SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 1998
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OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from _____________________ to _____________________
Commission file number 0-538
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AMPAL-AMERICAN ISRAEL CORPORATION
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(Exact Name of Registrant as Specified in Its Charter)
New York 13-0435685
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1177 Avenue of the Americas, New York, New York 10036
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (212) 782-2100
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Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|
The number of shares outstanding of the issuer's Class A Stock, its only
authorized common stock, is 23,938,712 (as of July 31, 1998).
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AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
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Index to Form 10-Q
Page
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Part I Financial Information
Consolidated Statements of Income
Six Months Ended June 30 ................................... 1
Three Months Ended June 30 ................................. 2
Consolidated Balance Sheets .................................. 3
Consolidated Statements of Cash Flows ........................ 5
Consolidated Statements of Changes in Shareholders'
Equity ..................................................... 7
Notes to the Consolidated Financial Statements ............... 8
Management's Discussion and Analysis of
Financial Condition and Results of Operations .............. 12
Part II Other Information ............................................ 18
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF INCOME
SIX MONTHS ENDED JUNE 30, 1998 1997
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(Dollars in thousands, except per share data) (Unaudited) (Unaudited)
(Note 2)
REVENUES
Equity in earnings of affiliates ..................... $ 5,309 $ 9,211
Manufacturing ........................................ 3,317 6,286
Interest:
Related parties ..................................... 2,056 4,325
Others .............................................. 386 1,228
Rental income ........................................ 3,591 3,707
Realized and unrealized gains on investments ......... 1,355 5,023
Other ................................................ 1,051 1,037
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Total revenues .................................. 17,065 30,817
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EXPENSES
Manufacturing ........................................ 4,259 6,735
Interest:
Related parties ..................................... 2,216 1,292
Others .............................................. 2,920 3,765
Rental property operating expenses ................... 1,733 2,083
Loss from impairment of investments .................. 270 977
Other ................................................ 2,846 3,561
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Total expenses .................................. 14,244 18,413
Restructuring charge ................................. -- 600
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Income before income taxes ........................... 2,821 11,804
Provision for income taxes ........................... 1,734 4,514
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NET INCOME ...................................... $ 1,087 $ 7,290
======= =======
Basic EPS
Earnings per Class A share .......................... $ .05 $ .31
======= =======
Shares used in calculation (in thousands) ........... 23,859 23,702
Diluted EPS
Earnings per Class A share .......................... $ .03 $ .26
======= =======
Shares used in calculation (in thousands) ........... 27,616 27,614
The accompanying notes are an integral part of the consolidated financial
statements.
1
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AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED JUNE 30, 1998 1997
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(Dollars in thousands, except per share data) (Unaudited) (Unaudited)
(Note 2)
REVENUES
Equity in earnings of affiliates .................. $ 2,130 $ 6,630
Manufacturing ..................................... 1,416 3,274
Interest:
Related parties .................................. 1,438 1,822
Others ........................................... 140 748
Rental income ..................................... 1,834 1,656
Realized and unrealized (losses) gains on
investments...................................... (281) 3,659
Other ............................................. 555 558
-------- --------
Total revenues ............................... 7,232 18,347
-------- --------
EXPENSES
Manufacturing ..................................... 2,272 3,714
Interest:
Related parties .................................. 1,279 577
Other ............................................ 1,747 1,712
Rental property operating expenses ................ 879 1,098
Loss from impairment of investments ............... 270 977
Other ............................................. 1,630 1,701
-------- --------
Total expenses ............................... 8,077 9,779
Restructuring charge .............................. -- 600
-------- --------
(Loss) income before income taxes ................. (845) 7,968
Provision for income taxes ........................ 74 3,199
-------- --------
NET (LOSS) INCOME ............................ $ (919) $ 4,769
======== ========
Basic EPS
(Loss) earnings per Class A share ................ $ (.03) $ .20
======== ========
Shares used in calculation (in thousands) ........ 23,885 23,725
Diluted EPS
(Loss) earnings per Class A share ................ $ (.04) $ .17
======== ========
Shares used in calculation (in thousands) ........ 27,616 27,614
The accompanying notes are an integral part of the consolidated financial
statements.
2
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AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
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CONSOLIDATED BALANCE SHEETS
June 30, December 31,
ASSETS AS AT 1998 1997
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(Dollars in thousands) (Unaudited) (Note 2)
Cash and cash equivalents ...................... $ 16,573 $ 45,457
Deposits, notes and loans receivable ........... 30,071 46,176
Investments (Note 3) ........................... 246,080 117,384
Real estate rental property, less accumulated
depreciation of $6,249 and $5,902 ............. 28,888 28,603
Property and equipment, less accumulated
depreciation of $2,735 and $2,596 ............. 3,603 3,899
Other assets ................................... 13,937 20,755
-------- --------
TOTAL ASSETS ................................... $339,152 $262,274
======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
3
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AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
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CONSOLIDATED BALANCE SHEETS
LIABILITIES AND June 30, DECEMBER 31,
SHAREHOLDERS' EQUITY AS AT 1998 1997
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(Dollars in thousands) (Unaudited) (Note 2)
LIABILITIES
Notes and loans payable (Note 3):
Related parties .................................. $ 54,971 $ 18,207
Others ........................................... 40,821 5,000
Debentures ......................................... 33,647 41,846
Accounts and income taxes payable, accrued
expenses and minority interests ................... 42,466 34,711
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Total liabilities .......................... 171,905 99,764
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SHAREHOLDERS' EQUITY
4% Cumulative Convertible Preferred Stock,
$5 par value; authorized 189,287 shares;
issued and outstanding 176,418 and
179,672 shares .................................... 882 898
6-1/2% Cumulative Convertible Preferred Stock,
$5 par value; authorized 988,055 shares;
issued and outstanding 936,257 and 968,288
shares ............................................ 4,681 4,842
Class A Stock, $1 par value; authorized
60,000,000 shares; issued 24,530,688 and
24,418,325 shares; outstanding 23,925,288 and
23,812,925 shares ................................. 24,531 24,418
Additional paid-in capital ......................... 57,555 57,491
Retained earnings .................................. 89,862 88,775
Treasury Stock, 605,400 shares of Class A Stock,
at cost ........................................... (3,829) (3,829)
Accumulated other comprehensive loss ............... (6,435) (10,085)
--------- ---------
Total shareholders' equity ................. 167,247 162,510
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ......... $ 339,152 $ 262,274
The accompanying notes are an integral part of the consolidated financial
statements.
4
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AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1998 1997
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(Dollars in thousands) (Unaudited) (Unaudited)
(Note 2)
Cash flows from operating activities:
Net income .......................................... $ 1,087 $ 7,290
Adjustments to reconcile net income to net cash
used in operating activities:
Equity in earnings of affiliates ................... (5,309) (9,211)
Realized and unrealized gains on investments ....... (1,355) (5,023)
Depreciation expense ............................... 670 923
Amortization expense ............................... 705 979
Loss from impairment of investments ................ 270 977
Restructuring charge ............................... -- 600
Translation (gain) ................................. (8) (101)
Minority interests ................................. (534) (211)
Decrease (increase) in other assets ................. 3,599 (520)
(Decrease) increase in accounts and income taxes
payable, accrued expenses and minority
interests .......................................... (4,291) 602
Investments made in trading securities .............. (8,542) (3,376)
Proceeds from sale of trading securities ............ 3,192 3,038
Dividends received from affiliates .................. 3,144 70
--------- ---------
Net cash (used in) operating activities ............ (7,372) (3,963)
--------- ---------
Cash flows from investing activities:
Deposits, notes and loans receivable collected ...... 15,616 13,336
Deposits, notes and loans receivable granted ........ (272) (907)
Investments made in affiliates and others ........... (113,119) (4,650)
Proceeds from sale of investments:
Available for sale ................................. 353 1,537
Others ............................................. 3,497 13,625
Proceeds from sale of real estate rental
property ........................................... -- 15,046
Purchase of property and equipment .................. (99) (257)
Purchase of real estate rental property ............. (911) (194)
--------- ---------
Net cash (used in) provided by investing
activities ........................................ (94,935) 37,536
--------- ---------
The accompanying notes are an integral part of the consolidated financial
statements.
5
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AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1998 1997
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(Dollars in thousands) (Unaudited) (Unaudited)
(Note 2)
Cash flows from financing activities:
Notes and loans payable received:
Related parties .................................... $ 72,537 $ 1,244
Others ............................................. 68,763 580
Notes and loans payable repaid:
Related parties .................................... (35,737) (18,168)
Others ............................................. (32,834) (4,813)
Debentures repaid ................................... (8,224) (13,776)
Contribution to partnership by minority
interests .......................................... 9,765 --
-------- --------
Net cash provided by (used in) financing
activities ........................................ 74,270 (34,933)
-------- --------
Effect of exchange rate changes on cash and
cash equivalents .................................... (847) (1,465)
-------- --------
Net (decrease) in cash and cash equivalents .......... (28,884) (2,825)
Cash and cash equivalents at beginning of
period .............................................. 45,457 20,633
-------- --------
Cash and cash equivalents at end of period ........... $ 16,573 $ 17,808
======== ========
Supplemental Disclosure of Cash Flow Information
Cash paid during the period:
Interest:
Related parties .................................... $ 1,127 $ 684
Others ............................................. 1,787 1,583
-------- --------
Total interest paid .............................. $ 2,914 $ 2,267
======== ========
Income taxes paid ................................... $ 3,568 $ 339
======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
6
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 1998 1997
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(Dollars in thousands, except share amounts) (Unaudited) (Unaudited)
(Note 2)
4% PREFERRED STOCK
Balance, beginning of year ........................... $ 898 $ 955
Conversion of 3,254 and 3,510 shares into
Class A Stock ....................................... (16) (18)
-------- --------
Balance, end of period ............................... $ 882 $ 937
======== ========
6-1/2% PREFERRED STOCK
Balance, beginning of year ........................... $ 4,842 $ 5,012
Conversion of 32,031 and 25,700 shares into
Class A Stock ....................................... (161) (128)
-------- --------
Balance, end of period ............................... $ 4,681 $ 4,884
======== ========
CLASS A STOCK
Balance, beginning of year ........................... $ 24,418 $ 24,257
Issuance of shares upon conversion of
Preferred Stock ..................................... 113 94
Issuance of additional shares ........................ -- 3
-------- --------
Balance, end of period ............................... $ 24,531 $ 24,354
======== ========
ADDITIONAL PAID-IN CAPITAL
Balance, beginning of year ........................... $ 57,491 $ 57,410
Conversion of Preferred Stock ........................ 64 52
Issuance of additional shares ........................ -- 12
-------- --------
Balance, end of period ............................... $ 57,555 $ 57,474
======== ========
RETAINED EARNINGS
Balance, beginning of year ........................... $ 88,775 $ 74,943
Net income ........................................... 1,087 7,290
-------- --------
Balance, end of period ............................... $ 89,862 $ 82,233
======== ========
ACCUMULATED OTHER COMPREHENSIVE LOSS
Balance, beginning of year: .......................... $(10,085) $ (6,628)
Cumulative translation adjustments:
Balance, beginning of year ........................ (10,085) (6,530)
Foreign currency translation adjustment ........... (2,038) (4,506)
-------- --------
Balance, end of period ............................ (12,123) (11,036)
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Unrealized gain (loss) on marketable securities:
Balance, beginning of year ........................ -- (98)
Unrealized gain, net .............................. 5,688 98
-------- --------
Balance, end of period ............................ 5,688 --
-------- --------
Balance, end of period ............................... $ (6,435) $(11,036)
======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
7
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AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
--------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. As used in these financial statements, the term the "Company" refers to
Ampal-American Israel Corporation ("Ampal") and its consolidated
subsidiaries.
2. The December 31, 1997 consolidated balance sheet presented herein was
derived from the audited December 31, 1997 consolidated financial
statements of the Company.
Reference should be made to the Company's consolidated financial
statements for the year ended December 31, 1997 for a description of the
accounting policies which have been continued without change. Also,
reference should be made to the notes to the Company's December 31, 1997
consolidated financial statements for additional details of the Company's
consolidated financial condition, results of operations and cash flows.
The details in those notes have not changed except as a result of normal
transactions in the interim. Certain amounts in the 1997 consolidated
financial statements have been reclassified to conform with the current
period's presentation. All adjustments (of a normal recurring nature)
which are, in the opinion of management, necessary to a fair presentation
of the results of the interim period have been included.
3. On January 22, 1998 (the "Closing Date"), the Company completed its
purchase of a one-third interest in the assets of the shared networks
operation ("SNO") of Motorola Communications Israel, Ltd. ("Motorola
Israel") for a base purchase price of approximately $110 million. The
payment for the purchase price was obtained from the Company's own
resources as well as from two short-term bridge loans ("Short-Term
Loans"), one in the amount of $40 million from Bank Leumi USA (of which $8
million plus interest was repaid on February 2, 1998) and a second in the
amount of $35 million from Bank Hapoalim B.M. ("Hapoalim"). Each loan had
a term of 90 days, bore interest at a rate of LIBOR plus 1/2% and was
repaid in full from the proceeds of the long-term loans described below.
A new wireless communications service provider, MIRS Communication Company
Ltd. ("MIRS"), initially one-third owned by the Company and two-thirds
owned by Motorola Israel, coordinates and operates in Israel the digital
and analog public-shared two-way radio and other services previously
furnished by Motorola Israel. The digital wireless communication service
is based on Motorola Israel's iDEN(TM) integrated wireless communication
technology, which is known as MIRS in Israel.
In March 1998, the Company transferred its interest in MIRS to a limited
partnership (the "Partnership"). A wholly-owned Israeli subsidiary of
Ampal (the "General Partner") is the general partner of the Partnership
and owns 75.1% of the Partnership. The limited partners of the Partnership
purchased their interests in the Partnership from the Partnership and
include (i) an entity owned by Daniel Steinmetz and Raz Steinmetz
(directors of Ampal and the controlling persons of Ampal's principal
shareholder), which acquired a 9.1% interest in the Partnership for $10
million, (ii) Hapoalim, which acquired a 7.45% interest in the Partnership
for $8.195 million, (iii) an unrelated third party (The Israel Mezzanine
Fund L.P., a limited partnership whose general partner is First Israel
Mezzanine Investors Ltd.), which acquired a 7.45% interest in the
Partnership for $8.195 million, and (iv) an entity owned by Dr. Yehoshua
Gleitman, Ampal's Chief Executive Officer, which purchased a .9% interest
for $1 million. In addition to the purchase price, the limited partners
also reimbursed the Company for their pro rata share of the expenses
incurred by the Company in connection with the original purchase from
Motorola Israel (including interest from the Closing Date until the
purchase date of the limited partnership interests).
8
<PAGE>
The related parties purchased their limited partnership interests on the
same terms as the unrelated third party which were determined through
arm's length negotiations between the Company and the unrelated third
party.
Each of the limited partners paid 35% of their respective purchase price
in cash and assumed their pro rata share of Ampal's financing of the
original purchase (equal to 65% of their respective purchase prices) and
assumed their pro rata share of the Partnership's long-term financing. A
portion of Dr. Gleitman's entity's purchase price was obtained through two
loans aggregating $250,000 from the Company. One loan, in the amount of
$150,000, has a term of 10 years, an interest rate of LIBOR plus 0.8% and
is without recourse to Dr. Gleitman. The second loan, in the amount of
$100,000, has a term of 10 years, an interest rate of LIBOR plus 0.5% and
is with recourse to Dr. Gleitman. Both loans are secured by Dr. Gleitman's
interest in the Partnership.
