<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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 SEPTEMBER 30, 1999
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 0-25622
DSP COMMUNICATIONS , INC.
(Exact name of registrant as specified in its charter)
DELAWARE 77-0389180
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
20300 STEVENS CREEK BOULEVARD, CUPERTINO, CALIFORNIA 95014
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (408) 777-2700
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 periods 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 ___
As of November 9, 1999, there were 40,461,426 shares of Common Stock ($.001 par
value) outstanding.
<PAGE>
INDEX
DSP COMMUNICATIONS, INC.
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
PART I. FINANCIAL INFORMATION
- -----------------------------
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets-September 30, 1999
and December 31, 1998...................................................................3
Condensed consolidated statements of operations-quarter
ended September 30, 1999 and 1998, and nine months
ended September 30, 1999 and 1998........................................................4
Condensed consolidated statements of cash flows-nine months
ended September 30, 1999 and 1998........................................................5
Notes to condensed consolidated financial statements-
September 30, 1999.......................................................................6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................................................9
Item 3. Quantitative and Qualitative Disclosures About Market Risk.................................21
PART II. OTHER INFORMATION
- --------------------------
Item 1. Legal Proceedings..........................................................................22
Item 2. Changes in Securities and Use of Proceeds..................................................22
Item 3. Defaults upon Senior Securities............................................................22
Item 4. Submission of Matters to a Vote of Security Holders........................................23
.
Item 5. Other Information..........................................................................23
Item 6. Exhibits and Reports on Form 8-K...........................................................23
SIGNATURES.........................................................................................25
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DSP COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(U.S. DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------- -------
(Unaudited) (Note 1)
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $30,719 $66,818
Short term investments 95,429 27,071
Trade accounts receivable 26,192 29,351
Other current assets 8,108 5,717
------- -------
Total current assets 160,448 128,957
Property and equipment, net 6,653 5,323
Other assets 4,973 5,063
Goodwill 4,777 5,894
------- -------
$176,851 $145,237
====== ======
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $13,791 $16,474
Accrued liabilities 15,178 17,110
Deferred income 57 285
------- -------
Total current liabilities 29,026 33,869
Stockholders' Equity
Common stock 40 38
Additional paid-in capital 87,521 78,777
Notes from stockholders (5,099) (5,099)
Retained earnings 65,474 37,624
Accumulated other comprehensive income (111) 28
------- -------
Total stockholders' equity 147,825 111,368
------- -------
$176,851 $145,237
====== ======
</TABLE>
See Notes to Condensed Consolidated Financial Statements
Note 1: The balance sheet at December 31, 1998 has been derived from
audited financial statements at that date, but does not include all
of the information and footnotes required by generally accepted
accounting principles for complete financial statements.
3
<PAGE>
DSP COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(U.S. DOLLARS AND SHARES IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Nine
Months Ended Months Ended
September 30, September 30,
-------------------------- -------------------------
1999 1998 1999 1998
------- ------- -------- -------
<S> <C> <C> <C> <C>
Revenues
Product $39,361 $34,040 $113,099 $85,522
Technology development 1,812 822 5,866 2,898
------- ------- -------- -------
Total revenues 41,173 34,862 118,965 88,420
Cost of Revenues
Product 22,136 19,701 64,701 46,537
Technology development 1,652 565 3,863 2,086
------- ------- -------- -------
Total cost of revenues 23,788 20,266 68,564 48,623
------- ------- -------- -------
Gross profit 17,385 14,596 50,401 39,797
Operating Expenses
Research and development, net 4,892 3,214 12,278 8,330
Sales and marketing 1,601 1,057 4,701 2,995
General and administrative 3,189 2,122 8,826 6,648
------- ------- -------- -------
9,682 6,393 25,805 17,973
------- ------- -------- -------
Operating income 7,703 8,203 24,596 21,824
Interest and other income, net 1,963 1,710 4,701 4,667
------- ------- -------- -------
Income before provision
for income taxes 9,666 9,913 29,297 26,491
Benefit (provision) for income taxes 712 (1,174) (1,447) (2,914)
------- ------- -------- -------
Net income $10,378 $8,739 $27,850 $23,577
===== ===== ===== =====
Earnings per share:
Basic $0.26 $0.22 $0.70 $0.59
===== ===== ===== =====
Diluted $0.24 $0.21 $0.63 $0.56
===== ===== ===== =====
Shares used in computing earnings per share:
Basic 40,375 40,276 40,017 40,200
===== ===== ===== =====
Diluted 44,007 41,787 44,073 42,353
===== ===== ===== =====
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
4
<PAGE>
DSP COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(US DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Nine
Months Ended Months Ended
September 30, September 30,
1999 1998
------------- ---------------
<S> <C> <C>
Operating Activities:
Net income for the period $27,850 $23,577
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 3,786 1,976
Compensation expense related to shares issued in a subsidiary -- 290
Compensation expense related to stock options -- 42
Changes in operating assets and liabilities:
Trade accounts receivable 3,159 (9,197)
Other current assets (2,391) 662
Other assets (600) --
Accounts payable (2,683) 2,045
Accrued liabilities (1,932) 4,887
Deferred income (228) 652
------- -------
Net cash provided by operating activities 26,961 24,934
------- -------
Investing Activities:
Cash purchases of equipment (3,309) (1,833)
Purchases of short-term investments (114,263) (38,188)
Sales and maturities of short-term investments 45,766 28,368
------- -------
Net cash used in investing activities (71,806) (11,653)
------- -------
Financing Activities:
Repurchase of common stock (9,528) (34,734)
Issuance of common stock for cash 18,274 9,213
------- -------
Net cash used in financing activities 8,746 (25,521)
------- -------
Decrease in cash and cash equivalents (36,099) (12,240)
Cash and cash equivalents at beginning of period 66,818 82,322
------- -------
Cash and cash equivalents at end of period $30,719 $70,082
===== =====
</TABLE>
See Notes to Condensed Consolidated Financial Statements
5
<PAGE>
DSP COMMUNICATIONS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of DSP
Communications, Inc. ("DSPC" or the "Company") have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and notes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the interim period are not necessarily indicative of the
results that may be expected for the full year. For further information, refer
to the consolidated financial statements and notes thereto included in the
Company's annual report on Form 10-K for the year ended December 31, 1998.
2. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share for the three and nine months ended September 30 as follows (in thousands
except per share data):
<TABLE>
<CAPTION>
Three Nine
Months Ended Months Ended
September 30, September 30,
1999 1998 1999 1998
------- ------ ------- -------
<S> <C> <C> <C> <C>
Numerator for basic and diluted earnings per share -
net income $10,378 $8,739 $27,850 $23,577
======= ======= ======= =======
Denominator for basic earnings per share -
weighted average shares 40,375 40,276 40,017 40,200
Effect of dilutive securities - employee stock options 3,632 1,511 4,056 2,153
------- ------ ------- -------
Denominator for diluted earnings per share -
adjusted weighted average shares 44,007 41,787 44,073 42,353
======= ======= ======= =======
Earnings per share:
Basic $0.26 $0.22 $0.70 $0.59
======= ======= ======= =======
Diluted $0.24 $0.21 $0.63 $0.56
======= ======= ======= =======
Potentially dilutive securities excluded from
computations as the effect would be antidilutive 733 917 265 735
======= ======= ======= =======
</TABLE>
3. SEGMENT INFORMATION
DSPC and its subsidiaries operate in one industry segment, principally the
development and marketing of integrated circuits for the wireless communications
market. Operations in Israel and Canada include research, development and sales.
Operations in the United States include marketing and sales.
6
<PAGE>
4. COMPREHENSIVE INCOME
During the third quarter of 1999 and 1998, total comprehensive income was
$10,375,000 and $8,882,000 respectively.
For the first nine months of 1999 and 1998, total comprehensive income amounted
to $27,711,000 and $23,677,000, respectively. Other comprehensive income
represents unrealized gains or losses on the Company's available-for-sale
securities.
5. NEW ACCOUNTING STANDARDS
Effective January 1, 1999, the Company adopted Statement of Position 98-1,
"Accounting for the Costs of Computer Software Developed For or Obtained For
Internal Use" (the "SOP"). The SOP requires the capitalization of certain costs
incurred in connection with developing or obtaining software for internal use.
The adoption of the new SOP does not have a material impact on the Company's
consolidated results of operations, financial position or cash flows.
In June 1999, the FASB issued Statement No. 137, "Accounting for Derivative
Instruments and Hedging Activities Deferral of the Effective Date of FASB
Statement No. 133." This Statement defers for one year the effective date of
FASB Statement No. 133, "Accounting for Derivative Investments and Hedging
Activities." The rule now will apply to fiscal years beginning after June 15,
2000. Because of the Company's minimal use of derivatives, the Company does not
anticipate that the adoption of SFAS 133 will have a significant effect on the
Company's consolidated results of operations or financial position.
6. STOCKHOLDERS' EQUITY
During the first nine months of 1999 the Company repurchased 644,100 shares of
its common stock for $9,528,000. In addition, during the first nine months of
1999, options to purchase 2,793,000 shares of the Company's common stock were
exercised for total proceeds of $18,274,000.
7. BENEFIT (PROVISION) FOR INCOME TAXES
The third quarter of 1999 results reflect a benefit for income taxes resulting
from the final tax assessments for the Company's main operating Israeli
subsidiary for prior years, up to and including the 1998 tax year, and the
reduction of the Company's effective tax rate for fiscal 1999 from 11% to 8%.
8. ISRAELI GOVERNMENT RESEARCH GRANTS
The Company is participating in programs sponsored by the Israeli Government for
the support of research and development activities. The Company has obtained
approval for grants from the Office of the Chief Scientist in the Israeli
Ministry of Industry and Trade (the "Chief Scientist") totaling approximately
$2,100,000, of which in the third quarter of 1999, $654,000 has been accrued
(included in other current assets) and in the first nine months of 1999,
$1,194,000 has been accrued. The terms of the grants from the Chief Scientist
prohibit the transfer of technology developed pursuant to the terms of these
grants to any person, without the prior written consent of the Chief Scientist.
The grant is repayable to the Chief Scientist, at the rate of 4% of the sales of
the products developed out of the projects funded, up to an amount equal to 100%
of the grant received.
7
<PAGE>
9. LITIGATION
On May 12, 1997, a class action lawsuit was filed against the Company and
several of its officers and directors in the Superior Court of the State of
California, County of Santa Clara. A second identical lawsuit was filed on May
22, 1997. The complaints, which were consolidated, alleged that the Company and
certain of its officers and directors violated California securities laws in
connection with certain statements allegedly made during the first quarter of
1997, and sought damages in an unspecified amount, interest, attorneys' fees,
other costs and other equitable and injunctive relief. On February 26, 1998, two
of the plaintiffs in the state action filed a similar complaint in the U.S.
District Court for the Northern District of California. The complaint made the
same allegations as the complaint filed in state court, but charged violations
of federal securities laws.
Settlement of the previously disclosed class action lawsuit was approved by the
Court on April 9, 1999. Under the terms of the agreement, the claims were
settled for $3,000,000, which was funded by insurance proceeds. The Company
believes that settlement was in the best interests of its investors and
continues to deny all allegations.
10. SUBSEQUENT EVENTS
On October 13, 1999, the Company entered into an Agreement and Plan of Merger
(the "Merger Agreement") with Intel Corporation ("Intel") and CWC Acquisition
Corporation, Intel's direct, wholly owned subsidiary ("Purchaser"), pursuant to
which Purchaser, on October 20, 1999, commenced a tender offer (the "Offer") to
purchase all of the outstanding shares of common stock, par value $0.001 per
share, of the Company for $36.00 per share net to the seller in cash. Under the
Merger Agreement and subject to the terms thereof, following the Offer,
Purchaser will be merged with and into the Company (the "Merger"), the Company
will continue as the surviving corporation and will be a direct, wholly owned
subsidiary of Intel. The Board of Directors has approved the Merger Agreement
and the transactions contemplated thereby, including the Offer and the Merger.
In connection with the execution of the Merger Agreement, on October 13, 1999,
the Company and Intel also entered into a Stock Option Agreement (the "Stock
Option Agreement"). Pursuant to the Stock Option Agreement, the Company granted
Intel an irrevocable option (the "Stock Option") to purchase 8,000,000 shares at
an exercise price of $36.00 per share, subject to adjustment as provided for in
the Stock Option Agreement. The Stock Option will be triggered upon the
occurrence of any event that would allow Intel to collect a termination fee
under the Merger Agreement. The profit that Intel obtains through the exercise
of the Stock Option will be aggregated with the termination fee payable pursuant
to the Merger Agreement, and the aggregate amount will be limited to $55
million.
On October 15, 1999, a complaint was filed by a stockholder, on her own
behalf and purportedly on behalf of the other common stockholders of the
Company (other than the defendants), against the Company and its directors
and Intel in the Superior Court of the State of California, County of Santa
Clara, bearing the caption ANTINEA F. JACONETTE, ON BEHALF OF HERSELF AND ALL
OTHERS SIMILARLY SITUATED V. DSP COMMUNICATIONS, INC., INTEL CORPORATION,
DAVIDI GILO, LEWIS S. BROAD, NEILL H. BROWNSTEIN, SHIGERU IWAMOTO, JOSEPH
PERL, AVRAHAM FISCHER, ANDREW W. SCHONZEIT, ET AL. The complaint alleges,
among other things, breaches of fiduciary duties by the directors of the
Company, and aiding and abetting of breach of fiduciary duties by Intel, in
connection with the Offer and Merger contemplated by the Merger Agreement.
The plaintiff seeks injunctive relief and unspecified monetary damages. The
Company believes that this lawsuit is without merit, and intends to
vigorously defend such action. To date, the complaint has not been served on
the Company.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The following information should be read in conjunction with the condensed
consolidated interim financial statements and the notes thereto in Part I, Item
1 of this Quarterly Report and with Management's Discussion and Analysis of
Financial Condition and Results of Operations contained in the Company's Annual
Report on Form 10-K for the year ended December 31, 1998. The matters addressed
in this Management's Discussion and Analysis of Financial Condition and Results
of Operations, with the exception of the historical information presented,
contain forward-looking statements involving risks and uncertainties. The
Company's actual results could differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including, without
limitation, those set forth under the heading "Certain Factors That May Affect
Future Results" following this Management's Discussion and Analysis section, and
elsewhere in this report.
RESULTS OF OPERATIONS
The following table sets forth certain items from the Company's consolidated
statements of operations as a percentage of total revenues (percentages may not
add due to rounding):
<TABLE>
<CAPTION>
Three Nine
Months Ended Months Ended
September 30, September 30,
1999 1998 1999 1998
------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues
Product 95.6 % 97.6 % 95.1 % 96.7 %
Technology development 4.4 2.4 4.9 3.3
------- -------- -------- --------
Total revenues 100.0 100.0 100.0 100.0
Cost of Revenues
Product 53.8 56.5 54.4 52.6
Technology development 4.0 1.6 3.2 2.4
------- -------- -------- --------
Total cost of revenues 57.8 58.1 57.6 55.0
------- -------- -------- --------
Gross profit 42.2 41.9 42.4 45.0
Operating Expenses
Research and development, net 11.9 9.2 10.3 9.4
Sales and marketing 3.9 3.0 4.0 3.4
General and administrative 7.7 6.1 7.4 7.5
------- -------- -------- --------
23.5 18.3 21.7 20.3
------- -------- -------- --------
Operating income 18.7 23.5 20.7 24.7
Interest and other income, net 4.8 4.9 4.0 5.3
------- -------- -------- --------
Income before benefit (provision) for
income taxes 23.5 28.4 24.6 30.0
Benefit (Provision) for
income taxes 1.7 (3.4) (1.2) (3.3)
------- -------- -------- --------
Net income 25.2 % 25.0 % 23.4 % 26.7 %
======= ======== ======== ========
</TABLE>
9
<PAGE>
REVENUES
PRODUCT: Product revenues increased to $39.4 million in the third quarter of
1999 from $34.0 million in the third quarter of 1998 and to $113.1 million in
the nine months ended September 30, 1999 from $85.5 million in the first nine
months of 1998. Product revenues consist primarily of baseband chip sets for
digital cellular telephones. Product revenues for the third quarter of 1999
include revenue from a $4.0 million software license with a single customer.
Revenues from sales to distributors are recognized at the time the products are
shipped by the distributor to the original equipment manufacturer ("OEM")
customer.
The increase in product revenues for the three months ended September 30, 1999
as compared to the same periods in 1998, was a result of an increase in sales of
the company's CDMA chip sets and the software license transaction described
above. The increase in product revenues for the nine months ended September 30,
1999 as compared to the same periods in 1998, was a result of stronger demand
for the Company's PDC and CDMA chip sets and the software license transaction
described above.
TECHNOLOGY DEVELOPMENT: Technology development revenues increased to $1.8
million in the third quarter of 1999 from $822,000 in the third quarter of 1998
and to $5.9 million in the nine months ended September 30, 1999 from $2.9
million in the first nine months of 1998. The Company's technology development
revenues fluctuate, and may continue to fluctuate, depending on the number and
size of technology development agreements and the timing of related milestones
and deliverables.
Technology development revenues mainly relate to contracts for development and
enhancement of products for PDC, TDMA and CDMA applications, and revenues from
reference design projects undertaken by the Company's subsidiary, CTP Systems
Ltd.
GROSS PROFIT
Gross profit in the third quarter of 1999 was $17.4 million (42.2% of revenues)
compared to $14.6 million (41.9% of revenues) in the third quarter of 1998.
Gross profit in the nine months ended September 30, 1999 was $50.4 million
(42.4% of revenues), compared to $39.8 million (45.0% of revenues) in the first
nine months of 1998.
The gross margins on product revenues in the third quarter of 1999 were 43.8% as
compared to 42.1% in the third quarter of 1998. Gross margins on product
revenues in the first nine months of 1999 were 42.8%, as compared to 45.6% in
the first nine months of 1998. The gross margins on product revenues were
affected by changes in the customer and product mix from quarter to quarter, the
increase in the sale of software in the third quarter of 1999 and by price
pressures which are impacted by, among other factors, fluctuations in the
dollar/yen rate of exchange.
The Company anticipates that the average sales prices of chip sets may continue
to decrease as a result of volume discounts and price pressures, which would
increase the cost of products sold as a percentage of product revenues; however,
any such price decreases may be offset to a certain extent by changes in the
Company's terms of trade, and further cost reductions from suppliers if the
Company's order volumes increase, and if the Company is successful in
negotiating such lower prices.
The gross margins on technology development revenues vary from quarter to
quarter depending on the number and size of technology development agreements
and the timing of related milestones.
In connection with its license agreement for CDMA, the Company has agreed to pay
royalties based on specified rates. The Company initiated payment of these
royalties in 1998 upon commencement of sales of its CDMA products. Royalty
expenses in the first nine months of 1999 amounted to $2,466,000 compared to
$366,000 in the first nine months of 1998.
10
<PAGE>
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses increased to $4.9 million in the third quarter
of 1999 from $3.2 million in the third quarter of 1998 and to $12.3 million in
the nine months ended September 30, 1999 from $8.3 million in the first nine
months of 1998. The increases were a result of increases in the number of
engineering personnel involved in research and development activities, including
the addition of engineering and software personnel hired by the Company's
subsidiary in Canada - Isotel Corp. ("Isotel"), as a result of the acquisition
on December 31, 1998 of substantially all of the assets of Isotel Research Ltd.,
an OEM software company, and the amortization of developed technology purchased
within the framework of the Isotel acquisition (the "Isotel Acquisition"). As a
percentage of total revenues, research and development expenses increased to
11.9% in the third quarter of 1999, from 9.2% in the third quarter of 1998, and
to 10.3% in the first nine months of 1999 from 9.4% in the first nine months of
1998. The Company expects that its research and development expenses will
increase in the future, in absolute dollars.
The Company has participated in programs sponsored by the Israeli Government for
the support of research and development activities. The Company has obtained
grants from the Office of the Chief Scientist in the Israeli Ministry of
Industry and Trade (the "Chief Scientist") totaling approximately $2,100,000, of
which, in the third quarter of 1999, $625,000 has been accrued (included in
other current assets). The terms of the grants from the Chief Scientist prohibit
the transfer of technology developed pursuant to the terms of these grants to
any person, without the prior written consent of the Chief Scientist. The grant
is repayable to the Chief Scientist, at the rate of 4% of the sales of the
products developed out of the projects funded, up to an amount equal to 100% of
the grant received.
SALES AND MARKETING EXPENSES
Sales and marketing expenses increased to $1.6 million (3.9% of revenues) in the
third quarter of 1999 from $1.1 million (3.0% of revenues) in the third quarter
of 1998 and to $4.7 million (4.0% of revenues) in the first nine months of 1999
from $3.0 million (3.4% of revenues) in the first nine months of 1998. The
increase was a result of increased sales and marketing staff at the Company's
headquarters in Cupertino, California, the addition of Isotel's sales and
marketing staff, and increased promotion and marketing activities.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses were $3.2 million (7.7% of revenues) in the
third quarter of 1999 compared to $2.1 million (6.1% of revenues) in the third
quarter of 1998 and $8.8 million (7.4% of revenues) in the first nine months of
1999 compared to $6.6 million (7.5% of revenues) in the first nine months of
1998. The increase in absolute dollars was a result of increased staffing levels
at the facility of D S P C Technologies Ltd., an Israeli subsidiary of the
Company, the addition of Isotel's administrative staff, increased facility
expenses resulting from additional space that was leased by the Company's
subsidiaries in Israel and in the U.S., increased administration expenses and
fees, and amortization of goodwill related to the Isotel Acquisition.
INTEREST AND OTHER INCOME, NET
Interest and other income, net, includes interest and investment income, foreign
currency remeasurement gains and losses and other miscellaneous expenses.
Interest and other income increased to $2.0 million in the third quarter of 1999
from $1.7 million in the third quarter of 1998. Interest and other income was
$4.7 million in the first nine months of 1999 and 1998.
Interest and other income, net, in the first nine months of 1999 and 1998 was
generated primarily from interest and realized gains on the Company's cash and
short-term investment balances, which were at an average level of approximately
$111 million and $114 million, during the first nine months of 1999 and 1998,
respectively.
11
<PAGE>
Interest and other income fluctuates as a result of changes in the level of the
Company's cash and investment balances, (which was primarily caused by the
repurchase of shares - see below, Liquidity and Capital Resources and the Isotel
Acquisition), changes in the rate of exchange between the Japanese yen and the
United States dollar and between the new Israeli shekel and the United States
dollar, and fluctuations in the available interest rates applicable to the
Company's deposits and short-term investments.
PROVISION FOR INCOME TAXES
The tax provisions have been favorably impacted by the benefits of the Israeli
"Approved Enterprise" status. The Approved Enterprise status was granted
according to investment plans and will allow the Company's Israeli subsidiaries
a two to four year tax holiday on undistributed earnings, and a corporate tax
rate of 10% to 25% for an additional six to eight years on each of the
investment plans' proportionate share of income. The benefits under these
current investment plans are scheduled to expire between the years 2005 and
2008.
As of December 31, 1998, the Company had United States federal, state, and
Israeli net operating loss carryforwards of approximately $34.0 million, $16.2
million and $5.3 million, respectively. The United States federal and state net
operating loss carryforwards will expire at various dates beginning in years
2001 through 2013. These loss carryforwards primarily relate to stock option
deductions, the benefit of which will be credited to paid-in capital when
realized. The Israeli loss carryforwards have no expiration date, but can only
be used to offset certain Israeli subsidiary earnings.
The results for the third quarter of 1999 reflect a benefit for income taxes
resulting from the final tax assessments for the Company's main operating
Israeli subsidiary for prior years, up to and including the 1998 tax year, and
the reduction of the Company's effective tax rate for fiscal 1999 from 11% to 8%
as compared to 11% for the same period of the prior year. The effective tax rate
reduction resulted mainly from the increase in the revenues attributed to tax
holiday investment plans, resulting from new Israeli tax regulation. Over time,
the Company's tax rate is expected to increase due to elimination of the tax
benefits awarded with Approved Enterprise status, as well as potential increases
due to rules regarding controlled foreign corporations ("CFC"). Losses incurred
by the Company or any of its subsidiaries in one country generally will not be
deductible by entities in other countries in the calculation of their respective
local taxes. Likewise, losses incurred by one Israeli entity or a combined loss
of the U.S. entities will increase the Company's effective tax rate.
The Company believes that, based upon a number of factors, the available
objective evidence creates sufficient uncertainty regarding the realizability of
the deferred tax asset such that a partial valuation allowance has been
provided. The deferred tax asset recorded of $1 million is realizable based upon
current levels of future taxable income on a jurisdictional basis. The Company
will continue to assess, on a quarterly basis, the realizability of the deferred
tax assets based on actual and forecasted operating results of each legal
entity. The unbenefited U.S. deferred tax assets primarily relate to stock
option deductions, the benefit of which will be credited to paid in capital when
realized.
D S P C Technologies Ltd., DSP Telecom Ltd., DSPC Israel Ltd. and CTP Systems
Ltd. (collectively, the "Israeli Companies") are CFCs for United States income
tax purposes. Accordingly, all or a portion of the earnings of these Israeli
Companies are subject to United States taxation if, among other things, the
Israeli Companies lend funds to the Company or otherwise invest in certain
proscribed assets; or the Israeli Companies engage in various types of
transactions defined in the Subpart F provisions of the United States Internal
Revenue Code. However, if the Israeli Companies' earnings become subject to
United States taxation, DSPC may be eligible to utilize its Israeli and other
foreign income taxes as a credit against its United States income taxes. The
Company believes that its existing plans will minimize the impact of the CFC
rules for the immediate future, subject to any changes in United States tax laws
that may occur. However, over time, the CFC rules may cause the Company's tax
rate to increase.
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FOREIGN CURRENCY ISSUES AND IMPACT OF RATE OF INFLATION
The United States dollar is the Company's functional currency as it is the
primary currency in the economic environment in which the Company operates.
Accordingly, monetary accounts maintained in currencies other than the dollar
(principally cash and liabilities) are remeasured using the foreign exchange
rate at the balance sheet date. Operational accounts and nonmonetary balance
sheet items are remeasured and recorded at the rate in effect at the date of the
transaction. The effects of foreign currency remeasurement, which have not been
material to date, are reported in current operations.
While most of the Company's revenues and costs are denominated in United States
dollars, a material portion of the sales prices for certain products sold by the
Company, and prices for certain components purchased by the Company, are quoted
in, or linked to, yen-based prices. Therefore, fluctuations in the exchange rate
of the yen in relation to the United States dollar could have a material adverse
effect on the Company's results of operations and financial condition.
The Company has subsidiaries that operate in Israel and Canada. As a result a
portion of the Company's expenses are denominated in Israeli shekels or Canadian
dollars. The Company's primary expense paid in these currencies is local-based
employee salaries. In addition, the Company also has certain Israeli
shekel-based and Canadian dollar-based liabilities and assets. As a result,
fluctuations in the value of Israeli currency or Canadian dollar in comparison
to the United States dollar and inflationary pressures on the Israeli shekel or
the Canadian dollar could affect the cost of technology development, research
and development expenses and general and administrative expenses, and could have
a material adverse effect on the Company's results of operations.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1999, the Company had $126.1 million of cash, cash
equivalents and short-term investments, compared to $114.3 million as of
September 30, 1998. The Company uses independent foundries to fabricate its
baseband chip set products, minimizing its need to invest in manufacturing
equipment and to develop integrated circuit fabrication processes. However, the
Company relies on its independent foundries to achieve acceptable manufacturing
yields and to allocate to the Company a sufficient portion of foundry capacity
to meet the Company's needs. The Company to date has ordered products from its
foundries primarily upon receipt of orders for chip sets from its distributors
or OEM customers and has not maintained any significant inventory of its chip
sets. This strategy allows the Company to avoid utilizing its capital resources
for manufacturing facilities and inventory and allows the Company to focus
substantially all of its resources on the design, development and marketing of
its products. The Company maintains limited inventory in anticipation of orders
from its distributors or OEM customers. CTP Systems manufactures its wireless
PBX systems product primarily through external subcontractor assembly
facilities. To date, production of wireless PBX systems has been limited and has
not had a material effect on the Company's liquidity or capital resources.
The Company has financed its operations and investments in capital equipment
primarily through cash provided by operations. In the first quarter of 1999, the
Company repurchased 644,100 shares of its common stock in its share repurchase
program, using an aggregate of approximately $9.5 million. A total of 11 million
shares have been repurchased through September 30, 1999, with a total aggregate
purchase price of approximately $106.5 million.
During the first nine months of 1999, options to purchase 2,793,000 shares of
the Company common stock were exercised for total proceeds of $18.3 million.
The Company's operating activities provided cash of $27.0 million in the first
nine months of 1999, as compared to $24.9 million in the first nine months of
1998. Net cash provided from operations in the first nine months of 1999 was
comprised primarily of net income and a decrease in trade accounts receivable,
less a decrease in current liabilities.
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The Company's investing activities in the first nine months of 1999, other than
purchases of and proceeds from sales and maturities of short-term investments,
have consisted of expenditures for fixed assets, which totaled $3.3 million.
As of September 30, 1999, the Company also had issued bank guarantees and
letters of credit totaling $736,000.
While operating activities may provide cash in certain periods, to the extent
the Company may experience growth in the future, the Company anticipates that
its operating and investing activities may use cash and consequently, such
growth may require the Company to obtain additional sources of financing. The
Company may also from time to time consider the acquisition of complementary
businesses, projects or technologies which may require additional financing or
require the use of a significant portion of its existing cash, although the
Company has no present understandings, commitments or agreements, nor is it
engaged in any discussions or negotiations with respect to any such transaction.
The Company believes that its existing cash, cash equivalents and short-term
investment balances, will be sufficient to meet its cash requirements for at
least the next twelve months.
IMPACT OF YEAR 2000
Many currently installed computer systems and software products experience
problems handling dates beyond the year 1999 and will need to be modified before
the year 2000 in order to remain functional. As a result, before the year 2000,
computer systems and/or software products and applications used by many
companies may need to be upgraded to comply with such year 2000 requirements.
The Company is implementing its year 2000 plan (the "Plan") which is designed to
cover all of the Company's activities. The Plan, which has executive
sponsorship, is reviewed regularly by senior management and includes the
evaluation of both information technology ("IT") and non-IT systems, and
consists of five steps.
Step one involved increasing awareness by educating and involving all
appropriate levels of management regarding the need to address year 2000 issues.
Step two consisted of identifying all of the Company's systems, products and
relationships that may be impacted by year 2000. Step three involved determining
the current state of year 2000 readiness for those areas identified in step two
and prioritizing areas that need to be fixed. Step four consisted of developing
a plan for those areas, including the Company's internal computers and operating
systems, identified as needing correction. Step five consists of the
implementation and execution of the Company's Plan and completing the steps
identified to attain year 2000 readiness. The Company is in the final stage of
completing step five. Based on the Company's assessment to date, it has
determined that it is unlikely that it has any material exposure to
contingencies related to the year 2000 issue.
With respect to third party suppliers and vendors ("External Parties") that
provide critical goods and services to the Company, including utility companies,
telecommunication service companies and other companies outside of the Company's
control, the Company is seeking assurances, either through formal communications
or otherwise that such companies will be year 2000 ready. As a general matter,
the Company is vulnerable to the inability of material External Parties to
remedy their own year 2000 issues.
The majority of the costs associated with the Company's year 2000 project are
not incremental to the Company, but represent a reallocation of existing
resources. This reallocation of resources is not expected to have a significant
impact on the day-to-day operations of the Company, including any material
effect on the implementation of any information technology project. The Company
believes that modifications deemed necessary will be made on a timely basis and
does not believe that the cost of such modifications will have a material effect
on the Company's operating results. To date, the Company's costs related to year
2000 issues have amounted to approximately $110,000 and the Company does not
expect the aggregate amount spent on the year 2000 issue to exceed $150,000. The
Company's aggregate cost estimate does not include costs that may be
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incurred by the Company as a result of the failure of any External Parties to
become year 2000 ready or costs to implement any contingency. The year 2000
project costs will be expensed by the Company as incurred. The Company is in the
process of evaluating the need for contingency plans with respect to year 2000
requirements. The Company expects that these plans will be substantially
completed by the end of 1999, but that the plans will continue to be modified as
the Company obtains additional information regarding the Company's internal
systems and equipment during the remediation and testing stages of its year 2000
program and regarding the status of the year 2000 readiness of External Parties.
The Company's expectations as to the extent and timeliness of modifications
required in order to achieve year 2000 compliance is a forward-looking statement
subject to risks and uncertainties. Actual results may vary materially as a
result of a number of factors, including, among others, those described above in
this section. There can be no assurance, however, that unexpected delays or
problems, including the failure to ensure year 2000 compliance by third parties
that provide goods or services that are critical to the Company's activities,
will not have an adverse effect on the Company, its results of operations,
liquidity and financial condition. Such a failure could result in, for example,
the inability of the Company to ship product, a telecommunications failure, a
decrease in customer orders, delays in deliveries from vendors or power outages
at one or more of the Company's facilities. In addition, the Company cannot
predict the effect of the year 2000 issues on its customers or the resulting
effect on the Company. As a result, if such customers do not take preventative
and/or corrective actions in a timely manner, the year 2000 issue could have an
adverse effect on their operations and accordingly have a material adverse
effect on the Company's business, financial condition and results of operations.
Furthermore, the Company's current understanding of expected costs of year 2000
compliance is subject to change as the project progresses and does not include
the cost of internal software and hardware replaced in the normal course of
business whose installation otherwise may be accelerated to provide solutions to
year 2000 compliance issues.
CERTAIN FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS
This Form 10-Q contains forward looking statements concerning our existing and
future products, markets, expenses, revenues, liquidity, performance and cash
needs as well as our plans and strategies. These forward looking statements
involve risks and uncertainties and are based on current management
expectations, and we are not obligated to update this information. Many factors
could cause actual results and events to differ significantly from the results
anticipated by us and described in these forward looking statements, including
but not limited to, the following risk factors.
IF THE INTEL MERGER AGREEMENT IS NOT CONSUMMATED, THE PRICE OF OUR COMMON STOCK
WOULD LIKELY DECREASE
In October 1999, we entered into an Agreement and Plan of Merger with Intel
Corporation and CWC Acquisition Corporation, Intel's direct, wholly owned
subsidiary, pursuant to which CWC Acquisition Corporation commenced, on October
20, 1999, a tender offer to purchase all of the outstanding shares of our common
stock for $36.00 per share net to the seller in cash. The consummation of the
tender offer and the merger is subject to certain conditions, including but not
limited to more than 50% of the outstanding shares of our common stock being
tendered to CWC Acquisition Corporation and not withdrawn on or prior to the
expiration of the tender offer, which is currently anticipated to occur on or
about November 17, 1999, subject to extension by CWC Acquisition Corporation.
There can be no guaranty that the conditions to either the consummation of the
tender offer or the merger will be met or that the tender offer or the merger
will be consummated. In the event that the tender offer is not consummated by
Intel, the trading price of our common stock would likely decrease
substantially.
