "Royalty Payments") of three percent (3%) of
Licensee's or its Affiliates' Net Sales and (ii) an amount equal to
ten percent (10%) of Licensee's or its Affiliates' Sublicense
Proceeds (the "Sublicense Payments"). The Royalty Payments and the
Sublicense Payments shall be paid on a quarterly basis within sixty
(60) days of the end of each Calendar Quarter with respect to the
Net Sales and Sublicense Proceeds, as applicable, of such preceding
Calendar Quarter. Licensee's commitment to pay Royalty Payments and
Sublicense Payments to Licensor shall remain in full force and
effect until the earlier of: (i) the lapse of five (5) years from
the First Commercial Sale, or (ii) the aggregate amount of Royalty
Payments and Sublicense Payments (including any Additional Amounts,
as defined in Section 9.4 below) paid by Licensee to Licensor shall
be equal to Two Million and Five Hundred Thousand Dollars
($2,500,000) (the "Maximum Payment Obligation").
Notwithstanding anything contained in the Section 8.2 to the
contrary, the parties hereby agree that until repayment in full of
the Grant Amount by the Licensor in accordance with Section 9.1,
payment of Royalty Payments and Sublicense Payments by Licensee to
Licensor shall (rather than being made on a quarterly basis) be paid
on the same basis for payment of the Grant Amount required from time
to time pursuant to the OCS (`Keren Tmura') rules and regulations
(which is currently paid on a semi-annual basis).
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9. OCS Grants.
9.1. The parties acknowledge that Licensor has received the OCS Grants
from the Office of the Chief Scientist of the Israeli Ministry of
Industry and Trade ("OCS") in connection with the development of the
Licensed Technology. Licensor hereby represents and warrants that it
has received grants from the OCS up to an aggregate principal amount
which does not exceed Five Hundred Thousand U.S dollars ($500,000),
and it has not received in connection with the Licensed Technology
any other grants from any third party. Subject to the provisions of
Sections 9.3 and 9.4 below, Licensor shall continue to be
responsible for complying, at its own expense, with the terms and
conditions applicable to such OCS Grants and to payment of royalties
due to the OCS with respect thereof, up to the aggregate amount of
such OCS Grants, adjusted to the Israeli consumer price index and
bearing interest as applicable (the "Grant Amount").
9.2. The parties further acknowledge that Licensor has applied to the OCS
for the approval of the License, which approval in principal was
obtained prior to the Effective Date, a copy of which approval in
principal is attached hereto as Exhibit C. Licensee agrees and
undertakes to comply with the provisions of the aforementioned
approval, including without limitation, to execute and submit to the
OCS the documents specified therein for the purpose of obtaining a
final approval of the License, and the parties each agree to comply
with the provisions of the final OCS approval which shall be
obtained thereupon.
9.3. In the event of Licensor's failure to pay any part of the Grant
Amount due to the OCS, other than failure to pay resulting from such
amounts being in dispute between Licensor and the OCS, Licensee
shall be entitled to make such payments on Licensor's behalf,
provided that Licensee notifies Licensor no less than fourteen (14)
days prior to effecting such payment and Licensor does not remedy
such default within such period. Any payments made by Licensee to
repay the Grant Amount as aforesaid shall be deemed payment on
account of the Royalty Payments and Sublicense Payments.
9.4. In the event that the Royalty Payments and Sublicense Payments shall
in the aggregate be lower than the royalties due from Licensor to
the OCS in connection with the repayment of the OCS Grants (such
difference being referred to herein as the "Additional Payment"),
Licensee shall pay the Additional Payment to the OCS on Licensor's
behalf together with payment of the Royalty Payments and Sublicense
Payments, provided however that the Royalty Payments, Sublicense
Payments and Additional Payments shall not, in the aggregate, exceed
the Maximum Payment Obligation. For the avoidance of doubt, in the
event Licensee is required to make payments to the OCS, on behalf of
Licensor, in excess of the Maximum Payment Obligation, Licensor will
indemnify Licensee for any excess payments made in connection
therewith.
