20-F











Exhibit 4.4  



LOAN AGREEMENT 



LOAN AGREEMENT dated as of 1 July
2008 (the “Agreement”) between RADA Electronic Industries Ltd., a company
organized under the laws of the State of Israel having its main place of business at 7
Giborei Israel Street, Netanya, 42504, Israel, (the “Borrower”) and Faith
Content Development Limited, a company organized under the laws of Hong Kong having its
main place of business at 1/F King Fook Building, 30-32 Des Voeux Road C, Hong Kong, (the
“Lender”). 



W I T N E S S E T H: 



        WHEREAS,
the Borrower has requested that the Lender lend to it an aggregate principal amount of up
to U.S.$1,500,000 (the “Principal Amount”); 



        WHEREAS,
the Lender is willing to lend the Principal Amount to the Borrower on the terms and
subject to the conditions herein set forth; and 



        WHEREAS,
the Principal Amount is to be used exclusively and directly for the Permitted Uses, as
defined below. 



        NOW,
THEREFORE, the Borrower and the Lender hereby agree as follows: 



ARTICLE I  



Definitions  



    1.1.        Defined
Terms.  As used in this Agreement, the following terms shall have           the
meanings specified below:  



        “Agreement”
shall have the meaning assigned to such term in the preamble and shall include the
recitals which shall constitute an integral part hereof; 



        “Banks”
shall mean, Bank Hapoalim B.M., Bank Leumi Le-Israel B.M. and the State Bank of India; 



        “Bank
Facilities” shall mean, the Borrower’s existing credit agreements and
arrangements with the Banks as in effect on the date hereof, further details of which are
set out at Part 1 to Exhibit E hereto; 



        “Borrower”
shall have the meaning assigned to such term in the preamble; 



        “Change
of Control Event” shall mean any event whereby the Borrower shall, directly or
indirectly, in one or more related transactions, (i) consolidate or merge with or into
(whether or not the Borrower is the surviving corporation) another Person, or (ii) sell,
assign, transfer, convey or otherwise dispose of all or substantially all of the
properties or assets of the Borrower to another Person, or (iii) allow a purchase, tender
or exchange offer to be made to and accepted by the holders of more than the 50% of the
Borrowers issued share capital (not including any shares held by the Person or Persons
making or party to, or associated or affiliated with the Persons making or party to, such
purchase, tender or exchange offer), or (iv) enter into a stock purchase agreement or
other business combination (including, without limitation, a reorganization,
recapitalization, spin-off or scheme of arrangement) with another Person; 














        “CEO”
shall mean the chief executive officer of the Borrower; 



        “Charge
Agreement” shall mean the floating charge debenture dated as of the date hereof
between the Borrower and the Lender, which will create a second priority floating charge
over the Charged Assets, in the form of Exhibit D hereto; 



        “Charged
Assets” shall mean all of the assets of the Borrower, wherever located and
whether now or hereafter existing and whether now owned or hereafter acquired, of every
kind and description, tangible or intangible, including, without limitation, the
following: (a) all the assets, monies, property and rights of any kind whatsoever without
exception, whether now or hereafter at any time in the future owned by or in the
possession of the Borrower in any manner or way whatsoever, including, without limitation,
any intangible assets; (b) all the current assets, without exception, now or hereafter at
any time in the future owned by or in the possession of the Borrower in any manner or way
whatsoever, the expression “current assets” meaning all the assets, monies,
property and rights of any kind with the exception of land, buildings and fixtures; (c)
all the fixed assets now or hereafter at any time in the future owned by or in possession
of the Borrower in any manner or way whatsoever, the expression “fixed assets”
to include, inter alia, land, buildings and fixtures; (d) all the securities and other
documents or instruments owned by the Borrower now and at any time in the future held by
Borrower and/or any rights in respect thereof; and (e) all other tangible and intangible
personal property of the Borrower, including, without limitation, all bank and other
accounts and all cash and all investments therein, all proceeds, products, offspring,
accessions, rents, profits, income, benefits, substitutions and replacements of and to any
of the property of the Borrower described above (including, without limitation, any
proceeds of insurance thereon and all causes of action, claims and warranties now or
hereafter held by the Borrower in respect of any of the items listed above), and all
books, correspondence, files and other records, including, without limitation, all tapes,
desks, cards, software, data and computer programs in the possession or under the control
of the Borrower or any other Person from time to time acting for the Borrower that at any
time evidence or contain information relating to any of the property described above or
are otherwise necessary or helpful in the collection or realization thereof; in each case
howsoever the Borrower’s interest therein may arise or appear (whether by ownership,
security interest, claim or otherwise); 



        “Closing
Date” shall mean 2 July 2008 or such other date agreed to by the Borrower
and the Lender, but in no event before the date on which all of the conditions set forth
in Article IV shall have been satisfied or waived; 



        “Commission”
shall mean the US Securities and Exchange Commission; 



        “Convertible
Note” shall mean the convertible note in the principal amount of U.S.$3,000,000
issued by the Borrower on 10 December 2007; 



        “Default”
shall mean any event or condition, which upon notice, lapse of time or both would
constitute an Event of Default; 



        “Default
Interest Rate” shall mean the Interest Rate plus 4%; 



2










        “Drawdown
Notice” shall have the meaning assigned to such term in Section 2.1(b); 



        “Event
of Default” shall have the meaning assigned to such term in Article VI; 



        “Excess
Cash” shall mean and shall be calculated as the Borrower’s current assets
minus its current liabilities as such figures appear on the Borrower’s most recent
annual or half year Financial Statements, less an amount equal to the sum of (i)
repayments due under the Convertible Note during the six (6) month period following the
date of the most recent annual or half year Financial Statements (the “Interim
Period”), in amounts of up to US$750,000 for each Interim Period and (ii) the
Borrower’s cash requirements for the Interim Period (excluding repayments due under
the Convertible Note), as set out in the budget approved by the board of directors of the
Borrower and as revised and updated in each financial quarter. Excess Cash shall be
determined on a six months basis from the annual or half year Financial Statements of the
Borrower;  




        “Exchange
Act” shall mean the US Securities Exchange Act of 1934, as amended; 



        “Financial
Statements” shall mean the annual and interim financial statements of the
Borrower as prepared in accordance US GAAP and the United States Securities and Exchange
Commission; 



        “First
Installment” shall have the meaning assigned to such term in Section 2.1(a); 



        “Governmental
Authority” shall mean any government, any state, city, town, municipality, local
or other political subdivision thereof or thereto and any department, commission, board,
bureau, instrumentality, agency or other entity exercising executive, legislative,
judicial, taxing, regulatory or administrative powers or functions of or pertaining to
government; 



