LETTER OF INTENT ("LETTER")
ENTERED INTO AS OF AUGUST __, 2005
1. The Parties. IBHAS Technologies Inc. of the one part ("IBHS") and
Tracetrack Technologies Ltd. ("TT Israel" or the "Company") of the other
part.
2. Background. TT Israel is the owner of rights in the Licensed Technology
(defined below). IBHS wishes to license from TT Israel the Licensed
Technology and promote its development and commercialization, based, inter
alia, on a development and commercialization plan as detailed below.
3. Licensed Technology. TT Israel has developed a product known as
"Carrysafe", for the automatic tracking of traces of explosive materials,
comprising a proprietary membrane and software, as disclosed and /or
claimed in the patents or patent applications listed in Exhibit A (the
"Product") and is the exclusive owner of all intellectual property rights
and all inventions and know-how related and/or pertaining to the Product
(the "Intellectual Property" and together with the Product, the "Licensed
Technology"). The term `Licensed Technology' shall be deemed to include
all continuations, continuations-in-part, divisionals, reissues,
reexaminations and extensions with respect to the patents or patent
applications listed in Exhibit A, and all improvements, updates,
modifications and enhancements with respect to the Product and/or the
Intellectual Property made by TT Israel. The term `Product' shall be
deemed to include any product and/or product component and/or product
supplement and/or process that is based on or results from the
Intellectual Property and/or incorporates the inventions, discoveries,
developments, methods, processes, devices or technologies claimed or
disclosed in the Licensed Technology.
4. License. TT Israel shall execute a License Agreement pursuant to which it
shall grant IBHS, conditional upon receipt of OCS approval, an exclusive,
worldwide, perpetual license to make any and all uses of the Licensed
Technology, specifically including, without limitation, the rights to use
the Licensed Technology for research and development, to commercialize the
Licensed Technology, the Product or any other products thereof in any
manner, including without limitation by the development, use, marketing,
distribution, sale and/or provision of any products or services
thereunder, and grant sublicenses and secondary sublicenses under the
License to third parties, subject to the conditions set forth under
Section 5 below (the "License"), all . TT Israel will refrain from using
the Licensed Technology in any manner whatsoever, other than pursuant to
IBHS' instructions in relation to research programs and/or manufacture of
the Product.
5. Rights of IBHS' Israeli Subsidiary. The License and the right to
manufacture, make and/or have made the Product (the "Manufacturing
Rights") will be granted to IBHS as part of the License, on the condition
that (i) IBHS will establish in Israel a wholly-owned subsidiary (the
"Subsidiary"), which Subsidiary shall establish an R&D center in Israel,
recruit employees and carry out R&D activities for the continued
development of the Product, and (ii) the Subsidiary shall be the sole
sub-licensee under the License to use the Licensed Technology for the
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continued development of the Product and sole sub-licensee of the
Manufacturing Rights; provided however that IBHS will be entitled to
assemble the Product and/or manufacture parts thereof (other than the
proprietary membrane and the software) outside of Israel, if and to the
extent required by TSA (US Transportation Security Agency) or a similar
governmental authority, and/or in accordance with the US purchase
requirements in connection with the US foreign aid financing extended to
Israel.
6. OCS. The grant of the License shall be subject to and conditional upon TT
Israel obtaining the approval of the Office of the Chief Scientist of the
Israeli Ministry of Trade and Commerce (the "OCS") with respect thereto to
the extent required under the Israeli Encouragement of Industrial Research
and Development Law, 5744 - 1984, as amended, and the rules and
regulations promulgated thereunder (the "R&D Law") and in connection with
OCS grants received by TT Israel for the funding of the development of the
Product. TT Israel shall utilize its best efforts to obtain said approval
and IBHS, the Subsidiary and TT Israel shall sign any document and/or
obligation which may be required by the OCS in connection thereof.
IBHS undertakes, and shall cause the Subsidiary to undertake, to observe
strictly all the requirements of the R&D Law as applied to TT Israel, and
as directed by the Research Committee, in particular those requirements
stipulated under section 19 of said law relating to the prohibition on the
transfer of know-how and/or manufacturing rights
7. Sublicense. Any sublicense or secondary sublicense shall be bound by
provisions substantially similar to those set forth herein, to the extent
applicable, including without limitation the rules and regulations of the
OCS and/or the R&D Law.
8. Payments.
8.1. An upfront fee of $100,000 (the "Upfront Payment") will be paid by
IBHS to TT Israel within three (3) business days of the execution of
this Letter .
