Contract
drawn up and signed on Thursday, February 4, 1999
Between: Solmecs (Israel) Ltd.
POB 0000, Xxxx Xxxxxxxxxx Xxxx, (hereinafter: of the
one part "Solmecs"),
And: 1. Text-On Ltd. (hereinafter: "Text-On"
2. Xxxxx Wettelmacher (hereinafter: "Xxxxx")
both, jointly and severally, of 00 Xxxxxxxx Xxxxxx, Xxxxx Xxxxx
of the other part
Whereas: Text-On has declared that it owns all the rights and
technological know-how required to produce an advanced electronic
dictionary in various languages based on the
English-Hebrew-English Oxford model DEH 111 (hereinafter: the
"Product"), continue the development and marketing, including,
but not only - algorithms, chips, modules, design and assembly of
the casing and any other component required for the production of
units which are complete and ready to be sold, including the
connections it has created in respect of production and marketing
of the Product (hereinafter: the "Rights"),
Whereas: Xxxxx has declared that the above Rights are fully owned by
Text-On only,
Whereas: Text-On has declared that it is the exclusive owner of the above
Rights in respect of the area comprising the entire world, with
the exception of the area of the State of Israel (hereinafter:
the "Territory"), which are free of any lien and/or rights
whatsoever to any third party whatsoever, with the exception of a
lien on the rights stemming from the existence of this Contract
in favor of Bank Hapoalim X.X. Xxxxxxx Xxxx branch (hereinafter:
the "Lien"), and with the exception of the rights in the
Netherlands and Belgium stemming from a contract between it and
between Romtech Electronics Ltd. of January 14, 1996, and that it
is authorized, entitled and qualified to transfer the Rights to
Solmecs, pursuant to the conditions of this Contract,
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Whereas: Text-On and Xxxxx have declared that they are aware that Solmecs
is entering into this Contract only on the basis of their
above-mentioned declarations, and that in the absence of the
above-mentioned declarations Solmecs would not have entered into
this Contract,
Whereas: Text-On has proposed that Solmecs purchase from it the Rights
pursuant to this Contract and Solmecs has consented to purchase
them from Text-On pursuant to the conditions of this Contract,
Wherefore the parties have declared, agreed and stipulated as follows:
1. The Preamble to this Agreement, including the declarations of the parties
which are included therein, constitutes an integral part thereof.
2. Subject to the fulfillment by Solmecs of all its obligations pursuant to
this Contract, Text-On hereby transfers the Rights to the complete and
exclusive ownership of Solmecs which, for the duration of the Contract,
shall be able to act in all matters pertaining to the Rights as though they
were the owners thereof.
3. Text-On and Xxxxx hereby undertake, jointly and severally, that for the
duration of the Agreement, including the Waiting Period as defined in this
Contract, they shall not engage, in any manner whatsoever, directly or
indirectly, themselves or by means of others, either as self-employed or as
employees, including by a corporation or partnership and/or holding,
themselves or by means of others, shares or management rights in any
corporations whatsoever, in the production and/or development and/or
marketing and/or distribution and/or sale of electronic dictionaries of any
type and kind in the Territory.
In order to remove doubt, it is hereby clarified that the rights to the
development, production and marketing of the Product in the area of Israel
(hereinafter: the "Israeli Rights"), shall also remain the entire property
of Text-On for the duration of the period of this Contract and thereafter,
and therefore both it and Xxxxx are also entitled to handle the Israeli
Rights during the existence of this Contract, and this shall not be deemed
a breach of contract by either party.
In order to remove doubt, it is hereby clarified that the undertakings of
Xxxxx pursuant to this section shall remain valid throughout the entire
period of the Agreement, including the Waiting Period, whether he continues
to be employed by Solmecs, or whether his employment is terminated.
