Document:

exhibit_4a-72.htm

	EXECUTION COPY	Exhibit 4.(a).72

 

SHARE PURCHASE AGREEMENT

 

Among

 

Partner Communications Company Ltd.,

 

Merhav Ampal Energy Ltd.

 

And

 

012 Smile Telecom Ltd.

 

___________________________

 

 

Dated as of October 13, 2010

 

___________________________

 

 

 

 

 

SHARE PURCHASE AGREEMENT

 

THIS SHARE PURCHASE AGREEMENT (this "Agreement") is made and entered into as of October 13, 2010, by and among Partner Communications Company Ltd., a company organized under the laws of Israel ("Purchaser"); Merhav Ampal Energy Ltd., a company organized under the laws of Israel (”Seller”); and 012 Smile Telecom Ltd. (f/k/a Ampal Investments and Communications 2009 Ltd.), a company organized under the laws of Israel (the "Company").  Certain other capitalized terms used in this Agreement are defined below or in Exhibit A.

 

 W I T N E S S E T H:

 

WHEREAS, the Company is engaged in the Business;

WHEREAS, the Company has authorized 100,000,000 Ordinary Shares, NIS 1.00 nominal value per share (“Ordinary Shares”), 1,000 of which are issued and outstanding (the "Shares") and Seller owns all of the Shares; and

WHEREAS, Purchaser desires to acquire all of the Shares, and Seller desires to sell the Shares to Purchaser, all on the terms and conditions set forth herein;

 

NOW, THEREFORE, the parties to this Agreement agree as follows:

 

 

Section 1.               DESCRIPTION OF TRANSACTION.

 

1.1           Purchase and Sale.  Subject to the terms and conditions of this Agreement, on the Closing Date, Seller shall sell, transfer, assign, convey and deliver to Purchaser, and Purchaser shall purchase from Seller, (i) the Shares and (ii) the Shareholder Loan.

 

1.2           Closing. Unless this Agreement is earlier terminated pursuant to Section 9 hereof, the closing (the "Closing") of such purchase and sale and of the other transactions contemplated hereby (collectively, the "Transactions"), shall take place at the offices of Goldfarb, Levy, Eran, Meiri, Tzafrir & Co., 2 Weizmann Street, Tel-Aviv, Israel, at 10:00 a.m., on the third (3rd) business day after all the conditions set forth in Sections 7 and 8 have been satisfied or waived, but not earlier than December 30, 2010, or on such other date, time and place as the parties may mutually agree (the "Closing Date").

 

1.3           Purchase Price.  The consideration (the "Consideration") for the Shares and the Shareholder Loan (including any interest accrued thereon and not paid) shall consist of, and be paid in the following manner:

 

(a)           On the date hereof, Purchaser shall deposit an amount in cash of  Thirty Million NIS (NIS 30,000,000) in a bank account designated by Seller (such amount, including any interest accrued thereon: the "Deposit"). The Deposit shall be held and disposed by Seller to the credit of either Seller or Purchaser, in accordance with the terms and conditions of this Agreement. At Closing, the Deposit shall be immediately released to Seller pursuant to the terms hereof and be applied to and credited against the Consideration in accordance with Section 1.3(b) below. If Closing does not occur, the Deposit shall be payable to Seller or to Purchaser in accordance with Section 9. If the circumstances do not result in the payment of the Deposit to Seller pursuant to this Section 1.3 or Section 9, the Deposit shall be released to Purchaser promptly after termination of this Agreement. To the extent that Seller shall be required to release the Deposit to Purchaser after termination of this Agreement, Seller will be entitled to withhold and deduct from the payment of any Deposit (including any interest accrued thereon), the Tax amount required to be withheld and deducted under any applicable law which are payable on such Deposit (including any interest accrued thereon). To the extent that amounts are so withheld by Seller, they shall be treated for all purposes of this Agreement as having been paid to Purchaser.

 

 

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(b)           At Closing, Purchaser shall pay to Seller, by wire transfer of immediately available funds to an account designated in writing by Seller, an amount in NIS equal to Six Hundred and Fifty Million NIS (NIS 650,000,000) minus the Deposit.

 

(c)           On the date hereof, the Company shall assign to Seller all of its rights to receive payments (including default interest, if any, and rights to seek enforcement and damages if such payments are not timely made) from B Communications Ltd. (f/k/a 012 Smile.Communications Ltd.), a company organized under the laws of Israel ("BC"), pursuant to that Amendment, Joinder and Affirmation to the Asset Purchase Agreement, dated as of January 26, 2010, by and between the Company and BC (the "BC Payments"). The parties hereby agree that, if BC or any other third party whose consent is required for the same at Seller's reasonable discretion, does not consent in writing to the aforesaid assignment until the Closing, then, in lieu of such assignment, Purchaser shall cause the Company, and the Company shall, (i) transfer any such payments received from BC on or following the date hereof to Seller (net of any applicable Tax, if any, paid by the Company), immediately following their receipt, (ii) if not timely received, cooperate with Seller (including by way of engaging an attorney selected and paid by Seller to pursue litigation), at Seller's expense, to compel BC to make such payments to the Company, and (iii) upon Seller's request, take all other reasonable actions, including execution of an appropriate power of attorney, to assign all of its causes of action in connection therewith to allow Seller, at Seller's election and expense, to compel (including litigation) BC to make such payments.

 

(d)           The aforesaid Consideration to be paid to Seller is exclusive of any VAT, if applicable (i.e., plus VAT, if applicable). To the extent that the Seller shall provide to the Purchaser prior to the Closing a valid withholding tax exemption certificate pursuant to the Israeli Tax Ordinance according to which the Seller is entitled to full exemption of tax withholding, Purchaser agrees it shall not deduct or withhold from any consideration payable or otherwise deliverable pursuant to this Agreement any Tax.

 

 

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Section 2.

	
REPRESENTATIONS AND WARRANTIES OF SELLER AND THE COMPANY.

 

Seller and the Company represent and warrant, severally and jointly, to and for the benefit of Purchaser, that, as of the date hereof, other than as set out in the Disclosure Schedule delivered to Purchaser on the date hereof, as follows:

 

2.1           Due Organization; Etc.

 

(a)           The Company is duly organized and validly existing under the laws of the State of Israel.  The Company has all requisite corporate power and authority to own and use its assets and conduct its business as currently conducted.

 

(b)           Other than 012 Mobile G P Ltd (P.C. 51-423764-3) and 012 Telecom Ltd (P.C. 51-370116-9) and 012 Mobile, Limited Partnership, which are wholly owned by the Company, the Company does not have any Subsidiaries nor owns any material Subsidiary.

 

2.2           Charter Documents. Part 2.2 of the Disclosure Schedule contains accurate and complete copies of the Articles of Association of the Company, including all amendments thereto.  There has not been any violation of any of the provisions of the Company's Articles of Association.

 

2.3           Capitalization. All of the issued and outstanding share capital of the Company, on an actual basis and on an as-converted and as-exercised basis, taking into consideration any and all convertible or exchangeable securities and other interests in the Company, is owned beneficially and of record by Seller. There are no outstanding or authorized subscriptions, options, warrants, calls, rights, convertible securities, or any other agreements of any similar character obligating the Company to issue any additional shares or any securities convertible into, or exchangeable for, or evidencing the right to subscribe for, any shares of the Company.  All of the Shares have been duly authorized and validly issued and are fully paid and nonassessable.

 

2.4           Financial Statements.

 

(a)           The Company has delivered to Purchaser accurate and complete copies of the unaudited and reviewed financial statements of the Company for the period ended June 30, 2010 attached as Part 2.4(a) of the Disclosure Schedule (collectively, the "Financial Statements").

 

(b)           The Financial Statements have been prepared in accordance with US GAAP consistently applied throughout the periods covered and, in accordance with US GAAP, accurately present in all material respects the financial position of the Company and its Subsidiaries, taken as a whole, as at the dates thereof and the consolidated results of their operations and cash flows for the periods indicated.

 

(c)            A complete list of the Company's financial borrowings, loans and loan facilities as of June 30, 2010, is set forth in Part 2.4(c) of the Disclosure Schedule. Such list is true, accurate and complete in all material respects as at the date thereof. The total outstanding loans under the Lending Banks Loans as of the date hereof is as set forth in Part 2.4(c) of the Disclosure Schedule, and at Closing shall not exceed NIS 800,000,000.

 

(d)            The selected financial information of the Company as of June 30, 2010 attached as Part 2.4(d) of the Disclosure Schedule is true and accurate in all material respects as at the dates thereof.

 

 

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2.5           Absence of Changes.  Except as specifically disclosed in the Financial Statements (including the notes thereto), since June 30, 2010:

 

(a)            other than due to changes and developments relating to regulatory requirements, there have been no changes, events, occurrences or developments which, individually or in the aggregate, have had a Material Adverse Effect;

 

(b)            the Company has not declared, accrued, set aside or paid any dividend or made any other distribution in respect of any shares of capital stock, and has not repurchased, redeemed or otherwise reacquired any shares of capital stock or other securities, and, other than payment of management fees to Seller, has not paid (and will not pay through Closing) any amount to Seller (including interest to Seller on the Shareholder Loan); or

 

(c)            the Company has not sold, issued or authorized the issuance of (i) any capital stock or other security, (ii) any option or right to acquire any capital stock or any other security or (iii) any instrument convertible into or exchangeable for any capital stock or other security.

 

2.6           Properties and Assets. The Company and its Subsidiaries has valid title to, or in the case of leased properties and assets, valid leasehold interests in, all of their properties and assets that are material to the Company and its Subsidiaries taken as a whole, free and clear of all Encumbrances except (a) such Encumbrances or other imperfections of title, if any, as do not materially detract from the value of or materially interfere with the present use of the property affected thereby, and (b) Permitted Encumbrances. The Company does not own any real property.

 

2.7            Intellectual Property.

 

(a)            As used herein, the term "Intellectual Property Rights" shall mean all intellectual property and proprietary rights throughout the world, including (i) all trademark rights, trade dress, service marks and trade names; (ii) all copyrights and all other rights associated therewith and the underlying works of authorship; (iii) all patents and all proprietary rights associated therewith; (iv) all inventions, mask works and mask work registrations, net lists, schematics, enhancements, designs, improvements, know how, discoveries, improvements, designs, trade secrets, computer software programs or applications (in both source code and object code form), flow charts, diagrams, coding sheets, listings and annotations, programmers' notes, information, work papers, work product; and (v) all registrations of any of the foregoing, all applications therefor, all documentation and all goodwill associated with any of the foregoing.

                (b)           The Company does not have material Intellectual Property Rights except for trademarks and rights under third party license agreements.  Such Intellectual Property Rights do not infringe, misappropriate or otherwise violate the Intellectual Property Rights of a third party in a manner that would have a Material Adverse Effect.

 

2.8           Material Agreements.

 

(a)            A "Material Agreement" means any Contract that is listed in Part 2.8(a) of the Disclosure Schedule.

 

(b)            Each Material Agreement is in full force and effect, and is not subject to any material default on the part of the Company, and to the Company's knowledge, no other party to such contract is in material default with respect thereto.

 

 

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2.9           Compliance with Legal Requirements.

 

(a)           The Company is in compliance with all Legal Requirements (except where any such non-compliance shall not have a Material Adverse Effect).

 

(b)           The Company holds all permits, licenses, certificates, registrations and other authorizations necessary to conduct the Business as currently conducted (except where the absence of such permits, licenses, certificates, registrations and other authorizations would not have a Material Adverse Effect).

 

(c)           The MoC Licenses, copies of which are attached as Part 2.9(c) of the Disclosure Schedule, are in the name of the Company or its Subsidiaries, as the case may be, are valid and compliant in all material respects and the Company is not aware of any procedures that in the Company's opinion would be reasonably likely to cause the cancellation or withdrawal of the MoC Licenses.

 

                2.10        Tax Matters.

 

(a)           As of June 30, 2010, neither the Company nor any Subsidiary had any material liability for Taxes which have not been accrued or reserved on the Financial Statements to the extent required to be accrued or reserved under US GAAP and neither the Company nor any Subsidiary has incurred any material liability for Taxes since June 30, 2010 other than in the ordinary course of business.

 

(b)           All Tax Returns required to have been filed by the Company have been duly filed (including any extensions).  The Company has paid all Taxes shown on such Tax Returns that are due.

 

2.11         Employees.

 

(a)           The Company is in compliance in all material respects with applicable Legal Requirements (including any national, industry or company collective agreement, order or award) and agreements relating (i) to the employment of its employees, and (ii) to the proper withholding and remission to the proper tax authorities or to the proper withholding or contribution and remission to the proper pension or provident, life insurance, disability insurance, continuing education or other similar funds of all sums required to be withheld, contributed or remitted, legally or contractually.

 

(b)           The Company is not a member in any employers’ organization, and no claim or request has been made of the Company by any employers’ organization.  The Company is not a party to, or bound by, any collective bargaining agreement or arrangement or union contract or extension order (excluding such extension orders that may apply to all employers or employees in Israel in general) and no such collective bargaining agreement is being negotiated by the Company.  No labor union or other representative organization has otherwise been certified or recognized as the collective bargaining representative of any employees of the Company or has applied to represent such employees or, to the Company’s knowledge, is attempting to represent such employees.

 

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2.12        Insurance. The Company has insurance coverage for the Business at a level that is reasonably adequate in view of the size and scope of the Business.

 

2.13        Related Party Transactions.

 

(a)           Except for transactions in the ordinary course of business at arm's length, the Management Agreement, the Lending Banks Loans, the Institutional Lenders Loan, the Shareholder Loan and by virtue of Seller's holding of the Shares, to the Company’s knowledge:  (a) no Related Party has any direct or indirect interest in any material asset used in or otherwise relating to the Business; (b) no Related Party is indebted, directly or indirectly, to the Company in connection with the Business; and (c) no Related Party has entered into any material contract, transaction or business dealing related to the Business.  For purposes of this Section 2.13, each of the following shall be deemed to be a “Related Party”:  (i) each Person that, directly or indirectly, has an equity interest in the Company; (ii) each individual who is an officer or director of the Company; (iii) each Family Member of each of the individuals referred to in clauses "(i)" and/or "(ii)" above.

 

                (b)           Other than the Management Agreement, the Lending Banks Loans, the Institutional Lenders Loan, the Shareholder Loan and by virtue of the holding of the Shares, Seller and Seller's Affiliates (excluding the Company or its Subsidiaries) are not parties to any material contract, transaction or business dealing with the Company or its Subsidiaries.

 

                2.14        Legal Proceedings; Orders.

 

(a)           There is no pending Legal Proceeding and, to the Company’s knowledge, no Person has threatened in writing to commence any Legal Proceeding against the Company that would have a Material Adverse Effect.

 

(b)          There is no order, writ, injunction, judgment or decree to which the Company, or any of the assets owned or used by the Company, is subject and that has any Material Adverse Effect.

 

                2.15        Authority. The Company has the full corporate power and authority to enter into and to perform its obligations under this Agreement; and the execution, delivery and performance by the Company of this Agreement have been duly authorized by all necessary corporate or organizational action on the part of the Company.  This Agreement constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to (i) laws of general application relating to bankruptcy, insolvency and the relief of debtors, and (ii) rules of law governing specific performance, injunctive relief and other equitable remedies.

 

                2.16        Non-Contravention; Consents. Other than the Regulatory Approvals, the Lending Banks Loans and the Institutional Lenders Loan, the execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby do not and will not violate or conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default, or give rise to a right of termination, cancellation or acceleration of any obligation or loss of any benefit  under (i) the corporate documents of the Company, (ii) any Legal Requirement or any order of any court or other Governmental Entity by which the Company or any of its material properties or assets is or are bound, and (iii) any provision of any agreement to which the Company is a party, in each of clauses (ii) and (iii), other than in a manner that would not have a Material Adverse Effect.

 

  

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2.17        Brokers.  No broker, finder or investment banker, for which the Company may be liable, is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Company or any of its directors, officers, employees or agents.

 

2.18        Disclosure; Disclaimer. The Company acknowledges and agrees that Purchaser does not make and has not made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 4 hereof.  The Company is aware of the significance of the transaction contemplated hereby to Purchaser and acknowledges that time is of the essence in consummating the transaction contemplated hereby.

 

	
Section 3.

	
REPRESENTATIONS AND WARRANTIES OF SELLER.

 

Seller represents and warrants to and for the benefit of Purchaser, as of the date hereof, other than as set out in the Disclosure Schedule delivered to Purchaser on the date hereof, as follows:

 

3.1          Due Organization; Etc. Seller is a corporation duly organized and validly existing under the laws of the State of Israel.  Seller has all requisite corporate power and authority to own, lease and operate its properties and to carry on its businesses as now conducted.

 

3.2          Ownership of Shares; Title. Seller is the lawful owner, beneficially and of record of all of the Shares, and, subject to obtaining the Institutional Lenders Consent and the Lenders Banks Consents, shall transfer to Purchaser at the Closing, all of the Shares, free and clear of all Encumbrances or as contemplated hereunder. Seller does not own any other shares, options or other rights to subscribe for, purchase or acquire any securities of the Company from the Company or from any other Person.

 

3.3          Authority.  Seller has the full corporate power and authority to enter into and to perform its obligations under this Agreement; and the execution, delivery and performance by Seller of this Agreement have been duly authorized by all necessary corporate or organizational action on the part of Seller.  This Agreement constitutes the legal, valid and binding obligation of Seller, enforceable against Seller in accordance with its terms, subject to (i) laws of general application relating to bankruptcy, insolvency and the relief of debtors, and (ii) rules of law governing specific performance, injunctive relief and other equitable remedies.

 

3.4          Non-Contravention; Consents. Other than the Regulatory Approvals, the Lending Banks Loans and the Institutional Lenders Loan, the execution, delivery and performance by Seller of this Agreement and the consummation by Seller of the transactions contemplated hereby do not and will not violate or conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default, or give rise to a right of termination, cancellation or acceleration of any obligation or loss of any benefit  under (i) the corporate documents of Seller, and (ii) any Legal Requirement or any order of any court or other Governmental Entity by which Seller or any of its material properties or assets is or are bound, in each case, other than in a manner that would not have a material adverse effect on Seller's ability to consummate the transactions contemplated hereby.

 

  

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3.5          Brokers. No broker, finder or investment banker, for which Seller may be liable, is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Seller or any of its directors, officers, employees or agents.

 

3.6          Disclosure; Disclaimer. Seller acknowledges and agrees that Purchaser does not make and has not made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 4 hereof.  Seller is aware of the significance of the transaction contemplated hereby to Purchaser and acknowledges that time is of the essence in consummating the transaction contemplated hereby.

 

	
Section 4.

	
REPRESENTATIONS AND WARRANTIES OF PURCHASER.

 

Purchaser represents and warrants to Seller, as of the date hereof, as follows:

 

4.1          Due Organization; Etc.  Purchaser is a corporation duly organized and validly existing under the laws of the State of Israel.  Purchaser has all requisite corporate power and authority to own, lease and operate its properties and to carry on its businesses as now conducted. The ultimate control of Purchaser is held by an Israeli citizen and resident in the manner required by applicable law to receive or maintain, directly and through the Company, the Licenses.

 

4.2          Authority. Purchaser has the full corporate power and authority to enter into and to perform its obligations under this Agreement; and the execution, delivery and performance by Purchaser of this Agreement have been duly authorized by all necessary corporate or organizational action on the part of Purchaser.  This Agreement constitutes the legal, valid and binding obligation of Purchaser, enforceable against Purchaser in accordance with its terms, subject to (i) laws of general application relating to bankruptcy, insolvency and the relief of debtors, and (ii) rules of law governing specific performance, injunctive relief and other equitable remedies.

 

4.3          Non-Contravention; Consents. Other than the Regulatory Approvals, the execution, delivery and performance by Purchaser of this Agreement and the consummation by Purchaser of the transactions contemplated hereby do not and will not violate or conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default, or give rise to a right of termination, cancellation or acceleration of any obligation or loss of any benefit  under (i) the corporate documents of Purchaser, or (ii) any Legal Requirement or any order of any court or other Governmental Entity by which Purchaser or any of its material properties or assets is or are bound, in each case, other than in a manner that would not have a material adverse effect on Purchaser's ability to consummate the transactions contemplated hereby.

 

4.4          Litigation. There is no judgment, decree or order against Purchaser that prevents, enjoins, or materially alters or delays the purchase of the Shares under this Agreement and the consummation of the transactions contemplated herein.

 

4.5          Financial Capability. Purchaser has access to, and at the Closing shall have, sufficient funds or commitments to pay in cash any and all amounts necessary to consummate the payments and transactions contemplated hereby, including the purchase of the Shares, and Purchaser acknowledges that any failure or delay to obtain financing necessary, if any, to consummate the transactions contemplated hereby shall not constitute a defense or condition precedent to its obligations hereunder.

  

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4.6          Regulatory Approvals. Purchaser and its Affiliates and Representatives have had adequate opportunity to review the MoC Licenses and related regulations, and have received all information (legal, financial and otherwise) requested by them concerning the MoC Licenses and related regulations and all of the terms and conditions thereto.

4.7          Experience; Receipt of Information; Consultation with Advisers. Without prejudice to the representations and warranties of the Company and Seller herein, Purchaser acknowledges that it has voluntarily decided to enter into this Agreement, to consummate the transactions contemplated herein and hereby confirms that (i) it has had adequate opportunity to select and consult with its financial, tax, accounting and legal advisors regarding the terms, conditions, rights and obligations set forth in this Agreement, and (ii) it has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks relating to acquiring the Shares and, by reason of its financial and business experience, it has the capacity to protect its interest in connection with the acquisition of such Shares.

4.8          Brokers.  No broker, finder or investment banker, for which Purchaser may be liable, is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Purchaser or any of its directors, officers, employees or agents.

 

               4.9           Disclosure; Disclaimer. Purchaser acknowledges and agrees that neither Seller nor the Company makes and has not made any representations or warranties with respect to the trasnsactions contemplated hereby other than those specifically set forth in Sections 2 and 3 hereof, including as to projections, forecasts or forward-looking statements. Without derogating from the foregoing or from the Company's and Seller's representations under Sections 2 and 3 hereof, or from Seller's indemnification under Section 10 hereof, Purchaser agrees that the Shares are purchased at the condition thereof on the Closing Date, whether or not any fact, act or circumstance of any nature whatsoever relating to the Company is different than expected by Purchaser, subject only to the Company's and Seller's representations under Sections 2 and 3 hereof. Without derogating from the Company's and Seller's representations under Sections 2 and 3 hereof, any materials and presentations made available to Purchaser or its affiliates or Representatives, do not, directly, or indirectly, and shall not be deemed to, directly or indirectly, contain representations or warranties of the Seller, the Company or any of their respective Affiliates or Representatives. Purchaser is aware of the significance of the transactions contemplated hereby to Seller and acknowledges that time is of the essence in consummating the transaction contemplated hereby.

