Document:

Exhibit 10.7

 

CHANGE IN CONTROL SEVERANCE AGREEMENT

 

FOR EXECUTIVE OFFICERS AND CERTAIN NEW KEY EMPLOYEES

 

This
Severance Agreement (this “Agreement”) is made as of
                    
    , 20     by and between Hertz
Global Holdings, Inc., a Delaware corporation, and any successor to the
business and/or assets of the Company that assumes this Agreement (the “Company”),
and
                                (“Executive”).

 

RECITALS

 

WHEREAS
the Compensation Committee of the Board of Directors of the Company (the “Board”)
has approved this severance agreement to provide Executive with certain
benefits upon certain terminations of employment;

 

NOW THEREFORE, the parties hereto agree as follows:

 

1.             Term of Agreement.  This
Agreement shall commence on the date hereof and shall continue in effect
through December 31, 20    ; provided, that the
term of this Agreement shall automatically be extended for one additional year
beyond 20     (and successive one year periods thereafter),
unless, not later than September 30, 20     (for the
additional year ending on December 31, 20    ) or September 30
of each year thereafter (for each subsequent extension), the Company shall have
given notice that it does not wish to extend this Agreement for an additional
year, in which event this Agreement shall continue to be effective until the
end of its then remaining term; provided, however, that,
notwithstanding any such notice by the Company not to extend, if a Change in
Control (as defined in Section 2 below) shall have occurred during the
original or any extended term of this Agreement, this Agreement shall continue
in effect for a period of twenty-four months beyond such Change in
Control.  Notwithstanding the foregoing,
this Agreement shall terminate if Executive ceases to be an employee of the
Company and its subsidiaries for any reason prior to a Change in Control which,
for these purposes, shall include cessation of such employment as a result of
the sale or other disposition of the division, subsidiary or other business unit
by which Executive is employed.

 

2.             Change in Control.  No benefits
shall be payable hereunder unless there shall have been a Change in Control of
the Company.  For purposes of this
Agreement, a “Change in Control” shall mean the first to occur of any of the
following after the date of this Agreement:

 

(A)          the acquisition by any person, entity or “group” (as
defined in Section 13(d) of the Securities Exchange Act of 1934, as
amended), other than 

 

 

any such acquisition by the Company, any of its
subsidiaries, any employee benefit plan of the Company or any of its
subsidiaries, or any of the Investors (as defined below), of 50% or more of the
combined voting power of the Company’s then outstanding voting securities;

 

(B)                                within any 24-month period, the Incumbent
Directors (as defined below) shall cease to constitute at least a majority of
the Board or the board of directors of any successor to the Company, provided
that any director elected to the Board, or nominated for election, by a
majority of the Incumbent Directors then still in office shall be deemed to be
an Incumbent Director for purposes of this clause (B); or

 

(C)                                the merger or consolidation of the
Company as a result of which persons who were owners of the voting securities
of the Company immediately prior to such merger or consolidation, or any of the
Investors, do not, immediately thereafter, own, directly or indirectly, more
than 50% of the combined voting power entitled to vote generally in the
election of directors of the merged or consolidated company;

 

(D)                               the approval by the Company’s
shareholders of the liquidation or dissolution of the Company other than a
liquidation of the Company into any subsidiary of the Company or a liquidation
a result of which persons who were stockholders of the Company immediately
prior to such liquidation, or any or all of the Investors, own, directly or
indirectly, more than 50% of the combined voting power entitled to vote
generally in the election of directors of the entity that holds substantially
all of the assets of the Company following such event; and

 

(E)                                 the sale, transfer or other disposition
of all or substantially all of the assets of the Company to one or more persons
or entities that are not, immediately prior to such sale, transfer or other
disposition, affiliates of the Company.

 

Notwithstanding
the foregoing, a Change in Control shall not be deemed to occur if the Company
files for bankruptcy, liquidation or reorganization under the United States
Bankruptcy Code.

 

For
purposes of the foregoing definition, the following terms shall have the
following meanings:

 

“Incumbent Director”
means the persons who were members of the Board as of the date of this
Agreement; provided, that a director elected, or nominated for election,
to the Board in connection with a proxy contest after the date of this
Agreement shall not be considered an Incumbent Director.

 

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“Investors” means
collectively (i) the Initial Investors, (ii) TC Group
L.L.C. (which operates under the trade name The Carlyle Group), (iii) Clayton,
Dubilier & Rice, Inc., (iv) Merrill Lynch Global
Partners, Inc., (v) any affiliate of any of the foregoing,
including any investment fund or vehicle managed, sponsored or advised by any
of the foregoing, (vi) any successor in interest to any of the
foregoing.

 

“Initial Investors”
means, collectively, the Carlyle Investors, the CDR Investors and the Merrill
Lynch Investors.

 

“Carlyle Investors”
means, collectively, (i) Carlyle Partners IV, L.P., (ii) CEP
II Participations S.àr.l., (iii) CP IV Co-investment, L.P., and (iv) CEP
II U.S. Investments, L.P.

 

“CDR Investors” means,
collectively, (i) Clayton, Dubilier & Rice Fund VII, L.P.,
(ii) CDR CCMG Co-Investor L.P., and (iii) CD&R
Parallel Fund VII, L.P.

 

“Merrill Lynch Investors”
means, collectively, (i) ML Global Private Equity Fund, L.P., (ii) Merrill
Lynch Ventures L.P. 2001, (iii) CMC-Hertz Partners, L.P., and (iv) ML
Hertz Co-Investor, L.P.

 

3.             Termination Following Change In Control. 
If a Change in Control shall have occurred, Executive shall be entitled
to the benefits provided in Section 4(iv) upon the subsequent
termination of Executive’s employment with the Company and its subsidiaries
during the two year period following such Change in Control (the “Protected
Period”) unless such termination is (A) a result of Executive’s
death, Retirement or Disability (except as provided in Section 3(i) below),
(B) by Executive without Good Reason (as defined in Section 3(iii) below),
or (C) by the Company or any of its subsidiaries for Cause (as
defined in Section 3(ii) below). 
In addition, Executive shall be entitled to the compensation provided
for in Section 4(iv) hereof (and without regard to Section 4(vii) hereof)
payable only upon the occurrence of an event constituting a Section 409A
Change in Control (as if his termination had occurred after the Section 409A
Change in Control) if, after an agreement has been signed which, if
consummated, would result in a Section 409A Change in Control, (x) Executive
is terminated without Cause by the Company and its subsidiaries prior to the Section 409A
Change in Control, and (y) such termination was at the instigation
or request of the party to the agreement evidencing the transaction that will
result in the Section 409A Change in Control or otherwise occurs in
connection with the anticipated Section 409A Change in Control.  “Section 409A Change in Control”
means any event described in Section 2 of this Agreement if such event
also is a “change in control event” within the meaning of the regulations under
Section 409A(a)(2)(A)(v) of the Code determined in accordance with the
uniform methodology and procedures adopted by the Company.

 

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(i)            Disability; Retirement.  For purposes
of this Agreement, “Disability” shall mean permanent and total
disability as such term is defined under Section 22(e)(3) of the
Internal Revenue Code of 1986, as amended (the “Code”), without regard
to whether Executive is subject to the Code. 
Any question as to the existence of Executive’s Disability upon which
Executive and the Company cannot agree shall be determined by a qualified
independent physician selected by Executive (or, if Executive is unable to make
such selection, such selection shall be made by any adult member of Executive’s
immediate family or Executive’s legal representative), and approved by the
Company, said approval not to be unreasonably withheld.  The determination of such physician made in
writing to the Company and to Executive shall be final and conclusive for all
purposes of this Agreement.  For purposes
of this Agreement, “Retirement” and corollary terms shall mean Executive’s
voluntary termination of employment with the Company under any of the Company’s
retirement plans that occurs prior to delivery of a Notice of Termination
pursuant to Section 3(iv) below; provided, that
notwithstanding the foregoing, no Retirement that occurs after any other
termination of employment shall adversely affect, interfere with or otherwise
impair in any way Executive’s right to receive the payments and benefits to
which he is entitled on account of a termination without Cause or with Good
Reason.  Accordingly, and for the
avoidance of doubt, if Executive provides a Notice of Termination for Good
Reason, and otherwise satisfies the conditions for Good Reason pursuant to this
Agreement, and also Retires, such Retirement shall not adversely affect,
interfere with or otherwise impair in any way his right to receive payments and
benefits hereunder.  Conversely, if
Executive terminates his employment on account of Retirement and at such time
is not (x) terminating his employment for Good Reason pursuant to
this Agreement or (y) being terminated by the Company without Cause
pursuant to this Agreement, he shall not be entitled to the payments and
benefits provided in this Agreement.

 

(ii)           Cause.  For purposes
of this Agreement, “Cause” shall mean (i) willful and
continued failure to perform substantially the Executive’s material duties with
the Company (other than any such failure resulting from the Executive’s
incapacity due to physical or mental illness) after a written demand for
substantial performance specifying the manner in which the Executive has not
performed such duties is delivered by the Chief Executive Officer of the
Company to the Executive, (ii) engaging in willful and serious
misconduct that is injurious to the Company or any of its subsidiaries, (iii) one
or more acts of fraud or personal dishonesty resulting in or intended to result
in personal enrichment at the expense of the Company or any of its
subsidiaries, (iv) substantial abusive use of alcohol, drugs or
similar substances that, in the sole judgment of the Company, impairs the
Executive’s job performance, (v) material violation of any material
Company policy that results in material harm to the Company or any of its
subsidiaries or (vi) indictment for or conviction of a felony or of
any crime 

 

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(whether or not a felony) involving moral
turpitude.  Notwithstanding the
foregoing, Executive shall not be deemed to have been terminated for Cause
unless and until there shall have been delivered to Executive a copy of a
resolution duly adopted by the affirmative vote of not less than three-quarters
(3/4) of the Incumbent Directors of the Board at a meeting of the Board called
and held for such purpose (after reasonable notice to Executive and an
opportunity for Executive, together with Executive’s counsel, to be heard
before the Board), finding that, in the good faith opinion of the Board,
Executive was guilty of conduct set forth above in this Section 3(ii) and
specifying the particulars thereof in detail.

 

(iii)          Good Reason.  Executive
shall be entitled to terminate employment with Good Reason.  For the purpose of this Agreement, “Good
Reason” shall mean the occurrence, without Executive’s express written
consent, of any of the following circumstances during the Protected Period
unless, in the case of Sections 3(iii)(A), (E), or (F), such circumstances
are fully corrected prior to the date specified as the Date of Termination (as
defined in Section 3(v)) in the Notice of Termination (as defined in Section 3(iv))
given in respect thereof:

 

(A)                              the assignment to Executive of any duties
or responsibilities not comparable to Executive’s position (as it existed
immediately prior to the Change in Control) and that results in a substantial
diminution or material adverse change in such duties or responsibilities from
those in effect immediately prior to the Change in Control other than a change
in title or reporting relationships;

 

(B)                                a reduction by the Company or any of its
subsidiaries in Executive’s annual base salary as in effect on the date hereof
or as the same may be increased from time to time;

 

(C)                                the relocation of Executive’s place of
business to a location more than fifty miles from Executive’s principal place
of employment immediately preceding the Change in Control that materially
increases Executive’s commute compared to Executive’s commute as in effect
immediately prior to the Change in Control;

 

(D)                               a reduction by the Company or any of its
subsidiaries in Executive’s annual bonus opportunity as in effect on the date
hereof or as the same may be increased from time to time;

 

(E)                                 the failure by the Company or any of its
subsidiaries to continue Executive’s participation in any long-term incentive
compensation plan on a level comparable to other senior executives;

 

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(F)                                 except as required by law, a reduction by
the Company or any of its subsidiaries of 5% or more in the aggregate benefits
provided by Executive (excluding changes to such benefits that occur in the
ordinary course, are of general application, and increase co-payments,
deductibles or premiums which must be paid by Executive) as those enjoyed by
Executive under the employee benefit and welfare plans of the Company and its
subsidiaries, including, without limitation, the pension, life insurance,
medical, dental, health and accident, retiree medical, disability, deferred
compensation and savings plans, in which Executive was participating at the
time of the Change in Control;

 

(G)                                the failure of the Company to obtain an
agreement from any successor to assume and agree to perform this Agreement, as
contemplated in Section 6 hereof; or

 

(H)                               any purported termination of Executive’s
employment by the Company or its subsidiaries which is not effected pursuant to
a Notice of Termination satisfying the requirements of Section 3(iv) below
(and, if applicable, the requirements of Section 3(ii) above); for
purposes of this Agreement, no such purported termination shall be effective.

