Document:

Unassociated Document

PREMIER POWER RENEWABLE ENERGY, INC.

4961 Windplay Drive, Suite 100

El Dorado Hills, CA 95762

November 10, 2011

Hernan Martinez

	 	
Re:

	
Director Offer Letter & Agreement

Dear Hernan:

Congratulations!  On October 27, 2011, the stockholders of Premier Power Renewable Energy, Inc., a Delaware corporation (the “Company”), elected you to a director position on our Board of Directors (the “Board”). We are very impressed with your credentials, and we look forward to your future success in this role.

Should you choose to accept this position as a member of the Board by signing the letter, this letter shall constitute an agreement (“Agreement”) between you and the Company and contains all the terms and conditions relating to the services you are to provide.

1.           Term. This Agreement shall be for the ensuing year, effective as of the date of this Agreement. Your term as director shall continue subject to the provisions in Section 8 below or until your successor is duly elected and qualified.  The position shall be up for re-election each year at the annual stockholders’ meeting and upon re-election, the terms and provisions of this Agreement shall remain in full force and effect.

2.           Services. You shall render services as a member of the Board (“Board Service”).  You shall be required to attend, at minimum, 3 meetings of the Board in person (“In-Person Meetings”) and, at minimum, 1 meeting of the Board by telephone (“Telephonic Meetings”).  As you have been determined by the Board to be an independent director as defined by Nasdaq Marketplace Rules, you shall also be required to attend at least one (1) meeting with the other independent directors without the presence of the Company’s officers and non-independent directors.  The services described in this Section 2 shall hereinafter be referred to as your “Duties.”

 

3.           Services for Others. You shall be free to represent or perform services for other persons during the term of this Agreement. You agree, however, that you do not presently perform and do not intend to perform, during the term of this Agreement, similar Duties, consulting, or other services for companies whose businesses are or would be, in any way, competitive with the Company (except for companies previously disclosed by you to the Company in writing). Should you propose to perform similar Duties, consulting, or other services for any such company, you agree to notify the Company in writing in advance (specifying the name of the organization for whom you propose to perform such services) and to provide information to the Company sufficient to allow it to determine if the performance of such services would conflict with areas of interest to the Company.

 

  

  

  

4.           Compensation.

4.1.           Cash for Meetings. You shall receive cash compensation of $2,500 for each In-Person Meeting and Telephonic Meeting that you attend. You shall be reimbursed for reasonable expenses incurred by you in connection with the performance of your Duties (including travel expenses for In-Person Meetings). A Board meeting attended telephonically for which you are owed cash compensation shall be considered a Telephonic Meeting if it is a meeting, at the Company’s sole discretion, to be of substantive significance and not incidental to your role on the Board.

4.2.           Monthly Cash Fee.  You shall receive cash compensation of $1,000, pro rata, for each month of your Board Service.

4.3.           Stock. You shall also receive 16,500 shares of the Company’s common stock, par value $0.0001 per share (“Common Stock”), after the completion of your first (1st) full year of Board Service.  After the completion of a second (2nd) full year of Board Service, if any, under this Agreement, you shall receive another 16,500 shares of Common Stock.  After the completion of a third (3rd) full year of Board Service, if any, under this Agreement, you shall receive another 17,000 shares of Common Stock.  The Company shall use its best efforts to issue shares of its Common Stock pursuant to this Section 4.3 in a timely manner.  The Common Stock issued pursuant to this Section 4.3 shall be issued as grants pursuant to the Company’s 2008 Equity Incentive Plan.

5.   D&O Insurance Policy. During the term under this Agreement, the Company shall include you as an insured under an officers and directors insurance policy with coverage not less than $5,000,000, which the Company shall obtain within a reasonable period of time.

6.   No Assignment. Because of the personal nature of the services to be rendered by you, this Agreement may not be assigned by you without the prior written consent of the Company.

7.   Confidential Information; Non-Disclosure. In consideration of your access to the premises of the Company and/or you access to certain Confidential Information of the Company, in connection with your business relationship with the Company, you hereby represent and agree as follows:

7.1.           Definition. For purposes of this Agreement, the term “Confidential Information” means:

a. Any information which the Company possesses that has been created, discovered, or developed by or for the Company, and which has or could have commercial value or utility in the business in which the Company is engaged; or

b. Any information which is related to the business of the Company and is generally not known by non-Company personnel.

 

  

  

  

 

c. By way of illustration, but not limitation, Confidential Information includes trade secrets and any information concerning products, processes, formulas, designs, inventions (whether or not patentable or registrable under copyright or similar laws, and whether or not reduced to practice), discoveries, concepts, ideas, improvements, techniques, methods, research, development and test results, specifications, data, know-how, software, formats, marketing plans, and analyses, business plans and analyses, strategies, forecasts, customer and supplier identities, characteristics, and agreements.

7.2.           Exclusions. Notwithstanding the foregoing, the term Confidential Information shall not include:

a. Any information which becomes generally available to the public other than as a result of a breach of the confidentiality portions of this Agreement, or any other agreement requiring confidentiality between the Company and you;

b. Information received from a third party in rightful possession of such information who is not restricted from disclosing such information; and

 

c. Information known by you prior to receipt of such information from the Company, which prior knowledge can be documented.

d.           Information that is disclosed to an order or requirement of a court, government administrative agency, or other governmental body.

7.3.   Documents. You agree that, without the express written consent of the Company, you will not remove from the Company's premises, any notes, formulas, programs, data, records, machines, or any other documents or items which in any manner contain or constitute Confidential Information, nor will you make reproductions or copies of same. In the event you receive any such documents or items by personal delivery from any duly designated or authorized personnel of the Company, you shall be deemed to have received the express written consent of the Company. In the event that you receive any such documents or items, other than through personal delivery as described in the preceding sentence, you agree to inform the Company promptly of your possession of such documents or items. You shall promptly return any such documents or items, along with any reproductions or copies to the Company upon the Company's demand, upon termination of this Agreement, or upon your termination or Resignation, as defined in Section 8 herein.

7.4.   No Disclosure. You agree that you will hold in trust and confidence all Confidential Information and will not disclose to others, directly or indirectly, any Confidential Information or anything relating to such information without the prior written consent of the Company, except as maybe necessary in the course of your business relationship with the Company. You further agree that you will not use any Confidential Information without the prior written consent of the Company, except as may be necessary in the course of your business relationship with the Company, and that the provisions of this paragraph (d) shall survive termination of this Agreement.

 

  

  

  

8.            Termination and Resignation. Your membership on the Company’s Board may be terminated for any or no reason at a meeting called expressly for that purpose by a vote of the stockholders holding at least fifty percent (50%) of the shares of the Company’s issued and outstanding shares entitled to vote.  Your membership on the Company’s Board may also be terminated for cause by a majority of the Board.  You may also terminate your membership on the Board for any or no reason by delivering your written notice of resignation to the Company (“Resignation”), and such Resignation shall be effective upon its acceptance by the Board, provided, however, that if the Board has not acted on such written notice within ten days from its date of delivery, then your Resignation shall upon the tenth day be deemed accepted by the Board. Upon the effective date of the termination or Resignation, your right to compensation hereunder will terminate subject to the Company's obligations to pay you any cash compensation (or equivalent value in Company common stock shares) that you have already earned and to reimburse you for approved expenses already incurred in connection with your performance of your Duties as of the effective date of such termination or Resignation.

9.   Governing Law. All questions with respect to the construction and/or enforcement of this Agreement, and the rights and obligations of the parties hereunder, shall be determined in accordance with the law of the State of California applicable to agreements made and to be performed entirely in the State of California.