The intended acquisition by CWC Acquisition Corporation may result in the
diversion of management's attention from other business concerns, the
disruption of our business, the loss of key employees, the loss of orders for
our products from our customers and the loss of key distributor, supplier or
other business partner relationships. There can be no assurance that we will
succeed in overcoming these or any other significant risks encountered in
connection with the proposed acquisition.
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WE RELY ON A LIMITED NUMBER OF CHIP SET PRODUCTS USED IN DIGITAL WIRELESS
TELEPHONES; WE MUST MAINTAIN AND INCREASE SALES OF EACH OF OUR PRODUCTS AND
DEVELOP NEXT-GENERATIONS OF OUR PRODUCTS AND THIRD GENERATION PRODUCTS TO BE
SUCCESSFUL
Unlike companies that sell a large number of products, substantially all of our
sales are from only three chip set products used in cellular telephones. Because
we sell so few products, a decrease or slowdown in sales of any single product
could have a material adverse effect on our results and financial condition. Our
success will also depend on our ability to develop and market successive
generations of these products. To succeed in the future, we may also need to
develop and market new products. If we are not successful in developing,
manufacturing and marketing next-generation products or any new products, our
business and results of operations could be materially and adversely affected.
Third generation digital wireless standards are currently being proposed and
developed worldwide to address the growing needs for high-capacity voice
communications and high-speed data, video and multimedia applications. The
Company is developing chipsets for use in Wideband CDMA and other third
generation standards. If we do not succeed in timely developing and marketing
third generation products that meet the new standards, our business would be
materially adversely affected.
IF OUR CELLULAR TELEPHONE MANUFACTURER CUSTOMERS DO NOT SUCCEED, WE WILL NOT
SUCCEED
Sales of our PDC, TDMA and CDMA chip sets will depend on the success of our
cellular telephone manufacturer customers in developing, introducing and
marketing competitive handsets using these chip sets, and in successfully
competing in their intensely competitive wireless personal communications
markets. In addition, our subsidiary, CTP Systems, will depend on the success of
its manufacturer customers in the market for intra-office wireless
communications systems, known as private branch exchange, or PBX, systems, for
sales of CTP Systems' wireless PBX systems. We will not be successful if our
customers are not successful.
WE SELL TO A SMALL NUMBER OF CUSTOMERS; THE LOSS OF EITHER OF OUR DISTRIBUTORS
OR ANY OF OUR CUSTOMERS COULD HAVE ADVERSE CONSEQUENCES
We sell substantially all of our baseband chip sets for digital cellular
telephones to Tomen Electronics Corp., our distributor in Japan, and to Tomen
Electronics America Inc., our distributor in the United States. These
distributors sell our products to a small number of cellular telephone
manufacturer customers. In the first nine months of 1999, seven cellular
telephone manufacturer customers accounted for substantially all of the sales of
our personal digital cellular, or PDC, baseband chip sets, while two cellular
telephone manufacturers accounted for all sales of our code division multiple
access, or CDMA, chip sets, and two customers accounted for all sales of our
time division multiple access, or TDMA, chip sets. The loss of either of our
distributors or the loss of or significant reduction in the distributors' sales
to any of these cellular telephone manufacturers could have a material adverse
effect on our business, financial condition and results of operations.
THE FAILURE OF THIRD PARTIES ON WHICH WE RELY TO MANUFACTURE OUR INTEGRATED
CIRCUIT PRODUCTS COULD ADVERSELY AFFECT FUTURE OPERATIONS
All of our integrated circuit products and certain of the components included in
CTP Systems' products are currently made by independent third parties, and we
intend to continue using independent foundries in the future. Accordingly, we
are and will remain dependent on independent foundries to achieve acceptable
manufacturing yields, to allocate to us a sufficient amount of foundry capacity
to meet our needs and to offer us competitive pricing. Since we are a
comparatively small customer of our chip set suppliers, some of these suppliers
have in the past, when market shortages of integrated circuits have occurred,
failed to allocate to us sufficient capacity to manufacture our chip sets upon
receiving our orders. These failures have caused delays in shipments. We
anticipate that if shortages of integrated circuits occur in the future, our
suppliers may again be unable or unwilling to allocate sufficient capacity to us
and may cause delays in shipments of our products to customers. Any failure by
our independent foundries to allocate sufficient capacity to us, or any other
material
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quality or pricing problems with our independent foundries could have a material
adverse effect on our business, financial condition and results of operations.
WE COULD BE ADVERSELY AFFECTED BY ANY DECREASE IN THE GROWTH OF THE WORLDWIDE
DIGITAL CELLULAR MARKETS IN WHICH WE SELL OUR PRODUCTS
Our increasing sales of chip set products have resulted to date largely from the
rapid growth of the global digital wireless telephone markets in which we sell
our chip set products. A slowdown in the growth of any of these markets could
have a material adverse effect on our business.
DECLINING SALES PRICES OF CHIP SETS COULD ADVERSELY IMPACT OUR FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Prices of wireless personal communications equipment have declined, and we
expect this decline to continue. As a result, prices for our chip set products
have declined and will likely continue to decline. In addition, pricing
competition among handset manufacturers and component suppliers has increased.
If we are unable to offset these price decreases with either increases in unit
volume, changes in our terms of trade, or reductions in per unit costs, our
gross profit would be adversely affected. Since cellular telephone manufacturers
often negotiate supply arrangements well in advance of delivery dates, we must
often commit to price reductions for our products before we are aware of how, or
if, adequate cost reductions can be obtained. If we are unable to lower costs in
response to these price reduction commitments, our business, financial condition
and results of operations could be materially and adversely affected. In
addition, our inability to respond to increased price competition would have a
material adverse effect on our business, financial condition and results of
operations.
WE MAY BE SUBJECT TO INFRINGEMENT CLAIMS BY THIRD PARTIES
Both the semiconductor and the wireless personal communications industries are
subject to frequent litigation regarding patent and other intellectual property
rights. Leading companies and organizations in the wireless personal
communications industry have numerous patents that protect their intellectual
property rights in these areas. Third parties may assert claims against us, our
distributors or our customers with respect to our existing and future products.
In the event of litigation to determine the validity of any third party's
claims, we could be required to expend significant resources and divert the
efforts of our technical and management personnel, whether or not such
litigation is determined in our favor. In the event of an adverse result of any
such litigation, among other requirements, we could be required to (1) develop
non-infringing technology; (2) obtain licenses to the technology that is the
subject of the litigation or (3) indemnify our customers from their damages
under certain contracts. In such an event, we may not be successful in
developing non-infringing technology or in obtaining a license to use the
technology on commercially reasonable terms.
WE COMPETE IN DIGITAL WIRELESS TELEPHONE CHIP SET MARKETS AGAINST COMPANIES WITH
GREATER RESOURCES
The digital wireless telephone chip set market is intensely competitive. Many of
our competitors have entrenched market positions, established patents,
copyrights, tradenames, trademarks and other intellectual property rights and
substantial technological capabilities. Our current and potential competitors in
the digital cellular market include:
- - other manufacturers and suppliers of digital signal processing-based chip
sets,
- - cellular telephone manufacturers that develop chip set solutions
internally, and
- - smaller companies offering design solutions.
Many of these competitors have significantly greater financial, technical,
manufacturing, marketing, sales and distribution resources and management
expertise than we do. We believe that we will rely on our ability to compete
successfully based on price, quality, availability, performance and features of
our products, timing of
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our new product introductions, and customer service and technical support. Other
factors outside our control will also affect our ability to compete, such as
pricing by our competitors, and the timing and quality of their new product
introductions. We may not have the financial resources, technical expertise,
intellectual property, or marketing, sales, distribution and customer service
and technical support capabilities to compete successfully.
RISKS RELATED TO NEW MARKETS FOR OUR TDMA, CDMA AND WIRELESS PBX PRODUCTS
Our success in marketing our TDMA-based and CDMA-based chip sets will depend on,
among other things, the success of the relatively new TDMA and CDMA standards
and growth of these markets worldwide. These standards may not be widely
adopted, and our TDMA or CDMA chip sets or successive generations of these
products may not be successful in the marketplace. In addition, increased sales
of CTP Systems' wireless PBX systems will depend on, among other things, growth
in the market for PBX systems and other low-mobility wireless communications
applications. This market has, to date, not grown as fast as previously
anticipated, and may not become large enough to support significant sales of CTP
Systems' products.
OUR SUCCESS DEPENDS IN LARGE PART ON OUR SUCCESS IN THE JAPANESE MARKET
Our future performance will depend, in large part, upon our ability to continue
to compete successfully in the Japanese market. A number of factors could
adversely impact our ability to do so, including any deterioration of existing
trade relations between Japan, Israel and the United States, the imposition of
tariffs in the wireless personal communications industry, or any adverse changes
in Japanese political conditions, trade policy or telecommunications
regulations. To remain competitive in Japan, we must also continue to develop
products that meet the technical requirements of our Japanese customers and
maintain satisfactory relationships with our Japanese customers and
distributors. Our inability to compete in Japan for any reason could have a
material adverse effect on our business, financial condition and results of
operations.
DECLINE IN JAPANESE AND OTHER ECONOMIES COULD HAVE ADVERSE CONSEQUENCES
Since we sell a large percentage of our products in Japan, the current
difficulties in the Japanese economy may materially affect our revenues. If the
Japanese economy remains weak or declines further, our business, financial
condition and results of operations could be materially and adversely affected.
An increasing amount of our sales are made to cellular telephone manufacturers
for sale outside of Japan. The economies of other global regions in which we or
our customers do business, such as North and South America and South Korea, may
also be negatively affected by the current economic difficulties in Japan and
Asia and other causes. Deterioration of economic conditions in these regions
could have a material negative impact on our business, financial condition and
results of operations.
FLUCTUATION OF EXCHANGE RATES BETWEEN US DOLLAR AND JAPANESE YEN COULD HAVE
ADVERSE EFFECTS
While virtually all of our sales to our Japanese customers are denominated in
United States dollars, a material portion of the sales prices for certain
products we sell to these customers are quoted in dollars linked to Japanese
yen-based prices. Fluctuations in the exchange rate for the United States dollar
in relation to the yen could materially affect the price of our products in
Japan and could have a material adverse effect on our sales and results of
operations. In addition, an increasing number of the components used in our
products are quoted in or linked to yen based prices, and an increase in the
value of yen relative to the United States dollar could materially increase the
cost of these materials. This increase could have a material adverse effect on
our results of operations and financial condition.
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SHORT VISIBILITY FOR FUTURE PRODUCT ORDERS COULD ADVERSELY AFFECT QUARTERLY
OPERATING RESULTS
The market for our chip sets is characterized by short-term order and shipment
schedules. Accordingly, since our revenue expectations and planned operating
expenses are in large part based on estimates rather than on firm customer
orders, our quarterly operating results could be materially adversely affected
if orders and revenues do not meet expectations.
RISKS OF INTERNATIONAL OPERATIONS, PARTICULARLY IN ISRAEL
We market and sell our products internationally and have offices and operations
in Israel, Japan and Canada in addition to our offices in the United States. We
are therefore subject to the many risks of doing business internationally and in
maintaining international operations, including:
- - unexpected changes in regulatory requirements,
- - fluctuations in the exchange rate for the United States dollar,
- - the impact of recessions in economies outside the United States,
- - the imposition of tariffs and other barriers and restrictions,
- - the burdens of complying with a variety of foreign laws,
- - global political and economic instability, and
- - changes in diplomatic and trade relationships.
Our principal research and development facilities are located in Israel, and
over 80% of our employees are located in Israel, including a substantial portion
of our senior management and research and development personnel. Israel's
political, economic and military conditions therefore directly affect us. In
addition, we pay many of our expenses in Israel with Israeli currency, and we
are subject to foreign currency fluctuations and to economic pressures resulting
from Israel's generally high rate of inflation. While our functional currency is
the United States dollar, a portion of our expenses, including Israeli based
employee salaries, are denominated in Israeli shekels. In addition, we also have
certain Israeli shekel-based liabilities and assets. As a result, fluctuations
in the value of Israeli currency in comparison to the United States dollar and
inflationary pressures on the Israeli shekel could increase the cost of
technology development, research and development expenses and general and
administrative expenses. Currency fluctuations, changes in the rate of inflation
in Israel or any of the other factors noted above may have a material adverse
effect on our business, financial condition and results of operations.
RISK OF INCREASED INCOME TAXES IN ISRAEL AND THE UNITED STATES
D S P C Technologies Ltd. and CTP Systems, two of our Israeli subsidiaries,
operate as "Approved Enterprises" under Israel's Law for the Encouragement of
Capital Investments, 1959. An Approved Enterprise is eligible for significant
income tax rate reductions for several years following the first year in which
it has income subject to taxation in Israel, after consideration of tax losses
carried forward. This favorable tax treatment may not continue, and any change
in this tax treatment could have a material adverse effect on our net income and
results of operations. We are not currently aware of any circumstances that
might cause us to lose our favorable tax treatment. If Israel's tax incentives
or rates applicable to D S P C Technologies or CTP Systems are rescinded or
changed, their income taxes could increase and their results of operations and
cash flow would be adversely affected. In addition, our income tax rate would
increase if any of the earnings of our Israeli subsidiaries were to become
subject to United States federal and state income tax as a result of actual or
deemed dividends or through operation of United States tax rules applicable to
"controlled foreign corporations."
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OUR STOCK PRICE HAS BEEN AND MAY CONTINUE TO BE HIGHLY VOLATILE
The price of our common stock has been particularly volatile and will likely
continue to fluctuate in the future. Certain of the factors which may cause the
price of our common stock and our quarterly operating results to fluctuate
include:
- - the timing of our new product introductions and of new product
introductions by our cellular telephone manufacturer customers,
- - the timing of product introductions by our competitors and our customers'
competitors,
- - changes in general economic conditions, particularly in Japan, South
Korea, other countries in the Far East and North and South America,
- - the timing of adoption of new cellular technologies and standards, - the
mix of products sold,
- - the quality and availability of chip sets manufactured for us by third
parties,
- - acquisitions of other businesses,
- - the timing of sales of wireless subscriber equipment by our customers, and
- - fluctuations in the exchange rates of the currencies in which we do
business.
It is possible that in some future quarter, our operating results may be below
public market analyst and investor expectations. If that occurs, the market
price of our common stock may fall. In addition, in recent years the stock
market in general, and the market for shares of stocks of technology companies,
such as our company in particular, have experienced extreme price fluctuations,
which have often been unrelated to the operating performance of affected
companies. Such fluctuations could have a material adverse effect on the market
price of our common stock.
RISK OF SECURITIES LITIGATION
In the past, we have been the object of securities class action litigation in
connection with the volatility of the market price of our common stock, and a
class action lawsuit has been filed against us and Intel in connection with the
merger agreement we entered into with Intel. If we were the object of additional
securities class action litigation in the future, it could result in substantial
costs and a diversion of management's attention and resources.
WE MAY BE UNABLE TO ENFORCE OUR INTELLECTUAL PROPERTY RIGHTS
Although we have made efforts to protect our intellectual property rights, other
unauthorized parties may be able to copy portions of our products or reverse
engineer or obtain or use technology or other information that we regard as
proprietary. In addition, the laws of the countries in which our products are or
may be developed, manufactured or sold, including Hong Kong, Japan, South Korea
and Taiwan, may not protect our products and intellectual property rights to the
same extent as the laws of the United States.
MANAGEMENT OF GROWTH
The growth and development in our business has placed, and is expected to
continue to place, a significant strain on our management and operations. To
manage our growth and development, we must continue to implement and improve our
operational, financial and management information systems and expand, train and
manage our employees. The anticipated increase in product development, general
and administrative, and marketing and sales expenses coupled with our reliance
on wireless telephone equipment manufacturers to successfully market and develop
products that use our products could have an adverse effect on our performance.
Our failure to manage growth effectively and efficiently could have a material
adverse effect on our business, financial condition and results of operations.
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OUR ACQUISITION OF ISOTEL OR OTHER COMPANIES MAY NOT BE SUCCESSFUL
In December 1998, we purchased the assets of Isotel Research, Ltd., a Canadian
software developer. As with any new acquisition, our management will need to
devote attention to the integration of our new Isotel subsidiary with the rest
of our company, and Isotel will likely divert management resources from other
areas of our operations. Our strategy in acquiring Isotel in order to include
software components together with our other products may not be successful. In
addition, we need continually to develop expertise in digital wireless software
development and marketing, which has been a field outside our current area of
focus. Although our purchase agreement with Isotel provides incentives for
Isotel's management to remain with our company for the next year or more, they
may leave after a limited period of time. Any of these factors could have a
material adverse affect on our business and results of operations.
Our strategy continues to include obtaining additional technologies and may
involve acquisitions of products, technologies or businesses from third parties.
Identifying and negotiating these acquisitions may divert substantial management
resources. An acquisition could use substantial cash, could require us to incur
or assume debt obligations, or could involve the issuance of additional common
or preferred stock. The issuance of additional capital stock would dilute
existing stockholders and could represent an interest senior to the rights of
our then outstanding common stock. An acquisition that is accounted for as a
purchase could involve significant one-time, non-cash write-offs, or could
involve the amortization of goodwill and other intangibles over a number of
years, which would adversely affect earnings in those years. Public market
analysts may view acquisitions outside the digital communications area as a
diversion of our focus on digital communications. For these and other reasons,
the market for our stock may react negatively to the announcement of any
acquisition. As with Isotel and other acquisitions, future acquisitions will
require attention from our management to integrate the acquired entity into our
operations and may require us to develop expertise in fields outside our current
area of focus. Management of the acquired entity may leave after the purchase.
An acquired entity may have unknown liabilities, and its business may not
achieve the results anticipated at the time of the acquisition.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In the normal course of business, the financial position of the Company is
routinely subjected to a variety of risks, including market risk associated with
interest rate movements and currency rate movements on non - U.S. dollar
denominated assets and liabilities, as well as collectibility of accounts
receivable. The Company regularly assesses these risks and has established
policies and business practices to protect against the adverse effects of these
and other potential exposures. As a result, the Company does not anticipate
material losses in these areas.
21
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On October 15, 1999, a complaint was filed by a stockholder, on her own behalf
and purportedly on behalf of the other stockholders of the Company, against the
Company and its directors and Intel in the Superior Court of the State of
California, County of Santa Clara, bearing the caption ANTINEA F. JACONETTE, ON
BEHALF OF HERSELF AND ALL OTHERS SIMILARLY SITUATED V. DSP COMMUNICATIONS, INC.,
INTEL CORPORATION, DAVIDI GILO, LEWIS S. BROAD, NEILL H. BROWNSTEIN, SHIGERU
IWAMOTO, JOSEPH PERL, AVRAHAM FISCHER, ANDREW W. SCHONZEIT, ET AL. The complaint
alleges, among other things, breaches of fiduciary duties by the directors of
the Company, and aiding and abetting of breach of fiduciary duties by Intel in
connection with the tender offer and subsequent merger contemplated by the
Agreement and Plan of Merger, dated as of October 13, 1999, by and among the
Company, Intel, and Purchaser. The plaintiff seeks injunctive relief and
unspecified monetary damages. The Company believes that this lawsuit is without
merit, and intends to vigorously defend such action.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
In connection with the execution of the Merger Agreement, on October 13, 1999,
the Company and Intel entered into a Stock Option Agreement (the "Stock Option
Agreement"). Pursuant to the Stock Option Agreement, the Company granted Intel
an irrevocable option (the "Stock Option") to purchase 8,000,000 shares of the
Company's common stock (the "Option Shares") at an exercise price of $36.00 per
share, subject to adjustment as provided for in the Stock Option Agreement.
Intel may exercise the Stock Option, in whole or in part, at any time or from
time to time on or after the occurrence of a Triggering Event (as defined
below). If Intel wishes to exercise the Stock Option at such time as the Stock
Option is exercisable and has not terminated, Intel is required to deliver
written notice (the "Exercise Notice") to the Company specifying Intel's
intention to exercise the Option, the total number of Option Shares it wishes to
purchase and a date and time for the closing of such purchase (an "Option
Closing"), which date will not be less than two (2) nor more than thirty (30)
business days after the later of (i) the date such Exercise Notice is given and
(ii) the expiration or termination of any applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. As used in the
Stock Option Agreement, the term "Triggering Event" means the earlier to occur
of (i) the time immediately prior to the occurrence of any of the events (or
series of events) specified in the Merger Agreement giving rise to the
obligation of the Company to pay a termination fee to Intel, and (ii) the date
on which Purchaser has accepted for payment the shares of the Company's common
stock tendered pursuant to the Offer; provided, however, that clause (ii) of
this sentence shall only constitute a Triggering Event if the number of Option
Shares plus the number of shares tendered pursuant to the Offer will, upon
issuance of the Option Shares, equal at least ninety percent (90%) of the issued
and outstanding shares of Company's common stock. The profit that Intel obtains
through the exercise of the Stock Option will be aggregated with the termination
fee payable pursuant to the Merger Agreement, and the aggregate amount will be
limited to $55 million.
The Company has relied on Section 4(2) of the Securities Act of 1933, as
amended, in connection with the execution of the Stock Option Agreement. The
execution of the Stock Option Agreement was privately negotiated, and Intel is a
sophisticated investor with access to all relevant information necessary to
evaluate the investment. No public offering or public solicitation was used by
the Company in connection with the Stock Option Agreement.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
None.
ITEM 5. OTHER INFORMATION
On October 13, 1999, the Company entered into an Agreement and Plan of Merger
(the "Merger Agreement") with Intel and Purchaser pursuant to which Purchaser
commenced, on October 20, 1999, a tender offer (the "Offer") to purchase all of
the outstanding shares of common stock of the Company for $36.00 per share net
to the seller in cash. Under the Merger Agreement and subject to the terms
thereof, following the consummation of the Offer, Purchaser will be merged with
and into the Company (the "Merger"), and the Company will continue as the
surviving corporation and will be a direct, wholly owned subsidiary of Intel.
The Board of Directors has approved the Merger Agreement and the transactions
contemplated thereby, including the Offer and the Merger. The consummation of
the Offer and the Merger is subject to certain conditions, including but not
limited to more than 50% of the outstanding shares of the Company's common stock
being tendered to Purchaser and not withdrawn on or prior to the expiration of
the Offer, which is currently anticipated to occur on or about November 17,
1999, subject to extension by Purchaser. For further information, please
refer to the Company's current report on Form 8-K filed with the Securities
and Exchange Commission on October 19, 1999, and the Schedule 14D-9 filed by
the Company with the Commission as well as the Schedule 14D-1 filed by Intel
and Purchaser with the Commission.
On October 19, 1999, the Company filed a Current Report on Form 8-K reporting
that the Company had entered into the Merger Agreement, and on October 20, 1999,
the Company filed a Solicitation/Recommendation Statement on Schedule 14D-9
describing the material terms of the proposed Offer and Merger and including,
among other things, the recommendation of the Board of Directors of the Company
that the stockholders tender their shares pursuant to the Offer and vote to
approve and adopt the Merger Agreement.
In July 1999, the Company appointed Shmuel Arditi, formerly the President of the
Company's subsidiary, CTP Systems Ltd., as Chief Operating Officer of the
Company.
In July 1999, the Company appointed Gabriel Hilevitz, formerly the General
Manager of the Company's subsidiary, DSPC Technologies Ltd., as an Executive
Vice President of the Company.
On August 16, 1999, Shigeru Iwamoto resigned from the Board of Directors of the
Company and became a non-officer employee of the Company.
On October 10, 1999, the Board of Directors of the Company amended the Bylaws of
the Company to decrease the fixed number of authorized Directors from eight to
six Directors. On October 19, 1999, the Company filed a Current Report on Form
8-K reporting this amendment to the Bylaws.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.34 Corporate Nondisclosure Agreement, dated June 2, 1999, by and
between the Company and Intel Corporation (Filed as Exhibit 1
to the Company's Statement on Schedule 14D-9, filed by the
Company on October 20, 1999, and incorporated herein by
reference).
10.35 Agreement and Plan of Merger, dated as of October 13, 1999, by
and among the Company, Intel Corporation and CWC Acquisition
Corporation (Filed as Exhibit 2 to the Company's Statement on
Schedule 14D-9, filed by the Company on October 20, 1999, and
incorporated herein by reference).
10.36 Stock Option Agreement, dated as of October 13, 1999, by and
between the Company and Intel Corporation (Filed as Exhibit 3
to the Company's Statement on Schedule 14D-9, filed by the
Company on October 20, 1999, and incorporated herein by
reference).
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10.37 Amended and Restated Employment Agreement, dated as of August
12, 1999, between the Company, DSP Telecom, Inc., and Stephen
P. Pezzola (Filed as Exhibit 24 to the Company's Statement on
Schedule 14D-9, filed by the Company on October 20, 1999, and
incorporated herein by reference) (1).
10.38 Employment Agreement, dated as of August 12, 1999, between
D.S.P.C. Technologies Ltd., and David Aber (Filed as Exhibit
28 to the Company's Statement on Schedule 14D-9, filed by the
Company on October 20, 1999, and incorporated herein by
reference) (1).
10.39 Lease Agreement, dated May 6, 1999, between Azorei Mallal
Industries Ltd. and D S P C Technologies Ltd.
10.40 Management Agreement, dated May 6, 1999, between Malal
Industries Areas Ltd. or anyone on its behalf, and D S P C
Technologies Ltd.
10.41 Non-Exclusive Distribution Agreement, dated as of September
29, 1999, between D S P C Technologies Ltd. and Tomen
Electronics Corp. (2).
27.1 Financial Data Schedule.
------------------
(1) Indicates management contract or compensation plan or arrangement
in which directors and/or executive officers of the Company are
eligible to participate.
(2) The Company has applied for confidential treatment for portions of
this agreement. The portions redacted have been filed separately
with the Securities and Exchange Commission.
(b) Reports on Form 8-K
The Company filed no Current Reports on Form 8-K during the quarter
ended September 30, 1999.
24
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SIGNATURE
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.
Date: November 11, 1999
DSP COMMUNICATIONS, INC.
By: /s/ DAVID ABER
-------------------------------------------------------------
David Aber, Senior Vice President and Chief Financial Officer
(Duly Authorized Officer, Principal Financial Officer and
Principal Accounting Officer)
25
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EXHIBIT 10.39
LEASE AGREEMENT
Between
AZOREI MALLAL INDUSTRIES LTD
and
D.S.P.C.TECHNOLOGIES LTD
1
<PAGE>
CONTENTS
1. Preamble
2. Definitions
FIRST CHAPTER - THE LETTING
3. The Lease and the Demised Premises
4. The Right to Rent Areas in Building No.4
5. The Roof of the Building
6. Rental of Parking Areas
7. The Purpose of the Letting
8 The Letting Period
9 Inapplicability of the Tenants Protection Laws
10. Management Contract
11. The Technical Specification
SECOND CHAPTER - DELIVERY OF POSSESSION
12. Delivery of Possession of the Demised Premises
13. Postponement of the Delivery Date
THIRD CHAPTER - THE CONSIDERATION
14. The Rent
15. The Manner of Payment of the Rent
16. Charge of the Company's Rights under this Lease, to a Bank
FOURTH CHAPTER - ADDITIONAL PAYMENTS BY THE LESSEE
17. The Obligation to Pay
18. Taxes
19. Telephone, Electricity, Water and Maintenance
FIFTH CHAPTER - THE LESSEE'S LIABILITIES
20. The Lessee's Liability to Make the Payments
21. Restriction on the Use of the Demised Premises
22 Signboards
23. Compliance with Laws
24. Sewage
25. The Building's Systems
26. Restriction on the Use of Areas Outside the Building
27. Public Areas and Common Property
28. Cleaning, Upkeep and Repair of the Demised Premises
29. Making Changes and Additions to the Demised Premises
30. Prevention of Nuisance
31. Park Tenants
SIXTH CHAPTER - THE COMPANY'S OBLIGATIONS
32. Ancillary Services in the Park
33. Health and Sports Club
34. Access Road to the Park
35. Additional Construction in the Park
SEVENTH CHAPTER - LIABILITY AND INSURANCE
36. Liability for Damage
37. The Lessee's Insurance Cover
38. The Company's Insurance Cover
EIGHTH CHAPTER - THE COMPANY'S RIGHTS
39. Entry to the Demised Premises
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40. Carrying Out of Works at the Demised Premises
41. Carrying Out of Works in the Building and in the Park
42. Traffic and Parking Arrangements
NINTH CHAPTER - SECURITIES
43. Bank Guarantee
TENTH CHAPTER
44. Breaches and Remedies
45. Fundamental Breaches
46. Delay in Payment
47. Appointment of Receiver or Liquidator
48. Rescission of the Lease Agreement
49. Payment of the Lessee's Debts
50. Vacation
ELEVENTH CHAPTER - MISCELLANEOUS
51. Transfer of Rights
52. Guarantee for the Due Performance of the Obligations of the Parties
53 Right of First Refusal
54. Costs of the Lease Agreement
55. Taxes, Fees and Levies
56. Value Added Tax
57. Jurisdiction
58. Prohibition on Setting -Off Payments
59 Waivers and Variations in the Agreement
60. Service of Notices
APPENDICES
Appendix "A": Plan
Appendix "B": Management Contract
Appendix "C": Technical Specification
Appendix "D": Operational Code
Appendix "E": Fixing of Signboards
Appendix "F": Bank Guarantees
Appendix "G": Ancillary Services in the Park
Appendix "H": Guarantees
Appendix "I": Plan Prescribing Limits of Development for the Building
Appendix "J": Main Frame Timetable
Appendix "K": The First SPA Plan
Appendix "L": Petach Tikva Municipality Letter
Appendix "M": Internal Ring Road
Appendix "N": Application for Proposals for Development Works -
Which is not a Final Document but merely Constitutes a Declaration
of Intent.
3
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A LEASE
Made and Signed on the 6th day of May 1999
BETWEEN
AZOREI MALLAL INDUSTRIES LTD
of Beit Gibor, 6 Kaufman Street, Tel-Aviv
(hereinafter called "THE COMPANY")
OF THE ONE PART
---------------
AND
D.S.P.C TECHNOLOGIES LTD
of 11 Ben Gurion Street, Givat Shmuel
(hereinafter called "THE LESSEE")
OF THE OTHER PART
-----------------
WHEREAS
In accordance with the development contract with the Israel Lands
Administration, the Company is establishing the park on the land, including the
building, all as such expressions are defined below.
AND WHEREAS
The Lessee is interested in taking a letting from the Company, and the Company
is interested in letting the demised premises to the Lessee for the purpose,
period, and for the consideration and on the further terms as specified in this
Lease Agreement.
AND WHEREAS
The parties wish to settle the terms concerning the letting of the demised
premises to the Lessee and for the operation of the Lessee's business at the
demised premises, with all that which is incidental, connected and relating
thereto, all being in accordance with the provisions of this Lease Agreement and
the contents set out therein and in the various Appendices attached thereto.
AND WHEREAS
The Company and the Lessee declare that there is nothing by virtue of any law or
contract that precludes them from entering into the contractual arrangements
that are the subject of this Lease Agreement.
IT IS ACCORDINGLY AGREED AND DECLARED BETWEEN THE PARTIES AS FOLLOWS:
1. PREAMBLE
4
<PAGE>
1.1. The preamble to this Lease Agreement and the Appendices thereto
constitute an integral part of the provisions of this Lease Agreement.
1.2 The Clause numbers and headings are for convenience purposes only,
and do not form part of this Lease Agreement.
1.3 This Lease Agreement and its Appendices represents all that has been
agreed between the parties in relation to the transaction that is the
subject matter thereof, and with effect from the date of the signature
of this Lease Agreement all previous agreements and/or understandings
and/or representations between the parties are null and void, and only
this Lease Agreement and its Appendices shall be binding on the
parties.
2. DEFINITIONS.
The expressions set out below in this Lease Agreement shall have the
meanings assigned to them and recorded at the side thereof.
2.1 "THE LAND"
The parcel of land bounded by the Ghetto Road (Road No.) of an area
of 43 Dunes, known as Block 6640 Parcel Nos. 87(part), 90(part),92
(part), 94 (part) and 96 (part)
2.2 "THE DEVELOPMENT CONTRACT"
A contract dated 2.11.97 between the Israel Lands Authority and the
Company under which the Company has been granted the rights to the land
and by virtue of which the Company has established the park.
2.3 "THE PARK"
Azores Park - a centre for business and employment for offices, high
tech industries and ancillary uses for the same, that the Company has
established on the land. It is to be clear that no factories and
industrial plants that are not high tech shall be built in the Park.
2.4 "THE BUILDING"
A storied structure known as Building No. in the Park, which on
completion of the construction thereof will have an area of
approximately 12000 meters. According to the City Building Plan that
applies to the land (revised plan described as No. /PT/NCH/2000/11D),
there is nothing to prevent the building as offices, as the building
has been erected on a plot that is classified as a special industrial
zone, that permits use as offices.
2.5 "THE DEMISED PREMISES"
The building, and at least some 7,500 metres thereof, as marked in
yellow on the plan annexed hereto as APPENDIX A of this Lease
5
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Agreement all subject to and in accordance with the provisions of this
Lease Agreement.
2.6 "THE AREA OF THE DEMISED PREMISES"
The area of the demised premises as it is specifically determined in
Clause 3 below.
2.7 "THE LETTING PERIOD"
The letting period that is specified in Clause 8 below.
2.8 "THE DELIVERY DATE"
The date on which possession of the demised premises is to be delivered
to the Lessee, in accordance with the provisions of Clauses 12 and 13
below.
2.9 "THE TENANTS PROTECTION LAW"
The Tenants Protection Law [Consolidated Version] 5732-1972.
2.10 "THE CONSUMER PRICES INDEX"
The Consumer Prices Index, including fruit and vegetables that is
published by the Central Bureau of Statistics and Economic Research,
including such Index also where published by another Government
Institution or Body and any other Official Index that replaces it,
whether it is based on the same data on which the existing Index is
based or not. If the Consumer Prices Index is replaced, by another
Index, the relation between the Index that is replaced and such other
Index shall be determined by the Central Bureau of Statistics. If the
Central Bureau of Statistics does not make such determination it shall
be determined by a Chartered Accountant, who shall be agreed between
the parties and his decision shall be final.
2.11 "THE DOLLAR RATE"
The representative rate of the US dollar that was published by the Bank
of Israel on 4.5.99 and in the event on such day the said rate was not
published, the rate that was published on the previous business day.
2.12 "DEFAULT INTEREST"
The normal rate of interest charged from time to time by Bank Hapoalim
Ltd in relation to unauthorised overdrafts on current accounts plus 4%
per annum.
2.13 "THE SURVEYOR"
An agreed surveyor who shall be appointed by mutual agreement between
the parties at least 60 (sixty) days prior to the delivery date as
defined above.
2.14 "THE INSPECTOR"
6
<PAGE>
The Inspecting Engineer employed by the Company to supervise the works
of erecting the building or any other supervising engineer who shall be
appointed by the Company, for the purpose of this Lease Agreement, at
its sole and absolute discretion.
FIRST CHAPTER - THE LETTING
3. THE LEASE AND THE DEMISED PREMISES.
3.1 The Company hereby lets to the Lessee and the Lessee hereby leases the
demised premises from the Company, for such period consideration and on
such other terms as are specified above and below in this Lease
Agreement.
