Document:

exhibit_4-28.htm

Exhibit 4.28

 

	
UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

Deed of Trust

 

The date of which is the 30th in December of 2013

 

By and between:          Ellomay Capital Ltd.

52-003986-8

of 9 Rothschild Boulevard, Tel Aviv

(hereinafter: the “Company”)

 

Of the first part;

 

And:                               Hermetic Trust (1975) Ltd.

51-070519-7

of 113 Hayarkon Street, Tel-Aviv

(hereinafter: the “Trustee”)

 

Of the second part;

 

Indicating that:

 

	
Whereas:

	
the Company’s Board of Directors resolved on December 25, 2013 to approve the issuance of the Debentures (as hereinafter defined), the terms of which are as set forth in this Deed of Trust and which shall be offered to the public by the Prospectus (as hereinafter defined);

 

	
And whereas:

	
the Trustee is a company limited by shares that was incorporated in Israel in 1975 according to the Companies Ordinance, whose main object is to engage in trusts, and it meets the eligibility requirements established by law, and in particular the requirements of the Securities Law (as hereinafter defined) to be a trustee of debentures;

 

	
And whereas:

	
the Trustee declared that there is no hindrance according to the Securities Law or any other law barring it from entering into this Deed of Trust with the Company and that it meets all of the demands and eligibility requirements set forth in the Securities Law to serve as Trustee for the issuance of the Debentures;

 

	
And whereas:

	
the Company has made a request to the Trustee that he shall serve as Trustee for the holders of  the Debentures and the Trustee has agreed, all subject to and in accordance with the terms of this Deed of Trust;

 

Therefore it was agreed, declared and stipulated by and between the parties as follows:

 

	
1.

	
Preamble; Interpretation; Definitions and Entry into Force

 

	
  

	
1.1.

	
The preamble of this Deed of Trust and the appendixes attached to it constitute a material and inseparable part hereof.

 

	
  

	
1.2.

	
The division of this Deed of Trust into sections and providing titles to the sections was made for convenience and as place-holders only and they should not be used for the purpose of interpretation.

 

	
  

	
1.3.

	
Anything mentioned in this Deed of Trust in plural shall also refer to singular and vice versa, anything mentioned in the masculine shall also refer to the feminine and vice versa, and anything mentioned regarding a person shall also refer to a body corporate, provided that this Deed does not contain any provision otherwise whether express and/or implied and/or if the contents of the matter or its context do not require otherwise.

 

  

  

  

 

	
UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

	
  

	
1.4.

	
In any matter that was not mentioned in this Deed of Trust and in any case of a contradiction between the provisions of the Israeli law and this Deed of Trust, the parties shall act in accordance with the provisions of the Israeli law. In any event of a contradiction between the Deed of Trust and the provisions described in the Prospectus with respect to this Deed of Trust and the provisions of this Deed of Trust, the provisions of this Deed of Trust shall prevail.

 

	
  

	
1.5.

	
In this Deed of Trust the following expressions shall have the meaning written at their side:

 

	
  

	
1.5.1.

	
“Debentures (Series A)” or the “Debentures” or “Outstanding Debentures” or “Certificates of Undertaking”: Debentures (Series A) of the Company, registered, which will be issued according to the Prospectus, and have not been fully paid or expired or cancelled.

 

	
  

	
1.5.2.

	
“A Person that has a Control Relationship with the Company”: a person that controls the Company, his family member and a body corporate that is under the control of any of them and/or a subsidiary of the Company, however except for the Company itself. With respect to this definition, “Control” as defined in the Law.

 

	
  

	
1.5.3.

	
“Meeting” or “Debenture Holders Meeting”: a meeting of Debenture Holders, including a meeting of a class of Debenture Holders.

 

	
  

	
1.5.4.

	
“Deferred Debenture Holders Meeting”: a Debenture Holders Meeting that was deferred to another time than the one scheduled for opening the Meeting, as a legal quorum was not present at the end of a half hour after the time that was scheduled for the beginning of the Meeting.

 

	
  

	
1.5.5.

	
“Stock Exchange”: the Tel-Aviv Stock Exchange Ltd.

 

	
  

	
1.5.6.

	
“Collaterals”: Any pledge on assets, guarantee or any other undertakings that secure the undertakings of the Company towards the Trustee and/or the Debenture Holders whether given by the Company and/or any third party.

 

	
  

	
1.5.7.

	
“Immediate Report”: A report of the Company that is submitted in accordance with the provisions of the Securities Regulations (Periodical Reports and Immediate Reports of a Foreign Corporation), 5761-2001.

 

	
  

	
1.5.8.

	
The “Law” or the “Securities Law”: The Securities Law, 5728-1968 and the regulations according to it, as they shall be from time to time. It is clarified that as of the date of this Deed of Trust the Company reports according and is subject to the provisions of Chapter E’3 of the Law.

 

	
  

	
1.5.9.

	
“Nominee Company”: as defined in the Law.

 

	
  

	
1.5.10.

	
“Trading Day”: a day on which trade is conducted on the Stock Exchange.

 

	
  

	
1.5.11.

	
“Business Day”: Sundays-Thursdays, in which a majority of the banks in Israel are open for performing transactions with the public, except for official holidays and days of rest in Israel.

 

	
  

	
1.5.12.

	
“Magna”- the Electronic Proper Disclosure System of the Securities Authority.

 

  

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UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

	
  

	
1.5.13.

	
Deleted.

 

	
  

	
1.5.14.

	
Deleted.

 

	
  

	
1.5.15.

	
Deleted.

 

	
  

	
1.5.16.

	
“Holder” or “Debenture Holder”: as this term is defined in the Securities Law.

 

	
  

	
1.5.17.

	
“Registrar”: Registrar of Debenture Holders as mentioned in section 28 of this Deed.

 

	
  

	
1.5.18.

	
“Trustee”: The First Trustee (as hereinafter defined) and/or anyone that shall serve from time to time as Trustee of the Debenture Holders according to this Deed.

 

	
  

	
1.5.19.

	
“First Trustee” Hermetic Trust (1975) Ltd. that shall serve as Trustee up to the date set forth in section 2.3 hereafter.

 

	
  

	
1.5.20.

	
“Office Holder”: as defined in the Companies Law, 5759-1999.

 

	
  

	
1.5.21.

	
“Principal”: the par value of the Debentures that are in circulation.

 

	
  

	
1.5.22.

	
“Control” as this term is defined in the Law.

 

	
  

	
1.5.23.

	
“This Deed” or “Deed of Trust”: This Deed of Trust including the appendixes attached to it and that constitute a material and integral part hereof.

 

	
  

	
1.5.24.

	
“Debenture Certificate”: The Debenture certificate the version of which is attached as Appendix 2.1 of this Deed of Trust.

 

	
  

	
1.5.25.

	
“Prospectus”: the prospectus of the Company that shall be published in December 2013 for issuing the Debentures and any later Prospectus according to which additional Debentures (from Series A) shall be issued.

	
  

	 	 

	
2.

	
Issuing the Debentures; the Terms of Issuance; Equal Ranking

 

	
  

	
2.1.

	
The Company shall issue a series of Debentures (Series A) under the terms set forth in Appendix 2.1. If after the date of the first issuance of the Debentures (Series A) this same series of Debentures shall be expanded by the Company, the Holders of the Debenture (Series A) that shall be issued in the framework of the expansion of that series shall not be entitled to receive payment on account of the Principal and/or interest for these Debentures that the record date for payment thereof shall be before the date of their issuance as mentioned.

 

	
  

	
2.2.

	
The Company shall be entitled or required, as the case may be, to perform an early redemption of the Debentures in the event the terms set forth in section 8 of the Deed of Trust have been fulfilled.

 

	
  

	
2.3.

	
The Debentures shall all be set at an equal security ranking pari passu between them with respect with the Company’s undertakings according to this Deed of Trust, and without a preferred right or right of priority over one another.

 

  

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UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

	
3.

	
Appointment of the Trustee; Commencement of Term; Period of Term ofin Service of the Trustee; Expiration of the Term of Service of the Trustee; Resignation; Dismissal; the Duties of the Trustee; the Powers of the Trustee

 

Appointment of Trustee

 

	
  

	
3.1.

	
The Company hereby appoints the Trustee as the First Trustee for the Debenture Holders by virtue of the provisions of Chapter E’1 of the Securities Law including for those entitled to payments by virtue of the Debentures that were not paid after the date for their payment arrived.

 

	
  

	
3.2.

	
If the Trustee shall be replaced by another Trustee, the other Trustee shall be Trustee for the Debenture Holders by virtue of Chapter E’1 of the Securities Law including for those entitles to payments by virtue of the Debentures which were not paid after the date for their payment arrived.

 

Commencement of Term;

 

	
  

	
3.3.

	
The Trust for the Debenture Holders and the duties of the Trustee according to this Deed of Trust shall come into force upon the issuance of the Debentures by the Company.

 

Period of Term of Service of the Trustee; Expiration of Term of Service of the Trustee, Resignation; Dismissal

 

	
  

	
3.4.

	
The First Trustee shall serve commencing onthe date mentioned in section 3.3 above and its term of service shall end at the time that the Debenture Holders Meeting is convened (the “First Appointment Meeting”), that the Trustee shall convene no later than 14 days after submitting the annual report regarding Trusteeship matters according to section 35H1(a) of the Law. Insofar as the First Appointment Meeting (by ordinary majority) approved the continuation of the term of service of the First Trustee, it shall continue to serve as Trustee until the end of the additional appointment period that was determined in a resolution of the First Appointment Meeting (which could be until the final repayment date of the Debentures).

 

Insofar as the First Appointment Meeting and/or any later Meeting determined the term in office of the Trustee, its term of service shall end with the adoption of a resolution of the Debenture Holders regarding the termination of his term of service and the appointment another Trustee in his place.

 

	
  

	
3.5.

	
Notwithstanding everything stipulated in section 3 the provisions of the Law shall apply to the appointment of the Trustee, his replacement, term of service, expiration, resignation and dismissal.

 

The Trustee’s Duties

 

	
  

	
3.6.

	
In addition to the provisions of the Law and without derogating from them, the duties of the Trustee shall be those mentioned in Appendix 3 of this Deed of Trust, and according to the law.

 

	
  

	
3.7.

	
The Trustee entering into this Deed of Trust is as an agent on behalf of the Debenture Holders.

 

The Trustee’s Powers

 

	
  

	
3.8.

	
The Trustee shall represent the Holders of the certificates of undertaking in any matter that arises from the undertakings of the issuer towards them, and it shall be entitled for this purpose to act in order to realize the rights given to the Debenture Holders according to the Law or according to this Deed.

 

  

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UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

	
  

	
3.9.

	
The actions of the Trustee are valid notwithstanding a flaw discovered in its appointment or qualifications.

 

	
  

	
3.10.

	
The Trustee shall use the powers, permissions and authorities that were conferred upon him according to this Deed of Trust, according to its discretion or in accordance with the resolutions of a Meeting.

 

	
  

	
3.11.

	
The Trustee shall be entitled to deposit all of the deeds and the documents that indicate, represent and/or stipulate its rights with respect with the trust pertaining to his Deed of Trust, including with respect to any asset that is in its possession at that time, in a safe and/or in another place that shall be chosen and/or at any bank and/or any banking auxiliary corporation and/or lawyer and/or accountant.

 

	
  

	
3.12.

	
The Trustee shall be entitled in the framework of performing the Trusteeship matters according to this Deed of Trust, to order an opinion and/or the advice of any lawyer, accountant, appraiser, assessor, surveyor, broker or any other expert. The Trustee is entitled to act according to an opinion or advice that was given by such person whether the opinion and/or advice was prepared at the Trustee’s request or at the Company’s request or anyone on its behalf or for it, and the Trustee shall not be required to pay and an offset shall not be performed from any money that is due to it with respect to any loss or damage that shall occur as a result of any action and/or omission that were made by it based on such advice or opinion as aforesaid, unless it was determined in a final judgment that the Trustee acted maliciously or in negligence in respect of which the Trustee is not exempted by law as shall be from time to time. The Company undertakes to bear, including in advance, the entire reasonable cost that is involved in employing any such expert that shall be appointed by the Trustee provided that the Trustee shall give the Company an advance notice of its intention to receive an expert opinion or advice as aforementioned with details of the expert’s fees and the purpose of the opinion (and regarding providing notice of the purpose of the opinion, provided that in the Trustee’s opinion this shall not harm the rights of the Debenture Holders), and the Company did not notify the Trustee in writing, within 3 Business Days, of its objection. The Company shall not object to the appointment of an expert or agent on behalf of the Trustee other than for reasonable reasons.

 

Any advice and/or opinion such as this can be given, sent or received by letter, telex, facsimile and/or any other electronic means for transferring information and the Trustee may act based on them, even if it turns out afterwards that errors and/or changes occurred in them including as a result of sending them or receiving them by such means, unless the errors could have been discovered by reasonable examination.

 

	
  

	
3.13.

	
The Trustee shall be entitled to give its consent or approval to any motion to the court that comes according to the demand of a Debenture Holder, and the Company shall compensate the Trustee for all reasonable costs that were incurred by such motion and from actions performed as a result of it or with respect to it provided that before makink such expense as abovementioned the Trustee will update the Company regarding its intention to make such expense and will receive the Company’s approval for this unless in the opinion of the Trustee such prior update as aforementioned could harm the rights of the Debenture Holders.

 

	
  

	
3.14.

	
The Trustee is entitled to institute any proceeding for protecting the rights of the Debenture Holders as set forth in section 10 below.

 

  

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UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

	
  

	
3.15.

	
The Trustee is entitled to appoint agents as set forth in section 24 of this Deed. The representing body of the Debenture Holders, insofar as will be appointed, is an agent of the Trustee from the time of its appointment.

 

	
4.

	
Purchasing Debentures by the Company or by a Person that has a Control Relationship with the Company

 

	
  

	
4.1.

	
Without derogating from the Company’s right to redeem the Debentures by early redemption as set forth in this Deed, the Company reserves the right to purchase at any time, whether on the Stock Exchange or outside of the Sock Exchange, Debentures at any price and quantity that it shall see fit, without harming the duty of repayment of the remaining outstanding Debentures. In the event of such purchase by the Company, the Company shall notify this in an Immediate Report.

 

The Debentures that shall be purchased by the Company shall immediately expire upon their purchase, they shall be delisted from trade on the Stock Exchange subject to the rules of the Stock Exchange, they shall be cancelled by the Company, and the Company shall not be entitled to re-issue them.

 

	
  

	
4.2.

	
Any person shall be entitled to purchase and/or sell Debentures at any time and from time to time, including in the event of an issuance by the Company. The Debentures that are held by a Person that has a Control Relationship with the Company shall be considered as the asset of that person, shall not be delisted from trade on the Stock Exchange and they shall be transferable as the other Debentures of the Company (subject to the provisions of the Deed of Trust and the Debenture), however as long as they are held by that person, they shall not confer upon that person the right to vote in any Debenture Holders Meeting, they shall not be taken into account for determining the existence of a legal quorum, and they shall not be included in the “balance of the par value of the outstanding Debentures” with respect to voting and the count of those present and the votes in Meetings and in class Meetings.

 

	
5.

	
Issuance of Debentures from New Series; Increasing a Series

 

	
  

	
5.1.

	
The Company shall be entitled to issue at any time, whether by an offering to the public according to a prospectus or in any other manner, and without needing the consent of the Trustee and/or the Debenture Holders or giving a notice to any of them of this, including to a Person that has a Control Relationship with the Company, debentures of other series beyond the Debenture series (the “Other Series”), under terms of redemption, interest, linkage, priority of payment in the event of liquidation and other terms, as the Company shall see fit, and whether they are preferable over the terms of the Debentures, equal to them or inferior to them, and this without derogating from the duty of repayment imposed on it, and provided that the Company shall not issue additional series of debentures which are not secured by a pledge and which have any preference at the time of liquidation in relation to the Debentures (Series A).

 

	
  

	
5.2.

	
The Company shall not be entitled to issue, whether by issuance to the public according to a prospectus, and whether in any other manner, additional Debentures of Series A, unless all of the terms set forth in Appendix 5.2 of this Deed have been fulfilled or after receiving the approval of the Debenture Holders Meeting.

 

All of the provisions of the Deed of Trust that apply to the outstanding Debentures shall apply to additional Debentures of Series A that shall be issued, as mentioned. For the removal of doubt, the Holders of additional Debenture of Series A, which shall be issued as mentioned, shall not be entitled to interest for periods of time that have passed before they were issued (it is clarified, in this respect, that in the event that additional Debentures of Series A shall be issued, after any time that entitlement has been stipulated in this Deed to the payment of interest, the interest for them shall be paid at the next payment date of interest, after the date of their issue, for the period from the date of their issue, at a relative amount from the payment of interest paid for the Debentures at that time, that is equal to the ratio between the period that passed from the time of their issue and between the original period for which the interest is paid at that time).

 

  

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UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

	
  

	
5.3.

	
Without derogating from the right of the Company to issue additional Debentures of Series A at a different discount rate than the discount rate of the outstanding Debentures at that time and subject to the Company meeting the terms in section 5.2 above, the Company reserves for itself the right to issue additional Debentures of Series A, in the framework of increasing the Series according to section 5.2 above, at a higher discount rate than the discount rate of the outstanding Debentures at that time. In the event of such increase, the Company shall calculate the weighted discount rate for all the Debentures from the Series After increasing the Series, it shall publish in an Immediate Report the weighted discount rate for the entire series of Debentures and the members of the Stock Exchange shall deduct tax at the payment dates of the Debentures according to the weighted discount rate as mentioned an in accordance with the provisions of the law. If an approval of the tax authorities regarding such discount rates shall not be received, the Company shall notify in an Immediate Report, immediately after issuing the Debentures as a result of increasing the series, the highest discount rate that was created for the series. The members of the Stock Exchange shall deduct withholding tax at the time of repayment of the outstanding Debentures, in accordance with the discount rate that shall be reported as aforementioned. Therefore, there could be cases where the Company shall deduct withholding tax for discount fees, at a higher rate than the discount fees determined to whoever held Debentures before the series was increased. In this case, it is the responsibility of the Debenture Holder (and the Debenture Holder only) who held the Debentures before the series was increased and until their repayment who is entitled, with their payment, to a refund of tax that was deducted at source, for the over-discount,  to approach the tax authority in this matter insofar as he shall wish to receive a tax refund.

 

This right of the Company does not exempt the Trustee from examining the issuance as aforementioned, and this is insofar as such duty is imposed on the Trustee according to any law, and it cannot derogate from the Trustee’s rights and the rights o the Debenture Holders according to this Deed, including their right to declare the Debentures immediately payable as mentioned in section 9 hereafter or in accordance with the provisions of any law.

 

	
  

	
5.4.

	
The Company shall notify in an Immediate Report regarding the issuance of debentures as mentioned in this section above.

 

  

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UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

	
6.

	
The Company’s Undertakings

 

The Company hereby undertakes towards the Trustee and the Debenture Holders, for as long as the Debentures were not fully paid (including the linkage differences on them), and for as long as all the undertakings towards the Debenture Holders and the Trustee were not fulfilled according to this Deed, as follows:

 

	
  

	
6.1.

	
To pay, at the times scheduled for this, the sums of the Principal, the interest and the linkage differences, insofar as these shall apply, which shall be paid according to the terms of the Debentures, and to fulfill all the other terms and undertakings that are imposed on it according to the terms of the Debentures and according to this Deed of Trust.

 

	
  

	
6.2.

	
To fulfill all of the financial terms and undertakings set forth in Appendix 6.2 to this Deed including with respect to the limitation regarding the distribution of dividends and regarding the rating of the Company.

 

	
  

	
6.3.

	
Deleted.

 

	
  

	
6.4.

	
To immediately notify the Trustee in writing of a reasonable concern of the Company that all or any of the events set forth in section 9.1 hereafter will occur or that there is a reasonable concern that the Company shall not have the ability to meet its existing and expected undertakings when the time to perform them arrives.

 

	
  

	
6.5.

	
To deliver to the Trustee no later than the end of 30 days after the date of this Deed of Trust, a clearing schedule for paying the Debentures (Principal and interest) in an Excel file.

 

	
  

	
6.6.

	
To notify the Trustee in a written notice signed by the senior Office Holder in the Company’s finances, within 4 Business Days from the date of payment, of any payment to the Debenture Holders and of the balance of the sums that the Company owes at that time to the Debenture Holders after making the aforementioned payment.

 

	
  

	
6.7.

	
To deliver to the Trustee annual financial statements or quarterly financial results, as the case may be, and in accordance with the requirements of the law that apply to the Company from it being a dual listed Company, at the time of their publication and in any event no later than from the time scheduled for this in the law to publish them (also in the event that the Company shall stop being a public or reporting Company then it shall report in accordance with the provisions of the Law that apply to the Company at the time of signing this Deed of Trust). Notwithstanding the forgoing, it is clarified that the quarterly financial results shall be published by the end of the following quarter.

 

	
  

	
6.8.

	
Deleted.

 

	
  

	
6.9.

	
To deliver to the Trustee notices regarding the purchase of Debentures by the Company or A Person that has A Control Relationship with the Company immediately upon the Company becoming informed of this.

 

	
  

	
6.10.

	
Each 31st of December of each year, and for as long as this Deed is in effect, the Company shall furnish to the Trustee a confirmation signed by the chairman of the board of directors of the Company that according to his best knowledge and in reliance on the examination that he has performed, in the period starting from the date of the Deed and/or from the date of the prior confirmation that was given to the Trustee, whichever is later, and until the date of the confirmation, the Company has not breached this Deed, including a breach of the terms of the Debenture, unless it was expressly mentioned otherwise.

 

	
  

	
6.11.

	
To deliver to the Trustee copies of the notices and invitations which the Company shall give to the Debenture Holders, as mentioned in section 26 hereafter.

 

  

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UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

	
  

	
6.12.

	
To cause that a senior Office Holder in financial matters in the Company shall give, within a reasonable time, to the Trustee and/or to the people who the Trustee shall order, any explanation, document, calculation or information regarding the Company, its business and/or assets that shall be required in a reasonable manner, according to the Trustee’s discretion, for fulfilling the Trustee’s duties and for protecting the rights of the Debenture Holders.

 

	
  

	
6.13.

	
To manage systematic accounting books in accordance with acceptable accounting principles. To keep the books and documents that serve as proof to them (including deeds of pledge and mortgage, bills and receipts).

 

	
  

	
6.14.

	
To inform the Trustee, immediately upon becoming informed, of any case in which a lien shall be imposed on its assets, all or in part, and in any event that a receiver is appointed to its assets, all or in part, and to report of the means that it took in order to remove such lien or cancel the receivership.

 

	
  

	
6.15.

	
To summon the Trustee to all of its general meetings (whether if to annual general meetings or whether to special general meetings) of the shareholders in the Company, without granting the Trustee the right to vote in these meetings.

 

	
  

	
6.16.

	
To deliver to the Trustee on the 15th of each January starting from 2015, a written approval signed by the senior Office Holder in the finance field, that all of the payments to the Debenture Holders were fully paid on time, and the balance of the par value of the outstanding Debentures.

 

	
  

	
6.17.

	
In addition to the statements or notices which the Company is required to give according to section 35J(a) of the Law, to give the Trustee, according to his demand, an affidavit and/or declerations and/or documents and/or details and/or information, as these shall be required by the Trustee, in a reasonable manner in order to protect the rights of the Debenture Holders.

 

	
  

	
6.18.

	
To perform all of the actions required and/or reasonably needed and in accordance with the provisions of this Deed and any law for validating the exercise of powers, authorities and authorizations of the Trustee and/or of its delegates in accordance with the provisions of this Deed of Trust.

 

	
  

	
6.19.

	
To list the Debentures for trade in the Stock Exchange and to act so that the Debentures shall continue to be listed for trade on the Stock Exchange until the date of their final repayment.

 

	
  

	
6.20.

	
To assist the Trustee in any reasonable manner to fulfill its duties according to law and/or according to this Deed including examining the performance of the Company’s undertakings in full and on time, examining actions and/or transactions that the Company performed, insofar as this is reasonably required in order to protect the rights of the Debenture Holders.

 

Any report or information that shall be published by the Company in the Magna system shall be considered as a report or information or summons, as the case may be, which was given to the Trustee in accordance with the provisions of this section. Notwithstanding the aforesaid, at the request of the Trustee, the Company shall transfer a printed copy of the report or information as mentioned.

 

See section 18 hereafter with respect to the confidentiality undertaking that applies to the Trustee.

 

  

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UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

	
7.

	
Not Securing the Debentures; Negative Pledge

 

	
  

	
7.1.

	
The Debentures are not secured by any pledge or any other collateral. The status of the Debenture Holders is the status of unsecured creditors of the Company, with all that this entails.

 

	
  

	
7.2.

	
Except as set forth in section 7.4 hereafter, the Company shall be entitled from time to time, to sell, pledge, lease, assign, deliver or transfer in any other manner its assets all or in part, in any manner, in favor of any third party, without the need for the Trustee’s and/or the Debenture Holders’ consent, but subject to the duties of the Company to report with respect to the aforesaid, as these are determined in the Deed of Trust or according to law.

 

	
  

	
7.3.

	
The Debentures issued under a certain series shall be equal in priority (pari passu) between them, without any right of preference or priority of one over the other.

 

	
  

	
7.4.

	
Notwithstanding the aforesaid in section 7.2 above, for as long as the Debentures (Series A) have not yet been fully repaid in any manner, including by way of a self purchase and/or early redemption, the Company undertakes not to create a floating charge on all of its assets in favor of any third party to secure any debt or undertaking and this is as opposed to a fixed charge or floating charge on a certain asset or a floating charge on a certain number of assets that the Company may create. Notwithstanding the aforesaid, the Company shall be entitled to create a floating charge on all of its assets in favor of a third party, in each one of the following cases:

 

	
  

	
7.4.1.

	
A receipt in advance of the consent of the Debenture Holders (Series A), which shall be adopted in the Meeting of the Debenture Holders (Series A) in which Debenture Holders (Series A) that hold themselves, or by their proxies, at least 50% of the balance of the par value of the outstanding Debentures (Series A) were present, by a majority of the Holders at least two thirds (2/3) from the balance of the par value of the Debentures (Series A) that is represented by a vote, or by a majority as aforementioned in a deferred meeting, in which the Debenture Holders that hold themselves or by their proxies at least twenty percent (20%) of this balance were present.

 

	
  

	
7.4.2.

	
Without the need to receive the consent of the Debenture Holders or the Trustee, and provided that together with creating the floating charge on all of its assets in favor of the third party, a floating charge shall be created on all of its assets also in favor of the Holders of Debentures (Series A) of the same priority, pari passu, which shall remain in force up to the date of removing the charge which shall be registered in favor of the third party, and this is as long as outstanding Debentures (Series A) shall exist (in other words as long as they were not fully paid or removed in any manner, including by way of a self purchase and/or early redemption).

 

For the removal of doubt, it is emphasized that the Company has the right, at any time (subject to the restrictions according to any law and/or any other agreement that the Company is party to), to pledge its assets, including its rights, all or in part, by any other pledge except for a floating charge on all of its assets, including, but not only, fixed pledges, including the creation of floating charges on specific assets, one or more, of the Company with respect to creating these charges (and bank accounts that can be pledged by a floating charge even without a fixed charge) and it is clarified that these fixed charges and/or floating charges shall be detracted from the applicability of a floating charge insofar as this shall be imposed according to the provisions of this sub-section above. Except for the aforesaid no restrictions shall apply to the Company in imposing all kinds of charges on its assets. It is further clarified, for the removal of doubt, that this clause cannot restrict the companies held by the Company (including subsidiaries and associated companies) from creating any charges, floating or fixed, on their assets, including on all of their assets.

 

  

- 10 -

  

 

	
UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

	 	 	
As of the date of signing this Deed, there is no floating charge in favor of a third party on all of the Company’s assets. As of the date of signing this Deed there are charges on the assets of the subsidiaries of the Company in the framework of project financing and additional pledges to Discount Bank as set forth in Item 5 of the annual report which the Company filed with the US Securities and Exchange Commission on the 25th of March 2013 and in the Company’s financial statements as at June 30, 2013 that were published on the December 26, 2013.

 

If and insofar as a floating charge shall be given as a security, as mentioned in section 7.4 above, the following provisions shall apply:

 

	
  

	
a)

	
The existence of a cause to declare the Debentures immediately payable and/or the realization of Collaterals is a preliminary condition to realizing a floating charge as mentioned.

 

	
  

	
b)

	
The Trustee shall be entitled to enforce a floating charge before immediate repayment has been declared for the Debentures, in accordance with section 35J1 of the Law or subject to adopting a decision of performing realizations in a resolution that shall be adopted by the Meeting of the Debenture Holders in accordance with the provisions of section 9.7 of this Deed.

 

	
  

	
c)

	
In enforcing the floating charge the Trustee shall make an effort so that the realization shall be performed in a manner that is expected according to the Trustee’s reasonable assessment to maximize the realization consideration from the floating charge and for this purpose the Trustee shall be entitled, subject to law, to determine the manner of enforcing this floating charge and the time when the floating charge should be enforced (hereinafter: the “Manner of Enforcing the Collaterals”).

 

Without derogating from any right that the Trustee has according to any law, the Trustee shall be entitled to receive instructions with respect to the Manner of Enforcing the Collaterals also by a resolution that shall be adopted in a Meeting of the Debenture Holders (Series A) in which Debenture Holders (Series A) that hold at least 50% of the balance of the par value of the outstanding Debentures (Series A) were present, themselves or by their proxies, by a majority Debenture Holders holding at least two thirds (2/3) of the balance of the par value of the Debentures (Series A) that is represented in the vote, or by such majority in a deferred meeting, in which Debenture Holders that hold at least twenty percent (20%) of this balance were present, themselves or by their proxies, and on its agenda is the giving of instructions to the Trustee regarding the Manner of Enforcing the Collaterals. The Meeting of the Debenture Holders as mentioned, shall be entitled to authorize a representing body of the Debenture Holders for advising the Trustee regarding the Manner of Enforcing the Collaterals.

 

  

- 11 -

  

 

	
UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

	 	
 

	

In any event in which the Company shall create a charge as mentioned in this sub-section in favor of the Debenture Holders, and this is a charge that requires registration in the Registry of Charges that is administered at the Registrar of Companies for its perfection, the charge shall be considered as legally registered only after the Company has furnished to the Trustee all the following documents:

 

	
  

	
1)

	
A charge document according to which the charge was registered in favor of the Trustee, bearing an original signature by the Company and stamped with an original  “received” stamp by the office of the Registrar of Companies, and bearing a date which is not later than twenty one (21) days after the signature date on the charge document;

 

	
  

	
2)

	
A notice of details of mortgages and pledges (form 10) signed with an original “received” stamp from the office of the Registrar of Companies, which bears a date that is not later than twenty one (21) days after creating the notice;

 

	
  

	
3)

	
An original pledge registration certificate from the Registrar of Companies;

 

	
  

	
4)

	
An extract of the pledges from the Registrar of Companies according to which this charge was registered;

 

	
  

	
5)

	
An affidavit of a senior Office Holder in the Company that the charge does not contradict or it is not in contradiction to the Company’s undertakings to third parties, all according to the wording that shall be acceptable to the Trustee according to his reasonable discretion;

 

	
  

	
6)

	
An opinion of a lawyer on behalf of the Company, inter alia, with respect to the nature of the rights of the pledging party in the pledged asset, the manner of the pledge registration, its validity, its creditor priority, its legality and it being exercisable and enforceable against the pledging party according to the law that applies in Israel, in the wording that shall be acceptable to the Trustee according to his reasonable discretion, which shall be given to the Trustee each year according to its demand.

 

  

- 12 -

  

 

	
UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

	
8.

	
Early Redemption

 

	
  

	
8.1.

	
Early Redemption Initiated by the Stock Exchange

 

If it is decided by the Stock Exchange to delist the Debentures (Series A) from trade as the value of the series has decreased from the sum that was determined in the Stock Exchange instructions regarding delisting from trade, the Company shall allow early redemption as mentioned of the series due to the delisting from trade of the Debentures as mentioned above, and it shall act as follows:

 

	
  

	
8.1.1.

	
Within 45 days after the decision of the board of directors of the Stock Exchange regarding delisting as aforementioned, the Company shall notify of an early redemption date in which the Holders of Debentures may redeem them. The notice of early redemption shall be published in an Immediate Report that shall be sent to the securities authority and to the Stock Exchange and in two daily and prevalent newspapers in Israel in the Hebrew language and it shall be given in writing to all the registered Debenture Holders.

 

	
  

	
8.1.2.

	
The early redemption date shall occur not before 17 days of the date of publishing the notice and no later than 45 days after this date, however not in a period between the record date for the payment of interest and its actual payment.

 

	 	
  

	
At the early redemption day the Company shall redeem the Debentures that the Debenture Holders requested to redeem. The redemption consideration shall not be less than the sum of the par value of the certificates of undertaking with additional interest that has accumulated until the date of actual payment, as set forth in the terms of the certificates of undertaking.

 

	
  

	
8.1.3.

	
The determination of an early redemption date as mentioned above cannot harm the redemption rights stipulated in the Debentures, of any of the Debenture Holders that shall not redeem them at the early redemption date as mentioned above, however the Debentures shall be delisted from trade on the Stock Exchange and will be subject, inter alia, to the tax implications arising from this.

 

	
  

	
8.1.4.

	
The early redemption of Debentures as mentioned above shall not confer upon any of the Holders of Debentures that shall be redeemed as mentioned the right to the payment of interest for the period after their redemption.

 

	
  

	
8.2.

	
Early Redemption Initiated by the Company

 

The Company may initiate early redemption, full or partial, of the Debentures (Series A) and this is according to its sole discretion and at any time after the Debentures (Series A) of the Company are listed for trade, and in this case the following provisions shall apply:

 

	
  

	
8.2.1.

	
The frequency of the early redemptions shall not exceed one redemption per quarter. With respect to this “quarter” means each of the following periods: January – March, April – June, July – September, and October- December. The minimal scope of each early redemption shall not be less than 1 million NIS. Notwithstanding the aforesaid, the Company shall be entitled to perform an early redemption at a scope which is less than 1 million NIS provided that the frequency of redemptions shall not exceed one redemption per year.

 

	
  

	
8.2.2.