        “Indebtedness”
of any Person shall mean (a) all obligations of such Person for borrowed money or with
respect to deposits or advances of any kind, (b) all obligations of such Person evidenced
by bonds, debentures, notes or similar instruments, (c) all obligations of such Person
upon which interest charges are customarily paid, (d) all obligations of such Person under
conditional sale or other title retention agreements relating to property or assets
purchased by such Person, (e) all obligations of such Person issued or assumed as the
deferred purchase price of property or services (other than payables in the ordinary
course of business), (f) all Indebtedness of others to the extent secured by (or for which
the holder of such Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien on property owned or acquired by such Person, whether or not the
obligations secured thereby have been assumed by such Person, (g) all guarantees by such
Person of Indebtedness of others, (h) all obligations of such Person in respect of
interest rate protection agreements, foreign currency exchange agreements, commodity
purchase or option agreements or other interest or exchange rate or commodity price
hedging arrangements and (i) all obligations of such Person, contingent or otherwise, as
an account party in respect of letters of credit and bankers’ acceptances. The
Indebtedness of any Person shall include the Indebtedness of any other entity (including
any partnership in which such Person is a general partner) to the extent such Person is
liable therefor as a result of such Person’s ownership interest in or other
relationship with such entity, except to the extent the terms of such Indebtedness provide
that such Person is not liable therefore; 



3










        “Intellectual
Property” shall have the meaning assigned to such term in Section 3.8; 



        “Interest
Period” shall mean, each period commencing on the day after a Quarter End and
ending on the next following Quarter End; provided, however, that the first
Interest Period shall commence on the Closing Date and end on the next following Quarter
End; 



        “Interest
Rate” shall mean, with respect to each applicable Interest Period, the applicable
LIBOR Rate for such Interest Period plus 3%; 



        “JV
Undertaking and License” shall mean, the license to be granted to the Lender and
the undertaking regarding the formation of a joint venture between the Lender and the
Borrower for the commercialisation of certain technologies of the Borrower, both dated as
of the date hereof between the Borrower and the Lender, in the forms attached hereto at
Exhibit A; 



        “Lender”
shall have the meaning assigned to such term in the preamble or any other Person to whom
this Agreement is assigned in accordance with Section 7.2; 



        “LIBOR
Rate” shall mean, with respect to the Loan Amount or to any outstanding portion
thereof, (i) the six-month London Interbank Offered Rate for deposits in U.S. dollars, as
published on the date which is two (2) business days prior to the first day of an Interest
Period, in The Wall Street Journal (Eastern Edition) under the caption “Money Rates
– London Interbank Offered Rates (LIBOR)"; or (ii) if The Wall Street Journal
does not publish such rate, the offered six-month rate for deposits in U.S. dollars which
appears on the Reuters Screen LIBOR Page as of 10:00 a.m., New York time, on the date
which is two (2) business days prior to the first day of an Interest Period, provided that
if at least two rates appear on the Reuters Screen LIBOR Page on any day, the
“LIBOR” for such day shall be the arithmetic mean of such rates; 



        “Lien”
shall mean with respect to any asset, (a) any mortgage, lien (statutory or other), pledge,
encumbrance, charge or security interest in or on such asset, (b) the interest of a vendor
or a lessor under any conditional sale agreement, capital lease or title retention
agreement relating to such asset and (c) in the case of securities, any purchase option,
call or similar right of a third party with respect to such securities; 



        “Loan
Amount” shall mean the Principal Amount outstanding from time to time, together
with all interest accrued thereon; 



        “Loan
Documents” shall mean this Agreement, the Charge Agreement and the JV
Undertaking and License, and all exhibits, schedules and appendices hereto and thereto; 



        “Permitted
Indebtedness” shall mean (i) Indebtedness incurred under this Agreement, the
Convertible Note or the Bank Facilities, and (ii) customer credit customary in the
Borrower’s industry which is given in the ordinary course of business.  




        “Permitted
Liens” shall mean (i) the existing Liens granted to the Banks as set out at Part
2 to Exhibit E hereto, (ii) Liens granted to secure any amounts outstanding under
the Convertible Note (iii) Liens for taxes, assessments or similar charges and
assessments not yet delinquent; (iv) Liens of mechanics, materialmen, warehousemen,
carriers or other like liens securing obligations incurred in the ordinary course of
business that are not yet due and payable or that are being contested in good faith by
appropriate proceedings.  



4










        “Permitted
Uses” shall mean the permitted uses of the Principal Amount as set forth on
Exhibit B hereto; 



        “Person”
shall mean any natural person, corporation, business trust, joint venture, association,
unincorporated association, company, partnership, limited liability company or government,
or any agency or political subdivision thereof; 



        “Principal
Amount” shall have the meaning assigned to such term in the recitals; 



        “Quarter
Ends” shall mean 31 March, 30 June, 30 September and 31 December in any calendar
year and “Quarter End” shall mean any of them; 



        “Second
Installment” shall have the meaning assigned to such term in Section 2.1(b); 



        “Securities
Act” shall mean the US Securities Act of 1933, as amended. 



    1.2.         Terms
Generally. The definitions in Section 1.1 shall apply equally to           both the
singular and plural forms of the terms defined. Whenever the context           may
require, any pronoun shall include the corresponding masculine, feminine and
          neuter forms. The words “include”, “includes” and
          “including” shall be deemed to be followed by the phrase “without
          limitation.” All references herein to Articles, Sections, Exhibits and
          Schedules shall be deemed references to Articles and Sections of, and Exhibits
          and Schedules to, this Agreement unless the context shall otherwise require.
          Except as otherwise expressly provided herein, (a) any reference in this
          Agreement to any Loan Document shall mean such document as amended, restated,
          supplemented or otherwise modified from time to time in accordance with the
          terms hereof or thereof, and (b) all terms of an accounting or financial nature
          shall be construed in accordance with generally accepted accounting principals
          as in effect from time to time.  



ARTICLE II  



The Loan 



    2.1        Advance
of Principal Amount. On the basis of the representations and warranties and covenants
made by the Borrower herein, and subject to the satisfaction of all the closing
conditions contained in Article IV, the Principal Amount shall be advanced to the
Borrower in two installments, as follows:  



		    (a)        on
the Closing Date an amount of US$1,000,000 (the “First           Installment”)
shall be advanced to the Borrower; and  







		    (b)        the
remaining US$500,000 of the Principal Amount (the “Second           Installment”)
shall be advanced to the Borrower within seven (7)           business days of receipt by
the Lender of the Borrower’s written request           (the “Drawdown Notice”),
provided such Drawdown Notice is           received by the Lender no less than six (6)
calendar months and no more than           nine (9) calendar months after the Closing
Date.  