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9.5. Notwithstanding the aforesaid provisions of this Section 9, in the
event that pursuant to the final OCS approval mentioned in Section
9.2 above, Licensee shall be required and shall accordingly
undertake towards the OCS to directly repay to the OCS all or part
of the Grant Amount, any such payments made by Licensee to OCS shall
be deemed payment on account of the Royalty Payments and the
Sublicense Payments. For the sake of clarity, in the event that
repayments made by Licensee to the OCS on account of the Grant
Amount as aforesaid shall in any given Calendar Quarter exceed the
aggregate amount of Royalty Payments and Sublicense Payments due to
Licensor hereunder with respect to such quarter, no Royalty Payments
or Sublicense Payments shall be due to Licensor with respect to such
Calendar Quarter; it being agreed and understood that as long as the
Grant Amount has not been fully repaid, the provisions of the second
paragraph of Section 8.2 above shall apply and the aforesaid
calculations shall be effected on the same basis as required at such
time for repayment of the Grant Amount pursuant to the OCS (`Keren
Tmura') rules and regulations, rather than on a quarterly basis.
9.6. Licensee shall comply with the R&D Law and the OCS regulations to
the extent applicable to the Licensed Technology in such manner as
to ensure Licensor's compliance with the terms and conditions of the
OCS Grants. Sublicenses of Licensed Technology shall be subject to
the receipt of any consents or approvals required pursuant to the
R&D Law and/or the OCS Grants, to the extent required.
9.7. Licensee shall be responsible for payment of any additional
royalties due to the OCS and/or payments due pursuant to the R&D Law
in addition to the Grant Amount, each relating to the OCS Grants, to
the extent resulting from Licensee's grant of rights to any third
party with respect to the Licensed Technology, including without
limitation grant by Licensee of any right to manufacture Products
outside of Israel, or any other grant of right that shall result in
an increase of the Grant Amount by the OCS. Licensor undertakes to
use its best efforts at its own expense to secure any such required
consents or approvals and Licensee shall assist and cooperate with
Licensor with respect to same.
10. Reports; Payments; Records.
10.1. Reports. Within sixty (60) days after the conclusion of each
Calendar Quarter commencing with the first Calendar Quarter in which
Licensee or an Affiliate of Licensee first receives Net Sales or
Sublicense Proceeds, Licensee shall deliver to Licensor a report
certified as being correct by the chief financial officer of
Licensee containing the following information:
10.1.1. with respect to Net Sales (which information shall, for
the sake of clarity, not include any transfer of units
of Products between Licensee and any of its Affiliates):
(a) the number of units of Products sold by
Licensee and its Affiliates in each country
for the applicable Calendar Quarter;
(b) the gross amount invoiced for the Product
sold by Licensee and its Affiliates during
the applicable Calendar Quarter;
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(c) a calculation of Net Sales for the
applicable Calendar Quarter, including a
listing of applicable deductions; and
(d) the total amount of Royalties Payments
payable to Licensor in currency received on
Net Sales for the applicable Calendar
Quarter.
10.1.2. with respect to Sublicense Proceeds, calculation of any
Sublicense Proceeds for the applicable Calendar Quarter
and the total amount of Sublicense Payments payable to
Licensor for the applicable Calendar Quarter.
If no amounts are due to Licensor for any Calendar
Quarter, the report shall so state. Together with the
reports set forth above, Licensee shall forward to
Licensor any reports received during such Calendar
Quarter from its Sublicensees in respect of such
entities' sales of Products. The provisions of the
second paragraph of Section 8.2 above shall apply,
mutatis mutandis, so long as the Grant Amount has not
been fully repaid to the OCS and the aforesaid reports
shall be effected on the same basis as required at such
time for reporting is required in relation to the Grant
Amount pursuant to the OCS (`Keren Tmura') rules and
regulations.