 

Executive’s continued employment shall not constitute consent to, or a
waiver of rights with respect to, any circumstances constituting Good Reason
hereunder.  Executive must provide the
Notice of Termination not later than 180 days following the date he or she had
actual knowledge of the event constituting Good Reason.

 

(iv)          Notice of Termination.  Any purported
termination of Executive’s employment by the Company and its subsidiaries or by
Executive shall be communicated by written Notice of Termination to the other
party hereto in accordance with Section 7 hereof.  For purposes of this Agreement, a “Notice
of Termination” shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail (other than with respect to a Good Reason termination
pursuant to Section 3(iii)(H)) the facts and circumstances claimed to
provide a basis for termination of Executive’s employment under the provision
so indicated.

 

(v)           Date of Termination.  “Date of
Termination” shall mean (A) if Executive’s employment is
terminated for Disability, 30 days after Notice of Termination is given
(provided that Executive shall not have returned to the full-time performance
of Executive’s duties during such 30 day period), and (B) if
Executive’s employment is terminated pursuant to Section 3(ii) or (iii) above
or for any reason (other than Disability), the date specified in the Notice of
Termination (which, in the case of a termination pursuant to Section 3(ii) above

 

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shall not be less than 30 days, and in the case of a
termination pursuant to Section 3(iii) above shall not be less than
30 nor more than 60 days, respectively, from the date such Notice of
Termination is given); provided, that, if within 30 days after
any Notice of Termination is given the party receiving such Notice of
Termination notifies the other party that a dispute exists concerning the
grounds for termination, the Date of Termination shall be the date on which the
dispute is finally determined, either by mutual written agreement of the
parties, by a binding arbitration award or by a final judgment, order or decree
of a court of competent jurisdiction (which is not appealable or the time for
appeal therefrom having expired and no appeal having been perfected); provided,
further, that the Date of Termination shall be extended by a notice of
dispute only if such notice is given in good faith and the party giving such
notice pursues the resolution of such dispute with reasonable diligence.  Notwithstanding the pendency of any such
dispute, the Company and its subsidiaries will continue to pay Executive’s full
compensation in effect when the notice giving rise to the dispute was given
(including, but not limited to, base salary and bonus) and continue Executive
as a participant in all incentive compensation, benefit and insurance plans in
which Executive was participating when the notice giving rise to the dispute
was given, until the dispute is finally resolved in accordance with this Section 3(v).  Amounts paid under this Section 3(v) are
in addition to all other amounts due under this Agreement and shall not be
offset against or reduce any other amounts due under this Agreement.  In the event that the Company is terminating
Executive the Company may, if it so chooses, pay Executive the base salary
which he would have received in lieu of waiting for the expiration of any
notice period otherwise required hereby and bar Executive from any of the
Company’s premises, offices or properties, subject to any rights set forth
herein for Executive to contest such termination.

 

4.             Compensation upon Termination or During Disability. 
Upon termination of Executive’s employment or during a period of
Disability, in either case, during the Protected Period, Executive shall be
entitled to the following benefits:

 

(i)            During any period that Executive fails to perform
Executive’s full-time duties with the Company and its subsidiaries as a result
of the Disability, Executive shall continue to receive an amount equal to
Executive’s base salary at the rate in effect at the commencement of any such
period, and Bonus (as defined in Section 4(iv)(B)), through the Date of
Termination for Disability; provided, that if any such period of
Disability ends during the Protected Period, Executive shall have the right to
resume active employment with the Company immediately following the end of such
period of Disability, unless, prior to the end of such period of Disability,
the Company has terminated Executive’s employment.  Thereafter, Executive’s benefits shall be
determined in accordance with the employee benefit programs of the Company and
its subsidiaries then in effect.

 

7

 

(ii)           If Executive’s employment is terminated by the Company
or any of its subsidiaries for Cause or by Executive without Good Reason
(excluding death, Disability or Retirement) the Company (or one of its
subsidiaries, if applicable) shall pay through the Date of Termination
Executive’s full base salary at the rate in effect at the time Notice of
Termination is given and shall pay any amounts otherwise payable to Executive
on or immediately prior to the Date of Termination pursuant to any other
compensation plans, programs or employment agreements then in effect, and the
Company shall have no further obligations to Executive under this Agreement.

 

(iii)          If Executive’s employment is terminated by reason of
Executive’s death or Retirement, Executive’s benefits shall be determined in
accordance with the retirement and other benefit programs of the Company and
its subsidiaries then in effect, except as otherwise provided in Section 3(i).

 

(iv)          If Executive’s employment by the Company and its
subsidiaries is terminated (other than for death or Disability) by (a) the
Company and its subsidiaries other than for Cause or (b) Executive
with Good Reason, then, subject to Executive executing, delivering and not
revoking the Release of Claims attached to this Agreement as Exhibit A
(the “Release”) within 30 days following the Separation from Service
Date (as defined in Section 4(vii)), Executive shall be entitled to the
benefits provided below:

 

(A)                              The Company (or one of its subsidiaries,
if applicable) shall pay any unpaid portion of Executive’s full base salary, at
the rate in effect at the time of the Change in Control (the “Base Salary”),
and a pro-rated annual bonus at target level, in each case, calculated through
the Date of Termination, no later than the thirtieth day following the Date of
Termination, plus all other amounts to which Executive is entitled under any
compensation plan of the Company applicable to Executive, at the time such
payments are due.

 

(B)                                The Company shall pay Executive, not
later than 10 days following the date on which the Release has become effective
and irrevocable, as severance pay to Executive, a severance payment equal to
       times the sum of (i) Executive’s
Base Salary, and (ii) Bonus. 
For purposes of this Agreement, the “Bonus” shall mean the
average annual cash bonus paid (or awarded, if different) in respect of each of
the three prior bonus years (exclusive of any special or prorated
bonuses).  If Executive has less than
three years of bonus history, “Bonus” shall mean the target bonus of the
year of termination.

 

(C)                                The Company shall credit the Executive
with an additional      years of age and an additional
     “Years of Service” for all purposes 

 

8

 

under The Hertz Corporation Supplemental Executive
Retirement Plan (“SERP II”) (the length of such additional years of
service, the “Severance Period”) with the benefit under the SERP II to
be provided at the time or times set forth under the terms of SERP II without
regard to Section 4(vii), and the averaging period over which “Final
Average Earnings” (as defined in SERP II) is determined shall include the Severance
Period (and, for this purpose, the payment made pursuant to Section 4(iv)(B) shall
be deemed to be compensation earned ratably over the Severance Period); provided
that, if Executive does not at the Date of Termination have at least five “Vesting
Years of Service” under the “Retirement Plan” (as these terms are used or
defined in SERP II), the following additional provisions shall apply to
Executive: (1) Executive shall, notwithstanding the second
paragraph of Section 3.2 of SERP II, be fully vested in his benefit under
SERP II (as increased pursuant to this Section 4(ii)); (2) if
Executive’s actual years of service plus the years of service credited pursuant
to this Section 4(iv)(C) equal less than five, then, notwithstanding Section 1.10
of SERP II, the averaging period over which Final Average Earnings shall be
determined shall be the period of such actual and credited service; (3) Executive’s
benefit under SERP II and this Agreement shall be reduced applying the
reduction factors set forth in the SERP II to reflect the timing of payment of
such benefit; and (4) such benefit shall be paid at the same time
as the payment set forth in Section 4(iv)(B) is paid.

 

(D)                               From the Date of Termination, until the
earlier of (i) the last day of the Severance Period or (ii) the
date upon which Executive becomes eligible to participate in plans of another
employer (such period, the “Benefit Continuation Period”), the Company
will continue Executive’s participation and coverage in all the Company’s life,
medical, dental plans and other welfare benefit plans (but excluding the
Company’s disability plans) (“Insurance Benefits”); provided that
if any other Company plan, arrangement or agreement provides for continuation
of Insurance Benefits, then Executive shall receive such coverage under such
other plan, arrangement or agreement, and if the period of such coverage is
shorter than the Benefit Continuation Period, then Executive shall receive
pursuant to this Section 4(iv)(D), such coverage for the remainder of the
Benefit Continuation Period.

 

(E)                                 The Company shall provide to Executive
outplacement services or executive recruiting services provided by a
professional outplacement provider or executive recruiter at a cost to the
Company of not more than 10% of Executive’s Base Salary (not to exceed $25,000)
to be provided within the period ending no later than the end of the year
following the year in which the Date of Termination occurs.

 

9

 

(v)           To the extent outstanding following a Change in
Control, Executive’s stock options and other equity awards shall be governed by
the terms of the equity incentive plans and award agreements under which such
stock options and other equity awards were awarded.

 

(vi)          The Company shall also pay to Executive, no less
frequently than monthly, all legal fees and expenses reasonably incurred by
Executive in connection with this Agreement (including all such fees and
expenses, if any, incurred in contesting or disputing the nature of any such termination
for purposes of this Agreement or in seeking to obtain or enforce any right or
benefit provided by this Agreement); provided, that if a determination
is made by the arbitrator selected under Section 12 hereof that Executive
has failed to prevail on at least one material claim, the Company shall not be
liable to pay such legal fees or expenses otherwise provided for thereunder and
the Company shall be entitled to recover from Executive any such amounts so
paid (either directly or, except as would violate the requirements of Section 409A
of the Code, by setoff against any amounts then owed Executive by the
Company).  Notwithstanding the
penultimate sentence of Section 8, no reimbursement pursuant to this Section 4(vi) shall
be paid later than the last day of the 10th calendar year following the
calendar year in which the applicable statute of limitations for breach of
contract claims expires or, if later, the last day of the calendar year
following the calendar year in which there is a settlement or other final and
nonappealable resolution of the related contest or dispute.

 

(vii)         Notwithstanding the foregoing provisions of this Section 4,
if, as of the Separation from Service Date, Executive is a Specified Employee,
then, except to the extent that this Agreement does not provide for a “deferral
of compensation” within the meaning of Section 409A of the Code, the
following shall apply:

 

1)                                      No payments shall be made and no benefits
shall be provided to Executive, in each case, during the period beginning on
the Separation from Service Date and ending on the six-month anniversary of
such date or, if earlier, the date of Executive’s death.

 

2)                                      On the first business day of the first
month following the month in which occurs the six-month anniversary of the Separation
from Service Date or, if earlier, Executive’s death, the Company shall make a
one-time, lump-sum cash payment to the Executive in an amount equal to the sum
of (x) the amounts otherwise payable to the Executive under this
Agreement during the period described in Section 4(vii)1) above and (y) the
amount of interest on the foregoing at the applicable federal rate for
instruments of less than one year.

 

10

 

For
purposes of this Agreement, “Separation from Service Date” shall mean
the date of the Executive’s “separation from service” within the meaning of Section 409A(a)(2)(i)(A) of
the Code and determined in accordance with the default rules under
regulations promulgated under Section 409A of the Code.  “Specified Employee” shall mean a “specified
employee” within the meaning of Section 409A(a)(2)(B)(1) of the Code,
as determined in accordance with the uniform methodology and procedures adopted
by the Company and then in effect.

 

5.             Adjustment in Payments

 

(i)            In the event that any payment or benefit received or
to be received by Executive pursuant to the terms of this Agreement (the “Contract
Payments”) or in connection with Executive’s termination of employment or
contingent upon a Change in Control of the Company pursuant to any plan or
arrangement or other agreement with the Company (or any affiliate) (“Other
Payments” and, together with the Contract Payments, the “Payments”)
would be subject to the excise tax (the “Excise Tax”) imposed by Section 4999
of the Code, as determined as provided below, and provided, that if
Executive’s Payment is, when calculated on a net-after-tax basis (taking into
account the Excise Tax as well as other applicable federal, state and local
income taxes), less than 100% of the net-after tax amount (taking into account
applicable federal, state and local income taxes) of the Payment which could be
paid to Executive under Section 280G of the Code without causing the
imposition of the Excise Tax, then the Payment shall be limited to the largest
amount payable without resulting in the imposition of any Excise Tax (such
amount, the “Capped Amount”).