 

10.   Entire Agreement; Amendment; Waiver; Counterparts. This Agreement expresses the entire understanding with respect to the subject matter hereof and supersedes and terminates any prior oral or written agreements with respect to the subject matter hereof. Any term of this Agreement may be amended and observance of any term of this Agreement may be waived only with the written consent of the parties hereto. Waiver of any term or condition of this Agreement by any party shall not be construed as a waiver of any subsequent breach or failure of the same term or condition or waiver of any other term or condition of this Agreement. The failure of any party at any time to require performance by any other party of any provision of this Agreement shall not affect the right of any such party to require future performance of such provision or any other provision of this Agreement. This Agreement may be executed in separate counterparts each of which will be an original and all of which taken together will constitute one and the same agreement, and may be executed using facsimiles of signatures, and a facsimile of a signature shall be deemed to be the same, and equally enforceable, as an original of such signature.

11.   Cancellation of Advisory Role. This Agreement’s effectiveness shall terminate your previous role as an advisor to the Board and terminate the Advisory Agreement entered into by you and the Company on August 11, 2011.  By signing this Agreement, you acknowledge that no shares of Common Stock have vested, and thus no such shares are owed to you, under the terms of such Advisory Agreement.  Any cash compensation owed to you under such Advisory Agreement shall be paid to you as soon as practicable.

[Remainder of Page Left Blank Intentionally]

 

 

 

 

 

  

  

  

 

This Agreement has been executed and delivered by the undersigned and is made effective as of the date set first set forth above.

 

	 	 
Sincerely,

	 
	 	 	 
	 	 
PREMIER POWER RENEWABLE ENERGY, INC.

	 
	 	 	 	 
	
 

	
By: 

	/s/ Dean Marks	 
	 	 	 
Dean Marks

	 
	 	 	 
Chief Executive Officer

	 

 

AGREED AND ACCEPTED:

/s/ Hernan Martinez

Hernan MartinezUnassociated Document

STATE OF ISRAEL

Ministry of Industry, Trade and Employment

Industrial Research and Development Administration

	  	 	
Jerusalem, 4.3.04

	  	 	  
	  	 	
Letter of Approval no. 32793

	
Attn.

	 	
(Budget Regulation 38020101)

	
Integrity Applications Ltd.

	 	
Group 13

	
P.O.B. 432

	 	  
	
Ashkelom 78100

	 	  

Letter of Approval

Replacing Approval dated 09/12/2003

 

	
1.

	
We hereby inform you that the Research Committee, by virtue of its authorization under Clause 17(c) of the Law for Encouragement of Research and Development in Industry, 5744-1984, hereinafter: “the Law”, held a discussion with regard to your application dated 30/04/2003 to approve an annual research and development plan, and on 10/02/2004 decided to approve the plan as an Approved Plan.

 

	
  

	
a.

	
Subject of the Plan: Non-Invasive device designed to monitor the level of glucose in the blood.

 

	
  

	
b.

	
Executor of the Approved Plan: Integrity Applications Ltd. Registration no.: 513151878.

 

	
  

	
c.

	
Research and development expenses approved for the execution of the Approved Plan shall be at an amount of up to NIS 700,000

 

In words: seven hundred thousand New Israeli Shekel.

 

	
  

	
d.

	
The rate of the approved grant is: 60% of the research and development expenses, at the amount of: NIS 420,000 (hereinafter: “the Grant”).

 

	
2.

	
The Approval is subject to the fulfillment of the provisions of the Law, its regulations and rules, as well as to the following conditions:

 

	 	
A.

	
The Approved Plan shall be executed as specified in your application within a period of 9 months from 01/04/2003 until 31/12/2003 (hereinafter:“the Execution Period”).

  

  

  

	
  

	
B.

	
(1) You should notify the Office of the Chief Scientist of any change of 25% or more in the Company’s shares and/or in one of the following control means: (a) voting rights in the Company’s meetings; (b) right to appoint executives in the Company; (c) right to participate in the Company’s profits.

 

(2) Transferring any percentage of the control means mentioned in Clause 2B(1) above to a foreign citizen or a foreign corporation, shall be subject to a written approval provided beforehand by the Research Committee.

 

	 	
C. 

	
Additional Terms

 

The budget is approved solely for the purpose of establishing feasibility.

 

Royalties shall be paid out of all the profits received from monitoring level of glucose in-vivo by an ultra-sonic device, measuring specific heat, measuring level of conductivity or any combination thereof, including software, algorithms and service.

 

	 	
D. 

	
See appendix concerning Intellectual Property.

 

	
3.

	
This Letter of Approval is replacing the former Letter of Approval dated 09/12/2003 and it includes a former grant at the amount of NIS 350,000 and an addition of NIS 70,000.

	  	
Sincerely,

	  	  
	  	
[Signature]

	  	  
	  	
Dr. Eli Offer

	  	  
	  	
The Chief Scientist

	
Enclosures: 

	
1. Detailed budget        Annexed to the Letter of Approval

2. Letter of Undertaking

3. Rules determined by the Research Committee for the execution of the provisions of the Law

4. Intellectual Property   Annexed to the Letter of Approval (according to Clause 2D)

  

  

  

 

	
This page is inseparable part of the Latter of Approval

	  	 
	
Details of the budget for the research and development in the subject of non-invasive device design to monitor the level of glucose in the blood.

	
file number

	
32793

	 
	
date

	
from

	
4/1/2003

	
to

	
12/31/2003

	
date of  preparing

	
9/4/2003

	 
	  	  	  	  	  	
company

	
Integrity Applications Ltd.

	  	  	  	  	  	
company number

	
4010

	 

 

	
A. employees

	  	  	  	  	  	  	  	  
	
number

	
name

	
academic degree

	
position

	
salary index

	
salary- total

	
salary, upper limit- total

	
time that was invested- %

	
month

	
budget

	
1

	
Avner Gal

	
cEE, MBA

	
project's leader

	
regular

	
              21,735

	
                               21,735

	
75

	
6

	
       97,008

	
2

	
David Ferger

	
PhD

	
ultrasound expert

	
regular

	
              21,735

	
                               21,735

	
100

	
6

	
      130,410

	
3

	
Jackob Aosiatinski

	
electronic

	
electronic

	
regular

	
              20,580

	
                               20,580

	
75

	
6

	
       92,810

	
4

	
Yivgeni Neidis

	  	
programmer

	
regular

	
              20,055

	
                               20,055

	
50

	
6

	
       80,105

	
5

	
Andrey Gershwien

	
software engineer

	
programmer

	
regular

	
              11,340

	
                               11,340

	
50

	
6

	
       34,020

	
6

	
Vladimir Bortchki

	  	
electronic

	
regular

	
              17,635

	
                               17,635

	
50

	
6

	
       62,605

	
7

	
Anatoli Diver

	
electronic

	
electronic

	
regular

	
              12,600

	
                               12,600

	
100

	
6

	
       75,600

	
8

	
Aharon Spector

	
electronic

	
models building

	
regular

	
                8,925

	
                                8,925

	
50

	
1

	
         4,463

	  	  	  	  	  	  	  	
overhead expenses-  20%

	
      109,536

	  	  	  	  	  	  	  	
sum

	
      547,801

	  	  	  	  	  	  	  	
sum- employees

	
      867,217

 

	
B. expendable substances and equipment

	  	  
	
substance

	  	  	  
	
number

	
description

	
quantity

	
budget

	
1

	
transducers

	
20

	
                                           2,820

	
2

	
physiological solution

	
30

	
                                              600

	
3

	
DSP parts

	
2

	
                                              263

	
4

	
electronical parts (gas, cables and so)

	
1

	
                                              500

	
5

	
crystal

	
12

	
                                              169

	
6

	
Semiconductors

	
1

	
                                              400

	
7

	
electronical spurts substance

	
1

	
                                              200

	  	  	
sum

	
4952

 

	
C. sub-contractors

	  	  	  
	
number

	
name

	
taype of work

	
מיקום

	
budget

	
1

	
Rohama Electronic

	  	
Israel

	
                6,580

	
2

	
Altec

	  	
Israel

	
                1,605

	  	  	  	  	  
	  	  	  	
sum of sub-contractors in Israel

	
                8,185

	  	  	  	
sum of sub-contractors aborad

	
                     -

	  	  	  	
sum of sub-contractors

	
                8,185

 

 

	
D. other

	  
	
number

	
description

	
budget

	
1

	
patent registration

	
                       29,654.0

	  	
sum

	
                       29,654.0

 

	  	  
	
total in NIS

	
700000

	
60% grant

	
350000

 

  

  

  

 

INTEGRITY APPLICATIONS LTD.