10.2. Payment. Concurrently with the delivery of each report delivered
pursuant to Section 10.1, Licensee shall remit to Licensor all
Royalty Payments and Sublicense Payments due to Licensor for the
applicable Calendar Quarter. All payments due under this Agreement
shall be payable in the currency in which they were received. All
payments due under this Agreement shall be effected against
Licensor's invoice and shall be accompanied by VAT at the rate
prescribed by law, if applicable.
10.3. Records and Audit. Licensee shall maintain complete and accurate
records of Net Sales and any amounts payable to Licensor in relation
to the same for at least three (3) years after the conclusion of the
respective Calendar Quarter. During such three (3) year period,
Licensor shall have the right, at Licensor's expense, to cause an
independent, nationally-recognized, certified public accountant
reasonably acceptable to Licensee, who is bound by a suitable
confidentiality arrangement with Licensee, to inspect Licensee' and
the relevant Affiliates' records relating to Products during normal
business hours for the sole purpose of verifying any reports and
payments delivered under this Agreement. Such audit shall also
include reports submitted to Licensee by Licensee' Sublicensees in
respect of their sales of Products. The parties shall reconcile any
underpayment or overpayment within sixty (60) days after the
accountant delivers the results of the audit. Licensor may exercise
its rights under this Section 10.3 only once every year and only
with at least sixty (60) days prior notice to Licensee.
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10.4. Withholding and Similar Taxes. All payments by Licensee to Licensor
under this Section 10 shall be paid in full, without deductions for
any sales, use, excise, value added, or other similar taxes or any
other governmental fees or charges, provided that in the event that
Licensee is required to withhold any taxes on any amount payable to
Licensor under this Agreement under applicable law, Licensee shall
deduct such amounts and furnish Licensor with official tax receipts,
or other evidence of payment of such withholding taxes, sufficient
to permit Licensor to demonstrate the payment of such withholding
taxes, in order to establish Licensor's right to a credit for such
withholding taxes against Licensor's income tax liability. Licensee
shall provide Licensor with all assistance reasonably requested by
Licensor in connection with any application to any competent tax
authorities to qualify for the benefit of a reduced rate of
withholding taxation under applicable law or tax treaty. The parties
shall generally cooperate to minimize payments due under law,
subject to and to the extent possible under applicable law.
11. Confidential Information; Disclosure; Publicity
11.1. It may, from time to time, be necessary for the Parties , in
connection with performance under this Agreement, to disclose
Confidential Information to each other. The Party receiving such
Confidential Information (the "Receiving Party") shall keep in
strictest confidence the Confidential Information of the other Party
(the "Disclosing Party") and shall not, directly or indirectly,
disclose, communicate, publish, describe, or divulge the
Confidential Information to any third party or use it directly or
indirectly for its own benefit or the benefit of others except as
expressly authorized by prior written consent of the Disclosing
Party or as required for the performance of its undertakings
hereunder.
11.2. Notwithstanding Section 11.1, the Receiving Party may disclose the
Confidential Information to any of its employees and consultants
(the "Authorized Employees"), on a "need to know" basis, and to the
extent necessary for the performance of its undertakings hereunder,
subject to the conditions set forth below:-
11.2.1. Each Authorized Employee will be informed that the
Confidential Information disclosed thereto is
confidential and will agree not to disclose such
information, or any part thereof, to others;
11.2.2. Each Authorized Employee will agree not to use any of
the Confidential Information except for the purpose of
performance of the Receiving Party's undertakings
hereunder.