4. It is agreed by the parties that Xxxxx shall be employed by Solmecs as a
department head responsible for project production, development and
marketing of the Product, throughout the period of his employment, subject
to the employment
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agreement which shall be signed with him, which is attached to this
Contract as Appendix A, and constitutes an integral part thereof. In order
to remove doubt, it is clarified that this undertaking is one of the
principal points of the Contract, and a breach thereof by Text-On and/or by
Xxxxx shall constitute a fundamental breach of the entire Contract and
Text-On shall not entertain the argument that the activities of Xxxxx are
not under its control and it even renounces this or any similar argument in
advance.
5. Xxxxx undertakes to act industriously, diligently and faithfully in order
to implement the assignments in accordance with the stages listed in this
Contract and he also undertakes to make every effort, to the best of his
ability, to promote the project which is the subject of this Contract.
Solmecs undertakes to act zealously, diligently and industriously to
promote the project pursuant to this Contract, and to make every effort
for this purpose, including investing all the funds required according to
the budget framework of the project appearing in Appendix B, and also
making additional reasonable investments in accordance with its
commercial considerations, and with the success of the project.
6. It is agreed by the parties that this Contract shall be valid from the date
of its signature onward (hereinafter and above: the "Contract Period"),
subject to the following provisions:
A. Solmecs shall be authorized and entitled, pursuant to its exclusive
discretion, to terminate the Contract at the end of six months from
the date of its signature or upon completion of Stages A and B as set
forth below, the later of the two, by giving the other party written
notice of 30 days. In order to remove doubt it is clarified that said
notice of contract termination shall also constitute notice of the
termination of Xxxxx' employment in Solmecs, and Xxxxx renounces any
argument in this matter.
B. In the event that Solmecs terminates the Contract pursuant to that
stated in subparagraph A. above, it shall be authorized and entitled,
but not required, at its exclusive discretion, to renew the Contract,
including all the provisions contained therein, within a period which
shall not exceed six months from the date of contract termination, as
aforesaid (hereinafter: the "Waiting Period"), by giving the other
party written notice.
C. In the above-mentioned Waiting Period, Text-On and Xxxxx, and or
persons acting on their behalf, shall be barred from transferring the
Rights or part thereof and/or using the Rights or part thereof,
themselves and/or by means of any third party whatsoever, directly or
indirectly, unless they have received written consent to this effect
from Solmecs.
Notwithstanding the aforementioned, it is agreed that in the Waiting
Period Xxxxx shall be authorized to perform acts to promote the
project, provided that these acts are fully coordinated with Solmecs.
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D. In order to remove doubt it is clarified that Xxxxx shall not be
entitled to any salary and/or payment or reimbursement of expenses
whatsoever during the Waiting Period.
Notwithstanding the aforesaid, it is agreed that during the Waiting
Period Solmecs shall transfer to Text-On any amount received from the
overseas sales of electronic dictionaries in the Hebrew-English
version, from the American company Sifrotech Ltd., and shall also
transfer to it the royalties pursuant to this Contract for overseas
sales during the Waiting Period.
E. In any case of cessation and/or termination of contract as aforesaid,
no party shall be entitled to any compensation and/or payment
whatsoever, including royalties and/or commissions and/or
reimbursement of expenses and/or any other payment of any type and
kind, excluding a salary and/or additional payments stemming from the
employment agreement of Xxxxx, until the end of the Contract Period as
aforesaid, also including the period of notice pursuant to any law,
with the exception of payments and royalties to which Text-On and/or
Xxxxx shall be entitled for the period in which the Contract was still
valid.
F. A fundamental breach of the Contract by Solmecs shall be the only
cause - after a written warning issued fourteen days in advance -
which affords to Xxxxx and/or Text-On the right to terminate the
Contract.
G. Complete termination by Solmecs of the Contract in the Waiting Period
or at the conclusion thereof, shall lead to a restitution to Text-On
of all the Rights pursuant to this Contract, without any consideration
whatsoever on its part.
7. It is agreed by the parties that Xxxxx is responsible for management of the
project for the production and marketing of the Product (hereinafter: the
"Project"), which shall be implemented in accordance with the stages and
objectives as follows, subject to the compliance of Solmecs with the
investment plan incumbent upon it pursuant to Appendix B:
A. Stage A shall apply upon signature of the Contract, shall conclude at
the end of four months from its signature, and shall include the
complete achievement of the following objectives.