The Partnership has been assigned all of the Company's rights under the
original purchase agreement with Motorola Israel and has assumed all of
its obligations.
On May 4, 1998, the Partnership received two long-term loans from Hapoalim
and Bank Leumi Le'Israel B.M. in the amount of $36.4 million, each. Both
loans are due on March 31, 2008 and bear interest at a rate of LIBOR plus
0.8%. The principal payments are due as follows: 10% on March 31, 2004,
15% on March 31, 2005 and 25% on each of the following dates - March 31,
2006, 2007 and 2008. Interest will be paid annually on March 31 of each
year from March 31, 2001 until and including March 31, 2008. The proceeds
from the long-term loans were used to repay the Short-Term Loans.
The Partnership owns all of the authorized preferred shares of MIRS and
Motorola Israel owns all of the authorized ordinary shares. Each share
issued by MIRS is entitled to one vote.
The Company accounts for its investment in MIRS using the cost method of
accounting. Under the cost method, the Company recognizes income from
dividends, as they are declared.
To the extent of available after-tax profits, MIRS is required to pay
dividends to the Partnership equal to at least $3,800,000 for fiscal year
2000 and $7,100,000 for each fiscal year thereafter, so long as the
financial stability of MIRS will not be impaired. MIRS shall endeavor to
pay dividends in the following amounts: for fiscal year 1998, $4,950,000,
for fiscal year 1999, $10,725,000 and for fiscal year 2000 and thereafter,
$23,430,000 (inclusive of the required payments), which all holders of an
interest in MIRS shall share on a pro rata basis. To the extent that any
of the above dividends are not paid by MIRS, they will accumulate. No
dividends will be paid by MIRS to Motorola Israel until the Partnership
has received all of its accumulated dividends. Any dividends which are
paid in excess of the above amounts for a given fiscal year will similarly
be paid pro rata to the Partnership and Motorola Israel based on their
shares in MIRS.
Pursuant to the original purchase agreement, Motorola Israel guaranteed
that the Partnership would receive from MIRS at least $3,800,000 for
fiscal year 2000 and $7,100,000 for each fiscal year between 2001 and 2005
inclusive, subject to an obligation of the Partnership to repay such
guarantee payments in amount equal to the excess of the amount actually
received by the Partnership from MIRS with respect to any subsequent year
over $7,500,000.
Motorola Israel has agreed to make certain payments to the Partnership in
the event that, prior to the thirteenth anniversary of the Closing Date,
there is a dissolution, liquidation, bankruptcy, winding up, or sale of
all or substantially all of the assets of MIRS and the total proceeds to
the shareholders of MIRS is less than $450 million.
9
<PAGE>
The $110 million base purchase price for the Partnership's one-third
interest in MIRS was based upon the Company's valuation of the SNO and its
prospects. The original purchase agreement provides that under specified
circumstances indicating that there has been an increase in the enterprise
value of MIRS, the Partnership must pay Motorola Israel an additional
amount (the "Bonus"). The formula for the Bonus varies depending upon
whether an initial public offering of MIRS' shares (an "IPO") has been
consummated. If an IPO is consummated prior to December 31, 2002, the
Partnership must pay Motorola Israel the Bonus based on an increase in the
valuation of MIRS for purposes of the IPO. In no event will such Bonus
exceed $33 million multiplied by 1.16^n, where n represents
the number of years (and any part thereof) between the Closing Date and
the closing of the IPO.
If an IPO is not consummated prior to December 31, 2002 and if all
dividends accumulated with respect to the Partnership's preferred shares
up to that time have been paid, then the Partnership must pay Motorola
Israel a Bonus if (A) the present value of the actual after tax net income
of MIRS (as reported by MIRS' auditors in compliance with generally
accepted accounting principles in Israel, excluding capital gains derived
from each transaction, not in the ordinary course of business, in which
the consideration for MIRS is more than $5 million) for fiscal years 1998
through 2002, discounted at the rate of 13%, exceeds (B) $71 million. In
this case, the amount of the Bonus, if any, will equal the lesser of (i)
the amount of such excess multiplied by 2.3376, or (ii) $46 million.
4. On June 9, 1998, Ampal's shareholders approved a grant of options to
purchase up to 1,000,000 shares of Class A Stock (200,000 shares at $6.75
per share, 300,000 shares at $8 per share, 500,000 shares at $10 per
share) and rights to purchase up to 200,000 shares of Class A Stock at 80%
of their fair market value to Dr. Yehoshua Gleitman, Chief Executive
Officer of Ampal. The shareholders also approved a long-term incentive
plan which provides for equity-based awards which are based upon or
related to up to 400,000 shares of Class A Stock. All employees, officers,
directors and consultants of the Company are eligible for selection to
receive awards under such plan.
5. As a result of a recent sale of Granite Hacarmel Investments Ltd.
("Granite") by its controlling shareholder, the shareholders' agreement
which had been in effect between that shareholder, the Company and the
Landau Group, as defined below, was terminated. The Company entered into a
new shareholders' agreement, dated July 16, 1998, with Yeshayahu Landau
and Yeshayahu Landau Properties (1998) Ltd. (collectively, the "Landau
Group"), with respect to their interests in Granite. The Company owns
21.5% interest in Granite and the Landau Group owns an 8.5% interest in
Granite.
6. On July 27, 1998, a Tel Aviv District Court judge ruled against Ampal in
its dispute with Yakhin Hakal Ltd., the manager and co-owner of Ampal's
50%-owned affiliates Etz Vanir Ltd. ("Etz Vanir") and Yakhin Mataim Ltd.
("Yakhin Mataim"). The judge's decision allows Etz Vanir and Yakhin Mataim
to redeem debentures owned by Ampal for approximately $800,000 and to
require Ampal to surrender all of its shares of Etz Vanir and Yakhin
Mataim for their par value, which is nominal. After the redemption and
surrender, Ampal will no longer have any interest in Etz Vanir or Yakhin
Mataim.
Etz Vanir and Yakhin Mataim cultivate in the aggregate approximately 1,200
acres of citrus groves.
Etz Vanir and Yakhin Mataim have not reported their financial results to
Ampal since 1990 and, therefore, their financial results have not been
included in Ampals' financial statements. The carrying value of Ampal's
investment in Etz Vanir and Yakhin Mataim, as of June 30, 1998, is
approximately $800,000.
10
<PAGE>
At the request of Ampal's attorneys, the Tel Aviv District Court has
issued a stay of performance of the judgment until the high court of
appeals issues a final judgment. Ampal anticipates filing an appeal as
soon as possible.
7. Effective March 31, 1998, the Company adopted Statement of Financial
Accounting Standard ("SFAS") No. 130 "Reporting Comprehensive Income,"
which establishes standards for reporting and display of comprehensive
income and its components (revenue, expenses, gains, and losses) in a full
set of general-purpose financial statements. Total comprehensive income
for the six months ended June 30, 1998 and June 30, 1997 was $4.7 million
and $2.9 million, respectively, and for the three months ended June 30,
1998 and June 30, 1997 was $2.3 million and $1.8 million, respectively.
11
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
Six months ended June 30, 1998 compared to six months ended June 30, 1997:
- --------------------------------------------------------------------------
Consolidated net income decreased to $1.1 million for the six-month period ended
June 30, 1998, from $7.3 million for the same period in 1997. The decrease in
net income is primarily attributable to the decrease in equity in earnings of
affiliates, lower realized and unrealized gains on investments and net interest
expense in 1998 as compared to net interest income in 1997. These decreases were
partially offset by the absence of a restructuring charge and lower loss from
impairment of investments and other expenses in 1998.
Equity in earnings of affiliates decreased to $5.3 million for the six months
ended June 30, 1998, from $9.2 million for the same period in 1997. The decrease
is primarily attributable to the decreased earnings of Ophir Holdings Ltd.
("Ophir"), the Company's (as defined below) 42.5%-owned affiliate, which is a
holding company with interests in high technology and real estate companies.
Ophir reported lower earnings in the six months ended June 30, 1998 as compared
to the same period in 1997, primarily due to lower gains on sale of investments
as a result of the sale of shares of Teledata Communications Ltd. ("Teledata")
in 1997.
The decrease in the equity in earnings of affiliates was partially offset by the
increased earnings of Bay Heart Limited ("Bay Heart"), Carmel Container Systems
Limited ("Carmel"), Trinet Venture Capital Ltd. ("Trinet") and Coral World
International Limited ("CWI"). Bay Heart, the Company's 37%-owned affiliate,
which leases and operates a shopping mall near Haifa, recorded higher earnings
as a result of decreased interest expense on its Consumer Price Index-linked
bank borrowings. Carmel, the Company's 20.7%-owned affiliate, which is a
manufacturer of paper-board packaging and related products, also recorded higher
earnings in 1998 due to the improved efficiency at Carmel's new manufacturing
plant in Caesarea and increased sales of containers to the local market, despite
the economic slowdown in Israel. Trinet, the Company's 50%-owned affiliate, a
high-technology venture capital fund, recorded realized and unrealized gains in
the six months ended June 30, 1998 as compared to unrealized losses in the same
period in 1997. CWI, the Company's 50%-owned affiliate, which owns and operates
marine parks in Eilat (Israel), Perth and Manly (Australia), and Hawaii (USA),
reported increased earnings in 1998 as a result of earnings attributable to its
new marine park in Maui, Hawaii which opened in March 1998.
Ampal-American Israel Corporation ("Ampal") and its subsidiaries (collectively
with Ampal, the "Company") recorded net interest expense in the amount of $2.7
million in the six months ended June 30, 1998, as compared to net interest
income of $.5 million in the same period in 1997. The net interest expense is
primarily attributable to bank borrowings in connection with the Company's
investment in MIRS Communication Company Ltd. ("MIRS").
In the six months ended June 30, 1998, the Company recorded $1.3 million of
gains on sale of investments, which are primarily attributable to its
investments in Mercury Interactive Corporation, Shikun U'Fituach le-Israel Ltd.,
and Fundtech Ltd. ("Fundtech"). In the same period in 1997, the Company recorded
$2.7 million of gains on sale of investments, $1.8 million of which is
attributable to its direct investment in Teledata.
The Company also recorded $.1 million of unrealized gains on investments which
are classified as trading securities in the six-month period ended June 30,
1998, as compared to $2.3 million in the same period in 1997. At June 30, 1998
and December
12
<PAGE>
31, 1997, the aggregate fair value of trading securities amounted to
approximately $11.8 million and $7.5 million, respectively.
Manufacturing revenues and expenses, which reflect the operations of Paradise
Industries Ltd., the Company's 85.1%-owned subsidiary, which is a manufacturer
and distributor of mattresses and fold-out beds in Israel, decreased as a result
of the slowdown in the Israeli economy during the first half of 1998.
Other expenses decreased for the six months ended June 30, 1998 as compared to
the same period in 1997, primarily as a result of a decrease of the
administrative expenses and an increase in the income attributable to the
minority interests included in this category.
The increase in the effective income tax rate in 1998 as compared to 1997 is
mainly attributable to the increased deferred tax provisions of certain Israeli
subsidiaries due to the reduction of available tax benefits.
Three months ended June 30, 1998 compared to three months ended June 30, 1997:
- ------------------------------------------------------------------------------
Consolidated net income decreased from $4.8 million for the three-month period
ended June 30, 1997, to a loss of $.9 million for the same period in 1998. The
decrease in net income is primarily attributable to the decrease in equity in
earnings of affiliates, realized and unrealized losses on investments, and net
interest expense in 1998 as compared to net interest income in 1997. These
decreases were partially offset by the lower loss from impairment of investments
and the absence of a restructuring charge in 1998.
Equity in earnings of affiliates decreased from $6.6 million for the three
months ended June 30, 1997, to $2.1 million for the same period in 1998. The
decrease is primarily attributable to the losses incurred by Ophir in the second
quarter of 1998 as compared to the earnings Ophir reported in the comparable
period of 1997. This decrease was partially offset by increases in the Company's
equity in earnings of Carmel, Trinet and CWI. (See "Discussion on Results of
Operations - Six months ended June 30, 1998 compared to six months ended June
30, 1997.") Moriah Hotels Ltd. also reported increased earnings in the three
months ended June 30, 1998, as compared to the same period in 1997 primarily due
to the reduced operating costs.
In the quarter ended June 30, 1997, the Company recorded $1.6 million of gains
on sale of investments, $1.1 million of which is attributable to its direct
investment in Teledata, but did not record any gains in the same period in 1998.
The Company also recorded $.3 million of unrealized losses on investments in the
three-month period ended June 30, 1998, as compared to $2.1 million of
unrealized gains on investments in the same period in 1997.
The Company recorded net interest expense in the amount of $1.5 million in the
three months ended June 30, 1998, as compared to net interest income of $.3
million in the same period in 1997. (See "Discussion on Results of Operations
Six months ended June 30, 1998 compared to six months ended June 30, 1997.")
The Company recorded a $.3 million loss from impairment of its investment in
Geotek Communications Ltd. in the quarter ended June 30, 1998. In the same
period of 1997 the Company recorded a $1 million loss on impairment of
investment in U.D.S. - Ultimate Distribution Systems Ltd.
The increase in the effective income tax rate in 1998 as compared to 1997 is
mainly attributable to the increased deferred tax provisions of certain Israeli
subsidiaries due to the reduction of available tax benefits.
Liquidity and Capital Resources
- -------------------------------
At June 30, 1998, cash and cash equivalents were $16.6 million as compared with
$45.5 million at December 31, 1997. The decrease in cash and cash equivalents
and
13
<PAGE>
increases in investments, notes and loans payable and minority interests are
primarily attributable to the investment in MIRS (See "Investment in MIRS"). The
decreases in deposits, notes and loans receivable and debentures are primarily
attributable to scheduled repayments.
In March 1998, Fundtech, the Company's then 2.2%-owned investee, which develops
software for worldwide banking institutions, completed a public offering of its
shares. As a result of the offering, the Company's equity interest in Fundtech
was reduced to 1.5%. In connection with the aforementioned offering, the Company
recorded a gain on sale of shares of $.2 million which is reflected in its
consolidated statement of income for the six months ended June 30, 1998. The
Company also recorded an unrealized gain of $1.5 million (net of tax) in
accumulated other comprehensive loss on its consolidated balance sheet.
In addition to the investment in MIRS (see "Investment in MIRS"), the Company
made the following investments in the high-technology field during the first
half of 1998, notably; (1) a $.8 million investment to acquire an additional
7.3% (total equity interest in 1998 - 19.1%) of XaCCT Technologies Ltd., a
developer of billing, auditing and accounting software for TCP/IP networks; (2)
a $.7 million investment to acquire an additional 1.6% (total equity interest -
8.8%) in its existing investee, Mutek Solutions Ltd., a developer of software
for servers; (3) a $.5 million investment to acquire 15.4% of Medco Electronics
Systems Ltd., a developer of special devices used to detect cardiac problems in
fetuses and (4) a $.3 million investment in its existing investee, Qronus
Interactive Israel (1994) Ltd., a developer and marketer of software testing
tools.
Investment in MIRS
- ------------------
On January 22, 1998 (the "Closing Date"), the Company completed its purchase of
a one-third interest in the assets of the shared networks operation ("SNO") of
Motorola Communications Israel, Ltd. ("Motorola Israel") for a base purchase
price of approximately $110 million. The payment for the purchase price was
obtained from the Company's own resources as well as from two short-term bridge
loans ("Short-Term Loans"), one in the amount of $40 million from Bank Leumi USA
(of which $8 million plus interest was repaid on February 2, 1998) and a second
in the amount of $35 million from Bank Hapoalim B.M. ("Hapoalim"). Each loan had
a term of 90 days, bore interest at a rate of Libor plus 1/2% and was repaid in
full from the proceeds of the long-term loans described below.