 

Number at the Registrar of Companies 513151878

	
Attn.

	  
	
Industrial Research and Development Administration

	
Date: 21.9.03

	
Office of the Chief Scientist

	
Company:4010

	
Ministry of Industry, Trade and Employment

	  
	
4 Mavo Hamatmid. P.O.B. 2197

	  
	
Jerusalem

	  

 

Dear Sir,

 

	
Reference:

	
Letter of Undertaking and Notification of commencement of Execution in the subject of: Non-Invasive Device Monitoring Level of Glucose in the Blood

 

File no.: 32793

 

We hereby inform you that we have commenced execution of the Approved Plan, in accordance with the aforementioned reference on 1/4/03.

	  	
[Signature]

	 
	  	
A.D. Integrity Applications Ltd.

	 

 

	
1.

	
We hereby declare and undertake to meet all the provisions of the Law for Encouragement of Research and Development in Industry, 5744-1984 (hereinafter: “the Law”), including:

 

	
  

	
A.

	
The obligation not to transfer to others the know-how, the rights thereof and the production rights resulting from the research and development, without the approval of the Research Committee.

 

	
  

	
B.

	
To pay royalties and submit all the reports in accordance with the provisions of the Law and the Regulations of the Encouragement of Research and Development in Industry (Rate of Royalties and Rules for their Application), 5756-1986 (hereinafter: “the Royalties Regulations”) as well as with the directives of the Industrial Research and Development Administration (hereinafter: “the Administration”).

 

  

  

  

 

	
2.

	
We declare that we have read all the instructions and directives concerning financial reports required for research and development and that we shall act upon them, including whatever is related to the subject of computerized system to report hours of task allocation.

 

	
3.

	
We agree to associate this file number: 32973 to Plan: 32793 in the subject of: non-invasive device monitoring level of glucose in the blood.

	  	
(Signature]

	 
	  	
A.D. Integrity Applications Ltd.

	 

 

	
4. 

	
Additional Undertakings

 

	
  

	
A.

	
We were informed of the Royalties Amendment published in “the Regulations File 5759” dated 3.12.1996 page 110 (File 5939).

 

Pursuant to the aforesaid amendment, the research royalties shall be dollar linked, holding annual interest at libor rate.

 

	 	
B. 

	
Additional Undertakings:

 

Royalties shall be paid out of all the profits received from monitoring level of glucose in-vivo by an ultra-sonic device, measuring specific heat, measuring level of conductivity or any combination thereof, including software, algorithms and service.

	  	
(Signature]

	 
	  	
A.D. Integrity Applications Ltd.

	 

 

  

  

  

 

	

	
State of Israel

	
Ministry of Industry and Trade

	
The Chief Scientist

  

	
Chapter:

	 	
Work of the companies with the Office of the Chief Scientists within the framework of the R&D Law

	 	
Page 1 of 13

	
Name of Regulation

	 	
Reporting and payment of royalties

	 	
Valid from:

2nd November 2003

	
Regulation No.

	 	
200-04    Version:  02

	 	  

	
1.

	
Objective

To define and determine a uniform mechanism for reporting and payment of royalties from revenues derived from the R&SD programs that are supported by the Office of the Chief Scientist.

	
2.

	
Background

 

	 	
2.1.

	
The Office of the Chief Scientist supervises the implementation and execution of the Research Committee’s decisions regarding support of R&D programs that it has approved.

	 	
2.2.

	
This regulation is designed to determine the mechanism for company reports in all matters relating to payment of royalties from revenues derived from R&D programs approved by the Research Committee.

	 	
2.3.

	
This regulation is designed to determine the company’s undertaking, if the R&D program has failed, after conclusion of the R&D program.

	 	
2.4.

	
In order to remove doubt, in any case of a contradiction between that stated in this regulation and that stated in the R&D Law and the Royalties Regulations, the Law and the Regulations shall prevail.

	
3.

	
Report and payment of royalties

	 	
3.1.

	
Commitment for payment of royalties

	 	
3.1.1.

	
The company is committed to pay royalties for every revenue which originates from the developed product and its derivatives, as defined in the Law and Regulations, including the revenues from provision of consultation and training services, installation and maintenance services, provision of marketing rights, sale of knowhow etc, all as stated in the R&D Law and the Royalty Regulations.

 

  

  

  

 

	

	
State of Israel

	
Ministry of Industry and Trade

	
The Chief Scientist

  

	
Chapter:

	 	
Work of the companies with the Office of the Chief Scientists within the framework of the R&D Law

	 	
Page 2 of 13

	
Name of Regulation

	 	
Reporting and payment of royalties

	 	
Valid from:

2nd November 2003

	
Regulation No.

	 	
200-04    Version:  02

	 	  

 

	 	
3.1.2.

	
The Research Committee, in the event that it shall approve the request for R&D support, shall deliberate and decide on the basis of an expert opinion by a professional examiner, the head of the professional field, and the company’s position if it is different from the expert opinion, about the products/technologies for which royalties will be paid, and whether the company will be required to pay increased royalties.

	 	
3.1.3.

	
A letter of undertaking that shall be sent by the Office of the Chief Scientist shall detail the products/technologies for which royalties shall be paid. Furthermore the previous dossiers attributed to the R&D program shall be noted whereby the criteria for attribution of dossiers are:

	 	
3.1.4.

	
The use made of the current R&D dossier in the outcomes of development/knowhow from other dossiers/programs.

	 	
3.1.5.

	
The product subject of the R&D dossier is attributed to the same product line and/or directed to those same types of customers as the previous dossiers.

	 	
3.2.

	
Charge for increased percentage of royalties

The Research Committee shall deliberate and decide about the percentage charge for repayment of increased royalties, in the programs detailed hereinafter, as stated in the Royalties Regulations:

	 	
3.2.1.

	
Programs for development of products based on the basic knowhow developed within the framework of the program which received benefits pursuant to the law or other benefits from the Office of the Chief Scientist;

	 	
3.2.2.

	
Programs for development of products the lifetime of which in the market is limited;

	 	
3.2.3.

	
Programs for development of identical or similar products to the products for which the programs for their development have received or should receive from the Research Committee approval pursuant to the law or pursuant to any law, on the condition that there is or shall be marketing competition between the applicants for the approval.

  

  

  

 

 

	

	
State of Israel

	
Ministry of Industry and Trade

	
The Chief Scientist

  

	
Chapter:

	 	
Work of the companies with the Office of the Chief Scientists within the framework of the R&D Law

	 	
Page 3 of 13

	
Name of Regulation

	 	
Reporting and payment of royalties

	 	
Valid from:

2nd November 2003

	
Regulation No.

	 	
200-04    Version:  02

	 	  

 

	 	
3.3.

	
Ceiling of royalties repayment

	 	
3.3.1.

	
A company obligated for payment of royalties for revenues derived from the development supported by the Office of the Chief Scientist, as stated in the Royalties Regulations, up to a repayment ceiling calculated according to the level of the program.