THE AREA OF THE DEMISED PREMISES.
3.2 The area of the demised premises on the delivery date as defined above
shall be an area of approximately 7500 metres, which shall at that time
constitute a total area of construction that is ready for delivery in
the building and a further approximate 500 metres warehouses. In the
event of the Lessee exercising the option granted to it in sub-clause
3.4 below for increasing the area of the demised premises, the area
thereof shall be increased and all the following provisions shall apply
to it.
3.3 Before the demised premises have been delivered, its exact area shall
be determined by the surveyor in a certificate signed by him, and his
determination thereof shall constitute "the area of the demised
premises" for the purposes of this Lease Agreement and shall be final
and binding on the parties for all intents and purposes. For the
purpose of determining the area of the demised premises the surveyor
shall measure the area of the demised premises in square metres, by
taking the external measurements of the building.
The rules for determining the area of the demised premises by the
surveyor as aforesaid, are those to which the parties have agreed and
which are specified in the Technical Specification that is attached
hereto as APPENDIX C, as an integral part of this Lease Agreement.
The surveyor shall submit the results of his measurements within 14
days, and in any event no less than 14 days prior to the delivery date.
OPTION TO INCREASE THE AREA OF THE DEMISED PREMISES.
3.4 The Lessee is hereby granted an option to increase the area of the
demised premises in additional areas of the building to the extent of
approximately a further 4500 metres, which subject to what is provided
hereafter, shall be built by the Company in the building (hereinafter
called "THE OPTION FOR AN INCREASE IN THE AREA OF THE DEMISED
7
<PAGE>
PREMISES", this being solely by notice being given in writing and in
advance to the Company at least 12 months prior to the date requested
by the Lessee for such actual increase of the area of the demised
premises as aforesaid. It is to be clear that, the Lessee may request
an increase in the demised premises as aforesaid of an area that is
less than 4500 metres, but no less than an area of 1000 metres. Where
notice on the terms specified in this Clause has been given, the areas
that are the subject of the notice shall be constructed and delivered
to the Lessee within 12 months from the date of the receipt of such
notice by the Company. The option for an increase in the area of the
demised premises, in a portion that is not less than 1000 metres each
time, shall be available to the Lessee commencing from the date of the
signature of this Lease Agreement and until the end of the letting
period or the end of any of the additional letting periods (if any) and
subject to the following conditions.
3.4.1 If on the date that the Lessee gives notice of the exercise of the
option for an increase in the area of the demised premises, the Company
has not fully utilised its rights of building in the Park, in a manner
that allows construction to take place for the purpose of increasing
the demised premises in accordance with the option for an increase in
the area of the demised premises.
Where the Company's rights in the Park have been utilised, in a manner
that does not permit an increase in the demised premises under the
option for such increase, the Company shall not be bound to construct
any further areas in the building, and the Lessee shall not in such a
case have any claim and/or demand against the Company.
Notwithstanding the above mentioned provisions of this sub-clause, it
is accepted and clear, that if the option for an increase in the area
of the demised premises is exercised before 1.1 .2004, this sub-clause
shall not be applicable.
3.4.2 The terms for the exercise of the option for an increase in the area of
the demised premises, shall be such that at the same time as the notice
of such exercise, the Lessee shall also give notice of extension of the
letting period for a further 4 years, so that on the date of delivery
of possession of the area that is the subject of the option for an
increase in the area of the demised premises at least 4 (four) years
shall remain until the end of the letting period or until the end of
the additional letting periods (if there are any) (hereinafter called
"the extension of the letting due to the increase in the demised
premises").
3.4.3 As a result of the provisions of Clause 3.4.2 above, it is agreed that
the exercise of the option for an increase in the area of the demised
premises shall be deemed to be noticed by the Lessee of the exercise
(wholly or partially as applicable) of one of the options for extending
the
8
<PAGE>
period of the letting, so that the period of the letting in
relation to the whole of the demised premises shall be extended for a
period of 4 years that shall commence from the date of the delivery of
the areas that are the subject of the option for an increase in the
area of the demised premises. For example: In the event that the Lessee
exercises its right for the second further letting period (as defined
below) that shall commence on 1.1.2009, and on 1.1.2001, the Lessee
exercises the option for an increase in the area of the demised
premises so that on 1.1.2012, possession shall be delivered to the
Lessee of an area that is subject of the option for an increase in the
area of the demised premises, the letting period shall be extended by a
further 4 years (from 1.1.2012 until 1.1.2016) So that on 1.1.2013 the
second additional letting period shall expire and the third additional
letting period shall commence (as defined and on the same terms
including as to rent, but excluding the matter of an extension, as
provided in sub-clause 8.4 below), for a period of a further 3 years
until 1.1.2006. Notwithstanding, and further to the above mentioned
example, in the event that the Lessee requests an extension of the
second period for the third further letting period IN ITS ENTIRETY
(namely, for a further 4 years, and not for 3, as required in
the above mentioned example), the Lessee shall be bound to notify
the Company 180 days prior to 1.1.2013 of the exercise of such right,
and a third further letting period shall expire on 1.1.2017, all as
specified in Clause 8.2 to 8.6 below.
3.5 For the avoidance of doubt it is to be made clear that the conditions
for the exercise of the right to a further letting period as specified
in Clauses 8.2 to 8.6 below, including the matter of the performance of
all the Lessee's obligations under this Lease Agreement, and the
provisions of Clause 14 concerning the rent for any of the extended
letting periods, shall prevail, in so far as any conflict exists
between them, over all the provisions of sub-clause 3.4.3 above.
3.6 Where the Lessee has elected to exercise the option for an increase in
the area of the demised premises whether once or in a number of
Parcels, the surveyor shall be instructed by the parties to determine
the area of the demised premises after such increase on each occasion,
and in this regard the provisions of Clause 3.3. above shall apply,
mutatis mutandis.
3.7 Until the date on which the Lessee gives notice of the exercise of the
option for an increase in the area of the demised premises, the Company
and the Lessee shall agree upon the planning principles for the area
that is the subject of the option for an increase in the demised
premises and the provisions of the specification shall apply in the
connection therewith, mutatis mutandis. It is to be clear that all the
provisions of this Lease Agreement, mutatis mutandis, including the
matter of timetables, shall apply to the areas which are the subject of
the option for an increase in
9
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the area of the demised premises, and to an extension of the letting
due to such increase of the demised premises.
3.8 It is understood that the Lessee shall not in any way object to or
prevent the execution of the works in the building until its completion
as aforesaid. The Company for its part shall use its best endeavours to
reduce in so far as is possible any disturbance that may be caused to
the use of the demised premises by the Lessee during the construction
of the building and until its completion as aforesaid. The completion
of the construction of the building means, for the purposes of this
Lease Agreement, the completion of construction of areas to an extent
of approximately 12,000 metres. If the Lessee fully exercises the
option for an increase in the area of the demised premises as
aforesaid, the demised premises will constitute the whole of the
building.
OPTION TO LEASE AREAS IN BUILDING NO.4 IN THE PARK.
3.9 The Lessee is hereby granted a further option to lease areas in the
building known as Building No. 4 in the Park (hereinafter called
"BUILDING NO.4"), which is to be constructed by the Company
(hereinafter called "THE OPTION TO LEASE AREAS IN BUILDING NO.4"), this
being solely by advance written notice being given to the Company no
later than after 6 months have elapsed from the date on which the
Company notifies the Lessee that the Company has received building
permits for Building No.4 (hereinafter called "THE DATE OF THE END OF
THE OPTION TO RENT AREA IN BUILDING NO.4"). Where the Lessee has not
exercised the option to rent areas in Building No.4 by the end of the
option to rent areas of Building No.4, such option shall expire
completely and subject to the provisions of Clause 4.1 below the Lessee
shall not have any right of any kind to rent additional areas in
Building No.4. Where the Lessee has exercised the option to rent areas
in Building No.4 in the Park as above, the rent to be paid by the
Lessee to the Company shall be identical to that specified in Clause
14.1.1 below plus 10% (ten per cent). All the other terms of this
Leasing Agreement shall apply mutatis mutandis to the contractual
arrangements that are the subject of the option to rent areas in
Building No.4.
3.10. In the event that during the period in which the option to rent areas
in Building No.4 as provided in Clause 3.9 above, is in force, the
Company reaches agreement with any third party as to the leasing or
sale of all the areas in Building No.4 to such third party, the option
to rent areas in Building No.4 that was granted to the Lessee as
provided in Clause 3.9 above, shall expire and at the same time the
right granted to the Lessee as specified in Clause 4 below shall take
effect, so that from the date of the receipt of notice from the Company
that it has received such an offer from a third party, the option to
rent areas in Building No.,4 shall completely expire and be invalid,
and the period of the right granted to
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the Lessee as specified in Clause 4 below shall commence and come into
effect.
4. THE RIGHT TO RENT AREAS IN BUILDING NO.4.
4.1 The Company hereby grants to the Lessee a right that shall be in force
from the date of the end of the option to rent areas in Building No.4
as provided in Clause 3.9 or 3.10 above, until the end of the initial
occupation of Building No. 4, by which in so far as the Company makes
areas available for lease in Building No.4. to any degree and its
discretion, it shall firstly offer them to the Lessee on the terms
specified in Clause 3.9 above.
4.2 For the purpose of such right that is hereby granted to the Lessee
under Clause 4.1 above, the following provisions shall apply:
In the event that the Company makes areas available for lease or sale
in Building No.4, to any degree at its discretion, and reaches
agreement with any third party, subject to the right hereby granted to
the Lessee, to rent or sell such areas to such third party, the Company
shall offer to lease such areas, before concluding a transaction with
such third party, to the Lessee, being the same amount of area as has
been agreed with such third party, in accordance with the terms
specified in Clause 3.9 above. If the Lessee is interested in renting
such areas from the Company on the terms specified in the said Clause
3.9, the Lessee shall give notice thereof to the Company within 14
business days from the date on which it received the Company's offer to
lease such above mentioned areas. In the event that the Lessee notifies
the Company that it does not wish to lease the said areas on the terms
specified in the said Clause 3.9, or if no notice at all is given to
the Company and the said period of 14 business days has elapsed, the
Lessee shall be deemed to have waived its right to rent the said areas
on the said terms, and in such event the Company shall be entitled to
lease or sell the said areas to any third party.
It is agreed and made clear that the rights granted to the Lessee under
Clauses 3.9, 10, 3 and 4 above in connection with Building No.4, are
subject to the option for an increase in the area of the demised
premises being fully exercised, namely an increase in the area of the
demised premises to 12,000 metres in Building No.2.
5. THE ROOF OF THE BUILDING.
The Lessee may notify the Company up until the stage of the conclusion
of the construction of the main frame of the building as provided in
the specification, of its wish for the roof of the building to be
tiled. Where the Tenant gives such notice. the Company shall undertake
the tiling of
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the roof and the Lessee shall reimburse the Company for the cost of
doing so.
6. RENTAL OF PARKING AREAS.
6.1 The parties hereby agree that for every 20 metres of construction in
the area of the demised premises as determined by the surveyor as above
the Company shall rent 1 standard parking place to the Lessee, this
being for the letting period as specified in Clause 8 below.
6.2 The Company shall on the delivery date allocate to the Lessee 200
specific and marked parking spaces in the underground parking area in
the basement of the building, and a further 175 parking spaces shall be
allocated to the Lessee in the main parking area in the Park, which
shall be bordered of and closed by mechanical and/or electrical and/or
other means, all as is marked on the plan APPENDIX A to this Lease,
within 30 days from the date of the signing of this Lease Agreement.
6.3 The Lessee shall be entitled to notify the Company from time to time,
but no later than 1.1.2003 of its wish to increase the number of
parking areas that are allocated for its use, by giving written notice
thereof to the Company 30 days in advance. Such notice shall specify
the number of original additional parking spaces and the number of
additional parking spaces in the main car park of the Park that the
Lessee wishes to rent, so that in any event the number of parking
spaces that are allocated to the Lessee shall not exceed a total of 600
parking spaces. Where such notice is given to the Company, it shall
allocate to the Lessee, within 30 days from the date of giving of such
notice the amount of parking spaces specified in the notice. The Lessee
shall pay the Company for rent of the additional parking spaces the
rent for the original parking spaces and for the parking spaces in the
main car park of the Park, as in Clause 6.4 below. It is to be clear
that the Company shall be entitled to allocate such additional parking
spaces anywhere that it sees fit, according to its own requirements and
at its sole discretion, and in so far as this is possible in the
vicinity of the Building.
6.4 In consideration of the parking spaces allocated to it in the
underground car park in the basements of the building, the Lessee shall
pay the Company a rent of $65 (sixty five US dollars) per month for
each parking space, plus lawfully chargeable VAT.
In consideration of the parking areas allocated to it in the main car
park in the Park the Lessee shall pay the Company the rent of $50 (50
US dollars) per month for each parking space, plus lawfully chargeable
VAT.
The provisions of Clauses 14-16 mutatis mutandis, shall apply to the
conditions of payment of rent for the parking spaces including the
matter of the date and manner of payment and linkage thereof to the
Index.
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6.5 The Company undertakes to mark and border the parking spaces that are
leased to the Lessee in the main car park, so that they can be
distinguished from the remainder of the parking spaces in the main car
park in the Park.
7. THE PURPOSE OF THE LETTING.
The purpose of the letting is the planning, development, and the clean
manufacture and sale (not retail) of products in the field of radio
communications, administration of the Lessee's offices and its business
in the high tech field and activities ancillary thereto, and in similar
fields but not necessarily only identical to those above mentioned.
The Company declares that the provisions of the Town Building Plan
indicated in Clause 2.4 above permits the uses that are specified in
the definition of the purpose of the letting as above. The Company
further undertakes to sign any document that the Lessee may require for
the purpose of obtaining licenses and/or approvals and/or permits for
the purpose of conducting its business at the demised premises provided
that nothing therein contained shall prejudice the rights of the
Company under this lease agreement and/or shall impose any liabilities
whatsoever on the Company in contravention of this Lease Agreement
and/or any financial liability.
8. THE LETTING PERIOD.
8.1 The Lease under this Lease Agreement is for a period of 4 years, which
shall commence on the delivery date as specified in Clause 12.
Notwithstanding the foregoing it is agreed that in the event that the
Lessee exercises the option for an increase in the area of the demised
premises as provided in Clause 3.4 above prior to 1.1.2001, the
counting of the said 4 years under this Clause shall start to run again
from the date of the delivery of the additional areas that are the
subject of the exercise thereof as aforesaid by the Lessee and from the
delivery date, and the letting period shall be deemed to have
recommenced from the date of the delivery of the said additional areas
(hereinafter called "THE LETTING PERIOD"). It is to be clear that
nothing by virtue of the foregoing shall derogate from any of the
parties obligations under this Lease Agreement in relation to the first
years letting that is to commence on the above mentioned delivery date.
8.2 The Lessee is hereby granted the right to extend the letting period for
an additional period of 4 years (hereinafter called "THE ADDITIONAL
LETTING PERIOD"), commencing from the expiration of the letting
period, this being solely by means of previous written notice that
shall be given to the Company at least 180 days prior to the expiration
of the letting
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period, and provided that the Lessee has complied with all its
obligations under this Lease Agreement.
8.3 Where the Lessee has exercised its said right to the additional letting
period, the Lessee shall be granted the right to extend the additional
letting period for a further period of 4 years (hereinafter called "THE
SECOND ADDITIONAL LETTING PERIOD"), commencing from the expiration of
the additional letting period, this being solely by means of previous
written notice that shall be given to the Company at least 180 days
prior to the expiration of the additional letting period and provided
that the Lessee has complied with all its obligations under this Lease
Agreement.
8.4 Where the Lessee has exercised its said right to the second additional
letting period, the Lessee shall be granted the right to extend the
additional letting period for a further period of 4 years (hereinafter
called "THE THIRD ADDITIONAL LETTING PERIOD"), commencing from the
expiration of the second additional letting period, this being solely
by means of previous written notice that shall be given to the Company
at least 180 days prior to the expiration of the second additional
letting period and provided that the Lessee has complied with all its
obligations under this Lease Agreement.
8.5 Where the Lessee has exercised its said right to the third additional
letting period, the Lessee shall be granted the right to extend the
third additional letting period for a further period of 4 years
(hereinafter called "THE FOURTH ADDITIONAL LETTING PERIOD"), commencing
from the expiration of the third additional letting period, this being
solely by means of previous written notice that shall be given to the
Company at least 180 days prior to the expiration of the third
additional letting period and provided that the Lessee has complied
with all its obligations under this Lease Agreement.
8.6 Where the Lessee has exercised its said right to the fourth additional
letting period, the Lessee shall be granted the right to extend the
fourth additional letting period for a further period of 4 years
(hereinafter called "THE FIFTH ADDITIONAL LETTING PERIOD"), commencing
from the expiration of the fourth additional letting period, this being
solely by means of previous written notice that shall be given to the
Company at least 180 days prior to the expiration of the fourth
additional letting period and provided that the Lessee has complied
with all its obligations under this Lease Agreement.
8.7 In any event, and notwithstanding all the provisions of this Lease
Agreement, the total letting period shall not be extended in excess of
25 (twenty five) years less 1 day.
8.8 In relation to the additional letting period (in so far as there is
one) and relation to the second additional letting period (in so far
as there is one),
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in relation to the third additional letting period (in so far as there
is one) and in relation to the fourth additional letting period (in so
far as there is one) and relation to the fifth additional letting
period (in so far as there is one), all the provisions of this Lease
Agreement shall apply, mutatis mutandis, except for the question of the
rent as specified in Clause 14 below.
8.9 Upon the expiration of the letting period as defined in clause 8.1
above, and so far as the letting has been extended in accordance with
any of the notices in Clause 8.2 to 8.5 above, the Lessee shall have
the right to terminate this Lease Agreement earlier, this being solely
by giving previous written notice of at least 18 (eighteen) months in
advance. Where the Lessee gives such notice in this sub-clause, the
letting under this Lease Agreement shall terminate after the expiration
of 18 months from the date of the receipt of such notice by the Company
and all the provisions of this Lease Agreement concerning the
termination of the letting, the vacation of the demised premises etc.
shall apply.
9. INAPPLICABILITY OF THE TENANTS PROTECTION LAWS.
It is hereby agreed between the parties as follows:
9.1 The letting, the lessee and the demised premises do not have the
protection of the Tenancy Protection Law and/or the Provisions of any
other law. existing or that may be enacted in the future, that affords
protection an any way what so ever to a tenant or occupant, and such
laws, amendments thereto and regulations and/or orders made and/or to
be made by virtue thereof do not and shall not apply to the demised
premises and to the letting under this Lease Agreement.
9.2 The building constitutes a new building the construction whereof was
completed after 5, and it follows that on 20.8.68 no tenant was
entitled to possession of the demised premises; the demised premises is
a new property within the meaning of such expression in Section 14 (a)
of the Tenants Protection Law and the Lessee has not been asked to pay
and has not paid key money to the Company or made any other payment
that are likely to be considered to be key money.
9.3 By reason by the fact that the demised premises and the letting under
this Lease Agreement are not protected under The Tenants Protection
Law, then at the time of the vacation of the demised premises - whether
this is as a result of the expiration of the letting period or as a
result of the cessation thereof, for any reason whatsoever - the Lessee
shall not be entitled to receive from the Company and/or from any other
party any payment of consideration whatsoever for vacating the demised
premises, whether as key money, as payment for additions and
improvements and whether for any other reason.
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10. MANAGEMENT CONTRACT.
Together with this Lease Agreement and as an integral part thereof the
Lessee shall sign the Management Contract that is attached to this
Lease Agreement as APPENDIX B (hereinafter and hereinbefore called "THE
MANAGEMENT CONTRACT".)
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11. THE TECHNICAL SPECIFICATION.
The Company shall erect the demised premises in accordance with the
Technical Specification that is attached hereto as APPENDIX C for this
Lease Agreement (hereinafter called "THE SPECIFICATION"). It is to be
clear that in so far as any contradiction shall arise between the
provisions of this Lease Agreement and the provisions of the
specification, the provisions of the specification shall prevail.
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SECOND CHAPTER - DELIVERY OF POSSESSION.
12. DELIVERY OF POSSESSION OF THE DEMISED PREMISES.
12.1 On 1.1.2001 the Company shall deliver possession of the demised
premises to the Lessee ready for use and constructed as provided in
this Lease Agreement and in accordance with the technical specification
(Appendix C) (hereinafter called "THE DELIVERY DATE"). The Company's
said obligation is conditional on the Lessee for its part fulfilling
each of the obligations that it is bound to fulfil under the provisions
of this Lease Agreement BEFORE receiving possession of the demised
premises. Notwithstanding the foregoing, the Company shall be entitled
to bring forward the delivery date by a period of up to 2 months, by
giving written notice to the Lessee, to be given 30 days in advance,
and with effect from such notice by the Company, the advanced date
shall be deemed to be the delivery date for all intents and purposes.
It is to be clear that the demised premises shall be considered as
being fit for delivery to the Lessee as above when it is fit for use by
the Lessee, as provided in the specification and it is connected to the
permanent water and electricity systems, and is ready for connection to
"Bezek". The Lessee undertakes to attend at the demised premises on the
delivery date in order to receive possession of the demised premises.
12.2 60 days prior to the delivery date and pursuant to a written notice
that the Company shall give to the Lessee at least 14 days in advance,
the Lessee shall be invited to the demised premises for the purpose of
inspection thereof (hereinafter called "THE INSPECTION DATE"). On the
inspection date the demised premises is to be inspected by the Lessee,
who shall confirm the condition of the demised premises to the Company
and the verification of the specification in a record that the parties
shall prepare on the inspection date (hereinafter called "THE DEMISED
PREMISES INSPECTION RECORD"). Where the Lessee considers that the
demised premises does not conform to the specification and/or that any
works have not been completed and/or had not been executed as agreed,
such deficiencies shall be recorded in the demised premises inspection
record. Where in the demised premises inspection record the Lessee has
indicated that in its opinion, the condition of the demised premises
does not conform with the specification, the inspector and an engineer
representing the Lessee shall examine such claims within 7 days and if
it is found that there is substance in such claims, or in some of them,
the Company shall repair what ever requires to be repaired as quickly
as possible. Where disputes arise between the inspector and the
engineer representing the Lessee, an engineer arbitrator shall be
appointed by agreement between the parties within 3 days, and if the
parties have not agreed on the appointment of an engineer arbitrator he
shall be appointed by the Chairman of the Engineers Association within
7 days, from application being made to him by the parties and the
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engineer arbitrator shall decide the dispute within 7 days from the
reference of the same to him, by one of the parties, and his decision
shall be conclusive and binding on the parties. It is agreed that
repairs and/or inconsistencies in the specification that do not
prevent the Lessee from reasonable use of the demised premises, and
which have been indicated in the demised premises inspection record,
shall not constitute a cause of the postponement of the delivery date,
provided that the non- connection of the demised premises to the
permanent water and electricity systems shall constitute a cause for
the Lessee to postpone the delivery date, and to exercise the same by
receiving agreed compensation as specified in Clause 13.3 below.
12.3 On the delivery date the parties shall sign a record in which the
delivery of the demised premises to the Lessee shall be indicated
(hereinafter called "THE DELIVERY RECORD"). The signature by both
parties of the delivery record and the delivery of keys of the demised
premises to the Lessee shall constitute evidence of the fact that the
Lessee has received the demised premises duly complete and finished in
accordance with this Lease Agreement and that safe for the details
specified in the demised premises inspection record, if any, the Lessee
has no claim or action against the Company in relation thereto.
12.4 Notwithstanding that for any reason, the Lessee has not attended at the
demised premises on the delivery date and as a result did not receive
possession of the demised premises on the due date, or that the Lessee
did attend and refused to accept possession of the demised premises
contrary to the provisions of this Lease Agreement, the demised
premises shall for all intends and purposes be deemed to have been
delivered on the delivery date, and the obligations under this Lease
Agreement shall apply to the Lessee and shall be applicable with effect
from the delivery date, including the matter of the performance of the
Lessee's obligations to make payments (including those by virtue of the
management contract), responsibility for the condition of the demised
premises, the maintenance thereof
12.5. The Lessee shall be entitled to enter the demised premises for the
purpose of carrying out the works that the Lessee requires for its
entry into the demised premises , or being subject to and in accordance
with Clause 12 F of the specification.
12.6 For the avoidance of doubt it is hereby made clear that prior to the
delivery of possession of the demised premises to the Lessee, the
Lessee shall be deemed to be in occupation of the demised premises for
any purpose included in the framework of the execution of works in
accordance with Clause 12.5 solely as a licensee and without having any
right of possession. In addition it is to be clear that the provisions
of the 5th 6th and 7th Chapters of this Lease Agreement that relate to
the liability for damage, the prevention of nuisances and the insurance
of the
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demised premises shall also fully apply to the period from the
Lessee's entry to complete the works that it requires under Clause 12.5
above, and until the delivery date.
12.7 For the avoidance of doubt, it is hereby made clear that prior to the
date of delivery of possession of the demised premises to the Lessee
the Lessee shall be deemed for any purpose under which it occupies the
demised premises, to be solely a licensee and without any right of
possession.
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13. POSTPONEMENT OF THE DELIVERY DATE.
13.1 If as a result of factors that are not dependent on the Company or over
which the Company has no control, including omissions on the part of
the Lessee in connection with the implementation and execution of items
in the specification as in the form thereof on the date of the signing
of this Lease Agreement and/or by reason of works that the Lessee is to
carry out as provided in Clause 12.5 above and/or if as a result of
force majeure, there is an interruption in construction or there is a
delay in the completion of the demised premises, the delivery date
shall be postponed for such reasonable period that is necessary by
reason of such interruption or such delay, provided that the Company
has before the due date taken reasonable steps to avoid or reduce such
delay in the delivery of the demised premises as a result of one of the
above mentioned reasons.
It is to be clear, that a delay in receipt of building permits and/or
financial demands made on the Company by the competent authorities
shall not come within the bounds of the circumstances specified in this
sub-clause.
For the avoidance of doubt it is hereby expressly declared that where
there has been an extension as provided in this paragraph the Lessee
shall not be entitled to reductions in the rent or the payment of
compensation and/or any expenses whatsoever.
13.2 Notwithstanding the provisions of this Lease Agreement, a delay in the
completion of the demised premises and the delivery thereof to the
Lessee, for any reason at all, that does not exceed 30 days, and a
delay that arises for the reasons specified in Clause 13.1 above, shall
not constitute a breach of the Company's obligations in this Lease
Agreement, and the Lessee shall not be entitled to any remedy and in
any event shall not be entitled to allege any form of breach of the
Company's obligations in connection with the delivery date and the
number of days of such breach.
13.3 A delay in completing delivery that is not in accordance with clauses
13.1 and 13.2 above, shall entitle the Lessee to agreed compensation as
follows:
13.3.1 A sum equivalent to 1 days rent for the demised premises namely - $4000
(four thousand US dollars) for each days delay.
13.3.2 A sum equivalent to 1 days rent for the demised premises plus 10% (ten
per cent) namely $4400 (four thousand four hundred US dollars) for each
days delay, where the Lessee has entered into an alternative Lease
Agreement as a result of such delay in completion of delivery and has
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relocated to an alternative site for the period of the delay in the
implementation of the Agreement.
Where the delay in completion of delivery continues as specified in
sub-clause 13.3. hereof, for a period that exceeds 8 months, the Lessee
shall have the right in addition to any other remedy and/or relief
under any law, to rescind this Lease Agreement to terminate it.
13.4 It is hereby agreed and made clear that the delivery date for
possession has been determined by the parties taking into account and
on the basis of the specification and of the works involved in
completing the demised premises in accordance thereto. Accordingly, in
any case in which changes in the specification occur on a date after
the signing of this Lease Agreement, the delivery date shall be
postponed by the period that is reasonable necessary by virtue of such
change in the specification and the Company shall not be liable to pay
the agreed compensation as provided in Clause 13.3 above. The period of
such postponement shall be determined by the inspector and the Lessee's
engineers, and in the absence of agreement an engineer arbitrator shall
be appointed within 3 days by mutual consent of the parties, and if the
parties have not reached agreement the engineer arbitrator shall be
appointed by the Chairman of the Engineers Association within 7 days
after one of the parties has referred the matter to him, and the
engineer arbitrator shall decide the dispute within 7 days from the
reference to him by one of the parties, and his decision shall be
conclusive and binding on the parties.
13.5 All the provisions that are specified in this Clause in relation to the
postponement of the delivery date of possession shall also apply,
mutatis mutandis, to the dates for the exercise of the option for
increasing the area of the demised premises, as specified in Clause 3.4
above. For the avoidance of doubt, it is hereby made clear that the
exercise of the option referred to in this sub-clause, by the Lessee,
shall not constitute a ground for the postponement of the date of the
delivery of possession of the first 7,500 metres in the building.
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THIRD CHAPTER - THE CONSIDERATION.
14. THE RENT.
The parties hereby agree as follows:
14.1 For the letting of the demised premises under this Lease Agreement for
the letting period the Lessee shall pay rent to the Company as follows:
14.1.1 A sum in NIS equivalent to $13 (thirteen US dollars) per month for
every metre of the area of the demised premises that does not include
the area of the warehouses, in accordance with the manner in which the
area of the demised premises is calculated as above.
14.1.2 Where the finishing works have not been completed in the area of the
warehouses as specified in the specification, namely for each metre of
warehouse area that is marked in the colour _____ on the plan attached
hereto as APPENDIX A to this Lease Agreement (hereinafter called "THE
WAREHOUSES") the Lessee shall pay as follows:
14.1.2.1 With effect from the delivery date until the end of the first two years
of the letting period, a rent equivalent to $7 (seven US dollars) per
metre per month.
14.1.2.2 With effect from the end of the first two years of the letting period
and the continuation thereafter of the letting period as defined above,
a rent equivalent to $9 (nine US dollars) per metre per month.
Where the finishing works to the warehouse area has been completed as
specified in the specification, then for each metre of the warehouse
area, the Lessee shall pay as follows:
14.1.3.1 With effect from delivery date and until the end of the first two years
of the letting period a rent equivalent to $9 (nine US dollars) per
metre per month.
14.1.3.2 With effect from the end of the first two years of the letting period
and the continuation thereafter of the letting period as defined above,
a rent equivalent a $11 (eleven US dollars) per metre per month.
The rents referred to in sub-clause 14.1.1 above together with those in
respect of the warehouses referred to in sub-clause 14.1.2 or in
sub-clause 14.1.3 above, shall be hereinbefore and hereinafter in this
Lease Agreement called "THE RENT".
14.2 It is agreed, that if the Company has not complied with its obligations
specified in Clauses 32.1 and 33.1 34.1.1, 35 and 35.2 below, and under
the conditions specified in Clauses 32.2, 33.2, 34.2, 35.3, below the
rent
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shall be reduced by a total amount that shall not exceed $15 (one
and a half US dollars) all as specified in the sixth chapter of this
Lease Agreement.
14.3 The rent shall be translated into NIS at the representative rate of the
dollar (as defined above), and shall be paid to the Company plus
differentials linked to the index as specified below commencing from
the date of the signature of this Lease Agreement until the date of
actual payment of each of the rental payments.
The index linked differentials that are to be added or subtracted from
the rent as aforesaid, shall be calculated in accordance with the
following definitions:
THE BASE INDEX
The index that was published 15.4.99 and that stood at ____ points.
THE NEW INDEX.
The last index that is published, periodically, prior to the date on
which the rent is paid.
LINKAGE DIFFERENTIALS.
The difference between the new index and the base index, divided by the
base index and multiplied by the rent at the above rates.
The rent as translated into NIS with the addition of or minus the
linkage differentials as above is hereinafter called "THE LINKED RENT".
14.4 Where the Lessee has exercised its right to extend the letting period
for a additional period, the rent for the further letting period shall
be increased by 5%, thus during the additional letting period it shall
be of a sum equivalent to 105% of the amounts being paid at the end of
the letting period as specified in Clause 14.1 above, and all the
remainder of the aforesaid terms shall apply in connection therewith,
mutatis mutandis.
14.5 Where the Lessee has exercised its right to extend the letting period
for a second additional letting period, the rent for the second
additional letting period shall be increased by 5%, thus during the
second additional letting period it shall be of a sum equivalent to
105% of the amounts being paid at the end of the letting period as
specified in Clause 14.1 above, and all the remainder of the aforesaid
terms shall apply in connection therewith, mutatis mutandis.
14.6 Where the Lessee has exercised its right to extend the second letting
period for a third additional letting period, the rent for the third
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additional letting period shall be increased by 5%, thus during the
third additional letting period it shall be of a sum equivalent to 105%
of the amounts being paid at the end of the second letting period as
specified in Clause 14.5 above, and all the remainder of the aforesaid
terms shall apply in connection therewith, mutatis mutandis.
14.7 Where the Lessee has exercised its right to extend the third additional
letting period for a fourth additional letting period, the rent for the
fourth additional letting period shall be determined by the parties by
mutual agreement, and in the absence thereof by a valuer who shall be
appointed by the Chairman of the Chamber of Valuers within 7 days after
one of the parties has referred to matter to him, and all the remainder
of the aforesaid terms shall apply in connection therewith, mutatis
mutandis.
14.8 Where the Lessee has exercised its right to extend the fourth
additional letting period for a fifth additional letting period, the
rent for the fifth additional letting period shall be determined for
the 5th additional letting period by mutual agreement between the
parties, and in the absence of such agreement, by a valuer who shall be
appointed by mutual agreement between the parties and in the absence of
such agreement such valuer shall be appointed by a Chairman of the
Chamber of Valuers within 7 days from a reference to him by one of the
parties and all the other above mentioned conditions shall apply in
connection therewith mutatis mutandis.
14.9 The provisions of sub-clause 14.2 - 14.8 above shall also apply,
mutatis mutandis, to the rent that the Lessee is to pay for the rental
of the car park spaces as specified in Clause 6.3 above.
15. THE MANNER OF THE PAYMENT OF THE RENT.
15.1 The Lessee shall pay the rent for the demised premises and for the car
parking to the Company every 3 months during the letting period,
additional letting period (if there is one), the second additional
letting period (if there is one), the third additional letting period
(if there is one) and the fourth additional letting period (if there is
one), and the fifth additional letting period (if there is one), in
advance, on the first day of the first month of each of the said 3
monthly periods.
15.2 It is agreed that the rent for the demised premises and for the car
parking areas for the first 3 months of the letting period, shall be
paid by the Lessee to the Company on the date of the delivery of
possession under this Lease Agreement.
15.3 VAT lawfully chargeable on the date of payment shall be added to each
of the payments specified in this Clause, and shall be paid to the
Company at the same time as the aforesaid payments of rent are made,
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in post-dated cheques whose date of payment shall in each case be one
day prior to the date for compulsory payment of VAT by the Company and
against a tax invoice receipt.
