AGREEMENT
This Agreement ("Agreement") is effective as of the 1st day of February, 2006
(the "Effective Date"), by and between TraceGuard Technologies Ltd. (the
"Company") a company registered in Israel, having its principal place of
business at 6 Ravnitzky Street, P.O. Box 4708, Segula Industrial Park, Petach
Tikva, Israel and Dr. Ehud (Udi) Ganani (ID No. 50900109) of 9 Yitzhak Sadeh,
Zikhron Yaakov, Israel ("Dr. Ganani").
Whereas, Company is in the business of development, manufacture and
production in the field of homeland security;
Whereas, Company desires to engage the services of Dr. Ganani to furnish
advice and assistance in connection with the Company's business and
Dr. Ganani has agreed to provide such services to the Company all as
more fully described herein; and
Now, therefore, the parties agree as follows:
1. Engagement
1.1. Subject to the receipt of all approvals required under applicable
law, the Company hereby engages Dr. Ganani and Dr. Ganani hereby
agrees to hold himself available to render at the request of the
Company, at such dates and times as shall be mutually agreed between
the parties from time to time, non-exclusive, independent advisory
and consulting services, to the best of his ability, in compliance
with all applicable laws, Company's policy and the terms and
condition set forth herein.
1.2. Until otherwise agreed between the parties, Dr. Ganani shall provide
consulting services and devote such time and attention as shall be
required by the Company from time to time. Dr. Ganani shall not,
during the term of this Agreement, without providing the Company a
prior written notice, be engaged, directly or indirectly, in any
other business or professional activity that is competitive to the
Company's activity, whether or not such activity is pursued for
gain, profit or other pecuniary advantage.
1.3. Dr. Ganani shall have no authority and shall make no commitment or
representation on behalf of Company other than as expressly approved
by the Company.
2. Services
Within the framework of this Agreement, Dr. Ganani undertakes to fulfill
the following services to the Company (the "Services"):
2.1. Serve as a member and as the executive Chairman of the Board of
Directors and the Chief Executive Officer (the "CEO") of the
Company.
2.2. Aid and consult the Company and render it with operational
management advice and assistance.
2.3. Upon Company's request, serve as a member of any committee of the
Board of Directors.
2.4. Dr. Ganani shall devote such time and effort to the Services as the
Company shall deem necessary and proper for the fulfillment of his
obligations hereunder.
2.5. Dr. Ganani shall utilize the highest professional skill, diligence,
ethics and care to ensure that all Services are performed to the
full satisfaction of the Company and to provide the expertise
required in connection with such services. Dr. Ganani acknowledges
and agrees that the performance of the Services may require domestic
and international travel.
2.6. In rendering the Services, Dr. Ganani shall comply with all policies
and procedures of the Company, as may be in effect from time to
time.
3. Compensation
For and in consideration of the Services to be performed by Dr. Ganani,
Company agrees to pay Dr. Ganani as follows:
3.1. A total monthly fee of fifteen thousand US Dollars (US$ 15,000),
payable on a monthly basis with respect to the preceding month (the
"Fee").
3.2. In addition, after the consummation of a financing which includes an
equity investment in the Company in an aggregate amount of no less
than four million US Dollars (US$ 4,000,000) commencing as of July
1, 2005, Dr. Ganani shall be entitled to a one time payment of
thirty thousand US Dollars (US$ 30,000) (the "Special Bonus Fee").
3.3. In addition, at the first quarter of each calendar year, the Board
of Directors shall determine the annual targets of the Company. If
such targets will be successfully achieved, as shall be determined
by the Board of Directors, at its exclusive discretion, Dr. Ganani
shall be entitled to an additional special one time payment
equivalent to thirty thousand US Dollars (US$ 30,000) (the "Annual
Bonus Fee").
3.4. Company agrees to reimburse Dr. Ganani for out of pocket expenses
incurred by him in connection with the Services hereunder
(including, but not limited to, telephone and mobile phone expenses,
internet services, news papers and proffessional magazines), against
valid receipts, provided that expenses exceeding in any calendar
month an aggregate of one thousand US Dollars (US$ 1,000) will be
subject to prior written approval of the Chief Financal Officer of
the Company (the "Expenses").