	 	
3.3.2.

	
The ceiling of the repayment shall be calculated according to a schema of repayment ceilings for each of the program dossiers as approved by the Research Committee whereby the dossiers for which the period of their execution began before 01/01/94, the ceiling of the repayment will be calculated according to 100% or 150% of the total grant received by the company and this pursuant to the instructions of the old regulations and pursuant to the various tracks. Dossiers for which the period of their execution started after 01/01/94, the repayment ceiling (for all the tracks) will be calculated according to 100% of the total grant received by the company.

	 	
3.3.3.

	
For the purpose of calculation of ceilings, the sum of the linked grant that the company received will be pursuant to the records of the Office of the Chief Scientist. The aforementioned R&D grants are linked to the dollar and bear an annual interest at the rate of the Libor interest (Libor interest is imposed on program dossiers that have been approved as of 1.1.99).

	 	
3.3.4.

	
Sum of the linked grant

	 	
3.3.4.1.

	
A company for which an R&D program is approved, will receive the grant payments throughout the period of the R&D. Each payment made by the Office of the Chief Scientist is translated on the day of the issue of the payment instruction into dollar value, accrued in these values and accredited to the debit of the company in the specific dossier.

  

  

  

 

	

	
State of Israel

	
Ministry of Industry and Trade

	
The Chief Scientist

  

	
Chapter:

	 	
Work of the companies with the Office of the Chief Scientists within the framework of the R&D Law

	 	
Page 4 of 13

	
Name of Regulation

	 	
Reporting and payment of royalties

	 	
Valid from:

2nd November 2003

	
Regulation No.

	 	
200-04    Version:  02

	 	  

 

	 	
3.3.4.2.

	
At the conclusion of the R&D and after the CPA’s audit on behalf of the Office of the Chief Scientist, the accrued sum of the grant which the company received for the R&D program will be ultimately determined.

	 	
3.3.4.3.

	
The collection of accrued grants in all the program dossiers is multiplied by the specific repayment ceiling for each dossier (according to the support track and/or according to the decision of the Committee) which creates the theoretical debt of the company to the Office of the Chief Scientist.

	 	
3.3.4.4.

	
It shall be noted that all the activity with the Counterpart Fund (reporting, payment, accounting, etc) will be carried out in relation to the dossier level and not in relation to the request (dossier).

	 	
3.4.

	
Royalty percentage

The company is obligated to payment of royalties to the State Treasury at variable rates, as noted in the Royalty Regulations in the table hereinafter:

	
Years from the start of the royalty repayments

	
Regular royalty percentage

	
Increased royalty percentage

	
First three years

	
3%

	
4%

	
From the start of year 4 and onwards

	
3.5%

	
4.5%

	 	
3.5.

	
Royalty payments

	 	
3.5.1.

	
A revenue that owes royalties as stated in the Royalty Regulations obligates a separate record in the company’s bookkeeping for the purpose of paying royalties by recording the revenue in its books (accrued basis), the revenues shall be translated into dollar values and shall be accrued in those values until the date determined for payment of royalties. On the determining date the dollar amount will be translated into shekel values and paid by the company into the account of the Office of the Chief Scientist.

  

  

  

 

	

	
State of Israel

	
Ministry of Industry and Trade

	
The Chief Scientist

  

	
Chapter:

	 	
Work of the companies with the Office of the Chief Scientists within the framework of the R&D Law

	 	
Page 5 of 13

	
Name of Regulation

	 	
Reporting and payment of royalties

	 	
Valid from:

2nd November 2003

	
Regulation No.

	 	
200-04    Version:  02

	 	  

 

Payment will be made by the company by means of a slip for payment into the account of the Office of the Chief Scientist in the Post Office Bank, Account No. 0-24830-7. The payment slip can be received from the Counterpart Fund Department. Any delay in payment will obligate the company to interest and linkage differences according to law from the determining date and until the day of clearance of the debt.

	 	
3.5.2.

	
Sales price owing royalties is the full price which the company recorded in its audited books and reports. You may deduct from the sales price expenses for purchase tax, VAT and exchange rate insurance only. Apart from the aforementioned and that stated in Section 4.6.5 no other expense may be deducted.

	 	
3.5.3.

	
Sales via affiliated companies

When the company sells its products to an affiliated company (as stated in Section 21 of the R&D Law) the sale price for the purpose of calculating royalty payment shall be the price that the affiliated company sold to the customer.

In this matter the date of the sale owing royalties is the date on which the company sold to the affiliated company and as recorded in the company books.

	 	
3.5.4.

	
Sale of a prototype

Sale of a prototype which was approved within the framework of the R&D program after conclusion of the R&D period, obligates the company for royalty payments from the sales price of the prototype, at an identical percentage to the grant percentage of the program according to which the prototype was approved.

  

  

  

 

	

	
State of Israel

	
Ministry of Industry and Trade

	
The Chief Scientist

 

	
Chapter:

	 	
Work of the companies with the Office of the Chief Scientists within the framework of the R&D Law

	 	
Page 6 of 13

	
Name of Regulation

	 	
Reporting and payment of royalties

	 	
Valid from:

2nd November 2003

	
Regulation No.

	 	
200-04    Version:  02

	 	  

 

	 	
3.5.5.

	
Revenues from products connected indirectly to the financed knowhow

	 	
a.

	
Products which were developed with the company’s financing without the assistance/support of the Chief Scientist however based on knowhow developed with the assistance of the Chief Scientist will be charged royalty payments as if it was a product developed with the assistance of the Chief Scientist.

	 	
b.

	
A product which was developed for the most part without the assistance of the Office of the Chief Scientist however for the purpose of completing it or its improvement it received the support of the Chief Scientist will be charged according to the rates determined in the Regulations and taken from the full sales price.

	 	
3.5.6.

	
Division of the product

	 	
a.

	
A product which was developed for the most part by independent financing by the company or other entities and received support for the conclusion of the development or its improvement will be charged with royalty payment from the full sales price of the product without consideration of the relative part of the investment of the company in the development.

	 	
b.

	
In the event that the company sells a system incorporating independent sub-systems which stand alone, whereby one was developed with the assistance of the Office of the Chief Scientist and the second was developed without assistance, the royalties shall be calculated as follows:

	 	
c.

	
Firstly the measure of the independence of the sub-systems shall be examined (by the Chief Scientist’s office), whereby the test is the measure of the connection between them, that is to say the measure of the technological involvement required during the development in order for these sub-systems to be integrated into one working system. If the Research Committee shall approve that indeed the sub-systems are

  

  

  

 

	

	
State of Israel

	
Ministry of Industry and Trade

	
The Chief Scientist

  

	
Chapter:

	 	
Work of the companies with the Office of the Chief Scientists within the framework of the R&D Law

	 	
Page 7 of 13

	
Name of Regulation

	 	
Reporting and payment of royalties

	 	
Valid from:

2nd November 2003

	
Regulation No.

	 	
200-04    Version:  02

	 	  

 

independent the company will be able to pay royalties according to the price of the sub-system on the open market (catalogue price). In the event that the sub-system is not sold on the open market, the sales price owing royalties will be calculated according to the ratio of production costs of the sub-systems.

In order to remove doubt, it is hereby clarified that this method of payment will be approved solely and only by the Research Committee in advance and in writing; for as long as approval is not received, the company shall report on the full sales price of the complete system.

	 	
3.6.

	
Reporting to the Counterpart Fund

	 	
3.6.1.

	
The company is obligated to report to the Counterpart Fund twice a year on the royalty report form (Appendix A) as regards the status of the R&D program. In the event that the company had sales during the half year, it is required to report and pay accordingly.

	 	
3.6.2.