(1) Selection and purchase of the rights to the
English-Spanish-English dictionary at the highest level for use
in the Product.
(2) Selection of the best and cheapest producer to produce the
Product, management of negotiations with said producer, and
signature of a binding agreement by Solmecs and said producer.
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(3) Creation of preliminary contacts with possible distributors of
the Product, such as national chain stores in the United States
and Spain, including the commencement of negotiations with them.
(4) Production and sale of the Product in the English-Hebrew-English
and English-Russian-English versions, which have already been
developed, shall begin in the United States, subject to the
location of and agreement with a suitable dealer.
B. Stage B shall begin upon the conclusion of Stage A, or earlier if so
decided by Solmecs, shall conclude within six months from date of
signature of this Contract, and shall contain the complete achievement
of the following objectives:
(1) Completion of development and beginning of production of at least
an English-Spanish-English version, subject to the fact that the
unit cost of production, including cost of royalties therefor,
does not exceed $ 32.
(2) Upon completion of negotiations with the distributors as
aforesaid in Stage A actual sales shall begin.
(3) It is agreed by the parties that the desired objective is a cost
to the distributor at the end of Stage B of $ 55 per unit.
C. It is agreed by the parties that the budget framework for
implementation of the objectives contained in Stage A, including
Xxxxx' salary, shall not exceed US$ 39,000 (thirty nine thousand).
D. It is agreed by the parties that the budget framework for
implementation of the objectives contained in Stage B, including the
salary of Xxxxx, shall not exceed US$ 20,000 (twenty thousand), and in
any event, the total cost of the two above-mentioned stages together
shall not exceed US$ 59,000 (fifty nine thousand) (hereinafter: the
"Total Cost").
E. Text-On and Xxxxx hereby declare that it is possible, and that they
shall make every effort, to implement and complete the objectives in
the two stages in the Total Cost framework and that in any event,
Xxxxx is not authorized to commit vis-a-vis any third party whatsoever
to amounts deviating from the Total Cost and/or which are liable to
cause such a deviation and/or deviate from the cost budgeted for any
objective unless prior written consent thereto has been received from
Solmecs. The budget for the Project investments is attached herewith
as Appendix B and constitutes an integral part of this Contract.
F. Notwithstanding the aforementioned, it is agreed that with the
conclusion of Stage A Solmecs shall be authorized to perform a
situation assessment in relation to the status of each of the
objectives determined for
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implementation in Stage A and to decide whether it wishes to continue
with Stage B, both in terms of implementation of the Stage B
objectives, and in terms of its investments in the implementation of
Stage B. Should the situation assessment indicate that implementation
of the objectives was lower than required pursuant to this Contract,
Solmecs shall be authorized to terminate the Contract with written
notice of 30 days, and in such a case, all the provisions set forth in
Section 6 above shall apply to the termination of the Contract, as
though the Contract had been terminated at the conclusion of Stage B.
G. Solmecs shall make the amounts set forth in the budget framework for
Stage A and Stage B available to the Project and shall make
investments at its expense, until the complete conclusion of the
stages, subject to the provisions set forth above, and in accordance
with the payment dates as shall be required, pursuant to actual
implementation of the operations linked to the achievement of the
objectives.
H. All the amounts cited in this Contract in US dollars shall be paid in
NIS or foreign currency, pursuant to the representative rate of the US
dollar in Israel, or according to the exchange rate known in Israel of
the US dollar and the currency in which payment is made, all according
to the knowledge available when payment is actually made, and do not
include VAT.
I. Notwithstanding the aforesaid, it is clarified that Xxxxx' salary
shall not be linked to the rate of the dollar but shall be paid in NIS
and linked to the cost of living increments as set forth below.