16. CHARGE OF THE COMPANIES RIGHTS UNDER THIS LEASE, TO A BANK.
The Company has charged and assigned, by assignment by way of charge to
Bank Hapoalim Ltd (hereinafter called "THE BANK") all its rights in
relation to the Lessee under this Lease Agreement, and hereby gives the
Lessee an irrevocable instruction to pay the rent and make any other
payments that are or are to become due to the Company from the Lessee
under this Agreement to a special account the number of which is 421006
at Balfour Branch, (branch No.527) of the Bank. The signature of the
Lessee on this Lease Agreement constitutes an undertaking on his behalf
to act as aforesaid in accordance therewith, the Lessee hereby
undertakes that it will pay to such special account those payments for
which it is liable under the provisions of this Agreement.
FOURTH CHAPTER - ADDITIONAL PAYMENTS BY THE LESSEE.
17. THE OBLIGATION TO PAY.
In addition to the rent that the Lessee is liable to pay to the Company
under this Agreement, the Lessee hereby undertakes to pay the Company
and/or the competent authorities, as applicable the payments that are
specified below in this Chapter.
18. TAXES.
The Lessee hereby undertakes to pay to the Governmental and Municipal
Authorities:
18.1 Commencing from the date of the delivery of possession of the demised
premises, all fees, levies, municipal taxes, taxes and other compulsory
payments, whether governmental or municipal that are imposed and/or
maybe imposed in the future on a Lessee and/or occupier of the demised
premises, whether for the demised premises itself or for the use
thereof, and also whether for the parking spaces that the Lessee has
rented under this Agreement and for the use thereof.
18.2 Commencing from the date of the delivery of the demised premises as
provided in Clauses 12 and 13 above, all fees, levies, municipal taxes,
taxes and other compulsory payments, whether governmental or municipal,
that are imposed and/or may be imposed in the future or the business
being conducted by the Lessee at the demised premises, including - but
without derogating from the generality of the foregoing, the fee for a
business license, sign board tax, business tax etc.
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19. TELEPHONE, ELECTRICITY, WATER AND MAINTENANCE.
19.1 The Lessee shall pay all the costs of using the telephone direct to the
telephone company, all according to the reading on the metre that the
telephone company is to install at the demised premises.
19.2 The Lessee shall pay all the costs of consumption of electricity at the
demised premises direct to the Electricity Corporation, all according
to the reading of the separate meter that is to be installed in the
demised premises.
19.3 The Lessee shall pay all the costs of the consumption of water at the
demised premises direct to the competent authority, all according to
the reading of the separate water meter that is to be installed in the
demised premises.
19.4 The Lessee shall pay the Company all the expenses and payments that are
specified in the Management Contract.
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FIFTH CHAPTER. THE LESSEE'S LIABILITIES.
20. THE LESSEE'S LIABILITY TO MAKE THE PAYMENTS.
The Lessee undertakes to pay the rent in full to the Company and to
make all the other payments that he is bound to pay under this Lease
Agreement, whether or not it has made use of the demised premises, all
being subject to the provisions of this Lease Agreement. The Lessee
shall not be entitled to and shall precluded from raising any claim
against the absolute liability to pay the rent to the Company under
this Lease Agreement.
21. RESTRICTION ON THE USE OF THE DEMISED PREMISES.
21.1 The Lessee shall not be entitled to install dining rooms, kitchens etc.
the demised premises unless it obtains the previous written approval
thereto the Company, and if such approval is given the Lessee shall be
bound to act solely in conformity with the conditions that are
prescribed in such approval in so far as this is the case.
21.2 The Lessee undertakes to comply with the rules of the Operational Code
in the form to be provided by the Company and/or the Management Company
in accordance with and subject to the provisions of this Lease
Agreement and the Management Contract, and in any event without this
making the Lessee liable for further financial charges beyond what
is provided in this Lease Agreement and so as not to detract from the
ability of the Lessee to use the demised premises for its purposes. The
operating code is to be attached as APPENDIX B to this Agreement.
22. SIGNBOARDS.
The Lessee undertakes to conform to the rules in the Code for the
fixture of signboards that is attached as APPENDIX E to this Agreement.
23. COMPLIANCE WITH LAWS.
The parties will strictly observe and comply with the provisions of the
Law in connection with the demised premises and the use thereof.
Included in the foregoing, the Lessee undertakes to comply with all
laws, regulations, and municipal by-laws, and requirements of any
competent authority that apply and/or that may apply to the demised
premises, the use thereof and to the Lessee's business and activities
of any kind at the demised premises, during the letting period and/or
the additional letting period (if there is one) and/or the second
additional letting period (if there is one) and/or the third additional
letting period (if there is one) and/or the fourth additional letting
period (if there is one) and/or the fifth additional letting period (if
there is one).
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24 SEWAGE.
The Lessee hereby undertakes not to discharge into the drainage system
and not to cause to be discharged into it, sewage that by the contents
thereof does not conform to the Ministry of Health's regulations
concerning the same.
25. THE BUILDING'S SYSTEMS.
For the avoidance of doubt it is hereby expressly made clear:
25.1 The Lessee shall be entitled to deal with the air-conditioning
installations, elevators, and including any electro- mechanical systems
(hereinafter called "THE BUILDING'S SYSTEMS") in the demised premises,
to maintain and/or repair them only through qualified professional
persons and experts in the building's systems, and only in accordance
with its obligations as provided in the Management Contract and in
accordance with the Manufacturers instructions and/or those of the
suppliers and/or the providers of the relevant services, including non
conformity with the operating manuals etc. and instructions concerning
the building's systems.
For the avoidance of doubt it is to be clear that the amounts that are
paid by the Lessee under sub-clause 6.2 of the Management Contract,
shall be used in the replacement of the building's systems, where the
need for such replacements arises from wear and tear as a result of
reasonable usage.
25.2 The Company shall transfer all warranty certificates concerning the
building's systems, to the Lessee, without this derogating from the
Lessee's liability as provided in this Lease Agreement.
25.3 Where the Lessee has committed a breach of the provisions of a
sub-clause 25.1 above and as a result any damage has been caused to the
building's systems, the Lessee shall bear the entire costs of repairing
such damage, and shall not entitled to any reduction whatsoever in the
rent even where any of such of the building's systems shall have
stopped working for any period of time.
25.4 In the event that the demised premises as leased to the Lessee, or any
part thereof, is not air-conditioned, the Lessee shall not be entitled
itself to connect in any form whatsoever to an air-conditioning system,
until having received the written approval of the Company, who shall
not unreasonably object , and in any event subject to the fact that
such air-conditioning installations shall be visible, shall not damage
the external fascia of the building, and that their installation and
maintenance shall be contrary to the provisions of any law including
provisions that concern the quality of the environment.
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25.5 The Lessee shall not in any case be entitled to install
air-conditioning units in the walls and/or the windows of the demised
premises.
25.6 A breach of the provisions of this Clause shall be deemed to be a
fundamental breach of this Lease Agreement and will entitle the Company
to any remedies that may be available to it as a result of a breach as
aforesaid under this Lease Agreement and under any law.
26. RESTRICTIONS ON THE USE OF AREAS OUTSIDE THE DEMISED PREMISES.
The Lessee hereby undertakes not to keep any materials, tools,
equipment, products, stock and any other chattels outside the demised
premises and the Lessee shall not be entitled to use an area and/or any
part of the building and/or the Park other than the demised premises,
for any purpose whatsoever safe for the use of the means of access to
the demised premises.
It is hereby agreed as follows:
26.1 If not withstanding the provisions of this Clause any goods belonging
to the Lessee are found outside the demised premises and have not been
removed by the Lessee in accordance with an initial demand by the
Company, the Company shall be entitled - but not obliged - to remove
such goods and chattels from the building and/or from the Park at the
Lessee's expense, without being in any way responsible for the
safekeeping thereof.
26.2 The non exercise of the Company's rights under sub-Clause 26.1 above
shall not be deemed to be agreement on its part to such goods and
chattels being kept outside the demised premises, and nothing thereby
shall give the Lessee the right to add to and to keep goods and
chattels there and nothing shall thereby preclude the Company from
taking any proceedings that it may be entitled to take under any law
and/or under this Agreement.
27. PUBLIC AREAS AND COMMON PROPERTIES.
27.1 It is hereby agreed and declared that the public areas and the common
property in the Park (as exclusively determined by the Company and
marked in the colour __ on the plan APPENDIX A. to this Lease
Agreement) including the roadways and walkways, gardens, lawns etc. and
the public areas and common property in the building (if any) shall
remain in the exclusive possession of the Company, and the Lessee shall
have no rights of any kind in relation to such areas.
27.2 The Lessee shall not be entitled to make an use of the public areas in
the Park and/or in the building (if any) and/or any of the areas
outside the
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demised premises other than for the purpose for which areas
are designated.
27.3 The Lessee shall be entitled to make use of the common property (as
this expression is defined in clause 2.1 of the Management contract and
solely in accordance with the objects and/or purposes and/or uses for
which the common property is designated by law and by the provisions of
this Lease agreement and the Management Agreement. The Company shall be
entitled from time to time, at its sole discretion, to permit any third
party to use any particular part of the common property, for purposes
that serve the object of the Park, and to enter into contractual
arrangements with any third party in any transaction in connection
therewith.
27.4 Without derogating from the generality of the foregoing, it is hereby
agreed and declared that the Company shall be entitled to collect
separate payment for the use of leisure facilities that are to be
constructed in the Park (if any are constructed), such as a swimming
pool, gymnasium, health club, sports pitches etc. Payment for the use
of such leisure facilities is not included in the rent under this Lease
Agreement or in the service charges under the Management Contract, and
the Company shall be entitled to require payment for the use of such
leisure facilities, whether for each use of the leisure facilities, or
whether a one time payment or an annual subscription payment or in any
other way that the Company sees fit and at its sole discretion. It is
agreed that the leisure facilities shall be at the disposal of the
tenants of the Park only, unless it is otherwise agreed by the majority
of the Park Tenants.
27.5 Without derogating from the generality of the foregoing, it is agreed
and made clear that the services that are included in the Park are as
specified in the Appendix "ANCILLARY SERVICES IN THE PARK" that is
attached as APPENDIX G to this Agreement.
28. CLEANING UPKEEP AND REPAIR OF THE DEMISED PREMISES.
28.1 The Lessee hereby undertakes to use the demised premises with
reasonable care and to keep the demised premises, and the building and
Park clean and to prevent all damage and/or breakdown in the demised
premises in the building. Without derogating from the generality of the
foregoing. The Lessee undertakes to cause all refuse to be removed from
the demised premises and to ensure that such refuse is placed by the
Lessee and/or its employees and/or its representatives solely in the
places designated for such purpose in the Park area.
28.2 The Lessee shall be bound to repair, immediately at its own expense any
damage and/or breakdown that is caused to the demised premises and/or
to the building and/or to the Park by the Lessee and/or by its
employees and/or those using the demised premises and/or by its
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representatives (other than breakdowns that are caused as a result of
wear and tear arising from normal and reasonable use and/or from
defects in the construction of the demised premises).
28.3 If the Lessee does not carry out such repair for which it is liable by
virtue of the provisions of sub-clause 28.2 above, the Company shall be
entitled - but not obliged - to undertake such repair at the Lessee's
expense and the Lessee shall be bound to re-imburse the Company for any
sum that it has expended in carrying out such repair plus index linked
differentials plus default interest from the date that such expense was
incurred by the Company until the actual re-imbursement thereof to the
Company. Save for cases of urgent repairs, the Company shall give the
Lessee 5 days advance notice of its intention to carry out repairs as
provided in this sub-clause.
28.4 The Lessee shall not be bound to repair damage to the demised premises
that stem from defective construction in the building. The Company
shall repair any damage of such kind that has occurred to the demised
premises within a reasonable time, and if the damage is such that it
prevents the Lessee from using the demised premises the Company shall
repair the said damage within 48 hours from the Lessee's above
mentioned notice, all being subject to the Lessee notifying the Company
of any damage that has been caused to the demised premises as aforesaid
within 3 business days from the time of the discovery thereof. If the
Company does not carry out such repairs as provided in this sub-clause
on the dates specified above, the Lessee may execute such repairs
provided that it notifies the Company of its intention to do so before
executing the repairs. Where the Lessee has executed repairs in
accordance with the provisions of this sub-clause and subject to the
provisions thereof, it shall be entitled to a refund of its expenses on
production of lawful tax invoices, and provided that such expenses are
no higher than the normal in the market at that time.
28.5 The Lessee shall not be bound to repair damage to the demised premises
stemming from warlike activities, earthquakes or other unexpected
natural events of nature, or repairs that are the liability of a Vendor
under the Sale(Housing) Law 5733 - 1973, as the above mentioned law
does not apply to this Lease Agreement and/or to the relationship of
the parties to this Lease Agreement.
29. MAKING CHANGES AND ADDITIONS TO THE DEMISED PREMISES.
29.1 The Lessee shall be entitled to make internal changes in the demised
premises provided that in no case shall any changes and/or works of any
kind and/or additions and/or renovations be carried out to any parts of
the construction of the demised premises, to any of its systems and/or
cladding (hereinafter called "THE ADDITION"), without first obtaining
the written approval of the Company thereto, apart from the taking of
action
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under clause 28.2 above. The Company shall be entitled - but not
bound, at its sole discretion - to approve such addition or part
thereof and to impose specific conditions, for the execution thereof,
including the matter of insuring the works and the execution thereof
and in accordance with the specification and the quantities that are
proposed by the Lessee and are approved by the Company and as to the
manner of the execution thereof with the minimum of disturbance, if
any, to the other occupants of the Park.
29.2 If the Lessee wishes to make use the walls of the demised premises
and/or the ceiling and roof system of the demised premises and/or the
building and/or other parts of the demised premises and/or the
building, for the purpose of connection or loading installations and/or
items of any kind that are heavy and that are liable to damage the
demised premises and/or the building and/or any of its systems, the
Lessee prior to undertaking the same as above mentioned shall obtain
the written consent of the Company.
It is to be clear that the Lessee is prohibited from installing and/or
operating aerials and/or any other facility that radiates
electro-magnetic waves and/or satellite dishes on the roof and/or walls
of the demised premises.
Notwithstanding the foregoing the Company hereby permits the Lessee to
install a number of aerials on the roof of the demised premises this
being strictly subject to the Lessee obtaining approvals from the
appropriate authorities including approvals from the Ministry of
Communications and the Ministry for the Environment and subject to the
Lessee's obligation to avoid creating a nuisance as specified in Clause
30 below. It is to be clear that nothing by virtue of the foregoing
shall give the Lessee the right to install a multiplicity of aerials on
the roof of the building such as on the "Gilat Tikshoret Lavianim"
building in Daniv Park, nearby.
29.3 Where the Lessee has, with the approval of the Company as stipulated in
sub-clause 29.1 above made any addition to the demised premises, then
at the end of the letting period or additional letting period (if there
is one) or the second additional letting period (if there is one), or
the third additional letting period (if there is one), or the fourth
additional letting period (if there is one), or the fifth additional
letting period (if there is one), as applicable the Lessee shall be
entitled to remove any such addition from the demised premises, on
condition that the Lessee restores the demised premises to its former
condition. The Lessee shall be entitled to leave the addition at the
demised premises. If the addition is left at the demised premises, it
shall be the property of the Company without the Company having to make
any payments whatsoever for such addition to the Lessee.
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29.4 The Company shall be entitled to remove or destroy any addition that
has been made by the Lessee in contravention of the provisions of this
Clause, or to restore the demised premises to its previous condition,
and the Lessee shall bear any expense incurred by the Company in
connection therewith.
29.5 Notwithstanding the provisions of this Clause, the Lessee shall be
entitled at any time until the end of the letting period, to dismantle
any addition that it has installed in the demised premises by agreement
with the Company and following the dismantling thereof to use it and
exercise the rights of ownership over it, on condition that the Lessee
does not cause any damage to the demised premises by the dismantling of
such addition. Notwithstanding the foregoing, it is to be clear that an
addition that constitutes a permanent fixture to the demised premises
shall not be dismantled, unless the previous written consent thereto
has been received by the Company.
30. PREVENTION OF NUISANCE.
The Lessee shall avoid creating any nuisance under any law, including
an undertaking by the Lessee not to create loud noise, smells and
shocks that are liable to disturb other occupants of the Park and/or
visitors the Park.
In any case of a breach of the provisions of this Clause the Lessee
undertakes to cease such nuisance within 7 days after receiving a
letter of demand to do so from the Company. Without derogating from the
foregoing and in addition to any other right that the Company has under
this Lease Agreement and/or under any law, the Company shall be
entitled to carry out any inspection and/or measurement and/or repair
and/or such other action as it deems necessary for the purpose of
removing such nuisance. All expenses that the Company may incur in
taking such action as provided in this sub-clause shall be borne by the
Lessee and shall be re-imbursed by the Lessee to the Company plus index
linked differentials from the date that such sums were incurred and
until they are actually re-imbursed to the Company.
31. PARK TENANTS.
The Company undertakes that in any contractual arrangements for the
sale of and/or the Lease of areas in the Park there shall be an
obligation included on the part of the purchasers and/or the Lessees to
refrain from causing nuisance, to act in accordance with the law by
complying with the provisions of the City Building Plan that applies or
is to apply to the Park.
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SIXTH CHAPTER - THE COMPANY'S OBLIGATIONS.
32. ANCILLARY SERVICES IN THE PARK.
32.1 Commencing from the date of delivery of possession as specified in this
Agreement a transport service shall be established in the Park from
Jabotinsky Street corner with Ha'yitsira Street to the entrance to the
Park, this being until a regular public transport service is
established to the Park area, the Support Centre and the area of the
demised premises to the Kindergarten.
32.2 If there is any delay in the implementation of the items that are
indicated in sib-clauses 32.1, the Lessee shall be entitled to a
reduction of $0.375 (thirty seven and a half cents US) per meter per
month of the demised premises area, in accordance with manner in which
the demised premises area is calculated under this agreement throughout
the period of such delay in the implementation of the above mentioned
items. Upon the completion of the commitment to implement the items
indicated in clause 32.1, such rent reduction as above shall completely
cease.
33. HEALTH AND SPORTS CLUB.
33.1 Commencing from the date of delivery of possession as specified in this
Lease Agreement a Health and Sports Club (hereinafter called "SPA")
shall operate in the Park area in accordance with the initial Spa plan,
Appendix K.
33.2 If there is any delay in the operation of the Spa as specified in
sub-clause 33.1, the Lessee shall be entitled to a reduction of $0.375
(thirty seven and a half cents US) per meter per month of the demised
premises area, in accordance with manner in which the demised premises
area is calculated under this agreement throughout the period of such
delay in the operation of the Spa. Upon the completion of the
commitment to operate the Spa, such rent reduction as above shall
completely cease.
34. ACCESS ROAD TO THE PARK.
34.1 The Company undertakes that on the delivery date as specified in this
Agreement, it will permit vehicle access to the building from the Geha
Road, in accordance with the plan that is attached hereto as the first
schedule to Appendix G.
34.2 If there is any delay in the provision of access as specified in
sub-clause 34.1, the Lessee shall be entitled to a reduction of $0.375
(thirty seven and a half cents US) per meter per month of the demised
premises area, in accordance with manner in which the demised premises
area is calculated under this agreement throughout the period of such
delay in
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the provision of the above mentioned access. Upon the completion of the
commitment to provide such access, such rent reduction as above shall
completely cease.
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35. ADDITIONAL CONSTRUCTION IN THE PARK.
35.1 The Company undertakes that within 6 months from the date of the
commencement of construction of Building No,2, the construction of the
building known as building No.3 in the Park shall commence.(hereinafter
called "BUILDING NO. 3")
35.2 The Company undertakes that the construction of building No.4 shall
commence within a year and a half from the date of delivery and will
conclude within 3 years of the delivery date.
35.3 If there is any delay in the dates specified in sub-clauses 35.1 and/or
35.2, the Lessee shall be entitled to a reduction of $0.375 (thirty
seven and a half cents US) per meter per month of the demised premises
area, in accordance with manner in which the demised premises area is
calculated under this agreement throughout the period of such above
mentioned delay. Upon the completion of the commitment by the company
to commence and finish the construction as provided in sub-clauses 35.1
and 35.2, such rent reduction as above shall completely cease.
35.4 The reduction of rent as specified above in sub-clauses 32.2, 33.2,
34.2, and 35.3 shall be the sole remedies available to the Lessee for
the delays referred to in such sub-clauses.
35.5 It is hereby agreed, that as the purpose of the mechanism for the
reduction in the rent as provided in sub-clauses 32.2, 33.2, 34.2 and
35.3, is for the purpose for ensuring that the Company's obligations
under clauses 32.1, 33.1, 34.1, 35.1 and 35.2 are carried out, then in
any case in which the Company substantially performs any of its
aforesaid obligations, the Lessee shall not have the right to an
appropriate reduction and the Lessee shall not be entitled to claim
such right other than on reasonable grounds. In any case of dispute on
the question of whether the Lessee has met the conditions of this
Clause, as to the right to a reduction in the rent, this shall be
resolved by representatives of the parties, and in the absence of
agreement between them within 14 days of such dispute having arisen, a
final arbitrator who shall be appointed by mutual agreement between the
parties, shall decide the issue and shall give his decision within 7
days from having been appointed as arbitrator.
If the parties have not agreed on the identity of the said arbitrator,
he shall be appointed by the Chairman of the Chamber of Valuers, and
shall give his decision within 7 days from the date of his appointment
as aforesaid.
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SEVENTH CHAPTER - LIABILITY AND INSURANCE.
36. LIABILITY FOR DAMAGE.
36.1 The Lessee shall be liable by law for any loss, injury or damage, of
any kind whatsoever, to body and/or all property, that may be sustained
by the Company and/or the Management Company (if one is formed) and or
to any of their representatives and/or any third parties, including -
but without derogating from the generality of the foregoing- to the
employees of the Company and/or employees of the Lessee and/or the
Lessees' customers and/or to persons visiting the Park, where such loss
injury or damage directly and/or indirectly derives from the actions of
the Lessee in the demised premises and/or from the state of the demised
premises (save as a result of defects of construction in the building)
and/or that are caused by and/or because of the equipment and/or
furnishings in the demised premises and/or caused during the course of
and/or as a result of works carried out at the demised premises and/or
by the act and/or omission of the Lessee and/or its employees and/or
its users and/or those authorised by it and/or its suppliers and/or any
person providing services for the Lessee.
36.2 Without derogating from the provisions of sub-clause 36.1 above and
from the Lessee's obligations regarding insurance as provided in Clause
37 below, the Lessee hereby undertakes to take all necessary steps to
effect the cancellation of any demand addressed to the Company or to
the Management Company and/or any action that is instituted against
them in relation to damage for which the Lessee is responsible under
sub-clause 36.1 above. The Lessee shall indemnify the Company,
immediately upon receipt of initial request to do so, for all damage
caused to it and/or to the Management Company for any sum that it has
to incur because of such demand and/or claim, including but without
derogating from the generality of the foregoing - legal costs and
Attorneys fees.
37. THE LESSEE'S INSURANCE COVER.
37.1 Without derogating from the Lessee's liability under the provisions of
this agreement and by law, the Lessee hereby undertakes to effect and
maintain, at its expense and throughout the whole of the letting
period, or additional letting period (if there is one) or the second
additional letting period (if there is one), or the third additional
letting period (if there is one), or the fourth additional letting
period (if there is one), or the fifth additional letting period (if
there is one), the insspecified below (hereinafter together called "THE
LESSEE'S INSURANCE COVER"), with a duly lawfully authorised reputable
Insurance Company:
(a) PROPERTY INSURANCE covering the contents of the demised premises
and additions and improvements made to it by and/or on
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behalf of the Lessee (but not those carried out by the Company and at
its expense) in their full value, this being for loss or damage that is
liable to be caused as a result of fire, smoke, lightening, explosions,
earthquake, storm and tempest, flooding , damage from leakage and
blocked pipes, impact from aircraft, accidental (impact) damage, riots,
strikes, malicious damage, burglary and theft etc.
Such property insurance shall include a waiver by the insurer of its
right of subrogation against the Company and all those working on its
behalf for any damage caused by them and also its right of subrogation
in relation to the other occupants of the building (if there are any)
and in the Park whose insurance cover contains a corresponding clause
concerning the waiver of subrogation in relation to the Lessee for any
damage caused by the Lessee, and provided always that the foregoing
provision concerning a waiver of subrogation shall not apply for the
benefit of a person who causes damage with malicious intent.
(b) THIRD PARTY LIABILITY INSURANCE covering the Lessee's liability for
any loss, injury or damage that may be caused to any third party for
which the Lessee is liable under the provisions of this Lease Agreement
and under any law, to a level of liability that shall not be less than
$1,000,000 (one million US dollars) per event and $2,000,000 (two
million US dollars) for the annual period of insurance.
It is to be clear that the above mentioned third party liability
insurance shall not be subject to any limitation of liability that
arises from fire, explosion, alarm, lifting apparatus, loading and
unloading, defective sanitary installations, poisoning, any harmful
matter in food and drink, strikes and lockouts and any subrogation
claims by the National Insurance Institute.
The said third party liability insurance shall be extended so as to
indemnify the company for its liability for the acts and/or omissions
of the Lessee, subject to a cross liability clause by which the
insurance shall be deemed to have been effected for each of the insured
individuals separately.
(c) COMPULSORY EMPLOYERS INSURANCE covering the Lessee's liability to
its employees for any bodily injury or illness caused to them during
the course of and as a result of their employment, to a standard
maximum level of liability that is customary in Israel on the date that
the insurance is effected and/or renewed.
The said employers compulsory insurance shall not be subject to any
limitation concerning hours of work, work at heights or at depths,
contractors, sub contractors and their employees, poisons and baits and
youth employment.
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The said compulsory employers insurance shall be extended to indemnify
the Company in the event that it shall be considered to be the employer
of the Lessee's employees or any of them.
(d) INSURANCE FOR LOSS OF INCOME (apart from rent), in the full value
thereof to the Lessee, for damage caused to the demised premises and/or
for its destruction resulting from the insured risks under the Property
Insurance in accordance with paragraph (a) of this sub-clause, for a
period of indemnity for not less than 12 months.
The said insurance for loss of income shall include a waiver by the
insurer of the right of subrogation in relation to the Company, and
also its right of subrogation in relation to other occupants of the
building (if there are any) and in the Park whose insurance cover
includes a corresponding clause concerning a waiver of the right of
subrogation in relation to the Lessee, provided that the foregoing
provision concerning waiver of right of subrogation shall not apply for
the benefit of a person who caused the damage with malicious intent.
Notwithstanding the foregoing provision in this clause the Lessee may
not purchase the said loss of income insurance provided that the
exemption from liability referred to in clause 37 .9 applies as if the
insurance has been fully effected.
37.2 If the Lessee considers that it is necessary to effect full and/or
additional insurance cover for the Lessee's insurance cover as
specified above, the Lessee hereby undertakes to effect and maintain
such full and/or additional cover in so far as may be necessary.
In all additional and/or full insurance cover as aforesaid a clause
shall be included concerning the right of subrogation in relation to
the Company and to all those working on its behalf as well as in
relation to other occupants of the building (if there are any) and in
the Park, whose insurance cover includes a corresponding clause
relating to a waiver of right of subrogation in relation to the Lessee
(concerning property insurance,) and/or the insurance shall be extended
to indemnify the Company subject to a cross liability clause
(concerning compulsory insurances), as the case may be.
37.3 The Lessee's insurance cover shall contain an express condition whereby
it takes precedence over any insurance that is effected by the Company
and the insurer waives any rule concerning participation with the
Company's insurance. The Lessee's insurance cover shall also include an
express condition whereby it will not be cancelled, or reduced unless
the Company has been given written notice thereof by the insurer, by
registered post, 60 days in advance.
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37.4 The Lessee shall furnish the Company, on the delivery date and as a
condition for the delivery of possession of the demised premises to the
Lessee, with a certificate of insurance by the Lessee signed by the
insurer.
37.5 In any case where the Lessee's insurer notifies the Company that the
Lessee's insurance cover is about to be reduced or cancelled as
provided in Clause 37.3 above, the Lessee undertakes to renew its
insurance cover and to produce confirmation of the renewal of such
insurance, within 30 days prior to the date of such reduction or
cancellation or expiration as aforesaid.
37.6 The Lessee hereby undertakes to comply with all the conditions of the
Lessee's insurance cover, to update the sum insured in respect of those
insurances that have been effected pursuant to paragraphs A and D of
sub-clause 37.1 above, to pay the insurance premiums in full and on the
due dates and to ensure that the Lessee's insurance cover is renewed
from time to time as necessary, in order that they remain in force
throughout the whole of the letting period.
37.7 In the event that the Lessee does not effect and/or maintain the
insurance cover as provided in this Clause or any one of such
insurances, the Company shall be entitled to - but not obliged - to
effect and/or maintain such insurances at the Lessee's expense, and the
Lessee shall be bound to reimburse the Company for any sum of money
that it incurs for such purpose plus index linkage differentials and
interest at a rate identical to that of the default rate of interest
referred to in Clause 2 above, such index linkage differentials to be
calculated from the date on which the money was spent by the Company
until the date of actual reimbursement.
37.8 It is hereby expressly agreed that nothing by virtue of the production
of confirmation of the effecting of and maintenance of the lessees
insurance cover and its inspection by the Company, or the production of
confirmation from the Lessee's insurer to the Company concerning the
reduction, cancellation or expiration of the Lessee's insurance cover
as aforesaid, shall impose any liability on the Company and'/or its
representatives in relation to the effecting of the lessee's insurance
cover, its renewal and/or its suitability as specified in this lease
agreement, and the Lessee hereby releases the Company and/or any
representative thereof from any such liability as aforesaid.
37.9 The Lessee hereby agrees and declares it shall not have any claim
and/or demand and/or action in relation to the Company and/or any of
its representatives for damage in respect of which it is entitled to an
indemnity under the insurance cover effected as specified above or in
respect it would have been entitled to an indemnity had it not been for
the policy excess specified in such policies of insurance, and the
Lessee
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hereby releases the Company and/or any of its representatives
from all liability for such damage. The provisions of this clause is in
addition to any other provision in this Lease Agreement concerning the
exemption from liability in relation to the Company and all those
working on its behalf, and shall not in any event derogate in any way
from the other provisions of this Lease Agreement as aforesaid.
38. THE COMPANY'S INSURANCE COVER
Without derogating from the Company's liability under this Lease
Agreement and by law, hereby undertakes that it will itself and/or
through the Management Company, effect and maintain throughout the
whole of the letting period the following insurance cover (hereinafter
called "THE BUILDINGS INSURANCE") with a legally authorised and
reputable Insurance Company:
38.1 Insurance of the structure of the building and its systems and
appurtenances, other than any change, improvement, renovation and
addition made and/or to be made or done by the Lessee at replacement
value, against loss or damage as a result of "extended fire" risks and
any other additional risk that in the opinion of the Company, is
required. Such insurance shall contain an express condition whereby the
insurer waives the right of subrogation in relation to the Lessee
and/or its representatives, provided that the matter of waiver of the
right of subrogation shall not apply for the benefit of a person who
causes malicious damage.
38.2 Insurance against loss of rent and/or service charges for damage
sustained by the vendor because of the destruction of the demised
premises, as a result of "extended fire" risks in an appropriate amount
and for the period of indemnity but not less than 12 months. Such
insurance shall contain an express condition whereby the insurer waives
the right of subrogation in relation to the Lessee and/or its
representatives, provided that the matter of waiver of the right of
subrogation shall not apply for the benefit of a person who causes
malicious damage.
38.3 THIRD PARTY LIABILITY INSURANCE covering the Company's and/or the
Management Company's liability for any loss, injury or damage that may
be caused for bodily injury to and/or to the property of any person and
/or legal entity in the common areas and/or for the acts and/or
omissions of the Company and/or the management company, to a level of
liability that shall not be less than $5,000,000 (five million US
dollars) per event and per annual period of insurance.
Such insurance shall not be subject to any limitation of liability that
arises from fire, explosion, alarm, lifting apparatus, loading and
unloading, defective sanitary installations, poisoning, any harmful
matter in food
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and drink, strikes and lockouts and any claims by the National
Insurance Institute. The policy shall be extended to indemnify the
Lessee for liability for damage in the common areas and subject to
a cross liability clause.
38.4 Compulsory Employers Insurance for the for the liabilities of the
Company and/or the Management Company towards its employees to a level
of liability which shall not be less than a total of $5,000,000 (five
million US dollars) per event and per annual period of insurance
38.5 The Company undertakes that in the event that a management Company is
appointed for the building , then in the Agreement that is to be signed
between the Company and the Management Company, the Management Company
shall undertake to effect and maintain the above mentioned insurance
cover.
38.6 The Company declares that it shall not have any claim and/or demand
and/or action against the Lessee and/or any of its representatives for
damage in respect of which it is entitled to an indemnity or to which
it would have been entitled had it not been for the policy excess
specified therein, in respect of the insurance cover effected by the
Company under Clauses 38.1, 38.2 and 37.2 above, and the company hereby
releases the Lessee and/or any of its representatives from all
liability for such damage, subject to the fact that in a case in which
despite the company being entitled to such indemnity, the Insurance
Company does will not indemnify the Company for a reason that is
connected with an act and/or omission on the part of the Lessee, in
which case the release from liability as provided in this sub-clause,
shall not apply and shall not be binding on the Company.
38.7 The Lessee shall be entitled to peruse the policies effected by the
Company and/or the Management Company under this Chapter, at such place
and at such time as shall be co-ordinated between the parties.
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EIGHTH CHAPTER - THE COMPANY'S RIGHTS
39. ENTRY TO THE DEMISED PREMISES
The Company's employees and its agents shall be entitled to enter the
demised premises, at any time, during normal working hours and by prior
arrangement with the Lessee, for the purpose of inspection or for the
purpose of carrying out repairs and other works that shall be necessary
in the opinion of the Company, in the demised premises and/or in the
building and/or in the park, as may be required.
In a case of emergency, the Company and/or its representatives shall be
entitled to enter the demised premises without the necessity of
obtaining the Lessee's previous consent.
40. CARRYING OUT WORKS AT THE DEMISED PREMISES
40.1 It is hereby agreed and declared that the Company and/or its
representatives are entitled to pass through (or over) the demised
premises pipes, ducts, and other conduits for water, sewage, gas,
electricity, telephone and/or for any other purpose and to carry out
works and/or other repairs to the demised premises that are required
for the purpose of completing the construction of the demised premises
and/or the building and/or the park, or that are required for the
purpose of repairs and/or renovations and/or works that are in the
opinion of the Company required to ensure the proper working order of
the demised premises and/or the building and/or the park, or for any
other similar purpose, and all subject to and provided that :
(a) The Company uses the powers conferred upon it under this sub-clause
in a form and in a manner that does not preclude the Lessee from
reasonable use of the demised premises and that reduces the
inconvenience and/or disturbance caused to the Lessee as a result
thereof as soon as possible
(b) The Company shall, in all those parts of the demised premises that
are affected by the carrying out of the said works, including
installations installed in the demised premises that belong to the
Company, carry out all such repairs that may be necessary to restore
the demised premises to the condition that it was in prior to the said
works having been carried out.
(c) The Company shall co-ordinate the execution of the said works and
all that is involved therein with the Lessee, and for such purpose the
provisions of Clause 39 above shall apply.