	
The abovementioned report is half yearly, the determining date for report and payment is two months after the end of the half year – for example, for the first half year of 2001 (months 01-06.01) you are required to report and pay by 31.8.01. For the second half year of 2001 (months 7-12.01) you are required to report and pay by 28.2.01.

	 	
3.6.3.

	
It should be noted that the obligation to report is imposed also on the programs which have still not matured and have not reached sales or programs that failed for any reason whatsoever.

	 	
3.6.4.

	
Once a year and close to the date of reporting the second half years of each report year, the company will attach a company managers’ declaration form and a special report by the CPA confirming the company’s reports for the entire year (these should be submitted in the wording attached in Appendix B only – other wordings will not be accepted).

  

  

  

 

	

	
State of Israel

	
Ministry of Industry and Trade

	
The Chief Scientist

  

	
Chapter:

	 	
Work of the companies with the Office of the Chief Scientists within the framework of the R&D Law

	 	
Page 8 of 13

	
Name of Regulation

	 	
Reporting and payment of royalties

	 	
Valid from:

2nd November 2003

	
Regulation No.

	 	
200-04    Version:  02

	 	  

 

	 	
3.6.5.

	
In the event that the company has subsidiaries, financial data will be transferred (as detailed in Section 5 of Appendix A) both as regards the company itself and in regard to the later data.

	 	
3.6.6.

	
The company reports should be sent by post to the Office of the Chief Scientist – Counterpart Fund, 4 Mevo Hamatmid, P.O.B. 2197, Zip code 91021, Jerusalem. Please attach a photocopy of the payment slip to the reports.

	 	
3.6.7.

	
Proceedings shall be taken against companies that shall not report in a timely fashion pursuant to Section 45 of the Encouragement of Research and Development in Industry Law 5744-1984, the gist being: termination of payments, stay of handling of the company’s requests and finally a demand for a return of all the benefits given to the company. Furthermore, the Counterpart Fund shall recommend to other units in the Ministry of Industry and Trade to stay the handling of the company’s requests.

	 	
3.7.

	
Royalties Audit

A company which has reported to the Counterpart Fund (even if they attached a CPA’s confirmation of their reports) and did not receive any reservation whatsoever from the Counterpart Fund as regards its reports does not constitute confirmation of the accuracy of the report by the Office of the Chief Scientist.

The Office carries out audits of the royalties in the companies on an ongoing basis from time to time. Within the framework of the audit the propriety and reliability of the company reports are examined with reference to the Royalties Regulations and to the specific terms which were determined for the company in the letters of approval and the letters of undertaking.

  

  

  

 

	

	
State of Israel

	
Ministry of Industry and Trade

	
The Chief Scientist

  

	
Chapter:

	 	
Work of the companies with the Office of the Chief Scientists within the framework of the R&D Law

	 	
Page 9 of 13

	
Name of Regulation

	 	
Reporting and payment of royalties

	 	
Valid from:

2nd November 2003

	
Regulation No.

	 	
200-04    Version:  02

	 	  

 

	 	
3.8.

	
Closure of programs in the Counterpart Fund

	 	
3.8.1.

	
A company is permitted to submit a request to exempt itself from the duty of reporting, if one of the following occurs, as stated in the Royalties Regulations: the company is not active; the R&D program has failed; the company is not selling the product.

	 	
3.8.2.

	
Please note, submission of a request to close a program in the Counterpart Fund does not exempt the company from continuing to report. The company is required to continue to report to the Counterpart Fund until receipt of a confirmation in writing as regards closure of the program in the Counterpart Fund.

	 	
3.8.3.

	
On the request form (Appendix C) the company shall declare the status of the program, the progression of the events which caused the company to declare its failure and that the company did not make use of the knowhow derived from the program and did not transfer the knowhow to another company. Furthermore they shall report on the products that it sold throughout the years from the date of the Scientist’s support and until submission of the request.

	 	
3.8.4.

	
The Counterpart Fund Unit will transfer the company’s request to be examined by a professional examiner who handled the program during the development stage. If necessary the request will be transferred to another professional examiner after consultation with the Deputy Chief Scientist for Technology.

	 	
3.8.5.

	
The professional examiner, after examination of the company’s request, including an inspection at the company’s site, will submit his reasoned recommendation to the Manager of the Counterpart Fund, while focussing on the verification of the accuracy of the company’s data and the feasibility of the company implementing the knowhow acquired in the program in the future. A copy of the recommendation will be sent by him to the Head of the Professional Field.

 

  

  

  

 

	

	
State of Israel

	
Ministry of Industry and Trade

	
The Chief Scientist

  

	
Chapter:

	 	
Work of the companies with the Office of the Chief Scientists within the framework of the R&D Law

	 	
Page 10 of 13

	
Name of Regulation

	 	
Reporting and payment of royalties

	 	
Valid from:

2nd November 2003

	
Regulation No.

	 	
200-04    Version:  02

	 	  

 

	 	
3.8.6.

	
The Manager of the Counterpart Fund, after he has examined the expert opinion of the professional examiner and after he has received the comments of the various entities in the Office of the Chief Scientist, will transfer his recommendation to the Chief Scientist within 14 days. The Chief Scientist, or whoever he shall authorize, shall notify the company of his decision.

	 	
3.8.7.

	
When an exemption is given the company shall undertake to report to the Chief Scientist as regards any change to the status of the program and that it is aware that the provision of approval of recognition of a program as a failure does not release the company from its obligation to meet the requirements of the R&D Law.

	
4.

	
Royalty payment agreement – investment intensive company in R&D

	 	
4.1.

	
Further to the amendment of the Regulations of Encouragement of Research and Development in Industry (Arrangement for Debt Repayment), 5761-2001 (attached), a large and investment intensive company in research and development (hereinafter: a company) that wishes to join the royalty repayment arrangement shall submit a request to the Counterpart Fund. The process of examining the request will be under the responsibility of the Counterpart Fund which will submit its recommendation to the Debt Repayment Committee headed by the Accountant General (hereinafter: the committee).

	 	
4.2.

	
The company’s request shall include:

	 	
4.2.1.

	
The declaration of the CEO of the company that the company meets the prerequisites determined in the Regulations in Section 2.2 “Large Company and R&D Intensive”.

	 	
4.2.2.

	
The last personnel report submitted to the National Insurance in which the employees employed in R&D are noted.

	 	
4.2.3.

	
An audited financial report for the last year ending and the quarterly reports of the current year.

  

  

  

 

	

	
State of Israel

	
Ministry of Industry and Trade

	
The Chief Scientist

  

	
Chapter:

	 	
Work of the companies with the Office of the Chief Scientists within the framework of the R&D Law

	 	
Page 11 of 13

	
Name of Regulation

	 	
Reporting and payment of royalties

	 	
Valid from:

2nd November 2003

	
Regulation No.

	 	
200-04    Version:  02

	 	  

 

	 	
4.2.4.

	
Details of the grants given to the company for each and every dossier as they are recorded in the company’s books.

	 	
4.2.5.

	
Linkage of the R&D dossiers given to the company for the research and development programs. The links between the dossiers shall be technological links thus that in the event that the supported knowhow in a certain dossier is based on supported knowhow in a previous dossier, these dossiers will be attributed to one R&D program.

	 	
4.2.6.

	
The division of the various company products into various R&D programs.

	 	
4.2.7.

	
The sales forecast for the products based on the knowhow supported by the Scientist and calculation of the current value (capitalized by a 4% interest) of royalties that the company should have paid to the Office of the Scientist for these sales. The sales forecast shall be based on the shelf reviews carried out by a recognized and independent professional entity which analyzes the market in which the firm operates. Please note, pursuant to the Regulations, a capitalized sales forecast plus royalties paid, is required to meet the minimum of 65% of the total grants paid to the company plus Libor interest in the relevant dossiers.

