exhibit_10dd.htm


    
      

      

    

    Exhibit
10dd

     

    
      
        

      

    

     

    OPTION
EXERCISE AGREEMENT

     

    among

     

    AMPAL-AMERICAN
ISRAEL CORPORATION

     

    and

     

    MERHAV
(M.N.F.) Limited

     

    dated as
of December 31, 2009

     

    
      
        

      

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      TABLE
OF CONTENTS

       

    

    
      
        
          	 	 	 	
                  
                    Page(s)

                  

                
	 	 	 	 
	
                  ARTICLE I DEFINITIONS

                	 
      	
                   

                	1
	 	 	 	 
	
                  ARTICLE II EXERCISE OF OPTION

                	 
      	
                   

                	
                  4

                
	    2.1      
      Exercise of Option	4
	    2.2      
      Share Adjustment	5
	    2.3      
      Closing.	6
	 	 
	
                  ARTICLE III MERHAV’S REPRESENTATIONS AND
      WARRANTIES

                	
                   

                	 
      	6
	    3.1      
      Existence; Authority; Enforceability	6
	    3.2     
      Interests in the Project	7
	    3.3     
      Absence of Conflicts	7
	    3.4      
      Compliance With Law; Consents	7
	    3.5     
      Litigation	7
	    3.6     
      Fees	8
	    3.7     
      Disclosure	
                  8

                
	 	 
	
                  ARTICLE IV COVENANTS

                	
                   

                	 
      	
                  8

                
	    4.1     
      Due Diligence	
                  8

                
	    4.2     
      Further Assurances	
                  8

                
	 	 
	
                  ARTICLE V INDEMNITY SURVIVAL

                	
                   

                	 
      	
                  10

                
	    5.1      
      Survival	
                  10

                
	    5.2      
      Indemnification	
                  10

                
	    5.3     
      Procedures Relating to Indemnification	
                  10

                
	    5.4      
      Other Claims	
                  12

                
	    5.5     
      Indemnification Limitations	
                  12

                
	 	 
	
                  ARTICLE VI MISCELLANEOUS

                	
                   

                	 
      	
                  12

                
	    6.1     
      Governing Law	
                  13

                
	    6.2     
      Arbitration.	
                  13

                
	    6.3      
      Severability	
                  13

                
	    6.4      
      Interpretation	
                  13

                
	    6.5     
      Costs and Expenses	
                  13

                
	    6.6     
      Notices	
                  13

                
	    6.7     
      Counterparts	
                  14

                
	    6.8     
      Entire Agreement	
                  14

                
	    6.9      
      No Third Party Rights; Assignment	
                  14

                
	    6.10    Waivers and Amendments	
                  14

                


        

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      
      

       

    

    OPTION
EXERCISE AGREEMENT

     

    OPTION
EXERCISE AGREEMENT (this “Agreement”), dated as
of December 31, 2009, by and among Ampal-American Israel Corporation, a New York
corporation (“Ampal”), and
Merhav (m.n.f.) Limited,
a company organized under the laws of the State of Israel (“Merhav”) (each, a
“Party” and,
collectively, the “Parties”).

     

    RECITALS

     

    WHEREAS,
Merhav, directly and through certain subsidiaries, including Merhav Renewable
Energies Limited, a corporation organized under the laws of Cyprus (the “Company”), intends to
develop a sugarcane ethanol-producing project in Colombia, as more fully
described on Exhibit A hereto (the “Project”);

     

    WHEREAS,
Merhav and Ampal entered in to an Option Agreement, dated as of December 24,
2007 (as amended by the Letter Agreement, dated December 25, 2008, the “Option Agreement”)
pursuant to which Ampal had an Option to purchase an equity interest in the
Project; and

     

    WHEREAS,
as partial consideration for entering into and amending the original the Option
Agreement Ampal loaned Merhav $20,000,000 evidenced by the Amended and Restated
Promissory Note, dated as of December 25, 2008, by Merhav in favor of Ampal (the
“Promissory
Note”); and

     

    WHEREAS,
in consideration for Merhav (i) delaying the payment date for the purchase price
of the equity interest upon the exercise of the Option and (ii) otherwise
amending the terms of the exercise of the Option as contained herein, Ampal has
agreed to extend the maturity of the Promissory Note as provided
herein.

     

    NOW,
THEREFORE, in consideration of the aforesaid premises and of the mutual
representations, warranties and covenants contained herein, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Parties hereby agree as follows:

     

    ARTICLE
I

     

    DEFINITIONS

     

    The
following terms shall have the following meanings for purposes of this
Agreement:

     

    “Adjusted Share
Amount” has the meaning set forth in Section 2.2.

     

    “Adjustment Termination
Date” means the date which is 180 days after commercial operations of the
Project commenced.