8. It is agreed by the parties that the work of Xxxxx in Solmecs and the
personal implementation by him of Stage A and Stage B in the Contract
Period constitutes a basic undertaking pursuant to this Contract and it
constitutes an undertaking of personal service on his part, an undertaking
which may not be transferred and/or assigned and/or implemented by any
third party whatsoever, unless with the prior written consent of Solmecs.
9. It is hereby agreed that should Xxxxx fail to fulfill his undertaking
pursuant to the employment agreement and/or pursuant to this Contract
and/or in the event that he is barred from fulfilling his above
undertaking, both for reasons dependent on him and for reasons which are
not dependent on him, whether on a permanent basis or whether for an
allotted period exceeding 30 days, Solmecs shall be authorized to take any
measures it deems necessary to continue and promote the Project, without
prejudicing the rights of Text-On to royalties pursuant to this Contract.
10. It is agreed that the employment by Solmecs of Xxxxx shall be pursuant to
the employment contract in Appendix A, the principal points of which are:
A. A monthly salary deriving from the employer's cost of NIS 17,000
(seventeen thousand) including all the social benefits pursuant to any
law, including severance pay if entitled thereto. Xxxxx' salary shall
be linked to
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the cost of living increments which shall be paid during the period of
his employment. It is agreed that the parties shall discuss the
above-mentioned salary of Xxxxx once a year.
B. A company car, of a private or commercial type, with a 1600 cc engine,
which shall be owned by Solmecs, or a rented car, all as shall be
decided by Solmecs, including all the expenses linked to the use
thereof, with the exception of income tax applicable to an employee
receiving a car from his employer.
C. Complete reimbursement of telephone expenses in Xxxxx' house up to a
ceiling of NIS 800 per month, including VAT. Income tax which shall be
due from Xxxxx for this payment, if applicable, shall be paid by him
and deducted from his salary.
D. Solmecs shall provide Xxxxx with a cellular telephone on its account
and shall pay all its operating expenses.
E. Solmecs undertakes to employ Xxxxx as aforementioned for a period of
not less than 24 months from date of commencement of his employment,
and Solmecs shall be authorized, from this date, at its discretion,
not to continue his employment. In order to remove doubt it is
clarified that cessation of the work of Xxxxx as aforesaid shall not
prejudice the rights of Solmecs pursuant to this Contract and shall
not prejudice the right of Text-On to royalties pursuant to this
Contract.
11. It is agreed by the parties that the programming work entailed by the
Project shall be performed by the programmers of Solmecs and/or of Text-On,
and the cost of the work, as it appears in Appendix B, shall be covered by
investments of Solmecs in the Project.
12. Text-On shall be entitled to royalties from sales of the Product pursuant
to this Contract, subject to the full implementation of its undertakings,
and subject to the realization of the declarations of Xxxxx pursuant to
this Contract, (hereinafter: the "Royalties"), as follows:
A. 5 (five) percent of the sales made during the first six months of
Product sales. It is agreed by the parties that in this subsection
exclusively, only sales of products developed or whose development was
completed after signature of this Contract, shall be considered as
"sales".
B. 10 (ten) percent of the sales made from the seventh month after the
commencement of sales and until the date on which total Royalties paid
to Text-On reach US$ 250,000 (two hundred and fifty thousand).
C. After Text-On has been paid royalties amounting to the above-mentioned
US$ 250,000, Solmecs shall continue to pay it royalties at a rate of 3
(three)
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percent of the volume of sales cumulative until a sales ceiling of US$
3 million, and royalties at a rate of one percent for sales above US$
3 million.
D. Notwithstanding the aforementioned, it is agreed by the parties that
royalties as aforementioned in this Section 12, including all its
subsections, shall be paid to Text-On only until fifteen years have
elapsed from date of signature of this Contract (hereinafter: the
"Royalties Period") and any sale which is made after the end of the
Royalties Period shall not entitle Text-On to royalties and/or any
other payment.
E. In order to remove doubt it is hereby clarified that after the end of
the Royalties Period Solmecs shall also have exclusive ownership of
the rights without this being cause to make any payment whatsoever to
Text-On or any person acting on its behalf, and Text-On renounces any
argument in this matter.