A new wireless communications service provider, MIRS, initially one-third owned
by the Company and two-thirds owned by Motorola Israel, coordinates and operates
in Israel the digital and analog public-shared, two-way radio and other services
previously furnished by Motorola Israel. The digital wireless communication
service is based on Motorola Israel's iDEN(TM) integrated wireless communication
technology, which is known as MIRS in Israel.
In March 1998, the Company transferred its stock interest in MIRS to a limited
partnership (the "Partnership"). A wholly-owned Israeli subsidiary of Ampal (the
"General Partner") is the general partner of the Partnership and owns 75.1% of
the Partnership. The limited partners of the Partnership purchased their
interests in the Partnership from the Partnership and include (i) an entity
owned by Daniel Steinmetz and Raz Steinmetz (directors of Ampal and the
controlling persons of Ampal's principal shareholder), which acquired a 9.1%
interest in the Partnership for $10 million, (ii) Hapoalim, which acquired a
7.45% interest in the Partnership for $8.195 million, (iii) an unrelated third
party (The Israel Mezzanine Fund L.P., a limited partnership whose general
partner is First Israel Mezzanine Investors Ltd.), which acquired a 7.45%
interest in the Partnership for $8.195 million, and (iv) an entity owned by Dr.
Yehoshua Gleitman, Ampal's Chief Executive Officer, which purchased a .9%
interest for $1 million. In addition to the purchase price, the limited partners
also reimbursed the Company for their pro rata share of the expenses incurred by
the Company in connection with the original purchase from Motorola Israel
(including interest from the Closing Date until the purchase date of the limited
partnership interests).
14
<PAGE>
The related parties purchased their limited partnership interests on the same
terms as the unrelated third party which were determined through arm's length
negotiations between the Company and the unrelated third party.
Each of the limited partners paid 35% of their respective purchase price in cash
and assumed their pro rata share of Ampal's financing of the original purchase
(equal to 65% of their respective purchase prices) and assumed their pro rata
share of the Partnership's long-term financing. A portion of Dr. Gleitman's
entity's purchase price was obtained through two loans aggregating $250,000 from
the Company. One loan, in the amount of $150,000, has a term of 10 years, an
interest rate of Libor plus 0.8% and is without recourse to Dr. Gleitman. The
second loan, in the amount of $100,000, has a term of 10 years, an interest rate
of Libor plus 0.5% and is with recourse to Dr. Gleitman. Both loans are secured
by Dr. Gleitman's interest in the Partnership.
The Partnership has been assigned all of the Company's rights under the original
purchase agreement with Motorola Israel and has assumed all of its obligations.
On May 4, 1998, the Partnership received two long-term loans from Hapoalim and
Bank Leumi Le-Israel B.M. in the amount of $36.4 million, each. Both loans are
due on March 31, 2008 and bear interest at a rate of Libor plus 0.8%. The
principal payments are due as follows: 10% on March 31, 2004, 15% on March 31,
2005 and 25% on each of the following dates - March 31, 2006, 2007 and 2008.
Interest will be paid annually on March 31 of each year from March 31, 2001
until and including March 31, 2008. The proceeds from the long-term loans were
used to repay the Short-Term Loans.
The Partnership owns all of the authorized preferred shares of MIRS and Motorola
Israel owns all of the authorized ordinary shares. Each share issued by MIRS is
entitled to one vote.
The Company accounts for its investment in MIRS using the cost method of
accounting. Under the cost method, the Company recognizes income from dividends,
as they are declared.
To the extent of available after-tax profits, MIRS is required to pay dividends
to the Partnership equal to at least $3,800,000 for fiscal year 2000 and
$7,100,000 for each fiscal year thereafter, so long as the financial stability
of MIRS will not be impaired. MIRS shall endeavor to pay dividends in the
following amounts: for fiscal year 1998, $4,950,000, for fiscal year 1999,
$10,725,000 and for fiscal year 2000 and thereafter, $23,430,000 (inclusive of
the required payments), which all holders of an interest in MIRS shall share on
a pro rata basis. To the extent that any of the above dividends are not paid by
MIRS, they will accumulate. No dividends will be paid by MIRS to Motorola Israel
until the Partnership has received all of its accumulated dividends. Any
dividends which are paid in excess of the above amounts for a given fiscal year
will similarly be paid pro rata to the Partnership and Motorola Israel based on
their shares in MIRS.
Pursuant to the original purchase agreement, Motorola Israel guaranteed that the
Partnership would receive from MIRS at least $3,800,000 for fiscal year 2000 and
$7,100,000 for each fiscal year between 2001 and 2005 inclusive, subject to an
obligation of the Partnership to repay such guarantee payments in an amount
equal to the excess of the amount actually received by the Partnership from MIRS
with respect to any subsequent year over $7,500,000.
Motorola Israel has agreed to make certain payments to the Partnership in the
event that, prior to the thirteenth anniversary of the Closing Date, there is a
dissolution, liquidation, bankruptcy, winding up, or sale of all or
substantially all of the assets of MIRS and the total proceeds to the
shareholders of MIRS is less than $450 million.
The $110 million base purchase price for the Partnership's one-third interest in
MIRS was based upon the Company's valuation of the SNO and its prospects. The
original
15
<PAGE>
purchase agreement provides that under specified circumstances indicating that
there has been an increase in the enterprise value of MIRS, the Partnership must
pay Motorola Israel an additional amount (the "Bonus"). The formula for the
Bonus varies depending upon whether an initial public offering of MIRS' shares
(an "IPO") has been consummated. If an IPO is consummated prior to December 31,
2002, the Partnership must pay Motorola Israel the Bonus based on an increase in
the valuation of MIRS for purposes of the IPO. In no event will such Bonus
exceed $33 million multiplied by 1.16^n, where n represents the number of years
(and any part thereof) between the Closing Date and the closing of the IPO.
If an IPO is not consummated prior to December 31, 2002 and if all dividends
accumulated with respect to the Partnership's preferred shares up to that time
have been paid, then the Partnership must pay Motorola Israel a Bonus if (A) the
present value of the actual after tax net income of MIRS (as reported by MIRS'
auditors in compliance with generally accepted accounting principles in Israel,
excluding capital gains derived from each transaction, not in the ordinary
course of business, in which the consideration for MIRS is more than $5 million)
for fiscal years 1998 through 2002, discounted at the rate of 13%, exceeds (B)
$71 million. In this case, the amount of the Bonus, if any, will equal the
lesser of (i) the amount of such excess multiplied by 2.3376, or (ii) $46
million.
Year 2000 Compliance
- --------------------
The Company is currently in the process of identifying, evaluating and
implementing changes to computer programs necessary to address the year 2000
issue which is the result of computer programs having been written using two
digits instead of four to define a year. This issue affects computer systems
that have date sensitive programs that may recognize a date using "00" as 1900
rather than 2000. Systems that do not properly recognize such information could
generate erroneous data or cause a system to fail, resulting in business
interruption. The Company does not believe the cost of converting all internal
systems to be year 2000 compliant will be material to its financial condition or
results of operations. Costs, which are not expected to be material, related to
the year 2000 issue are being expensed as incurred.
The year 2000 issue is expected to affect the systems of various entities
with which the Company interacts. However, there can be no assurance that the
systems of other companies on which the Company's systems rely will be timely
converted, or that a failure by another company's systems to be year 2000
compliant would not have a material adverse effect on the Company.
Other Developments
- ------------------
On June 9, 1998, Ampal's shareholders approved a grant of options to
purchase up to 1,000,000 shares of Class A Stock (200,000 shares at $6.75 per
share, 300,000 shares at $8 per share, 500,000 shares at $10 per share) and
rights to purchase up to 200,000 shares of Class A Stock at 80% of their fair
market value to Dr. Yehoshua Gleitman, Chief Executive Officer of Ampal. The
shareholders also approved a long-term incentive plan which provides for
equity-based awards which are based upon or related to up to 400,000 shares of
Class A Stock. All employees, officers, directors and consultants of the Company
are eligible for selection to receive awards under such plan.
As a result of a recent sale of Granite Hacarmel Investments Ltd.
("Granite") by its controlling shareholder, the shareholders' agreement which
had been in effect between that shareholder, the Company and the Landau Group
(as defined below) was terminated. The Company entered into a new shareholders'
agreement, dated July 16, 1998, with Yeshayahu Landau and Yeshayahu Landau
Properties (1998) Ltd. (collectively, the "Landau Group"), with respect to their
interests in Granite. The Company owns 21.5% interest in Granite and the Landau
Group owns an 8.5% interest in Granite.
16
<PAGE>
On July 27, 1998, a Tel Aviv District Court judge ruled against Ampal in
its dispute with Yakhin Hakal Ltd., the manager and co-owner of Ampal's
50%-owned affiliates Etz Vanir Ltd. ("Etz Vanir") and Yakhin Mataim Ltd.
("Yakhin Mataim"). The judge's decision allows Etz Vanir and Yakhin Mataim to
redeem debentures owned by Ampal for approximately $800,000 and to require Ampal
to surrender all of its shares of Etz Vanir and Yakhin Mataim for their par
value, which is nominal. After the redemption and surrender, Ampal will no
longer have any interest in Etz Vanir or Yakhin Mataim.
Etz Vanir and Yakhin Mataim cultivate in the aggregate approximately 1,200
acres of citrus groves.
Etz Vanir and Yakhin Mataim have not reported their financial results to
Ampal since 1990 and, therefore, their financial results have not been included
in Ampal's financial statements. The carrying value of Ampal's investment in Etz
Vanir and Yakhin Mataim, as of June 30, 1998, is approximately $800,000.
At the request of Ampal's attorneys, the Tel Aviv District Court has
issued a stay of performance of the judgment until the high court of appeals
issues a final judgment. Ampal anticipates filing an appeal as soon as possible.
17
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
--------------------------------------------------
PART II - OTHER INFORMATION
Item 1. Legal Proceedings - On July 27, 1998, a Tel Aviv District Court
-----------------
judge ruled against Ampal in its dispute with Yakhin Hakal, the
manager and co-owner of Ampal's 50%-owned affiliates Etz Vanir and
Yakhin Mataim. The judge's decision allows Etz Vanir and Yakhin
Mataim to redeem debentures owned by Ampal for approximately
$800,000 and to require Ampal to surrender all of its shares of Etz
Vanir and Yakhin Mataim for their par value, which is nominal. After
the redemption and surrender, Ampal will no longer have any interest
in Etz Vanir or Yakhin Mataim.
Etz Vanir and Yakhin Mataim cultivate in the aggregate approximately
1,200 acres of citrus groves.
Etz Vanir and Yakhin Mataim have not reported their financial
results to Ampal since 1990 and, therefore, their financial results
have not been included in Ampal's financial statements. The carrying
value of Ampal's investment in Etz Vanir and Yakhin Mataim, as of
June 30, 1998, is approximately $800,000. Ampal's evaluation of the
underlying real estate, however, is substantially in excess of the
carrying value of Ampal's investment in Etz Vanir and Yakhin Mataim.
At the request of Ampal's attorneys, the Tel Aviv District Court has
issued a stay of performance of the judgment until the High Court of
Appeals issues a final judgment. Ampal anticipates filing an appeal
as soon as possible.
Item 2. Changes in Securities and Use of Proceeds - Pursuant to a Letter
-----------------------------------------
Agreement, dated as of March 1, 1997, among Ampal, Ampal Realty
Corporation, an indirect wholly-owned subsidiary of Ampal, and Emmes
Asset Management Corp. ("Emmes"), Ampal agreed to issue to Mr.
Andrew Davidoff, as custodian, 100 shares of Class A Stock for each
of his three children each year for the duration of the term of the
letter agreement. Emmes and Mr. Davidoff provide general asset
management and property advisory services with respect to the
building located at 800 Second Avenue. On July 8, 1998, Ampal issued
300 shares to Mr. Davidoff, as custodian. The issuance to Mr.
Davidoff of such shares was exempted from registration under the
Securities Act of 1933, as amended, pursuant to Section 4(2) of such
Act.
Item 3. Defaults Upon Senior Securities - None.
-------------------------------
Item 4. Submission of Matters to a Vote of Security Holders - On June 9,
---------------------------------------------------
1998, Ampal's shareholders held their annual meeting (the "Annual
Meeting"). At such meeting, the shareholders elected the following
individuals as directors by the following vote:
FOR AUTHORITY WITHHELD
Michael Arnon 22,594,373 71,754
Benzion Benbassat 22,595,173 70,954
Yaacov Elinav 22,595,273 70,854
Hillel Peled 22,595,773 70,354
Shimon Ravid 22,595,273 70,854
Michael W. Sonnenfeldt 22,498,623 167,504
Daniel Steinmetz 22,594,373 71,754
Raz Steinmetz 22,594,773 71,354
Also at the Annual Meeting, the shareholders approved the
Ampal-American Israel Corporation 1998 Long-Term Incentive Plan
(17,504,257 for; 233,357 against; 32,070 abstain) and the grant of
1,000,000 options and 200,000
18
<PAGE>
purchase rights to Dr. Yehoshua Gleitman, Ampal's Chief Executive
Officer (17,463,577 for; 268,547 against; and 37,560 abstain).
Item 5. Other Information - After the conclusion of the Annual Meeting,
-----------------
Ampal's Board of Directors elected the following individuals to
serve as officers for the upcoming year:
Chairman of the Board: Daniel Steinmetz
Chief Executive Officer: Yehoshua Gleitman
Vice President -
Finance and Treasurer: Shlomo Meichor
Vice President -
Accounting and Controller: Alla Kanter
Vice President -
Legal and Secretary: Isaiah Halivni
Assistant Secretary: Gennifer A. Starita
Assistant Treasurer: Harold Aronowitz
Also, pursuant to an Amendment, dated June 16, 1998, to a
letter agreement, dated September 9, 1997, between Ampal Industries
(Israel) Limited, an indirect wholly-owned subsidiary of Ampal, and
Mr. Raz Steinmetz, the Chairman of Ampal's Executive Committee, Mr.
Steinmetz's base salary was increased from $100,000 per annum to
$175,000 per annum, effective April 1, 1998.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
Exhibit 3 - Amendment, effective June 9, 1998, to the By-laws of
Ampal-American Israel Corporation.
Exhibit 10.1 - Loan Agreement, dated April 27, 1998, between Bank
Hapoalim Ltd. and Ampal Communications Limited Partnership.
Exhibit 10.2 - Form of Loan Agreement between Ampal Communications
Limited Partnership and Bank Leumi Le-Israel B.M.
Exhibit 10.3 - Amendment No. 1, dated June 16, 1998, to a letter
agreement, dated September 9, 1997, between Ampal Industries
(Israel) Limited and Raz Steinmetz.
Exhibit 11 - Schedule Setting Forth Computation of Earnings Per
Share of Class A Stock.
Exhibit 27 - Financial Data Schedule.
(b) Reports on Form 8-K. - None.
19
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
--------------------------------------------------
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 thereunto duly authorized.