	
Upon adoption of the resolution of the board of directors of the Company regarding the performance of an early redemption as mentioned above, the Company shall publish an Immediate Report with a copy to the Trustee no less than seventeen (17) days and no more than forty five (45) days before the early redemption date. If an early redemption is scheduled in a quarter in which payment of interest is also scheduled, or payment of partial redemption or payment of final redemption, the early redemption shall be performed at the time that was scheduled for payment as mentioned. The early redemption date shall not apply in a period between the record date for the payment of interest for the Debentures and the date of actual payment of interest. The Company shall publish, in the aforementioned Immediate Report, the sum of the Principal that shall be repaid in the early redemption and the interest that has accumulated for it until the date of the early redemption in accordance with the provisions hereafter.

 

  

- 13 -

  

 

	
UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

	 	
  

	
Early redemption shall not be made to part of the series of Debentures if the last redemption sum shall be less than 3.2 million NIS. At the date of a partial early redemption, insofar as shall exist, the Company shall notify in an Immediate Report of: (1) The rate of the partial redemption in terms the unpaid balance; (2) The rate of the partial redemption in terms of the original series; (3) The interest rate in partial redemption of the redeemed part; (4) The interest rate that shall be paid in partial redemption calculated regarding the unpaid balance; (5) Update of the rate of the partial redemptions remaining, in terms of the original series; (6) The record date for entitlement to receive early redemption of the Principal of a Debentures that shall be twelve (12) days before the date scheduled for early redemption (it is clarified that if the record date for entitlement to receive partial redemption shall occur during a quarter during which there is the payment of current interest, the record date for entitlement to receive partial redemptions shall occur on the record date for receiving the payment of current interest that shall be paid during that quarter).

 

	 	
  

	
Partial early redemption shall be performed pari passu for each of the Debenture Holders according to the par value of each held Debenture.

 

	
  

	
8.2.3.

	
The sum that shall be paid to the Debenture Holders in the event of early redemption shall be the highest sum out of the following: (1) the market value of the balance of the outstanding Debentures, which shall be determined according to the average close price of the Debentures in the thirty (30) Trading Days prior to the date the resolution of the board of directors was adopted regarding the performance of early redemption; (2) the undertaking value of the outstanding Debentures that are subject to early redemption, in other words Principal plus interest, up to the date of the actual early redemption; (3) the balance of cash flow of the Debentures that are subject to early redemption (Principal plus interest) while discounted according to the Government Debentures Yield (as defined below) Report plus an annual interest of 1.5% calculated on a daily calculation basis based on 365 days per year. Discounting the Debentures (Series A) that are subject to early redemption shall be calculated commencing from the early redemption date up to the last redemption date that was determined with respect to the Debentures that are subject to early redemption.

 

  

- 14 -

  

 

	
UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

	 	
  

	
With respect to this matter: “Government Debenture Yield” means the average return (gross) for redemption, in a period of seven Business Days, that ends two Business Days prior to the date of notice of early redemption, of three series of governmental debentures whose average duration is closest to the average duration of the Debentures (Series A) at the relevant time.

 

	 	
  

	
The early redemption of the Debentures as mentioned above shall not confer upon a Holder of Debentures that shall be redeemed as mentioned, the right to receive interest for the period after the redemption date.

 

	
9.

	
Immediate Repayment

 

	
  

	
9.1.

	
Upon the occurrence of the causes, conditions and/or circumstances set fort below, the provisions of section 9.3.1 hereafter shall apply:

 

	
  

	
9.1.1.

	
A material worsening has occurred in the Company’s business as compared to its state at the issuance date, and there is a real concern that the Company will not be able to repay the Debentures on time.

 

	
  

	
9.1.2.

	
The Debentures were not repaid on time or another material undertaking provided in favor of the Debenture Holders was not fulfilled, however it shall be possible to declare the Debentures (Series A) immediately repayable due to this, only if the breach was not amended by the end of a period of fourteen (14) days after the date of breach.

 

	
  

	
9.1.3.

	
The Company did not publish a financial statement which it is required to publish according to any law or according to the provisions of this Deed, within 30 days after the last date on which it is obligated publish it. This section shall not apply in the case where the Company shall receive an extension to submit its financial statements from an qualified authority or in accordance with the provisions of this Deed, in such an event this count of days shall begin to be counted commencing from the last date set forth in the aforementioned extension.

 

	
  

	
9.1.4.

	
The Debentures have been delisted from trade on the Stock Exchange in accordance with the provisions of the Stock Exchange bylaws.

 

	
  

	
9.2.

	
Upon the occurrence of the conditions or circumstances set fort below, and provided that a resolution of the Debenture Holders Meeting has been lawfully adopted, the provisions of section 9.3.2 hereafter shall apply upon the fulfillment of the terms or circumstances set forth hereafter,:

 

	
  

	
9.2.1.

	
If a motion was filed for receivership or to appoint a receiver (temporary or permanent) on the Company’s assets, all or most, or if an order shall be given to appoint a temporary receiver – which was not dismissed or cancelled within forty five (45) days after they were filed or granted, respectively; or – if an order was given to appoint a permanent receiver on the Company’s assets, all or most.

 

Notwithstanding the aforesaid, the Company shall not be given any cure period with respect to the motions or orders that were filed or granted, respectively, by the Company or with its consent.

 

	
  

	
9.2.2.

	
(a) If the Company shall file a motion to issue a stay of proceedings or if such order shall be granted as mentioned or if the Company shall file a motion for settlement or arrangement with its creditors according to section 350 of the Companies Law (except for the purpose of a merger with another Company and/or a change in the Company’s structure or split that is not prohibited according to the terms of this Deed, and except for arrangements between the Company and its shareholders that are not prohibited according to the terms of this Deed, and which do not  affect on the Company’s ability to repay the Debentures) or if the Company shall propose in another manner a settlement or arrangement to its creditors, in light of the Company’s lack of ability to meet its undertakings on time; or (b) – if a motion shall be submitted according to section 350 of the Companies Law against the Company (not with its consent) which was not dismissed or cancelled within forty five (45) days after it was submitted.

 

  

- 15 -

  

 

	
UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

	
  

	
9.2.3.

	
If a lien shall be imposed on a Material Asset and except for assets that the finance that was received for them is without recourse to the Company (non–recourse), or if any action shall be performed of execution against any such Material Asset; and the lien was not removed, or the action was not cancelled, respectively, within 45 days after they were imposed or performed, respectively.

 

	 	
  

	
Notwithstanding the aforesaid, the Company shall not be given any cure period with respect to motions filed or given, respectively, by the Company or with its consent.

 

	
  

	
9.2.4.

	
If the Company shall cease to continue to operate and/or manage its business, as these are at the time of this Deed of Trust, and/or it shall notify of its intent to cease from continuing to operate its business as it is at the time of this Deed of Trust, and/or to manage its business. It is clarified that as long as the majority of the Company’s business is in the field of energy it shall be considered as continuing to manage its business.

 

	
  

	
9.2.5.

	
If the two following conditions shall occur, in the aggregate: (a) the rating of the Debentures (Series A) has decreased below ilBBB minus (or an equivalent rating by another rating company, insofar as it shall come in place of the company that rates the Debentures (Series A) at the signature date of this Deed of Trust) and (b) the ratio of the equity to the balance sheet of the Company, on a consolidated basis, shall be less than a rate of 25%.

 

	
  

	
9.2.6.

	
If the Company shall adopt a decision to liquidate (except for liquidation as a result of a merger with another Company as mentioned in section 9.2.16 hereafter) or if a final permanent liquidation order shall be given with respect to the Company by court or a permanent liquidator shall be appointed to it.

 

	
  

	
9.2.7.

	
If a temporary liquidation order shall be given by the court, or a temporary liquidator shall be appointed for the Company, or if any judicial decision of a similar nature shall be granted, and the appointment, the order or the decision as mentioned were not dismissed or cancelled within forty five (45) days after the day on which they were given or from the date the decision was granted, respectively.

 

	 	
  

	
Notwithstanding the aforesaid, the Company shall not be given any cure period with respect to motions or orders that were filed or given, respectively, by the Company or with its consent.

 

  

- 16 -

  

 

	
UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

	
  

	
9.2.8.

	
The Company ceased or notified of its intention to cease conducting its business as this shall be from time to time, and if the Company stopped or notified of its intention to stop its payments (subject to the cure periods insofar as these are included in this Deed of Trust). If the Company shall cease conducting its business as set forth in this section, the Company shall submit an Immediate Report of this.

 

	
  

	
9.2.9.

	
A Material Debt of the Company, or another series of the Company’s debentures, was declared immediately repayable.

 

	
  

	
9.2.10.

	
The Debentures have ceased to be rated and this is for a period exceeding 60 consecutive days, due to reasons and/or circumstances that are only in the Company’s control.

 

	
  

	
9.2.11.

	
The auditors of the Company shall write a going concern note in their report which is attached to the consolidated financial statements of the Company.

	
  

	 	 

	
  

	
9.2.12.

	
Not fulfilling one or more of the financial criteria in Appendix 6.2 of this Deed of Trust at the end of the Examination Period (as defined in Appendix 6.2 of the Deed of Trust), and this non fulfillment was not cured according to its financial statements for the following calendar quarter after the Examination Period, provided that the Company was not given an extension to cure as mentioned in section 27 of the Deed of Trust or in section 17.1.1 of the Deed of Trust (in this section: the “Cure Period”) or, a waiver was not given to the Company for the breach as mentioned in section 27 of the Deed of Trust.

	
  

	 	 

	
  

	
9.2.13.

	
The non fulfillment of its undertakings concerning the distribution of dividends included in Appendix 6.2 of this Deed of Trust.

	
  

	 	 

	
  

	
9.2.14.

	
There is a real concern that the Company shall not meet its material undertakings towards the Debenture Holders.

	
  

	 	 

	
  

	
9.2.15.

	
If the Company shall breach the terms of the Debentures or the Deed of Trust by a fundamental breach or if it will not perform any of its material undertakings within their framework, and the breach was not cured within 14 days after receiving a notice regarding the breach, during which the Company shall act to cure it or if a material representation of the representations of the Company in the Debentures or in the Deed of Trust is discovered to be incorrect and/or not complete, and in the event that this is a breach that can be cured – the breach was not cured within 14 days after receiving a notice regarding the breach, during which the Company shall act to cure it.

	
  

	 	 

	
  

	
9.2.16.

	
If a Merger was performed without receiving a prior approval of the Holders of the Debentures (Series A) by an ordinary majority, unless the Company or the receiving Company declared, as the case may be, towards the Holders of the Debenture (Series A), including via the Trustee, at least ten (10) Business Days before the merger date that there is no reasonable concern that as a result of such merger the Company or the receiving company, as the case may be, would not be able to fulfill its undertakings towards the Holders of the Debentures (Series A).

	
  

	 	 

	
  

	 	
With respect to this section: “Merger” means except for merger between companies that are under the Company’s control, when in this case a declaration of the Company or of the receiving company as mentioned above or a prior approval of the Debenture Holders as mentioned above shall not be required.

 

  

- 17 -

  

 

	
UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

	
  

	
9.2.17.

	
If the Company breached its undertaking not to create pledges as set forth in section 7.4 of this Deed.

	
  

	 	 

	
  

	
9.2.18.

	
A sale was made of most of the Company’s assets; in respect to this section “sale of most of the Company’s assets” means the sale of assets owned by the Company or owned by companies that are consolidated in its financial statements during 6 consecutive months, whose value, after deducting the value of assets that were purchased by the Company or the companies which are consolidated in its financial statements during the same 6 consecutive months period, exceeds percentage rate of 50% of the total assets according its last consolidated financial statements that were published. If a sale was made of most of the Company’s assets as set forth in this section, the Company shall submit an Immediate Report of this.

	
  

	 	 

	
  

	
9.2.19.

	
If the Stock Exchange suspended the trade of the Debentures, except for a suspension due to a cause of the creation of vagueness, as this cause is defined in the fourth part of the Stock Exchange bylaws, and the suspension was not cancelled within sixty (60) Trading Days.

 

	
  

	
9.2.20.

	
In the event the Company shall perform an expansion of the Debenture series (Series A) in a manner that the expansion of the series shall cause a reduction of the rating of the series of Debentures (Series A) or the Company not fulfilling one or more of the financial criteria as set forth in appendix 6.2 of this Deed, without the consent of the Debenture Holders (Series A) as set forth in Appendix 5.2 of this Deed.

	
  

	 	 

	
  

	
9.2.21.

	
If the Company stopped or shall notify of its intention to stop its payments to the Debenture Holders.

	
  

	 	 

	
  

	
9.2.22.

	

If the following three conditions have been fulfilled in the aggregate:

 

	
  

	
a)

	
The percentage of indirect and/or direct holdings of Shlomo Nehama, Ran Fridrich and Hemi Raphael together, or their relatives, as such term is defined in the Companies Law, or corporations under the control, as the case may be, of each of them (hereinafter together referred to as the “Controlling Shareholders”) all together, has decreased below 25% of the issued and paid up share capital of the Company;

 

	
  

	
b)

	
The Controlling Shareholders shall cease to be the largest shareholders in the Company and there is one shareholder that holds himself or together with others a larger quantity of shares in the Company (hereinafter: the “New Controlling Shareholder”); and/or the Controlling Shareholders shall cease to have the actual ability to appoint the largest amount of directors in the Company by themselves;

 

“Holding” and “Holding Securities together with Others” – as defined in the Law.

 

	
  

	
c)

	
As a result of the New Controlling Shareholder joining, the rating of the Debentures has decreased below the rating before the New Controlling Shareholder joined. The Company shall provide the Trustee with confirmation that the rating was not changed as a result of the New Controlling Shareholder joining in proximity to or before transferring the control.

 

If the conditions set forth above in this clause are fulfilled in the aggregate, the Company shall submit an Immediate Report of this.

 

  

- 18 -

  

 

	
UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

For the removal of doubt, it is clarified that the right to declare the Debentures immediately repayable as mentioned above and/or declaring the Debentures immediately repayable cannot derogate from any other or additional remedy that the Debenture Holders (Series A) have or that the Trustee has according to the terms of the Debentures and the provisions of this Deed or according to the law.

 

In this section:

 

“Material Asset” means: an asset whose book value exceeds 50% of the total consolidated assets of the Company according to its last consolidated financial statements that were published.

 

“Financial Statement” means: the last consolidated financial statements of the Company (audited or reviewed) that were published before the time of the event.

 

“Asset” means: an asset of the Company or an asset of a corporation which the holdings of the Company in it constitute a Material Asset of the Company.

 

“Material Debt” means:   a debt of 40 million NIS. It is clarified that declaring the debt for which fixed charges were placed for securing it or  a non- recourse loan immediately payable shall not shall be considered in this respect as a Material Debt.

 

“Debt” means: a financial debt of the Company or a financial debt of a corporation that the holdings of the Company in it constitute a Material Asset of the Company. It is clarified that a non- recourse debt, in other words a debt with no right of recourse to the Company shall not be considered as a Debt.

 

	
  

	
9.3.

	
Upon the occurrence of the causes, conditions and/or the circumstances:

 

	
  

	
9.3.1.

	
That are set forth in sections 9.1.1 – 9.1.4 above, the Trustee alone and the Debenture Holders (Series A) in a resolution of a Meeting that shall be adopted in the manner set forth in section 9.7 hereafter may declare the sum that is due to the Debenture Holders according to the terms of the Debentures immediately payable. The Trustee, insofar as according to its sole discretion it shall not materially harm the rights of the Debenture Holders, shall act to convene a Meeting of the Holders of the Debenture (Series A) on the agenda of which is declaring the Debentures immediately payable as set forth hereafter, and this before the Debentures are declared immediately payable at its initiative; and/or

 

	
  

	
9.3.2.

	
That are set forth in sections 9.2.1 – 9.2.22, except for sections 2.14- 9.2.15 above, the Trustee and a Debenture Holder (that holds alone or together with others 5% or more) shall be entitled to convene a Meeting of the Debenture Holders that on its agenda is a decision regarding the declaring of the entire unpaid balance of the Debentures immediately payable; and/or

 

	
  

	
9.3.3.

	
That are set forth in section s 9.2.14- 9.2.15 above, the Trustee and a Debenture Holder (that holds alone or together with others 5% or more) shall be entitled to convene a Meeting of the Debenture Holders that on its agenda is a decision regarding the declaring of the entire unpaid balance of the Debentures immediately payable;

 

  

- 19 -

  

 

	
UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

	
  

	
9.4.

	
Upon the occurrence of any of the events in section 9.1 above the Trustee, before he uses his authority to declare immediate repayment or to realize the Collaterals, insofar created, as mentioned in the beginning of section 9.1 above, shall be entitled to convene a Meeting of the Debenture Holders and receive its instructions.

 

	
  

	
9.5.

	
The Trustee or the Debenture Holders shall not declare the Debentures immediately payable and they shall not realize Collaterals, insofar as created, until after they gave the Company a notice of their intention to do so at least 21 days before the date of the decision or the Meeting, as the case may be: however, the Trustee or the Debenture Holders are not obligated to give the Company a notice as mentioned, if there is a reasonable concern that delivering the notice shall harm the possibility of declaring the Debentures immediately payable or realizing the Collaterals, insofar as created.

 

	
  

	
9.6.

	
If a reasonable period was determined in sections 9.1- 9.2 above or in a resolution of a creditors’ meeting, as the case may be, with respect to a certain section, in which the Company is entitled to perform an action or to adopt a decision which as a result the cause for declaring immediate repayment or realization of the Collaterals, insofar as created, is dropped, the Trustees or the Debenture Holders are entitled to declare the Debentures immediately payable according to these sections only if the period that was determined as mentioned has passed and the cause was not dropped; however, the Trustee is entitled to shorten the period that was determined as mentioned if it thought that it will materially harm the rights of the Debenture Holders.

 

	
  

	
9.7.

	
The decision of the Debenture Holders to declare the Debenture immediately payable or to realize the Collaterals, insofar as created, shall be adopted in a Meeting of the Debenture Holders in which Holders of at least fifty percent (50%) of the balance of the par value of the Debentures (Series A) were present, by a majority of the Debenture Holders of the balance of the par value of the Debentures that is represented or by such a majority in a deferred Debenture Holders Meeting in which the Holders of at least twenty percent (20%) of the aforementioned  balance were present.

 

	
  

	
9.8.

	
Subject to the provisions of any law, the Trustee’s duties according to this section 9 are subject to its actual knowledge of the existence of the facts, the occasions, the circumstances and the events set forth in it.

 

	
  

	
9.9.

	
The sending of a notice to the Company of the declaration of immediate repayment of the Debentures can be done also by way of publishing a notice of the decision of the Meeting or the decision of the Trustee in accordance with the provisions of section 26 hereafter and it shall constitute a declaration of the Debentures immediately payable.

 

	
  

	
9.10.

	
In the event that a notice shall be delivered to the Company that the Debentures were declared immediately payable according to the provisions of section 9,  the Company undertakes:

 

	
  

	
9.10.1.

	
To pay to the Debenture Holders and to the Trustee any sums due to them and/or that shall be due to them according to the terms of the Deed of Trust, whether the date of the obligation has arrived or not (‘acceleration’), and this is within 7 days after the notice date as mentioned in section 9.8 above; and

 

  

- 20 -

  

 

	
UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

	
  

	
9.10.2.

	
To deliver to the Trustee, according to its reasonable request, any affidavit or declarations and/or to sign any document and/or to perform and/or to cause the performance of the actions necessary and/or required in accordance with any law for giving effect to the exercise of authorities, the powers and the permissions of the Trustee and/or his attorneys that are required in order to enforce upon the Company its undertaking as mentioned in the Deed of Trust.

 

	
  

	
9.11.

	
For the purposes of this section 9 – a written notice to the Company signed by the Trustee that confirms that the action required by it in the framework of its powers, is a reasonable action, shall constitute prima facie evidence of this.

 

	
  

	
9.12.

	
After declaring the Debentures immediately payable in accordance with the provisions of this section 9, the Trustee and/or the Debenture Holders shall be entitled to immediately take all the steps that they shall see fit to take. Inter alia, the Trustee and/or the Debenture Holders shall be entitled to enforce and to realize the Collaterals, insofar as created, (all or in part) that were given to secure the Company’s undertakings to the Debenture Holders and to the Trustee according to this Deed. The Trustee shall be entitled to act in any manner that it shall see fit and effective, including in accordance with the relevant law in the relevant territory for each Collateral and within such actionsit shall be entitled to appoint by itself and/or by the court, a trustee, receiver or manager on assets that were provided as Collateral, all or part of them and insofar as such assets were provided.

 

	
10.

	
Claims and Proceedings by the Trustee

 

	
  

	
10.1.

	
In addition to any provision in this Deed and as a right and independent authority, the Trustee is entitled, according to its discretion, and will be obligated to do so by a decision adopted in a Meeting of Debenture Holders by the majority required according to law, and without giving an additional notice to the Company, to take, all of those proceedings, including legal proceedings and motions to receive instructions as it shall see fit and subject to the provisions of any law, for enforcing the Company’s undertakings according to this Deed of Trust, realizing Collaterals, insofar as created, and/or rights of Debenture Holders and protecting their rights according to this Deed of Trust. The Trustee shall be entitled to open legal proceedings and/or others even if the Debentures were not declared immediately payable and all for realizing Collaterals, insofar as created, and/or for protecting rights of Debenture Holders and the Trustee and subject to any law. The Trustee is entitled, in accordance with its sole discretion and without the need for giving a notice, to approach the competent court and submit a motion to receive instructions in any matter stemming and/or connected to this Deed of Trust also before the Debentures shall be declared immediately payable, including for giving any order regarding the trust matters.

 

	
  

 

	
10.2.

	
Subject to the provisions of this Deed of Trust, the Trustee is entitled but not required to convene at any time a general Meeting of the Debenture Holders in order to discuss and/or to receive its instructions in any matter regarding this Deed and it is entitled to convene it again. The Company waives any claim, towards the Trustee and/or the Debenture Holders, regarding damage that could be caused and/or was caused to it due to summoning a Debenture Holders Meeting.

 

  

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UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

	
  

	
10.3.

	
The Trustee is entitled before instituting any legal proceedings to convene a Meeting of the Debenture Holders in order for them to decide which proceedings to take in order to realize their rights according to this Deed of Trust. The Company waives any claim towards the Trustee and/or the Debenture Holders regarding damage that could be caused and/or was caused to it due to summoning the Debenture Holders Meeting.

 

	
  

	
10.4.

	
The Trustee is entitled, according to its sole discretion, to delay the performance of any action by it according to this Deed of Trust, for the purpose of approaching the Debenture Holders Meeting and/or the court until instructions are received from the Debenture Holders Meeting and/or instructions from the court are received how to act. Notwithstanding the aforesaid, the Trustee is not entitled to delay proceedings to declare the Debentures immediately payable which the Debenture Holders Meeting decided according to section 9 above.

 

	
11.

	
Order of Priority of Creditors; Dividing the Receivables

 

Each receivable which shall be received by the Trustee, except for its fees and the payment of any debt towards it, in any manner, including but not only as a result of declaring the Debentures immediately payable and/or as a result of proceedings that it shall institute, if it shall institute proceedings, inter alia, against the Company, shall serve for the purposes according to the order of priority of creditors as follows:

 

First – for the payment of any debt for the fees of the Trustee and its expenses; second – for the payment of any other debt according to undertakings to indemnify (as this term is defined according to section 25 hereafter); third – for paying the Debenture Holders that paid payments according to section 25 hereafter; fourth – for paying Debenture Holders late payment interest for delays in paying the interest and/or the Principal that are due to them according to the terms of the Debentures and subject to the provisions of linkage of the Debentures, pari passu and in a proportionate manner to the sum of the interest and/or the Principal that is delayed that is due to each of them without preference or right of priority regarding any of them; fifth – for the paying of sums of the Principal and interest to the Debenture Holders that are due to them according to the Debentures held by them pari passu and subject to the linkage terms of the Debentures, the payment date of which has not yet arrived and in a proportionate manner to the sums due to them, without any preference with respect to priority in time of issuing the Debentures by the Company or in any other manner; and sixth – the surplus, if such shall exist, the Trustee shall pay to the Company or to its substitutes.

 

Withholding tax shall be deducted from the payments to the Debenture Holders, insofar as there is a duty to deduct it according to any law.

 

	
12.

	
Authority to Demand Finance

 

The Debenture Holders Meeting is entitled to determine in a decision of an ordinary majority that the Company shall transfer to the Trustee a sum (or part of it) that is designed for a certain payment on account of the Principal and/or certain payment of interest for the Debentures for the finance required for matters that were determined in the Meeting as mentioned (the “Finance Sum”), and provided that such decision was adopted before the record date determining the entitlement of the Debenture Holders to receive the Principal or interest as mentioned.

 

  

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UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

If a decision of the Meeting was adopted as mentioned above, the following provisions shall apply, unless the Company shall transfer to the Trustee, before the record date as mentioned above, a sum equal to the Finance Sum and this not out of the certain payment as mentioned above:

 

	
  

	
12.1.

	
The Company shall transfer to the Trustee the Finance Sum at the time determined in this Deed for paying the Principal or the interest as mentioned above.

 

	
  

	
12.2.

	
The amount of the certain payment as mentioned above (Principal or interest) shall be reduced by deducting the Finance Sum, and in the event of an interest payment, the rate of the certain payment shall also be reduced respectively.

 

	
  

	
12.3.

	
Insofar as the Company has a duty according to law or according to the Deed of Trust to pay the costs and fees for which the Finance Sum was deposited, the Finance Sum (in addition to linkage and interest that apply to the Debentures according to this Deed of Trust, from the record date for the certain payment as mentioned above and until its actual payment) shall be paid at the next date scheduled in this Deed of Trust for payment on account of the Principal and/or the interest (or at another time as shall be determined in a decision of the Meeting as mentioned above) and it shall be added to the next payment as mentioned as an integral part of it.

 

	
  

	
12.4.

	
The transfer of the Finance Sum to the Trustee cannot constitute an admission of the Company regarding its liability in financing the costs and fees for which the Finance Sum was deposited.

 

	
  

	
12.5.

	
The Company shall publish an Immediate Report before the record date regarding the changes in the terms of this Deed of Trust regarding payments on account of the Principal and/or interest that arise from the aforesaid.

 

The aforesaid does not release the Company from its liability to pay costs and fees as mentioned where it liable to pay them according to this Deed and/or according to the law.

 

	
13.

	
Authority to Delay the Division of Funds

 

	
  

	
13.1.

	
Notwithstanding the provisions in section 11 above, and until the earliest of the dates set forth hereafter, if the sum which shall be received as a result of instituting such proceedings mentioned above and which shall be available at any time for distribution to the Debenture Holders as mentioned in that section, shall be less than 1 million NIS at the record date for distribution (the “Distribution Threshold”) the Trustee shall not be required to distribute it and it shall be entitled to invest this sum, all or in part, in accordance with the provisions of section 16 hereafter.

 

	
  

	
13.2.

	
When these investments mentioned above reach, if they shall reach, with their profits, together with other funds that shall reach the Trustee for the purpose of paying them to the Debenture Holders to a sum that will be sufficient in order to pay this sum mentioned above, the Trustee shall be required to use the mentioned sums according to the order of priorities in section 11 above and to distribute this sum at the earliest time of the payment of the Principal or the interest. Notwithstanding the aforesaid, the fees to the Trustee and its expenses shall be paid out of these funds immediately upon their arrival to the Trustee and even if they are lower than the sum set forth in section 13.1 above.

 

  

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UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

	
14.

	
Notice of Distribution and Deposit with the Trustee

 

	
  

	
14.1.

	
The Trustee shall notify the Debenture Holders of the date and place in which any payment shall be made out of the payments mentioned in sections 11 and 13 above, and this is by a prior notice of 14 days that shall be given in the manner set forth in section 26 hereafter.

 

	
  

	
14.2.

	
After the record date for entitlement for payment that was determined in the Trustee’s notice as mentioned, the Debenture Holders shall be entitled to interest for them according to the interest rate set forth in the Debentures, only on the balance of the Principal sum (if such shall exist) after deducting the sum that was paid or that was offered to them for payment as mentioned in this notice.

 

	
15.

	
Avoidance from Payment for a Reason that is not Dependent on the Company; Deposit with the Trustee

 

	
  

	
15.1.

	
Any sum that is due to a Debenture Holder and that was not actually paid for a reason that is not dependent on the Company, while the Company was willing to pay it and it was deposited with the Trustee according to the provisions of section 15.2 hereafter, shall cease to bear interest and linkage differences from the time that was determined, according to the provisions of the Deed of Trust, for its payment and the Debenture Holder shall be entitled, subject to the provisions hereafter, to that sum.

 

	
  

	
15.2.

	
The Company shall deposit with the Trustee, no later than 10 Business Days after the time that was scheduled for that payment, the payment sum which was not paid for a reason that is not dependent on the Company, and subject to the provisions of section 15.5 hereafter, such deposit as mentioned shall be considered as paying that payment, and in the event of payment of everything due for that Debenture, also as the redemption of the Debenture.

 

	
  

	
15.3.

	
The Trustee shall deposit in bank accounts in its name and to its order in trust for the Debenture Holders, the funds that shall be transferred to it as mentioned in sub- section 15.2 above, and shall invest them in investments in accordance with the provisions of section 16 hereafter. If the Trustee did so, it shall not owe to those entitled to those sums, other than the consideration received from realizing the investments, after deducting expenses, fees and mandatory payments, if existing, that are connected to that investment and to managing the trust account and after deducting its fees and expenses.

 

	
  

	
15.4.

	
Subject to the Trustee not transferring the sums to the Company according to section 15.5 hereafter, the Trustee shall transfer to any Debenture Holder the payment that is due to him after such deductions as mentioned in section 15.3 above, and this against presenting the proof to the entitlement for this payment, as shall be required by the Trustee to its full satisfaction.

 

	
  

	
15.5.

	
The Trustee shall hold the funds that shall be deposited as mentioned in section 15.3 above and it shall invest them in the aforementioned manner, until the end of one year after the final payment of the Debentures or by the date of payment of the funds to the Debenture Holders, whichever is earlier. After this time, the Trustee shall transfer to the Company the sums out of these funds, which have remained with him (including profits that have accrued from their investment) after deducting its fees, expenses and other costs that were expended in accordance with the provisions of this Deed (such as fees of service providers etc.).

 

  

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UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

Upon the transfer of the funds from the Trustee to the Company, to the Trustee’s satisfaction, the Trustee shall be exempt from payment of such sums to the entitled Debenture Holders.

 

The Company shall confirm to the Trustee in writing the fact that these funds have been received in trust for these Debenture Holders, and it shall indemnify the Trustee for any claim and/or cost and/or damage of any type and kind that shall be incurred by it as a result and for transferring the sums as mentioned.

 

The Company’s written confirmation regarding the receipt of these funds shall release the Trustee from any liability regarding these funds.

 

The Company shall hold these funds in a trust account for the Debenture Holders that are entitled to these sums for an additional year after they are transferred to the Company from the Trustee. Funds that have not been demanded by the Debenture Holders from the Company at the end of two years after the final payment date of the Debentures shall serve the Company for any purpose. The aforesaid shall not derogate from the Company’s duty towards the Debenture Holders to pay the funds to which they are entitled as mentioned.

 

	
16.

	
Investment of Funds

 

The provisions hereafter shall apply to any sum that shall be received by the Trustee in the framework of its trusteeship according to the terms of this Deed of Trust and which it must invest:

 

	
  

	
16.1.

	
If provisions were determined in the laws of the State of Israel regarding permitted investments for a trustee, the Trustee shall invest any such sum, as it shall see fit in accordance with the provisions of the law. If such provisions were not determined in the law, the Trustee shall invest any sum as mentioned in bank(s) in its name or to its order, in bank deposits of one of the five largest banks in Israel (provided that the bank rating shall not be less than AA minus) or in investments in securities of the State of Israel, all as the Trustee shall see fit.

 

	
  

	
16.2.

	
For performing such investments, the Trustee is entitled to use investment experts and agents and the provisions of sections 3.12 and 24 hereafter shall apply, as the case may be.

 

“Investment” with respect to this section– including the replacement of certain investments with others.

 

The provisions above shall also apply to the Company regarding funds that shall be held by it according to section 15.5 above.

 

	
17.

	
Urgent Representing Body for the Debenture Holders

 

	
  

	
17.1.

	
The Trustee shall appoint an urgent representing body of the Debenture Holders after it receives a written request from the Company that notes that the Company has adopted a decision to appoint an urgent representing body according to the terms of this section, that details the specific purpose and authorities that such urgent representing body should be granted, with the wording of the decision and written confirmation of the Company’s attorney, that the decision to which the confirmation is attached was lawfully adopted by the Company.

 

  

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UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

At the request of the Company as aforementioned, and without the need to convene a Meeting of the Debenture Holders, the Trustee shall appoint, according to its choice, out of the Debenture Holders, an urgent representing body which shall consist of no less than three members, subject to the advance consent of each member to serve in the urgent representing body. The Trustee shall aspire that the members of the urgent representing body shall be at least the three largest Debenture Holders in the series, as these shall be to the best knowledge of the Trustee or the Company at the time of appointing the representing body. In the event that one of the Debenture Holders to which the Trustee shall turn shall not be interested to serve in the urgent representing body the Trustee shall appoint the next largest Debenture Holder in line and so on and so forth. At any time, the Trustee is entitled, according to its discretion for reasonable reasons, to transfer to a member of the urgent representing body from its position and to appoint additional members to the urgent representing body.

 

A Debenture Holder that is a Person with a Control Relationship with the Company or that has a material conflict of interests due to the existence of any additional material matter that contradicts a matter that arises from serving on the representing body and from holding the Debentures (in this section only: “Conflicting Interest”), shall not serve on the urgent representing body. Each representative in the urgent representing body shall deliver to the Trustee, as a condition to its appointment, a declaration of the candidate that it has no Conflicting Interest. The Trustee shall rely on the declarations of the candidates only and shall not be required to perform independent investigations regarding the existence of a Conflicting Interest. If the consent of at least three Debenture Holders to serve on the urgent representing body was not received, an urgent representing body shall not be appointed.

 

The appointment of an urgent representing body according to this section shall be valid until the opening of the first Debenture Holders Meeting after the appointment.

 

The authorities of the urgent representing body shall be only the following:

 

	
  

	
17.1.1.

	
A one- time extension for fulfilling one or more of the financial criteria during a period that shall not exceed 3 months regarding each such extension;

 

	
  

	

17.1.2.

	
A one-time deferral of one or more of the dates appointed for the performance of any undertaking of the Company, for a period that shall not exceed three months regarding any such deferral.