F. Notwithstanding the aforementioned, it is agreed by the parties that
since Text-On has invested time and resources in the development and
marketing in Italy of an English-Italian version of the product, in
the event that the Product is sold in Italy, the first profits from
these sales shall be used to reimburse the expenses of Text-On as
aforesaid, in a definitive, agreed and absolute amount of US$ 11,330
(eleven thousand three hundred and thirty).
G. The Royalties shall be calculated on the basis of sales, before VAT -
including the VAT applicable by the local authority and national tax
authorities to sales - and they shall be paid to Text-On in Israel
plus VAT, pursuant to the law and against a tax invoice.
H. It is agreed by the parties that Solmecs retains the right to offset
against any amount which it is supposed to pay to Text-On as royalties
pursuant to this section, any amount to which it is entitled and/or
shall be entitled in the agreement period for agreed compensation
and/or for a lawful charge stemming from a breach of this Contract by
Text-On and/or Xxxxx and/or expenses and/or damages incurred by
Solmecs as a result of the requirement for it to act to remove any
kind of impediment whatsoever relating to the use of the Rights
pursuant to this Contract.
13. Text-On undertakes, further to its above declarations, that there is no
impediment whatsoever to the transfer to Solmecs of the Rights in full
without any restriction, to remove, within 10 days at the most, any
impediment to the full use by Solmecs of the Rights which have been
transferred to it pursuant to this Contract, including cancellation of
injunctions and/or any other injunction, if issued, including removal of
any lien, if imposed, with the exception of a lien stemming from the
obligation assumed by Solmecs toward the holder of the lien. Text-On shall
bear any expense required to remove any impediment as aforesaid, if any,
and it undertakes to compensate Solmecs, upon its first demand, for any
amount billed to Solmecs according to the law or that it shall incur if it
initiates removal of said impediment.
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The parties declare that they are aware that Bank Hapoalim B.M. has
consented to remove the lien encumbering the Rights against a lien on this
Contract in its favor, as set forth in the letter of the Bank attached
herewith as Appendix C of this Contract, and that the lien on the rights of
Text-On pursuant to this Contract should not be viewed as any kind of
impediment to the transfer to Solmecs of the Rights and/or to the use by
Solmecs of the Rights which have been transferred to it, unless otherwise
stated in this Contract.
14. Without derogating from all the aforementioned, it is hereby agreed that
Text-On shall be responsible for any damage incurred by Solmecs following
any impediment whatsoever, linked directly and/or indirectly to Text-On
and/or Xxxxx, regarding the possibility of making full use of the Rights
without any restriction whatsoever, upon the first written demand of
Solmecs.
15. It is agreed that Solmecs is entitled to receive the payments which Text-On
shall owe by virtue of that stated in Sections 13 and 14 above, only by
offsetting against the Royalties which will be to the credit of Text-On,
and not in any other manner.
16. After the end of Stage A and Stage B or at the end of six months from date
of signature of this Contract, the later of the two, Solmecs shall be
authorized to implement the Project, but shall not be required to do so,
all subject to that stated in Section 6 above. It is further agreed that
Solmecs is entitled to implement the Project and/or part thereof, either
itself or by means of a third party and/or by means of another corporation
which it shall set up, and it is authorized to assign its rights pursuant
to this Contract, in full or in part, to any third party whatsoever and/or
to the corporation as aforesaid, including its right to the services of
Xxxxx as aforementioned in this Contract, and in the contract of employment
which shall be signed with him by Solmecs prior to signature of this
Contract, provided that the rights of Xxxxx and/or of Text-On pursuant to
this Contract are not prejudiced.
Cancellation of the Contract by Solmecs, whether by means of a fundamental
breach, or whether in keeping with its right pursuant to this Contract,
shall lead to the mutual and simultaneous cancellation of the undertakings
of Text-On and Xxxxx pursuant to this Contract.
