[THIS DOCUMENT IS A COPY OF THE EXHIBIT 2.1 AND EXHIBIT 2.2 TO THE CURRENT
REPORT ON FORM 8-K (DATE OF REPORT -- AUGUST 3, 1995) WHICH EXHIBIT WAS FILED ON
AUGUST 7, 1995 PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION.]
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
Amendment No. 2
Current Report Pursuant to Section 13 or 15(d)
of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 3, 1995
Electronic Associates, Inc.
(Exact name of registrant as specified in its charter)
New Jersey
(State or other jurisdiction of incorporation)
1-4680 21-0606484
(Commission File Number) (IRS Employer Identification No.)
185 Monmouth Parkway, West Long Branch, New Jersey 07764-9989
(Address of principal executive offices, including zip code)
(908) 229-1100
(Registrant's telephone number)
N/A
(Former name or former address, if changed since last report.)
<PAGE>
Item 2. Acquisition or Disposition of Assets
General
Electronic Associates, Inc., a New Jersey corporation (the "Company"),
through a 52.3% owned subsidiary, has entered into a Joint Venture Agreement
("JVA") with Israel Aircraft Industries, Ltd., an Israel government corporation
("IAI"), for the purpose of forming a joint venture ("Joint Venture") with IAI
to review, develop, and exploit certain non-military, non-classified
technological applications ("Applications") developed by IAI. The transaction
was consummated on August 8, 1995.
Partner Preincorporation Agreement
To implement the JVA, in early August, 1995, the Company entered into a
Preincorporation Agreement to form an Israeli corporation ("Partner") which is
the joint venture partner and owns 50.1% of the Joint Venture. IAI owns 49.9% of
the Joint Venture. Under the Preincorporation Agreement, Partner is owned as
follows: (a) the Company owns a 52.3% interest, (b) certain Israeli persons own
an aggregate of 25.2%, (c) Mark Hauser owns a 15% interest, (d) Irwin L. Gross,
Chairman of the Company, owns a 5% interest, and (e) Broad Capital Associates
owns a 2.5% interest.
The equity interests in Partner were issued for an aggregate consideration
of $10,000 to each of the shareholders. In addition, the Company and the Israeli
citizens advanced $6.3 million and $1.575 million, respectively, to Partner. Of
such funds, $7.5 million has been advanced to the Joint Venture to be used
solely for working capital purposes. The remaining $375,000 will be used by
Partner for working capital purposes.
To fund its obligations under the Preincorporation Agreement, on August 3,
1995, the Company sold 1,458,333 shares of its common stock at a price of $4.80
per share for an aggregate of $7.0 million to five Israeli persons, three of
whom are shareholders in Partner. The offering was made pursuant to an exemption
under the Securities Act of 1933, as amended. The purchase agreements pursuant
to which the shares were sold contain an adjustment provision which requires the
issuance of additional shares in the event that the average closing price of the
shares for a certain period of time is less than the offering price in the
offering. The proceeds from the offering were placed in escrow and were
released upon the execution of the JVA.
Joint Venture Agreement
The JVA provides that the Joint Venture will have a Board of Directors
which will be comprised initially of six persons, three of whom will be selected
by Partner and three of whom will be selected by IAI. It is anticipated that
Messrs. Gross and Hauser will be two of Partner's three representatives on the
Board of Directors of the Joint Venture and that Mr. Gross will be elected the
chairperson.
The JVA provides that Joint Venture will review and evaluate Applications
developed by IAI, which are in various stages of development. To review and
evaluate the Applications, an investment committee ("Investment Committee")
comprised of seven persons will be formed. Partner will be entitled to select
four of the seven members of the Investment Committee. If an Application is
selected for development and exploitation, an entity will be formed ("Licensee")
in which Partner will own a 50% interest and IAI will own a 50% interest, and
IAI will grant such Licensee a perpetual, royalty free license for such
-2-
<PAGE>
Application. The Investment Committee will prepare a business plan to exploit
each Application selected, including a funding plan. The Company will be
primarily responsible to raise the funds necessary to exploit the application
selected. However, the Company will not be under any obligation to raise any
funds for such purpose unless and until the Investment Committee selects an
Application for exploitation. In the event the Company is unable to raise the
funds necessary to exploit any Application which the Investment Committee
selects, IAI can terminate the JVA. The JVA can also be terminated under certain
other circumstances.
The following is a brief description of certain of the initial Applications
developed by IAI which will be reviewed by the Investment Committee. The
description of the Applications has been provided by IAI.
1. A pilot evaluation system which is designed for the selection of
candidates for military and civilian pilots and air traffic controllers.
2. A system for automatic inspection of manufactured parts.
3. A system to monitor water and soil toxicity, water bacteria monitors,
air pollution detectors and air/water monitoring systems.
4. An air traffic control system for airports with small to
medium traffic density.
5. A Geographic Information System which is designed for environment and
hazardous assessment applications or drain dependent applications and for urban
applications.
The foregoing information has been provided to the Company by IAI which has
advised the Company that such Applications are in various stages of development,
including certain Applications which are fully developed and for which some
products have been sold. To date, the Joint Venture has not completed its
review of the Applications and, accordingly, there is no assurance that any of
the Applications will be selected for development and exploitation, or if
selected, will be capable of being developed, or if developed, will be
commercially accepted and if commercially accepted will be profitable.
At the present time, the Company is unable to determine whether, or the
extent to which, any of the Applications of IAI which the Investment Committee
reviews will be selected and exploited. Accordingly, with the exception of the
initial investment of $6.3 million in Partner, the Company is unable to
determine at this time the effect, if any, of this transaction on the results of
operation of the Company or on its liquidity and capital resources.
In connection with the consummation of the JVA, the Company granted IAI an
option to acquire 500,000 shares of its common stock exercisable at $7.25 per
share for a period of three years from the date of grant. The Company also
granted options to acquire 600,000 shares of its common stock exercisable at
$7.25 per share for a period of three years from the date of grant to a
corporation controlled by two of the Israeli shareholders in Partner.
-3-
<PAGE>
Item 7. Financial Statements and Exhibits
(b) Pro Forma Financial Information.
The following Unaudited Pro Forma Combined Condensed Balance Sheet was prepared
to reflect the Company's investment through a 52.3% owned subsidiary (Partner)
in a newly formed Israeli corporation which will be 50.1% owned by Partner (the
Joint Venture).The cash to finance this investment was raised in a sale of the
Company's common stock under an offering exempt from the registration
requirements under the Securities Act of 1933 (the Exempt Offering). The
Unaudited Pro Forma Combined Condensed Balance Sheet reflects the capital raised
in the Exempt Offering and the corresponding investments in Partner and the
Joint Venture as if such transactions had occurred on April 1, 1995.
The Company's investment in the Joint Venture will be accounted for by the
Company using the purchase method of accounting. For purposes of the
accompanying pro forma balance sheet, it has been assumed that no portion of the
purchase price will be capitalized since certain technologies may be in the
initial stages of development and considered to be in process research and
development with no alternative future use, thus resulting in a charge to
Accumulated Deficit of $5,500,000. The Company will obtain an appraisal of the
technological applications which the Joint Venture has a
right to exploit and selects for development and exploitation. Upon
completion of the appraisal, a portion of the purchase price may be capitalized.
Further, a portion of the purchase price is based on the estimated value of
options to acquire shares of common stock of the Company which were granted in
connection with the investment in the Joint Venture. The total purchase price
may change dependent upon the appraised value of such options.
-4-
<PAGE>
Unaudited Pro Forma Combined Condensed Balance Sheet
April 1, 1995
(in thousands)
<TABLE>
<CAPTION>
Historical
----------
----Pro Forma Adjustments----
Investment in Pro Forma
April 1, 1995 Exempt Offering Joint Venture Combined
------------- --------------- ------------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $33 $7,000 (A) ($6,305) (B) $728
Restricted Cash -- -- 7,910 (C) 7,910
Receivables, less allowance of
$327 in 1995 and $207 in 1994
for doubtful accounts 11,933 -- -- 11,933
Inventories 11,059 -- -- 11,059
Prepaid expenses and other assets 952 -- -- 952
----------- ------------- -------------- -------------
Total current assets 23,977 7,000 1,605 32,582
----------- ------------- -------------- -------------
Fixed assets 10,354 -- -- 10,354
Less accumulated depreciation (5,215) -- -- (5,215)
----------- ------------- -------------- -------------
5,139 -- -- 5,139
----------- ------------- -------------- -------------
Investment in affiliates 669 -- -- 669
----------- ------------- -------------- -------------
Intangible assets 14,512 -- -- 14,512
Less accumulated amortization (235) -- -- (235)
----------- ------------- -------------- -------------
14,277 -- -- 14,277
----------- ------------- -------------- -------------
Other assets 654 -- -- 654
Notes receivable 1,016 -- -- 1,016
----------- ------------- -------------- -------------
$45,732 $7,000 $1,605 $54,337
=========== ============= ============== =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term
liabilities $9,843 -- -- $9,843
Accounts payable 12,939 -- -- 12,939
Accrued expenses 2,472 -- 100 (D) 2,572
----------- ------------- -------------- -------------
Total current liabilities 25,254 -- 100 25,354
----------- ------------- -------------- -------------
Long-term liabilities:
Long-term debt 1,431 -- 1,600 (E) 3,031
Other long-term liabilities 2,680 -- -- 2,680
----------- ------------- -------------- -------------
Total long-term liabilities 4,111 -- 1,600 5,711
----------- ------------- -------------- -------------
Total liabilities 29,365 -- 1,700 31,065
----------- ------------- -------------- -------------
Minority Interest in Equity of Subsidiaries -- -- 3,755 (E) 3,755
Shareholders' Equity:
Common Stock 37,838 7,000 (A) 1,650 (D) 46,488
Accumulated deficit since
January 1, 1986 (20,996) -- (5,500)(D) (26,496)
----------- ------------- -------------- -------------
16,842 7,000 (3,850) 19,992
Less common stock in Treasury,
at cost (475) -- -- (475)
----------- ------------- -------------- -------------
Total Shareholders' Equity 16,367 7,000 (3,850) 19,517
----------- ------------- -------------- -------------
$ 45,732 $ 7,000 $ 1,605 $ 54,337
=========== ============= ============== =============
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed Balance Sheet
-5-
<PAGE>
Notes to Unaudited Pro Forma Combined Condensed Balance Sheet
The Unaudited Pro Forma Combined Condensed Balance Sheet was prepared to reflect
the Company's investment through a 52.3% owned subsidiary (Partner) in a newly
formed Israeli corporation which will be 50.1% owned by Partner (the Joint
Venture). The cash to finance this investment was raised in a sale of the
Company's common stock under an offering exempt from the registration
requirements under the Securities Act of 1933 (the Exempt Offering). The
Unaudited Pro Forma Combined Condensed Balance Sheet reflects the capital raised
in the Exempt Offering and the corresponding investments in Partner and the
Joint Venture as if such transactions had occurred on April 1, 1995.
The following is a summary of pro forma adjustments reflected in the Unaudited
Pro Forma Combined Condensed Balance Sheet as of April 1, 1995.
(A) Represents the net proceeds from the issuance of 1,458,333 shares of
the Company's common stock in the Exempt Offering.
(B) Represents the cash of the Company which will be advanced to Partner
($6,300,000) and the investment in Partner ($5,000). Substantially all
of the cash investment will be utilized to make an equity investment
in the Joint Venture.
(C) Represents the cash of Partner ($410,000) and the Joint Venture
($7,500,000). The cash was raised in the following manner:
6% subordinated capital notes
due the Company by Partner
due in five equal installments
beginning June 1, 2002 $6,300,000(1)
6% subordinated capital notes
due to certain minority shareholders
by Partner due in five equal
installments beginning June 1, 2002 1,600,000
Equity investments by Company $5,000(1)
and by minority shareholders ($5,000) 10,000
----------
$7,910,000
==========
(1) Eliminated in consolidated
financial statements of Company
(D) The Company's investment in the Joint Venture will be accounted
for by the Company using the purchase method of accounting. The
estimated purchase price, the minority interest in the Joint
Venture and the write-off of in process research and development
with no alternative future use have been determined as follows:
Purchase price:
Cash investment in Joint Venture $7,500,000(1)
Estimated value of options to
acquire shares of common stock of
the Company granted in connection
with this transaction 1,650,000(2)
Estimated fees, expenses and other
accruals 100,000(3)
----------
Total estimated purchase price $9,250,000
Minority interest in equity of Joint
Venture ($3,750,000)
----------
In process research and development $5,500,000
==========
The assets of the Joint Venture include the right to review and evaluate
certain technological applications developed by IAI which are in various stages
of development.If a technology is selected for development and exploitation, IAI
will grant a perpetual royalty free license to exploit the technology. IAI has
advised the Company that the technological applications are in various stages of
development, including certain applications which are fully developed and for
which some products have been sold. To date, the Joint Venture has not completed
its review of the applications and, accordingly, there is no assurance that any
of the applications will be selected for development and exploitation, or if
selected, will be capable of being developed, or if developed, will be
commercially accepted and if commercially accepted will be profitable. Certain
technologies may be in the initial stages of development and considered to be in
process research and development with no alternative future use. For purposes of
the accompanying pro forma balance sheet, it has been assumed that no portion of
the purchase price will be capitalized, thus resulting in a charge to
Accumulated Deficit of $5,500,000. The Company will obtain an appraisal of the
technological applications which the Joint Venture has a right to exploit and
selects for development and exploitation. Upon completion of the appraisal, a
portion of the purchase price may be capitalized.
-6-
<PAGE>
(1) Represents the portion of cash loaned to Partner by the
Company and certain minority shareholders which was
invested in the Joint Venture.
(2) Represents the estimated value of options to acquire
1,100,000 shares of common stock of the Company, which were
granted in connection with this transaction, at an exercise
price of $7.25 per share based upon a recent price of the
Company's common stock of $8.75 per share. The total
purchase price may change dependent upon the appraised
value of such options.
(3) Represents an estimate of expenses related to the Joint
Venture formation and investment including legal fees,
accounting fees, due diligence costs and other accruals.
(E) Represents the minority interest in the equity of the Joint Venture
($3,750,000) and the minority interest in Partner ($5,000).
(c) Exhibits
Exhibit No. Description
2.1 Form of Pre-Incorporation Agreement
2.2 Joint Venture Agreement
-7-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereto duly authorized.
ELECTRONIC ASSOCIATES, INC.