	 	
4.2.8.

	
Details of the royalties paid to the Office of the Chief Scientist in the various programs as they are recorded in the company’s books.

	 	
4.3.

	
Examination of the request

The Counterpart Fund will examine the request with the assistance of the heads of the technological fields of the Office of the Chief Scientist and a CPA if necessary. In the event that there are contradictions between the position of the Counterpart Fund and the position of the company, the Counterpart Fund will attempt to clarify the contradictions with the company representatives. In the event that the contradictions between the Counterpart Fund and the Company shall not be settled the Counterpart Fund shall submit its recommendations and the position of the company to the Committee’s decision.

  

  

  

 

	

	
State of Israel

	
Ministry of Industry and Trade

	
The Chief Scientist

  

	
Chapter:

	 	
Work of the companies with the Office of the Chief Scientists within the framework of the R&D Law

	 	
Page 12 of 13

	
Name of Regulation

	 	
Reporting and payment of royalties

	 	
Valid from:

2nd November 2003

	
Regulation No.

	 	
200-04    Version:  02

	 	  

 

	 	
4.4.

	
The Committee’s Decision

The decisions of the Debt Repayment Settlement Committee do not obligate the companies submitting a request for repayment. In the event that the company is not interested in reaching a settlement, as decided by the Committee, it is permitted to apply to the regular support track pursuant to the Regulations.

	 	
4.5.

	
Schedule

	 	
4.5.1.

	
A company is permitted to submit a request for repayment of royalties on a date that is convenient for it.

	 	
4.5.2.

	
A company wishing to enter into an arrangement before submission of requests for grants for the next budgetary year, is required to submit a request by 16/10/XX to the Counterpart Fund.

	
5.

	
Responsibility

	 	
5.1.

	
The overall responsibility for activation of this regulation is imposed on the Deputy Chief Scientist for Administration and Operation.

	 	
5.2.

	
The responsibility for interpretation and update of this regulation is imposed on the Deputy Chief Scientist for Administration and Operation.

	
6.

	
Appendices

-  Appendix A – Royalty Report Form

- Appendix B – CPA Confirmation

- Appendix C – Request for closure of program in Counterpart Fund

  

  

  

 

	

	
State of Israel

	
Ministry of Industry and Trade

	
The Chief Scientist

  

	
Chapter:

	 	
Work of the companies with the Office of the Chief Scientists within the framework of the R&D Law

	 	
Page 13 of 13

	
Name of Regulation

	 	
Reporting and payment of royalties

	 	
Valid from:

2nd November 2003

	
Regulation No.

	 	
200-04    Version:  02

	 	  

 

	
7.

	
Distribution

- Director General of the Ministry of Industry and Trade

- The management of the Office of the Chief Scientist

- Professional examiners

- Companies aided by the assistance tracks of the Office of the Chief Scientist

	
8.

	
Regulation Approver

	
Name:

	
Dr. Eli Oper

	
Position:

	
The Chief Scientist

	
Signature

	
(signature)

	
Date:

	
November 2nd 2003

 

  

  

  

 

	
Regulation No.

	
200-04

	
Appendix A

	
Valid from

	
1/11/01

	
Page

	
1

	
Of

	
3

	

	
The State of Israel

	
 

	
The Counterpart Fund – The Office of the Chief Scientist

The Ministry of Industry and Trade

Telephone: 02-6662454

Fax: 02-6662925

	
The Ministry of Industry, Trade and Employment

	
 

	
The Office of the Chief Scientist

	  

 

Royalty Report Form

Date: _____________

Att:

The Office of the Chief Scientist – The Counterpart Fund                                                                                                                                          Report period (2)

The Administration for Industrial Research and Development                                                                                                                                          Year    1st Half Year

The Ministry of Industry and Trade

5 Bank of Israel Street

Jerusalem

1) General details

	
Company name:

	
Company number at the Chief Scientist’s Office:

	
Company address:

	
Street:

	
Number:

	
Town:

	
Zip Code

 

	
Contact person:

 

	
Position of contact person:

	
Telephone:

	
Fax:

	
Email:

 

2) Company programs supported by the Chief Scientist in which there are sales (3)

	  	  	
Half yearly sales

	
Half yearly royalties

	
Annual sales *

	
Program

	
Topic

	
Local in $

	
Export in $

	
Total in $

	
Percentage

	
Total in $

	
Local in $

	
Export in $

	
Total in $

	  	  	
0.00

	
0.00

	
0.00

	
0.00

	
0.00

	
0.00

	
0.00

	
0.00

	  	  	
0.00

	
0.00

	
0.00

	
0.00

	
0.00

	
0.00

	
0.00

	
0.00

	  	  	
0.00

	
0.00

	
0.00

	
0.00

	
0.00

	
0.00

	
0.00

	
0.00

	  	  	
0.00

	
0.00

	
0.00

	
0.00

	
0.00

	
0.00

	
0.00

	
0.00

	  	  	
0.00

	
0.00

	
0.00

	
0.00

	
0.00

	
0.00

	
0.00

	
0.00

	  	  	
0.00

	
0.00

	
0.00

	
0.00

	
0.00

	
0.00

	
0.00

	
0.00

	
Total

	
0.00

	
0.00

	
0.00

	
0.00

	
0.00

	
0.00

	
0.00

	
0.00

* Please fill in the annual sales column in the report for the second half of the year only

___________________________

Stamp of CPA (for identification)

  

  

  

	
Regulation No.

	
200-04

	
Appendix A

	
Valid from

	
1/11/01

	
Page

	
2

	
Of

	
3

	
Company name:

	
Company number at the Chief Scientist’s Office

3) Programs supported by the Chief Scientist without sales (3)

	
Program No.(3)

	
Program Topic

	
Reasons for lack of sales (*)

	
Remarks

	  	
A

	  	  
	  	
A

	  	  
	  	
A

	  	  
	  	
A

	  	  
	  	
A

	  	  

 

 

(*) Detail the reasons for lack of sales

A. Continued R&D                                           B. No sales during the period                                                                C. Marketing failure/Technology failure – detail                                                                                     D. Other - detail

3) Details of dossiers for all the company programs supported by the Chief Scientist (where there are sales or where there are no sales)

	
Program No. (3)

	
Dossier No. (*)

	
Grant for dossier (**) in dollars

	
Total accumulated grant for the program in dollars

	  	  	
0.00

0.00

0.00

0.00

	
 

0.00

	  	  	
0.00

0.00

0.00

0.00

	
 

0.00

	  	  	
0.00

0.00

0.00

0.00

	
 

0.00

	  	  	
0.00

0.00

0.00

0.00

	
 

0.00

	  	
Total

	
0.00

	
0.00

(*) Enter one dossier only in each line

(**) Please ensure you consolidate the total accumulated grant per program

___________________________

Stamp of CPA (for identification)

 

  

  

  

	
Regulation No.

	
200-04

	
Appendix A

	
Valid from

	
1/11/01

	
Page

	
3

	
Of

	
3

	
Company name:

	
Company number at the Chief Scientist’s Office

5) General company data

	
A. Total company sales during the report period

	
Sales to local market in dollars

	
0.00

	
Sales for export in dollars

	
0.00

	
Total sales in dollars

	
0.00

	  	  
	
B. Total R&D expenses gross during the report period in dollars: Supported R&D

	
0.00

	
                                                                                                                Unsupported R&D

	
0.00

	  	  
	
C. Revenues from sales to an affiliated company in dollars:  Products supported by the Chief Scientist

	
0.00

	
                                                                                                       Products not supported by the Chief Scientist

	  
	  	  
	
D. Revenues from sale of knowhow in dollars:                        Knowhow supported by the Chief Scientist

	
0.00

	
                                                                                                      Knowhow not supported by the Chief Scientist

	
0.00

	
Comments

	  

We hereby attach:

□  A CPA’s expert opinion

□  A photocopy of the payment slip

The Company’s Declaration: I the undersigned, the authorized signatory of the company, hereby declare that all the details provided in this report are true and complete, I am aware that provision of incorrect details constitutes a criminal offence.

