Document:

Exhibit 10.6

 

[UNOFFICIAL TRANSLATION INTO ENGLISH]

 

Employment Agreement

made and signed on July 7, 2014

 

Between:  Brain Research and Development Services, Ltd.

19 Hartum, Jerusalem

Hereinafter:  (“the Company”)

Of the one part

 

And between:  Levy Hadar ID 25176884

Address:

Hereinafter:  (“the employee”)

Of the second part

 

Whereas:                                          The employee wishes to work at the Company and/or the Company Brainsway Inc., a Company controlling the Company and/or the Company Brainsway Ltd (hereinafter: “the parent Company”), as defined below and inconsideration for his work shall receive payment from the Company.

 

And whereas:                    The Company wishes to employ the employee and both wish to regulate the terms as stated for the employment at the Company and all of the terms of the employment agreement and its provisions (“the agreement”).

 

Accordingly it as agreed as follows:

 

1.  The Employment

 

1.1                                                                               The employment of the employee shall begin on September 14, 2014 (“the start date of employment”).  The employee will be employed full-time, 45 hours per week, everyday, Sunday-Thursday between the hours of 09:00-18:00.  The employment of the employee will be in the position of VP finance or any other position at a similar level as required by the Company.  The employee undertakes to carry out his undertakings and duties as shall be imposed upon him by the Company from time to time.

 

1.2                                                                               The work will be carried out Sunday-Thursday, at the work hours determined at law.  The weekly day of rest of the employee will be Saturday.

 

1.3                                                                               The employee agrees hereby that the Company has the right at its exclusive and absolute discretion to reduce the scope of his position in the Company, and accordingly to pro rate the consideration paid to him under this agreement.  The employee hereby waives any contention of significant deterioration in terms of

 

 

employment in respect of reduction of the scope of his employment at the Company as stated in this clause.

 

1.4                                                                               The employee undertakes to dedicate the entirety of his time, his attentions, his ability and his efforts exclusively for performance of his duties in the Company and undertakes not to engage, as employee or in any other manner in any business, commercial and/or professional activity, for pay or without, for the period of his employment, including after the hours of work, on weekends, or on vacation, without the consent in advance and in writing of the Company.  For the sake of removal of doubt, it is hereby clarified that the provisions of this clause shall not detract from the liabilities of the employee as described in Appendix B which is attached hereto.

 

1.5                                                                               Any of the parties may cancel this agreement at any time by notice in writing of 60 days in advance (hereinafter:  “the advanced notice”).

 

1.6                                                                               Notwithstanding that stated above, the Company shall be entitled to cease the employment of the employee immediately or to reduce the period of the advance notice, whether given by the Company or by the employee, and provided that in such instance the employee will be entitled to compensation in the value of the basic wage as stated in Appendix A as though he was employed by the Company through the end of the advance notice period as stated in Clause 1.4 above.

 

1.7                                                                               In the event that the employee resigns without fulfilling the obligation of advance notice, the employer is entitled to deduct from any amount due to the employee, as compensation agreed in advance, an amount equal to the ordinary wage which the employee would have received for the period of the advance notice in which he did not work.  This, without detracting from the right of the Company to claim from the employee in the stead of the agreed compensation, the damages which were actually caused to it by the employee not fulfilling his duty to provide advance notice.

 

1.8                                                                               Notwithstanding that stated above, and without detracting from its rights under this agreement, the Company shall be entitled to terminate the employment of the employee without the need for advance notice and without detracting from any remedy to which the Company is entitled at law and/or under the agreement, upon the occurrence of one or more of the following instances: (1) The employee embezzled company funds, (2) The employee fundamentally breached this agreement, (3) The employee carried out or was involved in an act, action or omission constituting breach of fiduciary duty against the Company, (4) The employee breached discipline, (5) The conduct of the employee caused heavy damages to the Company, (6) The employee was convicted of a crime, (7) The employee is unable to fulfill his position of the Company for a period exceeding 90 consecutive days. Return to work for period shorter than 15 days consecutively shall not end the consecutive 90 days as mentioned.

 

 

1.9                                                                               The employee shall not have any right to withhold assets of the Company, its equipment or any other material including information and secret information as defined in Appendix B to this agreement (hereinafter:  “company equipment”) in his possession.  The employee will return to the Company all of the Company equipment in his possession not later than the date of the termination of the employer-employee relations and upon his departure for a vacation in excess of 30 days (including maternity leave or vacation in respect of advance notice) - prior to departing for vacation as stated or within seven days of the demand to do so from the Company.

 

2.  Consideration

 

In consideration for the work in the Company and fulfillment of the provisions of this agreement and subject to that stated in this agreement including its appendices, the employee will be entitled to wage, terms and benefits as specified in Appendix A attached.

 

3.  Confidentiality, Non-compete and Ownership in Inventions

 

Together with the signature upon this agreement, the employee will sign upon an undertaking towards the Company in connection with confidentiality, non-competition and rights in inventions in favor of the Company and any subsidiary or parent company, attached hereto as Appendix B.

 

4.  Representations and Undertakings

 

The employee declares and undertakes a follows:

 

4.1                                                                               That he does not have and did not have in the past any claim against the Company and/or the parent Company in respect of cessation of services to the Companies prior to the date of commencement of the employment and he hereby waives, by irrevocable and informed waiver, any contention and/or claim against the Company and/or the parent Companies arising from a cause of action involving his employment at the Company and/or provision of services to the Company and/or the parent Companies up to the date of this agreement.

 

4.2                                                                               That he is not bound in any undertaking or other agreements whatsoever preventing him from committing in accordance with the provisions of this agreement and acting the thereunder.

 

4.3                                                                               That to the best of his knowledge he is not breaching any rights and/or undertakings towards his previous employer.

 

4.4                                                                               That he has the ability, the skills and the knowledge required for fulfillment of the position in accordance with the provisions of this agreement.

 

 

4.5                                                                               That he will notify the Company, immediately without delay, of any matter or issue for which he has or may have, or his close family, a personal matter and/or may cause a conflict of interests with his position and work in the Company.

 

4.6                                                                               That he will not receive any payment and/or other benefit from any third party in direct or indirect connection with his work at the Company.  If the employee breaches this clause, then without detracting from the rights of the Company under this agreement and at law, the amount and/or the benefit as stated shall be the property of the Company and will be delivered to its possession and the Company shall be entitled to deduct this amount or the value of the benefit from any amount due to the employee from it.

 

4.7                                                                               That in the framework of performance of his position at the Company he will not make and/or he will not represent any representation and will not commit on behalf of the Company and will not undertake any undertaking and/or will not grant any guarantee on behalf of the Company, save at the instruction of the Company and/or its managers and/or his supervisors, exclusively, in writing and in advance.

 

4.8                                                                               That he agrees and confirms that from time to time he may be required to travel and to stay overseas in the framework of his position.

 

4.9                                                                               That in certain exceptional instances where it shall be necessary, at the decision of the management of the Company, the employee shall participate in a polygraph examination.

 

4.10                                                                        That he undertakes to make use of the equipment of the Company solely and exclusively for performance of his work and in the framework of his position and that he is aware and he agrees that the Company may carry out inspection in the offices of the Company and the computers of the Company including the transmission of email and the manner of the use of the Internet and the contents of any of these.  For the sake of removal of doubt it is clarified hereby that the findings of the inspection shall be the exclusive property of the Company.

 

4.11                                                                        That in any event of cancellation of this agreement for any reason whatsoever, the employee will cooperate with the Company and will to the best of his ability assist the Company in an orderly transfer of his position in the Company and provide proper instruction to his intended replacement in the position.

 

5.  General Provisions

 

5.1                                                                               This agreement and all of the appendices attached thereto constitute the full agreement between the parties thereto and supersede any agreements, offers, understandings and arrangements made prior, whether orally or in writing, if any were made, between the parties in connection with the subject of this agreement.

 

 

5.2                                                                               Any change and/or addition to this agreement will bind the parties to the agreement and be valid towards them only if made in writing and signed by the parties.

 

5.3                                                                               The Israeli Law shall apply to this agreement and it shall be interpreted according to it.  The regional labor court in Tel Aviv shall have sole and exclusive jurisdiction in any matter arising from this agreement or related to it.

 

5.4                                                                               The non-validity and/or cancellation and/or invalidation of any of the individual provisions of this agreement and its appendices shall not prejudice the complete validity of the remaining provisions of this agreement and its appendices.

 

5.5.                                                                            The employee confirms and declares that he has thoroughly read and understands all of the provisions of this agreement and its appendices, that he accepts these provisions without reservation and he signs upon the agreement and the appendices willingly and with full consent.

 

5.6                                                                               Any notice which was sent from one party to the other at the address of the party as determined in the heading to this agreement or any other address which the party shall have notified upon in accordance with the provisions of this clause, by registered post or personal delivery will be deemed as received, when sent by registered post, four business days after its delivery to the post office and if delivered personally, upon its delivery, and provided that confirmation of delivery is received.

 

IN WITNESS WHEREOF, the parties had signed.