Registrant
By: /s/ JONATHAN R. WOLTER
---------------------------------------------
JONATHAN R. WOLTER
Treasurer and Vice President, Finance
(Principal Financial and Accounting Officer)
Date: August 15, 1995
-8-
[THIS DOCUMENT IS A COPY OF THE EXHIBIT 2.1 TO THE CURRENT REPORT ON FORM 8-K
(DATE OF REPORT -- AUGUST 3, 1995) WHICH EXHIBIT WAS FILED ON AUGUST 7, 1995
PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION.]
Pre-Incorporation Agreement
This Agreement is entered into as of the ____ day of August 1995, by
and among:
Electronic Associates Inc. a corporation organized and existing under
the laws of the State of New Jersey located at 185 Monmouth Parkway West, Long
Branch, N.J. 07764 fax no: 908-5710578 (hereinafter: "EA"); and Mr. Moshe
Wertheim of M. Wertheim (Holdings) Ltd., fax no. 972-3-522-424 or a company
controlled by him (hereinafter: "Wertheim"); and Mr. Mordechay Zisser of Control
Centers Ltd. fax no. 972-3-695-3080 or a company controlled by him (hereinafter:
"Zisser"); and FIBI Holdings Ltd., or a company controlled by it, a corporation
organized and existing under the laws of the State of Israel, located at 9 Ahad
Ha'am Street, Tel Aviv, Israel, fax no. 972-3-5196274 (hereinafter: "FIBI") or a
company controlled by them; Wertheim, Zisser and FIBI will be defined
collectively hereinafter as: "The Israeli Group"; and Mr. Mark S. Hauser of 101
East 52 St., New York N.Y 10022 fax no. 212-6445757 or a company controlled by
him (hereinafter: "Hauser"); and Mr. Irwin L. Gross of 441 North Fifth St.
Philadelphia, PA 19123 fax no.; 215-5928299 or a company controlled by him
(hereinafter: "Gross"); and Broad Capital Associates Inc., a corporation
incorporated under the laws of the State of New York, located at 152 West 57th
Street, New York, NY 10019 (hereinafter: "Broad Capital").
WITNESSETH: THAT
WHEREAS Israeli Aircraft Industries Limited (hereinafter: "IAI") seeks
a strategic partner who would be able to provide the financial, industrial,
management and marketing support required for the successful identification,
development, manufacture, marketing and other commercial exploitation of its
eligible technologies as defined in the Joint Venture Agreement (hereinafter:
the "JV Agreement") to be agreed by the parties hereto and to be signed by the
Company, as defined below, with IAI and which shall be marked as Appendix A and
attached hereto and made a part hereof; and
WHEREAS EA, The Israeli Group, Hauser, Gross and Broad Capital,
expressed their desire to become such a partner and represent that they have the
necessary experience, expert staff and resources required to provide such
financial, industrial, management and marketing support; and
WHEREAS EA, The Israeli Group, Hauser, Gross and Broad Capital, shall
collectively form a private company in Israel under the name of Electronic
Associates Israel Ltd. (hereinafter: "the Company") which shall engage in the
implementation of the JV Agreement; and
WHEREAS in order to finance and otherwise support the Company, the
parties hereto are willing to furnish equity capital, shareholders' loans and
other commitments upon the terms and conditions hereinafter set forth; and.
(1)
<PAGE>
WHEREAS the Company and IAI according to the JV Agreement, and in order to
implement it, intend to form a private company in Israel (hereinafter:
"Holdco"), in which the Company shall subscribe for 50.1% of the outstanding
issued and paid-up share capital of Holdco and IAI shall have the option to
subscribe for 49.9% of the outstanding issued and paid up share capital of
Holdco;
NOW, THEREFORE, in consideration of the mutual covenants and undertakings
herein contained, and subject to the terms and conditions set forth herein, EA,
the Israeli Group, Hauser, Gross and Broad Capital, agree as follows:
1. Formation
1.1 As soon as practical after the signing of this Agreement and
before the signing of the JV Agreement, the parties shall
incorporate the Company, under the Israeli Companies Ordinance
[New Version], 5748 - 1983 as a limited by shares Company.
1.2 The name of the Company shall be "Electronic Associates
Technologies Israel Ltd.", or if such name be unavailable,
such other name as may be authorized by the Registrar of
Companies and agreed upon by the parties hereto.
1.3 The Memorandum and Articles of Association of the Company
shall be in the forms attached hereto and marked Appendices B
and C respectively, subject only to further amendments in
accordance with prevailing Israeli Company Law.
1.4 The costs of registration of the Company, stamp duty in
connection with this Agreement, and the legal fees in
connection with registration of the Company, shall be borne by
the Company in full.
1.5 The purpose of the Company shall be the implementation of the
JV Agreement.
2. Share Capital
2.1 The registered share capital of the Company at the time of
registration shall be 28,000 New Israeli Shekels which shall
be divided into 27,000 Ordinary shares of 1 N.I.S. each
(hereinafter: "The Ordinary Shares") out of which 10,000
Ordinary Shared shall be issued; and 1,000 preferred Class B
Shares none of which shall be issued.
2.2 Upon incorporation of the Company:
(2)
<PAGE>
2.2.1 EA shall subscribe at nominal value in full, in cash
for 5,230 Ordinary Shares representing 52.3% of the
outstanding issued and paid-up share capital of the
Company; and
2.2.2 The Israeli Group shall subscribe at nominal value in
full, in cash for 2,520 Ordinary Shares representing
25.2% of the outstanding issued and paid-up share
capital of the Company; and
2.2.3 Hauser shall subscribe at nominal value in full, in
cash for 1,500 Ordinary Shares representing 15% of
the outstanding issued and paid-up share capital of
the Company; and
2.2.4 Gross shall subscribe at nominal value in full, in
cash for 500 Ordinary Shares representing 5% of the
outstanding issued and paid up share capital of the
company; and
2.2.5 Broad Capital shall subscribe at nominal value in
full, in cash for 250 Ordinary Shares, representing
2.5% of the outstanding issued and paid up share
capital of the Company.
2.3 Subject to sections 2.4 and 2.5, each of the Shares shall
entitle the shareholder concerned to equal rights in regard to
voting at, and participation in, the general meeting and all
other rights accorded by the Memorandum and in the Articles of
Association to the shareholders, with each share entitling the
shareholder to one (1) vote.
2.4 The Company shall issue Subordinated Capital Notes to each of
EA and the Israeli Group, one to EA for the sum of $6,300,000
(six million three hundred thousand) U.S. dollars and the
other to the Israeli Group for the sum of $1,575,000 (one
million five hundred and seventy five thousand) U.S. dollars
in consideration for the above mentioned sums of money.
The Subordinated Capital Notes to be issued will be subject to
the following conditions.
2.4.1 The Subordinated Capital Notes will rank behind and
be subordinated to all other obligations or debts of
the Company. The Subordinated Capital Notes will not
be negotiable nor will they be transferable or
capable of being pledged, except for a transfer
according to Paragraph 5.5 below.
2.4.2 The Subordinated Capital Notes will be denominated in
U.S. dollars. All outstanding debit balances shall
bear interest at an annual rate of 6.0% (six
(3)
<PAGE>
percent), which will be paid once a year at the end
of each year. The interest will be calculated in
relation to the period from the date on which the
Subordinated Capital Notes were issued by the Company
and up until the date of payment.
2.4.3 The Subordinated Capital Notes will be repaid by the
Company in five (5) annual installments, each
equivalent of 20% (twenty percent) of the amount of
the Subordinated Capital Notes (principal and
interest) commencing from June 1, 2002, (hereinafter:
"Dates of Payment"). Any anticipated repayment which
may be made between the Dates of Payment will be
deducted from the amount payable on the next Date of
Payment.
2.4.4 Each year the Company will apply at least 80% (Eighty
percent) of its net after -tax profits (on the basis
of its consolidated financial statements) to the
repayment of the Subordinated Capital Notes.
2.4.5 The Company shall be entitled at any time, to
anticipate the due date for payment of the
outstanding debit balance under the Subordinated
Capital Notes, or any part thereof.
2.4.6 Non-payment of Subordinated Capital Notes
In the event that the Company does not meet any of
its obligations to pay any amount (principal or
interest) owing according to the terms of the
Subordinated Capital Notes, then the unpaid debit
balance will be immediately converted into cumulative
redeemable Preferred Class B Shares of 1 INS each (
"the Class B Shares" and "the Outstanding Debit
Balance"), subject to the condition that the holders
of the Subordinated Capital Notes representing at
least 51% (fifty-one percent) of the amount of the
unpaid Outstanding Debit Balance, will be entitled to
pass a resolution to defer - and only to defer - the
date for repayment of the Outstanding Debit Balance
to a deferred date or dates.
2.5 Class B Shares
Class B Shares will confer on their holders the rights,
preferences and advantages as listed hereinafter:
2.5.1 The Company will not distribute any dividends to its
shareholders, as specified in Paragraph 2.9 below,
until the full payment of the Outstanding Debit
Balance. Dividend payments to the Class B
Shareholders will be made out of Company funds
available for distribution as dividends according to
(4)
<PAGE>
law. If the Company fails to pay the annual dividend
due to Class B shareholders, in whole or in part, the
short-fall will be added to the next annual dividend
distribution.
Each year the Company will apply not less than 60%
(sixty percent) of its net profits after the payment
of taxes towards the repayment of the Outstanding
Debit Balance.
2.5.2 On the winding-up of the Company, the Class B
shareholders will be entitled to be paid out of the
assets of the Company an amount equivalent to the
Outstanding Debit Balance at the date of the
winding-up (plus linkage differentials from the date
of the issuance thereof until the date of winding
up), as a first preference ahead of any distribution
to other shareholders.
2.5.3 The Company will at all times be entitled to redeem
the Class B Shares in consideration for payment of
the nominal value thereof (including linkage
differentials to the index) plus all dividends which
have accrued in respect thereof but which have not
been paid.
2.5.4 The Class B Shares shall have no voting rights.
2.6 The amount mentioned in Section 2.4 above which will be put at
the disposal of the Company is to be used solely for the
purpose of effecting the Initial Investment in the amount of
$7,500,000 as set forth in Section 6.1 of the JV Agreement and
to pay the Company's expenses.
2.7 For the removal of doubt but subject to Section 7 below, there
is nothing stated in this clause to prejudice the rights of
the Board of Directors of the Company to require from its
shareholders additional amounts over those stated above, in
order to implement the JV Agreement.
2.8 All payments shall be in US dollars or in New Israeli Shekels
in accordance with the rate for transfers and drafts as
published by the First International Bank of Israel, Ltd. on
the date of payment.
2.9 Subject to Sections 2.4.4. and 2.5.1, each year, unless
otherwise decided by the Board of Directors of the Company,
the Company will distribute to each of it's shareholders
dividends, which will be in a sum equal to 50% of its net
annual after tax profit based on its consolidated financial
statements, but subject to the Company's cash flow situation
and its obligations to Holdco.
(5)
<PAGE>
3. Management of the Company
3.1 The Board of Directors of the Company shall be comprised of up
to 9 directors. Until decided otherwise by all the directors,
the Board of Directors of the Company shall be comprised of 5
directors.
3.2 For so long as EA, the Israeli Group and Hauser are
shareholders of the Company, then EA shall be entitled to
appoint two (2) directors, the Israeli Group will be entitled
to appoint two (2) directors and Hauser will be entitled to
appoint one (1) director.
3.3 Four (4) members of the Board of Directors shall constitute a
legal quorum and decisions will be accepted by a majority
decision of the directors present at such meeting and subject
to the applicable laws. If the required quorum for the passing
of resolutions is not constituted, the meeting will be
postponed by 24 hours. In the counting of hours, Saturdays,
holidays and Jewish holidays will not be counted.
3.4 During the term of the JV Agreement and subject to Section 3.2
herein, Mr. Mark S. Hauser and Mr. Irwin L. Gross will be
Co-Chairmen of the Board of Directors. Mr. Moshe Wertheim and
a representative of FIBI shall be directors in Holdco., on
behalf of the Company. Mr. Mordechay Zisser shall be appointed
by the Company to sit on the Advisory Board of Holdco.
3.5 All decisions at any meeting of the Board of Directors shall
be decided by a majority of four votes and a determination by
a majority of the Directors shall for all purposes be deemed
a determination of the Board of Directors.
3.6 The Board of Directors may from time to time appoint any
person or persons, to the office of General Manager for such
period and on such terms as they think fit and, subject to the
terms of any agreement entered into in any particular case,
may revoke any such appointment.
3.7 The purpose of the Company shall be the implementation of the
JV Agreement.
3.8 Until otherwise authorized by the Board of Directors of the
Company, the principal place of business of the Company will
be located at Control Centers Ltd., 13 Mozes Yehuda St.,
Tel-Aviv 67772, Israel.
(6)
<PAGE>
4. The JV Agreement
4.1 At the signing of this agreement or immediately thereafter,
the shareholders of the Company or the Company will execute
the JV agreement with IAI, with intention to form Holdco.
4.2 All the Shareholders of the Company agree to promote the
purposes for which the Company was incorporated and work in
full cooperation to advance the aforesaid purposes.
5. Right of First Refusal
5.1 If at any time prior to the time that the Company shall offer
its Ordinary Shares in a public offering any shareholder of
the Company (the "Selling Shareholder") would like to sell any
or all of its Ordinary Shares or the Preferred Shares of the
Company (hereinafter: "The Shares"), or receives a bona fide
offer from any person to purchase any or all of his Shares of
the Company (a "Third-Party Offer") and if the Selling
Shareholder desires to accept such Third Party Offer, then the
Selling Shareholder shall give prompt notice to all other
Shareholders of the Company (the "Other Shareholders") which
notice shall contain (i) in the event of a Third -Party offer,
a true and correct copy of a Third-Party offer, setting forth
the name and address of the proposed purchaser, (ii) the
number of Shares of the Company which the Selling Shareholder
beneficially owns and the number of such Shares of the Company
which he wishes to sell, and (iii) the proposed purchase price
and all other terms and conditions of the Third-Party Offer.
The date on which notice is received by the last of the Other
Shareholders is hereinafter referred to as the "Notice Date".
Such notice shall be deemed an irrevocable offer of the
Selling Shareholder to sell to the Other Shareholders the
Shares of the Company which the Selling Shareholder wishes to
sell at the same price and under the same terms and conditions
as provided by the Third-Party Offer. The Other Shareholders
shall then have the irrevocable and exclusive option to buy
all of the Shares of the Company which the Selling Shareholder
wishes to sell pursuant to the Third-Party Offer on the terms
set forth herein.