3.5. Stock Options:
In addition, Company will grant Dr. Ganani options to purchase
shares of Common Stock of TG US (as defined below) par value US$
0.001 each (the "Shares"), as follows:
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3.5.1. Company will grant Dr. Ganani options to purchase up to an
aggregate of nine hundred ninety thousand (990,000) Shares
(the "Unconditional Options"), subject to the terms and
conditions of the Company's Incentive Stock Option Plan (the
"Plan") as set forth in Section 3.5.5 below.
3.5.2. Upon the receipt of the written approval of a Security
Organization (as defined below) for the fulfillment of the
Security Demands (as defined below) by the CarrySafe and for
the operational use of the CarrySafe- Company will grant Dr.
Ganani options to purchase two hundred thousand (200,000)
Shares of the Company (the "Security Options").
For the pupose hereof, a "Security Organization" shall mean
the Israeli Police, the Israel Security Services (the "ISS"),
the Transportation Security Administration of the USA, or any
similar recognized organization approved by the Board of
Directors as such;and "Security Demands" shall mean a formal
letter from the ISS with specific demands related to the
CarrySafe.
3.5.3. Upon the execution, delivery and performance of Strategic
Transaction (as defined below) by Company- Company will grant
Dr. Ganani options to purchase two hundred thousand (200,000)
Shares of the Company (the "Development Options").
For the purpose of this Section a "Strategic Transaction"
means entering into a cooperation agreement (of any sort or
kind) in order to promote Company's business in the field of
homeland security with any of the entities listed in the List
of Business Partners attached hereto as Exhibit A or any
financial, strategic, or homeland security expert entity
approved as such by the Company.
3.5.4. Qualified Transaction Options and Merger Consideration
Options.
(I) Upon a Qualified Transaction (as defined below), Dr.
Ganani will be granted options to purchase up to five
hundred thousand (500,000) Shares, provided, however,
that the total amount of such Options shall not exceed
five percent (5%) of the issued and outstanding shares
of the share capital of the Company at the time of such
grant (the "Qualified Transaction Options").
For the purposes of this Section, a "Qualified
Transaction" shall mean any event of: (i) a sale of all
or substantially all of the assets and/or shares of the
Company; and/or (ii) a merger of the Company with any
other entity, regardless whether the Company is the
surviving entity or not.
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(II) Notwithstanding the aforesaid, if in the framework of a
Qualified Transaction the Company shall grant to the
merged entity or its shareholders options to purchase
Shares (the "Merger Consideration Options"), Company
will also grant to Dr. Ganani such number of options
equal to four percent (4%) of the Merger Consideration
Options (the "Additional Transaction Options"),
provided, however, that the total number of the
Additional Transaction Options shall not exceed,
together with the Qualified Transaction Options, nine
hundred thousand (900,000). For the purpose of this
Agreement hereof, the Unconditional Options, the
Security Options, the Development Options, the Qualified
Transaction Options and the Additional Transaction
Options, as applicable, shall be referred to together as
the "Options".
3.5.5. The Options, as applicable, shall be granted to Dr. Ganani in
accordance with the following principal terms and conditions:
(I) Vesting. All Unconditional Options shall vest in
accordance with the terms and conditions of the Plan,
and unless expressly stated otherwise herein all other
Options shall vest immediately upon their grant to Dr.
Ganani.
(II) Exercise Price. Each Option shall be exercisable to one
share of common stock of the Company, par value $0.001,
against a payment of seventy cents (US$ 0.70).
(III) Term of Options. All Options, if and to the extent
granted according to this Section, shall be in effect
for a period of three (3) years commencing on the date
of their grant and shall expire immediately thereafter.
(IV) Tax. All Options granted to Dr. Ganani will be granted
in accordance with Section 102 of Israeli Internal
Revenue Ordinance ("Section 102") under the capital
gains tax track with a trustee, subject to the
requirements and conditions of Section 102.
3.6. General. All Options granted to Dr. Ganani shall be subject to the
terms and conditions of the Plan to be adopted by the Company and
subject to such terms and conditions of the Plan, as will be
approved by the Company, at its sole discretion. At the first
anniversary of this Agreement (i.e, 1st day of February, 2007), the
Fee, the Special Bonus Fee and the Annual Fee will be automatically
increased by ten percent (10%). At any anniversary of this Agreement
thereafter, if the term of this Agreement is extended by the
Parties, annual reviews shall be performed by the Company on a
yearly basis at its sole discretion.