Notwithstanding the aforementioned it is agreed that as long as Text-On has
a lien on this Contract in favor of Bank Hapoalim B.M., Xxxxxxx Xxxx
branch, Solmecs shall be barred from assigning or transferring its rights
in any manner whatsoever pursuant to the Contract to any third party
whatsoever, excluding the restitution thereof to Text-On, unless written
approval thereto is received from Bank Hapoalim B.M.
17. It is agreed by the parties that should Xxxxx be transferred for
employment, pursuant to this Contract, to another employer as
aforementioned in Section 16 above, this shall not be deemed an exchange of
employers and shall not afford Xxxxx any right afforded, pursuant to this
Contract and/or pursuant to any law, to an employee as the result of an
exchange of employers, provided that the
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conditions of his employment pursuant to his employment contract are not
prejudiced.
18. It is agreed by the parties that should Solmecs wish to sell its rights
pursuant to this Contract and/or part thereof, to any third party
whatsoever, Text-On shall have a preferential right to purchase the rights
from Solmecs provided that its proposal is not inferior to the best
proposal received by Solmecs in regard to this matter.
19. It is agreed by the parties that a breach of a fundamental undertaking in
this Contract, whether by Solmecs or whether by Text-On (hereinafter: the
"Breaching Party"), shall oblige the Breaching Party to pay the other party
(hereinafter: the "Injured Party"), compensation in a definitive, decided
and agreed amount without the need for proof of any damage whatsoever from
the Injured Party, an amount equal in NIS to US$ 60,000 (sixty thousand)
(hereinafter: the "Agreed Compensation"), all subject to the following two
provisions:
(1) That the fundamental breach of the contract by Xxxxx is regarded as a
fundamental breach of the contract by Text-On.
(2) That collection of the Agreed Compensation from Text-On, insofar as it
shall be due, shall be made only by offsetting of the royalties which
shall be ascribed to its credit pursuant to this Contract.
The undertakings of the parties as stipulated in this Contract shall be
determined as fundamental undertakings in the matter of this section, as
follows: declarations of the parties in the Preamble of the Contract, the
undertakings in Sections 2, 3, 4, 6, 7, 12, 13.
20. It is agreed and clarified that the right to the Agreed Compensation as
aforementioned, contains nothing to prejudice the right of any party
injured by a breach of this Contract, to compensation for damage it incurs,
over and above the Agreed Compensation, in accordance with its rights
pursuant to the Contract and pursuant to any law.
21. It is agreed by the parties that the ledgers of Solmecs and/or of any third
party or other corporation to which the rights of Solmecs pursuant to this
Contract shall be assigned, approved by an auditor of Solmecs or of a third
party and/or of said corporation, shall constitute evidence in the matter
of calculation of the Royalties pursuant to this Contract, subject to the
right of Text-On to have the relevant ledgers examined by an examiner
acting on its behalf.
22. It is agreed by the parties that any conflict which shall arise in the
matter of execution of this Contract and/or any of the conditions contained
therein, shall be brought for resolution by a single arbitrator to be
appointed with the consent of both parties. The arbitrator shall not be
subject to the laws of evidence but shall be subject to substantive law and
his decision shall be binding. The arbitrator shall
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determine his salary and which party shall pay it. This section constitutes
an arbitration agreement pursuant to the Arbitration Law, 5728 - 1968.
23. In the absence of agreement to the appointment of said arbitrator,
jurisdiction shall be awarded to the competent Beersheba Court.
24. Any notice sent by one party to the other shall be sent in writing and
shall be considered as having been received by the second party within 48
hours from dispatch by registered mail, and if delivered by hand - upon
delivery.
In witness whereof the parties have set their hands:
Signed: (-) Solmecs Signed (-) Text-On
/s/[ILLEGIBLE] /s/ Xxxxx Wettelmacher
---------------------------- ----------------------
Stamp: Solmecs (Israel) Ltd. Stamp: Text-On Ltd.
Telephone: 00-0000000
Signed Xxxxx
/s/ Xxxxx Wettelmacher
----------------------
Xxxxx Wettelmacher
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