5.2 Within 30 business days following the Notice Date, the other
Shareholders shall notify the Selling Shareholder in writing
as to whether they wish to purchase the exact same amount of
shares of the Company proposed to be purchased in the third
party offer at the same price and under the same terms and
conditions as provided in the third party offer (the
"election"). Subject to clauses 5.3 and 5.4 below, each of the
Other Shareholders shall then be obligated to purchase, and
the Selling Shareholder shall be obligated to sell, such
number of Shares of the Company, if any, as such Other
Shareholder has specified in his Election. If several
shareholders
(7)
<PAGE>
desire to purchase more shares than are offered by the Selling
Shareholders the shares will be divided pro rata between all
shareholders which have elected to participate in the purchase
of the shares.
5.3 If the Other Shareholders do not elect, within the 30 business
day period specified in clause 5.2 above, to purchase any of
the Shares of the Company which the Selling Shareholder wishes
to sell, then the Selling Shareholder may, within a period of
four months from the Notice Date, sell such Shares of the
Company to the third party (the "Third-Party Transferee") only
at the same price and on the same terms and conditions as
specified in the Third-Party Offer. If such Selling
Shareholder does not complete such sale within such two-month
period, the provisions of this section shall again apply, and
no sale of Shares of the Company shall be made otherwise than
in accordance with the terms of this Agreement.
5.4 Each Third-Party Transferee shall, as a condition to the
transfer to such Third-Party Transferee, execute and deliver
to all of the then shareholders of the Company a written
agreement in which such Third-Party Transferee agrees, to the
satisfaction of the other shareholders, to be bound by all the
terms and provisions of this Agreement as if it were a party
hereto, and agrees to be bound by all other obligations of the
transferor under the JV Agreement.
5.5 Except as set forth herein, Shares of the Company shall not,
directly or indirectly, be sold, assigned, pledged or
transferred, provided that this Agreement shall not prohibit
transfer of Shares of the Company to a corporation or some
other entity wholly owned by a transferor, and provided
further that the transferee executes and delivers to all of
the shareholders of the Company a written agreement in which
such transferee agrees to be bound by all the terms and
provisions of this Agreement as if it were a party hereto.
Should the transferee be a corporation ("Transferee
Corporation") this Section 5.5 will apply to its controlling
shareholders too regarding their share-holdings in the
Transferee Corporation.
5.6 If any share in the Company owned by any party hereto shall be
sold, transferred or otherwise disposed of to a third party
transferee in any manner permitted by this Article ("the
Transfer"), then the assigning party shall cause the
Third-Party transferee to duly endorse or ratify this
Agreement prior to the Transfer so that the obligations,
rights and privileges attached to the share thus sold,
transferred or otherwise disposed of, shall be assumed and
exercised by the Third-Party transferee.
6. Right of Co-sale
6.1 Subject to the other restrictions on transfer contained
herein, no Shareholder (the "Prospective Seller") shall sell,
assign, transfer or convey for value to any Third
(8)
<PAGE>
Party or Parties Shares held by such Shareholder, unless each
of the other Shareholders (for purposes of this Clause, the
"Other Shareholders") shall have the option to participate pro
rata (the "Pro Rata Portion") in such Sale on the same terms
and conditions as offered by such Third Party or Parties, with
the Shares to be sold by the Prospective Seller to be reduced
to, and those Shares to be sold by each Other Shareholder
delivering a Notice of Election (as defined below) to be equal
to, the product of (i) the total Shares to be sold to the
Third Party purchaser and (ii) a fraction, the numerator of
which is the number of Shares held by the applicable selling
Shareholder and the denominator of which is the total number
of Shares held by all such selling Shareholders (includes the
Prospective Seller and all Other Shareholders delivering a
Notice of Election).
6.2 If a Prospective Seller receives a bona fide offer or offers
to purchase or otherwise acquire (for purposes of this Clause,
an "Offer") any of such Prospective Seller's Shares, and such
Prospective Seller intends to pursue a sale of such Shares to
such Third Party or Parties, such Prospective Seller shall
provide written notice (for purposes of this Clause, the
"Offer Notice") of such Offer to each of the Other
Shareholders no later than the thirtieth Business Day prior to
the consummation of the Sale of the Shares. The Offer Notice
shall identify the number of Shares, the price offered for
such Shares, all other material terms and conditions of the
Offer and, in the case of an Offer where the consideration
consists in whole or in part of consideration other than cash,
such information relating to such other consideration as shall
be reasonably necessary to permit the Other Shareholders to
determine whether to sell their Shares in accordance with this
Clause and shall contain a true and complete copy of the
agreement, if any, pursuant to which such Sale is to be made.
Each of the Other Shareholders shall have the right and
option, for a period of twenty (20) Business Days after the
date the Offer Notice is given to such Other Shareholders (for
purposes of this Clause, the "Notice Period"), to notify the
Prospective Seller of such Other Shareholder's interest in
selling the Pro Rata Portion of such Other Shareholder's
Shares for the same consideration and otherwise on the same
terms and conditions as contained in the Offer. Each Other
Shareholder desiring to exercise such option shall, prior to
the expiration of the Notice Period, provide the Prospective
Seller with a written notice specifying that such Other
Shareholder wishes to sell the Pro Rata Portion of its Shares
in accordance with the terms of the Offer (for purposes of
this Clause, a "Notice of Election"). If any such Other
Shareholder shall elect to sell, then at the closing the Other
Shareholder shall deliver to the purchaser the certificate or
certificates evidencing the Shares to be sold pursuant to this
Clause by such Other Shareholder duly endorsed in blank or
accompanied by written instruments of transfer in form
reasonably satisfactory to the purchaser and executed by such
Other Shareholder. Delivery of such certificate or
certificates evidencing the Shares to be sold and the
instrument of assignment shall be made against the payment of
the consideration therefor from the purchaser.
(9)
<PAGE>
6.3 If at the end of the Notice Period any Other Shareholder shall
not have given a Notice of Election with respect to the Pro
Rata Portion of such Other Shareholder's Shares, such Other
Shareholder will be deemed to have waived all its rights under
this Clause with respect to the sale described in the Offer
Notice; provided that such sale or transfer is consummated
within the three months period following the expiration of the
Notice Period and is made to the person named in the Offer
Notice at the price and on the terms specified in such Offer
Notice or upon less favorable terms to the Prospective Seller;
and provided for that any purchase or transfer agrees to be
bound by all the terms and conditions of this Agreement.
6.4 Anything herein to the contrary notwithstanding and
irrespective of whether any Notice of Election shall have been
given, the Prospective Seller shall not have any obligation to
any Other Shareholder to sell any Shares pursuant to this
clause as a result of any decision by such Prospective Seller
not to accept or consummate any Offer with respect to its
Shares (it being understood that any and all such decisions
shall be made by such Prospective Seller in its sole
discretion).
6.5 In the event that any of the shareholders exercise their right
of first refusal with respect to any proposed sale of Shares
pursuant to the terms and conditions contained in Clause 5,
any right of co-sale under this Clause shall be waived and of
no effect with respect to that particular sale. The right of
co-sale in this Clause is expressly subordinate to the
shareholders` right of first refusal contained in Clause 5.
6.6 So long as the JV Agreement is in force, all the provisions of
Sections 5 and 6 above relating to the transfer, sale or any
other disposal of shares of any of the Parties hereto, are
subject to the limitations and restrictions set forth with
respect to such shares, in the JV Agreement.
7. Additional funding and Dilution
7.1 After the Company has exhausted every possibility of obtaining
funds for the implementation of the JV Agreement from banks or
any other sources, and subject to the fact that the
shareholders made their best efforts to raise Capital from
third parties without giving guarantees by any of the
shareholders, for the implementation of the JV Agreement
without issuing additional shares, the Company may, from time
to time, decide on the increase of paid-up capital and/or
shareholders loans and/or shareholders guarantees, all in
accordance with the pro rata share of each of the shareholders
in the paid-up share capital of the Company. The shareholders
shall use their best effort, but shall not be obligated, to
make the required financing instruments, as aforesaid,
available to the Company at such times and on such conditions
as the Board of Directors of the Company may decide from time
to time.
(10)
<PAGE>
7.2 Where the Board of Directors has made a decision as referred
to in Clause 7.1 above, and any party to this Agreement fails
to transfer the amount required in accordance with Clause 7.1
above (hereinafter: "the Party in Shortfall"), and one of the
parties notifies the Board of Directors of the Company in
writing that he is prepared to make available the said amount
(hereinafter: "the Party in Surplus"), the Company shall allot
to the party in surplus additional shares against the extra
financing in such way that the allotment of the shares to the
Party in Surplus will bring about a dilution of the shares of
the Party in shortfall (hereinafter: "the Additional Shares").
7.3 Notwithstanding the foregoing, the Party in Shortfall shall
have the right to purchase the Additional Shares from the
Party in Surplus, no later than 18 months from the allotment
of the Additional Shares, for the amount paid for the
Additional Shares plus interest at an annual rate of 10%. The
interest will be calculated in relation to the period from the
date on which the monies for the Additional Shares ware made
available to the Company and up to the date of payment by the
Party in Shortfall. All amounts shall be linked to the U.S.
dollar.
8. Expenses
Except as provided in this Agreement, all legal and other costs and
expenses, including stamp duty if required, incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid
by the Company.
All actual expenses incurred by EA with regard to the JV Agreement and
the implementation of the JV Agreement, until the establishment of the
Company, shall be paid by EA. These expenses shall include legal fees,
accountants, experts, travel etc.
9. Entire Agreement, Amendment, Waiver
This Agreement represents the entire understanding and agreement
between the parties with respect to subject matter hereof and
supersedes all prior negotiations, representations and agreements made
by and between such parties (other than written agreements and other
documents entered into or delivered pursuant hereto or in connection
herewith). This Agreement may be amended, supplemented or changed, and
any provision hereof may be waived, only by written instrument making
specific reference to this Agreement signed by the parties hereto.
Waiver by any party of any breach or default hereunder by any other
party shall not operate as a waiver of any other breach or default,
whether similar to or different from the breach or default waived.
(11)
<PAGE>
10. Validity
This agreement will be given effect and the obligations of the parties
hereto will be executed only subject to (I) the closing and signing of
the JV Agreement, and (ii) the issuance of 600,000 warrants by EA to
the Israeli Group in accordance with the Warrants Agreement which is
attached hereto as Exhibit 10.
In the event that for any reason whatsoever, the JV Agreement shall not
be signed by IAI within 90 days from the signing of this agreement,
this agreement shall be void and shall not bound any of the parties to
any of the obligations under this Agreement.
11. Law to Govern
11.1 This Agreement shall be governed by and construed and enforced
in accordance with the laws of the State of Israel.
11.2 "Business day" will be deemed to be any day Monday through
Friday excluding Israeli and/or U.S. holidays.
12. Press Releases
No press releases or other public announcements regarding the
transactions contemplated by this Agreement shall be issued by either
party without the prior consent of all the Parties hereto except that
in the event that the parties are unable to agree on a press release
and legal counsel for one party is of the opinion that such press
release is required by law, then such party may issue the legally
required press release.
13. Assignability
This Agreement shall be binding upon the parties hereto, their
successors and assigns, provided, however, that this Agreement in whole
or in part shall not be assignable by any party hereto without the
prior written consent of all the parties hereto.
14. Counterparts
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original but all of which together shall
constitute one and the same instrument.
15. Section Headings
The paragraph headings in this Agreement are for convenience of
reference only and shall not be deemed to alter or affect any provision
thereof.
(12)
<PAGE>
16. Notice
Any notice or other communication required or permitted hereunder shall
be in writing and shall be personally delivered, telegraphed, telexed,
sent by facsimile transmission or, if mailed, three (3) business days
after the date of deposit in mails, as follows:
(i) If to EA to:
Electronic Associates Ltd.
185 Monmouth Parkway
West Long Branch, N.J. 07764
USA
Facsimile: 908-571-0578
with a copy to:
Richard P. Jaffe, Esq.
Mesirov Gelman Jaffe Cramer & Jamieson
1735 Market St.
Philadelphia, PA 19103
USA
Facsimile: 215-994-1111
(ii) If to Wertheim to:
Mr. Moshe Wertheim
Ilanim Development & Investments Ltd.
c/o Ron Gazit, Adv.
1 King David Blvd.
Tel Aviv, Israel
Facsimile: 972-3-522-4224
with a copy to:
Dan Lahat, Adv.
Cohen, Lahat & Co.
Beit Hakeren
155 Bialik Street
Ramat Gan 52523
Israel
Facsimile: 972-3-751-2066
(iii) If to Mordechay Zisser to:
Mordechay Zisser
Control Centers Ltd.
13 Mozes Yehuda St.
Tel Aviv 67442 Israel
Facsimile: 972-3-695-3080
(13)
<PAGE>
with a copy to:
Dan Lahat, Adv.
Cohen, Lahat & Co.
Beit Hakeren
155 Bialik Street
Ramat Gan 52523
Israel
Facsimile: 972-3-751-2066
(iv) If to FIBI to:
FIBI Holding Co., Ltd.
Ahad Ha'am Street
Tel Aviv 61290 Israel
Facsimile:
with a copy to:
Dan Lahat, Adv.
Cohen, Lahat & Co.
Beit Hakeren
155 Bialik Street
Ramat Gan 52523
Israel
Facsimile: 972-3-751-2066
(v) If to Hauser to:
Mark Hauser
101 East 52nd Street
New York, NY 10022
USA
Facsimile: 212-644-5757
with a copy to:
Richard P. Jaffe, Esq.
Mesirov Gelman Jaffe Cramer & Jamieson
1735 Market St.
Philadelphia, PA 19103
USA
Facsimile: 215-994-1111
(vi) If to Gross to:
Irwin L. Gross
441 North Fifth St.
Philadelphia, PA 19123
USA
Facsimile: 215-592-8299
with a copy to:
Richard P. Jaffe, Esq.
Mesirov Gelman Jaffe Cramer & Jamieson
1735 Market St.
Philadelphia, PA 19103
USA
Facsimile: 215-994-1111
(14)
<PAGE>
(vii) If to Broad Capital to:
Broad Capital Associated
152 West 57th Street
New York, NY 10019
USA
with a copy to:
Richard P. Jaffe, Esq.