41. CARRYING OUT OF WORKS IN THE BUILDING AND IN THE PARK
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41.1 The Lessee declares that it is aware that the construction of the
building and of the park have not yet been completed, and that in the
park area there are and will in the future be construction works of
additional buildings carried out, including the completion of the
construction of the building, and the Lessee hereby expressly waives
and claim for inconvenience that is liable to be caused to it as a
result of noise, dirt etc. incidental to the execution of such works as
aforesaid.
The Company shall use its best endeavours in order that the execution
of the said works shall not unreasonably prejudice the possibility of
the Lessee using the demised premises.
41.2 The Company may, at its sole discretion, make an addition to the
construction area on the ground, in so far as the town building plan
that applies to or is to apply to such land, permits the same, with out
the need for previous notice being given to the Lessee or to obtain the
Lessee's consent thereto.
N, the company undertakes not to construct buildings in the main square
of the park (bounded by the internal ring road, in accordance with the
plan attached hereto as Appendix M), in a manner that materially
damages the appearance of the said square. In this connection, the
parties agree and declare that construction of building that are
designated for welfare, support and leisure, of a low height, are not
within the bounds of damage to the appearance of the square and the
construction thereof is permissible under the first part of this
sub-clause.
Subject to the foregoing, the Lessee undertakes not to object in any
way and not to interfere with the addition such construction areas by
the Company.
Where the Company has exercised its right to add construction areas on
the ground as aforesaid, the following provisions shall apply:
(a) The Lessee declares and undertakes not to prevent in any way,
directly or indirectly, and not to submit objections to any plan that
may be submitted by the Company for the addition of construction areas
on the ground, whether such plan be for the city or it is a plan for
building permits or any other plan.
(b) The Lessee undertakes to remove at its expense any obstacle and/or
object and/or installation and/or accessory that belongs to the Lessee
and is situated in a place that is designated by the Company for the
addition of further construction areas as above mentioned. The Company
shall as far as possible ensure that an alternative place is found for
the Lessee to place such installations and/or accessories that have
been removed as aforesaid.
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(c) The Company undertakes not to exercise the right to add to the
construction areas as provided in this sub-clause by way of adding to
the areas of construction for the building beyond that of the area of
construction planned for the building on the date of the signing of
this Lease Agreement (namely between 7500 metres and 12,000 metres
subject to the exercise of the option for an increase in the area of
the demised premises in the building).
41.3 It is made clear and agreed that subject to the Company's obligations
specified in the Appendix ANCILLARY SERVICES IN THE PARK attached
hereto as Appendix "G" and subject to the signed development plan for
building No.2 (scale 1:250) attached hereto as APPENDIX "I" , the
Company shall not be under any duty under this Lease Agreement to fully
or partially exercise the existing and/or future building rights in the
park land provided that the purposes for which the park was established
as specified in Clause 2.3 above, have been realised. The exercise of
such rights and construction and building to any extent of additional
properties in the park shall be at the sole and absolute discretion of
the Company, subject to its obligation for the construction of
buildings 3 and 4 in the park, and the Lessee hereby undertakes to
refrain from taking any action and/or from any omission that could
constitute interference and /or disturbance and/or from delaying in any
way the exercise of the Company's rights to do so and/or the taking of
any action whatsoever by the Company in accordance with its discretion
as above mentioned.
41.4 It is agreed and made clear that for as long as the letting subsists
pursuant to this Lease Agreement in relation to the building, the
Company shall not be entitled to add additional areas of construction
to the building beyond those areas that are the subject of the option
for increasing the area of the demised premises, in so far as it is
exercised by the Lessee, on the terms thereof, and provided that the
foregoing shall not limit in any way whatsoever, the right of the
Company to build on the remaining areas of the land and in the park
42. TRAFFIC AND PARKING ARRANGEMENTS
42.1 The Lessee hereby confirms that it is aware of and agrees that the
Company shall be entitled to determine traffic and parking arrangements
in the park as it shall see fit, and to collect, commencing from the
date that it shall prescribe, payment for parking in the park, whether
in the original carparks, in parking lots or in carparks adjacent to
the buildings, such payment to be of such amounts and on such
conditions as shall be determined from time to time by the Company, at
its discretion, provided that this shall not prejudice the rights of
the Lessee in relation to the parking areas that are allocated for the
Lessee's use and for the use of its visitors in accordance with the
provisions of this Lease Agreement.
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42.2 The lessee hereby undertakes to comply with all the rules that may be
prescribed by the Company regarding traffic and parking in the park and
to pay the amounts that the Company prescribed for parking within the
area of the Park, if the Lessee wishes to park cars in the park area,
as distinguished from those parking places that are designated for the
Lessee.
42.3 The Lessee confirms that it is agreed by the Lessee that parking
contrary to the signs and/or to the instructions of the person
appointed by the Company to supervise the traffic and parking
arrangements in the Park shall give the Company the right to have the
vehicle towed away at the expense of the vehicle owner and/or the right
to impose fines on the vehicle owner and/or the right to take such
other steps as shall be published.
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NINTH CHAPTER - SECURITIES.
43. BANK GUARANTEE.
43.1 To secure the performance of all its obligations under this Lease
Agreement in full and on the due dates, including and without
derogating from the generality of the foregoing, to secure payment of
the rent and the other payments which the Lessee is liable for under
this Lease Agreement, the Lessee undertakes to deposit with the
Company, on the signing of this Lease Agreement, an autonomous Bank
Guarantee indexed linked in the sum NIS equivalent to $600,000 (six
hundred US dollars) namely : NIS 2456.400 (two million four hundred
and fifty six thousand new shekels) which shall be in force until it is
actually replaced by another indexed linked autonomous Bank Guarantee
on the terms specified below, which as provided below, the Lessee
undertakes to provide for the Company on the delivery date. On the
delivery date the Lessee shall deposit a substitute guarantee as
provided at the beginning of this sub-clause, an autonomous index
linked Bank Guarantee in an amount NIS equivalent to the rent
(including for parking spaces) for 3 months. Such Guarantee shall be
renewed from time to time commencing from the delivery date and the
amount thereof shall be updated in proportion to the size of the area
of the demised premises and/or the extension of the letting period,
according to the amount of the rent, that under the provisions of this
clause, is to be payable by the Lessee, at that time to the Company.
The Guarantee shall be in force until the expiration of 3 months from
the date of the end of the letting under this Lease Agreement
(hereinafter called "THE GUARANTEE"). The Guarantee shall be in the
form as attached to this Lease Agreement as APPENDIX F.
43.2 In any case in which the Lessee has not made any payment that it is
bound to make under this Lease Agreement and/or under the Management
Contract, on the date fixed for the payment thereof, and/or has not
complied with any of the Lessee's obligations towards the Company under
the provisions of this Leasing Agreement and the Management Agreement,
the Company shall be entitled, but not obliged, after giving 7 days
advance written warning, to implement the Guarantee and recover from
out of the guarantee sum the amount that was not paid on the due date
and/or any other sum that the Lessee is at that time liable for to the
Company (plus indexation differentials and late default interest due to
the Company in respect thereof, if applicable).
43.3 It is hereby agreed and declared that in no case shall the exercise of
the Guarantee as provided in sub-clause 43.2 above derogate from any
other remedy that the Company is entitled to against the Lessee for a
breach of this Lease Agreement and/or Management Contract under this
Agreement and under any law.
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In addition the above mentioned exercise of the Guarantee by the
Company shall not confer any right on the Lessee in the demised
premises and nothing by virtue thereof shall constitute a waiver or
indulgence of any of the company's rights or of the obligations of the
Lessee under the provisions of this Lease Agreement and is not a
substitute for any of them.
43.4 Where the Company has exercised the Guarantee and has been repaid from
the amount of the Guarantee wholly or partially, in the circumstances
described above, the Lessee shall be liable to replace the original
amount of the Guarantee immediately on receipt of first demand from the
Company to do so, by way of production of a new Guarantee, for the
period and for the amount of the original Guarantee. Where a new
Guarantee has been produced to the Company as aforesaid, the Company
shall return the amount of the original Guarantee to the Lessee after
deducting from it the amount which has been used as above and by way of
set off of the expenses incurred by the Company in connection with the
enforcement of the Guarantee.
43.5 The Lessee shall produce to the Company, 30 days prior to the end of
the validity of the Guarantee, an original extended Guarantee, on the
same terms duly lawfully signed by the Bank that has issued it. Where
the Lessee does not extend the Guarantee as required, the Company shall
be entitled to enforce the original Guarantee and to hold the amount of
the consideration thereof instead of the Guarantee.
43.6 Prior to the commencement of the last letting period or in the
additional letting period (if there is one) or in the second additional
letting period (if there is one) or in the third additional letting
period (if there is one) or in the fourth additional letting period (if
there is one) or in the fifth additional letting period (if there is
one), the Lessee shall deliver a Guarantee to the Company whose
validity shall expire 3 months after the date of the end of the letting
under this Lease Agreement, this being to secure the actual performance
of all the Lessee's liabilities under this Lease Agreement, including
the covering of any debt owed by the Lessee to the Company and
including in relation to the end of the letting, including in
connection with the vacation of the demised premises by the Lessee at
the end of the letting
It is agreed and made clear that nothing by virtue of the end of the
letting under this Lease Agreement and/or the return of the demised
premises to the Company's possession shall derogate from the right of
the Company to enforce the Guarantee in the manner provided above in
relation to the above mentioned period of 3 months. Where the Guarantee
has been enforced as above, then after the said period of 3 months has
elapsed, the Company shall return the Lessee any sum remaining from the
amount of the Guarantee that was enforced, after setting of the amount
from which payment was made to the Company
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and the expenses that the Company incurred in enforcing the Agreement.
43.7 A breach of the provisions of this Clause shall be deemed to be a
fundamental breach of the provisions of this Lease Agreement.
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TENTH CHAPTER - BREACHES AND REMEDIES.
44. BREACHES.
Any party to this Lease Agreement who is in breach of and/or does not
comply with any of its obligations under this Lease Agreement shall be
bound to compensate the other for any damage and/or losses that such
party has sustained as a result thereof, this being without derogation
from the right of the injured party to receive any additional and/or
other relief and/or remedy to which it is entitled under this Lease
Agreement or under any law, including orders to enforce the Lease
Agreement and/or injunctions restraining a breach thereof.
45. FUNDAMENTAL BREACHES.
45.1 The parties hereby expressly agree that in addition to the provisions
which are prescribed in this Lease Agreement itself as being deemed to
be a fundamental breach, each of the breaches specified below shall be
fundamental breaches:
(a) Non payment of any amount for which the Lessee is liable under the
provisions of this Lease Agreement on the date prescribed for payment
thereof.
(b) A breach of any of the provisions of clauses 7,8,12,43,50,55 and/or
a breach of any of the provisions of Chapters 3, 5 and 7 of this
Agreement.
(c) Failure to arrange the securities that the Lessee has undertaken to
arrange in accordance with the provisions of the sixth Chapter of this
Lease Agreement, or failing to maintain such securities in force.
(d) Failure to deliver the Guarantee to the Company on the date
prescribed for doing so or failure to re-instate the guaranteed sum
after enforcement thereof by the Company.
(e) A material inconsistency between the demised premises and the
technical specification.
45.2 Where the Lessee and/or the Company have committed a fundamental breach
of this Lease Agreement and such breach has not been remedied within 30
days from the date on which they were required in writing to do so by
the other party, the Company and/or the Lessee shall be entitled to
give written notice to the other party of the rescission of this Lease
Agreement and the letting thereunder, and in connection therewith all
the provisions shall apply, that relate to the case of rescission of
the Lease Agreement as specified in Clause 48 below.
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45.3 It is made clear that nothing by virtue of this Clause shall derogate
from the rights of the parties to claim and avail themselves, together
with the rescission of the Lease Agreement or instead of the same, any
other lawful remedy, including damages and/or mandatory and/or
restraining injunctions.
.
46. DELAY IN PAYMENT.
Without derogating from the provisions of clauses 45 and 46 above, it
is agreed and declared between the parties as follows.
46.1 In any case in which one of the parties is late in making payment of
any sum that such party is bound to make to the other under the
provisions of this Lease Agreement and/or Management Contract, then
there shall be added to the sum that was to be paid, indexation linkage
differentials and default interest at the rates indicated in clause 2
above, from the day on which such payment should have been made and
until the date of actual payment thereof.
For the purposes of this Clause indexation linkage differentials shall
be calculated in the manner specified in clause 14.2 above in relation
to the rent.
46.2 Where one of the parties has paid any sum on account of a payment that
such party is bound to make to the other and which has not been paid on
the due date as aforesaid, then in so far as such sum has been paid it
shall firstly be credited on account of indexation linkage
differentials and interest, and thereafter on account of the principal
debt and thereafter on account of other current payments, this being
whether the party liable makes payment of the said sum for the purpose
of payment on account of the debt or whether the party liable makes
such payment on account of other current payments.
46.3 It is hereby agreed that where the Lessee is in arrears with payment of
any sum that he is liable to pay under the Management Contract and/or
payment of the costs of electricity consumption, the Company shall be
entitled, in addition to any other remedy to which it is entitled under
this Lease Agreement and/or by law, to cease providing any maintenance
service to the demised premises after giving a 7 day warning to remedy
such breach.
46.4 The provisions of this clause shall also apply to the Lessee's
obligation to refund to the Company sums which the Company has paid
instead of the Lessee as specified in clause 49.1 below.
47. APPOINTMENT OF RECEIVER OR LIQUIDATOR.
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It is hereby agreed and declared that in any case where a receiver,
interim or permanent, and/or a preliminary liquidator and/or a
liquidator in appointed for the Lessee and/or the Company, and/or a
winding up order is made against it, and such appointment or order is
not revoked within 90 days the fact of such appointment and/or the
making of such order and the non revocation thereof within the said
period of time shall constitute a fundamental breach of this Agreement.
It is hereby expressly agreed that in such circumstances the validity
of this Lease Agreement shall terminate, this Lease Agreement shall be
deemed to have been rescinded with effect from the date of the
appointment of such receiver and/or preliminary liquidator and/or
liquidator and/or from the date that the said winding up order was
made, and in connection therewith all the provisions that apply in a
case of rescission of the Lease Agreement as specified in clause 48
below, shall have effect. Where the validity of the Lease Agreement has
been terminated as a result of the appointment of a receiver and/or a
preliminary liquidator and/or a liquidator of the Lessee or as a result
of the making of a winding up order against the Lessee as aforesaid,
then with effect from the date of such termination as aforesaid of the
Lease Agreement neither the Lessee not the receiver, preliminary
liquidator and/or liquidator shall have any further rights at all in
the demised premises.
48. RESCISSION OF LEASE AGREEMENT.
Where the Lease Agreement has been rescinded in accordance with one of
the provisions of this Chapter, the following provisions shall apply in
connection therewith:
48.1 Upon the rescission of the Lease Agreement the Lessee shall be obliged
to vacate the demised premises and to return them to the possession of
the Company empty of any person and from any object which is not the
property of the Company and in the condition that it was in when it was
received, fair wear and tear excepted, and the provisions of clause 50
below shall apply.
48.2 Commencing from the date of the rescission of the Lease Agreement
neither the Lessee and/or any of the Lessee's representatives shall
have any further rights of any kind in the demised premises.
48.3 Nothing by virtue of the rescission of the Lease Agreement shall
derogate from the rights of the Company and/or from any remedy that is
available to the Company against the Lessee under this Lease Agreement
and under any law.
48.4 For the avoidance of doubt, it is to be clear that in a case in which
the Lease Agreement has been rescinded and the Lessee has vacated the
demised premises as a result of such rescission, the Lessee shall not
be
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entitled to receive any compensation and/or payment whatsoever for
such rescission and/or such vacation.
49. PAYMENT OF THE LESSEE'S DEBTS.
49.1 In any case in which the Lessee has not made any payment on the due
date in connection with the demised premises which it is liable to make
to any third party under this Lease Agreement and under any law, or it
appears to the Company that the Lessee does not intend to pay the same
on the due date, including payments for electricity consumption, water,
municipal taxes, Bezek etc., the Company shall be entitled - but not in
any case bound - to make the said payment instead of the Lessee.
49.2 In any case in which one of the parties has made any payment instead of
the other, including any payment referred to in sub clause 49.1 above,
such party shall notify the other of the same, and it shall be the
obligation of the other party to refund to the paying party the amount
that the paying party has paid as above within 14 days from the date of
receipt of such notice from the paying party, plus indexation linkage
differentials and default interest at the rate prescribed in clause 2
above from the date on which the payment was made by the first party
and until the date of re-imbursement thereof by the second party. The
provisions of this sub clause are fundamental provisions a breach of
which shall constitute a fundamental breach of this Lease Agreement.
50. VACATION.
50.1 Where the letting under this Lease Agreement has come to an end,
whether on the termination of the additional letting period (if there
is one) or the second additional letting period (if there is one) or
the third additional letting period (if there is one) or the fourth
additional letting period (if there is one) or the fifth additional
letting period (if there is one) or whether beforehand, for any reason
whatsoever, including as a result of the rescission of this Lease
Agreement for any reason or in the circumstances specified in clause
8.9 above, the Lessee shall be obliged to vacate the demised premises
in accordance with this Lease Agreement and to return exclusive
possession of the demised premises, together with the keys thereof,
completely vacant and empty of any person and object and in as good a
condition as it was received, fair wear and tear excepted, within 30
days from the date of the end of the letting under this Lease Agreement
as aforesaid.
50.2 Where the Lessee is obliged to vacate the demised premises as provided
in sub clause 50.1 above, the Lessee shall produce to the Company, by
not later than the date of actual vacation of the demised premises,
certificates from the electricity corporation and the local authority
that the Lessee has no outstanding debt for electricity and/or water
consumption and/or for taxes and /or fees due to the local authority in
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respect of the demised premises up to the date of actual vacation
thereof.
50.3 Without derogating from any right of the Company under this Lease
Agreement and under any law, where the Lessee does not vacate the
demised premises as provided in sub clause 50.1 above, the Lessee shall
pay liquidated pre estimated damages of daily rent at the rate thereof
at that time, for all the areas of the demised premises (including VAT)
and a further 10% (ten per cent) for each days delay in the vacation of
the demised premises (hereinafter called "THE DAMAGES").
The parties hereby declare that the said damages constitutes pre
estimated damages, in accordance with the damages that the parties
anticipate are likely to be sustained by the Company as a result of the
failure to vacate the demised premises as specified in sub clause 50.1
above.
For the avoidance of doubt it is to be clear that nothing in the
foregoing shall derogate from the Lessee's obligation to vacate the
demised premises.
For the purpose of recovery of the damages referred to above the
Company shall be entitled - but not in any event obliged - to enforce
the Guarantee. It is to be clear that nothing by reason of the
enforcement of the Guarantee shall derogate from any other remedy
available to the Company for recovery of the damages under any law.
50.4 Without derogating from any of the Company's rights under this Lease
Agreement and under any law, where the Lessee does not vacate the
demised premises as provided in sub clause 50.1 above, the Company
shall be entitled to repossess the demised premises provided that it
has given the Lessee written notice of at least 14 days prior to the
date of such repossession.
Where the Company has exercised its right to repossess the demised
premises as above, the following provisions shall apply in connection
therewith:
(a) Where the Company has exercised its right to repossess the demised
premises as above, the Company shall be entitled to change the locks of
the demised premises at the Lessee's expense and/or to prevent by any
other means that it sees fit, the entry of the Lessee into the demised
premises or the use thereof by the Lessee.
(b) Where the Company has exercised its right to repossess the demised
premises as above, the Company shall be entitled to evict all goods and
chattels found in the demised premises and to store them at any other
place, at the Lessee's expense. The Company shall be released from any
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liability toward the Lessee and/or any of its representatives for any
loss and/or damage that may be caused to such goods and chattels during
their removal and storage, provided that such removal and
transportation shall be carried out by professionals for such purpose
and the storage thereof shall be at an appropriate place.
(c) Where the Company has exercised its right to repossess the demised
premises as above, the Company shall have a right of lien over all the
Lessee's goods and chattels found at that time at the demised premises,
without this derogating from any other remedy to which the Company is
entitled under this Lease Agreement and under any law.
(d) Where the Company has exercised its right to repossess the demised
premises as above, the Company shall be entitled to let and/or sell
and/or transfer in any other manner the rights in the demised premises
to any third party whatsoever, and the Lessee shall have no claim
and/or demand and/or action against the Company in connection
therewith.
(e) Where the Company has exercised its right to repossess the demised
premises as above, this shall not constitute any defence to the lessee
and shall not constitute any waiver on the part of the company of any
of its rights under this Lease Agreement and/or the Management Contract
and under any law, and the Lessee shall not have any claim and/or
demand and/or action against the company in any way related the
exercise of its right to repossession of the demise premises under this
sub-clause.
(f) All costs and expenses incurred by the company in respect of the
repossession of the demise premises as above and in any way connected
thereto, shall be borne by the Lessee and shall be paid by the Lessee.
The company shall be entitled to deduct from the payment that it
receives by way of consideration for the sale of the goods and chattels
as specified in paragraph (b) above expenses that have been incurred in
respect of the repossession of the demise premises as above and in
connection therewith.
50.5 It is to be clear that the liabilities for which the Lessee is liable
under this clause shall continue to apply to the Lessee and the Lessee
shall be liable for the same also after the end of the letting under
this Lease Agreement notwithstanding that the Lease Agreement has been
rescinded by the company.
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ELEVENTH CHAPTER - MISCELLANEOUS
51. TRANSFER OF RIGHTS
51.1 The Lessee shall not be entitled to transfer and/or charge in any form
and manner the rights conferred on the Lessee under this Lease
Agreement, either wholly or partially, to any person and/or persons,
unless it has received the previous written consent of the company.
There are included in the foregoing any act in a body corporate that
constitutes the Lessee, whether a single act or a number of aggregate
acts, which as a result thereof, control is transferred either directly
or indirectly from the owners of such company on the date of the
signature of this Lease Agreement to a third party, shall be considered
as a transfer of rights subject to and requiring the previous written
consent of the company, which shall not be withheld other than on
reasonable grounds.
For the avoidance of doubt, it is to be clear that the Lessee shall be
entitled to issue its securities to the public for trading on Stock
Exchanges.
Without derogating from the generality of the foregoing, the Lessee
shall not be entitled to permit any other person any use of the demised
premises and/or any part thereof.
51.2 Without derogating from the generality of the foregoing, in sub-clause
51.1 above, it is agreed that the Lessee shall be entitled to transfer
its rights, wholly or partially, under this Lease Agreement and/or to
allow the use of the demise premises by a company in combined and/or
associated and/or subsidiary company of the Lessee (hereinafter called
"THE TRANSFEREE COMPANY"), provided that the transferee company signs
as an additional party to this Lease Agreement or a separate agreement
with the company, being in addition to the lessee and mutually
guaranteed between them, and also that the transferee company shall
furnish the company with guarantees for the due performance of the
Lease Agreement to the satisfaction of the company.
51.3 Notwithstanding the provisions of clause 51.1 above, it is hereby
agreed that the Lessee shall be entitled to permit the use of parts of
the demise premises (as distinct from the whole) to other persons as
sub-tenants, provided that the identity of such sub-tenants is approved
in advance and in writing by the company, who shall not refuse to
approve the same, other than on reasonable grounds, and subject to the
fact that in any case notwithstanding the permission for such use as
aforesaid, the lessee shall remain completely liable to the company for
the due performance of its obligations under this agreement in full and
on the due dates, both in relation to the areas which it is allowed to
sub-let in practice as above. The lessee and the sub-tenant shall be
mutual
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guarantors in relation to their obligations concerning the
demise premises. It is to be clear that the lessee shall not be
entitled to let parts of the demise premises to others as sub-tenants
for a period that exceeds the letting period under this agreement
and/or the additional letting period (if there is one) and/or the
second additional letting period (if there is one) and/or the third
additional letting period (if there is one) and/or the fourth
additional letting period (if there is one) and/or the fifth additional
letting period (if there is one), and no sub-letting made in
contravention of the foregoing shall be binding on the company.
51.4 On a letting by the lessee of parts of the demise premises as provided
in this sub-clause, the company shall be entitled, but not obliged to
enter a direct contractual relationship with the sub-tenant by way of
diminution of the lessee's relevant areas of the demise premises. Where
the company enters into such a direct contract with the sub-tenant as
above, the lessee and the sub-tenant shall no longer be mutual
guarantors of their obligations in relation to the demise premises and
the lessee shall not be liable to the company for the performance of
the obligations of the sub-tenant who has entered into a direct
contract with the company. Where the letting under this Lease Agreement
has come to an end for any reason whatsoever and on any date
whatsoever, any sub-tenancy shall completely terminate, without any
need for notice and/or any action to be taken by the company, provided
that the company shall have the right, at its discretion to offer the
said sub-tenant a direct contract with it in a new agreement for the
letting of areas in the park.
51.5 The company shall be entitled to transfer and/or charge its rights and
obligations under this Lease Agreement to another person, provided that
the rights of the lessee under this agreement shall not be thereby
prejudice.
For the avoidance of doubt, it is to be clear that nothing by virtue of
the transfer of the company's rights under this Lease Agreement to
another person as above shall derogate from any of the lessee's
obligations under this Lease Agreement and under the management
contract.
Notwithstanding the foregoing, it is agreed that the company shall not
be entitled to transfer its rights and obligations under this agreement
(as distinct from charging the same), until after the delivery date as
defined above.
51.6 At the end of 18 months after the delivery date, the company and/or the
management company, shall be entitled to transfer and/or charge the
rights and obligations of the management company under this Lease
Agreement to another company experienced in management, provided that
it meets all the standards concerning quality, character and expertise
for the provision of services as defined in the management contract,
because of which the management company was appointed at
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the outset and provided that the rights of the lessee under this Lease
Agreement shall not be prejudice. It is to be clear that nothing by
virtue of the transfer of the management company's rights under this
sub-clause to another person as aforesaid shall derogate from any of
the lessee's obligations under this agreement or under the management
contract.
52. GUARANTEE FOR THE DUE PERFORMANCE OF THE OBLIGATIONS OF THE PARTIES
It is made clear and agreed that Clal Real Estate Investments Ltd is a
guarantor for the due performance of the Company's obligations under
this Agreement and under the Management Contract in full and on the due
dates and that D.S.P.C. Inc. shall be guarantor for the due performance
of all the Lessee's obligations under this Lease Agreement and under
the Management Agreement in full and on the due dates, all as specified
in the GUARANTEES attached hereto as APPENDIX H. to this Lease
Agreement as an integral part thereof.
53. RIGHT OF FIRST REFUSAL.
53.1 The Company hereby grants the Lessee the right of first refusal to
purchase the building from the Company.
53.2 The following provisions shall apply for the purpose of the right of
first refusal that is hereby granted to the Lessee.
(a) In the event that the Company puts the building up for sale, and
reaches agreement with any third party, subject to the right of first
refusal hereby granted to the Lessee, for the sale of the building to
such third party, the Company shall offer the building, before
concluding a transaction with such third party, to the Lessee, on the
same terms that have been agreed with such third party. If the Lessee
is interested in purchasing the building from the Company on the said
terms, the Lessee shall give notice thereof to the Company within 30
days from the date on which the Company made an offer for the purchase
of the building as aforesaid. In the event that the Lessee notifies the
Company that it does not wish to purchase the building on the said
terms, or where the Lessee does not give any notice at all to the
Company and the above mentioned period of 30 days has elapsed, the
Lessee shall be deemed to have waived its rights to purchase the
building on the said terms, and in such a case the Company shall be
entitled to sell the building to any third party on terms that shall
not be better than those that were offered for the building to the
Lessee.
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(b) In the event that after a waiver by the Lessee of its right to
purchase the building on the terms as specified in paragraph (a) above
the Company reached agreement with any third party, subject to the
right of first refusal hereby given to the Lessee, for the purchase of
building of such third party on better terms than those that were
offered to the Lessee as referred to in paragraph (a) above, the
Lessee's right of first refusal shall be renewed, and the company shall
be bound to offer the building for a second time to the Lessee before
selling it to such third party, this being on identical terms to those
which had been agreed as above mentioned in this paragraph (b) with
such third party, and all the provisions in connection therewith as
specified in paragraph (a) above, shall apply.
54. COSTS OF THE LEASE AGREEMENT.
The costs of stamping this Lease Agreement shall be borne by the
parties in equal shares.
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55. TAXES FEES AND LEVIES.
All taxes, fees and levies whether governmental and/or municipal and/or
otherwise and other payments of any kind whatsoever, concerning the
conduct of the Lessee's business and/or the occupier of the demised
premises and/or that apply to the demised premises and/or which are to
apply to the demised premises during the letting period, shall be paid
by the Lessee including the Lessee's proportionate part of taxes, fees
and/or levies that apply to the common property (as such expression is
defined in the Management Contract, excluding the Park installations in
respect of which the Company collects a fee for the use thereof and
excluding installations in the possession of and used by the Company in
the Park). The proportionate share of the Lessee in such taxes fees and
levies that apply to the common property shall be determined in
accordance with the provisions of the Management Contract.
The Company shall bear the payments of Property Tax, in the event that
it applies to the demised premises and the payment of taxes (if any)
that are imposed by the Legislature on property owners and for any
payment levied on a property owner, including Betterment Levy and
ground rent to the Lands Administration.
Unless otherwise expressly provided in this Lease Agreement the Lessee
shall be released from any liability imposed by law on the Company.
56. VALUE ADDED TAX.
Any sum that the Lessee is bound to pay under this Agreement shall bear
Value Added tax at the legal rate payable on the date of the making of
the payment, and shall be paid by the Lessee on the date prescribed for
making of the payments in respect of which the tax is paid, by post
dated cheques the date for payment of which shall be 1 day prior to the
compulsory date for payment of VAT by the Company and against a tax
invoice.
57. JURISDICTION.
57.1 It is agreed by the parties that all disputes and differences that
arise between the parties in connection with this Lease Agreement,
without exception, concerning the signing thereof, interpretation and
the performance thereof or in connection with any matter or thing of
any kind arising from the Lease Agreement or in connection therewith,
but excluding any matter that has been referred for a decision of an
another party and/or person under this Lease Agreement shall be
referred for the decision of a single arbitrator who shall be appointed
by agreement between the parties and in the absence of agreement, by
the person who at that time is serving in the capacity of President of
the Israel Chamber of Advocates (hereinafter called "THE ARBITRATOR").
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57.2 The Arbitrator in his deliberations and in his decision shall be
relieved of the necessity of compliance with rules of procedure, the
Laws of Evidence and the Substantive Law, provided that he shall be
bound to give reasons for his ruling and shall be bound by the
provisions of this Lease Agreement.
57.3 The Arbitrators decision shall be completely final and shall be binding
on the two parties for all intents and purposes.
57.4 The Arbitrator can make restraining orders, mandatory orders and
interim orders, and he shall have all the powers prescribed for the
same by law.
57.5 The signature of the parties on this Lease Agreement is equivalent to
the signature of an Arbitration Agreement, and no further document
shall be required to initiate the arbitration between the parties.
58. PROHIBITION ON SETTING-OFF PAYMENTS
The parties agree that the amounts for which they are and/or for which
they will become liable to each other under this Lease Agreement and/or
the Management Contract and/or the under any law shall be capable of
set off, unless otherwise provided in this Lease Agreement, For the
avoidance of doubt, it is hereby made clear that in any case in which
the Lessee has a claim and/or demand and/or action against the Company,
the Lessee shall not be entitled to set off the amount of such claim
and/or demand against amounts that it is owes to the Company, but the
Lessee shall be entitled to issue proceedings in Court against the
Company for such amounts.
59. WAIVERS AND VARIATIONS IN THE AGREEMENT.
59.1 Any variation in the terms of this Agreement shall only be valid if
made in writing and it is signed by the two parties.
59.2 Any waiver of rights by one of the parties under this Lease Agreement
shall only be made in writing and signed by who ever is empowered to
bind such party. No delay in the exercise of rights under this Lease
Agreement shall be deemed to be a waiver.
60. SERVICE OF NOTICES.
60.1 Any notice to be given by the parties to each other shall be deemed to
have been given at the expiration of 48 hours from the time that it was
despatched by registered post from a post office in Israel to the
addresses of the parties as specified in this Lease Agreement.
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In addition to the foregoing, the parties shall be entitled to send
notices to each other by messenger and in such a case the date of
delivery of the notice shall be deemed to be the date that appears on
the delivery note signed by the messenger.
With effect from the delivery date service of a notice at the demised
premises on the Lessee or an employee of the Lessee, or the sticking of
the notice on the door of the demised premises shall be deemed to be
lawful service on the Lessee.
60.2 The addresses of the parties under this Lease Agreement shall be as
follows:
THE COMPANY: The address of the Company for the purposes of this Lease
Agreement shall be as specified as in the preamble to this Agreement.
THE LESSEE: The Lessee's address for the purposes of this Lease
Agreement shall be as specified in the preamble to this Lease
Agreement, with effect from the delivery date, the address of the
Lessee for the purposes of this Lease Agreement shall be the demised
premises.
60.3 The addresses of the parties under this Lease Agreement shall be deemed
to be their addresses for the purpose of the service of legal process.
AND IN WITNESS WHEREOF THE PARTIES HAVE SIGNED
/s/ Daniel Lavan /s/ David Aber
--------------------- -----------------------
The Lessee, The Company,
Azarei Mallal Industries Ltd. DSPC Technologies Ltd.
CERTIFICATE.
I the undersigned Adv._________, hereby certify that this Lease
Agreement and the Appendices thereto was signed by __________ and by
___________ who are authorised to sign on behalf of the Lessee Company,
and that the signatures of the above named together with the Company
Seal is binding on the Lessee for all intents and purposes. Dated this
_____ day of ________ 1999
---------------------------
Signature
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I the undersigned Adv._________, hereby certify that this Lease
Agreement and the Appendices thereto was signed by __________ and by
___________ who are authorised to sign on behalf of the Company, and
that the signatures of the above named together with the Company Seal
is binding on the Lessee for all intents and purposes. Dated this _____
day of ________ 1999
---------------------------
Signature
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APPENDIX E.
FIXING OF SIGN BOARDS.
1. The Company declares that it has no objection in principle to the
Lessee fixing its sign boards in the building (hereinafter called "THE
LESSEE'S SIGNS") provided that the affixing of the Lessee's signs as
above shall be carried out in co-ordination with the Company and with
its prior written consent.
2. Without derogating from the provisions of sub paragraph above
concerning the Lessee's signs, the Lessee shall not fix signs of any
kind whatsoever in any place whatsoever in the Park other than in the
building as above, unless the Company has given it permission to do so
previously in writing.
3. It is agreed and made clear that in the case of the fixing of an
illuminated sign by the Lessee, the Lessee shall be responsible for
installing the electrical connection to the sign and the Lessee shall
bear the costs of the supply of electricity before the sign
4. For the avoidance of doubt it is hereby made clear that it is the
Lessee's liability and responsibility to ensure that a license is
obtained for the signs from the competent authority for such purpose
under any law and pay any fee and/or charge that is made under any law
by the competent authorities in connection with the Lessee's signs. In
any event the Lessee shall not affix any signs whatsoever in the
building before receiving a legal license to affix the same as
aforesaid.