AMPAL-AMERICAN ISRAEL CORPORATION
By: /s/ Yehoshua Gleitman
-------------------------------------
Yehoshua Gleitman
Chief Executive Officer
(Principal Executive Officer)
By: /s/ Shlomo Meichor
-------------------------------------
Shlomo Meichor
Vice President - Finance
and Treasurer
(Principal Financial Officer)
By: /s/ Alla Kanter
-------------------------------------
Alla Kanter
Vice President - Accounting
and Controller
(Principal Accounting Officer)
Dated: August 12, 1998
20
<PAGE>
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
--------------------------------------------------
Exhibit Index
Exhibit No. Description
3 Amendment, June 9, 1998, to the By-laws
of Ampal-American Israel Corporation................ Page 22
10.1 Loan Agreement, dated April 27, 1998, between
Bank Hapoalim Ltd. and Ampal Communications
Limited Partnership................................. Page 23
10.2 Form of Loan Agreement between Ampal
Communications Limited Partnership and
Bank Leumi Le-Israel B.M. .......................... Page 48
10.3 Amendment No. 1, dated June 16, 1998, to a
letter agreement, dated September 9, 1997,
between Ampal Industries (Israel) Limited
and Raz Steinmetz................................... Page 52
11 Schedule Setting Forth Computation of Earnings
Per Share of Class A Stock.......................... Page 54
27 Financial Data Schedule.
21
Exhibit No. 3
AMENDMENT TO BY-LAWS
Section 5.1 of the Ampal-American Israel Corporation By-Laws was amended,
effective June 9, 1998, by deleting the sentence "The President shall be chosen
from among the directors, but no other officer need be a director." from such
section.
Exhibit 10.1
(Translation; Original Document in Hebrew)
LOAN AGREEMENT
--------------
Made and entered into at Tel Aviv on the 27th day of April 1998
Between: Bank Hapoalim Ltd.
Of 50 Rothschild Boulevard, Tel Aviv 66883
(hereinafter called the "Bank")
And: Ampal Communications (a Limited Partnership)
(Partnership No. 55 - 001710 - 7)
Herein represented by the General Partner, Ampal Communications
Holding Company Ltd. care of Ampal Industries (Israel) Ltd. Of 111
Arlozorov Street, Tel Aviv (hereinafter called the "Borrower")
Whereas: The Borrower has applied to the Bank to make available to it
credit facilities in the sum of $ 36,400,000 (thirty six million,
four hundred thousand United States dollars) for the purpose
referred to in paragraph 3.02 hereunder;
And Whereas: The Bank is prepared to consent to the application of the
Borrower subject to all the conditions and provisions set forth
in this Agreement;
Now therefore it is agreed between the parties as follows:
1. Interpretation
--------------
1.01 The preamble to the Agreement constitutes an integral part thereof.
1.02 Headings of paragraphs are for the purposes of convenience only and
are to be disregarded on any question relating to the interpretation
of the provisions of the Agreement.
1.03 This Agreement shall be interpreted in accordance with the following
provisions unless the context otherwise requires:
(a) A reference to paragraphs and to annexes means a reference to
paragraphs and annexes of this Agreement. A reference to this
Agreement means this
1
<PAGE>
Agreement together with all annexes thereto save for the
purposes of the provisions of subparagraph (b) hereunder.
(b) In any instance of an inconsistency between the provisions of
this Agreement and the annexes thereto - the provisions of
this Agreement shall prevail.
(c) Words in the singular form shall also include the plural and
vice versa.
2. Definitions
-----------
In this Agreement the following terms shall have the meanings attributed
to them hereunder unless the context otherwise requires:-
"ACI" - means Ampal Communications Inc.
---
"Ampal" - means Ampal Holdings Communications Company Ltd.
-----
"Ampal Israel" - means Ampal Industries (Israel) Ltd.
------------
"Ampal - America" - means Ampal American Israel Corporation.
---------------
"Dollar" and the Sign "$" - means the legal tender of the United States of
-----------------------
America; with respect to any payment which is due to be effected in
dollars in accordance with the provisions of the Agreement, means also
cash sums furnished for discharge on the same day under a New York
Clearing House Inter Bank Payment (or sums of other cash in dollars, as
shall be acceptable and as are customary at the time required for the
purpose of the discharge of international inter bank transactions
specified in dollars).
The "Bank" - means the Bank Hapoalim Ltd. and all the branches and offices
---------
thereof in existence as at the date of entering into this Agreement and
those which are in existence at any time in the future and in addition
replacements thereof, and those which exist by virtue thereof.
"Loan" or The "Loan" - means the amount of the unpaid capital of any
------------------
credit facilities which shall be made available by the Bank to the
Borrower together with interest which shall be capitalized from time to
time in accordance with the provisions of paragraph 4.10. The amount of
the capital of the loan shall be consolidated on the last day of the
interest period terminating on 31st March 2000.
The "Parallel Loan" - has the meaning as defined in subparagraph (m) of
------------------
paragraph 11.01.
The "Trustee" - means The Bank Hapoalim Trust Company Ltd. which shall
------------
serve as the Trustee for the Bank and the Borrower.
2
<PAGE>
The "Shareholders' Agreement" - means the Shareholders Agreement (the
----------------------------
annex to the Purchase Agreement) which was entered into on 29th March 1998
between Motorola and the Borrower together with all the annexes thereto.
The "Trust Agreement" - means the agreement which is to be entered into
--------------------
between the Bank, the Trustee and the Borrower in the form of Annex G to
this Agreement.
The "Purchase Agreement" - means the Purchase and Sale Agreement dated 5th
-----------------------
January 1998 which was entered into between ACI and Motorola, together
with all annexes thereto (including the Partnership Agreement, the
Shareholders Agreement, the Supply and Maintenance Agreement and the
Administrative Agreement) as amended on 22nd January 1998.
The "Assignment Agreement" - means the agreement for the assignment of
-------------------------
rights and obligations dated 18th March 1998 which was entered into
between ACI and the Borrower and under which ACI assigned to the Borrower
all its rights and obligations under the Purchase Agreement and in
consideration the Borrower undertook, inter alia, to repay on its behalf
and for ACI the bridging loan and to pay to Ampal - Israel its expenses in
connection with the Purchase Agreement.
The "Surplus Agreements" - means the agreements defined in paragraph 10.15
-----------------------
of the Agreement.
"Breach" or "an Event Entitling Immediate Repayment of the Loan" means any
--------------------------------------------------------------
one of the events or circumstances set forth in paragraph 12.
The "Shares" - means 5,500,000 cumulative and participating preference
-----------
shares numbered 22,000,001 to 27,500,000 (inclusive) in the Mirs Company,
having a par value of NIS 1. each.
The "Mirs Company" - means the Mirs Communications Company Ltd. (Company
-----------------
registration number 51 - 261596 - 4) the composition of the shareholders
of which are at present as follows: Motorola - 22,000,000 ordinary shares
having a par value of NIS 1.- each and the Borrower - 11,000,000
cumulative and participating preference shares having a par value of NIS
1. each.
"Trust Account" - means account number 542199 at the Arlozorov branch of
-------------
the Bank.
"Obligation" or "Indebtedness" - means the obligation to pay or to repay a
----------------------------
sum of money, either as principal debtor or as guarantor or by virtue of a
mortgage and irrespective of whether such obligation is in existence now
or shall be in existence in the future or whether certain or conditional.
3
<PAGE>
"Business Day" - means a day on which trading is conducted in deposits
------------
specified in United States dollars in the Inter Bank Euro Market in
London; and if a payment is due to be effected on that day then a further
condition of its being a Business Day is that it is a day on which banks
are open for business in London and in New York and on which the Bank in
Israel effects sales and purchases of United States dollars against
Israeli currency.
"Leumi" - means the Bank Leumi L'Israel Ltd.
-----
"Libor" 1. For as long as the Borrower pays on its due date all
-----
amounts due by it in accordance with this Agreement,
means - in relation to any interest period, a rate of
interest which shall be prescribed by the Bank at or
about 11.00 hours in the morning based on London time,
on the second Business Day prior to the first day of
that interest period as being the London Inter Bank
Offered Rate for twelve (12) months, for the dollar, as
quoted and published by the Reuters Agency to its
subscribers on the page known as the FRBD page.
2. Should the Borrower be in arrears with its payments
to the Bank, means - in relation to any interest
period, a rate of interest which shall be prescribed
by the Bank on the second Business Day prior to the
first day of that interest period as being the London
Inter Bank Offered Rate for a period of one day, for
the dollar, as quoted and published by the Reuters
Agency to its subscribers on the page known as the
FRBD page.
If on any prescribed date whatsoever the quotation page
shall not have been published by Reuters and/or the
quotation as aforesaid shall not have included the Libor
for the relevant interest period and/or Reuters should
change the banks and/or the data using them at the
present time for the purposes of such quotation page -
the Libor shall be determined, in the manner heretofore
set out, on the basis of the publications of Reuters on
its other page/s which they have, to the knowledge of
the Bank and in consultation with the Borrower, in order
to constitute an appropriate substitute for the
quotation page. (Any page/s as aforesaid of the Reuters
publications which shall be chosen as a replacement for
the quotation page, whether permanently or for a
particular date, shall also be called if it/they are for
the purposes of this definition, the "Quotation Page").
If on any prescribed date whatsoever the quotation page
shall not have been published by Reuters, or if on any
prescribed date whatsoever the Bank shall determine that
it is unable itself to finance on the Euro market the
Inter Bank in London at the interest rates contained on
the Quotation Page - then the Libor shall be - the
average (rounded upwards up to the next 1/16th of one
percent) of
4
<PAGE>
the interest rates as shall be quoted to the Bank, on
the relevant prescribed date, by the fixing banks, as
the interest rates at which the Bank shall be able to
obtain deposits in dollars, at a corresponding amount to
the amount with respect to which the Bank is requesting
the aforesaid quotation for the corresponding period for
the relevant interest period.
"Libid" - the Inter Bank interest for deposits (Euro Rate) - means the
-----
Inter Bank rate of interest which the "market makes" for payment for a
foreign currency deposit which another bank would deposit with it.
"Motorola" - means Motorola Communications Israel Ltd.
--------
"Date of Availability of Credit Facilities" - means the Business Day on
-----------------------------------------
which the Bank shall make available to the Borrower the amount specified
in paragraph 3.01.
"Date of Payment" - means with respect to each payment of interest: the
---------------
last Business Day of the interest period terminating on 31st March 2000
and thereafter the last Business Day of each interest period; and with
respect to any payment on account of the repayment of the Loan: the last
Business Day of the interest period terminating in March 2003 and
thereafter the last Business Day of each interest period.
"Taxes" - means any tax, whether on income or otherwise, levy, municipal
-----
rates, deduction at source, deduction, duty and any other compulsory
payment of any nature whatsoever, whether in existence now or which shall
be in existence at any time in the future, together with interest and/or
penalties with respect thereto (should there be any such). The expression
"taxation" shall be interpreted in accordance therewith.
"Loan Documents" - means the Agreement, a pledge of the shares in the Mirs
--------------
Company, a mortgage and an assignment by means of which half of the rights
of the Borrower in pursuance of the Purchase Agreement are mortgaged, a
mortgage and an assignment by means of which the rights of the Borrower as
against the Trustee are mortgaged, the irrevocable instructions, and any
other document which was entered into or which may be entered into at any
time in the future in order to serve as security for the repayment of the
Loan (in whole or in part) and/or for the payment of interest with respect
to the Loan and/or any other payment due to the Lender under the
Agreement.
"Clearance" or The "Clearance" - means eight tenths of a percent (0.8%).
----------------------------
The "Books of the Bank" - includes any book, ledger, a page of an account,
----------------------
a copy of a page of an account, a loan contract, a letter of undertaking,
a note containing the client's signature, a card index, a sheet of paper,
a reel, any means for the storage of data for purposes of electronic
computers as well as any other means for the storage of data.
5
<PAGE>
"Mortgage" - means any security, pledge, mortgage, lien, an assignment,
--------
attachment, a secured right, a restriction against the transfer of
ownership, an excess right, a trust arrangement and any other arrangement
or agreement as a result of which or the purpose of which is the creation
of any security whatsoever.
"Mortgage of Shares" - means a fixed, first ranking mortgage of 5,500,000
------------------
cumulative and participating preference shares, without limitation as to
the amount, numbered 22,000,001 to 27,500,000 (inclusive) together with
the fruits accruing therefrom in the Mirs Company including bonus shares
and all the existing or future rights and profits embodied in such shares
and in substitution thereof - in the form attached as Annex A to this
Agreement.
"Mortgage and Assignment by means of which Half the Rights of the Borrower
-------------------------------------------------------------------------
are Mortgaged in accordance with the Sale Agreement" - means a mortgage
---------------------------------------------------
and an assignment by means of which half the rights and monies due and/or
which may become due to the Borrower from Motorola under the Purchase
Agreement are mortgaged, including the assignment of the right of action
of the Borrower against Motorola under the Sale Agreement with respect to
the rights and the monies mortgaged to the Bank as aforesaid - in the form
attached as Annex B to this Agreement.
The "Mirs License" - means a special license numbered 12 0120 - 1 - 96051
-----------------
for the provision of detection business services by means of the "Mirs",
"Multi Wave " and "Multi Frequency" systems issued by the Ministry of
Communications.
"Interest Period" - 1. For as long as the Borrower pays on the
---------------
due dates thereof all the amount owing under
this Agreement - means a period of twelve (12)
months, commencing on the date of the
availability of the credit facilities,
including such date, save for the first
interest period which terminates on 31st March
1999.
2. Should the Borrower be in arrears with its
payments under this Agreement - means a period
of one day.
3. Any interest period (other than the first)
commencing upon the expiration of the previous
interest period.
3. Availability of the Loan to the Borrower
----------------------------------------
3.01 Subject to the fulfillment of the conditions and of the obligations
set forth in paragraph 3.03, the Bank shall make available to the
Borrower the sum of $ 36,400,000 (thirty six million, four hundred
thousand dollars) by crediting the Borrower's account number 680990
at the Arlozorov branch of the Bank and at the same time the Bank
shall debit the Loan Account of the Borrower at the Arlozorov Branch
with the foregoing sum.
6
<PAGE>
3.02 The Borrower declares that the whole amount that the Bank shall make
available to it is intended only to finance the consideration for
which it is liable in accordance with the Assignment Agreement.
3.03 The Bank shall make the Loan available to the Borrower only if no
instance of a breach had nor shall take place, nor had nor shall any
event or circumstance have taken place which shall amount to an
instance of a breach in the course of time and/or no notice or
warning shall have been given up to the date of the availability of
such credit facilities, provided that as at such date the Borrower
shall have furnished to the Bank the documents set forth hereunder,
duly completed and signed to the entire satisfaction of the Bank,
and at the same time all the share transactions hereunder shall have
been carried into effect and paid:
(a) The Borrower shall have signed in favor of the Bank and shall
deliver to the Bank:
(1) A deed of pledge for the purpose of mortgaging the
Shares, in the form of Annex A to this Agreement.
(2) A deed of pledge for the purpose of mortgaging and
assigning by means of which half the shares of the
Borrower are mortgaged in pursuance of the Purchase
Agreement, in the form of Annex B to this Agreement.
(3) A deed of pledge for the purpose of mortgaging and
assigning by means of which all the rights of the
Borrower against the Trustee to receive, from time to
time, monies which shall be deposited into the Trust
Account, are mortgaged in favor of the Bank, in the form
of Annex C to this Agreement.
(b) The Trust Agreement in the form of Annex G to this Agreement,
shall have been entered into between the Trustee, the Bank and
the Borrower.
(c) The Borrower shall have delivered to the Bank:
(1) A copy of a resolution of the board of directors of the
General Partner of the Borrower consenting to this
Agreement being entered into by the Borrower and receipt
of the Loan by the Borrower in accordance with the
Agreement, and the determination of the person or
persons authorized to sign for and on behalf of the
Borrower the Agreement and any document, addendum or
accompaniment to this Agreement.
7
<PAGE>
(2) An Opinion from the Borrower's legal advisor, bearing
the date of the signature of the Agreement, in the form
of Annex H to this Agreement.