 

	
Section 5.

	
CERTAIN COVENANTS OF THE COMPANY AND SELLER.

 

5.1           Ordinary Course of Business. Except (i) as otherwise contemplated by this Agreement, (ii) as required by applicable Legal Requirements, (iii) as set forth in Part 5.1 of the Disclosure Schedule or (iv) as consented to in writing by Purchaser (which consent shall not be unreasonably withheld, delayed or conditioned), and subject to any limitations under applicable Legal Requirements, during the period from the date of this Agreement through the Closing (the "Pre-Closing Period"):

 

  

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(a)           the Company shall conduct its business and operations in the ordinary course and in substantially the same manner as such business and operations have been conducted prior to the date of this Agreement;

 

(b)           the Company shall use reasonable commercial efforts to preserve intact its current business organization, keep available the services of its current employees and consultants, and maintain its relations and good will with all suppliers, customers, landlords, creditors, employees, consultants and other Persons having business relationships with the Company, all in the ordinary course of business;

 

(c)           the Company shall not declare, accrue, set aside or pay any dividend or make any other distribution in respect of any shares of capital stock, and shall not repurchase, redeem or otherwise reacquire any shares of capital stock or other securities, and, other than management fees pursuant to the Management Services Agreement in an amount not to exceed NIS 15 million per year plus linkage to the Israeli consumer price index, shall not make any other payment (including any interest or any other payment with respect to the Shareholder Loan) to Seller or its Affiliates. For purposes of this clause (c), the term "Affiliates" shall not include the Company, its Subsidiaries or their respective directors and officers;

 

(d)           the Company shall not sell, issue or authorize the issuance of (i) any capital stock or other security, (ii) any option or right to acquire any capital stock or other security, or (iii) any instrument convertible into or exchangeable for any capital stock or other security of the Company;

 

(e)           the Company shall not amend or permit the adoption of any amendment to the Company's Articles of Association, or effect or permit the Company to become a party to any Acquisition Transaction, recapitalization, reclassification of shares, stock split, reverse stock split or similar transaction;

 

(f)            the Company shall not make any sale, assignment, transfer, abandonment or other conveyance of any asset the value of which is NIS 100 million or more, except transactions pursuant to existing binding Contracts;

(g)           the Company shall not enter into any material new customer, supplier, lease, reseller or distributor agreement other than in the ordinary course of business consistent with past practice;

 

(h)           the Company shall not change the terms of any employment agreements or compensation practices with senior employees of the Company or make across-the-board changes in employment agreements or compensation practices or enter into any new (or amend any existing) employee benefit plan, program or arrangement, except in accordance with pre-existing contractual provisions or increases in the ordinary course that are consistent with past practice;

 

(i)            the Company shall  not enter into any transaction directly or indirectly with Seller or its Affiliates. For purposes of this clause (i), the term "Affiliates" shall not include the Company, its Subsidiaries or their respective directors and officers; and

 

  

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(j)           the Company shall not agree or commit to take any of the actions described in the clauses above.

 

5.2           No Control of Other Party; Procedures for Requesting Purchaser Consent.

 

(a)           Without derogating from the foregoing, nothing in Section 5.1 is intended to inhibit or otherwise restrict the Company from conducting its business during the Pre-Closing Period in the ordinary course of business.

 

(b)           Nothing contained in this Agreement is intended to give Purchaser, directly or indirectly, the right to control or direct the Company's or its Subsidiaries' operations prior to the Closing, and to give the Company, directly or indirectly, the right to control or direct Purchaser's operations. Prior to the Closing, each of the parties shall exercise, consistent with the terms and conditions of this Agreement, complete control and supervision over its and its Subsidiaries’ respective operations.

 

(c)           If the Company shall desire to take an action which would be prohibited pursuant to Section 5.1 hereof without the written consent of Purchaser, prior to taking such action, the Company may request such written consent by sending an e-mail or facsimile to the individuals whose names and contact information are set forth in Schedule 5.2 ("Purchaser Contact Persons"), and may not take such action until such consent in writing has been received from one of the Purchaser Contact Persons.  Any request by the Company pursuant to this Section 5.2(c) shall be made in writing (including, by electronic mail or facsimile).  Purchaser Contact Persons shall use commercially reasonable efforts to respond to such request in writing within three (3) Business Days of the receipt of such request.  Notwithstanding anything to the contrary in this Section, the Company shall not be prohibited or otherwise restricted from taking any action that was requested by the Company in the manner set forth above and to which Purchaser did not object within the aforementioned three (3) Business Day-period.

 

	
Section 6.

	
ADDITIONAL COVENANTS AND AGREEMENTS.

 

6.1           Filings and Consents.

 

(a)           Purchaser shall, and shall cause its Affiliates to, and Seller and the Company shall, and shall cause their respective Affiliates to, (i) file and execute all applications legally required of such Person with the Israeli Antitrust Commissioner in connection with obtaining the Antitrust Approval, within 14 days of the date hereof, and (ii) provide all information required by the Israeli Antitrust Commissioner in connection with such filings in a timely manner.

 

(b)           Purchaser shall, and shall cause its Affiliates to, (i) file within 14 days of the date hereof all applications legally required of such Person with (y) the MoC in connection with obtaining the MoC Approval, and (z) any other governmental authority required by applicable law in order to effect the transaction contemplated hereby ((y) and (z), together with the Antitrust Approval, collectively the "Regulatory Approvals”), and (ii) provide all information required by the MoC or other Governmental Authority in connection with such filings in a timely manner.  In the event that any such filings are to be made by Seller or the Company, they shall do the same (i.e., make filings and provide information).

 

  

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(c)           Upon the terms and subject to the conditions set forth in this Agreement, the parties agree to use reasonable best efforts to obtain the Regulatory Approvals as soon as possible, to make such filings and notifications and respond to any requests for additional information made by an authority in a timely, complete and correct manner, and to comply with all applicable law and all requirements applicable to it of the MoC or the Israeli Antitrust Commissioner or other applicable agencies or regulatory authorities, as the case may be, to effect the transactions contemplated by this Agreement.  Each of the parties further undertake not to, and shall exercise best efforts to cause any of its controlling shareholders and other Affiliates not to, take any action that would adversely affect its ability to effect the Closing in a timely manner or that would reasonably be expected to materially delay, impede or prevent receipt of any necessary Regulatory Approvals.

(d)           Notwithstanding the foregoing, it is hereby agreed that Purchaser shall not be required to agree to conditions imposed by the Israeli Antitrust Commissioner and/or MoC and/or any other applicable regulatory authority, if any, which conditions are either (A) reasonably likely to have a Material Adverse Effect on the assets and operating profit of Purchaser, and its subsidiaries, taken as a whole, compared to the assets and operating profit as reflected in the unaudited financial statements of Purchaser for the period ended June 30, 2010; (B) provide for the sale of the Company's International Telephony Business; or (C) provide for the sale of the Company's ISP Business (the "Special Regulatory Conditions").

(e)           Subject to any applicable Legal Requirement, Purchaser shall provide Seller and the Company with all material correspondence and material relevant information with respect to Regulatory Approvals; provided that any trade secrets or other confidential information shall be redacted from such updates and shall be provided to a third party trustee for safekeeping.  Purchaser shall promptly notify Seller of any material written communication made to or received by such party or its Affiliates from the MoC or the Israeli Antitrust Commissioner or any other regulatory body regarding any of the transactions contemplated hereby; permit Seller to review  in advance any material written communication to the MoC or the Israeli Antitrust Commissioner; and shall not agree to participate in any substantive meeting or discussion with or in the MoC or the Israeli Antitrust Commissioner in respect of any filing, investigation or inquiry concerning this Agreement or the transactions contemplated hereby unless, to the extent reasonably practicable and lawful, it consults with Seller in advance and, to the extent permitted and practicable, gives Seller the opportunity to attend, and furnish Seller with copies of all material correspondence, filings and written communications between them on one hand and the MoC or the Israeli Antitrust Commissioner or its respective staff on the other hand, with respect to this Agreement and the transactions contemplated hereby. This clause (f) shall apply to Seller and the Company, mutatis mutandis, in regard to the transaction contemplated hereby.

 

6.2          Public Announcements.  During the Pre-Closing Period, (a) neither the Company nor Seller or Affiliates or Representatives thereof shall issue any press release or make any public statement regarding this Agreement, or regarding any of the transactions contemplated by this Agreement, without Purchaser's prior written consent, and (b) Purchaser shall not (and Purchaser shall not permit any of its Affiliates and Representatives to) issue any press release or make any public statement regarding this Agreement, or regarding any of the transactions contemplated by this Agreement, without Company's prior written consent.  Notwithstanding the provisions of the preceding sentence, each party or any Affiliate thereof whose shares are publicly traded shall be permitted to issue any press release or make any public statement as is required by or (in its reasonable judgment) advisable in connection with any Legal Requirement, including, without limitation, Nasdaq rules, providedthat it first consults with the other party hereto as to the timing and substance thereof.  Each of Purchaser, the Company and Seller acknowledge that certain of the proceedings required to obtain consents to or approvals of the Transactions from Governmental Bodies are public, and consent to the filings and disclosures required during the Pre-Closing Period pursuant to Section 6.1 hereof notwithstanding anything to the contrary in this Section 6.2; provided that the parties hereto shall use their commercially reasonable efforts to cause the Governmental Bodies with which contacts may be made in order to obtain such consents or approvals to maintain the confidentiality of this Agreement and the Transactions to the fullest extent practicable.  To the extent inconsistent with the provisions of this Section 6.2, the Non-Disclosure Agreement dated October 6, 2010 between the Company and Purchaser (the "Confidentiality Agreement") is expressly superseded hereby and shall be deemed amended to conform hereto. In addition, the parties agree that, by virtue of execution of this Agreement, they agree that the Confidentiality Agreement shall be construed as a mutual confidentiality agreement.

 

  

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6.3           Reasonable Best Efforts.

 

(a)           During the Pre-Closing Period, (a) Seller and the Company shall use its reasonable best efforts to cause the conditions set forth in Section 7 to be satisfied on a timely basis, and (b) Purchaser shall use its reasonable best efforts to cause the conditions set forth in Section 8 to be satisfied on a timely basis.

 

(b)           Without derogating from the generality of clause (a), other than the closing conditions set forth in Sections 7 and 8 hereof, the absence of any consent, approval or authorization of any third party for the transactions contemplated hereby shall not constitute a condition precedent for Closing, a ground for terminating or not consummating this Agreement or the transactions contemplated hereby, or a breach of this Agreement.

 

(c)           Without derogating from the generality of clause (a), as promptly as practicable after the execution of this Agreement, Seller and the Company shall seek to obtain the consent of the Institutional Lenders (the "Institutional Lenders Consent") to the removal of the Institutional Lenders Pledges and the cancellation of the Institutional Lenders loan agreement dated January 31, 2010, to the extent it relates to the Company and the removal of the Company as a party from such agreement at, and subject to, the Closing. Purchaser undertakes to cooperate with Seller and the Company in that regard, including by way of executing appropriate pay-off letters to the benefit of the Institutional Lenders.

(d)           Without derogating from the generality of clause (a), as promptly as practicable after the execution of this Agreement, the parties shall seek to obtain the consent of Lending Banks to the transactions contemplated hereunder and the removal of the Lending Banks Pledges at, and subject to, the Closing (the "Lenders Bank Consent"). Purchaser undertakes to cooperate with Seller and the Company in that regard, including by way of executing appropriate documentation that would grant the Lending Banks the same level of the Lending Banks Pledges (including guarantees and other forms of security satisfactory to the Lending Banks); provided that, subject to Purchaser's compliance with this Section 6.3, Purchaser shall not be required to consent to acceleration of the Lending Banks Loan. Purchaser may, upon written notice to Seller and the Company of at least thirty (30) days prior to Closing, elect to have the Company prepay, at and subject to Closing, the Lending Banks Loans and, subject to any consent, if required, of the Lending Banks, the Company shall do so at Closing with, and subject to, the full cooperation of Purchaser (including arranging for a replaced financing to the Company, if needed). In such case, Purchaser further acknowledges that any prepayment commission or penalty imposed by the Lending Banks shall be its (or, post Closing, the Company's) sole responsibility and, for the sake of clarity, shall not be reduced from the Consideration.

  

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(e)           Without derogating from the generality of clause (a), Seller and the Company shall use best efforts to obtain the consents set forth under the second and third bullets of Part 2.16(A) of the Disclosure Schedule.

6.4           Tax Liability.  Each party shall be solely responsible for all its respective tax obligations deriving from the transactions contemplated in this Agreement.

 

6.5           Notification. During the Pre-Closing Period, the Company and Seller shall promptly notify Purchaser, and Purchaser shall promptly notify the Company and Seller, in writing of the discovery of any of the following:  (i) any event, condition, fact or circumstance that occurred or existed on or prior to the date of this Agreement and that caused or constitutes a material inaccuracy in or breach of any representation or warranty made by the relevant party in this Agreement; (ii) any event, condition, fact or circumstance that occurs, arises or exists after the date of this Agreement and that causes or constitutes, or could reasonably be seen as likely to cause or constitute, a material inaccuracy in or breach of any representation or warranty made by the relevant party in this Agreement; (iii) any breach of any material covenant or obligation of the relevant party; and (iv) any event, condition, fact or circumstance that would make the timely satisfaction of any of the conditions set forth in Section 7 or 8 impossible,  unlikely or postponed.

 

6.6          Information Rights. Purchaser shall cause the Company, and the Company shall, at the request of Seller and at its reasonable expense (if such information is not readily prepared by Purchaser due to its own internal or legal requirements), promptly prepare and furnish (and, where applicable, cause its accountants to prepare and furnish), such information (including audited consolidated yearly financial statements and quarterly reviewed financial statements, if required) relating to the financial condition, business and corporate affairs of the Company as Seller may from time to time request in order to comply (including by way of making public filings of such information and reports) with applicable legal requirements (including securities and stock exchange rules and guidance from the applicable authority or regulator)) that apply to Seller or its Affiliates. Without derogating from and subject to the foregoing, Purchaser shall cause the Company, and the Company shall, at Seller's reasonable expense, prepare and furnish the information relating to subsequent events, including discussions with management, management representation, representation from the current auditors, all in order to and to the extent required to enable Seller and its auditors to comply with Legal Requirements.‫‫

 

               6.7           Retention Plan of Senior Executives. At, but subject to, Closing, Seller undertakes to transfer to the Company or to Purchaser, at Purchaser's discretion, the amount specified, and to be used by Purchaser and the Company, in accordance with, Part 6.7 of the Disclosure Schedule.

 

  

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Section 7.

	
CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER.

 

The obligations of Purchaser to consummate the transactions contemplated by this Agreement are subject to the satisfaction, at or prior to the Closing, of each of the following conditions any or all of which may be waived in writing by Purchaser:

 

               7.1           Approval of (i) the MoC of the transactions contemplated hereby, either by the transfer of the existing Licenses to Purchaser or the grant of new licenses that permit the Business to continue to be operated or the consent for the contemplated change of control (the "MoC Approval"), (ii) the Israeli Antitrust Commissioner of the transactions contemplated hereby (the "Antitrust Approval"), and (iii) any other material Governmental Authorization necessary to effect the transaction contemplated by this Agreement (the "Closing Regulatory Approvals"), shall have been duly obtained and shall be in full force and effect on the Closing Date.

 

                7.2          No temporary restraining order, preliminary or permanent injunction, judgment or other order issued by any court of competent jurisdiction or other legal or regulatory restraint or prohibition preventing the consummation of the transactions contemplated hereby shall be in force.

 

                7.3          All of the covenants and obligations that the Company and/or Seller are required to comply with or to perform at or prior to the Closing shall have been complied with and performed in all material respects.

 

                7.4          The following consents shall have been duly obtained: (i) the Lenders Bank Consent and (ii) the Institutional Lenders Consent and the Institutional Lenders loan agreement dated January 31, 2010, shall be cancelled, to the extent it relates to the Company and the Company shall be removed as a party from such agreement.

 

                7.5         Purchaser shall have received the following documents, each of which shall be in full force and effect: (i) written resignations of all directors of the Company, effective as of the Closing Date; and (ii) duly executed share transfer deed for transfer of Shares to Purchaser.

 

	
Section 8.

	
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER AND THE COMPANY.

 

The obligations of Seller and the Company to consummate the transactions contemplated by this Agreement are subject to the satisfaction, at or prior to the Closing, of the following conditions any or all of which may be waived in writing by Seller:

 

8.1          The Closing Regulatory Approvals shall have been duly obtained and shall be in full force and effect on the Closing Date.

 

8.2           No temporary restraining order, preliminary or permanent injunction, judgment or other order issued by any court of competent jurisdiction or other legal or regulatory restraint or prohibition preventing the consummation of the transactions contemplated hereby shall be in force.

  

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8.3          All of the covenants and obligations that Purchaser is required to comply with or to perform at or prior to the Closing shall have been complied with and performed in all material respects.

8.4          The following consents shall have been duly obtained: (i) the Lenders Bank Consent and (ii) the Institutional Lenders Consent.

 

8.5          Subject to Closing, Seller and its Affiliates shall have been released of, and Purchaser assumed, all of the guarantees specified in Part 8.5 of the Disclosure Schedule.

 

	
Section 9.

	
TERMINATION.

 

9.1          Termination Events.  This Agreement may be terminated prior to the Closing:

 

(a)           By either the Company and Seller or by Purchaser if a court of competent jurisdiction shall have issued an order, decree or ruling or taken any other action (which order, decree or ruling the parties hereto shall use their best efforts to lift) and such was not at the request of the party seeking termination of the Agreement, in each case permanently restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement, and such order, decree, ruling or other action shall have become final and nonappealable; or

 

(b)           by Purchaser if the Closing has not taken place on or before December 31, 2010 (the "Initial End Date", as may be extended by Seller pursuant to clause (c) below); provided however, that Purchaser may extend the Initial End Date to February 15, 2011 by written notice to Seller if and only if the extension notice is delivered no later than December 15, 2010; provided further however that the right of Purchaser to terminate this Agreement under this Section (or to extend the Initial End Date) shall not be available if Closing shall not have occurred as a result of any material failure on the part of Purchaser to comply with or perform any covenant or obligation of Purchaser set forth in this Agreement; or

 

(c)           by Seller and the Company if the Closing has not taken place on or before Initial End Date (as may be extended by Purchaser pursuant to clause (b) above); provided however, that Seller and the Company may extend the Initial End Date to February 15, 2011 by written notice to Purchaser if and only if the extension notice is delivered no later than December 15, 2010; provided further however that the right of Seller and Purchaser to terminate this Agreement under this Section (or to extend the Initial End Date) shall not be available if Closing shall not have occurred as a result of any material failure on the part of Seller or the Company to comply with or perform any covenant or obligation of Seller or the Company set forth in this Agreement; or

 

(d)           by the mutual written consent of the parties; or

 

(e)           by Purchaser, if the Company or Seller shall materially breach any obligation or agreement hereunder such that (and only if) the conditions referred to in Section 7 would not be satisfied and such breach shall not have been cured within seven (7) business days following written notice of such breach, provided that the right to terminate this Agreement by Purchaser under this Section 9.1(e) shall not be available where Purchaser is at that time in material breach of this Agreement;

 

  

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(f)            by Seller, if Purchaser shall materially breach any obligation or agreement hereunder such that (and only if) the conditions referred to in Section 8 would not be satisfied and such breach shall not have been cured within seven (7) business days following written notice of such breach, provided that the right to terminate this Agreement by Seller under this Section 9.1(f) shall not be available where Seller or the Company is at that time in material breach of this Agreement; or

 

(g)           by Purchaser, if (i) all of the Closing Regulatory Approvals shall have been obtained prior to the Initial End Date (as may be extended hereunder) but any of which contains any of the Special Regulatory Conditions; or (ii) any of the Closing Regulatory Approvals shall have not been obtained prior to the Initial End Date (as may be extended hereunder) (i.e., the applicable Governmental Body has declined to issue the Closing Regulatory Approvals); provided that the right to terminate this Agreement by Purchaser under this Section 9.1(g)(ii) shall not be available where the applicable Governmental Authority has declined to issue the applicable Closing Regulatory Approval due toPurchaser's breach of its undertakings in Section 6.1 of this Agreement.

 

9.2          Termination Procedures. If Purchaser wishes to terminate this Agreement pursuant to Section 9.1(a), Section 9.1(b), Section 9.1(e) or Section 9.1(g), Purchaser shall deliver to Seller and the Company a written notice stating that Purchaser is terminating this Agreement and setting forth a brief description of the basis on which Purchaser is terminating this Agreement.  If Seller wishes to terminate this Agreement pursuant to Section 9.1(a), Section 9.1(c) or Section 9.1(f), Seller shall deliver to Purchaser a written notice stating that Seller is terminating this Agreement and setting forth a brief description of the basis on which Seller is terminating this Agreement.

 

9.3          Effect of Termination.

 

(a)           General. If this Agreement is duly terminated pursuant to Section 9.1, all further obligations of the parties under this Agreement shall terminate; provided, however, that:  (a) neither the Company nor Purchaser nor Seller shall be relieved of any obligation or liability arising from any prior breach by such party of any provision of this Agreement; (b) the parties shall, in all events, remain bound by and continue to be subject to the provisions set forth in Section 11; and (c) the parties shall, in all events, remain bound by and continue to be subject to Sections 9 and 11 and the Confidentiality Agreement.

 

(b)           Release of Deposit to Seller. The parties agree that if the Closing Regulatory Conditions have been obtained without any Special Conditions and Purchaser determines to terminate this Agreement pursuant to Section 9, then, in view of the difficulty of estimating with exactness the Damages to Seller or the Company which will result from any such termination, the parties agree that as liquidated damages, and not as a penalty but as sole and exclusive remedy to Seller and the Company, solely with respect to Purchaser's compliance with Section 6.1 of this Agreement and obtaining the Closing Regulatory Approvals, that Seller shall keep and have full title of the full amount of the Deposit and all interest accrued thereon and Purchaser shall have no title or claim in the Deposit, without however, having the need to prove any actual damages incurred by Seller or the Company, and the parties hereby acknowledge that such liquidated damages are reasonable to cover such potential Damages solely in respect of non-compliance of Purchaser with Section 6.1 of this Agreement and obtaining the Closing Regulatory Approvals, and Purchaser hereby waives any right or claim in respect thereto.

 

  

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(c)           Release of Deposit to Purchaser. The parties agree that if this Agreement is duly terminated for any reason other than Section 9.3(b), then Seller shall within three (3) business days release the Deposit to Purchaser and Purchaser shall have full title of the full amount of the Deposit and Seller shall have no title or claim in the Deposit.