The Company shall be entitled at the Lessee's expense, to remove any
sign that has been affixed by the Lessee in breach of the provisions of
this Clause
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APPENDIX "F"
UNCONDITIONAL AUTONOMOUS BANK GUARANTEE
Date:____________
TO: AZOREI MALLAL INDUSTRIES LTD
DEAR SIR,
Re: GUARANTEE NO TO AGREEMENT WITH .
We hereby guarantee to you that we will pay any amount that you request
us to pay up to a total sum of________New Shekels (NIS_____________)
(hereinafter called "THE GUARANTEE FUND"), plus indexation linkage
differentials as specified below, that is or may become due to you from
______________________________ (hereinafter called "THE DEBTOR").
We shall from time to time pay you, within 7 (seven) days from the date
of the receipt of your initial written demand, any sum that is
indicated in your said demand out of the Guarantee Fund plus indexation
linkage differentials which shall be calculated in manner specified
below, without you being obliged to substantiate your demand in any
form or manner whatsoever and/or to first require that the said sum be
paid by the Debtor and provided that the total amount that we are to
pay you under this our guarantee shall not exceed the amount of the
Guarantee Fund plus indexation linkage differentials.
For the purposes of this Guarantee "Index" means the Consumer Prices
Index, including fruit and vegetables, that is published by the Central
Bureau of Statictics. In the event that the basis of the index is
changed or in the event that the method of calculating and arriving at
the index is changed, or in the event that it is published by another
body instead of the said bureau, the calculation of a rise in the index
for the purposes of this paragraph shall be made having regard to the
said changes.
In any case in which it becomes evident that the last index published
prior to the making of payment under this Guarantee (hereinafter called
"the new index") is higher than the index for the month of _____ 1998,
that was published on the ____ day of _____ by the net rate of _____
(hereinafter called "the base index") there shall be added to the
Guarantee fund designated for payment a sum that is equal to the
difference between the new index and the base index divided by the base
index and multiplied by the Guarantee Fund (hereinafter called "the
linkage differential").
It is to be clear that in the event of the new index being equal to
the base index or lower than the base index, the said linkage
differentials shall not be added to the Guarantee Fund.
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This Guarantee by us shall be reduced from time to time, by the level
of the amount that we are required to pay - excluding linkage
differentials, which has been deducted from the total amount of the
Guarantee Fund and provided that the total amount of the demand -
excluding linkage differentials - does not exceed the total sum of the
Guarantee Fund This Guarantee is not conditional of the validity of the
debtors liability to yourselves.
This Guarantee shall remain in force until the ____ day of ____
inclusive. Any demand made under this Guarantee must be in writing
and arrive by _____day of _____ at this address:__________________
A demand arriving after the said date shall not be complied with.
Yours faithfully,
---------------
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APPENDIX G.
SERVICES IN THE PARK.
Azorim Park - the Business and Employment Center for offices, high tech
industry and uses ancillary thereto, that the Company is erecting, will
contain, for the purpose of realising the objectives that are defined
above, the services and facilities as follows:
A. Transport services from Jabotinsky Street corner with Hayitsira
Street and to the entrance to the Park during morning hours and in the
afternoon, until a regular public transport service is established in
the Park area.
B. A support centre that will provide and answer to the needs of the
Park Tenants in accordance with the usual criteria for the same.
D. The Company will act in establishing a branch of the post office in
the Park.
E. The Company shall act in order to establish automatic banking
services in the Park.
F. The unpaved section, between the Geha Road and Hayitsira Street, is
to be completed.
MANAGEMENT SERVICES IN THE PARK
A. Cleaning the public areas in the Park and the boundaries of the
Plot up to the building.
B. The removal of refuse as above.
C. Guards.
D. Information.
E. Maintenance of the general systems in the Park buildings - ongoing/
system service contracts.
F. Gardening around the perimeter of the buildings.
G. Operation of the car parks.
H. Water in the Park and garden areas.
I. External lighting in the Park area.
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J. Building insurance for the buildings and the systems.
K. Collection of service charges for maintenance.
L. Contact with the local authorities.
M. Public electricity supply.
N. Telephones.
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APPENDIX H
GUARANTEES.
GUARANTEE OF THE LESSEE'S OBLIGATIONS.
We the undersigned D.S.P.C. Inc. hereby confirm that we have read the
provisions of the Lease Agreement and its Appendices, and we hereby
give our absolute and unreserved guarantee for the due performance in
full and on the due dates of the obligations of D.S.P.C. TECHNOLOGIES
LTD ("The Lessee" under the Lease Agreement), without exception in
accordance with the above mentioned Lease Agreement, including any
amendments made thereto from time to time. We confirm and undertake
that this guarantee by us shall also remain in full force and effect if
AZOREI MALLAL INDUSTRIES LTD. transfers its debts and/or obligations to
another body in accordance with the provisions of the Lease Agreement.
For the avoidance of doubt in the event of disputes between ourselves
and AZOREI MALLAL INDUSTRIES LTD ("the Company" under the Lease
Agreement) in connection with this guarantee by us, the arbitration
clause that is prescribed in the Lease Agreement, shall be applicable.
D.S.P.C. Inc.
---------------------------
GUARANTEE FOR THE PERFORMANCE OF THE COMPANY'S OBLIGATIONS.
We the undersigned Clal Real Estate Investments Ltd hereby confirm that
we have read the provisions of the Lease Agreement and its Appendices,
and we hereby give our absolute and unreserved guarantee for the due
performance in full and on the due dates of all the obligations of
AZOREI MALLAL INDUSTRIES LTD ("the Company" under the Lease Agreement),
without exception under the above mentioned Lease Agreement, including
any amendments made to it from time to time, all being until the date
of delivery of possession of the demised premises under this Lease
Agreement. From the date of the delivery of possession of the demised
premises, our Guarantee shall be limited to the amount in NIS that is
equivalent to the rent (including parking spaces) for 3 months. We
confirm and undertake that this Guarantee by us will also remain in
full force and effect if AZOREI MALLAL INDUSTRIES LTD, transfers its
debts and/or obligations to another body in accordance with the
provisions of the Lease Agreement. For the avoidance of doubt, in the
case of disputes between ourselves and D.S.P.C TECHNOLOGIES LTD ("The
Lessee" under the Lease Agreement) concerning this Guarantee by us, the
provisions of the arbitration clause that is prescribed in the Lease
Agreement, shall be applicable.
CLAL REAL ESTATE INVESTMENTS LTD.
----------------------------------
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APPENDIX J.
"MAIN FRAME TIMETABLE FOR D.S.P.C. SPECIFICATION.
By 1st August 1999 - Completion of plans and submission for permit.
August 1999 - Commencement of excavation and foundation works.
October 1999 - Commencement of main frame works of the building.
August 2000 - Completion of main frame works of the building.
December 2000 - Completion of internal works in the building.
January 2001 - Delivery.
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Appendix L.
Moshe Spector
Municipal Director General.
Date: 28.4.99
Fax:5161842
For the Attention of Mr.Dan Dori
To Mr Dan Dori
Managing Director Azorim Properties Ltd.
Re: AZORIM PARK - MUNICIPAL PROPERTY TAX - CLARIFICATION.
-----------------------------------------------------
1. The Azorim Park area that is being erected in the Kiriat Arieh
Industrial Zone, Petach Tikva is considered as Area B
2. All types of industry that are established within the Park will receive
in addition to equivalent of 20% discount for 3 years, other than
properties/businesses that are not classified as "industrial" under the
Taxes Order (Restaurants/Insurance etc.
3. The offices of an industrial plant a property of an area of more than
500 metres, will also be charged the lower tariff (industrial), these
tariffs are for example:
(a). From 86 metres to 499 metres - offices are charged approx.
NIS 153 per metre per annum
(b) From 501 metres and upwards .............................NIS 106
per metre per annum
All the above apart from those classified, are an expression of Petach
Tikva Municipality's good will.
Moshe Spector
-------------
Copy to: Mr.Zvi Amitai - Director of the Assessment Division - Petach
Tikva Municipality.
72
<PAGE>
AREA PLAN - SCALE 1:1000
Internal Ring Road
AZORIM PARK - BUILDING NO.2
Rappaport Architects
73
<PAGE>
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
COMMERCE ONE, INC.
(Pursuant to Sections 242 and 245 of the
General Corporation Law of the State of Delaware)
Mark B. Hoffman and Robert M. Tarkoff each hereby certifies:
(1) They are the President and Secretary, respectively, of
Commerce One, Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware (the "General Corporation Law");
(2) The original Certificate of Incorporation of this corporation,
originally filed on March 24, 1999, is hereby amended and restated in its
entirety to read as follows:
<TABLE>
<S> <C>
FIRST: The name of this corporation is Commerce One, Inc. (the "Corporation").
SECOND: The address of the Corporation's registered office in the State of Delaware is
1209 Orange Street, Wilmington, County of New Castle, Delaware 19801.
The name of its registered agent at such address is Corporation Service
Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or activity for
which corporations may be organized under the General Corporation Law of
Delaware.
FOURTH: The Corporation is authorized to issue two classes of stock to be designated
respectively Common Stock and Preferred Stock. The total number of shares
of all classes of stock which the Corporation has authority to issue is Two
Hundred Sixty Million (260,000,000), consisting of Two Hundred Fifty
Million (250,000,000) shares of Common Stock, $0.0001 par value (the
"Common Stock"), and Ten Million (10,000,000) shares of Preferred Stock,
$0.0001 par value (the "Preferred Stock").
The Preferred Stock may be issued from time to time in one or more series.
The Board of Directors is hereby authorized subject to limitations prescribed
by law, to fix by resolution or resolutions the designations, powers,
preferences and rights, and the qualifications, limitations or restrictions
thereof, of each such series of Preferred Stock, included without limitation
authority to fix by resolution or resolutions, the dividend rights, dividend rate,
conversion rights, voting rights, rights and terms of redemption (including
sinking fund provisions), redemption price or prices, and liquidation
<PAGE>
preferences of any wholly unissued series of Preferred Stock, and the number
of shares constituting any such series and the designation thereof, or any of the
foregoing.
The Board of Directors is further authorized to increase (but not above the
total number of authorized shares of the class) or decrease (but not below the
number of shares of any such series then outstanding) the number of shares of
any series, the number of which was fixed by it, subsequent to the issue of
shares of such series then outstanding, subject to the powers, preferences and
rights, and the qualifications, limitations and restrictions thereof stated in the
resolution of the Board of Directors originally fixing the number of shares of
such series. If the number of shares of any series is so decreased, then the
shares constituting such decrease shall resume the status which they have prior
to the adoption of the resolution originally fixing the number of shares of such
series.
FIFTH: The Corporation is to have perpetual existence.
SIXTH: The election of directors need not be by written ballot unless the Bylaws of
the Corporation shall so provide.
SEVENTH: The number of directors which constitute the whole Board of Directors of the
Corporation shall be designated by the Bylaws of the Corporation.
EIGHTH: In furtherance and not in limitation of the powers conferred by the laws of the
State of Delaware, the Board of Directors is expressly authorized to adopt,
alter, amend or repeal the Bylaws of the Corporation.
NINTH: To the fullest extent permitted by the Delaware General Corporation Law as
the same exists or may hereafter be amended, no director of the Corporation
shall be personally liable to the Corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director.
The Corporation may indemnify to the fullest extent permitted by law any
person made or threatened to be made a party to an action or proceeding,
whether criminal civil, administrative or investigative, by reason of the fact
that he, his testator or intestate is or was a director, officer or employee of the
Corporation or any predecessor of the Corporation or serves or served at any other
enterprise as a director, officer or employee at the request of the Corporation or
any predecessor to the Corporation.
Neither any amendment nor repeal of this Article, nor the adoption of any
provision of this Amended and Restated Certificate of Incorporation
inconsistent with this Article, shall eliminate or reduce the effect of this
Article in respect of any matter occurring, or any cause of action, suit or claim
-2-
<PAGE>
that, but for this Article, would accrue or arise, prior to
such amendment, repeal or adoption of an inconsistent provision.
TENTH At the election of directors of the Corporation, each holder of
stock of any class or series shall be entitled to one vote for
each share held. No stockholder will be permitted to cumulate
votes at any election of directors.
The number of directors which constitute the whole Board of
Directors of the Corporation shall be fixed exclusively by one
or more resolution adopted from time to time by the Board of
Directors. The Board of Directors shall be divided into three
classes designated as Class I, Class II, and Class III,
respectively. Directors shall be assigned to each class in
accordance with a resolution or resolutions adopted by the
Board of Directors. At the first annual meeting of stockholders
following the date hereof, the term of office of the Class I
directors shall expire and Class I directors shall be elected
for a full term of three years. At the second annual meeting of
stockholders following the date hereof, the term of office of
the Class II directors shall expire and Class II directors
shall be elected for a full term of three years. At the third
annual meeting of stockholders following the date hereof, the
term of office of the Class III directors shall expire and
Class III directors shall be elected for a full term of three
years. At each succeeding annual meeting of stockholders,
directors shall be elected for a full term of three years to
succeed the directors of the class whose terms expire at such
annual meeting.
Vacancies created by newly created directorships, created in
accordance with the Bylaws of this Corporation, may be filled
by the vote of a majority, although less than a quorum, of the
directors then in office, or by a sole remaining director.
ELEVENTH: Meetings of stockholders may be held within or without the
State of Delaware, as the Bylaws may provided. The books of the
Corporation may be kept (subject to any provision contained in
the laws of the State of Delaware) outside of the State of
Delaware at such place or places as may be designated from time
to time by the Board of Directors or in the Bylaws of the
Corporation.
The stockholders of the Corporation may not take any action by
written consent in lieu of a meeting, and must take any actions
at a duly called annual or special meeting of stockholders and
the power of stockholders to consent in writing without a
meeting is specifically denied.
TWELFTH: Advance notice of new business and stockholder nominations for
the election of directors shall be given in the manner and to
the extent provided in the Bylaws of the Corporation.
-3-
<PAGE>
THIRTEENTH Notwithstanding any other provisions of this Restated
Certificate of Incorporation or any provision of law which might
otherwise permit a lesser vote or no vote, but in addition to
any affirmative vote of the holders of the capital stock
required by law or this Restated Certificate of Incorporation,
the affirmative vote of the holders of at least two-thirds
(2/3) of the combined voting power of all of the
then-outstanding shares of the Corporation entitled to vote
shall be required to alter, amend or repeal Articles NINTH,
TENTH, ELEVENTH or TWELFTH hereof, or this Article THIRTEENTH,
or any provision thereof or hereof, unless such amendment shall
be approved by a majority of the directors of the Corporation.
FOURTEENTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Amended and Restated
Certificate of Incorporation, in the manner now or hereafter
prescribed by the laws of the State of Delaware, and all rights
conferred herein are granted subject to this reservation.
</TABLE>
(3) This Amended and Restated Certificate of Incorporation has been
duly adopted by the Board of Directors of this Corporation in
accordance with Sections 242 and 245 of the General Corporation Law.
(4) This Amended and Restated Certificate of Incorporation has been
duly approved, in accordance with Section 242 of the General Corporation Law,
by vote of the holders of a majority of the outstanding stock entitled to
vote thereon.
IN WITNESS WHEREOF, the undersigned have executed this Amended and
Restated Certificate of Incorporation on this 7th day of July, 1999.
/s/ Mark Hoffman
-----------------
Mark B. Hoffman
President
/s/ Robert M. Tarkoff
- ----------------------
Robert M. Tarkoff
Secretary
-4-
<PAGE>
EXHIBIT 10.40
MANAGEMENT AGREEMENT
Made and Signed in Tel Aviv on May 6, 1999
<TABLE>
<S> <C>
BETWEEN: MALAL INDUSTRIES AREAS LTD. OR ANYONE ON ITS BEHALF
of 6 Koifman St., Beit-Gibor, Tel Aviv
(Hereinafter: the "COMPANY")
OF THE ONE PART
AND BETWEEN: DSPC TECHNOLOGIES LTD.
of 11 Ben Gurion St., Givat Shmuel
(Hereinafter: the "LESSEE")
OF THE OTHER PART
WHEREAS pursuant to Decision no. 717 of the Israel Lands
Council and in accordance with the Development
Agreement the Company constructs the Park, including
the Building, on the Land, as these terms are defined
in the Tenancy Agreement;
AND WHEREAS the Lessee has rented from the Company, pursuant to
the provisions set forth in the Tenancy Agreement of 6.5.99
(heretofore and hereinafter: the "TENANCY AGREEMENT"), the
Leasehold as defined in the Tenancy Agreement;
AND WHEREAS the Lessee agrees that the management,
maintenance and operation of the Park and of the
common property, including all the parts thereof,
shall be performed exclusively by the Company and/or
anyone on its behalf and it undertakes and agrees to
act in accordance with the terms of this Agreement
and to participate in the management costs as
provided herein;
AND WHEREAS at the Lessee's request and on the basis of
the Lessee's representations and obligations the
Company has agreed to leave the management of the
Building and the performance of all the works in
connection with the management of the Building in the
hands of the Lessee, the whole subject to compliance
with all the provisions of this Agreement;
AND WHEREAS this Agreement is intended to determine the mutual
obligations of the parties in connection with
the management and performance of the services in the
Building and in the Park;
</TABLE>
NOW THEREFORE IT WAS AGREED, DECLARED AND STIPULATED BY THE PARTIES AS
FOLLOWS:
<PAGE>
1. PREAMBLE
1.1 The preamble to this Agreement including the definitions and
declarations contained therein form an integral part hereof
and are binding on the parties in all respects.
1.2 The section numbers in this Agreement and their headings are
intended only for convenience, they do not form part of the
Agreement and no use should be made of them in construing this
Agreement.
1.3 The terms in this Agreement shall have the meanings accorded
to them in the Tenancy Agreement unless otherwise specifically
provided.
1.4 All the provisions of this Agreement are intended to
supplement the provisions of the Tenancy Agreement and they do
not derogate howsoever from the provisions of the Tenancy
Agreement. In any event of inconsistency between the
provisions of this Agreement and those of the Tenancy
Agreement, the provisions of the Tenancy Agreement shall
prevail and be binding on the parties.
2. DEFINITIONS
If no other intention appears from the contents hereof, the following
terms shall have the following meanings:
2.1 THE "OTHER PARK BUILDINGS" - structures in the Park which are
and/or will be built pursuant to the city development plan
which applies to the Land, except for building no. 2 in the
Park which is defined in the Tenancy Agreement as the
"Building".
2.2 THE "COMMON PROPERTY"
Any part of the Park which the Company has designated and/or
will designate, from time to time and at its sole and absolute
discretion and subject to the provisions of the INCIDENTAL
SERVICES AT THE PARK appendix which is attached to the Tenancy
Agreement as APPENDIX G, for the common use by any or all of
the residents of the Park including, without derogating from
the generality of the above:
(1) All the parts of the Park and the Other Park
Buildings including shelters, protected spaces,
machine rooms, electricity rooms, roofs, exterior
walls, the foundation, stairway halls, passages,
entrances, elevators, refuse rooms, electricity
rooms, yards, gardens, parking lots, facilities,
paths, ramps and sidewalks as well as the other areas
of the Park, except for the Building, and all the
areas of the Park, except for the parts which were
let or sold and/or which are intended for sale or
letting in the future and except for such parts of
the Park as the Company shall, at its discretion,
exclude from the Common Property.
<PAGE>
(2) It is made clear that the Common Property shall not
include parking spaces in the parking lots of the
Building and of the Park which were let to residents
of the Building or of the Park and in respect of
which there are collected subscription charges.
2.3 THE "SERVICES" (whether to be performed hereunder by the
Company or by the Lessee in respect of the Building)
Provision of services of management, operation, repair,
maintenance, cleaning, removal of refuse, insurance,
inspection, lighting, electricity, telephone and gardening to
the Building and to the Other Park Buildings and to the
parking lots of the Park and to the Common Property as defined
above, including with respect to piping, water installations
and facilities and areas which serve and/or are used by the
Building and/or the Park and/or the Other Park Buildings
and/or performance of actions in the Building and/or supplies
which are used, or which are intended to be used by or to
serve the Leasehold or the Building or other areas of the
Park, administration of the collection of the maintenance
charges and maintaining contact with the local authorities in
connection with the operation of the aforesaid Services.
Without derogating from the generality of the above, the
Company alone shall be entitled, at its discretion and subject
to the provisions of the INCIDENTAL SERVICES AT THE PARK
appendix which is attached to the Tenancy Agreement as
APPENDIX G, to manage, perform, initiate and provide or cease
to provide or perform any and all of the aforesaid Services
and also any other service at its option.
Considering the unique nature and complexity of the Park, the
Services may also include special services which are not
common in ordinary buildings such as: payment of charges,
taxes and levies which apply and/or will apply to the Common
Property, advertising, signposting, public relations,
organizing of events and the like, the whole at the discretion
of the Company.
2.4 THE "EFFECTIVE DATE"
The date on which the Company and the Lessee shall begin to
manage and perform the Services, as provided in Section 7.1
below.
3. PERFORMANCE OF THE SERVICES IN THE BUILDING
3.1 The Lessee shall provide the Services, as defined in Section
2.3 above, to the Building alone by itself and/or through
anyone on its behalf as of the Delivery Date (as this term is
defined in the Tenancy Agreement).
3.2 It is made clear that the operation of the Services at the
main parking lot of the Park is not included in the provisions
of this Section 3.
<PAGE>
3.3 The Lessee shall solely provide at its expense all the
Services as defined in Section 2 above to the extent same
pertain to the Building (hereinafter: the "LESSEE'S SERVICES
TO THE BUILDING"). It is made clear that the Lessee shall owe
the Company a duty of care and it undertakes to perform the
provision of the Lessee's Services to the Building only
through skilled craftsmen at the highest level while
maintaining the Building undamaged, in proper condition and
clean and ensuring the current and proper functioning of all
of its components, assemblies and systems, and the
responsibility in connection thereto shall be the Lessee's.
Included in the above, the Lessee undertakes to observe the
instructions of the manufacturers of the Building systems
and/or those of the providers of services to the Building and
also to comply with the maintenance instructions to be given
by the Company from time to time.
3.4 The Lessee shall be entitled to provide to the Building, as
part of the Lessee's Services to the Building, any service
which is not mentioned in this Agreement and/or to cease
providing to the Building any service it does not want, so
long as such action shall not prejudice the undertaking of the
Lessee as toward the Company as set forth in subsection 3.3
above. Notwithstanding the above, where the Company believes
that such provision of an additional service, or termination
of any service to the Building might harm the Leasehold and/or
the Building systems and/or the rights of the Company in the
Building and/or the Build's exterior appearance and/or the
Park, it shall be entitled to instruct the Lessee to cease
providing the additional service or to renew the provision of
the service which has been terminated, as relevant, and the
Lessee undertakes to comply with such instructions of the
Company.
3.5 It is agreed that to the extent that the provision of the
Lessee's Services to the Building requires making alterations
and/or any additions to the Leasehold and/or to any of its
components, parts or systems, or performing any works in
systems which serve also other residents in the Park, such
alterations and/or additions and/or works shall not be
performed without the prior written approval of the Company.
The Company shall be entitled to condition the granting of
such approval on such conditions as it shall deem appropriate
and to give the Lessee any instructions in connection with the
performance of such alterations and/or additions and/or works,
and the Lessee undertakes to strictly observe compliance with
such instructions in full.
3.6 The Lessee undertakes to allow the Company to enter into the
Leasehold as may be required for carrying out repairs and
providing Services in connection with the systems and
components located in the Leasehold and which serve any or all
of the other residents of the Park, so long as the Company has
coordinated this in advance with the Lessee. Notwithstanding
the above, it is made clear that in case of emergency the
Company shall be entitled to enter into the Leasehold even
without prior coordination with the Lessee.
<PAGE>
3.7 To remove any doubt it is made clear that in any event, the
provision of the Lessee's Services to the Building pursuant to
this Section shall be restricted to providing services with
respect to the Building alone. The provision of services to
other areas of the Park which are outside the Building shall
only be made, in any event, by the Company and/or anyone on
its behalf and the Lessee is prohibited from performing any
works and/or providing any services in connection with such
areas of the Park which are outside the Building.
3.8 It is made clear that nothing provided in this Agreement
derogates from the right of the Company to charge callers at
the Park separately for use of parking spaces at the various
parking lots, as distinct from the parking spaces let to the
Lessee under the Tenancy Agreement.
3.9 The Company shall charge, separately and without any
connection to the payment of the management charges hereunder,
such amount as it shall set for the use of the recreation
facilities in the Park (to the extent same may be built), such
as fitness gym, swimming pool, sports fields, and the like.
4. TERMINATION OF THE LESSEE'S SERVICES TO THE BUILDING -
AT THE LESSEE'S REQUEST
Without it being deemed as breach of the Lessee's obligations
hereunder, the Lessee shall be entitled to notify the Company of its
wish to terminate its operation of the Services in the Building, as
same are defined in Section 2.3 above, by giving the Company written
notice which shall be delivered to the Company 90 days prior to the
requested date of termination of the operation of the Services by the
Lessee, as aforesaid. Where the Lessee has given notice as provided
above in this subsection, 90 days of the date of such notice the
Company shall begin to the manage and perform Services to the Building
as well, so long that at the time of giving such notice the parties
shall jointly and mutually agree on the terms of the provision of the
Services to the Building by the Company including, and without
derogating, as regards the extent of the Services and the management
charges. It is agreed that in any instance of inconsistency between the
provisions of this subsection and the other provisions of the
Management Agreement, the provisions of this Section shall prevail.
5. MANAGEMENT OF THE SERVICES IN THE PARK AND IN THE OTHER PARK BUILDINGS
5.1 The Company shall operate the Services outside the Building,
but not in the area of the Lessee's parking spaces at the main
parking lot of the Park, contemporaneously with the operation
by the Lessee of the Services to the Building.
<PAGE>
5.2 a. The Company assumes the exclusive management and
performance of the Services in the Park during the
term of the Agreement as provided in Section 7 below,
and the Lessee agrees to this and delivers to the
Company the exclusive management and performance of
the Services during the term of the Agreement and
undertakes not to perform the Services by itself or
through others.
Two. The Company shall be entitled, from time to time and
at its discretion and subject to the provisions of
the INCIDENTAL SERVICES AT THE PARK appendix which is
attached to the Tenancy Agreement as APPENDIX G, to
determine the extent of the Services, their kind,
nature and the part thereof which is provided to the
Park and/or to the Other Park Buildings and/or to
certain parts thereof, if at all, the time and manner
of their provision and the duration thereof.
Three. The management and performance of the Services
shall be carried out by the Company itself and/or
through others and/or partly by itself and partly
through others in a reasonable and customary fashion,
the whole at the discretion of the Company. Without
derogating from the above, it is hereby agreed that
the Company shall be entitled to enter from time to
time into agreements with any other entity for the
provision of maintenance services to systems,
facilities and areas in the Park, the whole according
to the financial profitability to the Company, on the
one hand, and ensuring the quality of the service, on
the other.
5.3 The Lessee agrees in advance that the Company shall have the
right to establish from time to time procedures and directions
in connection with the management and performance of the
Services at it shall deem appropriate, and to modify same from
time to time. The Lessee undertakes to comply with such
directions so long as same are not explicitly inconsistent
with the provisions of this Agreement and/or the provisions of
the Tenancy Agreement and that same do not prejudice the
Lessee's reasonable use of the Leasehold.
5.4 For the purpose of the management and performance of the
Services as set forth herein, the Company shall be entitled to
keep an office at the Park and employ a system of technical,
professional, administrative and other employees to perform
the works involved in the management and performance of the
Services and it shall also be entitled to manage and perform
any and all of the Services through contractors,
subcontractors or in any other way it may decide, including
employment in full or part time positions, pursuant to a
special contract or on such terms of service providers as it
shall think fit, as may be needed, so long that the quality
and level of the Services shall not be prejudiced.
<PAGE>
5.5 The Lessee hereby undertakes:
One. That it and those acting in its name and on its
behalf shall cooperate with the Company and assist it
whenever such cooperation or assistance is required,
the whole in order to allow the regular and good
management and performance of the Services.
Two. To allow the Company and those acting in its name to
enter into the Leasehold for the purpose of carrying
out the actions pertaining to the management and
performance of the Services, whether such works be
performed for the Lessee or for a resident of the
Park, or in order to carry out repairs which may be
needed in other areas of the Park and, INTER ALIA, to
open walls, floors, ceilings and other parts, to
replace and repair plumbing and pipes and to connect
to them and to carry out any action which the Company
may deem as necessary in order to fulfill its
obligations hereunder, and the Lessee shall have no
claim against the Company as regards any disturbance
which may be caused to it as a result thereof. In any
instance of such action, the Company shall coordinate
the performance thereof with the Lessee and shall
strive to minimize the disturbance to the Lessee and
to see that the previous condition of the Leasehold
be restored as soon as practicable.
Three. To notify the Company as soon as practicable of any
malfunctioning or fault which necessitates repair the
taking of any other action on the part of the
Company.
Four. The Lessee declares that it is aware that the Company
shall be entitled - but not obligated to register
this Agreement, when it becomes possible to do so, in
the Land Registration Office, whether by
incorporating same under the Park's condominium code
or by registering a notice concerning the existence
of this Agreement and its binding effect or
otherwise, the whole at the absolute discretion of
the Company.
6. MANAGEMENT COSTS AND PERFORMANCE OF THE SERVICES
6.1 The Lessee shall pay the Company a fixed monthly charge at the
rate of US$0.5 (half a US dollar) per month for each square
meter of the area of the Leasehold (as shall be at the time of
payment), with duly adding VAT at the applicable rate at the
time of payment, for the performance of the Services, as
defined in Section 2.3 above, outside the Building by the
Company (hereinafter: the "SERVICES CHARGES"). The Services
Charges shall be calculated and paid in accordance with the
provisions of the Tenancy Agreement which apply to the
calculation and payment of the rent and on the dates set
according to the Tenancy Agreement for payment of the rent. It
is made clear that the parking
<PAGE>
spaces of the Lessee which are at the main parking lot of
the Park and the parking spaces underneath the Building shall
not be included in the area of the Leasehold for the
purpose of calculating the management charges pursuant to
this subsection. It is agreed that a condition for payment
by the Lessee of the Services Charges to the Company shall
be the completion of the development for the Building as
set forth in Appendix I of the Tenancy Agreement. Were such
development to be completed, the obligation to pay shall
apply. To the extent that the development has not been
completed on or before the Effective Date, the obligation
to pay the Services Charges shall automatically and
immediately apply upon its completion at a later date.
6.2 In addition to the Services Charges the Lessee shall pay
US$0.25 (a quarter of a US dollar) per month for each square
meter of the area of the Leasehold (excluding parking spaces)
which shall serve for the purposes of an amortization fund.
The amounts paid by the Lessee pursuant to this subsection
shall be used for replacing such systems in the Building which
the need to replace same stems from wear and tear due to
reasonable use.
6.3 The Lessee shall pay the Company value added tax in respect of
each payment it is obligated hereunder to effect, together
with such payment, at such rate as shall be applicable at the
time of actual payment, against a tax receipt duly issued by
the Company.
6.4 The Lessee declares that it is aware that residents of the
Park shall bear, in respect of the Services, all the costs of
the performance and management of same with adding management
charges at the rate of 15% on top of the costs.
6.5 It is agreed and made clear that to the extent that the Lessee
will hold areas in the Park in the Building together with
other resident/s, the arrangement provided in Section 6.4
above shall apply to said Building.
7. THE TERM OF THE AGREEMENT
7.1 The Company, with respect to the Park and the Lessee, with
respect to the Leasehold and the Building shall begin to
manage and perform the Services, whether by themselves or
through anyone on their behalf, as of the Delivery Date as
defined in the Tenancy Agreement (heretofore and hereinafter:
the "EFFECTIVE DATE"), however that in no event shall the
Company be obligated to begin to manage and perform the
Services before the date on which the Common Property of the
Park has been delivered to its possession by the contractor/s
performing the construction work of the Park, the whole as the
context requires.
As of the Effective Date the whole of the Lessee's obligations
hereunder shall apply to it without any exception.
<PAGE>
7.2 Subject to the provisions of the INCIDENTAL SERVICES AT THE
PARK appendix which is attached to the Tenancy Agreement
as APPENDIX G, the Company shall be entitled - but not
obligated - to terminate the provision of the Services
and/or any of them and/or to terminate the management and
performance of the Services and/or any of them by giving
written notice to this effect to all the residents of the
Park, as relevant, at least 3 months in advance and in
writing. Should the Company give notice of the termination of
the management and performance of all the Services, the
Company shall determine the principles and means to be taken
in order to continue the management of the Park.
7.3 Without derogating from the provisions of Section 7.2 above,
the lessees and/or purchasers of 75% of all the areas of the
Park which are intended for letting and/or sale shall be
entitled, by an instrument signed by them, to inform the
Company that they are not interested in the existence of a
certain service of the Services then provided by the Company.
In such case, the Company shall cease to provide such service
after three months of the receipt of such notice, however
that should the Company be of the opinion that such service
is essential for the maintenance of the Park, it shall be
entitled to apply to the General Manager of the Company and
obtain his final ruling on this. To remove any doubt it is
hereby made clear that a service the provision of which has
been terminated pursuant to this Section above, the residents
of the Park shall not be allowed to offer or provide same
whether by themselves or through a corporation or any other
entity.
7.4 Lessees and/or purchasers of 75% of all the areas of the Park
which are intended for letting and/or sale shall be entitled,
by an instrument signed by them and submitted to the Company,
to request the provision of a service not then provided by
the Company. The Company shall inform such lessees and/or
purchasers, within 30 days of receiving such request, whether
it is able to provide the additional services and, if so, the
date on which such services will commence to be provided and
the estimated cost thereof. Where the Company decides that
certain service will not be provided by it, such lessees
and/or purchasers of at least 75% of all the areas of the
Park shall be entitled to engage any third party for the
provision of such service subject to obtaining the prior
written consent of the Company. The Company shall be entitled
to withhold such consent if it is of the opinion that such
engagement may prejudice the Company and/or the other lessees
and/or users of the Park and/or any of the areas and/or
systems of the Park.
7.5 To remove any doubt, as regards built areas in the Building
and/or Park that are intended for letting and/or sale and
that were not let or sold, the Company shall be considered,
for the purpose of the matters set forth in subsections 7.3
and 7.4 above, as lessee of such areas.
7.6 Any change to the costs, as may be required, which arises as
a result of the termination of the provision of any of the
Services or from the
<PAGE>
provision of the additional services, as provided above,
shall be determined by the Company at its sole discretion
and the Lessee shall bear any increase in the costs
so determined as a result thereof.
7.7 It is agreed that the Company shall be entitled to round any
amount for the payment of which the Lessee is liable
hereunder to the nearest whole Shekel value.
8. VALUE ADDED TAX
Any amount for the payment of which the Lessee is liable hereunder
shall carry value added tax, which shall be paid to the Company
against a tax receipt at the time set for payment of any amount
hereunder, according to its legal rate on the date of payment to the
Company, by deferred checks the date of payment of which is one day
before the date of the VAT payment obligation of the Company and/or
the management company and against a tax receipt.