 

	
/s/ Uzi Sofer
    	
 
    	
/s/ Hadar Levy
    
	
Brain   Research & Development Services, Ltd.
    	
 
    	
The Employee
    
	
By: Uzi Sofer
    	
 
    	
Hadar   Levy
    
	
Position: CEO
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
[company stamp]
    	
 
    	
 
    

 

 

Appendix A - Consideration

 

1.  Wage

 

In respect of his full-time work at the Company, the employee will be entitled to a gross monthly wage of NIS 21,000 (“the basic wage”) and starting on March 1, 2015, he shall be entitled to a gross monthly wage of NIS 23,000.

 

In the framework of his work, the employee will receive a vehicle equivalent to a Mazda 6 or similar at the request of the employee and subject to approval of the CEO, for use at work.

 

The employee will be entitled at the end of each 12 months to a bonus of up to two monthly wages at the discretion of the CEO and the attainment of targets which shall be determined.

 

2.  Insurance Policy

 

Starting on the date of commencement of employment, subject to directives which shall be determined from time to time by the income tax commission, the Company shall insure the employee with a “Managers Insurance Plan” (hereinafter:  “managers insurance”) and will transfer as follows:  1) The Company will pay an amount equal to 6% of the basic wage together with overtime hours of the employee into managers insurance for the employee (hereinafter:  “share of the Company”), and will deduct 5% of the basic wage together with the overtime hours of the employee (hereinafter:  “share of the Employee”) and will pay this amount into the managers insurance for the employee (the division of the components of the managers insurance into savings and risk will be determined at the discretion of the employee.  2) The Company will pay an amount equal to 8 1/3% of the basic wage of the employee into a severance pay fund.

 

The employee hereby directs the Company to transfer into the managers insurance the amount constituting the share of the employee and the employer from each payment of his monthly wage.  From the sake of removal of doubt, in the event that the employee shall accumulate a cumulative amount in the fund which exceeds the minimum amount determined in the income tax order, the surplus amount will be deemed as income for tax purposes.

 

Continuing Education Fund

 

Starting on the date of commencement of work, subject to the instructions which shall be determined from time to time as directed by the income tax commission, the employee and the employer will transfer 2.5% and 7.5% respectively from the basic wage of the employee together with overtime hours into a continuing education fund.

 

3.  Release of Funds

 

3.1                                                                               Without detracting from the right of the Company at law and/or under this agreement, the managers insurance plan will be transferred to the employee, subject to applicable law and fulfillment of all of the undertakings of the employee as towards the Company upon termination of the employment of the

 

 

employee for any reason with the exception of circumstances of termination as stated in Clause 1.7 of the agreement.

 

3.2                                                                               It is clarified hereby that under Article 14 of the Severance Pay Law-1963 (hereinafter in this clause:  “the law”) and the general approval regarding payments of employers into pension funds and insurance funds in the stead of severance pay attached to this agreement (hereinafter:  “the approval”), the amount which shall be accumulated for the employee in the insurance policy during the course of his work at the Company and until the date of termination of employment, will come in the stead of severance pay.

 

Under the provisions of the approval, the employer hereby waives any rights he may have to a return of the funds which he paid, save if the employee was denied severance pay subject to the circumstance described in this agreement and in Articles 16 and 17 of the law and to such extent as was denied, the employee withdrew the funds from the pension fund or the insurance fund other than for an entitling event.  For this matter, “Entitling Event” - death, disability or retirement at the age of 60 or more.

 

4.  Vacation, Sick Pay and Recuperation Pay

 

Subject to the provisions of the Annual Vacation Law - 1951 (“Annual Vacation Law”), the employee will be entitled to a 21-workday vacation in respect of each 12 months of employment and provided that the vacation as stated is credited to the employee only in the following 2 years of employment.  If the employee has not utilized the number of vacation days due to him during the course of a work year, he shall be entitled to redeem unutilized workdays in accordance with the provisions of the Annual Vacation Law.  It is clarified that the dates of the vacation shall be determined by the Company in coordination with the employee.

 

The dates of the departure for vacation will be determined by the Company in accordance with its possibilities and needs and when possible, taking into account the desires of the employee.  The Company will be entitled to enact a uniform annual vacation for its employees, all or part thereof, for some of the vacation days or all of them, as it shall deem fit.

 

Sick pay and recuperation pay will be paid at law.

 

5.  Taxes

 

The Company will withhold or will obligate the employee in taxes and/or any other obligatory payments as required at law in connection with or arising from the consideration paid to the employee and/or received by him and in connection with any benefits to which the employee is entitled or maybe entitled.

 

 

Appendix B - Deed of Undertaking

 

Whereas:                                          Brain Research & Development Services Ltd. (hereinafter:  Brain Research & Development Services Ltd. and each of its subsidiaries, parent companies or associated companies - “the Company”) seeks to employ the employee subject to provision of this undertaking (hereinafter:  “the undertaking”).

 

And whereas:                    Hadar Levy, ID Number 25176884 of       Street (hereinafter: “the employee”), seeks to engage under terms of employment as stated.

 

Accordingly, the employee declares and undertakes towards the Company as follows:

 

1.                                      Confidential Information

 

The employer recognizes that he shall have access to confidential information, to information related to the activity of the Company and technologies related to the Company, research, development of products, patents, copyrights, commercial secrets, customers, (including client lists), marketing plans, strategies, forecasts, trade secrets, test results, experiments and trials, formulas, processes, information, knowledge, improvements, inventions, techniques, and products (existing and/or planned).  Information as stated in any form whatsoever, whether document, written, oral, computerized or magnetic media, shall be deemed “confidential information”.

 

The employee will not disclose during the course of his employment in the Company or at any time thereafter for any reason whatsoever to any person, corporation, partnership or any entity whatsoever, any confidential information, whether orally, in writing or in any other manner, which shall reach the employee or was brought to his awareness in the period of his employment in the Company and including, processes and technologies which serve or shall serve the Company in its business, the methods and results of the research of the Company, technical or financial information, the terms of employment of the employee and of other employees in the Company or any other information known about the business of the Company and any information in connection with customers of the Company unless he has received the consent of the Company in advanced and in writing.

 

2.                                      Confidential information will be deemed to include all confidential information which was delivered by, for or on behalf of the Company without taking into account its format, with the exception of information which the employee can prove has become public knowledge other than as a result of the breach of this undertaking by the employee.

 

3.                                      The employee agrees that all of the memoranda, the books, the lists, the reports (including all types of media or format), the diagrams, the formulas, the specifications, lists and any other document which was prepared, collected, analyzed, received, held or used by the employee during his employment at the Company, in connection with any stage in the business of the Company or its commercial secrets (hereinafter: “the material”), shall be the exclusive property of the Company and be transferred by the

 

 

employee to the Company upon termination of the period of his employment or at any time prior thereto or otherwise at the demand of the Company, without the employee maintaining any copies of the aforementioned and without the employee having a right to withhold them.

 

4                                         Unfair Competition and Prohibited Incitement

 

The employee agrees that the provisions of this undertaking are reasonable and required for the legal protection of the confidential information of the Company, its property (including its intellectual property) and reputation (“the principal assets of the Company”).  The employee declares that he has thoroughly read the provisions of this undertaking and he understands the results of this undertaking and agrees to that stated therein and that he has estimated for himself the advantages and disadvantages involved in engaging in this undertaking.  Accordingly, the employee undertakes:

 

That during the course of his employment in the Company and for a period of 12 months thereafter, he will not engage, establish, develop or in any other manner be involved, directly or indirectly, as an employee, owner, partner, agent, shareholder, director, adviser or in any other manner, in any business, occupation, work or any other activity which may reasonably include or be related to use of the principal assets of the Company (as defined above).

 

That during the course of his employment at the Company and for 12 months thereafter, he shall not incite any employee of the Company or anyone of its subsidiaries, parent Companies or associated Companies to cease his employment with them.

 

5.                                      Ownership of Inventions

 

The employee will notify and will deliver to the Company or to whomever is appointed by it, any information, improvement, invention, formula, process, technique, knowledge and information, whether a patent can be registered upon these or not, which was made or raised as an idea or was carried out or was learned by the employee, alone or jointly with others, during his employment at the Company (and including after the work hours, on weekends or on vacation) (all information as stated, improvements, inventions, formula, processes, techniques, knowledge and information will hereinafter be defined as:  “inventions” or “the invention”) and this immediately upon their discovery or receipt of invention, as the case may be.  If the employee was prevented for any reason from delivering the invention at the time of the provision of the notice upon the invention, the employee will notify the Company of the invention and specify in the notice the date at which it shall be delivered to the employer and the reason for its non-delivery immediately, and thereafter, as early as possible the invention itself shall be delivered.

 

The granting of a notice and delivery of the invention shall be made in writing, together with detailed description of the invention and proper documentation.  The employee agrees that any invention shall be the exclusive property of the Company and its transferees and that the Company and its transferees shall be the sole owners of any

 

 

patents and other rights in connection with the inventions as stated.  The employee hereby assigns to the Company all of his rights, existing and future, in the inventions as stated.  For the sake of removal of doubt, it is clarified hereby that a lack of a response from the Company with regard to notice regarding an invention or its delivery, shall not be interpreted as waiver of ownership of the invention, and in any event the  invention shall be the property of the Company only.