 

	
Section 10.

	
INDEMNIFICATION, ETC.

 

10.1        Survival of Representations, Etc.

 

(a)           The representations and warranties made by the Company and Seller hereunder shall survive the Closing and shall expire twelve (12) months following the Closing Date (the "Termination Date"); provided, however, that if, at any time prior to the Termination Date, any Purchaser Indemnitee delivers to Seller a written notice alleging the existence of an incompleteness of, inaccuracy in or a breach of any of the representations and warranties made by the Company or Seller (and setting forth in reasonable detail the basis for such Purchaser Indemnitee's belief that such an incompleteness, inaccuracy or breach may exist) and asserting a claim for recovery this Section 10 based on such alleged incompleteness, inaccuracy or breach, then the claim asserted in such notice shall survive the Termination Date until such time as such claim is fully and finally resolved; provided, further, that a claim for recovery in connection therewith, if not resolved by mutual consent, must be filed with a competent court by the Purchaser Indemnitee within ninety (90) days after the Termination Date.

 

(b)           The representations and warranties made by Purchaser hereunder shall survive the Closing and shall expire on the Termination Date; provided, however, that if, at any time prior to the Termination Date, Seller delivers to Purchaser a written notice alleging the existence of an inaccuracy in or a breach of any of the representations and warranties made by Purchaser (and setting forth in reasonable detail the basis for Seller's belief that such an inaccuracy or breach may exist) and asserting a claim for recovery under this Section 10 based on such alleged inaccuracy or breach, then the claim asserted in such notice shall survive the Termination Date until such time as such claim is fully and finally resolved; provided, further, that a claim for recovery in connection therewith, if not resolved by mutual consent, must be filed with a competent court by the Purchaser Indemnitee within ninety (90) days after the Termination Date.

 

10.2        Indemnification.

 

(a)           From and after the Closing Date (but subject to the time limitations set forth in Section 10.1(a)), the Purchaser Indemnitees may seek indemnification from Seller, and Seller shall be obligated to pay indemnification for any Damages that are suffered or incurred by any of the Purchaser Indemnitees or to which any of them has otherwise become subject and which arise from or as a result of:  (i)  any inaccuracy in or breach of any representation or warranty by the Company or Seller hereunder; (ii)  any failure to comply with, or breach of any covenant or obligation of the Company or Seller or any of the Company's or Seller’s respective obligations pursuant to the Transactions; or (iii) any Legal Proceeding relating to any inaccuracy, failure or breach referred to above (including any Legal Proceeding commenced by any Purchaser Indemnitee for the purpose of enforcing any of its rights under this Section 10); provided, however, that (A) no Purchaser Indemnitee shall be entitled to any such indemnification unless and until the Damages sought by all Purchaser Indemnitees exceed twenty five million NIS (NIS 25,000,000) (the "Indemnity Basket") in the aggregate, whereupon indemnification may be sought by Purchaser to the full extent of all such Damages (including the first NIS of the Indemnity Basket); (B)  Seller shall not be obligated to pay indemnification in the aggregate in excess of six hundred and fifty million NIS (NIS 650,000,000) (the "Indemnity Cap"); (C) each Damage for which a Purchaser Indemnitee is entitled to recovery under this Section 10 shall be reduced by (and if a claim for Damage has already been made and an amount therefor received from Seller, shall reimburse to Seller) the amount of any insurance proceeds that the Purchaser Indemnitee actually receives with respect to such Damage, net of any deductibles; and (D) if a Purchaser Indemnitee shall be entitled to receive proceeds from a third party (not affiliated with Purchaser) that are intended to cover a Damage for which a Purchaser Indemnitee seeks Damages hereunder, the Purchaser Indemnitee shall reimburse Seller for such payment, net of any expenses (including those related to collecting such proceeds from the third party) up to the lesser of (i) the amount of proceeds received from Seller on account of such Damage and (ii) the amount collected from the third party in respect of such Damage; provided that Purchaser Indemnitee shall not have an obligation to commence legal proceeding against such third party if it has duly assigned or subrogated such cause(s) of action to Seller prior thereto in a manner that shall not prejudice such Purchaser Indemnitee's rights.

 

  

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(b)           From and after the Closing Date (but subject to the time limitations set forth in Section 10.1(b)), Seller may seek from Purchaser, and Purchaser shall be obligated to pay, indemnification for any Damages that are suffered or incurred by a Seller Indemnitee or to which such Seller Indemnitee may otherwise become subject and which arise from or as a result of:  (i) any inaccuracy in or breach of any representation or warranty by Purchaser hereunder; (ii)  any failure to comply with, or breach of any covenant or obligation of Purchaser, or any of Purchaser's obligations pursuant to the Transactions or the other transactions contemplated by this Agreement; or (iii) any Legal Proceeding relating to any inaccuracy, failure or breach referred to above (including any Legal Proceeding commenced by such Seller Indemnitee for the purpose of enforcing any of its rights under this Section 10); provided, however, that (A) no Seller Indemnitee shall be entitled to any such indemnification unless and until the Damages sought by all Seller Indemnitees exceed the Indemnity Basket in the aggregate, whereupon indemnification may be sought by Seller to the full extent of all such Damages (including the first NIS of the Indemnity Basket);  (B) Purchaser shall not be obligated to pay indemnification in the aggregate in excess of the Indemnity Cap; (C) each Damage for which a Seller Indemnitee is entitled to recovery under this Section 10 shall be reduced by (and if a claim for Damage has already been made and an amount therefor received from Purchaser, shall reimburse to Purchaser) the amount of any insurance proceeds that the Seller Indemnitee actually receives with respect to such Damage, net of any deductibles; and (D) if a Seller Indemnitee shall be entitled to receive proceeds from a third party (not affiliated with Seller) that are intended to cover a Damage for which a Seller Indemnitee seeks Damages hereunder, the Seller Indemnitee shall reimburse Purchaser for such payment, net of any expenses (including those related to collecting such proceeds from the third party) up to the lesser of (i) the amount of proceeds received from Purchaser on account of such Damage and (ii) the amount collected from the third party in respect of such Damage; provided that Seller Indemnitee shall not have an obligation to commence legal proceeding against such third party if it has duly assigned or subrogated such cause(s) of action to Purchaser prior thereto in a manner that shall not prejudice such Seller Indemnitee's rights.

 

  

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10.3        Defense of Third Party Claims.  In the event of the assertion or commencement by any Person of any claim or Legal Proceeding (whether against the Company, against Purchaser or against any other Person) with respect to which any of the Purchaser Indemnitees or Seller Indemnitees shall have the right to seek indemnification pursuant to this Section 10, the indemnifying party shall have the right, at its election, to proceed with the defense of such claim or Legal Proceeding on its own, with counsel reasonably satisfactory to the party entitled to indemnification.  If such party so proceeds with the defense of any such claim or Legal Proceeding:

 

(a)           all reasonable expenses relating to the defense of such claim or Legal Proceeding shall be borne and paid by the indemnifying party;

 

(b)           the indemnifying party shall have the right to settle, adjust or compromise such claim or Legal Proceeding with the consent of party entitled to indemnification; provided, however, that such consent shall not be unreasonably withheld.

 

Each party seeking indemnification shall give the indemnifying party prompt notice of the commencement of any such Legal Proceeding against Purchaser, Seller or the Company (as applicable); provided, however, that any failure to do so shall not limit any of the rights of the indemnitees under this Section 10 (except to the extent such failure materially prejudices the defense of such Legal Proceeding).

 

10.4        Exercise of Remedies by Third Parties.  No Person who is not a party to this Agreement (or any successor thereto or assign thereof) shall be permitted to assert any indemnification claim or exercise any other remedy under this Agreement unless the applicable party to this Agreement (or any successor thereto or assign thereof) shall have consented to the assertion of such indemnification claim or the exercise of such other remedy.

 

10.5        Sole Remedy. From and after the Closing, the rights of the parties under this Section 10 shall be the sole and exclusive remedy of the parties with respect to claims resulting from or relating to any representation, warranty, covenant or agreement contained in this Agreement. Notwithstanding the above, each party hereto shall be (a) entitled to seek any available remedy of law or equity (including rescission or restitution) with respect to fraud and/or willful misconduct, (b) entitled to seek injunctive relief to enjoin the breach, or threatened breach, of any provision of this Agreement, and (c) entitled to seek the equitable remedy of specific performance in connection with this Agreement.

 

10.6        Representations not a Closing Condition. Without derogating from Purchaser's right to seek Damages pursuant to this Agreement, it is hereby clarified and agreed that completeness or accuracy of any of the representations and warranties made by the Company or Seller hereunder are not, and shall not be deemed to be, a closing condition of Purchaser and a breach of Sections 2 or 3 hereof shall not be a ground for terminating or not consummating this Agreement or the transactions contemplated hereby.

 

	
Section 11.

	
MISCELLANEOUS PROVISIONS.

 

11.1        Entire Agreement.  This Agreement and the other agreements referred to herein set forth the entire understanding of the parties hereto relating to the subject matter hereof and thereof and supersede all prior agreements and understandings among or between any of the parties relating to the subject matter hereof and thereof; provided, however, that, except as expressly provided in Section 6.2 above, the Confidentiality Agreement shall not be superseded by this Agreement and shall remain in effect in accordance with its terms until the earlier of (a) the Closing Date, or (b) the date on which such Confidentiality Agreement is terminated in accordance with its terms.

 

  

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11.2        Further Assurances.  Each party hereto shall execute and cause to be delivered to each other party hereto such instruments and other documents, and shall take such other actions, as such other party may reasonably request (prior to, at or after the Closing) for the purpose of carrying out or evidencing any of the transactions contemplated by this Agreement.

 

11.3        Fees and Expenses. Except as provided otherwise in this Agreement, each party to this Agreement shall bear and pay all fees, costs and expenses (including legal fees and accounting fees) that have been incurred or that are incurred by such party in connection with the transactions contemplated by this Agreement, including all fees, costs and expenses incurred by such party in connection with or by virtue of (a) the investigation and review conducted with respect to the other party's business (and the furnishing of information to in connection with such investigation and review), (b) the negotiation, preparation and review of this Agreement (including the Disclosure Schedule) and all agreements, certificates, opinions and other instruments and documents delivered or to be delivered in connection with the transactions contemplated by this Agreement, and (c) the preparation and submission of any filing or notice required to be made or given in connection with any of the transactions contemplated by this Agreement, and the obtaining of any Consent required to be obtained in connection with any of such transactions.

 

11.4        Attorneys' Fees.  If any action or proceeding relating to this Agreement or the enforcement of any provision of this Agreement is brought against any party hereto, the prevailing party shall be entitled to recover reasonable attorneys' fees, costs and disbursements (in addition to any other relief to which the prevailing party may be entitled).

 

11.5        Notices.  Any notice or other communication required or permitted to be delivered to any party under this Agreement shall be in writing and shall be deemed properly delivered, given and received when delivered (by hand, by registered mail, by courier or express delivery service or by facsimile) to the address or facsimile telephone number set forth beneath the name of such party below (or to such other address or facsimile telephone number as such party shall have specified in a written notice given to the other parties hereto):

 

	if to Purchaser and, after Closing, the Company:

 

Partner Communications Company Ltd.

8 Amal Street, Afeq Industrial Park

Rosh Ha’ayin 48103, Israel

Fax: 972-54-781-5951

Attention:  Emanuel Avner, VP, Chief Financial Officer

	 

 

  

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with a copy to (which shall not constitute notice):

 

Yossi Avraham, Arad & Co.

3 Daniel Ferisch Street

Tel-Aviv 64731, Israel

Fax: 972-3-6963801

Attention:  Yossi Avraham, Adv.

 

if to Seller and, until Closing, the Company:

 

Merhav Ampal Energy Ltd.

Abba Eban 10

Ackerstein Towers, Building C

Herzlia Pituach 46733, Israel

Facsimile:  +972-9-952-6001

Attn:  Yoram Firon, VP

with a copy to (which shall not constitute notice):

 

Goldfarb, Levy, Eran, Meiri, Tzafrir & Co.

2 Weizmann Street

Tel-Aviv 64239, Israel

Facsimile:  972-3-608-9908

Attention: Erez Altit, Adv.; Ido Zemach, Adv.

	 

 

or such other address with respect to a party as such party shall notify each other party in writing as above provided.  Any notice sent in accordance with this Section 11.5 shall be effective (i) if mailed, three (3) business days after mailing, (ii) if sent by messenger, upon delivery, and (iii) if sent via telecopier, upon transmission and electronic confirmation of receipt or (if transmitted and received on a non-business day) on the first business day following transmission and electronic confirmation of receipt.

 

11.6        Headings. The headings contained in this Agreement are for convenience of reference only, shall not be deemed to be a part of this Agreement and shall not be referred to in connection with the construction or interpretation of this Agreement.

 

11.7        Counterparts.  This Agreement may be executed in several counterparts, each of which shall constitute an original and all of which, when taken together, shall constitute one agreement.

 

11.8        Governing Law. This Agreement shall be governed by and construed according to the laws of the State of Israel, without regard to the conflict of laws provisions thereof.

 

11.9        Jurisdiction. Each party hereby irrevocably submits to the exclusive jurisdiction of the Tel Aviv Court for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents) and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or inconvenient venue for such proceeding.  Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law.

 

  

23

  

 

11.10      Successors and Assigns.  This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns (if any).  Neither party may assign any of its rights under this Agreement to any other Person without obtaining the consent or approval of the other parties hereto.

 

11.11      Remedies; Specific Performance. Except as otherwise provided herein, any and all remedies herein expressly conferred upon a Party will be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by Law or equity upon such Party, and the exercise by a Party of any remedy will not preclude the exercise of any other remedy. The Parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the Parties shall be entitled (without any requirement to post a bond or other security) to seek one or more injunction or other equitable remedies to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof, this being in addition to any other remedy to which they are entitled at Law or in equity.

 

11.12      Waiver.

 

(a)           No failure on the part of any Person to exercise any power, right, privilege or remedy under this Agreement, and no delay on the part of any Person in exercising any power, right, privilege or remedy under this Agreement, shall operate as a waiver of such power, right, privilege or remedy; and no single or partial exercise of any such power, right, privilege or remedy shall preclude any other or further exercise thereof or of any other power, right, privilege or remedy.

 

(b)           No Person shall be deemed to have waived any claim arising out of this Agreement, or any power, right, privilege or remedy under this Agreement, unless the waiver of such claim, power, right, privilege or remedy is expressly set forth in a written instrument duly executed and delivered on behalf of such Person; and any such waiver shall not be applicable or have any effect except in the specific instance in which it is given.

 

11.13      Amendments.  This Agreement may not be amended, modified, altered or supplemented other than by means of a written instrument duly executed and delivered on behalf of all parties hereto

 

11.14     Severability.  In the event that any provision of this Agreement, or the application of any such provision to any Person or set of circumstances, shall be determined to be invalid, unlawful, void or unenforceable to any extent, the remainder of this Agreement, and the application of such provision to Persons or circumstances other than those as to which it is determined to be invalid, unlawful, void or unenforceable, shall not be impaired or otherwise affected and shall continue to be valid and enforceable to the fullest extent permitted by law.

 

  

24

  

 

11.15      Parties in Interest. Except for the provisions of Section 10, none of the provisions of this Agreement are intended to provide any rights or remedies to any Person other than the parties hereto and their respective successors and assigns (if any).

 

11.16      Construction.

 

(a)           For purposes of this Agreement, whenever the context requires:  the singular number shall include the plural, and vice versa; the masculine gender shall include the feminine and neuter genders; the feminine gender shall include the masculine and neuter genders; and the neuter gender shall include the masculine and feminine genders.

 

(b)           The parties hereto agree that any rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not be applied in the construction or interpretation of this Agreement.

 

(c)           As used in this Agreement, the words "include" and "including," and variations thereof, shall not be deemed to be terms of limitation, but rather shall be deemed to be followed by the words "without limitation".

 

(d)           Except as otherwise indicated, all references in this Agreement to "Sections", "Schedules" and "Exhibits" are intended to refer to Sections of this Agreement and Schedules and Exhibits to this Agreement.

 

[SIGNATURES APPEAR ON THE FOLLOWING PAGE]

 

  

25

  

 

IN WITNESS WHEREOF, the parties hereto have caused this Share Purchase Agreement to be executed and delivered as of the date first above written.

 

	 	
Partner Communications Company Ltd.

	 
	 	 	 	 
	 	
By: 

	 	 
	 	
Name:

	 
	 	
Title:

	 
	 	 	 
	 	Merhav Ampal Energy Ltd.,	 
	 	 	 
	 	By: 	 	 
	 	Name:	 	 
	 	
Title:

	 	 
	 	 	 	 
	 	012 Smile Telecom Ltd.	 
	 	 	 	 
	 	By: 	 	 
	 	Name:	 	 
	 	Title:	 	 

 

 

26

 

 

EXHIBIT A

 

CERTAIN DEFINITIONS

 

For purposes of the Agreement (including this Exhibit A):

 

Acquisition Transaction.  "Acquisition Transaction" shall mean any transaction involving:

 

(a)           the sale, license, disposition or acquisition of all or substantially all of the Company's business or assets;

 

(b)           the issuance, disposition or acquisition of (i) any share capital or other equity security of the Company, (ii) any option, call, warrant or right (whether or not immediately exercisable) to acquire any share capital or other equity security of the Company, or (iii) any other security, instrument or obligation that is or may become convertible into or exchangeable for any capital stock or other equity security of the Company; or

 

(c)           any merger, consolidation, business combination, reorganization or similar transaction involving the Company.

 

Affiliate.  An “Affiliate” of a specified Person shall mean a Person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the Person specified.  For this purpose, “control,” shall mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

 

"Agreement" shall mean the Agreement to which this Exhibit A is attached (including the Disclosure Schedule and other Schedules and Exhibits thereto), as it may be amended from time to time.

 

Business. “Business” shall mean (i) the business of outgoing and incoming international telephony services, of hubbing services, and of international calling card services and any other operations and activities conducted by the Company, including other data and other related services, pursuant to the Company’s international services license dated December 31, 20091 and the Company’s international services licence in the Judea and Samaria region, dated February 18, 2008 (the "International Telephony Business"); (ii) the business of local telephony using VoB access and local telephony using dedicated lines based on PRI services and any other operations and activities conducted by the Company and its subsidiary pursuant to the domestic fixed-line license, dated December 15, 2005 and the Company’s domestic fixed-line licence in the Judea and Samaria region, dated February 18, 2008 (the "Land Line Business"); (iii) the business of the ADSL/cable/dial-up Internet and access services, the value-added services and the WiFi services and any other operations and activities, including all other related services, conducted by the Company pursuant to its internet access license dated December 31, 20092 and the Company’s internet access licence in the Judea and Samaria region, dated February 18, 2008 (the "ISP Business"); and (iv) the business related to end-point network services (and any other operations and activities conducted by the Company pursuant to the network end-point licence, dated December 31, 20093, of the Company), and the VoBoC and WIMAX experimental services of the Company and 012 Telecom Ltd. (the "Other Business"). On August 26, 2010, 012 Mobile, Limited Partnership has applied to the Ministry of Communication for an MVNO Licence which application is currently in process. The partners in 012 Mobile, Limited Partnership are: the Company (Limited Partner) and 012 Mobile GP Ltd. (General Partner) who is wholly owned by the Company.

 

1   The Licence entered into force on January 31, 2010.

 

2  The Licence entered into force on January 31, 2010.

  

3  The Licence entered into force on January 31, 2010.

 

  

27

  

 

Consent.  "Consent" shall mean any approval, consent, ratification, permission, waiver or authorization (including any Governmental Authorization).

 

Contract.  "Contract" shall mean any written, oral or other agreement, contract, subcontract, lease, understanding, instrument, note, warranty, insurance policy, benefit plan or legally binding commitment or undertaking of any nature.

 

Damages.  "Damages" shall include any loss, damage, injury, liability, claim, demand, settlement, judgment, award, fine, penalty, Tax, fee (including reasonable attorneys' fees), charge, cost (including costs of investigation) or expense of any nature.

 

Disclosure Schedule.  "Disclosure Schedule" shall mean the schedule titled "Disclosure Schedule" (dated as of the date of the Agreement) delivered to Purchaser on behalf of the Company and Seller.

 

Encumbrance.  "Encumbrance" shall mean any lien, pledge, hypothecation, charge, mortgage, security interest, encumbrance, claim, option, right of first refusal, preemptive right, or restriction of any nature (including any restriction on the voting of any security).

 

Entity.  "Entity" shall mean any corporation (including any non-profit corporation), general partnership, limited partnership, limited liability partnership, joint venture, estate, trust, company (including any limited liability company or joint stock company), firm or other enterprise, association, organization or entity.

 

Family Member. "Family Member" shall mean, in respect of a natural Person, (i) a spouse of such Person; (ii) a descendant of such Person or of a such Person’s spouse; (iii) such Person’s antecedent; (iv) such Person’s brother or sister, or (v) a spouse of any of the Persons referred to in clauses (ii), (iii), (iv) or (v) above.

 

GAAP.  "GAAP" shall mean generally accepted accounting principles in the United States or, as applicable, Israel, applied on a consistent basis.

 

  

28

  

 

Governmental Authorization.  "Governmental Authorization" shall mean any:  permit, license, certificate, franchise, permission, clearance, registration, qualification or authorization issued, granted, given or otherwise made available by or under the authority of any Governmental Body or pursuant to any Legal Requirement.

 

Governmental Body.  "Governmental Body" shall mean any:  (a) nation, state, commonwealth, province, territory, county, municipality, district or other jurisdiction of any nature; (b) federal, state, local, municipal, foreign or other government; or (c) governmental or quasi-governmental authority of any nature (including any governmental division, department, agency, commission, instrumentality, official, organization, unit, body or Entity and any court or other tribunal).

 

Institutional Lenders Loan. "Institutional Lenders Loan" shall mean the loan pursuant to that Loan Agreement, dated January 31, 2010, between Seller, the Company, Harel Insurance Company Ltd. and its affiliates and Menora Mivtachim Insurance Ltd. and its affiliates.

 

Institutional Lenders Pledges. "Institutional Lenders Pledges" shall mean the (i) first priority fixed pledge on the Shares, (ii) the second priority floating charge on the assets of the Company, and (iii) the other security interests imposed pursuant to the Institutional Lenders Loan.

 

Knowlegde. "Knowledge," "to its knowledge" and similar expressions shall mean, with respect to any Entity, with respect to any fact, circumstance, event or other matter in question, (i) in the case of Seller or the Company, the actual knowledge of the executive officers listed on Part 1.1 of the Disclosure Schedule after reasonable and diligent inquiry of those persons in the Entity that have principal responsibility over the subject matter in question, and (ii) in the case of Purchaser, the actual knowledge of the executive officers of Purchaser after reasonable and diligent inquiry of those persons in Purchaser that have principal responsibility over the subject matter in question.