Mesirov Gelman Jaffe Cramer & Jamieson
1735 Market St.
Philadelphia, PA 19103
USA
Facsimile: 215-994-1111
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above:
<TABLE>
<S> <C> <C> <C>
--------------- ----------------- ------------------- ----------------
EA Moshe Wertheim Mordechay Zisser FIBI
--------------- ------------------ ------------------------
Mark S. Hauser Irwin L. Gross Broad Capital Associates
</TABLE>
(15)
<PAGE>
[THIS DOCUMENT IS A COPY OF THE EXHIBIT 2.2 TO THE CURRENT REPORT ON FORM 8-K
(DATE OF REPORT -- AUGUST 3, 1995) WHICH EXHIBIT WAS FILED ON AUGUST 7, 1995
PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION.]
JOINT VENTURE AGREEMENT
THIS JOINT VENTURE AGREEMENT (the "Agreement"), entered into and made on the 8th
day of August, 1995 among:
ELECTRONIC ASSOCIATES TECHNOLOGIES ISRAEL LIMITED
an Israeli Corporation (51-21842403)
("Partner");
AND
ISRAEL AIRCRAFT INDUSTRIES LIMITED
an Israeli Government Corporation;
AND
Halacoach Haneeman #52 Ltd.
an Israeli Corporation
("HoldCo")
WHEREAS:
(1) Israel Aircraft Industries Limited ("IAI"), a company wholly
owned by the Government of the state of Israel, is the
largest industrial and the aerospace company of Israel
engaged, inter alia, in military and civilian electronics,
satellite systems, general aviation and unmanned air vehicle
systems, as well as in the maintenance, conversion and
upgrade of military and civilian aircraft and aircraft
engine/component; and
<PAGE>
(2) IAI has developed over the years a wide base of technology
which may be applied in various fields; and
(3) IAI has determined to exploit its unclassified applications
for commercial applications which are within the
non-military/security market and which are outside the scope
of IAI Core Business as defined below; and
(4) IAI seeks a strategic partner which would be able to provide
the financial, industrial, management and marketing support
required for the successful identification, development,
manufacture, marketing and other commercial exploitation of
its unclassified technologies as aforesaid; and
(5) Partner has expressed its desire to become such a partner
and represented that it has the necessary experience, expert
staff and resources required to provide such financial,
industrial, management and marketing support; and
(6) In light of the above, IAI and Partner have agreed to
cooperate by way of forming a business joint venture which
will serve as the vehicle for the identification, analysis,
development, manufacture, marketing and other exploitation
of IAI's Eligible Application (as hereinafter defined) as
contemplated herein;
NOW THEREFORE, the Parties hereto hereby agree as follows:
1. Definitions
As used in this Agreement and Exhibits hereto, the following terms shall
have the meanings ascribed to them below:
(2)
<PAGE>
"Advisory Board" A non-voting Board of Advisors appointed by the
Parties.
"Agreement" This Agreement including the preamble and all
Exhibits hereto.
"Articles" The Articles of HoldCo attached hereto as
Exhibit A.
"Authorized
Areas" Those business activities in which IAI shall
grant HoldCo in accordance with the terms of this
Agreement, rights regarding IAI's Eligible
Applications, as listed in Exhibit B hereto and
as may be amended from time to time pursuant to
Section 13.2 below.
"Board" Board of Directors of HoldCo.
"Broad Capital" Broad Capital Associates Inc., a corporation,
incorporated under the laws of the State of New
York which principal address is 152 West 57th
Street, New York,, NY 119, USA.
"Closing" The final consummation of the transactions as
contemplated in Section 11 of this Agreement in
accordance with the terms hereof.
"Closing Date" The day on which the Closing occurs.
"Control" The direct or indirect ownership of equity rights
that assure, in permanent fashion, a majority of
votes in the deliberations of a certain entity,
whether or not enjoying a separate legal
standing, and the power to elect, nominate or
appoint its directors, or a majority of them, and
(3)
<PAGE>
the power to effectively use such equity rights
to direct and orient its activities and
functioning.
"CPI" Consumer Price Index as published by the Central
Statistics Bureau.
"Director" A director of HoldCo.
"Dollar" or "$" A dollar of the United States of America.
"EAI" Electronic Associate Inc., a public corporation
organized and existing under the laws of the
State of New Jersey, traded on the New York Stock
Exchange which principal address is 185 Monmouth
Parkway West Long Branch N.J. 07764, USA.
"FIBI" F.I.B.I. Holdings Ltd., a corporation organized
and existing under the laws of the state of
Israel which principal address is 9 Ahad Haam,
Tel-Aviv, Israel.
"Gross" Mr. Irwin L. Gross of 441 North Fifth St.
Philadelphia, PA 19123, USA.
"Hauser" Mr. Mark S. Hauser of 101 East 52 St. New York
N.Y. 10022, USA.
"HoldCo" The company to be jointly held by the Parties
hereto under the provisions hereunder, having its
entire share capital in Ordinary Shares and which
is currently named Halacoach Haneeman #52 Ltd.
which name shall be changed as agreed upon by the
Parties hereto and approved by the registrar of
companies.
(4)
<PAGE>
"IAI" Israel Aircraft Industries Limited, a Government
owned Israeli corporation.
"IAI Core Business" IAI's current and/or presently planned core
business as may be modified from time to time
subject to Section 13.2.
"IAI's Eligible
Applications" Semi Products, i.e. technology applications in
various stages of development and data and
know-how developed by and/or for IAI consisting
of patents and documented know-how of IAI,
drawings, designs, diagrams, computer programs
and their sources, and other tangible technical
information, as well as mock-ups and prototypes
pertaining directly to said semi products of
which IAI is the owner or licensee or otherwise
has the legal rights to use such applications,
existing on the date hereof, and during the term
of this Agreement at IAI, which are not security
classified and are commercially exploitable for
non-military purposes, in one of the Authorized
Areas, whether with or without third party's
rights and/or limitations.
"Investment Plan" the set of plans and projections prepared
by or for HoldCo regarding a Project (as defined
in Sections 5.2.5.2 and 5.3.5.2 below) for
adoption by the Board outlining the overall
program of implementation of such Project for an
aggregate period of five years (divided into
Stage I and Stage II) inclusive of the
development, manufacture, marketing and sale
phases, together with the total investment
required in Dollars for the implementation
thereof in Stage I or Stage II, as the case may
be, and the respective financing terms within
such Stage, together with the
(5)
<PAGE>
corresponding time table therefor, as may be
amended from time to time by the Board, all as
further detailed under Section 6 below.
"Legal
Requirements" all applicable laws, statutes, rules,
regulations, orders, ordinances, limitations and
requirements of all foreign, national,
departmental and municipal authorities.
"License" with respect to each Project, a license in the
form of Exhibit C to develop, manufacture, market
and sell the product/s designated in the Project
exploiting an IAI's Eligible Application within
the aforesaid scope.
"Licensee" An affiliate of HoldCo established or assigned to
develop and commercially exploit an IAI's
Eligible Application, within the scope of a
Project, under a License granted to it by IAI.
"NIS" A New Israeli Shekel.
"Ordinary Shares" Ordinary Shares of HoldCo and/or Licensee, as
the case may be, issued pursuant to their
Articles of Association, each having always
a par value of one (1) NIS.
"Party" any Party to this Agreement on the date hereof
and any entity who shall become a Party in
accordance with Section 20.7 below.
(6)
<PAGE>
"Partner" Electronic Associates Technology Israel Ltd.,
(51-2184243), an Israeli corporation, or any
other name to be approved by the Companies'
Registrar.
"Partner Loans" loans and other forms of credit facilities
provided to Licensee from Partner or from its
Ultimate Controlling Person or entities
Controlled thereby, including through debentures
and equity securities, the terms and interest
charges of which shall be defined at the time
they are effected, according to market rates for
borrowers of similar amounts and periods,
provided any interest charged thereon or
distribution made in respect thereof,
respectively, shall not exceed the prime
corporate lending rate applicable in Citibank,
New York, New York for similar amounts and
periods, as prevailing at such time; the
repayment of any principal amount, the payment of
any interest or the making of any distribution,
shall be paid from Licensee's profits available
for distribution after distribution or allocation
for distribution of at least 50% of same; in any
event, the loans shall be provided for a period
of not less than five years with principal and
interest payable following the end of the loan
term as aforesaid; the equity securities may only
be redeemed and distributions thereunder may only
be made after the lapse of said period, as
aforesaid; except for the above distribution and
redemption rights the equity securities shall not
entitle the holder thereof to any other right.
"Stage I" The period of the first two years from the
commencement of each Project.
"Stage II" The period of three years following Stage I
of each Project.
(7)
<PAGE>
"Ultimate Controlling
Person" shall mean in the case of
Partner, EAI (52.3%), Wertheim (8.4%), Zisser
(8.4%), FIBI (8.4%), Hauser (15%), Gross (5%
directly and 9% through an interest in EAI, which
9% interest has been calculated on a fully
diluted basis, and all of which represents shares
which Gross has a right to acquire upon the
exercise of options granted to him) and Broad
Capital (1.5% directly and an indirect interest
through holdings of approximately 3.7% in EAI,
calculated on a fully diluted basis, which 3.7%
represents shares which Broad Capital has a right
to acquire upon the exercise of options granted
thereto).
"Wertheim" Mr. Moshe Wertheim of 41 Hasaifan Street, Ramat
Ha'Sharon 47248, Israel.
"Zisser" Mr. Mordechay Zisser of 13 Yehuda Mozes Street,
Tel-Aviv 67771 C/o Control centers Ltd.
2. Purposes of the Joint Venture
The purposes of the Joint Venture shall be:
2.1 Identifying from IAI's Eligible Applications those subjects which
are commercially exploitable (as defined below) and commissioning
and/or engaging in all necessary feasibility studies, market
research and other studies and examinations required for the
evaluation thereof.
2.2 Exploit IAI's Eligible Applications by way of development,
manufacture, marketing, selling and servicing of products derived
from the development thereof in an effort
(8)
<PAGE>
to maximize the financial benefits to the Parties (herein: to
exploit or commercially exploit).
3. The Joint Venture and Incorporation and Capitalization of HoldCo
3.1 The Parties establish hereby a business Joint Venture
(hereinafter the J.V.) the ownership of which shall be 50.1% to
Partner and 49.9% to IAI.
3.2 Within the frame of the J.V. Partner shall establish a private
company as a vehicle for the operation of the Joint Venture. The
Company will be limited by shares and incorporated in Israel,
under the Companies Ordinance (New Version) 1983 with a
registered share capital of one hundred thousand (100,000) NIS
divided into ninety thousand (90,000) Class A Ordinary Shares of
NIS 1.00 (one) par value each and ten thousand (10,000) Class B
Ordinary Shares of NIS 1.00 (one) par value each. Holders of
Class A Ordinary Shares shall be entitled to receive notice of,
attend and vote in any General Meeting of HoldCo and appoint
members to the Board of Directors and to receive distributions;
Holders of Class B Ordinary Shares shall not be entitled to any
of the aforesaid rights except the right to receive
distributions, all as set forth under the Articles.
Partner shall establish HoldCo as follows:
3.2.1 499 Class A Ordinary Shares of HoldCo shall be issued to
Partner by HoldCo in consideration of their par value
plus an amount of seven million and five hundred thousand
Dollars ($7,500,000) payable as premium thereon to a bank
account of HoldCo at the Closing. In addition, Z.G.P.
Rishumim (trustee company of Zellermayer & Pelossof,
Adv.) shall transfer one Class A Ordinary Share to
Partner and Z.G.P. Neemanim (trustee company of
(9)
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Zellermayer & Pelossof, Adv.) shall transfer one share to
Partner's designee - in consideration of their par value
at the Closing. The share transferred to the designee
shall be transferred to Partner upon the exercise of the
Option as defined below.
3.2.2 Simultaneously with the issuing of the 499 Class A
Ordinary Shares to Partner, IAI will be granted an option
to acquire in an allotment from HoldCo, 499 Class A
Ordinary Shares in consideration of ten Dollars $10, the
exercise price of which shall be the par value of the
shares issuable thereunder (hereinafter the "Option") in
the form of Exhibit D hereto. The exercise of the Option
by IAI shall be subject to receipt by IAI of all the
approvals required under the Government Companies Law,
1975. The Option shall be irrevocable. IAI shall, without
delay, submit all the applications required for the
exercise of the Option and make all reasonable efforts to
obtain the required approvals and to exercise the Option
not later than 18 months from the closing of this
Agreement.
If and when the required approvals are obtained, IAI
shall within 30 days therefrom, give written notice
thereof to HoldCo with a copy to Partner, in which event
HoldCo shall thereupon allot to IAI the necessary shares
for the exercise of the Option. Partner shall take
whatever steps necessary for such allotment to take
place.
3.2.3 Partner undertakes, immediately upon the issuing of the
499 Class A Ordinary Shares to him by HoldCo, to cause
the Board, to pass the following resolutions:
(i) To adopt the J.V.
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(ii) To grant IAI the Option and irrevocably authorize
any three members of the Board to take all steps
necessary for the exercise of the Option,
including without limitation, issue of shares
thereunder, signing of the Shares Allotment
report and making the respective entry in the
Member Registrar.
(iii) to appoint the General Manager of HoldCo in
accordance with the provisions of Section 15.3
below at the Closing but in no event not later
than 45 days from the Closing.
(iv) that until the exercise of the Option, no
resolution shall be adopted by the General
Meeting of HoldCo without IAI's prior written
consent.
3.2.4 The Memorandum and Articles of Association of HoldCo
shall be in the form attached hereto as Exhibit A.
4. Exclusive Right of First Review
The Parties hereof are looking forward to a fruitful mutual cooperation
and shall constantly endeavor during the term of this Agreement to
identify IAI's Eligible Applications which may be commercially exploited
by Licensees as provided in Section 5 below. During the term and subject
to the provisions of this Agreement, IAI shall grant HoldCo the right of
first review for the purpose of commercial exploitation of IAI's Eligible
Applications and shall, pursuant to the terms hereof grant Licensee(s) a
license, in the form of Exhibit C, to exploit an IAI's Eligible
Application for the implementation of a Project within an Authorized Area.
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During the term of this Agreement, IAI shall not pursue the commercial
exploitation of IAI's Eligible Applications other than in accordance with
the terms and conditions hereof.