 

The employee agrees in connection with all of the inventions indicated above to assist the Company or a party appointed by it, in any suitable manner to receive from time to time and to carry out any act including the implementation and registration of the invention in any manner including by way of registration of a patent for the invention as stated in any country whatsoever and to sign upon all of the documents required for submission for patent over the invention as stated and its implementation, as the Company shall desire, including deeds of assignment of the invention as stated to the Company or persons or entities appointed by it.

 

The employee will not be entitled, in anything related to that stated above, to any monetary or other consideration beyond that stated in Appendix A to this agreement or beyond that stated in any other special agreement or arrangements in this matter which were made in writing and signed by the Company.  In everything related to that stated above, there shall be no validity to any arrangement, engagement or agreement made orally or made in writing without being lawfully signed by the Company.

 

6.                                      General

 

The employee agrees that the provisions of this undertaking, which constitute an inseparable part of the terms of his employment, are reasonable and required for protection of the legitimate interests of the Company in connection with the matter in question in this undertaking.

 

If any legal forum shall determine that any of the provisions in this undertaking (including rule, paragraph or part thereof) is not valid or unenforceable, such provisions shall be deemed to have been amended to erase from them the parts which were determined as stated are not valid or not enforceable.  Such erasure shall apply only to the requirements and duties noted in the provision as stated in the jurisdiction in which the decision was rendered.  In addition, if it is determined that a certain provision included in this undertaking is too broad with regard to the timeframes indicated therein, geographic scope, activity or subject, it shall be interpreted such that the provision as stated shall be limited and restricted in connection with such characteristic such that the provision shall be enforceable to the greatest extent possible which accords with the law applying as shall be from time to time.

 

The provisions of this undertaking shall remain fully valid also after termination of the period of the agreement between the Company and the employee for any reason whatsoever.  This undertaking shall not serve in any manner to detract from the undertakings and liabilities of the employee at law.

 

 

	
Signature:
    	
/s/ Hadar Levy
    	
 
    

 

 

Appendix to Employment Agreement

 

Between:  Brain Research and Development Services, Ltd.

19 Hartum, Jerusalem

Hereinafter:  (“the Company”)

Of the one part

 

And between:  Levy Hadar ID

Address:

Hereinafter:  (“the employee”)

Of the second part

 

Whereas:                                          And the employee began working at the Company on September 14, 2014 and the parties signed upon the employment agreement (hereinafter:  “the employment agreement”).

 

And whereas:       The parties wish to add and to change certain provisions in the employment agreement as specified in this appendix, which shall apply between the parties and shall be valid as are valid the provisions of the employment agreement for all intents and purposes.

 

Accordingly it is agreed, stipulated and declared between the parties as follows:

 

1.                                                                                      It is agreed between the parties that starting on June 1, 2015 the provisions of Clause 1 in Appendix A of the employment agreement shall be replaced with the following:

 

1.1                                                                               In consideration for his work for the Company, the Company shall pay the employee a monthly wage in a total of NIS 31,644 (hereinafter:  “basic wage”).  In addition, the employee will receive payment in an amount of NIS 7,911 for work of up to 30 overtime hours which he shall carry out (hereinafter:  “the global consideration”).

 

1.2                                                                               The base wage together with the global consideration shall hereinafter be called in this agreement:  “the determining wage”.

 

1.3                                                                               The determining wage will be the basis for the provisions for social benefits as stated in this agreement and for severance pay.  It is clarified hereby that any grant and/or bonus and/or participation in expenses and/or refund of expenses and/or any other benefits which the employee will receive (if any) do not constitute part of the determining wage for purposes of social benefits including severance pay and/or provision for the various funds.

 

1.4                                                                               Nothing in that stated above has the effect of detracting or derogating from the duty of the employee to fulfill the directives of the Company with regard to recording of attendance and hours of work.

 

 

2.                                                                                      Subject to that stated in Clause 1 above - the remaining terms of employment of the employee at the Company will remain unchanged.

 

3.                                                                                      This appendix constitutes an inseparable part of the employment agreement.  It is declared and agreed between the parties that in the event of contradiction between the provisions of this appendix and those of the employment agreement - the provisions of this agreement shall supersede and such provision in this appendix shall come in the stead of the contradictory provision in the employment agreement.

 

IN WITNESS WHEREOF, the parties have signed to date      , the month of       the year 2015.

 

	
/s/ Hadar Levy
    	
 
    	
/s/ Uzi Sofer
    
	
Signature of Employee
    	
 
    	
Signature of Brain   Research & Development Services, Ltd.Exhibit 10.7

 

PUBLIC HEALTH SERVICE

 

PATENT LICENSE AGREEMENT— EXCLUSIVE

 

COVER PAGE

 

For PHS internal use only:

 

Patent License Number:

A-046-2003

 

Serial Number(s) of Licensed Patent(s) and/or Patent Application(s):

 

PCT Application No. PCT/US01/50737, “Coil For Magnetic Stimulation and Methods For Using The Same,” (filed 10/19/2001) claiming priority from U.S. Provisional Application No. 60/242,297 (filed 10/20/2000) by Zangen et al.

 

Licensee:

 

BRAINSWAY, Inc. and Affiliate(s) as successors in interest to BrainGates, Inc.

 

Cooperative Research and Development Agreement (CRADA) Number (if applicable):

 

                                                                                                                   

 

Additional Remarks:

 

                                                                                                                  

 

                                                                                                                  

 

                                                                                                                  

 

Public Benefit(s):

 

                                                                                                                  

 

This Patent License Agreement, hereinafter referred to as the “Agreement”, consists of this Cover Page, an attached Agreement, a Signature Page, Appendix A (List of Patent(s) and/or Patent Application(s)), Appendix B (Fields of Use and Territory), Appendix C (Royalties), Appendix D (Modifications), Appendix E (Benchmarks), and Appendix F (Commercial Development Plan). The Parties to this Agreement are:

 

	
PHS   Patent License Agreerment—Exclusive CONFIDENTIAL
    	
A-046-2003
    
	
Model 980611a
    	
FINAL
    	
Brainsway
    	
July 7,   2003
    
				

 

1

 

1)         The National Institutes of Health (“NIH”), the Centers for Disease Control and Prevention (“CDC”), or the Food and Drug Administration (“FDA”), hereinafter singly or collectively referred to as “PHS”, agencies of the United States Public Health Service within the Department of Health and Human Services (“DHHS”); and

 

2)         The person, corporation, or institution identified above and/or on the Signature Page, having offices at the address indicated on the Signature Page, hereinafter referred to as “Licensee”.

 

2

 

PHS PATENT LICENSE AGREEMENT-EXCLUSIVE

 

PHS and Licensee agree as follows:

 

1.                                        BACKGROUND

 

1.01          In the course of conducting biomedical and behavioral research, PHS investigators made inventions that may have commercial applicability.

 

1.02          By assignment of rights from PHS employees and other inventors, DHHS, on behalf of the United States Government, owns intellectual property rights claimed in any United States and/or foreign patent applications or patents corresponding to the assigned inventions. DHHS also owns any tangible embodiments of these inventions actually reduced to practice by PHS.

 

1.03          The Secretary of DHHS has delegated to PHS the authority to enter into this Agreement for the licensing of rights to these inventions and PHS represents that it is entitled to grant Licensee the rights provided hereunder.

 

1.04          PHS desires to transfer these inventions to the private sector through commercialization licenses to facilitate the commercial development of products and processes for public use and benefit.

 

1.05          Licensee desires to acquire commercialization rights to certain of these inventions in order to develop processes, methods, and/or marketable products for public use and benefit.

 

2.                                        DEFINITIONS

 

2.01          “Benchmarks” mean the performance milestones that are set forth in Appendix E.

 

2.02          “Commercial Development Plan” means the written commercialization plan attached as Appendix F.

 

2.03          “First Commercial Sale” means the initial transfer by or on behalf of Licensee or its sublicensees of Licensed Products or the initial practice of a Licensed Process by or on behalf of Licensee or its sublicensees in exchange for cash or some equivalent to which value can be assigned for the purpose of determining Net Sales.

 

2.04          “Government” means the Government of the United States of America.

 

2.05          “Licensed Fields of Use” means the fields of use identified in Appendix B.

 

3

 

2.06          “Licensed Patent Rights” shall mean:

 

a)             Patent applications (including provisional patent applications and PCT patent applications) and/or patents listed in Appendix A, all divisions and continuations of these applications, all patents issuing from such applications, divisions, and continuations, and any reissues, reexaminations, and extensions of term for all such patents;

 

b)             to the extent that the following contain one or more claims directed to the invention or inventions disclosed in a) above: i) continuations-in-part of a) above; ii) all divisions and continuations of these continuations-in-part; iii) all patents issuing from such continuations-in-part, divisions, and continuations; iv) priority patent application(s) of a) above; and v) any reissues, reexaminations, and extensions of all such patents;

 

c)              to the extent that the following contain one or more claims directed to the invention or inventions disclosed in a) above: all counterpart foreign and U.S. patent applications and patents to a) and b) above, including those listed in Appendix A.