Legal Proceeding.  "Legal Proceeding" shall mean any action, suit, litigation, arbitration, proceeding (including any civil, criminal, administrative, investigative or appellate proceeding), hearing, inquiry, audit, examination or investigation commenced, brought, conducted or heard by or before, or otherwise involving, any court or other Governmental Body or any arbitrator or arbitration panel.

Legal Requirement.  "Legal Requirement" shall mean any federal, state, local, municipal, foreign or other law, statute, constitution, principle of common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling or requirement issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any Governmental Body.

 

  

29

  

 

Lending Banks Loan. "Lending Banks Loan" shall mean the loan granted to the Company under that Credit Agreement, dated January 31, 2010, between the Company, Bank Leumi Le'Israel B.M. and Israel Discount Bank Ltd.

 

Lending Banks Pledges. "Lending Banks Pledges" shall mean the security interests imposed pursuant to that Lending Banks Loan.

 

Management Services Agreement.  "Management Services Agreement" shall mean that certain Management Services Agreement dated April 29, 2010, by and between the Seller and the Company.

Material Adverse Effect.  A "Material Adverse Effect" shall mean a material adverse effect on the business, operations, assets, liabilities, condition (financial or otherwise) or financial performance or results of the Company and its subsidiaries, taken as a whole, other than (a)  changes in general economic or political conditions or financial credit or securities markets in general (including changes in interest or exchange rates) whether worldwide or in any country or region in which the Company or its Subsidiaries conduct a material portion of their business, (b) any changes in the industries in which the Company and its Subsidiaries operate, (c) any changes in GAAP occurring after the date of this Agreement, (d) any changes in Laws applicable to the Company or any of its Subsidiaries or any of their respective properties or assets, in each case, occurring after the date of this Agreement; (e) acts of war, armed hostilities or terrorism or any escalation or worsening of any acts of war, armed hostilities or terrorism, (f) effects resulting from the negotiation, announcement or performance of this Agreement and the Transactions (including the impact thereof on relationships, contractual or otherwise, with customers, suppliers, vendors, employees or venture partners), (g) any failure to meet internal or published projections, forecasts, or revenue or earning predictions for any period; (h) any litigation arising from allegations of a breach of fiduciary duty or other violation of applicable Law relating to this Agreement; and (i) any action taken by the Company at the request of Purchaser or contemplated hereunder.

MoC. "MoC" shall mean the Israeli Ministry of Communications.

MoC Licenses. "MoC Licenses" shall mean the following licenses granted by the MoC  to the Company and/or its Affiliates, as amended from time to time: (i) International telephony license (general license), (ii) VoB and DFL license (general specific license), (iii) ISP license (specific license), (iv) Endpoint Network Services, (v) VoBoC experimental license.

 

Person.  "Person" shall mean any individual, Entity or Governmental Body.

 

  

30

  

 

Permitted Encumbrances. “Permitted Encumbrances” means:  (A) statutory liens for taxes not yet due and payable; (B) statutory liens to secure obligations to landlords, lessors or renters under leases or rental agreements which obligations are not yet due; (C) deposits or pledges made in connection with, or to secure payment of, workers’ compensation, unemployment insurance or similar programs mandated by applicable law; (D) statutory liens in favor of carriers, warehousemen, mechanics and materialmen, to secure claims for labor, materials or supplies and other like liens incurred in the ordinary course of business and not yet due; (E) liens in favor of customs and revenue authorities arising as a matter of law to secure payments of customs duties in connection with the importation of goods not yet due and payable; (F) non-exclusive object code licenses of software in the ordinary course of business; and (G) rights of third parties that are inherent to assets (such as software licenses, leased cars, contractual rights, etc.); provided, however, that Permitted Encumbrances shall not, for the avoidance of doubt, include liens created for the benefit of financial institutions.

Purchaser Indemnitees. "Purchaser Indemnitees" shall mean the following Persons:  (a) Purchaser and its Affiliates; (b) Purchaser’s successors and assigns; and (c) the Representatives of the Purchaser.

 

Representatives.  "Representatives" shall mean officers, directors, agents, attorneys, accountants, advisors and representatives.

 

Seller Indemnitees.  "Seller Indemnitees" shall mean the following Persons:  (a) Seller and its Affiliates; (b) Seller’s successors and assigns; and (c) the Representatives of the Seller.

 

Shareholder Loan. "Shareholder Loan" shall mean the outstanding amount and accrued interest of the loan granted by Seller to the Company pursuant to the loan agreement, dated April 29, 2010, including Seller’s contractual rights thereunder.

 

Subsidiary. "Subsidiary" shall mean a corporation, partnership, limited liability company, or other entity of which an entity directly or indirectly owns or Controls (i) a majority of the voting securities; or (ii) interests that are sufficient to elect or appoint a majority of the Board of Directors or other comparable organ of such Person. "Control" for this purpose shall mean the ability, directly or indirectly, to direct the activities of the relevant entity, including, without limitation, the holding of (i) more than 50% of the issued share capital, or (ii) such share capital as carries directly or indirectly, more than 50% of the shareholder votes in a general meeting or the ability to appoint or elect more than 50% of the directors or equivalent of such entity.

Tax.  "Tax" shall mean any tax (including any income tax, franchise tax, capital gains tax, gross receipts tax, value-added tax, surtax, excise tax, ad valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax, business tax, withholding tax or payroll tax), levy, assessment, tariff, duty (including any customs duty), deficiency or fee, and any related charge or amount (including any fine, penalty or interest), imposed, assessed or collected by or under the authority of any Governmental Body.

 

Tax Returns.  "Tax Returns" shall mean returns, reports and information statements with respect to Tax required to be filed by or on behalf of the Company with the Israel Income Tax Commission, the Israel Value Added Tax Authority, and any other applicable taxing authority, domestic or foreign.

  

31exhibit_4a-73.htm

Exhibit 4.(a).73

Final Version-English translation

 

Credit Agreement

 

Entered into in Tel-Aviv on January 31, 2010

 

by and among

 

012 Smile Telecom Ltd. (formerly, Ampal Investments and Communication 2009 Ltd.) (the

 "Borrower") p.c. No. 514350024

 

and

 

Bank Leumi l'Israel Ltd. ("Leumi")

 

Bank Discount l'Israel Ltd. ("Discount")

 

each individually referred to hereinafter as the "Lender" and together as the "Lenders" 

 

and 

 

Bank Leumi L'Israel Ltd. ("Bank Coordinator") 

 

	
Whereas

	
On November 16, 2009, an agreement was signed between the Borrower (through its founder – Merhav-Ampal Energy Ltd.) - and 012 Smile Communication Ltd. and Ampal Energy Ltd., for the sale of the assets, activities and obligations of Smile 012 Communication Ltd., to the Borrower, that was amended on January 26, 2010 – all as detailed in the aforesaid agreement (as amended);

 

	
Whereas

	
the Borrower has approached the Lenders, seeking to enter an agreement with them whereby they will jointly provide it with part of the Credit required to finance the above agreement;

 

NOW THEREFORE IT IS DECLARED AND STIPULATED AMONG THE PARTIES AS FOLLOWS:

 

	
1.

	
Definitions and Interpretation

 

	  	
1.1

	
The following terms will have the meaning set out opposite them, unless the context requires otherwise. Terms not defined in this Agreement will be given the meaning given to them in the Credit Documents (as defined hereunder).

 

	  	
1.1.1

	
"Institutional Loan" - a loan from institutional entities (the "Financial Institutions") in a sum of NIS. 220,000,000 which Merhav intends to take by the Closing, in order to provide the Independent Resources as defined hereunder, it is hereby clarified that in the event that the Borrower has obtained sums by virtue of Section 11.4 of the Acquisition Agreement, then for the purpose of this Agreement, the  amount set out above will decrease by an amount equal to 22% of the sums that the Borrower has received according to Section 11.4 hereunder (the "Reduced Total "), and the Loan will be considered as having been provided, ab initio, at the Reduced Total and the Financial Institutions' settlement time table as determined in Section 10.4.2.1 hereunder, will change accordingly. It is hereby clarified that the above calculations, including the change in the Financial Institutions' time table, are prepared for the purpose of this Agreement only and have no bearing or influence on the relationships between the Financial Institutions and Merhav and on the payments that Merhav is to pay to the Financial Institutions in accordance with the Agreement with them.

 

  

  

  

 

	  	
1.1.2

	
Ampal American - Ampal American Israel Corporation.

 

	  	
1.1.3

	
"Independent Resources" - a sum of NIS.400,000,000 (four hundred million new Israeli shekels) derived from investment in the Borrower's share capital or from subordinate loans which the Borrower will use to make the payments to Smile on account of the purchase consideration.

 

	  	
1.1.4

	
"Stakeholder" - As this term is defined in the Securities Law other than the Borrower's subsidiary companies.

 

	  	
1.1.5

	
"Financial Statements" - The Borrower's annual or quarterly Financial Statements, as the case may be, on a consolidated basis, prepared in New Shekels, consistently in accordance with generally accepted accounting principals, audited (in respect of periods concluding on December 31) or reviewed (in respect of periods concluding on other dates) as is customary in respect of reports of this kind, by the Borrower's accountants and any other report or explanation required according to relevant standard accounting procedures or by authorized authorities.

 

	  	
1.1.6

	
"Financial Statements - Solo" - The Borrower's annual or quarterly Financial Statements as the case may be, on an individual basis, prepared in New Shekels, consistently in accordance with generally accepted accounting principals, approved on behalf of the Borrower by the Chief Financial officer of the Company (CFO) or by the CEO.

 

	  	
1.1.7

	
"The Credit" - the loans provided to the Borrower from time to time in accordance with this Agreement by one of the Lenders.

 

	  	
1.1.8

	
"Provisions of the Law" - any provision of the law or legislation in Israel or abroad, a provision from the Bank of Israel, and any other competent authority in Israel or abroad, agreed to by one of the Lenders and the Bank of Israel or by one of the Lenders and any other competent authority in Israel or abroad, as may be in force from time to time.

 

	  	
1.1.9

	
the "Holding" - as this term is defined in the Securities Law.

 

	  	
 
1.1.10

	
"Subordinated Loans" - loans provided or to be provided to the Borrower by Merhav, Stakeholders in Merhav or a corporation controlled by any of the aforesaid in respect of which Merhav or a  Stakeholder or a corporation controlled by any of them, as the case may be, and the Borrower, undertake in writing to the Lenders, are not discharged before full settlement of the Credit, including by way of offset, except in accordance with the provisions of this Agreement (including by payments to Merhav in accordance with the provisions of Section 10.4 hereunder).

 

  

  

  

 

	  	
1.1.11

	
"Known Agreement Index" means - the monthly Index for December 2009 published on January 15, 2010 at the level of 105.2.

 

	  	
1.1.12

	
"Acquired Assets" - as [the term] "Acquired Assets" is defined in the Purchase Agreement and subject to and in accordance with all provisions of the Purchase Agreement related thereto.

 

	  	
1.1.13

	
this "Agreement" - this Agreement and all its annexes, in such form as it will be from time to time.

 

	  	
1.1.14

	
the "Purchase Agreement" - the agreement drawn up and entered on November 16, 2009 between the Borrower (through its founder - Merhav Ampal Energy Ltd.) Smile and Merhav, for the acquisition of part of Smile's operations, assets and obligations by the Borrower, as amended on January 26, 2010.

 

	  	
1.1.15

	
the "Guarantor" - each of: Merhav and Ampal American.

 

	  	
1.1.16

	
"Operating Profit to service the Debt" (EBITDA) means - the total cumulative operating profit, according to the Borrower's Financial Statements (consolidated), in each of the four consecutive calendar quarters, the conclusion of which is the date for assessing the latest quarterly or annual Financial Statements, as the case may be (the "Final Date") (for the avoidance of doubt, operating profit is after payment of management fees to Merhav), before finance costs/income (interest, linkage differential, exchange rate differential, commissions and the differential calculated on the activated loans, at fair value), and before taxes, plus depreciation and write-downs recorded in that period and after excluding capital gains/losses, excluding bonuses in respect of options granted to employees, excluding one-off expenses arising from reorganization; and with the total of the aforesaid cumulative amount being linked to changes in the Known Index where the base index is the index known on the Final Date and the revised index is the index known on the review date or on the relevant Assessment Date.

 

	  	
1.1.17

	
the "Licenses" - a general license for the Borrower to provide Bezeq International services, a general license to 012 Telecom Ltd. to provide domestic Bezeq land-line services, a special license for the Borrower to provide internet access services, a special license for the Borrower to provide end-user services and any other license that may arise in place thereof, or other license the termination or suspension of which may have a harmful effect on the Borrower's businesses, but not including a license whose termination or suspension as aforesaid, has a negligible effect on the Borrower's businesses.

 

	  	
1.1.18

	
"Subsidiaries" - as this term is defined in the Securities Law.

 

	  	
1.1.19

	
"Companies Law" - the Companies Law, 1999-5759, as amended from time to time.

 

	  	
1.1.20

	
"Securities Law" - the Securities Law, 1968-5728, as amended from time to time.

 

	  	
1.1.21

	
the "Accounts" - an account as specified below, opened by the Borrower with each of the Lenders, which serves solely to provide and manage the Credit as defined above, as well as an account that may replace an account specified hereunder, but only if it serves solely to manage the Credit, as defined above:

 

  

  

  

 

	  	
1.1.21.1

	
Leumi - account no. 75920/01 at Branch 800

 

	  	
1.1.21.2

	
Discount - account no. 91885843 at Branch 10.

 

	  	
1.1.22

	
"Business Day" - any day except Saturday, public holidays, the two days of Rosh Hashana, the eve of Yom Kippur and Yom Kippur, the first and eight days of Succoth, Purim, the first and seventh days of the Passover, Independence Day, Shavuot Festival, the Ninth of Av and also excluding any day that is determined by the Bank Commissioner not to be a bank Business Day.

 

	  	
1.1.23

	
"Closing Day" the day on which the Credit is provided by a Closing in accordance with this Agreement. It is hereby clarified that the Closing Day will not take place on a day on which the Index is published or during the two days prior to or after, a day on which the Index is published.

 

	  	
1.1.24

	
"Total Debt Service Ratio" means - the quotient reached by dividing: (A) the cumulative total of the Borrower's residual obligations (consolidated) to the Financial Institutions and other Lenders, other than suppliers' credit provided to the Borrower in its normal course of business, on commercial terms that are customary in that field, and other than obligations in respect of Subordinated Loans, as of the Assessment Date, less repayments made to Lenders, to the extent made, on the Assessment Date, and less cash and cash equivalents (including negotiable bonds) mortgaged by the Borrower in favor of one of such entities as such will be on the Assessment Date (it is hereby clarified that to the extent that the Assessment Date is a date on which the Borrower will have taken the Loan (including having made use thereof or withdrawn thereon, on account of the lines of credit provided to it) from a Financial Institution - the amounts of the aforementioned loan/usage/withdrawal, will be included in the balance of the obligations) by (B), the Operating Profit to service the Debt, according to the data in the Borrower's Financial Statements (consolidated) to the Final Date, as defined in Section 1.1.16 above.

 

	  	
1.1.25

	
"Debt Service Ratio" means - the quotient arrived at by dividing: (A), the difference between the Operating Profit to service the Debt and the lower of the following amounts: 70 million NIS. linked to the Known Index in the Agreement or the cumulative total of net cash flow to be utilized for the investment activities as appears in the Borrower's Financial Statements (consolidated) in the  report on cash flow during the relevant quarters; where the aforesaid cumulative total is linked to changes in the Known Index and where the base index is the known index on the Final Date and the revised index is the index known on the date of checking or on the relevant Assessment Date. (For this purpose, "net cash flow" means - cash flow to be used to acquire fixed property, equipment and other assets, less cash flow arising from the sale of fixed assets, equipment and other assets), by (B), the Total for servicing the Debt for the 12 consecutive months commencing immediately after the Assessment Date.

 

  

  

  

 

	  	
1.1.26

	
"Inclusive Total Debt Service Ratio" means - the quotient arrived at by dividing: (A), the difference between the Operating Profit to service the Debt and the lower of the following amounts: 70 million NIS. linked to the Known Index in the Agreement or the cumulative total of net cash flow to be utilized for the investment activities as appears in the Borrower's Financial Statements (consolidated) in the cash flow report during the relevant quarters; where the aforesaid cumulative total is linked to changes in the Known Index and where the base index is the Known Index on the Final Date and the revised index is the Index known on the date of checking or on the relevant Assessment Date. (For this purpose, "net cash flow" means - cash flow to be used to acquire fixed property, equipment and other assets, less cash flow arising from the sale of fixed assets, equipment and other assets), by (B), the Total for servicing the inclusive Debt for the 12 consecutive months commencing immediately after the Assessment Date.

 

	  	
1.1.27

	
"Index" means - the Consumer Price Index including fruit and vegetables, issued by the Central Bureau of Statistics in Israel.

 

	  	
1.1.28

	
"Financial Institution" - means any one of the following entities: banks, including auxiliary corporations as defined in the Banking Law (Licensing) 1981-5741, entities which are subject to the Law of Joint Investment in Trusts, 1994-5754, corporations which are subject to the Law Controlling Financial Services ( Kupat Gemel ) 2005-5765, an insurance corporation as defined in the Law Supervising Insurance Businesses 1981-5741, or any corporation similar to the aforementioned which is incorporated outside Israel and which is supervised by a competent authority in the country of incorporation and has debentures.

 

	  	
1.1.29

	
"Assessment Date" - any date of repayment of interest or principal of the Credit according to the Credit repayment timetable, 7 days prior to any settlement date to Financial Lenders as referred to in Section 10.4.2.1, and on any date on which the Borrower will take Credit (including utilization or withdrawal on account of the lines of Credit provided to it (to the extent provided)), in a sum that exceeds 5 million NIS. from a Financial institution. The first Assessment Date will take place on December 31, 2010 or 7 Business Days prior to the first date for making payments to Financial Institutions or the first date of taking Credit from a Financial Institution as aforesaid, whichever is the earlier.

 

	  	
1.1.30

	
"Merger" - a Merger pursuant to the first chapter of the eighth section, or the third chapter of the ninth section, of the Companies Law, or any act the result of which is the acquisition of most of the Borrower's assets by an individual or corporation.

 

	  	
1.1.31

	
"Credit Documents" - all of the following: (a) This Agreement (with its annexes); (b) the Securities Documents; (c) all requests to be provided with Credit A as defined in Section 5.1; (d) all requests to provide Credit B as defined in Section 5.2; (e) all requests to provide Credit C as defined in Section 5.3; (f) the General Conditions; (g) all resolutions, approvals, documents and agreements, relating to the provision of the Credit and its administration (including with respect to opening the Accounts) signed by the Borrower or by anyone on its behalf or delivered by the Borrower or by anyone on its behalf, all of them being in such style, on such conditions and in such form as is to the Lenders from time to time; and (h) every agreement or other document signed by the Borrower in favor of any one of the  Lenders in connection with the provision of the Credit by such Lender.

 

  

  

  

 

	  	
1.1.32

	
"Securities Documents" - all of the following: (a) agreements and forms testifying to the floating charge; (b) documents and forms testifying to a lien on the Accumulation Account as defined in Section 10.4.2.2; (c) the documents and forms testifying to a lien on shares in the Borrower in accordance with Section 8.5; (d) the documents and forms testifying to a lien on shares on 012 Telecom Ltd. in accordance with Section 8.7; (e) Owners Guarantees; (f) the documents and forms testifying to a lien on certain rights under the Purchase Agreement in accordance with Section 8.2 hereunder; and the documents and forms testifying to a lien on the rights to reimbursement of the Owners Loans in accordance with Section 8.6. And, all documents related to the aforementioned liens and guarantees.

 

	  	
1.1.33

	
"Event of Breach" - any event or circumstance, the happening of which constitutes grounds for the immediate repayment of the Credit in accordance with the Credit Documents. It is hereby clarified that if such event is only determined at the end of a period (to the extent that the situation has not reverted to its previous condition or the event has not been rectified) the Lender will be entitled to demand the immediate settlement of the Credit, such event will be considered as an Event of Breach even prior to the elapse of the period indicated therefor.

 

	  	
1.1.34

	
"Merhav" - Merhav Ampal Energy Ltd.

 

	  	
1.1.35

	
"Free and Clear" - Free and Clear of any lien, pledge, encumbrance, charge, debt, claim or any other right of any type or kind of any third party whatsoever.

 

	  	
1.1.36

	
"Total Debt Service" means - the cumulative amount of payments of financial charges to Financial Institutions, in respect of the Borrower's obligations ( consolidated) existing on the Assessment Date, in respect of anticipated financial charges for the 12 consecutive months starting immediately after the Assessment Date, together with the cumulative amount of payments on account of principal repayments to Financial Institutions the repayment of which occurs in the aforementioned 12 month period. It is hereby clarified that payments actually repaid on the Assessment Date will not be reckoned in the total of Debt servicing.

 

	  	
1.1.37

	
"Inclusive Total Debt Service" means - the cumulative amount of payments of financial charges to Financial Institutions, in respect of the Borrower's obligations ( consolidated) existing on the Assessment Date, together with payments to Lending Institutions as defined in Section 1.1.46 hereunder, as such are anticipated for the 12 consecutive months commencing immediately after the Assessment Date, together the cumulative amount of payments on account of repayment of principal to Financial Institutions (for the avoidance of doubt, including in respect of payments to Lending Institutions as defined in Section 1.1.46 hereunder) the repayment of which occurs in the aforementioned 12 month period. It is hereby clarified that payments actually repaid on the Assessment Date and payments to Lending Institutions effected 7 Business Days after the Assessment Date will not be reckoned in the total of Inclusive Debt servicing.

 

	  	
1.1.38

	
"Smile" - 012 Smile Communications Ltd.

 

  

  

  

 

	  	
1.1.39

	
"Owners Guarantees" - the Guarantees specified in Section 8.4, in the format attached as Annex 1.1.39 .

 

	  	
1.1.40

	
"Applicable Interest" the rate of interest before the addition of any kind of profit, used by Leumi to establish the interest to its customers for providing credit - in an amount, of such kind and for such period as are identical to the amount, kind and period of the relevant Credit, and this on the date that such credit is provided, renewed or replaced, as the case may be (the "Determining Date"). The aforesaid applies both in respect of credit bearing interest at a fixed rate and credit bearing interest at a variable rate. In the event that the relevant credit bears interest that includes a component of customarily basic interest whatsoever, that is likely to change during such credit period (for example - credit based on Prime interest) the Applicable Interest will be at the aforesaid interest rate plus or minus the fixed rate (the "Fixed Supplement") when the rate of the Fixed Supplement will be determined on the Determining Date; thus the Applicable Interest will be in accordance with the principals detailed above in this sub-Section and the rate of the Fixed Supplement will vary above or below the aforementioned basic interest during that credit period. A notification by Leumi regarding the Applicable Interest will be binding on the Borrower and may not be protested or appealed.

