Exhibit 10.7
AGREEMENT
THIS AGREEMENT is made as of June 30, 2002, by and between Voice Diary Ltd.
("VDL"), an Israeli company and Aryt Industries Ltd. ("Aryt").
RECITALS
A. VDL and Aryt have entered into a certain loan agreement dated March
31, 2002, and a certain addendum thereto dated April 24, 2002, pursuant to which
Aryt granted VDL several loans (collectively, the "Loans") in the aggregate
amount of US$ 650,000 (such loan agreement and the Addendum thereto shall be
hereinafter collectively referred to as the "Loan Agreement");
B. Between VDL and Aryt or some of its subsidiaries, several
transactions were executed, including but not limited to subcontracting of
software development, subcontracting of manufacturing, office lease and other
services. Pursuant to these transaction VDL may have obligations and outstanding
debt to Aryt or any of its subsidiaries (such obligations or outstanding debts
shall be hereinafter collectively be referred to as the "Debt"; it being
understood that the term "Debt" shall not include any future obligations which
may be incurred by VDL at any time following the date hereof );
C. The parties wish to provide for certain payments from VDL to Aryt in
lieu of any and all obligations of VDL under the Loan Agreement or under the
Debt, and in full satisfaction of VDL's obligations, which may exist under the
Loan Agreement or under the Debt.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and
agreements set forth herein and intending to be legally bound, the parties agree
as follows:
1. Royalties Payment to Aryt in Full Satisfaction of VDL's Obligations Under
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the Loan Agreement.
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1.1. Royalties. Subject to the terms and conditions of this Agreement, VDL
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undertakes to pay Aryt royalties from the Sales of VDL's Products, at the rates
specified in Section 1.2 below, up to an aggregate amount of US$ 751,000 (Seven
Hundred and Fifty One Thousand united States Dollars) (the "Maximum Royalty
Amount"), in exchange for the cancellation by Aryt of all of its rights, title
and interest in and to any obligation of VDL, or any other entity on its behalf,
arising out of the Loan Agreement or out of the Debt, specifically agreeing,
without limitation, that the obligation to repay the Loans or any interest
accrued thereon, or the Debt, is hereby terminated and that any promissory note
issued in connection with the Loans or the Debt is hereby cancelled and revoked.
For the purpose hereof:
The term "Product" shall mean the Voice Diary IMP. It being understood
that the term "Product" shall include any updates, upgrades and/or any
other improvement made to the Voice Diary IMP or any other version and
future generations of the Voice Diary IMP, including cellular
applications, but shall not include any other product/s of VDL which
does not incorporate any part of VDL's intellectual property currently
included in the Voice Diary IMP.
The term "Sales" shall mean: the income in connection with the
Product, as recorded in VDL's books.
1.2. Royalty Rate.
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The rate of the royalties to be paid by VDL to Aryt pursuant to Section 1.1
above shall be as follows:
1.2.1. Ten percent (10%) of the Sales of VDL's Products, until the earlier
to occur of: (i) the lapse of three (3) years following the date hereof, or (ii)
such time as the aggregate sum paid by VDL to Aryt pursuant to the terms of this
Agreement amounts to either US$ 250,000 or more (the term during which this 10%
royalty rate is applicable shall be hereinafter referred to as the "First
Term").
1.2.2. Six percent (6%) of the Sales of VDL's Products, commencing at the
end of the First Term and ending on the earlier to occur of: (i) the lapse of
two (2) years following the end of the First Term, or (ii) such time as the
aggregate sum paid by VDL to Aryt pursuant to the terms of this Agreement
amounts to either US$ 500,000 or more (the term during which this 6% royalty
rate is applicable shall be hereinafter referred to as the "Second Term").
1.2.3. One percent (1%) of the Sales of VDL's Products, commencing at the
end of the Second Term and ending on the earlier to occur of: (i) the lapse of
two (2) years following the end of the Second Term, or (ii) such time as the
aggregate sum paid by VDL to Aryt pursuant to the terms of this Agreement
amounts to the Maximum Royalty Amount.
1.3. Limited Royalties. VDL's obligation to pay royalties shall ipso facto
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terminate on such time that the aggregate royalty payments that were actually
paid by VDL shall equal the Maximum Royalty Amount. Aryt hereby consents and
acknowledges that in no event shall the aggregate royalties paid by VDL exceed
the Maximum Royalty Amount. This Section shall not derogate in any way from
VDL's obligation to pay interest in any event of delay in payments as specified
in Section 1.4 below or to pay additional royalties as specified in Section 1.5
below.