 

Licensed Patent Rights shall not include b) or c) above to the extent that they contain one or more claims directed to new matter which is not the subject matter disclosed in a) above.

 

2.07          “Licensed Process(es)” means processes which, in the course of being practiced would be within the scope of one or more claims of the Licensed Patent Rights that have not been held unpatentable, invalid or unenforceable by an unappealed or unappealable judgment of a court of competent jurisdiction.

 

2.08          “Licensed Product(s)” means tangible materials which, in the course of manufacture, use, sale, or importation would be within the scope of one or more claims of the Licensed Patent Rights that have not been held unpatentable, invalid or unenforceable by an unappealed or unappealable judgment of a court of competent jurisdiction.

 

2.09          “Licensed Territory” means the geographical area identified in Appendix B.

 

2.10          “Net Sales” means the total gross receipts for commercial sales of Licensed Products or commercial practice of Licensed Processes by or on behalf of Licensee or its sublicensees, and from leasing, renting, or otherwise making Licensed Products available to others without sale, less returns and allowances, packing costs, insurance costs, freight out, taxes or excise duties imposed on the transaction (if separately invoiced), and wholesaler and cash discounts in amounts customary in the trade to the extent actually granted. No deductions shall be made for commissions paid to individuals, whether they be with independent sales agencies or regularly employed by Licensee, or sublicensees, and on its payroll, or for the cost of collections.

 

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2.11          “Practical Application” means to manufacture in the case of a composition or product, to practice in the case of a process or method, or to operate in the case of a machine or system; and in each case, under such conditions as to establish that the invention is being utilized and that its benefits are to the extent permitted by law or Government regulations available to the public on reasonable terms.

 

2.12          “Research License” means a nontransferable, nonexclusive license to make and to use the Licensed Products or Licensed Processes as defined by the Licensed Patent Rights for purposes of research and not for purposes of commercial manufacture or distribution.

 

2.13          “Affiliate” means any corporation, company, partnership or other entity controlled by or under common control with either party. For the purpose of the foregoing definition “control” shall mean the holding of 51% or more of the voting rights in, or the right to appoint 51% or more of the directors or managers of, the said corporation, company, partnership or entity.

 

2.14          “Effective Date” means the date on which all parties have signed the Agreement.

 

2.15          “Licensee” means Brainsway, Inc., as successors in interest to BrainGates, Inc., and Affiliate(s).

 

3.                                        GRANT OF RIGHTS

 

3.01          PHS hereby grants and Licensee accepts, subject to the terms and conditions of this Agreement, an exclusive license under the Licensed Patent Rights in the Licensed Territory to develop, to make and have made, to use and have used, to sell and have sold, to offer to sell, and to import any Licensed Products in the Licensed Fields of Use and to practice and have practiced any Licensed Processes in the Licensed Fields of Use.

 

3.02          This Agreement confers no license or rights by implication, estoppel, or otherwise under any patent applications or patents of PHS other than Licensed Patent Rights regardless of whether such patents are dominant or subordinate to Licensed Patent Rights. PHS represents that to the best of its knowledge, other than the Licensed Patent Rights, there are no other patents or patent applications owned by or subject to assignment to PHS in the area of transcranial magnetic stimulation. In the event PHS discovers other patents or patent applications owned by or subject to assignment to PHS relating to transcranial magnetic stimulation and that are not licensed to Licensee under this Agreement, PHS shall promptly inform Licensee thereof and make reasonable efforts to license such patent application(s) and/or patent(s) to Licensee via an amendment to this Agreement.

 

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4.                                        SUBLICENSING

 

4.01          Upon written approval by PHS, which approval will not be unreasonably withheld, Licensee may enter into sublicensing agreements under the Licensed Patent Rights.

 

4.02          Licensee agrees that any sublicenses granted by it shall provide that the obligations to PHS of Paragraphs 5.01-5.04, 8.01, 10.01, 10.02, 12.05, and 13.07-13.09 of this Agreement shall be binding upon the sublicensee as if it were a party to this Agreement. Licensee further agrees to attach copies of these Paragraphs to all sublicense agreements.

 

4.03          Any sublicenses granted by Licensee shall provide for the termination of the sublicense, or the conversion to a license directly between such sublicensees and PHS, at the option of the sublicensee, upon termination of this Agreement under Article 13. Such conversion is subject to PHS approval and contingent upon acceptance by the sublicensee of the remaining provisions of this Agreement.

 

4.04          Licensee agrees to forward to PHS a copy of each fully executed sublicense agreement postmarked within thirty (30) days of the execution of such agreement. To the extent permitted by law, PHS agrees to maintain each such sublicense agreement in confidence.

 

5.                                        STATUTORY AND PHS REQUIREMENTS AND RESERVED GOVERNMENT RIGHTS

 

5.01          PHS reserves on behalf of the Government an irrevocable, nonexclusive, nontransferable, royalty-free license for the practice of all inventions licensed under the Licensed Patent Rights throughout the world by or on behalf of the Government and on behalf of any foreign government or international organization pursuant to any existing or future treaty or agreement to which the Government is a signatory.

 

5.02          Licensee agrees that products used or sold in the United States embodying Licensed Products or produced through use of Licensed Processes shall be manufactured substantially in the United States, unless a written waiver is obtained in advance from PHS.

 

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5.03          Licensee acknowledges that PHS may enter into future Cooperative Research and Development Agreements (CRADAs) under the Federal Technology Transfer Act of 1986 that relate to the subject matter of this Agreement. Licensee agrees not to unreasonably deny requests for a Research License from such future collaborators with PHS when acquiring such rights is necessary in order to make a Cooperative Research and Development Agreement (CRADA) project feasible. Licensee may request an opportunity to join as a party to the proposed Cooperative Research and Development Agreement (CRADA), which request shall not be unreasonably withheld. If Licensee is the sole CRADA partner, they shall have the first right of refusal to exclusively license the CRADA Subject Invention arising from such CRADA. If Licensee is one of several CRADA partners in a given CRADA, Licensee shall be free to negotiate terms to share, contract, or both share and contract with other non-PHS CRADA partners to license the Subject Invention.

 

5.04          In addition to the reserved license of Paragraph 5.01 above, PHS reserves the right to grant nonexclusive Research Licenses directly or to require Licensee to grant nonexclusive Research Licenses on reasonable terms. The purpose of this Research License is to encourage basic research, whether conducted at an academic or corporate facility. In order to safeguard the Licensed Patent Rights, however, PHS shall consult with Licensee before granting to commercial entities a Research License or providing to them research samples of materials made through the Licensed Processes. In said consultation with Licensee, PHS shall consider, in good faith, objections raised by Licensee regarding the grant of Research Licenses that may impact the exclusivity of the rights granted hereunder and shall not unreasonably deny such objections.

 

5.05          Other than Article 5 and Article 13 of this Agreement, PHS shall not grant any commercial patent license or other right within the Licensed Fields of Use of this Agreement to any third party with respect to the Licensed Products or Licensed Process, unless Licensee grants prior written approval to such a grant of rights or unless this Agreement has been terminated pursuant to Article 13.

 

6.                                        ROYALTIES AND REIMRURSEMENT

 

6.01          Licensee agrees to pay to PHS a noncreditable, nonrefundable license issue royalty as set forth in Appendix C within the time schedule provided therein.

 

6.02          Licensee agrees to pay to PHS a nonrefundable minimum annual royalty as set forth in Appendix C. The minimum annual royalty is due and payable on January 1 of each calendar year and may be credited against any earned royalties due for sales made in that year.

 

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6.03          Licensee agrees to pay PHS earned royalties as set forth in Appendix C.

 

6.04          Licensee agrees to pay PHS benchmark royalties as set forth in Appendix C.

 

6.05          Licensee agrees to pay PHS sublicensing royalties as set forth in Appendix C.

 

6.06          A patent or patent application licensed under this Agreement shall cease to fall within the Licensed Patent Rights for the purpose of computing earned royalty payments in any given country on the earliest of the dates that a) the application has been abandoned and not continued, b) the patent expires or irrevocably lapses, or c) the claim has been held to be invalid or unenforceable by an unappealed or unappealable decision of a court of competent jurisdiction or administrative agency.

 

6.07          No multiple royalties shall be payable because any Licensed Products or Licensed Processes are covered by more than one of the Licensed Patent Rights.

 

6.08          On sales of Licensed Products by Licensee to sublicensees or on sales made in other than an arm’s-length transaction, the value of the Net Sales attributed under this Article 6 to such a transaction shall be that which would have been received in an arm’s-length transaction, based on sales of like quantity and quality products on or about the time of such transaction.

 

6.09          With regard to expenses associated with the preparation, filing, prosecution, and maintenance of all patent applications and patents included within the Licensed Patent Rights incurred by PHS prior to the Effective Date of this Agreement, Licensee shall pay to PHS, as an additional royalty, Twelve Thousand One Hundred and Nineteen Dollars ($12,119) within thirty (30) days of the Effective Date of the Agreement, and Ten Thousand Dollars ($10,000) by December 31, 2003.