11.3. The Receiving Party's obligation hereunder shall not apply to
Confidential Information that the Receiving Party can show:
12
11.3.1. Is or later becomes part of the public domain through no
fault of the Receiving Party; or
11.3.2. Is received in good faith from a third party having no
obligations of confidentiality to the Disclosing Party;
or
11.3.3. Is required by law or regulation to be disclosed
(including, without limitation, in connection with
regulatory filings); or
11.3.4. Is independently developed by the Receiving Party.
11.4. Each party may disclose the terms of this Agreement to the extent
required to comply with applicable laws,. Licensor shall be entitled
to make publications in scientific journals which may refer to the
Licensed Technology, provided that a draft of such publication is
made available to Licensee at least sixty (60) days prior to its
intended publication date for its approval which will not be
unreasonably withheld, and provided further that if Licensee
requests modifications to the publication, Licensor shall prior to
publication edit such publication to prevent disclosure of trade
secret or proprietary business information or other information the
disclosure of which could be detrimental to Licensee or its
Sublicensees. In publications in scientific journals made by
Licensee, Licensee shall award Licensor scientific credit to
Licensor, as customary. Except as expressly permitted under this
subsection 11.4, Licensor agrees not to make any disclosures in
respect of Licensed Technology without Licensee's prior written
consent in each instance. Except as expressly permitted under this
subsection 11.4 or as required under applicable law, no party will
make, directly or indirectly, any announcement, publication,
presentation or similar disclosure, regarding this Agreement without
the prior approval of the other party, except that either party may
re-publicize information contained in a previously approved
disclosure. In addition, Licensee may make disclosures regarding its
development and commercialization efforts. Except as may be required
pursuant to applicable law, neither party shall use the name of the
other party or any of its directors, officers, shareholders,
employees, Sublicensees or agents in any promotional material or
other public announcement or disclosure relating to the subject
matter of this Agreement without the prior written consent of the
other party, except that either party may re-publicize information
contained in a previously approved disclosure.
12. Warranties; Limitation of Liability.
12.1. Representations and Warranties by Licensor. Licensor hereby
represents and warrants that:
12.1.1. It is the sole owner of the Licensed Patents;
13
12.1.2. It possesses all the right, title and interest in the
Licensed Patents and the Licensed Know-How currently in
existence and has not granted any rights in respect
thereof;
12.1.3. It has not received written notice of any claims, liens,
attachments, judgments or litigation relating to any of
the Licensed Patents or the Licensed Know-How, has no
knowledge of any claims, liens, attachments, judgments
or litigation relating to any of the Licensed Patents or
the Licensed Know-How, and it hereby undertakes to
notify Licensee in writing, immediately upon receipt of
any such notice or obtaining such knowledge;
12.1.4. It has not prior to the Effective Date of this Agreement
granted and will not during the term of this Agreement
grant to any person or entity, other than Licensee, any
right, license or privilege with respect to the Licensed
Technology;
12.1.5. It has the legal power to enter into this Agreement, and
all requisite corporate action has been taken to
authorize this Agreement, and neither the execution nor
the performance of this Agreement will result in any
violation of any statute, regulation or judicial decree,
or breach of any contractual commitment by which it is
bound;
12.1.6. Neither the execution nor the delivery of this Agreement
nor the performance by Licensor of its obligations
hereunder will result in a violation of any provision of
law, rule or regulation, or result in a breach of the
terms or conditions of, or conflict with or constitute a
default under, any agreement, instrument, undertaking,
governmental license, order, writ, decree, injunction,
judgment or regulatory or other restriction or
obligation to which it is party;
12.1.7. it has received grants from the OCS up to an aggregate
principal amount which does not exceed Five Hundred
Thousand U.S dollars ($500,000) and it has not received
in connection with the Licensed Technology any other
grants from any third party.
12.2. Representations and Warranties by Licensee. Licensee hereby
represents and warrants that (i) it will use best efforts to comply
with all local, state, federal, and international laws and
regulations relating to the development, manufacture, use, and sale
of Products, (ii) it is free to enter into this Agreement in its own
right and that there are no rights exercisable by or obligations
owed to any third party which may prevent or restrict it from
entering into this Agreement; and (iii) it has the legal power to
enter into this Agreement, and all requisite corporate action has
been taken to authorize this Agreement, and neither the execution
nor the performance of this Agreement will result in any violation
of any statute, regulation or judicial decree, or breach of any
contractual commitment by which it is bound.