1.4. Payments. Within thirty (30) days after the end of each calendar
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quarter (i.e. December 31, 2002, March 31, 2003, June 30, 2003, etc.),
commencing on the calendar quarter ending on December 31, 2002, VDL shall submit
to Aryt a statement in writing (the "Royalty Statement"), substantially in the
form of the report submitted by VDL to the Office of the Chief Scientist of the
Ministry of Industry and Trade, containing a calculation of Sales for the
preceding quarter and a calculation of royalties related thereto. Royalties
shall be paid by check within seven (7) days following the date on which VDL
submitted to Aryt the Royalty Statement. In any event of delay in the payment of
the royalties, in accordance with the provisions of this Section 1.4, VDL shall
pay interest at an annual rate equal to the maximum annual rate applicable in
Bank Hapoalim B.M. for debit accounts +1% from the date of the delay and until
the end of two month from the due date of such payment. At the end of such
two-month period, VDL shall pay interest at a monthly rate equal to the maximum
monthly rate applicable in Bank Hapoalim B.M. for debit accounts +0.4166% (or,
the maximum monthly rate permitted under applicable law) until the actual
payment. For the avoidance of doubt, it is hereby clarified, that no delay in
the submission of the report to Arty shall entitle VAL to delay the payment of
the royalties to Aryt.
1.5. Audit Rights of Aryt. Aryt shall have the right, at its own expense,
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to cause an independent certified public accountant reasonably acceptable to
VDL, to inspect VDL's records for the sole purpose of verifying any reports and
payments delivered under this Agreement. Such accountant shall not disclose to
Aryt any information other than information relating to accuracy of reports,
payments delivered under this Agreement, and what, if any, adjustments are
appropriate and shall provide VDL with a copy of any report given to the
auditing party. VDL shall pay any underpayment (and Aryt shall pay any
overpayment) within thirty (30) days after the accountant delivers the results
of the audit. Aryt shall bear the full cost of the audit unless the audit
performed under this sub-section reveals an underpayment in excess of seven (7)
percent in any semi annual period, in which case VDL shall bear the full cost of
such audit and shall pay accrued interest on the additional royalties due at an
annual rate equal to ten percent (10%) over the prime rate as published in the
"money rates" section of the Wall Street Journal on the date of the accountant's
report. Aryt may exercise its rights under this sub section and obtain an audit
not more than twice every twelve months period, during normal business hours and
after reasonable prior, written notice to VDL, provided however that in any
event that the audit showed underpayment of more than two percent (2%) Aryt
shall have the right to an unlimited audit. It is hereby agreed and
acknowledged that the provisions of section 1.4 shall not apply with respect to
any underpayments or overpayments due pursuant to the terms of this Section 1.5,
provided that such underpayments or overpayments were paid within thirty (30)
days after the accountant delivers the results of the audit.
2. Representations And Warranties of VDL.
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VDL hereby represents and warrants to Aryt that:
2.1. Authorization. VDL has full power and authority to enter into this
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Agreement. All actions on its part necessary for the authorization, execution,
delivery and performance by it of this Agreement have been duly taken to
authorize the execution and delivery by it, and this Agreement constitutes its
valid and legally binding obligation, enforceable in accordance with its terms
except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application affecting enforcement of
creditors' rights.
2.2. No Breach. The execution and performance of this Agreement and the
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consummation of the transactions contemplated hereunder will not result in a
breach of, nor will they constitute a default under, any applicable law or
regulation, or under any contract, agreement, commitment, indenture, mortgage,
note or other instrument or obligation to which VDL is party.
2.3. Approvals. No approval or consent of any person, authority or entity is
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required in connection with the execution and delivery of this Agreement or the
performance of the VDL's obligations contemplated hereby.
3. Representations And Warranties of Aryt.
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Aryt hereby represents and warrants to VDL that:
3.1. Authorization. Aryt has full power and authority to enter into this
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Agreement. All actions on its part necessary for the authorization, execution,
delivery and performance by it of this Agreement have been duly taken to
authorize the execution and delivery by it, and this Agreement constitutes its
valid and legally binding obligation, enforceable in accordance with its terms
except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application affecting enforcement of
creditors' rights.
3.2. No Breach. The execution and performance of this Agreement and the
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consummation of the transactions contemplated hereunder will not result in a
breach of, nor will they constitute a default under, any applicable law or
regulation, or under any contract, agreement, commitment, indenture, mortgage,
note or other instrument or obligation to which Aryt is party.
3.3. Approvals. No approval or consent of any person, authority or entity is
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required in connection with the execution and delivery of this Agreement or the
performance of the Aryt's obligations contemplated hereby.
4. Negative Pledge. Aryt hereby acknowledges that VDL's assets are subject
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to an existing first ranking pledge (the "Senior Pledge") pursuant to which any
and all of VDL's assets are pledged in favor of the Industry Development Bank
Ltd. (whether in the form of a floating charge, fixed charges, or a combination
thereof). Aryt hereby agrees and acknowledges that VDL may, at any time and
from time to time, assign the Senior Pledge to any other third party which is a
bank or a financial institution (collectively: a "Bank"), or create a new Senior
Pledge in favor of any third party which is a Bank, including, without
limitation, at any time following the expiration of the original Senior Pledge.