 

(ii)           For purposes of determining the Capped Amount, whether
any of the Payments will be subject to the Excise Tax and the amounts of such
Excise Tax, (1) the total amount of the Payments shall be treated
as “parachute payments” within the meaning of Section 280G(b)(2) of
the Code, and all “excess parachute payments” within the meaning of Section 280G(b)(1) of
the Code shall be treated as subject to the Excise Tax, except to the extent
that, in the opinion of independent tax counsel selected by the Company’s
independent auditors and reasonably acceptable to Executive (“Tax Counsel”),
a Payment (in whole or in part) does not constitute a “parachute payment”
within the meaning of Section 280G(b)(2) of the Code, or such “excess
parachute payments” (in whole or in part) are not subject to the Excise Tax, (2) the
amount of the Payments that shall be treated as subject to the Excise Tax shall
be equal to the lesser of (A) the total amount of the Payments or (B) the
amount of “excess parachute payments” within the meaning of Section 280G(b)(1) of
the Code (after applying clause (1) hereof), and (3) the value
of any noncash benefits or any deferred payment or benefit shall be determined
by Tax Counsel in accordance with the principles of Sections 280G(d)(3) and
(4) of the Code.  For purposes of
determining the amounts compared in the proviso of Section 5(i) above,
Executive shall be deemed to pay federal income tax at the highest marginal
rates of federal income taxation applicable to individuals in the calendar year
in 

 

11

 

which the Payment is to be made and state and local income taxes at the
highest effective rates of taxation applicable to individuals as are in effect
in the state and locality of Executive’s residence in the calendar year in
which the Payment is to be made, net of the maximum reduction in federal income
taxes that can be obtained from deduction of such state and local taxes, taking
into account any limitations applicable to individuals subject to federal
income tax at the highest marginal rates.

 

(iii)          If the Tax Counsel determines that any Excise Tax is
payable by Executive and that the criteria for reducing the Payments to the
Capped Amount (as described in Section 5(i) above) is met, then the
Company shall reduce the Payments by the amount which, based on the Tax Counsel’s
determination and calculations, would provide Executive with the Capped Amount,
and pay to Executive such reduced Payments; provided that the Company
shall first reduce the severance payment under Section 4(iv)(B) and
shall next reduce the benefits described in Section 4(iv)(C).  If the Tax Counsel determines that no Excise
Tax is payable by Executive, it shall, at the same time as it makes such
determination, furnish Executive with an opinion that he has substantial
authority not to report any Excise Tax on his/her federal, state, local income
or other tax return.

 

6.             Successors; Binding Agreement.

 

(i)    The Company will require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise)
to all or substantially all of the business and/or assets of the Company to
expressly assume and agree to perform this Agreement in the same manner and to
the same extent that the Company is required to perform it.  Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle Executive to compensation
from the Company in the same amount and on the same terms as Executive would be
entitled hereunder if Executive had terminated Executive’s employment with Good
Reason following a Change in Control, except that for purposes of implementing
the foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination.

 

(ii)   This Agreement shall inure to the benefit
of and be enforceable by Executive’s personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees.  If Executive should die while
any amount would still be payable to Executive hereunder if Executive had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to Executive’s devisee,
legatee or other designee or, if there is no such designee, to Executive’s
estate.

 

7.             Notice.  For the
purpose of this Agreement, notices and all other communications provided for in
this Agreement shall be in writing and shall be deemed to have been duly given
when delivered or mailed by United States registered mail, return

 

12

 

receipt requested,
postage prepaid (or its international equivalent)

 

if to the Company to:

 

Hertz
Global Holdings, Inc.

225
Brae Boulevard

Park
Ridge, New Jersey 07656

Attention:
Senior Vice President, Chief Human Resource Officer

With a separate duplicate copy of such notice to be
provided to the General Counsel of the Company

 

if to the Executive, to
the to the Executive at his or her most recent address as shown on the books
and records of the Company or any subsidiary of the Company employing the Executive.

 

8.             Miscellaneous.  No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by Executive and such officer as may be
specifically designated by the Board.  No
waiver by either party hereto at any time of any breach by the other party
hereto of, or compliance with, any conditions or provision of this Agreement to
be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time.  The validity, interpretation,
construction and performance of this Agreement shall be governed by the
internal laws of the State of New Jersey, without regard to its conflict of law
provisions.  This Agreement is intended
to satisfy the requirements of Section 409A of the Code with respect to
amounts subject thereto and shall be interpreted and construed and shall be
performed by the parties consistent with such intent, and the Company shall
have no right to accelerate any payment or the provision of any benefits under
this Agreement or to make or provide any such payment or benefits if such
payment or provision of such benefits would, as a result, be subject to tax
under Section 409A of the Code.  All
references to sections of the Code shall be deemed also to refer to any
successor provisions to such sections and the applicable regulations and
guidance thereunder.  Any payments
provided for hereunder shall be paid net of any applicable withholding required
under federal, state, local or other applicable law.  Anything in this Agreement to the contrary
notwithstanding, no reimbursement payable to Executive pursuant to any
provisions of this Agreement or pursuant to any plan or arrangement of the
Company covered by this Agreement shall be paid later than the last day of the
calendar year following the calendar year in which the related expense was
incurred, and no such reimbursement during any calendar year shall affect the
amounts eligible for reimbursement in any other calendar year, except, in each
case, to the extent that the right to reimbursement does not provide for a “deferral
of compensation” within the meaning of Section 409A of the Code.  The obligations of the Company under
Sections 4 and 5 shall survive the expiration of the term of this
Agreement.

 

13

 

9.             Other Arrangements.  The severance benefits under this Agreement
are not additive or cumulative to severance or termination benefits that Executive
might also be entitled to receive under the terms of a written employment
agreement, a severance agreement or any other arrangement with the
Company.  As a condition of the Company
entering into this Agreement, Executive expressly agrees that this Agreement
supersedes all prior agreements, and sets forth the entire severance benefit to
which he or she is entitled while this Agreement remains in effect.  The provisions of this Agreement may provide
for payments to Executive under certain compensation or bonus plans under
circumstances where such plans would not provide for payment thereof.  It is the specific intention of the Company
that the provisions of this Agreement shall supersede any provisions to the contrary
in such plans, to the extent permitted by applicable law, and such plans shall
be deemed to have been amended to correspond with this Agreement without
further action by the Company or the Board.

 

10.           Validity.  The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.

 

11.           Counterparts.  This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.

 

12.           Arbitration;
Indemnification.

 

(i)    In the
event of any dispute under the provisions of this Agreement, other than a
dispute in which the primary relief sought is an equitable remedy such as an
injunction, the parties shall have the dispute, controversy or claim settled by
arbitration in Park Ridge, New Jersey (or such other location as may be
mutually agreed upon by the Company and the Executive) in accordance with the
National Rules for the Resolution of Employment Disputes then in effect of
the American Arbitration Association, before a single arbitrator selected by
agreement of the parties (or, in the absence of such agreement, appointed by
the American Arbitration Association). 
Any award entered by the arbitrator shall be final, binding and
nonappealable and judgment may be entered thereon by either party in accordance
with applicable law in any court of competent jurisdiction.  This arbitration provision shall be
specifically enforceable.  The arbitrator
shall have no authority to modify any provision of this Agreement or to award a
remedy for a dispute involving this Agreement other than a benefit specifically
provided under or by virtue of this Agreement. 
Fees of the American Arbitration Association and the arbitrator and any
expenses relating to the conduct of the arbitration (including the Company’s
and Executive’s reasonable attorneys’ fees and expenses) shall be paid in
accordance with Section 4(vi).

 

(ii)   Following
any termination of employment of Executive (other than a termination by the
Company for Cause), the Company shall indemnify and hold harmless

 

14

 

Executive to the
fullest extent permitted under the Company’s by-laws (as in effect prior to the
Change in Control) and applicable law for any claims, costs and expenses
arising out of or in connection with Executive’s employment with the Company
(without regard to when such claim is asserted or issue is raised, so long as
it relates to conduct or events that occurred while Executive was employed with
the Company) and shall, for a period of not less than six years following a
Change in Control, maintain directors’ and officers’ liability insurance
coverage for the benefit of Executive which provides him with coverage, if any,
no less favorable than that in effect prior to the Change in Control; provided,
that if the Company maintains directors’ and officers’ liability insurance
coverage for other current or former officers or directors of the Company
following such six-year period, Executive shall also be provided with such
insurance coverage.

 

13.           Confidentiality, Covenant Not to
Compete and Not to Solicit.

 

(i)    Nondisclosure
of Confidential Information.  At no
time during the term of Executive’s employment or the 24 month period following
the Executive’s Date of Termination, shall Executive, without the prior written
consent of the Company, use, divulge, disclose or make accessible to any other
person, firm, partnership, corporation or other entity any Confidential
Information pertaining to the business of the Company or any of its affiliates,
except (i) while employed by the Company, in the business of and
for the benefit of the Company, or (ii) when required to do so by a
court of competent jurisdiction, by any governmental agency having supervisory
authority over the business of the Company, or by any administrative body or
legislative body (including a committee thereof) with jurisdiction to order
Executive to divulge, disclose or make accessible such information.  For purposes of this Section 13, “Confidential
Information” shall mean any trade secret or other non-public information
concerning the financial data, strategic business plans, product development
(or other proprietary product data), customer lists, marketing plans and other
non-public, proprietary and confidential information of the Company or its
affiliates, that, in any case, is not otherwise available to the public (other
than by Executive’s breach of the terms hereof) or known to persons in the
industry generally.

 

(ii)   Non
Competition.  During the term of
Executive’s employment and during the 12 month period immediately following the
date of any termination of Executive’s employment with the Company, Executive shall
not directly or indirectly become associated, as an owner, partner, shareholder
(other than as a holder of not in excess of 5% of the outstanding voting shares
of any publicly traded company), director, officer, manager, employee, agent,
consultant or otherwise, with any partnership, corporation or other entity that
competes with the car or equipment rental business, and for the customer base,
of the Company or any of its subsidiaries. 
This Section 13(ii) shall not be deemed to restrict Executive’s
association with any enterprise that conducts unrelated business or that has
material operations outside of the geographic area that encompasses the Company’s
customer base (or where the Company had plans at the Date of Termination

 

15

 

to enter) for so
long as the Executive’s role whether direct or indirect (e.g., supervisory), is
solely with respect to such unrelated business or other geographic area (as the
case may be).

 

(iii)  Non
Solicitation.  During the term of
Executive’s employment and during the 12 month period immediately following the
date of any termination of Executive’s employment with the Company, Executive
shall not directly or indirectly employ or seek to employ, or solicit or
contact or cause others to solicit or contact with a view to engage or employ,
any person who is or was a managerial level employee of the Company at the time
of the Executive’s Date of Termination or at any time during the twelve-month
period preceding such date.  This Section 13(iii) shall
not be deemed to be violated solely by (a) placing an advertisement
or other general solicitation or (b) serving as a reference.

 

(iv)  Reasonableness.  If any provision of this Section 13
shall ever be deemed to exceed the time, scope or geographic limitations
permitted by applicable laws, then such provisions shall be reformed to the
maximum time, scope or geographic limitations, as the case may be, permitted by
applicable laws.  Because Executive’s
services are unique and because Executive has had access to Confidential
Information, the parties hereto agree that money damages will be an inadequate
remedy for any breach of this Agreement. 
In the event of a breach or threatened breach of this Agreement, the
Company or its successors or assigns may, in addition to other rights and
remedies existing in their favor, stop making any additional payments hereunder
to Executive and apply to any court of competent jurisdiction for specific
performance and/or injunctive relief in order to enforce, or prevent any
violations of, the provisions hereof (without the posting of a bond or other
security).

 

14.           Amendment and Waiver.  The Company may amend this Agreement at any
time and from time to time; provided that any amendment that is adverse
to the Executive shall be effective only with respect to a Change in Control
that occurs one year or more following the date of such amendment.  The provisions of this Agreement may be
waived only with the prior written consent of the Company and the Executive,
and no course of conduct or failure or delay in enforcing the provisions of
this Agreement shall affect the validity, binding effect or enforceability of
this Agreement or any provision hereof.

 

15.           Entire Agreement.  No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this
Agreement.  This Agreement constitutes
the entire understanding between the parties with respect to Executive’s
severance pay in the event of a termination of Executive’s employment with the
Company, superseding all negotiations, prior discussions and preliminary
agreements, written or oral, concerning said severance pay; provided,
that any payments or benefits provided in respect of severance, or
indemnification for loss of employment, pursuant to any severance, employment
or similar agreement between the Company or any of its subsidiaries and

 

16

 

Executive, or as required
by applicable law outside the United States, shall reduce any payments or
benefits provided pursuant to this Agreement, except that the payments or
benefits provided pursuant to this Agreement shall not be reduced below zero.  Notwithstanding any provision of this
Agreement:  (i) Executive
shall not be required to mitigate the amount of any payment provided by this
Agreement by seeking other employment or otherwise, nor (except as provided for
in Section 4(iv)(D) above) shall the amount of any payment or benefit
provided by this Agreement be reduced by any compensation earned by Executive
as the result of employment by another employer or by retirement benefits
received after the Date of Termination or otherwise, and (ii) except
as otherwise provided in this Agreement, the obligations of the Company to make
payments to Executive and to make the arrangements provided for herein are
absolute and unconditional and may not be reduced by any circumstances,
including without limitation any set-off, counterclaim, recoupment, defense or
other right which the Company may have against Executive or any third party at
any time.