 

6.10          With regard to expenses incurred or to be incurred by PHS associated with filing national stage applications associated with the Licensed Patent Rights, Licensee shall pay to PHS, as an additional royalty of Five Thousand Dollars ($5,000) within thirty (30) days of the Effective Date of this Agreement, Five Thousand Dollars ($5,000) by March 30th, 2004, and the remaining balance of such expenses incurred by PHS associated with said national stage filing cost by December 30th, 2004, provided that such balance shall not exceed $35,000.

 

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6.11          Subject to Paragraph 7.01, Licensee shall assume responsibility for the preparation, filing, prosecution, or maintenance of any patent application or patent included with the Licensed Patent Rights on and after the Effective Date of this Agreement. Licensee shall directly pay the attorneys or agents engaged by it to prepare, file, prosecute, or maintain such patent applications or patents and shall provide PHS with copies of each invoice associated with such services as well as documentation that such invoices have been paid.

 

6.12          Licensee may elect to surrender its rights in any country of the Licensed Territory under any Licensed Patent Rights upon ninety (90) days written notice to PHS and owe no payment obligation under Paragraph 6.10 for patent-related expenses incurred in that country after ninety (90) days of the effective date of such written notice.

 

7.                                        PATENT FILING, PROSECUTION, AND MAINTENANCE

 

7.01          Upon the execution of this Agreement, and following filing of national stage applications for the Licensed Patent Rights that shall be done at the full responsibility of PHS after consultation with Licensee, Licensee shall assume the responsibility for the preparation, filing, prosecution, and maintenance of any and all patent applications or patents included in the Licensed Patent Rights and shall on an ongoing basis promptly furnish copies of all patent-related documents to PHS. In such event, Licensee shall, subject to the prior approval of PHS, select registered patent attorneys or patent agents to provide such services on behalf of Licensee and PHS. PHS shall provide appropriate powers of attorney and other documents necessary to undertake such actions to the patent attorneys or patent agents providing such services. Licensee and its attorneys or agents shall consult with PHS in all aspects of the preparation, filing, prosecution and maintenance of patent applications and patents included within the Licensed Patent Rights and shall provide PHS sufficient opportunity to comment on any document that Licensee intends to file or to cause to be filed with the relevant intellectual property or patent office.

 

7.02          Each party shall promptly inform the other as to all matters that come to its attention that may affect the preparation, filing, prosecution, or maintenance of the Licensed Patent Rights and permit each other to provide comments and suggestions with respect to the preparation, filing, prosecution, and maintenance of Licensed Patent Rights, which comments and suggestions shall be considered by the other party.

 

7.03          At any time, PHS may provide Licensee with written notice that PHS wishes to assume control of the preparation, filing, prosecution, and maintenance of any and all patent applications or patents included in the Licensed Patent Rights. If PHS elects to assume such responsibilities, Licensee agrees to cooperate fully with PHS, its attorneys, and agents in the preparation, filing, prosecution, and maintenance of any and all patent applications or patents included in the Licensed Patent Rights and to provide PHS with complete copies of any and all documents or other materials that PHS deems necessary to undertake such responsibilities. Licensee shall be responsible for all costs associated with transferring patent prosecution responsibilities to an attorney or agent of PHS’s choice.

 

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8.                                        RECORD KEEPING

 

8.01          Licensee agrees to keep accurate and correct records of Licensed Products made, used, sold, or imported and Licensed Processes practiced under this Agreement appropriate to determine the amount of royalties due PHS. Such records shall be retained for at least five (5) years following a given reporting period and shall be available during normal business hours for inspection at the expense of PHS by an accountant or other designated auditor selected by PHS for the sole purpose of verifying reports and payments hereunder. The accountant or auditor shall only disclose to PHS information relating to the accuracy of reports and payments made under this Agreement If an inspection shows an underreporting or underpayment in excess of five percent (5%) for any twelve (12) month period, then Licensee shall reimburse PHS for the cost of the inspection at the time Licensee pays the unreported royalties, including any late charges as required by Paragraph 9.08 of this Agreement. All payments required under this Paragraph shall be due within thirty (30) days of the date Licensee receives notice from PHS of the payment due.

 

8.02          Licensee agrees to have an audit of sales and royalties conducted by an independent auditor at least every two (2) years if annual sales of the Licensed Product or Licensed Processes are over two (2) million dollars. The audit shall address, at a minimum, the amount of gross sales by or on behalf of Licensee during the audit period, terms of the license as to percentage or fixed royalty to be remitted to the Government, the amount of royalty funds owed to the Government under this Agreement, and whether the royalty amount owed has been paid to the Government and is reflected in the records of the Licensee. The audit shall also indicate the PHS license number, product, and the time period being audited. A report certified by the auditor shall be submitted promptly by the auditor directly to PHS on completion. Licensee shall pay for the entire cost of the audit.

 

9.                                        RFPORTS ON PROGRESS, BENCHMARKS, SALES, AND PAYMEMTS

 

9.01          Prior to signing this Agreement, Licensee has provided to PHS the Commercial Development Plan at Appendix F, under which Licensee intends to bring the subject matter of the Licensed Patent Rights to the point of Practical Application. This Commercial Development Plan is hereby incorporated by reference into this Agreement. Based on this plan, performance Benchmarks are determined as specified in Appendix E.

 

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9.02          Licensee shall provide written annual reports on its product development progress or efforts to commercialize under the Commercial Development Plan for each of the Licensed Fields of Use within sixty (60) days after December 31 of each calendar year. These progress reports shall include, but not be limited to: progress on research and development, status of applications for regulatory approvals, manufacturing, sublicensing, marketing, importing, and sales during the preceding calendar year, as well as plans for the present calendar year. PHS also encourages these reports to include information on any of Licensee’s public service activities that relate to the Licensed Patent Rights. If reported progress differs from that projected in the Commercial Development Plan and Benchmarks, Licensee shall explain the reasons for such differences. In any such annual report, Licensee may propose amendments to the Commercial Development Plan, acceptance of which by PHS may not be denied unreasonably. Licensee agrees to provide any additional information reasonably required by PHS to evaluate Licensee’s performance under this Agreement. Licensee may amend the Benchmarks at any time upon written consent by PHS. PHS shall not unreasonably withhold approval of any request of Licensee to extend the time periods of this schedule if such request is supported by a reasonable showing by Licensee of diligence in its performance under the Commercial Development Plan and toward bringing the Licensed Products to the point of Practical Application as defined in 37 CFR § 404.3(d). Licensee shall amend the Commercial Development Plan and Benchmarks at the request of PHS to address any Licensed Fields of Use not specifically addressed in the plan originally submitted.

 

9.03          Licensee shall report to PHS the dates for achieving Benchmarks specified in Appendix E and the First Commercial Sale in each country in the Licensed Territory within thirty (30) days of such occurrences.

 

9.04          Licensee shall submit to PHS within sixty (60) days after each calendar half-year ending June 30 and December 31 a royalty report setting forth for the preceding half-year period the amount of the Licensed Products sold or Licensed Processes practiced by or on behalf of Licensee in each country within the Licensed Territory, the Net Sales, and the amount of royalty accordingly due. With each such royalty report, Licensee shall submit payment of the earned royalties due. If no earned royalties are due to PHS for any reporting period, the written report shall so state. The royalty report shall be certified as correct by an authorized officer of Licensee and shall include a detailed listing of all deductions made under Paragraph 2.10 to determine Net Sales made under Article 6 to determine royalties due.

 

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9.05          Licensee agrees to forward semi-annually to PHS a copy of such reports received by Licensee from its sublicensees during the preceding half-year period as shall be pertinent to a royalty accounting to PHS by Licensee for activities under the sublicense.

 

9.06          Royalties due under Article 6 shall be paid in U.S. dollars. For conversion of foreign currency to U.S. dollars, the conversion rate shall be the New York foreign exchange rate quoted in The Wall Street Journal on the day that the payment is due. All checks and bank drafts shall be drawn on United States banks and shall be payable, as appropriate, to “NIH/Patent Licensing.” All such payments shall be sent to the following address: NIH, P.O. Box 360120, Pittsburgh, PA 15251-6120. Any loss of exchange, value, taxes, or other expenses incurred in the transfer or conversion to U.S. dollars shall be paid entirely by Licensee. The royalty report required by Paragraph 9.04 of this Agreement shall accompany each such payment, and a copy of such report shall also be mailed to PHS at its address for notices indicated on the Signature Page of this Agreement.

 

9.07          Licensee shall be solely responsible for determining if any tax on royalty income is owed outside the United States and shall pay any such tax and be responsible for all filings with appropriate agencies of foreign governments.

 

9.08          Interest and penalties may be assessed by PHS on any overdue payments in accordance with the Federal Debt Collection Act. The payment of such late charges shall not prevent PHS from exercising any other rights it may have as a consequence of the lateness of any payment.