     

    “Affiliate” means (i)
with respect to any Person, a Person that controls, is controlled by, or is
under common control with such Person (it being understood, that a Person shall
be deemed to “control” another Person, for purposes of this definition, if such
Person directly or indirectly has the power to direct or cause the direction of
the management and policies of such other Person, whether through holding
ownership interests in such other Person, through agreements or otherwise); and
(ii) with respect to any natural Person, (1) any parent, grandparent, sibling,
child or spouse of such natural Person, or other Person related by marriage to
any such Persons, (2) any trust established for the benefit of such natural
Person or any Affiliate of such natural Person or (3) any executor or
administrator of the estate of such natural Person.

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    “Agreement” has the
meaning set forth in the Preamble.

     

    “Ampal Shares” has the
meaning set forth in Section 2.1(a).

     

    “Authority” means any
governmental, judicial, legislative, executive, administrative or regulatory
authority of Columbia, Israel and the United States or any state, local,
provincial or foreign government or any subdivision, agency, commission, office
or judicial, administrative or regulatory authority thereof.

     

    “Business Day” means
any day other than a Saturday, Sunday or a day on which banking institutions in
New York, New York or Israel are authorized or obligated by law or executive
order to close.

     

    “Charter Documents”
means any by-laws, charter, memorandum, certificate of incorporation, articles
of association and any other similar constitutive or governing
documents.

     

    “Closing Date” means
the date on which the sale and purchase of the Shares occurs in accordance with
Section 2.3.

     

    “Consent” means any
consent, waiver, approval, authorization, exemption, registration, permit,
license or declaration of or by any Person or any Authority, or expiration or
termination of any applicable waiting period under any Legal Requirement, that
is required with respect to any Party in connection with (i) the execution and
delivery of this Agreement or any other Transaction Document or (ii) the
consummation and performance of any of the transactions provided for hereby or
thereby.

     

    “Contract” or “Contracts” means any
and all contracts and agreements, including those that are franchises,
warranties, understandings, arrangements, leases, licenses, registrations,
authorizations, mortgages, bonds, notes and other instruments (whether written
or oral).

     

    “Judgments” means any
and all judgments, orders, writs, directives, rulings, decisions, injunctions,
decrees, settlement agreements or awards of any Authority or
arbitrator.

     

    “Legal Requirements”
means any and all (i) laws, ordinances and regulations, whether federal,
provincial, state or local, of Israel, the United States, or any other
applicable jurisdiction; (ii) codes, standards, rules, requirements and criteria
issued under any laws, ordinances and regulations, whether federal, provincial,
state or local of Israel, the United States or any other applicable
jurisdiction; and (iii) Judgments.

     

    
      
        
        

      

      
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    “Liabilities” means
any obligation, liability, or indebtedness of any kind, character or
description, whether absolute, contingent, accrued, liquidated, unliquidated,
known, unknown, executory or otherwise.

     

    “Lien” means any
mortgage, pledge, hypothecation, charge, assignment, deposit arrangement,
encumbrance, security interest, lien, fiduciary assignment and any security or
similar agreement of any kind or nature whatsoever.

     

    “Necessary Action”
means, with respect to a result required to be caused, all actions (to the
extent such actions are permitted by applicable Legal Requirements) reasonably
necessary to cause such result.

     

    “Note Balance” means
the outstanding balance of principal, interest and all other amounts due under
the Promissory Note as of the date hereof, which is $22,249,000.

     

    “Option” has the
meaning set forth in the  Option Agreement.

     

    “Option Agreement” has
the meaning set forth in the Recitals.

     

    “Merhav Loan” has the
meaning set forth in Section 4.4(b).

     

    “Party” or “Parties” has the
meaning set forth in the Preamble.

     

    “Per Share Purchase
Price” means the quotient of the Purchase Price divided by the number of
Ampal Shares.

     

    “Person” means an
individual, corporation, partnership, trust, limited liability company, a branch
of any legal entity, unincorporated organization, joint stock company, joint
venture, association or other entity, or any government, or any agency or
political subdivision thereof.

     

    “Pledge Agreement”
means the Pledge Agreement, dated as of December 24, 2007, between Merhav and
Ampal, delivered a security for the Loan.

     

    “Preamble” means the
preamble to this Agreement.

     

    “Promissory Note” has
the meaning set forth in the Recitals.

     

    “Project” has the
meaning set forth in the recitals.

     

    “Purchase Price” has
the meaning set forth in Section 2.1(b).

     

    “Qualified Financing
Date”  means the date on which long term debt financing was
obtained for the Project from Banco Do Brazil or any other unaffiliated Third
Party in an amount not less than $185 Million and the first disbursement under
the financing facility has been provided or other proof of such financing
commitment has been presented to Ampal to its full satisfaction.

     

    “Recitals” means the
recitals to this Agreement.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    “Shares” means shares,
par value 1 Euro per share, of the Company.

     

    “Share Equivalents”
means any securities which entitle the holder thereof to acquire Shares at any
time, including without limitation, any debt, preferred stock, rights, options,
warrants or other instrument that is at any time convertible into or
exchangeable for, or otherwise entitles the holder thereof to receive, Shares or
other securities that entitle the holder to receive, directly or indirectly,
Shares.