	 	 	 	 	 	 	 
	
Name of signatory

	  	
Position

	  	
Signature

	  	
Company Stamp

 

Notes

(1)  Please fill in all the sections of the report

(2) The period of the report shall always be for six calendar months

(3) The program number is usually the number of the first dossier of all the dossiers which received support for a certain topic.

(4)  Percentage of royalties – is the percentage which is the company is obligated to pursuant to the decisions of the Research Committee, letter of approval, letter of undertaking and/or pursuant to the R&DS Law and its regulations

(5) Please attach a photocopy of a payment slip for this report.

(6) To the report form for the second half please attach a CPAs expert opinion in the wording agreed with the Institute of Public Accounts in Israel in the matter of royalty reports for the two half years jointly, the reports must be signed with the CPA’s stamp for identification.

 

___________________________

Stamp of CPA (for identification)

 

  

  

  

 

	
Regulation No.

	
200-04

	
Appendix B

	
Valid from

	
1/11/01

	
Page

	
1

	
Of

	
5

Audit procedures for examination of the sales turnovers and royalties in the annual report submitted by the company to the Counterpart Fund – the Office of the Chief Scientist, the Ministry of Industry and Trade

The Committee for wording special expert opinions and CPA confirmations

Chairman: Yizhar Kaneh, CPA

	
1.

	
Read the appropriate sections in the letter of undertaking relating to the matter of the required accounting report, the “Regulations for Encouragement of Research and Development in Industry (percentage of royalties and rules of their payment), 5756 – 1996 (hereinafter – “the regulations”) and the “Regulations of the Counterpart Fund”.

	
2.

	
Receive from the company management a copy of “The Company Management Declaration” to the Chief Scientist as detailed in the Chief Scientist’s Regulations.

	
3.

	
Receive from the company a report detailing all its revenues in the report year while separating the various types (including those supported by the Scientist and those not supported by the Scientist) and compare the data to the Royalty Report Form. Compare this report to the Revenues section of the company reports.

	
  

	
Note: If the audit of the financial reports has still not concluded, check whether the fact that the audit has still not concluded requires an additional audit of the data in the financial reports. If an additional audit is required then following it check whether in this audit sufficient audit evidence was collected, in order for you to be able to give your opinion about the Royalty Report Form

	
4.

	
Check whether the company administered a separate accounting system within the framework of its bookkeeping as regards its revenues from the various products.

	
5.

	
Check whether the bookkeeping system is arranged such that you can create reasonably reliable data as regards a division in the sales turnover, between revenues from products supported by the Scientist and those not supported as well as between the local market and export (this is not an automatic data processing audit but rather a general external audit of the computer).

	
6.

	
Check the method of calculation of the translation of the data from new shekels to dollars and take a sampling of several calculations.

	
7.

	
Check a sample of several invoices from sale of R&D supported products or revenues from incidental services for these products, to examine whether they were included in the data of the various revenue reports as stated in Section 3 of “the Company Management Declaration”. Furthermore, review the Division of Revenues Report to check that it does not include the revenues from the incidental services for a product and which were not reported to the Counterpart Fund.

  

  

  

 

	
Regulation No.

	
200-04

	
Appendix B

	
Valid from

	
2/11/2003

	
Page

	
2

	
Of

	
5

 

	
8.

	
Check a sampling whether the royalty liability is calculated according to the relevant royalty percentages for the company revenues, derived from the various R&D programs as detailed in the Royalty Regulations.

	
9.

	
Check with the supervisor for financial matters in the company, whether “the date of sale” which determines the date of the cross section for inclusion in the company revenues report liable for royalties is as defined in “the company declaration” (Section 5).

	
10.

	
Check whether the company attributed its liable revenues to the various R&D programs to which the Chief Scientist of the Ministry of Industry and Trade supported, as they appeared in the “memorandum” sent to the company as detailed in the “management declaration” (Section 6 of the declaration).

	
11.

	
When there are revenues from royalties which were created by means of an affiliated corporation as defined in the Encouragement of Research and Development in Industry Law (hereinafter “the law”), then you are required to receive the management declaration signed by the management of that same corporation, relating to the matter of the propriety of the accounting data received from that same corporation, in the matter of reporting to the Chief Scientist. Check a sample of the application in practice of Section 8 of the declaration of the company managers.

	
12.

	
In cases as detailed in Section 11 check whether “another price” has been defined by the Research Committee and if so check if there is a declaration in this regards in Section 12 of the management declaration.

	
13.

	
Check whether the programs that have been terminated were reported this year and for which there are still sales of products, are those that the royalties for them in the previous year reached the return ceiling (as defined in the Regulations).

	
14.

	
Check from what you know as the CPA of the company and by a discussion with the management, whether during the period in which “transfer of production” as defined in the Law was made outside of the borders of the State of Israel. If so, check whether approval was given for this in writing from the Chief Scientist and whether the company is reporting on a percentage of royalties according to that written in the Regulations.

	
15.

	
Check from that known to you as the CPA of the company and by a discussion with the management, whether during the reported period there was a “transfer of knowhow” as defined in the law. If so, was a report provided on revenues derived from the transfer of the supported knowhow (whether directly or indirectly). Furthermore, check if approval was given for this in writing by the Chief Scientist.

	
16.

	
Without a requirement for an additional audit from you as CPA, check whether from that known to you from the audit of the financial statements that you did not receive information according to which the management declaration as detailed on page 3 was incorrect.

 

  

  

  

 

	
Regulation No.

	
200-04

	
Appendix B

	
Valid from

	
2/11/2003

	
Page

	
3

	
Of

	
5

 

These audit procedures have been determined by the joint committee of the Institute of Chartered Accountants in Israel and the management of the Counterpart Fund

  

  

  

 

	
Regulation No.

	
200-04

	
Appendix B

	
Valid from

	
2/11/2003

	
Page

	
4

	
Of

	
5

CPAs Special Report (Royalty Reports)

(The form will be submitted on the CPAs letterhead paper)

Date _________

Att:

The Counterpart Fund – The Office of the Chief Scientist

The Ministry of Industry, Trade and Employment

5 Bank of Israel Street

Jerusalem

Re:  CPA’s Expert Opinion as regards the Royalty Reports to the Chief Scientist

For half yearly I/200X; II/200X - _______________Company

As the CPAs of ________________ (hereinafter: “the company”) and at its request, we have audited the company’s royalty reports for year ending ________ which are attached and marked with our stamp for identification.

These Royalty Reports are under the responsibility of the company management. Our responsibility is to give our expert opinion as regards these Royalty Reports based on our audit.

We carried out the audit pursuant to the customary auditing regulations and pursuant to the rules determined between the Institute of Chartered Accountants in Israel and the Counterpart Fund. According to these regulations and rules we were required to plan the audit and execute it with the objective of achieving a reasonable measure of assurance that in the execution report there is no fundamental erroneous presentation.

The audit includes a sampling of the evidence which is supported by sums and information in the Royalty Reports, an examination of the required rules of accounting reporting, of the significant estimates carried out by the company management as well as the evaluation of the appropriateness of the presentation of the Royalty Reports in entirety. We believe that our audit supplies an appropriate basis for our expert opinion.

In our opinion the abovementioned Royalty Reports reflect appropriately, pursuant to the company’s books, in all fundamental aspects, the company revenues and the revenues owing royalties for the year ending ___________

Yours sincerely

____________________

CPAs

 

  

  

  

 

	
Regulation No.