 

9.9                 All plans and reports required by this Article 9 and marked “confidential” by Licensee shall, to the extent permitted by law, be treated by PHS as commercial and financial information obtained from a person and as privileged arid confidential, and any proposed disclosure of such records by the PHS under the Freedom of Information Act (FOIA), 5 U.S.C,, § 552 shall be subject to the pre-disclosure notification requirements of 45 CFR § 5.65(d).

 

10.                                 PERFORMANCE

 

10.01   Licensee shall use its reasonable best efforts to bring the Licensed Products and Licensed Processes to Practical Application. “Reasonable best efforts” for the purposes of this provision shall include adherence to the Commercial Development Plan at Appendix F and performance of the Benchmarks at Appendix E, subject to Paragraph 9.02 of this Agreement. The efforts of a sublicensee shall be considered the efforts of Licensee.

 

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10.2          Upon the First Commercial Sale within the United States, until the expiration of this Agreement, Licensee shall use its reasonable best efforts to make Licensed Products and Licensed Processes reasonably accessible to the United States public.

 

11.                                 INFRINGEMENT AND PATENT ENFORCEMENT

 

11.01   PHS and Licensee agree to notify each other promptly of each infringement or possible infringement of the Licensed Patent Rights, as well as any facts which may affect the validity, scope, or enforceability of the Licensed Patent Rights of which either Party becomes aware.

 

11.02   Pursuant to this Agreement and the provisions of Chapter 29 of title 35, United States Code, Licensee may: a) bring suit in its own name, at its own expense, and on its own behalf for infringement of presumably valid claims in the Licensed Patent Rights; b) in any such suit, enjoin infringement and collect for its use, damages, profits, and awards of whatever nature recoverable for such infringement; and c) settle any claim or suit for infringement of the Licensed Patent Rights provided, however, that PHS and appropriate Government authorities shall have the first right to take such actions. If Licensee desires to initiate a suit for patent infringement, Licensee shall notify PHS in writing. If PHS does not notify Licensee of its intent to pursue legal action within forty five (45) days, Licensee will be free to initiate suit PHS shall have a continuing right to intervene in such suit. Licensee shall take no action to compel the Government either to initiate or to join in any such suit for patent infringement. Licensee may request the Government to initiate or join in any such suit if necessary to avoid dismissal of the suit. Should the Government be made a party to any such suit at the request of the Licensee, Licensee shall reimburse the Government for any costs, expenses, or fees which the Government incurs as a result of such motion or other action, including any and all costs incurred by the Government in opposing any such motion or other action. In all cases, Licensee agrees to keep PHS reasonably apprised of the status and progress of any litigation. Before Licensee commences an infringement action, Licensee shall notify PHS and give careful consideration to the views of PHS and to any potential effects of the litigation on the public health in deciding whether to bring suit.

 

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11.03   In the event that a declaratory judgment action alleging invalidity or non-infringement of any of the Licensed Patent Rights shall be brought against Licensee or raised by way of counterclaim or affirmative defense in an infringement suit brought by Licensee under Paragraph 11.02, pursuant to this Agreement and the provisions of Chapter 29 of Title 35, United States Code or other statutes, Licensee may: a) defend the suit in its own name, at its own expense, and on its own behalf for presumably valid claims in the Licensed Patent Rights; b) in any such suit, ultimately to enjoin infringement and to collect for its use, damages, profits, and awards of whatever nature recoverable for such infringement; and c) settle any claim or suit for declaratory judgment involving the Licensed Patent Rights-provided, however, that PHS and appropriate Government authorities shall have the first right to take such actions and shall have a continuing right to intervene in such suit. If PHS does not notify Licensee of its intent to respond to the legal action within a reasonable period; which period shall not exceed ninety (90) days, Licensee will be free to do so. Licensee shall take no action to compel the Government either to initiate or to join in any such declaratory judgment action. Licensee may request the Government to initiate or to join any such suit if necessary to avoid dismissal of the suit. Should the Government be made a party to any such suit by motion or any other action of Licensee at the Licensee’s request, Licensee shall reimburse the Government for any costs, expenses, or fees which the Government incurs as a result of such motion or other action. If Licensee elects not to defend against such declaratory judgment action, PHS, at its option, may do so at its own expense. In all cases, Licensee agrees to keep PHS reasonably apprised of the status and progress of any litigation. Before Licensee commences an infringement action, Licensee shall notify PHS and give careful consideration to the views of PHS and to any potential effects of the litigation on the public health in deciding whether to bring suit.

 

11.04   In any action under Paragraphs 11.02 or 11.03, the expenses including costs, fees, attorney fees, and disbursements, shall be paid by Licensee. The value of any recovery made by Licensee through court judgment or settlement shall be treated as Net Sales and subject to earned royalties. Any and all costs incurred by the Licensee in defending the Licensed Patent Rights, as provided above, shall be deducted from Net Sales.

 

11.05   PHS shall cooperate fully with Licensee in connection with any action under Paragraphs 11.02 or 11.03. PHS agrees promptly to provide access to all necessary documents and to render reasonable assistance in response to a request by Licensee.

 

12.                                 NEGATION OF WARRANTIES AND INDEMNIFICATION

 

12.01   PHS offers no warranties other than those specified in Article 1.

 

12.02   PHS does not warrant the validity of the Licensed Patent Rights and makes no representations whatsoever with regard to the scope of the Licensed Patent Rights, or that the Licensed Patent Rights may be exploited without infringing other patents or other intellectual property rights of third parties.

 

12.03   PHS MAKES NO WARRANTIES, EXPRESSED OR IMPLIED, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF ANY SUBJECT MATTER DEFINED BY THE CLAIMS OF THE LICENSED PATENT RIGHTS OR TANGIBLE MATERIALS RELATED THERETO.

 

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12.04   PHS does not represent that it will commence legal actions against third parties infringing the Licensed Patent Rights.

 

12.05   Licensee shall indemnify and hold PHS, its employees, students, fellows, agents, and consultants harmless from and against all liability, demands, damages, expenses, and losses, including but not limited to death, personal injury, illness, or property damage in connection with or arising out of: a) the use by or on behalf of Licensee, its sublicensees, directors, employees, or third parties of any Licensed Patent Rights; or b) the design, manufacture, distribution, or use of any Licensed Products, Licensed Processes or materials by Licensee, or other products or processes developed in connection with or arising out of the Licensed Patent Rights. Licensee agrees to maintain a liability insurance program consistent with sound business practice.

 

13.                           TERM, TERMINATION, AND MODIFICATION OF RIGHTS

 

13.01   This Agreement is effective as of the Effective Date and shall extend to the expiration of the last to expire of the Licensed Patent Rights unless sooner terminated as provided in this Article 13.

 

13.02   In the event that Licensee is in default in the performance of any material obligations under this Agreement, including but not limited to the obligations listed in Article 13.05, and if the default has not been remedied within ninety (90) days after the date of notice in writing of such default, PHS may terminate this Agreement by written notice and pursue outstanding amounts owed through procedures provided by the Federal Debt Collection Act.

 

13.03   In the event that Licensee becomes insolvent, files a petition in bankruptcy, has such a petition filed against it, determines to file a petition in bankruptcy, or receives notice of a third parry’s intention to file an involuntary petition in bankruptcy, Licensee shall immediately notify PHS in writing. PHS shall have the right to terminate this Agreement immediately upon Licensee’s receipt of such written notice.

 

13.04   Notwithstanding anything to the contrary in this Agreement, Licensee shall have a unilateral right to terminate this Agreement and/or any licenses in any country or territory by giving PHS sixty (60) days written notice to that effect In such event. Licensee will not have any obligations whatsoever to PHS, other than for payments that should have been paid by Licensee to PHS prior to the date of the notice of termination.

 

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13.05   PHS shall specifically have the right to terminate or modify, at its option, this Agreement, if PHS determines that per the submission incorporated in Appendix F of this Agreement the Licensee: 1) is not executing the Commercial Development Plan of Appendix F with due diligence subject to any amendment thereto pursuant to Paragraph 9.02; 2) has not achieved the Benchmarks as may be modified under Paragraph 9.02; 3) has willfully made a false statement of, or willfully omitted, a material fact in the license application or in any report required by this Agreement; 4) has committed a material breach of a covenant or agreement contained in under this Agreement; 5) is not keeping Licensed Products or Licensed Processes reasonably available to the public after commercial use commences; 6) cannot reasonably satisfy unmet health and safety needs; 7) cannot reasonably justify a failure to comply with the domestic production requirement of Paragraph 5.02 unless waived. In making this determination, PHS will take into account the normal course of such commercial development programs conducted with sound and reasonable business practices and judgment and the annual reports submitted by Licensee under Paragraph 9.02. Prior to invoking this right, PHS shall give written notice to Licensee providing Licensee specific notice of, and a ninety (90) day opportunity to respond to, PHS’s concerns as to the previous items 1) to 7). If Licensee fails to alleviate PHS’s concerns as to the previous items 1) to 7) or fails to initiate corrective action to PHS’s satisfaction, PHS may terminate this Agreement.