 

16.           Further
Action.  The Company shall take any
further action necessary or desirable to implement the provisions of this
Agreement or perform its obligations hereunder.

 

 

	
   

  	
  HERTZ GLOBAL HOLDINGS,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Executive

  
	
   

  	
   

  
	
   

  	
  Date:

  	
   

  

 

17

 

Exhibit A

 

SEPARATION AGREEMENT 

 

and 

 

GENERAL RELEASE OF ALL CLAIMS(1)

 

This Separation
Agreement and General Release of All Claims (the “Agreement”) is entered
into as of [·] by and among [·] (the “Executive”), Hertz Global
Holdings, Inc. and The Hertz Corporation (hereinafter “Hertz” or
the “Companies”), duly acting under authority of their officers and
directors.

 

WHEREAS, Hertz Global Holdings, Inc. and
the Executive have entered into a Change in Control Severance Agreement, dated
as of [·] (the “Severance Agreement”);

 

WHEREAS, Executive’s employment with Hertz will
end effective as of [·];

 

WHEREAS, in connection with Executive’s
separation from employment, Executive is entitled to certain payments and other
benefits under the Severance Agreement, so long as Executive executes and does
not revoke this Agreement; and

 

WHEREAS, the parties desire to fully and finally
resolve any disputes, claims or controversies that have arisen or may arise
with respect to Executive’s employment with and subsequent separation from the
Companies.

 

NOW,
THEREFORE, in
consideration of the mutual promises, covenants and agreements stated herein
and in the Severance Agreement, which Executive and the 

 

(1) To be revised if necessary or appropriate
under any applicable law to effect a complete and total release of claims by
the Executive as of the effective date of the Agreement.

 

 

Companies
agree constitute good and valuable consideration, receipt of which is
acknowledged, the parties stipulate and do mutually agree as follows:

 

1.             In
exchange for receiving the payments and benefits described in Sections 4 and 5
of the Severance Agreement, Executive does for himself and his heirs,
executors, administrators, successors, and assigns, hereby release, acquit, and
forever discharge and hold harmless the Companies and the divisions, subsidiaries
and affiliated companies of each of the Companies, the officers, directors,
shareholders, employees, benefit and retirement plans (as well as trustees and
administrators thereof), agents and heirs of each of the foregoing, and the
predecessors, assigns and successors, past and present of each of the
foregoing, and any persons, firms or corporations in privity with any of them
(collectively, the “Company Released Parties”), of and from any and all
actions, causes of action, claims, demands, attorneys’ fees, compensation,
expenses, promises, covenants, and damages of whatever kind or nature, in law
or in equity, which Executive has, had or could have asserted, known or
unknown, at common law or under any statute, rule, regulation, order or law,
whether federal, state or local, or on any grounds whatsoever from the
beginning of the world to the date of Executive’s execution of this Agreement,
including, without limitation, (1) any and all claims for any
additional severance pay, vacation pay, bonus or other compensation; (2) any
and all claims of discrimination or harassment based on race, color, national
origin, ancestry, religion, marital status, sex, sexual orientation,
disability, handicap, age or other unlawful discrimination; any claims arising
under Title VII of the Federal Civil Rights Act; the 

 

19

 

Federal Civil Rights Act of 1991; the Americans with
Disabilities Act; the Age Discrimination in Employment Act; the New Jersey Law
Against Discrimination; or under any other state, federal, local law or
regulation or under the common law; and (3) any and all claims with
respect to any event, matter, damage or injury arising out of his employment
relationship with any Company Released Party, and/or the separation of such
employment relationship, and/or with respect to any other event or matter.

 

The only
exceptions to this Separation Agreement and General Release of All Claims are
with respect to retirement benefits which may have accrued and vested as of the
date of Executive’s employment termination, COBRA rights, enforcement of
Executive’s rights under this Agreement and the Severance Agreement, and any
claims under applicable workers’ compensation laws.

 

Nothing in this
Agreement shall be construed to prohibit Executive from filing any future
charge or complaint with the U.S. Equal Employment Opportunity Commission (the “EEOC”)
or participating in any investigation or proceeding conducted by the EEOC, nor
shall any provision of this Agreement adversely affect Executive’s right to
engage in such conduct. Notwithstanding the foregoing, Executive waives the
right to obtain any relief from the EEOC or recover any monies or compensation
as a result of filing a charge or complaint. In addition to agreeing herein not
to bring suit against any Company Released Party, Executive agrees not to seek
damages from any Company Released Party by filing a claim or charge with any
state or governmental agency.

 

20

 

2.             Executive
shall return to the Companies all Company property and Confidential Information
(as defined in the Severance Agreement) of any Company Released Party in
Executive’s possession or control, including without limitation, business
reports and records, client reports and records, customer information,
personally identifiable information relating to others, business strategies,
contracts and proposals, files, a listing of customers or clients, lists of
potential customers or clients, technical data, testing or research data,
research and development projects, business plans, financial plans, internal
memoranda concerning any of the above, and all credit cards, cardkey passes,
door and file keys, computer access codes, software, and other physical or
personal property which Executive received, had access to or had in his
possession, prepared or helped prepare in connection with Executive’s
employment with any Company Released Party, and Executive shall not make or
retain any copies, duplicates, reproductions, or excerpts thereof.  Executive acknowledges that in the course of
employment with any one or more Company Released Party, Executive has acquired
Confidential Information and that such Confidential Information has been disclosed
to Executive in confidence and for his use only during and with respect to his
employment with one or more of the Company Released Parties.

 

3.             Executive
acknowledges and agrees that he has agreed to be bound by the confidentiality
provision in the Severance Agreement for 24 months following Executive’s
separation of employment and the non-competition and non-solicitation 

 

21

 

covenants in the Severance Agreement for 12 months
following Executive’s separation of employment.

 

4.             Executive
declares and represents that he has not filed or otherwise pursued any charges,
complaints, lawsuits or claims of any nature against any Company Released Party
arising out of or relating to events occurring prior to the date of this
Agreement, with any federal, state or local governmental agency or court with
respect to any matter covered by this Agreement. In addition to agreeing herein
not to bring suit against any Company Released Party, Executive agrees not to
seek damages from any Company Released Party by filing a claim or charge with
any state or governmental agency.

 

5.             Executive
further declares and represents that no promise, inducement, or agreement not
herein expressed has been made to him, that this Agreement contains the entire
agreement between the parties hereto, and that the terms of this Agreement are
contractual and not a mere recital.

 

6.             Executive
understands and agrees that this Agreement shall not be considered an admission
of liability or wrongdoing by any party hereto, and each of the parties denies
any liability and agrees that nothing in this Agreement can or shall be used by
or against either party with respect to claims, defenses or issues in any
litigation or proceeding except to enforce rights under the Agreement itself or
under the Severance Agreement.

 

22

 

7.             Executive
understands and agrees that should any provision of this Agreement be declared
or be determined by any court to be illegal or invalid, the validity of the
remaining parts, terms or provisions shall not be affected thereby, and said
invalid part, term, or provision shall be deemed not a part of this Agreement.

 

8.             Executive
acknowledges that he understands that he has the right to consult with an
attorney of his choice at his expense to review this Agreement and has been
encouraged by the Companies to do so.

 

9.             Executive
further acknowledges that he has been provided twenty-one days to consider and
accept this Agreement from the date it was first given to him, although Executive
may accept it at any time within those twenty-one days.

 

10.           Executive
further understands that he has seven days after signing the Agreement to
revoke it by delivering to the Senior Vice President, Chief Human Resource
Officer, The Hertz Corporation, 225 Brae Boulevard, Park Ridge, New Jersey
07656, written notification of such revocation within the seven day period. If
Executive does not revoke the Agreement, the Agreement will become effective
and irrevocable by him on the eighth day after he signs it.

 

11.           Executive
acknowledges that this Agreement sets forth the entire agreement between the
parties with respect to the subject matters hereof and supersedes any and all
prior agreements between the parties as to such matters, be they oral or in writing,
and may not be changed, modified, or rescinded except in writing signed by all 

 

23

 

parties hereto, and any attempt at oral modification
of this Agreement shall be void and of no force or effect.

 

12.           Executive
acknowledges that he has carefully read this Agreement and understands all of
its terms, including the full and final release of claims set forth above and
enters into it voluntarily.

 

WITH EXECUTIVE’S
SIGNATURE HEREUNDER, EXECUTIVE ACKNOWLEDGES THAT EXECUTIVE HAS CAREFULLY READ
THIS AGREEMENT AND UNDERSTANDS ALL OF ITS TERMS INCLUDING THE FULL AND FINAL
RELEASE OF CLAIMS SET FORTH ABOVE. 
EXECUTIVE FURTHER ACKNOWLEDGES THAT EXECUTIVE HAS VOLUNTARILY ENTERED
INTO THIS AGREEMENT; THAT EXECUTIVE HAS NOT RELIED UPON ANY REPRESENTATION OR
STATEMENT, WRITTEN OR UNWRITTEN, NOT SET FORTH IN THIS AGREEMENT; THAT
EXECUTIVE HAS BEEN GIVEN THE OPPORTUNITY TO HAVE THIS AGREEMENT REVIEWED BY HIS
ATTORNEY; AND THAT EXECUTIVE HAS BEEN ENCOURAGED BY THE COMPANIES TO DO SO.

 

EXECUTIVE ALSO
ACKNOWLEDGES THAT EXECUTIVE HAS BEEN AFFORDED 21 DAYS TO CONSIDER THIS
AGREEMENT AND THAT EXECUTIVE HAS 7 DAYS AFTER SIGNING THIS AGREEMENT TO REVOKE
IT BY DELIVERING TO THE SENIOR VICE PRESIDENT, CHIEF HUMAN RESOURCES OFFICER,
AS SET FORTH ABOVE, WRITTEN NOTIFICATION OF EXECUTIVE’S REVOCATION.

 

IN
WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as
of the date set forth above.

 

24

 

	
   

  	
   

  	
  Date:

  
	
  EXECUTIVE

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  THE HERTZ CORPORATION

  	
   

  	
  HERTZ GLOBAL HOLDINGS,
  INC.

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
  Date:

  	
   

  	
  Date:

  
					

 

25ex10141.htm

 

Contract

 

 

Entered into and signed in Israel on May 14, 2010

 

Between:               1.           Xfone Inc., Corporation Number C23688-2000

Texas, U.S.A.

("Xfone")

via a signatory on behalf of the corporation,

Mr. Guy Nissenson

2.           Newcall Ltd., P.C. 512756917

11 Ha'avoda Street, Rosh Ha'ayin 48103, Israel

("Newcall")

via the signatory on behalf of the corporation,

Mr. Ilan Shoshani

3.           Margo Pharma Ltd., P.C. 512821471

26 Shalva Street, Herzliya 46705, Israel

("Margo")

via the signatory on behalf of the corporation,

Mr. Giora Shpigel

(Below, jointly and severally, the "Sellers")

of the first part

and:                      Marathon Telecom Ltd., P.C. 514413145

of 14 Shenkar Street, Herzliya 46733, Israel

via the signatory on behalf of the corporation,

Mr. Gilad Bar Lev

(the "Buyer")

of the second part

 

	
Whereas

	
Xfone is the registered owner and the sole holder of 690 ordinary Shares of the Company (according to the definition of such terms below) that constitute 69% of the Company's issued and paid-up capital; and

 

	
Whereas

	
Newcall is the registered owner and the sole holder of 260 ordinary Shares of the Company that constitute 26% of the Company's issued and paid-up capital; and

 

	
Whereas

	
Margo is the registered owner and the sole holder of 50 ordinary Shares of the Company that constitute 5% of the Company's issued and paid-up capital; and

 

	
Whereas

	
the Buyer is a private company, limited by shares, which was duly incorporated in Israel for purposes of the purchase of the Sold Shares (as the same are defined below); and

 

	
Whereas

	
the Sellers seek to sell the Sold Shares (as the same are defined below) to the Buyer, and the Buyer seeks to purchase the Sold Shares from the Sellers, all in the manner and under the terms and conditions as specified in this contract below;

 

  

-1-

  

	
  

	
Therefore, it has been represented, agreed and stipulated

 

	
  

	
by and between the parties, as follows:

	
1.