(3) A copy of the agreement as to the establishment of the
partnership of the Borrower and the certificate of
registration of the Borrower, duly certified by the
legal advisors of the Borrower as being complete and
correct.
(4) A copy of the Purchase Agreement (together with all
annexes thereto) duly signed by the parties thereto, and
every ancillary document which is signed in consequence
thereof or in connection therewith (including the
Assignment Agreement) duly certified by the legal
advisors of the Borrower as being complete and correct.
(5) The consent of the Director of Trade Restraints with
respect to the partnership between the Ampal group and
Motorola.
(6) A copy of the Mirs License.
(7) An irrevocable instruction from the Borrower to the Mirs
Company according to which any payment of a dividend
which shall become due to the Borrower with respect to
the shares and its half share of any sum which shall be
paid from time to time to the Borrower, whether as a
payment relating to a management fee, a consultancy fee,
a participation fee, a use charge, royalties, interest,
or otherwise - shall be paid to the credit of the Trust
Account together with a confirmation from the Mirs
Company that it will act in accordance therewith, in the
form of Annex D to the Agreement.
(8) An irrevocable instruction from the Borrower to Motorola
according to which half of any amount which becomes
payable by Motorola at any time to the Borrower in
accordance with the Purchase Agreement shall be remitted
to the credit of the Trust Account together with a
confirmation from Motorola that it will act in
accordance therewith, in the form of Annex E to this
Agreement.
(9) An irrevocable instruction from the Borrower to the
Trustee according to which a mortgage and an assignment
in favor of the Bank by means of which all its rights
against the Trustee to receive from time to time monies
which shall be deposited in the Trust Account are
mortgaged, together with a confirmation from the Trustee
according to which he undertakes not to remit to the
Borrower any monies deposited in the Trust Account
without
8
<PAGE>
receiving the prior approval of the Bank thereto, in the
form of Annex F to this Agreement.
(10) The share certificates with respect to the Shares.
(11) A confirmation from Secretary of the Mirs Company in the
form of Annex I to this Agreement.
(d) It shall have paid to the Bank the costs referred to in
paragraph 21.01 of this Agreement.
4. Payment of Interest
-------------------
4.01 The Borrower shall pay interest on the Loan effective from the date
of the availability of the Loan with respect to each interest
period, at the Libor rate together with the Clearance (the
"Interest") per annum.
Effective from the availability of the entire Loan and up to the
last Business Day of the interest period terminating on 31st March
2001, the interest which shall accumulate on the Loan shall be
capitalized at the end of each interest period and shall be added to
the unpaid balance of the capital of the Loan in such manner that it
shall constitute an integral part thereof; thereafter - the interest
with respect to the balance of the unpaid balance of the Loan shall
be paid by the Borrower to the Bank upon each payment date.
4.02 The interest shall accumulate from day to day and shall be
calculated on the basis of the actual number of days which have
elapsed, divided by 360.
5. Repayment of the Loan
---------------------
The Borrower shall repay the Loan to the Bank in 5 consecutive amounts on
each payment date, effective from the last Business Day of the interest
period terminating on 31st March 2004, at the following rates:
On 31st March 2004 it shall repay 10% of the Loan,
On 31st March 2005 it shall repay 15% of the Loan,
On 31st March 2006 it shall repay 25% of the Loan,
On 31st March 2007 it shall repay 25% of the Loan,
And on 31st March 2008 it shall repay 25% of the Loan.
9
<PAGE>
6. Arrears Interest
----------------
6.01 The Borrower shall pay arrears interest (hereinafter called "Arrears
Interest") on amounts unpaid on the date as bound under the
Agreement, effective from the date prescribed for the repayment
thereof up to the actual date of payment (either prior to or after
the grant of a judgment) at a rate of two percent (2%) per annum
over and above the amount of the Clearance together with Libor.
6.02 Furthermore, the Borrower shall pay Arrears Interest at the rate set
forth in paragraph 6.01 hereof on amounts which are due for payment
to the Bank under this Agreement upon demand and not were paid to
the Bank within five (5) Business Days from the date of demand by
the Bank, effective from the date of demand by the Bank up to the
date of actual payment (either prior to or after the grant of a
judgment).
6.03 The Arrears Interest shall be paid to the Bank upon demand, and
until so paid it shall be capitalized and added to the capital of
the Loan every month.
7. Additional Costs
----------------
If as a result of a change in the law or in the interpretation of the
provisions of any law and/or as a result of an obligation or a requirement
of the instructions of the Bank of Israel or of any fiscal or monetary
authority in Israel:
(1) The Bank shall bear additional costs as a result of its agreement to
enter into a contractual arrangement under this Agreement and/or by
reason of the performance of its obligations in accordance with the
Agreement and/or its obligation to make available to the Borrower
the Loan and/or to continue to make available the unpaid balance of
the Loan; or
(2) The Bank is unable to obtain the same yield rate on all its capital
resources which it would otherwise have obtained but for its having
entered into the contractual arrangement under the Agreement and/or
the existence of its obligations thereunder and/or having taken upon
itself the fulfillment of its obligation to make the Loan available
and/or to continue to make available the unpaid balance of the Loan;
or
(3) The cost of finance to the Bank had increased as a result of the
availability of the Loan or the continued availability of the unpaid
balance of the Loan; or
(4) The Bank had been required to pay tax (other than on its net
chargeable income) or any other payment in connection with the Loan
and/or with the unpaid balance of the Loan and/or in relation to any
amount which it had granted and/or is likely to give on the strength
of this Agreement,
10
<PAGE>
then the Borrower shall pay from time to time forthwith upon the Bank's
demand, additional amounts at such rates as shall be sufficient to
compensate the Bank for such additional costs of finance to the Bank.
The Bank shall furnish to the Borrower as soon as possible after the
foregoing occurrence, a detailed description within reason of the
occurrence entitling the Bank to demand such additional payments on the
basis of this paragraph.
The Borrower shall be entitled, after receipt of a demand for such
payment, to give notice to the Bank of its desire to effect early
repayment of the entire Loan (but not merely a part thereof) upon the next
payment date; provided that on such date it shall pay to the Bank all the
interest which had accumulated on the unpaid balance of the Loan and all
the additional amounts for which the Borrower is liable pursuant to this
Agreement.
8. Early Repayment
---------------
8.01 The Borrower shall be entitled to effect the early repayment of the
unpaid balance of the Loan or any part thereof without payment of a
penalty upon the fulfillment of the conditions set forth hereunder:
(a) If such repayment is a part of the unpaid balance of the Loan, then
the amount which shall be paid as an early repayment shall not be
less than $ 1,000,000.
(b) Such early repayment shall be effected on the last Business Day of
an interest period, by giving not less than 30 days notice in
writing in advance to the Bank, which shall be irrevocable and which
shall indicate the amount due for early repayment. Should the early
repayment be in effect other than on the last Business Day of an
interest period and/or should such advance notice in writing of not
less than 30 days not be given to the Bank - the Borrower shall
compensate the Bank immediately upon receipt of a demand from the
Bank with respect to the differences between the amounts of interest
for the period from the date of such early repayment and the
expiration of the current interest period in accordance with the
Libor to that interest period, and the amounts of interest to that
period in accordance with the Libor on the date of early repayment,
to the period between the date of early repayment and the expiration
of the current interest period.
(c) Amounts paid as an early repayment in accordance with this paragraph
shall be credited on account of the early repayment of the Loan, in
reverse order to the repayment thereof and it shall not be possible
to obtain a readvance thereon.
(d) None of the occurrences set forth in paragraph 12 of the Agreement
shall have taken place and continue to persist.
11
<PAGE>
(e) All of the amounts of the Loan, the due date of repayment of which
is on the date on which an early repayment is intended to be in
effect, shall be paid on the due date thereof.
(f) No such early repayment shall be effected by means of refinancing
from banking or quasi-banking sources.
8.02 Should the Borrower deliver a notice as to its intention to effect an
early repayment in accordance with the terms of this Agreement, but should
in fact such early repayment not be effected, then the Borrower shall
compensate the Bank, immediately upon receipt of a demand from the Bank,
with respect to any loss or expense occasioned to the Bank as a result of
the failure to effect such early repayment on such date.
8.03 The Borrower shall not be entitled to repay the Loan or any part
thereof other than upon the terms expressly set forth in this Agreement.
9. Date, Place and Manner of Payment
---------------------------------
9.01 Payment made by the Borrower in accordance with this deed shall be
made to the Bank clear and free of any tax, without setoff or
counterclaim, in United States dollars capable of being freely converted
and at the Arlozorov branch of the Bank, or at any other place as shall be
determined by the Bank provided that it shall have given 30 days advance
notice thereof to the Borrower.
9.02 Should the Borrower be required at any time whatsoever pursuant to
the laws of the State of Israel to deduct tax at source from interest
payments due to the Bank under this Agreement, then the Borrower shall be
entitled to effect such deduction provided that in such an event it shall
furnish to the Bank due verification as to the deduction of income tax at
source, in such form as shall be acceptable to the Income Tax
Commissioner, and subject also this being in accordance with the
provisions of Israeli law which at that time are that such deduction at
source shall be considered as part of the income tax of the Bank; should
this not be the case, the amount due by the Borrower with respect to
interest under the Agreement shall be increased at such rate as shall be
required in order to ensure that after the deduction of the tax or the
payment thereof by the Borrower, the full amount of the agreed interest,
which was supposed to be have been received by the Bank in accordance with
the Agreement had it not been for the requirement of the deduction of the
tax or the payment thereof by the Borrower, shall be received by the Bank
upon the date of such payment.
9.03 All payments due by the Borrower to the Bank in accordance with this
Agreement shall be paid only on a Business Day, as defined in this
Agreement. If the date of payment of any amount whatsoever shall be due on
a date which is not a Business Day, such payment shall be effected on the
next Business Day following, unless as a result thereof such payment shall
become due in the following calendar month; in such an event the payment
shall be advanced to the preceding Business Day.
12
<PAGE>
9.04 All amounts payable in accordance with this Agreement shall be
effected by 12.00 noon on that Business Day. Any payment effected after
this time shall be deemed to be a payment at 09.30 on the following
Business Day.
9.05 Any payment made by the Borrower on a day which is not a Business
Day, shall be deemed to be a payment on the first Business Day following.
10. Securities
----------
10.01 As security for the due and faithful payment of all amounts due
and/or which shall become due to the Bank by the Borrower for the
repayment of the Loan in accordance with this deed the following
securities shall be utilized:
(a) A mortgage of the Shares as well as a mortgage and an
assignment by means of the mortgage of 50% of any payment due
and/or to become due to the Borrower from the Mirs Company,
with respect to management fees, consultancy fees,
participation fees, royalties, interest or otherwise - in the
form attached as Annex A to this Agreement.
(b) A mortgage and an assignment by means of the mortgage of half
the rights of the Borrower in accordance with the Purchase
Agreement in the form of Annex B to this Agreement.
(c) A mortgage and an assignment by means of a mortgage in favor
of the Bank of all the rights of the Borrower against the
Trustee in accordance with the Trust Agreement, to receive
from time to time, amounts which shall be deposited into the
Trust Account, in the form of Annex C to this Agreement.
(d) An irrevocable instruction from the Borrower to the Mirs
Company confirmed by the Mirs Company in the form of Annex D
to this Agreement, pursuant to which half of any amount which
is paid by the Mirs Company (either in the nature of a share
in profits, or as a payment with respect to management fees,
consultancy fees, participation fees, use charges, royalties,
interest or otherwise) shall be remitted to the credit of the
Trust Account.
(e) An irrevocable instruction from the Borrower to Motorola and a
confirmation from Motorola to remit half of any amount which
shall be payable to the Borrower from time to time by Motorola
in accordance with the Purchase Agreement to the credit of the
Trust Account, in the form of Annex E to this Agreement.
13
<PAGE>
(f) An irrevocable instruction from the Borrower to the Trustee as
to the mortgage and assignment by means of a mortgage in favor
of the Bank of all its rights against the Trustee and
confirmation by the Trustee according to which he undertakes
not to remit monies deposited and/or which shall be deposited
from time to time in the Trust Account, to the Borrower, in
the form of Annex F to this Agreement.
(g) The lodgement of the share certificates of the Shares with the
Bank.
(h) The mortgage of all monies deposited and/or to be deposited
from time to time in the Trust Account in the form of Annex M
to this Agreement.
(i) Any other security which shall be furnished by the Borrower or
by any person on its behalf or by any of its partners in
accordance with the provisions of paragraph 10.15 of this
Agreement.
10.02 All the securities shall be cumulative and independent of each
other, shall not affect other securities which the Bank holds or
shall hold, and shall serve in the nature of a continuing security
for the discharge in full of all amounts to which the Borrower is
bound pursuant to this Agreement.
The Bank shall be entitled to realize the securities in any order as
it shall determine and the failure to utilize any security shall not
be construed as prejudicing or derogating from the use of any other
securities.
10.03 It is agreed between the Borrower and the Bank that the Bank shall
be entitled to utilize only securities deposited under paragraph
10.01 in order to recover monies which the Borrower owes to the Bank
by virtue of this Agreement and to utilize deposits to discharge any
indebtedness of the Borrower towards it.
10.04 The Bank hereby declares and confirms that it is aware that the
realization of the mortgage of the Shares shall be deemed to be a
Transfer in accordance with the Shareholders Agreement and subject
to the limitations set forth in paragraphs X and XI of the
Shareholders Agreement. At the time of signature of this Agreement
the Bank shall confirm the foregoing by its signature of a
confirmation in the form of Annex J to this Agreement.
10.05 Notwithstanding the mortgage of the Shares in favor of the Bank and
the mortgage and assignment by means of a mortgage of all the rights
of the Borrower against the Trustee to receive from time to time
monies to be deposited in the Trust Account in favor of the Bank -
the Borrower shall be entitled to obtain for its use:
(a) Accumulated amounts of up to $ 150,000 for each calendar year
to finance its partnership expenses provided that none of the
occurrences set forth in paragraph 12 of the Agreement shall
have arisen.
14
<PAGE>
(b) Additional amounts (including those for the purpose of their
distribution to the partners of the Borrower) provided that
the following conditions have cumulatively been fulfilled:
(1) The source of the monies is the payment of a dividend
from the Mirs Company resulting from profits in the
ordinary course of the business of the Mirs Company only
and/or from Motorola payments in accordance with the
Purchase Agreement.
(2) None of the events set forth in paragraph 12 of the
Agreement had occurred and had continued to persist.
(3) The balance remaining in the Trust Account is sufficient
to secure the payment of all amounts of the Loan due for
repayment in that calendar year and in the year
following.
(4) The Borrower had signed an additional deed of pledge in
order to give a double validity to the fixed and first
ranking mortgage over amounts deposited in the Trust
Account.
(5) Should the Borrower request the receipt for its use of
more than 35% of the monies deposited in the Trust
Account in the same calendar year - the Borrower shall
furnish to the Bank as a condition of the withdrawal of
monies in excess of 35% as aforesaid (hereinafter called
the "Surplus Amounts"), guarantees and securities to the
entire satisfaction of the Bank, of the partners in the
Borrower, each one in accordance with its share in the
Borrower, to secure the repayment of the Surplus Amounts
which had been transferred for utilization by the
Borrower should any of the events set forth in paragraph
13 of the Agreement take place, together with interest
at the same rate as that rate of interest which would be
applicable from time to time on the Loan under paragraph
4.01 of this Agreement at any time between the date of
the withdrawal of such Surplus Amounts and up to the
date of the actual depositing of such Surplus Amounts
together with the interest with respect thereto, into
the Trust Account and the mortgaging thereof under a
fixed and first ranking mortgage in favor of the Bank.