14
12.3. Limitation of Liability. Notwithstanding anything else in this
Agreement or otherwise, neither Licensor nor Licensee will be liable
to the other with respect to any subject matter of this Agreement
under any contract, negligence, strict liability or other legal or
equitable theory for any indirect, incidental, special,
consequential or punitive damages or lost profits. Except for
liability in connection with the indemnities set forth in Section 13
or claims for breach of the other party's confidentiality or
proprietary rights, each party's aggregate liability hereunder shall
not exceed an amount equal to the amounts paid by Licensee to
Licensor hereunder.
13. Indemnification.
13.1. Indemnity by Licensor. Licensor shall indemnify, defend, and hold
harmless Licensee and its respective directors, officers, employees,
consultants and agents and their respective successors, heirs and
assigns (the "Licensee Indemnitees") from and against any claim,
liability, damage, loss, or expense (including, without limitation,
reasonable attorney's fees) (collectively, "Damage") incurred by or
imposed upon any of the Licensee Indemnitees to the extent arising
from or relating to (i) a breach of any representation or warranty
made by Licensor hereunder; (ii) a breach of any obligation of
Licensor hereunder, (iii) any infringement of third party
intellectual property rights by all or part of the Licensed
Technology, or (iv) the gross negligence or willful misconduct of
Licensor in performing this Agreement. Licensor's obligation to
indemnify Licensee Indemnities under Subsection (iii) as aforesaid
shall be conditional upon the Damages being adjudicated pursuant to
a final court judgment and shall not exceed an amount equal to the
Maximum Payment Obligation.
13.2. Indemnity by Licensee. Except for claims for which Licensor
indemnifies Licensee pursuant to Section 13.1 above, Licensee shall
indemnify, defend, and hold harmless Licensor and its respective
directors, officers, employees, and agents and their respective
successors, heirs and assigns (the "Licensor Indemnitees"), from and
against any Damage incurred by or imposed upon any of the Licensor
Indemnitees to the extent arising from or relating to (i) the use,
offer for sale, or supply by Licensee or its Affiliates or
Sublicensees of Products; (ii) a breach of any representation or
warranty made by Licensee hereunder; (iii) any failure of Licensee
to manufacture, market or sell Products in conformance with
applicable laws and regulations; or (iv) the gross negligence or
willful misconduct of Licensee. Notwithstanding anything to the
contrary set forth herein, Licensee shall have no obligation or
liability to Licensor to the extent relating to any third party
claim (including, without limitation, costs or damages relating
thereto) asserting that all or part of the Licensed Technology as
such or use thereof infringes third party intellectual property
rights, provided however that notwithstanding the provisions of
Section 13.3 below in the event that Licensor requests Licensee to
control the defense in such third party claim and Licensee consents
to same, such claim shall be controlled by legal counsel selected
and appointed by Licensee in the name of both Licensee and Licensor;
and provided further that Licensee may retract its consent if in its
reasonable discretion it believes such joint legal representation
results in a conflict of interests.
15
13.3. Conditions for Indemnification. The parties' undertakings under this
Section 13 shall be subject to: (a) receipt of prompt written notice
of any claim by an indemnitee provided, however, that failure to
give such notice promptly shall only relieve the indemnifying party
of any indemnification obligation it may have hereunder to the
extent such failure diminishes the ability of the indemnifying party
to respond to or to defend the indemnitee against such claim, (b)
the cooperation of the indemnifying party and the indemnitee(s)
regarding the response to and the defense of any such claim, and,
(c) subject to Section 5, the indemnifying party's right to control
the defense in respect of such Claim, that shall include the right
to select and direct legal counsel and other consultants to appear
in proceedings and to propose, accept or reject offers of
settlement, all at its sole cost; provided however, that no such
settlement shall be made without the written consent of the
indemnitee, such consent not to be unreasonably withheld. Nothing
herein shall prevent the indemnitee from retaining its own counsel
and participating in its own defense at its own cost and expense.