3.7. During the term of this Agreement, Dr. Ganani shall be entitled to
use a leased car of type _____ (the "Company Car"). The Company will
cover all the operating expenses of the Company Car (not including
fines).
Dr. Ganani shall ensure that the provisions of the insurance policy
and the leasing terms relating to Company Car are carefully
observed.
Dr. Ganani shall have no rights of lien with respect to Company Car
and/or any other equipment relating thereto. Upon termination of his
Agreement, Dr. Ganani shall return the Company Car to the Company's
principal office.
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3.8. Payment of the Fee, the Special Bonus Fee (as applicable), the
Annual Fee and the Options (as applicable), shall be made against
Dr. Ganani's itemized invoice following the receipt of the relevant
invoice, which invoice shall be submitted to the Company within
seven (7) days of the end of each calendar month during the term of
this Agreement, and shall be accompanied by VAT at the rate
prescribed by law (subject to any set-offs or other deductions of
any nature as required under any applicable law, unless Dr. Ganani
provides the Company with appropriate tax exemption documentation).
3.9. For the avoidance of any doubt, the Fee or the Special Bonus Fee (as
applicable), the Annual Bonus fee (as applicable) and the Options
(subject to their terms) constitute the full and final consideration
for the Services, and Dr. Ganani shall not be entitled to any
additional consideration, of any sort or kind, for his Services.
4. Reports
4.1. Dr. Ganani shall submit to the Board of Directors of the Company
reports at such times and in such form as requested by the Company
which shall set forth any information and data requested by the
Company.
4.2. In the event that Dr. Ganani participates in a conference on behalf
of the Company, Dr. Ganani shall submit to the Board of Directors of
the Company a report on the subject of the conference, as requested
by Company.
5. Confidentiality
5.1. Dr. Ganani shall not disclose or put to its own use, or to the use
of any third party, any Proprietary Information (as hereinafter
defined) of the Company and/or TraceGuard Technologies, Inc. ("TG
US" and together with the Company and any of their affiliates "TG
Group") of which Dr. Ganani has been or hereafter becomes informed,
whether or not developed by Dr. Ganani.
"Proprietary Information" shall mean confidential and proprietary
information concerning the business and financial activities of TG
Group, including, inter alia, TG Group's product research and
development, the Company's banking, investments, investors,
properties, employees, marketing plans, customers, trade secrets,
and test results, processes, data, know-how, improvements,
inventions, techniques and products (actual or planned), whether
documentary, written, oral or computer generated. However, excluded
from the above definition with respect to Dr. Ganani's
confidentiality undertaking is any information that Dr. Ganani has
evidence that (i) is or shall become part of the public knowledge
except as a result of the breach of Dr. Ganani's undertakings
towards the Company; (ii) reflects information and data generally
known in the industries or trades in which the Company operates;
(iii) as shown by written records, is received by Dr. Ganani from a
third party exempt from confidentiality undertakings towards the
Company; (iv) Dr. Ganani is compelled by court or government action
pursuant to applicable law to disclose such information, provided,
however, that Dr. Ganani provides the Company prompt notice thereof
so that it may seek a protective order or other appropriate remedy,
after providing the Company with written notice.
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5.2. Dr. Ganani will use the Proprietary Information solely to perform
the Services for the benefit of the Company. Dr. Ganani shall use
best efforts to protect all Proprietary Information.
5.3. Upon termination of his engagement with the Company, Dr. Ganani will
promptly deliver to the Company all documents and materials of any
nature pertaining to its engagement with the Company.
5.4. Dr. Ganani recognizes that TG Group received and will receive
confidential and/or proprietary information from third parties
subject to a duty on the part of TG Group to maintain the
confidentiality of such information and to use it only for certain
limited purposes. At all times, both during his engagement and after
its termination, Dr. Ganani undertakes to keep and hold all such
information in strict confidence and trust, and he will not use or
disclose any of such information without the prior written consent
of the Company, except as may be necessary to perform his duties
hereunder and consistent with TG Group agreement with such third
party. Upon termination of his engagement with the Company, Dr.