It is recorded that if only some of the guarantees and
securities which the Bank had requested to obtain are
delivered - the Surplus Amounts which the Borrower shall
be entitled to receive for its utilization shall be
limited in accordance with the guarantees and securities
as furnished to the Bank.
15
<PAGE>
If not all the conditions heretofore set out have been fulfilled,
than all the amounts deposited in the Trust Account shall serve to
secure the repayment of the amounts for which the Borrower is
indebted in accordance with this Agreement.
11. Representations, Declarations and Undertakings
----------------------------------------------
11.01 The Borrower hereby declares in favor of the Bank as follows:
(a) The Borrower is a limited partnership which was duly
incorporated in accordance with the laws of the State of
Israel and registered under the provisions of the Partnership
Ordinance [New Version] 1975.
(b) The general partner of the Borrower is Ampal and the limited
partners in the Borrower are: Marinara Ltd., Bardilor Ltd.,
Hapoalim Properties (Shares) Ltd. and The Israel Mezzanine
Fund L. P. (hereinafter jointly called the "Partners").
The proportionate shares of each of the partners in the
Borrower are as follows: Ampal - 75.1%, Marinara Ltd. -
9.0996%, The Israel Mezzanine Fund L. P. - 7.45%, Bardilor -
0.91% and Hapoalim Properties (Shares) Ltd. - 7.45%.
The Partners are the registered and effective owners in their
own right (and not as a trustee for other persons and/or
another on behalf of other persons) with respect to their
entire interest in the Borrower.
(c) The Borrower duly enjoys all the authority powers and rights
to be the owner of all the assets of the partnership and to
manage its business as presently conducted.
(d) The Borrower is the owner of 11,000,000 cumulative and
participating preference shares having a par value of NIS 1.
each in the Mirs Company conferring upon it one third (1/3rd)
of the voting rights and of the capital of the Mirs Company.
(e) The Shares are clear of any debt, mortgage, claim or the
rights of third parties, save for a mortgage of the Shares
effected in favor of the Bank in accordance with this
Agreement and the rights granted to the remaining shareholders
of the Mirs Company in accordance with paragraphs X and XI of
the Shareholders Agreement.
(f) The Borrower is the owner of all the powers, authorities and
rights for the purpose of entering into a contractual
arrangement under this Agreement, and for the purpose of the
fulfillment of all the provisions thereof.
16
<PAGE>
(g) The Borrower has obtained all such consents, authorities,
permissions and approvals as are required in connection with
its entering into the Agreement and for the purposes of the
fulfillment of the obligations of the Borrower in accordance
therewith, and there is no need to obtain any additional
consents, authorities, permissions, and approvals whatsoever.
(h) All the obligations of the Borrower under the Agreement are
lawful, abiding, valid and binding and are capable of
enforcement against the Borrower in accordance with the
provisions thereof.
(i) Entering into this Agreement by the Borrower and the
fulfillment of its obligations in accordance therewith do not
and will not: (1) breach any provisions whatsoever of law or
permission applicable to, or granted to the Borrower; (2)
cause the breach of any contract, document or obligation to
which the Borrower is a party; (3) be a breach or deviation
from any provision of the Partnership's founding agreement.
(j) The Borrower has not breached any contract or permission to
which it is a party or granted to it under any breach which is
likely to affect in an essential manner the capability of the
Borrower to fulfill its obligations in accordance with the
documents comprised within this Agreement.
(k) To the knowledge of the Borrower, no action, arbitration,
litigation or administrative processes are pending or are
afoot against the Borrower or against Motorola (in connection
with the Mirs operations) or against ACI or against the Mirs
Company which are capable of materially affecting the ability
of the Borrower to fulfill its obligations under this
Agreement.
(l) No occurrence or circumstance has occurred which constitutes,
or which may constitute in the course of time or after the
giving of notice or a warning, any of the events set forth in
paragraph 12.
(m) The Borrower has paid the sum of $ 112,000,000 (one hundred
and twelve million dollars) for its rights under the Purchase
Agreement (including the accompanying expenses), this amount
being financed inter alia with credit made available to the
Borrower under this Agreement and an identical sum which
is/will be made available to the Borrower through Leumi.
(n) Save for the mortgage of the 5,500,000 cumulative and
participating preference Shares numbered 22,000,001 to
27,500,000 and all the present and/or future rights and the
profits embodied in the Shares and their replacement, and the
amounts of the dividends with respect thereto, and the
mortgage of 50% of all payments to be made to the Borrower by
the Mirs Company and the mortgage of half of the rights of the
Borrower under the sale agreement which confers upon Leumi as
security for the parallel loan -
17
<PAGE>
there is no mortgage over the assets of the Borrower and its
rights (both present and future), either over all or part
thereof.
(o) The due dates for the repayment of the Parallel Loan are the
same as the due dates of the payments prescribed in this
Agreement.
11.02 The representations contained in subparagraphs (a), (c), (f), (g),
(h), (i) and (j) of paragraph 11.01 shall be considered as
representations and declarations furnished on a continuous and
continuing basis by the Borrower with effect from the date of entry
into the Agreement and for as long as the Borrower is indebted to
the Bank for any amount whatsoever in accordance with the provisions
of the Agreement and as though they had been furnished with
reference to facts and circumstances existing on a continuous and
continuing basis as aforesaid.
11.03 The Borrower undertakes in favor of the Bank that for as long as it
shall owe any monies whatsoever under this Agreement:
(a) The Borrower shall obtain or shall procure that it obtains any
consent, authorization, permission or permit of any
governmental or public authority or of the court, as may be
likely to be required or to be appropriate from time to time
according to law, for the purpose of the complete fulfillment,
or the continued complete fulfillment of any obligation of the
Borrower under the Agreement. The Borrower shall ensure that
any such consent, authorization, permission or permit as
aforesaid shall continue to be fully valid and binding and it
shall fulfill all the conditions and provisions prescribed
therein.
(b) The Borrower shall procure the preparation of financial
reports of the Borrower and shall take steps to prepare
financial reports of the Mirs Company in accordance with
acceptable and customary accounting principles in Israel,
which shall be consistently applied with respect to each
financial year, and shall procure that such reports shall be
certified by a chartered public accountant. The Borrower shall
deliver a copy of such financial reports to the Bank as soon
as possible but not later than 180 days after the end of the
period to which the reports refer.
In addition the Borrower shall procure the preparation of a
quarterly balance sheet and a quarterly profit and loss
account relating both to it and to the Mirs Company, copies of
which shall be delivered to the Bank within 60 days of the end
of the period to which they refer.
(c) The Borrower shall furnish to the Bank such financial and
other information relating to the Borrower and to its
business, as shall be reasonably required by the Bank from
time to time.
18
<PAGE>
(d) That it shall not effect the early repayment of the
Parallel Loan without offering to repay in similar fashion
the credit afforded to the Borrower in accordance with this
deed upon the same conditions on which the Borrower effects
the early repayment of the Parallel Loan and that should
the Bank accept such offer the Borrower shall
simultaneously effect the repayment of both the credit
afforded under this Agreement and the credit afforded in
accordance with the Parallel Loan in such a way that at all
times the ratio between the amounts which the Borrower had
repaid to Leumi relative to the unpaid balance of the
Parallel Loan shall be identical to the amounts that shall
have been paid to the Bank under this deed relative to the
unpaid balance due to the Bank in accordance with this
Agreement.
(e) The Borrower shall deliver to the Bank in each year its annual
business plan together with any amendments, to such plan
immediately upon approval thereof by the Mirs Company.
(f) The Borrow shall, upon the Bank's demand, sign any document
which in the opinion of the Bank it requires in order to
allow, from time to time, for the issue of mortgages for
which the Borrower is obligated in accordance with
paragraph 10.01 of this Agreement, including the
registration of a new fixed mortgage, from time to time, in
favor of the Bank upon any crediting of the Trust Account,
in order that half of any amount which is payable to it
from time to time by Motorola in accordance with the
Purchase Agreement and any amount which is payable to it
from time to time by the Mirs Company with respect to the
Shares, including those in the nature of a distribution of
profits to shareholders, as well as 50% of any payment of
management fees, consultancy fees, participation fees, use
charges, royalties or interest or otherwise which is
payable to it by the Mirs Company, as well as any monies
which shall have been deposited from time to time into the
Trust Account, shall be bonded in favor of the Bank under a
fixed first ranking mortgage for the repayment of the
amounts for which the Borrower is liable under this
Agreement.
(g) The Borrower undertakes to give notice to the Bank as to any
breach of the conditions of the Purchase Agreement on the part
of any party whatsoever to such Purchase Agreement immediately
upon its becoming aware of any such break.
(h) Neither the Assignment Agreement nor the rights of the
Borrower in accordance therewith shall be altered and/or
amended, either in whole or in part, nor assigned nor ceded in
favor of other persons without receipt of the prior written
consent of the Bank thereto.
19
<PAGE>
(i) Neither the Purchase Agreement nor the rights of the Borrower
in accordance therewith shall be altered and/or amended,
either in whole or in part, nor assigned nor ceded in favor of
other persons without receipt of the prior written consent of
the Bank thereto.
(j) No act shall be performed which may prejudice and/or which may
be likely to prejudice the effectiveness of the mortgage over
the shares purchased, in favor of the Bank and the Borrower
shall take whatever action may be necessary for the purpose of
protecting the effective operation of the foregoing mortgage.
(k) The Borrower shall vote against any allotment of shares in the
Mirs Company other than:
(a) An allotment of shares under which the value of the
Company exceeds $ 330,000,000.
(b) The allocation of bonus share.
(c) The allocation of shares to employees.
(d) The allocation of shares to directors who are not
"parties at interest" in the Borrower.
(e) A Public Offering.
11.04 The Borrower undertakes in favor of the Bank that from the date of
this Agreement and for as long as it shall owe any monies whatsoever
to the Bank in accordance with this Agreement, without the prior
written consent of the Bank:
(a) The Borrower shall not create, nor enable nor agree to the
creation of a mortgage over its obligations, its property,
its rights and its income, either present or future, other
than in favor of Leumi in pursuance of paragraph 11.01 (n)
heretofore and other than the pledge of further shares
which it may acquire in the Mirs Company, this being as
security for a further loan which may be granted to it for
such purpose.
(b) The Borrower shall not merge or combine with any other entity.
(c) The Borrower shall not engage in any activities which exceed
the bounds of the management of its investment in the Mirs
Company.
20
<PAGE>
12. Breaches: Events Constituting Grounds for Immediate Repayment
-------------------------------------------------------------
12.01 The Bank shall be entitled to insist upon the immediate repayment,
forthwith upon demand by it, of the amounts due and which shall
become due to the Bank by the Borrower (in whole or in part) under
any one of the occurrences enumerated hereunder -
(a) The Borrower shall have failed to pay, on due date and in the
manner prescribed therefor in this Agreement, any amount
whatsoever which the Borrower is obliged to pay within the
context of this Agreement, and the aforesaid breach shall not
have been remedied within 15 (fifteen) days; or
(b) The Borrower shall have breached, or shall have prevented the
fulfillment of any of its obligations or undertakings
whatsoever which it had assumed in accordance with this
Agreement (except for the non payment of any amount whatsoever
on the due date thereof) and such breach shall not have been
remedied within 30 days from the date of the Bank's demand; or
(c) The Borrower shall have been required to effect the early
payment of an obligation which it owes to other creditors; or
(d) Any of the representations contained in this Agreement shall
have been proved to have been untrue in any material detail;
or
(e) Any of the consents, confirmations, permissions or permits
of or any registration whatsoever with, or any declaration
whatsoever to, any governmental authority or public body,
or judicial authority or otherwise, which the Borrower is
required to obtain or to be given, in order to approve, or
in connection with the signature, the execution, the issue,
the enforcement or exercise, of this Agreement or in
connection with the carry out of the obligations of the
Borrower under this Agreement or under the Purchase
Agreement - shall have been changed, shall not have been
granted, shall have been cancelled, shall have lapsed and
not have been renewed, or shall have ceased in any manner
whatsoever to be valid and which shall not have been
remedied within 30 days from the date of the Bank's demand;
or
(f) Any creditor whatsoever of the Borrower shall have imposed an
attachment in an amount in excess of $ 1,000,000 over, or
shall have seized, or shall have instituted any execution
proceedings whatsoever against, or any other action or
proceedings whatsoever in connection with, the assets of
the Borrower or any rights, income, obligations or any
property whatsoever of the Borrower and the aforesaid
proceedings shall not have been withdrawn within 60 days; or
21
<PAGE>
(g) If the Borrower shall have ceased to repay its obligations
or shall have been unable to comply with its repayment
obligations, or shall have admitted its inability to repay
its obligations, or if the Borrower shall have commenced
contacts or negotiations with its creditors or any one of
them, with the intention of reaching an arrangement of its
debts or a rescheduling of its debts or of any part
thereof, or shall have reached an agreement as to an
arrangement or shall have in fact have entered into any
arrangement whatsoever in favor of a creditor or creditors
(whether generally or in connection with a particular class
of creditors) or if it shall have instituted any
proceedings whatsoever in relation to the Borrower under
any law, provision, regulation or other arrangement
relating to an arrangement of debts or rescheduling of
debts or any other similar such arrangement; or
(h) The Borrower shall have taken any action, or proceedings or
steps whatsoever in connection with:
1. A declaration by it of insolvency or the cessation of
repayment; or
2. The winding up or liquidation thereof; or
3. The appointment of a liquidator, a receiver, a trustee,
manager or any similar such official, irrespective of
whether such appoint is provisional or final, in
connection with the Borrower with respect to any, or any
material part of, its assets, its obligations, its
rights or its income, as the case may be; or
(i) All or a material part of the obligations, property, assets,
rights, income, shares or any right of ownership and other
property of the Borrower shall have been seized, confiscated,
nationalized or removed from its ownership in accordance with
an order or directive of a competent authority; or
(j) Any change shall have taken place in the documents of
incorporation of the Mirs Company which are construed as
altering in any manner the rights conferred upon the Shares
other than changes effected on the eve of a Public Offering,
with respect to which 7 Business Days prior notice had been
given to the Bank; or
(k) Action had been instituted against the Borrower and/or against
the Mirs Company which materially adversely affects or which
raises a reasonable risk that it might materially adversely
affect the ability of the Borrower to effect the repayment of
the amounts for which it is obligated under this Agreement; or
22
<PAGE>
(l) The Borrower had failed to furnish to the Bank periodical
financial reports, books of account or other supporting
documents in connection with the position of its business and
that of the Mirs Company as required under paragraph 11 of
this Agreement and this state of affairs had not been remedied
within 15 days from the date of the Bank's demand; or
(m) In the event of any one of the occurrences enumerated in this
paragraph having changed resulting from changes in the
partners in the Borrower if any security and/or any guarantee
had been furnished to the Bank as a condition of the release
of Surplus Amounts in accordance with the provisions of
paragraph 10.05 of the Agreement.
(n) The Purchase Agreement shall have been changed and/or altered,
either wholly or in part; or
(o) The Assignment Agreement shall have been changed and/or
altered, either wholly or in part; or
(p) The Mirs License, either wholly or a material part thereof,
shall have been cancelled and/or suspended and/or restricted
and/or lapsed and/or shall not have been renewed, in such
manner that the Mirs Company no longer enjoys an authority
from Ministry of Communication to operate the Mirs system
under an arrangement to the satisfaction of the Bank; or
(q) If in the opinion of the Bank any material obligation
whatsoever of the Borrower had been breached because of an
illegality, the absence of binding force or impossibility of
performance; or
(r) Ampal - America shall have ceased to be the owner either
directly or indirectly of not less than a 51% interest in
Ampal; or
(s) Ampal shall have ceased to be the owner of not less than a 51%
interest in the Borrower; or
(t) Ampal shall have ceased to be the general partner in the
Borrower; or
(u) The amount of sales by the Mirs Company and the net pre tax
profit of the Mirs Company shall have declined beyond the
amounts set forth hereunder:
For the years 1998 and 1999 - the amount of sales shall have
declined from $ 160,000,000 and the net pre tax profit shall
have declined from $ 3,000,000.