5










    2.2        Interest.  



		    (a)        Subject
to the provisions of Section 2.3, the outstanding Principal Amount shall           bear
interest for each Interest Period, at a rate equal to the Interest Rate for           the
Interest Period in effect at the time of such calculation.  







		    (b)        On
the first business day of each Interest Period, commencing as of the second
          Interest Period following the Closing Date, and as long as the Principal
Amount,           or any portion thereof, remains outstanding (and without derogating
from Section           2.3), the Borrower shall pay to the Lender an amount equal to the
Interest Rate           applicable to the immediately preceding Interest Period, with
respect to the           Principal Amount or any portion thereof that was outstanding
during such           Interest Period.  







    2.3        Default
Interest. If the Borrower shall default in the repayment of any portion of the
Principal Amount or any interest accrued thereon or any other amount becoming due
hereunder, by acceleration or otherwise, the Borrower shall on demand from time to time
pay interest on such defaulted amount to the date of actual payment at a rate per annum
(computed as provided in Section 2.2) equal to the Default Interest Rate.  



    2.4        Repayment
of Principal Amount.  



		    (a)        Repayment
of Principal Amount: The Principal Amount shall be due and           payable as
follows:  







		    (i)        an
amount equal to U.S.$90,000 of the Principal Amount shall be due and payable           in
six (6) equal installments of U.S.$15,000 each, commencing on 1 July 2009,           and
continuing on the first business day of each of the next five (5) calendar
          quarters, with the last such installment (the 6th) being due and
          payable on 1 October 2010; and  







		    (ii)        the
remaining amount of the Principal Amount actually advanced to the Lender           shall
be due and payable in eight (8) equal installments, commencing on the 1           April
2011, and continuing on the first business day of each of the next seven           (7)
calendar quarters, with the last such installment (the 8th) being
          due and payable on 1 January 2013.  







		    (b)        Event
of Default. Notwithstanding the foregoing in subsection (a) above,           the
entire outstanding Loan Amount shall became due and payable to the Lender
          without demand upon the occurrence of an Event of Default in accordance with
the           provisions of Article VI.  







		    (c)        Prepayment:  







		    (i)        The
Borrower shall have the right at any time and from time to time to prepay           the
Loan Amount outstanding at such time, in whole or in part, with no penalty, provided,
however, that no such prepayment shall be in an amount less           than
U.S.$100,000 and, provided further, that the Borrower shall have
          delivered written notice to the Lender at least ten (10) days prior to any such
          prepayment.  







6










		    (ii)        Section
2.4(a) above notwithstanding, for as long as any of the Principal Amount
          remains outstanding, immediately following the publication of the annual or
half           year Financial Statements of the Borrower, the Borrower shall use any
Excess           Cash available as calculated from such Financial Statements to prepay
such of           the outstanding Loan Amount as is equal to such Excess Cash and such
prepayment           shall be made in accordance with the provisions of Section 2.4(c)(i)
above.  







    2.5        Manner
of Payment. Each payment hereunder by the Borrower shall be made to the Lender in
U.S. Dollars by wire transfer in immediately available funds to such account as the
Lender may designate in writing. Any payment made by the Borrower shall be attributed
first to be on account of outstanding interest (including Default Interest) and only
thereafter to be on account of the Principle Amount. All payments to be made by the
Borrower to the Lender shall be made free and clear of, and without deduction or
withholding unless the Borrower is required by law to make such a payment subject to a
deduction or withholding, in which case the Borrower shall, promptly on becoming aware of
such requirement, notify the Lender of it. If at any time is or becomes required by law
to make any deduction or withholding from any payment to the Lender due under this
Agreement, the sum due from the Borrower in respect of such payment shall be increased to
the extent necessary to ensure that, after the making of such deduction or withholding,
the Lender receives, on the due date for such payment (and retains free from any
liability in respect of such deduction or withholding), a net sum equal to the sum which
it would have received had no such deduction or withholding been required to be made.  



ARTICLE III  



Representations and
Warranties of the Borrower 



        The
Borrower represents and warrants to the Lender, as follows: 



     3.1        Organization;
Powers. The Borrower (i) is a company validly existing under the laws of the State of
Israel and (ii) has all requisite power and authority to execute, deliver and
perform the Loan Documents and to consummate the transactions contemplated hereby and
thereby. Schedule 3.1 hereto sets forth (i) the exact legal name of the Borrower and (ii)
the registered number of the Borrower.  



    3.2.        Authorization. Subject
to receipt of the consents detailed in Schedule           3.2 hereof (“Required
Consents”) the execution, delivery           and performance by the Borrower of
the Loan Documents (i) have been duly           authorized by all necessary action,
(ii) do not contravene its memorandum or           articles of association or any
applicable law or any contractual restriction           binding on or otherwise affecting
the Borrower or its properties, (iii) do not           and, based on current applicable
law, will not result in or require the creation           of any Lien upon or with
respect to any of its properties, and (iv) do not           result in any default,
breach, noncompliance, suspension, revocation,           impairment, forfeiture or
nonrenewal of any permit, license, authorization or           approval applicable to it
or its operations or any of its properties or any           agreement to which it or its
properties are subject or by which it or its           properties are bound, which, in
the case of this clause (iv), is reasonably           expected to have a material
adverse effect on the business, finances, operations           or prospects of the
Borrower.  



7










    3.3.        Validity. As
of the Closing Date, and in the case of the Charge Agreement           only, subject to
receipt of the Required Consent, each of this Agreement, the           Charge Agreement
and the JV Undertaking and License are, and when executed and           delivered, will
be, legal, valid and binding obligations of the Borrower,           enforceable against
the Borrower in accordance with their terms, except as may           be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or           other similar
laws and principles of equity.  



    3.4.        Litigation. There
is no pending or written notice threatening any action,           suit, proceeding or
claim affecting the Borrower or any of its subsidiaries,           before any
Governmental Authority or any arbitrator, or any order, judgment or           award by
any Governmental Authority or arbitrator, that may adversely affect the           grant
by the Borrower, or the recordation, of the charges purported to be           created by
the execution delivery and/or performance of any of the Loan           Documents by the
Borrower, or the exercise by the Lender of any of its rights or           remedies
hereunder. 



    3.5.        Tax. All
tax returns and other reports required by applicable law to be           filed by the
Borrower or its subsidiaries have been filed, or extensions have           been obtained,
and all taxes, assessments and other governmental charges imposed           upon the
Borrower or any of its subsidiaries or any property of the Borrower or           any of
its subsidiaries (including, without limitation, all income and other           taxes on
employees’ wages) and which have become due and payable on or           prior to the
date hereof have been paid, except to the extent contested in good           faith by
proper proceedings which stay the imposition of any penalty, fine or           lien
resulting from the non-payment thereof and with respect to which adequate
          reserves have been set aside for the payment thereof on the Financial
Statements           in accordance with general accepted accounting principles.  