9. TRANSFERRING THE HANDLING OF THE MANAGEMENT OF THE SERVICES
Subject to the provisions of the Tenancy Agreement, should the Company
decide to transfer the handling of the management and performance of
the Services, with all that ensues therefrom including all of its
rights and obligations hereunder, to any third party, it shall have to
receive from said third party, prior to effesuch transfer of handling,
a letter of undertaking according to which the third party agrees to
assume the performance of all the obligations of the Company hereunder
and has experience in providing management services.
10. RELIEVES IN CASE OF BREACH OF THE AGREEMENT
10.1 In any instance where the Lessee fails to timely effect any
payment due or to be due from it to the Company hereunder
and/or in any instance where the Lessee breaches any of the
provisions hereof, the Company shall be entitled to all the
relieves accorded to it under the Tenancy Agreement in case
of a breach of the Tenancy Agreement by the Lessee, subject
to the Company giving the Lessee prior written notice of 30
days in advance. It is made clear that the breach of this
Agreement by the Lessee shall be deemed as breach of the
Tenancy Agreement.
10.2 Without derogating from the generality of the above and in
addition thereto, in the event of such breach the Company
shall also be entitled to take one or more of the following
actions:
One. Terminate the management and performance of any and
all of the Services provided to the Lessee
hereunder.
<PAGE>
Two. Demand a prohibitory and/or mandatory injunction for
the performance of any actions or for refraining
from any such actions, for the purpose of enforcing
said payment and/or any other obligation of the
Lessee hereunder, as the Company may think fit.
Three. Act in any other way available to it under this
Agreement or the Tenancy Agreement or by any law,
including canceling this Agreement and canceling the
Tenancy Agreement with the Lessee and ejecting the
Lessee from the Leasehold.
Four. Where the Lessee has breached its obligations under
Section 3 above, the Company shall have the right
(but not the duty) to perform any or all of the
Services to the Building itself or through anyone on
its behalf at the expense of the Lessee.
10.3 It is agreed that in respect of any amount which the Lessee
is obligated hereunder to pay and which the Lessee fails to
timely pay (hereinafter: the "AMOUNT IN ARREARS") the Lessee
shall be obligated to pay to the Company, in addition to the
Amount in Arrears, linkage differences to the index, which
shall be calculated in the same manner as the linkage
differences in respect of the rent are calculated according
to the provisions of the Tenancy Agreement, as well as
arrears interest at the rate stated in Section 2 of the
Tenancy Agreement.
The Amount in Arrears together with the linkage differences
and the arrears interest shall be hereinafter referred to as:
the "DEBT IN ARREARS".
Any amount paid by the Lessee to the Company toward a Debt in
Arrears shall be split and appropriated pro rata against the
constituents of the Debt in Arrears according to the
following order: first toward the arrears interest, then
toward the linkage differences and finally toward the Amount
in Arrears.
11. THE LESSEE'S OBLIGATION TO EFFECT PAYMENTS
The Lessee's refusal or unwillingness to receive any service and/or
its wish to terminate the management and performance of the Services
with respect to the Leasehold, in whole or in part, and/or the
termination of the management and performance of the Services by the
Company shall not relieve the Lessee of the obligation to participate
in all the costs and management charges in accordance with the terms
of this Agreement.
12. NO SET-OFF OF AMOUNTS
The parties agree that the amounts they owe and/or will owe to each
other pursuant to the provisions of this Agreement shall not be
subject to set-off.
13. THE CONDOMINIUM'S REPRESENTATION
<PAGE>
The Lessee hereby agrees that throughout the term of the Agreement the
Company or anyone appointed by it shall serve as the "condominium's
representation" pursuant to Section 65 of the Land Law, 5729-1969,
and, to the extent required, it shall support such appointment.
14. THE COSTS OF THE AGREEMENT
The parties shall bear the stamp duty costs in respect of this
Agreement in equal shares between them.
<PAGE>
15. GIVING NOTICES
15.1 Any notice which the parties are required to give each other
shall be deemed to have been given 48 hours after the time it
was sent by registered post from a post office in Israel to
the addresses of the parties as set forth herein.
In addition to the above, the parties shall be entitled to
send notices to each other by courier and in such instance,
the time noted on the delivery form which is signed by the
courier shall be deemed as the time the notice was given.
As of the Delivery Date, the delivery of a notice at the
Leasehold to the Lessee or to its employee, or the fixing of
the notice on the Leasehold door shall be deemed as due
delivery to the Lessee.
15.2 The addresses of the parties under this Agreement shall be
as follows:
THE COMPANY: The address of the Company for the purposes
of this Agreement shall be as set forth in the
preamble to this Agreement.
THE LESSEE: The address of the Lessee for the purposes of
this Agreement shall be as set forth in the
preamble to this Agreement and as of the
Delivery Date, the Lessee's address for the
purposes hereof shall be at the Leasehold.
15.3 The addresses of the parties under this Agreement shall be
deemed also as their address for service of legal process.
IN WITNESS WHEREOF THE PARTIES HAVE SET THEIR HAND:
/s/ David Aber /s/ Daniel Lavan
---------------------- ---------------------
THE COMPANY, Azarei Mallal Industries Ltd.
DSPC Technologies Ltd.
<PAGE>
Confidential Treatment
Requested
EXHIBIT 10.41
NON-EXCLUSIVE DISTRIBUTION AGREEMENT
BETWEEN
D.S.P.C. TECHNOLOGIES, LTD.
AND
TOMEN ELECTRONICS CORP.
<PAGE>
[****] Confidential Treatment
Requested
THIS NON-EXCLUSIVE DISTRIBUTION AGREEMENT (this "Agreement") is made and entered
into as of the 29th day of September, 1999, between D.S.P.C. TECHNOLOGIES, LTD.
("DSPC") with its place of business at 11 BEN GURION STREET, GIVAT SHMUEL 51901,
ISRAEL, and TOMEN ELECTRONICS CORP. ("Distributor") with its place of business
at 8-27, KOHNAN 1 CHOME, MINATO-KU, TOKYO, 108-8510 JAPAN, which collectively
are referred to hereinafter as "the parties".
NOW, THEREFORE, the parties hereto hereby agree as follows effective April 1,
1999:
1. DISTRIBUTOR SALES
Distributor shall have the non-exclusive right to purchase Products (as
hereinafter defined, the "Product") from DSPC for resale through its
distribution network in the country of JAPAN. Sales of such Product in the
country of JAPAN to other than Distributor directly by DSPC's representatives,
agents, or other authorized distributors are not the subject of this Agreement.
The purchase price for the products shall be [************************]of the
suggested OEM resale price as set forth in Exhibit A (attached hereto and
subject to change by DSPC as otherwise set forth herein) except as otherwise set
forth in Exhibit A or as agreed to in writing by DSPC and Distributor.
Distributor agrees not to sell other products which are competitive with the
Product while this Agreement is in effect to any entity to which Distributor has
sold, is selling, or proposes to sell Product from DSPC. Distributor agrees not
to otherwise sell other products which are competitive with Product while this
Agreement is in effect without ninety (90) days advance notice in writing to
DSPC.
2. PERFORMANCE
(a) Performance under this Agreement shall be in accordance with the terms and
conditions set forth herein and in Exhibit A (DSPC's current published
Distributor Price List as may be amended by DSPC from time to time on advance
notice to Distributor), Exhibit B (DSPC's Terms of Sale, as may be amended by
DSPC from time to time on advance notice to Distributor) and Exhibit C
(Definitions).
Exhibits are hereby incorporated fully into and made a part of this Agreement.
In the event that any part of any Exhibit has been modified by, or is in
conflict with the body of this Agreement, the language in the body of this
Agreement shall prevail.
(b) The relationship of DSPC and Distributor established by this Agreement is
that of independent contractors, and nothing contained in this Agreement shall
be construed to (i) give either party the power to direct and control the
day-to-day activities of the other, (ii) constitute the parties as partners,
joint ventures, co-owners or otherwise as participants in a joint or common
undertaking, or (iii) allow Distributor to create or assume any obligation on
behalf of DSPC for any purpose whatsoever. All financial obligations associated
with Distributor's business are the sole responsibility of Distributor. All
sales and other agreements between Distributor and its customers are
Distributor's exclusive responsibility and shall have no effect on Distributor's
obligation under this Agreement. DSPC shall not create or assume any obligation
on behalf of Distributor for any purpose whatsoever.
1
<PAGE>
3. TERM OF AGREEMENT
This Agreement shall become effective on the date first written above and shall
remain in effect until terminated pursuant to Section 15 below.
4. PRODUCT
(a) Products covered by this Agreement are as set forth in DSPC's Distributor
Price List attached as Exhibit A, as modified from time to time by DSPC upon
prior written notice to Distributor not less than thirty (30) days before.
(b) Additional Product may be added to this Agreement through mutual agreement
on the conditions applicable to each additional Product.
(c) In the event that DSPC shall agree to supply Distributor with any Product
not listed in Exhibit A, or under conditions not covered in DSPC's Distributor
Price List attached as Exhibit A under this Agreement, certain provisions of
this Agreement may not apply to sales of such Products, if both parties so agree
in writing. Absent such a written agreement, all of the terms of this Agreement
shall apply except for the description of the Product being sold and the price
of such Product. The provisions that may not apply must be determined prior to
acceptance by DSPC of Distributor's purchase order for such Product.
5. PRICING
(a) DSPC shall sell to Distributor, and Distributor shall buy from DSPC Product
at the prices shown in Exhibit A hereto, with payment therefore to be made in
U.S. Dollars. Should this Agreement be terminated by either party, for any
reason, prior to payment of amounts due hereunder or pursuant hereto, such
amount shall be paid as and when due in accordance with the terms hereof. DSPC
will provide Distributor with "suggested OEM resale pricing" for the Product as
guidelines only. Distributor shall have the unilateral right to establish the
prices at which it will sell Product to its customers.
In the event that the price of a certain Product is not listed on Exhibit A, the
price of such Product shall be determined by the parties' mutual written
agreement from time to time.
(b) The pricing shown in Exhibit A does not include any sales or excise taxes
that may be applicable to the Product, and is subject to change at any time by
DSPC. DSPC shall provide Distributor with notice of any such change, and the
effective date thereof, by furnishing written notice to Distributor at least
thirty (30) days prior to such effective date.
(c) In the event that DSPC decreases the published Distributor price in any
Product shown in Exhibit A, DSPC will furnish Distributor with a listing of
Products affected, showing the old price and the new price. Distributor shall be
entitled to receive a credit equal to the difference between the price paid by
the Distributor, less any prior credits granted by DSPC and the new decreased
price for the Product, multiplied by the quantity of such Product in
Distributor's inventory on the effective date of the price reduction that are
not subject to purchase orders previously received. Issuance of such credit by
DSPC may be contingent upon DSPC's
2
<PAGE>
verification of Distributor's inventory report. All such credits will
forthwith be applied to Distributor's account for subsequent purchase of
Product, and shall not otherwise entitle Distributor to any rebate. All
Product shipped after the effective date of a price decrease will be invoiced
at the new/lower price.
(d) In the event DSPC increases the published price of any Product shown in
Exhibit A, such Product shipped on or after the effective date of such price
increase shall be invoiced at the price in effect at the time Distributor's
purchase order is accepted by DSPC.
(e) The price for each Product on every purchase order issued by Distributor
shall be based on the quantity ordered at the time of purchase order placement
and on DSPC's published price list in Exhibit A, as amended from time to time by
DSPC.
6. DELIVERY, TITLE AND RISK
(a) Shipment of all Product shall be FCA DSPC's point of shipment, freight
collect. Title to, and risk of loss or damage to, Product shall pass to
Distributor, upon delivery to carrier at the shipping point. In the event of
carrier's miss-delivery, DSPC shall aid the Distributor in dealing with the
carrier in tracing the shipment and obtaining delivery. Shipment made more than
five (5) days ahead of schedule or shipments made against orders properly
cancelled pursuant to the terms hereof are made at DSPC's risk and Distributor
shall not be responsible or liable for the Product, but Distributor will aid
DSPC in tracing the shipment and obtaining delivery.
(b) DSPC shall not be liable for delays in delivery or failure to manufacture
due to causes beyond its reasonable control, such as but not limited to: acts of
God, acts or omissions of Distributor, priorities, fire, strikes, floods,
epidemics, quarantine restrictions, riots, war, manufacturing delays caused by
its outside fabrication and manufacturing suppliers, transportation embargoes,
or failure or delays in transportation, inability to secure raw materials or
machinery for the manufacture of its devices ("Force Majeure"). In the event of
any such delay, the date of delivery shall be extended for a period equal to the
time lost by reason of the delay plus ten (10) days. If such event of Force
Majeure continues for a period of more than ninety (90) days, Distributor hereby
shall have the right to forthwith terminate to the extent of the obligation
affected by the event of Force Majeure in writing without prejudice any other
rights and remedies obtained before such termination respectively.
7. EXPORT CONTROL
(a) Distributor agrees and warrants to DSPC that unless prior authorization is
obtained from the United States Department of Commerce, neither Distributor nor
its subsidiaries shall knowingly, after due inquiry and review:
(1) export or re-export, directly or indirectly, any technical data (as
defined in Part 779 of the U.S. Export Administration Regulations), including
software, received from DSPC, or
(2) disclose such technical data or,
3
<PAGE>
(3) export re-export, directly or indirectly, any direct product of such
technical data, to any destination or country to which the export or release
of such technical data or products is restricted or prohibited by U.S. law.
(b) The foregoing assurance is furnished by Distributor to satisfy the general
license GTDR written assurance requirements under Part 779 of the U.S. Export
Administration Regulations.
(c) Distributor further agrees to obtain any necessary export license or other
documentation prior to export or re-export of any Product or technical data,
including software, acquired from DSPC or any product of such technical data.
(d) Further, Distributor shall give notice of the need to comply with such law
to any person, firm, or entity which it has reason to believe is obtaining any
such technical data or Product from DSPC with intention to export.
(e) Each party shall secure, at its sole expense, such licenses and export and
import documents as are necessary for it to fulfil its obligations under this
Agreement.
(f) This Article shall survive the cancellation or termination of this
Agreement.
(g) DSPC shall attempt to give prior written notice of any contingent tax which
might be imposed by the U.S. Government, including any federal, state, or local
taxes.
(h) To the extent that the Products contain any software to implement the TIA
Common Cryptographic Algorithms (the "Restricted Parts") and as such are subject
to export control restrictions, the parties shall i) have executed the required
agreement with the TIA to obtain the Common Cryptographic Algorithms; ii) have
obtained the controlled subject documents from the TIA; and iii) agree to
control the Software in compliance with the requirements of the TIA Agreement
and U.S., Canadian, and other export restrictions. The Restricted Parts will not
be included in the Products provided to Distributor, until the receiving party
can demonstrate compliance with the required export regulations.
8. ORDERING
(a) All purchases of Products pursuant to this Agreement shall be effected by
the issuance of Purchase Orders by Distributor with the terms and conditions of
this Agreement as set forth in Exhibit B, attached hereto and incorporated
herein by this reference. Such Purchase Orders shall state unit quantities, unit
descriptions, applicable prices, and requested delivery dates, and shall refer
to the forecasts described in Section 8(b) below. Distributor shall endeavor to
provide firm quantity and requested delivery dates consistent with DSPC's lead
time for subject Products
(b) Beginning on September 1, 1999, and on the first day of each month
thereafter, Distributor shall provide DSPC with a one year, nonbinding, rolling
forecast. Within seven (7) business days after receipt of the rolling forecast,
DSPC shall inform Distributor as to the feasibility of such rolling forecast.
DSPC shall use its reasonable efforts to fill Distributor's PO's which are based
on the approved rolling forecast.
(c) All Purchase Orders issued by Distributor are subject to written acceptance
by DSPC.
4
<PAGE>
[****] Confidential Treatment
Requested
9. RESCHEDULING/CANCELLATION
(a) For the purposes of this Article the following definitions shall apply:
i) "Standard Product" is defined as any Product which can be sold to
any customer free from any other customer's proprietary restrictions; and
ii) "Custom Product" is defined as any Product which has been
developed for specific customer and which is not free from that customer's
proprietary restrictions regarding its use or sale.
(b) Distributor may reschedule, only once per purchase order, certain
deliveries on existing orders for Standard Product upon written notice to
DSPC only according to the following schedule:
<TABLE>
<CAPTION>
Number of Days in Advance of
DSPC's committed Delivery Date Permitted Rescheduling
------------------------------ ----------------------
<S> <C>
[****************] [***********]
[**************** [********************
**********************] ********************************]
[********************] [********************************
*******************]
</TABLE>
(c) Distributor may reschedule certain deliveries on existing orders for Custom
Products upon written notice to DSPC according to the following schedule:
<TABLE>
<CAPTION>
Number of Days in Advance of
DSPC's committed Delivery Date Permitted Rescheduling
------------------------------ ----------------------
<S> <C>
[****************] [***********]
[**************** [********************
*********************] *********************
*********]
[********************] [********************************
********************]
</TABLE>
(d) Distributor may cancel deliveries on existing orders for Standard or Custom
Products upon written notice to DSPC subject to the following: The parties agree
that in litigation or in arbitration resulting from the damages caused by
cancellation by Distributor, the exact amount of loss would be extremely
difficult or impracticable to prove. Accordingly, the parties wish to make a
commercially reasonable estimate of the damages they would incur in the event of
cancellation by Distributor, and to establish that estimate as liquidated
damages. The parties agree that the liquidated damages provided in this Section
constitute that reasonable estimate. The cancellation charge amounts are as set
forth below:
5
<PAGE>
[****] Confidential Treatment
Requested
<TABLE>
<CAPTION>
Cancellation Charge as a Percentage of Cancelled
Order Value
Number of Days in Advance of
DSPC's committed Delivery Date Standard Product Custom Product
------------------------------ ---------------- --------------
<S> <C> <C>
[****************] [***] [***]
[**************** [**] [**]
*********************]
[******************] [*********** [************
*************] *************]
</TABLE>
(e) Notwithstanding the cancellation charges in paragraph (d) above,
Distributor may, within [********************] from the placement of any
order with DSPC, cancel that order without penalty as long as DSPC has not
shipped the order.
10. TERMS OF DISTRIBUTION.
(a) Distributor shall only distribute the Products to those customers that are
approved in writing by DSPC prior to any sale by Distributor. With respect to
any Product using CDMA technology, DSPC shall only approve sales by Distributor
to customers that have been approved as customers under DSPC's agreement with
Qualcomm, Inc., as that agreement shall be amended from time to time.
Additionally, Distributor and Distributor's customers must acknowledge in form
satisfactory to DSPC that the sale of CDMA ASICs or Products containing such to
Distributor's customers does not convey to Distributor's customers any
intellectual property rights of Qualcomm, Inc. in such CDMA ASICs, including,
but not limited to, any rights under any patent, trademark, copyright, or trade
secret and that Distributor's customers may not use or sell any CDMA ASIC, alone
or in combination with other components, without a separate license from
Qualcomm under all applicable patents. Distributor's customers' use and sale of
any CDMA ASIC shall be solely in accordance with the terms and conditions of
such license. This Agreement shall not modify or abrogate Distributor's
customers' obligations under any existing license agreement between
Distributor's customers and Qualcomm, Inc., including, but not limited to,
Distributor's customers' obligation to pay all royalties specified thereunder,
and shall not expand or alter Distributor's rights hereunder.
(b) All agreements of sale by Distributor of any Product shall contain a
provision that Distributor's customers agree to purchase Product from
Distributor under the Terms and Conditions contained in Exhibit D, attached
hereto and incorporated herein by this reference, or such other terms and
conditions as may be approved in writing by DSPC. All Purchase Orders received
by the Distributor shall state unit quantities, unit descriptions, applicable
prices, requested delivery dates, F.C.A. point of shipment, payment terms and
shipping instructions. Distributor shall not agree to provide its customers with
Products in lead time shorter than for which it has received confirmation from
DSPC.
(c) The terms set forth on Exhibit D, are the only ones upon which DSPC will
accept orders and Distributor agrees that such terms shall supersede the terms
contained on any purchase order that Distributor provides to DSPC. As an
additional matter, these terms supersede all prior written understandings,
assurances and offers. Any deviation from the terms set forth on Exhibit
6
<PAGE>
D, shall be deemed to be rejected unless expressly approved by DSPC in
writing. The terms contained in the attached exhibit shall become binding on
both parties with regard to a Purchase Order and DSPC's acceptance of such
Purchase Order.
(d) All agreements of sale by Distributor shall provide that Distributor's
customers shall provide Distributor with a one year rolling nonbinding forecast
prior to the first day of each month, and that within ten (10) business days
from the first day of each month Distributor shall inform Distributor's customer
as to the feasibility of such rolling forecast. Distributor shall promise its
customers no more than its reasonable efforts to fill PO's based on the approved
rolling forecast.
(e) If a customer of Distributor who purchases Products declines to abide by
the terms and conditions of this Article 10 and Exhibit D, Distributor must
get DSPC's written approval of any deviance. Absent such approval,
Distributor shall indemnify and hold DSPC harmless from any claims by
customers or other third parties that arise as a result of, or proximately
from, Distributor's failure to abide by the terms of this Article 10 and
Exhibit D.
11. REPORTS
Distributor shall send to DSPC within five (5) working days after the end of
each month, a written report containing the following information by location:
(a) A detailed inventory of all Products, at the end of said month, with
quantities and prices paid.
(b) A detailed Point of Sale (P.O.S.) activity report including the names of
customers with programs, Products, quantities purchased and the amounts invoiced
to said customers.
(c) Sales projections and bookings targets for the next six (6) months.
(d) "Design in" or custom design status activity.
12. ADVERTISING AND PROMOTION
(a) DSPC agrees to supply Distributor with DSPC's usual sales promotion and
advertising material, in quantities to be mutually agreed upon, without cost to
Distributor and to support the efforts of Distributor with DSPC's usual
advertising and other sales promotion efforts. All such material that
Distributor has not discarded with DSPC's permission shall be returned to DSPC
in good condition, except for reasonable wear, immediately upon demand by DSPC.
(b) Distributor agrees to promote the sale of DSPC's Product, at its own
expense, through various media advertising and other sales promotional efforts
as approved in writing by DSPC. Special advertising or promotion programs may be
agreed upon from time to time in which the parties will agree to some sharing of
the costs.
(c) A cooperative advertising program will be defined with a budget established
which is equivalent to two tenths of one percent (0.2%) of annual sales.
13. WARRANTY
7
<PAGE>
[****] Confidential Treatment
Requested
(a) DSPC shall provide Distributor with the warranty provided in Exhibit B
hereto, except that DSPC agrees to extend the [***********] limited warranty to
Distributor as stated in Exhibit B to a period of [******************] from date
of shipment by DSPC to Distributor, or [**********] from date of shipment from
Distributor to Distributor's customer, whichever is shorter.
(b) THE WARRANTY IN EXHIBIT B AS EXTENDED ABOVE IS PERSONAL TO DISTRIBUTOR, AND
IS EXPRESSED IN LIEU OF ALL OTHER WARRANTIES, EXPRESS, IMPLIED OR STATUTORY,
INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE, AND IN LIEU OF ALL OTHER OBLIGATIONS OR LIABILITIES ON THE PART OF
DSPC.
14. RETURNS AND REPURCHASES
Distributor may not return any Product purchased from DSPC except for claims
under warranty.
15. TERMINATION
(a) Either party may at any time terminate this Agreement with or without cause
upon one hundred and eighty (180) days written notice after having a review
meeting with the other party to discuss the termination. It is expressly
understood and agreed that the rights of termination set forth above are
absolute and that both parties hereto have considered the making of expenditures
in preparing for performance under this Agreement and possible losses incident
and resulting to them in the event of its termination. Therefore, in agreeing to
said terms of termination, it is with full knowledge of such possibilities and
either party hereto shall not be responsible to the other for damage, or
otherwise, by reason of the fact of termination of the Agreement.
Notwithstanding the foregoing, should this Agreement be terminated by DSPC, or
its successor, within twelve (12) months after a change in control of DSPC,
Distributor shall be entitled to a cancellation fee equal to fifty percent (50%)
of the cumulative discount received by Distributor under this Agreement for the
twelve (12) month period prior to such cancellation. For purposes of this
Section, a "change in control in DSPC" means a change in ownership of more than
fifty percent (50%) of the voting stock of DSPC, or a change in the composition
of its Board of Directors of more than fifty percent (50%).
(b) Distributor warrants that all identifying signs, literature, logos and
other evidence provided by DSPC will be returned to DSPC upon termination of
this Agreement. Distributor will cease production of any such materials
referring to the Products upon termination, and shall cease advertising that
there is any business relationship between the parties.
(c) Should this Agreement be terminated by either party prior to payment of
amounts due hereunder or pursuant hereto, such amount shall be paid as and when
due in accordance with the terms hereof.
(d) In event of termination of this Agreement without cause by DSPC, all orders
received and accepted by DSPC as of the date of such termination notice shall be
unaffected by such notice. DSPC will accept orders from Distributor to the
extent Distributor is contractually obligated to furnish Products to its
customers and does not have such Product in its inventory;
8
<PAGE>
[****] Confidential Treatment
Requested
provided that Distributor notifies DSPC of any and all such transactions in
writing within fifteen (15) days after the notice of termination is given by
DSPC.
(e) If this Agreement is terminated by DSPC with cause, by Distributor without
cause, DSPC shall repurchase at DSPC's option, any of all Products remaining in
Distributor's inventory, subject to the following:
(1) The price to be paid for the repurchase of said inventory shall be
the net amount of Distributor' s cost at time of purchase less any
subsequent price credits issued.
(2) All Product must be new, unused, undamaged, and in good
merchantable condition after inspection and testing by DSPC.
(3) All Product will be shipped FCA Distributor's designated facility,
freight collect.
16. ACCOUNTING
(a) The Terms of Payment are as defined in Exhibit B, Terms and Conditions of
Sale.
(b) DSPC and Distributor shall be jointly responsible for reconciling their
accounts in a timely manner, Distributor adjustments, debit memos, and billbacks
must be forwarded to DSPC within [***************] of the transaction date. DSPC
must reply to any such adjustment, debit memo, and billback-in writing within
[***************] of the date of notification. Any other entries will be
considered valid and closed to further negotiations. The only exception to this
policy will be for formal DSPC audit findings which may be conducted by DSPC
within fifteen (15) months after the date of any transaction.
(c) DSPC may request audits of physical inventory and books of record
pertaining to DSPC Product on an annual basis. No audit shall be retroactive
more than fifteen (15) months. Audit findings will be submitted to the
Distributor in writing within ninety (90) days from the day the audit stated.
Therefore, when the audit findings are received by the Distributor, no
Product will be more than eighteen (18) months old. The terms of this
subsection shall not apply to audits pursuant to subsection 16 (d) below.
(d) Distributor shall keep accurate and complete books and records concerning
any CDMA ASICs it may sell under this Agreement. As applicable, such books and
records shall include the date of transaction involving sales of CDMA ASICs,
including the number of Products sold. Distributor shall furnish DSPC within
thirty (30) days after the end of each calendar quarter a certificate, in the
form as requested by DSPC, signed by a responsible official of Distributor
showing the transactions and corresponding amounts during said calendar quarter
and any other information as may be reasonably requested by DSPC. DSPC may on
reasonable notice, no more than once each calendar year, have an audit conducted
by a major independent international accounting firm, which has not served as
DSPC's or Distributor's auditors during the preceding year, of Distributor's
applicable books and records to confirm the sales information of CDMA ASICs
provided by DSPC. Such independent accounting firm shall (a) maintain the
confidentiality of all information of the Distributor obtained in the course of
such audit except that such noncustomer-specific information as is necessary to
determine the accuracy of the sales
9
<PAGE>
information on CDMA ASICs provided by DSPC, and (b) execute a nondisclosure
agreement reasonably acceptable to the Distributor to reflect the above. The
cost of such audit shall be borne by DSPC, unless such audit determines that
the Distributor has underreported the sales of CDMA ASICs by the lesser of
(a) more than five percent (5%) or (b) twenty-five thousand dollars
($25,000); in which case, the Distributor shall, in addition to paying the
deficiency plus late payment charges, pay the cost of such audit. The
Distributor shall preserve and maintain all such books and records required
for audit for a period of five (5) years after the calendar quarter for which
the books and records apply.
17. GENERAL
(a) This Agreement, including any Exhibits hereto attached or incorporated by
reference, constitutes the sole and entire Agreement between DSPC and
Distributor concerning the subject matter hereof, supersedes all prior
communications or agreements written, or oral, including without limitation the
Distribution Agreement that existed between the parties or affiliated entities,
and is intended as a complete and exclusive statement of the terms of the
Agreement between the parties. Except as explicitly permitted herein, this
Agreement may be modified only in writing, signed by authorized representatives
of both parties.
(b) Both parties represent and warrant to each other that each has the right
and power to enter into this Agreement, and that there are no outstanding
assignments, grants, licenses, encumbrances, obligations or agreements,
either written, oral or implied, inconsistent with this Agreement.
(c) The transfer, delegation or assignment by either party of this Agreement,
or any of its duties, obligations, or rights hereunder, without the prior
written consent of the other party shall be void, except that DSPC may
transfer this Agreement to any present or future affiliated entities.
(d) THIS PROVISION LIMITS THE POTENTIAL LIABILITY OF DSPC ARISING OUT OF THIS
AGREEMENT AND/OR SALE OF PRODUCTS HEREUNDER. NEITHER PARTY SHALL BE LIABLE TO
THE OTHER FOR ANY INDIRECT, INCIDENTAL, CONSEQUENTIAL (INCLUDING LOSS OF
GOODWILL), PUNITIVE, OR SPECIAL DAMAGES RESULTING FROM PERFORMANCE OR USE OF ANY
GOODS OR SERVICES SOLD PURSUANT TO THIS AGREEMENT, WHETHER SUCH DAMAGES ARE DUE
TO A BREACH OF CONTRACT, BREACH OF WARRANTY, OR NEGLIGENCE. NEITHER PARTY SHALL
BE LIABLE TO THE OTHER FOR DAMAGES FOR INFRINGEMENT OF INTELLECTUAL PROPERTY OF
ANY THIRD PARTY, EXCEPT THAT DISTRIBUTOR SHALL BE LIABLE TO DSPC FOR ANY DAMAGES
CAUSED BY DISTRIBUTOR'S FAILURE TO COMPLY WITH SECTION 10 (a) OF THIS AGREEMENT,
OR DISTRIBUTOR'S MISUSE OF DSPC'S INTELLECTUAL PROPERTY. DSPC SHALL NOT BE
LIABLE TO DISTRIBUTOR FOR ANY AMOUNT IN EXCESS OF THE LESSER OF (i) AN AMOUNT
EQUAL TO THE TOTAL VALUE OF THE PRODUCTS PURCHASED BY DISTRIBUTOR FROM DSPC IN
THE YEAR PRIOR TO ANY CLAIM; OR (ii) $US 1,000,000 FOR EACH CUSTOMER OF
DISTRIBUTOR FOR EACH GENERATION OF CHIPSET PRODUCT.
(e) Without derogating from the above, DSPC shall not be responsible for any
failure to perform or late delivery arising from causes beyond its control.
These causes shall include, not be restricted to, fire, storm, flood,
earthquake, explosion, accident, acts of the public enemy, war,
10
<PAGE>
rebellion, insurrection, epidemic, quarantine restrictions, labor disputes,
labor shortages, manufacturing delays caused by its outside fabrication and
manufacturing suppliers, transportation embargoes, or failure or delays in
transportation, inability to secure raw materials or machinery for the
manufacture of its devices, acts of God, acts of any government or any agency
thereof, or any judicial action. In the event of any such delay, the date of
delivery shall, at the request of DSPC, be deferred for a period equal to the
time lost by reason of the delay, plus ten (10) days.
In the event of any delay by Distributor, DSPC may decline to make further
shipments without in any way affecting its rights under such order. If, despite
any fault by Distributor, DSPC elects to continue to make shipments, its action
shall not constitute a waiver of any default by Distributor or in any way affect
DSPC's legal remedies of any such default. Right of possession of the Products
sold hereunder shall remain with DSPC, and such Products shall remain personal
property until all payments hereunder (including deferred payments whether
evidenced by notes or otherwise) shall have been made in full in each, and
Distributor agrees to do all acts necessary to perfect and maintain such right
and title in DSPC.
(f) Distributor agrees that DSPC, or its affiliates, owns all right, title, and
interest necessary to enter into this Agreement in the Products now or hereafter
subject to this Agreement, and owns all right, title, and interest in, or is
licensed under, all intellectual property rights including but not limited to
patents, trade marks, trade names, inventions, copyrights, know-how and trade
secrets relating to the design, manufacture, and sale of the Products. The use
by Distributor of any of these property rights is authorized only for the
purposes herein set forth, and upon termination of this Agreement for any reason
such authorization shall cease. Distributor shall take no action to register any
of such property rights under its own or another's name, nor shall it take any
other action contrary to DSPC's or DSPC's licensor's ownership of such property
rights. Nothing in this Agreement gives Distributor the right to modify the
Products in any way, and Distributor shall have no right translate, decompile,
reverse engineer, or adapt the Products or any part thereof.
(g) Distributor acknowledges that by reason of its relationship to DSPC
hereunder, it may have access to certain information and materials concerning
DSPC business, plans, customers, technology, and products (the "confidential
information"). Distributor agrees that it will not use in any way for its own
account or the account of any third party, nor disclose to any third party, any
such confidential information revealed to it by DSPC, and shall use such
confidential information only for the purposes of this Agreement. Distributor
shall hold such confidential information in strictest confidence, and shall take
all measures necessary to protect against the disclosure or misuse of such
information. Distributor shall disclose such confidential information only to
those of its employees with a need to know for the purposes of this Agreement,
who are subject to no less than reasonable terms of confidentiality covering
such confidential information. Distributor shall not publish any technical
description of the Products beyond the description published by DSPC. In the
event of termination of Agreement, there shall be no use or disclosure by
Distributor of any confidential information of DSPC. Distributor shall not
manufacture or have manufactured any devices, components or assemblers utilizing
any of DSPC's confidential information.
(h) All notices required to be given hereunder shall be given in writing by
personal delivery or by a certified letter to the respective address as may be
designated in writing by either party and delivered to the other party. Notice
given by certified mail shall be deemed given five (5)
11
<PAGE>
business days after mailing date to the current address of the party. The
current addresses of the parties are as follows:
DSPC: D.S.P.C. TECHNOLOGIES, LTD.
11 Ben Gurion Street Givat Shmuel 51901
ISRAEL
Distributor: TOMEN ELECTRONICS CORP.
8-27, KOHNAN 1 CHOME
MINATO-KU, TOKYO, 108-8510
JAPAN
(i) This Agreement and all acts and transactions pursuant hereto and the rights
and obligations of the parties hereto shall be governed, construed, and
interpreted in accordance with the laws of the State of California, U.S.A.