23
<PAGE>
For the years 2000 and 2001 - the amount of sales shall have
declined from $ 120,000,000 and the net pre tax profit shall
have declined from $ 20,000,000.
For the years 2002 and 2003 - the amount of sales shall have
declined from $ 280,000,000 and the net pre tax profit shall
have declined from $ 70,000,000.
For the years 2004 and 2005 - the amount of sales shall have
declined from $ 300,000,000 and the net pre tax profit shall
have declined from $ 55,000,000; or
(v) In accordance with any audited annual financial report the
Mirs Company shall have sustained a loss (before tax) for two
consecutive years; or
(w) If the Borrower shall have been compelled to sell the Shares
under the provisions of paragraph 11.3 ("Bring Along") of the
Shareholders Agreement.
(x) The expiration or cancellation of the consent of the Trade
Restraints Director to the merger between ACI and Motorola.
12.02 If the Bank insists on the immediate early repayment, in whole or in
part, of the Loan, the Bank shall in addition be entitled to give
notice to the Borrower and/or to a guarantor that:
(a) The Loan and all the additional sums due to the Bank under
this Agreement shall bear interest at the rate as prescribed
in paragraph 6 of this Agreement, as though such amounts had
not been paid on due date. Upon delivery of such notice the
interest shall be due for payment immediately or in accordance
with the provisions of such notice; and/or
(b) To realize the securities, either in whole or in part, which
were handed over to secure the amounts for which the Borrower
was obligated under this Agreement, in any manner permitted by
law.
13. Illegality and an Alternative Basis
-----------------------------------
13.01 This Agreement is entered into according to the provisions of the
law, the regulations and the monetary provisions which are in force
as at the date of its being entered into and in accordance with the
existing conditions in the international financial market. If for
reasons which are not dependant on the Bank, the grant of the Loan
and/or its continued funding shall be rendered unlawful or
impossible, the Bank shall be entitled to give notice thereof to the
Borrower, and the Borrower agrees that in such an event the unpaid
balance of the Loan, together
24
<PAGE>
with interest due thereon and any additional amount due to the Bank
under this Agreement, shall be due for repayment within 30 days from
the date of the giving of such notice as aforesaid, or upon the
expiration of that interest period, whichever shall be the earlier.
13.02 (a) If at any time by reason of changes which affect the Inter
Bank Eurodollar market, the Bank is unable, for reasons
which are not dependent upon it and which are beyond its
control, to determine the Libor, or should it be itself
unable, for reasons which are not dependent on it, to fund
in United States dollars in relation to the Loan, then it
shall give notice thereof to the Borrower.
(b) The Bank shall in the circumstances set out in subparagraph
(a) propose to the Borrower an alternative basis for the
continuation of the provision of the Loan similar to that
given by the Bank at that time to its other preferred business
clients under similar transactions (hereinafter called the
"Alternative Basis"). Such an Alternative Basis would be
likely to include alternative interest periods in other
foreign currency, or different interest rates, taking into
consideration the unutilized balance of the Loan and the rate
of the Clearance. The Alternative Basis shall be binding on
the Borrower and shall be of full force in accordance with the
conditions thereof, with effect from the date upon which the
Bank had given such notice thereof to the Borrower.
(c) Should the Borrower decide that it does not desire to
continue to borrow the Loan or any part thereof, in
accordance with the Alternative Basis, then it shall give
notice thereof to the Bank within 10 days from the date of
receipt of the Bank's notice with respect to the
Alternative Basis. Upon giving the Borrower's notice as
aforesaid, the unpaid balance of the Loan shall become due
for immediate repayment, together with the full interest
which had accumulated and which is accumulating, at the
rate thereof during the course of the last interest period
in relation to which the rate of interest had been
determined taking heed of Libor.
14. Attributing Payments
--------------------
Unless otherwise agreed between the Bank and the Borrower, all monies
deposited by the Trustee and/or the Bank or which are received by it on
behalf of the Borrower, shall be credited by the Bank on account of any
amount due to the Bank by the Borrower under this Agreement, as set forth
hereunder, without taking into account whether the Borrower or any third
party may have requested that such monies be attributed for any other
purpose, or in any other manner;
25
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(a) Firstly, for payment to the Bank of all the costs and payments,
including those which the Bank had borne for the purpose of the
realization and enforcement of its rights under the Agreement or the
Loan Documents.
(b) Secondly, for the payment of interest/arrears interest on the Loan.
(c) Thirdly, for the early repayment of amounts of the capital of the
Loan, in reverse order to the date of repayment of any amount.
15. Obligation of the Borrower to Give Notice
-----------------------------------------
The Borrower undertakes to give immediate notice to the Bank:
(a) Concerning any instance of a claim of a right relating to any
security whatsoever which had been furnished or which is to be
furnished to the Bank under this Agreement or in relation thereto.
(b) Concerning any of the events enumerated in paragraph 12 hereof.
(c) Concerning any change of address.
(d) Concerning any application which is filed against the Borrower or by
the Borrower for the winding up of the Borrower, including the
adoption of a resolution by the Borrower as to its voluntary winding
up and/or a merger.
(e) Concerning any application for the appointment of a receiver over
all the assets of the Borrower or over any part of such assets.
(f) In the event of any of the occurrences enumerated in subparagraphs
(d) and (h) heretofore relating to any one of the partners in the
Borrower, if such partner had furnished security and/or a guarantee
under paragraph 10.05 of this Agreement, immediately upon the
Borrower becoming aware thereof.
(g) Concerning any instance of a claim in relation to the right of use
by the Mirs Company of a communication frequency which is being used
by it or concerning any instance of the cancellation of its right of
use of such frequencies.
(h) Concerning any instance of a material breach of any of the
conditions of the Purchase Agreement or the Assignment Agreement.
(i) Concerning any instance of the cancellation (in whole or in part) of
the Purchase Agreement or the Assignment Agreement.
(j) Concerning any instance of the cancellation of the Mirs Company
License by the Ministry of Communications for the operation of the
Mirs network.
26
<PAGE>
16. Compensation With Respect to an Amount Not Paid on Due Date
-----------------------------------------------------------
If for any reason whatsoever, the Loan or any part thereof or interest
accumulating thereon shall be paid or raised (either by the Borrower or by
any third party whatsoever) by virtue of a security or otherwise, on any
day other than the appointed date of payment (other than under an early
repayment pursuant to paragraph 8 of this Agreement), the Borrower shall
pay to the Bank upon demand an amount which compensates the Bank for the
loss sustained by it as a result of such payments which were borrowed in
order to carry out and to finance the Loan and/or the continued grant
thereof (including compensation with respect to loss of income), this
being in relation to any amount repayable (including early repayment) or
which is recoverable during the course of an interest period, and which
had not been paid on the agreed date for such payment.
17. Waivers
-------
Any delay in or refraining from the exercise by the Bank of any right,
power, privilege or remedy under this Agreement or any of the Loan
Documents shall not impair such right, power, privilege or remedy and
shall not be deemed as being a waiver thereof and in addition its having
done so on one occasion or partially with respect to any such right,
power, privilege or remedy shall not preclude any other or further
exercise of such power, right or remedy.
18. Disclosure of Information
-------------------------
Any branch of the Bank which manages the Loan or any section thereof shall
be entitled to disclose to the executive management of the Bank, as well
as to the Bank of Israel, to the Comptroller of Banks, to the Comptroller
of Foreign Currency or to any other person acting by virtue of the
authority thereof, or to any other competent authority to which that
branch or executive management of the Bank is subject, or to the executive
management of the Bank in order that it shall convey to such competent
authorities, particulars concerning the Borrower, concerning a surety or
relating to the Loan, either upon the demand of such competent authorities
or as the executive management of the Bank shall at its discretion deem
fit.
19. The Right of Transfer and Assignment
------------------------------------
19.01 The Bank shall be entitled at any time, at its discretion and
without requiring the consent of the Borrower, to transfer and/or
assign its rights in connection with the Loan or under this
Agreement, in whole or in part, including the securities which have
been delivered or which shall be delivered in accordance with this
Agreement, in whole or in part, to any financial or banking entity
within the Bank Hapoalim Group, and any transferee shall be
similarly entitled to transfer and/or to assign within the Bank
Hapoalim Group the foregoing rights without requiring the additional
consent of the Borrower. Any such transfer and/or assignment may be
27
<PAGE>
effected in such manner as the Bank or any subsequent transferor
thereof shall deem fit.
19.02 The Borrower shall not be entitled to transfer or to assign any
right or obligation under this Agreement without obtaining the prior
written consent of the Bank.
19.03 In the event of the retirement of a limited partner of the Borrower,
the Bank shall give consideration to the possibility of financing
such partner's pro rata share of the Loan separately subject to the
furnishing of suitable securities to the satisfaction of the Bank.
20. Conversion of the Loan to a Loan in Israeli Currency
----------------------------------------------------
20.01 The Company shall be entitled at any time, at its absolute
discretion, to convert the Loan in United States dollars to a loan
in Israeli currency linked to the United States dollar and so forth,
in such amount as shall be identical to the amount of all the
payments due at such time on account of the Loan provided that the
Borrower shall not as a result thereof incur any costs whatsoever.
The consideration for such conversion shall be remitted to the
credit of the Loan Account.
If and when the Loan is converted to Israeli currency linked to the
United States dollar, all the payments to the Bank under the
Agreement shall be effected in Israeli currency, linked to the
United States dollar, under which the linked shall be computed as
follows:
(a) The "United States Dollar Rate" - the representative rate
of the United States dollar as shall be published from time
to time by the Bank of Israel, or should the Bank of Israel
cease temporarily or permanently to publish the rate as
aforesaid, any other official substituted rate in
replacement thereof, and in the absence of any such other
official substituted rate, the average of the exchange
rates (for transfers and drafts) for purchasing for sale of
the United States dollar in consideration for Israeli
currency, which shall be undertaken at the Bank Hapoalim
Ltd. at the relevant time.
(b) The "New Foreign Currency Rate" - the rate of the United
States dollar as shall be published on the actual date of
payment or on the date upon which the conversion of the Loan
as heretofore set out shall be effected, as the case may be.
(c) The "Base Foreign Currency Rate" - the rate of the United
States dollar as shall be published on the date upon which the
credit facilities are made available.
28
<PAGE>
20.02 If on the date of actual payment or on the date of effecting the
conversion it shall be evident that the New Foreign Currency Rate
had risen and/or had declined relative to the Base Foreign Currency
Rate, the Borrower shall pay to the Bank the amount under which it
increases or reduces, as the case may be, pro rata to the extent of
such rise or decline in the New Foreign Currency Rate relative to
the Base Rate.
20.03 It is hereby recorded that for purposes of the conversion as
heretofore referred to, the Borrower shall not be obliged to pay any
exchange commission raised by the Bank at the time of purchase or
sale of United States dollars; furthermore, the Bank shall bear the
payment imposed on the purchase of United States dollars inasmuch as
this may result from effecting the aforesaid conversions.
20.04 It is hereby recorded that the rate of interest on the Loan shall
not alter by reason of effecting the conversions heretofore referred
to, but the interest shall be calculated on the basis of the number
of days which shall have actually elapsed divided by 365.
20.05 It is agreed by us [the Borrower] that for purposes of effecting the
foregoing, the Bank shall be entitled to open, to the extent
necessary, an account in Israeli currency or in foreign currency,
according to the circumstances, in our [the Borrower's] name.
20.06 Save for changes required in the foreign currency payment and in the
calculation of the interest on the basis of 365 days in the year,
all remaining provisions of the Agreement shall be applicable
without alteration.
21. Costs
-----
21.01 The Borrower shall pay to the Bank costs of $ 70,000 in connection
with the preparation of the Loan Documents.
21.02 The costs in connection with the preparation of the Loan Documents
as well as stamp duty thereon, the registration of the securities
and all the costs relating to the realization of the securities,
including those incurred should the court be required to intervene,
as well as the legal fees of the Bank's attorneys, shall be paid by
the Borrower to the Bank immediately upon demand, together with
arrears interest at the rate specified in paragraph 6 of this
Agreement, from the date of its demand to the date of discharge
thereof in full. Until such discharge in full, all the foregoing
costs, together with interest thereon, shall be secured by the
securities referred to in paragraph 10 hereof.
29
<PAGE>
22. Additional Provisions
---------------------
22.01 The Borrower confirms that the Books of the Bank, its accounts and
its records are trustworthy, shall be regarded as being correct and
may be used as prima facie evidence against the Borrower with
respect to all particulars thereof.
22.02 The Borrower confirms that it has been given notice by the Bank in
accordance with the Protection of Privacy Law 1981 as follows:
(1) All particulars which the Borrower has conveyed and/or which
are to be conveyed to the Bank may be used by the Bank as
acceptable in its current work in its absolute discretion.
(2) All particulars which the Borrower has conveyed and/or which
are to be conveyed to the Bank may be stored according to the
needs of the Bank in a data bank of the Bank and/or of any
person that supplies to the Bank from time to time computer,
data processing and information storage services, and the
Borrower confirms its consent to the foregoing.
22.03 As may be demanded by the Bank from time to time, the Borrower shall
make available to representatives of the Bank for perusal during
ordinary business hours, any balance sheet, financial return,
accounts ledger, cards, books and other supporting documents in
connection with the financial position of the Borrower.
23. The Authorized Representative
-----------------------------
The Borrower hereby agrees that until such time as the Bank shall have
received a certified copy of a fresh resolution of the board of directors
of Ampal confirming otherwise, for all purposes of the Agreement the
signature of any two of the following three persons - Mr. Giora Bar Nir,
Mr. Shlomo Meichor and Mr. Yehoshua Gleitman - shall bind the Borrower.
24. Notices
-------
24.01 Any notice under this Agreement shall be in writing unless expressly
otherwise stated, and may be effected also by telex or by means of
dispatch by facsimile.
24.02 Any notice or conveyance of a document which is effected or sent by
one party to this Agreement to the other party shall be so effected
or sent to that party at the address set forth hereunder (unless any
party shall have given 15 days prior notice to the other of any
change of address):
30
<PAGE>
(1) If to the Borrower:
Care of Ampal Industries (Israel) Ltd., 111 Arlozorov Street
Tel Aviv
Fax No. : 6952409
Attention : Deputy Managing Director - Mr. Shlomo Meichor
With a copy to Advocate Roni Peleg
Fax No. 6952409.
(2) If to the Bank:
43 Rothschild Boulevard
Tel Aviv
Attention : 1) The Official in Charge of Credit, the Credit
Department
2) Director, Food, Medicine, Trade and Concerns
Sector, Executive Management.
Any notice to be sent to the foregoing address shall be considered
to have been received on the day following the Business Day on which
it was sent in the case of its having been sent by post, and if
delivered by hand, on the day following the Business Day on which it
was actually delivered.
25. The Substantive Law and Place of Jurisdiction
---------------------------------------------
(a) This Loan Agreement and the suretyship shall be subject to the laws
of the State of Israel, and shall be interpreted in accordance
therewith.
(b) The place of jurisdiction for the purposes of this Agreement and the
suretyship is determined as being the competent court in Tel Aviv -
Jaffa.