	
Preamble, representations, annexes and titles

	 	 	 
	  	
1.1.

	
The preamble of this contract, the representations of the parties hereto and the annexes attached to it constitute an integral part hereof.

	 	 	 
	  	
1.2.

	
The titles of the sections in this contract and its division into chapters and sections are intended for convenience and orientation only and shall not serve for purposes of interpretation hereof.

	 	 	 
	
2.

	
Definitions

	  
	  	
In this contract, unless the context prescribes otherwise, the following terms shall be interpreted as provided alongside them:

	 	 	 
	  	
2.1.

	
"Company" – Xfone 018 Ltd.

	 	 	 
	  	
2.2.

	
"Share" or "Shares" – the Company's ordinary shares of NIS 1 par value each.

	 	 	 
	  	
2.3.

	
"Sold Shares" – 1,000 Shares that constitute all of the Company's issued and paid-up capital (100%) which are sold to the Buyer in accordance with the provisions of this contract.

	 	 	 
	  	
2.4.

	
"Performance Date" – the date which will be determined by the parties for the transfer of the Sold Shares to the Buyer. The parties hereby agree to schedule the performance date for the date which will be no later than 21 days from the date of receipt of the Minister's approval that is specified in Section 12.1 below.

	 	 	 
	  	
2.5.

	
"Minister" – the minister of communication.

	 	 	 
	  	
2.6.

	
"Law" – as defined in the Interpretation Law, 5741-1981.

	 	 	 
	  	
2.7.

	
"Trustee" – an attorney who will act as the parties' trustee, according to the Letter of Instructions to the Trustee.

	 	 	 
	  	
2.8.

	
"Letter of Instructions to the Trustee" – a letter of instructions to the trustee which will be executed by the parties and delivered to the Trustee on the date of the signing of this contract.

	 	 	 
	  	
2.9.

	
"Company's Licenses" – the International Operator License, the Internet License and the VOC License (as such terms are defined below).

	 	 	 
	  	
2.10.

	
"International Operator Regulations" – the Communication Regulations (Bezeq and Broadcasts) (Proceedings and Conditions for Receipt of a General License for Provision of InternationalBezeq Services), 5764-2004, including any and all amendments.

	 	 	 
	  	
2.11.

	
"Memorandum of Understanding" – the memorandum of understanding that was executed between Xfone, Newcall and the Buyer, on March 2, 2010.

	 	 	 
	
3.

	
Annexes

	  
	  	
The following annexes are attached to this contract and constitute an integral part hereof:

  

-2-

  

	  	
Annex 4.1(a)

	
The Company's certificate of incorporation.

 

	  	
Annex 4.1(b)

	
The change of name certificate for the Company.

 

	  	
Annex 4.1(c)

	
The Company's articles of association.

 

	  	
Annex 4.13

	
List of communication switches.

 

	  	
Annex 4.14

	
List of fixed assets.

 

	  	
Annex 4.17

	
List of legal proceedings and actions according to Section 4.17 below.

 

	  	
Annex 4.18

	
List of the Company's insurance policies.

 

	  	
Annex 4.19

	
List of the pledges imposed on the Company and/or on the assets thereof.

 

	  	
Annex 4.20

	
List of the guarantees issued by the Company.

 

	  	
Annex 4.21

	
List of the material agreements that the Company is party to and the breaches.

 

	  	
Annex 4.22

	
Specification of the employees which are employed by the Company.

 

	  	
Annex 4.23(a)

	
The Company's audited financial statements, as of December 31, 2009.

 

	  	
Annex 4.23(b)

	
The Company's reviewed financial statements, as of March 31, 2010.

 

	  	
Annex 4.24

	
List of the transactions deviating from the ordinary course of business.

 

	  	
Annex 4.25

	
Interested party undertakings.

 

	  	
Annex 5.1

	
Sketch of the structure of holdings in the Buyer that will be attached to the application which will be submitted to the Minister in accordance with Section 7.1 below.

 

	  	
Annex 5.8

	
Language of a letter of guarantee in accordance with Section 5.8 below.

 

	  	
Annex 8.1

	
Instructions pertaining to settling a dispute concerning the amounts of the Consideration.

 

	  	
Annex 8.2

	
Details of the bank accounts of the Sellers and the Trustee.

 

	  	
Annex 10

	
Language of Xfone letter of guarantee.

 

	  	
Annex 11.2(a)(3)

	
List of employees.

 

	  	
Annex 11.2(a)(4)

	
List of officers.

 

	  	
Annex 14.2

	
Language of letter of discharge.

 

	  	
Annex 16.6

	
Language of Letter of Instructions to the Trustee.

 

  

-3-

  

 

	
4.  

	
Sellers' representations and undertakings

 

The Sellers hereby represent and undertake vis-à-vis the Buyer, as follows:

 

	
4.1.  

	
The Company is a private company, limited by shares, which was duly incorporated in Israel on April 15, 2004 (under the name Xfone Communications Ltd.), and its number with the Registrar of Companies is 513533430.

 

A true copy of the Company's certificate of incorporation is attached hereto as Annex 4.1(a). A true copy of the change of name certificate for the Company is attached hereto as Annex 4.1(b).

 

	
4.2.  

	
The Company's registered capital is NIS 10,000 and it is divided into 10,000 Shares.

 

The Company's issued and paid-up capital is NIS 1,000 and it is divided into 1,000 Shares. All of the Shares which constitute the Company's entire registered, issued, and paid-up capital, confer equal rights.

 

	
4.3.  

	
Xfone is the registered owner and the sole holder of 690 Shares that constitute 69% of the Company's issued and paid-up capital.

 

	
4.4.  

	
Newcall is the registered owner and the sole holder of 260 Shares that constitute 26% of the Company's issued and paid-up capital.

 

	
4.5.  

	
Margo is the registered owner and the sole holder of 50 Shares that constitute 5% of the Company's issued and paid-up capital.

 

	
4.6.  

	
All of the Sold Shares are fully paid-up, and are free and clear of any and all debts, attachments, pledges and/or other rights of any third party.

 

	
4.7.  

	
The directors who hold office with the Company's board of directors on the date of the signing of this contract are:

 

Abraham Keinan (chairman of the board of directors), Guy Nissenson, Eyal Yosef Harish, Aviu Ben-Horrin and Ilan Shoshani (the "Directors").

 

	
4.8.  

	
As of the date of the signing of this contract, no act was performed, no proceeding was instituted and no application was submitted for the dissolution of the Company and/or the deleting of its name from any and all registers that are kept under the Law, and it received no notice or warning pertaining to dissolution and/or similar proceedings.

 

	
4.9.  

	
The Company received and it holds all of the licenses, permits and approvals required for purposes of conducting its activity and business, if and insofar any are necessary. Other than as provided below in Section 4.10, to the Sellers' best knowledge, the Company is not in any violation of the licenses, permits and approvals as aforesaid.

 

	
4.10.  

	
On July 4, 2004, the Company received a general license for the provision of international Bezeq services (the "International Operator License"), effective until July 3, 2024; In August 2006, the Company received a special license for provision of internet access services (the "Internet License"), effective until August 31, 2011; On April 1, 2009, the Company received a special license to perform a marketing experiment for the provision of domestic telephone services via use of VOC technology (the "VOC License"), effective until April 30, 2010. The Sellers reported that this license was extended by six months, however the Company has not yet received a formal notification thereon. As of the date of the signing of this contract, the Company meets and fulfills the material provisions and requirements that are set forth in the Company's Licenses. For purposes hereof, "material" – it is reasonable that violation thereof will lead the Ministry of Communication or the Minister to impose sanctions on the Company. No financial and/or other sanctions have ever been imposed on the Company by the Ministry of Communication in connection with the Company's Licenses, their scope, effect and/or the Company's activity in the field of the Company's Licenses, and it does not know of any and all pending arguments, demands, or claims, on the part of the Ministry of Communication, with regard to the Company's fulfillment of the terms and conditions of the Company's Licenses in a full and timely manner. Furthermore, the Company is not aware of any other pending argument that is based on prima facie grounds for the cancellation, limitation, restriction or suspension of any of the Company's Licenses and/or which constitutes prima facie grounds for forfeiture of the guarantees which were provided on behalf of the Company to the Ministry of Communication to ensure the fulfillment of the terms and conditions of the Company's Licenses.

 

  

-4-

  

	
4.11.  

	
The Company submitted all of the periodic reports that are required therefrom under the Company's Licenses and/or which were demanded therefrom by the General Director of the Ministry of Communication, and with regard to such reports there exists no pending argument of the Ministry of Communication.

 

	
4.12.  

	
The Company meets and fulfills all of the requirements and provisions which are set forth in the Communication Law (Bezeq and Broadcasts), 5742-1982 and the regulations thereunder for purposes of operation of the International Operator License , including, without derogating from the aforesaid, all of the provisions of Sections 16-21 of the International Operator Regulations.

 

	
4.13.  

	
The Company is the full and sole owner of the communication switches specified in Annex 4.13 which is attached hereto (the "Switches"). The Company operates the Switches and to the best of its knowledge they are intact, maintained well and in accordance with the manufacturers' instructions, usable, suitable and serve the Company's activity in the fields of international operation, internet and VOC in a current, intact and regular manner.

 

	
4.14.  

	
The Company is the sole owner and/or lessee of all of the equipment which is required for purposes of the current and proper activity thereof, including all of the software and hardware components which are used thereby for such purposes, as well as all of the items which were previously or are currently registered as fixed assets in the Company's books and which are currently serving the Company as specified in Annex 4.14 which is attached hereto.

 

	
4.15.  

	
The Sellers are fully authorized to engage in this contract and perform all of the undertakings thereof according thereto, and there is no lawful or other impediment which prevents the Sellers from engaging in this contract and performing the undertakings thereof pursuant thereto, subject only to fulfillment of the conditions precedent which are specified in Section 12 below.

 

The signatures of Messrs. Guy Nissenson (with regard to Xfone only), Ilan Shoshani (with regard to Newcall only), and Giora Shpigel (with regard to Margo only), are binding on the Sellers for all intents and purposes pertaining to the undertakings thereof pursuant to this contract, and this contract, upon the signing thereof by the Sellers, constitutes the Sellers' binding and valid undertakings.

 

	
4.16.  

	
The transfer of the Company's Shares is not restricted and/or prohibited and/or impeded, under Law (other than the Minister's approval which is specified in Section 12.1 below) or pursuant to an agreement (other than the bank's approval which is specified in Section 12.2 below); The Sellers and/or the Company did not engage, undertake vis-à-vis, grant, issue and give to any other body and/or person the right to purchase Shares of the Company and/or any and all rights to receive, in any other manner, Shares of the Company, including the right of first refusal (other than as provided in Section 18 of the agreement which was executed between the Company, Xfone and Ilan Shoshani on August 26, 2004, and which Ilan Shoshani waived for purposes of this contract), an option right, securities which are convertible into Shares which are effective on the date of the signing of this contract and/or any and all other similar rights.

 

	
4.17.  

	
As of the date of the signing of this contract, there is no claim and/or other legal or quasi legal proceeding, civil or criminal, that is pending against the Company before any and all courts and/or arbitrators which the Company is party to, and there are no judgments which were issued against the Company, and/or settlements that were reached, that the Company is party to and which have not yet been entirely performed, and there is no known fact or reason of any kind which may involve the Company in a claim or legal proceeding as aforesaid, and all other than as specified in Annex 4.17 which is attached hereto.

 

With regard to this Section 4.17 – a legal proceeding, including a written threat on the institution of legal proceedings which was delivered to the Company and/or the Sellers in the course of the 6 months prior to the date of the signing of this contract and which has not yet been removed.

 

	
4.18.  

	
A list of all of the insurance policies which are valid and which were issued in the name and/or in favor of the Company (other than managers' insurances which were taken out for employees), stating the type of the policy, its number, issuing date, the insurance period, type of insurance, insurance amount, parties insured according thereto, and the insurer's name, is attached as Annex 4.18 hereto. All of the policies specified on the list are valid and to the Sellers' best knowledge the Company is fulfilling all of the material terms and conditions of the insurance policies.

 

	
4.19.  

	
Other than the pledges as specified in Annex 4.19 which is attached hereto, no pledges of any kind are imposed on the Company and/or its assets and/or the registered and/or paid-up Share capital thereof, and the Sellers undertake that the Company shall not create such pledges until the Performance Date (inclusive).

 

  

-5-

  

	
4.20.  