 

	  	
1.1.41

	
"Rate of Participation" - the percentage set out below in respect of each Lender:

 

	  	
Bank Leumi L'Israel Ltd. - 80%

 

	  	
Bank Discount L'Israel Ltd. - 20%

 

	  	
or as such may vary as stated in Section 2.1.6 or 5.3.5 hereunder.

 

	  	
1.1.42

	
"Control" - as this term is defined in the Securities Law.

 

	  	
1.1.43

	
"Related Corporation" - a corporation, including a partnership or promoter, in which the Borrower has Control as well as any corporation (including a partnership or promoter) whose obligations the Borrower guarantees towards any entity whatsoever or in respect of the failure of such corporation (including a partnership or promoter) to comply with a debt or obligations, [the Borrower] has undertaken to indemnify any entity whatsoever.

 

	  	
1.1.44

	
"Area of Business" - means the field of communications in Israel only, including television services through the infrastructure of the internet or a similar service. It is clarified that apart from television services through the infrastructure of the internet, any investment or provision of services in the field of media, including television, will not be included in the Area of Business.

 

	  	
1.1.45

	
"General Conditions" - the general conditions of each of the Lenders for opening and managing the Account, and, also, with respect to Leumi, the Accumulation Account as defined in Section 10.4.2.2.

 

	  	
1.1.46

	
"Payments to Financial Institutions" - the cumulative total of payments of interest and principal that Merhav must pay in respect of the Financial Institutions' loan, during the relevant period.

 

  

  

  

 

	  	
1.1.47

	
"Closing" - the closing (completion) of the transaction that is the subject of the Purchase Agreement.

 

	  	
1.2

	
General: relationship between documents

 

	  	
1.2.1

	
Headings in this Agreement are added for the sake of convenience only and are intended for its interpretation.

 

	  	
1.2.2

	
The preamble and appendixes to this Agreement constitute an integral part hereof.

 

	  	
1.2.3

	
Every reference in this Agreement to an annex or Section will be understood, except if the context requires otherwise, as a reference to an annex or Section in this Agreement, respectively.

 

	  	
1.2.4

	
Any information, reporting, notice, demand, agreement or application pursuant to this Agreement, shall be given in writing even if no written request is specified as aforesaid.

 

	  	
1.2.5

	
Subject to the provisions of Section 1.2.6 hereunder, the provisions of this Agreement are in addition to the provisions of other credit agreements and do not derogate therefrom.

 

	  	
1.2.6

	
In the event of a specific contradiction between the provisions of this Agreement and the provisions of any of its annexes or between the provisions of this Agreement and provisions of any other credit agreements, the provisions of this Agreement will prevail.

 

	
2.

	
Consortium's Rules

 

Subject to the fulfillment of the Borrower's undertakings under this Agreement and to the fulfillment of the preconditions detailed in Section 4 hereunder, in accordance with the Borrower' requests to be provided with credit according to this Agreement, each of the  Lenders will provide the Borrower, at the Rate of Participation, the Credit specified in Section 5 hereunder.

 

	  	
2.1.2

	
The Borrower undertakes that any borrowings in respect of the Credit to be provided to the Borrower in accordance with the provisions of this Agreement, will be effected from each one of the  Lenders in parallel and that this will be at the Rate of Participation and on identical terms. Furthermore, the Borrower undertakes that each repayment of the Credit (including early settlement under Section 6 hereunder) as well as any reduction in the outstanding amount or the renewed outstanding amount as stated in Section 5.3.5 or 5.3.11 hereunder, will be implemented with each of the  Lenders in parallel and at the Rate of Participation.

 

	  	
2.1.3

	
For the removal of doubt, the Lenders and the Bank Coordinator are obligated to verify that the amounts of the Credit provided in accordance with the provisions of this Agreement or the amounts of repayment, actually comply with the Rate of Participation that applies to each of the Lenders, or are on terms that are identical for each of the Lenders and that the responsibility for this is enforced on the Borrower.

 

  

  

  

 

	  	
2.1.4

	
Unless specifically stated to the contrary, it is hereby clarified that any payment to the  Lenders or to the Bank Coordinator according to the provisions of this Agreement will be implemented without offset, lien, cross-claim or any other right from any source and that the sums to be paid to each of the  Lenders or the Bank Coordinator will be Free and Clear.

 

	  	
2.1.5

	
Unless specifically stated to the contrary, the obligations and rights of the Lenders under the Credit Documents are individual, are not reciprocal, are not inter-connected and are not dependent on one another. None of the Lenders will bear the costs of a breach of the obligations in this Agreement by one of the other Lenders. A breach of the obligations contained in the Credit Documents by one of the Lenders, does not constitute, of itself, a breach of the other Lenders' obligations, and unless specifically stated to the contrary, will not affect the obligations and rights of the other Lenders.

 

	  	
2.1.6

	
Notwithstanding the aforesaid, it is hereby agreed that if on the Closing Day, Bank Discount does not provide its full part of the Credit according to the Rate of Participation which applies to it, pursuant to a breach of this Agreement or due to one of the events specified in Section 7 hereunder, applying to it, or for any other reason - Leumi will provide, in its place, the full part of credit as aforesaid, Leumi's Rate of Participation will change accordingly and such Lender will cease to be a party to this Agreement. It is hereby clarified that an occurrence such as the aforesaid will not, of itself, constitute a ground for non-provision of the Credit by the remaining Lenders in accordance with the Rate of Participation for each Lender.

 

	  	
2.1.7

	
In any event that the agreement of the Lenders is required according to the Credit Documents, the notice in respect of agreeing or refusing to give their agreement, will be issued to the Borrower by the Bank Coordinator.

 

	  	
2.1.8

	
A notice concerning exercise of the right to make immediate settlement of the Credit or part thereof, or the right to increase the rate of interest according to Section 5.4 hereunder or in the matter of taking measures to exercise a security out of the Securities, will be issued to the Borrower or to a Guarantor, as the case may be, by the Bank Coordinator. It is specifically clarified that notwithstanding anything stated in this Agreement (including Section 2.15 above), exercise of the rights detailed above in this Section 2.18, will apply pro rata to all the Lenders.

 

	  	
2.1.9

	
Each of the parties will appoint someone to represent it and to act on its behalf in all matters relating to the implementation of this Agreement (the "Representatives"). The following persons will serve as the initial Representatives of the Parties: (a) for Leumi or the Bank Coordinator - the head of Leumi's communications department; (b) Discount - the business manager. Details of how to communicate with each of the Representatives are as specified in Section 19.3 hereunder.

 

	
2.1.10

	
Each of the parties will be entitled to replace its Representative by giving a notice, in writing, to the other parties which includes contact details for the new Representative on its behalf, and the date of replacing the Representatives.

 

  

  

  

 

	
2.1.11

	
Each of the Lenders and the Bank Coordinator will be entitled to rely on any notice or instruction given in the name of the Representative. None of the Lenders or the Bank Coordinator will be required to obtain any further proof of the genuineness of any fact, issue or calculation included in any notice or instruction given to it by one of the other Lenders' Representatives or a Representative of the Bank Coordinator.

 

	
2.1.12

	
The Lenders hereby declare to the Borrower that as of the date of entering this Agreement, there is no restriction or impediment, of any kind whatsoever, to providing all the amounts of credit under this Agreement to the Borrower, in full and on the due dates, including on the assumption of the adoption of any anticipated regulations (including Basel II).

 

	
2.1.13

	
The Lenders hereby undertake that exercising their rights under the liens specified in Sections 8.1, 8.5 and 8.7 hereunder, including their actualization, will not cause any adverse effect whatsoever to the provision of services under the Licenses, and in any event, exercise of their rights as aforesaid will be subject to all the limitations existing in law and in the Licenses in connection therewith.

 

	
3.

	
Object

 

The provision of the Credit to the Borrower on the Closing Day will serve the Borrower solely for the purpose of acquiring the activities, assets and obligations of Smile in accordance with the provisions of the Purchase Agreement and subject to its terms. 

 

	
4.

	
Preconditions for providing the Credit on the Closing Day

 

The provision of any amount on the Closing Day on account of the Credit under the provisions of this Agreement is conditional upon the fulfillment of all the following pre-conditions (which, if not stated specifically hereunder are due to be fulfilled on the Closing Day), to the complete satisfaction of the Lenders:

 

	  	
4.1.1

	
The Borrower will have provided to the Lenders, two Business Days prior to the Closing Day, a letter from the Borrower's attorney relating to the Loans and including its confirmation that all consents, authorizations, approvals and other requirements (to the extent required) have been received in accordance with the Provisions of the Law and in accordance with the Borrower' incorporation documents for the purpose of entering the Purchase Agreement and for the implementation of the Credit Documents in accordance with and subject to, the provisions thereof.

 

	  	
4.1.2

	
On the Closing Day, the Borrower will have deposited the Independent Resources in its account with the Bank Coordinator and signed on the irrevocable instructions attached as Annex 4.1.2 to this Agreement. The Independent Resources will be transferred by the Bank Coordinator to Smile together with the transfer of the amounts of the Credit, as stated in Section 5 hereunder.

 

	  	
4.1.3

	
The Borrower will have effected (signed on) the Securities, as detailed in Section 8 hereunder, in favor of the Lenders.

 

	  	
4.1.4

	
The Guarantors will have signed the Owners Guarantees, as detailed in Section 8.4 hereunder, in favor of the Lenders.

 

  

  

  

 

	  	
4.1.5

	
Merhav will have activated the liens as detailed in Sections 8.5 and 8.6 hereunder, in favor of the Lenders.

 

	  	
4.1.6

	
The Borrower will have fulfilled all its obligations under the Credit Documents.

 

	  	
4.1.7

	
Cancelled

 

	
4.1.8

	
No Event of Breach will have taken place and/or will there be, to the Lenders' knowledge, any great likelihood of there being an Event of Breach.

 

	
4.1.9

	
The Borrower's board of directors will have passed the resolution in the form attached as Annex 4.1.9 and the Borrower's attorney will have signed a confirmation in the form and on the terms that are acceptable to the Lenders.

 

	
4.1.10

	
The Borrower will have opened the Accounts and signed on the authorizations, confirmations and declarations required by any of the Lenders to that end.

 

	
4.1.11

	
The Closing Day will be not later than 22.6.2010.

 

	
4.1.12

	
If and to the extent that the Borrower is aware, that one of the conditions of the conditions prescribed in this Section has not been fulfilled, the Borrower will give notification thereof to the Lenders immediately after it becomes aware of the non-fulfillment of such condition.

 

	
5.

	
The Credits and their Conditions

 

Subject to that stated heretofore and hereinafter in this Agreement, at the behest of the Borrower, the Lenders will provide the Borrower, on the Closing Day, credit in NIS up to a total cumulative amount (for each of the Lenders) of NIS 800 million, split as detailed below. Each Lender will provide the Borrower with a portion of any credit in accordance with the Rate of Participation of such Lender:

 

	  	
5.1

	
Loan A, in the amount of (overall for each of the Lenders) NIS 500 million which will be provided on the Closing Day.

 

	  	
5.1.1

	
The principal of Loan A will be linked to the Index and will be settled in 14 continuous and equal, semi annual instalments (with the addition of linkage differences for each instalment). The first principal payment with respect to Loan A will apply upon the lapse of 6 months from the date of providing Loan A and the final payment will apply upon the lapse of 84 months from the date of the provision up thereof (“The Final Credit Settlement Date”).

 

	  	
5.1.2

	
Loan A will bear annual interest at a fixed rate of 2% above the Applicable Interest with the addition of index linkage differences. As an indication only, the Lenders confirm that as at the date of the signing of this Agreement, the Applicable Interest is [2.2] %.

 

	  	
5.1.3

	
The interest on Loan A will be paid every three months, commencing from the lapse of three months from the date of providing the loan.

 

	  	
5.1.4

	
The remaining terms and conditions of Loan A will be as detailed in the Loan Application, Annex 5.1.4 to this Agreement.

 

  

  

  

 

	  	
5.2

	
Loan B, in the overall cumulative amount (for all the Lenders) of NIS 200 million which will be provided on the Closing Day.

 

	  	
5.2.1

	
The principal of Loan B will be linked to the index and will be settled in one instalment at the final credit settlement date.

 

	  	
5.2.2

	
Loan B will bear annual interest at a fixed rate of 2% above the Applicable Interest with the addition of index linkage differences. As an indication only, the Lenders confirm that as at the date of the signing of this Agreement, the Applicable Interest is [3.1] %.

 

	  	
5.2.3

	
The interest on Loan B will be paid every three months, commencing from the lapse of three months from the date of providing the Loan.

 

	  	
5.2.4

	
The remaining terms and conditions of Loan B will be as detailed in the Loan Application, Annex 5.2.4 to this Agreement.

 

	  	
5.3

	
The line of Credit C, under the terms and conditions as detailed below, and in an overall and cumulative amount (for all Lenders) of NIS 100 million (the “Outstanding Renewed Amount”), which will be exploited in full, on the Closing Day.

 

	  	
5.3.1

	
Line of Credit C will be exploited by the Borrower by means of taking out an unlinked loan in NIS, (each loan will be designated a “Loan C”) for a period of 3, 6 or 12 months, at the Borrower's choice (each of the periods will hereinafter be designated – “The period of Loan C”) as long as the date of final settlement of the loans that will be provided within the line of Credit C, will commence after the lapse of 42 months from the Closing Day (the “Final Loan C Settlement Date”).

 

	  	
5.3.2

	
Each application to be provided with a Loan C will be submitted by the Borrower to the Lenders at least 4 Business Days prior to the date requested for providing the loan.

 

	  	
5.3.3

	
The total cumulative amount of the unpaid balance of Loan C will not exceed, at any time whatsoever, the Outstanding Renewed Amount or the Revised Outstanding Renewed Amount, as the case may be.

 

	  	
5.3.4

	
At the behest of the Borrower, as detailed above, the Lenders will put at the disposal of the Borrower the requested amount (each Lender in accordance with its Rate of Participation) as long as in addition to that stated in the sub-section of Section 5.3, the following terms and conditions will ensue cumulatively: a) If upon the date of providing the (new) loan, there is an unpaid balance of Loan C, the settlement date of which occurs at that time, the (new) loan will be initially used to settle the principal of Loan C, the settlement date of which occurs at that time, and if the amount of the (new) loan will be higher than the unpaid balance of Loan C, the settlement date of which occurs at that time, or, at that time, there is no applicable date of settlement of Loan C; then the balance of the (new) loan will serve the Borrower solely for the execution of investments in the Area of Business and b), up to that point in time, no instance of a breach has occurred and c) the cumulative amount of the unsettled balance of Loan C that will be conducted by each Lender immediately after providing the requested (new) loan, will not exceed the Rate of Participation of each Lender of the cumulative unsettled balance of Loan C that will be conducted by each Lender immediately after providing the requested (new) loan, and d) at that time, there is no limitation, as detailed in Section 7 below, on the part of any of the Lenders.

 

  

  

  

 

	  	
5.3.5

	
It is hereby agreed that, other than at the time of providing the loans on the Closing Day, with respect to which that stated in Section 2.1.6 above applies, should any of the Lenders not put at the disposal of the Borrower, the loan as detailed in Section 5.3 above, (whether as a result of the breach of this contract by the Borrower or whether a limitation, as detailed in Section 7 below, exists), this fact in itself will not constitute a ground for non-provision of the Credit by the remaining Lenders. It is hereby clarified that should an event as stipulated above occur, as of that date, the Outstanding Renewed Amount or the Revised Outstanding Amount, as the case may be, will automatically be reduced by the total of the amount not provided by the Lender as stated above, as well as, commencing from such date, the Rate of Participation of the Lenders will be updated in accordance with the ratio that will be in place at that time (immediately after providing the loan by the remaining Lenders, or part thereof), whether the unsettled balance of the Credit with each of the Lenders or the total amount of the unsettled balance of the Credit.

 

	  	
5.3.6

	
The principal of each Loan C will be settled in one instalment at the end of the period of the respective Loan C.

 

	  	
5.3.7

	
Loan C will bear annual interest at a fixed rate of 2% above the Applicable Interest.

 

	  	
5.3.8

	
The interest on Loan C will be paid every three months, commencing from the lapse of three months from the date of providing the applicable loan.

 

	  	
5.3.9

	
The remaining terms and conditions of Loan C that will be provided on the Closing Day will be as detailed in the Loan Application, Annex 5.3.9 to this Agreement. The remaining terms and conditions of Loan C that will be provided thereafter will be as detailed in the Loan Application to be signed by the Borrower with each Lender as is acceptable at that time to such Lender.

 

	  	
5.3.10

	
The Borrower will pay the Lenders (to each Lender in accordance with the rate of the Lender’s Participation), with respect to the unexploited balance of Line of Credit C, non exploitation commission as detailed in Annex 12 of this Agreement. The commission will be calculated on the balance of the unexploited Line of Credit C. The checking of the total unexploited Line of Credit C will be carried out on a daily basis and the payment of the commission with respect thereto, will be carried out retrospectively at the end of each calendar quarter. It is hereby clarified that should that stated in Section 5.3.5 be upheld, then commencing from that date, the Borrower will cease paying non exploitation commission to the Lender who has not provided its share in the new Loan C, as detailed in the above stated Section 5.2.5.

 

	  	
5.3.11

	
At any time at which there will be an unexploited balance of Line of Credit C, the Borrower will be at liberty to notify the Lenders in writing that it is the Borrower’s desire to reduce the amount of the Line of Credit C by the amount of the unexploited balance or part thereof. Commencing from the date of the receipt of the above stated notification, the amount of the Outstanding Renewed Amount will be irreversibly reduced accordingly. (the “Revised Outstanding Renewed Amount”).

 

  

  

  

 

	  	
5.4

	
Notwithstanding the aforesaid, should an instance of a breach occur, in respect of which a period [to remedy] is determined, only at the end of that period (to the extent that the situation has not reverted to its former state or the incident has not been rectified), will the Lender be entitled to demand the immediate settlement of the Credit, then, commencing from the date of the occurrence of the incident as stated and up to the earliest of the following dates: the date upon which the situation reverted to its former situation, or the date upon which the incident was rectified or the date upon which the Lenders issued a Letter of Waiver with respect to the breach (should such have been issued), or the date upon which the Lenders demanded the immediate settlement of the Credit, the interest rate determined for Loan A, Loan B and Loan C will increase by 2% per annum above the rate of interest determined for such loan, in accordance with Section 5.1.2 or 5.2.2. above, respectively, as such will be at that point in time. That stated in this sub-section above will not apply in the case of that stipulated in Section 11.3 or 11.2 occurring.

 

	  	
5.5

	
It is hereby clarified that in any case that the immediate settlement of the Credit will be demanded, on any date whatsoever, then, from that date, the unexploited balance of the Credit will bear arrears interest.

 

	  	
5.6

	
The Bank Coordinator will inform the Borrower and each of the Lenders regarding the change in the rate of interest by virtue of Section 5.4 above and the Bank Coordinator’s notification obligates the Borrower and the Lenders.

 

	
6.

	
Early Settlement of the Credit

 

	  	
It is hereby agreed that Article 13 (b) of the Mortgage Law, 5727 – 1967 will not apply and that the Borrower will be at liberty to settle, by means of early settlement, the lines of Credit or any part thereof, subject to the following cumulative terms and conditions:

 

	  	
6.1

	
The order of the execution of early settlement will be as follows:

 

	  	
6.1.1

	
The settlement of Loan C.

 

	  	
6.1.2

	
If, at the date of the execution of the early settlement, there is no unsettled balance of Loan C – the settlement of Loan B.

 

	  	
6.1.3

	
If, at the date of the execution of the early settlement, there is no unsettled balance of Loan C or Loan B, the settlement of Loan A by means of settlement on account of each of the outstanding principal instalments of Loan A in an equal manner, thus each instalment will be reduced by an identical amount. In the stated case, no changes in the dates of the payments and in the period of Loan A, will apply. Upon the execution of early settlement the Lenders will provide the Borrower with a new settlement time-table and this will obligate the Borrower.

 

	  	
6.2

	
The amount that will be settled by means of early settlement will not be less than NIS 5 million.

 

  

  

  

 

	  	
6.3

	
The early settlement will only be done upon a date for the payment of interest.

 

	  	
6.4

	
The early settlement of the New Israeli Shekel, index linked credit can only be executed after the lapse of one year from the date of providing the Credit, and this on a calendar date that overlaps with the date of the provision thereof (and should this date not be a Business Day, then the general terms informing the matter of the bringing forward or moving back to coordinate a Business Day, will apply.).

 

	  	
6.5

	
The Borrower will notify the Lenders in writing regarding the execution of the early settlement, 7 Business Days in advance.

 

	  	
6.6

	
On the date of the early settlement, the Borrower will pay the Lenders the full amounts of the interest and the commissions that have accumulated up to that time.

 

	  	
6.7

	
On the date of the execution of the early settlement, commission that will be calculated in accordance with the formula appearing in Annex 6.7, will be paid to each of the Lenders.

 

	  	
6.8

	
The early settlement by the Borrower will be carried out in a manner that will maintain the relevant Rate of Participation of each of the Lenders in the remaining credit.

 

	  	
6.9

	
Any notification issued by the Borrower regarding the intention of the Borrower to carry out early settlement will be non-revolving and irreversible.

 

	  	
6.10

	
With the exception of amounts that will settle Loan C, by means of early settlement and which, at the behest of the Borrower, will be provided anew [by the Lenders], subject to and in accordance with that stated in Section 5.3.2 above, any amount that will be settled by means of early settlement will not be provided anew [by the Lenders].

 

	
7.