8.2. Royalties. IBHS will pay TT Israel royalties at the rate of three
percent (3 %) of Net Sales (which term shall be defined in the
License Agreement) ("Royalty Payments"). The Royalty Payments shall
be paid on a quarterly basis within 15 days of the end of each
calendar quarter with respect to the Net Sales of such preceding
quarter. In addition, in the event that the Royalty Payments shall
be lower than the royalties due from TT Israel to the OCS (such
difference being referred to herein as the "Additional Amount"),
IBHS will pay TT Israel the Additional Amount together with the
Royalty Payments. IBHS' commitment to pay Royalty Payments to TT
Israel shall remain in force until the earlier of: (i) the lapse of
five (5) years from the First Commercial Sale of the Product (which
term shall be defined in the License Agreement) or (ii) the
aggregate amount of Royalty Payments (including any Additional
Amounts) paid by IBHS to TT Israel (exclusive of the Upfront
Payment) shall amount to $2.5 million (the "Royalty Period").
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9. Development and Commercialization. The parties will agree upon a Product
Development and Commercialization Plan (the "Plan") with respect to the
Product and other products based on the Licensed Technology, which Plan
will be annexed to the License Agreement and will contain, inter alia, the
following milestones and performance dates to be met by IBHS:
9.1. Milestone I: Submission/filing of Product prototype with, for
regulatory approval by, TSA (Transportation Security Agency)/ISA
(Israel Security Agency) or similar governmental authority to sell
the Product in the USA/Israel - by no later than eighteen (18)
months from the Effective Date (as defined in Section 14 below);
9.2. Milestone II: First Commercial Sale (as such term shall be defined
in the License Agreement) of the Product in the USA - by no later
than eighteen (18) months from receipt of regulatory approval by TSA
to sell the Product in the USA.
IBHS shall use reasonable efforts to promote the development and
commercialization efforts with respect to the Product.
10. Term of the License. The License under the License Agreement shall remain
in force and effect until the end of the Royalty Period, following
expiration of which, IBHS will be assigned all rights and title to the
Licensed Technology. Notwithstanding the aforesaid, TT Israel shall be
entitled to terminate the License upon (i) IBHS' failure to achieve any of
the milestones specified above by the agreed upon dates, or (ii) IBHS'
failure to either (a) achieve First Commercial Sale of Product or (b)
enter into a transaction with a strategic partner (such as a big
manufacture, marketing or integration company) within thirty-six (36)
months from the date of receipt of regulatory approval by ISA and/or TSA.
11. Patent Responsibility. IBHS will initiate, file, maintain and prosecute
all relevant existing and new patents on Licensed Technology as from the
Effective Date (as defined in Section 14), including payment of all
applicable costs and fees in connection therewith. The parties will
cooperate to insure prompt and complete protection of the Licensed
Technology and applicable patents.
12. Regulatory Approvals. IBHS shall be responsible for completing the
necessary filings to obtain regulatory approval by ISA/TSA or similar
governmental authority to sell the Product in the USA and other countries
and TT Israel shall reasonably assist IBHS in obtaining same.
13. Professional Assistance. TT Israel shall for a period of four (4) years
from the Effective Date (as defined in Section 14) provide professional
assistance by providing the services of Xx. Xxxxx Xxxxxx as reasonably
required by IBHS to assist it in utilizing the License hereunder. IBHS
shall reimburse TT Israel for its reasonable costs associated with such
assistance. Further undertakings by TT Israel in connection therewith,
including without limitation, confidentiality and non competition
provisions, will be determined by the parties in the License Agreement.
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14. Term; Effective Date; Execution of License Agreement. This Letter shall
enter into effect upon its execution and remain in full force and effect
until the earlier of (i) execution of a detailed License Agreement based
on the terms and conditions set forth herein and other customary terms and
conditions in transactions of this type (the "License Agreement"); (ii)
the lapse of a one year period commencing as of the execution of this
Letter. During said one year period, the parties shall negotiate in good
faith and execute a detailed License Agreement and use their best efforts
to obtain the OCS' approval to the transaction contemplated herein (as
detailed above), which approval constitutes a condition precedent to the
effectiveness of the License (the date upon which the approval of the OCS
is granted or the execution date of the License Agreement, whichever is
later, is referred to herein as the "Effective Date") It is further agreed
and understood that during said term TT Israel shall not enter into
negotiations for any agreement or arrangement with any third party in
connection with the Licensed Technology.
15. Confidentiality. The terms and conditions described in this Letter shall
be confidential information and shall not be disclosed to any third party.
Except as disclosed to potential investors of either party under standard
confidentiality agreement, or as required under any applicable law, and
except as required for the performance of this Letter, neither party shall
disclose or reveal to any other person any information relating to the
transactions contemplated hereunder, or the negotiations between the
parties.
16. Miscellaneous. This Letter shall be governed by Israeli law. Any claim,
dispute, or controversy arising out of or in connection with this Letter,
shall be subject to the sole jurisdiction of the applicable court in
Tel-Aviv.
Tracetrack Technologies Ltd. IBHAS Technologies Inc.
By: _______________________ By: Xxxxx Xxxx
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Its: ______________________ Its: /s/Xxxxx Xxxx
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