	
Other than guarantees as specified in Annex 4.20 which is attached hereto, the Company did not issue guarantees and/or collateral for the fulfillment of any kind of undertakings of any person and/or body, and the Sellers undertake that the Company shall not guarantee and issue collateral as aforesaid until the Performance Date (inclusive).

 

	
4.21.  

	
Annex 4.21 which is attached hereto specifies all of the material agreements to which the Company is party, and all of the Company's agreements with interested parties therein and/or agreements between the Company's shareholders and which are effective on the date of the signing of this contract; To the Sellers' best knowledge, other than as specified in Annex 4.21 there is no breach which was not remedied of any contract or undertaking from among the material agreements to which the Company is party.

 

For purposes of this section, a "material agreement" shall be deemed as any and all agreements, other than an employment agreement, whose financial scope and/or the undertakings pursuant thereto or deriving therefrom, for the Company, amount to at least the one-time amount of 60,000 dollars, and/or the amount of 5,000 dollars per month, or 60,000 dollars per annum, as the case may be".

 

	
4.22.  

	
Annex 4.22 which is attached hereto specifies all of the employees and officers who are employed by the Company (the "Employees") as of the date of the signing of this contract, according to their names and the description of their jobs, as well as details on the date of commencement of their work, the level of their pay or salary and the other material terms and conditions of their employment, including loans which were provided to them by the Company and insurance and indemnification arrangements which were made for them, and other than the Employees as specified in the aforesaid Annex 4.21, the Company does not employ in its service any other or additional Employees.

 

Other than as specified in Annex 4.22 which is attached hereto, the Company has made a provision for a reserve as specified in the Annual Statements (as defined below) and/or actually made proper payments and provisions for all of the Employees which are sufficient to pay and ensure all of their rights due to the period of their employment with the Company, and due to the termination of their employment pursuant to any Law and/or extension order and/or contract.

 

	
4.23.  

	
The Company’s financial statements as of December 31, 2009, audited by the Company's auditor (above and below, the "Annual Statements") and the Company's financial statements as of March 31, 2010, reviewed by the Company's auditor (the "First Quarter's Statements") (the Annual Statements and the First Quarter's Statements shall be jointly referred to below as the "Financial Statements"), are attached hereto as Annexes 4.23(a) and 4.23(b); the Financial Statements are prepared according to accepted accounting principles in Israel, and they reflect, fully and truly, the Company’s financial condition, its capital, assets, undertakings and financial results as of the date of the Financial Statements

 

	
4.24.  

	
Other than as specified in Annex 4.24 which is attached hereto, from March 31, 2010, until the date of the signing of this contract the Company's business did not deviate from the ordinary course of business, no act was performed in the Company, and no event occurred therein which results in or in itself changes or has a material adverse effect on the financial condition of the Company, as the same is reflected in the Financial Statements. For purposes of this section, any and all transactions with an interested party, change of terms thereof, as well as any and all transactions which adversely affect the Company's financial condition, as the same is reflected in the First Quarter's Statements, in the one-time amount of 60,000 dollars and/or the amount of at least 5,000 U.S. dollars per month or 60,000 U.S. dollars per annum, as the case may be, shall constitute a transaction which deviates from the ordinary course of business.

 

	
4.25.  

	
Other than the undertakings which are specified in Annex 4.25 which is attached hereto, the Company has no further undertakings vis-à-vis the Sellers, either as shareholders, managers, directors, consultants, lenders or Employees, or in any other way or manner, including in connection with loans they received therefrom or advance payments they received, or otherwise. The Trust Money (as defined in Section 16.1 below) shall serve for the payment of the Company's liabilities which are specified in Annex 4.25, to the Sellers and according to the Letter of Instructions to the Trustee. The Sellers undertake that after the closing of the transaction and payment of the Company's liabilities to the Sellers, neither one of them has or will have any and all arguments, demands or claims from the Company pertaining to additional undertakings or debts, and if there are any, they hereby finally, absolutely and irrevocably remit the same.

 

	
4.26.  

	
The Company shall not declare and shall not distribute a dividend and/or stock dividends and/or capital payments of any kind to the shareholders thereof, from the date of the signing of this contract until the Performance Date, and also has not declared a distribution as aforesaid which has not yet been entirely performed.

 

  

-6-

  

 

	
4.27.  

	
Tax assessments have been issued for the Company until 2008 (inclusive).

 

The Company submitted, to all of the tax authorities, all of the reports which it is obligated to submit (other than an annual tax report to the income tax authority in respect of 2009) and paid, to all of the authorities, all of the tax payments which are due and payable therefrom (however, in respect of 2009, the Company paid income tax advances in accordance with a composition of payments) and/or performed proper provisions in the Financial Statements which are sufficient for the payment of all of the liabilities thereof to the tax authorities.

 

	
4.28.  

	
The Sellers represent, confirm and undertake that they neither have nor will they have any objection to the Company using its name and trademark as well as any and all names or marks which include the combination "Xfone 018" (in Hebrew "אקספון 018"), for no consideration and without any restriction, in the State of Israel only.

 

	
4.29.  

	
The Sellers represent, confirm and undertake that the representations made thereby in this contract are complete and true, and to the best of their knowledge there is no material detail pertaining to the Company which was not presented and/or relayed to the Buyer.

 

	
5.  

	
The Buyer's representations and undertakings

 

The Buyer hereby represents and undertakes, as follows:

 

	
5.1.  

	
The Buyer is a private Company, limited by shares, which was duly incorporated in Israel on February 23, 2010, for purposes of purchasing the Sold Shares, and the number thereof with the Registrar of Companies is 514413145.

 

The structure of the holdings in the Buyer is as specified in the sketch in Annex 5.1 which is attached hereto, and which will be attached to the application which will be submitted to the Minister pursuant to Section 7.1 below.

 

	
5.2.  

	
The Buyer is fully authorized to enter this contract and to perform all of its undertakings pursuant thereto, and there is no lawful or other impediment to prevent the Buyer from entering this contract and performing its undertakings hereunder, subject only to the fulfillment of the conditions precedent specified in Section 12 below.

 

The signature of Mr. Gilad Bar-Lev together with the Buyer's stamp is binding on the Buyer for all intents and purposes in connection with the undertakings thereof under this contract, and this contract, once signed by the Buyer, constitutes a binding and valid undertaking of the Buyer.

 

	
5.3.  

	
On the date of the signing of this contract the Buyer has, and until the Performance Date it shall continue to have, the financial means for purposes of fulfilling all of its liabilities under this contract.

 

	
5.4.  

	
The Buyer received and has in its possession all of the licenses, permits and approvals that are required for purposes of conducting the activity and business thereof, if and insofar as any are necessary, and to the Buyer's best knowledge, it is not in violation of any of the licenses, permits and approvals as aforesaid.

 

	
5.5.  

	
Without derogating from the generality of the provisions of Subsection 5.2 above, the Buyer represents, confirms and undertakes that to the best of its knowledge it meets and fulfills – and until the Performance Date it shall continue to meet and fulfill– all of the requirements, terms and conditions and provisions which are set forth in the International Operator Regulations and in the International Operator License, which its fulfillment of, as Buyer of the Sold Shares, is required for the receipt of the Minister's approval which is specified in Section 12.1 below, including the eligibility and the terms and conditions that are specified in Chapter C of the International Operator Regulations. The Buyer confirms, represents and undertakes that it does not know of any reason, which directly or indirectly derives from the Buyer, due to which the issue of the Minister's approval specified in Section 12.1 below may be delayed or prevented. Notwithstanding the aforesaid, the Buyer represents, confirms and undertakes that it meets and fulfills the requirements which are determined in the International Operator Regulations and in the International Operator License pertaining to the citizenship, residence and financial strength.

 

  

-7-

  

 

	
5.6.  

	
The Buyer represents and confirms that the accounting and legal due diligence examination of the Company, its businesses and assets, which was performed on its behalf has been completed to the Buyer's satisfaction.

 

	
5.7.  

	
The Sellers represent, confirm and undertake not to use, in any way, the name "Xfone" or "אקספון" in Hebrew, in Israel, other than in the context of activity in the local capital market, public relations and management of Xfone, Inc.'s headquarters.

 

	
5.8.  

	
Upon the signing hereof, Carnie Capital Ltd., signed a letter of guarantee, in the language which is attached hereto as Annex 5.8, under which it guarantees vis-à-vis the Sellers, completely, absolutely and irrevocably, all of the Buyer's undertakings vis-à-vis the Sellers in accordance with this contract (including, in all that pertains to the payment of the Consideration, indemnification and payment of liquidated damages).

 

	
5.9.  

	
The Buyer represents, confirms and undertakes that in the event that the transaction contemplated in the contract will not be consummated, for any reason whatsoever, the provisions of the confidentiality agreement which was executed on December 31, 2009, between Carnie and Xfone, shall continue to fully apply thereto, indefinitely.

 

	
5.10.  

	
The Buyer confirms that it knows that in accordance with the Law which applies to Xfone, Xfone shall report to the U.S. Securities and Exchange Commission and the Israel Securities Authority on the engagement thereof in this contract and that such report shall be accompanied by an English translation hereof and it hereby issues its consent to the performance of the aforesaid report.

 

	
5.11.  

	
The Buyer represents, confirms and undertakes that the representations made thereby in this contract are complete and true.

 

	
6.  

	
Undertaking for sale of the Sold Shares

 

The Sellers undertake that at the Time of Performance (as defined below) and subject to the provisions of this contract above and below (including pertaining to payment of the Consideration), they shall sell and transfer, by themselves and/or through the Trustee, to the Buyer's ownership, all of the Sold Shares, and the Buyer undertakes that subject to the provisions of this contract above and below (including pertaining to payment of the Consideration), it shall purchase and receive the Sold Shares to its ownership.

 

	
7.  

	
Parties' undertakings in the period prior to the Performance Date (the "Transition Period")

 

	
7.1.  

	
Immediately after the signing of this contract, the parties shall approach the Minister and seek his approval for the sale of the Sold Shares to the Buyer pursuant to the provisions hereof. The parties undertake to do all that will be reasonably required in order to receive the Minister's approval as early as possible.

 

	
7.2.  

	
The Sellers undertake that in the entire period from the date of the signing of this contract until the Performance Date (the "Transition Period"), the Company shall not adopt any resolution to perform, and in practice no act will be performed, and the Company shall not enter any agreement and/or assume any undertaking, which is not in the ordinary course of business, other than with advance coordination with the Designated CEO (as he is defined in Section 7.5 below).

 

	
7.3.  

	
Without derogating from the aforesaid in Section 7.2, the Sellers undertake that in the entire Transition Period the Company shall maintain its credit facilities with the bank in effect, and shall perform no act or omission which may lead to the reducing, limiting or cancelling of the credit facilities thereof.

 

  

-8-

  

 

	
7.4.  

	
The Buyer shall appoint an observer on its behalf (the "Observer") who will participate in all of the meetings of the board of directors and of the shareholders of the Company, including board meetings and/or shareholder meetings which will be held through telephone conference calls. The Sellers undertake to invite the Observer to each board meeting or shareholder meeting as aforesaid, to produce to him all of the background information that is produced to each director and/or shareholder, and to allow him to inspect, at any time, any material, document or information that belongs to the Company. If the Observer shall have been invited to a board meeting and/or shareholder meeting as aforesaid and not participated therein, for any reason whatsoever, or announced in advance that he will not be able to participate therein, for any reason whatsoever, the Company shall be entitled, but not obligated, to postpone the date of the board meeting and/or shareholder meeting. The identity of the Observer shall be determined consensually between the Buyer and the Company. The Observer shall fulfill all of the terms of eligibility which are applicable to an officer with the Company by virtue of the Company's Licenses and any relevant Law. It is hereby clarified that the Observer shall have no executive powers whatsoever in the Company and that the Sellers and the Company shall not be obligated to pay any amount to the Observer due to his activity as an Observer as aforesaid. Prior to the commencement of his activity, the Observer shall sign an undertaking to maintain confidentiality and non-competition vis-à-vis the Company, in the language which is accepted in the Company.

 

	
7.5.  