26. Indemnity
---------
The Borrower hereby undertakes to indemnify the Bank against any loss or
damage which may be occasioned to the Bank as a result of a judgment of a
court and/or an order of a court which is granted for the payment of any
amount whatsoever under this Agreement and with respect to which the
currency for payment under such judgment or order as aforesaid is
determined in a different currency from that of the Loan, as well as any
loss
31
<PAGE>
which is likely to be occasioned as a result of any change whatsoever in
the exchange rates of the currency of the Loan relative to the rate of
exchange of the currency of the judgment, in any period between the date
prescribed for the repayment of that amount under this Agreement and the
date upon which such payment was actually effected. The foregoing
undertaking to indemnify is a separate and independent obligation on the
part of the Borrower and shall remain in full force without being affected
by any waiver and/or concession which may have been granted to the
Borrower from time to time and this obligation shall remain in place
without prejudice to and/or derogating from its validity as a result of
any such judgment or order as aforesaid.
27. The Independence of the Provisions of the Agreement
---------------------------------------------------
If at any time whatsoever any provision whatsoever of this Agreement shall
become impossible of performance, unlawful or impossible of enforcement in
any manner whatsoever pursuant to the laws of the State of Israel, such
circumstance shall not affect or prejudice the performance, the legality
or the enforcement of the remaining provisions of this Agreement.
In witness whereof the Borrower and the Bank have affixed their signature at the
place and on the date set forth at the head of this Agreement:
"signed" stamp - Ampal Communications Limited Partnership
- -------- By means of the General Partner
Ampal Communications Ampal Communications Holding Company Ltd.
Limited Partnership
By means of Ampal Communications Holding
Company Ltd.
By 1) Yehoshua Gleitman
2) Shlomo Shalo
"signed"
- --------
Bank Hapoalim Ltd.
By 1) Sarah Gani
2) Daganit Gabai
32
Exhibit 10.2
(Translation; Original Document in Hebrew)
Name of Partnership: AMPAL COMMUNICATIONS LIMITED PARTNERSHIP (the
"Partnership")
To: Bank Leumi Le-Israel B.M.
_______________ Branch Date: ________
Additional Terms and Conditions as an Annex to General Conditions
for Opening an Account for Receiving Credits in Foreign Currency
(the General "Conditions")
1. The ownership of MIRS Communication Co. Ltd. (the "Company") is held in the
following proportions:
(i) 67% - Motorola Communications Israel Ltd.;
(ii) 33% - the Partnership;
as more particularly described in Appendix "A" attached hereto.
2. The Credits to be given by the Bank are:
(a) US$36,400,000 on a non-recourse basis, save as mentioned hereunder in
sub-clause (c) below;
(b) The Credits will be granted for a period of 10 years, with a grace
period of 5 years for repayment of principal; repayment of principal
during the last 5 years on an annual basis shall be as follows:
6th year - 10% of the principal;
7th year - 15% of the principal;
8th -10th years - 25% of the principal each year.
(c) Interest on the Credits shall be at the rate of LIBOR + 0.8% p.a.,
payable on an annual basis, on 31st March in each year, save that
during the first 2 years, should the Company not pay a dividend
sufficient to cover the interest payment, then the Partnership shall
have the right not to pay any such installment of interest, the same
being compounded and being payable on the last day of such 2-year
period, the exercise of such right being subject to the Bank
receiving, prior to the granting of the Credits, a guarantee from
Ampal American Israel Corporation ("Ampal") and/or bank guarantees
from the other partners in the Partnership, each being in text
satisfactory to the Bank, to secure payment of such compounded
interest. However, should such a dividend be declared, then that
amount received in respect of the Shares, as defined in Clause 7 (a)
hereunder, shall be used to pay such interest as has been so
compounded.
<PAGE>
(d) US$32,000,000 out of the proceeds of the Credits shall be used to
repay the temporary loan given to Ampal Communications Inc. by Bank
Leumi USA, and the Partnership hereby gives to the Bank irrevocable
instructions to make the necessary transfer.
3. The balance of the amount required to purchase the Shares (as defined in
Clause 7 (a) hereunder) has been provided to the Partnership by the
individual partners, either by way of paid-up capital and/or subordinated
owners' loans and/or by investment in the Partnership.
4. Notwithstanding the provisions of Clause 2 (a) in the General Conditions,
the Partnership shall be entitled to prepay the Credits or any part thereof
subject to compliance by the Partnership with the following conditions:-
(a) (i) three years shall have passed since the granting of the Credits;
or
(ii) the amount to be prepaid shall be out of dividends received by
the Partnership on account of their Shares; or
(iii) the amount prepaid shall be out of the proceeds of a public
offering of shares in the Company.
(b) all amounts due from the Partnership in connection with the Credits at
the date of intended repayment shall have been paid by the
Partnership;
(c) any sum to be repaid shall not be less than US$1,000,000 (One Million
United States Dollars);
(d) there is no impediment under law or requirement of the Bank of Israel
preventing the Partnership from effecting such prepayment or the Bank
from receiving the same;
(e) the Bank shall have received not less than 30 (thirty) days notice (or
in the event of the amount being prepaid is less than US$5m., then not
less than 5 banking days notice) of intended repayment of the Credits
or such part thereof as is to be repaid as aforesaid, such notice
(which shall, once actually received by the Bank, be irrevocable)
shall specify such sum as is to be repaid and the date for such
repayment which shall be a date prescribed for the payment of interest
on the Credits; the Credits or any part thereof as is to be repaid as
aforesaid, shall be repaid on the date specified in the said notice;
(f) notwithstanding the provisions contained in Paragraph (e) above, the
Credits may be prepaid on a date which is not an interest payment date
on condition that if at the date of such prepayment LIBOR for the
period from such prepayment date to the end of the current interest
period shall be less than LIBOR for the then current interest period,
the Partnership shall pay by way of penalty an amount equal to the
difference between such interest rates applied to the amount so
prepaid for the period from such prepayment until the end of the
current interest period;
-2-
<PAGE>
(g) the amounts prepaid as aforesaid shall be appropriated towards the
repayment of the principal of the Credits and such appropriation shall
be made proportionately to each of the outstanding installments of
principal;
(h) at the time of giving the notice referred to in sub-clause (e) above,
the Partnership shall also confirm to the Bank that it intends to
prepay a similar sum to Bank Hapoalim B.M. and shall include in such
confirmation, if applicable, the terms under which it is to prepay
such amount to Bank Hapoalim B.M., if such terms are more favorable
than those referred to above. If the Bank cannot grant similar terms
to the Partnership, then it shall inform the Partnership in writing
accordingly, and the Partnership shall utilize the whole of the amount
it intends to use for such prepayment (including those monies intended
to be paid to the Bank) in prepaying the loan to Bank Hapoalim B.M.
5. The Partnership hereby agrees with the Bank that so long as any part of the
Credits remains outstanding to the Bank, they will not, without the
previous written consent of the Bank:
(a) take loans from any third party whatsoever nor create any obligations,
directly or indirectly, towards any third party whatsoever save such
loans as may be necessary to enable them to fulfill their obligations
towards Motorola Communications Israel Ltd. ("Motorola") contained in
the Purchase and Sale Agreement dated 5th January 1998 and all its
annexes made between Motorola and Ampal Communications Inc. (the "PS
Agreement") and the Shareholders Agreement made between Motorola and
the Partnership, dated 29th March 1998 (the "S Agreement") (the PS
Agreement and the S Agreement hereinafter being jointly called the
"Agreements"), provided nevertheless that any such loan shall be
subordinated to the Credits, unsecured by the assets of the
Partnership and also subject to a provision that the lender will have
no right to take bankruptcy or like proceedings against the
Partnership without the Bank's prior written consent; save that if the
Partnership shall make additional investments in the Company and/or
its shares by virtue of the provisions of the Agreements and/or any
right or option of the Partnership granted thereby, then the
Partnership shall be entitled to pledge, charge, or create, to a third
party, those shares in the Company representing such additional
investments in order to secure any obligation for repayment of the
said investment by the Partnership or any such third party.
(b) grant loans to any third party whatsoever;
(c) subject to (a) above, become guarantor or security for any third party
whatsoever, including any of the partners being a member of the
Partnership;
(d) charge or assign any of the assets of the Partnership to any third
party whatsoever other than those shares in the Company which
represent one half of the shares held by the Partnership and that part
of its rights under the Agreements which are to be charged to Bank
Hapoalim B.M. as security for a loan in an amount equal to the Credits
which are to be granted by the Bank to the Partnership;
-3-
<PAGE>
(e) distribute the profits of the Partnership or pay to any of the
partners a management fee or other payment whatsoever or grant loans
to its partners unless all payments of interest and principal of the
Credits due on the date of such distribution or payment have been paid
to the Bank on the due dates for payment thereof and there has been
deposited and pledged to the Bank an amount equal to the installments
of interest and principal of the Credits due to the Bank in the next
12 months, and this provided that such distribution or payment is made
from proceeds received in the ordinary course of business of the
Company; save that dividends declared by the Company which are not to
be paid out of profits made by it in the ordinary course of business,
shall be used by the Partnership for prepayment of the Credits;
(f) during the first two years from the date hereof, the interest - either
directly or indirectly - of Ampal in the Partnership, may be reduced
to 70% and thereafter to 50%, save that in any event Ampal shall -
either directly or indirectly - continue to own 75% of all rights in
the general partner of the Partnership; any other change in the
composition of the Partnership requires the prior written consent of
the Bank, and any application for such consent shall be considered by
the Bank in light of all the circumstances at that time.
6. The Partnership shall ensure that so long as any part of the Credits
remains outstanding:
(a) the Company shall fully observe the obligations as set out in Appendix
"B" attached hereto.
(b) all the agreements between the Company and Motorola to operate the
system and the services required (which shall continue to be granted
by Motorola) will be on such terms as are contemplated in the PS
Agreement.
(c) to notify the Bank of any material adverse change which has occurred
or is likely to occur to the business operations or financial
condition of the Company, immediately upon such event being known to
them or the possibility of such event occurring.
(d) to take all steps to prevent declarations of dividends and/or payment
of management fees by the Company if in its opinion the result thereof
is likely to adversely affect the business of the Company and/or
likely to cause an adverse change in the economic and/or financial
situation of the Company.
(e) not to change or waive in a material manner the rights granted to the
Partnership within the framework of the Agreements without receiving
the Bank's prior written consent in writing.
(f) the loans received or to be received by the Partnership from Bank
Hapoalim B.M. to enable it to purchase further shares in the Company,
parallel with the Credits, will be on terms similar as to interest
rate and repayment terms as the Credits received and/or to be received
from the Bank.
7. There shall serve as security for the repayment of the Credits:
-4-
<PAGE>
(a) a first degree pledge in favour of the Bank, unlimited in amount, of
5,500,000 cumulative participating preference shares with a nominal
value of NIS. 1 each, held by the Partnership in the Company (the
"Shares"). The Shares be deposited in a Securities Deposit Account
opened for that purpose with the Bank.
(b) a charge by way of assignment of 50% of the rights of the Partnership
against Motorola contained in the Agreements. - the Partnership
confirms that no amendments have been made to the PS Agreement since
the date thereof apart from Amendment No. 1 dated 22nd January 1998.
8. The Bank shall be entitled to exercise the rights granted to it in Clause
22 of the General Conditions on the occurrence of any of the events
detailed in Clause 9 of the Pledge of Shares referred to in Clause 7 (a)
above.
9. The rights of the Partnership under this document are not assignable or
transferable in any manner whatsoever to any third party and the
Partnership may not disclose the contents of this document to any third
party, without the prior written consent of the Bank.
10. Should any of the partners in the Partnership wish to resign from the
Partnership, then the Bank shall consider the possibility of releasing such
partner from its obligations in respect of the Credits, subject to its
prepaying such proportion of the Credits as corresponds to its proportion
in its share of the Partnership.
11. It is a condition of the granting of the Credits that the Bank receives a
comfort letter signed by Ampal American Israel Corporation in the text
annexed hereto, marked Appendix "C".
12. Wherever the terms contained in these Additional Terms and Conditions shall
be in conflict with the General Conditions, then the terms contained in
these Additional Terms and Conditions shall prevail.
-----------------------
signed by Ampal Communications Holding Company Ltd.
for and on behalf of the Partnership
as its General Partner and also in its own name
-5-
Exhibit No. 10.3
Amendment No. 1, dated June 16, 1998, to that certain letter agreement
(the "Agreement"), dated September 9, 1997, between Ampal Industries (Israel)
Limited ("Ampal") and Mr. Raz Steinmetz.
WHEREAS, Ampal and Mr. Steinmetz wish to amend the Agreement by increasing
the compensation that Ampal pays Mr. Steinmetz.
NOW, THEREFORE, it is agreed as follows:
1. The first sentence of paragraph 2 of the Agreement is hereby amended
and restated to read in its entirety as follows:
"As compensation for your services, you will receive a salary of
US$175,000 per annum, payable in the equivalent in NIS and subject to all
required income tax withholding."
3. This Amendment shall be effective as of April 1, 1998.
4. Except as otherwise amended hereby, the Agreement shall remain in full
force and effect.
5. This Amendment may be executed by the parties hereto in one or more
counterparts, each of which together
<PAGE>
shall be deemed to constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
AMPAL INDUSTRIES (ISRAEL) LIMITED RAZ STEINMETZ
By: /s/ Yehoshua Gleitman Ronnie Peleg /s/ Raz Steinmetz
- ---------------------------------------- --------------------------
Name: Yehoshua Gleitman Ronnie Peleg
Title: CEO Legal Advisor
Exhibit 11
AMPAL-AMERICAN ISRAEL CORPORATION AND SUBSIDIARIES
--------------------------------------------------
SCHEDULE SETTING FORTH COMPUTATION OF EARNINGS PER SHARE OF CLASS A STOCK
-------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 1998 1997
- --------------------------------------------------------------------------------
(Amounts in thousands, except (Unaudited) (Unaudited)
per share data)
Weighted average number of shares outstanding:
4% Preferred .................................... 178 189
6-1/2% Preferred ................................ 955 989
Class A ......................................... 23,859 23,702
======= =======
BASIC EPS
Net Income ......................................... $ 1,087 $ 7,290
======= =======
Earnings per Class A share ......................... $ .05 $ .31
======= =======
Weighted average number of Class A
shares outstanding ................................ 23,859 23,702
DILUTED EPS
Net Income ......................................... $ 953 $ 7,065(1)
======= =======
Earnings per Class A share ......................... $ .03 $ .26
======= =======
Weighted average number of Class A
shares outstanding assuming
conversion of preferred stock
into Class A shares ............................... 27,616 27,614
(1) Includes decrease in net income of $134 and $225, respectively, due to
dilution in equity in earnings of affiliate.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from unaudited
consolidated financial statements for the six months ended June 30, 1998 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 16,573
<SECURITIES> 246,080
<RECEIVABLES> 30,071
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 13,937
<PP&E> 41,475
<DEPRECIATION> 8,984
<TOTAL-ASSETS> 339,152
<CURRENT-LIABILITIES> 42,466
<BONDS> 129,439
0
5,563
<COMMON> 24,531
<OTHER-SE> 137,153
<TOTAL-LIABILITY-AND-EQUITY> 339,152
<SALES> 3,317
<TOTAL-REVENUES> 17,065
<CGS> 0
<TOTAL-COSTS> 4,259
<OTHER-EXPENSES> 4,849
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,136
<INCOME-PRETAX> 2,821
<INCOME-TAX> 1,734
<INCOME-CONTINUING> 1,087
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,087
<EPS-PRIMARY> .05
<EPS-DILUTED> .03
</TABLE>