 

Each member of the urgent representing body shall have one vote. Decisions of the urgent representing body shall be adopted by a majority of votes.

 

The appointment of an urgent representing body or the decision of the urgent representing body not to give the Company an extension or deferral as mentioned above, do not prevent the Company or the Trustee from convening a Meeting of the Debenture Holders when on its agenda is the approval of the Company’s request for an waiver or deferral as mentioned above.

 

The Company shall inform the Debenture Holders immediately upon appointing the urgent representing body as mentioned, regarding the appointment of the urgent representing body, the identity of its members and its authorities.

 

  

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UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

Subject to any law, the decision of the urgent representing body regarding granting a deferral or extension as mentioned in this section, shall bind the Debenture Holders. If the urgent representing body decided not to give the Company a deferral or extension as mentioned in this section above, the Trustee shall be obligated to convene a Meeting of the Debenture Holders to be convened no later than seven (7) days after it is summoned, and the possibility of granting such extension shall be on its agenda as mentioned. The appointment of the urgent representing body cannot derogate from the duties of the Trustee or from its powers according to the law that applies and this Deed of Trust.

 

	
18.

	
Confidentiality

 

	
  

	
18.1.

	
Subject to the provisions of any law and to the provision in this section hereafter, the Trustee undertakes, by signing this Deed, to keep confidential any information that was given to it from the Company, not to disclose it to another and not to make any use of it, unless its disclosure or the use of it is required for fulfilling its duties according to the Law, according to the Deed of Trust, or according to a court order or according to the instructions of a legally authorized authority.

 

	
  

	
18.2.

	
Transferring information to the Debenture Holders, including by publishing it publicly, for the purpose of adopting a decision regarding their rights according to the Debenture or for providing a report of the Company’s situation does not constitute a breach of the confidentiality undertaking as mentioned, all after advance coordination with the Company, and in any event only the necessary information for adopting such decision will be provided, to the extent provided.

 

	
  

	
18.3.

	
This confidentiality undertaking shall not apply to any part of the information, that is in the public domain (except for information that became public domain for a breach of this confidentiality undertaking) or that was received by the Trustee not from the Company – starting from the date its receipt.

 

	
  

	
18.4.

	
All the conversations and discussions in the parts of the Meetings that are conducted without the Company or in the Meetings conducted without the Company, insofar as the absence of the Company is required by the Trustee, are confidential, and the Company and/or anyone on its behalf including any Office Holder in it shall not require the disclosure of this information.

 

	
19.

	
Other Agreements

 

Subject to the provisions of the Law and the restrictions imposed on the Trustee in the Law the fulfillment of the Trustee’s duties according to this Deed of Trust, or its status as Trustee, shall not prevent it from entering into different contracts with the Company or from performing transactions with it in the ordinary course of its business.

 

	
20.

	
Reporting by the Trustee

 

	
  

	
20.1.

	
The Trustee shall make each year, at the time determined for this in the Law and in absence of a schedule time within 40 days after the end of each twelve months from the date of this Deed of Trust, an annual report of the trust matters (the “Annual Report”) and it shall submit it to the Securities Authority and to the Stock Exchange.

 

  

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UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

	
  

	
20.2.

	
The Annual Report shall include details that shall be determined from time to time in the Law. Submitting the Annual Report to the Securities Authority and to the Stock Exchange, is as furnishing the Annual Report to the Company and to the Debenture Holders.

 

	
  

	
20.3.

	
The Trustee must submit a report regarding the actions that it performed according to the provisions of chapter E’1 of the Law, according to a reasonable demand of the Debenture Holders that hold at least ten percent (10%) of the balance of the par value of the Debentures of that series, within a reasonable time of the demand, all subject to the confidentiality obligation of the Trustee towards the Company as set forth in section 35J(d) of the Law.

 

	
  

	
20.4.

	
The Trustee shall update the Company before a report according to section 35H1(a) through (c) of the Law.

 

  

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UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

	
21.

	
Fees and Covering the Trustee’s Expenses

 

	
  

	
21.1.

	
The Trustee shall be entitled to payments of its fees and expenses in connection with fulfilling its duties, in accordance with the provisions in Appendix 21 which is attached to this Deed of Trust. If a Trustee has been appointed in place of the Trustee whose term of service has ended according to sections 35B(a1) or section 35N(d) of the Securities Law, the Holders of certificates of undertaking (Series A) shall pay the difference by which the Trustee’s fees who was appointed as mentioned exceed the fee that was paid to the Trustee in place of whom it was appointed if such difference is unreasonable and the provisions of the relevant law at the date of replacement shall apply.

 

	
  

	
21.2.

	
The Debenture Holders (Series A) shall participate in financing the Trustee’s fees and the refund of its expenses in accordance with the provisions of the indemnification clause in section 25 of the Deed of Trust.

 

	
22.

	
Constant Safety Cushion for Covering the Company’s Undertakings of Indemnity and to Deposit Finance Cushions

 

Insofar as regulations shall be enacted and section 35E1(b) of the Law shall come into force, in addition to the Company’s undertakings to indemnify the Trustee according to section 25 hereafter but in substitution of the Company’s undertaking to deposit the ‘safety cushion’ according to section 25 hereafter, and the Company and the Trustee shall act in accordance with the provisions of section 35E1(b) of the Law and the regulations promulgated thereunder. Insofar as the regulations that shall be enacted by virtue of section 35E1(b) of the Law shall not require imposing a pledge on the account in which the safety cushion shall be deposited and the Trustee shall demand the imposition of such pledge, the Company shall not refuse to impose a pledge unless this is for reasonable reasons.

 

	
23.

	
Liability

 

	
  

	
23.1.

	
The liability of the Trustee shall be according to law.

 

	
  

	
23.2.

	
For the removal of doubt it is hereby clarified that:

 

	
  

	
23.2.1.

	
The Trustee has no duty to examine, and in actual fact the Trustee has not examined, the financial situation of the Company and this is not included among its duties.

 

	
  

	
23.2.2.

	
The Trustee did not make any financial, accounting or legal due diligence examination of the Company’s business situation or of the companies held by the Company or by a person that holds the Company’s shares and this is not among its duties.

 

	
  

	
23.2.3.

	
The Trustee has not given its opinion expressly or impliedly regarding the Company’s ability to meet its undertakings towards the Debenture Holders, nor by the fact that it entered into this Deed of Trust, nor by its consent to serve as Trustee of the Debenture Holders.

 

	
  

	
23.2.4.

	
The Trustee’s signature on this Deed of Trust is not an opinion of it regarding the nature of the offered Debentures or that it is worthwhile investing in them.

 

	
  

	
23.3.

	
The Trustee shall not be required to notify any party of the signature of this Deed. The Trustee shall not get involved in any manner in the management of the Company’s business or its affairs and this is not included in its duties.

 

  

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UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

	
  

	
23.4.

	
Subject to the provisions of any law, the Trustee is not required to act in a manner that is not expressly set forth in this Deed of Trust, so that any information, including with respect to the Company and/or with respect to the Company’s ability to meet its undertakings to the Debenture Holders will be brought to its knowledge and this is not one of its duties.

 

	
  

	
23.5.

	
The Trustee is entitled to rely on the presumption as mentioned in section 28 hereafter, and to rely on the correctness of the identity of a non registered Debenture Holder of the Debentures as this shall be given to the Trustee by a person whose name is registered as authorized by power of attorney, that a Nominee Company issued, insofar as the identity of the Debenture Holder was not registered in the power of attorney.

 

	
  

	
23.6.

	
The Trustee is entitled to rely within the framework of its trusteeship on any written document including, written instruction, notice, request, consent or approval, which appears to be signed or issued by any person or body, which the Trustee believes in good faith that it was signed or issued by him.

 

	
24.

	
The Authority of the Trustee to Employ Agents

 

The Trustee shall be entitled to appoint agent(s) that will act in its place, whether attorneys or others, in order to do or participate in the performance of special actions that must be performed with respect to the trust and without derogating from the generality of the aforesaid instituting legal proceedings. The Trustee shall also be entitled to pay at the expense of the Company the reasonable fees of any such agent including by way of offsetting sums that reached its hands, and the Company shall transfer to the Trustee immediately upon its first demand any such reasonable cost.

 

The Trustee shall give the Company a prior notice regarding the appointment of agent(s) only insofar as according to the Trustee’s opinion an advance notice as mentioned will not cause harm to the rights of the Debenture Holders.

 

It is clarified that the Company’s obligation to pay payments or refund costs with respect to appointing agents is subject to the terms set forth in the first paragraph of section 3.12 above.

 

	
25.

	
Indemnification

 

	
  

	
25.1.

	
The Company and the Debenture Holders (at the relevant record date as mentioned in section 25.5 hereafter, each for its undertaking as mentioned in section 25.3 hereafter) hereby undertake to indemnify the Trustee, each Office Holder in it, its employees, shareholders, agents and experts that the Trustee shall appoint (“Those Entitled to Indemnification”) as follows:

 

	
  

	
25.1.1.

	
For any expense and/or damage and/or payment and/or financial obligation, including according to a judgment, an arbitration judgment (in respect to which a stay of execution was not granted) or according to a settlement (and the Company’s consent to the settlement has been given) the causes of which are connected to an act or omission that Those Entitled to Indemnification performed or which they must perform by virtue of the provisions of this Deed, and/or according to the law and/or a instruction of an authorized authority and/or according to the demand of Debenture Holders and/or according to the Company’ demand; and

 

  

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UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

	
  

	
25.1.2.

	
For wages due to Those Entitled to Indemnification and reasonable costs that they expended and/or that they are about to expend in respect to performing an act or omission as mentioned above and/or with respect to using the authorities and powers according to this Deed, including with respect to all kinds of legal proceedings, opinions of lawyers and other experts, negotiations, discussions, expenses, travel costs and other costs, and provided that they shall be reasonable, claims and demands regarding any matter and/or thing that were made and/or not made in any manner with respect to the aforesaid.

 

And all provided that:

 

	
  

	
25.1.3.

	
Those Entitled to Indemnification shall not demand indemnification in advance in a matter that cannot be delayed;

 

	
  

	
25.1.4.

	
Regarding an act or omission for which the indemnification is requested it was not determined in a final judicial decision that Those Entitled to Indemnification acted: maliciously, negligently in respect to which there is no exemption according to the law, not in good faith or not in the framework of fulfilling their duties;

 

	
  

	
25.1.5.

	
The Trustee has informed the Company in writing, immediately after it has become informed, regarding any claim and/or demand as mentioned, and allowed the Company to manage the proceedings, unless these proceedings are managed by the insurance company of the Trustee or if the Company is in conflict of interest according to the reasonable discretion of the Trustee.

 

The undertaking to indemnify according to section 25.1 shall be referred to as the “Indemnification Undertaking”.

 

Even in the event that it shall be claimed against Those Entitled to Indemnification that they are not entitled to indemnification for any reason, they shall be entitled to indemnification immediately upon their first demand for the payment of the sum that is due to them for the “Indemnification Undertaking”. In the event that it shall be determined in a final judicial decision that Those Entitled to Indemnification do not have the right to be indemnified, Those Entitled to Indemnification shall return the sums of the Indemnification Undertaking that were paid to them.

 

	
  

	
25.2.

	
Without derogating from the validity of the “Indemnification Undertaking” in section 25.1 above, as long as the Trustee shall be required according to the terms of the Deed of Trust and/or according to Law and/or instruction of an authorized authority and/or any law and/or according to the demand of Debenture Holders and/or the Company’s demand, to perform any action, including but not only instituting proceedings or submitting claims according to the demand of Debenture Holders, as mentioned in this Deed, and insofar as the Trustee shall be of the opinion, according to its sole discretion, that the deposit funds (as this term is defined in section 35E1(b) of the Law) which the Company transferred are not sufficient and/or that the Law does not permit use of the deposit funds for the purposes necessary as mentioned, the Trustee shall be entitled to refrain from taking any such action, until it receives a money deposit to its satisfaction for covering the Indemnification Undertaking (the “Finance Deposit”) in first preference from the Company, and in the case that the Company shall not deposit the Finance Deposit at the time it was required to do so by the Trustee, the Trustee shall approach the Debenture Holders that held at the record date (as mentioned in section 25.5 hereafter) to request that they deposit with it the sum of the Finance Deposit, each according to its Relative Share (as this term is defined hereafter). In the event that the Debenture Holders will not deposit the entire Finance Deposit the Trustee will not have the obligation to take any action or relevant proceedings. The aforesaid cannot exempt the Trustee from taking any urgent action required to prevent adverse material harm to the rights of the Debenture Holders.

 

  

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UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

The Trustee is authorized to determine the sum of the Finance Deposit and it shall be entitled to increase it and to act in order to create an additional Finance Deposit as mentioned, from time to time, in an amount that shall be determined by it as long as there is a reasonable need for this.

 

	
  

	
25.3.

	
The Indemnification Undertaking:

 

	
  

	
25.3.1.

	
Shall apply to the Company in any event of (1). Actions that were preformed and/or required to be performed according to the terms of the Deed of Trust including for protection the rights of the Debenture Holders (including due to the demand of a Debenture Holder that is needed for such protection); and (2). Actions that were performed and/or required to be performed according to the Company’s demand.

 

	
  

	
25.3.2.

	
Shall apply to the Debenture Holders that held at the record date (as mentioned in section 25.5 hereafter) in any event of (1). an event that is not within the scope of section 25.3.1; and (2). the non- payment by the Company of the indemnification sum that applies to it according to section 25.3.1 above (without derogating from the provisions of section 25.6 hereafter).

 

	
  

	
25.4.

	
In any event that: (a). the Company does not pay the sums required for covering the Indemnification Undertaking and/or shall not deposit the sum of the Finance Deposit as the case may be; and/or (b). the indemnification duty applies to the Debenture Holders by virtue of the provisions of section 25.3.2 above and/or the Debenture Holders were called to deposit the sum of the Finance Deposit according to section 25.2 above, the following provisions shall apply:

 

	
  

	
25.4.1.

	
Insofar as sums are deposited in the safety cushion that shall be deposited in accordance with the provisions of section 35E1(b) of the Law and the regulations that shall be enacted by its virtue, the Trustee shall use the money deposited in it;

 

	
  

	
25.4.2.

	
Insofar as the sum deposited in the safety cushion as set forth above is not sufficient for indemnification as mentioned or that there is a restriction on the Trustee regarding the use of it, the money shall be collected in the following manner:

 

	 	
a)

	
First – out of the money (interest and/or Principal) which the Company must pay to the Debenture Holders after the date of the required action, and the provisions of section 11 above shall apply;

 

  

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UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

	 	
b)

	
Second – insofar as according to the Trustee’s opinion the sums deposited in the Finance Deposit shall not be enough to cover the Indemnification Undertaking, the Debenture Holders that shall hold Debentures at the record date (as mentioned in section 25.5 hereafter) shall deposit the missing sum, each one in accordance with its Relative Share (as such term is defined) with the Trustee. The sum that each Debenture Holder shall deposit shall bear annual interest at a rate equal to the interest determined for the Debentures and it shall be paid with preference as mentioned in section 25.7 hereafter.

 

The “Relative Share” means: the relative share of the Debentures which the Debenture Holder held at the relevant record date as mentioned in section 25.5 hereafter of the total par value of the outstanding Debentures at that time (after deducting the Debentures held by a Person that has a Control Relationship with the Company). It is clarified that the calculation of the relative share shall remain fixed even if after that time a change shall occur in the par value of the Debentures held by the Debenture Holder.

 

	
  

	
25.5.

	
The record date for determining the Debenture Holder’s obligation in the Indemnification Undertaking and/or in the payment of the Finance Deposit is as follows:

 

	
  

	
25.5.1.

	
In any event that the Indemnification Undertaking and/or payment of the Finance Deposit are required due to a decision or urgent action required for preventing adverse material harm to the rights of the Debenture Holders and this is without an advance decision of the Debenture Holders Meeting – the record date of the obligation shall be the end of the Trading Day of the date the action was taken or the decision was made, and if this day is not a Trading Day, the Trading Day prior to it.

 

	
  

	
25.5.2.

	
In any event that the Indemnification Undertaking and/or payment of the Finance Deposit is required according to a decision of the Meeting of the Debenture Holders – the record date for the obligation shall be the record date for participating in the Meeting (as this date was determined in the summons notice) and it shall also apply to a Debenture Holder that was not present or that did not participate in the Meeting.

 

	
  

	
25.5.3.

	
In any other case or in the case of disputes regarding the record date – the record date shall be as determined by the Trustee according to its absolute discretion.

 

	
  

	
25.6.

	
The payment by the Debenture Holders instead of the Company of any sum that is imposed on the Company according to this section 25 cannot release the Company from its obligation to pay such payment.

 

	
  

	
25.7.

	
The refund to the Debenture Holders that paid payments according to this section shall be made according to the order of preference set forth in section 11 above.

 

	
26.

	
Notices

 

	
  

	
26.1.

	
Any notice on behalf of the Company and/or the Trustee to the Debenture Holders shall be given as follows:

 

	
  

	
26.1.1.

	
In cases in which the provisions of the law require this or according to a decision of the Trustee by reporting to the Magna system of the Securities Authority (the Trustee may order the Company and the Company shall be required to immediately report to the Magna system on behalf of the name of the Trustee any statement according to its form as it shall be transferred in writing by the Trustee to the Company);

 

  

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UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

	
  

	
26.1.2.

	
In the cases set forth hereafter only in addition by way of publishing a notice that shall be published in two daily newspapers that are widely distributed, that are published in Israel in the Hebrew language: (a). An arrangement or settlement according to section 350 of the Companies Law, 5759- 1999; (b). Merger.

 

	
  

	
26.1.3.

	
Any notice that shall be published or sent as mentioned above, shall be considered as if it was delivered to the Debenture Holder on the date of its publication as mentioned (in the Magna system or in the press, respectively).

 

	
  

	
26.1.4.

	
In the event that the Company shall cease to report in accordance with the law, in cases in which there are provisions of the law that require this, or according to the decision of the Trustee, by sending a notice by registered mail to each registered Debenture Holder according to his last address registered in the Debenture Holders registry (in the event of joint Holders – to the joint Debenture Holder whose name appears first in the registry). Any notice that shall be sent as mentioned shall be considered as if it was delivered to the Debenture Holders 3 business days after it was delivered in the mail.

 

	
  

	
26.2.

	
Any notice or demand on behalf of the Trustee or Debenture Holder to the Company may be given by a letter that shall be sent by registered mail to their address, or by transmitting it by fax or in writing by a messenger or by electronic mail and any notice or demand such as this shall be considered as if it was received by the Company or other addressee:

 

	
  

	
26.2.1.

	
In the event of sending by registered mail – 3 Business Days after it was delivered in the mail.

 

	
  

	
26.2.2.

	
In the event of transmitting it by facsimile (with additional telephone confirmation that it was received) – at the time of the telephone confirmation.

 

	
  

	
26.2.3.

	
In the event of transmitting it by electronic mail – at the time of receiving confirmation by electronic mail that it was read or at the time that it was confirmed by telephone that it was received (if confirmation was performed), whichever is earlier of the two.

 

	
  

	
26.2.4.

	
In the event that it was sent by a messenger – at the time of its delivery by messenger to the addressee or in the event that the addressee refrained from accepting it during the messenger’s proposal to the addressee to accept it.

 

	
  

	
26.3.

	
Any notice or demand to the Trustee shall be given in one of the ways set forth in section 26.2 above.

 

	
27.

	
Waiver; Settlement; Changes in the Terms of the Deed of Trust, Debentures

 

	
  

	
27.1.

	
Subject to the provisions of the Law and the regulations that were promulgated and/or that shall be promulgated by its virtue, the Trustee shall be entitled from time to time and at any time, to waive any technical breach or the non fulfillment of the terms of this Deed by the Company if it was convinced that this is for the benefit of the Debenture Holders or where the change does not harm the Debenture Holders. The provisions of this section shall not apply to the change of the identity of the Trustee or its remuneration in this eed, for appointing a Trustee in place of the Trustee whose term has ended. The Trustee shall not be entitled to waive with respect to the times of the payments according to the Debentures, the interest rate, the causes for declaring Debentures immediately payable, financial criteria or with respect to changing the interest in the event a decrease in the rating of the Debentures .

 

  

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UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

	
  

	
27.2.

	
The terms of the Deed of Trust and/or the Debentures may be changed in the event of one of the following:

 

	
  

	
27.2.1.

	
The Trustee was convinced that the change does not harm the Debenture Holders. The provisions of this section shall not apply with respect to a change in the identity of the Trustee or its remuneration in this Deed, for appointing a Trustee in place of the Trustee whose term has ended; the Trustee shall be entitled to approve technical changes only. The Trustee shall not be permitted to change the Deed of Trust with respect to the payment times according to the Debentures, the interest rates, the causes for declaring the Debentures immediately payable, the financial criteria or with respect to changing the interest in the event a decrease in the rating of the Debentures.

 

	
  

	
27.2.2.

	
The Debenture Holders have agreed to the proposed change in a decision that was adopted in the Meeting of the Debenture Holders, in which Debenture Holders holding at least 50% of the balance of the par value of the outstanding Debentures were present, themselves or their attorneys, by a majority of the holders of at least two thirds (2/3) of the remainder of the par value of the Debentures represented at the vote, or by such majority in a deferred Meeting, in which Debenture Holders holding, themselves or by their attorneys, at least twenty percent (20%) of this balance were present.

 

	
  

	
27.3.

	
The Company shall report by Immediate Report of any change, or waiver as mentioned above, as soon as possible after it was made.

 

	
28.

	
Registry of Debenture Holders

 

	
  

	
28.1.

	
The Company shall administer a registry of Debenture Holders that shall be open to the review of any person in accordance with the provisions of the Law.

 

	
29.

	
Meetings of the Debenture Holders

 

Convening a Meeting of the Debenture Holders, the manner of conducting it and different terms regarding it, shall be in accordance with the second addendum.

 

	
30.

	
Applicability of the Law

 

The Deed of Trust and its appendixes, including the Debentures certificate, are subject to the provisions of the Israeli law. The parties shall act in accordance with the provisions of the Israeli law in any matter that was not mentioned in this Deed, and in any event of a conflict between the provisions of the law and this Deed.

 

	
31.

	
Exclusive Authority

 

The only court that shall be competent to hear matters connected to the Deed of Trust and its appendixes shall be the competent court in Tel Aviv – Jaffa.

 

  

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UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

	
32.

	
General

 

Without derogating from the other provisions of this Deed of Trust, and of the Debentures, any waiver, extension, discount, silence, avoidance from action (“waiver”) by the Trustee concerning the non performance or partial performance or incorrect performance of any undertaking towards the Trustee or towards the Debenture Holders according to this Deed and the Debenture, shall not be considered as a waiver by the Trustee of any right, but rather as a consent limited to this certain waiver and it shall apply on with respect to the specific time in which it was given and it shall not apply to other times or to other waivers.

 

Without derogating from the other provisions of this Deed of Trust and the Debenture, any reduction of undertakings towards the Trustee, that were set forth in this Deed or that were made according to it, requires receiving the Trustee’s consent in advance and in writing and no other consent shall be valid, whether verbal or by conduct regarding such reduction.

 

The Trustee’s rights according to this agreement are independent from each other and they are in addition to any right that currently exists and/or that the Trustee shall have according to law and/or other agreement.

 

	
33.

	
Addresses

 

The parties’ addresses shall be as set forth in the preamble of this Deed, or any other address in respect to which a notice shall be given according to section 26 above, to the other party. The addresses of the Debenture Holders shall be as mentioned in the registry or as shall be delivered by them by notice according to section 26 above.

 

	
34.

	
Authorization to Magna

 

In accordance with the provisions of the Securities Regulations (Signature and Electronic Reporting), 5763- 2003, the Trustee hereby authorizes the party authorized for this on behalf of the Company, to electronically report to the Securities Authority of this Deed of Trust.

 

[signature on a separate page]

 

And in witness whereof the parties have signed:

 

	
/s/ Shlomo Nehama, /s/ Ran Fridrich

	  	
/s/

	
Ellomay Capital Ltd.

	  	
Hermetic Trusts (1975) Ltd.

 

  

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UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

I the undersigned Odeya Brick-Zarsky, Adv. confirm that this Deed of Trust by Mr. Shlomo Nehama and Ran Fridrich and their signature binds Ellomay Capital Ltd. with respect to this Deed of Trust.

 

	
/s/ Odeya Brick-Zarsky

	 
	
Odeya Brick-Zarsky, Adv.

	 

 

  

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UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

Ellomay Capital Ltd.

 

First Addendum

 

Debentures (Series A)

 

The issue of a series of registered debentures (series A), bearing annual interest of 4.6%, not linked (Principal and interest) that shall be repaid in 10 annual equal installments on the 31st of the month of December in each of the years 2014 to 2023 (inclusive). The interest on the debentures (series A) shall be paid once every six months on the 30th of June and on the 31st of December of each calendar year after the debentures (series A) have been issued and until their final repayment on the 31st of December 2023.

 

Registered Debentures (Series A)

 

Number ____

 

 Par value in NIS _________

 

	
1.

	
This Debenture indicates that Ellomay Capital Ltd. (the “Company”) shall pay at the payment date as defined in Appendix 2.1 –Economic Terms of the Debentures (Series A) to whoever shall be a Debenture Holder at the record date, payments of Principal and interest, all subject to the details in Appendix 2.1 –Economic Terms of the Debentures (Series A) and the Deed of Trust.

 

	
2.

	
This Debenture is issued as part of the series of the debentures under terms that are identical to this debenture (the “series of the debentures”), that are issued in accordance with the Deed of Trust (“Deed of Trust) of the 30th of December 2013, which was signed between the Company of the first part and Hermetic Trusts(1975) Ltd. (“Hermetic”). It is clarified that the provisions of the Deed of Trust shall constitute an integral part of the provisions of this Debenture, and they shall bind the Company and the Debenture Holders included in this series. All the Debenture Holders of this series shall of equal priority among themselves (pari–passu) without anyone having right of priority over the other.

 

	
3.

	
This Debenture is issued subject to the terms set forth in Appendix 2.1 –Economic Terms of the Debentures (Series A) and in the Deed of Trust, which constitute an inseparable part of the Debentures.

 

	
4.

	
The terms set forth in this certificate shall change without the need for issuing a new certificate at any time when the Deed of Trust and/or its versions shall be lawfully modified.

 

Signed with the Company’s stamp that was stamped on the date ____________

 

In the presence of:

 

Director: _____________________ Director: ____________________

 

  

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UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

Appendix 2.1

 

Economic Terms of the Debentures (Series A)

 

	
1.

	
General

 

In this Debenture the terms in section 1.5 of the Deed of Trust shall have the meaning conferred upon them there, unless another intention is implied from the context of the matter.

 

	
2.

	
Securing the Debentures

 

The Debentures do not include any collateral or pledges and include an undertaking for negative pledge as set forth in section 7.4 of the Deed of Trust, and an undertaking to meet the financial covenants and restrictions regarding the distribution of dividends as set forth in appendix 6.2 of this Deed.

 

	
3.

	
The Date of Payment of the Principal of the Debentures

 

The Principal of the Debentures (Series A) shall be payable in ten (10) annual equal installments which shall be paid on the 31st of December of each of the years 2014- 2023 (inclusive) in a manner so that each of the installments shall constitute 10% of the total par value of the Debentures (Series A).

 

	
4.

	
The Interest

 

	
  

	
4.1.

	
The unpaid balance of the Principal of the Debentures (Series A) shall bear interest at a fixed annual rate of 4.6%, without linkage to any index or currency. The interest for the unpaid balance of the Principal of the Debentures (Series A) shall be paid twice a year in semi annual payments on the 30th of June and on the 31st of December of each of the years 2014 to 2023 (inclusive) for the period of six (6) months (except for the first interest period, as set forth hereafter) that began a day after the prior interest payment date and that ended on the date of payment. The first payment of interest for the Debentures (Series A) is scheduled for the 30th of June 2014, for the period that begins on the first Trading Day the next day after the day on which the Debentures (Series A) shall be offered to the public, and that ends on the first payment date of interest, when it is calculated on the basis of 365 days per year.

 

	
  

	
4.2.

	
Withholding tax that must be deducted shall be deducted from any payment.

 

  

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UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

	
  

	
4.3.

	
Adjustment mechanism of the interest rate:

 

	
  

	
4.3.1.

	
Changes to the interest rate as a result of a decrease in the rating of the Debentures (Deries A)

 

The interest rate of the Debentures (Series A) shall be adjusted for a change in the rating of the Debentures (Series A) in accordance with the mechanism described hereafter:

 

	
  

	
a.

	
Insofar as the rating of the Debentures (Series A) by the rating company set forth in the Deed of trust or any other rating company which shall take its place (hereinafter the “Rating Company”) (in the event of switching the rating company the Company shall transfer to the Trustee a comparison between the rating scale of the replaced rating company and the rating scale of the new rating company) shall be updated during any interest period, so that the rating that shall be determined for the Debentures (Series A) shall be lower by one level or more (hereinafter the “Reduced Rating”) from the rating that was mentioned in the prospectus (or a parallel rating that shall take its place and which shall be determined by another rating company, insofar as it shall take the place of the rating company mentioned in the Deed of Trust) (hereinafter the “Base Rating”), the annual interest rate which the unpaid balance of the Debentures (Series A) shall bear shall increase by the additional interest rate, above the interest rate that shall be determined in the tender, as the Company shall publish in the Immediate Report regarding the results of the offering (the “Base Interest”) and this is for the period that shall begin from the date of publishing the new rating by the Rating Company until full payment of the unpaid balance of the Debentures (Series A) as follows: (a) in the event the rating that shall be determined shall be lower by one level from the Base Rating – the annual interest rate which the unpaid balance of the Debentures shall bear shall not change and it shall be equal the Base Interest; (b) in the event the rating that shall be determined shall be lower by two levels from the Base Rating – the annual interest rate which the unpaid balance of the Debentures shall bear shall increase by 0.5% so that it shall equal the Base Interest with an additional 0.5%; (c) in the event that the rating that shall be determined shall be lower by three levels from the Base Rating - the annual interest rate that the unpaid balance of the Debentures shall bear shall increase by an additional 0.25%, so that it will equal the Base Interest with an additional 0.75%; (d) in the event the rating that shall be determined shall be lower by four levels from the Base Rating - the annual interest rate that the unpaid balance of the Debentures shall bear shall increase by 0.25% so that it will equal the Base Rating with an additional 1%.

 

	
  

	
b.

	
No later than the end of one Business Day after receiving the notice of the rating company regarding lowering the rate of the debentures (series A) to a Reduced Rating as defined in sub- section (a) above, the Company shall publish an Immediate Report, in which the Company shall mention: (a) the fact that the rating was decreased, the Reduced Rating, and the date of commencement of the Reduced Rating of the Debentures (Series A) (hereinafter the “Reduced Rating Commencement Date”); (b) the accurate interest rate that the balance of the Debentures (Series A) shall bear for the period that commences and the beginning of the current interest period until the Reduced Rating Commencement Date (the interest rate shall be calculated according to 365 days per year) (hereinafter in this section: the “Original Interest” and the “Original Interest Period”, respectively); (c) the interest rate that the balance of the Debentures (Series A) shall bear beginning on the Reduced Rating Commencement Date until the next interest payment date, that is: the original interest with additional interest rate per year (the interest rate shall be calculated according to 365 days per year) (hereinafter in this section: the “Updated Interest”); (d) the weighted interest rate which the Company shall pay to the Holders of the Debentures (Series A) at the next date of payment of interest, that arises from the aforesaid in sub-sections (b) and (c) above; (e) the annual interest rate that is reflected from the weighted interest rate; (f) the annual interest rate and the semi-annual interest rate.

 

  

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UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

	
  

	
c.

	
If the Reduced Rating Commencement Date of the Debentures (Series A) shall occur during the days beginning four days before the record date for paying any interest and ending at the next interest payment date after the record date (hereinafter in this section the “Deferral Period”) the Company shall pay the Holders of the Debentures (Series A) at the date of the next interest payment, the Original Interest (as appearing in the original terms of the paper) only, when the interest rate that stems from the additional interest in an amount equal to the additional interest rate per year during the Deferral Period shall be paid at the next interest payment date. The Company shall notify in an Immediate Report the exact interest rate to be paid at the next interest payment date.

 

	
  

	
d.

	
In the event the rating of the Debentures (Series A) was updated by the rating company, in a manner that shall affect the interest rate which the Debentures (Series A) shall bear as mentioned above in this section, the Company shall notify this to the Trustee in writing within one Business Day after publishing the Immediate Report as mentioned.

 

	
  

	
e.

	
It is clarified that in the event that after the rating is decreased in a manner that affected the interest rate which the Debentures (Series A) shall bear as mentioned in this section, the Rating Company shall update the rating of the Debentures (Series A) upwards, to a rating that equals or is higher than the Base Rating or to a rating at which the additional interest rate is lower, as set forth above (hereinafter the “Higher Rating”), then the interest rate that shall be paid by the Company to the Holders of the Debentures (Series A) shall be reduced, at the time of the relevant payment of interest, and this is for the period in which the Debentures (Series A) were rated by the Higher Rating only, so that the interest rate that the unpaid balance of the Principal of the Debentures (Series A) shall bear shall be an interest rate that was determined in the tender, as the Company shall publish in an Immediate Report regarding the results of the offering, without any addition or at a lower addition in accordance with the steps set forth in sub-section (a) above (and in any event the interest rate which the Debentures shall bear shall not be less than the interest rate determined in the tender). In such case the Company shall act in accordance with the provisions in sub-sections (b) to (d) above, mutatis mutandis that result from the Higher Rating instead of the Reduced Rating.

 

	
  

	
f.

	
Insofar as the Debentures (Series A) shall cease being rated for a reason dependent on the Company for a period that exceeds 60 days, before the final payment, provided that the interest rate as mentioned in sub-section (a) above was not increased, the cessation of rating shall be considered as a reduction of rating of the Debentures (Series A), to a rating lower by four levels from the Base Rating, as set forth in sub-section (a) above. Insofar as the Debentures (Series A) were not re- rated after 60 days have passed as mentioned above, the Company shall regard the date of the cessation of rating as the Reduced Rating Commencement Date with respect to the payment of interest and the provisions of sub sections (b) – (e) shall apply accordingly. For the sake of avoiding doubt it is clarified that if the Debentures shall cease to be rated, before final repayment, for a reason that is not dependent on the Company, this will not affect the interest rate as mentioned in section (a) above and the provisions of this section shall not apply.