	
The Buyer shall appoint a candidate for the position of Company CEO on its behalf (the "Designated CEO"). In the course if the Transition Period, the interim Company CEO shall orderly train the Designated CEO with regard to his designated position, including transfer for his inspection any and all material, documents and information that is relevant to his designated position, and as a rule, shall include the Designated CEO in the management of the Company, insofar possible and subject to the provisions of the Company's licenses and any Law. The Designated CEO shall fulfill all of the terms of eligibility which are applicable to an officer with the Company by virtue of the Company's Licenses and any relevant Law. The commencement of training shall be contingent on receipt of the defence agencies' confirmation that there is no impediment to the future appointment of the Designated CEO for the position of Company CEO. It is hereby clarified that the Designated CEO shall have no executive powers in the Company, no employment relationship will exist between him and the Company, and the Sellers and the Company shall be obligated to make no payment to the Designated CEO due to performance of the training as aforesaid. Prior to the commencement of training, the Designated CEO shall execute an undertaking to maintain confidentiality and non-competition vis-à-vis the Company, in the language which is accepted in the Company. In the event that the transaction contemplated in this contract will not be consummated, the undertaking to maintain confidentiality shall be indefinite, whereas the non-competition undertaking shall expire after the lapse of 3 months from the date on which it shall have come into the parties' knowledge that the transaction contemplated herein will not be consummated.

 

	
7.6.  

	
The Sellers undertake to transfer the ownership in the Company to the Buyer (in the Share sale transaction contemplated herein) without debts of the Company to banks and to shareholders. For purposes of ensuring this undertaking, the parties and the Trustee shall act in accordance with the provisions of this agreement and the Letter of Instructions to the Trustee.

 

	
7.7.  

	
Until and no later than the Performance Date , the Sellers shall release the Company of any and all guarantees which it shall have provided to any one of them to ensure payment of the loans which were taken by them from each other or from third parties.

 

	
7.8.  

	
Until and no later than the Performance Date, the Buyer undertakes to replace the bank guarantee in the amount of NIS 10,000,000, index linked, which was provided by the Company, through Newcall, in favor of the Ministry of Communication in accordance with the provisions of the International Operator License, and to provide, at the expense thereof, an alternative bank guarantee in its place, to the Ministry of Communication's satisfaction (the "Replacement of the Bank Guarantee").

 

	
8.  

	
The Consideration

 

	
8.1.  

	
In consideration for all of the Sold Shares, the Buyer undertakes to pay the Sellers the amount of US$ 7,852,000 (the "Consideration") minus the "Company's Debts to the Sellers" minus the "Debt Balance in the Banks". The Consideration minus the Company's debts to the Sellers minus the debt balance in the banks shall be referred to below the "Consideration due to the Sold Shares".

 

For purposes hereof:

 

"Debt Balance in the Banks" shall mean – debt balance the Company has in the banks on the Performance Date;

 

"Company's Debts to the Sellers" shall mean – the net total of all of the Company's Debts to the Sellers (namely: after offsetting the Sellers' debts to the Company) updated as of the Performance Date including shareholders' loans, balance of the amount of the capital note which shall have been provided to the Sellers by the Company, and inter-company balances from any source or on any grounds.

 

If a dispute shall arise between the parties pertaining to the amount of any of the sums above (Company's Debt to the Sellers and/or the Debt Balance in the Banks) the parties shall act in accordance with the provisions of Annex 8.1 which is attached hereto.

 

  

-9-

  

The Consideration shall be paid to the Sellers in the following manner:

 

	
8.1.1.  

	
On the Performance Date and against the transfer of the Sold Shares to the Buyer's ownership, the Buyer shall transfer to the Trustee the amount that is equal to the debt balance in the banks plus the Company's debts to the Sellers, and the Trustee shall transfer such amounts to the Company's bank account, and the Buyer shall cause the Company to pay, through them, its debts to the bank and to the Sellers.

 

	
8.1.2.  

	
At the same time, in accordance with the Letter of Instructions to the Trustee, the Trustee shall transfer to the Sellers the Trust Moneys (as defined in Section 16.1 below).

 

	
8.1.3.  

	
At the same time, the Buyer shall directly pay to the Sellers the amount in U.S. dollars which together with the amount which shall have been transferred pursuant to Section 8.1.1 and together with the Trust Moneys, shall constitute 85% (eighty five percent) of the total Consideration.

 

	
8.1.4.  

	
At the same time, the Buyer shall deposit in the Trustee's possession the balance of the Consideration in the amount in U.S. dollars which will constitute 15% (fifteen percent) of the total Consideration (the "Deposit"). The Deposit shall act as collateral for the indemnification determined in Section 17 below, and shall be paid to the Sellers subject to and in accordance with the Letter of Instructions to the Trustee, in three equal parts, while the first among them shall be paid at the end of eight (8) months, the second – at the end of sixteen (16) months, and the third – at the end of twenty four (24) months, whose count began on the Performance Date.

 

	
8.2.  

	
All of the installments to the Sellers that are specified in Sections 8.1.2 to 8.1.4 above shall be paid to the Sellers according to the holdings of the Sellers in the Sold Shares, namely: 69% of each installment shall be paid to Xfone; 26% of each installment shall be paid to Newcall; and 5% of each installment shall be paid to Margo. The details of the bank accounts for the transfer of the installments to each one of the Sellers are specified in Annex 8.2 which is attached hereto.

 

	
8.3.  

	
All of the installments which will be paid to the Sellers shall be paid in U.S. dollars. The installments which will be paid to the Company shall be paid in NIS according to the representative rate of the dollar at the Time of Performance.

 

	
9.  

	
Adjusting the Consideration

 

In the event that the net working capital as of the date of signing as defined in the memorandum of understanding is less than (NIS -2.6 million) (minus NIS 2,600,000) then a price adjusting mechanism shall be activated which shall offset, from the amount of the transaction, any sum which is greater than (NIS -2.6 million) (minus NIS 2,600,000) [namely: in the event that the net working capital as aforesaid as of the date of signing is lower than (NIS -2.6 million) the Consideration shall be updated].

 

In the event that the adjustment amount will be known prior to the Performance Date – the Consideration shall be updated as aforesaid. In the event that the adjustment amount will not be known on the Performance Date, the aforesaid update shall be performed from the sum of the Deposit.

 

	
10.  

	
Xfone's guarantee to secure damage which may be incurred by the Company in C.A. 25670-0110 Zur v. the Company et al.

 

Xfone is fully and exclusively liable for any and all amounts, payments or expenses which will be incurred by the Company as a result of a motion to approve a class action which was filed against it on January 19, 2010, in the context of C.A. 25670-0110 Zur v. the Company et al. at the Central District Court (below in this section: the "Action", the " Damage of the Action ") and on the Performance Date it shall sign a Company guarantee in the language that is attached hereto as Annex 10, to secure the Action's Damage ("Xfone's Guarantee"). In this matter it is agreed that Xfone shall bear any and all expenses or financial costs which are entailed by conducting the defense on behalf of the Company and/or the financial results thereof, including pursuant to a judgment or settlement (it is agreed that in the event that the Company will be obligated to provide services at a reduced price, Xfone shall bear only the cost of the services). The Company's conducting of the defense by shall be performed in full cooperation with Xfone and with mutual assistance.

 

	
11.  

	
The Performance Date

 

	
11.1.  

	
On the Performance Date, at 11:00 o'clock (above and below: the "Time of Performance ") at the offices of Carnie Capital Ltd., in the Nolton House, 14 Shenkar St., Herzliya Pituach, against performance of the Buyer's undertakings as specified in Section 8 above, the Sellers shall transfer, through the Trustee, the Sold Shares to the Buyer's ownership with the Sold Shares constituting, at the time of transfer thereof to the Buyer, 100% of the Company's issued and paid-up capital, and while they are entirely paid-up and free and clear of any and all debts, attachments, pledges and/or any other third party rights.

 

  

-10-

  

 

	
11.2.  

	
At the Time of Performance the parties shall simultaneously perform all of the following acts:

 

	
a.  

	
The Sellers shall deliver to the Buyer the following documents:

 

	
  

	
1.

	
 [cancelled]

 

	
  

	
2.

	
Sellers' confirmation that the Company is free of any guarantee which it provided in favor of any one of them, and that they have no demand from, argument or claim against the Company, including in respect of loans and/or debt and credit balances and/or with regard to managing fees and/or another payment of any kind which is due to any one of them from the Company;

 

	
  

	
3.

	
A letter of discharge signed by the Employees who are specified in Annex 11.2(a)(3) according to which they received all that is due to them due to their work with the Company and termination of their employment, including that they have no argument, claim or demand from the Company pursuant thereto.

 

	
  

	
4.

	
Confirmation of the officers who are specified in Annex 11.2(a)(4) that they have no demand , argument or claim against the Company, including due to salary and/or any right, compensation, payment or other benefit pursuant to their work for the Company;

 

	
  

	
6.

	
Approval of the Sellers' boards of directors that approve their engagement in this contract and the sale of the Sold Shares to the Buyer.

 

	
  

	
7.

	
Approval of the Company's board of directors which approves the transfer of the Sold Shares to the Buyer.

 

	
  

	
8.

	
Letter of resignation of all of the Directors of the Company, effective as of the Performance Date, together with a confirmation that they have no claims or arguments against the Company.

 

	
  

	
9. Xfone's Guarantee, duly signed.

 

	
  

	
One third of the first part of the moneys of the Deposit (as defined in Section 8.1.4 above) shall be withheld in the event that any of the required confirmations will not be delivered to the Buyer on time (the "Withheld Amount"), and the same shall not be transferred to the Sellers as part of the periodic payment which is due thereto in the indemnification period (two years from the signing date). If at the end of the indemnification period any document shall still not have been delivered, the Trustee shall deliver the Withheld Amount back to the Buyer.

 

	
  

	
Against:

 

	
b.  

	
The following documents which will be delivered to the Sellers by the Buyer:

 

	
1.  

	
Bank checks or confirmations of performance of bank transfers to the Sellers' and Trustee's accounts which are specified in Annex 8.2 hereof in the total amount that is equal to the entire amount of the Consideration as specified in Section 8 above.

 

	
2.  

	
Approval of the Buyer's board of directors of the Buyer's engagement in this contract and the purchase of the Shares that are sold pursuant thereto.

 

	
11.3.  

	
At the Time of Performance the Trustee shall act according to the Letter of Instructions to the Trustee and shall, inter alia, perform the following acts:

 

	
1.  

	
Deliver to the Buyer the Share transfer deeds in respect of all of the Sold Shares, duly signed by the Sellers.

 

  

-11-

  

 

	
2.  

	
Release and transfer the Trust Moneys in accordance with this contract and the Letter of Instructions to the Trustee.

 

	
12.  

	
Conditions Precedent

 

The closing of the transaction contemplated in this contract and sale of the Shares that are sold pursuant hereto are contingent on fulfillment of all of the following conditions:

 

	
12.1.  

	
Receipt of the Minister's approval for the sale of the Sold Shares to the Buyer pursuant to the provisions hereof. In the event that the Minister's approval will include conditions which directly or indirectly limit, prejudice or reduce the Company's activity as the same is at the time of the signing of this contract, the approval shall be deemed as a "contingent approval".

 

	
12.2.  

	
Receipt of the approval of Bank Hapoalim Ltd. for the sale of the Sold Shares to the Buyer pursuant to the provisions hereof.

 

	
12.3.  

	
Receipt of the approval of the Buyer's bank for replacement of the bank guarantee under the provisions of Section 7.8 above.

 

If the Minister will reject the application to receive approval for the sale of the Sold Shares, this contract will be automatically cancelled immediately after receipt of the Minister's negative answer, unless the parties will consensually decide to appeal the Minister's negative answer in which case the contract will be automatically cancelled only if and after the appeal will be denied, and the parties shall have no claim or argument of any kind whatsoever against one another.

 

If a contingent approval as defined in Section 12.1 above will be received, the Buyer shall have the right to agree to the conditions included in the contingent approval, and once it shall have done so, the condition precedent as provided in Section 12.1 above shall be deemed fulfilled for purposes of this contract, and if it shall have refused to do so, it will be deemed as if the Minister's approval shall not have been issued and the condition precedent as provided in Section 12.1 above shall not have been fulfilled, and the Sellers shall have no argument or claim of any type and kind whatsoever.

 

If the condition precedent as provided in Section 12.1 will not be fulfilled within six (6) months from the date of the signing of this contract and the parties shall not have agreed to extend the Performance Date, this contract shall be cancelled, and the parties shall have no claim or argument or of any type and kind whatsoever against one another.

 

If the condition precedent as provided in Section 12.3 will not be fulfilled, the parties agree that Newcall will be entitled, at its sole discretion, to extend the date for replacement of the bank guarantee also over and above the Performance Date for a period which shall be no longer than 30 days.

 

	
13.  

	
Taxes and payments

 

	
13.1.  

	
Each party shall bear its expenses in connection with this contract and everything deriving therefrom.

 

	
13.2.  