     

    “Shareholders
Agreement” has the meaning set forth in Section 2.1(c) (ii).

     

    “Strategic Partner
Equity” means an equity interest not to exceed, after giving effect to
the sale or issuance of such equity interest, 10% of the outstanding equity
interests in the Project on a fully diluted basis, issued to a strategic partner
mutually agreed to by Ampal and Merhav.

     

    “Termination Date”
means December 31, 2010.

     

    “Transaction
Documents” means each of this Agreement, the Shareholders Agreement, the
Disclosure Letter, the Share Issuance
Documentation and any other agreement, certificate or instrument
delivered pursuant to any of the foregoing.

     

    “Share Issuance
Documentation” has the meaning set forth in Section
2.1(b)(i).

     

    ARTICLE
II

     

    EXERCISE
OF OPTION

     

    2.1           Exercise of
Option

     

       Subject
to the conditions set forth in this Agreement, including without limitation
Sections 2.1 (c), 2.1 (d) and Section 2.3 hereof.

     

    (a)           On
the Closing Date, against payment of the Purchase Price in accordance with
Section 2.1(b), Merhav shall sell, or cause the Company to issue, to Ampal or
its designee (after giving effect to such sale or issuance and subject to
adjustment as set forth in Section 2.3 herein) such number of Shares
representing a 25% interest in all the issued and outstanding equity interests
in the Company, on a fully diluted basis (the “Ampal
Shares”).

     

    (b)           The
Purchase Price for the Ampal Shares shall be the Note Balance as of the date of
this Agreement, and shall be paid, unless otherwise agreed by the parties, on
the Closing Date.  Merhav shall give Ampal 5 days notice of the
proposed Qualified Financing Date, which shall be the proposed scheduled Closing
Date.

     

    (c)           On
the Closing Date, Merhav shall deliver to Ampal (and Ampal’s obligations under
this Agreement shall be subject to the receipt or waiver by Ampal) of the
following:

     

    (i)           such
documentation reasonably requested by, and satisfactory to, Ampal necessary and
desirable to transfer to Ampal the Ampal Shares, free and clear of any Liens(the
“Share Issuance
Documentation”);

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    (ii)           a
duly executed Shareholder’s Agreement, among the equity holders in the Project,
substantially in the form of Exhibit B hereto (the
“Shareholders
Agreement”);

     

    (iii)           Merhav
shall have delivered to Buyer a certificate, dated as of the Closing Date and
executed by an officer of Merhav, certifying to the fulfillment of the
conditions specified in Section 2.3(b);

     

    (iv)           payment
in full of all outstanding amounts due and payable under the Promissory
Note;

     

    (v)           such
other documentation reasonably requested by Ampal; and

     

    (vi)           deliver
to Ampal a Disclosure Letter reasonably satisfactory to Ampal.

    


    
      (d)                      On
the Closing Date, Ampal shall deliver to Merhav (and Merhav’s obligations under
this Agreement shall be subject to the receipt or waiver by Merhav of) the
following:

       

    

    (vii)           the
Shareholder’s Agreement duly executed by Ampal, and

     

    (viii)           such
documentation reasonably requested by Merhav to evidence the cancellation of the
Promissory Note and the release of the pledge under the Pledge
Agreement.

     

         2.2           Share
Adjustment.  (a)  If
prior to the Adjustment Termination Date, other than with respect to any
Strategic Partner Equity, Merhav sells or the Company issues  Shares
(or Share Equivalents entitling any Person to acquire Shares) at a price per
Share less than the Per Share Purchase Price (if the holder of the Shares or
Share Equivalents so issued shall at any time, whether by operation of purchase
price adjustments, reset provisions, floating conversion, exercise or exchange
prices or otherwise, or due to warrants, options or rights issued in connection
with such sale or issuance, be entitled to receive Shares at a price less than
the Per Share Purchase Price, such issuance shall be deemed to have occurred for
less than the Per Share Price), then, the Per Share Purchase Price shall be
reduced to equal such lower price, and (i) if the adjustment occurs prior to the
Closing Date, Ampal shall receive on the Closing Date such number of Shares
equal to the Purchase Price divided by the Per Share Purchase Price as herein
adjusted (the “Adjusted Share
Amount”) and (ii) if such adjustment occurs after the Closing Date but
prior to the Adjustment Termination Date, Merhav shall cause the Company to
issue additional Shares to Ampal so that such Shares, together with the Shares
Ampal received on the Closing Date, equal the Adjusted Share
Amount.  Such adjustment shall be made whenever such Share or Share
Equivalents are issued or sold.  Merhav shall notify Ampal in writing,
no later than the 10 days prior to the issuance or sale of such Shares or Share
Equivalents, subject to this Section, indicating therein the applicable issuance
price, or of applicable reset price, exchange price, conversion price and other
pricing terms.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    (b)           Notwithstanding
the forgoing, Merhav may cause the issuance of additional Shares in the Company
up to a maximum of 5% of the issued and outstanding Shares (after giving effect
to any such issuances), provided that all
holders of equity interests in the Company will be diluted pro rata with Ampal in
connection with any such issuances.