5. Operation of HoldCo
5.1 Identification of IAI's Eligible Applications.
5.1.1 Preliminary Meetings and Proposed Applications
5.1.1.1 IAI shall within reasonable time nominate a
person authorized thereby in each of its plants
to conduct preliminary meetings to discuss and
assess with HoldCo proposed applications
introduced for HoldCo (by either IAI or
HoldCo), cleared by IAI, to exploit through
Licensees an IAI's Eligible Application within
the scope of their respective License
("Proposed Application"). If necessary, said
persons shall convene other persons in the
respective plant or at IAI who are
knowledgeable in or who are in charge of the
Proposed Application in question, to
participate in such preliminary meeting and, if
required, to produce existing documentation in
response to reasonable requests made thereat
for information required to conduct such
initial preliminary assessment and evaluation.
5.1.1.2 HoldCo shall also nominate authorized
representatives recommended by the Investment
Committee to participate in the aforesaid
preliminary meetings who shall convene, if
necessary, other expert persons, qualified and
experienced in the identification and
commercialization of IAI's Eligible Application
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in question. All such persons shall be
subject to security clearance and customary
arrangements and/or restrictions concerning
the disclosure of confidential information.
5.1.1.3 Preliminary meetings as aforesaid shall be
convened on a regular basis and at least
once each month ("Preliminary Meetings").
5.1.2 the Investment Committee
An Investment Committee shall be formed no later than
seven days from the Closing Date and shall consist of
four (4) members appointed by Partner, two (2) members
appointed by IAI and the General Manager of HoldCo. IAI
and the Partner may each designate from time to time one
or more of their Authorized Persons as members of the
Investment Committee by giving a seven (7) days prior
written notice to HoldCo. Upon termination hereof for any
reason and/or when Partner ceases to hold directly and/or
through its Ultimate Controlling person or Persons
Controlled thereby at least 45% of the total issued and
outstanding share capital of HoldCo, excluding differed
shares, the Investment Committee shall be ipso facto
dissolved and all its powers and authorities hereunder or
otherwise shall be vested exclusively with the Board.
5.2 Procedure for examination and approval of Initial Applications
The Parties acknowledge the existence of certain identified IAI's
Eligible Applications which are at various stages of development
as described in Exhibit E 1-3 attached hereto (the "Initial
Applications") and have therefore, agreed that the
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examination of same by HoldCo to determine whether they should be
pursued by it, shall be granted priority and be carried on by
HoldCo, as follows:
5.2.1 the Investment Committee shall examine each of the
Initial Applications and shall determine whether such
Initial Applications should be pursued by HoldCo or,
whether any studies, marketing research and other
inquiries are necessary in order to make such
determination;
5.2.2 If the Investment Committee determines on the basis of
the materials provided by IAI and without commissioning
any further studies or inquiries, that an Initial
Application is not suitable for HoldCo to pursue, it
shall promptly advise the Board and IAI of such
determination in writing:
5.2.3 If the Investment Committee determines that further
studies or inquiries are necessary in order to determine
whether an Initial Application should be pursued by
HoldCo, HoldCo will commission same studies or inquiries
without delay. All technical feasibility studies shall be
commissioned from IAI on the basis of MOD Procurement
regulations respecting Time and Materials, unless IAI is
not interested in performing same. Based on the results
of the studies, the Investment Committee shall determine
whether or not to commission a Business Plan; if it
determines in the negative, it shall immediately advise
the Parties accordingly in writing and the provisions of
Section 5.2.6.1 below shall apply.
5.2.4 If the Investment Committee wishes on the basis of the
materials provided by IAI and without commissioning any
further studies or inquiries, to further examine an
Initial Application, it shall promptly commission from an
expert party approved by the majority of the members of
the Investment Committee
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including at least one member appointed by IAI, a
comprehensive five year Business Plan for it, inclusive
of a detailed Investment Plan covering at least Stage I
thereof and a budgetary Investment Plan for Stage II,
(hereinafter a Business Plan). Upon receipt of the
Business Plan commissioned, the Investment Committee
shall determine, on the basis of its findings and
results, whether or not to submit it for adoption by the
Board and shall advise the Board and IAI accordingly in
writing.
5.2.4.1 Notwithstanding the above, should the Business
Plan ordered indicate that the implementation
of the Project in question would require
funding in excess of $10,000,000 (ten million
dollars) and Partner does not express its
willingness and does not commit itself to fund
in accordance with Section 6.2 below the
additional amounts required to cover the excess
over the cap of ten million Dollars
($10,000,000) set forth in Section 6.2.5 below
or should IAI have a reasonable basis to
maintain that Partner might not fulfill its
funding obligations with respect to any
Project/Investment Plan/s for any reason
whatsoever, then each of the members of the
Investment Committee appointed by IAI shall
have veto power against submitting the
respective Business Plan to the Board for
adoption. In the event such veto is exercised,
the Investment Committee shall be deemed to
have determined against the pursuance by HoldCo
of the Initial or Proposed Application in
question and the provisions of Section 5.2.6.1
shall apply.
5.2.5 the Board shall determine without delay whether to adopt
or reject any Business Plan submitted thereto by the
Investment Committee;
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5.2.5.1 The Board shall be deemed to determine that
an Initial Application should be
commercially exploited by HoldCo if it
adopts its respective Business Plan when
submitted to it by the Investment
Committee. Such determination and adoption
by the Board, shall be made and be deemed a
positive determination and adoption if
supported:
(i) by a vote of the majority of the
members of the Board supporting such
adoption, or
(ii) by a tie vote, when an equal number of
directors appointed by Partner vote -
for the adoption of the Business Plan,
and an equal number of Directors
appointed by IAI vote - against the
adoption of same.
("hereinafter, a Positive Adoption").
5.2.5.2 An Initial Application/Business Plan,
adopted by the Board as provided
hereinabove, shall be referred to
hereinafter as a Project.
5.2.5.3 The adoption as aforesaid of a Business
Plan shall constitute on the one hand,
IAI's obligation to execute a License with
respect to the Project with the designated
Licensee and on the other hand, Partner's
commitment to fund the Project as set forth
in the Investment Plan/s in accordance with
the terms specified in Section 6 below and
to duly execute an undertaking to
respective Licensee in the form of Exhibit
F hereto.
(16)
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IAI's obligation to execute a License shall be in
consideration of Partner's obligation to fund the Project
as stipulated above.
5.2.6 The procedures set forth in Sections 5.2.1-5.2.5 shall be
completed with respect to the Initial Applications listed
in Exhibit E1 - within four and a half months from the
submission of the Proposed Application thereof, in the
form set forth in Exhibit G attached hereto, to the
Investment Committee; with respect to the Initial
Applications listed in Exhibit E2 - within nine months
thereof; and with respect to the Initial Applications
listed in Exhibit E3 - within fifteen months thereof, and
the following provision shall apply:
5.2.6.1 In any of the events stated in Sections
5.2.I-5.2.4 (inclusive) above where the
Investment Committee or the Board reaches a
negative determination with respect to the
pursuance by HoldCo of an Initial Application,
IAI shall be entitled thereupon to pursue the
commercial exploitation of the respective
Initial Application independently, free from
any restrictions under this Agreement.
5.2.6.2 In addition, in the event that no determination
is made by the Board regarding the adoption of
a Business Plan with respect to an Initial
Application, within the time periods set forth
in Section 5.2.6 above, whether or not a
respective Business Plan was submitted for its
adoption, IAI shall be entitled upon expiration
thereof to pursue the commercial exploitation
of the respective Initial Application
independently, free from any restrictions under
this Agreement.
5.3 General procedure for examination and approval of Proposed
Applications
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The following procedure shall apply to the examination by HoldCo
of Proposed Applications other than the Initial Applications.
5.3.1 Where all Parties are in agreement with respect to a
Proposed Application raised at a Preliminary Meeting as
stipulated in Section 5.1.1 above, HoldCo shall prepare
and submit a Proposed Application in the form of Exhibit
G, to the Investment Committee to recommend the
examination by it of the IAI Eligible Application
proposed and authorize funding by HoldCo of the
feasibility study, marketing research or other inquires
necessary to ascertain whether HoldCo should engage in
the commercial exploitation of the Proposed Application.
Where all Parties are not in agreement with respect to a
Proposed Application raised at a Preliminary Meeting,
then the Party supporting the pursuance thereof may
submit such application to the Investment Committee;
provided however that no Party shall submit to the
Investment Committee at any time during the first year
from the Closing Date more than 1 Proposed Applications
every three months and thereafter, more than 2 Proposed
Applications per month.
5.3.2 Within sixty (60) days from receipt of a Proposed
Application as above, the Investment Committee shall
advise the Parties in writing on its definite resolution
whether or not to pursue the examination of such Proposed
Application and authorize and make available the
necessary funding therefor. The Investment Committee
shall also advise the Board accordingly.
5.3.3 If the Investment Committee resolves not to allocate the
necessary funding required for the examination of the
applications specified in Sections 5.3.1 and 5.3.2 above,
or if no definite resolution to authorize and make
available the necessary funding is made by the Investment
Committee during the said
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sixty (60) days as aforesaid, it shall be deemed to have
rejected the Proposed Application in which case IAI may
pursue the commercial exploitation of the respective
Proposed Application independently, free from any
restrictions under this Agreement; provided however, that
(i) if during the said 60 day period, the Investment
Committee, after consulting with IAI, advises the
proposing party that essential additional
specific information, then readily available at
IAI, is required for making such resolution
regarding the Proposed Application in question,
than - unless security classified or otherwise
confidential hereunder - such information shall
be promptly provided by IAI and the period of 60
days shall be extended by 20 additional days; and
(ii) if on the other hand it becomes clear through
consultation with IAI that the additional
information required is not readily available at
IAI, then no extension of the said 60 day period
shall be granted and the presumptions and
consequences set forth in section 5.3.3 above
shall apply.
5.3.4 If the Investment Committee determines to authorize and
make available the necessary funding, it shall commission
without delay all such feasibility study, market research
and other inquiries as the Investment Committee deems
appropriate or necessary. All technical feasibility
studies shall be commissioned from IAI on the same basis
as MOD Time and Materials, unless IAI is not interested
in performing same.
5.3.4.1 Based on the results of the above studies the
Investment Committee shall determine whether or
not to commission a
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Business Plan; if it determines in the
negative, it shall immediately advise the
parties accordingly in writing and the
provisions of Section 5.2.6.l above shall
apply.
5.3.5 If the Investment Committee wishes, on the basis of the
results received by it to further examine a Proposed
Application it shall promptly commission from an expert
party, approved by the majority of its members including
at least one member appointed by IAI, a comprehensive
five year Business Plan for it, inclusive of a detailed
Investment Plan covering at least stage I thereof and a
budgetary Investment Plan for stage II. Upon receipt of
the Business Plan commissioned, the Investment Committee
shall determine, on the basis of its findings and
results, whether or not to submit same for its adoption
by the Board and shall advise the Board and IAI
accordingly in writing.
5.3.5.1 Notwithstanding the above, should the Business
Plan ordered indicate that the implementation
of the Project in question would require an
investment in excess of $10,000,000 (ten
million dollars) or should IAI have a
reasonable basis to maintain that Partner might
not fulfill its funding obligations of any
Project/Investment Plan/s for any reason
whatsoever, then each of the members of the
Investment Committee appointed by IAI shall
have a veto power against submitting the
respective Business Plan to the Board for
adoption. In the event such veto is exercised,
the Investment Committee shall be deemed to
have determined against the pursuance by HoldCo
of the Initial or Proposed Application in
question and the provisions of Section 5.2.6.1
shall apply.
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5.3.5.2 The Board shall be deemed to determine that
a Proposed Application should be
commercially exploited by HoldCo if it
adopts its respective Business Plan when
submitted to it by the Investment
Committee, by a Positive Adoption by the
Board.
A Proposed Application/Business Plan so
adopted shall also be refereed hereinafter
as a Project.
5.3.5.3 The adoption as aforesaid of a Business
Plan shall constitute on the one hand,
IAI's obligation to execute a License with
respect to the Project with the designated
Licensee and on the other hand, Partner's
commitment to fund the Project as set forth
in the respective Investment Plan/s in
accordance with the terms specified in
Section 6 below and to duly execute an
undertaking to respective Licensee in the
form of Exhibit F.
IAI's obligation to execute a License shall
be in consideration of Partner's obligation
to fund the Project as stipulated above.
5.3.6 The Board shall be deemed to have determined not to
pursue the commercial exploitation of the Proposed
Application if (i) it determines by a majority including
at least one Director appointed by Partner not to pursue
same, or (ii) if within a period of three months from
receipt of the results of the studies and the Business
Plan commissioned by the Investment Committee, if any, or
within 8 months from receipt of the original respective
Proposed Application by the Investment committee under
Section 5.3.1 above, whichever is earlier, the Board
makes no Positive Adoption to pursue same; in either of
the above events, IAI may pursue the commercial
exploitation of
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the respective Proposed Application, independently and
free from any restrictions under this Agreement.
5.4 Unless otherwise determined by the Board, six months prior to the
expiry of the two years period of Stage I of any Project, the
management of Licensee shall prepare or commission the required
Investment Plan for Stage II of such Project and submit it to the
Board of Directors of Licensee for adoption and, if adopted
thereby, to the Board for adoption, all no later than three
months prior to the expiry of Stage I; if the Board fails to make
a Positive Adoption of same within 2 months from submission
thereto as aforesaid, IAI shall have the option to revoke the
respective License granted by giving a 15-day prior written
notice to the Licensee in question with copies made to HoldCo and
Partner. Upon the expiration of the fifteen (15) day period, the
respective License shall terminate and the relevant IAI Eligible
Application in question shall revert to IAI (including all data
and know how transferred by IAI to Licensee and/or developed
therefor by IAI and/or by or for Licensee as well as any hardware
transferred by IAI to Licensee and/or built by or for respective
Licensee for the development of the Project in question such as
engineering mock-ups and/or prototypes) free from any restriction
and limitation herein and therein or otherwise, and respective
Licensee shall be deemed to have granted to IAI an irrevocable,
perpetual, royalty-free, worldwide, transferable and exclusive
license to use the Improvements made by and/or for Licensee and
any patents registered in its name with respect thereto for any
purpose whatsoever and thereupon Licensee shall transfer to IAI
the tangible Improvement in question and any and all
documentation and rights thereof. Notwithstanding the aforesaid,
it is hereby agreed that IAI will not be entitled to exercise its
aforesaid option to revoke the License in question, if it shall
become entitled to such option owing to unjusti-
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fied exercise thereby of its voting rights at the respective
Board of Directors so as to prevent the adoption of the
Investment Plan for Stage II of the respective Project.