 

  

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UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

	
  

	
g.

	
It is hereby clarified that insofar as the Debentures are rated or they shall be rated simultaneously by more than one rating company, changing of rating (or cessation of rating) that shall be performed only by one rating company, shall not lead to any change in the interest rate which the Debentures (Series A) shall bear, and a change in the interest rate shall be only after the rating is changed (or ceases, as the case may be) by all the rating companies that shall rate the Debentures. Furthermore, insofar as the Debentures are rated or shall be rated simultaneously by more than one rating company, the rating that shall be considered for this purpose shall be whichever rating is lower of the rating companies.

 

	
  

	
h.

	
Adjusting the interest rate for the Debentures as set forth in this section above shall not apply in the event of a decrease of the rating of the Company below the Base Rating, that arises as a direct result of changing the rating scale of the different rating companies, as part of the adjustment of the local ratings to international ratings, if and insofar as relevant. In such case, the Base Rating shall be adjusted to the new rating which is parallel to it, as shall be determined.

 

	
  

	
i.

	
For the sake of avoiding doubt it is hereby clarified that a change in the rating outlook of the Debentures (Series A) (or of the Company) shall not lead to a change in the interest rate which the Debentures (Series A) shall bear.

 

	
  

	
j.

	
Furthermore, notwithstanding the aforesaid, lowering the rating for the Debentures (Series A) or of the Company performed in the framework of a rating update for all companies in Israel and/or for companies that operate in the energy field, as a result of changing the methodology of the Rating Company, shall not lead to a change in the interest rate that the Debentures (Series A) shall bear.

 

	
5.

	
The Linkage Terms of the Principal and the Interest

 

The interest and the Principal of the Debentures (Series A) are not linked to the index or to any currency.

 

	
6.

	
Deferral of Appointed Times

 

If the date of payment of any payment of Principal and/or interest falls on a day which is not a Trading Day, the date stipulated shall be postponed to the next Trading Day after it without any additional payment and the “Record Date” for the purpose of determining entitlement to redemption and to interest shall not change as a result.

 

  

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UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

	
7.

	
Payments of the Principal and Interest of the Debentures

 

	
  

	
7.1.

	
Any payment on account of the Principal and/or interest of the Debentures (Series A) shall be paid to people whose names shall be registered as holders in the Debenture Holders (Series A) registry of the Company at the end of the 18th of June and 19th of December of each of the years 2014 to 2023 (inclusive), that falls immediately prior to the date of payment of that payment (hereinafter the “Record Date”), except for the last payment of the Principal and the interest that shall be paid to people whose names shall be registered in the registry on the date of payment and that shall be made against the delivery of the Debenture (Series A) certificates to the Company, on the date of payment, at the Company’s registered office or anywhere else where the Company shall notify. The Company’s notification as mentioned shall be published no later than five (5) Business Days before the last date of payment.

 

It is clarified that whoever is not registered in the Debenture (Series A) registry of the Company at any of the times mentioned in this section, shall not be entitled to the payment of interest for the interest period that began before that time.

 

	
  

	
7.2.

	
Payment to those entitled shall be made in checks or by bank transfer to the bank account of the people whose names shall be registered in the registry of Debenture Holders (as mentioned in section 7.1 above) and who shall be mentioned in the details given in writing to the Company on time, in accordance with the provisions of section 7.3 hereafter. If the Company shall not be able, for any reason which is not dependent on it, to pay any sum to those entitled, it shall deposit this sum with the Trustee as mentioned in section 14 of the Deed of Trust. In the event the clearing shall be made through the stock exchange clearing house – through the clearing house.

 

	
  

	
7.3.

	
A Debenture Holder that shall wish to notify to the Company the details of the bank account to credit with payments according to the Debentures as mentioned above, or change the payment instructions, as the case may be, can do so in a registered letter to the Company. The Company shall fulfill the instruction if it shall reach its registered office at least 30 days before the record date for paying any payment according to the Debentures.

 

	
  

	
7.4.

	
In the event that the notice shall be received by the Company late, the Company shall act according to it only with respect to payments scheduled after the payment date that is in proximity to the date the notice was received.

 

	
  

	
7.5.

	
If the Debenture Holder entitled to such payment did not deliver details to the Company regarding his bank account, any payment on account of the Principal and interest shall be made by check which shall be sent by registered mail to his last address written in the registry of Debenture Holders or by bank transfer crediting the bank account of the Debenture Holder, according to the Company’s choice. Sending a check to the one entitled by registered mail as aforementioned shall be considered for all intents and purposes as payment of the sum stipulated in it at the date of sending it by mail provided that it was paid upon lawfully presenting it for payment.

 

	
  

	
7.6.

	
Any obligatory payment insofar as required according to law shall be deducted from any payment for the Debentures (Series A).

 

  

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UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

	
8.

	
Arrears Interest

 

For any payment on account of the Principal and/or interest, which shall be paid in arrears according to the terms of the Debentures (Series A) and this is for a reason dependent on the Company, the Company shall pay to the Debenture Holders arrears interest in an annual rate that exceeds the debenture interest for this period by 3% (calculated pro rata for the period after the date scheduled for payment until the actual date of payment). For the sake of avoiding doubt it is clarified that in the delay period the sum delayed shall bear arrears interest in lieu of the interest as mentioned above. The Company shall notify of the arrears interest rate and of the date of payment as mentioned in an Immediate Report and this two (2) Trading Days before the actual payment date.

 

  

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UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

	
9.

	
Avoidance from Payment for a Reason that does not Depend on the Company

 

With respect to avoiding payment for any reason that is not dependent on the Compan,y the provisions of section 15 of the Deed of Trust shall apply and which are included in this addendum by reference.

 

	
10.

	
Registry of Debenture Holders

 

With respect to the registry of Debenture Holders, the provisions of section 28 of the Deed of Trust shall apply and that are included in this addendum by reference.

 

	
11.

	
Splitting Debenture Certificates and Transferring Them

 

	
  

	
11.1.

	
The Debentures can be transferred regarding any par value sum provided that it will be in whole New Shekels. Any transfer of Debentures shall be done according to a transfer document which is made out in the version acceptable for transferring shares, properly signed by the registered owner or his legal representatives, and by the recipient of the transfer or his legal representatives, that shall be delivered to the Company at its registered office with the Debenture certificates transferred according to it, and any other reasonable proof that shall be required by the Company for proving the right of the transferor to transfer them.

 

	
  

	
11.2.

	
Subject to the aforesaid, the procedural provisions included in the Company’s articles of association with respect to the manner of transferring shares shall apply, mutatis mutandis respectively, with respect to the manner of transferring Debentures and their assignment.

 

	
  

	
11.3.

	
If any obligatory payment shall apply to the transfer document of the Debentures, reasonable proof shall be given to the Company of their payment by the one requesting transfer.

 

	
  

	
11.4.

	
In the event of a transfer of only part of the sum of the Principal of the Debentures set forth in this certificate, the certificate shall be split first to a number of Debenture certificates as required from this, in a manner that the total sums of the Principal set forth in them shall be equal to the Principal sum set forth in this Debenture certificate.

 

	
  

	
11.5.

	
After fulfilling all of these terms the transfer shall be registered in the registry and all of the terms set forth in the Deed of Trust and in this Debenture shall apply to the transferee.

 

	
  

	
11.6.

	
All the costs and the fees involved in the transfer shall apply to the transfer applicant.

 

	
  

	
11.7.

	
Each Debenture certificate may be split to a number of Debenture certificates that their total Principal sum is equal to the Principal sum of the certificate the split of which is requested, and provided that such certificates shall not be issued unless this is by a reasonable quantity. The split shall be made against the delivery of that Debenture certificate to the Company at its registered office for the purpose of performing the split together with a split request lawfully signed by the applicant. Any costs involved in the split, including taxes and levies, if such shall exist, shall apply to the split applicant.

 

  

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UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

	
12.

	
Replacing Debenture Certificate

 

In the event a Debenture certificate shall become worn out, shall be lost or shall be destroyed, the Company shall be entitled to issue a new Debenture certificate in its place, and this is under the same conditions with respect to proof, indemnification and covering the reasonable costs incurred by the Company for clarifying regarding the ownership right of the Debentures, as the Company shall see fit, provided that in the event of the certificate becoming worn out, the worn out Debenture certificates shall be returned to the Company before a new certificate is issued. Levies and other expenses involved in issuing the new certificate, insofar as existing, shall apply to the one requesting such certificate.

 

	
13.

	
Early Redemption

 

With respect to early redemption of the Debentures, the provisions of section 8 of the Deed of Trust shall apply and which are included in this addendum by reference.

 

	
14.

	
Purchasing the Debentures

 

With respect to the purchase of Debentures, the provisions of section 4 of the Deed of Trust shall apply and which are included in this addendum by reference.

 

	
15.

	
Waiver; Settlement and Changes in the Debenture Terms

 

With respect to a waiver, settlement and changes in the terms of the Debentures, the provisions of section 27 of the Deed of Trust shall apply which are included in this addendum by reference.

 

	
16.

	
Debenture Holders Meetings

 

With respect to the general meetings of the Debenture Holders they shall be convened and conducted accordingly, the provisions of section 29 of the Deed of Trust shall apply and which are included in this addendum by reference.

 

	
17.

	
Immediate Repayment

 

With respect to immediate repayment of the Debentures, the provisions of section 9 of the Deed of Trust shall apply and which are included in this addendum by reference.

 

	
18.

	
Notices

 

With respect to notices, the provisions of section 26 of the Deed of Trust shall apply and which are included in this addendum by reference.

 

***

 

  

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UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

Appendix 3

 

The Trustee’s Duties

 

Routine Duties

 

	
1.

	
Checking according to the Company’s reports that were published in Magna (the “Public Reports of the Company”) and according to the confirmations and documents that shall be given to the Trustee by the Company according to the provisions of this Deed:

 

	
  

	
1.1.

	
That the payments of Principal and interest by the Company have been paid in a timely fashion.

 

	
  

	
1.2.

	
That the uses which the Company has made of the proceeds received for issuing the Debentures meet the targets that have been determined for this in the Deed of Trust and/or in the chapter that deals with the designation of the proceeds in the prospectus of the offering, insofar as determined.

 

	
  

	
1.3.

	
That the Company has met the milestones that have been determined in the Deed of Trust for its activities, insofar as determined.

 

	
  

	
1.4.

	
If any of the causes for declaring the debentures immediately repayable have occurred based on the Public Reports of the Company.

 

	
2.

	
Summoning Meetings of Debenture Holders according to the provisions of the second addendum of the Deed of Trust.

 

	
3.

	
Participating (including by electronic means) in meetings of the shareholders of the Company.

 

	
4.

	
Preparing an annual report of the trust matters as mentioned in section 20.1 of this Deed, and making it available for the Debenture Holders to review and preparing the reports required in the Law.

 

	
5.

	
Notice to the Debenture Holders of a material breach of this Deed by the Company in proximity to the date in which it is made aware of the breach and notice of the steps it has taken to prevent it or for the performance of the Company’s undertakings, as the case may be.

 

Special Duties

 

	
6.

	
Taking all the actions required for ensuring the Company’s undertakings towards the Debenture Holders, including examining the Company’s fulfillment of its undertakings towards the Debenture Holders.

 

	
7.

	
Examining from time to time and at least once per year, the validity of the Collaterals, insofar as given. It is clarified that the Trustee is entitled, if it thought that this is necessary for the examination as mentioned, to check the Company’s assets that are pledged in favor of the Debenture Holders; checking according to the Public Reports of the Company and according to the confirmation and documents that shall be given to the Trustee by the Company according to the provisions of the Deed of Trust:

 

	
  

	
7.1.

	
That the Company fulfills its undertakings towards the Debenture Holders.

 

	
  

	
7.2.

	
That the Company fulfills all of its undertakings set forth in the Deed of Trust.

 

	
  

	
7.3.

	
That the Company meets the financial criteria determined, if determined in the Deed of Trust.

 

  

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UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

	
  

	
7.4.

	
If a change has occurred in the registration of charges registered according to the provisions of the Deed of Trust, insofar as were registered. If a change has occurred in the Company’s rating or rating of the Debentures, insofar as rated.

 

	
8.

	
To fulfill all of the duties imposed on the Trustee according to the provisions of the Deed of Trust, insofar as imposed.

 

	
9.

	
To implement the resolutions of the Meeting of Debenture Holders that impose a duty on the Trustee and to take all the proceedings and actions required for protecting the rights of the Debenture Holders subject to providing the Trustee the financing required for implementing them, insofar as required.

 

	
10.

	
To take urgent actions for preventing adverse material harm to the rights of the Debenture Holders where it is not possible to wait for a Meeting to be convened.

 

	
11.

	
To examine the possibility of negotiations with the Company in the event the Company intends to turn to the Debenture Holders with requests or proposals.

 

	
12.

	
In the event the Trustee thought that there is a reasonable fear that the Company shall prevented of the ability to meet its existing and expected undertakings when the time comes to fulfill them, to examine the circumstances that establish such fear as mentioned and to act to protect the Debenture Holders as the Trustee shall see fit; and it is entitled, inter alia-

 

	
  

	
12.1.

	
To examine if the circumstances mentioned are due to actions or transactions performed by the Company, including distribution as defined in the Companies Law, that were made in breach of the law; however the Trustee shall not make such examination as mentioned if an expert was appointed for the holders of certificates of undertaking, as such term is used in section 350[18] of the aforementioned law, whose duty is to conduct such examination.

 

	
  

	
12.2.

	
To manage, in the name of the Holders of certificates of undertaking, negotiations with the issuer for changing the terms of the certificates of undertaking.

 

	
  

	
12.3.

	
With respect to this issue, the convening of a meeting of Holders of certificates of undertaking by the Trustee for receiving instructions how to act, shall not be regarded as a breach of its duty, provided that the convening of such meeting does not adversely harm the rights of the Holders.

 

	
  

	
12.4.

	
If a Meeting of Holders of certificates of undertaking was convened as mentioned in sub-section (d1), and a resolution was lawfully adopted at the Meeting, the Trustee shall act in accordance with the resolution; if it did so, its action according to this same resolution shall be regarded as having met the provisions of this section concerning the resolution.

 

	
  

	
To pay to the Debenture Holders money from the security cushions that were deposited with the Trustee for this purpose in accordance with the provisions in appendix 7, insofar as such security cushion was deposited.

 

	
13.

	
Deleted.

 

	
14.

	
Deleted.

 

	
15.

	
To distribute money to the Debenture Holders in accordance with the provisions of the Deed of Trust, which the Debenture Holders are entitled to receive and which have reached the Trustee.

 

  

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UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

	
16.

	
To supervise the process of realizing the rights of the Debenture Holders in the event a functionary has been appointed to the Company or for its assets.

 

	
17.

	
Performing any action required according to law including in accordance with amendments 50 and 51 of the Securities Law.

 

***

 

  

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UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

Appendix 5.2

 

Conditions for Increasing the Series of Debentures

 

The conditions for expanding the series of Debentures (Aeries A) are as follows:

 

	
1.

	
The actual expansion shall not harm the rating of the outstanding Debentures of Series A that are in circulation (that is, Debentures (Series A) that are in circulation before the expansion of the series), in a way that for purposes of expanding the series of the Debentures (Series A) an advance approval of the rating company for the rating the additional Debentures (Series A) will be received, in which the additional Debentures (Series A) were taken into account, by a rating that does not fall from the original rating of the Debentures (Series A) that existed at the time of initial issuance of the series or from the rating of the Debentures (Series A) on the eve of issuance of the additional Debentures (whichever is lower) and also the approval of the rating company that issuing the additional Debentures (Series A) does not harm the rating of the existing Debentures (Series A). Such approval shall be transferred to the Trustee before the performance of the issuance and it shall be published by the Company in an Immediate Report. The Trustee shall rely on the rating company’s notice and it shall not be required to an additional examination.

 

	
2.

	
At the time of expanding the series of Debentures (Series A) the Company meets the financial conditions set forth in appendix 6.2 and the expanding of the series will not harm the Company’s meeting the financial conditions as mentioned above. The Company shall deliver to the Trustee a written approval signed by an officer in the Company regarding the existence of these terms.

 

It is clarified that the Company’s undertaking as mentioned in this paragraph shall apply only with respect to additional issues of the Debentures by way of expanding the series, and not with respect to issuing other series of outstanding debentures existing at that time by way of expanding the series or with respect to issuing other new securities, whether these are rated or not.

 

  

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UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

Appendix 6.2

 

Financial Conditions and Undertakings

 

Financial Conditions

 

As long as outstanding Debentures (Series A) exist (in other words as long as they were not paid in full in any manner, including by way of self purchase and/or early redemption), the Company undertakes (for the duration of the Examination Period, as defined hereafter) as follows:

 

	
[1]

	
Definitions

 

In this appendix the following terms shall have the meaning written at their side:

 

“CAP Net” means – the equity of the Company according to its last consolidated and audited or reviewed financial statements (as the case may be), with the addition of the Net Financial Debt.

 

“Balance Equity” means – the consolidated equity according to the international finance reporting standards (IFRS), and including minority rights, capital note and shareholders loans.

 

“Net Financial Debt” - short term and long term debt from banks with the addition of debt towards holders of debentures that the Company issued and other interest-bearing financial obligations after deducting cash and cash equivelants and short terms investments and after deducting project finance, including hedging transactions for such finance, at the level of theCcompany’s subsidiaries.

 

	
[2]

	
Minimal Balance Equity

 

The Balance Equity of the Company, as defined above, according to the consolidated financial statements or the consolidated financial results, shall not be less than 55 Million U.S. Dollars.

 

	
[3]

	
The Ratio of Net Financial Debt to Net Cap

 

The ratio between the Net Financial Debt (as defined above) and the total equity and debt (Net CAP) (as defined above), on the basis of the financial statements or the financial results, on a consolidated basis, shall not rise above 65% (the “Ratio of Net Financial Debt to Net CAP”).

 

	
[4]

	
Equity to Balance Sheet

 

The ratio of the equity to the balance sheet (on the basis of the figures of the financial statements or the financial results, on a consolidated basis – shall not be less than 20%.

 

	
[5]

	
General

 

As long as the Debentures (Series A) have not yet been fully paid, the Company undertakes to inform the Trustee by a written notice signed by the senior Office Holder in finance  in the Company with a calculation, within 14 Business Days after publishing any financial statement or financial results of the Company, regarding it meeting the terms of sections [2] to [4] above. The Trustee shall rely on the Company’s confirmation and it shall not be required to perform another examination.

 

  

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THE BINDING VERSION IS THE HEBREW VERSION

 

If it turns out that according to the financial statements or the financial results for examination, the Company did not meet any of its undertakings mentioned in sub-sections [2] – [4] above, and its failure to fulfill its undertakings as mentioned continued during the Examination Period (as defined hereafter), then the provisions of section 9.2.12 of the Deed of Trust (that includes a cure period of the additional following quarter) shall apply. It is clarified that for the purposes of section 9 of the Deed of Trust, the date of the relevant breach shall be considered the date of publishing the relevant financial statements for the end of the Examination Period.

 

In this deed, the “Examination Period” means two consecutive quarters, based on the relevant financial results for the end of each of these quarters.

 

The Company meeting any of the financial ratios set forth in this Deed, shall be calculated according to the accounting standard that applies to the Company in its form as shall be from time to time. The Company shall publish in the framework of publishing its annual financial statements or financial results, as the case may be, the figures on which it based the calculation of the Ratio of Net Financial Debt to Net CAP.

 

Undertakings

 

As long as outstanding Debentures (Series A) shall exist (in other words as long as they were not fully paid, including by way of a self purchase and/or early redemption), the Company undertakes as follows:

 

	
[1]

	
Rating

 

The Company undertakes to act so that insofar as this is under its control, the Debentures (Series A) shall be followed by at least one rating company, as long as outstanding debentures exist of the same series (and without derogating from the generality of the aforesaid, in this framework, inter alia, the Company undertakes to pay all of the payments and to deliver the required reports required to the rating company, in accordance with the provisions of the agreement with it). In this respect it is clarified that transferring the Debentures to a “watch list” or any other similar action which is performed by the rating company shall not be considered as the cessation of the rating.

 

Without derogating from the Company’s undertakings as mentioned above, in the event that the company shall replace the rating company of the debentures (series A) at its own initiative by another (single) rating company, the company shall publish an Immediate Report that sets forth the reasons for replacing the rating company, and this is within one Trading Day after the event. It is clarified that the aforesaid does not derogate from the Company’s right to replace the rating company at any time, according to its sole discretion and as it shall see fit. If the Debentures of the relevant series shall stop being rated (in other words – they shall not be rated by any rating company) the Company shall immediately transfer to the Trustee a written notice regarding the reasons for stopping the rating and no later than one Business Day after the rating has stopped.

 

  

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UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

	
[2]

	
Distributing Dividends

 

The Company shall be entitled to perform a distribution (as this term is defined in the Companies Law) including the distribution of dividends, to its shareholders at any time, provided that in any event of such distribution: (a) the equity of the Company according to its consolidated statements, after such distribution, shall not be less than 75 Million U.S. Dollars, (b) the Company meets the financial criteria set forth above before performing the distribution and the distribution shall not harm the Company’s compliance with the financial criteria, (c) the Company shall not distribute more than 75% of the profit appropriate for distribution and (d) the Company shall not distribute a dividend on the basis of revaluation profits (for the sake of avoiding doubt, negative goodwill shall not be considered as revaluation profit).

 

After a decision is made regarding the distribution as mentioned, the Company shall transfer to the Trustee confirmation signed by a senior Office Holder in the financial field in the Company, regarding the Company meeting the limitations in this paragraph. The Trustee shall rely on the Company’s confirmation and shall not be required to perform an additional examination on its behalf. Beyond the aforesaid in this section, the Company has no restrictions with respect with performing distributions and distributions shall be made (insofar as made) in accordance with the Company’s sole discretion and for any reason that it shall see fit.

 

Except as set forth in this section, the Company declares that as of the date of signing this Deed of Trust, it is not aware of any restrictions that could affect its ability to perform a distribution in the future, except for legal general restrictions that apply to performing distributions in the Companies Law and except for restrictions that apply to the Company by virtue of the loan agreement of the Company with Israel Discount Bank Ltd. that stipulate that the Company may not perform a distribution if it is in breach of the loan agreement or if performance of the distribution shall cause the Company to breach the financial ratios set forth in the loan agreement.

 

  

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UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

Appendix 21

 

The Trustee’s Remuneration and Covering his Expenses

 

	
1.

	
The Company shall pay remuneration to the Trustee for its services in accordance with the Deed of Trust, as set forth hereafter:

 

	
  

	
1.1.

	
Annual payment for the first trust year in the sum of 25,000 NIS.

 

	
  

	
1.2.

	
Annual payment for each trust year in the sum of 20,000 NIS.

 

The sums according to sections 1.1 and/or 1.2 shall be referred to as the “Annual Remuneration”.

 

The Annual Remuneration shall be paid to the Trustee at the beginning of each trust year. The Annual Remuneration shall be paid to the Trustee for the period until the end of the trust period according to the terms of the Deed of Trust, even if a receiver and/or receiver manager was appointed for the Company and/or if the trust according to the Deed of Trust shall be managed under the supervision of the court.

 

	
2.

	
In the event that we shall participate in the discussions with the Securities Authority we shall be paid remuneration (at the tariff stipulated in section 5 hereafter), in accordance with the hours of the discussions in which we shall take part, including a refund of travel costs. This payment is not conditioned upon the issue of the Debentures or signing the Deed of Trust.

 

	
3.

	
In the event the term of the Trustee has expired as mentioned in the Deed of Trust, the Trustee shall not be entitled to the payment of its remuneration starting from the date that its term has expired. If the Trustee’s term has expired during the trust year the remuneration paid to it for the months that it did not serve as Trustee of the Company shall be returned. The provisions in this section shall not apply regarding the first trust year.

 

	
4.

	
The Trustee is entitled to a refund for the reasonable expenses that it shall expend in the framework of fulfilling its duties, and/or by virtue of the powers granted to it according to the Deed of Trust, including for publications in the press, provided that for the costs of expert opinion as set forth in the Deed of Trust, the Trustee shall give an advance notice of his intention to receive an expert opinion.

 

	
5.

	
The Trustee is entitled to additional payment, for actions, including those which it must perform in order to fulfill its lawful obligations by virtue of the Securities Law, (including amendments 50 and 51 of the Securities Law), and the regulations that shall be promulgated following these amendments and also those arising from a breach of this Deed of Trust by the Company and/or for an action of declaring Debentures immediately repayable and/or for special actions which shall be required to be performed, if required, for fulfilling its duties according to the Deed of Trust, all in addition and without harming the payments due to it as mentioned in this appendix.

 

	
6.

	
The Trustee shall be entitled to additional payment as mentioned, in the sum of 600 NIS for each working hour that it shall require to perform as mentioned above, linked to the known index, at the date of publishing the prospectus, but in any event no less than the sum set forth above. For each annual meeting of shareholders or Debenture Holders (and this is in addition to the payment according to section 5 above) in which the Trustee shall take part, an additional remuneration in the sum of 600 NIS per meeting, linked to the index known at the date of publishing the prospectus shall be paid, but in any case no less than the sum set forth above. The sum mentioned shall be paid immediately upon the issuing of the Trustee’s demand.

 

  

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UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

	
7.

	
This agreement is based on the consent that the debentures are without collaterals and without financial criteria which the Trustee must examine. However in the event that the Debenture Holders (series A) shall be granted any collaterals or in the event that they shall be determined with financial criteria or any other undertaking that the Trustee must examine, then the Trustee’s remuneration shall be agreed in accordance with the scope of work that shall be required to dedicate to the trust.

 

	
8.

	
VAT if applicable, shall be added to the payments due to the Trustee, according to the provisions of this appendix and it shall be paid by the Company. The sums above do not include a refund of expenses and lawful Vat and they shall be linked to the base index of each series however in each case a lower sum than the sum set forth in this proposal shall not be paid. The payment terms are 30 days net after the end of the calendar month of the invoice.

 

	
9.

	
The Debenture Holders shall participate in financing the Trustee’s remuneration and refund of expense in accordance with the provisions of the indemnification clause in section 25 of the Deed of Trust.

 

***

 

  

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UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

Second Addendum

 

Summoning a Meeting

 

	
1.

	
The Trustee shall summon a Debenture Holders Meeting (“Annual Meeting”) each year and no later fourteen (14) days after the annual report (as mentioned in section 20 of the Deed of Trust) was submitted, which shall be convened no later than sixty (60) days after the report was submitted. The agenda of the Annual Meeting shall include the appointment of the Trustee for the period that shall be determined (unless the prior Meeting determined a longer appointment time).

 

	
  

	
1.1.

	
The Trustee shall convene a Meeting of the Debenture Holders if it saw a need for this, or according to a written request of Debenture Holders that hold, alone or together, at least five percent (5%) of the balance of the par value of the outstanding Debentures.

 

	
  

	
1.2.

	
In the event those requesting to summon a Meeting are Debenture Holders, the Trustee shall be entitled to demand indemnification from them, including in advance, for the reasonable costs involved in this.

 

	
  

	
1.3.

	
The Trustee shall summon a Debenture Holders Meeting within 21 days after a demand to summon it was submitted to the Trustee, to a date that shall be determined in the summons, provided that the convening date shall not be earlier than seven days and not later than 21 days from the summons date; however, the Trustee is entitled to bring the meeting forward, to at least one day after the summons date, if it thought that this was required in order to protect the Debenture Holders rights and subject to the provisions of section 1.19 hereafter; if it did so, the Trustee shall explain the reasons for bringing the convening date forward in the report regarding the summoning of the Meeting.

 

	
  

	
1.4.

	
The Trustee may change the scheduled meeting time.

 

	
  

	
1.5.

	
In the event the Trustee convened a Meeting of the Debenture Holders not according to the request of the Debenture Holders the Trustee is entitled to determine that the Meeting shall take place by electronic means.

 

	
  

	
1.6.

	
If the Trustee did not summon the Debenture Holders Meeting, according to the demand of the Debenture Holder, within such time as mentioned in section 1.4 above, the Debenture Holder may convene the Meeting, provided that the scheduled Meeting shall be within 14 days, after the end of the period for summoning the Meeting by the Trustee and the Trustee shall bear the expenses that the Debenture Holder expended with respect to convening the meeting.

 

	
  

	
1.7.

	
If the Debenture Holders Meeting was not convened as mentioned in section 1.1 or 1.2 above, the court may at the request of the Debenture Holder, order that it be convened.

 

	
  

	
1.8.

	
If the court ordered as mentioned, the Trustee shall bear reasonable costs that the applicant expended in a court proceeding, as shall be determined by the court.

 

	
  

	
1.9.

	
Where there is no practical possibility to convene a Debenture Holders Meeting or to conduct it in the manner determined for this in the Deed of Trust or in the Law, the court may, at the  request of the Company, of a Debenture Holder that is entitled to vote in the Meeting or the Trustee, to order that a Meeting be convened and conducted in the manner as the court shall determine, and it may give supplementary instructions for this insofar as it shall see fit.

 

  

- 56 -

  

 

	
UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

Flaws in Convening the Meeting

 

	
  

	
1.10.

	
The court may, at the request of a Debenture Holder, order the cancellation of a resolution that was adopted in a Debenture Holders Meeting that was convened or conducted without fulfilling the requirements in the Law or according to this Deed.

 

	
  

	
1.11.

	
If the flaw in convening the Meeting concerns a notice regarding the place of convening the Meeting or its scheduled time, a Debenture Holder that attended the Meeting despite the flaw, shall not be entitled to demand the cancellation of the resolution.

 

Notice of Convening a Meeting

 

	
  

	
1.12.

	
A notice of a Meeting of the Debenture Holders shall be published according to the provisions of chapter G1 of the Law (“Electronic Reporting”) and it shall be delivered to the Company by the Trustee before the reporting and in accordance with the provisions in the regulations.

 

	
  

	
1.13.

	
The summons notice shall include the agenda, the proposed resolutions and arrangements regarding a written vote according to the provisions of section 1.28 hereafter.

 

Agenda in the Meeting

 

	
  

	
1.14.

	
The Trustee shall determine the agenda in the Debenture Holders Meeting and it shall include issues for which the Debenture Holders Meeting is required according to sections 1.1 and/or 1/2 above, and the issue for which it was requested as mentioned in section 1.2 of the Debenture Holder’s request.

 

	
  

	
1.15.

	
A Debenture Holder, one or more, that has five percent (5%) at least of the balance of the par value of the series of Debentures may request the Trustee to include an issue on the agenda of the Debenture Holders Meeting that shall be convened in the future, provided that the issue is suitable to be discussed in the Meeting as mentioned.

 

	
  

	
1.16.

	
In the Debenture Holders Meeting resolutions shall be adopted in issues as set forth in the agenda only.

 

Place of Convening the Meeting

 

	
  

	
1.17.

	
The Debenture Holders Meeting shall take place in Israel at the Company’s offices or another place which the Trustee shall notify of. The Trustee may change the address of the Meeting. The Company shall bear the costs of convening the Meeting at an address which is not its office.

 

The Record Date for Ownership of the Debentures

 

	
  

	
1.18.

	
Debenture Holders that are entitled to participate and to vote in the Debenture Holders’ Meetings are Holders of Debentures at the time that shall be determined in the decision to summons a Debenture Holders Meeting, provided that this date shall not exceed three days before the date of convening the Debenture Holders Meeting and it shall not be less than one day before the convening date.

 

  

- 57 -

  

 

	
UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

The Chairman of the Meeting

 

	
  

	
1.19.

	
In each Debenture Holders Meeting the Trustee or whoever it appointed shall serve as chairman of that Meeting.

 

 

	
  

	
1.20.

	
The Trustee shall prepare a protocol of the Meeting of the Debenture Holders and shall keep it at its registered office for a period of seven (7) years after the Meeting date. The protocol of the Meeting may be by way of recording. A protocol, insofar as made in writing, shall be signed by the chairman of the Meeting or by a chairman of the Meeting that was held after it. Each protocol that was signed by the chairman of the Meeting constitutes prima facie evidence to whatever is stated in it. The protocol registry shall be kept at the Trustee as mentioned, and it shall be open for the review of the Debenture Holders during work hours and with advance coordination and a copy of it shall be sent to any Debenture Holder that shall request this.

 

	
  

	
1.21.

	
The declaration of the chairman of the Meeting that a resolution in the Debenture Holders Meeting was adopted or rejected, whether unanimously or by a certain majority, shall be prima facie evidence to whatever is stated in it.

 

Legal Quorum; Postponed or Adjourned Meeting

 

	
  

	
1.22.

	
A Meeting of the Debenture Holders shall be opened by the chairman of the Meeting after he has determined that the legal quorum required for any of the issues on the agenda of the Meeting exists, as follows:

 

	
  

	
1.22.1.

	
The legal quorum required for opening a Meeting of the Debenture Holders shall be the presence of at least two Debenture Holders, who are present themselves or by their attorneys, that hold at least twenty five percent (25%) of the outstanding voting rights in circulation, within a half hour of the time that was scheduled for opening the Meeting, unless stipulated otherwise in the Law.

 

	
  

	
1.22.2.

	
If a legal quorum was not present in the Debenture Holders Meeting at the end of a half hour after the time scheduled for the beginning of the Meeting, the meeting shall be postponed to another time which shall not be earlier than two Business Days after the record date that was determined for convening the original meeting or one Business Day, if the Trustee was of the opinion that this is required for protecting the rights of the Debenture Holders; if the Meeting was postponed, the Trustee shall explain the reasons for this in the Meeting summons report.

 

	
  

	
1.22.3.

	
If a legal quorum was not present in the postponed Debenture Holders Meeting as mentioned in section 1.22.2 above, a half an hour after the time that was scheduled for it, the Meeting shall be convened with any number of participants, unless stipulated otherwise in the Law.

 

	
  

	
1.22.4.

	
Notwithstanding the provisions in section 1.22.3 above, in the event a Debenture Holders Meeting was summoned according to the demand of Debenture Holders that hold five percent (5%) at least of the balance of the par value of the outstanding Debentures, the postponed Meeting shall be convened only if holders of certificates of undertaking were present in it at least in the number required for summoning a Meeting as mentioned (in other words: five percent (5%) at least of the balance of the par value of the outstanding Debentures).

 

  

- 58 -

  

 

	
UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

	
  

	
1.23.