13.4. Insurance. Licensee shall maintain insurance that is reasonably
adequate to fulfill any potential obligation to the Licensor
Indemnitees hereunder consistent with industry standards, including
without limitation product liability to the extent consistent with
industry standards. Licensee shall provide Licensor, upon request,
with written evidence of such insurance.
14. Term and Termination.
14.1. Term. Unless earlier ended or terminated prior thereto pursuant to
the provisions hereof, the term of this Agreement (the "Term") shall
commence on the Effective Date and continue in full force and effect
until the expiration of Royalty Payment and Sublicense Payment
obligations pursuant to Section 7. At the end of the period for
which any Royalty Payments Sublicense Payments are due pursuant to
this Agreement, Licensee shall have a fully paid, exclusive,
royalty-free license, with the right to sublicense any Patents and
Know-How necessary to make, have made, use and sell Products.
16
14.2. Termination.
14.2.1. Termination Without Cause. Licensee may terminate this
Agreement upon sixty (60) days prior written notice to
Licensor, provided however that Licensee shall pay
Licensor all Royalty Payments and Sublicense Payments
due to Licensor pursuant to this Agreement until the
actual date of termination.
14.2.2. Termination for Failure to Achieve Milestones or Other
Agreed Targets. Licensor may terminate this Agreement
upon sixty (60) days prior written notice to Licensee
upon the failure of Licensee to either (i) achieve any
the First Milestone set forth in Section 7.2.1, or (ii)
enter into a Strategic Transaction (as such term is
defined in Section 7.2.2 above) or achieve the Second
Milestone set forth in Section 7.2.2 above within
forty-two (42) months from the Effective Date, and such
failure is not remedied within such sixty (60) days
notice period.
14.2.3. Termination for Default. In the event that either party
commits a material breach of its obligations under this
Agreement and fails to cure that breach (where the
breach is capable of cure) within sixty (60) days after
receiving written notice thereof, the non-breaching
party may terminate this Agreement immediately upon
written notice.
14.2.4. Bankruptcy; Receivership. Either Licensee or Licensor
may terminate this Agreement upon notice to the other if
the other party is adjudged bankrupt, applies for
judicial or extra-judicial settlement with its
creditors, makes an assignment for the benefit of its
creditors, voluntarily files for bankruptcy or has a
receiver or trustee (or the like) in bankruptcy
appointed by reason of its insolvency, or if the other
party becomes the subject of liquidation or dissolution
proceedings or otherwise discontinues business, provided
that with respect to all involuntary proceedings or
appointments or actions filed against a party, such
proceeding is not dismissed within ninety (90) days.
14.3. Effect of Termination. In the event of termination of this Agreement
by Licensor pursuant to Section 14.2.1, 14.2.2, 14.2.3 or 14.2.4,
Licensee shall return and/or transfer to Licensor any and all rights
and materials relating to the Licensed Technology, free and clear of
any encumbrance or third party right, and shall be prohibited from
making any further use thereof, except that any existing agreements
that contain a sublicense of the Licensed Technology shall terminate
to the extent of such sublicense, provided however, that for each
Sublicensee, upon termination of the sublicense agreement with such
Sublicensee, Licensor shall be obligated, at the request of such
Sublicensee, to enter into a new license agreement with such
Sublicensee on substantially the same terms as those contained in
such sublicense agreement, provided that such terms shall be
amended, if necessary, to the extent required to ensure that such
sublicense agreement does not impose any obligations or liabilities
on Licensor which are not included in this Agreement. The
termination of this Agreement for any reason shall not relieve a
party of any obligations, which shall have accrued prior to such
termination.
17
15. Miscellaneous.
15.1. Entire Agreement. This Agreement is the sole agreement with respect
to the subject matter hereof and except as expressly set forth
herein, supersedes all other agreements and understandings between
the parties with respect to same.
15.2. Notices. Unless otherwise specifically provided, all notices
required or permitted by this Agreement shall be in writing and may
be delivered personally, or may be sent by facsimile or certified
mail, return receipt requested, to the addresses set forth in the
preamble to this Agreement, unless the parties are subsequently
notified of any change of address in accordance with this Section.