5.5 Development of Projects
5.5.1 For the purposes hereof:
5.5.1.1 Field of License and Technology shall have
the same meaning as that defined therefor
in Section l of the License Agreement,
Exhibit C.
5.5.1.2 WBS Package shall mean the work break-down
structure package to be performed by IAI
exclusively for Licensee under Section
5.5.3 below.
5.5.2 Development of Projects
During the term of this Agreement, HoldCo shall cause any
research and development work required for the
development of a Project and its commercial exploitation
to be offered to IAI. Only where it can be shown that a
third party's offer is more competitive in terms of
quality, time and/or price shall the work in question be
commissioned from such a third party. Provided always,
that IAI shall be given a fair opportunity to evaluate
competing offers submitted and match the terms of its
offer therewith.
5.5.3 Notwithstanding the provisions of Section 5.5.2 above, it
is hereby agreed that where IAI, in its sole discretion,
determines that the disclosure and/or the transfer to
Licensee, under the License agreement of any portion of
the IAI
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Eligible Application designated in the Field of License
(herein the "Sensitive Portion") or that the performance
by Licensee or by a third party of the respective WBS
Package required for the research and development or for
the implementation of the Project, may jeopardize IAI's
rights to exclusively pursue and/or use such IAI Eligible
Application for all applications other than the
Application/s designated within the respective Field of
License - then such WBS Package shall be performed by IAI
and the following provisions shall apply:
(i) upon clearance by IAI, of the Proposed
Application in question under Section 5.1.1.1
above, IAI shall define in the space designated
in the Application therefor, the Sensitive
Portion and the respective WBS Package that is to
be exclusively performed by IAI.
(ii) Upon the examination by the Investment Committee
of such Initial or Proposed Application, it shall
consider among others, the IAI's limitations and
requirements stipulated therein with regard to
the Sensitive Portion and the WBS Package to be
performed by IAI. Should the Investment Committee
so request, IAI shall submit a price proposal for
the performance of same.
(iii) In the event that the Investment Committee
decides (whether before or after receiving a
price proposal for the WBS Package from IAI) that
the Initial or Proposed Application is not
suitable for HoldCo to pursue because of IAI's
said limitations or price proposal, the
provisions of Section 5.2.1. - 5.2.5.2.
(inclusive), as well as of Section 5.3. -
5.3.5.4. (inclusive) shall apply respectively.
(24)
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(iv) In the event that the Initial or Proposed
Application is submitted by the Investment
Committee for adoption to the Board and is
adopted by it as required under Section 5.2.5.1
or 5.3.5.2 above, the Technology listed in
Exhibit D of the respective License Agreement
describing the documented data to be transferred
by IAI to Licensee, shall not include the
Sensitive Portion (including any respective
engineering mock-ups and/or prototypes, if any).
Such Sensitive Portion shall however be kept and
designated by IAI at its premises and be
designated for the development by IAI of the
Project for Licensee. The use of such Sensitive
Portion and of the mock-ups and prototypes for
the performance of the respective WBS Package,
shall be free of charge except for reasonable
maintenance costs. Prices charged by IAI for the
performance of the WBS Package shall be no higher
than those charged for development work
contracted by IAI with Israel MOD in accordance
with MOD Procurement Regulations regarding Time
and Materials type of contract inclusive of the
specific hourly rates approved by MOD for each
audited period for such work at IAI, as well as
of the rules of such Regulations applying to
profit and reimbursement of direct and other
charges - as shall be certified by the Chief
Financial Officer of IAI.
5.6 Contract Manufacturing Rights to EAI and to IAI
5.6.1 HoldCo shall cause any electronic assembly work required
for the commercial implementation of Projects to be
offered to EAI and to IAI on an equal basis subject to
any applicable law and substantiated capabilities. Only
where it can be shown that a third party's offer is more
competitive in terms of quality, time and price shall the
work in question be commissioned from such third
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party. Provided always, that EAI or IAI, as the case may
be, shall be given a fair opportunity to evaluate
competing offers submitted and match the terms of its
offer therewith. The parties shall develop procedures to
assure equal offering of assembly work to IAI and EAI.
5.6.2 Subject to any applicable Law and substantiated
capabilities, HoldCo shall cause 75% of all electronic
manufacturing work required for the implementation of
Projects, to be offered on competitive basis to EAI, and
the remainder of 25% thereof to be offered on competitive
basis to IAI. All other contract manufacturing work
required for the implementation of Projects shall be
caused by HoldCo to be offered on competitive basis to
IAI.
6. Funding of HoldCo and Licensees
6.1 Initial Investments by Partner
For the purposes of funding the working capital of HoldCo,
including feasibility studies, market research and preparation of
Business Plans but excluding funding of Projects, Partner shall
invest in HoldCo an aggregate amount of seven million and five
hundred thousand Dollars ($7,500,000) ("Initial Investment") to
be paid at the Closing as premium on issuance of Ordinary Shares
in HoldCo as set forth in Sections 11.2 below (Closing).
Further funds for working capital of HoldCo, save for funding
Projects, is expected from distributions received by HoldCo from
Licensees and/or from equity and/or debt contributions made pari
pasu by HoldCo's shareholders and/or from third party lenders.
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6.2 Funding of Projects and Licensees
Subject to the provisions of Section 6.2.5 and 6.2.6 below,
Partner shall be obligated and responsible that a Licensee is
provided with the funds required in accordance with the
respective Investment Plan adopted so that at any given time
HoldCo's equity and voting interest in Licensee shall not fall
below fifty percent (50%) and Licensee equity to debt ratio shall
not fall below twenty-five/seventy-five percent (25/75%).
Partner shall provide funds to Licensee by way of:
6.2.1 amounts, payable to HoldCo as premium on Ordinary Shares
to be issued to Partner by HoldCo respectively, which in
turn shall be invested by HoldCo in Licensee in Ordinary
Shares and premium thereon so that HoldCo will at all
time hold at least fifty percent (50%) of Licensee equity
and voting rights. Simultaneously with any such issuance
of shares to Partner, HoldCo shall issue to IAI a number
of Ordinary Shares in consideration of their par-value,
so that the proportion between the total of IAI's
Ordinary Shares in HoldCo to the total issued Ordinary
Shares of HoldCo, prior to and following the issuance to
Partner and IAI pursuant hereto - shall remain unchanged.
6.2.2 Partner Loans made to Licensee in amounts that when added
to those provided under Section 6.2.1 above shall
constitute at least fifty percent (50%) of the total
investment required under the Investment Plan, and
6.2.3 the balance (after the initial fifty (50%) of the funds,
in equity and in Partner Loans, as stipulated in Sections
6.2.1 and 6.2.2 above, shall have been provided) - by
third party financing i.e., equity and/or debt
contributions by
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strategic and/or financial partners approved by the Board
and/or public offerings and/or banking institutions with
any security given, if required, by Partner and/or by
such strategic and/or financial partners.
6.2.4 Partner's obligation to fund Projects and Licensees under
the provisions of this Section 6.2 shall not fall below
an aggregate amount of one hundred million dollars
($100,000,000) for all Projects and Licensees, over a six
year period from the Closing Date.
6.2.5 The rules and obligations of Partner respecting the
funding of Projects and Licensees set forth above in this
Section 6, shall be binding upon Partner with regard to
both Stage I and Stage II respectively, provided however
that unless the funding of a higher investment in
accordance with Section 6.2 is agreed and committed to by
Partner with respect to a particular Project/Business
Plan, Partner shall not be obligated to fund a specific
Project as set forth in Section 6.2.1-6.2.3 above, beyond
a total of ten million Dollars ($10,000,000) per such
Project. If funding is required for the Project in
question after 5 years from its commencement and beyond
the total aggregate investment for (Stage I and Stage II)
set forth in the respective Investment Plan or in excess
of ten million dollars ($10,000,000), HoldCo shall seek
such excess funds from its shareholders after it and the
respective Licensee have exhausted all possibilities of
obtaining reasonable external non-equity finance. Failure
of a shareholder to provide such excess contributions as
aforesaid may cause the dilution of its derivative
shareholding in such respective Licensee (but not in
HoldCo).
6.2.6 If on the other hand the actual progress of the
implementation of the Project shall justify the
expediting/increasing or the delaying/reduction, as the
case
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may be, of any portion/s of the funding to be provided to
Licensee under the respective Investment Plan, the
following provisions shall apply:
6.2.6.1 With respect to delaying/reduction -- any
member of the Investment Committee will be
entitled to request it to pass a resolution
adjusting the Investment Plan accordingly, and
upon the Investment Committee adopting the
resolution to adjust the Investment Plan as
aforesaid, the Investment Plan shall be so
amended and Partner shall be obligated to act
accordingly; provided however, that such
adjustment be supported by the management of
the Licensee in question. If the respective
adjustment is not supported as aforesaid, no
such resolution shall be passed by the
Investment Committee unless supported by at
least one member of the Investment Committee
appointed by IAI.
6.2.6.2 With respect to expediting/increasing -- any
member of the Board will be entitled to request
it to pass a resolution adjusting the
Investment Plan accordingly, and upon the Board
adopting the resolution to adjust the
Investment Plan as aforesaid, the Investment
Plan shall be so amended and Partner shall be
obligated to act accordingly.
(29)
<PAGE>
7. Defaults and Termination
7.1 Fundamental Breach and Remedy
(i) Failure by Partner to fulfill any of its funding
obligations under Section 6 above and the respective
Business Plan pertaining to any Licensee, or
(ii) Failure by the Board, for any reason whatsoever, to adopt
a Business Plan for State II of any specific Project
prior to one month before the expiry of State I of the
Project in question,
shall constitute and be deemed a Fundamental Breach of this
Agreement by Partner. In such event IAI shall have the option, by
giving 30 day prior written notice to Partner and to HoldCo to
have Partner abandoned all of its interests with respect to the
Licensee in question, as set forth in Sections 7.1.1 - 7.1.3
below.
7.1.1 Upon the serving of such notice IAI shall have the
option:
(i) to acquire all of HoldCo shares in said Licensee
in consideration of an amount equal to Partner's
aggregate contributions to the respective Project
under Section 6.2.1 above or the shares' market
value (excluding the value of Partner Loans to
Licensee in question) as determined by HoldCo's
auditors, whichever is lower; and
(ii) to have all credits arising under all Partner's
Loans to said Licensee payable under the same
terms of payment as set forth in Section 7.1.2
below.
(30)
<PAGE>
7.1.2 The consideration payable by IAI for HoldCo's shares in
said Licensee under 7.1.1(i) above, as well as any
credits arising under all Partner's Loans to said
Licensee under 7.1.1(ii) above, shall be payable out of
such Licensee's profits available for distribution
remaining after 50% thereof are distributed, following
ten years from the transfer date of said Licensee's
shares to IAI - all without linkage and interest.
7.1.3 The shares of HoldCo in the respective Licensee shall be
transferred to IAI within fourteen (14) days of the
exercise of the option and HoldCo shall execute and
deliver to IAI any and all documents required in order to
effect such transfer.
7.2 Major Events of Default and Remedy
7.2.1 Each of the following shall constitute a Major Event of
Default:
(i) Partner's commission of a repetitious
Fundamental Breach under Section 7.1 above,
after having already committed at least one
previous Fundamental Breach, with respect to
any one or more of the first five Projects
pursued and implemented by HoldCo (hereinafter
the First Five Projects) and/or prior to
funding by Partner of an aggregate amount of
$40,000,000 with respect thereto.
(ii) The appointment of a receiver and/or liquidator
and/or a trustee and/or a manager appointed by
a court or other tribunal or approved thereby,
whether temporary or not, with respect to
Partner and/or over all or part of the assets
thereof and/or the filing of a motion for such
appointment which shall not be cancelled within
30 days of such filing
(31)
<PAGE>
and/or the negotiation of a general arrangement
with the creditors thereof and/or the
initiation of any insolvency or bankruptcy
proceedings with respect thereto which shall
not be cancelled within 30 days from the date
initiated.
(iii) Partner's failure to maintain Control of its
shares in HoldCo in its Ultimate Controlling
Person as required hereunder.
7.2.2 Upon the occurrence of any of the above Major Events of
Default, IAI shall be entitled, in addition to any other
remedy available to it under this Section 7, to exercise
the following option by giving Partner and HoldCo a
written notice to that effect:
To have a number of HoldCo shares held by Partner and/or
any entity Controlled thereby constituting 10% of the
entire issued and outstanding share capital of HoldCo
transferred to IAI in consideration of an amount equal to
Partner's pro rated aggregate contributions under Section
6.2.1 to the Projects then pursued by HoldCo or, the
shares' market value as determined by HoldCo's auditors,
whichever is lower, payable out of HoldCo's profits
available for distribution remaining after 50% thereof
are distributed, following ten years from the transfer
date, without linkage and interest (hereinafter "the
Price Payable"). The shares of Partner and/or any entity
Controlled thereby in HoldCo shall be transferred to IAI
within sixty (60) days of the exercise of the option and
Partner and HoldCo shall execute and deliver to IAI any
and all documents required in order to effect such
transfer.
7.3 Repetitious Event of Default
(32)
<PAGE>
Commission by Partner of a repetitious Fundamental Breach under
Section 7.1 above after having already committed more than one
previous Fundamental Breach, with respect to any Project pursued
and implemented by HoldCo and after funding by Partner of an
aggregate amount of at least $ 40,000,000 shall constitute a
Repetitious Event of Default. In such event IAI may, in addition
to any other remedy available to it under this Section 7,
exercise, by giving Partner and HoldCo a written notice to that
effect, an option to have a number of HoldCo Class B shares
constituting 10% of the entire issued and outstanding share
capital of HoldCo on a fully diluted basis issued to IAI, at par
value, within thirty (30) days of the exercise of the option.
7.4 Security and Designation of Transferee
7.4.1 As security for the performance of Partner's obligations
hereunder, upon Closing and upon each issue of HoldCo's
shares and/or options thereafter, Partner and/or any
entity Controlled thereby shall pledge and appoint a
proxy with respect to a number of their shares in HoldCo
constituting 10% of the entire issued and outstanding
share capital of HoldCo in accordance with Exhibit H
hereto.
7.4.2 If under applicable Legal Requirements the shares in
question, whether on a temporary basis or not, cannot be
transferred as above to IAI or if IAI, for any reason,
wishes such shares to be transferred to a third party,
IAI may designate another entity to which such transfer
may take place and Partner and/or any entity Controlled
thereby or HoldCo, respectively, shall be required to
transfer the said shares to such entity as aforesaid.