    3.6.        Public
Documents. The Borrower has filed all reports required to be filed           by it
under the Securities Act and the Exchange Act, including pursuant to           Section
13(a) or 15(d) thereof, for the twelve (12) months preceding the date           hereof
(or such shorter period as the Borrower was required by law to file such
          reports) (the foregoing materials together with reports on Form 6-K furnished
by           the Borrower to the Commission being collectively referred to herein as the
          “SEC Reports”) on a timely basis or has timely filed a valid
          extension of such time of filing and has filed any such SEC Reports prior to
the           expiration of any such extension.  



        As
of their respective dates, the SEC Reports complied in all material respects with the
requirements of the Securities Act and the Exchange Act and the rules and regulations of
the Commission promulgated thereunder, and none of the SEC Reports, when filed, contained
any untrue statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. 



8










    3.7.        Material
Changes since Financial Statements. Since the date of the latest           audited
Financial Statements included within the SEC Reports, except as           specifically
disclosed in the SEC Reports, (i) there has been no event,           occurrence or
development that has had or that could reasonably be expected to           result in a
material adverse change in the financial or business condition of           the Borrower,
(ii) the Borrower has not incurred any Indebtedness (contingent or           otherwise)
other than (A) trade payables, accrued expenses and other liabilities           incurred
in the ordinary course of business consistent with past practice and           (B)
liabilities not required to be reflected in the Borrower’s Financial
          Statements pursuant to generally accepted accounting principals or required to
          be disclosed in filings made with the Commission, (iii) the Borrower has not
          altered its method of accounting or the identity of its auditors, (iv) the
          Borrower has not declared or made any dividend or distribution of cash or other
          property to its shareholders or purchased, redeemed or made any agreements to
          purchase or redeem any share capital, and (v) the Borrower has not issued any
          equity securities to any officer, director or affiliate, except pursuant to
          existing share option plans. The Borrower does not have pending before the
          Commission any request for confidential treatment of information.  



    3.8.        Intellectual
Property. The Borrower owns and controls, or otherwise           possesses adequate
rights to use, all trademarks, patents, copyrights,           inventions, trade secrets,
proprietary information and technology, know-how,           formulae, rights of publicity
(collectively, the “Intellectual           Property”) which is the only
Intellectual Property necessary to conduct           its business in substantially the
same manner as conducted and as proposed to be           conducted, as of the date
hereof. Schedule 3.8 hereto sets forth a true and           complete list of all the
registered Intellectual Property owned or used by the           Borrower as of the date
hereof. All such Intellectual Property is subsisting and           in full force and
effect, has not been adjudged invalid or unenforceable, is           valid and
enforceable and has not been abandoned in whole or in part. Except as           set forth
on Schedule 3.8, no Intellectual Property is the subject of any           licensing or
franchising agreement. The Borrower has no knowledge of any           conflict with the
rights of others to any Intellectual Property and, to the best           knowledge of the
Borrower, the Borrower is not now infringing or in conflict           with any such
rights of others in any material respect, and to the best           knowledge of the
Borrower, no other Person is now infringing or in conflict in           any material
respect with any such properties, assets and rights owned or used           by the
Borrower. The Borrower has not received any notice that it is violating           or has
violated the trademarks, patents, copyrights, inventions, trade secrets,
          proprietary information and technology, know-how, formulae, rights of publicity
          or other intellectual property rights of any third party.  



    3.9.        Location
of Charged Assets. All equipment, fixtures, goods and inventory           now
existing are, and all equipment, fixtures, goods and inventory hereafter
          existing will be, located and/or based at the addresses specified therefore on
          Schedule 3.9(a) hereto, except that the Borrower will give the Lender not less
          than five days’ prior written notice of any change of the location of any
          such Charged Assets, other than to locations set forth on Schedule 3.9(a). The
          Borrower’s chief place of business and chief executive office, the place
          where the Borrower keeps its records and all originals of all chattel paper are
          located at the addresses specified therefore on Schedule 3.9(b) hereto. Set
          forth on Schedule 3.9(c) hereto is a complete and accurate list, as of the date
          of this Agreement, of each deposit account, securities account and commodities
          account of the Borrower, together with the name and address of each institution
          at which each such account is maintained, the account number for each account.
          Set forth on Schedule 3.9(d) hereto is a complete and correct list of each
trade           name used by the Borrower and the name of, and each trade name used by,
each           person from which the Borrower has acquired any substantial part of the
Charged           Assets.  



9










    3.10.        Liens.
The Borrower is and will be at all times the sole and exclusive           owner of, or
otherwise have and will have adequate rights in all of the Charged           Assets, free
and clear of any Liens, except for Permitted Liens. No effective           financing
statement, recordation of charge or other instrument similar in effect           covering
all or any part of the Charged Assets is on file in any recording or           filing
office, except (A) such as may have been filed in favor of the Banks           relating
to the Bank Facilities, and (B) such as may have been filed relating to           the
Convertible Note.  



    3.11.        Compliance
with Law and Other Instruments. Except as set forth in           Schedule 3.11, the
exercise by the Lender of any of its rights and remedies           under the Loan
Documents will not contravene any law or any contractual           restriction binding on
or otherwise affecting the Borrower or any of its           properties and will not
result in or require the creation of any lien, upon or           with respect to any of
its properties.  



    3.12.        Governmental
or Third Party Consents. No authorization or approval or           other action by,
and no notice to or filing with, any Governmental Authority or           other regulatory
body, or any other Person, is required for the exercise by the           Lender of any of
its rights and remedies hereunder or under any of the Loan           Documents other
than: (1) the consent of the Banks to the grant of the security           interest
pursuant to the Charge Agreement, and (2) the filing of the Charge           Agreement,
in accordance with the Israeli Companies Ordinance – 1983 which           filings
shall be made no later than 21 days of the date hereof.  



    3.13.        Effect
of Charge Agreement. Subject to receipt of the Required Consent ,           the
Charge Agreement creates in favor of the Lender a legal, valid and           enforceable
second priority floating charge over the Charged Assets, as security           for the
obligations of the Borrower under this Agreement second in priority only           to the
Permitted Liens. Such recordings and all other action necessary or           desirable to
record such security interests have been duly taken or will be           taken within 21
days of the grant of the Required Consents.  