(j) Any dispute between the parties arising out of this Agreement shall be
submitted to final and binding arbitration of Santa Clara, California, U.S.A.,
under the then current Arbitration Rules and supervision of the American
Arbitration Association, upon written notification and demand by either party
hereto. The American Arbitration Association shall be requested to submit a list
of prospective arbitrators experienced in commercial contracts involving the
semiconductor industry, and the parties shall select a single arbitrator from
such list to conduct the arbitration. The arbitrator may not award punitive or
exemplary damages, and the decision and award of the arbitrator shall be final
and binding and may be entered by any court of competent jurisdiction. The
parties hereto agree to pay their own attorneys' fees associated with the
arbitration, and to pay the other costs and expenses of the arbitration as the
rules of the American Arbitration Association provided. The provisions of
California Code of Civil Procedure Section 1283.05 permitting the taking of
depositions and obtaining discovery shall be applicable to any arbitration.
Nothing herein shall prevent the parties from seeking interim relief in any
court with competent jurisdiction.
(k) The following sections shall survive termination of this Agreement: 7, 13,
16, 17 and sections 7, 8, and 9 of Exhibit B.
(l) The terms and conditions herein contained together with the Exhibits
attached hereto and incorporated by reference constitute the entire and final
Agreement between the parties with respect to the subject matter hereof,
supersede all previous communications, representations, understanding or
agreements, either oral or written, between the parties with respect to such
subject matter, and shall take precedence over any additional or conflicting
terms which may be contained in either party's Quotations, Purchase Orders,
Acknowledgements or invoices.
(m) No agreement or understanding varying or extending any of the terms or
provisions hereof shall be binding on either party unless in writing and signed
by duly authorized representative of both parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized representatives as of the date first written above.
12
<PAGE>
D.S.P.C. TECHNOLOGIES,LTD. TOMEN ELECTRONICS CORP.
By: /s/ G. Hilevitz By: /s/ K. Taniguchi
------------------------------ ---------------------------
/s/ Shuli Chen
------------------------------
Printed Name: G. Hilevitz Printed Name: Katsuyoshi Taniguchi
-------------------- ----------------------
S. Chen
--------------------
Title: President Title: President
-------------------------- ------------------------
Date: October 5, 1999 Date: September 30, 1999
--------------------------- ------------------------
13
<PAGE>
EXHIBIT A
D.S.P.C. TECHNOLOGIES, LTD. DISTRIBUTOR PRICE LIST
TO BE PROVIDED
14
<PAGE>
[****] Confidential Treatment
Requested
EXHIBIT B
D.S.P.C. TECHNOLOGIES, LTD. ("SELLER") AND
TOMEN ELECTRONICS CORP. ("BUYER")
TERMS AND CONDITIONS OF SALE
1. GENERAL: The terms and conditions of sale contained herein apply to all
quotations made and purchase orders entered into by the Seller. The said terms
and conditions may in some instances conflict with some of the terms and
conditions affixed to the form order blank and/or specified by the Buyer.
Therefore, acceptance of the Buyer's order is made only on the express
understanding and condition that insofar as the terms and conditions of this
acceptance conflict with any terms and conditions of the Buyer's order, the
terms and conditions of this acceptance shall govern, irrespective of whether
the Buyer accepts these conditions by written acknowledgment, by implication, or
acceptance and payment of goods ordered thereunder. Seller's failure to object
to provisions contained in any communication from Buyer shall not be deemed a
waiver of the provisions contained herein. Any amendment or deviation from terms
and conditions of this Exhibit B must specifically be agreed to in writing by
the general manager of the Seller before becoming binding on either the Seller
or the Buyer.
All orders or contracts must be approved and accepted by the Seller at its home
office.
The said terms and conditions of sale shall be applicable whether or not they
are attached to each order sheet or enclosed with the Product to be sold or sold
hereunder.
2. PRICES: Irrespective of any prices quoted by Seller or listed on Buyer's
order, an order is accepted only at the prices shown on Seller's acknowledgment.
3. TAXES: All prices are quoted, all orders accepted, and all billings
rendered exclusive of all excise, sales, use and similar taxes, and all
shipping, freight and insurance expenses. Consequently, in addition to the
prices specified herein, the amount of any present or future excise, sales,
use or similar tax applicable to the sale of the Product hereunder shall be
paid by Buyer; or, in lieu thereof Buyer shall provide Seller with a tax
exemption certificate, to the taxing authorities.
4. TERMS AND METHOD OF PAYMENT: Where Seller has extended credit to Buyer,
terms of payment shall be net [**************] from date of invoice covering
the Product. No discounts are authorized. The amount of credit may be changed
or credit withdrawn by Seller at any time. On any order on which credit is
not extended by Seller, shipment or delivery shall be made, at Seller's
election, Cash With Order (in whole or part), C.O.D. or Sight Draft attached
to Bill of Lading or other shipping documents, with all costs of collection
for the account of Buyer.
If, in the judgment of the Seller, the financial condition of the Buyer at any
time does not justify continuation of production or shipment on the terms of
payment originally specified, the Seller may require full or partial payment in
advance and, in the event of the bankruptcy or insolvency of the Buyer or in the
event any proceeding is brought, Seller shall be entitled to cancel any order
1
<PAGE>
then outstanding and shall receive reimbursement for its cancellation charges or
require full or partial payment in advance.
Each shipment shall be considered a separate independent transaction, and
payment therefore shall be made accordingly.
5. TITLE AND DELIVERY: All sales are made FCA point of shipment. Seller's
title passes to Buyer and Seller's liability as to delivery ceases upon
making delivery of material purchased hereunder to Buyer's designated carrier
at shipping point in good condition. All claims for damages must be filed
with the carrier. All shipments will normally be made by Air Freight. Unless
specific instructions from Buyer specify which designated carrier is to be
used, the Seller will exercise his own discretion.
Products shall be shipped on the date specified in the accepted purchase order.
Such shipment date shall be determined in accordance with the lead-time agreed
upon in writing by the parties prior to placement of the purchase order by Buyer
to Seller. In the event that Seller anticipates not meeting an agreed upon
delivery date, Seller will notify Buyer with a revised date, provided that
Seller has given notice at least twenty (20) days before the scheduled delivery
date.
Without derogating from the above, Seller shall not be responsible for any
failure to perform or late delivery arising from causes beyond its control.
These causes shall include, but not be restricted to, fire, storm, flood,
earthquake, explosion, accident, acts of the public enemy, war, rebellion,
insurrection, epidemic, quarantine restrictions, labor disputes, labor
shortages, manufacturing delays caused by its outside fabrication and
manufacturing suppliers, transportation embargoes, or failure or delays in
transportation, inability to secure raw materials or machinery for the
manufacture of its devices, acts of God, acts of the Federal Government or any
agency thereof, or any judicial action. In the event of any such delay, the date
of delivery shall, at the request of the Seller, be deferred for a period equal
to the time lost by reason of the delay plus ten (10) days.
In the event of any delay by Buyer, Seller may decline to make further shipments
without in any way affecting its rights under such order. If, despite any
default by Buyer, Seller elects to continue to make shipments, its action shall
not constitute a waiver of any default by Buyer or in any way affect Seller's
legal remedies of any such default. Right of possession of the Products sold
hereunder shall remain with Seller and such Products shall remain personal
property until all payments hereunder (including deferred payments whether
evidenced by notes or otherwise) shall have been made in full in each, and Buyer
agrees to do all acts necessary to perfect and maintain such right and title in
Seller.
6. ASSIGNMENTS: The Buyer shall not assign his order or any interest therein
or any rights thereunder without the prior written consent of Seller.
7. PATENTS:
(a) Buyer shall indemnify, defend and hold Seller harmless against any
expenses, damages, costs and attorneys fees resulting from any claim, suit or
proceeding brought for direct or indirect infringement of patents, trademarks
copyrights, trade secrets or other intellectual property right or unfair
competition arising from: (i) compliance with Buyer's, or third party's as
directed by Buyer, designs or specifications or instructions; (ii) compliance
with any third
2
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[****] Confidential Treatment
Requested
party or independent group's telecommunications' standard; (iii) use,
combination, integration of any product purchased hereunder with software or
hardware not provided by Seller; or (iv) a claim that a manufacturing or
other process utilizing any product or any part thereof furnished hereunder,
directly or indirectly infringes any patent or other intellectual property
right of any third party under the laws of the United States or any other
country.
(b) Except in such cases as specified in Paragraph 7(a) hereof, Seller shall
defend any suit or proceeding brought against Buyer so far as it is based on a
claim that any Product, or any part thereof by itself, furnished hereunder
directly or indirectly infringes any patent of the United States or any other
country, if notified promptly of such claim in writing and given authority,
information and assistance (at Seller's expenses) for the defense of same, and
Seller shall pay all damages, costs, and attorneys' fees awarded therein against
Buyer, subject to any dollar limitation set forth in Paragraph 9 below. In case
any Product or any part thereof is in such suit held to directly or indirectly
infringe, and the sale, offer for sale, or importation of any Product is
enjoined, Seller shall, in its sole discretion and at its own expense, either
procure for Buyer the right to continue selling, offering for sale, and
importing the Product or part, or replace same with a non-infringing product (or
modify the Product so that it does not infringe), or accept the return of the
Product or part and refund the purchase price and the transportation costs
thereof. The foregoing states the entire liability of the Seller for patent
infringement by the Product or any part thereof and refers solely to products
held in inventory by Buyer, or Buyer's customers, and shall not cover damages of
any type whatsoever in connection with any Product or part already sold.
Sale of any Product or any parts thereof, hereunder confers on the Buyer no
license under any patent or other intellectual property rights of Seller or of
Qualcomm, Inc. governing or relating to (a) the structure of any devices to
which the Products or parts may be applied, or (b) a process or machine in
connection with which they may be used.
8. WARRANTIES AND ADJUSTMENTS:
(a) Products of Seller are warranted to be free from defects in materials and
workmanship and to meet the applicable specifications when tested to published
specifications for a period of [***********] from date of shipment. THE
FOREGOING IS IN LIEU OF ANY OTHER WARRANTY, EXPRESS, IMPLIED OR STATUTORY,
INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE, ALL OF WHICH OTHER WARRANTIES ARE HEREBY EXPRESSLY DISCLAIMED. The
liability of Seller under this warranty is limited solely in replacing, or
repairing, or issuing credit (at the discretion of Seller) for such Products
that become defective or fail to meet the specifications during such [******]
period, provided that, Seller will not be liable under this warranty unless (i)
Buyer promptly notifies Seller in writing within a reasonable time period upon
discovery of defects or failure to meet specifications, (ii) Buyer returns the
defective unit to Seller, transportation charges paid by Seller, (iii) Seller
receives the defective unit for adjustment no later than [************]
following the last day of the warranty periods, and provided further that Seller
will not be liable under this warranty if such defects or failure have been
caused by misuse, neglect, improper installation, repair, alteration or
accident. Any authorization for repairs or alteration must be in writing or
prevent voiding warranty. IN NO EVENT SHALL SELLER BE LIABLE TO BUYER FOR LOSS
OF PROFITS, OR LOSS OF USE BASED UPON A CLAIM FOR BREACH OF WARRANTY. Any
Product which has
3
<PAGE>
either been replaced or repaired under the provisions of this warranty
provision shall have warranty coverage for the remaining period of time of
the originally shipped Product.
(b) Seller's warranties as hereinabove set forth shall not be enlarged,
diminished or affected by, and no obligation or liability shall arise or grow
out of, Seller's rendering of technical advice or service in connection with
Buyer's order or the products furnished hereunder.
9. SELLER SHALL NOT BE LIABLE TO BUYER FOR ANY INDIRECT, INCIDENTAL,
CONSEQUENTIAL (INCLUDING LOSS OF GOODWILL), PUNITIVE, OR SPECIAL DAMAGES
RESULTING FROM PERFORMANCE OR USE OF ANY GOODS OR SERVICES SOLD PURSUANT TO
THIS AGREEMENT, WHETHER SUCH DAMAGES ARE DUE TO A BREACH OF CONTRACT, BREACH
OF WARRANTY, OR NEGLIGENCE. SELLER SHALL NOT BE LIABLE TO BUYER FOR ANY
AMOUNT IN EXCESS OF THE LESSER OF (i) AN AMOUNT EQUAL TO THE TOTAL VALUE OF
THE PRODUCTS PURCHASED BY BUYER FROM SELLER IN THE YEAR PRIOR TO ANY CLAIM;
OR (ii) $US 750,000 FOR EACH CUSTOMER OF BUYER FOR EACH GENERATION OF PRODUCT.
4
<PAGE>
EXHIBIT C
DEFINITIONS
A. TERMINATION FOR CAUSE
Any of the following events or occurrences are defined as a breach of the
Agreement, giving the injured party the right to terminate the Agreement for
cause, such termination exercisable by the injured party at its option. The
waiver of any instance of breach under the Agreement shall not constitute
waiving of the right to terminate the Agreement for any subsequent or like
breach.
(1) Any proceeding in bankruptcy or insolvency filed by or against either
party, or appointment of a Receiver or Trustee for such party or of a
substantial assignment for the benefit of the creditors of either party.
(2) Failure by either party to substantially perform any material covenant,
obligation or warranty set forth in the Agreement; or violation by either party
of any material covenant, obligation, agreement or warranty set forth in the
Agreement.
(3) Any significant change in ownership of either party that adversely affects
the relationship of the parties except for a change of control of DSPC.
B. TERMINATION WITHOUT CAUSE
Termination without cause is the termination of the Agreement, by either party,
upon the unilateral action of the terminating party for its primary convenience
and interest, for reasons other than those defined as breach.
C. DISCONTINUANCE
Product will be considered discontinued by manufacturer if it is removed from
DSPC's Distributor Price List upon one hundred twenty (120) days advance written
notice to Distributor.
5
<PAGE>
[****] Confidential Treatment
Requested
EXHIBIT D
TOMEN ELECTRONICS CORP. ("SELLER") AND
____________________________ ("BUYER")
TERMS AND CONDITIONS OF SALE
1. TERMS OF SALE AND PURCHASE.
These terms and conditions of sale govern the relationship between Seller
and Buyer with respect to the sale and purchase of the products (the "Products")
originally supplied to Seller by D.S.P.C. TECHNOLOGIES, LTD. ("DSPC"). These
terms are the only ones upon which Seller will accept orders, and Buyer agrees
that such terms shall supersede the terms contained on any purchase order that
Buyer provides to Seller. As an additional matter, these terms supersede all
prior written understandings, assurances and offers between the parties. Buyer
and Seller agree that any attempt to vary the terms specified herein, or that
propose additional terms to be included in any purchase order that Buyer may
issue, shall not be effective. Any such proposal shall be deemed to be rejected,
unless expressly approved by Seller in writing. Seller's failure to object to
provisions contained in any communication from Buyer shall not be deemed a
waiver of the provisions contained herein. Any amendment of, or deviation from,
these Terms and Conditions of Sale must specifically be agreed to in writing by
the general manager of the Seller before becoming binding on either the Seller
or the Buyer. All purchase orders or contracts must be approved and accepted by
the Seller in writing.
The said Terms and Conditions of Sale shall be applicable whether or not
they are attached to each order sheet or enclosed with the Product sold
hereunder.
2. PRICES, SHIPMENTS AND PAYMENT.
2.1 PRICES; TAXES. Irrespective of any prices quoted by Seller or
listed on Buyer's order, an order is accepted only at the prices shown on
Seller's acknowledgment. All prices are quoted, all orders accepted and all
billings rendered exclusive of all excise, use and similar taxes. Consequently,
in addition to the prices specified, the amount of any such tax applicable to
the sale of the Product sold hereunder, shall be paid by Buyer, or, in lieu
thereof, Buyer shall provide Seller with a tax exempt certificate for the taxing
authorities.
2.2 TERMS AND METHOD OF PAYMENT. Where Seller has extended credit to
Buyer, terms of payment shall be [*************] days from date of invoice
covering the Product. No discounts are authorized. The amount of credit may be
changed or credit withdrawn by Seller at any time. For any order on which credit
is not extended by Seller, shipment or delivery shall be made, at Seller's
election, Cash With Order (in whole or part), C.O.D. or Sight Draft attached to
Bill of Lading or other shipping documents, with all costs of collection for the
account of Buyer.
1
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[****] Confidential Treatment
Requested
If, in the judgment of the Seller, the financial condition of the
Buyer at any time does not justify continuation of production or shipment on the
terms of payment originally specified, the Seller may require full or partial
payment in advance and, in the event of the bankruptcy or insolvency of the
Buyer or in the event any proceeding is brought, Seller shall be entitled to
cancel any order then outstanding, and shall receive reimbursement for its
cancellation charges or require full or partial payment in advance.
Each shipment shall be considered a separate independent transaction,
and payment therefore shall be made accordingly.
2.3 ORDERS. All purchases of Products pursuant to this Agreement
shall be effected by the issuance of purchase orders by Buyer. Such purchase
orders shall state unit quantities, unit descriptions, applicable prices, and
requested delivery dates, and shall refer to the forecasts described in
Section 2.4 below. Buyer shall endeavor to provide firm quantity and
requested delivery dates consistent with Seller's lead time for subject
products. All purchase orders issued by Buyer are subject to written
acceptance by Seller.
2.4 FORECASTS. Beginning on the first date of the calendar month
after the date that this Agreement is executed, and on the first day of each
month thereafter, Buyer shall provide Seller with a one (1) year, nonbinding,
rolling forecast. Within seven (7) business days after receipt of the rolling
forecast, Seller shall inform Buyer as to the feasibility of such rolling
forecast. Seller shall use its reasonable efforts to fill Buyer's purchase
orders which are based on the approved rolling forecast.
2.5 CANCELLATION OF PURCHASE ORDER AND RETURN OF PRODUCTS.
(a) For the purposes of this Article the following definitions shall apply:
"Standard Product" is defined as any Product which can be sold to any customer
free from any other customer's proprietary restrictions; and "Custom Product" is
defined as any Product which has been developed for specific customer and which
is not free from that customer's proprietary restrictions regarding its use or
sale.
(b) Buyer may reschedule, only once per purchase order, certain deliveries on
existing orders for Standard Product upon written notice to Seller only
according to the following schedule:
<TABLE>
<CAPTION>
Number of Days in Advance of
committed Delivery Date Permitted Rescheduling
---------------------------- ----------------------
<S> <C>
[*****************] [**********]
[**************** [********************
*********************] ********************************]
[*******************] [********************************
*******************]
</TABLE>
(c) Buyer may reschedule certain deliveries on existing orders for Custom
Products upon written notice to Seller according to the following schedule:
2
<PAGE>
[****] Confidential Treatment
Requested
<TABLE>
<CAPTION>
Number of Days in Advance of
committed Delivery Date Permitted Rescheduling
---------------------------- ----------------------
<S> <C>
[****************] [**********]
[**************** [********************
*********************] ***********************
*********]
[*******************] [********************************
*******************]
</TABLE>
(d) Buyer may cancel deliveries on existing orders for Standard or Custom
Products upon written notice to Seller subject to the following: The parties
agree that in litigation or in arbitration resulting from the damages caused by
cancellation by Buyer, the exact amount of loss would be extremely difficult or
impracticable to prove. Accordingly, the parties wish to make a commercially
reasonable estimate of the damages they would incur in the event of cancellation
by Buyer, and to establish that estimate as liquidated damages. The parties
agree that the liquidated damages provided in this Section constitute that
reasonable estimate. The cancellation charge amounts are as set forth below:
<TABLE>
<CAPTION>
Cancellation Charge as a Percentage of Cancelled
Order Value
Number of Days in Advance of
committed Delivery Date Standard Product Custom Product
----------------------- ------------------------------------------------
<S> <C>
[****************] [***] [***]
[**************** [**] [***]
*********************]
[*******************] [************ [************
*************] *************]
</TABLE>
2.6 TITLE, DELIVERY AND DELAY. All sales are made FCA point of
shipment. Seller's title passes to Buyer, and Seller's liability as to delivery
ceases upon making delivery of material purchased hereunder to carrier at
shipping point. All claims for damages must be filed with the carrier. All
shipments will normally be made by Air Freight. Unless specific instructions
from Buyer specify which of the foregoing methods of shipment is to be used
and/or which carrier is to be used, the Seller will exercise his own discretion.
Products shall be shipped on the date specified in the accepted
purchase order. Such shipment date shall be determined in accordance with the
lead-time agreed between the parties. In the event that Seller anticipates not
meeting an agreed upon delivery date, Seller will notify Buyer with a revised
date, provided that Seller has given notice at least twenty (20) days before the
scheduled delivery date.
3
<PAGE>
[****] Confidential Treatment
Requested
Without derogating from the above, Seller shall not be responsible for
any failure to perform or delayed deliveries arising from causes beyond its
control. These causes shall include but not be restricted to fire, storm, flood,
earthquake, explosion, accident, acts of the public enemy, war, rebellion,
insurrection, epidemic, quarantine restrictions, labor disputes, labor
shortages, inability or poor performance by the fabrication or manufacturing
facilities, transportation embargoes, or failure or delays in transportation,
inability to secure raw materials or machinery for the manufacture of its
devices, acts of God, acts of the Federal Government or any agency thereof,
judicial action and failure of its Supplier to make timely supply of the
Products.
In the event of any such delay, the date of delivery shall, at the
request of the Seller, be deferred for a period equal to the time lost by reason
of the delay plus twenty (20) days.
In the event of any delay by Buyer, Seller may decline to make further
shipments without in any way affecting its rights under such order. If despite
any default by Buyer, Seller elects to continue to make shipments, its action
shall not constitute a waiver of any default by Buyer or in any way affect
Seller's legal remedies of any such default. Right of possession of the Products
sold hereunder shall remain with Seller and such Products shall remain personal
property until all payments hereunder (including deferred payments whether
evidence by notes or otherwise) shall have been made in full in each, and Buyer
agrees to do all acts necessary to perfect and maintain such right and title in
Seller.
3. WARRANTY.
3.1 WARRANTY. Seller warrants that all Products to be
purchased hereunder shall be free from defects in materials and workmanship
for a period of [*****] year from the date of shipment of the Products to
Buyer. The Warranty does not cover any default or damage resulting from: (i)
any breakage or wear and tear; (ii) misuse, improper installation,
maintenance, repair, alteration, operation or care; (iii) accident, fire,
war, flood, force majeure, sabotage, or any uncontrolled circumstances that
Seller, as a reasonable producer, cannot control. The liability of Seller
under this warranty is limited solely to replacing, or repairing, or issuing
credit (at the discretion of Seller) for such Products that become defective
during such [**********] period, provided that, Seller will not be liable
under this warranty unless (i) Seller is promptly notified in writing by
Buyer within reasonable time period upon discovery of defects or failure to
meet specifications, (ii) the defective unit is returned to Seller,
transportation charges paid by Seller. Any authorization for repairs or
alteration must be in writing or prevent voiding warranty. IN NO EVENT SHALL
SELLER BE LIABLE TO BUYER FOR LOSS OF PROFITS, OR LOSS OF USE BASED UPON A
CLAIM FOR BREACH OF WARRANTY. Any Product which has either been replaced or
repaired under the provisions of this warranty provision shall have warranty
coverage for the remaining period of time of the originally shipped Product.
3.2 LIMITATION ON WARRANTY. THE ABOVE WARRANTY IS EXCLUSIVE TO
THE BUYER AND IS EXPRESSLY IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED.
SELLER SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE AND MAKES NO REPRESENTATIONS REGARDING SUITABILITY FOR
USE OR PERFORMANCE. SELLER'S WARRANTIES AS HEREINABOVE SET FORTH, SHALL NOT BE
ENLARGED OR AFFECTED BY, AND NO OBLIGATION OR LIABILITY SHALL
4
<PAGE>
ARISE OR GROW OUT OF, SELLER'S RENDERING OF TECHNICAL ADVICE OR SERVICE IN
CONNECTION WITH BUYER'S ORDER OR THE PRODUCTS FURNISHED HEREUNDER.
4. CONFIDENTIAL INFORMATION. Buyer shall use all reasonable efforts to
protect and preserve the confidentiality of any information, in any medium,
which is received from Seller in connection with these Terms and Conditions or
any other agreement between Buyer and Seller, whether such information
originates from Seller or a third party ("Confidential Information"), and to
prevent any misuse of such Confidential Information. Without the written consent
of Seller, Buyer further agrees not to disclose any Confidential Information nor
to use any Confidential Information, except to the extent required for Buyer's
internal use of the Products according to their specifications.
5. INTELLECTUAL PROPERTY RIGHTS. Buyer acknowledges that D.S.P.C.
Technologies Ltd. or its affiliates ("DSPC") or certain licensor's of DSPC have
certain right intellectual property rights including but not limited to patents,
trade marks, trade names, inventions, copyrights, know-how and trade secrets
relating to the design, manufacture, or operation of the Products. Buyer shall
take no action to register any of such property rights under its own or
another's name, nor shall it take any other action contrary to DSPC's, or its
licensor's, ownership of such property rights. Nothing in this Agreement gives
Buyer the right to modify the Products in any way, and Buyer shall have no right
to translate, decompile, reverse engineer, or adapt the Products or any part
thereof.
6. REMEDIES AND DEFAULT. In the event that Buyer shall default in a
performance of any its obligations under these Terms and Conditions ("default")
and fails to cure, remedy or correct such default within thirty (30) days of
receipt of written notice from Seller, then Seller may at any time thereafter
terminate these Terms and Conditions upon written notice effective immediately.
Any required notice periods set forth herein shall run concurrently. For the
purposes of this Section, and in addition to any other act of default hereunder
(i) the entering into or filing by a party of a petition, arrangement or
proceeding seeking an order for relief under the bankruptcy laws of the United
States or similar laws of any other jurisdiction, a receivership for any of its
assets, a composition with or assignment for the benefit of its creditors, a
readjustment of debt, or its dissolution or liquidation, and (ii) the failure to
provide to Seller, upon request, reasonable assurances of future performance,
shall be considered an event of default hereunder. Except as is expressly stated
herein to the contrary, any termination of these Terms and Conditions or other
exercise of rights and remedies upon a default as may be herein, shall be in
addition to any rights or remedies provided by law, at equity or under these
Terms and Conditions; provided, however, that in no event shall either party
have any liability for indirect or consequential damages resulting from a
default of its obligations under these Terms and Conditions.
7. INDEMNITY.
7.1 BUYER'S INDEMNITY. Buyer shall indemnify, defend and hold Seller
harmless against any expenses, damages, costs and attorneys' fees resulting from
any claim, suit or proceeding brought for infringement of patents, trademarks,
copyrights, trade secrets, other intellectual property rights, or unfair
competition arising from: (i) compliance with Buyer's (or a third party as
directed by Buyer) designs or specifications or instructions; (ii) compliance
with
5
<PAGE>
[****] Confidential Treatment
Requested
any third party or independent group's telecommunications standard; (iii)
use, combination, or integration of any Product purchased hereunder with any
non-DSPC software or hardware; or (iv) a claim that a manufacturing or other
process utilizing any Product or any part thereof furnished hereunder,
constitutes either direct or contributory infringement of any patent or other
intellectual property right of any third party under the laws of the United
States or any other country. .
7.2 SELLER'S INDEMNITY Except in such cases as specified in Paragraph
7.1 above, Seller shall defend any suit or proceeding brought against Buyer so
far as it is based on a claim that any Products, or any part thereof by itself,
furnished hereunder directly but not indirectly infringes any patent issued in
the United States, or any other country, if notified promptly of such claim in
writing and given authority, information and assistance (at Seller's expense)
for the defense of same, and Seller shall pay all damages, costs, and attorneys'
fees awarded therein against Buyer, subject to the dollar limitation set forth
in Paragraph 8.1 below. In case any Product or any part thereof is in such suit
held to directly (but not indirectly) infringe, and the sale, offer for sale,
use, or importation of any Product or part is enjoined, Seller shall, in its
sole discretion and at its own expense, either procure for Buyer the right to
continue selling, offering for sale, using and importing the Product or part, or
replace same with a non-infringing product, or accept the return of the Product
or part and refund the purchase price thereof. The foregoing states the entire
liability of the Seller for patent infringement by the Product or any part
thereof.
7.3 NO LICENSE. Sale of Products or any parts thereof,
hereunder confers on the Buyer no license under any patent or other right of
DSPC or its licensors governing or relating to (a) the structure of any devices
to which the Products or parts may be applied, or (b) a process or machine in
connection with which they may be used.
8. MISCELLANEOUS
8.1 LIMITATION OF LIABILITY AND REMEDIES. NEITHER SELLER NOR ITS
SUPPLIER, DSPC, SHALL BE LIABLE TO BUYER FOR ANY INDIRECT, INCIDENTAL,
CONSEQUENTIAL (INCLUDING LOSS OF GOODWILL), PUNITIVE, OR SPECIAL DAMAGES
RESULTING FROM PERFORMANCE OR USE OF ANY GOODS OR SERVICES SOLD PURSUANT TO THIS
AGREEMENT, WHETHER SUCH DAMAGES ARE DUE TO A BREACH OF CONTRACT, BREACH OF
WARRANTY, OR NEGLIGENCE. NEITHER PARTY, NOR DSPC, SHALL BE LIABLE TO THE OTHER
FOR DAMAGES FOR INFRINGEMENT OF INTELLECTUAL PROPERTY OF ANY THIRD PARTY, EXCEPT
THAT BUYER SHALL BE LIABLE TO SELLER AND TO DSPC FOR ANY DAMAGES CAUSED BY
BUYER'S FAILURE TO COMPLY WITH SECTION 8.6 OF THIS AGREEMENT, OR BUYER'S MISUSE
OF DSPC'S INTELLECTUAL PROPERTY. NEITHER SELLER NOR ITS SUPPLIER DSPC SHALL BE
LIABLE TO BUYER FOR ANY AMOUNT IN EXCESS OF THE LESSER OF (i) AN AMOUNT EQUAL TO
THE TOTAL VALUE OF THE PRODUCTS PURCHASED BY BUYER FROM SELLER IN THE YEAR PRIOR
TO ANY CLAIM; OR (ii) $US 750,000 for each generation of a chipset. Any action
against Seller hereunder must be commenced within [**********] after the cause
of action has accrued.
8.2 GOVERNING LAW AND JURISDICTION. These Terms and Conditions and its
performance shall be governed by, be subject to and be construed in accordance
with the laws
6
<PAGE>
of Japan. Judgment upon the award rendered and/or the enforcement
of injunctive relief herein provided may be entered in any court having
competent jurisdiction. The parties agree to submit to the jurisdiction of the
appropriate courts located in Tokyo, for the purpose of any suit, action or
other proceeding for the enforcement of arbitration and/or injunctive relief
herein provided and each party expressly waives any and all objections as to
jurisdiction or venue in any of such courts. Nothing herein shall prevent either
party from seeking interim relief in any court with competent jurisdiction.
8.3 INVALIDITY. In the event that (i) any part of these Terms and
Conditions is declared invalid or unenforceable by a final, non-appealable
judgment or decree of a court of competent jurisdiction, or (ii) any
governmental authority or subdivision thereof adopts or interprets any measure,
regulation or law, which in either event, has or may have the effect of
nullifying or impairing any material object of these Terms and Conditions; then
upon the happening of either such event, the party adversely affected by such
event, upon written notice to the other, may propose negotiations for an
appropriate modification of these Terms and Conditions. If the parties cannot
agree to such a modification within thirty (30) days following such notice,
these Terms and Conditions may thereafter be terminated without any further
liability by the party adversely affected by such event, at any time during the
continuance of such event beyond said thirty (30) day period, effective
immediately upon prior written notice to the other party.
8.4 EXPORT CONTROL. To the extent that the Products contain any
software to implement the TIA Common Cryptographic Algorithms (the "Restricted
Parts"), and as such as subject to export control restrictions, the parties
shall i) have executed the required agreement with the TIA to obtain the Common
Cryptographic Algorithms; ii) have obtained the controlled subject documents
from the TIA; and iii) agree to control the Software in compliance with the
requirements of the TIA Agreement and U.S., Canadian, and other export
restrictions. The Restricted Parts will not be included in the Products provided
to Buyer, until the Buyer can demonstrate compliance with the required export
regulations.
8.5 NOTICES. Any notice or communication required or permitted
hereunder, shall be in writing and shall be sent by telex or fax and confirmed
by registered mail, postage prepaid, or personal delivery to the other party.
8.6 CDMA ASICS LICENSEES. With respect to any Product using CDMA
technology, Buyer may only purchase such Products if Buyer has been licensed to
make such purchase by Qualcomm, Inc. Additionally, Buyer hereby acknowledges
that the sale of CDMA ASICs does not convey any intellectual property rights of
Qualcomm, Inc. in such CDMA ASICs, including, but not limited to, any rights
under any patent, trademark, copyright, or trade secret. Buyer may not use or
sell any CDMA ASICs, alone or in combination with other components, without a
separate license from Qualcomm, Inc. under all applicable patents. Buyer's use
and sale of any CDMA ASICs shall be solely in accordance with the terms and
conditions of such license. This Agreement shall not modify or abrogate Buyer's
obligations under any existing license agreement between Buyer and Qualcomm,
Inc., including, but not limited to, Buyer's obligation to pay all royalties
specified thereunder.
8.7 ENTIRE AGREEMENT, MODIFICATIONS, WAIVERS. Except as otherwise
specified herein, these Terms and Conditions incorporates by reference such
Schedules and
7
<PAGE>
Exhibits as are identified by Buyer on the face hereof, which together set
forth the entire understanding and agreement between the parties hereto and
supersedes all prior verbal or written negotiations and understandings in
connection herewith. No waiver of or modification of or amendment of these
Terms and Conditions or any provision thereof shall be binding unless
executed in writing by the parties. No terms and conditions contained in any
other document which are contrary to the provisions of these Terms and
Conditions shall be binding unless executed in writing by the parties. No
waiver of any provision of these Terms and Conditions shall be deemed or
construed a waiver of any other provisions hereof (whether or not similar),
nor shall such waiver be construed a continuing waiver unless expressly so
stated.
SELLER: BUYER:
TOMEN ELECTRONICS CORPORATION _____________________________
By: _________________________ By: _________________________
Name: _______________________ Name: _______________________
Title: ______________________ Title: ______________________
Date: _______________________ Date: _______________________
8
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS IN THE QUARTERLY REPORT ON FORM 10-Q OF DSP COMMUNICATIONS,
INC. FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 30,719
<SECURITIES> 95,429
<RECEIVABLES> 26,392
<ALLOWANCES> 200
<INVENTORY> 2,112
<CURRENT-ASSETS> 160,448
<PP&E> 14,263
<DEPRECIATION> 7,610
<TOTAL-ASSETS> 176,851
<CURRENT-LIABILITIES> 29,026
<BONDS> 0
0
0
<COMMON> 40
<OTHER-SE> 147,785
<TOTAL-LIABILITY-AND-EQUITY> 176,851
<SALES> 113,099
<TOTAL-REVENUES> 118,965
<CGS> 64,701
<TOTAL-COSTS> 68,564
<OTHER-EXPENSES> 12,278
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 29,297
<INCOME-TAX> 1,447
<INCOME-CONTINUING> 27,850
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,850
<EPS-BASIC> 0.70
<EPS-DILUTED> 0.63
</TABLE>