 

13.06   When the public health and safety so require, and after written notice to Licensee providing Licensee a sixty (60) day opportunity to respond, PHS shall have the right to require Licensee to grant sublicenses to responsible applicants, on terms to be reasonably agreed with the Licensee, in any Licensed Fields of Use under the Licensed Patent Rights, unless Licensee can reasonably demonstrate that the granting of the sublicense would not materially increase the availability to the public of the subject matter of the Licensed Patent Rights. PHS will not require the granting of a sublicense unless the responsible applicant has first negotiated in good faith with Licensee. In addition, Licensee shall have the right within sixty (60) days of said written notice to submit a written plan, and accordingly modifying Appendices E and F, demonstrating that requirements of public health and safety can be met without the compulsory grant of sublicenses under this Paragraph. PHS shall give such a written plan good faith consideration and not unreasonably deny such a plan.

 

13.07   PHS reserves the right according to 35 U.S.C. § 209(f)(4) to terminate or modify this Agreement if it is determined that such action is necessary to meet requirements for public use specified by federal regulations issued after the date of the license and such requirements are not reasonably satisfied by, Licensee upon ninety (90) days prior notice.

 

13.08   Within thirty (30) days of receipt of written notice of PHS’s decision to modify or terminate this Agreement, Licensee may, consistent with the provisions of 37 CFR § 404.11, appeal the decision by written submission to the designated PHS official. The decision of the designated PHS official shall be the final agency decision. licensee may thereafter exercise any and all administrative or judicial remedies that may be available.

 

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13.09   Within ninety (90) days of expiration or termination of this Agreement under this Article 13, a final report shall be submitted by Licensee. Any royalty payments, including those incurred but not yet paid (such as the full minimum annual royalty), and those related to patent expense, that should be paid by Licensee to PHS prior to the date of the notice of termination shall become immediately due and payable upon termination or expiration. If terminated under this Article 13, sublicensees may elect to convert their sublicenses to direct licenses with PHS pursuant to Paragraph 4.03. Unless otherwise specifically provided for under this Agreement, upon termination or expiration of this Agreement, Licensee shall return all Licensed Products or other materials included within the Licensed Patent Rights to PHS or provide PHS with certification of the destruction thereof.

 

13.10   Following the expiration of this Agreement under this Article 13, as a result of the expiration of the Licensed Patent Rights with respect to each of the countries within the Licensed Territory, Licensee may continue to market and sell the Licensed Products or Licensed Processes, within such country with no obligation whatsoever to pay royalties or other consideration to PHS.

 

14.                                 GENERAL PROVISIONS

 

14.01   Neither Party may waive or release any of its rights or interests in this Agreement except in writing. The failure of either Party to assert a right hereunder or to insist upon compliance with any term or condition of this Agreement shall not constitute a waiver of that right by either Party or excuse a similar subsequent failure to perform any such term or condition by the other Party.

 

14.02   This Agreement constitutes the entire agreement between the Parties relating to the subject matter of the Licensed Patent Rights, and all prior negotiations, representations, agreements, and understandings are merged into, extinguished by, and completely expressed by this Agreement.

 

14.03   The provisions of this Agreement are severable, and in the event that any provision of this Agreement shall be determined to be invalid or unenforceable under any controlling body of law, such determination shall not in any way affect the validity or enforceability of the remaining provisions of this Agreement.

 

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14.04   If either Party desires a modification to this Agreement, the Parties shall, upon reasonable notice of the proposed modification by the Party desiring the change, confer in good faith to determine the desirability of such modification. No modification will be effective until a written amendment is signed by the signatories to this Agreement or their designees.

 

14.05   The construction, validity, performance, and effect of this Agreement shall be governed by Federal law as applied by the Federal courts in the District of Columbia.

 

14.06   All notices required or permitted by this Agreement shall be given by prepaid, first class, registered or certified mail or by an express/overnight delivery service provided by a commercial carrier, properly addressed to the other Party at the address designated on the following Signature Page, or to such other address as may be designated in writing by such other Party. Notices shall be considered timely if such notices are received on or before the established deadline date or sent on or before the deadline date as verifiable by U.S. Postal Service postmark or dated receipt from a commercial carrier. Parties should request a legibly dated U.S. Postal Service postmark or obtain a dated receipt from a commercial carrier or the U.S. Postal Service. Private metered postmarks shall not be acceptable as proof of timely mailing.

 

14.07   This Agreement shall not be assigned by Licensee except: a) with the prior written consent of PHS, such consent not to be withheld unreasonably; or b) as part of a sale or transfer of substantially the entire business of Licensee relating to operations which concern this Agreement, whether as sale of assets, merger or any other manner of transfer. Licensee shall notify PHS within ten (10) days of any assignment of this Agreement by Licensee. For the purposes of this Agreement, an Affiliate of the Licensee shall not be considered separate from the Licensee in that the obligations of the Licensee may be performed by its Affiliates (whether located in Israel or in any other country) and the rights granted to the Licensee hereunder might be exercised by the Affiliates of the Licensee, as if they were so originally granted, without such to be considered as sublicensing or assignment and without requirement of PHS’s approval or notice to PHS.

 

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14.08   Licensee agrees in its use of any PHS-supplied materials to comply with all applicable statutes, regulations, and guidelines, including PHS and DHHS regulations and guidelines. Licensee agrees not to use the materials for research involving human subjects or clinical trials in the United States without complying with 21 CFR Part 50 and 45 CFR Part 46. Licensee agrees not to use the materials for research involving human subjects or clinical trials outside of the United States without notifying PHS, in writing, of such research or trials and complying with the applicable regulations of the appropriate national control authorities. Written notification to PHS of research involving human subjects or clinical trials outside of the United States shall be given no later than sixty (60) days prior to commencement of such research or trials.

 

14.09   Licensee acknowledges that it is subject to and agrees to abide by the United States laws and regulations (including the Export Administration Act of 1979 and Arms Export Control Act) controlling the export of technical data, computer software, laboratory prototypes, biological material, and other commodities. The transfer of such items may require a license from the cognizant Agency of the Government or written assurances by Licensee that it shall not export such items to certain foreign countries without prior approval of such agency. PHS represents that if such a license is required, it shall be issued.

 

14.10   Licensee agrees to mark the Licensed Products or their packaging sold in the United States with all applicable U.S. patent numbers and similarly to indicate “Patent Pending” status. All Licensed Products manufactured in, shipped to, or sold in other countries shall be marked in such a manner as to preserve PHS patent rights in such countries.

 

14.11   By entering into this Agreement, PHS does not directly or indirectly endorse any product or service provided, or to be provided, by Licensee whether directly or indirectly related to this Agreement. Licensee shall not state or imply that this Agreement is an endorsement by the Government, PHS, any other Government organizational unit, or any Government employee. Additionally, Licensee shall not use the names of NIH, CDC, PHS, or DHHS or the Government or their employees in any advertising, promotional, or sales literature without the prior written consent of PHS, which shall not be unreasonably withheld.

 

14.12   The Parties agree to attempt to settle amicably any controversy or claim arising under this Agreement or a breach of this Agreement, except for appeals of modifications or termination decisions provided for in Article 13. Licensee agrees first to appeal any such unsettled claims or controversies to the designated PHS official, or designee, whose decision shall be considered the final agency decision. Thereafter, Licensee may exercise any administrative or judicial remedies that may be available.

 

14.13   Nothing relating to the grant of a license, nor the grant itself, shall be construed to confer upon any person any immunity from or defenses under the antitrust laws or from a charge of patent misuse, and the acquisition and use of rights pursuant to 37 CFR Part 404 shall not be immunized from the operation of state or Federal law by reason of the source of the grant.

 

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14.14   Paragraphs 4.03, 8.01, 9.05-9.07, 12.01-12.05, 13.08, 13.09, and 14.12 of this Agreement shall survive termination of this Agreement.

 

SIGNATURES BEGIN ON NEXT PAGE

 

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PHS PATENT LICENSE AGREEMENT—EXCLUSIVE

 

SIGNATURE PAGE

 

	
For PHS:
    	
 
    	
 
    
	

    	
 
    	
Date
    	
7/22/03
    

 

Steven Ferguson, M.B.A

Acting Director, Division of Technology Development and Transfer

Office of Technology Transfer

National Institutes of Health

 

Mailing Address for Notices:

 

Office of Technology Transfer

National Institutes of Health

6011 Executive Boulevard, Suite 325

Rockville, Maryland 20852-3804 U.SA.

 

For Licensee (Upon, information and belief, the undersigned expressly certifies or affirms that the contents of any statements of Licensee made or referred to in this document are truthful and accurate.):

 

	
by:
    	
 
    	
 
    	

    
	
 
    	
 
    	
 
    	
 
    
	

    	
 
    	
Date
    	
20/08/03
    
	
Signature of Authorized   Official
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
YIFTACH ROTH
    	
 
    	
 
    
	
Printed Name
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Director
    	
 
    	
 
    
	
Title
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Official and Mailing   Address for Notices:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Harechavim st. 15
    	
 
    	
 
    
	
P.O. Box 53150
    	
 
    	
 
    
	
Jerusalem 91531
    	
 
    	
 
    
					

 

Any false or misleading statements made, presented, or submitted to the Government, including any relevant omissions, under this Agreement and during the course of negotiation of this Agreement are subject to all applicable civil and criminal statutes including Federal statutes 31 U.S.C. §§ 3801-3812 (civil liability) and 18 U.S.C. § 1001 (criminal liability including fine(s) and/or imprisonment).