	
VAT, which will apply, if and insofar as the same will apply, to any payment fixed in this contract and/or deriving therefrom, shall apply to the paying party and shall be paid on the payment due date thereof to the VAT authorities against a duly prepared tax invoice which will be issued by the party receiving the payment.

 

The aforesaid notwithstanding, any and all invoices issued by Xfone shall not constitute tax invoices for purposes of VAT in Israel.

 

	
13.3.  

	
Withholding tax shall be duly deducted from each payment to the Sellers which are Israeli companies, unless a certification on an exemption from deduction of withholding tax will be produced.

 

	
13.4.  

	
Income tax and/or capital gains tax which will apply, if and insofar as the same will apply, to the sale of the Shares which are sold to the Buyer pursuant hereto shall apply to the individual Sellers and shall be paid by each one of them according to the tax liability thereof.

 

  

-12-

  

 

 

	
14.  

	
Employees

 

	
14.1.  

	
Until the Performance Date the Sellers shall be responsible vis-à-vis the Employees for any payment due to work pay, commissions etc., and/or severance pay and/or provision for provident payments and/or provision due to a study fund and/or any other amount which is due to them in respect of their work according to any Law and/or agreement, in accordance with the Company's policy which was accepted in the past and until now.

 

	
14.2.  

	
The parties agree that on the Performance Date the Sellers shall cause the Company to terminate the employment of the Employees listed in Annex11.2(a)(3). The Sellers undertake that the Company shall pay the aforesaid Employees all of the payments and rights which are due to them pursuant to their employment with the Company and pursuant to termination of their employment, and they will cause them to sign an appropriate letter of discharge in the language attached as Annex 14.2 hereto, and will produce the aforesaid letters of discharge to the Buyer on the Performance Date. The Sellers further undertake that the aforesaid Employees shall train and perform an orderly transfer of their work and position to the Buyer or another on its behalf. The Sellers shall do all that is within their power in order that the aforesaid Employees will be available to the Buyer, also after the Performance Date, and will reasonably cooperate therewith in answering questions and assistance and help in fields related to their work with the Company.

 

	
15.  

	
Non-competition

 

Each one of the Sellers undertakes not to engage, directly or indirectly, for or without consideration, alone or together with others, in activity which competes with the Company's activity in international operator, internet and local fields in Israel, for a period of 36 months from the Performance Date, whether or not the activity requires a license, and this includes not holding, directly or indirectly, shares which constitute more than five percent (5%) of the share capital of any Israeli license holder which operates in the aforesaid fields.

 

	
16.  

	
Trust

 

	
16.1.  

	
Upon the signing of this contract, the Sellers shall transfer in escrow to the Trustee, Share transfer deeds due to all of the Sold Shares, duly signed by the Sellers, to the order of the Buyer, whereas the Buyer shall transfer to the Trustee the amount which constitutes 20% (twenty percent) of the Consideration to the bank account whose details will be delivered thereto in writing by the Trustee (the "Trust Moneys").

 

	
16.2.  

	
[Cancelled]

 

	
16.3.  

	
No later than the Performance Date, the parties shall present to the Trustee the confirmations which attest to the fulfillment of all of the conditions precedent specified in Section 12 above. Subject to and immediately after receipt of the aforesaid confirmations, the Trustee shall act in accordance with the Letter of Instructions to the Trustee.

 

	
16.4.  

	
If six (6) months, whose count began at the time of the signing of this contract, shall have lapsed, and such date shall not have been consensually extended by the parties, and the Trustee shall not have received the confirmations stated in Section 16.3 above, the Trustee shall return the Share transfer deeds to the Sellers and the Trust Moneys to the Buyer.

 

	
16.5.  

	
In the event that the Trustee shall be unable to act as Trustee pursuant to this contract the parties shall consensually appoint an alternative Trustee.

 

	
16.6.  

	
Upon the signing of this contract, the parties and the Trustee shall sign the Letter of Instructions to the Trustee which includes the instructions according to which the Trustee will be required to act as provided herein, including in respect of the manner of investing the Trust Moneys, in the language which is attached as Annex 16.6 hereof.

 

  

-13-

  

 

 

	
17.  

	
Indemnification

 

Subject to the closing of the transaction contemplated in this contract, in any event that, from after the date of the signing of this contract until two years from the Performance Date will expire, damage and/or loss will be incurred by the Buyer or a financial charge or sanction will be imposed on the Company as a result of one of the following: (i) falseness of the representations made by the Sellers in this contract, or (ii) violation of any provision of any of the Company's Licenses or another instruction which shall have been issued by the Minister or another who was authorized therefor by him, provided that such violation was performed before the Performance Date or (iii) as a result of a demand or claim which was raised against the Company whose cause precedes the Performance Date (jointly together the "Damage"), the following provisions shall apply:

 

	
  

	
a.

	
During two years from the Performance Date , the Sellers undertake to compensate the Buyer in the amount of the Damage, subject to that the Sellers' undertaking to compensate the Buyer shall apply only to Damage in the amount which exceeds (in total and cumulatively) NIS 500,000 (five hundred thousand).

 

	
  

	
b.

	
The indemnification cap for each one of the individual Sellers shall be the amount which shall have been paid to such a seller pursuant to Section 8.2 above, and in no case will each one of the individual Sellers be required to pay the Buyer, and will it pay thereto, compensation or indemnification in the amount exceeding the amount which was actually paid thereto as aforesaid.

 

	
  

	
 c.

	
The Buyer undertakes to give the Sellers, immediately, notice on any claim or demand which will be filed against it and/or against the Company which may cause it Damage, as defined in this section above, and which is relevant to the Sellers' duty of indemnification.

 

	
  

	
The Sellers shall have the right to notify the Buyer and the Company within 7 days from receipt of the demand or claim into their possession on their desire to handle the same by themselves. If such notice shall have been issued, the Sellers shall assume (subject to the provisions below) the full responsibility to handle the demand or claim and to bear any and all expenses, costs, judgments and/or decisions which will be issued therein, and all of the expenses entailed thereby, while releasing the Buyer and the Company from any responsibility in connection with the demand or claim and any result that will derive therefrom. However, in such an event, the Buyer and the Company shall assist the Sellers as best they can (via documents, affidavits, delivering information etc.) to defend themselves from the demand/claim.

 

If the Sellers shall not have announced their desire to handle the demand or claim themselves, the Buyer shall handle the same. In such an event, the Buyer undertakes to (i) update the Sellers on any material development in the claim; (ii) refrain from agreeing to any settlement other than if the Sellers shall have agreed thereto in advance and in writing; (iii) allow the Sellers to join the defense at any stage (at the Sellers' expense).

 

	
  

	
d.

	
Without derogating from the provisions of Section a above and from the Sellers' obligation to compensate the Buyer up to the level of the cap as aforesaid in Subsection b, the Deposit as defined in Section 8.1.4 above shall serve for the payment of the indemnification pursuant to this Section 17, in accordance with the Letter of Instructions to the Trustee.

 

	
  

	
e.

	
The provisions of this Section 17 shall not apply to the Action and to the Damage of the Action (as defined in Section 10 above) and only the provisions of Section 10 shall apply in respect thereof.

 

	
18.  

	
Liquidated Damages

 

In the event that a party to this contract will breach the undertaking thereof to close the transaction contemplated herein on the Performance Date, for any reason whatsoever (the "Breaching Party"), and will not remedy the breach within 14 days from receipt of written notice from the other party (the "Fulfilling Party"), then the Breaching Party shall pay the Fulfilling Party damages that are fixed and agreed in advance, without being required to prove any damage at the rate of 25% of the Consideration determined herein (the "Liquidated Damages"). The parties agree that the amount of the Liquidated Damages is appropriate for the damage which may be incurred by the Fulfilling Party as a probable consequence of the breach.

 

The Liquidated Damages are in addition to the Fulfilling Party's right to claim the entire damage which was actually incurred thereby, and also to claim from the Breaching Party any other or additional relief which is conferred thereto by virtue of the provisions of any Law and/or the provisions of this contract.

 

  

-14-

  

 

 

Notwithstanding the aforesaid in the preamble of this contract, the aforesaid in this section shall apply to each one of the individual Sellers severally, meaning that each one of the individual Sellers shall be obligated to pay part of the Liquidated Damages, or entitled to receive part of the Liquidated Damages, as the case may be, solely according to the proportionate share thereof in the Sold Shares.

 

With regard to this section, in the event that the Minister's approval will not be received as provided in Section 12 above as the result of an act or an omission of a party hereto and/or in the event that it arises from the Minister's decision that the reason for failure to receive the Minister's approval is that a party hereto breached the undertakings thereof pursuant to this agreement and/or that the representations made thereby are incomplete and untrue, such party will be deemed as having breached its undertaking to close the transaction.

 

The Sellers undertake that at the time of the signing of this contract, the Company shall provide a Company guarantee in the amount of 25% of the Consideration determined in this contract as guarantee for fulfillment of the Liquidated Damages clause on the Sellers' part.

 

	
19.  

	
Arbitration

 

	
19.1.  

	
The parties agree to entrust all of the disputes which will erupt between them in connection with this contract and/or the Letter of Instructions to the Trustee and everything deriving therefrom and entailed thereby to the decision of a single arbitrator who shall be appointed consensually by the parties. In the absence of consent between the parties with regard to the identity of the arbitrator within 7 days from the date that his appointment was sought by any one of them, the arbitrator shall be appointed by the head of the Israel Bar Association.

 

	
19.2.  

	
The arbitrator shall be entitled to issue interim orders and other temporary relief which the court is authorized to issue. The arbitrator shall be subject to the provisions of the substantive law and shall be obligated to give reasons for his arbitration award and any decision issued by him, however shall not be subject to procedural law and to laws of evidence.

 

	
19.3.  

	
This section shall be deemed as a valid arbitration agreement by virtue of the provisions of the Arbitration Law, 5728-1968 (the "Arbitration Law"). The arbitration award may be appealed as determined in the provisions of Section 21a of the Arbitration Law. The provisions of the Schedule of the Arbitration Law shall apply to the arbitration proceedings and to the arbitrator.

 

	
20.  

	
General

 

	
20.1.  

	
The parties' rights and obligations hereunder are not assignable, transferrable or endorsable in any manner, including by way of pledge, other than with the advance written consent of all parties.

 

	
20.2.  

	
This contract embodies and exhausts all of the agreements between the parties in connection with the transaction contemplated herein, and upon the signing hereof it cancels any and all representations, understandings or undertakings, including any and all written instruments which were made prior to the execution hereof in connection with the transaction contemplated herein, including the memorandum of understanding.

 

	
20.3.  

	
Any and all changes or additions to this agreement shall be ineffective unless performed in writing and signed by all parties.

 

	
20.4.  

	
Delay or refrainment on the part of any one of the parties to exercise or enforce any one of the rights thereof pursuant hereto shall not be deemed as its waiver of or impediment to using its rights in the future, and it shall be entitled to use the rights thereof, in whole or in part, whenever it shall deem fit.

 

  

-15-

  

 

 

	
20.5.  

	
Without derogating from the provisions of Section 19 hereof, it is hereby agreed that the competent courts of the central district shall have exclusive jurisdiction in connection with this contract and everything deriving therefrom. This contract and everything deriving therefrom (including fulfillment, interpretation and breach of this contract) shall be governed by the laws of the State of Israel.

 

	
20.6.  

	
The parties determine their addresses for purposes of this contract, as follows:

 

Xfone: 5307 W. Loop 289 Lubbock, TX 79414, Tel: 806-788-2998, Fax 806-788-3398

 

Newcall: 11 Ha'avoda St., Rosh Ha'ayin 48103, Israel

 

Margo: 26 Shalva St., Herzliya 46705, Israel

 

The Buyer: 14 Shenkar St., Herzliya Pituach 46733, Israel.

 

and any notice sent by a party to the other party via registered mail according to its aforesaid address, shall be deemed as arriving at the destination thereof after 72 hours from the time of dispatch thereof, and if it shall have been delivered by hand and/or transmitted via facsimile – upon delivery or transmission thereof, as the case may be. The aforesaid notwithstanding, a notice which will be sent to Xfone shall be deemed as having arrived at the destination thereof within 2 business days from the time of dispatch thereof through an international courier Company.

 

In witness whereof the parties have hereto set their hands at the place and on the date as above written:

 

----------------------------------                                                                ----------------------------------

 

----------------------------------                                                                ----------------------------------

 

Xfone, Inc.                                                                                          Marathon Telecom Ltd.

 

----------------------------------                                                                ----------------------------------

 

Newcall Ltd.

 

----------------------------------

 

Margo Pharma Ltd.

 

 

  

-16-

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