7.5 Termination
(33)
<PAGE>
IAI shall also be entitled upon any Fundamental Breach, Major
Event of Default and/or Repetitious Event of Default to terminate
this Agreement, whether in addition to exercising any of the
options provided to it herein above in this Section 7 and/or
independently thereof, by giving Partner thirty (30) day prior
written notice and the provisions of Section 16.2 regarding
termination shall apply.
7.6 Grace Period
Notwithstanding the provisions of this Section 7, a delay of not
more than thirty (30) days in making any of the payments by
Partner under Section 6.2, shall not be considered as a breach
hereof, provided that Partner shall pay interest on the delayed
amount at an annual rate of 4% above the prime corporate lending
rate applicable in Citibank, New York, New York for similar
amounts and periods.
7.7 Ultimate Controlling Person's Liability
Notwithstanding anything to the contrary herein and to avoid any
doubt, subject to the personal commitments set forth in Exhibit I
there shall be no personal liability on the part of any Ultimate
controlling Person for any Fundamental Breach, Major Event of
Default or Repetitious Event of Default under this Section 7.
8. Option to IAI and IPO of Partner
8.1 At the Closing Partner shall deliver IAI a warrant agreement in
the form of Exhibit J hereto duly executed by EAI and binding
thereupon under which IAI shall have an option to purchase up to
500,000 shares of Common Stock (constituting 2.1% of the entire
issued and outstanding share capital of EAI, on a fully diluted
basis) carrying
(34)
<PAGE>
incidental and demand registration rights at EAI's expense, at an
exercise price of $7.25 per share.
8.2 When Partner contemplates a public offering of its shares, prior
to the closing of such offering, at IAI request, the parties
shall negotiate in good faith and reach an agreement assuring
that IAI's interest in HoldCo is swapped with shares of Partner
in a way which secures for IAI and the Ultimate Controlling
Person, as nearly as practicable, the benefits and obligations
reflected in this Agreement and exhibits hereto.
9. Progress Targets
9.1 The Parties hereby agree that the following progress targets
specified hereinbelow represent the minimal scope of activity and
investment anticipated for HoldCo and Licensees, within the
respective periods specified therefor:
9.1.1 Within the first two years following the Closing:
(i) the accomplishment of the examination of all
the Initial Applications as well as at least
fifteen (15) Proposed Applications and the
funding of such examination, and
(ii) the accomplishment of the adoption by the Board
of at least five (5) Business Plans (Projects)
in an aggregate investment of at least
$20,000,000 for Stage I of such Projects.
(35)
<PAGE>
9.1.2 Within four years following the Closing - the
accomplishment of the adoption by the Board of at least
nine (9) Business Plans (Projects) in an aggregate
investment of $ 65,000,000.
9.1.3 By the commencement of the sixth year following the
Closing - the commitment by the Partner under Section
5.3.5.3 above to no less than 82% of the minimal
aggregate investment amount set forth in Section 6.2.4
above.
9.2 In the event that one of the progress targets set forth in
Section 9.1 above, has not been accomplished within the time
period specified therefor, each Party shall be entitled to bring
this agreement to an end by giving the other Party a thirty (30)
days prior written notice to that effect in which event the
Agreement shall be deemed terminated on the date specified in the
notice and the provisions of Section 16.2 regarding Termination
shall apply.
10. Representations of the Parties
10.1 Partner hereby represents and warrants to IAI and HoldCo as
follows:
10.1.1 Partner has been duly organized and is validly existing
as a private company under the laws of the State of
Israel as hereinabove stated and has full corporate power
and authority to enter into this Agreement and to take
upon itself all the commitments and perform all the
obligations imposed upon it under this Agreement.
10.1.2 The activities contemplated by this Agreement will not
violate or be in conflict with or constitute a default
under any agreement or
(36)
<PAGE>
commitment to which Partner and/or its Ultimate
Controlling Person and/or entities Controlled thereby are
a party or by which they are bound or violate any Legal
Requirements.
10.1.3 Partner has the financial means required to provide the
Initial Investment and to the best of its knowledge and
belief will have at the time required the additional
funding necessary under Section 6 above, has experience
and expertise in the management of projects, ventures and
companies engaged in the development, manufacture,
marketing and sale of products in the high-technology
field, and is willing to and will use such expertise and
experience for the success of HoldCo.
10.1.4 Partner acknowledges and agrees that IAI did not make any
representations or warranties relating to IAI's Eligible
Applications, their feasibility, commercial potential,
originality or possible use and will not make or raise
any claims or demands relating thereto. Partner had been
given by IAI ample opportunity prior to the execution
hereof to conduct a due diligence review of the potential
for commercial exploitation of IAI's Eligible
Applications hereunder and has conducted such review and
in the course of which was given any available oral or
written information required by Partner in respect
thereof and is fully satisfied with the findings of its
review.
10.1.5 Mr. Gross and Mr. Hauser shall be the Co-chairman of
Partner.
10.1.6 EAI has delivered to IAI its audited consolidated balance
sheets, statements of operations, statements of cash
flows and statements of changes of shareholder' equity
for the fiscal years ended 1993 and 1994
(37)
<PAGE>
(collectively, the "Financial Statements"). The Financial
Statements are complete and correct in all material
respects and have been prepared in accordance with
generally accepted accounting principles ("GAAP") applied
on a consistent basis throughout the periods indicated.
The Financial Statements accurately present the financial
condition, operating results, cash flows and changes in
shareholders' equity of EAI as of the dates, and during
the periods, indicated therein. Except for liabilities in
immaterial amounts incurred in the ordinary course of
business since December 31, 1994, EAI has no obligations
(other than unknown liabilities which are immaterial in
amount) or otherwise except as set forth or reflected or
reserved against the Financial Statements.
10.1.7 Partner is aware that IAI has not obtained yet the
approval required under the Government Companies Law,
1975 for the holding of HoldCo's shares by IAI.
10.2 IAI hereby represents and warrants to Partner and HoldCo that:
10.2.1 IAI is an Israeli Government Company and has been duly
organized and is validly existing under the laws of the
State of Israel and has full corporate power and
authority to enter into this Agreement and to take upon
itself all the commitments and perform all the
obligations imposed upon it under this Agreement, and
shall apply for the approval required under the
Government Companies Law, 1975 for the holding of
HoldCo's shares by IAI.
(38)
<PAGE>
10.2.2 The activities contemplated by this Agreement will not
violate or be in conflict with or constitute a default
under any agreement or commitment to which IAI is a
party.
11. Closing
The Closing shall take place on August 8, 1995 at 10:00 a.m. at the
offices of IAI, at Ben Gurion International Airport, or on such other date
or at such other address in Israel as the Parties shall agree.
The following steps and transactions shall take place simultaneously at
the Closing:
11.1 Cancelled.
11.2 499 Class A Ordinary Shares of HoldCo shall be issued to Partner
by HoldCo, in consideration of their par value plus an amount of
seven million five hundred thousand Dollars ($7,500,000) which
shall be paid by Partner, as premium thereon, simultaneously with
such allotment, by way of Bank Transfer. In addition, Z.G.P.
Rishumim (trustee company of Zellermayer & Pelossof, Adv.) shall
transfer one Class A Ordinary Share to Partner and Z.G.P.
Neemanim (trustee company of Zellermayer & Pelossof, Adv.) shall
transfer one share to Partner's designee - in consideration of
their par value.
11.3 Partner shall cause HoldCo to convene a special General Meeting
of HoldCo whereupon it will be decided:
(39)
<PAGE>
(i) that HoldCo adopts the Articles set forth in Exhibit A in
place of the existing Articles.
(ii) until the exercise of the Option, no resolution shall be
adopted by the General Meeting of HoldCo without IAI's
prior written consent.
11.4 Partner shall appoint three Directors, inclusive of the first
Chairman of the Board.
Partner shall then cause the Chairman of the Board to convene the
first meeting of the Board whereupon the Option shall be granted
to IAI.
Thereafter, IAI, by virtue of the Option shall also appoint,
three Directors to the Board.
11.5 The Directors appointed by IAI shall join the Board meeting and
the Board shall continue to determine the following:
(i) The ratification and adoption of this Agreement and the
authorization of HoldCo to become a party hereof.
(ii) the signatories rights of HoldCo.
(iii) the appointment of the General Manager.
11.6 The authorized signatories of HoldCo shall execute this
Agreement on behalf of HoldCo.
(40)
<PAGE>
11.7 Partner shall deliver to IAI an undertaking in the form of
Exhibit I hereto, duly executed by its Ultimate Controlling
Person and a duly executed pledge and proxy in the form of
Exhibit H hereto.
11.8 Partner shall appoint Messrs. Gross, Wertheim, Zisser and Hauser
as its members to the Investment Committee.
12. Confidentiality.
12.1 Considering that HoldCo and/or the Parties may receive
confidential information, Partner and IAI agree to establish the
mechanisms necessary for the control and protection of
information as provided for in this Section.
12.2 For purposes of this Agreement, "Confidential Information" is
considered information transmitted in writing and marked
"confidential" and any other verbal information that the
delivering Party advises in writing is Confidential Information
prior to such disclosure or within thirteen (30) days thereafter.
12.3 With respect to the Confidential Information generated and/or
received by the Parties, the Parties agree to indicate in writing
persons approved by and who are qualified by them to
receive/transmit Confidential Information coming from one of the
Parties and/or generated thereby (referred to herein as "Persons
Authorized"), who shall be obliged to maintain this
confidentiality.
The Persons Authorized shall sign a pledge of secrecy with the
respective Party and the appointment by Partner of Persons
Authorized and Directors shall be subject to security clearance
by the competent authorities of Israel.
(41)
<PAGE>
12.4 Irrespective of the appointments made under the provisions of
the first paragraph of Subsection 12.3:
12.4.1 The members of the Board shall be Persons Authorized by
HoldCo as of the moment they respectively take office
until they vacate it.
12.4.2 Messrs. Zisser and Hauser shall be Persons Authorized by
Partner, until notice to the contrary shall be given by
Partner provided they have been cleared as required under
the second paragraph of Subsection 12.3 above.
12.5 An item of Confidential Information shall automatically cease to
be confidential whenever: (i) it is or becomes public without the
act or omission of the recipient; or (ii) it is communicated to
the recipient by third parties that are under or appear to be
under no obligation of confidentiality to the other Party or to
HoldCo; or (iii) five (5) years have elapsed from the termination
of this Agreement or from the time that the recipient Party
and/or entities Controlled thereby cease to hold shares in
HoldCo, whichever is later.
12.6 Any information transmitted to HoldCo or to another Party without
complying with the provisions in Sections 12.2 and 12.3 above
shall not be considered confidential and shall not generate an
obligation of secrecy on the part of the recipient.
12.7 The receipt of Confidential Information by the Parties in
accordance with the terms established in this Agreement does not
signify the transfer of ownership of such Confidential
Information, which shall be maintained as the property of the
transmitter.
(42)
<PAGE>
12.8 The Parties shall take appropriate measures to cause the officers
and other members of corporate bodies of HoldCo, including the
members of the Advisory Board, to comply with the terms of this
Section 12. Condition for taking office and exercising their
functions shall be that the respective occupants of such offices
sign a document obliging them to utilize all the Confidential
Information in compliance with the terms of this Section
(including compliance with the requirement that all Confidential
Information be clearly marked as such) and to strictly comply
with these obligations during their term of office and
thereafter.
13. Non-Compete, Authorized Areas, Soliciting Employees
13.1 Non Compete
13.1.1 Partner undertakes that Partner and/or its Ultimate
Controlling Person and/or persons and/or entities
Controlled thereby shall not engage, either directly or
indirectly, individually or with other partners, in any
business which is being pursued by HoldCo and/or any
Licensee and may be competitive therewith. Without
derogating from the generality of the aforesaid,
businesses shall include any Projects and any Proposed
Applications with respect to which the Investment
Committee has determined to commission any studies,
inquiries and/or a Business Plan in accordance with the
provisions of Section 5 above (hereinafter, an "Explored
Project").
13.1.2 Subject to any other provisions of this Agreement, IAI
undertakes that, it shall not engage, in any business
which is being pursued by HoldCo and/or any Licensee in
accordance with the provisions of this Agreement and may
be competitive therewith. To avoid any doubt,
(43)
<PAGE>
such businesses shall include any Projects and any
Explored Project. For the sake of clarity such businesses
shall exclude those outside the Authorized Areas;
13.1.3 The obligation not to compete as aforesaid shall last, in
relation to a Party hereto, for 2 (two) years after the
termination of this Agreement for any reason or 2 (two)
years after such Party and/or entities Controlled thereby
cease to hold shares in HoldCo, whichever is later.
13.2 Authorized Areas
The Authorized Areas are listed in Exhibit B hereto. Based on its
planning regarding IAI Core Business, IAI shall be entitled to
omit from Exhibit B any subject/s or part/s of area/s included
therein. Provided that IAI shall not be entitled to delete a
specific subject or part of an area therein where same is already
being pursued and so long as it is being pursued by HoldCo and/or
Licensees either as an Explored Project or as a Project.
13.3 Solicitation of Employees
Save with the prior written consent of the Parties, none of the
Parties will during the term of this Agreement and for a period
of three (3) years following its termination for any reason or
following such time as the soliciting Party and/or entities
Controlled thereby ceases to hold shares in HoldCo, whichever is
later, either on its own account or for any person, firm, company
or organization, employ, hire, solicit or entice or endeavor to
solicit or entice away from another Party, any key employee or
officer of such Party whether or not such person by leaving such
position will commit any breach of his contract of employment.
(44)
<PAGE>
14. Certain Indirect and Direct Transfers of Shares.
Transfer of shares in HoldCo shall be made in accordance with the
provisions of the Articles and subject to rights of first refusal and tag
along as provided in Article 17 therein.
The Parties further agree that:
14.1 The development of a long term relationship between Partner, IAI
and HoldCo is a prominent aspect of the transactions contemplated
under this Agreement. Therefore each of IAI and Partner hereby
agree and undertake not to sell or otherwise transfer any of
their shares in HoldCo for a period of six years from the Closing
other than as provided in Section 14.3 below. Partner further
undertakes that Control of its shares in HoldCo shall remain in
its Ultimate Controlling Person as specified in the definition
thereof for a period of six years from the Closing. Thereafter,
transfers other than as provided in Section 14.3 below shall be
subject to a right of first refusal and a tag along right
pursuant to Article 17 of the Articles as stated above and
subject to approvals as stated in Section 14.2 below. Party's
rights under this Section 14.1 to request fulfillment of the
other party's tag along and/or first refusal obligation shall
terminate ipso facto when such Party ceases to hold directly
and/or through its Ultimate Controlling person or Persons
Controlled thereby at least 45% of the total issued and
outstanding share capital of HoldCo, excluding differed shares.