ARTICLE IV  



Conditions to Closing 



        The
obligation of the Lender to lend the Principal Amount to the Borrower is subject to the
satisfaction of the following conditions, on or prior to the Closing Date, any or all of
which may be waived by the Lender: 



    4.1        the
representations and warranties made by the Borrower in this Agreement shall have been
true and correct when made, and shall be true and correct as of the Closing Date as if
the Closing Date was substituted for the date set forth in such representations and
warranties;  



    4.2        all
covenants, agreements, and conditions contained in this Agreement to be performed or
complied with by the Borrower prior to the Closing Date shall have been performed or
complied with by the Borrower, as the case may be, prior to or at the Closing Date;  



10










    4.3        from
the date hereof until the Closing Date, there will have been no material adverse change
in the financial or business condition of the Borrower;  



    4.4        the
Lender shall have received a certificate, dated as of the Closing Date and signed by the
CEO of the Borrower, confirming compliance with the conditions precedent set forth in
Sections 4.1, 4.2 and 4.8 of this Article IV;  



    4.5        the
Charge Agreement (subject only to receipt of the Required Consents), and the JV
Undertaking and License shall have been duly executed and delivered to the Lender by the
Borrower;  



    4.6        the
Lender shall have received a duly executed legal opinion of S. Friedman & Co,
Advocates and Notaries, counsel to the Borrower, in the form attached hereto as Exhibit
C;  



    4.7        all
corporate and other proceedings taken or required to be taken by the Borrower for the
execution, delivery and performance of the Loan Documents by the Borrower shall have been
taken and all documents incident thereto shall be reasonably satisfactory in form and
substance to the Lender;  



    4.8        this
Agreement and the other Loan Documents shall have received the approval of the
shareholders of the Borrower in accordance with Section 275 of the Companies Law,
5759-1999; and  



    4.9        the
Borrower shall have received the approval of the Office of the Chief Scientist to any
change of ownership of its assets which may occur as a result of the enforcement by the
Lender of the security interest created under the Charge Agreement.  



ARTICLE V  



Covenants 



        The
Borrower covenants and agrees with the Lender that so long as this Agreement shall remain
in effect or any portion of the Principal Amount or interest (including the Default
Interest) shall remain unpaid: 



    5.1        Business
and Properties. The Borrower will and will cause each of its subsidiaries, to do or
cause to be done all things necessary to obtain, preserve, renew, extend and keep in full
force and effect the rights, licenses, permits, franchises and authorizations material to
the conduct of its business as conducted and as proposed to be conducted, including
pursuant to the JV Undertaking (the “Business”); maintain and operate
such Business in substantially the manner in which it is presently conducted and
operated; comply in all material respects with all applicable laws, rules, regulations
and orders of any governmental authority, whether now in effect or hereafter enacted; and
at all times maintain and preserve all property material to the conduct of the Business
and keep its property in good repair, working order and condition and from time to time
make, or cause to be made, all required and proper repairs, renewals, additions,
improvements and replacements thereto necessary in order that the Business carried on in
connection therewith may be properly conducted at all times.  



    5.2        Location
of Charged Assets. The Borrower will keep the Charged Assets at the locations
specified therefor on Schedule 3.9(a) hereof or, upon not less than five (5) days’ prior
written notice to the Lender accompanied by a new Schedule 3.9(a) hereto indicating the
new location of such Charged Assets, at such other locations as set forth on such amended
Schedule 3.9(a).  



11










    5.3        Condition
of Charged Assets. The Borrower will maintain or cause the Charged Assets to be
maintained and preserved in good condition, repair and working order, ordinary wear and
tear excepted, and will forthwith, or in the case of any loss or damage to any equipment
within a reasonable time after the occurrence thereof, make or cause to be made all
repairs, replacements and other improvements in connection therewith which are reasonably
necessary or desirable, consistent with past practice or which the Lender may reasonably
request to such end. The Borrower will promptly furnish to the Lender a statement
describing in reasonable detail any loss or damage in excess of $100,000 to any of the
Charged Assets.  



    5.4        Taxes,
Etc. The Borrower agrees to pay promptly when due all property and other taxes,
assessments and governmental charges or levies imposed upon, and all claims (including
claims for labor, materials and supplies) against, the Charged Assets, except to the
extent the validity thereof is being contested in good faith by proper proceedings which
stay the imposition of any penalty, fine or lien resulting from the non-payment thereof
and with respect to which adequate reserves in accordance with general accepted
accounting principles have been set aside for the payment thereof.  



    5.5        Insurance  



		    5.5.1        The
Borrower will insure the Charged Assets at all times with a licensed insurer under the
Insurance Business Control Law, 5741-1981, at the full value of the assets charged
against reasonable and usual risks in respect of properties of the same type, and also
against such other risks as the Lender may from time to time indicate, if any, and in
accordance with terms and conditions the Lender will agree upon with insurance companies
(the “Insurance Policy”), and the Borrower will pay all insurance fees
on due date and deliver to the Lender copies of all the insurance certificates and the
receipts in respect of payment of the insurance premiums.  







		    5.5.2        The
Borrower will use best efforts to procure that each Insurance Policy shall provide for
all losses to be paid on behalf of the Lender and the Borrower as their respective
interests may appear, and each policy for property damage insurance shall provide for all
losses to be adjusted with, and, subject to the rights of the Banks under the Permitted
Liens, paid directly to, the Lender. The Borrower will use best efforts to procure that
each such policy shall, in addition, (A) contain an agreement by the insurer that any
loss thereunder shall be payable to the Lender on its own account notwithstanding any
action, inaction or breach of representation or warranty by the Borrower, (B) provide
that there shall be no recourse against the Lender for payment of premiums or other
amounts with respect thereto and (C) provide that at least 10 days’ prior written
notice of cancellation, lapse, expiration or other adverse change shall be given to the
Lender by the insurer. The Borrower will, if so requested by the Lender, deliver to the
Lender original or duplicate policies of such insurance. The Borrower will also, at the
request of the Lender, execute and deliver instruments of assignment of such insurance
policies and cause the respective insurers to acknowledge notice of such assignment.  







12










		    5.5.3        Reimbursement
under any liability insurance maintained by the Borrower pursuant to this Section 5.5 may
be paid directly to the Person who shall have incurred liability covered by such
insurance. In the case of any loss involving damage to equipment or inventory, and
subject to the prior rights of the Banks under the Permitted Liens, any proceeds of
insurance maintained by the Borrower pursuant to this Section 5.5 shall be paid to the
Lender and the Borrower will make or cause to be made the necessary repairs to or
replacements of such equipment or inventory, and any proceeds of insurance maintained by
the Borrower pursuant to this Section 5.5 shall be paid by the Purchaser to the Borrower
as reimbursement for the costs of such repairs or replacements.  