     

    2.3           Closing.

     

    (a)           The
Closing of the sale and purchase of the Ampal Shares will occur on the
Qualifying Financing Date or as soon as practicable thereafter (the “Closing
Date”), but no later than the Termination Date.

     

    (b)           In
addition to the conditions set forth in Section 2.1(c), Ampal’s obligations to
purchase the Ampal Shares hereunder is subject to the satisfaction, or waiver by
Ampal, of the following conditions:

     

    (i)           The
occurrence of the Qualified Financing Date;

     

    (ii)           From
the date hereof through the Closing Date, no material adverse change has
occurred to the business, properties, assets, condition (financial or otherwise)
of the Project has occurred (a “Material Adverse
Effect”);

     

    (iii)           There
(i) shall not be in effect any Legal Requirement directing that the transactions
provided for herein not be consummated as provided herein or which has the
effect of rendering it impossible or illegal to consummate such transactions or
(ii) there shall not be pending or threatened by any proceeding challenging or
seeking to prohibit or materially limit the transactions contemplated by this
Agreement or any other Transaction Document.

     

    (iv)           Merhav’s
and the Company’s representations and warranties made in this Agreement or any
other Transaction Document shall be true and correct in all material respects as
of the date hereof and as of the Closing Date as though made as of such date,
except to the extent such representations and warranties expressly relate to a
specified date (in which case such representations and warranties shall be true
and correct on and as of such specified date).   Merhav shall
have complied with all covenants required to be performed before the Closing
Date.

     

    ARTICLE
III

     

    MERHAV’S
REPRESENTATIONS AND WARRANTIES

     

    Merhav
hereby represents and warrants to Ampal on the date hereof:

     

    3.1           Existence; Authority;
Enforceability.  Merhav
is a company duly organized and validly existing under the laws of
Israel.  The Company is a company duly organized and validly existing
under the laws of Cyprus.  Each of Merhav and the Company has the
requisite power and authority to enter into each Transaction Document to which
it is a party and to perform its respective obligations
thereunder.  The execution, delivery and performance by each of Merhav
and the Company of each Transaction Document to which it will be a party and the
consummation by it of the transactions contemplated hereby and thereby have been
(or when required to be delivered will be) duly authorized and approved by all
corporate action of Merhav or the Company, as the case may be.  Each
of Merhav and the Company has duly and validly executed and delivered each
Transaction Document to which it is a party, and each such Transaction Document
constitutes (or when delivered shall constitute) its legal, valid and binding
obligation, enforceable against Merhav or the Company, as the case may be, in
accordance with its terms.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    3.2           Interests in the
Project.  (a)  Merhav
currently owns 100% of the outstanding equity interests in the
Company.  All of the issued and outstanding interests in the Company
have been duly authorized, validly issued and are be fully paid, nonassessable,
free of preemptive rights, with no personal liability attaching to the ownership
thereof.  There are no outstanding securities convertible into,
exchangeable for, or carrying the right to acquire, any interest in the Company,
or subscriptions, warrants, options, calls, rights (pre-emptive or other) or
other arrangements or commitments obligating any person to issue or dispose of
any of its capital stock or any ownership interest therein.  When
issued, the Ampal Shares shall be duly authorized, validly issued, fully paid,
each assessable free of any preemptive right, with no liability attaching to the
ownership thereof, and delivered to Ampal free and clean of any liens, other
than an Agreement with Riagro S.A., pursuant to which Riagro shall be entitled
to up to a 2.5% equity interest in the Project, coming from Merhav’s holdings in
the Project.

     

    3.3           Absence of
Conflicts.  The
execution and delivery by each of Merhav and the Company of the Transaction
Documents to which it is a party and the performance of its respective
obligations hereunder and thereunder, and the consummation of the transactions
contemplated hereby and thereby does not and will not conflict with, or result
in the breach of any provision of, the Charter Documents of Merhav or the
Company, as the case may be, or any Contract or violate any Legal Requirement
applicable to Merhav or the Company, as the case may be.

     

    3.4           Compliance With Law;
Consents.  No
Consent is required to be made or obtained by Merhav or the Company in
connection with (i) the execution, delivery or performance of the Transaction
Documents to be entered into by Merhav or the Company or (ii) the consummation
of any of the transactions contemplated by the Transaction
Documents.  To the best of Merhav’s knowledge, each of Merhav, the
Company and the Project are in compliance in all material respects with all
applicable Legal Requirements, except where such failure would not have or could
not reasonably by expected to have a Material Adverse Effect on Merhav, the
Company, or the Project or Merhav’s or the Company’s ability to consummate the
transactions contemplated by, and perform its obligations, under the Transaction
Documents.