	
According to the decision of the Trustee or resolution by ordinary majority of those voting in a Meeting in which a legal quorum was present, the continuation of the Meeting adjourned(the “Original Meeting”) from time to time, the discussion or adopting a resolution in an issue that was set forth in the agenda, to another time and to a place that shall be determined as the Trustee or the aforementioned Meeting shall decide (the “Continued Meeting”). In the Continued Meeting and in the postponed meeting only matters that were on the agenda and in respect to which no resolution was adopted shall be discussed.

 

If a Debenture Holders Meeting was postponed without changing its agenda, summons shall be given regarding the new time for the Continued Meeting, as early as possible, and no later than 12 hours before the Continued Meeting; the summons as mentioned shall be given according to section 1.12 above.

 

Participations and Voting

 

	
  

	
1.24.

	
The Trustee, in accordance with its discretion, shall be entitled to split the Meeting into meetings of types and to determine who shall be entitled to participate in each type of meeting.

 

	
  

	
1.25.

	
A Debenture Holder is entitled to vote in Debenture Holders Meetings by himself or by proxy.

 

	
  

	
1.26.

	
Any resolution that shall be proposed in the Debenture Holders Meeting during the meeting shall be decided by way of a show of hands, unless a confidential vote is required by ballot box by the chairman, and in this situation the vote shall be made by a count of votes.

 

	
  

	
1.27.

	
The chairman of the Meeting may determine that the votes shall be during the Meeting or by voting ballots that shall be delivered after the end of the Meeting – at a time that shall be determined by it. in the event that it was determined that the vote shall be by way of a voting ballot the chairman of the Meeting shall notify the Debenture Holders by a notice in accordance with the provisions of section 28 of the Deed of Trust that shall include the details required including by way of reference. The Trustee is entitled to extend or to shorten the voting times by voting ballot and it shall give a notice to the Debenture Holders of this in accordance with the provisions of section 28 of this Deed of Trust.

 

	
  

	
1.28.

	
A Debenture Holder is entitled to vote in the Meeting, by a show of hands, a voting ballot as mentioned in section 1.28 above or by voting deed that shall be sent by the Trustee to all of the Debenture Holders; a Debenture Holder may note the manner of his vote in the voting deed and send it to the Trustee.

 

	 	
  

	
A voting deed in which the Debenture Holder noted the manner of his vote, and which reached the Trustee by the last date determined for this, shall be considered as presence in the Meeting with respect to the existence of a legal quorum as mentioned in section 1.21 above.

 

	 	
  

	
The voting deed that was received by the Trustee regarding a certain matter in respect to which a vote was not held in the Debenture Holders Meeting, shall be considered as having abstained in the vote in that Meeting regarding a resolution to convene a deferred Debenture Holders Meeting according to the provision of section 1.23 above, and it shall be counted in the deferred Meeting that shall be convened according to the provisions of sections 1.22 or 1.22.3 above.

 

  

- 59 -

  

 

	
UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

	
  

	
1.29.

	
Each 1 NIS par value of the Debentures that are represented by vote shall confer one vote in the voting.

 

	
  

	
1.30.

	
A Debenture Holder may vote for part of the Debentures held by him including voting for some of them in favor for the proposed resolution and for another part of them against the resolution, all as he shall see fit.

 

	
  

	
1.31.

	
The holdings of a Debenture Holder that has a Control Relationship shall not be taken into account for determining the legal quorum in the Debenture Holders Meetings, and his votes shall not be taken into account in the vote of the Meeting as mentioned.

 

Resolutions

 

	
  

	
1.32.

	
Resolutions in the Debenture Holders Meetings shall be adopted by a vote of an ordinary majority, unless another majority was determined in the Law or in the Deed of Trust.

 

	
  

	
1.33.

	
The votes of those who have abstained in the vote shall not be counted in the number of votes participating in the vote.

 

	
  

	
1.34.

	
A proposed resolution regarding an issue that was not determined in respect to it that it shall be decided by a certain majority as following hereafter, shall be decided in an ordinary resolution.

 

	
  

	
1.35.

	
The issues hereafter shall be decided in a Debenture Holders Meeting by a majority which is not ordinary and/or by a legal quorum that is different than the one set forth in section 1.22, and these are the issues:

 

	
  

	
1.35.1.

	
Change, including an addendum and/or amendment in the provisions of the Deed of Trust as mentioned in section 29 of the Deed of Trust.

 

	
  

	
1.35.2.

	
Any amendment, change or arrangement of the rights of the Debenture Holders, whether these rights originate in the Deed of Trust or another source, including any settlement or waiver with respect to these rights except for a change that arises due to the action by virtue of section 14 of this Deed of Trust.

 

	
  

	
1.35.3.

	
Any other issue in respect to which it was determined in the Deed of Trust that it is subject to a resolution by a majority that is not an ordinary majority and/or legal quorum that is not a legal quorum as set forth in section 1.22 above.

 

	
  

	
1.35.4.

	
Any proposed resolution which the Trustee determined in respect to it that it shall be adopted by a majority which is not an ordinary majority.

 

	
  

	
1.35.5.

	
A resolution regarding the replacement of a Trustee as set forth in section 3.4 of the Deed of Trust, shall be adopted by a majority of fifty percent (50%) at least of the unpaid balance of the outstanding Debentures.

 

  

- 60 -

  

 

	
UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

Voting and Actions by Proxy/Attorney

 

	
  

	
1.36.

	
An appointment instrument appointing a proxy shall be in writing and it shall be signed by the appointer or by his attorney that has authorization to do so lawfully in writing. If the appointer is a corporation, the appointment instrument shall be made in writing and will be signed by a stamp of the corporation, with a signature of the authorized signatories of the corporation

 

	
  

	
1.37.

	
An appointment instrument of the proxy shall be made in any form which shall be acceptable to the Trustee.

 

	
  

	
1.38.

	
A proxy does not need to be a Debenture Holder himself.

 

	
  

	
1.39.

	
An appointment instrument and power of attorney and any other certificate according to which an appointment instrument was signed or a certified copy of such power of attorney, shall be given to the Trustee by the time of convening the Meeting unless it was otherwise stipulated in the notice summoning the Meeting.

 

	
  

	
1.40.

	
The Trustee shall participate in the Meeting via its employees, Office Holders s in it, holders of positions in it or another person that shall be appointed by it, however it shall not have a voting right.

 

	
  

	
1.41.

	
The Company and any other person except for the Trustee shall be prevented from participating in the Debenture Holders Meeting or in any part of it, according to the decision of the Trustee or according to an ordinary resolution of the Debenture Holders.

 

Turning to the Debenture Holders

 

	
  

	
1.42.

	
The Trustee, and the Debenture Holder, one or more, that has five percent (5%) at least of the balance of the par value of the outstanding Debentures, are entitled to adress the Debenture Holders in writing, via the Trustee, in order to convince them regarding the manner of their vote in any of the issues being raised for discussion in that Meeting (the “Position Notice”).

 

Examining a Conflict of Interests

 

	
  

	
1.43.

	
If a Meeting of the Debenture Holders was convened, the Trustee shall examine the existence of a conflict of interests of the Debenture Holders, whether an interest arising from their holding the Debentures and another interest of theirs, as the Trustee shall determine (in this section – “another interest”), in accordance with the provisions set forth in appendix 1.43 attached to this Deed; the Trustee shall require a Debenture Holder participating in the Meeting to notify it before the vote, regarding another interest of his and if he has a conflict of interests as mentioned.

 

	
  

	
1.44.

	
In the count of the votes in the vote that took place in the Debenture Holders Meeting, the Trustee shall not take into account the votes of the Debenture Holders that did not meet its requirements as mentioned in section 1.43 above or of the Debenture Holders in respect to which it found that a conflict of interests exists as mentioned in section 1.43 above (in this section – “Debenture Holders that have a Conflict of Interests”).

 

	
  

	
1.45.

	
Notwithstanding the provisions in section 1.44 above, if the total sum of holdings participating in the vote are not Debenture Holders that have a Conflict of Interests, became less than five percent (5%) of the balance of the par value of the Debentures of that same series, the Trustee shall take into account in counting the votes in the voting also the votes of the Debenture Holders that have a Conflict of Interest.

 

  

- 61 -

  

 

	
UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

Convening a Meeting of Debenture Holders for Consulting

 

	
  

	
1.46.

	
The provisions of sections 1.2, 1.5, 1.7, 1.14, 1.15 and 1.16 above cannot derogate from the Trustee’s authority to convene a Debenture Holders Meeting, if it saw it necessary to consult with them; in the summons to the Meeting as mentioned the issues on its agenda shall not be detailed, and the date of the Meeting shall be one day at least after the summons date.

 

In such meeting a vote shall not take place, no resolutions shall be adopted in it and the provisions of sections 35[12]1, 35[12]2, 35[12]3, 35[12]5, 35[12]6, 35[12]7(b), 35[12]12, 35[12]13, 35[12]14, 35[12]20(b), 35[12]21 and 35[12]24 shall not apply to it.

 

  

- 62 -

  

	
UNOFFICIAL TRANSLATION FROM HEBREW

THE BINDING VERSION IS THE HEBREW VERSION

 

Appendix 1.43

 

The Manner of Determining a Conflict of Interests

 

	
1.

	
Subject to the provisions of section 1.43-1.45 of the second addendum of the Deed of Trust, in the framework of voting in any Meeting of the Debenture Holders, the Trustee shall examine the votes of the ‘pure holders’ only so that the majority required for adopting a resolution shall be counted only out of the votes of the ‘pure holders.’ When counting the votes of the ‘pure holders’ only the votes of the Debenture Holders that have no foreign interests shall be counted, in other words- those in respect to which there is no reasonable concern that the vote of those Debenture Holders shall be affected from their holdings of other securities of the Company or of a party associated with the resolution, without referring to the nature of that impact or due to another impact that shall be mentioned by that Debenture Holder.

 

	
2.

	
For classifying the “pure holders” it was stipulated that a Debenture Holder in respect to which at least one of the following conditions has been fulfilled, shall be considered as a “Debenture Holder that has a Conflict of Interests,” whose vote shall not be counted in the framework of the votes of the “pure holders” in other words: they shall not be taken into account in the count of those votes participating in the voting. And these are the conditions:

 

	
  

	
2.1.

	
A Person that has a Control Relationship with the Company (as defined in the Deed of Trust).

 

	
  

	
2.2.

	
A Debenture Holder who served as an Office Holder in the Company in proximity to the event which is the basis of the resolution in the Meeting;

 

	
  

	
2.3.

	
Any Debenture Holder with respect to which the “fair value” (as defined hereafter) or “presumption of value” (as defined hereafter), as the case may be, that was determined for his holdings of the other securities (such as: shares, debentures, options etc.) of any relevant corporation (the Company or another) (the “Examined Securities”) is larger than the “fair value” or “presumption of value”, as the case may be that was determined for his holdings in the Debentures (pertaining to the meeting) when they are multiplied by 70%;

 

	 	
  

	
“Fair Value” shall be calculated as follows: the quantity of holdings of a certain Debenture Holder of a tradable security (including in the TACT-Institutional) multiplied by a weighted average of the closing price of the security in the last 30 days prior to the date of publishing the Meeting summons.

 

	 	
  

	
“Presumption of Value” means: the quantity of the Debenture Holder’s holdings of a certain non-tradable security, multiplied by a sum that the Trustee shall determine in a reasonable manner for the security.

 

	
3.

	
A separate meeting of Debenture Holders who shall fall under the definition of the term -Debenture Holder that has a “Conflict of Interests” shall not be convened, and in order to adopt a binding resolution it is not required to adopt a resolution also in a meeting of the Debenture Holders that have a “Conflict of Interests”.

 

	
4.

	
The criteria in this appendix is implemented for the purpose of identifying the ‘pure holders’ and it reflects an appropriate balance between the wish to prevent resolutions from being adopted on the basis of a vote affected – at least potentially – by a conflict of interests, and between the need to avoid a situation in which deciding the resolution remains with the minority of the Debenture Holders. However, it is possible that even this classification will lead at the end of the day to giving too much weight to Debenture Holders of a small percentage of the Debentures, whose vote does not necessarily reflect the position of the majority of the Debenture Holders. In such a case, the Trustee reserves the right to turn to the competent court to receive instructions regarding the proper manner to count the votes of the voters in the circumstances of the matter.

 

***

 

- 63 -exhibit_10-9.htm

Exhibit 10.9

ASSET PURCHASE AGREEMENT

BY AND AMONG

On Track Innovations Ltd.

AND

SuperCom Ltd.

Dated as of August 14, 2013

 

  

  

  

EXHIBITS AND SCHEDULES

EXHIBITS:

 

	
Exhibit A

	
Bank Guarantee

	
Exhibit B

	
Non Disclosure Agreement

	
Exhibit C

	
Seller Promissory Note

	
Exhibit D

	
Buyer Promissory Note

	  	  
	  	  
	
SCHEDULES:

	  
	 	 
	
Schedule ‎2.1.2

	
Tangible Property

	
Schedule ‎2.3.1

	
Specific Excluded Asset

	
Schedule ‎1.1.69

	
Products

	
Schedule ‎7.1.4

	
List of Major Issues

	
Schedule ‎5

	
Seller Disclosure Schedule

  

  

  

 

THIS ASSET PURCHASE AGREEMENT (this “Agreement”), dated as of August 14, 2013 (the "Signing Date"), is made by and among On Track Innovations Ltd., a company organized and existing under the laws of the State of Israel with offices located at Z.H.R. Industrial Zone, Rosh Pina 12000, Israel ("Seller"), and SuperCom Ltd., a  company organized and existing under the laws of the State of Israel with offices located at Nolton House, 14 Shenkar Street, Hertzliya Pituach 46725, Israel ("Buyer"). Each of Buyer and Seller may also be referred to herein as a "Party" and collectively as the "Parties".

 

WHEREAS  each of the Parties has determined that it is in its respective best interests, for the Seller to sell to the Buyer, and for the Buyer to buy from the Seller the Purchased Assets and to assume the Assumed Liabilities (as such terms are defined herein), all on the terms and subject to the conditions contained in this Agreement (the “Acquisition”); and

 

WHEREAS, the parties hereto desire to set the terms and conditions for the Acquisition and to make certain representations, covenants and warranties with respect thereto;

 

NOW, THEREFORE, Seller and Buyer hereby agree, as follows:

	
1.

	
DEFINITIONS & INTERPRETATION.

 

1.1.      Definitions. Wherever used in this Agreement, the following capitalized terms shall have the meanings attached to them:

 

1.1.1.                "Accounts Receivable" means all trade accounts receivable and other rights to payment from customers of the Business and the full benefit of all security for such accounts or rights to payment, including all trade accounts receivable representing amounts receivable in respect of Products sold or Services rendered to customers of the Business.

 

1.1.2.                "Acquired Assets" shall have the meaning set out in Section ‎2.1.

 

1.1.3.                "Action" or "Proceedings" means any lawsuit, action, arbitration proceeding, Claim, complaint, criminal prosecution, investigation, demand letter, governmental or other administrative proceeding, before or by any Court or Governmental Authority.

 

1.1.4.                "Advance Balances" shall have the meaning ascribed to it in Section ‎5.8.6 below.

 

1.1.5.                “Affiliate” means, with respect to any Party hereof, any Person controlled by, controlling or under common control with such party, and any shareholder, director or officer of such party; "control" for the purpose hereof shall mean the effective ability to control the operations of such entity or the possession, directly or indirectly, of 50% or more of the voting power or the right to appoint 50% or more of the members of the board of directors or equivalent body of such entity; the term "Affiliate" shall also include all Affiliates of such persons or entities.

 

1.1.6.                “Aggregate Earn-Out Amount” means the aggregate of all amounts of the Purchase Price payable by way of the Earn-Out Mechanism;

 

  

2

  

 

1.1.7.                "Approval" or "Permit" means any license, permit, consent, approval, authorization, registration, filing, qualification or certification issued by any Governmental Authority or under any applicable Law.

 

1.1.8.                "Assigned Claims" shall have the meaning set out in Section ‎2.1.

 

1.1.9.                "Assigned Contracts" shall have the meaning set out in Section ‎2.1.5.

 

1.1.10.              "Assumed Liability" shall have the meaning set out in Section ‎2.4.

 

1.1.11.              “Bank Guarantee” means an irrevocable bank guarantee issued by an Israeli bank in the amount of US$5,000,000 (Five Million United States Dollars) substantially in the form of the bank guarantee attached hereto as Exhibit A.

 

1.1.12.              “Base Purchase Price” shall have the meaning set forth in Section ‎3.1,

 

1.1.13.              "Books and Records" means all books of account, records, and other Documents, to the extent relating to the Business, the Acquired Assets or the Assumed Liabilities.

 

1.1.14.              "Buffalo Project" shall mean the Potential Project referred to in the Potential Projects List as the “Buffalo Project”.

 

1.1.15.              "Business" means the Seller’s existing Smart ID business that relates specifically to the development, license, sale, distribution, maintenance or support of governmental identification technologies and projects, including national identification cards and/or tags, traditional and electronic passports, drivers licenses, voters, elections, visas, border control, census and population registries, but expressly excluding the Seller’s other existing lines of business including, without limitation, (i) Seller’s businesses related to its existing medical, payment, parking and petroleum solutions as well as (ii) any other solutions currently under development or which may in the future be developed or undertaken by the Seller, together with all related assets and technologies, provided such solutions, related assets and technologies are not in direct competition with Seller’s existing Smart ID business.

 

1.1.16.              “Business Day” means any day other than a Friday, a Saturday, a public holiday or the eve of a public holiday in the State of Israel, or any other day on which banks are closed for foreign currency transactions in the State of Israel [or in the US].

 

1.1.17.              "Business Data and Records" shall have the meaning set out in Section ‎2.1.4.

 

1.1.18.              “Buyer Promissory Note” means an unconditional promissory note for the amount of US$ 2,500,000 (Two Million Five Hundred Thousand United States Dollars) issued by Buyer in favor of Seller and payable on Seller’s first demand, in the form attached hereto as Exhibit B.

 

1.1.19.              "Carve-out Financial Statements" means the audited carved-out financial statements of the Business, prepared pursuant to GAAP for the twelve month period ending on December 31, 2012, containing: (a) comparative balance sheet data for December 31, 2011, and (b) comparative profit and loss and cash-flow data for the period ending December 31, 2011.

 

  

3

  

 

1.1.20.              "Claim" means any claim, demand, cause of action, chose in action, right of recovery, right of set off, or right of recoupment.

 

1.1.21.              "Closing" shall have the meaning set out in Section ‎4.1.

 

1.1.22.              “Closing Certificate” means a Closing Certificate in a form to be agreed by the Parties prior to Closing.

 

1.1.23.              "Closing Date" shall have the meaning set out in Section ‎4.1.

 

1.1.24.              "Closing Balance Sheet" reviewed, not audited, balance sheet of the Business (including for each of the Seller Subsidiaries) as of the Signing Date.

 

1.1.25.              "Conditions Precedent” means the conditions precedent detailed in Section ‎8.

 

1.1.26.              "Contract" means any written or oral contract, agreement, arrangement, bid, understanding, license, commitment or other instrument, and all amendments, modifications and supplements thereto, whether express or implied.

 

1.1.27.              “Court” means any court or arbitration tribunal of any jurisdiction, or any state, province or other subdivision thereof, including, without limitation, the State of Israel.

 

1.1.28.              "Documents" means all files, documents, instruments, papers, books, reports, tapes, microfilms, photographs, letters, budgets, forecasts, ledgers, journals, title policies, customer lists, regulatory filings, operating data and plans, technical documentation (production files, design specifications, functional requirements, operating instructions, logic manuals, flow charts, etc), user documentation (installation guides, user manuals, training materials, release notes, working papers, etc.), marketing documentation (catalogs, sales brochures, sales literature, promotional materials, flyers, pamphlets, web pages, etc.), and other similar materials, in each case whether or not in electronic form.

 

1.1.29.              "Disclosure Schedule Delivery Date" shall have the meaning ascribed to it in Section ‎7.1.1;

 

1.1.30.              “Drop Dead Date” shall have the meaning set forth in Section ‎11.1.1.

 

1.1.31.              “Due Diligence Review” shall have the meaning set forth in Section ‎7.1.

 

1.1.32.              “Earn-Out Mechanism” shall mean the earn-out payment mechanism detailed in Section ‎3.2;

 

1.1.33.              “Escrow Agent” means as shall be defined in the Escrow Agreement.

 

  

4

  

 

1.1.34.              "Escrow Agreement" means an escrow agreement to be entered into by and between the Parties and Escrow Agent, in a form to be agreed by the Parties prior to Closing, in connection with the holding and release of  the Escrow Amount.

 

1.1.35.              "Escrow Amount" shall have the meaning set out in Section ‎10.4.6.

 

1.1.36.              “Excluded Assets” shall have the meaning set out in Section ‎2.3.

 

1.1.37.              "Excluded Liabilities" shall have the meaning set out in Section ‎2.5.

 

1.1.38.              "GAAP" means generally accepted accounting principles and procedures in the United States of America.

 

1.1.39.              “General Assignment, Assumption and Bill of Sale” means the General Assignment, Assumption and Bill of Sale in a form to be agreed by the Parties prior to Closing.

 

1.1.40.              "Governmental Authority" means any governmental agency, authority, department, commission, board, bureau, Court or instrumentality of any jurisdiction, including, without limitation, the State of Israel, and any subdivision or agency thereof, and any such authority having governmental or quasi-governmental powers, including any administrative agency or commission.

 

1.1.41.              "Guarantee" of or by any Person means any obligation, contingent or otherwise, of such Person guaranteeing any Indebtedness of any other Person in any manner, and including (i) any obligation of such Person (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or to purchase (or to advance or supply funds for the purchase of) any security for the payment of such Indebtedness; or (b) to purchase property, securities or services for the purpose of assuring the owner of such Indebtedness of the payment of such Indebtedness; or (ii) any autonomous bank guarantees, bonds, letters of credit and other similar instruments.

 

1.1.42.              "Hazardous Substance" means any substance (including radiation), which might damage or pollute the environment (including surface water, ground water, sea water, air and land) or be a hazard to human beings.

 

1.1.43.              "Indebtedness" of any Person means any obligations of such Person (a) to repay borrowed money; or (b) evidenced by notes, bonds, debentures, loan agreements, capital leases or similar financial instruments;

 

1.1.44.              “Intellectual Property” means all forms of intangible proprietary rights recognized under any applicable laws, whether or not patentable, including without limitation: (i) patents, patent applications, patent disclosures, inventions, patent rights, including but not limited to any and all continuations, divisions, reissues, re-examinations or extensions of the above; (ii) trademarks, trade secrets, service marks, trade names, logos and slogans (and all translations, adaptations, derivations and combinations of the foregoing), rights in brands, and Internet domain names; (iii) copyrights and copyrightable works; (iv) computer software, computer programs, file layouts, and (v) registrations, applications and renewals for any of the foregoing (vii) Know-how (viii) rights in business methods, concepts, confidential information, firmware, composition of matter or materials, certification marks, collective marks, customer lists, databases, designs (whether registered or unregistered), including designs of electronic circuits and computer-aided or other representations of the foregoing, ideas, improvements, industrial designs, innovations, manufacturing information, materials, original works of authorship, plans, processes, proprietary technology, reputation, research results, research records, specifications, systems, techniques, and any rights analogous to the foregoing as well as any other proprietary rights relating to any of the foregoing (including without limitation moral rights or similar rights and remedies against infringements thereof and rights of protection of an interest therein under the laws of all jurisdictions) – all of the foregoing whether or not registered or capable of registration, and whether subsisting in any specific country or countries or any other part of the world.

 

  

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1.1.45.              "Interim Period" means the period between the Signing Date and the Closing Date.

 

1.1.46.              "Inventories" means all inventories, wherever located, including all finished goods, work in process, raw materials, spare parts, packaging materials and all other materials and supplies that are used or consumed by the Seller Group as of the Signing Date in the production of those finished goods that are directly related to the Business.

 

1.1.47.              "Know-How" means any and all scientific, technical and/or commercial information, knowledge, or data, of any kind whatsoever.

 

1.1.48.              “knowledge” (including any derivation thereof, such as “know” or “knowing”) means, with respect to the Seller, the knowledge of any officer of Seller with authority to create and enforce Seller policies.

 

1.1.49.              “Law" means any law, statute, code, written policy, licensing requirements, ordinances, rules and regulations of any Governmental Authority.

 

1.1.50.              "Liabilities" means any debt, obligation, duty or liability of any nature (including any unknown, undisclosed, unmatured, unaccrued, unasserted, contingent, indirect, conditional, implied, vicarious, derivative, joint, several or secondary liability), regardless of whether such debt, obligation, duty or liability would be required to be disclosed on a balance sheet prepared in accordance with any generally accepted accounting principles, and regardless of whether such debt, obligation, duty or liability is immediately due and payable.

 

1.1.51.              "Licensed Intellectual Property" means any Intellectual Property that shall remain owned by Seller and licensed to Buyer pursuant to the OTI IP License Agreement.

 

1.1.52.              “Lien” means any charge, pledge, condition to title, encumbrance, attachment, security interest, mortgage, right of way, easement, servitude, right to acquire, right of first option, right of first refusal or similar restriction.

 

1.1.53.              "Lion Project" shall mean the Potential Project referred to in the Potential Projects List as the “Lion Project”.

 

  

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1.1.54.              “Losses” means losses, damages, Liabilities, Actions, sanctions, deficiencies, assessments, judgments, costs, interest, penalties, fines and expenses, (including, without limitation, reasonable attorneys’ fees).

 

1.1.55.              “Magna License Agreement” means the Magna License Agreement in a form to be agreed by the Parties prior to Closing.

 

1.1.56.              “Major Issue” shall have the meaning set forth in Section ‎7.1.4.

 

1.1.57.              "Material Adverse Effect" means, (A) with respect to Seller, a material adverse effect on (i) the ability of the Seller to perform its obligations under this Agreement; or (ii) the validity or enforceability of this Agreement; (B) with respect to the Acquired Assets (i) a material adverse effect on the Acquired Assets, their condition or value (other than changes or circumstances affecting general market conditions or which are generally applicable to the industry in which Seller engages); (ii) the ability of Seller to assign, sell, convey or transfer, or to procure the assignment, sale, transfer or conveyance of, the Acquired Assets free and clear of any Lien except for Permitted Liens; or (iii) the ability of Seller or any other Person to use the Acquired Assets substantially in the same manner they were used immediately prior to the occurrence of an event having such material adverse effect; (C) with respect to the Assumed Liabilities, a material adverse effect on the Assumed Liabilities and any material change in the value, scope or amount of, or the terms and conditions pertaining to such Assumed Liabilities (other than changes or circumstances affecting general market conditions or which are generally applicable to the industry in which Seller engages); and (D) with respect to the Business, a material adverse effect on the Business or its condition (other than changes or circumstances affecting general market conditions or which are generally applicable to the industry in which Seller engages).

 

1.1.58.              “Net Proceeds” in respect of a Secondary Offering (as referred to in Section ‎3.1 below), means the gross proceeds derived to the Buyer from such Secondary Offering, less those costs and expenses thereof detailed in the prospectus relating to such Secondary Offering.

 

1.1.59.              “Non Disclosure Agreement” means the Non Disclosure Agreement in the form attached hereto as Exhibit C.

 

1.1.60.              “Operating Guarantees” means all (i) Guarantees issued or made available by the Seller Group in support of the Seller Group’s undertakings to third parties, including, without limitation, its customers and suppliers, pursuant to Assigned Contracts, and (ii) deposits made by the Seller Group with any third party in support of the Seller's the Seller’s undertakings to third parties, including, without limitation, its customers and suppliers, pursuant to Assigned Contracts.

 

1.1.61.              “Order” means any judgment, order, writ, injunction, ruling, verdict, decision or decree of, or any settlement under the jurisdiction of any Court or Governmental Authority.

 

1.1.62.              “Organizational Documents” means, with respect to any incorporated legal entity, the memorandum of association, articles of association, certificate of incorporation, by-laws, certificate(s) of designation, partnership agreement or other constitutional documents of any type, including all restatements thereof and amendments thereto.

 

  

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1.1.63.              “OTI IP License Agreement” means the License Agreement in a form to be agreed by the Parties prior to the Closing.

 

1.1.64.              “Permitted Liens” means (i) statutory Liens for Taxes which are not yet due and payable or are due but not delinquent or are being contested in good faith by appropriate proceedings, (ii) Liens imposed under applicable Law, including statutory Liens in favor of carriers, warehousemen, mechanics, workmen, repairmen and materialmen to secure claims for labor, materials or supplies, and (iii) with respect to any Assigned Contract, any Liens arising under the terms of such Contract, provided such Liens are not resulting from a breach, default or violation by the Seller Group of any Contract or Law occurring prior to the Signing Date.

 

1.1.65.              "Person" means an individual, corporation, partnership, association, trust, unincorporated organization, limited liability company or other legal entity.

 

1.1.66.              “Potential Project” means each of the potential projects listed on the Potential Projects List.

 

1.1.67.              “Potential Projects List” means a list of potential projects of the Business that shall be provided to Buyer by Seller on the Signing Date.

 

1.1.68.              "Potential Transferred Employees" shall mean all of those employees of Seller who are directly involved in the Business and spend the majority time of their working time in the Business, a list of whom shall be provided to Buyer upon the Signing Date and who, upon the terms and subject to the conditions of this Agreement, shall be approached by Buyer to become Transferred Employees.

 

1.1.69.              "Product(s)" means the products that are developed, manufactured or marketed by the Seller Group as part of the Business, as listed in Schedule ‎1.1.69, to be prepared and attached to this Agreement by Seller on or around the Disclosure Schedule Delivery Date;

 

1.1.70.              “Promissory Notes” means the Buyer Promissory Note and the Seller Promissory Note.

 

1.1.71.              “Purchase Price” shall mean the amounts payable by Buyer under Section ‎3.

 

1.1.72.              "Release" means a waiver and release to be executed by each Transferred Employee in favor of each of Buyer and Seller in a form to be agreed by the Parties prior to Closing.

 

1.1.73.              "Seller Contracts" means any Contract (a) under which the Seller Group has or may acquire any rights or benefits; or (b) by which the Seller Group is or may become bound, in each case, directly related to the Business.

 

1.1.74.              “Seller Disclosure Schedule” or the "Disclosure Schedule" shall have the meaning set out in Section ‎5.

 

  

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1.1.75.              “Seller Promissory Note” means an unconditional promissory note for the amount of US$ 2,500,000 (Two Million Five Hundred Thousand United States Dollars) issued by Seller in favor of Buyer and payable on Buyer’s first demand, in the form attached hereto as Exhibit D.

 

1.1.76.              "Seller Group" means the Seller, together with the Seller Subsidiaries.

 

1.1.77.              “Seller Subsidiaries” means: (i) OTI Panama S.A.; (ii) OTI Tanzania Ltd.; (iii) Digoti Ltd., a company registered in Israel, and (iv) Otignia LLP, a limited liability partnership registered in Israel.

 

1.1.78.              "Services" means Services provided by the Seller Group with respect to the Products, including integration and systems support.

 

1.1.79.              “Signing Date” as defined in the preamble to this Agreement.

 

1.1.80.              “Supply Agreement” means the Supply and Services Agreement in a form to be agreed by the Parties prior to Closing.

 

1.1.81.              "Tangible Property" shall have the meaning set out in Section ‎2.1.2.

 

1.1.82.               “Taxes” means any state, local, foreign and other taxes, assessments, or other governmental charges, including, without limitation, income, estimated income, business, occupation, franchise, property, sales, use, employment or withholding taxes, including interest, penalties and additions in connection therewith.

 

1.1.83.              "Transaction Documents" means the documents, instruments and certificates contemplated by this Agreement or to be executed in connection with the execution of this Agreement and the consummation of the transactions contemplated hereby.

 

1.1.84.              “Transferred Employees” means those Potential Transferred Employees who will execute a Release, accept Buyer's offer of employment to be employed by Buyer as of the Closing Date.

 

1.1.85.              “Transferred Intellectual Property” means that Intellectual Property of the Seller that shall be listed in Item ‎5.9 of the Seller Disclosure Schedule.

 

1.2.      Interpretation.  The schedules and exhibits attached hereto are an integral part of this Agreement.  All schedules and exhibits attached to this Agreement are incorporated herein by this reference and all references herein or therein to this “Agreement” shall mean this Agreement together with all such schedules and exhibits.  Except as may be otherwise specifically indicated,  when a reference is made in this Agreement to Sections, Schedules, or Exhibits, such reference shall be to a Section, schedule or exhibit to this Agreement unless otherwise indicated.  The words “include,” “includes” and “including” when used herein shall be deemed in each case to be followed by the words “without limitation.”  The word “herein” and similar references mean, except where a specific Section or Article reference is expressly indicated, the entire Agreement rather than any specific Section.  The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.  As used herein, all pronouns shall include the masculine, feminine, neuter, singular and plural thereof whenever the context and facts require such construction.

 

  

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2.

	
PURCHASE AND SALE OF ASSETS.

 

2.1.      Purchase and Sale of Acquired Assets. Upon the terms and subject to the conditions set forth in this Agreement, at the Closing, Seller shall sell, transfer, assign and deliver to Buyer, and the Buyer shall purchase and accept from the Seller, all right, title and interest in and to all of the Acquired Assets, free and clear of all Liens except for Permitted Liens.