 

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APPENDIX A—Patent(s) or Patent Application(s)

 

Patent(s) or Patent Application(s):

 

PCT Application No. PCT/US01/50737, “Coil For Magnetic Stimulation and Methods For Using The Same,” (filed 10/19/2001) which claims priority from U.S. Provisional Application No. 60/242,297 (filed 10/20/2000) by Zangen et al.

 

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APPENDIX B—Licensed Fields of Use and Territory

 

Licensed Fields of Use:

 

Transcranial Magnetic Stimulation (TMS) apparatus and therapies.

 

Licensed Territory:

 

Worldwide.

 

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APPENDIX C—Royalties

 

Royalties:

 

Licensee agrees to pay to PHS a noncreditable, nonrefundable license issue royalty in the amount of Twenty Five Thousand Dollars ($25,000), Ten Thousand USD ($10,000) of which shall be paid within thirty (30) days of the Effective Date, and Fifteen Thousand (USD $15,000) of which shall be paid by March 31, 2004.

 

Licensee agrees to pay to PHS a nonrefundable minimum annual royalty in the amount of Two Thousand Dollars ($2,000), where the first payment will be due on January 1st, 2004.

 

Licensee agrees to pay PHS earned royalties on cumulative Net Sales by or on behalf of Licensee and its sublicensees as follows:

 

Three Percent (3%) on the portion of cumulative Net Sales up to and including Ten Million dollars (USD $10,000,000) and Two Percent (2%) on the portion of cumulative Net Sales greater than Ten Million dollars (USD $10,000,000).

 

Licensee agrees to pay PHS benchmark royalties as follows:

 

Ten Thousand Dollars ($10,000) to be paid within thirty (30) days of approval for marketing of a particular category of Licensed Products or Licensed Processes by either the FDA or its foreign equivalent (but only once per each category).

 

Licensee agrees to pay PHS additional sublicensing royalties as follows:

 

Eight Percent (8%) of the fair market value of consideration received by the Licensee for granting a sublicense under the Licensed Patent Rights, said consideration shall exclude:

 

a)                  Royalties on Net Sales paid by the sublicensee(s);

b)                  Gross receipts for commercial sales of Licensed Products or commercial practice of Licensed Processes on which earned royalty has been paid to PHS;

c)                   Future Research and development funding;

d)                  Out of pocket legal expenses reimbursed to Licensee by sublicensee(s) in relation to procuring such sublicense(s); and

e)                   Equity investment(s) in Licensee at current market rates.

 

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APPENDIX D—Modifications

 

PHS and Licensee agree to the following modifications to the Articles and Paragraphs of this Agreement:

 

None.

 

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APPENDIX E—Benchamarks and Performance

 

Licensee agrees to the following Benchmarks for its performance under this Agreement and, within thirty (30) days of achieving a Benchmark, shall notify PHS that the Benchmark has been achieved.

 

·                     Within twelve (12) months of the Effective Date of this agreement Licensee shall raise One Million ($1,000,000) Dollars in funds and demonstrate the availability of said funds, sufficient to undertake initial research and development of the Licensed Patent Rights, Licensed Processes and/or Licensed Products.

 

·                     Submission to FDA or foreign equivalent by June 1, 2005 of an application for regulatory marketing approval of a Licensed Product or Process.

 

·                     Regulatory marketing approval of a Licensed Product or Process by the FDA or foreign equivalent by June 1, 2006.

 

·                     First Commercial Sale of a Licensed Product or Process by January 1, 2007.

 

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APPENDIX F—Commercial Development Plan

 

Due to the early stage of the TMS market, the immature phase of the technology, and the lack of consensus within the scientific community regarding the viability of TMS in the treatment of brain deficiencies, the R&D and marketing plan represents only a guideline of the intentions of Brainsway Inc. Such plans will necessarily be adapted to reflect results of various R&D phases, as well as new discoveries that may be published by the scientific community.

 

Overall, the intention of Brainsway Inc. is to identify one or more brain deficiencies and/or malfunctions, develop coils and potentially also a stimulator that will be effective in altering these malfunctions, and promote and sell such coils and stimulators to hospital and clinics, potentially establishing a network of TMS clinics later.

 

In order to execute this plan, Brainsway Inc. will have, in its first 21 months of operation, two R&D tracks (i) Coil / stimulator development. (ii) Clinical trials. Pending the success of the clinical trials, and the state of the market at that time, Brainsway Inc. will strategize and select one or more applications to focus its effort on. Due to the high level of risk and uncertainty of these future phases, Brainsway Inc. plans to focus its operations in the first 21 months as follows: (refer to figure on next page)

 

Phase 1: Coil / Stimulator development:

 

While the subject matter of the patent shows theoretical improvement over existing coils, Brainsway Inc. believes that further improvements will have to be made, and a new coil should be developed to further enhance the effectiveness and the depth reach of the proposed deep brain stimulation. Brainsway Inc. will seek to use its internal know-how and design capabilities to develop this improved coil. The development of such new coil is budgeted as 9 months of two engineers’ time.

 

Phase 2: TMS treatment in clinical depression using an improved coil design

 

1.        Safety approval:

 

The improved coil will need to be initially approved for safety by the FDA. Brainsway Inc. plans (and has started initial discussions) to collaborate with one or more research centers or hospitals in the execution of this trial. Brainsway Inc. plans to conduct safety tests with the improved coil on 18 healthy volunteers. 2 researchers will support this trial over a period of two months.

 

27

 

2.        Clinical trial:

 

Upon completion of successful safety testing and upon approval of the FDA to conduct a clinical trial, Brainsway Inc. plans (and has started initial discussions) to collaborate with one or more research centers or hospitals in the execution of such a clinical trial. Brainsway Inc. plans to conduct clinical trials in order to develop a protocol for the treatment of depression, using 80 subjects. 2 researchers will support this trial over a period of eleven (11) months.

 

Phase 3: Others

 

Brainsway Inc. plans to evaluate the development of improved stimulators that will better meet the technical requirements of the developed coil, as well as other applications of the technology including addiction and schizophrenia and perform other studies accordingly.

 

 

Market Analysis

 

The field of TMS is still in its infancy. Researchers are still studying and measuring the effects of different types of coils and treatment protocols in clinical trials. The range of applications being considered for the Hesed coil (i.e., the licensed technology) includes development of treatments for depression, addiction and possibly schizophrenia.

 

TMS represents a revolutionary new approach to the treatment of depression. If TMS can capture even 1 % of the market for treatment of depression, we believe this would constitute the emergence of a commercially viable market for the coil and its product derivatives.

 

The commercial market for coils such as the licensed technology is currently negligible. There are currently only 4 known companies developing TMS related equipment (coils and/or magnetic stimulators). All are privately owned and therefore are not required to report sales but they are believed to be small. Nearly all sales relating to the licensed technology in the near term is expected to be to other research teams studying TMS.

 

If, in the future, the licensed technology proves better than competing coils and new treatment protocols and accompanying electronic equipment can be developed in order to safely and effectively treat certain disorders (discussed above), a viable commercial market for TMS may emerge. At this early stage it is not possible to provide meaningful market share or sales forecasts of what annual revenues for the company might be. However, we believe that two of the markets that the coil can potentially address, cigarette addiction and depression, are quite large, as described below.

 

Cigarette Addiction

 

Worldwide, 1.1 billion people smoke, a habit whose serious ill-effects on the cardiovascular and respiratory systems pose a major health problem in Western society. The WHO reports that each year 3 million deaths worldwide are attributable to smoking. However, smoking cessation—and products that ease smoking cessation—are on the rise. The recent surges in public awareness of the dangers of smoking and the legislation banning smoking have contributed to this trend.

 

Currently, the smoking cessation marketplace is dominated by nicotine replacement in multiple delivery forms: transdermal patch, gum, nasal spray, and the newest formulation, inhaler. Newer therapies that go beyond mere

 

 

nicotine replacement include Glaxo Wellcome’s recently approved Zyban and Elan/Sano’s late-stage nicotine/mecamylamine patch.

 

The current smoking cessation market is valued at $450 million. According to researchers, the growth of new smoking cessation therapies will help propel the market to nearly $1.5 billion by 2007. We believe that TMS, as an emerging smoking cessation therapy, may compete for a share of this lucrative market in the future.

 

Anti-depressants

 

Another potential market for the coil is for use in the treatment of depression. Currently the market for anti-depressants dwarfs that of smoking cessation. In 2000, Antidepressants were the #3-ranked therapy class worldwide, growing to $13.4 billion or 4.2 percent of all global pharmaceutical sales.

 

North America was the dominant market, accounting for 74.6 percent of sales and a 19 percent growth rate. Lilly’s Prozac was the leading product in the class with a market share of 21.5 percent. Prozac has been experiencing a decline in market share since 1996, in part due to new products and generic competition.

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