	
Change in the Ownership of the Borrower

 

	  	
7.1

	
In any case that as a result of any change in the Provisions of the Law (as defined hereinafter), as well as in any case that as a result of the fulfilment of a demand, provision or request of any kind – issued to or referred to any of the Lenders by the Bank of Israel or by any other qualified Authority, or as a result of the fulfilment of any undertaking on the part of any of the Lenders to the Bank of Israel or to any other qualified Authority, whether the fulfilment of the stated undertaking, the provision, the demand or the request results from any change whatsoever in the law as stated or whether it results from an agreement that has been drawn up or will be drawn up from time to time, between any of the Lenders and the Bank of Israel, or other qualified Authority:

 

	  	
7.1.1

	
The Lenders, all or part thereof, will be obligated to hold or deposit liquid assets of any type or the amounts or value of the liquid assets, that any of the Lenders is obligated to hold or deposit, will be raised; or

 

	  	
7.1.2

	
The amounts of the Credit that any of the Lenders is at liberty to grant or to continue to maintain will be limited or reduced, or the amounts of the deposits that any of the Lenders is at liberty to deposit with others [will be limited or reduced]; or

 

	  	
7.1.3

	
Any demands whatsoever will be imposed or will apply to any of the Lenders (or there is a change that, in the opinion of any of the Lenders, results in, from the point of view of the Lender, stricter requirements whatsoever) with respect to the ratio of the reserves of the relevant Lender, on the one hand, to the Credit the relevant Lender is at liberty to grant or to continue to maintain, or to the assets or deposits that the relevant Lender is permitted to hold or to receive – on the other hand; or

 

  

  

  

 

	  	
7.1.4

	
Should interest payments, fines, levies, or other payments be imposed or apply to any of the Lenders, or should any of the Lenders be required to pay such (or, should a change occur that, in the opinion of any of the Lenders, constitutes, from that Lender’s point of view, stricter requirements for these payments).

 

	  	
And such Lender will determine that, as a result of the above stated, the cost or the expenses of such Lender will increase with respect to the provision of the Credit (in whole or in part) or with respect to the continued existence of the Credit (in whole or in part), or should the amounts of the principal and the interest that that Lender is entitled to receive with respect to the loan, will decrease, then such Lender will be at liberty to refuse to put the Credit, in whole or in part, at the disposal of the Borrower – the Borrower will pay such Lender, from time to time, upon the first demand, such an amount which will, in the opinion of the Lender, indemnify for the increase in the costs and expenses of such Lender with respect to the Credit or regarding the reduction in the principal and the interest as stated, and the amount of the indemnification, as will be determined by such Lender, from time to time, as stated, will obligate the Borrower. It is clarified that the Lender in this matter will be at liberty to make use of its rights in accordance with the above stated, on condition that at the same time, the Lender will make use of the identical rights granted to the Lender with respect to other customers who were granted credit of such type, by such Lender, in a similar scope to the Credit and which was characterized in a similar classification in all matters related to the matter of requirements for reporting to the Bank of Israel.

 

	  	
For the purpose of this Section 7, the term “any change in the Provisions of the Law” – including a change as stated in the interpretation of the Provisions of the Law, by the Court or other Authority of the State as stated, qualified to this end or charged with the execution or the upholding of the Law, Regulation or Provision or Rule as stated.

 

	  	
7.2

	
If, at any time whatsoever, any of the Lenders will determine (and the stated determination of such Lender will obligate the Borrower) that as a result of any amendment whatsoever to the Law, the provision of the Credit, in whole or in part, at the disposal of the Borrower, or – if the Credit, in whole or in part, has been put at the disposal of the Borrower – the continued existence of the Credit, will become, for such Lender, illegal, then such Lender is at liberty to refuse to put the Credit, in whole or in part, at the disposal of the Borrower, or – if the Credit, in whole or in part, has already been put at the disposal of the Borrower – such Lender will be entitled to demand, of the Borrower, the settlement of the unsettled portion of the Credit (together with interest up to the actual date of settlement) and the Borrower hereby undertakes to repay all the above stated amounts, to such Lender, within 90 days of the date of first demand in writing on the part of such Lender as long as in the above stated demand, it will be stipulated that it is based on the provisions of this Section and an appropriate explanation will be attached to it. It is clarified that in the stated case, the Borrower will not be required to pay early settlement commission or other payments with respect to the early settlement. It is also explicitly clarified that, in the above stated case, the Borrower will not be required to also settle the parallel credit granted by the remaining Lenders should the illegality not be relevant to them.

 

  

  

  

	
8.

	
Guarantees

 

	  	
The guarantees detailed in this Section below, that will be produced for the Lenders, will serve to guarantee the full and precise settlement of the Credit and of all the remaining amounts owing and that will be owing to any of the Lenders by the Borrower, in accordance with the Credit Documents and also to guarantee any debt or other undertaking, from any source whatsoever, of the Borrower with respect to any of the Lenders:

 

	  	
8.1

	
General first ranking floating charge, without limitations on the amount, on all the existing and future assets and rights of the Borrower and a first ranking fixed charge, without limitation in the amount, on the unpaid share capital and the equity of the Borrower (the "Floating Charge”). The Charge will be imposed on the assets, the rights, the unpaid share capital and the equity, they being free and clear, with the exception of “Permitted Liens”, as this term is defined in the Purchase Agreement.

 

	  	
8.2

	
First ranking fixed charge on all the rights of the Borrower in accordance with the Purchase Agreement to receive amounts of indemnification in accordance with the provisions of Section 11.4 of the Purchase Agreement as well as the receipt of indemnity amounts in accordance with alternatives (i) and (ii) of Section 11.2 of the Purchase Agreement. The Borrower will transfer, to each of the Lenders, irrevocable instructions signed by the Borrower and referred to Smile and authorized by its signature, in the wording attached hereto as Annex 8.2, to transfer any amount that will be owing to the Borrower in accordance with the stated clauses of the Purchase Agreement, directly to the Borrower' account with each of the Lenders in accordance with its Rate of Participation. It is agreed that amounts that will be received in accordance with Section 11.4 of the Purchase Agreement will be handled as follows – a total of 66.66% of this amount will be used for the early settlement of the Credit under the terms and conditions as detailed in Section 6 above, with the following change: The Credit that will be settled against Loan C that was granted within the framework of Credit C will not be provided anew, and the Outstanding Amount or the Revised Outstanding Amount, as is appropriate, will be reduced accordingly, and the balance can be used by the Borrower for any purpose whatsoever, including distribution to shareholders, directly or indirectly, in the Borrower, in any manner whatsoever, and without any limitations whatsoever. Amounts that will be received in accordance with the alternatives (i) and (ii) of Section 11.2 of the Purchase Agreement will be used in full for the early settlement of the Credit under the conditions as detailed in Section 6 above with the following change: The Credit that will be settled against Loan C that was granted within the framework of Credit C will not be provided anew, and the Outstanding Amount or the Outstanding Renewed Amount, as is appropriate, will be reduced accordingly.

 

	  	
8.3

	
First ranking fixed charge on account of the accumulation as defined in Section 10.4.2.2. below, on all the monies credited or to be credited in favor of the accumulation account and all the Borrower's rights in respect thereof. As well as a first ranking fixed charge on account of the securities linked to the accumulation account on all the securities and the rights charged and which will be charged to the credit of the securities account and all the Borrower's rights with respect thereto.

 

	  	
8.4

	
Unlimited permanent guarantee of the amount that will be signed on by Merhav and unlimited permanent guarantee of the amount that will be signed on by Ampal American Israel Corporation in the wording attached as Annex 1.1.39, which, in spite of that stated at the beginning of this Section 8, will only guarantee the amounts as will be detailed in the letter of guarantee. The Borrower undertakes to produce to the Lenders by no later than March 15, 2010, an authorization from Ampal American Israel Corporation's lawyer attesting to the fact that the guarantee is valid and obligates Ampal American Israel Corporation under the applicable law.

 

  

  

  

 

	  	
8.5

	
Second ranking fixed charge after charges that will be created for the benefit of the Institutions, on all Merhav shares existing on the Closing Day, and on all the rights derived therefrom and relating thereto, including and without derogating from the stated generality, the rights to receive dividends or any other distribution with respect to the shares as well as the undertaking on the part of Merhav to create, for the benefit of the Lenders, a charge of the ranking as detailed above, on all additional shares that it will receive (directly or indirectly) in the Borrower and this together with the receipt thereof. It is hereby agreed that the charge will be subject to the limitations detailed in Annex 8.5 to this Agreement; it is clarified that as long as the Lenders have not realized the above stated charge, all the amounts or assets that Merhav will receive from the Borrower in the wake of a “distribution” (as defined in the Companies Law), with respect to Merhav’s shares in the Borrower, will be released to Merhav for its requirements.

 

	  	
8.6

	
First ranking fixed charge on all the rights of Merhav to the Borrower with respect to the loans provided by Merhav to the Borrower as well as the undertaking by Merhav to create, for the benefit of the Lenders, a charge of the ranking as detailed above, on all the rights for the repayment of the additional loans that will be granted to the Borrower, and this together with their being provided. It is agreed that Merhav will be at liberty to use the amounts received under the provisions of Section 10.4.2 below for the purpose of the payments to the Financial Institutions.

 

	  	
8.7

	
First ranking fixed charge on all the shares that will be transferred on the Closing Day to the ownership of the Borrower in 012 Telecom Ltd. and all the rights derived therefrom and related thereto, including, and without derogating from the stated generality, the rights to receive dividends or any other distribution with respect to the shares. It is hereby agreed that as long as no Instance of Breach has occurred, the Borrower will be at liberty to use the cash dividend amounts that will be transferred to the Borrower from 012 Telecom Ltd., for any purpose, subject to the provisions of this Agreement.

 

	  	
8.7.1

	
The Borrower undertakes that by no later than the lapse of 30 days from the Closing Day, Article 37a will be added to the 012 Telecom Ltd. Articles of Association, in the following wording: “That stated in Articles 36 and 37 will not apply to the realization of any charge whatsoever created and / or which will be created with respect to the shares in the company, in whole or in part, for the benefit of a banking institution. For the avoidance of doubt, it is clarified that any realization of a charge as stated, will be executed subject to obtaining the approval of the Minister as defined in the special general license issued to the company for the provision of internal land line based Bezeq services on December 21, 2005, as amended and / or will be amended from time to time.” “ Banking Institution ” – as defined in the Banking Law (Licensing) 5741 – 1981.

 

	
9.

	
Declarations by the Borrower

 

	  	
The Borrower declares and undertakes to the Lenders as follows:

 

	  	
9.1

	
The Borrower is a private company incorporated and registered in accordance with the laws of the State of Israel.

 

	  	
9.2

	
On the Closing Day, there are no claims, arbitration, discussions or administrative process pending against the Borrower, with the exception of an application to authorize an arrangement under Article 350 of the Companies Law 5759 – 1999, of December 15, 2009 and the Borrower is not aware of any claim, arbitration, discussions or administrative process pending against Smile with the exception of the above stated application and the claims detailed in the Purchase Agreement and all its appendixes and with the exception of that as detailed in Annex 9.2 of this Agreement. Furthermore, no information has been received by the Borrower with respect to the intention to open a process, as stated, against the Borrower or against Smile.

 

  

  

  

 

	  	
9.3

	
On the Closing Day, there is no lien or mortgage of any kind on the assets of the Borrower, (subject to that stated in Section 8.1 above), there is no undertaking on the part of the Borrower to create a lien or mortgage of any kind on any of the assets of the Borrower, and no entity whatsoever has a right of financial security or other right in any of the assets of the Borrower and there is no undertaking on the part of the Borrower to impart, to any entity whatsoever, rights of financial security or similar right in any of the assets of the Borrower, with the exception of liens created and / or which will be created by the Borrower in favor of the Lenders under the terms of this Agreement, and the current second ranking charge in favor of the Institutions with respect to the loan by the Institutions that will be subject to limitations as detailed in Annex 9.3 to this Agreement.

 

	  	
9.4

	
Neither the Borrower nor Merhav have any ground for the cancellation of the Purchase Agreement in accordance with the grounds for cancellation detailed therein. It is clarified that should the Borrower and / or Merhav are aware of a ground as stated up to the Closing Day, then even if the Borrower will decide to not realize its right to cancel the Purchase Agreement, the Borrower must inform the Lenders in writing regarding the ground as soon as possible after becoming aware of the ground for the first time, and the Lenders will be entitled not to provide credit and to cancel this Agreement.

 

	  	
9.5

	
As at the Closing Day, all the agreements, the permits and the authorizations required with respect to the execution of the Purchase Agreement, have been given to the Borrower by the Anti Trust Authority as well as by the Ministry of Communications and no additional authorizations whatsoever are required from other regulatory authorities.

 

	  	
9.6

	
Merhav is the holder of 100% of the issued share capital of the Borrower, and is the sole direct controlling shareholder in the Borrower.

 

	  	
9.7

	
The Borrower has the legal powers, the authority and the rights to contractually associate under this Agreement and to fulfil all its provisions and conditions, and all the Borrower's undertakings under this Agreement which are, in the framework thereof or in connection therewith, are legal, effective, valid, obligating and enforceable on the Borrower in accordance with all its terms and conditions.

 

	  	
9.8

	
All the agreements, the authorities, the permits and the authorizations required under the Provisions of the Law, in accordance with the Borrower’s documents of incorporation, in accordance with the Purchase Agreement, and in accordance with any other agreement that the Borrower or the controlling shareholders in the Borrower is a party to, for the purpose of contractually associating in the Purchase Agreement and the execution thereof in accordance with the provisions thereof, for the purpose of the signing of this Agreement by the Borrower, for the purpose of obtaining credit from each of the Lenders in accordance with this Agreement, for the purpose of creating the Securities in favor of each of the Lenders as detailed in this Agreement and for the purpose of granting priorities to the Lenders over third parties with respect to the above stated Securities (with the exception of the permitted liens existing over the mortgaged assets within the framework of the floating charge as stipulated in Section 8.1 above and with the exception of the lien on the Borrower’s shares, as stated in Section 8.5 above, which will be only of second ranking) and for the purpose of the execution of all that stated in this Agreement.

 

  

  

  

 

	  	
9.9

	
That by the Closing Day, the authorization of the Court will be obtained with respect to the application of December 15, 2009, submitted by the Borrower under Article 350 of the Companies Law and that the confirmation of the Borrower’s attorney of the fact that up to the Closing Day, no objections to the execution of the arrangement were submitted to the Court and that the period for the submission thereof, by law, has ended, will also be obtained. That the Borrower has carried out all the actions and has taken all the decisions and authorizations required for the purpose of the signing the Credit Documents and the execution thereof, and that the signing on the part of the Borrower on these documents obligates the Borrower to all intents and purpose. That each of the Credit Documents, after they will be signed by the other parties to the Agreement, will constitute an obligating and valid legal undertaking on the part of the Borrower, and will be enforceable on the Borrower in accordance with the terms and conditions thereof.

 

	  	
9.10

	
There is no limitation or exclusion under the law or in accordance with any agreement for the upholding of all the undertakings of the Borrower in accordance with this Agreement, and there is no limitation and / or exclusion as stated for the provision of the Securities in accordance with this document and that there are no limitations to the realization of the Securities in accordance with this document, on the part of any of the Lenders, with the exception of limitations in accordance with the Licenses and the limitations as stated in Annex 8.5 to this Agreement.

 

	  	
9.11

	
The Purchase Agreement has been legally signed and, as at the Closing Day, is valid, to all intents and the purpose, and obligates all the parties to it in accordance with its terms and conditions.

 

	  	
9.12

	
That all the information and the documents handed over to the Lenders or to the Bank Coordinator or to anyone acting of their behalf, in accordance with the Credit Documents, were correct, in full and precise at the time of the handing over thereof.

 

	  	
9.13

	
With the exception of their undertakings in accordance with the Purchase Agreement, no undertaking has been given on the part of the Borrower and / or on the part of the controlling shareholders in the Borrower, with respect to Smile, and the purchase consideration will be paid in full by means of the Credits and by means of the Independent Resources.

 

	  	
9.14

	
The Borrower is not in possession of information, that is not in the public domain, with respect to Smile or with respect to the Acquired Assets and / or with respect to the Purchase Agreement, which was not brought to the attention of the Lenders, and which, to the best of the Borrower’s understanding, if it had been brought to the attention of any of the Lenders, would have lead to the Lenders, all or some thereof, to refrain from providing the Credit for the benefit of the Borrower, or would have lead to their not agreeing to rely on the Securities detailed in this Agreement.

 

	  	
9.15

	
To the best of the Borrower’s knowledge, no Instance of Breach has occurred.

 

	  	
9.16

	
As at the date of the signing of this Agreement, all the terms and conditions and all the representations detailed therein, with the exception of the terms and conditions that are to be upheld after this date, are being upheld. The Borrower is not in breach of the terms and conditions and undertakings detailed in this Agreement. With respect to all the terms and conditions that must be upheld in accordance with this Agreement, after the date of the signing of this Agreement, there is no exclusion to executing and / or upholding them in full and on time.

 

  

  

  

 

	
10.

	
Additional Undertakings on the Part of the Borrower.

 

	  	
Without derogating from the Provisions of the Law and the provisions of the Credit agreement, the Borrower undertakes, to each of the Lenders, to uphold the following undertakings, at all times up to the settlement of all the Credit amounts:

 

	  	
10.1

	
Financial Information

 

	  	
The Borrower undertakes to submit to each of the Lenders:

 

	  	
10.1.1

	
No later than April 7 each year, the annual Financial Statements as at December 31 of the previous year. The following will be attached to the above stated Financial Statements: a). A confirmation, in the name of the Borrower, from the Chief Financial Officer (CFO) or from the Chief Executive Officer (CEO) of the Borrower, in accordance with which, the Borrower has complied with all the financial bench marks detailed below. b). Details of the relevant data and an exhaustive explanation with respect to the manner of the calculation of the Borrower complying with the financial bench marks. c). Solo Financial Statements referring to December 31 of the previous year, insofar as the Borrower customarily does, during the period related to the matter, draw up solo Financial Statements as stated, including for its internal use and d). Details of the Related Corporations existing as at December 31 of the previous year.

 

	  	
10.1.2

	
No later than 61 days after the end of each quarter, the Financial Statements relating to the preceding quarter, as well as: Details of the unsettled balance of Loan A, of Loan B and of Loan C as was the situation on the last day of the preceding quarter, with respect to each of the Lenders separately, details of the management fees paid by the Borrower during the course of the preceding quarter, insofar as this is not detailed in the Financial Statements relating to the matter, and insofar that, at the Closing Day, the Borrower selected the alternative as detailed in Section 5.3.2 – details of the unexploited balance of the Line of Credit C that was (insofar as it was), on the last day of the preceding quarter, with respect to each of the Lenders separately. Furthermore, the following will be attached to the above stated Financial Statements: a). A confirmation, in the name of the Borrower, from the Chief Financial Officer (CFO) or from the Chief Executive Officer (CEO) of the Borrower, in accordance with which, the Borrower has complied with all the financial bench marks detailed below. b). Details of the relevant data and an exhaustive explanation with respect to the manner of the calculation of the Borrower complying with the financial bench marks. c). Details of the Related Corporations existing as at the end of the quarter to which the Financial Statements refer, as stated.

 

	  	
10.1.3

	
No later than 2 days prior to the Assessment Date, all the relevant data for the purpose of the calculation of the compliance of the Borrower with the benchmarks stipulated in Sections 10.3 and 10.4.2, signed, in the name of the Borrower, by the Chief Financial Officer (CFO) or by the Chief Executive Officer (CEO) of the Borrower.

 

  

  

  

 

	  	
10.1.4

	
Should the Borrower not draw up solo Financial Statements, for any particular fiscal year, then the Lenders will be at liberty to demand of the Borrower, and the Borrower will be obliged to arrange for the Lenders, a presentation – on a date that will be set in coordination with the Lenders and the Borrower, but no later than May 31 – with respect to the solo financial data of the Borrower for such fiscal year, accompanied by explanations and notes insofar as will be demanded by the Lenders in that context.

 

	  	
10.1.5

	
Should one of the Lenders notify the Borrower that, in accordance with the demands of the Bank of Israel, the submission of Financial Statements is required at an earlier date than any date stipulated above, the Borrower undertakes to bring the submission of the Financial Statement forward to such date.

 

	  	
10.1.6

	
The Borrower confirms that it has been informed of the demands of the Bank of Israel with respect to the submission of Financial Statements on time and that a delay in the submission of the Statements is likely to cause any of the Lenders, inter alia additional costs and / or to obligate any of them to make a provision in their books.

 

	  	
10.1.7

	
The Borrower will submit, to the Lenders, a report regarding any management agreement or other agreement that gives the controlling shareholders in the Borrower the right to any payment whatsoever from the Borrower or from the companies under its control, immediately after the signing thereof. For the avoidance of doubt, it is hereby clarified that there is nothing stated in this Section to permit the payment of any payment whatsoever to the controlling shareholders in the Borrower, except in accordance with, and subject to, the limitations detailed in Section 10.4 below.

 

	  	
10.1.8

	
The Borrower will submit, to the Lenders, a copy of every authorization, notification, report or any other document that the Borrower is obliged to submit to the Registrar of Companies and / or to the Securities Authority and / or to the Stock Exchange in Tel Aviv and / or to the Ministry of Communications and / or to any other Authority and which is intrinsic for the purpose of examining capability of the Borrower to meet its obligations in accordance with this Agreement and this as soon as possible after the producing thereof to such entity. If the notification or the report are published on the date of the submission thereof to the relevant Authority, on the Authority’s website, the Borrower will inform the Lenders in writing regarding the submission of the report or notification, as stated, to the relevant Authority and submit a copy thereof to any of the Lenders, at its behest.

 

	  	
10.1.9

	
The Borrower will submit to the Lenders, at the end of 30 days after the Closing Day, a proforma report of the Borrower that will reflect the execution of the Purchase Agreement, signed in the name of the Borrower, by the Chief Financial Officer (CFO) or by the Chief Executive Officer (CEO) of the Borrower.

 

	  	
10.1.10

	
The Borrower will submit to any of the Lenders, at the reasonable demand of the Lender, subject to and in accordance with the Provisions of the Law, reports, documents, information and clarifications which, in the opinion of such Lender, are relevant for the purpose of the management of the Credits, the charges and the Securities, insofar as will be demanded by the Lenders including, but without derogating from the generality of the above stated, any information and documents with respect to the business and the financial state of the Borrower and of the corporations under its control and the Financial Statements of the corporations under the control of the Borrower, insofar as the above stated corporations generally draw up, at that time, Financial Statements on a separate basis.

 

  

  

  

 

	  	
10.1.11

	
The Borrower undertakes to transfer to the Lenders, a notification, in any case that the Borrower will become aware of the occurrence of an Instance of Breach, and this close to the time of the Borrower becoming aware of the breach.

 

	  	
10.1.12

	
The Borrower will submit, to the Lenders, a copy of every notification or essential material that the Borrower will submit to its shareholders in their capacity as shareholders in the Borrower (that is, any material that the shareholders in the company have a right to peruse, as stated in Article 184 of the Companies Law), close to the time of the stated submission.

 

	  	
10.1.13

	
The Borrower will transfer to the Lenders, any notification in writing received from a Government or Administrative Authority, with respect to the Licenses or any one thereof, with respect to a breach or apparent breach of the terms and conditions of the Licenses or any one thereof, the cancellation, suspension thereof or intrinsic change thereto, and this immediately after the receipt of the above stated notification.