     

    3.5           Litigation.  There
is no (a) litigation pending on behalf of or against or, to the best knowledge
of Merhav, material litigation threatened in writing on behalf of or against the
Company, Merhav or the Project or any of their properties, rights or assets
(including cease and desist letters or requests for a license) or (b) litigation
which questions or challenges (i) the validity of this Agreement or any
Transaction Document or (ii) any action taken or to be taken by Merhav or the
Company pursuant to this Agreement or any Transaction Document or in connection
with the transactions contemplated hereby or thereby.

     

    
      
        
        

      

      
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    3.6           Fees.  Neither
Merhav nor any of its Affiliates has paid or become obligated to pay any fee or
commission to any broker, finder or intermediary in connection with the
transactions contemplated hereby.

     

    3.7           Disclosure.  Merhav
has provided to Ampal all documents and information (i) in Merhav’s or any of
its Affiliate’s possession relating to the Project, and (ii) that is reasonably
material in connection with its decision to exercise the Option. No
representation or warranty by Merhav contained in this Agreement or any other
Transaction Document and no information contained in any other instrument
furnished or to be furnished to Ampal pursuant hereto or in connection with the
transaction contemplated by this Agreement or any other Transaction Document
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary in order to make the statements
contained herein or therein not misleading.  Merhav is not aware of
any facts or circumstances which would cause the representations and warranties
of Merhav contained in this Agreement or any other Transaction Documents to be
untrue or incorrect.  To the knowledge of Merhav, after due inquiry,
there is no fact, circumstance or condition which has had or could reasonably be
expected to have a Material Adverse Effect on Merhav or the Project, which has
not been disclosed to Ampal or its representatives.

     

    ARTICLE
IV

     

    COVENANTS

     

    4.1           Due
Diligence.  In
addition, Merhav hereby agrees to promptly deliver to Ampal (x) any new material
information with respect to the Project in its possession or control and (y) any
reports, models, projections or other information provided to any other person
or entity.

     

    4.2           Further
Assurances.  Subject
to the terms and conditions herein, each of the Parties agrees to take, or use
reasonable commercial efforts in order to cause to be taken, all Necessary
Actions and to do, or use reasonable commercial efforts in order to cause to be
done, all things necessary, proper or advisable under all applicable Legal
Requirements to consummate and make effective the transactions contemplated by
the Transaction Documents to which it is a party.

     

    4.3           Amendment of Promissory
Note.  The
Promissory Note is hereby deemed amended to extend the maturity date to the
earlier of (i)December 31, 2010 and (ii) the Qualified Financing
Date.

     

    4.4           Loan to the
Company.  (a)  Merhav
and Ampal hereby agree that if they mutually determine that the Company needs
additional funds for the continued development and operation of the Project,
that, unless otherwise agreed, they shall each make a loan to the Company on
identical  terms, which shall include, but not be limited to the
following

     

    (i)           an
original principal amount of up to $15,000,000;

     

    (ii)           an
interest rate equal Ampal’s interest cost for funding such loan;

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    (iii)           convertible
into Shares of the Company at a conversion price equal to the Per Share Purchase
Price; provided, however, the Merhav
Loan shall not be so convertible so long as Merhav or any of its Affiliates
(other than Ampal or its designee) remain the lender under such Merhav Loan;
and

     

    (iv)           such
loans will to be subordinated in right of payment to any third-party financing
for the Project.

     

    (b)           Until
the first anniversary of any loan extended to the Company (or its subsidiaries
or Affiliates in connection with the Project) by Merhav in accordance with
Section 4.4(a) (the “Merhav Loan”), Ampal
shall have the right to purchase the Merhav Loan from Merhav for  a
purchase price equal to all the outstanding principal, interest and other
amounts due under the loan, without premium.

     

    4.5           Reporting
Requirements. (a)  Merhav shall, or shall cause the Company to,
provide Ampal, from time to time, with such information respecting the financial
condition and operations of the Project, the Company and its subsidiaries as
Ampal may reasonably request, including, without limitation,

     

    (i)           any
and all information that would be required for Ampal to comply with law,
including, United States federal and state securities laws, and Israeli
securities laws;

     

    (ii)           requirements
of NASDAQ and the Tel Aviv Stock Exchange, or any other stock exchange on which
Ampal shares may be listed;

     

    (iii)           as
soon as available and in any event within 21 days after the end of each of the
first three quarters of each fiscal year of the Company, a consolidated balance
sheet of the Company and its consolidated subsidiaries as of the end of such
quarter and a consolidated statement of income and cash flows of the Company and
its consolidated subsidiaries for the period commencing at the end of the
previous fiscal year and ending with the end of such quarter, setting forth in
each case in comparative form the corresponding figures as of the corresponding
date and for the corresponding period of the preceding fiscal year, all in
reasonable detail; and certified by the principal financial officer of the
Company, subject, however, to year-end auditing adjustments; and

     

    (iv)           as
soon as available and in any event within 40 days after the end of each fiscal
year of the Company, a consolidated balance sheet of the Company and its
consolidated subsidiaries as of the end of such fiscal year and the related
consolidated statements of income and cash flows of the Company and its
consolidated subsidiaries for such fiscal year setting forth in each case in
comparative form the corresponding figures as of the close of and for the
preceding fiscal year, all in reasonable detail and, if requested by Ampal,
audited by an internationally recognized accounting firm reasonably acceptable
to Ampal.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    4.6           Organizational
Documents.  Prior to the Closing Date, Merhav shall cause the
Company to make such changes to the Company’s organizational documents as Ampal
reasonably requests, to reflect the agreements set forth in the Shareholder’s
Agreement.