As used in this Agreement, the term “Acquired Assets” means all of the following business, assets, properties, contractual and other rights, and goodwill, wherever situated and of every kind and nature, real or personal, whether tangible and intangible, owned, used or held for use by Seller in relation to the Business, whether or not reflected on the Books and Records of the Seller Group, as at the Closing Date, but excluding, however, the Excluded Assets:

 

2.1.1.                The Transferred Intellectual Property;

 

2.1.2.                All tools and equipment, machinery, and other tangible property owned by Seller Group to the extent directly related to the Business, as shall be listed in Schedule ‎2.1.2 to be to be prepared and attached to this Agreement by Seller on or around the Disclosure Schedule Delivery Date, in being agreed that such Schedule ‎2.1.2 shall exclude those tangible assets directly of the Business that the Parties mutually agree to exclude, as may be updated to reflect any changes between the date hereof and the Closing Date (together, the "Tangible Property"), including related documentation, instructions and manuals;

 

2.1.3.                All Inventories owned by the Seller Group to the extent related to the Business, as may be updated to reflect any changes between the date hereof and the Closing Date;

 

2.1.4.                All Documents to the extent related to the Business, including Documents relating to (i) the Products, the Services, or the Transferred Intellectual Property, and (ii) (subject to applicable Laws), personnel files for Transferred Employees (together, “Business Data and Records”) provided that Seller may retain copies of the foregoing Business Data and Records (a) if and to the extent required by Law or (b) if and to the extent related to Excluded Assets or Excluded Liabilities, or (c) as may be related to Liabilities that Seller may incur in connection with the Acquired Assets or the Assumed Liabilities provided such Business Data and Records referenced in this subsection (c) will be used solely for the purpose of allowing Seller to defend against such Liabilities and will be kept in escrow by Seller's General Counsel in accordance with a letter of confirmation to be provided by such General Counsel in form and substance reasonably satisfactory to Buyer's counsel, until the latest Survival Date or until such Business Data and Records are required in connection with such defense. ;

 

  

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2.1.5.                All rights, other than Accounts Receivable of Seller, whether fixed, contingent or otherwise of Seller, under all past and present Seller Contracts, including under those Seller Contracts with lessors of Tangible Property, service providers, agents, promoters and distributors relating to Products and Services, proposals and tender bids and further including, without limitation, those to be listed in Part ‎5.8.1 of the Seller Disclosure Schedule, all to the extent related to the conduct of the Business from and after the Signing Date (together, the “Assigned Contracts”);

 

2.1.6.                All Approvals issued to and used by Seller and all pending applications therefor or renewals thereof, to the extent related to the Business, in each case to the extent transferable to the Buyer, including those to be listed in Part ‎5.3 of the Disclosure Schedule;

 

2.1.7.                All Accounts Receivable of Seller, to the extent related to the conduct of the Business from and after the Signing Date;

 

2.1.8.                All Claims of Seller Group, to the extent related to the conduct of the Business in respect of the period from and after the Signing Date, whether known or unknown (the "Assigned Claims");

 

2.1.9.                All of the shares of each of the Seller Subsidiaries held by the Seller;

 

2.1.10.              All goodwill related to the Business, including without limitation, the goodwill related to the Transferred Intellectual Property;

 

2.1.11.              All deposits made by any third party (including without limitation the Seller Group's customers and suppliers) to the Seller Group and that are held by the Seller Group, in support of such third party's undertakings to Seller pursuant to Assigned Contracts;

 

2.1.12.              All other assets directly related to the Business and reflected in the Closing Balance Sheet (subject to updates resulting from the ordinary course of the Business following the date of the Closing Balance Sheet and until the Closing Date).

 

2.2.      Notwithstanding the foregoing, the transfer of the Acquired Assets pursuant to this Agreement shall not include the assumption of any Liability related to the Business, unless the Buyer expressly assumes such Assumed Liability pursuant to Section ‎2.4 hereof.

 

2.3.      Excluded Assets.  Notwithstanding any provision of Section ‎2.1 above, the following assets of the Seller shall be excluded from the Acquired Assets, and all rights in, such assets shall remain exclusively with the Seller (collectively, the “Excluded Assets”):

 

2.3.1.                All of the business, assets, properties, goodwill and rights of Seller of every kind and nature, tangible and intangible, including for the sake of clarity under Seller Contracts or Approvals that are not related to the Business;

 

2.3.2.                All Accounts Receivable of Seller or the Seller Group to the extent related to the conduct of the Business prior to the Signing Date;

 

  

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2.3.3.                All cash, cash balances, deposits, short term investments and cash equivalents of Seller as of the Signing Date;

 

2.3.4.                All Tax returns filed and associated Tax records and rights to refunds or claims to overpayments attributed to Tax payments made, in each case, to the extent relating to the conduct of the Business in respect of the period prior to the Signing Date;

 

2.3.5.                The benefits of all third party property and casualty insurance policies, whether or not related to the Business;

 

2.3.6.                All rights and interests of Seller in, to and in respect of the Excluded Liabilities;

 

2.3.7.                All rights and interests of Seller in, to and in respect of any legal entity owned by Seller other than the Seller Subsidiaries;

 

2.3.8.                All ownership, leasehold or other interest of Seller in any real property, or in any improvements, fixtures and other appurtenances thereto;

 

2.3.9.                All rights, title and interest of Seller in, to and under this Agreement and any of the Transaction Documents.

 

2.4.      Assumption of Liabilities.  Upon the terms and subject to the conditions set forth in this Agreement, as of the Signing Date (but subject to the consummation of the Closing), Buyer shall assume, and from and after the Closing, Buyer shall pay, discharge when due, and perform, all of the following Liabilities of Seller Group, other than the Excluded Liabilities (collectively, the “Assumed Liabilities”):

 

2.4.1.                All trade accounts payable and accrued expenses incurred by Seller Group, including all trade accounts payable representing amounts payable to suppliers of the Business, to the extent directly related to the conduct of the Business from and after the Signing Date;

 

2.4.2.                All Liabilities with respect to the Transferred Employees, including, without limitation, (i) all past obligations of the Seller toward the Transferred Employees; (ii) all ongoing obligations toward the Transferred Employees following their transfer to the Buyer; and (iii) all Claims of the Transferred Employees arising from their employment with the Seller, as of the Signing Date;

 

2.4.3.                All Liabilities, other than trade accounts payable and accrued expenses of the Seller Group, whether fixed, contingent or otherwise of Seller Group, under all Assigned Contracts, accruing from and after the Signing Date;

 

2.4.4.                All Liabilities attributable to the Acquired Assets with the exception of the Excluded Liabilities; and

 

2.4.5.                All other Liabilities related to the conduct of the Business and reflected in the Closing Balance Sheet (subject to updates resulting from the ordinary course of the Business following the date of the Closing Balance Sheet and until the Closing Date).

 

  

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2.5.      Excluded Liabilities.  Notwithstanding any provision of this Agreement to the contrary, Buyer shall not be deemed to assume, nor shall it assume or be obligated to pay, discharge or perform, the following Liabilities (collectively, the “Excluded Liabilities”), all of which shall remain the sole responsibility of Seller, and shall be retained, paid, performed and discharged by Seller:

 

2.5.1.                All trade accounts payable and accrued expenses incurred by Seller Group, including all trade accounts payable representing amounts payable to suppliers of the Business, to the extent directly related to the conduct of the Business up to the Signing Date;

 

2.5.2.                All Liabilities of Seller arising under any Seller Contract other than the Assigned Contracts;

 

2.5.3.                All Liabilities of Seller for Claims made in respect of a breach of, or a default by, the Seller Group accruing under (i) Assigned Contracts or (ii) Permits to the extent related to the Business, in each case with respect to the period prior to the Signing Date;

 

2.5.4.                All Liabilities arising out of, under or in connection with any Indebtedness of the Seller Group;

 

2.5.5.                All Liabilities of Seller in respect of the Excluded Assets;

 

2.5.6.                All Liabilities of Seller resulting from any act or omission of Seller occurring from and after the Signing Date;

 

2.5.7.                All Liabilities for (a) Taxes of the Seller Group, or its shareholders or their beneficial shareholders; (b) Taxes that relates to the conduct of the Business for taxable periods (or portions thereof) ending on or before the Signing Date; and (c) payments under any Tax allocation, sharing or similar agreement (whether oral or written);

 

2.5.8.                All Liabilities in respect of any pending or threatened Action arising out of, relating to or otherwise in respect of: (a) the operation of the Business to the extent such Action relates to such operation on or prior to the Signing Date, or (b) any Excluded Asset;

 

2.5.9.                Any third-party-beneficiary claim or any other type of claim of direct or indirect holders of interests in the Business or the Acquired Assets to any portion of the Purchase Price;

 

2.5.10.              All Liabilities with respect to the Potential Transferred Employees, including, without limitation, all obligations of the Seller toward the Potential Transferred Employees and all Claims of the Potential Transferred Employees arising from their employment with the Seller until the Signing Date;

 

2.5.11.              All Liabilities relating to amounts required to be paid by the Seller to its shareholders or beneficial shareholders;

 

  

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2.5.12.              Product warranties detailed in Assigned Contracts as at the Signing Date that were provided by Seller in respect of products manufactured by Seller and supplied under such Assigned Contracts;

 

2.5.13.              All of the Seller's Liabilities under this Agreement including with respect to costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby, as well as any Liabilities incurred by Seller in facilitating the transfer of the Acquired Assets at the Closing, unless specifically defined otherwise within this Agreement (it being agreed that nothing in this provision shall impose on the Seller any Liabilities not otherwise imposed by this Agreement).

 

2.6.      Conveyances.  The sale, conveyance, transfer, assignment and delivery to the Buyer of the Acquired Assets on the Closing, as herein provided, shall be effected by the Assignment and Bill of Sale and by such other bills of sale, endorsements, assignments and other instruments of transfer and conveyance as may be necessary to vest in the Buyer, as relevant, the respective rights, title and interests in and to the Acquired Assets, free and clear of all Liens except for Permitted Liens.

 

2.7.      Assumption of Contracts.  The Buyer shall at the Closing execute General Assignment, Assumption and Bill of Sale and will, at any time or from time to time after the Closing, upon reasonable request by the Seller, perform or cause to be performed such acts, and execute, acknowledge and deliver or cause to be executed, acknowledged and delivered such other documents, as may be reasonably required or requested for the assumption by the Buyer of the Assigned Contracts or for the discharge or the performance by the Buyer of any of the other Assumed Liabilities.

 

2.8.      Further Conveyances and Assumptions; Consent of Third Parties.  From time to time following the Closing, each of the Parties shall, and shall cause their respective Affiliates to, execute, acknowledge and deliver all such further conveyances, notices, assumptions, releases, and such other instruments, and shall take such further actions, as may be necessary or appropriate to assure fully to the other Party and its respective successors or assigns, the performance in full of the intents and purposes of Sections ‎2.6 and ‎2.7 and to otherwise make effective the Acquisition.

 

2.9.      Non-Assignable Contracts.

 

2.9.1.                Nothing in this Agreement nor the consummation of the Acquisition shall be construed as an attempt or agreement to assign any Assigned Contract or Approval, which by its terms or by Law is non-assignable without the consent of a third party including any Governmental Authority, or is cancellable by a third party or any Governmental Authority in the event of an assignment, or that the assignment thereof may otherwise affect the rights of the Buyer thereunder (“Non-assignable Assets”), unless and until such consent shall have been obtained.

 

  

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2.9.2.                The Seller shall use reasonable commercial efforts to obtain the consent of any relevant third party or Governmental Authority to the assignment of any Seller Contracts or any other asset included in the Acquired Assets, to the extent such consent is needed.  To the extent permitted by applicable Law, in the event that consents to the assignment thereof cannot or may not be obtained, such Non-assignable Assets shall be held, as of and from the Closing Date, by the Seller (or, in the event of a Non-assignable Asset from another member of the Seller Group, by such member of the Seller Group) in trust for the Buyer, and the covenants and obligations thereunder shall be performed by the Buyer in the Seller’s name and all benefits and obligations existing thereunder shall be for the Buyer’s account. The Seller shall take or cause to be taken, at the Buyer’s expense, such actions in its name or otherwise as the Buyer may reasonably request so as to provide the Buyer with the benefits of the Non-assignable Assets and to effect collection of money or other consideration that becomes due and payable under the Non-assignable Assets, and the Seller shall deposit all money or other consideration received by it in respect of all Non-assignable Assets in a special separate escrow account and shall promptly pay over such monies to the Buyer. As of and from the Closing Date, the Seller shall authorize the Buyer, either by delivering to the Buyer at the Closing Date, an irrevocable power of attorney, to the extent permitted by Law and the terms of the Non-assignable Assets, by entering into subcontracting, sublicensing or subleasing arrangements, or in any other manner as shall be reasonably requested by Buyer, at the Buyer’s expense, to perform all the obligations and receive all the benefits of Seller under the Non-assignable Assets and appoints Buyer, solely for this purpose, as its attorney-in-fact to act in its name on its behalf.  Notwithstanding anything to the contrary stated herein, Seller’s undertakings under this Section ‎2.9.2 as it relates to the Lion Project, shall be subject to Buyer procuring a guarantee from the third party guarantor and in a form acceptable to Seller, which guarantor undertakes to guarantee all of the obligations of Buyer under the Lion Project and to indemnify Seller in respect of all Liabilities arising under the Lion Project beyond the amount of any performance bond issued by Seller under the Lion Project.

 

	
3.

	
PURCHASE PRICE

 

3.1.      Purchase Price. In consideration of the Acquisition the Buyer shall pay to the Seller the Purchase Price, as follows:

 

3.1.1.                In the event Buyer raises Net Proceeds of at least US$20,000,000 (Twenty Million United States Dollars) through a secondary public offering of any Buyer securities prior to the Closing (a “Secondary Offering”), at the Closing, Buyer shall pay to the Seller in immediately available funds, the amount of US$17,500,000 (Seventeen Million Five Hundred Thousand United States Dollars) (the “Base Purchase Price”); or

 

3.1.2.                In the event Buyer closes prior to the Closing Date a Secondary Offering with Net Proceeds of less than US$20,000,000 (Twenty Million United States Dollars) through a Secondary Offering, at the Closing: (A) Buyer shall pay to the Seller in immediately available funds: (i) US$10,000,000 (Ten Million United States Dollars); plus (ii) the amount of Net Proceeds arising from such Secondary Offering less US$12,000,000 (Twelve Million United States Dollars); and (B) the balance of the Base Purchase Price shall be paid in accordance with and subject to the Earn-Out Mechanism detailed in Section ‎3.2 below.

 

  

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3.1.3.                In the event Buyer fails to close a Secondary Offering prior to the Closing Date: (A) at the Closing: (i) Buyer shall pay to the Seller in immediately available funds US$5,000,000 (Five Million United States Dollars); and (ii) Buyer shall deliver to Seller the Bank Guarantee; and (B) the balance of the Base Purchase Price shall be paid in accordance with and subject to the Earn-Out Mechanism detailed in Section ‎3.2 below, provided however that:

 

(X)      In the event Buyer closes a Secondary Offering following the Closing, then within 15 days of the closing of such Secondary Offering buyer shall pay to Seller in immediately available funds:

 

(i)        if such Secondary Offering results in Net Proceeds to Buyer of at least US$20,000,000 (Twenty Million United States Dollars), the balance of the Base Purchase Price outstanding at such time;

 

(ii)       if such Secondary Offering results in Net Proceeds to Buyer of less than US$20,000,000 (Twenty Million United States Dollars) but more than US$7,000,000 (Seven Million United States Dollars), (a) the amount of US$5,000,000 (Five Million United States Dollars), provided the Seller has not by such time drawn on the Bank Guarantee; plus (b) the amount of Net Proceeds arising from such Secondary Offering less US$12,000,000 (Twelve Million United States Dollars), provided that the aggregate amounts paid under this Section ‎3.1.3(X) shall in no event exceed the Base Purchase Price; or

 

(iii)      if such Secondary Offering results in Net Proceeds to Buyer of up to US$7,000,000 (Seven Million United States Dollars), then paragraph (Z) below alone shall apply.

 

(Y)      Payment by the Buyer of the amounts referenced in Section ‎3.1.3(X) above, shall be made against the return of the Bank Guarantee to the Buyer, to the extent it has not previously been drawn upon.

 

(Z)      The balance of the Base Purchase Price that remains outstanding following payment of any amount pursuant to paragraph (X) above shall be paid in accordance with the Earn-Out Mechanism.

 

3.1.4.                In the event that Buyer is awarded the Buffalo Project, then upon the later of: (a) the Closing Date; or (b) 15 days following Buyer’s receipt of the full amount of the advance payment payable under the Buffalo Project, Buyer shall pay to Seller in full and in immediately available funds all amounts of the Purchase Price outstanding at such date.  Buyer shall notify Seller as soon as practicable following its award of the Buffalo Project, to the extent so awarded.

 

3.1.5.                In the event that Buyer sells all or substantially all of the assets or contractual rights of the Business or the Division (defined below) to a third party other than an Affiliate of Buyer, then within 15 days of the consummation of such transaction Buyer shall pay to the Seller in full and in immediately available funds all amounts of the Purchase Price outstanding at such date.

 

3.1.6.                To the extent that Buyer closes a Secondary Offering as contemplated above and then subsequently closes a further Secondary Offering, then within 15 days of the closing of such subsequent Secondary Offering, Buyer shall pay to Seller in immediately available funds the lower of: (i) the balance of the Purchase Price outstanding at such time; and (ii) 40% of the Net Proceeds to Buyer of such subsequent Secondary Offering.

 

  

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3.1.7.                If at any time during the period commencing as of the Signing Date and ending on the third anniversary of the Closing Date, the Buyer and/or any of its Affiliates are awarded or otherwise receive orders under any Potential Projects other than the Buffalo Project (“Bookings”), then: (i) Buyer shall provide written confirmation to Seller of its engagement in respect of the relevant Potential Project, as soon as practicable following such engagement; (ii) the gross amount of all potential revenues under all Bookings during each of the three 12-month periods following the Closing Date (a “Year”) shall be divided into units of US$20,000,000 each (“Award Unit”); (iii) with respect to each full Award Unit in each Year, Buyer shall pay to Seller as additional consideration for the Acquisition the amount of US$1,666,667 (the “Additional Consideration”), which shall be payable in accordance with the Earn-Out Mechanism detailed in Section ‎3.2 below, provided that the aggregate amount of all Additional Consideration shall be no more than US$5,000,000.

 

3.2.      Any amount of the Purchase Price payable by way of the Earn-Out Mechanism, shall be paid as follows: within 90 days of the end of each calendar quarter following the Closing Date, Buyer shall pay to Seller an amount equal to 7% of the gross revenues derived from that business division of the Buyer and any of its Affiliates into which the Business shall be incorporated (excluding those revenues derived from the Buffalo Project, provided Buyer has paid the full amount owing under Section ‎3.1.4 above), currently known as the Buyer’s ∑ID division (the “Division”) and recognized by Buyer during such calendar quarter.  Such payment shall be accompanied by a certificate issued by the Buyer’s CEO or CFO, detailing the gross revenues derived by the Division and recognized by Buyer during the relevant calendar quarter.  Within 10 days of the publication of the Buyer’s annual audited financial statements (the “Buyer’s Annual Reports”), the Buyer shall deliver to the Seller a certificate issued by the Buyer’s auditors confirming the amount payable to Seller pursuant to this Earn-Out Mechanism during the year to which the Buyer’s Annual Reports relate (the “Buyer’s Auditor Certificate”).  The amount payable hereunder in respect of the last calendar quarter of each year shall be paid within 10 days of the publication of the Buyer’s Annual Reports and shall be adjusted to reflect any difference between the amounts actually paid to Seller during the previous calendar quarters and the amount that should have been paid pursuant to the Buyer’s Auditor Certificate.  Payments under this Earn-Out Mechanism shall be made over a seven year period commencing as of the Closing Date, provided that such period shall be extended by an additional year for each Award Unit recognized under Section ‎3.1.7 above (the “Earn-Out Period”). Notwithstanding anything to the contrary herein, provided that Buyer is in full compliance with its obligations under this Agreement, any amount of the Purchase Price payable pursuant to this Earn-Out Mechanism that has not become payable by Buyer to Seller out of the gross revenues derived by the Division up to the end of the Earn-Out Period, shall cease to be owing by Buyer, and Seller shall be deemed to have waived its entitlement to any such amount, as of such date.

 

3.3.      With respect to any amount payable under the Earn-Out Mechanism that Buyer fails to pay to Seller in accordance with Section ‎3.2 for two consecutive calendar quarters, such amount shall be deemed to be doubled and shall continue to double at the end of each additional six (6) month period therafter that such amount remains unpaid until the aggregate amount owing hereunder is paid in full by the Buyer.  Notwithstanding anything to the contrary in the immediately preceding sentence, in no event will the amount payable hereunder exceed the Aggregate Earn-Out Amount.

 

  

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3.4.      Purchase Price Allocation. The Parties agree that the allocation of the Purchase Price of the Acquired Assets shall be detailed in an Exhibit to this agreement to be attached at the Closing.

 

3.5.      Value Added Taxes. The Purchase Price does not include any value added taxes applicable to the Acquisition. Value added taxes applicable in Israel in accordance with the requirements of the Israeli Value Added Tax Law, 5735-1975 (respectively, “VAT” and the "VAT Law") shall be added by Buyer to the Purchase Price. At the Closing Buyer shall pay to the Seller the VAT applicable to the amount that is equal to the higher of (i) cash amounts actually paid at the Closing on account of the Purchase Price pursuant to Section ‎3.1 above; or (ii) US$10,000,000 (Ten Million US Dollars) against issuance by the Company of a duly issued invoice therefor. The Seller and the Buyer agree  to cooperate in the submission of a joint request to the Israeli Value Added Tax authorities under Section 20 of the VAT Law  (the “VAT Approval”).  In the event that VAT Approval is not received within 45 days of the Signing Date then the Parties shall negotiate and agree in good faith the manner in which the VAT will be paid with respect to that amount of the Purchase Price payable at the Closing. All VAT applicable to additional payments made on account of the Purchase Price following the Closing Date, shall be added to such payments and paid by Buyer to Seller against receipt of a duly issued invoice therefor.

 

The Seller and the Buyer  shall cooperate in minimizing all Value Added Taxes relating to the Acquisition, in accordance with all applicable Law.

 

3.6.      Withholding Taxes.  Buyer shall deduct and withhold from the Purchase Price any Taxes required to be withheld at source under Israeli Law or any other applicable Law , and shall provide Seller a certificate evidencing such withholder, unless Seller shall provide Buyer an appropriate certificate of exemption with regard to withholding at source of taxes that Buyer would otherwise be required to withhold under Israeli Law or any other applicable Law.

 

	
4.

	
CLOSING

 

4.1.      Closing.  The closing of the transactions contemplated by this Agreement (the “Closing”) will take place at 11:00 a.m. (Israel Time) on the third (3rd) Business Day following the satisfaction (or waiver, where permitted) of all Conditions Precedent, but no later than sixty (60) days following the Disclosure Schedule Delivery Date, unless another time or date is agreed to in writing by the parties (the “Closing Date”). The Closing shall be held at Seller’s offices in Rosh Pina, unless another place is agreed to in writing by the parties.

 

  

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4.2.      Transactions at Closing. At the Closing, all of the actions set forth in this Section ‎4.2 below shall occur and shall be deemed to occur simultaneously, such that no action shall be deemed to have been completed or any document delivered until all such actions have been completed and all such documents have been delivered:

 

4.2.1.                In addition to any other documents expressly required to be delivered under other provisions of this Agreement, Seller shall deliver or cause to be delivered to Buyer the following deliverables, each of which may be waived by Buyer at Buyer's discretion:

 

(a)               a Closing Certificate, executed by the Chief Executive Officer and Chief Financial Officer of Seller, certifying that: (i) the execution, delivery and performance of this Agreement, the Transaction Documents to which Seller is a party, and the transactions contemplated hereby and thereby, and the acts of the officers of Seller in carrying out the terms and provisions hereof and thereof, have been authorized and approved by all corporate action required to be taken on the part of Seller; (ii) except as otherwise expressly set forth in such Closing Certificate, (which exceptions may not reflect  a Major Issue), each of the representations and warranties of Seller in this Agreement, are true and correct in all material respects as of the Closing Date, and (iii) certifying that the Conditions Precedent set forth in Sections ‎8.1 and ‎8.3, have been satisfied or otherwise waived by Seller; and

 

(b)               all Approvals and other consents by any Person, the lack of which would constitute a Major Issue.

 

(c)               a duly issued invoice portion of the Purchase Price payable at the Closing pursuant to Section ‎3 above.

 

(d)               the Closing Balance Sheet;

 

(e)               deeds, bills of sales, endorsements, assignments, registrations and other instruments of transfer and conveyance, certificates of title, documents  and other instruments of transfer and conveyance, duly executed by the Seller Group, including assignments of all Transferred Intellectual Property and separate assignments of all registered marks, internet domain names, patents and copyrights, duly executed by Seller Group;

 

(f)                the Buyer’s Promissory Note; and

 

(g)               such other documents, instruments and certificates as may be required, in the reasonable opinion of Seller's Representative, to effect and consummate the Acquisition, which documents, instruments and certificates shall be attached to this Agreement.

 

4.2.2.                Buyer shall deliver or cause to be delivered to Seller:

 

(a)               a Closing Certificate, executed by the Chief Executive Officer and Chief Financial Officer of Buyer, certifying that: (i) the execution, delivery and performance of this Agreement, the Transaction Documents to which Buyer is a party, and the transactions contemplated hereby and thereby, and the acts of the officers of Buyer in carrying out the terms and provisions hereof and thereof, have been authorized and approved by all corporate action required to be taken on the part of Buyer; (ii) except as otherwise expressly set forth in such Closing Certificate, each of the representations and warranties of the Buyer in this Agreement, as amended or updated, are true and correct in all material respects as at the Closing Date, and (iii) certifying that the Conditions Precedent set forth in Sections ‎8.1 and ‎8.2, have been satisfied in all material respects or otherwise waived by Buyer; and

 

  

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(b)               to the extent necessary, the Supporting Bank Guarantee in an amount determined in accordance with Section ‎7.11.2 below;

 

(c)               deeds, bills of sales, endorsements, assignments, registrations and other instruments of transfer and conveyance, certificates of title, documents  and other instruments of transfer and conveyance, duly executed by the Seller Group, including assignments of all Transferred Intellectual Property and separate assignments of all registered marks, internet domain names, patents and copyrights, duly executed by Buyer;

 

(d)               the Seller’s Promissory Note;

 

(e)               the Bank Guarantee, to the extent required pursuant to Section ‎3.1 above; and

 

(f)                such other documents, instruments and certificates as may be required, in the reasonable opinion of Seller's Representative, to effect and consummate the Acquisition, which documents, instruments and certificates shall be attached to this Agreement.

 

4.2.3.                The Parties shall duly execute, deliver and exchange, to the extent agreed by the Parties prior to the Closing, each of  the General Assignment, Assumption and Bill of Sale, the OTI IP License Agreement, the Magna License Agreement and the Supply Agreement.  In addition the Parties shall duly execute, deliver and exchange the Escrow Agreement, to the extent an Escrow Amount is required to be deposited with the Escrow Agent at the Closing under this Agreement and provided that the form of the Escrow Agreement is agreed by the Parties prior to the Closing.

 

4.2.4.                Buyer shall pay to Seller, in immediately available funds transferred by wire transfer to Seller’s bank account designated by Seller to Buyer, in writing, at least five (5) Business Days prior to the Closing Date, the cash amounts payable at Closing in accordance with Section ‎3 above, as adjusted for the Adjustment Amount, in accordance with Section ‎7.2.1 less: (i) the amount of the Advance Balances; and (ii) the Escrow Amount, to the extent the Escrow Amount is required to be deposited under this Agreement and the Escrow Agreement is executed at the Closing, in which case the Escrow Amount shall be so deposited by the Buyer with the Escrow Agent at the Closing.

 

4.3.      Termination of Prior Agreement. Subject to and effective immediately upon the Closing, all service and supply agreements between Seller and Buyer shall terminate in its entirety and be of no further force or effect, including, without limitation the Service and Supply Agreement between the Parties dated as of December 31, 2006.

 

	
5.

	
REPRESENTATIONS AND WARRANTIES OF THE SELLER.

Except as disclosed by Seller in the disclosure schedule that Seller shall provide to Buyer by the Disclosure Schedule Delivery Date pursuant to Section ‎7.1.1 below(the “Seller Disclosure Schedule”), Seller hereby represents and warrants to Buyer that the statements contained in this Section ‎5 are true, complete and accurate as of the date of this Agreement and, in all material respects, as of the Closing Date, subject to the contents of the Seller’s Closing Certificate.

 

  

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5.1.      Organization and Qualification of Seller and the Seller Subsidiaries.  Seller is a corporation duly organized and validly existing under the Laws of the State of Israel. Each of the Seller Subsidiaries is a corporation duly organized and validly existing under the Laws of its place of incorporation as further detailed in Part ‎5.1 of the Disclosure Schedule.  Seller and each of the Seller Subsidiaries has all requisite power and authority to own, lease and operate its properties and to carry on its business as it is now being conducted and as contemplated to be conducted. The Seller Group has at all times carried on the Business in accordance with its Organizational Documents and in in all material respects under all applicable Laws. Seller Group is not in a material violation or default with respect to any Law or Permit which could have a Material Adverse Effect upon the Acquisition, the Business, the Acquired Assets or the Assumed Liabilities.

 

The Seller Group is duly qualified to conduct the Business and is in good standing in each jurisdiction in which it currently conducts the Business.

 

5.2.      Authorization; Binding Obligation.

 

5.2.1.                Subject to the fulfillment of all of the Conditions Precedent contained in Section ‎8.1, the Seller Group has all necessary power and authority to execute and deliver this Agreement, and each Transaction Document required to be executed and delivered by it pursuant to this Agreement, and to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby.  The execution and delivery by Seller of this Agreement and each Transaction Document required to be executed and delivered by it pursuant to this Agreement, the performance of its obligations hereunder and thereunder, and the consummation by Seller of the transactions contemplated hereby and thereby, have been duly and validly authorized by all required corporate action on the part of Seller, and no other corporate proceedings on the part of Seller are necessary to authorize this Agreement or any such Transaction Document or on the part of Seller Group to consummate the transactions contemplated herein and therein.  This Agreement has been, and each of the Transaction Documents required to be executed and delivered by it pursuant to this Agreement, when executed and delivered by Seller, will be, duly and validly executed and delivered by Seller, and this Agreement constitutes, and each such Transaction Document, when executed and delivered, will constitute, a legal, valid and binding obligation of Seller enforceable against Seller in accordance with their terms.  There is no outstanding Order binding on the Seller Group, and Seller Group is not a party to or bound by any agreement, restricting the transfer or sale of any of the Acquired Assets or the free and unhindered use of the Acquired Assets by the Buyer after the Closing.

 

5.3.      Consents and Approvals for Transaction.  The execution and delivery by Seller of this Agreement, and each Transaction Document required to be executed and delivered by it pursuant to this Agreement, do not, and the performance of the foregoing shall not, require Seller to obtain any Approval of any Person or Governmental Authority, or make any filing with or notification to, any Governmental Authority, except as set forth in Part ‎5.3 of the Seller Disclosure Schedule.

 

5.4.      No Violation.  Except as set forth in Part ‎5.4 of the Seller Disclosure Schedule, the execution and delivery by Seller of this Agreement, and each Transaction Document required to be executed and delivered by it pursuant to this Agreement, do not, and the performance and consummation of this Agreement, and each Transaction Document required to be executed and delivered by the Seller Group  pursuant to this Agreement, will not: (a) conflict with or violate the Organizational Documents of the Seller Group, (b) to Seller's knowledge, conflict with or violate any Law applicable to Seller Group or by which its properties are bound or affected, (c) to Seller's knowledge, result in any breach or violation of, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, any Contract of the Seller Group or by which Seller Group  is bound; which conflict, violation, breach or default is likely to affect the transactions contemplated hereby or Seller's ability to fulfill its obligations under this Agreement or any Transaction Document required to be executed and delivered by Seller pursuant to this Agreement; (d) result in any violation of, or conflict with, or constitute a default under any term of, or result in the creation or enforcement of any Lien upon any of the Acquired Assets (except for Permitted Liens); or (e) result in a Material Adverse Effect.

 

  

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5.5.      Business Approvals. Except as set forth in Part ‎5.5 of the Seller Disclosure Schedule: (i) the Seller Group, has all Approvals that are materially required for the conduct the Business, (ii) each such Approval is valid and in full force and effect, and (iii)  Seller Group has materially complied with all such Approvals, and (iv) to Seller's knowledge, there is no event that has occurred or circumstances that exist, that may constitute or result in a violation of, or in the revocation, withdrawal or suspension or modification of, any of such Approvals. There is no Action pending or to Seller's knowledge, threatened that could result in the termination, revocation, limitation, suspension, restriction or impairment of any Approval that is required for the conduct the Business, or the imposition of any fine, penalty or other sanctions for violation of any legal or regulatory requirements relating to any such Approval.

 

5.6.     Absence of Certain Events.  Except as set forth in Part ‎5.6 of the Seller Disclosure Schedule, since December 31, 2012, Seller Group has conducted the Business in the ordinary and usual course and has used commercially reasonable efforts to preserve intact its business organization and properties, to keep available the services of the present officers, employees, consultants and independent contractors of Seller Group, and to preserve the present relationships of Seller Group with suppliers, customers, and other Persons with which Seller Group has business relations. Without derogating from the generality of the preceding sentence, except as set forth in Part ‎5.6 of the Seller Disclosure Schedule, since December 31, 2012:

 

5.6.1.                Seller has not authorized or consummated any merger, consolidation, sale or other disposition of all or substantially all of the Acquired Assets,

 

5.6.2.                there has not been any other event or circumstance which has had or could reasonably be expected to have, a Material Adverse Effect on the Business, the Acquired Assets or the Assumed Liabilities;

 

5.6.3.                there has not been any damage to or destruction or loss of any asset or property comprising part of the Business, of an aggregate amount of more than US$500,000 (Five Hundred Thousand Dollars), whether or not covered by insurance, materially and adversely affecting the Business, the Acquired Assets or the Assumed Liabilities.

 

5.6.4.                there has not been any agreements or undertaking by the Seller Group to do any of the foregoing.

 

  

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5.7.      Title to Acquired Assets.

 

5.7.1.                Except for a minority shareholding by a third party in Otignia LLP and a minority shareholding by an Affiliate of Seller in OTI Tanzania Ltd., the Seller Group is the sole and exclusive legal and equitable or beneficial owner of, and has good, free and clear, and marketable title to or is the rightful licensee with right of assignment transfer or sublicense of, all of the Acquired Assets, free and clear of all Liens, except for Permitted Liens, subject to the Approval of counterparties to the Assigned Contracts whose consent is required for the assignment by the Seller to the Buyer of such Assigned Contracts.  Seller has the necessary and sufficient  authority and capacity to sell, transfer, assign, convey and deliver the Acquired Assets that will be transferred to the Buyer by it free and clear of all Liens (except for Permitted Liens), subject to the aforesaid consents of counterparties to Assigned Contracts.

 

5.7.2.                The Acquired Assets, together with the Licensed Intellectual Property:  (a) constitute all assets used in or held for use in the Business and are sufficient for the conduct of the Business as presently conducted; and (b) include all of the operating assets relating solely to the Business.