 

	  	
All the documents and the data required of the Borrower in accordance with this Section 10.1 will be drawn up to the satisfaction of the Bank Coordinator. In order only to eliminate doubt, it is hereby clarified that, subject to the remaining provisions of this Agreement, the handing over of the above stated documents and information is subject to the obligation of banking confidentiality customary in Israel.

 

	  	
10.2

	
Access to Data

 

	  	
The Borrower will enable the Lenders, including their employees and office holders (hereinafter – the “Representatives of the Lenders”), access to the books, documents, data or other information whatsoever in its possession, and the Borrower will also enable the Lenders or the representatives of the Lenders as stated, to obtain copies of the stated material, insofar as the matter will be deemed by the Lenders or their Representatives required to execute this Agreement or to manage the Credit and the Securities or to protect the rights of the Lenders in accordance with the Credit Documents.

 

	  	
In addition, the Borrower will enable the Lenders' professional consultants nominated with the consent of the Borrower who have entered into confidentiality undertakings towards it, access to its books, documents, data or information of any kind in its possession, and will also enable the aforesaid consultants to be provided with copies of such material to the extent that it seems to the consultant, a relevant requirement for the purpose of providing the services that they have agreed with it, to the Lenders in connection with its executing this Agreement or managing the Credit and Securities or protecting the Lenders' rights according to the Credit Documents.

 

  

  

  

 

The Borrower will not refuse to give its agreement to the appointment of any consultant whatsoever for reasons that are not reasonable. Furthermore, in any case of refusal, the Borrower will justify its refusal in writing. The Borrower hereby agrees in advance that Leumi Partners Investigations Ltd., will serve as an consultant subject to its signature on a non disclosure agreement in a wording acceptable to the Borrower and to that fact that the workers who will be employed to this end at Leumi Partners Investigations Ltd. will not carry out work for, or with respect to, any of the Borrower’s competitors, within the framework of which, the above stated workers will be in contact with any of the competitors or the office holders therein.

 

	  	
In addition, the Borrower will cooperate and will cause the office holders, consultants and relevant workers acting on behalf of the Borrower, to cooperate with the Lenders, their consultants or representatives of the Lenders as stated, will meet with them from time to time and will transfer to them any information or material as stated, all as the Lenders, their consultants, or representatives will deem necessary for them, and subject to the above stated limitations.

 

	  	
The Borrower declares that there is nothing in the appointment of the consultants acting on behalf of the Lenders as stated, and in the reports or information of any kind whatsoever, that will be handed over by those same consultants to the Lenders, in order to release the Borrower from any obligation whatsoever imposed on the Borrower, with respect to the Lenders, in accordance with the Credit Documents, whether an undertaking to transfer reports and information or with respect to any other undertaking whatsoever, or in order to impose on the Lenders or on the representatives of the Lenders or on the consultants acting on their behalf, any obligation whatsoever, or any liability with respect to the Borrower – with the exception of the obligation of confidentiality imposed on the consultants as will be detailed in the non disclosure agreement that will be signed by them as stated above – or in order to constitute a waiver of any kind on the part of the Lenders, or any estoppel whatsoever with respect to the Lenders or other allegations and such forth.

 

	  	
In order to only eliminate doubt, it is hereby clarified that, subject to the remaining provisions of this Agreement, the handing over of the documents and the information as stated above is subject to the obligation of banking confidentiality applicable in Israel.

 

	  	
10.3

	
Undertaking to Comply with the Financial Benchmarks (an Example of the Manner of the Examination Attached as Annex 10.3)

 

	  	
The Borrower undertakes to the Lenders to comply with each of the financial benchmarks detailed in this sub-section below, which will be examined at each Assessment Date:

 

	  	
10.3.1

	
The Operating Profit to service the Debt (EBITDA) of the Borrower will not be less than a total of NIS 220 million, this amount being linked to the index, commencing from the Known Agreement Index.

 

	  	
10.3.2

	
In accordance with the data of each of the calendar quarters detailed below, the Debt Service Ratio of the Borrower will not be less than the value stipulated in the following table with respect to such quarter.

 

  

  

  

 

	  	  	
With Respect to Q1

	  	  	
With Respect to Q2

	  	  	
With Respect to Q3

	  	  	
With Respect to Q4

	  
	
2010

	  	 	  	  	  	
1.230

	  	  	  	
1.230

	  	  	  	
1.251

	  
	
2011

	  	  	
1.251

	  	  	  	
1.281

	  	  	  	
1.281

	  	  	  	
1.322

	  
	
2012

	  	  	
1.322

	  	  	  	
1.361

	  	  	  	
1.361

	  	  	  	
1.434

	  
	
2013

	  	  	
1.434

	  	  	  	
1.510

	  	  	  	
1.510

	  	  	  	
1.547

	  
	
2014

	  	  	
1.547

	  	  	  	
1.582

	  	  	  	
1.582

	  	  	  	
1.614

	  
	
2015

	  	  	
1.614

	  	  	  	
1.648

	  	  	  	
1.648

	  	  	  	  	  

 

	  	
It is clarified that the unsettled balance of the principal of Loan C will be deducted from the Debt Service Ratio.

 

	  	
10.3.3

	
In accordance with the data of each of the calendar quarters detailed below, the Debt Service Ratio of the Borrower will not exceed the value stipulated in the following table with respect to such quarter.

 

	  	  	
With Respect to Q1

	  	  	
With Respect to Q2

	  	  	
With Respect to Q3

	  	  	
With Respect to Q4

	  
	
2010

	  	 	  	  	  	
3.830

	  	  	  	
3.830

	  	  	  	
3.651

	  
	
2011

	  	  	
3.651

	  	  	  	
3.425

	  	  	  	
3.425

	  	  	  	
3.208

	  
	
2012

	  	  	
3.208

	  	  	  	
2.981

	  	  	  	
2.981

	  	  	  	
2.786

	  
	
2013

	  	  	
2.786

	  	  	  	
2.111

	  	  	  	
2.111

	  	  	  	
1.936

	  
	
2014

	  	  	
1.936

	  	  	  	
1.752

	  	  	  	
1.752

	  	  	  	
1.587

	  
	
2015

	  	  	
1.587

	  	  	  	
1.410

	  	  	  	
1.410

	  	  	  	
1.246

	  

 

	  	
It is clarified that for the purpose of the examination of the compliance on the part of the Borrower with all of the financial benchmarks detailed in Sections 10.3.1, 10.3.2 and 10.3.3 above, in each of the quarters in 2010, the cumulative Operating Profit to service the Debt (EBITDA) as at the Closing Day, will be taken when adjusted by an annual calculation.

 

	  	
The financial benchmarks laid down in Sections 10.3.1, 10.3.2 and 10.3.3 above (“ The Benchmarks ”), are based on accounting standards, accounting rules, estimates and accounting policies (“ Financial Reporting ”) as implemented in the most recent Financial Statements of the Borrower, as at the date of this document (“ The Most Recent Statements ”).

 

	  	
A different financial reporting from that on which the drawing up of the most recent Statements was based, including, but not limited to, in the wake of the implementation of the International Financial Reporting Standards (IFRS), new / other / any financial reporting standards in Israel or abroad, a change in estimates and / or a change in financial reporting policies (all the above stated will be hereinafter called, jointly and severally - “ New Financial Reporting ”), is likely to bring about changes which will have ramifications on the benchmarks.

 

	  	
Therefore, the Borrower agrees as follows:

 

	  	
At any time that it will transpire in the perception of the Lenders, at their sole discretion, that changes have been made and / or are about to be made to the Borrower’s Financial Statements, in the wake of the New Financial Reporting, they will be at liberty, after consulting with the Borrower and upon obtaining the agreement of the Borrower, to determine what are the changes required in the benchmarks (“ The Amended Benchmarks ”) in order to adjust them to the stated changes, and this with the intention of adjusting them to the original financial purpose for which the benchmarks were determined.

 

  

  

  

 

	  	
Should the Bank Coordinator inform the Borrower what the amended benchmarks are – these will obligate the Borrower commencing from the date of the submission of the notification by the Bank Coordinator and will view this appendix as if it includes, commencing from the date of the submission of the notification by the Bank Coordinator, the Amended Benchmark.

 

	  	
It is hereby agreed that in any case that a difference of opinion between the Borrower and the Lenders will become apparent, with respect to the changes required in the benchmarks in the wake of the New Financial Reporting, the parties will appoint an expert who is an independent auditor, belonging to one of the big five auditing firms in Israel, who will determine what the Amended Benchmarks are and his ruling will obligate the parties. The Borrower will bear the cost of the fees of the above stated expert.

 

	  	
10.4

	
Undertakings with respect to Payments to Stakeholders

 

	  	
10.4.1

	
With the exception of that detailed in Sections 10.4.2 and 10.4.3 below, the Borrower and any Related Corporation, will not pay, directly or indirectly, in any manner whatsoever, to any of the Stakeholders in the Borrower or to a relative of an Stakeholder and / or to a corporation (including a partnership or enterprise) under the control of any of them, (not through the Borrower) and / or to a corporation (including a partnership or enterprise) under the control of any of them together with others (not through the Borrower) and / or to a third party who will replace them or act on their behalf, dividends, repayments of owners equity, salary, expenses, management fees, consultancy fees, participation fees, commissions or and amount owing and / or will be owing to them, with respect to any other ground whatsoever, whether in money or money equivalents, and will also not allow then to withdraw a monetary amount or monetary equivalent amount, as stated, without obtaining the prior written agreement of the Lenders. In spite of that stated in this Section above, it is hereby agreed that the Borrower as well as a Related Corporation, will be entitled to pay the CEO of the Borrower or of a Related Corporation, salary with respect to his office at the Borrower or at a Related Corporation and also to pay a director in the Borrower or in the Related Corporation, or to a Stakeholder or to the relatives of the Stakeholder, as the case may be, acceptable salary with respect to his position as a director or other officer in the Borrower or in the Related Corporation. Furthermore, the Borrower or the Related Corporation will be at liberty to pay amounts to the Stakeholders and their relatives, as stated above, with respect to transactions and contractual associations that are conducted in the course of the regular business of the Borrower or the Related Corporation and of the Stakeholder and under market conditions.

 

  

  

  

 

	  	
10.4.2

	
It is hereby agreed that the Borrower will be at liberty to pay Merhav payments as detailed below subject to the upholding of all the following terms and conditions in accumulation:

 

	  	
10.4.2.1

	
On every date of institutional payments as detailed in the settlement table attached as Annex 10.4.2.1 to this Agreement, or as will be amended in accordance with that stated in Section 1.1.1. (“ Financial Institutions Settlements Time Table”), the amount of payment to Financial Institutions relevant at that date. It is hereby agreed that in the case that Merhav will alter the terms and conditions of the Financial Institutions loan and, as a result thereof, the amounts that will be required to be settled with the Financial Institutions every three months will be lower than the amounts detailed in the Financial Institutions Settlements Time Table, and also in the case that Merhav will replace the loan from the Financial Institutions with credit from another financial institution, and the amounts that it will be required to settle with respect thereto, every three months, will be lower than the amounts detailed in the Financial Institutions Settlements Time Table, the Financial Institutions Settlements Time Table will be replaced in accordance with the amended or replaced credit terms and conditions as is appropriate, and the new Financial Institutions Settlements Time Table will apply and obligate from such date. At the date of the replacement of the Financial Institution Settlements Time Table as stated above, the parties will sign on an amendment to this Agreement for the purpose of changing the definition of the loan from the Financial Institutions and the institutional payments accordingly.

 

	  	
10.4.2.2

	
By no later than 2 Business Days prior to the date of the execution of the payments to Financial Institutions in accordance with sub-section 10.4.2.1 above, the Borrower will deposit, in a separate account, (the “Accumulation Account”) which will be conducted in the name of the Borrower at the Central Tel Aviv Branch (800) of the Bank Coordinator, an identical amount to the amount of the payments to the Financial Institutions for such date. The obligation of the Borrower to deposit the amounts as stated in the sub-section will be until the amounts that will be accumulated in the accumulation account will reach the accumulated amount – as the above stated amount will be estimated by the Bank Coordinator – of the interest that the Borrower will have to pay to the Lenders with respect to Loan A, Loan B and Loan C at two consecutive payments dates of each of the above stated loans, that apply after the date of the execution of the payment to the Financial Institutions related to the matter.

 

	  	
10.4.2.3

	
Together with the first deposit in favor of the accumulation account, the Borrower will create, in favor of the Lenders, a fixed charge of first ranking, on the accumulation account and on all the monies that will be deposited into the stated account and all the rights with respect thereto, for the purpose of guaranteeing its debts and undertakings with respect to the Lenders regarding the Credit Documents. The charge will be in the wording and under the terms and conditions as will be acceptable to the Bank Coordinator and the company will produce for the Bank Coordinator, upon the creation of the lien, any authorization and agreement as will be demanded by the Bank Coordinator.

 

	  	
In this matter it is clarified that:

 

	  	
The Borrower will be at liberty to invest the monies in the accumulation account in short term banking deposits, short term loans, or negotiable securities or negotiable Exchange Traded Notes issued by the State of Israel. To this end, the values of the short term banking deposits and / or the securities and / or the Exchange Traded Notes will be considered in accordance with their closing price on the Tel Aviv Stock Exchange, 2 Business Days prior to each payment date to Financial Institutions. Surpluses that will accumulate over and above the amounts required as stated in Section 10.4.2.2. above, will be able to be withdrawn by the Borrower.

 

  

  

  

 

	  	
10.4.2.4

	
As at the [date of the] Financial Statements known at the date of the relevant payment to the Financial Institutions, the overall Debt Service Ratio will not be less that the value stipulated in the following table, with respect to the quarter that is the subject of the above stated Financial Statements:

 

	  	  	
With Respect to Q1

	  	  	
With Respect to Q2

	  	  	
With Respect to Q3

	  	  	
With Respect to Q4

	  
	
2010

	  	 	  	  	  	
1.293

	  	  	  	
1.293

	  	  	  	
1.209

	  
	
2011

	  	  	
1.209

	  	  	  	
1.146

	  	  	  	
1.146

	  	  	  	
1.183

	  
	
2012

	  	  	
1.183

	  	  	  	
1.161

	  	  	  	
1.161

	  	  	  	
1.216

	  
	
2013

	  	  	
1.216

	  	  	  	
1.274

	  	  	  	
1.274

	  	  	  	
1.306

	  
	
2014

	  	  	
1.306

	  	  	  	
1.336

	  	  	  	
1.336

	  	  	  	
1.365

	  
	
2015

	  	  	
1.365

	  	  	  	
1.394

	  	  	  	
1.394

	  	  	  	  	  

 

	  	  	
It is hereby clarified that the unsettled balance of the principal of Loan C will be offset from the Debt Service Ratio.

 

 

	  	
10.4.2.5

	
As at the [date of the] Financial Statements known at the date of the relevant institutional payment, the total Debt Service Ratio will not exceed the value stipulated in the following table, with respect to the quarter that is the subject of the above stated Financial Statements:

 

	  	  	
With Respect to Q1

	  	  	
With Respect to Q2

	  	  	
With Respect to Q3

	  	  	
With Respect to Q4

	  
	
2010

	  	 	  	  	  	
3.377

	  	  	  	
3.377

	  	  	  	
3.219

	  
	
2011

	  	  	
3.219

	  	  	  	
3.043

	  	  	  	
3.043

	  	  	  	
2.850

	  
	
2012

	  	  	
2.850

	  	  	  	
2.801

	  	  	  	
2.801

	  	  	  	
2.619

	  
	
2013

	  	  	
2.619

	  	  	  	
1.999

	  	  	  	
1.999

	  	  	  	
1.833

	  
	
2014

	  	  	
1.833

	  	  	  	
1.672

	  	  	  	
1.672

	  	  	  	
1.514

	  
	
2015

	  	  	
1.514

	  	  	  	
1.356

	  	  	  	
1.356

	  	  	  	
1.199

	  

 

	  	
10.4.2.6

	
As at the date of the payment of the relevant Institutional payments, the amount of the Operating Profit to service the Debt will not be less than an amount of NIS 230 million, with this amount being linked to the Known Agreement Index.

 

	  	
It is clarified that for the purpose of the examination of the compliance of the Borrower with each of the financial benchmarks detailed in Sections 10.4.2.4, 10.4.2.5, 10.4.2.6 above, in each of the quarters applicable during 2010, the cumulative Operating Profit to service the Debt (EBITDA) from the Closing Day will be taken, it being adjusted by an annual calculation.

 

  

  

  

 

	  	
10.4.2.7

	
Commencing from the lapse of 36 months from the Closing Day (and after the payment to the Financial Institutions and the payment to the Lenders due at that point in time) and as long as Loan C, insofar as such exists, has not been settled, the payment to the Financial Institutions will be dependent, in addition to that stated heretofore and hereinafter, upon obtaining the prior authorization of the Lenders, in writing, for the execution thereof. The Lenders will not withhold such authorization, provided that the Borrower satisfies them, prior to the execution of the payments to the Financial Institutions, with respect to the Borrower’s ability to settle the unsettled balance of the principal of Loan C, in full and on time.

 

	  	
10.4.2.8

	
At the first date upon which the payment to the Financial Institutions will be executed, the Lenders will be in possession of the Financial Statements referring to the preceding quarter, and the data that will be included in the Financial Statements as stated, will indicate the fact that the Borrower was an active company during a minimum period of three months.

 

	  	
10.4.2.9

	
The Borrower has complied with all its obligations to each of the Lenders in accordance with the Credit Documents.

 

	  	
10.4.2.10

	
No Instance of Breach has occurred.

 

	  	
10.4.3

	
Furthermore, it is hereby agreed that the Borrower will be entitled to pay Merhav, a Stakeholder in the Borrower (as defined in the Securities Law) or bodies related to them, management fees, the cumulative total of which, in a calendar year, will not exceed NIS 15 million, linked to the Known Agreement Index (the “Maximum Management Fee Amount”) as well as the payment of the Value Added Tax, against an invoice that Merhav will produce to the Borrower, with respect to the interest paid on the Subordinate Loans, subject to all the following terms and conditions: (a) The terms and conditions detailed in Sections 10.4.2.9 and 10.4 2 10 will be upheld, (b) the Lenders will be in possession of Financial Statements indicating the fact that the Borrower was an active company during a minimum period of three months. It is hereby clarified that the amount of the management fees refers to each calendar year separately. Should management fees not be paid in a particular year – not as result of the Borrower failing to comply with the terms and conditions detailed in Sections 10.4.2.9 and 10.4 2 10 above – all or part thereof, the Borrower will be entitled to pay them subject to the upholding of the terms and conditions as stated above, only in the subsequent year.

 

	  	
10.4.4

	
The Borrower and any Related Corporation will not carry out, directly or indirectly, exceptional transactions as defined in the Companies Law (including provision of loans by the Borrower or a Related Corporation), with any of the Stakeholders in the Borrower, or a relative of a Stakeholder and / or with a corporation under the control of any of them (not through the Borrower) and / or with a corporation under the control of any of them together with others (not through the Borrower) and / or with a third party that will replace them or act on their behalf, without obtaining the prior authorization of the Lenders. It is clarified that, in the matter of the definition of “exceptional transactions”, the market conditions and the regular course of business will be examined relative to each of the parties to the transaction.

 

  

  

  

 

	  	
10.5

	
Conducting the Business of the Borrower.

 

	  	
10.5.1

	
The Borrower will not alter the field of its activities from the Area of Business except subject to that stated in Section 10.5.2 below.

 

	  	
10.5.2

	
The Borrower undertakes that, without the prior written agreement of the Lenders, the Borrower will not carry out significant investments that are not in the Area of Business, except after obtaining the prior written agreement of the Lenders. In the matter of this Section 10.5.2, “significant investments” – investments of an annual cost of a cumulative total exceeding NIS 5 million (linked to the Known Agreement Index), in each calendar year.

 

	  	
10.5.3

	
For the avoidance of doubt, and without derogating from the obligations of the Borrower detailed in the remaining Sections of this Agreement, or in the Security Documents, it is hereby clarified that all the activities purchased by the Borrower in accordance with the Purchase Agreement will be carried out and managed by the Borrower directly and will, at all times, be under the ownership of the Borrower.

 

	  	
10.5.4

	
The Borrower undertakes that any corporation that the Borrower is, or will be, a Stakeholder therein, including partnerships that the Borrower will, directly or indirectly, be the owners thereof, at a rate of 5% and over, will only deal in activities in the Area of Business.

 

	  	
10.5.5

	
The Borrower undertakes not to execute, not to undertake to execute, and not to institute any procedures whatsoever to execute a Merger (with the exception of in accordance with the application submitted to the Court on December 12, 2009, for an arrangement in accordance with Article 350 of the Companies Law 5759 – 1999) without obtaining the prior written authorization of the Lenders for this purpose. To this end, the Borrower undertakes to transfer to the Lenders, immediately, any information and document, required by the Lenders, at their discretion, with respect to the requested Merger, in order for them to determine their position with respect to the Merger.

 

	  	
10.5.6

	
The Borrower undertakes that no Related Corporation will create, for the benefit of any entity whatsoever, a lien of any kind whatsoever, on its assets or on part thereof, including on equity and non-paid up share capital.

 

	  	
10.5.7

	
The Borrower undertakes that it will not sign any guarantee to secure debts or undertakings of a corporation (including a partnership or venture) in which the Borrower is not a controlling shareholder, with respect to any entity, and neither will the Borrower undertake to indemnify any entity whatsoever with respect to the non-upholding of a debt or undertaking of the corporation (including a partnership or venture) as stated, with respect thereto, without obtaining the prior written authorization of the Lenders.

 

	  	
10.6

	
Undertaking to Produce Valuation

 

	  	
The Borrower will produce for the Lenders, at their behest, in which the Lenders will stipulate that it derives from a provision or demand from the Bank of Israel, and no more than once a year, an assessment of the value of the Borrower, (by cash flow capitalization, DCF, and in accordance with additional requirements that will be laid down by the Bank Coordinator in light of the provisions or demands of the Bank of Israel, as such will be from time to time), by an independent value assessor, who will be agreed upon by the Lenders in advance. For the avoidance of doubt, it is clarified that the Borrower will bear all the costs related to the value assessment as stated.

 

  

  

  

 

	
11.