     

    ARTICLE V

     

    INDEMNITY
SURVIVAL

     

    5.1           Survival.  Each
representation and warranty in this Agreement shall survive for a period of two
years after the date hereof, provided that (i) the
representation set forth in Section 3.1 and 3.2 shall survive indefinitely and
(ii) the survival periods set forth in this Section 5.1 shall not apply to any
claims involving fraud or bad faith on the part of any Party
hereto.

     

    5.2           Indemnification.  Merhav
shall indemnify Ampal, its Affiliates and each of their respective officers,
directors, employees, stockholders, agents and representatives (collectively,
each an “Indemnified
Party”) against and hold them harmless from each and any and all actions,
suits, proceedings, claims, liabilities, losses, charges, damages, costs and
reasonable expenses (including reasonable fees and expenses of counsel)
(collectively, “Losses”) suffered or
incurred by any such Indemnified Party arising from, in connection with,
relating to or otherwise in respect of (i) any breach of, or any inaccuracy in,
any representation or warranty made by Merhav in Article III of this Agreement,
or Merhav or the Company in any other Transaction Document or in any certificate
delivered by Merhav or any of it Affiliates pursuant hereto, in each case
disregarding all qualifications and exceptions contained therein relating to
materiality or material adverse effect or like words, solely for the purpose of
determining the Losses suffered by the relevant Ampal Indemnity,  or;
(ii) any breach of any covenant of Merhav or the Company in this Agreement or
any other Transaction Document.

     

    5.3           Procedures Relating to
Indemnification.  (a)  In
order for any Indemnified Party specified in Section 5.2 to make a claim for any
indemnification as provided for under Section 5.2 in respect of, arising out of
or involving a claim or demand made by any person against the Indemnified Party
(a “Third-Party
Claim”), such Indemnified Party must notify the indemnifying party (the
“Indemnifying
Party”) in writing, and in reasonable detail, of the Third-Party Claim
within twenty Business Days after receipt by such Indemnified Party of written
notice of the Third-Party Claim; provided, however,
that failure to give such notification shall not affect the indemnification
provided hereunder except to the extent the Indemnifying Party shall have been
prejudiced as a result of such failure.  Thereafter, the Indemnified
Party shall deliver to the Indemnifying Party, within five Business Days after
the Indemnified Party’s receipt thereof, copies of all notices and documents
(including court papers) received by the Indemnified Party relating to the
Third-Party Claim; provided, however, that failure to give such notification
shall not affect the indemnification provided hereunder except to the extent the
Indemnifying Party shall have been prejudiced as a result of such
failure.

     

    (b)           If
a Third-Party Claim is made against an Indemnified Party, the Indemnifying Party
shall be entitled to participate in the defense thereof and, if it so chooses
and acknowledges its obligation to indemnify the Indemnified Party therefor, to
assume the defense thereof with counsel selected by the Indemnifying Party;
provided that
such counsel is not objected to by the Indemnified Party in its reasonable
discretion.  Should the Indemnifying Party so elect to assume the
defense of a Third-Party Claim, the Indemnifying Party shall not be liable to
the Indemnified Party for legal expenses subsequently incurred by the
Indemnified Party in connection with the defense thereof (except in the case of
a conflict of interest, as described below).  If the Indemnifying
Party assumes such defense, the Indemnified Party shall have the right to
participate in the defense thereof and to employ counsel, at its own expense,
separate from the counsel employed by the Indemnifying Party, it being
understood that the Indemnifying Party shall control such defense (except that
if, in the reasonable judgment of the Indemnifying Party’s counsel, a conflict
of interest exists between the Indemnifying Party and the Indemnified Party, the
Indemnified Party may employ its own counsel, separate from the counsel employed
by the Indemnifying Party, and may control its defense to the extent deemed
necessary by the Indemnified Party).  The Indemnifying Party shall be
liable for the fees and expenses of counsel employed by the Indemnified Party
for any period during which the Indemnifying Party is not assuming the defense
thereof or during a conflict of interest (as described above).