		    5.5.4        All
insurance payments in respect of such equipment or inventory shall be paid to the Lender
and applied as specified in Section 7(b) of the Charge Agreement.  







    5.6        Inspection
and Reporting . The Borrower shall permit the Lender or representatives thereof or
such professionals or other Persons as the Lender may designate not more than twice a
year in the absence of an Event of Default, upon prior notice and during reasonable
business hours: (i) to examine and make copies of and abstracts from the Borrower’s
records and books of account, (ii) to visit and inspect the properties at which the
Charged Assets are located, and (iii) to conduct audits, appraisals and/or valuations in
respect of the Charged Assets. The Borrower shall also permit the Lender or any
representatives thereof or such professionals or other Persons as the Lender may
designate to discuss the Borrower’s affairs, finances and accounts with any of its
directors, officers, managerial employees, independent accountants or any of its other
representatives, during reasonable hours and subject to the execution of customary
confidentiality and non disclosure undertaking.  



    5.7        Use
of Proceeds. The Borrower shall use the Principal Amount exclusively and directly for
the Permitted Uses.  



    5.8        Indebtedness;
Liens. The Borrower shall not and shall cause its subsidiaries not to incur, create,
assume or permit to exist any Indebtedness other than the Permitted Indebtedness. The
Borrower shall not subject any of its assets to any Liens, other than the Permitted
Liens.  



    5.9        Dividends
and Distributions. The Borrower shall not declare or pay, directly or indirectly, any
dividend or make any other distribution (by reduction of capital or otherwise), whether
in cash, property, securities or a combination thereof with respect to any of its share
capital or directly or indirectly redeem, purchase, retire or otherwise acquire for value
(or permit any of its subsidiaries to purchase or acquire) any of its share capital or
set aside any amount for any such purpose; provided, however, that any subsidiary
of the Borrower may declare and pay dividends or make other distributions to the
Borrower.  



    5.10        Further
Assurance. The Borrower shall cooperate with the Lender and take such further actions
and execute and deliver such further instruments and documents as the Lender may
reasonably request to effect to the Lender’s reasonable satisfaction the
transactions contemplated by the Loan Documents including, without limitation, the
perfection of the security interest created by the Charge Agreement over the Charged
Assets.  




13









    5.11        Occurrence
of Event of Default. The Borrower shall immediately notify the Lender on becoming
aware of the occurrence or likely occurrence of an Event of Default.  



ARTICLE VI  



Events of Default 



        In
case of the happening of any of the following events (“Events of
Default”): 



    6.1        Non
Compliance. The Borrower fails to comply with any provision of the Loan Documents.  



    6.2        Misrepresentation.
Any representation, warranty or statement made, repeated or deemed made by the Borrower
in or pursuant to the Loan Documents is or proves to have been incorrect or misleading in
any material respect when made, repeated or deemed made.  



    6.3        Cross
Default.  



		    (a)        Any
Indebtedness (including a contingent obligation) of the Borrower to any           Person,
including without limitation to any of the Banks, is not paid when due.  







		    (b)        Any
Indebtedness of the Borrower to any Person, including without limitation to           any
of the Banks, becomes due or capable of being declared due prior to its           stated
maturity by reason of default.  







		    (c)        Any
expropriation, attachment, sequestration, distress, execution or enforcement           of
a security affects any of the Borrower’s assets.  







    6.4        Insolvency.  



		    (a)        The
Borrower stops or suspends payment of any of its debts, or is unable to or
          admits inability to pay its debts as they fall due.  







		    (b)        The
Borrower commences negotiations (by reason of actual or anticipated           financial
difficulties), enters into any composition or arrangement with one or           more of
its creditors with a view to rescheduling any of its Indebtedness.  







		    (c)        Any
of the following events occurs in relation to the Borrower:  







		    (i)        a
moratorium of any indebtedness, winding-up, dissolution, suspension of
          payments, administration, reorganization (by way of voluntary arrangement,
          scheme of arrangement or otherwise), petition for bankruptcy, composition,
          compromise, assignment or arrangement with any creditor;  







		    (ii)        any
liquidator, receiver, administrative receiver, administrator, compulsory
          manager or other similar officer is appointed in respect of the Borrower or any
          of its assets;  







		    (iii)        any
event occurs in relation to the Borrower that is analogous to those listed           in
this subsection (c).  







14










    6.5        Distress.
A distress, attachment, execution or other legal process is levied, enforced or sued
out on or against the assets of the Borrower.  



    6.6        Enforcement
of Security. Any security on or over the assets of the Borrower becomes enforceable.  



    6.7        Illegality.
Any or all of the Loan Documents becomes invalid, unlawful, unenforceable,
terminated, disputed or ceases to have full force and effect.  



    6.8        Repudiation.
The Borrower repudiates or evidences an intention to repudiate any of the Loan
Documents.  



    6.9        Material
Adverse Change. Any event occurs or circumstances arise which, in the opinion of the
Lender, is likely to materially and adversely affect the ability of the Borrower to
perform all or any of its obligations under, or otherwise comply with, the terms of the
Loan Documents.  



    6.10        Change
of Control Event. A Change of Control Event occurs or is about to occur.  



then, and in every such event,
(i) at any time thereafter during the continuance of such event, the Lender may, by notice
to the Borrower, take any and all of the following actions, at the same time or different
times: (x) declare the Loan Amount then outstanding to be forthwith due and payable in
whole or in part, whereupon the outstanding Loan Amount so declared to be due and payable,
together with any and all other liabilities of the Borrower accrued hereunder or under any
other Loan Document, shall forthwith become due and payable, without presentment, demand,
protest or any other notice of any kind, all of which are hereby expressly waived by the
Borrower, anything contained herein or in any other Loan Document to the contrary
notwithstanding, and (y) exercise remedies available under the Charge Agreement or
otherwise; and (ii) in any event with respect to the Borrower described in Sections 6.4,
6.5 or 6.6 above, the Loan Amount then outstanding, together with any and all other
liabilities of the Borrower accrued hereunder and under any other Loan Document, shall
automatically become due and payable, without presentment, demand, protest or any other
notice of any kind, all of which are hereby expressly waived by the Borrower, anything
contained herein to the contrary notwithstanding. On the occurrence of an Event of Default
the Borrower shall be liable for all of the Lender’s costs and expenses (including
reasonable attorney’s fees and expenses) incurred in connection with recovery of the
outstanding Loan Amount by the Lender. 