	
Immediate Settlement

 

It is agreed that in each of the events detailed hereunder, the Lenders (as required by each of them) are entitled to adopt one or more of the reliefs detailed hereunder. For the avoidance of doubt, it is clarified that if the Lenders abstain from adopting a specific relief, this will not detract from their right to do so on any future occasion; all at their discretion and without time limitation. Notwithstanding the aforesaid, it is hereby agreed that notwithstanding the occurrence of an Event of Breach, the Lenders, not having adopted any of the reliefs available to them and the Event of Breach having been rectified or no longer subsisting by the date on which the Lenders seek to adopt any of the reliefs available to them, then the Lenders will not be entitled to adopt such reliefs. It is clarified that nothing in the aforesaid shall derogate from the Lenders' rights to adopt any relief whatsoever in respect of another Event of Breach, if and to the extent there is such:

 

	  	
(a)

	
Not to provide the Borrower with any additional credit that they have undertaken to provide under this Agreement;

 

	  	
(b)

	
To demand the immediate payment of the balance of the undischarged Credit or part thereof, together with linkage differentials, exchange rate differentials, interest cumulative up to such time and not yet paid, expenses, other obligations and commission that have accumulated up to such time and have not been paid, plus arrears of interest applicable to such credit (but arrears of interest will only be paid on the Credit actually provided up to immediate settlement and applicable from such date to the extent that it has not been paid), as well as any additional sum which is, in the Lenders' opinion, available to them in respect of any damage caused to them pursuant to early settlement of the Credit;

 

	  	
(c)

	
To increase the rate of interest applicable to the Credit, or any part thereof, as specified in Section 5.4 above;

 

It is further clarified that the Events/circumstances specified above in the sub-sections of this Section 11 (as may be amended by the parties in writing from time to time) and the Events entitling the demand for immediate settlement as detailed in the debenture charge entered into by Telecom under Section 8.7 above and the floating debenture charge entered into under Section 8.1 above as amended by the parties from time to time (the "Credit Grounds"), are the sole grounds for establishing the right of the Lenders to demand immediate settlement. It is hereby clarified that if grounds are found other than the Credit Grounds, in other documents that are not referred to above, they will not be applicable in respect of the Credit.

 

These are the Events:

 

	  	
11.1

	
If the Borrower does not pay to any of the Lenders any amount whatsoever that is due to any of them according to the Credit Documents on the date determined for its payment and if such amount is not paid within 7 Business Days from the payment date.

 

	  	
11.2

	
If  a sequestration or any action by the Execution Office is imposed on the Borrower's assets or the assets of any Related Corporation or on part thereof or if the Execution Office initiates any action in respect thereof, in a sum that exceeds 20 million NIS., linked to the Known Agreement Index and it is not rescinded within 45 days, of if the sum is less than 20 million NIS. linked to the Known Agreement Index, and it is not rescinded within 90 days.

 

  

  

  

 

	  	
11.3

	
If an application is issued for a liquidation or the prior appointment of a provisional liquidator, receiver, special administrator or freezing processes or the granting of an order to seize assets, and no objection to such application is submitted within 30 days, or the objection is overruled, or if a winding-up order is issued against the Borrower or a Related Corporation, or a freezing order.

 

	  	
11.4

	
If the Borrower or a Related Corporation requests that a winding-up order be served on it, or a freezing order, or if the Borrower or a Related Corporation convenes a meeting of creditors for an arrangement with it, (unless the Lenders' prior written agreement has been given for a meeting of creditors in order to make a change in structure or for reorganization) or if the Borrower or a Related Corporation resolves on dissolution, or commits an act of bankruptcy.

 

	  	
11.5

	
If the Borrower or a Related Corporation resolves on a Merger, or a division or an arrangement, or if control or ownership of the Borrower changes, directly or indirectly compared with that which is detailed in Section 9.5 above, without the Borrower having obtained the prior written agreement therefore, of the Lenders.

 

	  	
"Splitting" - as defined in Part E(2) of the Income Tax Ordinance (New Version) or any Provision of the Law that succeeds it.

 

	  	
"Arrangement" - as defined in Sections 350 and 351 of the Companies Law 1999-5759, or any Provision of the Law that may succeed it.

 

	  	
11.6

	
If the Borrower's or a Related Corporation's business activities or commercial activity is discontinued and not recommenced within six months from the date of discontinuation.

 

	
11.6a

	
If the Borrower or a Related Corporation infringes or fails to fulfill the undertakings under the Credit Documents in a way that is not mentioned in any of the other sub-Sections of this Section 11 and which, in the opinion of one of the Lenders, is a fundamental undertaking towards it, and the breach thereof is not rectified within 30 days from the date on which the Lenders give warning thereof in writing.

 

	  	
11.7

	
If is clarified that there is a declaration or confirmation by the Borrower contained in the Credit Documents, that is "fundamental" in the sense that had the Lender been aware of it on the date of providing the Credit to the Borrower, the Lenders would not have given the Credit, whether contained above in this Agreement or contained in any of the other Credit Documents.

 

	  	
11.8

	
If the Borrower issues bearer securities without the Lenders' prior written agreement.

 

	  	
11.9

	
If a License/franchise that the Borrower or a Related Corporation has received, is rescinded or postponed, or if there is any change is made in the conditions of the License/franchise that the Borrower of the Related Corporation has received, which is, in the opinion of the Lenders, fundamental, and, in the opinion of any of the Lenders, pursuant to such change or rescission, as the case may be, there is less likelihood of the Credit being repaid in full and on time.

 

  

  

  

 

	  	
11.10

	
If at any time, an event or circumstance should occur that would, in the opinion of the Lenders, threaten or endanger, in a fundamental way, the likelihood of full and timely repayment of the Credit to the Lenders, including the aforesaid circumstances that could result in there being a high probability of an adverse effect on the financial position and/or the activities and/or the businesses of the Borrower, or if, in the opinion of the Lenders, there is a high probability that such event or circumstance is expected to occur, whether the occurrence of the event or circumstances as aforesaid is dependent on the Borrower or not;  but only if, to the extent that the event or circumstance is dependent on the Borrower, after the lapse of 30 days from the date on which the Lenders have given the Borrower notification of its existence, the Borrower has failed to establish, to the Lenders' complete satisfaction, that the measures required to assure the likelihood of the Lenders' being repaid in full and on time, have been adopted.

 

	  	
11.11 

	
If an event of any kind occurs, the result of which could entitle a Financial Institution, in accordance with any document whatsoever signed and/or to be signed by the Borrower or by a Related Corporation, to require the immediate settlement of the indebtedness and obligations of the Borrower or of a Related Corporation towards such entity, the cumulative total of which is not lower than 50 million NIS., and also if such entity does not exercise the aforesaid entitlement - on condition that the Financial Institution has not issued to the Borrower or the Related Corporation, within 25 days from the occurrence of the event, a written confirmation according to which it does not require immediate settlement of the Credit due to the occurrence of the event.

 

	  	
11.12 

	
If a Financial Institution has required immediate settlement of the indebtedness and obligations of the Borrower or of a Related Corporation towards such entity, the cumulative total of which is not lower than 10 million NIS. (linked to the Known Agreement Index).

 

	  	
11.13

	
If an application is submitted against any one of the Guarantors, for liquidation or the prior appointment of a provisional liquidator, a receiver, a special administrator or the freezing of proceedings or the granting of an order for the appropriation of assets, and an objection to such request is not submitted within 30 days or if the objection is rejected, or if a winding-up order or an order to freeze proceedings is issued against any of the Guarantors.

 

	  	
11.14

	
If Ampal American adopts a resolution regarding Merger, Splitting or Arrangement without obtaining the prior written approval of the Lenders therefore. In this regard, "Arrangement" is as defined in Section 11.5 above and "Splitting", as defined in Part E(2) of the Income Tax Ordinance (New Version) or any Provision of the Law that succeeds it, excluding however, transactions in the normal course of Ampal American's business.

 

	  	
11.15 

	
If Ampal American breaches or does not fulfill any of its obligations whatsoever towards the Lenders, detailed in Annex 11.15 of this Agreement and the breach is not remedied within 30 days from the date on which the Lenders give warning thereof in writing.

 

	  	
11.16 

	
In the event that a Financial Institution requires immediate settlement of the indebtedness and obligations of Ampal American towards such entity, the cumulative total of which is not lower than 100 million NIS. (linked to the Known Agreement Index).

 

  

  

  

 

If any of the events whatsoever detailed in Section 11 above, should occur, for which a remedial period is determined, the Bank will give its clients prior written notice of its requirement for immediate settlement, and the Bank will be entitled to require immediate settlement only if the Event of Breach has not been remedied by the end of the remedial period. However, if the Bank is of the opinion that its rights under the Credit Agreement are likely to be materially impaired as a result of its postponing its actions during the remedial period, the Bank will be entitled to require immediate settlement immediately upon the occurrence of the Event of Breach. For the avoidance of doubt, the remedial period will be calculated from the date on which the Event of Breach occurs and not from the date of the Bank's notification, except in cases specifically noted to the contrary in Section 11.

 

	
12. 

	
Commission

 

The Borrower will pay the Lenders the commissions specified in Annex 12 to this Agreement. In addition, the Borrower will pay to each of the Lenders, the other commissions involved in the management of the Borrower's Accounts and in managing the amounts of Credit and the Securities, as is customary from time to time with the Lenders.

 

It is agreed that additional commissions will be charged in the event of any changes in the Credit Documents after their signing, if any from time to time, and in such sums as will be agreed between the Lenders and the Borrower.

 

	
13. 

	
Authorization to charge an Account

 

	  	
13.1

	
The Borrower hereby grants irrevocable consent to debit the Accounts at each of the Lenders with the amounts due therefore according to the provisions of this Agreement, whether the relevant Account is in credit or in debit.

 

	  	
13.2

	
If one of the Lenders implements a right of offset available to it under one of the Credit Documents or under any other source, in respect of the amounts lodged with such Lender, (a) it will use the offset amount to settle the Credit, in respect of which it has exercised the right to offset as aforesaid, with all the Lenders at the Rate of Participation of each of them, and (b) the offset amount will not reduce the amount of Credit with the Lender that exercises the right of offset, by an amount that exceeds the Rate of Participation of such Lender in its amount of Credit.

 

The provisions of this Section constitute an irrevocable instruction by the Borrower to transfer offset sums to the other Lenders for settlement of the balance of the relevant undischarged amounts of Credit at the Rate of Participation of each of the Lenders.

 

	
14. 

	
Management of the Accounts and their computation

 

	  	
14.1

	
Each of the Lenders will manage the Accounts and will carry out computations in accordance with their customary procedures regarding credit and each amount that is repaid by the Borrower to such Lender. In the absence of any obvious error, prima facie , any written notification given by any of the Lenders in respect of the management of the Accounts and their computation as specified in this Section, will constitute prima facie evidence of the accuracy of its content.

 

	  	
14.2

	
The Borrower declares in respect of the relationship between it and each of the Lenders, in any legal or administration proceeding regarding the Credit Documents: (a) in the absence of any obvious error, prima facie , the Accounts managed by such Lender and the computations carried out by it in respect of these Accounts constitute prima facie evidence of the accuracy of their content, and (b) a declaration by an authorized Representative of the Bank Coordinator in respect of the Applicable Interest for the periods to which it refers, constitutes a conclusive presumption of the accuracy of its content.

 

  

  

  

 

	
15.

	
The Bank Coordinator

 

	  	
15.1

	
Appointment of the Bank Coordinator and its powers

 

	  	
15.1.1

	
Each of the Lenders appoints the Bank Coordinator to act on its behalf in accordance with the powers extended to the Bank Coordinator as specified in the Credit Documents.

 

	  	
15.2

	
The powers, rights and authority extended to the Bank Coordinator in this Agreement are solely of an administrative nature. Without derogating from the generality of the aforesaid, the Bank Coordinator will not have the power to bind any of the Lenders by any obligation whatsoever under the Credit Documents and will not be entitled to sign on them on behalf of the Lenders. The Bank Coordinator will not have the power to represent any of the Lenders or to bind any of them in any legal or administrative proceeding related to the Credit Documents.

 

	  	
15.1.3

	
The Bank Coordinator is entitled to exercise its powers in accordance with this Agreement through its employees or representatives.

 

	  	
15.2

	
The Bank Coordinator's responsibilities

 

	  	
15.2.1

	
The Bank Coordinator, its employees, functionaries, directors, share holders or representatives will not be held responsible to any of the Lenders in any regard of: (a) the validity, reliability or enforceability of the Credit Documents; (b) the collection of amounts owing to the Lenders under the Credit Documents; and (c) the accuracy of any declaration or representation that is given, whether in writing or orally, relating to the Credit Documents.

 

	  	
15.2.2

	
The Bank Coordinator will not be held responsible for its acts or omissions relating to the Credit Documents, other than an act or omission as aforesaid that constitutes extreme negligence or is perpetrated maliciously. The parties undertake not to initiate any proceeding or request for indemnification or other relief under any law, against the Bank Coordinator's employees, functionaries, directors, shareholders or representatives in respect of any claim they may have against any of them (even if based on extreme negligence or a malicious act by one of them) under the Credit Documents.

 

	  	
15.2.3

	
Each of the Lenders undertakes to indemnify the Bank Coordinator, in accordance with the Rate of Participation, for any claim, expense, loss or payment imposed on it that arises, directly or indirectly, from its appointment or from the performance of its office (except in the event of extreme negligence or a malicious act by the Bank Coordinator).

 

	  	
15.2.4

	
The Bank Coordinator is entitled to perform any action or to refrain from the performance of any action, the performance of or refraining from which, as the case may be, constitutes, in its opinion, a breach of any law applying to it or which is required for the fulfillment of any condition under law applying to it. Without derogating from the generality of the aforesaid, the Bank Coordinator is entitled to refrain from disclosing information in his possession relating to the Borrower, if, in its opinion, such disclosure constitutes a breach of the confidentiality undertakings applying to it or a breach of any law or that could constitute the basis for a claim against it.

 

  

  

  

 

	
16.

	
Amendments, changes and waivers

 

	  	
16.1

	
Except as specifically stated to the contrary, in every instance where there is a requirement for the Lenders' agreement or approval under this Agreement or the Security Documents or in an instance where there is a requirement for their agreement in respect of a waiver in relation to the provisions of this Agreement or of the Security Documents, the intention is for agreement to be given through the Bank Coordinator to implement the action requiring the agreement of the Lenders. In any instance in which the Borrower is required to implement an action pursuant to an instruction, request etc. from the Lenders under this Agreement or the Security Documents, the intention is for the request, instruction etc. given through the Bank Coordinator.

 

	  	
16.2

	
It is specifically clarified that any notice, confirmation or agreement given by the Bank Coordinator to the Borrower will be conclusively presumptive as if given on behalf of the Lenders.

 

	  	
16.3

	
Any provision included in the Credit Documents can be amended or changed only in a document testifying to the amendment or change is signed by the Borrower and by each of the Lenders.

 

	  	
16.4

	
The amendment of a provision that bestows rights of any kind to the Bank Coordinator, a change to or waiver thereof, or an amendment, change or waiver of additional obligations imposed  on the Bank Coordinator or an extension of the existing obligations, will not come into effect without the Bank Coordinator's written agreement to the said amendment, change or waiver.

 

	  	
16.5

	
A waiver by one of the Lenders of a prior breach or the non-performance of one or more the Borrower's obligations or the non-fulfillment of any condition whatsoever under the Credit Documents, will not be considered as agreeing to a further breach or to the further non-fulfillment of any such condition or obligation; the failure of the Lenders to exercise any right whatsoever available to them under the Credit Documents or according to any law, will not be regarded as a waiver of such right.

 

No easement or waiver of any condition whatsoever of these conditions, will be binding on the Lenders, unless given in writing.

 

	
17.  

	
Change in the parties; the Bank Coordinator's obligations and rights

 

	  	
17.1

	
The Borrower

 

	  	
The rights and obligations of the Borrower included in the Credit Documents, cannot be transferred without the agreement of all the Lenders.

 

	  	
17.2

	
The Lenders

 

  

  

  

 

	  	
17.2.1

	
Each of the Lenders is entitled at its exclusive discretion, to transfer its rights under the Credit Documents, in whole or in part, to Financial Institutions in Israel (a "Transferee"), on condition that the Transferee, as aforesaid, is subject to all components of the Credit (Loan A/Loan B/ Loan C and the Outstanding Renewed Amount) and the remaining cumulative unsettled balances of all credit (plus any Outstanding Renewed Amount or any of the Revised Outstanding Renewed Amount, as the case may be) immediately after the implementation of the transfer, both with the Transferor and the Transferee shall not fall below 12.5% of the balance of Cumulative unsettled balance of all the Credits plus the total unused amount of Credit C with each of the Lenders, as it will be at that time. The Borrower and the other Lenders will take all actions and sign all documents required to bring the transfer transaction as aforesaid into effect or to refine it, to release the transferring Lender from its transferred obligations and to transfer them to the Transferee or to bestow the transferred rights on the Transferee. It is hereby agreed that in any event where the Transferee is not a banking corporation in Israel, the Lenders will be entitled to implement the transfer transaction as aforesaid only after receiving the Borrower's prior written consent. For the purpose of this Section 17.2, "transfer" - the transfer of rights or obligations by a sale, check, endorsement, transfer or lien in any way whatsoever, either in whole or in part, either directly or indirectly (including by way of a sale of rights to participate in the above rights (participations) or in any other manner). The transfer can be made to one Transferee or to a number of Transferees, on the same date or from time to time.

 

	  	  	
The transfer as aforesaid in this Section 17.2.1 above, shall not be implemented unless a prior written notice has been issued to the Borrower not less than 3 Business Days in advance and the Transferee has accepted the transferor's obligations under this Agreement.

 

	  	
17.2.2

	
A Lender will be entitled, at any time, to reveal Information, (as defined hereunder) regarding a transfer transaction to any person or entity that corresponds to the definition of a "Transferee" when the Lender is conducting or is likely to be conducting with it, negotiations to implement a transfer transaction. Furthermore, such Lender will be entitled to reveal Information to anyone advising him and/or anyone on behalf of such person or entity and to companies involved in [the field of] credit rating, for the purpose of rating the rights. Disclosure of Information will be subject to the recipient of the Information signing a confidentiality undertaking, in a form that is acceptable to the Lenders and to the Borrower. For the purpose of this Section, "Information" means - any information currently in the Lender's possession or that is likely to be in its possession in the future, including information that is passed to the Lender by the Borrower, which, in the Lender's opinion, is essential or desirable to be passed regarding the transfer transaction, including information regarding the Credit, the Loans and any other banking service given or to be given to the Borrower, information on the liens and Securities given or to be given to secure [the Loans] and information regarding the Borrower.

 

	  	  	
It is hereby agreed that notwithstanding the aforesaid, the Lender will be entitled to transfer this Agreement to others without a confidentiality undertaking needing to be signed.

 

	  	
17.2.3

	
In the event of a transfer of part of the rights of one of the Lenders, the proportion of the relevant Rate of Participation of such Lender between it and the Transferee will be pro rata.

 

  

  

  

 

	  	
17.3

	
Third parties

 

This Agreement is not intended to impart, does not impart and shall not be interpreted as imparting, any right whatsoever to a person who is not a party to this Agreement, even though it is specifically referred to by name in this Agreement for any purpose whatsoever. None of this Agreement's provisions shall be interpreted as applying to the benefit of any person who is not a party to this Agreement.

 

	
18.

	
Expiration of the validity of the Agreement

 

If, by and including 22.6.2010, the prior conditions for the provision of the Credit have not all been fulfilled, this Agreement will be void ab initio , without the requirement for any action on the part of any of the parties hereto. In such event, as of the date of expiration, the Lenders will not be obliged to provide the Credit to the Borrower under this Agreement and all those actions taken up to such date, to the extent taken, will be annulled ab initio , and no party will have any claim or demand in respect thereof against the other parties.

 

	
19.

	
Miscellaneous

 

	  	
19.1

	
The Borrower agrees that the Lenders and the Bank Coordinator may share any information regarding it amongst and between themselves, including any document that any one of the Lenders or the Bank Coordinator receives or any information regarding its commercial situation or its financial situation, and there will be no contention in respect thereof.

 

	  	
19.2

	
In the event that a provision from the Credit Documents' provisions is determined to have been rescinded, is unlawful or unenforceable, this will not affect the validity of the remaining provisions in the Credit Documents.

 

	  	
19.3

	
Any notice sent by one of the parties to any of the others, will be considered to have reached its destination on the date of hand delivery, one Business Day after delivery by facsimile – on condition that confirmation of its receipt has been confirmed by telephone, or within three Business Days from the date on which it is sent by registered mail.

 

The parties' addresses for the purpose of this Agreement will be as specified hereunder (unless advised otherwise):

 

To the Lenders:

 

	
Bank Leumi L'Israel Ltd.

Attention: Head of Communications Department

Tel: 03-514-8398

Fax: 03-514-9017

Address: Yehuda Halevi 34, Tel-Aviv

 

	
Bank Discount L'Israel Ltd.

Attention: Business Manager

Tel: 03-514 4724

Fax: 03 -514-4053

Address Yehuda Halevi 23, Tel Aviv

	
Bank Coordinator

	  
	
Bank Coordinator – Bank Leumi L'Israel Ltd.

Attention: Head of Communications Department

Tel: 03-514-8398

Fax: 03-514-9017

Address: Yehuda Halevi 34, Tel-Aviv

 

	  

 

  

  

  

 

The Borrower:

 

Attention: Deputy Finance Director

Tel: 072-2002021

Fax: 072-2002060

Address: Hasivim 25, Petach Tikvah, 49170

 

	  	
19.4

	
This Agreement may be signed on one page containing the signatures of all the parties, and may be signed on separate pages which, when attached to this Agreement, will, together, constitute the parties' valid signing thereon.

 

	  	
19.5

	
The Credit Documents will be governed by the laws of the State of Israel and the courts of Tel-Aviv-Jaffo will have exclusive jurisdiction.

 

	  	
19.6

	
This Agreement will be considered as a draft by all the parties.

 

	  	
19.7

	
This Agreement and the Credit Documents contain, embody, merge and cause all the conditions agreed upon by the parties. No pledges, agreements, written or verbal, undertakings or representations in connection therewith, given or made by the parties prior to the date of executing this Agreement, shall increase the parties' obligations and rights as set out in this Agreement and the other Credit Documents or arising therefrom, or derogate from or change them, and the parties will not be bound by them as of the date of signing this Agreement.

 

IN WITNESS WHEREOF the parties have validly signed on the date set out in the preamble to this Agreement

 

	
Bank Leumi L'Israel Ltd.

 

By: /s/ Rina Vahaba

       /s/ Gadi Sivani

 

 

	
Bank Discount L'Israel Ltd.

 

By: /s/ Natalia Hagendorf

       /s/ Orit Alster  

 

 

 

 

	
Bank Coordinator - Bank Leumi L'Israel Ltd.

 

By: /s/ Rina Vahaba

/s/ Gadi Sivani

                                                                                    

	
012 Smile Telecom Ltd.

 

By: /s/ Irit Eluz

       /s/ Yoram Firon

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