     

    
      
        
        

      

      
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    (c)           If
the Indemnifying Party so elects to assume the defense of any Third-Party Claim,
all of the Indemnified Parties shall cooperate with the Indemnifying Party in
the defense or prosecution thereof.  In any event, the Indemnified
Party and its counsel shall cooperate with the Indemnifying
Party and its counsel and shall not assert any position in any proceeding
inconsistent with that asserted by the Indemnifying Party; provided, however,
that the foregoing shall not prevent the Indemnified Party from taking the
position that it is entitled to indemnification hereunder.  All
reasonable out-of-pocket costs and expenses incurred in connection with an
Indemnified Party’s cooperation shall be borne by the Indemnifying
Party.  Such cooperation shall include the retention and (upon the
Indemnifying Party’s request) the provision to the Indemnifying Party of records
and information which are relevant to such Third-Party Claim, and making
employees available on a mutually convenient basis to provide additional
information and explanation of any material provided
hereunder.  Whether or not the Indemnifying Party shall have assumed
the defense of a Third-Party Claim, the Indemnified Party shall not admit any
liability with respect to, or settle, compromise or discharge, such Third-Party
Claim without the Indemnifying Party’s prior written consent.  If the
Indemnifying Party shall have assumed the defense of a Third-Party Claim, the
Indemnified Party shall agree to any settlement, compromise or discharge of a
Third-Party Claim which the Indemnifying Party may recommend and which by its
terms releases the Indemnifying Party completely in connection with such
Third-Party Claim and which would not impose on the Indemnified Party and
obligation to pay any amount or otherwise adversely affect the Indemnified Party
or require any relief other than monetary damages (provided, however, that the
Indemnified Party shall not be required to consent to any settlement, compromise
or discharge which would require payments by the Indemnified Party in connection
with such Third Party Claim).

     

    (d)           Notwithstanding
the foregoing, the Indemnifying Party shall not be entitled to assume the
defense of any Third-Party Claim (and shall be liable for the fees and expenses
of counsel incurred by the Indemnified Party in defending such Third-Party
Claim) if the Third-Party Claim seeks an order, injunction or other equitable
relief or relief for other than money damages against the Indemnified
Party.  The indemnification required by Section 5.2 shall be made
only after final judgment which can not be further appealed.  All
claims under Section 5.2 other than Third-Party Claims shall be governed by
Section 54.

     

    
      
        
        

      

      
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    (e)           The
indemnification provisions of this Article V (i) shall apply without regard to,
and shall not be subject to, any limitation by reason of set-off, limitation or
otherwise and (ii) are intended to be comprehensive and not to be limited by any
requirements of law concerning prominence of language or waiver of any legal
right under any law (including, without limitation, rights under any workers
compensation statute or similar statute conferring immunity from
suit).

     

    5.4           Other
Claims.  In
the event any Indemnified Party should have a claim against any Indemnifying
Party under Section 5.2 that does not involve a Third-Party Claim being
asserted against or sought to be collected from such Indemnified Party, the
Indemnified Party shall deliver notice of such claim to the Indemnifying Party
with reasonable promptness.  The failure by any Indemnified Party so
to notify the Indemnifying Party shall not relieve the Indemnifying Party from
any liability which it may have to such Indemnified Party under
Section 5.2, except to the extent that the Indemnifying Party has
been  prejudiced as a result of such failure.  If the
Indemnifying Party does not notify the Indemnified Party within 20 Business Days
following its receipt of such notice that the Indemnifying Party disputes its
liability to the Indemnified Party under Section 5.2, such claim specified
by the Indemnified Party in such notice shall be conclusively deemed a liability
of the Indemnifying Party under Section 5.2 and the Indemnifying Party
shall pay the amount of such liability to the Indemnified Party on demand or, in
the case of any notice in which the amount of the Loss (or any portion thereof)
is estimated, on such later date when the amount of such Loss (or such portion
thereof) becomes finally determined.  If the Indemnifying Party has
timely disputed its liability with respect to such claim, as provided above, the
Indemnifying Party and the Indemnified Party shall resolve such dispute as
follows: (i) first, the parties shall negotiate in good faith for a period of up
to 15 Business Days to resolve such dispute, then (ii) if the Indemnifying Party
and the Indemnified Party are unable to reach an agreement, they shall resolve
such dispute in accordance with Section 6.2.

     

    5.5           Indemnification
Limitations.  (a)
Notwithstanding anything to the contrary herein, the indemnification
undertakings of Purchaser in this Article V shall be subject to the following
limitations: (i) Seller shall not be required to make any indemnification
payment hereunder until such time as the Loss suffered by the Purchaser
Indemnities exceeds $1,000,000 in the aggregate, in which case the Purchaser
Indemnitees shall be entitled to indemnification for the full amount of such
Losses, including those up to the $1,000,000 threshold and (ii) in any event,
Merhav shall not be under the obligation to make any indemnification payment
hereunder in excess, in the aggregate, of the Purchase Price.

     

    ARTICLE
VI

     

    MISCELLANEOUS

     

    6.1           Governing
Law.  This
Agreement shall be governed in all respects, including validity, interpretation
and effect, by the internal laws of the State of New York without regard to its
conflict of law principles (other than Section 5-1401 of the New York General
Obligation Law).

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    6.2           Arbitration.. All
disputes between the parties hereto arising under the terms of this Agreement or
any other Transaction Documents shall be arbitrated in New York City under the
rules of the American Arbitration Association then obtaining in the City of New
York judgment on any award made by the arbitrators hereunder may be rendered in
any court having jurisdiction.