15










ARTICLE VII  



Miscellaneous 



    7.1        Notices.
Notices and other communications provided for herein shall be in writing and shall be
delivered by hand or courier service and sent by telecopy as follows (or to such other
address or addresses as any party shall have specified to the other in writing):  



	 		
	 		
	 		
	 		
	 		
	 	(a)     if to the Borrower, to:	RADA Electronic Industries Ltd.
	 	 	7 Giborei Israel Street
	 	 	Netanya
	 	 	42504
	 	 	Israel
	 	 	Telephone: + 972-9-892-1109
	 	 	Facsimile: + 972-9-885-5885
	 	 	Attention: Zvika Alon and Shiri lazarovich







with a copy (which shall not
constitute notice) to S. Friedman & Co, Advocates and Notaries, Europe – Israel
Tower, 2 Weitzman Street, Tel Aviv, Israel Fax: + 972-3-693-1930 Attention: Sarit Molcho,
Adv.; 



	 		
	 		
	 		
	 		
	 		
	 	(b)     if to the Lender, to :	Faith Content Development Limited
	 	 	1/F King Fook Building
	 	 	30-32 Des Voeux Road C
	 	 	Hong Kong
	 	 	Telephone: + 852-2822 8678
	 	 	Fax: + 852-2845 9289
	 	 	Attention: Ms. Mina Chan






with a copy (which shall not
constitute notice) to Gross,  Kleinhendler,  Hodak,  Berkman & Co., 1 Azrieli Center, Tel
Aviv 67021, Fax: + 972-3-607 4590,  Attention: Lilian Safran Shaked, Adv. 



16












    7.2        Successors
and Assigns.  



		    (a)        Neither
party shall be entitled to assign or transfer any of its rights or           obligations
hereunder in the absence of specific written consent of the other,           provided
that the Lender shall be permitted to assign or transfer any of its           rights or
obligations hereunder to an entity controlled by, controlling or under           common
control with the Lender.  







		    (b)        Except
as otherwise expressly limited herein, the provisions hereof shall inure           to the
benefit of, and be binding upon, the successors and assigns, of the           parties
hereto.  







    7.3        Waivers;
Amendments.  



		    (a)        This
Agreement may not be amended, supplemented, discharged, terminated or           altered
except by writing signed by the parties hereto.  







		    (b)        No
failure or delay by any party to this Agreement to enforce at any time any of
          the provisions hereof, or to exercise any power or right thereunder, shall
          operate as or be construed to be, a waiver of any such provision, power or
          right. Any waiver of any provision hereof or any power or right thereunder
shall           be in writing, and shall be effective only in the specific instance and
for the           purpose for which given. All remedies, either under this Agreement or
by law or           otherwise afforded to any of the parties, shall be cumulative and not
          alternative.  







    7.4        Entire
Agreement. This Agreement and the other Loan Documents constitute the entire contract
between the parties relative to the subject matter hereof. Any previous agreement among
the parties with respect to the subject matter hereof is superseded by this Agreement and
the other Loan Documents. Nothing in this Agreement or in the other Loan Documents,
expressed or implied, is intended to confer upon any party other than the parties hereto
and thereto any rights, remedies, obligations or liabilities under or by reason of this
Agreement or the other Loan Documents.  



    7.5        Governing
Law; Jurisdiction. This Agreement shall be governed for all purposes exclusively by
the laws of the State of Israel to the exclusion of conflict of law rules. Any dispute
arising under or in relation to this Agreement shall be resolved in the competent court
for the Tel Aviv-Jaffa district, and each of the parties hereby submits irrevocably to
the exclusive jurisdiction of such court.  



    7.6        Severability.
In the event any one or more of the provisions contained in this Agreement or in any
other Loan Document should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained herein and
therein shall not in any way be affected or impaired thereby. The parties shall endeavor
in good-faith negotiations to replace the invalid, illegal or unenforceable provisions
with valid provisions the economic effect of which comes as close as possible to that of
the invalid, illegal or unenforceable provisions.  



17










    7.7        Survival
of Agreement. All covenants, agreements, representations and warranties made by the
Borrower herein and in the certificates or other instruments prepared or delivered in
connection with or pursuant to this Agreement or any other Loan Document shall be
considered to have been relied upon by the Lender and shall survive the making by the
Lender of the loan hereunder, regardless of any investigation made by the Lender or on
its behalf, and shall continue in full force and effect as long as any Loan Amount any
other amount payable under this Agreement or any other Loan Document is outstanding and
unpaid.  



    7.8        Right
of Setoff. If an Event of Default shall have occurred and be continuing, the Lender
is hereby authorized at any time and from time to time, to the fullest extent permitted
bylaw, to setoff and apply any and all obligations at any time owing by the Lender to the
Borrower or any of its subsidiaries against any of and all the obligations of the
Borrower or any of its subsidiaries now or hereafter existing under this Agreement and
other Loan Documents to the Lender, irrespective of whether or not the Lender shall have
made any demand under this Agreement or such other Loan Document and although such
obligations may be unmatured. The rights of the Lender under this Section 7.8 are in
addition to other rights and remedies (including other rights of setoff) that the Lender
may have.  



    7.9        Expenses.
The Borrower shall pay the Lender’s expenses in connection with this Agreement and
the transactions contemplated hereby, including, without limitation, any legal and
accounting fees, whether or not the transactions contemplated hereby are consummated. The
Borrower agrees to pay, and save the Lender harmless against liability for the payment
of, the costs and expenses, including attorney’s fees, incurred by the Lender in
enforcing any rights under this Agreement or in responding to any subpoena or other legal
process issued in connection with this Agreement or the transactions contemplated hereby
or by reason of the Lender’s having provided the loans hereunder, including costs
and expenses incurred in any bankruptcy case.  



    7.10        Headings.
Article and Section headings herein are for convenience of reference only, are not part
of this Agreement and are not to affect the construction of, or to be taken into
consideration in interpreting, this Agreement.  



    7.11        Counterparts.
This Agreement may be executed in counterparts, each of which shall be deemed an original
and all of which, taken together, shall constitute one and the same instrument.  



    7.12        Undertaking.
The Borrower undertakes to the Lender that for as long as any amount of the Loan remains
outstanding, it will and will continue to use its best efforts to obtain, as soon
reasonably practicable following the Closing Date, the Required Consents required in
connection with the entering into of the Charge Agreement and the creation of the
security interest thereunder, in favour of the Lender.



[THE REMAINDER OF THIS
PAGE HAS BEEN LEFT INTENTIONALLY BLANK] 



18










        IN
WITNESS WHEREOF, the Borrower and the Lender have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first above
written. 



		
		
		
		
		
	 	THE BORROWER: 
	 
	 	RADA ELECTRONIC INDUSTRIES LTD.
	 