 

5.8.      Assigned Contracts.

 

5.8.1.                The Seller Disclosure Schedule lists all of the Assigned Contracts. Each Assigned Contract is a legal, valid and binding obligation of the parties thereto and in full force and effect. The Seller Group is in compliance therewith, in all material respects. To the Seller’s knowledge, none of the other parties thereto is in default thereunder, nor has any Assigned Contract been cancelled by the other party; and the Seller is not in receipt of any claim of default by the Seller under any Assigned Contracts.

 

5.8.2.                The Seller Group has, or will have up to the Disclosure Schedule Delivery Date, furnished to the Buyer true, correct, and complete copies (or where oral, written descriptions containing all material terms) of the Assigned Contracts and will list them on Part ‎5.8 of the Seller Disclosure Schedule.

5.8.3.                Except as set forth in Seller's Disclosure Schedule, no party to an Assigned Contract has made a claim to the effect that the Seller Group has failed to perform an obligation thereunder, nor has any such party notified the Seller Group of an intention to make such claim or materially modify or terminate or, if applicable, not renew any such Assigned Contracts.

5.8.4.                Except as set forth in Seller's Disclosure Schedule and except as may be set out within the terms of the Assigned Contracts, there are no material renegotiations of, attempts to materially renegotiate or outstanding rights to renegotiate any material amounts paid or payable to the Seller or the Seller Subsidiaries under current or completed Assigned Contracts with any Person having the contractual or statutory right to demand or require such renegotiation and no such Person has made written demand for such renegotiation.

5.8.5.                Other than the Assigned Contracts, there are no material agreements, contracts or arrangements in effect relating to the Acquired Assets or the Business.

 

  

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5.8.6.                Other than as set forth in Part ‎5.8.6 of the Seller Disclosure Schedule, the Seller Group has not received any advance payment on account of the consideration or compensation due and payable to the Seller Group pursuant to any Assigned Contracts. Part ‎5.8.6 of the Seller Disclosure Schedule lists, with respect to each item the description of the applicable Assigned Contract, the amount of advance payment received by the Seller Group in connection therewith, the terms for repayment to the relevant customer of such advance payment and the outstanding balance due and owing by the Seller Group on account of such advance payment (the "Advance Balances").

 

5.9.      Intellectual Property.

 

5.9.1.                The Transferred Intellectual Property is described in Part ‎5.9.1 of the Disclosure Schedule, including a full and accurate list of all registrations and applications for registration of Intellectual Property and renfewals thereof, the applicable jurisdiction, registration number (or application number) and date issued (or date filed). The Seller Group is the true, lawful, and sole and exclusive owner of the Transferred Intellectual Property and has valid and marketable title in and to all of the Transferred Intellectual Property, free and clear of any Liens. To Seller’s knowledge, the Transferred Intellectual Property does not infringe any enforceable patent or other Intellectual Property of any other Person. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby will not breach, violate or conflict with any instrument or agreement governing any of the Transferred Intellectual Property. There are no overdue registration, maintenance, renewal or any other fees in connection with each item of the Transferred Intellectual Property, and all material documents and certificates required to be filed under the Law where such Transferred Intellectual Property is registered, have been filed with the relevant authorities.

 

5.9.2.                All of the software underlying the Transferred Intellectual Property is owned or duly licensed by the Seller Group (and if licensed, then freely transferable to the Buyer without any liabilities or obligations to the licensor).

 

5.9.3.                Except as set forth in the Seller Disclosure Schedule: (a) the Seller Group has not licensed-in any Transferred Intellectual Property from any third party for use by the Seller Group in connection with the Acquired Assets or the Business (excluding off the shelf software which was not incorporated into the Products); (b) Seller Group has not used modified, distributed, or embedded into or otherwise combined with its products any open source software; and (c) the Seller has not deposited any Transferred Intellectual Property in escrow for the benefit of any third party.

 

5.9.4.                Except as set forth in the Seller Disclosure Schedule and except for licenses granted in the ordinary course to customers of the Business under Assigned Contracts, the Seller Group has not granted any license of any Transferred Intellectual Property to any third party.

 

5.9.5.                Except for payment of fees with respect to off-the-shelf licenses or off-the-shelf software, and except as set out in the terms of any Assigned Contract, the Seller Group owns, or has the right to use, all of the Transferred Intellectual Property required for the operation of the Acquired Assets and the Business as currently conducted, without payment of a royalty to any third party.

 

  

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5.9.6.                There is no pending or, to Seller's knowledge, threatened Claim against the Seller Group or litigation contesting the validity, ownership or right to use, sell, license or dispose of any of the Transferred Intellectual Property.  None of the Seller Group has received any notice from any third party alleging their infringement, misappropriation or misuse of the Intellectual Property rights of any third party. Except as set out in the the Seller Disclosure Schedule, none of the Products have been developed upon the basis of any Intellectual Property of any third party, including on the basis of specifications of any customers, and none of the customers of the Business have any rights whatsoever to any Transferred Intellectual Property.

 

5.9.7.                No former or present employees, consultants, officers, directors of the Seller Group owns, directly or indirectly, or has any other right or interest in, in whole or in part, any of the Transferred Intellectual Property. Each developer, inventor or other contributor to the Transferred Intellectual Property and each current and former employee of, or consultant to the Seller, has signed a proprietary information and inventions assignment agreement protecting Seller's rights in the Transferred Intellectual Property. With the exception of Transferred Employees who may have previously been in the employ of Buyer, the Seller Group does not make or use nor has it made any use of, any invention or other creation of any of the Transferred Employees or any employee or consultant of the Seller Group, made by such person prior to such person's employment or engagement by the Seller Group.

 

5.9.8.                The consummation of the Acquisition will not result in the loss or impairment of the Buyer’s right to own or use any item of the Transferred Intellectual Property.

 

5.10.    Employees.

 

5.10.1.              The Seller Disclosure Schedule lists all of the Potential Transferred Employees and shows all benefits payable or which the Seller Group are bound to provide (whether now or in the future) thereto, including without limitation the names, the commencement  date of their employment, current compensation levels (including salaries, bonuses, incentives, commissions, and deferred compensation), share options, pensions (including those required by all applicable Laws), retirement benefits, company cars, profit sharing, any interests in any incentive compensation plan, accrued severance pay, contributions to pension scheme unused accrued vacation, and job titles of all the Potential Transferring Employees as they are as at the Signing Date.

 

5.10.2.              Except to the extent stated otherwise in the Seller Disclosure Schedule, all past and present employees, consultants, service providers, officers, and directors of the Seller that are or were engaged in the Business are parties to a written agreement, under which each such person or entity (i) is obligated to disclose and transfer to the Seller, all inventions, developments and discoveries which, during the period of employment with or performance of services for the Seller he or she makes or conceives of either solely or jointly with others, that directly relate to the Business, and (ii) is obligated to maintain the confidentiality of proprietary information of the Seller.

 

  

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5.10.3.              The Seller has delivered not later than by the Disclosure Schedule Delivery Date to the Buyer true and complete copies of all existing written agreements with the Transferred Employees.

 

5.10.4.              To the Seller's knowledge, Seller has complied in all material respects with all contractual requirements and the requirements of any applicable Law relating to the Potential Transferred Employees and has made all deductions and payments to the Income Tax Authorities and the National Insurance Institute required to be made by Law or under their respective employment agreements, the Seller's policies and practices and applicable Laws, collective bargaining agreements, extension orders and other legislation, to the extent applicable, including without limitation with regard to salaries, social benefits, insurances, pensions, expenses, health schemes, bonuses, vacations, sick leave and hours of work.

 

5.10.5.              Except to the extent stated otherwise in the Seller Disclosure Schedule, Seller did not receive notice from any Potential Transferred Employee of his or her current intention to terminate their employment with Seller, nor does Seller have a present intention to terminate any of the foregoing.

 

5.10.6.              Seller is not a member of any Employers' Union and there is no current union organizing activity among any of the Potential Transferred Employees or any union representative petition pending or threatened. Seller is not a party to any pending or, to the Seller’s knowledge, threatened, labor dispute, including any strike, work stoppage, or work slowdown with any Potential Transferred Employee. There are no claims pending, or to the Seller’s knowledge, threatened to be brought, in any governmental forum by any Potential Transferred Employee for compensation, pending severance benefits, vacation time or pay, pension benefits, claims for employment discrimination, harassment, unfair labor practices, grievances, wrongful discharge, or otherwise.

 

5.10.7.              All sums and deductions required to be made by the Seller, with respect to the Transferred Employees on account of employee health and welfare insurance, severance pay, managers’ insurance, study funds, vacation pay and similar payments, whether due under the terms of any agreement or by Law owing up to the Signing Date, will have been paid in full by the Closing Date.

 

5.10.8.              Except as set forth in Part ‎5.10.8 of the Disclosure Schedule, there are no agreements between the Seller and any of the Potential Transferred Employees which, subject to any termination procedure prescribed by Law, cannot be terminated by the Seller with up to 30-days’ notice.

 

5.11.    Accounts Receivable.

 

The Seller Disclosure Schedule sets out a true and complete list of all Accounts Receivable as of the Signing Date.

 

5.12.    Taxes.

 

5.12.1.              All Taxes for which the Seller Group is liable with respect to the Business and the Acquired Assets up to the Signing Date (including with respect to their transfer and sale to the Buyer hereunder and including, without limitation, any income, social security, unemployment insurance, worker’s compensation premiums, withholding, sales, use, excise, franchise and other Taxes, any deposits required to be made with respect thereto, and all penalties and interest charges thereon, have been or will be paid by the Seller  Group within the period required for such payment by applicable Law. The Seller Group has duly filed (or will file within the period required for such filing under applicable Law) all returns and reports of Taxes required to be filed prior to such date with respect to the Business and Acquired Assets, and all such returns and reports are (or will be) true and correct in all material respects. There are no Liens for Taxes on any of the Acquired Assets, the Business and the Assigned Contracts.

 

  

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5.12.2.              There is no dispute with any Tax authority in in any jurisdiction in which the Seller Subsidiaries are registered. The Seller is not aware of any circumstances in connection with the Acquisition which will give rise to any dispute with any relevant Tax authority in relation to the Business or the Acquired Assets, which may be imposed on the Buyer.

5.12.3.              All Taxes that the Seller Group is or was required by Law to withhold, deduct or collect in the conduct of the Business have been duly withheld, deducted and collected and, to the extent required, have been paid to the proper Governmental Authority.

5.12.4.              There is no tax sharing agreement, tax allocation agreement, tax indemnity obligation or similar written or unwritten agreement, arrangement, understanding or practice with respect to Taxes (including any advance pricing agreement, closing agreement or other arrangement relating to Taxes) that will require any payment by the Buyer.

5.12.5.              The Seller Group has not made, prepared or filed any elections, designations or similar filings relating to Taxes or entered into any agreement or other arrangement in respect of Taxes or tax returns that has effect for any period ending after the Signing Date, in connection with the Business or the Acquired Assets.

5.12.6.              The Seller Group did not sign an agreement with any Tax authority or received any ruling or decision from any Tax authority in connection with the Acquired Assets, the Business or the Acquisition.

 

5.13.    Assumptions or Guaranties of Indebtedness of Other Persons. Seller has not assumed, guaranteed, endorsed or otherwise become directly or contingently liable for (including, without limitation, liability by way of agreement, contingent or otherwise, to purchase, to provide funds for payment, to supply funds to or otherwise to invest in the debtor or otherwise to assure the creditor against loss) any Indebtedness of any other Person which are or could become a Lien against or otherwise have an adverse effect on any of the Acquired Assets or their use by Buyer.

 

5.14.    Compliance with Laws.  To Seller's knowledge, except as set forth in Seller Disclosure Schedule, Seller has not violated any Law applicable to the Business or any of the Acquired Assets in any material respects.

 

  

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The Seller Group did not receive notice or other communication (whether oral or written) from any Governmental Authority regarding (i) any actual, alleged, possible or potential violation of, or failure to comply with, any Law or Governmental Authorization held or not held by the Seller Group in relation to the Business or the Acquired Assets; or (ii) any actual, alleged, possible or potential obligation on the part of the Seller Group to undertake, or to bear all or any portion of the cost of, any remedial action of any nature, or any actual, proposed, possible or potential revocation, withdrawal, suspension, cancellation, termination of or modification to any Governmental Authorization.

 

5.15.    Legal Proceedings.

 

5.15.1.              Except as set forth in Seller Disclosure Schedule, there is no Action, including oppositions to Intellectual Property registration, pending or, to the knowledge of Seller, threatened by or against the Seller Group, or any of their officers, directors or employees (in such capacity) relating to, or which could reasonably be expected to affect, the Business, the Acquired Assets, the Assumed Liabilities, or the transactions contemplated by this Agreement and by any Transaction Document required to be executed hereunder.

5.15.2.              The Seller Group is not subject to any Order or investigation by Governmental Authority that has a Material Adverse Effect on the Business, the Acquired Assets, or the Assumed Liabilities.

 

5.16.    Interested Party Transactions.

 

Except as set forth in the Seller Disclosure Schedule, no  related Person, officer, director or shareholder (direct or indirect) of the Seller Group, or any family member thereof, is a party to any Assigned Contact or has or has had, directly or indirectly, (a) an interest in any Person which: (i) furnishes or sells services or products which are furnished or sold, or are proposed to be furnished or sold by the Seller Group as part of the Business, or (ii) purchases from or sells or furnishes to the Seller Group any goods or services as part of the Business, or (b) as of the Closing Date a beneficial interest in the Business, any Assigned Contract or the Acquired Assets.

 

5.17.    No Bankruptcy Event & Insolvency.

 

No insolvency proceeding of any kind or Order or application has been made or resolution passed, during the two years immediately preceding the Signing Date, for the winding up of the Seller Group or for the appointment of a liquidator to the Seller Group or for an administration order in respect of the Seller or the Seller Subsidiaries. No receiver, trustee or administrator has been appointed of the whole or part of the Seller Group's business or assets during the two years immediately preceding the Signing Date nor has the Seller Group applied or consented for such appointment. No voluntary arrangement has been proposed in respect of the Seller Group during the two years immediately preceding the Signing Date,. No compromise or arrangement with creditors has been proposed, agreed to or sanctioned in respect of the Seller Group during the two years immediately preceding the Signing Date. The Seller Group is not insolvent or unable to pay its debts, has not stopped paying its debts as they fall due or has admitted its inability to pay its debts. There is no unsatisfied Order outstanding against the Seller Group in relation to the Business.  The Seller Group has not, during the two years immediately preceding the Signing Date, suffered any equivalent or analogous proceedings or Orders to any of those described in this Section ‎5.17 under the law of any jurisdiction in which it carries on the Business or has an asset that is part of the Acquired Assets.

 

  

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5.18.    No Brokers.  Seller has not employed or engaged, either directly or indirectly, or incurred or will incur any Liability to, any broker, finder, investment banker or other agent in connection with the transactions contemplated by this Agreement.

 

5.19.    Carve-Out Financial Statements

 

5.19.1.              The Carve-Out Financial Statements will be substantially in accordance with the Books and Records of the Seller Group as they relate directly and solely to the Business and will be complete and correct in all material respects as of December 31, 2012. The Carve-Out Financial Statements will present a true, complete and fair view of the state of affairs, financial position, assets and Liabilities of the Seller Group as they relate directly and solely to the Business as of December 31, 2012, in all material respects.

5.19.2.              As of as of December 31, 2012, there were no material Liabilities, claims, or obligations of any nature directly and solely related to the Business, whether accrued, absolute, contingent, anticipated, or otherwise, whether due or to become due, that will not be shown or provided for in the Carve-out Financial Statements. Except to the extent noted otherwise in the Carve-out Financial Statements, the Liabilities of the Seller Group as they relate directly and solely to the Business and as detailed in the Carve-Out Financial Statements, were incurred in the ordinary course of business.

 

5.19.3.              The Closing Balance Sheet will be substantially in accordance with the Books and Records of the Seller Group as they relate directly and solely to the Business and will be complete and correct in all material respects as of the Signing Date. The Closing Balance Sheet will present a true, complete and fair view of the state of affairs, financial position, assets and Liabilities of the Seller Group as they relate directly and solely to the Business as of the Signing Date, in all material respects.

5.19.4.               As of the Signing Date, there were no material Liabilities, claims, or obligations of any nature directly and solely related to the Business, whether accrued, absolute, contingent, anticipated, or otherwise, whether due or to become due, that will not be shown or provided for in the Closing Balance Sheet. Except to the extent noted otherwise in the Closing Balance Sheet, the Liabilities of the Seller Group as they relate directly and solely to the Business and as detailed in the Closing Balance Sheet, were incurred in the ordinary course of business.

 

  

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5.20.    Business Books and Records

 

The Business Books and Records of Seller Group as they relate directly and solely to the Business, all of which will be made available to Buyer by the Disclosure Schedule Delivery Date, will be complete and correct in all material respects and represent actual, bona fide and arm's length transactions relating to the Business, and have been maintained in accordance with sound business practices of the Business.

 

5.21.    Assigned Real Property

5.21.1.              The Seller will make available to the Buyer, by the Disclosure Schedule Delivery Date, a correct and complete copy of the property lease agreement, together with all amendments, modifications or supplements thereto, relating to the real property leased by OTI Panama S.A. (the “Real Property”).

5.21.2.              OTI Panama S.A. has valid and enforceable leasehold interests over the Real Property. The Real Property lease is in full force and effect, and OTI Panama S.A. has not received or given any notice of any default or event that with notice or lapse of time, or both, would constitute a default or breach by OTI Panama S.A. under the Real Property lease and, to the Seller’s knowledge, no other party is in breach or default thereof, and no party to the Real Property lease has exercised any termination rights with respect thereto.

5.21.3.              The Real Property is the only real property leased by the Seller’s Subsidiaries.

 

5.22.    Tangible Property

 

The Seller Group has sole, good and marketable title to all of the items of Tangible Property as reflected in the Carve-Out Financial Statements (except as sold or disposed of subsequent to the date thereof in the ordinary course of business), free and clear of any and all Liens except for Permitted Liens. All such items of Tangible Property which, individually or in the aggregate, are material to the operation of the Business are in good operating condition and in a good state of maintenance and repair (ordinary wear and tear excepted) and are suitable for the purposes used.

 

5.23.    Inventories

 

5.24.    Part ‎5.24 of the Disclosure Schedule sets forth a complete list of all Inventories of the Seller Group related directly and solely to the Business as of Signing Date, including details of the cost and quantity and production completion percentage (in the production process of the Seller Group) of each item of all such Inventories as of the Signing Date.

 

5.25.    All items included in the Inventories of the Seller Group related to the Business consist of a quality and quantity usable and, with respect to finished goods, saleable, in the ordinary course of business of the Seller Group except for obsolete items and items of below-standard quality, all of which have been written off or written down to net realizable value in the Carve-Out Financial Statements or on the Books and Records of the Seller Group as of the Signing Date, as the case may be.

 

  

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5.26.    Incentives and Benefits

 

The Seller Group has not received any grants, incentives and subsidies from,, and has no outstanding applications (pending, outstanding, or otherwise) therefor to, any Governmental Authorities (including without limitation, foreign governmental or administrative agencies), granted to the Seller Group, in relation solely to the Acquired Assets and the Business.

 

5.27.    Health, Safety and Environment

 

5.27.1.              The Acquired Assets have not been the subject of any environment, health and safety ("EH&S") audit or any evaluation, assessment, study or test, nor has Seller received any notification from any Governmental Authority of any violation of any EH&S-related Law in connection with the Acquired Assets or the Business.

 

5.27.2.              Neither the Seller Group nor anyone acting on their behalf has stored, treated, discharged, transported or disposed of any Hazardous Substance other than in a safe manner in accordance with applicable law.

 

5.28.    Disclosure.

 

Neither this Agreement (including the exhibits and schedules hereto) nor any other Transaction Document required to be executed by Seller hereunder, contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary in order to make the statements contained herein or therein not misleading in light of the circumstances under which they were made or necessary to provide a prospective buyer of the Business, the Acquired Assets or the Assumed Liabilities with all information material thereto.

 

	
6.

	
REPRESENTATIONS AND WARRANTIES OF BUYER.

Buyer hereby represents and warrants to Seller that the statements contained in this Section ‎6 are complete and accurate as of the date of this Agreement.

 

6.1.      Organization and Qualification of Buyer.  Buyer is a corporation duly organized and validly existing under the Laws of the State of Israel. Buyer has all requisite power and authority to own, lease and operate its properties and to carry on its business as it is now being conducted.

 

6.2.      Authorization; Binding Obligation. Subject to the fulfillment of all of the Conditions Precedent contained in Section ‎8.1, Buyer has all necessary power and authority to execute and deliver this Agreement, and each Transaction Document required to be executed and delivered by it pursuant to this Agreement, and to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby.  The execution and delivery by Buyer of this Agreement and each Transaction Document required to be executed and delivered by it pursuant to this Agreement, the performance of its obligations hereunder and thereunder, and the consummation by Buyer of the transactions contemplated hereby and thereby, have been duly and validly authorized by all required corporate action on the part of Buyer, and no other corporate proceedings on the part of Buyer are necessary to authorize this Agreement or any such Transaction Document or to consummate the transactions so contemplated herein and therein.  This Agreement has been, and each of the Transaction Documents required to be executed and delivered by Buyer pursuant to this Agreement, when executed and delivered, will be, duly and validly executed and delivered by Buyer, and this Agreement constitutes, and each such Transaction Document, when executed and delivered, will constitute, a legal, valid and binding obligation of Buyer, enforceable against it in accordance with its terms.

 

  

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6.3.      Consents and Approvals.  The execution and delivery by Buyer of this Agreement, and of each Transaction Document required to be executed and delivered by it pursuant to this Agreement, do not, and the performance of the foregoing shall not, require Buyer to obtain the Approval of any Person or Governmental Authority, or make any filing with or notification to, any Governmental Authority.

 

6.4.      No Violation.  To the knowledge Buyer, and subject to receipt of all Approvals and Governmental Authorizations to be delivered by Seller to Buyer pursuant to this Agreement, the execution and delivery by Buyer of this Agreement and of each Transaction Document required to be executed and delivered by it pursuant to this Agreement, do not, and the performance of this Agreement, and each Transaction Document required to be executed and delivered by it pursuant to this Agreement, will not, (a) conflict with or violate the Organizational Documents of Buyer, (b) conflict with or violate any Law applicable to Buyer, or by which its properties are bound or affected, or (c) result in any breach or violation of, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, any Contract to which Buyer is a party or by which it is bound; which conflict, violation, breach or default is likely to affect the transactions contemplated hereby or Buyer's ability to fulfill its obligations under this Agreement or any Transaction Document required to be executed and delivered by it pursuant to this Agreement.

 

6.5.      Litigation.  There is no Action pending, or to the knowledge of Buyer, currently threatened against Buyer, that questions the validity of this Agreement or any of the Transaction Documents required to be executed by Buyer pursuant to this Agreement, or the right of Buyer to enter into this Agreement or any of the Transaction Documents required to be executed by Buyer pursuant to this Agreement, or to consummate the transactions contemplated hereby or thereby.

 

6.6.      Financing and Capital Resources. At the Closing, Buyer shall have adequate cash on its balance sheet or borrowing capacity facilities to pay that amount of Purchase Price payable at the Closing under Section ‎3.1 above, together with all fees and expenses of Buyer associated with the transactions contemplated hereby, and to make any other payments necessary to consummate the Acquisition in accordance with the terms of this Agreement.

 

6.7.      No Brokers. Buyer has not employed or engaged, either directly or indirectly, or incurred or will incur any Liability to, any broker, finder, investment banker or other agent in connection with the transactions contemplated by this Agreement.

 

6.8.      Disclosure of Information; No Further Representations. Except for the representations and warranties expressly set forth in Section ‎5, Seller has not made any further representations or warranties with respect to any subject matter of this Agreement, and the Acquired Assets shall be sold, transferred and assigned to, and the Assumed Liabilities shall be assumed by, Buyer, without any further representation, warranty or guarantee whether express, implied or statutory on the part of Seller or any representatives thereof.

 

  

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7.

	
COVENANTS.

 

7.1.      Access to Information; Due Diligence.

 

7.1.1.                The Parties agree and acknowledge that Buyer shall first receive a copy of the Seller Disclosure Schedule not later than 30 days following the Signing Date (the date in which a full copy of Seller Disclosure Schedule is actually delivered to Buyer shall be referred to herein as the "Disclosure Schedule Delivery Date").  By no later than the Disclosure Schedule Delivery Date Seller shall provide Buyer access to or deliver to Buyer copies of, substantially all the Books and Records of the Business.

 

7.1.2.                Subject to applicable Law, any applicable Order and the execution of the Non-Disclosure Agreement (which Buyer and Seller shall execute simultaneously with its execution of this Agreement) Seller shall afford certain representatives, officers and employees of Buyer, as well as its legal advisors and accountants, throughout the Interim Period, to make such investigation of the Business, including examination of the Business Books and Records as the Buyer reasonably requests and to make extracts and copies of the foregoing for the sole purpose of Buyer conducting a due diligence review of the Business, the Acquired Assets and the Assumed Liabilities (the “Due Diligence Review”). Buyer's Due Diligence Review shall be conducted during normal working hours and with Seller's reasonable cooperation, provided that Buyer's access to Seller's officers and employees and customers of the Business shall be limited as instructed by Seller's CEO and any meetings with same shall be coordinated in advance with Seller's CEO.

 

7.1.3.                No investigation by the Buyer prior to or after the Signing Date shall diminish or obviate any of the representations, warranties, or covenants of Seller contained in this Agreement or any other Transaction Documents, as may be updated by the Seller’s Closing Certificate.

 

7.1.4.                If at any time prior to the Closing Date Buyer reveals the existence of any of the issues listed in Schedule ‎7.1.4 (each, a “Major Issue”), it shall promptly notify Seller thereof, providing full details including copies of all relevant documentation supporting the existence of the Major Issue (a "Major Issue Notice").

 

  

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7.2.      Conduct of Business by Seller Group during the Interim Period.

 

7.2.1.                Subject to the consummation of the Closing, the rights, benefits, risks and Liabilities associated with the Business, including those attached to the Acquired Assets and Assumed Liabilities, shall be deemed to be those of the Buyer, effective as of the Signing Date.  At the Closing, Seller shall deliver to Buyer a report (the “Adjustment Report”), certified by Seller’s CFO, relating solely to Business during the Interim Period, which Adjustment Report shall reflect:

 

(i)                     the profit & loss results relating to the Business during the Interim Period;

 

plus

 

(ii)                    the value on the Books and Records of the Seller of the Business-related inventory as at the Signing Date less the value of the Business-related inventory as at the Closing Date.

 

The Purchase Price shall be adjusted by the result reflected in the Interim Report (the “Adjustment Amount”).  To the extent the Adjustment Amount is negative, Buyer shall add such negative amount to the cash portion of the Purchase Price payable to Seller at the Closing. If the Adjustment Amount is positive, Buyer shall reduce the cash portion of the Purchase Price payable to Seller at the Closing by such positive amount.

 

7.2.2.                Seller covenants and agrees that, during the Interim Period, the Seller Group shall conduct the Business in the ordinary course consistent with past practice, in all material respects and shall use commercially reasonable efforts to preserve intact, the present relationships of Seller Group with suppliers, customers, and other Persons with which Seller Group have business relations related to the Business.

 

7.2.3.                Without derogating from the generality of the preceding Section 7.2.1, during the Interim Period, except as required by this Agreement or to the extent not resulting in a Material Adverse Effect, the Seller Group shall:

 

7.2.3.1.                     use commercially reasonable efforts to preserve the Acquired Assets intact and to maintain the Acquired Assets in a state of repair and condition that complies with applicable Law and is consistent with the requirements and normal conduct of the Business, subject to normal wear and tear and, at all times in the ordinary course consistent with past practice, in all material respects;

 

7.2.3.2.                     maintain existing insurance coverage which each of the Seller and the Seller Subsidiaries maintains as of the date hereof;

 

7.2.3.3.                     use commercially reasonable efforts to perform its obligations under the Assigned Contracts and Permits, in the ordinary course consistent with past practice, in all material respects;

 

7.2.3.4.                     use commercially reasonable efforts to comply with all requirements of the Law, in the ordinary course consistent with past practice, in all material respects;

 

7.2.3.5.                     use commercially reasonable efforts to perform all actions necessary to maintain existing rights in the Transferred Intellectual Property, in the ordinary course consistent with past practice, in all material respects;

 

7.2.3.6.                     report periodically to the Buyer concerning the status of the Business, operations and finances;

 

  

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7.2.3.7.                     keep in full force and effect, without amendment, all material rights relating to the Business; and

 

7.2.3.8.                     reasonably cooperate with Buyer and assist Buyer in identifying the Governmental Authorizations required by Buyer to operate the Business from and after the Closing Date.

 

7.2.4.               Without derogating from the generality of the preceding Section 7.2.1, during the Interim Period, except as required by this Agreement or to the extent not resulting in a Material Adverse Effect, the Seller Group shall not, without Buyer’s prior written consent:

 

7.2.4.1.                     authorize or consummate any merger, consolidation, sale or other disposition of any or all of the Acquired Assets, except in the ordinary and usual course of business, or issue or sell any shares, stock, options or other securities in any of the Seller Subsidiaries;

 

7.2.4.2.                     enter into any Contracts which would reasonably be expected to result in a Material Adverse Affect on the Acquired Assets or the Business;

 

7.2.4.3.                     change its practices with respect to billing customers of the Business, extending credit to customers of the Business, collecting Accounts Receivable relating to the Business, paying Accounts Payable relating to the Business or otherwise discharging its Liabilities relating to the Business;

 

7.2.4.4.                     enter into any financing arrangement or incur, increase or Guarantee any Indebtedness, all pertaining solely to the Business, except accounts payable in the ordinary course of business;

 

7.2.4.5.                     waive any right, forgive any debt or release any claim relating to the Business, except in the ordinary course of business;

 

7.2.4.6.                     enter into any transaction (including purchase orders) in excess of US$ 5,000 (Five Thousand United States Dollars);

 

7.2.4.7.                     enter into or be a party to any new transaction with any related party, pertaining to the Business:

 

7.2.4.8.                     take or omit to take any action that is reasonably likely to cause any of the representations and warranties of the Seller under this Agreement not to be true and correct in all material respects as of the Closing without change, or that is likely to affect the Closing;

 

7.2.4.9.                     acquire any additional assets or dispose of or agree to dispose of (or grant any option or interest in respect of) any Acquired Assets, except in the ordinary course of business; or

 

7.2.4.10.                    enter into, materially amend or terminate any Contracts pertaining to the Business (including the Assigned Contracts).

 

  

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7.3.      No Control. Notwithstanding anything to the contrary herein, prior to the Closing Date, Seller shall exercise, consistent with and subject to the terms and conditions of this Agreement, complete control and supervision over its operations.

 

7.4.      No Default. Neither Party shall take any action that would reasonably be expected to result in the representations and warranties provided by such Party in Sections ‎5 and ‎6, respectively, becoming untrue or inaccurate in any material respect or that could materially impair the ability of the Parties to consummate the transactions contemplated hereby in accordance with the terms hereof.

 

7.5.      Cooperation; Approvals, Filings and Consents.

 

7.5.1.                Upon the terms and subject to the conditions set forth in this Agreement, each Party shall use commercially reasonable efforts to take, or cause to be taken, all actions, and do, or cause to be done, and to assist and cooperate with the other Party in doing, all things necessary, proper or advisable to consummate the transactions contemplated hereby and to satisfy or cause to be satisfied all of the Conditions Precedent that are set forth in Section ‎8, as applicable to each of them.  Each Party, at the reasonable request of the other Party, shall execute and deliver such other instruments and do and perform such other acts and things as may be necessary or desirable for effecting completely the consummation of this Agreement and the transactions contemplated hereby.

 

7.5.2.                Each Party shall, as promptly as practicable, use commercially reasonable  efforts to obtain all necessary Approvals (or waivers from a legal requirement to obtain Approvals) from Governmental Authorities and make all other necessary registrations and filings under applicable Law required to be obtained or made by it in connection with the authorization, execution and delivery of this Agreement and the Transaction Documents required to be executed by such Party hereunder or thereunder and the consummation of the transactions contemplated hereby and thereby.  The Parties shall, and shall cause their respective Affiliates to, act in good faith and reasonably cooperate with the each other in connection therewith and in connection with resolving any investigation or other inquiry with respect thereto. To the extent not prohibited by Law, each Party to this Agreement shall use commercially reasonable efforts to furnish to each other all information required for any application or other filing to be made pursuant to any Law in connection with the transactions contemplated by this Agreement. Each Party shall give the other party reasonable prior notice of any communication with, and any proposed understanding, undertaking, or agreement with, any Governmental Authority regarding any such Approval.

 

7.5.3.                Upon the terms and subject to the conditions set forth in this Agreement, each of the Parties agrees to use commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and to make effective, in the most expeditious manner practicable, the Acquisition, including: (a) the obtaining of all necessary Approvals (or waivers from the requirement to obtain Approvals) from any Governmental Authorization and other third parties; (b) the defending of any lawsuits or other legal proceedings, whether judicial or administrative, challenging the transactions contemplated under this Agreement and the other Transaction Documents or the consummation thereof; and (c) the execution and delivery of any additional instruments necessary to consummate the Acquisition and to fully carry out the purposes of, this Agreement.

 

  

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7.5.4.                It is hereby further agreed that the Seller and the Seller Subsidiaries, as the case may be, will bear any and all costs, expenses, penalties or fines (whether or not consensual) or other liabilities regarding the taking of the action referred to in Sections ‎7.5.1 - ‎7.5.3 (inclusive).

 

7.5.5.                Notwithstanding anything in this Agreement to the contrary, nothing contained in this Agreement (including under this Section ‎7.5 or under Section ‎8.1(a)) shall require any Party to take or agree to take any action with respect to, or agree to any prohibition or limitation on, or other requirement which would prohibit, impair or otherwise materially adversely affect the ownership or operations of all or any portion of the business or properties of such Party or any of its shareholders (including, without limitation, the Business).

 

7.6.      Public Announcements.  All announcements to third parties pertaining to this Agreement or the transactions contemplated hereby will be subject to review and approval of both parties before public disclosure. The Parties agree to keep confidential the terms of this Agreement and any Transaction Document required to be executed hereby until they mutually agree upon the language and timing of a press release or until such time as one of the parties determines, based upon the advice of counsel, that a public announcement is required by Law, in which case the parties shall in good faith attempt to agree on any public announcements or publicity statements with respect thereto.