14.2 The Board shall have the power to approve or disapprove any
transfer of shares in HoldCo. In addition, any transfer of shares
in HoldCo by a shareholder shall be subject to the prior approval
of all other shareholders provided however, that their consent
shall not be unreasonably withheld. For the purposes hereof,
other shareholders' consent shall, without limitation, be deemed
to be reasonably withheld
(45)
<PAGE>
if the transfer proposed is to an entity which is or may be
reasonably expected to be engaged in competition with HoldCo
and/or Licensees, directly or indirectly, or is Controlled by a
resident or a citizen of a country with which the State of Israel
has no diplomatic relations or which is an adversary thereof.
14.3 Subject to the provisions hereof and of the Articles, each Party
shall be permitted to transfer shares in HoldCo to an entity
Controlled thereby.
15. Certain Matters Relating to the Management of the Company.
15.1 HoldCo will be managed by the Board consisting always of members
with a term of office of one (l) year. Each tranche of nine and a
half percent (9-1/2%) of the total number of the issued shares of
the Company, excluding differed shares, will entitle the holders
thereof to appoint one (l) director to the Board, remove him from
his office and replace him whenever his place is vacated for any
cause or reason. Except as otherwise specifically stipulated in
Sections 5.2.5.1 and 5.3.5.2 regarding the adoption of a Business
Plan, and Section 5.3.6 regarding the rejection of a Business
Plan, the Board shall take resolutions by a majority of its
members, no member having a casting vote in the event of a tie.
In the first two years the Chairman of the Board of the Company
shall be appointed by Partner, in this second period of two years
by IAI, and so on in rotation on a biannual basis.
As long as IAI retains the Option, IAI will be entitled, by
virtue of the Option, to appoint up to five directors, remove any
of them from his office and replace him whenever his place is
vacated for any cause or reason. Should IAI exercise its Option
to acquire 499 Ordinary Shares, its right to appoint Directors by
virtue of
(46)
<PAGE>
the Option shall be cancelled and IAI will have the right to
appoint directors by virtue of its shareholding as stated above.
15.2 Unless otherwise expressly stated herein and in the Articles of
HoldCo, the General Meeting of the shareholders of HoldCo shall
take any ordinary resolutions by a majority of fifty five percent
(55%) of the total number of the issued shares of HoldCo.
15.3 The General Manager of HoldCo shall be recommended by Partner and
approved by the Board. If either IAI or Partner requests that the
General manager of HoldCo be removed and substituted, then the
Parties shall cause HoldCo to hold, within a period no longer
than thirty (30) days, a general meeting in which Partner and IAI
agree, together, to cause a vote for the requested removal,
arranging for his substitution as quickly as possible in the same
manner provided for herein.
15.4 The Parties agree to cause HoldCo, Licensees or, entities
Controlled thereby, as the case may be, to always appoint an
equal number of persons nominated by IAI and persons nominated by
Partner to serve as members of any board of directors and/or
comparable governing body and/or committees in which the Company
holds an equity interest, directly or in directly.
15.5 Dividend Policy
The Parties agree that unless otherwise decided by the Board,
HoldCo's and Licensees' dividend policy shall be to always
distribute a minimum of fifty percent (50%) of the amount allowed
by law subject, however, to the respective articles of
incorporation and to the goals and policies set forth in the
respective business plan adopted by HoldCo or Licensees.
(47)
<PAGE>
15.6 Party's rights under the second paragraph of Section 15.1, under
Section 15.3 and Section 15.4 shall terminate ipso facto when
such Party ceases to hold directly and/or through its Ultimate
Controlling person or Persons Controlled thereby at least 45% of
the total issued and outstanding share capital of HoldCo,
excluding differed shares.
16. Termination
16.1 This Agreement shall become effective as of the execution hereof
and unless the Parties agree otherwise in writing, shall
terminate six (6) years after the Closing Date, if not previously
terminated in accordance with the terms hereof or otherwise.
16.2 The following Sections shall continue to apply in the event of
any termination of this Agreement:
(i) Section 6.2 with respect to the funding by Partner of the
Projects then pursued by Licensees and Section 5.5, with
respect to the WBS Package to be carried out exclusively
by IAI.
(ii) Section 14 regarding the transfer of shares in HoldCo and
Section 15 with regard to certain matters relating to the
management of HoldCo so long as IAI and/or entities
controlled thereby and Partner and/or entities controlled
thereby hold shares in HoldCo.
(iii) Sections 12 and 13 regarding confidentiality and
non-compete as well as Sections 18-20 regarding notices,
governing law and miscellaneous.
(48)
<PAGE>
(iv) Section 7 with respect to certain defaults and remedies.
(v) Second paragraph of Section 5.1.2 with respect to the
Investment Committee being ipso facto dissolved upon
termination, and/or Partner's ceasing to hold at least
45% of HoldCo's shares.
17. Expenses
17.1 Each Party hereto shall pay the costs and expenses incurred by
such Party in connection with the entering into and completion of
this Agreement.
17.2 Each of the Parties declares that there are no brokers to this
transaction on its behalf and no commission payable to any entity
employed thereby.
18. Notices
Any notice, declaration or other communication required or authorized to
be given by any Party under this Agreement to any other Party shall be in
writing and shall be personally delivered or sent by facsimile
transmission (with a copy by ordinary mail in either case) addressed to
the other Party at the address stated below or such other address as shall
be specified by the Parties hereto by notice in accordance with the
provisions of this Section. Any notice shall operate and be deemed to have
been served on the next following business day.
Addresses for the purposes of this Section are as follows:
(49)
<PAGE>
Partner:
Electronic Associates Technologies Israel Ltd.
c/o Mr. Dan Lahat, Adv.
Cohen, Lahat & Co.
Beit Hakeren
155 Bialik Street, Ramat Gan
With copies to:
Mesirov, Gelman, Jaffe, Cramer & Jamieson
1735 Market Street
Philadelphia, PA 19103-7598
Attention: Richard P. Jaffe
Mark Hauser
c/o Tamarix Capital Corp.
101 E. 52nd Street, 11th Floor
New York, N.Y. 10022
facsimile: 212-644-5757
(50)
<PAGE>
IAI:
ISRAEL AIRCRAFT INDUSTRIES LTD.
Ben Gurion International Airport
70100 Israel
Facsimile: 03 935 8987
Attention: Herzela Ron, Legal Counsel
With a copy to:
Zellermayer & Pelossof, Adv.
Europe House
37 Shaul Hamelech, Tel-Aviv
Attention: Michael Zellermayer
Facsimile 03-6952884
19. Governing Law and Forum
This Agreement is governed by and shall be construed in accordance with
the laws of the State of Israel. The competent courts situated in Tel-Aviv
shall have exclusive jurisdiction in respect of any matter arising out of
or in connection with this Agreement.
20. Miscellaneous
20.1 Reference to any statute or statutory provisions includes a
reference to that statute or statutory provisions as from time to
time amended, extended or reenacted.
(51)
<PAGE>
20.2 Words denoting the singular number only shall include the plural
and vice versa.
20.3 The Section and other headings contained in this Agreement are
for convenience only and do not constitute matters to be
considered in interpreting this Agreement.
20.4 This Agreement may be executed in two or more counterparts each
of which shall be deemed an original but all of which constitute
one and the same instrument.
20.5 Save as expressly provided herein, this Agreement may be amended
or terminated, and any of the terms hereof waived, only by a
document in writing specifically referring to this Agreement and
executed by the Parties hereto or, in the case of a waiver, by
the Party waiving compliance. The failure of either Party hereto
at any time or times to require performance of any provisions
hereof shall in no manner affect this right at a later time. No
waiver by either Party hereto of a breach of any term contained
in this Agreement, in any one or more instances, shall be deemed
or construed as a further or continuing waiver of any such breach
or a waiver of any breach of any other form.
20.6 Any amount specified in Dollars in this Agreement and Exhibits
hereof should be paid in NIS or in Dollars if paid by a foreign
resident. Such Dollar amounts should be converted to NIS
according to the representative rate for Dollars last published
by the Bank of Israel.
20.7 This Agreement shall be binding upon and inure to the benefit of
each of the Parties hereto and its respective successors and
permitted assigns; provided, however, that this Agreement may not
be assigned, in whole or in part, by any Party hereto without the
prior written consent of the other Parties hereto. Transfers of
shares in
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HoldCo in accordance with this Agreement and the Articles of the
Company shall not be considered as prohibited assignment as
aforesaid.
Without limiting the generality of the foregoing, the Parties
agree that in the case of any transfer of shares in HoldCo
permitted in this Agreement, any transferee thereof, including,
without limitation, any entity which for whatever reason acquires
any of the shares, shall agree to be bound by the terms of this
Agreement. The Parties hereto further agree that any offer for
the sale, transfer or disposition of the shares will include the
obligation each Party assumes hereunder to require the transferee
to accept in writing the terms and conditions of this Agreement.
A copy of the transferee's letter of acceptance will be provided
to the management of HoldCo, which will confirm to the Board that
such acceptance has taken place. Once this letter of acceptance
has been provided, and the transfer concluded, management will
then proceed to register any such transfer in the corresponding
corporate records.
The Parties agree that the existence of restrictions on the
transfer of shares in HoldCo will be noted on the share
certificates issued by HoldCo in the following manner: "The free
negotiability of these shares is restricted legally and
contractually. The failure of the selling shareholder to disclose
and comply with all such restrictions will render any transfer of
these shares null and void."
20.8 For the convenience of the Parties, this Agreement may be
translated into Hebrew. In the event of conflicts arising from
such translation, the English counterpart shall control.
20.9 This Agreement, together with any and all Exhibits hereto, and
any document that may be delivered as required or provided for
hereunder, contains the entire
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agreement of the Parties with respect to the subject matters
hereof, and, from and after the date hereof supersedes all
previous agreements, negotiations, commitments and writings in
respect of such subject matters.
20.10 Any provision of this Agreement which is declared void or
unenforceable by any competent authority or court shall to the
extent of such invalidity or unenforceability be deemed
severable, and shall not affect the other provisions of this
Agreement, which shall continue unaffected. The Parties undertake
in good faith to replace any such invalid provision with a valid
one which, so far as is reasonably possible, leads to the same
result.
20.11 Time is of the essence of this Agreement with respect to any
provision hereof requiring the payment of money or delivery of
guarantees to the benefit of HoldCo and/or Licensees.
20.12 Each Party hereby undertakes to each of the other Parties that it
will do all such things and execute all such documents as may be
reasonably necessary or desirable to carry into effect or to give
legal effect to the provisions of this Agreement and the
transactions hereby contemplated.
20.13 If at any time after the date of this Agreement, the laws or
regulations of Israel or any other competent authority with
jurisdiction change, or, except where Section 20.10 is
applicable, are applied, in such a way as to materially impair or
frustrate the objectives or intent of the Parties or of HoldCo as
reflected in this Agreement, the Parties hereby covenant and
agree to renegotiate the terms of this Agreement in good faith so
as to secure for each Party and HoldCo, as nearly as practicable,
the benefits and obligations reflected in this Agreement.
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20.14 With respect to funding of Licensees this Agreement constitute an
Agreement for the benefit of a third party and Licensee in
question may rely on the provisions of Section 6 hereinabove.
20.15 The Parties hereto shall, and they shall cause HoldCo and
Licensees, to the extent of their ability as shareholders to, at
all times, comply in all respects with all applicable Legal
Requirements.
20.16 No delay on the part of any Party in exercising any rights
hereunder or failure to exercise the same shall operate as a
waiver of such rights; no notice to or demand on any party shall
be deemed to be a waiver of the obligations of such party or of
the right of the party giving such notice or demand to take
further action without notice or demand; provided however, that
where expressed remedy/ies is designated in this Agreement for a
specific respective breach/es/default/s by Partner defined
thereunder, such remedy/ies shall constitute the exclusive
remedies available to IAI for such respective
breach/es/default/s. A waiver by a party of a right or remedy in
any particular instance shall not operate as a waiver of such
right or remedy in any other instance.
20.17 This Agreement is binding and enforceable amongst the Parties
hereto. In case any provision of the Exhibits hereto or of the
Articles is contrary to or inconsistent with the provisions
hereof, the provisions hereof shall prevail with respect to the
Parties. In case the Exhibits hereto or the Articles are silent,
or any provision thereof is incomplete, the provisions hereof
shall govern and/or complete such omissions with respect to the
Parties.
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20.18 Partner shall not advertise, market or otherwise disclose to
others any information relating to this Agreement, nor
commercially use IAI's name or that of any of its affiliated
companies without IAI's express written consent.
21. Break-Up Fee
The Parties hereby agree as follows:
21.1 In the event that a Party hereto fails to perform the obligations
such Party undertook to perform at the Closing under Section 11
hereinabove it shall pay the other party hereto as liquidated
damages an amount equal to five hundred thousand Dollars
($500,000).
21.2 Both Parties hereto acknowledge that the amounts payable under
this Section 21 constitute liquidated damages and not penalties,
that the injuries caused by such failure are difficult or
impossible to estimate accurately, and that the sums payable
herein are reasonable pre-estimates of the probable losses
associated with such injuries.
21.3 Partner shall deposit upon execution hereof an amount equal to
five hundred thousand Dollars ($500,000) with Mr. Dan Lahat, Adv.
in accordance with the Letter of Instructions, Exhibit K hereto.
IN WITNESS whereof the Parties hereto have executed this agreement the day and
year first above written.
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<TABLE>
<S> <C>
ISRAEL AIRCRAFT INDUSTRIES LTD.
By:_/s/ S. Peretz____________________ By:________________________________
Name:________________________________ Name:______________________________
Title:_______________________________ Title:_____________________________
Date:________________________________ Date:______________________________
ELECTRONIC ASSOCIATES TECHNOLOGIES ISRAEL LIMITED
By:_/s/ Irwin Gross__________________ By:________________________________
Name:________________________________ Name:______________________________
Title:_______________________________ Title:_____________________________
Date:________________________________ Date:______________________________
HALACOACH HANEEMAN #52 LTD.
By:__________________________________ By:________________________________
Name:________________________________ Name:______________________________
Title:_______________________________ Title:_____________________________
Date:________________________________ Date:______________________________
</TABLE>
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