	 
	 	By:____________________
	 	Name:
	 	Title:
	 
	 
	 	THE LENDER: 
	 
	 	FAITH CONTENT DEVELOPMENT LIMITED
	 
	 	By:____________________
	 	Name:
	 	Title:






19










SCHEDULES  



	Schedule 3.1 	–	
            Exact legal name and organizational identification number 






	Schedule 3.8 	–	
Intellectual Property  






	Schedule 3.9 	–	
 Description of location of Charged Assets: (a) equipment, fixtures, goods or
inventory, (b) chief place of business and chief executive office, (c) records concerning
accounts and originals of chattel paper, and (d) trade names of Borrower and others used
in connection with the Charged Assets.  






	Schedule 11 	–	
             Compliance with other laws and instruments 






20









Schedule 3.1 – Exact
legal name and organizational identification number  


RADA Electronic Industries Ltd. Company No. 52 0035320











21









Schedule 3.2- Required
Consents  




The transaction contemplated under
the Loan Agreement requires the approval of the shareholders of the Borrower pursuant to
the requirements of Section 270(5) and 275 of the Companies Law. 



The registration of the Charge
Agreement is subject to: (i) the approval of Bank Leumi Le-Israel B.M.; (ii) the approval
of Bank Hapoalim B.M.; and (iii) the approval of the Office of the Chief Scientist. 



The validity of the Charge Agreement
is subject to it being filed with the Registrar of Companies. 



In the event the Lender will exercise
the security granted pursuant to the Charge Agreement, such exercise will be subject to:
(i) the approval of the Israeli Ministry of Defense as required by applicable law; and
(ii) in the event such exercise would result in the transfer of the equipment for the INS
technology purchased with the Loan Amount outside of the State of Israel, the approval of
the US Government. 



According to Section 3(b) of the
Pledges Law, 1967, a restriction or condition applicable according to law or agreement on
the transfer of ownership of an asset will also apply to a charge of such asset. 



22










Schedule 3.8 –
Intellectual Property 



The Borrower uses CATSTM,
ACETM and FACETM as trade names. The Borrower owns the rights to the Israeli
trademark VDS® and to the U.S. trademark application for the same trademark. 



Other than a patent that relates to
the Borrower’s ACETM System (Patent No. 5467274), the Borrower does not own any
patents and did not file any patent application. 



Other then off-the shelf software the
Borrower does not use any other third-party’s software. 



23










Schedule 3.9 



Description of location of Charged Assets:
(a) equipment, fixtures, goods or inventory, (b) chief place of business and chief
executive office, (c) records concerning accounts and originals of chattel paper, and (d)
trade names of Borrower and others used in connection with the Charged Assets 



	 	(a) 	All
the equipment is located in the Borrower’s premises either in Netanya           or
Beit Shean. 






	 	(b) 	The
chief place of business and chief executive office of the Borrower is           located
at 7 Giborei Israel Netanya, Israel. 






	 	(c) 	list,
as of the date of this Agreement, of each deposit account, securities           account
and commodities account of the Borrower, together with the name and           address of
each institution at which each such account is maintained, the           account number
for each account: 






	 	— 	Bank
Leumi le Israel B.M, Hazouran st. 1-a New Ind. Zone, Natanya, Israel branch 717 account __________. 






	 	— 	Bank
Leumi le Israel B.M, Hazouran st. 1-a New Ind. Zone, Natanya, Israel branch 717 account __________, (a trustee account for RADA’s employees options plans). 






	 	— 	Bank
Hapoalim B.M,  Hayetzira Branch, 45 Hamlacha st. Kiriat Sapir Natanya,  Israel,  branch
459 account __________.






	 	— 	Bank
Hapoalim B.M, Bnei Brak, Israel, branch 655 account __________. 






	 	— 	State
Bank of India,  Diamond Exchange Branch, 3, Jabotinsky Road, Ramat Gan, Israel,  Branch
No.          193, Account No. ________






	 	— 	HSBC
BANK account no __________ (Checking account) and account no. _________ (saving
account) , 452 FIFTH AVENUE NEW YORK, NY 10018 






	 	(d) 	None 






24










Schedule 11 –
Compliance with other laws and instruments 



25










Exhibit A 



JV Undertaking and
License 



26










Exhibit B 



Permitted Uses 



The Principal Amount shall be used
for the following Permitted Uses: 




	Item
	Amount ($M)
	 	Notes

	 		 	
			 	
			 	
			 	
	Purchase of those assets	$0.50 	 	 
	required to develop an
	inertial navigation system
	further details of which are
	set out below:
			 	
	1.    Rate and position
	       table, model number
	       2002P, by Ideal
	       Aerosmith, USA
	2.    Pitot/Static
	       pressure tester, model
	       number  MPS-31C, by D.
	       Marchiori S.R.L, Italy
	3.    Precision level,
	       (MiniLevel NT) model
	       number 011-150-243-001
	       by Wyler AG, Switzerland
	4.    MATLAB software
	       add-ons, by The
	       Mathworks, USA
	5.    Tools and
	       Accessories
	6.    Installation and
	       construction at RADA
	[Details of assets to be
	acquired by Borrower]
	 
	Working Capital	$1.00 	 	working capital needs of the Borrower in connection with the INS Technology
	 
	Total	$1.50 	 	 






27










Exhibit C 



Legal Opinion 



28










Exhibit D 



Charge Agreement 



29










Exhibit E 



Part 1 – Bank
Facilities 



	1.  	Facilities 






	 	
Bank
Leumi Le-Israel B.M.          US$450,000 






	2.  	Guarantees 






	 	
Bank
Leumi Le-Israel B.M.           US$750,000 





	 	
Bank
Hapoalim B.M.                                   US$430,000 





	 	
The
State Bank of India                  US$1,000,000 





Part 2 –
Permitted Liens 



	1.  	Floating
charge granted to Bank Leumi Le-Israel B.M., in respect of the           facilities and
guarantees listed in Part 1 of this Exhibit C 






	2.  	Floating
charge granted to Bank Hapoalim B.M., in respect of the guaranty listed           in Part
1 of this Exhibit C 






	3.  	Deposit
of US$250,000 with the State Bank of India, in connection with the           guaranty
listed in Part 1 of this Exhibit C 






        In
addition to the Bank Facilities and Permitted Liens listed above, it is agreed: (i) that
Borrower may raise an additional US$250,000 from the Banks and if necessary that this sum
could be secured and rank ahead of the Lender’s security over the Charged Assets,
and (ii) it is agreed that Borrower may procure guarantees from the Banks for a
further US$1 million for future projects and if necessary that this sum could be secured
and rank ahead of Lender’s security over the Charged Assets. 



30