Ganani shall act, with respect to such information, as set forth in
Section 5.2 and 5.3, mutatis mutandis.
5.5. Dr. Ganani's undertakings under this Section 5 shall remain in full
force and effect after termination or expiration of this Agreement
or of any renewal thereof and for a period of five (5) years
thereafter.
6. Intellectual Property Rights
6.1. Dr. Ganani shall disclose promptly to the Company or its nominee,
any and all inventions, designs, original works of authorship,
formulas, concepts, techniques, processes, formulas, trade secrets,
discoveries and improvements resulting, directly or indirectly, from
the Services and/or conceived or made by Dr. Ganani or anyone on his
behalf in the course of providing the Company with the Services
and/or during the term of this Agreement (the "Intellectual
Property"), and hereby assigns and agrees to assign to TG Group, at
the Company's sole discretion, or its nominee all its interest, save
for moral rights, in any Intellectual Property. Dr. Ganani agrees to
assist TG Group, as instructed by the Company in every proper way to
obtain and enforce patents, copyrights, mask work rights, and other
legal protections for the Intellectual Property in any and all
countries. Whenever requested to do so by the Company, Dr. Ganani
will execute any documents that TG Group may reasonably request for
use in obtaining or enforcing or extending or renewing such patents,
copyrights, mask work rights, trade secrets and other legal
protections. The obligations in this Section 6 shall be binding upon
Dr. Ganani's assigns, executors, employees, officers, administrators
and other legal representatives.
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6.2. Dr. Ganani agrees that all the Intellectual Property is work made
for hire and will be the sole and exclusive property of the Company
or its nominee, at the Company's sole discretion. All Intellectual
Property, which shall be reduced to practice during and/or within
twelve (12) months after termination of this Agreement, shall be
deemed to have been invented during the term of this Agreement,
unless otherwise established by Dr. Ganani.
6.3. Dr. Ganani's undertakings under this Section 6 shall remain in full
force and effect after termination of this Agreement or any renewal
thereof and for a period of five (5) years thereafter, provided that
the Company compensates Dr. Ganani at a reasonable rate for time or
expenses actually spent by him at the Company request for such
assistance after termination of this Agreement.
7. Term and Termination
7.1. The term of this Agreement shall be twenty four (24) months
commencing on the Effective Date (the " Engagement Period")
7.2. Following the Engagement Period, Parties shall be entitled to extend
the term of this Agreement upon the terms and conditions to be
agreed among the Parties.
7.3. In the event of termination of this Agreement by the Company in
writing during the Engagement Period, Dr. Ganani will remain
entitled to all benefits under Section 3 until the end of the
Engagment Period, including, but not limited to, all Options,
whether or not the milestones related thereto have been achieved
(the "Section 3 Benefits").
7.4. Notwithstanding the aforesaid, Dr. Ganani shall not be entitled to
Section 3 Benefits in the event of termination of Dr. Ganani's
engagement under the terms of this Agreement by the Company
following a material breach of the provisions of this Agreement by
Dr. Ganani; provided, however, that the Company may not terminate
Dr. Ganani's engagement under this Section 7.4, unless it has given
Dr. Ganani a written notice of the basis for the proposed
termination at least thirty days (30) before such termination (the
"Cure Period"), in order to cure such basis, and Dr. Ganani has
failed to cure such basis during the Cure Period.
7.5. For the avoidance of doubt, in the event of termination of this
Agreement by Dr. Ganani, Dr. Ganani shall not be entitled to receive
the Section 3 Benefits for the period following such termination.
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8. Assurances; No Conflict
8.1. Dr. Ganani hereby warrants, represents and confirms to the Company
that on the date hereof he is free to be engaged by the Company upon
the terms contained in this Agreement and that there are no
engagements, contracts, consulting contracts or restrictive
covenants preventing full performance of his duties hereunder.
8.2. Dr. Ganani hereby further represents warrants and confirms that
nothing in this Agreement conflicts with any of Dr. Ganani's current
affiliations or other current relationships with any other entity.
8.3. The Services performed hereunder will not be conducted on time that
is required to be devoted by Dr. Ganani to any other third party.