	
200-04

	
Appendix B

	
Valid from

	
2/11/2003

	
Page

	
5

	
Of

	
5

Date

 

Att:

The Counterpart Fund – The Office of the Chief Scientist

The Ministry of Industry, Trade and Employment

5 Bank of Israel Street

Jerusalem

Re:  Declaration of the Company Management for Year

We hereby declare the following:

	
1.

	
The Royalty Reports were prepared and submitted pursuant to the Encouragement of Research and Development in Industry Law 5744-1984 (hereinafter the law), pursuant to the rules of reporting required by virtue of the Regulations for Encouragement of Research and Development in Industry (Percentage of Royalties and Rules for their Payment) 5756-1996 (hereinafter the regulations), pursuant to the regulations of the Counterpart Fund at the Office of the Chief Scientist and pursuant to the various letters of undertaking.

	
2.

	
The company administered a separate accounting system, within the framework of its bookkeeping, regarding the revenues from the various products.

	
3.

	
The company included in its revenues of the royalties owing all the revenues derived from the product (as defined in the Research and Development Law and the regulations) whether directly or indirectly, including agents’ commissions, marketing commissions, running expenses, travel, marketing expenses and so forth as well as maintenance services, installation, training, consultation, application executions and any other service relating to the product.

	
4.

	
Liability for royalties calculated according to the relevant royalty percentages for company revenues derived from the various R&D programs, as detailed in the royalty regulations.

	
5.

	
Company revenues owing royalties were included according to “sales dates” as defined in the regulations: “Actual date of supply of the product to the customer; sales rights – the date of their transfer to the customer; continuing work – according to the progress of the work; all according to that recorded in the company books and their audited reports”.

	
6.

	
The company appropriately attributed its taxable revenues for the various R&D programs, which received the support of the Chief Scientist of the Ministry of Industry and Trade, as they appeared in the Memorandum sent to you on _________

	
7.

	
The company will continue to report on all its revenues owing royalties for as long as the royalties for these revenues (for each program separately) have not reached the ceiling of return as defined in the regulations.

	
8.

	
In any event of revenues that owe royalties, which were created by means of a controlling/controlled corporation as defined in the law, the report of revenues was executed according to the highest price of the final sale or other price if such price was defined for the company by the Research Committee.

	
9.

	
□  Production of products based on knowhow supported by the Scientist will be executed in entirety in Israel.

	
  

	
□ In the event that the production is not executed in entirety in Israel and the company received approval for this from the Office of the Chief Scientist and reports on increased royalties as defined for it in the regulations.

	
10.

	
1.  □ Transfer/sale of knowhow was approved by the Office of the Chief Scientist.

	
  

	
2.  □ The company reports on all its revenues derived from transfer of knowhow supported by the Office of the Chief Scientist at the Ministry of Industry and Trade, whether directly or indirectly.

 

 

 

	      	 	         
	
The Company CEO/

	 	  
	
Chairman of the Board of Directors

	 	
Supervisor for Financial Matters in the Company

 

  

  

  

 

	
Regulation No.

	
200-04

	
Appendix C

	
Valid from

	
1/11/01

	
Page

	
1

	
Of

	
3

	

	
The State of Israel

	
The Ministry of Industry, Trade and Employment

	
The Office of the Chief Scientist

Re:  Request to Close a Counterpart Fund Program

Date: ___________

I Mr/Ms ____________

authorized signatory of _____________ Registered No. ___________

hereby declare that Program No. ____________ on the topic of _______________

Which includes Dossiers _____, _____, _____, _____, _____, _____, _____, _____, _____,

Status:

□  Termination of sales, (please detail in the attached appendix)

□  Technology failed, (please detail in the attached appendix)

□  Marketing failed, (please detail in the attached appendix)

□  Other: __________ (please state the status and detail in the attached appendix)

From date ____________

	
  

	
□   I am hereby attaching the appendix detailing the progress of the program (the request shall not be processed if the completed appendix is not attached)

Declaration

I hereby declare in the name of the company:

1. That as of ________ and until the date of this letter,

	
□ 

	
there were no direct/indirect revenues from the program

 

	
□

	
all the royalties due from the direct/indirect revenues were paid from Program Number _______ and the company does not anticipate future revenues from the program or from information that was accumulated during the development of the program.

(Mark with an X)

	
  

	
2.  That the company did not make use of the knowhow derived from the R & D program in development of other products and knowhow was not transferred/sold to other companies.

 

  

  

  

 

	
Regulation No.

	
200-04

	
Appendix C

	
Valid from

	
1/11/01

	
Page

	
2

	
Of

	
3

	
  

	
I hereby undertake in the name of the company that:

	
1. 

	
In the event that there shall be future revenues and/or use shall be made of the knowhow in the future for the purpose of continued development and/or development of new products, to report this and pay royalties.

	
2.

	
In the event that the company shall wish to transfer the knowhow to a third party, to receive the approval in advance and in writing from the Office of the Chief Scientist.

	 	 	 	 	 	 	 
	
First name and surname

	  	
Position

	  	
Signature

	  	
Company Stamp

	  	  	  	  	  	  	  
	 	  	  	  	  	  	  
	
Date

	  	
Telephone

	  	
Fax

	  	  
	  	  	  	  	  	  	  

 

  

  

  

 

	
Regulation No.

	
200-04

	
Appendix C

	
Valid from

	
1/11/01

	
Page

	
3

	
Of

	
3

	
  

	
Appendix to the Request to Close the Counterpart Program

	
  

	
Details of the progress of the program

	
To company __________________

	
Reg. No. _____________

 
As of __________

	
Program No. __________

 

	
  

	
Please state in detail (if necessary please attach appropriate appendices)

	
  

	
1. What was achieved in the program?

	  

	
  

	
2.  At which stage did the program encounter difficulties?

	  

	
  

	
3.  What were the reasons and the factors for the failure of the program?

	  

	
  

	
4.  What did the company do to overcome the difficulties?

	  

	
  

	
5.  What is the situation in the market at present?

	  

	
  

	
6.  Financial date – what were the total accumulated revenues from the sale of the program (direct and indirect)?

	  

	
__________________

	
_____________

	
_______________    _______________

	
First name and surname

	
Position

	
Signature

	
Company Stamp

Notes:

	
a. 

	
Do not fill in the form in handwriting.

	
b. 

	
Please update personal details and telephone numbers.

	
c. 

	
Please transfer the form by email to:tmura@ocs.moital.gov.il

	
d. 

	
Please post the signed form to the following address:

Counterpart Fund – The Office of the Chief Scientist

The Ministry of Industry and Trade

5 Bank of Israel Street

Jerusalem

For queries:

	
Ilanit–

	
Tel: 02-6662454

Fax: 02-6662925

 

  

  

  

 

STATE OF ISRAEL

Ministry of Industry, Trade and Employment

Industrial Research and Development Administration

Office of Chief Scientist

   Jerusalem 4.03.04

	
Annt.

	
Latter of Approval no. 32793

	
Integrity Applications Ltd.

	
(Budget Regulation 38020101)

	
P.O.B 432

	
Group 13

	
Ashkelon 7810

	  

 

Appendix for the Latter of Approval

Obeying the Intellectual Property laws

We noted to ourselves your undertaking of 21.9.03 to obey the Intellectual Property laws and regulations as will be from time to time in Israel, and if you will be found guilty in breaching the Intellectual Property laws and regulations of Israel, in final judgment of a court in Israel, we will be entitled to rescind any benefit that you received from the Industrial Research and Development Administration, including grants, loan, tax benefits, or any other financial advantage, or part of benefit as said, and to demand their return with legal interest and linkage.

Sincerely,

Dr. Eli Offer

Head of the Industrial Research and Development Administration.

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