     

    6.3           Severability.  Each
Section, subsection and clause of this Agreement and each other Transaction
Documents constitutes a separate and distinct undertaking, covenant or provision
hereof.  In the event that any provision of this Agreement or any
other Transaction Document shall finally be determined to be unlawful, such
provision shall be deemed severed from this Agreement or such Transaction
Document, but every other provision of this Agreement or such Transaction
Document shall remain in full force and effect.

     

    6.4           Interpretation.  Whenever
used in this Agreement, except as otherwise expressly provided or unless the
context otherwise requires, any noun or pronoun shall be deemed to include the
plural as well as the singular and to cover all genders.  Unless
otherwise specified, words such as “herein”, “hereof”, “hereby”, “hereunder” and
words of similar import refer to this Agreement as a whole and not to any
particular Section or subsection of this Agreement, and references herein to
“Articles” or “Sections” refer to Articles or Sections of this
Agreement.  The headings in this Agreement are intended solely for
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.

     

    6.5           Costs and
Expenses.  Each
Party shall bear its own expenses incurred in connection with the negotiation,
preparation, execution and closing of this Agreement and each other Transaction
Document and the transactions provided for hereby and thereby.

     

    6.6           Notices.  All
notices or other communications required or permitted by this Agreement or any
other Transaction Document shall be effective upon receipt and shall be in
writing and delivered personally or by overnight courier, or sent by facsimile
(with confirmation copies delivered personally or by courier within three (3)
Business Days), as follows:

     

    If to
Merhav, to:

     

    Merhav
(m.n.f) Ltd

    33
Havatzelet Hasharon Street

    Herzlia,
Israel

    Attention:
Mr. Yossef Maiman and Mr. Leo Malamud

    Facsimile:+972-9-9501733

     

    If to
Ampal, to:

     

    Ampal-American
Israel Corporation

    10 Abba
Avan St.

    Ackerstein
Tower C, 9th
Floor

    P. O. Box
12215

    Herzlya 46733 Israel

    Attention:
Yoram Firon

    Facsimile:+972-9-952-6001

    


    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    with
copies to:

     

    Bryan
Cave LLP

    1290
Avenue of the Americas

    New York,
NY, USA 10019

    Attention:
Kenneth Henderson, Esq.

    Facsimile:
(212) 541-1357

     

    or to
such other address as hereafter shall be furnished as provided in this Section
6.6 by any Party to any other Party.  Any demand, notice or other
communication given by personal delivery shall be conclusively deemed to have
been given on the day of actual delivery thereof and, if given by facsimile, on
the day of transmittal thereof if given during the normal business hours of the
recipient, and on the Business Day during which such normal business hours next
occur if not given during such hours on any day.

     

    6.7           Counterparts.  This
Agreement and each other Transaction Document may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute a single instrument.

     

    6.8           Entire
Agreement.  This
Agreement together with the other Transaction Documents set forth the entire
understanding and agreement between the Parties as to the matters covered herein
and therein and supersede and replace any prior understanding, agreement or
statement of intent, in each case, written or oral, of any and every nature with
respect thereto.  In the event of any inconsistency between this
Agreement and the other Transaction Documents, this Agreement shall govern as
between the Parties with respect to the matters set forth herein.

     

    6.9           No Third Party Rights;
Assignment.  This
Agreement is intended to be solely for the benefit of the Parties and is not
intended to confer any benefits upon, or create any rights in favor, of any
Person other than the Parties and shall not be assignable without the prior
written Consent of the other Parties.  Notwithstanding any of the
foregoing, Ampal may transfer its rights and interests hereunder to an
Affiliate.

     

    6.10         Waivers and
Amendments.  No
modification of or amendment to this Agreement or any other Transaction Document
shall be valid unless in writing signed by the Parties referring specifically to
this Agreement or such other Transaction Document and stating the Parties’
intention to modify or amend the same.  Any waiver of any term or
condition of this Agreement or any other Transaction Document must be in a
writing signed by the Party sought to be charged with such waiver referring
specifically to the term or condition to be waived, and no such waiver shall be
deemed to constitute the waiver of any other breach of the same or of any other
term or condition of this Agreement or any other Transaction
Document.

     

    
      
        
        

      

      
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    IN
WITNESS WHEREOF, the parties hereto have duly executed this Option Agreement as
of the date first above written.

     

    
      	 	
              AMPAL-AMERICAN ISRAEL
      CORPORATION

               

              By: /s/
      Irit Eluz

                     /s/ Yoram Firon

               

              
                By:     
      __________________________________

                Name:
      Irit
      Eluz                                            
      Yoram Firon

                Title:   SVP                                                                  
      VP

                 

                MERHAV
      (M.N.F)  LIMITED

                       
      

                  By:
      /s/ Leo Malamud

                       
       /s/
      Zvi Pinczowski

                    

                  By:      
      __________________________________

                  Name:  Leo
      Malamud                             Zvi
      Pinczowski

                  Title:    SVP                                                                   VP 

                

              

            


    

                                            

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