Dr. Ganani shall not use the funding, facilities and resources of
any third party to perform the Services hereunder and shall not
perform the Services hereunder in any manner that would give any
third party rights to produce such work. Nothing done in Dr.
Ganani's work for any third party shall be considered part of the
Services performed hereunder.
9. Competitive Activity; Non-Solicitation
9.1. Dr. Ganani will not, as long as Dr. Ganani provides services to the
Company hereunder and for a period of twelve (12) months thereafter,
directly or indirectly, as owner, partner, joint venturer,
stockholder, employee, broker, agent, principal, corporate officer,
director, consultant, licensor or in any other capacity whatsoever
engage in, become financially interested in, be employed by, or have
any connection with any business or venture that is engaged in any
activities which are in direct competition with products or services
offered by TG Group at the prevailing time or in direct competition
with any research and development efforts in connection with TG
Group intended products and services at the prevailing time without
TG Group prior consent.
9.2. During the Term of this Agreement and for a period of twelve (12)
months thereafter, Dr. Ganani will not solicit or induce any
employee, advisor, contractor or customer of TG Group to terminate
or breach any employment, contractual or other relationship with TG
Group.
10. Resolution of Disputes
10.1. All disputes between the parties related to this Agreement shall be
resolved amicably by the parties within fourteen (14) days. In the
event the parties fail to settle the dispute, the dispute shall be
resolved exclusively by arbitration proceedings to be held in Tel
Aviv before Yossi Kuchik, or if he is unwilling or unable to serve
as an arbitrator David Ivri (the "Arbitrator").
10.2. The Arbitrator shall decide the matters in dispute in accordance
with the substantive laws of the state of Israel, without reference
to the conflict of laws rules thereof, and in accordance with the
provisions of this Agreement, but will not be subject to the
procedures and evidence law and the Arbitrator must substantiate his
decision, including interim decisions within forty five (45) days
with an option to extend this period by additional forty five (45)
days. This Section constitutes an arbitration agreement in terms of
the Arbitration Law, 5728-1968.
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10.3. The cost of arbitration shall be borne by the party whose contention
was not upheld by the arbitration proceedings, unless otherwise
provided in the arbitration award.
10.4. Nothing in this section shall prevent the parties from applying to
court for interim orders at any time.
11. Miscellaneous
11.1. Dr. Ganani shall not assign this agreement or any of his rights and
privileges hereunder, whether voluntarily or by operation of law, to
any person, firm or corporation, without the prior written consent
of the Company.
11.2. Except as otherwise provided herein, this Agreement constitutes the
entire agreement between the parties with respect to the matters
referred to herein, and no other arrangement, understanding or
agreement, verbal or otherwise, shall be binding upon the parties
hereto. This Agreement may not be amended, modified or supplemented
in any respect, except by a subsequent writing executed by both
parties hereto.
11.3. No failure, delay or forbearance of either party in exercising any
power or right hereunder shall in any way restrict or diminish such
party's rights and powers under this Agreement, or operate as a
waiver of any breach or non-performance by either party of any of
the terms or conditions hereof.
11.4. If any term or provision of this Agreement shall be declared
invalid, illegal or unenforceable, then such term or provision shall
be enforceable to the extent that a court shall deem it reasonable
to enforce such term or provision and if such term or provision
shall be unreasonable to enforce to any extent, such term or
provision shall be severed and all remaining terms and provisions
shall be unaffected and shall continue in full force and effect.
11.5. Any notice from one party to the other shall be effectively served
if sent in writing by recorded delivery to the address of the
receiving party as stated in the preamble to this agreement, unless
said party informs the other party in writing on a change of
address.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first hereinabove written.
--------------------------------- ----------------------------
TRACEGUARD TECHNOLOGIES LTD. Dr. EHUD (UDI) GANANI
By: __________________
Its: __________________
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EXHIBIT A
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List of Business Partners
1) GE
2) Smith Detection
3) L3
4) Boeing
5) Siemens
6) Lockheed Martin
7) Northrop Grumman Corp.
8) Rapsican
9) Any company that conducts significant business in the United States
with sales exceeding an amount of US$ 100,000,000 (One Hundred
Million U.S. Dollars) to the homeland security market.
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