Any notice shall be deemed to have been received as follows: (i) by
personal delivery, upon receipt; (ii) by facsimile, one business day
after transmission or dispatch; (iii) by airmail, three (3) business
days after delivery to the postal authorities by the party serving
notice. If notice is sent by facsimile, a confirming copy of the
same shall be sent by mail to the same address.
15.3. Governing Law and Jurisdiction. This Agreement shall be governed by
and construed in accordance with the laws of the State of Israel.
The parties hereby consent to personal jurisdiction in Israel and
agree that any lawsuit they file to enforce their respective rights
under this Agreement shall be brought in the competent court in Tel
Aviv, Israel.
15.4. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties and their respective legal
representatives, successors and permitted assigns.
15.5. Headings. Section and subsection headings are inserted for
convenience of reference only and do not form a part of this
Agreement.
15.6. Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original.
18
15.7. Amendment; Waiver. This Agreement may be amended, modified,
superseded or canceled, and any of the terms may be waived, only by
a written instrument executed by both parties or, in the case of
waiver, by the party waiving compliance. The delay or failure of any
party at any time or times to require performance of any provisions
hereof shall in no manner affect the rights at a later time to
enforce the same. No waiver by either party of any condition or of
the breach of any term contained in this Agreement, whether by
conduct, or otherwise, in any one or more instances, shall be deemed
to be, or considered as, a further or continuing waiver of any such
condition or of the breach of such term or any other term of this
Agreement.
15.8. No Agency or Partnership. Nothing contained in this Agreement shall
give any party the right to bind another, or be deemed to constitute
either party's authorization to act as agents for each other or as
partners with each other or any third party.
15.9. Assignment. Neither party may assign any of its rights or
obligations pursuant to this Agreement without the prior written
consent of the other Party, unless consent shall be required with
respect to an assignment of this Agreement by Licensee or Affiliate
to an acquirer of all or substantially all of Licensee's or
Affiliate's assets to a successor corporation resulting from any
merger or consolidation, provided, however, that Licensee shall give
the Licensor prompt written notice of any such assignment and of the
identity and address of such successor.
15.10. Force Majeure. Neither party will be responsible for delays
resulting from causes beyond the reasonable control of such party,
including without limitation fire, explosion, flood, war, strike,
riot, or delays in receiving approvals required pursuant to OCS
Grants for the transfer, sublicense or assignment of technology to a
third party where an agreement has been reached with such third
party, provided that (i) the nonperforming party uses commercially
reasonable efforts to avoid or remove such causes of nonperformance
and continues performance under this Agreement with reasonable
dispatch whenever such causes are removed; and (ii) with respect to
a Regulatory Force Majeure Event, the maximum excused delay pursuant
to this subparagraph shall be one (1) year.
15.11. Severability. If any provision of this Agreement is or becomes
invalid or is ruled invalid by any court of competent jurisdiction
or is deemed unenforceable, it is the intention of the parties that
the remainder of this Agreement shall not be affected.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized representatives as of the date first written above.
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TraceGuard Technologies Ltd. Tracetrack Technology Ltd.
By:/s/ Meir Zucker By: Dr. Fredy Ornath
------------------------ -------------------------
Name: Meir Zucker Name: Dr. Fredy Ornath
------------------------ ----------------------
Title: President & CEO Title:General Manager
------------------------ -----------------------
20
Exhibit A
---------
Licensed Patents
1. PCT/IL03/00041
2. PCT/IL2004/000011
21
Exhibit B
---------
Development Plan
Development Plans for 2006
o Development of test benches of various subsystems o Development of
flow and capture simulations
o Development of test methods with trace amounts of substances.
o Integration of the subsystems into functional systems
o Experiments to define the system's 'envelope of capabilities'
o Optimizing collection performance for multiple scenarios.
22
Exhibit C
---------
OCS Approval in Principal
23