 

7.7.      Disclosure to Seller Employees, Customers and Suppliers. The Seller and the Buyer will consult with each other concerning the means by which Seller's employees, customers, suppliers and others having dealings with the Seller Group in relation to the Business will be informed of the Acquisition, and the Buyer will have the right to participate in any such communication, other than Seller’s communication of the Acquisition to its employees.

 

7.8.      No Solicitation of Other Proposals.  From the date hereof until the earlier of the Closing Date or the termination of this Agreement in accordance with its terms, the Seller Group shall not, nor shall they permit any of their officers, directors, employees, representatives or agents (collectively, the “Seller Representatives”), directly or indirectly, to (i) solicit, encourage, facilitate, or initiate any inquiries or communications offer that constitutes or may constitute an Acquisition Proposal, (ii) participate or engage in any inquiries, discussions or negotiations with any Person concerning any Acquisition Proposal; or (iii) enter into or execute any agreement relating to an Acquisition Proposal.  For purposes of this Agreement, the term “Acquisition Proposal” shall mean any proposal or offer from any Person (other than Buyer or any of its Affiliates) relating to any merger, consolidation or other business combination involving the sale or other disposition of all or any significant portion of the Business or the Acquired Assets.

 

7.9.      Notice of Certain Events; Updates to Disclosure Schedules.

 

7.9.1.                Until the earlier of the Closing Date or the termination of this Agreement in accordance with its terms, each Party shall promptly notify the other Party, in writing, of: (i) any event, condition, fact or circumstance, of which it becomes aware, that would cause or constitute a material inaccuracy in or a material breach of any representation or warranty made by such Party in this Agreement; (ii) any material breach of any covenant or obligation hereunder of such Party ; and (iii) with respect to the Seller Group only, any and all material adverse events and developments concerning the Business, the Acquired Assets or the Assumed Liabilities.

 

  

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7.9.2.                Until the earlier of the -Closing Date or the termination of this Agreement in accordance with its terms, each Party shall give the other prompt written notice of (i) any notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with the consummation of the transactions contemplated by this Agreement, (ii) any notice or other communication from any Governmental Authority in connection with the transactions contemplated by this Agreement, (iii) any Action or threatened Action relating to or involving or otherwise affecting the transactions contemplated by this Agreement, and (iv) the occurrence of a breach or default or event that, with notice or lapse of time or both, could become a breach or default under this Agreement.

 

7.10.    Employment Matters.

 

7.10.1.              During the Interim Period: (i) Buyer shall offer employment to all Potential Transferred Employees, contingent upon the Closing, under terms of employment at least as beneficial to the Potential Transferred Employees as their existing terms with the Seller; and (ii) Seller shall permit Buyer to approach, interview and negotiate with each of the Potential Transferring Employees (but only with such Potential Transferred Employees), in respect of their potential employment by Buyer pursuant to (i) above.

 

7.10.2.              The Seller shall not take any actions that are intended to or are likely to dissuade any Potential Transferred Employee from accepting employment by Buyer.

 

7.10.3.              Without derogating from the provisions of Section ‎12 below, other than as expressly permitted pursuant to Section ‎7.10.1 above, Buyer shall not approach or discuss with any of the Potential Transferring Employees or any other employee, officer, consultant or representative of the Seller (other than those directly and actively involved in negotiating this Agreement) any of the terms of this Agreement and shall not directly or indirectly, solicit or encourage any such person to cease to work with the Seller, or solicit or encourage for purposes of directly or indirectly hiring any such person

 

7.10.4.              Seller undertakes that as of the Closing Date and for a period of at least 5 years thereafter, it will not, directly or indirectly, employ or engage as consultant, or solicit the employment or engagement as consultant of, any Potential Transferred Employee.

 

7.10.5.              At the Closing:

 

7.10.5.1.                 The Seller shall terminate the employment of all of the Potential Transferred Employees who did not become Transferred Employees effective on or around the Closing Date, except to the extent Buyer consents otherwise.

 

7.10.5.2.                 In respect of each Potential Transferred Employee who accepts employment by the Buyer and agrees to execute a Release, Buyer shall enter into an employment agreement with each such Transferred Employee under terms of employment at least as beneficial to the Transferred Employees as their existing terms with the Seller and which includes an undertaking to maintain continuity of their rights as employees despite their transfer to the employ of Buyer.

 

  

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7.10.6.              In addition, and without derogating from Seller's liabilities hereunder, the Seller shall transfer to each Transferred Employee the pension fund/manager's insurance policy and education fund of such Transferred Employee. As soon as practicable after the Signing Date, the Seller shall submit to the Assessor Office of the Israeli Income Tax, the forms required for the continuity of employment of the Transferred Employees and for transferring their pension funds pursuant to the Income Tax Circular 6/2011. The Buyer shall assist the Seller in such submission and shall execute and deliver all documents as reasonably required in connection therewith.

 

7.10.7.              The Seller shall be responsible for settling all amounts owing to the Transferred Employees up to the Closing Date. Without derogation from the generality of the foregoing, the Seller shall be liable for and shall pay all wages, bonuses, commissions, vacation pay, vacation accrual, recuperation pay, travel pay, pay for other compensated absences and other remuneration (including mandatory or discretionary benefits) earned or accrued by the Transferred Employees according to any applicable Law and/or agreement up to the close of business on the Closing Date, including any related payroll deductions (such as employee benefit plan contributions and employment taxes but excluding those payment expressly stated in Schedule ‎7.10.5.1 hereof) with respect thereto, regardless of whether such amounts have been accrued on the books of Seller at close of business on the Closing Date.

 

7.10.8.              The Buyer shall be solely liable for and shall pay all wages, bonuses, commissions, vacation pay, vacation accrual, recuperation pay, travel pay, pay for other compensated absences and other remuneration (including mandatory or discretionary benefits) owing to the Transferred Employees according to any applicable Law and/or agreement effective as of the close of business on the Closing Date, including any related payroll deductions (such as employee benefit plan contributions and employment taxes with respect thereto

 

7.10.9.              Seller hereby waives any claim it may have against Buyer (but does not waive any such claim Seller may have against any Transferred Employee, except to the extent such Transferred Employee is engaged by Buyer in the Business) arising solely from the employment of each such Transferred Employee by Buyer hereunder, in respect of the non-compete/non solicitation undertaking pursuant to such Transferred Employee’s current employment agreement with Seller, any applicable Laws or pursuant to any other instrument or Contract. Such waiver is expressly made also for the benefit of the Transferred Employees.

 

7.11.    Supporting Bank Guarantee

 

7.11.1.              Buyer shall up to the Closing Date: (i) use best efforts to replace all Operating Guarantees issued by or on behalf of Seller under the Assigned Contracts (“Seller Operating Guarantees”) with substantially identical Operating Guarantees issued by or on behalf of Buyer; and (ii) provide all such assistance to Seller to enable Seller to release and terminate all such Seller Operating Guarantees (without breaching the relevant Assigned Contracts), as at the Closing Date.

 

  

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7.11.2.              To the extent that any such Seller Operating Guarantees are not so replaced by the Closing Date (the “Remaining Seller Operating Guarantees”) Buyer shall deliver to the Seller, at the Closing, the Supporting Bank Guarantee in an amount equal to the aggregate of the underlying value of all of the Remaining Seller Operating Guarantees and shall thereafter continue to use best efforts to replace, release and terminate all Remaining Seller Operating Guarantees in accordance with Section ‎7.11.1 above.

 

7.11.3.              The Supporting Bank Guarantee shall remain in full force and effect until all Remaining Seller Operating Guarantees are released and terminated and Seller shall be entitled to immediately draw on the Supporting Bank Guarantee in the event that any third party makes a claim on a Remaining Seller Operating Guarantee and to the extent of such claim.

 

7.12.    Tax Matters.

 

7.12.1.              To the extent relevant to the Acquired Assets or the transactions contemplated hereby, each Party shall: (i) provide the other with such assistance as may  reasonably be required in connection with the preparation of any filings, reports or returns to the Israel Tax Authority (“Tax Returns”) and the conduct of any audit or other examination by the Israel Tax Authority  or in connection with judicial or administrative  proceedings relating to any Liability for Taxes; and (ii) retain for the period of time required at Law and provide the other with all records or other information that may be relevant to the preparation of any Tax Returns, or the conduct of any audit or examination, or other proceeding relating to Taxes.

 

7.12.2.               Each Party shall bear its own Taxes in connection with the transactions contemplated hereby.

 

7.13.    Litigation Cooperation.

 

7.13.1.              Until the earlier of the Closing Date or the termination of this Agreement in accordance with its terms, the Seller shall promptly notify Buyer of any Claims or Actions which after the date hereof are commenced against the Seller, or any officer, director, employee, consultant, agent or shareholder, in their capacities as such, and which relates to the Business or the Acquired Assets.

 

7.13.2.              Buyer acknowledges and agrees that Seller shall be entitled to control any and all Actions up to the Closing Date, subject to consultation with Buyer.

 

7.14.    Change of Seller Subsidiaries Trading Names.  Promptly following the Closing, Buyer shall take, or cause to be taken, all actions, do, or cause to be done, all things and execute, deliver or file, or cause to be executed, delivered or filed all documents and statements,  necessary, proper or advisable to ensure that no later than the 60th day following the Closing, all Seller Subsidiaries and all Seller Foreign Branches shall cease to trade or otherwise be identified by any name containing the words: "OTI" or "On Track Innovations".

 

  

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8.

	
CONDITIONS PRECEDENT TO CLOSING.

 

8.1.      Conditions to Obligations of Each Party.  The respective obligations of each Party to consummate the transactions contemplated by this Agreement shall be subject to the satisfaction of the following conditions:

 

8.1.1.                Governmental Approvals. All Approvals of, or declarations or filings, with any Governmental Authority, the lack of which shall constitute a violation of applicable Law, shall have been obtained or made at or prior to the Closing Date. Such Approvals, declarations or filings shall be detailed in a list to be prepared by the Parties' counsels until the Disclosure Schedule Delivery Date.

 

8.1.2.                No Injunctions or Restraints; Illegality.  No temporary restraining order, preliminary or permanent injunction, or other Order (whether temporary, preliminary or permanent) issued by any Court, or other legal restraint or prohibition shall be in effect at or prior to the Closing Date, which prevents the consummation of the transactions contemplated hereby on the terms contemplated herein.

 

8.2.      Additional Conditions of Buyer.  The obligation of Buyer to consummate the transactions contemplated by this Agreement shall be subject to the satisfaction of the following additional conditions, unless waived in writing by Buyer:

 

8.2.1.                Closing Documents. All of the documents to be delivered by the Seller pursuant to Section ‎4.2.1 above shall have been executed and delivered to the Buyer at or prior to the Closing Date, which includes the delivery of the Disclosure Schedule and all other schedules which are required to be annexed hereto as of the Closing, the lack of which would constitute a Major Issue.

 

8.2.2.                Required Approvals and Consents. Seller shall have obtained all Approvals and other consents by any Person, the lack of which would constitute a Major Issue.

 

8.2.3.                Due Diligence Review. Buyer’s Due Diligence Review (including its review of the Seller Disclosure Schedule) shall not have revealed any Major Issue that was not substantially remedied by Seller until the Closing.

 

8.2.4.                Agreements and Covenants. Seller shall have performed, procured or complied with in all material respects each obligation, agreement and covenant to be performed or complied with by it or by Seller Group under this Agreement at or prior to the Closing Date.

 

8.3.      Additional Conditions of Seller. The obligation of Seller to consummate the transactions contemplated by this Agreement shall be subject to the satisfaction of the following additional conditions, unless waived in writing by Seller:

 

8.3.1.                Closing Documents. All of the documents to be delivered by the Buyer pursuant to Section ‎4.2.2 above shall have been executed and delivered to the Seller at or prior to the Closing Date, which includes the delivery of all schedules which are required to be annexed hereto as of the Closing.

 

  

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8.3.2.                Agreements and Covenants. Buyer shall have performed or complied with in all material respects each obligation, agreement and covenant to be performed or complied with by it under this Agreement at or prior to the Closing Date.

 

	
9.

	
BREAK-UP.

 

9.1.      Simultaneously with the execution of this Agreement: (i)  Buyer shall execute the Buyer Promissory Note and shall deliver same to Seller; and (ii) Seller shall execute the Seller Promissory Note and shall deliver same to the Buyer.

 

9.2.      If, notwithstanding the fulfillment or waiver in accordance with Section ‎8 of the Conditions Precedent, either Party (a “Refusing Party”) refuses or otherwise fails to consummate the transactions set out herein at the Closing for any reason then, without limiting any other right or remedy available to the other Party (the “Closing Party”) under this Agreement or at Law, the Refusing Party shall pay the Closing Party, as liquidated damages, a break-up fee in the amount of US$ 2,500,000 (Two Million Five Hundred Thousand United States Dollars) (the “Break-Up Fee”).

 

9.3.      In the event the Closing is not consummated solely as a result of the failure of any Condition Precedent to be fulfilled (and absent the waiver of its requirement in accordance with Section ‎8), then, upon the Drop Dead Date each Party shall deliver to the other Party such other Party’s Promissory Note, without liability to the other Party.

 

9.4.      In the event the Refusing Party refuses to consummate the Closing notwithstanding the fulfillment of all of the Conditions Precedent (or waiver by the Closing Party of any unfulfilled Condition Precedent, in the event such Condition Precedent may be waived by the Closing Party in accordance with Section ‎8), then from the date all such Conditions Precedents precedent are so fulfilled or waived, the Break-Up Fee will become immediately payable by the Refusing Party to the Closing Party and the  Closing Party shall be entitled to draw on the Refusing Party’s Promissory Note immediately and in full.

 

9.5.      In the event the Closing fails to consummate for any reason other than as a result of Seller being the Refusing Party, then:

 

9.5.1.                as of the Signing Date Buyer shall not, and shall procure that its Affiliates do not, directly or indirectly compete with the Seller Group in respect of any of the Potential Projects (other than the Potential Projects in Zambia and Sri-Lanka), including by submitting competing bids in respect of such Potential Projects or offer or providing competing products or services to the customers of such Potential Projects, whether as principal or for another's account, solely or jointly with others, or through any form of ownership in another entity or otherwise (other than by holding less than 5% of the equity or voting power of any publicly traded company); and

 

9.5.2.                in the event Buyer is awarded the Buffalo Project, then 50% of all gross profits (EBIT) earned by Buyer and its Affiliates and deriving from the Buffalo Project shall be paid to Seller on a quarterly basis, without any set-off or withholding of any kind (the “Seller Project Share”).  The Seller Project Share owing in respect of each calendar quarter shall be paid to Seller within 90 days following the end of such calendar quarter and shall be accompanied by a certificate issued by the Buyer’s CEO or CFO, detailing the gross profits derived from the Buffalo Project during the relevant calendar quarter.  Within 10 days of the publication of the Buyer’s Annual Reports, the Buyer shall deliver to the Seller a Buyer’s Auditor Certificate confirming the Seller Project Share payable to Seller during the calendar year to which the Buyer’s Annual Reports relate.  The amount payable hereunder in respect of the last calendar quarter of each year shall be paid within 10 days of the publication of the Buyer’s Annual Reports and shall be adjusted to reflect any difference between the amounts actually paid to Seller during the previous calendar quarters and the amount that should have been paid pursuant to the Buyer’s Auditor Certificate.  Payments of the Seller Project Share shall be made over the life of the Buffalo Project.

 

  

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9.6.      In the event the Closing fails to consummate as a result of the Seller being the Refusing Party, then, in the event Seller is awarded the Buffalo Project, then 50% of all gross profits (EBIT) earned by the Seller and its Affiliates and deriving from the Buffalo Project shall be paid to Buyer on a quarterly basis, without any set-off or withholding of any kind (the “Buyer Project Share”).  The Buyer Project Share owing in respect of each calendar quarter shall be paid to Buyer within 90 days following the end of such calendar quarter and shall be accompanied by a certificate issued by the Seller’s CEO or CFO, detailing the gross profits derived from the Buffalo Project during the relevant calendar quarter.  Within 10 days of the publication of the Seller’s annual audited financial statements (the “Seller’s Annual Reports”), the Seller shall deliver to the Buyer a certificate issued by the Seller’s auditors confirming the Buyer Project Share payable to Buyer during the year to which the Seller Annual Reports relate (the “Seller’s Auditor Certificate”).  The amount payable hereunder in respect of the last calendar quarter of each year shall be paid within 10 days of the publication of the Seller’s Annual Reports and shall be adjusted to reflect any difference between the amounts actually paid to Buyer during the previous calendar quarters and the amount that should have been paid pursuant to the Seller’s Auditor Certificate.  Payments of the Buyer Project Share shall be made over the life of the Buffalo Project.

 

	
10.

	
SURVIVAL; INDEMNIFICATION.

 

10.1.    Survival of Representations and Warranties. All representations and warranties contained in Sections ‎5 and ‎6 shall survive the Closing for a period of 24 months following the Closing Date.  For convenience of reference, the date upon which any representation or warranty shall terminate is referred to herein as the “Survival Date”.

 

10.2.    Indemnification by Seller.  From and after the Closing , Seller shall indemnify, defend and hold harmless Buyer, and each of its officers, directors, employees, advisors, agents, parents, subsidiaries, affiliates, successors and assigns (the “Buyer Indemnified Persons”) from and against any and all Losses arising out of,  attributable to, occasioned by or resulting from:

 

10.2.1.              any breach or violation of the Seller’s representations, warranties, covenants and undertakings made or given in this Agreement;

 

  

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10.2.2.              any Claims or Actions resulting from or relating to any Excluded Liabilities (including, without limitation, the conduct and operation of the Business and the ownership of the Acquired Assets prior to the Signing Date).

 

10.3.   Indemnification by Buyer.  From and after the Closing, Buyer shall indemnify, protect, defend and hold harmless Seller, and each of its officers, directors, employees, advisors, agents, parents, subsidiaries, affiliates, successors and assigns (the “Seller Indemnified Persons”) from and against any and all Losses arising out of, attributable to, occasioned by or resulting from:

 

10.3.1.              any breach or violation of the Buyer’s representations, warranties, covenants and undertakings made or given in this Agreement;

 

10.3.2.              any Claims or Actions resulting from or relating to any Acquired Assets or Assumed Liabilities from and after the Signing Date; or

 

10.3.3.              in connection with or resulting directly or indirectly from any action carried out by the Seller on the Buyer's behalf or otherwise pursuant to Section ‎2.9.2.

 

10.4.    Limitations on Indemnification.

 

10.4.1.              To the extent that any circumstance giving rise to indemnification under this Section ‎10 is reasonably capable of being remedied by the Indemnifying Person (as defined below), the Indemnified Person (as defined below) shall afford the Indemnifying Person such opportunity as is reasonable to remedy such circumstance.

 

10.4.2.              No indemnification shall be payable to any Buyer Indemnified Person under Section ‎10.2.1 or to any Seller Indemnified Person under Section ‎10.3.1, until the aggregate amount of all Losses incurred by all Buyer Indemnified Persons or all Seller Indemnified Persons, as the case may be, exceeds US$300,000 (Three Hundred Thousand United States Dollars), whereupon Buyer Indemnified Persons or Seller Indemnified Persons, as the case may be, shall be entitled to receive the full amount of all Losses (i.e., including the first US$300,000 (Three Hundred Thousand United States Dollars) of such Losses);

 

10.4.3.              The maximum aggregate liability of Seller pursuant to Section ‎10.2.1 and of Buyer pursuant to ‎10.3.1 shall be the equal to $5,250,000 (Five Million Two Hundred Fifty Thousand United States Dollars) (the “Maximum Indemnification Amount”), except for claims arising from fraud or willful misrepresentation, to which the Maximum Indemnification Amount shall not apply;

 

10.4.4.              Anything herein to the contrary notwithstanding, Buyer shall not be entitled to recover any indirect, consequential, special, exemplary, punitive or similar damages, except to the extent that such damages are awarded to a third party in a Third Party Claim (as defined below);

 

10.4.5.              No claims for indemnification against any Indemnifying Person (as such term is defined below) under this Section ‎10, may be made following the expiration of the Survival Date, with the exception only of claims based on fraud or willful misrepresentation, which shall survive for the period of their statutory limitation.

 

  

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10.4.6.              As security for the indemnity provided by Seller for in Section ‎10.2.1 above only, at the Closing, the Buyer shall deposit a portion of the cash amount of the Purchase Price payable at the Closing with the Escrow Agent  as detailed below (the "Escrow Amount"), to be governed by the terms set forth in the Escrow Agreement.  The Escrow Amount shall be deposited into an interest bearing account and interest earned thereon will be held and distributed in accordance with the Escrow Agreement.  The Escrow Amount to be deposited shall equal the result of the following calculation: (i) $3,500,000 minus (ii) any amount of the Purchase Price that is subject to the Earn-Out Mechanism as at the Closing, such that if at least US$ 3,500,000 of the Purchase Price is subject to the Earn-Out Mechanism as at the Closing, then no amount shall be deposited with the Escrow Agent.  Subject to the terms of the Escrow Agreement, the Escrow Amount shall be held by the Escrow Agent for a period of 12 months, immediately following which the full amount of the Escrow Amount held at such time by the Escrow Agent shall be released and transferred by the Escrow Agent to the Seller.

 

10.5.    Indemnification Process.

 

10.5.1.              Any Buyer Indemnified Person or Seller Indemnified Person seeking indemnification under this Section  ‎10 (an “Indemnified Person”) shall give each party from whom indemnification is being sought (each, an “Indemnifying Person”) prompt notice of any matter (a “Notice of Claim”) which such Indemnified Person has determined has given rise to or could give rise to a right of indemnification under this Agreement, stating the amount of the Losses, if known, and method of computation thereof, and containing a reference to the provisions of this Agreement in respect of which such right of indemnification is claimed or arises as promptly as practicable after becoming aware of such matter; provided, however, that the failure to so provide such Notice of Claim will not relieve the Indemnifying Person(s) from any Liability which they may have under this Agreement or otherwise (unless and only to the extent that such failure results in the loss or compromise in any material respect of any material rights or defenses of the Indemnifying Person(s) and the Indemnifying Person(s) was not otherwise aware of such action or claim).

 

10.5.2.              The Liabilities of an Indemnifying Person under this Section ‎10 with respect to Losses arising from Claims of any third party which are subject to the indemnification provided for in this Section ‎10 (“Third Party Claims”) shall be governed by the following additional terms and conditions:

 

(a)               Upon delivery of a Notice of Claim that relates to a Third Party Claim, the Indemnified Person shall also deliver to the Indemnifying Person copies of all relevant documentation with respect to such Third Party Claim, including, without limitation, any summons, complaint or other pleading that may have been served, any written demand or any other document or instrument.

 

(b)               The Indemnifying Person shall have the right to defend against the Third Party Claim on its own, with counsel reasonably satisfactory to the Indemnified Persons, subject to (i) the right of the Indemnified Persons to participate (at its own expense and with counsel of its own choice) in the defense of such Third Party Claim, and subject to (ii) the Indemnifying Person's written acknowledgement that it is obligated to provide indemnification to the Indemnified Persons with respect to such Third Party Claim.  The Indemnifying Person, on the one hand, and the Indemnified Persons, on the other hand, shall make available to each other and their counsel and accountants all books and records and information relating to any Third Party Claims, keep each other apprised as to the details and progress of all proceedings relating thereto, and render to each other such assistance as may be reasonably required to ensure the proper and adequate defense of any and all Third Party Claims. 

 

  

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(c)               No Third Party Claim shall be settled or compromised by the Indemnified Persons, and no Indemnified Person shall admit any Liability under any Third Party Claim, without the written consent of the Indemnifying Person. Any settlement or compromise made in violation of the foregoing sentence shall relieve the Indemnifying Person from its indemnification obligations in respect of such Third Party Claim.

 

10.6.    The provisions of this Section ‎10 constitute the Parties' exclusive rights and remedies arising from or related to any breach or violation of this Agreement.

 

	
11.

	
TERMINATION.

 

11.1.    Termination. This Agreement may be terminated and the transactions contemplated hereby may be abandoned at any time prior to Closing Date:

 

11.1.1.              By either Buyer or Seller, by means of written notice to the other, if:

 

(a)               the Closing Date shall not have occurred within 120 days of the Signing Date (the “Drop Dead Date”); provided, however, that the right to terminate this Agreement under this Section ‎11.1.1 shall not be available to any party whose failure to fulfill any material obligation under this Agreement was  the cause of, or resulted in, the failure of the Closing to occur on or before such date;

 

(b)               a competent Court or Governmental Authority shall have issued an Order or taken any other action, in each case, which has become final and non-appealable and which restrains, enjoins or otherwise prohibits the Closing; or

 

(c)               such party (the “Non-Breaching Party”) is not in breach of any of its obligations, agreements or covenants under this Agreement, and if the other party (the “Breaching Party”) shall have or failed to perform in any material respect any of its covenants or other agreements contained in this Agreement, and (A) is incapable of being cured; or (B) if capable of being cured, is not cured prior to the earlier of: (x) the Business Day prior to the Drop Dead Date, or (y) the date that is thirty (30) days from the date that the Breaching Party is notified of such breach.

 

11.1.2.              By Buyer if it reveals a Major Issue that cannot be remedied by the Seller prior to the Drop Dead Date, provided that Buyer notified Seller in writing of the existence of Major Issue promptly upon becoming aware of it.

 

11.2.    No Other Termination. The parties agree that, except as otherwise set forth in Section ‎11.1, this Agreement may not be otherwise terminated.

 

  

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11.3.    Effect of Termination.  In the event of the termination of this Agreement in accordance with this Section ‎11, this Agreement and any of the applicable Transaction Documents (other than this Section ‎11.3, and Sections ‎9.5, ‎9.6, ‎12 and ‎14, which shall survive such termination) will forthwith become void, and there will be no Liability on the part of Buyer or Seller or any of their respective officers or directors to the other and all rights and obligations of any party hereto will cease.  Notwithstanding the immediately preceding sentence, in the event this Agreement is so terminated in circumstances where the Party receiving a notice of termination has failed to fulfill any material obligation under this Agreement or has otherwise been the cause of the failure of the Closing to occur on or before Closing Date, then such termination will be without prejudice to any rights or remedies available to the terminating Party under this Agreement or at Law.

 

	
12.

	
NON COMPETE

 

12.1.    Subject to the consummation of the Closing, Seller agrees that for a period commencing at the Closing Date and ending on the fifth (5th) anniversary thereof it shall not engage, either directly or indirectly, whether in Israel or outside of Israel, as principal or for another's account, solely or jointly with others, or through any form of ownership in another entity or otherwise (other than by holding less than 5% of the equity or voting power of any publicly traded company), in any business that operates in the field of the Business or otherwise competes with the Business.

 

12.2.    As of the Signing Date, in any event where Seller is approached by any Person including customers, suppliers and distributors in connection with the Business, Seller shall promptly advise Buyer of such approach in writing and shall refer such Person to Buyer.

 

	
13.

	
CONFIDENTIALITY

 

Subject to any obligation to comply with: (i) any Law; (ii) any rule or regulation of any Governmental Authority or securities exchange; or (iii) any subpoena or other legal process to make information available to the Persons entitled thereto, whether or not the transactions contemplated herein shall be concluded, this Agreement, its Exhibits, Schedules, the Transaction Documents shall be kept in confidence by each party, and each party shall cause its directors, officers, employees, representatives, agents and attorneys to hold such information confidential. Such confidentiality shall be maintained to the same degree as such party maintains its own confidential information (but in no event less than reasonable care) and shall be maintained until such time, if any, as any such data or information either is, or becomes, published or a matter of public knowledge (other than as a result of a breach of this Agreement).  This provision shall survive any termination of this Agreement.

 

	
14.

	
MISCELLANEOUS.

 

14.1.    Actions Regarding Non-Compete. In the event that any of the non-compete or non-solicitation undertakings in this Agreement (each, a "Non-Compete Undertaking") is deemed a restrictive arrangement by the Restrictive Practices Authority or otherwise under applicable Israeli Law, the Parties agree to cooperate in seeking the approval or exemption from the Restrictive Practices Authority or any other relevant Court or Regulatory Authority in respect of such Non-Compete Undertaking, provided, however that in the event that such approval or exemption is not received, then the period of the Non-Compete Undertaking shall be deemed to be reduced to a period of four (4) years following the Closing Date.

 

  

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14.2.    Expenses. All fees, costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby including, without limitation, legal and accounting fees and any, fees, costs and expenses borne in connection with any due diligence investigations carried out with respect to the transactions contemplated hereby, including the Due Diligence Review (“Transaction Expenses”), shall be borne and paid by the Party incurring such Transaction Expenses, whether or not the Closing occurs.

 

14.3.    Amendment.  This Agreement may be amended only by an instrument in writing signed by duly authorized representatives of Buyer and Seller.

 

14.4.    Entire Agreement.  This Agreement, together with its Schedules, Exhibits, the Transaction Documents, and all other ancillary agreements, documents and instruments to be delivered in connection herewith, contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements, either oral or written, including, without limitation, that certain Letter of Intent entered into by the Parties on July 18, 2013, which is hereby terminated and of no further force or effect. Without limiting the generality of foregoing and notwithstanding anything in this Agreement to the contrary, no Party is making any representation or warranty whatsoever, oral or written, express or implied, in connection with the transactions contemplated by this Agreement and the Transaction Documents other than those set forth in this Agreement or in the Transaction Documents and no Party is relying on any statement, representation or warranty, oral or written, express or implied, made by any other Party except for the representations and warranties set forth in this Agreement or in the Transaction Documents.

 

14.5.    Third Party Beneficiaries.  Nothing express or implied in this Agreement is intended to confer, nor shall anything herein confer, upon any Person other than the Parties and the respective successors or assigns of the parties, any rights, remedies, or Liabilities whatsoever, except to the extent that such third person is an Indemnified Person in respect of the indemnification provided in accordance with Section ‎10 of this Agreement.

 

14.6.    Seller Disclosure Schedule. Nothing in Seller Disclosure Schedule constitutes an admission of any liability or obligation of Seller or the Seller Group to any third party, nor an admission against Seller’s or the Seller Group's interest to any third party. Seller Disclosure Schedule contains information, descriptions and disclosures regarding Seller only, all of which constitutes confidential information of Seller.

 

14.7.    Assignment.  No Party hereto shall assign or otherwise transfer this Agreement or any of its rights hereunder, or delegate any of its obligations hereunder, without the prior written consent of the other Party hereto.

 

14.8.    Governing Law; Jurisdiction.  This Agreement shall be governed by the laws of the State Israel without giving effect to any choice of law or conflict of law provision or rule that would cause application of the laws of any jurisdiction other than the State of Israel.  The parties hereby stipulate that any action or other legal proceeding arising under or in connection with this Agreement shall be commenced and prosecuted in its entirety exclusively in the competent courts located in Tel-Aviv or the Merkaz Districts, Israel, each party hereby submitting to the exclusive jurisdiction thereof.

 

  

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14.9.    Severability.  If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner adverse to any party.  Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the extent possible.

 

14.10.  Notices.  All notices or other communications which are required or permitted hereunder shall be in writing and sufficient if delivered personally or sent by registered mail, return receipt requested, or by facsimile, with confirmation as provided above addressed as follows:

 

If to Buyer:                                           SuperCom Ltd.

The Nolton House_

14 Shenkar Street, Herzeliya

Attention:  Chief Executive Officer

Facsimile: 09-889 0820

Email:arie@supercom.com

 

With a copy to:                                   S. Friedman & Co., Advocates

5th Floor

Amot Investment Tower

2 Weitzman Street

Tel Aviv, Israel

Attention:  Sarit Molcho and Arnon Mainfeld

Facsimile: 03-6931830

Email: saritm@friedman.co.il; arnonm@friedman.co.il

 

If to Seller:                                          On Track Innovations Ltd.

Z.H.R Industrial Zone

Rosh Pina, Israel

Attention:  Chief Executive Officer

Facsimile: 04-693 8887

Email: ofer@otiglobal.com

 

  

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With a copy to:                                    Sharon Raviv & Co., Law Offices

Floor 13

11 Menachem Begin Street

Ramat Gan, Israel

Attention:  Sharon Raviv, Adv.

Facsimile: 03-6161500

Email: sharon@ravivlaw.com

 

or to such other address as the party to whom notice is to be given may have furnished to the other party in writing in accordance herewith.  All such notices or communications shall be deemed to be received (a) in the case of personal delivery, on the date of such delivery, (b) in the case of facsimile transmission, upon confirmed receipt, and (c) in the case of registered mailing, on the fifth working day following the date on which the piece of mail containing such communication was posted.

 

14.11.  Representation by Counsel.  Each Party hereto acknowledges that it has been advised by legal and any other counsel retained by such party in its sole discretion.  Each Party acknowledges that such Party has had a full opportunity to review this Agreement and the Transaction Documents and all related exhibits, schedules and ancillary agreements and to negotiate any and all such documents in its sole discretion, without any undue influence by any other party hereto or any third party.

 

14.12.  Construction.  The Parties have participated jointly in the negotiations and drafting of this Agreement and in the event of any ambiguity or question of intent or interpretation, no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement.

 

14.13.  Waivers.  No waiver by any Party, whether express or implied, of its rights under any provision of this Agreement shall constitute a waiver of the other Party’s rights under such provisions at any other time or a waiver of the other Party’s rights under any other provision of this Agreement.  No failure by any party to take any action against any breach of this Agreement or default by another party shall constitute a waiver of the former party’s right to enforce any provision of this Agreement or to take action against such breach or default or any subsequent breach or default by the other party.  To be effective any waiver must be in writing and signed by the waiving party.

 

14.14.  Counterparts.  This Agreement may be executed in two or more counterparts, any one of which need not contain the signatures of all parties, but all of which counterparts when taken together will constitute one and the same agreement.

 

[Remainder of Page Intentionally Left Blank]

 

  

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[Signature Page to an Asset Purchase Agreement dated August 14, 2013]

 

NOW THEREFORE, the parties hereto have executed, or caused this Asset Purchase Agreement to be executed by their duly authorized representatives, as of the date first written above.

 

	 	
ON TRACK INNOVATIONS LTD:

 

By: /s/ Ofer Tziperman,  Shay Tomer

 

Title: CEO / CFO

 

SUPERCOM LTD:

 

By: /s/ Arie Trabelsi, Doron Ilan

 

Title: CEO / CFO

 

51

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