However, VDL shall not create any other new pledge in favor of any third party
that is not a Bank, on any of its assents without the prior written consent of
Aryt.
5. Termination of the Loan Agreement. It is hereby agreed to terminate the
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Loan Agreement and the Debt, effective on date hereof, which Loan Agreement and
the Debt shall expire and shall be of no further force or effect.
Each of the parties hereto acknowledges and approves that all of its rights,
title and interest arising out of the Loan Agreement or the Debt, including,
without limitation, VDL's obligation to repay the Loans or the Debt or any
interest accrued thereon is hereby cancelled and terminated; each party further
releases the other parties, their directors, officers, employees, shareholders,
attorneys, affiliates, or agents of each entity, from any and all claims,
liabilities, obligations, agreements, damages, rights, demands, and losses of
any nature whatsoever arising out of the Loan Agreement or the Debt, whether or
not now known, suspected or claimed. This Section shall not derogate in any way
Aryt's rights to receive royalties as provided in this Agreement.
6. Limitation on Transfer. VDL shall not sell or irrevocably transfer the
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title of any of the intellectual property that is currently incorporated in the
Voice Diary IMP unless the transferee of such intellectual property shall assume
VDL's respective obligations hereunder.
7. Miscellaneous.
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7.1. Governing Law. This Agreement shall be governed in all respects by the
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laws of the State of Israel. The parties irrevocably consent to the exclusive
jurisdiction of any competent court located within the city of Tel-Aviv-Jaffa,
with respect to any and all disputes arising from this Agreement.
7.2. Successors and Assigns. Except as otherwise expressly provided herein,
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the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
Neither party may transfer or assign any of its rights or obligations under this
agreement to any third party without the prior written consent of the other
party.
7.3. Further Acts. The parties hereto shall perform all further acts and
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execute and deliver all documents that may be reasonably necessary to carry out
their obligations hereunder and the purposes of this Agreement.
7.4. Changes and Termination. Except as otherwise expressly provided
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herein, neither this Agreement nor any provision hereof may be changed, waived,
discharged or terminated orally, without the prior written consent of all
parties hereto.
7.5. Entire Agreement. This Agreement and the other documents delivered
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pursuant hereto constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and thereof.
7.6. Taxes. Subject to the provisions of Section 4 above, Aryt shall pay
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any and all taxes levied on account of the royalties that it receives under this
Agreement. If laws or regulations require that taxes be withheld from any
payment under this Agreement, VDL may deduct such taxes from the amount due to
Aryt, pay such taxes to the proper tax authority, and provide evidence of the
obligation and proof of payment to Aryt promptly after making such payment.
7.7. Limitation of Remedies. In no event shall VDL be liable, in contract,
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tort, or otherwise, for any consequential, indirect, special, or incidental
damages, cost, or expense, whether foreseeable or unforeseeable (including, but
not limited to loss of profits) which may be caused to Aryt or arise out of or
in connection with this agreement.
7.8. Notices. Any notice required or permitted hereunder shall be sent to a
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party at its address set forth below, or to another address if the recipient has
given prior written notice thereof. Any notice may be given as follows: (i) by
delivery in hand, effective on receipt; (ii) by registered mail, return receipt
requested, effective on the fifth business day after the date of mailing, or
(iii) by recognized commercial overnight courier, effective on the second
business day after such deposit for other addresses.
7.9. Severability. In case any provision of this Agreement shall be
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invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions of this Agreement shall not in any way be affected or
impaired thereby.
7.10. Titles and Subtitles. The titles of the sections and subsections of
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this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
7.11. Counterparts. This Agreement may be executed in any number of
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counterparts, each of which shall be an original, but all of which together
constitute one instrument.
7.12. Delays or Omissions. No delay or omission to exercise any right,
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power or remedy accruing to a party to this Agreement shall impair any such
right, power or remedy of such party, nor shall it be construed to be a waiver
of any breach or default under this Agreement, or any acquiescence therein, or
any waiver of or acquiescence in any similar breach or default thereafter
occurring; nor shall any delay or omission to exercise any right, power or
remedy accruing to a party to this Agreement or any waiver by such party of any
single breach or default by any other party be deemed a waiver by such party of
any other right, power or remedy or breach or default theretofore or thereafter
occurring.
IN WITNESS THEREOF, VDL and Aryt have caused this Agreement to be signed and
delivered, all as of the date first above written.
/s/ Arie Hinkis & Ran Eckhaus /s/ Yoav Bachar & Ran Eckhaus
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Voice Diary Ltd. Aryt Industries Ltd.
By: Arie Hinkis & Ran Eckhaus By: Yoav Bachar & Ran Eckhaus
Address: Shaar Yoqneam, Yoqneam 20692 Address: 7 Haplada St., Or Yehuda
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Israel Israel